Volume 282, July 11 – July 15, 1940

DIARY Book 282 July 11 - 15, 1940 - A - Book Page lture Mar Conditions Engineering Company. doe War Conditions: Airplanes (Engines) intments and Resignations Harris, Basil: Letters to and from HMJr on resignation - 7/15/40 282 317 Puleston, William D. (Captain): HMJr wishes assignment completed by September lst 349 - B - Barclay's Bank See War Conditions: Foreign Funds Control Business Conditions Economic Developments: Noble (Commerce Department) report - - 7/11/40 65 Haas memorandum on situation for week ending July 13, 1940.. 336 - C - Canada See War Conditions China See War Conditions Coast Guard HMJr comments on inability to get extra funds after Coast Guard has shouldered Northeastern Patrol for three months "while Navy played in the sun off Guantanamo" - 7/15/40 564 - D - Departure Permits (Ships) See War Conditions: Export Control Dieu, Louis Arrival in New York and intention of becoming American citizen reported by Cochran - 7/13/40 276,289 Dutch East Indies See War Conditions: Foreign Funds Control - E - Estonia See War Conditions Export Control See War Conditions - F - Book Page Finland See War Conditions: Export Control; Finland Foreign Funds Control See War Conditions France See War Conditions Freezing of Funds See War Conditions: Foreign Funds Control - G - Germany See also War Conditions Federal Bureau of Investigation report containing instructions to propaganda agents - - 7/12/40 282 138 Gold: See War Conditions: Switzerland Gold See War Conditions: Estonia; France (Martinique); Lithuania; Switzerland Great Britain See War Conditions: United Kingdom - H - - Harris, Basil See Appointments and Resignations - I - Indiana See Tax Evasion Italy See War Conditions - L - - Labor For wage and hour regulations, see War Conditions: Defense Latvia See War Conditions: Foreign Funds Control Loverbeck, Otto H. Federal Bureau of Investigation report - 7/12/40 144 - M - Martinique See War Conditions: France Merchant Shipping See War Conditions: Export Control Regraded Unclassified - N - Book Page Netherlands See War Conditions: Foreign Funds Control - 0 - Oil See War Conditions: Export Control - P - Phillips, Sir Frederick See War Conditions: United Kingdom Puleston, William D. (Captain) See Appointments and Resignations - R - Revenue Revision Excess Profits Tax: Representatives of National Association of Manufacturers confer with HMJr - 7/11/40 282 1 Conference at Sullivan's home with representatives of Advisory Commission, Council of National Defense - 7/11/40 5 a) McReynolds-HMJr communications 82 Amortization (Vinson-Trammell Act) ruling about to be made for Wright Aeronautical Corporation discussed in Foley memorandum - 7/11/40 44 a) Conference with Knudsen (Foley memorandum) - 7/11/40 45,105 1) Knudsen reports on Louis Johnson's (Assistant Secretary of War) refusal to sign contract embodying suggestions agreed upon at White House b) Cooperation of Reconstruction Finance Corporation discussed by HMJr with Jones - 7/12/40 168 1) Foley-HMr conversation 172 2) Knudsen-HMJr " 174,219 c) Furlong (Admiral, Navy) explains his testimony in connection with misunderstanding which has arisen - 7/12/40 256 Doughton calls to explain absence from meeting and asks for resume - 7/11/40 113 Conference with Randolph Paul; Sullivan and Foley also present - 7/15/40. 575 a) Plan to favor small companies discussed See also Book 283, pages 9,232,245 -S- - Book Page Schafer, John C. (Congressman, Wisconsin) See War Conditions: Airplanes (Engines) Sell, Kurt (American representative, DNB, Nasi News Agency) See War Conditions: Germany Ship Movements See War Conditions: Export Control Shipping See War Conditions: Export Control; Shipping Spangler, Ruth C. (Mrs.) See Telephone Switchboard Stinnes, Edmund H. See War Conditions: Foreign Funds Control Sweden See War Conditions: Export Control; Sweden Switzerland See War Conditions - T - Tax Evasion Indiana: Publicity prior to Democratic Convention in Chicago discussed by McNutt's representative and Treasury - 7/12/40 282 160 Taxation See Revenue Revision Telephone Switchboard HMJr warns Mrs. Spangler to place no European calls unless authorized by him - 7/15/40 522 Texas Company See War Conditions: Export Control - U - U.S.S.R. See War Conditions: China; Estonia; Lithuania; Switzerland; U.S.S.R. United Kingdom See War Conditions - V - Vinson-Trammell Act See Revenue Revision - W - Wage and Hour Regulations See War Conditions: Defense - I - (Continued) Book Page War Conditions Agriculture: Foreign developments - 7/11/40 282 108 Airplanes: Engines: Allison Engineering Company: Schedule of deliveries 582 Packard: Agreement to make engines for United States and Great Britain reported to Purvis by HMJr - 7/13/40 263 a) Knudsen disturbed over possible refusal of Jones to agree to plan which will make possible same treatment from Reconstruction Finance Corporation with regard to additional plant facilities as United States (Foley memorandum) - 7/15/40 323,386,546 1) Jones' letter to Knudsen 327 2) Meeting with Packard officials 325 Rolls Royce: Schafer (Congressman, Wisconsin)-HMJr correspondence concerning "provision of law authorizing Treasury to place joint purchases for United States and Great Britain" - 7/11/40 90 Disposition of plans and drawings now in War Department - 7/15/40 393,506 Ward, J. Carlton: Ford representative's note as presented to Ward - 7/12/40 251 Preliminary report of Ward group sent to France at their request by General Motors - 7/15/40 587 a) Original returned by HMJr after copy has been made - 7/16/40: See Book 283, page 49 b) Copy sent to General Marshall - 7/16/40: See Book 283, page 64 Canada: Army Requirements: Conferences between Young, War and Navy Departments to discuss - 7/15/40 553 China: Wood Oil: Shipments to United States through Burma - (7/9/40) 106 Petroleum deliveries from United States through Rangoon: American Consul memorandum - 7/12/40 152 Financial assistance: White preliminary report on possibility of - 7/15/40 290 a) Soong memoranda attached Chen's resume of situation in China as sent to Chinese Embassy, Washington - 7/15/40 525 Three-way arrangement between United States, U.S.S.R., and China: White memorandum - 7/15/40 533 Regraded Unclassified - W - (Continued) Book Page War Conditions (Continued) Defense: Wage and Hour Regulations: Administrator Fleming's (Wage and Hour Division, Labor Department) memorandum to FDR - 7/11/40 282 117 Estonia: Transfer of gold to Soviet State Bank reported - 7/14/40 281,282 Exchange market resund - 7/11/40, etc. 39,164,166 Export Control: Departure permits discussed by HMJr, Bell, Cairns, Young, and Harris - 7/11/40 10 a) Hull-HMJr conversation 14 b) Land-HMJr If 19 c) Berle-HMJr " 23 d) Watson-HMJr If 27 e) Resume of ships involved 29,33 f) Harris memorandum stating problem 34 g) Foley memorandum 41 h) Purvis told of situation 73 1) SS VELI-RAGNAR (Finnish) carrying Swedish ammunition held by order of FDR - 7/11/40 79,93 5) Oil Shipments for Spain: HMJr discusses with Knox; FDR has suggested that Navy buy the cargo, storing it in Virgin Islands, Puerto Rico, etc. - 7/12/40 192 1) Foley and Cairns say Presidential Proclamation will be necessary 196 2) Conference; present: representatives of Treasury, Navy, and State - 7/12/40 224 3) Texas Company representatives confer in Cairns' office (See also Book 283, page 270) 248 4) Texas Company representatives confer in Foley's office 250 k) Conference; present: HMJr, Bell, Berle, Harris, Bernstein, Foley, Young, Cochran, and Cairns - 7/15/40 564 1) Conference; present: HMJr, Foley, and Thompson - 7/17/40: See Book 283, page 259 Finland: Trade agreement between Finland and Germany - resume of - 7/13/40 265 Foreign Funds Control: Barclay's Bank: Status of Paris branch asked by Corn Exchange Bank, Philadelphia (American correspondent) - 7/12/40 130 Estonia, Latvia, and Lithuania covered by new regulations - 7/15/40 583 Stinnes, Edmund H.: State Department and British Embassy express opinions concerning - 7/11/40 54 Netherlands: Dutch East Indies: Anticipated exchange regulations described - 7/11/40 97 Notherlands Bank: Federal Reserve Bank of New York attitude toward instructions when dispatched from the Netherlands discussed in Cochran memorandum - 7/12/40 150 Regraded Unclassified - W - (Continued) Book Page War Conditions (Continued) France: Martinique: Delivery of planes and gold discussed at 9:30 meeting - 7/12/40 282 157,203 Germany: Federal Bureau of Investigation report containing instructions to propaganda agents - 7/12/40 138 Food Situation: Report prepared in Division of Monetary Research - 7/12/40 148 Trade agreement between Finland and Germany - resume of - 7/13/40 265 Supplementary trade agreement between Sweden and Germany - 7/15/40 285 Sell, Kurt (American representative, DNB, Nazi News Agency): Document for German White Paper No. 6 (alibi for entry into low countries and France) left through error in Collector of Internal Revenue's office, Washington, when making arrangements for leaving for Havana - 7/15/40 397,435 a) Distribution of copies 434 1) White House acknowledgment of copy: See Book 283, page 1 Italy: Balances in New York given by Federal Reserve Bank of New York: Cochran memorandum - 7/12/40 131 Lithuania: Transfer of gold earmarked account with Federal Reserve Bank of New York to account of State Bank of Russia - 7/13/40 264 Shipping: Harris resume - 7/12/40 134 Sweden: Supplementary trade agreement between Sweden and Germany - 7/15/40 285 Switzerland: Credit Suisse: British Embassy, Federal Bureau of Investigation, and Treasury to watch any transactions that may show them to be "for Soviet or German gold traffic" - 7/11/40 8 a) HMJr and Hoover discuss - 7/11/40 100 U.S.S.R.: Balances in New York given by Federal Reserve Bank of New York: Cochran memorandum - 7/12/40 131 Ukase making issuance of poor quality or defective industrial products a crime against the State - 7/15/40 284 Three-way arrangement between United States, U.S.S.R., and China: White memorandum - 7/15/40 533 Regraded Unclassified - 1 - (Continued) Book Page War Conditions (Continued) United Kingdom: Military Situation: Reports from London transmitted by Lothian - - 7/11/40, etc. 282 85,180,186, 278,319 Phillips, Sir Frederick: London press comment on visit - 7/12/40 177 Leroy-Beaulieu = If " - 7/12/40 179 Arrives in Halifax accompanied by Bewley - 7/12/40 262 Agenda for meeting discussed by HMJr, Bell, White, Cochran, Viner, and Stewart - - 7/15/40 363,384,510 White House visit to discuss finances and airplane situation suggested by HMJr to General Watson - 7/15/40 508 Cochran memorandum on visit - - 7/15/40 514 HMJr's pencilled notation 518 Norman (Governor, Bank of England) informs Kennedy of Phillips' inability to understand cancellation of credits and Kennedy points out indication of bad feeling between Bank of England and Treasury - 7/15/40 600 Program "to place nearly every form of commercial and financial settlement between sterling area and United States (and Switzerland) on official basis effective July 18" explained in Cochran memorandum - 7/15/40 333 Ward, J. Carlton See War Conditions: Airplanes Wright Aeronautical Corporation See Revenue Revision Regraded Unclassified RE EXCESS PROFITS TAX July 11, 1940 11:00 A.M. Present: Mr. Sargent Mr. Richardson Mr. Chamblin Mr. Sullivan Mr. Foley Sargent: Well, Mr. Secretary, the primary purpose of our visit here 18 to tender any cooperation that we might be able to give through the Association on the tax problem which confronts you. We realize, of course, the fact that it 1s necessary in many ways to provide for raising an additional amount of revenue and we appreciate also the fact that it 1s a very complicated job to do that in such a way as to raise the revenue in a way which will provide a measure which will be administratively as reasonably workable and do as little harm to industry as may be necessary, particularly in respect to not providing any handicaps for the defense industries which we must seek to promote. We appreciated enormously the opportunity offered last year by you to work with you and Mr. Hanes in connection with some general tax proposals and in connection with Social Security matters. In some conferences which we held, as you know, privately and to which we never gave any publicity or anything at all, the fact that we had been in conference with you was also appreciated. We were able to work out some things which we thought afterwards were -- H.M.Jr: It was helpful. Sargent: Resulted in improvements, and we are very willing and desirous, if it would be agreeable to you, to work in the same way with this excess profits tax. Regraded Unclassified 2 - 2 - H.M.Jr: The work you gentlemen did with us on Social Security was distinctly helpful. Well, Mr. Sullivan 1a the man for the Treasury and we have got to the point that you gentlemen saw yesterday. Let me ask you gentlemen, is the Government the first question I want to ask - sufficiently far along 80 that we are actually placing contracts? Sargent: Well, you should know better than we should, Mr. Secretary, but my own guess 1s that - of course, all of these conferences, we understand, outside of the fact that you keep a record for yourself, are not for publication in any way - that there 1s a large amount of talk about the necessity of raising a large amount of additional money, but that as a matter of fact it 1s physically impossible to place contracts fast enough or to provide for the completion of contracts fast enough even after the contracts are placed, to require the expenditure of any large amount of money within, say, & short period of months or anything of that sort. In other words, if you should work out a schedule of the dates when you will probably make the payments of money under all of the contracts, billions of dollars which are placed, they would probably be fairly widely spaced. H.M.Jr: Well, that 1s the impression I had, but the people you are in contact with this proposed legislation on excess profits, 18 that holding them back at all? Sargent: Well, I don't think that is holding it back as much as some other things. For example, the question of specifications and toleranoes in connection with many contracts 1s a very great deterrent, and I understand that Mr. Nelson 18 doing some work endeavoring to get that straightened out. We have run across, for example, many instances where specifications are either woefully in- complete or over-complete. For example, I Regraded Unclassified 3 - 3 - heard the other day a story - you hear many such stories, undoubtedly - of a company which - where some Government people went to them and said, "We want to have some tanks built." "Well, what kind of a tank do you want?" "Well, we don't know exactly, but we want a tank 80 many feet long and 80 many feet wide to carry guns of a certain weight." "Have you any other specifications?" "No, we have none at all. We have & limit of price and we think you ought to be able to do it for about 200 thousand dollars," and that was all the company was given in the effort to work something out, Mr. Secretary. H.M.Jr: It 18 a good story, anyway. By the time I tell it, I will improve on it. Sullivan: I don't think you could, much. H.M.Jr: I guess you are right. Bargent: And then on the other hand I had a man tell me yesterday who was in charge of a large manufacturing plant that some of the Navy people came and they had specifications years ago for a certain radio which was & very fine radio, 1924, and they had the exact speci- fications and wanted some more radios built exactly like that. He said that today there are radios BO far more efficient than that that it 18. perfectly silly to make that particular radio at all. We hear all sorts of incidents of that sort from our members, Mr. Secretary. H.M.Jr: Not too good, is it? Sargent: No, sir. H.M.Jr: Well, I think if, John, you take these gentlemen - theywre very cooperative with the Social Security thing and it 1s a very - it is a two way avenue, both for distributing the facts and getting your constructive criticism, and I haven't had any trouble with their working in silence, which 1s almost impossible in Washington. Regraded Unclassified 4 - 4 - Sargent: We should be very glad to do whatever we can, both in considering principles of these taxes, and efforts to apply principles. H.M.Jr: So I don't know when is a good time for you. Sullivan: Well, I have got three different groups working in three different places now, and I am just milling around. I was asking if they were all here in Washington all of the time or -- H.M.Jr: Well, you fix it up with them. How is that, gentlemen? Chamblin: Mr. Richardson and Mr. Sargent are both in New York. H.M.Jr: They like to come down here. Sargent: We can come down here any time. H.M.Jr: They like our climate. 5 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION Regraded Unclass DATE July 11, 1940 TO Secretary Morgenthau FROM Mr. Foley For the Secretary's Diary At & conference held at Mr. Sullivan's home between 8:30 and 12 o'clock Monday night, July 8th, there were present Messrs. Henderson, Nelson, Forsyth, McReynolds, Ginsburg and Biggers (who came in about 10 o'clock) representing the Advisory Commission of the Council of National Defense, and Messrs. Sullivan, Foley, Paul and Kades of the Treasury Department. The representatives of the Advisory Commission urged that the proposed amortization allowances considered in the office of the Secretary of the Treasury at a conference earlier in the day be approved by the Treasury and submitted to Congress for enactment into law this week without waiting for the submission of an excess profits tax. Mr. Sullivan stated that be thought no time would be lost if the amortization proposal was submitted on July 22 along with the excess profits tax and opposed sending the amortisation proposal to Congress separately. In answering objections that this would mean long delay while hearings were held on the excess profits tax, Mr. Foley pointed out that the two could be separated if it appeared that there would be any real delay and the execution of contracts was actually held up pending enactment of the amortisation deduction. No agree- ment was reached as to when the amortisation proposal should be submitted to Congress. The next point considered was upon whose certification the amortization allowance would be granted by the Commissioner of Internal Revenue. Mr. Sullivan expressed the view that the initial certification of the cost and necessity of the special additional facilities should be made by the Navy and War Departments, as the case might be, and should be concurred in by the Advisory Commission. The representatives of the Advisory Commission felt that the War and Navy Depart= ments would certify anything and that the interests of the Government would be better protected if the Advisory Commission had sole power. Mr. Foley pointed out that the Advisory Commission would have to get its information from the service departments in any event but the representatives of the Advisory Com- mission indicated they thought to require initial certification by the service departments would result in delay. No decision was reached as to what agency should make the certification. A long discussion of the need for special amortisation deductions took place with Mr. Henderson presenting the viewpoint of the Advisory Commission for the most part, supported by Messrs. Biggers and Nelson. Their argument ran to the effect that in order to make investment in new plant capacity attractive to private capital it was essential that the privilege of writing off such plant facilities rapidly be assured and that in this way not only would the national defense program be expedited and redundant capital utilized, but prices would be stabilized and kept from rising without the Government losing any revenue in the long run. 8 -2- Mr. Sullivan stated he was not convinced as to the need for special amortiza- tion allowances of such a liberal character, pointing out that no concern had ever refused a government contract up to date. Mr. Foley indicated he thought a distinction should be drawn between jiga, tools, dies and machinery on the one hand and the acquisition of land and construction of buildings on the other hand and that although a four-year period might be reasonable for machinery it was rather short for permanent structures. Vr. Kades felt that liberal amortization allowances would freeze the competitive position of the larger concerns which would primarily benefit, making it almost impossible for smaller business con- cerns not having the benefit of the allowances to compete. In the absence of effective competition, there was little hope that prices could or would be kept at reasonable levels. Mr. Nelson thought, however, rapid amortisation was very important in stabilizing prices. Mr. Paul declared that since, once the facilities were amortized, no further depreciation could be taken the Treasury would not lose any revenue but Mr. Sulli- van feared that if the Vinson-Trammell Act were repealed and such liberal amortiza- tion allowances permitted, the excess profits tax would not serve the purpose of checking exorbitant war-time profits and raising the revenue anticipated. Mr. Biggers brought up the point that Mr. Jones was not willing to go through with the plan of financing as contemplated in the draft agreement of June 24, 1940 unless the War and Navy Departments would guarantee the manufacturer obtaining & loan from the RFC against loss resulting from the construction of special additional facilities, thus shifting from the RFC to the Treasury the risk of any loss. Mr. Foley pointed out that this was inconsistent with the arrangement which Mr. Jones had entered into with Mr. Knudsen, that it was not fair to the contract- ing officers to impose such a responsibility upon them, and that it was not fit for the RFC to make money from the national defense program as it had made profits out of unemployment. The question of carrying over the 25 percent provision from one year to an- other up to 75 percent was also considered. Mr. Biggers favored this carry-over because of its flexibility and because there might not be much income in the first year, but he thought B. modification might be made whereby no more than 25 percent deduction could be taken in any one year but the taking of the deduc- tion could be postponed at least through the fifth year. It was suggested that if the principle of amortisation allowances was accepted the percentage permitted to be deducted had no true relationship to the amount of net income and that from this standpoint it would be logical to permit some form of carry-over. The fundamental question was whether four years was & reasonable measure of the emergency period and this was reconsidered in conjunction with the possibility of & carry-over without any decision being reached. 9.11.7L. Regraded Unclassified 7 Miss Chauncey: ) Mrs. Klotz gave me this last night - said it is very confidential - for the diary. She also said she thinks the attachment goes with it. McH 7/12 8 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE July 11, 1940 TO Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL The Credit Suisse of Zurich established in New York last year an organization known as the Swiss American Corporation at 24-26 Pine Street. This is the old home of Speyer and Company, and part of this organisation was transformed into the new concern. Mr. George Lindsay, formerly a Speyer partner, is the leading American officer in the Swiss American Corporation. Mr. Straessle, from the home office at Zurich, is here as the head bank's representative, The above-mentioned concern handles the security end of the Credit Suisse business in the United States. Just recently an agency of the Credit Suisse has also been opened at the same address in New York. B.M.P. On receipt of this I called J. Edgar Hoover and asked him to check personally on this organization and he suggested, and I readily concurred that we should supervise. H. M. Jr. (Memorandum handed by Mr. Pinsent of the British Embassy to 3 Mr. Cochran of the Treasury on July 1, 1940.) COPY June 8th. 1. Some Soviet gold, after being sent to the Reichsbank, Berlin, is sent by the latter to. the Société de Banque Suisse, Locle, (Canton of Neufchatel), where the metal is refined and then shipped to the United States, via Genoa. We have just learned that, following an approach made to the directors of the Société de Banque Suisse, these have pledged themselves not to take part in Soviet or German gold traffic any longer, and we ask you to watch the activities of the Société de Banque Suisse, and to let us know if this bank respects or does not respect its pledge to the French authorities. 2. The Reichsbank is supposed to be contacting the "Crédit Suisse" of Zurich to administer the dollar holdings of Germany in the United States. The Denish banks have endeavoured to transfer their holdings to the "Crédit Suisse" of Zurich. We wish you would secure all information as to the activities of the Credit Suisse, and to advise us of all and any operations which would appear to be of en irregular nature. Bio 10 RE DEPARTURE PERMITS July 11, 1940. 11:30 a.m. Present: Mr. Bell Mr. Cairns Mr. Young Mr. Harris H.M.Jr: Now, there is one ship for Casa Blanca? Cairns: Here is a list of them. The first two have gone. The third has left but can be grabbed. From here on they are being held. H.M.Jr: "On July 2, 1940, the Assistant Collector of Customs, Port Arthur, Texas, requested per- mission for the departure of the Spanish Tanker Campuzano for Malaga, Barcelona and Valencia, Spain; cargo, refined petroleum products. This request was referred to Mr. Gaston, and he personally authorized the issuance of a departure permit.' Now, is that being held? Cairns: No, that left. The second one has gone. H.M.Jr: "On July 5, request for a departure permit was received from the Collector of Customs, Port Arthur, Texas, for the Panamanian Steamer Loeta --" She has gone? Cairns: Yes. H.M.Jr: And on July 9 -- Cairns: That is an American vessel, the Nevada, which has gone but can be detained at Key West today. H.M.Jr: At Key West? Cairns: Yes, if we act soon enough. H.M.Jr: Now, wait a minute. There is another one at Port Arthur, isn't there? There are two vessels with oil? Cairns: Three with oil. Regraded Unclassified 11 - 2 - H.M.Jr: Where is the third? Cairns: July 10, the Swedish tanker, Bera -- H.M.Jr: Two were U. S. flags? Cairns: Yes. H.M.Jr: Two vessels with U. S. flags with oil for - going to Spain? Caims: Yes. H.M.Jr: Now, which is the next one? Cairns: The Swedish tanker, Bera, for Spain with oil. H.M.Jr: I don't want to mix up the U. S. flag and the Swedish flag. Cairns: Those are the only American vessels involved. H.M.Jr: Then we have got the famous Vel-Ragnar and then we have got this Casa Blanca thing. Harris: I think that is the next to the last there. It has sugar. H.M.Jr: A Greek vessel with sugar for Casa Blanca. Now, the Vel-Ragnar is being held. What about this Greek vessel, is she being held? Cairns: That is being held; one American vessel is being held, and the Swedish vessel is being held. H.M.Jr: And the Swedish vessel? Cairns: Yes. Bell: Permits have been denied or delayed? Cairns: Delayed. H.M.Jr: I guess I have learned my lesson now so I can talk to Hull. Regraded Unclassified 12 - 3 - Young: The Vel-Ragnar, I understand that the Swedes are going to unload her unless she clears by one o'clock today. Harris: That may have come from a suggestion I made to them that -- H.M.Jr: What was that? Harris: Well, I told O'Keefe if they came in to see him to tell them that it might be just as well to put the munitions on the dock and let the boat go. They were anxious to get the boat off. So maybe they have adopted that. H.M.Jr: Where did you hear it from? Young: I heard it through MacMoreland, who got it from one of his Swedish friends. H.M.Jr: Too much Smorgasbord around here. Young: Joe Green also had it from one of his Swedes. Harris: Well, it seemed rather silly to me to hold up a ship for - what is it, 40 or 50 tons, and that can just as well go on the next boat if it is cleared and they might just as well get their boat out. H.M.Jr: How big a ship is this? Harris: I imagine she has probably got 5500 tons. H.M.Jr: And the ammunition amounts to -- Harris: 50 tons, at the most, isn't it? Young: I don't know what the tonnage is. It is about five million rounds of ammunition. Cairns: I just have 625 cases of ammunition. Harris: No, it is 1625 cases. Regraded Unclassified 13 - 4 - Young: That 18 just three and a quarter million and there is two million rounds of other stuff in addition. Harris: But those aren't at the dock, are they? Young: Along with 33,000 gas masks. H.M.Jr: Well, we wouldn't do anything about the gas masks, would we? Young: No, they don't require a license. They are defensive material. Bell: It is a fine line you draw. (Telephone conversation with Secretary Hull follows:) Regraded Unclassified 14 July 11, 1940 11:30 a.m. H.M.Jr: Hello. Operator: Secretary Hull coming on. H.M.Jr: Thank you. Cordell Hull: Henry? H.M.Jr: Yes. H: I just got -- I've been at work all morning on twenty things, including that oil ship of the Texas company, and I understand that the Maritime Commission is telling them and all like them that it's dangerous to go into that area and they're opposed to their going. H.M.Jr: I didn't know that. H: That they haven't got exact statutory law to put the thumb screws to them, but that that is their position 80 I'm inclined to think that if you would talk with them and get that information at first hand you could discourage these fellows and tell them that we -- give them the reasons that the Maritime Commission has. H.M.Jr: Yeah, but I've got the -- to issue the license or not to issue the license. H: Well, then, you -- yes. H.M.Jr: You see? I mean, I can't argue with the fellows. I mean, supposing they say, well, eay yes or no to us and ...... H: What ground can you refuse license on? H.M.Jr: Gosh, I don't know. I guess just not do it, that's all. B: What do you think of your lawyer talking with the Maritime Commission and seeing if there is -- see if you can get a toe hold on that license thing. Unclassified 15 - 2 - H.M.Jr: Well ...... H: I'd like to see them discourage it in every way possible, I just ...... H.M.Jr: Well, let's put it this way. If after talking to the Maritime Commission, I decide not to let American flagships -- give them clearance for any reason, you see? H: Yeah. H.M.Jr: Would you feel perfectly happy about it? H: Why, I'd feel all right. H.M.Jr: That's all I want to know. H: Your lawyer will ..... H.M.Jr: Well, I've got plenary power. H: I see. You have that power BO there's no comeback no matter what your ground 1s. H.M.Jr: No. H: I see. H.M.Jr: I'm all right on that. H: Yes, all right, Henry. H.M.Jr: Now, just a minute while I've got you, please. H: Yeah. H.M.Jr: That takes care of these U.S. flagships, you see, with 011. Now we're holding a Swedish ship loaded with oil for Spain. H: Well, now, I suggested this a while ago to somebody, it came in, representing I think Maxwell's office, maybe. I said, we have already issued a license and that's little stuff and we could just in order to not have any ex post facto controversies we could let that go and notify the British 80 they can pick it up anywhere they want to. Regraded Unclassified 1S - 3 - H.M.Jr: Well, I ..... H: And get out of it in that fashion because that would be contraband and the British would get it for nothing. H.M.Jr: Well, what I think is going to happen, I just got this this last minute, that the Swedes have figured out it isn't worthwhile and they're going to most likely unload it on their own initiative. H: Oh, I see. H.M.Jr: So that would take ...... H: I mean, they know they'd probably be captured. H.M.Jr: Yes. H: I thought that just to turn it over to the British that way would get us out of a -- the bother of dealing with an ex post facto situation. H.M.Jr: Right. Now, we've got another Swedish vessel that's got oil on it for Spain. H: Yeah. Now, that's like the Texas one. H.M.Jr: Yes, but this is under a Swedish flag. H: Yes. Well, suppose if your man after he talks with the Maritime Commission fully, -- if there's anything else I can discues in the light of what they get over there, I'll be mighty glad to do it. H.M.Jr: Yeah. And then we've got a Greek vessel with sugar for Casa Blanca. H: Oh, I see. I see. Those things are going to become a nuisance, aren't they? H.M.Jr: They're a nuisance right now. H: Yeah. Well, let's keep in -- I think we need to keep in touch with this Maritime Commission and see what they've got on facts about danger and other things. 