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Volume 371 - Bank of America, February 8 – February 11, 1941
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Volume 371 - Bank of America, February 8 – February 11, 1941
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 371
February 8 - 11, 1941
- A -
Book Page
Ammunition
See Var Conditions: Ordnance
Appointments and Resignations
Houghteling, James L.t Anticipated duties in Treasury
discussed by 9:30 group - 2/10/41
371
49
- B -
Bloch-Laine, Mr.
Present whereabouts discussed by 9:30 group -
2/10/41
53,163
Bruce, "Ned"
See Financing, Government: United States Savings Bonds
Buckley, James c.
Resume' for week - 2/10/41
133
Business Conditions
Hass memorandum on situation for week ending
February 8, 1941
111
Butterworth, Walton W.
To be associated with Wayne Taylor in Commerce
Department - 2/11/41
163
- 0 -
China
See War Conditions
- D -
Defense Savings Bonds, United States
See Financing, Government
- F -
Financing, Government
Debt limit bill passed by House: Newspaper comment -
2/10/41
96,97,98
Testimony before sub-committee of Senate Finance
Committee discussed by HMJr, Bell, Sullivan, Schwars,
Haae, and Kuhn - 2/11/41
184
a) Draft of statement
197
b) Reading draft - 2/12/41: See Book 372, page 31
United States Savings Bonds: New defense series
discussed by HMJr, Graves, Bell, and Kuhn - 2/11/41
206
a) Ned Bruce-HMJr conversation.
246
b) Administrative set-up discussed by HMJr, Graves,
Bell, and Kuhn - 2/11/41
225
French Indo-China
See War Conditions: Indo-China, French
- G -
Book Page
Gracoe
See Var Conditions: Airplanes
- H -
Houghteling, James L.
See Appointments and Resignations
- I -
Indo-China, French
See War Conditions
Inter-American Bank
See Latin America
- L -
Labor, Department of
HMJr assigns car for use of Second Assistant
Secretary Tracy - 2/11/41
371 256
Latin America
Inter-American Bank:
State Department announces adherence of nine
countries, including United States, to
convention for creation of Inter-American
Bank - 2/8/41
11
Amendment cleared by D. V. Bell at staff
meeting limiting operations to those which
are guaranteed by participating government,
central bank, or other acceptable banking
institution
65
Lend-Lease Legislation
See War Conditions
- N - -
Martha, Crown Princess
See War Conditions: Foreign Funds Control
- N -
Norway
See War Conditions: Foreign Funds Control
- 0 -
Ordnance
See War Conditions
- P -
Book Page
Peacock, Sir Edward
See Var Conditions: Purchasing Mission
- R -
Rifles
See War Conditions: Ordnance
- U -
Unemployment Relief
Work Projects Administration report for week
ending January 29, 1941
371
107
United Kingdom
See War Conditions
United States Savings Bonds
See Financing, Government
- Y -
War Conditions
Airplanes:
Greece: Need for planes again discussed at
Cabinet meeting - 2/8/41
1,26
a) HMJr's conversation with Knox - 2/11/41
148,235
b) HMJr's memorandum to FDR - 2/11/41
153
c) HMJr-Berle conversation - 2/11/41
175
China:
Munitions to be manufactured by China in British
territory, probably India or Burma - 2/8/41
12
Sterling arrangement as proposed by British
causes uneasiness: Doctor Soong tells State
Department - 2/11/41
19
Exchange market resume' - 2/8/41, etc
9,105,267
Foreign Funds Control:
Norway: Crown Princess Martha's account in United
States reviewed 2/10/41
20,39
Indo-China, French:
Report on Japanese pressure and need of assistance
from Nicholson, Treasury Attache', Shanghai -
2/11/41
274
Lend-Lease Legislation:
Discussion at 9:30 meeting 2/10/41
30
Agricultural products discussed by HMJr, Miskard,
Cox, Buckley, and Haas - 2/10/41
68
a) HMJr's memorandum to FDR showing that bill
"clearly covers agricultural products" -
2/10/41
82
Copy of bill showing amendments suggested by House
Foreign Affairs Committee, and amendments adopted
on floor of House - 2/10/41
72
Action to be taken pending enactment of H.R. 1776:
HMJr's memorandum to FDR - 2/10/41
79
Editorial opinion summarized for FDR - 2/10/41
85
Regraded Unclassified
- W - (Continued)
Book Page
War Conditions (Continued)
Military Planning:
War Department bulletin: "Comments of an American
Unofficial Observer on the Fall of France" -
2/11/41
371
289
Ordnance:
"Deal" involving 250,000 Lee Enfield rifles and
50 million rounds of ammunition has been
arranged for between British Purchasing
Commission, War Department, and FDR; no
certificate being issued, no publicity, etc. -
2/10/41
29
Purchasing Mission:
See also War Conditions: Lend-Lease Legislation
Federal Reserve Bank of New York statement showing
dollar disbursements for week ending
January 29, 1941
5
Vesting order sales for certain Indian Government
sterling loans - 2/8/41
10
Vesting order sales - 2/11/41
269
British Financial Position: Peacock (Sir Edward)
calls on HMJr to discuss - 2/11/41
263
Security Markets (High-Grade):
Current Developments: Haas memorandum - 2/11/41
277
Shipping:
Reconditioning of old ships: FDR lays down "rule
of thumb" that not over 80% of cost shall be
spent on reconditioning - 2/8/41
1
Land (Chairman, Maritime Commission) asked by FDR
to assist in every way possible in carrying out
United States shipping needs expeditiously and
effectively. - 2/10/41
128
United Kingdom:
Assets: Gold and dollar assets as of January 31, 1941,
provided by British Purchasing Commission -
2/8/41
4,34
Work Projects Administration
See Unemployment Relief
1
February 8, 1941.
MEMORANDUM
TO:
Secretary Morgenthau
wr
FROM: Mr. Gaston
SUBJECT: Cabinet Meeting, Friday, February 7, 1941.
Frank Walker brought in and read to the others, before the
President arrived, a clipping attributing to an ancient Chinese
philosopher the statement that intelligence had brought him nothing
but grief so he would take care that his son should be ignorant and
stupid so that he could wind up a successful career by being a
Cabinet officer. After the others had enjoyed this, Walker took it
in to Grace Tully and the President brought it out with him and read
it with great glee.
The President said Wendell Willkie was enroute, with a tail wind,
from Africa for Trinidad and that Harry Hopkins was to leave Lisbon on
the 15th. He said Harry Hopkins had made a great hit with Winston
Churchill, being so different, and he thought perhaps Winant would make
a similar good impression.
There was talk of the need of doing something for Bob Reynolds,
since it appeared that the vote on the lease-lend bill in the Senate
Committee might be very close. The President had heard that the
blockade on the Burma Road was very serious, that the Chinese seemed
to have no capacity for straightening out tangles and dealing with
unexpected obstacles, such as the destruction of a bridge. He asked
if there wasn't supposed to be some American expert over there advising
them, but nobody seemed to know.
Secretary Hull brought up the subject of planes for Greece, saying
mildly that he hoped some way could be found to help them. The President
had a suggestion to make. It was that the 30 old, single seater Grummans,
which the Navy offered, should be turned back to the manufacturer, who
would in turn sell them to the British for use in Africa. The British
would find them useful in that area as dive bombers and then ought to
be willing to give additional air help to the Greeks in Albania. He
thought this ought to satisfy the Greeks. Hull did not pursue the sub-
ject further. However, Berle had been working actively during the day
trying to devise a plan by which the Greeks could get at least 30
modern fighting planes, such as Airacobras or P-40's. Hull did say that
it would create a bad impression in the Balkans if we disappointed the
Greeks.
Regraded Unclassified
2
- 2 -
The President had sent back to you the order to abandon the
International Ice Patrol for this year after first signing it and then
scratching out his signature. I asked him if he wanted to discuss
this and he said we ought not to abandon it since it would serve as a
good blind for the use of vessels in the vicinity of Greenland. If
we announced the discontinuance of the ice patrol we could not give
that excuse for the presence of vessels in the North. I pointed out
that it would be impossible for us to fulfil our obligation to broad-
cast useful information to shipping of all nations, as required by the
International Convention, but the President adhered to his decision.
Actually, of course, we won't be kidding anybody about what our ships
Qty doing in the North. The newspapers carried a number of stories
about the cutters that went to Greenland last summer and that these
trips had nothing to do with the ice patrol.
I reported that apparently some pain was being caused the Army,
the Havy and Jesso Jones' corporations because of inability to import
strategic materials free of duty. I pointed out that the only author-
ity we have to waive duty is a statute which exempts emergency pur-
chases of war materials made abroad by the Secretary of the Navy and
said that as to any particular shipment all that we would want would
be a letter from the Secretary of the Navy stating that it was such
an emergency purchase made abroad.
Bob Jackson objected to a price agreement between machine tool
manufacturers entered into under the direction of O.P.M. He said it
was in flat violation of the law. As far as we could go in that direction,
he thought, was for Henderson to issue a statement giving a maximum fair
price or for the War and Navy Departments to say that they would not pay
above a certain price or prices. Jackson also said that State taxes
of various forms, particularly on sales of materials, were going to add
materially to the cost of contracts on the cost plus basis. The Presi-
dent suggested that we might find some way to discipline States that
were too greedy through WPA. It was sugrested the Treasury ought to be
able to get up some data on the importance of this problem and I said
I felt sure we could get information on tax rates. Jackson said that
a bill ordering the deportation of Harry Bridges, by name, would be
pressed in Congress again this year and he didn't think we would be
able to prevent its passage unless me had a substitute. His idea was
a bill requiring that officers and directors of labor unions shall be
American citizens. During the discussion Jackson said that W. J.
Cameron of the Ford Motor Company is illegally in the United States.
The President said that he had been talking to Dan Bell and
Hi-old Smith about a Havy request for an appropriation for eighteen
old ships, $50,000,000 for the purchase and $65,000,000 to recondition.
Regraded Unclassified
3
- 3 -
He had turned this down and had laid down a rule of thumb that not over
eighty per cent of the acquisition cost should be spent on reconditioning.
As to the big defense deficiency appropriation for the Navy, the estímates
for which were a billion 4 millions, he told Forrestal it ought to be cut
to just under 900 millions for psychological reasons.
Ickes read a memorandum from the Solicitor of his Department in-
dicating that valuable oil resources were being drained from under two
Army reservations. The Interior Department thought they had authority
to enter into contracts to protect the Government's interest, but that
Justice disagreed. After asking who was the Doheny in the case, the
President expressed the opinion that an Executive Order might cure the
situation.
Wickard talked about cotton for war uses and Jones about business
conditions, transportation of rubber and the need of additional zinc
smelting facilities.
prs
4
COPY
Willard Hotel,
Washington,
8th February 1941.
Dear Mr. Cochran,
Playfair asked me to provide you with details of the British gold and
dollar assets at January 31st 1941. The figures are as follows in comparison
with the figures of a month earlier:
U. K. Gold and Dollar Exchange Assets
Millions of U. S. dollars
Dec. 31, 1940
Jan. 31, 1941
Gold
292
154
Official dollar balances
54
116
*Private dollar balances
302
305
Marketable securities
616
562
Direct and miscellaneous
investments
900
900
TOTAL
2,164
2,037
Assets not available:
Private dollar
balances
302
305
Scattered gold
30
29
Other gold not
available
21
6
Total not available
353
340
Total available
1,811
1,697
*
Supplied by U. S. Treasury; December figure is revised, January figure
provisional.
Very sincerely yours,
/s/ R. G. D. Allen
Mr. H. Merle Cochran,
U. S. Treasury,
Washington, D. C.
Copy:alm
5
SS Chauncey
February 8. 1941
Dear Mr. Knoke:
Permit no to acknowledge, on behalf of the
Secretary. the receipt of your letter of February 6.
1941, enclosing your compilation for the week ended
January 29. 1941. showing dollar disbursements out of
the British Repire and French accounts at the Federal
Reserve Bank and the meane w which these expenditures
were financed.
Toure faithfully.
(Init.) H.M. C.
I. Merle Cookram
Technical Assistant to the Secretary
L. V. Enche, Bequire,
Vise President,
Federal Reserve Bank of New York,
Bow York, New Test.
Copy for Serip is files
Regraded Unclassified
6
Mss Chauncey
pme
FEDERAL RESERVE BANK
OF NEW YORK
February 6, 1941.
CONFIDENTIAL
Dear Mr. Secretary:
Attention: Mr. H. Merle Cochran
I am enclosing herewith our compilation for the week
ended January 29, 1941, showing dollar disbursements out of
the British Empire and French accounts at this bank and the
means by which these expenditures were financed.
Yours faithfully,
When
L. W. Knoke,
Vice President.
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Enclosures
100 EER B W 93
111 Millione or Dollars)
Week
Ended
Jan. 29, 1941.
Configential
BANK OF EMPLAND (BRITISH
BAZH
OF
FRANCE
DEBITS
GREDITS
DEBITS
GREDITS
Proteeda nf
Other Net Intr.
Net Inor.
Gov't
Sales of
Credits (+) or
Givit
noods
(*) OF
Total
Expendi- Other
Total
Seturities
[ins].
Dear. (-)
Total
Expendi-
Other
Thtel
PERIOD
of Gold
Other
Desr. (-)
Debito
tures(a)
Debits
Crodits
Gid
(Bot.) (3)
adj'ts)
in Balance
Debits
sured(=)
Debite
Credito
Sules
Credits
in Balance
1939
Aug. 31 Sept.27
94.3
3.6
90.7
207.8
185.4
33.6
-11.2(d)
+113.5
19.4
6.0
13.4
11.3
-
11.3
- 8.1
Sept.28 Nov. 1
106.7
5.8
100,9
142.0
3.8
52.6
66.2(e)
+ 35.3
88.6
1
76.2
$1.8
35.0
41.2
Nov. 2 - 29
191.7
8.9
182,8
105.4
- 12.4
105.8
57,8
25.0
23.0
- 85.9
78.8
)
82.9
55.1
Nov. 30 - Jan, 3
97.7
27.8
8.7
89,01
75.2
- 4.3
50.5
14.2
10.4
- 22.5
86.8
3.1
58.7
109.2
93.9
15.3
1940
+ 25.4
Jan. 4 - 31
54.6
16.8
36.0
43.4
20.6
17.8
5.0(f)
- 11.4
61.5
81.5
30.0
55.9
50.1
5.8
Feb. 1 - 28
- 5.6
124.2
15.4
108.8
103.3
56.7
17.9
33.7
- 15.9
72.7
82.8
30.9
71.5
54.8
16.7
- 1.2
Feb. 29 Apr. 3
115.5
14.5
101,0
94.0
60.9
21.5
11.6(€)
- 21.5
99.6
35.5
63.7
105.0
75.4
29.6
+ 5.4
Apr- 4 - May 1
113.4
26.1
87.3
86.4
46.8
13.4
20.2(h)
- 27.0
84.8
29.4
55.4
78.7
60.7
18.0
May 2 - 29
- 6.1
100.9
23.6
77.3
126.2
93.2
7.1
25.9
+ 25.3
101.4
57.0
44.4
145.4
126.2
19.2
+ 44.0
May
30 - July 3
283.2
145.3
137.9
319.3
301.3
5.1
18.9
* 36.1
(156.7.(1)
127.3(1)
29.4
345.1(i)
335.6
9.5(1)
+188.4
July 5 - - 31
249.7
156.7
93.0
225.0
212,2
2.0
10,8
- 34.7
7.3.
6.3
1.0
3.2
3.0
0.2
Age. 1 - 28
- 4.1
261.1
180.2
80.9
294.8
267.4
LO
26.4(1)
+ 33.7
8,9
0.5
9.4
10.9
10.4
0,5
. 2.0
First year of THE
1793.2
605.6
1,187.6
838.2
356.1
211.2
350.9
+ 35.0
B66.3
416.6
449.7
1,095.3
900,2
195,1
Aug. 89 - Oct. 2
+229.0
316.8
244.3
72.3
306.9
271.5
6.0
31.4(k)
- 7.9
8.6
4.4
4.2
1.3
-
1.3
- 7.3
Oct. 3 - 30
196.7
167.8
28.9
198.5
160.5
6.0
32.0(1)
+ 1.8
0.5
0.3
0.2
0,5
-
0.5
-
Oct. 31 Nov. 27
241.0
201.1
39.9
259.5
210.0
18.0
31.5(m).
+ 18.5
0.8
0.1
0.7
0.7
-
Nov. 28 - Deo. 31
0.7
234.6
206.8
- 0.1
27.8
198.0
111.4
26.0
60.6(m)
- 36.6
2.1
-
2.1
0.6
-
0.6
- 1.5
Jan. 2 - 29
197.4
162.7
34.7
259.9
176.2
52.0
31.7(0)
+ 62.5
1.7
I
1.7
0.5
I
0.5
- 1.2
WEEK ENDED
Jan. 8
60.9
43.9
17.0
47.9
25,8
14.0
8.1
- 13.0
-
1
-
0,2
-
0.2
+ 0.2
15
56.9
49.9
7.0
163.8
143.6
14.0
6.2
+106.9
0.8
I
0,8
0.2
-
0.2
22
- 0.6
37.8
31.9
5.9
28.6
5.8
12.0
10.8
- 9.2
0.5
-
0.5
-
-
-
29
41.8
37.0
4.8
19.6
1.0
- 0.5
12.0
6.6
- 22.2
0.4
-
0.4
0.1
-
0.1
- 0.3
Average eskly Expenditures Since Outbreak of Var
Transfers from British Purchasing Commission to
France (through June 19)
$19.6 million
Bank of Canada for French Account
(See fhotnotes (EL reverse side)
Week ended Jan. 29.
10,2
million
England (through June 19)
27.6 million
Cummintion from July 6 125.8 million
England {since June 19)
56.9 million
Regraded Unclassified
(a) Includes payments for assount of British Purchasing Commission, British Air Minletry, British Supply Board, Ministry of Supply Timber
Control, and Ministry or Shipping.
(b) Through June 19, these figures represent total seles no American securities in District reported Tur assuant of the United Eingdre.
(Proseeds or these sales, however, may not have been predited to the Bank of England's acount in all 20000.) Beginning with the week ended
June 26, the figures represent transfers from the Bank of Montreal, New York Agency, which In custudies for requisitioned American mecurities
held in this country. The transfers apparently reflect proceedo of official neverity sales, including those handled through private deals.
Prom June 17 to July 19, transactions in securities payable in specified foreign currencier, including dollars, by United Kingdom residents
were probibited.
(e) Includes payments for account of French Air Commission and French Purchasing Commission.
(d) Includes edjustment for (b) above.
(e) About $85 million transferred from assinints of Britfah authorized banks with New York banks.
(f) About $11 million transferred from accounts n° British authorized banks with New York banks.
(8) About $8 million transferred from accounts of British authorized tanks with New York banks.
(b) About $10 million transferred from accounts of British authorized banks with New York tenks.
(1) Adjusted to eliminate the effect of $20 million paid out on June 26 and returned the following day.
(j) About $2 million transferred from accounts of British authorized banks with New York banks.
(k) About $2 million transferred from accounts of British authorized banks with New York banks.
(1) About $4 million transferred from accounts of British authorized banks with Now York banks.
(=) About $6 million transferred from accounts of British authorized banks with New York banks.
(a) About #32 million transferred from accounts of British authorized banks with New York banks.
(o) About $2 million transferred from accounts of British authorized banks with New York banks.
Regraded Unclassified
(In Millions of Dollars)
neex - Jan. 29, 1941
BANK
OF
CANADA
commonwealth BANK DE AUSTRALIA
DEBITS
CREDITS
DEBITS
CREDITS
Transfers
Transfers
te
Proceeds Transfers from Official
liet Incr.
to
Proceeds
Net Inor.
Total
Official
Other
Total
of
British A/C
Other
(+) or Total
Official
Other
Total
of
Other
(+) or
Debita
British
Debits
Credita
Gold
for Own
For French
Credite
Deor. (-) Debits
British
Debits
Credits
Gold
Credits
Deor. (-)
PERIOD
A/C
Sales
A/C
A/C
in Balance
A/C
Sales
in Bulance
1939
Aug. 31 - Sept. 27
17.5
0.6
16.9
21.8
15.1
O.B
-
5.9
+ 4.5
-
I
-
-
-
-
-
Sept.28 Have 1
9.6
0.3
9.3
16.7
7.3
2.1
-
7.3
+ 7.1
-
I
I
I
-
I
-
Nov. 2 - 29
9.9
0.7
9.2
14.4
13.3
-
-
1.1
+ 4.5
-
I
&
1.9
1.9
-
+ 1.9
Nov. 30 - Jen.
3
30.0
-
30.0
22.8
13.3
3.0
-
6.5
- 7.2
2,5
-
2.5
5.8
5.8
-
. 3.5
1940
Jan. 4 31
25.5
-
23.5
25.7
21.1
-
-
4.6
+ 2.2
5.2
0.3
4.9
S.3
3.0
0.3
- 1.9
Feb. 1- 26
23.1
I
23.1
17.0
16.1
-
-
0.9
- 6.1
3.3
0.1
3.2
2,4
2.2
0.2
- 0.9
Feb. 29 - Apr.
3
42.3
I
42.3
29.5
29,3
-
-
0,2
- 12.8
3.0
0.3
2.7
2.2
1,6
0,6
- 0.8
Apr. 4- May
1
38.2
-
23,2
42.9
24.8
15.0
-
3.1
+ 4.7
2.3
-
2,3
2.0
1.8
0,2
- 0.3
May 2 - 29
37.9
15.0
37.9
50,2
50,0
-
-
0.2
- 12.3
1.2
0.2
1,0
2,6
1,7
0,9
+ 1.4
May 50 - July
3
44.1
#
44.1
73.5
72.2
-
I
0,3
+ 28.4
2,3
-
2.3
5.9
4.4
1,5
+ 3.6
July 4 31
28.2
-
25,2
117.6
98.3
-
19.2
2.1
+ 89.4
4,5
-
4.6
5.0
4,2
0.6
+ 0.4
2118. 1- 25
18.7
-
18.7
73.6
53.9
-
19.5
0.2
+ 54.9
6.8
3:0
1.8
5.0
3.4
1,6
- 1.8
First year of war
323.0
16.6
306.4
504.7
412.7
20.9
38.7
33.4
+181.7
31,3
9.9
20.3
36.1
30.0
6,1
+ 4,9
Aug. 29 Oct.
2
44.3
-
44.3
43.9
16,4
-
27.3
0.2
- 0,4
5,7
-
8,7
B.O
6.7
1,3
- 0,7
Oct. 3 - 30
26.7
-
26.7
28.6
14.0
.
14.3
0.3
4 1.9
10.1
7,5
2.6
7,9
6.5
1,4
- 8.2
Oct. 81- Nov. 27
35.2
-
35.2
69.6
49.2
-
16.7
3.7
+ 34.4
3.1
0.6
2.5
3.6
2.1
1.5
+ 0.5
Nov. 28 - Dec. 31
48.0
-
48.0
60.6
42,5
-
13.7
4,4
+ 12.6
4.8
-
4.8
6.8
4.8
2.0
+ 2.0
Jan. 2- 29
33,7
-
33.7
33.9
16.9
-
15,0
2,0
+ 0,2
4.8
.
4.8
6.8
5.1
1.7
+ 2.0
WEEK ENDED
Jan. 8
1.8
-
1.8
7.0
5,4
-
-
1,6
+ 5,2
0.9
-
0.9
0.1
-
0,1
- 0.8
15
9.0
9.0
1,8
1.8
-
-
-
-
- 7.2
2,8
-
2.8
0-4
-
0.4
- 2.4
22
9.0
-
9.0
9.7
4.5
-
4.8
0,4
+ 0.7
0.2
-
0.2
5-4
5.1
0.3
+ 5.2
29
13.9
13.9
15.4
5.2
-
10.2
--
-
+ 1.5
0.9
-
0.9
0.9
1
0.9
-
Teekly Average of Total Debite Since Outbreak of War
Through Jan. 29
$ 6.9
million
8
Regraded Unclassified
9
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE February 8, 1941
to
Secretary Morgenthau
FROM Mr. Cochran
CONFIDENTIAL
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
£30,000
Purchased from commercial concerns £53,000
Open market sterling remained at 4.03. Transactions of the reporting banks
were as follows:
Sold to commercial concerns
£1,000
Purchased from commercial concerns - 0 -
The only change that took place among the other currencies consisted of a
slight improvement in the Canadian dollar. Closing quotations were:
Canadian dollar
17% discount
Swiss franc (commercial)
.2323
Swedish krona
.2386
Reichemark
.4005
Lira
.0505
Argentine peso (free)
.2362
Brasilian milreis (free)
.0505
Cuban peso
6-13/16% discount
Mexican peso
.2066
Chinese yuan
.05-7/16
There were no gold transactions consummated by us today.
The Federal Reserve Bank of New York reported the following gold engagements:
$383,000 from Mexico, shipped by the Bank of Mexico to the Federal for its own
account, for sale to the New York Assay Office.
154,000 from Venezuela, shipped to the New York agency of the Royal Bank of Canada
for account of that bank's London office. This gold, which arrived yesterday,
was sold to the New York Assay Office.
537,000 Total
No gold or silver prices were received from Bombay today.
Just
10
MHO
PLAIN
London
Dated February 8, 1941
Rec'd 8:10 a.m.
Secretary of State,
Washington.
482, Eighth.
For Treasury. Vesting orders for the following
Indian Government sterling loans have just been
announced; 5 percent stock 1942-47, 4-1/2 percent
stock 1950-55, 4-1/3 percent loan 1950-55, 4-1/2
percent loan 1958-58, 4 percent stock 1948-53, 3-1/2
percent stock 1954-59. 3 percent stock 1949-52.
Under these orders United Kingdom holdings will
bE acquired by the British Treasury and the securities
transferred to the Government of India. The orders
are reported to have been made in full agreement with
the Indian Government in order to utilize for the
repatriation of Indian loans raised here part of the
large sterling balances accumulated in the hands of
Indian currency authorities during the war. Similar
steps are being taken by the Indian Government regarding
holdings of the same securities in the hands of residents
of India.
JOHNSON
CSB
11
Peterary 6, 1941
Piles
Mr. Cochren
In a converention yesterday w telephone I was informed w Mr. Collado of
the Department of State that sine countries, including the Walted States, have BBV
adhered to the convention for the creation of the Inter-American 3mk. These
countries are: United States, Belivia, Brasil, Colombia, Dominions Republic,
Reunder, Mexico, Ficaragua and Paraguay. Gollado said several others vere believed
to be ready to & along with the plan after & little impotue is given here. be
thought Pera could easily be influenced to enter the plan, and he had frand Probisch
of Argentina interested therein. Incidentally, Mr. Grunbash, who 10 a member of
the Probisch niesion, is remaining in the United States for & month or ⑉ after the
departure today of Mr. Prebisch. to will spend some time with the Federal Reserve
is New York.
ml
NO:dm:2,8.41
Regraded Unclassified
No. 411
12
AMERICAN
CONSULATE
Rangoon, Burms, February 8, 1941.
STRICTLY CONFIDENTIAL
British Government agrees in principle to the manufac-
ture by China of munitions in British territory; any
Subject: production under agreement would be in either India or
Burma: China expects Japan to protest to British Gov-
ernment because of assembly of American training planes
in Rangoon.
THE HONORABLE
THE SECRETARY OF STATE,
WASHINGTON.
Sir:
I have the honor to report that it is authoritatively stated here that
the British Government has agreed in principle to the manufacture by the
Chinese of munitions in British territory.
If the British agreement is made effective, and China takes over or
establishes a plant for the production of war materials, the plant will be
in either India or Burma. The former country offers industrial areas where
power and some raw materials are available, and probably greater security
from attack in the event of war between Japan and Britain. A plant in Burma
would have the advantage of providing a source of supplies relatively close
at hand. However, the matter has not yet reached the stage of definite
arrangements.
China is now manufacturing some war materials at arsonals in China, and
the manufacture of such materials in Burma or India has been pointed to as a.
possibility since the European war cut off Continental sources of supply.
There were no developments in the matter during the time that the British
Government sought to avoid straining relations with Japan, but the present
British attitude toward Japan has resulted in the agreement in principle
mentioned.
It is reliably reported that China expects Japan to lodge a protest with
the British Government because of the assembly in Rangoon of American training
planes for the Chinese Government (despatch no. 397, of January 8, 1941).
Respectfully yours,
Distribution:
Austin c. Brady
In Quintuplicate to
American Consul
the Department.
Copy to Embassy, Chungking.
Copy to Embassy, London
800
ACB
Regraded Unclassified
13
Mill I 6.
Files
b. Geshran
Dr. Beeng telephousd se at 18+15 voluy. Be stated that be had been $31 the
back fee days at esassquently had net been is teach with us. Be asked If I had
BOSS Sir Proderick Phillips. When I reported that Sir Prederick had case to ⑉ me
at 5 e'cleak last Puestay, as I recell 10, stated that Phillips bed sees bis
at 3 ofcieek the case afternoon. Scong had argued with the British that the proposal
which the latter have in used would not be effective insefar as China 10 concerned.
Seeng had received no further word free Leadon is the premises. I told Beeng
that X had net mentioned to Phillips that he, Seong. had been is to see as end that
Phillips had not referred to his visit with Seong. I added that with Mosors.
forgentham, Bell and White about from the Treasury this vesit, so has net been pos-
the for us to study the British properition. as reported W Dr. Beeng and
He Proderick Phillips. but that I have americants svailable fee w colleagues so
study early next week. We shall pt is souch with By. Beeng as - as - have had
ypertunity to - over this material.
IC:1ap-2/8/41
Regraded Unclassified
14
CONFIDENTI AT.
Persphance of Code Rediegram
Insulance a 1 1 a
at 7097, February s, 2942
Lemien, filed 13:30, February e, 1941.
20 a Triday, February 4 the operations of the Britdsh
Coastal Command were limited w adverse weather conditions and no
British bookers were in the air. During the proceding night,
planes of the Domber Command attacked an airfield in Northmen
France, The results of this adusion could net be observed. Date
ing the - night Duskirity, Boulague, and other investon parts
a the Maglish Chamal were beaked w heavy beabers, It is thought
that - investion vessels vere destroyed and that others -
damaged, Explesions and fires were observed. No British planes
were lost in these activities.
s
During the might of February 7-8 there were no German
planes over England. During the preseding day ceastal antiair-
craft fire at Lewesteft brought down the - German plane that
came inland. Small forees of German planse wase pletted over the
Streits of Dever and off the coasts at Aberdeen and the Firth of
Forth,
30
Italian supply dumps and meter transport consentrations
at Topelani, Albenia, wase attacked w British planes based in Greess,
In the Charen area of Eritrea five Italian planes were destruyed
- the ground and a motor transport consentration was attached.
Trains and buildings occupied by Italians and withdrawing Italian
CONFIDENTIAL
Regraded Unclassified
15
CONFIDENTIAL
I a and I I 1 a ave Prior I I
componented with 1000 feress to the explure of Bengast in the
Libyan theater. The Italian airfields at Agadebia, Barks and
Bondon have been pet out of operation by Brittsh benking, A
large under of notor transport vehicles are withdrawing from
Agedable in the direction of Tripeli. According to reports
conding from Multa there 10 no shipping activity between Italian
parts and Tripoli.
4a
Recent Auto air operations in the Middle East consist
of raids an Delimare, the Calafrana resplane base and Lusa, all
a the Island of malts, a the might of February 60% No -
alties and as damage resulted from these reide.
SCANLON
Distributions
Secretary of Har
State Department
Secretary of Treasury
Acct. Secretary of You
Chief of Staff
- Plane Division
Office of Naval Intelligence
Air Carps
0-3
CONFIDENTIAL
Regraded Unclassified
16
CONFIDENTIA
Paraphrase of Code Rediogrem
Received at the Mar Department
at 8:09, February 9, 1941
Lendon, filed 13:35, February 9, 1941.
1. On Saturday, February 8, planes of the British Coastal
Command off the Norwegian coast attacked four German cargo boats
and two German destroyers. One of the destroyers was thought to
be damaged but no direct hits were soored. However, one German .
plane was shot down. During this day oil storage plants in the
Metherlands were attacked by British medium bombers but the No-
sulte could not be determined. Planes of the Fighter Command in
an offensive patrol machine gunned German aircraft on the ground
and airfield facilities in the northern part of France. There
is no definite information as to the extent of the damage done.
During the preceding night heavy damage was inflicted di harbor
facilities and invasion vessels in attacks on Boulogns, Ostend,
Dunkirk and Calais by British heavy bombers. There were no British
sircraft casualties as a result of these operations.
2. During the night of February 0-9 two Cerman planes
were pletted over the Humber river, another over the Kings Lymn
region and eight others engaged in mining operations on the Bris-
tal Channel. British night fighters were up but were unable to
intercept the attackers. The extent of the damage is not known.
During the preceding day only a few German planse were active
over Britain and three of these were shot down. No damage has
been reported.
CONFIDENTIAL
Regraded Unclassified
17
CONFIDENTIAL
3. British planse from the Angle-Sayption Budan engaged
in attacks a the Keren, Amare and neighboring regions of
Britree where Italian buildings, treep trains, ground forces and
artillery positions ware mashine gumed. Nine Italian planes
- the ground at the Alemata airdrens (cm the
border due south of Macalle) were destroyed and the city of
Dessie in eastern Ethiopia was attacked by Aden-based British
planes. There are no reports of British air operations in the
Libyan theater. The tome of Birkao (?) and Afmade in southern
Italian Semaliland were attacked by British bembers from Kenya.
4. Two civilians were killed and no military personal
or property was damaged in the runden bening of Malta by seven
Anis planes.
5. In England, invasion alort no. 3 continues to be in
effect.
SCARLON
Distribution:
Secretary of Var
State Department
Secretary of Treasury
Acet. Secretary of Bar
Chief of Staff
Bar Plane Division
Office of Naval Intelligence
Mr Corps
0-3
CONFIDENTIAL
18
BJS
GRAY
Madrid
Dated February 9, 1941
Rec'd 2:05 p.m.
Secretary of State,
Washington.
100, February 9, noon
An official announcement published in a most (*) posit-
ion in this morning's press and conspicously headlined states
negotiations with Argentina have been concluded whereby
the latter country will supply Spain with 120,000 bales of
cotton. The communique continues that there is part of a
larger program of commercial relations being studied by both
Governments of which the first phase will consist of the im-
portation by Spain of 500,000 tons of wheat and 15,000
tons of meat. No information is given regarding the means
of payment. Editorially in both ABC and ARRIBA imply that
the program is an accomplished fact and comment glowingly
on this proof of the close ties and sympathetic relations
between the two countries.
WEDDELL
WSB
eh:copy
Regraded Unclassified
19
hereby 11, 1994
Files
Mr.
Mr. Senes of the he Basters Division of the Department of State telephonet B6
at 9:80 S.M. Be mill that M. Boong bed been to so 200 his last work und
had been schoppy over the Brittch proposal for a storling arrangement with China.
Rr. Jesse thought that the proposal of the Brittish. invefar as our relations with
China were consersed, would Include & formle by which us would name available to
the Chinese deverment the dollar prosede of importe of China into the United Plates.
I teld Jenes briefly of 47 converentions last week with Sir Frederick Phillips
and Dr. lease. I explained that the Treasury bad done nothing further with respect
to the Chincee Stabilisation Fund arrangement because of the absence last week of
Morgeathen, Bell and White. the pertinent including copies of a
document filed with use by Mr Proterick Phillips, had, however, nov loss circulated
est 10 was hoyed that meetings could be hate - time this vesit to the Treasury
Department with the view to formisting are Meas w the preposals new submitted. I
agreed that the Treasury Department beep is teach with the Department of State abd
15 as consiterat - the withsh proposition or the Chinago position in cypecition
thereto without consulting the Department of Mate.
Valor Secretary Bull teld me later is the day that Mr. Jesse had been in touch
with Mr. the yesterday is regard to the contemplated British-Jopances starling w
Pangmant. I then valided with Mr. Goo, to bring his to date with respect to the
above conversations. I beliew Recers. Doll, Ose and I ware is agreement that the
State Department should take se setion with respect to the contemplated Brittsh-
Jaganese sterling agreement until ve have gase a little further into our - problem
of the triengular Mates project.
76.mg
lap-2/11/41
Regraded Unclassified
20
February 20. 1942
Files
Mr. Geskram
Mr. Scholdt telephoned se at 11:55 this serving is shover to my inquiry made
on Saturday. at the request of the State Department, ⑉ behalf of the President. at
to the annual income of the Grova Princess of Nerway.
Mr. Schn149 stated that the Grown Princess opened on September 5 as assount
with the Rigge Bank which the jointly controls with the Court Chamborlain - to
with her. This account is free both for deposite and withdrawals insefer as our
control is conserned. the original deposit use for $50,000. Since them three
deposite totaling $24,500 have boon made. Gas of these was for $17,000. the
for $6,000 and a third for approximately $2,000. $24,000 have been withdraws free
the account to date, leaving at present a balance of $50,000. fince the account has
MY been running five months and $24,000 have been withdrawn. the seathly rate of
vithdrawale 10 elightly under $5,000. The funds for this account - from the
Norvegian efficial account with the Federal Reserve Bank at New York.
A.M.S.
04C:1ap-2/10/41
Regraded Unclassified
21
February 10, 1941
12:00 Noon
GROUP MEETING
Present:
Miss Chauncey
Mr. Gaston
Mr. Bell
Mr. Sullivan
Mr. Thompson
Mr. Buckley
Mr. Pehle
Mr. Graves
Mr. Cairns
Mr. Cox
Mr. Haas
Mr. Cochran
Mr. Schwarz
Mr. Kuhn
H.M.Jr:
Well, I take it, Herbert, that you have
been running the Treasury very successfully.
Gaston:
Well, everything seems to have been very
peaceful here. It seemsto have been
running itself. We had nice pleasant
social meetings five mornings out of six,
and as far as I could learn, everything
was under control.
H.M.Jr:
I thank you for not having heard from you.
Gaston:
I thank you. (Laughter)
H.M.Jr:
I was good up until about - where is Cox?
Cox:
Right here.
22
- 2 -
H.M.Jr:
Until Saturday night. The local paper was
a little garbled.
Gaston:
What was that on?
H.M.Jr:
They had it that we would only use a billion
three. They printed it Saturday, and I got
in touch with Cox Saturday night.
Schwarz:
They misinterpreted it.
Gaston:
I see. That limitation thing.
Bell:
Does the bill carry percentage?
Cox:
No, it carries the dollar amount, a billion
three.
Bell:
Well, the amendment they adopted carried
percentage.
Cox:
Then they substituted a new section.
Bell:
I see. That is very important. I don't see
how they got the billion three on & percentage
basis.
Cox:
Nobody else does.
Bell:
I thought it was nearer 800 million.
H.M.Jr:
Have you been away?
Bell:
Oh, off and on. I have been in and out. I
have had & nice rest.
H.M.Jr:
Did you get a little rest?
Bell:
Yes. Two hours a morning sleep did me a little
good.
23
- 3 -
H.M.Jr:
Did you get my telegram turning down Foley
and White?
Gaston:
I did.
H.M.Jr:
Do you think it reached them in time?
Gaston:
I don't know as I ought to tell you. They
are in New Orleans, and it is a secret that
they are in New Orleans. They are taking
advantage of the extra 72 hours. They got
tired of the food in Mexico, and so they
are in New Orleans.
H.M.Jr:
Did they leave before --
Gaston:
They left before your telegram arrived, but
they were - wanted to go anyway and they
could use the 72 hours better in New Orleans.
H.M.Jr:
I see. The telegram came the one night I
left the ranch. I went over to Nogales,
and when I got - but they have left? They
are perfectly happy?
Gaston:
They are happy to be in New Orleans.
H.M.Jr:
I loved the ticker about Foley and White.
They and Willkie have made a quick survey.
Gaston:
Preliminary investigations.
H.M.Jr:
I see the Treasury has made available to
Representative Lawrence Arnold something
or other.
Schwarz:
If you are asked about that this afternoon
at the press conference, Mr. Secretary, our
answer so far is that there is no Treasury
survey. Mr. Cox can tell you what was
done.
24
- 4 -
Cox:
Arnold asked for those figures, and they
were given to him after clearance with
Mr. Cairns and Mr. Bell on the specific
understanding that his statements would
say that he dug it up himself out of public
sources and also that under no circumstances
was he to say that it came from the Treasury,
which he agreed to, and that was the way it
was put into the Congressional record and
this morning that story came over the ticker.
There have been no questions asked of you yet,
have there?
Schwarz:
Just one. The request was an informal one,
as I understand it. There is nothing that
we have published, 80 I wouldn't call it a
survey.
H.M.Jr:
But is there anything that I ought to know?
I am lunching with the President. He might
like to know. I read. your letter (Gaston's)
and the editorial based on your letter.
Gaston:
Oh yes. That was Mr. Kuhn and some others,
that letter, but they did a very nice job.
They got me fame.
H.M.Jr:
Renewed your fame.
Gaston:
Yes, that is right. (Laughter)
H.M.Jr:
And Coast Guard is still intact?
Gaston:
Well, we haven't had any notice yet. I took up
that matter of the ice patrol, and he has an
idea to continue the ice patrol, as it will
form a good cover for the cutters working in
Greenland waters. I think it can be done that
way, but I think it would be better to abandon
the ice patrol; but that is the idea he has.
25
- 5 -
H.M.Jr:
Did you go to Cabinet Friday?
Gaston:
Yes.
H.M.Jr:
Anything special?
Gaston:
Nothing of very great importance. There is
one thing that you should know about that
is very hush hush.
H.M.Jr:
Can you tell me afterward?
Gaston:
Yes.
H.M.Jr:
All right.
Gaston:
Some more - did you know about Mr. Knox'
press conference thing?
H.M.Jr:
Well, I read it in the paper, and then I
saw the White House threw it down. Phil
isn't here, but I thought - I said, "No
appointments Friday after Cabinet. I will
come back and everything will be quiet."
All that happened --
Gaston:
I know all that happened.
H.M.Jr:
You were here?
Gaston:
Yes. I wrote you a report on what I learned.
You asked me as to how that - on the Hopkins
matter.
H.M.Jr:
A report? Where is it?
Gaston:
It is right there.
Chauncey:
Here it is.
26
- 6 -
Gaston:
I can tell you in one word.
H.M.Jr:
Yes. Do you want to tell that afterward?
Gaston:
Yes. Then about those Greek planes, as a
result of Knox' statement there was quite
a flurry, and Welles, it seemed, had committed
himself to the Greek Minister that they would
get 30 or more modern fighting planes, and
after that Knox' statement came out and the
State Department thought it would have a very
bad effect on the Balkans, and they renewed
their effort to get some kind of planes and
they asked Jim Buckley - Berle asked him to
investigate the field and let him know in-
formally if they were going to get them,
where would be the best chance of getting
them; 80 we put nothing on the record but
did give them some information about the
general fighter plane situation informally
over the telephone.
Then Hull brought the matter up in Cabinet,
but in a very feeble way. He didn't say
that the State Department was committed,
and the President's reaction was, "I will
tell you what we will do, we will give those
planes - we will sell those planes back to
the manufacturer and then the manufacturer
will sell them to the British, and then the
British - that is the 30 old Grummans - and
the British will use them in Eritrea; and
then they will give the Greeks some more
help in Albania." So it is settled.
Buckley:
Berle talked to me yesterday, and he didn't
think that would work at all, and he said he
understood his boss had been very calm,
but he said, "I think you should recognize
that when these Tennessee mountaineers get calm,
they just get madder and madder."
27
- 7 -
H.M.Jr:
Who is he getting mad at?
Buckley:
Just at the world in general. He thought
Mr. Hull was getting ready to explode.
H.M.Jr:
I wish he would.
Gaston:
I think the State Department is going to
continue the fight to try to get some modern
planes.
H.M.Jr:
I know the place to get them, just the way
you do, is Republic. Right?
Buckley:
Yes, except that now the Army doesn't figure
that they would be so happy to get rid of these
Republic planes as we thought they would, and
Mr. Berle now wonders if the State Department
couldn't bring influence on the War Department
to have them give up 15 P-40's if the British
would give up 15 P-40's.
H.M.Jr:
I won't ask the British to give it up.
Buckley:
I have the full story.
H.M.Jr:
Well, I won't ask the British to give up a
thing. They won't send those things down to
Eritrea. They will send them up to Canada
for training purposes, which is all that
they are good for. The British are no fools.
They will send them to Canada for training
purposes. But we will get around to that.
After all, it has kicked around Washington
for two months. It will kick around for two
days longer. That is the Arizona sunshine
working for one day. (Laughter)
Anything else?
28
1. 8 -
Gaston:
No, I have some figures from one source,
and that is Mr. Coe on this German Budget
since 1933, and Italian, and I am looking
to get some more from others.
H.M.Jr:
Will you give it to me?
Gaston:
Yes.
H.M.Jr:
Did you read my hand writing?
Gaston:
Oh yes.
H.M.Jr:
To say nothing about my spelling. Was it
all right?
Gaston:
Yes.
H.M.Jr:
Wonderful. Cox? I have got two notes here
from you.
Cox:
One of them I thought was another hush hush
thing which may be the same thing Herbert
is talking about, on finding out what Stimson
and Purvis made out.
H.M.Jr:
Do you know?
Buckley:
Yes.
H.M.Jr:
Do I have to know by one o'clock?
Buckley:
I think you ought to.
H.M.Jr:
Spill it, go ahead.
Cox:
Go ahead, Jim, you know more about it.
Buckley:
Mr. Gaston knows all about it.
29
- 9 -
H.M.Jr:
A little louder.
Buckley:
Maybe we ought to leave it to him.
H.M.Jr:
Is that one of the things you wanted to
tell me about?
Buckley:
It is the same thing, this hush hush deal
Valentine told us about the other noon.
Gaston:
He didn't even want us to make a note while
he was telling us. Two hundred fifty thousand
Lee Enfield rifles and --
H.M.Jr:
For Canada?
Gaston:
Great Britain and 50 million rounds of ammunition
and --
H.M.Jr:
Is that .303?
Gaston:
Yes. I don't know just the calibre.
Buckley:
Thirty calibre.
Gaston:
And I think they are being loaded already.
H.M.Jr:
What was the rush on that?
Buckley:
Well, they feel that they needed this very
badly, and they made the deal with the War
Department, and the President. There isn't
any certificate being issued on it, no deal
at all, no publicity. The theory is that
it is being left on the dock and the trucks
come up and get it.
H.M.Jr:
It just disappears?
Buckley:
That is right.
30
- 10 -
H.M.Jr:
Wonderful.
Gaston:
Well, the rush is that they believe there is
going to be an invasion.
H.M.Jr:
I see. But that is the only thing that
happened while I was gone? I thought you
were going to tell me that he gave them
some bombers or something. Is that the
only thing they got while I was gone?
Buckley:
The only thing except that considerable
progress has been made on the interim
purchasing.
H.M.Jr:
Good. I want to check that with you after-
ward. What else, Herbert?
Gaston:
I think that is all.
H.M.Jr:
Now, Cox, on the Lend-Lease?
Cox:
Yes. Here are two memos, one a very short
one and the other a little longer on the
same subject, whichever one you want to use.
(Referring to two suggested letters to the
President for the Secretary's signature,
dated February 10.)
H.M.Jr:
I was terribly sorry I asked you to do that
on Sunday.
Cox:
Oh, that is all right.
H.M.Jr:
Which one do you recommend?
Cox:
The top one, which is two pages.
H.M.Jr:
You have your men up there on the Hill,
don't you? You do?
31
- 11 -
Sullivan:
No, they are waiting to go.
H.M.Jr:
Why don't you send them up?
Sullivan:
I will.
