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Volume 218, October 18 – October 23, 1939
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Volume 218, October 18 – October 23, 1939
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 218
October 18 - October 23, 1939
Book Page
Alcohol Tax Unit
Gambino-Lapadure Alcohol Conspiracy: Gaston memorandum
giving resume of case - 10/19/39
218
173
American Smelting and Refining Company
Exemption from requirement that silver bars refined
by Mexican subsidiaries and purchased under Silver
Purchase Act bear stamp of American refineries
refused - 10/19/39
155
- B -
Business Conditions
See Purchasing, Government
o War Conditions
- C -
China
Reorganization of government reported by Nicholson;
Soong will visit United States in private capacity
first and wishes to confer with FDR - 10/18/39
2
a) FDR and H/Jr "will be delighted to see him in
capacity of old friend" - 10/18/39
3
Transportation engineers: Keeshin provides copies of
reports received - 10/19/39
196,235
Transportation report by American Consulate - 10/20/39
227,246
Aviation Manufacturing Situation: Hanes' resume of
l'organ (Thomas A. - Sperry Corporation) information
209
a) See also Book 219, page 325
Malaria Program: Ambassador reports on make-up of
mission - 10/20/39
212
Colombia
See War Conditions: Latin America
- F -
Farley, James A.
Asks for contact man to succeed Gibbons - 10/19/39
161
Farm Credit Administration
See Financing, Government
Financing Government
Farm Credit Administration: Bell tells Snow Treasury is
out of market on Commodity Credit Corporation notes;
OK for them to go ahead - 10/19/39
86
Refunding of Treasury notes naturing 12/15/39 discussed
by HMJr, Hanes, Ball, Eccles, and Harrison - 10/19/39
87
- F - (Continued)
Book Page
Financing, Government - (Continued)
Conference; present: HWr, Riefler, Hanes, Bell, Haas,
Murphy, Hadley . - 10/23/39
218
293,309
Announcement of offering ***** in exchange for
1-3/8% Treasury Notes of Series 9-1939, maturing
12/15/39 - 10/23/39
325
Closing of books - 10/23/39
330
Foreign Bondholders Protective Council, Incorporated
For Cotton memorandum, aee War Conditions: Latin
America
- 0 -
Gambino-Lapadura Alcohol Conspiracy
See Alcohol Tax Unit
Government Purchasing
See Purchasing, Government
- 1/2 -
Mexico
Silver: See American Smalting and Refining Company
Monetary Study
Federal Reserve hires two special assistants: Donald
Woodward, of Moody's and Robert Warren, of Case-
Pomeroy - 10/18/39
23
a) Duffield memorandum strongly urging similar
Treasury procedure - - 10/19/39
169
- P -
Peru
See War Conditions: Latin America
Purchasing, Government
Reaction on general economy in case of recession and
also in case of war discussed by Treasury group,
Frank, Lubin, and Currie - 10/18/39
52
a) McReynolds asked to explain set-up two years
ago under similar lines with particular
reference to shoe and woolen industries
b) Frank memorandum to FDR suggesting study of
possible effects on security markets of peace
- S -
Stabilization Fund
Wagner inquiry with regard to use to support currencies
of foreign governments - 10/19/39
91
a) HMr's denial - 10/19/39
90
b) Barkley provided with copy - - 10/19/39
89
W -
Book Page
Wagner, Robert F. (Senator, New York)
See Monetary Study
War Conditions
Business situation for week ending 10/21/39:
Hass memorandum
21.8
270
Czechoslovakla:
Kennedy told amount of assets in New York as of
3/15/39 and policy being followed concerning them -
10/18/39
76
Exchange market resume - 10/29/39, et cetera
210,261
Percentage change in exchange rates, 8/24-10/21/39
287
Finland:
Loan again discussed by Procope, HWr, and lanes -
10/19/39
133
a) List of commodities to be bought in United
States during next twelve months attached
1) HWr tells Welles of discussion at
Cabinet; no great enthusiasm on part of
FOR and Hull - 10/19/39
166
Foreign Governments, Accounts for: See War Conditions -
Purchasing Mission
(Britiah-French)
France: (su also Purshesing Mission
Plans for imports of silver discussed by Pinsent and
Cochran - 10/18/39
26
Exchange control: Loophole problem under consideration
by Foreign Exchange office - 10/19/39
127
See further details: Book 219, page 158
Germany:
Clearing agreement with Yugoslavia extended for one
year - 10/18/39
BO
War Finance: Reichsbank playing minor role; resume of
measures employed - 10/19/39
121
Great Britain: (SRE also Punchasing Mission)
Economic coordination debate in House of Commons -
10/19/39
124
Latin America:
Financial assistance discussed; present: HMr and
Treasury group, Jones, Welles, Feis, Collado -
10/13/39
6
a) Colombia: economic resund
17
b) Foreign Bondholders Protective Council,
Incorporated: Cotton menorandum - 10/18/39
20
Jones told by HWr of conversations with Hull and
Welles - 10/18/39
34
a) HWr, Jones, and Welles to be committee to
rehabilitate financially Latin American countries
1) Entire situation to be surveyed - both
public and private debt
2) Plan then to be submitted to FIR; if approved,
to Hull; Pittman then to be asked "Can you
defend before Congress?"
- W - (Continued)
Book
Page
WAT Conditions - (Continued)
Latin America: (Continued)
3) Colombia suggested by Hull as first
country
4) HMJr determined to prevent any further
bungling as in case of Brazil
Leak in proposed Colombian negotiations discussed
at 9:30 meeting - 10/19/39
218
139
a) HMJr discusses with Welles - 10/19/39
164
b) Duffield memorandum after talking with
Herald-Tribune and Times representatives
170
c) Duffield memorandum stating that Kiplinger
also has information
172
Peru, not Colombia, to be consideredi Cotton reports
at 9:30 meeting - 10/23/39
248
Purchasing, Government: See Purchasing, Government
Purchasing Mission (British-French):
Monnet agreement: Wellos reports to H/Jr on Bullitt's resume
of text as concluded in London - 10/18/39
38
Foreign Governments, Accounts for: again discussed by
Treasury group - 10/19/39
92
a) H&Jr wants assurance that he and FDR will
be kept informed of all actions
1) Harrison explains procedure
106
b) Eccles' memorandum again read
c) Eccles and Harrison join group
97
1) Zocles gives resume of Board discussion
98
2) Harrison admits Congress can appoint
committee to investigate account with
Federal Reserve
3) Harrison opposes exclusive account with
France Coll. Federal Blues Reserve Bank.
103
Kennedy reports on build-up undoubtedly leading to
132A,2T4A
cutting off all possible normal trade - 10/19/39
112
a) Kennedy also sees immediate and considerable
lessening of prestige of American Ambassador
in London
1) HMJr explains to group FDR's desire to
"protect Kennedy from himself"; 1.e.,
Kennedy wishes to be person through whom
information clears concerning American
securities; FDR wishes this information to
clear through Securities and Exchange
Commission and Treasury
114
2) Situation discussed by HMJr and Cochran with
Pinsent and Osborne (Bank of England): FDR
and HMJr wish consultations held on this side
of Atlantic by Treasury and Securities and
Exchange Commission - 10/19/39
177
3) For discussion of Kennedy cables with FDR
nee Book 219, page 9
(American security holdings reported)
- - (Continued)
Book
Fage
War Conditions - (Continued)
Purchasing Mission (British-French) - (Continued)
Pinsent and Osborne (Bank of England) discuss
situation with HMJr and Cochran (Leroy-Beaulieu
later) - 10/19/39
218
176
a) H/Jr explains slight modification of original
idea (approved by FDR): same procedure as in
case of airplane purchases - Federal Reserve
Bank to carry accounts of Central Banks of
Groat Britain and France
b) American Embassy, London, so informed - 10/21/39
233
Silver: See War Conditions - France
Special Advisers:
Press release: Temporary assignment now at end - 10/19/39
B2
Strategic War Materials:
Quicksilver: Building up of reserves reported on by
Graves - 10/18/39
4
a) Priority lists (1st, 2nd, and 3rd) as fixed by
Munitions Board
Tungsten: Navy contract for; Currie memorandum to FLR,
Admiral Spear's memorandum,
334,335
a) Ill'Jr's memorandum to FDR - 10/23/39
324
Army bids: see Book 219, pages 181,188
b) Procurement memorandum to HMr
342
Manganese: Bids reported on proposal opened on 10/19/39 -
10/23/39
344
Turkey:
Anglo-Franco-Turkish financial treaty: Details of
provided by American Embassy, London - 10/19/39
119
U.S.S.R.:
Gold shipment (17 tons) from U.S.S.R. to Germany:
Butterworth and Heath asked for information - 10/19/39
126
a) Butterworth's reply - 10/20/39
229
b) Heath's reply: see Book 219, pages 78, 201
Tugoslavia:
Clearing agreement with Germany extended for one year -
10/18/39
80
Winchell, Walter
H/Jr's telegram denying illness - 10/19/39
150
1
MA
GRAY
Rio de Janeiro
Dated October 18, 1939
Rec'd 4:47 p.m.
Secretary of State
Washington
370, October 18, 4 p.m.
Department's 207, October 17, 7 p.m.
The Bank of Brazil acting as fiscal agent of the
Brazilian Government today confirmed to me verbally
the Treasury Department's understanding of the agreement
as get forth in the telegram.
The bank does not require dollar credits at present
but when it does it will inform the Federal RESERVE Bank
and then open corresponding milreis credits here.
In the meantime the Bank of Brazil will purchase gold
from the Federal RESERVE Bank to be oredited to its
gold account in NEW York.
The Bank of Brazil is confirming this in writing
today to the Federal RESERVE Bank.
CAFFERY
NPL
SECRET ADVISED ME IN SERICT CONFIDENCE THAT GEN CHIANG KAI SHEK
CONFIDENTIAL
2
HAS AGREED ON REORGANIZATION OF THE CHINESE GOVERNMENT ABOUT THE
MIDDLE OF NOVEMBER WHEN KUOMINTANG PARTY CONFERENCE IS TO MEET AND
THAT HE WILL RETURN TO HIS OLD POSTS AS VICE-MINISTER EXECUTIVE
YUAN AND MINISTER OF FINANCE WITH CHIANG HIMSELF AS THE PRESIDENT OF
EXECUTIVE YUAN STOP SOONG SUGGESTED TO GEN CHIANG THAT IN VIEW OF
SOONG'S INTIMATE KNOWLEDGE OF CHIANG'S PERSUASIONS AS WELL AS CHINESE
MILITARY, POLITICAL, AND ECONOMIC BACKGROUND, THAT BEFORE ASSUMING THE OFFICE
SOONG SHOULD MAKE A FLYING VISIT TO THE UNITED STATES IN A PRIVATE
CAPACITY AS CHIANG'S OFFICIAL REPRESENTATIVE;FIRST TO DISCUSS WITH
PRESEDENT ROOSEVELT THE FUTURE POLICIES IN THE FAR EAST WHICH MAY RE E
ESPECIALLY TIMELY IN VIEW OF THE SOVIET PACT WITH GERMANY AND TRUCE
WITH JAPAN, AND POSSIBLE CHANGES IN THE ATTITUDE OF OTHER WESTERN
POWERS RESULTING THEREFROM; SECOND TO DISCUSS INFORMALLY WITH YOU
CHINA'S CURRENCY AND FINANCIAL PROBLEMS STOP IT WAS ORIGINALLY IN-
TENDED TO MAKE THIS APPROACH THROUGH THE CHINESE EMBASSY BUT BOTH
THE
CHIANG AND SOONG WISH TO KEEP/X MATTER AT THIS TIME FREE FROM
DIPLOMATIC PROCEDURE, HENCE BOTH THOUGHT IT BEST IN THE INTERESTS
OF SAFETY AND UTMOST SECRECY TO MAKE THIS INFORMAL INQUIRY STOP
UNDER THESE CIRCUMSTANCES CAN YOU SEE YOUR WAY CLEAR TO INDICATE
YOUR OPINION IN THE MATTER so THAT I MAY QUIETLY ADVISE SOONG
(SIGNED) NICHOLSON
SECRET
3
MEMORANDUM FOR SECRETARY MORGENTHAU:
This message was sent with the special request that it be
delivered into no hands but yours. Therefore, no one has seen
the message except Lieutenant McKay and only one copy, the in-
closed, has been prepared.
45 friedwan
E.S. FRIEDMAN
Pres the in to of
see old hing wend 5
me Transcript of ybore
reply made by 17.Me Kay
in my presence 11:m Oct.18
M.S
TREASURY DEPARTMENT
MY
4
WASHINGTON
October 18, 1939.
MEMORANDUM FOR THE SECRETARY:
Re: Quicksilver.
Captain Collins advises 8.6 follows:
He has presented to the Army and Navy Munitions Board the matter
of proceeding at this time with the purchase of B. quantity of quick-
silver for stockpile reserve.
The Munitions Board have now informed him that they feel that the
purchase of quicksilver should be deferred until additional funds are
available. They point out that inasmuch as quicksilver is produced
in considerable quantities in the United States, and in view of the
limited funds available at this time, it has been placed in a deferred
classification.
Incidentally, Captain Collins has provided me with the following
listing of strategic materials according to the priority fixed by the
Munitions Board:
First Priority
Second Priority
Third Priority
Chromium
Manila fiber
Aluminum metal
Manganese
Nickel metal
Antimony
Tin
Optical glass
Coconut shells
Tungsten
Quartz crystals
Mica
Quinine
Quicksilver
Rubber
Raw silk
Wool
Under the $10,000,000 appropriation now available, the program of
the Munitions Board contemplates purchases only of the items listed under
the first priority, plus Manila fiber, optical glass, quartz crystals, and
quinine under the second priority.
GRAVES.
NOTE: The above information regarding quicksilver was given
to the Secretary verbally this morning by Captain Collins.
The Secretary phoned General Watson's secretary to the
effect that it would apparently be necessary for the
President to give instructions direct to the Munitions
Board.
5
October 18, 1959.
MEMORANDUM FOR THE SECRETARY:
Re: Quicksilver.
Captain Collins advises as follows:
He has presented to the Army and Navy Munitions Board the matter
of proceeding at this time with the purchase of a quantity of quick-
silver for stockpile reserve,
The Munitions Board have now informed him that they feel that the
purchase of quicksilver should be deferred until additional funds are
available. They point out that inasmuch as quicksilver 18 produced
in considerable quantities in the United States, and in view of the
limited funds available at this time, it has been placed in a deferred
elassification.
Incidentally, Captain Collins has provided me with the following
listing of strategic materials according to the priority fixed by the
Munitions Board:
First Priority
Second Priority
Third Priority
Chromium
Manila fiber
Aluminum netal
Manganese
Nickel metal
Antimony
Tin
Optical glass
Cooonut shells
Tungsten
Quartz crystals
Mice
Quinine
Quicksilver
Rubber
Raw silk
Wool
Under the $10,000,000 appropriation now available, the program of
the Munitions Board contemplates purchases only of the items listed under
the first priority, plus Menila fiber, optical glass, quartz crystals, and
quinine under the second priority.
GRAVES.
MOTE: The above information regarding quicksilver was given
to the Secretary verbally this morning by Captain Collins.
The Secretary phoned General Watson's secretary to the
effect that it would apparently be necessary for the
President to give instructions direct to the Munitions
Board.
HNG/mff
Regraded Unclassified
B
RE LATIN AMERICAN FINANCE
October 16, 1939.
3:00 p.m.
Present:
Mr. Welles
Mr. Jones
Mr. Feis
Mr. Collado
Mr. White
Mr. Foley
Mr. Riefler
Mr. Cochran
Mr. Young
Mr. Cotton
H.M.Jr:
I had a talk with the President and I had a talk
with Mr. Hull and Mr. Welles, in which Mr. Hanes
participated. I talked with Mr. Jones on the
telephone this morning with the result that
Mr. Welles, having been in Panama - I might say
both the President and the State Department wanted
something done in a financial way for some of the
South American countries. It was suggested that
Mr. Welles and Mr. Jones and myself act in an
informal way to take up the financial needs of
any country that the President and the State
Department designate and a or the countries they
wish us to consider.
Furthermore, if we designate a country, we will
try to work out a pattern. I think the best
word to use would be & reorganization of the
finances of B. particular country. We will submit
it to the President and Mr. Hull. If he likes it,
he can show it to Senator Pittman and ask 1f he
can defend it on the Hill, and then if this was
all right with the country involved and they would
accept it, this would be B. pattern on which we
would go ahead. The thought was that Mr. Welles
and Mr. Jones and myself and our assistants would
sit continuously until we worked out a formula
for whatever country the State Department designa-
ted they would like us to take up first. Is that
stating it about correctly?
Welles:
I would like to make just one qualification. When
you speak about the financial reorganization of
a country, I think that goes probably a good deal
further than might be desirable in certain cases.
I can conceive of certain cases where that would
be necessary and where they would like it. In
other cases, they might want limited forms of
assistance without our making any suggestions as
Regraded Unclassified
7
- 2 -
to their financial organization. That is the only
qualification I want to make.
H.M.Jr:
I used the word reorganization as an all-inclusive
term, that is all. Now, are you ready to suggest
a country?
Welles:
I am ready to make any suggestions of any character
that you think would be helpful.
Jones:
I nominate Texas.
Welles:
I didn't think Texas needed any help, Jesse.
Jones:
Then, California.
H.M.Jr:
I will say this, I asked Mr. Welles when he picked
a country to pick one that would have a 75 percent
chance of being successful.
Welles:
My reply to the Secretary of the Treasury on that
was that it seemed to me that the case of the
Republic of Colombia was probably as good a test
case as we might take up, because I think all of
the other ones are in difficulty in that situation.
I think, at the same time, the prospects for a
favorable and successful solution are there.
H.M.Jr:
Can somebody give us the picture of Colombia?
Welles:
Certainly. May I interrupt just et moment? It is
my understanding that your thought 1s that we
would take up the question of Colombia simply for
study at this moment to see what the various
elements are and then at one of our next meetings,
take up the various other requests that are pending
before us, 18 that right?
H.M.Jri
Well, what I had hoped we could do, if I might
modify that B. little bit, is that we could take
whatever country you suggest. As far as I am con-
cerned, I would like to stick with that thing until
it was finished.
Welles:
There is one difficulty there. That difficulty is
that the Colombian picture is somewhat involved,
and in the meantime we have pending requests from
8
- 3 -
a good many other governments, some of those being
very limited or minor in scope and I think probably
we would want to settle many of these other problems
before you got through with the Colombian picture.
Without being unduly pessimistic, it would seem to
me that the Colombian picture might require anywhere
from six weeks to two months in the way of time. In
the meantime, if you got B. small request from the
Government of Costa Rica for assistance, you might
want to pass on that without waiting for Colombia,
H.M.Jr:
I take it that this 18 B. bank and Mr. Welles, Jones
and Morgenthau are the loan committee, is that right?
Welles:
As far as you two gentlemen are concerned, it is
very much all right.
H.M.Jr:
Well, shall we start with Colombia? Might I say
this, that I have had a talk with Mr. Welles and
as far as I am concerned, I am going to keep myself
very elastic on this thing and be as helpful as I
can. There are no fixed rules, 1s that right?
Welles:
Fine.
H.M.Jr:
Is that all right with you, Jesse?
Jones:
Yes. What does Colombia need?
Welles:
I would like to make the suggestion that first of
all Dr. Feis state what Colombia's representatives
at Panama asked for and then either Dr. Feis or
Mr. Collado give us B. general picture of Colombia
and what their problems are. Does that seem to
you logical, Dr. Feis?
Feis:
Yes. They state they want financial help for two
reasons. They don't want to curtail imports if
they can help it, because so many of their imports
are connected with their whole program of national
development. They fear they may have to curtail
imports to protect their exchange situation because
of the possible disturbance of their trade in the
immediate future and the possible depression in
the prices of coffee. Therefore, they wanted funds -
they didn't say that they had quite decided 1f they
wanted them only for the purpose of utilizing the
exchanges or whether they would also like some to
- 4
strengthen their general reserve situation. They
left that rather indefinite.
They dwelled upon and admitted that their long-term
economic and foreign trade prospects were better
than their immediate prospects. They would have
liked to have secured a substantial sum right away.
When told of the present position of the Bank, the
idea suggested itself of a possible modest scheme
of assistance in the immediate present and then
more substantial assistance later on after more
extensive study. They were told that we would be
prepared to continue discussion with them after the
chance had been presented to consider the matter up
here between ourselves. I think that is about the
essentials of the conversation.
S.V.Jr:
Well, who are you going to talk to for Colombia?
Feis:
This is not certain. We did not want to define that
too definitely. They would probably send up here
the same person that was talking down there.
Welles:
The former Secretary of the Treasury.
Feis:
Ex-Secretary of the Treasury and a very able and
reasonable fellow.
H.M.Jr:
There is nobody here to talk to now?
Welles:
Well, the Ambassador is here but he is retiring and
I think they would undoubtedly be better off if they
sent up some special nan just for this job, particu-
larly B. well qualified man.
H.M.Jr:
Can we start before he gets here?
Welles:
Well, I don't think there is any use of his coming
up here until we have cleared the ground pretty
extensively and if you feel that there 1s some
reason for him to come
H.M.Jr:
What do you think, Jesse?
Jonso:
Have we any way of knowing what he 1a going to come
for, what kind of money, what kind of credit, what
he wants to do?
10
- 5 -
Welles:
Certain figures were mentioned to you, Dr. Feis,
as I recall it.
Feis:
They want the funds partly to assure themselves
of the reserve situation and partly to continue to
defray the exchange required for current imports
from the United States.
Jones:
From the U. S.?
Feis:
Yes.
Jones:
How much are they talking about?
Feis:
They would have talked, I should think, up to
40 million, perhaps beyond that, if they hadn't
caught an expression on somebody's face, and so
I don't believe they ever mentioned 8 figure of
over 30. Then, when informed of the present
restricted situation of the Bank, it was made clear
to them that anything immediate within the resources
of the Bank would be somewhere in the neighborhood
of five million dollars, at the most. That was
left general.
Jones:
Did they want to borrow money or did they want credit
for supplies?
Feis:
I think they would take it whichever way they could
get 1t. They would want to use part of it for
supplies. I think they would like to borrow the
rest of it for 8. reserve, despite the fact they
have got considerable gold reserve.
Welles:
They have about 20 million, haven't they?
Feis:
Somewhat over that.
Jones:
Their cash position is very good, is it?
Feis:
It is fair, but you see Colombia has been moving
ahead rapidly. Their budget is probably now as
high as it ever has been. It is going into such
things as roads, municipal developments. They
feel 1t very important not to interrupt that.
They constantly were recurring to that as the
central point of their problem, not to interrupt
their whole program of national development, which
vitally dependa on imports, machinery and road
equipment, et cetera.
11
- 6 -
Welles:
There is one factor we haven't mentioned. I
haven't got the figures at hand. If you are
familiar with the American investment in oil
properties in Colombia and as I remember those
oil properties are just about becoming productive,
are they not? What 1a the estimated value of
those exports for this year?
Collado:
The Barco Pipe Line is just now beginning to
function, They have just completed It and they
are expecting three or four million dollars a
year, the first years', and they hope that will
increase to seven or more later.
Jones:
Just in new oil?
Collado:
Just in new oil developments. This year it will
be quite small.
White:
of course, they only get a portion of that exchange.
Jones:
Well, assuming we had all the money that we wanted,
let's talk about it from that standpoint, how much
we would be willing to consider toward Colombia
and why. That seems to me the basis to start on.
Welles:
I should say it would be very difficult to hazard
any guess until we had E. clearer picture from them
of exactly what they want to use it for.
Jones:
I should think we would need that, Henry, before
we could get started.
H.M.Jr:
Well, I think we ought to - personally, I think we
ought to have the fellow come up and take a look
at him and sit down and talk with him, don't you
think so, Jesse?
Jones:
I would think 80. We don't know what we are talking
about.
H.M.Jr:
I would send for the fellow.
Welles:
I shall do it at once.
Jones:
That 18 the former Secretary of the Treasury?
12
- 7 -
Welles:
That is right. He speaks English, incidentally.
Jones:
Is there a meeting here of all those people down
there?
Welles:
I think 1t is possible that 1f we invited him to
come up here for this purpose, that they then
would appoint him their representative on this
Inter-American Advisory Committee which will meet
on November 15th.
Jones:
What 1s that for?
Welles:
That is a very short question and I will have to
give you R very long answer.
Jones:
All right.
Welles:
Have you got a text of the resolution at hand? (Mr. Feis)
Feis:
No, I haven't.
Welles:
Have you (to Mr. Collado)?
Collado:
I will see.
Jones:
You needn't malco it that long.
Welles:
I am going to give you quite a long answer.
H.M.Jr:
It is like one of those questions that you plant
at your press conference, you hope somebody asks
you.
What is the matter with the President Harding, is
there anything wrong?
Jones:
They rescued a lot of people and they are asking
for some supplies, medical and so forth and so on.
Welles:
(To Mr. Jones) You can read the answer to your
question. It is in the first two pages.
H.M.Jr:
While this man is in the process of coming, our
people could work with your people in getting up
& document for me on the economic resources. Have
you got one in your top drawer?
13
- 8 -
Welles:
I think Collado has it in pretty good shape now.
H.M.Jr:
You could talk it over with Harry White and get
together and give me 8. paper and one for Mr. Jones,
each 24 hours in advance of the fellow's arriving
here. Would you want to do any other country or
just let it go at Colombia and wait until the
fellow gets here?
Welles:
Well, I might mention that we have these other
pending requests. The Costa Rican request for
short-term construction financing, which I think
is very desirable. I understand that Mr. Jones
has already been informed of that.
Jones:
We approved a small loan, didn't we, half a million
dollars? We did approve & half & million dollars
for Costa Rice.
Cotton:
That 18 right.
Jones:
Was there something besides that now?
Welles:
Not from Costa Rica, no. There is a general request
from Peru for assistance of the same character as
that made by Colombia. There are requests from
various other governments. I think the best way
to take this up would be for me to have proper
documentation prepared in each case so far as we
are concerned, the Department of State, that is,
giving all of the information of the kind that you
have asked for in the case of Colombia, and then
at our next meeting we can take up one or two of
them.
H.M.Jr:
Why don't we say when the meeting will be, because
we are all pretty busy. Then we could look forward
to another day. How would that be?
Welles:
Very well.
Jones:
In the meantime, we ought to have, I should think,
the list of what you have got in mind, based upon
our meeting at Panama, and then looking forward
to this next meeting on the 15th.
Welles:
Yes. But now that meeting on the 15th, I think it
will have to be dealt with in an entirely different
14
- 9 -
way. The matters that we are discussing here now
are purely bilaterel questions, that 1s, requests
from other governments to us for certain financing.
The meeting on November 15th 1s a general continental
meeting to discuss 8. great many major problems that
affect all of the American Republics, including ours,
and I think an entirely separate list of agenda will
have to be prepared for that meeting, after full
discussion with all of the Government departments
and agencies that might be interested.
Jones:
But the matter of credits won't enter into it?
Welles:
Not at that meeting.
Jones:
That is fine.
H.M.Jr:
Anything else? It would be Tuesday, the 24th, at
3:00 o'clock. How would that be, all right?
Welles:
I won't be here on Tuesday, the 24th.
H.M.Jr:
Then I don't want the meeting.
Welles:
No.
H.M.Jr:
Will you be here Wednesday?
Welles:
No, I won't be here until Monday, the 30th.
E.M.Jr:
Do you want us to meet during your absence?
Welles:
Just as you see fit. I think valuable time will
be saved if these proposals can be put in documentary
form and put before you.
Jones:
May I suggest you give us the information you were
going to give us and let us each study it and con-
tact you (H.M.Jr.) for a meeting.
H.M.Jr:
You're a practical fellow. Then the thing is up to
Collado and Feis and White to get the stuff to Jones
and me. I won't keep you waiting long. Right?
Jones:
Right.
Welles:
of course, in the case of some of these where you
get a general request, all you can do is get the
general picture.
15
- 10 -
H.M.Jr:
But one thing we decided today is that the State
Department will invite this gentleman to cane up
from South America.
Welles:
That is right.
Jones:
Are we going to do that before we study this busi-
ness?
H.M.Jr:
oh, sure, they will want to do something.
Jones:
The others will all follow.
Welles:
Not unless they are invited.
Jones:
But they will seek invitations. It seema to me
that we could plough this ground just a little bit
before you invite him. Give us two or three days
until we can study this material you were going
to give us and then see what we are going to expect
from him and from others.
Walles:
If you don't mind my making this suggestion, I
think it would be well to do as the Secretary of
the Treasury has suggested, ask him to come up.
We know that we will want to do something, but we
don't know the scope of it. In the case of Colombia,
I think all of us feel there is something that can
be done. The advantage to my standpoint will be
that if he is invited, his Government will then
appoint him as the Colombia member on the Inter-
American Committee, and I think his presence on
that committee would be advisable.
Jones:
All right. Tell him not to fly.
Welles:
I will tell him to take a good slow steamer, the
kind I had going down there.
Jones:
That will serve the purpose.
E.M.Jr:
Anything else?
Jones:
Nothing else.
Welles:
Would it be agreeable to you 1f we do make Monday,
the 30th, a day for meeting, even if you meet before?
Regraded Unclassified
16
- 11 -
H.M.Jr:
Sure. Well, Monday is always a bad day for me.
Could it be Tuesday?
Welles:
Yes, indeed, Tuesday, the 3lst.
H.M.Jr:
I hate to make a date for Monday. Tuesday, the
31st, at 3:00 o'clock.
Welles:
That is right.
H.M.Jr:
All right.
Jones:
You will notify us?
H.M.Jr:
Yes. Cotton, call up Mr. Jones' office and tell
them to put it on the calendar for him, will you,
Tuesday, the 31st?
Cotton:
Yes.
TREASURY DEPARTMENT
17
INTER OFFICE COMMUNICATION
DATE October 18, 1939
TO
Secretary Morgenthau
FROM
Mr. White
Subject: Colombia
CA
A. Debt Situation in Colombia
1. Colombia has an internal debt of 77 million pesos
(845 million). This debt has been and is being serviced
without interruption.
2. Colombia is now in complete default on her long term
external debt which amounts to approximately $160 million.
Most of the debt 18 in dollar bonds and more than half of
these are held in the United States. About $80 million of
the foreign debt consists of national government obligations
and the remainder, local government oblig tions.
Partial default began in 1931 end complete default in 1934.
The interest on her defaulted external debt has reached
#22 million.
3. She has an external short term debt of $19 million,
contracted in 1930. This debt 18 renewed from time to time
and 18 being serviced in full. Lopez, ex-President of Colombia,
16 now in the United States in the hope of obtaining B. settle-
ment if such settlement can be made.
B. Financial Situation in Colombia
1. Colombia's financial situation is fairly sound. She
has had B. balanced budget for four years and business and for-
eign trade conditions were good before the outbresk of war.
About half of Colombia's exports are coffee and Germany used
to take 15 to 20 percent of that coffee. Colombie has lost
that market temporarily but the increase in oil exports and
gold production will soon mpke up for the loss of that coffee
market.
18
Secretary Morgenthau - 2
2. Colombia has $25 million of gold and produces about
$15 million of gold a year.
63.1
3. Colombia has offered to begin payments on her foreign
debt at the rate of percent interest with no payments on
account of principal for five years. This offer was refused
by the foreign bondholders who insisted on 4 percent interest
end no reduction in principal.
Mr. Welles announced to the Panama Conference that he was
recommending a short-term loan of several million dollars
to Colombia and Bolivia.
4. Colombian exchange has not depreciated since the beginning
of the war and her exchange position on the whole is good.
5. Colombia 1s supposed to be the most nearly true
democracy of all the Latin American countries.
6. Recently the government negotiated a settlement on
a minor sterling obligations which involves the scaling down
of principal roughly in half.
Secretary Morgenthau - 2
19
2. Colombia has $25 million of gold and produces about
$15 million of gold a year.
3. Colombia has offered to begin payments on her foreign
debt at the rete of to 3 percent, depending on an increase
in exports. Under this plan no payments on account of prin-
cipal are anticipated for seven years. This offer was refused
by the foreign bondholders, who insisted on 4 percent interest
end no reduction in principal.
Recently the government negotiated 8 settlement on a minor
sterling obligation which involves the ecaling down of princi-
pal roughly in half and involves a new obligation in pesos
rather than in sterling. The settlement amounted to a new
interest burden of 1.88 as compared with 4 percent previously.
4. Mr. Welles announced to the Panama Conference that
he was recommending a short-term loan of several million dollars
to Colombia and Bolivia.
5. Colombian exchange has not depreciated since the
beginning of the war and her exchange position on the whole
is good.
6. Colombia is supposed to be the most nearly true
democracy of all the Latin American countries.
TREASURY DEPARTMENT
20
INTER OFFICE COMMUNICATION
DATE October 18, 1939
TO
Secretary Morgenthau
FROM
Joseph P. Cotton, Jr.
Re: Foreign Bordholders Protective
Council, Inc.
The Council, in form a private, non-profit membership corporation
incorcorated under the laws of Maryland, is, in fact, a semi-official,
self-perpetuating body concerned with the protection of the holders of,
and with the negotiation of debt settlements with respect to, obligations
of foreign governments and political subdivisions thereof. Formed at the
and of 1933 by certain prominent private individuals, at the request of
the Secretary of State, the Secretary of the Treasury and the Chairman of
the Federal Trade Commission, the Council has become recognized by bond-
holders and foreign governments, as well as by the authorities of the
United States Government, as a permanent, semi-official agency similar to
the British council upon which it is modeled; and has largely monopolised
the field to the exclusion of ad hoc bordholders' protective committees
which formerly prevailed.
I. Origin.
It should be noted that not only WGB the Council formed upon the
initiative of officials of the Federal Government, but that the decision
represented a deliberate choice of this method as opposed to the alterna-
tive of creating an agency of the Federal Government to do the job. At the
time, Title II of the Securities Act of 1933, sponsored by Senetor Hiram
Johnson, had been enacted, providing for a Federal corporation with a
directorate to be nominated by the Federal Trade Commission, but contain-
ing a provision that Title II should not become effective until the Presi-
dent finds and declares its taking effect to be In the public interest,
which, to date, he hus never seen fit to do. It was felt that it would be
unrise for the Government, from the stanipoint of the conduct of its for-
eign relations, to be directly concerned and, as B. matter of general prin-
ciple, for the Government to accept exclusive responsibility in the matter.
