Volume 345, January 4 – January 7, 1940

DIARY Book 345 January 4 - 7, 1941 - & - Book Page Allison Engineering Company See Var Conditions: Airplanes (Engines) "America First" See Federal Bureau of Investigation Appointments and Resignations Gulick, Luther: Salary supplementation by foundations frowned upon: Sullivan memorandum - 1/7/41 345 306 McGrath, Joseph (Collector of Customs, Boston): McCormack (Congressman) told there is no thought of dismissal - 1/6/41 94,138 Odegard, Peter (Professor, Amherst): Reporting to Treasury January 8, 1941 48 - B - Banking Transferring Checking Accounts of Banks to Post Office (100% Reserve Plan): Haas memorandum - 1/6/41 194 Bullitt, William C. Address before International Relations Club, University of North Carolina - 1/7/41 252 Business Conditions Hass memorandum on situation for week ending January 4, 1941 102 - C - Canada See War Conditions: Export Control China See War Conditions Cooper, Jere (Congressman) See Ingram, Rice A. - D - Duffield, Bugene 8. (Wall Street Journal) Early asks Secret Service to investigate source of Duffield story that Hillman vas to be given no authority; HMJr thoroughly opposed - 1/6/41. 57 a) HMJr apologizes - - 1/7/41 301 - È - Emergency Relief Consolidation of Treasury accounting and disbursing offices in Albany, New York, to be explained to Farley, Wagner, and Mead - 1/6/41 65 Export Control See War Conditions - 1 - Book Page Federal Bureau of Investigation Ileas memoranda - 1/6-7/41 345 133,273 m) "America First" connection with German and Senator Wheeler's wife reported Foundations Supplements to Treasury salaries frowned upon: Sullivan memorandum - 1/7/41 306 - G - Greece See Var Conditions Gulick, Luther See Appointments and Resignations - I - - Hungary See War Conditions: Foreign Funds Control - I - Ingram, Rice A. (Secret Service) Congressman Jere Cooper discusses with HMJr - 1/7/41 284 a) Gaston asked to look into 283 International Telephone and Telegraph Company See War Conditions: Foreign Funds Control (Roumania) - L - Latin America South American Orders: FDR recommends committee for pre-clearance action - 1/4/41 1 Rockefeller report. - 1/6/41 126 Lend-Lease Legislation See War Conditions - X - McGrath, Joseph (Collector of Customs, Boston) See Appointments and Resignations Mowrer, Edgar Ansel (Chicago Daily News) See War Conditions: Foreign Funds Control - 0 - Odegard, Peter (Professor, Amherst) See Appointments and Resignations Office of Production Management Order establishing - 1/6/41 295 a) Statement by members 205 b) Duffield story - 1/6/41 67,301 - ? - Book Page Post Office Transferring Checking Accounts of Banks to Post Office (100% Reserve Plan): Heas memorandum - 1/6/41 345 194 - R - Roosevelt, Franklin D. Message to Congress - 1/6/41 IS Roumania See War Conditions: Foreign Funds Control - S - Secret Service See also Duffield, Eugene S. Ingram, Rice A: Congressman Jere Cooper discusses with HMJr - 1/7/41 284 a) Gaston asked to look into 283 Smith, Tom I. Son's draft status discussed with HMJr - 1/7/41 274 Spain See War Conditions - T - Treasury (Albany, New York) Consolidation of emergency relief accounting and disbursing offices to be explained to Farley, Wagner, and Mead - 1/6/41 65 - U - Unemployment Relief Work Projects Administration report for week ending December 25, 1940 118 U.S.S.R. See War Conditions: Foreign Funds Control United Kingdom See War Conditions: Military Planning War Conditions Airplanes: Engines: Allison Engineering Company: Deliveries - 1/6/41 165 P-40 Pursuit Planes: British negotiations discussed by Young, Wright, and Vaughan - 1/7/41 263 China: "Scuttling Shanghai" (withdrawing support from national yuan) decried in American Consul General report - 1/6/41 115 Central Reserve Bank opens - 1/6/41 137,281 a) Japanese consular officer disclaims official knowledge of regulations - - 1/7/41 282 - w - (Continued) Book Page War Conditions (Continued) Exchange market resume - 1/4/41, etc. 348 6,122,270 Export Control: Meeting of Mazwell's Advisory Committee: Young memorandum - 1/6/41 92-A a) Proposed proclamations presented: export licenses on all exports to Canada (with exception of aras, ammunition, and var materiel) to be eliminated; copper, brass, etc., to be brought under export control 0) Miles discusses var situation: economic warfare "met run parallel with military warfare" c) Maxwell refers to meeting as first one of "policy" committee Export of petroleum products, scrap iron and scrap steel from United States to Japan, Imasia, Spain, and Great Britain, as shown by departure permite granted for week ending January 4, 1941 166 Foreign Funds Control: General over-all control: "National" defined by Foley and Wiley in connection with proposed Executive Order - 1/6/41 23,24 Hungary: Transactions with National City Bank and Guaranty Trust Company - 1/6/41 124 Mowrer, Edgar Ansel (Chicago Daily News): To be asked by Kuhn not to write, story stating that Treasury 1s considering freezing all foreign funds - 1/7/41 304 a) HWr releases Mowrer - 1/10/41: See Book 346, page 440 Roumania: IT&T (International Telephone and Telegraph Company): FDR "has approved in principle proposed release of funde"; Hull, therefore, sees no reason why license should not be granted a) Discussion at 9:30 zeeting - 1/6/41 44 b) American Legation, Bucharest, reports final signing of contracts - 1/6/41 133 U.S.S.R.: Reported transfer of $15 million by U.S.S.R. to Reichsbank not supported by Treasury records - 1/6/41 139 a) SMJr discusses with Smith (Budget Bureau). 97 b) Federal Reserve Bank of New York memorandum - 1/7/41 275 Greece: Resume of military supplies situation - 1/6/41 167 a) FDR sees Greek Minister: promises his 60 fighting planes; HKJr asks Stimson and Knox for assistance in fulfilling promise: Hull informed - 1/7/41 290 - V - (Continued) Book Page War Conditions (Continued) Lend-Lease Legislation: Copy of memorandum and statute taken to White Rouse for discussion with FDR - 1/6/41 345 171 Order establishing Office of Production Management - 1/6/41 206 a) Statement by members 205 b) Duffield story - 1/6/41 67,301 Interim program pending passage of legislation by Congress to be studied by HMJr, Stimson, Knox, Jones, Knudsen, and Hillman - 1/7/41 263 a) Statement of British requirements as given to HMJr by Purvis 268 Military Planning: Reports from London transmitted by Butler - 1/4/41, etc 14,310,313 Var Department bulletin: German and Italian bombs - notes on - 1/6/41 197 Purchasing Mission: See also Var Conditions: Lend-Lease Legislation Assets: Amounts to be studied by Walter Stewart 80 that he can answer Congressional questions as to why they are not larger - 1/6/41 62 Enforced sale protested by Lehman Brothers, Dillon Read Investment Trust, and Lazard Freres Investment Trust a) Frank and HMJr discuss - 1/7/41 212 Interim program, pending passage of legislation by Congress, to be studied by HMJr, Stimson, Knox, Jones, Knudsen, and Hillman - 1/7/41 265 a) Statement of British requirements as given to HMJr by Purvis 268 Shipping: Immobilized Shipping: FDR telle Cabinet HMJr will handle situation" when Knox offers to man ships with United States crews; Cabinet decides "to let entire situation die down" - 1/6/41 40 Spain: Loan to Spain for food supplies opposed by Tahuda (Professor) - 1/4/41 2 Work Projects Administration See Unemployment Relief - Y - Tahuda, 1. S. (Professor) See War Conditions: Spain TO: Photostatic copies ofthis went to D. Bell Foley Thompson Graves young From: LT. COMDR. McKAY THE WHITE HOUSE WASHINGTON January 4, 1941 The Honorable The Secretary of the Treasury Dear Mr. Secretary: I wish to acknowledge receipt of your letter of December 19 outlining the work of your informal committee. I think that your report is quite complete and thank you for it. Mr. Knudsen informs no that your clearance procedure for foreign orders will in the future be amended to provide for priority rating on the item in question. As to orders for South America, arrangements are being nade to provide necessary spare parts for aircraft without delay; and in conference with Mr. Nelson Rockefeller, it was decided to clear promptly all items not on the emergency list and apply priority ratings only to aircraft and motors, industrial and electrical machinery, chemical end petroleum products, textiles, and arms and ramitions of all kinds. This leaves then for South American orders only the cuestion of policy to be handled in advance of clearances, and it is my suggestion that this be done through a committee consisting of one reure- sentative each from the State Department South Anerican Liairon Body, Export License Control, and the Treasury. Cordially yours, Kimble Musevel Thank him fer letter say always From Professor A.S.Yahuda. glad to Aan forms flims 12, Stockton Street, Princeton, 2 how this Swilus (Kulur Kuhu New Jersey. January 4th.1941. Dear Mr Morgenthau, When I was in Tashington some weeks ago, I regretted that owing to your absence, I was deprived of the oppor- tunity of seeing you. Whilst there I had talks with various per- sonalities, among them Mr Ickes and Mr Berle, about the proposed loan to Spain for food supplies. I was very glad to observe that some of the people I spoke to were in accord with me in opposing a policy of appeasement, and that even those who were inclined towards such a policy, admitted that the arguments advanced by me, deserved some consideration. I see that that schome is still being debated and I should like to observe that both sides: Suñer, the accomplice and tool of the Nazis, and the bulk of the army, who is opposed to any Nazi penetration of Spain, expect their salvation from the food supplies. Suner and the Falangists who were afraid to encourage Hitler to let his army go through a hungry Spain and an army living in the most precarious conditions, hope that by feeding the hungry, Hitler will be at ease to risk the passage of his army through Spain to Gibraltar and thence further to North Africa. On the other hand the army hopes that by pledging Franco not to go with the Naziz as Regraded Unclassified Mr Vergenthau 2. 3 88 & condition for American help, the army will be able to keep Hitler's hordes outside the borders of Spain. I am still apposed to this policy particularly 1) because & hungry population and 8. badly fed army are a deterrent to to the Ritler-Suner invasion plan; and the best nursery for the revolution- ary germs against the dictatorship; and 2f because any concession to Spain will encourage the appeasers in America and the Hoover-Humani- tarianists to divide public opinion on defense measures. But it seems smin that the sympathizers of feeding, are in a stronger position. im/Epañ. Now if America is determined to adopt their viewpoint in- spite of the failure of all appeasement attempts, it should at least be utilised to strengthen the position of those circles of the Span- ish army who are against Suner and, and to some extent, also against France It is known in Spanish quarters that the Minister of War Varela and the generals Yague and Arranda have intimated to Franco their reso- TO RESIST lute decision, any attempt of German invasion. It is also known that the Commander of Algeciras is not at all in favour of a German march against Gibraltar as he, like many other Spaniards, realises that a German occupation of the British Rock would be more dangerous to Spain than the British as neighbours. It is possible that 8. discreet and cautious approach to such men would provide some guarantee for frustrating the Suner and Hitler plans. But I must repeat again that at the same time the Spanish Governement must be asked to give America all the available coal and minerals (copper, mercury etc) as part payment for the food, not so much because America is in need of them, but to prevent their Regraded Unclassified Mr Morgenthau 3. 4 being sent to Germany and to secure in some way a part payment which otherwise could never be expected from a bankrupt Spain. AS to Suner's position in Franco's Cabinet: I may add to my previous information that his main object in taking in his hands the Office of Foreign Affairs, was not only to oust his predecessor, be- cause he turned anti-Nazi after he realised the true sims of Hitler, the efforts of but more probably to hamper/the Spanish Ambassador in London, the Duque de Alba, to keep Spain out of war. The Duque, who has Scottish royal blood in his veins, was always pro-British and not a great lover of the Nazis, especially since German bombers destroyed his beautiful Liria palace in Madrid with Its worid-renowned paintings and Manue- scipts, among which there was a most precious illuminated Bible, val- ued at a million dollars. of course, the Nazis charged the communists with having committed that vandalism; but the Duque knew better to whom it was due. It may be that these facts and many others are known to you; and as a matter of fact I was hesitating whether I should write to you; but your kind appreciation of my previous information encouraged me to bring some of the facts known to me to your notice. In conclusion I should like to inform you that I was all the time in close contact with my Spanish and other friends, and hope that something concrete may be achieved in connection with the formation of 8. united front of eminent Emigres against Fascien and Bacion, especials in Latin America, which I was advocating since I arrived in this countr Very sincerely your A.L.Yahura Regraded Unclassified more 5 P.S. Under separate cover I as sending you a copy of my bast book The Accuracy of the Bible as a token of my admira- tion of the great work you are accomplishing in helping your great President to check the oppressor nations and to bring back to a harassed world liberty and human rights. May the New year bring you happiness and good health to continue your work. to A.S.Y. of was ASTUE 1829 Be Leise Date The food 2 YES may came 90 observe But LVDE we the events - spoke LO CODE in gooding ⑉156 26 in spotting policy 11 will 80% SINCE Director York Instinal terms with & advitied HAS the General les may security WHAT coosideration. 1 IN SINKA list uses Le mills below e-Wated see X should like Co signature these with (be - not cash of the Mabia, and Ost Bulk at the 1007,200 Lg - $ son permissive w Spain, there nine Ima Live foot main Sext bill the and no affile La encount JINES X KV90 a hungry Spash and ME (city drive in We Dugs das 2. We holders, no too provide theough System 10 9a - OF the which new the MM as FOR Mise Chausesy 6 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE January 4. 1941 TO Secretary Morgenthau CONFIDENTIAL FROM Mr. Cochran Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns 127,000 Purchased from commercial concerns 129,000 The Federal Reserve Bank of New York sold £15,000 in registered sterling to R: non-reporting bank. Open market sterling VAB steady at 4.03-3/4. There were no reported trans- actions. Except for an improvement in the Cuban peso, the other currencies experienced little change. Closing quotations were: Canadian dollar 14% discount Swies franc .2321 Swedish krons .2385 Reichemark .4005 Lira .0505 Argentine peso (free) .2360 Brazilian milreis (free) .0505 Mexican peso .2066 Cuban peso 8-1/4% discount Chinese yuan .05-9/16 We sold $1,000,000 in gold to the Bank of Portugal, to be added to ite eermarked account. The Federal Reserve Bank reported that the Central Bank of El Salvador repaid $70,000 of the three-month loans previously made to it by the Federal. Upon repayment, the Federal transferred $71,061.42 worth of gold from the collateral account to the Salvadorean bank's own earmarked account. The amount of loans outstanding is now $577,000, secured by $989,579.61 in gold. The State Department forwerded to us a cable stating that the Commonwealth Bank of Australia in Sydney shipped $10,470,000 in gold from Australia to the Federal Reserve Bank of San Francisco. The disposition of this shipment is unknown at the present time. In the nast such gold has been sold to the San Francisco Mint upon arrival, with part of the proceeds of the sale being credited to the British account, and part to the Australian account. No gold or silver prices were received from Bombay today. NMP 7 (Copied from a strictly confidential message showed by Mr. Pinsent of the British Embassy to Mr. Cochran in the Treasury at 11:45 a.m., January 4, 1941.) Telegram from London dated December 30, 1940. Confidential information from F informant] suggests that the New Wang Ching Wei Central Bank hopes to obtain backing of its propose II "ed" omitted note issue by tapping exchange resources of the Chinese Stabili- sation Fund with the Chinese National currency F collected] in the puppet area and sent to Shanghai. They claim that 50,000,000 dollars Chinese, initially at disposal of this Bank, have already been exchanged into American dollars. This information (for what it is worth) my be of interest to Mr. Morgenthau. da B - Jenuary 4, 1341. 