H.M.Jr:
Maybe on second thought you had better go,
too, John.
Sullivan:
I would feel safer.
H.M.Jr:
Go ahead. I will see you later.
(Mr. Sullivan left the conference.)
H.M.Jr:
I will take the top one.
Cox:
All right. I will give you another copy.
H.M.Jr:
Yes. Lend-Lease. Who else? Mr. Bell ought
to have a copy.
Cox:
Yes. I might tell you that some of the other
branches of the Government, OPM and what not,
are just getting concerned about these same
problems. I don't think they are aware of
them. Informally Eddie Greenbaum and McCloy
talked with Ferdie and myself Saturday after-
noon for awhile about this, and they are in
agreement with our viewpoints on the thing.
H.M.Jr:
I see. What else?
Cox:
That is all. And then there is one other
set of information you may want (handing
memorandum to Secretary) on what the bill
means. It is a fiscal matter on what stuff
has been appropriated for and what stuff
has been obtained or is being obtained under
contract authorization.
32
- 12 -
H.M.Jr:
This is unique. "To Undersecretary Bell,
from Morgenthau."
All right. Will you (Miss Chauncey) see
that Mr. Bell gets this, please? (Laughter)
Bell:
Is it instructions?
H.M.Jr:
It is some questions as to the appropriations.
Cox:
That is all I have.
H.M.Jr:
How are you and Bloom? Do you sleep in the
same bed?
Cox:
I haven't been invited to Bloomtop yet, but
I feel all right otherwise.
H.M.Jr:
Is that what they call it? (Facetiously)
Cox:
No, I think he has one called by that name.
Everybody on the Hill talks about it.
H.M.Jr:
It is the one on the Blue Ridge, probably.
Cox:
Probably.
H.M.Jr:
What else?
Cox:
That is all.
H.M.Jr:
They are going to wind up tomorrow.
Cox:
I think so, tomorrow evening. LaGuardia is
going to testify, as well as Willkie.
H.M.Jr:
I think my Mrs. will want to go up tomorrow.
Cox:
All right, fine.
33
- 13 -
H.M.Jr:
I told her I didn't know of any more sign
of affection that she was willing to meet
me rather than go to meet Willkie. Willkie
is testifying today. I thought that was 8.
real test.
Cox:
It certainly is.
H.M.Jr:
He is going to testify tomorrow. Is everything
else all right?
Cox:
Right.
H.M.Jr:
Won't you be on the Hill?
Cox:
No, there is nothing much happening there. We
have got somebody watching the Senate thing.
H.M.Jr:
Merle?
Cochran:
I have asked Livesey to give us anything to
help Herbert get that armament data together.
H.M.Jr:
Oh yes.
Cox:
And I also spoke with Playfair, who has been
in charge of the British - Pinsent has been
sick and now Sir Frederick is in the hospital
and Playfair said they had 8. little information
but he took the liberty of cabling to get
some more specific information.
H.M.Jr:
Good. I thought that - what I had in mind
was that - the letters I wrote this time,
Dan, I treated better than I treated you.
I didn't expect any answer to that. Every
time I would only want the answer next week
but if I could get the figures on what Italy
and Germany are using for armaments since
Hitler came in, that when we went up for our
appropriations that they would be very helpful
Deeraded
34
- 14 -
for my testimony, that is what I had in
mind, you see. I could say, "Now look,
gentlemen, Germany is spending 30 or 40
or 50 million dollars a year. You see?
Be & little fresh testimony, and I think
it would be helpful to show that.
Bell:
When you go for what appropriation?
H.M.Jr:
Before Appropriations. I take it the
President will want me to go.
Bell:
Under the Lease-Lend Bill?
H.M.Jr:
Yes. If I don't, I will give it to somebody
else, you see. I mean, to show - I mean,
they will all say, "Well, this is terrific,"
and so forth and so on, and I thought if we
could show what the other fellow is doing
and what we are asking is modest by comparison,
it might be helpful.
Gaston:
Did you read that Fritz Sternberg book on
Aid to Britain? That went into that thing.
Ernest Lindley summarized it in his column
yesterday.
Cox:
There has also been testimony before the
Military Appropriations Committee by Marshall
that up to June of 1940 Germany spent 140
billion dollars.
H.M.Jr:
I think it is low.
Cox:
I think it is low, too.
H.M.Jr:
Merle?
Cochran:
And Playfair gave me this morning a statement
on British dollar and gold assets as of
January 31. Do you want that? I can give
it to you?
35
- 15 -
H.M.Jr:
As of January 31?
Cochran:
Yes, as of January 31.
H.M.Jr:
Well, what I will do is, I want to sit down
with you and Bell and take a look at it
together.
Cochran:
All right. I just got it.
H.M.Jr:
Yes, I do want to see it.
Cochran:
Then I have the securities sales statements.
They have been doing some of those private
transactions in fairly good amounts for the
last two days.
H.M.Jr:
Well, you keep them. I am going to try &
system of seeing you people and not let the
stuff go to the house. I mean, I am going
to see how it works.
Cochran:
All right.
H.M.Jr:
It will back up somewhere anyway. As long
as it doesn't back up on the table next to
my bed.
Cochran:
Sir Edward Peacock was down and saw me, and
he wants an appointment for Wednesday.
H.M.Jr:
With me? Sure.
Cochran:
And they hoped that Phillips would be out
by that time.
H.M.Jr:
What is the matter with Phillips?
Cochran:
He has had the grippe. He was in the hotel
a while and they moved him to the hospital
yesterday.
36
- 16 -
H.M.Jr:
Eleven o'clock Wednesday morning.
Bell:
Your hearing has been postponed until
Wednesday.
H.M.Jr:
My hearing?
Bell:
As I understood it. It has been postponed
from tomorrow until Wednesday at the same
hour because all of the members of the Senate
Finance Committee want to go to that Willkie
hearing tomorrow.
H.M.Jr:
Oh.
Bell:
And I guess they would get no publicity out
of the Subcommittee hearings, 80 they had
better hold it over.
H.M.Jr:
Well, would I testify . - why not --
Bell:
Well, I should think you might be there two
hours.
H.M.Jr:
In the afternoon?
Bell:
No, the afternoon would be a better time for
Sir Edward. I understood from John Sullivan
just before he came in here --
H.M.Jr:
How would three o'clock be?
Bell:
To see Sir Edward?
H.M.Jr:
Yes.
Bell:
I think that would be fine.
H.M.Jr:
And I would like Chairman Frank to be here,
too.
37
- 17 -
Cochran:
All right, sir.
H.M.Jr:
You will take care of it?
Cochran:
Yes, sir.
Bell:
They called on Jere and just paid a courtesy
call one day last week.
H.M.Jr:
Don't you think it is necessary?
Bell:
Well, I think it is all right.
H.M.Jr:
Let me see him alone at the first.
Bell:
But he has seen Frank just as a courtesy
matter.
H.M.Jr:
All right. What else?
Cochran:
I think that is about all. I have been
getting some information on that Argentine
Spanish arrangement. I can give you a memo
on that the first time I see you. It is
rather a long story. There has nothing
awfully big been transacted now and it isn't
based on our dollar credits.
H.M.Jr:
If you have it I wish you would give it to
Kuhn and Schwarz and then in turn give it
to PM, that wrote this article. Between you
work it out. PM wrote this article.
Kuhn:
I saw the article.
H.M.Jr:
What I wanted to get the - I wanted PM to
get it and let them have Time magazine write
a correct story on it.
Cochran:
Time had an item on the Sofina operation.
That is correct.
38
- 18 -
H.M.Jr:
Well, I wish you would show it to PM.
Cochran:
All right, I will give them the material.
Bell:
A gain wasn't based on the dollar transactions.
Cochran:
That is right.
H.M.Jr:
Well, why not have somebody - have the
Washington PM man come in.
Schwarz:
I can have him come in.
H.M.Jr:
And give him the whole thing. Let him see
and let him see Cochran.
Cochran:
I can go down to Chick's room. Swiss securities
sales have let up. They have been purchasing
some dollar securities in the last few days,
but as & result of these few weeks' operations
the Swiss, as well as the Italians, have sold
a good many securities on this merket and the
dollar deposits here of Brazil, Argentina,
and Panama, have increased, which leads us
to believe that some of the dollars taken
out of private accounts have gone into Latin
American accounts.
H.M.Jr:
I wish you would prepare me a memorandum of
not more than two pages on that, which I can
use with Mr. Hull. I will be seeing him in
the next day or two.
Gaston:
The Swiss Minister was over to the State
Department again. There is a letter came
in this morning on that subject. He complained
very bitterly against any change.
H.M.Jr:
I would like very much if you could give me
that tomorrow. Can you do it in 24 hours?
39
- 19 -
Cochran:
Sure.
H.M.Jr:
Not more than two pages.
Cochran:
No, I will just give you a summary.
H.M.Jr:
And if you could go back to January 1 to
show what has happened.
Cochran:
Yes, I can do that.
H.M.Jr:
Would that be significant?
Cochran:
I think it will, yes.
H.M.Jr:
If not, go further back.
Cochran:
I don't believe it is necessary to go much
further back, because I can give some total
figures since last May, I think, when the
movement began. But I will give you the
most interesting part, which is since
January 1. There is just one other item.
The State Department phoned on Saturday to
the effect that the White House had inquired
about the Crown Princess of Norway's income.
The President is advising her about a house
and 80 on. I don't think you want that now.
H.M.Jr:
Advising her about what?
Cochran:
About getting a house or what she should do
here and whether you want any figures now -
or shall I pass it back to the State Depart-
ment?
H.M.Jr:
Better give it to me.
Cochran:
She has a deposit of $50,000 to her credit
with the Riggs on the fifth of September, and
since then there has been $24,800 added to that.
In the meantime she has spend $24,000 80 that
for five months has been a little under $5,000
a month.
40
- 20 -
H.M.Jr:
Let me have this once more.
Cochran:
$50,000 deposited September 5. I have
dictated a memo which is all ready if you
want it. $50,000 deposited September 5.
H.M.Jr:
When was another deposit?
Cochran:
Three deposits. One, $17,000; one $6,000;
and one $2,000.
H.M.Jr:
How long is this memo?
Cochran:
Oh, it is very short.
H.M.Jr:
You might bring it in to me.
Cochran:
All right.
H.M.Jr:
Who called up from the State Department?
Cochran:
This man in charge of protocol, Stanley
Woodward.
H.M.Jr:
I would like to give it to the President
myself.
Cochran:
All right, fine, I will give it to you.
H.M.Jr:
Anything else?
Cochran:
No, sir.
Pehle:
We wrote State another letter about the
Indo-China accounts, of which there is about
10 million free dollars, and as a result
Feis and Atherton and Hamilton came over
and talked to Mr. Gaston and Mr. Cochran
and myself. The three people that came
over seemed agreeable to revoking those
licenses with the one qualification that
41
- 21 -
we should give them free dollars for the
imports of rubber which the Department of
State promised them. They said they were
going to take it up with Hull. That was
Tuesday or Wednesday, and we haven't heard
anything further. Those dollars can disappear
very quickly if they want to transfer them.
H.M.Jr:
Have you ever heard anything from Mr. Hull
about 10 million dollars in Martinique for
South Africa?
Cochran:
That was mentioned when we were talking about
this plus another item they had in North
Africa and they haven't made any decision.
H.M.Jr:
Remember I asked you to get the report of
that State Department fellow who is supposed
to have made a trip through South Africa?
Pehle:
Murphy?
H.M.Jr:
Murphy. Remember?
Cochran:
Yes.
H.M.Jr:
I never got the report.
Cochran:
I have a statement about it but I haven't
the full report yet.
H.M.Jr:
Would you see that I get it?
Cochran:
Yes.
Pehle:
There were a number of exports to Indo-China
that we have written the State Department
about, and they asked us to let the small
unimportant ones go and hold all the big
ones, which we are doing. They have been
held up for some time. That amounts to a
Treasury embargo.
42
- 22 -
H.M.Jr:
I see they are suing now for 250 million
dollars.
Pehle:
That is right.
H.M.Jr:
I see the Federal Reserve has no objection.
Pehle:
Well, there is something in the paper to
indicate the Treasury was backing it --
H.M.Jr:
Yes, I saw that too. What else?
Pehle:
That is all. We had a little flurry about
Danish ships which Mr. Gaston handled.
Gaston:
It is still unsettled.
H.M.Jr:
George?
Haas:
(Handing report to the Secretary) They did
a little bit better.
H.M.Jr:
Allison delivered six engines last week,
33 the week before, and 33 the week before.
What is that, George?
Haas:
This is the regular report. Here is this
thing on Hamm.
H.M.Jr:
Well, hold onto it and tell the boys you want
to see me.
Haas:
O.K.
H.M.Jr:
Huntington?
Cairns:
Here is a brief memorandum bringing you up
to date on the Schenk trial which was to go
to trial today, but was postponed under the
law because conscientious objectors have to
be tried first and their trial will take a
43
- 23 -
week. There has been a little development,
and this memorandum sets it all out.
H.M.Jr:
I am glad you have good type back there.
It shows you are learning.
Cairns:
Well, I inquired as to whether that was typed
on Harry's typewriter or ours, and I haven't
gotten a satisfactory answer.
H.M.Jr:
Have you got a new typewriter? Splurging
while I was gone?
Cairns:
I think the whole difficulty is caused by
the fact that Cahill has resigned and Correa
doesn't want to run any risk on his first
big case. It is a question of whether the
1937 indictment should be dropped.
H.M.Jr:
Well, don't be so sure. I have had - a few
whiffs that haven't been so good on this.
What is Cahill doing?
Cox:
Going back to private practice.
H.M.Jr:
I see.
Cairns:
He wants to run for mayor, Walter Winchell
said last night.
H.M.Jr:
Watch that Schenk case. What else?
Cairns:
That is all.
Kuhn:
Allen Barth has been making a very good study
of a mountain of clippings on the Lend Lease
Bill. He summarized them very briefly and
well. If you would like to have that summary
of what the trends are, I can give it to you.
H.M.Jr:
Yes. If it is good, would you send it out
to Robert Sherwood?
44
- 24 -
Kuhn:
Yes. What does he want in the way of --
H.M.Jr:
Just what you sent me.
Kuhn:
He wants it every day?
H.M.Jr:
Yes. Just 80 it has to do with Lend-Lease.
Kuhn:
But he doesn't want us to go back a week or
two?
H.M.Jr:
No, just on Lend-Lease.
Kuhn:
And keep it up?
H.M.Jr:
You might write him a little note and ask him
if he would let you know when he leaves there.
Kuhn:
That is all I have.
H.M.Jr:
Just write him a little note. He says he
knows you.
Kuhn:
Yes, I know him.
H.M.Jr:
He makes good use of it, because William
Allen White was down there and other people
and he likes to have that stuff when they
come down to see him.
Schwarz:
Did you have e. chance to see the story of
the new committee? This fellow from Kansas
City is going out of 8. Legion for Democracy
and now he calls it "United Americans."
H.M.Jr:
Which side are they on?
Schwarz:
On our side.
Kuhn:
Mr. Secretary, would you like this kind of
thing once a week?
45
- 25 -
H.M.Jr:
Very much.
Kuhn:
Good. If there is anything particular,
he can dig it up.
H.M.Jr:
Well now, who is going to - he is just on
Lend-Lease?
Kuhn:
At the moment, yes.
H.M.Jr:
Well, this is going to last - I want you to
get a man as good to do the same thing on
taxes.
Kuhn:
He would be free to do that after a little
while.
H.M.Jr:
No he won't.
Kuhn:
He won't?
H.M.Jr:
No. I want another man. Will you?
Kuhn:
Surely.
H.M.Jr:
This English thing, whether it is Lend-Lease
or something else, if he just concentrates
on the attitude and sentiment in this country
toward England and War and all that, if he
just concentrates on that - but I want another
man to give his full time to taxes. Would
you?
Kuhn:
Yes, sir.
H.M.Jr:
I mean, let him not only study Lend-Lease
but the whole attitude of this country toward
the war.
Kuhn:
That is what he is doing.
46
- 26 -
H.M.Jr:
Well, and then get me another man, please,
will you, on taxes?
Kuhn:
All right.
H.M.Jr:
Soon.
Harold? Are you all ready? Have you got
an organization and people working on
savings bonds?
Graves:
I think perhaps Mr. Kuhn and I very soon should
have a talk with you.
H.M.Jr:
I am available.
Graves:
At your convenience.
H.M.Jr:
Well, tell Stevens. Is Odegarde coming down?
Kuhn:
He was down last week, and he will be down
again on Thursday. He did a lot of work,
and we have got a lot to talk to you about.
H.M.Jr:
Did you hire anybody?
Kuhn:
Not yet, but we have got people who can be
hired as soon as you give the word.
H.M.Jr:
Did you hire Mr. Bell's friend?
Bell:
My friend?
H.M.Jr:
Yes.
Cox:
The young lady.
Bell:
Oh, yes. I thought you said we would have
to think about her 80 I sort of dismissed
her from my mind.
Regraded Unclassified
47
- 27 -
H.M.Jr:
Is that the way you think about her?
Bell:
Yes, that is it.
H.M.Jr:
Well, I am ready. What was that other
man he said was a very sophisticated
person and when he said that, I said, 11
That was Huntington Cairns' field,
somebody who talked about coming in?
You mentioned somebody who was down here
and --
Bell:
Simson?
Kuhn:
Not Milton. I don't remember.
H.M.Jr:
He mentioned a name. I think he is with
this Columbia group.
Kuhn:
Lasswell?
Cairns:
He is here now. He is a good man.
H.M.Jr:
That was the man. What did you do, drop
him?
Cox:
You would have difficulty understanding
what he is saying.
H.M.Jr:
Have you dropped him?
Kuhn:
He has got him on his list.
H.M.Jr:
We can hook him if we want him?
Kuhn:
I believe so.
H.M.Jr:
Lasswell was the fellow. Did you know him,
Huntington?
Cairns:
I have read all his books. He is concerned
with propaganda technique and public opinion.
48
- 28 -
H.M.Jr:
That is us.
Schwarz:
He is a little scientific for a practical
problem, I think. He can advise all right,
but he is not good at operating.
H.M.Jr:
Harold is the practical fellow, and I am
the dreamer; so Laswell, Harold and I make
a good combination. Kuhn interprets these
dreams, you see. (Laughter)
And Huntington goes on the air and criticizes
them. What else, Harold?
Graves:
Nothing.
Schwarz:
The New York Journal of Commerce this morning
carries an editorial in which they recommend --
H.M.Jr:
They recommend what?
Schwarz:
They recommend that the liaison with the
British purchasing should go into the OPM
after passage of the Lend-Lease Bill, and
I have been gratified some of the corres-
pondents who were covering defense who saw
it this morning have been calling here and
saying if anything it ought to be the other
way around, that the Treasury ought to take
care of production. The reporters are still
being very critical of the administration
of the production.
H.M.Jr:
I came back with a bad attack of indigestion,
and not only do I not want to absorb any
more, but I may disgorge something.
Schwarz:
Senator Overton wrote in and said he was
very much impressed by newspaper reports
of your statements on the Lend-Lease Bill,
Regraded Unclassified
49
- 29 -
and asked for several copies. We sent him
some.
H.M.Jr:
Good.
Schwarz:
And one point I wanted to ask about in
connection with Mr. Houghteling, do you
want to make an announcement in connection
with his work? I think if he is going to
be here for some time, we ought to say
something. I will check with Harold.
H.M.Jr:
Sure. The social aspect of liquor. How
to drink and be a gentleman, or what a
gentlemen is supposed to be. (Laughter)
Bell:
In other words, when to stop.
H.M.Jr:
Yes. Incidentally - you see, he is under
Harold. I learned for the first time what
Fred Osborne is doing. Maybe you know all
this. Fred Osborne is chairman of a
committee in the Army. Under him, he
had three men. Sherwood is on Recreation.
There are three different people under him.
I think Houghteling ought to get in touch
at once with Fred Osborne, whom he undoubtedly
knows, and tell him what we are doing and
where we can dovetail in with what they are
doing and not overlap, you 890.
Graves:
Mr. Houghteling has made 8. contact with the
Federal Security Administrator on this
matter. That would be Mr. McNutt.
H.M.Jr:
Yes. Well, I know he has something to do
with the thing, according to the newspapers,
but Osborne is working for the Army and his
committee is responsible for the soldiers
inside the cantonments.
50
- 30 -
Now, for instance, Sherwood told me -
incidentally, he was a private in the
last war in the Canadian Army. He made
one trip and that is where he got pneumonia.
He said the thing pleased him 80 that this
time they are serving beer on the reser-
vations, you see, but that - there are
two aspects. I think one is inside the
Army reservations and I think that McNutt
has the thing outside. I think that is
right, and I know shockingly little about
it. I think if he would talk to Fred
Osborne and then after he has talked to
him, maybe you and I could - Sherwood said
when it comes to enforcing anything, they
have no power; and he would be delighted,
anything that we could do to back him up
if they found any trouble. Is that the
way it is? I think the Fred Osborne Committee
would be inside.
Graves:
That is as I understand it. I am sure McNutt
has nothing to do with what goes on inside.
Schwarz:
That is all.
H.M.Jr:
Are you wound up? Are you pitched?
Schwarz:
I am ready to.
H.M.Jr:
Jim? I will bet you have nothing.
Buckley:
I have got a dozen memorandums. Do you
want them?
H.M.Jr:
No, we will do it together. A new system
for 24 hours.
Buckley:
I might throw some light on this editorial
in the Herald - Journal of Commerce. Don
Nelson has hired 8. so-called Foreign Liaison
man. There has been a rash of new liaison
men.
51
- 31 -
H.M.Jr:
A rash?
Buckley:
Yes. I have had three of them this week.
One is a chap named Allen from Don Nelson's
shop, and we talked in generalities and I
staved him off for awhile and he has been
working with the British Purchasing Commission
on studying what Nelson would have to do under
the Lease-Lend Bill for the British.
Now, I hadn't ever heard of him before, and
he might want to talk to Purvis about the
fact that he has been working there for
some time without our knowledge.
H.M.Jr:
No, no, that is not correct. Don Nelson
asked permission to personally go up to
New York and make a study of the Purchasing
Mission, which he did, and Purvis told me
about it.
Buckley:
I believe he sent Allen instead of going
himself.
H.M.Jr:
He said he would spend two or three days
there himself. I knew about that.
Buckley:
I sent yours and Phil's regrets for not going
to the annual meeting of the trustees of the
National Gallery this morning.
H.M.Jr:
Good.
Buckley:
Mr. Gaston and I didn't think I would be
any good.
Gaston:
We looked over the list of officers and directors
and decided they would be re-elected in any
event so we couldn't do anything about it.
52
- 32 -
Buckley:
You know, I believe, that Phil will be back
Wednesday noon.
H.M.Jr:
No, I didn't.
Buckley:
There was an article in this morning's
New York Times about the fact that certain
American insurance companies are not taking
insurance on ocean freight that are not
acceptable to British insurance companies.
OPM called me this morning, young Levin,
saying he wondered if that was not in restraint
of trade and in view of the insurance investi-
gation, he just, merely as a matter of in-
formation, brought it to my attention. I
have the article.
H.M.Jr:
Why don't you pass it on to O'Connell, the
TNEC thing. Right, Huntington?
Cairns:
I will do that.
H.M.Jr:
He is the right man, isn't he?
Cairns:
Yes, he is the man.
Buckley:
You will probably want to talk about the
Greek situation later. The State Department
has invited me to sit in at a meeting with
Atherton and Henderson of their staff
tomorrow afternoon, when they are going
to tell Oumansky that he has to work through
the Liaison Committee or else, and since that
is what we have been working for, I have
accepted, subject to your approval.
H.M.Jr:
Surely.
Buckley:
Mr. Purvis hasn't heard any more about
Bloch-Laine.
53
- 33 -
H.M.Jr:
No, you got that message?
Buckley:
Yes. The last he knew of him he had been
sent to Vichy. Then he heard later that
he was in the south of France and presumably,
although he doesn't know for a fact, no
longer with Lazard Freres on that job.
H.M.Jr:
I woke up in the middle of the night thinking
of Bloch-Laine and I gave him a promise if
he ever wanted to come back to this country,
we would help him. At least I got Sumner
Welles to give him that promise in return
for what he did for the British on turning
over the contracts. I woke up in the middle
of the night thinking about Bloch-Laine.
And I wondered if there is any way that we
could follow through.
Buckley:
Purvis is going to check on his sources
again and find out. That is all I have.
Cochran:
Dean Jay was down last week from New York,
and he knows Bloch-Laine very well, and
just came from France. He could tell us.
H.M.Jr:
Will you ask him?
Cochran:
Surely, I will find out.
H.M.Jr:
All right. Dan?
Bell:
This may come up at the luncheon at the
White House today, I don't know. Last
Friday morning quite late I got & call from
the White House that my appointment with
the President would be for 11:45. I called
and told them that I had no appointment,
and asked what it was all about. General
Watson said he didn't know, but he had
a note from the President that he wanted
Regraded Unclassified
54
- 34 -
to see Jerry Frank and Commissioners
Pike and Eicher and Leo Crowley and myself.
He didn't know what the conference was
about. When we got over there it was Trans-
America.
The President said he had a memorandum on
his desk about the whole matter. He didn't
say from whom, but that he was getting rather
tired of hearing about it and he would like
to have the departments concerned get together
and settle it.
I spoke up and said, "Well, Mr. President,
does that memorandum concern the Treasury
and the SEC or just the SEC?" He said,
"I think it is largely the SEC, and I said,
"Well, we have settled our matter with the
Bank of America with the exception of a
small real estate item and I think that will
be settled within a week."
Leo Crowley spoke up and said, "We haven't
settled the matter of the branches," and I
said, "So far as the Treasury is concerned,
we have settled them. We have turned them
all down, but when I returned to the Treasury
I found that we had received six subsequent
applications which were still pending that
I didn't know about at the time.
Jerry Frank told him that he thought the people
in the room --
H.M.Jr:
Excuse me. Just 80 I get it right. You said
there was Frank, Eicher, and Pike?
Bell:
Yes. Healy was not invited. He is the
other member. Jerry Frank said he thought the
people in the room were pretty much in agree-
ment as to the policy of the Federal Government
55
- 35 -
toward the Bank of America, and the Trans-
America and he said the only ones that are
out of step are Jesse Jones and Marriner
Eccles.
H.M.Jr:
Did he say that?
Bell:
Yes.
H.M.Jr:
He did say that?
Bell:
Yes, he did. He was quite frank.
H.M.Jr:
Good for Jerry.
Bell:
He said he was quite willing to sit down at
a table and try to settle this matter. But
he said the Trans-America crowd has not been
willing to stipulate the facts which they
must insist upon, and after they stipulate
the facts the Commission will have to render
8. decision, which they don't want, and he
told the President he thought it would be
very bad for the Commission if they were not
permitted to render a decision. It would
hamper them in their future work with all
other organizations.
The President said he didn't want them to settle
it without a decision, he recognized there had
to be a decision. Jerry said if they had
hired themselves a lawyer, and he so told
Ed Flynn last week, somebody besides the
House lawyer, who doesn't own his own body
and soul --
H.M.Jr:
House lawyer?
Bell:
That means their own counsel in the bank.
H.M.Jr:
If who would hire a lawyer?
56
- 36 -
Bell:
Trans-America.
H.M.Jr:
Oh.
Bell:
Such as Cushing or Flagler, who could really
sit down and negotiate, they could settle it
in the course of 8 month. It wound up by
the President saying that the five of us
should act as a committee to settle this
matter.
I said I thought it was clearly within the
province of the SEC, and we had nothing to
do with it; and I didn't think we ought to
sit in.
H.M.Jr:
That is right.
Bell:
That is the way it was left.
H.M.Jr:
Where does Leo Crowley come in on it?
Bell:
Well, it was a Trans-America Bank problem.
I had quite a time explaining it to the
press. The President said, "When you go out,
just say to the Press that you have been
discussing power with me," and that is what
Jerry said, I guess. I came through the
basement. I don't know. But the press
said, "Well, what was Leo Crowley doing
there then if you were discussing power?"
Schwarz:
On the strength of that one word, the Post
boy wrote three quarters of 8. column on
power.
Gaston:
He told the Cabinet you were discussing
Navy Budget matters.
Bell:
Oh no.
Regraded Unclassified
57
- 37 -
Gaston:
Yes, He said that Harold Smith and Dan
Bell were in and he was talking to them
about the - this Navy acquisition of a
lot of old merchant ships, and he laid down
the rule that the reconditioning cost should
not be more than 80% of the original cost
of the vessels.
Bell:
Harold Smith was in ahead of us, but I wasn't
in with him.
H.M.Jr:
Well now, I want Ed Foley to have a copy of
this, and put it on top of his pile when
he comes back.
Bell:
The memo?
H.M.Jr:
If you please. Have you let Preston Delano
know?
Bell:
Yes. I am sending him a copy of this memo,
too.
H.M.Jr:
But you don't know who wrote the President
his memo?
Bell:
No, but I have a suspicion it was Tom Corcoran
because he was around the week before getting
information. He was asking Delano what had
been done and what we had done with the
branches, and so forth.
H.M.Jr:
What would Tom Corcoran want it for?
Gaston:
Don't you think the pressure is from the
National Democratic Committee?
Bell:
I think Tom is working under Ed Flynn.
H.M.Jr:
No.
58
- 38 -
Bell:
You don't think 80? I just had this
suspicion. Maybe it was from Ed Flynn.
H.M.Jr:
I think it is Ed Flynn. His partner --
Gaston:
Ewing?
H.M.Jr:
Ewing isn't a partner. Goldwater is his
partner. He was looking after it while
he was gone.
Bell:
By the way, there was a Mr. Ewing sitting
in the room when we went in, and he went
in just before we did.
Gaston:
He is a general assistant to Flynn in the
Committee, Oscar Ewing.
H.M.Jr:
Oh, I think this is Democratic Committee.
Gaston:
Yes.
Bell:
He wouldn't say where it came from. He
just waved the memorandum and then stuck
it in his basket upside down.
H.M.Jr:
Ask Ed to ask Tom Corcoran if he is interested
in this, will you? I am sure he is.
Bell:
Before you went away --
H.M.Jr:
Did they bring up bank holding legislation?
Bell:
Not at all.
H.M.Jr:
I would say that Frank had his way, didn't
he?
Bell:
Yes. I thought the President agreed with
him very much. He just wanted him to push
it and settle it, but he didn't dictate how
59
- 39 -
it should be settled. I agreed it should
be an agreement with a decision.
H.M.Jr:
I still don't see why Leo Crowley should
be there.
Bell:
There wasn't any reason for me to be there
either except that we were both on the
Bank of America thing.
H.M.Jr:
As to the other branches, if you get a
recommendation for me from Preston Delano,
I will act on it.
Bell:
He just got them recently, and he will be
ready soon. Leo knew about it and I didn't.
H.M.Jr:
What else?
Bell:
Dr. Burgess wanted to see you before you
went away about the Inter-American Bank,
8. provision in there which he and the other
banks which have branches in South America
were concerned with that would enable the
bank to do a commercial business with
private individuals and he came to see
me instead, and I told him that he certainly
shouldn't try to see you until after you
returned.
They had a conference at the State Department
on the 7th, at which Loree, Charlie Spencer,
and Burgess were present. They agreed that
they couldn't do anything to put in legislation
a direction to the American director. They
thought that would be bad, and it would be
a precedent and every other South American
country would undertake to put something in
their legislation, and they couldn't change.
the by-laws because as I understand it, it
Regraded Unclassified
60
- 40 -
has been made part of the convention. So what
they have agreed to do is that the Departments
concerned will write a letter to Congress and
state that they will instruct our director
on the board to recommend that the by-laws
of the bank be changed 80 as to provide any
loans made under two years, I think it is,
be guaranteed, the same as loans made after
two years. Everybody agreed to that except
the Treasury, and it was accepted by the
Treasury subject to your approval. I take
it it is all right.
H.M.Jr:
I am not sure if I get that.
Bell:
It is what the Treasury originally proposed.
Does anybody remember it?
Pehle:
Yes, that is right. We proposed it and it
was strongly objected to by the Federal
Reserve Board and by Pearson.
H.M.Jr:
Is it the way we wanted it originally?
Bell:
That is right.
H.M.Jr:
That is O.K.
Bell:
Now they are back to it.
H.M.Jr:
All right.
Bell:
This is a memorandum for your files, and I
will tell Bernstein to go ahead.
H.M.Jr:
What else?
Bell:
I sent one of Harry White's representatives
out to get that information from these various
corporations as to the difficulty they had
had and I see where one representative, I
61
- 41 -
don't know who, gave it out to the Wall
Street Journal that the Treasury was
around trying to find out the attitude
of various corporations to freezing control.
That is about the only thing that was said.
I have his report, which I haven't read.
H.M.Jr:
Supposing you read it and we will discuss
it together. That would go, if it fits
in with what Merle is doing for me for
Mr. Hull - I want it for the same purpose.
Bell:
It is available. It hasn't been read by
Harry White.
H.M.Jr:
We can't wait for Harry, and if we could
get together you can prepare something for
me if it is something that I could use as
an argument why we should go ahead and
freeze.
Bell:
O.K.
H.M.Jr:
Merle --
Bell:
He has a private report here.
H.M.Jr:
I am sure Merle will find good points in
there.
Cochran:
This will involve freezing Latin America.
H.M.Jr:
Well, you read it and if you think there
is something I can use, give me the good
points.
Gaston:
I think the violent excitement of the Swiss
is a pretty good argument.
H.M.Jr:
Will you do that?
62
- 42 -
Cochran:
Yes.
H.M.Jr:
If there is anything which you think would
be a good argument from my standpoint.
All right, Dan? I ought to quit now. How
much more have you got?
Bell:
I just wanted to tell you that Hadley made
a survey last week of Cleveland, Philadelphia,
Boston, New York, the same as he did in
Chicago, of the last bond.
H.M.Jr:
That plus the memorandum which I didn't
read before I left that Miss Chauncey can
give you, written by Rouse, I would like
to sit down with you and go over them
quietly; and will you also be prepared to
talk to me on the timing on this bill and
everything else, whether we ought to increase
our bill borrowing now or whether we should
sit tight or get out a bond issue. If you
would be ready in a day or two to talk to
me, and then when we talk that over, I would
like you and George and I to sit down, see.
Bell:
O.K. We have been talking about that.
H.M.Jr:
I would like to read those things.
Bell:
The only other item is that the appropriation
is before the Appropriations Committee, our
estimates, and we have a hearing at two
o'clock on the three million dollars.
H.M.Jr:
Can you take care of that?
Bell:
Yes, I am going at two o'clock with Harold
and Mr. Broughton and Mr. Kilby.
Regraded Unclassified
63
- 43 -
H.M.Jr:
Good. Now, let Kuhn go just to listen.
He has never been to one. Just so he can
see how easy or hard it is to get three
million dollars.
Now, who has got what I am going to say
Wednesday?
Bell:
I have a draft of it here if you would like
to read it. I gave it to Kuhn and Schwarz
and one or two others, John Sullivan, and
I haven't gotten their suggestions back.
It is just a rearrangement of what you said
before the House.
H.M.Jr:
When can I do that?
Bell:
Either this afternoon or tomorrow morning.
Or tomorrow afternoon. I have cut 8. great
deal of the other out and got it down now
to about six pages, and it still can be
reduced if you want to.
H.M.Jr:
I would like everybody else to go over it
before I do.
Bell:
That would save their time if I could get
their suggestions this afternoon.
H.M.Jr:
I will see you at 10:15 tomorrow. Is that
all right?
Bell:
Yes.
H.M.Jr:
O.K?
Thompson:
The Treasury appropriations bill was intro-
duced in the House today. They cut us about
four million dollars, spread out all through
the bill, mostly Coast Guard. Two million
cut on reconstruction in the Coast Guard.
64
- 44 -
H.M.Jr:
A little louder.
Thompson:
Two million cut on the Coast Guard for
reconstruction. I just got these figures
as I was coming in, and I don't see anything
very serious.
H.M.Jr:
I think they are in such good shape that
you might get me a reservation tonight for
Arizona again.
Gaston:
I think you made a mistake to come over.
H.M.Jr:
I was very lucky on the week I picked.
It was marvelous.
Bell:
It hasn't been so hot here.
H.M.Jr:
The weather?
Bell:
Yes, it was rain and snow.
H.M.Jr:
It is almost unbelievable that I was riding
in the country yesterday and there was about
one person every ten miles and I am back
here today. The Mexicans still are just
as progressive as ever on the other side
of the border.
I went down into this village where these
Indians live about ten or 15 miles the other
side in Mexico, and it is very clean and
everything; and I said, "That is the life,
no electric lights, running water, radio,
and the man that runs the ranch says, "Well,
that is easy. I can fix that for you tonight.
You can sleep on the floor and everything.
65
Treasury Department
Office of the Under Secretary
Date:
From: DWB
To: mrs. Klotz.
J. in the matter
on Inter-American Bk
which I cleared the
mooning not a staff meeting
about one mouth ag 0.
For sam's file.
66
C
o
DEPARTMENT OF STATE
F
Y
Washington
In reply refer to
YE
My dear Senator George:
In a memorandum relating to the proposed Inter-American
Bank attached to my report of July 3, 1940, which was trans-
mitted to the Senate with the President's messare of July 5.
1940. it was stated:
"While the purposes and powers of the projected
Bank have been stated in fairly broad and elastic
terms, as is both customary and essential in the
organic laws of such institutions, discussions during
the drafting of the convention and bylaws indicated
that it was the intention of the Inter-American
Financial and Economic Advisory Committee to
complement existing financial institutions rather
than to provide a substitute for them."
Certain provisions of Section 5B of the draft bylaws would
enable the Bank to deal in the securities of an make loans or
extend credits having maturity not exceeding two years to
nationals of a participating government without any further
guaranty so long as the participating government makes no
timely objection. It is suggested that this might permit
the entry of the Bank into a type of business not now intended
or contemplated.
Accordingly, it seems desirable to clarify the situation
by amending as soon as practicable after the organization of
Regraded Unclassified
67
- 2 -
the Bank the bylaws to limit such operations to those which
are guaranteed by a participating government, central bank or
other acceptable banking institution. This would of course
allow further amendment of the pertinent provisions of the
bylave at some future time to permit such operations without
such guaranty if an emergency should alter the present situa-
tion. This would not change the existing provisions of
bylaws regarding operations having a maturity of two years
or more which must be guaranteed by the national's government.
On my own behalf and on behalf of the Secretary of the
Treasury, the Chairman of the Board of Governors of the Federal
Reserve System, and the Federal Loan Administrator, I am prepared
to state, for your information and guidance in passing upon the
above-mentioned convention that, should we participate in the
Inter-American Bank Committee as provided in the proposed bill,
it would be our purpose, so soon as the Bank is established,
to undertake to have the representative of the United States
of America on the Board of Directors exercise his best efforts
to bring about an amendment of the bylaws of the Bank as
indicated above.
Sincerely yours,
Regraded Unclassified
Febing 1941
68
MEMORANDUM or CONFERENCE
Time: 3:20 p.m. to 3:55 p.m.
Present: Secretary Morgenthau, Mr. Wickard, of the
Department of Agriculture, and Oscar Cox.
Jim Buckley came into the conference at 3:28
and George Haas at 3:32, both at Secretary
Morgenthau's request.
Secretary Morgenthau started the conference by saying
that agricultural products were covered under the Lend-Lease Bill.
He asked Cox to point out why they were covered. Cox stated that
the definition of "defense article" in the Lend-Lease Bill spe-
cifically included any other article or commodity for defense pur-
poses, as well as arms end implements of war. He also pointed out
that to remove any doubt on this subject, the Report of the House
Committee on Foreign Affairs specifically stated that:
# * * It should be noted that the term
'defense article' includes not only all arms,
munitions, and implements of war, but also
other articles or commodities such as cotton,
wheat, and all other agricultural products
which may be necessary for defense purposes.
****
Secretary Morgenthau handed over to Secretary Wickard a
marked copy of the House Report.
Secretary Wickard said that was fine and completely an-
swered the question he had raised with the President while Secretary
Morgenthau was at lunch with the President.
Then Secretary Wickard showed Secretary Morgenthau a cable
received from the Food Ministry in London by the State Department
about the British purchase of food-stuffs in this country.
At this point, Secretary Morgenthau asked Mr. Buckley to
come in. Secretary Wickard said that in attempting to purchase such
food-stuffs as cheese and tinned beef in this country, the Britich
would, because of the prevailing situation, unnecessarily run up the
prices. Cor asked if one way of handling the situation would be for
Regraded Unclassified
69
- 2 -
the Secretary of Agriculture to make up a sort of inventory showing
the kind of food-stuffs that could reasonably be purchased by or for
Britain in this country without unnecessarily running up the price.
Secretary Morgenthau and Secretary Wickard both agreed that this
would be a good idea. Secretary Morgenthau pointed out that this is
what he has been doing for about two years in connection with the pur-
chase of military equipment, etc.
Secretary Morgenthau suggested that in his view the practical
way of handling the situation would be for Purvis to call on Secretary
Wickard and work out the procedure for handling food purchases. Secre-
tary Morgenthau said he would arrange to have Purvis call on Secretary
Wickard.
Secretary Morgenthau asked Secretary Wickard if he would
like to have a list of all wool materials which the Army purchases, in
order to ascertain whether or not cotton could be used as a substitute
for any of it. Mr. Wickard said he would like very much to have it.
Secretary Morgenthau called Haas and asked him to bring it in.
The list was given to Secretary Wickard.
On the question of appropriations to be made unde under the
Lend-Lease Bill for agricultural products, Secretary Morgenthau said he
would get in touch with Secretary Wickerd about them and would also like
to have him available at the meeting scheduled for Thursday on this sub-
ject.
Secretary Wickard said he was well pleased with the situation.
70
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE February 10, 1941
to
Secretary Morgenthau
FROM 0. S. Cox
The material on what action should be taken now pending
the enactment of the Lend-Lease Bill is ready for you any time you
want it. You thought you might want to discuss the matter with the
President at luncheon today.
osc
71
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE FEB 10 1941
TO
Secretary Morgenthau
FROM
0. S. Cox
Subject: Disposition of Existing Army Materiel
McCloy, Special Assistant of Secretary Stimson, has
told me about the conferences of Mr. Purvis with Mr. Stimson
and the action, approved by the President, taken on the basis
of these conferences.
You may want to get from Mr. Purvis a first-hand ver-
sion of this situation before your luncheon with the President.
ose.
Regraded Unclassified
72
This marks the House Foreign Affairs Committee
Amendments to the bill.
House. This marks amendments adopted upon the Floor of the
77TH CONGRESS
Ist SESSION
H. R. 1776
IN THE SENATE OF THE UNITED STATES
FEBRUARY 10,1941
Read twice and referred to the Committee on Foreign Relations
AN ACT
Further to promote the defense of the United States, and for
other purposes.
1
Be it enacted by the Senate and House of Representa-
2 tives of the United States of America in Congress assembled,
3 That this Act may be cited as "An Act to Promote the
4 Defense of the United States".
5
SEC. 2. As used in this Act-
6
(a) The term "defense article" means-
7
(1) Any weapon, munition, aircraft, vessel, or
8
boat;
9
(2) Any machinery, facility, tool, material, or
10
supply necessary for the manufacture, production, proc-
73
2
1
essing, repair, servicing, or operation of any article
2
described in this subsection;
3
(3) Any component material or part of or equip-
4
ment for any article described in this subsection;
5
(4) Any other commodity or article for defense.
6 Such term "defense article" includes any article described
7 in this subsection: Manufactured or procured pursuant to
8 section 3, or to which the United States or any foreign
9 government has or hereafter acquires title, possession, or
10 control.
11
(b) The term "defense information" means any plan,
12 specification, design, prototype, or information pertaining to
13 any defense article.
14
SEC. 3. (a) Notwithstanding the provisions of any
15 other law, the President may, from time to time, when he
16 deems it in the interest of national defense, authorize the
17 Secretary of War, the Secretary of the Navy, or the head
18 of any other department or agency of the Government-
19
(1) To manufacture in arsenals, factories, and ship-
20
yards under their jurisdiction, or otherwise procure, any
21
defense article for the government of any country whose
22
defense the President deems vital to the defense of the
23
United States.
24
(2) To sell, transfer, exchange, lease, lend. or other-
25
wise dispose of, to any such government any defense
74
$
1
article, but no defense article not manufactured or pro-
2
cured under paragraph (1) shall in any way be dis-
3
posed of under this paragraph, except after consultation
4
with the Chief of Staff of the Army or the Chief of Naval
5
Operations of the Navy, or both. The value of defense
6
articles disposed of in any way under authority of this
7
paragraph, and procured from funds heretofore appro-
8
priated, shall not exceed $1,300,000,000.
9
(3) To test, inspect, prove, repair, outfit, recondi-
10
tion, or otherwise to place in good working order any
11
defense article for any such government.
12
(4) To communicate to any such government any
13
defense information, pertaining to any defense article
14
furnished to such government under paragraph (2) of
15
this subsection.
16
(5) To release for export any defense article to
17
any such government.
18
(b) The terms and conditions upon which any such
19 foreign government receives any aid authorized under sub-
20 section (a) shall be those which the President deems
21 satisfactory, and the benefit to the United States may be
22 payment or repayment in kind or property, or any other
23 direct or indirect benefit which the President deems
24 satisfactory.
25
(c) Neither the President nor the head of any depart-
75
76
4
5
1 ment or agency shall after June 30 1943 exercise any
1 clo or defense information is exported, immediately inform
2 of the powers conferred by or pursuant to subsection (a),
2 the department or agency designated by the President to
3 nor shall such powers be exercised if terminated by IL сод-
3 administer sectión 6 of the Act of July 2, 1940 (54 Stat.
4 current resolution by both Houses of the Congress, except
4 714), of the quantities, character, value, terms of disposi-
5 that until July 1, 1946, such powers may be exercised to
5 tion, and destination of the article and information 80
6 the extent necessary/to carry out a contract or agreement
6 exported.
7 with such a government made before July 1, 1943.
7
(b) The President from time to time, but not less fre-
8
(d) Nothing in this Act shall be construed to author-
8 quently than once every ninety. days, shall transmit to the
9 ize or to permit the authorization of convoying vessels by
9 Congress a report of operations under this Act except such
10 naval vessels of the United States.
10 information as he deems incompatible with the public interest
11
(e) Nothing in this Act shall be construed to authorize
11 to disclose, Reports provided for under this subsection shall
12 or to permit the authorization of the entry of any American
12 be transmitted to the Secretary of the Senate or the Clerk
13 vessel into n combat area in violation of section 3 of the
13 of the House of Representatives, as the case may be, if the
14 Neutrality Act of 1939.
14 Senate or the House of Representatives, as the case may be,
15
SEC. 4. All contracts or agreements made for the dis-
15 is not in session.
16 position of any defense article or defense information pur-
16
Sec. 6. (a) There is hereby authorized to be appro-
17 suant to section 3 shall contain a clause by which the foreign
17 priated from time to time, out of any money in the Treasury
18 government undertakes that it will not, without the consent
18 not otherwise appropriated, such amounts as may be neces-
19 of the President, transfer title to or possession of such defense
19 sary to earry out the provisions and accomplish the purposes
20 article or defense information by gift, sale, or otherwise.
20 of this Act.
21 or permit its use by anyone not An officer, employee, us
21
(b) All money and all property which is converted
22 agent of such foreign government.
22 into money received under section 3 from any government
23
SEC. 5. (a) The Secretary of War, the Secretary of the
23 shall, with the approval of the Director of the Budget,
24 Navy, or the head of any other department or agency of
24 revert to the respective appropriation or appropriations out
25 the Government involved shall, when any such defense arti-
25 of which funds were expended with respect to the defense
Regraded Unclassified
77
78
6
7
1 article or defense information for which such consideration
1 this Act through such department, agency, or officer as he
2 is received, and shall be available for expenditure for the
2 shall direct.