17 - 4 - H.M.Jr: Cordell, is there some fellow over there you'd like me to work with on this or would you rather have me call you direct? H: Why, it's all right to -- would you like to work with Berle? H.M.Jr: Berle and I get along 0. K. H: Well, all right. Suppose you just work with him on it. H.M.Jr: That suits me. H: And I'll keep in touch with him. H.M.Jr: Good. H: Yeah. H.M.Jr: Thank you. H: All right, sir. 13 - 5 - Harris: The Maritime Commission has no jurisdiction over a Greek ship loading sugar to Casa Blanca. H.M.Jr: I know it, but you could see - he said this is getting to be a damned nuisance. Harris: We reached that conclusion some time ago. Cairns: Now, there is one simple way to take care of American vessels, if Mr. Hull wants to do it. He has got the power to make a qualified combat zone. He has never done it. All the combat zones are absolute. He can make a qualified combat zone on the coast of Spain and say that American vessels carrying the following cargoes cannot go into those zones and he can list petroleum and whatever else he wants to list. H.M.Jr: How about a Swedish vessel? Caims: Then we will have to rely on the statute we are operating under now. Harris: I checked yesterday with the British Embassy and they are not giving navicerts to any of this oil for Spain, which means that they are certainly going to be picked up. I think, Mr. Secretary, if I could suggest this, that the idea I gave you the other day is the best one. If you don't want oil to go to Spain, tell the oil people. H.M.Jr: Well, I have started that. (Telephone conversation with Admiral Land follows:) Regraded Unclassified 19 July 11, 1940 11:35 a.m. H.M.Jr: Hello. Operator: Admiral Land. Go ahead. H.M.Jr: Hello. Admiral Emory S. Land: Yes, sir. Good morning, Mr. Secretary. H.M.Jr: How are you? L: Very well. H.M.Jr: I Just got through talking to the Secretary of State and he said somebody told him over at the Maritime Commission that you fellows felt it would be a little dangerous for American flagships to take oil over to Spain. L: I don't know where -- I don't know that any- body had said that. H.M.Jr: Well, I'm just repeating what he just told me two minutes ago. L: I don't think the question of danger came along unless you mean by that that somebody might mean that it was rather inimical to our own defense in that the oil itself would probably not reside in Spain very long but would go to some unpleasant belligerents. H.M.Jr: No, I think they meant that the ships might be sunk. L: Well, it didn't emanate in any way from an official source -- it may be an individual's opinion. I don't know anything about it, a.s a matter of fact, except that it was discussed generally there that with Italian and German submarines operating in and around Gibralter that something might happen, but then anybody could prophesy that. Officially, there's no such action or no such opinion been expressed by the Commission. Individuals may have done 80. Regraded Unclassified 20 - 2 - H.M.Jr: Well, now, look. We've got two American tankers and we're going to hold them up, see? Hello? L: Yes. H.M.Jr: With oil for Spain and I want your backing and Mr. Hull said he'd be perfectly happy if we did it. L: (Laughs). That's all right with me, I was -- is this on the basis of danger or policy? H.M.Jr: Policy. L: O. K. H.M.Jr: Policy. I'm not going to say anything publicly, but if it got into an argument, I mean, in the -- there won't be any argument, but I just want to be able to say, because Mr. Hull said I could call you up, that you're in sympathy with what we're doing. L: Oh, yes. As a matter of policy, absolutely. H.M.Jr: O. K.? L: Yes, sir. H.M.Jr: Right. Thank you. L: All right. 21 - 6 - Harris: He overlooked one very fundamental point and that is, he talked of danger. The danger lies, Mr. Secretary, not in being sunk, as I see it, but being picked up - you see, they are not navicerted and therefore they will be picked up by the British and they will be taken in either to Gibraltar or to Falmouth or some place like that, which means that you are taking an American ship into a very dangerous zone. If you take them into Falmouth, into the barred zone and then if you get an American ship sunk in those waters, then you are in trouble. Cairna: I am afraid, Basil, that if we rely on danger, then the charge will be if there is danger Mr. Hull should make a combat zone. H.M.Jr: What do you call it? Cairns: Qualified combat zone. Harris: I think that is pretty sound. Cairns: That will be a new 1dea to the State Department, but that is perfectly possible, as I understand the law. Harris: You don't want to make it just Spain, do you? Why not make it Portugal as well. Cairns: The whole coast. The statute states the Presi- dent has the power to make combat zones under such rules and regulations as he may proscribe. Young: There isn't much point in our going over and trying to see Hull. H.M.Jr: No. Harris: You know that I talked with Berle yesterday and Mr. Berle's views coincide strongly with mine. He said I could state his views. I didn't bring up this thought of a qualified danger zone. Regraded Unclassified 22 - 7 - Cairns: That is an original thought, but I think it 1s possible under the statute. Young: I think it 1s a darned good one. Cairns: If you can agree on the list of commodities. American vessels are permitted to go into this zone provided they don't carry the following commodities, and we list commodities the British are apt to seize. The theory is the British might take the vessel if it has petroleum on it. Young: Let 8. few go in with what you know is all right. Cairns: You can say the vessels carrying the following commodities cannot go in. Harris: It is easier to bar two or three. Cairns: Say all arms, ammunition, and implements of war and petroleum, whatever else you want to say. Take everything in the President's proclamation and then add to it. H.M.Jr: What about Casa Blanca? Cairns: Extend the combat zone right down the coast. (Telephone conversation with Mr. Berle follows:) Regraded Unclassified 23 July 11, 1940 11:40 a.m. H.M.Jr: Hello. Operator: Mr. Berle is with Secretary Hull. H.M.Jr: Tell him I -- who's there, on the wire now? Operator: In his office? H.M.Jr: No, Mr. Hull's office. Operator: Oh. I'll ring back and get Mr. Hull's office. H.M.Jr: What? Operator: I'll call back and get Mr. Hull's office. I have Mr. Berle's office on the line now. H.M.Jr: Tell the man to go in and ask Mr. Berle if he can talk to me on the phone that Mr. Hull said I should talk to Mr. Berle. Operator: All right. H.M.Jr: See? Operator: Right. H.M.Jr: Do it through Mr. Hull's secretary. Tell him that Mr. Hull said I should talk to Mr. Berle. Operator: Right. 11:41 a.m. H.M.Jr: Hello. Operator: Mr. Berle. H.M.Jr: Hello. Regraded Unclassified 24 - 2 - Adolph Berle: Hello, Henry. How are you? H.M.Jr: I'm fine. B: That's splendid. H.M.Jr: I was just talking to Mr. Hull about some of these ships -- were you there? B: Right. Yes. H.M.Jr: Now, look, we've got to get together with this stuff and we can't keep passing the buck all the time. B: Well, that's what I think. H.M.Jr: And I think Cabinet will be over early today -- could you come over here around four? B: I will do so. Four o'clock. H.M.Jr: Four o'clock, yeah. And let me just give you this thought that you can be thinking about. The boys here have developed an idea of a qualified combat zone, in which they'd specify that in that qualified combat zone such things as 011, et cetera, could not go in. B: Yeah. H.M.Jr: You see? B: Yeah. H.M.Jr: On American flagships. B: That's right. H.M.Jr: Because this idea -- if we're going to let all this oil go into Spain, we'll be as bad as the English were with Italy in Ethiopia. B: Yeah. All right. 25 - 3 - H.M.Jr: And somebody's got to help me on this stuff. I mean, we can't just keep passing this thing, you know. B: Clearly not. H.M.Jr: What? B: Clearly not. H.M.Jr: So I'll be ready at four if you'd come. B: I'll do that with pleasure. H.M.Jr: Thank you. B: Right. 26 - 8 - Harris: You could solve this by just simply adding petroleum to the President's proclamation as regards Spain and Portugal. Cairns: Yes, but I think we might want to add other commodities as well. I am not in a position to speak on what commodities, but somebody in the Government ought to know. H.M.Jr: Well, look, in the meantime we sit on every- thing just as we are. We don't let anything go. Cairns: Perhaps I ought to bring that tanker into Key West, the American tanker that is due to pass Key West today. H.M.Jr: Bring her in. Regraded Unclassified 27 July 11, 1940 11:45 a.m. H.M.Jr: Hello. General Watson: Yeah. H.M.Jr: Henry Morgenthau. W: Did you call me? H.M.Jr: Oh, couple of hours ago. W: Well, I just this second got to work. Say, look here. H.M.Jr: Where you been, honey? W: I've been in there talking to the President, boy. (Laughs). H.M.Jr: oh, is that 80? (Laughs). You just come up for air every two hours -- every two hours? W: Yeah. I got a thing over from the Secretary of State and he turned that thing down on two counts. H.M.Jr: Yeah. And you know what's happening? W: What? H.M.Jr: I just got through talking to them -- (laughs) -- and we've scared the Swedes so we think they're going to unload the damn stuff and then we're going to let them sail. W: Good. Well, that's all right then. H.M.Jr: They're going to do it on ...... W: He, the Secretary of State, went into consultation with his legal adviser and he sent over here and advised the President not to do any more. But. they promised to go into each one of those con- tracts permitting certain cargoes to go. They're going to study them right immediately. raded Unclassified 28 - 2 - H.M.Jr: Well, ...... W: So let me tell them to just take no further steps then. H.M.Jr: No, don't -- hello. W: Yeah. H.M.Jr: If you'll sit tight, see, and do nothing, I think in a couple of hours I'm going to have that ammunition off the boat and do it BO the Swedes won't kick. W: All right. I won't do 8. move then. H.M.Jr: You just go on and do what you were doing the last two hours. W: (Laughs). All right. All right. 'Bye. H.M.Jr: All right. Good-bye. 29 July 11, 1940 On July 2, 1940, the Assistant Collector of Customs, Port Arthur, Texas, requested permission for the departure of the Spanish Tanker CAMPUZANO for Malaga, Barcelona and Valencia, Spain; cargo, refined petroleum products. This request was referred to Mr. Gaston, and he personally authorized the issuance of a departure permit. On July 5, request for & departure permit was received from the Collector of Customs, Port Arthur, Texas, for the Panamanian Steam LOETA for Vigo and Bilbao, Spain; cargo, fuel oil. Apparently based upon the case of the CAMPUZANO, a departure permit was issued. On July 9, a request was received from the Assistant Collector of Customs, Port Arthur, Texas, for a departure permit for the American Steamship NEVADA for La Caruna and Bilbao, Spain, sailing the afternoon of July 9. The owner was given as the Texas Company, and the cargo as petroleum products in bulk and in packages. Upon the basis of the above two cases, a departure permit was issued. It 1s believed that it is possible, however, to detain the vessel at Key West today. On July 10, & request for departure permit was received from the Collector of Customs, Port Arthur, Texas, for the American Tanker ARYAN for La Caruna and Santander, Spain. The ARYAN is a small tanker of 400 feet, and it 8 cargo is petroleum products in bulk or in packages. No departure permit has been issued. The ARYAN plans to sail the morning of July 13. On July 10, a request for departure permit was received from the Collector of Customs, Port Arthur, Texas, for the Swedish Motor Tanker BERA for La Caruna and Vigo, Spain. It is carrying a cargo of fuel oil and other petroleum products in bulk and in packages. It 1s a vessel of 6787 net tons, and wishes to sail immediately. No departure permit has been granted. On July 10, & request for departure permit was received from the Collector of Customs, Galveston, Texas, for the Greek Vessel LACONIKOS. The LACONIKOS TWO plans to sail on July 11. No departure permit has been granted. On July 2, a departure permit was given the Norwegian Vessel MATHILDA, carrying a cargo of refined sugar from New Orleans to Casa Blanca. The Finnish Vessel VEL-RAGNAR is awaiting B. departure permit in New York Harbor. It carries 1625 cases of ammunition for the Swedish Government. mil. mg.79 Regraded Unclassified 30 July 11, 1940. Dear General Marshall: I as conding you herevith, for your confidential use, the following reports: Part I - Airplanes Deliveries of and New Orders for Airplanes, May 1 - July 6, 1940; Unfilled Orders and Estimated Deliveries on July 6. 1940. Part II - Airplane Ragines Deliveries of and New Orders for Airplane Engines, May 1. July 6, 1940: Unfilled Orders and Estimated Deliveries on July 6, 1940. These tables carry forward through July 6, 1940 the information furnished you last week. Sincerely, (Signed) H. Morgenthau, Jr. General George c. Marshall, Chief of Staff, War Department, Vashington, D. c. M FILE COPY By Messenger 9550m7/12 Regraded Unclassified 31 July 11, 1940. her Mairal Starks I - sending you herevith, for your confidential use, the following reported Part I - Airplanes Deliveries of and New Orders for Airplanes, Neg 1 - July 6, 1940: Unfilled Orders and Notimated Deliveries on July 6, 1940. Part = - Airplane Ingines Deliveries of and New Orders for Airplane Ingines, May 1 - July 6, 19401 Unfilled Orders and Retimated Deliveries 45 July 6, 1940. These tables carry forward through July 6, 1940 the information furnished you last week. Statembly, (Signed) H. Morgenthau, JI. Makral Harold 1. Stark, Chief of Noral Operations, Informat, Day (ack'd 7-12) Vashington, D. c. Allo FILE COPY By Messenger 9'5m 7/12 Regraded Unclassifie 32 July 11, 1940. I 1 É I - sending you herevith, for your confidential use, two espies of each of the following reporter Part I - Airplanes Deliveries of and New Orders for Airplance, May 1 - July 6, 1940: Unfilled Orders and Estimated Deliveries on July 6, 1940. Part II - Airplane Regises Deliveries of and 1n Orders for Airplane Engines, May 1 - July 6. 1940: Unfilled Orders and Estimated Deliveries on July 6, 1940. These tables carry forward through July 6, 1940 the information furnished you last week. Sincerely. (Signed) H. Morgenthau, Jr. Mr. Villiam s. Imion, Chairman, Advisory Comission to the Council of National Dafence, Room 2262, Federal Receive Building, Vechington, D. c. DA FILE COPY By Messenger 9tom 7/12 Regraded Unclassified 33 July 11, 1940 gone On July 2, 1940, the Assistant Collector of Customs, Port Arthur, Texas, requested permission for the departure of the Spanish Tanker CAMPUZANO for Malaga, Barcelona and Valencia, Spain; cargo, refined pstroleum products. This request was referred to Mr. Gaston, and he personally authorized the issuance of a departure permit. gone On July 5, request for a departure permit was received from the Collector of Customs, Port Arthur, Texas, for the Panamenian Steamer LOETA for Vigo and Bilbao, Spain; cargo, fuel oil. Apparently based upon the case of the CAMPUZANO, a departure permit was issued. On July 9, 8 request was received from the Assistant Collector of Customs, Port Arthur, Texas, for e deperture permit for the American Steamship NEVADA for La Caruna and Bilbao, Spain, sailing the afternoon of July 9. The owner was given as the Texas Company, and the cargo as petroleum products in bulk and in packages. Upon the basis of the above two cases, a departure permit was issued. It 18 believed that it is possible, however, to detain the vessel at Key West today. On July 10, a request for departure permit was received from the Collector of Customs, Port Arthur, Texas, for the American Tanker ARYAN for La Caruna and Santander, Spain. The ARYAN is a small tanker of 400 feet, and its cargo is petroleum products in bulk or in packages. No departure permit has been issued. The ARYAN plans to sail the morning of July 13. On July 10, 8 request for departure permit was received from the Collector of Customs, Port Arthur, Texas, for the Swedish Motor Tanker BERA for La Caruna and Vigo, Spain. It is carrying a cargo of fuel oil and other petroleum products in bulk and in packages. It is a vessel of 6787 net tons, and wishes to sail immediately. No departure permit has been granted. On July 10, a request for departure permit was received from the Collector of Customs, Galveston, Texas, for the Greek Vessel LACONIKOS TWO, carrying a cargo of refined sugar to Casa Blanca, French Morocco. The LACONIKOS TWO plans to sail on July 11. No departure permit has been granted. On July 2, a departure permit was given the Norwegien Vessel MATHILDA, carrying a cargo of refined sugar from New Orleans to Casa Blanca. The Finnish Vessel VEL-RAGNAR is awaiting a departure permit in New York Harber. It carries 1625 cases of ammunition for the Swedish Government. July 11,1980 34 (1) The problem is - In view of this country's intention to prepare itself for defense, do we want to allow oil (a fundamental necessity of war) to reach those countries most likely to attack us. (2) If TO prevent exportation of oil from U. 8. to Cenary Islands and/or Spain, whether on U. S. ships or foreign ships will this solve the problem? (No) (3) Will not same companies who export oil from U. 8. ports, if prevented, simply export from Central and South American fields? (Probably) (4) Who are these companies? (1) Gulf 011 (3) Texas Co. (5) Std. of New York (2) Shell 011 Co. (4) Std. of New Jersey (6) ? (5) Possible Procedure - Call representatives of above companies to Washington, outline Government's policy and ask their cooperation. (It is indicated they would agree.) Have British not allow charters to British, or other foreign flag tankers which they control, to ply in this trade. Have British Government seize all other oil ships in above waters. Basil Harris 35 (1) The problem is - In view of this country's intention to prepare itself for defense, do we want to allow oil (a fundemental necessity of war) to reach those countries most likely to attack w. (2) If we prevent exportation of oil from U. a. to Cenery Islands and/or Spain, whether on U. 8. ships or foreign ships will this solve the problem? (No) (3) Will not sume companies who export oil from U. s. ports, if prevented, simply export from Central and South American fields? (Probably) (4) Who are these companies? (1) Gulf 011 (3) Texas Co. (5) Std. of New York (8) Shell Oil Co. (4) Std. of New Jersey (6) , (5) Possible Procedure - Call representatives of above companies to Washington, outline Government's policy and ask their cooperation. (It 10 indicated they would agree.) Have British not allow charters to British, or other foreign flag tankers which they control, to ply in this trade. Have British Government seize all other oil ships in above waters. Regraded Unclassified (1) The problem 18 - In view of this country's intention to prepare itself for defense, do we want to allow oil (a fundamental necessity of war) to reach those countries most likely to attack us. (2) If we prevent exportation of oil from U. 8. to Cenary Islands end/or Spain, whether on U. 8. ships or foreign ships will this solve the problem? (No) (3) will not came companies who export oil from U. 8. ports, if prevented, simply export from Central and South American fields? (Probably) (4) Who are these companies? (1) Gulf 011 (3) Texas Co. (0) Std. of New York (2) Shell 011 Co. (4) Std. of New Jersey (6) , (5) Possible Procedure - Call representatives of above companies to Washington, outline Government's policy and ask their cooperation. (It 10 indicated they would agree.) Have British not allow charters to British, or other foreign flag tankers which they control, to ply in this trade. Have British Goverment soise all other oil ships in above waters. Regraded Unclassified 37 (1) The problem 18 - In view of this country's invention to propare itself for defense, do we want to allow oil (a fundemental necessity of war) to reach those countries most likely to attack us. (2) If we prevent exportation of oil from U. 8. to Canary Islands end/or Spain, whether on U. 8. ships or foreign ships will this solve the problem? (No) (3) Will not come companies who export oil from U. 8. ports, if prevented, simply export from Central and South American fields? (Probably) (4) Who are these companies? (1) Gulf 011 (3) Texas Co. (8) Std. of New York (2) Shell 011 Co. (4) Std. of New Jersey (6) 1 (5) Possible Procedure - Call representatives of above companies to Washington, outline Government's policy and ask their occperation. (It is indicated they would agree.) Have British not allow charters to British, or other foreign flag tenkers which they control, to ply in this trade. Have British Government soise all other oil ships in above waters. Regraded Unclassified 38 (1) The problem 10 - Is view of this country's intention to propare itself for defense, do w went to allow oil (a fundemental necessity of war) to read those countries meet likely to attack w. (a) If we provent expertation of oil from U. a. to Camery Islands en4/or Spain, whether on U. s. skips or foreign ships will this solve the problem? (No) (a) will not - companies who export oil from U. a. porte, if prevented, simply export from Central and South American fields? (Probably) (4) the are those companies? (1) Culf 012 (5) Texas Co. (5) Std. of New York (a) Shell 011 Go. (4) Std. of New Jersey (s) , (8) Possible Procedure - Call representatives of above companies to Washington, outline Government's policy and sak their corporation. (It 10 indicated they would agree.) Have Britten not allow charters to British, or other foreign flag tankers which they control, to ply in this trade. Have British Government seise all other oil abige in above waters. Regraded Unclassified 39 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE July 11, 1940 TO Secretary Morgenthau FROM Mr. Cochram CONFIDENTIAL The downward movement in sterling continued today. From an opening of 3.73. the pound declined, with no appreciable interruption, to a low of 3.66-1/2 at the close. The latter rate was 7-1/2# below yesterday's final quotation. Heavier offerings of sterling by foreign banks appeared as the feature in today's reported turnover figures. Sales of spot sterling by the six reporting banks totaled £286,000. from the following sources: By commercial concerns & 69,000 By foreign banks (Far East, South America and Europe) £ 217,000 Total e 286,000 Purchases of spot sterling amounted to £118,000, as indicated below: By commercial concerns £ 102,000 By foreign banks (South America and Far East) & 16,000 Total £ 118,000 The Guaranty Trust Company reported that it had sold cotton bills totaling 274,000 to the British Control on the basis of the official rate of 4.02-1/2. The Irving Trust Company stated that it had purchased £4,000 from the British Control at the official rate of 4.03-1/2, the funds to be used to pay for shipments of paddles. The Canadian dollar was quoted at a elightly better rate. After reaching discount of 14% in mid-afternoom, it reacted to 14-1/4% at the close, as compared with yesterday's closing discount of 14-5/8% The other currencies closed as follows: Swiss franc .2267 Lira .0505 Reichsmark .4004 Cuban peso 9-13/16 $ discount Mexican peso .1990 bid, .2020 offered. 40 - 2 - We purchased $1,375,000 in gold from the earmarked account of the Central Bank of the Colombian Republic. The Federal Reserve Bank of New York reported that the Bank of Brasil shipped $2,434,000 in gold from Brasil to the Federal for its account as fiscal agent of the Brasilian Government. The State Department forwarded to us a cable stating that the following two shipments of gold would be made from England, both of which are for sale to the U. S. Assay Office: $356,000 shipped by the Midland Bank, London, to the Irving Trust Company, New York. 71,000 shipped by Samuel Montagu, London, to the Irving Trust Company, New York. $427,000 Total The Bombay gold price rose the equivalent of 84 to $33.89. Spot silver in Bombay vas equivalent to 43.77#. off 3/16#. In London, the prices fixed for spot and forward silver were both 1/8d lower at 21-13/16d and 21-5/8d respectively. The U. S. equivalents were 39.66# and 39.35#. Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44. The Treasury's purchase price for foreign silver was also unchanged at 35#. There were no purchases of silver made by us today. BMR. CONFIDENTIAL aded Unclassified 41 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE 7/11'40 TO Secretary Morgenthau FROM Mr. Foley Subject: The Licensing of Exports of Military Equipment, etc., Under the Neutrality Act and Under the Embargo Provisions, Public--No. 703--76th Congress. I. Both the procedure and purpose for licenses under the Neutrality Act and the Embargo Act are and should be completely different. Under the Neutrality Act no discretion is given in connection with the granting or denial of a license for the export of arms, munitions and implements of war. Under the Embargo Act all of the materiel and equipment proclaimed by the President 1s not supposed to be granted a license for export unless in the discretion of the President or someone delegated to act on his behalf the proposed exportation would not be detrimental to the interests of the national defense. II. Once a person has registered properly under the Neutrality Act and the exportation would not violate the Neutrality Act or other law of the United States or a treaty to which the United States is a party, then the license must be issued. The relevant provision of the Neutrality Act (Public-- No. 54--76th Congress) provides as follows in Section 12(f): Regraded Unclassified 42 - 2 - "Licenses shall be issued by the Secretary of State to persons who have registered as herein provided for, except in cases of export or import licenses there the export of arms, amminition, or implements of war would be in violation of this joint resolution or any other law of the United States, or of a treaty to which the United States is a party, in which cases such licenses shall not be issued; but a valid license issued under the authority of section 2 of the joint resolution of August 31, 1935, or section 5 of the joint resolution of August 31, 1935, as amended, shall be considered to be a valid license issued under this subsection, and shall remain valid for the same period as if this joint resolution had not been enacted." III. The purpose of the discretionary powers given to the President to prohibit or curtail exports of military equipment, etc., under Public--No. 703--76th Congress [H.R. 98507 is to protect the national defense. The relevant section of Public--No. 703 provides as follows: "Sec. 6. Whenever the President determines that it 18 necessary in the interest of national defense to prohibit or curtail the exportation of any military equipment or munitions, or component parts thereof, or machinery, tools, or material, or supplies necessary for the manufacture, servicing, or operation thereof, he may by proclamation prohibit or curtail such exportation, except under such rules and regulations as he shall prescribe. Any such proclamation shall describe the articles or materials included in the prohibition or curtailment contained therein. In case of the violation of any provision of eny proclamation, or of any rule or regulation, issued hereunder, such violator or violators, upon conviction, shall be punished by a fine of not more than $10,000, or by imprisonment for not more than two years, or by both such fine and imprisonment. Regraded Unclassified 43 - 3 - The authority granted in this section shall terminate June 30, 1942, unless the Congress shall otherwise provide." Orderly and effective administration would seem to require that the issuance of a license under the Embargo Act be required prior to the issuance of a license under the Neutrality Act. If in the interests of the national defense a license is denied no license need be or could legally be issued under the Neutrality Act. The Neutrality Act provides that a license cannot be issued where it would be in violation of a law of the United States. Exportation prohibited under the Embargo Act would thus prevent the issuance of a license under the Neutrality Act. E.,1.7h 44 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE July 11, 1940. TO Secretary Morgenthau FROM Mr. Foley A long step toward solving the problem of amortizing the cost of acquiring new facilities by private manufacturers who participate in the national defense program is taken by a ruling about to be made by the Commissioner of Internal Revenue in the case of the Wright Aeronautical Corporation based upon the fol- lowing facts: 1. The RFC by letter dated June 20, 1940, addressed to Wright has agreed to lend to a subsidiary of Wright the sum of $33,500,000 to be repaid within eight years at 4 percent from the proceeds of the sale of aircraft engines to the Government on the basis of $800.00 per engine. 2. The Wright subsidiary will receive $33,350,000 for the pur- pose of constructing and equipping a new plant. The remaining $150,000 will be expended to acquire the site for the new plant, the title to which will be either in the RFC, or in a subsidiary of the RFC, which will lease the site to the Wright subsidiary for the eight year period of the loan at an annual rental of $6,000. The Wright subsidiary will have the option to renew the lease of the ground for eight years. 3. The loan by the RFC to the Wright subsidiary will be secured by a first mortgage on the leasehold (i.e. the buildings and the machinery) but, like railroad equipment trusts and bonds of public authorities like the Triborough Bridge Authority, will not be secured by the general credit of the Wright Aeronautical Corporation itself. 40 Since Wright Aeronuatical Corporation has more than doubled its productive capacity in recent years and contemplates this further expan- sion only because of the existing national defense program, it can not be said that there is any reasonable certainty that the lease of the ground will be newed at the end of the eight year period. Consequently, the Wright subsidiary is entitled to spread the cost of the buildings and the machinery (1.e. $33,350,000) over the eight year period, with- out taking into account the right of renewal, under existing Treasury regulations and court decisions. This deduction under the regulations (Regulations 103, $19.23(a)-10) is in lieu of depreciation and is entire- ly satisfactory to Wright Aeronautical Corporation, as stated in & letter dated July 3, 1940. 