II. Management and financing.
The Council is ostensibly run by a self-perpetuating directorate
of some 15 to 20 prominent private individuals who are largely figure heads.
The effective management resides in an Executive Committee of about helf
that number and, in fact, largely in the hands of Francis White, President,
who is also B. member of, and J. Reuben Clark, Jr., who is Chairman of, the
Executive Committee of the Council. Other members of the Executive Com-
mittee now are:
Regraded Unclassified
21
- 2 -
Laird Bell
Hendon Chubb
James Grafton Rogers
John C. Traphagen
Thomas D. Thacher
The Council operates on & budget of something less than $100,000
per year and is financed by membership contributions, fees from foreign
governments and voluntary contributions from bondholders. Only the first
source of funis has been of importance. During 1934-36 the Council had a
large contributing membership of investment bankers and other banks from
which It derived a major cortion of its funds. These memberships were
terminated following the Securities and Exchange Commission's recommenda-
Mon, in its report to Congress in 1937 on the operation of protective coo-
mittees in the field of foreign bonds which included EL study of the Council,
The SEC recommended that an attempt be unde to secure funds from private
foundations, which the Council unsuccessfully endecvored to do when it was
first formed, and from Congress. Since the termination of the banker con-
tributions, the Council has been living largely upon a reserve fund built
up in the earlier period from that source, without any apparent prospect of
adequate financing in the future.
III. Operation.
As pointed out, the Council has virtually taken over the whole field
of negotiation of debt settlements with respect to foreign government bonds.
It operates with the support of and in close contact with the State Depart-
ment. The Council has tended to keep negotiations in its own hands and not
to operate through protective committees. The Council is autonomous in opera-
tion in the sense that it does not consult with, nor seek to become legal
representative of, the bondholders by solicitation of proxies or of deposits
of bonds. It proceeds upon its own initiative to attempt to negotiate set-
tlouents and to make public for the benefit of bondholders its recomenda-
tions - positive, negative or non-committal --- with respect to any offer of
settlement by & foreign government.
The SEC in its 1937 report gave its general blessing to the Council,
both as regards its set-up and operation, while stressing that the efficacy
of the institution in view of its autonomous and monopolistic status in the
field will depend upon the quality of its management. It pointed out that
the Council had not done much to develop cases where the bondholders might
have remedies against issuing houses or to protect the bondholder against
preferential treatment by foreign governments of short-term creditors; and
discussed at 50.0 length, but inconclusively, the criticism that the Council
has been dominated by these banking interests.
IPCP
Regraded Unclassified
October 18, 1939
After the three o'clock meeting, Sumner Welles
stayed behind and talked to Jones and me,
He said the President agreed that they should
take up this Joint Resolution which passed one of the
Houses, authorizing us to make loans to South America
for the purchase of our materials, and try to get them
to add $100,000,000 to it and get it through this spe-
cial session. Jones said he would be willing to go
up and sound out the Congress.
I then said, "No one has asked me, but I think
the President is making a great mistake.' I said, "In
the first place, I know Jones has at least $40,000,000
he can scrape together for South America and Bell tells
me that if anything goes up it should be & deficiency
bill for the Army and Navy because he believes the Prea-
ident is breaking the law by not sending up the defici-
ency bill and I think he 1s making a mistake."
I suggested that Welles take the matter up again
with the President and he said he would and that he felt
the way I did inasmuch as Jones said here in the office
that he believed he had enough money in the Export-Import
Bank to last until next February.
-
#
Welles stayed then alone and let me see the tele-
gram that Bullitt sent yesterday, which he phoned me
about & little before 3. In this it seema that Monnet
has been in London and has negotiated an agreement for
a Joint purchasing thing, English and French, and they
want a joint mission in this country to do the same thing,
and was I willing. The President said that he was will-
ing.
I thought the matter over and while I am not
crazy to have Monnet come over here (and I understand
that he is to represent them) that I suppose I get along
with him as well as I can with any other Frenchman, but
it does bother me (and I told this to Welles) that Monney
has his own business in New York and heavens only known
what all his connections are.
Regraded Unclassified
23
October 18, 1939
FOR THE SECRETARY:
Barney Kilgore tells me that the Federal Reserve
Board has hired two "special advisers" to help it prepare
for the Wagner Monetary Hearings. They are Don Woodward of
Moody's and Robert Warren of Case, Pomeroy. They are to
whip together into final form a great mass of information
which the Federal Reserve Board has accumulated for the
Hearings. They have been in town for about two weeks,
ESD
TREASURY DEPARTMENT
24
INTER OFFICE COMMUNICATION
DATE October 18, 1939
TO
Secretary Morgenthau
FROM
Mr. Cochran
The foreign exchange market continued in the quiet trend which has been in
evidence all this week. Sterling opened at 3-99-7/8: quickly receded to 3-99-3/8.
and subsequently recovered to 4.00-1/4. It closed at 3.99-3/4.
The rate for belgas continued the improvement of yeaterday and closed at .1686.
Reporting banks in New York and the Federal Reserve Bank reported sales
totaling L375,000. from the following sources:
Commercial concerns
I 319,000
Foreign banks (Europe and Far East)
1 56,000
Total
I 375,000
Purchases of sterling amounted to 1274,000 as indicated below:
By commercial concerns
L 192,000
By foreign banks (Far East and Europe)
I 82,000
Total
1 274,000
The banks also reported that the British Control purchased sterling amounting
to L85,000, at the official rate of 4.02.
There were no now gold transactions consummated by this office today.
The Federal Reserve Bank of New York informed us of the following gold ship-
ments from England:
$ 84,000 to Chase National Bank of New York
$ 28,000 to Chase National Bank of New York
$ 14,000 to Johnson Mathey and Company, Now York
$126,000 Total
Yesterday Mr. Blaisell and Mr. Green of the Securities Exchange Commission
alled to discuss an inquiry received from the New York Curb Exchange. It seems
hat the Curb Exchange ie desirous of building up an active market in Canadian
scurities. In order to do 80, the Securities Exchange Commission would have to
lter certain of their regulations. Involved in the problem is the fact that
mericans have, on deposit in Canada, Canadian securities which it would be
25
- 2
desirable to bring to the United States no that these securities would be
available for trading. Mr. Blaisell and Mr. Green conferred with Mr. Dietrich
relative to their problem in connection with the present Canadian regulations
for control of foreign exchange and security transactions. At the conclusion
of the conference the two representatives felt that the Securities Exchange
Commission should take no steps with respect to the matter discussed.
Mr. Leroy-Besulieu, Financial Counselor of the French Embassy, told me
by telephone this morning that he had been instructed by his Government to
put $20,000 at the disposal of the American Government to cover expenses
incurred in the representation of French interests at Berlin by the American
Embassy in that city. Mr. Leroy-Besulieu d not know how to hendle this payment,
I told Mr. Leroy-Beaulieu that he should remit the sum by check payable to the
Secretary of State of the United States. He chose to deliver the check personally,
and I told him the officers who would receive him were Mr. Breckinridge Long,
or Kr. Hugh Wilson, both in Room 218 of the State Department.
Mr. Knoke told me by telephone at 11:15 this morning that, as of October
16, the balance of the State Benk of Russia with the Chase Bank was $3,000,000.
The balance of Amtorg with the Chase Bank on the same date Vas $500,000. The
only item of interest entering the above account of the Russian State Bank was
8. trensfer of 8346,000 from Sweden. This afternoon Knoke telephoned me that
as of today the Amtorg balance has been reduced to $400,000. while the balance
of the State Bank of Russia has risen to $5,900,000, due to three payments from
Sweden,
With reference to the item in my memorandum of yesterday, reporting that
the Federal Reserve Bank of New York was reducing its deposit with the B.I.S.,
Kr. Knolre told me this morning that the B.I.S. had cabled that repayment was
being effected, value October 19, of $528,000.
Mr. Knoke referred to an informal inquiry we had made of his 3ank as to
the short position in sterling amounting to $2,557,000 which the brokerage house
of Abraham & Company has been carrying for several weeks, as noted from the
tabulation which we receive regularly. The Federal Reserve Bank could not
properly call in this firm for consultation in the premises, since it is not a
member of the Federal Reserve system. Our friends happen to know, however,
through the Bank with which Abraham operates, that this concern has B. long
position in sterling bonds against which it has been maintaining this short
position in sterling. The bank with which Abraham does business had incuired
on this point since it did not wish to be 8. party to a transaction possibly
involving speculation in a foreign currency.
BMS
Regraded Unclassified
26
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 18, 1939
TO
Secretary Morgenthau
FROM Mr. Cochran
Mr. Pinsent, Financial Counselor of the British Embassy, telephoned ne
last night that he would come by this forenoon to give us a message which he
had received from his Government in regard to silver. He called at 12:15
this noon and summarized to me the message which he had received, as follows:
The Britlah have found no satisfactory way of preventing purchases of
silver against dollars by speculators and others in London.
It is proposed to prohibit the import of silver except under license.
Licenses would be granted in fact for imports of silver from India or
sterling countries but not for imports from Canada or the United States.
Pinsent was acked to explain the British position to Secretary Morgenthau.
He said his people would take no action pending word of the Secretary's re-
action to this message.
In reply to my questions, Pinsent said he thought this was a proposal
to take formal steps towards stopping a loophole, since he understood imports
of silver had already been discouraged. He made clear that the proposed
action concerns the United Kingdom. Since our discussions conetime ago
about the proposal for the imposition of an embargo upon silver imports
into India, he has seen no word of the carrying out of this proposal.
Mr. Pinsent will call at 2:30 on Thursday afternoon to present Mr.
Osborne of the Bank of England. He would appreciate receiving an answer
in regard to silver at that time, or earlier if it may be convenient for
the Secretary.
B.M.S.
STRICTLY CONFIDENTIAL
7
27
October 18, 1939
11:54 a.m.
HMJr:
Hello.
Marriner
Eccles:
Henry.
HMJr:
Yes, Marriner.
E:
You said something about a meeting at 11 o'clock
tomorrow.
HMJr:
That's right.
is
And it was tentative.
HMJr:
Yeah.
E:
Now
HMJr:
I'm anxious to have it.
in
Well, I -- I just wanted to know because George has
got to get down from New York.
H.Jr:
Well, I'm -- I'm anxious to have it.
in
You prefer to have it tomorrow rather than Friday?
HMJr:
I -- I don't think I'll be here Friday.
E:
I see. Well, it
HXJr:
The French are pressing me very hard for an answer.
in
So the sooner the better.
HMJr:
The sooner the better and what I'd like to do 18,
at the meeting tomorrow, I'd like to come to a
decision with you and with Harrison.
E:
Yeah.
HMJr:
See?
E:
Settle it definitely.
HMJr:
Because the French are quite upset because we don't
Regraded Unclassified
29
- 2 -
E:
George -- George thought that he -- he'd bring
Knoke down.
HMr:
That's all right.
in
He seemed to think thet Knoke, as a practical opera-
tor, would be even more helpful than Logan, the
lawyer.
CNr:
Well that's up to him.
in
Yeah. Now, there's another thing. This bond market
as you have possibly noticed is -- has been pretty
strong all week and I'm just wondering, with reference
to the sale of notes -- there's been -- we've been
having a little talk about whether or not we should
consider letting some of the securities we've bought
GO in order to just hold the market from continuing
to advance as fast 86 it 18. But it would seem to
me that while this market 1s showing the strength
it is, it may be an excellent time -- we've been out
of the market now for oh, what 1s it, over three
weeks, three or four weeks. It might be e good time
to -- to announce your refunding if you expect to
Co it in the near future.
HMJr:
Well, I think you're right, but was it you or I once
said back here a couple of years ago when they just -
things went up a little bit and we Just began to get
the taste of prosperity.
61
Well, of course this -- this -- these particular
bonds now have gone about -- almost half way ug to
the -- to the point where they were when we started
to buy, and of course we had felt that buying all the
way down there that when they -- after they got up
to a certain point that we -- to let them continue
to go up it only means that the reaction 16 that
much worse when they come on the down side. And it
certainly wasn't -- it isn't our idea to -- certainly
not mine, to -- to try to bring the market down.
It's merely to stabilize it.
HiJr:
Well, goah before you do any celling would you give
me e. chance to talk to you?
in
Oh, sure. on, in
Regraded Unclassified
- 3 -
29
HMJr:
But I am planning the refunding of those
E:
Oh, we -- we wouldn't think of doing anything at all
without discussing the whole thing with you.
HAJr:
Well, I'm planning
E:
And that's why I mention it now, because
HMJr:
Well, I tell you, Marriner, I'm going to have a
press conference at 10:30 tomorrow.
E:
Yeah.
HMJr:
And I'll drop a strong hint that we're going to do
these notes next week.
E:
Uh-huh.
HMJr:
How's that?
E:
Well, I WAB just wondering if there's any -- any
advantage in letting the market know about it?
What do you think of that?
HMJr:
Well, let me think it over, Marriner.
E:
I think -- I think that it may be good strategy, if
this thing 18 strong, to just come right out and
announce it without -- without giving them a chance
to -- to go out and -- I've always found that the
trouble with BO darn many of those fellows up there,
when they have this advance information they try to
take some advantage of it.
HXJr:
Well then, I wouldn't do anything until next Monday.
is]
And -- and it would seem to me that you wouldn't do
a thing, not even -- and the fewer the people we
talk to about it the better.
HXJr:
Well
E:
And then -- and then if this market is good and
strong, just decide it in that day that -- just
announce that we're going to refund these just as
a matter of routine. You see?
- 4 -
30
HMJr:
Well, let me think about it and I'll talk to you
again about it then tomorrow.
is
All right. Now, I've got George coming down and I'm
going to ask the -- the executive committee to meet,
inasmuch as he's going to be here, to discuss this
whole thing.
HMJr:
Good.
E:
And 80 that we can discuss the letting of some of our
stuff run off; also in connection with this -- the
refunding.
HMJr:
O. K., Marriner.
E:
All right then, we'll see you at 11 in the morning.
H/Jr:
Yeah.
E:
O. K.
HMJr:
Thank you.
31
October 18, 1939
12:00 noon
George
Harrison: Henry, Knoke yesterday called Cochran about a message
that he got
HMJr:
Yeah.
H:
from the Furness Withy Company.
HMJr:
Right.
H:
And it was coming close to the matter about which I
said I'd keep in touch with you personally, BO I
wanted to let you know what it was.
HMJr:
Well, now I just got through talking with Marriner
and I've asked to see you and him tomorrow at 11
o'clock
H:
I see.
HMJr:
at my office.
H:
All right.
HMJr:
I
H:
Well now on this -- on this thing, these people --
that 1s, the steamship company here in New York
of course expects some sort of an answer from us.
HMJr:
Well, tell them you can't give them an answer until
tomorrow afternoon.
H:
Uh-huh. All right.
HKJr:
We'll settle the thing definitely tomorrow.
H:
All right. First-rate.
HMJr:
O. K.
H:
Goodbye.
32
October 18, 1939
12:02 p.m.
HMJr:
Hello.
Janes
Varley:
This 16 Winchell calling.
ENr:
(Laughs) Is he & friend of yours?
F:
I wouldn't say so.
Har:
(Laughs)
I never
F:
I thought you were going to die the way I read the
pepers.
Life:
(More laughter)
F:
My God ! I I didn't know what to think of things around
here.
Wer:
OI
F:
What the hell possesses a guy to do -- well, of course
I'm not -- let me tell you e funny story about him.
A year ago -- one night -- more - maybe it's a couple
of years ago I happened to Le in the library reading
and listening to him and Bess was listening to him in
her room and Jimmy
Wy:
Yeah.
F:
was listening to the radio. And over -- that
night over the radio he predicted that the Ferley's
were going to have a baby, see, the way he tells
those things.
Mildr:
I know.
F:
So I went in to Bess and I said, "Are you holding
out on me"? And when I was kidding her about it
Jinny came in and said, "Mother, what is Winchell
talking about you"?
33
- 2 -
HMJr:
(Hearty laughter) That's wonderful.
M
Very funny. Now I -- I'm merely telling you this
story to show you how far-fetched -- now he doesn't
care what he says without checking. See?
HMJr:
I know.
F:
It was very funny. You're all right, are you?
HIJr:
Oh, I'm fine.
in
How's the money?
H/Jr:
Oh, we've got lots of it.
F:
Good. Well, take it easy. I'm glad you're all
right. Is everything all right in Dutchess County?
HMJr:
Everything 18 fine. Apples a little cheap but that's
all.
F:
It's as democratic as ever, 18 it?
HMJr:
Just E.S. democratic.
F:
Very good.
HVJr:
We've still got the same congressmen.
F:
0. K. Well that's all right.
HMJp:
All right.
E
See you later.
HMJr:
Goodbye.
34
October 18, 1939
12:05 p.m.
HMJr:
Hello.
Operator:
Mr. Jones.
HNJr:
Hello.
Jesse
Jones:
Hello.
H/Jr:
Jesse?
J:
Yeah.
HVJr:
I'd like to talk to you for 8 couple of minutes if
you're free.
J:
All right, sir.
HMJr:
Oh, back in September I got a letter from Hull and
then one from Welles saying the President wanted to
set up a committee to handle this South American
business, see?
J:
Yes.
HMJr:
But saying that -- laying down the law pretty much
that we couldn't ão anything unless the State Depart-
ment initiated it. Well then, Welles in his letter
said that he'd talk about it when he came back. So
I went over there and first I had a long talk with
Welles and came to an understanding with him. Second,
yesterday Hanes and I went over and had a long talk with
Hull and Welles. Now the point that I made was, I'm
busy, I've got lots of thinge to do and I don't want
to do anything that the President or Mr. Hull doesn't
want me to do.
J:
Yeah.
HMJr:
And if they would like me to do any negotiating with
any country in South America, and they indicate the
country, I'd be glad to take it on. But once I do
take it on I don't want to have happen what did in
Brazil, thet for three weeks they put the screws on
these fellows while they tried to extract some money
from the private bondholders.
Yeah.
Regraded Unclassified
35
- 2 -
HMJr:
And in the process ruined Dr. Arahna's reputation,
his usefulness, and we lose one of the best friends
America's got, which is what happened.
J:
Um-hm.
HKJr:
Now, the outshot of it WGB that I said, "Now look,
if you will pick a country, and pick us & good one
where we've got e 75 percent chance of being success-
ful, I make the suggestion you pick the country and
then that you let Jesse Jones, Welles and I try to
work out a formula."
J:
Yeah.
HWr:
"We'll submit it to the President and see if he likes
it; show it to you, Cordell, and see if you like it;
and then we'll show it to Key Pittman and say, 1 Can
you defend this on the floor of Congress?" Nov
I said, "If 8. fellow has a fire in his store and
he's burned out and there's five thousand dollars
damages and he needs ten thousand dollars to rebuild
and put in a little equipment he's decided he's a
good risk. The banker doesn't say, 'well, I'm not
interested because he already owes me twenty-five
hundred dollars and I'm not going to do anything
until he pays that back first.'
J:
Yeah.
HMr:
And I said, "That's What you're telling these South
American countries," and I said, "Just to protect
the bond committee of Hanson, White and Herbert Feis,
say they won't settle for anything less then e
hundred cents on a dollar."
J:
Um-hm.
RWr:
And I said, "The Treasury permits a company to buy
in its bonds at any price it can." I said, "Jones
got through a bill almost permitting the railroads
to do the same thing and I say what's happened
in the last six years, we haven't made a settlement
with any country." See?
J:
Yeah.
HMJr:
And I said, "You can't put the private debts off in
one corner and at the same time turn about making B.
loan to them and then put the screws on these fellows."
- 3 -
36
And I said, "Look, what have you got out of Brazil?
One million dollars."
J:
Yeah.
HMJr:
And that's all. So I don't know whether you think
I'm talking horse sense or not.
J:
No, I think you're talking sense.
HWr:
So I said, "Jones is doing this every day; he's got
reorganizations; he understands his business and I
think he'll be in sympathy." Well Hull says, "I'm
in entire sympathy." I mean, I -- he said,
"If you're going to rehabilitate a fellow you can't
only talk about part of this thing, you've got to
talk about the whole thing."
J:
That's right.
HiJr:
So that was the purpose of this meeting this after-
noon.
J:
Yeah.
HMJr:
And the idea is that you and Welles and I will carry the
ball and meet frequently until we do one country, but
do it differently than we've done it before; look at
it from the whole -- every standpoint. See?
J:
Yeah.
H/Jr:
Then when we've got something we'll follow the
plan that we've set. Then if it's all right he's
got five or six other countries to do it. See?
J:
Yeah.
H.Jr:
But he said, "Colombia is the easiest."
J:
Yeah. So
HNJr:
What?
J:
So we want to talk that one this afternoon?
HMJr:
We'll talk about that one this afternoon and stick
to it until we either Bay, "We're licked," or here's
a way to refinance Colombia Just as though it WEB a
private business.
Regraded Unclassified
27
- 4 -
J:
O. K.
HMJr:
And we'll have to do something with this private --
this bondholders' protective committee which is the
apple of the eye of Herbert Feis you know.
J:
Um-hm.
HNJr:
And -- but that's the background. Now the President's in
entire sympathy; Hull's entire sympathetic to this and
BO is Welles.
J:
All right.
H.Jr:
But they were going to bring in Federal Reserve. I
said, "What can the Federal Reserve contribute to
this?"
J:
That's right.
HMJr:
I said, "Nothing." I said, "If they can we'll in-
vite them in later on." But I said, "Three people
are enough." And I said, "Jones and I always get
along. We've put through & lot of deals together."
So how does it strike you?
J:
That strikes me all right, and that's what we will
discuss this afternoon.
HMJr:
That's right.
J:
0. K.
HNJr:
All right.
J:
And I'll be there at three.
HMJr:
Thank you.
J:
Thank you.
38
October 18, 1939
2:50 p.m.
HMJr:
Hello.
Sumner
Welles:
Hello, Henry.
HMJr:
Yes, Sumner.
W:
I hope you had a good lunch.
HMJr:
(Chuckles) Gosh, I go to these things once a year
and then I'm always - sat down at a quarter of two
and I left in the middle of it.
:
That's pretty bad.
HWr:
Yes.
W:
I'm glad I didn't go. The President asked me to get
in touch with you AS soon 8.8 I could.
HMJr:
Yes.
%:
And asked me to read this telegram to you which he
has just received from Bullitt,
HMJr:
Right.
W:
Ah -- he first of allrefers to a letter that he sent
to the President and then goes on to say, "I now
have the text of the agreement which Monnet con-
cluded in London for the coordination of French-
British economic activities during the war covering
shipping, air production and supply of rew materials
and munitions, oil and food. Monnet W&B informed
by the British government that you had indiciated
to Lothian that you considered e British mission
preferable to a purchasing corporation. The ques-
tion will be decided in Paris tonight or tomorrow.
Because of the pooling of resources by the French
and British governments, the British -- the French
government 18 inclined to believe that it would be
preferable to make purchases in the United States
through a single joint Franco-British mission.
"My opinion 16 that a joint Pranco-British mission
would be the most efficient mechanism. Question
one, do you agree. I assume from Morgenthau's
39
- 2 -
talk with
on September 13 that such a
joint mission would be able to find the same sort
of cooperation in Washington that was accorded last
winter to Monnet.
"Question two, 18 this assumption correct."
That's the end of the telegram. The President
HMJr:
Please.
W:
is inclined to think as I do that the answer
to both of these questions should be in the affirma-
tive, but he wanted to be sure that you agreed before
I sent the reply.
HMJr:
Well now, Sumner, are you coming over here?
W:
Yes.
HMJr:
I'd like to talk a minute. This -- this is pretty
important.
W:
Yes.
HMJr:
And I'm not smart enough to Just
V:
What?
HMJr:
I -- I'd like to think about it for an hour and then
talk a little bit with you.
W:
Why certainly.
HMJr:
And
W:
Bill called me up on the telephone to ask why we
hadn't sent a reply, that he needed it immediately,
and that's the reason I telephoned you instead of
waiting until I came over.
HMJr:
Well, I -- I don't -- these important things, I can't
-- Bullitt's always in a hurry.
W:
That's right.
HMJr:
And
- 3 -
40
V:
All right, Henry, I'll bring it over with me and then
we can talk about it and you can think it over in the
meantime.
HMJr:
Well, let me ask you a question. In London did he
say it was Monnet or Monick?
W:
Monnet.
HMJr:
Oh. Well, I -- I definitely would like to talk with
you a little bit. I appreciate the President giving
me a chance but certainly 1f he -- if we decide by
four o'clock, huh?
W:
That's all right.
HMJr:
And I'm willing, if anybody asks say I asked for an
hour to think it over.
W:
All right, Henry.
HMJr:
That doesn't seem unreasonable.
W:
I'll bring it over with me.
HMJr:
Thank you, Sumner.
W:
I'll be over in a minute.
HMJr:
Thank you.
October 18, 1939
41
4:00 p.m.
HMJr:
Hello.
Operator:
Mr. Bell. Go ahead.
HHJr:
Hello.
Daniel
Bell:
Hello.
HMr:
Yes, Dan.
B:
Hadley wanted to go up to New York tonight and stay
two or three days - see his sister, I think. Do
you have any objection? He'll be back here Monday
morning.
HSJr:
That's all right.
B:
I think he ought to go. Re has worked pretty hard.
H/Jr:
I think that's all right.
B:
All right, I'll tell him.
HIJr:
Anything else?
B:
That's all. Have you talked to Eccles?
HKJr:
Do you want a good laugh?
B:
Yeah.
H/Jr:
He called me up. He thought they might sell some
bonds now.
B:
(Laughs) I just got through talking to him for a
half hour. I asked him if he would stay out until
we refunded the December. He says, "Oh yeB, I had
no intention of going in before you did that."
H.Jr:
Can you beat him?
B:
But he said, "I hope you refund them right eway 80
that if we have to go in we can go in pretty soon."
HMJr:
God Almighty. Can you beat him?
Regraded Unclassified
- 2 -
42
B:
No. Well, the world has come to an end.
HMJr:
Why? Because the bond market went up?
B:
No, because they're selling. He says they want to
sell.
HMJr:
I told him -- I said it's like when we got & little --
a recovery everybody gets worried we're going to have
too much this and too much that.
B:
Yeah. Say, isn't this thing that was in there this
morning a starting of something clse?
HMJr:
Spending?
B:
Yeah.
HRJr:
Sure, they said so right in the memorandum.
B:
Oh, did they?
HMJr:
Oh, yes.
B:
Oh, I just thought it was a revival of the old
HMJr:
Well
B:
school.
HMJr:
I'd rather have it in my office than in some-
body's
B:
Well, I -- I thought -- God, yes. I thought you were
all right on that but I Just wondered if it was the
same old thing.
HMJr:
Sure.
B:
Well that's what I suspicioned but I couldn't tell.
HMJr:
Well, why not have it in my office?
B:
Oh, it should be there. It's better there than any
place else.
HMJr:
What?
- 3 -
43
B:
I agree.
HMJr:
Fine.
B:
But I just wondered if you recognized the thing.
HMJr:
Well, I -- he said -- he used the -- Jerome Frank
used the thing -- a new spending program.
B:
Oh, did he? I didn't get that.
HMJr:
Yeah. He used it in his memo to the President.
B:
Oh, in his memo. He didn't say that this morning?
HMJr:
No.
B:
Well after I got out I said, "Well, this 18 the old
-- same old head."
HMJr:
Right.
B:
A different hat on it.
HMJr:
Yeah.
B:
All right. All right, thanks.
HMJr:
Goodbye.
Regraded Unclassified
44
October 18, 1939
4:40 p.m.
Jesse
Jones:
Kind enough to suggest to me a few times that I
rest a little more. I think -- I was a little
worried about you this afternoon. You looked
tired.
HMJr:
(Chuckles) That I looked tired.
J:
Yeah.
HMr:
Oh, I feel a little tired.
J:
Well I think you ought to go home.
HMJr:
Well
J:
Don't worry about these damn things.
HMJr:
I don't worry about them. That's right sweet of
you, Jesse.
J:
Huh?
HMJr:
It 18 very sweet of you to call me.
J:
Well, I thought about it after I left there, Henry,
and
HMJr:
Well, they come over here
J:
These fellows from -- like
HMJr:
God, and he had a cable in his pocket from Bill
Bullitt and he wanted an answer yes or no, and he
called me up on the phone and wanted an answer.
And I said, "Stay behind." I said, "Give a fellow
five minutes to think these things over," you know.
J:
Yeah.
HMJr:
But I am a little tired.
J:
Well, I -- I think I'd
HMJr:
I'm going to the theater tonight with my wife. I
hear that's a good play at the National.
45
N I I
J:
Um-hm. Well, go on home and rest a while.
HMJr:
Thank you, Jesse.
J:
Forget it.
HMJr:
I will.
J:
We'll wrestle with them some way.
HMJr:
Thank you.
J:
Goodbye.
HMJr:
Goodbye.
46
October 18, 1939.
MEMORANDUM
TO: Secretary Morgenthau
FROM: Mr. Gaston
Mr
SUBJECT: Steamships PRESIDENT HARDING and BLAIRBEG
At 10:00 p.m. Tuesday the American steamship PRESIDENT HARDING
reported to the Navy Commander of the Atlantic patrol that she was in
a violent storm and needed assistance, particularly morphine, codigne,
splints and other hospital supplies and also an additional physician.
The cutter HAMILTON, the nearest vessel of the patrol, was ordered to
make contact with the PRESIDENT HARDING as soon as possible. At 1:48
the PRESIDENT HARDING reported she was Love to. At 2:10 she reported
a list of injuries, including a skull fracture, broken limbs and
other cases. The HAMILTON made contact with the PRESIDENT HARDING
at 8:45 a.m. today. The sea was too rough for transferring injured
persons but the medical supplies desired were put aboard the PRESIDENT
HARDING. She reported she needed no further assistance and was resuming
her voyage to New York where she expected to arrive Saturday.
The position of the PRESIDENT HARDING at the time of her original
distress call was southeast of Cape Sable and about 1,000 miles out of
New York.
At 2:55 a.m. the patrol intercepted an SOS from the British steam-
ship BLAIRBEG, also in the vicinity of the patrol. At 3:15 the cutter
DUANE was ordered to proceed at full speed to assist the BLAIRBEG, 300
miles away. At 6:44 the BLAIRBEG reported hatches intact and they were
Regraded Unclassified
47
- 2 -
endeavoring to rig steering tackle. The BLAIRBEG later reported
that assistance was no longer required.
Both cutters were ordered to resume their stations.
C
48
October 18, 1939
2082 from Kennedy. VERY CONFIDENTIAL. He has
no answer to 2026. Thinks power of his posi-
tion as Ambassador will be diminished if he can't
handle advise the British about sale of their
securities.
(This 18 filed with other pertinent cables as of
10/24/39, date they were shown to the President.)
approx 10-18-39
49
EXCERPT FROM POLITICAL REPORT FOR THE MONTH OF
SEPTEMBER, 1939, FROM AMERICAN CONSULATE AT
YUNNANFU
B.
Transportation and Communications.
1. Highways.
The washout on the Burma road mentioned in last
month's report has not yet been repaired. Shipments are
still arriving in Yunnanfu, although in greatly reduced
volume. It is reported that heavy rains during the
latter part of the month extensively damaged this road.
So far as can be learned, the Tunnanfu-Kweiyang-
Chungking road has suffered little damage since the rains
reported in June. The Yunnanfu-Luchow-Chungking road 10
scheduled to be opened to traffic in mid-October, but after
so many false reports concerning this route one is
inclined to be skeptical.
The Kwangsi road from Dong Dang to Nanning and thence
northward has been under heavy fire during the past two
months. According to information available in Yunnanfu,
this route is strafed daily by Japanese aircraft;
casualties among both drivers and trucks are said to
be many, and it is becoming more difficult to get
drivers who are willing to take vehicles over this road.
Traffic is still proceeding, much of it moving at night.
It is reported that a new road has been completed
from Caobang, Indochina, to Kweiyang via Hochi, in
Kwangsi. The connecting road from Caobang to Hanoi is
said to be in poor condition, but when improved the route
will
- 2 -
50
will offer a welcome alternative to the other Kwangei route,
as it lies farther to the west.
The Southwest Highway Administration (branch of the
Ministry of Communications) has levied en additional
maintenance tax on vehicles using the roads of southwest
China (exclusive of the Burma road). The rates are:
NC$0.04 per kilometer for passenger vehicles with seven
seats or less, NC$0.08 per kilometer for passenger
vehicles with more than seven seats, and NC$0.06 per kilo-
meter for trucks. These rates went into effect on September
1. It is reported that the Ministry of Communications is
to spend NC$13,000,000 on & road improvement program in
this area.
2. Railways.
The outbreak of war between Germany and France
caused 8. brief period of confusion and stoppage of ship-
ments on the Tunnan-Indochina railway for a few days.
Transit traffic is now permitted to go through, although
shipments of goods to and from Germany are of course,
prohibited.
On September 23 a north-bound passenger train was
wrecked near Kaiyuan, between Mengtes, Tunnan, and
Tunnanfu. There were reported to be 300 casualties (killed
and injured) in this, the most serious accident on the
railway since 1911, when the line vas completed to Tunnanfu.
The
Regraded Unclassified
51
- 3 -
The heavy rains of the last week of September have
washed out the railway in several places and all traffic
had ceased at the end of the month.
52
RE REGULATION OF GOVERNMENT PURCHASES
October 18, 1939.
10:30 a.m.
Present:
Mr. Graves
Mr. Stewart
Mr. Haas
Mr. Bell
Mr. White
Mr. Duffield
Mr. Smith
Mr. Frank
Mr. McReynolds
Mr. Lubin -
Mr. Currie.
Capt. Collins
Mrs Klotz
H.R.Jr:
This meeting, in the first place, 1s White House
business so it is extra confidential. It 1s the
result of two memoranda that I have received. One
is from Mr. Frank to the President, to me, what
are we going to do in case we should have peace,
and the other one 1s from Mr. Currie, who feels
worried about the first quarter of this coming year
and is there anything we can do on Procurement.
Well, I would say they both sort of come together,
what are we going to do 1f business is bad. I
thought if you didn't mind I would try to kill
two birds with one stone, and it looks as though
whatever we did, it might be the same answer.