3 purpose for which such expended funds were appropriated
Passed the House of Representatives February 8, 1941,
4 by law, during the fiscal year in which such funds are
Attest:
SOUTH TRIMBLE,
5 received and the ensuing fiscal year.
Clerk.
6
SEC. 7. The Secretary of War, the Secretary of the
By H. NEWLIN MEGILL.
7 Navy, and the head of the department or agency shall in all
8 contracts or agreements for the disposition of any defense
9 article or defense information fully protect the rights of all
10 citizens of the United States who have patent rights in and
11 to any such article or information which is hereby authorized
12 to be disposed of and the payments collected for royalties on
13 such patents shall be paid to the owners and holders of such
14 patents.
15
SEC. 8. The Secretaries of War and of the Navy are
16 hereby authorized to purchase or otherwise acquire arms,
17 ammunition, and implements of war produced within the
18 jurisdiction of any country to which section 3 is applicable,
19 whenever the President deems such purchase or acquisition
20 to be necessary in the interests of the defense of the United
21 States.
22
SEC. 9. The President may, from time to time, promul
23 gate such rules and regulations as may be necessary and
24 proper to carry out any of the provisions of this Act; and he
25 may exercise any power or authority conferred on him by
79
2/10/41
Taken to White House today by the
Secretary
-
Feb10-194
THE SECRETARY OF THE TREASURY
WASHINGTON
MEMORANDUM
TO:
The President
EXIS:
Secretary Morgenthau
SJECT: Action To Be Taken Pending the Enactment of H.R. 1776.
Consideration should probably be given, as soon as possible,
10 the three following problems, so that no delay will result in
corrying out the Lend-Lease Bill, if and as soon as it is passed:
(1) Having the regulations ready for signature
the day you sign y.9. 1776;
(2) Having the requests for appropriations ready
to C° to Congress the day the bill is signed; and
(3) Vaving ready for disposition the defense
articles which the Army and .avy have on hand, and
which they can reasonably spare to moet the urgent
needs ot Britain, China and Greoce.
(1)
Regulations
(a) Do you want the regulations ready
for your signature the day you sign the bill?
(b) Should Tar, Navy and Treasury start
at once to prepare such regulations?
Regraded Unclassified
81
. 2 -
(2)
Appropriations
(a) Should the Secretaries of Mar, Navy
and Treasury get together informally now to
frame the policy upon which the appropriation
requests shall be made?
ak
(b) After such policy is framed and ap-
proved by you, should the Secretaries of Mar,
Havy and Treasury consult with the Director
of the Budget and proceed to prepare the re-
quests 50 that they can be passed upon by Budget
and sent up to Congress immediately after H.P.
1776 is signed by you?
(3)
Disposition of Army and Havy
atericl on Hand
(a) Should the Secretaries of Mar, Havy and
Treasury get together informally, as soon as
possible, to determine: (1) As of today, or with-
in the next two months, what are Britain's, China's
and Greoce's most pressing needs; and (2) In rela-
tionship to these needs, what defense articles do
the Army and Navy now have on hand that they could
reasonably transfer?
Regraded-Unclassified
82
FEB 10 1941
-
Dear Mr. Products
them I ⑉ back to the office, I found that the
Lond-Lease Bill clearly covers agricultural products. the
bill itself defines the expression "defense article" to in-
clude not only are and implements of war but also any other
article w community for defense purposes.
90 resere my doubt on the question, the Report of
the House Condition as Foreign Affeirs specifically stated
that -
"It should be noted that the -
'defence article' includes not only all
are, munitions, and implements of war,
bet also other articles or communities
THE I 1 I 1 I :
agricultural products which my be MH-
eary for defense purposes."
For your information, I an enclosing a marked cigy
of the House Comittee Report.
Faithfully yours,
(Signed) H. Morgenthau, Jr.
the President,
the White -
080:41b
Regraded Unclassified
83
FEB 10 1941
Dear Mr. Presidents
the I - back to - office, I found that the
Lend-Lease 2111 clearly covers agricultural products. the
bill itself defines the expression "defense article" to in
clude not only are and implements of war but also any other
article or comunity for defense purposes.
to remove my doubt an the question, the Report of
the House Condition an Foreign Affeirs specifically stated
that -
"It should be noted that the term
'dafunce crticle' invivies not only all
are, musitions, and implements of w,
but also other articles w camedities
such as cotton, whest, and all other
agricultural products which my be -
easy for defense purposes."
to your information, I - enclesing a mohol copy
of the House Comittee Report.
Faithfully yours,
(Signed) H. Morgenthau, of
the President,
the White House.
Employere
OSC:djb
Regraded Unclassified
84
77TH CONGRESS
1st Session
}
HOUSE OF REPRESENTATIVES
REPORT
No. 18
TO PROMOTE THE DEFENSE OF THE UNITED STATES
JANUARY 30, 1941,-Committed to the Committee of the Whole House on the state
of the Union and ordered to be printed
Mr. BLOOM, from the Committee on Foreign Affairs, submitted the
following
REPORT
[To accompany H. R. 1776)
The Committee on Foreign Affairs, to whom was referred the bill
(H. R. 1776) further to promote the defense of the United States by
supplying material aid to those countries whose defense is vital to the
defense of the United States, and for other purposes, having considered
the came, report favorably thereon with amendments and recommend
that the bill as amended do pass.
The amendments are as follows:
Page 3, line 2, strike out the period and insert in lieu thereof a
comma and the following:
but DO defense article not manufactured or procured under paragraph (1) shall
In any way be disposed of under this paragraph, except after consultation with the
Chief of Staff of the Army or the Chief of Navul Operations of the Navy. or both.
Page 3, after line 18, insert a new subsection as follows:
(c) Neither the President nor the head of any department or agency shall,
after June 30, 1943, exercise any of the powers conferred by or pursuant to sub-
section (a), except to carry out a contract or agreement with such a government
made before July 1, 1943,
Page 3 after subsection (c) insert a new subsection as follows:
(d) Nothing in this Act shall be construed to authorize or to permit the au-
thorization of convoying vessels by naval vessels of the United States.
On page 4, line 3, after "Sec. 5," insert "(a)", and on page 4, after
line 11 insert a new subsection (b) as follows:
(b) The President from time to time, but not less frequently than once every
90 days, shall transmit to the Congress a report of operations under this Act
except such information as be deems Incompatible with the public Interest to
lisclose. Reports provided for under this subsection shall be transmitted to
de Secretary of the Senate or the Clerk of the House of Representatives, as the
case may be, If the Senate or House of Representatives, as the case may be, is
not In session.
2
PROMOTE DEFENSE OF THE UNITED STATES
PROMOTE DEFENSE OF THE UNITED STATES
8
GENERAL STATEMENT
THE - of the
language in section 2 (a) article" of the bill when describing read what
10, 1941. Full and extensive bearings on the 1
This bill was introduced in the House of on
"defense bill: together
2 weeks by your committee. The committee heard,
Secretary of State Cordell Hall, Secretary of the Treasury Houry
subject to the limitations are
to in authorize the bill, the whether disposition or not of they defense
Morgenthau, Jr., Secretary of War Henry L Stimson, Secretary of
articles, articles which have been manufactured vital to or procured national especially
the Navy Frank Knox, the Director of the Office of Production Man.
defense country the defense of which of is is our which security. not
agement, William S. Knudsen, Ambassador Joseph P. Kennedy, Mr.
for the any equipment to be 60 disposed equipment then was the dis-
Norman Thomas, Mr. Hanford MacNider, Col. Charles A, Lindbergh,
manufactured If or procured specifically for such with a country, the Chief of Staff
Gen. Hugh S. Johnson, Dr. Brooks Emeny, Mr. William R. Cantle,
position can only be made after consultation of the both,
Rev. Gerald Smith, Mr. John Burke, Mr. Benjamin C. Marsh, Mr.
of as provided by your committee's emendment to paragraph (2) of
the Army or the Chief of Naval Operations Navy, or
William J. Grace, Mr. William C. Dennis, Ambassador William C.
Bullite, Gen. John F. O'Ryan, Miss Dorothy Thompson, Minister to
section a (a).
Norway Mrs. J. Borden Harriman, Mr. William Green, Mr. Louis
Waldman, and Hon. Ernest W. Gibson. Statements were submitted
the national defense, to authorize the Secretary of War, the Secretary
(2) Empowers the President, when he deems it in the interest of
by many others, The committee also heard, in executive sesion. Gen.
of prove, repair, outfit, recondition, or otherwise to place in good
the Navy, or the head of any other governmental agency, to test,
George e. Marchall, Chief of Staff of the Army, Admiral Harold It,
Stork, Chief of Navid Operations, and Gen. George IT. Brott, Active
working inspect, order IL vessel or other defense article owned or controlled by
Chief of the Air Corps, Also appearatives were made by Members
United a States. However, this additional language in section $ (a)
nation whose defense the President deems vital to (lie defense of the
of Congross
From Chese heneings and the public discussion and debate nil Um.
of the bill witing forth what is included in the phrase "defense article"
bill, it has been clear to your committee that our national policy in and
in not intended to, and does not, in any way enlarge OF modify the
should be: (a) To keep oill of war: and (4) for our own national BALL
powers of the Government to requisition any defense articles such as
pity, to aid Britain and those other nations whose defense in vital to
foreign ships interned in our ports.
the defense of the United States by supplying them as quickly and
The definition in section 2 (b) of "defense information," when read
as officiently as presible with defense articles in a munney consistent
together with the substantive provisions of the bill, means that only
with OUR democratic procedures.
then plans, specifications, designs, prototypes, or other information
(In the considered opinion of your committee, the bill. as amended,
pertaining to defense articles which have been actually transferred,
aquarely nuots these objectives of our national policy. It is the con-
Ridered view of your committee, insofar as human minds can evaluate
of which is vital to the defense of the United States. The bill does not
pursuant to the bill, can be communicated to a country the defense
the situation, that the probable effect of the bill will be to keep us ont
communicate any defense information unless such communication follows
in way enlarge the powers of the Government or its officers to
of war rather than to get ns into it, It is also the judgment of your
committee that the bill provides the most efficient way of supplying all
after, and is incidental and relates to, a defense article transferred
possible insterial aid to those countries which are resisting aggression.
pursuant to the bill. The obvious purpose of authorizing the com-
It accomplishes this objective in a menner which is best for our fill-
inmication of such defense information is to enable the country to
tional defense and wholly consistent with the Constitution and
which defense articles are transferred intelligently and effectively to
international law.
que such defense articles. Obviously, neither this definition nor any of
the substantive provisions of the bill would empower the Government
ANALYSIS (if THE BILL
OF any of its officers to communicate information concerning, for ex-
Section I of the bill contains the short title, "An Act to Promote the
attiple, the defenses of the Panama Canal or of Fort Knox.
Defense of the United States." It requires no comment.
Section 25. is the heart of the bill. Briefly, it empowers the President
Section # of the bill contains the definition of the words "defense
to authorize the Secretary of War, the Secretary of the Navy, or the
article" and "defense information." It should be noted that the term
head of may other department or agency of the Government, to manu-
"defense article" includes not only all arms. nunitions, and unplements
of War, Int also other articles or commodities such as cotton whent,
minicate defense information, to or for the benefit of those nations the
facture (IF procure, dispose of and repair defense articles, and to com-
other agricultural products when may be necessary for defense
defenso of which is vital to the defense of the United States, nutwith-
of DUTDOMS, The term does not include men nor does any other provision
stunding the provisions of any other law.
the bill denl with the utilization of our armed forces.
The expression "notwithstanding the provisions of any other law"
The term "defense acticle" is also by the terms of the bill intended
has been used by the Congress since shortly after the formation of the
any foreign country under the bill but also articles to of which the
to include not only articles manufactured or procured especially for
Union. In 1794, the Congress granted exemption from customs duties
to certain munitions, "anything in any former law to the contrary not-
United States or any foreign country either now has or or horenfter
withstanding" (1 Stat. 370). Since that time a similar phrase has been
nequires fitle, possession, OF control,
med inmunorable times, as for instance in the period from 1814 through
1822: a State 49, 143, 261, 334, 412, 402, 582, 610, 640, 662, It has also
4
PROMOTE DEFENSE OF THE UNITED STATES
PROMOTE DISPENSE OF THE UNITED STATES
5
been and many times since then, as for example, in sections A (a) and
14 (a) of the Act of June 28, 1040 (Public, No. 671, 70th Cong.)
does not in any way authorize the extension of credits by privute
The phrase "notwithstanding the provisions of any other law" has
bill individuals to any foreign country which has defaulted on its debt to
not only been used many times, but its meaning is clear. When
the United States: it simply sets up a method for supplying material
statute containing this language covers is general subject matter web 9.
aid, in the interests of our national defense, on a straight government-
as the disposition by the Government of military and nayal equipment,
fo-government basia.
such a general statute prevails over specific statutes covering part of
Nor does this bill repeal the provisions of the Neutrality Act of 1989,
the field or inconsistent with the general statute. Statutes the
which by its terms is applicable to private persons and corporations
plication of which would be inconsistent with the provisions of metion ap-
and not in the Government itself. Section 7 is the only provision of
8 (a) are not repealed by the bill. The only effect of the phrase "Ther
(he Noutrality Act which might possibly apply to the Government.
withstanding the provisions of any other law" is to suspond the
That spetion is not by its express terms made applicable to this
plication of such inconsistent laws in order to make possible ap- the
Government, although it does apply to Government corporations such
effective earrying out of the provisions of section 3 (a), Such laws
the Export-Import Bank. It should be noted, however, that in the
remain in full force and effect with respect to all other matters to which
as course of the discussion of that section of the Neutrality Act of 1939
they now apply. This H. R. 1776, insofar as it provides that military
the floor of the Congress some of the Members of Congress thought
equipment can be disposed of on such terms as the President derms
that on il would apply to the extension of credit by the Government. See
sutisfactory, would provail over a statute requiring public advertise
ment before military equipment can be transferred.
if it should be assemed that the spirit of section 7 of the Neutrality
(190) 85 Cong. Rec. 1017; (1989) 85 Cong. Rec. 516. However, even
Alno, the present bill, by empowering the President to authorize the
Act makes it applicable to the Government, it would be modified by
Secretary of the Navy, for example, to build or procure torpedo boats
this hill insolar as extensions of credit by the Government may con-
specifically for a belligerent whose defense is vital to our defense and
ceivably be involved and only to that extent.
to release them for export. would prevail over section 8 of the Act of
Paragraph (1) of section 8 (a) of the bill empowers the President,
June 15, 1017 (40 Stat. 229), which now mukes it unlawful to and
when he deems it in the interest of the national defense, to authorize
ngt of the United States a vessel of war built for it belligerent,
the Secretary of Wur, the Secretary of the Navy, or the head of any
Similarly, the present hill, ns amended, would prevail over the act
other department or agency of the Government ^(1) To manufacture
of July 28, 1802, as amended (27 Stat. 321: 45 Stat. 988) which author-
in arminale, factories, and shipyards under their jurisdiction, or other-
ixes the Secretary of War in his discretion, if be deenis it to be in the
wish procure, any defense article for the government of any country
whose defense the President deems vital to the defense of the United
public good, to lease, for a period not exceeding 5 years and revocable
at any time, such property of the United States under his control as
States." At the present time, the Government has no statutory authority to
may not for the time be required for public use, Under the terms of
the present bill, the President, after consultation with the Chief of
manufacture military and naval equipment in its arsenals or to pro-
Staff of the Army, in appropriate cases, could authorize the Secretary
cure such equipment from private manufacturers directly on behalf
of War to lease property, over which the Secretary of War has control,
of any foreign government, except for the American republics pur-
surnt to the Joint Resolution of June 15, 1940 (Public Res. No. 88,
which would not be revocable at the option of the Secretary of War,
The expression "nolwithstanding the provisions of any other by"
70th Cong.). This paragraph proposes to enlarge the Government's
when read together with the whole of the bill, as amended, does not
power in this respect to meet the present situation.
in any way modify, repeal, or change such legislation as the Walsh-
This paragraph does not violate international law insofar as the
Healey Act, the Wage-Hour Law, the Eight-Hour Law, the Wagner
maintacture or procurement of defense articles may be carried on for
Act, or other similar provisions of domestic law because there is no
If belligerent country whose defense is vital to the defense of the United
inconsistency between them and this bill. These laws continue in full
States. In the first place, it is is firmly established principle of inter-
furre and effect and are in no way affected by this bill. Insufar as
national law that a nation is justified in acting in its own self-defense.
the powers granted by subsect (1) of section 3 (a) are concerped.
Secondly, mutuality is an accepted principle of international law as
giving the Secretary of War, the Secretary of the Navy, nb the load
well as of equity, and a nation which violates the basie rules of inter-
of any orline department OF agency, when authorized by the President,
national law is not in a position to claim that another nation, in the
the power to manufacture or procure defense articles, DO discretion
interests of its own defense, is not complying with the less basic rules
is given to waive domestic legislation of the kind mentioned.
of international law. Furthermore. the Kellogg-Briand Pact, which
The expression "notwithstanding the provisions of any other law"
is DI part of international law not only was intended to outlaw force NS
does not repond the Johnson Act. By its specific terms and by its spirit,
a Deans of resolving international disputes, but its violation has also
that Act does not apply to this Government, to A public corporation
been regarded by many distinguislied international lawyers as giving
controlled by the Government. The Johnson Act only prohibits the
created by special authorization of Congress or to a public corporation
any signatory the power:
"In decline to observe townrd the State violating the Part the dulles prescribed
extensions of credit by individuals OF private corporations to n. foreign
by International Law, spart from the Part, for a insural in relation to " beltig-
Proof. (and to) Supply the Right attacked wilh financial or material assistance,
country which has defaulted on its debt to the United States. This
Invisting muntilone of war,
6
PROMOTE DEPENSE OF THE UNITED STATES
PROMOTE DEFENSE OF THE UNITED STATES
7
Germany, Italy, and Japan are parties to the Part. Se, too, are China
Ethiopia, Austria, Czechoslovakia, Poland, Norway, Denmark, Neth.
relations This consideration, LEX connection with what we have already said on
erlands, Belgion, Albania, and Greece, The United States in alm)
mental the prover to my down narrowly by which The President
estijed, discloses the nnwisdom of definite requiring staudards Congress in this field of govern-
party to the Pact. The Pact is consistently interpreted by dutin
is to be governed.
guished international law experts to mean that A violator of the Paet,
Section a also empowers the President to require that in return for
such AS Germany, cannot legally renounce the Pact by its violation.
the disposition of defense articles, any country, for example Britain,
It should also be noted that Hague Convention No. XIII of 31/07,
shall pay with rubber, tin, the transfer of defense plants owned in this
which is often erroneously given as a reason in international law by
contiry, or any other direct or indirect benefit to the United States.
prohibiting the supplying of material aid of the kind in question, in
The compelling need for this provision is the fact that Britain, for
inoperative by its own terms. Article XXVIII of the Hague Can.
example, has only enough assets which can be converted into dollars
vention specifically provides that the Convention shall not apply unless
in both this country and abrond to pay for orders already placed in
"all the belligerents are parties to the Convention." Great Britain
this country. According to the testimony of the Secretary of the
and Italy are not parties to the Convention.
Treasury, Britain does not have available assets convertible into dollars
Paragraph (2) of section 3 (a), ne amended by your Committee,
which ean be used to place further orders or to nequire further defense
empowers the President, when he deems it in the interests of national
articles in this country. The flexibility granted by this provision to
defense, to authorize the Secretary of War, the Secretary of the Navy,
the Chief Executive, who is, by the Constitution, the Commander in
or the head of any other department or agency of the Government, "To
Chief of the Army and Navy, is intended to enable him to net quickly
sell, transfer, exchange, lease, lend, or otherwise dispose of, to any
and decisively in the best interests of this Nation. It is conceivable
such government any defense article, Intr no defense article not mame-
that our national security may be materially furthered by supplying
factured nt procured under paragraph (1) shall in any way be disposed
certain defending countries, such as Britain, for example, with certain
of under this paragraph. except after consultation with the Chief
was equipment without repayment in kind or property or any benefit
of Staff of the Army or the Chief of Nuval Operations of the Navy,
other time that Britain actually uses it in the defense of the British
or both."
Isles, thereby furthering our own national defense. Where the in-
This, unquestionably, is the most important single provision of the
tenests of our national defense are consistent with requiring payment
bill. Ti authorizes the disposition by this Government, to any nation
for defense articles, for example, in tin, rubber, or other property, the
whose defense is vital to the defense of the United States, of any
Chief Executive of this Government undoabtedly will make the best
defense article upon those terms and conditions which the President
bargain possible for this country. Under this bill, this Government
deems sutisfactory. As to defense articles which are not specifically
would be empowered to transfer to Britain, for example, certain de-
manufactured or procured on behalf of such a foreign government,
fense articles for use in the defense of the British Isles, resulting in a
the disposition can only be made after consultation with the Chief
benefit to the United States in that, if Britain is successful in her gal-
of Staff of the Army or the Chief of Naval Operations of the Navy,
lunt defense of our civilization, our defense expenditures are likely to
or both. This provision, in a manner wholly consistent with our
be reduced, or if Britain's ability to hold ont is enhanced, we thus
Constitution, gives the flexibility necessary to meet the fust changing
obtain valuable time adequately to prepare. In the opinion of your
situation in the war abroad in order that our own national defense
committee, this would be one of the kinds of benefits contemplated by
interests may be served best, It places this power of negotiation and
the bill. However, this power is discretionary and not mandatory.
disposition in the President, the Chief Executive and Commander in
In addition to such a benefit, the Government, of course, can require
Chief of the Army and Navy, As Mr. Justice Sutherland suid in
payment in kind or property,
United States V. right Emport Corp., 299 U. 3(4, 319-822:
Paragraph (8) of section 8 (n) enables the President to authorize
the Secretary of War, the Secretary of the Navy, or the head of any
It is Important to bear in mind that we are here dealing not nlone with an
authority rested In the President by no exertion of legislative power, but with
other department or agency of the Government, "To test, inspect,
such an authority plus the very delicate, plenary and excinsive power of the
prove, repair, outfit, recondition, or otherwise to place in good work-
President as the sole organo of the Federal Government in the field of Interna-
ing order any defense article for any such government." Under this
tional relations
It Is quite apparent that If, in the mulutenance of
provision, the War Department could, for example, test tanks pro-
aur International relations, emburrassment-perbape arrions
cured for Britain at its Aberdeen Proving Ground, and the Navy
to be avoided and surgers für our alms achieved, congressions) legislation which
le In be made effective through negotiation and loquiry within the International
Department could repair the H. M. S. George V in the Norfolk Navy
Held trinst often arring to the President a digree of discretion and freedom from
Yard, if the President deemed it. in the interest of the national defense
involved statutory restriction which would not be admissible were domestic affairs alone
to do 50, Here again the power is permissive, not mandatory.
When the President le to be authorized by legislation to net in respect of a
These permissive powers, if exercised, would not violate interna-
bears to mind the Important remideration that the form of the President's
maller Intended to affect a signation in foreign territory, the legislator properly
tional law for the reasons previously given in connection with the
dismassion of paragraph (1) of section 3 (a).
acilan-or, Indeed, whether he shall net at nli-may well depend, anong other
Paragraph (4) of section 8 (a) enables the President to authorize
things, upon the nature of the confidential Information which be has of may
therenfter receive or upon the Hiret which his setton may have upon our fureign
the Secretary of War, the Secretary of the Navy, or the head of any
other department or agency of the Government, "To communicate to
8
PROMOTE DEFENSE OF THE UNITED STATES
PROMOTE DEFENSE OF THE UNITED STATES
9
any such government any defense information, pertaining to any
lense article furnished to such government under paragraph (2) de at
tion, a thousand pursuit planes which would require
A contract with such N country made on December 19 1, months 1941, to to
this subsection." In addition to the explanation about this mbjos
procore could be carried out by delivery of the planes in August could
previously given in this report, several other facts should be noted
perform 1943. However, 14 similar contract with such a country
Within its limitations, this section covers two practical situations
of be entered into on July 2, 1943. In this connection it should
The first is where, for example, B private individual OF a firm has
not be noted that in addition to this time limitation provided by
patent on a particular item of military equipment, such as, for in. 1
this also amended subsection (c), the bill cannot be completely carried
stance, the Sperry bombsight. In such n ense-prior to recent logis.
into effect unless and until Congress appropriates the funds in the
lation-it has been the practice of the War and Navy Departments
usual manner to manufacture or procure defense articles porsuant
to obtain a contract obligation from the holder of the patent rights
to be discussed in more detail in connection with section 6 of the bill,
paragraph 1 of section 3 (a). This appropriation limitation will
not to disclose the patent OF military secret without first obtaining the
consent of the War or Navy Department, Normally, after K new
mendment, speaks for itself. This subsection provides that the bill
Subsection (d), which is added to this bill by your committee's
sight is developed, the War and Navy Departments consent to the
release of the information. Under this section of the bill, read in.
shall in to way be construed to authorize or to permit the authorizing
gether with section 7, the release, for example, of the Sperry botnbaight
of convoying by naval vessels of the United States. In fact, without
to the Chinese Government would carry with it the obligation en the
the amendment it was the view of your committee that nothing in the
part of the Secretary of War or the Secretary of the Navy to son to
bill in any way enlarged the powers of the Navy to convoy vessels.
protected. it that the patent rights of the American fiolder were adequately
However, to avoid any doubt on this highly controversial issue, your
committee deems it wise to recommend this amendment.
Another type of case is the one where the Government itself bolds
Sections 4 through 8 of H. R. 1776 are substantially the same as 6BC-
the patent to n. military or naval invention by reason of a discovery
tions : through 7 of the Aid-to-American-Republics Joint Beso-
made by employee of the Government in the scope of his govern.
lution of June 15, 1940 (Public Res, No. 83, 76th Cong.), except for
mental work and transferred pursuant to statute to the Government,
committee amendment adding a new subsection (b) to section 5
or where the Government has otherwise obtained such N. patent in its
n. of this bill, to require reports to the Congress of the details of the
own name. Paragraph (4) of section 3 (n) of the bill enables the
transactions disposing of defense articles, The Act of June 15, 1940,
President to authorize the Secretary of War or the Secretary of the
does not require such reporting to the Congress.
Navy to communicate the defense information, relating to any such
Section 4 of H. R. 1776 is intended ILS a fimitation upon the powers
defense article which has been transferred, to a country whose defense
granted by the bill and as a protection to the Government. It retains
is vital to the defense of the United States.
Paragraph (5) of section 8. (u) enables the President to authorize
articles transferred to any country whose defense is vital to the defense
part of the control in the United States Government over defense
the Secretary of War, the Secretary of the Navy, or the head of any
of the United States. Thus, for example, rifles transferred to Britain
other department or agency of the Government, "To release for export
for the defense of the British Isles could not be transferred by Britain
any defense article to any such government." This provision does
to any other country without first obtaining the consent of the
not in any way modify or enlarge the right to transport or deliver
President of the United States.
defense articles.
Section 5 of the bill requires the keeping of accurate and detailed
The intent and purpose of this paragraph is essentially twofold:
records showing the quantities, character, value, terms of disposition,
(1) As already indicated, it prevails over existing laws prohibiting
and the destination of the defense articles and information transferred
the taking out of the United States of vessels of war built for a bel-
to foreign government. It also requires the reporting of such
ligerent: and (2) it makes it possible for the Secretary of War, for ex-
information any to the Congress, insofar as it is compatible with the public
ample, to release for export defense articles for Greece without requir-
interest to do so. It also requires reporting to the Administrator of
ing a license from the Administrator of Export Control pursuant to
Export Control.
section 6 of the act of July 2, ID40 (Public, No, TOS, 76th Cong.).
Section 6 of H. R. 1776 contains nn anthorization for an appropria-
However, it should be noted that under section 5 of the bill, as
tion, Such an authorization, of course, does not appropriate funds
amended by your committee, full and detailed reports of the trans-
nor does it. make available funds which can be used to manufacture
actions must be made to the Congress and to the Administrator of
or procure defense articles for disposition pursuant to the bill.
Export Control.
Article I, section 9. clause 7 of the Constitution provides that:
Subsection (b) of section 3 has already been discussed in detail,
Subsections (c) and (d) of section 3 are both committee amend-
No shall be drawn from the Treasury, but in Consequence of Appropria- and
thous money made by Law: and a regular Statement and Account of the Herelpts
Dients. Subsection (e) fixes June 30, 1915 as the terminal date of
Expenditures of all public money shall be published trom time to time.
the powers granted to the President or the head of any department
It is, therefore, illegal to contract or otherwise to commit the Gov-
foro that date, with a government whose defense is vital to the defense
or agency of the Government, except that contracts entered into be
erhinent, unless Congress has appropriated funds therefor, OF author-
of the United States, may be carried out. Tinus, by way of illustra-
ized the commitment.
10
PROMOTE DEFENSE OF THE UNITED STATES
PROMOTE DEPENSE OF THE UNITED STATES
11
Paragraph (b) of section 6 provides, in effect, B. revolving fund,
in connection with the formulation British of certain tanks, the standard regulations speci-
that any moneys collected from the disposition of articles pursuant to to
instance, both United States and with the advice
ment under the This is a customary and valid provision. Article
the bill can be bill. used for two years to manufacture or procure equip.
fications well for provide that the Secretary of Ordnance, War, acting should determine
might Chief of Staff and the Chief of thick. Similar
have the power-
I, section 8, clause 12 of the Constitution provides that Congress shall
of the armor should be 1 inch or 2 inches for in the regu-
a 1 a a admimistrative power
equally well be provided can be delegated.
shall he for a longer Term than two Years:"
"To roise and support Armles, but no Appropriation of Money to that The
CONCLUSION
It is well known that the purpose of this constitutional provision in
to prevent a large standing army without the constant check and
firm opinion of your committee that, taking of H. into R. considera- 1776 into
veillance of the Congress through the means of appropriations. Rif. See
tion is existing of the highest importance to the vital interests our
It is the world conditions, prompt enactment of country-
The Federalist, No. XXVI, It should be noted that this provision
of the Constitution. neither by its terms nor its spirit, applies to
and law even of our civilization.
appropriations for military equipment or defense articles, See
(1904) 25 Op. Atty. Gen. 105. It has long been customary for the
and naval equipment. During the World War there were innumer.
Congress to provide for revolving funds in connection with military
able statutes making provision for similar revolving funds. A sim-
ilar provision is contained in the Act of October 10, 1940 (Public
Res. No. R29, 76th Cong-the Requisitioning Act). A provision
virtually identical for present purposes was included in the Act of
June 15, 1940 (Publie Res. No. 83, 76th Cong.). This is the Act
authorizing material aid to the American republics.
and the head of any other department or agency concerned, to make
Section 7 requires the Secretary of War, the Secretary of the Navy,
provision for safeguarding the rights of citizens of the United States
who have patent rights in any defense article or defense information
transferred to a foreign government,
Section 8 authorizes the Secretaries of War and Navy to purchase
OF arouire arms, ammunition, and implements of war produced within
the jurisdiction of any country whose defense is vital to the defense of
the United States, if the President deems such a purchase or acquisi-
tion necessary in the defense of the United States. Under this pro-
vision, the Secretaries of War and Navy could be authorized, for
example, to purchase tin from Bolivia or power-driven turrets from
Canada, if the President considered such a purchase or acquisition
necessary in the interests of the defense of this country.
Section 9 authorizes the President to formulate rules and regulations
which may be necessary to carry out the provisions of the bill, and he
may exercise any power or authority conferred upon him by the bill,
through such department, agency, or officer as he shall direct.
issued under an Act must, of course, be consistent with the terms and
This is a customary statutory provision. Rules and regulations
purposes vide of the Act, Thus, the President cannot, for example, pro-
citizens in any defense articles which are transferred to n. foreign
by rules and regulations that the patent rights of American
government can be disregarded. since this would be contrary to the
provisions of section 7 of the bill.
this section to delegate his authority under the bill, the President can
By his rules and regulations and by the authority vested in him by
provide who that the actual administration shall be handled by those people
know most about the subject matter to be covered. Thus. for
* dear Ms. Presidents
I thought the emolosed number
of editorial opinion on B. n. 1776
might be of interest to you.
Yours sincerely,
Henry
The President,
The White House.
By Hand 2/10 4.45
86
February 10, 1941
My dear Mr. President:
I thought the enclosed summary
of editorial opinion on H. R. 1776
might be of interest to you.
Yours sincerely,
Henry
The President,
The White House.
By Hand 2/10 4:45
Regraded Unclassified
87
February 10, 1941
My dear Mr. President:
I thought the enclosed summary
of editorial opinion on H. R. 1776
might be of interest to you.
Yours sincerely,
Jenny
The President,
The White llouse.
at
By Hand 2/10 at4:45
Regraded Unclassified
88
DECLAR OPINION ON 1.1. 1776
General Reaction
Editorial judgment on B. R. 1776 has registered a
marked swing toward acceptance of the bill during the
progress of House and Senate Committee hearings. Almost
all newspapers acknowledge that enactment of the
legislation in some form is assured. From the outset,
there was preponderant approval of the bill's purposes.
Opposition was largely directed toward securing
restrictive amendments. But even this opposition has
undergone a distinct dilution during the past week.
Factors Diminishing Opposition
It is evident from a study of newspaper editorials
that three factors have been responsible for moderating
criticism of the bill:
1. There was virtually unanimous applause for
the bi-partisan White House conference on the bill. In-
mediately after it, editorials significantly relaxed the
partisanship of their initial approach.
2. Administration acceptance of the four amendments
agreed to at the White House conference spiked many
editorial guns. It has been generally recognized that
Deaml
89
Editorial Opinion on 1776 ... 2.
the Administration passessed the votes to pass the bill
on its own terms. These limitations were interpreted,
therefore, as "concessions," representing & conforting
degree of victory for the critics.
3. There has gradually seeped through to editorial
ivery towers a comprehension of the fact that the President's
powers as Commander-in-Chief of the nation's armed
forces were conferred on him by the Constitution, instead
of by H. R. 1776, and that these cannot be abridged.
This belated understanding has, in large measure, quashed
the "dictator" argument profusely advanced in early
comments. Editorial writers, of necessity, marry an
idea in haste and divorce themselves from it at leisure.
Nature of Opposition
A decided majority of newspapers approve Aid-to-Britain
as & settled feature of American foreign policy and accept
the principle that it must take something akin to the
Lend-Lease form. Opposition to E. R. 1776 has, in
consequence, been temperate in tone on the part of most
commentators. It follows three main lines:
1. That the bill confers dictatorial powers on the
President. Only a few newspapers (notably The Chicago Trib-
une, The Daily Worker, The Boise Stateman, The Cedar
Regraded Unclassified
90
Biltorial Optates - 1776 ... 3.
Regide Casette and The Colorado Springs Gasette) have
iniulged in unrestrained thumping of this thesis.
Heat of the viewing-mith-clam is of as indefinite
character and has an apparent 202 form quality; 10
- serely to serve that any proposal advanced
by the Administration must be watered down.
2. That the bill will involve us in war. libet
objections on this basis are aimed at deleting from
the bill the authorization to permit the repair of
British ships in American porte and at writing into 18
& prohibition of convoys.
3. That the United States is being swindled by
the British. This impression proceeds from the persistent
delusion that the British still peasess considerable
assets convertible into dollars. There is also
discarmible a hangover from the antique American inferierity
complex which holds that this country 10 bound to be
hornswoggled in any deal with the shrowd diplomate of
Europe.
Objectors in this category advance a number of
counter proposals, the met popular of which is the one
spensored by the Scrippe-Hourd papers to take over
Britein's island possessions in the Atlantic. At the
other extreme are seattered suggestions that American
Regraded Unclassified
91
Editorial Opinion on 1776 ... 4.
material be granted to the British as a free am.
There is centinued and widespread insistance that the
British be compelled to exhaust their own recources
before receiving financial aid from the United
States.
To meet these objections, it might be well to 20-
emphasise the point that the British have genuinely
dug deep into their own pockets and to demonstrate
that this country has received concrete benefits from
Britain in the form of military information, patent
rights and industrial expansion, as wall as in the
defense of democracy.
A.B.
92
FEB 10 1941
My dear Mr. President:
It occurs to - you might be interested in the
attached table showing the number of military and
commercial transport airplance delivered by American
manufacturers during specified intervals covering the
period from Jamary 2, 1940 to February 1. 1941. The
figures in this table are elassified herisontally w
type of airplane. Vertically, they are classified both
w class of purchaser and by periods of time. the first
time period revered is Jumary 1 to July 6, 1940.
Succesding figures are for bi-weekly periods.
Faithfully,
(Signed) H. Morgenthar
The President,
the White House.
Attachment
SQT:GCH:vea
2/10/42
93
FEB 10 1941
my door Mr. Presidents
10 coours to - you might be interested in the
attached table showing the musher of military and
commercial transport airplanes delivered w American
namfacturers during specified intervals covering the
period from Jamary 3. 1940 to February 1, 1941. The
figures in this table are elassified horisontally by
type of airplane. Vertically, they are elassified both
w class of purchaser and W periods of time. the first
time period envered is Jumary 1 to July 6, 1940.
Succesding figures are for bi-weekly yeriods.
Phithfully,
(Signed) H. Morgenthau
The President,
the White House.
Attachment
By Hand on 2poat 45
aBA
80T:0CH:vaa
2/10/41
565
FILE COPY
RICTLY CONFIDENTIAL
DELIVERIES or AIRPLAMED, or FUNCHASERS AND BY TYPES OF FLAVES
January 1. 1940 - February 1, 1941
Other
Bontere
Pureuits
Trainers
allitary
Commercial
planes
Total
clanse
TOTAL ALL FURCHASERS
Jan. 1 - July €
569
630
946
106
420
2,693
July 7 - July 20
63
71
96
3VD
6
40
276
July F1 - Alle- 3
56
99
131
6
5%
346
AUE. 4 - Aug. 17
55
71
139
4
51
320
Aug. 1e - Aug. 31
54
65
131
14
53
dent. 1 - 3ent.14
337
16
61
172
6
LA
300
Sent.15 - Sent.25
26
104
171
25
206
and
9
116
64
369
Jest.29 - Dot. 12
Dot, 13 - Det. 26
"19
28
6
184
DI
35
305
Cot, 97 - Now. 9
36
105
159
9
28
342
DOV. 10 - Dow, 23
19
93
96
6
Nov. 24 - Dec.
19
253
61
114
179
16
Dec. & - Dec. 21
37
405
63
113
136
2
Dec. 27 - Jan. -
79
386
95
134
179
4.
26
Jan. 5 - Jan- 16
438
60
97
185
5
36
406
Jan. 19 - Feb. 1
79
151
324
33
22
609
Subtotal July 7 - Fab. 1
780
1,471
2,491
130
659
5,531
Total Jun. 1, 1940 - Feb. 1, 1941
1,369
2,101
3,437
238
1,079
6,224
AND
Jan. 1 - July é
34
50
532
65
-
681
July 7 - July 20
o
21
60
11
40
74
E
-
July a - Alig. !
91
-
189
aug. 4 - Aug. 17
7
X
82
1
-
119
Aug. 14 - Aug. 31
e
36
83
6
-
135
Sost. 1 - Sept.14
4
16
7e
1
-
99
Sept.15 - Dect.28
6
4
%
87
-
-
145
Sept.29 - Cet, 12
86
-
-
104
Oat. 11 - Oct. 26
6
14
92
-
-
112
Des, 27 - Nov. 9
6
6
67
,
-
79
Nov. 10 - Now. 23
4
4.
33
2
-
43
Yor. 24 - Dad. 7
4
10
96
I
-
110
Dec. 8 - Dec. 21
1
12
43
-
-
56
Deo. 22 - Jan. 4
1
7
32
-
-
-
Jan. 5 - Jun. 14
6
6
66
-
-
Jan. 19 - Fab. 1
96
1
tu
167
-
-
170
Subtptal July 7 - Feb. 1
79
291
1,166
16
-
1,552
Total JAG. 1. 1940 - Feb. 1, 1941
113
341
1,698
61
-
2,233
SAVY
Jan, 1 - July 6
42
3
92
39
-
176
July 7 - July 20
-
-
L2
2
-
14
July 21 - Aug. 3
3
-
13
2
,
15
Aug. 4 - Aug. 17
M
-
1
Aug. LE - Aug. 31
4
?
me
3
-
6
3
an
-
18
Sept. 1 - Sept.14
6
14
5
-
31
Sept.15 - Sent.25
8
-
26
9:
-
43
Dent.29 - Det. 12
8
13
12
or
-
&
Det. 13 - Oct. 25
B
12
?
5
I
37
Dat. 27 - Nov. 9
14
11
26
9
-
60
Nov. 10 - New. 23
7
10
our
30
4
-
46
Nov. 24 - Dec. 7
6
X
10
-
78
Den. 6 - Dec. 21
2
11
4g
7
-
2
-
6%
Dec. 22 - Jan. 4
14
27
-
-
52
Jan. 5 - Jan. 18
17
14
79
5
-
115
Jan. 19 - Feb. 1
35
11
113
33
-
198
Bubtotal July 7 - Feb. 1
138
95
477
11F
-
826
Total Jan. 1, 1940 - Feb. 1, 1941
180
102
569
151
-
1,002
BRITISH EXPIRE AND PRAVOR*
Jan. 1 - July 6
500
384
20)
2
10
1,099
July 7 - July 20
55
44
17
2
-
1,1.6
July 21 - AME. 3
42
57
we
-
2
143
Aug. - - Aug- 17
44
38
27
-
2
111
AUR- 16 - Aug. 31
25
44
15
-
1
45
Best. 1 - Sept.14
5
39
37
-
81
Sept.15 - Sept.28
11
52
14
-
la
51
Sept.29 . Oct. 12
13
$
35
1
6
124
Dat. 13 - Oct. 26
13
21
13
-
1
73
Get. 27 - Nov. 9
13
76
19
-
2
112
Bov. 10 - Now. 23
Do
67
27
-
4
1P6
liav. 24 - Dec.
47
so
21
-
4
152
Dec. 8 - Dec. 21
54
B1
34
-
-
166
Dec. 22 - Jan. -
74
113
113
-
-
300
Jan. 5 - Jan. 10
57
$
9
-
5
140
Jan- 19 - Fwb. 1
43
126
40
-
-
209
Subtotal July 7 - Feb. 1
52%
97A
486
2
31
2,321
Total Jan. 1, 1940 - Feb. 1. 1941
1,024
1,362
609
4
41
3,120
OTHER
Jan. 1 - July 6
13
193
119
2
410
737
July 7 - July 20
-
6
7
-
40
is
July 21 - Alag- 1
1.
2
?
-
52
56
ave. 4 - MIR. 17
D
4d
8
-
Sg
84
Regraded
AGE- 14 - NAE- 31
17
50
-
-
52
99
Sent. 1 - Sept.14
1
49
-
45
09
-
Sent.15 - Sent.20
3
-
44
-
73
120
Sect.29 29 - Oct. 12
-
61
-
58
119
-
Date 13 - Det. 26
1
3
45
-
34
#3
Det. 27 - For. 9
45,
13
47
-
26
91
Sow. 10 - Nov. 25
-
17
6
-
15
34
Raw. 24 - Dec. 7
22
10
-
33
65
Dec. 8 - Dec. 21
6
Dec. P2 - Jan. b.
ou
it
-
72
100
4
7
-
26
#
Jan. 5 - 2m. 14
Jan. 19 - Peb. 2.
,
&
14
-
32
53
12
4
-
22
38
-
Subtotal July 7 - Fab. 1
39
103
362
-
620
1,132
Total Jan- 1. 1940 - Feb. 1, 1941
52
296
4a%
2
1,038
1,859
ffice of the Secretary of Use Treasury, Division of Research and Statistics,
February 50 1941.
Petiveries under Prench contrating VITS ends was la June 30, 1940.
95
February 10, 1941
5:18 p.m.
H.M.Jr:
I've been trying to get General Watson for
for last ten minutes.
Mrs.
Dennison:
I think he's over with the President.
H.M.Jr:
They kept telling me he was on long distance.
Tell him he's a very difficult man to talk
to.
D:
(Laughs). Well, we can't very well get
him out of the President's own room.
H.M.Jr:
No.
D:
Do you want to talk to him when he comes
back?
H.M.Jr:
No, I'd enjoy talking to you.
D:
Thank you, sir.
H.M.Jr:
Have you got & pencil?
D:
Yes, sir.
H.M.Jr:
Would you tell General Watson that on
Thursday, if convenient for the President,
I'd like to bring Mr. Arthur Purvis over;
I'd like half an hour. He has a very
important document from Mr. Churchill on
munitions, and I think it 18 well worth a
half an hour of the President's time.
D:
That's on Thursday the 13th.
H.M.Jr:
Thursday the 13th - my lucky day.
D:
(Laughs). Well, I hope it 1s.
H.M.Jr:
And I make the suggestion - just a suggestion
that it be off the record.
D:
All right. I'll do that. I'll write this up
right away and when he comes back we'll put
it before him.
H.M.Jr:
Thank you so much.
D:
Thank you, Mr. Morgenthau.
Debt Limit Bill Passed 96
APPROVED sell BAISING NATIONAL not LIMIT TO
-
It
-
sell - PASSED n votes VOTE AFTER THE muse MAD DEFEATED,
ww - VOICE wrs, a REPUBLICAN MOTION TO RECOMMIT IT AND LOUER THE
LIMIT n $60,000,000,000.
2/10--W0527P
ADD DEST BILL, HOUSE,
THE muse DEFEATED AM AMEXICANT BY PATMAN to STRIKE OUT THE SECTION
WHICH RENOVES THE FEDERAL TAX EXEMPTION PRIVILEGE FROM FUTURE ISSUES
or FEDERAL OBLIGATIONS.
me - sme, INC.
I the I SAID
- PEOPLE SAVEN w TAXING SECURITIES TAX
= TIME HAS come, saso, no TAXE a STEP TOWARD PUTTING THE
I
FAIR
SUBJECTIES
-
il
I
BASES
as
OTHER
E
Regraded Unclassified
97
February 10, 1941
5:25 p.m.
H.M.Jr:
Hello.
Operator:
Sullivan calling you from the Capitol.
H.M.Jr:
Well, I want to take McCormack. I'll talk
to Sullivan but if McCormack comes in please
put him right on, will you?
Operator:
All right.
John
Sullivan:
Hello, Mr. Secretary.
H.M.Jr:
Hello, John.
S:
The bill just passed.
H.M.Jr:
Oh, really.
8:
There were two fights: one, on the reduction
of the debt limit from 65 to 60. On the
division in the teller's vote, that was
carried as it 18 in the bill at 65 by a
vote of 195 to 105.
H.M.Jr:
Good.
S:
The other fight was on the tax exemption
feature and that was overwhelmingly in our
favor, only three votes that I could hear
on a voice vote against us.
H.M.Jr:
Good.
S:
That's all. I thought you'd want a report
before you went home, sir.
H.M.Jr:
Thank you 80 much.
S:
Right-o. And the hearing for tomorrow morning,
I think Mr. Bell told you, has been postponed
until Wednesday.
H.M.Jr:
That's right.
S:
Right-o.
98
February 10, 1941
5:30 p.m.
John
McCormack:
Hello, Mr. Secretary. How are you.
H.M.Jr:
I hear you put the bill through.
McC:
Well, yes. It all went through without
& roll call.
H.M.Jr:
The debt bill.
McC:
Yes.
H.M.Jr:
Wonderful.
McC:
Yeah, everything went through - no roll
call.
H.M.Jr:
Well, that's real leadership.