9.11.7h. Regraded Unclassified 45 July 11, 1940. MEMORANDUM FOR THE SECRETARY'S DIARY. At 5 o'clock this afternoon there was B conference in Secretary Morgenthau's office. Those present were Secretary Morgenthau, William Knudsen and Ed Foley. Mr. Knudsen said that Assistant Secretary of War Louis Johnson refused to sign contracts embodying suggestions agreed upon at the White House yesterday in regard to legislation to be introduced in the near future to afford special amortization treatment for additional plant facilities upon certification that such facilities were necessary for national defense purposes. Secretary Morgenthau advised Mr. Knudsen to take the matter up with Secretary Stimson. Mr. Foley confirmed Secretary Morgenthau's statement that everything Assistant Secretary of War Johnson was empowered to do, the Secretary of War also could do. Mr. Foley pointed out that an erroneous impression had grown up in Washington that the Assistant Secretary of War had certain statutory powers independent of the Secretary of War. Mr. Foley stated that we hed examined the law and the Assistant Secretary of War acted under the supervision and direction of the Secretary of War. Mr. Foley told Mr. Knudsen that Mr. Johnson of course could not incorporate provisions in the contract which were not authorized by law. However, there seemed to be no reason why Mr. Johnson could not write a letter to the other contracting party stating that if legisla- tion were enacted to afford special amortization treatment for additional plant facilities, such legislation would be taken into consideration in connection with the contract entered into by the Army prior to the enact- ment of the legislation. Mr. Knudsen said that this seemed to be a practical solution since he in turn could advise the other party to the contract to proceed on this basis. Secretary Morgenthau said that he would be willing to go with Mr. Knudsen to Secretary Stimson's office but Mr. Kmudsen did not think this was necessary. Secretary Morgenthau said that he would hold himself in readiness to do everything in his power to assist Mr. Knudsen in getting contracts executed without further delay. Regraded Unclassified 46 Regraded Unclassified July it, 1940. MA FOR THE DIARY. at , o'closk this afternoon there 148 à conference in Secretary Morgenthau's office. These present vare Secretary Morgentham, Vilitam Enudeen and & Polay. Mr. Knudsen muld that Assistant Secretary of Yes Louis Johnson refused to sign contracts embodying suggestions agreed upon at the White House yesterday La regard to logisiation to is introduced in the not future to afford special amortination treatment for additional plant facilities upon certification that each facilities trafe necessary for national defense purposes. Secretary Margesthau advised Mr. Knudsea to take the mitter up with Secretary Stinson. Mr. Foley confirmed Secretary Morgenthau's statement that everything Assistant Secretary of her Johnson me empowered to do, de Secretary of was also could do. Mr. Feley pointed out that an orreneous impression and grown up in Machington taxt Lue Assistant decretary of Var Ded certain statutory powers Inde endent of the Secretary of Rar. Mr. Folay stated that 19 had examined Las Law 800 the Assistant Secretary of her acted under the supervision and direction of the Secretary of war. Mr. Foley told Mr. Knudsen that Mr. Johnson of course could not incorporate rovisions 10 the contract skich veze not authorised by law. Revever, there seemed to be no reason why Mr. Johnson could not write a letter to the other contracting party stating that If legisle- tion were enacted to afford - locial amortization treatment for additional plant facilities, such ingialation would be taken into consideration in connection «1th the contract entered into by the any prior to the enset- ment of the Legislation. dr. Studen sald that this seemed to be a rections) solution since he in turn could sivise the other party to the contract 1 proceed on this basis. Secretary Morgenthaw said that be yould be willing to go with Mr. Knuteen to Secretary Stimson's office but Mr. Knuden did not think this w necessary. Secretary Morganthau said that be -ould bol hinself in readiness to do everything in his pewer to assist b. Enudsen in setting contracts executed without Further delay. 7-11-40 47 TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS Press Service Thursday, July 11, 1940. No. 21-55 7/10/40 Secretary of the Treasury Morgenthau today offered for cash subscription, through the Federal Reserve Banks, at par and accrued interest, an issue of 2-1/4 percent Treasury Bonds of 1954-56. The amount of the public offering is $600,000,000, or thereabouts, and in addition $50,000,000, or thereabouts, of these bonds may be sold to Government investment accounts during the next month. For the benefit of small investors, preferential allotment will be given to subscriptions for $5,000 and under, where delivery in registered bonds 90 days after the issue date is specified. Those who enter such a subscription for preferential allotment may not enter any other subscription. The bonds now offered will be dated July 22, 1940, and will bear interest from that date at the rate of 2-1/4 percent per annum, payable semiannually on June 15 and December 15, with the first coupon covering the fractional period from July 22 to December 15, 1940. The bonds will mature June 15, 1956, but may be redeemed at the option of the United States on and after June 15, 1954. They will be issued in two forms: bearer bonds, with interest coupons attached, and bonds registered both as to principal and interest; both forms will be issued in denominations of $50, $100, $500, $1,000, $5,000, $10,000 and $100,000. Regraded Unclassified 48 - 2 - The bonds will be accorded the same exemptions from taxation as are accorded other issues of Treasury bonds now outstanding. These provisions are specifically set forth in the official circular issued today. Subscriptions will be received at the Federal Reserve Banks and Branches, and at the Treasury Department, Washington. Banking institutions generally may submit subscriptions for account of customers, but only the Federal Reserve Banks and the Treasury Department are authorized to act as official agencies. Subscriptions from banks and trust companies for their own account will be received without deposit but will be restricted in each case to an amount not exceeding one-half of the combined capital and surplus of the subscribing bank or trust company. Subscriptions from all others must be accompanied by payment of 10 percent of the amount of bonds applied for. The right is reserved to close the books as to any or all subscriptions or classes of subscriptions at any time without notice, The basis of allotment will be publicly announced. Pay- ment for any bonds allotted must be made or completed on or before July 22, 1940, or on later allotment. The text of the official circular follows: Regraded Unclassified 43 UNITED STATES OF ANERICA 2-1/4 PERCENT TREASURY BONDS OF 1954-56 Dated and bearing interest from July 22, 1940 Due June 15, 1956 REDEEMABLE AT THE OPTION OF THE UNITED STATES AT PAR AND ACCRUED INTEREST ON AND AFTER JUNE 15, 1954 Interest payable June 15 and December 15 1940 TREASURY DEPARTMENT, Department Circular No. 637 Office of the Secretary, Washington, July 11, 1940. Fiscal Service Bureau of the Public Debt I. OFFERING OF BONDS 1, The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, approved September 24, 1917, as amended, invites subscriptions, at par and accrued interest, from the people of the United States for 2-1/4 percent bonds of the United States, designated Treasury Bonds of 1954-56. The amount of the public offering is $600,000,000, or thereabouts. In addition to the amount offered for public subscription, $50,000,000, or thereabouts, of these bonds may be allotted to Government invest- ment accounts. II. DESCRIPTION OF BONDS 1. The bonds will be dated July 22, 1940, and will bear interest from that date at the rate of 2-1/4 percent per annum, payable on a semiannual basis on December 15, 1940, and thereafter on June 15 and December 15 in each year until the principal amount becomes payable. They will mature June 15, 1956, but may be re- deemed at the option of the United States on and after June 15, 1954, Regraded Unclassified 50 - 2 - in whole or in part; at par and accrued interest, on any interest day or days, on 4 months' notice of redemption given in such manner as the Secretary of the Treasury shall prescribe. In case of partial redemption the bonds to be redeemed will be determined by such method as may be prescribed by the Secretary of the Treasury. From the date of redemption designated in any such notice, interest on the bonds called for redemption shall cease. 2. The bonds shall be exempt, both as to principal and interest, from all taxation now or hereafter imposed by the United States, any State, or any of the possessions of the United States, or by any local taxing authority, except (a) estate or inheritance taxes, or gift taxes, and (b) graduated additional income taxes, commonly known as surtaxes, and excess-profits and war-profits taxes, now or hereafter imposed by the United States, upon the income or profits of individuals, partnerships, associations, or corporations. The interest on an amount of bonds authorized by the Second Liberty Bond Act, approved September 24, 1917, as amended, the principal of which does not exceed in the aggregate $5,000, owned by any individual, partnership, association, or corporation, shall be exempt from the taxes provided for in clause (b) above. 3. The bonds will be acceptable to secure deposits of public moneys, but will not bear the circulation privilege and will not be entitled to any privilege of conversion. 4. Bearer bonds with interest coupons attached, and bonds registered as to principal and interest, will be issued in denomina- tions of $50, $100, $500, $1,000, $5,000, $10,000 and $100,000. 51 - 3 - Provision will be made for the interchange of bonds of different denominations and of coupon and registered bonds, and for the trans- fer of registered bonds, under rules and regulations prescribed by the Secretary of the Treasury. 5. The bonds will be subject to the general regulations of the Treasury Department, now or hereafter prescribed, governing United States bonds. III. SUBSCRIPTION AND ALLOTMENT 1. Subscriptions will be received at the Federal Reserve Banks and Branches and at the Treasury Department, Washington. Banking institutions generally may submit subscriptions for account of customers, but only the Federal Reserve Banks and the Treasury Department are authorized to act as official agencies. Others than banking institutions will not be permitted to enter subscriptions except for their own account. Subscriptions from banks and trust companies for their own account will be received without deposit but will be restricted in each case to an amount not exceeding one- half of the combined capital and surplus of the subscribing bank or trust company. Subscriptions from all others must be accompanied by payment of 10 percent of the amount of bonds applied for. 2. The Secretary of the Treasury reserves the right to reject any subscription, in whole or in part, to allot less than the amount of bonds applied for, and to close the books as to any or all sub- scriptions at any time without notice; and any action he may take in these respects shall be final. Subscriptions for amounts up to and including $5,000 where the subscribers specify that delivery Regraded Unclassified 52 - 4 - be made in registered bonds 90 days after the issue date will be given preferred allotment. In each such case a subscriber may not enter any other subscription, and payment must be made as pro- vided in Section IV of this circular. Allotment notices will be sent out promptly upon allotment, and the basis of the allotment will be publicly announced. IV. PAYMENT 1. Payment at par and accrued interest, if any, for bonds allotted hereunder must be made or completed on or before July 22, 1940, or on later allotment, In every case where payment is not so completed, the payment with application up to 10 percent of the amount of bonds applied for shall, upon declaration made by the Secretary of the Treasury in his discretion, be forfeited to the United States. Any qualified depositary will be permitted to make payment by credit for bonds allotted to it for itself and its customers up to any amount for which it shall be qualified in excess of existing deposits, when so notified by the Federal Reserve Bank of its district. V. GENERAL PROVISIONS 1, As fiscal agents of the United States, Federal Reserve Banks are authorized and requested to receive subscriptions, to make allotments on the basis and up to the amounts indicated by the Secretary of the Treasury to the Federal Reserve Banks of the respective districts, to issue allotment notices, to receive pay- ment for bonds allotted, to make delivery of bonds on full-paid subscriptions allotted, and they may issue interim receipts pending delivery of the definitive bonds. Regraded Unclas ified 53 - 5 - 2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering, which will be communicated promptly to the Federal Reserve Banks. HENRY MORGENTHAU, JR., Secretary of the Treasury. 54 duly n. 1940 Mr. fell Mr. Corkren STRICTLY CONFIDENTIAL At our meeting yesterday on control of foreign funds, I was acked to find out from the State Department what I could in regard to the standing of Mr. Idmind I. in whose behalf Kidder. Peabody and Company have filed na application for the treasfer of certain securities from an account with a Retherlands concern. This evening I have spoken with Mr. Janes Dann, Advisor en Pelicitel Polations in the Department of Mate, who vas case of the four State Department officers listed :- references w Hr. Stimes in the spelleation. Hg. Dues told se that it was an importinence for Mr. Ptinnee to list his as a reference. It M.S true that Mr. Stimpes had visited the Department on various occusions and had been received w Mr. Date as well no by Reserv. Resseremith not Selet. who vero likevise listed in the application, and had made . display of his enti-Nesi feelings. Mr. Suno had never considered Mr. Itimmes' reasres of sufficient polue to form the be-in of a memorandus. Duan had listened " his as be is obliged o listen to user callers. Be said he would "not touch his with a ten-foot pale" and --- suppected him. as he 416 his father, of possibly being a Nasi agent. Vp. Dumn vaccented that I let the other non in the State Department know that Stanes had sited then a.e references. July 12, 1940 I neked Mr. Pinsent this morning about Nr. Stimes. Se stated that Stanes had a reputation for reliability and for being pro-Dritish. Pinsent throught It would be enfe so release any funds accessary to his for living expenses. If he, bewever, vented any large amount. Pinsent would be a little suspicious. It should be taken into consideration. Pinsent said. that Stlance may have relatives in Germany upon whom considerable pressure night be brought. 1 asked My. Gelet of the State Department what be knew about Mr. Stinnee. Gatet stated that he had known Stinnes for many years Is Germany: had greated his an 1sm1- gration visa to - to this country: end that Stinnee was at his home for dianer last night, To Mr. Neeseremith and other State Department efficials Mr. Goist said that Mr. Stinnes had is recent years gives much information which was helpful to as, and which vas certainly not 10 the interest of the Rest Government. delet pointed our that Stinnes vas seeing a sumber of our Doverment people, and had conferred with Mr. Nettings recently. Goist door not believe that he is a last agent. At the - time be insisted that he listens to Stimes and gives DE information is return. He sees so objection to our releasing funds to Stance. le advises against teking Me into our confidences. pmp Regraded Unclassified 55 TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS Press Service Thursday, July 11, 1940. No. 21-55 7/10/40 Secretary of the Treasury Morgenthau today offered for cash subscription, through the Federal Reserve Banks, at par and accrued interest, an issue of 2-1/4 percent Treasury Bonds of 1954-56. The amount of the public offering is $600,000,000, or thereabouts, and in addition $50,000,000, or thereabouts, of these bonds may be sold to Government investment accounts during the next month. For the benefit of small investors, preferential allotment will be given to subscriptions for $5,000 and under, where delivery in registered bonds 90 days after the issue date is specified. Those who enter such a subscription for preferential allotment may not enter any other subscription. The bonds now offered will be dated July 22, 1940, and will bear interest from that date at the rate of 2-1/4 percent per annum, payable semiannually on June 15 and December 15, with the first coupon covering the fractional period from July 22 to December 15, 1940. The bonds will mature June 15, 1956, but may be redeemed at the option of the United States on and after June 15, 1954. They will be issued in two forms: bearer bonds, with interest coupons attached, and bonds registered both as to principal and interest; both forms will be issued in denominations of $50, $100, $500, $1,000, $5,000, $10,000 and $100,000. Regraded Unclassif 56 - 2 - The bonds will be accorded the same exemptions from taxation as are accorded other issues of Treasury bonds now outstanding. These provisions are specifically set forth in the official circular issued today. Subscriptions will be received at the Federal Reserve Banks and Branches, and at the Treasury Department, Washington. Banking institutions generally may submit subscriptions for account of customers, but only the Federal Reserve Banks and the Treasury Department are authorized to act as official agencies. Subscriptions from banks and trust companies for their own account will be received without deposit but will be restricted in each case to an amount not exceeding one-half of the combined capital and surplus of the subscribing bank or trust company. Subscriptions from all others must be accompanied by payment of 10 porcent of the amount of bonds applied for. The right is reserved to close the books as to any or all subscriptions or classes of subscriptions at any time without notice. The basis of allotment will be publicly announced. Pay- ment for any bonds allotted must be made or completed on or before July 22, 1940, or on later allotment. The text of the official circular follows: 57 UNITED STATES OF AMERICA 2-1/4 PERCENT TREASURY BONDS OF 1954-56 Dated and bearing interest from July 22, 1940 Due June 15, 1956 REDEEMABLE AT THE OPTION OF THE UNITED STATES AT PAR AND ACCRUED INTEREST ON AND AFTER JUNE 15, 1954 Interest payable June 15 and December 15 1940 TREASURY DEPARTMENT, Department Circular No. 637 Office of the Secretary, Washington, July 11, 1940. Fiscal Service Bureau of the Public Debt I. OFFERING OF BONDS 1. The Secretary of the Treasury, pursuant to the authority of the Second Liberty Bond Act, approved September 24, 1917, as amended, invites subscriptions, at par and accrued interest, from the people of the United States for 2-1/4 percent bonds of the United States, designated Treasury Bonds of 1954-56. The amount of the public offering is $600,000,000, or thereabouts. In addition to the amount offered for public subscription, $50,000,000, or thereabouts, of these bonds may be allotted to Government invest- ment accounts. II. DESCRIPTION OF BONDS 1. The bonds will be dated July 22, 1940, and will bear interest from that date at the rate of 2-1/4 percent per annum, payable on a semiannual basis on December 15, 1940, and thereafter on June 15 and December 15 in each year until the principal amount becomes payable. They will mature June 15, 1956, but may be re- deemed at the option of the United States on and after June 15, 1954, graded Unclassified 58 - 2 - in whole or in part, at par and accrued interest, on any interest day or days, on 4 months' notice of redemption given in such manner as the Secretary of the Treasury shall prescribe. In case of partial redemption the bonds to be redeemed will be determined by such method as may be prescribed by the Secretary of the Treasury. From the date of redemption designated in any such notice, interest on the bonds called for redemption shall cease. 2. The bonds shall be exempt, both as to principal and interest, from all taxation now or hereafter imposed by the United States, any State, or any of the possessions of the United States, or by any local taxing authority, except (a) estate or inheritance taxes, or gift taxes, and (b) graduated additional income taxes, commonly known as surtaxes, and excess-profits and war-profits taxes, now or hereafter imposed by the United States, upon the income or profits of individuals, partnerships, associations, or corporations. The interest on an amount of bonds authorized by the Second Liberty Bond Act, approved September 24, 1917, as amended, the principal of which does not exceed in the aggregate $5,000, owned by any individual, partnership, association, or corporation, shall be exempt from the taxes provided for in clause (b) above. 3. The bonds will be acceptable to secure deposits of public moneys, but will not bear the circulation privilege and will not be entitled to any privilege of conversion. 4, Bearer bonds with interest coupons attached, and bonds registered as to principal and interest, will be issued in denomina- tions of $50, $100, $500, $1,000, $5,000, $10,000 and $100,000. Regraded Unclassified 59 - 3 - Provision will be made for the interchange of bonds of different denominations and of coupon and registered bonds, and for the trans- fer of registered bonds, under rules and regulations prescribed by the Secretary of the Treasury. 5. The bonds will be subject to the general regulations of the Treasury Department, now or hereafter prescribed, governing United States bonds. III. SUBSCRIPTION AND ALLOTMENT 1. Subscriptions will be received at the Federal Reserve Banks and Branches and at the Treasury Department, Washington. Banking institutions generally may submit subscriptions for account of customers, but only the Federal Reserve Banks and the Treasury Department are authorized to act as official agencies. Others than banking institutions will not be permitted to enter subscriptions except for their own account. Subscriptions from banks and trust companies for their own account will be received without deposit but will be restricted in each case to an amount not exceeding one- half of the combined capital and surplus of the subscribing bank or trust company. Subscriptions from all others must be accompanied by payment of 10 percent of the amount of bonds applied for. 2. The Secretary of the Treasury reserves the right to reject any subscription, in whole or in part, to allot less than the amount of bonds applied for, and to close the books as to any or all sub- scriptions at any time without notice; and any action he may take in these respects shall be final. Subscriptions for amounts up to and including $5,000 where the subscribers specify that delivery - 4 - so be made in registered bonds 90 days after the issue date will be given preferred allotment. In each such case a subscriber may not enter any other subscription, and payment must be made as pro- vided in Section IV of this circular. Allotment notices will be sent out promptly upon allotment, and the basis of the allotment will be publicly announced. IV. PAYMENT 1. Payment at par and accrued interest, if any, for bonds allotted hereunder must be made or completed on or before July 22, 1940, or on later allotment. In every case where payment is not 30 completed, the payment with application up to 10 percent of the amount of bonds applied for shall, upon declaration made by the Secretary of the Treasury in his discretion, be forfeited to the United States. Any qualified depositary will be permitted to make payment by credit for bonds allotted to it for itself and its customers up to any amount for which it shall be qualified in excess of existing deposits, when so notified by the Federal Reserve Bank of its district. V. GENERAL PROVISIONS 1. As fiscal agents of the United States, Federal Reserve Banks are authorized and requested to receive subscriptions, to make allotments on the basis and up to the amounts indicated by the Secretary of the Treasury to the Federal Reserve Banks of the respective districts, to issue allotment notices, to receive pay- ment for bonds allotted, to make delivery of bonds on full-paid subscriptions allotted, and they may issue interim receipts pending delivery of the definitive bonds. Regraded Unclassified 61 - 5 - 2. The Secretary of the Treasury may at any time, or from time to time, prescribe supplemental or amendatory rules and regulations governing the offering, which will be: communicated promptly to the Federal Reserve Banks. HENRY MORGENTHAU, JR., Secretary of the Treasury. # 62 AS Tientsin via N. R. Dated July 11, 1940 Rec'd 9:27 n.m. Secretary of State, Washington. 122, July 11, 10 n.m. Disposal of Tientsin silver in British Concession for relief purposes. A communique from the Japanese Consulate General dated yesterday is printed in todays NORTH CHINA STAR as follows: "Arrangements in connection with the disposal of the silver holdings in the British Concession as pro- vided in the Anglo-Japanese agreement have been completed between the Japanese and British consuls general. Accordingly, actual work to set aside pounds sterling one hundred thousand worth of silver was started on July nineth". Yesterday's statement made by the British Consul General reads: "The Tientsin agreement provides for the setting aside of pounds sterling one hundred thousand for purposes of relief. Arrangements have not been completed and the silver will bE transferred to the Chartered Bank in Regraded Unclassified 63 AS-2- #122, July 11, 10 a.m., from Tientsin via N. R. in the near future pending final arrangements for its shipment abroad for purposes of sale". Yesterday's Dome1 reports states that the French Consul and Japanese Consul General will meet "in a day or so" to affirm the draft agreement on the policing question in the French Concession in Tientsin, dis- cussions of which were concluded yesterday, immediately after approval by the Gaimussy and the French Embassy in Tokyo. Sent to Department. REPEATED to Chungking, Priping, Shanghai. Air mail to Tokyo. FLETCHER DDM 64 PARAPHRASE OF TELEGRAM SENT TO: American Embassy, R10 de Janeiro NO.: 211 DATE: July 11, 1940, 5 p.m. Reference is made to your despatch no. 3197 of June 24, 1940. The Department has been informed by the Treasury Department that they have been advised by the Chase Bank that the two checks referred to in the above- mentioned despatch have neither been advised, presented, nor paid. It is also stated by the Treasury that they have, moreover, issued to the Chase Bank a license allow- ing up to 25 percent of the Banco Francez e Italiano's balances to be paid. HULL (FL) EA:FL:EB EA:EB Regraded Unclassified July 11, 1940 65 ECONOMIC DEVELOPMENTS CONFIDENTIAL PRELIMINARY DATA FOR JUNE above that consumption advanced sharply in that south, allowing for woul sensonal adjustments. Our index of the dollar value of all retail sales passed the December 1939 park and the physical volume index squaled last year's high, also made in December. The June gain over May in these indexes 19- sulted largely from substantial increases recorded in department store and automobile sales. EXAMPLES: Total Retail Trade - Seesonally Adjusted (1929=100) Dollar Physical Value Countity 1939 June 87.5 100.5 Docember 95.3 106.0 19/0 January 95.3 107.8 February 95.7 107.8 March 92.2 103.9 April %.1 105.8 May %.1 105.7 June %.0 108.0 is compared with a year age-bafore the was boosted production end insome-dellar volume of retail trade has risen approximately 10 percent. Ixtent of the increases in the various APOLE of trude were as follower Percent increase in retail sales June 1939 to June 1940 Automobiles 34 Department stares 8 Taristy 5 Insury 8 Dural General 8 Canaline 3 SIGNIFICANCE Consumption, which is characteristically nothe alaggish the production, dropped only moderately during the first quarter of this your. Under the impact of the dafense program, larguly paychological no fur, consumption has reached last year's high although production 10 still below the December 1939 post. Regraded Unclassified 66 - 2 - It is interesting to note that, at its June level, consumption in quantity terms me 8 persent above the 1929 average, is population also increased 8 percent during the decade, per capita consumption in June was equivalent to that of 1929. In the expansion that is now under my per capita consumption should tep the 1929 figure to reach new resord levels. SUSTAINED RISE IN RETAIL MALES of automobiles during the latter two- thirds of June, after the unfavorshle late May and early June showing, lifted sales for the month above the May total. This contrassessonal gain is as indication of the firs tome prevailing in - markets. Coupled with the alaskening in assemblies, the high rate of retail deliveries affected a substantial (90,000) reduction in dealar's stocks of new ours. Continued curtailment of production is, of course, in prospect as the model year approaches its class but the let-up will not be considerably more than the usual seasonal. The industry's position is now quite satiafactory-such more no than seened likely a few months age. Several independent producers have already stopped production on the current model, and indications are that the production year will be substantially over by the end of August rather than September, Automobile Production, Sales, and Inventories (1940 Model Tear to Date) United States Domestic Sales Ber Car Production Mine Exporte Inventories* (In thousand units) October 312 301 155 November 352 327 180 December 452 339 273 January we 314 407 February 394 309 492 March 417 429 680 April 432 427 485 May 391 403 473 June (prelisinary) 336 425 386 "Calculated Regraded Unclassified 67 3 - Automobile Production, Sales, end Exports (First 9 months of model year) (In thousand units) Modal-your Production Domestic Sales Amarte 1929 4,641 3,714 454 1932 1,192 1,081 116 1935 2,941 2,544 202 1937 3,907 3,332 267 1938 2,220 1,866 272 1939 2,932 2,389 242 1940 3,553 3,067 178 SIGNIFICANCE: June's pick-up in sales assures the industry of one of the best automotive years on records production for the year will pass the 4 million mark and may reach 4.2 willion units. The first 9 months of the 1940 modal year were the third best in the history of the industry, surpased only by the pro- duction and sales records of 1929 and 1937. The gain in domestic sales this year over 1939 is close to 30 percent. Both production and sales are over 90 percent d the comparable 1937 figures, with a. sisable portion of the difference between the 2 years accounted for by the lew level of exports. DIFFERENCE BETWEEN THE FACTORS THAT STIMULATED last fall's rise in industrial production and that currently under say is brought out by the following figures. All the estimates for June are pre- liminary. They are, however, assentially correct in the picture they give of the underlying situation. Income Producing Expenditures That Offset Seving (Seasonally Adjusted - Million of Dollars) Average Sept-Oct 1939 June 1960 Industrial Equipment 4 Machinery 380 460 Industrial Plant 160 200 Housing 190 200 Consumer's Credit R 90 Foreign balance 90 120 Government Net Contribution 260 260 Inventory Increase 280 50 Total 1,410 1,380 Index of Industrial Production 116 115 Regraded Unclassified 68 SIGNIFICANCEs with the production Index 115 in June M against 116 sverage last September-October, almost all the male factors which determine the level of activity are now higher. The 10- partant exception is net investment in inventories. It is the lessened influsnce of the volatile inventary factor which gives us more confidence in the coundness of the present recovery NOTE= sent. No do not believe inventory accumulation is an important item in any sajer area other than steel consuming industries. Horeover, three of the met significant factors, equipment, plant, and government contribution, will undoubtedly NOTE up- ward during the months about. Note that the government contribu- tion in June YAS no higher then the September-October average. This item had risen to 350 in January but fell off toward the and of the fiscal year) it is expected to exceed the January level before the end of the year. Regraded Unclassified 69 PORKIGN TRADE NOTES Findand: A trade and payment agreement with the Seviet Union has been announced, which provides for a trade turner of $15,000,000 for the first year on a barter basis, Finland to supply chiefly tog boats, lighters, electrical equipment, supper wire, leather, butter, and acet, and the Seviet Value to supply skiefly whest, rye, petro- 1 I products, É i ! The amounted trade agreement with Geruary ;rovides for M increase of 75 persent is the trade between the two countries es a ocuponse- tion basis. Finnish exports will consist shiefly of mood products, paper, ores and other minerals, and seas agricultural products, against coal, cake, and various products free Germary. Swedens According to confidential information, the recently concluded agreement with Germany provides for the export of prescribed quanti- ties of characal, pig iron, steel here, forre-ciliente, timber, real puly, and iron are, Germany paying about 15 persent below the surrent market price for Swedish payer. Oweden has boom guaranteed 5,700,000 tene of Derman ecal and coke and increased amounts of chemicals, - ufactured goods, and special mekinery. Sweden has practically abol- ished the restrictions on importations of non-essential goods from Germany. in interesting part of the agreement is permission granted presumably by Germany to Temark to sell sugar and butter to There is a heavy credit balance in l'aver of Sweden in its trade with Demark, including considerable anounts representing interest an loans. Both Demark and Seeden desire release in Regland and in the United States of blooked Damich funds in amounts adoquate to meet the interest payments, Sueden to guarantee that sush exchange would not leave the country. Since in terms of mrke Demark is a heavy creditor of Gerenary, and is terms of crowns a heavy debine to Susden, Schacht favors a tri- angular arrengement which, however, is net favorably considered in Sunden because of the politionl implications of such an arrangement. Germany: It appears that Germany proper will have adequate supplies of Food throughout the souding year and that it is in a better position to aobilise for its - disposition the surplus supplies of emails- ental countries. The feed policy of Germany is deceribed as follows: (a) the German population shall exist an standard rations) (b) alien sal prinemer labor in Commany to reseive mailer rations of essential feedatuffs which, however, are sensidered M sufficienty (a) the cooupied terri- torice to provide M far as possible their our food supply: and (a) ossupied territories to feed the coopying foress of Germany. Regraded Unclassified 70 - 2 Junes Plane for industrial oupension will be delayed W the - - patiem of the Notherlando. It appears that industrial equipment entered from terms firms was hold at Dutah parts pending negotiations with the British for the transfer of the cargo to dayamess vessels. there is also the prospect that belligement countries will tighten the restrie- time - the vital - materials which are required in Jugan for - dustrial expansion M well as military supplies. the Government has resently ordered the discolution of a - labor party which me about to be formed. 