8 War Plant Amortization Looms as 'Hill' Issue By CHARLES 1 LICET Congress may be asked soon to amend that part of the Excess Profits Tax Act of 1940 which permits short-term amortization, for tax purposes, of the cost of new plants built for national defense duction. The tips over amortimion VM one DUES APPROVED PLAS of the that of the last 1 Organ, with the Treasury and the 22 et A I X # If required mal unler of for National Delete Advisory Commission S. Emailer, of the Deleme Consis- tenking the Die-par anthin disapreting - reveral polots. - may a - of felense provides to cases where they found Anotiation is the device by which officials the - that the knothe- their DES plants, belave the my be represtion, in computing taxes, take tion and - pub tax chould be to to E of this loss an sond credit for the depreciation handled tapther Zip If 1 of their plants Ordinarily this credit Treasury officials is buse clarified Syme andern a believe to apint tatable Income - be good their partian B the guestion of Gon- be reasoning that tax rates be over many your Be many var unted, the the energency, hiper In a few years, and that and- materials plants will be unders, or of plants bult especially for delense ing the smortintion our a know relatively so, when the present ear- They at to beter sught Govern- period might be besae met enstrol - plants finance en- of this, pricy passes. tirely to printe cigital-s position CAN It ACCULERATED which, - the minunderstand- the act of 1940 provides that If I If I 3 x M. emperations building Drw plants becau- Only where the Government rém- sity for defense may amortive the and & I 1 # Tax = the years, that is, they may sib- bis instruct In a delense plant. Ind spe-fifth of the cod. from their Transy afficials as, du they but taxable income to each of those years. that provision be made by statute for The corporation - choose, after Government entral of the plant after bilding arb a plant, whether to the The Deleme Commis- over the short route or the size styled that disposition of the normal, longer period. If # wishes to plant should be hundled not by statute morth quickly, # must obtain a but in each Informational emiract This "certificate of prossity" from the was the method intually simpted Government. Treasury the also derry ever However, = is provided that after blocking $ extal plan Per of If the corporation wishes to ought by the Day Department - take advantage of five-year amortian- 1331 as a - priminary to ar- tim = must get this certificate before beleration of the 1 top building rather than after, building the plant, propram, Is striste for tax Drime officials, = is learned, may I E I In If the propose to Ompress that this provision computer of - under the law be replaced by are allowing 16. certain limiting shipibulding This - time Init, perhaps 90 days in which let, = in entired 925 disposed of to such such = certificate after & plant I 4d 1 # - Eng 30 11 Я I systemached be Trustry, and bining As - matter of fact, only a fraction) delays vialere. of the expected number of manufac- The Treatry's to - tom are taking advantage of theme in slowing geld Ber short tem amortization. transacy immived de- n VM charged last year that delay printe is sin shown, officials in passing & short term amortination - by "tising" agreemia last, this certain assurances to - I 1 I # terts in arros plants that The OR has Par Arms Mandae- = - be be, had held back de- baring Co. for instance, has term il- - The Treasury VIS criticine for I 9 I per 5 a # I 20 2 THE the y 1 paid 18 1 N a exts profiles tax, Instead of favoring dies until my for defere wet This specify exclust of a special amerti- done In compution perio- law. able = cirtain Greennt others Government dering the NEW YORK WORLD-TEL.BIRAM - December 30, 1040. 9 U.S. Plants Still Work On Outmoded Planes Latest Type Craft Only Now Beginning to Come Off Lines By CHARLES T. LUCEY, World-Telsgram Stall Writer. WASHINGTON, Dec. 30.-It is becoming plain that William S. Knudsen's jarring admission of B. 30 per cent lag in plane production, and his "terrible urgency" warn- inf. did not come too soon or go too far. Be did not tell the complete Where could France get these story. He did bot say, for exam-planes He feared that Freich pil. that today. 16 months after industry was not geared to Do- Warsaw was bombed almost off duce planes, especially engines, in the map. and six months after the numbers needed to match the break-through at Sedan. that Germany. England had its own Arberican aircraft industry is still hands full. So, the planes would préducing outmoded planes. have to come from the United Planes are still coming off the States. prot action lines without self-seal- It was only a short time until = gasoline tanks, revolving tur- Mr. Bullict and M. Monnet were retal tall guns, pilot armor, and laying the case before President with armainent short of European Roosevelt. standards. They found the President com- Yesterday's Planes. pletely sympathetic, He believed These, say government officials that expansion of U. 8. plane 321 yesterday's planes. Today's production capacity, growing out clanes are Just beginning to come of French orders, would be of from the factories. military benefit to this country. Bewever, serious as the 30 per Takes Up the Fight. xmi The is. Washington is coming The President directed M. Mon- la addit that if the Bitish and net. to Secretary of the Treasury had not come, into the Morgenthau, and the next night, D. 5. Dane market two years ago. AC n dinner in the Morgenthau arts but millions to expand pro- home in Washington, M. Monnet duction facilities, the situation again described the problem. would be even more acute. In Secretary Morgenthau the The matter of warplanes for ex- French, and later the British port has been a. subject of con- found a man who took up their treversy ever since the day in fight. January. 1929. when a two-engine The plane procurement job bomber crashed 5 California, might have been handled as rou- killing its American pilot and in- tine-a few minutes from Mr. juring A French military observer. Morgenthau's time when he could A knowledge of the story of spare it from Treasury duties: $ French and British plane buying conference squeezed in here and in this country. never fully told, there. The President didn't want 15 becessary to an understanding that kind of job. and Mr. Morgen- of the defense problems the that made the cause his own. United States faces. Today Mr. Morgenthau and That story began Oct. 1. 1938. those around him say events have after Premier Daladier returned shown how right he was-that to Paris from the signing of the two-thirds of present American Manich Pact. He lunched with airplane-factory capacity was Jean Monnet, banker, and Wil- built because of French and Brit- tax C. Bullitt, United States Am- ish orders. besador to France Mr. Morgenthau did everything Expected War. possible to enable M. Monne to Daladier knew Hitler meant make a survey of what the Fresch #12. Prance must get ready at could expect. The study cign- once. Daladier was thinking in pleted, M. Monnet returned to terms of air power, and he said France. But there he found that across the table: opposition to plane purchases in had had 3000 or acceptive country was already being planes there would have been DO heard. Memich Regraded Unclassified WASHINGTON DAILY NEWS - December 31, 1940. 10 Estimate'4) Plane Production at 17,000 Foreign Orders Tripled U.S. Plane Production By CHARLES T. LOCEY American industry in the last two years has turned out 2500 military airplanes for the British and French. France alone, before its collapse, laid $95,000,000 on the line for planes and for factories to build planes. Britain, after learning it could not fight a cheap war, poured tena of millions into United States aircraft plants These foreign orders have been the The United States built 1020 III- represented his atticude and the of chief factor in tripling American tary planes in the first half of 300 Secietary Morgenthsu: The French duction of military aircraft in two when France was beginning to ame wished to buy airplanes here: mole of years. This increased factory capacity into the market. Production was up the aircraft plants were virtually clound has been eited repeatedly by President only to 1112 in the last half. But and for lack of orders; here was en oppor- Roosevelt as being of immense impor- the first half of 1940, with France cry- tunity to get them going and expand Lance to this country's DWD defense. Ing for help, cutput went to 2273. In production capacity. According to the United Press, avia- the last six months production valid The uproar subsided, for the most tion experts estimated today that be- about 3600. part, and negotiations went on. twoen 16,000 and 17,000 military alt- Jean Monnet, Premier Daladier's ENGINE-MAKING JUMPS craft-more than double the output of representative, had come to this eoun- 1940-will be built in the United Stales In the spring of 1939, American tn- try first in October, 1938, 3 month after in 1041. dustry could build 400 engines a month Munich. After learning what the They also estimated that between or the 1200-borsepower type used in United States plane Industry might be 35,000 and 20,000 plane engines will fast fighter planes. In the spring of able to do, be returned to Paris. He come off assembly lines in the next 12 1040, before this country's own defense was back with 5 mission in December. months program YM really roiling, it could and in the next three morlths 800 to That la the bist that can be-done in build 2000 such engines a month. 900 planes INVEICE ordered from Curtuse 1941, the experts say, unless some short- Officials of the Treasury. where Sec- Wright, North American, Douglas and cut plan is found feasible to bring other relary Morgetithau directed the job of Martin That completed the first industrial facilities, such as auto plants, British-French Jane procurement phase of French buying into quick production. handed him by the President, eite this SECOND PHASE The plane estimate exclude figures quickening of pace as evidence of the for adveral thousand other planes that soundness of Mr. Morgenthay's fight The second phase began will) the 10- will a built next year and which could for this program. varion of Poland. Boon the United be quickly converted for Haison and When the French tried to buy planes States Neutrality Act had boen photographic work. The engine esti- here they found that the best had not amended in a special session of Con- mate is for motors of 1000 borsepower been produced in substantial numbers gress, and that opened the way to or more. Secretary Morgenthau's task was to buge French orders, particularly for According to the Aeronautical Cham- bring the French mission and the plane plane engines. Deliveries of the ELENT ber of Commerce, there is now 22.500,- manufacturers together, and he was planes ordered began to come along 000 square feet of productive floor space determined from the first that there very slowly. late in 1939. in plane Inctories. There are under were to be no sky-high profits at The British and French pooled their construction new plants with 22,600,000 Prench expense. purchasing efforts early in 1040, and square feet, Those were heclic days for the appealed to the United States to do French and the manufacturers, and everything possible quickly. PEAK IN AUGUST for the Government officials who at Secretary Morgenthau surned his The experts say at is their conserva- Mr. Roosevelt's instance were trying to fullest energy to the job. He went to Live conclusion that the peak of pro- bring them together. Meetings would the Allison engine plant at Indianape- duction would be resched by August, last all day at the Treasury, then ad- 11s, was shown but 5. single completeo 1941. Then aircraft factories should be journ to & hotel and go on far into engine in the whole plant. and ne- turning out planes at the rate of 1750 the night Time and again Treasury tugried to impress on Alfred Sloarf of 1 month, they may. Defense Production officials were called from their homes o Ineral Motors the need for (i) Chief William 8. Koudsen calimates at night toto 5 roomful of tense, weary eritine output General Motors 992 present production at about 700 plunes men who had bugged down in their m into the plant. a month negotiations From this time on the accent waston The experts say #750 planes should be buill in the last five months of There was no publicity, Not until a speed. 1941, bomber ertahed in California with a Engine production, according to the French military observer aboard was best private estimates available, la now the gist of the story known generally 1950 a month. All, however, cannot be The resultant Uproar on Capitol HILL lind) immediately nince to the case of was terrifie. one particular type of engine the re- Congressmen demanded to know Rects in role is high Experts expect whether this country's most valliable the butput to be doubled when facill- military secreta were being divulged 3 Lies DOW under construction are ready, Primot Why FM the Treasury carry- stan probably in August. ing the ball, and why did the War De- In the last Five months of 1941. en- partment know an little about TLF strie production La expected to be 19.500. President Roomvett provided what Regraded Unclassified NEW YORK WORLD-TELEGRAM - Jamary 2, 1941. 11 U.S. and Britain Speed American Output Through Agreeing on Stabilization By CHARLES T. LUCEY. World-Telegram Staff Correspondent. WASHINGTON, Jan. 2-An agreement on standard- ization of the Curtis P-40, one of America's fastest fight- ing planes, is making possible the delivery of about 200 more of these ships to Great Britain this winter than had been anticipated, defense officials revealed today. Curtles has produced the P-40' with the Allison "C" Hquid-cooled Both Mr. Koudsen and Secre- engine, but recently has been pre- tary of the Treasury Morgenthau paring to produce the P-40D. have contended that too many which takes the faster Allson "P" different types of planes are be- engine. ing made. Both have devoted Britain has been trying to get much time to standardiration. all the svailable at DDCC. One recent study showed that The Army has been trying to get the 1200-borsepower Model 1830 production 8 the P-4AD. engine, made by Pratt & Whitney. Mearth 10 Planes a Day. has been produced in SETTO types Some time ago William 8. Knud- -three for the Army, two for the sen. defense production director: Navy and two for Britain. Brig. Gen. Arnold, army air corps Differences Missr. chief: Philip Young. of the Treas- Offictals say many of the dif- try Department's Baison com- derences in plane equipment are mittee directing British purchases, minor, such as types of glass for and officials of the British Pur- windshields. altimeters, engine chasing Commission went to the starters, safety belts, gun signts, Curtiss plant at Buffalo to study propeller shafts, ignition shielding. this problem. carburetors and carburetor adjust- It was agreed that all produc- ments, parachate flares, foel-tank tion would be on the P-40 until protection. gun cameras, fire es- Allison "F" engines were produced tinguishers and radios. in quantity. The swing to the Some defense experts say the P-40D will be made to the spring. really substantial production will and hereafter both Britain and come only when the United States the Army will get the faster plane. and Great Britain develop alship The greement means 10 planes a which will be identical in very day tristend of stx. it was said. respect for each service. EX YORK WORLD-TELEGRAM - January 3, 1941. 12 U.S. Acts to Speed Aluminum for Planes Stettinius Calls Delays Temporary- New Plants Are Being Rushed IMI by CHARLES 2. LOCKY, World-Telepruss Staff Writer. WASHINGTON, Jan. 3.-A recent survey of aircraft factories has shed light on the delays forecast by Edward R. Stettinius, Jr, of the National Defense Advisory Com- mission, it was learned today. Mr. Stettinius called the delays temporary and said they would be offset by new aluminum fabricating facilif es not being built. The survey was made by agents delivery schedules 8 a the of of Secretary of the Treasury Mer- bomber préered in large numbers prother and of the War and Sary by in progrement of materials, departments. particularly aluminme, Suppertions for expediting pro- Reparts - daction until the DEV factories - into production include: Another aircraft concern No parted that = had been several Reduce production of - thousand pounds behind on fab- - for non-defense purposes. ricated chiefly sheets, Obtato from each plane builder needed for production. an itemized list of sus unother West Coast manu- deliveries required monthly for facture reported that although the next year and then ATTRISE delivery promises - aluminum for priorities to assure deliveries. parts were not ratisfactory, a re- If DECEMBERY, place all alond- serve OR hand would permit - siz- - production 00 a 24-hour, able bomber program to proceed. seven-day basis. Other firms said they were able New fabricating facilities now to avers production difficulties building. according to Mr. Stat- through havy aleminum orders this will increase capacity trom placed months am. two to five times that of last Received Supments. September. Mr. Settinios has and that RV- One atteraft plant reporting the eral reports of shortages apparent- following delivery periods - DE- by arose from fear about future tain fabricated Items: deliveries. But since September, Almohann castings, 10 to 30 be said, total shipments of alumi- weeks: wires and baz. 18 weeks: num materials to aircraft plants forgings, 20 weeks; sheet ahmi- have excerded the amount mos- DEL 20 to 28 weeks, and tubling. sary for current military plane & 28 weeks. There has been to real livery achedules, shortage of Mr. State alway sheet mill ca- times has contraded. bet and pacity, DOV about 8,009,500 pounds aircraft manufactures have com- a moth, is scheduled to increase plained of difficulty in getting to 12.500.000 pounds a month by aleminum, Marth, 15,000,000 pounds a month West coast plane manufactur- = August and 22,500,000 pounds - have urged the government to by June, 1942 do everything possible to RITERGE These Increases are expected to 200 alumbum production facil- progre $ monthly capacity to - the in that region. AND of requirements, including Cthe manufacturer told goveral- drillaz requirements at 100 - representatives that the levels, Mr. all not serious problem in meeting 13 BRITISH EMBASSY, WASHINGTON, D.C. 4th January, 1941. Personal and Secret. Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, harile Buth The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D. C. 14 Telegram received from London dated JANUARY 1941 Maval. On January lat at Tripoli were $ craisers, 4 destroyers, 90 large merchant vessels. Tanker "British Zeal" reported torpedoed 180 miles west of Dakar on December Slat vas still afloat p.m. January let and has been boarded again. 8. Royal Fleet suxiliary "Attendant" mined and sunk in Thames Estuary a.m. January let and anti- submarine trawler "Bandolero" sunk in collision p.m. December 30th in Gulf of Sollum. 3. Since the beginning of the for 48,610 ships British Allied and neutral have been convoyed) represent- ing shipping of 165 million gross tons with a cargo carrying capacity of 850 million tons. Total losses of ships in convoy amounted to 987,000 gross tons. 4. Mediterraneen. An East-bound convoy of 4 French merchant ships escorted by an armed trawler was inter- cepted off the Spanish Moroccan coast outside territorial waters by 8 of our destroyers and is being escorted back to Gibralter. 5. On December 30th a Naval trawler was in collision with a British destroyer in the Oulf of sollum and sank. 6. Military. Libya. Check of Italian captured war material to January amounts to: field and redium game 261, enti-tank gune 48, heavy anti-airereft guns 20. Many pieces are unserviceable. 7. Albania. Central cestor. During the mopping- up operations Greeks have occupied some heights and several Regraded Unclassified 15 small villages North test of Keleyre. 8. Epirus sector. Italians leunshed an - successful attack with armoured fighting vehicles. Greeks captured one armoured fighting vehicle and eight guns. 9. Royal Air Porce. Night of January let/2nd. A total of 161 aircreft were despatched as follows: Locality Target Raided No. of Aircraft Bremen Industrial, shipping 113 heavy and and transport. 