That is why the thing is here.
Now, to go back a little bit, when McReynolds used
to work for a living and he was over in the Treasury,
before he went to the White House, a couple of years
ago, we did work with the help of Lubin and some
other people - Mac may remember - on this idea of
looking at the particular industries which had
peaks and valleys. At that time we were looking
at them and Government purchases, and in particular
the shoe industry and the woolen industry, and
trying to direct the Government purchasing so that
we wouldn't do it the way the Army did that year,
buy the woolen blankets for two years at the peak
of the market without regard to employment. We
were old-fashioned in those days. We are interested
in employment now. We made all that study and there
were certain industries where we found the Govern-
ment was buying, both from the standpoint of employ-
ment and price, at the wrong time and B. lot could
have been done. We had great difficulty with the
Army and Navy about getting information.
53
- 2 -
While we wait for Lubin, I think inasmuch 8.8
Currie said that he felt that this was the
most useful device that we might use - am I
quoting you right?
Currie:
Yes.
H.M.Jr:
I wonder, Mac, if you would sketch what we
worked out a couple of years ago.
yest
Well, the idea was to schedule the prices, that
is, gather the information. I guess Harry did
that for Procurement. Collins gathered the in-
formation from the Government service and some
from the military branches too, didn't you, Harry?
Collins:
Both the Army and Navy, yes, sir. That was the
principal source of information.
McR:
They are the ones that bought commodities.
3.M.Jr:
Should I ask Harry?
McR:
I think Harry could tell the story 30 far 83 the
gathering in of information went. He would have
a better knowledge.
Collins:
You will recall, Mr. Secretary, the study at that
time was principally on the subject of textiles,
both woolen and cotton.
H.M.Jr:
And that covers shoes too?
Collins:
Yes, but the principal study still came back to
textiles. Well, Procurement at that time was
buying a very large quantity of cotton textiles.
The Army and the Navy, after several meetings and
after digging up quite a lot of information, finally
simply stated that they had to make purchases to
meet the requirements when the requirements arose.
They used as an illustration the uniforms they had
to furnish at that time for the CCC, for which they
had to make those inordinately large purchases of
cotton khaki, With reference to shoes, we had
information concerning what quantities they were
using, but it was not possible, they claimed, under
their budgetary system, to defer purchases or to
Regraded Unclassified
54
- 3 -
step them up, although in the spring of '38 we
did, by direction of the President, make pur-
chases - direct these people to make purchases
of all the textiles and any other commodities
they could, principally textiles, because it
was the textile market at that time we were dis-
cussing.
Procurement, I think, has solved the problem more
than either of them because that was at that time
when we had a valley in the textile production.
We did step in then and buy textiles, which more
or less leveled it off and provided employment for
the industry.
On shoes, nothing much has been done about them.
H.M.Jr:
Well, let me ask you this: Supposing the Presi-
dent decided that he wanted to conserve the
Government cash - I have asked Harold Smith to
be here; he will be here late - in case he wanted
to have B. shock absorber, in case of peace abroad
or in case of business turning down, how could
the President direct whoever he wished to direct
to po about - I mean whether it is the Maritime
Commission in building ships or whether it is the
Army or Navy or Procurement, I mean what sort of -
didn't we have 8. paper set up? I thought McReynolds
worked on that. I mean, isn't there of set-up some-
where that could be set up over the President's
signature to very quickly do this thing, because
they are placing the orders every day and they
are tremendous. Mac, didn't you have a set-up?
ECR:
No.
H.M.Jr:
I am doing my home work in front of you gentlemen,
1f you don't mind.
HeR:
It would be a budgetary control, of course, 80 far
as purchases outside the Army and Navy are con-
cerned. They could withhold, wherever it was
possible, through orders issued through Procurement.
55
- 4 -
So far as the Army and Navy are concerned, the
orders would have to come - since they have no
control over them, the orders would have to 80
from the President directly through the heads of
those departments. It would be B. withholding of
authority, just spending money for these supplies,
I suppose.
B.W.Jrt
Mac, wouldn't it be very simple to draw up B. piece
of paper for the President to sign to get how much
money 19 left in all - out of this year's budget?
I mean, say that he would like the answer by Monday
from every department head, how much money they
have got left of money other than salaries.
MeRs
That could be provided, I imagine. Dan could
answer that better than I could, but I imagine it
could be provided every place except the Army.
Bell:
Well, we could give you B. statement by Monday as
of September 30th, get those monthly statements.
I haven't a lot of faith in some of them because
they use B, different definition for obligations,
but each department and
(Mr. Smith and Mr. Lubin enter)
H.M.Jri
Let me give you a rough idea. There are two things,
one, that in the first quarter of next year business
may be bad. Two, we may have peace. The trouble
with these ideas 18 that they come every two years
and go back to roost. I will just take a second to
say there are two schools of thought that have
approached the President. He asked me to get them
out. One is the possibility of 8. downturn in busi-
ness the first quarter. The second is the possi-
bility of peace and what could the Administration
do in either case, and Currie asked - he thought
that the best device that he knew of - am I quoting
you right?
Currie:
One of the devices.
H.M.Jr:
One was the possibility of controlling purchases.
We have gone this far. You (Lubin) made that study
for us of the shoe industry and woolens, and so forth.
At that time we were interested in employment and
still are. I have just gone this far, how could
56
- 5 -
we get for the President and the White House
people here, say by Monday, B. picture which
would be 90 percent correct of how much money
there is available left in this year's budget
other than salaries.
In your absence (Smith), I was asking Dan, former
Budget fellow, how that could be done, whether
we could get by Monday BL picture of how much
ammunition we have got left.
Smith:
I would think so. I think we have got most of it
built up for the summer. Wouldn't you think so,
Bell?
Bell:
Yes, I was just saying.
Smith:
Within certain limits, possibly.
Bell:
We could get by Monday 8 statement as of Septem-
ber 30th, showing the unobligated balances. In
some cases, I think we might have to go back to
the departments, because I haven't a lot of faith
in some of their figures, but we could get that,
I think we would have to consider that October is
about gone, as far 89 obligations are concerned.
Now, as to the control over the next few months,
each department is required under law, 8.8 you know,
to submit to the Director of the Budget in July
an apportionment of their appropriations over the
year, which receive the approval of the Director.
Now, if the President wanted to control that for,
say, November, December and January, he could
direct the departments to submit again their
apportionments, sheets, for those months with
the reduction of any figure that he wants to show
in the obligation and 15 or 20 percent, putting
that amount in a reserve to be released upon -
subject to the approval of the Director.
H.M.Jr:
Isn't that something as of the first of November,
taking for granted that October 13 gone? Why
isn't that O. K.?
Smith:
That depends upon what you want to accomplish,
or the objective. I haven't listened enough to
get it all.
Regraded Unclassified
57
- 6 -
Bells
I take it what the Secretary wants is to roll
up B. reserve of four or five hundred million
dollars that can be put into subsequent months
when business curves go down. Is that right?
H.M.Jr:
Well, I am talking - the President gave me a
copy of Frank's memorandum, which is on one angle,
and Currie and I had a telephone conversation.
I say I am doing my home work out loud. It seems
to me that it 18 the height of stupidity to over-
look B. bet and not to have some kind of a cushion.
If we can do it and show the President how it
could be done and he likes it, he can say, "Fine,
do it, " but at least we can put it on his desk
by Monday and say, "Now, Mr. President, you can
save three to five hundred million dollars that
you could release whenever you see fit. Do you
want to do it?" Well then, we have done our
duty on this front. That is all,
Currie:
That is right.
E.B.Jr:
Would that cover what you had in mind?
Currie:
Yes, Mr. Secretary.
H.M.Jr:
Am I talking too fast or too much?
Currier
Not at all. What the possibilities are, without
disrupting any agency's program, of pushing cer-
tain purchases over for E few months, what further
possibilities there might be in the first quarter
of anticipating requirements for the remainder of
this year on supplies.
H.M.Jr:
That would be B little bit different.
White:
Is it so much a question of postponing purchases
8.9 also postponing orders, in view of the fact
that a Government order itself is sufficient to
get production started, even though they can say
the funds wouldn't be forthcoming for another few
weeks or a month or two?
Currie:
Yes.
Bell:
That is the reason I said control the obligations
Regraded Unclassified
58
- 7 -
rather than the cash. If you controlled the
obligations, you would control that.
H.M.Jrt
Well, immediately when we began to do it, certain
people would begin to holler and then it comes
down to the question of how serious is the holler.
White:
Then there is the further danger, which one has to
take into consideration, that if that is going to
be done on any substantial scale and if there
should be a downturn in January, that 1a why the
downturn will occur. One would have to weigh that
possibility. They will allocate the downturn or
cessation to any very large reduction in Government
orders if it does amount to a very substantial
amount.
Currie:
I take it
Frank:
I take it that the problem Mr. Currie raised
arises from the huge volume of orders anticipating
demand that is now expanding inventories and likely
will lead to a drop subsequently. I think that
general notion has been percolating into the public
mind. You see it is getting into the press and
it 18 not merely governmentally-inspired sources.
I think industry generally is really concerned.
Currie:
Yes.
Frank:
And therefore I think a corrective from the Govern-
ment would not be resented as it might have been in
some other period. I think there is a general
apprehension on the subject.
H.M.Jr:
There we could get much more scientific with the
help of Lubin and Lubin could show us which indus-
tries are working above 8. hundred percent.
Currie:
It 1s my recollection, Mr. Secretary, that in that
week in September in which the cotton textile in-
dustry had the biggest orders in history, that we
also put a big order in that week.
Lubin:
Here is the way the figures look
H.M.Jr:
I have given Lubin 25 minutes' notice, 80 that 1s
20 minutes more than he is accustomed to.
Regraded Unclassified
59
- 8 -
Lubin:
Here is the way the figures look. When print
cloth was selling for 4 and 3/4ths, we bought
from August 21st to 26th, 91,000. The week of
August 28th to September 2nd, we bought 111,000.
The week of September 16th, when prices jumped
to 5.6, which was a cent increase or 20 percent,
we bought 1,404,000 dollars worth the next week,
then 1,005,000 dollars worth. Then print started
falling about the 25th of September and we cut
our orders.
Heas:
We represent the public.
E.M.Jr:
I hope that isn't all Procurement.
Collins:
No, sir, it 1a not.
Lubin:
It includes everything.
H.M.Jr:
Were we in on that?
Collins:
We were in on some of it, sir.
H.M.Jr:
Couldn't you, by Monday, if they were getting
these figures, having three or four days to work
on it, show which industries they should ease up
on first? Then the criticism would be diminished
and we would be doing it on B more or less intelli-
gent basis. Just the way we did two years ago,
say, "For heaven's sake, ease up on woolens or
shoes."
-Lubin:
Of course, your big problem, as I understand it,
is that they say they have got to buy when they
feel they need it.
White:
It is & question of defense versus economy with
them and they say they cannot delay purchasing.
H.K.Jr:
I am satisfied that it is Just baloney, just
100 percent baloney. The more contact I have
with the Army and Navy - I will say that because
I am in the hands of my friends here - the less
respect I have for their purchasing. We are in
this thing now on the strategic war materials.
They are just driving us crazy. Their little
ten million dollars causes us more trouble than
8. hundred million dollars of regular stuff. Is
that right, Collins?
Regraded Unclassified
- 9 -
EO
Collins:
That is right, sir.
H.M.Jr:
They don't know one day to the next what they want.
It is deadly. I would like to talk to Collins and
Graves and you (Currie) about that manganese, if
you will stay afterwards.
Currie:
Yes. But it does mean, Mr. Secretary, as Lubin
suggested, that we can't do an awful lot without
the Army and Navy.
H.M.Jr:
You fellows over there and the Director of the
Budget - I mean unless you have gone socialized or
something and would like to be invited out to
Ft. Meyer or something, you can direct the Budget.
It is Just a question of being a little tough.
Smith:
It 1s a little difficult right now to be tough
with the Army and Navy.
Bell:
They are sitting on 8. pedestal, aren't they?
Smith:
I often read the decisions in the newspapers my-
self.
H.M.Jr:
I have had an illustration during the last week
where the President was and got just what he wanted
and got it within five hours, so I mean if he wants
it I am sure he can get it.
Frank:
He is still the Commander-in-Chief.
White:
How important might the shipping program be in this
connection? They are doing an awful lot of building.
Couldn't they curtail their program?
Currie:
I am afraid on that, Harry, that is mostly let out
by contract. You mean the Maritime or Navy?
White:
Maritime.
Currie:
Maritime 1a mostly all by contract.
H.M.Jr:
Mostly done, too. You (Bell) looked into that a
month ago. What was the story?
Bell:
I have forgotten the figures, but they have & sub-
stantial amount of contracts left between October
61
- 10 -
and June and 80 does the U. S. Housing Authority
have & mumber of contracts yet to let. The Navy
does all of its work by contract, either private
or at the Navy Yards, but if the contract isn't
let, that is the place to stop it for B. couple of
months.
Prank:
Even if it has been let
Bell:
and work hasn't been started, you can delay 1t.
Frank:
Maritime could delay it, couldn't it? I would think
under some of their contracts they could go to the
person and arrange to slow down their purchases, that
they shouldn't put in their orders for some time.
Bell:
Give them an extension of time.
Frank:
And ask them not to let their orders stop.
Bell:
That probably could be done, yes.
H.M.Jr:
Jerome, did you have some other ideas than this?
Frank:
I was thinking very vaguely in terms of our situa-
tion, what we might do over at SEC in case of peace.
Then I suggested that the situation seemed to be so
disturbing as to the possibilities of the effect on
industry of sudden peace that I thought we might be
putting something in the cooler as to - I was thinking
in terms of a. longer range program of legislative
activity, what kind of B. program we might want to
have ready for next session for governmental emergency
spending if it happened, because - I may be wrong,
but I would think that with the present inventory
situation and with persons' expectations throughout
all the country, which doubtless is affecting con-
sumption buying to some extent, a sudden peace might
mean a really serious recession.
Currie:
That is what we are afraid of.
Frank:
I think you are right.
E.M.Jr:
Let's try to have something by next Monday.
Frank:
This 1a something you can do now.
C2
- 11 -
H.M.Jr:
This is something we can do and then this legis-
lative picture will take longer.
White:
Is there any possibility of doing anything in
cooperation with the States, any of the large
States?
H.M.Jr:
On roads.
White:
Possibly in our other matters. Some of those States
are very big purchasers, and if you can get a half
dozen of the largest States to cooperate in some
measure, they might almost duplicate the Federal
activities.
Trank:
Particularly those where the Governors are friendly
to the Administration, I would think, for instance,
New York, perhaps, say Illinois, now. I think
Horner would probably respond quickly.
Currie:
This request for information, Mr. Secretary, do you
think it would be advisable to have it broken down
somewhat between the regular continuing expenditures,
salaries and supplies?
H.M.Jr:
Yes. Well, let me ask the Director of the Budget,
how would you like to do this, set up a little
committee 30 we can have something by Monday?
Smith:
Well, it doesn't make any difference to me what
is set up in the way of 8. committee. It seems to
me that you have got in Procurement a bottleneck
there that you can start to work on right away.
We scrapped through this problem of setting up
reserves. It is awfully difficult to go back and
revise that, I mean, and get immediate action,
whereas it seems to me in Procurement you might get
inmediate action by just refusing to do certain
buying until people are brought in and
E.M.Jr:
I thought you were a nice fellow.
Sell:
I don't think there is enough money involved, is
there, Harry?
H.M.Jr:
You couldn't do that. It has to be done openly,
I mean saying that you would freeze so much money.
Regraded Unclassified
E3
- 12 -
I haven't reached the point where I want to recom-
mend it but I think we ought to take a look at it.
I wouldn't put Harry Collins out on the end of a
limb and say such and such & department wants some-
thing and just don't do it, just stall them. That
wouldn't be fair to him.
Smith:
What I am thinking of, we may be piling up the Pro-
curement items between Army and Navy and those
items over which you (Collins) have control and
which you purchase. That would be obvious to you,
probably, immediately, where it was not to others.
I don't think you would get any such quick control
through a readjustment of funds. That 18 a longer
proceeding, holding back on all sorts of expendi-
tures.
H.W.Jr:
If the President wants to do this and he will tell
the Secretary of War and Navy he wants to do it,
I can talk with them. If he says he wants to do
it, we could work out a program in 24 hours. Mac
and Lubin and others went all through this thing
and to do anything unofficially without the authority
of the President of the United States back of it
is just a headache and I haven't got the time to
take on unnecessary headaches.
Smith:
I wasn't suggesting that, but I think it is a very
important part of the plan that the bottleneck is
right in Procurement where we execute it.
H.M.Jr:
Well
Smith:
Am I wrong in that? I am looking back in my State
experience in a smaller organization where the
purchasing agent 13 across the hall and we get
together and we stop these things.
P.M.Jr:
No, but don't mind my saying you are wrong.
Frank:
Procurement doesn't have anything to do with Army
and Navy purchases at all.
Smith:
I understand that but I mean there might be some-
thing worked out there.
Regraded Unclassified
- 13 -
64
H.M.Jr:
If I hadn't had this experience over two years
ago - Mac, you went all through that - it is
just a. headache.
delts
November, 137, is when we started working on this,
M.M.Jr:
That is a significant date. It will have to be
put down on a piece of paper. The President will
have to look at it and he will have to call in the
Secretary of War and Navy and say, "I want this
done, and he does. And then he will tell them
to tell Mr. Smith and Mr. Jones and Army and Navy
to work with whomever he designates.
Amith:
Well, I don't disagree with you on that. However,
I just came from a conference this morning in which
we were worrying about the same thing from the other
end. The Army and Navy have been given certain
orders to 80 ahead. They have already committed
themselves to an extent which worries us very greatly
in the Budget office and from the practical point
of view it is going to be extremely difficult to
stop filling their orders at this time. I don't
think you can get the terms for setting up reserves.
That has been done. And when the pressure arises,
the reserves are broken through and Navy, as you
say, those issues have got to be sifted out rather
carefully and I think to get immediate results,
there would have to be, as you suggested, a very
careful set of specifications without many "ifs"
and "ands".
Currie:
You may find, Mr. Secretary, that there have been
so many committments made, 60 much in the works at
the moment, that the best bet may be to see what
anticipatory buying we could do.
H.M.Jr:
If there is so much going on, if the President
moved back It would be worth while because Dan, I
think, and perhaps Harold have been weeping
on my neck that the President 1s breaking the law
by not sending up e. deficiency bill at this session
and that was just on his own initiative. I am
rather suspicious of Dan. Dan got 8. little cross
with me because I wouldn't do something about it.
No, I was just kidding.
Well, anyway, let's give the President the picture,
Regraded Unclassified
65
- 14 -
whatever it is. If they are overboard, over-
expended and dragging along because they are
spending money they haven't got, let's give him
that picture. Has he got it?
Smith:
He has got a good part of it.
Frank:
But the other could also be canvassed, the antici-
pating volume in January.
H.M.Jr:
Should I appoint a committee?
Smith:
Yes,
H.M.Jr:
Well then, why don't we do this, because these
are the people: Do you (Mr. Frank) want to sit
in or wait until it comes back to me?
Frank:
I wouldn't have any technical knowledge.
H.M.Jr:
You can wait until it comes to me. Will you (Mr.
Smith) serve?
Smith:
Yes.
S.M.Jr:
And Mr. Currie and Mr. Collins and Bell and
McReynolds. How is that? And Lubin. Could you
meet, say Monday, and then come back here Tuesday
at 11:00 o'clock?
Smith:
I think 80.
H.M.Jr:
You see, that is Smith, Currie, Lubin, Collins,
Bell and McReynolds.
White:
There is another possibility
H.M.Jr:
Just a. second. Be back here Tuesday with something
on paper at 11:00 o'clock.
Currie:
Something on paper.
H.M.Jr:
This is weighted pretty heavily for the White House.
They ought to get something done about it. We
will see what this new combination over there,
the "Silent Six," can produce.
- 15 -
C6
Currie:
Maybe they will produce silence.
H.M.Jr:
Is there anything else?
White:
There is another possibility that
H.M.Jr:
This is the voice of Harry.
White:
That is that
H.M.Jr:
He got 1t, all right.
White:
I looked at Currie's face and I got it.
There is the possibility of cooperation with the
British and French Governments and I am sure that
a good many of their very large orders which they
are giving now can be regulated without interfering
with their necessary output.
R.M.Jr:
May I say without explaining it that that is under
complete control. I can't explain it now. The
President is entirely aware of that situation.
It is a good idea. He has got the picture. Any
other suggestions? Well, I am not going to be
disappointed, am I, on Tuesday?
MoR:
I think 30.
Smith:
I couldn't swear that you wouldn't be.
H.M.Jr:
Don't disappoint me.
McR:
I don't mean you will be disappointed about having
a report.
M.M.Jr:
I mean this is just something to put on the Presi-
dent's desk, does he want to do it.
McR:
You want to get the significance of the facts and
what could be done. As far as getting that, I
think we ought to be able to give you the facts.
H.M.Jr:
I think Lubin could give us & few glaring examples,
There is another angle to the thing. A very bright
young fellow came in here two or three weeks ago,
Bob Stevens, and he 18 in the textile business and
he says that the Navy, I think, was in the market
- 16 -
for 75 or 100 thousand blankets, woolen blankets,
and they could only get the order filled for
25,000. He had all the figures ano said that
England had bought far in excess of the wool
they need from Australia and South Africa and
why not swap some wool for some cotton. I made
the suggestion that we take this wool as we did
in WPA, keep title to 1t, give it to the mills
and pay the mills In wool for manufacturing for
the Army and Navy or anybody olse that wanted 1t.
1 sent him over to the Department of Agriculture
and nothing happened, but the woolen picture
must be something terrible on prices. The thing
that we are talking about 18 what the so-called
Stettinius Board was going to do, but they are
either out of town or on the way out of town.
The President will have to substitute something
to take its place. Is that right, Lauch?
Deric
I think so.
Right now It is all on you peoples' heads. This
group we are talking to have got to do something
for him. You can give us some good examples, can't
you, Lubin?
Lubin:
I think SO.
The woolen situation must be terrible. Now, I
don't know whether it is so or not, but they tell
me that the automobile truck - Woodring made the
statement that ne couldn't get B. delivery of a
truck for the Army for six months. I don't
believe it, but that is what he said.
Lister:
We can check that pretty definitely through a con-
tact with the truck manufacturers.
U.M.Jrs
I will tell a story out of school. Somebody asked
the President 1f the var ends and you are going to
have A general mobilization in & month, how was
the General going to get down there. The Presi-
dent said, "Let him walk."
Now, Frank, are you satisfied with this for one
meeting?
Regraded Unclassified
C8
- 17 -
Frank:
Fine, excellent.
H.M.Jr:
Currie?
Currie:
Yes, Mr. Secretary. I think this ties in with
1t. WPA has been asked to give me their schedule
of anticipated expenditures for the end of the
year.
H.M.Jr:
We do their buying.
Currie:
Not on their buying but the people they intend to
carry on their monthly expenditures.
Bell:
I saw in the paper that they went up the first part
of October. I wondered why.
Haas:
They have been going up for three weeks.
Bell:
Yes.
Currie:
You say they are going on 8. prior schedule worked
out three or four months ago and perhaps there
should be some revision in it in line of the new
prospects we expect this year.
H.M.Jr:
Currie, as long as you have raised this thing,
somebody has got to carry the ball and see that
the boys meet and everything else. Would you
mind doing that?
Currie:
I would love to.
H.M.Jr:
Somebody always has to.
THE WHITE HOUSE
WASHINGTON
LY CONFIDENTIAL
October 13, 1939.
MORANDUM FOR
THE SECRETARY OF THE TREASURY
Will you speak to me
shout this?
F. D. R.
HIGHLY CONFIDENTIAL MEMORANDUM
October 4, 1939
TO:
The President
FROM: Jerome N. Frank, Chairman,
Securities and Exchange Commission
Although there may be no great likelihood of its
occurrence, it would seem unwise not to be prepared for
the consequences to the economy of the United States of
a: peace in Europe in the near future. with that in mind
I am having some of the staff prepare a highly confidential
memo (which I shall review and revise, if necessary before
sending it to you) as to the possible effects on the security
markets of such a peace (In the light of the current condi-
tion of the market) together with suggestions for measures
to be adopted in such circumstances. I shall send you such
a memo in the next few days.
I respectfully suggest that it might be well if some-
one, perhaps Secretary Morgenthau, were to call together
the representatives of several government Departments and
agencies to conslder that general problem jointly; in such
a conference, special consideration ought probably be given
to the necessity of incressed government spending, in the
event of such a peace, in the light of the present inventory
situation and the possible cessation of armament programs
abroad.
TREASURY DEPARTMENT
71
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
October 18, 1939
MEMORANDUM FOR THE SECRETARY
Supplementing my memorandum of October 17th concerning the supply
of coal in the several departments of the Government, information
has just been received to the effect that of 146 Army posts 7 have
no reserve supply; 24 have storage capacity approximately 25% filled;
25 approximately 50% filled; 18 approximately 75% filled; and
72 approximately 100% filled.
of 1224 CCC camp locations, 156 have no reserve supply of coal;
352 have storage capacity approximately 25% filled; 286 approximately
50% filled; 167 approximately 75% filled; and 263 approximately 100%
filled.
Director Agalin of Procurement
12
October 18, 1939
MEMORANDUM FOR THE SECRETARY
Supplementing my memorandum of October 17th concerning the supply
of coal in the several departments of the Government, information
has just been received to the effect that of 146 Army posts 7 have
no reserve supply; 24 have storage capacity approximately 25% filled;
25 approximately 50% filled; 18 approximately 75% filled; and
72 approximately 100% filled.
of 1224 CCC camp locations, 156 have no reserve supply of coal,
352 have storage capacity approximately 25% filled; 286 approximately
50% filled; 167 approximately 75% filled; and 263 approximately 100%
filled.
Director of Procurement
HRC:ga
Regraded Unclassified
@JUADRUPLICATE
289
no.
Treasury
73
AMERICAN
CONSULATE
Bangoom, Burna, October 18, 1939.
STRICTLY CONFIDENTIAL
Subject/iar materials for China, statistics of imports at Rangoon.
THE HONORABLE
THE SECRETARY OF STATE,
WASHINGTON.
Sir:
I have the honor to refor to telegraphic information recently
furnished the Department, and to transmit herowith statistics of in-
ports at Rangoon of war materials for China, passed for transit
through Burna by the local'Custams authorities during the period from
August 3, 1939, to September 15, 1939, both dates inclusive.
The materials covered by the enclosed statistics were valued
for Customs purposes at Rupees 1,322,654, or $462,929 at exchange of
35 cents to one rupee. On September 15th the total value of all
transit shipments to China was Rupees 74,880,628, or approximately
$26,211,369.
Transport difficulties on sections of the Yunnan-Durm highway
because of damage by rains had much to do with the reduced movement
of was materials to Chima during the six weeks under review. In the
first half of August the materials shipped had a value of only
Rupees 80,487 ($28,170). The Customs authorities are now making only
monthly reports of shipments, but it is stated that statistics will
again be compiled fortnightly when transit shipments are increased.
Respectfully yours,
Austin C. Brady
American Consul
In quintuplicate to the Department.
D
800
- 2 -
74
RAR MATERIALS FOR CHINA.
Statistics of imports at Rangoon inspected and passed for transit by the
Burna Customs authorities during the period August 3 to September 18, 1939.
Type of
Humber
Description
Country of
Value
Material
pkgs.
and quantity
origin
Rupees
Aeroplane parts
and accessories
1
No description
United Kingdom
9,098
8
M
1
United States
10,699
Detomators
11
For shells; 1990
Germany
10,448
Tracers
22
For shells; 100,000
-
60,941
Machine guns
1
Bren gums and equip-
ment; 4
United Kingdom
6,372
6
Colt gums and equip-
ment, 50 cal., 3
United States
9,638
1
Colt aircraft gun and
convertible parts, 50
cal.; 1
#
-
3,493
303
Madsen 7.92 light
guns and equipment;300 Denmark
590,580
Rifles
440
Mauser 7.9 m.,11,000
Belgium
618,356
8
7.9 - (Make not
stated); 19
United Kingdom
1,206
Cartridges
4
For Bren machine
gume; 8000 rounds
-
If
1,129
8
7.9 - in clips;8000
=
=
636
1
38 caliber; 800
-
-
58
Total
1,322,654
- 3 -
75
WAR MATERIALS FOR CHINA.
Imports at Rangoon inspected and passed for transit by the Burna Customs
authorities during the period August 3 to September 15, 1939.
RECAPITULATION
VALUES BY COUNTRIES OF ORIGIN
Country of
Value
Equivalent
origin
Rupees
U.S. Dollars
1. Belgium
618,356
216,425
2. Demark
590,580
206,703
3. Germany
71,389
24,986
4. United States
30,202
10,571
5. United Kingdom
12,127
4,244
Total
1,322,654
462,929
VALUES BY TYPES OF MATERIAL
Type of
Unit
Quantity
Value
Equivalent
Material
Rupees
U.S. DOLLARS
1. Rifles
No.
11,019
619,562
216,847
2. Machine gums
-
308
610,083
213,529
3. Tracers
.
100,000
60,941
21,329
4. Aeroplane parts -
19,797
6,929
5. Detomators
#
1,990
10,448
3,657
6. Cartridges
#
13,800
1,823
638
Total
1,322,654
462,929
BECEIAED
eeer 12 von
"
public où yrs e
you di M I -
Regraded Unclassified
76
PARAPHRASE OF TELEGRAM SENT
TO: American Embassy, London, England
DATE: October 18, 1939, 3 p.m.
NO.: 1244
FROM SECRETARY MORGENTHAU.
Re telegram No. 2004 of October 11, 6 p.m., from
Butterworth.
You are provided with the following strictly confiden-
tial information, for guarded use only. It 1s assumed that
a responsible official requested the information.
Approximately $240,000 were held for the account of
the National Bank of Czechoslovakia in New York around the
fifteenth of March. The New York banks with which these
balances were held for a few days after March 15 undertook
voluntarily to refrain from permitting any important or
unusual withdrawals from these accounts for Czechoslovakia.
Since that time, the policies which the individual banks
have followed have been determined independently and upon
their lawyers' advice.
HULL
(HF)
HEOFINED
ever 05 33
EA:LWW him HD
VIS - You 170 And
-
MA
GRAY
77
BE
Paris
Dated October 18, 1939
REC'd 3:47 p.m.
Secretary of State
Washington
2513, October 18, 6 p.m.
FOR THE TREASURY.
The securities market had EL firm undertone today
and most issues advanced. Rentes were stronger and the
1925 and 1937 exchange guaranty issues advanced 2.10
and 1.70 respectively. The more optimistic tone prevailing
on the Bourse today is attributed to the "failure" of the
recent German air raids against England, on the favorable
interpretation given the departure of the Turkish Foreign
Minister from Moseow without signing a treaty, and on
a general feeling that Hitler is uneasy and undecided,
French statistical services have suspended publication
from periods since the first of September of all indices
of production, cost of living, carloadings, unemployment
and similar means of taking the country's Economic pulse.
The Director of the Statistique Generale de la France
informs us that for the time being they had no data
to go on and intimate that the ensors' scissors might
prevent publication if they had.
(END OF SECTION ONE)
BULLITT
EMB:NPL
78
MA
GRAY
Paris
Dated October 18, 1939
Rec'd 4:10 p.m.
Secretary of State
Washington
2513, October 18, 6 p.m. (SECTION TWO)
It is reported from Holland that the weekly statement
of the Bank of the Netherlands shows an increase of
8,000,000 florins in gold holdings bringing the total
to 1,112,000,000. This is attributed in some Dutch
financial circles to German payments for imports from
Holland and it is intimated that the gold ao employed
may have been part of the recent shipment from Russia
to Germany. Other Dutch sources attributed the increase
to dehoarding by private Dutch holders. Total
demand liabilities are 1,426,000,000 as against 1,420,000,000
a week ago and gold coverage has increased to 77.98 %
against 77.81 %.
Paris savings bank deposits for the period October 9
to 14 totaled 9,444,000 francs 83 against withdrawals
of 4,483,000 francs thus indicating a continuence of the
recent more satisfactory trend. (END OF MESSAGE)
BULLITT
BEES
NPL
79
MA
PLAIN
London
Dated October 18, 1939
REC'd 4:57 p.m.
Secretary of State
Washington
(
2083, October 18, 10 p.m.
FOR TREASURY FROM BUTTERWORTH.
My 2004, October 11, 6 p.m.
KENNEDY
NPL
BECEIAED
00, 13 1838
When
- Card will
Terms -
80
REB
GRAY
Berlin
Dated October 18, 1939
Rec'd 7:20 P. m.
Secretary of State,
Washington.
1751, October 18, 7 P. m.
The German preos carries n brief announcement that
following a fortnight's negotiations an agreement was
signed in Belgrade on October 16th Extending the German-
Yugoslavian clearing arrengement for one year. No
details C3 to the results of the trade negotiations
have yet been made public beyond the statement in
papers to at Germany will receive "lead, antimony,
and other netals". The press comminiques do not state
that the DEW arrangemento will result an increase in
total trade between the two countries. IMFORM TREASURY.
KIRK
NPL
Q3V13038
1333 CS 00
107m TRACKS
more - amu
51 el meteral No kival
October 19,1939
81
1250 cable to Kennedy replying to 2082. Question
re marketing American securities by British Govt
is still being turned over in our minds. Helpful
if British Govt would designate one or more people
to discuss this in Washington
(This 18 filed with other pertinent cables as of
10/24/39, date they were shown to the President.)