20 is apparantly the Community's plan to interporate the Jugan labor Union and the All Jayan Industrial Bedies Federation into - of the - spiritual revenunts, mussly, the "Serving to the Nation through Industry Association." Although the spiritual mobilisation revement 10 regarded as a failure from the stand- point of impressing the general public with the gravity of the situation, the Government ovidently feels that it 10 an inportant work and three Maistrice have appropriations in the current budget w subsidine at support the spiritual leaders. Bureau of Foreign and Denestic Comeres July 10, 1940. Regraded Unclassified 71 when usiolesale PRICE (1926 $ 100) - - I 1939 1940 'Persentage increase, 9 "July 6. 1940 from Group . . , 8 1 July the Sept. June July - 1 I . # July 8, 1 bug.26, $ 25 16 29 6 1939 1939 . - - e 9 # I - # 1 I I 8 commodities 75.6 # 74.8 . 79.3 1 77.1 0 77.5 1 2.5 . 3.6 Farm products 64.1 9 61.1 69.7 65.7 66.7 4.1 . 9.2 Foods 68.1 , 66.7 - 75.5 69.7 70.4 3.4 I 5.5 All commodities other than I farm products and foods .' 80.3 I 80.4 82.4 82.3 82.4 . 2.6 I 2.5 Hides and leather products 92.8 e 92.6 , 98.3 , 99.9 100.3 I 8.1 . 2 Textile products. 67.0 - 67.4 I 72.4 # 72.0 I 71.9 I 7.3 I 6.7 Fuel and lighting esterials' 73.2 # 73.2 1 74.1 I 71.9 72.0 - 1.6 I 1.6 Metals and metal products 93.3 . 93.5 I 94.9 . 94.8 - 94.9 # 1.7 , 1.5 Building naterials. 89.5 I 89.7 - 90.7 I 92.4 - .... 92.6 3.5 , 3.2 Chemicals & allied products' (1) . (1) I (1) . 76.0 I 77.1 - I I House-furnishing goods. 57.0 I 87.0 # 57.1 I 89.9 I 90.0 3.4 e 3.4 Miscellaneous 73.3 1 73.1 I 76.1 1 76.9 - 77.0 5.0 I 5.3 . - law asterials 68.4 , 66.2 - 73.0 - 70.2 # 70.7 3.4 I 6.8 eximmufactured articles 74.2 e 74-4 I 82.0 - 77.8 , 78.0 5.1 I 4.8 Finished products ...... 79.6 I 79.3 . 82.3 I 80.6 . 80.9 . 1.6 I 2.0 . - - Comparable data not available. arcet Buresu of Labor Statistics, U. 8. Department of Labor. Regraded Unclassified 72 SELECTED COMMODITY PRICE SERIES 1999 I 1940 # Commodity Unit - July 12 August 30 Sept. 13 9 July 3 July 10 1 - per, electrolytic, lev York " per lb. 10 1/4 20 1/2 I 12 11 11 1/2 d, prompt shipment, de 4.85 5.05 9 5.50 5.00 5.00 lev York 10, New York do 4.84 5.34 - 6.64 6.64 6.64 do # 40 1/2 . 193/4 75 # 52 . straits, la York' 51 1/2 ber, plantation, de . les York 169/16 16 13/16 22 1/2 21 21 les, light native loss, Chicago. is 11 11 - 15 12 1/2 12 1/2 E, 13-15 denier, 78% scriplane, N.Y. '$ per lb. 2.64 1 2.72 3.21 # 2.57 2.56 ton, middling, aver- go, 10 markets. : per 1b. 9.51 8.53 9.01 10.43 10.25 int cloth, 60 X 64, IS 1/2 inches, N.Y. " per yd. 45/8 45/8 53/8 43/4 43/4 tops, Oct. 1940 futures, Bes York. .'' per 1b. 3/82.2 1/81.5 1/111.9 91.0 89.0 jar, ram, %, duty 1 free, New York. de 2.85 2.92 3.70 2.73 2.60 coa, Accra, Ben York' de 4.30 4.38 6.45 4.90 4.85 fee, Sentos, No. 4, les York do 71/4 75/8 . 73/4 71/8 71/8 rd, cash, Chicago. do . 5.50 5.65 7.75 6.02 5.87 stonsoed all, 801. 1940 futures, N.Y. de w 5.99 '3/ 5.61 w 7.30 6.27 6.15 eat, Sept. 1940 futures, Chicago per E 2/113/ JII 2/4'2/ ,85 3/8 .78 3/4" .75 3/8 go, good and choice, 220-240 lbs., perfect. 7.00 I 6.88 6.13 I 6.23 6.53 eers, beef, medium, 750-1,100 1bs., Chi. to 8.63 I 8.38 - 8.88 9.38 9.13 1 Nominal. 2/ October 1939 futures. y December 1939 futures. w September 1939 futures. surcess Ail consodities, with the exception of wool tops, cottommed oil, hogs, and tears, are taken from the Journal of Commerce) well tops and cottonseed oil are taken from the Fall Street Jourmal, and hoge and stears are from the 1. 8. Department of Agri- bulture, Bureen of Agricultural Economics, Regraded Unclassified 73 RE DEPARTURE PERMITS July 11, 1940 4:45 p.m. Present: Mr. Purvis Mr. Young H.M.Jr: This is going to put you on your mettle the way you have never been put before. All the cards are on the table. Purvis: Fine. H.M.Jr: Here is the situation. I have in my office what they call administration of ship move- ments. No ship can sail from the United States unless they get a permit from me. Purvis: Quite. H.M.Jr: And I am holding now - let me say first, there is this tremendous flow of American oil to Spain and the Canary Islands where they have a small refinery. We don't know how big it is. Now, we are, and have for the last couple of days, stopping all Ameri- can flagships, which means two at the moment, loaded with oil for Spain. We haven't given them permits. We have also held up a Swedish tanker with oil for Spain. She is not going to sail. The President has asked that the five American companies doing business - he is going to have Mr. Hull ask the American companies in Venezuela and Colombia who have largely English ships, English flag- ships, but they are American owned subsidiaries, not to send any oil to Spain or to the Canary Islands until we can sort this thing out and - because this flow of oil is just unbelievable, which makes us believe that this is their only source of supply. Purvis: Quite. H.M.Jr: Now, in doing this thing, we want a hundred percent cooperation. Purvis: Correct. H.M.Mr: And we don't want to find out that we stopped this thing and the good old English business I Inclassified 74 - 8 - men continue to do the same thing. Purvis: Excuse my snickers. H.M.Jr: I think that day is past. Purvis: I think 80, H.M.Jr: This is tremendously important. And further- more, through your own connections, Embassy connections and diplomatic connections, see what you can find out, what is happening to that oil picture in Spain. Now, we are doing it. Also see what you can find out about what is going on in the Canary Islands. We are also doing that. As of tonight, no American flagship is going to sail for Spain or the Canary Islands. We are going to ask the American companies to stop shipping oil out of Central and South America to Spain and we are even holding a Swedish ship. We have gone that far. This is as good 8. chance as I know - the English ought to jump at it and kiss us on both cheeks. Purvis: Yes, and what you want is really B. specific assurance that no British ship is going to carry oil -- H.M.Jr: In substance -- Purvis: to Spain or the Canary Islands until we have had plenty of time to sort out between us what is the proper course to take. E.E.Jr: And I don't know whether you issue navicerts for Colombia or whether that is done from here. Purvis: The navicerts come from the Embassy, that is right, but the navicert applications are sorted out by the Consul General in New York where the real work 1s done. E.M.Jr: But is it done for this Continent, North and South America? Regraded Unclassified 75 - 3 - Purvis: No, I would think not. I think that 1s confined here. But that is something we can control. H.M.Jr: Well, let's see -- Purvis: I get you. H.M.Jr: Well, I mean, if they don't do it, it 1s just the height of stupidity. Purvis: Let me really do a job of work. You see, this is where the advantage of having a policy center to go to, as distinguished from just cabling into the air to the Ministry of Supplies. This is our business, to knock that right out like that, with such help as I need from the Ambassador, which I will get I am sure. H.M.Jr: Frankly, I don't think you and I have ever discussed anything any more important than this, because this may be their life blood for the next two or three months and when you cable, get them - where else can they get the oil from, other than Rumania? Purvis: That seems to be the only other place. You would like any information or surmise on that? H.M.Jr: I want -- Purvis: Any picture they can give you that is in- telligent and accurate. H.M.Jr: Yes. And then what will happen most likely, it is getting down to rationing Spain as to what they would call their normal needs. Purvis: Is that aviation gasoline or gasoline? H.M.Jr: I haven't been able to find out. It is just oil. Don't let's do what Mr. Anthony Eden did. He was chairman of the committee on oil for the League of Nations when Italy Regraded Unclassified 76 - 4 - went to war with Ethiopia. Twice that committee WB.S called and they never met. They never put sanctions on oil when she was fighting Ethiopia. Purvis: That was about the only thing. H.M.Jr: We made a study and the Government stopped them just like that. If the League of Nations committee on oil, of which Anthony Eden was chairman, had put on oil sanctions against Italy at that time, it would have just shut the thing off. Purvis: This has an importance in the United States administration as B. whole. It is a subject of discussion for the administration, in addition to your particular interest in it. It is B. major point. H.M.Jr: Well, I cleared it at Cabinet. Purvis: Quite. H.M.Jr: I did it and then I got a clearance at Cabinet. Purvis: Yes. H.M.Jr: I am not exaggerating, am I? Young: No. H.M.Jr: All these ships are held. Young: It 1s very conservative. H.M.Jr: We did it and then I got a clearance at Cabinet. Now, the only thing that hasn't been done yet, Mr. Hull was directed to send for the five oil companies in Central and South America, by the President, and tell them to stop ship- ping. Now, he hasn't done that yet. I have done my part. I want to make that plain. Purvis: Yes. H.M.Jr: But he was directed by the President to do this. Regraded Unclassified 77 - 5 - Purvis: I see. These being companies with head- quarters in New York but with properties in South and Central America? H.M.Jr: That is right. I think Shell is one of them, and immediately the question came up, "Well, all right, we would do it but would England go ahead and grab the business?" Purvis: Let me have that, will you? That is meat. H.M.Jr: Well, I don't know anything more important. I really don't. Purvis: I will do a job of work on that. H.M.Jr: Because this may be the jugular vein. Purvis: Yes. Well, by heavens, it is worth an effort, even if we were wrong. Any chance is good enough. Regraded Unclassified 78 PLAIN JT STOCKHOLM Dated July 11, 1940 Rec'd 10:20 p.m. Secretary of State, Washington. 720, eleventh. In million crowns Riksbank July 6 metallic reserve 719 point 4. foreign exchange 547 point 9. note cover 2115 point 8, note circulation 1402 point 3, noninterest bearing deposits compared to January 1940 Government 94 point 2 compared 266 point 9. commercial banks 75 point 9 compared 152 point 9. others 6 point 6 compared 4 point 6. Increas- ing foreign exchange due principally gold sales. Cost of living index second quarter up five points to 124 involves laborwage agreement, increases 3 million crowns monthly. Private telephone communication between Sweden and Norway via Oslo resumed restricted to business calls in German, Swedish, Norwegian, Danish. Foreign office announces conclusion Swedish-German negotiation resulting in prospects substantial extension mutual trade. Swedish owned shale refineries at Tallinn expropriated by Estonian Government and protests being lodgedbut apparent- ly little hope Sweden procuring supplies that source. INFORM COMMERCE. STERLING NPL July 11, 1940. The Precidenthas approved the holding of the Veli- Ragnar according to word received by Mr young from Maj Smith 4 DEM 80 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE July 11, 1940 TO Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL At 2:20 p.m. on July 9 the Secretary referred to me a telephone call from He. Robert Loree of the Guaranty Trust in New York. I reported back to the Secretary Mr. Loree's inquiry. Mr. Loree had noted that the American Export Line S.S. Exochordia van, according to the Press. scheduled to sail from New York on July 11 and would take mail, via Portugal, for European countries, in- cluding those occupied by Germany. Mr. Loree stated that his bank vas worried over sending out debit and credit statements to their clients in such cities BE Ansterdam, for example, lest the authorities ascertain therefrom information which night be used to the prejudice of such cliente. Mr. Loree mentioned that the account of Mees and Sohne of Rotterdam showed, for an example, a debit entry involved by 8. payment of $50,000 to two Dutch citizens, a. man and wife, who have opened a personal account. Mr. Loree stated that the Post Office officials had to send their mail when facilities were available, and thought that the banks were likevise legally bound. The bank's lawyers likewise advised that the bank must send out its statements. Mr. lorse inquired, therefore, whether, with the view to protecting the interests of the bank's cliente residing in occupied territory, the Secretary of the Treasury might ssk the postal officiale of the United States to refuse to accept mail for the occupied countries, returning it to the senders. The Secretary of the Treasury had me repeat the above conversation in the presence of Governor Harrison of the Federal Reserve Bank later in the afternoon. The Secretary discussed the matter with B. group consisting of Messre. Harrison, Bell, Chamberlain, Foley, Bernstein and myself, and thereafter asked Governor Harrison to telephone Mr. Loree on the subject. Mr. Harrison then vent into Mr. Bell's office and spoke by telephone with Mr. Loree. He told him that the Secretary, as one human being to another, could say to Mr. Loree that he hoped the banks might find some way to delay transmitting statements to clients in ocupied areas. He could not. however, ask this officially. Nor could he re- quest the Post Office Department to change its customary procedure. Mr. Loree asked whether the desired end could be reached through some appli- intion of our freezing control. Mr. Harrison told him this had been discussed, 4a had I, but that ve had not found any way to make the control applicable to Mank statements. It vas arranged that Governor Harrison and Mr. Loree would dis- use this matter further upon Mr. Harrison's return to New York the following jorning. Regraded Unclassified 81 - 2 - Yesterday afternoon Governor Harrison told ne by telephone that he had talked with Loree that morning, but that the bank's lawyers insisted that the bank is responsible for sending out statements to their correspondents, and that the holding up of these statements would involve a risk to the bank. Furthermore, sending these statements to the Legations in the United States of the countries involved instead of to the clients of the bank, would not release the latter from their responsibility. The statements will, therefore, be mailed, but to cor- respondent banks rather than individual private customers. Mr. Loree thought that the Post Office people were a. little foolish in accepting mail which they were not certain they could deliver. But if the Post Office continues to accept mail, and if the Secretary of the Treasury does not feel that he can seek a change in this policy, the Guaranty will follow the lawyers' advice and mail their usual state- ments. I told Governor Harrison that I would let his know if we bad any further observations to make, but that I thought the matter was closed as far as the Treasury is concerned. I reported this conversation to the Secretary shortly after it took place. 10.m8 Regraded Unclassified 82 Regraded Unclassified JUL 1 1 1940 Kg dear us. MeRaynolds: 1 have your letter of July 20, 1940 stating that the Advisory Commission desires to have partponed the prevuleation of regulations relating to costs in commetion with recent changes in the Tobay amendment to the Vinson-Tramuell set [48 State 505, 13 as assuled by 49 State 1926 and 53 stat. 500]. Pursuant to 54 of the 16% of June 20, 1940 (Public m. Noth Cang., 3d seas.] Resoutive Order No. 8465 dated June 29, 1940 is F.R. 2453 (No. 129 of July 3, 1940)] was drafted by the Treasury Department for the purpose of prescribing a procedure to govern certifications by the Secretary of Har and the Secretary of the havy in respect of special additional equipment and facilities to be charged against 000m tracts for neval vessels and aray and may aircraft. It is DOW contemplated that the Secretary of har and the Secretary of the lary and the Commissioner of Internal Revenue will Leave joint rules for the administration of this insecutive Order. These rules not forth the details of the procedure outlined in the Executive Order and have been drafted in cooperation with officials of the Var and Navy Departments. Since they do not sentain any substantive provisions No lating to the determination of conte, I do not believe that they are of the character which would - within the scepe of your letter. Other than the Executive Order and the rules mentioned above, the Treasury Department imp DO further regulations in mind except the purely formal changes which will be required by the reduction in allow- able profit by 52(b) of the not of June 28, 1940 referred to above and which may because necessary if Senate 2464 is enacted into law. These regulations would not change the present nothod of determining costs or the elements which " into cost as fixed by existing regulations [T.D. 4906, 4 y.R. 24923 T.D. 4909, 4 y.n. 2733]. These regulations have been considered by congressional committees and embody an admin- intentive practice which has been in effect since the emetment of the profit limitation law. The regulations relative to excess profits en Havy contracts vere issued by the Commissioner of Internal Invonce with the joint approval of the Secretary of the Treasury and the Secretary of the Nevy, and the regulations relative to exsess profits on Any contracts too aircraft 7670 issued by the Commissioner of Internal Revenue with the joint approval of the Secretary of the Treasury and the Secretary of Ware 83 In view of the fact - the elements included in the - of - germing 6 contract conform to standard cost amounting proctice and that the Gengress - not soon so ofter nature consideration to efter the existing mothed of determining - yesfits encept to the antess - with Labent to - uni Separtant mothfications. - by $4 of the of - 25, 2049, I dealh if so would be smoker- if the Chanker of Commission - specific suggestions 1 i I á requirements as 1 1 I ( 3 - chadress of & consities - the céninistration of the profit limitation 4 Housey, Room 4002 - of Internal - the has - designated providion. 10 to hardly membership to att that if the Advisory Comission desires to discuss my point with M I shall be glad to arrange a - forence for that puryeon. yours, Signature (Signed) 11. Morgenthau, Jf. Secretary of the Treasury. Nome William & Relicymolds Commission to the Council of Entional Information Federal Reserve Building Weakington, 2, 4 CLK,O 7-31-40 Regraded Unclassified 84 THE ADVISORY COMMISSION TO THE COUNCIL OF NATIONAL DEFENSE FEDERAL RESERVE BUILDING WASHINGTON, D.C. NO, 13261 PPEAR ON GENERAL COUNS* July 10. 1940. KEN NK SLIF SHOWING "ACTIV- My dear Mr. Secretary: The Advisory Commission understands that the Treasury intends to promulgate today regulations relating to costs in connection with the recent Vinson-Trammell Act changes. On the assumption that the Treasury is interested in the views of this Commission concerning a matter of this kind, I am directed by the Commission to suggest the desirability of postponing the promulgation of such regulations until a committee of Commission members can consult with representatives from your Department. The Aeronautical Chamber of Commerce has presented its views to one of the members of our Commission on the question of what items and elements of cost should be considered in prospective contracts for aircraft manu- facture, and the Commission will presently be prepared. If you desire, to discuss these proposals. Sincerely, Wm. H. McReynolds Secretary The Honorable, The Secretary of the Treasury Regraded Unclassified 85 BRITISH EMBASSY, WASHINGTON, D.C. July 11th, 1940 Personal and Secret. Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D. c. 86 Telegram despatched from London late in the evening of July 10th On July 9th one of our aircraft attacked U-boat east of Cape Spartivento and claims to have sunk it. It is reported that the French have now agreed to reduce crews of warships at Alexendria to a quarter in respect of combatant ratings and to an overall reduction to one third of the full complement. Seven French submarines reported to have left Casablance during the night of July 5th to 6th. During the night of July 8th to 9th hostile aircraft activity increased. Attacks directed chiefly against East and South coasts where small number of bombs were dropped at various places widely dispersed. Very little damage was done. At Llanelly bombs dropped on steel works but production not affected. Mine-laying activities proceeded. Marly on July 9th abnormal activity noted off Dutch coast which developed into attacks on shipping in the Thanes Estuary and English Channel. At Cardiff docks damage estimated repairable in 48 to 60 hours, is reported. At Norwich two factories were hit, at one of which production will be Regraded affected/ Unclassified 87 affected to some extent. Reconnaissances of aerodromes carried out in area of Portland, Bristol, Oxford and Shoreham. During the night of July 9th to 10th enemy air activity less than usual. Some bombs dropped in Yorkshire, East Kent and at Bournemouth and Edinburgh: damage slight and casualties few. This morning some cosualties caused and mains demaged at Plymouth and three aerodromes in East Anglie were bombed. Further details not at present available. Total casualties of all above operations reported as seventeen killed and sixty-one wounded. Results of R.A.F. night raids mentioned in peragraph four of yesterday's telegram indicate that bombs burst in dockyards at Kiel and Wilhelmshaven, and very large explosions followed the attack on synthetic oil plant at Homburg. Hite observed on marshalling yards at Harm and on six aerodromes and 30 bases in north- west Germany and Holland. Successful mine-laying also carried out. Yesterday, Blenheims attacked Sola serodrome near Starangeo. Large numbers of enemy aircraft in the aerodrome and more than 20 fighters encountered. We lost 7. As result of energy attacks, 9 enemy aircraft destroyed and further probable casualties; in addition, an enemy bomber was shot down off east coast of Scotland and another off Yarmouth. Six fighter aircraft lost. Last night, heavy bombers attacked oil refineries at Monheim, ruilway targets Regraded Unclassified 88 at Hemm and Soest, dockyard at Wilhelmshavn and canale in northwest Germany; all airoraft returned, reports not yet available. Successful mine laying operations also carried out; all our aireraft returned. Mercentile shipping casualties reported yesterday amount to three British shipe sunk in home waters by U-boats or M.T.B.s and two others attacked; one other ship hit by bomb had to be beached. A French sloop in our hands and also a British anti-submarine vessel were damaged by bombs but can be salvaged. Mediterraneen. At Malta yesterday, an enemy bomber escorted by seven fighters was attacked and shot down by Hurricanes after which the enemy fighters were engaged without conclusive result. One of our aircraft slightly damaged. In the Sudan, enemy has been dropping leaflets printed in Arabic, procleiming Italy's love for Mohammedens and Mussolini as "The Protector of Ielem" also that their attacks are directed against Englishmen and not Sudeness. At six hours on July 9th Commender- in-Chief Mediterranean was about 150 miles west of Crete - heading northwest. At ten fifteen Regraded houre/ Unclassified hours flying boat reported two Itelian battleships end five destroyers about 130 miles to the north- northwest. Further air reports received later were very mixed but it appears that Italian force, which had two battleships, six cruisers and eleven destroyers, had by July 9th been joined by several more cruisers and destroyers from Augusta. As & result Italian navel force heavily outnumber a the British force in cruisers. At fifteen forty-two hours Commander in Chief reported that he was engaging enemy and wireless silence then came into force. It appears that a short and confused action followed during which the British battleship obtained one hit on the enemy bettleship at very long range. Enemy soon turned away under cover of smoke and made for lessina pursued by Commander in Chief of Reditorre- nean, at utmost speed. At sixteen thirty-one hours all available British torpedo-carrying aircraft flew off to attack enemy. Result of this attack not yet known but damaged enemy cruiser reported in tow about 70 miles from essina at nineteen hours. Report also received of bombing attack by eivoraft on our Noval forces in Western Mediterrenean yesterday. Two of these aircraft shot down by gun fire, two by fighters and seven others damaged, three seriously. Regraded Unclassified 90 JUL 11 1940 My dear Dengresenta Behafers I have your letter of July 9, 3940 asking m 'mder what prevision of law the Treasury Department is placing orders too the joint purchase of Rello-Reyee airplane motors w the United States and Gress Pritain." I do net know of my provision of law authorising the Treasury Department to place orders for airplane motore either - behalf of the United States w an behalf of Great Britain, w both; and the treasury Department has not placed my orders of say character for the purchase of Balls-Reyes nature. Apparently you have been misled. Sincerely years, Signed) H. Morgenthau, Jr. Secretary of the Treasury. Honorable date c. Schafer House of Representatives. cc to mr. Thompson CIX:t 7-10-40 11.7L By Messenger 1110 Regraded Unclassified 91 JUL 11 1940 my door Schnfore 1 have your letter w July no 2040 asking - - what provision of 100 the Treasury Repartment to placing orders for the joint purchase of Rella-Seyee airplane nature w the United States and - Aritain." I do not - of my provision of Law authorizing count $ I I s 1 I I either - behalf of the United States w - behalf of treat Britain, - bothy - the Treasury Department - not placed my ordere of my character - the purchase of nature. / I I I E yours, Sincerely (Signed) H. Morgenthau, Jr. Secretary of the Treasury. Removable - & Schulur of Representatives, CLESS 7-20-40 By Messenger Regraded Unclassified 92 OHN c. SCHAFER BTM DIRT. Wisconsin 13259 LEAS NU. MUST Congress of the United Statesisar ON GENERAL COUNSEI House of Representatives PINK SLIP SHOWING "ACTTO" - lashington, D.C. July 9, 1940 The Honorable The Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: Will you please let me know under what pro- vision of law the Treasury Department 1s placing orders for the joint purchase of Rolls-Royce air- plane motors by the United States and Great Britain. Sincerely yours, Jolay \ MS 0, 516 JULDIA Diet w 1210 90 3 Regraded Unclassified 93 July 11, 1940 General Watson telephoned me at 10 o'clock - he evidently had Colonel Maxwell at his side - to say that the President approved of the policy of not letting ammunition go to Sweden. I gathered from the conversation that he approved not letting the ammunition go on the Veli-Ragnar, but Watson said that Colonel Maxwell would go over to see Mr. Hull, and unless Mr. Hull approved we should let the steamer sail. General Watson said that I would hear from him later in the day. This does not check with the memorandum that McKay gave me from Philip Young. Regraded Unclassified 94 July 12, 1940 9:55 a.m. H.M.Jr: Hello. Secretary Stimson: Yes. H.M.Jr: Morgenthau speaking. S: Yes, this is Stimson. H.M.Jr: Good morning. S: Good morning. H.M.Jr: Mr. Stimson, I wondered if sometime this morning you could see Philip Young on these requests that we have now for Canada. S: To do what? H.M.Jr: See Philip Young? Could you see him any time this morning? S: Yes. H.M.Jr: What time would be good for you? S: Well, I have only -- I have a White House appointment hanging over my head -- I can't tell just when it's going to ripen, but he can come over right off and say get him here in about fifteen minutes. H.M.Jr: In fifteen minutes. S: Fifteen or twenty minutes. H.M.Jr: Have him there at quarter past ten? S: Well, make it twenty minutes past ten. H.M.Jr: Twenty past ten. S: Now what's the subject? Hello. 