18 medium Flushing Train ferrys 14 Coastal "Invasion Docks and shipping 4 heavy Porte" 4 medium and 1 coastal. 10. All aircraft returned safely except 8 heavy bombers which crashed on landing. The crew of one air- craft is safe but crews of other two were all killed except for one person. 11. Italy. It is becoming increasingly evident that Italian air resources are being severely taxed. Our bombing of Adriatic ports has forced Italians to rely more and more on air transport and the presence of several German troop carriers indicates - serious effort by the Itelians to develop air commmnications and (some words undecypherable) mean to do 80 by themselves. It is reliably reported that the aircraft supply situation for Albanian campaign is causing anxiety, especially as regards fighters owing to the requirements of the Libyan front. 18. Germany. Berious railway dislocation resulted from recent Royal Air Force raids on Mannhein owing to the cutting of the lines between Mannheim and Ladwigshaven; this/ Regraded Unclassified 16 this cester is specially important since it carries military traffic between Germany and compled France and also North-South traffic including coal supplies for Italy. 13. German Air Force. Night of January lat/2nd. About 80 enemy aircraft were operating over the country. The attack was scattered and vas not heavy. Reported one aircraft flew as far as Dublin. 14. Home Front. London. Night of January let/ January 2nd. Two parachute mines were dropped in the London area; elsewhere only a few bombe are reported causing alight damage and few casualties. 15. France. It has recently been reported from Brittany that fishing activities which had been severely curtailed by lack of fuel are now in full swing and that fishermen have no difficulty in obtaining diesel oil. One French boat has even fished off the Irish coast. 17 0-2/2657-220 RESTRICTED M.I.D., W.D. January 4, 1940. No. 284 SITUATION REPORT 12:00 M. This military situation report is issued by the Military Intelligence Division, General Staff. In view of the occasional inclusion of political information and of opinion it is classified as Restricted. I. Western Theater of War. 1. Air Force Operations. Last night the German Air Force made an exceedingly heavy attack on Bristol and also bombed a number of other British towns. The R.A.F. last night raided Bremen for the third successive time, apparently on about the same scale as the night before. II. Greek Theater of Mar. Local ground attacks by both sides. Aerial activity was hampered by bad weather. III. Mediterranean and African Theaters of War. Preceded by a heavy aerial bombardment lasting most of the night, Australian units of the British North African forces, supported by tanks, attacked Bardia from the southwest at dawn, January 3. The attack broke through the outer defenses and is re- ported to have resulted in the capture of several thousand Italian prisoners. RESTRICTED 18 CONFIDENTIAL Persphrace of Code Indiagram Received at the We Department at 3:89 yes. Junuary 4, 1941, London, filed 14:57. Junuary 4, 1941. 1. Buring daylight hours of Friday, Jenuary 5, 67 planes of the Coastal Commend were astive. The night before 47 havey banking planes vere used in attacks against Irons. One bender attacked an oil refinery in Austerian and the skippard at Inion was the target of seven other British hembers, The recults of flights of Coastal Commi planse on that night were of M particular significance. 2. On January 3, 77 German planse were plotted over Britain. During the preceding night 160 Gerusa planes were will. Commercial and private proparties in Cardiff and the central area of this city suffered considerable damage as a result of the our - raid on that night, The - distributing system - damaged and - skip in deek was hit. Buring the night of Junuary H Bristel - attacked by Gernan benbers, 3. Thirty-five chips in convey surived from Canada, bet 10 is believed that a 6,400-tem vessel of this cervey was lest. A 6,800-tea British reasel me such about 500 siles northeast of the Gape Verdo Islands. 4. On January 5, at down, Austrolisa treepe in the Iybian theater broke through the other defenses of Bardia. This cussonaful CONFIDENTIAL Dearaded 19 CONFIDENTIAL I I I I I I 1 and of - 14. 6. Signature taxe of books ware droped a Tripoli w tea Wallington havy benders - the sight of Junuary 1-8. Matribution: Secretary of Ver State Department Secretary of Treasury Act. Secretary of the Chief of Staff Ver Plane Division Office of Nevel Intelligence A.C. H CONFIDENTIAL CONFIDENTIAL Puraphrose of Sale Indiagree 20 Reserved a the w hyrist $ 1 1 I THE - 1 " Mild I N - 1. a Saturday, Junuary a unformable wather provented the - of niner benking attempts of the British. Elasty-sas I required - 18 # 1 Include a I Proposed night a completely montal situat - curried at against from for the third straight night. emities ware very faverable. During the nights of Junuary H and 46, and during daylight hours of January 4, planes of the Coastal - - reutine flights laid nines in Germa ports and attacked has orders and teakers. 1. two of the w planes that flew over Regland a recommaissance missions - humany 4 were destroyed. During the pro- esding night 200 German planse ware plotted over Britain. During the sight of January 4-6 the German attack me directed at the Avenouth- Bristel area and - German planes ware over Lender 5. Unfeverable weather has slowed ém the Creek forees in Albania but a steady advance is being más. Italian divisions in Albenia now total 19 including the three - - that have recently been identified there. These relaforements have apparently had little effect en the empaign. 4. a Junuary 4 word - received from General Sir Archibald Wavell, commanding the British Any in the Middle East that over 8,000 Italian priseners had boss tains. the Air Perce, which is very active in this theater, is cooporating with the Any in the attack - Bardia. The Royal Air Force engaged five Italian fighters in this area and - streyed three of then. In eddition, them Italian planes wire destroyed CONFIDENTIAL Regraded Unclassified CONFIDENTIAL 21 with I , 1 a s LES Motribution: a % State Department 1 r Asst. Secretary of War Chief of Staff Mar Plans Division Office of Neval Intelligence M - 2 6-5, 1 + CONFIDENTIAL TREASURY DEPARTMENT INTER OFFICE COMMUNICATION STRICTLY CONFIDENTIAL DATE January 6, 1941. TO Secretary Morgenthau FROM Mr. Foley Re: Definition of "national" in proposed Executive Order on extension of "freezing" control. Mr. Wiley's coments on the above subject reflect E. view which this office considered at length in drafting the definition of "national" finally edopted. The problem raised is the extent to which we are prepared to go. Obviously, if we were to freeze the accounts of the approximately 5,000,000 resident aliens in the United States we would, in the process, presumably freeze certain Axis agent accounts, although clearly a large number of such agents are in fact naturalized citizens who would escape even that control. As Mr. Wiley indicates, we would be compelled to issue a general license of such broad proportions as to nullify the effect of the extended definition except in those specific instances where we had information connecting such persons with Axis operations. The problem, therefore, resolves itself into whether it is preferable to include all of the group within the Order and thenexclude all but a few by general license, or whether we should exclude the group in the first in- stance and thereafter apply the freezing control to those persons, be they resident aliens or American citizens, whom we definitely suspect of subversive activities. Some of the factors to be weighed will be the public reaction to any neasure covering millions of resident aliens into our control in order to snare a few undesirables and also the tremendous administrative problems which may ensue. In weighing the two alternatives we felt constrained to suggest the less offensive course. It should be noted that in the definition of "national" adopted, you are vested with the power of determining whether "any person * * * is, or has been, acting or purporting to act directly or indirectly for the benefit or on behalf of *** [any] foreign country or national thereof" as well as "any other person who there is reasonable cause to believe" has been so act- ing. If you so decide, the accounts of such person are blocked. It is believed that any person who there was sufficient reuson to suspect was an Axis agent es to cause his exclusion from B general license could, in view of the fore- going, be regarded as a "national" as the term is presently defined. E.N.H. 24 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION STRICTLY CONFIDENTIAL DATE January 6, 1941 TO Secretary Morgenthen FROM Mr. Wiley I have been informed that in the proposed Executive Order prepared in the Treasury for general freezing the definition of "national" has been so written as to exclude resident aliens from the scope of the Order. I wish to suggest, if there is time or opportunity for reconsideration, that that limitation be taken out of the Order and the problem of resi- dent aliens be handled entirely by license. In the work of this office we have come across a number of highly suspicious resident aliens who are Aris citizens and are apparently en- gaged in Axis work. This number might be increased if Justice should succeed in revoking the naturalization of former Aris citizens. It is highly desirable that the funds of these persons be controlled so far as possible. While in the case of the invaded countries persons resi- dent in the United States were properly excluded from the scope of the respective Orders, the situation would appear to be entirely different in the case of Axis citizens claiming residence or domicile in the United States. The concept of "residence" would appear to be such as to permit, indeed, a considerable amount of evasions, since residence can be easily claimed if that is to be the test. While it is true that it may be pos- sible to cover Axis agents in this country under the provision concern- ing agents of governments and nationals of the frosen countries, we would be assuming a very difficult-and unnecessary-burden of proof, since a main purpose of our desire to control these accounts is to get evidence concerning the agency of these people. A general license to resident aliens with 8 provision for revocation in particular instances of suspicious persons or suspicious transactions would be most helpful in the work of this office in following the use of funds for subversive activity. New 25 NOLD FOR RELEASE HOLD FOR RELEASE HOLD FOR RELEASE January 6, 1941 CONFIDENTIAL: To ba held in STRICT CONFIDENCE and no portion, synopsis or intimation to be published or given out until delivery of the President's message to the Congress HAS BEGUN. 1710 Release expected about 2:00 P. 11., E. S. T., January 6, 1941, CAUTION: Extreme care must be exercised to avoid premature publication. STEPHEN EARLY Secretary to the President TO THE CONGRISS OF THE UNITED STATES: I address you, the Members of the Seventy-Seventh Congress, at a moment unprecedented in the history of the Union. I use the word "unprecedented", because at no previous time has American security been as seriously threatened from without as it is today. Since the permanent formation of our government under the Constitution, in 1789, most of the periods of crisis in our history have related to our domestic af- fairs. Fortunately, only one of these -- the four year Mar between the States - ever threatened our national unity. Today, thank Ood, one hundred and thirty million Americans, in forty-eight States, have forgotten points of the compass in our national unity. It la true that orior to 1914 the United States of often had been disturbed by events in other Continents. Te had even engaged in two wars with European nations and in a number of undeclared wars in the West Indies, in the Mediterranean and in the Pacific for the maintenance of American rights and for the principles of peaceful com- merce. In no case, however, had a serious threat been raised against our national safety or our independence, That I seek to convey is the historic truth that the United States as a nation has at all times maintained opposition to any attempt to lock us in behind an ancient Chinese wall while the procession of civilization went past. Today, thinking of our children and their children, we oppose enforced isolation for ourselves or for any part of the Americas. That determination of ours was proved, for example, during the quarter century of wars following the French Revolution. While the Napoleonic strug¿les did threaten inter- ests of the United States because of the French foothold in the Test Indies and in Louisiana, and while we engaged in the Tar of 1212 to vindicate our right to peaceful trade, it is, nevertheless, clear that neither France nor Great Britain nor any other nation W&O aiming at domination of the wholeworld. Regraded Unclassified - 2 - no single war in Europe or in Aola constituted a real In like fashion from 1815 to 1914 - 99 years - other American nation, threat against our future or against the future of any and the strength of the British fleet in the Atlantic has foreign power sought to establish itself Ln this Hemisphere; Except in the Daximilian interlude in Mexico, no been a friendly strength. It is still a friendly strength. Even when the World Tar broke out in 1914, it seemed to contain only small threat of danger to our own began to visualize what the downfull of democratic nations American future. But, as time went on, the American people night mean to our own democracy. We need not over-cmphasize imperfections in the Poace of Versailles. 7e need not harp on failure of the democracies to denl with problems of world reconstruction. We should remember that the Peace of 1919 was far less unjust than the kind of "bacification" which began even before Munich, and which is being carried on under the new order of tyranny that seeks to spread over every con- tinent today. The American people have unalterably set their faces against that tyranny. Every realist knows that the democratic way of life is at this moment being directly assailed in every part of the world - assailed either by arms, or by secret spread- ing of poisonous propaganda by those who seek to destroy unity and promote discord in nations still at peace. During sixteen months this assault has blotted out the whole pattern of denocratic life in an appalling number of independent nations, great and small. The as- great and small. sailants are still on the march, threatening other nations, Therefore, as your President, performing my consti- tutional duty to "give to the Congress information of the state of the Union", I find it necessary to report that the future and the safety of our country and of our democracy are overwhelmin ly involved in events far Seyond our borders. Armed defense of democratic existence is now being gallantly traged in four continents. If that defense fails, all the population and all the resources of Burove, Asia, Africa and Australasia will be dominated by the conquerors. The total of those populations and their resources greatly exceeds the sun total of the population and resources of the whole of the Testern Memisphere - many times over. In times like these it is imature - and incident- ally untrue - for anybody to brag that an unprepared America, hold off the whole world. single-handed, end with one hand tied behind its back, can No realistic American can expect from a dictator's peace international generosity, or return of true independence, or world disarmanent, or freedom of expression, or freedom of religion - or even good business. Such a peace would bring no security for us or for our neighbors. "Those, who would give up essential liberty to nor safety". purchase a little temporary safety, deserve neither liberty As a nation "E may take oride in the fact that we are soft-hearted; but the cannot afford to be soft-headed Regraded Unclassified 3 We must always be vary af* those VSA With sounding trass and a tinkling cymbal preach the "isn" of hynomet. 