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Volume 6, June 1 – June 15, 1935
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Volume 6, June 1 – June 15, 1935
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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76
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Working and Quality Constitue, 4 For: present
Conditions heavy Option, spaced 1V:4/36
77
11 Botter and Dystom deplare any is accounting,
Shink Insurance of parting - Date antion
: Uphao called to phone - Valid Michael Time
National Superve Board, 24 - 962 video
assisted any statement 10
Regraded Unclassifier
Book
Page
American Bankers' Association
See Banking Legislation
- B -
Banking Legislation
Discussion of - 6/13/35
VI
61
a) HMJr refers to fact that, unless there 1s
additional legislation before 7/1, so-called
permanent plan of deposit insurance (part of
Banking Act of 1933) will go into effect
Second meeting - evening of 6/13/35
63
a) Crowley says he is worried about possibility
of losing 4000 banks and the effect on the
fund and the banking structure of the country
b) O'Connor thinks Federal Deposit Insurance Corporation
is in jam - no chance of Banking Bill of 1935 being
enacted by 6/30
c) HMJr thinks if new bill is not passed and permanent
plan of deposit insurance must go into effect 7/1,
there should be a joint statement from Federal Reserve,
Federal Deposit Insurance Corporation, Comptroller,
and perhaps Reconstruction Finance Corporation -
stockholder in many of the banks
d) HMJr quotes Tom K. Smith: "If Eccles will agree to
Open Market Committee of 6 members of Federal Reserve
Board and 5 Governors, 1935 Banking Bill can be
passed easily"
e) HMJr thinks FDR, Eccles, and he should see Senator
Glass concerning; if Ecoles annoys Glass, then Eccles
"could stay at home"
f) Tom K. Smith joins group; says he thinks if an agreement
can be reached concerning 6-5 Open Market Committee and
a 25% top on deposit reserves, they can get Banking Bill
passed
g) HMJr thinks it his duty, as fiscal officer, to see that
at least two weeks' notice be sent to all bankers con-
cerning possibility of insurance on 7/1
h) HMJr phones FDR who agrees to 6-4 Open Market Committee
but not 8. 6-5 Committee; Tom K. Smith objects; Eccles
says he has in writing that FDR will accept 8-5 Committee
1) Tom K. Smith tells HMJr American Bankers' Association
sticks for 6-5 membership of Open Market Committee 6/14/35
76
Appointment with Senator Duncen V. Fletcher, chairman of
Banking and Currency Committee, arranged by FDR; present:
HMJr, Coolidge, West, Upham; Senator Byrnes present 6/14/35
77
1. Fletcher and Byrnes deplore delay in Glass' subcommittee,
think issuance of publicity statement might force action
2. Upham called to phone and told by Elliott Thurston
Federal Reserve Board, in session, had voted unanimously
against any statement to public
Regraded Unclassifie
- B - (Continued)
Book Page
Banking (Continued)
HMJr tells Eccles statement will be issued if it has
to be done by Secretary of Treasury
VI
80
O'Connor (telephone conversation: Book VI, page 85+)
leaves Federal Reserve Board meeting to talk to
HMJr; also thinks statement inadvisable - may be
upsetting to banks and bank depositors
Crowley says Federal Reserve Board, Federal Deposit
Insurance Corporation, and Comptroller will have
another joint meeting
HMJr tells O'Connor when Senator Byrnes suggested HMJr's
staying on Federal Reserve Board and Comptroller going
off, HMJr stated both stayed or both went off
82
Copy of proposed statement
83
Board of Tax Appeals
Kitchin, Mills (son of Claude Kitchin, former chairman,
Ways and Means Committee) recommended by Congressman
Doughton (see Book IV, pages 44 C-E); HMJr annoyed
when he finds Oliphant has done nothing about
recommendation 6/12/35
59
Bruce, Edward
$500,000 allotted for his art project; Bruce 80 informed
in the hospital 6/3/35
2
Budget, Director of
HMJr, Bell, and McReynolds want Tom K. Smith as Director;
plan for permanent Fiscal Assistent Secretary in charge
of accounting and fiscal matters discussed; HMJr would
keep Bell as Special Assistant until 12/31/35 as slight
compensation, 6/11/35
51
Tom K. Smith tells HMJr he cannot come as Director;
HMJr thinks bankers have worked on him 6/14/35
81
- C -
Cochran, Merle (Second Secretary - American Embassy, Paris)
Recommendation for promotion by HMJr 6/3/35
1
Cohen, Bernard (Dr.)
See Narcotics
87
Commercial Molasses Corporation (successor to Molasses
Products Corporation)
See Molasses
36
- D - -
Doughton, Robert L. (Congressman, North Carolina)
See Board of Tax Appeals 6/12/35
59
See Federal Alcohol Control bill 6/12/35
59
Regraded Unclassified
- E -
Book
Page
Emergency Relief
See Unemployment Relief
- F - -
Federal Alcohol Control Bill
Congressman Doughton asks HMJr concerning; HMJr says
bill Charles West has is satisfactory to Treasury;
points out Treasury does not want to get into social
aspects of bill - Choate "is doing a good job on
that" 6/12/35
VI
59
HMJr tolls Choate, "We do not want control in the
Treasury"; tells Choate about conversation with
Doughton 6/13/35
75
Federal Reserve Board
See also Banking Legislation
See also Open Market Committee
HMJr talks to James Moffett about Secretary of Treasury
and Comptroller of Currency going off Board, so far
as voting is concerned 6/14/35
80 C-G
HMJr talks also to O'Connor; says Secretary and Comptroller
will stay or go together 6/14/35
80 H-I
Financing, Government
Open Market Committee meeting 6/7/35
40
a) Coolidge announces conclusion to offer 5-year
12% note to be exchanged for notes maturing 6/15
and 8/1; interest on 8/1 notes will be paid only
to 6/15
6/10/35 - Offering of 5-year 12% Treasury notes of
Series B - - 1940 in exchange for Treasury notes of
Series A - - 1935 maturing 6/15/35 and Series B - - 1935
maturing 7/1/35
49 A
a) Subscription books close 6/13/35
57 A
b) Subscriptions amount to $738,373,400;
allotments 6/18/35
VII
4.4
Tentative plan discussed by HMJr and Coolidge. 6/11/35
VI
58
Last week in June borrow enough for July needs
Last week in July borrow enough for August needs
Middle of September new large bond issue to take
Government through 12/15
Coolidge wants an offer for conversion of the
#1 billion, 200 million, due 10/15 - last 41's
Earl Bailie thinks Treasury is in market too often;
old policy of four times yearly best 6/12/35
After talk with Kiplinger, HMJr tells Bell following
plan: on 6/24 to get money for 7/1 and get enough
to last until 7/15 ($500 million)
60
$4 Billion 8 Fund
See Unemployment Relief
Regraded Unclassified
- G - -
Book
Page
Garten, Oscar (Druggist)
See Narcotics
VI
87
Gold
See Stabilization
Government Purchasing
See National Recovery Administration
9,22
- K - -
Kaplan Interests
See Molasses
36
Kitchin, Mills
See Board of Tax Appeals 6/12/35
59
- L -
Long, Huey
New York Herald Tribune carries story about huge deposits
in a St. Louis bank; Ted Wallen sees HMJr about
implication he thought HMJr made that no story about
Treasury should be used unless confirmed from & Treasury
source 6/3/35
10
- M -
Molasses
Summary of "important happenings" prepared by Graves 6/6/35
36
Molasses Products Company (succeeded by Commercial Molasses
Corporation)
See Molasses
36
- N - -
Narcotics
Oliphant draws up draft of instructions for physicians in
dealing with patients to prevent recurrence of case in
names of Dr. Bernard Cohen and Druggist Oscar Garten
6/14/35
864
National Recovery Administration Decision
"Provisions can still be enforced by Government in its own
contracts" - Oliphant. Peoples, Oliphant, Bell,
McReynolds, and Charlie West appointed by HMJr to work
out details 6/3/35
9
Release giving two steps that have been discussed and
agreed to by members of the Administration and leaders
of Congress 6/4/35
22
a) Extended to 4/1/36
b) Government will still observe National Recovery
Administration rules in its contracts
Regraded Unclassified
- N - - (Continued)
Book Page
National Recovery Administration Decision (Continued)
Sayles returned to active duty: Cummings himself to
handle legislation relative to Government purchasing.
FDR says observance of National Recovery Admini-
stration rules is to be extended to Lending Agencies
Peoples, Oliphant, Reed, Cummings to work out details
together
VI
23+
Peoples issues circular notice
27
North American Import Company
See Molasses
36
- o -
Open Market Committee
See also Banking Legislation
See also Financing, Government
Meeting 6/7/35
40
a) D. W. Bell's resume':
On 7/1, $600 million of Consols to be paid off:
$225 million of lawful money will come in, net drop
in cash of $450-500 million; $250 million new money
needed
b) Bidding method two or three times recommended by
Eccles, Harrison says not much dealer profit in
bidding method; Harrison thinks Treasury has done
magnificent job during last 3 years and success and
smoothness shouldn't be upset by bidding procedure now.
HMJr agrees with Burgess: if conditions sour, resort
should be had to use of notes rather than bonds; Eccles
and Young think main trouble with bidding method is
resistance of banks to any change.
Reference made to decline in Mellon's 3's shortly after
their issuance; Burgess said "only case where Treasury
had gone against advice of New York"
- S -
Sayles, Captain
See National Recovery Administration
23
Silver
McCarran letter to HMJr concerning purchasing program 6/7/35
52
Pittman comes to HMJr's office to discuss answer; makes
suggestions; HMJr decides to state facts but definitely
not to be apologetic
50
HMJr's answer 6/11/35
54
Pittman sees United States moving to lend silver and gold
6/15/35
97
Smith, Tom K.
Talks to HMJr about accepting job as Director of Budget 6/12/35
58 A
a) Tells HMJr he cannot come - 6/14/35
81
Regraded Unclassified
- S - (Continued)
Book
Page
Speeches by HMJr
At Deerfield Academy 6/5/35
a) Draft 1
VI
29 A-G
b) Draft 2
29 H-R
e) Reading copy
29 S-FF
d) Mimeographed copy
29 GG+
Before Tax Revision Council, Washington, D. C. 6/7/35
30
Stabilization
French Negotiations (See also Book V)
Cochran telegram 3/3/35
3
Tendency on part of speculators to buy back france:
Swiss situation calmer; enheartened by defeat of
referendum by 140,000 votes; 100,000 most that had
been expected
Great Britain matching French and American situations
closely: doubt if stabilization were worked out
whether terms would be maintained by the continental
countries - particularly Germany; concerned about
effect of veto of National Recovery Administration on
world prices
Lebrun, Herriot, Cailloux, "Le Temps" and L'Intransigeant"
quoted
Cariguel expresses gratitude of himself and Governor
Tannery at United States assistance 6/3/35
11
Resume':
12
Commercial banks refrained from gold shipments to
United States 1/15/35 - 2/18/35 pending United States
decision. Treasury purchased $89 million in gold in
Paris and London to maintain dollar stability; $11 million
subsequently sold in Paris market; $70 million shipped
to United States and $8 million returned in London;
during recent flurry this $8 million was disposed of in
London at slightly over $35 per ounce; $200,000 profit
accrued to Stabilization Fund
Stabilization Fund acquired pound sterling equalling
$28 million in order to hold sterling dollar rate steady.
At one time this showed book loss of $500,000 - eventually
showed profit of $25,000
13
Treasury renews offer of 5/31 to Bank of France: to buy
up to $116,000,000 gold (reserve offer) 6/4/35
15
Federal Reserve Bank (New York) requests Bank of France to
ship no more than $15,000,000 of United States gold "this
week" 6/4/35
16
French Government falls 264-262; HMJr telks to Cochren 6/4/35
17,18,19
a) Caillaux talked too much - people lost confidence in him
b) Laval or Herriot may be Premier
c) Both want to keep franc steady
Pittman and McNary told what Treasury did for the franc 6/4/35
20
After Government falls, Bank of France asks Federal Reserve
Bank of New York to renew order for purchase of gold in
Paris; only $33,000,000 of the $150,000,000 originally
authorized used and HMJr authorizes renewal for unused
balance 6/4/35
21
Regraded Unclassifie
- S - (Continued)
Book Page
Stabilization (Continued)
French Negotiations (Continued)
Cariguel, through Guaranty Trust Company, will ship
$33,000,000 on Bremen and later will ship balance
of first $35,000,000 on the American Merchant 6/6/35 VI
33
Governor Norman's cable read to HMJr by Allen Sproul
of Federal Reserve Bank, New York:
"At suggestion of Governors of several continental
Central Banks, Bank of England has invited co-
operation of all sections of market in restricting
facilities for speculation in foreign exchange
and for gold" 6/7/35
39
Pittman sees United States moving to lend gold and
silver 6/15/35
97
- T -
Tax Program
FDR discusses plan with HMJr after supper to celebrate
Bobby Fitzmaurice's birthday 6/13/35
81
a) Ray Moley has rewritten message; essential features
are: inheritance tax
graduate tax
inter-corporate tax
tax on top incomes; other items can go in omnibus
section:
10% surtax less dividend
unnecessary surpluses
depletion
tax-exempt securities
Pat Harrison asks to see HMJr concerning; HMJr tells him
it's FDR he ought to see 6/14/35
81
Cartoon showing British income and inheritance taxes saying
"I balanced the British budget; want yours balanced?"
98
- U - -
Unemployment Relief
HMJr calls Hopkins' office to ascertain number of people put
back to work - no information on hand 6/12/35
59
Haas presents on 6/14/35 data obtained by Collectors of
Internal Revenue concerning changes in rate of pay, hours
of work, and volume of employment since 5/25/35
90
- W -
Wallen, Theodore (Chief, Washington Bureau - New York Herald Tribune)
See Long, Huey
10
Regraded Unclassified
1
June 3d
H.M.Jr. called Secretary Hull and said that he
would like to recommend a promotion for Mr. Cochran, who is
the Second Secretary at the Embassy in Paris, as he had done
8 grand job.
H.M.Jr. read the following cable, No. 247 from
the American Embassy in London:
"A few days ago Leith-Ross made occasion to
tell me there was no ground in fact for the belief on the
part of the Treasury of the United States that the activi-
ties of the United States equalization fund were being
made known to either the Bank of England or the British
Treasury. Leith-Ross added that it had been hoped that
Bewley, who was attached to the British Embassy, Washing-
ton, might have been able to furnish such information to
London, but that to date no such contact with the U. S.
Treasury had been established by Bewley.
"Leith#Ross made it plain that he was making
the above statement deliberately. In view of this fact,
the Embassy asked him whether, in transmitting his obser-
vations, Leith-Ross desired to suggest a reciprocal ex-
change of information with Washington through this Embassy
as to any or all of the British equalization fund activi-
ties. The answer to this by Leith-Ross was that this was
a matter which had to be taken under official advisement.
He said he would inform me later if I would agree to post-
pone action. I am submitting this preliminary statement
to you for your information since up to the present I have
had no further communication from Leith-Ross. I will
report again when I hear from him."
(Signed) Bingham
H.M.Jr. asked Mr. Hull to tell Bingham not to
pursue them any further; that if Leith-Ross wants to take
this up again O.K. but to tell Bingham not to pursue them.
He also told Mr. Hull that he wants to ask the
President to send for Bewley, owing to the fact that Leith-
Ross is not telling the truth, because all the funds used
in the British market are with the Bank of England and we
can't make a move without their knowing it.
Regraded Unclassified
2
H.M.Jr. called the President and told him that
everything was quiet; that the Franes are 6.60-11/10 and the
pound is 4.91-3/8. Future Francs are recovering and some of
the fellows who sold the Franc short are going to get a spank-
ing. Switzerland is going to stay on gold. H.M.Jr. believes
this whole thing will straighten itself out until next October.
H.M.Jr. called Cochran at 12 noon to-day. Cochran
practically gave Mr. Morgenthau the information contained in
the attached cable, which came the day after their conversation.
H.M.Jr. told Cochran that he spoke to Secretary
Hull this morning and recommended him for a promotion and that
Hull said he could do it after July lst.
He also told him that if the Governor gets this
vote of confidence tomorrow that H.M.Jr. would appreciate it
if Cochran would have a personal talk with Cariguel and tell
him that he thinks it would be a nice thing if the Bank of
France would give out a statement explaining what the United
States did last night at 10:30 to help them. They could say
what a valued friend the United States government is. Tell
him that it was not the Federal Reserve of New York who gave
them this credit - that it was the Treasury.
I spoke to the President to-day about Ed Bruce
and he told me that we can send word to him to the hospital
that he will definitely get his $500,000 for his art work.
H.M.Jr. called Mrs. Bruce and she said that
this information would help bring him back to good health.
Regraded Unclassified
3
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris, France
DATE: June 3, 1935, 3 p.m.
NO.: 461 FROM COCHRAN
At 12 noon Cariguel telephoned to me from the Bank of
(foremoon?)
France to tell me that by 10:30 this afternoon the Bank of
England had sold to the market 150,000,000 francs. The
Bank of England had canceled the gold earmarking order for
today of 170,000,000 francs which it had with the Bank of
France. Calm exchange market, but busy, with this tendency
to buy back francs, presumably on the part of speculators
who last week had sought sterling and dollars. The techni-
cians had now done their part with respect to protection of
the franc, Cariguel said, and it was now up to the politi-
cians to do what they could to protect it. It is Cariguel's
opinion that extended powers will be granted the government,
but demonstration of their use is anxiously awaited.
This afternoon I talked by telephone with the B.I.S.
economic adviser. The Swiss had been surprised he said be-
cause the crisis referendum had been defeated by 140,000
votes when a majority of not more than 100,000 was anticipated.
Swiss officials and banking circles were enheartened by this,
and the Swiss franc rate underwent instant strengthening. My
contact explained, however, that since the Swiss Government
had not wanted any bank failures prior to the referendum con-
siderable aid had been given to some of the weaker banks for
several weeks prior to the vote. There may be an easing of
the Swiss banking situation if return of funds to Switzerland
Regraded Unclassified
- 2 -
4
results from the more confident atmosphere now prevailing.
If this does not happen, it may be necessary to declare a
moratorium for one or more banks. The tourist trade of
the present summer season should now help both Switzerland
and France. My contact thinks that with this help, and
with the French Government likely to procure special powers,
and with the defeat of the Swiss referendum, for about three
months the gold bloc may conceivably have a period of com-
parative calm.
The BIS economist was in London last week, where he
found the French and American situations being closely watched
by British officials, and with much interest on their part.
In London the general opinion seemed to prevail that even if
international agreement on stabilization might now be worked
out, it was extremely doubtful whether the terms of such
agreement could be maintained by the continental countries,
particularly Germany and the gold bloc. The question now
arises in the minds of British observers whether the wreeking
of the NRA may lead to a lowering in costs in American com-
petition on the world markets. These observers consider that
the NRA was a factor in American economic planning which was
chiefly responsible for the rise in prices. A policy of wait-
ing, my contact said, is likely to be followed by the British
until they are more certain about the outcome of recent de-
velopments in the United States, and until the European mone-
tary situation is more settled. British people still insist
that definite arrangements cannot yet be made because in these
days there are too many surprises.
END SECTIONS ONE AND TWO.
STRAUS.
Regraded Unclassified
REP
5
GRAY
PARIS
Dated June 3, 1935
Rec'd 1:17 p.m.
Secretary of State,
Washington.
461, June 3, 3 p.m. (SECTIONS THREE AND FOUR)
According to the press Cailloux, new Minister of
Finance, has stated "I do not propose to hold the position
of Minister of Finance any longer than it is necessary
for me to take into account the exact situation and to
take the first measures recognized as indispensable for
the reestablishment of the finances. After this I shall
resume the post of Minister of State which Premier Bouisson
was good enough to offer me. But I wish to emphasize
immediately that I am absolutely determined to defend the
franc from all attacks from any quarter and to prevent
its devalorization. I can assure you that the speculators
all of them will realize that their path will be difficult;
they realize this already, it is evident."
LE TEMPS quotes as previously from the address made
at Rheims on June 2 by President Lebrun "The day when
the nations finally weary of the common misery which
surrounds all decide to return, in the financial, political
Regraded Unclassifie
6
and economic and monetary domains to the sound practices
which I believe assured their happiness prior to the
great torment, no doubt the world will once more ex-
perience a period of prosperity. France has shown that
she has worked towards this end with all her strength.
She joins with the nations attached to peace in efforts
to set up a system of collective security capable of
dissipating the troubles and the anxieties which poison
the distressed and hinder any resumption of confidence.
She vigorously defends the principle of monetary
stability without which commercial transactions can not
resume their former activity. France is ready to enter
into conversations to revive commercial exchange which
a tragic destiny reduces more and more each day. Let us
hope that in the near future these meritorious efforts
may be crowned with full success."
Talking yesterday at Lyon Herriot is said to have
declared "A policy of devaluation would not be long in
bringing rise of prices and upset of our export trade.
I ask all thoughtful men to aid measures in the task I am
undertaking to defend the franc against devaluation
which could only bring about a temporary period of false
prosperity."
Regraded Unclassifie
7
Jenny in LE TEMPS says it is not enough to fight
the speculators; budgetary problems must be solved and
constant borrowing avoided.
Mitzakis in L' INTRANSIGEANT after citing the manner
in which the Netherlands, France and Switzerland have
in turn repelled devaluation says that it is now for the
gold bloc to hold steady awaiting the time for construc-
tive negotiations with the United States and Great Britain.
Tomorrow morning new Ministry will discuss govern-
ment's declaration of policy which will be read before
Chamber and Senate in the afternoon. It is expected to
be short and to
(END SECTIONS THREE AND FOUR)
STRAUS
WSB
Regraded Unclassified
8
PARTIAL PARAPHRASE OF
SECTION FIVE. No. 461 of June 3, 1935, from the American
Embassy Paris.
Champion defense of the franc, reestablishment of budgetary
equilibrium, and regeneration of the national economy.
Tremendous business continues to be done by British
control this afternoon in selling francs as cover is sought
by short sellers. The estimate of one operator is that
over 53,000,000 business was done by the control today.
There is a steady belga; for the week ended May 29 a gain
of 887,000,000 francs gold is reported by the National
Bank of Belgium. As a result of the Swiss crisis referendum,
the Swiss franc is stronger; loss in gold and gold exchange
reported by Swiss National Bank for May 31st statement is
only ten million franos. The current rumors of internal
problems in the Netherlands have caused a weakening of the
florin. Today a gain of from 2.50 to 4.30 is noted for
French rentes. Heavy decline in international stocks.
About 10 percent loss for Suez Canal. Gold eagles have
fallen from 27.75 to 25.95, and gold sovereigns have fallen
from 133 to 128.
Invoice was certified today for shipment on the
CHAMPLAIN of 198,000,000 france gold bars by the Bank of
France to federal.
STRAUS
EA:LEW
Regraded Unclassifie
9
June 3d
Mr. Morgenthau discussed the following memorandum,
which Mr. Oliphant gave him to-day with the President.
"Apart from all other plans to deal with the
situation created by the Schechter decision, there is no
possible constitutional objection to legislation requiring
the Treasury and all other governmental agencies to stipulate
as a condition to eligibility to bid on contracts for work
or supplies of any form for the Government or any of its
agencies that the bidder shall agree to comply with those
provisions of the Industrial Recovery Act and requirements
developed thereunder which we want to continue. We can
likewise require that the Government will not deal with
these contractors unless they agree also to do business only
with those firms who similarly agree to comply with the
aforesaid provisions and requirements. By this method a
very large sector of American industry will be covered.
This proposed legislation should cover not only
all ordinary expenditures of the Government, but emergency
expenditures, particularly those under the Relief Appropri-
ation Act.
The foregoing is not merely an effective way
to enforce proper standards, but will also put the Government
in the forefront of the movement for voluntary compliance."
Admiral Peoples, Oliphant, Bell, McReynolds and
Charlie West were appointed by Mr. Morgenthau to work out this
plan for him.
Regraded Unclassifie
10
JUNE 3RD
Ted Wallen, Chief of the Washington Bureau of the
New York Herald Tribune called on Mr. Morgenthau today
as B. result of an appointment made at his request through
Mr. Gaston. On Friday, May 24th, a signed story by Wallen
had appeared in the New York Herald Tribune which was head-
ed: "Long and Aid Banked Lump $500,000 Sum, Agents Report.
Treasury Investigators, Pushing 'Spare Nobody' Income Hunts,
Allege Deposit was in St. Louis."
The first paragraph of the story read:
"Washington, May 23. -- Months of digging
into Senator Huey P. Long's income sources have
produced an official report purporting to show
that Long and 8 friend, on one occasion, put
$500,000 in a St. Louis bank in a single deposit.
The investigation is being pushed under Treasury
instructions to 'make no exceptions."
Mr. Wallen thought that he had been unfairly treated
in the Secretary's references to this story in the Press
Conference of Monday, May 27th. The Secretary was asked at
that conference whether the story was true. The Secretary
had said that after reading the story through three times he
had failed to find anything in it to justify the headlines and
Mr. Gaston said at the conference that the Treasury had no such
report. The Secretary also said that he had no 1dea where
Wallen got the story and turning to Mr. Gaston asked: "He
called you up didn't he?" Mr. Gaston's reply was: "He called
me up and I told him that I had never heard of it. He certain-
ly would not write it unless he had it from some source." Mr.
Wallen's grievance was based on the belief that the implication
of the Secretary's remarks was that & correspondent had no
ethical right to write a story about the Treasury if he could
not get it confirmed from a Treasury source.
In the talk with Mr. Wallen the Secretary said emphati-
cally that he had not expressed any such idea, nor given grounds
for any such implication. As to the point that Mr. Wallen was
accused, before fellow newspaper men and in his absence, of un-
ethical practices, the Secretary said he had no such intention,
that he had not himself raised the question but merely answered
B. direct question by one of the reporters present and that what
he said on the subject was all off the record. Mr. Wallen
seemed entirely satisfied with the conference and parted from
the Secretary in entire good humor.
Regraded Unclassifie
11
FEDERAL RESERVE BANK
OF NEW YORK
OFFICE CORRESPONDENCE
Date June 3, 1935.
To CONFIDENTIAL FILES
Subject Telephone Conversation with
From L.W. Knoke
Mr. Cariguel of the Bank of France.
Cariguel called at 1:15 P. m. He stated that they had
8. busy time today principally in connection with the operations
of the British Control which had sold francs in excess of
220,000,000. I asked Cariguel whether he expected a renewal of
the unused balance of $116,000,000 but he said it would not be
necessary. I inquired guardedly what he thought the next step
would be and he said that the only thing they had in mind was to
fulfil the contract they had made with us and ship the gold as
quickly as they could. I suggested that if later on he had any
suggestions to make in connection with these gold operations, he
let me know and he promised that he would talk to me very frankly.
In conclusion he requested that I tell Governor Harrison
on behalf of Governor Tannery as well as on Cariguel's behalf how
grateful they were for the cooperation they had received from us.
LWK: KMC
Regraded Unclassified
12
June 3, 1935
MEMORANDUM
Between January 15, 1935 and February 18, 1935, commercial
banks refrained from engaging in gold shipments to the United
States pending the decision of the Supreme Court on the gold
case. In order to maintain the stability of the dollar the
United States Treasury purchased in the Paris and London
markets in this period 89 million dollars in gold. Subsequently,
11 million dollars of this amount was resold in the Paris market.
70 million dollars was shipped to the United States and
8 million dollars was retained in London. During the recent
flurry in the London gold market this 8 million dollars was dis-
posed of in London at slightly over $35 per ounce. These sales
resulted in a profit of $200,000 accruing to the Stabilization
Fund representing the saving of the expenses which have been set
up to cover the cost of transporting this gold to the United
States.
Regraded Unclassified
13
June 4, 1935
MEMORANDUM
In the period from January 26, 1935 to February 18,
1935, during the uncertainty which prevailed while the
decision of the Supreme Court on the gold case was awaited,
pound sterling to the equivalent of about $28,000,000 was
acquired by the Stabilization Fund in order to hold the
sterling dollar rate steady. At one time this balance
showed a book loss of about $500,000, but as sterling re-
covered the balance was disposed of with the net result
that this operation shows a profit of about $25,000.
Regraded Unclassified
FEDERAL RESERVE BANK
14
OF NEW YORK
OFFICE CORRESPONDENCE
Date June 4, 1935.
To CONFIDENTIAL FILES
Subject Telephone Conversation with
From
L. W. Knoke
Mr. Cariguel of the Bank of France.
Cariguel called at 4:45 p. m. He said that fortunately
before leaving the office tonight he had given the Guaranty Trust
Company an order for the New York market. I told him that I had
just learned from the Guaranty that under this order they had so
far bought about 20,000,000 francs, mostly on orders from Europe.
Cariguel then stated that he had advised Mr. Cochran of the Embassy
that the Bank of France would very much like to have an order as
before. I replied that we were in touch with Washington and would
send him a cable tonight giving an order if the Secretary renewed
it. If not, I promised I would call him on the telephone. In
case he did not hear from me by telephone, then he would know that
a cable was on the way.
Cariguel thought that was all right.
I inquired how things were shaping now but he stated it
was difficult for him to say since he had not seen anybody yet.
LWK: KMC
Regraded Unclassified
FEDERAL RESERVE BANK
OF NEW YORK
15
OFFICE CORRESPONDENCE
Date June 4, 1935.
To CONFIDENTIAL FILES
Subject Telephone Conversation with
From L. W. Knoke
Mr. Cariguel of the Bank of France
I called Mr. Cariguel at 6:15 p. m. I told him we were
sending him a cable tonight advising that the Secretary had re-
newed the offer contained in our cable No. 83 of May 31 (that is
to buy up to $116,000,000 gold). I explained that although no
mention of it was made in our cable the understanding was that, as
heretofore, this offer was to be considered as a reserve offer to
be used only in case the operations of the commercial banks were
not sufficient to meet the demand for dollars. I then referred
to our telephone conversation this morning in which I had requested
him to ship no more than $15,000,000 gold this week. I repeated
that, as he knew, the reason for this request had been the desire
of our friends if possible to sell some of the gold in Paris
rather than have it all come over here. Inasmuch, however, as
developments this afternoon had brought about such a complete
change that it now looked as though we might instead of selling
gold in Paris, buy some more, I was wondering whether he could re-
new his booking of space on the Manhattan and ship the total of
about $17,000,000 as originally planned by him. Cariguel assured
me that he thoroughly understood my suggestion and he would be per-
fectly glad in the morning to do his best provided of course he
could get the necessary insurance which might be difficult.
LWK: KMC
Regraded Unclassifie
FEDERAL RESERVE BANK
16
OF NEW YORK
OFFICE CORRESPONDENCE
Date June 4, 1935.
To CONFIDENTIAL FILES
Subject Telephone Conversation with
From L. W. Knoke
Mr. Cariguel of the Bank of France.
I called Mr. Cariguel at 10:30 this morning and inquired
whether there was anything new in their market. Cariguel replied
"Nothing at all," that things were much quieter today but that the
British Control had continued to buy sterling. He had not received
the final figures yet but thought that the total of the operations
was small even though sterling had turned a little stronger.
I told Cariguel that the purpose of my call was to request
him to ship no more than $15,000,000 of our gold this week and
after this amount had been arranged not to do anything further un-
til he heard from us again. I explained to him that our friends
were now considering whether some of the gold in Paris could not
be sold back in that market because they felt it would be more
helpful not to have too much of the metal come over here. I added
that I would discuss this matter with him further in a day or 80
and repeated my request of yesterday, that he let me have any sug-
gestions that might occur to him in this connection. Cariguel re-
plied he would.
LWK:KMC
Regraded
17
June 4th
Conversation between Mr. Cochran and H.M.Jr.
at 3:15 to-day after Mr. Morgenthau got word over the
ticker that the French Government was defeated on its
demands for full financial powers in the Chamber of
Deputies to-day and that the Cabinet had resigned.
H.M.Jr: What is the matter over there?
Cochran: The government fell at 8 o'clock today.
H.M.Jr: What is going to happen now?
C:
I was at the bank at 6 o'clock and at that time
there was a rumor that the government didn't have
a very good outlook.
H.M.Jr: What are we going to do? Go through the same
performance again? Keep in touch with us and
we will watch it very closely over here. I
thought everything was fixed up. It looked
that way yesterday.
C:
Finance Minister Joseph Caillaux talked too
much and talked very foolishly and they lost
confidence in him. Now it looks as though
Laval or Herriot will be Premier.
H.M.Jr:
How do they stand on the Franc and on
devaluation?
C:
Both are for keeping it steady. Herriot had
indicated that he would be willing to devalue
only by international agreement.
C:
In regard to our conversation of yesterday do
you think it would be wise for the Bank of
France to give out that publicity?
H.M.Jr:
There is no use doing it until the French
Cabinet is in existence for at least ten days.
Don't figure on anything until you have a
government.
Regraded Unclassified
18
June 4th
The following are statements received over
the U P ticker:
At 9:34
"Premier Fernand Bouisson called on the French
Parliament to-day for semi-dictatorial powers to save the
Franc. In a governmental declaration read both to the
Chamber of Deputies and the Senate, he outlined a compre-
hensive program for a "New Deal" in which he stressed the
following points:
The war on speculations will be "brutal and
decisive" in the drive to save the Franc and
stop the drain of gold.
A balanced budget will be sought in an effort
to restore the country's finances and economy.
An effort will be made to aid the farmers
especially, but also merchants and industri-
alists. (There was a hint in this section of
a move to keep up price levels.
Unemployment will be fought and the younger
generation will be aided so it can face the
future with confidence.
Externally, France will work for peace and
international collaboration.
At 9:46
The Parliamentary group of the powerful radical
socialist party decided to-day to refuse the full powers asked
by Premier Fernand Bouisson. Edouard Herriot, President of
the party, who favors granting full powers, resigned and
then withdrew his resignation. Bouisson demanded that questions
be shelved and asked for a vote of confidence on that demand.
At 10:15
The Chamber of Deputies voted confidence in the
Cabinet of Premier Fernand Bouisson to-day, accepting his
demand that interpellations by Deputies be shelved.
Regraded Unclassified
19
At 11:27
The Finance Committee approved, 19 to 18, the
proposed full powers to the government to meet the monetary
crisis.
At 2:22
The French government was defeated on its demand
for full financial powers in the Chamber of Deputies to-day.
At 2:25
The Cabinet has resigned.
At 2:33 and to everybody's great surprise
The coalition government went down to defeat by
a margin of two votes. The vote was so close that at first
it was announced the government had been given full powers,
but an official recount was demanded and the roll call showed
the government beaten by 264 to 262.
Regraded Unclassified
20
June 4th
I saw Senator Key Pittman, explained to him
what we had done Thursday and he seemed very much pleased. I
asked him whether I should see McNary and he said, "yes by
all means".
Senator McNary came in at 11 o'clock. I ex-
plained to him what we had done for Franc# and I seldom have
seen a man so enthusiastic. He said, "what you have done is
courageous and statesmanlike and I am proud to be able to call
you friend".
Regraded Unclassifie
21
MEMORANDUM
June 4, 1935
Shortly after the fall of the French Government was
announced the Bank of France called the Federal Reserve Bank
of New York and stated that they would very much like to have
our order for the purchase of gold in Paris renewed, as
irrespective of the political situation they wished to main-
tain the working of the gold standard. As up to the present
the Bank of France had only used $33,000,000 out of the
original authorization of $150,000,000, I authorized the
Federal Reserve Bank of New York to renew this authorization
to the Bank of France for the unused balance amounting to
approximately $116,000,000.