82
ADD MORGENTHAU
OCT 19 1939
WASHN - SECY MORGENTHAU SAID THE 206 000 000
DLS REFINANCING PROGRAM OF COMMODITY CREDIT
CORP HAS GONE EXTREMELY WELL
ON BASIS OF THE RESPONSE TO THAT OPERATION
MR MORGENTHAU ASSERTED THAT INDICATIONS ARE
THAT THE -EMERGENCY SITUATION- THAT AROSE UPON
DECLARATION OF WAR IN EUROPE HAS SUBSIDED -
AS -PART AND PARCEL OF THAT SITUATION- THE
SECY CONTINUED W R BURGESS TOM K SMITH AND
EARLE BAILIE WHO WERE APPOINTED TEMPORARY
SPECIAL ADVISERS TO THE TREASURY IMMEDIATELY
AFTER OUTBREAK OF THE EUROPEAN WAR ARE
RETURNING TO THEIR PRIVATE BUSINESSES - -ALL
THREE OF THEM HAVE BEEN EXTREMELY HELPFUL-
MR MORGENTHAU DECLARED - -IF ANY OTHER SITUATION
SHALL ARISE THEY WILL BE ON CALL TO COME DOWN
AGAIN-
CONTINUING HIS DISCUSSION OF THE APPARENT
SUBSIDENCE OF THE WAR FINANCIAL EMERGENCY
INSOFAR AS THIS COUNTRY IS CONCERNED MR
MORGENTHAU ASSERTED THAT PRICES OF LONG TERM
GOVERNMENT BONDS ARE NOW HIGHER THAN THEY WERE
ON SEPTEMBER 3 AND THAT THE BOND MARKET IS
APPARENTLY RETURNING TO NORMAL - AS A RESULT
HE SAID THAT THE NEXT MATTER WHICH THE
TREASURY WILL TAKE UP FROM A FINANCING POINT
OF VIEW WILL BE THE REFUNDING OF THE TREASURY-S
526 000 000 DLS NOTE MATURITY ON DEC 15
October 19, 1939
SECRETARY NORGENTHAU SAID THAT THE EMERGENCIES RESULTING FROM THE
EUROPEAN war HAD SUBSIDED so FAR AS THE TREASURY was CONCERNED.
10/19--R1052A
ADD MORGENTHAU
BECAUSE OF THIS MORGENTHAU SAID THAT HE HAD RELEASED THREE BUSINESS
MEN ADVISORS TO EMABLE TEEN TO RETURN TO THEIR OUR ENTERPRISES.
THEY ARE V. R. BURCESS, VICE CHAIRMAN OF THE NATIONAL CITY BANK OF
NEW YORK; TOM K. SMITH, PRESIDENT OF THE BOATHEN'S NATIONAL BANK OF ST.
LOUIS: AND EARLE BAILIE, CHAIRMAN OF TRI-CONTINENTAL CORP.
MORGENTHAU SAID THAT THE REFUNDING OF $206,000,000 COMMODITY CREDIT
CORPORATION NOTES "WENT OVER EXTREMELY WELL.
10/19--R1059A
ADD MORCENTEAU
*IT 18 INDICATIVE THAT EMERGENCY CONDITIONS ARISING FROM THE
SITUATION OVER THERE HAVE SUBSIDED," MORGENTHAU SAID.
THE BOND MARKET, HE ADDED, IS SETTLING BACK TO MORNALCY. THE
PRICES or LONG TERN GOVERNMENT BOMDS ARE NIGHER THAN THEY WERE SEPT.
3.
THE NEXT ORDER OF DUSINESS, THE SECRETARY SAID, WILL BE THE REFUND-
ING IN ADVANCE OF A $526,000,000 TREASURY NOTE ISSUE COMING DUE DEC.
15.
REFERRING TO HIS THREE SPECIAL ADVISORS, HORGENTEAU SAID THAT THEY
HAVE BEEW EXTREMELY HELPFUL IN THE SEVEN VEEKS THEY VERE HERE.
*IF ANY OTHER SITUATION SHOULD ARISE," HE ADDED, "THEY WILL BE on
CALL TO COME DOUN ACAIN."
THREE OTHER SPECIAL ADVISORS, ALL OUTSTANDING ECONOMISTS, WILL
REMAIN AT THE TREASURY, MORCENTRAU SAID, BECAUSE THERE ARE STILL HANT
PROBLEMS *IN THE TRENENDOUS SHAKEUP THAT'S COING ON IN THE WORLD
TODAY- THAT WILL REQUIRE CONTINUOUS STUDY. THESE ADVISORS ARE JACOB
VINER, OF CHICAGO, UNIVERSITY, AND VALTER W. STEWART AND WINFIELD F.
RIEFLER, BOTH OF THE INSTITUTE FOR ADVANCED STUDY,
PRINCETON, N.J.
10/19--R1107A
ADD MORGENTEAU
THE SECRETARY DISCLOSED THAT UNDER SECRETARY or STATE SUNNER WELLES,
FEDERAL LOAN ADMINISTRATOR JESSE JONES AND ME NET TESTERDAY TO DISCUSS
A REPORT ON THE FINANCIAL ASPECTS ARE SCHEDULED FOR CONSIDERATION
AT A MEETING HERE NOV. 15 OF THE INTER-AMERICAN ECONOMIC COMMITTEE.
10/19--R1113A
TREASURY DEPARTMENT
85
INTER OFFICE COMMUNICATION
DATE October 19, 1939
TO
Secretary Morgenthau
FROM
W. H. Hadley
Treasury Notes
Maturity
Coupon
Yield
Market Price
Premium
4 yrs. 10-1/2 mos.
1%
0.85
100.23
23/32nds
(Sept. 15, 1944)
0.90
100.15
15/32nds
1-1/8%
0.85
101.11
1 pt. 11/32
.
0.90
101.3
1 pt. 3/32
1-1/4%
0.85
101.29
1 pt. 29/32
0.90
101.22
1 pt. 22/32
e Appears to be best issue in present market although a 1% issue
might & all right.
TREASURY DEPARTMENT
86
WASHINGTON
October 19, 1939.
MEMORANDUM
To:
Secretary Morgenthau
From: Mr. Bell
Mr. Snow of the Farm Credit Administration called me early
this morning in accordance with our arrangement earlier in the
week, to see if there was any objection on the part of the Treasury
to selling 10-1/2 months' 3/4 per cent debentures of the Federal
Intermediate Credit Banks in the amount of $29,000,000 on a 0.55
per cent basis. These notes were being offered for the purpose
of raising funds to pay off a maturity of November 1st in the
same amount. I told him that the Treasury was out of the market
on the Commodity Credit Corporation notes last night and that he
was free to go ahead on this basis,
He called me back right after lunch, saying that the books
were open only an hour and a half and they received $75,000,000
tenders in New York City and $50,000,000 outside of New York City,
a total of approximately $125,000,000 tenders for this issue,
which is an over-subscription four times.
swB
TREASURY DEPARTMENT
B7
WASHINGTON
October 19, 1939.
MEMORANDUM
To:
Secretary Morgenthau
From: Mr. Bell
Governor Eccles of the Federal Reserve Board, Governor
Harrison of the Federal Reserve Bank of New York, conferred with
the Secretary today regarding the refunding of Treasury notes
maturing December 15, 1939. Mr. Hanes and I were also present.
Governor Eccles said that they had discussed the Treasury
refunding at the Board during the morning meeting and had all
come to the conclusion, after a thorough canvass of the situation,
that this is an admirable time to carry through this operation.
On the basis of last night's market they thought the Secretary
could offer in exchange a new note maturing September 15, 1944
(4 years 11 months) at 1-1/8 per cent. This, he thought, would
sell at a premium of about a point or better and if the market
continued to be strong, might be a little rich, but if it didn't
change any from yesterday, he would still recommend this security.
On the other hand, he thought the Secretary might want to consider
a 1 per cent, 4 years and 5 months note (March 15, 1944).
He said that most of his people feel that the Treasury
should go ahead and announce it on Monday, next, just like they
did the Commodity Credit Corporation's, but he didn't think that
we ought to consult anybody in the market on Friday and Saturday
of this week.
Then he said that after the refunding of the December 15th
notes was out of the way the Federal Reserve Open Market Committee
might like to consider from time to time during periods of strong
rising markets, letting some of their securities either run off
or make switches or sell on the market. The only comment the
Secretary made on this was that he hoped they wouldn't do any of
these things when the Treasury had a refunding or financing job
to put through,
swif
10/27'39
For my record
12:30 (Noon)
The following papers were delivered
to Mr. Foley upon the request of
Mrs. Klotz:
Carbon copy of Secretary's letter
of 10/19'39 to Senator Barkley
transmitting copy of Wagner's letter
to the Secretary and the Secretary's
reply - both dated 10/19'39 and
stated the Treasury's policy with
reference to the operation of the
Stabilization Fund
(Wagner's letter was a photostatic
copy)
Telephone conversation on 10/25'39
at 11:15 a.m. between Senator
Vandenberg and the Secretary
Initialed copy of the letter of
10/24'39 sent by the Secretary to
Senator Vandenberg re Stabilization
Fund and the purchase of gold.
Original incoming letter under
date of 10/17'39 from Senator Vandenberg
Telephone conversation on 10/23'39
at 9:45 a.m. between Secretary and
Senator Vandenberg about the reply
to his letter of 10/17'39.
Chauncey
88
89
October 19, 1939
Ity doar Senator:
Since Mr. Poley talked with you the other day concern-
ing the activities of the Stabilization Fund I have received
a letter on this subject from Sonator Wagner, copy of which I
am enclosing, together with copy of my reply. I think this
covers the point in which you were interested.
If additional information is needed I shall be happy
to furnish it.
Sincerely,
(Signed) M. Morgenthau, Jr.
Secretary.
Honorable Alben T. Barkley,
United States Senste.
Enclosures
October 19, 1939
so
By dear Senator:
I have your letter of October 19, in which you
refer to recent discussions on the floor of the Senate
with reference to the operations of the Stabilisation
Fund.
of course, as the Treasury Department has at all
times made clear, the Stabilization Fund has never been
used to support the currencies of any foreign country but
bas been used solely for the express purpose set out in
the statute pursuant to which it was created, namely,
to stabilise the exchange value of the dollar. In connection
with the carrying out of such purpose it has been necessary,
0.0 YOU explained at the hearings last spring on the bill
to extend the Stabilisation Fund powers, for the Fund to
soquire foreign currencies from time to time. I should
like to state, however, that the Stabilisation Fund is not
acquiring any currencies of belligerent countries and
is holding only trifling amounts of foreign currencies
of balligerent countries which were acquired long before
the outbreak of the NEJ's
Sincerely,
(signed) H. Morgentham, J:,
Secretary.
Honorable Robert F. Wegner
Chairman of the Senste Committee on Banking end Currency
United States Senate
Meshington, D. C.
UNITED STATES SENATE
Mashington, D.C.
1
October 19, 1939
The Honorable
The Secretary of the Treasury
Washington, D. C.
My over ar. Secretary:
It appears from recemt Alsoussions on the Senate
floor that BORD of the members are fearful that the Stabilization
Fund 1s being used to support the currencies of England and Prance
during this period of war in Europe.
I know that you publish quarterly information which
revenls the operations of the Statilization Fund, but na 1 under-
stand it, the information concerning operations during September
will not be available in the onliner) course of events until
January 1, 1940. In view of the questions which are being raised
at the present time as to the operations of the Stabilization Fund,
I would appreciate it if you mould advise be as Chairman of the
Senate Committee on Banking and Currency whether the Stabilization
Fund 10 acquiring the currencies of England and France or whether
the Fund is supporting these currencies.
I apprediate the resours why the Treasury would
hesitate to make public any information concerning the scope of the
activities of the Fund bithout the lapse at - angquate period of
time but under the circumstances I hope that you will be able to
make an exception in this instance.
Very incerely yours,
(signed) Robert F. Wagner
Regraded Unclassified
92
RE FOREIGN DEPOSITS
October 19, 1939.
10:50 a.m.
Present:
Mr. Hanes
Mr. Foley
Mr. White
Mr. Cochran
Mr. Stewart
H.M.Jr:
All I want, 8.3 Secretary of the Treasury, and for
myself and the President, is to know at any time
what is this account doing. I feel that it 1s not
necessary that the Board of Directors of the Federal
Reserve Bank of New York or anybody other than the
Chairman of the Federal Reserve Board in Washington
to know that.
Poley:
I don't think they have to. You see, Eccles is the
fellow that is saying that such accounts need be
no less confidential than Government accounts which
might be opened by the Federal Reserve Bank, acting
as fiscal agent of the United States under the
plan suggested by the Treasury. Now, if Eccles can
deliver Harrison on that and can agree that you
will get all the information this way that you would
get under the fiscal agency arrangement, then you
are just supposed to go along.
Hanes:
One thing that I drew from that memorandum, my own
impression was that the British and the French Govern-
ments both already have accounts with the Federal
Reserve. Why say anything, but use that account
which has already been opened with the understanding
between the French and the British that they are now
acting as fiscal agents for Treasury and that Treasury
wants to be kept advised by Federal Reserve, with
their permission.
White:
They have other accounts, John.
Hanes:
Well, you can mark them "A", "B", "C" and "D".
White:
I mean they have other accounts than in the Federal
Reserve Bank.
Hanes:
I assume they are going to keep them.
H.M.Jr:
No, not on this one. They are all to be transferred.
That is what they want to do. They are all to be
transferred to the Federal Reserve.
S3
- 2 -
Hanes:
I thought they were just going to make this a buying
account in the Federal Reserve Bank,
Foley:
John, you would never know anything unless you had
them all there because any transactions they didn't
want you to know about, they would put through a
private account.
White:
It seems to me, Mr. Secretary - - first, let me give
you an explanation. I am wondering if you could
omit the first part, that in view of the neutrality
legislation, not to give those fellows the impres-
sion that you are trying to
H.M.Jr:
Supposing I just read Eccles' memorandum.
White:
That would be the best way of handling it.
Foley:
I would read Eccles' memorandum and then I would
say that
H.M.Jr:
"Referring to the talks that you have had with
me regarding a proposal that the Federal Reserve
Bank of New York, as fiscal agent of the United
States, open accounts with the Government of
Great Britain and the Government of France, I
have discussed this matter with the other members
of the Board of Governors. While the law provides
that the Federal Reserve Bank, when required by
the Secretary of the Treasury, shall act as Fiscal
Agent of the United States, it was the opinion of
the Board that there would be some advantage in
handling the matter in another way. It might be
wiser, instead of requesting the New York Bank
as fiscal agent of the United States to open
34
- 3 -
governmental accounts under the plan suggested,
if an arrangement were made under which the Bank
of England and the Bank of France, which now have
accounts on the books of the Federal Reserve Bank
of New York, would utilize such accounts for such
special deposits and withdrawals as in the cir-
cumstances might be necessary. This procedure
has the advantage of conforming to existing prac-
tice. You indicated some question as to the con-
fidential nature of such accounts, Such accounts
need be no less confidential than governmental
accounts which might be opened by the Federal
Reserve Bank acting as fiscal agent of the United
States under the plan suggested. Furthermore,
there is no reason why you could not be as fully
and continuously advised as to governmental trans-
actions handled through the central bank accounts
as you would be as to transactions in the accounts
proposed to be carried on the books of the New York
Bank acting as fiscal agent, provided the respective
governments instructed the central banks to author-
ize the New York Bank to give you the desired in-
formation. I appreciate your discussing the matter
with me and will be glad to be advised currently as
to any further developments in connection with this
or any other important matter affecting the fiscal
agency relations."
Regraded Unclassified
- 4 -
I have talked with everybody on this but Walter
Stewart. Now, would you give me
alawart:
I have talked with Foley. I agree as to the pro-
cedure. It seems to me what you need is to indicate
to then that you want B. certain thing, you want to
have the result. You are going to have the final
result. I didn't know it was to be inclusive. I
didn't know it was to be the only depository of
that nation. I think that 1s awfully important
because otherwise you don't get what you want. I
didn't know that had been arranged.
Well, 80 many things happen and I always try to
give you all the facts. Now, 1f you put me on the
spot and gave me a Bible and said, "Is that the way,"
I an not sure that I could swear to it. I mean,
there is an awful lot of things that go through the
old bean every day and she's a little bit tight,
but If you put me on the spot and said, "Is this
80," I don't know. Let's put it this way, is that
B. good move, in your opinion?
tounet:
I think it 18 essential if you want your information.
If you want a complete prospectus of what 1s going
on, the only way you can assure yourself of it 1a
either to have those governments report in detail
or to have a bank account through which all the
transactions go, not some of the transactions.
Now, this thing just came yesterday. It is ter-
rifically secret, I don't know why, but it is,
They want it guarded so. I am not going to tell
this to anybody with the exception of this group.
As of yesterday, the English and the French came
to an agreement they are going to do all their
buying jointly and the President was kind enough
to ask for my yes or no on it late yesterday. Well,
the only answer was yes. If it is going to be joint,
then it makes it all the more reason, possibly - I
mean 1f they are going to do it jointly, let's have
it all in one place.
play:
It makes it bigger and all the more important why
it should be concentrated where you can see it.
E6
- 5 -
H.M.Jr:
But they want it guarded. This call from the
President and Mr. Welles came over late, so I
don't see what else I can say but yes, do you?
It was only to be consummated in Paris last night.
White:
They were contemplating that.
M.M.Jr:
But it was only approved and they would sign it
last night in Paris.
Penes:
It is my understanding from Lord Riverdale when he
was here that they would keep us posted, wanted
to keep us posted, as to what they were going to
buy, because they didn't want to ruin our buying
through the Procurement division or the Army and
Navy, so they wanted to work out some arrangement
so they could warn us, so to speak, before they
went into the market.
White:
They also don't want to drive up the price so the
American producer wouldn't got the seme advantage
he would get if they were buying independently.
I am wondering whether that angle of it should not
be
B.M.Jr:
Could I just read this?
"Secretary Morgenthau said that the emergencies
resulting from the European war had subsided so
far as the Treasury was concerned. Because of this,
Morgenthau said that he had released three business
men advisers to enable them to return to their own
enterprises.
"They are V. R. Burgess, Vice-chairman of the National
City Bank of New York; Tom K. Smith, President of
the Boatmen's National Bank of St. Louis; and Earle
Bailie, Chairman of Tri-Continental Corporation.
"Morgenthau said that the refunding of 206 million
dollars Commodity Credit Corporation notes 'went
over extremely well'".
O. K., John?
danes:
Excellent, that is fine.
87
- 6 -
H.M.Jr:
Don't you think, Walter, that is all right?
Stewart:
Fine.
White:
There are one or two aspects to both matters.
One 18 with respect to the purchasing, there are
some advantages and there is this disadvantage
from the point of view of the American producer,
and they may have some complaint. I don't think
it is decisive.
H.M.Jr:
Harry, let's just sidetrack that a minute.
Foley:
I think, Mr. Secretary, Harrison is going to kick
on making this information available to you and
that is where there is going to be this disagree-
ment, and I think 1f you sit off and let Harrison
and Eccles fight it out and then let them come
back to you and say they can do it that way, you
will be in a much more strategic position.
H.M.Jr:
Here is the point: I am having a very short dress
rehearsal with you people. I have had none with
them. I have had none with them.
Hanes:
I would like to tell you a reservation that I have
got.
S.M.Jr:
Write it on a piece of paper and give it to me. I
will have time.
(Mr. Ecoles and Mr. Harrison enter)
Marriner, I don't know just how to start this
meeting, but there have been discussions going on
now for, I guess, several weeks as to how the
Administration would like the English and French
Governments to handle their accounts.
(Mr. Knoke enters the conference)
The question is up and I have got to have an
answer this morning, because I am seeing Mr. Osborne
at noon and I have got to give him an answer. The
French have been stalling around and they want an
answer. The purpose 1a, what is best for us to
tell the English and French Governments how we
7
would like to have them handle their bank balance
in this country. Is that the question, Marriner?
Docles:
That is the question.
H.M.Jrs
And, as I understand it, there are two ways it
could be done. Cne, to suggest to them that they
deposit the money in the Federal Reserve in New York
acting as fiscal agency for the Treasury, or, two,
that they deposit the money in the Federal Reserve
Bank of New York.
dlay:
Through their Central Bank.
celes:
That is right, through the Bank of England and the
Bank of France. They both have accounts.
M.M.Jr:
Right. Now, I am willing to listen.
Accles:
Well, the discussion that we had, re came to the
conclusion that there was nothing to be gained by
the establishment of new accounts under the fiscal
agency provision, that the accounts were already
established with the Bank of England and the Bank
of France and that this business could be done
through those accounts, that the information could
be kept Just as confidential as it could be 1f it
were done through the fiscal agency account, that
it would require no action on the part of either
the Board of New York Federal Reserve or action on
the part of this Board here, inasmuch as those
accounts are already established. But the Treasury
could be fully informed with reference to the
activities in those accounts, and they could get
a transcript, 1f the French advised the New York
Bank to furnish the Treasury such information. It
seemed to us the advantage of doing business in
that way was that the relationship had already been
established. It would require no further action.
It would possibly be better, because less comment
and maybe less question would be raised, if you
want to look at the thing from the possibilities
of questions that may be raised by certain people
on the Hill, that there would seem to us to be
less likelihood or practically no likelihood of
any question being raised about the matter 1f it
was done through the existing accounts.
S9
- 8 -
Now, that, in a general way, is the conclusion
that we came to. That doesn't mean, of course,
that there 18 any objection on anybody's part,
that is, so far as the Board is concerned, to
the Treasury establishing this account under the
fiscal agency provision if they choose to. There
1s no question at all raised in that regard. If
they for some reason felt that they would prefer
that, then we would have nothing at all to say
about it. We have no objection to it.
..M.Jr:
Well, this 18 the way I feel: If everything that
can be accomplished that I mentioned to both you
and Harrison, can be accomplished by doing it
through the Bank of England and the Bank of France
and through the Federal Reserve, if we can accomplish
everything we would like to, what we want 18 secrecy
and make it a confidential nature and the Treasury
has access to the information. If we can get every-
thing that way, I am willing to try it.
Recles:
You would get everything that way 1f
H.M.Jr:
I am willing to try it.
Recles:
The Bank of France would instruct the New York
Federal Reserve to supply the information. The
New York Federal would have to, of course, have
that
B.H.Jr:
That could be done both
Recles:
That would have to be done in either case.
H.M.Jr:
In my conversation with the English and the French,
I would simply say that this is easier but we want,
88 far as you are concerned - & rose by any other
name smells as sweet - but we would like to have the
information, whether it is Federal Reserve acting
for the Bank of England or Federal Reserve acting
for the U. S. Treasury. We are telling you before-
hand that we would like this information. There
isn't going to be the slightest trouble with them,
not the slightest. They want us to have the informa-
tion. They are anxious to have us have it. They
are interested. The other thing, 1f there can be
the same secrecy around the account in the Federal
Reserve as there would be if it was B. fiscal agency,
I would like that.
100
- 9 -
parpison:
I think there 1s no question as to that, Mr. Secre-
tary. In either case, it is the Federal Reserve
Bank of New York that takes the deposit, as a cor-
poration. Under the law, the Directors are responsi-
ble for running the corporation and for its conduct.
Technically, I presume that they could ask for any
information that is on our books, because it 13
their Bank and they are responsible for its running.
As B matter of practice, however, they never do and
never have, that I know of, asked for the details of
operations of any of these accounts. We don't give
it to them end they don't expect it. If there is
any question about It, that could well enough be
covered in advance, certainly 8.8 to the account
which we will label "X", we will say, that is the
account to be handled for the Government.
Supposing some member of your Board did ask.
Earrison:
Well, I think that I would have to get a Board action
on the request. I would recommend that we not give
it to them and I am sure of B. conclusion. As a
matter of fact, I have this understanding with my
Directors on all foreign accounts, not only on the
fiscal agency's operation, that we do not disclose
the information that goes through those accounts
to the Directors. I have appointed a special com-
mittee of three Directors, none of whom are bankers,
to whom I can go for advice or help in the event
that there is a foreign question that comes up that
I want to clear on account of some Director. Actually,
I don't think I have consulted that committee or
talked with them for 8. number of years. There hasn't
been any occasion to.
H.M.Jrs
Those three Directors - I know who they are. Would
they have to see this account?
marrison:
No.
H.K.Jr:
I don't think that they should.
Earrison:
I agree with you. They shouldn't see It and wouldn't
ace it. If there is any question about it, I could
well enough talk with my Directors again and get a
complete understanding, though I think I have got
1t anyway, so that if there is to be any doubt in
101
- 10 -
the minds of the Directors, I would advise you to
handle the account in E. different way, but I am
sure there isn't any doubt.
Mooles:
It seems to me that there is nothing to be gained
by carrying the fiscal agency account, because the
Directors, if they have B. right in the one case,
they have the right in the other under the general
supervisory powers. According to George's argument
here, the fact that it is carried as EL fiscal agency
account excludes the information from the Directors
except by consent and, as a practical matter, neither
does it from the Board, because we haven't general
supervisory powers and our auditors and our examiners
have to go into the Bank and examine the whole thing.
But as a practical matter, we have not at any time
asked for any information that the Treasury wanted
to keep confidential and neither has the Board of
the New York Bank and certainly I can't conceive of
either the Board of the New York Bank or the Board
here asking for any information, whether it be in
the fiscal agency account or whether it be in the
special account.
R.O.Jr:
Now, let me ask you this. This was the question
that Lercy-Beaulieu asked both Harrison and myself.
Will they be running more or less risk by having EL
Congressional investigation of the account 1f it is
with the Federal Reserve than if it was in a private
bank? Now, I answered them as to the fiscal agency,
but how would you answer that question, assuming
that this is going to be with the Federal Reserve.
Harrison:
I suppose there is no question that Congress has
the right to appoint B. committee to investigate
anything that concerns the Government.
H.2.Jr:
Surely.
harrisont
And that they could give that committee power to
subpoena witnesses and documents and they could
have equal right to investigate the Guaranty Trust
or the Federal Reserve Bank, but in either case
they would have to go through that procedure, so
frankly, while there may be more temptation on
the part of Congress to do it 1f it is in e semi-
governmental institution, there is no less right
on the part of the Congress, as I understand it,
to investigate 8 private institution.
122
- 11 -
Bell:
You have a precedent. They did call J. P. Morgan
and all his books down and went into the English
transactions during the War.
(Discussion off the record)
H.K.Jr:
Let me raise another question, 1f I may. Marriner,
if we do it this way, there seems to be every d1s-
posal to try it this way, do you think that we should
indicate to the British and French that gradually
they should transfer all their accounts into this
one? I mean that all of their balances should be
with the Federal Reserve.
Locles:
Personally, I think so, to the extent that they
are
F.M.Jr:
Here is what Dow-Jones says:
"On basis of the response to that operation, Mr.
Morgenthau asserted that indications are that the
'emergency situation' that arose upon declaration
of war in Europe has subsided as 'part and parcel
of that situation.' The Secretary continued
W. 3. Burgess, Tom K. Smith and Earle Bailie, who
were appointed temporary special advisers to the
Treasury immediately after outbreak of the European
war, are returning to their private businesses,
All three of them have been extremely helpful,
Mr. Morgenthau declared. If any other situation
shall arise, they will be on call to come down
again.
"Continuing his discussion of the apparent sub-
sidence of the war financial emergency in so far
as this country 1s concerned, Mr. Morgenthau asserted
that prices of long-term Government bonds are now
higher than they were on September 3rd and that the
bond market is apparently returning to normal. As
8. result, he said that the next matter that the
Treasury will take up from B. financing point of
view will be the refunding of the Treasury's 526
million dollar note maturity on December 15th."
Excuse me, but we were on this question of
Eccles:
whether they should do all the business through
this Bank, Well, it would seem to me that if this
503
- 12 -
Commission that, as I understand it, the French -
and I suppose the British - expect to set up to
make their purchases in this country, are going
to make payments through what we would call a
special account or an "X" account for the Bank
of France and the Bank of England, then certainly
to make only part of their payments through that
account, if they have other accounts through which
some payments are made, would in no way accomplish
the purpose that you want to accomplish. I would
insist that 1f this arrangement is to be set up
for the purpose of getting - keeping this Covern-
ment advised and for such purposes as we may feel
necessary to exercise such control over the situa-
tion 8.8 seems desirable, then to permit that busi-
ness to be divided so that Morgan or Guaranty or
some other institution has B. part of the business,
would be very unwise, in my opinion, and I would
feel that I would have nothing to do with it and
assume no responsibility for advising with them,
take no responsibility for either approval or dis-
approval of the arrangement, or I would insist that
the entire arrangement and the entire business be
done through this account. If you want my personal
opinion, that is it.
S.V.Jri
Do you want to say anything on It, George?
Marrison:
I do, very much.
lanes:
You are on swfully dangerous ground here.
Parrison:
I take it first, Mr. Secretary, that while I agree
with the lavdable objective of getting all of the
information, I don't think that is the way to do
1L anyway, to have an exclusive account in the
Federal Reserve Bank. The adventage of information
that you are going to get in this Government of what
foreign overnments are doing here will be very much
minimized if you wait until the consummation of the
transaction represented by the payment. You ought
to have advance information of orders being placed,
where they are being placed, and how they are being
placed. That contemplates an agreement with those
governments that through their purchasing agents
you will be currently informed of all transactions,
actual and on order, rather than to have to wait
for the payment of a check to give you the informa=
tion you want and which, in many cases, will not
104
- 13 -
be very illuminating, anyway, if you just get the
check alone, 50 I would hope and expect, whatever
you do, you will have an arrangement with those
purchasing commissions to be currently informed
directly by them, rather than through whatever
bank or deposit they are using.
Eccles:
I would have that, too, George. I certainly wasn't
excluding that.
White:
That would facilitate - having control over the
banking account would facilitate information we
have in the other.
Knoke:
It is the final check.
Harrison:
That is right. But there 1s a practical considera-
tion too. The Federal Reserve Bank - no Federal
Reserve Bank is properly geared up or equipped to
handle the checking of commercial documents in the
way that they ought to be handled and checked prior
to a final clearance and approval of the documents.
Even in the case now, where for both the French
and the British we are handling payments through
the Bank of England and the Bank of France on air-
plane contracts, the documents themselves are not
checked by us. They come to us countersigned and
approved but they go through commercial banks plus
some foreign representative here too, don't they,
Knoke?
Knoke:
No, just through banks.
Harrison:
Just through banks alone?
H.M.Jr:
May I ask, the bank is acting for the manufacturer,
isn't it, the American manufacturer?
Knoke:
Yes, that is correct.
Poley:
They have purchasing commissions here now, don't
they, George?
Harrison:
Yes.
H.M.Jr:
Just a second, what I am getting at is that the
American manufacturer who 18 going to get paid
205
- 14 -
for whatever he produces, he clears through the
ment. bank and they send those documents over for pay-
Knoke:
That 1s correct.
M.M.Jr:
The French don't do that.
Knoke:
No, it sends its documents through City Bank and
City Bank sends them over to us.
S.N.Jr:
That is all right. I mean, Curtis, using the
National City or some other bank, sends it over
to you for payment.
White:
The City 1s operating for the Curtis and not for
the French Government.
S.M.Jr:
That is right. That 1s the way I thought it was.
I have stalled on this thing and the thing we are
talking about today doesn't have to be settled at
this minute. My own inclination is that it ought
to be given vory serious consideration and I leaned
toward the concentration in the Federal Reserve
1f this thing is going to get very big. But I
haven't discussed it with my own associates.
Locles:
So does the whole Board. I mentioned this very
thing because I had understood there was some con-
templation of B division of the business and it
seemed that the whole purpose of the thing was
lost, 1f that 1s what you were going to do.
H.M.Jr:
Marriner, I lean that way but I am not - I mean I
haven't given the people in Treasury B. chance to
argue with me and I would like to do that. I may
be wrong, I don't know. As of this moment, I will
lean that way. I would like to get a clearance on
this now. I am seeing the British representative
at noon, Mr. Osborne, and can I tell Mr. Osborne
this, talking for the Administration, that it will
be pleasing to us if they would follow the same
procedure as in the case of the British planes on
all of their purchases? That 1s the form, isn't
1t? And tell the French the same thing.
Harrison:
I don't want to bother you with details, but I
would like to work out with the Bank of England
a different procedure.
206
- 15 -
H.M.Jr:
That doesn't interest me.
Herrison:
I want them to draw their checks on us rather than
to send certifications on which we pay. I just
wanted to be sure that
F.R.Jr:
Well, follow the general procedure. Is that right,
Marriner?
accles:
I am not familiar at all with the way these other
accounts were handled, so I can't say.
But the general procedure
Eceles:
But as I understand That was done, it would seem
to me that that would meet the requirements, that
the purpose here 1s to have the New York Federal
Reserve Bank act as the bank for the French Govern-
ment and the British Government through the Bank
of France and the Bank of England, and all payments
for what this commission purchases would be made
through that account at the Federal Reserve Bank.
Marrison:
That we, however, whatever we do, whether under
fiscal agency or central bank account or a bank
deposit, we are not purchasing agents, we can't be.
We are not B. liquidating agent and we can't be,
and one step further, we are not geared up nor will
we be prepared to advise any foreign commission on
either of those questions.
iccles:
I don't think there is any disagreement on that.
4.V.Jr;
Now, for the sake of the French, how fast can you
fellows move now?
Harrison:
Why, all they have got to do is send us some money
this afternoon and say, "Label It "T'", end it
19 there,
Poley:
How about making the information available to us?
Harrison:
That, I think the way you would have to do that
1s say to Beaulieu that the Bank of France should
instruct us to advise you of all transactions
through this particular account, not their regular
central bank account.
107
- 16 -
E.M.Jr:
That 1a all right, but you don't have to get BL
letter from the Ambassador and a letter from all
the rest, do you?
Harrison:
Oh, no.
H.M.Jr:
He is coming here at 4:00 to see me and I will
tell him, "You go tomorrow morning at the opening
of the Bank to see Mr. Harrison. He 1s ready to
talk business." Is that right?
Earrison:
Well, of course, in a formative way. We have got
to talk business with the Bank of France. They
are the ones that have got to ask us to open the
account.
H.M.Jr:
But you can go to town on it.
Earrison:
That is right.
H.M.Jr:
Mr. Beaulieu can go to New York instead of Mr. Smith
coming to Washington.
Harrison:
That is right.
h.M.Jr:
Is that all right, Marriner?
secles:
Yes.
S.M.Jr:
Is that the way to do it?
Socles:
Any way is all right with me.
H.M.Jr:
And this 13-a trial thing and we will see how it
works. If we get everything we want and the accounts
are surrounded with the proper secrecy, we are satis-
fied.
Eccles:
Somebody in the Treasury, however, no doubt through
the French Embassy, would have to have the Bank of
France advise New York to make available all informa-
tion in this special account that is to be opened.
H.M.Jr:
I am going to do that personally.
Harrison:
Yes, that must come from the other way around rather
than from us.
Regraded Unclassified
108
- 17 -
S.N.Jr:
Just let me go around a minute.
Hanes?