27 Te must emecially becare of tant small group of selfish nen who would clip the wings of I be American eagle in order to feather their own netts. I have recently pointed out how quickly the tempo of modern warfare colds bring into our very midst the physical attack which we must expect if the dictator M- tions Tin this var. There is meh loose taix of our injunity from is- mediate and direct Invesion from across the sens. Obvirusly, as long as the British Davy retains its power, be such danger exists. Even if there wore no 3ritfsh Savy, it is not probable that any onery sorli be studid enough to tttack us by landing troops in the United States from across thousands of miles of beean, until it had acquired strategic bases from which to operate. But we learn much from the lessons of the past "ears in Surope - porticularly the lesson of Horway, whose essential sesports were esptured by treatdery and surprise Juilt up over B. Series of years. The first oncse of the invasion of this would net be the landing of regular troops. The necessary surstegic points would be occupied by secret agents ane their duries - and groat numbers of then are already here, and in Latin America. AS los as the ajaressor nations haintain the of- fensive, they - not -- will chocol the time abd the place and the mathod of terir outack. That Le why the [u'tire of all American Regablics = today in serious danger, that is Ky this Annual Massage to the Congress is unique in our history. That is shy every nerber if the Executive branch of the and every nember of to Congress face great responsibility - and great accounta38lity. The need of the nament is that our actions ed our policy should be dévoted primarily -- almost exclusivaly - to meting this formign pril. For all our conestic problems are now a part of the great energency. Just as our ustional policy in internal affairs has been based upon a decent respect for the rights and dignity of all our fellow-mer within our gates, so our national policy in foreign affairs has been based on a decent respect for the rights ano dignity of all nations, large and stall, and the justice of morality must and will win in the end. Our national policy is this: First, by an Lapressive expression of the pulic will and without regard to partisanship, == are conditted to all-inclusive national defense. Second, 5) an impressive expression of the public till and without regard to partisanthip, 12 are comitted to full support of all those resolute peoples, overywhere, to are resisting agrossion me are thereby keeping var any from our Homisphere. Dy Lada support, we express our der termination that the democratic CRUSO shall prevail; and we strengthen the defense an. security of our OWEL nation. Regraded Unclassified 28 - 4 Third, by an impressive expression of the public will and without regard to partisanship, WE are committed to the proposition that principles of corality and consid- erations for our own security will never permit us to ac- quieace in a peace dictated by expressors and sponsored by appeasers. To las that enduring peace cannot be bought at the cost of other people's freedon. Im the recent national election there was no sub- stantial difference between the two great parties in respect to that national policy. No issue was fought out on this line before the American electorato. Today, it is abundantly evident that citizens sverwhere are demanding and supporting speedy and complete action in recognition of obvious danger. Charefore, the intediate need is a swift and driv- Ing increase in yes production. Leaders of industry and labor have responded to sur sumpris. Dals of speed have besh set. In eome cases thes, 2615 are being reached anead of time; in some cases de are or En other cases there are slight but not serious delars; tré in sone DESTO - and I en sorry to say very important CASES - wa are all = oncerned by the slowness of the accorplishment of our -lans. The Amy and towever, have pade substantial progress durin, the as Actual experience is in- proving and máil, - as rethods of production vità every passing day. of best is not good enrugh for tororrow. I % % satisfied with * thas far nade. The nen in tary: 1€ to program ripresent the best in train- inj, shility is 2 are not satisfice with the progress this for c. of 12 will be satisfied until the job is in [02] as set too 45 = 120 18, city le Anicker and botter results. To give to Illustrations: ** are sur covelule L terming cus finished air- planes; :: E7: day trid bloit to solv the innumerable problems and 10 No. - Te are thesi of schedule in building warships; but KE are worldn to git oven further shead of schedule. To change S whole nation from a bacis of peace time production of imlents of pence to a basis of war time production 52 imlents of war is no small task. And the greatest difficulty comes at the beginning of the program, when new tools and plant facilities and new assembly lines and ship 7675 must first be constructed before the actual material begins 10 flow steadily and speedily from then. The Congress, of course, must rightly keep itself informed at all times of the prograss of the program. How-- ever, there is curtain information, as the Congress itself will reality recognize, suich, in the interests of our own security and those 17 the nations we are supporting, must of needs Se went in confide CE. Regraded Unclassified 29 - New circumstances are constantly begetting new neede for our safety. I shall ask this Congreas for greatly In- creased new appropriations and authorizations to carry on what we have begun. I also ask this Congress for authority and for funds sufficient to manufacture additional munitions and war sup- plies of many kinds, to be turned over to those nations which are now in actual war with aggressor nations. Our most useful and immediate role is to act as an arsenal for them as well as for ourselves, They do not need man power. They do need billions of dollars worth of the weapons. of defense. The time is near when they will not be able to pay for them in ready cash. To cannot, and will not, tell them they must surrender, merely because of present inability to pay for the weapons which we know they must have. I do not recommend that we make them a loan of dol- lars with which to pay for these weapons -- a loan to be repaid in dollars. I recommend that we make it possible for those na- tions to continue to obtain war materials in the United States, fitting their orders into our own program. Nearly all of their materiel would, if the time ever came, be useful for our own defense. Taking counsel of expert military and naval authorities, considering what is best for our own security, we are free to de- cide how much should be kept here and how much should be sent abroad to our friends who by their determined and heroic resist- ance are giving us time in which to make ready our OWD defense. For what we send abroad, we shall be repaid, within a reasonable time following the close of hostilities, in similar materials, or, at our option, in other goods of many kinds which they can produce and which we need. Let us say to the democracies: "We Americans are vitally concerned in your defense of freedom. We are putting forth our energies, our resources and our organizing powers to give you the strength to regain and maintain a free world. Ne shall send you, in ever-increasing: numbers, ships, planes, tanks, guns. This is our purpose and our pledge.' In fulfillment of this purpose me will not be intim- idated by the threats of dictators that they will regard as a breach of international law and as an act of war our aid to the democracies which dare to resist their aggression. Such aid is not an act of war, even if & dictator should unilaterally pro- claim it so to be, When the dictators are ready to make war upon us, they will not wait for an act of war on our part. They did not wait for Norway or Belgium or the Netherlands to commit an act of mar. Their only interest in in B. new one-way international law, which lacks mutuality in its observance, and, therefore, becomes an instrument of oppression. The happiness of future generations of Americans may well depend upon how effective and how immediate we can nake our aid felt. No one can tell the exact character of the emergency situations that we may be called upon to meet. The Nation's hands must not bo tied when the Nation's life is in danger. Regraded Unclassified 30 - 6 - We must all propare to nake the surrifices that the energency - as serious na war itsulf -- demends. Thatever stands in the way of speed and efficiency in defense propara- Wons cust give way to the national need. A free nation has the right to expect full coopera- tion from all groups. A True nation has the right to look to the losders of business, of labor, and of agriculture to take the lead in stimulating affort, not anting other groups but within their own groups. The Sest way of dealing with the few slackers or trouble makers in our midst is, first, to shame them by patriotic example, and, if that fails, to une the sovereignty of government to save government. As men do not Hw 09 head alone, they do not fight by arnaments alone. These nhe con our refenses, and those behind them who baild our defenaes, nust have the stamine and courage which come from su belief in the nanne I' of life which they 35 ocfencing. The nighty action which we are calling for cannot DE SCEEC on 1 disregard of all things worth fighting for. The Nation talms grant satisfection and much strength from the things unless have been done to make its people con- scious of their individual stake in the preservation of demo- cratic life in marica. Those things have toughened the fibre of our unople, Lave renewed their faith and strengthened their devotion to the institutions 40 make ready to protect. Certainly this is no time to stop thinking about the visual and economic problems which Fre the root cause of the social revolution which is today & supreme factor in the world. There in nothing mysterious about the foundations of a healthy and strong democracy. The basic things expected by our people of their political and economic systems are simple. They are: Equality of opsortunity for youth and for others. Jubs for those can work. Security for those the need it, The ending of 5. cial wiydling for the for. The proservation of civil Inertios for all. The enjoyment of the Truito of scientific progress in a wider end constantly claims standard of living. These are the simple and Sasic things that must never be lost sight of in the turno 1 and undelievable complexity of cher nodern wrlf. The inner and abiding strength of our éobnomic and political systems is dependent upon the degree to which they fulfill these expectations. Many subjects connected with our social economy call for impodiate improvement. AG oxamples; we should bring more citizens under the coverage of olá age pensions sná unemployment insurance. le should widen the opportunition for adoquate medical care. Regraded Unclassified To should plan a better system by which persons de- serving or needing gainful employment my dotain it. I have called for personal sacrifice, I am assured of call. the willingness of almost All Americans to respond is that A part of the sacrifice teans the payment of more money in taxes. In my budget nossage I recommend that a greater portion of this great defense program be paid for from taxation than are paying today. No person should try, or be allowed, to get rich out of this program; and the principle of tax payments in accordance with ability to pay should be constantly before our eyes to guide our legislation. If the Congress paintains these principles, the voters, outting patriotion shead of jocketbooks, will give you their applouse. In the future days, which we seek to make secure, we look forward to a world founded upon four essential human freedoms. The first 18 freedom of speach and expression - everywhere in the world. The second is freedom of every person to worship God in his own way - everywhere in the world. The third is freedom from want - which, translated inte world terms, means economic understandings which will se- cure to every nation a healthy peace time life for its inhabi- tants - everywhere in the world. The fourth is freedom from lear - which, translated into world terms, means a world-wide reduction of arrisments to such a point and in such of thorough fashion that no nation will be in is position to count an act of physical aggression against any neighbor - anywhere in the world. That 1s no vision of & distant millennium. It is a definite basis for a kinc of world attainable in our own time and generation. That kind of world is the very antithesis of the so-calied new order of tyranny which the dictators seek to create with the cresi, of a booth. To that new order We appose the greater conception - the moral order. A good society is able to face schemes of world domination and foreign revolutions alike without fear. Since the beginning of our American history we have been engaged in change - in a perpetual peaceful revolution - a revolution which goes on steadily, quietly adjusting itself to changing conditions - without the concentration camp or the quick-line in the ditch. The world order which we seek is the cooperation of free countries, working together in a friendly, civilized society. This nation has placed its destiny in the hands and heads and hearts of its millions of free eien and women; and its faith in freedom under the guidance of God. Freedom means the supremacy of human rights everywhere. Our support good to those who struggle to gain those rights or keep them. Our strength Is in our unity of purpose. To that high concept there can be no end save victory. FRANKLIN n. ROOSEVELT THE VILITS HOUSE, Regraded Unclassified HOLD POR RELEASE HOLD FOR RELEASE END FOR RELEASE January E, 1541 CONFIDENTIAL: To be held in STRICT CONFIIENCE and no portion, aynopsis or intimation to be published or given out. until delivery of the President's message to the Congress HAS SEIN. Release expected about 2:00 P. K., 3. 5. i., January 6, 1941. CAUTION: Extrese care must be exercised to avoid premature publication. STEPEEN EARLY Secretary to the President 20 X COMBESS R THE UNITED STATES: I address on, the Lembers of the Congress, at a moment unprecedented in the history of the Union. I use the word "unprecedented", because at DO previous time has american security been as seriously threatered from without as it is today. Since the permanent formation of our government under the Constitution, in 1789, most of the periods of crisis in our history have related to our domestic af- fairs. Fortunitely, only one of these - the four year X between the States - ever threatened our national unity. Today, thank God, one hundred and thirty million inericans, in forty-sight States, have forgotten points of the compass in our national unity. It is true that prior to 1914 the United States often und been disturbed by events in other Continents. Te had even engaged in two wars with European nations and in = mmber of undeclared wars in the Sest Indies, in the Wediterrenean and in the raciffe for the caintenance of American rights and for the principles of peaceful con- narce. In no case, nonever, had a serious threat been raised against our national safety or our indecendente. That I seek to convey is the historic truté that the United States LS a nation has at all times raintained opposition to any attempt to lock us in behind an ancient Chinese wall while the procession of civilization net pest. Today, thinking of our children and their children, we oppose enforced isolation for ourselved or for any cart of the inericas. That determination of ours was proved, for example, during the quarter contury of wars following the French Revolution. While the Napoleonic struggles did threaten inter- esta of the United States because of the Presel foothold in the Test Indies and in Louisiana, and while VE engaged in the The of 1812 to vindicate our right to perceful trade, it is, nevertheless, clear that neither Prance nor Great Britain nor any other nation was aiming at domination of the stulevorld. Regraded Unclassified 33 2 - In like fashion from 1815 to 1914 - 99 years - no $ inde war in Europe or in Asia constituted $ real threat against our future or against the future of any other American nation. Excent in the Magimilian interlude in Mexico, no Loreign nower sought to establish itself in this Remisphere; and the strength of the British fleet in the Atlantic has bein E friendly strength. It. is still a friendly strength. Even when the World "Tar broke out in 1014, it seened to contain only small threat of danger to our cwn American future. But, as time went on, the American people began to visualize what the downfall of democratic nations ni lit nean to our crim comocracy, To neod not over-emphasise impurfections In the Paace of Versailles. Tie need not harp on failure of the de seracias to deal With roblems of world reconstruction. e should repender that the Peace of 1519 was far less unjust than the kind of "pacification" which began even before Nunich, and which is being carried on under the tax order of turanny that svoks to soread over every con- tinent tokey. The American neople have unalterably set Ueir Istus against that tyranny. Every realist knows that the democratic way of 2525 it at this assent voing directly assatled in every nort 15 will - assailed either by arms, or by secret spread- CO passphous proparanda by those who seck to destroy 211 promote discord in nations still at peace. During sixteen nonths this assault hus blotted No :40 ...ple pattern of wenecratic life in an appalling curier of independent nations, breat and mall. The as- sailams are still on the march, threatening other nations, rest stis small. Therefore, as your President, performing ny consti- to "(ive to the Congress information of the state of NA Snion", I fine it necessary to report that the Evture ins the safety of our country and of our denocracy are 17 involved in events far beyone our borders. Arte. defense of denocratic existence is now being allastic valed in four centinents. If that defense fails, <02 production and all the resources of Suro e, Asia, and Authalisis mill be Geminated by the conquerors. "ze Total of those populations and their resources greatly excéets % EUT, total of the posulation and resources of 4/ tole of the lestern lienischero - many times over. In times Tike thes. it is immature - and incident- ally untruo - for anybody to brag that an unorepared America, end with one Mand tied Benind its back, can helo DE: the world. No reglistic American can expect from a dictator's Teace international generosity. or return of true independence, = vorld Lisarmment, or freedom as evoression, or freedom of religion - or (Vec jood business. Such & prace vould bring no security for us or for =u= neighbors. Those, who would iva up essential liberty to perchase little termorary safety, deservo naither liberty "De safety". As A. nation wa may take -rinc in the fact that de information; X: 10 proce affort to de soft-headed. Regraded Unclassified - 3 - We must always be wary of those who with sounding brass and R tinkling cymbal preach the "1am" of appeasement. We must especially beiere of tast small group of selfish men who would clip the wings of to he American eagle in order to feather their own nests. I have recently pointed out how quickly the tempo of modern warfare could bring into our very midst the physical attack which we must expect if the dictator na- tions win this war. There is much loose talk of our insunity from in- mediate and direct invasion from across the 0035. Obviously, AB long as the British Navy retains its power, no such danger exists, Even if there wore no British Navy, it is not probable that any enemy would be stupid enough to attack us by landing troops in the United States from across thousands of miles of ocean, until it lisd acquired strategic baces from which to operate. But we learn much from the lessons of the past years in Europe - particularly the losson of Norway, whose assential seaports were exptured by treachery and surprise built up over a series of years. The first phase of the invasion of this Hemisphere would not be the landing of regular troops. The necessary strategic points would be occupied by secret agents and their dupes - and great numbers of then are already here, and in Latin America. As long as the aggressor nations maintain the of- fonsive, they - not we -- will choose the time and the place and the method of their attack. That is why the future of all American Republics 18 today in serious danger. That is why this Annual Message to the Congress is unique in our history. That is why every member of the Executive branch of the government and every member of the Congress face great responsibility - and great accountability. The need of the moment is that our actions and our policy should be devoted primarily - almost exclusively - to meeting this foreign peril. For all our domestic problems are now a part of the great emergency. Just as our national policy in internal affairs has been based upon a decent respect for the rights and dignity of all our fellow-non within our gates, so our national policy in foreign affairs has been based on a decent respect for the rights and dignity of all nations, large and small. And the justice of morality must and will win in the end. Our national policy is this: First, by an impressive expression of the public will and without regard to partisanship, we are committed to all-inclusive national defense. Second, by an impressive expression of the public will and without regard to partisanship, we are committed to full support of all those resolute peoples, everywhere, who are resisting aggression and are thereby keeping war away from our Hemisphere. By this support, we express our de- termination that the democratic cause shall prevail; and we strengthen the defense and security of our own nation. Regraded Unclassified Third, by an impressive expression of the public will and without regard to partisanship, we are committed to the proposition that principles of norality and consid- erations for our own security will never permit us to ac- quiesce in & peace dictated by aggressors and sponsored by appeasers. 