Regraded Unclassifie
IMEDIATE RELEASE
June 4, 1035.
FOR THE PRESS
Today's announcement follows:
In order to meet un imediate problem relating to
the Exocutive Brunch of the Government as a result of the
Suprome Court docision, two steps have been discussed and
agreed to by members of the Administration and leaders of
Congross.
1, - (a) Passage by the House of Representatives
of the Sonate Joint Resolution extonding the life
only
of the National Recovery Administration to April 1,
1936. The President has mde this recommendation
to the Spoaker, Chairman Doughton of the Ways and
Morns Cormittee and Chairmn O'Connor of the Rules
Committee this afternoon, This recommendation in
based on the desirobility of maintaining a 0010>>
paratively mall staff in Washington and in the
more important centers of the country, in order to
bring togother and summarize the root amount of
information not in the possession of NRA, relating
to the actual results of Code Meinistration and
to collect information in regard to the effocts on
industry, both employors and employees, of the
abandonment by the Government of Code enforcement
or requirements. These latter refor to working con-
ditions and to fair trado procticos, This informa-
tion will, it La believed, be of great value to the
Congress, the Administration and the country ne a
whole.
(b) The other ruason for continuing a skeloton
organization of NRA is that such an organization will be
useful in carrying out the proposed requirement that
Government purchases and contracts bo placed only with
corporations or contractors who live up to curtain
minimum requirements,
(e) If the House of Representatives approves the
Joint Resolution passed by the Sonato, that portion
of the Resolution which in offect relates to codos will,
of course, be inoporative insofar as the old codes are
concerned.
(d) The extension of the National Recovery
Administration would moan, without question, = very
largo cut in the officors and employees now attached
to 1014, but would BORD the retention of a substantial
number of them.
"In this coun tion", the Prosident said, "I want
to record my doop reciation and that of the country
for the unsulfish vo which thousands of men and vomon
employed under or in conjunction with the National
Recovery Address atration, have dore in the post to years.
I extend to then EY sincoro thanks; and t PUCI the cir-
cunstances under which the retirement of may or them
from Government survice becomos obligatory."
It should not be assumed by any person that
this proposed continuntion of the National Recevery
Administration, in skolotonized form, relates in any
way to the onforcement of working conditions or fair
trado practices formurly misting under the Codes,
All such requirements FORD climinated by the Suprome
Court docision.
Regraded Unclassified
- 2 -
2, The other measure which, like the first, must be con-
didered no only 15 very partial stop-gap relates to Government con-
tracts. Only D very smill partion -- probably not much over one
per cent of the industrial production of the country-is used in
Government work. Novertheless, the President feels that even though
the percentage be small, the Government should take e practical end
definite step to show its good foith in maintaining the Thrger
objectives sought by NRA. The proposed legislation would authorize
a requirement in every Government purchase that all persons engaged
in the production of the supplies or in the carrying out of the coo-
tract sholl be paid in accordance with minimum wage and maximum hour
standards and that no person under the age of sigteen years shall be
employed. The game rule could apply to the use of Government loans
or gruote to States, municipulities or other local government agencies.
It is belioved that this proposed bill carries out moral
responsibility of the Federal Government and It 10 hoped that such
action will be followed as largely B.B. possible by private industry
in every one of its branches.
This proposed neesure, however, like the first, does not
make much progress toward obtaining the ultimate objectives of
national standards for the working population of America nor for
national stendards which seek to protect honorable employers against
the wafair practices of less honorable competitors.
5, The Supreme Court decision here effected a number of
agencies which were set up in part or in viole under the authority
of Title I of the National Industriul Recovery Act. A careful
review of the effects of the Supreme Court decision has been mode,
(e) New legislation would be necessary for the continumnce
of the Federal Alcohol Control Administration, for the Electric Home
and Farm Authority, for the Petroleum Administrative Board and the
Centrel Statistical Board, Legislation to weet these four ends is
now under consideration.
(b) Two Agencies can be continued by emendments to Executive
Orders: The National Emergency Council and the National Resources
Board. Both of then relute to planning for and execution of work
rellef and con, therefore, be continued under the work relief act,
(c) Three agencies have completed their work and will be
terminated as heretofore planned 00 June 16th -- the Committee on
Meonomic Security, the Advisory Council on Economic Security end the
Office of the Special Advisor to the President on Foreign Trade.
(d) Seven lebor boards created under N.R.A. must terminete
Ln their present cepecity. They cre: The National Labor Reletions
Board, The Petroleum Labor Intions Board, The Steel Labor Relations
Board, The Textile Labor Re one Board, The Work Assignment Board
for Cotton, The Work Assigns
Board for Silk, and The Work Assign-
ment Bonrd for Wool.
The President has, mover, sent to the Speeker of the
House of Representatives e mg Momental estimate of appropri stions
for the Department of Lebor
the coming floor] your in the BLLID of
$600,000. This will entitle we Secretary of Labor to conduct
additional modiation and conciliation activities end thus take over
& amall portion of the work of the boardo which are abortshed. It
10 worth noting, however, that the authority of the Department of
Lobor extenda only to mediation and concillation. The Wagner Lebor
Bill, if enscted, would set up now tribunals which would substantially
cover the functions beretofore exercised by the various boerds above
mentioned.
Regraded Unclassified
June 4th
The following are notes made at a meeting at
2 P.M. to-day in Secretary Morgenthau's office. Those
present were:
Mr. Oliphant
Mr. Bell
Admiral Peoples
Mr. McReynolds
Mr. Haas
Mrs. Klotz
Mr. Coolidge
Mr. Morgenthau to Mr. McReynolds: The Secretary
of the Navy has ordered Sayles returned to Active Duty on
July 1 in one of the new positions authorized for retired
officers. I wish you would get in touch with Captain Sayles
and notify him.
Mr. McReynolds: That is fine. I will take
care of it.
Mr. Morgenthau: Homer Cummings has been desig-
nated by the President to carry the whole question of
legislation with regard to Federal purchasing. The agree-
ments to maintain wage standards, hours of duty and elimi-
nation of child labor are to extend to all individuals and
agencies of any kind whatever that are accepting grants or
loans from any government agency. He had an entire draft
of a bill prepared by Stanley Reed. The Attorney General
said he had only one copy of this draft. Inasmuch as the
President asked 6 people I said, "Won't you please desig-
nate the Attorney General to be responsible for this legis-
lation?" The President said he would.
Mr. McReynolds: We have stopped making contracts.
Mr. Oliphant: Practically, that means Reed.
Mr. Morgenthau: No - the Attorney General said
it means himself.
Mr. Morgenthau: Now the big problem centered
as to whether that should be extended to Loaning Agencies.
Miss Perkins and I argued for that. The President said
it would be extended.
Mr. Coolidge: Does that mean new loans?
Regraded Unclassified
24
Mr. Morgenthau: Everything. If Ickes loans
$10,000 on a $25,000 schoolhouse it means that everything
that goes into that schoolhouse will have to conform to the
different rules and regulations the government sets down.
Mr. Oliphant: That includes grants and loans?
Mr. Morgenthau: Everything.
Mr. Coolidge: Will those rules be flexible?
Mr. Morgenthau: I can't answer Jeff. You will
have to see the Attorney General. The thought is that it
will go right straight down as far as it can. Perkins
and I argued for it. The thing would spread from coast
to coast. The thought is that they will try to make it
just as effective as they can. The more Mr. Ickes argued
against it the more he convinced me that it was right.
Mr. Coolidge: I think that is fine.
Mr. Morgenthau: From the President's standpoint
the thing I argued was that we should not leave a stone
unturned so no one could say the United States did not try
in its own purchasing. Now if 1t works a hardship then it
should be corrected. First the Army was against it. Then
when he saw the picture he said, "that's right and I am
for it."
Mr. McReynolds: What about the contracts we
have now?
Mr. Morgenthau: Let me tell you what was dis-
cussed. The buying responsibility is Peoples'; the draft-
ing of the Legislation is resting with the Attorney General
and anything Reed has in his shop you (01iphant) should get
into with him. General Counsel of the Treasury advises
Peoples. Anybody that has any ideas like Coolidge take
them and throw them into the hopper. Coolidge is familiar
with industry in New England.
Mr. Morgenthau: This is the funniest thing - the
Attorney General had no idea WE were working on this thing.
Steve Early personally feels responsible for this.
Mr. Bell: He (Early) put it on me.
Mr. Morgenthau: On FACA the Attorney General
had a complete draft. He hadn't seen ours. He very much
wants to see ours.
Mr. Oliphant: Is he carrying the ball on that?
Mr. Morgenthau: No.
Regraded Unclassified
25
Mr. Morgenthau: The Attorney General would like
to be kept up to date.
Mr. Morgenthau: The President is working on the
following bills:
Social Security
Banking Bill
Wagner Bill
Guffey Coal
AAA Amendments
011 Bill
T.V.A. - Utilities Bill
Bill to extend N.R.A. - Administrative
organization
Transportation - Could live another year
if necessary
Taxes
They are pressing to keep it (NRA) going. 2000
people in Washington to watch it. We have a joint resolu-
tion pending before Congress. They think they can get
that through very nicely.
Mr. Morgenthau: They all jumped on your (Oliphant's)
suggestion when they read the word "license".
Mr. Morgenthau: Any questions?
Admiral Peoples: Will this new legislation be
part of this bill for the extension of the NRA?
Mr. Morgenthau: You mean buying thing?
Admiral Peoples: No - legislation.
Mr. Morgenthau: I think it is a separate bill.
Mr. Oliphant: Then I will get in touch with
the Attorney General and ask him to work with me on FACA.
Mr. Morgenthau: All right.
Mr. Oliphant: I will get in touch with him
and keep Admiral Peoples advised.
Mr. Oliphant: I want your decision on this
question of policy. Whenever the Attorney General gets
started setting this up he is going to find that he has
to provide an agency that will determine whether or not
this person is qualified to receive a grant or loan and
then he has to have agencies to see that they are com-
plying. Will you use the old frame-work of the NRA?
Regraded Unclassified
26
4
Mr. Morgenthau: It is very difficult for all of
us when ten people are pinned with the same thing. It gets
down to where people know where they are going. I didn't know
where I was going.
Mr. Morgenthau to Admiral Peoples: Do you know
where you are going?
Admiral Peoples: I have one big problem before
me now and Oliphant said he thought we should have a conference
afterwards. There are literally thousands of cases all over
the country where bids are submitted on the basis of codes.
Where code is called illegal code cannot be written into new
contracts. In other words, what should be put into those con-
tracts so as to continue the business of the government until
this legislation becomes effective?
Mr. Morgenthau: You people and the Attorney
General will have to agree on that.
Mr. Morgenthau: I am tickled to death that the
President gave this to the Attorney General because every time
I am met on the street someone says I am charged with this
responsibility. (Laughter)
Mr. Morgenthau: I am serious.
Mr. Morgenthau: Steve Early says he is charged
with the responsibility of buying.
Mr. Morgenthau to Mr. Coolidge: Jeff, is there
anything you want to bring up on this?
Mr. Coolidge: No.
Mr. Morgenthau: I think that covers the whole
thing.
Admiral Peoples: Yes.
Regraded Unclassified
June 7, 1935.
27
CIRCULAR NOTICE
To the Heads of the various Executive Departments,
Independent Establishments and Agencies.
An important question of policy has arisen in connection with
Federal contracts for supplies and for construction work of all kinds
through the necessity for the elimination of the code compliance re-
quirements as a result of the decision in the case of the Schechter
Poultry Corporation, et. al., vo. United States.
It is understood that it 1s the intention of the President to
submit to Congress at an early date legislation which would require
provision to be made in every Government contract that all persons
engaged in the production of the supplies, or in the carrying out of
the contract, shall be paid in accordance with minimum wage and maxi-
mum hour standards, and that no person under the age of sixteen years
shall be employed. The same law to apply to the use of Government
loans or grants made by the United States, or any agency thereof, to
any state, municipal government, local subdivision, person or corp-
oration.
Until such time as the proposed legislation may be acted upon
by Congress, the Director of Procurement recommends that in lieu of
the code compliance requirements stipulated in paragraphs 1 to 4, in-
clusive, of Executive Order 6646 - temporarily suspended by Adminis-
trative Order G.C. No. 89, of May 30, 1935 - all invitations to bid
for supplies, materials, or construction projects of any character in-
clude the following clause:
"Bids are requested on the basis that if subsequent legis-
lation shall require observance of minimum wages and/or maximum
hours of employment and/or limitation as to age of employees, in
the performance of Government contracts any contract entered into
shall be subject to modification to accord with such statutory
requirements to the extent authorized or required by law."
and contracts based thereon to be entered into accordingly.
It is further suggested that awards may be made on pending
proposals if the bidder will agree to the inclusion in the contract
of the stipulation above-quoted in lieu of the code compliance re-
quirements; and, if the bidder does not agree, new proposals should
be issued which include the above stipulation.
It is further recommended that each Executive Department, in-
dependent establishment, or other agency shall:
Defer action on all contracts, except contracts for services,
supplies, or projects which are essential to the current conduct
of the Government's business until Congress can declare its in-
tention as to Federal contract requirements concerning hours,
wages, and other conditions of performance.
0. J. PEOPLES
Director of Procurement
Approved
Secretary of the Treasury.
Regraded Unclassified
FEDERAL RESERVE BANK
OF NEW YORK
28
OFFICE CORRESPONDENCE
Date June 5, 1935.
To CONFIDENTIAL FILES
Subject Telephone Conversation with
From L. W. Knoke
Mr. Cariguel of Bank of France.
Mr. Cariguel called me at 12:10 P. m. He stated they
had had a good day; Guaranty have had to sell about $5,000,000
only which he thought was very satisfactory all things con-
sidered. I inquired as to the latest political news and he
said Laval was reported still to be working on a cabinet and
that Mr. Pietrie had been mentioned as a possible choice as
Minister of Finance. I inquired whether there was any more
talk of Rist taking that portfolio but he said no.
I asked him whether he had been able to do anything on
the Manhattan shipment and he replied he thought they had
closed for a total of 175,000,000 francs. With reference to
further shipments, he stated they would continue making them
as readily as possible until they heard from us again. I re-
plied that would be in order.
LWK: KMC
FEDERAL RESERVE BANK
OF NEW YORK
20
OFFICE CORRESPONDENCE
Date June 5, 1935.
To CONFIDENTIAL FILES
ject: Telephone Conversation with
From L.W. Knoke
Mr. Cariguel of the Bank of France
Mr. Cariguel called me again at 2 p. m. to say that
towards the close dollars had been a little more in demand
with the result that the Guaranty Trust had to sell a total
for the day of $9,000,000. In accordance with our under-
standing all of this will be applied under the facilities
placed at Cariguel's disposal by Guaranty Trust Company.
As explanation for the stronger tendency of the dollar Cari-
guel gave the fact that Laval had not succeeded in forming a
cabinet; something else was being tried now but he understood
from Governor Tannery that the plan was to give Laval later on
another chance to try again.
If our friends in Washington saw their way clear to re-
new last night's offer, Cariguel said he would be most happy.
LWK: KMC
Regraded Unclassified
Note:
Mr. Crowell says he believes this
is the first draft of the Deerfield
speech and that the original copy
was destroyed, there having been so
many changes.
McH
June 26th
Regraded
29A
I am happy to have the opportunity to speak to the people
of this old American community tonight and to you boys who
have been living and growing here in body and mind. And I
should like to add that since I have been in my present office
this is the first time I have spoken except over the radio,
so that fact at least tells you how much I wanted to come here
and how glad I am to be with you.
As I have passed among these hills and valleys that you
know so well and that have come to be another home for my two
boys who have been here in this fine school, I have thought --
as all of you must often have thought -- of the events that
have occurred here in a dozen generations. I have tried to
picture the kinds of people who have lived here and of how
they have acted toward each other. I have tried to picture
their ideas of human cooperation and of government.
Each generation has seen 8 different world from that
of the generation that preceded it. The difference has not
been so much in the physical changes that have taken place.
You have not had many or violent changes of that kind here.
But thesé are not the important changes anywhere. Buildings,
railroads, highways, dams -- all of these things are not so
significant as the progress of knowledge in men's minds. It
is that which fundamentally makes the differences between one
generation and another -- the significant difference which
creates the character of a civilization.
1 -
29B
Do you remember Mark Twain's interesting fantasy of the
Connecticut Yankee mechanic who was translated back to the time
of King Arthur in England and how the knowledge he bore with
him of the mechanical processes of our late nineteenth
century was sufficient to build a modern community in ancient
England -- even to cannons and rapid-firing guns. The process
might be worked the other way. One could picture the people
of a primitive civilization placed in the surroundings of
today. Without instructors from our age they couldn't turn a
wheel of our industry or make any of the products we regard
as essential to our living. The factories and tall buildings
would crumble and the wheels would rust and decay while the
population went back to the bow and arrow hunting and crude
agriculture to which they had been educated.
We have to fit ourselves today for a pretty complicated
way of living. We have to acquire some of the essence of
what it took many ages to discover. We have to acquire it
because it is our education that will determine the character
of the civilization of our partimlar America -- our particular
world. The factories and tall buildings we inherit will not
determine it.
But there is an essence of progress that is a thread
running through all generations. It is in the energy and the
curiosity and the will to learn new things. It has as
its basis straight thinking and absolute intellectufl integrity.
In this Democratic country of ours we have found that this
2
Regraded Unclassified
29c
spirit thrives in company with another principle -- the
principles of social justice -- and that principle is just a
simple rule of action as between man and man.
I want to give point to what I have to say about that
principle by some incidents and situations that have come
to my attention in public life. I might choose these incidents
from those which you may associate as all important in
connection with the Treasury, such as its monetary policy,
or budget making, or major governmental financing, but I
shall omit all of these important as they are, and talk to
you today of certain things, which I believe to be more
fundamental, and more vital than even the most perfect monetary
machinery, because they deal with human beings, with our every
day life, our every day conduct, and therefor have a direct
bearing in our attitude toward our government.
I am going to talk to you about law enforcement, with
which the Treasury has much to do in connection with its duty
of collecting the revenue due to the government. In that
work we have to deal both with those who don't want to pay
and with the greater number who pay willingly. If there were
a general conspiracy not to pay, then our job would be hope-
less. But fortunately most people have a true understanding
of the fact that government in this democratic country is
a partnership and they pay what is due to their fellow
citizens as a duty and even a privilege of citizenship.
- 3 -
Regraded Unclassified
29D
They do it with pride -- and you should remember that they are
in the overwhelming majority. Others seek ways to evade
paying -- to cheat their government and their neighbors.
Of this group of troublemakers there are two classes --
those who are in the upper world and think themselves worthy
of respect, and those who are in the underworld and don't care
whether they are respectable or not. I say they are the
gangsters of both the upper and the lower world.
For instance: A man emerges from the obsurity of being
a petty crook handy at all forms of comparatively safe crime
to be the boss gangster of a community, a fairly big community
in our country. He enjoys the fame of being an overlord
of crime and vice and illegal trade and he makes an income
that probably no man in lawful business in his city can
equal. He is frankly of the underworld, but what of the
bankers who handle his "dough", as he calls it? What of the
lawyer who knows just what he is doing and yet "fronts" for
him, helps him to dodge the law and cheat prosecution? What
of the politicians who stand by and let him operate? And
finally, when a Treasury enforcement unit does what local
authorities have not been able to do and indicts him for
a Federal penitentiary offense -- evading his income taxes --
What of the influential, respectable citizen who comes down
to Washington with a message that the gangster is really quite
a fine upstanding fellow who may have done a little technical
- 4 -
Regraded Unclassified
29 E
wrong but ought to be let down easy?
Or let us take another case, the case of the manager of
8 big industrial plant who did a favor for a group of men
seeking a location for a busines and a favor also to the corpora-
tion which had an idle plant to be rented. He introduced
these business men to the banker with whom they deposited a
large sum of money and to the agent of the idle factory. He
did this same courteous service twice in two different
communities for this particular group of business men. Did he
know that their business was making alcohol on a large scale
illegally? He said he didn't when our alcohol tax man caught
up with him.
And again, there seems a difference of opinion about what
is fair and right when one finds the most influential people
in a community mustering every power to save from punidhment
a physician who for years has gathered B very large income
by dispensing narcotics illegally to addicts. It is that
sort of case that gives one real distress to contemplate.
Then there are those who sharpen their pencils and use
trick devices to understate their income with the hope that
they can impose on Treasury accountants and that at the
worst after long delay they can obtain a compromise that
will mean a clear gain to them -- at the expense of their
fellow taxpayers. And there are those who advise them to do
these things.
This is the dark side of the picture. But for every one
of these there are thousands who scorn such tricks, who have
a law of conduct -- the simple law that right is right and that
- 5 -
Regraded Unclassified
29F
black is not white.
Our form of government is one that requires the coopera-
tion of citizens. It is not a tyranny. It is not a dictator-
ship. So long as we co-operate in carrying out the laws
which honestly seek to furnish revenue to our government, we
help to uphold our democracy. When we seek to cheat and
nullify and evade, and help others to evade, even though
they do not come into open conflict with the law, we are
in truth undermining the main foundations of our government.
When I entered on the duties of my present position
there was a notable income tax investigation hanging fire.
The men of the Bureau of Internal Revenue because of the
implications of this case wanted authoritative word about
what to do. I learned of their dilemna and sent for some of
them. I didn't discuss the details of this particular case
with them at all. I simply said: "Let's get this matter of
policy straight and it will save us all & lot of trouble.
If there is a case of law-breaking to be made against a man,
make it. If there is a tax to be collected, collect it."
I didn't need to impart any special instructions about
this case, nor did I need to get any. It is better to have
one rule for all cases, and I had that rule. Five years of
association in public life with Franklin D. Roosevelt had
given me daily assurance that as long as I abided by that
rule I would always be supported. The rule is simply that the
- 6 -
Regraded Unclassified
296
law is to be obeyed and that influence doesn't count. I can
direct the work of 50,000 United States Treasury employees
with the same confidence in the inviolability of that rule
as in New York State I assured 150 game protectors that
they needn't hesitate to arrest a politician who had shot
a deer out of season. It is as simple as that.
It is in essence the simple rule that black is black
and white is white. It is the rule of fair dealing by which
all honorable business is conducted. It is the rule
not to take advantage of the weak nor give special favors
to the strong. There is no monopoly of it, no unique virtue
that one can claim for practicing it. But it is a comfortable
rule to follow. It smoothes out difficulties and makes
and makes many tangled problems simple. It is the essential
principle of which I have spoken, without which we cannot have
good government in a democracy. This rule has consequences,
a corollary, I think you would call it, which is expressed
in the two words, "social justice".
One is unfortunate if he hasn't learned it early. I
began to discern it as a boy when I sat in a corner of my
father's office and saw it appear in business discussions.
When, years later, I saw him laboring to protect the Armenians
from annihilation, it was but the same rule in practice in
a larger field. You, each one of you, could furnish your
own recollections and instances of it. In spite of occasional
exceptions and violations such as I have noted, it is a rule
that is a part of the American spirit and character.
- 7 -
Regraded Unclassified
29Ga
It is so much so that it is a password to a great brother-
hood. When I voiced it to the men of the intelligence unit
their faces lit with joy, and that was a tonic to me.
The pleasure that I get out of my present office is due
chiefly to the fact that the men and women who serve their
government, who serve you, serve well and with enthusiasm
for doing a good job. There is nothing wrong with the morale
of government workers. Any private company would be proud
and happy to be served as faithfully as your government is
served.
There are plenty of problems of government still to be
solved. We are going to leave many of them to you boys who
have been graduated today, and there will be others left for
future graduating classes. But this I believe to be true;
that there was never a time when so many able men and women
were willing to give their services so freely to their
government for its good rather than their own: never a time
when the problems of government commanded such self-sacrific-
ing labor as today.
You boys who have been graduated today will soon be
working shoulder to shoulder with us, you will often be
forging ahead of us, giving us of your strength, your character,
your ambition. That I believe is something to give us
renewed courage and renewed faith that our form of democratic
government will and must prosper.
0000000
Regraded Unclassified
Note $
Mr. Crowell thinks this is the
2d draft of the Deemfield Speech.
McH
5
June 26th
2
3
500
- - Made Del
22 1 5 Yr 5
I of was N each Libe new -
I - 1
- - pacy - 20 MA
DMV - adidas 59 that 298
son due my two
- - listreght -
-
laim
55
Acture
- - - way
Usage
Tot
will
4am
Begraded
speech gaton prepared + corrected by by 29H
mism
I am happy to have the opportunity to speak to the people
of this old American community tonight and to these you boys who have
1.
been living and growing here in body and mind.
It may be of
passing interest to you to know that I have not before spoken in
the presence of a seeing and hearing audience since I have been
clean
Secretary of the Treasury. That fact at least tells you that I
am glad to be here.
I am going to speak about what I regard as the first essen-
tial of good government in a Democratic country. What that essen-
is I hope will appear plainly to your from some incidents in the
life of & public official that I shall tell you.
As I have passed among these hills and valleys that you
know 80 well and that have come to be another home for my two
boys who have been here in this fine school, I have thought -
as all of you must often have thought -- of the events that have
occurred here in a dozen generations. I have tried to picture
the kinds of people who have lived here and of how they have
acted toward each other. I have tried to picture their ideas of
human cooperation and of government.
Of one thing I feel sure; that they have advanced and have
prospered in a real sense to the degree that they have observed
that principle of government of which I want to speak. Each
generation has seen a different world from that of the generation
that preceded it. The difference has not been so much in the
physical changes that have taken place. You have not had many
Regraded Unclassified
29D
- 2 -
or violent changes of that kind here. But these are not the
important changes anywhere. Buildings, railroads, highways,
dams - all of these things are not so significant as the
progress of knowledge in men's minds. It is that which funda-
mentally makes the difference between one generation and another - -
the significant difference which creates the character of the a
civilization.
Do you remember Mark Twain's interesting fantasy of the
Connecticut Yankee mechanic who was translated back to the time
of King Arthur in England and how the knowledge he bore with him
of the mechanical processes of our late nineteenth century was
sufficient to build a modern community in ancient England -- even
to cannons and rapid-firing guns. The process might be worked
the other way. One could picture the people of a primitive
civilization placed in the surroundings of today. Without in-
structors from our age they couldn't turn a wheel of our industry
or make any of the products we regard as essential to our living.
The factories and tall buildings would crumble and the wheels
would rust and decay while the population went back to the bow and
arrow hunting and crude agriculture to which they had been
educated.
omisstors
We have to fit young men and women today for a pretty
WE
complicated way of living. They have to acquire some of the
WE
essence of what it took many ages to discover. They have to acquire
our
it because it is their education that will determine the character
Regraded Unclassified
29J
- 3 -
of the civilization of their particular America - their particular
we
world. The factories and tall buildings they inherit will not
determine it.
the
But there is an essence of progress that is a thread running
through all generations. It is in the energy and the curiosity
2
and the will to learn new things. Nie have found in this democratic
country that this spirit thrives beside and in company with another
principle - the principle of justice. And that principle is just
a simple rule of action as between man and man.
I want to give point to what I have to say about that princi-
ple by some incidents and situations that have come to my attention
form
w
in public life. You may think it strange that I do not choose
these from among matters of really great moment. They have nothing
to do with monetary policy and little to do with the budget or
major government financing. But I think them even more vital than
any of these matters in their bearing on government.
1 am going totalk to ronabout law interequent
They are connected with law enforcement, with which the
Treasury has much to do in connection with its duty of collecting
the revenue due to the government. In that work we have to deal
both with those who don't want to pay and with the greater number
me
who pay willingly. If there was a general conspiracy not to pay,
then our job would be hopeless. But fortunately most people have
a true understanding of the fact that government in this democratic
country is B. partnership and they pay what is due to their fellow
Regraded Unclassifie
29K
- 4 -
citizens as a duty and even a privilege of citizenship. They do
it with pride - and you should remember that they are in the
overwhelming majority. Others seek ways to evade paying -- to cheat
">
their government and their neighbors. Of this group of trouble-
makers there are two classes - those who are in the upper world and
think themselves worthy of respect, and those who are in the under-
world and don't care whether they are respectable or not. Of
course, when a man doesn't care he isn't respectable. But those who
want respect are not always respectable in your judgment or mine,
either.
For instance: A man emerges from the obscurity of being
a petty crook handy at all forms of comparatively safe crime to be
the boss gangster of a community, a fairly big community in our
country. He enjoys the fame of being an overlord of crime and vice
and he makes
and illegal trade as well no an income that probably no man in
can
Hz 16 Prankly
lawful business in his city equals He of the underworld,
but what of the bankers who handle his "dough", as he calls it?
What of the lawyer who knows just what he is doing and yet "fronts"
for him, helps him to dodge the law and cheat prosecution? What
of the politicians who stand by and let him operate? And finally,
when a Treasury enforcement unit does what local authorities have
not been able to do and indicts him for & Federal penitentiary
offense - evading his income taxes -- what of the influential,
respectable citizen who comes down to Washington with a message
Regraded Unclassifie
29L
- 5
that the gangster is really quite & fine upstanding fellow who
may have done a little technical wrong but ought to be let down
easy?
another can
Or let us take the case of the manager of a big industrial
n
plant who did a favor for a group of men seeking a location for a
business and a favor also to the corporation which had an idle
plant to be rented. He introduced these business men to the
banker with whom they deposited a large sum of money and to the
agent of the idle factory. He did this same courteous service
twice in two different communities for this particular group of
business men. Did he know that their business was making alcohol
on a large scale illegally? He said he didn't when our alcohol
tax man caught up with him.
And "Th
There seems a difference of opinion about what is fair and
right when one finds the most influential people in a community
mustering every power to save from punishment a physician who for
years has gathered EL very large income by dispensing narcotics
that
illegally to addicts. It is the sort of case that gives one real
distress to contemplate.
Then there are those who sharpen their pencils and use
trick devices to understate their income with the hope that they
can impose on Treasury accountants and that at the worst after
long delay they can obtain a compromise that will mean a clear
gain to them - at the expense of their fellow taxpayers. And
there are those who advise them to do these things.
Regraded Unclassifie
zq m
the is the take side 6 -51 the picture
But for every one of these there are thousands who scorn
such tricks, who have a law of conduct - the simple law that
right is right and that black is not white, and for that reason
don't have to bother their heads about the Laws that send men
to the ponitentiary.
We hear a good deal about subversive influences in our
National Hfe, influences that are a peril to our form of govern-
two
ment. Our form of government is one that requires the cooperation
of citizens. It is not a tyranny. Are not those who refuse co-
operation with the revenue laws which furnish our government its
support, who seek to cheat and nullify and evade and help others
give
to evade without coming into open conflict with the law really
attacking the main pillars of our government? Are they not doing
Y
:
a good deal to promote tyranny as an alternative to popular
government?
When I entered on the duties of my present position there
was B. notable income tax investigation hanging fire. The men of
the Bureau of Internal Revenue because of the implications of
this case wanted authoritative word about what to do. I learned
of their dilemma and partinder sent for some of them. I didn't discuss
the details of this case with them at all. I simply said: "Let's
get this matter of policy straight and it will save us all a. lot
of trouble. If there is & case of law-breaking to be made against
& man, make it. If there is a tax to be collected, collect it."
Regraded Unclassifier
zan
- 7 -
I didn't need to impart any special instructions about
this case, nor did I need to get any. It is better to have one rule
for all cases, and I had that rule. Five years of association in
public life with Franklin D. Roosevelt had given me daily assurance
that 83 long as I abided by that rule I would always be supported.
The rule is simply that the law is to be obeyed and that influence
doesn't count. I can direct the work of 50,000 United States
Treasury employees with the same confidence in the inviolability
150
of that rule as in New York State I assured game protectors that
Mm
e needn't hesitate to arrest & politician who had shot a deer
out of season. It 16 as simple asthat.
It is in essence the simple rule that black is black and
all
white is white. It is the rule of fair dealing by which honorable
business is conducted. It is the rule not to take advantage of
the weak nor give special favors to the strong. There is no monopoly
of it, no unique virtue that one can claim for practicing it. But
it is a comfortable rule to follow. It smoothes out difficulties
and makes many tangled problems simple. It is the essential
principle of which I have spoken, without which we cannot have
good government in a democracy. This rule has consequences, &
corollary, I think you would call it, which is expressed in the
two words "social justice."
One is unfortunate if he hasn't learned it early. I began
to discern it as a boy when I sat in a corner of my father's office
Regraded Unclassified
- 8 -
and saw it appear in business discussions. When, years later,
I saw him laboring to protect the Armenians from annihilation, it
one
was but the same rule in practice in a larger field. You, each of
you, could furnish your own recollections and instances of it. In
spite of occasional exceptions and violations such as I have noted
it is a rule that is a part of the American spirit and character.
It is so much so that it is E. password to & great brother-
hood. When I voiced it to the men of the intelligence unit their
faces lit with joy, and that was a tonic to me.
In spite of such instances as I have cited, I am able to
turn away from the dark side of the picture to the bright face of
The that / gut our of my pasant office
events. I gèt pleasure out of being Secretary of the Treasury as
well as some worries and my pleasure is due chiefly to the fact
that the men and women who serve their government, who serve you,
under my direction serve well and with enthusiasm for doing a
good job. There is nothing wrong with the morale of government
private
workers. Any employer would be proud and happy to be served as
faithfully as your government is served.
still
There are plenty of problems of government to be solved.
We are going to leave many of them to these you boys who have been
graduated today, and there will be others left for their
future children. graduating
But this I believe to be true; that there was never a time when
so many able men and women were willing to give their services 50
freely to their government for its good rather than their own;
Regraded Unclassified
290
- 9 -
never a time when the problems of government commanded such self-
sacrificing labor as today. 11 And I think there was never a time
when the essential rule of good government that I have discussed
has been so widely understood and supported, There are yet plenty
of violations of it but the demand that it shall be uniformly
applied, and the willingness of men to apply it in their own
affairs, grow stronger daily.
That, I believe, is something to give us courage and new
faith in government.
oo00oo
Regraded Unclassified
29P
BY MORGENTHAU, JR.