95 - 2 - H.M.Jr: It this request for these surplus munitions for Canada. Hello? S: Yes, I'm on. H.M.Jr: And on this Committee which the President set up 1s Colonel Burns, Bo could he be there at that time, too? S: I'll see whether he's here. I think 80, but I'm not sure. H.M.Jr: Well, he'e familiar with the subject and there's a Committee of ...... S: Well, I'll -- (talks aside -- is Colonel Burns available? Find out -- just open that door) You just want the conference to be personal to me and Young and Burns. H.M.Jr: If it could be. S: Yes. (Aside -- try and get -- no, I want him in twenty minutes) I think it'll be all right. If I find that I can't get him for any reason, I'll have word sent to you. H.M.Jr: Well, you needn't bother. I'll have Philip Young there and I just want to, well, frankly, put it in your lap, if I may because I think if we could do something for Canada now it would ...... S; Well, what is he asking for? H.M.Jr: He's asking for those 80,000 Enfields and General Marshall told us that, I think, 48,000 were available. Well, if there's 48,000 and they say they desperately need 80,000, they should have at least a quarter of a million of them. S: Yeah. Well, Marshall himself is up at the Hill just at present. I shall want to talk to him about it and I'll see Burns too. 96 - 3 - H.M.Jr: But if as I say, I can frankly lay it in your lap and then maybe Monday you could give me an answer why I'd appreciate it. S: Hull -- this gentleman's name 16 Hull -- the one I saw yesterday. H.M.Jr: Yes. C. D. Hull. S: C. D. Hull. H.M.Jr: Minister -- I guess, well he's Minister of National Defense for Canada. S: Yes. All right. H.M.Jr: I'll have Phil over there -- Philip Young over there at quarter past. S: Yes. All right. H.M.Jr: Thank you so much. Regraded Unclassifie 97 Copy for Mr. Cochran COPY OF INCOMING CABLEGRAM Batavia, July 11, 1940 Federal Reserve Bank of New York New York No. 30 ONE New exchange regulations for Dutch East Indies will come in force next week. Unless special exemption granted all Dutch East Indies residents are to sell their dollars U.S. Currency balances (deposits cash balance et cetera) to local Dutch East Indies banks who in their turn transfer their excess funds to Exchange Control Fund which will concentrate its dollars U.S. Currency balance with you. The Exchange Control Fund is & Government fund under management of Javasche Bank. TWO Stocks and bonds in United States of America of Dutch East Indies residents are to be brought under custody of the Amer- ican banking correspondents of the Javasche Bank, Nederlandsche Handel Maatschappij, Nederlandsche Indische Handelsbank, Neder- landsche Indische Escompte Maatschappij and the securities are to be hold* in thename of last mentioned Dutch East Indies bank who in this respect acting as agent for Exchange Control. There is no intention to liquidate these securities which are kept as a centralized exchange reserve. THREE In view of license system for transfers from Netherlands and Dutch East Indies accounts now in force in United States of Regraded Unclassified 98 COPY OF ....... INCOMING CABLEGRAM -2- America we request your help to have the transfers referred to above be effected with as little delay as possible. Dutch East Indies Government will cable to this same effect to the Netherlands Minister Washington, D.C. De Javasche Bank * probably means held BECEINED ТИЗМТЛАЯЗО YOURABAT are Mr 13 bW I 18 OFFICE OE THE 10 THE Regraded Unclassified Treasury Department TELEGRAPH OFFICE Tew 1940 JUL 11 PM 3 55 WY152 FO TWS PAID 3 MINS BOSTON MASS JULY 11 327P 1940 MENRY MORGENTHAU JR SECY OF THE TREASURY WASHNOC GLAD TO COOPERATE IN MATTER YOU SPOKE OF OUR OFFHAND BELIEF BUT METHOD THROUGH OUR PRESENT EMPLOYEES. SUGGEST HOOVER CALL POLLAN BOSTON AND ARRANGE A MEETING TO DISCUSS MOST SATISFACTORY PROCEDURE JEFF COOLIDGE 354p Regraded Unclassified 100 July 11, 1940 10:14 a.m. J. Edgar Hoover: Good morning. H.M.Jr: Good morning. Mr. Hoover, there's a concern called the Credit Suisse, S-u-1-8-8-0, Zurich, who in New York do business under the name of Swiss American Corporation, 24 Pine Street. H: Yes. 24 Pine. H.M.Jr: Now, we have reason to believe the Germans are going to use that as their principal office to sell and liquidate seized securities, H: Yes. H.M.Jr: And I'd like you to sort of put your mind on 1t, you see? H: Fine. Well, I think we of course can do that and I think we ought to be checking into their bank accounts up there. H.M.Jr: Well, yes -- well, that I think we have. H: You have them. All right, then. H.M.Jr: I think we have that, but I was -- yes, because -- yes, I think we have that. They have to report to us. H: I see. H.M.Jr: But I was thinking more of their personnel and who's in the place. H: Right. H.M.Jr: That we haven't done, but their bank accounts I'm quite sure we cover. H: Well, we'll skip that and then we'll concentrate upon the personnel and it might be well to put 8. technical check over their conversations for awhile. H.M.Jr: I had that in mind. Regraded Unclassified 101 - 2 - H: To see what could be done along that line. H.M.Jr: This information came to us from the British Embassy. H: Yes. H.M.Jr: And we've been suspecting it ourselves. H: Yes. H.M.Jr: So if you'd -- H: I'll get after that right away. H.M.Jr: It may -- they've got to use somebody and this is as likely a person as any one. H: Right. They have to have some front for it. H.M.Jr: Right. H: And we'll get after that right away and I'll let you know what the developments are. H.M.Jr: Thank you. H: Fine. Good-bye. H.M.Jr: Good-bye. 102 July 11, 1940 10:25 a.m. Senator Townsend: Henry? H.M.Jr: How are you? T: I'm pretty good. How are you? H.M.Jr: Well, I had a bad strawberry season. T: Oh, pshaw. Well, I had a pretty good one. H.M.Jr: Did you? T: Yeah. I thought you had a good one up there. H.M.Jr: No. We had a small crop and the prices were poor. T: Yeah. Well, can I sell you any silver this morning? H.M.Jr: In exchange for -- I've got some raspberries. T: (Laughs). Can I trade you silver for rasp- berries? H.M.Jr: Sure. T: All right. H.M.Jr: What's worrying you? T: What I called you up for yesterday, Henry, was to know what you're going to do with these bonds but since it's public now -- so I have it. H.M.Jr: Oh. T: You're going to make them fourteen, seventeen years, are you? H.M.Jr: Fourteen, sixteen. T: Two and a quarter. Regraded Unclassified 103 - 2 - H.M.Jr: Yeah. Can I sell you a couple? T: Huh? H.M.Jr: Can I sell you a couple? T: Yeah, we'll buy some. H.M.Jr: What? T: Yeah, we'll buy some. H.M.Jr: I see. You want a little advance ...... T: Trade this darn silver, can we, at 35% an ounce for bonds. H.M.Jr: What did you want?? Yes, you say you want a little advance information? T: No, I wasn't trying to get advance information, I was just trying to ask you what's going to be done 80 I can tell my bank. H.M.Jr: (Laughs). Oh, you've got a bank. T: Yeah. H.M.Jr: Well, today is the day. T: Today is the day. H.M.Jr: You can get up to 5,000 if you keep them for ninety days. T: (Laughs). All right. All right, Henry, I'm much obliged and much obliged for calling me. Anything I can do for you? H.M.Jr: Sure. T: What is it? H.M.Jr: Keep your sense of humor the way you've got it. T: What? H.M.Jr: Just keep your sense of humor. Keep that good sense of humor. 104 - 3 - T: Oh, well. (Laughs). Thank you ever to much. H.M.Jr: Good-bye. T: Come up to see me. H.M.Jr: I'll do that. T: All right. 105 July 11, 1940 5:11 p.m. H.M.Jr: Hello. Operator: Mr. Foley. Go ahead. Ed Foley: Hello. H.M.Jr: Ed. F: Yes, Mr. Secretary. H.M.Jr: What I told Knudsen there about that contract and what he told us about Johnson is terribly important and I want you to write that down for me. F: All right. H.M.Jr: I haven't got time to dictate it, but that's terribly important. F: All right. 0. K., I'll dictate a little memorandum for the diary. H.M.Jr: Right. F: Right. All AMERICAD CONSULATE 106 Rangoon, Bunne, July II, 1940. Subject: Exports of Wood Oil from China to the United States Shipped Through Surma. The Monorable The Secretary of State, Washington. Sir: : have the honor to report that 436 tons of Chi- nase wood oil (tung gil) were shipped from Surma to the United States on the S.S. Exbrook on April 24, 1940 and that 568 tons were shipped on the M.V. Excelsior on July 9, 1940. These shipments were handled, as previous ship- sents have been, by the Foo Shing Trading Corporation and consigned to the Universal Trading Corporation of New York in accordance with an agreement with the Export-Import Bank for commercial credits to China to be repaid from the proceeds of sales of wood oil. With the interruption of shipments to Haiphong, the Burma route has increased its importance as an outlet for China's shipments of wood oil. The Foo Shing Trading Corporation has been trying to ship 500 to 600 tons a month through Rangoon in order to reach a total of 5,000 tons by the end of the year. There were no shipments in May and June, out if regu- lar shipments are made from now on, the desired total should be reached. All the wood oil so far shipped from Rangoon has been carried by the American Export Lines and it is unierstood that this line has practically guaranteed to take all the wood oil given them, in spite of a general shortage of freight space now being felt in Rangoon, The amount that can be brought in over the Burma- Yunnan road depends on the condition of the road and the expense of hauling. It was originally thought that trucks returning empty from Kunming could carry wood oil to Burma at no extra cost. It was found, however, that the amount of gasoline required to haul a full load as compared to the amount required to haul an empty truck was considerable. It was, in fact, snough to add largely to freight costs, Later it was found that if the trucks carried no more than three drums (about 1,275 pounds) the amount of gasoline con- sumed was very little more than for an empty truck. Accordingly shipments have been coming into Burma loaded Regraded Unclassified 107 - 2 - loaded about two or three drums to a truck. Since each drum averages about 425 pounds of wood oil, it would take about 33 trucks arriving each day carrying three drums apiece to make 600 tons a month. The average number of trucks coming into Burma each day appears to be above the 33 required to make this total. There were 544 tons shipped in March, 436 in April, and 568 in July. This gives a total of 1,548 tons shipped. To make 5,000 tons by the end of the year it will be neces- sary to ship 3,450 tons in the next six months (counting the present month of July as a whole month) or 575 tons per month. It seems that this total might be reached barring unforeseen contingencies. Respectfully yours, W. LEONARD PARKER American Vice Consul Distribution: 1. In quintuplicate to Department. 2. Copy to Embassy, London. 3. Copy to Embassy, Chungking. 4. Copy to Consulate, Yunnanfu. 800 108 CONFIDENTIAL OFFICE OF FOREIGN AGRICULTURAL RELATIONS July 11, 1940 FOR CABINET MEETING SUMMARY OF CABLES ON FORMIGN DEVELOPMENTS (Received from July 5 to 10, 1940) BRAZIL: Germen firms are soliciting orders in Sao Peulo for delivery of German products in September end October. Contracts provide for penelties of 10 to 40 percent for failure in the fulfillment of contracts. FINLAND: The Prime Minister announced the conclusion of 8 trade agreement with Germany signed in Berlin on June 29. The details have not been announced but the press states that Finnish exports to Germany will be increased possibly by seventy-five percent above the 1936 to 1939 level. Trade will be conducted strictly on e compensation basis and not in free exchange. Exports will comprise chiefly wood products, paper, minerels, and a substantial quota of agricultural products against imports of coking coal and undescribed manufacturies. FRANCE: According to a DNB report from Paris dated July 6 the German military authorities in French occupied territory have set up distribution bureaus which have ordered the sequestration of all agri- cultural produce, food supplies and semi-manufactured materials, It is stated that these supplies are not being exported but are being requisitioned with 8 view to providing for orderly distribution, and that individual shops are free to sell to their customers for their deily needs without any extraordinary control on the part of the military authorities. Shops, the owner of which are absent, are to be managed by provisional administrators. The report continues that workers end employees are forbidden to leave their jobs, or to strike, and that unauthorized raising of prices will be punished. NORWAY: New rationing measures have been placed in effect in Norway. The maximum daily ration of butter is placed at 45 grans, or margarine at 35 grams, against individual rationing cards. The consump- tion of fats and fatty acida by somp factories was reduced to 65 percent of normal. Strict rationing of clothing, shoes, and leather is entici- pated shortly. Negotiations involving the sale of practically the entire Norwegian surplus of cenned fish to Germany were concluded. Dried fish sales are now being discussed. Trade with Sweden and Denmark has in- creased somewhat although it is still unimportent. Strenuous efforts Regraded Unclassified 109 are being made to increase the sales of various German products to replace `simflar items formerly imported from other sources. RUMANIA: The economic loss to Rumanie involved in the cession of Bessarabie and Northern Bukowina is indicated roughly by the follow- 1ng percentage figures based on 1938 production statistics. In total area the loss is about 5,000,000 hectares, or 17 percent, and in arable land about 3,250,000 hectares, or 23 percent. In cereal production the ceded area contributed 9,085,000 tons of wheat and 1,050,000 tons of corn in 1938, 20 percent of the total crop in both cases. The propor- tionate loss in this year's crop is much greater since heavy rains have damaged crops in the old Kingdom while benefiting those in usually arid Bessarabia. Based on normal crops, other-serious production losses are: potatoes 29 percent, sunflower seed 74 percent, sugar beet 32 percent, soybeans 80 percent, vineyards 22 percent, cattle 17 percent, horses 28 percent, sheep and hogs 20 percent each. Important industrial losses occurred only in the food processing industry which contributed 20 per- cent of total production value, principally in sugar refineries and in the lumber industry with 15 percent of total production. The oil seed crops were produced almost entirely for export to Germany end it is understood that German buyers had already contracted for most of this year's crop end paid in advance for much of it. German circles appear far from certain as to Russia's intention to complete delivery. of interest to the American import trade is the loss of almost 100 percent of caracul sheep. Exports of caracul skins to the United States totalled $600,000 in 1939. Rumanie's chronic difficulty in effecting merchandise and payments to the United States will be greatly increased by the disappearance of this export item. As regards American investments the greatest potential loss 18 that of the international telephone and telegraph subsidiary which as previously reported has 7 percent of its equipment in the area valued at 800,000,000 gold lef. Romanie Americans has no direct investments but through its interest in Distributia, a domestic retailing subsidiary, may incur an indirect loss of $80,000 in stocks and installations, Other American firms may incur moderate losses in uncollected accounts in the area. Due to the comparative poverty of the area the loss in future merket potentialities for American goods will not be proportionate to transfer of population involved. STRICTLY CONFIDENTIAL. Reliable information has been received that fifteen hundred carloads of sugar had been bought by the Germans, who were preparing them for shipment out of Bessarabia. The Russien authorities' attitude is indicated by their refusal up to now to allow the head of the economic section of the German Legation, Neubacher, to enter Besearabia to look after the interests of the Germans. 110 - 3 - SWEDEN: A Norwegian delegation is in Stockholm discussing 8. clearing agreement. Sugar rations for the period July 1 to August 4 were increased to 40 kilos per person, including 1-1/2 kilo for canning. The Swedish Government acting on powers recently granted by the Rikadag has decreed 8. suspension until October 15th of provisions of law on working hours in agriculture. UNITED KINGDOM: The British Board of Trade advises that the question of flax supplies for the United States 1s under active con- sideration and promises 8 decision as soon as possible. The British Food Minister announced on July 8 that the time had come when he must ask the nation to go on to hard living, eliminate all lururies, use fresh foods now sessonally available, and conserve canned goods, Effective July 15 hotels and restaurants may serve only one course of meat, game, poultry or fish. Tea was rationed to two ounces per capita weekly effective July 9. Margarine and cooking fats will be rationed on July 22 but amounts are 88 yet unspecified. Other similar measures seem likely in the near future. The foregoing measures are largely precautionary in order to keep stocks on hand for the difficult period ahead, though they imply 8 reduction in food supplies. The following comments by the American Agricul tural Attaché in London on developments in the Liverpool cotton market during the neek ending July 5 are of interest, (1) Liverpool Futures Market: The market has been very narrow due to the absence of outside speculative interest. July liquidation and light hedging have about balanced moderate trade offtake. Greatly restricted importing and heavy mill forwardings are causing 8 steady tightening in the locel supply situation. All indications point to a very strong contract situation in the late summer. A scarcity of cotton around 7/8 to 15/16 staple is already pronounced. Distant months are lagging owing to the lack of speculative and straddle support. Buying of those deliveries is restrained by the great uncertainty surrounding the Control's future import policy and by the confused war situation. It cannot be seid that the market is functioning successfully at the present the. The whole situation is dominated by the Government import policy which 18 still indeterminate. Increasing importation difficulties threaten to create an unworkable contract position in the autumn. The establisiment of a breader futures contract will soon become an imperative necessity. (2) Spot Market: Spinner demand during the past week has been much quieter, sales totalling around 35,000 bales. A fair spinner inquiry continues for desirable cotton on hand but forward business 18 greatly restricted by the uncertain future arrivel of steamers and the difficulty in obtaining freight space end import licenses. Virtually no forward business in American cotton has been done to date, merchants being unwilling to risk new crop sales ahead until the freight quote for September onwards is announced. Forward business in South American cottons is almost impossible owing to the severe cut in import licenses. 4 - 111 Merchants who have sold Brazilian and Peruvien cotton alead are in the invidious position of being unable to obtain more than 20 percent of the quantities contracted for, and many contracts will have to be can- celled. A good business has been done in West African cottons, there being no restrictions on the import of Empire growths. The basis is still tending to harden despite easier prices in most producing countries. Import buying of all growths has remained very slow. All indications point to a steady reduction in local stocks over the coming three months. Negotiations are reported to be proceeding with the Egyptian Government for the purchase of the balance the 1939 crop and the whole of the 1940 crop. If an agreement is reached the cotton will be stored in the United Kingdom as an emergency reserve. URUGUAY: The Bank of the Republic on July 3 announced quotas of $396,000 in controlled exchange and $704,000 in free exchange for imports from the United States covering parmaceuticals, chemicals, industrial and agricultural machinery, construction steel, galvanized wire, yarns, white cement, lubricents, lumber, automobile and truck parts, and tools, tobacco and other materials of prime necessity. CONFIDENTIAL: LATEST REPORTS ON EUROPEAN CROP PROSPECTS The following information received since July 5 supplement the reports on European crop conditions presented in this report for June 28 and July 5. SWEDEN: Exceptionally dry weather in many sections has seriously retarded crop developments, especially hay crops. It is still too early to make a reliable prediction as to final results. UNITED KINGDOM: Reports indicate that the British crop of early apples will be only 50 percent of normal, of Bramley's Seedling apples one-third of normal, and of pears 60 percent of normal. On the other hand, a plum crop of record proportions, apparently over 100,000 tons, is expected. No estimates are available as to grain crops, potatoes and sugar beets. However, good rains are needed generally. ITALY: Non-Italian observers further consulted by the American Embassy in Rome express the opinion that the wheat crop will be "mediocre." The unofficial concensus of opinion at the International Institute of Agriculture is that it will be below that of last year although no est- mate can be obtained as to the probable extent of the shortage. Current continued rains in the north constitute an unfavorable factor. Much still depends on the weather for the next few weeks. The Legation of one Balkan country, which exports wheat to Italy, thinks that production may be 6 million quintals below that of last year when the crop was generally understood to be about eo million quintale although the latter figure has been considered by some observers as exaggerated, Another Balkan Legation thinks that the crop may be 10 million quintals below last year's adding, however, that this is merely an impression. 112 5 DANUBE BASIN; Weather throughout the Danube Basin was reported as uncertain during the past wook as far as crop developments are con- cerned. Rainy, overcast and cool periods were interupted by intervals of sunshine and higher temperatures, such intervals lengthening towards the weekend. In several districts, however, frequent local showers with some hall contributed to the already unfavorable crop situation. Cereals have completed the milky stage of development in sotheastern districts of the Basin where harvesting will probably start by July 10. The corn crop is growing vigorously. However, despite remarkably improved appearance crop prospects are still uncertain, HUNGARY: According to the International Institute of Agriculture in Rome the 1940 amall grain acreage and production in Hungary (present frontiers including Sub-Carpathian Russia) compared with 1939 are estimated as follows: : 1939 : 1940 Crop : : Acres Bushels : Acres : Bushels : : : : : = : : Wheat : 4,669,000 : 112,767,000 : 4,312,000 : 82,305,000 Rye : 1,728,000 : 35,310,000 : 1,624,000 : 29,447,000 Barley 1,344,000 : 35,847,000 : 1,300,000 : 32,610,000 Oats : 636,000 : 24,576,000 : 793,000 : 26,800,000 : : : : FRANCE: VERY CONFIDENTIAL - The American Embasay in Paris cables that the food situation in that city is already difficult and that there is every reason to believe that it will become acute shortly. An organization is being developed to centralize for the Embassy staff the discovery and purchase of certain essentials which have become almost unobtainable in the ordinary way, notably, milk, butter, eggs, potatoes, fresh vegetables and meats. The complete breakdown of normal transporta- tion fecilities is largely responsible for the existing situation. Study is being given to means of procuring regular supplies of tinned and other foods from the United States. Coal supplies are low, and deliveries almost impossible. It seems certain that no fuel oil will be available in Paris during the coming winter. 113 July 11, 1940 5:35 p.m. H.M.Jr: Hello. Operator: Congressman Doughton. Go ahead. H.M.Jr: Hello. Cong. Bob Doughton: All right, Mr. Secretary, how are you? H.M.Jr: Fine. When did you get back? D: I came in here about 3:30. H.M.Jr: I see. D: I just thought I'd kind of check up. I wasn't able to locate Jere and see if there's been anything doing here this week that I'd be interested in. I saw you'd had a meeting at the White House. H.M.Jr: Yeah. Well, we tried to get hold of you each day and D: How's that? H.M.Jr: I spoke to your office and told them to let you know what we were doing. D: Well, I never got word. I got word day before yesterday that I was wanted at nine o'clock, I believe, the next morning and I got it eight o'clock the night before. I was not at home that day -- out on some official matters -- and I couldn't make it then. I don't know when you let my office know, but I didn't get the word until the night before the meeting was to be at nine o'clock. H.M.Jr: Yeah. Well D: She sent a wire sometime 114 - 2 - H.M.Jr: Well, we tried our best to get hold of you. D: Well, how much time did you give ahead, that's what I want to find out. H.M.Jr: Well, the second time -- you're the first man I called. I can't remember, Bob. I mean, so much has happened since then, but I called you first and ...... D: Well, it's all over and there's nothing we can do now, 18 there? H.M.Jr: No, just what you saw in the paper and I tell you what I'd like to do. Couldn't Sullivan drop up and call on you tomorrow? D: Yes. H.M.Jr: What time ...... D: I just want to say -- I just want to get my position very plain, because it's a little embarrassing to me. I'm not criticising -- not a blaming you. When I came up here before I called and we had the meeting down there and I thought they were ready to do something and I stayed here until Wednesday and tried to get in touch with Sullivan and they said he was gone for the entire week. I couldn't get in touch with him and was no use to stay here, BO I had some very pressing matters at home 60 I went home. I'd have been here at his disposal all last week. I saw in the paper that you said you were ready to go on any time the Ways and Means Committee was and I tried to get in touch with him. He'd already told us he'd need sixty days before that and I tried to get in touch with him and they said he was gone for the entire week on Tuesday evening. H.M.Jr: Yeah. D: So I couldn't do anything without getting in touch with him, you know. And then the next thing I knew the other meeting was 115 - 3 - called so short that I didn't get down to that and the folks down home wonder whether or not I'm neglecting my business or whether or not ignored up here. It's embarrassing. H.M.Jr: Well, I can't do anything more than try to get hold of you and of course the pressure 18 on me to do something and I've Just got to go ahead and -- I don't know any other way to get hold of you except through your own office. D: Well, there's no other way, but I just was wondering if usually these things are 80 urgent that we couldn't get more than one day's notice. H.M.Jr: Well, I don't even get that. D: (Laughs). Well, I'm not complaining, but I know we wouldn't hold a meeting -- I wouldn't hold one if you were away for a week, or perhaps two or three days, without giving you more of a notice -- a day's notice. H.M.Jr: Well, I'm sorry, Bob. I had no notice and I just had to go to town and ...... D: I don't know why Sullivan ran off. I was here last week and if this thing was urgent why we couldn't have had this conference last week. I came here a purpose. H.M.Jr: Well, he didn't know. We thought there wasn't going to be any hurry and then they wanted to clean this thing up before the Convention next week. Now that's what the hurry was. D: Well, if he wants to see me, of course, I'll always be glad to see him or you either one. But there's some matters that I want to talk over with you about it one of these days 80 we can get these things straight so either one of us won't be embarrassed. H.M.Jr: Right. Well, when would you like to talk things over. 116 - 4 - D: Whenever it suits you. I'll be here -- when're you going to the Convention? H.M.Jr: I'm not going. D: You're not going. H.M.Jr: No. D: Well, anytime tomorrow. I don't think I'll go until Saturday afternoon. I've got an awful lot of accumulated mail and departmental work to do here tomorrow and next day. I don't think I can get away before Saturday afternoon, 80 I'll run down at your con- venience. H.M.Jr: Yeah. Well, let's just see. What're you doing around eleven o'clock? D: I'll be right at your office, if you say 80. H.M.Jr: That'll be wonderful. I'd love to see you. D: In the meantime, if Sullivan wants to Bee me either before or after that, I'll be glad to see him. H.M.Jr: Well, supposing I tell Sullivan to be up at your office at ten tomorrow morning. D: Fine. H.M.Jr: How's that? D: Thank you. I'll be here at ten and I'll be down at your office at eleven. H.M.Jr: O. K. D: Thank you very much. Good-bye. 117 POR THE PRESS IMMEDIATE RELEASE JULY 12, 1940 at his press culference 7/12/40. July Referred to by Present 11, 1940 The President The White House Washington, D. C. Mr. President: The question whether in the light of the national defense emargency it will be necessary to raise the ceiling for hours, above which time and one half must be paid, has given me much concern. As a soldier, the nation's defense is my primary interest. My assignment to the administration of 8. labor law has in no way lessened that interest. Were there any defense need in certain industries for abrogation of the time and one half rule, nothing could keep no from ao reporting. In my contacts with industry no such need has yet been demonstrated to me- Two documents from the last war should be called to public attentions One is the wartime report of the British Munitions Commission. The report stated that from experiments spread over thirteen and EL half months, G. reduction of working hours of munitions workers WEB associated with an increase of production. For example, in one factory hours of work were changed, first from a 66-hour week to B. 55-hour week, and then to G. 45}-hour week. Considering the weekly output of the 66-hour week 65 100, it wes found that the 55-hour week yielded a relative output of 111. The 45}-hour week yielded a relative output of 109. Thus the 45)-hour week yielded more in products then the 66-hour week and practically as much as the 55-hour week. The same results wore obtained during the 13-month period in various other munitions factories. The other document is General Order No. 13 issued by the Chief of Ordnance, United States Army, on Hovember 15, 1917, seven months after the declaration of war when the United States was at the height of its procurement effort. The Order stated: "In view of the urgent necessity for e prompt increase in the volume of production of practically every article required for the conduct of the war, vigilance is domanded of all those in any way associated with industry lest the safeguards with which the people of this country have sought to protect labor should be unwisely and unnocessarily broken down. It is a fair assumption that for the most part these safeguards are the mechanisms of efficiency. Industrial history proves that reasonable hours, fair working conditions, and a proper wage scale are essential to high production. During the war every attempt should be made to conserve in every way possible all of our achiovemente in the way of social betterment. But the prossing argument for maintaining industrial sefeguards in the present emergency is that they actually contribute to efficiency, To waive them would be a shortsighted policy, loading gradually but inevitably toward lowered production," These documents wore drafted almost a generation ago. The production line techniques of industry have been greatly developed since then. Today maximum production calls for maximum efficiency of the machine, Maximum efficiency of the machine is usually obtained by using relays of workers in shifts short enough to make constantly intense offort possible. Regraded Unclassified 118 - 2 - I think it also should be called to the public's attention that the French 40-hour W eek in effect from 1936 to 1938 had little resemblance to our "ceiling for hours." The French 40-hour woek generally was a rigid limitation. Germany was on an 8-hour day, 48-hour week basis from July 26, 1934, to January 1, 1939. A survey ontitled "Labor Policy in Germany" appearing in the June 1940 issue of the Monthly Labor Review reports that a 10-hour day, 60-hour week began in non-defense industries after January 1, 1939, que to & labor shortage. In the moro vital industries, hours up to 16 per day might be permitted by the factory inspector. But this lengthening of working hours was not successful. The article states: "Production began to fall off rapidly, accompanied by such an alarming increase of industrial accidents and stoppages as to attract the serious attention of the (overnment authorities The government applied the strictest measures against suspected saboteurs but also began to lighten somewhat the hard labor conditions." Any complaints from the key defense industries that the payment of time and a half for overtime is making difficult their operation will be promptly brought to your attontion. To date the Wage and Hour Division has received but three