76 know that enduring peace cannot be bought at the cost of other people's freedon. In the recent national election there was no sub- stantial difference between the two great parties in reseect to that national policy. No issue was fought out on this line before the American electorate. Today, it is abundantly evident that American citizens everythere are denanding and supporting speedy and complete action in recognition of obvious danger. Therefore, the incediate need is a avift and driv- ing increase in our amazent production. Leaders of industry and labor have responded to our summons. Gouls of sheed have been set. In some cases these goals are being reached anead of time; in some cases we are on schedule; in other CSSES there are slight but not serious dalays; znd in some 08523 - and I am sorry to say very important CASES - we are all c oncerned by the slowness of the accomplishment 3£ our "lans. The Army and Revy, however, have made substantial progress during the post year. Actual experience is in- proving and speading un our whole of production with every passing day. and today's best is not good enough for tomorrow, I au not entisfied with the progress thus far made. The men in charge of the program represent the best in train- Los, ability and patriction. They are not satisfied with the progress thus for Mode. None of us will be satisfied until the job is John. No matter whether include original goal was set too high or too 1on, our cujective is quicker and better results. To five two illustrations: Ne are behind scitedule in turning out finished air- planes; DO are working day and night to solve the innumerable problems and to catch UD+ le are ahead of schedule in building warships; but we are working to get even further shead of schedule, To change a whole nation from a basis of peace time production of implemente of pence to a basis of war time production of implements of war is no small task. And the greatest difficulty cones at the beginning of the program, when new tools and plant [acilities and new assembly lines and ship ways must first be constructed before the actual material begins to flow steadily and speedily from thom. The Congress, of course, must rightly keep itself informed at all times of the prograss of the program. How- ever, there to certain information, as the Congress itself will readily recognize, which, in the interests of our own security and those of the nations we are supporting, must of needs be keet in confidence. Regraded Unclassified - 5 New circumstances are constantly begetting DAY coods for our safety. I shall ask this Congress for greatly 10- creased new appropriations and authorizations to carry 05. mut we have begun. I also ask this Congress for authority and for funds sufficient to manufacture additional munitions and war SEP- olies of many kinds, to be turned over to those nations which are now in actual war with aggressor nations. Our most useful and immediate role is to act as an arsonal for them as well as for ourselves. They do not need can power. They do need billions of dollars worth of the of defense. The time is near when they will not be able to 247 for them in ready cash. To cannot, and will not, tell then they must survender, arrely because of present inability to pay for the wespons which we know they must have. I do not recordend that we make then a loan of dol- lars with which to pay for these weapons - a loan to be recaid in dollars. I recomend that WE make it possible for those na- tions to continue to obtain war materials in the United States, fitting their orders into our own program. Nearly all of their materiel would, if the time ever came, be useful for our defense. Taking counsel of expert vilitary and naval authorities, considering what is best for our own security, we are free to de- cide hav much should be kept here and how much should be sent abroad to our friends who by their determined and heroic resist- ance are giving us time in which to make ready our CRITI decense. For what we send abroad, we shall be repaid, within a reasonable time following the close of nostilities, in sizilar aterials, or, at our option, in other goods of cany kinds which they can produce end which we need. Let us sav to the democracies: "Te Americans are vitally concerned in your defende of freedom. Te are outting forth our energies, our resources and our organizing powers to give you the strength to regain and maintain a free world. The shall send you, in ever-increasing mumbers, ships, planes, tanks, guos. This 1a our nurpose and our "ledge." Ir. [ulfillment of this purpose we will not be intio- idated by the threats of dictators that they will regard as a breach of international law and as an act of war our aid to the denocracies which dare to resist their aggression. Such aid is not an set of Har, even 11 & dictator should unilaterally pro- clain it so to be. Then the dictators are ready to make war upon us, the; will not suit for an act of war on our part. They did not wait for Moriny or Delgium or the Methorlands to connit an act of mr. Their only interest is in a new one-way international law, which lacks mutuality in its observance, and, therefore, becomes an instrument of oppression. The happiness of future generations of Ansricans may well depend upon how effective and how innediate we can make our aid felt. No one can toll the exact character of the energency situations that ye may be called upon to met- The Nation's hands must not be tidd when the Nation's life is in danger. Regraded Unclassified 37 - B de cust all prepart to make the sucrifices that the emergency - 85 serious as Tar its:lf - demands. Thatover stand in the way of speed and efficiency in defense prepara- tions cust give way to the national need. A free nation has the right to expect full coopera- tion from all groups. A free nation has the right to look to the leaders of business, of labor, and of agriculture to take the lend in stimulating effort, not any the groups but within their own groups. The best way of dealing with the few slackers or trucule makers in our midst is, first, to stane then by patriotic example, and, if that fails, to use the sovereignty of government to save government. Às non do not live by treat alene, they do not fight by arnanents alone. Those pto nan our nelesses, and those behind then who build our defenser, mist, Lave the stamine and courage which come from an unshalmable belief in the nanner of life which they are defending. % nighty action which we are calling for cannot be based on = discription of all things worth fighting for. The Nation takes (port satisfaction and much strength from the things valch have been cone to mile its people con- stions of their individual state is the inservation of demo- cratic life in America. Zhose they have toughened the fibre of our people, have tab frith and strengthened their Service to the institutions X missing ready to protect. Certainly this is no time to stop thinking about the soil and economic order vich are the root cause of the selal revolution which is total 11 factor in the world. There is nothing enterious about the foundations of a tealthy and strong democracy. The bisic things expected by our people of their political and systems are simple. Dep are: Equality of opportunity for youth and for others. Jobs for those who can wri. Security for those who tax 11. The ending of special while for the few. The preservation of civil liberties for all. The enjoyment of the fruits of scientific progress in a wider and constantly rists, student of living. Those are the simple et baste things that must never be lost sight of in the turned and ondelivable complexity of our modern world. The inter and cricing strength of our economic and political systems is depensent - the degree to which they fulfill these expectations. Many subjects connected with = social economy call for imediate imrovement. As examples: de should bring sore citizens under the coverage of old age pensions and unexployment insurance. "Te should widen the reportunities for adequato medical care. Regraded Unclassified 1 Te should plan a better system by which persons de- serving or needing (sinful employment may obtain it. I have called for personal sacrifice. I an assured of call, the willingness of almst ell americans to respond to that A part of the sacrifice means the payment of more money in taxes. In by budget nassage I recomend that a greater portion of this great defense program be paid for from taxation than as are paying today. No person should try, or be allowed, to got rich out of this program; and the principle of tax payments in accordance with ability to pay should be constantly before our ayes to guide our legislation. If the Congress maintains these principles, the voters, outting patriotism ahead of pocketbooks, will give you their applause. In the future days, which "ye Beck to make secure, we look forward to = world founded upon four essential human freadons. The first is freedon of speech and expression - everywhere in the world. The socond is freedom of every person to worship God in his com way - everyder. in the world. The third is freedom from want - which, translated into world terms, economic understandings which will se- cure to every nation = healthy peace time life for its inhabi- tants - everythere in the world. The fourth Is freedon from fear - which, translated into world terms, neans a world-vide reduction of amazents to such a point and En ruch = through fashion that no nation will be in a position to comit an act of physical aggression against any neighber - in the world. That is no vision of a distent millennium. It is a definite basis for a kind of world attainable in our OWN time and generation. That kind of world is the very antithesis of the so-calied new order of tyracay which the dictators seek to create with the crest of a book. Is that new order we oppose the greater conception - the noral order. & good society is able to face schemes of world domination and foreign revolutions alike without fear. Since the beginning of sur American history WE have been engaged in change - in a perpetual peaceful revolution - a revolution which does on steadily, quietly adjusting itself to changing conditions - without the concentration camp or the quick-line in the ditch. De world order which we seek is the cooperation of free countries, working together in a friendly, civilized society. This nation has placed its destiny in the hands and heads and hearts of its millions of free ben and women; and Its faith in freedom under the guidance of God. Freedom means the supremacy of human rights overyahere. Our support goes to those the strugyle to gain those rights or keep thes. Our strength in in our unity of purpose. To that high concept there can be no end save victory. FRANKLIN D. ROOSEVELT THE MITS HOUSE, Regraded Unclassified 39 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE January 6, 1941 TO Secretary Morgenthau OM Mr. Cochran STRICTLY CONFIDENTIAL Following the conference held in the Secretary's office and attended by Sir Frederick Phillips, Mr. Pinsent and Mr. Gifford, the sale of British securities vas speeded up, and effort made to dispose of blocks through private sales and through concerns having wide distribution facilities over the country. The practice was also commenced as of December 16, 1940, of providing the Secretary daily with a list, by Lane, of the securities sold each day, indicating the number of shares or par value if bonds and the price obtained therefor. After the first few days the system was insugurated of indicating by asterisks blocks of 1,000 shares and upwards sold out- ide national exchanges. There follows an itemization of the net proceeds from sales from December 16: December 16 $1,151,479 December 17 838,449 December 18 1,759,386 December 19 3,346,822 December 20 1,573,624 December 21 204,469 December 23 1,157,637 December 24 111,682 December 26 3,785,724 December 27 1,234,392 December 28 1,170,817 December 30 2,094,338 December 31 2,300,141 January 2 4,790,505 70mg 40 January 6, 1941 9:30 a.m. GROUP MEETING Present: Mr. Haas Dr. Viner Mr. Pehle Mr. Sullivan Mr. Foley Mr. Kuhn Mr. Graves Mr. Thompson Mr. Young Mr. Cochran Mr. Gaston Mr. Bell Mr. White Mr. Schwarz Mrs. Klotz H.V.Jr: Good morning, everybody. You might be interested in the result of a discussion that Gaston and I had the other day on ships. After talking with Waesche, it was agreed that I take it up at Cabinet and it was agreed that other than putting our own crews on board the ships, anything less than that would be useless, and I thought - I mean Gaston was right in his analysis and I thought it was interesting, and I want to say that Knox spoke up, Herbert, and said that he had the men ready and the President said, no, Henry would take care of it. Regraded Unclassified 41 - 2 - Gaston: Very good. H.M.Jr: So I thought that was rather interesting. And the other thing which I want to say in this room, that for reasons that I can't explain, no move of any kind is to be made on ships, I mean in any way to give anybody & tip off. They want the whole thing to die down. So even moving a ship - the whole thing, all committees are being discharged publicly. Gaston: Yes. H.M.Jr: If you want to know privately, I will tell you why, see. So even moving a ship from one place to another would be against the plan that they have. Gaston: I thought that might be the situation. That is the reason I raised that question about moving the ships. H.M.Jr: That was only decided at Cabinet. They were going to let everything die down. So that is that. Gaston: Yes. Right. H.M.Jr: And while I am on that, I checked my records and I did say I would take up all legislation. (Laughter) I have no other confessions that I am willing to make. White: You mean the six of us were right? H.M.Jr: No. Bell: You mean the six of us were right? H.M.Jr: No. 42 - 3 - Bell: Six of us and the record. H.M.Jr: Thank God for the Stenotype. He was right. Sullivan: His vote counts for more than all the rest of us. H.M.Jr: Harry, I admitted everything in which I was wrong last week. White: I can't afford to. (Laughter) H.M.Jr: That is a pretty good answer. Gaston: I haven't anything except that I have the day pretty well occupied with a series of meetings in connection with this Defense Communications Board. We have about 300 people coming in at 10:30 this morning for the meetings on the communications in defense. H.M.Jr: I will try very carefully not to disturb you. Anything else? Gaston: I think that is all. Archie Lochhead handed me a letter to him from the New York Chapter of the American Institute of Banking, asking that you address them on February 1. I gave the letter to Mr. Schwarz. H.M.Jr: What is the honorium? Gaston: The honorium is a chance to sell them 8. bill of goods. H.M.Jr: It is not worth it. Gaston: They are young bankers, the hope of America. H.M.Jr: You thank him. Anything else? 43 4 - Gaston: Nothing else. H.M.Jr: I only talked to you (Foley) four times yesterday. Did you get to Ball? Foley: I talked to him on the telephone. The sent a copy out to Hackworth and Hackworth called and said he had no suggestions. H.M.Jr: I thought we would stay right after this meeting, and there are a couple of questions I would like to ask. Mr. Sullivan? Sullivan: Nothing. H.M.Jr: Chick? Schwarz: Edgar Mowrer called me this morning. He would like to see you for a few minutes during the first part of this week or whenever it is convenient this week for you. H.M.Jr: Well, I am waiting to hear from General Dowding. He announced that he wouldn't see anybody. Schwarz: Tomorrow? H.M.Jr: Today, isn't it? Schwarz: The radio said he would be here tomorrow. H.M.Jr: Tomorrow. How often has Mourer asked? Schwarz: This is the second time. H.M.Jr: And I have got the radio fellow too that wants to see me. What is his name? Foley: Kaltenborn. H.M.Jr: Well, if Mowrer can get here at 11:15 -- 44 - 5 - Schwarz: He will make it. He will be glad to. H.V.Jr: Eleven fifteen. I would like you to sit in with him. Wait a second, I have got White from eleven to eleven thirty. Are you ready on that banking? White: It wasn't on that banking. It was on something else. I don't think we will need more than ten of fifteen minutes. E.V.Jr: Tell Mowrer I can see him at eleven thirty. Schwarz: Eleven thirty. Sullivan: Is Kaltenborn coming in this morning? E.V.Jr: Not that I know of. Sullivan: T would like to see him when he comes. I know him and I think I can do some good with him on something else. E.V.Jr: I see. Pehle: On this I. T. & T. matter which has now come to a head, we now have 8. letter from Cordell Hull saying the matter has been discussed with the President and having already received his approval in principle of the proposed release of funds, he perceives no reason why a license should not be granted. H.M.Jr: Well, there is nothing to do then, is there, wan' Bell: I don't think 30, I don't understand what approval in principle means. I don't know whether you discussed it with the President or not. 45 - 6 - H.M.Jr: No. Bell: There was some indication, wasn't there, of what -- Pehle: They discussed it with the President, and the first time Mr. Hull discussed it with them he said, "No, not now," and then Mr. Hull took it up again with him and he said, "Yes." I take it the amount was not given at the first, but it amounts to about seven million dollars of Roumanian gold. H.M.Jr: How much Roumanian gold is there? Pehle: About 28million. It is about a forth of all the Roumanian assets in this country. Bell: I think you will have to approve it. H.M.Jr: You think what? Bell: I think we will have to approve it. We raised the question with the State Department as to whether this was the preferenced - and apparently they sort of glossed over that, didn't they, John? They said they didn't think they could go into that at this time. Pehle: I think that is what they decided. H.M.Jr: How do you know that Mr. Hull saw the President twice on it? Pehle: I only know he saw the President from what Mr. Livesey told me, but the letter says this matter has been discussed with the President. H.M.Jr: May I see the letter? Well, there is nothing to do but do it. 46 - 7 - White: I think in justice to all other creditors, that some publicity might be given to that so as to acquaint other creditors with the acceptance of that principle so there won't be any favoritism; so if there are other creditors that have funds that they would like to get out on that basis, they would know that it is being done. Bell: I take it it will receive publicity. Pehle: I think the minute it comes out it will receive -- H.M.Jr: Well, I think also from the standpoint of speculation in the stock that if you are going to do it, I would announce it tonight after the market closes 80 there is no inside information. Cochran: There has already been a story in the press that this was anticipated. H.M.Jr: I would do it after three o'clock tonight. Bell: We will merely announce that we have granted the license. H.M.Jr: That is enough. Pehle: Should we take an affirmative step to see that nothing is announced before then? They are working out the deal this morning between the Federal Reserve Bank who sent a man down with the checks -- H.M.Jr: Don't accept it until three o'clock. Pehle: Don't give any license until three o'clock? H.M.Jr: That is right. 