Volume 294, August 15 – August 19, 1940

DIARY Book 294 August 15 - 19, 1940 Regraded Unclassified - A - Book Page Agnew, Sir Andrew (British oil expert) Coming to United States - 8/16/40 294 130 American Red Cross Procurement Division authorized to purchase for. - 8/19/40 356 Anglo California National Bank (San Francisco) Federal Bureau of Investigation report concerning deposit from Swedish bank payable to German Consulate General, San Francisco - 8/16/40 230 Appointments and Resignations Harris, Sol (Collector - Seattle, Washington): Resignation discussed - 8/15/40 24 Australia See War Conditions - B - - Belgium See War Conditions Bomb Sights See War Conditions - C - - Chile See Latin America China See War Conditions Coast Guard Design for new station at Detroit discussed - 8/15/40 26,28 Communist Party Federal Bureau of Investigation report 230 - D - Defense, National Foley memorandum discussing possible confusion caused by Joint Resolution of June 15, 1940, and Section 14 of Act of June 28, 1940 - 8/16/40 106 - F - Foreign Funds Control See War Conditions - G - Germany See War Conditions Great Britain See War Conditions: Export Control; Military Planning; United Kingdom Guatemala See Latin America Regraded Unclassified - H - Book Page Hanly, John (Secret Service) See Ingersoll, Ralph Harris, Sol (Collector - - Seattle, Washington) See Appointments and Resignations Hughes, Howard See War Conditions: Airplanes - I - Ingersoll, Ralph HMJr expresses enthusiastic approval of PM - 8/16/40.. 294 147 a) Ingersoll asks to borrow John Hanly (Secret Service) for a month 1) Gaston disapproves: See Book 295, page 40 - J - - Japan See War Conditions: Export Control Johnson, Louis Stimson and HMJr discuss refusal of appointment as Special Administrative Assistant on National Defense - - 8/15/40 72 - L - - Latin America Chile: Welles asks HMJr to see Chilean delegate in Havana now in Washington - 8/15/40 21 Guatemala: United States exchange restrictions explained - 8/17/40 315,334 - M - - Mexico Federal Bureau of Investigation reports 342,346 Military Planning See War Conditions - N - National City Bank, New York See War Conditions: Foreign Funds Control National Defense See Defense, National NORTHLAND See War Conditions: Ship Movements Regraded Unclassified - 0 - Book Page Oil See also War Conditions: Export Control Agnew, Sir Andrew (British oil expert): Coming to United States - 8/16/40 294 130 - P - PM See Ingersoll, Ralph Perrine, Mr. Federal Bureau of Investigation report - 227 Phillips, Sir Frederick See War Conditions: United Kingdom Procurement Division See American Red Cross - S - - Ship Movements See War Conditions SOUTHERN CROSS, Yacht See War Conditions: Ship Movements Spain See War Conditions: Export Control Sperry Company See War Conditions: Bomb Sights Sweden See War Conditions: Germany - T - Tinkham, George Holden (Congressman, Massachusetts) See War Conditions: United Kingdom (Phillips, Sir Frederick) - U - - U.S.S.R. See War Conditions: Export Control; U.S.S.R. United Kingdom See War Conditions: Export Control; Military Planning; United Kingdom Regraded Unclassified - W - Book Page Mar Conditions Airplanes: Progress reports sent to Secretaries of War, Navy, etc. - 8/15/40 294 44 Hughes, Howard: Plant near Los Angeles to menufacture plywood planes - Hinckley's report - - 8/16/40 89 Australia: Regulations for sale of United States and Canadian securities held by Australian nationals - 8/15/40 81 Belgium: Resume of situation given Cochran by Senator Kronacker - 8/16/40 235 Bomb Sights: Manufacture by Sperry Company discussed in Knox memorandum - 8/17/40 296 China: Aid discussed by Hornbeck (State Department) and HMr preparatory to conference with Soong - 8/15/40 37 Air-raid shelter pictures, and pictures of steps in production of wood oil, sent by Chen - - 8/16/40 153 Chen sends further letter on situation - 8/16/40 249 Exchange market resume - 8/15/40, etc. 27,233, 262,361 Export Control: 011: Japanese situation covered in memorandum sent to FDR - 8/16/40 120 Exports of petroleum products, scrap iron, and scrap steel from United States to Japan, Russia, Spain, and Great Britain, as shown by departure permits granted for week ending 8/17/40 318 et If If 8/24/40: Book 295, page 224 M If II 8/31/40: Book 296, page 332 Foreign Funds Control: National City Bank, New York: Rentschler and HMJr discuss future policy of French branch - 8/15/40 60 (See also Book 295, page 161) Brussels branch situation - 8/17/40 293,360 Germany: Federal Bureau of Investigation report concerning deposit in Anglo California National Bank of San Francisco from Swedish bank payable to German Consulate General, San Francisco - 8/16/40 230 Westrick, Gerhardt Alois (Dr.): Federal Bureau of Investigation report 263,265,281 Military Planning: Reports from London transmitted by Lothian - 8/15/40, 8/18/40 1,319 Purchasing Mission: Status of orders by commodities, week ending 8/17/40 309 See also Book 296, page 333 (8/31/40) Pegraded - W - (Continued) Book Page War Conditions (Continued) Ship Movements: Port of destination in British Isles and name of ship - omission of requested of Treasury - 8/16/40 294 87 NORTHLAND: Course discussed by State Department and Treasury - - 8/16/40 116 SOUTHERN CROSS, Yacht: Federal Bureau of Investigation report 257 U.S.S.R.: Communist Party: Federal Bureau of Investigation report 230 United Kingdom: Agnew, Sir Andrew (British oil expert): Coming to United States - 8/16/40 130 Phillips, Sir Frederick: Tinkham (Congressman, Massachusetts) sent copy of release at conclusion of visit - 8/16/40 139 Wenner-Gren, Axel Federal Bureau of Investigation report 257 Westrick, Gerhardt Alois (Dr.) Federal Bureau of Investigation reports 263,265,281 1 BRITISH EMBASSY, WASHINGTON, D.C. August 15th, 1940 PERSONAL AND SECRET Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, Lolezan The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D. C. 2 Telegram despatched from London in the evening of August 14th, 1940 Navel Ngrly yesterday morning three NTE's encountered E-boate and anti-airereft shipe off the Dateh const. They engaged enemy with hand granades and use and cas STD passed en s-boot which reduced her speed to 6 knots, damage to enemy unknown. All our NTBe returned safely. semaliland. Yesterday destroyer "Kinberley" and aloop "Amekland" bouberded and dispersed enemy troops and lorries on the coast road west Berbers and probably delayed enemy's advance. one H-8 trawler bonbed and sunk in Downs. 2. Reval AIP Foree. Night operations on August 12th-13th again hampered by cloud. only small number of aircraft bembed primary targets. Fires started at Getha sircraft factory, other sigeraft attacked acredrence as secondary torgets, Five bleaheine attacked seredroses north-west France, one missing Deeks in Northern Hollend successfully attacked, - mine-laying also accomplished. Yesterday 9 out of 17 Membeins bested envolvements at Jersey and north-rest France, 7 others abliged to abouton tack, 1 failed to return og/ Regraded Unclassified 3 + or 18 Blemboine cont to attack large corodreno in North one returned early, reasisder aloning. Last night, 101 heavy beabers despatched as follows: 62 to Northern Dermany to clusinium works, sircreft fastories, Failway targets. 37 to Italy to attack Fist aero-engine featory at Turin and Capront aircraft factory at Milan. All these aireraft returned. two to make photographic recommissance of dockyard and oil plant at Stattin and seaplane base elsewhere. six modium bembers to attack aerodrance is occupied French territory. From all the above operations two airereft missing, crew of one safe. 3. German Air Force. Purther reports of night of 12th-13th notified fee casuelties and slight damage sunderlend, South vales and Flymouth. Leaflets dropped in Derbyshire. Exceptional air activity throughout yesterday. Estimated that over 2000 enemy aircraft engaged operations over Great Britein during day. severe enemy casualties inflicted by fighter squadrong from which 13 aircraft lost but only 5 pilots. Attecks began at 6 a.m. when formations crossed Sussex const end raiders operated almost continuously over southern and south-sestern counties as for inkend se wiltshire and Serkshire. At 4.30 Pollo about 500 enemy aircraft reported ever socat from Themes latuary so reymouth. Enery attacks directed chiefly against sepairence and Southmapton where premises and sentents of cold-sterage building burnt out. Denage w Regraded Unclassified 4 to coredrance slight except at Dealing which was attacked by 15 dive-bombers, 8 Blemheims destroyed on the ground, operations POOR destroyed and Commending officer killed. At Andover, offices and quarters badlydamaged, one sircraft hit. At Mastehurch operations reen destroyed. your barrage balloons destroyed at Dover. Casualties determined light considering extensive attacks. Enery air looses 39 bombers and 36 fighters destroyed, 32 more aircraft probable casualties and 49 damaged. In addition 3 aircraft destroyed by anti-aireraft. Our losses 2 Spitfires and 11 Hurricanes, only 3 pilots. Last night several anall raids by single aircraft OF small formations over widespread area. Offices and tool room badly damaged at Suffield's aero feetory, cesualties two killed, 50 wounded. one hundred incendiary bombe dropped on Castle Brewwich, only elight damage. 4. Shipping Casualties. A. By U-bont. swedish ship of 5,800 tone torpedaed and sunk off Northern Ireland on August 9th. B. By aircraft. Swedish ship of 900 tone suns in western Approaches on August 10th. Attack ande on two convoys off north sectlend during lest night, no damage reported. 5. Hiddle East. someliland. situation at 6.0 1.3. August 13th. After heavy attack, preseded by low flying E.G. fire and hombing, August 11th on HELL Hill, in left centre, our position estride Hargeise-Berbera road, in which we suffered some casuelticas/ Regraded Unclassified 5 casualties; enemy reached the read before being foreed beek by our sounter-stick. Subsequently the easay in heavy infestry attack supported by tanks compelled our evacuation of will Hill with less of two 3.7 inch howitzers after resoval of breach blocks. Anticipated slight infiliration of enemy would be cleared by the morning of August 13th, but no general counter attack contempleted owing to importance of maintaining poserves. Enemy casualties believed heavy, ours elight except at will Hill. Enemy column of 400 strong reported moving aleag the coast road west of Berbore. meny heavy artillery ineffective, many duds. Our treeps resisted stubbornly but are tired after two days of fighting. Our Blenheiss while heavily attecking enemy artillery positions were intercepted by fighters. Two Blenheime forced-landed at Berbera (ome erashed), another returned to Adem but is probably a "write-off". on August 13th three of our medium bombers dropped 1, tons of bombs on Italian aerodrames, reconnaiseance scroplane called for fire from destroyer on enemy troops and 3 are attached targets in bettle area. Libya. Ca Aggust 12th 9 blembeins with fighter secort attecked floating Grane is Terbruk harbour, two small vessele hit. Total of 13 essort-fighters and 29 fighters have arrived tree Sicily and are being sent to Benghani. Regraded Unclassified 6 August 15, 1940 10:50 a.m. H.M.Jr: Hello. Knudsen: This is Knudsen. H.M.Jr: Good morning. Knudsen: Good morning. What did you get out of that conference yesterday noon? H.M.Jr: Oh, well, I got it that Jones was going to do it just his own way. Knudsen: That was no policy question there, was it? H.M.Jr: No, he seemed awful sore, I don't know. I've never seen Jones act quite as mad as that before. Knudsen: Well, do you think we can do this, take them up one at a time and have a discussion of each one and then give Purvis any sort of assurance? H.M.Jr: Do I think so? Knudsen: Yes. H.M.Jr: I don't know, I tell you, Bill, I - when are you going away? Knudsen: Monday. H.M.Jr: Oh. I find it sort of difficult to do this on the phone. I'd love to sit down with you. Have you got any time today? Knudsen: Sure. H.M.Jr: If you want to. Knudsen: Sure. 7 - 2 - H.M.Jr: I could do it right after lunch. I have lunch -- Knudsen: I have to go over to the White House at 2:00 o'clock. H.M.Jr: At 2:00 o'clock. Knudsen: But say I come after I get through there? H.M.Jr: Well, I've got somebody at 3:00 and 3:45, that's the only trouble. Knudsen: Yes. H.M.Jr: I don't quite get what you have, but I think it's important. I'd be glad to sit down and talk to you. Knudsen: Yes. How are you later in the afternoon? H.M.Jr: I tell you what you do - how long do your meetings usually last at the White House? Knudsen: Well, sometimes they only last an hour and sometimes they last two hours. H.M.Jr: Why don't you, when you get through there, call me up from the White House and see where I'm at, huh? Knudsen: All right. H.M.Jr: How would that be? Knudsen: Fine. H.M.Jr: When you get through with the President, give me & ring. Knudsen: Fine. H.M.Jr: Okay? Knudsen: Yes. H.M.Jr: Thank you. Regraded Unclassified 8 August 15, 1940 2:35 p.m. H.M.Jr: Hello. Guy Vaughn: Hello. H.M.Jr: Morgenthau. V: Mr. Secretary, how are you? H.M.Jr: Oh, I'm alive. V: Well, so am I. I wondered what you found out in Indianapolis, in a general way. H.M.Jr: Well, what I found out was this: They've got 49 engines which have passed the Green test. V: Yes. H.M.Jr: And they have trouble with superchargers. V: Oh, yes. H.M.Jr: And my understanding with Mr. Evans was that when that was fixed, he would call me. V: I see. H.M.Jr: I spoke to him on Monday and I haven't heard from him. V: I see. H.M.Jr: And he promised that the minute he saw day- light on these 49 engines, he would call me. V: I see. H.M.Jr: Now, not having heard from him, I thought I'd call him tomorrow morning. Regraded Unclassified 9 - 2 - V: Yes. H.M.Jr: But, that's what it is. V: Well, those are regular teething troubles that they didn't expect but everybody told them they'd have. H.M.Jr: Well, it's too damn bad because it - just at this time - it's about as bad a time as they could pick. V: It certainly is. H.M.Jr: But, that's the whole story. V: That's too bad. Now, you know that I offered - through Alfred Sloan we had a conference in New York about two months ago with Henry Crane. H.M.Jr: Yes. V: And I don't know whether you know Henry Crane or not, but George Mead does know him very well and we have - I think George has great regard for him and I certainly have. H.M.Jr: Yes. V: We offered him the services of our engineers. H.M.Jr: Yes. V: We told Crane at the time - he unloaded his engineering troubles to me, you see. H.M.Jr: Yes. V: And General Brett was present, very fortunately. It was on June 15th, to be exact. Regraded Unclassified 10 - 3 - H.M.Jr: Yes. V: We told Crane that we would be very glad to offer the services of our engineers, not that we knew very much about it, but we'd had an awful lot of experience that they had not had, and that we might be able to help them out of their difficulty because we had had a similar one which we knew had been licked in such and such a way. H.M.Jr: Yes. V: Then we went back to Alfred Sloan and he had to get through Hunt. He said Hunt was a little obstinate and didn't want anybody from the out- side coming . - horning in. H.M.Jr: Yes. V: We have never heard another thing about it. H.M.Jr: I see. V: I still believe that whether our engineers can help them or not, that possibly some improvement might be made and at least if they get together we'd know that they couldn't or they would. H.M.Jr: I see. V: Now, I don't know, but it seems to me that something like that ought to be shoved down 0. E. Hunt's craw. It doesn't seem right that a man like Hunt would say, "We won't have any help from anybody when we're in a hell of a fix." H.M.Jr: Well, I get the idea, and I'll see what I can do with it. Regraded Unclassified 11 - 4 - V: And that offer of ours still holds good. We'll let them have any engineers that they want who are specialists in our plant to go out there and discuss - not tell them anything to do, but just discuss it with them and then let them do as they damn please. They're running their own show, after all. H.M.Jr: Right. V: If I was in trouble, I'd welcome a thing like that in a minute. H.M.Jr: Well, thank you very much and I appreciate - it's B. very sporting offer and I'll see what I can do about it. V: All right. I think it's just for the whole national good, everybody's good. H.M.Jr: Right. V: Now, there's one other thing. H.M.Jr: Yes. V: The Army, on this British question that 53 engines are still chasing around, and the British wanted us to - I believe the Army were perfectly willing to divert some engines to them, provided we'd give up that 60-day specification that we have 60 days delivery of motors before the delivery of airplanes. H.M.Jr: Yes. V: That is a nominal and normal time for the motors to come in on the production that we have. H.M.Jr: Yes. Regraded Unclassified 12 - 5 - V: Mr. Morgenthau, we just can't give that up because it breaks a perfectly clean-cut record of ours; it sets up a precedent; and it is apt to cost us a great deal of money at a future date. H.M.Jr: But of course, the 53 engines don't exist. V: They don't exist, I know. I say, they're still chasing us around. That's the number that they had in mind. H.M.Jr: Well, Brett was wrong, he took -- V: All the Army have to do is to not give up anything themselves, not take anything from anybody else, but just say that these engines are for the British instead of us; in other words, put a British designation on them instead of an Army designation. H.M.Jr: I get it. V: Get all the engines that the British - I mean, give them all that they can in that way. H.M.Jr: Yes. V: Without disrupting - we've got a pretty good record and we're proud of it. H.M.Jr: Yes. V: And besides that, if we give it up today, one year from now we'll be forced to give it up again because we did give it up. H.M.Jr: Yes. V: And do with 20 engines or 30 engines in process 30 days before delivery and it's going to cost us a lot in liquidated damages. Regraded Unclassified 13 - 6 - H.M.Jr: Yes. V: Due to no fault of ours. H.M.Jr: Okay. V: I think it's perfectly fair. H.M.Jr: Yes. V: The British are willing to pay the liquidated damages, but I don't think it is a very dig- nified thing to ask them to do. H.M.Jr: Well, all the Army has got -- V: That would upset our whole show. H.M.Jr: All the Army has got to say is to Allison, let every other engine or whatever they want to go, be designated British, is that right? V: That's exactly correct. And then nobody needs be disturbed, nobody give up anything or take anything away. H.M.Jr: Well, that's what I - that's the position I took. V: And I do think it's a little undignified to ask the British to pay, but that would be the end of that. H.M.Jr: Yes. V: The main part is that it is going to ruin us eventually - not ruin us, but make us suffer undue hardships and God knows we've got enough of them now. H.M.Jr: Okay. 14 - 7 - V: All right, sir. Thank you very much. H.M.Jr: If I hear anything, I'll call you. V: All right. Thank you. 15 CABLE FROM: Treasury Attache Nicholson, Shanghai, China. DATE: August 15, 1940 For the Secretary of the Treasury. Shanghai market August 14 closed uncertain at 3-45/64 for cash and August 3-11/16 for September for sterling 5-7/16 for cash and August 5-3/8 for September for U.S. dollars. Gold bars closed at 5,808 and wei wah at discount of 4.30%. NICHOLSON 16 G-2/2657-220 RESTRICTED M.I.D., W.D. August 15, 1940. No. 170 SITUATION REPORT 12:00 M. This military situation report is issued by the Military Intelligence Division, General Staff. In view of the occasional in- clusion of political information and of opinion it 1s classified as Restricted. I. Western Theater of War. 1. No ground operations. 2. Air Force Operations. On the 14th German daylight operations were on a re- duced scale. Objectives attacked included the Dover balloon barrage, airdromes in south and southeast England, rail communications at Southampton and the harbors of Cardiff, Weston and Portland. No details are available on raids conducted by the British and Germans during the night of August 14-15, According to press reports German air activity over England was somewhat increased today, but below the level of Aug- ust 11-13. II. Mediterransan Theater of War. No important ground or aerial activity reported. III, East African Theater of War. 1, Ground Operations. British troops in Somaliland have retreated in the face of a violent Italian attack. British naval unite from Aden are reported to be moving to the support of the defenses of Ber- bera. Supply and evacuation at Berbera are rendered exceedingly difficult by the seasonal monsoons now blowing. 2. The Italian air force has attacked British troops south of Berbera and installations at Berbera itself. RESTRICTED Regraded Unclassified 17 August 15, 1940 11:01 a.m. H.M.Jr: Hello, George. Harrison: Henry, I haven't got a thing in the world on my mind or to tell you, but it has been so long since I talked to you, I just thought I'd call up and see whether there was any- thing we've been bad about or anything we can do. H.M.Jr: (Laughs) No, you've been very good boys, as far as I know. H: (Laughs). H.M.Jr: But the - there just wasn't - as far as I was concerned, I wasn't in any trouble so I didn't have to talk to you. H: Well, that's been my fix. H.M.Jr: Yes, things are going along fairly smoothly. H: I think so. H.M.Jr: And I had nothing, and I hope to go away for the last two weeks in August. H: Good for you. H.M.Jr: And -- H: Danny is away now, isn't he? H.M.Jr: He's away on account of that, you see. H: Yes. H.M.Jr: Be back Monday. H: I see. Regraded Unclassified 18 - 2 - H.M.Jr: Otherwise, I'm all right. H: Where are you going, up to your farm? H.M.Jr: No, we think we're going up into Canada. H: Oh, good. H.M.Jr: Yes, get far enough away 80 that -- H: That's the cheapest place to spend your vaca- tion now. H.M.Jr: That's right. That's right. H: Better get some cheap Canadian dollars. H.M.Jr: How does one do that? H: We'll get them for you. H.M.Jr: Really? H: Yes. H.M.Jr: Well, I wasn't - should I take some money with me? H: Well, what I would do - I think you would do better to buy free dollars here, which they are glad to have you do. H.M.Jr: Yes. H: And get a draft on a Montreal bank and just cash it when you get up there, on any bank. H.M.Jr: Oh, really? H: Yes. 19 - 3 - H.M.Jr: I didn't -- H: Whereas if you take American money up there, you'll get maybe, I think, & ten percent dis- count, whereas here you get thirteen. H.M.Jr: Is that perfectly -- H: Perfectly proper. H.M.Jr: Perfectly proper? H: Yes. H.M.Jr: Well, I don't know how much I want, but with the whole family, I surely need $500. How do I do it, send you 8. check? H: Why, all you do is send me 8. check and ask me to get you a draft for $500 worth of Canadian dollars. H.M.Jr: You mean send you my check. H: Yes. H.M.Jr: Well, I'll give it to -- H: Or your bank there in Washington can do it for you. H.M.Jr: No, I have no bank in Washington. H: Well, just send it up here, I'll do it. H.M.Jr: What? H: Just send it up here, we'll do it. H.M.Jr: Is that perfectly -- Regraded Unclassified 20 - 4 - H: Absolutely. I inquired, because the three Grayson boys have just gone up yesterday. H.M.Jr: Yes. H: And there's no - and I spoke to Knoke about it and he said no objection at all, I'd like to have you do it. H.M.Jr: And then you give me - then I get a draft for that on the Bank of Montreal. H: Yes. H.M.Jr: Should I? H: Yes, on some Montreal bank. H.M.Jr: I see. H: Okay. So if you want me to do it, I'd be very glad to. H.M.Jr: Fine. I'll do it right away. H: All right, sir. H.M.Jr: Thank you for calling me. H: And if there's anything else I can do, let me know. H.M.Jr: Okay. H: Goodbye. H.M.Jr: Thank you. H: Goodbye. 