Hanes:
No, I would like to talk sometime about another
phase of this thing, a completely different angle
of approach, with you personally before you sign up
on this thing, because I think there are two or
three sides.
H.M.Jr:
You don't want to go as far as telling them to open
this account?
Nanes:
Oh no, that is all right. It is a matter of telling
them to close all other accounts, is the thing that
I want to talk about.
Marrison:
I haven't been asked my advice on that, either, but
I hope your inclination to suggest to them that we
make this an exclusive account, you might waver a
little, because there are all sorts of implications
in that that I think might cause trouble later.
Hanes:
I am thinking chiefly of up on the Hill about that
matter.
H.M.Jr:
Dan?
Bell:
I haven't anything.
H.M.Jr:
Do you see anything?
Stewart:
I agree with this procedure.
H.M.Jr:
You do?
Stewart:
Yes.
Cochran:
Would there be any new joint account opened up or
would this just be a separate account for each of
the two banks?
Eccles:
Each of the two governments.
Cochran:
Working through the two central banks?
Scoles:
I understand it would be a central account. Each
bank would have
- 18 -
Cochrant
Take care of its own?
Scles:
Take care of its own account.
Enrrison:
You take today, we have individual ledger accounts,
not all bulked in one account. Some of them are
marked "A", some "B", some "I". We know, and they
have advised us in the past which account was their
Government account. It may well be that they won't
even have to open up B. new account because each one
of them, 1 think, has got B. Treasury account.
Knoke:
Yes, they will. It would require a special account.
socles:
This would be a special account by France.
Knoke:
Bank of France, cell it "X".
errison:
And it would be called on our books, Bank of rance,
X" or "T", whatever you choose to label it.
Anybody else?
Talls
There might be more than one account, though, because
they might say that this individual is designated
to draw for airplanes and this one to draw for some-
thing else and they might want separate accounts
within a group.
docles:
It is B. matter of bookkeeping entirely. I would
just like to say this with reference to the establishing,
doing all the business with this account, I don't mean
by that that the British Government or the French
Government may not continue accounts that they have
had in the past through private banks. I don't know,
there may be the British or French securities and
Morgan may be trustee and it may be necessary to
deposit funds there to meet coupons, and 50 forth.
I don't think that this need necessarily disturb
those existing arrangements, but what I was thinking
of, however, is here 1s a new type of business. It
is El. type of business that is going to be done, as
I understand it, through a French Commission and a
British Commission. It will be government funds
that will come through the Bank of France and the
Bank of England. Now, I can't see why there is any
justification for dividing that business up between
Regraded Unclassified
120
- 19 -
the Federal Reserve and private banks. It is
business that hasn't existed; it is business
that is now going to be set up. It may have
existed in the case of the planes, I don't know,
but it is business that is now going to be set
up for a specific purpose and it doesn't neces-
sarily need to disturb - and I don't know but
what - I wouldn't say that it 1a advisable to
disturb - I don't know - other relationships that
may exist between private banks and foreign govern-
ments or government agencies. That 1s a question
of knowing what all the facts are with reference
to that, I can't imagine this Government, if the
case were reversed, establishing connections abroad
with private banks, and I can't imagine a foreign
government permitting it.
H.M.Jrs
Well
Knoke:
May I say a word?
S.N.Jr:
Please.
moke:
As I see it, 1t isn't a question of dividing inisi-
ness between the Federal Reserve and/or others,
it 1s a question of having one central account at
the Reserve Bank from which other accounts at
commercial banks are fed. Now, if it is & question
of getting information on the details of those other
accounts of commercial banks, I think that can easily
be arranged. The central account shows definitely
what - where the money has gone, to Guaranty or to
the City, or whatever it 1s, and I wonder whether it
wouldn't be perfectly proper to arrange with the
commercial banks to furnish to us, for the Treasury,
transcripts of those accounts and then you have all
the information you need to check up on what the
purchasing agencies, commissions, should have told
you beforehand. As far as the Reserve Bank 1s con-
cerned, that means still keeping track of the money
that is paid out here, but not being called upon to
do commercial business for which the central bank
is really not equipped and it eliminates these
endless negotiations and discussions with manufacturers,
which really the Reserve Banks should not be - It
isn't advisable that the Reserve Banks should go
into all these details. It might ultimately imply
- 20 -
assuming responsibility which isn't theirs and,
politically, it might be altogether inadvisable.
Harrison:
of course, the difficulty or the disadvantage -
put it that way - of having this not an exclusive
account, that is, the disadvantage of having
deposits in other banks, isn't comparable now to
the problem that we had in 1914 and 1917 and
through the last war. The difficulty there was
that private institutions were used not merely as
banks of deposit but also as purchasing agents
and the political criticism of the transactions
in those days was not that the commercial bank had
a deposit from B. foreign government but that they
made, supposedly, large profits on a commission
basis of everything that they bought. That has
been answered this time by the appointment of a
commission in each case to make the purchases over
here rather than to have a private institution in
this country make the purchases. As I understand
it, in none of the plans that have been suggested
is It contemplated that any institution, commercial
or federal, should be the one to make the purchases,
actually. Frankly, I think the commorcial banks
are not going to be seeking this when they find
out that it is just & matter of deposit, because
they make no profit out of 1t and have to pay a
tax to the FDIC on the deposit.
I have got what I want. I an satisfied of what
I am going to tell them and I might just say in
passing, before I had this conversation, I had a
chance to see the President, and this is entirely
agreeable to him.
(Mr. sccles, Mr. Harrison and Mr. Knoke
leave the conference)
Let me read this cable out loud. I have got enother
one and they all put pistols to my head.
"Personal and strictly confidential for the Secretary
and Undersecretary of State:
"I have not received any answer to my 2026, October
13th, 4:00 p.m. and therefore I don't know what
112
- 21 -
answer I am to give 1f I am asked again, and of
course it is possible that some steps have been
taken by the Treasury to notify the British
Ambassador in Washington.
"In any event I would like to make B. couple of
things clear. I saw preliminary outline of the
amount of marketable securities that the British
have acquired from their nationals and it will
be around 200 million pounds - B. great deal less
than anybody imagined. I have sat in and listened
to arguments about how they cannot send dollars
to the United States. I an convinced that this
argument 18 being used so extensively and 50
acutely everywhere I turn that it really is an
excuse for cutting off every possible bit of normal
trade that we might reasonably expect. I an
thoroughly convinced that not one dollar's worth
of anything will be bought in the United States
unless it is absolutely essential. Realizing
this and seeing their financial picture, sooner
or later, if this war continues, there will be
no place to turn but to the United States, and my
reason for sending the wire the other day, about
which I feel even more strongly now, is that we
should avoid to the farthest degree any possible
indication that we have made any suggestions RB
to where they should keep their money or how they
should spend 1t, because I am certain that we will
rue the day.
"I feel it my obligation and duty to advise you of
this from the feeling I get of this situation here.
I think I should also warn you that the leverage
of the present American Ambassador in -London is
due to lessen and that probably rapidly. I believe
that any really useful work I may be able to accom-
plish will have to be done quickly because I am
convinced that, without having anything to pin It
on, the boys think I an too hardboiled B. nationalist.
Bell:
Who is that from?
U.M.Jr:
Kennedy.
Bell:
He 10 probably going to lose prestige.
H.M.Jr:
For what?
113
- 22 -
Fell:
well, when we get through he isn't going to have
much to say, isn't that what he means?
nite:
He says Bullitt's 1s due to lessen.
1.M.Jrs
No, American Ambassador in London.
Toley:
Because they look upon him as too much of E. patriot.
stewart:
Nationalist, and not internationalist. We are to
blame. That 1s all it says.
Welles called me up. You see, the other cable which
was here - and this has to be quadruple confidential -
was that he didn't want me to tell them where to
put the money, 386. And the quadruple part 1s not
that he didn't want me to do that but the President
issued instructions that the State Department should
not answer that cable, that the President would protect
Kennedy against himself.
Stewart:
I think this raises the question of whether this whole
question of the banking methods is adequate. The
other approach, getting information from an agency
from the time they first place an order, is essential.
It doesn't have anything to do with money. You can
check up the cash afterward. I don't see why one
waits to make that decision. lie need it, it is
absolutely essential, it 1s the only way the question
can be settled and & full picture obtained.
Hanes:
I think they agreed to that, Walter. I think they
not only agreed to that but they asked for it. That
is just what he wanted, that is exactly what he wanted.
E.M.Jri
Now look, gentlemen, this is what I don't know. This
is too much for me. John, I would like you to get
this group in this afternoon and maybe get Herbert
Feis over. Get hold of the other cable, bearing in
mind what the President said.
Hanes:
2026?
S.K.Jr:
Yes, Bearing in mind what the President said, inasmuch
8.5 this - I would invite Jerome Frank to come over,
inasmuch as this is American securities. Welles said
14
- 23 -
to me, "Never mind about the deposit business."
Welles 1s in entire sympathy and so is Mr. Hull,
that we open the account this way. He said 1f
he could tell them something about American
securities - I think it would be helpful if you
could answer that. I think if you could have B.
meeting this afternoon, get Jerome Frank or Herbert
Feis over here, plus this gang here, and sit down
and see 1f there is something we can do. What
Kennedy wanted was that he should be the person
to whom information should be given about American
securities, is that right?
Cochren:
He said he would have an opportunity to give them
advice.
E.M.Jr:
That is what the President definitely doesn't want
and that 18 what the President meant, that he wanted
to protect Kennedy against himself. He definitely
doesn't want it. And also to guide you, the Presi-
dent said he wanted SEC and the Treasury to be kept
informed on this side as to what the policy was of
the sale of securities.
(Discussion off the record)
As to the question of the securities and bales, he
(the President) would like the English to keep the
SEC and ourselves informed and we have asked that
they do that, and so forth and ao on, see.
Hanes:
Do you want to ask Feis to come in on this?
H.M.Jr:
Yes, I would ask Feis and I would ask Frank.
White:
Mr. Secretary, as B. determination of our policy,
I take it that that is not going to be discussed
here, because I think that there 1a a. desirable
policy for us to pursue with respect to when, what
and how they shall acquire their dollar balances
and I take it that that is not going to be discussed
this afternoon or in any other sources outside of
Treasury, until Treasury agrees as to what they
regard as the best policy.
H.M.Jr:
As I remember 2026, Kennedy wanted two things. He
15
- 24 -
was offering advice to Sir John Simon that they
don't right? deposit with the Federal Reserve, is that
Cochran:
That 1a right.
H.M.Jr:
That thing has been settled with the President.
Two, if I am right, he was suggesting that he be
used as the method of transmitting what they were
going to do on the purchase and sale of securities.
Cochran:
Saying that he would like to be called on for
advice.
Bell:
In an earlier cable, as I remember, while you were
away, Mr. Secretary, he said that he would like to
be consulted before any action was taken on this
American securities. Don't you remember, Johnny?
When these early cables came in, he expressed that
in one of them.
U.V.Jr:
Johnny, I am going to ask you to come to lunch today
and you will hear what he says. Will you please
come at 1:00 o'clock?
Hanes:
Yes,
S.N.Jrt
I am going to the President tonight, so I would like
this group to advise me, 1f possible, how I should
say what position I shall take with Mr. Welles re-
garding this cable, just to reiterate - well, I have
made clear how the President feels and how I feel.
Now, after reading 2026, I think both Feis and
Jerome Frank should sit in there. You sew 2026.
Hanes:
Oh, yes, I gave it to you. I didn't keep a copy
of it, though.
E.M.Jr:
Do you (Stewart) mind sitting in on this? This 1s
a long-term thing and what Harry was talking about
is that the English sold 50 million dollars worth
of securities and raised the money that way instead
of selling the 50 million dollars worth of gold,
which I say is swell, don't you?
Stewart:
Right.
116
- 25 -
H.M.Jr:
And you (White) think it is swell?
White:
Yes, I think that is the thing we ought to Insist
on.
H.N.Jr:
You don't want to upset it?
White:
Within reasonable limits.
U.V.Jr:
But I don't think that has to be settled in answer
to Kennedy, but it is the kind of thing that we
can talk, not in one day or one hour, with Osborne.
This is Just a two-day visit or & one-day visit -
& courtesy call today, 8.8 I understand, but it is
something which I am rolying on both my special
advisers, economists, and my regular staff and it
has been taking care of 1\self so far. I don't want
Kennedy to upset it.
John, have you any difference in opinion?
Manes:
No, I just want this committee to know what to tell
you.
E.M.Jr:
I want them to answer it for me. When I come back
from Cabinet, if you come in hereand say, "Henry,
here is a draft, we have all agreed to this."
Hanes:
All right, fine.
S.M.Jr:
Do you have any personal difference?
Hanes:
No, I just want to know whether you want to 20 into
the
4.M.Jr:
won't you think the President is right, that Joe,
away from all of 113 and entirely by himself, shouldn't
do this?
Hanes:
Oh, sure.
White:
I don't see that there is even any two sides to that
question.
H.M.Jr:
You see what Joe 1s practically saying, "Well, if you
don't do this, my usefulness is over. He 1s threat-
ening to resign.
II7
- 26 -
White:
He can be a channel of information of transmission.
H.M.Jr:
That is what Mr. Butterworth is for.
White:
but it should be done here.
It certainly doesn't seem important who does that,
H.M.Jr:
I don't know how often he threatens to resign, but
I don't want him to resign on my account.
Hanes:
Can we take this cable?
H.M.Jr:
Please. I don't want him to say, "I asked for this
home." and Morgenthau wouldn't give it to me and I am coming
White:
We want to raise a question about the other matter
before you talk to Osborne about this question as
to what you want them to do. I think we are in
agreement and I don't think we agree with you. I
am not sure whether we do or not.
H.M.Jr:
What question, Harry?
White:
As to what you are going to tell them and asking
them to open up an account here.
H.M.Jr:
What do you think I am going to tell them?
White:
I thought you were just going to say it would be
pleasing to you 1f they were to open up an account
through which this business might be transacted.
H.M.Jr:
And what would you like me to say?
White:
I don't know that I would word it the same way the
others would like it, but it seems to me I would
word it that this Government wants them to open up
that account and it wants all the information with
respect to whatever orders they give in such detail
as fits the occasion, not give them any choice of
saying, "Well, that is very interesting," and so
on, but rather indicating as you have every right
to indicate that in time of war the situation requires
that the Government be completely informed as to the
operations of foreign belligerent governments.
118
- 27 -
H.M.Jr:
We can't say we want this thing. I used the words,
"It would be pleasing." 11 They just will have every
reason to fall all over themselves to do everything
I suggest, and they will. We can do the one thing
and I am certainly going to give Hanes an oppor-
tunity, and we can certainly say we want to make
a start, and I might say we may subsequently suggest
to them that all the funds be concentrated.
But John, if you will give me, 1f possible, a finished
telegram, it would be most helpful.
Walter, you don't mind sitting - this 1s all down
your alley, because you have got both sides of the
water. Is it too much spot news?
Stewart:
No.
H.M.Jr:
Getting a little fun out of it?
Stewart:
Yes.
19
STRICTLY CONFIDENTIAL
The following 18 a paraphrase of information received by cable
from the American Embassy, London (No. 2095 of October 19, 1939)
In strict confidence the British Treasury has given the
Embassy the following information with regard to the finan-
cial accommodation granted to Turkey by Great Britain and France.
On the coming into force of the Anglo-Franco-Turkiah
treaty, Turkey will receive 15,000,000 pounds gold, to be
deposited in Turkey, the French share of which 18 4,000,000
pounds, and Great Britain will contribute 2,000,000 pounds for
use in liquidating arrears in the clearing account between
Great Britain and Turkey.
Furthermore, an arms credit has recently been granted
to Turkey; the French share of this 18 4,000,000 pounds,
and the British 11,000,000 pounds - an attempt will be
made by the British to extract some part of the 11,000,000
pounds from the French. This arms credit is additional
to that in the amount of 10,000,000 pounds which was granted
Turkey in July of last year by Great Britain.
General Orbay 18 the head of the Turkish military
mission which has been in England for some weeks negotiating
the 4,000,000 pounds and 11,000,000 pounds credits. This
mission has been obtaining further war materials under the
previous credit of 10,000,000 pounds. After Poland collapsed,
several shipments of airplanes and other instruments of
war which had been prepared for despatch to that country,
were diverted to Turkey. It may be recalled that Great
Britain
120
- 2 -
Britain granted to Turkey a development credit in the amount
of 10,000,000 pounds and an aircraft credit in the amount
of 6,000,000 pounds in May, 1938. Up to the present time
Turkey has drawn on the development credit for only about
2 1/2 million pounds, and in further drawings has agreed to
"go slow". The 3,000,000 credit to the Brasset Steel Plant
was granted by Great Britain in 1937.
KENNEDY.
03V13038
eser IS
Through
EA:LWW
F16
121
PARTIAL PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Berlin, Germany
DATE: October 19, 1939, 5 p.m. Rec'd 20th.
NO.: 1759
Comparison of the Reichsbank statement of October 14th
with that of September 30th confirms the observation already
made in recent reports that the Reichsbank itself in the
last few weeks has been playing a minor role in creating
credit for the Reich's war expenditures. Increased tax
revenues, the tax certificates and the military notes "see
my number 1542 October 2, 5 p.m." plus direct loans from
the savings banks, insurance companies and social insurance
organizations and short term Treasury bills have been the
main instruments of war financing. The restriction on
normal business and expenditure have left the banks in a
liquid condition enabling them to take large amounts of
short and medium term Government paper without recourse to
the Reichsbank.
The bill and check portfolio of the Reichabank on
October 14 stood at 9,567 million marks, a decrease of
537 million marks in the two weeks period while loans on
securities showed practically no change and miscellaneous
assets reported at 1,227 million marks showed a decrease of
377 million marks. These appear to be the normal declines
following the usual higher month end demands on the
Reichsbank.
The Reichsbank's holdings of eligible securities
increased 61 million marks probably representing chiefly
122
- 2 -
tax certificates, bought on the open market to a total of
1,385,000,000 marks was a negligible increase of 8 million
marks in the holdings of miscellaneous securities to a
total of 400 million marks. The Reichsbank's coin holdings
increased by 74 million marks which probably was chiefly
a result of the increase in the circulation of Renten bank
notes discussed below.
Both the note circulation and call deposits showed
considerable decreases during these two weeks the former
declining 500 million marks to a total of 10,495 million
marks and the latter by 257 million marks to 8. figure of
1,345 million marks. These appear to be the normal movement
of these items after an end of the month maximum.
The statement of the Gold Diskont Bank of September 30
discloses no explanation concerning the source of the funds
used by the Reich for war expenditures. Its portfolio of
bills showed a decline of 321 million marke during the
month and Treasury bills and non-interest bearing Treasury
certificates a decrease of 67 million marks coupled on the
liability side with a decrease of 64 million marks in deposit
liabilities and a 288 million mark decrease in liabilities
on account of single bills (solawechsel).
The September statement of the Renten Bank shows an
increase in the issue of Renten Bank notes of 400 million
marks to 809 million marks. On August 31 409 million marke
of
-23
- 3 -
of these notes had been issued and the Reichsbank held
22 million marks of them. On September 30 the total issue
W&B 809 million marks and the Reichsbank's holding was
159 million 80 that the net increase in the circulation of
Renten Bank notes during September was 264 million marks.
Between September 30 and October 14 the Reichsbank holding
of Renten Bank notes increased to 179 million marks. Whether
or not the Renten Bank has expanded its issue of these notes
since the end of September cannot be ascertained until the
next monthly statement is issued.
As for metal coinage circulation, there are still no
figures available.
It 18 the estimate of one economic observer that at
present the Government 18 expending about 1,5 billion marks
each month for war purposes; if the conflict intensifies,
he estimates that expenditures will rise possibly to a
maximum of 3.6 billion marks each month. Reference my
telegram of September 14, noon, No. 1235:- this same
observer (above mentioned) estimates that the new war taxes
will yield 5.5 billion marks B. year, but a decrease of
3.5 billion marks in the yield of other taxes will offset this
increase. It 18 stated by various sources that if the
war intensifies, in January the Government ie planning to
again increase taxes.
It is requested that this telegram be repeated to the
Treasury Department.
EA:LWV
KIRK.
124
FS
PLAIN
London
Dated October 19, 1939
Rec'd 2:15 p.m.
Secretary of State,
Washington.
2097, October 19, 6 Dema
FOR TREASURY FROM BUTTERWORTH.
The HOUSE of Commons yesterday devoted five and a
half hours to a debate on Economic coordination and the
machinery outlined on October 9 by the Prime Minister and
reported in my No. 1981 of October 9. A number of speakers
of All parties pressed for an Economic general council
headed by a Minister in the War Cabinet who could devote
his entire time to questions of Economic coordination.
MEMbErs of more than one political party also urged that
the Chancellor of the Exchaquer as head of the Treasury
was unsuitable as the chairman of the Coordinating Committee
being himself the head of an interested department, while
a number of speakers also requested a statement of the Bri-
tish Government's Economic policy. The Chancellor of the
Exchequer's reply pleaded that Lord Stamp's active connec-
tion with business was a desirable feature of his appoint-
ment, that he 1VES the greater part of his time to his new
job and that hE has for Eight years been the chairman of
the Economic Advisory Committee of the Government and is in
close
125
FS
2-No. 2097, October 19, 6 p.m. from London
close touch with all the problems to bE met. HE also
stressed the practical nature of the decision which must
be made and the fact that they could not bE based on
purely theoratical Economic grounds.
The speaker who followed Simon quoted the story
of a judge who delivered judgment allowing an appeal for
certain reasons, while his fellow judge disagreed stating
that he would disallow the appeal for the same reasons.
HTM
KENNEDY
BECEINED
1333 CS 00
VRUZA INT
no terms on les with
phot NET of nowes!
126
PARAPHRASE OF TELEGRAM SENT
TO: American Embassy, London, England
DATE: October 19, 1939, 3 p.m.
NO.: 1249
The following 1s from the Secretary of the Treasury,
for Butterworth:
You are requested to send by telegram any information
which 18 available on the reported gold shipment from
the U.S.S.R. to Germany, in the amount of some seventeen
tons.
HULL
(HF)
SAME TO: AMERICAN EMBASSY, BERLIN, NO. 734 from the
Secretary of the Treasury, for Heath.
PEBLIS
EA:LWW
PARAPHRASE OF TELEGRAM RECEIVED
127
FROM: American Embassy, Paris, France
DATE: October 19, 1939, 6 p.m.
NO.: 2524
FOR THE TREASURY DEPARTMENT.
Authorities in the Foreign Exchange Office are making
a careful atudy of the loophole problem which 18 presented
by French exporters invoicing their exports in france rather
than foreign currencies, and the facility given here for
French nationals to deposit france to the account of for-
eigners without blooking - reference telegram of September 29,
No. 2253, from the Embassy. The foregoing factors, and
the frequent difficulty of tracing the origin of france
which are received in this way for French exports, where
such france have possibly gone through several channels,
make it difficult to find out whether such exports are in
fact being paid for in france which were held before the
ninth of September, or "transferable" france. In theory,
exporters are of course under obligation to turn over the
foreign currency proceeds of their exports. However, the
difficulty of adequately enforcing this 18 illustrated by
the foregoing.
One solution for the problem now being considered 18
"to persuade" French exporters to certain countries, partic-
ularly the United States, to invoice in foreign currencies.
From the British financial prees we gather that a somewhat
similar problem faced the British during the period of the
pound
28
- 2 -
pound weakness in New York and that in effect British
exporters are required to invoice in foreign currencies
now.
The French, on the other hand, want to encourage exports
as much as possible, and there 18 some fear that exports in
certain lines might be hampered by such & requirement.
Then too the authorities of course do not want to discourage
exporters from making out invoices in france to certain
countries which have blocked currencies and with which
clearing and payment agreements are in effect. Another fear
18 that if they restrict the transfer of franc balances here
belonging to foreigners, they may start a dreaded double frano
quotation for france, transferable and non-transferable.
END SECTIONS ONE TO FOUR, INCLUSIVE.
BULLITT.
129
EDA
GRAY
PARIS
Dated October 19, 1939
RECEIVED 6:26 pame
Secretary of State
Washington
2534, October 19, 6 P.M. (SECTION FIVE).
Under a decree published in the JOURNAL OFFICIAL
today, additional credits totalling 102,000,000 francs
are authorized under the general budget and others total-
ling 6,631,000,000 francs under the special armament
budget for the present year. The Air Ministry is like-
wise authorized under the special armament budget to
"contract" during the current year additional expenditures
totalling 27,820,000,000 francs to bE charged to credits
to bE opened "under future budgets".
The October 14 Bank of France statement published
today shows that the state had again drawn on its
25,000,000,000 franc authorization this time in the
amount of 1,700,000,000 bringing the total to 5,000,000,000.
BULLITT
JRLPCFW
320
CJ
GRAY
PARIS
Dated October 19, 1939
Rec'd 5:08 p.m.
Secretary of State,
Washington,
2524, October 19, 6 P.M. (SECTI N SIX).
Otherwise the bank statement shows further improvement:
commercial advances decreased by 1,429,000,000 francs to
a total of 9,820,000,000; open merket operations decreased by
1,000,000 francs to a total of 4,269,000,000;advancss
against securities decreased by 43,000,000 francs and thirty
day advances by 498,000,000 and note circulation declined
by 872,000,000 francs to around 145,000,000,000. Pay to
and deposit accounts decreased by 1,075,000,000 francs.
The Treasury account was reduced by B further 31,000,000
francs to a total of 137,000,000.
(END SECTION SIX)
BULLITT
NPL
0.117
1082 US
131
RFP
GRAY
Paris
Dated October 19, 1939
Rec'd 6:15 p.m.
Secretary of State
Washington
2524, October 19, 6 p.m. (SECTION SEVEN).
The ratio of gold cover decreased slightly from 59.38
per cent to 59.33 per cent.
The securities market was strong today both French and
internat onal issues moving up. The news of Turkey's loyal
attitude toward rance and Great Britain and the President's
telegram to the King of 3weden WEDE very favorably commented
upon. Rentes gained from 30 centimes to 3.70 with the 1925
and 1937 Exchange guaranty issues advancing 3.70 and 3.50
respectively. Exchange rates were unchanged EXCEPT for the
belga which improved slightly (733-739 against the previous
quotations of 730-736).
BULLITT
HPD
132
PARAPHRASE SECTION KIGHT, TELEGRAM NO. 2524
OF OCTOBER 19, 1939 FROM AMERICAN EMBASSY, PARIS.
Reference is made to telegram of September 29 from
the Embassy, No. 2553 (22537). Confidential information
has come to us that Italy has obtained the rest of the
dollar exchange, $1,300,000. Therefore there will be no
public default on its obligations in question at New York -
although contractually October 1 vas the date the $4,000,000
was due the paying agent.
END OF MESSAGE.
BULLITT.
BECEIAED
1333 OS : 00
ТИЗМ ТИА930 YRU8A3WT
FAILMN M by
nacisical
132 A
TREASURY DEPARTMENT
PROCUREMENT DIVISION
amer of THE CHECTOR
WASHINGTON
October 19, 1939
MEMORANDUM FOR THE SECRETARY
There is attached hereto statement indicating the present status of
contracts reported by memorandum of October 7th.
There is also attached a statement of new contracts entered into be-
tween the French State and the contractors indicated since report of
October 7th was transmitted, This report is contained on page 3 of
the statement attached.
In connection with this latter report, the contract with the Curtiss
Wright Corporation, Wright Aeronautical Division, for 1,440 engines
amounted to $28,679,040, which amount includes 88 a surcharge
$5,500,800 for plant extensions.
Director of Procurement
atts.
132B
AIRPLANES
Complete
Contractor
Description
Ordered
Delivered
Delivery
Curtiss-Wright Corporation
1 engine Pursuit 75-A
200
200
Clenn L. Martin Company
2 engine Bomber 167-F
215
22
Dec. 31, 1939
Douglas Aircraft Company, Inc.
2 engine Bomber DB-7
100
o
Jan. 51, 1940
North American Aviation, Inc.
Basic Trainer
230
198
Nov. 15, 1959
United Aircraft Corporation
Chance-Vought Division
Dive Bomber V-156
40
20
Nov. 30, 1959
785
440
ENGINES
Complete
Contractor
Description
Ordered
Delivered
Delivery
United Aircraft Corporation
Pratt & Whitney Division
P&W 1830 Twin Wasp
1,821.
952
July, 1940
United Aircraft Corporation
Pratt & Whitney Division
P&W 1535 Twin Wasp, Jr.
520
15
July, 1940
Curtise-Wright Corporation
CII 0R2600 Twin Cyclone
42
4
Mar. 15, 1940
2,383
971
SPARE ENGINES ORDERED BY NORTH AMERICAN AVIATION, INC., FOR BASIC TRAINER CONTRACT
Complete
Contractor
Description
Ordered
Delivered
Delivery
Curtise-Wright Corporation
CW R-975-E Single Row Whirlwind
115
50
Dec. 51, 1939
Oct. 19, 1939 (F)
Regraded Uncl
132C
AIRPLANES
Complete
Contractor
Description
Ordered
Delivered
Delivery
Curtise-Wright Corporation
1 engine Pursuit 75-A
530
0
Dec., 1940
1 engine Pursuit P-40
100
o
Dec., 1940
Clenn L. Martin Company
2 engine Bomber 167-F
150
o
June, 1940
ENGINES
United Aircraft Corporation
Pratt & Whitney Division
P&W 1830 Twin Wasp, 2 speed
2,250
o
Dec., 1940
OTHER EQUIPMENT
General Electric
Searchlight Equipment
128
0
Nov., 1940
Trucks (General Motors)
640
0
Nov., 1940
Portable Power Plants
384
o
Nov., 1940
Sperry Gyroscope Company
Searchlight Equipment
256
0
Nov., 1940
Sound Locatore
256
o
Nov., 1940
Oct. 19, 1939 (F)
Regraded Uncl
1320 a
AIRPLANES
Complete
Contractor
Description
Ordered
Delivered
Delivery
North American Aviation, Inc.
Basic Trainers
#200
Aug., 1940
Douglas Aircraft Company, Inc.
2 engine Bomber DB-7
170
Aug. 31, 1940
ENGINES
Complete
Contractor
Description
Ordered
Delivered
Delivery
Curtiss Wright Corporation
Wright Aeronsutical
R2600 Twin Row Cyclone
1,440
Dec. 31, 1940
United Aircraft Corporation
Pratt & Whitney Division
R1535 Twin Wasp, Jr.
600
Dec.,1940
Propellers
600
Dec., 1940
*Includes 50 spare engines and spare parts for planes
Oct. 19, 1939 (F)
Regraded Uncl
132E
TREASURY DEPARTMENT
PROCUREMENT DIVISION
PFICE OF THE DIRECTOR
WASHINGTON
October 19, 1939
m
MEMORANDUM FOR THE SECRETARY
Yesterday afternoon late I was confidentially informed that the first
of the Douglas Twin Bombers, while being test flown by a French pilot,
crashed.
Reports indicated that the pilot was not seriously injured, but there
was no information available at the moment as to the extent of damage
suffered by the plane. The pilot ie on his way to Washington, and on
his arrival I will transmit any further information learned.
Director Joseph of Procurement
TREASURY DEPARTMENT
PROCUREMENT DIVISION
All
OFFICE OF THE DIRECTOR
WASHINGTON
October 25, 1939
MEMORANDUM FOR THE SECRETARY
a September 19th a proposal was issued for manganese are in quantities ranging from
,000 to 15,000 long tons for delivery at Ogden, Utah, or Baltimore, Maryland, covering
hree grades of ore. This proposal was opened on October 19th, and the following bids
ere received:
IDDER
DESTINATION
QUANTITY
PRICE PER UNIT
J. Buck, Inc.
Baltimore
8,000 to
15,000 LT
$ .49
bmestic Manganese and
Development Company
Ogden
15,000 LT
.67
redarick 1. deFriess
Ogden
5,000 LT
.5277
L. Bilmore and
D. 1. Kendall
Ogden
5,000 LT
.77
resubrier Vining Corp.
Baltimore
5,000 LT
.75
una Manganese Company
Ogden
15,000 LT
1,67
ana Manganese Company
Baltimore
15,000 LT
1.61
E. Kraner
Ogden
5,000 LT
.40
atson Geach & Co., Inc.
Baltimore
10,000 LT
.42
1th the exception of the bid of L. J. Buck, Inc., and Watson Geach and Company, Inc.,
11 other bidders propose furnishing domestic ore.
E the bids indicated above it appears eward may be made to Frederick W. deFriess and
recobrier Mining Corporation and that no award may be made to the other domestic bidders
adicated on account of a failure to meet specifications.
Director of Procurement
133
October 19, 1939
Present:
Minister Procope
Mr. Hanes
Minister: Well, I have prepared & list of com-
modities. Bext to that another list and if there are
details about the military things, I have my Military
Attache.
HM,Jr: This is the military? The short one?
Minister: This item 10 1s also military -- no, I
mean item 11.
HM,Jr: Well, this 18 what I asked for and the
next step is up to us.
Minister: Yes. Yes.
HM,Jr: What?
Minister: Yes. It 1s. But can I put some,
how shall I say, routine questions. If you can give
a loan upon this, how 1e that given; in what form?
HM,Jr: Well, I don't know, but what I am going
to do, for your information only, I am going to bring
this up at Cabinet at two o'clock this afternoon.
Minister: Fine!
HM,Jr: I will bring this up at Cabinet and I will
ask the President for instructions.
Minister: May I say that we are badly in need of
that money. Our general situation is good, but every-
thing 18 going up in value terribly.
HM,Jr: I will take it up.
Minister: I have a new idea. You gave me the
thought.
--2--
HM,Jr: Did I?
Minister: You spoke about this Stabilization
Fund. The Stabilization Fund, that 1s a question you
could argue about for hours. I don't know what it 1e
worth.
HM,Jr: They told me, when I was there, $45,000,000.
Minister: Yes, it is. Even on the books it is
even more. It 16 $50,000,000, B. little more, but part
of that, I should say 40%, is invested in the country.
HM,Jr: Are you sure of that?
Minister: Sixty percent is invested abroad ac-
cording to the last information I had.
HM,Jr: Because, if you don't mind, I just raised
the question, I got the impression that that money was
in gold, a large proportion in Swedish exchange.
Minister: Quite right.
HM,Jr: And I got the impression that practically
very little of it, if any, was not what I would call 100%
liquid.
