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Volume 288, August 1 – August 4, 1940
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Volume 288, August 1 – August 4, 1940
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 288
August 1 - 4, 1940
- A -
Book Page
Agriculture, Department of
For funds in connection with American Red Cross
see Financing, Government
American Red Cross
See Financing, Government
Australia
See War Conditions
- B - -
Belgium
See War Conditions
Boeing Aircraft Company
Labor Conditions: Federal Bureau of Investigation
report
288 127
Brasil
See Latin America
Business Conditions
Economic Developments: Noble (Commerce Department)
report - 8/1/40
8
- C -
Canada
See War Conditions
Cannona-Machine Guns
See War Conditions: Airplanes
Chile
See Latin America
China
See War Conditions
Coast Guard
Gaston's (Herbert E.) speech at New York World's Fair
on Coast Guard Day - 8/4/40
299
Credit to Draftees
See Draftees, Credit to
Cuba
See Latin America
Customs, Bureau of
See War Conditions: United Kingdom
- D -
Departure Permits
See War Conditions: Export Control
Draftees, Credit to
Retail merchants restricting credit to men between the
ages of 21 and 31 because of the Conscription Act:
Federal Bureau of Investigation report
127
Dutch East Indies
See War Conditions: Netherlands
- B -
Book Page
Estonia
See War Conditions: Foreign Funds Control
Export Control
See War Conditions
- P - -
Financing, Government
American Red Cross-Agriculture request for essential
funds to make available food and clothing for
Europe - 8/1/40
288 64
a) Conference; present: HMJr, Chamberlain,
and Bell - 8/6/40: See Book 289, page 291
Defense Expenditures, July 1939-June 1940:
Bell memorandum
162
Foreign Funds Control
See War Conditions
France
See War Conditions: Foreign Funds Control; France
- G - -
Gaston, Herbert E.
Speech at New York World's Fair on Coast Guard Day -
8/4/40
299
Germany
See War Conditions
Great Britain
See War Conditions: United Kingdom
- H - -
Havana Conference
See Latin America: Cuba
- L -
Latin America
Financial measures taken with regard to territories
occupied by Germany: Stopford memorandum prepared
for Chamberlain - 8/2/40
117
Brazil:
Dollar credit arrangement with Federal Reserve Bank
of New York discussed in cable to American Embassy,
Rio de Janeiro - 8/1/40
27
Anglo-Brazilian Agreement: Text of - 8/2/40
166
Chile:
Hochschild transmits report - 8/3/40
242
Cuba:
Havana Conference:
White resume 8/2/40
197
"Convention and Final Act": State Department release...
202
- M -
Book Page
Machine Guns-Cannons
See War Conditions: Airplanes
Martinique
See War Conditions: France
Merchant Ship Movements
See War Conditions: Export Control
Mexico
Hochschild transmits reports - 8/1/40
288 33,34
Economic conditions within Mexico: Federal Bureau of
Investigation report
127
- o -
Oil
British should send over outstanding oil expert:
HMJr tells Purvis - 8/2/40
85
Dutch East Indies: Oil refineries - White resume -
8/3/40
275
- R -
Revenue Revision
Excess Profits Tax: Cabinet discussion reported by Bell
to HMr - 8/2/40
154
Rifles (Enfield)
See War Conditions
S # I
Ship Movements
See War Conditions: Export Control
Sweden
See War Conditions
Switzerland
See War Conditions: Foreign Funds Control; Switzerland
H I I
Tax Research, Division of
Report on projects during July 1940
19
Taxation
See Revenue Revision
- U -
U.S.S.R.
See War Conditions
United Kingdom
See War Conditions: Destroyers; United Kingdom
Regraded Unclassified
= . .
Book
Page
War Conditions
Airplanes:
3000 planes monthly program: Knudsen-Purvis data
on cost per month, etc. - 8/3/40
288
247
Airport situation in United States discussed by
Hinckley at Cabinet meeting - 8/2/40
161
Boeing Aircraft Company: Labor Conditions -
Federal Bureau of Investigation report
127
Cannons-Machine Guns: Beaverbrook advises against
increased production of 20-mm cannon; offers
drawings and specifications of Mark II cannon;
prefers machine guns to the 20-mm cannon -
8/1/40
56
Australia:
Exchange control adjusted to conform generally with
United Kingdom - 8/1/40
173
Belgium:
Creation by Germany of Bank of Issue of Brussels
reported in American Consul's memorandum,
Brussels - 8/3/40
269
Canada:
Payment for purchases through Federal Reserve Bank
of New York discussed by HMJr and Howe -
8/2/40
142
China:
Shanghai financial resumé - 8/1-2/40
5,148
Stabilization Fund: Sterling situation discussed by
Hall-Patch, British Financial Commissioner in the
Far East, and Cochren - 8/3/40
260
Destroyers:
Lothian asks Knox for fifty; situation desperate:
Knox reports at Cabinet meeting - 8/2/40
158
a) Islands in this hemisphere as payment
discussed by Knox and Lothian
b) Willkie's support to be sought
160
Exchange market resume - 8/1/40, etc.
15,163,259
Export Control:
Welles transmits to H&Jr memorandum answering Treasury
complaints regarding efficiency of present administration
of export control - 8/1/40
40
a) Young's reaction - 8/3/40
248
Licenses outstanding as reported by Green to Gaston -
8/3/40
297
Foreign Funds Control:
Estonia: Consul General discusses situation with Cochren,
Chamberlain, and Bernstein - 8/3/40
246,311
Financial measures taken in Latin America with regard
to territories occupied by Germany: Stopford memorandum
prepared for Chamberlain - 8/2/40
117
France: Leroy-Beaulieu memorandum calling attention to
hardships as a result of strictness of rules of
application - 8/2/40
121
Switzerland: Inquiry as to likelihood of blocking assets -
8/2/40
165
- W - (Continued)
Book Page
War Conditions (Continued)
France:
Report on colonies as prepared by Intelligence
Division, Office of Chief of Naval Operations,
Navy Department - 8/2/40
288
68
Present situation in Martinique: Federal Bureau of
Investigation report
127
Office for Supervision of Banks in Occupied Territory:
Report from American Embassy, Vichy - 8/3/40
271
Germany:
Financial measures taken in Latin America with regard
to territories occupied by Germany: Stopford memorandum
prepared for Chamberlain - 8/2/40
117
German-Swiss trade negotiations discussed in memorandum
from American Embassy, Berlin - 8/3/40
264
Netherlands:
Dutch East Indies: Oil refineries - White resume - 8/3/40
275
See also Book 289, page 250
Purchasing Mission:
Canada: Payment for purchases through Federal Reserve
Bank of New York discussed by HMJr and Howe - 8/2/40
142
Vesting Order: Official sales of British-owned dollar
securities - 8/1/40
17
Rifles (Enfield):
"The 1,500,000 Rifle Story": Young resume - 8/3/40
250
Sweden:
Swedish-Russian negotiations concerning expropriation of
Swedish enterprises and blocked Swedish funds in Beltic
States - 8/1/40
6
Switserland:
German-Swiss trade negotiations discussed in memorandum
from American Embassy, Berlin - 8/3/40
26L
U.S.S.R.:
Swedish-Russian negotiations concerning expropriation of
Swedish enterprises and blocked Swedish funds in Baltic
States - 8/1/40
6
United Kingdom:
Military Situation: Reports from London transmitted by
Lothian - 8/1/40, etc.
1,122,307
Norman expresses dissatisfaction with new budget - 8/1/40
29
Tax to be imposed on purchases of goods from wholesalers:
United States Customs valuation of these goods when
imported discussed in British Embassy memorandum -
8/3/40
286
a) Urgency of situation stressed by Chancellor of
Exchequer and assistance of United States Treasury
asked - 8/13/40: See Book 292, page 298
1) British Embassy informed no action can
be taken: Cochran memorandum - 8/14/40:
See Book 293, page 177
b) Possible trade effects: Report from London -
8/14/40: See Book 293, page 197
Willkie, Wendell L.
See War Conditions: Destroyers
1
BRITISH EMBASSY,
WASHINGTON, D.C.
Personal and Secret
August lst, 1940
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,
Louran
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D. C.
2
Telegrem despatched from London
early in the evening of July 31st.
1.
Destroyer "whitehed" strack a
mine off Harwich, being towed into harbour.
Greek ship "Hermione", carrying
petrol and oil, intersepted July 28th by
cruiser "Neptune" in the Aegean. Later the
"Heptune" and 11. 11. Australian ship "Sydney"
were bombed while escorting the Hermione"
and were obliged to sink her. Captain and
crew were sent away in ships boat close to
land.
2.
R. so F. Bad observing conditions,
low clouds, severe icing hindered night operations
on the 29th to 30th. Attacks on oil targets
were successful especially at Monheim where
refinery was left burning fiercely.
3.
Twenty-four Blenheims despatched
yesterday, principally against aerodromes,
oil targets, and aircraft depot in enemy
occupied territory. Bomba seen to fall amongst
dispersed aircraft on various aerodromes and
on railway trucks and sidings. Barges in
Ostend Canal also attacked, results unobserved.
One aircraft registered two hits on 5000 ton
ship/
Regraded Unclassified
ship off Flushing. All aircraft returned.
Last night 1/: Wellingtons sent to
attack oil targets. Other operations cancelled
owing to weather conditions. All our aircraft
returned.
German air force only slight activity
yesterday. One aeroplane attacked southbound
convoy off Harwich; few bomba dropped, no
damage, Single aircraft dropped bombs on
Norwich, a printing works and some houses
damaged; casualties 10 killed, 16 injured.
Formation of 15 enemy aircraft approached South-
weet coset but turned away.
Last night, enery activity much
reduced, probably owing to weather, some air-
craft reached outer London suburbs; few bomba
dropped, no damage or casualties. Some barrage
balbons reported fired at. Sporadio bombing,
without material result, reported from southwest
England.
4.
Summary of air casualties:-
Day of July 30th. Enemy (confirmed)
one HE 111. One KE 110. Total, enemy 2
British: nil.
5.
Shipping cosunlties.
By U-boat; 2 Greek ships (3500 and 4000
tons), carrying grain and wood to Ireland, sunk
14 and 15 miles off Portuguese coast and French
Atlantic const. Yesterday, British "Clan
Menzies" (7300 tons), carrying wheat and tinned
fruit from Australia, torpedoed and sunk off
northern/
Regraded Unclassified
4
northern Ireland. Master and 35 of the crew
landed in Ireland.
6.
On July 26th to 27th two
car patrole 11th Hussare attacked
Libyan frontier by enemy aircraft; two armourned
ears burned, one man killed, three wounded.
One officer and twelve men with two armoured
care and lorries missing.
7.
Libra. Indications received Italians
considerably reinforeing Egyptian frontier
area. Artillery activity has increased, very
large column of M.T. and tanks seen south of
Bardie July 28th.
s
min. Heavy rains reported in the
whole area.
5
CABLE
FROM: Commercial Attache Nicholson
Shanghai, China.
DATE: August 1. 1940
For the Secretary of the Treasury.
Shanghai market July 31 closed quiet at 3-55/64 for
cash 3-27/32 for August for sterling 5-15/16 for cash
5-29/32 for August for U.S. dollars. Gold bars closed at
5,415 and wei wah at discount of 4.90%.
NICHOLSON
Regraded Unclassified
6
JT
PLAIN
STOCKHOLM
Daved August 1, 1940
Reo'd 8:31 p.m.
Secretary of State,
Washington,
786, first.
Negotiations between Sweden and Russia concerning
expropriation of Swedish Enterprises and blooked Swedish
funds in Baltio Status may bE linked with present trade
negotiations. Riksbank believes reported blooking Swedish
funds by France likely as Sweden blocked French funds
on Jund 38 (BEE our 691 and 708). Industrial Commission
estimates rubber stock sufficient two years.
INFORM TREASURY, COMMERCE.
STERLING
LMS
BUREAU OF FOREIGN AND DOMESTIC COMMERCE. 7
August 1, 1940
1:
Bruce Berckmans
To:
Hon. Henry Morgenthau, Jr.,
Secretary of the Treasury.
Sent at the request of Mr. Noble,
Under Secretary of Commerce.
Bure Barchmans
Bruce Berckmans,
Acting Director.
August 1, 1940.
8
BOONOMIC DEVELOPMENTS
23530
IN GENERAL continued to improve in July, after allewance for
curtemary sensonal novemnts. The gain during the month w noder-
ate compared with the sharp upswing in June but at the end of July
overall estivity we higher than at the end of June. Though -
of the weekly business indemes published w private agencies have
tended to decline in resent weeks, this does not - that activity
to again tending love. These indoxes are limited in seeps because
of the lask of comprehensive weekly data; they do not have broad
representation of the durable goods industries which 470 providing
the basis stimins to the recent rise in business.
INNUSTRIAL PRODUCTION definitely advanced in July over the Ime volume,
Preliminary estimate of the Reserve Board's adjusted index shoes a
rise to 127 free the June figure of 114. is in other resent months
steel 1nd the my as workly output rese from 86.5 percent of capacity
for the last work of June to 90.4 percent for the vosk ended August
de The only major industries to fall below the June volume on - +
justed basic were automobiles and crude petroleum.
EXAMPLESS
Adjusted Indeme
(1923-25-100)
M
June
Mr
Industrial production
106
114
117
Steel
110
148
160
Cetten
116
118
125
Antemobiles
95
92
73
Carlos/Ings
72
75
%
*Prolinizary
SIGNIFICANCE: is the Board allows for & seasonal decline of 3 points
is production for July, the index indicates that actual output was
the - 1a July as in June-the rise from 114 to 117 resulting from
absence of the usual - alackening. In terms of the index, a
sharp dealine in automobile assomblies was effect by moderate advances
In most other industries. Neverer, the decline in automobiles 26-
mite from the earlier change-over to DOB models this year-a change
in the sensonal that distorts the Board's index und most weekly in-
dama of business activity. Automobile companies are winding up &
very good model. year and existing stocks are being reduced at a fever-
able rete. 28 my be noted also that advanced manufacturing indus-
tries that have been stimisted by the w and our defense program-
Regraded Unclassified
9
2
aircraft, anchine tools, mashinery, and shipbuilding-bave undoubted-
by continued to advance moderately and these industries are not &
rectly represented in the Board's and other indomes. This will be
resedied when the revised index is published.
THE PEN INDICATORS of consumption now available for July show that bund-
2006 is receiving strong support from retail purchasing. Department
stare sales hald to the high June level, the adjusted index being 93
in both June end July. July sales NO20 7 persent above 5. year age.
Automobile mlss are reported at not such below the June total, a val-
- that sease a substantial increase en & sensonally adjusted basis.
Other consumer durable goods lines are also doing comperatively well.
The report an alectrical appliance sales for the first siz months of
this year shows consumer takings of the more important Items at an
all-time high.
of THE RECOVERY MOVEMENT has taken place in the face of
vealmess in sensitive comodity prices and a practically noticuless
stock market. Commodity prices have drifted downard almost 000-
tinnously during the month with the Bureau of Labor Statistics' in-
dex of 28 commodities falling from 110.2 - July 1 to 106.8 on July
no Most of the individual commedities included in the index have
essed off. The volume of trading on the stock emally has boen the
smallest since August 1918, the 7,304,820 share turnover for the
month compares with close to 25 millim average for to pressding
our months, Price movements for all classes of securities have tem
senfined within exceedingly DATTON limits.
June 16
July 1
July 11
Bureen of Labor Statisticss
Spet commedity price index
110.8
110.2
106.8
Agricultural products
111.7
111.8
111.8
Industrial raw enterials
114.9
112.8
109.5
Import commedities
114.3
113.0
107.4
June 15
July 1
July
Doe-Janess
Industrial stocks
123.4
121.1
126.1
Railreed stocks
25.0
25.7
26.9
Utility stocks
20.6
22.3
22,7
Corporate bands
85.5
67.1
88ah
SIGNEFICANCE Many malysts feel that the present price washmes
and security market insetivity indicate BODS slackming in business
for the immediate future, over if the we continues. In fact, -
believe that a mild recession is already under way. The do not share
3
10
Regraded Unclassifi
that opinion. It 10 troe that the volume of industrial purchasing
of eartain standardised commodities full off in July from the paes
of ordering in June. Det M buying in these markets usually comes
in sparts this of itself is of little importance. is to the price
verbness it should be remembered that since the beginning of the
recovery in m14-1938 prices have moved lover such of the time.
Price behavier has boen characterised by brief but sharp advances
during periods when forward buying we the rule. is the buying
spurts subsided prices tended to case from the packs reached en the
buying wrs. There is little forward buying at the present time
and no price advances are not to be expected. with most of Europe
est off from world markets the volume of consumption is simply not
large enough to generate a. price rise in the shames of an inventory
boom. This situation is not likely to change until the defense per
- is such further advanced, if them. This is a feverable rether
than an unfavorable factor in the present situation as it will tend
to make the meding recovery less erratic and should tend to limit
liquidation should Britian be defented.
Assuming & continuation of the we w believe the business curve will
continue to riss. There my be a sincer downtown in the Board's (old)
production index early in the fall for either of too reasons. (1) The
seasonal adjustment allows for a sharp pick-up in business from August
to October and this may not occur because n are now operating at work
& high lovel. Ilence, there my be 1. statistical dacline without in
actual a. (2) There is probably BOBS occurulation of steel inve-
tories at the present rate of production, and the heavy weight given
this item would reduce the general level of the index in the event
that the steel rate dropped back to the volume of consumption plus
exports.
Sush 4. dealine would net - a reversal of the movement of general
business, or even of industrial production. the do not expect a de-
aline in terms of employment de national income.
Confidential
11
FORKISH TRADE NOTES
trazile the yro-Germa trade propaganda is accounting more and zore definite
forms. In July a series of articles have appeared is Brasilian -
papers holding forth premises of large German purchases of Brasilien
products in the MMF few. the articles pointed out that the Derman
fasteries are already propering for postens trade, calling attention to
Germany's great and of trazilian primary products, and adverting a
resumption of the omposstion system of trade, Those articles also
call attention to the strict credit terms by American exporters
when Brasil et off from the European supplies.
in incriom occers has boen negatisting with the Administration of the
Port of Rio de Juneire for the construction of a modern pre-seeling
plant, but evidently could not - to terms a account of the demand
for lang-term wedit facilities. Recently a Brasilian representative
of a German firm affered to construct the plant, exclusive of anchinory,
on the basis of payment in to years at 9 percent interest. the pleat
would cost about $1,500,000 and the German company offered to accopt
promissary notes of the Administration of the Port of Rio de Jansire.
The equipment is to be furnished by an American omers and would wet
about $600,000.
One of the mest important German houses operating in Brasil has just
placed at order with an incrican sewing machine company for 10,000
sering machines, to be delivered at the rate of 2,000 units & sonth.
Branch factories of two American tire companies are new in operation
and will produce approximately 600 tires daily a the basis of three
8-hour shifts. The completion of as Italian tire factory is delayed
by the var and the company has sent technical MI to the United States
to purchase machinary.
2t is interesting to note that when - of the American factories dia-
covered that the other insriess fastery we to produce a British brand
of tires in addition to its - brand, it pretested to the Federal
Government and was uphold in its claim that the American company vas
exceeding its sharter which permitted only the manafesture of incrions
tires.
It is believed that after all the - plants are in operation, the impor-
tation of tires and tubes from the United States and other countries will
I
Japana with rainfall in Testers Japen reported If the lightest since 1934,
fears are again expressed regarding a of the power shortage
which greatly curtailed industrial activity is Japan during the last
half of 1939 and the early months of 1940. A centinued lask of reinfall
would also affect the rise crop and another year crop would MISS serious
consequences ter the nation.
There is discussion is the depensee press of the desirability of -
traties an the development of trade with the East Asia blso at M less
attention to stimulating shipmants to the United States and the storling
New.
12
- 2 -
The Japan Becomie Federation, which is nate up of the leading
industrialists and business - of the country, is reported to
have submitted a plan to the Government previding for the
establishment of the German system of cartels for all major is
dustries. This cartel system is to replace the present system
of official regulation and control and the present policy of the
Government toward the establishment of the "national policy"
concerns. It is believed that this - indicates the approhension
which provails in industrial circles toward the present trend of
State centrol of industry.
Bureau of Foreign and Demestic Cenneree
July 32, 1940
13
WASHINGTON WHOLESALE PRICE INDEXES
(1926 $ 100)
5
#
-
.
1939
1940
Percentage increase,
.
.
July 27, 1940 from-
Group
.
I
-
July
,
Aug.
I
Sept.
July
#
I
July
July 29,
I
Aug. 26,
29
26
16
20
27
,
I
1
-
1939
I
.
1939
I
#
,
,
1
I
I
11 commodities
1
74.8
I 74.8
I 79.3
,
77.6
I
77.3
3.3
.
3.3
Farm products
61.4
1
61.1
. 69.7
-
67.3
. 66.0
7.5
I
8.0
Foods
66.7 1 66.7 il 75.5 . 70.4 , 69.6
4.3
.
4.3
All commodities other than
1
#
farm roducts and foods
80.4
,
80.4
I
82.4
82.4
I
82.4
I
2.5
1
2.5
Hides and leather products.
93.7
.
92.6
#
98.3
-
99.9
,
99.0
5.7
1
6.9
Textile products.
67.5
,
67.4
1
71.4
I
71.9
-
71.8
I
6.4
.
6.5
Fuel and lighting materials'
73.3
#
73.2
I
74.1
I
71.8
,
71.8
- 2.0
1
- 1.9
Motals and metal products
93.4
,
93.5
# 94.9
94.9
, 94.9
I
1.6
.
1.5
Building materials.
89.4
I
89.7
-
....
90.7
92.8
1 92.7 ,
3.7
I
3.3
Chemicals & allied products'
(1)
, (1)
I (1)
I 76.9
76.8
I
1
-
-
House-furnishing goods.
87.0
,
57.0
.
.
87.1
90.0
90.0 ,
3.4
,
3+4
Miscellaneous
72.9
-
73.1
,
76.1
-
77.3
-
77.7 ,
6.6
,
6.3
I
I
-
.
Rew materials
66.9
, 66.2
.
73.0
-
70.6
, 70.0 I
4.6
,
5.7
Semimanufactured articles
74.5
.
74-4
I
82.0
. 77.8
#
77.5
I
4.0
.
4.2
Manufactured commodities.
79.1
I
79.3
-
82.3
I
81.1
-
81.0
1
2.4
I
2.1
,
I
1
Comparable data are not available.
Bource: Bureau of Labor Statistics, U. 8. Department of Labor,
Regraded Unclassified
14
SELECTED COMMODITY PRICE SHRING
.
.
-
-
.
1999
I
1940
Commodity
. Unit
9
August 2
August 30
-
Sept. 13
I
July 24
-
July 11
.
8.
8.
I
-
opper, alectrolytic,
-
-
1
,
I
Now York
" per 1b.
10
3/8
10 1/2
-
12
.
11 1/2
#
11 1/2
ood, prospt shipming
.
.
9
New York
do
I
4.95
5.05
I
5.50
* 5.00
. 5.00
inc, Now York ...
I
de
.
4-94
5.14
-
6.64
. 6.64
* 6.64
in, straits, les York
do
#
42 1/2
493/4
75
6 52 1/2
#
527/8
ibber, plantation, #
.
I
New York
s
I
169/16
16/13/16
22 1/2
22
21 2/4
idea, light native E
.
coss, Chicago.
de
I
12
11
15
11 3/4
- 111/4
11k, 13-15 denier,
I
I
78% seripleme, N.Y.'S per 1b.
2.73
.
2.72
-
3.21
2.55
2.55
otton, middling, ever-
e
9
#
#
,
age, 10 markets per 1b.
9.38
.
8.53
.
9.01
I
10.10
-
10.06
rint cloth, 60 X 64,1
.
38 1/2 inches, N.I.'s per yd.
43/4
45/8
I
53/8
4.5/8
43/4
ol tops, Oct. 1940
.
futures, New York ⑇ per 1b.'2/83.7
'3/81.5
$3/111.9
#
69.4
90.3
ligar, res, 96°, daty'
.
9
.
free, New York
de
,
2.90
#
2.92
e
3.70
-
2.67
2.63
sees, Acera, N.Y.
to
#
4.45
*
4.38
9
6.45
4.35
4.15
fiee, Sentos, No.4,"
#
New York
de
I
75/8
75/8
73/4
71/8
.
71/8
Quieges into 1
I
4a
I
5.77
.
5.65
.
7.75
e
5.62
. 5.50
ottensed oil, Sept.'
I
1940 futures, N.Y.
de
5.75
1/5.61
13/
7.30
1
6.04
5.96
best, Sept. 1940
I
#
futures, Chicago . '8 per will 51/25/ .67 1/43/ .85 3/8'
.74
5/80
-757/8
gs, good and sheles'
.
#
.
.
18 per est. 6.60
.
6.88
6.
8.23
6.10
.
6.38
i inc, tom,
.
.
750-1,100 104% Chill
do
-
8.13
8.38
.
8.88
8.63
8,25
a
-
.
Noninal. 2/October 1939 futures. V December 1939 futures. w September 1939 for
É
M
lourees All commedities, with the exception of real tops, cottensed eil, hoge, and
tears, are taken free the Journal of Commerce) well tops and cottensood all are taken
You the Wall Street Journal, and hoge and store are from the Γ. D. Department of
grienlture, Bireon of Agricultural
RECEIVED
15
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 1, 1940
TO
Secretary Morgenthau
CONFIDENTIAL
FROM Mr. Cochran
Activity of the six reporting banks in registered sterling was as follows:
1. Purchases of L106,000. of which 180,000 were acquired from the Federal
Reserve Bank of New York.
2. There were no sales of registered sterling,
Of the above-mentioned purchases, L89,000 were bought by the banks for their
customers; the remaining L17,000 apparently were used to increase registered account
balances in London.
The Federal Reserve Bank of New York also stated that L6,000 in registered
sterling were purchased from it by two non-reporting banks.
In the open market, sterling advanced nearly 6#, from an opening of 3.83-1/4
to B high of 3.89 at the close. We learned that the New York agencies of Japanese
banks were fair buyers of sterling. The reporting banks executed orders to sell
L26,000 and to purchase L48,000, all of which were for account of their commercial
customers.
The Canadian dollar had a slightly weaker tone. Às compared with yesterday's
final rate of 11-3/4% discount, it closed today at 12%.
The other currencies closed AS follows:
Swiee franc
.2274
Lira
.0505
Reichsmark
.4005
Cuban peso
10-1/2% discount
Mexican peso
.2018 bid, .2036 offered
We made the following purchases of gold from earmarked accounts:
$51,403,000 from His Britannic Majesty's Government
1,126,000 from the B.I.S.
$52,529,000 Total
The Federal Reserve Bank of New York reported that the Bank of Mexico shipped
$1,765,000 in gold from Mexico to the Federal for its own account, disposition
unknown.
Regraded Unclassified
16
- 2 -
The State Department forwarded to us a cable stating that the following shipments
of gold were made from England, both of which are for sale to the U. S. Assay Office
at New York:
$21,000 shipped by Erlangers Ltd., London, to the Manufacturers Trust Company, New York.
12,000 shipped by Westminster Bank, London, to the Chase National Bank, New York.
$33,000 Total
The Bombay bullion markets were reported to have been closed today, and no
quotations were received from that center.
In London, spot silver was fixed 1/16d lower at 22-5/16d. The forward price was
unchanged at 22-1/16d. The U. S. equivalents were 40.51# and 40.06$ respectively.
Handy and Harman's settlement price for foreign silver was unchanged at 34-3/40.
The Treasury's purchase price for foreign silver was also unchanged at 35¢.
We made three purchases of silver totaling 270,000 ounces under the Silver
Purchase Act, all of which represented new production from foreign countries, for
forward delivery.
f SMV
CONFIDENTIAL
Regraded Unclassified
17
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 1, 1940
TO
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
Official sales of British owned dollar securities under the vesting order
effective February 19:
No. of Shares
$ Proceeds of
Nominal Value
$ Proceeds of
Sold
Shares Sold
of Bonds Sold
Bonds Sold
July 22
300
1,075
22,000
18,713
23
100
5,617
137,500
118,765
24
-
-
21,000
16,174
25
2,530
30,409
41,000
34,808
26
1,100
11,499
16,000
12,016
27
1,100
7,576
12,000
9,695
5,130
56,176
249,500
210,171
Sales from
February 22 to
July 20
1,388,083
48,270,744
2,729,000
2,397,935
TOTAL FEBRUARY
22 TO JULY 27
1,393,213*
48,326,920
2,978,500
2,608,106
Mr. Pinsent reported that non-vested securities for the week ending July 20
totaled $500,000.
z ZMP. P.
Regraded Unclassified
18
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE,
Press Service
Thursday, August 1, 1940.
No. 21-77
The Secretary of the Treasury today announced the finel
subscription and allotment figures with respect to the cur-
rent offering of 3/4 percent notes of Series F of the
Commodity Credit Corporation.
Subscriptions and allotments were divided among the
several Federal Reserve Districts as follows:
Federal Reserve
Total Subscrip-
Total Subscrip-
District
tions Received
tions Allotted
Boston
$ 198,303,000
€ 17,960,000
New York
1,590,407,000
143,436,000
Philadelphia
130,218,000
11,819,000
Cleveland
216,021,000
19,616,000
Richmond
88,199,000
8,204,000
Atlanta
75,166,000
7,622,000
Chicago
434,250,000
39,523,000
St. Louis
77,325,000
7,237,000
Minneapolis
37,368,000
3,444,000
Kanses City
47,457,000
4,352,000
Dallas
51,421,000
4,698,000
Sen Francisco
239,071,000
21,547,000
Tressury
-
-
TOTAL
$3,185,206,000
$289,458,000
-o0o-
Regraded Unclassified
19
August 1, 1940
MEMORANDUM FOR THE SECRETARY:
Attached is a summary report of the projects
which have been worked on in the Division of Tax
Research during July 1940.
RB
AMS
20
Monthly Report on Projects in the
Division of Tax Research
July 1940
I. New projects
1. Additional assignments on war and excess profits
taxes
New assignments on various aspects of the study
of war and excess profits taxes are incorporated
in the summary statement on this project given
on the following page.
2. Allocation of taxes by income brackets
A criticism was prepared of 8. report by the Depart-
ment of Commerce on "Allocation of Federal, State
and Local Taxes to Consumer Income Brackets. #
(Mr. Farioletti)*
3. Texation trends and developments
An article treating on trends and developments
in the field of taxation during 1940 is in process.
(Mr. Atlas)
4. Sales taxes in the United States
At the request of the State Department, data on
sales taxes in this country were prepared for the
Finnish Legation. (Mr. Atlas)
Persons listed as working on the different projects do not
include those who acted largely or exclusively in a consult-
ing or reviewing capacity. In general, the person, if any,
actively in charge of the project is listed first.
21
- 2 -
II. Continuing projects
1. War and excess profits taxes
Analysis of issues raised by war and excess profits
tax proposals and assembly of statistical and other
information relative thereto have proceeded along
several lines. These include a report on the
treatment of the issues raised in the "Agenda
for the Excess Profits Tax Committee" under the
War Revenue Acts; study of amortization and
inventory problems; analysis of special treat-
ment accorded to particular types of business
under the World War and present excess-profits
taxes of the United States, Great Britain, and
Canada; consideration of the treatment of non-
corporate business entities and of non-business
income of individuals under an excess profits
tax; the setting-up of forms for tabular presenta-
tion of the essential features of foreign excess-
profits tax laws; the compilation from official
documents of statistical and other basic data;
and analysis of statistical information relating
to business profits and failures. (Mr. Blough
and staff)
Regraded Unclassified
22
- 3 -
2. Undistributed profits tax
A memorandum 1s in process analyzing, in the
light of issues raised by the undistributed
profits tax, the statistics made available from
income tax returns and other sources.
(Mr. Shere, Mr. Atlas and Mr. Copeland)
3. Inventory of tax proposals
A compilation of Treasury tax proposals other
than those designed to produce revenue is in
preparation; and the draft inventory of proposals
for raising additional revenue 18 being reviewed.
(Mr. Shere and Mr. Zorach)
4. Tax on value added
A memorandum is in preparation analyzing the
economic and administrative issues which would
be involved if a value-added tax were imposed.
(Mr. Farioletti)
5. Exempt insurance companies
A memorandum on exempt insurance companies, giving
attention to differential treatment of mutual
insurance companies other than life and to various
tax-exemption issues has been completed and is
awaiting review. (Mr. Shere, Miss Till, and
Mr. Mills)
Regraded Unclassified
23
- 4 -
6. Incentive taxation
A report analyzing the provisions of S. 3560,
76th Congress, has been prepared and 1s being
edited. This bill provides for the imposition
of a tax which 1s reduced as the expenditure for
labor used in business is increased. (Mr. Shere
and Mr. Farioletti)
7. Building and loan associations
A memorandum analyzing the suggestion to exempt
dividends on building and loan association stock
from the Federal normal income tax has been pre-
pared and 18 now being edited. (Mr. Shere and
Miss Till)
8. Tax-exempt securities
Data on (1) the gross amount of interest-bearing
securities of Federal corporations and agencies
outstanding at the end of each calendar year from
1929 to 1939 and (2) the amount of such securities
held by the United States Government, Federal
trust funds and Federal agencies have been compiled
and are being reviewed. (Mr. Ecker-Racz and
Mr. Mannen)
Regraded Unclassified
24
- 5 -
9. Income and estate taxes
(a) A memorandum analyzing the problems of
estate tax payment 1s in process. (Mr. Mille)
(b) Reports on the following subjects have not
been actively prosecuted during the month:
(1) Distribution of tax-exempt securities by
net income brackets with particular refer-
ence to the holdings of such securities by
persons in high income brackets.
(Miss Coyle)
(2) Proposal to allow corporations with five
or less shareholders to be treated for tax
purposes as partnerships. (Mr. Mills)
(3) Powers of appointment and remainders under
the estate tax. (Mr. Mills)
10. Articles, etc.
An article was prepared for the July issue of
the Treasury Bulletin on "Size and Industrial
Distribution of Partnerships in 1936."
(Miss Coyle)
11. Tax chronology, 1918-1927 and 1928-1940
The chronology of Federal tax rates 1918-1927
was revised to give effect to suggestions from
25
- 6 -
the General Counsel's office. Corresponding
revision of the chronology for the period
1928-1939 and extension to incorporate the 1940
act are in process. (Mr. Atlas and Miss Hughes)
12. Income Tax Study, WPA
The work of the Philadelphia project has been
divided in the past month between continuance
of the study of income tax returns in process
since October 1938 and a special analysis of
statistics relevant to war and excess profits
taxes. Plans and procedures for this special
tabulation were formulated, and review was made
of additional text and table forms connected
with the continuing study. (Mr. Blough, Mr. Shere,
Mr. Ecker-Recs, and Miss Coyle)
13. History of taxation of life insurance companies
A memorandum reviewing the treatment of life
insurance companies under the Federal income,
capital stock, and excess profits taxes 1909-1940
W&B revised to give effect to criticisms of the
General Counsel's office and W9B sent to the
Securities and Exchange Commission. (Mr. Mills)
Regraded Unclassified
26
- 7 -
III. Routine assignments
1. Reviews of publications
The first press release from "Statistics of Income for
1938, Part 1"was reviewed. (Miss Hughes and
Miss Coyle)
2. Statistics
(a) Data relating to different taxes, digests
of tax items, and Congressional activity on
tax items of interest to the Division are
currently prepared. (Staff members)
(b) In connection with the supervision of the
technical work of the Bureau of Internal
Revenue, several proposals of statistical
tabulations were reviewed. (Mr. Blough
and Mr. Shere)
(o) Administrative reports and statistics of the
Bureau of Internal Revenue are graphed and
commented on for the information of
Mr. Sullivan. (Mr. Campbell)
3. Correspondence
The Division handled correspondence pertaining to
tax problems. (Staff members)
7
TELEGRAM SENT
JT
GRAY
August 1, 1940
noon
AMEMBASSY
RIO DE JANRIRO
232
The following strictly confidential communication is
transmitted to you at the request of the Treasury Depart-
ment'
QUOTE The Federal RESERVE Bank of NEW York has re-
DEIVEC from the Banco do Brasil a cable dated July 27,
1940, indicating a desire on the part of the Banco do
Brasil to UBE dollar credit under the arrangement entered
into by the Federal RESERVE Bank of NEW York as fiscal
United States with the Banco do Brasil as fiscal agent of the
agent of whe/Brasilian Government, pursuant to the letter
of July 15, 1927, from the Secretary of the Treasury to
the Minister of Finance of Brazil, as supplemented and
modified, The Federal RESERVE Bank of NEW York, as fiscal
agent of the United States, is prepared to purchase from
the Banco do Brasil Brazilian milreis as provided in the
arrangement contained in the letter dated July 15, 1937,
from the Secretary of the Treasury of the United States
to the Minister of Finance of Brazil as supplemented
and
Regraded Unclassified
28
-3- #232, August 1 to Rio de Jangiro
and modified by the letter dated September 2, 1938,
from the Federal Reserve Bank of NEW York to the Banco do
Brasil, upon receipt of the confirmation by the United
States of Brazil that the Banco do Brasil has been de-
signated as fiscal agent of the United States of Brazil
to enter into such arrangement and is authorized to act
as such in connection with the transactions referred to.
Confirmation requested because confirmation contained
in note to you from the Ministry of Foreign Affairs of
Brazil dated October 26, 1539, transmitted to the
secretary of State with your despatch no, 1978, dated
Octob 27, 1939, indicated only that the Banco do
Brasil is authorized as fiscal agent of the Brazilian
Government to revintain a gold deposit account in accordange
with abovereesoribed arrangement and did not indicate
whether Banco Co Brasil is authorized to act as fiscal
agent of the Brazilian Government in connection with the
purchase of milreis by the Federal RESERVE Bank of NEW
York from the Banco do Brasil under the above-desoribed
arrangement. UNQUOTE
Please obtain a written communication from the Govern-
ment of Brazil to the Embassy constituting the I cquested
confirmation, telegraph text, and forward certified copies
which the Department of State can transmit to the Treasury
Department and the Federal RESERVE Bank of New York,
HULL
(FL)
EA:FL:EHS
OFFICER 4 COMMUNICATIONS TO
THE SECRETARY OF STATE
I di é
29
DEPARTMENT OF STATE
WASHINGTON
August 1, 1940.
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury, and
encloses for his confidential information one copy
of paraphrase of telegram No. 2488 of July 31 from
London.
18 1RE 21
LEGINES
END vne I bill J 20
BECEINED
H'F
30
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, London, England
DATE: July 31, 1940, 4 p.m.
NO.: 2488
TRIPLE PRIORITY.
STRICTLY CONFIDENTIAL FOR THE SECRETARY AND THE
SECRETARY OF THE TREASURY.
Yesterday I had lunch with Montagu Norman. He
included in his talk one matter of particular interest,
which was his expression of complete dissatisfaction with
the budget. He said that because the Treasury had played
politics, the budget was completely ineffective.
The Treasury had had suggested to it by all the
experts - and I judge this included Norman - that since
taxes beyond all reason had been imposed upon the rich
and middle classes, that it was the committee's opinion
the tax to be levied should take in the people who
received most financial benefit from the war, namely,
those in the group which receive upwards of $25 a week.
The above proposal was favored by Kingsley Wood, but
it was referred to Attlee when taken to the Cabinet.
Attlee was definitely opposed to the idea until the taxes
for those in the upper brackets had been raised still further,
and until imposition of & capital levy.
Norman reiterated to me that Attlee and the Labor
Party did not understand that the Government needed not
a
31
- 2 -
a percentage of goods but they needed cash. The suggestion
has been advanced time and time again by people holding
bonds and government securities that they be permitted
to pay their income taxes with government securities;
they state that if they could anticipate this they would
participate to a greater extent in government loans
at the present time. However, the suggestion has been
turned down in all cases.
I questioned Norman as to how much the plan which
he and the Committee outlined might be expected to obtain.
He said as much as L 300,000,000. I remarked that the
amount of the deficit as given to the publicas
1 2,100,000,000, and the foregoing amount was a long way
off from that. He said the deficit figure was of course
for public consumption, that as an actual fact for the
current year it would hardly amount to L 700,000,000.
The plans of the Treasury made provision for 10 200,000,000
of this. If the emall tax payer were included in the plans,
provision would be made for another L 300,000,000, making
a total of 6 500,000,000. Thus the major part of the
deficit would be taken care of. Norman said that they
must of course come to it sooner or later, without a doubt.
Norman 1s terribly bearish as to the functioning of
export and trade. I should judge that most of his time is
spent
32
- 3 -
spent taking care of discount houses which are not in a
position to meet their obligations. I have the idea that
he 1s doing this very secretly out of Bank of England
profits - his contention being that unless all confidence
is to be lost, he must keep the banking machinery functioning.
KENNEDY.
evolve : MII . 20
IDENTIFY BECEINED VESTEDIEW
EA:LWW
COMMITMENTS
OF
MR. H. K HOCHSCHILD
Copy of Letter from B, Mexico City, August 1, 1940.
The public attention has been centered on the reorganizations of
the oil industry end the Railroads. The President, who had left the city
at the letter part of past week, again addressed the workmen of the two
industries (ss 5 matter of fect of all industries) from Queretaro, and
on this occasion be was 8 little more outspoken and energetic, and made
quite clear his intention of going through with the reorganization.
Previously, the Directors of the oil industry had been authorized to
cerry the matter before the Labor Board, seeking the unavoidable read-
justment with the Board's intervention. The procedure is that of the
"ecouomic conflict", which so often has been denied to private enter-
prises ( Bee the A.S.& R.Co. atehuale case). It is now reported that
5000 headway 1a being mede before the Board und that the read justment
will rapidly be carried out, consisting of laying off Bone 2500 to 3000
non, preferably those employed after the 18th of Merch 1938, dete of the
expropriation. Selariss and wages will be revised downwards, as will
be other benefits enjoyed by the oil workers. It would not be surprising
to learn that the oil workers conditions will be less favorable efter
this readjustment then they were before the expropriation. The develop-
went 18 rather interesting, considering that the labor contracts fur-
niened the pretext for the expropristion; although the development is
to surprise. The Railroade will in all probability have to take the
Dame medicine as the oil workers, although the leaders are assuring
that they will not accept any reedjustment. They either do, or the
wallroads will be unable to continue operating.
And the Government's labor troubles do not end with oil end Reil-
runds. There are serious conflicts at severa_ State Departments, such
CA Comunicaciones and Asistencia Rublica, where federal employees are
threatening to strike if their demends are not accepted. So at this
time the most serious labor trouble seems to be between the Government
not some of the Unions. or course, there are others like the Canensa
strike, which remains in atatu quo; Matehuala, on which nothing has
done. Then, there 18 another electricians strike coning up,
affecting several of the Northern States.
In the political field things have been pretty quiet. There is
nome talk that two Congresses will be set up, one by the P.R.M. and
snother one by the Almezanistes, but whether these rumors have any
foundation remains to be seen, The present Congress is quietly meeting
in an extraordinary period, at which some projects of lews are to be dis-
cuesed, amongst them that of compulsory military service.
The Havana conference has received 80/18 ettention, and opinions seem
to differ. In some quarters disappointment hes been expressed over the
rect that the conference seems to give more attention to the political
side, than to the economic side, which was to be expected. People here
are being warned in editorials not to be too optimistic over the economic
outcome of that meeting.
The exchange continues at 4.95 without snowing any tendency either
were
Regraded Unclassified
34
Copy of Report from Monterrey, N. L., Mexico,
August 1,1940.
President Cardenas has demanded of the petroleum and reilway
workers that a reorganization of both industries be made to effect
economies which are necessary for continued operation. The Govern-
ment admits that the operations of the petroleum industry have re-
sulted in et deficit of approximately 68 million pesos since the
properties were expropriated. The reorganization, as proposed by
the President, calls for drastic cuts in wages and social security
benefits. The Executive Committee of the Petroleum Syndicate had
agreed to accept the President's suggestions and were supposed to
have signed an agreement today with Petroleos Mexicanos, who operate
properties. The Syndicate members state that the Executive Committee
has no authorization to sign the agreement and are demanding that the
matter be discussed in a general convention, called for that purpose,
and state that, if the Executive Committee signs the agreement without
the authorization of the Convention, it will not be recognized by the
Syndicate members. The Syndicate members claim that the deficit in
operation is not due to wages and benefits received by the petroleum
workers but was due to the Government's selling the oil to Germany,
Italy and a Houston Refining Company at a price greatly below pro-
duction costs and to improper management, and that, therefore, they
should not be called on to make any sacrifices.
The railway workers are also demanding that the reorganization
plan proposed by the President be discussed by a general convention
which will decide whether or not the plan should be accepted.
President Cardenas is insisting on immediate action, but it
remains to be seen whether or not he will be able to control the
Syndioates.
There has been very little change in the political situation in
the past few days. Both the Almazenistas and the National Revolu-
tionary Party are apparently going ahead with their plans for convening
two separate Congresses for September 1st. It is rumored that the
Almazan Party members, who are to be designated as senators and con-
gressmen, have been instructed to proceed individually to Mexico
City in disguise, to be on hend for the opening of Congress. General
Almazan is still in Havene, but, M advised in 6. previous memorandum,
he has stated that he will return to Mexico August 15th.
Exchange 4.95.
COMPLIMENTS
OF
MR. H. K. HOCHSCHILD
Regraded Unclassified
35
Ingust 1. 1940.
Bear Matral Starks
I - sending you herevith, for your confidential use,
the following reportes
Part 1. Airplanes
Delivaries of and New Orders for Airplanes,
May 1 - July 27. 1940; Unfilled Orders and
Natimated Deliveries on July 27. 1940.
Part = - Airplane Regines
Delivaries of and New Orders for Airplane
Engines, May 1. July 270 1940: Unfilled Orders
and Estimated Deliveries on July 27, 1940.
These tables carry forward through July 27. 1940 the
information furnished you last work.
Sincerely.
(Stened) D. W. BELL
Acting Secretary of the Treasury.