21 August 15, 1940 11:10 a.m. Sumner Welles: Good morning, Henry. H.M.Jr: Good morning. W: Henry, in a conversation that I had yesterday with Seignor Schnake, the Minister of Fomento of the Chilean Cabinet, who is here -- H.M.Jr: Yes. W: He was the Chilean delegate in Havana. He brought up certain questions which clearly came within the jurisdiction of the Treasury Department and I told him that I would ask if you would be kind enough to see him in order that he could lay these problems before you for study by the Treasury Department. H.M.Jr: Yes. W: I know you are leaving in the next day or so, but I would appreciate it if you could see him before you go. H.M.Jr: Well, I can see him at 11:00 tomorrow morning. W: 11:00 tomorrow morning? H.M.Jr: Yes. W: Fine, I'll send word immediately. H.M.Jr: Would you have somebody from the State Depart- ment present? W: I'll be very glad to, Henry. I'll have Collado go over. H.M.Jr: Collado. W: Yes. Regraded Unclassified 22 - 2 - H.M.Jr: You'll have him introduce him, then. W: Yes, indeed. H.M.Jr: At 11:00 tomorrow morning. W: 11:00 tomorrow morning. H.M.Jr: Thank you. W: Thank you so much. Goodbye. H.M.Jr: Goodbye. Regraded Unclassified 23 Note: Copy of this turned over to Mr. Gaston at 12:40 on instructions of Secretary Morgenthau. R McH Aug. 15th 24 August 15, 1940 11:40 a.m. H.M.Jr: Hello. Bone: Hello, Mr. Morgenthau. H.M.Jr: How are you? Bone: Fine. I had a talk long distance last night with Sol Harris, the Collector out in Seattle. H.M.Jr: Yes. Bone: He wants to quit out there and he rather attached a couple of suggestions to it that made me - was the reason for my calling you. He said he wants to - doesn't want to quit unless we both want him to quit. H.M.Jr: I see. Bone: Well, I haven't any feeling one way or the other about it. If he wants to, why all well and good but I - he, I suppose, feels some sense of responsibility to me and we have been very warm friends over the years. H.M.Jr: Yes. Bone: I guess he feels badly about the way some things have gone, so now I'm merely telling you and passing it on, he wants the consent of both of us and so you can have that in mind, Mr. Morgenthau. H.M.Jr: I feel just the way you do. It's immaterial to me. If he wants to quit, that's okay. I mean, it's perfectly satisfactory to me. I'm not, naturally, in close touch with the situation, as you are. 25 - 2 - Bone: Sure. Well, I think it isn't anything out there except just merely - I suppose he -- I don't know, maybe he's discouraged with the general political situation out there.-- H.M.Jr: But it's okay with me and I appreciate very much your calling me. Bone: Yes, well I wanted you to know this, and if there is anything that you care to do, why it's all right with me. H.M.Jr: Thank you. Bone: All right, Mr. Morgenthau. H.M.Jr: Goodbye. 26 August 15, 1940. MEMORANDUM TO: Secretary Morgenthau FROM: Mr. Gaston I talked to Admiral Johnson about the design of the Detroit River Life Saving Station and he will look into the question whether it is possible to employ Dyer as consulting architect. He has previously been employed by the Office of the Coast Guard Civil Engineer in Cleveland as an architectural draftsman, at a salary of $2,000 per year. It is not possible to reemploy him in that status under Civil Service rules since he is more than seventy years old. The Cleveland station, Johnson tells me, was produced under the direction of Chief Engineer Gay at Cleveland by four architectural draftsmen - Porter, Rasmussen, Arany and Dyer. He says that no one of the four is responsible for the design but they are entitled to about equal credit. The general idea of developing modernistic stations and different types of stations adapted to the localities in which they are to be erected came from his office in Coast Guard headquarters. It may be that you would like to talk to Johnson about the project. If so, he will of course be glad to come over at any time. Regraded Unclassified 27 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE August 15, 1940 TO Secretary Morgenthau FROM Mr. Cochran confidential The only transactions in registered sterling effected today by the six reporting banks were purchases of £39,000 for customer account. The open market for sterling was featureless, and the rate showed little variation from 4.02-1/4, the first and last quotation. The reporting banks sold £20,000 and bought £22,000 for commercial concerns. The other currencies closed as follows: Swise franc .2279-1/2 Canadian dollar 13-1/4% discount Lira .0505 Reichsmark .4005 Cuban peso 11-9/16% discount Mexican peso .1992 bid, .2016 offered There were no gold transactions consummated by us today. The State Department forwarded to us B cable stating that the following gold shipments were made from England, for sale to the U.S. Assay Office at New York: $266,000 shipped by Samuel Montagu, London, to the Chase National Bank, New York. 42,000 representing two shipments to commercial banks in New York. $308,000 Total The Bombay gold price was equivalent to $33.72, off 2#. Spot silver in Bombay was 1/8$ lower at the equivalent of 44.964. In London, the price fixed for spot silver was 23-1/24, up 1/16a, while the forward price was unchanged at 22-11/16d. The U.S. equivalents were 42.67$ and 41.20# respectively. Handy and Harman's settlement price for foreign silver vas unchanged at 34-3/44. The Treasury's purchase price for foreign silver was also unchanged at 35#. We made one purchase of silver amounting to 150,000 ounces under the Silver Purchase Act, which represented a sale from inventory. for spot delivery. B.M. Regraded Unclassified 28 August 15, 1940 9:30 a.m. GROUP MEETING Present: Mr. Gaston Mr. Sullivan Mr. Thompson Mr. Cochran Mr. Chamb erlain Mr. Foley Mr. Schwarz Mr. White Mr. Buckley Mrs. McHugh H.M.Jr: Did you (Foley) see this clipping about SEC? Herbert? Gaston: I have Admiral Johnson coming over to show me some plans for a new Coast Guard Life Saving Station in the Detroit River, Lake St. Clair. Would you be interested? H.M.Jr: Is it like the one in Cleveland? Gaston: I haven't seen them, but they were done before that was completed. H.M.Jr: I would like to take a look at it. Gaston: I've got some pictures coming through on that. H.M.Jr: Anything else? Gaston: No, I don't think 80. You got this message through Mr. Cochran about the British tax which will add to the value of their products unless they change it? Regraded Unclassified - 2 - H.M.Jr: Yes. Coohran: That is the one you cleared. H.M.Jr: Yes. Anything else? Oneton: Nothing clse. H.M.Jr: Ed? Foley: I may want to talk to you later in the day about the Curtiss-Wright deal. The RFC changed the basis on which we gave the ruling and they have included an option to purchase provision on the stipulated price in there. It makes the scheme smack more of tax avoidance than it did before, and we may not be able to go along. Now, Curtiss-Wright said they didn't want it and they didn't ask for it in the original application for the ruling, but they say that Mr. Jones insisted that that provision go in there because he didn't want the Government to be in the position at any time of owning airplane plants and Hotchkiss indicated to us that if we take the position that we can't give the ruling, they would have no objection to going along without the option. H.M.Jr: Well, if you are going to do it in view of yesterday's meeting I think I would call up Jones and ask if you couldn't see him and explain the difficulty BO that he doesn't get his back un again. Foley: Yes, okay, H.M.Jr: I thought that was all settled. Foley: It would have been if they had left that out and I understand that there are several other companies, Douglas and other companies, that are just waiting to see whether this deal goes through and if it goes through they all want to come in and get similar arrange- ments. Regraded Unclassified 30 - 3 - H.M.Jr: Well, how do you think we had better handle it 80 there is no time lost? Foley: Well, I want to wait and get word from the Bureau as to whether or not they are going to go along. If they say they can't go along, then I think I had better call Mr. Jones and go over and see him. H.M.Jr: All right. Will you handle it? Foley: Yes, I will handle it. H.M.Jr: All right. Why does he do that sort of thing? Foley: I don't know. It 1s just petty, that is all. It wasn't necessary to do it. The commany didn't ask for it. H.M.Jr: All right. If you have any trouble, let me know. Anything else? Foley: No. H.M.Jr: What are you doing these days, John? Sullivan: On the Hill. I am due there at ten. H.M.Jr: Are you getting anywhere? Sullivan: oh, Just trying to Bee how we can excuse the few people left from paying tax. H.M.Jr: I sent you that so-called Henderson Plan. What happened to that? Sullivan: Leon and I have discussed it. H.M.Jr: I don't have to get in on it. Sullivan: I shouldn't think 80. I don't understand what has happened on the Hill. Cochran: Mr. Knoke telephoned me again yesterday on that Bank of Canada matter. Howe has been pressing him, and I told him we would let him know Monday. The only thing, it delays Regraded Unclassified 31 - 4 - him a little bit because they are having a Board Meeting today. H.M.Jr: Well, they will have to wait. Cochran: All right. H.M.Jr: Let me just read this. Cochran: Stone offered that, so I think it is all right. H.M.Jr: All right. Schwarz: You may be asked in press conference this merning regarding the new system of financial reporting set up by the President's Executive Order Tuesday. Dan Bell was eager that if we do say anything, we hold it to generalities, just that it 1s an improved system. H.M.Jr: I haven't the foggiest idea what it 1s. Do you know? Schwarz: Yes. It calle for more detailed reporting, especially by the independent agencies and by the Government corporations. H.M.Jr: It was set up in the first instance by the Budget, wasn't it? Schwarz: That 18 correct. We could refer any questions to them. H.M.Jr: Refer them to the Budget? Schwarz: Yes. H.M.Jr: What else? Schwarz: That 1s all. Buckley: We had Mr. Cunliffe, Administrator of Aluminum for the United Kingdom, entire British Empire, in yesterday. I took him over and introduced him to Mr. Stettinius and he went over the aluminum situation with our people. There were several problems, and I think they will be Regraded Unclassified 32 - 5 - worked out. He left town last night, but I think he will be back again. I think that is the only thing I have. H.M.Jr: Mr. White? White: There was 8 contemplated case of dumping of Mexican oils to the United States which the Mexicans were apparently quite interested in. We couldn't find any grounds for further investigation of the case, 80 we are going to inform them that we have dropped it. I didn't know but what you might have something in mind now or in the future in which you might want to tell them that you are doing this as a favor to them, or if there 1s nothing on foot, it will merely go through, because we have no choice in the matter. H.M.Jr: I am waiting to see who 1s to be the next president of Mexico. White: Well, it 1s Camachio. H.M.Jr: How do you know? Gaston: They haven't had the revolution yet, Harry. White: You mean he hasn't taken office yet. I don't. H.M.Jr: I thought their Congress was going to decide that. White: Our Congress? H.M.Jr: Their Congress. White: Well, I thought it was in the bag. H.M.Jr: Do you think that would help you - Mrs. Morgenthau has a set of dishes of eight pieces and she would like to get another four. The Minister of Finance gave them to us. White: I should say it would help. Regraded Unclassified 33 - 6 - H.M.Jr: On the strength that I would like to get another four pieces. We broke a couple. I have been waiting for some excuse. I told her I couldn't ask the Ambassador now, but sometime it was a good excuse. I was just being silly. You remember what is his name gave us a set of Mexican dishes that comes from his home town. The freight is more than - the dishes don't cost anything. Never mind, I was just joking. Gaston: Creighton, our Supervising Customs Agent on the Border, goes down every month. He could take one of those dishes down and match them. White: It may be juggling, but I will see that you get it. H.M.Jr: We bought some of the stuff. It doesn't cost anything. It 1s the freight and packing to get it up here. Gaston: Well, he could pack it in his suitcase. H.M.Jr: It is a couple of good offers, anyway. White: I will take it up with Mrs. Morgenthau. H.M.Jr: What did Harry say? Sullivan: He said he would take it up with Mrs. Morgenthau. Foley: He took it out of your hands. H.M.Jr: All right. White: Hornbeck is coming here at a quarter of eleven, and I wanted -- H.M.Jr: Eleven o'clock and Soong at eleven fifteen. White: I wondered if I could see you a few minutes before Hornbeck comes in. H.M.Jr: How many minutes? Regraded Unclassified 34 - 7 - White: Five. H.M.Jr: Five minutes of eleven. Professor Chamberlain? Chamberlain: We haven't yet heard about that note renewal. I called up this morning and they say it is on the President's desk and hasn't yet been signed. You remember that letter to authorize -- H.M.Jr: I am seeing the President tomorrow morning. If you could give me & copy of it to take with me, give me another copy - a complete set and I will take it over at 9:30 tomorrow morning. Chamberlain: We are keeping in touch with the White House offices, 80 if anything turns up we will let you know. H.M.Jr: I am going over at 9:30 tomorrow morning to see him. Chamberlain: I will see that you are informed, Mr. Secretary. That is all. I am staying here at lunch. Thompson: I have this letter from Mrs. Delahunt. H.M.Jr: And what do you think? Thompson: I think we ought to continue her and I can easily arrange it. There was a young man in yesterday looking for a job. He was 8. very nice looking boy, and I think we could use him.as & messenger boy or in our photostat room. H.M.Jr: You think you can? Thompson: Yes. He 1s a bright boy. I think he will be all right. H.M.Jr: Write a letter to my sister and I will sign it. Is that all? Regraded Unclassified 35 - 8 - I don't want to crow yet, but I think there 1s something happened over in the War Department. Assistant Secretary Patterson is going to town on things, and he just brushes the generals aside. It 1s just too good to be true. We will know this afternoon. Do you know Judge Patterson? Chamberlain: Just know him. What I have heard of him is very good. H.M.Jr: Like a breath of fresh air. Chamberlain: And what I have heard of him - I have heard that he was that kind of man. H.M.Jr: He just - (accidentally striking glass) White: Oh, he rings the bell? H.M.Jr: He shows particular good sense by letting the Treasury people write his letters for him. He seemed to have known Cox when he was up in New York, and Cox is over there now writing & letter to Maxwell, ien't he? Foley: Yes. H.M.Jr: Wonderful. I will see this afternoon if he really goes through with it. I think he will. If we could only get somebody like that in the State Department. White: Oh, yes. H.M.Jr: All right, thank you. Regraded Unclassified August 15. 1940 files it. Coobran incon de Gruben. Counselor of the Nelgian telephoned he resterday 1.- regard " the letter which be had addressed to no 05 August 10 in regard to the - of Georges Thounis. I told him that after meting inquiries I ed (evid TMS the State Department had forwerded to the Treasury Ambasender Theanis' of July 19. but that through insivertence this had not been received by the intered Telerve Rank at liev York or had been forwarded by the Treasury Department. Consumently I net melcod Rr. "etle, is visase heads the letter rested, to do the Certam received this verning from a. Fehle - 0017 of the letter which he transed #& /agust 13 for Professor Chemberlain's signature. I checked with fev Tork ad from that 9. Enotre had received it not had referred It to Xr. Cameron for remin-1100 184 possible discussion with Mr. Knoke. I then telephoned Baron de Gruben that the letter vos in Sev Torm and that vp. Anoke would let ne know if there VII any Lifically la consumating the desired transmation wean the basis of this letter. or whether the Federal Receive Bank night have any specific surgestions to maine for the future bandling by the Tubsey of transactions of this type. Daron de Graben our intervention. but still feels that the Federal Reserve Revis to below calts lemlistic In dealing with sheee miters. lie hoped to come in and see DE within she dear future in regird to general problems of the Selgian account=, particularly those of the Retional Tank of Delgiue. sugar 16, 1940 1. include telephoned be today 1a regin to the letter written is Thronts under X fulg 19 to the Department of State which ver transmitted to the Treasury an Wabs - - by the Treasury to the Federal Recerve Teak on 14. Kanite und this Biller - not assisfactory to the Faderal and that the transaction 1a question could 1 H Heoleted on the basis thereof. Se auted be to let the Belgion lisbery how - that # letter similar to that written by en June 23 to the Security registing - payment of $3,300.000 to the Dwise thank Corporation by the Referel That of Yes Tork, be propered and sent through the astablished channels the RATE 18: Pressury Departments, interboand the Delgion Tabesay this -fternoon but learned that Peron de Oruben New not he La 10m will Honday, when I shall communiests with binagest 19. 1940 1 care the above information this morning to the Secretary of the Belgion lubrear, 1- the clarace of Peron de Cruben. I also read to his the cable of August 17 from willows 7 Lee Governor of the Benque Nationale Belgique. B.M.S Regraded Unclassified TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE August 15, 1940 TO Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL At 11 o'clock today the Secretary received Dr. Hornbeck of the Department of State. Measrs. White and Cochran also were present. This meeting was to prepare for D. conversation with Dr. T. V. Soong of China. It was explained, principally by Dr. Hornbock, that Mr. Welles, the Acting Secretary of State, was not willing to pro- néed et present with any triangular negotiations between the United States, Russia and China, involving e possible facilitating of Chinese purchases of munitions from dursta in return for American credits extended Chine against bungsten or other pro- ducte, in view of present diplomatic relations and negotiations between the United States and Russia. Mr. Welles felt that the Russians might misunderstand any advances which we made toward them in the name of good relations with Ohina. The Secretary definitely excluded the possibility of the Stabilization Fund extending any assistance to China. There remained, therefore, only the chance of obtaining something from the Envirt-Import Bank. when Dr. Soong joined the group at 11:15, the Secretary asked him what iccoss he had had in this country. Dr. Soong stated that he had visited the Depart- cent of State and bed also enjoyed technical discussions with Dr. Herry White, but USD no results had yet been achieved. In answer to the Secretary's request for an emplanation of the present Chinese situation, Soong stated that China needed materials for the pureuit of her war against Japan and also support for her currency. If China should fell either from lack of materials or from the collapse of her currency. he felt that the repercussion on the other democracies of the world would be serious. When the Secretary ouestioned him in regard to the facility of Chine to export and import esterials, Soong thought that exports could be made both through French Indo-China and over the Burna Road. He was not aware that the British had interposed any objection to emorts over Burma. In confirmation of his belief that Chinese products could be flivoed out through Indo-China, he cited the recent cargoes of tungsten and antimony, vitch the United States R.F.C. had purchased from China and shipped from Haiphong. (It should be recalled that this material had been in Indo-China for months.) The Secretary stated definitely that he would not be warranted under lew to take the risks involved in the American Stabilization Fund lending direct assistance to Chinese currency. Ee suggested that Soong again get in touch with the Export-Import tank, or directly with Mr. Jones, if and when the pending legislation for increasing the resources of the Export-Import Bank may be passed. It is understood that in its Present form this legialation would permit further credits to China, the maximum limits of which under the present law have now been reached. The idea was discussed of China paying back any new credit through shipments of tungsten ore which Dr. Soong stated could be produced to the extent of approximately 13,000 tone annually, with EL value of *round $13,000,000. The meeting ended, therefore, with the Secretary positively refusing Stabilization Fund credit and leaving the matter of an Export-Import Bank credit for loons to take un directly with Jones if and when the present bill passes Congress. BMP Regraded Unclassified 38 August 5,1940 Possible Agenda for 11 o'olook Conference with Mr. Hornbeck A. There are three possible ways of extending economic aid to China: 1. A stabilization loan, provided you are willing to accept the risk of possible loss. (See B-1 in book) 2. The President's proposed Three-Way Arrangement under which the R.F.C. buys manganese, chromite, asbestos, platinum, etc., from Russia, making partial advanced payments, while Russia extends equivalent sum of credits to China for purchases of war materials. (See A page 2) 3. The R.F.C. can purchase $50 million worth of wolfram and tin from China, paying in advance -- delivery over the next five year period. (See A- page 1) B. The following should be discussed this morning: 1. Does the State Department wish the Treasury Depart- ment to push project of financial aid to China, or do they wish the matter dropped. (See copy of appended telegram.) 2. Does the State Department approve of B. stabilization loan should the Treasury find it feasible to extend such a loan? 3. Does the State Department object to further explora- tion with the Russians of the proposal made by the President of a Three-Way Arrangement? 4. Has the State Department any concrete suggestion to offer either as method of aiding China, or procedure in negotiations? 5. Would the State Department actively support the Treasury in its attempt to secure R.F.C.'s favorable action in the purchase of strategic materials from either Russia or China? Regraded Unclassified 39 Copy of telegram given informally to Mr. White by Mr. Soong. The telegram purports to be a report of Mr. Johnson's (U. S. Ambassador to China) comments to the Chinese Government. 40 COPY TELEGRAM FROM CHUNGKING JULY 31, 21:31 No. 1635/ July 31. FOLLOWING ARE SALIENT POINTS AMERICAN EMBASSY UPON INSTRUCTION VERBALLY CONVEYED US (1) U.S. WILL CONTINUE ASSISTANCE TO CHINA AS FAR AS IT IS APPROPRIATE AND PRACTICABLE (2) U.S. SYMPATHIZES WITH CHINA'S RESISTANCE AND HER PRESENT PLIGHT AND WISHES MANIFESTATION SUCH SYMPATHY IN CONCRETE FORM (3) IMPORTANT AMERICAN OFFICIALS ARE CONSTANTLY STUDYING CHINA'S SITUATION (4) U.S. HOPE AND BELIEVE OUTCOME CHINA'S STRUGGLE WILL BE HER INDEPENDENCE AND POSSESSION OF LARGE INFLUENCE (5) CHINESE AMBASSADOR WASHINGTON IS KEEPING CLOSE CONTACT WITH HIGH OFFICIALS AMERICAN GOVERNMENT AND MUST BE REPORTING HIS OBSERVATIONS AND INTERPRETATIONS OF CONDITIONS IN U.S. TO HIS GOVERNMENT. WAICHIAOPU July 31, 1940. Regraded Unclassified 41 C o P Y BRITISH EMBASSY, WASHINGTON, D.C. 15th August 1940. Dear Merle, With reference to Stopford's letter to you of the 12th August, covering an extract from a Ministry of Economic Warfare telegram dated August 9th, on which you tele- phoned me yesterday evening, I began getting further information by telegram elmost immediately after our telephone conversation, and I enclose a note of this information. Yours ever, (signed) Jerry Pinsent Note: I have put Stopford's initials on the note, as I am doing this for him. H. Merle Cochran, United States Treasury, Washington, D.C. Regraded Unclassified 42 0 P I 1. On July 19th, the Twentsche Bank, Amsterdam, told the Guaranty Trust of New York that their account was 204,000 guilders overdrawn, and asked them to cover, adding that the buying rate for dollars WELB 188 3/16ths. 2. On the same date the same Amsterdam bank advised the National City Bank of New York identically in reference to an overdraft of 81,000 guilders. 3. There was a similar recent interchange between the Rotterdamsche Bank and the Bank of the Manhattan, who are said to be 55,400 guilders overdrawn. 4. The Manhattan Bank say that they have already covered other contracts with Dutch banks. Apart from this there is no evidence to show whether any of the American banks above complied with the request to cover the overdrafts. 5. On July 28th the American Express Company of New York asked their Zurich agency to transmit a. message to Boyce, Bordeaux, asking whether in view of the unrestricted dollars they were placing to his credit he could not place these to the credit of the Banque de France in his books, and instruct New York to act in accordance with the instructions of the Banque de France who should give Boyce francs. On that basis they proposed continuing to order payments of dollar amounts to Boyce paying the equivalent in france. They also asked whether he could still handle travellers' cheques. 16. Regraded Unclassified 43 6. Several German banking houses are recommend- ed by German Consulates as collecting agents for inheritances in the United States of America. One such is Hoerner of Heilbron, Neckar, who have recently asked the Chase Bank to transfer $220,500 to the Reichsbank's account. 