47 - 8 - Pehle: We are taking 8. chance on a possible revocation coming through from Roumania before then, and it is 13 million dollars. H.M.Jr: All right, do it the may we used to do the gold prices. Before the ink is dry let Chick go to the Dow Jones people and put it on the ticker the same second. The second it is signed, tell Chick Schwarz and he tells it to the boys and within five seconds it is on the ticker and nobody gets a break. Pehle: I think that is better. I know they are worried about 8 revocation. H.M.Jr: All right, we will do it that way, the way we used to handle the gold prices. Pehle: The other matter was, I mentioned before -- H.M.Jr: You can do it another way. You can do it before the market opens. Pehle: What time does it open° H.M.Jr: Ten o'clock. Bell: It wouldn't be ready that soon, would it? Pehle: We will be ready. We are ready right now. Whether they will be ready I don't know. H.M.Jr: Couldn't you say we are going to approve it? Schwarz: Then everybody will have the information before the market opens. Pehle: Yes, I think we can do that. Can I go out and start it? 48 - 9 - H.M.Jr: Why don't you go ahead and go out and if you can get it out before ten o'clock, everybody gets - eleven million dollars to the stockholders of I. T. & T. is a tidy sum. Schwarz can go with you. Go ahead, Schwarz. Cochran: Has Knoke spoke to you this morning? Pehle: No, but I will call him right away. Cochran: He was trying to get me. (Mr. Pehle and Mr. Schwarz left the conference.) Kuhn: I have nothing except that Amherst Professor whom you want to see tomorrow. Are you going to see him tomorrow? H.V.Jr: I phoned him yesterday. Did you know I phoned him? Kuhn: No. H.V.Jr: Yes. I phoned him. You (Klotz) make a note. Odegarde will be here at 9:15 Wednesday. Kuhn: I have got a couple of other suggestions, but they can wait until he gets here. H.V.Jr: Good. 9:15 Wednesday. Kuhn: May I see you a minute or two before Mowrer comes in? H.V.Jr: Sure. Kuhn: I think I know what he has got in his mind. H.V.Jr: Dr. Viner, what I would like to do, if you 49 - 10 - would concentrate for me, first, everybody in the shop here - not everybody - you can find out from Mr. Bell, but Bell and White and Haas have been working on an answer for the President, a confidential memorandum, on the Eccles memorandum, and if you could get in on that before I see it, I would appreciate it. Now, the other thing, at the same time you talk to Haas, he will tell you what I was thinking of in terms of a positive program. I mean, the two things - I mean rather than, if you don't mind, this foreign stuff. This is in your field. You did the banking study for me. The two things, one the President asked us to analyze the Eccles thing and point out the good and bad points. The other thing is, I have an idea as to a positive program and I told it to Haas. Bell laughed at me. Bell: No, I didn't laugh at you. I laughed at the air up there on the farm. H.M.Jr: I mean you laughed with me. You thought the air was a little strong up there. It is all right but get that from - you could be most useful to me if you would just stick on that. I mean, the other stuff - well, that is right now what I need. I think you could help me most there. I don't know what is the status of that memorandum to the President. Bell: Well, it was in fine shape Saturday night, wasn't it, George? Harry hadn't seen it. I don't know whether he has seen it this morning. Haas: Harry saw it late Sunday. 50 - 11 - White: Well, I think there is a little difference of opinion that you might help resolve if you could by any chance give us some indication of what the purpose of the memorandum is. The memorandum as it is presently drafted is in my opinion satisfactory for one purpose and not satisfactory for another, and I think it is & little weak to give the President - I should like to see it made much stronger. On the other hand, if the President is going to use it to give to the Federal Reserve Board as an answer to them -- H.M.Jr: What he said was, "Henry, give me a memorandum which I willmemorize and then destroy. White: I don't know whether the other men understood that but if they did -- H.M.Jr: He said, "I will memorize it and then destroy it. I will show it to nobody." White: Then I feel that the present memorandum is much too weak, but we will have another - if we have another opportunity this morning -- H.M.Jr: You have, because the President - I told Foley last night - isn't seeing me until 9:30 tomorrow on this legislation for the British, so I am not going to - so this other thing I won't get to until tomorrow. White: If you are going to see him at 9:30 tomorrow - do I understand that? H.M.Jr: Yes. White: Then I think you ought to reserve some time late this afternoon -- 51 - 12 - H.M.Jr: But I am not going to see him on this subject. Thite: Oh. H.V.Jr: It is on aid to Britain legislation at 9:30. White: Then we will have time to iron out our difficulties,I think. H.V.Jr: I think the papers are all wrong on what he is going to say. The message that I zot was that he had not finished his message to Congress, and he was going to work on it this morning. Foley: I think that is true. Ben was over here and when I went home last night I left Ben over at the White House where they were still working. Sam had called him just before we left. He had talked with Sam two or three times. H.N.Jr: I don't think this aid to Britain is in the thing. It is in? Foley: Yes. H.V.Jr: It is in? Foley: Yes. E.M.Jr: This form Foley: Yes. H.W.Jr: He has taken our form Foley: 20 far as Ben knew it was consistent with what they had in there. The only thing that Ben wanted done was to set the message un in such a way that he wouldn't foreclose the possibility of doing something by way of Regraded Unclassified 52 - 13 - lease or some such arrangement under existing law in the event the legislation didn't go through, but he said he hadn't - he told Sam that he hadn't been advised that he could do it under existing law and Ben was trying to get him to put back in again the language that he drafted that would say that he wanted the benefit of Congressional approval of the thing -- H,M.Jr: Ts there a way he can do it under existing law? Foley: Yes. H.M.Jr: I mean through the RFC" Foley: No. He has got power in 80 far as the Army is concerned. The Navy could turn the stuff over to the Army and then the Army could do it. H.M.Jr: But he had our original memorandum Friday afternoon. Well anyway, I don't want to rush this Eccles thing, and I will not be able to get it today. I want - Viner can't do it in one day, and do me a good job any more than the rest of you, so we will get at it some time tomorrow. White: That will give us adequate time. Senator Wagner said that they apparently were pushing to get this Taft Bill which embodies Eccles' suggestions. I haven't seen the bill, so I don't know whether it is all or some, and they want to get it before the committee as quickly as possible and talk a little to them about it, and he said, Well, we are not going to let them sweep us off our feet," so I don't know what the progress of that will be, but they - apparently they had hoped to get it before Congress at once. 53 - 14 - H.M.Jr: I can't be swept off my - I mean, now that the situation is as it is, whatever I send the President I want to have time to think about it, and I want time for everybody to think about it. So I mean I won't touch it today. Where was I? Viner? Haas? Haas: Allison killed a small delivery, and I put in a telephone call and here is the explanation I just got. H.M.Jr: Give that to Philip Young. The British - they have 66 engines on hand at Allison awaiting instructions from the British. Can you give a copy of this to Viner? How do you like it? Haas: It is a maiden's answer to a maiden's prayer on one point of view, and a nightmare from somebody elses. H.M.Jr: I tell you one fellow that is going to like it is "North Dakota Gaston." Gaston: Thanks very much. H.M.Jr: Herbert, we are going back to good old first principles, Non-Partison League and so forth and so on. Gaston: In that connection I was going to ask if I might submit 8. short memorandum to Messrs. Viner, White, and Haas and Federal Reserve. H.M.Jr: Sure. Just take a look at that headline on that memorandum. Gaston: Very interesting. H.M.Jr: All right? - 15 - Gaston: That is Larry Sultzer's favorite. Haas: I put & list of people on there that are interested. (Mr. Schwarz and Mr. Pehle returned to conference.) Schwarz: John has just talked to Knoke, who has asked us to hold this up an hour. He can explain the reason I think, that we should. Pehle: The transaction is going through just at eleven o'clock, and they are afraid to announce it in advance for fear there may be either a revocation or some sort of attachment that will hold it up; but they agreed to our announcing it just as it goes through. H.M.Jr: O.K. That gives the boys a chance to buy the stock for one hour. Shall we make a little pool and buy some of I. T. & To Viner: Can I step out for a minute? Gaston: Two of them have gone out already. H.M.Jr: How about 8. little pool? Do you think 10,000 shares is enough to divide up? (Laughter) Foley: We had better sell it short and hold UD the news. White: It is already out, Ed. Gaston: I neglected to tell you that Lucey finished his series Saturday evening of a story on taxation which has been checked over. He sent me quite a bunch of clippings. The heads of some of them were very good. 55 - 16 - H.M.Jr: George, when you leave the room call up Purcell and tell him that I want a copy of all transactions of I. T. & T. from ten to twelve this morning, who did the business. From ten to twelve I want actually every transaction of I. 7. & T. Haas: And the parties involved. H.V.Jr: And the parties involved. Bell: You ought to ask him if there has been any activity in the rast week also. H.M.Jr: You might ask that. Pehle: They got the word Saturday from the State Department that it was going to 20 through. H.M.Jr: Then let's start with Friday. I want to know every share sold and who bought it, and who the actual buyer is, beginning with Friday morning. Let's start with Thursday and do it right. (Laughter) Every share sold, who bought it, and whose account and so forth, beginning with Thursday, through until tonight. hite: What is the date of that letter from Secretary Hull? Pehle: It was dated January 4, Saturday. H.M.Jr: Well, let's start with Thursday morning through Monday night. Pehle: How about sales today H.M.Jr: Everybody. 56 - 17 - Haas: Going to get it? H.M.Jr: From Thursday morning, every sale and who the actual buyer is. Gaston: It might help to have a little graph of the movement of I. T. & T. in the market for the last two or three months up to this point. H.M.Jr: I just wanted to know who is getting in on it. Take a look at it the way Gaston said. Young: As a result of your efforts, Meigs at the Defense Commission with Knudsen's approval has passed on all of these South American aircraft accessory applications, and parts, and so on, cleared them all, on their responsibility regardless of the Army or Navy. H.M.Jr: Good. Young: Which they hope to continue to do and Nelson Rockefeller is very appreciative of what we did over here on it. H.M.Jr: Does he know it? Young: Yes. We worked with Meigs on it. H.M.Jr: Good. Young: And as a result of that, we boosted to the limit minimum limit for clearance up to 50,000 on all of those various -- H.M.Jr: Do you think we could get out a story on that? Young: Yes, I should think so, probably. We haven't got the official documents back yet. We probably will get them today. 57 - 18 - H.M.Jr: When you get them, Chick, why don't you work on them with Bob Horton? Schwarz: Fine. Young: Knudsen was very cooperative the other day on priorities, and that procedure is now established, I hope. H.M.Jr: Yes. The Executive Order setting that Board up hasn't gone though yet, has it? Foley: No, I saw Smith coming out of Knox's office last night, and I asked him and he said he wasn't going to do anything on it until he got the office of Production Management Executive Order signed. He is having trouble with that. Gaston: Steve Early asked the Secret Service to investi- gate the source of Gene Duffield's story, saying that Hillman was to be showed to one side in that Executive Order and given no authority. H.M.Jr: And, of course, you did it. Gaston: Well, I learned about it after they had made some inquiries and I told the Chief that I thought the inquiry by investigative agencies as to the source of stories was a silly business, and Steve Early ought to know it. H.M.Jr: Did you kill it? Gaston: I haven't definitely killed it. They had already done some work. H.M.Jr: I wouldn't do it. Gaston: All right, I will tell Chief Wilson. 58 - 19 - H.M.Jr: Why don't you call up Steve and simply say that I - you can use me and say I will not have the Secret Service used for that purpose. Gaston: The man talked to Gene Duffield and, of course, Gene just laughed at him, and said, "I don't tell where I get my stories. H.M.Jr: I would call up Steve and tell him as far as Secret Service is concerned, we just don't do that kind of thing. He knows better than that. Do you mind calling him up? Gaston: No, I don't mind calling him up. Schwarz: Gene told me about the investigation and said that he got the story from three different people and he wasn't going to name any of them. H.M.Jr: I would call up Steve and would you please call up Gene Duffield yourself and tell Gene that we have killed it, and it was done without either your knowledge or my knowledge? Will you apologize to him? Gaston: I will do that. The Chief just told me about it late Saturday. Viner: What a story that would cause in the press if that came out. H.M.Jr: Well, fortunately Duffield is a friend. It is an outrageous performance. Early knows better than that. If he wants to do that kind of thing, let him use F.B.I. Young: The British have applied for an export license for the erection and maintenance drawings of the Curtiss SFC-4 dive bomber, which are the 50 dive bombers at Martinique. So far as I am 59 - 20 - able to find out, those are the only Navy bombers of that model which are outside of the country. H.M.Jr: Yes. Young: I don't know what that means. H.M.Jr: All right? Young: But it seems peculiar they should have applied for that. H.M.Jr: Now, that stuff which came over from Maxwell, have you got anywhere for the Greeks? Young: On the Republic planes. I have been checking into that. I am trying to find out just now where the planes are. There are about 12 yet to come out of the factory. The rest of them have already been delivered to the Army and part of them will be shipped to the Philippines from the West Coast. H.M.Jr: Philip, in the next day or two we have just got to do something for the Greeks, because I don't want the President to ask me why not. Young: Have you talked to anybody on the Republic P-43's, which are the new ones? H.M.Jr: The Greeks, no, but I am perfectly willing to. - Young: Because they come along in January, February, and March. H.M.Jr: I am perfectly willing to. Young: I think that that ought to be taken up with General Marshall, probably, because he talked about them the other day in that meeting when 60 - 21 - the Secretary called his office. H.M.Jr: Tell Mack that whenever I get through with Foley, I want to see you and we will talk about that, and I will do it at that time. Will you please? Young: Right. H.M.Jr: Harry? White: Here is some various material on shipping, (handing charts to Secretary) and we are ready to talk to you on oil if you want to at any time. H.M.Jr: Well, don't leave this here. You hold onto this oil matter, will you please? White: Yes. The oil and gasoline are still going in very substantial amounts to Japan. I just thought you ought to know that. H.M.Jr: Well, what is his name, Sumner Welles, made a remark to me the other day which I think we might follow up. He said, "I thought we were going to drop the octane content of export gas to 67." He said, "I am surprised we haven't done it before." So just keep that in mind. White: Yes. Of course, the public doesn't know that this stuff is going. The public seems to think that it is embargoed. H.M.Jr: Well, we will see. White: Then there are other things about oil. There is no hurry about it. Senator Wagner made a comment which may be of interest -- 61 - 22 - H.M.Jr: I got & call from him. White: Well, on the holding companies? H.M.Jr: Yes. White: He told you? H.M.Jr: No, I haven't spoken to him. White: Oh. He said that he didn't like this death sentence on the holding companies. He was very reluctant and he was going to take it up with Glass. I didn't discuss it with him. I am merely passing that comment on. I didn't know whether you knew where he stood or not. He said he was wondering whether some compromise might not be found. H.M.Jr: I am