Matral Marold 2. Stark,
Chief of Namel Operations,
Havy Department,
Washington, D. a.
am
to
FILE COPY
By Messenger 315 3
Regraded Unclassified
36
August 4 1940.
bur Mr. Instruct
to
8 - sending you herevith, for your confidential use,
to copies of the fellowing reportet
Part I - Airplanes
Deliveries of and Nov Orders for Airplanes,
May 1 - July 27. 1940$ Unfilled Orders and
Notimated Deliveries on July 27. 1940.
Part II - Airplane Ingines
Deliveries of and New Orders for Airplane
Bagines, May 1 - July 27. 1940; Unfilled Orders
and Estimated Deliveries on July 27. 1940.
These tables carry forward through July 27. 1940 the
information furnished you last week.
Sincerely,
(Signed) D.W. BELL
Acting
Secretary of the Treasury.
Mr. William s. Kaudsen,
Chairman, Advisory Commission to the
Commeil of National Defense,
less 2262, Federal Reserve Building,
Vaskington, D. c.
awn
Am
FILE COPY
By Messenger 3'5
Regraded Unclassified
37
Impust 1, 1940.
Dear General Marshalls
I - sending you herevith, for your confidential use,
the following reportet
Part 1 - Airplanes
Deliveries of and New Orders for Airplanes,
May 1. July 27, 1940: Unfilled Orders and
Estimated Deliveries on July 27. 1940.
Part II - Airplane Engines
Deliveries of all New Orders for Airplane
Ingines, May 1- July 27. 1940s Unfilled
Orders and Notimated Deliveries on July 27. 1940.
These tables carry forward through July 27. 1940 the
information furnished you last week.
Sincerely,
(Signed) D. W.BELL
sens
Secretary of the Treasury.
General Courge c. Marshall,
thief of Staff,
Var Department,
Vachington, D. c.
for
FILE COPY
camber
By Messenger 315
Regraded Unclassified
38
In mply enter to Initials
and No.
NAVY DEPARTMENT
OFFICE OF THE CHIEF OF NAVAL OPERATIONS
WASHINGTON
1 August 1940
My dear Mr. Bell:
This will acknowledge receipt by
Admiral Stark of confidential reports, Part I -
Airplanes, and Part II - Airplane Engines,
which information carries through July 27, 1940.
Yours sincerely,
W.R. Smedberg VII,
Lieutenant U.S. Navy,
Aide to Admiral Stark.
Honorable D.W.Bell,
Acting Secretary of the Treasury,
Washington,D.C.
TC R MA $ DUA QUA ONE 018
TRUCATORE 30
201740
39
WAR DEPARTMENT
OFFICE OF THE CHIEF OF STAFF
WASHINGTON
August 1, 1940.
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D.C.
Dear Mr. Morgenthau:
Thank you very much for the following
reports, which you sent me this date:
Part I - Airplanes
Deliveries of and New Orders for Airplanes,
May 1 - July 27, 1940; Unfilled Orders and
Estimated Deliveries on July 27, 1940.
Part II - Airplane Engines
Deliveries of New Orders for Airplane
Engines, May 1 - July 27, 1940; Unfilled
Orders and Estimated Deliveries on July 27,
1940.
Faithfully yours,
Chief of Staff.
40
August 1, 1940
My dear Mr. Welles:
In the absence of Secretary
Morgenthau, who is away from Wash-
ington, I an scknowledging your
letter of July 29th together with
inclosures.
As soon as Mr. Morgenthau
is back at his desk, which I expect
will be on Monday, I shall bring
your letter to his immediate atten-
tion.
Yours sincerely,
(Signed) H. S. Klotz
H. S. Klots,
Private Secretary.
Honorable Summer Welles,
Under Secretary of State,
Washington, D.C.
41
August 1, 1940
My dear Mr. Welles:
In the absence of Secretary
Morgenthau, who is away from Wash-
ington, I am acknowledging your
letter of July 29th together with
inclosures.
As soon as Mr. Morgenthau
is back at his desk, which I expect
will be on Monday, I shall bring
your letter to his immediate atten-
tion.
Yours sincerely,
(Signed) H. S. Klotz
H. S. Klots,
Private Secretary.
Honorable Summer Welles,
Under Secretary of State,
Washington, D.C.
Regraded Unclassified
-
42
August 1, 1940
My dear Mr. Welles:
In the absence of Secretary
Morgenthau, who is away from Wash-
ington, I an acknowledging your
letter of July 29th together with
inclosures.
As soon as Mr. Morgenthau
is back at his desk, which I expect
will be on Monday, I shall bring
your letter to his immediate atten-
tion.
Yours sincerely,
(Signed) H. S. Kletz
H. S. Klots,
Private Secretary.
Honorable Summer Welles,
Under Secretary of State,
Washington, D.C.
Regraded classified
43
THE UNDER SECRETARY OF STATE
WASHINGTON
July 29, 1940.
PERSONAL AND CONFIDENTIAL
Dear Henry:
It seemed to me imperative after reading the memo-
randum you were good enough to hand me at the last Cabinet
meeting on July 26 to have an immediate and careful in-
vestigation made of the complaints listed in that memo-
randum with regard to the present administration of
export control.
The investigation which was then made has crystallized
into a further memorandum which I am enclosing herewith
for your information.
After your return to Washington, I shall be more than
happy personally to go into these questions with you.
Believe me
Yours
A very sincerely Nells
Enc.
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
44
DEPARTMENT OF STATE
DIVISION OF CONTROLS
MEMORANDUM
July 27, 1940.
The Acting Secretary:
There are submitted herewith, in compliance with
your request, comments on the attached Treasury memorandum
in regard to the effect of export control on British orders.
1. The machinery for the administration of the Export
Control Act 18, briefly, as follows.
Colonel Maxwell, the Administrator of Export Control,
determines the policies which are to govern the issuance
of export licenses. He determines these policies after
consulting an informal committee consisting of represen-
tatives of the Departments of State, Treasury, War, Navy,
and Commerce, and the Advisory Commission to the Council
of National Defense. This consultation is sometimes on-
tirely informal and sometimes at meetings of a committee
of representatives of the interested Departments. Mr. Grady,
Mr. Feis and I, in accordance with the Secretary's instruc-
tions, act as the representatives of the Department of
State in liaison with the Administrator. The Administrator,
recognizing
Regraded Unclassified
45
-2-
recognizing the paramount responsibility of the Secretary
of State in the conduct of foreign relations, has uni-
formly accorded full consideration to the views of the
Department on matters relating to foreign policy.
The issuance of licenses is a function of the Division
of Controls of the Department, which issues or declines to
issue licenses in accordance with the rules and regulations
and specific directives furnished by the Administrator after
the consultation mentioned above. The overwhelming majority
of licenses for articles and materials, other than machine
tools, are now being issued in accordance with general
rules and regulations. The consideration of applications
for licenses to export machine tools involves questions of
such a technical nature that these applications are referred
individually to the office of the Administrator who, after
consultation with the Army and Navy Munitions Board, in-
dicates in each case the action to be taken.
2. Applications for export licenses submitted by the
British Purchasing Commission have, since the Export Con-
trol Act became effective, been given preferential treat-
ment in accordance with my instructions. The result has
been
Regraded Unclassified
46
-3-
been that except in a few cases where decisions on technical
matters have been involved, these applications have been very
rapidly dealt with. A day or two after the system was estab-
lished, I called Mr. Ballantine, Washington representative
of the British Purchasing Commission, by telephone, told him
that we were anxious to cooperate with his organization in
every way, and invited him to bring to my personal notice any
cases which required particular attention. Until the receipt
this morning of the Treasury memorandum, the only intimation
that I have ever had that the British Purchasing Commission
was not entirely satisfied with the administration of the
Export Control Act was on July 16, when the Administrator
informed me that he had heard a rumor that someone had said
that members of the British Purchasing Commission were com-
plaining of delays in the issuance of licenses. He said that
he had made an investigation and had not been able to sub-
stantiate this rumor. On that same day, in the presence of
Mr. Price, of this Division, the Administrator asked Mr. Philip
Young, Assistant to the Secretary of the Treasury, whether he
had heard any complaints from the British Purchasing Commis-
sion. Mr. Young replied that he had heard rumors of such
complaints but that, having consulted representatives of
the Commission, he had been informed that they had no com-
plaints of any kind to make. On the contrary, they were fully
satisfied
47
satisfied with the treatment which they were receiving, In
order to make certain that no complaints were being made in
any responsible quarter, I called Mr. Ballantine, Washington
representative of the Commission, by telephone on July 17 and
asked him directly whether he was experiencing any difficulties
in obtaining export licenses. He replied emphatically in the
negative, stating that the Commission was obtaining the licenses
with all the rapidity which it could possibly expect. He took
occasion to thank me in very warm terms for the cooperation
which the Commission had received from the Department, and
to compliment me on the rapidity with which the complicated
administration had been set up. I also called Mr. Opie,
Second Secretary of the British Embassy, by telephone, told
him of the rumors which I had heard and asked him whether he
had ever heard any such complaints on the part of the British
Purchasing Commission. He replied that, on the contrary, he
had always heard the administration of the Export Control Act
spoken of most enthusiastically in British circles. He said
that he would, however, consult some of his colleagues in the
Embassy and also with members of the Commission itself and
call me later by telephone. When he called me back he re-
peated what he had said before and added that far from hav-
ing any grounds for complaints, the members of the Commission,
many of whom had had experience with the British export
licensing system, were astounded at the rapidity and efficiency
with
Regraded
18
-5-
with which our system of export licenses was functioning.
Upon receipt of the Treasury memorandum this morning, I called
Mr. Ballantine again by telephone, told him that I had once
more heard reports to the effect that the British Purchasing
Commission was dissatisfied with the administration of the
export license system. Mr. Ballantine expressed great aston-
ishment and reiterated that the Commission had received the
fullest cooperation and that the issuance of licenses was
being expedited far beyond what the Commission had considered
possible. He said that of course there had been some con-
fusion and some delays in shipments due to the sudden imposi-
tion of this control of exports, but that he considered that
confusion and those delays inevitable and that the situation
was being straightened out to his entire satisfaction. He
added that if he had ever had any cause for complaint he
would have communicated directly with me. Similar expressions
of opinion have been received from others connected with the
British Purchasing Commission. Complete satisfaction with the
administration of the export license system was expressed
this very day, of his own accord, by Captain Coventry, who
1s charged by the Commission with liaison with the Division
of Controls.
3. In regard to the specific cases of delay in the
issuance of export licenses alleged in the Treasury memorandum:
(a)
Regraded Unclassified
49
-6-
(a) No application for license has ever been received
from the Bohn Aluminum and Brass Company. Structural steel
is not in any case a. commodity for which an export license
1s required.
(b) Applications were received on July 12 and July 16
from the Michigan Seamless Tube Company for licenses to
export structural steel. In each case replies were dio-
tated within two days informing the company that licenses
were not required for the exportation of structural steel.
(o) Several applications were received from du Pont
for license to export cellulose acetate. These applica-
tions raised a technical question which was necessarily sub-
mitted to the Administrator. The Administrator's decision
was submitted to the Department without any delay and the
company was informed that cellulose acetate was not among
the materials for which an export license was required.
(d) No applications for export licenses have been
received from the Hills MoCanna Company. In any case, no
export license is required for castings unless they are
castings for specified types of arms and ammunition.
(e) Action has necessarily been delayed on the applica-
tion of the British Purchasing Commission for license to
export two Fairchild K8A camera operating units, because of
the
Regraded Unclassified
-50
-7-
the fact that these units appear to involve military secrets
of interest to the national defense. The question was imme-
diately referred to the War and Navy Departments for a deci-
sion in accordance with established procedure. An action
on the application for license will be taken as soon as the
decision of the War and Navy Departments 1s communicated to
this Department.
(f) It is presumed that the application submitted by
the British Purchasing Commission on July 14, which is
referred to in the memorandum in general terms was an ap-
plication for a license to export a machine tool. In several
instances, applications of this kind did not contain suf-
ficient technical information to enable the Army and Navy
Munitions Board to advise the Administrator as to whether
export licenses should be issued, and the Department in
those cases was obliged to request further information. The
British Purchasing Commission now having ascertained what
information is required in regard to the machine tools which
it desires to export 18 furnishing this information and thus
avoiding such delays as that referred to in this case.
In general, it may be stated that as the Export Control
Act was approved on July 2, and effective on July 5, both
the Administrator and the Department were faced with the
problem of setting up adequate administrative machinery
within
51
-8-
within a very few days and with the problem of endeavoring
to get this machinery to function while it was still in the
process of being set up. Inevitably, there was in the begin-
ning some delay in the issuance of licenses and articles and
materials subject to license which were already on the dock
or were en route to a port of exit were in many 08808 sub-
jected to delay in exportation while licenses were being
obtained. This delay was increased by the faot that the
Division was deluged with applications for licenses to export
articles for which no export license is required. Exporters
are gradually becoming familiar with the regulations and this
cause of delay 18 being rapidly eliminated. Exporters, in-
cluding the British Purchasing Commission, realized the situa-
tion with which the Administrator and the Department were
confronted and very few complaints were received. On the
contrary, both the Administrator and the Division of Controls
have encountered B. most reasonable and cooperative attitude
on the part of exporters and several exporters and important
organizatione of exporters have written to compliment us on
the efficiency with which the administration 16 functioning.
For example, the Aeronautical Chamber of Commerce of America,
Incorporated, on behalf of the manufacturers of airplanes and
seronautical equipment and accessories, wrote me a letter on
July 15, which contains the following paragraph!
"You and your Department certainly have reason
to be very proud of an organization which can demonstrate
such
Regraded Unclassified
52
-9-
such a remarkable ability to 80 fully rise to the
occasion under the stress of these emergency con-
ditions.
The administrative machinery 1s now functioning with
reasonable efficiency and with the fullest cooperation be-
tween the office of the Administrator and the Division of
Controls. Nevertheless, both the Administrator and the
Division of Controls recognize that improvements in the
administration can be made and they are being instituted
as rapidly as possible. The statement in the Treasury
memorandum that there 1s an average delay of from 10 to
12 days between the submission of an application and the
receipt of an export license was an exaggeration even at
the beginning of the month. At this date it is an entirely
unwarranted statement. Except in a few isolated cases in
which technical questions are involved, licenses are being
issued within a week or less than a week from the date of
the receipt of the application, and the Department is issu-
ing approximately 700 export licenses per day. The applica-
tions of the British Purchasing Commission which receive
preferential treatment are being acted upon more rapidly
than those of other exporters.
4. The Treasury memorandum contains a statement
which
Regraded Unclassified
53
-10-
which gives the impression that licenses are refused to
authorize the exportation of machine tools to Great Britain.
As a matter of fact, among the many hundred applications
received for license to export machine tools to Great
Britain, only four have been rejected. These were rejected
after the administrator, on the advice of the Army and Navy
Munitions Board, had determined that the particular tools
in question were needed to carry out our national defense
program.
5. When the Export Control Act became effective, the
Administrator, on the advice of the War and Navy Depart-
ments and the Advisory Commission to the Council of National
Defense, furnished me with rather rigorous directives which
required the Department to decline to issue a relatively
large proportion of the licenses applied for. Subsequent
directives have gradually relaxed the control of exports 80
that licenses are now being issued which were not issuable
a few weeks ago. For example, the Administrator has now
directed no to issue all licenses applied for to authorize
the exportation to Canada of any of the articles or mater-
ials, except machine tools, subject to export control.
The Administrator examines each individual application for
license
54
-11-
license to export machine tools and, in specific cases,
when the tools which it is proposed to export are essential
for the carrying out of our defense program, he directs that
licenses be not issued.
If the British Government is in fact confronted by any
difficulty as & result of our refusal to issue export licenses,
it would seem that these difficulties should be brought to
our attention by the British Ambassador. I venture to sug-
gest that he might well be invited to bring such difficulties
to our attention if they really exist. Any questions raised
by him would be submitted to the Administrator with & request
that I be furnished with directives which would put an end
to the difficulties. The Administrator has always heretofore
complied with such requests.
6. It is not perceived that there is any validity to
the objection set forth in the Treasury memorandum that the
British Purchasing Commission is now obliged to obtain export
licenses before entering into contracts for the purchase of
machine tools. American companies have been advised by the
Advisory Commission to the Council of National Defense not
to enter into contracts to export machine tools until export
licenses
55
-12-
licenses had been obtained. This advice was given with the
knowledge and approval of the Administrator. Its object
was to prevent and not to create delays in exportation and
to obviate for both the American manufacturer and the British
Purchasing Commission the difficulties which would arise if
machine tools were contracted for, manufactured and perhaps
ready for shipment before it was ascertained whether they
could be exported.
7. In view of the facts set forth above, the Adminis-
trator, whom I have consulted in regard to this matter, and
I are entirely at a loss to understand what legitimate basis
there can be for the complaints set forth in the Treasury
memorandum.
Joseph 0. Green
Co:JCG:LCR:EJF
Phil young 56
August 1, 1940
CONFIDENTIAL
My dear General Miles:
In the absence of the Secretary who is
away from Washington, I am acknowledging your
letter of July 31st inclosing two cablegrams
which you received from the Military Attache in
London in regard to the procurement of war ma-
teriel.
As soon as Mr. Morgenthau is back at
his desk, which I expect will be on Monday, I
shall bring these cables to his immediate attention.
Yours sincerely,
(Signed) H. S. Klotz
H. S. Klots,
Private Secretary.
Brigadier General Sherman Miles,
Acting Assistant Chief of Staff,
War Department,
Washington, D.C.
57
August 1, 1940
CONFIDENTIAL
My dear General Miles:
In the absence of the Secretary who is
away from Washington, I an acknowledging your
letter of July 81st inclosing two cablegrams
which you received from the Military Attache in
London in regard to the procurement of war na-
teriel.
As soon as Mr. Morgenthau is back at
his desk, which I expect will be on Monday, I
shall bring these cables to his immediate attention.
Yours sincerely,
(Signed) H. S. Klotz
H. S. Klots,
Private Secretary.
Brigadier General Sherman Miles,
Acting Assistant Chief of Staff,
War Department,
Washington, D.C.
58
August 1, 1940
CONFIDENTIAL
My dear General Miles:
In the absence of the Secretary who is
away from Washington, I an acknowledging your
letter of July 31st inclosing two cablegrams
which you received from the Military Attache in
London in regard to the procurement of war na-
teriel.
As soon as Mr. Morgenthau is back at
his desk, which I expect will be on Monday, I
shall bring these cables to his immediate attention.
Yours sincerely,
(Signed) H. S. Klotz
H. S. Klots,
Private Secretary.
Brigadier General Sherman Miles,
Acting Assistent Chief of Staff,
War Department,
Washington, D.C.
CONFIDENTIAL
59
WAR DEPARTMENT
WAR DEPARTMENT GENERAL STAFF
MILITARY INTELLIGENCE DIVISION, G-1
G-2/2574-1544
WASHINGTON, D.C.
July 31, 1940
The Honorable,
The Secretary of the Treasury.
Dear Mr. Secretary:
For your information, I am inclosing copies of two
paraphrased cablegrams from the Military Attache, American
Embassy, London, bearing on the procurement of war materiel.
Very sincerely yours,
Зилшан SHERMAN MILES,
Wiles
Brigadier General, U.S. Army,
Acting Assistant Chief of Staff, G-2.
Inclosures
CONFIDENTIAL
60
0-2/2574-1544
July 31, 1940
The Honorable,
The Secretary of the Treasury.
Dear Mr. Secretary:
For your information, I an inclosing copies of two
paraphrased cablegrams from the Military Attache, American
Embassy, London, bearing on the procurement of war materiel.
Very sincerely yours,
SHERMAN MILES,
Brigadier General, U. S. Army,
Acting Assistant Chief of Staff, G-2.
Inclosures
CONFIDENTIAL
Regraded Unclassified
RESTRICTED
61
of total
Received at the Mr Department
at 10:07 m, they so, 1949
Landon, filed 12:45 P.M.
2a a interview with last Mixister of -
smith Froduction, Major studier - tald the followings
2 She Waited States - should not ruh production
of a the aireraft - too replAty.
2. the Brittsh will funds at - emplete number-
I # 8 as I 1 1 I I
if - the welght is - 1000 younie.
& the Dritish manustering the has hom ordersit
to build - Mark # - for the U.S. - the yotes
amot be now determined.
I a I M a in 8 s a I
is Fritein, s project is still under way w reach a -
1988, 1 n I costs r I n to $ 1 4
& land personally your the - mill-
for miss - to the - - stating that If no
a r 1 I 1 I $ 2 I
I s # I a 1
a. Mir Gdelt Marchall Indian comming the Their
- criticizes alreadly the yesess Spitfire
RESTRICTED
Regraded Inclassified
62
RESTRICTED
with the 20-m - a theree grownist (a) such plans
curries only two - (b) - lesses are limited W
the w rounds of ammitten your - and (e) meating -
on their sides (rather than vertically) - difficulty.
v. Fature Harricans and Spitfire fighters will each
be armed with four 20-m - mounted belig -
8. the belt feed for this - is still under
developments but W are propered to give the United States
full details M - M they - determined."
I desire to know whether or not I should ask for this
nonfacturing data. If so, what previsions should be mate for
payment?
Ky resemuendation, which is consurved. in w n Alr and and
- officers, is that the United States Any should not comit itesif
to a MY program at the expense of the .80 caliber machine - years
until the exporience with both types of weapons to swailshie.
% date this experience is very limited.
LM
RESTRICTED
. 2 -
Regraded Unclassified
S3
CONFIDENTIAL
Paraphrase of Code Rediegrem Received at the
War Department 2:30 P.M., July 30, 1940
London, July 30
Engine from German airplane secured for the Chief of
the Air Corps will be shipped about August 1, 1940, on the BS
SAMARIA, consigned to the Army Supply Base, Breaklyn.
IEE
CONFIDENTIAL
COPY
64
August 1, 1940
Through the Bureau of the Budget
My dear Mr. President:
There are enclosed herewith separate requests of the
Secretary of Agriculture and the Secretary of the Treasury
for initial allotments under Section 40 of the Emergency
Relief Appropriation Act, fiscal year 1941, Public Resolu-
tion No. 88, 76th Congress, approved June 26, 1940, to en-
able them and The American Red Cross to carry out the
functions under this Act vested in them by their being
designated as the agencies to perform such functions by
Executive Order No. 8495, dated July 26, 1940.
There is also enclosed & letter from The American Red
Cross to the Secretary of the Treasury in connection with
the anticipated requirements of The American Red Cross for
expenses of distribution other than administrative expenses.
The amount requested to be allotted to the Secretary
of Agriculture for the purchase of agricultural supplies is
$5,000,000 of which not to exceed $50,000 is to be available
for administrative expenses and to the Secretary of the
Treasury for the purchase of other supplies is $2,000,000
of which not to exceed $20,000 is to be available for
administrative expenses with an additional amount of
$1,000,000 for payment of the expenses of The American Red
65
- 2 -
Cross, other than administrative expenses.
The amounts suggested in these requests are based
upon estimates made by The American Red Cross as stated
in the accompanying letter of The American Red Cross to
the Secretary of the Treasury.
The rapidity with which the supplies can be pur-
chased, transported, and distributed in accordance with
the provisions of the Act will depend upon the following
factors:
(1) The availability of shipping facilities which
can be employed for the transportation of such
supplies.
(2) Assurance that such relief supplies will be
permitted to pass through the blockades
established by the belligerent nations.
(3) The ability of the distributing agency to
secure adequate agreements and understand-
ings which will insure the protection and
satisfactory distribution of the supplies
in the nations or areas to which relief is
to be directed.
However, in our opinion it should be possible to work
out the necessary arrangements for the transportation of
the commodities to the areas in which there are refugees
66
- 3 -
who have been driven from their homes or otherwise render ed
destitute by hostilities or invasion. It is proposed,
therefore, to proceed with the purchase of some supplies
immediately in order to have them available when such
arrangements are completed.
It is expected that the purchase will be made largely
from the following list of commodities and products.
FOOD
Milk (Evaporated & Dry)
Flour
Fats - 011s - Lard
Sugar - Syrups
Meat Products (Pork)
Dried Fruit
Rice
Oatmeal and other cereals
Dry Beans
Fruit and vegetable
Cornmeal
concentrates
CLOTHING
Outer and under garments and shoes for men, women, children
and infants and/or materials for the production of the same,
Medical and Hospital Supplies.
Sanitary Supplies: such as, Soap, Disinfectants, etc.
Bedding: such as, Cotton and Wool Blankets, Ticking or Bed
Sacks, Unbleached Muslin.
Equipment for Emergency Care and Feeding of Refugees: such
as cots, toweling, cooking utensils and equipment.
67
- 4 -
It is respectfully recommended that allotments be
made in accordance with the enclosed requests.
Faithfully yours,
Chester Davis,
National Defense Advisory Commission.
Henry A. Wallace,
Secretary of Agriculture.
(Signed) D. W. Bell
D. W. Bell,
Acting Secretary of the Treasury.
The President,
The White House.
COPY
5#
Issued By The Intelligence Division
Office of Chief of Naval Operations
Navy Department
INTELLIGENCE REPORT
Serial
3
Monograph Index Guide No. 105
From F-3 (ONI)
at
Date 2 August, 1940
Reference Comdt. 10th ND Conf. ltr. ND10/A8-2/(C-26) of 22 July, 1940
Source Mr. D. A./Draughon, Federal Marshal in Evaluation reliable
San Juan
Subject FRANCE
COLONIES
MARTINIQUE - Neval Situation - Political Conditions -
Economic Conditions.
The following information on Martinique is furnished by
Mr. Donald A. DRAUGHON, who, with Mr. R. B. MILLER of the F.B.I.
arrived Fort de France on 11 July and remained there until the
18th:
PART I - Naval Situation.
We made a twenty-minute stop at Guadeloupe both coming
and going. The airport manager informed me that the food supply
in Guadeloupe is dangerously low and that the food shortage
has been aggravated by the arrivel of the French training ship
JEANNE D'ARC with her complement of 700 men. This ship arrived
from Martinique on July 3rd. There are three other vessels in
port; one banana ship enchored at the wherf with no steam, one
empty cargo ship in midstream with no steam, and one cargo ship
apparently heavily laden with sugar and rum. This ship had
steam up. All three ships were flying the French fiag.
Upon our arrival in Martinique we learned that heavy
military and naval censorship was in force, and that we could
send no code messages without the Governor's approval. This,
however, was arranged through the good offices of Admiral
Robert, the High Commissioner. The authorities know about our
trip because the French Consul at San Juan had communicated by
cable with Martinique and the Embassy in Washington concerning
8 visa for Mr. Miller.
The harbor at Fort-de-France is closed to all traffic be-
tween the hours of five P.M. and seven A.M. The Pan American
plane approaching the harbor must enter from due south and at
Regraded Unclassified
. 2 -
59
an altitude of one hundred meters. The French cruiser EMILE
BEATIN is docked at the wharf of Cie, Atlantique. This is the
cruiser that brought over the gold from France as I reported on
June 28th. (To digress, the gold 1s now at an old fort near
Fort-de-France and the consensus of opinion among local bankers
1s that it will remain there indefinitely). The EMILE BERTIN
is reported to have been in the battle of Narvik and shows the
effect of damages. She is also reported to have assisted in
the evacuation of British troops from Dunkirk. This ship is
freshly painted and has steam up. The crew, whom we could see
leaning over the deck rails, seemed to be in good spirits.
The EMILE BERTIN is berthed behind a mined submarine net
extending a distance of about a hundred feet from the tip of
the wharf to the stern of the SS DUC ADMIRAL, B passenger ship
tied up to the wharf on the other side. I saw an officer and
several members of the crew in a small boat examining the mine
attached to the net. It is significant that all the guns on the
EMILE BERTIN which point out to sea are stripped and ready for
action; those pointing shorewards are covered and plugged.
This is true of the guns of the three converted auxiliary
cruisers (with 3-inch guns) QUERCY, ESTEREL (that recently
returned the French troops from Aruba and returning soldiers
report no remaining soldiers in Aruba) and BARFLEUR. One of
these vessels is constantly on duty in B sheltered arm of the
outer harbor which 18 practically invisible from the entrance
to the harbor. The patrol boats LAMENTIN, TROISILET and
BALATE with one-inch guns mounted fore and aft, are constantly
patrolling the entrance to the harbor. The airplane carrier
BIARN WBS anchored in Lamentin Bay upon our arrival but was
brought into the inner harbor Tuesday to discharge her planes.
These planes are the Curtiss 751C-CTECD with one propeller of
three blades each. The serial numbers on the planes discharged
were from 56 to 96. The planes are being discharged near the
dock where the EMILE BERTIN is tied up. There is 8 heavy guard
around them but I approached close enough to note the numbers.
I counted about forty-eight on the upper deck of the BEARN when
I was in Martinique on June 27th, and this morning, July the
18th, there were approximately twenty odd planes still on the
upper deck. The planes are being removed to land in lighters.
The reason for this is that this is the hurricane season and
the planes are being brought ashore to protect them in the
event of B hurricane. However, other reports are that this is
being done at the insistence of the British. There were twelve
to fourteen fliers on the BEARN but they departed some days ago
on the British cruiser DUNDEEN.
3
There are five French seaplanes based at Fort-de-France,
each carrying two bombs end B machine gun, which make regular
patrol flights beginning at six A.M. each morning.
A neval unit said to be the U. S. DESTROYER 195 was seen
at a distance off Fort-de-France Tuesday morning, causing some
excitement and consternation among the civil population.
From authoritative and checked sources we learned that a
e ntract had been given to a Mr. Sari, Italian by birth, and
4 French citizen, to build a landing field six miles south of
Fort-de-France.
A French passenger ship, S/S CUBA, which left Bordeaux
on June 15th, WBS sighted off Fort-de-France at 6 A.M. on Satur-
day, July 13th. A French plane and an suxiliary cruiser accom-
penied the ship into the harbor. We watched the arrival of
the ship and the zig-zag course she took upon entering the har-
bor led me to think it might be mined at certain points. The
CUBA carried as passengers about 400 Loyalists (Spanish),
refugees in France, and one hundred odd German, Czech and
Austrien refugees. Twelve French passengers disembarked at
Fort-de-France and the others were transferred to the S/S
SAINTE DOMINGUE which had been tied up et Fort-de-France and
sailed the following Wednesday at 8 P.M., presumably for
Mexico. It is said that the CUBA will sail from Martinique
with French reservists when a favorable occasion presents 1t-
self.
Mertinique nes the following communications with the out-
side world; one receiving wireless station located behind the
P.A.A. dock, one sending station for ships and a Government
sending station, one shore wave commercial broadcasting sta-
tion. The French cable to Europe is via London or to Madrid
via Buenos Aires. Communication with the United States is via
French cable to St. Thomas and Puerto Rico.
PART II - Report on Political Conditions.
The internal situation in Martinique may shortly be
serious. There are foodstuffs on hand to C ntinue normal food
supplies for from about five to six weeks but there will be no
actual starvation for several months. Very little food is pro-
duced on the island. All staples are imported from France.
It is the universal opinion among the whites that a serious
food shortage would be productive of riots. The Government is
doing its best to carry on public works projects in order to
provide work and quiet uneasiness and unrest.
Regraded Unclassified
The population of Martinique 1s 250,000; 3,000 white,
20,000 mulattos and the rest black. The masses are controlled
by black political leaders who, in turn, are controlled by the
whites. The black leaders are becoming increasingly difficult
to handle and are continually demanding greater concessions in
the form of higher wages, shorter hours and better treatment
from the whites.
There are three social classes; white, mulatto and black,
but as far as property is concerned, a few white families,
closely intermarried, control everything. The Government non-
sists of 8 High Commissioner for all of the French West Indies;
a Governor, Treasurer, Director of Public Works who are all
appointed directly from France and are all French whites, The
policy making officials are all whites but there are many black
clerks and other Government employees who have received their
education in France at the expense of the Martinique Government.
There is & degree of local self-government in the Municipal
Council.
The situation now, politically BS well as economically,
is very tense and chaotic.
Admiral Robert, the High Commissioner, with supreme authority
over Guadeloupe, Martinique and French Guiana, asked us to call
on Monday, July 13th. He is not, as was reported in some
sources, in charge of the combined English and French West Indies
fleet. He offered us every facility during our stay in Martinique.
Re said that there W&S no English blockade of Martinique as
evidenced by the arrival of the SS CUBA and one or two American
cargo ships. Be did state that British cruisers were nearby
and no doubt would try to prevent any French navel unit from
leaving. His relations with the British Admiral at Bermuda
were most cordial he told us. Upon his request the British
cruiser FIJI remained twenty miles off shore on Thursday July
11th, after signalling their intention to engage in target
practice. The Admiral is apparently pro-British and hope for
an amicable settlement between the two countries. In his
opinion one of the most pressing problems confronting Martinique
is a solution to the problem of exchange in order that there
may be a free flow of trade between the United States and the
French West Indies. All commerce is now at & standstill.
The Governor, Mons. Henri Brossellers, who reached
Martinique about four months ago, took another view of the
situation. He is definitely anti-British and vehemently de-
nounced the British support of Blum and his Popular Front
Government which, he says, was responsible for the defest of
France. He thought that the recognition of the Petsin Government
Regraded Unclassified
- 5 -
72
WAR the only recourse open to Frenchmen. According to him,
British officers at Dunkirk forced French soldiers to remain
benind while British were being evacuated. He predicts a
German invasion of England and the total defeat of the British
unless they accept German peace terms. Be visualizes a conti-
nental block to effect trade pacts with a Pan American trade
block and expressed the hope that the United States would make
a trade agreement with the French West Indies.
Monsleur Andre Garcin, President of the Bank Credit
Martiniqueis, does not believe in the stability of the Petsin
Government. He prefers to remain French but realizes any French
Government at the present time would be dominated by the Reich.
de thinks that an American protectorate is the best solution
for the time being. Assets of Martinique citizens in banks at
Trinidad and Santa Lucia B.W.I., are frozen.
Mr. Miller and I talked with a number of my good friends
and scquaintances in Martinique including M. E. Aubery, indus-
trialist and reputed the wealthiest man in Martinique; Leon
Hayot, industrialist; Andre Dorn, sugar factory manager; Robert
de Jaham, engineer; Ronce Cottrell, ship agent; M. Latil,
Manager of French Cable; Chief of Police Capt. de Jaham of
Martinique Colonial Army; R, A. de Schusten, former American
Vice-Consul; Leon and Victor Albert; merchants and others.
The consensus of opinion seemed to be that, although they would
prefer remaining French if possible, they would welcome an
American protectorate, at least temporarily, and they do not
look with favor upon the present constituted French Government.
There is 8. small Martinique colonial army consisting of
about 1800 native soldiers and 150 white non-commissioned and
commissioned officers. Most of these soldiers are equipped
with rifles and bayonets. There are about 150 gendarmes,
mostly write, scattered throughout the Island. The police of
Fort-de-France are captained by 8 man who claims to have
American citizenship papers, M. Ancelle. He lived for some
time in the Canal Zone.
PART III - Economic Condition of Martinique.
Ever since the Armistice between France and the Reich the
French West Indies have been isolated from their capital.
Some Vartiniquais think this isolation is only temporary and
that economic adjustment in France will soon begin. Others,
and these are far more numerous, consider the present situation
hopeless and would welcome any solution of the dilemma in which
they find themselves.
Regraded Unclassified
73
- 6 -
D₁ to now, this island of 987 sq. kilometers, supporting
&
population of about 250,000 has llved under the liberal
French Economic regime, which protects French products sold in
the colonies BS well as coloniel products sold in France.
This makes for high prices because in addition to the duty,
freight rates ere high between France and the colonies. The
prosperity of the Island is due to the very high subsidy granted
on Island products, of which sugar, rum and benanas constitute
more than 90% of the exports.
France has up to the present absorbed all the products of
Martinique and furnished by far the greeter part of the imports
which consist largely of wheat flour, salt fish, rice, corn,
coffee and table oils. For this resson Martinique has not had
to look for any market in the Western Hemisphere, High customs
duties against products of the French colonies on the part of
Latin American countries have constituted an additional barrier
to trade.
The everage value of imports for the last eleven years was
199,000,000 francs snnually and the average exports during this
same period smounted to 221,000,000 annually. The principal
imports are:-
Wheat flour
-
8,000 sacks monthly
Rice
-
2,000
"
BY
Beans
600
"
If
Salt Fish
1
-
1,000 barrels.
011 (table)
-
750
"
Gasoline
-
500,000 litres
Beeves (butchered)
500 head
Soap
60 tons.
Mertinique exports annually 61,000,000 litres of rum,
1,500,000 boxes of pineapple preserves, end 30,000 tons of
bananas. Small quantities of cured hides, cacso and chocolate
are also exported.
The principal crop is sugar, averaging 55,000 long tons
annually with an approximate valuation of 200,000,000 francs.
The estimated production cost is 210 fr. per 220 lb. bag c.i.f.
New York. The growing season lasts about three months end all
the sugar and rum is sent directly to France, where 1t produces
sufficient income to cover imports until the next crop. The
crop ended the latter part of May this year and the entire
crop had been sold and shipped to France, but no payment has
been received as the funds are frozen in France.
Regraded Unclassified
74
- 7 -
It can be readily seen, therefore, that the situation in
Martinique is desperate, and that unless some provision can
be made whereby the French West Indies can dispose of their
products and buy the necessary goods in the Western Hemisphere,
the people will soon be in dire distress. It is hoped that a
plan can be worked out to permit commercial agreements between
Martinique and the American countries.
Business men feel that there should be a resumption of
consular relations between the United States and Martinique.
In order for a French Citizen to obtain a visa to visit the
United States he must go to Trinidad, and with the present
strained relations between England and France, they are unwill-
ing to do this.
PREPARED BY
T. E. Chandler,
Comdr., U. S. Navy.
75
To:
The Office of Naval Intelligence - ROOM 1715
Please C omplete and return
Navy Dept.
RECEIPT OF F-3 (ONI)
receipt when reference
report is received to
Report No 3 of 2 Aug. 1940. is acknowledged by
ROOM 1713
Date
For Bureau of Treasury Dept.
NAVY DEPARTMENT
PENALTY FOR PRIVATE USE TO AVOID
OFFICE OF CHIEF OF NAVAL OPERATIONS
PAYMENT OF POSTAGE, $300
WASHINGTON, D. C.
X
OFFICIAL BUSINESS
CONFIDENTIAL
Opened in Surety
Bonds Section
CONFIDENTIAL
CONFIDENTIAL
SECRETARY'S CORRESPONDENCE
RECE
10:30
(he NOA DETACH-The chip is a part of permanent No -
N.
-
NO
ROUTING SLIP
NAVAL INTELLIGENCE
OFFICE OF CHIEF OF NAVAL OPERATIONS
NAVY DEPARTMENT
patifict Lectinique - report m.
7-3 (VIII) Serial No 3 of 2 Aug.
1940
Date
8 August 1940, File No.
TYAYS NO
Room
FROM DIRECTOR
No.
To
Seretary of the Navy
2046
Assistant Secretary of the Navy
2034
Ant. Serretary of Nav (Navy Yard Div.)
2030
Chief. Noval Operations
2054
Assistant Chief, NEVER Operations
2056
Contral Division
2058
Technical Assistant
2616
Communications
2621
First Training
2803
Inspections
3621
Flest Maintenance
2610
Naval Districts
2065
Stupe' Movements
2601
WAT Plans
2064
Deveral Board
2748
Officer.
2002
>
isotics
2084
Dive EL
2003
Engineering
2014
Bystragraphic
1027
D.A. G,
2524
Marine Curps
3038
M.A.S.
1078
Navigation
3052
Onlinance
3149
R.A.A
1001
K&D
2022
Aeronautical Board
3638
TREASURY DEPARTMENT
X
CHECK ACTION
Information and return O.K.I. Room
&
Retain
Note unitial, and pass to next
For comment and return
Necessary setton or reply
Cognisance activity checked
Information on which to base reply
Regraded Unclassified
ISSUED BY THE INTELLIGENCE DIVISION
OFFICE OF CHIEF OF NAVAL OPERATIONS
NAVY DEPARTMENT
INTERNAL
INTELLIGENCE REPORT
Serial 3
Monograph Itulex Guide No. 105
HW) - wine - 1-4h, 3-40)
(To computed with SUBJECT native - o, N. ID
Make Humi for - main
From 1-3 (ONI)
of
Date 2 August
- - me. realise, - pressure
1940
Reference Coalt. 10th ID Conf. ltr. of 22 July 1940
- related export, was y acplinable)
Source Mr. D, As Drauchen, Federal Versical in
Evaluation reliable
(As directed, 1 prantimida, press. with identify
mL
Subject
FRANCE
COLORIES
(Nation reported will
CMain title M part index guide)
(Onficition
Male importe report bir - vitle?
Date anter mental muntary of report, containing infortance instade important best, - -
MARTINIQUE - Naval dituation - Political Conditions -
Conditions.
The following information on Markinique Le furnished by a. Denald 4.
Ce de the the Arms by chetred and emples Jain Signature address Suim. whis justinal and tis regal. projecting - - America
If propers - Dir
DRAUGHON, who, with No. Re B. SILLER of the F.B.I. arrive: Fort do France -
11 July and realined there until the 19th.
PART I - lovel Situation.
file mde I stop at Oundeleups both coming and going.
The airport manager informed - that the food supply in Owndelsups is
dangerously low and that the food shortage has been agreement by the
arrival of the French training ship JEANS D'ARD with her complement of 700
sen. This ship arrived free Martinique on July 3rd. There are three other
vessels in parts coe beings ship undiored at the sharf with as stom, one
empty cargo ship in with no stam, and one eary,o ship apparently
hoavily laden with sugar and This ship had stemp up. All time ships
wird flying the Freich Place
Upon our arrival La Martinique w learned that heavy allitary end
nevel omeratip was in force, and that TO could and as code - with
out the Governie's approval. This, however, - arranged through the good
offices of Adminal Robert, the High Comminsioner. The authorities me
about our trip because the French Geneul at Dan June had comminicated by
cable with Martinique and the in makington conserning a visa for
Mr. Viller,
The harbor at Fort-de-Prance is closed to all traffic between the hours
repirts times case Furginal and retained of number
of five l'allo and - Aglio The Pan American plane appreaching the harber
must enter from due south and at an altitudo of one hundred maters. The
French cruiser DALE BIRTH is decked at the warf of Cia, Atlantique. This
Le the erulser that brought over the gold free France M 1 reported -
June 20th. (To digrees, the gold is new at an old fort near Port-do-Trance
and the - of opinion - local bankers Le that 14 will remin there
indefinitely). The mills SOUTIN is reported to have been in the battle of
Harvik and shows the affect of damages. The is also reported to have assisted
in the evacuation of Drittish troops from Dunkirk. This ship is freshly painted
Distribution By Originator
Rowing the below - - in 0, N.I. Trave on - une HE under viluen so the the to which this perticular wgs if this repurt
las term milled by information, Int forther musing. (R for retention Indicate by check §/1 - this - 15a complete distribution of ntior explan et this repairt.
Tv)
show renting cel provided la 9 the - blank
A-B-C-0-E-F-X-2
G-H
06-16-1
r
GarT
Sex: No.
or
Artivities
War
Sudget
pub
Resert
of.
Callege
M.I.D.
N.O.
lemits.
New.
OnL
1.a D.
CAR
Beg.
5.6.L
M.S.S.
E.S.M.C.
cac
Com.
Com.
Circ
3
Cey
0.5.
So. Fm.
A.F.
form.
P.A.T.U.
Ge
Da-12
Dj.-13
Op-11
Op-20
Oq.-21
a
06-00
a.s.
Masiline
-
Care
Civil
Comdr. lot Brigade,
less
let Ear.For.,
1
lush
quantico, Yes
Regraded Unclassified
1-) (cmr) Sorial 110. 3
2 August 1940
File No: 100
Regraded Unclassified
and les stem up. The are, whom - could Be leasting over the desk rails,
assued to be in good spirits.
The SMILE ACTIN is berthed behind & alnet withourine net extending .
distance of about e hundred feet from the tip of the sharf to the stem of
the 20 DUG ADMIRAL, a passenger ship tied up to the wart on the other side.
I BIP an officer and several members of the orm in a mill bast examining the
doe sitached to the not. It Le significant that all the Dune on the nou
SCHOOLY which point out to see are stripped and ready for nation; those
politing shorowards are covered and plugged.
This is true of the pm of the three converted autiliary stuteers (with
3-1nch guns) QUENST, ESTERIL (that recently returned the French troops from
Aruba and returning soldiers report no remining soldiors in Aruba) and
EARFLITUR. One of these vessels is constantly on duty in a sholtered are of
the outer larber which to practically invisible from the entrance to the harber.
The patrol boats LAMBRIN, TROISILET and BALATE with one-inch give mounted fore
and art, are constantly patrolling the entrance to the harber. The airplane
carrier BEARN vius andhored in Lamentin Day upon our arrival but was brought into
the Laner harber Tuesday to discharge her planes. These planes are the Curtime
7520-CTRUD with one propaller of three blades cash. The serial numbers on the
planos discharged cere from 56 to 96. The planes are beding discharged near the
dock where the USIS BERTIN 10 tied up. There is a heavy pard around them but
I approached close enough to note the numbers. I counted about forty-sight en
the upper dock of the BEARN when I we in Martinique on June 27th, and this
corning, July the 13th, there word approximately twenty odd planes still on
the upper deak. The planse are being resoved to land in lighters. The Page
for this le that this is the hurricane - and the planes are being brought
schore to protect then in the evert of a hurricans. However, other reports are
Use this is being done at the insistance of the British. There ware twolve
to fourteen fliers on the BEARN but they departed BOMO days age on the British
arulser
There are five French seaplanes based at Port-do-Prance, each earrying two
beahe and a machine an, which unite regular patrol flights beginning at de
much norning.
& navel unit and to be the U. 3. DESTROYER 195 was Boan et a distance off
Fort-de-France Tuesday corning, causing nose excitement and constermation amon;
the civil population.