7. We are instructed to ask the United States Treasury to watch for any transfer of shares in the American Askania Corporation, and to consult us if any proposal of the kind should be made. 8. We are also instructed to ask if payments by the British-American Tobacco Company can be held up (details of the payments referred to are not given but can be asked for if required). (Initialed) R.J.S. British Embassy, 15th August 1940. jba Regraded Unclassified August 15. 1940. My dear Mr. Secretary: I - emding you herewith, for your confidential use, the following reporte: Part I - Airplanes Deliveries of and New Orders for Airplanes, May 1 - August 10, 1940; Unfilled Orders and Estimated Deliveries or August 10, 1940. Part II - Airplane Engines Deliveries of and New Orders for Airplane Bagines, May 1- August 10, 1940: Unfilled Orders and Estimated Deliveries on August 10, 1940. These tables earry forward through August 10, 1940 the information furnished you last week. Sincerely, (Signed) H. Morgenthau, J1. The Honorable, AUG 15 1940 By Messenge The Secretary of Vaz, 3:30 P.m. Vachington, D. c. 9001 7Pm FILE COPY Regraded Unclassified 45 tf sent by measinger Matterson August 16, 1940. w in Mr. Pattermant I - conting you herewith, for your confidential use, the following reporter Part I - Airplance Selivarias of and New Orders for Airplance, May 1 - August 10, 1940; Unfilled Orders and Retimated Deliveries en August 10, 1940. Part II - Airplane Regines Beliveries of and New Orders for Airplane Regines, May 1 - August 10, 1940: Unfilled Orders and Retimated Reliveries on August 10, 1940. these date have hase compiled from reports minitted w airplane and eirplane engine Sincerely, (Signed) H. Morgenthau, A. Housechle Robert P. Patterson, Accident Secretary of Var, Hashington, 3. c. ORIGINAL FORWARDED TO ADDRESSEE FROM OFFICE OF THE SECRETARY By Messenger AUG 16 1940 1:25 P.M. GOA Am FILE COPY Regraded Unclassified 46 August 15. 1940. By door Mr. Secretary: I an sending you herewith, for your confidential use, the following reporte: Part I - Airplanes Deliveries of and New Orders for Airplanes, May 1 - August 10, 1940: Unfilled Orders and Setimated Deliveries 02 August 10, 1940. Part II - Airplane Ingines Deliveries of and Ber Orders for Airplane Ingines, May 1 - August 10, 1940; Unfilled Orders and Notimated Deliveries on August 10, 1940. These tables carry fervard through August 10, 1940 the information furnished you last vesk. Sincerely, (Signed) H. Morgenthau, J1. The Nonorable, AUG 15 1940 By Messenger 3:30 / m. The Secretary of the Nevy, Washington, D. c. DA for FILE COPY Regraded Unclassified 47 August 15. 1940. Dear Mr. Endsent I as sending you herewith, for your confidential use, two copies of the following reports: Part 1- Airplanes Deliveries of and New Orders for Airplanes, Mey 1- August 10, 1940; Unfilled Orders and Estimated Deliveries on August 10, 1940. Part II - Airplane Engines Deliveries of and New Orders for Airplane Engines, May 1 - August 10, 1940; Unfilled Orders and Estimated Deliveries on August 10. 1940. These tables carry forward through August 10, 1940 the information furnished you last vook. Sincerely, (Signed) H. Mongenthau, Jr. Mr. Villiam s. Karadoen, Chairess, Advisory Commission to the AUG 15 1940 By Messenge. Council of National Defence, 3:30 e.m. Room 2262, Federal Reserve Building, Washington, D. c. WA to FILE COPY Regraded Unclassified 18 August 15. 1940. Dear General Marchalls I - sending you herewith, for your confidential use, the fellowing reporter Part I - Airplanes Reliveries of and In Orders for Airplanes, May 1 - August 10, 1940; Unfilled Orders and Estimated Deliveries en August 10, 1940. Part II - Airplane Regines Reliveries of and New Orders for Airplane Regines, May 1 - August 10, 1940: Unfilled Orders and Retinated Deliveries on August 10, 1940. These tables carry forward through August 10, 1940 the information furnished you last week. Sincerely, (Signed) H. Morgenthau, JI. AUG 15 1940 By Messenger General George c. Marshall, 3:30 P.m. Chief of Staff, Yes Department, Vashington, D. c. ZOA The FILE COPY Regraded Unclassified 19 August 15. 1940. Dear Mr. Mayt I am sending you herewith, for your confidential use, the following reports: Part I - Airplanes Deliveries of and New Orders for Airplanes, May 1 - August 10, 1940; Unfilled Orders and Estimated Deliveries on August 10, 1940. Part II - Airplane Ragines Deliveries of and New Orders for Airplane Engines, May 1 - August 10, 1940; Unfilled Orders and Estimated Deliveries on August 10, 1940. These tables carry forward through August 10, 1940 the information furnished you last week. Sincerely, (Signed) H. Morgenthau. dr. AUG 15 1940 By Messenger Mr. Stacy May, Director, 3:30 P. m. Bureau of Research and Statistics, The Advisory Commission to the Council of National Defense, Washington, D. c. DA Their FILE COPY Regraded Unclassified 50 August 15. 1940. Dear Admiral Stark: I - sending you herewith, for your confidential use, the following reportet Part I - Airplanes Deliveries of and New Orders for Airplanes, May 1 - August 10, 1940: Unfilled Orders and Astimated Deliveries on August 10, 1940. Part II - Airplane Ragines Deliveries of and New Orders for Airplane Engines, May 1 - August 10, 1940; Unfilled Orders and Estimated Deliveries on August 10, 1940. These tables carry forward through August 10, 1940 the information furnished you last week. Sincerely, (Signed) H. Morgenthau, J1. AUG 15 1940 By Messenger Mairal Harold 1. Stark, 3:30 P.m. Chief of Naval Operations, Mary Department, Washington, D. c. MA the FILE COPY Regraded Unclassified 51 STATES THE ASSISTANT SECRETARY OF WAR WASHINGTON STATE August 16, 1940. My dear Mr. Secretary: I thank you very much for the reports on airplanes and airplane engines. With best regards, I am Sincerely yours Honorable Henry Morgenthau, Jr., The Secretary of the Treasury, Washington, D.C. 52 WAR DEPARTMENT OFFICE OF THE CHIEF OF STAFF WASHINGTON OCS 17840-203 August 15, 1940. The Honorable, The Secretary of the Treasury. Dear Mr. Secretary: Thank you very much for the following reports which you sent me on August 15, 1940: Part I - Airplanes Deliveries of and New Orders for air- planes, May 1 - August 10, 1940; Unfilled orders and estimated deliveries on August 10, 1940. Part II - Airplane Engines Deliveries of and New Orders for air- plane engines, May 1 - August 10, 1940; Unfilled orders and estimated deliveries on August 10, 1940. Faithfully yours, Chief of Staff. 53 DEPARTMENT OF THE NAVY OFFICE OF THE SECRETARY WASHINGTON August 15, 1940 My dear Mr. Secretary: Secretary Knox wishes me to acknowledge and to thank you for sending him the Tables showing deliveries of and new orders for airplanes and airplane engines, May 1 - August 10th, 1940, un- filled orders and estimated deliveries on August 10, 1940. Sincerely yours, M. L. Deyo Captain, U.S.Navy Aide to the Secretary Hon. Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D.C. 54 In reply enfor to Initiale and No. NAVY DEPARTMENT OFFICE OF THE CHIEF OF NAVAL OPERATIONS WASHINGTON 15 August 1940 My dear Mr. Morgenthau: This will acknowledge receipt by Admiral Stark of confidential reports, Part I - Airplanes, and Part II - Airplane Engines, which information carries through August 10, 1940. Yours sincerely, Commander, Aide to Chief of Naval Operations. Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D.C. TIG: TIGHTAPLE 10 5 NH MT are DADA TWO US 55 UNITED AIRCRAFT CORPORATION EAST HARTFORD, CONNECTICUT OFFICE OF THE PRESIDENT August 15, 1940 The Honorable Henry Morgenthau, Jr., Secretary, United States Treasury, Washington, D. C. My dear Mr. Secretary: I am glad to have your letter of July 26, and shall await with interest any further communication on the mat- ter which the Advisory Commission of The Council of National De- fense may send me. Yours very truly, E. E. Wilson, President md - MC MM 56 JT PLAIN LONDON Dated August 15, 1940 Rec'd 4 p.m. Secretary of State, Washington. 2745, August 15, FOR TREASURY FROM BUTTERWORTH. Asked in the House of Commons whether the British Government had received from the Soviet Government a communication about bank balances in the United Kingdom belonging to the states of Lithuania, Latvia and Estonia, the Under Secretary of State for Foreign Affairs replied: "His Majesty's Covernment are at present considering the representations of the Soviet Government in which they raise objection to the prohibition imposed by order-in-council on the transfer of the gold lying in the Bank of England to the account of the three Baltic States. The Soviet point of view is being carefully considered in the light of the various important political, financial and legal considera- - tions involved." Asked will the fate of these gold balances bE considered as part of a general commercial arrangement with the U.S.S.R. if such be come to in the future, Mr. Butler replied: "I thank WE must take it that these Baltic Regraded Unclassified 57 -2- #2745, August 15, from London Baltic questions provide a problem of their cwn. WE have our point of VIEW and our interests, but I do not SEE why SOME settlement should not bE arrived at. KENNEDY WSB Regraded Unclassified 58 PLAIN Kaunas Dated August 15, 1940 Rec'd 5 p.m. Secretary of State Washington 209, fifteenth. There follows a copy of a certificate executed. by me today. American Legation, Kaunas, Lithuania, August 15, 1940. I certify that the Lithuanian Foreign Exchange Commission made available on August 8, 1940 to the Americans repatriated by this Legation for lits ten thousand five hundred six point fifty at a rate of lits five ninety-two to the dollar, dollars one thousand seven hundred seventy-four point seventy- five, which were used by the Legation on behalf of these persons to purchase transportation to Stockholm over Berlin at a cost in dollars of one thousand six hundred sixty-seven point ought six (lit equivalent nine thousand eight hundred sixty- nine) and marks five hundred and ten at a cost of dollars one hundred and seven point sixty-nine (lit equivalent Regraded Unclassified 59 - 2 - equivalent six hundred thirty-seven point fifty and I respectfully request the Treasury of the United States of America to grant licenses to the Federal Reserve Bank of New York and other banking institu- tions in the United States holding accounts in dollars of the Bank of Lithuania for the transfer upon the instructions of the Bank of Lithuania to a special free dollar account of dollar funds of the Bank of Lithuania in the amount of dollars one thousand seven hundred seventy-four point seventy- five. Signed Bernard Gufler. GUFLER CSB COPY n° Regraded Unclassified 60 August 15, 1940 11:30 a.m. H.M.Jr: Hello. Rentschler: Hello, Henry, good morning. H.M.Jr: Good morning. R: How are you? H.M.Jr: I'm all right. R: Henry, I have two things. In the first place, I understand you are interested in talking with Pete Shorrey, who just came back from Japan. H.M.Jr: That's right. R: And we told Pete to come down any time you want him. H.M.Jr: I gave him a time, I think. R: Oh, fine. Well, that's all right. H.M.Jr: He's coming - let's see - tomorrow, at 10:30. R: That's all right, fine. H.M.Jr: Yes. R: Now, Wilshire told him to give you the whole story as completely as he can. H.M.Jr: Good. R: Now, the next one is, we're having & little trouble getting a license on remitting back to France on francs that we have to have for our branch there to liquidate our depositors. Regraded Unclassified 61 - 2 - H.M.Jr: Yes. R: Will you take a personal look at it? The request is New York 33226. H.M.Jr: What number is that? R: 33226. H.M.Jr: 33 -- R: 33226. H.M.Jr: Right. R: New York. H.M.Jr: Yes. R: Now, Henry, here's what we're doing. This is just off the record to you, if you please. H.M.Jr: Yes. R: But no further. H.M.Jr: Yes. R: Over in France, we've got ten millions reduced down to francs. We've got ten millions on each side of our balance sheet, besides our building. H.M.Jr: Yes. R: Now, of that ten millions, five million nine is in foreign currency deposit and that foreign currency deposit is only - we're only obligated to give that depositor a draft on New York. H.M.Jr: Yes. 82 - 3 - R: And so that means that that five million nine is cash in United States dollars in New York. You see? H.M.Jr: Yes. R: Now, we've got three million dollars, approxi- mately, worth of franc deposits, which belong to all manners and class of people. H.M.Jr: Yes. R: And if that three million dollars worth of francs that we're paying out as were demanded - they're demanded from us. H.M.Jr: Yes. R: Because very, very much off the record between us, we're still outside of Paris operating from LePuy which is not in occupied territory, and I have a personal hunch that what we ought to do is when we get liquidated down to approximately nothing, we might want to come home. H.M.Jr: I see. R: You see what's in my mind? H.M.Jr: Yes. Well, I'll take a look at it. R: You take a look because I'd like - I don't want to be in the position of getting in trouble with banking authorities there because we're not liquidating our obligations. H.M.Jr: I see. R: So the sum total is not a great sum total. The five million nine we're not obligated Regraded Unclassified 63 - 4 - to give anybody except as they present drafts in New York. H.M.Jr: Yes. R: And as you know, all those drafts have to be approved here before remittances can go back over there. H.M.Jr: Well, let me take 8. look at it. R: Yes, you take a look at it. It would help us a good deal if we can get this in the clear because we are running short of cash there now. H.M.Jr: Okay. R: And that's franc cash which we ought to pay our franc cash depositors. H.M.Jr: Okay. R: Thanks very much, Henry. H.M.Jr: Okay. Goodbye. R: Goodbye. Regraded Unclassified 64 August 15, 1940 2:56 p.m. H.M.Jr: Hello. Knox: Hello, Henry. H.M.Jr: How are you? K: Fine. H.M.Jr: Two things, Frank. You know, they keep throwing into my face all the time that Admiral Gormley told the State Department that Japan has a reserve of 69,000,000 barrels of oil. K: Well -- H.M.Jr: Well, I wondered if you couldn't find out where Gormley got his figures and what they are based on. K: Well, do you know where Gormley is? H.M.Jr: I know where he is. K: Yes. H.M.Jr: But is the Navy still carrying on? K: Well, I'll find out, if I can. H.M.Jr: I mean, supposing you, as Secretary of the Navy, said you wanted to know - and forget about Gormley - what would -- K: How many were there, 67,000,000? H.M.Jr: Sixty-nine, I think they said. K: 69,000,000 barrels -- H.M.Jr: Of oil that Japan had on hand. Regraded Unclassified 65 - 2 - K: All right, I've got a memorandum of that. Now, what else? H.M.Jr: The other thing is, you remember when we -- K: What? H.M.Jr: When we were talking, we were talking about & $2500 house. K: Yes - $2,000 house. H.M.Jr: Well, gosh. K: Huh? It makes a difference when they're build- ing thousands of them. H.M.Jr: Are you still interested? K: You bet your hootin' I am! H.M.Jr: Well, these dirt foundations - I had one of my boys take it up with them. K: Yes. H.M.Jr: And they took it up with the Weyhauser lumber people and they could do a hundred houses a week. K: A hundred a week! H.M.Jr: Yes. K: Well, what'll the house cost in quantities like that. H.M.Jr: Well, I don't know, but this fellow is avail- able if you want to see him. K: Well, I do want to see him if you'll send him over here. Give me his name, now. Regraded Unclassified S6 - 3 - H.M.Jr: Well, I think it's Davidson but I'm not sure. It's the Pierce Foundation. K: Oh, yes, I've got that name. H.M.Jr: And I'll tell you, if you'll - I can have him call up your secretary if you tell me what day you want to see him. K: Well, I guess I'd better see him next Mon- day. I'm going to be loaded to the rails today and tomorrow. I want to try to get away tomorrow night. H.M.Jr: Well, do you want to give me a time, just put down Pierce Foundation. I can't -- K: All right, what time? I'll make it -- H.M.Jr: You say the time and I -- K: All right, let me look at this book. There's nothing on that day at all. Well, suppose he comes in here about 11:00 o'clock. H.M.Jr: 11:00 o'clock, and I'll tell your man what his name is, but it's the Pierce Foundation and they can do a hundred B. week. K: Uh-huh. All right, I've got a memorandum for that, too. H.M.Jr: What? K: Fine! What else is on your mind? H.M.Jr: Not a thing. K: Have you heard the results of the latest message? Regraded Unclassified 67 - 4 - H.M.Jr: No, I have not. K: Accepted, one hundred percent. H.M.Jr: No! K: Yes. H.M.Jr: Wonderful! K: Yes. H.M.Jr: Wonderful! Now, what happens? K: Well, I haven't heard from the big fellow. H.M.Jr: I see. K: But I suppose he's working on some message or other, I don't know. But I got that from Lothian this morning. H.M.Jr: Did it just come in? K: Well, it came in just this morning, yes. No reservations at all. H.M.Jr: Well, I'll be damned! Well, things are looking up. K: Yes, 8. little better. H.M.Jr: Do your boys feel at all cheerful about what's happening around Great Britain, the island? K: Yes, the last 24 hours, I think, look better. The British are taking the offensive and that - if anything could - was needed. That will certainly establish the fact that the Germans haven't established mastery in the air, or the British wouldn't be bambing French concentra- tions if they were unable to maintain themselves Regraded Unclassified 88 - 5 - over their own territory. H.M.Jr: Right. K: Another interesting thing is that the fighting over England, of course, is over English soil. H.M.Jr: Yes. K: And these fighters have now learned the trick of bailing out when their machine is - if they're not killed, they bail out. Well, it makes quite a difference. That goes for both sides, the Germans and English alike. But the German lands in enemy territory and is immediately captured and the British flier lands in home territory and he is in another plane the next day. H.M.Jr: I see. K: Which makes quite a difference, especially when there's a real shortage of pilots in both countries. H.M.Jr: Well, thank you, Frank. K: You'll notice in the communiques from now on, I think, - it was this morning - that the British list how many pilots they lost. H.M.Jr: I see. K: That may have nothing to do with the number of machines they lost. H.M.Jr: I see. K: It makes it a little more intelligible when you read a communique. Okay, Henry. Goodbye. H.M.Jr: Thank you. Goodbye. Regraded Unclassified 89 August 15, 1940 3:37 p.m. Knudsen: Hello. H.M.Jr: Hello, are you back at your office? Knudsen: Yes. H.M.Jr: Why do you -- Knudsen: I called you from over there. They say you couldn't be disturbed. H.M.Jr: Well -- Knudsen: So I came back here. H.M.Jr: I didn't - they didn't tell - I had the former Air Minister of France in here. Knudsen: Uh-huh. H.M.Jr: La Chambre; I don't know whether you've met him or not. Knudsen: Yes. H.M.Jr: Do you want to get together today or tomorrow? Knudsen: Well, I'd rather get together today, a little later in the evening. How late are you over there? H.M.Jr: Well, I'm not going to be here so awful late tonight. Knudsen: Can I pick you up in the morning? H.M.Jr: Well, no, I'm going to the White House the first thing in the morning. Knudsen: Uh-huh. Do you want me to come over now? Regraded Unclassified 70 - 2 - H.M.Jr: Well, let me just - I tell you, I got this - just a second, let me look & minute. I'll be free at 4:15. Knudsen: Uh-huh. H.M.Jr: Are you tied up? Knudsen: Yes. H.M.Jr: You are tied up? Knudsen: Yes. When do you get through at the White House tomorrow? H.M.Jr: I don't know that. You know how those appointments are. Knudsen: Well, I just came in here. H.M.Jr: What's that? Knudsen: I just came back. H.M.Jr: But supposing when I get through, I call you up? Knudsen: Fine. H.M.Jr: My first appointment tomorrow is at 10:30 and if I get through there, I can give you a ring. Knudsen: All right, fine. H.M.Jr: But he said to come over the first thing in the morning. Knudsen: Yes. H.M.Jr: How would that be? Knudsen: Sure. H.M.Jr: Thank you. Regraded Unclassified 71 August 15, 1940 4:30 p.m. Stimson: Hello, Henry. H.M.Jr: How are you? S: A number of things are happening today, I suppose you know. H.M.Jr: I don't know whether I do or not. S: Well, you remember our conference Tuesday? H.M.Jr: Yes, I hear that there's been a good cable come in. S: Yes. H.M.Jr: What? S: Yes, complete acceptance, I understand. H.M.Jr: Well, that's marvelous. S: Perfectly marvelous. H.M.Jr: Yes. S: But that isn't the only thing I wanted to speak to you of. H.M.Jr: Yes. S: I haven't heard anything from the White House yet on that, and I don't suppose you have, have you? H.M.Jr: Well, I heard it from Knox, to be - that's who told me. S: From Knox? H.M.Jr: Knox told me about this cable. Regraded Unclassified 72 - 2 - S: Well, he heard it from Lothian and Lothian told me this morning. H.M.Jr: Well, I got it -- S: Just got back from Aberdeen. H.M.Jr: Well, I got it from Knox. S: Yes. Well, I suppose that will - we'll soon hear something about that. H.M.Jr: Yes, I hope so. S: Now, have you seen the tape ticker? H.M.Jr: I don't know . - I have seen it, but I don't know whether I've seen what you want me to. S: Something - a matter on which you were of great help to me. H.M.Jr: What's that? S: I read these three lines: "Louie Johnson today rejected President Hoover's offer - President Roosevelt's offer of an appointment as Special Administrative Assistant on National Defense." H.M.Jr: Yes. S: "He took under advisement an offer of another position in the Federal Government," and there's some more about it. H.M.Jr: Yes. S: You remember the thing. H.M.Jr: I did see that, yes, sir. Regraded Unclassified 73 - 3 - S: Well now, I want - I'd like to have you think about that. Of course, I heave a tremendous sigh of relief. I don't know what Special Administrative Assistant on National Defense means, except from the title. I don't know whether it was 8. matter that the President had in mind, other than as an escalator clause, so to speak. H.M.Jr: I don't know. S: But if it means that he's thinking of somebody for such a position, which I would take from the name meant something in the nature of a Presidential liaison officer in regard to national defense, it is a matter of great im- portance to the War Department and the Navy Department as to who such a person would be. H.M.Jr: Yes. S: You can see - I mean, it would have been a terrific jolt, if it had gone - if it had not been rejected. Now, if that's going begging and if it's likely to be appointed - the fact that it's been named - it may be that a great many patriots will be thinking of it and I had to think of it with reference to our job here. H.M.Jr: Yes, of course. S: And in thinking of it, I wondered whether just - this is just a shot in the air and I'd like your reaction on it. H.M.Jr: Please. S: A man who, S0 far as I know, from my stand- point, would not at all be obstructive, but would be very welcome to - that is, as such a position, SO far as I know of him, though Regraded Unclassified 74 - 4 - I know him only slightly, would be Stettinius. H.M.Jr: I see. S: You see? H.M.Jr: Yes. S: I just wanted your reaction. H.M.Jr: Well, I'll tell you -- S: Think it over, will you? H.M.Jr: Of course, I'll think it over, but I'll give you my first reaction. S: Yes? H.M.Jr: I'd - Patterson has made a tremendous hit with me. S: Yes. H.M.Jr: And I don't see what - why you and Patterson need anybody between you and the President. S: Well, I don't - mind you - you misunderstand me. We don't. But if there is going to be someone, we don't want it to be an insulator. H.M.Jr: Well, this is - now, mind you, I haven't talked to the President about this since that original time, you know? S: Yes. H.M.Jr: And I think what he was doing was to make a job to suit the man. See? S: That's what I thought. Regraded Unclassified 75 - 5 - H.M.Jr: And if Louie Johnson doesn't take this, I think he'll forget about it. S: Well, I pray to heaven that he will, but I didn't quite like - after these announcements. H.M.Jr: Yes. S: There was such a position. And in a Presidential year with lots of patriots around, I didn't know what might happen. That was the only reason for -- H.M.Jr: Well, I don't know if I'll have any luck, but I'll try to do a little snooping. S: Just sounding. H.M.Jr: I'll try to do a little sounding. S: Well, I'll be grateful -- H.M.Jr: But I say, personally, I don't know why, unless there's a case of political expedience in & case like Louie Johnson's, I think the Presi- dent would be much better off not to have any- body between you and Patterson and himself. S: Do you think he's fairly satisfied with us, so far? H.M.Jr: Well, I think he has every reason to be. S: Well, that's different. H.M.Jr: What? S: That's different, he might not be. I hope he is. H.M.Jr: Well, the only indications he's given me have been that he's been most pleased. 