STATE OF NEW YORK
DIVISION OF PARKS
COMMISSIONER
ERT E. GASTON
DIVISION OF WATER POWER
DEPUTY COMMISSIONER
AND CONTROL
T.GISSS
DIVISION or LANDS AND FORESTS
SECRETARY
DIVISION OF FISH AND GAME
CONSERVATION DEPARTMENT
ALBANY
Itis not a dictatorship. I. long as
us co-oparatz in carrying out the
laws which honasty seek to Punish
Pronume to our got, we 12th to
uphold our Asmocracy. Hhru we saak to
ohsat and millity and quadz, and
help others to quady, 9040 tho They do
hot come into open conflict with
the law, NZ are in truth attackess
the thair pillare foundations of our
Gut. he are helping to promets
Vyranny as are Harnster to popular
90t
Regraded Unclassified
29Q
And Ishould like to ad d that s WE
has back in wg present office that
nevu spiken axc4pt bozu The Radio
This the first time / have spoker the
1xcapt is TBV The Radio, so Mait
at 14ust talls you how much J
wanted to come hare to and
how glad lam toke with you
XaH 2 has as its basis 1 stought thinking the and
absolute intellactual interivity,
In this Democrate country 5/0ms
nh have Found that along This
spirit thrives in company with
another principla - The principla of
Social Justice - and that principle is
just a scieply Rule spaction as
Rtanau mare r man
* 3 ( might chone These incidents
from Those which you may assous
as oll unportant in are in connection
with the Such as its monta
policy, or budget mathing or
but Ishall
out all 7 there Gudtahe my
Examples from them other
somers which un port ant as they
are, and talk to you, to dae of
knower +4 ve
Cartam theys, which are more
and inns u & d
than 70312 The must partact Month
are dzal
with humantsings,
madimum Because They 2Hst
mithour 70129 day like, ocu 90mg
day conduct, and This a
bind threefor
direct. have as Hacks bir attittade toward
the
thour own
Maving
am going to talk Toyou about Law
toour
Enforcement
Regraded Unclassifie
29R
all than coossed con juard
bus physical fronting hour
It took in quity pund straugth
yts Kin
and character to puild This
hodron 070603
You boys who hour been graduated
to day will soon shouldre
to shoulder with us, you will often
be forging aload rus, 9wing character us
of your stranghth, your comare
your ambition, That 1 Glimer
is something to gir us knumsed
comarz and Reuawad faith
that our form of Rem gut
will dirust prospar
Regraded Unclassifi
Speech delivered by Secretary Morgenthau
at Deerfield Academy on Wednesday
evening, June 5th, 1935, at 8 P.M.
Sple
295
I am happy to have the opportunity to speak to
the people of this old American community tonight and
particularly to you boys who have been living and
growing here in body and mind. And I should like to
add that since I have been in the Treasury this is the
first time I have spoken except over the radio, 30 that
fact at least tells you how much I wanted to come here
and how glad I am to be with you.
As I have passed among these hills and valleys
that you know so well and that have come to be another
home for my two boys who have been here in this fine
school, I have thought -- as all of you must often
have thought -- of the events that have occurred here
in a dozen generations. I have tried to picture the
kinds of people who have lived here and of how they
have acted toward each other. I have tried to picture
Regraded Unclassifie
29T
- 2 -
their ideas of human cooperation and of government.
Each generation has seen a different world from
that of the generation that preceded it. The difference
has not been so much in the physical changes that have
taken place. You have not had many or violent changes
of that kind here. But these are not the important
changes anywhere. Buildings, railroads, highways, dams
-- all of these things are not so significant as the
progress of knowledge in men's minds. It is that which
fundamentally makes the differences between one generation
and another -- the significant difference which creates
the character of a civilization.
I am sure you remember Mark Twain's interesting
fantasy of the Connecticut Yankee mechanic who was
translated back to the time of King Arthur in England
and how the knowledge hs bore with him of the mechanical
processes of our late nineteenth century was sufficient
Regraded Unclassified
29h
- 3 -
to build a modern community in ancient England --
even to cannons and rapid-firing guns. The process
might be worked the other way. One could picture the
people of a primitive civilization placed in the sur-
roundings of today. Without instructors from our age
they couldn't turn a wheel of our industry or make any
of the products we regard as essential to our living.
The factories and tall buildings would crumble and the
wheels would rust and decay while the population went
back to the bow and arrow hunting and crude agriculture
to which they had been educated.
We have to fit ourselves today for a pretty com-
plicated way of living. We have to acquire some of the
essence of what it took many ages to discover. We have
to acquire it because it is our education that will
determine the character of the civilization of our
Regraded Unclassified
zav
- 4 -
particular America -- our particular world. The
factories and tall buildings we inherit will not deter-
mine it.
But there is an essence of progress that is a
thread running through all generations. It is in the
energy and the curiosity and the will to learn new
things. It has as its basis straight thinking and
absolute intellectual integrity. In this Democratic
country of ours we have found that this spirit thrives
in company with another principle -- the principles
of social justice -- and that principle is just a simple
rule of action as between man and man.
I want to give point to what I have to say about
that principle by some incidents and situations that
have come to my attention in public life. I might
choose these incidents from those which you may asso-
Regraded
- 5 -
ciate as all important in connection with the Treasury,
such as its monetary policy, or budget making, or major
governmental financing. But I shall omit all of these,
important as they are, and talk to you today of certain
things which I believe to be more fundamental, and more
vital than even the most perfect monetary machinery.
They are more vital and fundamental because they deal
with human beings, with our every day life, our every
day conduct; and have a direct bearing on our attitude
toward our government.
I am going to talk to you about law enforcement,
with which the Treasury has much to do in connection
with its duty of collecting the revenue due to the
government. In that work we have to deal both with
those who don't want to pay and with the greater number
who pay willingly. If there were a general conspiracy
Regraded Unclassified
29X
- 6 -
not to pay, then our job would be hopeless. But for-
tunately most people have a true understanding of the
fact that government in this country is a partnership
and they pay what is due to their fellow citizens as a
duty and even a privilege of citizenship. They do it
with pride -- and you should remember that they are in
the overwhelming majority. Others seek ways to evade
paying -- to cheat their government and their neighbors.
of this group of troublemakers there are two classes --
those who are in the upper world and think themselves
worthy of respect, and those who are in the underworld
and don't care whether they are respectable or not. I
say they are the gangsters of both the upper and the
lower world.
For instance: A man emerges from the obscurity
of being a petty crook handy at all forms of comparatively
Regraded Unclassif
zqy
- 7 -
safe crime to be the boss gangster of a community, a
fairly big community in our country. He enjoys the
fame of being an overlord of crime and vice and illegal
trade and he makes an income that probably no man in
lawful business in his city can equal. He is frankly
of the underworld, but what of the bankers who handle
his "dough", as he calls it? What of the lawyer who
knows just what he is doing and yet "fronts" for him,
helps him to dodge the law and cheat prosecution? What
of the politicians who stand by and let him operate?
And finally, when a Treasury enforcement unit does what
local authorities have not been able to do and indicts
him for a Federal penitentiary offense -- evading his
income taxes -- what of the influential, respectable
citizen who comes down to Washington with a message that
the gangster is really quite a fine upstanding fellow
who may have done a little technical wrong but ought
Regraded Unclassif
e 8 -
to be let down easy?
Or let us take another case, the case of the
manager of a big industrial plant who did a favor for
a group of men seeking a location for a business and a
favor also to the corporation which had an idle plant
to be rented. He introduced these business men to the
banker with whom they deposited a large sum of money and
to the agent of the idle factory. He did this same
courteous service twice in two different communities for
this particular group of business men. Did he know that
their business was making alcohol on a large scale il-
legally? He said he didn't when our alcohol tax man
caught up with him.
And again, there seems a difference of opinion
about what is fair and right when one finds the most
influential people in a community mustering every power
Regraded Unclassified
29AA AA
- 9 -
to save from punishment a physician who for years has
gathered a very large income by dispensing narcotics
illegally to addicts. It is that sort of case that
fills me with disgust and wrath.
Then there are those who sharpen their pencils
and use trick devices to understate their income with
the hope that they can impose on Treasury accountants
and that at the worst after long delay they can obtain
a compromise that will mean a clear gain to them -- at
the expense of their fellow taxpayers. And there are
those who advise them to do these things.
This is the dark side of the picture. But for
every one of these there are thousands who scorn such
tricks, who have a law of conduct -- the simple law that
right is right and that black is not white.
Our form of government is one that requires the
Regraded Unclassified
29BB
- 10 -
cooperation of citizens. It is not 8. tyranny. It is
not a dictatorship. So long as we cooperate in carry-
ing out the laws which honestly seek to furnish revenue
to our government, we help to uphold our democracy.
When we seek to cheat and nullify and evade, and help
others to evade, even though they do not come into open
conflict with the law, we are in truth undermining the
main foundations of our government.
When I entered on the duties of my present position
there was a notable income tax investigation hanging fire.
The men of the Bureau of Internal Revenue because of the
implications of this case wanted authoritative word
about what to do. I learned of their dilemna and sent
for some of them. I didn't discuss the details of this
particular case with them at all. I simply said: "Let's
get this matter of policy straight and it will save us
29CC
- 11 -
all a lot of trouble. If there is a case of law-breaking
to be made against a man, make it. If there is a tax
to be collected, collect it. Let the chips fall where
they may."
I didn't need to impart any special instructions
about this case, nor did I need to get any. It is better
to have one rule for all cases, and I had that rule.
Twenty years of association with Franklin D. Roosevelt
had given me daily assurance that as long as I abided by
that rule I would always be supported. The rule is
simply that the law is to be obeyed and that influence
doesn't count. I can direct the work of 50,000 United
States Treasury employees with the same confidence in
the inviolability sanctity of that rule as in New York State while
serving as Conservation Commissioner under Governor
Roosevelt, I assured 150 game protectors that they needn't
Regraded Unclassity
29AD
- 12 -
hesitate to arrest a prominent politician who had shot
a deer out of season. It is as simple as that.
It is in essence the simple rule that black is
black and white is white. It is the rule of fair dealing
by which all honorable business is conducted. It is the
rule not to take advantage of the weak nor give special
favors to the strong. There is no monopoly of it, no
unique virtue that one can claim for practicing it. But
it is a comfortable rule to follow. It smoothes out
difficulties and makes many tangled problems simple.
It is the essential principle of which I have spoken,
without which we cannot have good government in a
democracy. This rule has consequences, a corollary, I
think you would call it, which is expressed in the two
words, "social justice".
One is unfortunate if he hasn't learned it early
Regraded Unclassi
29EE
- 13 -
in life. I began to discern it as a boy when I sat
in a corner of my father's office and saw it appear
in business discussions. When, years later, I saw him
extinction
laboring to protect the Armenians from annihilation,
A
it was but the same rule in practice in a larger field.
You, each one of you, could furnish your own recollec-
tions and instances of it. In spite of occasional
exceptions and violations such as I have noted, it is
a rule that is & part of the American spirit and character.
It is so much so that it is a password to a great
brotherhood. When I voiced it to the men of the Internal
Revenue Intelligence Unit their faces lit with joy, and
that was a tonic to me.
The pleasure that I get out of my present office
is due chiefly to the fact that the men and women who
serve their government, who serve you, serve well and
with enthusiasm for doing & good job. There is nothing
Regraded Unclassifie
29 29FF
- 14 -
wrong with the morale of government workers. Any
private company would be proud and happy to be served
as faithfully as your government is served.
There are plenty of problems of government still
to be solved. We are going to leave many of them to you
boys who have been graduated today, and there will be
plenty of others left for future graduating classes.
But this I believe to be true; that there was never a
time when so many able men and women were willing to give
their services so freely to their government for its
good rather than their own; never a time when the prob-
lems of government commanded such self-sacrificing
labor as today.
You boys who have been graduated today will soon
be working shoulder to shoulder with us, you will often
be forging ahead of us, giving us of your strength, your
character, your ambition. That I believe is something
Regraded
- 15 -
to give us renewed courage and renewed faith that our
form of democratic government will and must prosper.
---000000--
Regraded
29GG
TREASURY DEPARTMENT
See Page 7.
Washington
Following is the text of an address by Henry
Morgenthau, Jr., Secretary of the Treasury,
sibl
to be delivered at Deerfield, Mass., Wednesday,
June 5, in connection with the graduation
exercises of Deerfield Academy. It is for
release upon delivery which is set for 8 P.Ms
I am happy to have the opportunity to speak to
the people of this old American community tonight and
particularly to you boys who have been living and
growing here in body and mind. And I should like to
add that since I have been in the Treasury this is the
first time I have spoken except over the radio, so that
fact at least tells you how much, I wanted to come here
and how glad I am to be with you.
As I have passed among these hills and valleys
that you know 30 well and that have come to be another
home for my two boys who have been here in this fine
school, I have thought - as all of you must often
have thought - of the events that have occurred here
in a dozen generations. I have tried to picture the
kinds of people who have lived here and of how they
have acted toward each other. I have tried to picture
their ideas of human cooperation and of government.
Each generation has seen a different world from
that of the generation that preceded it. The difference
has not been so much in the physical changes that have
taken place. You have not had many or violent changes
of that kind here. But these are not the important
changes anywhere. Buildings, railroads, highways, dams
Regraded Unclassifie
- all of these things are not so significant as the
progress of knowledge in men's minds. It is that which
fundamentally makes the differences botween one generation
and another - the significant difference which creates
the character of a civilization.
I am sure you romember Mark Twain's interesting
fantasy of the Connecticut Yankee mechanic who was
translated back to the time of King Arthur in England
and how the knowledge he bore with him of the mechanical
processes of our late nineteenth contury was sufficient
to build a modern community in ancient England -
even to cannons and rapid-firing guns. The process
might be worked the other way. One could picture the
people of a primitive civilization placed in the sur-
roundings of today. Without instructors from our age
thoy couldn't turn a wheel of our industry or make any
of the products we regard as essential to our living.
The factories and tall buildings would crumble and the
whoels would rust and decay while the population wont
back to the bow and arrow hunting and crude agriculture
to which they had been educated.
No have to fit ourselves today for a pretty com-
plicated way of living. We have to acquire some of the
essence of what it took many ages to discover. We have
to acquire it because it in our education that will
determine the character of the oivilization of our
particular America - our particular world. The
Regraded Unclassified
-3-
factories and tall buildings we inherit will not deter-
mine it.
But there is an essence of progress that is a
thread running through all generations. It is in the
energy and the curiosity and the will to learn new
things. It has as its basis straight thinking and
absolute intellectual integrity. In this Democratic
country of ours we have found that this spirit thrives
in company with another principle - the principles
of social justice - and that principle is just a simple
rule of action as between man and man.
I want to give point to what I have to say about
that principle by some incidents and situations that
have come to my attention in public life. I might
choose these incidents from those which you may asso-
ciate as all important in connoction with the Treasury,
such as its monetary policy, or budgot making, or major
governmental financing. But I shall omit all of these,
important as they are, and talk to you today of certain
things which I believe to be more fundamental, and more
vital than even the most perfect monetary machinery.
They are more vital and fundamental because they deal
with human beings, with our overy day life, our every
day conduct; and have a direct bearing on our attitude
toward our governmont.
Regraded Unclassified
- 4 -
I am going to talk to you about law enforcement, with
which the Treasury has much to do in connection with its duty
of collecting the revenue due to the government. In that work
we have to deal both with those who don't want to pay and with
the greater number who pay willingly. If there were a general
conspiracy not to pay, then our job would be hopeless. But
fortunately most people have a true understanding of the fact
that government in this country is a partnership and they pay
what is due to their fellow citizens as a duty and even a
privilege of citizenship. They do it with pride -- and you
should remember that they are in the overwhelming majority.
Others seek ways to. evade paying -- to cheat their government
and their neighbors. Of this group of troublemakers there
are two classes --- those who are in the upper world and think
themselves worthy of respect, and those who are in the under-
world and don't care whether they are respectable or not. I
say they are the gangsters of both the upper and the lower
world.
For instance: A man emerges from the obscurity of being
a petty crook handy at all forms of comparatively safe crime
to be the boss gangster of a community, a fairly big community
in our country. He enjoys the fame of being an overlord of crime
and vice and illegal trade and he makes an income that probably
no man in lawful business in his city can equal. He is frankly
Regraded Unclassified
- 5 -
of the underworld, but what of the bankers who handle his
"dough", as he calls it? What of the lawyer who knows just
what he is doing and yet "fronts" for him, helps him to dodge
the law and cheat prosecution? What of the politicians who
stand by and let him operate? And finally, when a Treasury
enforcement unit does what local authorities have not been able
to do and indicts him for a Federal penitentiary offense -
evading his income taxes - what of the influential, respectable
citizen who comes down to Washington with a message that the
gangster is really quite a fine upstending fellow who may have
done a little technical wrong but ought to be let down easy?
Or lot us take another case, the case of the manager
of a big industrial plant who did a favor for a group of men
seeking a location for A business and a favor also to the
corporation which had an idle plant to be rented. He intro-
duced these business men to the banker with whom they deposited
a large sum of money and to the agent of the idle factory. He
did this same courteous service twice in two different communi-
ties for this particular group of business men. Did he know
that their business WAS making alcohol on a large scale 11-
legally? He said he didn't when our alcohol tax nan caught
up with him.
Regraded Unclassified
- 6 -
And again, there seems & difference of opinion about what
is fair end right when one finds the most influential people in
a community mustering every power to save from punishment a
physician who for years has gathered a, very large income by dis-
pensing narcotics illegally to addicts, It is that sort of
case that fills me with disgust and wrath.
Then there are those who sharpen their pencils and use
trick devices to understate their income with the hope that
they can impose on Treasury accountants and that at the worst
after long delay they can obtain a compromise that will mean
a clear gain to them - at the expense of their fellow tax-
payers, And there are those who advise them to do these things.
This is the dark side of the picture. But for every one
of these there are thousands who scorn such tricks, who have a
law of conduct - the simple law that right is right and that
black is not white.
Our form of government is one that requires the cooperation
of citizens. It is not a tyranny. It is not a dictatorship. So
long as we cooperate in carrying out the laws which honestly seek
to furnish revenue to our government, we help to uphold our democ-
racy. When we seek to cheat and nullify and evade, and help
others to evade, even though they do not come into open conflict
with the law, we are in truth undermining the main foundations
of our government.
Regraded Unclassified
7 I I
When I entered on the duties of my present position there was
a notable income tax investigation hanging fire. The men of the Bureau
of Internal Revenue because of the implications of this case wanted au-
thoritative word about what to do. I learned of their dilemna and sent
for some of them. I didn't discuss the details of this particular case
with them at all. I simply said: "Let's get this matter of policy
straight and it will save us all a lot of trouble. If there is a case
of law-breaking to be made against a man, make it. If there is a tax
to be collected, collect it. Let the chips fall where they may."
I didn't need to impart any special instructions about this
case, nor did I need to get any. It is better to have one rule for all
cases, and I had that rule. Twenty years of association with Franklin
D. Roosevelt had given me daily assurance that as long as I abided by
that rule I would always be supported. The rule is simply that the law
is to be obeyed and that influence doesn't count. I can direct the
work of 50,000 United States Treasury employees with the same confidence
in the inviolability of that rule as in New York State while serving
as Conservation Commissioner under Governor Roosevelt, I assured 150
game protectors that they needn't hesitate to arrest a prominent
politician who had shot a deer out of season. It is as simple as
that.
Regraded Unclassified
- 8 -
It is in essence the simple rule that black is
black and white is white. It is the rule of fair dealing
by which all honorable business is conducted. It is the rule
not to take advantage of the weak nor give special favors to the
strong. There is no monopoly of it, no unique virtue that one can
claim for practicing it. But it is a comfortable rule to follow.
It smooths out difficulties and makes many tangled problems simple.
It is the essential principle of which I have spoken, without which
we cannot have good government in a democracy. This rule has
consequences, a corollary, I think you would call it, which is
expressed in the two words, "social justice".
One is unfortunate if he hasn't learned it early in life.
I began to discern it as a boy when I sat in a corner of my father's
office and saw it appear in business discussions. When, years later,
I saw him laboring to protect the Armenians from annihilation, it
was but the same rule in practice in a larger field. You, each one
of you, could furnish your own recollections and instances of it. In
spite of occasional exceptions and violations such as I have noted,
it is a rule that is a part of the American spirit and character.
It is so much so that it is a password to a great
brotherhood. When I voiced it to the men of the Internal Revenue
Intelligence Unit their faces lit with joy, and that was a tonic to me.
Regraded Unclassifie
- 9 -
The pleasure that I get out of my present office is due chiefly
to the fact that the men and women who serve their government, who
serve you, serve well and with enthusiasm for doing a good job.
There is nothing wrong with the morale of government workers. Any
private company would be proud and happy to be served as faithfully
as your government is served.
There are plenty of problems of government still to be solved.
We are going to leave many of them to you boys who have been graduated
today, and there will be plenty of others left for future graduating
classes. But this I believe to be true; that there was never a time
when so many able men and women were willing to give their services
so freely to their government for its good rather than their own;
never a time when the problems of government commanded such self-
sacrificing labor as today.
You boys who have been graduated today will soon be working
shoulder to shoulder with us, you will often be forging ahead of us,
giving us of your strength, your character, your ambition. That I
believe is something to give us renewed courage and renewed faith
that our form of democratic government will and must prosper.
------000000--
Regraded Unclassified
30
TREASURY DEPARTMENT
Washington
The following text of an address by Henry Morgenthau, Jr.,
Secretary of the Treasury, before the Tax Rovision Council
in Washington, D.C. at 10:30 A.M. Friday, June 7, is for
release upon delivery.
I appreciate the invitation to take part in this discussion of the
(coblem of conflicting and overlapping taxation.
It is an old problem and not confined to the United States, but it grows
more complicated, more difficult, and more acute with the years. At present
ve find it 30 ncute in our country that it must be faced, and the fact that
we are facing it raises the hope that we shall soon be taking important steps
to solve it.
The depression has brought this problem into prominence by impairing
the usual surces of revenue, thus causing our various governmental units to
cremote with each other for new sources and for greater yield from the old
sources. This competition has produced numerous unfortunate results. For
example, certain states have discovered that their taxes drove business into
noighboring states; others have revised their tax laws primarily to attract
business. Tax evasion, in all fitsforms, has boen increased by the fact
that our machinery for the levying of taxes is out of equilibrium. We find
11.4.10 states imposing taxes proviously levied solely by the Federal government,
and therefore having to set up duplicate administrative machinery. The
Foderal Government has also tapped sources of revenuo proviously regarded as
for the statos alone. The conflicts between local and state governments
in the field of taxation are too mumerous even to be cataloguod during the
few minutes I shall address you. Every phaso of this problem bristles with
thorny details.
Regraded Unclassifie
30
The principal contribution that I should like to make to your deliberations
on this subject is a definition ofthe basic problem. With the definition in
mind WO are ready to divide the problem into its many parts, and take them up
in detail. The basic problem, as I see it, is to be just to the tax-payer.
Independent levying of taxes by all of the various taxing authorities, without
due consideration for the tax structure as a whole, has often resulted in
unfair and uneconomic distribution of the burden. This is unjust, and
therefore, affects the very foundations of government. It touches the welfare
of the citizen in his daily task of earning a living. I think the problem
should be approached, with this point of view. Duplicate taxes cause waste,
but that is a detail. The greater problem is to restore equilibrium in the
tax structure as a whole, in order, primarily, to be fair and just. The waste
is not as important as the injustice. It is entirely possible that we could
attack the problem of waste and solve it without removing injustice. If we
considered the matter solely from the point of view of the efficient tax
gatherer it would become a technical problem. You could summarize it as a
question of how to get the most money with the least expense. Stated in those
terms the problem of this democratic government would be no different from
that of any ancient tyrant. He had to raise money to support his government
and ho tried to get as much as he could with the least possible expense.
A considerable part of the oppression which charactorized tyranny was a direct
result of taxation for revenue only, without regard to justice.
We must remember that, to the individual citizen, taxes are taxes, and
that it maices no difference to him which agency is most at fault for any
injustice he suffers. The tax structure should be sound, and the responsibility
for making it 30, rests upon every part of our government. When each taxing
authority is guided only by its own immedinte needs, and lovies regardless of
Regraded Unclassifie
30B
-3-
the existence of identical or, similar taxes imposed by other government units,
the structure cannot be sound.
The problem of how to be fair in levying taxes is not easy, and porfection
is out of the quostion; but the very complexity of the question pakos it
necessary for us to be striving constantly toward perfection because of the
neverending drift in the opposite direction.
We must be careful to guard against injustices as between geographic
sections of the country, as between commodities, and industries, no less than
as between individuals. An unjust distribution of the tax burden immediately
creates artificial obstacles, and their disturbing influence is injected into
the economic life of the nation.
I think it would be a great mistake, therefore, to think of our problem
as limitod to the removal of such administrative conflicts as now exist
between the Federal, State, and local governments with respect to taxes.
Certain types of new taxes which have been adopted as emergency measures might
well be left to their administrative difficulties, in the hope that they will
be discontinued. It would be a mistake, in my opinion, to accept as our main
problem the task of making it easier to collect and administer all taxes.
What, then, should be our immediate approach to the problem? To may as
well forego at the outset, the approach that would disregard the historical
development of our political institutions, and attompt to recast our whole
Government from top to bottom in such fashion that all governmental functions
would be redistributed between Federal, State, and local units according to
some idoal pattern. The practical objection to setting up such an ideal
cystem of taxation, based upon a thorough redistribution of all governmental
functions, is that we would be forced to spend the rest of our lives contom-
plating the impossibility of putting it into effect. To be practical, in this
Regraded Unclassifie
30C
connection, we must do our utmost to correct grave abuses without attompting to
recest our whole machinery.
On the other hand, I don't believe that it would be wine to go to the
other extreme; that is, to make a list of all of the specific types and cases
of conflicts and overlapping, and attempt to take them up one by one. That
type of piecemeal tinkering is very slow and rarely effective. Moreover, it
in subject to the danger that each piecemeal solution, adopted without due
reference to fundamental principles, might produce new inconsistencies. And
a series of such piecemoal solutions could easily result in a badly distorted and
unjust total tax structure.
The best approach would be the fundamental one of considering the entire
problem from the standpoint of the individual taxpayor. The first step, in my
opinion, is to make a careful survey and analysis of the total tax structure
of the country to determine just how the burden of our governmental expenses
in now distributed. Next, I would note what practicable changes in the
cumbined tax structure of the country would produce a sound and more equitable
distribution of the total burden. In the third place, I would concentrate
upon a few important and workable means of eliminating conflicts and overlapping
in a manner consistent with our analysis of what constitutes a fundamentally
desirable tax structure. Finally, having arrived at a few important possibili-
ties which we know to be fundamentally sound, we can then attempt to put them
into effect. Each progressive step that we succeed in achieving along this
line would not be a compromise that might create now conflicts, but would
completo part of our task. Each fundamental stop completed would provide a
stopping-stono to make the next part of our program easier to achieve.
30D
Wherever the problem has been attacked in this manner real progress has
resulted. Several of the states are excellent examples but I am most familiar
with what was dono in Now York State when Franklin D. Roosevelt was Governor.
At his direction, the problem of oqualizing the tax burden was studied by
exports, and their reports are among the most valuable we have on this subject.
In the rural aroas of Now York State, tax reforms of great social value were
put into effect, and romain as boacon-lights to direct our course,
Mr. Roosevelt's interest in this problem has been intonsified sinco he
became President of the United Statos. At his diroction the Treasury is
undertaking a now study of overlapping taxes. This will supplement and carry
further the excellent work nn the problem of double taxation done by the staff
of the Joint Committee on Taxation of the Congress for the Ways and Moans
Committoe in 1932.
In procooding along the course I have outlined, guided at overy stop by
the basic principlo offairness, wo should ba careful not to assumo that the
revenue noods of our various governmental units are, now fixed for all time.
That assumption would load us into new difficultios.
Our attack upon the problem of conflicting and overlapping taxation must
be SQ basic that the solutions we arrive at aro sufficiently floxible to
provide for changing noods.
In the case of somo taxos, it is entirely possible that wo shall find it
dosirable to malco a rigid separation of sources between Foderal, State, and
local governmonts. In other casos, wa might find that cortain taxes now levied
by numorous governmontal units could bo best administered by tho Fodoral Govern-
mont, and the proceeds shared with the Statos. It is also possible that the
BY
states might handlo certain of the taxos more oasily than the Fodoral Government.
Regraded Unclassifie
30E
-6-
It would be highly desirable to center considerable attention upon the
principles that should govern the allocation of such revenue.
In conclusion, I strongly urge that the technical details of tax-gathering,
and even the essential matter of supporting the government, be considered
secondary in importance in your doliberations, and that first consideration
be given to the vital question of justice to the tax-payer. That course
simplifies the task and leads directly to the goal.
or
Regraded Unclassified
31
147
TAXPAYERS FIRST
An address delivered before the Tax Revision Council urging that prime consideration
be given to the vital question of justice to the taxpayer.
By HENRY MORGENTHAU, JR.
Secretary of the Treasury
Chairman of the Tax Revision Council
and overlapping taxation is an
ous taxing authorities, without due considera-
Cold problem. old not confined to the United
tion for the tax structure as a whole, results in
States, which grows more complicated,
unfair and uneconomic distribution of the bur-
note difficult, and more acute with the years.
den, affecting the very foundations of govern-
has now become so acute in this country that
ment. It touches on the welfare of the citizen
must be faced squarely. The fact
in his daily task of earning a liv-
Bat we are facing it gives rise to
ing. Duplicate taxes cause waste,
the hope that we shall soon be tak-
but that is a detail. The greater
important steps to solve it.
problem is to restore equilibrium
The problem has recently been
in the tax structure as a whole, in
Trought into prominence by de-
order, primarily, to be fair and
Pression decreases in the usual
just to every class of taxpayer.
purces of governmental revenue
It is entirely possible that we
which have forced our various gov-
could attack the problem of waste
Termental units to compete with
and solve it without removing in-
ach other for new sources of tax
justice. If we considered the mat-
income and for greater yield from
ter solely from the point of view of
the old sources. This competition
the efficient tax gatherer it would
produced numerous unfortu-
become a technical problem which
Henry Morgenthau. Jr.
bate results. Some states have dis-
could be summarized as a question
covered that their taxes drive business into
of how to raise the most tax revenue with the
heighboring states; others have revised their tax
least administrative expense. Stated in those
primarily to attract business. All forms of
terms the problem of this democratic govern-
IX evasion have been increased by the fact that
ment would be no different from that of any
our tax machinery is out of equilibrium. Some
ancient tyrant who had to raise money to sup-
Rates, imposing taxes previously levied solely by
port his government and who tried to get as
the federal government, have had to set up
much as he could with the least possible ex-
duplicate administrative machinery. The con-
pense. A considerable part of the oppression
diets between local taxes and state taxes are too
which characterized tyranny was a direct result
numerous for me to catalogue. Every phase of
of taxation for revenue, without regard to
THIS problem bristles with thorny details.
justice.
The contribution which I should like to make
The problem of how to be fair in levying
to these deliberations is a definition of the basic
taxes is not easily solved. Perfection is out of
problem. With a definition in mind we can
the question; but the very complexity of the
to divide the problem into its many
question makes it necessary for us to strive con-
parts, and take them up in detail. The basic
stantly toward perfection and overcome the
problem. as ! sée it, is to be just to the taxpayer.
never-ending drift in the opposite direction. All
independent levying of taxes by all of the vari-
governmental units must face that responsibility.
Regraded
STATE GOVERNMENT
149
149
We must be careful to guard against unjust
meal solutions could easily result in a badly dis-
placing of the burden on particular geographic
torted and unjust total tax structure.
sections of the country, on particular commod-
The best approach would be the fundamental
IN THE DARK
ities, and on particular industries, DO less than
one of considering the entire problem from the
State officials lack adequate information on the fiscal
on particular individuals. An unjust distribu-
standpoint of the individual taspayer. The firs
problems with hich they must deal.
tion of the tax burden immediately creates arti-
step is to make a careful survey and analysis of
ficial obstacles to business, and the disturbing
the rotal tax structure of the country to detes.
work of the Tax Revision Council and
influence of these obstacles is injected into the
mine just how the burden of our governmental
for the immediate future are not inviting. The
economic life of the nation.
expense is now distributed. Next, We should
T
of all other fiscal bodies interested in the
financial support available to the Bureau of the
note what practicable changes in the combined
rationalization of state and local financial
Centus assures immediate restoration of only
It would be a great mistake to think of our
tax structure of the country would produce a
problema is greatly hampered by the lack of
that part of the program which contemplates a
problem as limited to the removal of such ad-
ministrative conflicts as now exist between the
sound and more equitable distribution of the
comparative information. It is necessary that
financial survey of cities having a population in
mml burden. In the third place, we should cop-
the finances of states and their political sub-
excess of 30,000. It does not look toward sample
federal, state, and local us systems. Indeed, CCT-
divisions be understood before attempts to iron
tain types of new taxes which have been adopted
centrate upon A few important and workable
coverage of smaller units or a complete report-
as emergency measures might well be leh to
means of eliminating conflicts and overlapping
out tax conflicts can be successful and before
ing of state data. Moreover, the report of 1931
in a manner consistent with our analysis of what
the RUICI can work out satisfactory tax struc-
and 1932 is now almost completely useless for
their administrative difficulties, in the hope that
they will be discontinued. It would be a mistake
constitutes a fundamentally desirable tax itruc-
cares. At present the data for a comprehensive
an interpretation of the present financial situa-
ture. Finally, having arrived at a few important
financial picture are noticeably lacking.
tion in the states. There has been, since 1931 and
to accept as our main problem the task of sim-
plifying the administration of all taxes.
possibilities which we know to be fundamen-
1932, an almost revolutionary change in state
Census statistics
tally sound, we can then attempt to par them
and local finance and defects in that report
No extremes
into effect. Each progressive step which we such
The Boreau of the Census, prior to 1930, took
render it difficult to utilize figures for compare-
ceed in achieving along this line would not be
an annual census of the financial activities of
son with such data as can be obtained at the
What, then, should be our immediate ap-
a compromise that might create new conflicts
cities of more than 30,000, and of all states. As
present rime, sparse as that material is.
preach to the problem? We may as well forego
at the outset, the approach which would dis-
but would complete part of our task. Each would
an economy measure during the depression,
provide a stepping-stone to make the next part
publication of the financial statistics of cities
What is needed
regard the historical development of our politi-
from thirty to a hundred thousand population,
la order to obtain a reasonably accurate and
cal institutions, and attempt to recast our whole
of our program easier to achieve.
and of the financial statistics of states has been
complete picture of public finance another sur-
government from top to bottom, in such Fashion
Possibilities
discontinued.
vey compurable in scope, but superior in quality,
that all governmental functions would be re-
distributed between federal, state, and local
In the case of some taxes, it is entirely pos
The Bareau has also conducted a more com-
in that of 1931-32, is necessary. The Cents
units according to some ideal pattern. The prac-
sible that we shall find it desirable TO make a
prehensive decennial survey of the finances of
Bureau would, of course, be glad to conduct
tical objection to setting up such an ideal system
rigid separation of sources betwoen federal,
various units of government. The scope of this
such a survey if financial support were made
of resation, based upon a thorough redistribu-
state, and local governments. In other cases,
ten year survey has been the entire govern-
available. It has canvassed the possibility of de-
tion of all governmental functions, is that we
we might find that certain motes now levied by
mental organization of the United States rather
veloping à works project for this purpose, but
would be forced to spend the rest of our lives
numerous governmental units could be best sil-
than merely cities within a specified population
there is some doube as TO the legality of such
contemplating the impossibility of purting it
ministered by the federal government, and the
group and state governments. The last of these
a scheme, and much graver doube as to whether
into effect. To be practical, we de odr
proceeds shared with the states. It is also por-
comprebensive surveys was made as of 1931-32.
its execution would be possible with work relief
ulmost to correct grave abuses without attempt-
sible that the states might handle certain of the
As a result of investigations of state and local
labor, unless a great deal more supervision could
be provided than is possible under present ap-
ing to recast our whole machinery.
taxes more easily than the federal government
Ratistics conducted by the Central Statistical
On the other hand, I do DOE believe that it
We must center considerable attention upon the
Board and the Municipal Finance Officers' Asso-
propriations.
would be wise to go DO the other extreme; that
principles governing allocation of such reventif,
cation, the Bureau of the Census is now plan-
A number of state financial officials may wish
is, to make a list of all of the specific types and
In conclusion, [ strongly urge that the tochno-
ning a greatly improved program for collecting
to concern themselves with efforts to secure ade-
clues of conflicts and overlapping, and attempt
cal details of tax-gatbering, and even the essor-
datistics of state and local governments. The
quate financial dam on state and local govern-
to take them up one by one. That type of piece-
tial matter of supporting the government, be
program, when completely under way, will DOE
ment. Appropriate authorities in Washington
rueal tinkering is very slow and rarely effective
considered secondary in importance in these de
only improve the quality of the data, but will
-especially in the Cennus Bureau - would
Moreover, it is subject to the danger that each
liberations, and that first consideration be given
also make possible an intelligent estimate of the
doubtless be glad to receive encouragement
piecemeal solution, adopted without due refer-
to the vital question of justice to the tax-payer.
total financial picture at any une time.
from state and local officers, who would be most
ense to fundamental principles, might produce
That course supplifies the task and leads di-
Nevertheless, the situation at present is cer-
benefited by their revised program if, and when,
new inconsistencies. And a series of such piece-
recrly to the goal which we strive to raid
tainly TYCE what it should be, and the prospects
is could be put into effect.