From authoritative and checked sources we learned that a contract had been
given to n. Mr. Sarl, Italian by birth, and a French citizen, to build & landing
field six adlas south of Part=de=France,
1. French passenger ship, 5/3 CUBA, which left Bardenux on June 1/th, was
aldrind off Fort-do-7runce at 6 halls an Saturday, July 13th. A French plane and
5 auxillary cruiser accompanied the ship into the lazbor, We the arrival
of Lice ship and the sig-mi course the took upon entering the harber led - to
whe it wight be and at ourlain points. The CUBA curried as passengers about
400 Loyalists (Spanish) ,refugeon in Tranos, and one hundred odd German, Caedh
ICE Austrian refuges. Twolve French pursongare disembarked at Fort-do-France
not the others ware transferred to the B/S SAINTE DONINGUE which had been tiel
Ley at /ort-de-Prance and miled the following Wednesday et 8 Palley presumbly
for Marleo. It is mid that the CUBA will mil from Partinique with Franch
reservists when . favorable occusion presents itself.
- 2 -
CONFIDENTIAL
CONFIDEN.
F-3(ONI) Serial No. 3
2 August 1940
File No: 105
Vartinique has the following communications with the outside worlds
sox receiving wireless station located behind the dook, - sending
station for shipe and - Government sending station, one shore were comurcial
broadoasting station. The French cable to Purope is via Landon or to Madrid
via Buendos Aires. Communication with the United States is via French cable
to 5% Thomas and Puerte Rico.
PAST II - Report an Political Conditions.
The internal situation in Markinique my shortly be serious, There are
feodstuffs on land to continue normal food supplies for from about five to
six vesks but there will be no actual starvation for several months. Very
little food is produced on the island. All staples are imported from France.
It is the universed opinion emong the whites that n. serious food shortage would
X productive of riots. The Doverment is deing its best to carry on public
verts projects in order to provide work and quiet uneastries and unrest.
The population of Markinique is 250,000; 3,000 white, 20,000 mulattes
and the rest black. The IMPROS are contralled Seg black pelitical lenders who,
in turn, are controlled by the whites. The black leaders are becoming
increasingly difficult to handle and are continually desanding greater
sions in the form of higher wages, shorter hours and better treatment from the
whites.
There are three social classess white, milatte and black, but as far as
property is concerned, a few white families, closaly intermarried, control
everything. The Government consists of a Righ Commissioner for all of the
French Test Indies: a Government Treasurer, Director of Public Yorks who are all
appointed directly from Prence and are all French shites. The policy mking
officials are all whites but there are may black clarks and other Government
employees who have received their education in France at the expense of the
Martinique Government. There is a degree of local self-government in the
Municipal Council.
The situation - politically as well us commonically, is very tenno
end chaotic.
Admiral Robert, the High Consissioner, with suprese authority over Guadeloups,
Martinique and Trunch Outsom, asked us to all en Honday, July 13th. He is not,
as MLS reported in - sources, in charge of the contined English and French
Test Indies flest, Re offered - every facility during our stay in Martinique.
He mid that there was no English blockade of Martinique as meldenand by the
arrival of the B3 CUBA and one of to American cargo ships. He 414 state that
British eruisers were nearby and no doubt would try to prevent any French reval
unit from leaving. His relations with the British Matral at Banada were sest
contial he told us. Upon his request the British cruiser FLJI remined twenty
alles off abore on Thursday July 11th, after signaling thair intention to enjuge
in target practice. The Admiral is apparently pro-Dritish and hope. for -
unicable settlement between the too countries. In his opinion one of the wast
pressing problems confronting Martinique is a solution to the problem of
exchange in order that there may be e free flow of trade between the United
States and the Trensh Tost Indies. All observer 10 now at a standstill.
CONFIDENTIAL
3
Regraded Unclassified
CONFIDENTE
7-3(0NI) Serial 100m 3
2 August 1940
File Nov 105
Regraded Unclassified
The Governor, House Heart who reached Hartinique about
four months ago, took another view of the situation. He is definitely anti-
British and vahemently demanded the British support of Blues and his Pepular
Front Government which, he mays, was responsible for the defent of Transe.
lie thought that the recognition of the Petain Government was the only requires
open to Frenthmine According to Ma, British officers at Dunkirk foreed
Fronch soldiers to reada behind while British were being emounted. He prodicts
a German invasion of England and the total defeat of the British unlows they
accept German peace terms. He visualism & continmrial block to effect trais
pacts with a Part American trade block and expressed the hope that the United
States would nake a trade agreement with the French Yest Indica.
Vonsieur Andre deroin, President of the Dank dredit Hartiniquis, does
not believe in the stability of the Petain Government. Be prefere to reals
French but realizes ear Frunch Covernment at the present time would be desirented
by the Redch. He thinks that an American protectorate is the best solution for
the time being. Assets of Martinique citizens in banks at Trinidad and State
Lucia B.W.I., are frozen.
Er. viller and I talked with my good friends and acquiriances
in Martinique including 110 Be Aubery, industrialist and reputed the woulthiest
man in Martiniques Lest Mayoty industrialist; Andre Dorn, sugar factory -
Robert de Jaham, engineers Rance Cettrell, ship agents Me latil, Manager of
French Cables Chief of Police Capt. de Jahan of Martinique Colonial Any)
the 4. de Scharben, former Amarican Vise-Censul; Leon and Victor Albert; merchants
and others. The consensus of opinion senood to be that, although they would
prefer remining French if possible, they would welcome an American protectorute,
at loast temporarily, and they doinet look with faver upon the present
constituted French Government.
There is a mall Martinique colonial any consisting of about 1800 native
soldiers and 150 white nan-commissioned and consissioned efficers. Hours of
these soldiers are equipped with rifles and beyonets. There are about 150
gendarmes, metly white, seattered throughout the Island, The police of Part-de-
France are exptained by a - who claim to have American citizenship papers,
". Ancelle. He lived for sond Line in the Canal Lone,
PART III - Condition of Martinious.
Yor since the Armistice between Prance and the Reich the French West Indies
have been isalated from their capital. Im Martindquals think this isolation
is only temporary and that economic adjustemt in France will seen begin.
others, and these are far asro memorous, consider the present situation hopeless
and would walcuse any solution of the dism in which they find themelves.
Up to HOWE this island of 967 no kilmsters, supporting a population
of about 250,000 has lived under the liberal French Economic regise, which
protects French products sold in the colomies as well as solonial products
sold in Trance. This mine for high prices because in addition to the duty,
freight rates are high between Prance and the colonics. The prosperity of the
Island is due to the vary high subsidy granted en Island products, of which
signr, na and because constitute more than 90% of the exports.
- 4 -
CONFIDENTIAL
93
7-3(08I) serial No. 3
File No. CONFIDENTIAL
2 August 1940
Trando has up to the present absorbed all the products of Martinique
and furnished by far the greater part of the importe which consist largely
of wheat flour, alt fish, rice, corn, coffee and table oils. For this
reason Martinique has not had to look for any market in the Western Memisphore,
Kigh customs duties against products of the French colonies on the part of
Latin American countries have constituted - additional barrier to trade.
The average value of imports for the laurt eleven years we 199,000,000
france annually and the average exports during this as period assounted to
221,000,000 animally. The principal imports are:-
Theat flour
5,000 sucks monthly
Rice
2,000 -
Beans
600
-
Salt Fish
1,000 barrels.
011 (table)
750
Gameline
500,000 litres
Beeres (burtchered)
500 hand
Soup
60 tons.
Martinique exports annually 61,000,000 litros of rusa, 1,500,000 boxes of
pineapple preservos, and 30,000 tone of banance. Small quartition of curst
hides, casao and thocolate are also exported.
The principal crep is sugar, averaging 55,000 long tens annually with
an approximate valuation of 200,000,000 france. The estimated production
cost is 210 fr. per 220 1b. bag colof. New York. The grewing season lasts
about three months and all the sugar and run So sent directly to France, where
it produces sufficient income to cover imports until the next drop. The crop
ended the latter part of May this year and the entire crop had been sold and
shipped to France, but no payment has been received as the funds are frosen
in France,
It can be readily soon, therefore, that the situation in Martinique 10
despensate, and that unless - provision our be unde whereby the French West
Indies can dispose of thair products and buy the necessary goods in the
Vestern Hendsphere, the people will - be in dire distress. It is hoped
that a plan can be verked out to permit commercial agreements between Martinique
and the American countries.
Business - feel that there should be a resumption of consular relations
between the United States and Martinique. In order for a French Citizen to
obtain a. visa to visit the United States be must go to Trinidad, and with the
present strained relations botween England and France, they are unwilling to
do this.
PRIPARED BY
T. I. Chandler,
Ceair, U. 3. Havy.
CONFIDENTIAL
Regraded Unclassified
FILED UNDER DATE OF AUGUST 2, 1940,
83
LAST DATE COVERED IN THIS MEMO
84
7/23/40
Young: The Secretary gave the copy of the limt of
71100
complaints from the British (in regard to
delays in obtaining licenses which you prepared)
to Wells. Give Mrs Klotz another copy of this for
the Secretary's files.
Give AL copy of the list to General Watson and explain
it to him. He feels that he is restonsible as he got
the job for Col Maxwell.
Take list to Secretary Stimson and explain it to him.
You should invite complaints from the British in
reference to these delays in issuence of licenses until
the matter is straightened out,
Give copy of list to Col Maxwell.
How many Allison engines were turned out last week
Bell:
The Secretary wants you to arrange for some one to
represent the Treasury as on inspector in the American
Banks in Paris and to keep the Treasury informed ns.to
how the Germans trest the American Banks. The man selected
should be B. very intelligent person and should be ready
to leave within a week.
Mrs Klotz: The Secretary wunts to know how you are feeling.
He said that if you are not feeling fine you should 70 away
for the rest of the week. He urges you to do this. Be
and that he in feeling fine and that he is getting e
good rest.
Young - nothing new- will take care of matters
as directed- 15 allison engine from 21 to 27 guly.
Bell- Willhor a bank examiner ready to go
upon the Secretary return.
Mr Klotz - Feeling fine notful the ahe can gooway
Heat simply terrible worst spellive had- appreciates
offer of time off. sends greetings to Secty Y mrs M.
Regraded Unclassified
85
7/29/40
Bell:
In reference to men who is to TO to Paris - he
2:30 7.m.
should be pro-allies and a good observer and D
reporter to keep the Secretary informed about
anything out of the ordinary as well as information
on how the Germans treat the American Banks. Do not
wait till the Secreatry returns to send the man,
Bell said bankswer opening only on
small problem. basis far. N.Y.
Young:
Tell Purvis that HMJr thinks that the English should
send over at once the most important man they have
who knows the world oil situation in order that he
may discuss it with the Secretary. They will have to
take = gamble on whether or not the men will get any results.
HWr will discuss with him both the European and For
Eastern oil situation. Tell them in 9.5 much as the Secre-
tary 60 the idea up here and has not had n. chance to
disouss it with anyone the man will have to come over
more or less secretly. HMJr recommends strongly that
they take the gamble and send the man over here.
The Secretary says also to tell them th t if his
memory serves him right they were to have 14000
planes before the 3000 per month and if the have not H
already ordered them they should do do without fail
before the army changes its mind.
young said ak. nothing to take up.
CoastGuard Plane and Sinton and crew should be at Malor by
Thursday night ready for B. flight some time Fraday
to Bar Harbor airport Check on available
information on the cindition of BarHarbor sirport
to see if it in OK. It was OK last time the V 151
went
Capt in chalher there. said plane would be her asrequisted
Mrs Klotz How feeling? The Secretary again urges that you take
the rest of the week off if the to at continues. He
says that he is relaxing 00 much 08 when he was on
the ranch.
Feeling fair continues sends regards
86
7/20/40
Mrs Klotz
10:15am
Nothing to take up. Fuling fair- rain in
wash late afternoon 729th said never
experienced anything like the healthers
in whole life.
Young
Nothing to take up.
Bell
Nothing to take up.
Bellswid nothing to report- White is
back and looks well in fact does
not think he needs any more vacation
this year.
Regraded Unclassified
07
-
ruling this pretty good - the healt really
awful morning
said Kundrea had had no luck in jamming
legal opinions down Jonis Throat. ikio nobl
in portant however as every thing going fine mil
ski
said has thought more abaab problem.
Possible min to send ar:-
Two (a) tank One who is aminers has is amined Querican
H another who has unisted - about.
banho in foreing tennitory already
Two customs attachis
(a) Waite
(4) One recently brought back.
Mathews our asint from Vicky if he
has no difficulty wassing line.
Cochran says a man by name of
George him drafting clink if lift
at submary would be fine
Bill would recommend some one
already then.
1st Choice Mathews if available
2 nd chrice that walt if available
3rd
will and letter on it.
Regraded Unclassified
88
ASK TELEPHONE OPERATOR THAT HMSR BARHARBOR TEL.NO. 18.
IN Elots
How many and what " the price of raspberries
this week
10:30am
miss was gone unable to get info.
weatter cooler - and regards
3011
If a man can get to Paris the Secretary says
that he would rother have TADE Kenminer
assigned to the job, Thinks will waite till and back
willothinks difficult to ged new in and sitted maken then
-
The Secretary ruid NO tall : thuthe expects
could
you to go away Fritay for make
---
go
orders. thats 700 will may come +
goinfo with euch
Tax
had conference with Massilemb 73/- Pres saidhe
quill them - Lax lagging - Coopert Daughter
creating
notice.
wanted action - Fulltax committee must
Today- will at your know 8/2 what happens
White
The Secretary mate you to put posted
on the oil situation particularly oil leaving
Columbie - Venezuela - Mexico. Be mate to know
where it is going. 30 realy by Healing.
will have by Monday - had fine toip.
C.G.
Plane on way via Bar Harbor.
sinton + Harding
diar
Regraded Unclassified
89
8/1/40
Bell:
The Secretary says for you to go away
on a weeks vacation anyway. If he can
2:30 pm.
not handle the tax matter he will send
the plane for you to bring you back for
a day.
White:
With that oil information also be able
to give the Secretary all information
you can get about the refineries in the
Dutch East Indies. Do they make aviation
gas ?
Telephone Number of HMSr
BH266
60/
90
8/2/40
Mrs Klotz
Have you gooten the circulars of the place
that the Secretary is going to in Canada ?
If not get after Young to get them from
Ballantyne.
operator. not in message given to telephone
Young
Secretary wants you to ask Ballantyne how
many aircraft the British have completed in our
factories and waiting for engines. The
Secretary wants full details Monday.
Gas ton
The Secretary said if there is a Treasury car
near Bar Harbor he would like to have you arrange
for it to meet the plane there this afternoon
to furnish transportation for the plane crew.
mr Gaston not in instructions given
to C.Bell. C.
bet
Regraded Unclassified
91
ye
K
mashington D.
aug / 151-635-pm
to mr morganthaw
Lovine Pand counts
malure jry.
Hope to the at
hyde Park sunday
Delighted to see your
telephone when you
Creach Hiskill
Araisklin D Rooserelt
ginal in White house folder
ACCRESS OFFICIAL COMMUNICATIONS TO
92
THE SECRETARY OF STATE
WASHINGTON, D. c.
DEPARTMENT OF STATE
WASHINGTON
August 2, 1940
The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and encloses
eight copies each of paraphrases of telegrams nos. 189
and 190, dated July 30 and August 1, respectively, from
the American Embassy, Santiago, regarding blocked French
funds in the United States.
Despatch no. 698 dated July 27, from the American
Embassy at Santiago, will be communicated to the Treasury
when it is received.
Enclosures:
1. No. 189, July 30,
from Santiago. (8).
2. No. 190, August 1
from Santiago. (8).
16 THE RECEIVIVIN LIVES
THAT/136A JACKBOOT
at 68 CALCE % THE
BIO vne 5 bill 3 oz
RECEIVED
33
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Santiago.
DATE: July 30, 1940, 5 p.m.
NO.: 189.
URGENT.
FOR THE SECRETARY AND THE UNDERSECRETARY.
With further reference to Embassy's despatch no. 698
dated July 27, and apropos of the French Government's
attempt to have the United States release $415,000 of
French Gov't. funds which are blocked in the U.S., in
order to meet its contract for lentils and beans in
Chile, I am asked by the Minister of France to tell
you that this transaction 16 bona fide. Undoubtedly
the purchase was contracted for with payments beginning
early in April when transfer of the money could have
been made to Chile, but the French were hoping to con-
vert francs and therefore held up the purchasing agents,
who had bought, from their own pockets, in pesos. All
the agents here were British and they complained to
the British Embassy after 2 months. Then, after re-
deiving instructions from London, the British agreed
to take over in excess of seventy percent of the
lentils and beans; the sale was effected, the price paid
in sterling, and thus the (omission) and lentils no longer
belong to the French or the agents. This was proposed to
the French Minister by the British as a gesture of
iriendliness
Regraded Unclassified
94
-2-
friendliness and at the time the Minister seemed pleased.
The Minister was informed that the beans and lentils
could not reach France under any circumstances because
the British ships would be instructed to not take them.
No French ships will come. The French Legation yesterday
called the agents in and complained and told them they
would not be released from the contract; the Legation
threatened the agents regarding in Nazi fashion regard-
ing commercial dealings with Chile in the future. The
British are sure that the plan is to break the blockade
of the French gold in the United States. The French
Commercial Attaché, Chayet, told the agents, when they
replied that they didn't receive their money, that the
United States was to blame in spite of the fact that,
though the payment was due on April 2, it was not made.
The French Ambassador in Argentina is handling the affair.
The French Commercial Attaché complained to the Under
Secretary of Commerce and tried to get him to bring
pressure on us, and he talked the matter over with Brooks
without knowledge of the fact that seventy percent of
the beans and lentils has been bought and paid for by
the British and that the British are thinking of taking
the rest.
BOWERS
EA:MSG
Regraded Unclassified
95
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Santiago, Chile.
DATE: August 1, 1940, 4 p.m.
NO.: 190.
Please refer to my 189 of July 30, 5 p.m.
It is stated by the Under Secretary of Commerce
that the Chilean Embassy at Washington has been requested
by the Foreign Office, by telegraph, to make an effort
to secure the unblocking of French funds in the U.S.
to cover 1,644 tons of beans which the French ordered
last winter at pesos 3,611,000. A single influential
Chilean firm holds most of these beans; the French
would -omission- them in stock here awaiting the con-
tingent termination of Great Britain's blockade, or
they would endeavor to secure permission to send the
beans to the Red Cross of France.
According to information I have received, the
British will buy these beans but the price they offer
would cause a small loss to the Chilean firm of about
40 pesos per ton, or about two thousand dollars.
Therefore, this matter has small intrinsio practical
importance and the attitude of the Foreign Office rep-
resents only a technical compliance with requests which
it knows the Germans have forced the French to make.
All the aspects of the case are well understood by the
Foreign Office, and if the request is unsuccessful, the
X Foreign Office probably won't be disappointed.
BOWERS
EA:MSG
ADDRESS OFFICIAL COMMUNICATIONS TO
THE SECRETARY OF STATE
96
WASHINGTON, D.G.
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
EA 840.51 Frozen Credits /406
August 2, 1940
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury and
encloses five copies of a paraphrase of telegram no. 69,
dated August 1, 1940, from the American Consulate General
at Algiers, regarding frozen French credits in the
United States.
Enclosure:
YRAT38038 SHT 07
217 30 301990
EO Z M9 S DUA DAG
DESIBIMENT
Paraphrase of telegram
ДЕСНИКУГ
03/13/38
no. 69, August 1, 1940,
from American Consulate General,
Algiers.
28
Regraded Unclassified
Department of State
BUREAU
DIVISION
}
EA
ENCLOSURE
TO
Letter drafted
ADDRESSED TO
Secretary of the Treasury
#, & INFEREMENT PERFERS -
1-1003
97
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Consulate General, Algiers, Algeria.
DATED: August 1, 1940, 4 p.m.
NO: 73
Refer to my telegram of July 31, No. 69.
Bank at Tunis refuses to discount draft of American
Consul there he reports.
10 THE 25062 YBA
122
GLACE S
000 vne exo vne S M. 2 02 202
EA:fmc
-
world OFFICIAL COMMUNICATIONS TO
THE SECRETARY OF STATE
S8
WASHINGTON, D.C.
DEPARTMENT OF STATE
WASHINGTON
August 2, 1940.
In reply refer to
EA
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury and
encloses copies of telegram no. 33 dated August 1 from
the American diplomatic agent at Tangier which relates
in part to restrictions imposed under Executive Order
no. 8389.
Enclosure:
Telegram no. 33,
5
dated August 1, 1940 (4).
DE
ST
It
S9
JT
PLAIN
TANGIER
Dated August 1, 1940
Rec'd 8:32 p.m.
Secretary of State,
Washington.
33, first.
Concerned over rapidly approaching serious food
shortage in Tangier, the International Administration
has officially requested this Legation to present the
situation for the benevolent consideration of the United
States Government.
To feed itself alone Tangier requires monthly sugar
200 tons, flour 900 tons, condensed milk 400 cases,
cottonseed oil 100 tons, soap 100 tons.
All EXCEPT uncertain amounts of flour still obtainable
from French Morocco can only be obtained from United States
Present stocks barely sufficient one month,
The difficulties present are first transportation
and second financial. The stoppage of American shipping
has out off the sole free market from which the zone
can be supplied. An irregular service of small Portuguese
sailing boats might be used for transshipment from Lisbon
at
Regraded Unclassified
100
-2- #33, August 1, from Tangier
at greatly added Expense if the money difficulty could
be avoided.
HOWEVER, blooking of Tangier dollar credits in the
United States renders local merchants helpless to pur-
chase in America or Portugal as American dollar has
now become the only acceptable medium.
The Administration therefore requests the Depart-
ment to consider (one) possibility resumption export
line SERVICE to neutral Tangier and (two) liberation in
NEW York of Tangier dollar credits to feed the town.
BLAKE
LMS
101
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE July 30, 1940
TO
Mr. Cochran
FROM
Mr. Dfetrich
Mr. Livesey of the State Department called regarding a cable which was being
sent to the Vice Consul recently assigned to Martinique, Among the items mentioned
in the cable was the question of financing exports from the United States to
Martinique and Guadeloupe. It seems that the Export-Import Bank was-approached in
this connection after difficulty had been experienced in securing a license to
release Martinique funds in the United States, I understand from Mr. Livesey that
Martinique and Guadeloupe banks have funds at the French American Banking Corporation
which he feels should be used in financing exports. Ee asked me to find out what
our attitude was about releasing such funds.
I called Mr. Pehle and he told me that an application had been received from the
Martinique bank for 8 general license. After taking the matter up with the Secretary
the application was not approved but word passed along that the Treasury would consid-
er applications for specific transfers. Mr. Pehle also stated that g. similar
pulication VD.6 received from Guadeloupe and that it would probably be handled in the
ame manner.
I called Mr. Livesey and gave him the information which I obtained from Mr. Pehle
and I mentioned to Mr. Livesey the question of this Government's attitude towards
allowing exports from the United States to the islands of Martinique and Guadeloupe.
I also stated that this was & broader question which did not come under the Treasury
but WRS mainly one for the State Department.
X
August 2, 1940
In conversation by telephone this morning with Mr. Livesey, the above question
came up. I told Mr. Livesey that the French Purchasing Commission had taken some steps
toward spending their funds in this country for the purchase of food stuffs for the
French West Indies. Livesey agreed with no that it is much preferable that the French
should continue to spend their own balances on this market for this purpose, rather than
cause Martinique and Guadeloupe to seek loans from the Export-Import Bank. It is not
known, of course, how long the French Government officials in this country would be
disposed to follow their present policy.
Regraded Unclassified
102
ADDRESS OFFICIAL COMMUNICATIONS TO
THE SECRETARY OF STATE
WASHINGTON, D.C.
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
EA
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury and
submits four copies of a memorandum dated August 2,1940
requesting urgent license for transfer of $1200 for
fares of the staff of the Legation of Mexico in
France from Vichy to Lisbon, Portugal, and of a
memorandum of the same date requesting license
for transfer of indicated amounts for account of the
Government of Mexico to serve European cities.
10 THE EXCELLYHA
LECHNCY
OFFICE OF 00
Enclosures:
Memoranda of August 2, 1940 21
BECOUVED
sh
103
TRANSLATION
Embassy of Mexice
Confirming the oral representations made by the
Embassy of Mexico to the Chief of the Division of the
American Republics of the Department of State, the
Embassy would be very grateful to the Department men-
tioned if it would urgently arrange for the necessary
permission in order that the National City Bank of
New York might remit for account of the Government of
Mexico the following amounts to the European countries (sio)
listed below:
Berlin
$ 5,900.83
Rome
2,728.66
Stockholm
4,695.47
Geneva (League of
Nations)
3,296.28
Hamburg
2,886.50
Genoa
3,368.60
Milan
1,318.86
Stockholm
882.64
Goteborg
809.94
Total
$25,887.78
50 visa S MI è 33
Washington, D. c.
August 2, 1940.
RECEIVED
RA:Burs1ey:GRS
Regraded Unclassified
104
TRANSLATION
Embassy of Mexico
The Financial Attaché of the Embassy of Mexico,
whose offices are at 70 Pine Street, New York City,
reports having encountered difficulties at the National
City Bank of that City in making a remittance to Vichy,
France, in the amount of $1,200, the total of the
fares of the staff of the Legation of Mexico in France
from Vichlite (101) the City of Lisbon, Portugal.
In view of the urgency with which these funds are
needed in Vichy and pending resolution by the Department
of State of the definitive way in which funds can be
made available to all the Foreign Service of Mexico in
Europe, it is desired that by the most rapid channels
and with urgent character the Treasury Department
issue instructions to the National City Bank in order
that it may remit this amount of $1,200.
Washington, D. C., August 3, 1940.
RA:Bursley:GRS
Regraded Unclassified
105
August 2, 1940
Files
Mr. Geshren
STRICTLY CONFIDENTIAL
Os July 31 Mr. Insire telephoned as from New York. Be referred to Acting
Secretary Bell's letter of July 30 instructing the Federal Reserve Bank of New York
to pay the balance due on French gold imported on the Vinsennee. Encire asked as
how notice should be given Frence of this final payment. I sold his that 10 should
be from the Federal Reserve Bank of New York direct to the Bank of France.
juy
EMC:dm:8.2.40
Regraded Unclassified
106
TELEGRAM SENT
JR
GRAY
August 2, 1940
6 jahle
American Legation
Kaunas.
153,
Your 178, July 26, your 183, July 28, and your 195,
July 31.
Advist Bank of Lithuania that Treasury will grant
licenses to Federal Riserve Bank of NEW York and other
banking institutions in the United States holding dollar
accounts of the Dank of Lithurnia, authorizing transfer,
upon instructions of Dank 01° Lithuenic, to special free
dollar accounts of dollar funds of the Bank of Lithuania,
up to a total mount not exceeding one hundred thousand
dollars, upon receipt from you through this Department of
certification that equivalent amount of dollar funds has
been furnished by the Bank of Lithuanic in exchange for
Lithuenich lito to American citizens and their familits,
and to cliens permently Somiciled in end documented for
recomission to the United States. You are authorized to
idaue appropriate certification.
HULL
(FL)
Regraded Unclassified
- OPPICIAL COMMUNICA TIMES TO
107
THE SECRETARY OF STATE
EXPIRMEN, 9. D.C.
DEPARTMENT OF STATE
WASHINGTON
August 2, 1940.
In reply refer to
EA
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury and
encloses B copy of a Pro Memoria addressed to the
Department of State on August 2 by the Bulgarian
Minister at Washington, regarding Danish credits
affected by Executive Order no. 8389.
-
Enclosure:
From Bulgarian Minister,
Pro Memoria, August 1, 1940.
If
108
PRO MEMORIA
According to information furnished by the
National Bank of Bulgaria, the Bulgarian firm, Nikola Tohilov
of Sofia, has exported to Denmark several shipments of sun
flower seed cake in the following amounts:
$505.00
813.09
6,361.73 and
3,770.75
It is to be noted that all of the shipments
have taken place before the first of April, last.
In accordance with the terms agreed upon the
payment was guaranteed by a letter of credit issued by the
Kopenhagska Commercial Bank of Copenhagen with the Bulgarski
Kredit Bank of Sofia, and the transfer of the amounts were to
be effected through the Irving Trust Company of New York.
The transfer has been delayed on a coount of
control formalities as to the quantity and quality of the
shipments.
YR
TMA
S9
Consider that the regularity of the above
M9
ТИЗМТЯЛЯЗО
transactions could in no way be questioned the Bulgarian
BECEIVED
Government would much appreciate if the Treasury Department
DUA
would take appropriate action in order to authorize the
Irving Trust Company of New York to effect the trensfer in
question,
August 1, 1940.
THE A MOLLVO37
WASHINGTON
17943
109
RDS
PLAIN
STOCKHOLM
Dated August 2, 1940
Rec'd 9:33 p.m.
Secretary of State,
Washington.
790, Second.
Riksbank July 30 nearest million crowns metallic re-
SERVE 725, Foreign Exchange 578, note cover 2030, note
circulation 1430, noninterest bearing deposits 295, RECENT
gradual improvement foreign Exchange reserve due partly
\
repatriation American balances fearing blocking. Govern-
ment proposed today's Riksdag measure to impose added income
tax on company earnings for last four months 1939 at fol-
lowing rates: 50% tax on first 20% by which earnings EX-
CEEdEd comparable 1938 Earnings end 60% tax on 21 to 50
and 70% tax on all over 50. Additional budget No. 1 1940-41
introduced today calls for nearest million crowns 46 for
operating bud get including 41 for defense purposes and
64 for capital budget of which 50 for state war risk in-
surance. State income and property tax 1940 estimated 488.
DEfense loan 500 closing November already oversubscribed.
Swedish-Hungarian trade and payments agreement signed
July 31 Effective through DECEMBER 1940 fixes goods quotas
improving Sweden's export prospects and provides payment
in
110
-2- #790, Second, from Stockholm
in free Exchange. Poor fruit crop EXPECTED due late frosts
and drought. State Transport Commerce and State Shipping
Board merged into new State Traffic Commission under
Public Supply Department.
INFORM COMMERCE, TREASURY, AGRICULTURE.
STERLING
JRL
111
AS
GRAY
(Paris)
Vichy
Dated August 2, 1940
Rec'd 8:52 a.m., 3rd
Secretary of State,
Washington.
233, August 2, 5 p.m.
FOR THE TREASURY FROM MATTHEWS.
The following "order for the establishment of a
control office for banks in French accupied territory"
issued by the majority Governor of occupied territory, &
copy of which I have just received, was published on
July 26 in the JOURNAL OFFICIAL of Paris.
"By virtus of the plenary powers which have been
conferred upon me by the Fushrer and Supreme Chief of the
German army I decree as follows:
One. An office of bank supervision shall be BET up
in occupied territory. This office has its headquarters
in Paris.
Two. Enterprises which professionally carry on bank-
ing operations and savings banks (receiving and supplying
money, purchasing, selling, receiving on deposits and manag-
ing securities for others' accounts) which have their head
office
Regraded Unclassified
112
AS-2- No.233, August 2, 5 p.m., from Viohy.
office or place of management in occupied territory, are
subject to the control of the Office of Bank Supervision;
they are obliged to follow the instructions of the Office
of Bank Supervision.
Three. The Office of Bank Supervision is Especially
authorized:
(a) to examine the books and accounts of the credit
establishments subject to its supervision, as well as the
cash, securities, bills, Et cetera, and to request infor-
mation regarding all transactions, as well as to make im-
portant operations dependent upon its consent.
(b) to Examine or require submission of balanor
sheets and documents pertaining thereto.
END SECTION ONE.
MURPHY
570
113
AC
GRAY
Paris
(Vichy)
Dated August 2, 1940
REC'd 9:25 a.m.
Secretary of State
Washington
233, August 2, 5 p.m. (SECTION TWO).
(c) To prohibit the carrying on of the business
or any particular transactions, especially the dis-
posal of securities, the repayment of obligations
or commercial communications.
(D) To order the deposit or the transfer of
the securities of the controlled credit.
(E) To withdraw from authorized persons
the right to represent the credit Establishments and
to confer this right upon others.
Four. Transactions which are depending upon
the consent of the Office of Bank Supervision (3a),
but which have been carried out without its consent
are null and void.
Five. After the present order has come into
Effect credit Establishments already existing can
only bE Established upon the previous written
authorization of the Office of Bank Supervision.
(The word
114
- 2 - #233, August 2, 5 p.m. (SECTION TWO) from Vichy
(The word "not" before "already" was apparently omitted.)
Six. The Expenses of the supervision are to
be borne by credit Establishments 30 supervised.
SEVEN. The provisions of this order do not
anply to the Bank of France.
Eight. Infractions of the terms of this order
or of the orders issued in Execution thereof are
punishable by prison and a fine, or one of these
penalties.
Nine. The present order COMES into force
on the day of its publication.
For the CommandEr-in-Chief of the Army, the
Chief of the Military Administration in France."
MURPHY
TFV
115
PARAPHRASE OF SECTION THREE OF TELEGRAM NO. 233, DATED
AUGUST 2, 1940, 5 P.M., FROM AMERICAN
EMBASSY, VICHY, FRANCE.
It is to be noted that, according to the above, German
control is made practically complete over all banks in
the territory of occupation, which was to be expected
of course. The Guaranty Trust, J.P. Morgan and the
National City Bank consider this order to be very im-
portant; I have been asked by them to communicate its
text to their head offices if possible.
I have been promised by Rueff (who had lunch today
with me) that he will send me the text of an order gov-
erning the Bank of France, which 18 somewhat similar.
Rueff said that it was, in its terms, "even broader"
and applied to the Bank of France in entirety, whether
or not in occupied territory. He said the implication
seemed to be that whether the Bank of France now takes
back all of its personnel and accounts to Paris or not
made little difference. Rueff came to Vichy to talk
this question over with the 2 or 3 officials of the
Finance Ministry who remain here yet.
He said that the Bank of France hasn't replied yet
to the inquiry regarding its gold reserve nor has it
replied to a similar inquiry concerning holdings of
foreign exchange. In this connection refer to Embassy's
213 of July 30, 6 p.m.
Rueff
116
-2-
Rueff hasn't heard whether or not the privately
owned safe deposit vaults (see Embassy's telegram) were
actually opened on Wednesday at Paris.
MURPHY
EA:MSG
well
1MF 2 CIVUA
not 30
BIO vna 3 by IS R
voe 2 5% IS +2
LUEVENUA DEGISTMENT
LIKEV SECEIVED 1
OT
one
117
COPY
2nd August, 1940
Dear Mr. Cochran,
It was a great pleasure to meet you the other day and I much appreciate
your kindness in introducing Mr. Pinsent and me to Professor Chamberlain,
with whom we had a very interesting talk, I look forward with pleasure to
the prospect of co-operation with you and your colleagues.
Professor Chamberlain asked me then if we had any information on two
points. I enclose:
1. A copy of a memorandum which we have prepared on
financial measures taken in Latin American States
with regard to territories occupied by Germany.
2. Some information which we have received from London
with regard to the action there in the matter of
French balances.
I believe that the phrase "pro-Allied French territory" in the second
paragraph refers to those parts of the French Empire which have not been
defined as enemy territory. The parts defined as enemy territory are
European France (including Corsica) Algeria, French Zone of Morocco and
Tunis. This definition was circulated by the Foreign Exchange Committee in
their Circular No. 198 of the 23rd of July.
Yours sincerely,
R.J.Stopford
Mr. H. Merle Cochran,
United States Treasury,
Washington, D. C.
RJS:MK
128
MEMOHAZITION
Financial Measures taken in Latio-
American States with regard to tor-
ritories Occupied by Germany.
In paragraph 9 of the aide-memoire dated the 3rd July 1940,
which was given by His Majenty's Ambassador to the State Department
on that day, a note was promised giving more in detail the direction
in which action was desired by the Intin-American States.
The following is information available in the British Embasy
as regards the present position in the different States.
Argentina. A decree was issued about June 27th laying down that all
transfers of funds to countries with which Argentina has clearing
agreements must be effected through the the clearing accounts. The
Central Bank will control all transfers of funds and securities to
such countries, and all operations in cash or securities debits to
existing or future accounts in Argentine banks in the names of residents
in such countries. Special permits are required from the Central Bank
for transfers to France and the French Colonies and Protectorates.
Brasil.
The supply of exchange for the purpose of imports from
territories occupied by Germany, including France, is now closed, (the
regulations in general do not allow payments to foreign countries
except for the purpose of imports). There do not sypear to be any other
restrictions on the use or sale of the mosets of occupied territories
in Brasil.
Uruguay. French, Datch and Belgian funds have been blocked, but it
appears that this measure does not extend to Colonial territories, which
are, however, 88 an extra precuation, allowed to operate only through
banks in the United States. There is no control over the import of
securities, though the Bank of the Republic 1a watching the position.
Chile.
The Government has taken no measures of the kind referred
to, and has declined to block the assets of occupied countries. The
Chilean Government also allows payments to occupied countries through
compensation agreements to continue: the countries with which such
agreement exist include Belgium, Denmark, France and Holland.
Venezuela. The Veneruelan Government has taken no measures of this
kind, and His Majesty's Government believe that any suggestion from them
to that Government that the latter should block enemy assets would
meet with no response.
Colombia. French funds have been blocked provisionally but it is
believed that the Exchange Control would reconsider the position if the
French Government were to request it.
Regraded Unclassified
119
- 2 -
His Majesty's Government agree that Argentina and Brasil
are the most important of the countries under consideration, but
they consider that Uruguay, Chile and Venezuela are also of
importance in this connection. The Argentina Government appears
to have gone further than the others, though it does not appear
that the steps which that Government have taken go as far as those
which have been taken by the United States Government. His
Majesty's Government desire strongly to urge that the United States
Government should use its influence with those five countries to
induce them to take measures corresponding to those which have been
taken by the United States Government itself, or to measures which
may hereafter be taken by the United States Government such as the
blocking of the assets of Germany and Italy themselves.
British Embasay,
Washington, D. c.
July 12th, 1940.
120
All French balances including those of French controlled
banks operating in neutral territory were blocked on June 17th.
Balances of branches in pro-Allied French territory are
temporarily not blocked. Balances of private customers in enemy
territory are vested in the Oustodian.
Branches in London of French banks were permitted clearing
in London of current transactions, All other transactions
require a license.
The ability of such branches to carry on divorced from their
offices in enemy territory is now under consideration.
Many United Kingdom branches of French companies are being
granted licenses to continus operations with related branches in
non-enemy territory on assurances given by the latter to treat
United Kingdom offices as head office and to ignore France.
(Names of more important cases will be communicated later).
French directors of the United Kingdom companies ceased office on
July 10th and the majority of French shareholdings have been
vested.
We are considering the question of remittances to unoccupied
France.
(Prepared by Mr. Leroy-Basulieu, Financial Counselor of the French Embassy, 121
and handed to Mr. Cochran in the Treasury at 12:30 noon, August 2, when
Mr. Lercy-Beauliou was making his last visit prior to his departure for
France.)
New York, August 2, 1920.
MEMORANIUM ON THE FREEZING OF FRENCH ASSETS IN THE U.S.
Up to the present time, the freezing of French assets in the
U.S. has been put into application with the greatest astrigency.
Consequently, even the minor operations involving very small sums,
or those operations which do not present any risk of the sums being
diverted from their object, cannot be earried out.
The following examples can be given:
1.) Americans having friends in France, either American or French,
in dire need of funds, are prevented from sending them even the
smallest sums.
B.) Americans desiring to send funds for charity purposes in France
have been prevented from doing 80.
It is to be pointed out here that these restrictions do not apply
to Americans wanting to send money either to German friends or to
German charities, which they are perfectly free to do.
3.) Transfers from a French frosen account in an American bank to
another frozen account in the same bank have not yet been permitted.
In a number of cases, these transfers were asked for in order to
cover an overdraft in one of the accounts, for which a debit interest
was being paid, which means an unjustified loss for the bank.
(Ex.: copper credits).
4.) The French banks in the U.S. have not been allowed to invest
their frozen funds in earning assets (short term bonds, ete.).
122
BRITISH EMBASSY,
WASHINGTON, D.C.
August 2nd, 1940
ersonal 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,
holder
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D. C.
123
Telegram despatched from London
early on the morning of August 2nd.
Destroyer "Whitshed" reported
damaged yesterday arrived at Harwich under
own steam. Casualties five killed, fifteen
wounded, eight missing.
Strong noval forces covering convoy
in Eastern editerrenean attacked five times
by enemy aircraft on July 27th; fifty-three
bombe dropped, no ship hit. July 31st
cruiser "Sydney" had two ratings slightly
injured.
On July 29th southeast of Crete two
aircraft from British aircreft carrier
engaged three Italian sircraft; shot down one,
damaged snother. One of our aircraft forced
to land on the sea and sank, pilot rescued.
On July 31st British nimed merchant
cruiser proceeding to Preetown attacked
three times, some damage caused by near misses.
During last attack two enemy bombers driven
off by one Anson.
British merchant ship reported having
eighted yesterday morning disguised as merchant
ship raider 900 miles southwest of Freetown.
volish/
Regraded Unclassified
124
Polish merchant ship arrived at Preetown on
July yoth having escaped from Dakar on July
27th although part of her machinery had been
removed by the French authorities. Captain
reports that "Richelieu" hit by two torpedoes
in attack by our aircraft on July 8th.
di
LA.R.R. During bombing on July 30th -
July 31st, two large explosions observed on
oil refinery and synthetic oil plant set on
fire. Two fires caused in reilway yards.
Aluminium featory at Cologne, aerodromes and
anti-aireraft batteries in northwest Germany
and Belgium all successfully attacked.
Yesterday of twenty-eight Blenheims
despatched twelve obliged to abandon task.
One shot down enemy fighter and one is missing.
Direct hit on hanger on enemy aerodrome
reported. Im the afternoon four Blenhoims
bushed three E-boats off Havre; boats dispersed
me at least seven near misses registered.
Lest night thirty medium bombers
despatabed against oil targets in Hannover
acrodrems, also twolve Hampdens sent mine-
laying in Kiel area. Three machines missing.
5.
Air Force. During night of
July 30th- 31st, later reports state, two
R.A.P. fuel oil depote straddled but missed,
to bonies dropped close to Octane factory.
Bill
125
No air bombing reported yesterday;
very slight activity.
Last night, enemy activity on wide
area, but few bombs dropped, no casualties
reported. Bombs, mostly incendiary, dropped
in Themes and Mersey Natuaries and in Cardiff
and Bristol areas.
4.
Summary of air casualties:
Day of July 3let: Enemy confirmed 2 Messer-
schmitts 109, unconfirmed 2 bombers and 1 fighter
British confirmed 1 Blenheim and 2 Spitfires.
Night of July 31st - August lat: Enemy nil,
British 3 missing.
Total: Enemy 2, British 6.
5.
Shipping casualties yesterday.
By U-boat: British ship (6,300 tons) outward
bound in convoy torpedoed and sunk off northern
Ireland.
By mine: Norwegian ship (1,300 tons) carrying
coal, sunk in Bristol Channel.
6.
Halta. Yesterday morning nine enemy
fighters and one bomber engaged by three
Gladiators over Islands; bomber turned back,
one fighter shot down. One Gladiator shot down,
pilot rescued.
70/
Regraded Unclassified
126
To
Reported from four separate sources
that Italian battleships "Giulio desare* and
"Conte di Cavoun" recently inadvertently
attacked by Italian aircraft and severely
damaged with numerous casualties. Reports
suggest that resemblance to British "Hood"
when viewed from air accounted for the mistake.
8.
Germen divisions in France believed
distributed as follows:-
Northern Prance (within approximately 50 miles
of the coast between Dunkirk and Brest) forty.
Swies Frontier (Bale to Geneva) seven,
(Possibly including one armoured).
Bordeaux to Sunnish Prontier, three, (possibly
including one motorised).
West of Prance, fifteen.
Total: sixty-rive.
127
August 2, 1940
My dear Mr. Hoover:
In the absence of Secretary Morgenthau, I am
acknowledging receipt of the following communications:
July 30 - Present situation in Martinique;
July 31 - Economic conditions within Mexico;
July 31 - Retail merchants restricting
credit to men between the ages
of 21 and 31 because of the
Conscription Act;
Aug. 1 - Labor conditions at the Boeing
Aircraft Company, Seattle.
I shall be glad to bring this material to the
Secretary's attention on his return to the office.
Yours sincerely,
(Signed) H. S. Klotz
H. S. Klotz,
Private Secretary.
Mr. J. Edgar Hoover, Director,
Federal Bureau of Investigation,
Washington, D.C.
22%
August 2, 1940
My dear Mr. Hoover:
In the absence of Secretary Morgenthau, I am
acknowledging receipt of the following communications:
July 30 - Present situation in Martinique;
July 31 - Economic conditions within Mexico;
July 31 - Retail merchants restricting
credit to men between the ages
of 21 and 31 because of the
Conscription Aot;
Aug. 1 - Labor conditions at the Boeing
Aircraft Company, Seattle.
I shall be glad to bring this material to the
Secretary's attention on his return to the office.
Yours sincerely,
(Signed) H. S. Klotz
H.S.Klotz,
Private Secretary.
Mr. J. Edgar Hoover, Director,
Federal Bureau of Investigation,
Washington, D.C.
Regraded Unclassified
129
August 2, 1940
My dear Mr. Hoover:
In the absence of Secretary Morgenthau, I am
scknowledging receipt of the following communications:
July 30 - Present situation in Martinique;
July 31 - Economic conditions within Mexico;
July 31 - Retail merchants restricting
credit to men between the ages
of 21 and 31 because of the
Conscription Act;
Aug. 1 - Labor conditions at the Boeing
Aircraft Company, Seattle.
I shall be glad to bring this material to the
Secretary's attention on his return to the office.
Yours sincerely,
(Signed) H. S. Klotz
H. S. Klots,
Private Secretary.
Mr. J. Edgar Hoover, Director,
Federal Bureau of Investigation,
Washington, D.C.
Regraded Unclassified
JOHN EDGAR HOOVER
130
DIRECTOR
Federal Burren of Investigation
United States Department of Justice
Washington, B. C.
July 30, 1940
PERSONAL AND
CONFIDENTIAL
BY SPECIAL MESSENGER
The Honorable Henry Morgenthau, Jr.
The Secretary of the Treasury
Treasury Department
Washington, D. C.
My dear Mr. Secretary:
I am transmitting herewith a. memorandum
pertaining to the present situation in Martinique.
This information was received from a source which
has heretofore been found to be reliable.