76 - 6 - S: Well, I'm very glad of that. H.M.Jr: Most. S: But just - I wanted you, as a man who knew the situation and who has been very friendly and helpful, to know that and I would like your - a little guidance and advice. H.M.Jr: Well, I'm hoping to see him early tomorrow morning and if I do, I'll see if I can do a little sounding. S: Well, thank you very much. Now, the Swedish matter has gone through all right and -- H.M.Jr: Oh, really? S: Oh, yes. A letter has just been drawn. There was a little question at first of power, raised by the Uniform Force, so to speak, but I found a way around it... H.M.Jr: Oh, really! S: ....I thought, and the letter has been drawn to Maxwell, in regard to the licenses. You sent over a draft and I put in - there was a little question raised as to whether Patterson had the statutory power to do it, so I assumed that myself. H.M.Jr: Good for you! S: And let him say that he did it by my direction. H.M.Jr: Well, fine! S: He has the power. Regraded Unclassified 77 - 7 - H.M.Jr: Well, is it far enough along that I could tell Arthur Purvis about it? S: Why, I think so. I'll tell you, I'll let Patterson call you as soon as it's actually signed. H.M.Jr: Oh, I see. S: I just passed the letter. H.M.Jr: I see. Well, if you'll have him do that, I'd appreciate it. S: I will, yes. H.M.Jr: And if I find out anything, I'll let you know. S: Yes. Then in regard to the other big explosion, we'll sit and hold tight. H.M.Jr: You mean the ships? S: Yes. H.M.Jr: Right. S: All right. H.M.Jr: Thank you. S: Thank you. 78 August 15, 1940 4:42 p.m. H.M.Jr: Hello. Patterson: Hello. H.M.Jr: Morgenthau. P: Yes. H.M.Jr: I want to go home. P: Yes. H.M.Jr: And I can't go home until I hear whether you've signed that letter. P: I haven't, but I'm going to. It's - I had to make a little change in it. H.M.Jr: Yes, Mr. Stimson just called me up. P: Yes, he's right here. H.M.Jr: And he told me about it. P: Yes. H.M.Jr: But I didn't want to go home until I heard from you. P: Well, it's okay. I'll sign it tomorrow morning. H.M.Jr: I see. P: Is that time enough? H.M.Jr: Oh, sign it tonight. P: Sign it tonight? All right. I'll sign it tonight. H.M.Jr: I'm sorry you couldn't come. I just wanted Regraded Unclassified 79 - 2 - to get better acquainted. Maybe we can do it some other time. P: I hope so. H.M.Jr: Yes. P: This is only a deferred thing, I think - I hope. H.M.Jr: Yes, but I just - I want it very informally and I thought we might - you know, but when I get back - I'm going away for two weeks, tomorrow, and when I get back, I hope we can do it some other time. P: Well, I want to talk over agricultural problems with you. H.M.Jr: Well, there's nothing that I do better. I can talk about them. P: I've been taking a course all this winter up at the Cornell Agricultural, by correspondence. H.M.Jr: Oh, really? P: On farm soils, and I am in arrears now on the lessons. H.M.Jr: Well, we'll have to have some more, but - well, this is fine; I'm simply delighted, and -- P: I'll send the letter off tonight. H.M.Jr: Fine. The sooner Maxwell gets it, the better. P: Yes, I'll send it to Maxwell. H.M.Jr: Well, isn't that who it goes to? Regraded Unclassified 80 - 3 - P: Yes, I'll send it to Maxwell. H.M.Jr: Yes. P: All right, I'll sign it. There's a little change in it but of no importance. H.M.Jr: Well, Mr. Stimson said you're signing by direction of the Secretary of War, isn't that it? P: That's right. H.M.Jr: That's the only change, isn't it? P: That's all. H.M.Jr: Fine. Thank you. P: Goodbye. 81 DEPARTMENT OF STATE WASHINGTON In reply refer to IA August 15, 1940. The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and transmits copies of a letter dated August 5 from the Australian Government Trade Commissioner to an officer of the Depart- ment of State, with enclosure, regarding sale of United States and Canadian securities held by Australian nationals, together with a copy of the Department's reply dated August 12, 1940 dealing with this and an unrelated matter. Enclosure: 1. From Australian Government Trade Commissioner, August 5. 1940, with enclosure (4). 2. To Australian Government Trade Commissioner, August 12, 1940 (1). Regraded Unclassified 82 DEPARTMENT OF STATE WASHINGTON In reply refer to August 12, 1940. My dear Mr. Macgregor: I have received from Mr. Fuqua of this Department your informal communications of August 5. 1940, which you addressed to me. With regard to the first communication concerning certain Commonwealth of Australia bonds said to belong to Mrs. 0. M. Middleton of Cap Martin, France, the dis- position of such bonds in the United States or the pay- ment of interest thereon from funds in the United States would appear to fall under restrictions imposed by Execu- tive Order No. 8389 of April 10, 1940, as amended. The regulations provide that information concerning this Executive Order and questions arising under it may be obtained from the Federal Reserve Bank of New York. With regard to the second communication which relates to the order of the Australian Government for the sale by Australian holders of certain American securities, I have L. R. Macgregor, Esquire, Australian Government Trade Commissioner, 630 Fifth Avenue, New York, New York. Copy Regraded Unclassified 83 -2- have cast around without coming to any clear understanding as to what may be involved in the suggestions you have re- ceived or whether it is advisable that you in any way amend or add to what you have heretofore done. My sug- gestion would therefore be on this also you take occasion informally to consult the Federal Reserve Bank of New York, having regard to their general competence in such matters. Sincerely yours, Frederick Livesey Assistant Adviser on International Economic Affairs Copy Regraded Unclassified 24 GOVERNMENT OF THE comonwealth OF AUSTRALIA Office of the Australian Government Trade Commissioner In the United States of America 630 Fifth Avenue New York. INFORMAL 5th August, 1940. Mr. F. Livesey, Assistant Economic Adviser, State Department, Washington, D. 0. Dear Sir: ORDER BY AUSTRALIAN GOVERNMENT FOR SALE BY AUSTRALIAN HOLDERS OF CERTAIN AMERICAN SECURITIES I have to advise that on the 30th of April, an order wes issued by the Australian authorities for the sale of certain American securities held by Australian holders under conditions stipulating that the proceeds of such sale are to be made over to the Federal Reserve Bank for the account of the Commonwealth Bank of Aug- tralia. A few weeks Ago a request was received from a. New York brokerage house for information as to the correct procedure to be followed in carrying out the Australian regulations and this house wes suitably advised. In giving the information I enquired as to whether it was felt that the brokerage houses generally had not been fully informed by their Australian assoc- iates. The house in question indicated that they doubted whether adequate information was available, and auggested that I should advise the Secretary of the New York Stock Exchange. A communication was addressed to the New York Stock Exchange giving the information and asking whether they would circulate it among the brokerage houses con- cerned, or whether it was preferred that this office should do so. The reply from the Stock Exchange was a request that this office should communicate with 58 brokerage houses, the names of which were furnished by the Stock Exchange. Copy Regraded Unclassified 35 A communication was therefore addressed to the 58 brokerage houses concerned, as per copy attached. A number of communications have been received from the brokerage houses concerned acknowledging the communi- cation and offering every co-operation. One house, however, Messrs. Kidder, Peabody & Company, has raised the question as to whether certain official procedure should not be complied with to put the matter in proper order. This firm suggests that whereas the majority of the brokerage houses may comply with the instructions, there may be some who will not do so. They envisage a. possibility of leakage. They also suggest the possibility of legal action ensuing if the procedure be not regularised. I enquired of Messrs. Kidder, Peabody as to whether they knew of such procedure having been followed by the British authorities in connection with their liquidation of securi- ties, and they advised that it was doubted as to whether this had been done, although they felt that we would be in a stronger position if a formal procedure were followed, Consultation with the British Treasury representa- tive in New York concerned with liquidation of securities, elicited the information that the British authorities are not issuing any instructions or following any official procedure at this side but are relying entirely upon the compliance by their own nationals in their own country with the regulations promulgated in the United Kingdom and upon the penalties for non-compliance imposed by the British regulations. I would be grateful to you for the favour of any informal advice or suggestion which you may be able to offer, and particularly as to whether any U. S. regula- tions have been promulgated, setting forth the action which should be followed by us, or if not, as to whether it would be prudent to take some official action or follow some specific procedure in this country either for legal or other protection. Yours very truly, L. R. MACGREGOR Australian Government Trade Commissioner, M:D (c o P Y:EHS) Regraded Unclassified 86 GOVERNMENT OF THE COMMONWEALTH OF AUSTRALIA Office of the Australian Government Trade Commissioner in the United States of America 630 Fifth Avenue NEW YORK 23rd July, 1940. Dear Sirs: SALE OF UNITED STATES AND CANADIAN SECURITIES HELD BY AUSTRALIAN NATIONALS The following information regarding sale of United States and Canadian securities held by Australian nationals is being transmitted to you at the suggestion of the New York Stock Exchange, viz: - 1. Under Australian Government regulations it is prescribed that as and when securities are sold, proceeds must be paid in United States dollars to the Federal Reserve Bank of New York for credit of the Commonwealth Bank of Australia No. 3 Account. The payment to the Reserve Bank is to be accompanied by a statement setting out the full name of the owner, together with particulars of the securities. 2. It is required that the New York broker forward to the Governor, Commonwealth Bank of Australia, Sydney, the broker's contract notes showing the terms and amount of the proceeds of the sale of the securities together with particulars of the payment made to the Federal Reserve Bank in New York as above set forth. Attached hereto is a photostat of the regulations. I remain, Yours very truly, L. R. MACGREGOR Australian Government Trade Commissioner M:D (c 0 P Y:EHS) COPY Regraded Unclassified S7 August 16, 1940. MEMORANDUM TO: Secretary Morgenthau FROM: Mr. Gaston MA We have lately received several requests from the British through different channels for cooperation and assistance in the matter of ship movements. (1) Through Lord, Day & Lord, New York maritime attorneys, we were asked to omit the port of destination in the British Isles from telegrams passing between Collectors and the Office of Ship Movements over commercial wires. This was done and the initials U.K. substituted in all such requests for departure. Through the same charmel we are now asked to devise some means to obviate having the names of the ships come over commercial wires. I believe we can accomplish this by having the shipping agents make their requests for departure as early as possible so that the data may be submitted by air mail and permit granted by use of a key number. We may also be able to extend slightly the use of the teletype, which the British regard as adequately protected. (2) Through Foley's office Pinsent asked if we couldn't find some means to let them know if any German or Italian ships should put to sea from American ports, or show signs of putting to sea. We have taken no action on this request. (3) Through Merle Cochran Pinsent has asked if we can not pre- vent the departure of two French ships - the VAN and the WISCONSIN - now on the Pacific Coast. I have asked Derby to consult me before granting departure permits for either of these vessels. (4) Pinsent presented to Cochran yesterday an inquiry whether we couldn't hold ships of Esthonia, Latvia and Lithuania. I have not replied to this request. Regraded Unclassified 88 August 16, 1940. MEMORAN DUM TO: Secretary Morgenthau sm FROM: Mr. Gaston Among the ship departure permits yesterday the following are of some interest: (1) Russian SS TURKSIB - New York for Murmansk - with the 1939 Russian display at the New York World's Fair. (2) Finnish SS KURIKKA - Baltimore for Petsamo, with a cargo of sugar. (3) Greek SS EVANTHIA - New Orleans for Japan, with scrap iron. (4) Japanese SS NIPPON MARU - San Pedro for Japan, with crude oil. (5) Japanese SS DAISAN OGURA MARU - San Francisco for Yokohama, with crude oil. Regraded Unclassified Kondsen 83 August 16, 1940 Memorandum to the Secretary: From Mrs. McHugh: Mr. Hinckley informed me that so far they have been able to get very little information on the plant which Howard Hughs has somewhere near Los Angeles for building plywood planes. As far as Mr. Hinckley knows, it is still in the experimental stage, but Hughs has been working very secretly and they haven't been able to find out much about it. There is another plant near Los Angeles by the name of Timm which is supposed to be working on this same kind of plane, and it is rumored that Hughs is also backing this company. They have one ship completed and the tests were very satisfactory. Mr. Hinckley thinks the Timm Company is planning to build only trainer planes. Mr. Hinckley said he had sources of information available to him and he would be glad to look into the matter further if you so desire. Thomas to MM Kmideen's Suretary 8/16 -. Regraded Unclassified 90 August 16, 1940 To: The Secretary From: Mr. Buckley Subject: Swedish Situation. I had a call at 2:05 P.M. from Colonel Maxwell who said that he was going over Judge Patterson's letter with the State Department. He asked me why we thought the license for the approximately $27,000 worth of spare parts for Douglas DC-3 planes should be revoked. I told him that dollar-wise it wasn't a very important item from our standpoint but that I believed the Army Air Corps had felt rather strongly that the parts could be used better in this country than in Sweden. He asked me if the approximately 7,000,000 rounds of 9 mm. parabellum cartridges, to the export of which the letter said no objection would be made. represented the amount now manufactured. I told him that our best information was that approximately 7,250,000 rounds had been manufactured but I suggested that before the exact amount to be revoked is set forth in a formal order it might be well to call the manufacturer directly. f Regraded Unclassified 91 AUG 16 1940 Dear Mr. Howards I want to express my appreciation for the oil map you submitted through Mr. Sadler, and also for the information in your letter of August 13, 1940. I have forwarded photo- graphie copies to the Secretarios of war, Havy, and Interior. The material is very helpful, and I want to thank you for your kindness. Sincerely, (Signed) H. Morgenthau. Jr. Secretary of the Treasury. Mr. Frank do Heward, Vice President, Standard Oil Company, 30 Reckefeller Pless, Room 2800, les York, New York. ORIGINAL FORWARDED TO ADDRESSEE FROM OFFICE OF THE SECRETARY HDWamd Carlion Copies to 8/16/40 Mr. T hompan NDW FILE COPY Regraded Unclassified 92 STANDARD On COMPANY es New Issues NEW YORR TRANK A HOWARD Vim December August 13th, 1940 The Hon. E. Morgenthau, Jr. Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: With reference to Mr. Sadler's letter of August 12th we have prepared a set of maps which show the location, outside of the United States, of tetraethyl lead plants and synthetic oil plants. These maps are being expressed to you today, to- gether with the maps mentioned in Mr. Sadler's letter, in a. single container, A. distinction has been made on the mape be- tween the hydrogenation type and the Fischer type of synthetic oil plants. Attached to the maps are tables giving the location, capacity, feedstock and type of products of the synthetic oil plants and & table giving the location of the tetraethyl lead plants. Outside of Europe the only tetraethyl lead plant con- cerning which we have any definite knowledge is B small one re- cently put into operation near Mexico City. There are certainly also one or more tetracthyl lead plants in Russia but we have no information as to their location or size. Early this year certain Japanese groups were discussing with the Ethyl Gasoline Corporation the possibility of a license for the manufacture of tetraethyl lead in Japan and assistance in the construction of a plant. In deference to the wishes of the State Department we asked that these negotiations be suspended. We believe that the result will be that the Japanese will proceed on their own with the manufacture of tetraethyl lead in the near future. Our Japanese patents are Just about to expire. If we can be of further assistance in this matter please do not hesitate to get in touch with use Very truly yours. Frank A FAH:MF Regraded Unclassified 93 AUG 16 1940 Dear Mr. Sadler: I want to thank you for the information received in your letters of August 9, 10 and 12, in connection with various questions that arose during the recent discussion on the petroleum situation. The maps and tables have arrived, and I an sure they will be useful to us. I very much appreciate receiving this information. Sincerely, (Signed) H. Morgenthau, dt. Secretary of the Treasury. Mr. B. J. Sadler, Vice President, Standard 011 Company, 30 Rockefeller Plasa, Room 2867, New York, New York. ORIGINAL FORWARDED TO ADDRESSEE FROM OFFICE OF THE SECRETARY carlion copies to You T hompson WLU:dlm 8/15/40. you FILE COPY Regraded Unclassified 94 Mr. Morgenthau:- The attached memorandum may be of interest to you. E.J.S. 95 STANDARD OIL COMPANY INCOMPORATED IN 30 ROCKEPELLER PLAZA ADLER. ROOM 2867 NEW YORK Aug. 9, 1940. The Hon. H. Morgentahu, Jr., Secretary of the Treasury, Washington, D.C. ** dear Mr. Secretary:- Bearing on the discussions at the Treasury Depart- ment on Wednesday, I beg to advise that the representative of Mitsui & Company in New York asked the Standard Vacuum Company to offer them any kind of avistion gasoline they might have for delivery at points other than the United States for shipment over the belance of this year. This telephonic request came in Tuesday and was confirmed by letter, as per attached copy. It would appear, therefore, that the Japs will now canvass the world for supplies to replace those that they have been receiving from the United States. We inquired of the Shell whether they knew whether their company would be encouraged or discouraged by the British Government in mak- ing further supplies of aviation products available to the Jepanese, and we were advised by the local people that they had not information on this sub- ject at the present time. They believed that this particular point was now under consideration in Great Britain, and they believed that one attitude might be assumed for their operations in the Dutch East Indies, and another attitude assumed for their operations in other countries outside the United States, and that they would try to clear up this point. Photostat in duplicate of Vitaui's letter of inquiry to the Standard Vacuum is attached hereto. 5J3/LTD -Inclosure- Madhv Yours Regraded Unclassified 96 HEAD OFFICE.TOKYO,JAPAN ANOMA HSINGKING SAIGON KARACHI SAN FRANCISCO KORE SEATTLE 'Gable Address this Brall officer 2 NON KEELUNG SEMARANG LONDON SEOUL 1 LOS ANGELES SHANGHAI i VTTA MANILA SHIMIZU ON MEDAN SINGAPORE MITSUI& CO.LIMITED TOWN MELBOURNE SYDNEY MINE SOURABAYA 00 MOJI TAIPEH 180% MURDEN TAKAO /. Uitsui Bussan Jráisha. T/d) . NAGASARI TEHERAN o NAGOYA TIENTSIN DATE NEWCHWANG TSINGTAO DW DTANU WARAMATSU 350 FIFTH AVENUE, NEW YORK IN USAKA YOKOHAMA SHIMA PERING ETC.ETC. TELEPHONE CHICKERING 4-2900 NONE HANGOON NEW YORK PLYPLEASE RTO Sundry #1 Dept. August 7th, 1940. Standard-Vacuum 011 Company, 26 Broadway, New York City. Dear Sirs: Attention: Mr. W.S. Leaper Confirming conversation had with you at your office yesterday, you are kindly requested to offer any type of Aviation Gasoline for delivery at other countries than the United States and shipment to be made during the balance of this year. This morning, we have been earnestly requested by our Tokyo people to secure an offering from you promptly. Therefore, will you please let us know as soon as possible if you can offer any quantity available. Thanking you for your usual kind 00- operation, we remain Very truly yours, 8. Nakao/FP S.hahao 97 HEAD OFFICE TOKYO, JAPAN JANDAIA HSINGKING SAIGON KARACHI SAN FRANCISCO "bable for all office DT KORE SEATTLE NAG RECOUNG SEMARANG SAOR LONDON SEOUL www. LOS ANGELES SHANGHAI SEAT CUTTA MANILA SHIMIZU SINGAPORE MITSUI & CO.LIMITED (YON HEDAN MELBOURNE SYDNEY 100% MIJAE SOURABAYA MOJI TAIREH 100 MURDEN TAKAO / Hitsui Bussan Tráisha, Ttd) was : NAGASARI TEHERAN WD NAGOYA TIENTSIN DDATE NEWCHWAND TSINGTAO OTANU WAKAMATSU 350 FIFTH AVENUE. NEW YORK por SIN OSAKA YOKOHAMA TELEPHONE CHICKERING 4-2900 REKING ETC/ETC SHONG RANGOON NEW YORK (PLY PLEASE CATO Sundry #1 Dept. August 7th, 1940. Standard-Vacuum 011 Company, 26 Broadway, New York City. Dear Sire: Attention: Mr. W.S. Leaper Confirming conversation had with you at your office yesterday, you are kindly requested to offer any type of Aviation Gasoline for delivery at other countries than the United States and shipment to be made during the balance of this year. This morning, we have been earnestly requested by our Tokyo people to secure an offering from you promptly. Therefore, will you please let us know as soon as possible if you can offer any quantity available. Thanking you for your usual kind co- operation, we remain Very truly yours, 8. Nakao/FP S.hahao Aug. 9, 1940. 98 The following information comes from the American representative of the Shell: He in not informed since the shutting-off of American avistion supplies 10 Japan from the United States what his company's procedure will be, or whet, If any, instructions his company will have had from the British Government. It is his conviction that the American Government is currently end fully informed on decisions in this respect from the British Government. It is his information that operetions in the Dutch East Indies and supplies from this area to the Japs will be in a different class from supplies from other sources availableto the Shell. The Shell's present avistion gesoline plent makes ebout 300 barrels daily of high octane gasoline (90 to 100). (Dutch Eest Indies) From normal naphthas in the Dutch East Indies the Shell segregetes around 4,000 barrels daily of 77 octane base stock;with 4 C.C.'S of lead this is 90 octane. In addition, they have about 4,500 barrels daily of 74 octane gasoline, which, with 4 0.0,'S of lead goes to 87 octane. The Shell have under construction a second alkylation plent in the Dutch Last Indies which will be finished about December 31st, and will produce 1,000 tons per month of alkylate, or about 300 barrelsdaily. In the past they have probably not been delivering any aviation gaso- line to Japan which could be leaded to higher than about 87 or 90 octane, and their high octane production is probably all under contract to the British. Recently, the Dutch East Indies Government in an appeasement program agreed to supply Japen with 40,000 tons per month of crude, of which one cargo (10,000 tona) WELS to be so-called Navy quality, which would make 15 to 20% of aviction @asoline susceptible to leading to 87 to 90 octane. The other three cargoes wore to be crude comparable to Kettleman Hills. The deliveries of such crudes may docrease to some extent the production = the Dutch East Indies by the Shell of the 74 and 77 octane base stocks which are noted above as being current production. The Japs, since the American embargo, want to incresse the one cargo a month of Havy quality crude to three cargoes a month. This will probably not be possible, and the alternative of increasing product deliveries of gasoline Diesel oil and fuel oil may be worked out. After the 40,000 ton monthly agreement was made with the Dutch Zest Indies, en inquiry WB 9 made by the Japs for a million tons 6. year, but nothing stems to have come from this inquiry. The information of the party referred to is that the Jeps will probably plan to attack and keep the Dutch EastIndies if they are not otherwise able to obtein everything which the Dutch Zest Indies produces and which Japan requires. The party referred to above has been yestorday at the British Legation in Weshington. ETS/LTD Wilhinson Regraded Unclassified 99 STANDARD OIL COMPANY (INCORPORATED IN 30 ROCKEFELLER PLAZA ROOM 2667 ADLER. DE PRESIDENT NEW YORK Aug. 9, 1940. The Hon. H. Morgenthau, Jr., Secretary of the Treasury, Washington, D.C. My dear Mr. Secretary:- Bearing on the inquiries made Wednesday at the Treasury Department, we find that the Japs are willing to pay very high prices for petroleum coke in the Dutch East Indies which they use, ac- cording to our information, with bauxite in the production of aluminum in Japan, largely for use in airplane construction. It is possible that they are purchasing similar petroleum coke on the Pacific Coast. We are not clear that the petroleum coke is indispensable in the production of aluminum, but it appears at the present time to be important to the Japs. We believe that some of the petroleum companies on the Pacific Coast who have been important suppliers to the Japs in the past are perhaps negotiating with them at the present time in looking to co-operation in supplying Japan's needs of petroleum products. This 1s, however, a matter of hearsay, and one which the Treasury Department can probably clear up through its own channels, if it is interested. EJS/LTD alladur Yours very truly P.S.