McC:
Well, it's the only way to do it. Listen,
what I wanted to talk to you about, Ray
McKeough who is on Ways and Means 1s a hell
of a good fellow. He's a wild Irishman but
a good fellow and he's got some matter out
in Chicago he's awfully interested in.
H.M.Jr:
Yeah.
McC:
He's spoken to me about it & dozen times
and he's intensely interested in it. I don't
know any facts in the case except that Ray
18 an awfully good fellow and if something
could be done for him on it, it would be
damn good.
H.M.Jr:
Well, how can I get the facts, John?
McC:
Well, I was going to ask if you'd see
Ray and go over it with him.
H.M.Jr:
Sure, any time.
McC:
All right. I'll tell him that he can call
you up and make an appointment, because
he's an awfully good fellow, Henry
......
H.M.Jr:
He comes from Illinois.
99
- 2 -
McC:
Yes, and you know he's a real fellow and
a good fellow to have in your corner and
it may be - I guess this case 1s a tax case
but it is something that he has spoken to
me about for the last year and a half or
two years and 1s apparently a matter that
he has an interest in because I guess the
fellow he's interested in has been pretty
good to him. See?
H.M.Jr:
Well, let me see him and at least I'll listen.
I'll be glad to listen.
McC:
Yes.
H.M.Jr:
And you have him call me up, will you?
McC:
I will and I don't know anything about the
facts but if there is anything you can do
why all I can say is that Ray is a darn
good fellow and I've had him in my corner
and he 18 as game as they make them.
H.M.Jr:
Fine.
McC:
Just as game 8.8 they make them.
H.M.Jr:
Well, I'll give him & courteous reception.
McC:
Well, do more than that if you can.
H.M.Jr:
Well, I don't know what the facts are, John,
but I'll be glad to look at it.
McC:
All right, Henry.
H.M.Jr:
Thank you.
McC:
Good-bye, old boy.
100
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE 2/10/41
TO
Secretary Morgenthau
FROM
Mr. Foley
Re: United States V. Joseph M. Schenck, et al.
This memorandum is written for the purpose of bringing you up
to date on the above case which will probably go to trial this
month in New York.
1. Schenck was indicted for perjury by the Grand Jury for the
Southern District of New York on June 3, 1940, the indictment con-
sisting of twenty counts in connection with transactions between
Schenck and Bioff. Schenck was also indicted on the same day for
attempted evasion of income taxes, the indictment consisting of four
counts, one for each of the years 1935, 1936, and 1937, and one for
conspiracy with his accountant, Moskowitz.
2. Meanwhile, a supplemental investigation had been made as to
the income tax returns of the Twentieth Century Fox Film Corporation
for the years 1934 to 1937, inclusive. During this investigation
the revenue agent discovered that approximately three-fifths of the
dividend declared on the common stock for the year 1937 had been paid
from capital. The result was two-fold: (1) to decrease the
dividends-paid credit of the corporation, thereby increasing its tax
liability, and (2) to eliminate three-fifths of the amount of the
Regraded Unclassified
101
- 2 -
dividends returned as taxable income by Schenck and other stockholders
and to tax such amount as a capital gain. Schenck's tax deficiency
for the years 1935 and 1936 of approximately $250,000 is unaffected.
The perjury indictments are likewise unaffected.
3. As a result of this adjustment, the Department of Justice
is considering dismissing the 1937 count in the tax evasion indictment,
which has been seriously weakened, since instead of owing $158,000
for 1937, Schenck owes at the most $46,000. It is my understanding
that Schenck will be prosecuted for income tax evasion at least for
the years 1935 and 1936.
Edward H. fally, gr.
per N.C.
102
EH
GRAY
Berlin
Dated February 10, 1941
Rec'd 9:41 pam.
Secretary of State,
Washington.
470, February 10, 3 p.m.
FOR TREASURY FROM HEATH.
The official news agency DEUTSCHES NACHRICHTEN BURO
presents an Extended resume of a speech by Schmidt,
Director of the Deutsche Bank, defending the "soundness"
of German finances. The DIENST AUS DEUTSCHLAND also
presents an optimistic EXPOSE of government finances and
monetary administration. The speech and article contain
only two new statements of interest viz: (1) an Estimate
that the national income of Germany as Extended by the
acquisition of former Polish provinces is at the present
rate of 100,000,000,000 marks per annum; (2) that some
5,000,000,000 or 6,000,000,000 marks per year of the
money capital accumulated since the outbreak of the war
originated from the liquidation of stock (a process which
has now presumably been completed).
MORRIS
NK
Unclassified
103
GRAY
JR
Berlin
Dated February 10, 1941
REC'd 1 p.m.
Secretary of State,
Washington.
463, February 10, noon.
The Luther franc was demonatized as of February 5 by
a decree of the Chief of the German Civil Administration.
The franc may bE changed for German reichsmarks which
are to bE the sole circulating currency up to March first
after which date they 111 no longer have any value.
Inform Treasury.
MORRIS
KLP
104
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Consulate, Dakar, French West Efrica
DATE: February 10, 1941, 3 p.m.
NO.: 63
FOR TREASURY.
Regular Air France passenger planes are twice weekly
taking Belgian and Polish gold to France. The amount sent
each time varies considerably, depending on how much space
is available. The French gold at Kayes (amounting to
1250 metric tons) remains intact.
WASSON.
10 Er IVAL The
EVE
DI 120 BITTED THE SR 5 41 USH
EA:LWW
Regraded Unclassified
105
TREASURY DEPARTMENT
west
INTER OFFICE COMMUNICATION
DATE February 10, 1941
Secretary Morgenthau
TO
FROM
Mr. Cochran
CONFIDENTIAL
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
£29,000
Purchased from commercial concerns
& 3,000
In the open market, sterling held steady at 4.03. Transactions of the reporting
banks were as follows:
Sold to commercial concerns
£1,000
Purchased from commercial concerns
£1,000
Closing quotations for the other currencies were:
Canadian dollar
17-1/8$ discount
Swies franc (commercial)
.2323
Swedish krona
.2385
Reichsmark
.4000
Lira
.0505
Argentine peso (free)
.2365
Brazilian milreis (free)
.0505
Cuban peso
6-13/16% discount
Mexican peso
.2066
Chinese yuan
.05-1/2
There were no purchases or sales of gold consummated by us today.
The Treasury issued licenses under both the Gold Reserve Act and Executive
Order No. 8389 as amended, permitting the Federal Reserve Bank of New York to effect
the following transfers of gold in its vaults:
$900,000 from B.I.S. account No. 2 to the account of the Bank of Portugal.
Gold in B.I.S. account No. 2 is owned by that bank.
$900,000 from the National Bank of Denmark's account to B.I.S. account No. 2
and a like amount from B.I.S. account No. 2 to the account of the
Bank of Portugal.
The second transfer is & purchase of gold by the B.I.S. from the National Bank of
Denmark and a sale of the same gold by the B.I.S. to the Bank of Portugal. Payment
for both of these gold transfers will be made on the books of the Federal Reserve Bank
of New York.
Regraded Unclassified
106
- 2 -
No new gold engagements were reported.
The Bombay gold price was equivalent to $33.96. representing a decline of 30
from last Friday's level. No silver price vas received from India today.
In London, the price fixed for spot silver was 23-5/16d, up 1/16d. The for-
ward quotation was unchanged at 23-1/4d. The dollar equivalents were 42.33$ and 42.21#
respectively.
Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44.
The Treasury's purchase price for foreign silver was also unchanged at 35#.
We nade four purchases of silver totaling 221,872 ounces under the Silver
Purchase Act. Of this amount, 171,872 ounces consisted of new production from foreign
countries, for forward delivery. The other 50,000 ounces represented part of the
Central Bank of China shipment of 822,000 ounces which arrived in this country on
January 3. So far, we have bought 700,000 ounces of this shipment.
The Federal Reserve Bank's report of February 5, listing deposits of banks in
Asia with the New York agencies of Japanese banks, showed that such deposits totaled
$104,646,000, a decrease of $1,420,000 since January 29. The largest change in
deposits took place on the books of the Mitsui Bank's New York agency, where Japanese
and Manchurian bank accounts declined by $1,305,000 to $958,000. Also reported were
the Yokohema Specie Bank Agency's dollar liabilities to and dollar claims on Japanese
banks in Asia, which stood as follows on February 5:
February 5
Change from Jan. 29
Liabilities: Deposits for Japan & Manchuria
$56,565,000
+$ 752,000
Deposits for China
38,030,000
- 574,000
: U.S. Treas. bills, comm.paper,etc.
28,590,000
- 554,000
Claims
: Loans
$56,664,000
+$ 1,995,000
#
: Other - mainly Jap. import bills.
12,068,000
+ 990,000
The last three categories refer mainly to Japanese banks in Japan and Manchuria.
HMS
CONFIDENTIAL
Regraded Unclassified
107
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE February 10, 1941
Secretary Morgenthau
TO
FROM
Mr. Haas MA
Work Projects Administration employment declined slightly
to 1,895,000 persons during the week ended January 29, 1941.
While this represents a decrease of 1,000 from the previous
week's employment, it is 17,000 more than the number of persons
employed during the last week in December.
108
WORK PROJECTS ADMINISTRATION
Number of Workers Employed - Monthly
United States
Number of Workers
1938
(In thousands)
July
3,053
August
3,171
September
3,228
October
3,346
November
3,287
December
3,094
1939
January
2,986
February
3,043
March
2,980
April
2,751
May
2,600
June
2,551
July
2,200
August
1,842
September
1,790
October
1,902
November
2,024
December
2,152
1940
January
2,266
February
2,324
March
2,288
April
2,092
May
1,926
June
1,665
July
1,701
August
1,691
September
1,704
October
1,779
November
1,820
December
1,878
1941
January
1,895
Source: Work Projects Administration
Monthly figures are weekly figures for the latest week
of the month.
They include certified and noncertified workers.
109
WORK PROJECTS ADMINISTRATION
Number of Workers Employed - Weekly
United States
Week ending
Number of Workers
1940-41
(In thousands)
June 5
1,858
June 12
1,785
June 19
1,714
June 26
1,665
July 3
1,608
July 10
1,620
July 17
1,659
July 24
1,690
July 31
1,701
August 7
1,709
August 14
1,708
August 21
1,698
August 28
1,691
September 4
1,690
September 11
1,687
September 18
1,689
September 25
1,704
October 2
1,747
October 9
1,762
October 16
1,768
October 23
1,776
October 30
1,779
November 6
1,783
November 13
1,785
November 20
1,806
November 27
1,820
December 4
1,832
December 11
1,855
December 18
1,872
December 25
1,878
January 1
1,880
January 8
1,887
January 15
1,893
January 22
1,896
January 29
1,895
Source: Work Projects Administration
110
WORK PROJECTS ADMINISTRATION
Number of Workers Employed
United States
Monthly W.P.A. Employment
Weekly W.P.A. Employment
1935
1936
1937
1938
1939
1940
41
1935
1940
1841
MAR
MAY
JULY
SEPT.
MOVA
MAS.
MAY
M.I.
ASPLA
ILLION
BILLINES
MILLIONS
MILLIONS
or
of
or
OF
MORKERS
-
WORKERS
WORKERS
3.4
3.4
3,3
JJ
1.)
1.2
3.2
3.2
3.1
3.1
2.8
2.8
3,0
3.0
2.9
2.9
2.4
2.4
2.0
2.8
2.7
2.7
2.0
2.0
2,6
2.6
2,5
2.5
2,4
1.6
1.6
2.4
2.3
2.3
2.2
2.2
1.2
1.2
2.1
2.1
2.0
2.0
,
.8
1.9
1.9
1.8
1.8
A
A
1.7
1.7
1.6
1.6
1.5
g
o
1.5
ML.
MAY
JULY
LEFT.
NOV.
JAB.
MI.
*
.
1
il
-
-
If
M
M
.
.
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
JAN.
1935
1936
1937
1938
1939
1940
41
1939
1940
-
1941
SOURCE: MORE PROJECTS ADMINISTRATION
Office el the invertary of the Treasury
2 221 52
- di - -
111
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
CONFIDENTIAL
DATE February 10, 1941
TO
Secretary Morgenthau
FROM
Mr. Haas AA
Subject: The Business Situation,
Week ending February 8, 1941.
Summary
(1) Industrial production on a seasonally-adjusted basis
made 8 further small gain in January. On the showing of pre-
liminary data, the FRB index for the month 18 now estimated
at 138, a.B. compared with 137 (revised) in December.
(2) The recent decline in prices of stocks, grains, and
some other commodities came to a halt during the past week and
B slight rally ensued, although volume of trading continued
very light. Prices of industrial materials and imported com-
modities on the whole have continued to display a firm under-
tone.
(3) New orders for steel continue in large volume. Orders
reported last week by the U. 8. Steel Corporation were at 145
per cent of capacity, down somewhat from the previous week.
While the price of No. 1 heavy melting steel scrap at Pittsburgh
has declined $3.00 per ton since the request for & cut in prices
was made in early January, it 1a reported that the new lower
price is largely nominal.
(4) Exports of domestic merchandise in December declined
alightly despite a moderate increase in shipments of essential
war materials. Exports in 1940, including re-exports, totaled
& little more than $4,000,000,000, thus exceeding the previous
year's figure by 27 per cent and reaching a new high since
1929,
(5) The national income 16 rising rapidly. Income pay-
ments in December reached an annual rate of $78.1 billions,
compared with $74.3 billions for the year 1940 and $82.1 bil-
lione for 1929. If account 18 taken of price changes, the
national income in 1940 actually exceeded that of 1929. In-
come payments in December, after seasonal adjustment, rose
more rapidly than in any other month on record.
Regraded Unclassified
112
- 2 -
Industrial production elightly higher
Industrial production on a seasonally-adjusted basie
showed a further elight rise to B. new high in January. On
the basis of preliminary data thus far available, actual
production fell a little below the previous month. Since
the decline was lese than the usual seasonal amount, the
FRB adjusted index of industrial production is now estimated
at 138 for January, as compared with 137 (revised) in
December. (Bee Chart 1.)
Although the steel and textile industries increased out-
put sbove December's record levels, the gaine were lese than
seasonal. Further gains were shown by the aircraft, ship-
building and machinery industries while actual automobile
production reached the highest level of any January on record.
The continuing high rate of operation in the automobile in-
dustry doubtless reflects in part at least the desire to build
49 new car stocks because of apprehension that the defense
program may cause curtailment in normal production. Although
new car stocks have now reached unusually high levels, pre-
liminary estimates indicate that the ratio of stocks to sales
in January WRB elightly below that of January 1940 due to the
substantial gain that has occurred in new car sales.
New orders maintain high level
Our new orders index declined slightly in the week ended
February 1 (see Chart 2), although still near the average of
the high level which has been maintained since the middle of
October. Steel and textile orders fell off somewhat, more
than offsetting the moderate gain in other components.
The failure of textile orders to increase further is
largely because of a decline in orders for woolens; orders for
cottons were higher. According to trade reports, leading
woolen manufacturers have adopted & policy of limiting civilian
orders on certain types of goode for fall delivery in order to
assure delivery of Government orders on schedule.
Heavy demand for steel continues
The steel industry has continued to receive new business
in large volume. According to the Iron Age, tonnages booked
in January exceeded the previous month's strong showing, with
increases in some instances amounting to as much as 15 per
cent. During the week ended January 30, bookings of the U. S.
Steel Corporation declined slightly but still amounted to 145
per cent of the capacity reported at the end of 1939,
Regraded Unclassified
113
- 3 -
Trade sources report that a heavy volume of buying has
been coming from automobile and household equipment manufac-
turers whose sales have been expanding. Tinplate operations,
which have been slower than most other lines are reported to
be picking up and an increasing demand 1e noted from the
railroads.
In order to meet these heavy demands, the industry con-
tinues to maintain production at high levels. Because of
the necessity of making repairs, last week's operations de-
clined to 96.9 per cent of capacity (revised basis) from 97.1
per cent in the previous week, In the current week, opera-
tions are scheduled slightly higher at 97.1 per cent of capacity.
Steel scrap market still unsettled
At the end of January it was announced that leading rail-
roads had agreed to consider $21 per ton as the top price for
heavy melting reilroad scrap at Pittsburgh during February,
thus cutting the price $1.00 per ton. This action was fol-
lowed at once by an equivalent out in the price of No. 1
heavy melting steel sorap at Pittsburgh. This carried the
price down to a quotation of $20.50 to $21.00, which 16 $3.00
below the level prevailing at the time of Commissioner
Henderson's request for 8 price reduction. It 16 reported,
however, that this new reduced quotation is largely nominal
and that normal trading in the Pittsburgh area has been dis-
rupted.
Increase in steel capacity
The American Iron and Steel Institute recently announced
that capacity to produce ingots and steel for castings by all
processes in the United States, as of December 31, 1940, W&B
84,152,000 net tone. Ostensibly this represents an increase
of 3.1 per cent, or 2,533,000 net tone over capacity avail-
able AS of December 31, 1939. Only 8. part of this, however,
represents an actual increase in plant capacity. A large
part apparently represents merely 8. re-statement of existing
capacity at higher figures, through (1) adding to active
capacity plants which had previously been removed from the
list as obsolete, and (2) raising the reported capacity of
individual plants by cutting down the allowance for repairs.
An indication of the significance of outting the repair al-
lowance may be judged from 8. recent estimate of the American
Iron and Steel Institute that the industry could operate for
8. time at 21 per cent above the present rated capacity, which
contraste with a figure of 5 per cent given by the President
of the Institute last October.
Regraded Unclassified
114
Residential construction contract awards decline in January
Residential construction contract awards in January, 88
reported by the F. W. Dodge Corporation, showed a substan-
tially greater than seasonal decline and dropped to
$111,000,000 from $159,000,000 in the previous month. Be-
cause of the inclusion of a large amount of construction re-
sulting from the defense program, residential construction
awards rose to very high levels in the closing months of
1940. (See Chart 3.) Thus, despite the decline, last month's
figures were still 44 per cent above year earlier levels.
Mortgages selected for avoraisal by the FHA thus far
in 1941 have been running ahead of the corresponding periods
of previous years. (See Chart 3.) The total for last month
was 21 per cent above January 1940 and the recovery from the
year-end decline has been proceeding at 8. somewhat faster
pace then a year ago.
Cost of St. Louis house slightly higher
The cost of a standard 6-room house in St. Louis, as
estimated by the Real Estate Analyst, rose in January to
$6,797 from $6,786 in December. This increase was due to
slightly higher costs for finished lumber and certain other
materials. The costs of unfinished lumber and other items
remained unchanged.
The Real Estate Analyst mentions that although a large
part of the direct Government purchases of lumber for can-
tonments has been completed, 110 million board feet are
#till being purchased in January and February. The Analyst
believes that the problems of transportation of lumber may
come into considerable prominence before the end of the
year, particularly in the East, owing to the probability
that some of the 89 vessele carrying lumber from the Pacific
Coast may be transferred to other uses. A sidewise movement of
of lumber prices 1s looked for, with a strong possibility
FL resumed upward movement by the latter part of the year.
December exports decline despite gains in war materials
Despite moderately increased shipments of essential war
materials, exports of United States merchandise in December
declined $6,000,000, or 2 per cent below the previous month,
to a total of $315,000,000. United States exports, includ-
ing re-exports, during 1940 totaled slightly more than
$4,000,000,000 -- a figure 27 per cent above 1939 and the
largest yearly total since 1929.
Regraded Unclassified
115
in 1 *
War materials continued to be shipped abroad in heavy
volume during December. Machinery and iron and steel exports
gained over $5,000,000 to reach $32,000,000, the second high-
rose elightly above November levels, while aircraft exports
est figure of the year. (See Chart 4.) Exports of aircraft
(including parts, etc.) in 1940 totaled $312,000,000 &B com-
pared with only $118,000,000 in 1939.
The moderate increase in war material exports during the
month was more than offset by declines in other items. Among
these were petroleum and products, automobiles, coal, and cot-
ton. (Refer to Chart 4.) Although tobacco exports showed
noticeable increase over the previous month's very low levels,
8. agricultural exports as a whole declined $1,000,000 or 4 per
cent to the second lowest level of the year. As & result,
United States merchandise exports in December as compared with
agricultural products accounted for only 8 per cent of total
22 per cent in December 1939. In fact, on the basis of quan-
agricultural exporte in the closing months of 1940 were at the
tity indexes as reported by the Department of Commerce, our
lowest level since 1869.
National income substantially increased
The national income is rising rapidly. Income payments
in December reached the highest figure for any month since
February 1930, and on 8. seasonally-adjusted basis December
showed the largest increase in income payments of any month
since the series was started in 1929.
Total income payments in 1940 rose to $74.3 billions, the
highest since 1930. (See Chart 5, upper section.) By the end
of the year this level was substantially exceeded, preliminary
nual rate of $78.1 billions. (Lower section of Chart 5.)
figures showing that payments in December had risen to an an-
While the national income in 1940 (in dollars) was below
the 1929 total of $82.1 billions, lower living costs have
raised the real national income materially above the 1929
level, (Shown by dotted lines on Chart 5 as the "purchasing
power of national income.") Allowing for the growth in popu-
lation, the per capita "purchasing power" in 1940 was about
the same as in 1929.
Weekly business indexes
The New York Times index of business activity for the
week ended February 1 rose to 122.5 from 122.1 (revised) in
the previous week.
Regraded Unclassified
116
- 6 -
The principal factor in the moderate rise mentioned was
contra-seasonal gain in automobile production which caused In
a adjusted index for this component to rise 15 points.
addition, the actual miscellaneous freight carloadings rose week more
than seasonally to the best levels for any comparable
since 1930, while the adjusted indexes of electric power pro-
duction, cotton mill activity, and paperboard production also
showed gains.
All other components of the index after adjustment for
seasonal factors showed declines. The only substantial de-
more than 6 pointe because of a more than seasonal decline in
crease occurred in the index of lumber production which fell
actual lumber production.
Barron's index of business activity for the week ended
February 1 confirmed the trend of the Times index and rose to
128.1 from 127.6 in the previous week.
Preliminary data for the week ended February 8 indicate
that the adjusted index of steel ingot production will decline
moderately while automobile production rose contra-seasonally
to a new high for the year at 127,700 units.
Commodity prices at lower level
Commodity prices strengthened at the end of last week
moderately lower. Security prices rallied elightly last week
although the average for the two weeks ended February 7 was
and thus relieved speculative pressure on commodity prices,
especially grains, fats, and oils which had been showing the
greatest weakness on the decline. In the past two weeks,
half the rise registered between the end of December and
the major declines came among the foods, which lost almost the one-
middle of January. (See Chart 6, upper section.) Certain
industrial materials resisted the decline while imported com-
modities were generally higher.
The following commodity prices were lower in the two
weeks ended February 7. (See Chart 6, lower section.)
Wheat: Substantial decrease. The leader in general price
deoline. In addition to adverse speculative influences, the
fall in wheat prices reflected favorable new crop outlook
Hemisphere. Rise of price at end of last week associated
and record export surplus of 1 billion bushels from Western
with stock market action as well a.8 Army flour
buying, improved reports of Oriental activity in export market, and
trade opinion that wheat and other agricultural commodities
may be included under terms of British aid bill.
Regraded Unclassified
117
- 7 -
Lard: Considerable decline. Followed general market tendency
in spite of fact that lard stocks in second half of January
showed 8. sizable deorease because of falling off in hog
marketings. Consumption is holding up well.
The trade estimates that Japan and Russia have purchased
over 6,000,000 pounds of lard during the past 3 weeks and
are inquiring for 800,000 pounds more. According to & United
Press dispatch to the Wall Street Journal, Russia has bought
more than 12,000 tons of copra in the Philippines and at
least 6,000 tons of coconut oil in the United States in the
last 2 months for trans-shipment to Germany where it will be
used in manufacture of explosives. Japan has purchased
2 million pounds of glycerin within the last 6 months.
Hoge and steers: Noticeable decline, in line with market move-
ments. Weekly hog receipts, however, have fallen below last
year for past 6 weeks. (Receipts represent hoge on sale at
public stockyards plus direct shipments to packers.) Miss
Harriet Elliott, NDAC Commissioner, gave support to consumer
protests against high cost of meat by eaying that Army pur-
chases are not large enough to justify any increase in price.
Her remarks were addressed to the president of the Greater
New York Hospital Association, who estimated that the price
of meat increased 25 per cent last year.
Tallow: Declined 6.7 per cent. Partly a correction of the
recent rise with liberal quantities offered at current lev-
els. It seems likely that some sales have been coming from
speculative holdings. Renderers have only & small supply
left to be sold because of recent bookings.
Cottonseed oil: Appreciable decline, along with other fate
and oils. Deliveries have been 80 heavy lately that refiners
say they cannot take orders for delivery in less than 2 weeks.
Hides: Wide decline. Deadlock in spot hide market where
packers and tanners cannot agree about price. High level of
packers' inventories may end deadlock soon.
Flaxseed: Substantial decline. Buying of linseed oil has
tapered off because of recent heavy bookings which covered
most consumers' needs several months ahead.
Rosin: Appreciable decline. A possible influence on world
rosin market 18 announcement that British Board of Trade
has reduced rosin import quota for first quarter of 1941.
Regraded Unclassified
118
Prices of imported and certain industrial materials higher
Prices of imported commodities, textile, and other indus-
trial materials resisted declines or were actually higher for
the two weeks ended February 7. (Refer to Chart 6, lower
section.)
Coffee: Noticeable increase. Increased minimum prices in
Colombia (the eighth increase since November). Brazilian
prices also higher. Ratification of coffee quota agree-
ment between United States and producing countries an 1m-
portant factor.
Cocoa beans: Large increase at end of last week offsetting
previous decline. In trade opinion, a marketing program
is now assured prescribing shares of United States and
United Kingdom markets to various producing areas along
lines of coffee program.
Rubber: Considerable increase. Freight rates from the Far
East will be increased 25 per cent beginning March 1.
Burlao: Increase of 9.7 per cent. Expected increase in
freight rate effective April 7 -- also 25 per cent.
Premium on prices for spot and afloat the largest since
outbreak of hostilities. Withdrawal of 5 British vessels
from burlap trade in past 10 days has accentuated shipping
shortage, especially because stock of unshipped goods in
Calcutta was already high.
Print cloth: Noticeable increase. Trade reports suggest
prices less important than timely deliveries.
Wool: Appreciable increase. Persistent trade buying reflect-
ing potential demand under defense program and strength in
Argentine market.
Zinc: Spot prices unchanged and nominal; futures higher.
Stocks of slab zinc at end of January reduced to 8,800 tons,
compared with 12,900 at the end of December. These stocks
were the lowest ever recorded being equal to only four days'
needs. Production showed no increase in January compared
with December.
Regraded Unclassified
119
FEDERAL RESERVE BOARD INDEX OF INDUSTRIAL PRODUCTION
1935-39=100
1938
1939
1940
1941
JFMAM J J A S o N D J F M A M J J A S o N D J. r M A M JJASONDJFMAMJ
PERCENT
PERCENT
Seasonally Adjusted
In
135
135
130
130
125
125
120
120
115
115
110
110
105
105
100
100
95
95
90
90
85
85
80
80
75
75
70
70
J F M A M J J A S o N D J F M A M J J A $ O N D J F M A M J J A S o N D J F 1941 M A M J
1938
1939
1940
Office of the Secretary of the Treasury
C-349-1
- é - ind Income
120
INDEXES OF NEW ORDERS
Combined Index of New Orders and Selected Components
Chart 2
CONFIDENTIA
1939
1940
1941
.
o
#
a
F
-
A
M
J
a
A
a
o
.
B
A
di
,
a
A
M
o
ENGENTAGE
PERCENTABLE
POINTS
MINTS
220
220
210
210
Total |oombined Index)
1000 - 100
200
200
190
190
180
180
170
170
160
160
150
150
140
140
130
130
120
120
110
110
100
100
R
W
90
60
Total escluding Steel and Textiles
80
70
70
60
60
50
50
&
40
Steel Orders
MI
30
N
20
to
Textile Orders
10
0
A
0
1
o
#
D
c.
F
#
A
E
-
J
A
$
o
.
a
J
F
-
A
.
J
J
A
5
0
.
e
1939
1940
1941
- - Secretary el the Tremiry
- el - - -
1-M-D
RESIDENTIAL CONTRACT AWARDS AND F.H.A. MORTGAGES
1939
1940
1941
F M A M J J A $ o N D J F M A M J J A $ o M D J F M A - J J A s o .
DOLLARS
DOLLARS
MILLIONS
MILLIONS
(AWARDS)
(MORTGAGES)
174
Mortgages Selected for Appraisal
160
and F.W. Dodge Awards
Monthly
162
150
F.W. Doper AMARDS
150
140
138
130
126
120
114
110
102
100
90
90
78
80
MORTGAGES SELECTED FOR
APPRAISAL, F. H. A.
66
70
54
60
J
F
M
A
M
J
J
A
$
o
N
D
J
F.
M
A
M
J
J
A
5
o
N
D
J
F
M
A
M
J
J
A
$
o
N
D
1939
1940
1941
DOLLARS
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
DOLLARS
MILLIONS
MILLIONS
40
Mortgages Selected
40
for Appraisal, F.H.A.
Weekly
35
35
30
30
25
1941
25
1939
20
20
IS
IS
1940
10
10
5
5
0
0
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
Office of the Secretary of the Treasury
C -
Division of Research and Stabistics
Regraded Unclass
U.S. TOTAL TRADE AND EXPORTS, BY COMMODITIES
1920
PRIM.
-
-
1933
-
1928
1934
1931
:
1938
-
DOLLARS
DOLLARS
Millians
-
san
TOTAL TRADE
ses
-
use
n
458
442
400
390
110
Exports
Imports
-
(Name)
380
300
110
aso
EDO
see
189
ISS
160
100
188
(80
Trade Balance
дво
100
as
se
M
o
-Id
-so
400
1929
-
1931
1932
1933
IM
1934
HD
HM
-
-
EXPORTS OF U.S. MERCHANDISE
Total Nonagricultural
Selected Nonagricultural Commodities
DOLLARS
DOLLARS
DOLLARS
DOLLARS
Millions
Milliams
Millions
Millians
Mashinery
true and Stasi
Irso and Start
"
44.
(Bell Servil
is
325
44
40
18
-
"
36
.
-
**
300
"
10
@
a
.
di
.
J
L
-
M
#
-
14
"
"
275
- Products
an
18
$5
OR
20
38
H
44
250
5
se
18
44
29
26,
2F
"
-
#
225
10
0
"
j
at
.
E
a
A
a
-
B
$
is
45
as
100
Automobiles
-
IS
"
10
175
-
se
18
38
26
e
"
10
&
F
-
À
-
-
di
A
.
4
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a
#
150
"
If
5
Airsraft
12
is
a el F - . 0 o
w
125
44
is
is
Cost
46
.
10
100
"
o
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,
.
a
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4
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6
e
-
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a
.
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-
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.
di
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5
#
a
75
y
Chemicals
"
=
"
Capper
10
10
--
so
18
is
:
-
-
25
19
is
12
*
.
#
8
-
R
0
-
.
a
JAR MAR. MARY JULY SEPT NOV
of
M
-
-
A
o
.
of
4
#
-
A.
-
4
di
-
-
=
.
«
#
M
Total Agricultural
Selected Agricultural Commodities
DOLLARS
DOLLARS
DOLLARS
DOLLARE
Milliams
-
Cattan
Milliam
I
Tobacco
Whees and Flour
is
-
19
130
as
AS
10
2PM
ss
as
.
-
125
48
as
#
#
-
-
4
,
0
40
"
is
100
M
Carn
as
18
is
OR
-
se
10
=
75
5
R
19
1
%
9
"
#
.
so
4
,
M
.
,
al
.
I
0
.
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-
-
a
+
1
18
18
is
132
39
Maste and Land
Fruits, Drive and
18
10
18
23
I
-
P
É
.
.
.
o
#
#
JAM MAR. MAY JULY SEPT NOV
.
M
&
M
A
-
M
.
la
-
a
of
+
a
0
.
-
-
: 1 I
!
I
Regraded Unclas sifi
NATIONAL INCOME AND ITS EQUIVALENT PURCHASING POWER
1931
1933
1935
1937
1939
1941
1929
DOLLARS
DOLLARS
BILLIONS
BILLIONS
Yearly
95
95
90
90
85
Dec. 1940Level
85
80
PURCHASING POWER OF
80
NATIONAL INCOME®
75
75
70
70
65
65
60
60
NATIONAL INCOME
55
55
50
50
45
45
1931
1935
1937
1939
1941
1929
1933
1938
1939
1940
1941
1942
1937
DOLLARS
DOLLARS
BILLIONS
BILLIONS
Monthly
95
95
90
90
PURCHASING POWER OF,
NATIONAL INCOME®
85
85
80
80
75
75
70
70
NATIONAL INCOME
&
65
60
60
1938
1939
1940
1941
1942
1937
BASED ON COST OF LIVING INDIX OF NAT'L. IND. COMF. BD., 1929=100
SEASONALLY ADJUSTED. MONTHLY FIGURES MULTIPLIED BY 12
123 Chart 5
Office of the Secretary of the Treasury
c 374
- of Bank and -
Regraded Unclassif
124
Chart
MOVEMENT 07 BASIC COMMODITY PRICES
AUGUST 1939 - 100
1940
1941
NOVEMBER
DECEMBER
JANUARY
FEBRUARY
MARCH
2
J.
F.
M
A
#
J
J
A
a
9
N
D
al
F.
M
A
.
16
23
30
7
14
21
28
4
11
18
25
1
15
22
B
15
PCR
PER
PER
PER
CENT
Weekly Average
CENT
CENT
CENT
Daily
130
130
128
126
125
125
16 RAM INDUSTRIAL
16 RAW INDUSTRIAL
124
MATERIALS
124
MATERIALS
120
120
120
120
115
115
116
116
110
110
12 FOODSTUFFS
112
112
105
105
12 FOODSTUFFS
100
100
108
108
95
D
J
,
M
M
J
A
o
D
95
104
104
A
J
.
N
J
F
E
A
M
16
23
30
7
14
21
28
4
"
18
25
I
8
15
22
1
8
15
1940
1941
NOVEMBER
DECEMBER
JANUARY
FEBRUARY
MARCH
1940
1941
Percentage Change for Individual Commodities, August 1940 Low to January 24, 1041, and to February 7, 1941
PER
PER
CENT
CENT
16 RAM INDUSTRIAL MATERIALS
12 FOODSTUFFS
50
(WOOL 50.1%
50
MALLOW 46.6%
40
40
BURLAF 36.1%
30
30
COCOA 21,65
THISES 20.2%
SHOOS 27.2%
(WHEAT 23.2%
RPLANSED 23.0%
COFFEE 20.4%
20
PAINT CLOTH 19.0%
COTTOMBEED BIL
19.6%
20
16.0%
GLEAD 15.00
16.5%
LEING
15.1%
ABUTTER
15.1%
SHELLAC
13.00
RELAND 13.2%
NOOPPER 11.8%
SUBAR 13,0%
10
NSTEEL SONAT, poi. 11.6%
ROSIN 11.3%
10
POOTTON 5.9%
VITEL SCHAP, LEF.
5.5%
YOURSER
2.9%
0
NEILE 1,2%
TIN -.5%
o
CORN -1.5%
-10
-10
Aug. Low
JAN.24 Fa.7
Aus. Low
Jan.24
Fo.7.
Office of The Secretary of the Treasury
- of - - I
P - 187 -
125
THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA
Box 680
TELEPHONE: REPUBLIC 7860
BENJAMIN FRANKLIN STATION
WASHINGTON. D. C.
February 10, 1941.
Mr. Herbert E. Gaston,
Assistant to the Secretary,
Treasury Department,
Washington, D. C.
Dear Mr. Gaston,
For your information I enclose a
summary of the two messages which I showed
to you on February 7th.
Yours very truly,
b.J. Ballantipez
Associate Secretary.
Enclosure
SECRET AND CONFIDENTIAL
On January 22nd Mr. Purvis telegraphed to
London to say:-
1. That the Secretary had advised us that
Mr. Jesse Jones had agreed that the R.F.C.
could and would proceed to finance the
placing by the Army and Navy of British
contracts for common types amounting
to $884 million including plant facilities.
2. That the United States Army would pur-
chase existing contracts for U.S. weapons
to the extent of unexpended available
appropriations on the understanding that
we would place contracts for British
type weapons to the same extent.
3. That the R.F.C. would buy some of our
fixed investments for U.S. type weapons,
the proceeds of which would also be
used for the purchase of British type
weapons.
4. It was pointed out that the amounts
available under the two preceding para-
graphs would be determined as promptly
as possible and it was pointed out
that they would be quite small. The
message also stated that the Secretary
had promised to consider with Sir Frederick
Phillips if any other methods of finding
cash were available.
Upon the night of January 31st, Mr. Purvis
sent a long telegram to Sir Andrew Duncan. In this
communication he pointed out that there was an obvious
misunderstanding in London of the actual position
here. There was set out in complete detail a list of
the contracts which it was hoped could be placed prior
to February 28th. The message continued by describing
fully the aid which was being extended to cover the
interim period. Mr. Purvis asked that the Chancellor
explain to Mr. Hopkins the substance of the explanations
contained in this cable. It was also stated that the
State Department was cabling to Mr. Hopkins the same night
pointing out that his aircraft request was based on an
evident misunderstanding of what the Administration did on
January 22nd to meet our difficulties in placing orders.
February 10, 1941
Regraded Unclassified
127
2-10-41.
valor secretary Boll
Secretary Morgenthou
would you please - - the figures shoulage
(a) the dollar amount of contracts placed by the was
Department and the Havy Department ter arm, munitions, implements
of war and supplies under contract authorisations which have net
yet been followed up by actual appropriations)
(b) the dellar - of contracts placed by the Your
and Havy Departments for arms, munitions, implemento of wir and
supplies under contract authorisstions for which m requests for
appropriations have yet been más
(o) the dollar - of contracts placed by all
Goverment departments and agencies fer military and navel equipe
must of all Male, for merchant ships, for strategic and critical
mterials, for NW materials such M dl, clumine, steel, an.,
and for feed-stuffe water contract authorizations and for which
as actual appropriations have yet been made w requested.
060:djb
2-9-41
Regraded Unclassified
128
The Secretary directed that copies of this
letter be given to Messrs. Gaston, D. Bell,
Foley, Young and Thompson, and copies were
furnished to them on 2/12/41.
129
THE WRITE HOUSE
FEB 10 1941
W dear Mr. Chairman:
The successful conduct of the national defense program requires
that our facilities for ocean transportation be fully coordinated;
only in this my can maximum utilization of such shipping facili-
ties be assured.
As Chairman of the United States Maritime Commission, you are
in a strategic position to advise and assist me in assuring that
our ocean shipping needs are cared for in an expeditious and effec-
tive manner. Specifically, I shall wish your aid in respect to the
following matters:
1. The analysis of the stated requirements of the
War and Hery Departments, and other agencies of
the Government, for narehent vassel tormage and
facilities needed for ceean transportation of
foreign and domestic commerce in connection with
national defense.
2. Advise with owers and operators of ships regis-
tered under the United States relative to ship-
pdng reutes, asvement of versels, and character
of cargoes M defense requirements may min
necessary.
3. the coordination of plans for the acquisition
and creation of additional ships and facilities
(a) to carry the water-borns comeros of the
United States, including the transportation of
strategic and critical materials, and (b) to
act as military and nevel suxiliaries.
4. The preparation of recommendations partaining
to (a) the acquisition of additional tomage
under foreign registry to mest cosan tormage
requirements for national defense, and (b)
requests by other countries or their nationals
for assistance in obtaining additional tormage.
Regraded Unclassified
130
- 2 -
I should like to receive from you regular reports conserning
the availability and adequicy of cosan-going ships and facilities
for their operation, together with your recommendations. I par-
ticularly request that you give all assistance and cooperation to
the office of Production Management in expediting the shipment of
materials which are essential to our production program. You will,
of course, need to tie closely to the State Department on all st-
ters involving foreign policy and relations.
State, War, Navy, Treasury, and Commerce and the Director General
Copies of this letter are being sent to the Secretaries of
of the office of Production Management. I - certain that these
officials will inform you promptly of such problems as they my
have involving oesan transportation, and will fully cooperate in
facilitating the assistance that I an requesting of you.
Sincerely yours,
(Signed) FRANKLIN D. ROOSEVELT
Rear Adairal Emory s. Land
Chairman
United States Maritime Commission
JREMSTIVA DELIVERING
& 8 MA Il 839 IACI
04:P
TRUSABAT 10 YHAT38032
DEFICE
Regraded Unclassified
131
MEMORANDUM
February 10, 1941
TO:
The Secretary
FROM: Mr. Buckley
RE: High Spote of the Week
With the exception of the further difficulties in the
Greek plane situation arising for the most part from Secre-
tary Knox' press conferences on Wednesday, this has been a
relatively calm week. Events of particular interest are
described below under the following headings:
British Orders Approved
Chinese P-40's
Confidential Deal Between the War Department and
the British
Export Control
Greek Plane Situation
Interim Purchasing
Interview with Dr. Walter Kraus
Lease-Lend Procedure
Priorities Publicity on British Efforts to Reduce Down Payments
Russian Clearance Situation
Statistical Reports from Foreign Purchasing Commissions
British Orders Approved
During the week ended February 8, 1941 approval letters
were given to the British Purchasing Commission on regular
orders totalling $33,930,773.08, as against a tentative
budget of $35,000,000. This total includes $5,533,000 for
the Packard Motor Car Company to cover capital costs above
the original estimate on the Rolls Royce engine order.
Approval letters were also given on special items
totalling $8,884,7 710 as against a budget for this purpose
of $10,000,000. These include $8,800,000 for the 20
Boeing B-17-C's and their accompanying bombs, flares,
and ammunition.
Chinese P-40's
Mr. Allard of Curtiss-Wright called from New York
early in the week to say that there would probably be a
Regraded Unclassified
132
- 2 -
break in the delivery of the planes to the Chinese, since
they were limited by the British to deliver 2 planes per
day to the Thinese up to 36, and 1 per day thereafter up
to 100. At this rate the present British contract would
be completed when only 72 planes had been delivered to the
Chinese. We checked wi th the British, and they have agreed
to execute whatever supplementary agreement Curtiss-Wright
desires in order that the full 100 may go to the Chinese
from the present contract, which means that the Chinese
will get all their planes by about the end of March.
Confidential Deal Between the War Department and the British
Mr. Ballantyne told Mr. Gaston and me on Wednesday
afternoon of a deal which had been worked out between the
War Department and the British which I think you would
prefer not to have reduced to writing. Mr. Gaston and I
have the details in mind, however.
Export Control
There has been & rash of new liaison men appearing on
the scene, including B. Colonel Bates who 18 working for
Colonel Maxwell. Colonel Bates came in Wednesday afternoon
to discuss ways of tying in the export decisions with the
decisions on our Preliminary Negotiation Reports. He
wondered if we wouldn't let the Colonel review our de-
cisions before they go to the foreign purchasers, but I
pointed out to him that the time between placing the order
for production and having it ready for export is often BO
long that I doubted if such a procedure would be very
effective, with which view he agreed. I think the idea
of making these decisions available to Export Control
does make sense and ties in with our general feeling
that there should be one application for production
clearance, export license, foreign funds clearance if
necessary, and so on. This would be a step in that d1-
rection, and accordingly I told him that I would have Mr.
Young consider the problem immediately upon his return.
This will give us an opportunity to consider the impli-
cations that such a step might have.
You might be interested to know that the memorandum
on tallow prepared by Mr. Haas, which you forwarded to
Leon Henderson, went from him to Colonel Maxwell as a.
recommendation that all oile and fats be placed under
export control. This came before Colonel Maxwell's Sub-
committee on Legislation, Proclamations and Regulations
Regraded Unclassified
133
at a meeting during the week, but I pointed out that with
40,000,000 pounde of lard in storage for the Surplus Com-
modities Corporation, it would seem to me that the problem
was considerably broader than Mr. Rass' memorandum on tallow
and would need intensive consideration. Accordingly, the
memorandum has been tabled pending further study.
Greek Plane Situation
Bright and early Saturday morning, February 1, Mr.
Murray of the State Department called up to say that the
Greek Minister had come in very much upset because of his
conference with you the day before, and insisted that this
Government was definitely obligated to sell Greece 30
modern fighting planes, and that the acceptance or rejec-
tion of the 30 obsolete Grummana would not satisfy this
obligation. I checked all our notes pretty carefully end
called him back Monday morning saying that since the Greeks
had never taken up the suggestion made to them in November
that they order 30 P-40's for delivery in the summer of
1941, and since their deal with the British had fallen
through, it seemed to me that the problem of whether or
not they were supposed to get 30 modern fighting planes
now was rather academic, since there were no planes to
give them unless the State Department could convince the
War Department to divert current deliveries. I pointed
out to him also that in view of this, it WAB pretty ob-
vious that it would have to be the 30 old Grummans or
nothing. He was very much at a loss 8.8 to what to do
and asked that I at least listen to the Greek Minister
again on Monday afternoon.
I talked to Mr. Gaston about it and we reviewed
together the notes on your conference the preceding Friday
afternoon, from which it was evident that the Minister had
been told that it was the Grummane or nothing, and that he
had been given an opportunity to reconsider whether or not
they wanted the Grummans. Accordingly, Mr. Gaston suggested
that I meet with the Minister, but follow in conversation
the same attitude which had been taken in your conference.
The Minister came in late Monday afternoon, and J
listened to him for the better part of an hour. He re-
viewed the entire course of negotiations and insisted
throughout that he had been promised 30 modern fighting
planes by Mr. Sumner Welles, and therefore felt that
regardless of their decision on the Grummans he still was
entitled to an additional 30 modern planes. He did not
have an answer from his government yet on the Grummane,
and I pointed out to him that as a practical matter outside
of the Grummans there were no planes for him to order for
early delivery, or even for summer delivery, since they had
134
never acted on our earlier suggestion. He recognized clearly
the practical situation, and agreed with my suggestion that
the problem now, apart from Grummahs, was one between him
and the State Department, since if the State Department
agreed with his view as to their obligation, it would be up
to them to convince the Army and Navy to divert planes from
current deliveries. On that basie he left, saying that he
proposed to continue his discussions with the State Depart-
ment on the 30 fighting planes, and would advise us on the
Grummans as soon as he had 8. reply.
Tuesday and Wednesday were red-letter days because I
heard nothing from or about the Greeks. However, Secretary
Knox' statement to the press appeared in the evening papers
on Wednesday, and I knew that we would have the Greeks with
us on Thursday without fail.
Thursday morning Mr. Murray of the State Department
called up to ask whether the matter of the price of the
Grummans had ever been discussed in our conference, and
also to inquire whether the Greek Minister had yet given
us a decision on the planes. Apparently, the Greek Minister
had already been trying to get an appointment with Secretary
Hull and the President. I told Mr. Murray that we had not
yet had either acceptance or rejection on the Grummane from
the Greek Minister following your offer of the preceding
Friday, and after checking Mr. Young's notes carefully and
calling Admiral Towers, I told him that the question of
price had never come up in the various conversations with
the Greek Minister. Admiral Towers had told Mr. Young on
January 23 that Secretary Knox would like to give the planes
to the Greeks, but nothing to thie effect had ever been told
to the Greek Minister, and I sm sure he WAB justified in his
feeling that he would have to pay for these planes -- par-
ticularly since under the law it would be impossible for
the Navy to dispose of them otherwise.
Mr. Berle called me late Thursday afternoon and WAS
very concerned about the turn which the matter had taken.