such complaints, all from small establishments. Respectfully, Philip B. Fleming Administrator 119 U.S. COAST GUARD COMMANDANT'S OFFICE Memorandum for 12 Jaly '40 miss Channey The available for you information, as per phone request from min Frazie, this date. ImBailes / (COPY) 00-F-010 (7/11/40) 120 THE Director, Bureau of the Budget, Washington, D. c. Sir: Under date of April 24, 1939, I recommended to you, in response to Bureau of the Budget circular letter of April 14, 1939, a reorganisa- tion plan abolishing the Bureau of Marine Inspection and Navigation, of the Department of Commerce, and dividing its duties among the Maritime Commission, the Bureau of Customs (Treasury Department), and the Coast Guard (Treasury Department). On January 18, 1940, I again recommended this reorganization plan to you, stating that the enforcement of neutral- ity relating to merchant shipping has created a greater demand for such a reorganization than existed when I made my first recomendation. Now that national defense measures are more urgent than at any previous time in the history of our country, the need for this proposed reorganisation plan becomes imperative. Before resubmitting this reorganisation plan to you I took up the matter with Rear Admiral Land, Chairman of the Maritime Commission, and Admiral Stark, Chief of Naval Operations. Both Admiral Stark and Admiral Land have given their unqualified approval to this reorganization plan, and there are inclosed herewith photostatic copies of letters from the Chief of Naval Operations and the Chicklen of the Maritime Commission expressing their complete approval of this plan. A copy of the proposed reorganization plan, together with a proposed letter of transmittal from the President to the Congress, with all sup- porting data and details as to the merits and advantages of the plan, are in the hands of the Bureau of the Budget. It is my understanding that the Bureau of the Budget has already made & comprehensive study of the plan. If, after & review of the plan and corollary data previously sub- mitted, the plan meets with your approval and you agree with no that the present national emergency makes most desirable its adoption at the Regraded Unclassified 60-7-010 (7/11/40) 121 earliest practicable date, my I suggest that you lay the matter before the President. The urgeney of immediate action results from the need to increase materially the national defense value of the merchant marine and to carry out mrs efficiently the nestrality and national defense policies of this country through the elimination of the duplication and overlapping of the functions recomended for distribution to the Maritine Commission, the Bureau of Customs, and the Coast Guard. The adoption of this plan will be & further step to improve national defense with no increase in cost and with the probability of a saving. Very truly yours, Secretary of the Treasury. Inclosures - 2. - 2 Regraded Unclassified 122 11 July, 1940. the Secretary of the Treasury: In the attached letter to the Director of the Bureen of the Budget, prepared for your signature, you request the Director to again review the recrgenization plan which you last submitted on January 18, 1940. I have recently gone over the entire plan personally with both Admiral Stark, Chief of Maval Operations, and Rear Admiral Land, Chairman of the Maritine Commission. You will note that in the letters of the Chief w Neval Operations and the Chairman of the Maritime Commission they not only approve the plan as being sound in prin- ciple, logical in its set-up, increasing as it does the efficiency of the Government in handling maritine affairs, but that they both stress the decided adven- tages of the plan in connection with the national de- fense. I night add that during By conferences with them, in addition to approving the plan, both Admiral Stark and Admiral Land evinsed a lively interest in the reorganisation plan and in the early adoption. May I suggest that if you approve and forward the attached letter to the Director of the Budget, it would greatly facilitate its early consideration by him if you would phone Mr. Smith & personal nessage regarding your desire for immediate consideration. Action in the premises is required at the earliest pratticable date, sime if the President approves of the plan it must be forwarded to the Gengress while the latter is in secuion, and the recrgmining authority of the President expires in January, 1941. R. Re WARSCHE. Regraded-Unclassified 123 CO-F-010 (7/11/40) r JUL 11 1940 The Director, Bureen of the Budget, Washington, D. C. Sir: Under date of April 24, 1939, I recomended to you, in response to Bureau of the Budget circular letter of April 14, 1939, a reorganisa- tion plan abolishing the Bureau of Marine Inspection and Ravigations, of the Department of Commrce, and dividing its duties among the Maritime Comission, the Bureau of Customs (Treasury Department), and the Coast Guard (Treasury Department). On January 16, 1940, I again recomended this recorgmisation plan to you, stating that the enforcement of neutral- ity relating to nerchant shipping has created a greater deeand for such a reorganization than axisted when I made my first recommendation. Now that basional defense insures are more urgant than at any previous time in the history of our country, the need for this proposed recrganisation plan becomes imporative. Before resubmitting this reorganisation plan to you I took up the matter with Rear Admiral Land, Chairman of the Maritime Commission, and Admiral Stark, Chief of Naval Operations. Both Admiral Stark and Admiral Land have given their unqualified approval to this recrgamization plan, and there are inclosed herewith photostatic copies of letters from the Chief of Naval Operations and the Chairesn of the Maritine Commission expressing their complete approval of this plan. A copy of the proposed recrgenisation plan, together with a proposed letter of transmittal from the President to the Congress, with all sup- porting data and details as to the medits and advantages of the plan, are in the hands of the Bureau of the Budget. n is n understanding that the Buress of the Budget has already nade a comprehensive staty of the plan. If, after a review of the plan and corollary data proviously nb- nitted, the plan nosts with your aproval and you agree with M that the present national energency rakes met desirable its adoption at the Regraded Unclassified 124 00-F-010 (7/12/20) earliest practicable date, any I reggest that you Leg the number before the President. The urgenty of imediate action results from the used to increase materially the national defense value of the marchant mrine and to carry out me officiently the sentrality and national defense policies of this country through the elimination of the duplication and overlapping of the functions recomented for distribution to the Maritine Commission, the Suream of Customs, and the Grast and. The adoption of this plan will be & further stop to improve sational defense with as intrease in cost and with the probability of a suving. Very truly years, (Signed) H. Morgeuthau, Jr. Secretary of the Treasury. Inclosures - 2. a - File to Mr. T7 not mailed in Secips office Regraded Unclassified 125 implemento in sed No NAVY DEPARTMENT OFFICE OF THE CHIEF OF NAVAL OPERATIONS WASHINGTON 9 July 1940 My dear Mr. Morgenthau: I am in receipt of your letter of 9 July regarding the reorganization plan which in effect abolishes the Bureau of Marine Inspection and Navi- gation of the Department of Commerce and divides its duties among the Maritime Commission, Bureau of Customs (Treasury Department), and the Coast Guard (Treasury Department). I went over the detailed plan of this some time ago as set forth by the Commandant of the Coast Guard in his memorandum of 23 May 1940. I believe the reorganization plan proposed is sound in principle and that it is distinctly in the interest of national defense. Yours sincerely, HRDiard Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D.C. Regraded Unclassified 126 UNITED STATES MARITIME COMMISSION WASHINGTON July 10, 1940 OFFICE THE CHAIRMAN The Honorable The Secretary of Treasury Washington, D. C. My dear Mr. Secretary: Receipt is acknowledged of your letter of recent date, proposing the abolition of the Bureau of Marine Inspection and Navigation and the redistribution of that Bureau's duties among the Bureau of Customs and Coast Guard of the Treasury Department, and the Maritime Commis- sion. Some consideration and study have been made of the subject during the past two years and from time to time informal discussions have occurred with those interested in improving the administration of the Government agencies involved, as well as endeavoring to either avoid dupli- cation of effort or reduce it to a minimum. If the general principles are accepted as sound and the proposed reorganization put into effect, there are some minor readjustments that could readily be made in the proposed reassignment of duties which, in my judgment, would increase the effectiveness of the re- organization. Specifically, it would be more effective if the Shipping Commissioners who handle personnel matters were put under the Coast Guard instead of under the Customs Bureau. These adjustments and division of duties can readily be worked out satisfactorily by the Coast Guard, the Customs Bureau and the staff of the Maritime Commission. It is my belief that the reorganization plan as pro- posed is, on the whole, sound in principle, logical in its setup, follows correct administrative lines and will in- crease the efficiency of the Government in handling maritime affairs, which in turn will be for the interest of national defense. Sincerely yours, is hand. 127 RDS GRAY Buenos Aires Dated July 12, 1940 Rec'd 5:10 p.m. Secretary of State. Washington. 291. July 12, 11 B.E. Embassy's telegram 281, July 8, 3 p.m. According to confidential figures obtained from the Central Bank, Argentina had an unfavorable balance of international payments in free exchange in the official market during the first 5 months of 1940 amounting to 47,000,000 pesos. Regular exports produced 365,000,000 pesos, while importe consumed 363,000,000. service of the debt and official expenditures 45,000,000 and financial services 5,000,000. The estimate for the last 7 months of 1940 is an unfavorable balance of 387,000,000 pesos. Exports are expected to produce 145,000,000, while imports are expected to consume 482,000,000, service of the debt and official expenditures 47,000,000 and financial services 3,000,000. The unfavorable balance of payments in free exchange through the official market in the whole year 1940 is thus expected to be 434,000.000 pesos. ARMOUR JRL COPY Regraded Unclassified 128 JUL 12 1940 = Bear Dr. - I should like to thank you for your letter of June 26, 1940 calling to my attention - item in the Gengraphical Journal for June 1940 - The 1 I have read the quotation in your letter carefully and found the coments contained therein very interest- ing. I (Signed) H. Morgenthau, Jr. I if I Gffice of the President, The Johns Hopkins University, Faltiners, Maryland, Edital NRA 6/29/40 HDW RAULE COPY 75 ccto mr. Thompson Regraded Unclassified 129 THE JOHNS HOPKINS UNIVERSITY BALTIMORE, MARYLAND OFFICE OF THE PRESIDENT June 26, 1940 Dear Mr. Secretary, You will recall earlier correspondence about the Yunnan-Burma Road. In the latest issue of the Geographical Journal for June, 1940, is an item, the whole of which I quote as follows: "THE YUNNAN-BURMA ROAD We are indebted to Professor C. G. Beasley, of Rangoon, for the following information: The discussion following Mr. Patrick Fitzgerald's interesting paper, "The Yunnan-Burma road," published in the March number of the Journal, revealed a quite inadequate appreciation of the success of this highway and of the volume of trade which is already passing over it. The trade now goes from the rail-head at Lashio, and in the eleven months from the first of April to the end of February 1940, commodities to the value of two million pounds sterling passed over the road from Burma to China in addition to & large volume of munitions and war supplies, the figures for which are not disclosed by the Government of Burma. A great variety of items is included in this trade, the most impostant single branch of which consists of motor omnibuses, vans, and lorries, with spare parts and pneumatic covers and tubes, which account for nearly half of the total trade. Other important items include petroleum, cotton piecegoods and blankets, machinery of all kinds, hardware, steel bars, drugs and medecines, and chemicals. The success of the road has in fact exceeded all expectations, and the existing volume of commercial traffic would have been greatly increased were it not for the vital necessity of giving precedence to the passage of war supplies. No doubt the nature of this traffic is fundamentally artificial and no sound inferences can yet be drawn as to its chances of survival in normal circum- stances. It is desirable however that wider publicity should be given in England to the great achievements of the Chinese in the rapid development of manufacturing activities in the western provinces, and the large part that is being played therein by the maintenance of this new link with Burma." Sincerely yours, Isainh Bowman The Honorable Henry Morgenthau, Jr. U. S. Treasury Department, Washington, D. C. Regraded Unclassified 130 TREASURY DEPARTMENT Regraded Unclass INTER OFFICE COMMUNICATION DATE July 12, 1940 TO Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL Mr. C. Lyon Chandler, Assistant Cashier of the Corn Exchange Bank at Philadelphia, telephoned me at 10:45 this morning from New York. He desired to ascertain the present status of the Paris branch of Barclay's Bank, of which the Corn Exchange is an American correspondent. I told him that I had no information and referred him to Mr. Leroy-Beaulieu, giving the latter's telephone number. Mr. Chandler called back at 11:10, stating that Mr. Leroy-Beaulieu vas in Washington and that his office know nothing about banks in Paris. When I talked with Leroy-Beaulieu in Washington this afternoon, I found that he had no information in the premises. I discussed with Mr. Livesey the propriety of the State Department sending a cable to our Embassy in France, requesting, at Mr. Chandler's expense, information as to the present status of Barclay's Paris branch bank. Livesey solicited the opinion of Mr. Clark, with which both Livesey and I agreed, namely, that the State Department should not request its diplomatic ffice in unoccupied French territory to seek information with respect to a. British bank in territory occupied by Germany. I telephoned the above information to Mr. Chandler in Philadelphia this after- noon. I added that I had had occasion to speak with an international banker (Dr. Somary) who is of the opinion that Barclay's branch now has its French head- quarters at Vichy. I told Mr. Chandler that my informant had suggested that Mr. Frank Altschul of Lasard Freres in New York could confirm this. B.M.R. 131 TREASURY DEPARTMENT Regraded Unclassi INTER OFFICE COMMUNICATION DATE July 12, 1940 TO Secretary Morgenthau STRICTLY CONFIDENTIAL FROM Mr. Cochran In the absence of Mr. Knoke, Mr. Cameron of the Federal Reserve Bank has given no the following data with respect to Italian and Russian balances in New York. On June 13 the National City Bank paid $105,000 to the United States Steel Export Company to the debit of the account of the Italian Fist Company. On June 14 the National City Bank debited the Bank of Haples Trust Company account for $200,000 for & currency shipment. On June 19 the Chase Bank debited the Banco Commerciale Italiano $499,000 on & check drawn in favor of the New York Discount Corporation. On June 21 the Chase Bank debited the Banco Commerciale Italiano $291,000 in favor of the Standard 011 Company of New York. On June 25 the National City debited Fiat $86,000 for payment to the United States Steel Export Company. On July 1. the Chase debited the Banco Commerciale Italiano a check drawn for $599,000 in favor of the Discount Corporation. On July 3 there vas & check drawn on Chase by the Credito Italiano for $350,000 in favor of Post and Flagg. On July 9 there was a similar transaction for $100,000. It is our under- standing that these payments, and probably those to the Discount Corporation, have been for the purchase of securities, principally of the United States Govern- ment. On July 10 the Chase Bank reported that & cash transfer had been ordered by the Riunione Adristica di Sicurta, Trieste, to the German Gold Discount Bank, Berlin, for account of the Internationale Unfall Schaden Versicherung Gesellschaft, Vienna, in the sum of $100,000. On July 5 the Federal paid $50,000 to the B.I.S. by order of the Bank of Italy. On July 5 the Federal received $700,000 for account of the Bank of Italy from the National Bank of Rumania. The Bank of Italy instructed the Federal to pay the funds to the Bank of Maples Trust in You York for the account of the Italian Exchange Institute. 132 -2- HUSSIA On June 11 Russian balances with the Chase Pank in New York were as follows: State Bank of Russia, dollar account, $6,900,000; State Bank of Russia, letter of credit account, $4,686,000; Amtorg, dollar account, $783,000; Antorg, letter of credit account, $1,453,000. During the preceding week the Union Bank of Switzerland at Zurich paid $250,000 into the State Bank's account. $63,800 case from the Skandinaviska Bank, Stockholm. The Federal credited the account with $200,000 by order of the B.I.S. The principal debit from the State Bank account yas for $500,000 in favor of Amtorg. On June 18 the balances were: State Bank of Russia, dollar account, $6,265,000; State Bank of Russia, letter of credit account, $4,723,000; Amtorg, dollar account, $389,000; Amtorg, letter of credit account, $1,556,000. There was an in-payment to the State Bank account by the Manufacturers Trust acting in behalf of the Anglo Pragus Credit Bank, Bratislava, for $134,000. There VII 8 transfer from the Slovemine Bank, Bratislava, for $100,000. $300,000 WSS credited from the Union Bank of Switserland. Out-payments included one to the Mosta Machine Company, Pittsburgh, for $216,000. On June 25 the balances were: State Bank of Russia, dollar account, $5,235,000; State Bank of Russia, letter of credit account, $4,385,000; Amtorg, dollar account, $1,266,000; Antorg, letter of credit account, $1,566,000. There was a transfer to the State Bank account of $101,000 from the National Bank of Estonia. There was & similar transfer from the Central Bank of Latvia for $107,000. There was a credit from the Bethlehem Steel Company of $124,000. There was & payment to the Bank of Rome for $50,000. On July 3 the balances were) State Bank of Russia, dollar account, $4,783,000; State Bank of Russia, letter of credit account, $4,007,000; Amtorg, dollar account. $770,000; Amtorg, letter of credit account, $1,519,000. There were credits from the Bethlehem Steel and certain rubber companies for $19,000. There was a payment to the Union Bank of Switzerland for $500,000. There vas & payment to the Bank for Foreign Trade, Moscow, for $50,000. There vas e credit from the Bank of Chosen for $400,000. There wis & debit of $278,000 involving payment on & note domiciled at the Chase in favor of the American Society for Jewish Form Settlement in the U.S.S.R. There vas a payment to the Russian Bank of Iran for $150,000. On July 10 the balances were: State Bank of Russia, dollar account, $5,164,000; State Bank of Russia, letter of credit account, $3,444,000; Amtorg, dollar account, $657,000; Amtorg, Regraded Unclassified 133 letter of credit account, $1,517,000. There was a transfer from the State Bank of Russia to the Netherlands branch account of Amtorg for $600,000, and a second payment of this sort for $59,000. Credits to the State account included one from the Federal Reserve Bank, by order of the B.I.S., for $250,000; and one from Skandinaviska Bank for $200,000. There was a transfer from the Russian State account to the Bank for Foreign Trade at Moscow for $50,000. There was an in-payment from the Bethlehem Steel Corporation and subsidiary companies for $93,000. There was a payment from the Public National Bank & Trust Company of New York for $400,000. BMP. 134 MEMORANDUM FOR THE SECRETARY: JULY 12, 1940. Re Shipping Situation. The records of the Association of American Railroads reflect a sharp downward turn from the record figures of June. On July 8th the number of cars of export freight lightered amounted to 840; on July 11th this had dropped to 634. On July 1st cars of export freight on hand to be lightered numbered 5125; on July 11th this had fallen to 4050. The number of cars of export freight in railroad storage facilities is also declining, indicating a drawing on the back-log. A further indication of the decreased volume moving into export is the fact that there were only 49 lighters on demurrage et noon July 11th. Grain available for export at New York is unchanged from weeks past, with 8 little over a million bushels in railroad cars, elevators and boats. Carloadings for the week ending July 6th, while approximately 107% of the ten year average, showed a decline of over 115,000 cars from the preceding week, due to the Fourth of July holiday and the slowing up of activity in the day and a half following the holiday. The poor export cargo market, particularly to the United Kingdom, has been aggravated by the requirement that export licenses must be obtained on a long list of commodities. Further confusion and delay will follow inability of exporters to obtain the forms on which to make application for licenses. Underwriters have advanced the war risk rates on cargo moving to west coast United Kingdom, Irish and United Kingdom channel ports, not east of Southampton, from 71 to 10%. Regraded Unclassified 135 July 12, 1940. The Far East trade has become weaker while there is an improvement in the Australian trade. The surplus of ships presently available for loading to United Kingdom ports has brought about a decision on the part of the British governmental authorities not to approve proposed increases in ocean freight rates from the United States and Canada, which, it had been hoped, would become effective August 1st. The only nourishment the steamship lines have obtained is an increase in the rate on bulk grain from 5/8 per quarter to 10/- and on flour from 40 to 60¢ per 100 lbs. In spite of the fact that the regular lines are having difficulty in obtaining sufficient cargo at remunerative rates under prevailing conditions, the speculators, such as Bernstein and his former associates the General Atlantic Steamship Company, are putting vessels on the United Kingdom berth, which ships they have chartered on net form at 3234 per cubic foot. On this basis, and without taking into consideration possible demurrage, it requires an average rate of 50¢ per cubie foot on the cargo loaded to break even. To attain this average is extremely difficult, even with the exercise of the utmost selection in the choice of cargo because of the comparatively low level of Conference rates and there would seem to be absolutely no opportunity to obtain premium rates in the face of all the lines scrambling for cargo. One explanation offered is that there are substantial quantities of steel offering to Dublin and other Irish ports and that the General Atlantic are trying to hold the shippers of this steel up for $25. per ton versus the Conference rate of $10. The chances of getting any such rate have been greatly diminished by the reported action of their former Regraded Unclassified 136 July 12, 1940. associate, Mr. Bernstein, in quoting $15. on the same business. Efforts to overcome the blockade of the Mediterranean by going through the back door continue. In addition to the transhipping setup utilizing the regular lines to the Persian Gulf via the Cape of Good Hope, promoted by the Barr Shipping Company, the Isthmian Steamship Company is placing on berth from New York direct to Port Sudan and Suez, via the Cape of Good Hope, the Egyptian-flag steamer "STAR OF ALEXANDRIA". Mr. Isbrandtsen climbs on the band wagon advertising the Swedish Motor Vessel "VASALAND" from Philadelphia and New York to Bombay, Karachi and Basra, the latter port to be the base for transhipment to Turkey and other eastern Mediterranean countries. Incidentally, Isbrandtsen paid $4.50 per deadweight ton per month for the charter of the "VASALAND". Full cargo rates all over the world are still going down. Linseed from the Argentine to Canada can be done at $7.00. Coal from Hampton Roads to Rio de Janeiro was traded at $5.40 per ton. The American steamer "JOSEPHINE LAWRENCE" took $3.00 for a round trip West Indies. The American Export Line chartered their SS "EXAMINER" for a round trip east coast South America, July; rate not disclosed but presumed to be $3.00 or $3.25. Banil harris Regraded Unclassified 137 TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Press Service Friday, July 12, 1940. No.21-58 7 /11/40 Secretary of the Treasury Morgenthau announced last night that the subscription books for the current offering of (600,000,000, or thereabouts, of 2-1/4 percent Tressury Bonds of 1954-56 closed at the close of business Thursday, July 11, except for the receipt of subscriptions for amounts up to and including $5,000 where the subscribers specify that delivery be made in registered bonds 90 days after the issue date. The subscription books will be closed for the receipt of subscriptions of that class at the close of business Saturday, July 13. Subscriptions of either class addressed to 8 Federal Reserve Benk or Branch or to the Treasury Department and placed in the mail before 12 o'clock midnight of the respective closing days will be considered as having been entered before the close of the subscription books. Announcement of the amount of subscriptions and the basis of sllotment will probably be made on Wednesday, July 17. -o0o- Regraded Unclassified 138 July 12, 1940 My dear Mr. Hoover: Thank you for your letter of July 9th containing the report of instructions to German propagenda agents. I also take this opportuni- to to acknowledge receipt of your letter of July 10th referring to statements made by the German Consul in New York. I have read both of these - munications with a great deal of interest. Sincerely yours, (Signed) a Morgestion, Jr. Mr. J. Edgar Hoover, Director, Federal Bureau of Investigation, Washington, D.C. Regraded Unclassified 139 July 12, 1940 My dear Mr. Hoover: Thank you for your letter of July 9th containing the report of instructions to German propaganda agents. I also take this opportuni- ty to seknowledge receipt of your letter of July 10th referring to statements made by the German Consul in New York. I have read both of these cem- munications with a great deal of interest. Sincerely yours, (Signed) H. Morgenthau, J1. Mr. J. Edgar Hoover, Director, Federal Bureau of Investigation, Washington, D.C. Regraded Unclassified 140 July 12, 1940 My dear Mr. Hoover: Thank you for your letter of July 9th containing the report of instructions to German propaganda agents. I also take this opportuni- ty to acknowledge receipt of your letter of July 10th referring to statements made by the German Consul in New York. I have read both of these com- munications with a great deal of interest. Sincerely yours, (Signed) H. Morgesthau, Jr. Mr. J. Edgar Hoover, Director, Federal Bureau of Investigation, Washington, D.C. Regraded I Unclassified JOHN EDGAR™ HOOVER DIRECTOR 141 Federal Thream of Imestigation United States Department of Instire Washington, B. C. July 9, 1940 ack- STRICTLY CONFIDENTIAL The Honorable The Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: The following information has been received from an unusually reliable source. Within a few days it is ex- pected that a photographic copy of the instructions as set forth below will be made available to me, and upon its receipt a copy will be furnished to you. The report states: "Source of proved reliability in close touch with responsible German officials in an occupied territory reported on June 15th that a confi- dential instruction, in substance as below, had been addressed by the Fuehrer to chiefs of propa- ganda sections in all regions: 'The German Armies are winning against democ- racies and plutocracies. It is not going to be long before this war ends victoriously and Reich dominates Europe. It is obvious that conquered territories will continue to be under protection of mighty Germany. But this victory is not going to terminate the war because the guardian of democracies and plutocracies will remain undestroyed. The war will continue against U.S.A., on British and French ships, and with our brave Navy in order that America shall pay for crimes she committed against Germany during and after World War, as well as at present time. The punishment given will be as successful as everything else undertaken by German Nation and victorious Army. 142 -2- 'My Party Comrades, I command you emphatically to be reserved in territories 80 far con- quered and to preserve a correct attitude toward the minorities and the conquered nations. This correct attitude is to be maintained until day I myself fix. This day will come and will be the day of reckoning.' If The foregoing quotation is a memorized version. A photo- graph of the actual instructions, barring accidents, should be available in due course. With expressions of my very best regards, I am Sincerely yours, J. Edgan atoover BY MESSENGER EDGAR HOOVER 143 DIRECTOR Federal Bureau of Imestigution United States Department of Justice Washington, D. C. July 10, 1940 PERSONAL AND CONFIDENTIAL The Honorable The Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: Information has been received from a confi- dential source that about July 1, 1940, an official in the office of the German Consul in New York, New York, while conferring with an individual who inquired whether shipments from Marseilles, France, were controlled by the French or Germans, replied that they were controlled by the French but that "...we will be able to do much more about such things in approximately two weeks." Further, the Consulate official reportedly also stated that the invasion of England would " probably start next week" and that they II "...expected peace within a month," Sincerely yours, Ee. shover J. BY SPECIAL MESSENGER 144 JUL 12 1940 PERSONAL AND CONFIDENTIAL My dear Mr. Hoover: In your letter of July 1, you advised me that Otto H. Loverbeck is reported to have taken a pro-Nasi and anti- American position. Mr. Loverbeck formerly was in the Treasury Department but he was transferred to the Federal Works Agency when the Public Buildings Branch of the Procurement Division of the Treasury was transferred to the Federal Works Agency under Reorgenization Plan No. 1, effective July 1, 1939. You will no doubt wish to furnish advice to Mr. Carmody of your re- port on this san. Sincerely yours, (Signed) H. Morgenthau, JT. Secretary of the Treasury. Honorable J. Edgar Hoover, Director, Federal Bureeu of Investigation, Department of Justice, Washington, D. c. When the By Messanger 10 15 Regrade Unclassified 145 JUL 12 1940 PERSONAL AND CONFIDENTIAL My dear Mr. Hoover: In your letter of July 1, you advised me that Otto H. Loverbeck is reported to have taken a pro-Nazi and anti- American position. Mr. Loverbeck formerly was in the Treasury Department but he was transferred to the Federal Works Agency when the Public Buildings Branch of the Procurement Division of the Treasury was transferred to the Federal Works Agency under Reorganization Plan No. 1, effective July 1, 1939. You will no doubt wish to furnish advice to Mr. Carmody of your re- port on this man. Sincerely yours, (Signed) H. Morgenthau, Jr. Secretary of the Treasury. Honorable J. Edgar Hoover, Director, Federal Bureau of Investigation, Department of Justice, Washington, D. c. WNTIRES By Messenger Regraded Unclassified 146 PERSONAL AND COMPINSITIAL My dear Mr. Noover: In your letter of July 1, you advised no that Otto H. Loverbook is reported to have taken a pre-Mast and cati- American position. Mr. Leverbeck formerly was in the Treasury Department but he was transferred to the Federal Works Agency when the Public Buildings Brejãoh of the Presurenent Division of the Treasury we transferred to the Federal Works Agency under Reorganization Plan No. 1, effective July 1, 1939. You will no doubt wish to furnish advice to Mr. Carmody of your 100 part on this MB. Sincerely yours, (Signed) E Mongenthan, Jr. Secretary of the Treasury. Nenorable s. Rigar Neover, Director, Federal Bureeu of Investigation, Department of Justice, Washington, D. 0. When e I Regraded Inclassified 147 IN EDGAR HOOVER DIRECTOR wherpson Federal Bureau of Investigation United States Department of Justice Washington, D. E. July 1, 1940 PERSONAL AND CONFIDENTIAL BY SPECIAL MESSENGER The Honorable The Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: Information has been received by this Bureau from a confidential source with reference to one Otto H. Loverbeck, who is employed as an architect by the Treasury Department. This man is reported to have taken a pro-Nazi and anti- American position. His wife is reported to be in Germany. The above is being forwarded to you for your information. With expressions of my highest esteem and best regards, Sincerely yours, de Hoaver J. Regraded Unclas 148 or TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE July 12, 1940. TO Mr. White FROM Mr. Gass Subject: The German Food Situation. 