Regraded Unclassified
180
151
THE SUPREME COURT SPEAKS
LEGISLATIVE LEVEES
Excerpts from the recent NRA decision which define the
Interstate compacts offer il strong bulwark against retrogression in the
control of social and industrial problems of the nation.
powers lying within the domain of the states.
The
commerce
power:
"It
is
not
the
the extent of the regulation of cost
By ETHEL M. JOHNSON
province of the court to consider the
would be a question of discretion and
Secretary of the New Hampshire Commission DW Interance Labor Company
economic advantages or disadvamages
not of power."
of (such) a centralized system. It is suf-
HE purpose of interstate compacts with
Massachusetts and New York, of the industrial
ficient to say that the federal constitu-
Indirect effects: "The distinction be-
T
respect to labor legislation is to remove
states of the east, have a 48-hour law.
tíon does not provide for it. Our growth
tween direct and indirect effects has
unfair differentials in the labor laws of
These differentials in regulatory measures
and development have called for wide
been clearly recognized in the applica-
the different states, to assure more adequate pro-
tend to encourage the migration of factories
use of the commerce power of the fed-
tion of the Anti-Trust Act. Where a
tection for employees in these states, and to give
from states with high standards of protective
eral government in its control over the
combination or conspiracy is formed,
greater permanence to the legislation enseted.
legislation to others with lower standards. The
expanded activities of interstate com-
with the intent to restrain interstate
It it to the interest of the manufacturer to
resulting displacement of labor contributes to
merce and in protecting that commerce
commerce or to monopolize any part of
have greater uniformity in the labor laws of
sectional unemployment. The movement of
from burdens, interferences and con-
it, the violation of the statute is clear.
comparable industrial states. It is equally to
textile factories from New England to the
spiracies to restrain and monopolize it.
"But where that intent is absent and
the interest of workers that uniform standards
southern states is an outstanding example of
"But the authority of the federal gov-
the objectives are limited to intrastate
regarding conditions of employment be adopted
such migration. A shifting of plants on a lesser
ernment may not be pushed to such an
activities the fact that there may be an
by the several states, and that these standards
scale, but with disturbing results, goes on much
extreme as to destroy the distinction,
indirect effect upon interstate commerce
should conform to the most enlightened criteria,
of the time between adjacent states in which
which the commerce clause itself estab-
does not subject the parties to the fed-
competing industries are located.
eral statute, notwithstanding its broad
Wide variations
lishes, between commerce among the
Another consideration in connection with the
several states' and the internal concerns
provisions."
Existing differences in labor legislation be-
compact device in the field of labor and indus-
of a state
Iween Rates with competitive industries have
try is that legislation enacted under a compact
The commerce clause: "But where
resulted in wide variations in working candi-
agreement is presumably of a more permanent
the effect of intrastate transactions upon
tions and practices and, to some extent, in the
nature than that enacted by a single state. The
Wages and hours: "If the federal
interstate commerce is merely indirect,
cost of continuing business. An illustration of
compact is a formal contract involving not only
government may determine the wages
such transactions remain within the do
this may be found in the Atlantic seaboard
and hours of employees in the internal
ratification by the legislatures of the signatory
main of state power.
states. A number of these have closely compet-
states, but, in addition, the sanction of Congress.
commerce of a state, because of their re-
"If the commerce clause were con-
ing industries, yet their legal regulations in such
Each state is free to decide whether it wishes to
lation to cost and prices and their indi-
strued to reach all enterprises and trans-
matters as hours of employment, night work,
rect effect upon interstate commerce, it
ratify a given compact. Once a state has given
actions which could be said to have an
wages, and child labor vary greatly. Of the New
its consent to a compact, however, is is under
would seem that a similar control might
indirect effect upon interstate com-
England states, for instance, Maine and Rhode
be exerted over other elements of cost
moral obligation to observe the provisions of
merce, the federal authority would effl-
Island prohibit the employment of children
also affecting prices, such as the number
the agreement.
brace practically all the activities of the
less than 15 years of age, Connecticut has
of employees, rents, advertising, meth-
people and the authority of the state
ods of doing business, etc.
recently enacted legislation prohibiting the em-
Regional agreements
over its domestic concerns would exist
playment of minors under 16 years of age. The
The interstate compact, 25 applied to labor
"All the processes of production and
only by sufferance of the federal gov-
distribution that enter into cost could
other Hates permit boys and girls of 14 or more
legislation, has many interesting possibilities. It
emment. Indeed on such a theory even
likewise be controlled. If the cost of
years of age, if properly certified, to leave school
suggests not only direct agreement on common
the development of the state's commer-
No become wage earners. New Hampshire is
problems between two or more states, but the
doing an intrastate business is in itself
cial facilities would be subject to federal
the one Rate in the group which requires extra
further posibility of regional agreements be-
the permitted object of federal control,
control."
compensation for injury to minors who are il-
tween groups of states representing different sec-
legally employed. Connecticut, Massachusetts,
tions of the country. One of the promising les-
and New Hampshire are the only New England
turo of the interstate compact is the opportunity
Rales with minimum wage legislation. Only
it affords of beinging states into closer relation-
Regraded Unclassified
152
STATE GOVERNMENT
153
ship with one another. Greater harmony
One of the sifeguards from this danger in the
among the states should be promoted by the
unilization of the compact in the field of labor
development and use of this device for meeting
and industry may be the definite limitation of
LABORS FOR LABOR
mutual problems.
the sphere of action for the compact as applied
There is, however, a possible danger in con-
to labor legislation. If, instead of attempting to
A recent interstate conference recommended the broadening of
nechion with the compact as applied to labor
use the compact as an agency for securing new
legal protection for workers.
legislation which should be frankly recognized
labor laws or higher standards of legislation, the
in under that it may be avoided, This in the pos-
compact is used to remove differentials in exis-
recent meeting of the Conference on
sibility that the proposed plan may be regarded
T
interdate action from the angle of the econo-
ing labor laws and to deal with those special
Interstate Labor Compacts at Spring
mist. The effort of the compact is toward the
as a substitute for state labor laws. There is also
problems peculiar to two or more states which
Lake, New Jersey, on June 28 and 29, was
maintenance of a reasonable standard of labor
the ponibility that the chance of securing a com-
no one state is competent to settle by itself, and
marked by keen discussion and substancial prog-
in a competitive market.
pact agreement may be urged as an excuse for
which are also outside the sphere of federal
reve Forty-six delegates registered from nix-
"This of course does not mean that competi-
opposing or delaying needed legislation within
action-there may be less possibility of conflict
teen states, a larger group, representing more
tion is to be eliminated nor specific regulation
the states.
with either state or national legislation.
SHC than has ever gathered in the history of
imposed, If it were a choice between unfettered
the labor compact movement. It was especially
competition with all of its faults and detailed
interesting to observe that the unference was
regulation by government, I, for one, would be
extending its field of interest to the south and
for competition. The proposal is merely to fix
to the West, Representative S. Pierre Robineau
a level, a plane below which conditions of labor
AN IMPORTANT SUGGESTION
of Florida and Attorney General Paul Prosser
shall not be allowed to fall as the result of com-
of Colorado were welcomed with especial en-
petitive pressure,
The compact is suggested
Excerpt from an article by Senator Henry Parkman, Jr. in "Industry,"
thusiasm.
as a device which will enable a group of states
the publication of the Associated Industries of Massachusetts.
Judge Joseph G. Wolber, acting chairman of
constituting a fairly well defined competitive
the host New Jersey Commission on Interstate
producing area to formilate a common policy
I
IV this difficult situation, a most welcome sug.
In the exercise of its police power and acting for
Cooperation, presided in the absence of Chair-
for dealing with such common problems as
gestion is that the federal power might be
the preservation of the social standards of its
man Richard Hartshorne. He was ably aided
wages and hours"
exercised, within the field so strictly re-
citizens, a state could pass legislation prohibit-
by Senator Henry Parkman, It, permanent
Miss Johnson, in speaking of the compact OD
served for it by the Supreme Court decision, to
ing the sale of goods within its borders produced
chairman of the Conference. Governor Harold
minimum wages, already ratified and in effect
support the states in the maintenance of mini-
under conditions in another competing indus-
G. Hotfman spoke on both days and welcomed
in two states, clarified the position of the com-
mum labor standards. In the days before na-
trial state which did not come op to the level (CI
the delegates to New Jersey's "Little White
pact and the interstate commission which it
tional prohibition the dry states passed strict
by such state or group DE states as desirable for
House," the Governor's nummer cottage at Sea
establishes.
legislation against the sale of intoxicants within
its citizens.
Girt.
"It should be noted that the present compact
their borders. This alone, however, was not
does not establish new standards but rather at-
enough to prevent the importation of liquor
Protecting standards
Highlights of speeches
tempts to bring a larger number of states into
from the wet states, and the itates themselves
Federal legislation denying the privilege of
Opening specches were delivered by Senator
agreement on standards that have already been
were limited constitutionally in their power lo
interstate transportation to such goods would
Parkman, Professor George E. Bigge, Chairman
made effective in certain of the dates. The
prevent such importation. To help solve the
secm to be constitutional under the decisions
of the Rhode island Commission on Interstate
powers of the Commission are confined to in-
difficulties, the federal government enacted the
affirming the constitutionality of the Webb
Labor Compacts, Miss Ethel Johnson of the
vestigations, recommendations, and publication
so-called Webb-Kenyon Act which denied the
Kenyon Act, and at the same time would be
New Hampshire Labor Compact Commission,
of its findings."
privilege of interstate commerce to liquor trans-
extremely effective not only in giving protection
and Commissioner Joseph M. Tone of Connec-
ported from a Wet Mate into a dry one for pur-
to the labor standards set by compact in a group
time All were address to the point of what
Child labor
pare of sale. This coöperation of the federal and
of states, but also in pointing out to other states
interstate cooperation could achieve in the field
Commissioner Time elaborated the details of
state governments proved an effective protec-
the advantages of bringing their standards into
or labor regulation. On page 152 appears an in-
the proposed child labor compact which "for-
tion to dry states.
conformity with those in effect in the compust
leveling excerpe from a recent article by Senator
bids employment of children under 16 years of
ing states. The denial of a market to goods prir
Adequate legislation
Parkman which give his theory of federal help
age in manufacturing and certain other speci-
duced under "Sweat Shop" conditions would be
la intervate action by an industrial equivalent
fied employments; minors under 18 in haz-
The same principle could well be adapted for
2 compelling argument with any state towards
of the Webb-Kenyon Act.
ardous employments; minori under 18 in manu-
the maintenance of adequate social legislation
the removal of the impodiments which kept le
Professor Higge, in commenting on the hours
standards within a group of compacting states.
facturing and other specified employments be-
products from the market,
of labor compact, explained the possibilities of
twom 10 P.M. and 6 A.M.; minors under 18 for
Regraded Unclassified
154
STATE GOVERNMENT
STATE GOVERNMENT
155
more than eight hours per day, forty hours per
Tax Commissioner: Joseph C. Paul, Chairman,
werk and six days per week. Minors under 18
New Jersey House Committee on Intervate Ca-
EXTRA INNINGS
HAROLD M. GROVES
must have work certificates."
operation; John Roach, New Jersey Deputy
The regular schedule in the Legislators' League
Member of the Board of Managers of the
Mr. Tone noted that in addition to the future
Commissioner of Labor; Joseph G. Wolher,
is rapidly drawing to 4 close.
American Legislators' dissociation
value of the compacts 25 working instruments
Judge of the Circuit Court, New Jersey, and
of government, "the educational value of these
Chairman, New Jersey Commission on Inter.
HE legislators of Massachusetts and Wis-
compact conferences is worth many times what
conan are still taking their regular turns
M
ADISON, Wisconsin is blessed with the
state Cooperation; E. B. Patton, Director, Divi-
T
state university on one hill, the state
the meetings have already cost or will cost the
sion of Statistics and Information, Department
at hat, having been in session since early
capitol on another. That proximity is
governments of the itates in the future"
of Labor, New York.
Imuary. STATE GOVERNMENT'S Massachusetts
more than casually geographic. Much of Wie
Frederick L. Zummerman, Member, New
agent prophesies that a series of homeruns will
consin's eminence in
Group meetings
York Assembly; A. L. Fletcher, North Carolina
probably soon end the struggle for the Bay
state legislative affairs
After the introductory speeches the con-
Staters.
is chargeable to a close,
Commissioner of Labor; Edgar W. Brill, Chief,
ference was divided into sections on child labor,
Factory and Building Inspection, Department
Alabama, whose Constitution calls for only
cordial, university-cap-
minimum wages, hours of labor, and permanent
of Industrial Relations, Ohio; Keith Lawrence,
OBC set-to every four years, needs more than the
tool relationship, and
organization. Considerable discussion preceded
Member, Ohio Senate Committee on Internate
ordinary amount of "warm-up" to work not
many of Wisconsin's
Cooperation; John G. Lowery, Member, Obio
kinks and to devise a system. Convening first
most famed citizens
adoption of the reports of these sections by the
general conference. It was recommended that
on January 8, opening day was scheduled for
have scaled both
Senate Committee on Internate Coóperation:
ratification of the minimum wage and child
J. Freer Bittinger, Speaker, Ohio House of Rep-
April 30, Falling imo a slump, the legislators ad-
licights, along the pro-
resentatives; Elizabeth S. Johnson, Research
journed on July 10, to reassemble about July 30.
gressive paths made
labor compacts be urged on the various states
Idaho and Louisiana have already indulged
famous by the LaFol-
and that the hours of labor compact be reserved
Assistant, Department of Labor and Industry,
for further consideration. Plans for establishing
in short, pott-season exhibitions, and Tennessee
lettes.
Pennsylvania; Dr. J. E, Schechle, Secretary of
a permanent organization were discussed and
has been enjoying a special session since July 15,
Along these routes
Welfare, Pennsylvania; George E. Bigge, Pro-
Changes in the legislative line-up follow:
went Harold M.
approved.
fessor of Economics, Brown University, Rhode
Harold if Grows
Groves, first to the uni-
Delegates attending the conference included:
Island; Thomas P. McHugh, Member Rhode
Now meeting
versity, where lie interlarded Phi Beta Kappa
Paul P. Prosser, Attorney General, Colorado;
Island House of Representatives: L. Metcalfe
Royal Meeker, Deputy Commissioner of Labor,
Walling, Rhode Island Director of Labor: F.
Regular Servions:
Convened:
Will probably adjourn:
scholarliness with teaching. Topping off his
Connecticut: Joseph M. Tone, Commissioner of
Massachusetts
G. Austin, Retired Member, Vermont Interstate
January
2
July 30
Ph.D. degree, in 1927, with a year in the law
Labor, Connecticut: H. P. Young, Director,
Wisconsin
January 9
school at Harvard, he returned to the university
Labor Compact Commission: C. H. Day. Mem-
State Employment Service, Delaware
Special Section:
at Madison and a professorship in the depart-
her, Vermont Interstate Labor Compact Com-
Tennessee
5. Pierre Robineau, Member, Florida House
July 15
ment of economics. Thus, unqualifiedly and
mission; Arthur W. Peach, Chairman, Vermont
unreservedly, call he be labeled, "Harold M.
of Representatives; Dr. Peter Swanish, Chief,
Interstate Labor Compact Commission; Tay
Recent journments
Groves, Brain Truster," a serious indictment in
Division of Statistics and Research, Department
lor Frye, Assistant to Industrial Commision,
of Labor, Illinois; Thomas Dorgan, Member,
Wisconsin; Voyta Wrabetz, Chairman, Indus-
Regular Sessions:
Adjaurned:
Convened:
this year of grace, 1935,
Massachusetts House of Representatives; Ed-
Alabama
trial Commission, Wisconsin.
July to
April 30*
Into public service
ward J. Kelly, Member, Massachusetts House of
Special Sermani:
klabe
Representatives: James P. Meehan, Member,
Federal participants
July 10
July 8
Dropping his guard a second time, in 1930,
Louisiana
Massachusetts Senate; Henry Parkman, Jr,
Beatrice McConnell, Director, Industrial Di
July is
July 4
Dr. Groves became a member of the General
Assembly of Wisconsin, exposing himself to
Chairman, Massachusetts Commission on Labor
vision, Children's Bureau, United States De-
*Rease-will probably reconvene July 30,
such allegedly humorous barbs as are directed
Compacts
partment of Labor, Washington, D. C.
at all legislators by those errant knights of the
Mary E Cruzen, Director of Employment,
A. Louise Murphy, Industrial Economist.
Missouri; Robert P. Bingham, Chairman, New
United States Department of Labor, Washing
IN THE COOL NORTH
pen-columnistr and cartoonists-who are faced
with the necessity of filling their daily space for
Hampshire Interstate Labor Compact Commis-
loo, D. C., M, E. Pidgeon, Director of Research,
The National Association of Secretaries of
their daily bread.
sion: W. Ellis Commissioner, Department of
Women's Rureau, United States Department of
State is holding its eighteenth annual gathering
Member of the State Tax Commission in
Institutions and Agencies, New leney; S. Rus-
Labor, Washington, D. C.; Louise Stirt, Indu-
in St. Paul, July 29th to August L Hon. Enoch
1932-33, and elected state senator in the fall of
ling Leap, Member, New Jersey Senate Com-
trial Economist, Women's Bureau, United Scales
D, Fuller of New Hampshire, a member of the
1934, Dr. Groves, although quiet, modest, and
mittee on Interstate Cooperation: Stephen 1.
Department of Labor, Wa-hington, D. C.: and
Council of State Governments Board, is Presi-
certainly no rabid radiol, continues to lempt
Livenz, Counsel, New Jersey Department of
V. A. Zimmer, Director, Division of Lahr
dens of the Association, and Hon. Mike Holm
those who live by their lines abour mm in the
Labor; 1. H. Thayer Martin, New Terrey State
Standards, Washington, D. C.
of Minnesota is bost to the convention.
public eye.
Regraded Unclassified
156
BEYOND OUR BORDERS
MINNEAPOLIS TRIBUNE
Incidental illustrations of the technique of government from far and near.
A recent editorial discusses the Tax Revision Conncil.
Penal ties
discussion. The question arose over the power
THE socio-recrestional side of American
of the Driminion Government to ratify collies
que problem of taxsboo, not unlike the
T
have now joined the federal government in
T
prison life has ofres been lamponned.
tions which might affect the legislative rights
tariff, is something of a local issue. Yet in
levying a tax upon incomes and there is eyes
The alma mater-Dannemors, Joliet, or
of the provinces. Over the loud lamentatires
the same sense that the tariff raises more
talk of city income taxes in some sections of the
Sing Sing-is pictured as a cozy country club,
and protests of those who favored preference the
than a local problem, so are the problems which
country. An increasing number of states are
which our pampered public enemier are leathe
the provinces in legislative matters, the conven-
curround taxes and their collection more than
also making use of the sales tax and the variante
to leave, to which they eagerly return.
tions were ratified.
local It is because of the many-sided character
in rates and exemptions adda another confusing
Italy proposes to strengthen such school spirit
With the participation of the United States
of the tax question that a commission such as
element to our badly organized system of tax-
on a legitimately sound basis. Special welfare
the International Labor Office, similar question
the une just appointed by the Council of State
ation.
councils are being attached to creminal courts to
may arise in this country to add another subject
Governments can prove useful.
That something approaching uniformity
aid in the return of convicts to a normal indus-
to conversations on federal-state relationships
should be brought to this system, and that the
Cooperative council
trial life. By remaining in the welfare head-
overlapping of levies be reduced in number,
quarters after the completion of their terms,
Wage differentials
This commission is to be made up of eight
would be highly desirable, Yet under DATE pres-
former prisoners may get vocational training
A knotty problem, DOL yet satisfactorily silvet
representatives of the federal government, a like
ept form of government these reforms can be
and guidance.
in this country, has arisen in attempting to #
number representing the state governments and
realized but slowly and that only through the
Assistance is also given to the families of con-
wage rates for the unemployed who are engaged.
another eight, the city and county governments.
intelligent cooperation of federal, state, and
viets both during their terms and during their
This commission, which is to act as 4 Tax Re-
in work relief projects. There are many pour
local governments.
vision Council, will seek to eliminate tax con-
apprenticeships. To complete the rehabilita-
bilities: the single standard, uniform wages; the
tion, employment is found for these individuals
double standard, north-south or urban-card
fin through coôperation and allempt to de-
Another phase
as they leave prison or training headquarters.
Other schemes are suggested, both in comection
termine those lunctions which are best per-
Any organization that will act to make that
So might the Fascist felon easily become senti-
with public works and with the approaching
formed by the federal government and those
cooperation effectively possible in rendering an
mentally attached to his particular prison, after
which would be handled to the best advantage
important service. Yet the fact remains that the
social security program.
by the states and their subdivisions. One of the
graduation.
New Zealand has devised a four-way wag
lack of uniformity in our taxing system is only
differential for those on work relief, in the fol
first problems which is being undertaken by the
one phase of the problem. We are not only
Bogus bonus
lowing regressive order: (1) in the four biges
Contacil is to determine which governments are
suffering because too many agencies are trying
To employers who hire workers registered in
urban centers; (2) in secondary cities; (3) e
able a collect particular taxes most effectively.
to collect the sume kind of taxes, but also be
the public employment office, France pays a
This phase of the problem of taxation is un-
cause the taxes being levied are tou high. Sin-
smaller towns; and (4) in rural areas.
bomas. Assiduously safe-guarded, the subsidy
quesdomably OBE of growing importance. Fod-
plifying the method of tax collection by
is not paid unless the total number of employees.
Reich righteousness
onl, state, and local governments are now
centralizing it would not necessarily make the
collecting taxes EML the same items and each acts
exceeds the average number employed by the
That life begins at forty is a philosophy not
taxes any easier to pay. While it is highly de-
individual or corporation in the same quarter of
alone expressed on the silver screen and between
accounting to its OWD rules; levying taxes at
sirable that reforms directed toward simplifying
the preceding year and in the preceding quarter
the covers of a novel, An order of the President
varying nin A tax on the sale of gasoline is
the tasing system be carried our, it should not
of the sime year. Nor can the mimber of regu-
of the Federal Institution for Employment B
collected DUE only by the federal government
be forgotten that this is only one aspect of a
las workers be smaller than the number for
changes and Unemployment Insurance to Ge
and by all the states but also by some local
comples problem.
whom the bonus is paid To the republic, the
many contained the following instructions: (1)
commonities, The confusion, the difficulties of
Cooperation, in every aspect of government
bonus is spurious-since is may not sacced the
new vacancies are to be filled by employees foro
enforcement, and the premium being placed DO
as functionally distributed between federal,
allowance which would have been paid if the
years of age or older, preference to be given BI
attempts at evasion resulting from this multiple
state, and local units, would result in distinct
system are obvious.
employee bad continued to require assistance,
those more advanced in age, and to those with
advantages and might easily bring about low-
families; (2) employees under 25 are to be
A Very similar experience is being repeated in
ered 12% levies with no decrease in services per-
Dominion over provinces
gradually replaced by males over forty, prefe-
the Care of the income fax. Must of the rates
formed.
A resent debate of the Canadian Parliament
ably married; (3) the Reich ands ready to of
nver ratification of several International Labor
courage employment of such persons through
Conference conventions, turned into a spirited
subsidies.
House Councils of the American Legislators' Association
Alabama
*Georgia
Maine
Nebraska
Ohio
Texas
Mirst M. Tenned On
Bay V Harrité, Ce.
William , Invest.
W " CA.
Fiser Ch.
Marian " Allse
Net Fux
Martine 1. Custome
Myrou B. Octerning
D. Calima
per Luist
M. Payment
Juha Clark Signature
Diesn
II. Dritel
krita
Employer
Louise Flaming
Lester Unite
Frank H. Time
a
Cavide
Coup C. Thrompers
Nel 4. McDonald
Jum 3. Giffert
- Tatlem
Charge Modiess
Arizona
"Idaho
Maryland
Nevada
Oklahoma
Utah
Time D. Smith n.
nober Markers
Bosk, 4b
Lein Philips, Ch.
Watter
Onces IL Curthe
Williams 11. Labre
Note
Mirim Manua
Mining C Robina Comp
K.
les Chamiers
William
i
tisd F Barls
Carrelf, In.
Main Newing
N.
Komi Marker Community
Since .
Vivense - Papp
Winsion Easue
Warmid -
G.
*Arkense
Illinois
Massachusetts
New Hampshire
*Oregon
Vermont
The
Christian No Here.
Amril N. Ch.
Homes D. Anaril Oh.
Teleg Hereby
Fredor's W
Minit Registrative
Allan M. Within
KL Currer
R. F. Bestle
The Code
Handd II. Hort
15.1 F. Harch
Muriner R. Phone
-
Nom
Action
Goods W Roasell
House Hamilier
G. Barber
" V. Lest
Jamia N.
Transit Viede Kmin
Ent If für
United P. McDeem
Les Conselle
California
Indiana
Michigan
*New Jersey
*Pennavlvania
Virginia
Club CA
5
Jumple C. Paul. C%
Willim O.
Ashima Donel
Flax
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your -
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A
Credito
fürnen n Revenue
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Flank W March
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Date Timbers
When
Mombin
M
Times
Idea CA Scood
Eliment Terned
IL Plants
A. - Sughess
"Colorado
Town
Minnesota
New Mexico
Rhode Island
"Washington
Mome
Michael
Course w OL
And N. White 14.
James 11. Kinnan CS.
Planne Mytra, Ch.
-
Willia Ford
Masch Hard Paint
Frank E. Bellow
Me Serves
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D
Willigia D Redite
Juin g. Joins
M/
Own n. Marrani
Charles Brown
a Liquida
Vie Skinset
Imp -
1.
T.I. McNol
Inhin H. Scanneria
Bodert P. Waldram
Connection
Kansas
0
Mississippi
*New York
South Carolina
"West Virginia
Mari,
e 2 J
Chinde A. Tarlor, Ch.
Jueti
Water Clr.
Frederick
John
a
Due
Harry W. Flaire
date A Perman
Noville Benneit
L. Gebit
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Balt
The Dear
La Beiley
Terms "
Calliam Thomas
la A Date
Autos Harm
n. Wall
Horent's
Harmit C. Oursing
Jamph Meg. Moorer
Game P. Parrid
- -
W. be From
Samuel V dedersion
P. If. Netsun
Fisi Tronsger
Delaware
Kentucky
Missouri
North Carolina
South Dakota
Wisconsin
Minim - C&
Righ W. Cultury 18
for Hundle, Or
Robert Grade Ch.
W , Expert, Ch.
Paul H. Allower,
the Loves
firtly Pysema
Maine
Thereas O'Bectry
Dasino H Clark
May Name
I
Tyles Musterd
o K.
Lauie
Painter
Milma T. Mailer
Host
Classic Molley
"
7. M. Karminsara
Albem Paid
From - -
W. IL theme
Last
T- Bowie
J Address è
Corporate T. Years
*Florida
Louisiana
Montana
North Dakota
Tennessee
*Wyoming
E I
for , Ch.
W P. Ch
L. Twichell, Ch:
Water M. Härnes, Uh.
Heary D Waternal
Name
Alleno Krawn
binar Mour
H, emerge
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Fraud --
Herbert
I. Date
Thomas 15. In
L. Kewil Areatment
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Manua Number
information
McDraith
N it, Patton
Paul Fries
I I
Gener M. insure
H. 0. Redub
Consingham
Artbur 1. Checked
kitey II. Willers
Senate Councils of The American Legislators' Association
Alahama
Georgia
Maine
Nebraska
*Ohio
Texas
Hardy Lic
Inter can
Harnld Works, a
Checks n New
Keich Lawrence, Ch.
in G. Classi
William M Lister
Carrent Discressive
Juhn G. Lawers
Will M. Visita
-
Presium Vantier
Shive
Gilleim
Fronk E. Whittermine
I
- -
Bay Ferasti
E Products
IL Donovan
Coul
Visant
Justity A.
Charles 1. Wereft
William H. Herein
Car Customer
*Arluma
Maleo
Maryland
Nevada
Oklahoma
Utah
Crime
is
CO
Alles -
Limiteve C. Brankin, (b)
last Brigox, Ch.
Restrict
a.
Max
Banin
thus
-
Tame
Barker
Mame Vensey
A Marab
David M
Inline M.
1
M. -
juice LA I/we
Inho A. MacDenal
Ward Ilslinit
-
AL. Montgard
A. - Jark
Maxia L. Firm
Part
Past Summer
William Crife,
IL Evisions
Lomie A. Fiecht
to A
Albortnas
Illinois
Massachusetts
New Hampshire
Oregon
Vermont
this Mileno
- V. no
Mail
1.
United
University L Carbett, Ch.
filing
Witen
Carded
-
Dati
Charles M state, Ch
fronge W Tiana
basine to livelty
Chillined
jumely H Carlon
Asseria United
West
W If Straper
William if Wille
Magroe
- e- Mother
N. Vaniore
Name Masso
Flain A.
Homany Mice
Thrmas Marlin
Image 5. -
Davos De
Walser 5. Fisher
Allied H.
California
A Caries
"Indiana
Michigan
"Pennaylvania
Virginia
MA Di
Write o
will
Visa Ch.
*New Jersey
Cheque Walson
George Wondward. Ch.
John A Leant, a
/ P Name
Walter Troval
E. Carlle White
G, Willner
Clarence Horkmen
Moher Name
= ! i
Flood Carents
P State
Frank Harris
Miler
11.
Missure
Balph 6. Twing
Therease
Les A Ournam
Tulen F. Bathour
Herman E. Bancier
INTURY n. Apperal
Boding Leap
George A. Kipp
Hill Mantage
*Colorade
Towa
Minnesota
from IL Tuvian
Rhode Island
Washington
Mar Tallen On
M. - Club
Denta V. Ch.
I -
W.
New Mesico
William G. True, OR
8 1 ,
Milico
Affreit (a) Challes
Wallet Monahl
yore -
-
& Wight
Fiel E. Ch-
T. Bedwell
Inho -
Carrits e. Bradge
IL information
(Mrs 11. -
Francis J. Kirrnam
E. -
Date Miss
Juive N. Vehicles
1. Webs
A. Jampa
Thomas EL Mears
Gener 5.
Huran E Smith
Connecticut
Kansas
Mississippi
In 1.0. Theatou
*South Carolina
West Virginia
julio Dh.
- Wash
Windred Name Ch.
William a Belowing
"New York
Kishard M. Ch.
Charles E- Halph
Crewn
it More
Bradime
In H. visio
Edgir A. Brown
Aller) G. Matibew
- Unitin
E. Harmal
Bellow W Kinspe
William T. Brim
John F. Williams
A. L Helmit
Theore A Miner
A. Service
Walter Juma
5 More
Walting X Tarker
Strum Hormund
Lines R. lam
Bade 5. Waran
X. Sime
James Paull
Delaware
Kenrucky
Missouri
North Carolina
South Dakota
Less Mahame a
Em 1. M Rom, Ch
Income M Justice, Cls.
- M -
Port NK. Consums
Paul D. Grady, CB.
Millan
Malton, Ch.
Wisconsin Harry " -
Income die
Claims 0 know
Marrina Newman
Alien M.
M.
Marshall
Ivha Hill
Frank K. W. PARE
DE
If a
PM M. Omailly
Juhn A, Haland
W L. 30.
Bir a Mass
Carroil W Weathers
W. 1. Chause
Jawes 5. Billing
Sherman Hairy W Costor
Dr. 1. T Burrus
Rus B. Nature
Massion
Florida
Louisiana
Montana
North Dakota
Tennessee
William C Ch.
Trank Tylerman, Ch.
Γ. Naton, Ch,
Pail Change
Arthur W. Fowler, Ch.
Andres J. Grares, CA.
*Wyoming Edward L. Comp.
Partish
Robert Pastine
Trumas G. Fords
J.P. Cale
Jumply In
W A. W Cantra
Schwart#
W. IL Charch
G. Drew
Sinart Giths
Senier
Flair Bolt
Leighton Revell
W.
Walter W, Bow
Calvin K. schwing
Earigate
Heary Their
Louis M. Elains
W. Fine
Flescher Morgan
w, E. C, C. Delieff
"An official Standing Committee, established by legislative action.
Regraded Unclassified
STATE
GOVERNMENT
PERFECT OF ***** UNION
=
00110
The COUNCIL DI
STATE GOVERNMENT
JULY, 1935.
THE TAX REVISION COUNCIL.
INTERSTATE LABOR COMPACTS.
Regraded Unclassified
THE AMERICAN LEGISLATORS' ASSOCIATION
Administrative Offices: Drexel Avenue and 5-thsh Street, Charge, Ulinois.
GOVERNORS
Legislation Is-or should be-a profession, and the American Legislators' Association is the professional
of the 7500 me legislatives. It is studying the means for securing lietter qualified legislatives, for improving the They
News notes about the doings of state executives.
broaden ENCE w through sease reference hormaus and through the foreritate
and procedure all legislators of the legislarures, the developing worthy professional standards, and for honer
Conference: The month of June brought an important gathering of governors The an-
Returns the perspective of legislators by pase conferences, regional conferences,
mial Governors' Conference, held this year at Biloxi, Mississippi, June H, 14. and 15, gi.
tracted more than rwenty of the chief executives of the Abily planned by Ham,
BOARD OF MANAGERS
Cary A. Hardee, former Governor of Florida and Secretary of the Conference vince 195,
First Fair
Servid
de meeting was interesting and instructive
WILLIAM n. BELESAP
GEORGE WOODWARD
UNNAY PARKMAN, JR.
Draw -
Straine
State
lines likey
Departing from a procedent of the Governors' Conference, resolutions were introduced
Francimento
Name:
for
(AMIES I CHANNOCK
HARGLO M. GROVES
Chinge -
at this meeting. Governor Ehringhaus drew up a measure commending the course of
THOMAS V.