He said that he felt the entire Balkan situation might
well be seriously affected by this incident, which the
Axis powers could use as an indication of this Government's
unwillingness to keep faith with small nations. Accordingly,
he said that he felt that something must be done for the
Greeks to erase this impression, and asked if I would check
informally with the Army, Navy and British to see what
possible solutions there might be if the Department of
State marshaled all its influence to get something for
the Greeks.
Regraded Unclassified
135
I reviewed this conversation with Mr. Gaston early
Friday morning, and he felt that it would do no harm for
us to investigate informally for Mr. Berle. Accordingly,
I spent all Friday morning checking with War and Navy
Department and the Office of Production Management, from
which it was obvious that the only modern fighting planes
available are the Curties P-40's which are being delivered
to the Army and to the British, and the Grumman F4F3's
which are being delivered to the Navy. Consequently the
problem could be solved only by a diversion from one or 8.
combination of these three sources. So far as increased
production is concerned, Curtiss-Wright might be able to
make 30 more P-40's in June and July if the British would
release the engines and the War Department would release
propellers, guns, and government-furnished equipment.
Since this 18 the time when Curtiss-Wright will be swinging
into production on the P-40-D's, it would not seem par-
ticularly wise to give them this additional burden.
After discussing this with Mr. Gaston, I called Mr.
Berle late in the afternoon and reviewed these possibilities
with him. He said that the obvious solution to him seemed
to be a diversion of P-40's from the Army and/or the British,
and he felt that an arrangsment ought to be made tentatively
to get 15 from the Army and 15 from the British. I reminded
him that the British had been released from their responsi-
bility on the Greek situation as one of the conditions of
giving up 100 P-40's to the Chinese, but he said that he
felt this Government was in such 8. spot on the matter now,
he thought he would like to ask you to go to the British
on it anyway. I told him that I would bring it to your
attention immediately upon your return.
Mr. Fairey came in Saturday morning, and I discussed
the Greek problem with him informally, saying that I was
not conveying a request in any sense of the word, but that
I wanted him to think about it from the standpoint of
whether he B&W any possibility of helping, not the Greeks,
but the United States Government to get out of a very
embarrassing situation. He, of course, appreciated our
position and said that he would discuss it informally
with Sir Henry and Morris Wilson in case you should decide
upon your return to ask them for 8. decision.
Interim Purchasing
Mr. Gaston has a letter from the British Purchasing
Commission outlining the developments on interim purchasing
by the Army and Navy through February 7- Progress 18 being
made on the entire list. Definite action has been taken on
Regraded Unclassified
136
- 6
small arms ammunition, and negotiations are In progress on
the 20 m. Hispano-Suiza gun, the 20 mm. Oerlikon gun, and
the 40 mm. Bofors anti-aireraft gun. The tank program will
be taken up in the week beginning February 10. I have not
yet had definite word from the War Department B.B to whether
the RFC 18 ready to go ahead and place orders, but I am
following this and should have definite information Monday
or Tuesday.
Interview with Dr. Walter Kraus
Monday afternoon A call was referred down from your
office to Mr. Young's office and finally came to me, from
A Dr. Walter Kraus who wanted an appointment. After I had
arranged to see him at noon on Tuesday, I found that what
he wanted to talk about was a plan for "revitalizing world
economy". This looked like quite an order, BO I raised
the question at the staff meeting Tuesday morning to find
out whether anyone was acquainted with this man. Mr. Gaston
had his dossier, and it turned out that he is a very famous
psychiatrist and neurologist, apparently with considerable
means and many influential friends, but apparently a little
cracked. The note Mr. Gaston had read in part 8.0 follows:
"As a rule he is rational, but it 18 believed he might com-
mit violence if people disagree with his ideas." It developed
in the staff meeting that he had been trying to see you for
some time, and the general opinion Was that someone would
have to Bee him and I was elected. It was agreed to have
Mr. Eddy, a member of Mr. White's staff, who 1s pretty
husky, join me in the conference, and we also had A couple
of guards outside the door.
He came in and we listened to him read his plan for the
better part of an hour and discussed it with him for another
half-hour. As near as I can gather, it would make the British
Empire B. sort of gigentic WPA project, but the complexities of
the scheme are beyond me. I got Dr. Kraus to drawing pictures
of how his scheme would work, after he had finished reading
it, and then it developed that he had discussed it with many
people in Washington, but wondered if we had any further
suggestions. I asked him about what he planned to do with
it, and he said he had thought of publishing it immediately,
but felt that it was 80 secret that he did not want to make
it available to the Axis powers by publication, and thought
the Treasury ought to take it up on a secret basis for use
by this Government. I suggested to him that the resources
of the Axis powers were probably not sufficiently elastic
at the moment to take up 8. gigantic plan such as his, and
suggested that in a democracy such 8,8 ours publicity was
the best way to get widespread critical comment and I thought,
137
7
therefore, that he should have it published. He said that
he was anxious to get further critical comment, and I sug-
gested that since he had not yet seen Leon Henderson, it
might be B, good idea to try to get in touch with him.
He left saying that he Was going to polish off the
rough oorners, and that he would send us in a copy, which
I said we would be glad to have for our files. We have
heard no more from him, but the attached clipping appeared
in the Times-Herald on Saturday morning.
Lease-Lend Procedure
Another lisison man appeared on the scene Tuesday
afternoon in the person of Mr. W. L. Allen, who is working
for Don Nelson. He came in to say that he had been em-
ployed by Mr. Nelson to study the work that Mr. Nelson
would have to do for the British Purchasing Commission
under the Lease-Lend Bill if the purchasing functions
were given to him. I gather from his conversation that
he has been working directly with men in the British Pur-
chasing Commission for several days or longer studying
their operations, although this WAS the first time his
existence had come to my attention. You might want to
comment on this to Mr. Purvis, since it would seem that
we should be informed of any comprehensive work of this
kind which 16 being done. In the course of our conversa-
tion I discussed in general terms with Mr. Allen the function
of the Liaison Committee and the procedures which it had
established. He seems a very nice chap, and observed
gratuitously that he had started out thinking that an
entirely new procedure would be needed under the Lease-
Lend Bill, but after studying the work of the Liaison
Committee from the standpoint of the British Purchasing
Commission, he felt that the most he could recommend would
be some adaptation of our present procedure to tie in with
the other functions Mr. Nelson would have under the bill.
I told him that I knew Mr. Young had done a great deal of
thinking on this problem, and that, therefore, I did not
feel competent to do anything but discuss it in generali-
ties. I propose to bring it to Mr. Young's attention as
Boon as he returns.
Priorities
I have become acquainted over the telephone, and shall
meet today, another liaison man, who has been hired by Mr.
Stettinius to work on foreign priorities. This is Mr.
Carl Adams, who has already been of considerable assistance
to us in the few days that he has been operating.
Washington Times-Herald
138
February 8, 1941
Hunt
Suspect
GEORGE WATERS
Valnable documents siptaining
perset plans for worksomle recovery
in this country and in nations
friendly to America, were stolen
yesterday from the Benate Foreign
Relations Committee room, the
Times-Herald learned last night,
Theft of the documents was re-
ported to the Pedafa) Bureau of
Investigation and the Capitol Po-
lice, who were furnished a descrip-
tion of A man suspected of stealing
the important papera.
The secret papers were stolen
from Dr. Walter Max Kraus, one
of the country's leading econo-
mists and former professor at Cor-
nell and Columbia universities.
Dr. Kraus told investigators the
documents mysteriously disep Di
seared as he attended the Senate
hearing on the Lend-Lease Bill.
The décuments. according to
Dr. Kraus, contain his world re-
realization plan. which he wants
to submitte to Congress as a non-
legislative aubstitute for the Lend-
Lease Bill.
Dr. Kraus was as the hearing
with Mrs. Clean Norton Broy, wife
of the United States consul at
Brossels, Belgium, and Mrs. Mary
Wright Johnson, former Demoi
cratic national committeewoman
for the District.
Dr. Kraus says he suspects
tall, alender man who became dis-
agreeable with Mrs. Broy, Mrs.
Johnson and himself at the com-
mittee meeting.
"I would not like to see my plan
get in the hands of an un-
friendly power," Dr. Kraus said;
"I here kept the plan & secret
for that NAMED alone. Bitler
could db: al lot of damage with
information contained in those
documents.
139
- 8 -
The foreign priority situation 1s settling down into
what appears to be et very setisfactory routine. Mr.
Williams is working closely with the administrative
officers of the priorities division, and all foreign
priority requests are coming to the priorities division
through the Liaison Committee, and foreign priority rat-
inge are being issued both to manufacturers and to foreign
purchasers through the Lisison Committee. There 18 8
completely friendly understending on all sides. While
there do remain some major problems to overcome such as
the problem of extending foreign priority ratings from
prime contracts to subcontracts, and the problem of getting
priority ratings for all foreign machine toole by February 28,
after which none will be delivered unless 80 rated, etill
our relations with the priorities division have been so
pleasant that I do not anticipate any difficulty in working
out these or subsecuent problems.
Publicity on British Efforts to Reduce Down Payments
Mr. Schwarz called me Friday afternoon to BAY that e
representative of International News Service had incuired
as to the truth in a report that the British were trying
to get back some of their down payments to use for current
orders in anticipation of the passage of the Lease-Lend
Bill, under which the long-term contracts would be taken
over by the United States. He felt that publicity of this
type might well react unfavorably on the Lease-Lend Bill.
I checked with Mr. Purvis, and it developed that in general
no such effort was being made, but that on some large iron
and steel contracts Sir Frederick and Mr. Elliott (their
steel man) had discussed 8. way of getting back some of
their rather substantial down payments. There was no
thought that this effort would be given publicity or
adopted generally. However, as a result the American
Iron and Steel Institute has sent out a. circular letter
to its members on this point. I have been unable as yet
to secure & copy of this letter, but apparently it was
favorable to the effort. Mr. Playfsir, assistant to Sir
Frederick, discussed it with Mr. Schwarz and me, and Mr.
Schwarz decided that the best policy would be for him to
tell the representative of the International News Service
that there was no general attempt to recover down payments
in contemplation of the passage of the Lease-Lend Bill,
but that some djustments had been discussed in connection
with e few large contracts. In the meanwhile, the British
Purchasing Commission is checking all angles of the problem
and will be prepared for any further inquiries on the sub-
ject which may be made by the press.
Regraded Unclassified
140
- 9 -
Russian Clearance Situation
As you know, we have had difficulty in getting the
Russians to enter into the clearance procedure wholeheartedly.
On the other hand, as the production 81 tuation becomes
tighter, more and more American manufacturers are becoming
hesitant about taking Russian orders without some indication
from our Government that they will not conflict with the
needs of the defense program. This week alone I have had
visits from representatives of the Birdsboro Steel Foundry
and Machine Company, which makes hydraulic presses, the
Barber-Greene Company, which makes materials handling equip-
ment, the Gardner-Denver Company, which makes pumps, and
the Industrial Furnace Menufacturers Association, which
includes almost all manufacturers of heat treating furnaces.
Many of these companies make products which are not
subject to export control, but which might well conflict
with the needs of the defense program. They would like to
be sure when Amtorg comes to place an order that the War
and Navy Departments and the Office of Production Manage-
ment have had a chance to consider the order. To meet
their need until the Russian problem 1B settled, we have
arranged with War and Navy and the Office of Production
Management to consider these orders informally on the
basis of a request from the manufacturers and indicate
to un for transmission to the manufacturers any objection
they may have.
All the manufacturers who have talked to us have been
very appreciative of our willingness to do this for them.
To settle the problem more permanently, you will
remember we had & conference of all interested Government
agencies on the Russian machine tool problem & short time
ago, at which it W&B decided that State would have the
Russians file Preliminary Negotiation Reports for all
orders from now on, and would stop discussing with them
8, series of lists which the Ambassador kept preparing and
bringing down for disoussion with Mr. Welles. In this
connection I was asked to meet with Mr. Atherton and Mr.
Henderson of the State Department on Tuesday afternoon
for an interview which they propose to have with the
Russian Ambassador. During this interview they are going
to tell him that his government will have to follow the
clearance procedure used by other governments, and they
would like to have me there to enswer any questions which
may arise. Since this is a step in the direction toward
wh1 which we have been working, I told them that I would come,
subject to your approval.
141
- 10 -
Statistical Reports from Foreign Purchasing Commissions
Just before you left, Mr. Young worked out with Mr.
Knudsen an arrangement by which we would send all statistical
data to one man in the Office of Production Management and
thus eliminate duplication of requests such as we have had
in the past. Also, by routing all such requests through
the Liaison Committee, we shall have a better control over
the type of data supplied and the form in which it 18
presented. The day after Mr. Young left Mr. Stacy May,
who 16 the man designated to receive such information at
the Office of Production Management, presented requests a
mile long, including some for the most confidential British
data. Most of the routine material had already been sent
to Mr. Knudsen, and we immediately arranged to have this
go to Mr. May in the future in line with our agreement
with Mr. Knudsen. However, with respect to his request
for future programs, which in many cases are very confi-
dential, I felt that I had to call up Mr. Knudsen and ask
him whether he wanted these sent to a statistical division,
or whether he would not prefer to have them come directly
to him, since he would be responsible for them. He said
that definitely he did not want any of these confidential
programs to go anywhere in the Office of Production Manage-
ment except his office, end that he would then make them
available to Mr. May 1f necessary. Accordingly, I informed
Mr. May that we would supply him directly with the routine
statistical reports and send confidential program informa-
tion to Mr. Knudsen, advising Mr. May at the same time 8.6
to what we were sending to Mr. Knudsen BO that he could take
up with him the distribution of this confidential material
within the Office of Production Management.
Gob
Regraded Unclassified
STRICTLY CONFIDENTIAL
ALLISON ENGINEERING COMPANY
142
Deliveries of Airplane Engines
:
Actual
:
Estimated deliveries
: deliveries : on existing orders
1940
January
10
May 1 - June 1
15
June 2 - 29
31
June 30 - July 27
50
July 28 - August 31
91
September 1 - 28
221
September 29 - October 26
231
October 27 - November 30
248
December 1 - 7
30
December 03 - 14
86
December 15 - 21
78
December 22 - 28
52
December 29 - January 4
12
1941
January 5 - 11
85
January 12 - 18
43
January 19 - 25
33
January 26 - February 1
32
February 2 - 8.
86
February 9 - 28
314
March
400
April
473
May
500
June
500
July
475
August
550
September
625
October
750
November
800
December
800
1942
January
455
February
277
March
225
April
225
May
207
June
66
Office of the Secretary of the Treasury,
Division of Research and Statistics.
February 10, 1941.
143
STRICTLY CONFIDENTIAL
ALLISON SHIPMENTS
: Dec. 29: Jan. : Jan. : Jan. :Jan. 26: Feb. :
Total
: Jan. 4: 5-11 : 12-18 : 19-25 : Feb. 1: 2-8 : Dec. 29-Feb. 8
British
8
83
41
33
31
60
256
Army
4
2
2
I
1
26
35
Total
12
85
43
33
32
86
291
Office of the Secretary of the Treasury,
Division of Research and Statistics.
February 10, 1941.
Regraded Unclassified
144
EXPORTS OF PETROLEUM PRODUCTS, SCRAP IRON AND SCRAP STEEL
FROM THE UNITED STATES 20 JAPAN, RUSSIA, SPAIN, AND GREAT BRITAIN
AS SHOWN DEPARTURE PERMITS GRANTED
Week ended February 8, 1941
:
JAPAN
:
RUSSIA
:
SPAIN
:
GREAT BRITAIN
:
:
:
:
BOLEUM PRODUCTS
tel and Gas 011 (including
Diesel 011)
-
-
30,000 Bbls. 55,350 Bbls.
trade -
Blended or California
High Octane Crude*
246,500 Bbls.
--
--
--
All Other Crude
74,500 Bbls.
--
-
66,666 Bble.
esoline -
Gasoline 100
-
-
--
70,053 Bbls.
Gasoline F
76,467 Bols.
--
-
--
All Other Gasoline
-
--
--
--
acricating Oil -
Aviation Lubricating 011***
--
-
-
125,128 Bbls.
All Other Lubricating 011
48,467 Bbls.
-
--
617 Bbls.
-
-
--
stracthyl Lead***
--
Boosters", such as Iso-
Octane, Iso-Hexane, or
Iso-Pentane
-
-
--
-
AP IRON AND SCRAF STEEL
umber 1 Heavy Melting Scrap
--
-
3,203 Tons
-
ni Other Scrap
-
-
13.742 Toma
-
dce of the Secretary of the Treasury, Division of Research and Statistics.
February 10, 1941.
rce: Office of Merchant Ship Control, Treasury Department.
Any material from which by commercial distillation there can be separated
more than 3 percent of aviation motor fuel, hydrocarbon or hydrocarbon
mixture. President's regulations of July 26, 1940.
Aviation Gasoline.
As defined in the President's regulations of July 26, 1940.
Regraded Unclassified
145
CONFIDENTIAL
Paraphrase of Code Reflagren
Received at the Har Department
at 9103, February 20, 1941
Lendon, filed 14:45, February 10, 1941.
1. On Sunday, February 9, a force of Bristel Beaufort benhere
of the British Coastal Command made (M) direct hit with torpodose
when they attacked a mmber of Oorman destroyers off the Norangian
coast. During the BAND period two British fighter planes attacked
German troeps and gun positiess along the coast of Belgium with
mashine - fire and a airficld in compled France - mashine
guaned w other fighter planes. Also a this day Brittich notion
bumbers attacked harber installations along the French and Belgium
consta and bembed gaseline stores at hobterdom. During the -
eeding night w the target of a small number of British
heavy bethere but the I of this mission ⑉ not be determined.
2. During the night of February 9-20 German planes raided
targets in Norfolk and Suffelk and in the Clyde river area. Damage
resulting from these raids has net been reported. Other Occuran
planes nined the Bristel Chargel. and the Humber River. Cerman
fighter planse are now being used to assort Cerman planse engaged
in night rining operations. During the preceding day morthant
shipping as the Retuary of the Themes - attached by German
planes. A British fighter sho's drm - of the attackers and no
damage was inflicted on British shipping,
CONFIDENTIAL
Regraded
146
CONFIDENTIAL
3. in Italian motor transport the the visizity of Kelhie (T)
we attached w Kenya-based Bridah babore. British aircraft
based in the Indan cosperated with land forces in the Brittich #
vances in the Lake Ima region of Ethiopia and in the Amare and
Charem areas of Britren,
he During the night of February 8-9 the Island of Malta was
the object of a heavy 9-hour German attack by a total of 45 Hedness
and Junkers beabers. They operated at altitudes as low as 400 feet
and attacked in twoo or singly. & hangar at the airfield at
Kal Far was wreeked and two British Clean Martin beabers a the
ground and a runny at the airfield of Insa were damaged, In
addition private property suffered considerable damage. Brittish
searchlights picked up four of the attackers and of these, -
were damaged and - we destruyed by British Purrisans fighter
planes that operated singly.
SCANLOW
Distribution:
Secretary of Your
State Department
Secretary of Treasury
Acet. Secretary of MP
Chief of Staff
Var Plans Division
office of Neval Intelligence
Air Caryo
0-3
CONFIDENTIAL
147
RESTRICTED
G-2/2657-220
M.I.D., W.D.
No. 312
February 10, 1941
12:00 M.
SITUATION REPORT
This report covers the period February 8 - February 10, 1941,
I. Western Theater of War.
Air: German: Considerable activity against shipping.
Relatively minor operations over England, Light attacks were
launched only on the 8th-9th.
British. Operations generally limited. However
strong daylight attacks were launched against the invasion ports
on the 8th.
II. Greek Theater of War.
Air: Minor activity.
Ground: Local actions only.
III. African Theaters of War.
Libya. The British pursuit has reached El Agheila, at
the base of the Gulf of Sydra and near the Tripolitanian border.
Eritrea. British advance from the west against Keren
has slowed down. However a new British attack, force undetermined,
has developed from the North near Karora and is reported to be mak-
ing substantial progress down the coastal plain and to have reached
Mersa Taclai on the Red Sea, terminus of a railroad to Keren.
Abyssinia. British advance on Gondar slowed down.
Somaliland. Further progress by light British forces.
IV. Mediterranean Theater of Mar.
Naval: Heavy units of the British fleet bombarded
Genoa at dawn, February 9th.
Air: In conjunction with the above, the Fleet Air Arm
bombed Genoa, Pisa and Leghorn (Livorno).
Note: This military situation report is issued by the Military in- In-
telligence clusion of political information and of opinion it is classified as
Division, General Staff. In view of the occasional
Restricted.
RESTRICTED
Regraded Unclassified
148
February 11, 1941
9:12 A.M.
H.M.Jr:
Hello.
Operator:
Secretary Knox.
H.M.Jr:
Hello.
Frank
Knox:
Hello, Henry.
H.M.Jr:
How are your
X:
How's the cowboy?
H.M.Jr:
Oh wonderful!
K:
I wish I could have been out there with you.
H.M.Jr:
Oh -
X:
There's nothing I enjoy more than getting & leg over
a horse.
H.M.Jr:
I'm going to do it once a month, maybe.
K:
(Laugh) Maybe. Yeh, I guess you better say maybe.
H.M.Jr:
Frank -
X:
Yeh.
H.M.Jr:
One of the first jobs that falls in my lap is the
Greeks.
X:
Yeh.
H.M.Jr:
And, I'd like to put this proposal up to you. You had
an order with Grumman -
X:
Yeh.
H.M.Jr:
- For eighty-one 14% fighters.
K:
Yeh.
H.M.Jr:
These are to be followed by four hundred and ninety-
seven F4F4's. Now these new number 4's have got the
folding wings, you see.
X:
Teh.
H.M.Jr:
And the others don't. And, therefore, these 4's particularly
for your purpose are much more useful planes.
K:
Wait a minute. What?
Regraded Unclassified
149
- 2 -
H.M.Jr:
More useful planes.
I:
Yeh,
H.M.Jr:
Now the suggestion that I had to offer was that of these F4F3's
which you still have about twenty-seven to take delivery of, that
they be permitted to accumulate at Grumman and that when the bill
passes that these be earmarked for Greece plus another two or
three whatever you'd have to pull back.
X:
All new?
H.M.Jr:
All new.
K:
Well, here, you're just stripping one of our carriers, that's
what you're doing.
H.M.Jr:
Well, you get forty a month of these -
o
K:
Yeh, but hell we carried ninety two hundred and something like
ninety two planes on the carrier. You're taking half & carrier
load.
H.M.Jr:
Well -
X:
I don't know when trouble's going to break. I'd be willing to
let them have the old ones but about the new ones - you're just
stripping us.
H.M.Jr:
Well, let us - you can -
X:
We were 29 percent behind in our deliveries in January.
H.M.Jr:
How much?
K:
29 percent.
H.M.Jr.
Yeh. Well -
X:
You do it with your eyes open, Henry. You're just crippling the
Navy in & vital way.
H.M.Jr:
Yeh.
Kt
It's like taking guns away from one of the battleships. Just
exactly.
E.M.Jr:
Yeh. Well, it's got down to now that -
K:
God damn them! Why don't they take the ships they offer them?
They're fighting against first class Italian planes and lousy
flyers in them. And they ought to take what they get. God dam
it, I don't like this business of coming around and telling us
what they're going to take from us. I'm getting good and - -
- 3 -
150
XI
still a lot of things happened while you were away.
H.N. Jr. Teh.
il
(laugh)
H.M.Jr:
Well, all I had is to call up and say here's & suggestion,
That's all I can do.
I:
Well, you think it over yourself and see whether you want to ask
this because it's exactly like as if you actually take all the
guns out of one of the turrete of the battleships. That's just
what you're doing.
H.M.Jr:
No, no.
X:
Yes, exactly. You're taking half the striking power away from
one of the carriers,
H.M.Jr:
Well, it means that - you get
K:
We only have six of them, you know.
H.M.Jr:
What?
X:
We only have six carriers; you're taking half the guns away from
one of the carriers.
H.M.Jr:
No, it means that you'll have to wait twenty days.
K:
Well, we'll have to wait that much longer. God knows how long
it will be.
H.M.Jr:
Twenty days.
E:
Yeh. That's on the basis of estimated production.
H.M.Jr:
Well, Grumman's on time.
K:
Huh?
H.M.Jr:
Grumman's on time. Twenty days.
K:
Well, it's not as easy as that, I don't think.
H.M.Jr:
Well, they've got their delivery - forty a month of these fighters.
So, it would -
X:
They haven't delivered any of them yet.
H.M.Jr:
Oh yes.
K:
Not of the kind you want us to wait for.
151
4
H.M.Jr:
Oh yes,
X:
Got any 74th from Gruman yet?
H.M.Jr:
No, 13's. I don't want any 74's, Hello.
Xt
Yes.
H.M.Jr:
I don't want any 14's.
If
Well, 13's. Which is it? Oh you, without the folding vings,
1473 - how many have you had delivered of these?
H.M.Jr:
(Talks aside.) He says he's got about sixty of them.
K:
What?
H.M.Jr:
Charlie says he's had about sixty out of the eighty-one.
Yeh.
X:
(Talks aside.) Do you want to give them the other twenty-one -
the Greeks? (Laughs) I'll tell you what I'll do, Henry. I
don't want to decide anything like that over the telephone.
Write me a little memorandum about it, vill your
H.M.Jr:
What?
X:
Write me a little memorandum about it. I don't want to decide
an important thing - it's a damn important thing to us,
H.M.Jr:
I - I do all this stuff verbally. I don't write any memorandums.
X:
(Laughs) Well, I'll make a memorandum then. I'll talk it over
and call you back.
H.M.Jr:
Yeh, That's right. It's the 13's.
K:
F3F4 is that it?
H.M.Jr:
No, it's F4F3.
X:
F4F3. Is that the numeral for one plane or two kinds of planes?
H.M.Jr:
What?
K:
Just one kind of plane. All right. 1473.
H.M.Jr:
Yeh.
X:
And you want twenty-one of them?
H.M.Jr:
I want thirty of them.
Kt
Oh, no. Hall, you'll take some away from what ve've got. We've
only got twenty-one coming.
152
- 5 -
H.M.Jr:
Well, you can pull back some.
X:
Tehi (Laughs)
H.M.Jr:
You can pull back some,
X:
(Laughs) Well, I might for the British but I'll be damned if I
will for the Greeks.
H.M.Jr:
(Laughs) Well, you know what I told the - the English the day I
left. I said, "You've got the damndest allies." They said,
"You're telling me."
K:
(Laughs) Right.
H.M.Jr:
I asked them whether the English couldn't recommend a good
Armenian rug dealer to advise me when I had the Greeks
around.
X:
Yeh.
H.M.Jr:
So, I don't feel any different about it than you do.
K:
Yeh. Well, I'll tell you, Henry, I'll talk it over and let you
know.
H.M.Jr:
Thank you.
K:
Are you going to be at this meeting at Hull's Office at 9:301
H.M.Jr:
I don't know about any meeting.
K:
Well, that's probably just Stimson and myself.
H.M.Jr:
Right.
K:
O.K., Henry. I'm looking forward to seeing you.
H.M.Jr:
I'm looking forward to you.
K:
All right. Bye.
153
Inhawed that
m young 2/12/41
February 11, 1941
My dear Mr. President:
On my return to Washington, one of the first
things that has been brought to wy attention is the
fiasco over the Greek planes. This norning I called
up Frank Knox and suggested a my out would be as 101-
lows.
The llavy ordered from the Grumman Aircraft En-
gineering Corporation 81 F4F-3 fighters. of these, The
I an informed, about 60 have been delivered.
balance will most likely be delivered this month. This
model has fixed wings. Beginning in March, the Gruman
Company are supposed to deliver approximately 40 planes
& month of the 74F-4 fighter, which has folding wings.
My suggestion to Frank Knox was that the Grumman
Company accumulate at the plant the balance of approx-
imately 21 of the F4F-3 fighters until the Lend-Lease
Bill passes and that then these planes plus 9-which
have already been delivered, or & total of 30, be trans-
ferred, on some basis to be arranged later, to the Greeks.
The State Department is very desirous that the
Greeks receive 80 first-class fighting planes in view
of your personal assurances to the Greek Minister on
December 31.
Frank Knox is reluctant to do this unless he gets
& direct order from you.
I need your assistance in this matter.
Yours sincerely,
The President,
The White House.
Regraded Unclassified
154
February 11, 1941
My dear Mr. President:
On my return to Washington, one of the first
things that has been brought to 5 attention is the
fiasco over the Creek planes. This norning I called
w Frank Knox and suggested e. may out would be as fol-
lows.
The Havy ordered from the Cruman Aircraft En-
gineering Corporation 81 F4F-3 fighters. of these,
I an informed, about 60 have been delivered. The
balance will most likely be delivered this month. This
model has fixed wings. Beginning in March, the Grumman
Company are supposed to deliver approximately 40 planes
& month of the F4F-4 fighter, which has folding wincs.
My suggestion to Frank Knox was that the Gruman
Company accumulate at the plant the balance of approx-
imtely 21 of the F4F-3 fighters until the Lend-Lease
Bill passes and that then these planes plus 9-which
have already been delivered, or a total of 30, be trans-
ferred, on some basis to be arranged later, to the Creeks.
The State Department 10 very desirous that the
Greeks receive 30 first-class fighting planes in view
of your personal assurances to the Greek Vinister on
December 31.
Frank Knox is reluctant to do this unless he gets
a direct order from you.
I need your assistance in this matter.
Yours sincerely,
The President,
The White House.
Regraded Unclassified
155
February 11, 1941
lty dear kr. President:
On my return to Washington, one of the first
things that Las been brought to 5 attention is the
flasco over the Creek planes. This morning I called
up Frank Knoz and suggested a my out would be as [0]-
lows.
The Navy ordered from the Cruman Aircraft En-
gineering Corporation 81 F4F-3 fighters. of these, The
I an informed, about 60 have been delivered.
balance will most likely be delivered this month. This
model has fixed wings. Beginning in March, the Gruman
Company are supposed to deliver approximately 40 planes
a month of the F4F-4 fighter, which has folding wings.
My suggestion to Frank Knox was that the Grumman
Company accumulate at the plant the balance of approx-
imately 21 of the F4F-3 fighters until the Lend-Lease
B111 passes and that then these planes plus 9. which
have already been delivered, or 8. total of 30, be trans-
ferred, on some basis to be arranged later, to the Greeks.
The State Department is very desirous that the
Greeks receive 30 first-class fighting planes in view
of your personal assurances to the Greek Minister on
December 31.
Frank Knox is reluctant to do this unless he gets
4. direct order from you.
I need your assistance in this matter.
Yours sincerely,
The President,
The White House.
Regraded Unclassified
156
February 11, 1941
9:20 A.M.
H.M.Jr:
Hello.
Operator:
Mr. Bailey hasn't come in yet. I left a message.
H.M.Jr:
Well, leave word. I also - Breckinridge Long
called me. If he isn't there leave word on that.
Operator:
All right.
H.M.Jr:
Hello.
Breckinridge
Long:
Hello, Henry?
H.M.Jr:
Good morning!
L:
Good morning to you. Henry, I don't want to
bother you about detail. This 18 what this 18:
It concerns Butterworth in London.
H.M.Jr:
Yeh.
L:
And Butterworth 1s doing some work for you -
a good deal of it.
H.M.Jr:
Yeh.
L:
Now, Wayne Taylor has put in a request for him.
H.M.Jr:
Yeh.
L:
And I didn't want to tell Wayne he could have him
if you still wanted him.
H.M.Jr:
What does Wayne want him for?
L:
He wants him - They're reorganizing the Bureau
with a view of making the Bureau more useful to
the other departments of the Government and to
the business community under present conditions.
This fellow has had an experience there which is
valuable and he's had experience before he went
there that's particularly valuable and I know
that he's been very useful to you and I didn't want
to - it's up to you to say whether Wayne can have
him in other words.
H.M.Jr:
Sure he can have him.
L:
It's all right?
H'M.Jr:
O.K.
157
- 2 -
L:
Fine.
H.M.Jr:
Thank you for calling.
L:
Thanks, Henry.
will
158
February 11, 1941
9:30 A.M.
GROUP MEETING
Present:
Mr. Haas
Mr. Buckley
Mr. Bernstein
Mr. Pehle
Mr. Cochran
Mr. Sullivan
Mr. Graves
Mr. Thompson
Mr. Bell
Mr. Schwarz
Mr. Kuhn
H.M.Jr:
I just spoke to Berle and he invited
himself over for lunch and he said,
"Well, I am going to send for the
Greeks." I said, "No, that is just
what I don't want you to do."
Buckley:
Yes.
H.M.Jr:
We put the heat on Frank Knox this
morning for 30 really good planes for
the Greeks.
Gaston:
Did you?
H.M.Jr:
Yes. He squirmed and swore and sputtered
and so forth and 50 on.
Gaston:
That is rather poetic justice. He stepped
into it.
H.M.Jr:
That is what I figured.
159
- 2 -
Mr. Thompson?
Thompson:
You remember the case of William I.
Steele?
H.M.Jr:
Yes, very well.
Thompson:
He has been placed in the Labor Depart-
ment, Civil Service.
H.M.Jr:
Would you write me & letter on it?
Thompson:
It is information we gave to her, and
she used all this as --
H.M.Jr:
And he got it? Wonderful.
Thompson:
So he is off our payroll permanently.
H.M.Jr:
Fine.
Thompson:
That is all I have this morning.
H.M.Jr:
Dan?
Bell:
The only thing I have is that I haven't
seen anything in the Washington papers of
a statement we gave to the Committee in
our testimony on the Foreign Funds appropri-
ation. We gave them two statements, one a
summary of the assets of the countries under
control which are held in this country, and
the other one a rather detailed breakdown.
The detailed breakdown was in confidence,
and we asked them not to put that in the
record. They put the one that was confiden-
tial in the record and --
H.M.Jr:
I saw that in the papers.
Bell:
I didn't see it in the Post.
160
- 3 -
H.M.Jr:
It is in the New York papers.
Bell:
But we gave it to them with the under-
standing that they would not put it in the
record. I suppose it was a slip-up up
there somewhere.
H.M.Jr:
I was surprised. I was so worried when
I gave out about the French, you know.
Well, it is there.
Bell:
It is there.
H.M.Jr:
It gives somebody else a chance to sue us.
Bell:
I don't think that suit is bad, myself.
H.M.Jr:
Are you at the bottom of my being made a
director of every lending agency in
Washington? I see in the papers that
Senator Byrd has a Bill.
Bell:
No, you signed the letter.
H.M.Jr:
What did I say?
Bell:
In 8 report on Senate Resolution 150,
you made several recommendations. You
didn't make that recommendation, but you
made'a recommendation that legislation
be passed to require all of these agencies
to report to the Secretary their financial
statements and so forth.
H.M.Jr:
But not that I go on as a director?
Bell:
No.
H.M.Jr:
I don't want to go on as a director.
161
- 4 -
Graves?
Graves:
Nothing.
H.M.Jr:
I am sorry I didn't get to you yester-
day, but Claude Wickard was late, and
then he stayed a half an hour and got
me bogged down. He was fifteen minutes
late.
Kuhn:
May we come today?
H.M.Jr:
You can follow Mr. Bell this morning.
He comes at 10:15, don't you?
Bell:
Yes sir.
H.M.Jr:
Was it this morning?
Bell:
Your statement for tomorrow morning.
H.M.Jr:
You (Kuhn) sit in on that, don't you?
Kuhn:
Yes.
H.M.Jr:
Right after that, we will continue. How
is that?
Kuhn:
Fine.
H.M.Jr:
George?
Haas:
I have nothing.
Pehle:
We had an oral clearance from State on
revoking some of these Indo-China licenses.
H.M.Jr:
What is that?
Pehle:
We have an oral clearance from State. We
162
- 5 -
are getting something in writing
today, I think.
Kuhn:
Edgar Mowrer rang up the other day
saying that he was very anxious to do a
story on what the British had turned
over to us in the way of information on
weapons and so on, to show that this
help is not a one-way proposition; and
I think it would be better if that came
from the War Department rather than from
us, so I asked McCloy informally if he
would see Edgar Mowrer. He said he would
be delighted, but he had been having an
argument with Stimson about the whole
subject, and McCloy is very anxious to have
this information brought out; and he sees
no military harm in it whatever. Stimson
is afraid that it will make it seem that
there is an understanding, secret under-
standing between the general staffs of the
two countries and that it might have a
bad effect. So McCloy is going to see
Mowrer and then go on and argue some more
with Stimson, and try to get this thing
released.
H.M.Jr:
Well, I am glad to have the information,
but I am not going to --
Kuhn:
No, I just thought you would want the
information.
H.M.Jr:
We have it, you know.
Kuhn:
I know, but I thought it was better not
to come from here.
H.M.Jr:
Much. And be sure and tell Joe Alsop I
could use the 200 million dollars that
Regraded Unclassified
163
6 -
Bill Bullitt got for the English.
Kuhn:
That is all I have.
Bernstein:
I have nothing.
H.M.Jr:
Is it good?
Bernstein:
I don't know. I haven't gotten the latest
reports.
H.M.Jr:
How are all these suits? Are you worried?
Bernstein:
No, I don't think we should worry.
H.M.Jr:
Mr. Breckenridge Long called me up and
wanted to know would I have any objection
to Butterworth going to Wayne Taylor as
one of his assistants to advise him on
how to service other departments. So I
told him I had no objection. O.K.?
Bell:
It is all right with me. Very good.
H.M.Jr:
So he is going to work for Wayne Taylor.
Bell:
In the Department of Commerce or in the
transfer from --
H.M.Jr:
I don't know.
Cochran:
He could be detailed there just as I am
detailed here.
H.M.Jr:
I didn't ask.
Cochran:
I inquired in New York yesterday about
Bloch-Laine, and he is in Lyon in charge
of the Lazard office in unoccupied France.
H.M.Jr:
Unoccupied?
Regraded Unclassified
164
- 7
Cochran:
Yes. There was a report in the Paris
paper some days ago that he was coming
over here, but his friends in New York
couldn't confirm that at all, so he is
still getting along all right. I spoke
to Secretary Hull's office again yester-
day, I think it was the first time
yesterday, on this Murphy report, and
this morning they called back and said
that Mr. Welles had all that material,
and he would let me hear from him on it.
Then Sir Edward Peacock is coming in at
four, and I told Mr. Bell.
H.M.Jr:
Could he see me a few minutes alone? I
will let him have a few minutes alone,
and then I will phone you, Dan.
Bell:
O.K.
H.M.Jr:
He sent word to me, he would like to see
me a couple of minutes alone.
Cochran:
Mr. Schenker, Dave Schenker, telephoned
yesterday --
H.M.Jr:
Who?
Schwarz:
Schenker.
H.M.Jr:
I am a little sensitive to Schenck.
Cochran:
He telephoned me yesterday saying that
he had a number of inquiries, people wanted
to get in touch with Sir Edward and wondered
when he was coming down. I told him he
would be here in a day or two.
H.M.Jr:
Well, we can tell him that this afternoon.
Regraded Unclassified
165
- 8 -
Cochran:
That this man has inquiries. But I didn't
think you wanted him here for the meeting.
H.M.Jr:
No. You might let it leak, Chick, that he
is coming in around four.
Schwarz:
A little bit before that?
H.M.Jr:
A little after.
Schwarz:
After he is inside.
Cochran:
I have a couple of things on the British
sales which you might be interested in see-
ing before he comes in.
H.M.Jr:
That is just securities, isn't it?
Cochran:
Yes.
H.M.Jr:
Just as soon as I get over my testimony,
I am expecting to sit down with Bell and
you and bring myself up to date on the
financial situation, British financial
situation. You have got a report, haven't
you?
Cochran:
Yes, I have.
H.M.Jr:
But I don't think --
Cochran:
No, it is not directly concerned.
H.M.Jr:
I will keep it in mind.
Sullivan:
You were going to call Mr. Doughton and
Mr. Cooper.
H.M.Jr:
Yes. I will do a little shouting. You got
through nicely, didn't you?
166
- 9 -
Sullivan:
They did & good job yesterday.
H.M.Jr:
Were you on the floor?
Sullivan:
No, I was in the gallery. I never go on
the floor.
H.M.Jr:
Do your boys go on the floor?
Sullivan:
Tarleau does, but I think it was better
judgment for me not to, and then they
could come up or call me down.
H.M.Jr:
And what does Tarleau do, does he sit
right on the floor?
Sullivan:
No. On the Tax Bill he is right in there,
but if they want me, they call me and I
come down and they come outside.
H.M.Jr:
Everything else all right?
Sullivan:
Yes. Capper had 8. number of amendments
yesterday.
H.M.Jr:
Sometime when you are ready, I am going to
sit down and talk new taxes with you.
Are you ready?
Sullivan:
Sure.
H.M.Jr:
I mean, the first time I have a breathing
spell.
Sullivan:
I think having waited until now was pretty
good judgment, because they are all begging
for information. They want to go up there.
It is quite a shift.
H.M.Jr:
Anything else, John?
Sullivan:
No, sir.
Regraded Unclassified
167
- 10 -
H.M.Jr:
Chick?
Schwarz:
I have nothing.
H.M.Jr:
Herbert?
Gaston:
I have some reports on our 9:30 meetings
while you were gone. Shall I give them
to Miss Chauncey?
H.M.Jr:
Yes, she would love to have them.
Gaston:
I also have from Mr. White's shop, Mr. Coe,
two one-page reports on German and
Italian military expenditures, but they
are working on a revision of that and a
recapitulation summary on one page which
I asked them to do.
H.M.Jr:
Well, I would like -- as a result of my
conversation with the President yesterday,
I would like to shoot it to him just as
soon as I can.
Gaston:
This was addressed to Mr. White by one
of his men, and I am having that changed,
and I am having a recapitulation sheet put
on there that summarizes the whole situa-
tion.
H.M.Jr:
No, I am sorry, I am talking about something
else. I am talking about the treatment of
American companies in Germany. That is what
I want. I want to get that to the President
as soon as possible. This would be for the
next thing.
Gaston:
The statement on the Lease-Lend appropria-
tions when they come up.
168
- 11 -
H.M.Jr:
Well, I am not going to testify on the
Appropriations Bill. That was decided
yesterday.
Bell:
Beg your pardon?
H.M.Jr:
I am not going to testify on the Appro-
priations for the Lease-Lend Bill.
Bell:
You are not?
H.M.Jr:
No, I put it up to the President yester-
day, and he is going to let Stimson and
Knox and Knudsen.
Bell:
I think that is right.
H.M.Jr:
Stimson, Knox and Knudsen and you (Bell)
know about the secret meeting at my house,
which you are to be at, so we'll do all the
background work and then let those three
men carry it.
Bell:
I have had some conversations with Harold
Smith on setting up a committee to look
after the accounting and the types of
appropriations we ought to have. He spoke
to the President last Friday, and the
President said to go ahead.
H.M.Jr:
Well, that is all - it fits into the same
picture, doesn't it?
Bell:
That is right.
H.M.Jr:
But when I spoke to the President yesterday,
he hadn't thought about this thing at all,
about how they are going to testify, and he
said he was very glad to have me go ahead
and push it, you see, and - which we'll do.
169
- 12 -
Bell:
It might be a good thing to get this appro-
priation for aid to these countries into
one fund, say get three and a half or four
million dollars for aid to these countries
under this Lease-Lend Bill, and then as
the material goes out from the War Depart-
ment to the Navy, check against this one
fund and reimburse the appropriations. It
is a good accounting arrangement, and we
would always have the information in one
place.
H.M.Jr:
Well, would you - that ought to be written
in to the Appropriations Bill.
Bell:
That is right, it will have to be written
right into the language.
H.M.Jr:
Cox is working on this for me.
Bell:
Well, we'll have to discuss it with the
Budget.
H.M.Jr:
Do you want to do that before Thursday?
Bell:
We can. I don't know what you want to do
at this meeting, just discuss ways and means,
or --
H.M.Jr:
Yes.
Bell:
Well, we can have some preliminary dis-
cussions with the Budget before then.
H.M.Jr:
You come prepared.
Bell:
Yes.
H.M.Jr:
And I will look to you and Cox.
170
- 13
Bell:
All right.
H.M.Jr:
How will that be?
Bell:
Good.
H.M.Jr:
Have you seen the memorandum?
Bell:
Yes.
H.M.Jr:
With the President's initials on it?
Bell:
Yes, I saw that.
H.M.Jr:
Who else would there be to come?
Bell:
Well, Smith ought to be there.
H.M.Jr:
He is invited, but I mean from the Treasury.
Bell:
That is all, I think.
H.M.Jr:
Except Phil Young; of course, he knows
what they need.
Bell;
Yes, I expect he would be good.
H.M.Jr:
This is Thursday at 9:00. The President
is very anxious to keep this a secret. I
am having this at the house instead of here.
He is very anxious not to have any leaks
on this.
Gaston:
There was a cargo of rubber came in last
week on Indo-China for consignment for sale
on the New York market, and it passed through
several hands and was sold to Amtorg, and
they immediately began trans-shipment of it,
changing it to another ship which had been
171
- 14 -
chartered to Amtorg by the Maritime
Commission, the Exchester. Johnson
learned about it through one of the
legal staff in New York and expressed
the opinion that it might be subject to
the Export Control and reported it to the
Division of Export Control of the State
Department. They decided that it was
subject to Export Control, and a license
would have to be issued. The Russians
were SO notified. They came in yesterday
to protest. It seems that they had been
told by Maxwell that it would not be
subject to Export Control Licensing. Also,
unfortunately, they had been told the same
thing by one or two subordinates in the
Custom House in New York. But it is
rather an amusing thing.
H.M.Jr:
Who caught it?
Gaston:
A lawyer named Rains in our legal division
in New York.
H.M.Jr:
Will you write me a one-page letter for the
President saying that this is the kind of
thing that is happening under the present
set-up? This is an argument for having it
in one place.
Gaston:
Yes.
H.M.Jr:
Will you write a one-page letter for me?
"My dear Mr. President: Here is a good
example that I know of the kind of leaks
of strategic materials which is going on
every day and will continue to go on until
the Control is in one place." I wouldn't
say "in the Treasury, you see,
Gaston:
Yes.
Regraded Unclassified
172
- 15 -
H.M.Jr:
This letter that I will write him will
be circulated all over, and don't try
to spare anybody's feelings.
Gaston:
Yost, over there in the Division of
Controls, was very petulant when the
suggestion was made that perhaps this was
Maxwell's business. He said it wasn't
Maxwell's business, it was their business.
H.M.Jr:
Well, will you put it in a letter for me
to the President and say, "this is a good
example that I know of the necessity of
having it all in one place," but don't
say "in the Treasury."
Gaston:
There is another incident somewhat of the
same kind that relates not to exports but
to imports. A man named Halbach, represent-
ing the General Dye Stuffs Corporation,
which has, of course, important German
connections, came in last week and said
that he had applied to the Chase National
Bank for a loan of $500,000 to finance some
imports of chemicals from Germany via
Russia. The Chase National told him that
they would not make him this loan without
the approval of the government, so he came
down here and saw Johnson. Why, I don't
know, but at any rate - no, he first saw
the State Department, that is how it was,
and they said it was nothing with which they
had anything to do and advised him to see
Customs, and they came to see Johnson, and
Johnson told them that it was nothing with
which he had anything to do, but offhand,
he would express the opinion that they had been
denied a loan by the Chase National Bank;
but now yesterday Johnson learned, or heard,
that they saw a man named Morgan in the
Regraded Unclassified
173
- 16 -
Office of Production Management, and this
man told them this deal was perfectly all
right; and on the strength of that word,
they went to the Chase National Bank and
got the $500,000 loan to import chemicals
from Germany.
H.M.Jr:
Give that to the President, too. If you
can get this to Miss Chauncey by 2:00, I
will sign it.
Gaston:
Yes.