1. There is no convincing evidence that the food situation in Germany will be substantially worse this winter than last. Stocks of cereals (and consequently bread rations) may be somewhat smaller this year, but supplies of butter, egge and meat will be larger. 2. The weight of opinion is that German rations, as estab- lished last winter and maintained since then with only minor changes, are sufficient to maintain health and efficiency. They provide only a very dull diet, and when the supply of fresh vegetables is interrupted - as last winter -, these rations no doubt create. serious dissatisfaction. But adequate provisions are made for the special needs of heavy laborers and soldiers; so long as these special provisions can be maintained, there will be little loss of physical efficiency in essential war industries or at the front. 3. The general adequacy of the German food supply finds no parallel in the areas occupied by the German armies. Poland is starving, while the cream of her able-bodied population has been drafted for work on German farms. There is a serious shortage of food in Belgium. The Netherlands and Dermark will no doubt be short of breadstuffs by winter. France will also get a taste of hunger this winter if - as apparently provided by the armistice - she must support the German army of occu- pation. 1 The Department of Agriculture dissents, partially, from this judgment: see Foreign Agriculture, April 1940, especially page 195. Regraded Unclassified THE NEW YORK TIMES, SUNDAY, JUNE 30, 149 BOOTED FOOD suigium Scant < ( APPEAL SEND To - KIND NEARTS r Owna ASE TARVING WICKED EUROPE FOOD To AND THE BLOCKADE BEAT THE IN U.S.A u. BRITISH cow "I GAVE YOU A NICE PLACARD IN EXCHANGE, DIDN'T I?" A cartoon by Low which appeared in London Friday Times Wide Wend Radiophólo, passed by Dritish riment Law o all mustrial Regraded Unclassified 150 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE July 12, 1940 TO Secretary Morgenthau FROM Mr. Cochran 42 10:15 this forenoon I talked by telephone with Mr. Cameron of the Federal Reserve Bank at New York. I referred to the three cablegrams, of which copies of two had been provided us, which the Federal had received from the Netherlands Bank in recent days, and which have not yet been answered. Cameron had told me that yesterday a further message had been received from the Netherlands Bank, inquiring AR to the receipt of the three messages in question. I told Mr. Cameron that I had submitted to the Secretary of the Treasury a memorandum reporting the question which confronted the Federal Reserve Bank in regard to these telegrams, considering the instruction which the Bank had received on May 14 from the Netherlands Bank to the effect that thereafter the Federal should no longer execute instructions sent to it on behalf of the Netherlands Bank when such instructions were despatched from the Netherlands. The Secretary had not com- mented upon this subject. and I did not feel that I should press him for an expres- ion of opinion on a matter which vas primarily for the Federal Reserve Bank to accide, I told Mr. Cameron that two days ago Governor Harrison had telked with me on this subject during a conversation by telephone primarily on another matter. It bad been understood that I should inquire of the Netherlands Legation in this city B.B. to whether there was any objection to published documents in regard to our control of funds being sent to the Netherlands Bank. I told Cameron that I had this morning spoken with Mr. Molekamp, Commercial Counselor of the Netherlands Legation, on this subject without mentioning any inquiry that had been received by the Federal. I had told Mr. Molekamp that, following my long service in Europe and my contacts with the various Finance Ministers and Central Bank Governors, I had assumed the task of keeping them provided currently with such published Treasury documents as could properly be forwarded to them. The question now came to my mind BE to whether I should endeavor to supply the Netherlands Bank at Ansterdan with copies of our Con- trol proclumations, regulations, licenses et cetera. Mr. Molekamp confirmed that his Embassy had no direct contact with the Netherlands Bank. At the same time he saw no reason why this Treasury of a neutral country should refrain from making documents of the type under reference available to the Wetherlands Bank. He was positive that the German Embassy had already provided Berlin with full information and documentation on this subject. 80 that the question of our cotting information into the hands of enemise of the Netherlands which the latter otherwise would not receive, did not arise. Regraded Unclassified 151 - 2 - In my conversation with Mr. Cameron I gate the foregoing information. I told his that while I could not speak for the group which handles our freezing system, I felt that the majority thereof would are no reason for the Federal Reserve replying to the cablegrams under reference. If he wanted my personal opinion, I did not hesitate to recommend that all of the meages so far received be answered. I sav, of course, the objection to carrying out anything which might be considered an instruction, in view of the "stop order" from the Netherlands, which has not yet been rescinded. I observed, however, that it should be perfectly proper to let the Netherlands Bank know whether an actual credit transaction in its favor had been consummated, and furthermore, to let the Bank have published information concerning policies directly affecting it. I did not consider that answering these nossages would put the Federal under any obligation to carry out instructions with respect to specific transactions. Decisions on these could be taken, if the question should arise. In the meantime, I personally thought that messages of the type under reference could be acknowledged without any harm to anyone, and should be acknowl- edged. Mr. Cameron understood the spirit in which I vas offering this personal opinion. He said he would discuss the matter with his colleagues, and would let no know what they decide to do. In the meantime, I said I would do nothing toward forwarding documents to the Netherlande Bank, July 13, 1940 Mr. Cameron told no by telephone at 11:30 this morning that the Federal Reserve Bank had decided yesterday not to respond to any of the cablegrams BO far received from the Netherlands Bank, Ansterdam. I informed Mr. Molekamp of this decision and the latter indicated his approval of this decision. A.M.S STRICTLY CONFIDENTIAL ESTEDOA) 52 Extra copies sent by ordinary mill AIR MAIL AMERICAN CONSULATE Rangoon. Burma, July 12, 1940 STRICTLY CONFIDENTIAL Subject: Deliveries for Shlpment Through Rangoon of Petroleum Products Ordered by Chinese Government Under Export-Import Bank Credits. The Honorable The Secretary of State. Washington. Str: I have the honor to report that & total quantity of 120,445 drums, or 6,393,183 American gallons, of petroleum products of American origin, chiefly motor gasoline but including some lubricating and dissel 011, has been imported into Rangoon between July 26, 1939, and June 19, 1940, by the Standard-Vacuum 011 Company and the Texas 011 Company for delivery to the Chinese Government. which is understood to have financed the purchase of the entire quantity upon the basis of credits extended by the Export-Import Bank. Details relating to the combined importations by these two companies appear in an enclosure submitted herewith. The share of each company was approximately one half the total. Shipments arriving in Rangoon are stored temporarily by the American companies, and delivery of the Chinese Government is effected by placing stocks aboard railway cars in accordance with the requirements of the Fooshing Trading Company, which arranges for their shipment by rail to Lashio and thence into China by motor truck over the Burma-Yunnan highway. Of the total quantity imported, delivery has been made of all but about 10,000 drums (530,000 gallons). which remain in storage at Rangoon. Approximately 10,000 drums which have been delivered are understood to be stored at Leshio awaiting transportation by truck into China. The balance, therefore, of approximately 100, 445 druma (5,333,183 gallons) may be regarded as the minimum quantity which has already been shipped to China. Within the past few weeks deliveries and shipments from Rangoon have been accelerated considerably. Since the latter part of June, 1940, shipments from Rangoon have been sade at the average rate of 1,200 druns a day. It is expected, therefore, that stocks remaining in Rangoon will be cleared in the near future. Respectfully yours. V. LEONARD PARKER Distribution: American Vice Consul l. Original & four copies to Department: 2. Copy to London: 3. Copy to Chungking: 4. Copy to Tunnanfu, E00 Regraded Unclassified 153 Combined Statistics Relating to Arrivals of Patroleum Imported into Rangoon by the Standard-Vaouum 011 Company and the Texas Company for Delivery to the Chinese Government egraded Unclassified Date of Arrival at Motor Gasoline Lubricating 011 Diecel 011 Name of Steamer Rangoon Drums* U. 8. Gallons Drums* U. 8. Gallons Drums* U.S.Gallouso Hannah Moller July 26, 1939 8,000 424,000 - - - - Miner September 26, 1939 5,000 265,000 - - - - **Steel Age October 18, 1939 3,000 159,000 - - - - offect Cusseta October 27, 1939 5,270 279,310 986 54,230 126 6,930 **Encley City December 8, 1939 - - 474 26,070 - - **Steel Ranger December 20, 1939 3,607 191,171 - - 996 54,780 **Steel Inventor December 28, 1939 5,883 311,799 - - - - Prominent February 7, 1940 8,530 452,090 - - - - Lyder Sagen February 21, 1940 18,563 983,839 - - - - **Steel Worker March 5, 1940 - - - - 1,102 60,610 Proteus March 7, 1940 7,690 407,570 - - - - Sandviken March 29, 1940 18,563 983,839 - - - - **Steel Age April 9, 1940 - - 1,115 61,325 - - Germa May 4. 1940 14,000 742,000 - - - 7 # Utsire June 19, 1940 17,540 929,620 - - - - Totals 115,644 6,169,238 2,575 141,625 2,224 122,380 GRAND TOTALS 120,445 druss 6,393,183 U.S.Gallons *Drums of motor gasoline contain 53 U.S. gallons, and drums of lubricating and diesel oil contain 55 U. 8. gallons. **These are American vessels which brought their cargoes directly from the United States; the other vessels carried cargoes of American origin transshipped at Hong Kang. COPY 154 TREASURY DEPARTMENT Washington FOR RELEASE, MORNING NEWSPAPERS, Press Service Friday, July 12, 1940. No.21-58 7 711/40 Secretary of the Treasury Morgenthau announced last night that the subscription books for the current offering of $600,000,000, or thereabouts, of 2-1/4 percent Treasury Bonds of 1954-56 closed at. the close of business Thursday, July 11, except for the receipt of subscriptions for amounts up to and including $5,000 where the subscribers specify that delivery be made in registered bonds 90 days after the issue date. The subscription books will be closed for the receipt of subscriptions of that class at the close of business Saturday, July 13. Subscriptions of either class addressed to a Federal Reserve Bank or Branch or to the Treasury Department and placed in the mail before 12 o'clock midnight of the respective closing days will be considered as having been entered before the close of the subscription books. Announcement of the amount of subscriptions and the basis of allotment will probably be made on Wednesday, July 17. -o0o- Regraded Unclassified 155 THE WHITE HOUSE WASHINGTON July 12, 1940. My dear Mr. Secretary: There are pending in the present Congress a number of bills proposing to mend the unemployment compensation pro- visions of the Social Security Act and the Railroad Unem- ployment Insurance Act, as well as a proposal to create & Federal unemployment insurance system for Maritime employees. In view of the fact that these proposals are necessarily interrelated, and involve, in some instances, far reaching precedents, it appears desirable to have a comprehensive study made and a report and recommendation submitted by the several agencies concerned covering the entire subject of the Covernment's participation in unemployment compensation. It is, therefore, requested that you designate a repre- sentative to serve on an interdepartmental committee, com- posed of representatives of the Treasury Department, the De- partment of Labor, the Maritime Commission, the Railroad Re- tirement Board and the Federal Security Agency, the representa- tive of the latter agency to serve as chairman, to make such a study and submit a report and recommendation to me before the convening of the next regular session of Congress. Sincerely yours, The Honorable, The Secretary of the Treasury. Regraded Unclassified 156 GROUP MEETING July 12, 1940 9:30 a.m. Present: Mr. Bell Mr. Haas Mr. Foley Mr. Thompson Mr. Young Mr. Sullivan Mr. Cochran Mr. Schwarz Mr. White H.M.Jr: Chick, I just saw this on the ticker. "Friendly recommendation on excess profits will not be ready until late this month or early in August." Schwarz: That is in the Wall Street Journal this morning. H.M.Jr: Well, that is incorrect. You can get the date from Mr. Sullivan. Sullivan: Five minutes of nine, July 22nd. Schwarz: I put in a call for Tom Wilson on it. H.M.Jr: How are you going to remember? Schwarz: I will remember it. H.M.Jr: Well, this is interesting, because this is the result of Knudsen's visit here, I think. "The War Department moved today to stop threatened delay of at least two months in getting aircraft procurement program under way." That isn't what we spoke about, is it? Foley: No, but it is along those lines. H.M.Jr: I tried to get Knudsen this morning. He is up in New York. What have you got, Ed? Regraded Unclassified 157 - 2 - Foley: I haven't anything. That thing you wanted us to remind you about, FDIC -- H.M.Jr: Oh, yes. Cochran: I have nothing important. Last night I talked with Mr. Leroy-Beaulieu quite a while. He was talking about that Martinique situation and he told me all those planes were unloaded. I don't know whether you knew it or not. H.M.Jr: No, I did not. Cochran: Yes, they have been taken ashore and the gold also. H.M.Jr: The State Department sent an observer down there. Cochran: They have had a Consul there for many years. They withdrew the Consul about three or four years ago but they had one there for many years. H.M.Jr: They have got all the planes? Cochran: That is what he told me and he said he thought the natives there were the most loyal of any in the Colonies, that being France's oldest Colony. He was sure they would destroy them before they would let any one else get them. H.M.Jr: Loyal to whom? Cochran: To France. White: The French Government. Cochran: Yes. And that is that shipment of gold that had come into Halifax. H.M.Jr: Do you know how much? Cochran: Twelve billion francs. 158 - 3 - H.M.Jr: What was that? Cochran: 245 million dollars. H.M.Jr: 245 million? White: It is in Martinique? Cochran: Yes. White: It must be the natives are loyal. H.M.Jr: How much does that make for each native? Cochran: That is what Harry was thinking. White: That is a quarter million dollars per native. H.M.Jr: No wonder Edward is going to be Governor General of the Bahamas. If he takes that and they should capture Martinique, it would be worth while. It would keep Wally going for years. What other news have you got? Cochran: If you just have time for gossip, I will give you a little more. (Discussion off the record) H.M.Jr: If I had known Leroy-Beaulieu had all that, I would have seen him myself. Is that what you talked about in your room? White: Unfortunately, no. H.M.Jr: When do you think this gentleman is going to get here, Sir Frederick? Cochran: It is uncertain. There is one ship, I have told Basil Harris, gets into New York today and another one gets into Halifax today or tomorrow and we don't know wh ich one he is on and Pinsent was not going up himself. He Regraded Unclassified 159 - 4 - hadn't had any instructions. I just asked him if he was going. H.M.Jr: Phil, you have got one appointment, haven't you? Young: Yes, sir, with the Navy. H.M.Jr: I haven't heard from this Mr. Stimson. The Vel-Ragnar hasn't yet started to take her ammunition out, but she is supposed to at 1:00 o'clock today, probably due to the heavy rains in New York. (To Lieutenant McKay) Mac, ask Coast Guard to get off B. message. I want to know, on these two American tankers that we are hold- ing, plus the Swedish tanker, I want a description - detailed description of their cargo, what is in that cargo. McKay: Two American tankers? H.M.Jr: Two American tankers and one Swedish tanker. I think they are all in Texas. And then this sugar cargo that we are holding on a Greek vessel for Casa Blanca, I want a detail on that cargo also. McKay: Commander Derby down here knows that. H.M.Jr: If he doesn't, get it and tell him to rush. McKay: All right, sir. H.M.Jr: Anything else? Young: No. H.M.Jr: Chick? Schwarz: I have nothing. H.M.Jr: George? Haas: I have nothing. Regraded Unclassified 160 - 5 - H.M.Jr: Harry? White: Nothing. H.M.Jr: Dan? Bell: I have a number of letters to sign. H.M.Jr: All right. Bell: This is an approval of the return of 40 million dollars of capital funds. H.M.Jr: Did you take care of St. James' Church? Bell: Yes, sir. H.M.Jr: Did you? It must have been pitiful, wasn't it? Bell: It was. I just had to write a memorandum, that is all. You remember some time ago the President asked you to confer with McNutt regarding an amendment to the Social Security Act. H.M.Jr: I don't remember. Maybe that is what they were referring to. Schwarz: That is not what they said. Bell: That is a letter to the President reporting that you have conferred and you have agreed on the amendment and that you will follow it up. H.M.Jr: Tell them what the publicity man told. Listen to Chick. This is a good story. Schwarz: Mr. McNutt's public relations man called me and said that Mr. McNutt had asked him if he would get a complete and verbatim check on what the Secretary of the Treasury would say at his press conference yesterday about the McNutt income tax case. He said Mr. McNutt Regrade Unclassified 161 - 6 - had been to the White House and said he was going out to Chicago as a condemned man and he thought he had played ball and he deserved EL break and that Pa Watson was going to call the Secretary and arrange for a statement, which is all right up to the point that it never happened, the latter part. H.M.Jr: What did you tell him as an answer? Schwarz: I just told him that there was no statement made and we had had no request made. H.M.Jr: And that I talked to Pa Watson every hour on the hour. Schwarz: Yes. Yesterday afternoon after he was supposed to have talked with Mr. McNutt -- Bell: Those are the Library of Congress letters. H.M.Jr: Did he say anything more? Schwarz: The public relations man said, "Maybe they didn't give me the right story." H.M.Jr: That was funny. All I can hope is that Mr. McNutt is Undersecretary of the Treasury when I am back on the farm. Bell: I want to talk to you about this 50 million dollar account. H.M.Jr: You stay with me. Schwarz: Mr. McNutt expects to leave the Government, according to his man. H.M.Jr: Where is he going? Schwarz: Back to Indiana. Fowler Harper has already gone out there. H.M.Jr: On the shores of the Wabash? UInclassified 162 - 7 - Poley: Has Harper quit? H.M.Jr: Yes. Thompson: I helped Mr. Nelson prepare a resignation. He signed it but he said he wanted to give it to you in person. I am wondering if you received it. H.M.Jr: Is he in the building? Thompson: No. He has gone to the Federal Reserve Build- ing. H.M.Jr: Is his room empty now? Thompson: Yes, Mr. Alexander was in yesterday to thank you for having placed him in Boston as Alcohol Tax Supervisor. H.M.Jr: Did he see Sullivan when he was in here? Thompson: I don't know. Sullivan: You know where I live, don't you, down the alley here? Thompson: Well, he came into my office. Sullivan: Well, it is quite B. long walk from your office to mine. Thompson: He was very cordial. Yesterday the National Defense Council asked for 12 stenographers from Internal Revenue, but I turned them down because we can't start wrecking our regular organization. I have helped them out by putting them in touch with people. H.M.Jr: Who have been discharged? Thompson: Yes. H.M.Jr: Yes, that is fine. Regraded Unclassified 163 - 8 - Thompson: So we nearly met their call by people of that type. We have too much to do in Internal Revenue. H.M.Jr: It is the craziest thing I ever heard. Sullivan: We don't want to let experienced people go over there. Bell: We are going to do their accounting work over there on a reimbursement basis. 164 TREASURY DEPARTMENT Regraded Unclass INTER OFFICE COMMUNICATION DATE July 12, 1940 to Secretary Morgenthau CONFIDENTIAL FROM Mr. Cochran In light trading, the downward movement in sterling was reversed today. From an opening of 3.66-1/4, the pound advanced by stages to a high of 3.71 at the close. Sales of spot sterling by the six reporting banks totaled L157,000, from the following sources: By commercial concerns i 38,000 By foreign banks (Europe, South America and Far East) L119,000 Total L157,000 Purchases of spot sterling amounted to L113,000, as indicated below: By commercial concerns 6 76,000 By foreign banks (Far East, South America and Europe) I 37,000 Total L113,000 The following reporting banks sold cotton bills totaling L9,000 to the British Control on the basis of the official rate of 4.02-1/2: 1 8,000 by the Bank of Manhattan 1,000 by the Bankers Trust Company 1 9,000 Total Sterling in the amount of L20,000 was purchased from the British Control at the official rate of 4.03-1/2 by the following banks: L18,000 by the Bank of Manhattan (for whisky) 2,000 by the Irving Trust Company (for various commodities) L20,000 Total The Canadian dollar again improved, closing at 13% discount, as against yester- day's final quotation of 14-1/4%. The other currencies closed as follows: Swiss franc .2268 Lira .0505 Reichsmark .4004 Cuban peso 9-7/8% discount Mexican peso .1990 bid, .2020 offered 165 - 2 - To purchased $1,000,000 in gold from the earmarked account of the Central Bank of the Uruguayan Republic. The Federal Reserve Bank of New York reported that the Bank of Canada made two shipments of gold totaling $12,360,000 from Canada to the Federal for its own account, for sale to the U.S. Assay Office at New York. Gold in Bombay was priced at the squivalent of $33.77, off 12#. The Bombay spot silver quotation was equivalent to 43.57#, off 3/164. In London, spot silver was fixed at 21-3/44, off 1/16d. The forward price was 21-1/2d, off 1/8d. The U.S. equivalents were 39.544 and 39.094 respectively. Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44. The Treasury's purchase price for foreign silver was also unchanged at 35#. To made one purchase of silver amounting to 100,000 ounces under the Silver Purchase Act. This consisted of new production from foreign countries, for forward delivery. p.m. confidential 166 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE July 13. 1940 TO Secretary Morgenthau FROM Mr. Cochran CONFIDENTIAL In a lifelees foreign exchange market, sterling opened at 3.70-1/2, moved within & narrow range, and closed at 3.71, unchanged from yesterday's final rate. Sales of spot sterling by the sir reporting banks totaled L143,000, from the following sources: By commercial concerns & 8,000 By foreign banks (Far East and Europe) L135,000 Total 1143,000 Purchases of spot sterling amounted to $55,000, as indicated below: By commercial concerns is 33,000 By foreign banks (South America and Europe) 19 22,000 Total 1 55,000 According to a Dow-Jones news item from Berlin, an official news agency despatch from Geneva reported that the French Government intended to tie the franc to the American dollar at & rate to be determined later, and that the franc MSS to be separated completely from the British pound. Prior to the German invasion of France, the Bank of France's official franc-dollar rates were 43.70 to 43.90 (squivalent to .0228-7/8 and .0227-3/4 per franc respectively). In a cable received by us from Trance a few days ago, it was mentioned that "for the present" the Bank of France would maintain the official quotations given above. The other currencies closed as follows: Swise franc .2267 Canadian dollar 12-7/8% discount Lira .0505 Reichamark .4004 Cuban peso 9-7/8% discount Mexican peso .1990 bid, .2020 offered We purchased $7,000,000 in gold from the earmarked account of the Central Bank of the Argentine Republic. he following amounts of gold from England to the Federal: The Federal Reserve Bank of New York reported that the Bank of England shipped 24,816,000 representing two shipments to be earmarked for account of the Bank of England. 1,078,000 for account of the Bank of Finland, disposition unknown. 25,894,000 Total Regraded Unclassified 167 - 2 - The State Department forwarded to us a cable stating that the following ship- ments of gold would be made from England, for sale to the U. S. Assay Office at New York: $541,000 shipped by Sharps and Wilkins, London, to J. P. Morgan, New York. 59,000 shipped by the Societe Generale de Credit Industriel et Commercial, London, to the Central Hanover Bank and Trust Company, New York. 18,000 shipped by The Chase National Bank, London, to its head office at New York. $618,000 Total Gold in Bombay was priced at the equivalent of $33.81, up 44. The Bombay spot silver quotation advanced the equivalent of 3/164 to 43.774. H.M.S. confidential Regraded Unclassified 168 July 12, 1940 10:08 a.m. H.M.Jr: Hello. Jesse Jones: Hello, Henry. H.M.Jr: How are you? J: Pretty good. How are you? H.M.Jr: All right. I didn't like the way you looked the other day. I thought you looked kind of ...... J: I was tired. My God! I've been going on this treadmill here. H.M.Jr: Yeah. Jesse, I thought you'd like to know this. Ed Foley has been working with the lawyers for Curtiss Wright -- we gave them a ruling and when he gave it to them he said, you know, we haven't heard a thing from the R.F.C., and we're just sitting here waiting to hear from them. J: Yeah. H.M.Jr: Now, I don't know what -- I just thought I'd pass it along to you. J: Well, we hadn't heard from them. I didn't know he was waiting to hear from us. H.M.Jr: Well, I'm talking in connection with this new plant. J: Yeah. H.M.Jr: Well, they evidently are waiting to hear from you -- I'm just passing it along. J: Yeah. Well, we hadn't heard from Ed. We didn't know that we were expected to send anything. H.M.Jr: Well, he told me this last night. Regraded Unclassified 169 - 2 - J: Yeah. H.M.Jr: Well, don't you think you could send for them. J: What? H.M.Jr: Don't you think you could send for them? J: Why, certainly. H.M.Jr: Yeah. J: Why, sure." It's -- this thing that we were talking about over at the White House, that's got everybody up in the air and we've got to. get it straightened out before the boys can H.M.Jr: Well, will you send for Curtiss Wright? J: For Curtiss Wright? H.M.Jr: Yes. It's Curtiss Wright I'm talking about. J: Oh, I see. H.M.Jr: No, it's they that said that they're ready but they're waiting to hear from you. J: And you've given them what? H.M.Jr: A ruling on how they can depreciate this plan. J: Uh-huh. Can we have a copy of that? H.M.Jr: Sure. And would you like to have Ed explain it? J: Yeah. I think if you'll send it over here -- have him send it over here and let us study it and then call Ed if there's any question in our minds about it and then we'll get hold of the other fellows. H.M.Jr: 0. K. Regraded Unclassified 170 - 3 - J: How did your bonds go? H.M.Jr: Oh, beautifully. Beautifully. J: When did you make the allotments? H.M.Jr: Well ...... J: You haven't made them yet, huh? H.M.Jr: No. We won't make them before Monday. J: Have you closed it? H.M.Jr: We closed it last night but you can still get $5,000 worth. J: Can, huh? H.M.Jr: Yeah. Individual subscription if you keep them for ninety days. J: If you'll hold them for ninety days. H.M.Jr: Yeah. You can get $5,000 and Mrs. Jones can get $5,000. J: All right. I'll send the word now. H.M.Jr: And we can take that up until Saturday afternoon. J: O. K. Well, I'll attend to that. H.M.Jr: Right. What else can I sell you? -- One other thing, Jesse, I mean, do you think that that Packard thing on Rolle Royoe will be able to go through? J: Well, I don't know. I want to talk to you about that today if I can have some time with you or somebody, because we're pretty doubtful about the British part of it. We don't think that our law permits us to build except in our own defense program. 