-
Smillit
RETINCE
Smiller
President Rousevelt and tendering him the coriperation of the governors It was adopted
Chest Para
Chinges 100ml
-
TAMYS j. WADSWORTH
X THERE
without a dissenting vote, at the concluding session. A resilution protesting against the
MEN to UNEAL
Expression
Service
o vous
No Find
Falls, Trans
June
transfer of the administration of work-relief funds from date authorities m folcal agrini
Krass
cies was introduced by Governor Fitzgetald of Michigan, hur was rabled by a vide of
thirreen to three
Governors Talmadge and Nice launched all assult on the NRA but were outnumberal
by Governors MeNurt, Sholtz, Graves, and Juhnstin who defended the policies of the fod-
THE COUNCIL OF STATE GOVERNMENTS
etal government and the fundamental principles of the National Resinery Act, recom-
Administrative Offices Dressi Avenue and sinth Street, Chicago, Illinois.
mending that these principles be retained by state action through interstate compacts.
The Council of Sure Givernments in primarily concerned with those governmental apheres over which de
Through suspension of the rule which prohibits all except members from addressing
Nates provideral lo ima DO jurisdiction. It anks no develop bener and more active indperation brewer -
the Conference, Miss Ethel M. Johnson, Sectetary of the New Hampshire Commission on
surernments better adjustment wish the federal government-aud with IOWS and cir) governments.
the various regidos of the United States, and also between die 46 states as a whole. If also nevks 10 brive
Intersente Labor Compatis, addressed the executives, Miss Johnson outlined the 1)ar
of compacts in American history, and averied that a mure extentive adaptation of fine
compact device is the safest, shortest jouie out of the dilemma rewlting (com the decision
OFFICERS
of the Supreme Court in the Schechter case,
Provided
Governor McNut of Indiana was reclectal chairman of the executive committee of
HON, joun a WINANT
The
Firma of New
the conference, with Governors Horner, Landon, Sholtz, and Nice completing (he menti-
A. MILLERS
look, WILLIAM II. BELKNAP
Pur Problems
I
bership of the committee. It was announced that no convention city will he selected for
of -
LION MARK GRAVES
DMV. HENET
Inmire
Product Nrs Cord
the nest meeting until it is known where the national commating conventions of PM
Sale To
-
will be licht.
Hudgets and Billfolds: An unusual situation occured in California during the last VE
PLANNING BOARD
inn when, for several days, Governor Merriam refusel to sign the itate budget nail
-idequate lak laws WERE passed. Under the California law. other appropriation bills canitet
la Addition a the Officers
JAIN ENNERY L AVERILL
be adopted until the büdget has become law. Meantime, the period for payment of sila-
Providen), Verimal of
MAN x BEVERLEY HERBERT
Commat
Femar el Fresh
ITON. SEADITILY C. MAFTICK
JUDGE neth -
Nrw Tel Commission for
National -
fies to legislators expired, and the temperature began to climb in Sucramento Bodgen
BDN, M SENNETT CONNER
Cardies Legalatore
Kender of (If Tax Cass
A -
- of
i 1
and billfolds were suon repleneatied.
IMM HAROLD G. HOFFMAN
NON. M 1. DESMOND
of New Tmey
HOW PART V. MENUTT
BOX your il POLLCE
From Name 4
Family Comunit -
Crime: Governor Curley of Massachuselts has agned 3 bill making if possible (or ai
NON. HENKY DORNER
General of Indian
- Companity
- Driver's
- e Illians
and General Conformer
mer THOMAS -
judge to sentence to life imprisonment a person convicied of the illegal possession of a
MON. JOHN E B.
HITN. ALF. M. JAKISON
Memia
machine gun.
Game of Nine Califies
Green el Same
DON C. IL MORRYSENTI
Tax Commissioner of Virginia
pos possible 6 will
NON HENRY F. LOHO
Mymber of Nm -
Governor Fitzgerald of Michigan affixed las signature to several anti-crime bills painel
nov. ENOCO FULLER
Problem Natured of
Tax Commission of
WORK
by the Michigan legislature. It is DOW mandatory that all inmates of date supported in-
-
and Printed National TM
nos BENRY PARKMAN. jx.
HAVE
Memigo of Service
Member of -
stuurions in Michigan be finger-printed. Persons convicied of sex chmes are subject to
numediate examination by psychiatrias and physicians before commitment to any inte
Consultant Nambers
A general enabling act for the negation of interstate purole agreements was
LOIIS BROWNLOW
PRUE DATE e CHAMBERLAIN
TOK. HARDLD W, DODDS
SCOTT M. LOPTIN
IXM. LEONARD 0 -
adopted.
PROP. FRANCIS W. COEER
DIL LUTHER GULICK
DR. ARNOLD BENNETT HALL
GEENGE FORT MILTON
COLONEL jomx H.
DILLE SHERWEN
DR. E. WETTE
Regraded Unclassified
JULT, 1985
VOL. NO. 7
STATE GOVERNMENT
35 CENTS A CURRENT COPY
12.50 A YEAR
TAX TRINITY
The Tax Revision Council is a joint effort of federal, state, and local governments
to develop means for simplifying and harmonizing American tax systems.
0
XI of die most important developments
A group of equally weighty tax authorities
in the American science of government
has been designated by the Interstate Com-
occurred when the Tax Revision Coun-
mission on Conflicting Taxation to speak for
al held (E) first meeting in Washington, June
the interests of the MICL The lot includes
(-8 Reprosentatives of the federal government,
Hon. William B. Belknap of Kentucky, Presi-
of the Rate governments, and of the local gov-
dent of the American Legislators" Association;
an together to work our an into-
Sehator Seabury C. Mastick, Chairman of the
graind tax program for America's one federal,
New York State Commission fur Revision of
forty-eight state, and 175.000 local units. For
the Tax Laws, Hon. Henry F. Long, Commis-
the first time in our history the three levels of
sinner of Corporations and Tration in Massa-
pwernment initiated a serious attempt to work
chusetts; Hon. Mark Graves, President of the
their (voblems through joint endeavor.
New York State Tax Commission: Senatur
WAYS AND MEANS
Foderal members of this significant new or-
George Woodward, Chairman of the Pennsyl-
Galhered around a Long table in the room ordinarily reserved for the Congres Gonal
are drawn from the major surrizes
vania Senate Committee on Interstate Coopera-
Committee which is faced with the thembless task of tailoring a revenue program to for broad-
foleral tax policy-the Treasury Department,
tion: Hon. Henry W. Tall of Colorado, Execu-
and congressional committees 00 finance. la
tive Director of the Council of State Govern-
shouldered expenditures, members of the Tax Revision Council met in Washington on June
addition In Secretary Morgenthau, they include
ments: Hon. C. H. Morrissett, State Tax Com-
6 and 7.
Him Herman Oliphant, General Counsel of
missioner of Virginia; and Hon. George F.
Their problem was not here no Take money but has to reconcile the methods of ins.
the Treasury, and Hon. George C. Haas, Direc-
Yantis, former Speaker and now a Member of
tion NOS used by the three levels of government. The proposed line of attack is discussed
für of Research and Statistics of the Treasury.
the Washington House of Representatives.
Service Par Harrison, Chairman of the Senate
in the article which begins ON the opposite page.
Local government is represented by nominees
Finance Committee, Hon. Robert L. Doughton,
from various national associations of local offi-
Sitting of the for end of the table is Secretary of the Treasury Morgenthan, and to his
Uniman of the House Committee on Ways
cials. The American Municipal Association-
left is Senator Mastick of New York. Proceeding in that general direction-to the left, #
el Means, Segator William H. King, Chair-
an organization of the state leagues of munici-
Hearst heresy-we meet, in the order of their appearance. Mesors. McCarren, Hasts, Tull,
man of the Senate Subcommittee on Conflicting
palities--is represental in the Council by Mayor
Texastion, Hon, Fral M. Vinson, Chairman of
Daniel W. Hoon of Milwaukee. The United
Vinion, Parker, Boyington, Warkenton, Yantis, Moffett. Gallagher, Marin, Gaston, Wood
the House Subcommittee on Conflicting Taxa-
States Conference of Mayors (cities over 50,
word. Graves, Belknep, Movrissett, Long, Mrs. Klatz, private secretary to Mr. Morgenthan.
wa, md Hon. Lovell H. Parker, Chief of Staff
(X)) has appointed Controller Leonand 5. Leavy
Mr. Oliphant, and the steuotypist.
of the Joint Committee on Internal Revenue
of San Francisco. The International City Mana-
Treation, comprise the congressional contingent.
geri' Association has selected City Manager
143
Regraded Unclassified
144
STATE GOVERNMENT
STATE GOVERNMENT
145
C, A. Dykstra of Cincinnati as its representa-
live, President Rouneth 1. McCarren of the
House Committee on Ways and Meani which
appeared early in 1933. Representative Frat M
Washington. The crediting device, employed
beverage, unless needal for regulatory purposes.
Detroit Board of is to represent the
views of the National Association of Tat As-
Vinson of Kentucky is the chairman of the
athe field of death taxation under the Federal
After careful consideration of a number of
subcommittee, and Mr. Lovell H. Parker M
Revenue Art of 1926, has been recognized as a
factors the Commission decided to make no
sening Officers, while City Auditor Charles 1.
Chief of Staff. The report is a valuable Factual
exclul procedure, and the Commission has sym-
recommendation DD the question of instituting
Foc of Boston as to be a participant through
appointment by the Municipal Finance Offi-
summary of federal and state taxabine, Al
pathercally exammed proposals for federal col-
a federally-administered, state-shared sales tax
though it does not offer suggesions or recom-
loctions and zure sharing of other las revenues.
Attention was also given to the possibility of
cers' Association.
mendations, it is of great importance the Rine
A brief review of the findings of the Inter-
willizing the crediting device in the field of in-
Less organized, but
effort to view the national tax system as a com
scile Communion on Conflicting Taxation will
come exation. A creil-
too less ably represent-
plete picture. The listing of the different NON
serve to diestrate the Type of considerations with
iting plan was pro-
of, is rural local gov-
taxes and the information about tax reimue
which the Tax Revision Council must deal.
posed, which would
effiment which is as-
have made this report a torchouse of know).
After careful andy. the Commission definitely
involve a minimum of
sured of consideration
edge for students of conflicting Mr.
accept the view that come degroe of separa-
federal interference.
by the membership on
Parker's suff has also issued several other
una of surces of federal and state revenues is
This plan would make
the Council of Hon.
reports including the recent Summary of the
demable It is expensive to provide duplicate
all distinctly personal
Guy Boyington,
British Tax System and Income Tax in Camada
federal and state gasoline and tobacco tax ad-
state and local have
County Judge of Clar-
ministrative machinery. The Commission also
eligible for the federal
sop County and Mem-
Interstate comminion
magaizal that state and local governments ex-
credit and would not
ber of the State Plan-
Readers of STATE GOVERNMENT are already
persones a verise of financial responsibility if
include uniformity TC-
ning Board of Oregon:
quainted with the careful work of the law.
they levy and administer their own taxes, which
quirements. The Com-
Serbury C. Mustich
County Clerk and As
state Commission an Conflicting Taxation, and
feeling of responsibility is lacking if another
mission recognized
seisor J. K. Warkentin
of the First and Second Interstate Assemblies
und of government collects taxes for them to
that such a device
of Marion County. Kansas: and District Attor-
liency IF, Toll
which sponsored the work of the Commisite
spend. Finally, the Commission realized that
would result in a mini-
ney Otis Miller of Anson, Texas, former Presi-
dent of the County Judges' Association of Texas.
In the twenty-eight months since its organiza
administration of numerous taxes by the federal
mum of relief from existing income tax con
Occasional conferences of officials from the
tion, in February, 1933, the Comminion has,
promer would, ultimately, result in an un-
flicts; but it nevertheless believed the experi-
by dint of thorough staff investigations and
desirable increase in restrictions on the ltates.
ment worth consideration.
three different levels of government have met
before, but never for The purpose of launching
seven meetings of sue
Largely DE these grounds, the Commission
The removal of tax exemptions to one of the
tained,
sought specific points
most fundamental proposals for alleviation of
a surrained, broadside attack on a national prob-
heated, discussions, ar-
at which separation
tax conflicts. The Commission has offered por
lem. The take of the Tas Revision Council
are based on extensive preparatory work by the
rived at a penetrating
of sources of revenue
definite recommendation on the subject, but, al
Treasury Department of the federal govern-
and reasonable pro-
might be operative.
the time the Commission's report was submitted
gram for dealing with
After conferring with
to the Second Interstate Assembly, two pro-
ment, by the Congressional foint Committee on
many of the burdens
laxation leaders in
posals for modification of reciprocal federal-
Internal Revenue Taxation, and by the Inter-
of conflicting taxation.
Congress, studying
state exemptions were offered from the Bour
state Commission on Conflicting Taxation,
Every member of
staff reports, and care-
and adopted. The first recommendation sought
Treasury study
the Commission is
fully deliberating prox
the removal of exemptions of government MD
either a legislator who
and cons, the Corumis-
curities and salaries of government officials; the
The Treasury, ar the reques of President
Roosevelt, las undertaken a broad study of the
is actively concerned
iion unanimously pro-
second proposed that the federal government
with tax affairs, or a
posed: (1) that the
authorize the taxation of private property on
problems of conflicting taxation. This study
will be greatly anded by the wealth of material
litate tax official. The
federal government
federal reservations.
Ammeth 1. McCarrey
in the Treasury biles and by the studies made
results show that the
Mark Groups
should abandon gaso-
The work of the Commission has been hands-
last year by the Treasury stall under the direc-
Commission has attacked the problem in a
line taxation: (2) that
capped from the beginning by A lack of statis-
tion of Dr. Jacob Viner.
broad and practical manner. D has room
no additional tobacco tasty should be adopted
tical information regarding stare and local
Among the comprehensive mudics upon
nized, for example, that maintenance of
by the Milles for revenue purposes; (3) that
finance. As a consequence of this difficulty, the
and local fiscal responsibility male
Congress should releave electric energy taxes for
Commission recommended that the states col-
which the Tax Revision Council will be able TO
and local administration of certain taxes, each
the relutive use of the states; and (4) that,
lect more adequate financial statistics of state
base its work AN the preliminary report of the
though purely economic considerations would
the the interal government has imposed a
and local governments and that many of the
Subcommittee on Conflicting Tatation of the
PURREST centralisation of tas administration ETT
heavy to on herr, other units of government
states conduct comprehensive in vedigations of
should refrain from levying heavy taxes on that
their nwn date and local problems.
Regraded Unclassified
THEASURY DEPARTMENT
146
STATE GOVERNMENT
Mashington
The third long-range proposal of the Com-
mision-that a Tax Revision Council be estab-
furm the duties which are outlinal below:
lisbed-has now been accepted.
1. Federal-State Planning Committee-
The following text of on nádress by Henry Morgenthm, Step
the development of a plan or plans for coint
Secretary of the Treasury, before the Tax Rovidon Council
At the first meeting of the Tax Revision
nating federal and state tax systems; on net).
In Whohington, D.C. at 10:30 A.V. Friday, June 7, In for
Council, on June 6-8, the following members
ols of putting such plans into effert; and (0)
release upon delivery.
attended: Messrs. Belknap, Boyington, Dough-
inequities subject to prompt correction. Has
ton, Graves, Haas, King, Long, Mastick,
McCarren, Morgenthau, Morrissett, Oliphant,
Mark Graves, chairman: Measts Belknap,
Leary, Long, Oliphant, and Parker.
I supreciate the Invitition to taken part in this discussion of the
Parker, Toll, Vinson, Warkentin, Woodward,
2. State-Local Planning Committee-on the
and Yantis. Assurances of complete cooperation
development of a model plan for coordinating
problem not conflicting and overlapping taxation.
were offered from the Senate Fi-
nance Committee by Senator King,
state and local tax systems, includ-
It in an old problem and not confined to the United Staton, but is grown
ing a report on possible methoded
who recalled that he had proposed
cooperation between the several
a tax revision council as early as
are commlianted, auro difficult, and more acute with the yours. At present
1921. A similar curdial message
states. Hon. C. H. Morrissen,
from the House Committee on
chairman: Messrs. Boyington, For,
ve find it no noute in our country that it must be faced, and the fnot that
Miller, Warkentin, and Wood-
Ways and Means was nffered by
ward.
so não factor It radses the hope that we shall soun be taking important steps
Representatives Doughton and
3. Federal, State, and Local
Vinion. The latter urged prompt-
Functions Committee-in the at
to nolve It,
new of attack as a vital necessity,
On the morning of June 7, Sec-
location of governmental Functions
among federal, state, and local
The depression has brought this problem into promissance by impairing
retary Morgenthan presented a
proposed policy, the Text of which
governments. Hon. C. A. Dyk-
the usual SINCERS of revenue, than extending our various governmental units to
stra, chairmant Mears. Hoan,
appears on pages 147-148. Messrs.
Parker, Mastick, and Lung pre-
Dykatra
Mastick, Oliphant, and Yantis.
cumoto with each other for 50% ningross and for gaster vield from the old
sented statements of the triple approach to this
4. General Survey Committee-
problem by the Congress, the Interstate Com-
on the collection of facts and staristics in respect
This cignetiti m has produced numerous unfortunate coultn. For
mission on Conflicting Taxation, and the Na-
to governmental tax laws, functions, revenues,
and expenditures. Hon. George C Haas, chair-
excuple, cortain states ivive Biocovered that their broon drove business into
tional Tax Association, respectively. Other
members of the Council presented various view-
man: Mean. Mastick, McCarren, and Parker.
points. A letter from City Manager Dykstra
As advisory members of the last named LOGH
withhoring states; others insve revised their tax Inwn primarily to attract
pointed to the division of functions of govern-
mittee there were appointed Mesurs. Morris
Copeland, Stuart Rice, Mayne S. Howard, and
impiness. evacton, in All Maforma, has beso increased by the fact
ment as the real underlying problem and sug-
lohn Willmotr.
gested the possibility of constitutional revision.
libert vuz maninery for tax levving oz taxes 16 att of aquilibrium. We find
Secretary of the Treasury Morgenthau was
Through these committees the Tax Revision
elected chairman of the Council, Senator Mas-
Council is to begin its work. The seriouses
- state imposing taxes previously Inviod Holaly is the Federal government,
tick, first vice-chairman, Mr. McCarren, second
of the difficulties which it is attempting to
vice-chairman, and Mr. Henry W. Toll Was
smooth out cannot be too often emphasited. If,
nai therefore having to not up dupliente ulministrative The
named secretary. Mears: Vinson, Graves, and
in what must necessarily be a slow, orderly pco-
Dykstra, in addition to the officers, Were named
cedure. it can assist in the transformation of our
Foremal Government had alno tapped sources of revenue previously regarded as
members of the esecutive committee. The cuts
existing competitive tax system into a coôpera
of photographs accompanying this article are
tive tax system, the aims and purposes of the
for the stating alone. the conflicts between local and utato governmente
those of surge of the members of this committee.
Council will have been amply fulfilled.
in the field of tarntion are too numarous evan to be cataloguel buring the
Chairman Morgenthau's picture is included
with the text of his address to the Tax Revision
"Every tax ought to be so contrived as bath DE
take new and to keep out of the pockets of the
for minutes I shall address your Twery phone of this problem brintion with
Council which appears elsewhere in this issue.
At the afternoon ression on Friday, June 7,
people or little at possible over and above will
is brings into the public previous of the unt."
therry details.
the following committees were selected, m per-
-AMAM Sami, Fourth Canon of Taxation.
Regraded Unclassified
-2-
The principal contribution that I should like to make to your deliberations
on this subject is a definition ofthe basic problem. With the definition in
mind WO are ready to divide the problem into its many parts, and take them up
in detail. The basic problem, as I see it, is to be just to the tax-payer.
Independent levying of taxes by all of the various taxing authorities, without
due consideration for the tax structure as a whole, has often resulted in
unfair and uneconomic distribution of the burden. This is unjust, and
therefore, affects the very foundations of government. It touches the welfare
of the citizen in his daily task of earning a living. I think the problem
should be approached. with this point of view. Duplicate taxes cause waste,
but that is a detail. The greater problem is to restore equilibrium in the
tax structure as a whole, in order, primarily, to be fair and just. The waste
is not as important as the injustice. It is entirely possible that we could
attack the problem of wiste and solve it without removing injustice. If we
considered the matter solely from the point of view of the efficient tax
gatherer it would become a technical problem. You could summarize it as a
question of how to get the most money with the least expense. Stated in those
terms the problem of this democratic government would be no different from
that of any ancient tyrant. He had to raise money to support his government
and he triod to get as much as he could with the least possible expense.
A considerable part of the oppression which charactorized tyranny was a direct
result of taxation for revenue only, without regard to justice.
We must remember that, to the individual citizen, taxes are taxes, and
that it makes no difference to him which agency is most at fault for any
injustice he suffors. The tax structure should be sound, and the responsibility
for making it 30, rests upon every part of our government. When each taxing
authority is guided only by its own immediate neods, and levios regardless of
Regraded
Unclassifier
-3-
the existence of identical or similar taxes imposed by other government units,
the structure cannot be sound.
The problem of how to be fair in levying taxes is not easy, and perfection
is out of the question; but the very complexity of the question makes it
necessary for us to be striving constantly toward perfection because of the
neverending drift in the opposite direction.
We must be caroful to guard against injustices as between geographic
sections of the country, as between commodities, and industries, no less than
ao between individuals. An unjust distribution of the tax burden immediately
creates artificial obstacles, and thoir disturbing influence is injected into
the economic life of the nation.
I think it would be a great mistake, therefore, to think of our problem
ns limited to the removal of such administrative conflicts as now oxist
between the Federal, State, and local governments with respect to taxes.
Certain types of new taxes which have been adopted as emergency measures might
well be left to their administrative difficulties, in the hope that they will
be discontinued. It would be a mintako, in my opinion, to accept as our main
problem the task of making it easier to collect and administer all taxes.
What, thon, should be our immediate approach to the problem? To may as
well forego at the outset, the approach that would disregard the historical
development of our political institutions, and attempt to recast our whole
Government from top to bottom in such fashion that all governmental functions
would be redistributed between Federal, State, and local units according to
some ideal pattern. The practical objection to setting up such an ideal
system of taxation, based upon a thorough rodistribution of all govornmental
Tunctions, is that we would be forced to spend the rest of our lives contem-
plating the impossibility of putting it into effect. To be practical, in this
Regraded Unclassifier
connection, we must do our utmost to correct grave abuses without attompting to
receast our whole machinery.
On the other hand, I don't believe that it would be wine to go to the
other extreme; that is, to make a list of all of the specific types and cases
of conflicts and overlapping, and attempt to take them up une by one. That
type of piecemeal tinkering is very slow and rarely effective. Moreover, it
is subject to the danger that each piecemeal solution, adopted without due
reference to fundamental principles, might produce new inconsistencies. And
a series of such piecemeal solutions could easily rosult in a badly distorted and
unjust total tax structure.
The best approach would be the fundamental one of considering the entire
problem from the standpoint of the individual taxpayer. The first step, in my
opinion, is to make a careful survey and analysis of the total tax structure
of the country to determine just how the burden of our governmental expenses
in now distributed. Next, I would note what practicable changes in the
combined tax structure of the country would produce n. sound and more oquitable
distribution of the total burden. In the third place, I would concentrate
upon a few important and workable means of eliminating conflicts and overlapping
in & manner consistent with our analysis of what constitutes a fundamentally
desirable tax structure. Finally, having arrived at a few important possibili-
ties which we know to be fundamentally sound, we can then attempt to put them
into effect. Each progressive step that we succeed in achieving along this
line would not be a compromise that might create now conflicts, but would
cumplete part of our task. Each fundamental step completed would provide a
stopping-stone to make the next part of our program easier to achieve.
Regraded Unclassified
Wherever the problem has been attacked in this manner real progress has
rosulted. Several of the states are excellent examples but I am most familiar
with what was dono in Now York State when Franklin D. Roosevelt WILS Governor.
At his direction, the problem of equalizing the tax burden was studied by
exports, and their reports are among the most valuable we have on this subject.
In the rural arcas of Now York State, tax reforms of great social value were
put into effoct, and romain as boacon-lights to direct our courso.
Mr. Roosovelt's intorest in this problem has been intensified sinco he
became President of the United States. At his direction the Treasury is
undertaking a now study of overlapping taxes. This will supplement and carry
further the excellent work on the problem of double taxation done by the staff
of the Joint Committoo on Taxation of the Congress for the Ways and Means
Committee in 1932.
In procooding along the course I havo outlined, guided at every stop by
the basic principlo offairness, wo should be careful not to assume that the
revenue needs of our various governmental units are, now fixed for all time.
That assumption would load us into now difficultios.
Our attack upon the problem of conflicting and overlapping taxation must
DO 80 basic that the solutions we arrive at are sufficiently flexible to
provide for changing noods.
In the case of some taxos, it is entirely possible that we shall find it
dosirable to malco a rigid separation of sources between Federal, State, and
local governments. In other cases, WC might find that certain taxes now levied
by numorous governmental units could be bost administored by the Fodoral Govern-
mont, and the proceeds sharod with the States. It is also possible that the
states might handlo certain of the taxes more easily than the Fodoral Government.
Regraded Unclassified
-6-
It would be highly desirable to center considerable attention upon the
principles that should govern the allocation of such revenue.
In conclusion, I strongly urge that the technical details of tax-gathering,
and even the essential matter of supporting the government, be considered
secondary in importance in your doliberations, and that first consideration
be given to the vital question of justice to the tax-payer. That course
simplifies the task and leads directly to the goal.
Regraded Unclassified
11:00
WORDESTHAD DROES JUSTICE TO TAXPAYER
- SECT OF THEASURY MORGENTHAO
SPEAKING TODAY BEFORE THE TAX REVISION COUNCIL
HERE united THAT TRUHNICAL DETAILS OF TAX DATH-
BE CONSTDERED 8800NDARY IN IMPORTANCE IN
bad IDEMATIONS REGARDING TAX REVISIONS AND FINST
CONSIDERATION BK GIVEN TO THE DUBSTION OF JUST-
are 10 THE TAXPAYER-
-INVERENDENT LEVYING OF TAXES BY 4bL DE Fill
VARIOUS TAXING AUTHORITIES- MII MORGENTHAU
RAID -WITHOUT DUE CONSIDERATION POR THR TAX
STRUCTURE AD A. WHOLE HAS OFTEN DESOLTED IN IIN-
PAIR AND UNECONOMIC DISTRIBUTION OF THE HOROEN-
DUVLICATE TAXES CAUSE WASTE BUT IS A. - BUT
THAT 10 A DETAIL- THE URBATER PROBLEM IN TO
RESTORE HOUTLIBNIUM LN THE TAX STRUCTURE AB A
WHOLE EN ONDER PRIMARILY TO BE PAIR AND JUST-
THE WASTE 18 NOT AS IMPORTANT AS THE INJUSTICE-
-THE FINST STEP IN MY OPINION IS TO MAKE
A CAREFUL SURVEY AND ANAYL-- ANALYSIS OF THE
TAX STREKTURE OF THE COUNTRY TO DETERMINE JUST
HOW THE BURDEN OF nue GOVERNMENTAL EXPENSES
10 NOW DISTRIBUTOD- THE SECT SAID - -NEXT 1
NOTE WHAT PRACTICABLE CHANGES IN THE COM-
SINED TAX STRUCTURE WOULD PRODUCE A GODUND AND
MORE EDUITABLE DISTRIBUTION OF THE BURDEN - IN
IMM THIRD -
THE THIRD PLACE 1 WOULD CONCENTRATE UPON A FEW
IMPORTANT AND WORKABLE MEANS OF ELIMINATING
COMPLTATE AND OVERLAPPING IN A MANNER CONSTS-
TENT WITH OUT ANALYSIS OF WHAT CONSTITUTES A
#UNDAMESTALLY DESTRABLE TAX TRUCTORE-- STRUCTURE
FINALLY W CAN THEN ATTEMPT TO PUT A FEW TM-
PORTANT POSSIBILITIES INTO EFFECT-
THE SECT SAID THAT THE THEASURY 18 UNDER-
TARING A NEW STUDY OF OVERLAPPING TAXES AT THE
DIRECTION OF PRESIDENT #003EVELT- THE STUDY
BILL SUPPLEMENT AND CARRY FURTHER THE WORE ON
THE PROBLEM OF DOUBLE TAXATION DONE BT THE
STARF OF JOINT COMMITTEE ON TAXATION OF CONTRE-
se FOR THE WATS AND MEANS COMMITTRE IN 1892-
MII WORDENTHAU SUGGESTED THAT IN THE CASE
OF SOME TAXRS IT WIGHT BE DESIRABLE to NAKE A
HIGID SEPARATION OF SOURCEY BETWEEN A PEDERAL
STATE AND LOCAL DOVI AND THAT IN OTHER CARES
CRATAIN TAXES NOW LEVIED BY WOMEROUS GOVERNME-
NTAL UNITS #IGHT BS BEST ADMINISTERED BY THE
FEDERAL GOVT ASID THE PROCEEDS SHARED WITH THE
STATUS- HE SUGGESTED ALSO THAT THE STATES NIGHT
MANDLE CENTAIN TAXES MORE EASILY THAT THE FEOL
GOVT-
Regraded Unclassified
FEDERAL RESERVE BANK
OF NEW YORK
32
OFFICE CORRESPONDENCE
Date June 6, 1935.
To CONFIDENTIAL FILES
Subject TELEPHONE CONVERSATION WITH
From L. W. Knoke
MR. CARIGUEL OF THE BANK OF FRANCE.
Mr. Cariguel called at 10 a. m. today, and stated they
were having an easy time today, total dollar sales amounting
so far to $3,500,000 only.
He then referred to the $33,000,000 gold now held for
our account in Paris for optional shipment to New York or to
London and inquired whether he might send this amount by two
steamers on June 7 and June 8 direct to New York. I replied
that I thought the answer would be yes but that I would have
to check back with Washington first. At the same time I in-
quired whether such shipment under present conditions would
be all right from their viewpoint, considering probable news-
paper comment about the resumption of gold shipments from
Paris. He said, "Absolutely," also that he would not hesi-
tate to send it. If Washington was willing to have the gold
come to New York he would use the steamer New York on June 7
and the steamer Bremen on June 8, both being German boats.
He added that for political reasons he would ask the Guaranty
Trust Company in Paris to effect the shipments as his agents.
Politically there were no new developments; Pietri is
still trying to form a ministry. Everybody believed that
ultimately Lebrun would have to ask Laval again to make
another effort.
LWK:KMC
Regraded Unclassified
FEDERAL RESERVE BANK
OF NEW YORK
33
OFFICE CORRESPONDENCE
Date June 6, 1935.
To CONFIDENTIAL FILES
Subject TELEPHONE CONVERSATION WITH
From L. W. Knoke
MR. CARIGUEL OF THE BANK OF FRANCE.
I called Mr. Cariguel at 10:40 a. m. to tell him that
I discussed the shipment of $33,000.000 to New York Instead of
to London with Washington and that our friends were agreeable to
have the Banque de France proceed as suggested by him. Cariguel
will accordingly request the Guaranty Trust Company, as his agent,
to ship $33,000,000 odd on the New York and on the Bremen con-
signed to Federal Reserve Bank of New York. The balance of the
first $35,000,000, that 18 about $4,000,000, Cariguel said,
would come forward on the American Merchant. All of our gold
will therefore have been moved out of France by the end of the
week. In this connection, Cariguel with a laugh expressed the
opinion that this might be best for our Treasury.
I then referred to his cable (his No. 143) of May 31,
in which he confirmed having bought gold from us under the Trea-
sury's offer contained in our cable No. 82 and told him that the
lawyers here had pointed out two small inaccuracies in the word-
ing of this message: firstly, he had mentioned the price as $35
without adding "less 1/4% handling charges and customary mint
charges"; secondly he had stated the gold was "guaranteed free
for export, etc." and the lawyers would have preferred to have
had him say instead "guaranteed by us free for export, etc."
Cariguel assured me that on both points there was no misunder-
standing on his part as to the terms which we had proposed and
that next time he accepted 8 proposition he would bear the
Regraded Unclassified
- 2 -
SD VO TOTAL
34
lawyers' request in mind and word his cables accordingly.
As regards political developments, Cariguel thought
they would have a government tonight or tomorrow morning at
the latest, either Pietri or Laval forming it.
LWK: KMC
Twinty
the
monestary for MA 10 not My M %
FEE soold act -
at for H/F expert top - - 15 -
warned. anto Tue YOU
-
Min request
14 Covernor VLAS effects N NYK -
in France I amtions No the Main see 109
received CO Notak that the Gayment was Wish 5
- tox - Optional replid The the 55 - su
The THE skirst will of dont A - -
may,
z referred THE persigned are - TSH - n US Doit
and Vold bis that VI used marks - Es X FREE
case repealing shat 11 - VALID -
the Characty Trank Greatery 188 with BA to of online
states in affection No - - ISSM mis.
2791 46473 antimed that the 2016 MM W - N
whill expected that the Yes disk ------------------------- of
be had Accepted the offer Secure 13 made WAST to
But the good over,
FEDERAL RESERVE BANK
OF NEW YORK
35
OFFICE CORRESPONDENCE
Date June 7, 1935.
To CONFIDENTIAL FILES
Subject TELEPHONE CONVERSATION WITH
From L. W. Knoke
MR. CARIGUEL OF THE BANK OF FRANCE
Mr. Cariguel called at noon to let me know that the
market was quiet and that they had done nothing at all in
dollars. Under the circumstances he thought it would not be
necessary for us to renew the order for tomorrow. I told him
we would act accordingly unless we heard from him to the con-
trary. As far as support for the franc in this market is con-
cerned, Cariguel said he was giving an order to the Guaranty
Trust Company as heretofore.
Cariguel then requested that I again convey his thanks
to Governor Harrison. With reference to the political situa-
tion in France I mentioned to Cariguel that the market here
seemed to think that the Government would obtain a majority
in the Chamber. Cariguel replied that they too thought 80.
The Paris market will be closed on Monday, that being Whit-
monday.
I referred to paragraph one of his cable No. 158 just
received and told him that we would probably send him a cable
this afternoon repeating that it was our understanding that
the Guaranty Trust Company was acting as Bank of France's
agents in effecting the shipment of 22,000 kilos gold. Cari-
guel again mentioned that the gold would be consigned to us
and repeated that the Guaranty had offered their services and
he had accepted the offer because it was the quickest way to
get the gold over.
LWK:KMC
Diary
36
OFFICE OF
Katy
TREASURY DEPARTMENT
WASHINGTON
THE
SECRETARY
my
June 6, 1935.
MEMORANDUM FOR MR. McREYNOLDS:
Following is a. summary of the "important happeninge" in the molasses
situation, according to my notes, which some weeks ago you asked me to
prepare for Mrs. Klotz's files.
About the middle of November, 1934, the Secretary received informa-
tion to the effect that the Secretary of Agriculture was about to consum-
mate an agreement with the North American Import Company and the Molasses
Products Company, pursuant to the provisions of the so-called Costigan-
Jones Act, whereby these two companies were to import substantial quanti-
ties of molasses into the United States from the Philippine Islands,
Puerto Rico, and Hawaii, and to distribute such molasses to the feed trade
in this country as agents for the Agricultural Adjustment Administration.
Upon the receipt of this information, the Secretary called the at-
tention of the Secretary of Agriculture to the past record of the Molasses
Products Corporation, owned by the Kaplan interests, and questioned the
propriety of giving so important a contract, calling for the distribution
of a substantial tonnage of molasses over an extended period, to a concern
which was known to be a principal source of supply of raw material for the
bootleg trade.