- The naps which you requested are in the course of preparation. Regraded Unclassified 100 STANDARD OIL COMPANY (INCORPORATED IN NEWJERSET) 30 ROCKEFELLER PLAZA ROOM 2867 ADLER. PRESENT NEW YORK Aug. 10, 1940. The Hon. H. Morgenthau, Jr. Secretary of the Treasury, Washington, D.C. My dear Mr. Secretary:- In connection with my note to you with respect to the use of petroleum coke in Japan, I am able to give you additional information in regard to exports of petroleum coke to Japan for the year 1938, as per following quotation from a memorandum given me under date of August 9th: "As per your request this morn- ing, the exports of petroleum coke from United States to Japan for the year 1938 were 11,455 long tons. The value of this product was $212,456, which is roughly $18.66 per ton. There is no breakdown given for the raw and calcined product, but we are attempting to get a division on same. For the year 1939 the United States exported 47,871 long tons. No value is obtainable on this amount as yet, as we took the latter figure from the Socony-Vacuum statistical division." EJS/LTD Elladur Yours very truly, 101 STANDARD OIL COMPANY INCORPORATED IN NEWJERSET) 30 ROCKEFELLER PLAZA ROOM 2867 ADLER. EX PRESIDENT NEW YORK Aug. 10, 1940. The Hon. H. Morgenthau, Jr., Secretary of the Treasury, Washington, D.C. My dear Mr. Secretary:- I am now able to give you the exact figures on sales of the Standard Vacuum and of the Shell people in Japan for the year 1939. These figures, of course, include only the sales of these companies and affiliates in the Japanese market. Janes EJS/LTD 81.0 BI 0 MA SPINAG 06 -Enclosure- 102 YEAR 1939 JAPAN TERRITORY (Bbls.42's) Total S.V. Sales Shell Sales S.V. & Shell Gasoline * 857 537 1 187 987 2 045 524 Kerosene 299 518 278 167 577 685 Fuel & Diesel - Ind. 298 501 1 560 622 1 859 123 - Bunkers 45 199 1 111 453 1 166 652 Lubg. Oils 139 139 65 962 205 101 Total 1 639 894 4 204 191 5 844 085 Mitsui Sales Fuel & Diesel - Ind. 1 319 955 - Bunkers 1 297 499 Total 2 617 454 # Includes Aviation - S.V. - 28 117 Bbls. (1,211 bbls. from N.E.I. to Formosa/ Dairen on Exoh., Balance from Calif.) Shell - 13 794 Above does not include Emergency Aviation Sales - s.v. - 52 960 bbls. F.O.B. Calif. in drums No record of Shell. Crude 011 Imports - Year 1939 From General Pet. California - 865 434 Bbls. Straight Crude . Shell U.S.A. 191 774 . - Topped Crude # - 391 951 # Lube Crude Miri - 595 455 # Topped Crude Total Shell 1 179 180 Total General & Shell 2 044 614 Statistical & Distribution Dept. August 9, 1940 Regraded Unclassified 103 YEAR 1939 JAPAN TERRITORY (Bbla.42's) Total s.v. Sales Shell Sales S.V. & Shell Gasoline * 857 537 1 187 987 2 045 524 Kerosene 299 518 278 167 Fuel & Diesel - Ind. 577 685 298 501 1 560 622 - Bunkers 1 869 123 45 199 1 111 453 Lubg. Oils 1 156 652 139 139 65 962 Total 205 101 1 639 894 4 204 191 5 844 085 Mitsui Sales Fuel & Diesel - Ind. 1 319 955 - Bunkers 1 297 499 Total 2 617 454 . Includes Aviation - S.V. - 28 117 Bbls. (1,211 bble. from N.E.I. to Formosa/ Shell - 13 794 Dairen on Exch., Balance from Calif.) Above does not include Emergency Aviation Sales - B.V. - 62 960 bbls. F.O.B. Calif. in drums No record of Shell. Crude 011 Imports - Year 1939 From General Pet. California - 865 434 Bbls. " Shell Straight Crude U.S.A. - 191 974 - Topped Crude # - 391 951 # Lube Crude Miri - 595 455 . Topped Crude Total Shell 1 179 180 Total General b Shell 2 044 614 Statistical & Distribution Dept. August 9, 1940 Regraded Unclassified 104 STANDARD OIL COMPANY (INCOMPORATED IN NEW JERSET) 30 ROCKEFELLER PLAZA ROOM 2667 ER. RESIDENT NEW YORK Aug. 12, 1940. The Hon. H. Morgenthau, Jr., Secretary of the Treasury, Washington, D.C. My dear Mr. Secretary:- Pursuant to your request when we were in Washington last Wednesday, we are sending you by express a set of maps showing the petroleum producing areas and the refining areas outside the United States as well as the existing pipe lines. There are tables attached to the maps giving additional information as to the ownership of producing and refining activities, using the figures for the year 1939. In addition to these maps, Mr. Howard is also sending maps showing the tetra-othyl lead plants and the synthetic oil plants outside the United States, making a distinction between hydro- genation plants and Fischer process plants. As these maps are rather large, they are being sent separately by express. Yours very analy, EJS/LTD is VISUAL - count OMBIGUA to - Regraded Unclassified 105 STANDARD OIL COMPANY (INCOMPORATED IN NewJERSET) 30 ROCKEFELLER PLAZA ROOM 2867 ER. 1 NEW YORK Aug. 14, 1940. The Hon. H. Morgenthau, Jr., Secretary of the Treasury, Washington, D.C. My dear Mr. Secretary:- The maps you requested were sent by express yesterday afternoon, and I would be pleased to know that they were received without delay and confidentially. They were sent as valuable papers with a declared value of $100.00 to insure, as far as we were able, that they were carefully handled. Yours very truly, EJS/LTD 106 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE AUG 1 6 1940 TO Secretary of the Treasury FROM General Counsel A question has been raised whether provisions of the Joint Resolution of June 15, 1940 (Public Res. No. 83, 76th Congress) are limited by the provisions of section 14 of the Act of June 28, 1940 (Public, No. 671, 76th Congress). The pertin- ent provisions of the Joint Resolution of June 15, 1940, read as follows: "(a) the President may, in his discretion, authorize the Secretary of War to manufacture in factories and arsenals under his jurisdiction, or otherwise procure, coast-defense and anti- aircraft matériel, including ammunition therefor, on behalf of the government of any American re- public; to sell such materiel and ammunition to any such government;* : "(b) The President may, in his discretion, authorize the Secretary of the Navy to construct vessels of war on behalf of the government of any American republic in shipyards under his jurisdiction; to manufacture armament and equip- ment for such vessels on behalf of any such gov- ernment in arsenals under his jurisdiction; to sell armament and equipment for such vessels to any such government; to manufacture antiaircraft artillery and ammunition therefor, on behalf of any such government in factories and arsenals under his jurisdiction; to sell antiaircraft artillery and ammunition therefor to any such government; ... And provided further, That no transaction authorized herein shall result in expense Regraded Inclassified 107 - 2 - Regraded Uncla to the United States, nor involve the extension of credits by the United States: And provided further, That no contract shall be entered into under the terms of this joint resolution which shall interfere with or delay the United States in the full use of its shipyards, srsenale, munition plants, and other equipment for its own purposes." Section 14 of the Act of June 28, 1940, provides: "Sec. 14. (a) Notwithstanding the provision of any other law, no military or naval weapon, ship, boat, aircraft, munitions, supplies, or equipment, to which the United States has title, in whole or in part, or which have been contracted for, shall hereafter be transferred, exchanged, sold, or otherwise disposed of in any manner what- soever unless the Chief of Naval Operations in the case of naval material, and the Chief of Staff of the Army in the case of military material, shall first certify that such material is not essential to the defense of the United States. "(b) The Secretary of War and the Secretary of the Havy as the case may be are hereby requested and directed to furnish or cause to be furnished to the respective chairmen of the Committees on Military Affairs and the Committees on Naval Affairs of the Senate and House of Representatives a copy of each contract, order, or agreement covering ex- change of deteriorated, unserviceable, obsolescent, or surplus military or naval equipment, munitions, or supplies exchanged for other military or naval equipment, munitions or supplies, and a copy of each contract, order, or agreement shall be fur- nished regarding any other disposition of military or naval equipment, munitions and supplies by which the title passes, either de jure or de facto, from the United States, or by which delivery of material thereunder is deferred, where the original cost of such military or naval equipment, munitions or sup- plies exceeded or exceeds $2,000. The copies of each contract, order or agreement herein referred to shall be transmitted to the respective chairmen of the committees not later than twenty-four hours after such contract, order or agreement is made, and the 108 - 3 - chairman of each committee shall consider such contracts, orders or agreements confidential un- less a majority of the members of his committee shall direct the particular transaction to be made public." I shall assume, first, a set of facts whereby, under the provision of the Joint Resolution of June 15, 1940, certain mili- tary and naval equipment is constructed and manufactured in Govern- ment factories, arsenals, and shipyards, or otherwise procured, on behalf of the government of an American republic, and which from the very beginning of its construction or manufacture is being made for the American republic. It is clear, in my opinion, that under that set of facts the transfer of such constructed, manufactured, or procured equipment to the American republic would not be subject to the conditions set forth in section 14 of the Act of June 28, 1940. Subsection (a) of section 14 refers to equipment "to which the United States has title, in whole or in part". Subsec- tion (b) of section 14 refers to the "disposition of military or naval equipment, munitions and supplies by which title passes, either de jure or de facto, from the United States". Under the facts assumed above in connection with the Joint Resolution of June 15, 1940, it will probably be true that during the construc- tion or manufacture of the equipment or when the equipment is procured on behalf of the American republics title thereto will Regraded Unclassified 109 - 4 - Regraded Unclas be vested in the United States. Although there is nothing in the terms of the Joint Resolution which would necessitate that fact, the contracts with the American republics will probably contain provisions to that effect for sound business reasons or for purposes of convenience. It would seem, therefore, that under the literal terms of section 14 of the Act of June 28, 1940, when the equipment now under consideration is finally delivered to the American republics, there would have to be compliance with the conditions set forth in section 14. However, section 14 of the Act of June 28, 1940, when read in the light of its legislative history, presupposes a situation where the materials therein men- tioned have been ordered for the use of the United States or are actually a part of the equipment of the military or naval estab- lishments of the United States. 86 Cong. Rec., June 21, 1940, at 13314 et seq. Since, under the assumed facts, from the initial stages of the transactions the equipment will have been constructed, manufactured, or procured for the American republics, it is evident that the situation thus arising is entirely different from that with which section 14 of the Act of June 28, 1940, is concerned. There- fore, although title to the equipment involved under the assumed facts would be lodged in the United States Government for certain purposes, it is not believed that section 14 should be construed as 110 - 5 - applying to the ultimate transfer of such equipment to the American republics. Supposition may be made of a second set of facts involv- ing the transfer of war and naval equipment to an American republic under the provisions of the Joint Resolution of June 15, 1940. The case might arise where it would be desired to complete, on behalf of the government of an American republic, the construction or manufacture of equipment which is being constructed or manufactured for use in the military or naval establishments of the United States. There would appear to be no doubt that the provisions of the Joint Resolution are broad enough to authorize such a transaction provided, of course, that proper arrangements with the American republic were made with regard to the expense involved. In addition, the Joint Resolution contains an authorization for the sale to the government of an American republic of certain limited war and naval equipment which is a part of the military and naval establishments of the United States. It might be inferred, from what has previously been stated, that the transfer of such equipment to an American republic is the type of transfer contemplated by section 14 of the Act of June 28, 1940. However, whether the transfer of even such equipment to an American republic, under the Joint Resolution, is subject to the con- ditions set forth in section 14 of the Act of June 28, 1940, is open to question. Regraded Unclassified 111 - 6 - In view of the propositions set forth in the Monroe Doctrine, the United States is, of course, committed to the policy that the protection of the American republics from outside & gression is essential to the defense of the United States. Indeed, the authorizations contained in the Joint Resolution of June 15, 1940, are, in a real sense, a recognition and reaffirmation of that policy. In a letter dated June 5, 1939, addressed to the Chairman of the Committee on Foreign Affairs, House of Representa- tives, the bill which later became the Joint Resolution of June 15, 1940, was approved by the Secretary of War. In that letter it vas stated, among other things: # * * It is the opinion of the War Depart- ment that these measures will result in closer cooperation among American republics on matters pertaining to defense and will bring about & better understanding of our common defense prob- lem. Also, the utilization by American republics of similar types of equipment for defensive pur- poses will simplify the munitions problem in any common defense in which American republics may be engaged." (1939) H.R. Rep. No. 1231, 76th Cong., 1st Sess. 2. In connection with the same bill, Admiral Leahy, Chief of the Bureau of Naval Operations, made the following statement to the Committee on Foreign Affairs, House of Representatives: "It is my personal opinion that closer relations between the navies and the armies of the American republics will bring about a better understanding of our common defense problems and a closer relationship between the peoples. 112 - 7 - "Improvements in the naval material of any or all of the South and Central American republics will make more difficult and dis- courage aggression against this continent from overseas, and should it become necessary for America to support the Monroe Doctrine with its navies, the burden to be borne by the United States Navy will be reduced in exact proportion to the number of efficient ships available to the other Republics of America." (1939) 84 Cong. Rec. 9860. Referring to the same bill, Mr. Sumner Welles, the then Acting Secre- tary of State, stated to the press on March 14, 1939: "Cooperation between the United States and the other American republics in the defense of this hemisphere would be to the distinct ad- vantage of this country. To make possible such cooperation is a logical corellary of the 'good- neighbor policy'. "The proposed joint resolution, if enacted, would enable the governments of the other Ameri- can republics to obtain in the United States, without expense to this Government, vessels of war, coast and antiaircraft artillery of modern types at the same prices as those at which they are obtained by the Government of the United States. It would also enable this Government to cooperate with the governments of the other American republics in the construction of vessels of war in their own shipyards. Its enactment would foster the growing spirit of American solidarity and would constitute a further and a necessary step in the interests of the national defense." (1939) H.R. Rep. No. 1231, 76th Cong., 1st Sess. 3. In view of the expressions quoted above it may reasonably be argued that the Joint Resolution of June 15, 1940. 1s concerned with transfers of equipment to American republics for purposes of our own national Regraded Unclassified 113 - 8 - defense. In cases, therefore, where such transfers are made, the Chief of Naval Operations and the Chief of Staff of the Army could not accurately make the certifications required by section 14(a) of the Act of June 28, 1940, that the equipment "18 not essential to the defense of the United States" since the Congress seems to have recognized that the transfers, and thus the equip- ment involved in those transfers, are essential to the defense of the United States. It is believed that no intent should be at- tributed to the Congress to render substantially ineffective, by section 14(a) of the Act of June 28, 1940, the transfer provisions of the Joint Resolution of June 15, 1940. Under the above argument, therefore, it may be said that the transfers involved in the second set of facts hereinbefore set forth and with which we are now con- cerned would not be subject to the provisions of section 14(a) of the Act of June 28, 1940. Although a conclusion, based on another ground, has been reached regarding the transfers involved in the first set of facts discussed above, it is evident that the above argument is equally applicable to such transfers. It is not without significance, in connection with the foregoing argument, that prior to the time of the transfers, the President, in the exercise of the discretion granted to him by the Joint Resolution of June 15, 1940, could determine whether the equipment would better serve the interests of the United States in the military or naval establishments of this country or in those Regraded Unclassified 114 - 9 - of another American republic. It is not to be assumed that the President would abuse the discretion thus granted to him. With respect to section 14(b) of the Act of June 28, 1940, requiring transmittal of information to the House and Senate concern- ing certain transfers, there is reason to believe that, since it is so closely related to section 14(a) of that Act, it applies only to those transfers which are covered by section 14(a) and which involve equipment originally costing in excess of $2,000. Support for that view may be found in the debates which occurred in the Senate on June 21, 1940, when, on the floor of that body, section 14 was first introduced as an amendment to H.R.9822, the Bill which later became the Act of June 28, 1940. 86 Cong. Rec., June 21, 1940, at 13368 et seq. In addition, the Bill was sent to conference, and in the report of the Conference Committee to the House, on June 22, 1940, it was stated that section 14: "Prohibits the disposal of any military or naval weapon, ship, boat, aircraft, or other military supplies without certification of the Chief of Naval Operations or the Chief of Staff of the Army that such material is not essential to the defense of the United States. It pro- vides that the Secretary of War and the Secre- tary of the Navy shall notify the chairman of the respective congressional committees the de- tails of any transfer of any such material or equipment within 24 hours when the value exceeds $2,000 with copies of the contracts, orders, or agreements. on (Underscoring supplied.) (1940) H.R. Rep. No. 2706, 76th Cong., 3rd Sess. 7. It is also to be noted that the circumstances surrounding the passage of the Act make it reasonably clear that one of the primary purposes for the insertion of section 14 was to prohibit and discourage, on the part of the executive branch of the Government, transfers of Regraded Unclassified - 10 - 115 military and naval equipment belonging to the United States when those transfers tended, in the views of the legislative branch of the Government, to weaken our national defense. See 86 Cong. Rec., June 21, 1940, at13314 et seq. Whatever may be the situation with regard to transfers to Europeen states, it has previously been pointed out that the transfers under the Joint Resolution of June 15, 1940, may not be considered as being transfers which would weaken our national defense. While the matter is not entirely free from doubt, I feel that it may well be argued that the transfers now under consideration would not be subject to the provisions of either section 14(a) or section 14(b). Finally, it should be noted that 80 far as the sale to an American republic of arms, ammunition, or implements of war 1s concerned, section 3 of the Public Resolution of June 15, 1940, provides that all con- tracts of sale must contain a provision that the American republic receiving the arms, ammunition, or implements of war will not dispose of them to any state other than an American republic. Thus, it is clear that the arms, ammition, or implements of war sold to the American republics will not fall into the hands, by subsequent transfer, of any of the European belli- gerents. General Regraded Unclassified 116 August 16, 1940 4:05 p.m. GROUP MEETING Present: Mr. Gaston Mr. White Mr. Schwarz Mr. Cochran Mr. Chamberlain Capt. Puleston Mr. Thompson Mr. Haas Mr. Buckley Mr. Graves Mr. Foley Mrs. McHugh H.M.Jr: Herbert - two things for you. You had better get a pencil. Ralph Ingersoll of P.M. would like you to give John Handley, Secret Service, a month's leave of absence 80 he could work with a man doing a serial. I said that as far as I was concerned I was sure we could give it. Gaston: All right. H.M.Jr: What does this fellow know about that? Gaston: I guess his father knows this fellow he is to work with. H.M.Jr: Then, the Northland, Sumner Welles called up and she is west of Cape Farewell, to go to Julianeshaab tonight. Gaston: She is there. H.M.Jr: You are to keep her there until further notice, because the English want her to Regraded Unclassified -117 - 2 - go up - instead of going through that pass between Iceland and Greenland - what is it called? Gaston: Denmark Strait. H.M.Jr: They want her to go via the Faeroe Islands. Gaston: The English notified us about -- H.M.Jr: The point is you are to hold her and not let her proceed any further until - - because he said we did not have - what do you call this -- Gaston: Paravanes? H.M.Jr: We do not have paravanes. Gaston: No. We were definitely assured by the State Department before she left here that it was all right. H.M.Jr: Well, Denmark Strait 1s supposed to be mined. Gaston: That 18 what I told the State Department and then the State Department came back and said it would be all right. H.M.Jr: Well, now they have said it is all right. As a matter of fact this American Legion 1s coming back here. They are running her through the Faeroe Islands instead of north of Iceland, and the Germans have told them they won't guarantee her free passage, but she left last night. I wouldn't mention that out of the room. I had to do quite a little arguing to keep our ship there, because the idea was, well, just let her go up but be careful. But my God, to go up through Denmark Strait if that is mined -- Gaston: I thought when we got that word back - you see the British put out an official notice they had mined the Strait. I thought when we got that word back it Regraded Unclassified 118 - 3 - was all right. It must have been just mined for publicity, but apparently that is not the fact. Then we will hold her at Julianeshaab until we get further notice, presumably it will be from the White House or State Department. H.M.Jr: State Department, but I would be very much opposed - I put up a fight today. I don't want her to go on. Gaston: Clear across the ocean. I think that 1s bad business. H.M.Jr: And to just let her go on up through the Denmark Straits when it is mined I think is awful business. Gaston: Yes. H.M.Jr: So I think I would keep her there for awhile and then let her come back. Gaston: If the British mined that Strait, I think it 18 up to them to look after those Islands along the east coast of Greenland. There are about a dozen villages there. H.M.Jr: The other thing - I communicated with Colonel Maxwell. I am going to call Mr. Purvis as soon as I get through here. The Swedish deal is through, and Colonel Maxwell thanked me for getting him off the hot spot. Buckley: I think that 18 marvelous. H.M.Jr: And Mr. Welles said he had always been for it. White: Now all that is necessary is for the Swedish to say they are glad and it will be a perfect score. H.M.Jr: So unless somebody else has some emergency matter, I say good-bye and hope you all have a good time for the next two weeks. Now, Ed, you are going away for two weeks? Foley: If you tell me to I will. Regraded Unclassified 119 - 4 - H.M.Jr: And, Harry, I am telling you. Who else would like to go away? Haas: It is as good a time as any, I think. H.M.Jr: Anybody else? Graves: If you don't mind I think I will take a little official trip. H.M.Jr: All right. Gaston: Is there anybody who would like to stay here? Schwarz: I will stay in town, but I would like to be away from the office a few days. H.M.Jr: It is all right. Buckley: I would like to take a day to catch my breath after Phil gets back. H.M.Jr: All right. If you stay behind a minute you can hear what I have to say to Purvis. Well anyway, good-bye. 111 120 AUG 16 1940 My dear Mr. President: I an transmitting herewith for your consideration a memorandum re- garding the petroleum situation in Japan. Faithfully yours, (Signed) H. Morgenthau. Jr. By Messonger AUG 16 1940 4:45 p.m. The President, The White House. carbon copies to T hompson HDN NIN:1s FILE COPY 8/16/40 Regraded Unclassified 121 August 14, 1940 MEMORANDUM FOR THE PRESIDENT Subject: Petroleum Situation in Japan The conference on the oil situation held last wook at the Treasury was attended by Secretaries Knox, Ickes and worgenthau, and by numerous officials of Standard 011 and Tidewater Associated ted 011 Companies in charge of foreign marketing. The company officials left copies of various charte and tables, among which were saps giving the location of refineries in Japan and other foreign countries. Copies of the se documents were forwarded to the Secretaries of xar, Havy and Interior. The following important points were made by the 011 sen: 1. Japaness petroleum stocks are believed to be about 20 million barrels, or equivalent to six or seven months' requirements at Japan's present rate of consumption. 