Buckley:
On the other side of that rubber deal, as
an example of what they keep in, there has
been 22 hundred pounds of Swedish crepe
rubber for soles that the Swedes have been
fighting about for about five months,
$762 worth that they wouldn't let out.
I mean just the other angle, a little bit
that doesn't mean anything to anybody. They
refused to let it out. The Swedes are just
about frantic. Nobody will take it over,
and they have shipped it across the Atlantic
to Bergen and back once, and it is sitting
in 8. warehouse in New York, 2200 pounds of
rubber.
H.M.Jr:
Would you put that in? "On the other hand,
here is a case which should be permitted
to go." Or wouldn't you? Maybe that makes
it too complicated.
Gaston:
One point about this rubber thing, it is
one of those things you can decide either
way. It is a question of high policy, and
we have three or four agencies deciding
governmental policy.
H.M.Jr:
Well, take your time and give me 8. good
174
- 16 -
letter, and I will sign it. Anything
else, Herbert?
Gaston:
Very complicated complications on Danish
ships, but I don't think you want to go
into it now.
H.M.Jr:
No. I tried to get in on it once. 10:15?
Bell:
All right.
175
February 11, 1941
9:32 A. M.
H.M.Jr:
Hello.
Adolf
Berle:
Good morning, Mr. Secretary, I hope you had &
good holiday.
H.M.Jr:
I had a wonderful holiday.
B:
(Laughs) You needed it because it may be a long
time before another one.
H.M.Jr:
I came back with a resolution - one week in four
- but I -
B:
(Laughs) Well, if you stick to that you'll have
quite a gambol in several paths. All I want to
know 1e the formula after you get it worked out.
(Laughs)
H.M.Jr:
I'll give it to you.
B:
(Laughs)
H.M.Jr:
The reason I'm calling you is Jim Buckley suggested
I call you and that you tell anybody in the State
Department interested. I put it up to Frank Knox
today that I wanted thirty Grumman that will be
coming off the line now -
B:
Oh fine.
H.M.Jr:
To be permitted to be accumulated - they come off
at the rate of forty a month -
B:
Yes.
H.M.Jr:
Now, a thing with a designation F3 which has a wing
which does not fold - and at the end of the month -
before the end of the month - well, within ten or
fifteen days they begin to get new planes with fold-
ing wings which 18 a. big improvement, you see?
B:
Oh yes.
H.M.Jr:
Now -
B:
But the others are perfectly good.
H.M.Jr:
Oh - they're going right on the carriers and the
only - from their standpoint it's better; they
don't want a folding wing plane.
B:
No.
176
- 2 -
H.M.Jr:
You see they have no use for it,
B:
Not the slightest.
H.M.Jr:
Now, he's Just raised bloody hell about my
suggestion, and he said he'd do it for the English
but he'd be damned if he'd do it for the Greeks.
So I said it's a matter of high policy. All I
could do was to suggest it.
B:
(Laughs)
H.M.Jr:
And I didn't - but my suggestion was to let them
accumulate on the ground and then when the bill
passes they'd be there. all ready to go to Greece,
you Bee?
B:
Right.
H.M.Jr:
Now Buckley said you were working with the Army
on something else and if you knew this -
B:
Well -
H.M.Jr:
I'll get 8. yes or no out of him I think today.
B:
Well, we'd fight for that. I've got to check
with that Greek and find out if it's all right
but I've absolutely no doubt that it would be.
H.M.Jr:
Oh, I don't - if you don't mind, I wouldn't say
anything.
B:
Well, still better I won't. I'd rather you'd
talk to him.
H.M.Jr:
No, no I mean let's wait. There's been 80 much -
Let's give Frank Knox a chance to say he has
it in writing.
B:
You see he sounded off a few notes.
H.M.Jr:
Yeh.
B:
And unfortunately got it wrong.
H.M.Jr:
I know.
B:
And that put us in a terrible hole.
H.M.Jr:
Well, that's why I'm putting the heat on him
in order to make good now.
Regraded Unclassified
177
3
B:
Well, I think that's perfectly swell. I - one thing,
Henry, in some of theee things, seriously I wondered
whether it would do any good if you and I lunched
together once every two weeks or 80 -
H.M.Jr: Well, I think - the Greeks -
B:
- while I could give you the rest of the story on it.
H.M.Jr: I think it would be swell.
B:
For instance, this Greek business, now I think I have
a rough idea of your opinion of the Greeks and I may
say that Henry had a lot to do with them in trying to
practice march the same but that's got very little to
do with it. What we're really playing for is to try
to keep all this Near East business in line and the
British or anybody else could lose a hell of a lot more
than any thirty planes -
H.M.Jr: Yeh.
B:
Just on some general idea that all these people are
going to be left alone. And we (laughs) the Greeks, as
you know, asked to see the President and -
H.M.Jr: I know.
B:
And the President sent word through General Watson
that he could come back and talk to me. (Laughs)
H.M.Jr: I see.
B:
I didn't feel like seeing him and I haven't seen him
until I have something to say because -
H.M.Jr: Well -
B:
I couldn't explain away what Frank Knox said and I'm
certainly not going out saying bad things about an
American officer to a foreign diplomat.
H.M.Jr:
Well -
B:
So I just stalled it.
H.M.Jr: Well, don't, if you don't mind, keep this strictly
within the Department until we hear from Frank Knox.
B:
Righto.
H.M.Jr: My suggestion 18 an absolutely workable one. He talked
about robbing the plane - aircraft carriers and I
178
4.
said, "Nutel What this means is that you have to
wait just exactly twenty days."
B:
Well, that's exactly the point and -
H.M.Jr: He'll have to wait twenty days and then he'll get B.
plane with a folding wing.
B:
Well, I think that's swell because he waite twenty days
and he gets a better quality of plane and he can take
more on his carrier.
H.M.Jr: That's right.
B:
That's all that happens to that.
H.M.Jr: I know I've got him in Achilles' heel and he's going
to have a hell of a time squirming out of it.
B:
(Laughs) So far, but I think you'll probably get him to
feeling slightly contrite anyway. (Laughs)
H.M.Jr: Well, I went on - He commenced to swer and I said, "That's
all right. This 18 a good proposal and you ought to come
through.' Then he - he evidently had a staff meeting
and you know - but I expect to hear from him and when I
hear I'll let you know.
B:
Much obliged. Meanwhile I keep the Greeks stalled.
H.M.Jr:
Right.
B:
Righto.
H.M.Jr: And don't mention it to anybody out of the Department,
please.
B:
I won't - well, that 18 it will stay quiet in the
Department.
H.M.Jr: Right.
B:
As I say, the other thing - I thought sometime maybe
if it will do any good I could sit down and go over
some of the various pressures we're under because I
have a hunch that maybe we don't keep them as closely
as - I don't know how many of the cables you see. You
see I know the Treasury ones but there a lot of other
things that go on here -
H.M.Jr: Well, I tell you now, you see, Thursday, come over
Thursday and have lunch with me.
Regraded Unclassified
179
-5- - -
B:
I'll make myself free Thursday if I'm not.
H.M.Jr: One o'clook.
B:
One o'clook on Thursday.
H.M.Jr: Right.
B:
Right.
H.M.Jr: Thank you.
February 11, 1941
10:08 A.M.
180
H.M.Jr:
Hello.
Operator:
Congressman Doughton.
H.M.Jr:
Hello.
Congressman
Doughton: Henry?
H.M.Jr:
Bob?
D:
Hello, Henry.
H.M.Jr:
Bob, you're a master of strategy.
D:
What's that?
H.M.Jr:
You are a master of strategy.
D:
Oh you flatter me too much, Henry.
H.M.Jr:
You got that bill through marvelously.
D:
Well, I think we did a pretty good job on it.
You know we got it out and our boys all stood up
very loyally. The Republicans - they lined up in
one solid determined frontage against us.
H.M.Jr:
Well, you certainly gave them a spanking.
D:
Yes, we certainly did. Did you read the record?
H.M.Jr:
Oh, well I've got it before me.
D:
Well, if you have time to - Some rainy Sunday
afternoon when you're not down to
you might read my speech.
H.M.Jr:
I'm going to do that.
D:
Thank you. (Laughs)
H.M.Jr:
I'll do that.
D:
Well, we're mighty glad to be of service about that.
I think that was mighty attractive. If you'll read
the record - they certainly tried to justify them-
selves by some way. But that statement you'd made
before the Committee, maybe the Foreign Affairs
Committee or some Committee and all that - they
tried every way in the world you know to raise some
Regraded Unclassified
181
- 2 -
D:
doubt in the minds of our folks but they stood up
all right, We didn't lose but, two or three
Democratic votes on the teller vote.
H.M.Jr;
Well, I wanted to tell you how pleased I was.
D:
Well, I was glad to do it - - always. Want to talk
to you some of these days. I'll tell you what I
want to get after with you -
H.M.Jr:
- Yeh.
D:
And go to the President with it -
H.M.Jr:
Yeh?
D:
That paragraph in your letter or in your statement -
I think it's on page 5 - I quoted it yesterday.
H.M.Jr:
Yeh.
D:
In my speech about the importance of economy at
this time.
H.M.Jr:
That's right.
D:
I want us to take some concrete, forward steps on
that.
H.M.Jr:
Well, I -
D:
I just can't conscientiously go along and continue
to increase taxes and continue to increase borrowing
and the debt adding on - passing on obligations to
the future generations they may not be half as able
to stand as we are until we effect every reasonable
economy.
H.M.Jr:
Well, I'm with you any time. Just let me know and
I'm at your service.
D:
Well, if we get time and go over there to the
President - the only thing that he and I ever
seriously well not seriously but especially disagreed
about 18 this question of - of spending money.
H.M.Jr:
Yeh.
D:
He made a statement down there some time ago that
shooked me when he was talking about the W.P.A.
H.M.Jr:
Yeh.
D:
I don't remember whether you were there or not.
H.M.Jr: No.
182
3 -
D:
Instead of defining the different groups of W.P.A.
people we have to take care of he asked if these
fellows got drunk every week.
H.M.Jr:
Yeh.
D:
And I told him I couldn't go along on that.
H.M.Jr:
No.
D:
That I wasn't willing to tax the people to give
fellows jobs five days a week to drink it up Saturday
night and Sunday.
H.M.Jr:
Yeh. Well -
D:
We've got to do something. The public's going to -
I can't do it conscientiously and the public won't
justify it in going on unless we out out as far AS
we can - it may not be much - it's really in the
mind, you know, -
H.M.Jr:
Yeh.
D:
A very serious question as to what we are doing
and it subjects us to criticism and I want us to
take some - whether we'd better get together the
Chairman of the Appropriations Committee and his
Committee and try to get some of the House -
- the best way to do it I don't know.
H.M.Jr:
Well -
D:
But I do know that when it's through Senate I'd
be glad to talk about it.
H.M.Jr:
Well, anytime you're ready I'm at your service.
D:
Well, thank you very much, Henry, you're always -
you're fine to work with.
H.M.Jr:
Thank you.
D:
I find I should say fine to work for.
H.M.Jr:
Thank you.
D:
Good bye.
183
February 11, 1941
20118 1. 1.
H.M.Jri
Hello.
Operator: Speaker Rayburn.
H.M.Jr:
Hello. Hello.
Speaker
Rayburn:
Yeh, Henry.
H.M.Jr:
Sam?
R:
Hello.
H.M.Jr:
I just wanted to call up and tell you how
pleased I was about the way you handled our
bill yesterday.
R:
Well, that was-- I thought it was pretty good.
H.M.Jr:
I thought it was damn good. And I don't see
how it could be handled any better.
R:
Well, it looks to me like it was all right and
I thought the lend-lease thing slipped through
pretty easy with only one amendment.
H.M.Jr:
Well, you've done a masterful job.
R:
Well, the Committee worked fine.
H.M.Jr:
Yeh.
R:
Sol and his whole Committee did a good job
and John McCormick did a swell Job too for his
part of it and everybody worked together and we
got by pretty well.
H.M.Jr:
I just wanted to tell you how appreciative I
am.
R:
All right, Henry. Now - did you have a nice trip?
H.M.Jr:
Wonderful!
R:
Well, that's fine. I wish you'd take me with you
some time.
H.M.Jr:
I'll do that.
R:
(Laughs) All right. Bye.
H.M.Jr:
Bye.
Regraded Unclassified
184
February 11; 1941
10:15 a.m.
TESTIMONY BEFORE PROPRIATIONS COMMITTEE
Present:
Mr. Bell
Mr. Sullivan
Mr. Schwarz
Mr. Haas
Mr. Kuhn
Bell:
The first two paragraphs on page 4 are new.
They kind of hit into the Byrd idea.
H.M.Jr:
Limitation provided in H.R. 2959. What is that?
Sullivan:
That is the bill.
Bell:
You could say, "Limitation provided in this bill."
H.M.Jr:
I just wanted to know what bill it was. I don't
think that paragraph is very interesting. I
don't think it makes sense.
Bell:
Well, it is the argument that has been put up.
H.M.Jr:
Yes, but you raise it, and you leave me in the
air. I don't know whether I am for it or against
it.
Bell:
Well, read the next paragraph. This is the one
we are really for, is the next paragraph. We
just say this is impossible to tell.
H.M.Jr:
You don't say!
(Mr. Kuhn entered the conference.)
185
- 2 -
Bell:
Yes, we do. We say it is impossible to tell.
H.M.Jr:
I don't like it.
Bell:
Don't like either one of them?
H.M.Jr:
No, sir.
Bell:
Well, let's take them out.
H.M.Jr:
A lot of words, and I don't know who wrote it,
and I don't think it means anything.
Bell:
Well take it out. It shortens it anyhow.
H.M.Jr:
It is wonderful when we have five people here,
and I never know whose toes I am stepping on.
Five times ten is fifty toes.
Bell:
As long as I wrote it, they all get credit for
it.
H.M.Jr:
Well, I don't like it, Dan.
Bell:
O.K. Well, it was just thrown in there for
Mr. Byrd. That is the thing he talked about.
H.M.Jr:
That goes down to the middle of page 6?
Bell:
That is right.
Kuhn:
Can't that kind of thing be handled better in
questioning anyway?
H.M.Jr:
Dan will handle it beautifully verbally.
Bell:
This would have saved me.
H.M.Jr:
He can give it. Well, on page 9, I would re-
verse it. "I conferred with some members of the
Senate and the House." That is the top of page
9. It is just a small thing. And instead of
Regraded Unclassified
186
- 3 -
saying, "explained to them," I would say, "I
discussed with them." I don't get that, "in
taking these steps.' I don't get that. "I
conferred with some members of the House and
Senate and discussed with them what I had in
mind."
Bell:
Well, in deferring my refunding, it was my hope
that Congress would enact this legislation,
taking the steps that you discussed with them,
that you hoped that they would go ahead and
carry out the program.
H.M.Jr:
I think it is kind of muddled.
Kuhn:
When you change the word to "discussed," that
explains it.
Sullivan:
Just take out "these steps" and start B. new
sentence, "it was my hope."
Kuhn:
Yes.
H.M.Jr:
That is all right. And at the last, "it is
the program
Sullivan:
"The program met with their hearty approval."
H.M.Jr:
That is all right. It is full of vim and vigor
like Sullivan. He gets the bill through.
Sullivan:
Maybe.
H.M.Jr:
How about saying, "as you know"- instead of
saying, "as you know, the principle involved
is nothing new to everyadministration for the
past 20 years. The principle involved--"
Bell:
Starting that paragraph?
H.M.Jr:
Yes. "The principle involved in this bill is
Regraded Unclassified
187.
s
nothing new."
Bell:
Well, the principle involved is not new, because
you are talking about taxing.
H.M.Jr:
Yes, "the principle involved is not new. Every
administration has had it."
All right, gents?
Bell:
Yes.
H.M.Jr:
I don't want Sullivan to get all the corrections.
You have got too damn many steps. "Take the
first step to - it is particularly appropriate
that this step," and 60 forth.
Bell:
Make, it, "that this should be."
Kuhn:
Should we change it, that "All segments of the.
economy will be called upon," and make it, "All
parts - #
Haas:
Just say, "All will be called upon."
H.M.Jr:
All right. What does that mean? "It is urgent
that all subscribers to any given class of
securities shall receive the same return."
Sullivan:
I think the thought there is that because of the
added taxes, the net return--
H.M.Jr:
I know, but the cop on the street corner wouldn't
understand that. Fix it up.
Haas:
We had that spelled out and made it brief.
H.M.Jr:
No one would understand it if they should print
it in the paper.
Bell:
"Receive the B ame tribute."
Sullivan:
"Equal treatment under the law."
188
- 5 -
Schwarz:
Or make it negative, "That no subscriber should
receive an advantage."
Bell:
Yes.
H.M.Jr:
Will you fix it up? I think it isn't clear.
I don't like, which are worth nothing to the
poorest class, but very much to -
Sullivan:
Worth a great deal."
H.M.Jr:
Something like that.
Bell:
You don't like the words, "very much"?
H.M.Jr:
No.
Kuhn:
Is it necessary to have "class" in there at all?
Sullivan:
Yes.
H.M.Jr:
You are quite right. I don't like the word
"class."
(Telephone conversation with Representative
Jere Cooper follows:)
February 11, 1941
10:26 A.M. 189
H.M.Jr: Hello.
Operator: Congressman Cooper.
H.M.Jr: Hello.
Jere
Cooper:
Hello, Henry.
H.M.Jr:
How are you, John?
C:
Pretty good, thank you. I didn't know you were
back yet.
H.M.Jr: Oh sure I came back to get the good news how you
operate up on the Hill.
C:
All right, fine.
H.M.Jr:
That was some job yesterday.
C:
Yes, we got along fine.
H.M.Jr:
I'm simply delighted. I called up to say thank
you.
0:
Well, that's awfully kind, Henry, I appreciate it.
H.M.Jr:
I wish I had some more legislation BO you could
handle it.
C:
Well, fine, fine. Are you going to get things
worked out pretty soon in the Senate do you think?
H.M.Jr: Well, I don't know. I go up there tomorrow on
the debt limit.
0:
Well, that's what I thought.
H.M.Jr:
And -
C:
I understand they're going to take up that lease-
lend bill next Monday 80 it looks like they ought
to run this in ahead of it if they can.
H.M.Jr:
Well, if they could it'd be swell.
0:
Yeh. 'Cause with your March 15th coming on - if
they get in debate on that lease-lend bill, they
may run up till March 15th.
H.M.Jr: Yeh.
Regraded Unclassified
190
- 2 -
H.M.Jr: Well, thanks for everything.
C:
All right, Henry, thank you very much. I appre-
ciate your kindness.
H.M.Jr: Bye.
C:
Bye.
191
- 6 -
Sullivan:
I think the bill has a very good chance, and I
am going up this morning to see Prentiss Brown.
H.M.Jr:
How about seeing Barkley?
Sullivan:
I thought I ought to see Brown first, because
we have got to get it out of the Committee before
we can get in there.
H.M.Jr:
Why Prentiss Brown?
Sullivan:
He is chairman of the Sub-committee that is
handling this thing.
Bell:
I wonder if that last part is necessary.
H.M.Jr:
What is that?
Bell:
We said, "This makes it urgent, from an equitable
point of view, that all subscribers are treated
alike, = and strike out the rest of it - if we
did that, does it make that a sort of blank wall?
H.M.Jr:
No, I like that next sentence.
Haas:
Doughton uses this very argument against that
amendment.
H.M.Jr:
I like that sentence about the wealthy sub-
scribers.
Haas:
He pointed out that it should all be--
H.M.Jr:
I like that.
That next sentence is too damn involved.
"Such exemptions". I would leave that out. At
least no one would understand that, including
myself.
Kuhn:
Those that were left - "Such exemptions are
Regraded Unclassified
192
incompatible with democratic financing of the
defense program." Then you go right along in
the next paragraph to discuss the defense pro-
gram.
H.M.Jr:
That is all right.
Kuhn:
Leave out the middle.
Haas:
The attempt to explain it, muddles it.
H.M.Jr:
How would it read, Ferdie?
Kuhn:
"Such exemptions are incompatible with the
democratic financing of the defense program and
should be removed." Then it goes on to say our
whole economy should be concentrated on national
defense.
Sullivan:
There would be no new paragraph. Your new para-
graph would come in the second sentence.
H.M.Jr:
"Such exemptions are incompatible with demo-
cratic financing of the defense program and
should be removed."
Schwarz:
It is clear.
Bell:
You don't want a paragraph, John?
Sullivan:
I thought this next sentence followed on that
one better. "Our whole economy and effort should
be concentrated on national defense."
Bell:
That is part of that economy.
Haas:
Well, the economy thing ought to be set up in
one paragraph.
Bell:
Do you want to repeat that economy thing?
H.M.Jr:
I was going to weep if you hadn't.
193
- 8 =
Sullivan:
What a hand Doughton got when he gave your
economy speech yesterday.
Kuhn:
Did he use 8. magnifying glass?
Sullivan:
Yes.
Kuhn:
Good.
Schwarz:
One of the Republicans said he had always had
a high regard for him, and now he thought more
of him than ever.
Sullivan:
One of the Republicans quoted your statement
on the magnifying glass.
Bell:
We took that out of here. Maybe we had better
put back the magnifying glass.
Kuhn:
What about microscope?
H.M.Jr:
I would put it back in.
Bell:
We just took it out to be a little different.
Reexamined with a magnifying glass.
Various classes--
Sullivan:
Various investors.
Bell:
Various characters.
H.M.Jr:
John, hit your shin instead of my table, please.
Sullivan:
Aye, aye, sir. Excuse me. It drives me wild
when anybody does it in my office.
Bell:
Do you think it would make more noise?
H.M.Jr:
At least, if he did it often enough, he would
stop it. (Laughter)
Regraded Unclassified
194
9 P
Sullivan:
It drives me crazy.
H.M.Jr:
He would finally get a black and blue mark on
his shin.
Sullivan:
I am sorry.
H.M.Jr:
That is all right.
Sullivan:
Type of security
Bell:
That is all right.
Schwarz:
That is all right.
H.M.Jr:
Well, I have just got one thought that I would
like to get in here. I first got it from Mrs.
Malone of the New York Tribune, and then I got
it from Mrs. Roosevelt. That is, I don't know
what the technical term is. What is this term
they use? Is the security wage that the people
should pay in three months after they lay them
off?
Bell:
Dismissal wage.
Kuhn:
Dismissal compensation.
H.M.Jr:
What I was thinking of, if the worker put in his
excess earnings into savings, it would be in
the form of a nest egg against the day when the
period of readjustment comes.
Bell:
In connection with that last sentence, you mean
on individual security.
H.M.Jr:
I just want to give you the idea. The thought
is that if it will work due to all of this spend-
ing of the money, I mean, if the farmer or laborer
gets an additional compensation, it would be very
sensible for him to invest it in this kind of
Regraded Unclassified
195
- 10 -
Security against a - it is a self insurance
against the day when this readjustment period
will come, when this program ceases, something
like that.
Kuhn:
That raises a delicate point, and we came up
against it. I am talking of this savings
business. It will spare the fear of compulsory
docking of payrolls, which has been suggested
and which was one of the interpretations of Mrs.
Roosevelt's speech. You have to make it per-
fectly plain that this would be done only vol-
untarily and get rid of all suspicion of coer-
cion.
Haas:
I think it is a good idea, Mr. Secretary, but I
think the Social Security ought to raise it.
Schwarz:
It is sugessted in a general way later on.
H.M.Jr:
I would like you to go over it and in retyping
it, Dan, if you would have them do it in
italics or something 80 I can see what is dif-
ferent, and I will read it once more between -
well, I am tied up tight as a drum from three
until five, 80 you would have to get it to me
between two and three. If you get it to me
just in italics, and I will go over it with you
alone, if you just bring it in, you see, Dan.
I will be working on my mail, and any time
between two and three, you can walk in here
and just have the changes in italics.
Bell:
O.K. We could just take that one and insert
them.
H.M.Jr:
Any time between two and three.
Kuhn:
Dan, how about the postal savings? There is one
point that came up that we would like to talk
over with you.
196
- 11 -
H.M.Jr:
Don't do it now.
Kuhn:
It might be slipped into the text here.
H.M.Jr:
Let's discuss it in connection with the plan.
Dan, in view of the fact that I need it between
two and three, do you want to sit in with these
fellows?
Bell:
Yes, I do, but I think Chick can make - he has
got all the changes except this other thing that
we will discuss at this postal savings con-
ference, and we can dictate that in a few minutes.
H.M.Jr:
What I would like to do, I would like just a
couple of minutes now with Bell alone on financ-
ing, and then if you get - by a quarter - it is
now six minutes of. If you and Harold Graves
would come in here at a quarter of, Kuhn, or
anybody else who is going to be here. I just
want to talk to Bell alone a couple of minutes,
and you (Stenotypist) come back at a quarter of.
Schwarz:
Do you want to do anything on this idea of two-
thirds revenue?
H.M.Jr:
Oh, I will have it in the old bean. Somebody
is going to ask me.
Sullivan:
Do you anticipate a question on that?
H.M.Jr:
Let's see how it goes. It might be embarrassing.
Regraded Unclassified
197
Draft
I as appearing before you today in support of R.R. 2959,
which raises the debt limit to $65,000,000,000 provides for
the elimination of the present partition in the debt limit,
provides greater flexibility in our financing operations,
and provides that the income from all future issues of
Federal securities, both direct and indirect, be subject
to all Federal taxes.
The 1942 Budget submitted to the Congress last month
indicates that our contemplated National Defense program
has now been increased to approximately $28,500,000,000
in appropriations, contract authorisations and recommendations.
It also indicates that the estimated expenditure pregrams
will result in combined deficite for the fiscal years 1941
and 1942 of $15,400,000,000. the balance of the borrowing
authority on Jamary 51, 1941, w $1,123,000,000 under the
general limitation, and $1,628,000,000 under the National
Défense limitation. This combined total of $8,753,000,000
Regraded Unclassified
198
- 2 -
provides the Treasury with borrowing authority sufficient
only for the next four months, and even in that period we
would be restricted to short-term obligations for a larger
part of our financing operations than seems advisable at
this time.
Short-term securities would for the most part be
purchased by commercial banks, thereby causing a further
increase of deposits. The Treasury would like to avoid
further increases of deposits as far as possible and to
some extent this can be accomplished by issuing obligations
attractive to permanent investors outside of the banking
system. In times such as these, 1t is our desire to borrow
as much as possible from real savers rather than from banks.
The bill, among other things, proposes to amend the
Second Liberty Bond Act BO as to limit the face amount of
public debt obligations issued under the authority of that
Act to an amount not to exceed in the aggregate $65,000,000,000
outstanding at any one time. This provision as written will
Regraded Unclassified
199
- 3
repeal section 21(b) of that Act which authorises the issuance
of $4,000,000,000 face amount of National Defense notes.
A suggestion has been made that the debt limitation be
increased to an amount sufficient to take care of only the
expenditure program outlined in the Budget, in lieu of the
limitation provided in H. R. 2959. The Budget contemplates
a gross public debt on June 30, 1942 of $58,367,000,000,
to which must be added the future accruals of United States
Savings Bonds. As it is not possible to tell at this time
what these accruals will amount to on June 30, 1942, or what
kind of a program we will adopt for the sale of additional
securities, it is impossible to estimate the amount of the
debt limitation which will be necessary on this basis. It is
Obvious, however, that it will have to be in excess of the
estimated gross public debt as carried in the Budget,
Another suggestion is that Congress fix the debt limit
in an amount sufficient to cover all of the sums that it has
appropriated or which are carried in the Budget as estimates
Regraded Unclassified
200
4
of appropriations for the fiscal years 1941 and 1942 after
deducting the estimated receipts for those two years,Dlus
the public debt on June 30, 1940. On this basis the debt
limitation would be fixed at $61,396,000,000 to cover
appropriations already made and the estimates of appropriations
included in the Budget. There should, however, be added to
this figure the sum of approximately $3,500,000,000 which the
Budget document shows will be submitted to Congress this
session as supplemental items and which are not included
in the above figure. This would make a total of about
$65,000,000,000 for a debt limitation without any provision
for the future accruals on Savings Bonds or for any additional
amounts which it may be necessary to appropriate under the
pending Lend-Lease bill.
Another matter of vital importance in connection with
the financing of the National Defense program is the tax-
exemption feature of the debt obligations of the Federal
Government and its agencies. I said last year that if it
Regraded Unclassified
201
-
4a-
were within my power I would issue National Defense securities -
subject to all Federal taxes. As you know, the discretionary
authority of the Treasury to issue securities subject to all
Federal taxes is confined to Treasury notes with a naturity
of from one to five years. As to all other
Regraded Unclassified
202
- of deverment constities, the is Check? deficiting firms to
from tenstion and there to - atterity to
- consentive officer of the Government to very these complime-
that the Signature mult mater the of
tax comptions is this conston, 11 - to as highly destruble that
the treasury name se further offers of long-tore - scourities
will the Congress had had - apportunity to the question again
is the 11ght of the hago defense financing program before M. I began
in December to Insue fully texable short-term obligations for cash to
meet our impodiate requirements and deferred our March 15 refusting
program, which ordinarily would have been concluded three months is
attence, pending the decision of this designees on the question of
eliminating tom-exemptions from all future Lerses of Federal corrition.
I conforred with - nambers of the Bones and of the Senate ml
explained to them what I had is sind and that, is taking these chops,
11 - of hope that Congress weld promptly must legislation to -
the Income from all future Leases of committee of the Federal favore-
sent or my of 190 agenci co subject to all Federal texas. the program
explained to them met with their hearty approval.
la you loss, only administration fee the past - years has
recomented the complete clinination of tex- constities. the
MII now before you propesso that the United States Government actually
take theftret stop to eximinate this universable feature from -
financing. 20 to particularly appropriate that this shop check be
initiated is commention with the financing of the National Befores
program. All of the - will be called - to share to
this task. This nutree 19 wrgant. from a equitable point of visa,
Regraded Unclassified
6
203
that all subscribers to way given class of securities cheque receive
the name return. This 10 impossible If the securities are Leased with
tax-examption privileges which are worth nothing to the persent class
of subscribers but very mush to the more vealthy relearibers. Pack
exemptions - which make the not return on Government securities
progreesively higher as the income of the purchaser is higher, and
progressively lower as his income 10 lower - are incompatible with
the democratic financing of the defense program and should be removed.
Our whole economy and effort should be concentrated on national
defense. I once again want to urge economy in Federal expenditures.
I believe, therefore, that all Federal non-defense expenditures should
be re-examined to make certain that no more funds are granted than
are absolutely essential is the existing circumstances.
In view of the enlarged progrem facing the Treasury, it is desirable
to have greater flexibility in the types of securities which my be
offered to meet the requirements of various classes of investors. There-
fore, this bill further amende the Second Liberty Bend Act 60 as to
broaden the authority under which United States Savings Bonds are
issued and to provide for & new class of security to be called "Treasury
savings certificates." The statutory limit on the term for which
Savings Bonds my be 1ssued would continue to be twenty years, as at
the present, while a limitation of ten years would be placed on the
Treasury savings certificates. It would also provide that both classes
of securities say be issued on an interest-bearing basis, on a discount
basis, or on a combination interest-bearing and discount basis, and
that the Treasury may fix w regulation the amount of Havings Bondo and
savings certificates which may be held w any one person at any one time.
Regraded Unclassified
7
204
IN addition, the Treasury were be enthorized to Lemo stamps of
provide other steake to evidence payments for Havings Bonds and envings
certificates, and to provide for the emergenge of savings certificates
for Savings Bonds. This would permit the freasury to carry on a
program encouraging more poyalar participation is the financing. Is
this connection, the Treasury wishes to be able to offer
of a character which should facilitate and promote thrift and savings.
We hope that & substantial part of the defense program for which we
have to berrow funds can be financed out of the real savings of the
people. Newover, is bringing these offerings to public attention I -
assure you that there will be no high-pressure saleemanship or coercive
propaganda.
One of the most important services the American people can reader
at this time is to cooperate in supplying the means for national defense.
To ought to make 11 possible for vorkers and farmers no less than
bankers and business men to contribute to the financial needs of the
Government, not only through their tax payments but through their
savings as well. the bill therefore provides authority to issue
securities on sush terms and in such denominations as will calist support
from the largest number of subscribers. There is every reaeon viry a
substantial part of the savings resulting from the (urrent increase in
employment should be conserved w investment in United States Covers-
sent securities. The small investor who pate his savings is Government
somurities will in this my contribute not only to national defense -
also to his own individual excurity.
Regraded Unclassified
205
February 11, 1941
10127 A.Ms
H.M.Jr:
Hello.
Operator:
Postmaster General calling.
H.M.Jr:
Right.
Operator:
Go ahead.
H.M.Jr:
Hello.
Frank
Walker:
Hello, Henry.
H.M.Jr:
How are you?
W:
Did you have a nice trip?
H.M.Jr:
Wonderfull
W:
That's good. Say, Henry, what 18 the name of
the man you are interested in for your postmaster?
H.M.Jr:
Oh, geel
W:
Is it Storm?
H.M.Jr:
Storm is right. Will Storm.
W:
Yeh. He's O.K.
H.M.Jr:
He's O.K.?
W:
Yeh.
H.M.Jr:
Wonderfull That's fine. Well they told me our
local committee and the county committee all
endorsed him.
W:
He was number three on the list but we're going
to appoint him.
H.M.Jr:
Good.
W:
All right, Henry.
H.M.Jr:
Thank you.
206
February 11, 1941
10:45 a.m.
RE SAVINGS BONDS
Present:
Mr. Graves
Mr. Kuhn
Mr. Bell
Kuhn:
I have got an art gallery for you, Mr. Secretary.
(Indicating savings bond posters)
H.M.Jr:
Wonderful. Is this original?
Kuhn:
They are all British.
H.M.Jr:
These are English?
Kuhn:
Yes. They are put out in war time without a
single flag waving stunt or militaristic emphasis.
H.M.Jr:
The man to handle this end for us, if he is well
enough, is Ned Bruce.
Kuhn:
Where is he?
H.M.Jr:
He is here in Washington. He used to be in the
Treasury and did all the murals in the public
buildings and stands ace high with the artists
all over the country. He is a great guy. He
had a stroke, that is the only trouble, but he
is a great fellow. He drew in competitions and
all that. He is a great guy and a hundred per-
cent New Dealer. I would like you to get in
Regraded Unclassified
207
2
touch with him. Where is Ned Bruce now?
Graves:
As I understand, he is with the Public Buildings
Administration.
H.M.Jr:
He works with Public Works.
All right, now what next?
Kuhn:
Want to sit around the table with us?
H.M.Jr:
Surely.
Kuhn:
Fine. I would suggest that Mr. Graves tell you
what has been happening.
H.M.Jr:
I am in your hands. I have got an hour.
Graves:
Well, I could at least bring you up to date,
Mr. Morgenthau. We have continued our contacts
with the Post Office Department, and we found
in canvassing the postal savings stamp situation
that under the present law they could not give
us a stamp with a denomination higher than one
dollar, and as we have thought about it here,
we think they should be larger denominations
than & dollar, perhaps a five dollar stamp, and
Dan, I think, himself said yesterday $6.25 stamp
as being 8. convenient denomination leading to
the purchase of a bond that costs $18.75, so
we have, with their collaboration, worked out
an amendment to the pending bill.
H.M.Jr:
I heard about that.
Graves:
Mr. Sullivan tells us that there would be no
difficulty about getting that amendment in. The
Post Office Department has told 118--
(Telephone conversation with Secretary Stimson
follows:)
Regraded Unclassified
208
February 11, 1941
11:00 a.m.
Henry L.
Stimson:
Henry, this 18 just a word to welcome you
back and say that I hope you're all right.
H.M.Jr:
oh, I'm fine.
S:
Do you think it's all over?
H.M.Jr:
For the moment.
S:
We've got lots of new ones for you.
H.M.Jr:
(Laughs) Well, the first four or five
days I was quite miserable and then I began
to feel fine and then I began to wish I
could stay another week.
S:
Well, it might have been & good plan to do it.
H.M.Jr:
Wonderful horseback riding country out there.
8:
Fine. In what part of Arizona were you?
H.M.Jr:
Right down on the border due south from
Tucson.
S:
Oh, yes. I've been through Tucson.
H.M.Jr:
A place called Sasabe.
S:
Well, now, just this little word. You very
likely have heard of it through the President.
I've done something for your friends
.....
H.M.Jr:
So he told me yesterday.
S:
while you were away that may take
my head off, but will you please not let
any of your young men know about it - I mean
if you can avoid it, because if it should
get out before this Lease-Lend Bill goes
through it would kill it.
H.M.Jr:
There'll be no leaks at this end. I'll
guarantee it. He told me about it at lunch.
He was quite happy about it.
209
- 2 -
S:
Well, he 18 more 80 than I am. I had to
do it, there's no doubt about it. We
engineered it here and for a while he had
quite a long face but he rose to it like &
man.
H.M.Jr:
Wonderful. You got word about getting
together Thursday?
S:
Yes.
H.M.Jr:
Is that agreeable to you?
S:
Yes, I think 80. I don't quite know what
it's about but
.....
H.M.Jr:
Well, he wants us - he asked me to prepare
some of the things for him and if and when
the bill passes - and also about getting
ready to testify before the Appropriations
Committee, and Harold Smith, the Director
of the Budget, will be there.
S:
Yes. Well, is that an organization that
he's talking about to take charge of the
Lease-Loan operations?
H.M.Jr:
No, more to get ready to testify before the
Appropriations Committee.
S:
Yes, I see.
H.M.Jr:
And on the other thing, the organization on
that, I asked him to start thinking about
it which he did and I'll be glad to tell
you what I told him. Hello?
S:
Yes.
H.M.Jr:
And then what he - his comeback. In the
first place I told him that I thought that
the Army should buy strictly Army stuff and
the Navy buy what is Navy and he said what
wouldn't come into either the Army or Navy
would fall to Knudsen.
8:
Yes.
Regraded Unclassified
210
- 3 -
H.M.Jr:
And he said he really hadn't thought about
it before but he said he seemed to think
that that was a pretty good arrangement.
You wouldn't object to that, would you?
S:
No. I've been worrying over it a little.
Nobody can get along with it better than
old Bill but the thing 18 there are lots of
military questions in it, you know.
H.M.Jr:
Well, the way it 18 now it would be entirely
in the hands of you and Knox
8:
Yes. I'm not humming for any more than I
can help but I
H.M.Jr:
Well, I
......
S:
You 800 the - I don't know whether you saw
my argument before the Committee but we
pointed out that the great point was that
it threw into the hands of Americans who
are acquainted with American business
methods - of course that would apply as
much to Knudsen as to us, but it would
apply to the Army too in regard to their
things - the making of orders.
H.M.Jr:
I asked the President
.....
S:
That's one of the great advantages that
it would stop the - the very thing that, I
mean, appealed to the Committee - you see
it fell to me to make the argument on the
meaning of the bill and that was the line
I took.
H.M.Jr:
Un-huh. And furthermore, on this thing,
I don't expect to appear before the Committee
on Appropriations and the President doesn't
see why I have to. See?
S:
Yes.
H.M.Jr:
But he wanted me to be helpful to sort of
get the thing lined up 80 then we could go
and see him.
S;
Yes, I see.
Regraded Unclassified
211
- 4 -
H.M.Jr:
And then I also asked him whether he wouldn't
please let me drop out of the picture entirely
after the bill passed and he said he wouldn't.
He said he wanted us to continue to help
.....
8:
I should think not. You've got enough
information there to help anybody along.
H.M.Jr:
Well, he said he wanted us to continue to
help Purvis as much as possible, but I feel
very strongly that the Army and Navy should
do the buying and make the deals. See?
S:
Yes.
H.M.Jr:
And make the deals. I feel very
.....
S:
And then Knudsen will come in as he does on
our purchases.
H.M.Jr:
No, the President seemed to think that if
it was straight Army stuff, you'd buy it.
S:
Well, we won't know that. The whole point
of the bill 10 that that won't be determined
until the stuff is ready.
H.M.Jr:
I see.
S:
Don't you see - at the assembly lines.
That was my whole argument to them. At
present it 18 all subject to changes during
the year and a half that the stuff 18 being
built. The whole strategic position may
change. That was the argument he had. Now
that assumption of having a different man
in there to do that 1e assuming that that
1s known before hand and it won't be.
H.M.Jr:
Well that's all the more purpose that we
should thrash it out together and then go
and see him.
8:
Yes. Now, I'm not, mind you, I'd like for
instance to shove off not only the British
but the Army's on somebody else for I'm
dead tired, but 1t's got to be done by the
force that we've got. The plan that the
212
- 5 -
President outlined and the plan that his
Cabinet officers have all supported before
the Congress was a plan to put into the
hands of the American Army and Navy these
things - choices with the ultimate choice
of who they should go to to be made when
they were finally finished. Of course
that doesn't eliminate the necessity of
some planning before hand - some planning
before hand. I mean we're not going to buy
double for the Army just on the chance or
double for the Navy just on the chance
.....
H.M.Jr:
Well, he - it's important .....
S:
But I think it 1s very important that they
should go through the same channel and that
was the expression I used over and over again
to those people that by having the channel
the same you had the negotiations much
simplified, you had the property much- - that
there was a strong tendency towards standard-
ization and you had it in the hands of
people who were accustomed to giving orders
for Army and Navy things.
H.M.Jr:
Well, now, I didn't invite Knudsen for
Thursday morning.
8:
All right.
H.M.Jr:
It's just you and Knox and Claude Wickard,
and the reason for Wickard 18 that the
President wanted him to clear it on agri-
cultural stuff. There's a provision in
the bill that they can buy agricultural
products, you see.
8:
Well, I wish he'd sometimes drop a word
with me. I hate to talk
and to bother you, but all right, I'll
manage.
H.M.Jr:
Pardon? And the Director of the Budget.
8:
Yes, all right.
213
- 6 -
H.M.Jr:
But I didn't ask Knudsen because I thought
that - well, I just didn't know at this
meeting
8:
Yes.
H.M.Jr:
What?
8:
Well, all right.
H.M.Jr:
Would you want Knudsen?
S:
No, I think it better not until we have a
talk over that with the Cabinet officers
involved.
H.M.Jr:
And then you see here Dan Bell, my Under
Secretary, has been working with the
Director of the Budget on the mechanics
of how to handle the money and I'd like to
have them lay that before you. I mean,
the actual bookkeeping, you see. And then
I thought that if we got together then
we could say to the President, would he
please see us, but I thought it was high
time that - that we do it this week in the
hope that the bill will pass soon.
8:
Well, I admit, Henry, there is a tough knot
in there to solve as an organization because
however much we conceal it, however much
we try to unify it, why of course it remains
that even at the time of the order there
must be some knowledge of what the outsiders
want, and at the same time I think that that
can be done withcut destroying the uniformity
of the negotiations. I think you were right
on that. I think your project was the right
one.
H.M.Jr:
Well, one thing that I convinced the President
of is that there is no need for R.F.C. in
this.
S:
Well, I hadn't any idea that he was looming
up.
H.M.Jr:
Well, he was and I told the President
......
214
7
S:
He's been helping out & good deal how
helpful. before the bill was done. He's been very
H.M.Jr:
But after the bill is done, there 1e some
talk that he'd do all the negotiating and
I don't see why.
S:
Well, I know he's a damn sight better
negotiator than I am. (Laughs)
H.M.Jr:
Well, I don't agree. I don't agree. I
think Jesse is sometimes too good a
negotiator, I mean, I think there 1e a time
for negotiating and there is time for winning
a war and right now we want to see these
fellows win the war.
S:
All right.
H.M.Jr:
Bo I don't see after the bill passes that
Jesse should need to figure in a thing.
Do you?
S:
I don't see where his part 18.
H.M.Jr:
No, I don't either.
S:
But it may be because I haven't thought
much on it.
H.M.Jr:
Well, the President
.....
S:
All right. Well, I didn't mean to bother
you. I just called you up
......
H.M.Jr:
You never can bother me. It is always a
privilege.
S:
I'll try to be there Thursday.
H.M.Jr:
Thank you.
215
H.M.Jr:
The idea that is bothering him is, he wants to
get this stuff bought, you see. It is good to
have this meeting - of course, this is very
much in the room here - he said he just doesn't
want to say we will buy double for the Army
and double for the Navy, but he does think the
Army and Navy should buy it and then they won't
divide the stuff up until it actually comes off
the production line. I don't know whether he
is right or wrong, but that is another idea.
In other words, if the English come through and
say, "We need 'X' billions of dollars, "this
stuff won't be earmarked for the English but
will be bought for the Army and Navy, and then
if this week we manufacture a hundred planes,
we will decide how much goes to each country.
The decision will only be made when it comes off
the line.
Bell:
I originally thought that all the contracts would
be placed just as though they were Army and Navy
contracts and as the material rolls out the door,
you can say this block is for the British, and
you sign a, document of some kind. If you want
to call it 8. lease, sign it there and then, and
that document. comes to the Treasury just the
same as for & foreign obligation, and we get
the accounting and write the President's report
every 90 days and it goes to the Budget.
H.M.Jr:
We would write the report?
Bell:
I should think we ought to do it. It certainly
ought to pass through the Budget if we write it.
H.M.Jr:
Think about it. If it is financial, I think we
ought to write it.
Bell:
And we ought to have the documents in our vaults.
They ought to be lodged here.
216
- 4 -
H.M.Jr:
Just as those of foreign obligations.
Bell:
That is right.
H.M.Jr:
It is very important to have this meeting Thurs-
day because you can see that the President
hasn't thought about it, and Stimson has got
some very definite ideas, and it is high time
we got together.
Bell:
O.K.
H.M.Jr:
Be forehanded on the thing and not wait until
the bill passes and say, What the hell are we
going to do?"
Kuhn:
The effect of it is increased if you have every-
thing ready the day the bill is signed.
H.M.Jr:
All right.
Graves:
The Post Office Department has said that they
will be entirely willing to leave to us the
design of their series of stamps. and the cards
and posters and material that will be used in
connection with the sales of stamps. We have
asked them whether there would be objection on
their part to our substituting for the present
series a new series that might be earmarked
for defense, and they said they have no objec-
tion to that. We have Mr. Hall now working on
designs of the new series.
H.M.Jr:
If you don't mind, if Ned Bruce is well, I think
Hall's designs are lousy. All you have got to
do is look at any of his stamps. Ned is a great
guy, and incidentally has a tremendous following
on the Hill. They are both Republicans and
Democrats. When he is well, nobody is more
enthusiastic than he is.
Graves:
We might ask him independently to work out--
Regraded Unclassified
217
- 5 -
H.M.Jr:
Well, he worked out 8. series of designs on
stamps here sometime ago. They were perfectly
beautiful. Hall said he couldn't design them
or something like that.
Kuhn:
He is scared of counterfeiting, and that is why
the stamps are so fussy looking.
Graves:
Counterfeiting is & problem here because these
stamps will pass as money.
H.M.Jr:
Well, they can make & few curlicues or something
in the paper. Anyway, if Ned Bruce is well, he,
himself, not the other fellow - the other fellow
just gives me the fidgets, this man under him
that does his--
Bell:
Sloan, I think he is.
H.M.Jr:
No, not him. It is a young fellow with curly
hair. If Ned is well enough himself, but not the
second man.
Graves:
Would you like me to find out and contact him?
H.M.Jr:
I wish you would.
Bell:
The point here is that the Post Office will let
us do almost anything with their stamps and
cards to fit in with our program. You have
got authority to start your own Treasury saving
certificate program. In view of the fact that
this whole machinery is set up and they can
expand it to any number of Post Offices in ad-
dition to what it already serves, and they also
have the accounting up to the time that it is
exchanged into United States Savings Bonds -
we don't have to worry about that accounting,
and during the War we had a terrible time get-
ting together between the Post Office and the
Treasury, whether or not there should be a
public debt procedure and who stood the loss.