Aa the result of this suggestion, the Secretary of Agriculture
directed that the proposed contract should be held in abeyance pending
investigation by the officials of the Agricultural Adjustment Adminis-
tration.
On or about November 20, 1934, Mr. Chester C. Davis of the Agricul-
tural Adjustment Administration, accompanied by Mr. J. A. McConnell, repre-
senting the G. L. F., conferred with the undersigned during the Secretary's
absence from the city, with a view to inducing the Treasury Department to
withdraw the objection which the Secretary had made to the proposed con-
tract. I advised these gentlemen that on the assumption that the Secre-
tary's objection was based on the fact that the Molasses Products Corpora-
tion had been, and still was, engaged in illicit traffic, I did not see
how this objection could be set aside, inasmuch RS the Department had
positive evidence of the company's derelictions. I made the suggestion
to Mr. Davis that the whole matter should be left in aboyance until Secre-
tary Morgenthau's return to the city, at which time he could confer with
the Secretary personally. Mr. Davis assented to this suggestion.
Regraded Unclassified
37
-
On or about November 26, Mr. Davis, again accompanied by Mr. McConnell,
conferred with Secretary Morgenthau in the latter's office. The undersigned
was present. Mr. Davis sought to show the Secretary the importance of con-
cummating the contract from the point of view of providing essential stocks
of feed, particularly to agricultural communities in drought-stricken areas.
The Secretary advised Mr. Davis that while he considered it his duty to ao-
quaint the Secretary of Agriculture with the character and reputation of
the Molasses Products Corporation, the question whether the contract should
be consummated with that company was one for decision by the Secretary of
Agriculture. There was protracted discussion, but at the end of the con-
ference Mr. Davis let it be understood that in view of the Secretary's atti-
tude he did not consider it advisable to consummate the proposed contract.
On November 26 and 27, the Secretary received telegrams from Mr. A. I.
Kaplan, of the Molasses Products Corporation, asking a hearing with refer-
ence to the Department's objections to the contract. At the Secretary's
instruction, such a hearing was accorded Mr. Kaplan on December 4, at which
time Mr. Kaplan made what is believed to be & full and truthful statement
of the business operations of the Molasses Products Corporation, and its
subsidiary, the Dunbar Company. The undersigned, Captain Sayles, and Mr.
Avis were present at this meeting, following which I advised the Secretary
in writing (on December 6) that in my opinion the Department should adhere
to its objections to the contract.
About this same time, Mr. H. E. Babcock, head of the G. L. F., con-
ferred with the Secretary, and subsequently with Mr. Oliphant and the under-
signed, with regard to the formation of a new company to take over the plant
asseta of the Molasses Products Corporation and to contract with the
A. A. A. to import molasses according to the original plan.
About January 10, the undersigned was advised by Mr. J. A. McConnell,
of G. L. F., that 9 new corporation had been formed, under the name Com-
mercial Molasses Corporation, to acquire the assets and take over the busi-
ness of the Molasses Products Corporation. The new Company was owned as
follows:
Commercial Solvents
70 per cent
Corn Products
25 per cent
G. L. F.
5 per cent
The consideration paid to the Kaplan interests was $4,000,000 in cash.
A copy of the contract of sale was furnished the Department, at my
request, by officers of the new company about January 20, and returned on
February 9, after analysis by Mr. Klaus, of the General Counsel's staff,
At this time the undersigned was given assurances by the officers of the
new company that it would do no business with known or suspected users of
molasses for illicit purposes, and that the company desired, and would
make full use of, the cooperation and help of the Department to that end.
Regraded nclassifie
-3-
38
Pedepay
York,
These assurances have been repeated subsequently, and, 80 far as the
Department is aware, are being carried out by the new company in good faith.
It is understood that the Commercial Molasses Corporation has received
no contract from the A. A. A. looking toward the importation of molasses
from the Philippine Islands, Puerto Rico, and Hawaii, along the lines of the
originally proposed contract with the Molasses Products Corporation and the
North American Import Company.
Marks
The
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follows:
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Thank you
Regraded Unclassified
39
June 7, 1935.
Friday.
Allen Sproul of the Federal
Reserve Bank of New York.
H.M.Jr:
Hello.
Allen
Mr. Secretary?
Sproul:
H.M.Jr:
Yes.
S:
This is Allen Sproul of the Federal Reserve Bank of
New York.
H.M.Jr:
Yes, Governor Harrison said you'd be talking.
S:
I've a cable from Governor Norman which he wanted me to
read to you.
H.M.Jr:
Please.
3:
It reads as follows: At the suggestion of Governors of
several Continental Central Banks, we have recently in-
vited all sections of this market to cooperate in
restricting facilities for speculation in foreign ex-
change and for gold. In this connection, we can approach
the London officers or representatives of the foreign
banks in London including the American Banks who have
been given a memoranda setting forth various points upon
which we desire Federal cooperation. The gist of this
memoranda will perhaps be transmitted to your side, and
I, therefore, mention the subject for your information
and I hope from your support a copy will be mailed to
you tomorrow. Signed Norman.
H.M.Jr:
Yes.
S:
We have made arrangements to get hold of either a copy
or a summary of the memorandums tomorrow morning by
cable.
H.M.Jr:
Yes.
S:
And we'll advise your office of what it contains.
H.M.Jr:
All right.
3:
But, I wanted to get this information to you and I assume
the Governor will be talking to you about it.
H.M.Jr:
Thank you very much.
S:
You're welcome.
H.M.Jr:
Thank you.
June 7, 1935.
40
The Open Market Committee met with the Secretary of the
Treasury in his office at 12 o'clock. Those present were:
Henry Morgenthau, Jr. Secretary of the Treasury.
Marriner S. Eccles, Governor, Federal Reserve Board,
G.L. Harrison, Governor, Federal Reserve Bank of New York,
T.J. Coolidge, Under Secretary of the Treasury,
W.R. Burgess, Deputy Governor, Federal Reserve Bank of N.Y.,
R.A. Young, Governor, Federal Reserve Bank of Boston,
G.J. Seay, Governor, Federal Reserve Bank of Richmond,
D.W. Bell, Commissioner of Accounts and Deposits,
George C. Haas, Division of Research & Statistics,
C.B. Upham.
Mr. Coolidge reported that he and the Open Market people
had had some discussion and that the only conclusion reached was
to offer on Monday a 5 year 1-1/2% note to be exchanged for the
notes which mature June 15th and August 1st. Interest to June
15th only will be paid on the notes maturing in August.
Mr. Coolidge and Mr. Burgess guessed that the new note would
probably sell at about par and 5/8ths.
It was agreed that a 4-1/2 year note would be more attractive
than a 5 year note but a 5 year note will go.
Mr. Morgenthau said that this program was satisfactory to
him, and Mr. Coolidge said that that was all he cared to do on
Monday.
Mr. Morgenthau asked Mr. Bell what his best estimate is
of available cash on June 16th.
-2-
41
Mr. Bell replied that we ought to have in the neighborhood
of 850,000,000 on June 30th and probably it would not be much
different as of June 16th.
Mr. Bell said that on July 1st there will be $600,000,000
of Consols to pay off and that there will be $225,000,000 of
lawful money come in with 8 net drop in cash of from $450,000,000
to $500,000,000. We will need $250,000,000 of new money in July.
That much will just about take up the deficit.
Mr. Coolidge said that Jesse Jones expects to make considerable
payments in July, to which Mr. Morgenthau said not to figure too
strongly on that.
It was reported that on June 17th the FCA has a conversion
of $250,000,000 Land Bank Bonds and that they expect to offer 8
20 or 30 year bond, callable in 10 years, bearing 3 or 3-1/4%
interest.
It was suggested that an offering on June 24th for payment
July 1st would be a pretty good day for a new money announcement.
Mr. Harrison asked why it was necessary to get new money 80
soon, and Mr. Morgenthau replied that $450,000,000 cash balance
was pretty low.
Mr. Coolidge interposed to say that we want to train the
purchasers of Government securities in the bidding method.
Mr. Burgess said that he was agremable to an offering on
June 24th if the market is favorable and the character of the
offering adjustable.
Mr. Eccles recommended trying out the bidding method two or
three times at least.
-3-
42
Mr. Harrison said that was alright if we were looking for a
wet blanket on Government bonds.
Mr. Morgenthau asked, if in the event of a real row with the
bond dealers, could the Treasury count on the Federal Reserve
Board to go along.
Mr. Eccles said that the Board had no power to go along.
Mr. Morgenthau said the Treasury might offer the System
$1,000,000,000 in bonds. Suppose the Treasury put it up to the
Board, he said, to take $1,000,000,000 new securities at 1/8th
of 1%.
Mr. Harrison said he knew what his advice as fiscal agent
of the Treasury would be to such a proposal.
Mr. Morgenthau added that he referred to the case of 8 real
showdown.
Mr. Burgess said he did not think it was a dealer problem,
but referred to the fact that the group had agreed to an
experiment in offering securities on a bid basis at the last
meeting and suggested the advisability of having a report on
results.
Mr. Morgenthau asked Mr. Harrision to report.
Mr. Harrison was of the opinion that there was some disappoint-
ment and some confusion. He referred to the fact that there was
not much dealer profit in the new procedure and that small banks
did not have so much chance to acquire securities. He reported
a checkup in Chicago as indicating that the big banks did not
mind the new method but that the small banks did.
Regraded Unclassifie
43
Mr. Young interposed to say that he had talked to only one
country bank but that he cannot feel that the bidding program
has been a failure. He still thinks that there is something in
the bidding venture and that it got a bad break on its first
trial. He said that he did not want to give up the idea. He
8
referred to the N.R.A. decision as/disturbing influence.
Mr. Morgenthau commented that he thought the French
situation was equally disturbing. He added that there had been
discussion of the bidding venture for 3 months and that everyone
had approved it and that he considered it a distinct success,
and in view of the French difficulties, which were very serious,
he thought it remarkable that there was only a threepoint fall.
He indicated that he considered it silly to say that the decline
in the Government market is caused by the method of offering
$100,000,000 of bonds.
Mr. Harrison said that it was his feeling that the Treasury,
during the last 3 years has done a magnificent job in arranging
maturities and through lowering interest payments and through
the use of a thoroughly understood and successful process. While
there has been occasional gravy, his own belief is that the
Treasury has secured its money more cheaply than if it had used
the bidding procedure. Its success and smoothness shouldn't be
interrupted at a moment when things are going so well, from the
Treasury point of view. He saw no very cogent reason to change
today. Maybe both ways are needed in an emergency but we should
stick to the traditional method until we need more money.
44
Mr. Morgenthau said that he was always appreciative of
previous experience and that he was very willing to listen to
men on the firing line. He said that the way he looks at it
is that we have gone through a very difficult period in Govern-
ment finance and that it has been the good fortune of the
Treasury for conditions to improve very definitely over the first
three months that he was Secretary. We are riding high now, he
said, and in his opinion it is time to look for other methods
of disposing of the bonds and try them out. If we have to try
them out with our backs to the wall it will be 8 sign of weakness.
Another reason, he said, is that the Treasury can now estimate
cash
better what its/requirements are. RFC loans are nearing an end.
Heretofore their estimates have been out as much as $1,500,000,000
at a time. The Treasury has pretty good control over the rate
of work relief expenditures. He said he would like to go through
the summer on a 30 day ahead basis rather than getting the
$1,000,000,000 needed at one time.
He agreed with Mr. Burgess that if conditions sour resort
should be had to the use of notes rather than bonds.
Mr. Harrison said that his remarks had been made wholly
independent of the success or failure of the bid offer.
Mr. Morgenthau said that he didn't think the United States
Government could let 5 bond houses tell it what to do.
Mr. Burgess and Mr. Harrison said that there was nothing
to that idea -- that it was all wrong.
Mr. Coolidge said, too, that reports that a small group of
Unclassified
45
-6-
bond houses were dictating to the Government were an exaggeration.
Nevertheless, he said, if the dealers had felt badly about the
experiment they could have influenced the result more favorably.
Mr. Coolidge added that there are two reasons for the change
to the bid basis. He said we have issued bonds with longer and
longer maturities until we now have outstanding a 25 year issue.
Maturity vacancies have been filled -- we do not need a new bond.
In the second place, he said, the bidding has become worse and
worse, so far as over-subscriptions are concerned, more and more
people want to take rides.. This has been a bad influence from
the spending end as evidenced in the demand for a bonus and
other extravagances. If an offering on a bid basis doesn't go
too good he is not disposed to feel too badly about it.
Mr. Burgess said he thought we had been gaining better control
over over-subscriptions.
Mr. Coolidge was of the opinion that the last offering was
the worst of all, and that many banks and others had put in bids
in the names of numerous other people.
Mr. Young said he had considered offering 8 two way proposi-
tion -- price a bond and at the same time invite bids.
Mr. Coolidge said he thought it might be wellto put a bottom
limit onwhat we will accept -- say 103 or better. This he thought
would produce closer and more satisfactory bidding.
Mr. Burgess said that representatives from Chicago and Cleveland
were not able to come to the meeting and that they had been asked
their impression. The report from Chicago was that the rural
bankers didn't like it but that the Chicago banks were not so
Unclassified
-7-
46
hostile. He read 8. telegram from Mr. Fleming of Cleveland to
the effect that the banks in the large cities opposed the new
method and regarded the procedure as disturbing to the market.
He added that New York banks are not particularly averse.
Devine and Company like it, he said, and Mr. Coolidge commented
that they bought 103.2 and 103.1.
Mr. Burgess continued by saying that it is a cinch for
dealers who will take a short position.
Mr. Young commented that he doesn't know of anything better
for the Government market right now than a substantial short
interest.
Mr. Burgess commented that the two things Mr. Morgenthau
had been seeking were better distribution and a rest for the
market and that the new procedure achieved neither. He agreed
that there was a pretty narrow margin of error in the bidding.
Mr. Young said that he assumed the bankers opposed the
procedure for two reasons: First, because banks opposed change
anyway, and second, that they get less profit.
Mr. Burgess commented that the new procedure would go good
in good weather and bad in bad weather.
Mr. Coolidge commented that one group is really hurt by the
new procedure -- those who ordinarily get a $10,000 preference on
small subscriptions. Heretofore they have received about 1 point
profit. This group includes about half the banks in the country.
Mr. Seay reported that the Baltimore banks told him the
new method creates uncertainty and works against a free market
and brings about a down turn in prices. He reported that trust
Regraded Unclassified
47
-8-
companies would not enter bids for their trusts. He regarded
this position as wholly illogical. He said that the Richmond
bank got more bids than ever before but that the bids were too
low and so the bidders got no bonds.
Mr. Young interposed to say that the banker is a "chiseller"
and 8 bargain hunter.
Mr. Morgenthau said he would like to continue on a bid
basis through the summer with a new issue on the old basis
about September 15th to bring in from $500,000,000 to $1,500,000,000
to last through to January.
Mr. Seay thought it would be helpful to the country banks
if a sheet were sent along showing the current prices on out-
standing bonds.
Mr. Morgenthau replied that the Treasury would consider
accompanying the next request for bids with newspaper advertise-
ments in cities of 25,000 or over.
Mr. Young, Mr. Eccles and Mr. Coolidge were of the opinion
that the banks in the smaller cities were pretty well circular-
ized by the dealers.
Mr. Burgess said that the general reaction is that the bid
method is a mistake. He was of the opinion that we ought to
keep on trying but take it gradually and in our stride -- not
use it for all new cash this summer and do not appear to be
stubborn and run our heads against the wall. Do not imperil
the whole program without reason, he said.
Mr. Eccles commented that banks prefer the old method
Regraded Unclassified
-9-
48
because it is for their interest, and Mr. Morgenthau added "for
the turn that they could make."
Mr. Eccles said "yes, for the profit in 1t". He added
that as long as there are so many excess funds in the banks
there is not the slightest reason for concern about financing.
From the Treasury standpoint, he said, he has heard no argument
yet that weighed against the new method.
Speaking to the point of distribution, Mr. Coolidge said
he thought the new method would be better for gradual end
eventual distribution. He blamed the difficulties of last
September on June offerings for cash. The June sales were not
distributed until September, he said.
Mr. Morgenthau said that if the market drops people are
worried and critical but if it is up their comment is that the
Treasury is pushing it too hard. He said the Treasury could have
put out 8 new issue for $1,000,000,000 in June.
Mr. Eccles said the bond houses buy for speculation on
large offerings and that on the bid basis he thinks there is
better absorption and less overloading of dealers.
Mr. Morgenthau asked if those present would come down two
weeks from today and then we can make up our minds what to do
about new money.
Mr. Harrison said he wanted it understood that he had an
open mind on the problem.
Mr. Morgenthau said he did too and that he has no hobbies
and no set ideas about it. He added that he has not been convinced
that the experiment is not wroth continuing.
49
-10-
Mr. Seay thought the new method was founded on reason and
common sense.
Mr. Morgenthau said to Mr. Burgess "you are not convinced
that the new method is wrong, are you?" Mr. Burgess replied "no".
He said it is surrounded with difficulties and we ought to go
slow.
Mr. Harrison said he thought that a more important statement
than that the new method is not wrong 1s the statement that the
old method is right.
Mr. Eccles said that he agreed with Mr. Young that the main
trouble with the banks is their resistance to change.
Mr. Burgess commented that that is a good reason for changing
slowly.
Mr. Seay said to Mr. Morgenthau that he didn't fully
understand earlier reference to selling $1,000,000,000 of Govern-
ment securities to the Federal Reserve Banks.
Mr. Morgenthau indicated that he had not been too serious
in that proposal, that ft had better be forgotten.
Mr. Young commented that if the Government market went sour
he was pretty sure that the Federal Reserve Banks would do whatever
were necessary to make their investment of $2,500,000,000 good.
Reference was made to the decline in the Mellon's 3's shortly
after their issuance and Mr. Burgess commented that that piece of
financing represented the only case where the Treasury had gone
against the advice of New York.
Regraded Unclassified
49A
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING NEWSPAPERS,
Press Service
Monday, June 10, 1935.
No.5-9
6-8-35.
Socretary of the Treasury Morgenthau today announced the offering of 5-year
1-1/2 percent Treasury notes of Series B-1940 in exchange for Treasury notes of
Series A-1935 mnturing June 15, 1935 and for Treasury notes of Sories B-1935
maturing August 1, 1935.
About $416,600,000 of the notes of Series A-1935 will mature on June 15,
and about $353,800,000 of the notes of Series B-1935 mature on August 1, 1935.
These maturing notes may now be exchanged for the new issue, the amount of
which will be limitod to the amount of the maturing notes tendered and accepted
for exchange. The offering is confined to exchange subscriptions, and cash sub-
scriptions will not be received.
The Treasury notes now offered will be dated June 15, 1935, and will bear
interest from that date at the rate of 1-1/2 percent per annum payable semi-
annually. They will mature June 15, 1940, and will not be subject to call for
redemption before that date.
The notes will be exempt, both AS to principal and interest, from all taxa-
tion. The exemption does not apply to estate or inheritance taxes or gift taxes.
The notes will be issued in bearer form only in denominations of $100, $500,
$1,000, $5,000, $10,000 and $100,000.
Applications will be received at the Federal Reserve banks and branches, and
at the Treasury Department, Washington. Banking: institutions generally will
handle applications for subscribors, but only the Federal Reserve banks and the
Treasury Department are authorized to act as official agencies. The Secretary of
Regraded Unclassified
49B
-2-
the Treasury reserves the right to close the books as to any or all subscriptions
or classes of subscriptions at any time without notice. Subject to the reserva-
tions set forth in the official circular, all exchange subscriptions will be
allotted in full.
Payment at par for any now notes allotted must be made on or before June 15,
1935, and may be made only in Treasury notes of Sories A-1935 maturing June 15,
1935, or in Treasury notes of Scries B-1935 maturing August 1, 1935, which will
be accepted at par and should accompany tho subscription. In the case of
Treasury notes of Sorios B-1935 tendered in payment, coupons dated August 1, 1935,
must be attached to the notes whon surrendered and accrued interest from Fobruary
1 to Juno 15, 1935, on the surrendered notes will be paid following their
acceptance for exchange.
The text of the official circular follows:
Regraded Unclassified
UNITED STATES (F AMERICA
49C
1-1/2 PERCENT TREASURY NOTES OF SERIES B-1940
Dated and bearing interest from June 15, 1935
Due June 15, 1940
Interest payable June 15 and Docember 15
OFFERED ONLY IN EXCHANGE FOR TREASURY NOTES OF SERIES A-1935, MATURING JUNE
15, 1935, AND TREASURY NOTES OF SERIES B-1935, MATURING AUGUST 1, 1935
1935
TREASURY DEPARTMENT,
Dopartment Circular No. 542
Office of the Secretary
Washington, June 10, 1935.
Public Debt Service
The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, approved Sontember 24, 1917, as amended, invites subscriptions,
at par and accrued interost, from the poople of the United States, for 1-1/2
percent notes of the United States, designated Treasury Notes of Sorios B-1940,
in payment of which only Treasury Notos of Series A-1935, maturing Juno 15, 1935,
or Treasury Notes of Sorios B-1935, maturing August 1, 1935, may be tendered.
The amount of the offering under this circular will be limited to the amount of
Troasury Notos of Scrios A-1935 and of Series B-1935 tondored and accepted.
Description of Notos
The notes will be dated June 15, 1935, and will bear interost from that date
at the rate of one and one-half percent por annum, payable semiannually, on
Docember 15, 1935, and thereafter on June 15 and Docember 15 in each year. Thoy
will mature June 15, 1940, and will not be subject to call for redemption prior
to maturity.
The notos shall bo exempt, both as to principal and interost, from all taxa-
tion (except estate or inheritance taxes 1) now or hercafter imposod by the
Unitod Statos, any Stato, or any of the possessions of the United Statos, or by
any local taxing authority.
1 Similarly, the exemption &008 not apply to the gift tax, SOC Treasury Decision
4550€
Regraded Unclassified
The notos will be accepted at par during such timo and under such rulos and
rogulations as shall bo prescribed or approved by the Socretary of the Tronsury
in payment of income and profits taxes payable at the maturity of the notos.
The notes will be acceptable to secure doposits of public moneys, but will
not bear tho circulation privilogo.
Boarer notos with interest coupons attached will be issued in donominations
of $100, $500, $1,000, $5,000, $10,000, and $100,000. The notes will not 00
issued in rogistored form.
Application and Allotment
Applications will be recoived at the Federal Reserve banks and branches and
at the Treasury Dopartment, Washington. Banking institutions generally will
hendle applications for subscribors, but only the Foderal Resorve banks and the
Trensury Department are authorized to act as official agencies. The Secretary
of the Treasury reserves the right to close the books as to any or all subscrip-
tions or classes of subscriptions nt any time without notice.
The Secretary of the Treasury reserves tho right to reject any subscription,
in whole or in part, to allot less than the amount of notes appliod for, to make
allotments in full upon applications for smallor amounts and to make roduced
allotmonts upon, or to reject, applications for larger amounts, to make classified
allotmonts or to make allotmonts upon a gradunted scalo, or to adopt any or all
of said mothods or such other mothods of allotment and classification of allot-
monts as shall bo decmed by him to be in the public interost; and his action in
any or all of those respects shall bo final. Subject to these roscrvations,
all subscriptions will be allotted in full. Allotmont notices will be sent out
promptly upon allotmont.
Regraded Unclassifie
49E E
-3-
Payment
Payment at par and accrued interest, if any, for notes allotted hereunder
must be made on or before June 15, 1935, or on later allotment, and may be made
only in 3 percent Treasury Notes of Serios A-1935, maturing June 15, 1935, or
in 1-5/8 percent Treasury Notes of Series B-1935, maturing August 1, 1935,
which will be accepted at par, and should accompany the subscription. In the
caso of Treasury Notes of Serios B-1935 tendored in payment, coupons datod
August 1, 1935, must be attached to the notes whon surrondored, and accrued
interest, to June 15, 1935, 2 will bo paid following acceptance of tho notes for
exchange.
General Provisions
As fiscal agents of the Unitod Statos, Federal Reserve banks are authorized
and requested to reccivo subscriptions, to make allotmonts on the basic and up
to the amounts indicated by the Secretary of the Treasury to tho Fodoral Rosorve
banks of the respective districts, to issue allotmont noticos, to receivo payment
for notes allottod, to make dolivory of notos on full-paid subscriptions allottod,
and thoy may issue intorim receipts pending dolivery of the definitivo notos.
The Socretary of the Treasury may at any timo, or from time to timo,
proscribe supplomontal or amendatory rulos and regulations governing the offoring,
which will be communicated promptly to tho Fodoral Reserve banks.
HENRY MORGENTHAU, JR.,
Socrotary of tho Treasury.
2 Accrued intorest at 1-5/8 percent from Fobruary 1, 1935, to Juno 15, 1935, on
$1,000 is $6.015193.
Regraded Unclassified
50
June 11th
At the 9:30 meeting this morning Mr. Oliphant
brought in draft of a letter to Senator McCarran in answer
to one which Mr. Morgenthau received dated June 7th in regard
to the Treasury's silver purchase program. Mr. Morgenthau
suggested many changes. He then telephoned Senator Key
Pittman and told him about the letter which he had received
from Senator McCarran and also about our suggested reply and
asked whether he would have the time to bok over our letter
before we sent it up on the hill. Senator Pittman said he
would come down in about 15 minutes.
Mr. Oliphant then read both letters to Senator
Pittman. He then dictated the following suggestions:
"I think it would be impolitic to discuss the
Stabilization Fund as it 1s purely an American
policy and deals more with international ex-
change than our local currency.
"I am sure that it is realized the publicity
in regard to the Stabilization Fund would be
contrary to public interest and no member of
Congress has heretofore asked for any public
expression in regard to it.
"I have submitted you these facts which seem
to be the conclusive evidence that the Treasury
Department is carrying out the act according to
its mandates and in the spirit intended.
"On or about such and such a date you had a group
of Senators come down to your office, such Senators
as you could reach by telephone and those who are
interested in silver legislation. At that time a
number of them responded and we had a very open
and frank conference in regard to the complete
operation of the Treasury Department under the
Act. That you explained to those present what
you had done, what you were doing and what you
intended to do and outlined quite fully the en-
tire policy. Everyone present either by statement
or by apparent acquiescence agreed to the policy.
"Point out that McCarran was not present at that
meeting but that he came to your house upon your
invitation the next morning and you answered all
questions which he asked and that you attempted
to outline what you were doing and were under
the impression that he was satisfied with it.
Regraded Unclassif
51
"That if any group of Senators desire to
come down and discuss this or any phase
of it with you that you would be very
happy to do so that you never intended
to conceal anything from them."
After Senator Pittman left, Mr. Morgenthau decided
to give McCarran facts but he certainly did not intend to be
apologetic. Attached herewith are copies of Senator McCarran's
letter to Mr. Morgenthau and his reply.
McReynolds, Bell and I talked over the future of
the office of the Director of the Budget and we all three agree
that for the immediate future it would be best if we could get
somebody like Tom Smith to become Director of the Budget. As
to the future, Bell and McReynolds have a plan of a permanent
fiscal Assistant Secretary who would have charge of accounting
and fiscal matters. I think that this should be gone into very
thoroughly.
If I am able to get Tom Smith to come then I would
want Bell to stay on my payroll as Special Assistant until
December 31, 1935 in order to compensate him in a small way
for his efforts.
Regraded Unclassified
UNITED STATES SENATE
Committee On Appropriations
June 7, 1935
Hon. Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
My dear Mr. Secretary:
I am at a loss to understand the reason for the recent
drop in the price of silver with its other attending phases, and
therefore appeal to you for facts of which I am entirely uninformed.
Will you be 80 kind BS to tell me whether the Treasury
has sold any silver directly or indirectly through the stabiliza-
tion fund or through any of its agencies, and if so, in what
quantities and at what price?
Will you also tell me what steps are being taken now by
your Department to carry out the provisions of the Silver Purchase
Act of 1934?
Lastly, will you kindly inform me to what reason you
attribute the recent fall in the price of silver, which fall was
approximately nine cents?
Frankly, I am concerned about the seeming failure to assure
the country on the status of silver. Reports which I assume of course
to be wholly unfounded are being circulated in the world markets
to the effect that the United States is to abandon its silver policy;
end from some source there seems to come an intimation that your
Department was not intent in carrying out the provisions of the
Silver Purchase Act. These rumors appear to be particularly per-
sistent in India and China and from what I can learn are being
circulated without refutation or authentic statements from the
Department nor from any person or agency in this country most in-
terested in silver. Cable reports from Shanghai assert that the
rumors originate with certain Washington correspondents of the
news agencies. Whether this be so of course I do not know, but
in the absence of any positive statement from the Treasury or Con-
gressional circles such rumors may continue, and it appears to me
that something should be done to prevent a demoralization of the
market.
I trust that you may see fit to tell an uninformed public
that the provisions of the Silver Purchase Act are being enthusias-
tically carried out by the Treasury Department and that there is not
the slightest basis for the rumors to which I have made reference;
Regraded Unclassified
58
Hon. Henry Morgenthau, Jr., page 2
6/7/35
also that as soon as practicable silver will be equal to one-fourth
the value of the monetary metal in the treasury.
Assuring you of my continued cooperation in carrying
out the provisions of the Silver Purchase Act, and with the hope
that I may have your reply as soon as it is convenient, I remain
Respectfully yours,
U
/s/ Pat McCarran
1
She 15
END E The
cives, Los of in Ddd
The S. VP X0,
so
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of light 124. Delig the and
THE
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992,
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x the of
and In the States the st MM we
FOR too GRM from 2, 1956 to DJ 106, is :
STATE Si, of
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of - 14. De -
Use currents If Mrs. Yesas
as MA - the School -
M web W 15ml over
The state swis, is -
of living the THE -
May 190% OF
151
June 11, 1935.
52
thy dear Senator:
I refer to your letter of June 7 in which you ask me
to furnish you certain facts in respect to our silver pur-
chase program.
I believe you will agree with me upon reflection
that, since the purpose and operations of the Stabilization
Fund are matters of American policy and primarily have to do
with international exchange relations rather than domestic
monetary matters, discussion of the operation of the Fund
would not be in the public interest. This has been the fixed
policy of the Department since the Fund was established.
That this 1s generally appreciated is evidenced by the fact
that no inquiry concerning the operation of the Stabilization
Fund has come to the Treasury from any member of the Congress
or other officer of the Government. Only those primarily in-
terested in speculation in silver would seriously question
the wisdom of this policy.
I can, however, give you the facts with respect to the
operations under the Silver Purchase Act and Proclamations
relating to newly mined silver. It is entirely consistent
with the public interest that these facts should be made
known; and they, therefore, furnish the best means of answer-
ing your questions.
In carrying out the policy declared in the Silver Pur-
chase Act, and in accordance with the authority and direction
therein given, the Secretary of the Treasury has acquired in
the ten months ending May 31, 1935, by purchase, 283,000,000
ounces of silver as to which delivery has already been made,
and 112,850,000 ounces of silver under the Nationalization
Order of August 9, 1934. During the same period 25,647,000
ounces of newly mined domestic silver have been received under
the Executive Proclamation of December 21, 1933. In the aggre-
gate, our stocks of monetary silver have been increased by
421,497,000 ounces.
The extent of these purchases may better be appreciated
by a comparison of the amounts of silver which have been pro-
duced and consumed in the United States and in the world during
the ten months from August 1, 1934 to May 31, 1935. It is
estimated that 25,700,000 ounces of silver were produced in the
United States, of which 9,000,000 went into industrial use,
leaving a net of only 16,700,000 ounces. During the same
period the Secretary of the Treasury received 16.4 times as
much silver as was produced in the United States and 25.2 times
as much of that production as was available for monetary use.
The whole world, it is estimated, produced only 156,000,
000 ounces of silver during the ten months from August 1, 1934
to May 31, 1935, of which 60,000,000 ounces were necessary for
industrial use. The acquisitions of the Secretary of the
Regraded Unclassified
- 2 -
53
Treasury during the same period exceeded the world production
by about 265,000,000 ounces, and exceeded such of that pro-
duction as was available for monetary purposes by more than
325,000,000 ounces. In other words, the receipts of silver
were 2.7 times the total world production and 4.4 times the
current world output of monetary silver.
The United States agreed at the London Conference to
withdraw 24@ million ounces of current newly mined silver
from production every year. The receipts of silver under the
Executive Proclamation of December 21, 1933, alone, more than
comply with this Agreement. During the ten-month period from
August 1, 1934 to May 31, 1935, we have acquired for monetary
purposes 401,100,000 ounces more silver than we agreed to by
the London Agreement. We have, in fact, withdrawn more than
twenty times 8.8 much as we agreed to do.
The total amount of silver to be withdrawn each year
by all other parties to the London Agreement was 9,500,000.
The United States alone has withdrawn during the ten-month
period 421,497,000 ounces, or forty-four times more than the
other countries agreed in a whole year.
Under the Sherman Act of 1890 the Treasury purchased
during the 3½ years of its operation 168,675,000 ounces. The
Treasury has purchased and received delivery of 2@ times that
amount in the ten months that the Silver Purchase Act has been
in operation. Our monthly average purchases during the ten
months from August 1, 1934 to May 31, 1935, have been ten timos
the average monthly purchases under the Sherman Act of 1890.
During the period 1920-1930, it is estimated that the
annual withdrawal of silver for monetary purposes for the whole
world, including the United States, averaged approximately
200,000,000 ounces, During the past ten months the United
States has received more than twice the average annual amount
taken by the whole world during that period. I have taken a
ten month period, for, 8.8 you doubtless know, delivery is
usually made at the end of the month and these figures are
based upon deliveries.
The figures on a monthly basis are even more significant.
Confining ourselves to actual receipts, during the past ten
months the Secretary of the Treasury has acquired and received
delivery of silver averaging more than 42,000,000 ounces a
month.
Concerning the policy and purpose of the Treasury Depart=
ment in carrying out the letter and spirit of the Silver Pur-
chase Act of 1934, the foregoing facts speak for themselves.
Referring to your last question concerning the recent
course of the price of silver, I do not believe that the sudden
and abnormal rise of the price to eighty-one cents in the latter
part of April was the result of the normal operation of legiti-
mate market forces. I think rather that it is to be attributed
- 3 -
54
to manipulations of speculative interests. The dis-
appearance of this unhealthy condition and influence has
been a wholesome development.
to Very truly yours,
Secretary.
Honorable Patrick McCarran,
United States Senate.
Ins
The
will
E
time
tom.
no
of trew
Grand 18. Mill,
of Regra and Issue
a Repressatatives,
Regraded Unclassified
June 11, 1935.
57
My dear Mr. Chairman:
I am glad to avail myself of the opportunity afforded
by your invitation to have representatives of the Treasury
appear before the Subcommittee of which you are chairman to
answer questions in respect to legislation affecting the mis-
cellaneous internal revenue taxes. As you are aware, a number
of these taxes were terminated by the Revenue Act of 1934; a
substantial number of other taxes expire on June 30 and July 31
of this year; and in the case of a few of the continuing taxes,
the rate will be substantially reduced effective on June 30.
The President in his Budget Message of January 7
estimated that the miscellaneous internal revenue taxes for 1936
would increase some $143,000,000 over the collections for 1935,
stating that "this increase is predicated on the assumption that
the taxes terminating on June 30 and July 31, 1935, will be ex-
tended by Congress, and also that the tax rates which would be
reduced on June 30, 1935, will be continued." Accordingly, the
President recommended "that the Congress take steps by suitable
legislation to extend the miscellaneous internal revenue taxes
which under existing law will expire next June or July, and
also to maintain the current rates of taxes which will be re-
duced next June." He added "I consider that such taxes are
necessary to the financing of the Budget for 1936."