sure, but I am not going to compromise. Somebody else can, but I am not going to. You can't compromise with a death sentence. Harold Bell: I think you might give the President authority to extend that period, Mr. Secretary, by executive order. It would help some. H.M.Jr: Oh, that puts him on the spot. Bell: Well, that doesn't hurt. You might have people trying to buy broken up companies, and they might wait right until the deadline and then -- H.M.Jr: Well, they shouldn't. Bell: And then get them very cheaply. H.M.Jr: Well, they have got three years under the bill. 62 - 23 - Bell: Yes, I know, but if they have this authority to extend it, they will never know when the date is actually going to come. H.M.Jr: On the other hand if we work it the other way around, if they thought it was going to be extended, they might keep postponing it. Bell: Well, they would have to work it out some time and the deadline would be whatever the end of the period was in the President's authority rather than a definite three year period. H.M.Jr: Well, we will think about it. Harry, what happened to that book that you had on all the English assets which you said I might take to Cabinet? White: I have another copy. I gave it to Mrs. Klotz. H.M.Jr: Do you have it? Klotz: Yes. White: That is as of several weeks ago. We can give you additional information now. It wouldn't change very much. H.M.Jr: Well, Stewart is going to be here for two days, today or tomorrow, and I want him to take a fresh look at that thing for me. I want everything prepared for him so he can take it and go in 8 room and lock himself up and then be prepared to a sk us questions as though he was a committee on the Hill. The question that I am going to have to answer is why the English haven't got more money, you see. I mean, the English asset position in the thing, I want to turn over to him tomorrow morning. I am going to ask him just to concentrate on that. 63 - 24 - Will you have it ready, Harry? White: Yes, sir. H.M.Jr: Dan? Bell: Bob Pierce who is the manager of the National City's branch in Paris will be in town tomorrow. I thought you might like to talk to him. H.M.Jr: You talk to him. Bell: I am going to talk to him. H.M.Jr: I am just so far behind on my appointments. Bell: I thought I would let him talk to all the other boys, Pehle and White and 80 on. H.M.Jr: Sure. Bell: May we show Archie Lochhead the draft of the Chinese agreement and get his comments? H.M.Jr: Please. Bell: Last spring when we had our Federal Reserve conference, we rode the Federal Reserve Banks of San Francisco, Dallas, and Atlanta pretty hard for not policing their subscriptions, and Clark of San Francisco said he would make another attempt. He sends in a list now which is very good, but the type of security might have had something to do with reduction. The Bank of America group, which subscribed for 44 million 500 thousand of the July bond, subscribes for a million and 8 half of the December note; and the Stewart group, which subscribed for 44 million of the July bonds, subscribed for 5 million of the December note and that whole group, The Bank of America and 64 - 25 - Trans-America and the Stewart group, subscribed for a hundred million dollars of the July note - or the July bond and for the December note only seven million, so they really did some work on it, if this is any indication. I think the type of security had something to do with it. H.M.Jr: I don't get the significance. Bell: Well, the Trans-American group has been the worst offender in padding, and we have never been able to control them because they go through so many companies and these various companies scattered around on the Pacific Coast put in subscriptions that they could never pay for and shouldn't get them. That is the way the banking group has gotten a large amount of government securities which they have put on the market. He has gone to all of them -- H.M.Jr: Who has? Bell: Clark. H.M.Jr: Who is he? Bell: He is the Vice-President of the Federal Reserve Bank of San Francisco. H.M.Jr: I see. Bell: And apparently it has had some results. H.M.Jr: Will you remember that when we go to testify on the bank holding bill as one of the evils of the bank holding companies? Bell: Yes, I would be delighted. 65 - 26 - H.M.Jr: It is a very good point, it is an excellent point. Will you remember that when we go up to testify? Bell: Yes, I will. May I see you about five minutes today some time? H.M.Jr: Sure. Tell McKay that after Foley you come and then Young. Bell: All right. Thompson: Your testimony before the Appropriations Committee is all ready. Do you want to go over it? H.M.Jr: Who is all ready? Thompson: Bell, Gaston, Haas and White. H.M.Jr: Let Ferdinand Kuhn read it, please. Thompson: I have a proposal here for Mr. Bartelt to consolidate the Treasury emergency relief accounting and disbursing offices. They have got to vacate their present quarters -- H.M.Jr: Which office will you close? Thompson: Close the Albany office. The must vacate on that. H.M.Jr: Will I get a kick back on that. Thompson: There will probably be & lot of kick backs on it, but it seems to be a desirable thing to do. H.M.Jr: Then in order to save us - who does my politics? Thompson: Mr. Gaston. 66 - 27 - H.M.Jr: What office is this? Thompson: The offices. emergency relief accounting and disbursing H.M.Jr: That comes under who? Thompson: Bartelt. H.M.Jr: Would you mind calling up the Chairman of the New York Democratic Committee, Mr. James Farley? Explain what it was and was it all right with him to do this? It was something I would like to do. I think if Farley knows about it beforehand -- Bell: The kick would come from two Senators also, Mead and White. Thompson: Twenty-three employees would be dropped. H.M.Jr: I think if Wagner and Mead knew about it beforehand and Farley, if you don't mind. There is no hurry. Don't bother with it today. You can do it tomorrow. Thompson: It also involves the dismissal of Mr. Grubb, who is the accountant in charge at New York City. H.M.Jr: Give Gaston a memorandum on it, and if he could call up these three people saying this is what is going to happen, see? Gaston: Yes. H.M.Jr: I just want Foley to stay behind. 67 January 6, 1941 10:17 a.m. H.M.Jr: Well, Harry spoke to me about the thing and it's perfectly all right with me. Senator Robert Wagner: It seems to me this: now, of course, I'm going to do what he wants as you know, but when the public 1e anxious about things and wants to know, it seems to me - and at & time like this, I don't think it's wise to keep them uninformed. H.M.Jr: Well, I agree with you. W: Now, I don't know, if he has a different idea it's just another case where it'll put me on the spot because they'll be after me on the Committee, you know. H.M.Jr: Yes. Well, the point 18 this: I don't think that the President can get his legislation through unless he does tell the Congress what the situation of the British 18. See? W: That's my opinion, and I think I'm going to tell him that. Has anybody told him that at all? H.M.Jr: Not that I know of. W: The trouble is you know they don't tell him these things. H.M.Jr: Not that I know of, but if he asks me, I'd certainly tell him that, and I've been pre- paring myself just for that kind of 8 call from the Hill because I was sure that when they got his suggestions 88 to how to do this thing the first question they're going to ask 1s, well, just how broke are they? W: Yeah, and it would be a better thing if I started that rather than to have it started in Foreign Relations where undoubtedly that legislation would have to go, but of course it would be in the form of an amendment to the Neutrality Act I would imagine. Regraded Unclassified 68 - 2 - H.M.Jr: I don't think that that's the way It's going to be, Bob. W: Well, I don't know. I haven't asked him and I only know what I read in the paper. They're not very accurate. H.M.Jr: Yeah. W: Well, there's nothing else you have on your mind? H.M.Jr: Well, yes, this other thing. We've been working with Carter Glass on this bank holding thing and anytime that you're ready I'd like to talk to you about it. W: Now he talked to me the other day about that and he told me - he said that you had talked to his but of course he wanted me to be consulted. Well, I said ..... H.M.Jr: Well, you know ..... W: Yes, well now wait a minute. I said, now, I told Henry Morgenthau at one time that on these matters he should always talk to you ..... H.M.Jr: That's right. W: ..... and it was entirely - that it vas a very clear understanding about that Carter. He needn't worry about that, and he talked about ne introducing it. I said, no, you introduce it now that it's set. Well, he said, there are a couple of matters there that I'm not sure that I'm with the Secretary on and I'd like to discuss those with you because I want your judgment as to what we can get out of the Committee and all that sort of thing. So I said, all right, I'll talk to you as soon as you're ready. Now he'll probably want to talk to me. Now what he had in aind particularly I think 1s, he said to ae that he don't like that 1dea of 69 - 3 - H.M.Jr: I Bee. W: He'd like to have it the way he had it when he introduced the bill, you know, from now on. H.M.Jr: Well, you mean to freeze W: To freeze, yes, exactly. H.M.Jr: Well, that doesn't suit me at all. W: So I said what we'd better do, Carter, is when we are ready let's ask the Secretary to meet with us and let's talk it out that way, which was agreeable to him. H.M.Jr: I'd like to do that very much. W: Now, that's the status of it. H.M.Jr: Well, now, if you'll set the time ..... W: Did you give it to Steagall? H.M.Jr: No. Carter told us not to. W: Yeah. Well, he doesn't get along well with him. H.M.Jr: But I made it perfectly plain to him that when I saw him that I was simply carrying out the suggestion, because you always say to me.... W: Oh, yeah. Well, there's no - I told him that same thing myself too. Oh, I think what he wanted to be sure of was that it was all right with me as chairman, you know. H.M.Jr: Well, I had a call in, you remember, and you called me. W: Oh, yeah. Well, there's no talk about that. I cleared that with him, but I think he wanted to make sure for himself. So I tell you, I'll talk to him today H.M.Jr: Will you, and will you do this: I'd like to mention it to Barkley and when we meet I wish that Barkley would sit in on it. 70 - 4 - W: Yes. H.M.Jr: So you mind if I call Barkley? W: Not & bit, not a bit. I don't mind any of those things. H.M.Jr: Well, and then I'm going to say that if and when we meet, I would like to meet with you and with Carter and with Barkley. W: Yeah. That's fine with me. H.M.Jr: All right, because once before I didn't tell Barkley before I came up on the Hill and he was hurt. W: Yeah. H.M.Jr: So I don't want it to happen again. W: All right. H.M.Jr: So it would help me a little bit if he could be included. W: Oh, sure, that's all right with me. H.M.Jr: Well, in not too distant future - do you think you can do it this week? W: Well, I'm going to try to. I'm settling down. I'm dieting and I've lost about 8 pounds now and I feel a little better. H.M.Jr: God, you must be handsome as hell. W: (Laughs). H.M.Jr: The line for the girls forms on the right, eh. W: You can't think of those things these days - you can, but not me. H.M.Jr: All right. W: All right, Henry. 71 January 6, 1941 10:25 a.m. H.M.Jr: Hello. Senator Barkley: Hello. H.M.Jr: Alben, Henry talking. B: How are you? H.M.Jr: I'm fine. Alben, I've been talking with Senator Glass over & proposed bill on bank holding companies. Hello? B: Yeah. H.M.Jr: And I'm very anxious that we do something, and he has it under consideration, and Wagner said he'd like to have me come up and talk to him and when I do I'd like very much if you'd be there. B: All right. You haven't fixed any time yet. H.M.Jr: No. If you'd like to have something in advance - to give you an idea - to read it before we come up, I'll be glad to send it up to you. B: All right. Suppose you do that. H.M.Jr: Well, I'll send it up, but we've fussed around with these bank holding companies now and I think it's time we did something. B: Yeah. Well, I think Glass has, as I understand it, has always been rather sympathetic with the proposal that they ought to be handled.- - used to be - I don't know whether he - I haven't talked to him lately. H.M.Jr: Well, here's the difference between the way I'm thinking and the way Glass is. Glass would like to freeze the present situation and simply say well whatever it 16 at present we'll let that - but they can't grow. I'd like to have it so that over a period of say several years these kind of companies be liquidated and we don't have bank holding companies. 72 - 2 - B: Sort of a death sentence. H.M.Jr: Definitely. B: A postponed execution of it. H.M.Jr: Yeah. Give them three years. B: Yeah. Well, I'll be glad to talk with you about it and in the meantime get any memo- randum you want to send over. H.M.Jr: I'll send one up today. B. All right. H.M.Jr: Thank you. B: Good-bye. 73 1941 n door Denster in accordance with our telephone commission relative to the bank holding company problem, I - transmitting herevith e short comparing the principal features of 8. 3575 (75th Congress), the bank holding company bill introduced w Senators Class and Holder is 1938, a copy of which to enclosed, and the type of bill preferred by the Treasury Depart- sent which me recently diseased with Senater Glass. In addition, I as enclosing a americates giving - of the sulient facts concerning Transamerica Corpora- tion and the Bank of America National Trust and Sevings Association and the difficulties which the office of the Comptreller of the Currency has encountered is the supervision of that bank. Very truly yours, (Signed) H. Morgenthau, Jr. Secretary of the Treasury. In. Albon W. Barkley, Orig start endoswery 7 special I I 1 messinge at 4:55 pm 1/6/41, from General Cannel's office I Allowis 7/6/19 74 STRICTLY CONFIDENTIAL COMPARISON or 8. 3575 (7538 CONGRESS) 180 MM SOLDING COMPANY LAGIALATION CONTEMPLATED BY THE TREASURY DEPARTMENT. B. 3575, introduced by Sensions Gase end Belder is 1938, if ensabed into law, would operate to "froom" the bank helding tenjety by prohibiting further expansion of bank holding companies eat by placing certain restrictions upon the sperations of such concenies. the Mill is brief defines a holding coupany of an insured bank as . congrage which and of holds more than 10 persent of the charge of expital stock of as insured bank or dominstes the election of the najarity of directors of an insured bank. (See. 2(7) end (#). page 20) 8. 3575 would not abolish bank holding companies or require then to dispose of any bank stock which they bold or sequire prior to the effective date of the Act, but would prohibit then from acquiring any more votteg stock of any insured bank and would probibit any company from acquiring sufficient voting stock of an insured bank to become a helding company. (See. 4, page 4.) in insured bank which is controlled by a helding con- pany would net be parmitted to make loans to or cellsteralized with 100 curities issued w, purchase securities from, or invest in securities issued w, the helding company or any of its subsidiaries; nor sould such a bank establish say now OF additional branches. (Sec. 3, page " sec. 5, page 5.) 8. 3575 contains - number of sametions for enforeing its provisions. If a holding company acquired any additional stock in en insured bank after the effective date of the Act and thereby violsted the Act 18 would be unlawful for such insured bank to pay any dividends to such holding company. (See. 10, page 8.) s violation of the Act would constitute a misdemeaner, with a $5,000 fine for each violation by B company, and & $5,000 fine or not exceeding one year's ingrisonment, or both, for each violation by a. natural yersen. (See. 14, page 12.) If an insured bank or a holding company of such insured bank violated the 202, the insured bank night become ineligible to receive deposits of public funds of the United States, and night have its insurance terminated by the Federal De- posit Insurance Cerporation. The Federal Deposit Insurance Corporation also could obtain injunctive relief free the courts to enjoin violations of the Act. Although 5. 3575 eight help the situation somewhat by plasing certain rectrictions upon the activities of bank holding companies and insured banks controlled by such companies, 18 10 believed that the bill does not " far enough to reasdy the evile inkerent in the control of insured banks by holding compenies. The draft of legislation which the Treasury Depart- sent has in aims would prescribe a definite period within which holding 75 company control of banks would have to be terminated. It muld make 10 underful after June 30, 1944 for any company to on or control in up manner more than 10 persent of the voting cosurities of an insured bask of to control is any name the election of the majority of the directors of at insured bank. s violation of the set would subject a violating company to 8. fine, and a violating individual to a Sine, or to imprisem- met, or both. the 20ard of Directors of the Federal Deposit Insurance Carporation would be authorized to obtain injustive relief free the courts to enjoin violations, and would also be authorised, after hearing, to remove any officer or director of 48 incured bank visa was responsible for, of failed to discless to proper authorition, may violation of the Mr. Is addition, the draft of legialation contemplated by the Treasury Department would provide that after the date of the approvel of the in 12 sould be unlewful for say national bank, over the objection of the Comptroller of the Currency, or any State bank insured by the Federal De- posit Insurance Corporation, over the objection of the Corporation, to declare or to pay any dividend. Such a provision would be necessary be step holding companies from blooding banks by the dealaration and payment of excessive dividends in the period between the date of approval of the Act and the termination of holding company control of banks on June 30, 1944. In addition, such a vote upon excessive dividends would be 200M- sary after 1944 is order to insure that no company or group of individuals who night devise a scheme to circumvent the Act and obtain centrel of as insured bank could bleed the bank by distating the declaration and payment of excessive dividends. Sush a veto over excessive dividends would - stitute the most effective single method for assuring the continued and- ness and stability of the banks insured by the Federal Deposit Insurance Corporation. DJ8100 typed 1.6.41 Regraded Unclassified 76 75TH CONGRESS 3D SESSION S. 3575 IN THE SENATE OF THE UNITED STATES JANUARY 5 (calendar day, MARCH 2), 1988 Mr. GLASS and Mr. McAnoo introduced the following bill; which was read twice and referred to the Committee on Banking and Currency A BILL To provide for the regulation of bank holding companies and affiliates, 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 the "Bank Holding Company 4 Act of 1938". 