Sincerely yours,
Enclosure
J. 2. Hoover
131
Regraded Unclassifi
July 30, 1940
MEMORANDUM:
Re: CONDITIONS IN MARTINIQUE
NAVAL SITUATION
At the port of Guadeloups the French training ship
Jeanne d'Aro with a. complement of 700 men arrived on July 3, 1940.
Three other vessels are in the port, a banana ship and an empty
cargo ship which do not have steam up and & cargo ship heavily
laden with sugar and run which has steam up. All three vessels
are flying the French flag.
In Martinique & strict military and naval censorship
is in force. The harbor at Fort-de-France is closed to all
traffic between the hours of 5:00 p.m. and 7:00 s.m.
The French Cruiser Baile Bertin is docked at the wharf
of Cie. Atlantique. This is the cruiser which brought the gold
from France. The gold is now located in an old fort near Fort-de-
France and the concensus of opinion is that it will remain there
indefinitely. The Emile Bertin was reported to be in the battle
of Narvik and shows the effect of damages. She is also reputed to
have assisted in the evacuation of British troops from Dunkerque.
The vessel is freshly painted, has steam up and the crew appears
to be in good spirits. The Emile Bertin is berthed behind a mined
submarine net which extends a distance of about 100 feet from the
tip of the wharf to the stern of the 8.8. Due Admiral, & passenger
ship tied up to the opposite side of the wharf. All guns on the
Emile Bertin which point to sea are stripped and ready for action.
Those pointed shoreward are covered and plugged. This is true of
the guns of the three converted auxilliary cruisers, the Guersey,
Esterel and Balfleur. One of these vessels is constantly on duty
in a sheltered are of the outer harbor where it is practically
invisible from the entrance to the harber. They are equipped with
three-inch guns. The patrol boats, Lamentin, Troisilet and Balate,
with one-inch guns mounted fore and aft, are constantly patrolling
the entrance to the harbor.
The airplane carrier Bearne anchored in Lamentin Bay was
brought into the inner harber to discharge her planes. There were
more than 100 planes on board. The planes are said to be Curtis
132
751C-CTECD's with one propeller, the serial numbers on the planes
discharged being from 56 to 96. The discharged planes are heavily
guarded, It is said they were removed because this 1a the hurricane
season and they were brought ashore in order to be protected in
the event of a hurricane. Other reports were that the planes were
landed at the insistence of the British. There were twelve to
fourteen flyers on the Bearne who departed about the middle of July
on the British Cruiser Dundeen.
Five French seaplanes based at Fort-de-France each carry
two bombe and 8. machine gun and make regular patrol flights beginning
at 6:00 a.m. each morning.
A French passenger ship, the S. S. Cuba, was accompanied
into the Port-de-France on July 13, 1940, by a French plane and
auxilliary cruiser, From the sig-sag course she took upon entering
observers believed that the harbor might be mined at certain points.
The Cuba carried about 500 loyal Spanish refugees and 100 Garman,
Csech and Austrian refugees. Twelve French passengers disembarked
at Fort-de-France. The others were transferred to the S. S.
Sainte Domingue, which sailed the following Tuesday, presumably
for Mexico.
Martinique has communications with the outside world
through a wireless receiving etation located behind the Pan-American
Airways dock, the sending station for ships, & government owned
sending station and a short wave commercial broadcasting station.
The French cable to Europe is via London or to Madrid via Buenos
Aires. Communication to the United States is via French cable to
St. Thomas and Puerto Rico.
Admiral Robert, the High Commissioner, is not, 6.6 reported
by some sources, in charge of the combined English and French West
Indies Fleet. He stated to the informant that there was no English
blockade of Martinique as evidenced by the arrival of the 8. S. Cuba
and one or two American cargo ships. He did state that British
Cruisers were nearby and would undoubtedly try to prevent any
French naval units from leaving. He felt that his relations with
the British Admiral at Bermuda were most cordial and mentioned that
the British Cruiser remained twenty miles off shore on July 11 at
his request after signalling its intention to engage in target practice.
Admiral Robert is apparently pro-British and hopes for an amicable
settlement between the two countries.
2-
Regraded Unclassified
133
POLITICAL CONDITIONS
The internal situation in Martinique is said to be
serious. There are foodstuffs for normal usage for five or six
weeks. There would be no actual starvation for several months.
The food supply in Guadeloups is low and has been aggravated by
the arrival of the French training ship with her complement of
700 non. Little food is produced on the island. All staples
are imported from France. The white residents are of the opinion
a serious food shortage would be productive of riots. The
government is endeavoring to carry on public work projects in order
to provide work and quiet the uneasiness and unrest. The mass
of the population of Martinique, 250,000, is controlled by black
political leaders who in turn are controlled by the whites. The
black leaders are becoming increasingly difficult to handle,
demanding greater concessions in the form of higher wages, shorter
hours and better treatment. While there are three social classes,
white, mulatte and black. A very few white families, who are
closely intermarried, control the country. The important govern=
sent officials are all appointed directly from France and are
French whites. There are many government employees who receive
their education in France at the expense of the Martinique govern-
ment.
While Admiral Robert, the High Commissioner, is seld to
be pro-British, the Governor, Monsieur Henri Bressollers, who arrived
in Martinique four months ago, 1a said to be definitely anti-British
and has vehemently denounced the British support of Blue and his
Popular Front government which he says was responsible for the defeat
of France. He thought the recognition of the Petain Government was
the only recourse open to the French. His further attitude is
reflected by his statement that British Officers at Dunkerque
forced French soldiers to remain behind while the British were
being evacuated. He predicts a German invasion of England and
the total defeat of the English unless they accept German peace
terms. He then visualises a continental bloo to effect trade pacts
with the Pan American trade bloo and stressed the hope that the
United States would nake a trade agreement with the French West
Indies.
Monsieur Andre Garcin, President of the Bank Credit
Martiniquais, does not believe in the stability of the Petain
government. While he prefers to remain French he thinks that an
American protectorate 10 the best solution for the time being.
-3-
Inclassified
134
Other persons in Martinique, including M. E. Aubery,
industrialist and reputed the wealthiest man in Martinique; Leon
Hayot, industrialist; Andre Dorn, sugar factory manager; Robert
de Jaham, engineer; Renee Cottrell, ship agent; M. Latil, Manager
of French Cable; Chief of Police, Captain de Jaham of Martinique
Colonial Army; R. A. de Schusten, former American Vice-Consul;
Leon and Victor Albert, and others seem to be of the opinion that
while they would prefer remaining French if possible they would
welcome an American protectorate at least temporarily, and that
they do not look with favor upon the present French Government.
The Colonial Army of Martinique consists of 1800 native
soldiers, 150 white commissioned and non-commissioned officers, for
the most part equipped with rifles and bayonets. There are about
150 gendarmes, mostly white, scattered throughout the island. The
police of Fort-de-France are captained by M. Ancelle, who claims
to have American citisenship and at one time lived in the Canal
Zone.
ECONOMIC CONDITIONS
Since the armistice between France and Germany the
French West Indies have been isolated from their capitol. Some
residents think this isolation only temporary and the economic
adjustment in France will soon begin. Others, far more numerous,
consider the present situation hopeless and would welcome any
solution of the dilemma in which they find themselves. The
situation both politically and ecomomically 1s described as being
very tense and chaotic.
Admiral Robert is of the opinion that one of the most
pressing problems is a solution of the problem of exchange in order
that there may be & free flow of trade between the United States and
the French West Indies. Commerce is now at a standstill. Assets
of Martinique citisens in banks at Trinidad and Santa Lucia, British
West Indies, are fromen.
There has existed & liberal French economic regime which
protected French products sold in the colonies all well as the colonial
products sold in France, Prices were high because of the duties
and the high freight rates between France and the colonies. The
prosperity of Martinique is said to be due to the high subsidy
granted on island products, sugar, run and bananas constituting more
than ninety per cent of the exports. France has always absorbed the
Regraded Unclassified
135
Regraded Unclassif
products of Martinique and furnished by far the greater part of
the imports, consisting largely of wheat flour, salt fish, rice,
corn, coffee and table oils. For this reason Martinique has not
been forced to look for any markets in the Western Hemisphere.
High duties against products of the French colonies have oon-
stituted an additional barrier to trade with Latin American
countries. The average imports for the past eleven years amounted
to 199,000,000 francs annually. The exports during the same period
were 221,000,000. The principal crop is sugar. Harvest was COM-
pleted in the latter part of May. The entire crop for this year
has been sold and shipped to France but no payment has been re-
ceived as the funds are fromen in France.
To relieve the desperate situation the informant believes
some provision must be made whereby the French West Indies can dis-
pose of their products and buy the necessary goods in the Western
Hemisphere, and hopes that a plan will be perfected to permit
commercial agreements between Martinique and the American countries.
Business men of Martinique feel that there should be a resumption
of consular relations between the United States and Martinique.
At present for a French citisen to obtain a visa to visit the United
States he must go to Trinidad, and with the present strained re-
lations between England and France the residents are unwilling to
do this.
JOHN EDGAR HOOVER
136
DIRECTOR
Federal Bureau of Imeatigation
United States Department of Justice
Washington, B. C.
July 31, 1940
PERSONAL AND CONFIDENTIAL
BY SPECIAL MESSENGER
The Honorable Henry Morgenthau, Jr.
The Secretary of the Treasury
Treasury Department
Washington, D. C.
My dear Mr. Secretary:
I am transmitting herewith copies of a
memorandum received from a confidential source
which pertains to economic conditions within Mexico
and which may be of interest to you.
Sincerely yours,
Enclosures
J. Hower
137
COPY
July 17, 1940
The President 1s discussing two reorganization
schemes concerning two vital branches of industry: oil and
railroads, both of which have not been as prosperous in
the workmen's hands as had been anticipated. These dis-
cussions have now been going on for some time without any
visible results. As a matter of fact the Railroads seem
to be going from bad to worse. Lack of discipline 1a still
causing constant accidents with the consequent loss of life
and material, Service is bad and rates are high, and the
public is getting pretty tired of these conditions,
Lic. Suares and Sub-secretary of Foreign Affairs,
Lic. Beteta, heading the Mexican delegation to the Havana
conference, are said to have left last night for Cuba to be
in time for the inauguration on the 20th. Mr. Suares wanted
to hear propositions from the Mining Industry by which help
could be extended through the proposed Inter-American Cartell
to be discussed at Havana. The uncertainty and vagueness
surrounding the Havana Meeting mnde it impossible to talk
about suggestions. So, what was given to Mr. Suarez were
merely the facts about the present situation. Before expecting
help from the outside, especially in regard to financing the
country, they should endeavor to bring some relief from the
inside. Lowering of taxes, stabilized labor conditions, a
stabilized exchange, etc., would be the most essentials. But
in that respect nothing has been done. On the contrary, the
exchange is showing a tendency again towards & lower dollar.
It went again today to 4.96 and someone claims to have heard
the President say that he will get exchange back to 3.60 before
leaving office.
There has been no change in the status of the Cananea
strike, but the agitation for sympathetic strikes in the industry
seems to have died down.
(The last paragraph refers to the strike at
Anaconda's Copper Mines in Sonora which in of several months'
duration.
COPY
Regraded Unclassified
138
Regraded Unclas
COPI
July 17, 1940
The President is discussing two reorganization
schemes concerning two vital branches of industry: oil and
railroads, both of which have not been as prosperous in
the workmen's hands as had been anticipated, These dis-
cussions have now been going on for some time without any
visible results. is a matter of fact the Railroads seen
to be going from bad to worse, Lack of discipline is still
causing constant accidents with the consequent loss of life
and material. Service is bad and rates are high, and the
public is getting pretty tired of these conditions.
Lic. Suares and Sub-secretary of Foreign Affairs,
Lic. Betsta, heading the Mexican delegation to the Havana
conference, are said to have left last night for Cuba to be
in time for the insuguration on the 20th. Mr. Suares wanted
to hear propositions from the Mining Industry by which help
could be extended through the proposed Inter-American Certell
to be discussed at Havana. The uncertainty and vagueness
surrounding the Havana Meeting made it impossible to talk
about suggestions. So, what was given to Mr. Suares were
merely the facts about the present situation, Before expecting
help from the outside, especially in regard to financing the
country, they should endeavor to bring some relief from the
inside. Lowering of taxes, stabilised labor conditions, a
stabilised exchange, etc., would be the most essentials. But
in that respect nothing has been done. On the contrary, the
exchange is showing a tendency again towards a lower dollar,
It went again today to 4.96 and someone claims to have heard
the President say that he will get exchange back to 3.60 before
leaving office.
There has been no change in the status of the Cananea
strike, but the agitation for sympathetic strikes in the industry
seens to have died down.
(The last paragraph refers to the strike at
Ansocnda's Copper Mines in Sonora which is of several months'
duration.
COPI
JOHN EDGAR HOOVER
139
DIRECTOR
Federal Turrau of Investigation
United States Department of Justice
PERSONAL AND
Washington, D. C.
CONFIDENTIAL
BY SPECIAL
July 31, 1940
MESSENGER
The Honorable
The Secretary of the Treasury
Washington, D. C.
My dear Mr. Secretary:
I have been informed that retail mer-
chants, generally, throughout the United States
are restricting, to a large extent, the matter
of granting credit, such restriction being
caused by anticiptation of the enactment of
the Conscription Act. I am further informed
that an official of the National Association
of Furniture Dealers recently voiced an opinion
that within a few weeks it is doubtful if any
unmarried man between the ages of twenty-one
and thirty-one will be able to obtain credit
privileges unless considered an extraordinarily
good credit risk because of family connections.
I thought you might be interested in
this information.
Sincerely yours,
J.20.2000
2.
Drover
ON EDGAR HOOVER
DIRECTOR
140
Federal Burran of Investigation
United States Department of Justice
Washington, D. C.
August 1, 1940
PERSONAL AND CONFIDENTIAL
SPECIAL MESSENGER
The Honorable
The Secretary of the Treasury
Washington, D. C.
My dear Mr. Secretary:
With reference to my letter dated
July 17, 1940, I am transmitting herewith as of
possible interest to you a copy of a memorandum
dated July 31, 1940, containing additional
information received from a reliable confidential
source concerning labor conditions at the Boeing
Aircraft Company, Seattle, Washington.
Sincerely yours,
1
Hower
Enclosure
Regraded Unclassified
141
July 31, 1960
Information has been received from a
reliable confidential source that negotiations
between the Boeing Aircraft Company, Seattle,
Vashington, and the Aeronautical Mechanics Union
in regard to the proposed strike to take place
August 1. 1940. are still under way and there is
no present indication as to the outcome of these
negotiations.
It 10 reported that John Bader, President
of the Beeing Aeronautical Mechanics Union. in a
noonday speech on July 30, 1940, instructed plant
employees to leave the plant without damaging
property in the event the strike occurs. Bader
reportedly further instructed that if any of the
employees observed another employee damaging the
company's preperty. he should "beat up" that
employee and then bring his before Bader so that
any other action necessary might be taken as to
the offender.
The informant stated that is view of
the above, Boeing Aircraft Company officials are
not anticipating any trouble should the strike
occur on August 1. 1940.
142
August 2, 1940.
Dear Mr. Purvis:
For your confidential information, I attach
herewith a copy of a lotter which I have received
from Mr. H. S. Vance of the Advisory Commission.
This letter indicates that some more or less defi-
nite arrangement has been made by Mr. Baker, of
the British Purchasing Commission, to coordinate
your machine tool program with the United States
national defense program.
I have received your note of August 1st con-
cerning the use of the Federal Reserve Bank by
the Dominion Government, with attached letters
from the Honorable 0. D. Howe. I shall call these
to the attention of the Secretary immediately upon
his return.
Sincerely yours,
(Signed) Philip Young
Philip Young,
Member, President's
Liaison Committee.
Mr. Arthur B. Purvis,
British Purchasing Commission,
15 Broad Street,
New York, New York.
PT/jm
143
15 BROAD STREET, NEW YORK
TELEPHONE HANOVER 2-2460
BRITISH PURCHASING COMMISSION
August 1, 1940.
Dear Mr. Young:
Use of Federal Reserve Bank by the
Dominion Government
As promised I send you, for the Secretary, a
copy of the Hon. C. D. Howe's letter to me of July
26th. We can perhaps discuss this subject next week
when the Secretary returns.
Yours sincerely,
Arthur B. Purvis
Phillip Young, Esq.,
Washington, D. C.
BECEINED
oner = DUA
- (wint
group shift W silld
144
Office of
0
P
The Minister of Munitions and Supply
Y
Ottawa, Canada
July 26th, 1940
Dear Mr. Purvis:
In the course of our luncheon with Mr.
Morgenthau in Washington, Mr. Morgenthau suggested that the
Dominion Government should pay for its purchases in the
United States through the Federal Reserve Bank of New York.
I have discussed the matter with our
Minister of Finance and with the Governor of the Bank of
Canada, and enclose the comments of Mr. Graham Towers on
Mr. Morgenthau's suggestion.
It occurs to me that the proper procedure
for placing this matter before Mr. Morgenthau is through yourself.
I would be glad if you would place the information before him
and let me have his suggestions in the light of Mr. Towers' letter.
I am sure that the Treasury here will follow
Mr. Morgenthau's wishes after he has given consideration to the
views expressed by Mr. Towers.
Yours very truly,
(Signed) C.D. Howe.
B. Purvis, Esq.,
Director General,
British Purchasing Commission,
15 Broad St.,
New York
145
OPT/MM
BANK OF CANADA
Ottawa, July 24th, 1940
Dear Mr. Howe:
You will recall that in conversation a
short time ago you told me that Mr. Morgenthau had discussed
with you the procedure followed by Dominion Government in
making payments for purchases of war supplies in the United
States, and had enquired whether these payments could all be
made from a Bank of Canada account with the Federal Reserve
Bank of New York. Since the Bank of Canada commenced operations,
It has carried en account with the Federal Reserve Bank, so that
there are no insuperable difficulties in the way of adopting Mr.
Morgenthau's suggestion. But, for reasons which I am indicating
below, it would be more convenient to follow another procedure.
As matters stand, I believe that Munitions
and Su ply contracts are made direct with the suppliers in the
United States - this being true even when the organisation
headed by Mr. Purvis acts as the agent in the first instance.
When the time comes to settle with the verious contractors,
payments are made by means of cheques issued by the Controller
of the Treasury, drawn on the Dominion Government's account with
the Bank of Montresl in New York. There have been a few ex-
ceptions to this rule: for example, some payments have been made
through American banks such as the National City Bank. In that
case, the Controller of the Treasury issues a cheque on Bank of
Montreal, New York, in favour of the National City Bank. I
believe, however, that it has been suggested that exceptions of
this character should be eliminated, and that all payments to
contractors should be made through Bank of Nontreal.
This being the case, there are two possible
alternatives to Mr. Morgenthau's suggestion:-
(1) Arrangements could be made by Dominion
Government so that he could get the information
which he would like to have from the Bank of
Montreal. It must be admitted, however, that
there are undesirable features to this procedure.
(2) Arrangements could be made through the Con-
troller of the Treasury to supply him with information
in respect to payments made for purchases of munitions
and supplies. Mr. Morgenthau would then obtain, in a
convenient way, all information which would be available
to him if payments were all made through our account
with Federal Reserve Bank.
Regraded Unclassified
146
The Hon. C.D. Howe
2
July 24th, 1940
The main U.S. dollar account of the
Dominion Government is carried direct with Bank of Canada,
and we, in turn, hold the balances with the Federal
Reserve Bank of New York. But the use of the Bank of
Montreal in New York for chequing purposes, and for main-
tenance of moderate working balances, does represent a very
material convenience so far as the Dominion Government is
concerned. Perhaps after giving consideration to the foregoing
you might wish to have a talk with Dr. Clark to decide what
reply should be made to Mr. Morgenthau.
In our conversation you also enquired
whether we had received any estimate of Munitions and
Supply contracts which would be placed in the United States
during the course of the next few months - as Mr. Morgenthau
had indicated interest in such information. We have received
no estimates.
Yours sincerely,
(Signed) G. F. Towers
The Hon. C.D. Howe,
Minister of Munitions and Supply,
Ottawa.
147
0
0
2
Y
THE ADVISORY COMMISSION 90 THE COUNCIL OF NATIONAL DAFENSE
FEDERAL RESERVE BUILDING
WASHINGTON, D.O.
July 31, 1940.
Mr. Philip Young
Assistant to the Secretary
U. 8. Treasury Department
Washington, D. 0.
Dear Mr. Young:
will you please express to Mr. Ballantyne our apprecia-
tion of his release of four Giddings and Lewis boring mehines to
Koppers Company who have an important contract for gan mounts, and
could not have net delivery requirements except for the concession
of the British Purchasing Commission.
In regard to this general subject, Mr. Baker of the Bri-
tish Purchasing Commission was here yesterday and vo found our
selves in complete agreement on the miter of coordinating the
pressing needs of machine tools for our defense program, and the
needs of Britain and Canada, regardless of the terms of British
and French contracts outstanding.
Mr. Baker will spend a day or more each week in Washing-
ton, working with Mr. Donald Nelson to this end.
I an sure that this is an important accomplishment which
will be sutually advantageous to the British and ourselves.
Sincerely yours,
// 1. 8. Vance
1. 8. Vance
Regraded Unclassified
148
TREASURY Sec. 1,3, and 2
MT
PLAIN
Shanghai VIA NR
Dated August 2, 1940
Rec'd 4:39 p.m. Aug 3
Secretary of State,
Washington.
731, Second.
FROM COMMERCIAL ATTACHE. Weekly Financial.
Shanghai open market foreign exchange rates slightly easier
during week due to persistent import cover but selling at the lower
rates by hoarders and overbought speculators prevented further do-
cline. Inter bank spot selling rates this morning around five
fifteen sixteenths cents and three twenty seven thirty seconds pence
saving high during week of six one eighths and three twenty nine
thirty seconds and a low of five seven eighths and three twenty
seven thirty seconds, August delivery one thirty second cent and one
sixty fourth. Penny lower, September delivery three thirty seconds
cent and one sicty fourth penny lower than August rates. Note local
rates this morning on a parity of sterling United States dollar of
three point seven one whereas New York free sterling closing rate
for August first was at three point eight eight five, indicating that
Shanghai developing independent free sterling market. Chinese financial
circles express belief that present steady rates due to marketing time
by speculators who are unwilling to operate on account of their belief
in the
149
-2- 731, August 2, 4:39 p.m. from Shanghai.
in the possibility of unexpected attempts for a China Japan pease
and their apprehensions of world wide repercussions in case of
actual German invasion of British Isles, sentiments similar to
those which prevailed recently in New York stock market. (END SECTION
ONE)
BUTRICK
NK
hd
150
atp
PLAIN
Shanghai via NR
Dated August 2, 1940
Rec'd 8130 a.m. 3rd
Secretary of State,
Washington.
731, August 2, (SECTION TWO)
These circles also believe that despite present saturation d
commodity hoarding and business industrial setback in Shanghai,
unslackened import demand will weaken rates in late August and
early September. It is also believed locally that a break in rates
with erratic flucuations may be expected in September as cash is now
again abundant in Shanghai and speculators may use such funds for
exchange operations, however should any Sinc-Japanese peace negotia-
tion develop entire picture would be changed. Other quotations this
morning: gold bare around yuan five four five naught having high
during week of yuan five five three naught and low of yuan five three
hundred, wei wah cash discount rate four point six percent, Bank
Japan yen one for Chinese yuan one point two eight, military scrip
yen one for Chinese yuan one point two four, Central Bank gold unit
for yuan two point seven naught seven or United States dollars naught
point six three five, Shanghai customs gold unit rates for duty pay-
ment purposes at Hua Hsing yuan two point eight nine five or Chinese
yuan
151
-2- 4731, August 2, (SECTION TWO) From Shanghai via NR
yuan four point five seven four because Hua Hsing yuan commands
today premium of fifty eight percent over Chinese yuan, Tientsin
exchange rates five nine sixteenths cents and three five eighths
pence, Tientsin Shanghai remittance charge seven point two five
percent, (END SECTION TWO)
BUTRICK
TFV
hd
252
HDS
PLAIN
SHANGHAI VIA N.R.
Dated August 2, 1940
Ree'd 8:00 p.m.
Secretary of State,
Washington.
731, (SECTION THREE)
Tientsin Federal Reserve Bank yuan nine four point seven five
for Chinese yuan one hundred, Shanghai-Tientsin remittance Shanghai-
Chinese yuan eleven hundred Tientain to receive FRB yuan one thousand.
Yesterday's closing quotations: Chinese domestic bonds average five
one point eight eight ex interest, Shanghai general stocks average
two three four point naught six, Shanghai rubber shares average two
five eight point one eight. Ministry Finance Chungking as of August
1st lowered "commercial rates of yuan" from seven pence to four one
half pence, former rate unchanged since early July last year. United
States dollar equivalent of four one half pence determined by New York
free sterling rates. This has no connection with Shanghai open market
rates though for a time Shanghai exchange rates lowered a little on
receipt of the news. Note this "commercial rate of yuan" is difference
from official stabilisation rates of yuan at thirty cente and fourteen
one half pence which remains unchanged. For details relation of
"connercial rates" refer Consulates 565 and 566 of July 6 last year
transmitting Commercial Attaches Nos. 6 and 7 to Commerce. Ministry's
act
153
-2- 4731, (SECTION THREE) From Shanghai via N.R.
act on mere recognition of fact that commodity prices in Chinese
controlled interior have risen and that adjustment is necessary.
INFORM COMMERCE.
(END OF MESSAGE)
BUTRICK
JRL
hd
dury
154
August 2, 1940
MEMORANDUM FOR THE FILES:
Cabinet meeting - Friday, August 2, 1940
The President congratulated Secretary Hull on his success at the
Havana conference. He told him that he thought he had done a grand job
and the publicity on the success of the conference could not have been
better. Mr. Hull said he had nothing to discuss at the Cabinet today.
After I had shown the President the Times Index of business
activity and the statement on national defense expenditures for the past
year, he asked me about the excess profits tax bill. I had intended
taking this matter up at the close of the Cabinet and asking for a
conference with him for Mr. Sullivan and myself to discuss the situation,
but he started right out discussing the whole matter. He asked me if
I had been informed of his conferences with Messrs. Doughton and Cooper
and with Senator Harrison on the proposed tax bill. I told him that I
had not been informed except to the extent that the conferences had been
reported in the newspapers, which were not very fully stated. He then
told me that he had made it plain to these gentlemen that we must have
an excess profits tax bill this session; that he did not want to be
bothered with the details of the bill but would leave that entirely to
the legislative branch of the Government, but he did want to impress
upon them that he had to have a bill of some kind this session and if
there were any mistakes in it, they could be corrected at the next
session. I then told him the situation as Mr. Sullivan had related it
- 2 -
155
to me earlier in the day, that apparently from the conversations which
Mr. Sullivan had had with the representatives of the Ways and Means
Connittee and the Senate Finance Committee, about the only thing the
Committees were thinking of is a "face-saving" bill, and not one that
will really get the revenue on an equitable basis. I told him that
Mr. Stam's bill did not get any revenue from & corporation which had
been earning, say 35 per cent on its invested capital over the past
four years, unless it earned more than that rate in the years to come.
I also stated that I did not think this could be termed a fair excess
profits tax bill. The President then said he did not want this bill to
get bogged down because of differences between the Treasury experts
and the Congressional experts. The main thing now is to get a bill
through and then straighten it out next January. He said even the
amount of revenue is not so important at this time. I then asked him
if he would take a "face-saving" bill if that is what the Committees
insist upon. He said, "Yes." He asked that I pass this message on to you.
Mr. Stimson said that he also had the tax bill on his agenda to
discuss at the Cabinet meeting. He wanted to stress the fact that the
delay in enacting legislation covering the amortization question was
holding up many contracts in the Army- Mr. Knox also said it was holding
up many in the Navy: that industry was just not signing the contracts
as long as this question remained open. Mr. Stimson said that he thought
haste is certainly important in the interest of national defense. He
wondered if the two committees could not agree immediately upon the
provisions covering amortization and publish the fact that they had
agreed. He thought this would help 8 great deal and that many of the
- 3 -
156
contracts would be signed if they thought that Congress would go ahead
with the program agreed upon.
The President then suggested that we try to write a preamble to
the proposed tax bill which would lay down the general principles with
respect to (1) the amortization question; and (2) the excess profits
tax question; and that the two committees in Congress agree to the
preamble to the proposed bill. That preamble made public would be an
inducement to industry to sign the national defense contracts. I told
him that we could probably work out the preamble but I did not think
that the fact that the two committees agreed upon it would necessarily
bind the two Houses of Congress. The President agreed to this, but said
that if this preamble could not be agreed upon by the two committees,
then he thought they might agree upon a joint statement concerning
amortisation, which statement would be made public and used by the War
and Navy Departments in its negotiation for national defense contracts.
He thought this statement should assert that the plants built for
emergency national defense could be amortized within a five-year period
with a provision that if the emergency ends before the five-year period
is over, an amended tax return could be filed.
Mr. Stimson then discussed the status of the conscription bill
on the Hill. He said that he thought it might take a word from the
President to move the bill along. There was quite a discussion of the
principles of conscription and the various organizatiomin the country
which are opposed to it. The President said that he had already told
Congressional leaders that it was up to Congress to fix the age
157
- Is -
limitation in the conscription bill, but that he had announced publicly
that he was in favor of the draft. He also stated it was generally
known that Mrs. Roosevelt was a pacifist and that ahe was tied up rather
closely with the youth movement. As & result of this, she is getting
a great deal of mail. She told the President last night that 95 per cent
of her mail at this time is opposed to the draft bill. Yet, she says,
when you analyze this mail, it 1s perfectly apparent that their reasons
are false and are not based upon known facts to the writer. She said
that many of them feel that because of the statements in the Press
regarding the age limitation of 20 to 65, a great many old people and
those who are better fitted for some other line of work will find them-
selves in a military training camp. The President said that the view
is of course just plain nonsense. No responsible official of the
Government had any such idea. He discussed at great length his conference
of this morning with a group of women representatives of various
organizations throughout the country. He said there were about 165
present. He thought that when he got through discussing the theory of
the draft, they were quite well impressed with what the Administration
is trying to do in this connection.
Mr. Jackson discussed at some length a few anti-trust cases and
then brought up the Westrick case. The President asked him if the
publicity had in any way hurt his case against Dr. Westrick. Mr. Jackson
stated that the publicity had not hurt the case, but that it had
destroyed a place where the Department of Justice had been able to get
a great deal of information of the workings of the German machine.
- 5 -
158
Now that this had been made public, Dr. Westrick would have to move to
another place or the Germans would probably get another man to replace
him. This means that the Department of Justice will have to find out
who this new man is and where he is located. There was then 8 discussion
of Jim Mooney's article in this week's Saturday Evening Post along this
general line. Mr. Jackson said that it is amazing the contacts
Dr. Westrick had been able to make since being in this country. He did
not think that the Fifth Column activities are now so much concerned with
blowing up plants, but they are more concerned with getting the industrial
leaders of the country on their side. They have, therefore, attempted to
impress large industrial leaders, like Henry Ford, that American industry
should trade with Germany; that the war should stop, and it is only
England's fault that it is now being carried on; that as soon as it is
over, trade will be resumed with Germany and there will be a profit for
all. The Americans who have their plants closed or operating under strict
orders in Germany, are promised that their plants will be reopened and
freed.
Mr. Knox then gave an account of a conference he had last evening
with the British Ambassador. He said that the British Ambassador called
him while he was at dinner and told him he had a very important matter
that he wished to discuss with him that evening. Mr. Knox stated that
he went over to the Embassy and talked with the Ambassador for some time,
and the Ambassador gave him quite a pitiful story. Mr. Knox seemed very
much worried about the whole situation. The Ambassador made a great
plea for 50 American destroyers and he wanted Knox to exhaust every means
- 6 -
159
that he could think of before giving him a negative reply. He said the
shipping situation in Great Britain is quite serious and unless they
get these 50 destroyers, he did not know what would happen to the British
Isles. Mr. Knox said he then asked the Ambassador if his country had
ever considered selling a part of the Islands in this Hemisphere for
these destroyers and other supplies. He thought that the British should
understand that the United States would anyway have to defend these
Islands if we are called upon to defend this Hemisphere. The Ambassador
said that he had not discussed this with his Government, but that he
would be glad to take it up if Mr. Knox wanted him to. Mr. Knox asked
the Ambassador if it would hurt the British Government if this desperate
situation were made public in the United States in our discussion with
the Legislative Branch regarding ways and means of transferring these
destroyers to his Government. He said they would have to take that
chance but the situation demanded action.
Mr. Hull was asked if acquiring any part of the British territory
in this Hemisphere would violate the agreement just reached in Havana.
The President and Mr. Hull both thought that it might, and the President
then suggested that probably we could lease a part of this territory
along the same general lines as we are now leasing a naval base in
Trinidad. There was then a general discussion of this whole question as
to the ways and means which might be found to furnish the British the
additional destroyers. Every one thought it was quite important that
if we did furnish the British these ships, that the British in return
would promise that no part of its fleet would under any condition fall
into hands of the German Government if the British lost the war, but
160
- 7 -
that the British fleet would at least be sent to this Hemisphere. There
was some question as to whether this should be part of the formal
agreement or whether it might not be better to have it as an informal
understanding.
Mr. Hull thought that about the only way to accomplish the transfer
of the destroyers to the British Government would be to repeal that old
law which prohibits such sale, and this repeal could not be accomplished
without some very definite understanding between the President and
Mr. Willkie. It was, therefore, suggested that the President have
William Allen White, who not only has the confidence of the President,
but also has the confidence of Mr. Willkie, come to Washington to
thoroughly acquaint himself with this question by discussing it with
the British Ambassador and Secretaries Hull and Knox. The latter two
were instructed to prepare a statement which Mr. White would take to
the President at Hyde Park on Monday or Tuesday, and after getting the
President's approval, White would discuss it with Mr. Willkie. If
agreement is reached, an attempt will then be made to get legislation on
the subject after the publication of the joint statement. Messrs. Wallace
and Jackson thought it poor politics to consult Willkie. Jim Farley
thought it an excellent thing to consult him, it was for the good of
the country, and to him what was for the good of the country, was good
politics.
Mr. Hinckley of Commerce again brought up the importance of the
tax measure in connection with the production of airplanes. He said
that the airplane manufacturers were contributing approximately $100,000
161
20 - fund, supposedly for educational purposes, but he had a mispicion
that it night be used in connection with any tax program. At any rate,
he thought the delay in the tax measure was also causing a delay in
production of planes.
He said that Civil Aeronautics Authority had 18,000 youths in
actual training for work in the Air Corps and that they had 12,000
additional on ground training. They were employing at the present time
about 1600 training planes in 500 universities throughout the country.
The President asked him how many persons would receive their preliminary
course in 1941. He said that about 45,000 studints would receive the
preliminary course and about 9 to 10,000 would receive their secondary
course. Then these students have received their secondary course,
practically all of them will make pilots for the Army and Navy.
Se stated there WAS a great need for about 3800 airports in this
country which will cost about $500,000,000. The airports today are not
at all suited for the heavy Army and Navy planes and it is quite
important that some consideration be given to this matter. The President
PAÍd that he had asked Congress for all of the money that he intended
to ask for this session. lie is wondering if the Civil Aeronautics
Authority could not use some of the WPA money. Mr. Binckley said that
he could URE some of the WPA funds, but the Amount was limited. He
thought Colonel Harrington had some $35,000,000 for this purpose, but
that was guite inadequate.
DWB
Regraded Unclassified
162
NATIONAL DEFENSE EXPENDITURES
War
Navy
Total
July, 1939
$ 49M
$ 60M
$ 109M
August
45
69
114
September
46
62
108
October
52
63
115
November
50
68
118
December
54
71
125
January, 1940
58
74
132
February
57
72
129
March
64
78
142
April
62
97
159
May
67
87
154
June
64
89
153
Total fiscal year 1940:
$ 668M
$ 890M
$ 1,558M
Total fiscal year 1939:
490
673
1,163
July, 1940
79
98
177
August 2, 1940
Regraded Unclassified
163
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 2, 1940
Secretary Morgenthmu
TO
CONFIDENTIAL
Mr. Cochran
FROM
The only transactions in registered sterling effected today by the six reporting
banks were purchases of 130,000 for customer account.
The Federal Reserve Bank of New York stated that 15,000 in registered sterling
were purchased from it by a non-reporting bank.
In the open market, sterling was first quoted at 3.88-1/2. Although it eased
during the morning to 3.86-1/2, it subsequently recovered, closing at 3.88. The
reporting banks executed orders to sell 136,000, of which L31,000 were for account
of Far Eastern and Near Eastern banks, and L5,000 for commercial concerns, Orders
to purchase L49,000 were also executed, and of these, 135,000 were for commercial
concerns, the other L14,000 being bought for European banks,
The discount for the Canadian dollar continued to widen, and the closing quotation
as 12-1/2%, as against yesterday's 12%.
The other currencies closed as follows:
Swies franc
.2274
Lira
.0505
Reichsmark
.4005
Cuban peso
10-5/8% discount
Mexican peso
,2015 bid, .2036 offered
There were no gold transactions consummated by us today.
The Federal Reserve Bank of New York reported the following shipments of gold:
$2,361,000 from Portugal, shipped by the Bank of Portugal, to the Federal Reserve Bank
of New York, to be earmarked for its account.
270,000 from England, shipped by the Swise Bank Corporation, London, to its New York
agency, for sale to the U. S. Assay Office.
$2,631,000 Total
The State Department forwarded to us a cable stating that the following gold
shipments were made from England, all of which are for sale to the U. S. Assay Office
at New York:
$
56,000 shipped by Sharps and Wilkins, London, to the Central Hanover Bank and Trust
43,000
Company, New York,
shipped by Johnson Matthey, London, to the Canadian Bank of Commerce, New York.
36,000 shipped by Johnson Matthey, London, to the Chase National Bank, New York.
33,000 shipped by Sharps and Wilkins, London, to the Chase National Bank, New York.
$168,000 Total
164
- 2 -
The Bombay gold price was slightly higher at the equivalent of $33.72.
Spot silver in Bombay was equivalent to 44.56, off 1/16#.
In London, the prices fixed for spot and forward silver were both unchanged at
22-5/16a and 22-1/16d respectively. The U. S. equivalents were 40.51$ and 40.06#.
Handy and Harman's settlement price for foreign silver was unchanged at 34-3/46.
The Treasury's purchase price for foreign silver was also unchanged at 35#.
Ve made four purchases of silver totaling 600,000 ounces under the Silver Purchase
Act. Of this amount, 250,000 ounces represented a sale from inventory, and the
remaining 350,000 ounces consisted of new production from foreign countries, for
forward delivery.
CONFIDENTIAL
JMP.
165
Angust 2. 1940
Prefermer Chamberlain.
Mr. Cookram
Rr. Livesey sold ne yesterday w telephone that the Swine Minister is Vashington
had taken up with Mr. James Duan, Advisor to the Secretary of State en Political
Affaire. the question as to whether there vac any likelihood of this Devertment
blecking Svice assets is the United States. In 8 previous americation I have
recounted a conversation which I had with the twice Minister 46 Monday, following
the appearance in the veekend pross of a story that Germany had made sovere demands
upon Switzerland for old, fuel and foodstuffs. the Drine Minister had told M that
he had received a flat official denial of this story from his devernment.
I told Mr. Liversy of the call which I had received from the Svice Minister.
I added that he could let He. Dunn know that the Treasury vas not now contemplating
the imposition of control on twice assets is the United States. The question had not
been submitted to Secretary Morgenthan, nov on holiday, and there is no present plan
to open this question. We are, havever, watching Ovies balances in this country.
70ml
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166
JR
PLAIN
London
Dated August 2, 1940
Rec'd 2 Dalla
Secretary of State,
Washington.
2528, second.
FOR TREASURY FROM BUTTERVORTH.
1. With reference to the first paragraph of my
No. 1832 of June 25, I am cabling the text of the Anglo-
Brazilion agreement signed July 30, supplied by the
British Treasury which states "though it may not be
verbally exact, C.S WE have not yet had a copy sent us as
signed: these are the operative articles and WE shall
not know till the mail arrives whether there are some :Ends
and tails to add; but these do not matter." The British
Treasury also asks that the taxt be treated 28 confidential
since it is between the two central banks and will not bE
published.
"1, All trade and financial payments between Brazil
and the sterling area shall be contracted in starling.
In the CAGE of debto due to Brazil necessarily payable in
milraio, E.G. dock dues, shipping Expenses Etc., from
persons resident in the starling area, milrtis may be
purchased from the Bank of Brazil by sterling area debtors
against credit of sterling to a Brozilian special account.
"2.
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167
-2- #2528, August 2, from London.
"2. The Bank of Brazil shall quote rates for sterling
based upon the corresponding rates for dollars fixed 07 the
Brozilian authorities and the official middle price for cold
in London which at 168/6 per fine ounce is squivalent to
04.02-1/2 sounls.pounds 1.
"3. All sterling payments to Brazil from persons
resident in the starling payments to Brazil from persons
resident in the sterling area shall DE made to the special
account of the Bank of Brazil at the Bank of England or to
opecial accounts of the Bank of Brazil with their
correspondents in the United Kingdom registered at the Bank
of England, or to special accounts of other banks operating
in Brazil which may, subject to the prior agreement of the
Bank of Brazil and of the Bank of England, bE opened with
their United Kingdom correspondents after registration at
the Bunk of England. Sumo standing to the credit of a
Brazilian special account may be freely transferred from one
Brazilian special account to another but may not bE
transferred to a non-resident account EXCEPT to C. Brazilian
sterling area account. A non-rasident account means the
account of any person resident outside the sterling crea.
"4" Sterling accruing to Brazilian special accounts
shall be used for the payment of commercial and financial
services in starling due from Brazil to the starling area
such
Regraded Unclassified
168
⑉3⑉ #2528, August 2, from London,
such 20 - (a) payments through the usual service bankero in
respect of federal, state and municipal debt. (b) Other
sterling requirements of the Brazilian Government. (c)
Interest and dividends and other remittences on other
starling area invostmento in Brazil. (d) Shipping freights
and insurance. (E) Sterling area exports to Brazil. (f)
Purchases in the market or directly of federal, state and
municipal bonds of the public debt of Brazil issued in
Great Britain and of isoues of British owned undertakings
in Brazil subject to agreement between Brazilian Government
and undertakings concerned. (s) All other paymento by
Brazil to sterling area.
"5. The Brazilian authorities shall take all possible
stres, in cooperation with the United Kingdom Exchange
control, to ensure that all payments and remittances to
the sterling area will bE made from a Brazilian opecial
account and not otherwise.
"5. The balance of the special account of the Bank of
Brazil at the Bank of England shall carry a guarantee based
on the o ficial middle price of gold in London (at present
168S. GD. per fine ounce). Should any alteration in the
official price of gold in London occur the sterling balance
on this special account shall bE revolued accordingly.
"7. Notwithstending the fortgoing provisions of this
agreement,
Regraded Unclassified
169
-4- #2528, August 2, from London.
agreement, the Bank of England may authorize the opening
or maintenance of accounts with banks in the United Kingdom,
to be denominated 'Brazilian sterling area accounts', in the
name of persons resident in Brazil but having Close
connections with any territory in the sterling area, to which
credits representing income arising in the sterling area
would be permitted. Transfero from special accounts to
Brazilian sterling area accounts may be permitted. Sumo
standing to the credit of these accounts may bE used only
(a) for payments to persons resident in the sterling area,
other then payments in respect of goods exported from the
starling area to Brazil or remittances of financial services;
and (b) payments to a Brazilian special account. They may
not bE jaid to any other non-racident account (as definied
in paragraph S).
"8. Upon the expiry of this agreement- (a) the guarantee
provided for in clause 6 shall continue to apply to the balance
hEld on the special account of the Bank of Brazil at the
Bank of England.
(b) Balances remaining on Brazilian special accounts
shill be utilized for the purposes laid down in clause 4.
"9. The sterling area comprises the United Kingdom,
any other part of His Majesty's Dominions (EXCEPT Canada,
Newfoundlend and Hong Kong), any territory in respect of which
Regraded Unclassified
170
-5- #2528, August 2, from London,
= mandate on behalf of the League of Nations has been
accepted by His Majesty and is being by His
Majesty's Government in the United Kingdom or any
dominion, any British protectorate or protected state,
Egypt, the Anglo-Egyptian Sudan and Iraq.
"10. This agreement shall take Effect immediately
and shall ramin in force until 30th September 1941. If
neither the Bank of Brazil nor the Bank of England shell
have given notice to the other six months before the above-
mentioned date of their intention to terminate the agreement
it shall remain in force until the expiration of
six months after the date on which either the Dank of Brazil
or the Bank of England shall have given to the other notice
of termination."
2. The British Treasury is going chead with its
network of payments agreements. Aa previously reported, a
payments agreement has been made with Hungary and the
agreements with Sweden and Rumania remain, for what they may
bE worth. Agreement has been reached with Portugal and the
mechanism put into Effect but the Portuguest have been
unwilling to sign a dÉfinitive arrangement until after the
procedure has operated experimentally for a while. The
British Treasury states in confidence it intends to approach
the Spanich about payments for articles outside of the
clearing
Regraded Unclassified
171
⑉6⑉ #2528, August 2, from London.
clearing and also to have further discussions with the
Turks in this connection but Anglo-Turiclah negotiations are
really a perpetual matter.
Agreement has been reached with Uruguay but not yet
signed. An agreement with Chile is under active discussion.
Negotiations have started with Bolivia and a counter draft
to the VEnEZUELAN proposals of some time ago is being
prepared. A British representative plans to arrive in Peru
on the 14th for discussions there,
There have been desultory conversations with Japan
which would like 2 gold settlement weekly. This is
unacceptable to the British who however cannot GEE how
it would benefit Japan to agree to a payments arrangment
similar to those being made with other countries. The
British Treasury feelo that sooner or later it will have
to put up the question of whether a unilateral clearing is
to bE imposed on Japan but has not yet approached the
Foreign Office about this hypothatical contingency.
KENNEDY
HPD
Regraded Unclassified
172
CABLE
FROM: Treasury Attache Nicholson,
Shanghai, China.
DATE: August 2, 1940
For the Secretary of the Treasury.