Minister: Well, I am afraid I am right, but I
could
HM,Jr; Well, anyway, whatever it 19, whatever
part 18 liquid, you could use that?
Minister: of course we can.
HM,Jr: First?
Minister: Of course we can, but we have, what we
have 18 different currencies. We have abroad -- the
Bank of Finland has some currencies abroad, although I
see that they are dwindling and then private banks have
also some currency abroad.
HM,Jr: We gave you an idea.
35
-3-
Minister: Yes and that gave me the idea. I
think it is perfectly clear that the Government is not
buying all this copper or all this gasoline, but the
Government can take, we can take
....
HM,Jr: For my purposes today, it does not make
any difference today. Today it is Finland. It 1s
Finland that needs this and what are the wishes of the
President and Mr. Hull in regard to this, and I will find
out.
Minister: Good!
HM,Jr: It's good you came in this morning.
Minister: Thank you. I had good luck.
HM,Jr: So you are not losing any time. I get
this at 10;30 and at 2 o'clock I will show it to the
President.
Minister: When do you allow me ....
HM,Jr:
....
to get an answer? If I have an
answer we will get word to you either this afternoon or
tomorrow morning. We will try to make it this afternoon.
Minister: Thank you.
If there are some faults in the addition, you will
excuse me, because I worked until 4 o'clock this morning.
000-000
Washington, D. 0. October 18, 1939
List
.36
of certain commodities
Finland is expected to buy
from the United States during
12 months (in some cases delivering later)
I. Oil
Gasoline
110000 metric tons
Other fuel oil
94,000
#
#
Lubricating oil
12,000
a
If
Total value of gasoline and oil
mk 400.000.000 $8,000,000
II. Cotton
14,000 metric tons
If
300.000.000 $6,000,000
40,000
"
II
a
III. Sugar
300,000.000
$6,000,000
IV. Metals
Pig iron
14,000
If
.
Plates 2 sheets) }
Iron wrought
figure iron)
80,000
If
#
Pipes
16,000
If
"
Lead
4,000
N
If
Copper bars
7,000
If
H
V. Oil cakes and seed
20,000
#
H
VI. Wheat
40,000
N
#
VII. Rubber and rubber
products
1,600
"
W
VIII. Woolen thread
600
#
#
II, Automobiles, motore
for same and parts
thereof
I, Various chemicals
XI. Sundries
mk 600,000,000 $12,000,000
Total value of groups IV - XI
Transferred to page 2
$32,000,000
Regraded Unclassified
Page 2.
Transferred from page 1 $33,000,000
XII/ Machinery and sundries
137
Particular government purchases .
Tractors
$380,000
Binoculars
625,000
Airolane propellers
100,000
Pratt-Whitney airplane
engines
880,000
Machinery for mechanical
factories
58,000
Motors for speed boats
250,000
Machinery for rolling mill 282,000
Disce and bullet jackets
?
Gasprotecting equipments
500,000
3,075,000
IIII. Airplanes
According to annexed
schedule
8. 28,894,000
Grand total
# 63,969,000
Also the other groups in this list might include Government purchase.
Anbex to list of rianned Vinnish nurchases from the
United States.
Washington, D.C. Dat, 18, 1939.
AIR PLANES
TYPES,
NUMBER
PRICES
P9ODUCERS
DELIVERY
Light
Bell Aircraft Corp.
Monoplanes
230
$45,000
Brewster
From
with 1000 HPS
Aeronautical Corp.
Curtis Wright Corp
4 months
Douglas Aircraft
Light
Co. Inc
to
Monoplanes
147
$52,000
Guman Aircraft Eng.
with 600-800 HPS
Lockheed Aircraft Corp.
18 months
Clenn L. Martin Co.
North Am. Aviation Inc.
Seversky Aircraft Corp.
Light
Stearman Aircraft
Homplanes on
20
Vought - Sikorsky
Pontoons
$40,000
Aircraft Corp.
with 600-900 HPS
Vultee Aircraft
lleawy
Monoplanes
77
$130,000
with two
Engines
Total: : 28,894,000
(1)
Regraded Unclassifie
239
GROUP MEETING
October 19, 1939.
9:30 a.m.
Present:
Mr. Gaston
Mr. White
Mr. Foley
Mr. Hanea
Mr. Smith
Mr. Thompson
Mr. Graves
Mr. Bell
Mr. Cotton
Mr. Stewart
Mr. Viner
Mr. Cochran
Mr. Haas
Mr. Duffield
Mr. Harris
Mrs Klotz
H.M.Jr:
John?
Hanes:
Nothing.
H.M.Jr:
At 11:00 o'clock Eccles and Harrison are coming
in on this question of Governmental deposits, and
if Hanes, Foley and Cochran and Walter Stewart
and Harry White could be here at ten minutes of
11:00, see, you could kind of brush me up. Now,
Harry, if you haven't been up on it, see Ed right
after the meeting. Nothing has happened since
you (Hanes) have gone.
Benes:
Well, I am up to date, I think.
3.M.Jr:
Have you seen Eccles' memorandum?
Banes:
Yes.
S.M.Jr:
You have had a chance, have you, Walter Stewart?
Stewart:
I talked with Mr. Foley last evening.
H.M.Jr:
Hanes, Foley, Cochran, Stewart and White. Did you
got in on that, Dan?
Bell:
I don't know.
E.M.Jr:
Foreign deposits.
14"
- 2 -
Bell:
Oh, I went over the other day with Ed.
H.M.Jr:
Be here.
All right, you have nothing, John?
Manes:
No.
H.M.Jr:
And you are coming in with me on the finish.
Hanes:
Is that right?
H.M.Jr:
Yes. The finish is at 10:00 and this other thing
is ten minutes of 11:00.
Hanes:
There 1s one thing to be done about that meeting.
I have a memorandum from Phil Young written yes-
terday on this Colombia, South America thing.
H.M.Jr:
No
Hanes:
Are there any instructions to anybody after that
meeting?
H.M.Jr:
No, the only instructions are that the economic
staff of the State and Treasury are going to pre-
pare 8. memorandum.
Hanes:
On that specific one?
H.M.Jr:
On that specific one. I take it they are working
on it now.
White:
We have begun already.
H.M.Jr:
Gene, there is a story in today's Tribune on that
meeting and I would like to know whether the State
Department - here it is. In view of this story,
I am going to be asked - I want to call up Welles
and say, How should I answer that?"
Duffield:
I didn't know the Tribune knew about it. The
New York Times knew from the State Department that
there was going to be a meeting over here yesterday
afternoon.
H.M.Jr:
Could you call up the press section fellow?
141
- 3 -
Dirgiold: Yes.
And let me know, because I want to call up Welles
and say, "Well, the story came out and I have got
to say something. Am I saying we are studying
Colombia, am I saying we are going to invite them,
or are you going to give it out?"
Diffield:
You could do that without my talking to the press
section.
No, I would like to say to Welles that it 1s true
that this story came from the State Department and
I am on the spot,
I saw something in the paper last night about having
B. meeting over here. Did it give any details? I
just saw the headlines and didn't read the story.
Am I right, Gene?
Inffield:
That is right. But the New York Times man, Crider,
yesterday started trying to find out whether it
would be worth his while to go to Guatemala. While
he was over at the State Department inquiring about that
he was told that the discussion of it was going to
take place over here that afternoon, yesterday after-
noon.
H.M.Jr:
There was one thing discussed afterwards which I will
tell you (Hanes) about.
Sotton:
Wouldn't it be sort of unfortunate if the name of
the country got out?
E.G.Jr:
I don't know, but like all these things, you have
to face the newspaper man and, as I say, he is
kind of hard, and 1f they have got a piece of e
story, what am I going to tell them? It 1s Just up
to Welles. Welles may like to have it out.
Diffield:
The Brazilian business was announced while the
negotiations were going on.
H.M.Jr:
Normally, I wouldn't do it, but they have given out
8. piece of a story and there has been so much, as
Jones said yesterday to Welles, given out about
loans and he didn't feel he knew all about it,
142
- 4 -
Jones didn't. I mean there is so much talk, Com-
merce, State, everybody talking, and they have got
nothing to deliver. They had to 80 back to 1937.
We will see.
Herbert?
Gaston:
When we were over at the State Department the other
day, Mr. Berle gave us a copy of the Act of Panama,
If you are interested - I suppose you have seen it.
B.W.Jr:
No, they gave one to Mr. Jones yesterday. I am not
interested. The people who are studying this might
be. I just haven't got time.
Jaston:
Do you want to say anything about that Baltimore
thing at this time?
11.M.Jr:
No, other than that I think....
Gaston:
You wondered why there was not EL prosecution there.
H.R.Jr:
Yes. But that 1s not the whole thing, why did we
have B. crook in the Treasury? Why is he just dis-
missed? Why isn't he prosecuted?
Gaston:
I will look into that. I have got to talk to
Elmer some more about that.
H.M.Jr:
That is all. And I didn't think that that memorandum
floating around the files was awfully pretty anyway,
stating the method they used to get him. I don't
308 why they should put it in writing.
Cotton:
Is that the Colombian Consul out on the West Coast?
Gaston:
No, 1t 13 a tax case.
Cochran:
Nothing, sir.
H.N.Jr:
How is your cold?
Viner:
No good.
S.M.Jr:
George?
Haas:
I have nothing, but there is something in here
(handing report to Secretary) that you might want
to see.
C43
- 5 -
Basil, I don't hear from you these days. Is
everything O. K.?
uncrist
Yes, I have been a little busy lately.
1.2.Jr:
Just to take a minute, Basil, what happened to
the ship of your former company?
Arris:
Got caught in that hurricane.
Everything 1a all right now, she is in, Isn't she?
hereit
Yes, The danger of those hurricanes is, after they
have floated around the West Indies for & while
they come out into the North Atlantic. By the
time they get out there, they are moving very fast.
They may be moving, say, 60 miles an hour. Due
to some freak, that storm will awitch and she
then goes on a right angle tangent, whereupon the
velocity would be doubled. She then becomes 160 miles
an hour and then you are in a storm.
THE
That 1s what happened?
Expris:
That is what happened.
S.S.Jr:
All the way over they had weather maps, clockwise
and counter-clockwise, and wondering if they would
pass, and 30 forth and so on. Viner and I got so
we didn't know whether you dealt to the right or
the left. la that right?
Didn't care.
2.2.22:
I have got to tell a story on myself. My second
son was maliciously circulating It about this trip
of ours coming back. It is absolutely malicious
and there isn't a word of truth about it. The
Captain was supposed to have come in to see me and
I was lying in my bunk with my head hanging out.
He said, "Sir, I would like to heave to." I am
supposed to have answered, "Fino, I have just heaved,
too."
Marris:
I have that letter of Mr. Wait's.
V.M.Jr:
He ought to have that and would you go to bat for
him? The poor fellow has tried to have it and
144
- 6 -
I think if you talk to Merle Cochran he might
give you a little background, why Treasury
fellows can't get diplomatic passports, recog-
nition in France. Tell him what 12 the trouble
and what 1s the best way to avoid it over across
the sea.
White:
That is true in England, too, Mr. Secretary.
H.M.Jr:
Well, this would be for Europe, and in these times
particularly.
Harris:
This poor fellow is having a terrible time.
H.M.Jr:
He ought to have it and who would be the fellow
to see over at State, who is the right fellow to
give it to him?
Cochran:
It would be one of the Assistant Secretaries, but
first. I will get in touch with the passport section
H.E.Jr:
Would it be Messersmith?
Cochran:
Yes.
H.M.Jr:
Whoever it 18, will you go to bat for your boys?
Harris:
If you will back me up.
H.M.Jr:
I will back you up.
Viner:
It will take all the strength of the Treasury.
E.M.Jr:
I think you can get 8. little background here and
you (Cochran) can tell him where the opposition
comes from.
Cochran:
All right.
H.M.Jr:
If you will ask Mrs. Klotz, I would like her to
tell you several things, too.
Harris:
Inside stuff?
H.M.Jr:
Yes. 0. K.?
Harris:
Yes.
- 7 -
1151
Mr. Secretary, I am going home this afternoon and
1f it 1s agreeable to you I would like to have
the same arrangement I had before, that when I
am needed, you will ask me to come down ano then
for B. time, at least, I will keep the office and
if anybody wants to get in touch with me, the
telephone runs to St. Louis.
S.M.JP:
One way.
berth:
That is all.
U.M.Jr:
Harry?
Odty
You may have noticed the selling of - by Britells
of securities, but since the war it has been
running fairly regularly and now amounts to almost
50 million dollars, and curiously, that is about
equal to what we have estimated her loss of gold
would have been had she used gold instead of
securities, so, though it is much too early to
say, it looks to begin with that she is pursuing
& policy of conserving her gold and utilizing such
balances as she 18 able to obtain from the sale
of her securities, which would be very interesting
if 1t is continued.
There is EL note here about oil from the SEC. I
don't know whether that came to me by accident
N.M.Jr:
What kind of oil do they produce, banana oil?
white:
They do, but it isn't in this letter. This is
about the TNEC hearing and oil rates and so on.
Some revenue should have gone to the Treasury,
probably, or might have gone 1f something else
had been done. You asked me to speak to you
about it, and possibly the letter was in error
in coming to me.
C.M.Jr:
No, I got this letter and I didn't have time to
read it and I thought you might boil it down to
half et page or a paragraph.
Thite:
And you would like an answer prepared?
E.M.Jr:
Yes. I wanted you to boil It down for me to B
paragraph.
246
- 8 -
White:
I spoke to Ed about it and ne 13 having his man,
O'Connell, prepare a memorandum which he couldn't
prepare until he had asked the witness some more
questions bearing on Treasury interests, 80 it
should be ready any time now, and when it is, it
will be sent to you with an answer,
Let it come up to me through Hanes, will you please?
Thise
Right. Then there is snother memorandum from the
Far Eastern Division to see you about China, I
think 1f you have five or ten minutes, the Chinese
situation is apparently changing pretty substantially.
H.M.Jr:
I wouldn't have any time today. Is that the kind
of information we want?
hite:
They ssked you for something. They asked whether
this was information merely in which he is raising
the question whether the Consul ought to be stationed
at Rifong or whether he can just go over from Kanoya,
back and forth, the way he has been doing. I am
inclined to leave that decision wholly to
S.F.Jr:
I was told that was the best they can do.
Cochrun:
This is the first case of information they have
gotten. It is rather interesting, for they have
gotten by his trip down.
U.R.Jri
Will you tell the State Department that this 1s good
and I would like to, 1f I could, pet that kind of
thing fortnightly.
Cochran:
All right. Hamilton phoned me before he sent it
over.
M.M.Jr:
If we could have a cable like that fortnightly, I
would appreciate it.
White:
Which would be an answer to the question 88 to how
the situation should be covered.
Cochrant
Yes, They say it is just experimental with them
still.
H.M.Jr:
What I am interested in 1a the Hifong-Kanoya route,
147
- 9 -
If I could get 8. cable at least fortnightly, I
would appreciate 1t. Don't you think that would
be often enough, Harry?
White:
Quite.
H.M.Jr:
That 18 the first one?
Cochran:
It is the first one under this new arrangement,
S.M.Jr:
The boys of the State Department are kind of a
little tricky with me. They gave me the impres-
sion that this 1a just coming along and had nothing
to do with my inquiry.
White:
I didn't know this W&B the first one.
Cochran:
It is the first detailed one like that.
White:
There is another outflow of capital, substantial
amounts, but a large portion of that are these
British selling of chiefly American securities,
but there are other balances that are being
reduced by many other countries, so that the net
movement is an outflow of capital, small inflows
of gold.
H.M.Jr:
Gene?
Duffield:
Nothing.
Rell:
Nothing. There is B. meeting this morning of our
committee.
R.M.Jr:
What committee?
Bell:
That you appointed yesterday.
R.M.Jr:
What committee is that?
Bell:
Currie and the others.
B.H.Jr:
I am glad you talked about that. I appointed
a committee on gold statistics. What happened to
that?
Banes:
We mot on Tuesday. Representatives of the Federal
48
- 10 -
Reserve and the Commerce Departments and Harry
and Central Statistical Board and Merle Cochran
and myself. I think everybody was agreed that
they should reduce it to weekly statistics, on
the gold movement, instead of daily, except the
one man, and that 18 Gardner in the Federal
Reserve. He seems to think they ought to con-
timue to give out the figures daily and I don't
think we ever convinced him, Harry, that we were
right and he was wrong. We left it, however,
that there were four people there who all thought
there should be just a weekly figure.
E.W.Jr:
By Commerce?
White:
By Commerce, with some cooperation from the Federals.
Banes:
We never convinced him.
E.K.Jr:
You never will.
Hanes:
We left it that we would do nothing about it further
until we heard from him.
White:
It cropped up last spring, Mr. Secretary. We had a
larger meeting. At that time there was a difference
of opinion between the Federal Reserve Bank of
New York and the Federal Reserve Board here 88
represented by Gardner were pretty adament in their
opinion that it should be continued. Rather than
use the big stick, we thought we would let it go
until something happened. Something has happened
and has taken away their argument, which was that
there was no excuse for changing.
B.M.Jr:
In B. very polite and soft voice, let's say weekly.
White:
He may agree that is all right.
Hunes:
He said he would like to go back and consult his
associates.
Cochran:
Mr. Secretary, he telephoned me yesterday afternoon
on that same thing and he wanted my arguments again.
I think he 18 weakening.
H.M.Jr:
John, give him until next Monday.
149
- 11 -
Hanes:
And then tell him we will do it weekly?
H.M.Jr:
Yes. Agreed?
Hanes:
Yes. I don't think his arguments are any good.
I think he is just stubborn.
Foley:
Mr. Secretary, that order that was in the paper
this morning signed by the President yesterday
prohibiting submarines from our waters was pre-
pared here.
H.M.Jr:
By whom?
Foley:
Cairns.
H.M.Jr:
So I understood.
White:
Did you see the note in this morning's paper about
the use of the stabilization fund? It was in
this morning's Times. There was a part of & column
on it and I assumed that they got it from somebody
here.
Duffield:
I haven't seen it, either, I am sorry.
White:
I will give it to Gene.
H.M.Jr:
Thompson?
Thompson:
Nothing.
NEW YORK DAILY MIRROR - October 19, 1939
Walter Winchell
150
On Broadway
time Marl 1989, Daily Miner)
Our Red-Faxe Dep't: To amounced that it would probably be
denied but that Sec'y of the Treasury Morgenthau was an Not serious,
we added Just as 98 exclusively predicted, the cabinet member con-
firmed the first half of the scoop in the following telegram: "Dear
Walter: You will be glad to learn and some people will not be 10
pleased that Sunday morning I enjoyed a two hour horsebeck ride.
Sunday afternoon Mrs. Morgenthau and I Look 1 long cross-country
walk. Everything was perfect until nine clock when I turned on my
radio to listen to my favorite Sunday night commentator. From then
on I wasn't sure which of us was sick. The telephone began to ring.
Friends and press associations wished to uncertain the state of my
health. I assured them that up to the time of your brondcast 1 had
been perfectly well. My telephone is in working arder. How's yours!"
It's not feeling to good-thove over.
151
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 19, 1939
TO
Secretary Morgenthau
FROM
Mr. Cochran
At 10 o'clock this morning I telephoned Mr. Hamilton, Chief of the Far
Instern Division of the Department of State, I told him that the Secretary
had noted with interest the cablegram (#374) of October 13, 1939, from the
American Consul General at Hongkong, quoting & message of October 11 from
the American Consul at Hanoi. I told Mr. Hamilton further that Secretary
Morgenthau would appreciate receiving similar mossages at least as frequently
as every fortnight. Mr. Hamilton thought it likely that reports would be
coming in more often than every two weeks, but if they do not, he will issue
the necessary instructions. In answer to my question as to whether this was
the first cablegram transmitted upon the question of transport of goods
through Indo-China since the arrangement had been set up for the Consul at
Hanni to deal with this situation, he replied that it WBS either the first or
second. I did not recall receiving a first one, and he said he might be in
error. Checking through our files, I find no other cablegram of the type
of #374 received from Ranoi.
BMR
CORPLUENTIAL
52
A telegrom (m. 374) of October 13, 1939, from the
America Censul General at liong Kong (setime a telegram
of October 11 from the American Gensul nt Ranel visits
reads substantially as follows:
that the policy of Transe is connection with Chim
is still to a (resh degree dependent wash politient -
pediency is above w information which is en14 to come
from authoritative official sturess exameraing the
policy which 10 to be followed toward the transit and
export to Ohima of goods which NPO not allowed to be
exported from Indochine. After October 13 there will
be a bes - the trensit and export of much goods to
private - in China and from a date which the
Director of Customs at Hamel will announce there will
be a in où the treasit and emport of these prohibited
gode to the Chinese Government, according be motifies-
ties given the Chinese Consul General by the Severned
General of Interhine in letters dated October 3. the
transit end export of pole covered by the Universal
Trading Company leen will, however, be allowed IS in
the past. Verious persons vis have talked with the
Director of Customs and the Severent General since the
- 2 -
53
Lebrers reseired 2 E a I
Consul General have very definitely mites the Improve-
sion thes If the condition of freight of
Heighoug is eleared up a - lentent policy will to
followed then that described in the letters. Have the
six menths will be required be clear to the congration
at Hadyhoug, according to information received w the
American Commi. the French visa to - giving the
appearance of accisting the Changes deverment actively,
secirding be information from foreign and Chinese yet-
seas. There is a that there 10 an order that
regardless of whether as care and twoke are londed all
such cars and trucks must got out of Halphong within a
period of three days. A musber of the aforemationed
foreign and Chinese courses state that within a verit #
w 10 Le expented that certain Japanese will come to
Hadphang and that only effort La being made to force a
clearing - w the Chinese of the almost unbolisvable
overcrowing of freight. the break in the refireed to
Teansfe, which line as not be usable for the use
partation of freight for . month at least; the conditions
ties of the highway beyend the frantier which within
a Injury 1 paint 1 I 5 1 3
sages and the Lask of truck drivers are definite headl-
Has be the assement of up imediately.
- 3 -
154
19 would - judging from conversations hold a
short time up is Enigheeg end Homes, that the Govern-
ant of Indochine to instined fee the present to -
sider foresably the native of chipmants to the Chinnes
I 8 1 s
the United Mates. Deverse, there does exist a strong
desire to compo complications with Japan. This declare
which 10 understandable is se strong as to justify the
1 = I 1 I a any 1 in I
care, restrictions my be impesed - the transit to
China of the sbove-nentioned mede.
$93,24/600
155
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 19, 1939
TO
Secretary Morgenthau
Mr. Cochran
FROM
I discussed with the Secretary this morning the request of Mr.
Brockington of the American Smelting & Refining Company that his Company
be exempt from the requirement that silver bars refined by its Mexican
subsidiaries and purchased from it under the Silver Purchase Act bear
the stamp of American refineries. The Secretary accepted the recom-
cendation set forth in Mr. Dietrich's memorandum of October 10 that DO
exception should be made in this case.
October 20, 1939
I mentioned the above matter to Mr. Knoke when he was in my office
yeaterday and explained to him by telephone today that the Treasury had
decided against making any exception in this case and that he, Mr. Knoke,
should so inform Mr. Brockington of the American Smelting & Refining
Company, for whom Mr. Knoke had made the appointment with the Treasury
on October 4.
16.10/8
CONFIDENTIAL
TREASURY DEPARTMENT
156
INTER OFFICE COMMUNICATION
DATE October 10, 1939
Coch
Mr. Cochran
TO
Xr. Dietrich
FROM
With reference to our conversation with Mr. Brockington of the American
Smiting and Refining Company on October 4 regarding exemption fronthe condition
us: silver bars purchased from the American Smelting and Refining Company under
the Silver Purchase Act must have the stamp of American refineries, the following
LA the beckground relative to this subject.
Barly in 1936, speculators were shipping considerable amounts of silver
ITOM London to New York for sale to the Treasury. In order to discourage this
ractice na much as possible, it W&B decided, with the approval of the Secretary.
that all silver bara purchased under the Silver Purchase Act, in order to be
eligible for sale to the Treasury, would have to bear the stamp of en American
refinery located in the United States.
The reasons for this action were as follows:
1. It lowered the export point on silver shipped from London, due to
Use Increased cost of having the bars receet when they reached here if they did
not bear the stamp of an American refinery located in the United States.
2. It gave additional work to American labor as new production
silver sent to the United States from South America would be refined in
American refineries.
3. It was a protective measure in case we discovered that large
anounte of silver were coming in, and it would give us at least a day or
two to debate E. change of policy if necessary.
Mr. Brockington stated that the American Smelting and Refining Company
Is nn American Corporation and that their Mexican subsidiaries are also in the
Lane classification. He also stated that the bars they shipped from Mexico
are good delivery bare everywhere but when sold to the Treasury, and that his
Company calculates that their profit is reduced by approximately $75,000 a year,
this to the fact that the bare have to be recest at one of their refineries
in the United States in order to be eligible for sale to the Treasury.
Mr. Brockington is bringing up this question at the present time
because be feels that the domestic market 18 not in B position to absorb further
amounts of silver at the higher price which has prevailed recently, Handy and
Harmon's price being at times as high as 44 above the Treasury's price. As and
when Hendy and Harmon's price again goos under the Treasury's price the American
- 2 -
_SI
Scelting and Refining Company will probably offer their silver to the Treasury,
hence the request that they would like to have the requirement that bare bear the
(team of an American refinery located in the United States rescinded.
In considering this request the following matters should receive
consideretion:
1. If we make an exception in the case of the American Smelting
and Befining Company and accept their Mexican bara without recasting we could
be accused of fevoritism. It would be but E. matter of a short time before we
would have to maire a similar exception to all sellers of silver.
2. The removal of this requirement would deprive American refineries
of E. certain amount of work which they now receive.
3. If we remove this requirement it means that we are increasing the
profits of the various mining companies as well B.S. meculators when silver
shinced to this country is sold to the Treasury.
4, By the removal of this requirement, it encourages larger amounts
of gilver to be shipped to the United States for sale to the Treasury.
5. As recently R.B. July of this year one of the conditions for the purchase
of forward silver, that 1a, the length of time on forward contracts. was changed from
6 months delivery to 5 months delivery, which includes the current month. This change
took one month off the time for forward deliveries and tends to reduce the amount of
silver offered to the Treasury,
In view of the agitation for the repeal of the Silver Purchase Act, and
the fact that as late as July of this year we changed one of our conditions for
the nurchase of silver, as mentioned above, my recommendation would be that the
requirement of the stamp of American refineries on silver bere purchased by us be
retained.
M.
TREASURY DEPARTMENT
158
INTER OFFICE COMMUNICATION
To
Cochran
DATE: October 18, 1939
Mr. Coohran No
in
FROM
Mr. Dietrich
With reference to the question of silver in London which we
discussed, the probable effect would be to increase sales to the Treasury
under the Silver Purchase Act.
Below are some further restrictions which we could place on our
purchases:
1. Discontinue purchasing speculative silver, silver which is
the product to secondary materials, or scrap, or any type
of silver that could come under that classification.
2. Confine our purchases to only newly produced silver.
3. Reduce further the time and delivery on future contracts
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 19, 1939
TO
Secretary Morgenthan
FROM
Mr. Cochran
The foreign exchange market was slightly more active today, with increased
volume in sterling transactions. The opening quotation for starling was 3.99-3/4.
and by early afternoon it had advanced to 4.00-1/2. In mid afternoon, one of the
Sev York banks received an order from abroad to purchase 135,000, and after this
order appeared in the market the rate rose to 4.01-1/4, the high for the day.
It closed at 4.01.
The French franc opened at .0226-5/8, and closed at .0227-5/8. The belga
receded from yesterday's close of .1686 to .1680. Guilders and Swime france
vere about unchanged and closed at .5309 and .2243 . respectively.
Reporting banks in New York and the Federal Reserve Bank reported sales
totaling 6645,000, from the following sources:
Commercial concerns
1 305,000
Foreign banks (Europe and Far East)
L 240,000
Federal Reserve Bank (For Denmark)
1 100,000
Total
1 645,000
Purchases of sterling amounted to 1790,000 as indicated below:
By commercial concerns
1 415,000
By foreign banks (Far East and Europe)
1 107,000
Federal Reserve Bank (For Turkey)
L 268,000
Total
1 790,000
The banks also reported that the British Control purchased sterling amounting
to 169,000, at the official rate of 4.02.
With reference to the purchase of 1265,000 by the Federal Reserve Bank for
Turkey, this payment 18 being made to the Bank of England for the account of the
3.1.5. In view of the fact that the sterling 1a to be paid for the account of the
3.1.5., I think that it represents payment of a loan made by that institution to
Turkey.
There were no new gold transactions consummated by this office today.
- 2
180
The Federal Reserve Bank of New York informed us that they had not received
any reports of gold shipments to this country.
I discussed with the Secretary this morning the request of Mr. Brockington
of the American Smelting and Refining Company that his Company be exempt from
the requirement that silver bars refined by its Mexican subsidiaries and purchased
from it under the Silver Purchase Act bear the stamp of American refineries. The
Secretary accepted the recommendation set forth in Mr. Dietrich's memorandum of
October 10 that no exception should be made in this case.
B.M.R.
TO:
Min Klotz
O.K.
ney
From: Mr. GASTON
Regraded Unclassified
161
October 19, 1939
9:58 a.m.
HMJr:
Hello.
James A.
Farley:
I think I'll bring Carmody around today.
HMJr:
(Chuckles) Can't you control him, that soft-spoken
gentleman?
F:
Can anybody?
HMJr:
I don't know.
F:
(Laughs) It's amusing, really.
HWr:
Yeah.
F:
I'll tell you what I called you about. When Steve
was over there with you, Henry, and people would
come in to us and wanted information and wanted
help or advice, different things like that that we
didn't know anything about, of course we'd send
them over to Steve and Steve would take care of
them if he could; if he couldn't he'd tell them,
and so forth and BO on.
HMr:
Yes.
F:
You know, we'd just pase them on
HMJr:
I know.
F:
and he'd do what he could. If he couldn't
it was all right.
HMJr:
Yes.
F:
Now -- well, now that he's gone, who 18 there over
there for us to send anybody to with problems and
things affecting
HMJr:
How would Herbert Gaston be?
F:
Oh, it'll be perfectly all right if he's the fellow.
I don't
- 2 -
162
HMJr:
Well I hadn't -- I'll ask him.
F:
You ought to have someone over there because we
get people who want to find things and we don't
know
HWr:
Well
:
It ought to be -- I don't care who it 18.
HMr:
Well, Herbert would be the only fellow I've got.
F:
Well that's all right.
HMr:
Is he all right with you?
F:
Yeah, he will be perfectly all right as long as we
have someone that we can send people to. Now I don't
want them to do anything they shouldn't, as you know,
but we have to send them to someone to talk with.
They come in, a lot of -- sometimes the requests
are crazy requests and Steve would dismiss them in
a minute and say, "Well, nothing can be done on that."
HMJr:
Well
F:
But he would at least see them, you see.
HMJr:
Well, if you don't -- I'll get word to him and be-
tween now and Cabinet I'll ask him if it's all right.
F:
Well that's all right. As long 8.8 it's someone 80
that when the people come in here Bray will call up
and say, "Well, so-and-so 18 coming over and just
see him and do as you can.¹ If you can't it's all
right.
HMJr:
O. K.
F:
Thanks a lot. Goodbye.
163
October 19, 1939
10:24 a.m.
Sumner
Welles:
Henry, how are you?
HAJr:
I'm all right. How are you?
V:
I'm fine thanks.
HWr:
I guess we both would -- doing a little lying, but
that's all right.
V:
(Laughs) I have here before me a further telegram
from Joe Kennedy which has not been sent over to
you and which I am sending to you personally
immediately.
H.Jr:
Right.
V:
In view of our talk the other day no reply, of course,
will be sent to him with regard to the question of
depositories or agencies.
H.Jr:
No.
V:
On the other hand he raises the other second point,
which I think it would be helpful for him to have
a reply upon if you agree, and that 18 the question
of the handling of the British marketable securities
in this country.
HWr:
I see.
V:
So I'm sending over the telegram to you and if you
agreed perhaps you'd be kind enough to indicate the
reply that you want made, if any.
HMJr:
0. K. Now
W:
Yeah.
HMJr:
don't hang up on me.
W:
No.
HVJr:
Are you through?
W:
Yes.
161
- 2 -
HWr:
Now, I don't know whether you saw the story in the
Tribune quite in detail about our meeting yesterday.
W:
No, I haven't read the Tribune yet.
HWr:
Well, they had quite & story on it and I believe
they got it from your Department. I'm not sure,
I think BO. Now -- which 18 unimportant -- but
I'm seeing the press -- my -- I have press twice
a week and I'm seeing them at 10:30 and I wanted
some guidence from you as to what, if anything, I
should say that we were meeting about yesterday.
%:
Well point number one, I will call in immediately
the two people who were with me and find out if
they have discussed in any sense what we met for
yesterday with any newspaper correspondent.
EWr:
Yeah.
W:
I will let you know.
HiJr:
Yeah.
My very strong impression 18 that neither one of the
men with me have talked to any correspondent.
H/Jr:
Yeah.
V:
If they have, there'll be trouble.
HaJr;
Yeah.
V:
Point number two, I rather wonder if it might not
be well, if you feel that you have to say something,
to Bay that it wes merely EL preliminary exchange
of views as the result of the Panama meeting in
view of the November 15th scheduled meeting of the
Inter-American Advisory Committee and let it go at
that.
ENr:
That's all right with me. That's -- I'll say just
that.
V:
If you think that's advisable.
HNJT:
Yes, I think that's fine.
- 3 -
165
V:
All right, Henry.
HMJr:
I think that's fine. Yeah, well, I'll wait for that
Kennedy cable.
W:
Thank you very much.
HMJr:
Thank you.
W:
Goodbye.
166
October 19, 1939
5:05 p.m.
HMJr:
Hello.
Overator: Mr. Welles. Go ahead.
H/Jr:
Hello.
Summer
Welles:
Hello, Henry.
RJr:
Sumner
==
Yesh.
MJr:
Johnny 18 sitting here with me.
23
Yes.
H.Jp:
At Cabinet I took up this list of purchases that the
Finnish Minister wanted to make.
W:
Oh, yes.