2. Japan is now planning to obtain a greatly in- creased share of its petroleum from the Netherland East Indies. (Standard 011 officials have been ad- vised from London that Motherland officials are now negotiating for the sale to Japan of 3 million bor- rele of orude immediately, plus 14 million annually, or a total amount equal to almost A half of Japan's yearly requirements.) Japen has been importing three-quarters of its oil supply from the United States. 3. The Standard 011 officials report that former plans to destroy East Indies production facilities (in ORGE of attack) have been abandoned. They be- lieve the & German pressure on relatives of Dutch colonial officials, together with England's efforts to appease Japan, will result in the East Indies supplying oil to Japan. Shell, however, bes informed Standard 011 that the British Government has not yet expressed RS attitude toward contemplated transactions. Regraded Unclassified - 2 - 4. Japan also plane to obtain increased supplies of orude oil from Venezuela and Colombia. Our State Department, I AB informed, has indicated it had no objection to sales of crude oil to Japan from these two countries, but did wish to discourage sales of eviation gasoline. Some of the oil officials felt that even though British and American companies would +1ah to cooperate, if asked, in not exporting oil to Japen from their Latin American properties, that the Latin American Governments having final jurisdiction nd faced with loss of revenue might force such exports. (Lost year Continental Europe, now a lost mrket to Latin America, took approximately 70 million barrels of Latin American 011.) 5. The Japanese will probably DE able to unke most of their avistion gasoline If they can obtain tetraethyl lead. They may be able to purchase tetreethyl lead (which le produced in England, France, Germany, Itely, Mexico, U.S.S.R.) or any be able to make it. Both Standard Oil end Tidewater officials believe th t Japan CAN make tetraethyl, though the experts disagree as to the difficulty involved. Japan can get suitable orude petroleum for making into base stock for avistion gasoline from the Metherland East Indies or from Latin America. It 1e reported that suitable erude can Also be obtained from the United States, despite the export control. 6. Japaa may De able to purchase aviation gasoline in finished form from the East Indies, which produces 3.7 million barrels per year -- .7 million of straight 100 octane gasoline, and 3 million barrels leaded 87 octane gasoline. (The streight 100 octane has all been going to England.) The Japanese have rsked ItanGard 011 to inform them of any aviation gesoline it holde outside the United States available for purchase. (Standard's reply is not available.) 7. Tidewater officials believe that Japen, with 1tr present plants, can produce sviation lubricating 011 from crude petroleum, from fuel oil, or from ordinary lubricating oil (all of which it oan still import from the United States.) Standard 011 officials be- lieve Japen could do It, but with considerable dif- fieulty. Regraded Unclassified 123 - 3 - 8. Standard officials pointed out that fuel oil was one of Japan's most important import items. Not only is it necessary for ships and tanks, but it can be cracked and refined into gasoline and blending agents. (Japan can refine 24 million bar- rels of crude annually, or two-thirds of its general requirements.) Tidewater representatives said that fuel oil could be made into aviation lubricating oil. They complained, however, that the export regulation covering products that can be converted into aviation gasoline is written so broadly that it might be used to embargo many petroleum products intended for non-aviation purposes. HDW: VBC :WLU:lrs 8/14/40 Regraded Unclassified 124 August 16, 1940. My dear Mr. Secretary: I am transmitting herewith for your information copy of a memorandum which I have sent to the President regarding the troleum situation in Japan. Sincerely yours, (Signed) 1 Jr. m Manager 16 1940 4:45 Am. Honorable Harold L. Ickes, Secretary of Interior. copy 8 enclosure attached to letter to President s the same date. Regraded Unclassified 125 August 16, 1940 My dear Mr. Secretary: I am transmitting herewith for your informa- tion copy of a memorandum which I have sent to the President regarding the petroleum situation in Japan. Sincerely yours, filligned to conther. Jr. Honorable Henry L. Stimson, By Messenger AUG 16 1940 Secretary of War. 4:45 P.m. Copy of enclosure attached to letter to President of the same date. Regraded Unclassified 126 August 16, 1940. My dear Mr. Secretary: I am transmitting herewith for your information copy of a memorandum which I have sent to the President regarding the petroleum situation in Japan. Sincerely yours, (Signed) H. Morgesthau. Jr. By Messenger AUG 16 1940 4:45 p.m. Honorable Frank Knox, Secretary of the Navy. Copy 8 enclosure attached to letter a President 8 The a same date. Regraded Unclassified -127 AUG 16 1940 My dear Mr. Secretarys There are transmitted hereeith photographic copies of several confidential mage and tables which have been submitted by the Standard 011 Company (N. de). The material indicates the oil extracting and refining facili- ties of Europe, Asia, Cossmia, South insuries, and Africa, as well as the European equipment for manufacturing tetracthyl load. Sincerely, (Signed) H. Morgenthau, Jt. ORIGINAL FORWARDED TO ADDRESSEE FROM OFFICE OF THE SECRETARY By Messenger AUG 16 1940 4:45 P. m. The Nonarable Mary L. Stimpem, Secretary of War, Washington, D. C, copies of mape in Harry 3 hite's office. Carbon copies to HDWard FILE COPY m Thompson 8/16/40/HOW Regraded Unclassified 128 AUG 16 1940 My dear Mr. Secretary: There are transmitted herewith photographic copies of several confidential mage and tables which have been submitted by the Standard oil Company (N. de). the material indicates the eil extracting and refining facili- ties of Europe, Asia, Oceania, South America, and Africa, as will as the Buropean equipment for manufacturing tetracthy] lead. (Signed) E Monganthau. Jr. the Honorable Frank Know, By Messenger AUG 16 1940 Secretary of Havy, 4:4 5 P.m. Washington, D. 0, Inclosures. Copies & mape in Harry white's office Carbon copies C mr. T hampeon HOWard yow FILE COPY 8/16/40 Regraded Unclassified 129 AUG 16 1940 My dear Mr. Secretary There I I I & explain of several esufidential nape and tables which have been submitted by the Standard 012 Company (N.J.). The material indicates the sil extresting and refining facilities of Europe, Asia, Opensin, South America, and Africa, as wall as the Duropean equipment fee naminaturing tetracthyl lead. (Signed) H. Morgestion. Jr. ORIGINAL FORWARDED TO ADDRESSEE FROM OFFICE OF THE SECRETARY By Messenger AUG 16 1940 4:45 p.m. The Emerable Harold be Ickes, Secretary of Interier, Weakington, D. a copies of make in Harry white's office carbon copies L HDWard 8/16/40 HDW FILE COPY me. ihompam Regraded Unclassified 130 August 16, 1940 My dear Mr. Ambassador: I was delighted to receive your letter of August 15th informing me that Sir A. Agnew, your oil expert, is sail- ing on August 17th and should reach New York about a week later. Thank you very much for furnishing me with this information. Yours sincerely, (Signed) H. Morganthau. Jr. His Excellency, By Messenger AUG 16 1940 The British Ambassador. 4:45 P.m. Regraded Unclassified 131 August 16, 1940 My dear Mr. Ambassador: I was delighted to receive your letter of August 15th informing me that Sir A. Agnew, your oil expert, is sail- ing on August 17th and should reach New York about a week later. Thank you very much for furnishing me with this information. Yours sincerely, (Signed) H. Morgesthau, Jr. By Messeneer AUG 16 1940 His Excellency, 4:45 p.m. The British Ambassador. Regraded Unclassified 132 BRITISH EMBASSY, SECRET WASHINGTON, D.C. August 15th, 1940 Dear Mr. Morgenthau, You will be glad to hear that Sir A. Agnew, our oil expert, is sailing on August 17th and should reach New York approximately a week later. Either Purvis or I will bring him to see you as soon as he arrives. I am also informing Mr. Welles of his impending arrival. Yours sincerely, holuza The Honourable Henry Morgenthau, Jr., United States Treasury, Washington. COPY 133 ATP PLAIN OSLO Dated August 16, 1940 Rec'd 10:45 a.m. Secretary of State, Washington. 921, Sixteenth. Following for Guaranty Trust Company, New York from Norenberg and Belsheim "Have signed order duly executed before Consul Oslo transfer ten thousand dollars from our account to Irving Trust Company, New York, for account of Kjobmandsbanken, Oalo. If license necessary apply Estrin or Rowe or Irving Trust." PRESTON KLP 134 ATP GRAY STOCKHOLM Pated August 16, 1940 Reo'd noon Secretary of State, Washington 840, August 16, noon. According to documents shown to the Legation Skandinaviska Banken, Malmo, transforred 6th of April $73,543.41 to National City Bank, NEW York, for account DENNORSKE Credit Bank, Oslo by error. Mistake being fully explained, all three banks willing to reverse transfer but license American authorities refused. Please ask Treasury to investigate and advise what steps may bE taken to permit license. STCOR. GREENE DDM 135 DEPARTMENT OF STATE WASHINGTON In reply refer to TA 840.51 Frozen Credits/463/464 August 16, 1940 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and transmits copies of translations of two notes from the Mexican Ambassador in Washington, regarding a license for the transfer of funds held in the United States. Enclosures: From Mexican Ambassador, August 7, 1940. (2) copy Regraded Unclassified 5033 136 [Translation] EMBASSY OF MEXICO Washington, D. C., August 7. 1940. Excellency: With reference to the note verbale No. 4877 which this Embassy addressed to the Department of State on August 2, 1940, I am taking the liberty of asking Your Excellency very respectfully to amplify the request made therein so as to include in the permit which the Embassy desired as a matter of urgency the amount of $1,235.84, which is to be drawn by the National City Bank of New York at Bucharest, Rumania, on the account of our Government, to pay the Mexican diplomatic officials at that place. At the same time, I respectfully ask Your Excellency that if possible a global permit be granted to the said Bank up to $60,000.00 per month, which will cover the necessities of the Mexican service in Europe, for there have really been serious difficulties in the financial management of such payments, the amounts and the identifiable destination of which appear to justify the granting of the permit referred to. I offer to Your Emellency the assurances of my high and distinguished consideration. F. CASTILLO NAJERA Ambassador. His Excellency Cordell Hull, Secretary of State, Etc., etc., etc. TR: :JP:IML COPY Regraded Unclassified 137 5029 I Translation] EMBASSY OF MEXICO Whahington, D. C., August 7. 1940. Excellency: Our Fiscal Delegate in New York communicates to us that the Mexican Consulate General at London has informed him us follows: "The Fiscal Delegation of the Department of Hacienda at Brussela sent me several checks for the payment of expenses and salaries of this General Office and that of Liverpool during the months of April and May, some of which checks on their presentation for collection in New York at the National City Bank, on which they were drawn by the same bank at Brussels, were protested, I being notified as follows: 'Checks drawn by National City Bank of New York, Brussels, on their New York office, unpaid with the answer: Unpaid on account Presidential Proclamation. Drawee applying for license to pay' Protest fees $1.37 and $1.27." - and consequently they were not paid, thus causing injury and expense to the interested parties. I take the liberty of communi- cating the foregoing to you with the very respectful His Excellency Cordell Hull, Secretary of State, etc., etc., etc. Regraded Unclassified 138 -2- request that you be good enough to intervene in the appropriate quarter to the end that payment be effected in the understanding that these checks were presented by the Guaranty Trust Company of New York of that city, in the name of Martin's Bank of London, and others through the channel of the said National Bank at London." In view of the foregoing data I request Your Excel- lency most respectfully that if possible the Treasury Department address the National City Bank of New York for the purpose of authorizing it to pay the said amounts. I avail myself of the opportunity to renew to Your Excellency (etc.). F. CASTILLO NÁJERA Ambassador. TR: :JP:IML COPY Regraded Unclassified 139 ANG 16 1840 My dear Congressment I have pleasure in referring to your letter of August 12 in which you inquired as to whether 47 recent conferences with Sir Frederick Phillips, Undersecretary of the British Treasury, included "some consideration of the possibility of coordinating British purchases in the United States with the United States OVD are pro- pul, and if 80, "what arrangements, if any, vere made to effect the desired purpose". For your information, I an happy to enclose a copy of the statement which was issued to the Press on July 19, 1940, at the termination of the meetings which vere hold between Sir Frederick Phillips and myself. Any reference that say have been made in these meetings to the subject of British purchases in the United States touched only the banking and monetary problems in- volved. Very sincerely yours, (Signail) - J1 Secretary of the Treasury. Enclesure. I FORWARDED TO ADCRESSEE Nonerable George Holden Tinkham, FROM OFFICE OF THE RECRETARY House of Representativer, Vashington, D. c. k Measenger AUG 16 1940 1:25 p.m. JOB/S Carbon Copies the to Mr. Thompson Regraded Unclassified TREASURY DEPARTMENT 140 Washington FOR IMMEDIATE RELEASE, Press Service Friday, July 19, 1940. No. 21-65 Conferences during the past week between Sir Frederick Phillips, Under Secretary of the British Treasury, and Secretary Morgenthau have provided en opportunity for the discussion of questions of mutual interest to the British and American Treasuries. The British Under Secretary was able to assure Secretary Morgenthau that, while Great Britain is now obliged by the exigencies of war to resort to exchange control and other tempor- ary measures affecting international transactions, his Government plans to return to liberal monetery and trade policies as soon as possible after hostilities cease. Such temporary measures in- clude the arrangement between the financial centers of London and New York insururated on July 18 for 8 system of registered sterling accounts, which should tend toward stabilizing the sterling rate end help protect the American market. Prospective British purchases in the United States were con- sidered in detail and their effects on the balance of payments between the two countries during the next twelve months were care- fully exemined, The controls by the two Governments, AS they effect their respective netionals, over assets of invaded countries held in Great Britain and the United States were given attention. -000- Regraded Unclassified TREASURY DEPARTMENT 141 Washington FOR IMMEDIATE RELEASE, Press Service Friday, July 19, 1940. No, 21-65 Conferences during the past week between Sir Frederick Phillips, Under Secretary of the British Treasury, and Secretary Morgentheu have provided en opportunity for the discussion of questions of mutual interest to the British and American Treasuries. The British Under Secretary was able to assure Secretary Morgenthau that, while Greet Britain is now obliged by the exigencies of war to resort to exchange control and other tempor- ary measures affecting international transactions, his Government plans to return to liberal monetary and trade policies as soon as possible after hostilities ceese. Such temporary measures in- clude the arrangement between the financial centers of London and New York insugurated on July 18 for B system of registered sterling accounts, which should tend toward stabilizing the sterling rate end help protect the American market. Prospective British purchases in the United States were con- sidered in detail and their effects on the balance of payments between the two countries during the next twelve months were care- fully examined. The controls by the two Governments, as they effect their respective nationals, over asseta of invaded countries held in Great Britain and the United States were given attention. -000- 142 GEORGE HOLDEN TINKHAM a c. HAMELIN very Diffect MASSACHUSETTS SECRETARY - OF FOREIGN AFFAIRS Congress of the United States House of Representatives Mashington, D. €. August 12, 1940 The Honorable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. My dear Mr. Morgenthau: In the July 12 edition of THE TIMES (London) there appeared an article bearing upon a conference which was to take place between you and Sir Frederick Phillips, and Under- Secretary of the British Treasury. Referring to "the field of possible topics" the article stated: "it may include among other things some consideration of the possibilities of coordinating British purchases in the United States with the United States own arms programme." I should like to know (1) if the topics dis- cussed at the conference in question included "some con- sideration of the possibilities of coordinating British pur- chases in the United States with the United States own arms programme" and (2) if so, what arrangements, if any, were made to effect the desired purpose. With appreciation of your attention and advice, I remain Sincerely yours, GEORGE HOLDEN TINKHAM 8 Regraded Unclassified THEASURY-Procurement Div. Attn: Mr. W.S. Leaycraft, 143 ATP GRAY LONDON Dated August 16,1940 Rec'd 10:55 a.m. Secretary of State, Washington 2762, August 16, 3 p.m. The Embassy has received the following informal communica- tion from the Ministry of Economic Warfare: "You will remember that it was arranged that Russell of the Chrome Company should suggest to the Turks that they might try and sell chrome to America. We have now received a telegram from Ankara informing us that: (1). Russell approached the Eti Bank and learned that the Mutual Chemical Company, the agents for the Eti Bank in America, are offering a minimum of $23.50 per ton F.O.B. for guleman ore (sic-presumably they are offering ore at this price) (2). Russell is suggesting the United Kingdom contract price with possibly $22 for considerable quantities. (3). If we could give some indication of the quantities which the United States of America would be willing to take, also maximum price and delivery requirements, it would facilitate his efforts. The 144 -2- 2762, August 16, 3 p.m. from London The telegram also mentions that the present freight rate to America is about $16, and correspondingly higher via Suez. If you care to let us have the information asked for we will be glad to pass it on to Russell. Otherwise you may wish to get your people to instruct your Embassy in Ankara. Às regards shipping we have discussed this here. Chrome is such a valuable substance to the axis that we do not like to see it pass within their reach, If other things were equal we should prefer that it went round the cape but as this would put up the cost we do not wish to press for this. Te think it would be desirable to arrange, however, that not more than one shipload should be afloat in the Mediterranean at one time; that is to say, ship A should not sail until ship B has safely reached Gibraltar.". KENNEDY WSB 145 August 16, 1940 4:05 p.m. H.M.Jr: Hello. Operator: General Watson. H.M.Jr: Thank you. Watson's Secretary: Colonel Maxwell is standing right here, but the General is not here. H.M.Jr: That's all right. Okay, put Maxwell on, please. Watson's Secretary: All right, Colonel Maxwell, sir. H.M.Jr: Hello. Hello. Maxwell: Yes? Colonel Maxwell. H.M.Jr: Morgenthau. Maxwell: Yes, sir. H.M.Jr: Mr. Welles said in Cabinet that he'd cleared that matter of the cancellation on the Swedish stuff? Maxwell: Yes, sir. Well, I've just delivered the in- structions to the State Department and left a copy with General Watson. H.M.Jr: Well then, I'm free to tell the Purchasing Mission to go ahead. Maxwell: That's correct, yes, sir. H.M.Jr: All right. Maxwell: And I want to thank you very much for the way you took action. Regraded Unclassified 146 - 2 - H.M.Jr: Well, that's very kind of you. I figured the way to do it was through the Secretary of War. Maxwell: That's fine? H.M.Jr: What? Maxwell: That saved things for me very nicely. H.M.Jr: It made it easy for you, didn't it? Maxwell: Yes, sir. H.M.Jr: Well, that's one less worry. Maxwell: Yes, sir. H.M.Jr: Thank you for your cooperation. Maxwell: Well, we'll do the best we can. H.M.Jr: Good luck. Maxwell: All right, sir. H.M.Jr: Goodbye. 