Shanghai market August 1 closed quiet at 3-55/64
for cash and August for sterling 5-31/32 for cash 5-15/16
for August for U. S. dollars. Gold bars closed at 5405 and
wei wah at discount of 4.70%.
NICHOLSON
173
COPY
Federal Reserve Bank
of New York
INCOMING CABLEGRAM
Sydney, August 2, 1940
Federal Reserve Bank of New York
New York
No. 82
Referring to our letter of March 14
(1) Effective on August 1 Australian exchange control has
been adjusted to conform generally with that of United Kingdom
(2) Exports are now required to be paid for as follows
(a) To the United States and territories (except
American Samoa) Switzerlend and Sweden in Dollars
Swiss Francs and Swedish Krona respectively or in
registered Sterling under letter of credit or
otherwise
(b) To other countries with which United Kingdom have
made special account arrangements in official
sterling under letter of credit or otherwise
(3) Other transactions follow closely the line of United
Kingdom Control
(4) We shall be pleased to cable more details if you wish
Full information goes forward by mail.
Governor
Commonwealth Bank of Australia.
274
August 2, 1940
Professor Chamborlain
Mr. Cochran
At our Group Neeting yesterday I montioned that I had just received a telephone
call from Mr. Livesay of the Department of State, in regard to the application of
Charles Pettines (No. 663.of July 26, 1940) for the insurance of 6 letter of credit
to pay for an importation of $8,000 with of prophite from fanancive,
to be skipped w the Scoiete Generals des Graphites.
Mr. Livesey stated that Mr. lares, representing the above-mancd individual,
had been is touch with the Department of State is regard to this application, as
will as an carlier application, No. QUOT of July 26, and is very enzione that
faverable action be taken inmediately by the Treasury since s ship specially
chartered to bring graphite to the United States is now ready to sail. Mr. Idvesty
nantioned that the Department of State had cosupied itself with the question of
obtaining graphite, as important strategie material and had had as exchange of cable-
press on this subject. Consequently the Department of State would like to ⑉ this
matter expedited.
16.m.p.
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Regraded Unclassified
175
August 2, 1940
Prefesser Chamberlain
Mr. Geshran
M 9,45 this norming Mr. Livesey telephoned as that the State Department had
received two cablegrams from w Motory of Sentlege, Chile, is regard to payments
for Chilesa products contracted for w France. Be to sending over the coblegrame
as seen as paraphrases are más. Be explained that despatch 690 of July 87 which
10 neationed is cas of these commissions has net you been received. Me will
provide u with copies thereof as seen as 19 arrives. Be asked If we know anything
of the transactions under reference. From the text of the first of the cablegrams
11 appeared to me that the transaction which the French Mahang is Names Aires
had desired, analy, the payment to 10 of $20,000,000 for purchases as well as fee
maintemence of diplematic and consular difficure in certain latts American countries,
was perhaps involved.
H.M?
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Regraded Unclassified
176
Angust 2. 1940
Professer Chemborlain
Mr. Cechren
while talking w telephone with Mr. Livesey of the Department of State this
norning I nentioned the mbject of the termines treaty between France and the United
States which vas discussed in our Group Meeting yesterday afternoon. Mr. Livesay
volunteered that the subject of ratification of this treaty had cass up within the
last month in his Department. Judge Meero had recomended that the Department of
State should not take the initiative is pushing the Senate toward giving advice and
consent on this treaty. Beither should the Department of State attempt to block
notion thereen. It was desided that the Senate should be left entirely free. If
it should take favorable action, the question would then be left to the Fresident
as to whether he would ratify the convention. If this is done prior to the clese
of the present year, 11 would become effective on January 1, 1941.
Lux
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177
August 2, 1940
Professer Chamberlain
Mr. Cookran
AS 11:30 A. N. en July 31. Mr. Livesey telephened me that a Foreign Officer en
duty is the Department of State, Mr. Kalmsley, has been sending is the past & neathly
check for $100 to an alies is Biarrits is Transe and Mrs. Maria Banes Prode, 19
Avenue Carnet. Inquiry 10 now made as to whether such remittances sould be effected.
After talking with Mr. Pehle, I teld Mr. Livesey that the Treasury was continuing to
refrain from approving remittances of this type to aliens in countries whose assets
are blocked in the Waited States.
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178
August 2. 1940
Prefesser Chamberlain
Mr. Cechren
w telephone last evening Mr. Livesey of the Department of State told se that
Mr. Rebert Pell of the Burepean Division of the State Department had received a
personal letter from Mr. Paul Yes Sealand, en-Prine Minister of Belgium, saking
Pell's assistance is obtaining the freeing of his funds hold in the United States.
Mr. Van Zeeland unde the point that he had - to this country last Auturn to take
up residence have as an efficer engaged is refuges wellef verk, and had left the
United States only temperarily to return to Barage with the view to effering his
services to Belgium in the war. be had arrived is Belgium too late for this, and
is nov bask is the Valied States to recome the work for which he Case to this -
try. I told Mr. Livesey that I believed R. Van Seclend's application had been
received and that instructions would @ out refusing 10. Livesey stated that the
application was No. 6261 of July 22, 1940,
Just
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179
August 2, 1940
Prefesses Chamberlain
Mr. Cochren
Mr. Livesey of the State Department told se at 6:00 last sight that he had as
his desk a letter from Belgian Special Ambacander Thousis dated July 19, 1940,
which be hesitated to file since there me as record of any reply having been me
thereto. This letter conserned funds advanced by Thousis for paying service en
Belgion dellar bonds, and a copy thereof was transmitted to the freasury Department
by & third person note dated July 24. Mr. Livesey desires to know whother setion
has been taken is the premises by the Treasury, and whether my reply has been mão
by us directly or otherwise to Antensenter Thousis.
Sm.H
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180
lagues 2, 1940
Professor Chemberlain
Itr. Cochren
Mr. Alexander of J. P. Morgan and Company, Inc., telephened as from Ter York
at 3:00 p.m. yesterday. Be stated that his fire vas the paying agest for two French
fovernment leass, cas LOVER percess and use DATES and one-half persent. The etak-
1M fund installments of $350.000 are the each south. Approximately stasty percent
of the outstanding bends of those too Issues are nov held is Prence. Heretofore
the French Government has deposited france with Morgan and Company in Paris to take
care of the bonds hold is Frence.
Due to changed conditions. Morgan and Company in New Terk have sev drawn w .
cablegram for transmission to their fire is Paris suggesting # method of taking care
of future service 00 these two leams. He. Alexander read no the draft of the cable-
gras, but I did not take it dewn. I told his that I eculd not express an opinion
thereon, but would be glad to submit it to 47 colleagues in the Foreign Funds Centrol
Group, which VAS then meeting. Mr. Alexander decided net to sek this, bal to 60
seal and read the cablegram. If this is favorably reseived in France, bis organize-
tion vill then apply for the accessary license, end Mr. Alexander will let us know
If and when such action is taken. I told Mr. Alexander that no could be
gives his nov as to what decision the Treasury would take, in the absence of full
information being provided to as.
pml
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181
August 2, 1940
Professor Chanberlain
Mr. Cookson
Mr. Livesty of the State Department told - at 6:00 yesterday creating that
Assistant Secretary of State Deris had received an urgest appeal from the Mealean
Antesender for assistance in obtaining the release of funds from the National City
Bank for Meziean diplematic representatives is Burepo. The Mexican Ambucander was
to provide the Department of State at asse with a witten statement. 1 teld
it. Livesey that if the Department of State would them transmit this document to us,
se would consider 10 promptly.
pmp
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Acgment 2. 19/10
Professor Guaberiain
Mr. Cochrem
B. Livessy telephened DE from the Mate Department at 11:45 today to the
offect that a cablegram had been reseived from the State Department representative
st Isuase, Lithmania, is regard to the desire of ninety-two American citizens
resident In Lithmania to return to the United States on the American transport
which is due to mil free Potenne on August 8. It appears that the leeal authori-
ties will permit these people to my their transportation is lite but will not
allow them to take their capital out of Lithmania in lits. unless the American
Dovernment will make available to Lithmania as equivalent - in dollars. If any
action to to be taken by the American authorities to nosist in the situation. it
met be done at once since it is understood that there will be only the one miling
from and 11 is - question of five days' travel to reach Paterno from Issues.
I seld Mr. Livesey that I could mesest M immediate solution, but would submit the
matter to our Group this afternoon. In the meantime, Mr. Livessy is seeking the
advice of Mr. Berle on the subject, since there would be involved - question of
recognition of pelitical authorities. etc., of primary interest to the Department of
Aste.
B.M.S.
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G-2/2657-235
M.I.D., 7.D.
Tentative Lessons
Bulletin No, 28
August 2, 1940.
TENTATIVE LESSONS FROM THE RECENT
ACTIVE CAMPAIGN IN EUROPE
The information contained in this series
of Bulletins will be restricted to items
from official sources which are reasonably
confirmed. The lessons necessarily are
tentative and in no sense mature studies.
CONTENTS
GERMAN ATTACKS UPON MODERN
PERMANENT PORTIFICATIONS
1, Pioneer Troops.
A. Duties.
Pioneer troops constitute the special units which
have served as spearheads for all successful German attacks upon
modern permanent fortifications during recent hostilities in Europe,
These units are generally referred to as assault detachments,
Pioneers are primarily charged with the duty of
reducing strongly fortified areas, emplacement by emplacement. In
operations other than those against permanent fortifications, they
have been used for capturing and clearing barricades, for over-
coming resistance in towns and villages, for slowing down enemy
movements, clearing the way for the advance of wheeled and foot
elements, and providing for the protection of flanks, gaps, and the
rear through efficient use of demolitions and obstacles.
b. Personnel and Organization.
Composition of the assault detachment is not
rigidly fixed; rather, it varies according to the nature of the
fortifications to be reduced. Its nucleus is an engineer unit, often
a company, whose routine and traditional duties have been taken over
by special labor and technical groups. Such groups assume responsi-
bility for map reproduction, rear communications, end other engi-
neering functions in order that the pioneers may be left free for
activities which are strictly combatant in nature. Other elements,
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such as infantry, antitank, and antiaircraft units, are joined
with the engineers to round out the detachment, The senior officer,
often an engineer officer, is in command,
Organization is further discussed in Paragraph 2.b.(1)
of this lesson.
0, Equipment.
Pioneer troops generally have available the
following equipment:
(1) For protection of personnel: Gas masks,
protectivedlothing for passage through fire.
(2) For detecting and removing mines: Mine
detectors, prodding rods, spades, picks,axes.
(3) For cutting passages through wire: Bangalore
torpedoes, wire cutters.
(4) For scaling walls: Ladders, both rigid and
cable.
(5) For crossing water barriers: Collapsible and
inflatable rubber boats, each carrying about
12 men.
(6) For blinding enemy observation: Smoke candles,
smoke grenades.
(7) For effect against armor plate: Flame throwers
thermite grenades.
Note: The flame thrower now in use is said to
have a range of 50-60 yards and a jet of heat
sufficient to melt 3/4-inch armor plate at
that range. It can be carried by one man.
After use, the flame thrower must be returned
to the factory for recharging.
(8) For placing charges: Long poles equipped for
this purpose.
(9) For demolishing structures: Issue explosives,
including 6.6 lb. block equipped with a hand-
grenade type of detonating cap.
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185
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de Historical Note,
In March, 1915, two German engineer companies and
& amall detail of field artillery were united near Cologne to form
what has since been called the original assault detachment. While
the detachment was almost entirely wiped out in subsequent action,
the conception of assault tactice which it developed was considered
sound. A few months later Captain Rohr, an infantry officer,
adopted for his Rohr Storm Battelions the principle of employing
engineer troops, with their specialized knowledge and equipment, for
assault purposes. Great successes resulted in further adoption of
the principle within the German Army, in continued emphasis upon it
after the war, and in extensive study of it in the Engineer Training
School at Dessair-Rosslau, It was during the Polish campaign that
the Germans first used direct antitank and antiaircraft fire in
support of assault operations, The recent and important contribution
of the engineers, or pioneers, in the reduction of permanent forti-
fications in the west will be shown in this lesson.
2. Technique Employed in Assault Operations.
Observation and study of attacks upon permanent
fortifications in Poland, Holland, Belgium, and France indicate that
the typical assault operation may be divided into six phases:
Reconnaissance, Preparation, Long Range Bombardment, Approach, Assault,
and Occupation.
B, Reconnaissance Phase.
The area to be sttacked is thoroughly reconnoitered
for information regarding features of terrain; location of bunkers,
strong points, and installations protective objectives; type of
weapons to be encountered and dead angles of those weapons, Such
information is obtained from serial and ground photographs and
observation, maps, reconnalssance in force, and reports of intelligence
agents,
The speed and precision with which the Germans
attacked and captured the Belgian fort at Eben Emael and Fort 505 of
the Maginot Line suggests that, through reconnaissance, they had
obtained much, if not all, of the following information:
(1) Eben Emael: The walls of the fort were almost
vertical and about 40 meters high, The King Albert Canal provided &
mater barrier 500 meters wide around two sides. Overhead cover con-
sisted of 2 meters of reinforced concrete and 5 meters of earth. The
fort was gas-proof, Among its weapons were 35 pieces of artillery
and 20 double machine guns, which provided all-round defense. Every
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aperture, every sentry position, every means of defense, and every
topographic feature in and about the fort was known to the Germans.
(2) Fort 505% The fort was located about 3/4
of the distance up the forward slope of a hill. It comprised two
armored sections, or combat blocks, and one casemate, all of which
were connected with one another and with other forts by undergound
passages. There were four armored turrets, one of which could be
elevated and lowered. The fort was armed with artillery up to the
caliber of 105 mm. and with machine gune. It was protected by
outpost positions - concrete dugouts and bunkers - located 1000 meters
in front.
b. Phase of Preparation.
The composition of the assault detachment, the
materiel and equipment to be used, and the training necessary for the
troops are determined only after B. careful study of information
obtained through reconnaissance. It is impossible to place too much
emphasis upon the necessity of making thorough preparation and de-
veloping e plan providing for effective coordination of all elements
participating.
(1) Composition of Attacking Force.
General organization and pioneer units has
been discussed in Paragraph 1.b. of this lesson. The following
specific examples should be noted:
(a) Eben Emael: The assault 178,6 made by a
picnoer battalion supported by an infantry battalion, light tanks,
antitank units, antiaircraft artillery, air detachments, and a
parachute infentry company of about 100 men.
(b) Fort 505: The attacking force was
composed of a company of pioneers supported by an infantry battalion,
medium and heavy field artillery, antitank units, antiaircraft artillery
and air detachments,
(2) Choice of Equipment and Materiel,
Knowledge of terrain and obstacles is important
for proper selection of weapons and equipment for pioneer troops.
Those have been described in Paragraph 1,c. of this lesson.
Mortars and high velocity, flat trajectory weapons are used
by supporting artillery and infantry. Photographs indicate that 37mm.
and 75mm. guns are employed at very short range. In addition, a promi-
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nent German general staff officer reports the development of a shell
which breaks up concrete at low mussle velocity. While the construc-
tion of the shell is undetermined, its effect is said to depend upon
a specially constructed point and a delay fuze rendering high missle
velocity unnecessary.
(3) Training of Attacking Force.
When the necessary composition of the force
has been determined and the choice of proper equipment and materiel
has been made, the troops to be used are given careful practice upon
terrain approximately as closely as possible. that of the area to be
attacked. Maps and scale models are studied. The actual storming is
rehearsed step by step, with particular stress upon coordination of
all elements. For example:
(a) Eben Emael: In a carefully guarded area
of Poland, a replica of Fort Eben Emael was constructed. For several
weeks the assaulting troops, including parachutists, rehearsed the
attack in all its details. Each parachutist was assigned a particular
task, such as overcoming a sentry, rushing an entrance, or closing
an exit.
(b) Fort 505: Plans were made for repelling
a possible counter attack, and troops designated for this operation
rehearsed it carefully.
0. Phase of Long Range Bombardment.
This phase begins with the establishment of
local air superiority. The bombardment is then effected by air forces
and long range artillery, which, over a period of several hours, bomb
and shell the entire area to be attacked. Activity is directed
primarily at strong points and defending artillery. Under cover of
this fire, roads which might be used for counter attack are blocked,
while pioneer troops, light and medium artillery, antitank and anti-
aircraft guns are moved up within range of the objective.
In the operations at Sedan, no artillery
preparation was made because physical conditions did not permit the
forward movement of both tanks and artillery without curtailment of
the momentum of the drive. Instead, the area to be attacked TRS
subjected to B. 25-hour dive bombardment, which was effective beyond
artillery ranges. This enabled tanks to cross the entire fortified
zone in one bound and had a devastating effect upon the nerves of
defending troops.
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0. Approach Phase,
Light and medium artillery go Into action, seeking
especially to register hits at vulnerable points, such as loop holes,
vision alots, door hinges, cupolas, turrets, and ventilating systems.
The bombardment includes both high angle and flat trajectory fire.
High velocity artillery, antiaircraft and antitank guns are brought
up as far as possible for the purpose of direct fire upon the
fortifications. The effects of this close range bomberdment are as
follows:
(1) Camouflage is dislodged.
(2) lline fields and obstacles about emplacements
are broken up.
(3) Some defending weapons are silenced.
(4) Craters to be used as cover for advancing pioneer
troops are formed.
(5) Breaks and cracks in concrete are effected.
They facilitate the use of explosive charges in
a later phase.
Under cover of this fire, as well as under the
protection of rifla and machine gun fire by the infentry, the assault
detachment moves as fer forward ad possible, taking advantage of
craters and dead spaces created y the bombardment. Bangalore
torpedoes and other distributed charges are used for clearing a path
through barbed wire entanglements.
There water barriers exist, pioneers and infantry-
men are brought across in collapsible rubber boats, which can be
launched, loaded, paddled, and unloaded with great speed. As soon as
possible, the bridge train comes forward, and engineers begin the
construction of a light pontoon bridge for use by tanks and other
supporting units.
Certain instances and exceptions should be noted:
(1) Eben Emaol: Belgian and German reports differ
na to the manner in which the pioneers crossed the Albert Canal, The
former say that the Belgian soldier whose duty it mas to destroy tro
bridges over the canal was killed before he could perform his task
and that the troops marched across, The German accounts say the
pioneers crossed in collapsible boats, However, since they admit that
there were tanks and vehicles waiting on the far bank to assist them
In the edvance towards the fort, they imply the bridgeo were used to
some degree in the operation.
(2) Fort 5051 The close range bombardment was
particularly successful in this attack. Many bits on apertures
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were registered. Conorete tainkers and field positions in front of
the fort were neutralized by direct fire even before the approach
of the pioneers.
Assault Phase.
When, under cover of close range bombardment, the
assault detachment has reached a position close enough to rush the
first emplacement to be attacked, the detachment commander orders A
rocket signal for the cessation of artillery, antiaircraft and antitank
fire. This fire is shifted to the next emplacement to be assaulted,
The assault detachment now closes in on the 0
placement, taking advantage of weapons particularly suited to the
accomplishment of its mission. Smoke candles and smoke grenades
are used to blind enemy observation. Flame throwers and thermite
grenades produce effect upon armor plate and help to blind bunker
ports. Hand grenades and explosive charges are placed in any avail-
able openings, including the weak points developed by direct fire
upon the concrete face, and a special effort is made to place
explosives inside the bunker. Charge-placing poles are used to great
advantage throughout this phase of the assault. Explosive charges
can be built up in sections to obtain tresendous disrupting effects,
In conjunction with frontal assaults at important
points, parachute troops have been landed, upon several occasions,
behind fortified zones for the purpose of attacking bunkers from the
rear. Their effort has been supported generally by the fire power of
aviation, but there is no evidence to indicate that aviation has been
used for bombardment of bunkers in direct support of frontal attacks.
The following variations of assault technique should
be noted:
(1) Eben Emael: Parachutists took up positions on
the fort side of the Albert Canal before the pioneers crossed the
water barrier, and one German report says that they held these positions
for 24 hours before they were joined by the pioneers. In addition,
surprise landings were made by parachutists and troops in gliders,
either on top of the fortification or within its walls, apparently
during the assault phase, All troops so landed were probably provided
with flame throwers and other pioneer equipment. Reports differ as
to whether overhead cover was provided for the entire fort. A London
official source indicates that it was not, and that an air photograph
made after the capture showed the ground area within the walls pitted
with bomb craters. The photograph also showed six parachutes and ton
gliders inside the fort. The gliders were large; they carried from
10 to 20 men each, Apparently they were towed up to a certain height
RESTRICTED
7
Regraded Unclassified
190
RESTRICTED
by power-driven aircraft and then released.
(2) Fort 505: The destruction of its ventilating
system was a large factor in putting this fort out of action, It
was accomplished through liberal use of high explosive charges.
During the assault phase, the French attempted a tank counter attack
from the flank, but this effort was rendered fruitless by German
infantry, light fast tanks, and entiaircraft units, which had been
carefully prepared and rehearsed in anticipation of such an attack.
All German units were subjected to heavy artillery and machine gun
fire from nearby forts throughout the operations against Fort 505.
f, Phase of Occupation.
Infantry and mechanized units advance, occupy
positions reduced by the assault detachment, and begin exploitation
of the break through. The attack towards the interior is made with
all possible dispatch in order that defonses in the rear may be
taken by surprise.
At Sedan the rapid advance of mechanised, motorized,
and line infantry divisions was protected by intensive air support,
and excellent coordination of air and ground forces was a major
factor in the German success. The break-through was facilitated
by the fact that the Allies had inadequate airpower, a shortage of
antiaircraft artillery, and ineffective armor-piercing ammunition.
3. Conclusions.
The foregoing summary of steps in German attacks
upon modern permanent fortifications 15, in itself, explanatory of
the success achieved. Perhaps the two most important elements in
this success are:
a. Organization and use of engineers as pioneers,
described above.
b. Complete coordination of all elements involved, in
accordance with a carefully detailed and rehearsed
plan based upon painstaking reconnaissance.
RESTRICTED
- 8 -
Regraded Unclassified
191
August 2, 1940
Secretary Morgenthau
E. H. Foley, Jr.
I am attaching a digest of decisions reviewed by
the Board of Tax Appeals during the week ended August 2,
1940. Also attached are decisions of the United States
Processing Tax Board of Review received during the week
ended August 2, 1940.
192
DECISIONS of the UNITED STATES PROCESSING TAX BOARD OF REVIEW
received during the wook ending August 1. 1940.
Farmers Rice Milling Co., Inc.
V.
Docket No. 12
Commissioner of Internal Revenue.
Issues: 1. Is the surrender of tax-payment warrants
a payment of tax within the meaning of Title
VII of the Revenue Act of 19361
2. Did petitioner bear the burden of any amount
of processing tax, refund of which is claimed?
Decided in favor of the Government on the first issue, citing
Standard Rice Co., Inc. v. Scofield, Collector of Internal
Revenue, 27 J. Supp. 854. In view of decision on first issue,
the Board did not consider second issue.
Matthews dissents: In & twenty page memorandum attached to
the decision the following reasons were given for the dissent:
1. Title VII of the Revenue Act of 1936 and the Agricultural
Adjustment Act show on their face that satisfaction of the
tax by tar-payment warrants was intended as payment.
2. The legislative history of the sections of the Agricultural
Adjustment Act dealing with tax-payment warrants shows that
Congress intended that a tax antisfied by such warrants be
considered for all purposes as paid.
(Decision by the Board dated July 29, 1940. signed by
John 1. Edwards, Member.)
Arkansas State Rice Milling Company
7.
Docket No. 117
Commissioner of Internal Revenue
Issue
)
Decision
)
Same M is above.
and
)
Diesent
)
(Decision by the Board dated July 29, 1940,
signed by E. Stewart McDonald, Member.)
Regraded Unclassified
193
- 2 -
El Campo Rice Milling Go., Inc.
T.
Docket No. 30
Commissioner of Internal Revenue.
Issue
)
Decision
)
Same as in above.
and
)
Dissent
)
(Decision by the Board dated July 29, 1940,
signed by L Stewart McDonald, Member.)
Jack J. Croft
v.
Docket No. 285.
Commissioner of Internal Revenue.
Issue: Should the petition be dismissed for failure to
comply with Rules 4, 5, 6 and 7 of the Rules of
Practice and Procedure before the Board? An
imperfect petition was filed.
Decided in favor of the Government.
(Order of dismissal by the Board dated July 30, 1940,
signed by Charles West, Member.)
No dissents.
The Hub, Inc.
v.
Docket No. 278.
Commissioner of Internal Revenue.
Issue
)
Decision
)
Same as in above.
and
)
Dissent
)
J. Manly Smith
T.
Docket No. 284.
Commissioner of Internal Revenue
Issue
)
Decision
)
and
)
Same as in above.
Dissent
)
Unclassified
- 3 -
Ramon Suriaga
V.
Decicet No. 194.
Commissioner of Internal Revenue.
Issue: Should the petition be dismissed for failure to comply
with Rules 4, 5, and 6 of the Rules of Practice mi
Procedure before the Board? An imperfect petition was
filed on September 12, 1939. (In January 5, 1940, the
petition was dismissed for failure to comply with the
Board's rules. On March 20, 1940, the Board on peti-
tioner's motion extended the time allowed to comply with
its rules.
Decided in favor of the Government.
(Order of dismissal by the Board dated July al, 1940,
signed by Charles Nest, Member.)
No dissents.
195
DECISIONS REVIEWED BY THE BOARD OF TAX APPEAIS
RECEIVED DIRING WEEK BUDING AUGUST 1, 1940
mini, 92700) George H. Whiteley, Jr,, 42 B.T.A. No. 61 (Income Tax) Opinion
of 10% Disney.
Lobie 1: Was petitioner in substance the grantor of a trust created which
in form created by his wife, where the corpus thereof was owned by
the prior to the creation of the trust?
(us - decided in favor of the Government; consequently petitioner ia taxable
on the income under Sec. 166 because as designated beneficiary of trust
lie was (a) entitled to all of the net income of the trust; (b) could,
with the consent of nominal settlor (wife) require trustee to distribute
to kin unounts of principal for his maintenance, support, enjoyment, etc;
(c) could vote and exchange the stock; (d) exercise power of appointment
on the corpus by will; (e) sell, exchange, etc. property of trust. Also
taxable under Sec. 167 on income used to pay insurance on his life.
Losué 2: Io petitioner taxable on income of irrevocable trusts created for
benefit of his children, the trusts providing that income thereof was to
be distributed to donor to be used solely for children's maintenance,
support, education and enjoyment and if not so used to be invested but
doring taxable year income was not distributed but became part of
corpus?
Tes - decided in fevor of the Government. If trust income may in dis-
cretion of grantor be distributed to him, it is taxable to him whether
listributed or not. Sec, 167(a)(2). llenry A. Loeb, 40 B.T.A. 517.
The restriction (that it should be used only for education, maintenance,
etc.) entailing only what would cause grantor's treability under Dou-las
V. Villouts, 296 U.S. 1, does not prevent application of rule in Loob
COSO, ..lso, since income could be spent for "enjoyment" of minors,
who la not legal obligation of Fother, no difference From et more
listribution to grantor.
Issents: Members Murdock and Vallott.
docunto: Leech (Members Smith, Van Fossan c Tyson agree) - Grave
doubt BE to correctness of majority decision on first issue.
Conclusion on second issue inconsistent with other Doard decisions.
rentor is taxable only on income actually received and used to discharge
his legal obligations. Fact that discretion to distribute incooe vested
in grantor and not in trustee unimportant. Loeb case inapplicable. Here
LBS of income was restricted to that of neeting grantor's legal obligation
crul sime it wes not received or used it is not taxable to him.
Regraded Unclassified
196
-2-
Atta Listerson, 12 D.S.A. 42. (31ft Tex) Ginton by Dirner.
Reze imaband and wifo, owning community property, executed a joint
and coverent providing that the survivor should receive 1 life
in the entire community estate with remainders over to their
pic children, and after husband's death, petitioner (wife) executed an
document of transfer releasing to her children all of her interest in
of the original comunity estate, what property right of wife
your released - what constituted the subject matter of gifts to the
children?
aller in fever of the Government. & full life interest In one-half of
original community ostate.
cani rejected petitioner's contention that upon her husband's Jonth
04 MIP acceptance of benefits under the will, she was livested of all
in and to her one-half interest in the community estate except
type provided for in joint will and covenant, and under that instrument
EYE Kad no right except to support and maintenance which she termed
limited life estate; and that relinquishment thereof to resaindermen did
:00 constitute taxable gift.
||old that although joint will and covenant could have been revoked by
consent during joint lives of makers, after husband's death and peti-
Lioner's acceptance of benefits thereunder, she could not repudiate covenant
to detriment of beneficiaries. Children's remainder interests because vestod
when husband died and petitioner accepted benefits under will and thereafter
petitioner had no interest in community estate other than A full life interest.
it husband's death, will operated to pass a life interest in his undivided
one-half interest in comunity estate to petitioner with remainders in fee
to the children, while as to petitioner, it operated as transfer to children
of reminders in fee in her undivided one-half interest in said estate.
Children's vested remainder interests in fee vested in 1931 and unaffected
by fact that instrument may still operate as petitioner's will and control
the disposition of other property at her death.
Dissents: Dr. Vellott (Members Smith and Harron agree) (upholding position
assended answer). Remainder interests of husband and wife did not pass
to children and become vested in fee in 1931 at husband's death. Peti-
tioner remained owner of an undivided one-half interest in fee in
commity procerty after her husband's death. Under instrument trans-
ferring her undivided one-half interest in community estate, she
therefore conveyed her undivided one-half interest in fee in community
property and should be taxed thereon. l'ere probating of joint will
does not pass interest of both makers while one survives. The surviving
party to an agreement for mutual will, can revoke it after death of the
first maker; hence no estate of the survivor vested under the vrill; all
that vests in such case io right to enforce the contract against sur-
vivor.
velly 8-1-40
8/1/40
Regraded Unclassified
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE
August 2, 1940
TO
Secretary Morgenthau
FROM
Mr. White
subject: The Work of the Habana Conference
OBJECTIVES:
The American delegation sought action on three lines:
(a) To provide safeguards against possible changes
in ownership and administration of European-held
territories in this hemisphere.
(b) To reduce the effectiveness of subversive activity
by totalitarian powers in Latin America.
(o) To reach agreement on a statement of general
principles on the economic side, with a view to
subsequent implementation to check economic
penetration by totalitarian powers.
(d) In addition, the occasion was provided to can-
vass informally the situation regarding commodity
surpluses and to get first-hand up-to-date infor-
mation on the economic situation.
ACCOMPLISHMENTS:
(a) The American delegation succeeded in getting the
Conference to approve a satisfactory declaration
on the subject of European-held territories in
this hemisphere, despite the considerable resist-
ance of Argentina and certain other countries.
The Argentine signature requires the approval of
the Government in Buenos Aires, and ratification
similarly is required in other countries.
(See appendix, attached, for gist of declaration.)
(b) The agreement regarding subversive activity is an
important step in the right direction, although
I do not know whether the State Department got all
it hoped for.
Regraded Unclassified
38
2
Division of Monstary
Research
(0) The statement on soonomic principles in aub-
stantially as desired by the United States.
(See appendix, Page 2, for outline of resolu-
tions.)
CO ITMENTS:
(a) I do not know whether Secretary Hull or Mr. Berle
made any commitments on the economic side in order
to win agreement on the "Act of Habana", I believe
that they did not go beyond the assurance that
proposals for economic and financial cooperation
would be given careful and sympathetic considera-
tion in Washington.
(b) Secretary Hull and Mr. Berle were quite pleased
with your telegram regarding possible use of the
Stabilization Fund and I am sure it helped.
(a) At the request of Secretary Hull and Mr. Berle, I
had long conversations with delegates from Brazil,
Argentina, Chile, Peru, Colombia and Mexico, and
brief conversations with technical men from some of
the other countries. Information not otherwise
available WBB obtained and some progress was made
in clarification of the economic problems confront-
ing the Americas, Naturally, I made no commitments
of any kind but offered no discouragement to their
hopes for assistance from the United States.
The Immediate Future:
Several delegations indicated that they expected
to proceed to Washington to enter into discus-
sions of economic cooperation. The Treasury will
probably be asked to undertake discussions regard-
ing possible operations for currency stabilization.
Accordingly, we are preparing surveys of the situa-
tions in individual countries which will be of use
when the subject comes up. Among the countries which
are expected to propose cooperative action in the
near future are Brazil, Chile, Argentina, Colombia
and Mexico.
Regraded Unclassified
Division of Monetary
Research
(Appendix)
The Gist of the Declarations:
1. On the political side, the "Act of Habana*
declares that when areas in this hemisphere
now held by non-American states are in danger
of becoming subject-matter of exchange of
sovereignty, the American nations may establish
regione of provisional administration, for the
defense of the continent and for the benefit
of the areas; when the emergency has passed
the areas would revert to original status or
be organized into autonomous territories.
It 1s specifically stated that transfer
of interests would not be recognized and the
American nations reserve the right to Judge
if a transfer or intent to transfer may impair
the political independence of such regions
even if no formal change occurs.
An emergency committee of one representative
per nation shall be set up and come into being
as soon as two-thirds of the nations name their
representatives.
But where immediate action is needed and
action by the committee cannot be waited on,
any American nation may act individually as
its defense or continental defense requires.
This appears to give the United States the
privilege of intervening when a European
possession 18 threatened with totalitarian
control. In other words, it whitewashes the
protective seizure by the United States of
such European possessions 8.9 the United States
may deem essential to preserving the status
quo in this hemisphere.
Administration may be executed by one or
more American states. Any country is free to
stand aside from the actual measures taken.
Some details of administration are stated, as
for example: no condition of privilege for
articular nations shall be created by the
administrator; natives of the administered
regions shall be allowed to participate in
administration; rights under local laws and
customs shall be continued where possible,
Regraded Unclassified
200
Division of Monetary
Research
2. On the subject of subversive propaganda,
each republic agreed to take suitable notion
within its country to suppress subversive
activity, to consult regarding a menace of
subversive activity when the State directly
interested requests it, and to exchange
information on such activity.
3. On the economic side, the declaration
reaffirms adherence to liberal principles of
beaceful international trade, looking forward
to the day when such doctrine might be embraced
by non-American nations but urging in the
meantime closer inter-American cooperation
towards 8 stronger inter-American economy as
a unit.
The Inter-American Financial and Economic
Advisory Committee, which has been meeting
in Washington since the Panama Conference of
1939, 1a charged with making recommendations
along several lines, as follows:
Greater use of surplus commodities
within the country producing the
surplus and more effective interchange
of surpluses among American nations,
including humanitarian distribution
of a portion if found feasible;
Promotion of orderly marketing
while protecting normal trade channels;
means of raising standard of living;
Stimulation of flow of developmental
capital, especially by Joint enterprises
in whose capital and administration two
or more republics participate, with the
recommendation that the Inter-American
Bank give such enterprises favorable
consideration.
Among the suggestions rejected was one
referring to ownership of European-owned
utilities in the event of & German victory.
Copies of the Final Act of the Conference
are attached.
Regraded Unclassified
201
DEPARTMENT OF STATE
FOR THE PRESS
AUGUST 3, 1940
No, 364
FINAL ACT
and
CONVENTION
of the
SECOND MEETING OF MINISTERS OF FOREIGN AFFAIRS
OF THE AMERICAN REPUBLICS
Habana, Cubo
July 30, 1940
***
Regraded Unclassified
202
CONVENTION
AND
FINAL ACT
OF THE
SECOND MEETING OF MINISTERS CF FOREIGN AFFAIRS OF
THE AMERICAN REPUBLICS, SIGNED IN THE CITY OF LA HABANA,
THE THIRTIETH DAY OF JULY, ONE THOUSAND NINE HUNDRED AND FORTY.
The Governments of the American Republics, in order that
their Ministers of Foreign Affairs or their Personal Repre-
sentatives might meet for surposes of consultation in accord-
anoe with agreements approved at prior Inter-American
Conferences, duly accredited the Delegates hereinbelow ex-
pressed (following the order of procedence determined by
lot) who met in the City of La Habana during the period com-
prised betwoon the twenty-first and the thirtieth of July,
one thousand nino hundred and forty, in answer to the invita-
tion of the Government of the Republic of Cuba:
HONDURAS
His Excellency Silvorio Lainez, Personal Representative of
His Excellency The Minister of Foreign Affairs.
HAITI
His Excellency Loon Lalcau, Secretary of State for Foreign
Affairs.
COSTA RICA
His Excellency Luis Anderson Morua, Personal Representative of
His Excollency The Secretary of Foreign Affairs.
MEXICO
His Excellency Eduardo Suarez, Personal Representative of
His Excellency The Secretary of Foreign Affairs.
ARGENTINA
His Excelloncy Loopoldo Melo, Personal Representative of
His Excellency The Minister of Foreign Affairs.
Regraded Unclassified
208
URUGUAY
His Excellency Pedro Manini Rios, Personal Representative of
His Excellency The Minister of Foreign Affairs.
ECUADOR
His Excellency Julio Tobar Donoso, Minister of Foreign Affairs
BOLIVIA
His Excellency Enrique Finot, Personal Representative of
His Excellency The Minister of Foreign Affairs
CHILE
His Excellency Oscar Schnake, Personal Representative of
His Excellency The Minister of Foreign Affaire
BRAZIL
His Excellency Mauricio Nabuco, Personal Representative of
His Excellency the Minister of Foreign Affairs.
CUBA
His Excellency Miguol Angcl Campa, Secretary of State.
PARAGUAY
His Excellency Tomas A. Salomoni, Ministor of Foreign Affairs.
PANAMA
His Excellency Narciso Garay, Sccrotary of Foreign Relations and
Communications.
COLOMBIA
His Excelloncy Luis Lopoz do Mosa, Ministor of Foreign Affairs.
VENEZUELA
His Excelloncy Diogenes Escalanto, Personal Representative of
Hio Excellency The Ninister of Foroign Affairs
EL SALVADOR
His Excelloncy Hoctor Escobar Sorrano, Personal Representativo of
Hio Excelloncy The Ministor of Foreign Affairs.
DOMINICAN REPUBLIC
His Excellency Arturo Dospradel, Secretary of State for
Foreign Affairs,
PERU
His Excollency Lino Cornojo, Personal Representative of
His Excellency The Minister of Foreign Affairs.
Regraded Unclassified
NICARAGUA
Br Excellency Marinno Arguelles, Minister or Foreign Affairs,
GUATENALA
His Excollency Carlos Salazar, Secretary of Foreign Affairs.
UNITED STATES OF AMERICA
Ete Excellency Cordell Hull, Secretary of State,
The Meeting hold its inaugural scosion on the twenty-
first day of July, One thousand nino hundred and forty, nt
four o'clock in the afternoon, in the Hall of Sessions of the
House of Representatives, in the National Capitol, in the
provonoc of His Excellency Dr. Fodorico Laredo Bru, President
of the Republic of Cubn, under the provisional presidency of
H1s Excellency Miguel Angel Campa, Secretary of Stato, with
Dr. Coanr Srlaya y de la Fuonte, noting DB Secretary General,
The Regulations for the Nooting were approved by the
Governing Board of the Pan American Union at a session hold
the twonty-ninth dry of June, One thousand nino hundrod and
forty, and the Agenda at a scosion held by the same body on
the fifth day of the curront month.
The aforcoaid Regulations and Aganda were ratified by
the Mooting in the proliminary secsion hold the twohty-second
of July, Ono thousand nino hundred and forty, at ton o'clock
in the morning.
At the Plonery Session hold the same dny nt four o'clock
in the afternoon, Dr. Higuel Angel Campu, Secretory of State
of the Republic of Cube, Was elected Permanent President of
the licoting.
In complience with the provisions of Articles VII and VIII
of the Regulations, the following Committees were created:
Orodontinls, Coordination, Noutrolity, Presorvation of Peace
in the Western Homisphoro and Economic Cooporation, For the
constitution of the latter three Committees the division in
three parts or chapters of the Agenda of the Nooting was taken
into consideration.
At the samo Proliminary Session at which the Regulations
were ratifiod, the members of the above-montioned five Com-
mittics were appointed, ДВ follows:
COMPITTEE ON CREDENTIALS:
Their Excellencies:
Nargiso Goray, (Panama)
Tomas A. Solomeni, (Paraguay)
Carlon Solazar, (Guntomnin)
Hector Escober, (El Salvedor)
Silverio Lainez, (Honduras)
Regraded Unclassified
COMMITTEE ON COORD. \TION:
Their Excellencies:
Leopoldo Nelo, (Argentina)
Mauricio Nabuco, (Brazil)
Cordell Rull, (United States of America)
León Lalcau, (Heit1)
COIMITTEE ON NEUTRALITY:
Their Excellencies:
Leopoldo Melo, (Argentina)
Luis Anderson, (Costa Rica)
Oscar Schnake, (Chile)
Pedro Manini Rios, (Uruguay)
Enrique Finot, (Bolivia)
Carlos Salazar, (Guatemala)
Silverio Lainez, (Honduras)
CONNITTEE ON PRESERVATION
OF PEACE IN The VESTERN MEMISPHERE:
Their Excellencies:
Cordell Hull, (United States of America)
Diogones Escalante, (Venezuola)
Mauricio Nabuso, (Brazil)
Julio Tober Doneso, (Erundor)
Arturo Despradel, Dominican Republic)
Tomas A. Solomoni, (Peraguay)
Narciso Garay, (Panama)
CONNITTEE ON ECONOMIC COOPERATION
Their Excelloncine:
Eduardo Suarez, (Moxico)
Luis Lopoz do Nead, (Colombia)
Lino Cornjoo, (Poru)
Mariano Arguellos, (Nicarague)
Loon Laloou, (Hoiti)
Hoctor Recober Serreno, (El Solvador)
Miguel Angol Compa, (Cubn)
At the same Proliminary Scesion already mentioned, it
was unonimously resolved that the Committoe referred to in
Articlo VI WAB to be mnde up by the Ministers of Foreign
Affairs of the American Republics or their Personal Repro-
sontativos.
It was likewise resolved that the Delegations that pro-
sented projects corrosponding to matters portaining to any of
the three last montioned Committoes, had the right to bolong
to the corresponding Committee, 08 cx-officio members.
The Second Meeting of the Kinisters of Foreign Affriro of
the Amorican Republics approved the following Votos, Notions,
Doclarations, Recommondentions and Rosolutions:
I,
Regraded Unclassified
206
-6-
I.
INTER-AMERICAN NEUTRALITY COMMITTEE
The Second Meeting of the Ministers of Foreign Affairs
of the American Republice
RESOLVES:
ONE: To urge the Inter-American Neutrality Committee
to craft a preliminary project of Convention dealing with
the Juridical effects of the Security Zone and the measures
of international cooperation which the American States are
ready to adopt to obtain respect for the said Zone.
TWO: To entrust the Inter-American Neutrality Committee,
which functions at Rio de Janeiro, with the drafting of a
Project of Inter-American Convention which will cover com-
plecely all the principles and rules generally recognized in
International Law in matters of neutrality, and especially
those contained in the Resolutions of Panama, in the individual
legislation of the different American States, and in the
recommendations alrendy prosented by the same Committee.
THREE: When the aforementioned Project has been drafted,
17 sholl be deposited in the Pan American Union, in order to
be submitted for the signature, adhesion and ratification of
the respective Governments of the Amorican Republics.
FOUR: Ponding the drafting, acceptation and ratification
of the Project, it 18 recommended that the American States
adopt in their respoctive legislation concerning noutrality,
the principles and rules contained in the Doclarations of
Panama and in the Rocommendations alrondy drafted, or which
may herenfter be drafted by the Inter-Amerionn Noutrality
Consittoo, it being suggested that the incorporation of the
said Resolutions and Recommendations in tho respective logis-
lattons be made, in BO for OR practicable, in a codified and
joint form,
FIVE: To direct that the aforementioned Inter-Amerionn
Nontrality Committee submit, whenover it may doem advisnble,
1tr. Recommendations direct to the Governments of the American
Republics, provided, however, that It shall report also con-
couning then to the Pan American Union.
SIX: To recommend that the Pan American Union circulate,
among the Governments of the American States. the minutes of
the Inter-Amoricon Neutrolity Committee of Rio de Janeiro, and
that the minutos be published by the Pnn American Union, when
the cold Committee deems it opportune.
BEVEN: That the Inter-Amorican Neutrolity Committee may
function with the attendance of n minimum of five members,
and that, whatever be the number of monbers present at the
Ocotings, resolutions shall be ndopted with the favorable
2010 of at lonst four monters.
EIGHT: That oven though the Condittoe is permanent in
cotspo, It is authorized to hold periodical meetings and to
1030m for E. specified time, without prejudice to the colling
of artroordinary copsions by the President, when some urgont
and important question 18 to be considered.
Regraded Unclassified
-6-
NIKE: 10 extend a Vote of plause and congratulations,
for its meritorious work, to the Inter-American Neutrality
Committee of R10 de Janeiro, and to its members, Their Excel-
lencies Afranio de Mello Franco, L. A, Podesta Costa, Mariano
Fontecilla, A. Aguilar Machado, Charles G. Fenkick, Roberto
Cordobal Gustavo Herrera, Manuel Francisco Jimenez and
S. Kartinez Mercado.
II.
NORMS CONCERNING DIPLOMATIC AND CONSULAR FUNCTIONS
WHEREAS:
1, One of the bases of the spiritual unity of the
Americas has its roots in the firm adherence by the peoples
of the Continent to the principles of international law.
2, The American republics on February 20th, 1928 signed,
at Habana, a Convention on diplomatic officers which contains
the principles genorally necepted by all nations.
S. The said Convention establishes, among others, the
following principles:
(a) Foreign diplomatic officers shall not parti-
cipate in the domostic or foreign politics of the state
in which they excrcise their functions.
(b) They must exercise their functions without
coming into conflict with the laws of the country to
which they are accredited,
(c) They should not claim immunities which are not
ossential to the fulfillment of their official duties.
(d) No state shall accredit its diplomatic officers
to other states without previous agrocment with the
lattor.
(o) Statcs any doelino to receive n diplomatic 01-
ficer from another, or, having already accepted him,
may request his recoll without boing obliged to atnto
the reasons for such a áccision.