HWr:
Now, I didn't got very much enthusiasm from the
President or from Mr. Hull, but they said to kind of
20 ahead and see whether, first whether he couldn't
do it and be financed through private banks and if
not do something. But we haven't got much money
left, but on the other hand E fellow -- I figured
this way, the President has gone this far and I
don't went to leave the fellow high and dry.
V:
Yeah.
HWr:
So -- well, I said, "How about having Mr. Welles,
Jones and myself take un this matter and Bee what
we can do?" And they said, "Fine." Sut I know
you're going away tomorrow and 60 am I and I thought
that Hanes might do something Friday or Saturday
if you would designate who could act in your place.
V:
Well, I'm not going swey until tomorrow night.
H.Jr:
Well, do you want to do it tomorrow?
N:
Well, I'll be glad to.
H.Jr:
Well, would you call a meeting?
- 2 -
167
V:
No, I think it's much better to have it over there
and let me come over at some time that's
HMJr:
Well then
W:
convenient.
HiJr:
Hanes will call you and make an appointment for you
and Jesse and -- for tomorrow?
V:
Yeah. Could you wait just a second, Henry?
HMr:
I'll wait
%:
H:Jp:
All right. Right now.
V:
And
HMJr:
Just a second.
V:
Make it some time that's convenient.
HWr:
Well, do you want to give say two different times,
one in the morning and one in the afternoon or
V:
The best time for me would be three because my
morning is filled, but anytime in the afternoon
would be all right.
HWr:
Hanes -- Hanes will -- will call you back.
W;
All right. Henry
HMJr:
Yeah
W:
About the telegram I sent you.
H/Jr:
Yes.
W:
Have you
HMJr:
Yes, I've just O.K.'d it and it'll be over to your
place within twenty minutes.
W:
Oh, fine.
- 3 -
188
HWr:
It's O.K.'d and it's B. collaboration with Jerome
Frank, Herbert Feis and the Treasury gang.
V:
Grand.
HNJr:
And everybody's in accord - at least enough in accord
that I've O.K.'d it.
V:
Thank you very much indeed.
HMr:
And this 18 B very polite slap on the wrist.
V:
Um-hm.
HilJr:
It's BO polite I never could have written it myself.
V:
(Laughter)
H/Jr:
How's that?
W:
(More laughter) I shall read it with interest.
MJr:
(Laughter)
W:
All right, Henry. Then I'll wait until Johnny calls
me in the morning.
HlWr:
Yeah, and this thing will be over to you -- to your
office direct within twenty -- they've got to recopy
it. It oughtn't to take more than twenty minutes.
W:
All right.
HMJr:
It'll come right to your office.
V:
Thanks.
HiJr:
Goodbye.
V:
Goodbye.
C9
October 19, 1939
FOR THE SECRETARY:
In line with the note I sent you yeaterday about the
Federal Reserve hiring a special staff to prepare for the Wagner mone
tary investigation, I am considerably concerned lest the Treasury be
at a disadvantage because preparations are not completed when the
hearing begins.
Accordingly, I should like to maice B. suggestion which
you and Mr. Hanes, to whom you delegated the preparatory work, might
consider.
Mr. Hanes, Mr. White, Mr. Haas, Mr. Delano and other
members of your staff who are interested in this work have other duties
which absorb their time and push the work on this less immediate problem
temporarily into the background. Therefore, to get the work started
I suggest that a group of "junior" officials be set up to collect 10-
formation and sketch an outline of presentation for the Treasury's case.
I think the members of this group should be freed from a part of their
routine work. Anything they did, of course, would be subject to review
and change by Mr. Hanes and any group of higher offidials be wished to
have sit with him.
Someone should head up this "junior" group and ride
herd on it. You couldn't ask for a better man than Walter Stewart, if
he would undertake it. Phil Young is another good bet. If no one else
would do it, I would be glad to try, but I couldn't begin to do the job
that Mr. Stewart could do.
ESD
TREASURY DEPARTMENT
19-39
Washington
The State Department Press Section
(Mr. McDermott) said that they had not talked
about yesterday's meeting to anyone. He had
not seen the Herald-Tribune story.
Gregory of the Herald Tribune tells
ne he got the story merely by seeing Mr.
Telles, etc. in the Treasury halls. He says
he tried later to get in touch with both Welles
and Jones but failed.
However, Crider of the Times, who wrote
no story, talked with Feis before the meeting.
Feis told him it was going to take place and
that it might clarified the Guatamala meeting.
This latter is confidential.
your
No Mechanism at Present
NEW YORK HERALI TRIBUNE
AL presene there is no existing
OCT 19 1939
mechanism for eachange of Informa-
tion between the Treasury and the
treasuries of the Latin American
republics. The Treasury was bene-
fitted by the co-operation existing
between France and England under
the tri-partite agreement These
problems will also be discussed by
ParleyStudies
treasury representatives of the re-
publics, meeting at Gustemala City
next month.
The question of setting up an In-
LatinAmerica
ter-American financial Institution la
part of the general scheme to pro-
tect the economic and financial
FiscalPlan
structures of the republies. They will
also consider problems of monetary
relationships, foreign exchange man-
agement, and balance of Interna-
tional paymenta
Morgenthau, Welles and
The Inter-American Financial
and Economic Advisory Committee
Jones Act on Financial,
consists of one expert in economic
questions from each of the twenty-
Economic Problems
one American republics. The organ-
(zation of the group was intrusted
to the Pan American Union under
American Version
the terms of the resolution adopted
nt Panama, and the meetings of the
Of I. S. Weighed
committee will be held at the Union.
Three Departments Studying Plans
The State, Treasury and Com-
Establishing of Such an
merce Departmenta are at present
engaged in various studies affecting
Institution Held Part
United States and Latin American
of Protective System
trade, monetary relations and was
and means of financing Latin Amet-
lean trade. Last work President
From the Iternia Frünch Aureau
Roosevelt at a press conference
WASHINGTON, Oct. 18-Henry
mentioned the possibility that Use
Morgenthau Jr., Secretary of the
United States might extend gold
Treasury, conferred today on Latin
credits to 5 number of countries.
American problems with Jesse H.
However, It is doubtiul If gold
Jones, Federal Loan Administrator,
loans will be extended to any of the
and Summer Welles, Under Secretary
tatin American countries for out-
of State, and American delegates to
rency stabilization purposes without
the Inter-American conference of
Congressional approval. What may
American republies, held at Panama
be done is the extension of credit
recently.
for purchase of equipment and
The conferees, It is understood,
manufactured goods by the repub-
discussed the coming meeting of the
lics, Another medium may be the
Inter-American financial and eco-
extension of the special reciprocy!
numée committee which will be held
arrangement which the Treature
in Washington Nov. 15. The com-
has with Brazil making dollar ex-
mittee will canvass ways and means
change available to that country.
of assuring closer economic co-op-
Meanwhile, the question of gold
eration among the twenty-one re-
was magnified today with the pub-
publics adopted In B resolution at
lication of the daily Treasury state-
Panama.
ment showing that gnid holdings
One of the proposals to be taken
are now at $16,995,006,272. Treasury
up is the creation of an inter-Amer-
officials believe that the $17,000,000.-
000 mark will be passed before the
lean Institution to Insure permanent
and financial co-operation between
week is about. On Sept. 30 the
the treasuries of the republica. It
Treasury's gold holdings totaled
may take the form of an Institution,
$16,931,515.000.
jointly sponsored by the republics,
similar to the Bank for Internation-
al Settlements, which has operated
in Europe for a number of years.
172
MEMORANDUM
October 19, 1939.
TO: Secretary Morgenthau
FROM: Mr. Duffield
The Colombia story seems to be leaking very badly.
Fred Shelton of the Kiplinger Service called me at 11:30
to say that Colombia was coming up to arrange a loan, that
Mr. Wells was smoothing the way and had even urged the
Colombian representative to fly up at once. I knew nothing
about the situation of course.
ESD
373
October 19, 1939.
MEMORANDUM
TO: Secretary Morgenthau
AAA
PROM: Mr. Gaston
SUBJECT: Gambino-Lapadura alcohol conspiracy.
We do not yet have a full report on this case, referred to
in the attached clipping from the New York Times of October 17th.
Cahill's publicity was somewhat premature, since not all arrests
have been made, but possibly was forced by the garage raid, in
which New York City police cooperated. It would be difficult to
cover up this sort of thing. Alcohol Tax expects to arrest a
total of approximately 90 persons, 20 of whom are principals and
financially interested in the syndicate. The Gambino-Lapadura
gang is apparently a reorganization of the Stahl-Pelligrino gang,
74 members of which were convicted on May 26th of this year.
Joseph (Black Lefty) Lapadura, arrested Monday, is a relative of
Angelo Lapadura, sentenced to 22 months imprisonment in May. The
Lapaduras originally represented a group of New Jersey racketeers
who attempted to control distribution of illicit alcohol in the
metropolitan area. At the time of the spring and arrests the com-
bination had seven alcohol drops in the city and handled in excess
of 5,000 gallons weekly.
In the current investigation five alcohol drops have been
located and 60 vehicles identified as being used by the gang.
Radio equipped cars performed effective service in the investiga-
tion.
MY
October 19, 1939.
MEMORANDUM
TO: Secretary Morgenthau
P.O.: Mr. Gaston
SUBJECT: Gambino-Lapadura alcohol conspiracy.
We do not yet have a full report on this case, referred to
in the attached clipping from the New York Times of October 17th.
Cahill's publicity was somewhat premature, since not all arrests
have been made, but possibly was forced by the garage raid, in
which New York City police cooperated. It would be difficult to
cover up this sort of thing. Alcohol Tax expects to arrest &
total of approximately 90 persons, 20 of whom are principals and
financially interested in the syndicate. The Gambino-Lapadure
gang is apparently a reorganisation of the Stahl-Felligrino gang,
74 nembers of which were convicted on May 26th of this year.
Joseph (Black Lefty) Lapadura, arrested Monday, 1s a relative of
Angelo Lapadura, sentenced to 22 months' imprisonment in May. The
Lapadures originally represented a group of New Jersey recksteers
who attempted to control distribution of illicit alcohol in the
metropolitan area. At the time of the spring and arrests the com-
bination had seven alcohol drops in the city and handled in excess
of 5,000 gallons weekly.
In 4.10 current investigation five alcohol drops have been
located and 60 vehicles identified as being used by the gang.
Redio equipped care performed effective service in the investige
tion.
NEW YORK TIMES
OCT 17 1939
HUGE BOOTLEG RING
SMASHED IN RAIDS
Drive Long Under way
The drive was not disclosed until
Government Agents and Police
after Lapadura's arrest. During the
last few waeks forty-one others had
Hold 51 Said to Be Operating
been picked up and held under rou-
tine charges. Many were released
in Metropolitan Area
on bail, and no indication of the
significance of the arrests was
given until late yesterday.
The breaking up of the "largest
While Mr. Cahill declined to Indi-
bootleg ring elnee prohibition" was
cate how many more prisoners WHITE
atill to be taken, or how great the
attounced yesterday by United
amount of taxes evaded by the
States Attorney John T. Cahill, The
group might be, bie etatement that
time. fifty-one of whose members
the group was the "largest since
alrendy have been arreated, oper-
prohibition" appeared to indicate
that more than 100 arresta might be
sted five or sis atilla in New York
made, and several million dollars
and New Jersey, and distributed
in Federal and State taxes Involved.
2,000 gallons of grain alcohol a day
The Pellegrino-Polatniek ring.
to druggieta and bootleggers In the
broken up in the Summer of 1938,
involved the arrest of 106 persons,
metropolitan area and even in
and Federal taxes evaded were #
Massarbusetts, IL Will alleged.
timated at $1,800,000. At present
Mr. Cahill's announcement was
tax rates, the volume of illieit alco-
made after agents of the Alcohol
hol described by Mr. Cahill would
Tas Unit of the Treasury Depart-
cost the Federal and State Govern-
ment, cooperating with city police,
ments $11,540 a. day.
had raided the Mercer-Houston
Selze Trucks and Automobiles
Corage at 165 Mercer Street There
The garage raided yenterday was
they arrested ten men, of whom
an old-fashioned. five-story build-
the most inrportant was Joseph
(Hinck Lefty) Lapadura of 126 Ellz-
Ing. close to East Houston Street.
On the ground and upper Bonce pri-
aboth Street Lapadura was de-
vate aujomobiles and trucks were
acribed as the commander-in-chiet
stored, but the basement was given
of the outfit The others taken in-
over entirely to the activities of the
cluded Jacob Frankel of 217 Haven
ring. it was said. Two trucks and
Avenue, the proprietor, and eight
several automobiles were seized. All
employee of the place, according to
had been used for the delivery of
the announcement.
alcohol, according to the Federal
authorities.
The trucks were large, ordinary-
looking vehicles, ostensibly used by
a grocery house. The hurlap sacks
and paper cartons they contained,
however, setually were camouflage
for the five-gailon tins used invari-
ably in the Illeft alcohol trade,
None of the ten prisoners taken
yesterday were arraigned on formal
charges. They probably will be
charged today by John K. Carroll,
assistant United States attorney.
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 19, 1939.
TO
Secretary Morgenthan
PROM Mr. Cochran
At 1 o'clock the Becretary received Mr. Pinsent, Financial Counselor
of the British Embassy, and Mr. Osborne. of the Bank of England, who were
his guesta for lunch in the Secretary's diningroom. Mr. Cochran also WB8
present.
The Secretary explained to his guests that the question has been pend-
in for sometime as to the manner in which the banking deposits of the
British and French Governments should be handled in connection with their
purchases in this country. The Secretary told Mr. Osborne that be had
seized upon the latter's visit here as a reason for incisting upon a deci-
sion in the premises this forenoon. At a meeting held in the Treasury
this morning, and attended by Chairman Eccles of the Board of Governore of
the Federal Reserve System and President Harrison of the Federal Reserve
bank of New York and members of the Secretary's staff, the question had
been discussed and a decision taken. The Secretary stated frankly that
the idea which had been talked about for some time of opening accounts for
these Governments with the Federal Reserve Bank of New York as Fiscal Agent
of the Treasury might conceivably lead to some political question, which
would be highly undesirable at the present time, The Secretary had con-
sulted freely with Messrs. Eccles and Harrison and had decided that the
best policy would be to modify slightly the original idea 80 as to meet the
full approval of these two gentlemen. The proposal which has now been
decided upon has the approval of the President.
The Secretary let his visitors know that the Treasury would be pleased
to see their Governments' accounts for war purchases handled in the same
manner as those which are now in operation for airplane purchases. That
is, no account, or accounts, could be carried with the Federal Reserve
3enic of Bew York by the Central Banks of the two foreign countries, into
which funds of their respective Treasuries would be placed. These would be
deposit accounts upon which the official purchasing representatives in this
country would draw. The Secretary stated that he had the assurance of
Governor Socles, backed by the unanimous agreement of his Board, and of Mr.
Harrison, that accounts BO opened would be given fully as much secrecy as
accounts opened with the Federal Reserve Bank of New York as Fiscal Agent
of the Treasury. Mr. Harrison even gave the assurance that the members of
the Committee of his Board which he consults when necessary upon foreign
business would have no knowledge of the transactions passing through these
accounts. The Secretary made it clear, however, that our Government de-
stred to be kept fully informed of the purchasing operations of these two
CONFIDENTIAL
-2-
)evernments in the United States and that when the account of the British
devermment is opened through the Bank of England, the Bank of England
should instruct the Federal Reserve Bank of New York to the effect that
:ne Treasury is entitled to such information as it may require with respect
to the operations concerned in this account. The Secretary said that come
of his own advisers, as well as members of the Federal Reserve Board, had
ruggested the desirability of the foreign Governments centering all of
Sheir deposits for purchases in one place, that is, with the Federal Reserve
Bank of New York, although there might be several accounts with this same
Bank, The Secretary said he was considering this and night take up the
point later. In the meantime, the British were quite free to approach
lis, Harrison with the view to immediate operations under the above described
plan if they saw fit. It WELS explained by the Secretary that the above de-
cribed arrangement with respect to Government accounts is en experiment.
The desire is to be mitually helpful, and either aide is free to recommend
changes.
This plan struck both Osborne and Pinsent quite favorably. They
shought it had certain advantages over the idea of a Fiscal Agency account.
Pingent said that they had received no instructions from the British
Treasury uyon the question of & Fiscal Agency account. They undertook to
what this revised plan by cable to their Government. The question as to
whether some member of their Purchasing Commission would be given authority
to draw upon the Treasury money in the Bank of England Account with the
Federal Reserve Bank of New York occurred to them, but it was agreed that
this wes E technical detail which they could probably work out. The visitors
explained to the Secretary that the present plan is for the setting up of n.
British Control Commission for North America which would supervise the
operations of a Purchasing Commission in Canada and a Purchasing Commission
in the United States. It was intimated that Mr. Osborne would be B. member of
the Control Commission and would remain on this Continent 80 long as the
British Treasury requires his presence. The two British officials had no
word of the decision which was expected by our Ambassador in Paris to be
taken in London last night toward consolidating British and French purchas-
the operations on this market, but they favored the 1dea. They appeared
confident that their Government would demire to acquaint our Government with
their purchasing operations, seeing the mutual advantages of such & practice.
The visitors raised the question as to disposition of British held
securities on the American market. The Secretary stated that he had not
planned to bring up this topic. He explained that Ambassador Kennedy had
raised this point in a cablegram received this morning and that a reply
will be drafted this afternoon. The Secretary let his visitors know that
It mg the desire of the President and of himself that consultations upon
this subject should be held upon this side of the Atlantic and that the
Treasury and the S.E.C. would be prepared to dismiss this problem with such
representatives of the British Government B.S. might be indicated.
CONFIDENTIAL
Regraded Unclassified
The visitors referred to an amendment to the Neutrality Bill reported
M discussed yesterday in a Senate Committee which would prohibit credits
16 private concerns in belligerent countries, They thought this more serious
(san any ninety day proviso, particularly if it might stop credits to
American branch concerns in Canada. The Secretary asked me to consult Mr.
Foley on this point, which I did after lunch. Mr. Foley thought the idea
or to extend the ban on credits to belligerent Governments to include
nationals of belligerent countries, covering munitions of mr, airplanes
and such other articles as are now embargoed.
Mr. Pinsent's question in regard to the Treasury's attitude toward the
British plan for prohibiting silver imports into the United Kingdom emept
under license (and refusing licenses to imports from the United States and
Canada while approving them for imports from India and sterling countries)
was raised. The Secretary said his answer was the same as in the case of
India. (In this case he stated that he appreciated the action of the British
Government in consulting him: that he did not desire to express any opinion
ne to this policy: but that he did not raise any objection thereto.)
The British officials did not understand the Furness-Withey inquiry of
yesterday about opening a British Ministry of Food account with the Federal
Reserve Bank of New York, They knew nothing of this.
The Secretary mentioned American needa for Australian wool, Later in
the afternoon Mr. Pinsent telephoned me that Mr. Chalkey of his Embasay had
this question under discussion with Mr. Hanes.
The British expected 25,000 air pilote, British as well BE Canadian, to
se trained in Canada.
Mr. Osborne conveyed to the Secretary the best wishes of Governor Towers
at the Bank of Canada. Secretary Morgenthau reciprocated these good wishes.
Re also asked Mr. Osborne to let the Minister of Finance of Canada know that
he would be very welcome here any time he might choose to come to Washington.
The Secretary has nothing to take up on his part, but wants the Minister to
feel free to come at any time, without standing on formality.
At of o'clock the Secretary received Mr. Leroy-Bemulieu, Financial Counselor
16 the French Embassy, with Mr. Cochran present.
The Secretary explained the revised proposal for handling French Government
purchasing accounts in the United States. in the same terms 8.6 used with the
British, and hereinabove described,
Leroy-Beaulieu set forth the difficulties which had been experienced in
Massing the French Treasury funde for airplane purchases through a Bank of
Trance account with the Federal Reserve Bank of New York. These arose
principally from the refusal of the Bank of France to permit Leroy-Beaulieu
to sign for withdrawals from the account, and the consequent necessity of
CONFIDENTIAL
Regraded Unclassified
179
of cabling the French Treasury to give the necessary instructions to the
Bank of France, to pass on to the Federal Reserve Bank of New York, when-
ever payments were to be made. Leroy-Beaulieu was also dubious as to the
readiness of the Bank of France to agree to the account being accessible
to inspection by us. Ee said, however, that he would report the matter to
his Government and give the Secretary any information that he may have
when he comes to Washington again on Monday afternoon.
Upon leaving, Leroy-Beaulieu telephoned Pinsent from my office, ar-
ranging to consult tonight on their common problems.
CONFIDENTIAL
PAGES 180-192 PLACED IN
BOOK 191, PAGES 214A-M -
5/23/39
CHINESE EMBASSY
193
WASHINGTON
October 19, 1939
My dear Mr. Secretary:
Referring to previous correspondence in regard
to the American Government's kind participation and
assistance in the campaign of survey and control of
malignant malaria in the Southwestern Provinces of
China, I wish to thank you and through you the United
States Government for the most welcome information
which you were kind enough to convey to me in your note
of October 12 to the effect that the Surgeon General of
the Publio Health Service would send a Vission consist-
ing of Senior Surgeon L. L. Williams, Jr., Surgeon Hiram
J. Busb, and Special Expert Bruce Mayne to gouthwestern
China and Burma to survey for a period of three m nths
the epidemic diseases in areas traversed by the new
China-Burma
Ronora le Cordell Hull,
Secretary of State
- 2 -
94
China-Burea Highway, to determine the nature of the die-
eases, to make available to the Chinese Health authorities
the results of their survey and study, and to sivise these
authorities as to methods and measures for succression und
control of the diseases: and that all three surgenne would
don't from San Prancisco, October 20, 1939, and expect
to arrive in Pangoon about member 1.
Upon the recel t of your kind mts, I immediately
cabled 5 summary of it to my Government. It given me
great pleasure to transmit to you the following measure,
un 'st date of October 18, signed by H1R Excellency,
Dr. lang Chung-hui, the Minister of Mater:
"Please C evey the following wessage to
the State Cenartment:
'Chinnee Government demoly appreciate
kindness of Public Health service in mending
technical mission to gruthwestern China and
Burma for survey epidemic dissasse. Their
colluboration with Chinese authorities and
experts will yield immense benefit not only
to local inhabitants but to humanity in general.
Viscion may rest assured th t all tue protec-
tion and possible facilities will be xtended
to them during their travel and performance of
their WOTK.'
/s/ wang Chung-hill"
will you
- 3 -
195
Will you be kind enough to transmit a copy of
the above message to the Administrator of the Federal
Securities Agency and through him to the Surgeon General
of the Public Health Service.
May I add that a copy of the above cable
message 10 being telegraphed to Doctors Williams, Rush
and Mayne on the S.S. President Coolidge.
I as, my dear Mr. Secretary,
Sincerely yours,
HU SHIH
BECEIAED
eeer AS TOO
THEMTRAR30 YRU2A3RT
enterned edit to soltO
- off of - -
Plock receipt
196
KEESHIN FREIGHT LINES, INC.
J.L.KEESHIN
221 WEST ROOSEVELT ROAD
PRESIDENT
CHICAGO
October 19, 1939
The Honorable Henry J. Morganthau,
Secretary of the Treasury,
Treasury Building,
Washington, D.C.
My dear Secretary:
I an enclosing herewith true
copies of original reports from Messrs. Sheahan,
Bassi and Van Patter which are sent to you for
your information.
With kindest personal regards,
Very sincerely yours,
L. Keeshin
JLK:LR
Enc. (3)
Chungking, China
Sunday October 1, 1939
jest p. Koeshin:
197
This note is merely to report progress. We have tackled the basic
problems of more utilization of equipment and roads in the following manner:
(1) Drivers - le have attempted to secure a more rational approach to the problem
drivers shortage by enhancing the position, both in the minds of the drivers and
their superiors. In other words, through leadership and not force. Severe penalties
for rule infractions etc., have been eliminated and useloss red tape severed in regards
to Government regulations.
(2) Trabation - Similar to drivers, we believe the problem to be, treatment as EL
situs tolow standard. We favor more humano treatment. Competent mechanics and
srivers turn to other fields at the first opportunity, under the present system.
13. -Perations - Lesa than one-third of the total number of trucks are available
for operations and those confined in the main to daylight hours, limiting utilization
of roads to loss than 50 percent. We are striving in every way to effect consolidation
of 14 Governmental operating units, as well as Foo Shine. The letter company while
waranteeing 1000 truck operation, has less than 50 actually operating. Over A
-111gn dollars (Chinese Currency) worth of spare parts are here but useless as
they are non-ementials. Each Government Operation orders blindly more than necessary
Abc overlook essentials. There being no Chinese characters for the various parts and
PO entaloge in the shops, they draw pictures which are frequently misinterpreted -
result - 1/3 of the equipment is under repair and 1/3 awaiting parts constantly. The
consolisation into ono Government owned corporation will eliminate 15 different shops
of e4ch point, and with Andy as General Manager, should function smoothly and cannot
help but reflect improvement over existing conditions. By splitting runs, and re-
clounting equipment to given territories, the drivers will become familiar with their
rest: ted runs and we can push night operations. This last will be A big job in China
yone prefers to sleep at night and have fear of venturing beyond the city walls
vity, It will also involve constructing roads around these walled cities as the
eit
" are usually looked at, or shortly after duske
198
(To de L. Keeshin
- 2 -
Chungking, China,
October 1, 1939
de have already started a new drivers license and personnel card with
photos and fingerprints to prevent corruption and illicit traffic in both passengers
and freight. Re have under way a national license with the name of the province
issular the license on each, one-fourth of the annual fee to be collected by the provine
the plates, the next one-fourth otc., to be collected by the province in which
Co truck or bus is located, on the due date. Full reciprocity will result and as all
fundi collected will be used for highway construction and maintenance, there will be
an incontive for each province to provido the best and have the greatest number of
vehicles in operation on due dates.
the M ghways are not nearly es bad es. I expected. lie had far worse on the
gut Court within the past twenty years. True they are rough, rolly and touch on
equipment, with share ourves and grados to twenty percent but evolution and time will
strulghten then out 82 WAS our own case, There are many long stretches that would
certify of tractor-trailer operation, and this we are planning. Other stretches are
impossible of operation with any other than mall equipment but nore sturdy and
& larger engines than at present. We are also looking into the possibility of
aerial transays to bridge streams, leaving both trucks and buses to operate their
respective sides of the river and transferring only cargo and passengers.
Plan to have Van Patter take ovor all maintenance commencing at Kwieyang
letober 3, Andy will proceed to Hanoi and heiphong in French Indo-Chine the same date
to brone that bottle-neck, and if possible get the French Sailway to commence night
operations to Rumming. I will leave about the same date for Rangoon, Burma and
attampt to get things started. One bridge is out near the Burma border and they are
Ned up they so don't know what progress to expect but will do my best. Workmen are scare
on the Burna route owing to the sparse population, black water fever and malaria.
agatedly twenty thousand lives was the cost of the road, such as it is. Maintenance
And improvement are taking a similar toll. The heat in that territory is high and
humald but will be able to advise more fully at an early date.
109
is. J. L. Keeshin
- 3 -
Chungking, China,
October 1, 1939
have gone into the recent purchase of five hundred light Dodges and in
discussions with the Premier and Minister of War amongst others, believe steps will
be taken to stop the order; more on this subject Monday and Tuesday. Personally,
it nakes little difference as to the make of truck, just so it is substantial,
honestly built and a ssembled, and parts are available. The Chevolets are also on-
tirely too light, especially front ends. The Fords stand upwell but use too much
pas and oil, and require more engine adjustment. If we only had some more sturdy
and higher powered equipment? Frankly the blame appears to be with our own Government,
insisting on the competitive bid idea and buying the cheapest but not the best.
Writing a letter is quite EL task here and I trust you will excuse me if
this appears disjointed. We have been interrupted so frequently by air raids - in
fact, this is being written at 12 noon, October 2, and the foregoing paragraph last
evening at 10 P.M. The major portion of the time between then and now has been spent
in blackout periods, dugouts or out in the hills. It is our sixth raid in four con-
secutive days.
Will write more fully regarding the Dodges but perhaps a day or two
late AS those raids disrupt all arrangements.
As ever
(Signed) Maurice
COPY
200
Sept. 24, 1939
just Jack:
- week on the job and not blown up yet. This is certainly the dissiest place
I've port been and does it seem & long way off until next Fourth of July.
As Maurice wrote you, we have been on the run since we left Hong Kong, reviewed
the confusion st Haifong, SAW all of the "titles" in Hanoi including the Governor
of rode the "Soenic Railroad" to Kumming thru the jungle and then the most beautiful
and mountains I've ever seen.
The rellroad is & joke insofer BS 6. "life line" is concerned. Meter gauge, ten
ton DATE and little pony locomotives, Then came the road trip, believe me when I
my that they have done a heroío job with stone and mud, They have no sand or small
crushed pure Line stone. The native stone is lime bonded but of sedimentary origin
and when it disintegrates its just slippery slimy clay end this is the stuff they
used for water bonding the Macadam type of paving.
de know before we left that there were mountains here but we didn't realize that
its practically all mountains, mountains everlastingly. You torture a car up one
0.5% there in front of you is another. We have tried to figure EL tractor trailer
operation in the Kumming, Chunking section but it looks like about 6. total distance
of possibly not more than two hundred or so miles. The southeast we have not surveyed
62 yet.
During our trip I regret to say that we witnessed the result of twelve accidents
the first day. The second day we saw six including one that just occurred resulting
is the death of one man and the serious injury of two others. The third day out we
sun only two turned over down the mountainside, The fourth and fifth I just quit
counting. with the exception of a few "over the end" on the switchbacks they were
caused by front end failures, by this I mean either the breakage of the front spring
on the right side or the breaking off of the wheel spindle also on the right side.
This situation is very serious and all of the shops have just an unbelievable number
of units waiting for spindles, bodies and springs. The cause for all of this is the
!wrrific inertia loading; (on e left hand turn) of the right front corner. The
traffic DE you know is left hand as in Europe. Therefore the turn to the left(and
believe me they are short and even hairpins) being of so short a radius, it throws
strain upon the spring and spindle that certain makes of units are not built for
and any further purchase of this light equipement is to invite death to the driver
and destruction of valuable property.
The Dodge unit while performing quite well otherwise is too week on the for-
word exle and the froht springs are just 60 much matchwood. This company must do
smothing and do it quickly or their loss of face is inovitable. The Chevrolete
of course are out of question, they do not fit in any sense of the word. The Whites
have done a beautiful job and are proportionately longer in service than any other
truck. Their front ends are heavy enough "to stand the gaff" and while they are
having B. terrible time getting pistons, pins and rings for these units, there is
little also to take them out of service and they run them until they just pump out
All of their oil, The mechanical setup is quite terrible, administration is all
right, in a sense, but the mechanics are just awful.
Unclassified
201
-2-
V
PAY* gooD meeting every day in conference with the Minister of Communication and
the Vine Ministers and Directors and are formulating a new plan of operation. Tie
of probably have guessed have been royally treated and feted nearly every night DO
you any time to write letters has been quite out of the question excent on Sunday last
1 X today. donover, today we had Tiffen with our Ambassador and his retinue, We have
Recerval 1000, that is for Chungking, which also contains our offices and clerical
(oree, IND compounds from the Minister's home where we hold our conferences daily. Our
is located EL short distance away in the compound of the Vice Minister of Econ-
at 1. one of the best in Chungking, I understand.
our and hostess, Mr. and Mrs. Frances Pan have done everything to make us
comfortable and we are quite happy as things go, EO far away from home.
China, Jack, 1a simply awful. You cannot in your wildest dreams imagine the filth,
sirt, the mells, the poor devils that sleep in the mud of the gutter, the labor they
and their Dodies you would not inflict on A. horse. In fact they don't treat horses
[De they do men because & horse represents en investment and life is so cheap here.
by sará thought of leaving the compound is one of dread and when you return you want
averything you have on. The meticulous care you take with everything you
10th or net soon becomes a habit und even cold water is something to suspect.
The uppor classes of which not many romain in Chungking are nearly all in govern-
IF +ork and seriously do their level best to bring this war to a victorious conclu=
11th The difficulty in getting action in because too much conference is required to
made my natter.
HE hope to steamroller the first part of our program thru in the next three or
days und then make B. dash to the northwest territory to look that over. Then re-
un for whother week of conferences on that division. Then comes the Burna highway
no operation, now closed by A washout, with some four hundred new trucks the other side
or the wash waiting to get thru.
Those trucks are Fooshing's, which is another worry for poor Mr. Chen. There are
may things to mention, but other than to tell you of the locally built (Haifong)
todies and onbe I must puss the others on until next Sunday,
The bodles and cabs built at Haifong are atrocities. You never saw such junk in
your life. Built of green wood by little boys who plaster mud in the cracks to cover
in unlite and who pound the metal work out of tin cans. When the trucks arrive at
Ivieyang or Chungking they must be rebuilt before they can be used. I don't believe
zitimit looking into the cost of export cabs, that they save EL cent in this way.
In cloking this ramble 1 wish to remind you that E protest against unsuitable
their and bodies would be a favor to the people of China and especially to those who
That operate them, which might be our commission, who knows? Call Ray Wible and tell
tim I'll write 65 soon B.# we get B. chance to catch 6. second breath.
Yours sincerely,
(signod) Andrew Bass!
Regraded Unclassified
COPY
-02
September 20, 1939
ImP it. Keeshin:
Se arrived in Chungking on Sept. 16 in suite of one day alay on Wake, seven
lage on Thank and four days in Manille. We were met in Hongkong by Mr. Francis Fan
of the kinletry of Communication and Mr. E. M. Pan who manages the China travel
service. our treatment has been of royal nature in every respect. Our stope were
sale pleasant and our travel very comfortable. We flew from Hong Kong to Hanoi;
took 6. train from that city to Kunming and on to Chungking by car. While at Hanoi
we drove at Lal-hong, e port of entry for supplies and made an inspection of their
may and assembly shop as well as checking on the amount of supplies stored waiting
or transportation. We met several Chinese government employees who are trying to
keep things on the move. At that time the French had every thing tied up by an embargo
saurel by the wer in Europe. Mr. Sheahan called on the Governor who promised action
on recoving The embargo. I understand that supplies and trucks are now moving into
Chiza from that port.