147 August 16, 1940 4:07 p.m. H.M.Jr: Hello. Operator: Mr. Ralph Ingersoll. H.M.Jr: All right. Hello. Operator: Go ahead. Ingersoll: Hello, Secretary Morgenthau. H.M.Jr: Talking. I: This is Ralph Ingersoll. H.M.Jr: How do you do? I: Do you remember me? H.M.Jr: Well, I certainly do and I've been reading your editorials and I've been meaning to write you because I think they've been simply swell. I: Well say, that's very good of you to say that. H.M.Jr: Yes. I: I hoped I'd be in Washington today because I wanted to see you for a minute. I have a very odd request of you that I'm putting up to you. H.M.Jr: Well go ahead, take a chance. I: The fellow that's working on our Benedict Arnold stuff, Henry Painter, he's an old lifelong friend of a man who works for you. H.M.Jr: Yes. Regraded Unclassified 148 - 2 - I: Whose name is John Handley. He's in the Secret Service. H.M.Jr: Oh, surely. I: And Painter came to me and said if he could get this fellow to work with him, if he could get him a leave of absence for & month from the Treasury Department, it would be a wonder- ful help to him. H.M.Jr: Yes, I see. I: Well, is that an impertinent way to -- H.M.Jr: No, it's not impertinent. Does Handley want 8. leave of absence? I: I believe Painter has talked to him and asked him if he would do it if it could be done and I think he said yes, although the motive power came from Painter. H.M.Jr: What's Painter's first name? I: Henry. H.M.Jr: Henry. Well, I'll tell you what I'll do. I'm seeing Herbert Gaston in two minutes. I: Yes. H.M.Jr: And I'll tell him - the Secret Service comes under him. I: Yes. H.M.Jr: And I'll tell him it's all right with me, he should get in touch with Handley and if Handley wants a leave of absence for a month, to give it to him. I: Say, that's perfectly great. The reason I 149 - 3 - felt at liberty to call you was because he's working on things that I know you approve and believe in. H.M.Jr: Right. I: And it's in the cause. H.M.Jr: Good. I'm going to - I hope - I'm going away for a little holiday and any time you come down, after Labor Day, if you'd let me know a day or two in advance, I'd love to have you have lunch or supper with me. I: Oh, I will do that, certainly. H.M.Jr: Because my whole family is reading your paper and we're very enthusiastic. I: I couldn't be more pleased. H.M.Jr: So if you're down here any time after Labor Day, let me know a day or two in advance. I: Fine. I'll do that, and we'll have lunch, and thank you very kindly. H.M.Jr: All right, goodbye. I: Goodbye. Regraded Unclassified 150 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE August 16, 1940 TO Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL At the Group Meeting yesterday morning I reminded the Secretary of the memorandum which I had written the previous evening in regard to the desire of Mr. Knoke to obtain before yesterday noon a decision as to our attitude on the question of the Federal Reserve Bank accepting gold deposits from the Canadian, British and Netherlands Governments, in order that the matter could be definitely submitted at the Thursday meeting of the Directors of the New York bank. I called Mr. Knoke back at noon and let him know that this matter would have to wait until Monday. I am to alce up with Under Secretary Bell on that day, and inform Mr. Knoke of the decision which may be taken. BMX. 151 LEGATION OF THE UNITED STATES OF AMERICA OTTAWA August 16, 1940. My dear Mr. Secretary: I am delighted to know that you are coming to Canada to spend your vacation, and hope very much that you and Mrs. Mor- genthau get a real rest. I can imagine that there is nothing that you crave as much as getting away from people, tele- phones, etc. However, if there 18 any- thing that I can do for you, I should be delighted to have you let me know. I need hardly add that if at any time the spirit moved you to motor this way, - and Ottawa 18 only 50 miles distant, - my wife and I would be only too delighted if you would lunch or have tea with us either alone or with anybody that you might want to The Honorable Henry Morgenthau, Jr., The Seigniory Club, P.Q. 152 152 ) - 2 - to see. Both Mr. Howe and Graham Towers have told me how kind you have been to them during their trip to Washington. With every good wish to you and Mrs. Morgenthau, in which Lilla Joins, As ever, yours, Regraded Unclassified ach'd 9/11/40 Neept ack or 153 KWANG PU CHEN Shanghei Commercial & Savings Bank, Kunming, China, August 16, 1940. The Honorable Henry Morgenthau, Jr., Secretary of The Treasury, Washington, D.C., U. S. A. Dear Mr. Morgenthau, I nm enclosing two snepshots, one of which WAS taken outside one of the doors of the air-raid shelter in the Foreign Trade Commission. It was taken when we were loitering outside the cave after the alarm WRS sounded but before the enemy planes arrived. The temperature in the cave is et least ten degrees lower than the outside. You will notice that we are all carrying extra clothes which was to be put on after we enter the cave. The second shapshot is a picture showing people entering the air-raid shelter behind the house of 8. wealthy Chungking contractor. Under separate cover I am sending you a set of pictures taken from an illustrated magazine published in China. Inade- quate as they are, they illustrate, in 8 vague WAY, the various steps in the production of woodoil. I am hoping to make some pictures that will give you 8. clearer idea of this important industry and of the activities of Foo Shing Corporation. With the kindest personal regards to you and Mrs. Morgenthau, When Sincerely Yours, Regraded Unclassified WOOD OIL GREAT CHINESE EXPORT CROP Accounting - - of (NAT international unde file noth and all - - grevint infindual rejury during that par, whing wp 10% of the Gul. The public of this or bex - - for less -flacted by - nai, - de Auf growing sinis - will is au hands De the of have less generally improved with due and al experts by the givernment in SMOKER Toman. Hupch AND when provider where de sung the The givernment's - nil for the riport of 70,000 - of of apposity. L'HU'LE DE GRAINS D'ALEURITES CORDATA-UNE DES PRINCIPALES EXPORTATIONS DE LA CHINE L'huils de proliss d'alession of MAE de pcs production principales a - who plant in Importante dama le commerce important D'apits les instructions du - International de 1938. Finale de pie condata europe la première place, at pour - de l'expertation mealr. Depuis la per de - l'immen, las pays productions v'hant para envalle par - como, l'exparation de Think de graine d'eleurites contra - pas changement. Two your l'mourage - du personal qui a développé et amflier la plantation eurdina dam in provious de Yunnet, Human " Hisper. la quantity de production a visiblement augmenti el probibliment - - pur 48. Les de sex représentations "a planotive d'airuntes cordits d la production de How CBSCH04 MAGGO ГААВЛИЙ ЭКСПОРТКИЙ ПРОДУКТ KITAR Corasono roprosas Haran o 34 1938 P., дрависное pepaos MBOTO средя инспортима продуктов страям . 27 scaru ascoupta. Производств store Speguers до ERI nop pe пострад MO . pollow, TAX KAX районы eno продувідм продолжант OCTABITOR . pysax. Hand opoT, метоли and обработки DOCTURED улучшается . правительство document спедивлистов $9 nos MRCTG рождения - 50209 уровайность. use мегодний BUNGS 75,000 VTOPO MACAN заграницу. Mode of Chin's boy I/WES grow in L'alcurité cordita ell de have gifte et . de grandes feuilles. Большинство доровьев "ryn" pacTyT 3 провиция Сичуаль. ****** The truet from which work! el . provided. The plane has a long - and large leaves. Les prim on la trame d'un sew, - I'm time à l'buile. Les feuilles - la last e one prime, WITE une Impue up. Плод, wa BoTopoΓo прессуется древесное масло. Pactorse AM507 даилимй стебель E большие дистья. MARRAN BARSMA- NEGUE - " cand the dieso funcier of draits, Juli all which yold el Tury Stowns in NO blace Comp do grains d'aleurites Unive product la Пять copToB nadzos двлжих ценный продухт- Цвети дерева "ryn. NENNE MUMERRO GROUN? HOW WOOD OIL IS PRODUCED Tin a drail by baking Strings au in des graim It = ground - powder. Broyage des pain. Плод сушатся = novas. On растарается , порошок. - The is again heared and deved, OM method of pursong al from the desd powister Méduge én prains Mise en provir (le clishi la - Поровов CHOBA просуживается. Старий способ прессовжи wacas #2 порошка. me RAIN The ml 11 of - buentie be - The matte resideng der ne all # cigrest il make which make a pod En PT un Lembe Bank un manor. Residu de Phoile unit d'engrais Vacao проводится » бочки uepes трубм. UCTATOR досде прессовия MAGIA - преврасное удобрения для AMAR. - - Regraded Unclassified LA FRODUCTION. DE L'HUILE DE GRAINS D'ALEURITES HAR ПРОИЗВОДИТСЯ ДРЕВЕСНОЕ MACIO CORDATA # a Wood oil ready for shipment abroad. On the way to the ship, On scelle les forneaux contenunt de Phanle: La transportation par les portelais. Macao 9 виспортной упаковке. Depaut STAR экспорта. 1 ****- KRANNA Photoe by HaYs Chas, Ready to F L'arrivée au pert d'exportation par les B permoro зарохода. ******* Regraded Unclassified 158 September 11, 1940. ang, 16 litter litter indeped chem Dear Mr. Chens I have received your letter of August 16th, and the two snapshots which you were so good as to send no. I am very mush interested to see these and appreciate your thought in forwarding them to no. I have also received the pages from the illustrated magazine, showing the various steps in the production of woodoil. This is most informative and I - glad to have it. with cordial regards and all good vishes, Sincerely, (Signed) H. Morgenthan, Sr. Mr. Kwang Pu Chem, Shanghai Commercial & Savings Bank, Kunsing, China. GEF/dbs Regraded Unclassified 159 September 11, 1940. Dear Mr. Chen: I have received your letter of August 16th, and the two snapshote which you vere so good as to send no. I AM very such interested to ⑉ these and appreciate your thought in forwarding them to no. I have also received the pages from the illustrated magazine, showing the various steps in the production of woodoil. This is most informative and I - glad to have 10. with cordial regards and all good vishes, Sincerely, (Signed) H. Morgenthan, Jr. Mr. Kwang Pu Chen, Shanghai Commercial & Savings Bank, Kunsing, China. GEF/dbs Regraded Unclassified 5/16/40 British Purchasing Commission 160 Memorandum Re Tanks It is understood that the United States Government has now in manufacture light tanks Type M2 A-4. This type of tank is considered one which would be most suitable for immediate use in the Middle East. Such tanks are urgently required for this purpose and would be of inestimable value if they could be obtained for the United Kingdom. Fifty such tanks would equip one tank battalion and twenty would be the normal reserve. It is believed that the United States military authorities might welcome an opportunity of trying out this tank under service conditions in the Middle East. The Director General of the British Purchasing Commission therefore desires to enquire whether seventy such tanks with appropriate stores and ammunition could be made available now either from stocks or from priorities. A.B.P. August 16, 1940 Regraded Unclassified 161 Memorandum Re Chemical Warfare There is a strong possibility that the United Kingdom will desire to place contracts with American manufacturers for finished products coming under Category VI of the President's Proclammation of May 1, 1937 which is set out in the fourth annual report of the National Munitions Control Board for the year ended December 31, 1939. In view of the strong possibility of such orders being placed, it is desired to now know whether in the event of the manufacture of such products they would be licensed for export sale to the United Kingdom. We would be obliged if you could clear this matter for us now because without such knowledge it will be impossible to decide upon a course of action. C.T.B. Washington August 16, 1940 Regraded Unclassified 162 August 16, 1940 To: The Secretary From: Mr. Buckley Lieutenant McKay turned over photostate of the attached memoranda from the British Purchasing Com- mission covering: its - 1. Tanks No - 2. Chemical Warfare with a note which seemed to indicate that a copy of each should be sent to Mr. Knudsen. Obviously the tank memorandum ought to go to Mr. Knudsen but I do not believe that at this stage the memorandum on chemical warfare ought to be transmitted. Will you please advise me as to your wishes in this matter. RP Regraded Unclassified 163 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE August 16, 1940 TO Secretary Morgenthau FROM Mr. Cochran STRICTLY CONFIDENTIAL In accordance with an arrangement which I made directly, at the Secretary's request, with Vice President Howard Sheperd of the National City Bank, Mr. Arthur C. Shorey, Assistant Vice President of that bank, called this morning and vas received by the Secretary at 10:45. Messrs. White and Cochran were present. Mr. Shorey sum- marized to the Secretary his views upon the economic situation in Japan, which country he had visited only recently, and was then taken to the office of Dr. White for a further conference. BMR Regraded Unclassified 164 August 16, 1940 Prefesser Chamberlain Mr. Cechran AS 10 e'cleck yesterday ferences I received Mr. Bernard 8. Carter, a partner in the Paris fire of Morgan & Co., together with Messrs. Alexander and Miskle of J.P. Morgan 6 Co., Inc., of Bev York. I took these gentlemen to Professor Chamberlain's office, w sppointment, where Mr. Carter related to Prefesser Chamber- lain the difficulties experienced w his bank is Paris, and also provided information in regard to the operation of American benevolent institutions is France. Neasrs. Friedman and Towson subsequently, I understand, received Meesrs. Alexander and Miskie. There 10 attached a copy of a letter which I have today received from Mr. Carter, referring to the visit which be had with u. BMR ENC:dm:8.17.40 Regraded Unclassified 185 August 16, 1940 Professor Chamberlain Mr. Cechran Mr. Zeltewski, Financial Counseler of the Polish Robasey, telephoned me at 5:30 this ovening from Bev York. Re referred to application for license Be. 30547 which had been filed w the Guaranty Trust Company is behalf of cas Resetecki, which natter I had made the subject of a after a conversation seus days age with Mr. Seltewski. The Attache now tells no that he has reseived a cablegram free Leaden protesting that the approval which the Treasury gave did not facilitate the transfer of the stock is question into the hands of the ovner, but merely into the agency of the Guranty Trust. This left the situation no better than it was a month ago. Goa- sequently, Leltowski salted urgently that we de something to great satisfaction to the applicant. Jun HMC:dm:8.17.40 Regraded Unclassified 186 August 16, 1940 Professor Chamberlain Mr. Cechrem Mr. Robert Levett, a partner in Brown Brothers Harrima Co., New Terk, telephoned no this mean that a vire from the Bask for International Settlements at Chatesa d'Oez, Svitserland, had been received August 15 w Brown Brothers Services 00.1 "Our vire of August 8 our you explain why delay as payment constitutes simple transfer of proceeds natured notes our owner- ship to account of 3. 1. 8. with Federal Reserve Bank of New York, New York City net involving sky third party's interest." Original cable received August 8: "Value eighth this month please pay $250,000 to Federal Reserve Bank of New York 8462." Brown Brothers Harrinan made application as that date, August 8, quoting the cable and stating also is the application that the Federal Recerve Bank of Bev Tork has instructions to receive the above amount. The New York number of the appli- cation is 36506. I brought this case to the attention of Mr. Pehle, who informed no this afternoon that as approval of the application was being net to New York this ovening. Consequently I telephoned this information at 4:30 p.m. to Mr. Levett's effice is New York, AMS EMC:dm:8.17.40 Regraded Unclassified 167 August 16, 1940 Professer Chamberlain Mr. Cechran As reported at today's Group Meeting, Mr. Livessy of the Department of State telephened se at 2:35 this afterneen to the effect that the Bear Mastern Divi- sion of the State Department had inquired urgently as to what action had been taken W the Treasury Department en two cablegrame recently received free the American Goneal General at Beirut, Syrin, conserning the blocking of Hyrian balances is the United States. August 19, 1940 On Saturday, August 17. Mr. Livesey telephoned as again about the above cablegrams. The Near Bastern Division of the Department of State Ima refted & tentative reply, which will be hold pending come vost from w, which is urgently desired. B.M.P. MC:dm:8.17.40 Regraded Unclassified 168 August 16, 1940 Professor Chamberlain Mr. Cochram Mr. Toungs, of Desinick a Dominick is New York, called or as this after- noon at 2:30. Be left with se the attached accuration, and asked that vs do enything possible to expedite favorable consideration of application Be. 17,725. made w Me consern with respect to some securities by Pictet & Co. of Switzerland. Be told - that the Svies were quite concerned over the provibility of United States freesing their assets is this country, and that their inability to obtain action with respect to the securities is each cases as that under reference tends to confirm their fears that 11 will be difficult for then to withdraw their assets from the United States. Is this connection Younge thought that the rise is the Svice frame this past week had resulted to come extent from Svice conceras which have their capital funds ea this market vithireving them sad converting them into thrice france, is order that they MY have such funds available for their accessary operations is Ovitserlend in case Ovitser- lead night be included under our blocking regulations. H.MS. EMC:dm:8.17.40 Regraded Unclassified 189 August 16, 1940 Professes Quateriain Mr. desirent R. lievate Shoperá, Fice President of the National City Bank of Rev Terk, called = yesterday at 10:00 W telephone to inquire whether the Treasury had taken any action on the two applimities filed w that institution is consection with the business of its Pario organisation, copecially la the light of the engast collegen which had boon received from Manager Fearee. SW France. and which b. thousand not communicated to me the proceding day. I teld Mr. theyerd that as action had yet been taken, bet that I vould bring the matter to the afterness cossies of the Centrol droup as an urgent case. Regraded Unclassified 170 August 16, 1940 Professor Chamberlain Mr. Cechram In accordance with the understanding of our Group, I took up with the Legation of Uragnay is Vashington several days age the attached application No. 27583 of the French incrican Banking Corporatisn. the Minister premised to cable his Severa- set is regard therete. At 11 e'cleck today the Minister told no that he had received a reply free Nontevideo to the effect that the transaction was a bone fide purchase actually made by the Government of France and that the Frigerifice Nacional of Menterides expected payment of the $210,000 is question. the Minister therefore recomended 11 to us as 8. purchase of Uraguayan products for which he hoped payment would be duly fesilitated. 30 vsa villing to give as a formal letter through the Department of State If we required 11. I a to inform his when the transaction Le definitely approved. B.MS EMC:dm:8.17.40 Regraded Unclassified 171 August 16, 1940 Professer Chamberlain Mr. Cookram Mr. Pineest of the British Roberry telephoned BE yesterday overing. Me referred to a nemeranden left with se W Mr. Hoyford, and dated August 8. which referred to the importation of seld and securities W Clipper skips. Pineest states that they are decired that this note be altered, since the original communication had been besed as sisinfermation. It is net & question of stepping gold shipments. the British having as knowledge that there are any imports of gold Late this country by airplane from Barepe. The Brittch de desire, bewever, that w probibit the importation w 011yper ships of securities and other valuables, neet particularly disnemês, since they have been advised that the Germane are organising the traffic line this country of dissendo to be smagled en Clipper ships. SMY 1 Regraded Unclassified 172 August 16, 1940 Professor Chamberlain Rr. Cochress Testorday staning Mr. Levis Clark of the Department of State telephoned se that . despatch had been received from Prence enclosing All affidavit essecuted by as incrican vomes in Paris in regard to the destruction is the presence of two officers of our State Department establishment in that city of certain securities belonging to her. These included no United States Government bonds, but American industrial securities. This setion had been taken following the telegraphic instructions which and been Issued by the Department of State, in accordance with the 1deas of the Treasury Department. for the guidance of individuals is areas threatenet with German invasion. It will be recalled that the advice vo.e that one copy of the affidavit be retained by the owner of the securities: that one copy be filed with the American Consular Office at which 10 is executed, and that the third be forwarded to the Separtment of State at Vashington. No. Clark states that the evaer of the securities whose destruction vas coorded desires that the American towning conserns is the United States be actified of each destruction. the question arises, therefore, me to whether the Department of Male should scouse this tank: whether the Treasury Department should accept the daty: or whether ve can suggest some other eyetem. It seems imperative, bowever, that E practice should nov be instituted which may be uniformly maintained. I sald My. Clark that I would call his back after consulting with KY colleagues os this subject. 13.mg EMC:1ag-8/16/40 Regraded Unclassified 173 August 16, 1940 Prefessor Chamberlain Mr. Cochras Senstor Henderson of the 2. P. 0. telephened no this noraing is regard to the question as to whether the dollar proceeds of tin imported Late this country from China w the Bank of Indo-China branch at Tunnan and w one Readen world be free. I explained that if the tia is seld w parties recognised as French under m freesing orders, the process would serually @ into a blooked assount. 1 explained further the arrangement wherely branches is the Far Rest of the Bank of Inde-Ohine at present are permitted to draw out ene-fourth of their dollar assets, plus are deposite. I contiened his that this arrangement was provisional, being subject be renoval from month to month. Furthernere I made the point that we had as Insuledge of the nationality of Readon, and commequently could net my just what the situation would be if a sale should be consumnated jointly w Readon and the Bank of Indo-Chine. The Senator stated that he would pass en to Remien, who is new is New York, ay advice that he call personally at the Federal Reserve Bank of New York to obtain full infer- ution for his guidence. B.M.S Regraded Unclassified 174 August 16, 1940 Professor Chamberlain Mr. Cochran A few days age we asked the Britich Robesey to give us any information in regard to the Ranque Belge et Internationale is Reypt. having branches at Gaire and Alexandria. Mr. Pinsent informed no last ovening that this matter had been sabled to Lendon and he is now informed that the British Government is making inquiries at Cairo. Re will let us know the results thereef. BMP EMC:lap-8/16/40 Regraded Unclassified August 23, 1940 175 At the Secretary's request, a copy of this letter and 8. copy of Mr. Foley's opinion were given to Mr. Young to give to Judge Patterson. Mrs. McHugh 176 AUS 16 1940 Death Mr. Knuison: I thought you would be interested in the enclosed opinion of my General Counsel bolding that the United States may lawfully assist the manufacturer in obtaining plant expansion (by means other than the lending of noney) even though the expanded plant any be used in part to produce military supplies and equipment for sale to others than the United States. This complements Hr. Folay's opinion dealing with the powers of the Reconstruction Finance Corporation to finance, by say of loan, additional plant capacity for astional defense where part of such expanded facilities may be used to produce equipment for sale to other countries. The enclosed opinion is applicable to situations such as the new tank plant to be built on behalf of the Ter Department and operated by the Chrysler Corporation, which was announced yesterday. Very truly yours, (Signed) H. Morgenthatt. JI. Secretary of the Treasury. Hon. William S. Knuden By Messeuger AUG 16 1940 Advisor on Industrial Production Advisory Commission of the Council 4:45 p.m. of National Defense finth YHE tax Tashington, D.C. 8/16'20 Regraded Unclassified 177 AUG 1 B 1900 My dear Mr. Secretary: The T Company, which name/atheres supplies and materials useful for national defense, is desiress of enlarging its present plant especity and equipment, The T Company 18, and will be, pro- dusing such supplies and materials for the Government of the United States and also for the Government of Great Britein. the progres of expansion my monstat of nov buildings or now makingry and equipment, or both. Tea have Inquired whether the of the United States my lawfully assist the T Company in obtaining that plast expension (by - other than the leading of money) oven though the expended plant my be used in part to produce sill- tary supplies and equipment for sale to others then the United States. 18 is understeed, of course, that is the event the United States needs the entire output of the I Company's plant, sush out- yes will be available to the United States. It 10 my spinien that there is ample statelery authority for the Government of the United States be seciet the T Company (W seens other than the leading of may) is obtaining that sidi- tional plant espacity, and that there would be 20 legal objection If the Y Company were to - such expect ty in the namer proposed. Regraded Unclassified 178 - 2 - Section 54 of the Resonstruction Finance Corporation Act, 18 anouded (U.S.C., Sup. 1. title 15. 