The Second Neeting of the Ministors of Foreign Affairs
of the American Republics
RESOLVES:
To urgo the Governments of the American Republics to
provent, within the provisions of international law, politi-
onl activities of foroign dinlomatic or consular agents,
within the territory to which they are necredited, which may
endanger the pondo and the democratic tradition of America.
III.
Regraded Unclassified
III.
COORDINATION OF POLICE AND JUDICIAL
MEASURES FOR THE DEFENSE OF SOCIETY
208
AND INSTITUTIONS OF EACH AMERICAN
STATE
WHEREAS:
1. The First Meeting of Foreign Ministers of the American
Republica held at Panama, approved on October 3, 1939 & recom-
mendation on the coordination of police and judicial measures
for the maintenance of neutrality, article 1 of which states
as followe:
"That action be taken, a.B soon as possible, through
an exchange of views between the Foreign Offices, or
through an Inter-American conference, for the formulation
between thomselves of coordinated rules and procedure of
a useful, opportune and offoctive manner, that will facil1-
tato the action of the police and judicial authoritics of
the respective countries in preventing or repressing
unlawful activities that individuals, whether they be
nationals or alions, may attempt in favor of a foreign
bolligeront State.'
2, Experience has shown that it is not only desirable
to formulate such rules and procedure with reference to
noutrality, but it has also demonstrated the need to organize
in the most effective manner possible the defonse of society
and of the institutions of ench State not only against common
crimes, but likewise with respect to certain unlawful notivi-
tics which may nffect thom;
3. Such defense must be undertaken by the nuthorities
of oach State, but its efficacy depends to a largo oxtont upon
a common orientation, as uniform as possible, ns well as upon
an adoqunto and constant cooperation botwoon such authoritios;
The Scoond Meoting of the Ministers of Foreign Affaire
of the Amorican Republics,
RESOLVES:
ONE: The Governing Board of the Pan American Union sholl
convoko the States which are Mombers of the Union to an inter-
national conference nt such place nnd date BB it may determine
to draft the intornational conventions and recommendations
which it dooma necessary to assure through the action of the
propor authorities in ench State, and through the coordination
of such action with that of other States in the Continent, the
most complete and offectivo defoneo against note of an unlaw-
ful character, ns woll na against any other unlawful notivities
which may affoct the institutions of Amorican States.
TWO: In the said conforence, oach State shall be roproe
sented by a jurist with plenipotontinry powers accompaniod, if
doemed advisable, by exports on mattors portaining to the
police authoritics.
THREE:
Regraded Unclassified
THREE: Before the conference is convoked, the Pan
209
American Union shall undertake the preparatory work by means
of an inquiry among the Governments of the Continent with
re ard to the existing legislative or administrative pro-
visions, as well as with respect to their opinions on the
various topics which it 18 deemed advisable to consider.
IV.
INTER-AMERICAN LEAGUE OF NATIONAL RED CROSS
SOCIETIES
WHEREAS:
It is America's unavoidable duty, for reasons of human
solidarity, to contribute to the alleviation of the suffering
and misery of victims of war,
The Second Meeting of the Ninisters of Foreign Affairs
of the American Resublics
RECOMMENDED:
That the Fourth Pan American Red Cross Conferences, which
will meet at Santiago do Chilo next Docember, consider the
dosirability of organizing, along the general linos of the
Lengue of National Rod Cross Sociotics, an Inter-Amerioan
Loague of National Red Cross Societics, which shall coordinate
the action of the said Red Cross Societics of the American
countries and the cooperation of the Inter-Amerionn Lengue
and its Executive Committee with the League and the Inter-
national Committee of the Red Cross.
V.
PRECAUTIONARY MEASURES WITH REFERENCE TO THE ISSUANCE
OF PASSPORTS
WHEREAS:
1. A Passport in essentially an identification document
which accrodite in foreign countries the holder thorcof as a
national of the country which issues it;
2, Such document hrs nn eminently international charactor,
innamuch as its possessor uses it sololy 0.8 n document of
identification outsido the torritory of his country of origin
or of adoption;
3. Tho States of the American Continont must oxorcise
the utmost care in issuing possports for the use of thoir
respective nationala, in order that they may find greater
facilities in traveling through the countrice of America;
4. It is their duty to prevent the use of counterfeit
possports,
The
Regraded Unclassified
The Second Meeting of the Ministers of Foreign Affairs
of the American Republice,
-9-
RESOLVES:
ONE: To recommend to the Governments of the American
Republics the adoption of the precautionary measures in the
issuance of passports which each deems appropriate.
TWO: To recommend to the countries of America the
adoption of uniform punitive measures against the use or
counterfeit or altered passporte or passports of more than
one country.
VI.
ACTIVITIES DIRECTED FROM ABROAD AGAINST
DOMESTIC INSTITUTIONS.
The Second Meeting of Foreign Ministors of the American
Republics,
RESOLVES:
ONE: That having in mind the equal concern and equal
responsibility of the American Republics for the proservation
of the peace and security of the homisphere, each one of the
Governments of the American Republics sholl adopt within its
torritory all necessary measures in accordance with its con-
stitutional powers to provent and suppress any notivition
directed, assisted or abotted by foreign governments, or
foreign groups or individuals, which tend to subvert the
domentic institutions, or to fomont disorder in their internal
political lifo, or to modify by pressure, propaganda, threats;
or in any other manner, the free and sovereign right of their
peoples to be governed by their existing democratic systems.
In the event that the peace of any of the American Repub-
lice 18 mennood by such nctivities, the respective Governments
agree that they will immodiately consult together, if the
State directly interosted wishos to request it, taking into
account the provisions of thio resolution and the special cir-
cumetances which may nffoct the peace or the tranquility of
the American Republics.
The Amorican Republics boing juridically equal as covercign
and independent states, ench shall not in ito individual caps-
city in any atops undertaken in this connoction.
TVO: In order to mrke such consultation more officecious,
the governments of the American Republics further doclare that
the fullost interchange of information between thom 10 coson-
tinl with regard to the aforomentioned activities within thoir
respective jurisdictions.
THREE: The governments of the American Republics agroo
that any government which obtains information purporting to
show that nativities of the aforementioned character are
taking
Regraded Unclassified
taking place, or are throatoning to take place, within the
territory of ono or more of the American Republies, shall
at onco communicate in the strictost confidence to the Foreign
Minister of such nation or nations the information 60 obtained.
FOUR: The governments of the American Republics doclare
that, under existing world conditions, the fullost interchange
betwoon thom of all information of the character doscribed, 16
in the common interest of thom all, and will neeist in the
preservation of the ponce and integrity of the Amoricas.
VII.
DIFFUSION OF DOCTRINES TENDING TO PLACE IN
JEOPARDY THE COMMON INTER-AMERICAN DEMOCRATIC
IDEAL OR TO THRIATEN THE SECURITY AND NEUTRALS
ITY OF THE AMERICAN REPUBLICS.
WHEREAS:
3. At the first Meeting of Foreign Ministers hold at
Panama the American Republics once more affirmed their ndhoronce
to the democratic ideal that provails in this Continont, con-
sidering that this ideal might find iteclf ondangered by virtue
of the action of foreign idoologies inspired by dinmotrically
opposed principles;
2, That the "General Doclaration of Noutrality of the
"merican Republics", signed nt Panama on October 5, 1939,
recognized AG one of the principles of neutrality, admitted
by the American States, that they "shall provent in accordance
with their internal legislation, the inhabitants of their
torritorios from engaging in activities capable of affocting
the noutral status of the American Republics";
3. The Convention on the rights and duties of states
in the ovont of civil strife was signed at the Sixth Intor-
national Conference of American States at Habana in 1928,
which has boon ratified by the majority of the Amorican
States;
4. The exclusion of foreigners from the onjoyment and
excreise of strictly political right 18 a general rule of
internal public law incorporated in the constitutions and
laws of atntos;
5. The Sanchez de Bustamanto Code of Privato International
Law, accepted and put into force through the Convention con-
cluded and signed nt the Sixth Inter-Amorican Conforence on
Fobruary 20, 1928, catablishes an idontical rulo excepting,
of course, special provisions contained in the internal logis-
lation of the American States;
6. The aforesaid exclusion from the enjoyment of politi-
oal rights implion the tacit prohibition for foreignors to
ongago in politionl notivities within the torritory of the
state in which they rosido;
7.
212
-11-
7. The present European conflict has revealed the
existence of foreign political organizations in certain
neutral states with the deliberate purpose of making at-
tempte against public order, the system of government and
the very personality of such states;
8, Such foreign political organizations would consti-
tuto in the American States a denial of the latters' demo-
cratic institutions, a menace to their right of self-
preservation and a threat of violation of their regime of
noutrality, and
9. In order to protect the security and neutrality of
the Am rican Republics in BO far as they might be affected
by illicit activities on the part of individuals or asso-
cintions, either national or foreign, tending to fomont
civil strife or internal disturbances and to propagate sub-
vorsivo ideologics, it is advisable to coordinate the mensures
which may be ndopted either in common or individually to com-
bat these dangora.
The Bocond Mooting of Ministers of Foreign Affaire of
the American Republics
RESOLVES:
ONE: To reitorate the recommundation mado at the First
Consultative Meeting held at Panama to the offect that the
Governments of the American Revublics "take the necessary
measures to erndiente from the Americas the sprond of doctrines
that tend to place in joopardy the common inter-American
democratic ideal", and also that they take the measures which
may be ndvisable to prevent any nctivities susceptible of
joopardizing American neutrality.
TWO: To recommend to the Governments of the Amorican
Republics the following rules with respect to civil strife,
internal disturbances, or the sprend of subversive ideologios:
(c) To une the necessary menns to provent the
inhabitants of their territory, nationals or nliono,
from participating in, collecting supplies, crossing
the boundary or sailing from their territory for the
purposo of starting or promoting civil strife, internal
disturbances, or spronding subversive idoologics in
another Amorican country;
(b) To disarm end intern every rebel force
crossing their bounderies. Thoro shall be observed,
in 80 for as they are applicable, the rules of
internment drafted by the Intor-Americon Neutrality
Committee at Rio de Innoiro;
(c) To forbid the traffic in arms and war matorial,
except when intended for the government, unloss the bel-
ligoroncy of the robele has been rocognized, in which
latter cano the rules of neutrality shall be applied,
and
(d) To prevent that within their jurisdiction thore
bo equipped, armed or adapted for warliko purposes any
vossel intended to operate in favor of the robollion.
Regraded-Unclassified
THREE: To reiterate the recommendation of the First
213
Consultative Meeting, held at Panama, to the effect that
action be taken, as soon as possible for the adoption of the
rules and procedure that may be Judged useful to facilitate
the action of the police and judicial authorities of the
respective countries in repressing unlawful activities that
individuals, either nationals or foreigners, may attempt at
any time in favor of a foreign state.
FOUR: To recommend to the Governments of the American
States that they edopt the following legislative or adminis-
trative norms, without prejudice to the respect due to their
individual and soveroign right to regulate the juridical
status of foreigners;
(a) Effective prohibition of every politionl activity
by foreign individuals, associations, groups or political
partics, no matter what form they uso to disguise or clonk
such activity;
(b) Rigorous supervision of the entry of foreignors
into national territory, particularly in the case of
nationals of non-American States;
(c) Effective police supervision of the activities
of foreign non-Amorican groups established in the American
States;
(a) Creation of nn emergency penal system for the
offensos set forth in this article.
FIVE: To encourage the reciprocal communication, directly
or through the Pan American Union, of information and data
concorning the entry, rejection and expulsion of foreigners
and the adoption of the proventive and repressive mensures
provided for in the previous article;
SIXTH: Any of the American Republics dircotly affected
by the activities referred to in this Resolution may initiate
the procodure of consultation.
VIII.
PROJECT ON EXTENSION OF TERRITORIAL WATERS
The Scoond Meeting of the Ministers of Foroign Affairs of
the Amorican Republics
RESOLVES:
That the project presented by the Delegation of Uruguay,
concerning the oxtension of territorial waters, togother with
the modifications introduced by the present Consultative
Meeting be transmitted for study to the Committoe of Exports
for the Codification of International Law; and that there clso
be requested the opinion of the Inter-Americon Neutrality
Committee at Rio do Janeiro regarding the same project.
IX.
Regraded Unclassified
IX.
PROJECT ON REFUGEES
214
The Second Meeting of the Ministers of Foreign Affairs of
the American Republics
RESOLVES:
That the projects presented to the Meeting by the Delega-
tions of Argentina, Uruguay and Mexico (Projects Nos. 35, 36
and 42) concerning refugees and assistance to minors proceed-
ing from evacuated areas be referred for consideration to the
Pan-Amorican Union.
X.
TRANSOCEANIC RAILWAY BETWEEN ARICA AND SANTOS
BY WAY OF BOLIVIA
The Second Meeting of Foreign Ministers of the American
Republics
RESOLVES:
To recognize the importance and usefulnoss for continontal
defense of the Arica (Chile)-Santos (Brazil) transocoanic rail-
way, through Bolivia, and to recommend to the American nations,
especially to those directly interested in the project, the
advisability of proccoding as soon as possible with the f1-
nancing of the section still to be constructed.
XI.
CODIFICATION OF INTERNATIONAL LAW
WHEREAS:
1. The Eighth International Conference of American States
approved several resolutions with the purpose of coordinating,
intensifying and accolerating the work of codification of
international law in America;
2, The said Conference also adopted other resolutions on
the coordination and improvement of the inter-Amorican peace
instruments;
3. According to historical tradition and the most pro-
found convictions of the American peoples it is urgont at
this time, whon the basee of law and of pncific rolations among
peoples are the object of scrious attacks, that the nations of
America once again roaffirm their offective support of the
principles of international law and of the pacific sottlement
of international controversies and prove their firm intention
to work for the maintenance and prosorvation of those principles
The Second Meeting of the Ministers of Foreign Affairs of
the American Republics
RESOLVES:
RESOLVES:
-14-
215
ONE: To recommend to the Governments of the American
Republice that they adopt the necessary measures to carry out
the resolutions approved by the Eighth International Conference
of American States relative to the codification of international
law and the improvement and coordination of the inter-American
peace instruments.
TWO: To urge the various organizations: in charge of the
study of matters to which the above-mentioned resolutions
refer, to submit, 88 soon as possible, their recommendations
and observations 80 that the Governing Board of the Pan-
American Union may convoke the meeting of the International
Conforence of American Jurists within the next two years.
THREE: To request the Pan-American Union to communicate
the present resolution to all Governments members of the Union,
together with a report on the present status of the work pro-
vided for in the above-mentioned resolutions of the Eighth
Conference.
XII.
PROMOTION OF CONTINENTAL SOLIDARITY
WHEREAS:
The sentiment of solidarity between the American Republice
constitutos a genuine force for continental defense, to which
all of them should lend unroservedly their maximum cooporation,
removing any obstacle that might jeopardize this principle of
Amorican public law, in order that no State of this Continont
may find itself deterred from offering its fullost and most
docided cooporation, both in the political and economic fiolds,
to the fulfillment of that ideal;
The Bocond Meeting of the Ministors of Foreign Affairs
of the American Republics,
RESOLVES:
To recommend to the American States that in any caso in
which internal logislation or contractual acts in force cons-
tituto a hindrance to the fullest cooperation which a State
should lend to the principle of continental solidarity, it
initiate, through legal monns, the revision of such acts, in
BO far as this may be possible.
XIII.
HOSTILE ACTS IN TERRITORIAL WATERS AND IN THE SECURITY
ZONE
WHEREAS:
1, At the First Mooting of Foreign Ministers hold at
Panama for the purposo of preserving peace, the neutrality
of
Regraded Unclassified
-15-
2/6
of the American Republics was established, during the war
begun in Europe; the irrevocable purpose was asserted of
complying strictly with those duties within the principles
of International Law and the clauses of the Conventions codi-
fying them, and due respect was demanded for the situation
created by those norms;
2. Within this purpose of maintaining security on this
Continent, a maritime zone, adjacent to the territorial area
of each nation was established, excluding such zone from
hostile acts from the land, sea, or air;
3. In the hostilities, belligerency has transgressed
the principles of International Law, Las disregarded the
duties imposed by neutrality, and has also brought about
hostile acts, not only in the zone excluded by the XV Res-
olution of Panama, but also contrary to sovereignty in
the maritime zone of some of the Republics;
4. Without prejudice to the juridical procedure and
settlement which should be given in each case to the
claims raised because of these transgressions, it is nec-
essary end opportune that the voice of the Republics of
America condemn them and state the irrevocable purpose
of practicing end demanding respect to the fullest extent
for the norms regulating the existence of the international
community;
THE SECOND MEETING OF FOREIGN MINISTERS OF THE
AMERICAN REPUBLICS
DECLARES:
ONE: That it condemne hostilities within terri-
toriel waters, 85 contrary to the right of sovereignty
of the nation having jurisdiction over then and to the
tenets of International Law.
TWO: That it considers such hostilities within the
Security Zone to be prejudicial to the votes and joint
resolutions of the Republics of America for the preserva-
tion of peace on this Continent.
XIV.
THE PEACEFUL SOLUTION OF CONFLICTS
WHEREAS:
In behalf of the closest possible unity of the
Continent, it 16 imperetive that differences existing
between
Regraded Unclassified
217
-15a-
between some of the American nations be settled.
The Second Meeting of the Ministers of Foreign Affairs
of the American Republics
RESOLVES:
To recommend to the Governing Board of the Pan
American Union that it organize, in the American capital
deemed most suitable for the purpose, a committee com-
posed of representatives of five countries, which shall
have the duty of keeping constant vigilance to insure
"hat States between which any dispute exists or may arise,
of any nature whatsoever, may solve it as quickly 8.8 pos-
sible, and of suggesting, without detriment to the methods
ndopted by the pertiee or to the procedures which they may
agree upon, the measures and steps which may be conductive
to P settlement.
The Committee shell submit & report to each Meeting
of the Ministers of Foreign Affeirs and to each Interna-
tional Conference of American States regarding the stetus
of such conflicte and the steps which may have been taken
to bring about B. solution.
XV.
RECIPROCAL ASSISTANCE AND COOPERATION FOR THE
DEFENSE OF THE NATIONS OF THE
AMERICAS
The Second Meeting of the Ministers of Foreign Affairs
of the American Republics
DECLARES:
That any attempt on the part of a non-American State
against the integrity or inviolability of the territory,
the sovereignty or the political independence of an
American State shell be considered 26 en act of aggres-
sion against the States which sign this declaration.
In case acts of aggression are committed or should
there be reason to believe that an act of aggression is
being prepared by B non-American nation against the
integrity or inviolability of the territory, the sover-
eignty or the political independence of en American
nation, the nations signatory to the present declaration
will consult among themselves in order to agree upon the
meesure it may be advisable to take.
All
Regraded Unclassified
All the signatory nations, or two or more of them, accord-
-16-
ing to circumstances, shall proceed to negotiate the necessary
complementary agreements BO as to organize cooperation for
2/8
defense and the assistance that they shall lend each other in
the event of aggressions such as those referred to in this
declaration.
XVI.
MAINTENANCE OF PEACE AND UNION AMONG THE
AMERICAN REPUBLICS
The Second Meeting of the Ministers of Foreign Affairs
of the American Republics
DECLARES:
ONE: That the Governments of the American Republice are
irrovocably determined to maintain and strongthen their union,
in order that America may fulfill its high mission on bohalf
of civilization;
TWO: That they will, therefore, omit no effort to pro-
vont any controversy which might impair their solidarity;
THREE: That they will also make every offort to sottle
in a friendly mannor and as soon As possible the differences
which oxist botween them, in order that their reciprocal
confidence and their cooperation for continental defonso
against any foreign aggrossion may be further strongthened;
FOUR: That they reaffirm thoir strong desiro to avoid
the use of force in this continent na a moans of solving
differences between nations and, therefore, to resort oxolu-
sively to juridical and pacific mothods;
FIVE: That they consider it essential to extend the
sphere of action of these methods, 00 that in all cases they
may be decisively offective for the proservation of peace;
SIX: That they will, likowiso, make every offort to the
end that these principles and aspirations may be ndoptod in
the rolations between the nations of America and those of other
continents.
SEVEN: That during the present period of hostilities
they will strive for the maintonance of law and justice, in
accordance with the doclaration of Panama;
EIGHT: That thoy vohemently dosire that pence be estab-
lished on bases which will be lasting and inspired by the
common welfare of all peoples;
NINE: That they are disposed to maintain international
rolations on juridical bnsos resting on the solid foundation
of moral forcos, in order to roostablish definitely the bonds
of human community; and
TEN:
Regraded Unclassified
218
-12-
TEN: That, faithful to their ideals, they will coordinate
their own interests with the duties of universal cooperation,
XVII
PROCEDURE ON CONSULTATION
WHEREAS:
1. It 18 incumbent upon the present Meeting, as pro-
vided in paragraph 3 of Chapter II of the Agenda, to examine
the functioning of the System of Consultation among the
Governments of the American Republics catablished by the
resolutions of the Intor-American Conference for the Mainte-
nanco of Peace and of the Eighth International Conference of
Amorican Statos, for the purpose of suggesting measures sus-
coptible of perfecting it;
2, Tho high motives which led the American Republics to
put the aforemontioned system into effect, will continue to
make advisable the convoking of other Moetings such as those
of Panama and of Habana, whenover the lofty interests of the
Continent 80 require;
3. Future Meetings, as in the 00.80 of the present one,
will have to be convoked under the pressure of ovents and
under emergoncy conditions which will mako it difficult and
inadvisable to determine in advance the most appropriate timo
and country for the Meeting;
4. Prior to the First and the Second Consultative Meet-
ings, the experience and knowlodge of the Governing Board of
the Pan American Union was resorted to, and in convoking future
Mootings, it would bo advisable to take advantago of the 001⑉
laboration of that body.
The Second Meeting of the Ministero of Foreign Rolations
of the American Republics,
RESOLVES:
ONE: The Government which desires to initiate consulta-
tion in any of the casos contemplated in the Conventions,
Doclarations and Resolutions of the Inter-Amorican Conferences,
and to proposo a Mooting of the Ministors of Foreign Rolations
or of their ropresentatives, shall address the Governing Board
of the Pan American Union indicating the questions with which
It dosires the consultation to doal, D.B woll as the approxi-
mate date on which the Meeting should be hold,
TWO: Tho Governing Board shall immodiately transmit the
request, together with e list of the subjects suggosted, to
the other Governments' members of the Union, and invite the
obscrvations and suggostions which the respectivo Governments
may desire to presont.
THREE: On the basis of the answers received, the Govern-
ing Board of the Pan American Union will dotermine the date
for the Moeting, propare the appropriate Agenda, and adopt, in
accordance
Regraded Unclassified
-18-
lke
accordance with respective Governments, all other measures
advisable for the preparation of the Meeting.
FOUR: The Governing Board of the Pan American Union shall
proceed to draft regulations for Consultative Meetings which
shall be submitted to all the American Governments for their
approval.
FIVE: The Third Meeting of the Ministere of Foreign
Relations of the American Republics will be held at Rio de
Janeiro, the capital of Brazil.
SIX: After the next Meeting, the designation of the
country where each Consultative Meeting shall be held, shall
be undo by the Governing Board of the Pan American Union in
accordance with the procedure set forth in the present Roso-
lution.
XVIII.
RELATIONS BETWEEN THE GOVERNMENTS OF CHILE
AND SPAIN
The Second Necting of Ministers of Foreign Relations of
the American Republics,
Pursuant to the declaration of Continental Solidarity
proclaimed at the Eighth Pan American Conference held at Lima
and ratified at the Consultativo Meeting at Panama in 1939,
DECLARES:
That it has followed with concern the conflict which has
arison between Chile andSpain, and that, notwithstanding its
cordial sontiments toward Spnin, it expresses its lively
sympathy and fraternal solidarity with the attitudo assumed
by the Government of Chile in defenec of principles funda-
mental for the froo peoples of America, and that it expresses
its hope that the rolations between the two States will be
roostablished 0.6 soon as possible.
XIX.
THE QUESTION OF BELIZE
The Second Meoting of the Ministors of Foreign Affnire of
tho American Republics
RESOLVES:
To express the koon desiro and wishes of the American
countrics in favor of a Just, pcaceful, and prompt solution
of the question of Belize between Guntomala and Great Britain.
XX
Regraded Unclassified
221
-19-
XX.
ACT OF HABANA CONCERNING THE PROVISIONAL ADMINIS-
TRATION OF EUROPEAN COLONIES AND POSSESSIONS
IN THE AMERICAS
WHEREAS:
1, The status of regions in this continent belonging to
European powers 18 a subject of deep concern to all of the
Governments of the American Republice;
2. As a result of the present European war there may
be attempts at conquest, which has been repudiated in the
international relations of the American Republics, thus placing
in danger the essence and pattern of the institutions of
America:
3. The doctrino of inter-American solidarity agreed upon
at the mootings at Lima and at Panama requires the adoption of
a policy of vigilance and defonse 80 that systems or regimes
in conflict with their institutions shall not upset the peace-
ful life of the American Republics, the normal functioning of
their institutions, or the rule of law and order;
4. The course of military ovents in Europe and tho
changes rosulting from them may croate the grave dangor that
European territorial possessions in America may be converted
into stratogic centers of aggression against nations of the
American Continent;
The Sccond Mosting of Ministors of Foreign Affairs of
tho American Republics,
DECLARES:
That when islands or regions in the Amoricas now under the
possession of non-Amorican nations are in danger of becoming
the subject of bartor of torritory or change of sovercignty,
the American nations, taking into account the imporative need
of continental security and the desires of the inhabitants
of the said islands or regions, may set up n regimo of pro-
visional administration under the following conditions:
(a) That as soon as the reasons requiring this measure
shall conso to exist, and in the ovent that it would not be
projudicial to the safety of the American Republics, such
territorios shall, in accordance with the principle reaffirmed
by this doolaration that peoples of this continent have the
right freely to dotermine their own destinios, be organized
08 autonomous states if it shall appear that thoy are ablo to
constitute and maintain thomselves in such condition, or be
restored to thoir provious status, whichever of these altor-
nativos shall appear tho moro procticable and just;
(b) That the regions to which this declaration refers
shall bo placed tomporarily under the provisional administra-
tion of the American Republics and this administration shall
be excrcised with the two-fold purpose of contributing to the
security and defonse of the Continent, and to the economic,
political and social progress of such regions and,
RESOLVES:
Regraded Unclassified
222
#20-
RESOLVES:
To create an emergency committee, composed of one repre-
sentative of sach of the American Republics, which committee
shall be deemed constituted 06 soon 08 two-thirds of its
members shall have been appointed. Such appointments shall
be made by the American Republics as soon as possible.
The committee shall meet on the request of any signatory
of this resolution,
If it becomes necessary C8 an imporative emergency measuro
before the coming into offect of the convention approved by
this Consultativo Meeting, to apply its provisions in order to
scfoguard the ponce of the continent, taking into account
also the desires of the inhabitonto of any of the above-
mentioned regions, the committee shall assumo the administra-
tion of the region attacked or throntened, acting in accord-
ance with the provisions of the said convention. As soon AG
tho convention comos into effoot, the authority and functions
excrcised by the committee shall bo transferred to the inter-
American Commission for Torritorial Administration,
Should the noed for emergency action be BO urgent that
action by the committoe cannot be awaited, any of tho American
Republics, individually or jointly with others, shall have the
right to act in the manner which its own defonse or that of
the continent requires. Should this situation arisc, the
Amorican Republic or Republics taking action shnll place the
matter before the committee immodintely, in order that it may
consider the action taken and adopt appropriate monsures.
None of the provisions contained in the present Act rofors
to torritorios or possessions which are the subject of disputo
or claims between European powers and one or more of the
Republics of the Americas.
XXI.
INTER-AMERICAN SANITARY COOPERATION
WHEREAS:
1. According to reports received by the meeting the
principal epidemic discasse, such as bubonic plague, yollow
fover and malignant malaria, which wero an international
monace and could be sproad through international commerce,
have been effectively controlled to such an extent that for
all practical purposes the danger of their international
propagation 1s believed to have boon climinated;
2. Discases and opidemics are intensified in cases of
alterations in the normal life of peoples, reaching clarming
degrees whenever wors betwoon nations are unlonshed; and
3. The satisfactory results obtained have been due to
offective ocoporation botween various countries, the Pan
Amorican Sanitary Bureau and the Rockefoller Foundation, pur-
suant to the sanitary treaty known D.B the Pan American Sani-
tary Code, which has been ratified by all the Governments,
The
Regraded Unclassified
The Scoond Meeting of the Ministors of Foreign Affairs
of the American Republice
RESOLVES:
To express its satisfaction for the efficient results
obtained to date and to recommend that cooperation with re-
lation to sanitary activities continue and, 98 far 8.8 DOS-
sible, be extended with 8. view to further improving sanitary,
social and economic conditions, recognized as essentially
interdependent and beneficial nationally as well as inter-
nationally.
XXII.
PROJECT REGARDING COOPERATION BETWEEN PAN AMERICAN
INSTITUTIONS
The Second Meeting of Ministers of Foreign Affairs of
the American Republice
RESOLVES:
That the project presented by the Dominican Delogation
regarding cooperation between official Pan American insti-
tutions in defonso of the continental principles of peace
and domocracy be transmitted for considoration to the Pan
American Union,
XXIII.
PAN AMERICAN HIGHWAY
WHEREAS:
1. It has boon the invariable desire of all the American
Republics, expressed since the First Intor-Amorican Conforence,
to make effective and practical their solidarity by means of
the construction of a network of highways to unito all of their
capital citios, and the satisfaction of this desiro, as a result
of world circumstances, has become a vital and urgent nood;
2. In carrying out these nims, the American Republics
signed at Bucnos Aircs, on Docember 23, 1936, at the Inter-
American Conference for the Maintonance of Peace, a convention
to advance the finnncing, the technical studics, and the oon-
struction of the highway reforred to;
3. The recommendations contained in Rosolution III,
approved at the First Meeting of the Ninisters of Foreign
Affairs of the American Republice, hold at Panama in 1939,
included the following:
"10. To make every effort in order to complete thoir
respective acctions of the Pan American Highway
and to recommend to the countries which have
ratified the Buonoo Airce convention that they
designate
Regraded Unclassified
224
-22-
designate Be soon 88 possible one or more experts
to expedite the fulfillment of the recommendations
of the Third Pan American Highway Congress."
4. The Pan American Highway, by promoting close relations
and commerce between nations, would benefit equally all the
inhabitants of the Americas; and
5. The distribution of the cost of constructing the
highway among the nations which it crossed on the sole basis
of the torritorial extension of each country, in addition to
not being equitable, makes impossible or dolays indofinitoly
its construction;
The Second Mooting of the Ministers of Foreign Affairs of
the American Ropublice
RESOLVES:
ONE: To invite the American nations which 08 yet have
not ratified the Convention of Buonos Aircs relating to the
Pan American Highway, to do 80 na soon as possible.
TWO: To recommend to the Financial Commission created by
that Convention that, in drafting the plans for financing the
construction of the Highway, it study the dosirability of
taking into account, in distributing the total cost among the
nations linked by it, the following factors: the oconomic
capacity of the individual nations; their population; thoir
revenues; the longth of the Highway in the territory of each
of them; and the bonofits which each nation will derivo from
the Highway. The and Commission should clso take into account
the right of thoso nations which have constructed all or part
of thoir respective scotions to have the ostimated value of
the work completed by them nooopted as all or part of the con-
tribution which would be alloonted to the particular country DE
its share in the total cost of the Pan Amorican Highway.
THREE: To recommend to the Inter-Amorionn Financial
and Economic Advisory Committee that it collaborato fully
with the Pan American Highway Financial Commission with a
view to the prompt and officacious accomplishment of its
tack.
XXIV.
INSURANCE AND REINSURANCE
WHEREAS:
1, The Delogation of the Dominican Republic has pro-
sented to this Second Mooting a Draft Resolution recommending
to the American nations that they oncourago by appropriate
legislation the development of insurance, and capecially of
reinsurance facilities; and
2. Because of its complex tochnical character, n de-
tailed study of the various aspocts of this rocommendation
in required, which this Mooting is not in n. position to
undortako in view of the shortness of the time nt its disposal.
The
Regraded Unclassified
225
-23-
The Second Meeting of the Ministere of Foreign Affairs
of the American Republics,
RESOLVES:
To transmit to the Inter-American Financial and Economic
Advisory Committee, at Washington, the project of the Domini-
Can Republic to the end that it proceed to make & study of
it and to report its conolusions to the Governments of the
American Republics.
XXV.
ECONOMIC AND FINANCIAL COOPERATION
WHEREAS:
1. At the first consultativo moeting hold at Panama it
was resolved to doolare that in view of oxisting circumstance,
it had become more desirable and necessary than over to 08-
tablish a closo and sincere cooperation between the American
Republics in order that they might protoct their oconomic and
financial structure, maintain their fiscal equilibrium, safe-
guard the stability of their currencies, promoto and expand
their industries, intensify their agriculture, and develop
thoir commerce;
2. In order to attain the objectives of the proceding
paragraph, it WAB agreed to create an Inter-Amerioan Financial
and Economic Advisory Committee, in Washington;
3. The war now in progress has increased the disruption
in the channels of international commerce and the curtailment
of markets for certain products of the Americas;
4, The existence of surpluses of commodities, the
exportation of which 18 essential to the economic life of the
countires of the Americas, 18 economically, socially, fl-
nancially, and in other respects a matter of great importance
to the masses of the population, and especially to those
groups participating in the production and distribution of
wealth in each country, and, finally, to the Govornments of
the entire Continent;
5, It must be anticipated that these difficulties will
exist as long as the war continues and that some of them, as
well as other new ones, will exist after the war ends; and
6. It 18 of great importance that the economic develop-
mont of the American countries be directed towards a diversi-
fication of their production and, at the sarie time, towards
an increase in their consumption capacity;
The Second Meeting of Ministers of Foreign Affairs of
the American Republics
RESOLVES:
ONE: To declare:
(a) That the American nations continue to adhere
to the liberal principles of international trade, con-
ducted with peaceful motives and based upon oquality
of treatment and fair and equitable prootices)
Regraded Unclassified
(b) That it 10 the purpose of the American nations
to apply these principles in their relations with each
other an fully B.D. present circumstances permit;
(0) That the American nations should be prepared
to resume the conduct of trade with the entire world in
accordance with those principles ae soon as the non-
Amorican nations are prepared to do likowise;
(a) That, in the meantime, the American nations
shall do everything in their power to strengthen their
own economic position; to improve further the trade and
other economic relations between and among themselves;
and to devise and apply appropriate means of effoctive
action to cope with the difficulties, disadvantagos and
dangers arising from the present disturbed and die-
located world conditions; and
(e) That the American nations consider it necessary
to maintain or improve the normal economic situation
established between them in order to assure the pro-
servation or improvement of the position enjoyed in their
respective markets.
TWO: To strengthen and expand the activities of the
Inter-American Financial and Economic Advisory Committee as
the instrument for continuing consultation among the American
Ropublics with respect to economic and trade matters and
arrangements, having in mind especially the immediate situa-
tions which must be met D.B a result of the curtailmont and
annged character of important foreign markets, For the
purpose of dealing with special problems, there may be
organized subcommittoes, composed of representativos of the
\terested countries, which should meet at such placos as may
b, decemed most appropriate for their effective functioning.
THREE: Specifically, to instruct the caid Committee that
proceed forthwith:
(a) To cooperate with cach country of this con-
tinent in the study of possible measures for the increase
of the domestic consumption of its own exportable
surpluses of those commodities which are of primary
importance to the maintenance of the economic life of
such countries;
(b) To propose to the American nations immediate
measures and arrangements of mutual benefit tending to
increase trade among them without injury to the interests
of their respective producers, for the purpose of pro-
viding increased markets for such products and of expand-
ing their consumption;
(c) To create instruments of inter-American co-
operation for the temporary storing, financing and handling
of any such commodities and for their orderly and
systematic marketing, having in mind the normal condi-
tions of production and distribution thereof;
(d) To develop commodity arrangements with a view
to neguring equitable terms of trado for both producers
nod consumers of the commoditi ou concerned;
Regraded Unclassified
(o) To recommend mothods for improving the standard
of living of the pooples of the Amerions, including public
health and nutrition measures;
(f) To establish appropriate organizations for the
distribution of 8. part of the surplus of any such
commodity, as & humanitarian and social relief measure;
(g) To consider, while these plans and measures are
being developed, the desirability of a broader system
of inter-Amerioan cooperative organization in trado and
industrial matters, and to propose credit mensuros and
other measures of assistance which may be immediately
necessary in the fields of economics, finance, money, and
foreign exchange.
FOUR: To reaffirm Resolution XIII of the Inter-American
Financial and Economic Advisory Committee, and to recommend
that, in order to promote the economic development of the
American Nations under the terms of said resolution, each
nation, upon its own initiative and in consonance with the
program of the Inter-American Development Commission, estab-
11sh appropriate onterpriscs with government or private capital
provided by two or more American Republics. Such enterprises
may doal directly with the Inter-American Bank or other
official or private credit institutions, it being recommended
that the said Bank give its sympathetic consideration to the
possibility of granting them financial aid.
XXVI
VOTE OF THANKS
The Second Meeting of Foreign Ministers of the American
Republics
RESOLVES:
ONE: To express its gratitudo to His Excellency, The
Prosident of the Republic of Cuba, Dr. Federico Laredo Bru,
and to his illustrious Government for all the attentions and
courtesies extended to all the delegations attending the
Meeting.
TWO: To record its profound appreciation of the ef-
fioacious and admirable work performed by His Excellency,
Dr. Miguel Angel Campa, President of the Meeting and
Secretary of State of Cuba, and of the skillful and courteous
manner in which he has conducted the doliberations of the
Meeting.
THREE: To congratulato the Secretary General, Dr. Cosar
Salaya y dela Fuento, and the personnel of the Secrotariat,
for their admirable contribution to the work of the Meeting,
and the many courtesies extended to the members of the
soveral Delogations.
IN WITNESS WHEREOF, the Ministers of Foreign Affairs of
the American Republics or their personal representatives,
sign and seal the present Final Act.
Regraded Unclassified
228
-26-
Done in the City of Habana, this thirtieth day of July,
one thousand nine hundred and forty, in texts in the English,
Spanish, Portuguese and French languages, which shall be
deposited in the archives of the Pan Amorican Union. The
Secretary General of the Meeting shall transmit the original
of the present Final Act to the Pan American Union through
the intormediary of the Department of State of Cuba.
Reservation of the Bolivian Delegation:
229
4, - As to the Resolution concerning the Inter-American
Committee of Rio de Janeiro (I):
"The Bolivian delegation decires that the peculiar
situation of its country be borne in mind, moditer-
ranean state lacking coasts, whose right to free
transit has been recognized in the Convention of
Habana, of 1928, on Maritime Neutrality and by b1-
lateral treaties entered into with frontier nations.
"Tho application of the principles suggested by the
Inter-American Committee on Neutrality, in BQ far
as respects internment, would signify a disregard
of the rights of Bolivia on this subject, which has
surely not been in the minde of the authors of the
project, and would load to the danger that, in the
ovent of war, the internment of the members of the
armed forces of its country, who were forced to
cross into neutral territory would take place."
Reservation of the Chilean Delegation:
5. - "The Delegation of Chile, convinced of the need of
giving practical application to continental soli-
darity, approves the agreements with the understand-
ing that Chile will only assume obligations and
responsibilities when the aforementioned agreements
aro ratified by its constitutional bodies.
Reservation of the Chilean Delegation:
6. - As to the Resolution on Economic and Financial
Cooperation. (XXV):
"The Delegation of Chile, as it did at the First
Consultative Meeting of Panama, qualifies its vote
in respect of 'liberal principles of international
trado' to which reference 18 made in paragraphs
a, b and o of Soction 1, for the reasons stated
before the Committee which dealt with this project.
"It requests that record of this qualification be
made in the appropriate document."
Reservation of the Colombian Delegation:
7. - As to the Aot of Habana (xx) and the Declaration
concerning Reciprocal Assistance and Cooperation for the De-
fense of the American Nations (XV):
"I vote affirmatively with the statement that I
shall sign the Act of Habana and the Declaration
concerning Reciprocal Assistance and Cooperation
for the Defense of the Nations of the Americas,
subject to approval by my Government and to the
constitutional norms of my country."
Regraded Unclassified
230
-28-
Reservation of the Venezuclan Delegation:
8. - As to the Act of Habana (xx):
"The Venezuelan Delegation signs with the under-
standing that the Act of Habana relative to col-
onial possessions is subject to ratification by
the Public Power of the Nation in accordance with
its constitutional provisions."
Reservation of the Peruvian Delegation:
9. - As to the Resolution on Pacific Solution of Con-
flicts:
"Poru accepts the proposal of the Haitian Delo-
gation with the reservation that the Committee
shall function only at the request of the inter-
ested parties."
HONDURAS:
HAITI:
COSTA
RICA:
MEXICO:
ARGENTINA:
URUGUAY:
ECUADOR:
BOLIVIA:
CHILE:
BRAZIL:
CUBA:
Regraded Unclassified
231
#29-
PARAGUAY:
PANAMA:
COLOMBIA:
VENEZUELA:
EL SALVADOR:
DOMINICAN REPUBLIO
PERU:
NICARAGUA:
GUATEMALA:
UNITED STATES OF AMERICA:
Additional Reservation of the Chilean Delegation:
As to the Act of Habana (xx) :
"The Chilean Delegation, at the time of signing
the present Final Act, makes reservation in addi-
tion to the reservation set forth in yesterday's
Private Plenary Session, of the rights of Chile
in Antaretica."
Regraded Unclassified
232
July 29, 1940
CONVENTION
The Governments represented at the Second Meeting of
Ministers of Foreign Affairs of the American Republics,
CONSIDERING:
ONE: That the American Republics have formulated
at the Second Consultative Meeting the Act of Habana with
regard to the destiny of colonies of non-American countries
located in this hemisphere as well as with respect to the
provisional administration of such colonies.
TWO: That as a result of the events which are taking
place in the European continent situations may develop in
the territories of the possessions which some of the
belligerent nations have in America* which may extinguish
or materially impair the sovereignty which they exercise
over them, or leave their government without a leader,
thus creating a state of danger to the peace of the con-
tinent and a state of affairs in which the rule of law,
order, and respect for life, liberty and the property of
inhabitants may disappear;
THREE: The American Republics consider that force
cannot constitute the basis of rights, and they condemn
all violence whether under the form of conquest, of
stipulations which may have been imposed by the bel-
ligerents in the clauses of a treaty, or by any other
process.
FOUR: That any transfer, or attempted transfer, of
the sovereignty, jurisdiction, possession or any interest
in or control over any such region to another non-American
State, would be regarded by the American Republics as
against American sentiments and principles and the rights
of American States to maintain their security and political
independence;
FIVE: That no such transfer or attempt to transfer
or acquire any interest or right in any such region,
directly or indirectly, would be recognized or accepted
by the American Republics no matter what form was employed
to attain such purpose;
SIX: By virtue of a principle of American inter-
national law, recognized by various conferences, the
acquisition of territories by force cannot be permitted.
SEVEN: That the American Republics, through their
respective government agencies, reserve the right to
Judge whether any transfer or attempted transfer of
sovereignty, Jurisdiction, cession or incorporation of
geographic regions in the Americas, possessed by European
countries up to September 1, 1939, has the effect of 1m-
pairing their political independence even though no
formal transfer or change in the status of such region
or regions shall have taken place;
EIGHT:
Regraded Unclassified
233
-2-
EIGHT: That in the cases foreseen, as well as any
others which might leave the government of such regions
without B. leader, it 10, therefore, necessary to estab-
lish a provisional administrative regime for such regions
until such time as their definitive regime 18 established
by the free determination of their people;
NINE: That the American Republics, as an inter-
national community which acts strongly and integrally, using
aa & basis political and Juridical principles which they
have applied for more than a century, have the unquestion-
able right, in order to preserve their unity and security,
to take such regions under their administration and to
deliberate as to their destinies, in accordance with their
respective degrees of political and economic development;
TEN: That the provisional and transitory character
of the measures agreed to does not imply an oversight or
abrogation of the principle of non-intervention which
regulates inter-American life, a principle proclaimed by
the American Institute, recognized by the meeting of
Jurists held at Rio de Janeiro and fully reaffirmed at the
Seventh International American Conference held at Montevideo;
ELEVEN: That this community has therefore inter-
national Juridical capacity to act in this manner;
TWELVE: That in this case, the most appropriate regime
is that of a provisional administration; and that this
system entails no danger because the American Republics do
not entertain any purpose whatsoever of territorial
aggrandizement;
THIRTEEN: That the establishment of a special provi-
sional regime in the present Convention and in the Act of
Habana concerning the provisional administration of European
colonies and possessione in the Americas does not eliminate
or modify the system of consultation agreed upon at Buenos
Aires and confirmed at Lima and at Panama.
FOURTEEN: Being desirous of protecting their peace
and safety and of promoting the interests of any of the
regions herein referred to which may fall within the pur-
view of the foregoing recitations have resolved to con-
clude the following convention:
I.
If 8. non-American State shall directly or indirectly
attempt to replace another non-American State in the
sovereignty or control which it exercised over any territory
located in America, thus threatening the peace of the
continent, such territory shall automatically come under the
provisions of this convention and shall be submitted to a
provisional administrative regime.
II.
The administration shall be exercised, as may be con-
sidered advisable in each case, by one or more American
States, with their previous approval.
Regraded Unclassified
234
+
III.
When the administration shall have been established
for any region it shall be exercised in the interest of the
security of America and for the benefit of the region under
administration, with a view to its welfare and progress,
until such time as the region 18 in a position to govern
itself or 18 restored to its former status, whenever the
latter 18 compatible with the security of the American
Republics.
IV.
The administration of the region shall be exercised
under conditions which shall guarantee freedom of conscience
and of worship, subject to the regulations which public
order and good habits may demand.
V.
The administration shall enforce the local laws coordi-
nating them with the purposes of this convention, but it may
furthermore adopt such measures as may be necessary to
meet situations in which such laws do not exist.
VI.
In all that concerns commerce and industry, the
American nations shall enjoy the same situation and bene-
fits, and the administrator 18 forbidden to establish a
privileged position for itself or its nationale or for
certain states. Open economic relations shall be maintained
with all countries on B. reciprocity basis.