5 SEC. 2. (1) "Insured bank" means any operating 6 bank, banking association, trust company, savings bank, or 7 other banking institution, the deposits of which are insured 8 in accordance with the provisions of section 12B of the 9 Federal Reserve Act, as amended. 10 (2) "Person" means any individual, partnership, asso- 11 ciation of persons, or company. 2 1 (3) "Company" means any corporation, incorporated 2 bank, banking association, insured bank, joint-stock com- 3 many, business trust, or trustees of any voting trust. 4 (4) "Director" means any director or trustee of any 5 company, or any individual who performs similar functions 6 in respect of any company. 7 (5) "Securities" include notes, drafts, acceptances, 8 bonds, debentures, capital notes, voting trust certificates, 9 capital stock, treasury stock, warrants, and rights to sub- 10 scribe to or certificates of deposit for any of the foregoing. 11 (6) "Capital stock" includes common and preferred 12 stock, capital notes, and debentures. 13 (7) "Control" means the legal or equitable ownership 14 or holding of more than 10 per centum of the total number 15 or par value of the outstanding shares of capital stock or total 16 number of voting rights for electing directors, or the domina- 17 tion. directly or indirectly, in any manner of the election of 18 a majority of the directors of an insured bank or any other 19 company, and wherever used in this Act the word "control" 20 in any grammatical form shall have this meaning. 21 (8) "Holding company" of any insured bank means any 22 company which controls the insured bank or controls any 23 other company which in turn controls the insured bank, and 24 every company in any series or succession of companies in 25 any system of controlling and controlled companies, in which Regraded Unclassified 77 8 1 any company or combination of companies control the in- 2 sured bank. 3 (9) "Affiliate" of any insured bank means any com- 4 pany which with respect to the insured bank is a holding 5 company, every company in any series or succession of com- 6 panies constituting any system of controlling and controlled 7 companies, in which any company is controlled by the in- 8 sured bank or by such holding company or by any company 9 or combination of companies in such system, and any com- 10 pany having one or more shareholders who have legal or 11 equitable ownership of more than 50 per centum of the 12 number or par value of the outstanding shares of capital stock 13 or voting rights for electing directors of both the company 14 and the insured bank: Provided, That notwithstanding the 15 foregoing, any company engaged solely in the business of 16 (a) operating a safe-deposit vault; or (b) holding or op- 17 erating the building and premises occupied by any insured 18 bank, shall not be an affiliate of the insured bank. 19 (10) "Effective date" means the date of enactment of 20 this Act. 21 SEC. 3. It shall be unlawful for any insured bank, 22 directly or indirectly or by any device whatever (1) to 23 make any loan or extension of credit to any of its affiliates 24 or to invest any of its funds or any funds administered by 25 it, in any securities issued or guaranteed by any of its 4 1 affiliates; or (2) to purchase any securities from any of 2 its affiliates; or (3) to make any loan or extension of 3 credit to any person secured by any collateral consisting 4 of any securities issued or guaranteed by any of its affilintes, 5 Notwithstanding the foregoing, any insured bank, which 6 prior to the effective date, shall have made any loans, exten- 7 sions of credit, or investments which by virtue of this section 8 would constitute prohibited loans, extensions of credit, or 9 investments if made after the effective date, shall have three 10 years after the effective date within which to collect, sell, 11 or otherwise dispose thereof. During said three-year period 12 any such lonns or extensions of credit may be renewed or 13 extended, but no renewal or extension shall be given beyond 14 said period. Within two years after the effective date, 15 where necessary to save itself from loss, any such insured 16 bank may accept securities issued or guaranteed by its 17 affiliates, as payments to apply on or as collateral security 18 for loans or extensions of credit made prior to the effective 19 date to any person other than one of its affiliates, and in 20 such event the insured bank shall collect, sell, or otherwise 21 dispose of such securities within three years after the 22 effective date. 23 SEO. 4. It shall be unlawful for any company to acquire 24 any capital stock, or voting rights for electing directors, 25 of any insured bank or of any holding company of any Unclassified 78 b 1 insured bank, if such company is or upon such acquisition 2 would become A holding company of any insured bank. 8 SEC. 5. No insured bank shall éstablish or operate or 4 be permitted to establish or operate any new or additional 5 branchés while such insured bank is controlled by any hold- 6 ing company. 1 SEC. 6. Every company shall before the expiration of 8 sixty days after the effective date cause to be filed with the 9 cashier or secretary of every insured bank as to which it is 10 an affiliate, an affidavit to be signed by one of its executive 11 officers having knowledge of the facts, which shall set forth 12 as of the effective date (1) the total number and par value 13 of the outstanding shares of capital stock and total number 14 of voting rights for electing directors of such insured bank, 15 which such company owns or holds, the names of the per- 16 sons in whose names such shares or rights are issued and a 17 full description of any instruments evidencing such shares 18 or rights; (2) the amount of any indebtedness of such com- 19 pany to the insured bank, direct and indirect, the maturity 20 dates, and the person in whose name such indebtedness 21 stands, if other than the company; and (3) an itemized 22 statement of its nssets and liabilities as of the last day of the 23 preceding month and of its earnings for the current fiscal 24 year to the last day of the preceding month, if the company 25 be directly or indirectly indebted to the bank. Within Regraded Unclassified 6 1 twenty days after the close of each calendar month there- 2 after, if there has been any change in any of the matters 3 covered in such affidavit, except item 3 thereof, during such 4 month, the company shall file a like report, so long as it 5 shall continue to stand in the relation of an affiliate to such 6 insured bank. Every company shall file within thirty days 7 after the last day of June and December of each year with 8 the cashier or secretary of every insured bank as to which 9 it is an affiliate a like sworn itemized statement of its assets 10 and liabilities as of the last day of June and December of 11 each year and of its earnings for the current fiscal year to 13 the last day of June and December of each year. Every 13 insured bank shall retain such Iffidavits and statements on 14 file ns a part of its records for at lenst three years. 15 SEC. 7, Every insured bank, holding company, and 16 affiliate shull file with the Federal Deposit Insurance Cor- 17 poration such annual, semiannual, quarterly, and other 18 periodic and special reports, the answers to such specific 19 questions and the minutes of such directors', stockholders', 20 committees', and other meetings, as the Corporation by 21 order may prescribe as necessary or appropriate for the 22 proper consideration of the condition of any insured bank 23 or for the proper supervision of the Federal deposit insur- 24 ance system, and the Corporation may make such investiga- 25 tions of any insured bank, holding company or affiliate, and 79 7 1 the books and records thereof, as shall be necessary (If 2 proper to disclose the condition of any insured bank or the 3 effect of the relations between any holding company or 4 affiliate and any insured bank, upon the Federal deposit 5 insurance system or any insured bank. And such investi- 6 gations shull be made at the expense of the Corporation; 7 and it shall be unlawful for any insured bank, holding com- 8 pany, or affiliate knowingly to make any false statement 9 or report to the Corporation or to refuse authorized repre- 10 sentatives of the Corporation access to any information re- 11 quired in connection with any such investigations. 12 SEC. 8. After the effective date, the Board of Governors 13 of the Federal Reserve System shall not, without the consent 14 of the Board of Directors of the Federal Deposit Insurance 15 Corporation, grant or extend the operative effect of any 16 voting permit to any holding company affiliate under the 17 provisions of section 2 of the Banking Act of 1933, as 18 amended (U. S. C., title 12, sec. 61). 19 SEC. 9. Whenever it shall appear to the Board of Direc- 20 tors of the Federal Deposit Insurance Corporation that any 21 person is engaged or about to engage in any acts or practices 22 which constitute or will constitute a violation of the provi- 23 sions of this Act, the Board in its discretion may bring an 24 action in the proper district court of the United States or the 25 Supreme Court of the District of Columbia, to enjoin such Regraded Unclassified 8 1 acts or practices and to enforce compliance with this Act, 2 and upon a proper showing a temporary or permanent injune- 3 tion, decree, or restraining order shall be granted without 4 bond. The Corporation may transmit such evidenco as may 5 be available concerning such nets or practices to any United 6 States attorney or to the Attorney General, who, in his dis- 7 cretion, may institute appropriate criminal proceedings under 8 this Act. The proper district for the commencement of any 9 injunction proceeding pursuant to this section shall be any 10 district wherein any act or transaction constituting the viola- 11 tion occurred or in which the defendant is an inhabitant or 12 transacts business, and process in such cases may be served 13 in any district in which the defendant is an inhabitant or 14 transacts business or wherever the defendant may be found. 15 Judgments and decrees so rendered shall be subject to review 16 as provided in sections 225 and 347 of title 28 of the United 17 States Code, and section 7, as amended, of the Act entitled 18 "An Act to establish a court of appeals for the District of 19 Columbia", approved February 9, 1893 (D. C. Code, title 20 18, sec. 26). No costs shall be assessed for or against the 21 Corporation in any proceeding under this Act brought by it 22 in any court. 23 SEO. 10. It shall be unlawful for any insured bank to 24 pay to any holding company, directly or indirectly, any 25 dividend on any shares of its capital stock so long as such Regraded Unclassified 80 1 holding company shall continue to hold any shares of the 2 capital stock or voting rights for electing directors of such 3 insured bank, or of any company which is 9 holding company 4 with respect of such insured bank, acquired in violation of 5 any provision of this act. 6 Sed. 11. Whenever the Board of Directors of the Fed- 7 eral Deposit Insurance Corporation shall determine, after 8 reasonable notice to the company affected an opportunity for 9 a hearing, that any insured bank or any company which with 10 respect to any insured bank is a holding company has violated 11 any provision of this Act, and that such action is necessary 12 for the protection of the public or the safety and integrity of 13 the Federal deposit insurance system, it may make a finding 14 of the facts of such violation. Upon making such finding, 15 the Board of Directors of the Federal Deposit Insurance Cor- 16 poration may cause the same to be published in the Federal 17 Register and thereafter the insured bank shall be ineligible 18 to receive deposits of public funds of the United States or of 19 any public officer, agent, or instrumentality of the United 20 States. Upon making such finding, the Board of Directors 21 of the Federal Deposit Insurance Corporation may proceed 22 to terminate the insured status of the insured bank, in like 23 manner 88 provided in subsection (i) of section 12B of the 24 Federal Reserve Act, as amended. Upon notification in 35 writing by the Board of Directors of the Federal Deposit In- Regraded Unclassified 10 1 surance Corporation to the Board of Governors of the Fed- 3 eral Reserve System of any such finding of such violazion on 3 the part of any holding company and request for such revoor- 4 tion, the Board of Governors of the Federal Reserve System 5 forthwith shall proceed to revoke any voting permit thereto- 6 fore granted to such holding company as a holding company 7 affiliate under the provisions of section 2 of the Banking Act 8 of 1933, as amended (U. S. O., title 12, sec. 61) The 9 Board of Directors of the Federal Deposit Insurance Cor- 10 poration shall have the right, upon such terms and conditions 11 as may be consistent with the public interest, the safety and 12 integrity of the Federal deposit insurance system and the 13 purposes of this Act, to review, suspend, modify, or revoke 14 any order or finding made pursuant to this section. 15 SEC. 12. Any person or party aggrieved by an order 16 issued by the Board of Directors of the Federal Deposit 17 Insurance Corporation under this Act may obtain a review 18 of such order in the circuit court of appeals of the United 19 States within any circuit wherein such person resides or bas 20 his principal place of business, or in the United States Court 21 of Appeals for the District of Columbia, by filing in such 22 court, within sixty days after the entry of such order, a 23 written petition praying that the order of said Board be 24 modified or set aside in whole or in part. A copy of such 25 petition shall be forthwith served upon any member of said 81 11 1 Board, or upon any officer thereof designated by the said 2 Board for that purpose, and thereupon the said Board shill 3 certify and file in the court IL transcript of the record up$n 4 which the order complained of was entered. Upon the 5 filing of such transcript such court shall have exclusive 6 jurisdiction to affirm, modify, or set aside such order, in 7 whole or in part. No objection to the order of said Board 8 shall be considered by the court unless such objection shall 9 have been urged before said Board or unless there were 10 reasonable grounds for failure 80 to do, The findings of 11 the said Board as to the facts, if supported by substantial 12 evidence, shall be conclusive. If application is made to the 13 court for leave to adduce additional evidence, and it is shown 14 to the satisfaction of the court that such additional evidence 15 is material and that there were reasonable grounds for failure 16 to adduce such evidence in the proceedings before said Board, 17 the court may order such additional evidence to be taken 18 before the said Board and to be adduced upon the hearing 19 in such manner and upon such terms and conditions as to 20 the court may seem proper. Said Board may modify its 21 findings as to the facts by reason of the additional evidence 22 80 taken, and it shall file with the court such modified or 23 new findings, which, if supported by substantial evidence, 24 shall be conolusive, together with its recommendation, if any, 25 for the modification or setting aside of the original order. 12 1 The judgment and decree of the court, affirming, imindifying, 2 or setting aside, in whole or in part; any such order of sald 8 Board shall be final, subject to review by the Suprimes Code 4 of the United States upon certiorari or ocetification iss pilo- 5 vided in sections 346 and 347 of title 28 of the United Stafes 6 Code. The commencement of proceedings under this section I shall not, unless specifically ordered by the court, operate 8 as a stay of said Board's order. Hade 8 9 SEC. 13. It shall be unlawful for the individual directors, 10 officers, or agents of any company to authorize, order, or do 11 any act constituting in whole or in part a violation of the 12 provisions of this Act by such company. 13 SEO. 14. Any person who knowingly violates any pro- 14 vision of this Act shall be guilty of a misdemeanor; any 15 company which knowingly violates any provision of this 16 Act, upon conviction thereof, shall be punished bigs fine of 17 not exceeding $5,000 for each violation, and any natural 18 person who knowingly violates any provision of this Act, 19 upon conviction thereof, shall be punished for each violation 20 by fine of not exceeding $5,000 or by imprisonment for not 21 exceeding one year, or by both, in the discretion of the 22 court. 23 SEO. 15. No provision in this Act shall apply to, or be 24 deemed to include, the United States, 8 State, or any politi- 25 cal subdivision of & State, or any corporation which is Regraded Unclassified 82 13 1 wholly owned, directly or indirectly, by any one or more of 2 the foregoing, or any corporation which is managed by a 3 person or persons appointed pursuant to law by the Presi- 4 dent of the United States or the Governor of a State or the 5 chief executive of any political subdivision of 8 State, or any 6 officer, agent, or employee of any of the foregoing acting 7 as such in the course of his official duty or to any company 8 which is determined by the Board of Directors of the Fed- 9 eral Deposit Insurance Corporation, on application for 10 exemption or of its own motion, to be only incidentally a 11 holding company and to be primarily engaged in business 12 other than holding the stock of or managing or controlling 13 banks, banking associations, savings banks, or trust com- 14 panies, or to be only incidentally or temporarily an affiliate 15 of any insured bank. 16 SEO. 16. If any provision of this Act or the application 17 of such provision to any person or circumstances shall be 18 held invalid, the remainder of the Act and the application 19 of such provision to persons or circumstances other than those 20 as to which it is declared invalid shall not be affected 21 thereby. 75TH CONGRESS Bo SESSION S. 3575 A BILL To provide for the regulation of bank holding companies and affiliates, and for other pur- poses. By Mr. GLASS and Mr. McADoo JANUARY 5 (calendar day, MARCH 2), 1938 Read twice and referred to the Committee on Banking and Currency 83