171 - 4 - H.M.Jr: Well Knudsen asked -- he was over here yesterday and he asked Foley and me about that and Foley told him it was legal. J: Well, we doubt it. Knudsen explained it to me last night and I talked to him as late as ten o'clock because we had -- he called me yesterday afternoon and said that it had been straightened out. Well, when we got to digging into it and I called him last night and he said he'd be in New York today. But I do want to talk to you or Ed or somebody about that. H.M.Jr: Ed's the fellow. If you'll tell me now when you want him I'll have him over there. He can bring over the Curtiss Wright ruling, too. J: Tell him to come over here then about eleven- thirty. H.M.Jr: Eleven-thirty. J: And I'll be all set. H.M.Jr: I'll have him at your office at eleven-thirty. J: Thank you. H.M.Jr: Thank you. J: Good-bye. 172 July 12, 1940 10:12 a.m. H.M.Jr: Ed. Ed Foley: Yes, Mr. Secretary. H.M.Jr: I just got through talking with Jesse Jones and I told him that we'd sent a ruling -- given them & ruling on the Curtise Wright, and they were sitting around waiting to hear from him. F: Right. H.M.Jr: Well, that seemed to surprise him. F: I see. H.M.Jr: So he said if we'd send the ruling over, he'd study it. So I said, how are you getting along with Packard? F: Yeah. H.M.Jr: Well, he said, as late as ten o'clock last night he talked with Knudsen and he, Jones, doesn't think it's legal as far as the English are concerned. So I made an appointment for you to see Jesse at eleven-thirty this morning at which time you can discuss the legality of this Packard thing and also the Curtiss Wright ruling. F: Right. H.M.Jr: But there's where the neck of the bottle is and when I was tipped off that Jones had given this story to Krock to throw it on me, you see, I think that that tip was much better than ...... F: Than Bob's? H.M.Jr: Than Bob Kintner's saying it was Biggers. F: Yeah. 173 - 2 - H.M.Jr: Because the neck of the bottle. -- well, here's two instances -- Curtiss Wright and Jones and they're both being held up by Jones. F: Right. O. K. I'll go over at half past eleven and then I'll give you a report. H.M.Jr: O. K. F: All right. H.M.Jr: Thank you. 174 July 12, 1940 10:53 a.m. H.M.Jr: Hello. Operator: Mr. Knudsen. H.M.Jr: Hello. Wm. S. Knudsen: Yes. H.M.Jr: Morgenthau. K: Yes, sir. H.M.Jr: How are you? K: Fine, sir. H.M.Jr: Mr. Knudsen, the reason I called you was this. I was kind of worried about the Curtiss Wright contract because Foley told me last night that we gave them a ruling and they've been sitting around and hadn't heard from Jesse Jones, 80 I called him up this morning and he seemed to be surprised to hear that Curtiss Wright were waiting to hear from him. Hello? K: Yes. H.M.Jr: So Mr. Foley 1s on his way over now to see Mr. Jones. See? K: Yes. H.M.Jr: To kind of stir him up a little bit, and then while I had him on the phone I said, well, what about Packard. So he said he'd talked to you late last night and he'e still worried that what you're trying to do 1e illegal. See? K: Yeah. H.M.Jr: So Foley is going to talk to him about that also. Regraded Unclassified 175- - 2 - K: But you see, Mr. Morgenthau, we can't really give Curties Wright that order until they get this bill passed. We can only give them a letter. But I think that enough work has been done 80 that there won't be much delay in the plant itself. The surveys are started, we've got the options and all the preliminary work has been done. H.M.Jr: Well, their lawyers told Foley yesterday that they're just sitting there waiting to hear from Jesse Jones. K: Well, then, he must have had some dealings with Jesse Jones that I don't know about. H.M.Jr: Well, what I'm trying to do is to be helpful BO I called him up, you see, to kind of stick a pin in him. X: Yeah. Is that Hotchkiss? H.M.Jr: What? K: Is that Hotchkiss? H.M.Jr: Is that hard? K: No. Is his name Hotchkiss? H.M.Jr: The lawyer, yes. K: Well, I'll get him on the telephone down here today. What I'm down here for, I'm trying to settle with Purvis the last part of the Packard deal. H.M.Jr: Oh. That's what you're doing now. K: Yes. Packard is all set and now I'm trying to get Purvis to agree to the financial arrangements that were made. H.M.Jr: Well, is Jesse Jones set on the Packard deal? K: What's that? H.M.Jr: Is Jesse all set? 176 - 3 - K: Why Jesse is worried about the point that we spoke about yesterday and when he called me last night, I said, you haven't anything to worry about. I've been talking with the Secretary and Mr. Foley and they all feel that in getting this separate corporation with a lease that the British Government is doing no business with the holding company -- it's doing business with the Packard Motor Company who leases from the other company. H.M.Jr: Well, he's still worried 80 I sent Foley over there -- he's going over there now. K: Uh-huh. H.M.Jr: But he's still worried about that K: Well, I was worried myself until I talked to Foley and afterwards to you. H.M.Jr: Yeah. K: But I can't see that there are any legal complications now if we go that route, and Packard is willing to go that route. H.M.Jr: I see. Well, I wanted to let you know what I did and I thought I'd been a little bit helpful. K: Thank you very much, sir. H.M.Jr: Thank you. 177 BJS PLAIN 20 LONDON Dated July 12, 1940 Reo'd 11:25 a. m, Secretary of State, Washington 2116, July 12 FOR TREASURY FROM BUTTERWORTH: The London press this morning carries the British Treasury's announcement of Phillips' visit, most commen- tators suggesting that problems arising out of France's fall will bE the chief topice discussed, while several point out that financing of British purchases in the United States will be another subject of consultation. The MANCHESTER GUARDIAN City Editor suggests that the recent break in Wall Street prices has made liquidation of British dollar assets wasteful and says "it remains to bE BEEN whether a provisional alternative can be de- vised." This writer notes, however, that the French collapse has resulted in many new problems and that there is "no lack of urgent and weighty questions calling for discussion. The invitation should not, in other words, arouse any hopes of pending American credits to this country." THE TIMES City Editor notes that "one of the original Regraded Unclassified 178 -2- 2116, July 12, from London of is by 02 original signatories of the Tripartite Agreement is now occupied by Germany and the present meeting has no definite objective beyond & discussion of technical and other questions between the American and British Treasuries. The field of possible topics is obviously very wide; it may include, among other things, some consideration of the possibilities of coordinating British purchases in the United States with the United States own arms programme. THE EVENING STAR also mentions the disposal of French orders for war materials and concludes that the "disposal of French gold and other convertible holdings in the United States including L450,000,000 belonging to the Bank of France" is pertinent in this connection. KENNEDY TFV Regraded Unclassified 179 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE July 12, 1940 Secretary Morgenthau TO STRICTLY CONFIDENTIAL FROM Mr. Cochran Mr. Leroy-Beaulieu, Financial Counselor of the French Inbassy, telephoned no this forenoon from New York in regard to the article appearing in today's Herald Tribune concerning the visit of Sir Frederick Phillipe. Leroy-Beaulieu was con- cerned with the suggested agenda, as specifically set forth in the article. I reminded Lercy-Beaulieu that when be was with no yesterday evening I had told his that Sir Frederick Phillips vas coming over, and he said he was aware of this. I told Leroy-Beaulieu this morning that we had issued a communique at noon, and the British simultaneously in London, and I read the text thereof to him. I told him that there had been no agenda discussed in advance, and that there had been no exchange of views with London on any agenda. Only this morning had ve made a. few notes ourselves as to topics to be brought up. Leroy-Beaulieu vis especially concerned over the report that the Tripartite greement would be under discussion, as well as French gold. I reminded Leroy- Seaulieu that Phillips had visited the Treasury in 1937. a year after the Tripartite Agreement, and that we have constantly had contact directly with him. Furthermore, I explained, the invitation had been extended Sir Frederick weeks ago, long before the French capitulation. Leroy-Beauliva asked no if we have received anything directly from Matthews on the subject of German demands with respect to gold, securities, valuables et cetera, in occupied French territory. I told him that ve knew nothing of this aside from the press story. Leroy-Beaulieu took pains to point out that this vas & British story. At the same time he VO.0 anxious to obtain any information which ve might re- ceive, Referring to the designation of Ambassador Leon to act as linison officer De- tween the French and Germen Governments, Leroy-Beaulieu volunteered that the two financial experts who were accompanying him were entirely dependable, and not Masia by any stretch of imagination. One of these I knew slightly, Mr. Barnand, of the banking firm of Vorms and Company. The other is & career san in the French Ministry of Finance. Regraded Unclassified 180 BRITISH EMBASSY, WASHINGTON, D.C. July 12th, 1940. ret and Personal. Dear Mr. Secretary, I enclose herein for your personal and secret information a copy I of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary. Very sincerely yours, Lolation The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D. C. 181 Telegram despatched from London early on the morning of July 12th. British aircraft carrier and speed merchant cruiser in collision July 9th in dense tropical storm in the South Atlantie. No casualties but the armed merchant eruiser badly damaged. British cruiser bombed and hit in the sediterrancen July 9th. Beveral casualties and coptain killed. Confirmed that the Nediterranean Fject suffered no casualties either in unterial or personnel in the fleet action July 9th, but force was bombed at intervels this day without result. Four enemy aircraft shot down, 7 others damaged, 2. Casualties at Norwish July 9th were 16 killed 17 wounded. Enemy bombing activity yesterday occurred south Wales, southwest Englend and on eonvoys in Themes estuary and east @hannel. Casualties in second locality elight. In wales bombs were dropped on docks at Fembroke, Cordiff and swanses, end on 8 Royal Ordnance factory. Twelve persons killed; extent of damage not yet known. Operational training in Baltie maintained name level; mine laying carried out off we cast const. Tunerous flights of transport aircraft from Cologne. area to aerodrouse in the Low Countries, leading top Regraded Unclassified + 182 to Le Bourget and Lisieux. 3. Royal AIR Force day bombing yeaterday much hindered by lack of cloud cover. Oner, however, was bombed. In enemy attack on caroy in Themes estuary by 1 bonber, excorted by 10 Messerschmidts, enemy lost 1 fighter (confirmed) probably 4 more, and was driven off. Large force of about 120 enemy sircraft approached & convoy between Dover and Dungeness from the direction of Calais. Interception by 5 squadrons of British fighters resulted in 7 enemy fighters, 2 bombers destroyed (confirmed), 7 fighters, 4 bombers probably destroyed. Total result of fighter operations July 10th 12 enemy aircraft destroyed certain, 17 probable. Our casualties 2 Hurricanes lost, 2 badly damaged. Royal Air Force night bombing operations 10th/11th July abendoned through unfavourable weather. Fleet Air Arm attacked port Augusta during night and sank 1 destroyer. 4. Yesterday enemy aireraft active against convoys in Irish Sea, off Portland and in the I Thames, but very little damage. British shipping losses reported; 1 ship by air action. Neutrals, 2 Dutch ships by sircraft, 1 by U-Boat, 1 from unknown cause; 1 Letvien ship sunk w air setion. 5. Mediterraneen. Air attacks on Catania Massace recently have not drawn any fighter defense, although attacks pressed home with the intention I of indusing fighters to take so the air. Purther movements of fighter aquadrons from the North to the South of Itely reported indiesting probability the Regraded Unclassified -3- 183 that Italians consider further attacks in the North unlikely. 6. Sudan. Police garrison of the frontier post at Kurmuk about seventy strong, foreed to retire before enemy attack of 300 Colonial troops supported by light artillery and machine guns. Garrison inflieted 50 casualties in a stout fight and sustained one killed six missing. Itelians thought to have withdrawn from Kurmuk same day, our police patrols now reconnoitring with the intention of re-occupying the town. East Africa. British Moyale was being heavily attacked 10,00 hours on the 10th by Italian regular troops considerable artillery, mortar and light machine gun fire,and post now partielly surrounded. Reinforcements and aircraft are being sent to assist the defense. 7. Units of French floot still capable of service: (A) Under British control. At Portsmouth: Bettleship "Courbet". One light cruiser and five torpedo boats being commissioned under White Insign. Two submerines. Plymouth, battleship "Porie". One light cruiser two destroyers and cae torpedo best being commissioned under white Ensign. Two defective submerines. Swansee: One submarine (just off the etcaks). Dundee: one submarine. Alexandria (partly demiliterised and with reduced crews): Regraded Unclassified -4- 184 Battleship "Lorraine". Suffren, Duqueens, Tourville and Inquay Trouin eight-inch cruisers. Lynx light eruiner. Three destroyers. One submarine. (D) Not under British control. At Le Verdon; one large destroyer (possibly incompleted). Brest: One obsolete battleship. Vendres: Three destroyers. Cette: Three light ordisers. Toulon: Battle oruiser "Strasbourg" (possibly damaged). Five light cruisers. Six 6-inch cruisers, one destroyer. Dakars Battleship "Njohelieu" (disabled). Two light cruisers. One destroyer. Seven armed merchant cruisers. two submarines. Casablanoa: Battleship "Jean Bart" (not yet completed). One six-inch eruiser. 10 destroyers, 13 submarines 07 at sea). Oran. 5 light cruisers, 2 destroyers, 2 of these vessels sunk. Six submarines. Diserts: 1 destroyer, 7 submarines. Bounser 2 submarines. Brax: 4 8-inch cruisers, 8 light cruisers, 2 torpedo boats 3 submarines, same or all of these ships may be at or my have arrived at Toulon. Beirut: 5 submarines. Martinique: 6-inch cruiser "Exil Dertin", Aircraft carrier "Bearn". Guadeloupe: Training eruiser "Jennne d' Regraded Unclassified 185 -3- d'AFG". Araba: 1 armed merchant eruiser. fairen: 6-1nch eruisor "La Notte Piequet". ,1 armed merchant eruiser. There are two light eruisers and possibly 7 destroyers and 22 submarines unaccounted for. Later. Damage sustained by British cruiser referred to in third sentence was slight and did not prevent her from taking part in engage- ment with Italian fleet. Regraded Unclassified 186 BRITISH EMBASSY, WASHINGTON, D.C. July 12th, 1940 Personal and Secret Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, holuzan The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D. C. Telegram despatched from London on the 187 evening of July 12th, 1940. British fleet at ... in Sectorn Nediterrancen vse bambed and constantly shadowed during July 11th. No further details available. At midday on the same day His unjesty's destroyer Essert returning with save) force in western Mediterrenean was torpedoed by enemy submarine and sunk. Number of casualties not yet known. As - result of enesy air ectivity off Portland July 11th lis Majesty's yacht warrier II vse sunk. Premising attack on U-boat by H.W.B. Deptford July 10th followed up ottnoke in the same visinity by H10 unjesty's destroyers ilavelock end Harvester; this attack probably successful. Two British transports have arrived at Iceland with troops. 2. Royal Air Foree bombing operations yesterday earried out by 36 Blenhaims on aerodrozes in north-east France and Holland, barges on Purnes camel and oil targets and sluminium works in north- west Germany. Large consentration of barges between Purson and Dunkirk vas bombed also Boulogne serodrame where 5 aircraft on the ground believed damaged. All Blesheims except one returned. Lest night 55 sireraft attacked industrial plante and reilway targets in north-west Germany. Three bomber: missing. 3. Enemy sir activity yesterday directed against cast coast between Great Yarmouth end Plauborough Head, Portland and Portsmouth. At Bridlington station on an unition dump was blown up and Regraded Unclassified and goodsyard set on fire. About fifty fighters 188 and benefits attacked shipping In Fortland area. No damage on land; two ships slightly damaged in addition to secualty mentioned in paragraph 1. similar number of sireraft attacked Portenouth 16.00 hours. Little navel damage done but two barges half loaded with aumunition were sunk. leveral fires caused sany buildings damaged. Total casualties from these reids 27 killed, 52 injured. Enemy aircraft lost 13 bembers, 10 Messerschmidt 1100 (confirmed) 12 bombers, 3 fighters (unconfirmed). One seaplane also destroyed. or the above two confirmed and one probable claimed by enti-airereft st ortland. Our cosunlties 5 aircraft. During night of July 11th/12th ineffective hostile reids mostly by single aircraft on the constal districts of east and south west. Few boxbs dropped except in Dartmouth district where 29 H.Se. fell. Present reports give no serious damage or casualties. 4. Shipping lesses reported yesterday as follows:- 1 Finnish ship torpedoed end aank, 1 unknown ship terpedned reported by aircraft. 5. 2016 raided on July 10th by 20 aircraft. Bombo dropped on dockyard sieids and Manoel Islands area. Blight military damage fee cosualties. Two eneuy sircraft shot down for certain and snother probable. Aden. Aircraft from Aden dropped two tons of bombo on reilway workshope at Diredawa July 8th and on ####### aerodrome 08 July 9th and July 10th. Direct hits scored on hanger and two or three fighters on the ground. kgypt. thesy airereft bombed $141 Barreni July 10th. One Lysander aircraft destroyed otherwise/ Regraded Unclassified 189 -3- otherwise as damage or cosunation. Neet Africa. Counter attack on British Moyale by our treeps from south regained escarpment but touch with our garrison not yet established. Our casualties 10 Hilled 16 wounded. Those of enemy not known but believed heavy. 6. Further reports on effects of our bombing raids on Hamburg and elsewhere have been received. They mention destruction of administrative buildings, severe damage to largest drydock and to bridge connecting Hamburg and Farburg. Reported air reids have sade working conditions so difficult that several factories have closed and fuel will no longer be stored at Hemburg. Reports from neutral countries state that our constant air attacks make it difficult for the Germans to assemble treeps and stores for operations against the United Kingdom and that former extrone optimism of quick sad successful invesion of England is now changed in certain high quarters in Germany to one of hesitation. Regraded Unclassified 190 July 12, 1940 12:30 p.m. Present: Mr. Bell Mr. Foley Mr. Young Mr. Cairns Mrs. Klotz HM,Jr: We will do one (Bell), two (Foley) and. three (Young.) Start on oil. What's the situation on the three tankers? Mr. Bell: Three tankers. Two of them are chartered by the Texas Company and the other 1s chartered by the Spanish 011 Monopoly, as I understand it. It 1s costing the Texas Company $3,000 a day and, of course, they are rather anxious to get these ships released. We have statistics as to what the cargo is, but Cairns has it. I have not got it. They have made applications to the British Em- bassy for navicerts -- sometime ago -- late in June, but they have not been granted. That might be one out for delaying, but you can't use it as an excuse to these people. HM,Jr: You can tell them this -- think about it and we can talk it with Berle -- "Of course we don't want to embarrass you" and 80 forth and 80 on, "we are prepared to buy the cargo. The President Just told me 80. I won- der who Knox has that he can count on. Well, that's that. Let's go around the table. Mr. Bell: Well, you buy it. All right. But they won't be satisfied with that. They may be satisfied so far as these two cargoes are concerned, but they are go- ing to raise other questions. First, they will lose the contract which is very valuable to them, and, second, they will probably go into some other country to get their oil. Regraded Unclassified 191 -2- HM,Jr: No, they will not. Mr. Bell: Roumania is cut off at the present time. HM,Jr: "We are studying the law". Mr. Bell: I think you can delay it. (Mr. Cairns came in at this point.) Mr. Bell: Cairns has a memorandum on his con- ference. Very short. (Mr. Cairns gave the attached memorandum to the Secretary which the Secretary read. When about half way through, HM, Jr spoke on the phone to Secretary Knox and a copy of his conversation follows this page. 192 July 12, 1940 12:45 p.m. H.M.Jr: Hello. Operator: Secretary Knox. H.M.Jr: Hello. Frank Knox: Hello, Mr. Secretary. R.M.Jr: Yeah. Here is a good hot one for you. K: Yeah. H.M.Jr: You heard me at Cabinet yesterday -- that I reported I was holding these shipments of 211 to Spain. E: Yeah. H.M.Jr: Well, we're still holding them and it's all oil going to Spanish Monoply under contract from the Texas Company. K: Texas? H.K.Jr: Yeah. Texas 011. X: Yeah. E.M.Jr: Now we're still holding them and the President Just called me -- evidently somebody had been talking to him or else -- at least, he said he had this idea over the night, that if we ran into difficulty, he thought under the new law the Navy could buy the cargo and store it in the Virgin Islands or Puerto Rico or some place where they needed it for strategic purposes. K: You mean the cargoes. H.M.Jr: The cargoes. K: Yesh. Regraded Unclassified 193 - 2 - H.M.Jr: Now Mr. Berle is coming over here at 2:15 to confer with us and this is costing the Texas Company $3,000 a day per ship, demurrage, you see. K: I didn't get that last sentence. H.M.Jr: Well, it's going to cost the Texas Company -- you see, they're paying demurrage on each ship $3,000 a day. K: I see. H.M.Jr: So I may have to move fast. K: Yes. H.M.Jr: What help can I get from you? K: Well, as to our using this 011? H.M.Jr: Yeah. Buying it. K: Well, if the President says buy it, I suppose we'll buy it. H.M.Jr: Right. Now who could come over at 2:15 and sit with me in case we decide to buy it ...... K: Do you want a technical man or can Compton cover that? H.M.Jr: Compton would be fine. K: All right. I'll have Compton there. H.M.Jr: But he'd better have a blank check in his pocket. K: (Laughs). Well, I don't think we can move as fast as that. Besides you'll have to give them the check. (Laughs) Well, you aren't serious about that, are you? H.M.Jr: What, about moving today? K: No. About the check. Regraded Unclassified 194 - 3 - H.M.Jr: No, I'm not. No, but, I mean, just so that he's ...... K: Well, I'll start right in and have a talk with him. H.M.Jr: Well, I mean, they might be thinking where they want it because I mean we may have to move on it today. That's all. K: Yeah. And you may have to buy it. H.M.Jr: And we may have to buy it. Hello? Hello? Hello? Operator: Navy. H.M.Jr: I was cut off from Mr. Knox. Operator: You're connected, sir. H.M.Jr: Hello. Operator: I mean I have my connection ...... Treasury Operator: Operator, ring him back, please. Operator: Well, I don't know how I can ring him back. H.M.Jr: Hello. Operator: Just a moment. Go ahead. H.M.Jr: Hello. K's. sec'y: Mr. Morgenthau. H.M.Jr: We were cut off. K's. sec'y: Just a second, sir. K: Hello, Mr. Secretary. H.M.Jr: I'm afraid we were cut off. I: Cut off, yes. Regraded Unclassified 195 - 4 - H.M.Jr: Well, if Compton will come over here K: Do you want him to come to your office. H.M.Jr: My office. K: All right. At 2:30? H.M.Jr: 2:15. K: 2:15. H.M.Jr: And Berle will be here representing the State Department. K: All right, fine. I'll have a talk with Stark and talk to Compton before he comes. H.M.Jr: Thank you. God, I'm glad you're here. It's a breath of fresh air. X: (Laughs). Thank you very much. H.K.Jr: I would have had to argue for six months recently and then I wouldn't have got anything. K: Really? S.M.Jr: Sure. K: Well, perhaps a newspaperman's training helps to make the decisions. H.M.Jr: Well, you know, a newspaperman and a farmer get together -- we make hay. X: (Laughs). That's right. H.M.Jr: All right. K: All right. H.M.Jr: Thank you. Regraded Unclassified 198 -3- Mr. Cairns: We will need a Presidential Proclama- tion. HM,Jr: What do you mean, a Presidential Proclama- tion? God! You always -- gee whiz! Can't we get along without a Presidential Proclamation? Are you serious? Mr. Cairns: I am serious. The President listed the commodities that would be held. Mr. Foley: He did not say oil was a strategio material. HM,Jr: What if the Navy buys it? Texas don't want to sell it, let the ships wait, if the ladies will excuse me, until Hell freezes. If they want to sell, I buy it today. Mr. Cairns: I thought this was Colonel Maxwell's. HM,Jr: You still want a Presidential Proclamation? Mr. Cairns: No. HM,Jr: All right. Be good then. That's a swell idea of the President's. Mr. Bell: Where do we go fromthere? HM,Jr: Did I tell you the moral of this thing? Harold Ickes sat on helium for three to six months and the State Department did everything possible -- and the President 1s back of me and I am going to sit on this oil. HM,Jr: This "hot" oil. HM,Jr: Did I tell you what Berle said yesterday? I said, "If I go to Atlanta I want to go for a good reason." So he said, "Well, I would rather go to Atlanta than a con- centration camp." Ford, thanking him for not manufacturing the Rolls Royce? Mr.Young: Hear the Joke about Hitler calling up He thanked him and said he would like to have him manufacture Regraded Unclassified 197 -4- some tanks for Hitler. Henry said, I would manufacture them, but I don't know whether I could deliver them be- cause of the British blockade. Hitler said, I'll take care of that. He said, Ship them f.o.b. Detroit and I will pick them up there. (At this point, HM,Jr concluded reading Mr. Cairns' memorandum.) HM,Jr: Well, I think what we will do, we will have a little talk at 2:15 with one Compton, one Berle. Tell them the President said to sit tight. If they don't like this thing, we will buy the cargo. Mr. Cairns: They will ask whether you are pre- pared to buy 72,000 tons per month. HM,Jr: You tell them the reasury is on a 24-hour basis. Were they nasty? Mr. Cairns: Oh, no! No! Mr. Bell: Cairns said they were very nice and very cooperative. HM,Jr: What do you gents think? Mr. Foley: I think we have two jumps. We will take one. HM,Jr: Which one? Mr. Foley: This one about these three ships. Buy these cargoes and then see what we can do. Mr. Cairns: I think we should tell them we will not grant any departure permits. If they want to dispose of this cargo, we will take it, but any future cargoes we will not make any commitments. HM,Jr: After all, let's do a little mathematics. To date, how much for the first six months? They have had 72,000 tons. Regraded Unclassified 198 -5- Mr. Foley: Average. HM,Jr: Average. A month. Which is double what they had in '35 ..... Mr. Foley: ...37 HM,Jr: so on that basis they ought not to get any more for the rest of the year. Mr. Cairns: That wasn't only Franco. HM,Jr: Well, 52,000. Mr. Bell: You haven't got the picture here. We don't know the normal requirements of Spain. This 18 Just what the Texas Company supplies. Mr. Cairns: They supply all of it, they say. HM,Jr: That's wonderful! Mr. Bell: Puleston is trying to get some statis- tics before the 2:15 conference. HM,Jr: I don't want Puleston at the 2:15 meeting. He 1s not to attend the meeting. All right? All set? Want to take five minutes now? Mr. Foley: I went over there ..... HM,Jr: Excuse me. Miss Chauncey, make a note that pursuant to my phone call to Jesse Jones, this morning, Mr. Foley went over to see him. Mr. Foley: I went over there and he had Hamilton and Schram in the office. I gave him a copy of the request for Commissioner's ruling from Curtiss-Wright and gave him copy of our regulation. Explained the legal background for it and gave him copy of the proposed closing agreement and he mas terribly interested and said they had not talked to him about this method. Regraded Unclassified 199 -6- HM,Jr: Who had not? Mr. Foley: Curtiss-Wright. I said that prob- ably was true, but this was merely & minor adaptation of the proposal he had submitted to them in writing and this was entirely satisfactory insofar as they were concerned and we are concerned as to the tax problem. This would enable them, without any change in the law at all, to amortize the leasehold interest over a period of eight years. And he asked some questions about some of the properties in New York that he was familiar with and he asked if he could keep a copy of the law. He had over- looked it. He said, "Like a lot of things, it came to him too late." HM,Jr: This 1s his own real estate? Mr. Foley: Yes. I told him his trouble was he did not have a good lawyer. HM,Jr: Did you? Mr. Foley: Sure! He said, "I need a lot of them. . So, on the Packard thing he does not want to put it on the basis of law HM,Jr: Before you leave Crutiss-Wright, 18 he going to send for those babies? Mr. Foley: Yes. He said the trouble is we have not worked closely enough. I said, That's right. After all, these fellows are not too anxious to duplicate their facilities. We have to keep the heat on them and we have to be the moving factors. Knudsen in New York and told him you were on the way over HM,Jr: After I talked to Jones, I called up it wasn' t. there. He thought everything was lovely and I told him Mr. Foley: That's right. So he 1s going to send for Curtiss-Wright and get them down here. He wants Regraded Unclassified 200 -7- to have a preliminary discussion with his own people based on the information we furnished and he will have them in tomorrow or Monday and he will get in touch with us. HM,Jr: That's R good job. Mr. Foley: I brought in the Arthur Krock thing too. HM,Jr: Did you? Mr. Foley: Sure. The meeting was a little hostile at first, but when the meeting was all over Jesse had a different attitude than I have seen in a long time. He was friendly and happy about it. So far as Packard is concerned, he does not want to put it on the basis of law. He admits that under 5-D they might have power to finance a plant. He raises A question as to the criticism that Congress might make if, under their National Defense powers, they constructed facilities for British needs as well as for our own needs. HM,Jr: Whoever thought that idea up anyway? Do you know? I wonder. Mr. Foley: I made the broader argument about National Defense, as including defense for Great Britain, where we had absolute control under Section 120 of the productive capacity of the plant. At any time we could take contract priority. Take over the whole thing. What ve are interested in and needed for National Defense was additional capacity to turn out airplane engines and the fact that some might be sold as an incident of this trans- action to the British did not take away from the legal power. He said, well, he put it up to the Board. They felt a little differently about it. I said, "Let's talk about the law. Would you be willing to put it up to the Attorney General because I think I am right." He said no because even if the Attorney General approved, he would not want to do it that way. I said, "All right, Mr. Jones. If you are willing, and we have help, we have enough ingen- uity in the crowd to work out another way to do the same Regraded Unclassified 201 -8- thing. On such a nucleus, that's what he wanted to do. Then he told me about some troubles he 18 having with Packard. Packard wants to locate it inside their own fence and they don't want to give them a mortgage on the plant 80 Packard is not entirely cooperative. So he has a problem there. And I suggested to him that we get to- gether ourselves with Mr. Knudsen and work out something and then callin Mr. Purvis and see what they are willing to do with that $25,000,000 that they are going to put up and then when we have something that is satisfactory to Purvis, Knudsen, R.F.C. and ourselves, then call in Packard and give it to them. HM,Jr: What surprised me, when I spoke to Knudsen he said, "I came up to New York just to see Purvis to close the Packard deal. Can you make that one out? Mr. Foley: As Jones said, "You have the tax end of it, Knudsen has the orders end, and I have the money end, and we have not worked closely enough together." HM,Jr: It is not our fault. Why does Knudsen go up to New York to see Purvis. I suppose he had to at- tend a General Motors meeting. Mr. Young: A long weekend. It's Friday. HM,Jr: Fish day. That sounds very good, Ed. Mr. Foley: I thought it was good. HM,Jr: Now, what luck did you have with Mr. Stimson? Mr. Young: We had a nice chat. Read over the list. Had Colonel Burns there. Read over the list which 1s the old one revised, minus tanks plus additional items. Stimson was shocked they asked for more than the 80,000 rifles they mentioned yesterday at lunch, but I explained that it was the minimum training requirement for Canada. He asked Burns to give him complete lists of their existing Regraded Unclassifie 202 -9- stocks of everything, not just stuff that was on the list, but everything including ammunition for the vari- ous types, plus production schedule and dates of delivery HM,Jr: Good. Mr. Young: so he could look at it himself. HM,Jr: What did they do? Up the thing above 80,000? Mr. Young: Yes. Kept it where it was before. At the 200,000 figure. HM,Jr: Are you writing up today what happened this morning for Mrs. Klotz? Mr. Young: Delighted. HM,Jr: And this afternoon you will be seeing Knox. I think that's all to the good. We have done a lot of Treasury business. (Laughter) There is not a single thing we have talked here which has to do with the Treasury! Mr. Bell: No wonder we are busy! HM,Jr: Somebody has to spark, believe me. o0o-o0o Regraded Unclassified