VII.
Natives of the region shall participate, as citizens,
in public administration and in the courts of Justice
without further qualification than their capacity 60 to do.
VIII.
To the extent that it may be practicable, rights of
every sort shall be governed. by local law and custom, and
vested rights shall be protected in accordance with such
law.
IX.
Forced labor shall be abolished in the regions where
it exists,
X.
The administration shall provide facilities for educa-
tion of all kinds with the two-fold purpose of developing
Regraded Unclassified
235
the wealth of the region and improving the living conditions
of the population, especially as regards public and
individual hygiene and preparation for the exercise of
political autonomy as soon as possible,
XI.
The natives of a region under administration shall have
their own Organic Act which the administration shall
establish, consulting the people in whatever manner 18
possible.
XII.
The administration shall submit an annual report to
the inter-American organization entrusted with the control
of the regions under administration, of the manner in which
it has fulfilled its functions, attaching thereto copies
of its accounts and of the measures adopted in the region
during the year.
XIII.
The organization referred to in the preceding article
shall be competent to take cognizance of the petitions
submitted by inhabitants of the region through the medium
of the administration, with reference to the exercise of
the provisional administration. The administration shall
transmit, with this petition, such observations as it may
deem proper.
XIV.
The first administration shall be granted for a period
of three years at the end of this period, if necessary,
it shall be renewed for successive periods not longer than
ten years.
XV.
The expenses incurred in the exercise of the admini-
stration shall be defrayed with the revenues of the region
under administration but in case they are insufficient the
deficit shall be met by the State or States which act as
administrators,
XVI.
A commission to be known as the "Inter-American Com-
mission on Territorial Administration" 1s hereby established,
to be composed of a representative from each one of the
States which ratifies this convention; it shall be the
international organization to which this convention refers.
Any country which ratifies the convention may convoke the
first meeting proposing the city in which it 18 to be held.
Regraded Unclassified
Once
236
-5-
Once this convention has become effective the Commission
shall elect its chairman, complete its organization and fix
its definitive seat. Two-thirds of the members of the Com-
mission shall constitute a quorum and two-thirds of the
members present may adopt decisions.
XVII.
The Commission is authorized to establish a provisional
administration in the regions to which the present conven-
tion refers; allow such administration to be exercised by
the number of States which it may determine in each case,
and supervise its exercise under the terms of the preceding
articles.
XVIII.
None of the provisions contained in the present conven-
tion refers to territories or possessions which are the sub-
ject of dispute or claims between European powers and one
or more of the Republics of the Americas.
XIX.
The present convention is open for signature by the
American Republics at the City of Habana and shall be
ratified by the High Contracting Parties in conformity
with their constitutional procedures. The Secretary of
State of the Republic of Cuba shall transmit at the earli-
est possible date authentic certified copies to the govern-
ments for the aforementioned purpose of ratification. The
instrument of ratification shall be deposited in the
archives of the Pan American Union in Washington, which
shall notify the signatory governments of said deposit.
Such notification shall be considered as an exchange of
ratifications.
XX.
The present convention shall enter into force when
two-thirds of the American Republics have deposited their
respective instruments of ratification.
Done in the City of Habana, etc. etc.
Regraded Unclassified
237
BRITISH EMBASSY,
WASHINGTON, D.C.
Personal and Secret
August 3rd, 1940
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.
238
Telegram despatched from London on the evening of
August 2nd, 1940.
Navel.
Aried nerchant craiser "Alcentors"
permitted by Prontlian authorities to remin
four days in No for repairs.
East Const conveye continually
ottacked by emburine yesterday as any as ten
times.
only camalty one Aritish tarker
0500 tone damaged.
A Canadian convoy two arrived
safely in home waters.
No.
Royal are Force.
Dense cloud over all target arong,
hampered sodium bonbers night of July 31st -
August lot.
Heavy bochers attached oil refin-
ories, rellvay targets, scroplane base insterden
various acrodromes dolland. Results unobscrved
in nost cases but boobe straddled one all
refinery and onsiged big explosion at another.
Yestorday norming lack of cloud
cover largely provented besting operations but
direct hit registered on new hanger one sero-
aras. one Menhein nissing. In the after-
noon; reconneinence - Monhein reported
thirty energy aircraft Cherbourg: thirteen
Blenheirm recorted by ten Mienhotu fighters
Regraded U nclassified
238
1 8 1 i obtatned I 8
- circuit one burreck blocks; may alreraft
mathine - fires and explosions reported,
three circumft failed to return.
All resonnaiseance Reil gestorday should
in flooting doske,
is dock, one Ripper class cruiser in any
desk - II class eruisor. Approximately seven
enhaurines. Considerable activity in Canal.
Last night 48 heavy beabers despatched
against oil targets and military objectives in
company, Projected operations by other
bookers cancelled. All our aircraft returned.
Harly this morning 24 Bletheirs left
s I I do I
also circreft depote and factories cleawhere.
s
Yesterday corning enemy activity
slight and chiefly restricted to recomaissance
by single aircraft or mall formations.
nationalive damage canned Boulton and Penal
factory Revieb but not aircraft factory) steel
were also slightly danaged, siz killed, as
injured. Little debt that this attack carried
- by health
last night activity alight. todo
devepos a efficers' llass, Park. one
officer Miller, als wounded) also in motions.
missing I 1 Institution % I
aropos Mine-laying susported
theme commy end off the northeast and
Regraded Unclassified
Scottish conste.
4.
Sumary of air casualties day of
240
August lot: enery confirmed, two, unconfirmed
three. British, confirmed, one fighter, four
medium bookers. Total, energy two, British
five.
5.
shipping cosualties. By U-boate:
on July 30th British ship 5600 tone ounic off
Hebrides. Marly this norning three British
tankers 6000 tons, 6500 tono and 11,000 tone
aunk off northern Ireland during dispersal of
outbound convey. Late reports indicate
sinking of Norwegian ship 1600 tom, Swedish
ship 2000 tone off northern Ireland 18th, and
Greek ship 3300 tone in the wastern approaches
17th. By nine: British ship 7500 tono nined
Orfordness yesterday. ship did not sink,
tuge sent to assist.
6.
Itely.
Considerable air transport activity
last three days on the routes Italy - Libya,
Dodecanese - Italy and Dodecanese - Libyn.
one hundred German dive bombers pro-
viously reported Pola have now moved to
southern Itely.
Also reported 38 Gorman
dive bombers have gone to Libye via Austria
and Italy.
7.
Middle
not.
on July 29th five of
our heavy bombere attacked munitions durp at
Results unobecrved. Four of our
circraft damaged. on July soth attacks by
/medium
Regraded Unclassified
241
máins and havey bonbers nate on tronp -
trations, buildings and rellway station at
Kassela.
All our aircraft returned.
Copy of Letter from Y. Santiago, August 5,1940.
242
COMPLIMENTE
OF
MR. H K. HOCHSCHILD
There have been some polities] changes here recently, Humberto Alvarez
Suarez left the Ministry of the Interior. That 18 importent because
be had already signed the decree dissolving Congress and Senate. The
President was going on 8 vecation and 80, constitutionally as Vice-
President, he together with his redical and socialist colleagues would
have run the country. H1a plan was not carried out because the bulk
of his party 18 beginning to be afraid of the cooperation with the
socialists and communists. There 1s supposed to be an election here
in 1941, and unless something unforeseen happens and if this election
tekes place, the minority of the socialists and communists in Congress
and Senate might be converted into e majority. The favourable points
about the situation - there are at present not very many favourable
points about the situation - are the following:
1. That the Redical Party realizes 1f it comes to elections
next year the party aight be almost wiped out;
2. That the cooperation between socialists and communists
18 by no means harmonious.
The simultaneous resignation of the Minister of Foreign Affairs
ie of no greet importance, excepting that his successor, Mr. Marcial
Mora, 1e 5. more desirable man and decidedly more intelligent.
The naming of Guillermo Labarca as Minister of the Interior may be
of considerable importance. Mr. Laberca 18 an honest man who is very
antagonistic to the socialists. Labarce's wife Amenda is ambitious.
She desires to figure in all prominent reminine activities. both
Mr. and Ars. Labarce are professors. The influence of ATS. Laborea on
her husband is supposed to be not very considerable.
The elimination of Alvarez and Saenz and the naming of Guillermo
Laberce end Mercial More may be interpreted as 8 smell step in the
right direction However, the situation is still quite obscure. The
armed forces are pressing for an adjustment with the Conservatives.
But since the Government intends to create new texation laws end there-
fore expects to be shortly in B. position to improve the situation the
of the armed forces, not too much importance must be given to
tendency of the armed forces. What may be important will be the re-
Party and the Conservatives to call off by E 2/3 majority in Congress feet.
sults or the present negotiations between воде members of the Redical
and Senate the elections of next year. This would be quite B.
If simultansously the armed forces could be setisfied, this project
would probably be put over without much difficulty.
Under the above conditions, which are not clear and not very
promising, and the Germen Embassy 18, as usual, quite active in that direction.
German propagande has 8 fertile field for making trouble
I wish to draw attention to the fact thet there exists a so-celled the
object is the customery one. Peouliarly enough, Don Miguel Cruchage of the
"Instituto Culturel Germano Chileno". The name sounde pretty;
Tocornal, Conservative who Party, 8 devout Cetholic, 1e president of the "Instituto".
is president of the Senate of Chile and member
Regraded Unclassified
243
-2-
This institute is intimately connected with a newly founded "Asociacion
de Amigos de Alemania" which is supposed to defend Germany or "German
reputation" during the war. In this latter institute the following
men are enthusiastic cooperators:
Generals Arturo Ahumada, Francisco Javier Diaz, Tellez and
Messrs. Valdez, well known propagandists for the Nezis in Chile.
Regraded
244
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 3. 1940
TO
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
Mr. Christie, the Canadian Minister, told me yesterday that Governor Graham
Towers, of the Bank of Canada, urgently desired to be received by the Secretary on
Monday or Tuesday next. After consultation with Under Secretary Bell, I told the
Minister that the Secretary would not be available on Monday, but that he would
receive Governor Towers on Tuesday. I added that Mr. Bell and I would be available
to confer with Governor Towers if the Secretary might conceivably refer him to us
after receiving him. The Minister thought the subject might be the finances of a
third country (I presume this is France). I should like to phone the Minister on
Monday to give an exact hour for the appointment on Tuesday.
NMR.
Regraded Unclassified
245
CABLE
FROM: Treasury Attache Nicholson,
Shanghai, China.
DATE: August 3, 1940
For the Secretary of the Treasury.
Shanghai market August 2nd closed uncertain at
3 53/64 for eash and August for sterling 5 27/32 for each
and August for US dollars gold bars closed at 5525 and
weiwah at discount of 4.60%
Nicholson
10:48 AM
August 3. 1940
Prof. Chamberlain
Mr. Cochres
Al the request of Mr. Memiervez of the Department of State I received this
sorning the Consul General of Retonis, Mr. Johannes Kaiv. We were in turn n-
culved by Professor Chamberlain, and Mr. Dornatein joined the group.
The Estenian Consul General is the only representative of his Government
in the United States. Le presented to us first the question of taking 0828 of
vossels entering and departing from llev Tork, which still fly the Estoniam flag.
de vis reminded that the Norwaglan and Danish representatives have net up com-
nissigns in New York to look after their respective shipping interests. Natonia
10, of course. is a different category, since there is as yet no refuges govern-
sent abroad. and the country is apparently being swallowed up completely by
Russia. It is possible that some political leaders my have fled from Retonia
to finland who vill endeavor to not up some sort of an authority abroad.
The Consul General was informed that - would be receptive to applications
which sight be made in behalf of operators and owners of Natonian flag vossels,
insofar as funds for supplies, Labor, demarrage. etc. are concerned. It was ax-
plained to us that these ships vill probably remain in the vestern Hemisphere.
There is some possibility of their continuing under time charter to operate
between New York and British ports. We could only assure the visitor that
sympathetic consideration would be given those applications. It voe pointed out
that vescels of other occupied countries are menaging to operate out of Nev York
under our licenses.
On the matter of funds for his ⑉ office and apartment. the Consul General
is obviously facing & difficult situation, since his resources on hand are
smil, Be has regularly received a remittance from Estonia through the Central
Smok of that country to pay his official expenses in the United States. These
apparently will nov be stopped. No has no authority to draw drafts on his
overnament or on the Retonian Central Bank. When be asked as as to whether be
could draw on Retonian funds blocked in this country, we found that be apparently
had no authority et present. We advised his, however, that this vas & matter
on which be should consult with the National City Bank through which he operates.
Dar duty was one of supervision and licensing, 3rm but not of directing the payment
of funds.
Regraded Unclassified
247
August 3, 1940
To:
The Secretary
From:
Mr. Young
High Spote of the Yeek with the British
The high mote of the week (July 29th to August 3rd) with
the British were: the Packard contract; the 3,000 planes per
month program; the arrival of Brig. Gen. D. E. Pratt and Michael
Dewar; reactions from Colonel Maxwell and Under Secretary Welles
to the complaints by the British on export control: the avail-
ability of 800 small guns for release to the British by the
Navy: the coordination of a Canadian production program with
the United States Defense Program, including suggested methods
of controlling expenditures through the Federal Reserve: an
additional chapter to the now famous Enfield rifle story: and
the procedure for filing preliminary negotiation reports by the
British.
Packard.-Purvis has agreed to pay a 10 million dollar down
payment on the contract. Knudsen told me Jesse Jones wouldn't
budge. Purvis has written Knudsen two letters, one acquiescing
to the request for the 10 million dollar down payment, and the
other stating his disappointment that a complementary program
could not be worked out. Knudsen fully agreed that it was dis-
appointing. Minor details of the contract are now being worked
out with Packard. The British Purchasing Commission informed me
that three Rolls engineers from England arrived in New York City
Thursday night with additional blueprints.
3,000 Planes Per Month Program.--Knudsen gave Purvis data
(copies of which are attached) outlining the cost of initiating
well
a 3,000 planes per month program. To produce 3,300 airframes,
5,830 engines, and 5,830 propellers per month, there would have
to be built 15 airframe plants, 6 engine plants, and 2 propeller
plants, costing $233,300,000. These plants would employ 552,000
employees and would necessitate $646,800,000 worth of machine tool
Regraded Unclassified
248
- 2 -
equipment. Emilsen said he thought these dollar amounts to be
nt least 10 per cent too high. Under this program no demand
would be made on existing production facilities except in minor
instances. Knudgen said the program was fantastic as machine
tool requirements alone were approximately double the current
United States annual capacity.
As an alternative, Knudsen presented a scheme for producing
1,375 planes per month at 8 total expenditure of $415,000,000
representing approximately a 50 per cent cut in all items, Purvis
was to discuss both programs with Morris Wilson and Sir Henry Self
this week.
General Pratt and Michael Dewar.--Brig. Gen. Pratt, who WAS
in charge of a British tank brigade at the Battle of Flanders, and
Michael Dewar, British Government tank production expert. called
on me Tuesday, I made arrangements for them to go to Aberdeen on
Wednesday to examine the U. S. experimental tanks. After viewing
our tanks, Gen. Pratt said they were superior from the waist down
but did not have enough armor or fire power from the waist up. On
Thursday morning I took Measrs. Pratt and Dewar to see Mr. Kmudsen
and later Secretary Stimson, both of whom were greatly interested.
At my suggestion, Stimson called in Gen. Marchall who invited Pratt
and Dewar to lunch. I understand from Mr. McReynolds that the
Advisory Commission has already adopted certain ideas advanced by
Pratt and Dewar for use on our tanks. There is a general tank
meeting scheduled for 9:30 Tuesday morning with all interested
parties to be represented.
Export Control Complaints.-I accordance with your instruc-
tions, I delivered copies of the memorandum citing complaints by
the British on export control, as well as copies of the British
memorandum on which mine VRS based, to Secretary Stimson, General
Watson, and Colonel Karvell, Stimson wanted to know why you sent
it to him, but he finally broke down and confessed he would like to
read it.
First reaction came from Colonel Marvell who said that certain
improvements had already been made on the basis of experience, but
that he looked "forward to & stage in the development of the system
beyond which little improvement can be expected insofar as delays
are concerned." Further, he wanted to know whether the Treasury
could recommend that the British program be given preference over
all other requirements, including our own munitions program. He
stated further that the Army and Mavy Munitions Board and the Ad-
visory Commission had dictated the policy being followed on machine
Regraded Unclassified
249
- 5 -
tool exports without regard to the country of destination. To
this obvious trap, I replied to Colonel Mazwell that the Treasury
served as a licison, that I understood other machinery had been
established to settle priorities.
The next reaction to the complaint memorandum came in the
form of & letter to you from Summer Welles with a report made by
Joe Green, Without any attempt to refute Green's insinuations
and arguments, this memorandum represents B pathetic attempt on
his part to veasel out of a bad situation, Except in a few
minor instances, he does not refute the specific illustrations
contained in my original memorandum, and he makes certain state-
mente which are obviously ridiculous. If you are interested, see
item No. 6 wherein Joe Green states there is no basis for the
Treasury charge that the British cannot sign contracts with metal
working machinery manufacturers until an export license has been
secured. In the next sentence he admite that the Advisory Commis-
sion has requested such manufacturers not to sign contracts until
an export license has been issued. Since last Tuesday, the British
Purchasing Commission has had super-extraordinary service from the
State Department, receiving 0.5 a matter of record 65 export licenses
cleared on Thursday alone. At the moment there are no further ex-
port complaints from the British.
Availability of Navy Guns.--Admiral Spear has told ne that the
British could have 50 four-inch Naval guns with projectiles, but
without powder, as well as 350 three-inch .50 calibre and 400 four-
inch .50 calibre guns without ammunition. The British Purchasing
Commission has cabled London to find out if these guns are desired,
Canadian Production Program and Use of Federal Reserve by
Cenada.--Attached is a copy of & letter from Mr. C. D, Hove with
its enclosure explaining the situation which would make it difficult
for Canada to clear all of its purchases through a Federal Reserve
Bank account. Canada has developed plans for a tremendous produc-
tion program for aircraft, munitions, and other supplies. The
machine tool portion of this program alone calls for at least 45
million dollars worth of equipment, and I have transmitted to Mr.
Knudsen the first request for the release of such items. Due to the
fact that British orders for machine tools already absorb one-third
of this country's annual capacity, and, as the Advisory Commission
is anxious to take priority on part of these orders for our own
Defense Program, additional demand by Canada will create a serious
situation.
Regraded Unclassified
250
- 4
At the present time machine tools cannot be exported to
Canada unless they cannot be used by the Advisory Commission, the
War Department, or the Havy Department. On July 17th, Purvis
told Vance that no more machine tools would be shipped out of
the country to England to increase British production by the addi-
tion of new facilities. The only machine tools to be exported to
England would be those of immediate and vital necessity, plus
those needed to complete existing facilities already established.
I would advocate the free export of all machine tools on
order for British account to Canada if they could be utilized
there. This procedure would leave a. net balance of additional
orders which Canada would like to place in the United States. I
have written Mr. Knudsen outlining this situation, and I have asked
the British to have in Washington next Tuesday and Wednesday the
Canadian official best qualified to discuss this matter.
The 1,500,000 Rifle Story.-You may or may not recall this
story where certain agencies in New York have been attempting to
sell the British 1,500,000 Enfield rifles ex-United States arsenals.
I have followed it carefully and it has become more serious for two
reasons: first, because London has brought great pressure to bear
on Purvis to buy these rifles (which are not available); and,
secondly, because the verious agents and subagents mixed up in the
deal seem to tie in closer and closer with Washington. I talked
with Mr. Foxworth, Assistant Director of the Federal Bureau of In-
vestigation, and he said he VBS well acquainted with the story as
they had been studying it for over two years. I have given Forworth
a photostat copy of the British Purchasing Commission file on this
matter and he is investigating it.
Preliminary Negotiation Reports.-In accordance with the agree-
ment between Purvis and Knudsen on July 17th, the British Purchasing
Commission agreed to file a report covering every item of $150,000
or more for which it is negotiating. A procedure for handling these
reports has been established, and, if it functions efficiently, ap-
proval or disapproval of any report should be cleared in five days.
Unallocated Plane Orders.-The British are furnishing & com-
plete breakdown by type. quantity, and supplier of the unallocated
balance of 4,245 planes yet to be ordered for the program ending
April 1, 1942.
00000
PT:bj
Regraded Unclassified
251
The Advisory Commission to the Council of National Defense
Federal Reserve Building
Washington, D. c.
July 31, 1940
Mr. Arthur 3. Purvis
Director-General
British Purchasing Commission
725 Fifteenth Street, I. V.
Washington, D. c.
Dear Mr. Purvis:
Referring to your letter of July 24,
I hand you herewith two sets of estimates in connection
with your 3,000 planes per month inquiry.
It is fair to assume that due to the
limited time ve had to prepare the figures that they
would be approximately 10% high.
Yours very truly,
(85d.) V.S. Knudsen
William 8. Knudsen
K:c
c
0
P
Y
Regraded Unclassified
252
CONFIDENTIAL
1,250 PLANES PER MONTH PROGRAM
1. REQUIREMENTS.
No. of
No. of
Type
No. of
Engines
Planes
Engines
per Plane
per no,
per mo,
C. Heavy Bombers
4
125
500
b. Medium Bombers
2
300
600
C. Patrol Boats
2
125
250
d. Dive Bombers
1
200
200
e. Pursuit
2
200
400
f. Pursuit
1
300
300
Totals
1,250
2,250
Spare Parts (10%) in
terms of complete units
125
225
TOTAL
1,375
2,475
2. SUIMARY OF FACILITIES.
Delivery: Total : Total :
Cost of Facilities
Units
: Floor :
à
:
Willions of dollars
per
: Area inloyees :
:
:
Month
:Million: Thou-
:
Build-
:
Machine :
Total
: sq.ft.: sends
:
ings
:
Tools
:
a. Airfranes
1,375
15.9
159.0
47.7
127.0
174.7
b. Engines
2,475
7.0
35.0
24.5
112.0
136.5
C. Propellers
2,475
1.0
7.0
3.4
15.0
18.4
d. Miscellaneous
-
9.4
57.3
28.9
56.5
85.4
TOTAL
33.3
258.3
104.5
310.5
415.0
Prepared by: Aeronautical Section (T.P.V., A.E.L.),
National Defense Advisory Commission.
July 29, 1940
Regraded Unclassified
1,250 PLANES PER MONTH PROGRAM
CONFIDENTIAL
3.
DETAILS OF FACILITIES.
253
Delivery: Total : Total
:
Cost of Facilities
Units I Floor 1 Ib-
#
Millions of dollars
per
I Area :ployees 1
#
#
Month
iMillion: Thou-
I
Build-
I Machine
#
Total
# sq.ft.: sands
:
ingo
1
Toole
I
A.
Airframe
1. Heavy Bomber 4 eng.
138
4.0
40.
12.0
32.0
44.0
2.
Medium .
2 eng.
330
4.5
45.
13.5
36.0
49.5
3. Flying Boats
137
3.0
30.
9.0
24.0
33.0
4. Dive Bombers
220
1.4
14.
4.2
11.0
15.2
5. Pursuit Planes 2 eng.
220
1.8
18.
5.4
14.5
19.9
6.
.
.
1 sug.
330
1,2
12.
3.6
9.5
13.1
Total Airframs
1,375
15.9
159.
47.7
127.0
174.7
B.
Engines
1.
Wright Aero.
1,045
3.0
15.0
10.5
48.0
58.5
2. Pratt s Whitney
1,100
3.0
15.0
10.5
48.0
58.5
3. Allison
330
1,0
5,0
3.5
16.0
19.5
Total Engines
2,475
7.0
35.0
24.5
112.0
136,5
C. Propellers
1. Hamilton-Standard
1,275
0.4
3.0
1.4
6.0
7.4
2.
Curtiss-Wright
1,200
0.6
4.0
2.0
9.0
11.0
Total Propellers
2,475
1,0
7.0
3.4
15.0
18.4
D.
Miscellaneous
1. Aluminum Sheet
6,000tons)
2.
-
Oast. & Forg.
1,500tons)
5.0
15.0
15.0
25.0
40.0
3. Magnesium Castings
60tons 0.1
0.3
0.3
0.5
0.8
4. Steel Forg.(Rods,Shafts,Gears)
0.3
1.8
1.7
4.3
6.0
5.
.
If
(Cylinders)
40,000
0.2
0.3
0.7
1.4
2.1
6. Propeller Hub Forgings
-
0.1
0.4
0.5
1.0
1.5
7. Bearings 0/1
-
0.1
1.5
0.3
0.5
0.8
5, Valves
2,500eets 0.2
2.2
0.6
1.9
2.5
9. Carburetors
2,500 )
10. Magnetos
5,000
1.0
13.5
3.0
7.0
10.0
11. Starter & Generator
2,500
12. Shielding Harness
2,500
0.2
2.5
0.6
0.5
1.4
13. Rxhaust Manifolds
2,500
0.2
1.8
0.8
1.2
2.0
14. 011 Coolers & Radiators
2,500
0.1
1.0
0.3
0.4
0.7
15. Hydraulic pumps, etc.
6,000
0.1
1.3
0.3
0.7
1.0
16.
Turbo Superchargers
1,000
0.5
3.0
1.5
3.5
5.0
17. Landing Gear Strute
1,375prs.
0.4
3.2
1.2
3.2
4.4
18. Wheels & Brakes
2,750
0.1
0.5
0.1
0.1
0.2
19.
Instruments & Anto Pilots
1,375mets
0,8
9.0
2,0
5.0
7.0
Total Miscellaneous
9.4
57.3
28.9
56.5
85.4
GRAND TOTAL
33.3
258.3
104.5
310.5
415.0
Prepared by:
Aeronautical Section (T.P.W., A.E.L.).
National Defense Advisory Commission.
July 29, 1940
Regraded Unclassified
CONVIDITITAL
3,000 PLANES PER MONTH PROGRAM
1. REQUIREMENTS.
No. of
No. of
No. of
Engines
Planes
Engines
Type
per Plane
per mo,
per mo,
a. Heavy Bombers
4
250
1,000
b. Medium Bombers
2
600
1,200
c. Patrol Boats
2
250
500
d. Dive Bombers
1
400
400
e. Pursuit
2
400
800
f, Pursuit
1
600
600
E. Trainers-Adv.
2
300
600
h. Trainers-Adv.
1
200
200
Totals
3,000
5,300
Spare Parts (10%) in terms
of complete units
300
530
TOTAL
3,300
5,830
2. FACILITIES.
1
: Total
I
:
=
: Floor
:
=
Cost of Facilities
Delivery :
= Area
= Total
:
in
Units
:
No.
2 -
: Employees
:
$1,000,000
of
= Million
:
-
:
Build-
Machine
per
:
Month
: Plants
:
sq.
ft,
:
Thousands
:
ings
Tools
Total
33.2
332
116
266
382
a. Airframes
3,300
15
b. Engines
5,830
6
15.0
75
52.5
240
292.5
5,830
2
1,8
14.4
6.3
27.0
33.3
C. Propellers
d. Miscellaneous
-
23
18.6
130.6
58.5
113.8
172.3
TOTAL
46
68.6
552.0
233.3
646.8
880.1
3,000 PLANES PER MONTH PROGRAM
256
4. FACILITIES.
CONFIDENTIAL
Delivery:
I Total I Total I Cost of Pacilities
Units :
I Floor -
En
# Millions of dollars
per
:No. of Area
E
ployees:
Month
Plants:Million:
Thous-
:Build-:Machine: Total
I
:
sq.ft.:
ands
I
inge
1
Toole
If
A. Airframe
1. Heavy Bomber
4 eng.
275
2
8.
80.
28.0
64,
92.0
2. Medium .
2 eng.
660
3
9.
90,
31.4
72.
105.4
3. Flying Boats
275
2
6.
60.
21.0
48.
69.0
4. Dive Bombers
440
2
2.7
27.
9.4
22.
31.4
5, Pursuit Planea 2 eng.
440
2
3.6
36.
12.5
29.
41.5
6.
If
-
1
"
660
2
2.4
24,
8.4
19.
27.4
7. Adv.Trainers
2
=
330
1
1.
10.
3.5
8,
11.6
#
-
8.
1 "
220
1
0,5
5.
1.8
4.
6.8
Total Airframe
3,300
15
33.2
332.
116.
266.
382.0
B. Engines
1, Wright Aero.
2,090
2
6.
30,
21.0
96.0
117.0
2. Pratt & Whitney
2,420
2
6.
30.
21.0
96.0
117.0
3. Allison
660
1
2.
10.
7.0
32.0
39.0
4. Lycoming
660
1
1.
5.
3.5
16.0
19.5
Total Engines
5,830
6
15.
75.
62.5
240.
292.6
C. Propellers
1, Hamilton-Standard
3,200
1
0.9
7.2
3.2
13.6
16.7
2. Curtiss-Wright
2,630
1
0.9
7.2
3.1
18.6
16.6
Total Propellers
5,830
N
1.8
14.4
0.0
27,
30.0
D. Miscellaneous
1. Aluminum Sheet
12,000tons 1
)
2.
if
Cast.&Forg.
3,000tons
2
)
-
10.0
30.0
30.0
60.0
80.0
3. Magnesium Castings*
-
+
-
.
-
-
4. Steel Forg. (Rode,Shafts,Geers)
2
0.6
3,5
3.5
8.5
12.0.
5.
=
=
(Cylinders)
88,000
:
:
"
:
**
:
6. Propeller Hub Forgings
-
1
0.2
0.9
1.0
2,0
3.0
7. Bearings C/L
-
1
0.2
3.0
0,6
1.1
1.7
8. Valves
5,000seta 1
0.3
4.5
1.2
3.8
5,0
9. Carburetors
5,830 )
10. Magnetos
11,860
)
2
2.
27.0
6.0
14.
20.0
11. Starter & Generator
5,830 )
12. Shielding Harness
5,200
1
0.4
5.3
1.2
1,6
2.8
13. Exhaust Manifolds
4,600
2
0,6
4.0
2,1
5.0
6.1
14. Radiators & Oil Coolers
3,300
1
0.2
2.0
0.6
0.8
1.4
15. Hydraulic pumps, etc.
12,000
2
0.2
2.7
0.6
1.4
2.0
16. Turbo Superchargers
2,000
2
1.0
13,5
3.0
7.0
10.0
17. Landing Gear Strute
3,300prs.
2
0,8
6,4
2.4
6.4
8.8
18. Wheels & Brakes
6,600
1
0.1
0.8
0.3
0.2
0.5
19. Instruments & Auto Pilots
3,000sets
4
2.0
27.0
6.0
14.0
20.0
Total Miscellaneous
25
18.6
130.6
58.5
113.8
172.3
GRAND TOTAL
48
68.6
552.0
233.3
646.8
880.1
+
No data available. Use of magnesium insignificant.
: Cost of facilities (approx. $6,000,000) not included in totals.
prepared by Aeronautical Section,
National Defense Advisory Commission, T.P.W., A.E.L., July 26, 1940
Regraded Unclassified
256
*2*
3. FACILITY COST
Airframes
$ 382,000,000
Engines
292,500,000
Propellers
33,300,000
Miscellaneous Parts
172,300,000
GRAND TOTAL
$ 880,100,000
Prepared by Aeronautical Section,
National Defense Advisory Commission, T.P.W., A.E.L.
July 25, 1940
257
August 3. 1940
Prof. Chamberlain
Mr. Cochran
At our request the State Department has this morning endesvored to obtain
more information from the Mexican Embacy in regard to the two memorands which
accompanied the note from the State Department which 19 received yesterday
ovening.
Mr. Livessy now informs no that - OND dieregard the first memorandum,
which indicated a number of cities in Europe to which it is desired that dollars
be submitted by the Mexican Fabruary. Since these cities IN not in blocked
areas, there is no question for the Treasury Department. The State Department
has suggested to the Merican Hobsey that the problem of remitting to the cities in
question be taken up directly with their bankers.
with regard to the second semarandum, concerning funds for the treas-
nortation of the Mexican Legation staff from Vichy to Lisbon, the Mexican
ibsury has been told by the State Department that the National City Bank
has informed the Treasury that it has no knowledge of the transaction under
reference. Consequently the Mexican Rabasay should give & procise instruction
to the National City. requesting that a copy of its letter or cablegram be
attached to the regular application to W filed with the Federal Recerve Bank
of New York for reference to the Treasury Department. To have assured the
Nexican Imbassy through the State Department that this transaction will be
taken care of as soon as it may be reseived.
SW
HMC:emk:8.5.40
ba
Regraded Unclassified
258
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 3. 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
On August 2 I spoke with Mr. Knoke of the Federal Reserve Bank at New York
on the desire of the Government of Afghanistan to purchase 50,000 ounces of gold
to be earmarked with the Federal Reserve Bank in New York. This matter has been
the subject of correspondence over several months. I referred to the peraphrase
of telegram No. 167 dated July 18 from the American Legation at Tehran, a copy
whereof had been sent by the State Department to the Federal Reserve Bank of New
York.
Mr. Knoke told me that under date of July 30 he had written a letter to
Mr. Omar, in charge of the Afghan Commercial Agency in New York, referring to their
conversation of June 19, and informing Kr. Oner of the message now received through
the American Legation at Tehran. Mr. Knoke stated that he reminded Mr. Omar of the
request which the Federal Reserve Bank had made of him that he provide it with cer-
tain information in regard to the Banque Millie Afghan, which is to act as the
inancial representative of the Afghan Government in this transaction. The informs-
tion desired included the statutes and latest balance sheet of the Banque Millie
Afghan. in English. When this matter had been discussed on June 19, Mr. Omar had
advised Mr. Knoke that he had some of the data immediately available, would procure
some from London and the remainder from Afghanistan. Mr. Knoke has not heard from
Xr. Omar since the visit of June 19. Be does not feel that the Federal Reserve Bank
can take any steps towards opening the desired gold account in the absence of the
requested information. I told Mr. Knoke that neither the State Department nor the
Treasury Department had any precise data in their files which would be of direct
assistance, It 1s understood, therefore, that nothing further will be done pending
some word to the Federal Reserve Bank of New York from Mr. Omar.
I an providing a. copy of this memorandum to Mr. Livesey in the State Department,
in order that he may advise the Near Eastern Division of the status of this case.
The State Department may desire to give us a little time to hear from Mr. Omar,
before answering the cablegram of July 18 from Tehran. Since we are now in touch
with the Afghan representatives, that 1s, the commercial representative in New York
and the Afghan Ambassador at Tehran, it seems unnecessary to work, for the present
at least, through the Turkish Embassy in Washington.
B.M.S.
Regraded Unclassified
259
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 3. 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
CONFIDENTIAL
Only two of the six reporting banks effected transactions in registered sterling
today. They made purchases of L121,000, mainly for customer account. Of this amount,
112,000 were acquired from the Federal Reserve Bank of New York.
Open market sterling was first quoted at 3.87-3/4. The market vas idle throughout
the morning, and the final quotation was 3.88. The reporting banks executed orders to
sell L24,000, of which L12,000 were for commercial concerns and L12,000 for foreign
banks. Orders to purchase L14,000, all for commercial concerns, were also executed.
The other currencies closed as follows:
Swiss franc
-2274-1/2
Canadian dollar
13% discount
Lira
.0505
Reichsmark
.4005
The Federal Reserve Bank of New York purchased 85,000 Swiss france for account of
the B.I.S. In its instructions to the Federal, the B.I.S. mentioned that this trans-
action was being executed for the Bank of France.
We made the following purchases of gold from earmarked accounts:
$51,272,000 from His Britannic Majesty's Government
5,005,000 from the Central Bank of the Argentine Republic
$56,277,000 Total
The Federal Reserve Bank of New York reported that the Bank of the Colombian
Republic shipped $1,074,000 in gold from Colombia to the Federal, to be earmarked for
its account.
The Bombay gold price YES slightly lower at the equivalent of $33.70.
Spot silver in Bombay was equivalent to 44.31#. off 1/44.
AMP
Regraded Unclassified
260
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 3, 1940
TO
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
Mr. Pinsent, Financial Counselor of the British Embasay, called on ne yesterday
evening, accompanied by Mr. E. L. Hell-Patch, His Britannic Majesty's Financial
Commissioner in the Far Zast. I had known Mr. Hall-Patch before. After a year and
a half in England, he is now returning to his duties in the Far East. He was some-
what concerned over the future of the Stabilization Funds of China, since the
principal foreign exchange in one of them and part of the foreign exchange in the
second consists of sterling. Under the British ruling effective July 18, 1940, such
sterling can now only be utilized in the sterling area, and consequently its utility
as a support for the Chinese currency is lessened. Hall-Patch had mentioned this
point to Dr. Soong two days ago, and the latter 1s looking into it, Hall-Patch had
informally recommended that the Chinese invest part or all of this sterling in com-
modities such as tin or rubber which can be acquired in the sterling area and then
dispose of them for hard currencies which would be of more use to the Stabilization
Funds. Hall-Patch did not explain to me how or whether this might be possible under
the British regulations controlling exports. Hall-Patch will be in town a few days
before sailing for the Far East.
Since Mr. Hall-Patch has known Mr. Jean Monnet in Europe and the Far East for
several years, I asked him in regard to the latter's present whereabouts. He said
that he knew nothing about Jean Monnet at present. When his Job in London collapsed
with the signing of the French-German Armistice, Jean Monnet offered his services to
the British Government, but this offer WE.B not accepted. Hall-Patch doubted whether
Monnet could return to France because of his close connection with Deladier.
Regraded Unclassified
261
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 3. 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
When Mesers. Pinsent and Hall-Patch, the latter being the representative of
the British Treasury in the Far East, called on me yesterday afternoon, Pinsent
brought up the subject of whether the Channel Islands should be blocked. I have
submitted one memorandum of a conversation which I had with Mr. Knoke on this sub-
ject. It was decided that Pinsent should cable his people to see whether the
British are interested in the assets of those islands being frozen. It is under-
stood that the Patino tin family has important holding companies domiciled in the
Channel Islands and that other capitalists have set up organizations in those
islands to assist them in avoiding taxes and other fiscal regulations. I reminded
Pinsent that we had not looked favorably upon the French idea of blocking any
country piecemeal. If the British suggest to us now the blocking of assets from
these islande, and we accept the idea, a precedent would be established with which
it might be difficult to be consistent if the Germans extend further their invasion
of the United Kingdom.
ZYR.
262
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 3, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
Kr. Paul Leroy-Beaulieu, retiring French Financial Counselor, called on ne
Saturday to say good-bye. He was accompanied by Mr. Marcial, the representative
of the Bank of France in New York. Talking with me by telephone the preceding day
from New York, Leroy-Beaulieu had complained about the administration of our freezing
regulations. I asked if he cared to give me an informal memorandum on this subject.
Ee presented a one page note thereon when he called, and I am circulating this
separately.
Mr. Georges Picot, now with the French Purchasing Mission in New York, will
carry on Leroy-Beaulieu's work of Financial Attache until his successor, Mr. Herve
Alphand, arrives from France.
AMR.
Regraded Unclassified
263
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 3. 1940
TO
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
In a conversation with Mr. Knoke yesterday I learned that the Hungarian
National Bank had within recent days paid the sum of $1,800,000 to the
Federal Reserve Bank, representing the entire balance due the Federal on
account of the "short term" credit to the National Bank of Hungary, extended
in the autumn of 1931 by a group of central banks through the B.I.S., in which
the Federal participated to the extent of $5,000,000. It is my impression
that the Federal brought strong pressure on the National Bank of Hungary to
obtain this result, threatening to put a lien on the gold held with the
Federal by the National Bank of Hungary, in the name of the B.I.S.
BMP.
Regraded LInclassified
264
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Berlin.
DATE: August 3, 1940, 10 a.m.
NO.: 3369.
FROM HEATH FOR THE TREASURY AND FOR DEPARTMENT'S
INFORMATION.
Despite the fact that German-Swiss trade negotia-
tions are reaching termination now, Swiss sources here
say that no proposal has been received by the Swiss
negotiators that Switzerland enter into the multilateral
clearing agreement of Europe under the direction of
Germany, which was foreshadowed by Funk in a speech on
the new economic era in Europe--refer in this connection
to Embassy's 3203 of July 26, 5 p.m.--nor have the
Swiss negotiators received any indication that proposals
would be forthcoming along this line. However, these
Swiss circles state that no objections would be raised
by Switzerland to entering an agreement for multilateral
clearings (offsetting) periodically of blocked balances
resulting from trade which is conducted on a basis of
bilateral clearing with other countries of Europe as
a transitional solution until free exchange returns,
since Switzerland would be enabled thereby to reduce or
get rid of its blocked credit balances in certain countries
by application of them against its debit balances with
other nations.
However
Regraded Unclassified
265
-2-
However, any multilateral arrangement which goes
beyond the clearing (offsetting) periodically of blocked
balances resulting from trade between pairs of nations
and prescribes that individual trade and financial pay-
ments can no more be made direct between Switzerland
and Switzerland's trading partners, but must go through
a Berlin clearing office and therefore come under the
German Government's scrutiny and control, will be opposed
by Switzerland and only under compulsion will it be
adnered to.
I have information that pressure has been success-
rully exerted by Germany in these negotiations to force
larger exports of agricultural products and machinery
from Switzerland, which Germany needs. The Government
or Switzerland will have to extend export credits to
hundred
its exporters probably in the amount of one/million
Swims francs since it will not be possible during the
war as it is now for Germany to pay for these greater
purchases by increases in its exports to Switzerland.
My informants state, on the other nand, that German de-
mands for such credits are not being opposed by Switzer-
land because such credits will foster merchandise sales
which can't be exported now on account of the war and
blockade conditions; also there 18 tacit admission that,
in
Regraded Unclassified
266
-3-
in order to erase the memory of Switzerland's previously
unaccommodating attitude toward German trade, Switzer-
land is definitely pursuing a policy of economic co-
operation with Italy and Germany.
Regraded Unclassified
267
A statement was made to the effect that Italy was
previously obligated to pay in free france Swiss railway
freights for transit shipments but now Italy,: by means
of the Italian Swiss clearing, is permitted to cover them.
When the war began, Switzerland had in Germany a blooked
clearing balance of around sixty-five million francs.
In order to absorb this balance, Switzerland successfully
insisted that the arrangement be amended. Because of the
new arrangement and the fact that when the war began
Germany was able to increase her exports to continental
countries, not only was the Swiss exchange claim against
Germany wiped out in the period of about three months but
a credit of around forty million Swiss france was acquired
and retained by Germany. This balance will be utilized
by Germany for increasing imports from Switzerland and,
through the Government of Switzerland export credits
referred to above, will also further increase imports by
about one hundred million Swise francs.
(END OF MESSAGE)
KIRK
and
50 13 w 2. WA or
Regraded Unclassified
TWO COPIES FOR TREASURE
17997
RDS
PLAIN
268
SHANGHAI VIA N.R.
Dated August 3, 1940
Rec'd 11:35 p.m.
Secretary of State,
Washington.
733, Third.
FROM COMMERCIAL ATTACHE.
Special Financial. Regarding low parity of local
Exchange rates as compared with NEW York free sterling
rates as mentioned in my 731 dated August 2nd, local
arbitrage operators cannot take advantage this situation
because American banks in Shanghai have been instructed
not to undertake transactions involving the sale of free
sterling acquired locally to operators for United States
dollars in NEW York, though transactions involving selling
of United States dollars for free sterling in NEW York
are permitted. This technical handicap has more or less
dissociated Shanghai free sterling from that quoted in
NEW York. Shanghai free sterling parity as Expressed in
local rates has been during last WEEK around United States
dollars 3.70, unaffected by NEW York free sterling fluc-
tuations, local free sterling selling today opened at
parity of 3.66 as compared NEW York free sterling August
2nd at 3,885.
INFORM COMMERCE.
BUTRICK
EMB
Regraded Unclassified
269
VOLUNTARY
20449
ESTABLISHMENT OF NEW BANK OF ISSUE IN BELGIUM
From:
Edward A. Dow, Jr., American Vice Consul
American Consulate, Brussels, Belgium
Date of completion: July 20, 1940
Date of mailing:
August 3. 1940
A decree of the German Military Commander for Belgium and
Northern France, dated June 27, 1940 and published in the Verordnungs-
blatt fur die besetzten Gebiete of July 6, 1940. created the Bank of
Issue of Brussels (Emissionsbank in Brussel- Banque d'Emission de
Bruxelles) for the issue of currency in Belgium.
The decree states that the Bank is being created by the Military
Commander in virtue of the authority vested in him by the Commander
in Chief of the German Army. The Bank's capital is fixed at
150,000,000 Belgian france, divided into 15,000 shares of 10,000
france
Regraded Unclassified
270
- 2 -
francs each, of which at least 20 percent must be paid up at the
time of the establishment of the institution.
The bank is authorized to issue banknotes in Belgian franc
denominations and these are to be legal tender in the occupied
territory of Belgium. It is authorized (1) to buy and sell public
treasury, provincial and communal obligations which fall due within
a period of one year from the date of purchase, (2) to discount
bills of exchange and drafts guaranteed by at least two persons
whose solvency is known to the Bank (bills of exchange must fall
due within six months of the date of discount), (3) to make loans
against interest, the loans to be for a period of not more than six
months. The Bank is also authorized to carry on foreign exchange
transactions with foreign countries.
The banknotes issued by the Bank are to have as coverage the
credits resulting from discount and loan operations, credits of the
National Bank of Belgium and "foreign exchange holdings". It is
specifically laid down that the latter term is to include German
currency as well as the Reichskredietkassenscheine issued for the
occupied territories.
PREMIT
The statutes of the Bank are to be submitted for the approval
RECEIVED
of a Reich Commissioner.
AT OT or
EDIVE
At least B. portion of the capital of the new bank is reported
to have been subscribed by commercial banks operating in Belgium,
notably the Societe Generale de Belgique.
No currency had been issued by the Bank of Issue of Brussels
up to the end of July.
File No.851.
cad/r
Regraded Unclassified
(COPY:DCA)
271
EMBASSY OF THE
UNITED STATES OF AMERICA
Vichy, August 3. 1940
Subject: Order setting up an office for the Super-
vision of Banks in Occupied Territory
The Honorable
The Secretary of State,
Washington, D. C.