The representatives of the Treasury appearing before
your Committee will be glad to answer any questions and to make
available to the Committee the results of its experience with
these taxes.
Respectfully,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
Hon. Samuel B. Hill, Chairman,
Subcommittee of Ways and Means Committee,
House of Representatives.
Regraded Unclassified
57
A
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING niwspapers,
Pross Service
Wednesday, June 12, 1935.
No.5-11
6-11-35.
Socrotary of the Treasury Morgonthau announced today (June 11) that the
subscription books for the curront offoring of Treasury Notos of Scries B-1940
will closo at the close of business Thursday, June 13, 1935. Subscriptions
placed in the mail before 12 o'clock, midnight, Thursday, Juno 13, will be
considored as having been onterod before the close of the subscription books.
This offoring is open only to tho holders of Treasury Notes of Serios A-1935,
maturing June 15, 1935, and to the h ddors of Treasury Notos of Serios B-1935,
maturing August 1, 1935.
Regraded
Unclassified
58
June 11th
The following is a tentative plan of financing
which I discussed with Mr. Coolidge to-day:
That the last week in June we borrow enough
to take care of our July needs; the last week in July we
borrow enough to take care of our August needs and the
middle of September we get out a new large bond issue for
new money to take us through December 15th.
Coolidge wants an offer for conversion of the
1 billion 200 million which comes due October 15th. These
are the last 4-1/4's.
58A
June 12, 1935.
Wednesday.
Tom
my two partners come into my apartment this afternoon
Smith:
to talk the matter over and wanted you to understand
why there was some delay in calling you.
H.M.Jr: Oh, well, then - then, I'd say that we still can hope.
S:
Yes.
H.M.Jr: Good.
S:
You may hope. I'll be talking to you tomorrow or the
next day.
H.M.Jr: How is your permanent partner?
S:
Well, she's not very warm to it.
H.M.Jr: Not very warm to it.
S:
Not very warm to it, no, she thinksI'm simply taking on
another job, probably a good deal heavier than anything
I've tackled and I ought to go the other way.
H.M.Jr:
But, she hasn't said no.
S:
Well, it isn't - it isn't final.
H.M.Jr: Good.
S:
And I think it lies really with what arrangements I can
make
H.M.Jr: Fine. Well, I'll - I'll wait with great interest to
hear from you.
S:
Thank you so much.
H.M.Jr:
Thank you.
S:
Goodbye.
June 12th
59
Mr. Morgenthau called Harry Hopkins to-day
to find out how many people have been put to work out of
the money allocated from the 4 billion 8. Mr. Hopkins
was not in and his office informed Mr. Morgenthau that
they did not have the information on hand - that they had
not gotten around to that yet.
Congressman Doughton called up and asked
Mr. Morgenthau whether the Treasury had a representative
on the hill, to which Mr. Morgenthau replied that we had
Mr. Hester on the hill all the time. Congressman Doughton
then asked who was looking after the Federal Alcohol Con-
trol Bill and Mr. Morgenthau informed him that the bill
that Charlie West has on Federal Alcohol Control has the
approval of the Treasury. That any time he wanted Mr. Mor-
genthau to come up on the hill he would be delighted to do
so but that Choate was a little touchy and if he called him
he ought to call Choate as well. That the Treasury did not
want to get into the social aspects of the Alcohol Bill and
that Mr. Choate was doing a very good job on that.
Mr. Doughton also reminded Mr. Morgenthau about
the man he was interested in for appointment on the Board of
Tax Appeals. The man's name is Kitchen and Mr. Morgenthau
promised to have definite word for Mr. Doughton tomorrow
morning. Mr. Morgenthau told Mr. Doughton that this was a
Presidential appointment to which Mr. Doughton replied "just
as soon as I know what you are going to do I'm going to see
the President about it."
Mr. Morgenthau was very much annoyed with
Mr. Oliphant because he had told someone about Mr. Kitchen
several times and nothing was done about it. If the man is
good he certainly wants to satisfy Mr. Doughton.
59A
June 12, 1935.
Wednesday.
H.M.Jr:
Hello.
Robert
Doughton:
Mr. Secretary?
H.M.Jr:
Yes, Mr. Doughton.
D:
Congressman Doughton. How're you getting along?
H.N.Jr:
oh, I don't know. What do you think?
D:
Well, I just don't know myself; I wanted to find out.
You've got 80 quiet there, but still I didn't know
whether you'd left town, gone over on a long vacation
- vacation excursion or what.
H.M.Jr:
oh, no, we - we're just sitting down here borrowing
money at five years - one and a half percent.
D:
Yes. I didn't know - I wanted to talk with you one of
these days or someone representing your department
about this bill that's come before our committee from
the Alcohol Control Division. I - it's - they've sent
down their bill and we're going to refer it to a sub-
committee I have and then I - decide whether or not I
can submit it in its present shape or whether or not -
maybe we should change it for you before introducing it.
I didn it know but what you had any representations or
any views you wanted to express.
H.M.Jr:
Well, we have - I thought we had a man up there all the
time.
D:
Well -
H.M.Jr:
Isn't Mr. Hester up there?
D:
Who?
H.M.Jr:
Hester.
D:
Yes, Hester, yes.
H.M.Jr:
Yes.
D:
We hadn't brought that bill especially up before our
committee.
H.M.Jr:
Is that Federal Alcohol Control?
D:
Yes.
H.M.Jr:
Yes. Well, anytime - I'll come up or have anybody else
come up. You just say the word.
D:
Well, I thought maybe that - if you'll - been giving the
59A
June 12, 1935.
Wednesday.
H.M.Jr:
Hello.
Robert
Doughton:
Mr. Secretary?
H.M.Jr:
Yes, Mr. Doughton.
D:
Congressman Doughton. How're you getting along?
H.M.Jr:
oh, I don't know. What do you think?
D:
Well, I just don't know myself; I wanted to find out.
You've got so quiet there, but still I didn't know
whether you'd left town, gone over on a long vacation
- vacation excursion or what.
H.M.Jr:
Oh, no, we - we're just sitting down here borrowing
money at five years - one and a half percent.
D:
Yes. I didn't know - I wanted to talk with you one of
these days or someone representing your department
about this bill that's come before our committee from
the Alcohol Control Division. I - it's - they've sent
down their bill and we're going to refer it to a sub-
conmittee I have and then I - decide whether or not I
can submit It in its present shape or whether or not -
maybe we should change it for you before introducing it.
I didn it know but what you had any representations or
any views you wanted to express.
H.M.Jr:
Well, we have - I thought we had B. man up there all the
time.
D:
Well -
H.M.Jr:
Isn't Mr. Hester up there?
D:
Who?
H.M.Jr:
Hester.
D:
Yes, Hester, yes.
H.M.Jr:
Yes.
D:
We hadn't brought that bill especially up before our
committee.
H.M.Jr:
Is that Federal Alcohol Control?
D:
Yes.
H.M.Jr:
Yes. Well, anytime - I'll come up or have anybody else
come up. You just say the word.
D:
Well, I thought maybe that - if you'll - been giving the
Regraded Unclassified
59B
- 2 -
matter your own personal attention that I might just
talk with you personally about it a little some day.
H.M.Jr:
The Federal Alcohol Control?
D:
Yes.
H.M.Jr:
Well, I'll be glad to, Mr. Doughton. I - I -
Dt
You know, they want a separate commission and I under-
stand that you-all want it in the Treasury Department.
H.M.Jr:
No, the bill - the bill that Charlie West has got on
Federal Alcohol Control - we worked with Choate's
people on that.
D:
Well -
H.M.Jr:
And the bill that Charlie West has got - has got the
o.k. of the Treasury.
D:
All the way down the line?
H.M.Jr:
All the way down the line.
D:
Well, that means an independent setup - independent
commission.
H.M.Jr:
Yes.
D:
Well -
H.M.Jr:
I'll tell you how I feel. That gets into the social
aspects of this Alcohol thing and I would rather not
have it in the Treasury and I think Mr. Choate done a
swell job.
D:
Well, I knew you were doing a right good job myself.
H.M.Jr:
But, that bill that Charlie West took up on the Hill,
I've o.k'd it and I'm for it.
D:
Well, I'm glad to know that.
H.M.Jr:
Now, I'll come up, but Mr. Choate's a little bit touchy
and I'd little bit rather have you send for him, but if
that isn't agreeable, you know, all you've got to do is
to press the button and I'll come.
D:
Well, thank you very much. Well, now
you remember, some time
ago, I brought to your attention a matter that - of an
important member of the -
H.M.Jr:
Board of Tax Appeals.
D:
Yes, Board of Tax Appeals.
Regraded Unclassified
- 5 -
59C
D:
Yes, Board of Tax Appeals.
H.M.Jr:
Yes, sir.
D:
Did you check on that man?
H.M.Jr:
Now, just a minute, I've got some people right in the
office and I'll ask them.
D:
Yes.
H.M.Jr:
Just hold the wire a minute.
H.M.Jr:
Well, they don't seem to know. We'll - they have -
I'll have to ask them. It's young Kitchen.
D:
Yes.
H.M.Jr:
Now, wait a minute.
D:
He's had a great deal of experience in that work
and he's certainly a man of extraordinary ability. As
to his background and how's he been getting along where
he's worked and all that kind of detail, I just couldn't
tell. But, he's one of the finest minded men I know of
and I wouldn't be surprised 1f he makes you B. most ex-
cellent man down there.
H.M.Jr:
Well, I - I haven't forgotten about him for EL moment.
D:
I haven't asked you for much, you know.
H.M.Jr:
No.
D:
And I'm not going to ask you for that unless you think
he qualifies.
H.M.Jr:
Well, you know - I'm not the fellow to ask anyway.
D:
How's that?
H.M.Jr:
It isn't my appointment, you know. It's a Presidential
appointment.
D:
I know it is, but I would imagine that he would rely on
you as fas as investigations of the facts were concerned.
H.M.Jr:
Yes, well, don't think I forgot it because I haven't.
D:
Well, how soon do you reckon I'll be able to find out any-
thing about it?
H.M.Jr:
Oh, I'd say, couple of days.
D:
and if you don't find
then, I'd like to go talk to the President,
59D
- 4 -
H.M.Jr:
Well -
D:
If you find some vivid reason why you don't think you
could consider him, why, that would drop it with me.
H.M.Jr:
Well, supposing I give you B. call or send up for it
tomorrow?
D:
Fine, thank you so much and if
I'll come
around and talk with you.
H.M.Jr:
O.K.
D:
Thank you 80 much.
H.M.Jr:
Thank you.
D:
Goodbye.
Regraded Unclassified
60
June 12
Earle Bailie said he thinks H.M. Jr. is making a
mistake in being in the market so often for the Treasury.
His old policy of going into the market four times a year
is best.
H.M. Jr. called in Bell after talking to Kiplinger,
and said he thinks that June 24th he ought to go out and
ask for money for July 1st, enough money to last us until
Sept. 15th and give the market a rest. Bell said five
hundred million ought to take care of us.
registement in
of the
understand of the
surp
in
the
Tax
Personal
is
and
June 13, 1935.
61
A group met in the office of the Secretary of the Treasury
at 9:30 A.M. for a discussion on banking legislation. Those
present were:
Henry Morgenthau, Jr. Secretary of the Treasury,
T.J. Coolidge, Under Secretary of the Treasury,
Herman Oliphant, General Counsel,
Herbert E. Gaston, Assistant to the Secretary,
D.W. Bell, Commissioner of Accounts & Deposits,
Vm. H. McReynolds, .dministrative Assistant to the Secretary,
George C. Haas, Director of Research & Statistics,
Mrs. H.S. Klotz, Special Assistant to the Secretary.
C.B. Upham.
Mr. Morgenthau referred to the situation with respect to the
FDIC and the fact that unless there is additional legislation between
now and July 1, the so-called permanent plan of deposit insurance,
originally enacted as a part of the Banking Act of 1933, will go
into effect on that date.
He referred to the requirement in the present law that
National banks must be class A stockholders of the FDIC on July 1
or it becomes the duty of the Comptroller of the Currency to
appoint receivers or conservators for them. Moreover, it is
made the duty of the Federal Reserve Board to terminate the member-
ship in the Federal Reserve System of member state banks which are
not class A stockholders in the Corporation on July 1.
The Federal Reserve Board is given the duty of prescribing
regulations for the computation of deposit liabilities of member
banks for the determination of the amount of their stock subscriptions.
Regraded Unclassified
62
-2-
Mr. Morgenthau was of the opinion that, as fiscal officer
of the Administration, it was his duty to take steps to see that
arrangements are made under which the permanent deposit insurance
plan can be set up and be put into effect on July 1, if that
becomes necessary. It was pointed out that the various agencies
concerned have relied upon a general belief that there would be
legislation prior to July 1 either giving a further extention
of the temporary fund or enacting Title I of the proposed Banking
Act of 1935.
It was recalled that the permanent plan now on the statute
books was scheduled to go into effect on July 1, 1934 but had
been postponed until July 1, 1935 by action of the Congress.
Mr. Morgenthau asked that a meeting be arranged in his office
for 2:30 P.M. and that Mr. Eccles, Mr. Crowley, Mr. O'Connor,
and (in the absence of Jesse Jones) Lynn P. Talley be asked to
come. He asked Mr. Coolidge and Mr. Upham to arrange the agenda
for the meeting.
Regraded Unclassified
-2-
62
Mr. Morgenthau was of the opinion that, as fiscal officer
of the Administration, it was his duty to take steps to see that
arrangements are made under which the permanent deposit insurance
plan can be set up and be put into effect on July 1, if that
becomes necessary. It was pointed out that the various agencies
concerned have relied upon a general belief that there would be
legislation prior to July 1 either giving a further extention
of the temporary fund or enacting Title I of the proposed Banking
Act of 1935.
It was recalled that the permanent plan now on the statute
books was scheduled to go into effect on July 1, 1934 but had
been postponed until July 1, 1935 by action of the Congress.
Mr. Morgenthau asked that a meetingbe arranged in his office
for 2:30 P.M. and that Mr. Ecoles, Mr. Crowley, Mr. O'Connor,
and (in the absence of Jesse Jones) Lynn P. Talley be asked to
come. He asked Mr. Coolidge and Mr. Upham to arrange the agenda
for the meeting.
Regraded Unclassific
June 13, 1935.
63
A group met in the office of the Secretary of the Treasury
at 2:30 P.M. to discuss the situation with respect to the permanent
Federal Deposit Insurance plan which goes into effect July 1,
1935, unless there is legislation prior to that time.
Those present were:
Henry Morgenthau, Jr. Secretary of the Treasury,
Marriner S. Eccles, Governor, Federal Reserve Board,
T.J. Coolidge, Under Secretary of the Treasury,
Leo T. Crowley, Chairman, FDIC,
JF.T. O'Connor, Comptroller of the Currency,
Herman Oliphant, General Counsel, Treasury Department,
Lynn P. Talley, President, Commodity Credit Corporation,
James B. Alley, General Counsel, RFC,
Herbert E. Gaston, Assistant to the Secretary,
C.B. Upham.
Mr. Morgenthau explained that he had asked for this meeting
because he is frankly disturbed about the situation which is
developing with respect to the insurance of deposits. He added
that the intricate details of the situation were even better known
to the Governor of the Federal Reserve Board, the Chairman of the
FDIC and the Comptroller of the Currency than to him, but that the
situation had been brought forcibly to his attention by Mr. Tom K.
Smith and Mr. C.B. Upham.
Mr. Morgenthau stated that he felt considerable responsibility
in the situation as Secretary of the Treasury and the fiscal officer
of the Administration. He added that he was not so much interested
in the politic thing to do as in the right thing to do. He indicated
Regraded Unclassified
64
that there was 8. possibility of adjournment of the Congress on
July 1 or soon thereafter, and that as Secretary of the Treasury he
cannot continue indefinitely to neglect the legislative situation.
In his opinion the agencies concerned may very well be open to
criticism because they have not taken action earlier than this.
Inaction may leave the Administration wide open to criticism.
People may point to the fact that the situation was known and
that nothing was done to help the banks get ready for the permanent
insurance plan. As custodian of the peoples money in the banks,
the Secretary said he was interested in doing the right thing and
that he wanted the advice and help of those present. He wanted
to be able to go to the President and say such and such a procedure
had been agreed upon and should be followed up.
Mr. Crowley said that he supposed the FDIC was more vitally
concerned than any of the other agencies. There are 7800 State
non-member banks which must make application before July 1 for
Class à stock and pay an assessment equal to 1/4 of 1% of their
total deposit liability.
The Board and the Corporation said we cannot sit back and
do nothing. As a matter of fact, he said, letters are being
prepared to the Comptroller and to the Federal Reserve Board
calling the situation to their attention. He said he thought it
was important that the FDIC take the necessary steps without a
great upset to the banking system.
Mr. Morgenthau said he thought that on the 15th of June we
could have no choice about notifying the banks.
Mr. Crowley agreed that we couldn't wait any longer. He
remarked that the Banking Act of 1935 had been introduced on
Regraded Unclassified
-3-
65
February 5, 1935 -- that there is no opposition to Title I -- that
it can be passed before July 1. It is Title II that hurts, he said,
and he feels that the FDIC shouldn't be sacrificed any further.
Mr. Morgenthau told Mr. Crowley that we had been all through
that and that Title I was just a part of the Administration's
financial program.
Mr. Crowley said he thought it was his duty to let Mr. Morgenthau
know how he feels, and also what the Corporation is doing.
He said that he is not worried about the loss to the Corporation
in a few closed banks but that he is worried about losing 4000
banks and the effect on the fund and the banking structure of the
country. He said that the bankers approved the new Title I,
that it has been approved by the House, and the Senate Sub-committee
approves it. He stated his belief that the Corporation cannot
be gotten into shape for the permanent fund starting as of this
date. He said he had been led by the two banking and currency
committees to think that there would be legislation before July 1
and so no notification to the banks on the present permanent fund
would be necessary. If notice is now sent to the State Bank
Supervisors there will be meetings in all the State groups and
withdrawals of State non-member banks from the fund. It is a
serious matter and the necessary arrangements cannot be made
between now and June 30th.
Mr. O'Connor said that the Corporation is in a jam. Even
if the Bill came out of the Committee tomorrow it could not be
passed by June 30th. There will have to be a conference between
the two Houses because some things in the House Bill cannot be
Regraded Unclassified
left as they are. Some things were put in for trading purposes.
66
Mr. O'Connor said there had been 8. meeting of the FDIC Board
and it was agreed to send notices out at once. He said a letter
had been approved. He is asking the Federal Reserve Board for
6000 copies of the regulation which they must provide, which he
will send the National banks. He added that none of us wanted
to disturb the banking structure unless it is necessary.
Mr. Morgenthau suggested that if anything is done he thinks
it ought to be joint action and a joint statement to the press
for the information of the public on the reasons for taking the
action.
Mr. O'Connor thinks there ought to be no statement of any
kind to the public and no publicity.
Mr. Morgenthau said that he differed with Mr. O'Connor.
He thought there should be a joint statement from the Federal
Reserve System, the FDIC, the Comptroller, and, perhaps the
RFC, which is a stockholder in many of the banks. He asked those
present what their best guess was as to the reaction on the Hill
if a statement were sent out on Saturday and on Monday received
by the banks. Would Congress try to pass the bill or would they
prefer to let the present permanent plan go into effect?
Mr. O'Connor was of the opinion that the House would like
to see the present permanent plan go into effect.
Mr. Crowley was of the opinion that there would at least
be 30 days debate on what to do. He said there is e deadlock and
that some would like to hold off permanently. Nothing can be passed
without a compromise. They spent 10 days in the Senate Sub-committee on
-5-
67
Title I. They will take up Title III next. On the basis of time
spent on Title I, the sub-committee will take 2 or 3 weeks on
Title II.
Mr. Morgenthau reported that Tom Smith is of the opinion
that if Mr. Eccles will agree to an open market committee made
up of 6 members of the Federal Reserve Board and 5 Governors that
the bill can be passed as easily as snapping the fingers.
Mr. Eccles said he did not think that was correct. He
added that Senator Glass is opposed to the whole business --
that the 6-5 matter is an issue with the bankers but not with
the committee.
Mr. Morgenthau said that Tom Smith is pretty careful about
making statements and that he wouldn't attach 80 much weight
to that statement if someone else had made it.
Mr. Crowley said that if there could be an agreement to a
6-5 open market committee - an upper limit of 25% reserves
against deposits -- if Mr. Morgenthau would see Senator Glass --
the bill could be passed.
Mr. Eccles said he had no objection to the upper limit of
25% for reserves against deposits and that the 6-5 open market
committee was particularly a question for the Secretary to decide,
but that he (Mr. Eccles) had no objection to it.
Mr. Morgenthau recalled that the agreement prior to intro-
duction of the bill was for a 3-2 open market committee.
Mr. Eccles said that there were particularly good reasons
for having 5 governors because it gave geographical representation
to the four sections of the country and one member at large.
Regraded Unclassified
-6-
68
This committee, he thought, with an executive committee of three
members of the Federal Reserve Board including the Governor, and
two regional bank Governors would be an excellent arrangement.
In response to an inquiry from Mr. Morgenthau, Mr. Eccles
explained that he was on record beforethe committees for the Open
Market Committee to be made up of the Federal Reserve Board
with a group of Reserve Bank Governors acting in an advisory
capacity.
Mr. Morgenthau said that he felt that if there were an
agreement reached by this group and if it were then giventhe
O.K. of the President that the group must absolutely stick
together on that agreement and all sing the same song.
Mr. Eccles said he thought that was absolutely right.
Mr. Morgenthau personally inclined toward letters to the
banks and publicity with respect thereto to shock the country
and the Hill into action.
Mr. Eccles interposed to say that the organized opposition
of the bankers is responsible for the delay.
Mr. Morgenthau said that if that were true it makes
Tom Smith's argument all the stronger.
Asked by the Secretary for his opinion, Mr. O'Connor said
that he had no expression of view to make on the composition of
the Open Market Committee.
Mr. Morgenthau said that it was agreeable to him that the
Secretary and the Comptroller have no vote. He didn't care
about that. He said they could then sit back and tell the Open
Market Committee when it was wrong. He added that the President
Regraded Unclassified
-7-
69
disagreed with him on that and wanted the Secretary of the Treasury
on the Board.
Mr. Morgenthau suggested asking Tom Smith into the meeting
for a statement on how he can make good upon his statement that
the bill could be passed if a 6-5 Open Market Committee was agreed
to.
Mr. Crowley said he thought it would be possible to get the
6-5 compromise but he thought the Secretary should see Senator
Glass in any event.
Mr. Morgenthau is under the impression that the President
should see Senator Glass with him and Mr. Eccles. He added that
if Mr. Eccles is an irritation to Senator Glass it might be well
to leave him at home, to which Mr. Eccles cordially agreed.
Mr. Morgenthau said he wasn't going to have any more compli-
cation of the President and Senator Glass differing in the stories
that they tell about their conversations and agreements -- that
the thing to do was to get them together.
Mr. Morgenthau said he thought a combined statement could be
prepared and the Senate leaders told that it is going to be sent
out.
Mr. Crowley thought that was O.K. but we might be playing 8
joke on ourselves -- that it is past the time for any scare.
Mr. Morgenthau said that so far as he was concerned it was not
a bluff -- that he took his oath of office seriously.
Mr. Eccles said that he would suggest the group agree on
a program, then have the President call Senator Glass down
Regraded Unclassified
70
-8-
and try to get the whole Banking Act through. If that is found
to be impossible prepare a resolution for a 30 day extension of
the temporary insurance plan.
Mr. Morgenthau said that he thought Mr. Eccles, Mr. Crowley
with
and Mr. O'Connor did not fulfill the duties/which they are charged.
He was of the opinion that many bankers would think the delay and
inaction outrageous, and any others who might know of it.
Mr. O'Connor thought that the situation was pretty well
understood all around.
Mr. Eccles said an extension of the temporary fund must be
secured or the notices sent out.
Mr. Crowley was of the opinion that there would be no exten-
sion now.
Mr. Oliphant was in favor of sending out notices at once.
At this point Mr. Tom Smith joined the group.
Mr. Morgenthau explained the situation to him, indicating
that there had been discussion of sending out 8 letter on sub-
scriptions to the permanent insurance fund and told him that he
had reported to the group what Mr. Smith had said about getting
the bill passed and Mr. Smith agreed that he thought there was a
good chance of passing the bill if they could get an agreement
of 6-5 Open Market Committee and a 25% top on deposit reserves.
He said he thought it could be brought about.
Mr. Morgenthau and Mr. Oliphant thought that the notice to
the banks should be sent out anyway -- that there is no assurance
and there can be no définite assurance that the bill will pass.
There are always possibilities of a fillibuster.
Regraded Unclassified
-9-
71
Mr. Crowley was in favor of giving a few days time before
sending out the announcements. He thought they would have 8 bad
effect on the banking system.
Mr. Oliphant was opposed to any delay and his comment was that
there were a number of members in the Senate who whuld delight in
embarrassing the Administration by consenting to a delay and then
passing the plan.
Mr. Morgenthau said he was interested in doing the moral and
legal thing and that his interest is in what is right.
What explanation, he said, can I, as fiscal officer of the
Administration, give if I have not advised the President and the
public of the situation. At least two weeks notice is due the
bankers. I think there is justified criticism of myself and my
associates that the thing has not been brought to a head sooner.
Mr. Oliphant pointed out that the Boards of Directors of the
various banks must determine whether to go into the permanent fund
and that it will be impossible to arrange Board meetings for that
purpose between now and July 1. He was willing to agree on B.
6-5 Open Market Committee but said that if there was any expectation
of getting complete agreement on the bill that there would be no
bill before June 30th.
Mr. Morgenthau was of the opinion that if the notices were
sent out, he and his associates would have done their duty.
Mr. O'Connor agreed that we must protect ourselves.
Mr. Ecles agreed that notice should be sent out unless there
was a 30 day extension at once.
Mr. Morgenthau said he thought it was not only good public
Regraded Unclassified
-10-
72
psychology but common decency to send out notices at once.
Mr. Ecoles said that even if the notices were sent out it
might still not be sufficient time or notice to the banks and
suggested that we ask for 30 day extension also.
Mr. Morgenthau was opposed to this and said that Senator
Glass would inquire why this had not been suggested sooner.
Mr. Crowley said that Title I had been tied to Title II in
order to pass Title II. He suggested that if EL conference with
the Hill brought about an agreement to pass Title II in some form
eventually that it might be well to pass Title I at once, and
then pass Title II on July 10 or some other date following the
first of the month.
Mr. Oliphant suggested the possibility of sending out the
notice, having conference with the Hill, waiting 10 days and then
provide for 30 day extension.
Mr. Crowley was of the opinion that they wouldn't be able
to get a 30 day extension.
Mr. Eccles said it would be impossible to get Title I alone
through the House. He said that they shouldn't permit Senator
Class and the bankers to determine what legislation to pass.
Mr. Oliphant said we had the same situation on the Gold
Reserve Act and if it had gone to the Glass sub-committee instead
the
of to the whole committee, that/same situation would have resulted.
Mr. Morgenthau said that if all agreed he would recommend
to the President, (1) that a notice would go out Saturday night
to the banks, (2) that there would be a joint publicity statement
for Monday papers, (3) that the President would agree to a 6-5
Regraded Unclassified
-11-
73
Open Market Committee for trading purposes and that he would send
for anybody that he wished to make the best bargain he can.
It was agreed that the 25% top limit for reserves would be
included also.
Mr. O'Connor said that he was for that plan. He said there
was brief time and wondered if he should prepare certificates.
A committee was appointed to draw up the joint publicity state-
ment composed of Mr. Upham, Mr. Elliott Thurston, Mr. Folger.
Mr. Crowley said he would name a representative of the FDIC
later.
Mr. Smith said that Senator Glass would be out of the city
next Monday, Tuesday and Wednesday. He asked what he might say
to the bankers on all this.
Mr. Morgenthau asked that he say nothing until they would
go across the street to see the President.
Mr. Morgenthau called Marvin MacIntyre and told him that the
group present in his office were all in agreement and they would
like to see the President for 15 minutes. The President was
unable to see the group at that time, but Mr. Morgenthau went
into an adjoining room and talked with him on the 'phone.
Mr. Morgenthau returned and reported that the President would
agree to B 6-4 Open Market Committee but not 6-5.
Asked by Mr. Morgenthau if he gave a damn, Mr. Smith
said that he certainly did give a damn -- that it made a great deal
of difference -- that to get a different type of representation
with 5 means a greater dispersion over the country.
Mr. Eccles interposed to say that the President would take
8-5 -- that he had it in writing.
Regraded Unclassified
-12-
74
Mr. Morgenthau said that the President would not see
Senator Glass and that he was leaving the whole thing to him.
Mr. Morgenthau at this point was called on the telephone
by the White House and told that the President had arranged
an appointment for the Secretary with Senator Fletcher at 11
tomorrow morning.
Mr. Smith asked how about 8 to 5 and Mr. Eccles reported
again that he had the President in writing on that.
Mr. Smith said that he would talk to his associates about
8 to 5.
Mr. Eccles, Mr. Coolidge and Mr. Crowley all said that they
prefer 8 to 5.
Mr. Morgenthau again called the White House and confirmed
the 8 to 5 as O.K. with the President.
During the discussion Mr. Smith asked about the amendment
to the Utility Bill which should bar bank officers and directors
from serving at the same time on utility boards.
Mr. Talley of the RFC said that he was for the amendment.
Mr. Smith and Mr. Coolidge thought it very important that
it be killed and Mr. Morgenthau said that with all the other
things on his mind he couldn't get excited about it.
Regraded Unclassified
June 13th
75
H.M.Jr. called Mr. Choate and the following is their
conversation:
H.M.Jr:
I was talking to the President this morning on
your bill and I told him that as far as we are
concerned there is no misunderstanding as to
where we want to s.ee this control. We do not
want it in the Treasury.
Choate:
The Ways and Means Committee boys thought you
wanted it.
Then Mr. Morgenthau gave Mr. Choate the gist of his
conversation which he had with Mr. Doughton yesterday.
(A copy of this conversation can be found under date of
June 12th in the telephone records.)
H.M.Jr:
Bell tells me that some of the Committee was down
to see him and said that they would like to see
it in the Treasury. I told the Press two weeks
ago that I thought you did a grand job and that
I wanted to see FACA under your control. I do
not want to go into the social aspects of the
thing. I am 100% for having FACA stay with you
and they are trying to play us off one against
the other.
Regraded Unclassified
AS 11:00 And the President beving
76
June 14th
Secretary Morpesthau, Under
orantee lest C.B. Theres called or the Greeny
Tom Smith came in and said that he contacted the
bankers last night (officers of the American Bankers' Association)
and they stick by six to five.
and currency Goodsitee, Degator symes MOLD 4200 present
Mr. expirined the situation with 500 TO
security FOR caving otops 50 your into effect the personality
insurance plan an July 2, in the almande of
00 soup prior to that time. de teld no the meeting E.75
316 restarcing with 035 at the Pederal Decerve
worm, the est the Moderal Deposit Insurance Corporation,
15a or the Customer. and repronentatives of the
Competion, NV which shore Y/A
that - Finant officers K the 50118 us Longue relf
LOVE signatution of Auglidation online the Sy VAS ADDRESS that
189 FILES circule as notified w MO have class X 03058-
NATURE K the Mend Deposit Comporation before Love
of Fistcher sat MR. Immes 2014 shows the -
MAR prepared No give to press explaining tis name
Tse agen the health for applications for
DAVE with advised that 16 be and out. Sector THE
ISS V65 - 4010 to tayor of 10 then TUBE works
narline, Insurance be had Sant cose com a mms.
bacing the making Let of 1935 in shares.
42167 4 Diven nimbe associate
case people does town, and because -
Regraded Unclassified
June 14, 1935.
77
At 11:00 A.M., the President having arranged for the
appointment, Secretary Morgenthau, Under Secretary Coolidge,
Charles West and C.B. Upham called at the office of Senator
Duncan U. Fletcher, of Florida, Chairman of theSenate Banking
and Currency Committee. Senator Byrnes was also present.
Mr. Morgenthau explained the situation with respect to the
necessity for taking steps to put into effect the permanent
deposit insurance plan on July 1, in the absence of legislation
on the subject prior to that time. He told of the meeting in
his office yesterday with the Governor of the Federal Reserve
System, the Chairman of the Federal Deposit Insurance Corporation,
the Comptroller of the Currency, and representatives of the
Reconstruction Finance Corporation, at which there was agreement
that the fiscal officers of the Government could no longer rely
upon expectation of legislation before July 1, and agreement that
the banks should be notified that they must become Class A stock-
holders of the Federal Deposit Insurance Corporation before that
date.
Mr. Fletcher and Mr. Byrnes were shown the statement which
had been prepared to give to the press explaining the necessity
for calling upon the banks for applications for Class A stock,
and both advised that it be sent out. Senator Byrnes said that
he was even more in favor of it than he would have been an hour
earlier, because he had just come from a meeting of the subcommittee
having the Banking Act of 1935 in charge, and that it had adjourned
after a fifteen minute session, because Senator Glass had to meet
some people down town, and because Senator Glass, who lives at the
Regraded Unclassified
⑉2⑉
78
Raleigh Hotel, has had little sleep for two or three nights on
account of the Shriners Convention. Moreover, because Senator Glass
is to be away Monday and Tuesday of next week having degrees
conferred on him, the consideration of Title II of the Bill was
postponed until next Wednesday.
Mr. Byrnes said that there was quite & difference of opinion
among the members of the Committee. Senator Bulkley, he said, is
almost ready to go to the idea proposed by Mr. Vanderlip in his
testimony, and shut the bankers out entirely, giving complete con-
trol to the Government. Senator Couzens is going to the hospital
and will not be back this session. He is leaving a memorandum with
Townsend and giving him authority to vote for him. Senator Couzens
has been talked around to agreeing to a 6-5 open market committee,
Mr. Byrnes thinks.
Both Senator Byrnes and Senator Fletcher deplored the delay
and inaction of the subcommittee, and Senator Fletcher said that
the full committee ought to take the bill away from the subcommittee.
Senator Byrnes said he had pressed Senator Glass so hard that even
so good a friend as he had always been , now passed him no more
than a Good Morning. All the rest of the subcommittee agree
readily to any suggestion Senator Glass makes about putting off
consideration of Title II or postponing meetings of the subcommittee.
Senator Byrnes said he thought the issuance of a publicity
statement would help the bill's chances of passage and that some
action was needed.
Senator Byrnes referred to a proposal that all members of the
Federal Reserve Board be made Covernors and that they be permitted
Regraded Unclassified
to elect their own Chairman. Mr. Morgentheu was of the opinion
79
that the President should appoint the Chairman of the Board.
Senator Byrnes said there were various proposals to leave
the Comptroller off the Board or to leave both the Secretary and
the Comptroller off the Board. Mr. Morgenthau said that personally
he was not eager to be a member of the Board, in fact, would prefer
not to be, but that the President wanted him on the Board, and that
settled it -- that he would go along with the President. He added
that the Secretary and the Comptroller should be treated alike,
either both left on or both removed.