100. 6060). M added to by section 5 of the Act of June 25. 1940 (Fublie, Zo. 60, 76th Gengrees, 3rd Sees.). provides, in parts "In order to aid the Covernment of the United States in its national-defense pregram, the [Reconstruction Finance) Corporation to authorized ... "(2) Than requested by the Federal Lean Administrator, with the approval of the Presi- deat, so create or to organize a corporation or corporations. with power (a) to produce, sequire, and carry strategic and critical materials as defined w the President. (b) to purchase and lease lead, to purchase, lease. build, and expand plants, and to purchase and preduce equipment, supplies, and machinery, for the manufacture of arms, ammunition, and imple- mosts of var. (e) to lease such plants to pri- vate corporations to capage in mush unsufacture, and (a) if the President finds that 10 is 20000- may for a Government agreey to sagage is such remfecture, to engage is such manufacture itself. The Corporation may sake leans so, or purchase the capital stock of, any such corporation for say purpose within the powers of the corporation AS above set forth related to the national- defense program, a such terms and conditions 40 the Corporation my determine." Title II of the first Supplemental National Defense Appropriation Act, 1941. not of June 26, 1940 (Public, No. 667, 76th Congress, 3rd Seen.), provides, in parti eye enable the Secretary of far, upon the recommendation of the Council of National Do- fease and the Advisory Commission thereof, and with the approval of the President, and without reference to section 3709, Revised Statutes, to expedite the production of equipment and supplies for the Agay for quergency national defense Regraded Unclassified 179 - 3 - yurgeses, including all of the objects and purposes specified under aach of the appro- printions available to the Var Department during the fiscal year 1941, for procurement or preduction of equipment or empplies, for erection of structures, n fer asquisition of load; the furnishing of Government-owned facilities at privately evact plants; the pro- curement not training of civilian personnel in commention with the production of +quipment and micrial and the use and operation thereef; and for any other purposes which in the discro- tion of the Secretary of Mar are desirable is expediting production for military purposes and are recomented by the Copacil of National Der fense and the Advisory Commission thereof, and approved by the President, $150,000,000, to be immediately available, . : and, in addition, the Secretary of Mar. upon the recomendation of the Connetl of National Defense and the Advisory Commission thereef, and with the approval of the President, is authorised to enter into contracts prior to July 1. 1941. for the same purposes to as amount not exceeding $50,000,000 .... Section 1 of Act of July 2. 1940 (Public, No. 703. 76am Congress, 3rd Sess.), provides, is parts *(a) is order to expedite the building up of the national defense. the Secretary of Var is authorised, out of the menaye appropriated for the Var Department for national-defence par- posse for the fiscal year ending Im 30, 1941, with or without advertising, (1) se provide for the assessary construction, rehabilitation, - version. and installation at military posts, do- pote. stations, or other localities, of pleate, buildings. facilities, utilition, and apparten- ander thereto (including Government-owned facill- ties at privately owned plants and the expansion of make plants, and the acquisition of make land, and the purchase or lease of smoke structures, as my be necessary), for the development, manufac- tare, unintenance, end storage of military equip- meat, munitions, and empplies, and for shelters (2) to provide for the development, parchase, manufacture, shipment. mistemasse, and starage of military equipment, munitions, and supplies, Regraded Unclassified 180 - 4 and for shalter, at such plaase and under as conditions as he my does accessary; eat (3) to enter into such contracts - . ", and to amount or supplement such scieting contracts, as be may doem necessary to carry out the yes posse specified in this sections . . *(b) The Secretary of Was is further anth- orised, with or without advertising, to provide for the operation and mintemance of any plants, buildings. facilities, utilities, and apparten- asses thereto constructed pursuant to the author orisations contained in this ecotion and scotten 5. either w means of Government personnel or through the agency of selected qualified comer- cial manufacturers under contracts entered Late with them, and, when be doems 14 necessary in the interest of the national defense, to lease. sell, or otherwise dispose of, say such plants, buildings. facilities, utilities, appartements thereto, and land, under much terms and condi- tiens as he my does advicable, and without № an to the provisions of section 321 of the Act of June 30, 1932 (47 Stat. 412).- Section 5 of that Act provides, is parts "The President is authorized, with or with- out advertising, through the appropriate agencies of the Government (1) to provide for amergencies affecting the national security and defense and for each and every perpose counseled theirowith, including all of the objects and parposes speed- fied under say appropriation available or to be made available to the Var Department for the fis- eal years 1940 and 1941, (2) to provide for the furnishing of Government-owned fesilities at pri- vately owned plants; . Appropriations in terms prestically identional with the Insti-queted authorization are contained in the Military Appropriation A62, 1941, Aet of June 13. 1940 (rublic, No. 611. 76th Congress, 3rd scao.). and the appropriation net for the May Department for the fiscal year saling June 30. 1941, Act of June 11, 194D (Fublie, Zo. 508, 76th Congress. 3rd Sees.). Regraded Unclassified 181 - 5 - 10 to apparach that by the foregoing statutes the Congress intended to provide methods and sesne to increase the capacity w the nation to produce articles necessary to the defense of the United states. In By opinion to you dated July 23. 1940, 11 was pointed out that the authority granted to the Reconstruction Plaants Corpora- tion w section 5(1) of the Act of June 25. 1940 (Petate, no. 69, 76th Congress, 3rd sees.), w nake leans to private industry *ter plant construction, expension and equipment" to be used in the - facture of equipment and supplies necessary to the national defense, contempleted, not only the impodiate needs of the United States for such equipment and supplies, but also the present preparation of the industries of the United States for such production is possible no ture merganetes. It I clear that the industrial preparation contemplated w the statutes now under consideration also to - for meeting these future emergencies as will as for meeting the present needs of the United States. with respect to section 5(2) of the Act of Im 25, 1940, quoted above, what was stated in my opinion of July 23. 1940, ⑉ corning the extent of the industrial preparation with - ember plated by the Congress under section 5(2) of that Ast, and GOLDER ing sales to others that the United States 10, of course, equally applicable. The only material difference is the too particas of that Act conseras the mothod of ashisving the preparation. Regraded Unclassified 182 6 That the Congress contemplated the use of the famis appropriated in the previoucly-quoted porties of the First Dup- plemental National Defense Appropriation sot, 1941. for the above type of industrial preparation is indicated W the legislative history of that Act. The pertions of the President's message to the Congress en May 31. 1940, which were quoted to ay opinion to you of July 23. 1940, were set forth is part in the Report of the House Committee on N.R. 10055, the bill which became the ACT nov under consideration, as being "pertinent to the appropriations" recommended therein. (1940) 1.1. Rep. No. 2497. 76th Gong., 3rd Seas. 3. In those pertiens of the President's message strees me placed on the need for the United States to prepare industrially "ro meet possible fature emergencies". In addition, the Committee stated with reference to the $200,000,000 item contained in the above-quoted provision is the First Supplemental Acts no . . The purpose of the appropriation is to smable the War Department to be is position to provide additional casufacturing capacity either at Government arsemals, existing conner- sial plants, or W now plants all leaking so major national-defense requirements. The terms of the appropriation as approved w the counities require approval of projects w the Secretary of Var upon recommendation of the Genneil of National Defense and the Advisory Commission of the Coun- eil and final approval by the President. This fund is not contemplated for noe in consection will the production C military matériel for which appropriations are contains {n_thie_bil} or for which are contained in the military appropriation 1111 for 1941. in the latter bill Regraded Unclassified 183 - 7 - is contained as energency fund to the President of $66,000,000 is direct appropriation and $66,000,000 in contractual authority, or $132,000,000 of obligating authority, for sind- lar purposes. "the present fuel of $200,000,000 looks to the future and so the procurement of facili- Bice which vill be needed for var purposes, which do not exist for normal commarcial Mr. mile, and which take a very long time to create. The committee is advised that if the United States is to prepare for major antional defense within the next 2 years it is 20000- sary to create additional mamfacturing capacity to fill is the gape and deficiencies of our munitions production. . . on (1940) H.R. Hop. No. 2497, 76th Geng., 3rd Sess. 10. (Under- scoring supplied.) It is to be noted that there is nothing in the terms of the statute now under consideration which would restrict the use of the facilities which are authorised to be created to the produc- tion of supplies and equipment for the United States Government. Indeed, 11 is not reasonable to believe that the Congress intended that the industrial capacities authorized to be created by that statute, if not immediately needed to fill orders placed by the United States Government, should 110 1410 until the "possible future emergencies" arice. The creation by the Dovernment of the fheilities contemplated by the statute and their authorised installation is privately owned plants requires the cooporation of the owners of the plants and, in may cases, a vast physical recrgnaisation of the plants. If that is be be accomplishad at the present time and a Regraded Unclassified 184 - E - reasonable obtained w the Government, 10 to only reasonable to - that the Congrees ass not intend to forbid the utilization of the fasilities to the extent accessary to fill orders that might be placed w others than the Government of the United States. Drea spart from such the - ⑉ clusion may, is w opinion. be reached w considering that the operation of the fasilities would provide a mothod of giving value able training to personnel, a memossary step in any industrial proparedness program and - which to recognized in several of the mrs above nentioned, including the statute - under considers- tiem. with respect to the presise question of using the fasilities to fill orders placed w Great Britain. your atten- ties is directed to a statement mile w Representative Woodrum during the debatos in the House on that partion of 1.2. 10055 which is new under consideration. Be stated: - are propering to reader to the Allies every possible assistance that can w rendered w a nation that is going to remain a neutral nation. We are going to cont then supplies. We V 10 has previously been pointed one, of course, that the entire output of the plant would be available to the United States If postal. See, is this commention, section 2(a) of the Act of July 26, 1940 (Public, Be. 672, 76th Congress, 3rd sees.). which provides, is the discretion of the President, for prierity to be given is the filling of Army and Havy contracts w orders over all deliveries for private account or for empost. Regraded Unclassified 185 - , - 670 going to send them planos and equipment. to are going to and them whatever ONE be cost to these countries " long as 90 can without actually entering this conflist." as Cong. 200.0 same 12, 1940, at 12245.2 In view of the foregeing discussion, 10 my be concluded that 10 would be legally proper to use the appropriation and authorization is the First Supplemental National Defense Appropria> tien Act, 1941. to assist the # Company to calarge its present plant especity and equipment and that there could w no valid of jestion If such plant capacity and equipment were used w the T Company for the proposed purposes. Turning to sections 1 and 5 of the Act of July 2, 1940, all not to expedite national defense, not out above, 10 is orident from the wording of those sections that the authority therein granted 10. all 10 conserns the question under consideration, at bread as the authority contained is the previously considered per- ties of the First Pupplemental National Defense Appropriation we 1941. Vades the language of that Act. the Secretary of Var is authorised to provide for who expansion of such [privately owned] plants". and to provide for the furnishing of Government-ovned facilities at privately anned plants. the is given authority "under such conditions as he my doom necessary* to provide for the 2/ Representative Weedrum wes is charge of the MII a the floor of the House. Experitory statements w those in charge of legisle- tim my, of course, be used all on aid is the interpretation of that legislation. (1937) 300 U.S. 400, 463. Regraded Unclassified 186 - 10 - namefasture of munitions and supplies. the authority to expend privately and plants on the condition that they my soll any part of their product not needed w the United States would clearly - to be included. It will be noted that is subsection (b) of sestion 1 of the July 2 Act authority is given to the Secretary of w " lease. sell, or otherwise dispose of" plants, buildings, facilities, utilities, sppartenences therete, and land "under such terms and conditions as he my does advisable." the Act of July 2, 1940, was prosed within a for days of the ensolment of the First Supplemental National Defense Appro- priation Act, 1941, and 10 would, therefore, coon to be unversented to read into the former Act, which is terms and import is 00 broad, restrictions which the Congress did not desire to include in the latter Act. In wg opinion, therefore, the authority and funds granted in sections 1 and 5 of the Act of July 2. 1940. my validly be used is assisting the T Company is the proposed manner. It 10 w conclusion. therefore, with respect to each of the above-cited Acts. that suple authority exists whereby the Government of the United States my assist the T Company is the contemplated plant expansion, and that there is no requirement. in absence of need thereof w the deverument of the United States. that the output of such plant be cold enclusively to 19. Very truly yours. - s. 1. - w General Commol. the Nonerable the Secretary of the Treasury. JAG:HPZ1PJW - M 8-3-40 Regraded Unclassified - - COMMUNICATIONS TO THE SECRETARY OF STATE 187 WASHINGTON, B. c. DEPARTMENT OF STATE WASHINGTON In reply refer to EA 840.51 Frozen Credits/456 August 16, 1940 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and transmits & copy of a note dated August 14, from the Peruvian Ambassador in Washington, requesting the licensing of transmittal of funds to Peruvian diplomatic and consular officers in territories occupied by Germany. Enclosure: From Peruvian Ambassador, August 14, 1940. rs 188 PERUVIAN EMBASSY WASHINGTON, D, c, August 14, 1940. Your Excellency, In view of the difficulties encountered by the Peruvian Consulate General at New York in forwarding their salaries to the Peruvian diplomatic and consular officers resident in the European countries now occupied by Germany, I have the honor to ти S request that Your Excellency be so good as to obtain, H possible, from the competent United States Department authorization empowering va the Central Hanover Bank to remit those funds. OFFICE 05 DE THE 2EC al DUA BECEI The Peruvian Consulete General at New York acts in 0 this instance as the Government's disbursing agency, and tensacts business through the said Central Henover Bank. I may add that the amount to be remitted monthly is not large. as the diplomatic and consular officers in question are few. Thanking Your Excellency in advance, I have the honor to renew the assurances of my highest consideration. er de Fuyro zg S. His Excellengy Cordell Hull. Secretary of State, Department of State. Washington. Regraded Unclassified 189 August 16, 1940 To: The Secretary From: Mr. Buckley FeA Subject: Meeting on Allison Engines and Swedish Export Situation - August 13, 1940. This meeting VAS attended by Mr. Patterson, Major Smith and Mr. Buckley. Discussions under the two headings were as fol- lowa: ALLISON ENGINES There was outlined for the benefit of Mr. Patterson the shocking situation that the Allison plant produced only one engine last week and they cannot, at the present time, give any assurances as to future deliveries. Until production makes up a back-log of 24 engines due on Army orders, as of the week beginning August 12, and is maintained at 15 per week for the Army thereafter, the British will get none of these engines under the present arrangement. Tet the British have about 40 air- frames at the Curties plant at Buffalo awaiting Allison engines. Suggestion was made that beginning at once every other engine produced be made available to the British, so that these airframes awaiting at Buffalo could be utilized quickly. This will mean a slight delay for the Army, but will make available to the British some pur- suit ships which are vitally needed. Mr. Patterson said that he was not at all familiar with the situation, but was impressed by the need for some action and would take it up with General Brett and General Arnold at the War Department. SWEDISH EXPORT LICENSES It was explained to Mr. Patterson that the Swedes have on order about 115 Republic pursuit planes, for 22 of which an old export license is outstanding. About 40 of these planes have been completed and are on hand at the Republic plant. Regraded Unclassified 190 - 2 - In addition, Sweden has on order 156 Vultee pursuit planes, on which order delivery is to begin in September. Discussion brought out that export of the planes to Sweden would be contrary to our present policy. In fact, the Swedish Minister has already been advised informally that no licenses would be granted for the Vultee planes or for the Republic planes not covered by the present licenses. Recommendation W&B made to Mr. Patterson that Colonel Maxwell revoke the export licenses on 22 Republic planes and that a method be worked out by which the planes could be sold to Canada or Great Britain, both of whom stand willing to take them. Mr. Patterson expressed himself in favor of this pro- codure and agreed to take it up immediately with the men in the War Department and attempt to secure approval on the procedure recommended. A discussion was then had 6.6 to the 211 Pratt and Whitney airplane engines for Sweden still covered by an export license. It we pointed out that these engines were badly needed by our own air force for pursuit planes and certainly should be kept here for them. rather than exported to Sweden. Mr. Patterson expressed himself as heartily in accord with this view, and agreed that an effort should be made to have Colonel Maxwell revoke this export license, The remaining items for which export licenses are still in effect for Sweden were discussed briefly and it was the concensus of opinion that the Administrator of Export Control, because of the nature of the items, should revoke all licenses with the possible excep- tion of those covering E. small amount of spare parts for Douglas DC-3 commercial sirplanes; those covering 10,000 rounde of rifle ammunition; and those covering approximately 7,000,000 rounds of 9 mm. parabellum cartridges which have already been manufactured, are swaiting shipment, and cannot be used by the U. S. Army. Regraded Unclassified 191 - 3 - There is attached a copy of a table showing the export licenses for Sweden which are still in effect. This tabulation Yes the basis for discussion at this meeting. COPY 192 Re: Swedish Export Licenses The following 18 a complete analysis of undelivered balances of export licenses now in effect for shipment to Sweden: Airplanes 22 Republic 2 PA pursuit ships are covered by license out of a total of 115 still to be delivered on an old order. 34 of these ships were on hand complete with engines ready for delivery on August 9. No export license exists for 156 Vultee pursuit planes on which delivery will begin in September, The Swedes have asked Vultee to offer these planes to the U. S. Army. Engines 211 Pratt and Whitney aircraft engines suitable for pursuit ships are covered by existing export licenses. Propellers 106 Hamilton Standard Hydromatic propellers 36 Hamilton Standard propeller blades 60 Hamilton propeller hub forgings 65 Hamilton propeller blade forgings All the above are covered by existing export licenses. Spare Airplane Parts $193,602.00 worth of spare parts for the Republic 2 PA pursuit ships are covered by an existing export license. $ 29,091.67 worth of spare parts for Douglas DC-3 commercial planes are covered by existing export licenses. Regraded Unclassified 193 - 2 - Cartridges 23,150,000 rounds of 9 mm. parabellum ammunition suitable for Swedish, British, Canadian and German pistols are covered by existing export licenses. 10,000 rounds of rifle bullets are covered by existing export licenses. 184 August 16, 1940 To: The Secretary From: Mr. Buckley & Subject: Meeting on Allison Engines and Swedish Export Situation - August 14, 1940. This meeting was attended by Mr. Patterson, Assistant Secretary of War, and Messrs. Foley, Cox and Buckley. It was emphasized in the discussion that the objective at the moment was to get to the British as much material as possible within the next 60 days. To this end, Mr. Patterson was again ap- prised of the desperate situation with regard to deliveries of Allison engines and he agreed to do everything possible to secure agreement from the Army Air Corps to the allocation of every other Allison engine to the British. Mr. Foley pointed out certain alternatives with reference to the disposition of the Swedish planes now on order. These were: (1) They could be sold to the U. 3. Army which could trade them back in, leaving the manufacturers free to re-sell them to the British or Canadians, (2) Export licenses being revoked, the manufacturers would be free to dispose of the planes. If they disposed of them to Canada, it would be in line with our general policy of hemisphere defense and should not embarrass the State Department. Mr. Patterson agreed that the second alternative was the better of the two, and will make every effort to secure agree- ment in the War Department to that end. Mr. Patterson again reviewed the items for which export licenses are still outstanding. and agreed that with the possible exception of the spare parts for Douglas DC-3 commercial planes, the rifle amminition and the 7,000,000 rounds of 9 mm. parabellum cartridges which have already been manufactured, the licenses ought to be revoked. He said that he would arrange to have a recom- mendation go to the Administrator of Export Control from the War Department, recommending such revocation. Regraded Unclassified 195 August 16, 1940 9:08 a.m. General Brett: Yes, sir. H.M.Jr: General, could you just explain to me - I have before me my table here, and what is the Allison V-170-27? B: The V -- H.M.Jr: 1710. B: 1710, dash -- H.M.Jr: 27. B: Well, I haven't my book right here, sir. I could call you right back. I'm up at the head office and my book's down in my other office. I could call you right back and give you exactly the purpose of that -- H.M.Jr: Well, there's another, there's a 27-29 and -- B: Well, I'll tell you, the 27-29 may be & small change from the standpoint of the method of supercharging, the method of ignition, or whether it's. a ram-controlled engine or whether it's a straight carburetor engine. I mean, and also, for instance if we're in- stalling an engine in a P-39, it's a little bit different than the P-30 and the P-40. Now, the P-40 engine is a little bit different than the P-14 engine. H.M.Jr: Could you go to your office and call me? B: Well, I can call you within three minutes. H.M.Jr: I'd appreciate it. Regraded Unclassified 196 - 2 - B: I'm going right on down now. H.M.Jr: Thank you. B: Okay.