Sir:
With reference to the Embassy's telegram No. 233,
August 2, 5 p.m., I have the honor to transmit herewith a
copy and translation of the Order published in Paris on
July 26, setting up an Office for the Supervision of Banks
in Occupied Territory.
Respectfully yours,
ROBERT D. MURPHY
Charge d'Affaires ad interim
Enclosures:
mg
1. French text of Order
2. Translation of Enclosure No. 1
In triplicate
Regraded Unclassified
Enclosure No. 2 to Despatch dated Vichy, August 3, 1940.
272
Translation
Paris, July 26, 1940
JOURNAL OFFICIEL
CONTAINING THE ORIERS ISSUED BY THE MILITARY
GOVERNOR FOR FRENCH OCCUPIED TERRITORY
ORDER FOR THE ESTABLISHMENT OF AN OFFICE OF BANK
SUPERVISION IN FRENCH OCCUPIED TERRITORY
(BANK SUPERVISION ORDER)
July 22, 1940.
By virtue of the plenary powers which have been
conferred upon me by the Fuhrer and Supreme Chief of
the German Army, I decree as follows:
1.
An Office of Bank Supervision shall be set up in
French occupied territory. This Office has its head-
quarters in Paris.
2.
Enterprises which professionally carry on banking
operations and savings banks (receiving and supplying
money, purchasing, selling, receiving deposits and
managing securities for the account of others) which
have their head office or place of management in occu-
pied territory, are subject to the control of the Office
of Bank Supervision: they are obliged to follow the in-
structions of the Office of Bank Supervision.
3.
The Office of Bank Supervision is especially au-
thorized:
a) to examine the books and accounts of the credit
establishments subject to its supervision, as well as
the cash, securities, bills, etc., and to request in-
formation regarding all transactions, as well as to malce
important operations dependent upon its consent;
b) to examine or require submission of balance
sheets and documents pertaining thereto:
c) to prohibit the carrying on of the business or
any particular transactions, especially the disposal of
securities, the repayment of obligations or commercial
communications;
d) to order the deposit or the transfer of the
securities of the controlled credit establishment;
e) to
Regraded Unclassified
273
-2-
e) to withdraw from authorized persons the right
to represent the credit establishments and to confer
this right upon others.
Transactions which are dependent upon the consent
of the Office of Bank Supervision (3 a), but which have
been carried out without its consent are null and void.
5.
After the present order has come into effect credit
establishments already existing can only be established
upon the previous written authorization of the Office
of Bank Supervision. (The word "not" before "already"
was apparently omitted.)
6.
The expenses of the supervision are to be borne by
credit establishments 80 supervised.
7.
The provisions of this Order do not apply to the
Bank of France.
8.
Infractions of the terms of this Order or of the
Orders issued in execution thereof are punishable by
prison and a fine, or one of these penalties. Serious
DECEMED
offenses are punishable, by hard labor.
8020
9.
The present Order comes into force on the day of
its publication.
For the Commander in Chief of the Army,
The Chief of the Military Administration in France.
COPY
bj
Regraded Unclassified
274
TELEGRAM SENT
PLAIN
August 3, 1940
LEGATION
COPENHAGEN
RUSH.
203, third.
Your 447, August 2, 5 D. m.
Treasury advises it will grant license to Federal
RESERVE Bank of NEW York authorizing the transfer, upon
instructions of Densmarks National Bank, to a special
free dollar account of dollar funds of Dansmarks National
Bank up to additional $10,000 requested, upon receipt
from the American Legation at Copenhagen, through the
Department of State, of certification that an equivalent
amount of dollar funds has been furnished by the Dans-
marks National Bank for Danish kroner for transportation
for returning American citizens and their families to
United States on American Legion.
HULL
(GHB)
840.51 FROZEN CREDITS/132
EU
DA
SD:GLB:LFS
En
Regraded Unclassified
cohy ex Paws.
TREASURY DEPARTMENT
275
INTER-OFFICE COMMUNICATION
DATE August 3, 1940
TO
Secretary Morgenthau
FROM
Mr. White
Subject: 011 Refineries in Dutch East Indies
1. Standard 011 of New Jersey and the Dutch Shell each
have & refinery in Dutch East Indies with a capacity of
1,000 barrels a day of aviation gasoline of 86 octane. Another
refinery of same capacity (1,000 barrels a day) is under con-
struction. Gasoline of 86 octane gas 1a high enough to oper-
ate planes with fair efficiency. With the addition of 3 C.C.
of lead the quality of the gasoline can be stepped up to
10 octane, (The above information was supplied by Mr. Sadler
of the Standard 011 of New Jersey via Captain Puleston. We
have been able to find no published data on the Dutch East
Indies capacity of high octane gas. The Bureau of Mines ex-
perts thought it very likely that the Dutch East Indies have
(
facilities for production of high octane a.s but were not
certain.)
2. The Netherlands East Indies produces about 62 million
barrels of crude petroleum a year, of which about 4 million
barrels are refined into gasoline. In 1938 Japan imported
about 2.5 million barrels of oil from Netherlands East Indies.
(Japan was supposed to have imported from all countries
in 1938 over 36 million barrels of petroleum, including at
least 22 million barrels of crude oil, and at least 2 million
of gasoline, and 10 million of fuel oil.)
3. The experts in the Bureau of Mines estimated it
would take at least 6 months to build additional plants in
Japan or Dutch East Indies capable of turning out high octane
gas.
Regraded Unclassified
copy/ a Purvice 278
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE August 5. 1940.
TO
Secretary Morgenthau
Mr. White
FROM
Subject: Effectiveness of licensing control over aviation
gasoline, aviation lubricating 011 and tetraethyl lead.
What effect the recent addition of (a) aviation gasoline,
(b) aviation lubricating oil and (e) tetraethyl lead to the list
of commodities requiring an export license will have on Japan's
military effectiveness seems to be unknown in Washington. If
what some experts say is true, the prohibition has considerable
effectiveness, but if what others say 18 true, it is almost com-
pletely ineffective. The numerous oil experts interviewed are
not in agreement on important points and a more extended investiga-
tion into the subject 1s warranted before definite conclusions
can be drawn with respect to the effectiveness or ineffectiveness
of the new prohibition.
The substance of the situation appears to be as follows:
I. Aviation Gasoline
a. Japan has been importing less than 1 million barrels of
avistion gas a year but she has been importing large quantities of
tetraethy1 lead with which she can make her own aviation gas out of
crude oil and ordinary gasoline. In the Dutch East Indies the
Standard 011 and Dutch Shell produce almost 1 million barrels of
high-octane gas, but we do not know how much of it they will sell
to Japan.
b. A plant to produce iso-cotane (used to blend with ordinary
gasoline to bring it up to 85-90 ootane) has recently been com-
pleted near Tokyo. Another one 1s in process of construction.
(More information could be obtained about this plant in Japan from
the Tidewater Associates in the United States who own a half inter-
est in the plant.)
According to Mr. Saddler of the Standard 011 of New Jersey,
(via Puleston) Japan's contract for orude oil with the Dutch East
Indies producers require that 20 percent of the crude oil delivered
to Japan should be doped with enough tetrasthyl lead so as to yield
when distilled, gasoline with an octane of 87. According to
Mr. Williams, Chief Chemist at the Bureau of Customs, crude oil
doped with tetraethyl lead or 1s0-00tane fluid can be distilled to
obtain aviation gasoline.
Regraded Unclassified
277
Division of Monetary
- 2 -
Research
Our own prohibition 1s 80 worded that crude oil for import
to Japan 1s presumably not permitted to contain enough tetraethyl
lead go as to yield B. high-cotane gas, but if Japan can get crude
sil w1 th adequate lead content from the Dutch East Indies her
supply of high-cotane gas will be substantially increased, even
though Japan should not be able to produce tetraethyl lead herself.
0. It is reported (in a German source) that Japan and
Manchukuo produce synthetic gasoline at the rate of over 7 million
barrels & year. How much of it if any is of high enough ootane
Quality, we do not know.
II. Tetraethyl Load
The prohibition on tetraethyl lead may or may not be effective.
The ingredients necessary for its manufacture can be obtained by
Japan. According to one expert, the manufacture of tetraethyl lead
18 a highly complicated, dangerous, difficult and expensive process,
but according to another expert, it 1s a relatively aimple one, If
the expert who claims that it can be simply made (Mr. Kraemer of
the 011 Department of the Bureau of Mines) 18 correct, then the pro-
bibition on tetraethyl lead would not be serious to Japan, and she
could make all the aviation gas she needed out of crude 011 and
motor gasoline.
III. Aviation lubricating 011, with 8. higher viscosity index of 85
Whe ther this prohibition proves to be effective or not depends
upon the extent to which American exporters are willing to cooperate
with the objective of the new regulation. The expert who wrote the
regulation said that it 1s A very simple matter to mix the high
grade oil in such B way that it could legally be exported and then
with simple processing in Japen have the visoosity restored to higher
than 85. Japan could, moreover, process high quality lubricating 011
If she has the appropriate base crude petroleum, though It is sup-
posed to be an expensive process.
IV. I spoke to the man who drafted some of the provisions and who
helped in other provisions in the prohibition and he volunteered the
information that the regulation had been drafted in its present form
rather than in the form in which it was first given to the President
because:
a. It would be too difficult an administrative job to
require a license for all exports of all petroleum
products.
b. The working assumption was that the measure was intended
only to restrict the use of planes and not of ships or
tanks or trucks.
0. Though there were numerous ways of legally evading the
written, they were 80 pressed for time they couldn't
prohibition of lubricating oil as the regulation is now
avoid the flaws in the formula.
Regraded Unclassified
Copy timis.
TREASURY DEPARTMENT
278
INTER-OFFICE COMMUNICATION
DATE August 5, 1940
TO
Mr. White
FROM
u.r. VIluann
mbjects the Petroleum Situation in Japan
1. Japan can supply less then 10 percent of its petroleum requirements
AND oil originating in its own wells, and is therefore dependent on outside
journes 01 supply.
Lnown Japanese imports in 1939 exceeded 30 million barrels, of which
and United States supplied 28 million carrels (or 93 percent), the remainder
Team Minnlied by the Metherlands East Indies,
2, us tocal Japanese 1939 imports, crude petroleum end Tuel oil ac-
for 93 percent (crude petroleum 53 percent, are mel oils 40 percent).
:- United tates exports of principal petroleum products to Janan in
mounted to 28 million barrels (valued at 145.4 million), livided as
Jollown:
Crude petroleum
57)
Fuel oils
35
Avistion gasoline
2
Other [asoline
3
Lubricating oil
2
Kerosene
1
inited States exports to Japan in 1939 were almost 12 percent below
The exports. in the first six months of this year, our exports to Jaman
-*** 23 rercent lower than in the corresponding period of last year. Low-
wer, June, 1940 exports are slightly nigher than shirments in June, 1939
0,5 represent c rise over exports of the preceding lour months. Attached
tables indicate United States exports to Japan.
he The Metherland East Indies, in 1939, exported 2.3 willion barrels
of petrolem products to Jaban, 91 percent of which was fuel oil. Basoline
mounted to only 4 percent. No lubricating oil was exported to Janan (see
table ii).
Vetherland Lost Indies exports to Japan in 1939 were oelow 1938 exports
00 only 4 percent,
Regraded Unclassified
279
- 2 -
Division of Monetary
Research
5. It is reported (in a Verman source) that Japan and vanchukuo pro-
duce synthetic asoline at B rate exceeding 7 million barrels a year. There
is no verification of this report, \jowever, nor does the report indicate the
quality of the product produced.
6. Japan's ability to refine imported products into aviation gasoline
cennot be accurately determined. Her imports of sviation gasoline in 1939
amounted to less than 1 million barrels, Japan imported only 108 thousand
carrels of gasoline (of all types) from the Netherland Bast Indies in 1939,
and 600 thousand barrels of aviation gasoline irom the United States, Her
imports from the United States in the first half of 1940 were 20 percent be-
low the corresponding period of 1939.
Japan is known to be refining a ome aviation gasoline. She has in the
past operated some aviation gasoline plants, and has recently completed new
ones (one of which is half-owned by a United States company, Tidwater
Associates). Furthermore, according to Mr. Saddler of the Standard Oil
Company, Japan's contract with the Netherland East Indies provides that
one-fifth of the crude petroleum shiments are to be doped with enough
tetraethyl lead to yield gasoline exceeding 87 octane,
Moreover, Japan's imports of anti-knock compounds from the United States
rose in the first six months of 1940 (over the corresponding period of 1939)
even though Japan's imports of all petroleum products declined.
7. Japan's ability to produce aviation lubricating oil cannot be deter-
mined. In 1939, Japan imported only a half million berrels of lobricating
oil of all types, only a part of which was of the high quality usually re-
ferred to as aviation oil (i.e., oil that will stand up under the extreme
heat and pressure of airplane motors).
However, most of the lubricating oil exported to Japan could either be
used as received, or could be further processed into a higher quality.
Woreover, Japan has facilities to produce lubricating oil from crude products.
The manufacture of aviation lubricating oil (as distinct from ordinary
lubricating oil) depends on the technical skill of the manufacturers, rather
than on special equipment. Therefore, if Japan has adequately skilled per-
somel, it can produce aviation lubricating oil from imported crude petroleum
or from other oils.
products. Her known imports and production in 1938 amounted to over 38 mil-
8. It appears that Japan has been accumulating stocks of petroleum
lion barrels. Her consumption for that year, however, was estimated at
25 million barrels (Garfias estimate quoted in "Petroleum Facts and Figures,"
1939), leaving an apparent surplus of 13 million barrels.
Regraded Unclassified
280
- 3 -
Division of Monetary
Research
Similarly, Japanese consumption in 1939 was estimated at 25.4 million
barrels, in contrast to known imports and production of almost 33 million
barrels (leaving a surplus of almost 8 million barrels).
It is possible, in view of these facts, that the decline in Japanese
imports can be ascribed to a desire not to increase stocks, rather than
to any decrease in consumption.
Regraded Unclassified
281
Table I.
United States Exports of Petroleum and Products to Japan, 1936 to Date
(In millions of dollars)
:
Total
:
:
:
:
:
:
All
: Petroleum
:
Crude
:
Aviation
:
Other
:
Fuel
: Lubricating :
Other
:
and
:
Petroleum
:
Gasoline
:
Gasoline
2
:
Oils
:
Oils
:
Petroleum
:
products
:
:
:
:
:
:
Products
1936
28.9
14.2
2.5
9.0
2.8
.4
1937
43.8
22.1
1/
4.5
10.8
5.5
.9
1938
51.3
29.8
1/
8.8
9.2
2.8
.6
1939
45.4
20.9
5.0
2.9
9.9
5.2
1.5
First six months 1939
21.8
10.0
3.0
.8
5.4
2.0
.6
Second six months 1939
23.6
10.9
2.0
2.1
4:5
3.2
.9
First six months 1940
18.2
7.6
1.6
1.0
3.6
3.2
1.2
1939 January
3.2
1.3
.7
.3
.6
.2
.1
February
3.5
1.8
.8
.1
.5
.2
.1
March
3.5
1.5
.4
.2
1.0
.3
.1
April
3.5
1.7
.4
.1
.7
.5
.1
May
5.0
2.3
.4
.1
1.7
.4
.1
June
3.1
1.4
.3
3/
.9
.4
.1
July
2.9
1.9
.1
.3
.3
.1
.2
August
1.9
.7
.1
3/
.5
.4
.2
September
4.0
1.9
.1
ah
1.0
.5
.1
October
5.2
2.7
.7
.2
.8
.7
.1
November
4.9
2.0
.3
.8
1.0
.7
.1
December
4.7
1.7
.7
ph
.9
.8
.2
1940 January
5.1
1.6
.5
.5
.6
1.7
.2
February
2.4
1.0
.2
.3
.5
.4
March
2.3
1.1
.2
:-
.5
.4
3/
April
2.3
1.1
3/
.1
.5
.4
.2
May
2.9
1.4
.6
-
.7
.2
3/
June
3.2
1.4
.1
-
.8
.1
8
Treasury Department, Division of Conetery Research.
August 5, 1940.
w
Incl ed with Other Gasoline prior to 1939.
and
to
1939
aviation
Regraded
282
Table II. Exports of Principal Petroleum Products from the
United States and the Netherland East Indies to Japan, 1939
(Millions of barrels)
: From the
:
From the
:United States:Netherland East Indies
Crude petroleum
16.1
-
Aviation gasoline
.6
1/
Other gasoline
.8
.1
Kerosene
.1
.1
Gas oil and fuel oil
9.9
2.1
Lubricating oil
.5
-
Total
28.0
2.3
Treasury Department, Division
August 5, 1940
of Monetary Research.
TREASURY DEPARTMENT
Copy to 283
INTER-OFFICE COMMUNICATION
DATE August 5, 1940.
TO
Secretary Morgenthau
FROM
Mr. White
Subject: Reducing the Supply of 011 Available to Aggressive
Countries.
1. Germany, Italy and Japan together produce in areas under their
control less than one-fourth their minimum needs. They can get
adequate supplies of oil from only four sources: (1) Roumania,
(2) United States, (3) Dutoh East Indies, and (4) Latin America.
011 from the Near East 16 not available to them, and oil from Russia
will be available only in small amounts and only if Roumanian oil
continues to flow to Germany.
The British, Dutch and American oil interests among them con-
trol virtually all the oil -- except Russian, Roumanian and Mexican
oil -- produced in these areas. Moreover, a large portion of the
Dutch companies are owned by British stockholders. Inasmuch 6.8 the
C
"legitimate" Dutch Government is in England and since they presum-
ably are still allies of England, it 1s possible without military
measures to eliminate the sales of petroleum products to aggressive
countries from areas outside of Russia and Roumania, Possibly our
control over Dutch funds could be 6. factor in promoting cooperation
of the Dutch Shell. (Netherlands has assets of almost $1-1/2 b11-
lion blocked in the United States -- almost $400 million of which
belong to the government and Central Bank.)
2. Your proposal was that the United States consider adopting the
following course of action:
(a) Let the Latin American countries supply England
and Canada with all their needs;
(b) Absorb the remaining exportable surplus of Latin
American countries;
(o) Control exports of all petroleum products from the
United States to all countries on the grounds that
we need to conserve our own oil, and license exports
to those areas and on those items in accord with the
objectives of the program and so far 8.6 should prove
to be politically feasible.
The adoption of such & program would involve an expenditure of from
$250 to $400 million a year, depending upon the amount of exports
that could be licensed while still adhering to the proclaimed objec-
tive of conserving needed supplies. An expenditure of that magnitude
Regraded Unclassified
284
Division of Monetary
- 2 -
Research
during the coming year would be adequate to reimburse the oil
producers for any loss they might suffer through curtailed foreign
markets. This would include the refineries and processors 8.8 well
as the crude oil producers. The necessary corollary to such pro-
posal would be arrangements with the American, British and Dutch
oil interests not to expand their production in Latin America
beyond current output.
In pursuance of such a program, in some cases it would be
feasible to curtail output of American wells by closing some of
them, but in other cases the oil will have to be stored in add1-
tional built tanks inasmuch as some wells cannot be stopped from
producing without serious deterioration. In either case, the pro-
ducer would have to be reimbursed to some extent. (An argument
that can be used to encourage oil producers to cooperate is that
world consumption of oil under present conditions is less than
would be consumption after war ceases. Hence, the increased supply
resulting from a "AAA oil program" will not be as bearish on oil
prices in the future as might at first appear.)
There are ways in which the cost could be reduced - by sub-
sidizing consumption, by the anticipated expansion of domestic
market resulting from our defense program, etc., but no matter what
was done the cost would remain over $1/4 billion during the next
year.
Conclusion:
Your proposal may be stated in the following brief terme:
1. If the United States -- alone or together with Great
Britain -- is willing to spend $25 to $35 million a
month on an oil conservation program, and
2. If the Dutch and the British will either destroy their
wells in Dutch East Indies, or embargo oil exporte ex-
cept to British areas, and
3. If Russia could be induced to take over the Roumanian
wells, and
4. If England would concentrate and extend her bombing
attacks on German oil producing centers;
Then:
1. Japan will have to sue for peace with the Chiang-Kai-Shek
Government in the very near future inasmuch as without 011
reserves her military operations would be gravely hampered.
Regraded Unclassified
285
Division of Monetary
- 3 -
Research
2. The Japanese navy will be in no position to undertake
any new venture, and hence her attitude toward the
United States would undergo an abrupt change for the
better.
3. Germany would be in a desperate plight to continue
fighting. She might elect to utilize her remaining
supplies in one desperate effort to break through the
blockade. Should such a venture fail she would per-
force be compelled to seek peace; should it succeed,
it would be because she would succeed in any case.
Altogether, a risk of $25 - $35 million a month on the part
of the United States seems like a trifling price to pay for a
gamble where the stakes are 80 high and the chance of winning 80
good.
Regraded Unclassified
286
TREASURY department
INTER OFFICE COMMUNICATION
DATE August 3. 1940.
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
When Mr. Pinsent handed to me yesterday evening the attached memorandum, he
asked that I bring it personally to the attention of the Secretary with the hope
that the latter may see fit to grant some relief to the British Government under
our Customs regulations. Mr. Pinsent explained that the Commercial Secretary of
the British Embassy had discussed the subject matter of the memorandum with
Mr. Johnson, our Customs Commissioner, and that he would also inform Assistant
Secretary of State Grady of the submission of this question to the Treasury.
B.M.P.
287
(Eanded by Mr. Pinsent of the British Robasay to
Mr. Coohran in the Treasury at 6 p.m. on August 2, 1940)
As the U.S. Government will be aware,
H. M. Government have submitted to Parliament
proposals for the imposition of 8 tax in respect
to purchases of goods from wholesalers. The
effect of the proposels will be that the tax
will fall upon purchases of goods (other than
those specifically exempted) by retailers from
manufacturers or wholesalere. Sales for export,
whether by msnufacturers or wholesalers, will
be free from tax.
In framing the proposals H.M. Government
have naturally paid regard to provision of United
States law relating to valuation of goods for
asseesment of ad valorem duties but they are
not satisfied that as United States law stande at
present there may not be 08588 in which it may
be claimed that the amount of the proposed
purchase tax should form part of the value upon
which duties will be assessed. Even if such claims
were not upheld by the Courts the intervening
period of uncertainty would cause impediments
to trade. To H. M. Government it appears
inequitable that 8 tax such 88 the tax in question
which does not enter into the cost of production
of goods in the United Kingdom should attract
import duty. Moreover such a result would be
very serious at B time when it 18 essential to
promote exports to the utmost in order to provide
means for paying for munitions and other essential
requirements. Should the U.S. Government feel
that the fears of H. M. Government are well founded,
they trust that the U.S. Government will consider
with sympathy whether the existing law could be
amended BO 86 to remove the inequity to which
attention 18 directed above.
jers
2nd august 1940
Regraded Unclassified
TREASURY
17975
MT
PLAIN
London
288
Dated August 3, 1940
dote:
\
Rec'd 5:55 p.m.
SECRETARY of State,
+
Washington.
2537, August 3,
Monthly Economic.
British Economic mobilization in all sections of
industry trade, finance and labor continued actively
during July. Compulsory powers available to Government
in this fiEld have however been invoked sparingly, reliance
being placed in voluntary cooperation far as possible.
Problems rising national expenditure at least partially
met by increased taxation in interim Emergency budget,
third since beginning war, and by additional measures
including vigorous savings campaign to restrict civilian
consumption and private expenditure. Generally, production
Essential supplies continues expand but output ordinary
consumer goods tending progressively downward in line
with various measures to restrict civilian consumption,
Establishment Industrial Capacity Committee under chair-
manship Parliamentary SECRETARY to Ministry Supply
announced at End of month. Area boards in Each civil
defence region composed of representatives employers
labor and government supply departments will function.
under
Regraded Unclassified
289
-3- 2537, August 3 from London.
under central committee to assist in most Effective
control and utilization industrial capacity, placing of
government contracts, advice on questions of priority,
and on other problems arising from changeover of industry
to war basis. Railway operations showed some overall
improvement during first half year due mainly larger
volume freight traffic, partly higher freight passenger
rates. REVENUE passenger traffic reported below normal.
Daily average postal receipts June 13% higher than preceding
June but allowing for increased rates volume of postal
traffic about one third lower. Decline of about 7%
compared May attributed partly to reduction in circulars
result paper Economy campaign. Wholesale textile trade
index June including domestic Export trades shows progress-
ive substantial decline to 97 June (1937-100) from 152
March reflecting loss normal export markets and restriction
supplies for domestic consumption. Board Trade announces
continuation after September 30 of current orders limiting
supplies of cotton rayon and linen piece goods and made
up goods for civilian home trade. Supplies during period
October 1 to March 31 will bE restricted to following
percentages of corresponding quantities supplied in same
period 1939-40: cotton thirty SEVEN and half, rayon
sixty six and two thirds, linen twenty five. FEW formal
changes
Regraded Unclassified
290
-3- 2537, August 3, from London.
changes in import restrictions but in practice general
trend was toward stricter control all imports other than
those considered directly Essential to war effort. NEW
export restrictions during month related mainly to trade
with continental and North African areas chiefly France
and French territories which for purposes commercial
relations generally now treated by British authorities
as Enemy territory. Prohibition of jEWElry exports intend-
Ed prevent Evasion Exchange control, original purchase tax
bill withdrawn as anticipated although revised tax pro-
posals incorporated in new finance bill publishzd End
month follow in general lines of original bill. NEW
tax which is EXPECTED become Effective within month or
two is intended restrict civilian consumption aa well as
provide additional revenue and will apply wide range
consumer goods at rate of one third on luxuries and one
sixth on other goods, on wholesale prices representing
approximately 24 and 12% respectively on retail prices
but with exemption for food, fuel, public utility, services,
children's clothing and goods already highly taxed, new
machinery and plant control order adds various classifications
to Existing list of machinery and plant supplying or acquiring
of which is prohibited EXCEPT under Board Trade license.
Clearances from bond of unmanufactured tobacco are made
subject
Regraded Unclassified
-4- 2537, August 3, from London.
291
subject to license under Board Trade order Effective
August 1. While it is officially Explained that at
present licenses will bE issued for quantities roughly
Equivalent to current rate of clearance and that order
merely provides machinery for restriction if and when
required, separate announcement made that leading tobacco
manufacturers in conjunction with Board Trade have decided
to restrict tobacco sales during August September by
10% of sales a year ago. Prices staple consumer goods
and services Especially foods and official cost living
index continue to show comparatively small increases
after nearly year war conditions dus vigorous government
action including centralized purchasing (for Example,
announcemtnt just made of agreement to purchase during
current cereal year additional hundred million bushels
Canadian wheat stated to bE largest purchase ever
recorded) official price controls and some government
subsidies, Wholesale price indexes have risen more
rapidly and retail prices of semi-staples and some goods
normally considered Essential such as imported fresh fruits
have risen more sharply indicating probability progressive
and possibly more rapid increase cost of living generally.
In some CASES prices have been maintained but supplies
much reduced, for ExamplE, Egga increasingly soarce and
SOME imported canned goods practically off market.
Rising costs for persons in marginal income classes being
partially offect
Regraded Unclassified
⑉5⑉ 2537, August 3, from London.
292
partially
offset by special measures such as provision free milk
for young children. Indicative of rising trading costs
is additional increase Effective August 1 of 5% on rates
aná charges by port of London authority. Following
several carlier increase, unemployment continues decrease
and special examining panels set up in further effort
absorb unemployed. Minister Labor announced August 1
formation international labor branch that Ministry to
mobilize for industrial Employment allied and friendly
forsigners in United Kingdom. Loss continental trade
and trade affected by continental changes reflected in
value decline 13% imports 22% exports resports June
compared May. Largest import decrease was in raw
materials, mainly oils oilseeds nonferrous ore scrap
and textile materials other than raw cotton which
showed little change on month and sharp increase over
June preceding two years. In foodstuffs group, sub-
stantial further declines imports dairy produce fresh
fruits vegetables beverages unspecified food products,
Latter changes and smaller imports hardware Electrical
Equipment and textile leather and miscellaneous manufactures
also show progressive Effect import restrictions. Export
decreases distributed all classes manufactured goods with
shipments beverages coal also lower. Export drive for
remaining markets intensified during July by means increased
allocation
Regraded Unclassified
293
-6- 2537, August 3, from London,
allocation raw materials to export industries, further
restriction domestic civilian consumption, Extension
number and activity commodity export groups and Extension
active government support illustrated by formation special
cotton textile Export company under official auspices
and by special publicity campaign in factories stressing
importance of Export trade. Six months EXCESS merchandise
imports over exports 5343,430,000 against L183, 368,000
and L203,616,000 same periods 1939 and 1938 respectively.
This growing disparity more apparent than real however
to extent that import figures include transportation
insurance costs which are now far higher than in preceding
years and which aucrue chiefly to British interests.
:
INFORM COMMERCE.
KENNEDY
NK
Regraded Unclassified
294
TELEGRAM SENT
ATP
PLAIN
August 3, 1940
AMEMBASSY
VICHY
219 Third
Your 202, July 30,
Treasury has looked into the matter and the Irving
Trust Company has no information with regard to the
transaction in question.
hull
EA:FL:EHS
EU
Regraded Unclassified
TELEGRAM SENT
AS
PLAIN
August 3, 1940
AMEMBASSY,
MEXICO.
248
Your 286, July 30.
Treasury advises as follows: QUOTE The French
American Banking Corporation of NEW York has filed a
number of applications covering specific transactions
on behalf of Cia Minrra Del Bolco of Santa Rosalia,
Lower California. Such applications have been handled
promptly and have been approved.
On July 13 B. license was granted to the Chase National
Bank of NEW York freeing one of the accounts of Jean
Hermanos of Mexico City. Subsequently another application
was filed with respect to another account of Jean Hermance.
Authorization is being sent to the Federal RESERVE Bank
to free this account also. UNQUOTE
HULL
(BL)
EA:FL:EHS
RA
Regraded Unclassified
296
TELEGRAM SENT
AS
PLAIN
August 3, 1940
AMEMBASSY,
MEXICO.
248
Your 285, July 30.
Treasury advises as follows: QUOTE The French American
Banking Corporation of New York has filed a number of applice-
tions covering specific transactions on behalf of 01a Minera
Del Boleo of Santa Rosalia, Lower California. Such applications
have been handled promptly and have been approved.
On July 13 a license was granted to the Chase National Bank
of New York freeing one of the accounts of Jean Hermanos of
Mexico City. Subsequently another application was filed with
respect to another account of Jean Hermanos. Authorization is
being sent to the Federal Reserve Bank to free this account
also. UNQUOTE
HULL
(BL)
RA
KA:FL:EHS
hd
Regraded Unclassified
297
August 3, 1940
MEMORANDUM
TO:
Secretary Morgenthau
M
FROM: Mr. Gaston
I called the Division of Controls of the State
Department after talking to you on the phone on Saturday.
Mr. Allen of that Division, Assistant to Mr. Green, told
me there had been no general cancellation of licenses
subsequent to July 5th and that thousands are still out-
standing. He said the new control of strategic materials
did not affect at all the validity of licenses under the
Neutrality Act. A good many licenses that were outstanding
July 5th had been cancelled but these were individual cases
and special circumstances. As an instance, he said that
of course licenses granted for export to France had been
cancelled. These had been sent in for cancellation either
by the exporters or by the Collectors. There are other
cases in which exporters had voluntarily surrendered
licenses.
Regraded Unclassified
Mrs. Klotz:
298
This is the copy of the speech Mr.
ston made Sunday. The Secretary told
Mr. Gaston this morning he would be
interested in seeing a copy.
299
Address of Herbert 1. Gaston, Assistant Secretary of the
Treasury, at the New York World's Fair on
Coast Guard Day, Sunday, August 4, 1940.
As we meet to celebrate the one hundred and fiftieth
anniversary of the creation of the oldest maritime arm of our
government, the United States Coast Guard, we celebrate other
events and other matters of greater moment and deeper sig-
nificance.
Bound up in the history of the Coast Guard 18 the story
of the growth of a Nation and the development of an ideal of
government. It 18 the story of the struggle to justify the
belief that men may rule their affairs successfully on the
basis of the doctrine that only by the consent and through
the will of the people do governments derive their Just powers.
The lifeline of the Coast Guard is a thread that is woven into
a grander pattern, the pattern of the evolution end the growth
of a government dedicated to liberty.
And 80, Mr. Chairman, while I speak for the Secretary
of the Treasury and the whole organization of the Coast Guard
in expressing our gratitude that the New York World's Fair
has chosen to honor by 8 special day in this great parade of
the progress of mankind this organization which is devoted to
the service of our people and the service of humanity, we
recognize a special fitness in this action.
Regraded Unclassified
300
- 2 -
The history of the Coast Guard is in miniature a history
of our Nation.
One hundred and fifty years is e. short period in the whole
history of mankind but in the march of humanity it marks a great
distance and great accomplishment.
When the Revenue Marine first came into being in 1790 as a
little fleet of sailing sloops, independence had been achieved
by the colonies and settlements from which our Nation sprang, but
the struggle to create B. "more perfect union" under the name of
the United States of America had only begun.
Those few little vessels of 1790 and the near succeeding
years had a modest but an indispensable role to perform. Here
in the waters about Long Island and on the Jersey shore, in
Massachusetts Bay, in the Delaware and elsewhere on this eastern
coast they made possible the collection of the revenues from
imports and from shipping which were for many years the chief
financial sustenance of the Nation.
As the Nation has grown that role has become of less
relative importance. No longer is the whole revenue of the Nation
dependent upon the vigilance of the guardians of the gates to the
sea. But because those guardians performed their tasks well they
have succeeded to a host of other duties. Their function has
extended beyond the protection of the revenue--though they still
perform that duty and perform it well. It has extended to the
protection of life and property at sea and to care for the safety
of voyagers by air over the seas and to the performance of a
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multitude of other services to make the lives and the interest
of our people more secure.
Today the ships and aircraft of the Coast Guard are
patrolling the seacoasts of the United States and its possessions.
They are on guard to protect life and property and to enforce
order and the will and interests of the people of the United States
in the waters of our most distant possessions. They are cruising
in the Bering Sea and elsewhere on the coasts of Alaska, in the
waters around Hawaii and the Pacific islands of the United States.
They are on the shores of Puerto Rico. Other units of the fleet
are on e. mission of aid and protection to Greenland; and far out
in the Atlantic on the course from LaGuardia field by way of
Bermuda and the Azores to Lisbon in Portugal there are cutters
stationed to observe the weather and to make safe the passage
by air as well as by water to the continent of Europe.
All along our coasts hardy surfmen of the Coast Guard
shore units patrol the sands and stand ready to go to the rescue
of seamen and voyagers in distress. The lights and radio beacons
of the service from Maine to Florida, around the great curve of
the Gulf and from Lower California to the Bering Sea flash their
messages to navigators, guiding them safely to harbor or setting
them truly on their courses for distant ports.
It 1s a long step from the handful of men who manned the
little sailboats of the seventeen-nineties, daring and competent
as these men were, to the fleet of armed seagoing cutters and
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patrol-boats, the patrol and rescue seaplanes, the lighthouses,
radio beacons and surf stations of today, manned by non trained
in the intricacies of a score of specialized crafts-seamen still,
some 17,000 of them, but seamen who know how to command the use
of all the devices of science to aid their seamenships, seamen
who are marine engineers, experts in ship construction and ship
safety, in metsorology, in radio communication, in all forms of
signalling devices, in the study of ocean ourrents, in maritime
and customs law.
These are phases of the growth of the Coast Guard that
parallel the growth of the Nation. Ours has been a people ambitious
and diligent in building, eager for knowledge and ingenious in its
application. Has our superior progress in these lines been due to
the fact that the people who came to these shores, early or late,
were gifted with innate constructive and mechanical and scientific
capacities, innate gifts for organization and direction of affairs?
On the face of it, that is incredible. These material conquests
have been wrought in a democracy, where people were free to think
and free to act.
There are other phases of the life of the Coast Guard that
parallel the life of the Nation. The Coast Guard's primary function
is the service of our people and the service of humanity. It is to
contribute to their safety and security in the pursuit of progress
and the ways of peace, and by that means to enlarge their liberties
and their happiness. It menaces no people and no man who pursues
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the ways of peace and the ways of order. In that respect it
represents the ideals of the people whom it serves. Its battles
have been in the main battles with the elements in carrying out
its mission of protection. But it has been equipped with force
and has had the courage to apply force to restrain the lawbreaker.
It has contributed also to the defense of the Nation in
wars for human liberty. The Coast Guard has been a part of the
armed forces of the United States in every war in which the Nation
has participated since the service was created and it has performed
its warlike duty as valiently and as courageously as it has per-
formed its humanitarian duties in times of peace.
The Coast Guard has a. motto, "Semper Paratus," which can be
translated freely as "Always Ready," but "paratus" means something
more than that. It is ready not simply in the sense of being
willing to act on the instant, but prepared in the sense of
looking forward and making provision for the performance of the
duty that it may be called upon to perform. In the Coast Guard
broad interpretation has been given to that motto. It prepares
not only in equipment but in the training of its men. Its officers
are educated for their duties in an institution especially created
for them, the Coast Guard Academy, where four years of the highest
quality of technical training are superimposed upon a liberal
education. The service has schools, too, for enlisted men, where
seemanship and the special crafts of Coast Guard seamanship are
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304
taught. It 1s engaged also in the training for the Maritime
Commission of merchant seamen and merchant ship officers and the
qualities of Coast Guard officers as instructors in seamanship
have net nothing but the highest praise.
There would be no point to telling of these things as a
boast on behalf of the Coast Guard out of pride in an admirable
service. They have a much deeper significance. In its evolution
from a hendful of willing sailors pursuing smugglers to a highly
trained and technically trained body of career servants of the
public, the Coast Guard is a good example of the capacity of a
democratic and free people to develop the techniques of govern-
ment--not the techniques for oppression; not the techniques for
conquest, but the techniques for service to humanity, the techniques
for expending opportunity and freedom, the techniques of liberty.
It is not 6. solitary exemple. Not by any means. It is
typical of our progress in government and it is only useful to
cite because it is typical.
We need a new faith in democracy. We are listening today
to a clamor throughout the world that democracies are decadent,
that democracies can't serve their people as efficiently as tyrannies.
It 1s a monstrous falsehood, disproved by the record, but we are in
danger of letting the hypocritical clamor deceive us. We need a
new faith in America.
Where in the world has government served its people as a
democratic government has served its people in America? Where in
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305
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the world is physical progress or intellectual progress or moral
progress equal to the progress of America? Where in the world
does government now and has government over the last hundred and
fifty years dealt more humanely and more fairly with its people
than in America? Where else have human liberty and human opportunity
advanced save in this country and in others that have adopted and held
fast to the democratic way of life? Where in the world have there been
social progress and enlargement of opportunity equal to ours in these
last few years?
Is it because we are decadent that the treasure of the world
is heaped upon us for safekesping? Is it because we are decadent
that people of worth and energy and ambition seek to enter here
and have for many years sought to enter here in numbers more than
we could admit? Is it because we are decadent that people in every
country of the world stretch out their hands to us in appeals for help?
Just a few miles from here, across this island and the waters
of New York harbor, stands a structure that should have a greater
significance to mankind than any other edifice anywhere. It is the
Statue of Liberty, holding aloft her torch to enlighten the world.
It was the gift of the people of France to the people of America.
It was a message, an eternal message, from a people whose country
had just been ravaged by war and is again ravaged by war, a people who
loved liberty and still love it, bidding us to preserve liberty, to
hold aloft the torch of freedom and to defend it valiantly, whatever
might befall elsewhere in the world.
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306
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For more than fifty years that status has been silently
speaking its message, not alone to America but to all the world.
Today it speaks to Americans with a special insistence that ought
to reach all our ears. It tells us that the way of liberty is
the way of progress and the way of hope. It tells us that we
must be vigilant and we must be valiant. It tells us that
democracy is worth fighting for and we must be prepared to de-
fend it. It echoes in solemn tones the words of a great American
who said that "Eternal vigilance is the price of liberty" and of
another who prayed for a new birth of freedom.
Freedom was never more greatly menaced. It is a time to
forget petty things and to see America whole. We have an obligation
we can not escape. It is to hold firmly aloft the torch of liberty.
307
BRITISH EMBASSY,
WASHINGTON, D.C.
Personal and Secret
August 4th, 1940
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.
Telegram despatched from London
on the evening of August 3rd.
1. Naval. Reference to summary
375 page two. first paragraph. Fourteen
U-boats located at Kiel August 1st.
Submarine "Oswald" presumed lost
following Italian claim of sinking and report
that fifty-two of the crew including the
Captain resoued.
Reinforcement of fighter aireraft has
safely arrived at Malta.
U-boat attacked yesterday afternoon
off northern Ireland by British aircraft which
claims to have caused damage by near misses.
8. Royal Air Force. Heavy bombers
carried out very effective work night of
August lat/2nd. Fires were started in four oil
plants at Kruppe, at Essen end OR marshalling
yards, one aerodrome also attacked. Particu-
larly successful results at Kamen oil plant,
three successive aircraft caused explosions,
one being particularly violent, target appeared
completely destroyed.
Yesterday owing to weather condi-
tions no day nombers reached Germany; very
successful attacks delivered by twenty-four
on their aerodromes in Belgium and Holland,
one aircraft missing.
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+
Last night fifty heavy bombers sent
to attack oil plants, railway target and electric
power station at Bremen, twelve aircraft mine-
laying in Lubeck area and northeast Denish waters,
two machines not returned.
S. German Air Force. British merchant
vessel believed "Righlander" twice attacked by
enemy sireraft early yesterday. One Heinkel shot
down in flemes by Lewis guo during first attack;
during second by air torpedoes enemy aircraft hit
ship and crashed on deck. Ship has arrived in
Scottish port with enemy aircreft on board.
Enemy activity yesterday slight. Con-
fined to coastal reconnaissance and some light
attacks on shipping.
Last night activity chiefly by single
airereft. Some bombs dropped in South wales,
Themes, Medway areas and also on coavey off
Scotland.
4. Summary of air casualties:
Day of 2nd: enemy two bombers, British one medium
bomber, confirmed.
Eight of 2nd-3rd: British two bombers; total:
enemy two, British three, all confirmed.
Shipping casualties:
By U-boat.
Three British tankers reported sunk in
yesterday's summary, paragraph 5, are making for
port under own steem with naval and air escort.
By air. Early this morning British LAV
6800 tons in convey off North Scotland set on
rivel
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310
-8-
fire and reported sinking. fugs sent to
assistance.
Yesterday British ship 8000 tons,
aground Theses Estuary previous day was bombed and
severely damaged.
5. Middle-mast. Confirm principal
munitions dump at Bardia destroyed by our air attar
on August lat. The setae day successful attacks
carried out on two serodromes in Abyssinia and hea'
explosion caused to oil refinery near income.
On July 3let five and a half tons of
bombs dropped OD anemy aerodrome near Diredawa
where 27 enemy aircraft located; one of our aero-
planes forced land in enemy territory.
Italian aircraft attacking Port Sudan
August let reported using English type camouflage
and British marking.
Regular night air-mail service not in
operation between Libya and Italian Sest Africa.
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3'i
21107
LEGATION OF THE
UNITED STATES OF AMERICA
No. 343.
Tallinn, August 4, 1940.
Subject: Foreign Exchange Restrictions in the
New Estonian Soviet Socialist Republic.
The Honorable
The Secretary of State,
Washington.
Sir:
1/
I have the honor to forward herewith the text, translated into
English, of regulations enacted yesterday pertaining to restrictions
and to the procedure of handling foreign exchange in the Estonian
Soviet Socialist Republic.
It is indicated that a local bank moratorium had been put into
effect to stop run on banks. Until July 19th last the banks were
permitted to deal in foreign exchange under certain restrictions, but
the new decree greatly restricts the purchase of foreign exchange
either in the form of currency, checks or other negotiable papers.
Respectfully yours,
Walter L. Leonard
Charge d'Affaires a.i.
Enclosure:
1/ English translation of decree.
File No. 851.5
WAL/JJ
In quintuplicate.
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312
Inclosure to despatch No. 343 of August 4. 1940, from the Legation at Tellinn.
SOURCE, RIIGI TRATAJA (Official Gazette)
No. 92 of August 3. 1940. Tallinn.
FULL TRANSLATION
Article 914. REGULATIONS CONCERNING MOVEMENTS OF FOREIGN EXCHANGE
Issued by the Government of the Republic on August 3, 1940.
Basier Paragraph 2 of law concerning regulation of movements of foreign
exchange media and precious metals (RIIGI TEATAJA No. 95 of 1931,
article 695.)
For the purpose of introducing fixed procedure as regards expenditure
of foreign exchange, the Government of the Estonian Soviet Socialist
Republic has decided to enact the following stipulations:
Par. 1. The sale of foreign exchange, in the form of cash as well as
checks and letters of credit, shall be suspended.
Par. 2. Payments of foreign exchange from foreign exchange accounts
of foreign diplomatic representatives my be granted in no larger amounts
than 50 United States dollars in terms of exchange in which the account is
opened, provided 8 foreign passport 18 produced bearing a stamp of the
erit visa, The Besti Pank may issue payment orders and checks made out to
the name of foreign banks abroad, exceeding the aforementioned fixed sun,
upon demand of foreign diplomatic representatives from their accounts.
Par. 3. Payments of foreign exchange, in cash, from current accounts
kept in foreign exchange, to firms and citizens of foreign States my be
granted according to the same procedure and in the same extent as prescribed
for foreign diplomatic representatives, but no transfers abroad exceeding
such amounts shall be permissible.
Par. 4. When granting payments of foreign exchange, in cash, the Eesti
Pank shall charge a 2 percent commission.
Par. 5. Transfers of foreign exchange abroad for commodities shall be
temporarily suspended.
Par. 6. The balances of accounts of correspondents of foreign banks
at the Eesti Pank shall be temporarily blocked, and no writings-off from
these accounts shall be permissible.
Par. 7. Exceptions from the restrictions of the foreign paragraphs
my be granted with the permission from the Ministry of Economic Affairs
in each individual case.
These regulations shall enter into effect upon publication.
(Signed): H. Kruns, Alternate Prime Minister.
J. Harms, Minister of Economic Affairs.
I. Terras, State Secretary.
EH/53
imc
COPY
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