During the course of the conference, Mr. Upham was called to
the telephone and informed by Elliott Thurston that the Federal
Reserve Board, in session at the time, had voted unanimously
that in their opinion no statement should be given to the public,
and that if one was, the Federal Reserve Board would not participate
in it.
At. Mr. Morgenthau's request, Mr. Upham telephoned to Mr. Crow-
ley to be in the office of the Secretary in 15 minutes on an
emergency matter. He also tried to reach Mr. O'Connor with the
same message. Upon being told by Governor Ecoles' secretary that
Mr. O'Connor was on another telephone, Miss Egbert was asked to
give the message to Mr. O'COnnor. Upon returning to the Secretary's
office, Mr. Crowley appeared, and Mr. Morgenthau called Mr. O'Connor
at the Federal Reserve Board meeting. Upon his return to his own
office, Mr. Upham was given 8. message from Miss Egbert to the
effect that Mr. O'Connor would come to the Secretary's office if he
got out of the Board meeting, but that he doubted that he would get
Regraded Unclassified
80
out in time.
Mr. Morgenthau talked to Governor Eccles on the telphone, and
Governor Eccles confirmed the action of the Federal Reserve Board,
and told Mr. Morgenthau that the Board felt that it had no respon-
sibility in the matter, other than to issue the necessary regula-
tions, and to certify member State banks when asked to do so by
the Federal Deposit Insurance Corporation. Mr. Morgenthah told
even
him that the statement would be made/if it had to be made by the
Secretary of the Treasury.
Mr. O'Connor, who came out of the Federal Reserve Board meet-
ing to talk to the Secretary, told him, after ascertaining that
frank speaking was acceptable, that he thought it most inadvisable
that any statement be made to the public, that it would be very
upsetting to the banks and bank depositors, and might result in
serious banking disarrangements.
Upon being informed of the action of the Federal Reserve Board,
Mr. Crowley said that he would issue the statement by himself.
Asked if Mr. Goldsborough would go along with him in such action,
mr. Crowley replied in the affirmative. When Mr. Upham returned
to his office he found a communication from Mr. Crowley to the
effect that his Board had voted that before any statement should be
given out to the public, there should be a joint meeting of the
Federal Reserve Board, the Federal Deposit Insurance Corporation,
and the Comptroller of the Currency to discuss it.
Regraded Unclassified
50A
June 14, 1935.
Friday.
Marriner S.
Eccles:
- occasion and no responsibility whatever except for
the certification of the member banks, or in short,
when they're submitted to the F.D.I.C.
H.M.Jr:
Well, have you got - how - don't you make the rules
and regulations?
E:
Don't we what, you say?
H.M.Jr:
Make the rules and regulations.
E:
Well, they make - no, they only make one regulation.
They deposits. make a regulation as to the method of concluding
H.M.Jr:
Are those - 1a that regulation -
&
That regulation - the regulation is out. The Board
just - it's been out for some time. The
already had most of the work done on it; it was just
a question of fixing the date of the bank statements
that they wanted to use, see?
H.M.Jr:
I see.
E:
And we've discussed it with the Comptroller - he's here
now, and the dates are fixed and the regulation has been
just adopted by the Board in conformity with the law.
H.M.Jr:
Yes.
E:
And the regulation will be out in the - we'll wire it
as to the Federal Reserve Bank and ask the Federal
Reserve Bank to send it so it will - it can be in the
hands of every bank tomorrow morning.
H.M.Jr:
Well, who do you think ought to sign that statement?
E:
I think nobody but Crowley. I don't think that either
the - I don't think the Comptroller ought to do it and
I don't believe the Treasury ought to do it, for this
reason, that 8. statement going out - now, I'm speaking
of it psychologically and not legally - but if state-
ments go out signed by the Governors of Federal Reserve
Board and the Comptroller and the Treasury, it gives
too much importance to this thing. It - I think we
ought to treat it just as a normal matter and not throw
a lot of scare and get a lot of headlines on it.
H.M.Jr:
Well, do you think it 1s a normal matter?
E:
What is it?
H.M.Jr:
Do you think it's a normal matter?
Regraded Unclassified
80 B
- 2 -
E:
I think it is. I think it's simply complying with the
law, and to do - to treat it any other way, I really
think it would be a mistake.
H.M.Jr:
Well - they voted on it, did they?
E:
They voted on it this morning.
H.M.Jr:
All.right.
E:
I hope you feel the same way about it.
H.M.Jr:
Well, I'm going to get the statement out if I have to
sign it alone.
E:
Well, I - of course - you shouldn't sign it though by
all means.
H.M.Jr:
Yes, but the statement is going to go out -
E:
Well, the statement should go out immediately.
H.M.Jr:
- and if the only person to sign it - I'll sign it.
E:
Well, it's up to Crowley - it's up to the F.D.I.C.
Board to put the statement out. I mean, that's their
legal responsibility, and there's no reason at all for
you to do it or for you to take the responsibility of
1t, and as far as I'm personally concerned, I don't
have any hesitancy at all about doing it - but, as
Governor of the Board I can't do it unless the Board
approves of it.
H.M.Jr:
Yes, that's all right.
E:
You know that.
H.M.Jr:
Yes.
E:
And, of course, you also know the general situation here.
H.M.Jr:
All right, Marriner.
E:
All right.
H.M.Jr:
O.K.
E:
All right, goodbye.
Regraded Unclassified
June 14, 1935.
$0C
Friday.
H.M.Jr: Hello.
James
Moffett: Hello, Henry?
H.M.Jr: Yes, Jimmy, how are you?
M:
This sub-committee of ours will meet this morning in
anticipating that the subject may be discussed
H.M.Jr: Yes.
M:
You - you do not approve of taking the Secretary and
the Comptroller the Board so far as voting is con-
cerned, do you?
H.M.Jr: Well, Jimmy, this is - there's a difference on this be-
tween the President and myself.
M:
Yes.
H.M.Jr: Just a minute, please. (Would you mind stepping out 8.
minute?) Just hold the wire, please. I couldn't talk.
Hello.
M:
Yes.
H.M.Jr: I had Mr. Frazier, President of the International Bank
of Basle,
but he's now with the New York Bank; I
couldn't talk.
M:
Right.
H.M.Jr: Now, here's the thing. We had all of the governmental
agencies affected in here yesterday by this, do you see?
M:
Yes.
H.M.Jr: And then we called in Tom Smith who represents the Ameri-
can Banker.
M:
Yes.
H.M.Jr: Then we had two or three talks with the President.
M:
Yes.
H.M.Jr: Now, the President said confidentially for trading purposes
he'd be willing to go eight to five, see?
M:
Eight to five.
H.M.Jr: Yes, or six to four. Hello.
M:
I figured eight to five.
H.M.Jr: Eight to five.
Regraded Unclassified
to
- 2 -
M:
Yes.
H.M.Jr: Now, the President insists that I stay on the Federal
Reserve and I vote.
M:
Yes.
H.M.Jr: The American Bankers who have been very decent on this
thing insist that they don't want the Secretary of the
Treasury or the Controller to vote on the open market.
Personally, I - I don't give & darm, see?
M:
Yes.
H.M.Jr: And - but the President is very insistent that the
Secretary of the Treasury should stay on the Federal
Reserve and he had told them that.
M:
Take that on the ground without public interest
H.M.Jr: Yes, Now, the President made the appointment for me to
go and see Senator Fletcher this morning at 11:15 on
this subject.
M:
Yes. Trouble is we're meeting at 10:30. I just left
H.M.Jr: Well, now he called up Senator Fletcher and said, I'm
sending up the Secretary of the Treasury to see you on
this.
M:
Well -
H.M.Jr: And I asked Charlie West to be there so that there
wouldn't be any misunderstanding, see?
M:
The trouble is, he don't set in on the sub-committee.
H.M.Jr:
Who?
M:
Fletcher.
H.M.Jr: Well, I - but, this is what happened yesterday and I
could tell you for trading purposes the President will
go to eight to five or six to four. But, he will not do
what the Bankers want nor what Glass wants and that is
six to five.
M:
No.
H.M.Jr:
Because that -
M:
Well, how about this -
H.M.Jr: You see, that leaves the Secretary of the Treasury and
Regraded Unclassified
To
- 3 -
the Comptroller off voting
M:
Well, I'm agreeable keeping them both
H.M.Jr:
Pardon me?
M:
If you keep both of them on, both voting
H.M.Jr:
Yes. Well, that's eight to five.
M:
That's eight to five. That'll go that far; that's what
I told them.
H.M.Jr:
Well, the President - all he'll go is - as far as they
can shove him is eight to five.
M:
Well, that's my - I'm on that. Now, let me ask you -
H.M.Jr:
Yes.
M:
This thing of the Governors - calling them Governors
the Board selecting its own chair-
man. What's he got to say about that?
H.M.Jr:
I never took it up with him; I don't know.
M:
What do you think best?
H.M.Jr:
You'll have to repeat it because I don't quite get it.
M:
The proposal of fellows was, and I know that certainly
Glass seemed to favor it.
H.M.Jr:
Yes.
M:
That - called the method of the Board of Governors -
H.M.Jr:
Yes.
M:
members of the Board and they've selected
each one, you see, as a Governor.
H.M.Jr:
Yes.
M:
And they select their chairman instead of the chairman
being appointed by the President.
H.M.Jr:
The chairman of this -
M:
Federal Reserve Board.
H.M.Jr:
Well, the President now appoints the chairman, doesn't he?
M:
Well, that's what they want stopped and have the chairman
selected by the members themselves.
Regraded Unclassified
80h
- 4 -
H.M.Jr: Oh, I don't think so. I think that - that - I mean, it's
never been put up to me before and I'd have to give you a
curb stone opinion.
M:
Well, let's take Interstate Commerce Commission -
H.M.Jr: Well, I'd have to give you curb stone and my curb stone
opinion is that the President should appoint the chair-
man.
M:
Well, that would be mine.
H.M.Jr: Well, that's just curb stone; no one has ever asked me
before.
M:
What else did you determine upon?
H.M.Jr: Well, the only other point was this quostion of 25% re-
serve and -
M:
You're fixing the
H.M.Jr: The reserve that the - that they can't change reserves
from 25%, see? I mean, as I understand it they wanted
to have it so the Federal Reserve Board could increase
or decrease the amount of the reserves, you see?
M:
Yes.
H.M.Jr: But they want to have - leave it the way it is which is
now 25%. Now, those are the only two things that -
M:
Now,
H.M.Jr: Yes, I think that's the way it is. I'm a little hazy
on it, but I know they kept talking about 25% reserve,
see?
M:
Yes.
H.M.Jr: There's just two things, that Tom Smith said that they -
everybody would be happy 1f they'd make it six to five
and leave the reserve to 25%. You know, I'm not a banker.
M:
Yes.
H.M.Jr: So, we agreed on the 25%; I didn't even put it up to the
President, see, because the whole guts of this thing,
Jinury, is the question of this open market committee,
see?
M:
Yes.
H.M.Jr: That's the whole thing and Tom Smith was back here this
morning again. He said, well, we've got to fight on this
thing. I said, well, I'm sorry, Tom. And he said, well,
Regraded Unclassified
TOG
- 5 -
we can't do better - we can't do better than six to
five and I said, well, this Administration cannot meet
you on that.
M:
Well, if necessary, we'll have - if necessary, we'll
take the Comptroller off and put another member on.
It would be putting another member on the Board.
H.M.Jr: Well, that would be all right, but the President in-
sists - the President insists that the Secretary of
the Treasury stays on. If you take the Comptroller off
you've got to take care of his salary, though. See?
Because he gets part of his salary from being a member
of the Federal Reserve Board, you know.
M:
All right.
H.M.Jr: So you'd have to take care of his salary.
M:
Well, we'll do that..
H.M.Jr:
What?
M:
We'll do that.
H.M.Jr:
Yes.
M:
All right.
H.M.Jr: Now, I'm here and - I wasn't doing anything until yester-
day; now the President has kind of pinned this thing on me.
M:
Well, it was - after you get through this morning, I'll
tell you what's happened and then you can keep up to date
on it.
H.M.Jr:
And I will be at Senator Fletcher's office at 11:15 at the
President's request.
M:
All right, good.
H.M.Jr:
God bless you and I'm glad you're in it.
M:
Goodbye.
Regraded Unclassified
to H
June 14, 1935.
Friday.
J.F.T.
0'Connor:
Yes,
H.M.Jr:
- about my going off the Board and your going off the
Board.
O'C:
Yes.
H.M.Jr:
And then he said - I told him that we were willing to
go eight to five and nothing else.
O'C:
That's right.
H.M.Jr:
And then he said, what about the Controller's going
off the Board and you staying on and creating a
vacancy and then we could put a new member. I said,
no, whatever you do the Comptroller and I either stay
on or go off together.
0'0:
I'm with you a hundred percent.
H.M.Jr:
Now, I want you to know that.
O'C:
I'm a hundred percent with you, but - now, I - those -
that committee - I don't think I told you came to
see me a couple of times and I said this - and - this
point hasn't been emphasized. Can I take & second?
H.M.Jr:
Surely.
O'C:
This point hasn't been emphasized and that is, they
talk about political control and this man. I said, do
you realize where the greatest control of this nation
is today over money? Well, that's over a two billion
dollar profit in the hands of one man, and have you
found any complaint anywhere in this country about it?
I said, I haven't got that, the Federal Reserve and
the Federal Deposit haven't gotthat - haven't got any
responsibility such as that and have you found any com-
plaint? Well, they said, no they hadn't. Well, I said,
all right; that's the answer.
H.M.Jr:
Well, I just wanted -
O'C:
Well, you're dead right.
H.M.Jr:
I don't know where that idea came from.
0'0:
Well, I know where it came from.
H.M.Jr:
Well, I - I -
0'C:
It came from the same source that's been fighting us
right along.
Regraded Unclassified
TOD
- 2 -
H.M.Jr:
Well, I wanted to tell you 80 in case you heard
about it. I've taken the position that the two of
us either go on or stay off.
0'0:
I'm with you a hundred percent. suppor no
Rottle
Mriday,
H.M.Jr:
O.k.
kSa bax
0'0: Thank you. a Sul W prepared for
20 Dis pregram,
H.M.Jr: Goodbye. and organization M - Polices)
Inhoritance Its
Graduate In
Tx
Tax ORE cop Inspense
The other tax Items EAD 04 Ulw By - secretary
Did 43.71
105 sures Issue
Consumsary
Identify and
Tax exempt security
The 12 INVOICE with 234 President to monthly 90 12
mee or loss or - compatgo document loying citydes the Magia
at to where 200 stands. Se doos not april M - - du
1st gives the people a year to think 16 -
0 - - 46 0 -
Pat Hospital called up Sata windle not
Mr. that be wanted to ER orer the MM ath
NIN and 12. Norgwothms 1034 Pat that be WOD always
clad to 10 over axprehing with We but It RI the Presidents
Box vanted to 500 on the the progres and and blood? - that
M and entirely 10 the hists of the President,
Too Units fold Mr. - esso 76 with
was DOES SS Director of the Mr. BargatChes 100/0
THAT we bankers when M his last alizhs and advised No
4K42008 taking LE, bescure the new dive VA. talt
wash be who 500 VOTA Uset ha could essay
Regraded Unclassified
S1
June 14th
Last night Mr. and Mrs. Morgenthau had supper at the
White House - celebrating Bobby Fitzmaurice's birthday.
After supper the President discussed his tax program
message. Ray Moley rewrote the message that we prepared for
the President. The taxes included in the President's program,
which he feels are important and essential, are as follows:
Inheritance Tax
Graduate Tax
Inter-corporate Tax
Tax on top incomes
The other tax items can go into the omnibus section.
They are:
10% surtax less dividend
Unnecessary surpluses
Discovery and Depletion
Tax exempt securities
The tax message which the President is sending up is
more or less of a campaign document laying down the principles
as to where he stands. He does not expect any action on this
but gives the people a year to think it over.
*********
Pat Harrison called up this morning and told
Mr. Morgenthau that he wanted to go over the new taxes with
him and Mr. Morgenthau told Pat Harrison that he was always
glad to go over anything with him but it was the President
he wanted to see on the tax program and not himself - that
it was entirely in the hands of the President.
Tom Smith told Mr. Morgenthau to-day that he could
not come as Director of the Budget. Mr. Morgenthau feels
that the bankers worked on him last night and advised him
against taking it, because the other day Mr. Morgenthau felt
that he was 50% sure that he could come.
Regraded Unclassified
82
H.M.Jr. then called Jefty O'Connor and told him that he
had just come from the hill and had seen Senator Fletcher and
Jimmy Byrnes and they are very anxious that the statement be
given out in regard to the permanent insurance plan and that
we go ahead. (Statement attached herewith).
Crowley says that he is perfectly willing to sign the
statement alone and Eccles feels that nobody but Mr. Crowley
ought to sign the statement. Mr. Morgenthau then asked
Mr. O'Connor how he felt and he frankly told him that he thought
it was a great mistake to give out any statement at this time.
However, Mr. Morgenthau informed Mr. O'Connor that he, Coolidge
and the President all agreed heartily in favor of giving out
the statement to which Mr. O'Connor replied that if Mr. Morgen-
thau decided to do it he would go along with him.
Mr. Morgenthau also told Mr. O'Connor that when Jimmy
Byrnes raised the question of Mr. Morgenthau staying on as a
Member of the Federal Reserve Board and possibly the Comptroller
going off Mr. Morgenthau made it very clear that either both
stayed on the Board or both went off.
Regraded Unclassified
83
The permanent insurance plan provided for by Section 12 B of the
Federal Reserve Act, as amended, will become operative under the
terms of the present law on July 1. 1935. In order, however, to obtain
the benefits of the permanent insurance, every bank which is & member
of the temporary Federal Deposit Insurance Fund must become & Class A
stockholder of the corporation on or before July 1, 1935. For this
purpose the corporation 18 sending out the necessary application forms
to all such banks. As the amount of stock which each bank is required
to subscribe and pay for must be computed in accordance with regulations
prescribed by the Federal Reserve Board, that Board has promilgated the
necessary regulation and copies of the regulation are being sent to all
banks which are members of the temporary fund. The law requires that
upon receipt of the application of each member bank, the corporation
shall request the Federal Reserve Board, in the case of a. State member
bank, or the Comptroller of the Currency, in the case of a National
bank, to certify as to the adequacy of the assets of the applying bank
to enable it to meet all of its liabilities to depositors and other
creditors as shown by its books. State banks which are not members
of the Federal Reserve System must also apply for Class A stock, but
inasmuch as the necessary certification was furnished by the State
Supervisory authorities at the time of their admission to the fund,
no further certification is required.
Blank forms which may be used in applying for Class A stock in
the Corporation are being sent out to the banks and plans are being
completed for putting the permanent plan into effect on July 1.
Regraded Unclassified
84
mae
In order that the transition from the temporary fund to the
permanent insurance may be effected smoothly and without unnecessary
delay or confusion, it 1s urged that every bank fill out its
application and file it with the office of the Federal Deposit
Insurance Corporation promptly upon receipt.
The permanent insurance plan was scheduled to go into effect
on July 1, 1934, but the effective date was postponed for one year
by the Congress. A revised plan for permanent insurance is now
pending before & subcommittee of the Senate Committee on Banking
and Currency, having been passed by the House of Representatives on
May 9. In view of the Impossibility of definite assurance that this
legislation, included in the Banking Act of 1935, will be enacted
before July 1, the Federal Deposit Insurance Corporation is accordingly
prepared to receive applications for continuance of insurance coverage.
Regraded Unclassified
85
After Mr. Morgenthau returned from the Hill he had
the following conversation with Mr. Eccles.
Marriner S.
Eccles:
- occasion and no responsibility whatever except
for the certification of the member banks, or in
short, when they're submitted to the F.D.I.C.
H.M.Jr:
Well, have you got - how - don't you make the rules
and regulations?
E:
Don't we what, you say?
H.M.Jr:
Malce the rules and regulations.
in
Well, they make - no, they only make one regulation.
They make B. regulation as to the method of concluding
deposits.
F.M.Jr:
Are those - is that regulation -
E:
That regulation - the regulation is out. The Board
just - it's been out for some time. The
already had most of the work done on it; it was just
a question of fixing the date of the bank statements
that they wanted to use, see?
H.M.Jr:
I see.
E:
And we've discussed it with the Comptroller - he's here
now, and the dates are fixed and the regulation has
been just adopted by the Board in conformity with the
law.
H.M.Jr:
Yes.
in
And the regulation will be out in the - we'll wire it
as to the Federal Reserve Bank and ask the Federal
Reserve Bank to send it so it will - it can be in the
hands of every bank tomorrow morning.
H.M.Jr:
Well, who do you think ought to sign that statement?
E:
I think nobody but Crowley. I don't think that either
the - I don't think the Comptroller ought to do it and
I don't believe the Treasury ought to do it, for this
reason, that & statement going out - now, I'm speaking
of it psychologically and not legally - but if state-
ments go out signed by the Governors of Federal Reserve
Board and the Comptroller and the Treasury, it gives
too much importance to this thing. It - I think we
ought to treat it just as a. normal matter and not throw
a lot of scare and get a lot of headlines on it.
H.M.Jr:
Well, do you think it is a normal matter?
Regraded Unclassified
- 2 -
86
E:
What is it?
H.M.Jr:
Do you think it's a normal matter?
E:
I think it is. I think it's simply complying with the
law, and to do - to treat it any other way, I really
think it would be a mistake.
H.M.Jr:
Well - they voted on it, did they?
E:
They voted on it this morning.
H.M.Jr:
All right.
E:
I hope you feel the same way about it.
H.M.Jr:
Well, I'm going to get the statement out if I have to
sign it alone.
E:
Well, I - of course - you shouldn't sign it though by
all means.
H.M.Jr:
Yes, but the statement is going to go out -
E:
Well, the statement should go out immediately.
H.M.Jr:
- and if the only person to sign it - I'll sign it.
E:
Well, it's up to Crowley - it's up to the F.D.I.C.
Board to put the statement out. I mean, that's their
legal responsibility, and there's no reason at all for
you to do it or for you to take the responsibility of
it, and as far as I'm personally concerned, I don't
have any hesitancy at all about doing it - but, as
Governor of the Board I can't do it unless the Board
approves of it.
H.M.Jr:
Yes, that's all right.
E:
You know that.
H.M.Jr:
Yes.
E:
And, of course, you also know the general situation here.
H.M.Jr:
All right, Marriner.
E:
All right.
H.M.Jr:
O.K.
E:
All right, goodbye.
Regraded Unclassified
TREASURY DEPARTMENT
87
Inter Office Communication
Date June 14, 1935.
To
Secretary Morgenthau
From Mr. Oliphant
In connection with the case against Dr. Bernard Cohen
and Druggist Oscar Garten for violation of the Narcotics
laws, Dr. Cohen claimed that treatments given-by him to
narcotics addicts had been with the consent and approval of
the Narcotics enforcement officer in his district.
You asked that an examination be made to determine
whether and to what extent the Bureau should take action to
prevent the repetition of such cases.
Our study indicates that there is no acceptable method
of assisting physicians to determine their action in indi-
vidual cases. The other alternative is to issue instructions
to all Narcotics officers to be on their guard against any
commmunications with physicians which will indicate a concur-
rence in or acceptance of the treatment of any individual
patient.
For this purpose the attached draft of instructions has
been prepared. If you agree, please return the file to me
and I will forward it to Deputy Commissioner Wood with
appropriate advice.
(Signed) Herman Oliphant.
Regraded Unclassified
TO NARCOTIC DISTRICT SUPERVISORS AND OTHERS CONCERNED:
It has come to the attention of the Bureau that, in certain
instances, narcotic officers have adopted the practice of advis-
ing applicants as to the propriety of administering narcotics in
specific cases concerning which the applicant may be in doubt.
Your attention is directed to the statement contained in
Narcotic Pamphlet N-No. 56, revised, that;
"The Bureau is not charged with the duty of laying down
any fixed rule as to the furnishing of drugs or the fre-
quency of the prescriptions in any particular case."
It is recognized that narcotic officers receive numerous re-
quests for advice in prescribing and dispensing narcotics in
specific cases on which a ruling may be desired either because of
a bona fide lack of understanding of the law and regulations by
the applicant, or because of a desire to attempt to shift to the
officer and the Bureau the responsibility in questionable cases.
Every case where the dispensing of narcotics is concerned
presents different circumstances and it is impossible to formulate
regulations which will lay down definitely B. rule in every case
that may be presented. Responsibility for the proper dispensing
of narcotics 1s placed on the practitioner. The custom of advis-
ing whether narcotics may or may not be prescribed in specific
cases tends to result in B. lack of accuracy and encourages viola-
tions of the law and regulations difficult to prosecute, since an
unscrupulous, careless, or incompetent practitioner may apply a
ruling in a case legitimately requiring the prescribing and dis-
pensing of narcotics to a case of outward similarity, but which,
In reality, does not require such prescribing and dispensing. A
fferent interpretation by a narcotic agent or inspector of 8.
situation in which an applicant has acted upon advice of another
such officer may result in both the Bureau and the applicant being
placed in an embarassing position.
In the future all applications for interpretations of the law
and regulations should be answered by forwarding to the applicant
a copy of Narcotic Pamphlet N-No. 56, revised. In the event that
information is given to any representative of the Bureau of B.
treatment or prospective treatment by a physician, or application
1s made for an interpretation or advice as applied to any specific
case or symptoms, the applicant, in addition to being furnished B.
copy of the above-mentioned pamphlet, should be advised in the
following, or similar, terms:
"Under the Harrison Narcotic Law, a. physician is allowed to
prescribe or dispense narcotic drugs in the course of his profes-
sional practice only. The Bureau has no authority to grant per-
mission to any physician to prescribe narcotic drugs for any person
or under any circumstances. What constitutes professional practice
and the good faith of the physician in any given case must neces-
sarily be established by the facts and circumstances of that case,
Regraded Unclassified
- 2 -
89
the application of existing law, and the consensus of medical
opinion with regard thereto, based on the experience of the medi-
cal profession in cases of a similar nature.
"While the Bureau is desirous of rendering every assistance
possible, it feels that advice with reference to the prescribing
and dispensing of narcotic drugs in any specific case would not
only be wholly unauthorized, but might lead to misinterpretation
of the Bureau's function. The responsibility for the proper dis-
pensing of narcotics is one which the law places upon the physi-
cian and which the Bureau can not assume."
Narcotic officers and other employees of this Bureau will
exercise care to avoid advice, comments, interpretations, or
silence, which might be construed as authorizing the prescribing
and dispensing of narcotics in any specific case.
Commissioner.
Regraded Unclassified
TREASURY DEPARTMENT
90
INTER OFFICE COMMUNICATION
DATE June 14, 1935
To
Secretary Morgentheu
FROM Mr. Haas
On June 3, 1935, telegrams were sent to Collectors and Deputy
Collectors of Internal Revenue, asking them to instruct their agents
to obtain information from taxpayers regarding changes in rates of
pay, hours of work, and volume of employment since May 25th. Of the
returns received (1) 8,511 represented firms with an aggregate employ-
ment of approximately 1,475,000 workers. In Table 1 these returns
are distributed by Census geographic areas, indicating that all parts
of the country are represented.
Table 2 shows the general changes made by the 8,511 firms. The
bulk of them, or 88 percent of the total, show no changes whatsoever.
384 firms, or 4.5 percent of the total, show decreases in pay, increases
in hours, and decreases in employment. or some combination of two or
three of these. These adverse changes affected 107,352 employees.
This leaves 637 firms, or 7.5 percent of the total, showing increases
in pay, decreases in hours, increases in employment, or some combination
of two or three of these.
More detailed information on firms showing adverse changes since
May 25, 1935, can be obtained from Table 3. It can be seen that there
were 36 firms which showed decreases in pay, or decreases in pay plus
some other change. These firms employed 2,467 workers, or .2 percent
of the total number. 195 firms show increases in hours or
increases in hours plus some other change. These firms employed
22,729 workers, or 1.5 percent of the total. 153 firms reported
decreases in the number of employees. These firms employed 82,156
workers, or 5.6 percent of the total. Little importance is to be
attached to the last two categories since it may well be that such
changes ordinarily take place at this time of the year. This is
especially true in view of the fact that there were 637 firms which
show favorable changes.
In Table 4 all the firms showing adverse changes are classified
by type of business. It is to be noted that an unusually large number
of firms in trade show adverse changes. Of the 384, approximately
(1) Some 750 returns were received but not tabulated either because they
carried no information or because they were received too late for
tabulation.
their for z copies made
Regraded Unclassified
91
- 2 -
one half are in this group. However, they had only 21.8 percent
of the number employed by firms in all groups, indicating that they
were very small firms. The average number of workers per firm in
all groups is approximately 280, while the average number per firm
in the trade group is approximately 120, and in manufacturing
approximately 590. Of course in the country as a whole the a verage
per firm is smaller in trade than in manufacturing.
of the 36 firms which decreased pay, 11 with an average number
of approximately 50 are in the trade group and 20 with an average
number of approximately 89 are in the manufacturing group.
Box ordane
THE Torth
Fres Mota States
Touth
7646 Smith
list Smith Content
110t
Regraded Unclassified
92
Table 1.
Total Number of Returns Classified
by Census Areas
Census Area
Number of
Per
Number of
Per
firms
cent
employees
cent
New England
723
8.5
150,618
10.2
Middle Atlantic
2,070
24.3
513,634
34.8
East North Central
1,435
16,9
361,772
24.5
West North Central
1,107
13.0
49,898
3.4
South Atlantic
1,171
13.7
210,027
14.2
East South Central
226
2.7
34,565
2.4
West South Central
915
10.7
103,192
7.0
Mountain
397
4,7
12,560
.9
Pacific
423
5.0
31,175
2.1
Not classified
44
.5
7,229
.5
Total
8,511
100.0
1,474,670
100.0
Regraded Unclassified
93
Table 2.
Summary of changes shown by 8,511
returns, in rates of pay, hours of
work and volume of employment.
Number of
Per
Number of
Per
Number of
returns
cent
employees
cent
employees
affected
Returns showing
no changes
7,490
88.0
1,152,800
78.2
-
Returns showing
adverse changes.
384
4.5
107,352
7.3
19,120
Returns showing
favorable changes
637
7.5
214,518
14.5
41,946
Total
8,511
100.0
1,474,670
100.0
Regraded Unclassified
94
Table 3.
Distribution of 8,511 returns
by types of changes made.
Type of change
Number of
Per
Number of
Per
Number of
firms
cent
employees
cent
employees
affected
No changes
7,490
88.0
1,152,800
78.2
Decrease in pay and other
changes
36
.4
2,467
.2
1,508
Increase in hours and
other changes
195
2.3
22,729
1.5
12,882
Decrease in employees and
other changes
153
1.8
82,156
5.6
4,730
Increase in pay and other
changes
229
2.7
114,355
7.7
35,186
Decrease in hours and
other changes
20
.2
3,957
.3
3,788
Increase in employees and
other changes
388
4.6
96,206
6.5
2,972
Total
8,511
100.0
1,474,670
100.0
61,066
Regraded Unclassified
95
Table 4.
Firms showing adverse changes classified by
types of business
Type of
Number of
Per-
Number of
Per-
business
firms
cent
employees
cent
affected
Banking and finance
6
1.6
57
.1
Building
2
.5
119
.1
Manufacturing
136
35.4
80,427
74.9
Printing and publishing
7
1.8
2,079
1.9
Service
35
9.1
1,126
1.1
Trade
195
50.8
23,408
21.8
Miscellaneous
3
.8
136
.1
Total
384
100.0
107,352
100.0
Regraded Unclassified
96
June 3, 1935.
Instruct your deputy collectors to obtain the following
information when calling upon or interviewing taxpayers: Name of
taxpayer. Nature of business. Number of employees on Saturday
May twenty-five nineteen thirty-five. What changes have been made
in rates of pay of employees since May twenty-five. Specify increase
and number of workers affected, decrease and number of workers
affected, or no change. What changes have been made in weekly
hours of work since May twenty-five. Specify increase and number
of workers affected, decrease and number of workers affected, or no
change. What changes have been made in number of employees since
May twenty-five. Specify increase and number of workers affected,
decrease and number of workers affected, or no change.
Send a separate return for each taxpayer interviewed to
George C. Haas, Director of Research and Statistics Treasury
Washington DC. Forward returns at end of each day by air mail.
Guy T. Helvering,
Commissioner.
Regraded Unclassified
Taken from Dow Jones Ticker - June 15, 1935
97
Pittman seen U. S. moving to lend gold and silver
Washn - The increasing stocks of gold and silver in the United
States can mean only one thing that is that the government 18 build-
ing closer toward a stabilization of currencies Sen Pittman Demo-
crat Nevada probably the silverite closest to the administration
said Friday To effect stabilization however the United States must
and will lend both gold and silver to foreign powers properly safe-
guarded to carry out the stabilization agreements The Senator de-
clared A responsible group of Senate Silverites led by Senator
Pittman believe that the Treasury silver program is working splen-
didly and successfully despite a disgruntled expression of sentiment
coming from more aggressive quarters in Congress
Sen Pittman states that the Treasury stock of gold having
reached B. new high record does not interfere or present a problem in
the carrying out of the silver program - anti-silver interest he
points out are contending that the silver policy can never be
carried out because the incoming gold is offsetting purchases of
silver to date which were designed to bring the white metal to & one
to three ratio to gold in the monetary reserves
Sooner or later Sen Pittman explains the United States is going
to have to part with some of its gold and silver in order to bring
about effectively a permanent stabilization of currencies - then he
predicts there will be an adjustment of gold and silver stocks in
accordance with the policy laid down in the Silver Purchase Act
- There is no danger of the United States getting too much gold
or too much silver- the Senator stated - - the more we have the
better we shall be able to dominate the negotiations for stabili-
sation with the leading powers of the world on both a silver and
gold basis - - if left alone the Senator contends the Treasury will
work out its monetary program in 8. satisfactory way and - I have no
doubt that the Treasury is living up to the spirit of the Congres-
sional silver policy -
Meanwhile Sen McCarran Dem Nev states that further silver
moves by his bloc will be postponed until next week because he 18
leaving Washington for the middle west to make 8. series of speeches
Entertaining views somewhat similar to those of his colleague
Sen McCarran declares that the only permanent way to settle the
silver issue is to stabilize the currencies of the leading powers
of the world - more aggressive in his demands Sen McCarran declares
that the Treasury bring the silver purchase program to a close by
fixing 6 16 to 1 ratio between gold and silver - in order to do this
he explains it will be necessary to devalue silver to obtain a mone-
tary price of 2 dls 18c
Regraded Unclassified
98
WASHINGTON POST
ST: SUNDAY. MAY 5. 1935
BRITISH
INCOME
AND
INHERITANCE
TAXES
Hypating
Prom the 54. Louis Post-Dispatch.
"I Balanced The British Budget. Want Yours Balanced?"
During the temporary absence of Mr. Elderman, The Post's cartoonist, a symposlum of editorial reaction
to current national and foreign affairs will be published from day to day in this space. The reprinted
drawings will not necessarily represent our own viewpoint, but are selected as reflections of considered
opinions on the passing scene. The editors of The Post wish to make full acknowledgment of the courtery
of their contemporaries in granting permission for this procedure.
Regraded Unclassified