Regraded Unclassified
218
I think it is important that we adopt that
whole machinery If we can tie it into our
defense picture, and I think we can.
H.M.Jr:
That was my inclination when I left here. Here
is a going machine. I don't know how many
post offices they have got and rural mail car-
riers and everything else.
Kuhn:
You can put these things on sale in shops and
hotels and stores as well.
H.M.Jr:
Designating them sub-post offices.
Graves:
There are about 55 thousand post offices in the
country, of which I think only about 12 thousand
are now authorized to sell bonds.
Bell:
I thought it was about 16 thousand selling United
States Savings Bonds, but there aren't that many
selling postal savings.
Graves:
But there is no reason why they should not all
be qualified to sell postal savings bonds, and
we sounded the post office people out on the
point made by Mr. Kuhn, that we should have
sales agencies other than the post offices.
Stores should be encouraged to carry stocks of
stamps, banks, and any facility of that kind
that is available. They will permit them to
be utilized for the sale of postal savings
stamps. We probably would end up by having a
quarter of 8. million places where stamps could
be purchased if there was any need for so
large B. number.
H.M.Jr:
I take it the way you are thinking now, your
drive is going to be on the stamps.
Graves:
Well, that is one - I wouldn't say that. I
wouldn't say that the emphasis necessarily will
219
7
be on the stemps. It will be emphasized as
one important part of this program, but I sus-
pect the more productive result will come from
the direct sale of the bonds of small denomi-
nations, the 25 dollar bond or the 50 dollar
bond or 100 dollar bond, sold directly without
the stamps. That will be more productive in
money. If it doesn't reach more people, it
will still be more productive. One of the
things that we are planning, of course, is
the early expansion of the mailing list, that
you know about, which now consists of about
six and 8. half million names. We can, using
the income tax lists, quickly - or I say quickly,
it is a pretty tedious job, but we can soon have
that list doubled to something like 12 or 14
million names; and that, I think, is apt to be
more productive an approach than through the
stamps in dollars.
Bell:
Did you think about getting the Social Security
names?
H.M.Jr:
I was just going to say that.
Bell:
They won't give them to you unless you use &
little pressure.
Graves:
Social Security names are much fewer in number
than the income tax lists and probably don't
give us any additions.
Bell:
Not fewer in number?
Graves:
Yes. There are only two million Social Security
tax payers.
Bell:
I am talking about the wage earners. There are
45 million of them. Of course, they are the people
that are going to work now.
Regraded Unclassified
220
- 8 -
Graves:
I thought you meant the employers.
H.M.Jr:
What about those?
Graves:
Well, the Social Security Board has always
objected to--
Bell:
You have to use a lot of pressure.
Graves:
.... to making their names available.
H.M.Jr:
Well, they wouldn't in this case.
Graves:
They have never permitted access to their lists,
to the Treasury, for any reason, and they say
they are bound by law. Their policy at any rate
has been to protect those lists against any
possibility of people using them to approach
their beneficiaries.
H.M.Jr:
Well, we can think about that.
Graves:
There are some 35 million or more workers who
are subject to the Social Security Act.
Now, as to our own savings bonds, perhaps Dan
would be a better spokesman than myself about
that. The plan is that we will remodel that
bond too, 80 as to denominate it as a defense
bond. We will still call it the United States
Savings Bond; but we will call it, for example,
Defense Series or National Defense Series.
H.M.Jr:
Well, now, I want to ask a question. Let's
just say, for example, that this bill passes
on the first of March. Effective the first of
March, for instance, the United States Savings
Bonds are no longer tax exempt?
Bell:
No, the bill becomes effective, as to that part
of it, the first of the month after it is passed.
Regraded Unclassified
221
- 9 - -
So if it goes through in February, it will be
effective March 1, and that gives us time to
change our regulations.
H.M.Jr:
That is what I wanted to ask. Have you, for
instance, started - Hall, who is terribly slow
on designing--
Bell:
He is working on the borders of the savings bond
and getting a stock laid up.
Graves:
I think there was no intention to redesign the
bond, was there?
Bell:
Not the engraved part, no. He may have to do
something with United States Saving Bond across
the top, but there, I believe, we decided to
put the National Defense Series down in & little
block on the righthand side in red.
H.M.Jr:
You wouldn't want to just over-print the word?
Bell:
That is all.
Graves:
That is what it will be.
H.M.Jr:
I mean over-print it, not in a corner. So this
is the bond, and you just print right across
the face of it.
Bell:
No, it is like this. You see, you have got your
bond, and then in the upper lefthand corner you
have got United States Savings Bond across the
top, and then you have got a little block just
to the right to put National Defense Series
right in that in red.
H.M.Jr:
That isn't what I meant. I meant to put it right
across in light red, National Defense Bond.
Bell:
That would be possible.
Regraded Unclassified
222
- 10 -
H.M.Jr:
I would do that.
Graves:
It would be just as easy.
H.M.Jr:
Just in a very light red line.
Graves:
Skeleton letters.
Bell:
That could be done too, I think.
H.M.Jr:
You can do both, if you want to.
Graves:
I don't know whether this is the proper place
to bring it up, but one point we have been dis-
cussing is the lower ceiling on the amount that
can be held by any one person. The present
limitation is 10 thousand dollars B. year and--
H.M.Jr:
Why do you want to lower the ceiling?
Bell:
Well, the rate is pretty high.
H.M.Jr:
Well, I may want to change the rate.
Bell:
Well, that is B. little difficult because all
your advertising has been on this type of secur-
ity and your rate and your ten years. We thought
it would be better to lower the ceiling on that
10 thousand down to about three and be willing
to pay that subsidy for the class of people you
can get to save.
H.M.Jr:
I wouldn't be ready to cross that bridge today.
Bell:
It will take about 60 days to get out those
securities.
H.M.Jr:
Bring it up again. You have planted the seed,
and we will see whether it sprouts or dies.
Graves:
It has already disqualified, as I understand it,
223
- 11 -
every one except individuals for the purchases
and the ceiling is now 10 thousand dollars.
H.M.Jr:
If we are going to get the money, I don't want
to lower the ceiling.
Bell:
You ought to have another type of security that
will appeal to trust estates.
H.M.Jr:
That is something else.
Kuhn:
An intermediate thing.
Bell:
With maybe a coupon attached so they can get some
current income and then a bonus at the end.
H.M.Jr:
Something like that.
Bell:
That will appeal to pension funds and trust
estates.
H.M.Jr:
I am toing to talk about this every day now until
we get the thing straightened out.
Graves:
I think we ought to come to a decision as quickly
as we can on these various things because really
the promotion program ought to start--
H.M.Jr:
What do you want decided today.
Graves:
Nothing, but I was suggesting we ought not to
defer too long a decision on it.
H.M.Jr:
I will meet with you every day.
Bell:
Harold's point is that we ought to decide the
types of securities because it takes time to
get them out, and when we have the day fixed--
H.M.Jr:
Are you ready today to recommend anything?
Bell:
No, I don't think we are. But we ought to time
Regraded Unclassified
224
12 -
our publicity for that date, too.
H.M.Jr:
You fellows get the thing down that you are
recommending and then argue the yes or no with
me.
Kuhn:
O.K.
Graves:
Now, on the organization, Mr. Bell testified
yesterday before the House Committee on appro-
priations, and from the minority members there
was some evidence of hostility.
H.M.Jr:
Did you go up?
Kuhn:
Yes, I was up there.
Graves:
So I suppose that nothing very extensive should
be done about organization until - until we
know what is going to happen to that bill. My
own guess is that enough money will be made
available to--
Bell:
We may not get the three million.
H.M.Jr:
Was there a little opposition?
Bell:
Well, it was amusing. Taber said that he - he
started out right away that we didn't need any
campaign like this. He said, "You have been
getting your money cheaply all these years and
you have had great over-subscriptions and what
is the sense of all this campaign?" Well, then
I had to explain to him about the same way you
did before the Ways and Means Committee as to
the reasons for it and try to keep it out of
banks as much as possible and not increase bank
he says, "bank buying a bond doesn't increase its
deposits, and he said, "Well, now, wait a minute,"
deposits." And then I had to go through elemen-
tary examples to show how the bank purchasing
a bond increases deposits and a purchase by an
Regraded Unclassified
225
- 13 -
individual didn't increase the deposits. I
thought he was a banker. I was amazed at his
ignorance, unless he was just doing it to -
for the benefit of the Committee.
H.M.Jr:
I think he is ignorant.
Kuhn:
He is awfully ignorant. Just as if all the
truths about inflation and so on hadn't sunk
into his mind.
H.M.Jr:
Well--
Bell:
But I think they are all right. They weren't
hostile in a sense that they were bitter. They
just asked these types of questions.
H.M.Jr:
What else, gents?
Graves:
Mr. Odegarde left with me a memorandum before
he went away giving us the names of persons that
he considers qualified for various places in
this organization. His recommendations chiefly
relate to persons for the planning group and the
advisory committee; and he has in mind, I think,
that we should emply at first what he calls &
director of publicity and promition who would be
a specialist in public relations, and he has
given us the names of a number that he considers
qualified for that.
Kuhn:
You see, we have met a particularly good one who
could take this on for at least a month or six
weeks while the thing is getting under way.
H.M.Jr:
Who is that?
Kuhn:
Don Harris, that Pillsbury Flour man.
H.M.Jr:
Is he O.K.?
Kuhn:
He was here and spent a long time with us, and
Regraded Unclassified
226
- 14 -
I liked his ideas and I liked his personality
and general slant.
Graves:
I think it would be wise if we could make up
our minds about who should have that place to
make an appointment quickly.
H.M.Jr:
Who else?
Graves:
He has the name of Mr. Roscoe Wright.
H.M.Jr:
Who is Roscoe Wright?
Graves:
Roscoe Wright is the Director of Information for
the Civil Aeronautics Authority. He is a former
Texas newspaperman who did publicity work for
the WPA under Hopkins. Most notable among his
achievements is the organization and conduct of
the public relations program for the Census
Bureau last year.
H.M.Jr:
Did he do that?
Graves:
So this says.
H.M.Jr:
That was a swell job.
Graves:
He names also Mr. Harford Powel, Vice President
of the Institute of Public Relations in New York.
He says he is 54 years old, spent his life in
advertising and editorial work. Former editor
of Harper's Bazaar and Collier's Weekly and
Youth's Companion. Six years of Kimball, Hubbard,
and Powel. He is the author of many books on
advertising. Claude Pendill was suggested to
him by Mr. Elmo Roper, born in Michigan 50 years
ago, graduate of the University of Michigan,
served in the Navy during the World War, assistant
sales manager of several companies, until recently
Vice President of the Towle Silver Smiths, was
in International Silver Company, and was Treasurer
of the Anchor Manufacturing Company. Member of
Regraded Unclassified
227
- 15 -
the American Legion.
Kuhn:
That is a job that ought to be filled quickly
even if it is only temperarily.
H.M.Jr:
Go back to this Don Harris. What does it say
about him?
Graves:
In charge of advertising for the Pillsbury Flour
Mills for the McCann-Erickson Agency in Minneapolis.
Mr. Harris spent two days in Washington and is
familiar with the problems involved. He is will-
ing to come for & limited period to assist in
getting the program started.
Bell:
Bring him down for a month or two.
Graves:
He is here now, isn't he?
Kuhn:
He has gone back, but he could take this over for
a month or two and get the whole thing rolling,
and I am strongly in favor of that.
Bell:
If this other fellow is around, bring him in as
his assistant and after that use Harris as &
consultant.
H.M.Jr:
Yes.
Kuhn:
But that is one of three jobs that ought to be
filled.
H.M.Jr:
I said right at the beginning that this Pills-
bury fellow sounded good because he has got
advertising agency experience and his company
experience, and they must certainly - Pillsbury
uses all forms of advertising.
Kuhn:
Yes. He struck me as a very competent, wide-awake
young fellow.
Regraded Unclassified
228
- 16 -
H.M.Jr:
Is he young?
Kuhn:
He is young. How old is he?
Graves:
I should say he is 41 or 42, maybe.
H.M.Jr:
What would you say? When is Odegarde going to
be down here again?
Kuhn:
Thursday, isn't he?
Graves:
He said this week.
H.M.Jr:
When could Don Harris be down again?
Kuhn:
I can try to arrange that so that he is here at
the same time.
H.M.Jr:
Well, if he could get down here Thursday or
Friday. Does he fly?
Kuhn:
Yes.
H.M.Jr:
Well, I would try to get him down here Thursday
or Friday so I could have a little talk with him.
Thursday is a little bit bad day. If he could
be here Friday morning I could fix it up Friday
morning for 10:00 o'clock, if his plane works out
right. We will settle it Friday morning.
Kuhn:
I will let you know.
H.M.Jr:
And then I was particularly impressed with the
know, Dan, your friend from Toledo was the head
job that they did on the Census that time. You
of it, and I wondered how he got such good
publicity.
Bell:
That was the unemployment census. Is that the
same thing?
Graves:
No.
Regraded Unclassified
229
- 17 -
Bell:
This the 1940 Census.
Kuhn:
They did a beautiful job against great obstacles.
Senator Tobey was kicking up public opinion
against the Census and they dealt with that very
beautifully.
H.M.Jr:
Well, whoever did that other job did a good job.
Bell:
We might find out.
H.M.Jr:
That was a tough job and Hopkins was opposed to
it and everything else. Do you remember how
Hopkins fought?
Bell:
Yes.
H.M.Jr:
Whoever did the job for Jack Biggers - it was
the unemployment census job. Well, I would have
this fellow down Friday. Now, there is a deci-
sion. We will look him over.
Kuhn:
Good.
Graves:
Now, another job that both - that all of us feel
should be--
H.M.Jr:
Are you all right on that?
Bell:
Yes, fine.
H.M.Jr:
I think if you can get a man from business as
a starter, I think it gives a certain good tone,
don't you think so?
Bell:
Yes.
Graves:
Another position which we all think should be
filled quickly is the position of head of the
us the names of people that he considers quali-
field organization, and Mr. Odegarde has given
fied for that. Mr. Orville Poland and Mr. Boyd
230
- 18 -
Fisher.
H.M.Jr:
Is Johnson on that?
Graves:
No, he is not.
H.M.Jr:
Have you heard all this before?
Bell:
No, this is new to me.
Graves:
Poland - Mr. Odegarde says he is from Boston,
lawyer, 52 years old, was educational director
in Boston with the American Institute of Banking.
General Counsel of the Anti-Saloon League in
New York. Organized and managed the campaign
for the United States Senate of Judge Cristman
as an Independent Republican in 1926, thus assur-
ing the election of Robert Wagner.
Kuhn:
He is the fellow who put Wagner off without
splitting the Republicans in New York State.
Graves:
Was active on the Independent Voters Committee
for Roosevelt. Has been chairman of the Civil
Liberties Committee of Massachusetts and active
in Community Fund and other civic movements.
H.M.Jr:
Doesn't sound hot to me.
Graves:
An extremely high type person who commands the
confidence of people in every walk of life.
The other man is Boyd Fisher. At the present
time with the Rural Electrification Administra-
tion. Formerly with Morris L. Cooke as & coun-
sellor in industrial relations. For some time
Director of Industrial Relations with the Lockwood-
Green Corporation. Served as Director of Person-
nel in Industrial Relations for the National Tool
Manufacturers Association. During the World War
was s. captain in the Ordnance Department. In
Regraded Unclassified
231
- 19 -
recent years has been active in the organiza-
tion of local committees and cooperatives in
the Rural Electrification Administration.
H.M.Jr:
Neither of them sound good.
Kuhn:
The third one is better, I think.
Graves:
The third man, I have no notes on because Odegarde
didn't see him, although at his suggestion we
have asked for him to come in to Washington, and
he is here today. His name is Gail M. Johnston.
He lives and works in St. Louis. He works for
the Metropolitan Life. He is in charge of their
group insurance activities in the St. Louis area
and when we contacted him he was on a tour of the
country making speeches on that subject, group
insurance. He is a Princeton man, 36 years old,
as I remember, and a good friend of Gene Sloan.
It was Gene Sloan--
Bell:
Gene might know him.
Graves:
Gene knows him well. He suggested him. At the
suggestion of Mr. Odegarde and Mr. Kuhn we have
him here today.
H.M.Jr:
That is more the type.
Kuhn:
And also his greatest claim, to my mind, for con-
sideration here is that he was in charge of the
Community Fund in St. Louis, which is an activity
along the same lines as we want to use for our-
selves. It combines charts and so on. He is
a good speaker, he is - according to Sloan, he is
a fellow who knows the country thoroughly.
H.M.Jr:
Tom Smith would know about him.
Graves:
Yes, he is a friend of Tom Smith's, as I under-
stand.
Regraded Unclassified
232
- 20 -
H.M.Jr:
Doesn't that sound more like it?
Bell:
Yes.
Graves:
About this field organization, Mr. Morgenthau,
that is going to be the hardest job to do. It is
going to take the longest time to organize and
get going. It is a matter of - to begin with,
it is a matter of selecting representatives of the
Treasury who can be located in the various states
and communities to supervise this program. The
duties of these representatives would be to
induce the organization of state committees and
local committees and through those committees
make contacts with the Rotary Clubs and Lions
Clubs and 4-H Clubs and Boy Scout organizations
and SC on.
H.M.Jr:
Make that appointment Friday for 10:15 to 11:00,
you see.
Graves:
Carrying out a suggestion which you made, I have
spent considerable time in canvassing the avail-
ability of Treasury personnel, people already on
our payrolls--
H.M.Jr:
Now, listen, you old fox, that was your sugges-
tion that you put in my mouth.
Graves:
Well, I think it is a good one anyway. (Laughter)
I hope you recognize it as your own.
H.M.Jr:
All right. That is what I do with the President,
but it doesn't always work with me.
Graves:
We have a great many people in our field service.
Not & great many, I had better say & limited
number of people in our various Treasury services
who in my judgment would be very well qualified
as representatives of the Treasury on this pro-
gram.
233
- 21 -
H.M.Jr:
The suggestion I made was, as I see it, that I
thought we could get an allotment as a WPA -
and then you - then you came baok and said, as
I remember, "Well, a lot of Treasury people we
could use. Isn't that about the way it was?
Graves:
I guess it is; I have forgotten.
H.M.Jr:
I thought we could get 8. couple of million dol-
lars as a project from WPA to--
Graves:
Well, the WPA people would serve for a certain
type of leg work and so on, but we have got to
have, as I see it, people who are somewhat dis-
tinguished in their communities, who have wide
acquaintance in their communities--
H.M.Jr:
For instance, collectors and BO on.
Graves:
That is right. Take, for instance, at Chicago.
Our collector is Carter H. Harris, who was three
times Mayor of Chicago. His father before him
was Mayor of Chicago. He is, it is true, an old
man. He is 80. But he has the respect and the
liking of that entire community. Now, I know
that he is too old for any very arduous labor in
this connection, but our thought was that we
could give to him an assistant who had all the
qualifications which otherwise we would expect
the principal to have who could take off Mr.
Harris much of the arduous arm and leg work that
would be involved in this thing, you see. At
the same time, Mr. Harris could lend his name
to it. Going down state, in Illinois, we have
a man named Dallman as collector at Springfield.
Dallman is an enthusiastic Administration sup-
porter. He is the editor of the Springfield
State Register, which is probably the most
widely known newspaper in Illinois out of Chi-
cago. He knows everybody in the State of Illi-
nois and everybody knows Dallman. Again, we
could give Dallman an assistant paid out of this
Regraded Unclassified
234
- 22 -
fund, Dan, and not out of the Revenue appropria-
tions and let Dallman lend his name to this
thing and generally supervise the activities and
make all the contacts and steer the man.
H.M.Jr:
Dan?
Bell:
Yes. I don't know--
H.M.Jr:
It wouldn't be the Revenue fellow every time.
Graves:
No. There are other people in Customs and in
some of our other services.
Kuhn:
And it wouldn't mean that all of the field organ-
ization men would have to be from these services,
because they are not all suitable.
Graves:
No, in some places, some territories, we wouldn't
be able to find & man.
H.M.Jr:
Then go to other Government agencies.
(Telephone conversation with Secretary Knox
follows:)
Regraded Unclassified
235
February 11, 1941
11:43 A.M.
H.M.Jr:
Hello. Hello, Frank?
Frank
Knox:
Hello, Henry.
H.M.Jr:
I refuse to take fifty. Y only want thirty.
K:
Well, what you're going to do now is buy me a
lunch.
H.M.Jr:
(Laughs)
K:
(Laughs) Have you got a luncheon engagement?
H.M.Jr:
Bill Bullitt's coming for lunch but I'm free
tomorrow.
K:
Well, what the hell why don't I come with Bill
Bullitt? Have you got any secrets you want to
talk to him about?
H.M.Jr:
Not a thing.
K:
Well, what are you waiting for then?
H.M.Jr:
You want to come over today?
K:
Yeh. I got a luncheon engagement tomorrow; I can't
come then but I can come today.
H.M.Jr:
You're -
K:
I want you to tell me.all about the nice time you
had out West.
H.M.Jr:
You're invited.
K:
Am It
H.M.Jr:
Absolutely.
K:
Sure it won't embarrass you?
H.M.Jr:
You can't embarrass me publicly.
K:
(Laughs) Well, this will be more or less a private
luncheon. (Laughs)
H.M.Jr:
All right.
K:
Is it all right?
H.M.Jr: of course.
236
- 2 -
K:
Well, be a little more cordial about it, damn you.
H.M.Jr: Well, if you don't come, I'll come over and drag you
over. How's that?
K:
That's better.
H.M.Jr: How's that?
K:
What time?
H.M.Jr: One o'clock.
K:
One o'clock O.K.
H.M.Jr: Thank you.
K:
Bye.
237
- 23 -
Kuhn:
We are talking about this field organization
again and Dan likes the idea.
Graves:
You see, we have gone two months at one stroke
if we do a thing like that, because we don't
have to bother to find people and test their
qualifications and so on. We just draft people
and test their qualifications and 80 on. We
just draft people already in our service that
we are confident have the qualifications.
H.M.Jr:
The reason it appeals to me, I am thinking &
little bit in terms of this coordination of
detective agencies in the Treasury, and we put
the man in charge in that territory who happens
to be the best man. He may be a Customs man,
he may be a Coast Guard man, but whoever is the
best man for that territory, we put him in
charge. Isn't that the way it works?
Graves:
Sure, that is right.
Kuhn:
If you can't find anyone from the staff in that
territory, you might have to hire somebody out-
side.
H.M.Jr:
That is right, and I kind of like the idea to
have a fresh young fellow full of pep who is an
insurance salesman coming in with new blood and
new ideas rather than to use a Treasury man as
the sales manager. That is what it amounts to.
Bell:
That is right.
H.M.Jr:
If you could get a really fresh fellow who knew
how to go out rather than a Treasury fellow who
would go up and pep these fellows up. What we
are talking about is the position of sales manager.
Graves:
Yes, supervisor of this whole field effort.
H.M.Jr:
Well, sales manager. The company has & director
Regraded Unclassified
238
24 -
of publicity and an advertising and sales
manager,
Bell:
You are going to get a lot of help outside on
this thing.
Graves:
That would be the primary function of these
Treasury representatives we are talking about.
Their primary object in life would be to stimu-
late volunteer workers of different types and
kinds.
H.M.Jr:
I have got some letters from volunteers who are
.coming in.
Kuhn:
Sloan has had scores of them.
Bell:
Yes. Colonol Pope was in yesterday offering his
services any time you wanted him to say anything.
He is going to make & speech here next month.
H.M.Jr:
That fellow can go and get a job from the National
Republican Committee. I have heard things that
he has said about Roosevelt.
Bell:
Well, it is people like that, I don't care
whether you use him, that might be able to say
things that we can't say.
H.M.Jr:
Well, don't worry, but if he - let him sell his
bonds in Boston. I heard some things that he
said at one of these cocktail parties about
Roosevelt that were just outrageous. That is
neither here nor there, but I will never forget.
Kuhn:
Have we finished on the field organization?
Bell:
Can you split a state?
Graves:
Yes, we would have to split certain states.
Bell:
You can do that, you think?
Regraded Unclassified
239
- 25 -
Graves:
Oh, yes. We would just lay down county boundaries,
Dan, in states like New York and Illinois and
maybe Ohio, and California, certainly because of
the peculiar situation WC have there.
I have talked this over, Mr. Morgenthau, with
Mr. Helvering's people, and they have a certain
amount of enthusiasm, but they would like to do
it. They would like to do it.
H.M.Jr:
Good.
Graves:
And I think that we can advance ourselves a long
time by taking advantage of that - of our own
facilities.
H.M.Jr:
Good. The great advantage of having 8. fellow
who is under our control is, God damn it, you
can say, "Either produce or you go back to your
old job," and when you have 8. volunteer, "Well,
I have got to look after my own business, I can
give it mornings or nights, and, "I am terribly
sorry, but I had to go to 8. funeral," or this
thing or the other thing, but if these fellows
are working for the Treasury--
Graves:
They will work. And you were just suggesting
when you were interrupted that we might make use
of other agencies of the Government. Well, my
own view about it is that if the Treasury has
them, all right, but if they don't I would
rather hire our own people.
H.M.Jr:
Out of 80,000 people, we ought to have some good
ones.
Graves:
We are getting now from Revenue and Customs a
statement of the qualifications of the people
that we have been discussing.
H.M.Jr:
What else have you got to decide? You are going
to see this Metrolpolitan Life fellow?
Regraded Unclassified
240
-
26 -
Graves:
He is waiting to see me now.
Kuhn:
Can I take the ball & minute?
Graves:
Yes.
H.M.Jr:
him. If everybody likes him, let me take a peek at
Graves:
Right.
Kuhn:
I would like to take the ball away and talk for
Odegarde any myself now on another thing. That
is on the director of the whole organization.
Odegarde believes, and I agree with him, that
that job calls for an administrator with & firm
hand and control, chiefly. He doesn't know of
anybody who fills that bill better than Mr. Graves,
and I agree completely, and I would like to put
that up to you.
H.M.Jr:
Well, I am prejudiced.
Kuhn:
I know. That is why I put it up to you.
H.M.Jr:
But I mean I am prejudiced in his favor.
Kuhn:
Yes. Well, how do you like the set-up of having
Mr. Graves as director, here in the Treasury,
with the reins in his hands and with the sales
manager responsible to him and with the publicity
man responsible to him as specialists in those
two fields and let them go and hire their help?
That is, let the publicity man hire his advertis-
ing man, his poster man, and so on, and find
them. He knows better than we do what he can
find.
H.M.Jr:
Well, here is the way - I will think out loud.
If this is going to be a Treasury organization
Regraded Unclassified
241
- 27 -
like we are talking about, Dan, you see, it is
going to be Internal Revenue, and they are
going to use an Acting Commissioner of Internal
Revenue for a while, you most likely know that,
and he has been all through this thing and if
it is going to be Treasury people, when I
couldn't get anybody as good as Harold.
Bell:
Well, I don't mean him for a director. Wouldn't
he have it as just part of his organization now
that he has?
Graves:
That would be my own notion. You get the same
effect out of it.
Bell:
He is your Assistant in charge of Bureau of
Engraving and Printing and Bureau of the Mint,
and this will be this other bureau or division
or whatever you want to call it that will fall
under him.
Kuhn:
It will be a very arduous job--
Bell:
Well, he might have to work a couple more hours
a day.
Kuhn:
That is what I meant. Somebody who would be
the Secretary's proxy here and control and direct--
Bell:
Instead of putting it under an Assistant Secretary,
you put it under Harold as Assistant to the Sec-
retary.
H.M.Jr:
What?
Bell:
It is all right.
H.M.Jr;
Except that if we are going to do that, if any
of these other things take much of Harold's
time, I think I would take them away from him.
He might cry about taking the Mint away.
Regraded Unclassified
[
242
- 28
Graves:
I don't think it would be necessary to take
those away.
H.M.Jr:
He likes the Directress of the Mint. She has
gotten so she doesn't cry on his shoulders at
least twice 8. week.
Graves:
I think we are going all right with the three
bureaus that come under me.
H.M.Jr:
What have you got?
Graves:
Procurement and Mint and Engraving and Printing.
Incidentally, Mack did a swell job on the Com-
mittee before Appropriations and was especially
commended in the report of the Committee.
Kuhn:
Who is Mac, Harold?
Graves:
Director of Procurement.
H.M.Jr:
Clifton Mack.
H.M.Jr:
Oh.
H.M.Jr:
We did the absolutely unheard of thing. We
took an Internal Revenue Intelligence Agent and
made him Director of Procurement.
Kuhn:
Good.
H.M.Jr:
At least, I told him this, we may pay & little
bit more; but, if we do, it is going to be honest.
Kuhn:
Is that the Mack that I met up here?
H.M.Jr:
He is the Mack who had lunch with us.
Kuhn:
Yes, that is the one.
H.M.Jr:
At least there isn't going to be any graft while
Regraded Unclassified
243
29 -
he is there.
Kuhn:
I know that Herbert Gaston, for example, would
Graves. be enthusiastic about this arrangement with Mr.
H.M.Jr:
He mentioned it to me.
Kuhn:
He did?
H.M.Jr:
I should have had Herbert sitting in on this.
Has he been sitting in with you?
Kuhn:
Well, he did last week.
H.M.Jr:
Well, this sounds all right so far.
Kuhn:
Then the other jobs, there is no such urgency
about them.
H.M.Jr:
This sounds all right. If it goes this way, I
think it should be under Harold. Now, the one
thing I think we ought to do at an early date, I
think if we are going to do much with the Post
Office, I think Harold ought to call on Frank
Walker so that he personally knows about it and
doesn't get it through some of his subordinates.
Graves:
I have nothing but praise for the attitude of the
whole establishment.
H.M.Jr:
No, but Frank Walker may never have heard of it.
Graves:
I am sure he has, because the day you sent me
down there first--
H.M.Jr:
I think it would be nice to call up Frank Walker
and ask if you can come over and see him. He is
an awfully sensitive fellow.
Graves:
You mean you will call him and tell him I will
come over?
Regraded Unclassified
244
- 30 -
H.M.Jr:
I will do that.
Graves:
I think that would be best.
Kuhn:
We have had very nice replies from all of the
Cabinet officers on this business of using the
publicity organizations.
H.M.Jr:
I will do it now.
Graves:
Tomorrow, if satisfactory. Tomorrow would be
the best time for me.
H.M.Jr:
Harold, I have had in mind a long time - if you
don't like it, you don't have to take it - but he
is full of pep and energy. That is John Fox. If
you could bring him into this with you--
Graves:
Yes. About John Fox, you once told me you
wanted to work him into the Procurement. It is
just about to go through now. He was to go
over and work for Mr. Mack.
H.M.Jr:
That is all right. I mean, he is very able.
Graves:
I like him very much.
H.M.Jr:
If you have that fixed up, I wouldn't change.
Graves:
We have just a bout worked it out. We are waiting
for a successor to be appointed to his job here,
as I understand.
H.M.Jr:
What is he going to do over there?
Graves:
He 18 going in the Planning Division.
H.M.Jr:
That is all ight. On setting up organizations -
you have got to move this thing to New York and
all that kind of stuff. John is swell, you know.
I don't want you to feel I am pushing you. He
is there. I brought him down originally. He is
Regraded Unclassified
245
- 31 -
honest as hell, He leans over backward.
Graves:
Yes, I know him very well.
(Telephone conversation with Ned Bruce follows:)
246
February 11, 1941.
12:00 M.
Ned
Bruce: Hello, Henry, happy new year!
H.M.Jr: (Laughs)
B:
How are you?
H.M.Jr: How are you?
B:
Fine.
H.M.Jr: Say, Ned, are you full of pep and ambition these
days?
B:
You bet.
H.M.Jr: I'll tell you what I got in mind. We're about to
start a national campaign for savings.
B:
A what?
H.M.Jr: A national campaign for savings. Selling savings
bonds, you know.
B:
I didn't get the adjective on that thing. (Laughs)
A what?
H.M.Jr:
National campaign.
B:
National. Yeh.
H.M.Jr: And -
B:
I thought you used & nasty word.
H.M.Jr: No, no. You just - That's just the way your mind
runs, that's all.
B:
No, it isn't. I got a sweet mind.
H.M.Jr: Is that 80?
B:
Yes sir.
H.M.Jr: Well now, Ned -
B:
Yeh.
H.M.Jr: A great deal of this is going to be posters.
B:
Pal, I'd love to do it.
Regraded Unclassified
247
- 2 -
H.M.Jr:
And Harold Graves 1s going to represent - be in
charge for me but we're bringing down a lot of
people; it's going to take a big lot of work
and -
B:
I'd give my shirt to 800 something by Christy of
a bathing beauty.
H.M.Jr:
You'd do what?
B:
I'd give my shirt to see, in a poster, something
with a bathing beauty from Christy.
H.M.Jr:
Well, now we've got all the English stuff and I'm
going to have him send it over to you and it's
beautiful stuff what the English are doing.
B:
Yeh. Well - A funny thing happened, Henry. Margaret
called me up this morning from Life.
H.M.Jr:
Yeh.
B:
And they're doing an article this week about it.
H.M.Jr:
Is that right?
B:
Yeh.
H.M.Jr:
Well -
B:
And they wanted to do an article about the section
and I told them that we didn't do that sort of
thing.
H.M.Jr:
Well now -
B:
Now, if I'd known that you'd call me up a couple
of hours later, I could have put an article in.
Maybe I can put it in now if -
H.M.Jr:
No. No, we're not ready.
B:
All right.
H.M.Jr:
We're not ready.
B:
Well, I'll get it in anytime she wants it.
H.M.Jr:
Well, we're not ready, but this is something I'd
like you to get your own teeth into.
B:
Well, I'd love nothing more in the world.
H.M.Jr:
Well -
248
- 3 -
B:
I really would. I've been tearing my heart out
not to do something of that sort, as you know.
H.M.Jr:
Well, Harold Graves will get in touch with you.
B:
All right. Now -
H.M.Jr:
If this is a - What would you think? You'd want
to concentrate on this, wouldn't you?
B:
Well, I'm perfectly willing to concentrate on it.
My own job here is in beautiful shape.
H.M.Jr:
It 1s.
B:
I've got some grand news.on this thing.
H.M.Jr:
What's that?
B:
Well, I can't tell it yet but I've got a new
museum for you - Roosevelt Museum of Art -
American Art.
H.M.Jr:
Oh really?
B:
Yeh. Wonderful.
H.M.Jr:
Well, you think about it.
B:
Don't tell anybody about that now because I can't
shoot it yet.
H.M.Jr:
You don't want me to tell the press.
B:
No, no. Not yet, please.
H.M.Jr:
O.K. then. All right.
B:
Now, who's coming over to see me?
H.M.Jr:
Harold Graves.
B:
All right. G-r-a-v-e?
H.M.Jr:
S.
B:
I'm only too happy to see him. Where is he?
H.M.Jr:
He's here in my room now. He'll call you up.
B:
Can he come over and have lunch with me tomorrow?
H.M.Jr:
He says yes; he doesn't know what a lousy lunch
I don't know. I'll ask him. Wait a minute.
you serve but he'll be over there.
Regraded Unclassified
249
- 4 -
B:
Well, it's a damn sight better lunch than most
artists get. I'll tell him that.
H.M.Jr: O.K.
B:
All right, fine.
H.M.Jr: Bye.
B:
Good, Henry, grand!
250
- 32 -
H.M.Jr:
Now listen, I don't like his organization, see.
I don't like this lousy art critic that he has
got over there. The Englishman write this
magazine, and I don't like any of the people
he has got around him. His man who runs his
publicity I don't like, and I don't like his
other people. But if you can get Ned and trans-
fer him bodily over to the Treasury, he is one
of the swellest fellows in the country and let
his own people run this public buildings thing.
Graves:
Get him detailed over here, that would be your
idea?
H.M.Jr:
I don't know whether he takes pay or not. When
he was over here - Thompson knows all about how
we paid him. But if you could get Ned and trans-
fer him bodily and leave his own organization
over in Public Buildings - I don't like his
organization, but he has got B. - I am terrible
on names. But he is wonderful. The rest of his
crowd I don't like at all.
Kuhn:
We can have him--
H.M.Jr:
They are the arty crowd and I don't like them,
but this fellow, you know, he was 8. businessman
up until 50 years and then he started to paint.
He is a beautiful painter. He paints the most
georgeous things. Since he had a stroke, he
can't paint any more. But--
Kuhn:
Could we ask him to have a crack at a design for
those stamps?
H.M.Jr:
Oh, right away.
Kuhn:
Because Hall had a good idea.
H.M.Jr:
Well, wouldn't take the stuff, but that is
Hall knows him, and he doesn't like Hall. all
Hall right. He is a rough fellow, you know. He has
Regraded Unclassified
251
- 33 -
been in the Philippines, and he is a rough
guy, but thoroughly honest, artistic to his
fingertips, and he can get the President of
the United States to come over and look at
things when nobody else can, and does. I mean,
it drives me nuts. He used to call up Mrs.
Morgenthau at 6:00 o'clock every mòrning so
she would tell me what he had in the Public
Buildings and they used to drive me crazy.
He is a driving force, you see. But see if you
can't get him over here and leave his own organi-
zation over there in Public Buildings. You
will see the crowd. It is this awfully kind of
arty crowd that I don't like. You know the
kind. They talk art, but Ned can produce.
Kuhn:
Good. May we come to you with & little list
of specific recommendations on the types of
securities?
H.M.Jr:
I am waiting.
Kuhn:
Good. Could we do that tomorrow, Dan?
H.M.Jr:
Well, we testify tomorrow.
Bell:
We are going on the Hill tomorrow.
H.M.Jr:
I will tell you now. I will give you 8. time
Thursday.
Kuhn:
Wouldn't that be good, to get that settled?
Bell:
Yes, it would.
H.M.Jr:
Wait a minute. Gentlemen, would you be ready
at, 3:00? That crowds you too much, doesn't it?
Bell:
Tomorrow?
H.M.Jr:
Yes.
252
- 34 -
Bell:
I would rather make it the next day.
H.M.Jr:
Eleven o'clock Thursday.
Kuhn:
All right.
Bell:
I will have Haas, too.
H.M.Jr:
And Ferdie, tell Gaston what happened this
morning will you, to keep him up to date?
Kuhn:
Sure.
H.M.Jr:
That is 11:00 to 12:00 on Thursday. Is that
all right now, Harold?
Graves:
Yes, sir.
H.M.Jr:
And if this fellow looks good, let me know and
I will take a look at him.
Regraded Unclassified
253
MEMORANDUM
February 11, 1941.
TO:
Secretary Morgenthau
FROM:
Mr. Sullivan
This morning while discussing the general relief
amendment to the Excess Profits Tax Act with Mr. Doughton and
Mr. Cooper we all spoke of the difficulty we would encounter
in having this measure passed in the Senate because of the
Lease-Lend Bill, which Mr. Cooper says will be debated for
three or four weeks. We discussed the advisability of having
the general relief provision added in the Senate as an amend-
ment to the Public Debt Act, which we hope to have passed on
Saturday.
It was decided that a meeting of the House Ways and
Means Committee should be held at 3:30 this afternoon at which
time I was to explain the relief provision and at which time
the members of this Committee could be canvassed as to their
willingness to have this relief provision first introduced in
the Senate.
I have discussed this matter with Mr. Bell who
approves the suggested procedure providing the House Ways and
Means Committee approves.
Will you please indicate if you have any objections
to my getting the opinion of the House Ways and Means Committee
this afternoon.
JAS
Regraded Unclassified
254
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
Secretary Micht Morgenthau
DATE February 11, 1941
TO
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
Mr. Zoltowski, Financial Counselor of the Polish Embassy. called on me at
12:45 today. He stated that he had talked at length with Minister Theunis in regard
to the recent Belgian attachment of Bank of France gold in New York, As hinted on
previous occasions, the Polish authorities have had B. similar suit 1b mind. Zoltowski
has left with me recently copies of official Polish correspondence in regard to Bank
of Poland gold which had been in France when the war broke out, A similar file has
been given to President Sproul of the Federal Reserve Bank in New York and
Mr. Boltowaki has spoken with Mr. Sproul in regard to a possible suit against the
Bank of France. Mr. Sproul has, I understand, refrained from making any comment,
since the Federal Reserve Bank acts also as correspondent for the defendant Bank of
France.
Mr. Zoltowski stated that his people would not be disposed to enter any litign-
tion against the Bank of France if this might embarrase the United States Treasury.
I told Zoltowski that our attitude had been with respect to the Belgian suit that
this was a matter to be settled in court between the two banks, and that the Treasury
had no part therein. I presumed that our attitude would be the same in any prospec-
tive litigation between the Bank of Poland and the Bank of France. Zoltowski under-
stood this, but still insisted that if the Treasury desired to impose any objection.
finding the contemplated eait embarrassing to the Treasury or the Administration, he
would be glad to be informed and his people would take cognisance thereof,
As a second point, Zoltowski asked if I could ascertain whether Admiral Leahy
had since his arrival in Vichy as American Ambassador taken up with the French
Government the interest of the American Government in seeing the Bank of Foland's
gold restored to its rightful owner. It was Zoltowski's understanding that former
Polish Ambassador Potocki had taken this question up with President Roosevelt and
that the latter had given Admiral Leagy direct personal instructions on this subject
before leaving for Vichy. Zoltowaki said that if the American Fabasay at Vichy is
already interceding in behalf of the Bank of Poland, the Polish authorities would
naturally desire to do nothing in this country to cross wires.
Finally, Zoltowski renewed the hope expressed on his last visit, namely, that
the Lend-Lease Bill would not limit by specifically naming the countries which could
benefit thereunder, since he is anxious that Poland may be entitled to enjoy such
benefits as are planned for Great Britain.
I promised that I would bring the above points to the attention of the Secretary
and would let Zoltowski hear from me later in the week. He offered to come back to
Washington for another conversation if this may appear advisable.
255
2
February 12.
At 5:30 yesterday evening I telephoned the Department of State and spoke
with Mr. Page when Mr. Henderson was not available. Since Mr. Page was not familiar
with the Polish gold situation, I called Mr. Henderson this morning at 10 o'clock
and recounted Mr. Zoltowski's conversation with me of yesterday. Mr. Henderson let
ne know that before Admiral Leahy's departure, Paderewaki had addressed a letter to
the President asking that Leahy talk over with his secretary certain Polish problems
before the new Ambassador proceeded to Vichy. Henderson was sure the letter had
been written by Paderewski's secretary. whom Henderson considers a very officious
and meddlesome individual. Henderson drafted the reply to Paderewski. He doubts
very much that the President gave any instructions whatever to Admiral Leahy to look
into the Polish gold question after arrival at Vichy. I told Henderson that
Zoltowski did not want to advise instituting a suit in New York against the Bank of
France if this might conflict in any way with representations being made by Admiral
Leahy at Vichy. Henderson desired to speak with Mr. Atherton before definitely clos-
ing the subject, but thought that I was right in letting Zoltowski understand that
the position of the Treasury Department with respect to a suit by the Bank of Poland
against the Bank of France was the name as that in the matter of the Central Bank of
Belgium suit against the same defendant. That is, this is a question between the
Central Banks which does not concern the Treasury.
February 13, 1941
I was unable to reach Mr. Henderson at 5:30 last night, but he telephoned me at
9:15 this morning to let me know that he had conferred with Mr. Atherton in regard
to the above question. Neither Atherton nor Henderson knew anything of any instruc-
tions being issued to Ambassador Leahy with respect to Polish gold, and no reports
have been received from him on this subject. Henderson stated that the position of
the State Department is that it has no comment to make if the Poles may desire to
bring action against the Bank of France.
Regraded Unclassified
256
February 11, 1941
Memorandum for Mr. Norman Thompson
From:
Secretary Morgenthau
I want this thing done the first thing in the
morning.
This has to do with my call with the Secretary
of Labor.
Regraded Unclassified
257
February 11, 1941
3:53 p.m.
Madame
Perkins:
Hello, Henry.
H.M.Jr:
Yes.
P:
I'm awfully sorry to bother you but
......
H.M.Jr:
You haven't. I apologize for having been
slow in answering your call.
P:
I see. I've got a very special need. I
have two Assistant Secretaries of Labor,
the Congress only allows us one car
.....
H.M.Jr:
Pardon?
P:
Only one car - automobile.
H.M.Jr:
Yes.
P:
The first Assistant Secretary uses it all
the time and it is rarely available for the
second. The second Assistant Secretary
because of the Defense Program has become
our departmental coordinating officer and
he is about the busiest person here.
H.M.Jr:
Yes.
P:
He runs all day from the Defense Commission
to the Army and the Navy and the Maritime
Commission and back and forth. He needs a
car badly. Do you think you could make it
possible to assign one of your pick-up cars
over there for him to use?
H.M.Jr:
Surely. What's his name?
P:
His name is Daniel Tracy, Assistant Secretary
of Labor.
H.M.Jr:
Daniel Tracy. It won't be anything very
fancy but it will run.
P:
That doesn't matter; just 80 it goes.
258
- 2 -
H.M.Jr:
Bure. We'll get him one over tomorrow.
P:
Oh, that's just wonderful! I thank you
more than I can tell you.
H.M.Jr:
Sure. We'll have one over there for him
tomorrow.
P:
All right. That's just fine.
H.M.Jr:
That's easy. Ask me something hard.
P:
Oh, well, that's fine.
H.M.Jr:
All right, Frances.
P:
(Laughs). Good-bye.
259
Note:
A copy of this was delivered to Phil
Young this morning - as per instructions
of Secretary Morgenthau.
McH
Feb. 12/41
9:20 a.m.
260
February 11, 1941
3:58 p.m.
H.M.Jr:
Hello.
Operator:
Mr. McCloy.
John J.
McCloy:
Mr. Secretary?
H.M.Jr:
Hello, McCloy.
Mc6:
I may be barging into something that -
by the way, did you have a good trip?
H.M.Jr:
Wonderful.
McC:
Good. The other day when I was over in
Mr. Jones' office I said that I didn't know
anything about what was happening with the
ships and the machine tools, that 80 far as
munitions were concerned I thought we had
the program going along pretty well, but
who was dealing with that and where was it.
He said he didn't know but he said, do you
need money for ships or machine tools?
I said why certainly we need money. He said
well maybe I can give it to you. Well, now,
whose job would that be?
H.M.Jr:
Well, now, you'll have to be more explicit.
McC:
Well, I'm talking about these - what 18 it -
these 60 ships - merchant shipe that were on
that list Purvis sent us - sent you.
H.M.Jr:
Well, they ordered those.
McC:
What's that?
H.M.Jr:
They've ordered those.
McC:
Have they ordered all of them?
H.M.Jr:
They ordered all 60.
McC:
I had an impression that only half of them
were ordered.
Regraded Unclassified
261
- 2
H.M.Jr:
No.
McC:
Well, then that's taken care of.
H.M.Jr:
I'm quite sure they ordered all 60 of
them the same day.
McC:
Oh, they did. Who ordered them - the
British?
H.M.Jr:
The British. That was in December, I
believe.
McC:
Oh, this was & much more
......
H.M.Jr:
I'm talking about the contract with Todd.
McC:
Uh-huh. Well, maybe it's all taken care
of but the list that I had had merchant
ships on it and as I wasn't doing anything
about it I just wondered where
......
H.M.Jr:
No, I haven't - Purvis would have said
something.
MoC:
Now, do you know anything about machine
tools?
H.M.Jr:
Not & thing.
McC:
There was a substantial item on machine
tools on that list. I think that everything
has been covered. then, if ships are covered
except 80 far as I know machine tools, except
the purely British equipment that we didn't
have the proceeds of the sale of facilities
sufficient to purchase.
H.M.Jr:
You mean, I take it, both ships and tools
- the possibility of buying up their contract?
MoC:
Yes, or new stuff that they are ordering or
want to order and couldn't order because they
didn't have the money.
H.M.Jr:
Well now look. Philip Young will be back in
the morning.
McC:
I tried to get him at -
262
- 3 -
H.M.Jr: And I'll turn this over to him the first thing in
the morning and if there's anything that can be
done, I'll have him get in touch with you.
McC:
Well, I was surprised because I'd understood up to
that moment that Jesse Jones said he didn't have
any money available for either of those and the
other day he rather indicated maybe that he might.
H.M.Jr: Well I'm delighted you called me. We'll look into
it at once because any money that Jesse has free
I'd like to grab it.
McC:
Yeh. I think he's moving a little slowly but I think
he's moving ahead all right.
H.M.Jr: Well, he's moving. You're quite right. I think they've
cleared one - actually one contract Purvis told me last
night.
McC:
Uh, huh.
H.M.Jr: One.
McC:
It's moving slower than I hoped but I do think he's
got quite a staff at work on it and one of these days
I suppose a good many will be cleared.
H.M.Jr: Well, thank you for calling up and I'm delighted to
have you do it anytime.
McC:
Righto. All right.
263
TREASURY DEPARTMENT
Noted
/
INTER OFFICE COMMUNICATION
A. Hawkey
CCPY FCR OFFICE FILES
Distributed by Mr. Contran to:
DATE February 11, 1941
Secretary Morgenthen
Societary
TO
Mr. Beil
Wind
Mr. Benefitem
FROM
Mr. Cochran
Mr. Way
Pshis
At 4 p.m. today Secretary Morgenthau received by appointment Sir Edward Peacock,
who had arrived from England during the Secretary's recent absence, and who had come
to Washington today to pay his respects to the Secretary. After a conversation of &
few minutes between the Secretary and Sir Edward, Measrs. Pinsent, Playfair and Allen,
who had accompanied Sir Edward to the Treasury, joined the conversation, together
with Messrs. Bell and Cochran of the Treasury.
Sir Edward Peacock let the Secretary know that he is feeling his way cautiously
and cannot yet report definite transactions. He has been approached by a large num-
ber of people interested "in being of service". He is agreeable that all inquiries
which the Treasury may receive in regard to his undertaking should be addressed
directly to him at 15 Broad Street, in care of the British Purchasing Commission. He
will visit Washington occasionally, making headquarters with the British Purchasing
Commission at the Willard Hotel. but will have his offices in New York. He is
already arranging for the services of an expert accountant and hopes to build up. &
staff shortly.
In answer to the Secretary's inquiry, Sir Edward stated that he VAI already faced
with certain questions under our Anti-Trust Laws. The Secretary offered to have his
General Couneel's Office go into any such questions which Sir Edward might have, and
to solicit the opinion of the Attorney General if necessary. Sir Edward vse appre-
ciative of this offer.
It was further arranged that Sir Edward would let the Secretary know as his nago-
tiations take form, preferably at the beginning. As business develops, a system
vill be worked out for keeping the Treasury informed through Mr. Pinsent. Sir Zdward
seemed anxious to cooperate with the Treasury and to have the benefit of such assist-
ance the Treasury and the Securities Exchange Commission may be able to extend.
In answer as to the Secretary's further query, Sir Edward stated that he had called on
Commissioner Frank at the S. E. C., together with certain of Mr. Frank's associates,
and also upon Mr. Welles, Under Secretary of State, after he had come to the Treasury the
last week. Mr. Frank had cordially offered Sir Edward any proper assistance on York
part of the Commission, either through its Washington headouarters or its Sev
office.
In with the Secretary's suggestion, Sir Edward met the Treasury He press
group stressed as the point that he must go carefully and that this is not an emergency sale
agreement he left the Secretary's office and gave them an assuring interview.
in which various interests will not be properly unfeguarded.
BMP
Regraded Unclassified
264
TREASURY DEPARTMENT
misgny Secretary Morgenthau
INTER OFFICE COMMUNICATION
DATE February 11, 1941
TO
FROM Mr. Cochran
When Mr. Pinsent called on me at 4 o'clock this afternoon he left with me the
attached memorandum in regard to the move toward emending our Tariff Act so as to
exclude from the "foreign value" the recently established British Purchase Tax.
Mr. Pinsent explained that his Embassy had taken this matter up with Secretary
of State Hull and that the latter had spoken with Mr. Doughten urging that the mat-
ter of appropriate legislation be expedited. Mr. Hull had also suggested that the
British solicit Secretary Morgenthau's assistance in the premises. The British now
request this, since they feel that Congressman Cullen, who introduced the bill, is
not perhaps as active as the Administration might desire that he be at present.
7.mg
265
(Handed by Mr. Pinsent of the British Embasay to Mr. Cochran in
the Treasury at 4 p.a., February 11, 1941.)
MEMORANDUM FOR THE SECRETARY OF THE TREASURY
It is understood that the various United States Depart-
ments concerned have now reported favourably on H. R. 1589, pro-
viding that Section 402(c) of the Tariff Act should be amended so
as to exclude from the "foreign value" of imported merchandise any
tax (except import duty) which is not applicable with respect to
such or similar merchandise when exported to the United States.
This Bill replaces that which was introduced by Kr. Cullen in the
last session of Congress and which formed the subject of a memo-
randum to the Secretary of the Treasury from the British Embassy
on the 13th December last.
Reports which are reaching the British Embassy tend to
confirm the fears expressed in thememorandum of 13th December that
the inclusion of the Purchase Tax in the dutiable value of imports
from the United Kingdom would have a very serious effect on the
trade of the United Kingdom with the United States, and in parti-
cular it appears that traders are very reluctant to enter into
future commitments, pending the enactment of H. R. 1589. It would
accordingly be warmly appreciated if the Secretary of the Treasury
would take such steps as are open to him and as he may consider
expedient to expedite consideration of the Bill by the Congress.
(signed) G.H.S.P.
British Embassy,
Washington D.C.
11th February 1941.
COPY:lep
Regraded Unclassified
266
Paraphrase of No. 17, February 11, 194a, 14 P.M. from Asuncion.
A decree issued unexpectedly yesterday makes exchange
transactions subject to a very tight and exclusive control
under the Department of Exchange Control, a new and
largely autonomous entity with full power created within
the Bank of the Republic. Depending upon the availability
of exchange export and import permits are to be required.
Restrictions are to be administered based upon a schedule
of preferences headed by necessities and in so far as
possible to follow the rule of buy from those who buy from
us and including a provision for barter and compensation
transactions.
STRICTLY CONFIDENTIAL The decree was motivated at
this time by a pronounced depreciation of the Paraguayan
peso in relation to the Argentine peso and an increase in
the demand for the Argentine peso in everyday transactions.
The lack of administrative machinery is causing confusion
and it is probable that the decree will have to be modified.
SCHOENRICH
eh:copy
Regraded Unclassified
267
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
FOR wiss
LATE February 11, 1941
TO
Secretary Morgenthau
CONFIDENTIAL
FROM Mr. Cochran
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
255,000
Purchased from commercial concerns £22,000
The Federal Reserve Bank of New York sold £15,000 in registered sterling
to a non-reporting bank.
Open market sterling was again quoted at 4.03. Transactions of the reporting
banks were as follows:
Sold to commercial concerns
214,000
Purchased from commercial concerns £ 3,000
Principle changes in the other currencies consisted of a moderate improvement
the Argentine free peso and some weakness in the Cuban peso. Closing quotations
vere:
Canadian dollar
17-1/8% discount
Swies franc (commercial)
.2324
Swedish krons
.2385-1/2
Reichsmark
.4005
Lira
.0505
Argentine peso (free)
.2370
Brazilian milreis (free)
.0505
Cuban peso
6-15/16% discount
Mexican peso
.2066
Chinese yuan
.05-1/2
We sold $19,950,000 in gold to the Central Bank of the Argentine Republic,
which vas added to its earmarked account.
No new gold engagements were reported.
The Federal Reserve Bank of New York reported that there are no gold shipments
enroute to this country at the present time.
No gold or silver prices were received from Bombay today.
In London, price of 23-5/16d was again fixed for spot silver, the forward is
totation vas also a. 23-5/16d, up 1/16d. The dollar equivalent of this price
.2.33#.
Regraded Unclassified
268
- 2 -
Handy and Harman's settlement price for foreign silver vas unchanged at 34-3/46.
the Treasury's purchase price for foreign silver vas also unchanged at 35#-
We made one purchase of silver amounting to 100,000 ounces under the Silver
Purchase Act. This consisted of new production from foreign countries, for forward
delivery.
The report of February 5 received from the Federal Reserve Bank of New York,
giving foreign exchange positions of banks and bankers in its district, revealed that
the total position of all countries vas short the equivalent of $8,416,000, B decrease
of $312,000 in the short position. Net changes were as follows:
Short Position
Short Position
Change in
Country
January 29
February 5
Short Position*
England**
$ 35,000 (Long)
$ 456,000
+ $491,000
Europe
3,302,000
3,385,000
+ 83,000
Canada
405,000 (Long)
318,000 (Long)
+ 87,000
Latin America
204,000
91,000
- 113,000
Japan
4,461,000
3,598,000
- 863,000
Other Asia
1,244,000
1,219,000
- 25,000
All others
43,000 (Long)
15,000 (Long)
4 28,000
Total
$8,728,000
$8,416,000
- $312,000
lue sign (+) indicates increase in short position, or decrease in long position.
Minus sign(-) indicates decrease in short position, or increase in long position.
"Combined position in registered and open market sterling.
BMP.
CONFIDENTIAL
Inclassified
269
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
Secretary Mischy Morgenthan
DATE February 11, 1941
TO
FROM
Mr. Cochram
STRICTLY CONFIDENTIAL
Official sales of British-owned dollar securities under the vesting order
effective February 19, 1940:
No. of Shares
$ Proceeds of
Nominal Value
$ Proceeds of
Sold
Shares Sold
of Bonds Sold
Bonds Sold
February 3
27,975
2,092,985
142,000
148,153
4
27,642
1,518,933
610,000
628,541
our
12,284
427,603
191,000
161,935
99,597
2,834,862
281,000
247,272
7
16,375
306,592
782,000
848,648
8
600
13,795
Nil
Hil
184,473
7,194,770
2,006,000
2,034,549
Sales from
February 22, 1940
to February 1, 1941
5,027,278
151,781,091
13,747,800
12,816,210
TOTAL FEBRUARY 22,1940
TO FEBRUARY 8, 1941
5,011,751
158,975,861
15,753,800
14,850,759
Miss Poate reported sales of non-vested securities for the week ending
February 1 totaled $750,000.
20ml
Regraded Unclassified
270
February 11, 1941
MEMORANDUM
TO:
The Secretary
FROM: Mr. Buckley
Re: Status of Reconstruction Finance Corporation
Purchasing for the British.
The Reconstruction Finance Corporation has been
working on two general projects in connection with the
British program. These are (1) the placing of direct
orders for arms, ammunition, and materiel of war, and
(2) the purchase of plant facilities which have been
established by the British Purchasing Commission for the
production of machine guns and powder. The status of
these two projects 1s as follows:
l. Placing of direct orders for war supplies,
They have been working with the Army and Navy on a
procedure under which the Defense Supplies Corporation
would place orders for standard United States items.
They expect to have this procedure ready for Mr. Jones'
approval this morning end will send us a draft as soon
as it 18 ready for presentation to him. The plan 1s
for these contracts to be taken over by the Army or
Navy as soon as appropriations are secured under the
Lease-Lend Bill.
2. The purchase of British plant facilities.
This involves the taking over by the Defense Plant
Corporation of the plant of the Tennessee Powder Company
at Memphis, Tennessee, and four plants established by
four different manufacturers for the production of
machine gune. This has been approved by the War and
Navy Departments and by Mr. Jones, who has also secured
the approval of the President. The only problem now 1e
to complete the necessary arrangements between the War
Department, the Defense Plant Corporation, and the
British. Colonel Greenbaum 18 working on this at the
War Department, and it should be completed shortly.
Regraded Unclassified
271
11, 1941
peealson12
Dear Mr. Rallantynes
Year Letter of February 10, 1941, enclosed applications
for the placement of the following orders:
Brittich Purchasing Cominsion
Motor Vehicles
8 560,317.98
est - Equipment
70,180.00
Chemicals
17,000.00
Replectives
$46,550.00
defenses ml
473,889.10
the
146,250.00
from and Stool
Total
$4,561,148.96
a Presency Department has M objection to the assestion
of these with the exception of Contract L-657, a
which the Prokining Regotiation Report has met got been
Application for placement of orders wher this
exateme) after you are mottfied of the
I r
I
Mr. Charles 2.
Purchasing Construction,
the Villard Notal,
Vockdagion, D.G.
/
Regraded Unclassified
272
BRITISH EMBASSY
WASHINGTON, D.O.
February 11th, 1941,
My dear Cochran,
4
I understand that the Secretary of the Treasury
is anxious to have our estimates of German expenditure on
armaments year by year since 1933. I telegraphed to London
for their estimates and have today received such information
as is at their disposal, copy of which I attach to this letter.
The figures are not secret from the point of view
of publication, but you will of course appreciate that they
are merely estimates and that there is always a danger that
& misleading picture may be given when one is dealing with
statistics relating to such a highly organized regime as
the present German Government.
Yours sincerely,
(a) R.J. STOPPFORD
Mr. Merle Cochran
U.S. Treasury Dept.,
Washington, D.C.
273
1.
Published figures of German arnaments or civilian expenditures
are not available, but some astimate of the rate of increase of total
expenditure can be made after examination of the published figures of
revenue from tax receipts and of increases in the published figures of
the public debt. The publighed figures are as follows for the financial
years ending March 31st.
1933
6.9 milliard Reichemarks
1934
8.4
ditto
1935
9.4
ditto
1936
11.9
ditto
1937
13.6
ditto
1938
17.3
ditto
1939
29.6
ditto
1940
44.6
ditto
1941
probably about 64 milliard Reichsmarks.
2.
These figures do not include receipts from the so-called secret
debt nor certain insurance funds which can only be estimated roughly.
3.
Estimates for armament expenditure (1.e. non-civilian), including
investment costs of certain "Four Year Plan" factories, fortifications etc.
for the financial years ending 31st March are as follows:-
1933
0.5 milliard Reichsmarks
1934
2.
ditto
1935
6.
ditto
1936
12.
ditto
1937
13.
ditto
1938
15.
ditto
1939
26.
ditto
1940
42.
ditto
1941
probably about 60 milliard Reichsmarks.
The figure for 1941 does not include the costs of armies of
occupation, which are paid by the occupied territories at a rate at present
believed to be 10 milliard Reichemarks a year.
These figures may be compared with Hitler's statement on September lst,
1939 that since he came to power over 90 milliard Reichsmarks had been spent on
building up the German armed forces. Our estimates are inevitably rough, but
those for later years are more reliable than those for the earlier years.
4.
These financial estimates have been checked with reasonably
reliable estimates of manpower employed directly and indirectly in the
production of all kinds of armaments.
(Init.) R.J.S.
ag
COPY
Regraded Unclassified
274
CONFIDENTIAL MEMORANDUM
February 11, 1941
TO THE SECRETARY:
Guy de Schompre, former French Consul at Tientsin, China, and now
leader of Free French Organisation in Far East, called at our Hongkong
office recently and in course of conversation stated that he is tour-
ing the Far East, Australia, and United States, enroute to England,
and is cooperating closely with the British Military; that he under-
stands Japanese are negotiating for control of the entire French Indo
rubber output so as to sell same to obtain foreign exchange. He ex-
pressed the view that aid to French Indo China was immediately neces-
sary and thought the forty-five planes, bombs, machine guns, etc.,
now stored in Manila and originally intended for Siam should be sold
to General Decoux for cash, plus definite agreement as to resistance
to Japs and that such supplies would not fall into Japanese hands.
He is of opinion Decoux is in an unenviable position in Indo China
and lacking any encouragement from Britain or the United States has
no option but to accede to Japanese demands.
U. S. Treasury Attache
Shanghai, China
Regraded Unclassified
275
TELEGRAM SENT
MMM
GRAY
February 11, 1941
8 p.m.
AMERICAN CONSUL
HANOI (FRENCH INDOCHINA)
2.
Treasury Department wishes you to inform Government
of French Indochina that it is terminating blanket
licenses which permitted payments, transfers, and with-
drawals from certain accounts of the Banque de l'Indochina
and the Banque Franco Chinoise pour le Commerce Et
l'Industrie. Transactions with respect to such accounts
will hereofter bE on the basis of a specific license
relative to each transaction and applications for such
licenses will, of course, receive prompt and careful
consideration by the Treasury Department.
Department's 10, November 29, 1940. Mutually satis-
factory arrangements for the free USE of the proceeds of
the sale of rubber to the Government of the United States
will bE immediately explored with representatives to bE
designated by the interested banks.
Inform Scigon.
HULL
(FL)
EA:FL:MSG
FE
Regraded Unclassified
276
GMW
GRAY
Rome
Dated February 11, 1941
Rec'd. 9:25 a.m.
Secretary of State,
Washington.
191, February 11, 11 a.m.
Referring to Embassy's telegram No. 142, January
30, 4 p.m., not infrequest inquiries are being received
from persons in Italy, including diplomats and local
Americans, one, as to the conditions, if any, under which
the release may bE obtained of funds from accounts which
ATE blocked in the United States under the regulations
pertaining to occupied territories, and two, what pro-
ordure must be followed in applying for such releases.
If any non-confidential regulations on these points
are available which could be communicated to the Embassy
they would be helpful.
Incidentally, several persons have recently reported
that they had been informed by their banks or relatives
in the United States that funds could not be transferred
to Italy.
PHILLIPS
ALC
277
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE February 11, 1941
TO
Secretary Morgenthau
FROM
Mr. Hass MAR
Subject: Current Developments in the High-grade Security
Markets
SUMMARY
(1) Prices of Treasury bonds have declined slightly more
than a point in the past two weeks. Prices of Treas-
ury notes have fallen somewhat less than one-half
point in that time (Chart I).
(2) Weekly reporting member banks acquired about $349 mil-
lions of Treasury notes in the week ended February 5
(Chart II). This week includes the issue date of the
new Defense notes. Thus, assuming no change in their
holdings of other Treasury notes, these banks acquired
about 55 percent of the new issue.
(3) Long-term Treasury bonds have receded from their
December high prices to prices at which their yields
are about the same as they were just prior to the
Scandinavian invasion last April. Shorter bonds are
selling at higher yields than at the beginning of
April 1940 (Chart III). The yields of Treasury notes,
which were already higher on December 30 than just be-
fore the Scandinavian invasion, have since advanced
yet further (Chart IV).
(4) High-grade corporate and municipal bonds declined in
price during the past two weeks (Charts V and VI).
The market is still not very receptive to new issues.
(5) Despite war borrowing in excess of L2 billions, in-
terest rates on British Government securities have
decreased since the outbreak of war (Chart VII).
I. United States Government Securities
Prices of Treasury bonds have declined, on balance,
of Treasury notes have fallen somewhat less than one-half
slightly more than & point in the past two weeks. Prices
Regraded Unclassified
278
Secretary Morgenthau - 2
point (Chart I). Contrary to the usual experience, the
shorter maturities of both bonds and notes have declined
more than the longer. This is indicated by the following
table which shows the price changes by maturity classes:
:
Average price change
:
January 27 - February 10
:
(Decimals are thirty-
seconds)
Notes
1 to 3 years
- .13
3 to 5 years
- .12
Bonds
5 to 15 years to call
-1.07
15 years and over to call
-1.03
During the past two weeks there has been a very slight
narrowing in the yield differential between the new Defense
note of September 15, 1944 and the tax-exempt Treasury note
due the same date, from 28 basis points to 24 basis points.
II. Bank Holdings of Government
Securities
The primary distribution of the new Defense note is
reflected in the statements of weekly reporting member banks
for the week ended February 5. Note holdings of weekly
reporting banks in New York City increased $224 millions
during the week, and those of banks outside of New York
City increased by $125 millions, or & total for the weekly
reporting group of 8349 millions (Chart II). These figures
do not necessarily reflect net acquisitions of the new note
alone. Assuming, however, that there was no change in
their holdings of other outstanding notes, reporting banks
acquired about 55 percent of the new issue.
279
Secretary Morgenthau - 3
III. Perspective of the Government Security Market
The price of the longest-term Treasury bond outstand-
ing (the 2-3/4's of 1960-65) has fallen 3-1/2 voints since
December 30, with the result that its yield has increased
from 2.05 percent to 2.25 percent. At this level it is back
about to its position Just prior to the German invasion of
Denmark and Norway.
During the intervening months long-term bonds have be-
haved better than either bonds of shorter maturity or Treas-
ury notes. This may be seen from Charts III and IV which com-
pare the yields of Treasury bonds and notes, respectively, on
April 3, 1940, just before the Scandinavian invasion, on
December 30, 1940, and at the close yesterday, February 10,
1941.
As was indicated above, the longest outstanding bonds
are now priced to yield about the same rate as at the begin-
ning of April last year. Bonds of shorter maturity, on the
other hand, are selling at appreciably higher yields (and
correspondingly lower prices) than they were in April of
last year Chart III). Treasury notes did not share in the
price rise between April 3 and December 30. Thus, the ourve
for December 30 on Chart IV is above the curve for April 3,
1940, indicating higher yields for comparable maturities in
December than in April. The curve for February 10, 1941 is
considerably higher than that for either of the other two
dates. The Defense notes have been disregarded in plotting
the note curves for both December and February.
IV. Other Domestic High-grade Securities
During the two-week period since January 28 our average
of the yields of high-grade corporate bonds, moving inversely
to prices, has increased by 12 basis points Chart V). This
compares with an increase of 9 basis points during the same
period in the average yield of long-term Treasury bonds.
Municipal bonde also fell in price in the last two weeks,
but not 60 much as Treasury bonds or corporates. The decline
for the two weeks ended Saturday is reflected by an increase
in the Dow-Jones average yield of twenty 20-year municipal
bonds of 4 basis points (Chart VI).
New bond offerings to the public in the New York market
during the past two weeks amounted to slightly less than
$70 millions. This 18 about $100 millions less than during
Regraded Unclassified
280
Secretary Morgenthau - 4
the preceding two-week period. The market for new issues
continues quiet and not very receptive. Syndicate price
restrictions are still in effect on several of the recent
corporate offerings, including the $26.5 millions issue of
3-1/4 percent 30-year bonds of the Wisconsin Public Service
Corporation which were offered last week at & price to yield
2.95 percent. Figures published by The Bond Buyer indicate
that slowly. several recent municipal offerings are also moving
V. British Government Security Prices have Risen
during the War
It is interesting, in view of the rather generally held
belief that an extensive war effort necessarily entails a
sharp rise in the cost of Government borrowing, to observe
the course of interest rates in Great Britain during the war.
According to a statement by the British Chancellor of the
Exchequer on December 27, the British Government borrowed
by means of various war loans about L1.3 billions from
November 1939 to the end of December 1940. This sum includes
subscriptions to the 3 percent war loan offered early in
1940, the sale of 2-1/2 percent national war bonds, and the
proceeds of & popular savings campaign. If the amount 18
added to the net increase in other public debt obligations
(principally floating debt) the total borrowing for the
13-month period would come to somewhat more than L2.0 bil-
lions.
In spite of this large increase in debt (equivalent to
about $8 billions in United States currency at the present
official rate of exchange and equivalent on & per capita
basis to an increase of about $24 billions in the debt of
the United States) interest rates in Great Britain have
followed & downward trend since the outbreak of war. The
price of 2-1/2 percent Consols has risen from 70-3/8 at the
end of May 1939 (before the war crisis developed) to 77-3/4
on Monday. This 1e equivalent to 8. decrease in yield from
3.58 percent to 3.24 percent (Chart VII). Other British
Government securities have followed & similar course. The
3-1/2 percent war loan, a perpetuity callable after 1952,
which sold at 96-3/8 at the end of May 1939 and below 90
in September 1939 1e now selling at about 103-1/2.
Attachments
Regraded Unclassified
281
Chart I
CHANGES IN THE PRIORS OF U.S. SECURITIES
Pointe Plotted Represent the Difference from April 6, 1040 Price of Seeh Naturity Class
1940
1841
1940
1941
MAY
DECEMBER
JANUARY
FEBRUARY
JULY
POINTS
MPT.
É
JAB.
MAR.
MAY
7
14
21
28
4
11
10
25
15
22.
(NET CHANGE)
POINTE
POINTS
GST CHANGE)
(AST CHANGE)
deturday Quotations
Daily
438
128
+4
:
45
+3
+5
+3
428
+25
+2)
+2)
e2
+2
+2%
423
Bonns
OVER 15 Yes,
of
+2
TO CALL
42
et
NOTES
NOTES
+11
1-3 Yes,
of
3-5 Yes.
o
0
+1)
+1+
+11
+11
-1
-1
Bones
5-15 Yes,
41
TO CALL
41
7
-2
+1
+1
+1
++
7
-3
time,
+
+ 1
5-15 Yes.
NOTES
TO CALL
3-6 Yes.
o
0
T
1
-
- i
- +
Boxps
&
OVER 15 Yes
TO CALL
4
+1
-+
NOTES
1-3 Yes.
-1
-1
9
9
-1
-1
-7
-7
+H
-16
-11
-11
,
*P
-15
-H
4
-2
é
-9
-21
-2%
-10
-10
+21
48
MAY
JULY
SEPT.
NOV.
JAN.
MAR.
MAY
7
M
21
20
4
Il
18
25
1
8
15
22
1940
1941
DECEMBER
JAMJARY
FEBRUARY
1940
1941
Office of the Sentary of the Treasury
Mile of - and his
7-153-8-5
Chart II
U.S. GOVERNMENT SECURITY HOLDINGS, WEEKLY REPORTING MEMBER BANKS
Cumulative Net Change from September 25, 1940
1940
1941
OCTOBER
NOVEMBER
DECEMBER
25
2
JANUARY
9
16
23
FEBRUARY
30
6
MARCH
13
APRIL
20
27
4
18
25
DOLLARS
8
15
22
29
5
12
19
26
5
12
19
26
2
9
16
23
30
MILLIONS
DOLLARS
MILLIONS
New York City
800
800
500
600
TOTAL
400
400
GUARANTEED
200
200
0
o
BONDS
BILLS
NOTES
-200
-200
-400
400
OCTOBER
NOVEMBER
DECEMBER
JANUARY
FEBRUARY
MARCH
APRIL
600
600
All Other
400
400
DONDS
TOTAL
200
200
BILLS
282
o
0
GUARANTEED
-200
-200
NOTES
-400
-400
600
<<00
OCTOBER
NOVEMBER
DECEMBER
JANUARY
FEBRUARY
MARCH
APRIL
1,200
1,200
All Cities
1,000
1,000
800
800
TOTAL
600
600
400
400
BONDS
BILLS
200
200
GUARANTEED
o
o
-200
-200
NOTES
-400
400
-600
18
25
-600
25
2
9
16
23
30
6
13
20
27
4
11
1
8
15
22
is
5
12
19
26
5
12
19
26
2
9
16
21
30
OCTOBER
NOVEMBER
DECEMBER
JANUARY
FEBRUARY
MARCH
APRIL
1940
1941
Office of the Secretary of the Treasury
Division of Reserve - Pulice
E - 146 - 0
Regraded Unclas
Chart III
YIELDS OF TREASURY BONDS
YEARS TO MATURITY OR CALL
5
10
15
20
25
PERCENT
PERCENT
2.4
2.4
FEBRUARY 10, 1941
2.0
2.0
APRIL 3, 1940
1.6
1.6
DECEMBER 30, 1940
1.2
1.2
.8
.8
.4
A
o
0
5
10
15
20
25
YEARS TO NATURITY OR CALL
283
Office et the Secretary of to Treasury
Details of - - -
F - 118 - E
Regraded Unc
284
Chart IV
YIBLDS OF TREASURY NOTES
Excluding Defense Notes
YEARS TO MATURITY
2
3
4
PERCENT
5
PERCENT
.7
.7
.6
.6
FEB. 10, 1941
.5
.5
Dec. 30, 1940
A
A
.3
.3
.2
.2
APRIL 3, 1940
.1
.1
o
0
1
2
3
4
5
YEARS TO NATURITY
Office of the Secretary of the Treasury
F - 198
Division of - - Statistics
285
Chart V
COMPARATIVE YIELDS OF AVERAGE OF ALL LONG TERM US TREASURY
AND AVERAGE OF HIGH GRADE CORPORATE BONDS
1940
JAN
PER
MAE
$
MAY
JUNE
JULY
AUS.
BEFT
OCT
NOV
DEC
1941
JAN
FEB.
1940
.
if
"
-
at
⑉
MAR
"
APR
MAY
1941
-
=
=
to
#
-
.
#
"
-
15
JUNE
di
JULY
a
"
AUS.
SEPT.
=
OCT,
NOV
DEC
DEC
"
-
24
JAM
FEB
E
Inverted Scale
=
.
-
a
a
in
RE
,
-
e
-
+
e
is
=
.
#
PER CENT
Inverted Scale
THE
Invert Scale
PER CENT
FER CENT
WEEKLY. Saturday Quotations
DAILY
16
1.6
1.6
2.0
2.0
LO
Long Term
Treasury
2.2
22
2.2
Long Term Treasury
(12 years or more to earliest of data)
24
24
24
2.6
2.6
26
Corporate
28
28
2.8
Corporate
3.0
3.0
10
12
12
32
34
34
34
36
3.6
36
PER
PER
PER
CENT
CENT
CENT
1.00
100
100
Spread Between Long Term
Treasury and Corporate
80
60
80
60
so
60
Spread
40
40
40
20
20
20
o
o
o
. JAN # FEB If MAR 16 - APR If MAY 11 JUNE 100 AUE as REPT. OCT. NOV DEC JAN FEB MAR. # APR. a - MAY - JUNE 41 JULY # AUG + " SEPT IN OCT. M NOV - DEC.
.
14
BY
:
.
=
is
⑉
-
IN
=
DEC
JAN
FEE
1940
1941
1940
1941
. Change in composition of Long Form Treasury average
Oliva el the fereiary of the Treasury
-18-6-4
- # - - -
COMPARATIVE YIELDS OF AVERAGE OF ALL LONG TERM U.S. TREASURY
AND Dow-JONES AVERAGE OF MUNICIPAL BONDS
Yields Based on Saturday Quotations
1940
1941
JAN
FEB.
MAR
§
MAY
AME
JULY
AUG
SEPT
OCT.
NOV
DEC.
JAN.
FEB.
MAR.
APR
MAY
JUNE
JULY
AUG.
SEPT
OCT
NOV.
DEC.
.
or
,
16.
-
13
27
#
29
a
#
.
20
I
If
all
H
:
12
26
,
as
7
a
4
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I
e
"
12
as
ID
24
,
21
.
.
#
is
so
=
If
II
19
a
If
Inverted Scale
Inverted Scale
PER CENT
PER CENT
1.8
Long Term Treasury" (12 years or more do earliest call date)
1.8
2.0
2.0
2.2
2.2
2.4
2.4
2.6
2.6
Twenty 20-Year Municipal Bonds
2.8
2.0
3.0
3.0
32
1.2
PER
PER
CENT
CENT
60
60
Differential
40
40
20
20
o
o
IF
14
-
di
⑉
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a
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-
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e
18
#
#
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to
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.
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=
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I
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#
-
1
4
=
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18
#
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e
=
#
.
JAM
FEB
MAR
APR
MAY
AND
JULY
AUG
SEPT
OCT
BOV
DEC
JAM
FEB
MAR
APE
MAY
AND
any
AUG.
SEPT.
OCT
NOV
DEC
1940
1941
en And andicates change - compartion of lang farm Treasury average
286
Office of the Secretary of the Transary
F-134-0
- of - - -
Regraded Uncla
287
Chart VII
COMPARATIVE YIELDS OF AVERAGE OF ALL LONG TERM U.S. TREASURY
BONDS AND U.K. 2½% CONSOLS
1939
MAY
JULY
SEPT
1940
NOV.
JAR
MAR
1941
MAY
JULY
SEPT.
1940
NOV.
1941
AM
MAR
DEC
JAN
FEE
Inverted Sopie
MAR
Inverted Scale
.
PER CENT
inverted Rogie
WEEKLY. Friday Quotations
PER CENT
Daily
PER CENT
2.0
2.0
20
Long Term Treasury
2.2
2.2
It
2.4
2.4
24
2.6
2.6
14
2.0
Long Term Treasury
(M) years - more # contingt coll
2.8
11
3.0
3.0
8.0
1.2
U.K. 2% x Console
3.2
12
3.4
1.4
14
U.K. 24% Console
3.6
3.6
14
New Minitus
New Minimum
3.6
3.0
0.0
4.0
4.0
4.0
et Minimum
4.2
4.2
42
PER
CENT
PER
PER
CENT
CENT
1.6
1.6
1.6
Differential
1.4
1.4
1,4
1.2
1.2
12
Differential
1.0
1.0
10
0
8
.
6
é
&
4
4
4
2
2
.
D
.
#
-
*
o
0
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#
-
-
-
-
MAY
.
.
-
.
.
.
-
.
#
-
.
.
#
.
.
NO
SEPT.
NOV.
JAN
MAR
MAY
JULY
SEPT.
NOV
JAM
MAR
DEC
JAH.
#
E
1939
1940
1941
1940
1941
. Change - componition Lang five Treasury
- el the larrary of - Travy
land a farm of provide, bet veries - thrms -
- . - -
FO-186-F
288
RESTRICTED
G-2/2657-220
M.I.D., W.D.
No. 313
February 11, 1941
12:00 M.
SITUATION REPORT
I. Western Theater of War.
Air: German. Minor air activity over England. The
Germans claim that their night fighters destroyed 12 British
planes last night.
British. Fairly large daylight raids were executed
against northern France and probably in limited force against north-
west Germany on the 10th. Last night the R.A.F. operated in some
force over northwest Germany, attacking Hanover in particular.
II. Greek Theater of War.
Ground: Local operations only.
Air: Widespread Italian bombing outside the combat zone.
There was a sharp fighter action over Klisura.
III. Libyan Theater of War.
Ground: The British are mopping up the area Bengasi-El
Agheila.
Air: The Fleet Air Arm bombed Tripoli on the night
February 9th-10th.
IV. East African Theater of War.
Ground: No important changes in the situation.
Air: The R.A.F. was active, apparently in small force,
over several points in Eritrea.
V. Mediterranean Theater of War.
Air: Axis. Malta was attacked on the night of the 10th.
British. The R.A.F. raided Sicily and southern
Italy, concentrating on the German base near Catania,
This military situation report is issued by the Military in- In-
Note: Division, General Staff. In view of the occasional classified
telligence clusion of political information RESTRICTED and of opinion it is as
Restricted.
Regraded Unclassified
289
RESTRICTED
MILITARY INTELLIGENCE DIVISION,
TENTATIVE LESSONS BULLETIN.
WAR DEPARTMENT,
No. 85
Washington, February 11, 1941.
0-2/2657-235
NOTICE
The information contained in this series of bulletins
will be restricted to items from official sources which are
reasonably confirmed. The lessons necessarily are tentative
and in no sense mature studies.
This document is being given an approved distribution,
and no additional copies are available in the Military Intel-
ligence Division. For provisions Governing its reproduction,
see Letter TAG 350.05 (9-19-40) M-B-M.
COMMENTS OF AN AMERICAN UNOFFICIAL OBSERVER
Oil THE FALL OF FRANCE
SOURCE
This bulletin is based upon comments made in late January,
1941, by an American observer who is without official status, but
whose military background and education render his opinions inter-
esting and probably valuable. The observer was in France before,
during, and after the German invasion. Ee was given access to
certain sources of information not normally available to other
observers.
CONTENTS
1. INTRODUCTION
2, MORALE
3. STAFF ORGANIZATION
4. LACK OF AIRCRAFT
5. EMPLOYMENT OF TANKS
6. SHORTAGE OF ANTITANK GUNS
7. LIGHTS FOR NIGHT MOTOR MOVEMENTS
8. RENARKS ON OPERATIONS
RESTRICTED
-1-
Regraded Unclassified
290
RESTRI CTED
1. INTRODUCTION
The principal reasons for the defeat of France were a
marked deficiency in French equipment as compared with the German,
particularly in aircraft, tanks, antiaircraft and antitank weapons;
defective staff work on the part of the French, and poor utiliza-
tion of the means at their disposal.
2. MORALE
Inferior morale was not 8. basic cause of French defeat,
but rather & by-product, and it cannot be held responsible for
the initial decisive disasters. Morale became bad after these
disasters as a result of the fact that troops were called upon to
fight under impossible conditions. The French fought well with
what equipment they had until it was obvious that they could do
nothing effective, and morale cracked only when troops without proper
equipment were repeatedly called upon to accomplish hopeless tasks.
Bad morale accounts for the rapidity with which France declined in
the late stages, but not for her actual defeat.
3. STAFF ORGANIZATION
The French staff, badly organized from the beginning became
almost completely disorganized during active operations. Considerable
friction resulted from the failure of Gamelin and Georges to work
together harmoniously. Gamelin was, in effect, superimposed upon
Georges as a commander, and disagreements between the two frequently
resulted in counter orders.
4, LACK OF AIRCRAFT
During the decisive fighting in May, the Germans had complete
control of the air, and their bombing attacks were effective. In
addition, all French arms were handicapped by the absence of airplanes
for artillery observation, reconnaissance, and liaison. This de-
ficiency was particularly grave in view of the fact that the French
tactical system stressed centralization and placed Great reliance
upon artillery.
5. EMPLOYMENT OF TANKS
Since the French allotted a tank company - or sometimes four
or five tanks - to almost every division, they were unable to form
88 strong or as many armored units AS they otherwise might have.
The divisions often used these tanks poorly and in many cases ear-
ployed them merely as movable pillboxes.
The operations of General Delattre's division around Rethel
RESTRICTED
+
Regraded Unclassified
291
RESTRICTED
in the latter part of May indicated what regults might have been
expected from more concentrated employment of tanks. This division,
a reserve unit with several tanke attached, encountered leading
German elements soon after May 14, and in & counterattack it drove
the Germans back and knocked out four of their tanks. These were
repaired and added to the unit's tank strength. Having acquired a
taste for mechanised operations, General Delattre sent out night
raiding parties to steal tanks from adjacent French divisions. He
considered that these divisions had less use for the tanks than he
did, since he was holding a bridgehead. Eventually General Delattre
had a "mass" of 16 tanks, which proved effective in counterattacks
and helped his division put up a defense that was relatively success-
ful as compared to that of other units.
6, SHORTAGE OF ANTITALX GUNS
In addition to the fact that French divisions had insuf-
ficient numbers of antitank guns, the divisional echelon appears to
have been missing in many cases,
7. LIGHTS FOR NIGHT HOTOR MOVEMENTS
The French used one impressive device in night motor move-
ments. Motorcyclists placed small, shaded, red lamps, operated by
batteries, on standa at 100-yard intervels along highways and at
10-yard intervals on curves. These facilitated rapidity of movement.
Motorcyclists constantly picked the lights up after the passage of
the column and replaced them in front of the column.
8. REMARKS ON OPERATIONS
When the Germans invaded Belgium on May 10, French troops
moving forward to meet them, as well B.O regimental and divisional
steffe, appeared elated. They felt that at last the Gernans were
out from behind the West Wall and that the Allies were marching to
victory. Many officers at GHQ felt the same way. Corps staff
officers, however, were wary and tended to view the situation with
apprehension. Some French officers say that Gamelin was reluctant
to order the advance and did BO only under political pressure.
The best of the French units on the left moved into Belgium
on schedule or even ahead of time without being vigorously attacked
by German aviation. General Giraud's Seventh Army made its last
march by day and got into position 14 hours ahead of time. The
havoc wrought in rear areas by German aviation, however, was ominous.
The French placed great reliance upon difficult features of
the terrain in front of General Corap's Ninth Army, through which the
Germans later made their initial penetration. In actuality, however,
RESTRICTED
Regraded Unclassified
292
RESTRICTED
although the Ardennes present extramely unfavorable ground for the
French eyatem of tactics, they are an ideal battleground for German
units accustomed to decentralized action and commanded by leaders
in whom creat initiative has been fostered. General Corap's tray
apparently did not get into position on time, and the Germane
crossed the Meuse before the main body of the army was set along
the river. Most of the French were in hastily dug fox holes when
they were attacked.
The Germans chose a sector about five miles wide for the
initial attack, and the manner in which they proceeded against this
narrow front was extraordinary, Preparation made by dive bombors
vas extremely effective; French officers estimated that 300 to 400
planes were used in three or four waves, They started their dives
at about 4000 feet and did not pull out until they were very close
to the ground - some say they came 8.8 low as 50 feet, After dropping
bombs, the planes circled back and machine-gunned the French. The
first wave usually made its machine gun attack soon after the fourth
wave had finished dropping bombs.
The ground attack vas led by hundrede of German tanks
equipped with flame throwers and advancing almost hub to hub. They
presented an extremely vulnerable target, but the danger of their
mission was lessened by the fact that most of the few French anti-
tank guns had been knocked out. The tanks were followed in turn
by motorcyclists with sub-machine guns, and by infantry in fast
cross-country carriers, Motorized divisions followed up the Panser
divisions. By the time the ground attack had begun in one sector,
bombers were preparing another solected sector. In the initial
breakthrough, the Panzer units, after penetrating the defenses to
their front, fanned out and exploited laterally in order to break
down the shoulders of the gap: later they exploited in great depth.
The ense with which the Germans swept through the extension
of the Maginot Line 1B explained by the fact that the concrete worke
were almost without personnel for defenso. The bulk of the troops
had gone forward, and the pillboxes were manned by only a few reserve
formations. These were not familiar with the terrain and in some
cases did not even know how to operate the weapons in the pillboxes.
The Germane who broke through Corap's army attacked before these
weakly manned defenses were coordinated, penetrated them, and then
attacked similar defenses in other sectors from the rear.
At Vervins on the evening of May 14 - just after the situs-
tion had become extremely serious - General Corap stated that he had
been ordered to occupy an extremely wide front, although his troops,
mostly first and second line reserves, were badly equipped and ill
trained. He had assigned wide frontages to his units, but he had been
unable to retain adequate reserves. Moreover, he admitted he had
RESTRICTED
Regraded Unclassified
293
RESTRI CTED
little idea as to what was going on and pointed out that his means
of liaison and communication were inadequate; for example, the army
had only two staff cars for liaison service. Corap WELLS relieved
about two days after he had made this statement.
A number of foreign correspondents were permitted to inter-
view General Corap at Vervins. They were sont back to Cambrai in
an old school bus which the staff was able to requisition only after
five hours of negotiations. Two days later, the headquarters of the
first group of armies hurriedly abandoned Cambrai at midnight without
notifying these foreign correspondents, who did not even realize they
had been left behind for some twelve hours. This incident reveals
the extent of French demoralization.
The French were impressed by the ability of the Gorman nnti-
aircraft defense to keep abroast of a rapid advance. One French
colonel commanding an aviation bombardment unit told of bombing a
German division which was holding a bridgehead south of Masstricht
on May 11. He was not surprised at encountering strong antiaircraft
fire, for the German unit had made only a short advance. Three days
later, however, he received orders to attack the same division, which
meanwhile had advanced 100 kilometers, and he was amazed to find that
antiaircraft fire was even heavier than before. Some French officere
stated that German antiaircraft units noved with advanced elements -
ahoad of main bodies - and established themselves in such a way as to
protect critical points.
The French defensive, hastily organized along the Somme and
the Aisne by Weygand after the disaster in Belgium, sought to "mouse-
trap" the German Panzer divisions. The main body of defenders,
holding a few antitank centers, were to let the tanks through into
the rear areas where organized antitenk centers were located. After
passage of the tank elements, these forward troops were expected to
resist the foot elements which followed, and it was believed that the
depth over which antitank defanses had been organized would permit
entrapment of the tanks. The principal hope was that the tanks would
be involved in such long, drawn out operations that they would run
out of gas behind the French lines.
There was little time, however, for coordinating this type
of defense; each division commander did what he could, but the number
of troops necessary for creating an entitank zone which would be
sufficiently deep could not be mustered. The depth of the zone was
only about 10 miles, and in many parts of it the defenses were net-
essarily perfunctory.
During the first three days of their attack, which started on
June 5, the Germans did not use the bulk of their tanks; on many parts
of the front they employed an infentry-artillery attack. In addition,
RESTRI CTED
-6-
Regraded Unclassified
294
RESTRICTED
the shortage of gasoline which had been hoped for did not develop
among such German mechanized units as effected penetration at the
start of the attack. There were insufficient French reserves to
close the gaps which were created, although closure was a fundamental
requirement of the defense system improvised by Weygand.
RESTRICTED
-6-
295
CONFIDENTIAL
- of toto Notingen
at the - Department
ab 9105, Tobruary 11, 1941.
senter, filed, February 12, 1941.
20 a Manday, Totorry 20, British planes of both the
Constal Command and the Romber Command engaged in the need -
effensive launshed w the Royal Air Force since the beginning of
the wills Fighter planes assorted three separate formations of
Elembets benisers in individual attacks on the invasion parts of
Punkink and calate. Investon vessele, harber installa-
time and buildings vire damaged coverely. Fellowing this -
stgarato - over the date Non-Calais region w foreations -
yours of there of Spitfire fighters make Brittsh
nation beakers nate a attack on a Dateh understaring
- and benefit other nortingstern - Ritch and French parts
with equal I The British Lest - fighter plane and the
- lest three planse of this type is these activities. During
the preseling night a fire - storted at a German nevel base as a
result of the certivities of planes of the Beaber Command in nowtherned
I
so Parting the might of Tobruary 20-11 - planse was
active against airficide is - Terkshire, Baffelk and Perfolk,
There we as reported - to vilitary installations. Puring the
preseling - - sir operations against Ingland were mine. -
CONFIDENTIAL
Regraded Unclassified
CONFIDENTIAL
296
I 1 I I 8 1 1 I a I I
structs of Never.
s. In the Greek theater Brittish planse attached German
streets and German Leeses vere fear planes confirmed and three others
probable, Fires vase started and we Italian planes vere dectroyed.
during British air attacks on Galate (1) and Marittea, Rhades. Kenga-
based British planes cooperated with land forces in British abrances
in this cootor. land foress in the Asusta-Cheren region of Britrea
also reseived the support of the Royal Air Force. In addition British
planes is this area were responsible for the destruction of two
Italian planse.
4 The Tentra sirfield in Greese was attacked w five
And bookers but there was - damage to military installations.
Throughout daylight hours of February 10 And planes vere on -
naturance missions around the island of Malta but no planes were
able to penstrate inland.
s. Forty leaded reilreed traine are on the var from Generary
to continuatorn Balgaria carrying Gorman Mr Terce books, ammittion
and fail.
6. It is thought that vessels of all sizes will be able
to procest through the Sees Genal w Marsh B. The Canal is any able
to handle all vessels of 8,000 teas or less
4. off the coast of Valee at Cardiff a - best of
Belgium registry we benched after having struck a sins, A Jayancob
CONFIDENTIAL
Regraded Unclassified
297
CONFIDENTIAL
- nicoles on the m to Darlin is about the Japanese visiti
ASKARA MARK between the Funeral Genel and lisbon. 40 men on
Formany . a - sevel vassel thought to be & endow of the
ADMIRAL HIFPER class - traveling in a mortheasterly direction
about ⑉ wilso off the west coast of Ireland.
SCANLON
Distributions
Georatory of Was
State Department
Secretary of Treasury
Acct. Secretary of Var
of Staff
Ver Plane Mvision
C.M.I.
CONFIDENTIAL
Regraded Unclassified