Since our arrival in Chungking the Minister of Communication, ar. Chang Kie
you his staff have had us at daily conferences to lay the groundwork for e better
[réasportation system. Only between forty and fifty percent of their equipment 18
on she road, Shortage of parts is one big factor as well as poor maintenance along
11th sany accidents. Steps are being taken to setup e. central stores for supplying
AMI to the various shops and garages, which I em sure will be the answer to this
problem efte it starts to function. It will take some time due to the faot that
practically all parts have to come from either United States, Russia or France. Part
of their shop equipment purchased in the States have arrived and is being used to
extent in Kunming, Kweiyang, Chungking and Funchow as the present major points,
bie to frequent bombings in these cities with the exception of Lanchow. Its not
pressical t. have too large a shop with all their equipment in one place. A shop
and the light plant in Hweiyang was bombed in short time before our arrival. However,
in spite of these handicaps I know that we are going to be able to help them improve
donalitions in all of their truck transportation departments. Its obvious that they
have been using hit and miss maintenance methods and are very much in need of improved
supervision in their shops and garages. I might add that the supervision is handi-
capped by not having trained and experienced mechanics but in due time I an our much
improvement will be shown,
They have Deen having a lot of trouble with the right front spindles breaking on
the Lodges and I understand that quite & few serious accidents have been caused by
this defect. Also many broken front springs and bent front axles. We have been
vitable to Pimi out how many are tiad up for this reason but I an sure its quite EL large
cuseur, Dasing my ideas on the amount that was done in their shops, between Hunming
and Chungking. the only road we have covered. The front end on these Dodges are
too light for the severe conditions they have to operate under. The road has hundreds
of Keirpin turns with grades B.G much as twenty percent. To give you an idem of these
Turns, a truck with more than 165 inoh wheelbase would have to back up and manuever
around many of them. Even the shortest semi and tractor could not operate over about
one helf of the highways between here and Kumming until such a time that the turns
KPI Teurthened to B. reasonable degree. The mountain ranges this particular highway
Father through are Worse than our Eastern ranges in Pennsylvania and New York.
Che Chevrolet is too light in every respect for this operation. In fact many
are tisd Mt) with broken frames, cylinder heade and other mechanical failures. I
Kill mention here that the Dodge radiators and grills are another noticeable failure.
Regraded Unclassified
-2-
203
The 704 Whites seem to be operating more efficiently, but of course they are a
heavier unit with more cubie inch piston displacement, making them a more practical
unit to operate. Where we have been, very few International trucks are being used, which
in my opinion is a. mistake based on the fact that the International is easier to
maintain, especially with inexperiemoed mechanics such 6.8 they have. Any model smaller
than the D-40 would be too light. They have 6. GMC at Kweiyang that's never been used.
the motor is too small. They claim to have tried it a few times but could not got it up
the mountains without help. I noted it was built with an Oldamobile type motor.
A short time before and since our arrival the days and nights have been very
cloudy, which is the best kind of weather due to the fact that when it is clear the
Jape drop bombs daily on some part of the city. We have a nice solid dugout at our
convenience so are looking forward to the first clear day or night. The city is pro-
tected with an alarm system 80 that everyone has plenty of time to get under cover.
Their air defense is improving also, making it much safer here than one might think
it would be.
I hope my future writings will give you a better picture of the conditions and
problems that confront us here in China.
I also hope everything is well with you and yours.
Sincerely,
(Signed) C. W. Van Patter
204
October 30, 1939.
Dear Mr. Keeshin:
Thank you for your letter of October 19th,
and for the copies of reports which 18 enclosed.
I appreciate your getting this information to no.
Sincerely,
(Signed).H. Morgenthau, Jr.
Mr. J. L. Keechin,
President, Keeshia Freight Lines, Inc.,
221 Vest Roosevelt Road,
Chicago, Illinois.
GEF/dbs
205
October 30, 1939.
Dear Mr. Keechins
Thank you for your letter of October 19th,
and for the copies of reports which 10 enclosed.
I appreciate your getting this information to NO.
Sincerely.
(Signed) E Morgenthau, Jr.
Mr. J. L. Keechin,
President, Keeshin Freight Lines, Inc.,
221 Vest Roosevelt Road,
Chiengo, Illinois.
GEF/dbs
206
October 30, 1939.
Dear Hr. Keeshins
Thank you for your letter of October 19th,
and for the copies of reports which 10 enclosed.
I appreciate your getting this information to no.
Sincerely,
(Signed) H. Morgenthau, Jr.
Mr. s. L. Keeshin,
President, Keechin Freight Lines. Inc.,
221 Yest Roosevelt Road,
Chicago, Illinois.
GEF/dbs
ADDRESS THE COMMANDANT. U.S. COAST GUARD
AND REFER TO No.
207
TREASURY department
SECRET
UNITED STATES COAST GUARD
HEADQUARTERS FOR THE PERSONAL
WASHINGTON
ATTENTION OF THE
SECRETARY
October 20, 1939.
From:
Spagent, Shanghai, China.
To :
Secretary of the Treasury.
Message from Mr. Nicholson.
T. V. Soong presents his compliments to
President Roosevelt and Secretary Morgenthau and ap-
preciates and thanks them for their friendly message
of October 18th.
208
PARAPHRASE OF TELEGRAM SENT
TO: American Embassy, Rio de Janeiro, Brazil
DATE: October 20, 1939, noon
No.: 208
Your telegram No. 370 of October 18 has been received.
You are requested to refer to our telegram to you
dated October 17, No. 207; kindly obtain confirmation from
the Brazilian Government and advise us.
HULL
(HF)
@8%
EA:LWW
109
October 20, 1939
$
To:
The Secretary
From:
Mr. Hanes
I had asked Tom Morgan to come to see you, end since he arrived this
morning during your absence I talked with him at length concerning the
Chinese evistion manufacturing situation. The Intercontinent Company was
formed about 10 years Ago by the North American Aviation Company, which
ovned it at that time, for the purpose of extending American evistion
transportation in foreign countries. The Intercontinent Company obtained
& franchise from the Chinese Government, working at that time through
:. V. Sooag and his group. When the North American Aviation Company vos
dissolved, due to the cancellation of air nail contracts several years
rgo, the Intercontinent Company passed from control of that company to the
Sperry Gyroscone Company, and the stock of Sperry was distributed to the
stockholders of North American Aviation Company.
A short while ago the Sperry Gyroscope Company sold the Intercontinent
Sompany to n group headed by a nan named Pawley. Mr. Pawley is now operating
the Intercontinent Company. and carrying on with the Chinese company which
is entirely owned by the Chinese Government. The Intercontinent Company
tes been largely a sales and management enterprise, getting 5% commission
on all purchases made on behalf of the Chinese company. Intercontinent has
= 3r.les agency for the Ourtiss-Wright, Douglas and Vultoe planes, and 1
understand from Mr. Norgan that up-to-date they have sold about $20 million
worth of equipment in China.
The factory, first built near Shanghai. was later moved to Hankow,
and when the Japa got busy with bombs was finally moved to the Burna border.
The Douglos Company has now sold out its interest in Intercontinent. leaving
Ourtine-Wright the only aviation company holding & stock interest in it.
The present working arrengement between Intercontinent and the Chinese
Government is that all materials going into the factory must be American
made; all plane designe must be American; Americans will furnish all the
personnel (to be paid for by the Chinese, The factory, including machinery
and tools. in entirely under American management, and title is vested with
Americans until the Chinese have paid for it. The time limit for this say-
ment is five years.
The plane now being built in the factory is a training ship. However,
they do assemble some planes. (which Mr. Morgan thinks are mostly Vultees)
from parta built in this country and shipped abroad. They do all the repair
work on planes now in China. Mr. Morgan thinks they have capacity to produce
About 50 planes per year.
Mr. Morgan will be back in Washington next week, at which time he will
be evailable if you want further information.
J.w.H.
Regraded Unclassified
TREASURY DEPARTMENT
210
INTER OFFICE COMMUNICATION
DATE October 20, 1939
TO
Secretary Morgenthan
Mr. Cochran
A
FROM
The foreign exchange market resumed its quiet trend today. Sterling
fluctuated between 4.00-1/2 and 4.00-3/4 up to the early afternoon, when
some commercial demand appeared in the market. The rate then advanced to
4.01, and remained there for the balance of the day.
With respect to sterling, the banks reported this morning that they had
not received any orders to operate in that currency. The available supply of
sterling coming into the market is diminishing, and there are two probable
reasons for this situation: (1) the efforts of the British to build up their
inter-Empire trade, which results in the settlement of transactions in sterling,
and therefore does not require foreign exchange operations, and (2) the fact
that the British are endeavoring to have their exporters invoice their ship-
vents in currencies other than sterling.
Reporting banks in New York and the Federal Reserve Bank reported sales
totaling 1304,000, from the following sources:
Commercial concerns
- 104,000
Foreign banks (Europe)
I 200,000
Total
1 304,000
Purchases of aterling amounted to 1335.000 as indicated below:
By commercial concerns
1 278,000
By foreign banks (Europe)
I 57,000
Total
I 335,000
The banks also reported that the British Control purchased sterling amounting
to 219,000, at the official rate of 4.02.
The Federal Reserve Bank sold 2,000,000 Swiss france in the market for the
account of the National Bank of Rumania. This sale was consummated at .2242 and
at the time, it had a slight depressing effect on the rate for Swine france.
There were only nominal changes in the rates for the other European currencies
11
- 2 -
Gold valued at $10,000,000 and $16,000 vas sold by the Bank of France and
the Benk of the Republic, Colombia, respectively, from their carnarked gold
accounts.
The Federal Reserve Bank informed us that they had not received any reports
2010 shipments to this country.
Having noticed from our statistics that the dollar balances of the Bank of
(viden with the Federal Reserve Bank of New York have declined by $30,000,000
the poet five weeks, I inquired into this matter when talking with Mr. Knoke by
teleshone this afternoon. Ee said that these withdrawals had not been nade for
urpose of investments through other banks in New York on the part of the
Incl: of Sweden, In previous reports I have informed the Secretary of the desire
of Governor Rooth to get a little return from his holdings on this market because
if the heavy expense he has incurred in shipping gold to the United States and
in keeping so large a part of his reserves in unproductive dollars. Mr. Knoke
excertained from New York banks that the recent withdrawale in question have been
lo provide funds with commercial banks in New York for private and commercial
Svedish banks, which formerly had important sterling credits and now prefer to
establish dollar credits. Time the funds which are withdrawn from the Bank of
Sweden account with the Federal do not annear in ito name with the New York
banks to which they are moved, but are actually transferred to the accounte of
the Swedish private end commercial banks. The New York banks have been pleased
!o have this intervention by the Bank of Sweden. This is the first evidence of
transfer of foreign banking business from the London to the New York market
which has come to our attention, and may prove to be the forerunner of an
increased amount of such business.
n.m.
Regraded Unclassified
Please CHINESE ander EMBASSY HT 212
WASHINGTON
October 20, 1939
My dear Mr. Secretary:
It gives me great pleasure to inform you that
the Surgeon General of the Public Health Service has
decided to send a Mission consisting of Senior Surgeon
L. L. Williams, Jr., Surgeon Hiram J. Bush, and Special
Expert Bruce Mayne to Southwestern China and Burma to
survey for & period of three months the epidemic diseases
in areas traversed by the new China-Burma Highway, to deter-
mine the nature of the diseases, to make available to the
Chinese Health authorities the results of their survey
and study and to advise these authorities as to methods
and measures for suppression and control of the diseases:
and that all three Surgeons would depart from San
Francisco, October 20, 1939, and expect to arive in
Rangoon about December 1.
I cannot adequately thank you for your deep
interest in this matter, whi ch is culminated in the
despatch of the Williams' Mission to China.
I take
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury
- 2 -
13
I take this opportunity to transmit to you the
following message under date of October 18th signed by
the Minister of Foreign Affairs:
"Chinese Government deeply appreciate kindness of
Public Health Service in sending technical mission
to Southwestern China and Burma for survey epidemic
diseases. Their collaboration with Chinese authori-
ties and experts will yield immense benefit not
only to local inhabitants but to humanity in general.
Mission may rest assured that all due protection and
possible facilities will be extended to them during
their travel and performance of their work."
I have already sent a copy of the above cable
message to Doctors Williams, Bush and Mayne on the B/B/
President Coolidge.
A copy of B. note from the Secretary of State
dated October 12th is enclosed for your perusal.
I am, my dear Mr. Secretary,
Sincerely yours,
Hn Shit
Enclosure:
Copy of note from
Secretary of State.
Department of State
Washington
October 12, 1939
Excellenoys
with further reference to your note of August 16
and to the Department's reply of August 21 in regard to
the hope of the Chinese Government that the American
Government may be prepared to participate and to essiot
in e campaign of survey and control of "Malignant
Maluria" in the Provinces of Yunnan, Kwangai and
Kweichow, I take pleasure in informing you of the
receipt of a communication under date October 9 from
the Administrator of the Federal Security Agency
which reads in part as followe:
"I desire to inform you that the Surgeon
Jeneral of the Public Health Service will Bond
R mission, consisting of Senior Surgeon L. L.
Williams, Jr., Surgeon Hiram J. Bush, and Special
Expert Bruce Mayne, to southwestern China and to
Burma to survey epidemic diseases in areas traversed
by the new China-Burma highway, with special
reference to the possibility of their transmission
by way of this new highway to sreas where they
will become a menace to the United States. The
commission is especially selected to authoritatively
determine whether the disease presently reported as
epidemic in these areas is in fact malignant
malaria and whether other dangerous epidemic di-
****** exist therein.
"While on this mission, it is ex ected that
His Excellency
these
Dr. Hu Shih,
Chinese Ambaesador.
Regraded Unclassified
215
-2-
these officers will work in close cooperation with
Chinese health authorities and that the Chinese
Government will make available facilities at their
command in the regions in which the study will be
conducted, including laboratory facilities where
they exist, and also that the Chinese Government
will make available in China interpreters familiar
both with English and with locally spoken languages
and dialects.
"While working in cooperation with Chinese
health authorities, the officers of this mission
will make available to them the results of their
survey and any other information relative to the
disease conditions they may study which might be
of value. They will also advise as to methods
and measures for suppression and control of these
diseases.
"All three officers will depart from San
Francisco October 20, 1939, and expect to arrive
in Rangoon about December 1st. Their orders are
predicated upon a period of three months devoted
to actual survey."
On the assumption that the proposed activities of
this mission are in conformity with the desires of the
Chinese Government, I would request on behalf of the
members of the mission the extension to them by the
Chinese authorities not only of the facilities specifically
mentioned above but also such other assistance and pro-
tection as may further their investigations and
adequately provide for their safety and well-being,
In this
216
-3-
In this connection I may add that copies of your
note of September 30 and of the enclosures thereto
in regard to The Five-Year Program of Anti-Malaria
Work in Yunnan Province have been transmitted to the
United States Public Health Service.
Accept, Excellency, the renewed assurances of my
highest consideration.
/m/ Cordell Hull
217
October 31, 1939.
My dear Mr. Ambassador:
Thank you very much for your letter of October 20th.
I am delighted to know that the Mission sent by the
Surgeon General of the Public Health Service is now on its
vay to China, and I hope that the Doctors in question may
be able to be of real service in this connection.
I also was glad to have a copy of the cable sent by the
Minister of Foreign Affairs, and the letter written you by
the Secretary of State.
with cordial regards,
Sincerely,
(Riguted) E Morgeathou, Jr.
Nonerable 2hr Shih,
Chinese Ambessador,
Chinese Rubeauy,
2001 Nineteenth Street,
Washington, D. c.
GHF/dbs
218
October 31, 1939.
My dear Mr. Ambassador:
Thank you very such for your letter of October 20th.
I am delighted to know that the Mission sent by the
Surgeon General of the Public Health Service is now on its
way to China, and I hope that the Doctors in question may
be able to be of real service in this connection.
I also was glad to have a copy of the cable sent by the
Minister of Foreign Affairs. and the letter written you by
the Secretary of State.
with cordial regards,
Sincerely,
(Signed) H. Morgenthau, Jr.
Honorable 2hr Shih,
Chinese Ambassador,
Chinese Mebasay,
2001 Nineteenth Street,
Washington, D. c.
our/dbs
19
October 31, 1939.
My dear Hr. Ambassador:
Thank you very much for your letter of October 20th.
I - delighted to know that the Mission sent by the
Surgeon General of the Public Realth Service is now on its
way to China, and I hope that the Doctors in question my
be able to be of real service in this connection.
1 also was glad to have & copy of the cable sent by the
Minister of Foreign Affairs. and the letter written you by
the Secretary of State.
with cordial regards,
Mincerely,
(Signed) B. Morgenthau. Jr.
Honorable Ha Shih,
Chinese Ambassador,
Chinese Imbnesy,
2001 Nineteenth Street,
Washington, D. C.
own/dbs
Regraded Unclassified
220
October 20, 1939
2109 from Kennedy. Long talk with Philips, etc.,
and got tentative list of American securities
readily saleable. British believe their best
interests would be served by dealing thru Morgan.
Asks specific questions (1) Possible to make loan
on these securities? (2) wants to be advised if
you have anything further to say about their pro-
cedure or method of sale.
(This 18 filed with other pertinent cables as of
10/24/39, date they were shown to President.)
TREASURY DEPARTMENT
121
WASHINGTON
OFFICE OF
OF ISTERNAL REVENUE
- TU
never
- CITERRAL Tin REVENUE
October 20, 1939.
IT:P:CA
CAA
REPORT FOR SECRETARY MORGENTHAU:
During the week ended October 20, 1939, no new requests for
agreements under the Vinson-Trammell Act were received.
In regard to closing agreements which have been requested,
the following applies:
Colt's Patent Fire Arms Manufacturing Company
Mr. Teller, attorney, telephoned from Hartford, Connecticut,
that they have some minor differences which they desire to propose
and discuss, for incorporation in the proposed closing agreement
and a conference was arranged for 10 o'olock A. M., Monday,
October 23, 1939.
Consolidated Airoraft Corporation
On the afternoon of Monday, October 16, 1939, Mr. Hanes dis-
cussed the case with Messrs. Foley, Wenchel, Sullivan, Appel and
Kades.
The tentative draft of proposed agreement was delivered to
the contractor's local representative, Mr. Weihmiller, on the
late afternoon of Monday, October 16, 1939. In the forenoon of
the next day, Weihmiller came down and Reiling went over the
proposed agreement with him explaining the proposition. Nothing
further has been heard from this case.
New matters developed as follows:
Leland-Gifford Company, Worcester, Massachusetts.
Stanley B. Dowd, sales manager, called seeking information
relative to Press Release 18-79 with E. view to filing & request
222
-2-
for a closing agreement respecting special facilities required
for the performance of expected suboontracts for the grinding
of orank shafts for airplane engines. He is to contact the War
Department in regard to certification. No promises were made
as to the Treasury's action.
There were no other transactions in regard to closing agree-
ments under the Vinson-Trammell Act.
Commissioner.
223
October 20, 1989.
IT:P:CA
CAA
REPORT FOR SECRETARY MORGENTHAU:
During the week ended Ostober 20, 1939, no new requests for
agreements under the Vinson-Trammell Act were received.
In regard to closing agreements which have been requested,
the following applies:
Colt's Patent Fire Arms Manufacturing Company
Mr. Teller, attorney, telephoned from Hartford, Connecticut,
that they have some minor differences which they desire to propose
and discuss, for incorporation in the proposed closing agreement
and a conference was arranged for 10 e'cleek A. M., Monday,
October 23, 1939.
Consolidated Aircraft Corporation
On the afternoon of Monday, October 16, 1939, Mr. Hanes dis-
cussed the case with Measrs. Foley, Wenchel, Sullivan, Appel and
Kades.
The tentative draft of proposed agreement was delivered to
the contractor's local representative, Mr. Weihmiller, on the
late afternoon of Monday, October 16, 1939. In the forenoon of
the next day, Weihmiller came down and Reiling went over the
proposed agreement with him explaining the proposition. Nothing
further has been heard from this case.
New matters developed as follows:
Leland-Gifford Company, Woreester, Massachusetts.
Stanley B. Dowd, sales manager, called seeking information
relative to Press Release 18-79 with a view to filing 6. request
Copy for Commissioner.
224
for a closing agreement respecting special facilities required
for the performance of expected subsentracts for the grinding
of crank shafts for airplane engines. He is to contact the Mar
Department in regard to cortification. No promises were made
as to the Treasury's action.
There were no other transmetions in regard to closing agree-
ments under the Visson-Trammell Act.
(Signed) Guy T. Heivering
Commi ssioner.
DESARTMENT
1020 OCL SI W 11 13
TRUCABAT 70 YRAT38032
OEEICE
сал/меа
Regraded Unclassified
COPY
255
AMERICAN CONSULATE
Tunnanfu, China, October 20, 1939.
Subject:
Transportation of War Materials.
The Honorable
The Secretary of State,
Washington.
Sir:
I have the honor to state that for the past month
very little in the way of military supplies has entered
China through Yunnan. Heavy rains in the latter part
of September reduced traffic on the Burna road to a
very alight amount and caused such serious landelides
on the Yunnanfu-Indochina Railway that goods traffic has
entirely stopped. A wreck on the railway on September 23
also contributed to the disruption of traffic. Even
passenger traffic on the railway is stopped et the present
time but will commence on e reduced scale on October 22.
It may be B. month before goods traffic on the railway CAD
be resumed. Both passenger and goods traffic on the
Burma highway have been resumed BS far as Siakwan from
Yunnanfu, and through traffic to Burne will be resumed
within a day or two. Stocks of war materials at
Yunnanfu are believed to be very lov. Traffic from
Yunnanfu to Kweichow was not interrupted by the rains
so accumulated stocks were readily moved. Information
obtained from B recent traveler over the highway between
Indochina and Chungking via Kwangei and Kwelchow is to
the effect that traffic is moving despite the daily
raida on the highway by Japanese planes. However regula-
tions imposed by both the Chinese French authorities
obstruct the flow of traffic and reduce the quantity of
var materials that could be carried over this road.
I expect to have more detailed information in & few
days as to the condition of the Burma highway and the
quantity of war materials available for transportation
over it from Burna.
Respectfully yours,
PAUL V. MEYER,
American Consul.
In quintuplicate, Original by air mail.
Copy to Embassy at Peiping.
Copy to Embasay at Chungking.
Copy to Consulate at Saigon.
Copy to Consulate at Rangoon.
800
PM::Epy
26
CJ
GRAY
PARIS
Dated October 20, 1939
Rec'd 5:10 p.m.
Secretary of State,
Washington.
2536, October 20, 7 p.m.
FOR THE TREASURY.
With reference to my telegram 2524, October 19, 6 p.m.,
WE estimate that total appropriations for armament purposes
from January 1, 1939 to date are as follows: under the
ordinary budget for 1939 B. total of 31,929,000,000 francs;
under the special armament and public works budget for 1939
a total of 72,575,000,000 francs; under the finance law of
December 31, 1938 chargeable to 1940 and subsequent budgets
B. total of 81,228,000,000 francs. The total of the fore-
going thus is 185,732,000,000 francs of which about
81,000,000,000 francs are to bE charged tothe future.
The undertone of the securities market was firm today
and profit-taking W&S Easily absorbed. Most rentes issues
were down fractionally after yesterday's substantial advance
but EL number of French bank utility and industriel issues
registered advances. The signature of the Anglo-Franco-
Turkish accord yesterday was an important bullish factor.
BULLITT
EMB
No. 5
AMERICAN CONSULATE
Hanoi, October 20, 1939
SUBJECT: Transportation to China by the Caobang Road.
YEA BONORABLE
THE SECRETARY OF STATE,
WASHINGTON.
a:
i jave the honor to report that I have recently obtained some information
at to the present condition of the highway between Langson and Caobang (in French
Indochina), of the highway between Caobang and the frontier (between French Indo-
ohies and Kwangsi), and of the highway from the frontier to Pingma (in Kwangsi).
the interesting point of this information is the possibility of utilizing this
highway for the transport of supplies to China and to the Chinese National Govern-
sent,
According to the sources upon whom I place reliance, an American connected
with the Foo Shing Company and a. British subject engaged in the oil business,
the Chinese section of the highway is vastly superior to the Indo-chinese section.
Is 16 stated that the Chinese section to at present roughly equal in traffic
capacity to the highway from Dong Dang to Nanning. This section is approximately
270 kilometers in length. In contrast, these informants remark that the Indo-
china section, although tolerably well engineered, is narrow with an insufficient
mumber of turnouts. It is also stated that the great majority of bridges, par-
ticularly In the section from Caobang to the frontier, are relatively flimay wooden
structures and have a capacity of but one ton. This section, from Caobang to the
:rontier, is sald to be approximately 88 dilonetere in length.
However, information obtained from French sources is to the effect that the
Chinese section is in bad condition and that it will need a great deal of work
before It can be utilized by the same type of traffic now using the Done Dang*
Wanning highway. These same sources claim that the Indochina section is in ex-
cellent condition and will be ready for heavy traffic well before the Chinese
section. At the present time, however, the Indochian authorities are apparently
loath to grant permission to use the highway between Caobang and the frontier -
which may or may not be evidential that the highway is not in as good condition
as claimed. The American informant mentioned above is of the opinion that this
is the case.
There 18 some question as to where the highway goes beyond Pingra. But 11 is
understood that the uain extension will be to Hochi by may of Tunchow and Nenkok,
about 220 kilometers in length. It is stated by several sources that work is
progressing on this section and one Chinese informant professes to know that this
section will be ready for traffic within a few months.
Still another Chinese source of information states that an alternate route
from Pingma is contemplated but, as he is rather vague as to details, this infor-
mation must be accepted AS subject to confirmation. The alternate route is a.
highway between Pingma and Anshun by may of Tungchow, Poseh and Lohli, said to
Regraded Unclassified
=28
be a matter of approximately 350 kilometers. The advantages of this route
are of course the increased distance from Japanese air bases and the do-
cressed distance to Kunming. The apparently most obvious disadvantage is
the difficulty of terrain.
Although it is understood that the Langson-Caobang-Pingma-Hochi high-
my possesses some disadvantages, notably the mountainous character of the
country around Caobang and to the frontier, the possibility remains that this
may become one of the main arteries for the transportation of supplies to
China, especially if the Dong Dang-Nanning continues to be the subject of
daily Japanese air raids. The new highway would of course be the target of
Japanese attacks but it would serve an extremely useful purpose in providing
an additional means of supply for unoccupied China.
Respectfully yours,
CHARLES S. REED, II,
American Consul
Original and 2 copies to the Department
Copy to Embassy, Chungking
Copy to Embassy, Peiping
Copy to Consulate, Saigon
815.4
CSR/CJ
(Draft of this despatch was received at Saigon November 6, 1939, Mailed
November 7. 1939),
(Copy)
PARAPHRASE OF TELEGRAM RECEIVED
229
FROM: American Embassy, London, England
DATE: October 20, 1939, 7 p.m.
NO.: 2108
FOR SECRETARY MORGENTHAU.
A
FROM BUTTERWORTH.
Reference 16 made to your telegram of October 19,
No. 1249.
There just appeared in the TIMES, in an article from
its correspondent at Riga, the report of the passage through
Lithuania of a consignment of 17 1/2 tons of gold from
Moscow to Berlin.
In confidence we learn from the British Treasury that
the Foreign Office has received telegrams indicating that
the correspondent of the TIMES obtained his information
from A reliable source, and a "very reliable source" con-
firmed it. The Treasury states that although the published
report gave the figure as 17 1/2 tone of gold, actually
the capacity of the railroad car was 17 1/2 tons, and the
car contained 107 cases of 7613.3 kilograms gross weight.
It 1a expected that 8. further carload will be sent.
The frank admission of the British Treasury 1s that it
does not know what conclusions to draw as to the character,
extent or significance of the foregoing; it indicated that
it would appreciate obtaining any information which could be
supplied reciprocally by us.
END SECTION ONE.
KENNEDY.
EA:LWW
231
PAP
PLAIN
LONDON
Dated October 20, 1939
Rec'd 6:12 p.m.
Secretary of Stato
Washington
2108, October 20, 7 p.m. (SECTION TWO).
Yostordays TIMES contains the following article from
its Amstordam correspondent:
"The wookly report of the Noderlandscho Bank shows a
gold stock of 1,112,200,000 florins an incroaso of
8,000,000 gold florins or 10,000,000 dovalunted florina.
The incroase cannot be accounted for by the usual trans-
actions of the equalization fund, the exchange rato not
being such 18 to warrant tho purchase of gold. In banking
circles 1t is thought that the transfer of gold came 'from
the east'; one supposition is that it represents part of
the rocont Russian transfer to Gormany which is boing used
to croate Gorman balances in noutral countries, Although
this explanation hos not boon confirmed or donied officially
it is widoly accopted and the transfor is hold to be an
indication of tho ponceful intontions of Gormany towards
Holland. On the other hand, it is possible that the transfer
is Russian gold intended to scrvo for payment of Russian
orders for ships and drodgers.'
Todays
231
PAP -2- 2108, October 20, 7 Dalla (SECTION TWO) from
London
Today's FINANCIAL NEWS contains the following article:
"There is no rouson to suppose that the transfer ro-
prosonts a loan to Germany to case her difficultios in ob-
taining row moterials from noutral countries. It is well
known that the Reich's inability to pay in free exchange has
raised difficulties in the trade talks with Bulgaria and
other states, But it is probable that the Soviet gold has
been merely moved to Berlin for subsequent transfer to
Holland and other neutral states to enable Russia to sup-
plement her own foreign exchange reserves. Thus it is be-
lieved that the recent increase in the Netherlands bank
gold holding was due to an arrivel of Russian gold. It
should be remembered that for some years past the Russian
Government has regularly sold her gold production to acquire
free exchange. For a time the gold travelled through Ber-
lin but during the past few years most of it has come to
London. Shipments this year have been much below normal -
only 57,200,000 in the first eight months, against $22,100,00
in 1938 and $46,400,000 in 1934 and it is therefore reason-
able to suppose that the Russian Government might be at-
tempting to liquidate further quantities of metal without
delay. It therefore soems likely that the gold now in Ber-
lin is morely awaiting transfer to various continental centres
and is not in any way available for use by the German Govern-
mont." (END OF MESSAGE).
KENNEDY
NK:EMB
C32
October 21, 1939
1270 to Kennedy. British financial counselor in
DC has been advised that Treas would be pleased to
see British Govt handle its war purchase accounts
along lines it 1s following for airplane purchases
in US, that is open acct with FRBk of NY.
(This is filed with other pertinent cables as of
10/24/39, date they were shown to the President.)
233
PARAPHRASE OF TELEGRAM SENT
TO: American Embassy, London, England
DATE: October 21, 1939, 3 p.m.
NO.: 1270
FROM SECRETARY MORGENTHAU.
The following 18 for your information and guidance,
and 1e strictly confidential:
The Financial Counselor of the British Embassy in
Washington has been informed as of this week that, A8 8
matter of administration policy, the Treasury would be
pleased to see the British Government handle its war purchase
accounts in this country along the lines it 18 now following
for its airplane purchases in the United States; 1.e.,
funds of the British Government would be deposited in an
account, or accounts, which would be opened and carried
with the Federal Reserve Bank of New York by and in the
name of the Bank of England. Official payments would be
made from this account, which would be used exclusively
for puchasing war supplies.
Discussion has been given to the desirability of
having some British official in the United States (perhaps
a member of the British Purchasing Commission) designated
to draw checks against the accounts for war materials.
HULL (FL)
SAME repeated mutatie mutandis to PARIS, as Department's
1289, October 21, 3 p.m.
EA:LWW
TREASURY DEPARTMENT
234
INTER OFFICE COMMUNICATION
DATE October 21, 1939
TO
Secretary Morgenthan
FROM
Mr. Cochran
The foreign erchange market was very quiet today. Sterling fluctuated
within a narrow range and closed at 4.01.
The other important European currencies were fairly steady.
Reporting banks in New York and the Federal Reserve Bank reported sales
totaling L219,000, from the following sources:
Commercial concerns
1 44,000
Foreign banks (Europe)
I 175,000
Total : 219,000
Purchases of sterling amounted to L170,000 as indicated below:
By commercial concerns
1 94,000
By foreign banks (Far Last and Europe)
I 76,000
Total 1 170,000
The banks also reported that the British Control purchased sterling amount-
ing to 24,000 at the official rate of 4.02.
The Bank of Latvia bought in this market 200,000 French france, 50,000 Swins
france, and 30,000 guilders.
The B.I.S. sold $3,500,000 gold from their earmarked account.
The Federal Reserve Bank informed us that they had not received any reports
of gold shipments to this country.
1
Averty
Handa him m
235
KEESHIN FREIGHT LINES, INC.
JLKEESHIN
221 WEST ROOSEVELT ROAD
CHICAGO
used PRESIDENT you und
October 21, 1939
The Honorable Henry J. Morganthau,
Secretary of the Treasury,
Treasury Building,
Washington, D. C.
My dear Mr. Secretary:
With further reference to my letter
of October 19 I am enclosing herewith additional copies
of reports received from Messrs. Sheahan and Bassi
which are sent you for your information.
not we yes
With kindest personal regards,
file was
Very sincerely yours,
42 J, L. L Keeshin Rushur
JLK:CFB
Enc: (2)
leader
October 26, 1939.
236
Dear Mr. Keeshin:
The Secretary read with a great deal of
interest the reports that were enclosed with
your letter of October 21st. He asked me to
thank you very much for the information that
you sent him.
Sincerely yours,
(Signed) H. S. Klotz
H. S. Klots,
Private Secretary.
Mr. J. L. Keeshin,
President, Keeshin Freight Lines, Inc.,
221 Vest Recesvelt Road,
Chicago, Illinois.
Copy to Mrs.
GEF/dbs
Regraded Unclassified
UOPY
EST
October 7, 1939
Hanoi, China
of dook:
I arrived here yesterday and got my first night's sleep for one
party The Jane have beon raiding every night since the mid harvest festival and
they send over wave after waveuntil daylight. The damage is of no consequence
65 the pursuit planes keep them off of the city itself and I don't think they
ant to get tangled up in antiairoraft fire, but just the same the city "black-
nuts" end everyone runs for his dugout.
We have all worked quite hard on this end especially M. E. S, and
it nes been an uphill fight all the way. Brother, We have learned a lot about
Calam and especially the Chinese.
I'm down here to get hold of any and all automobile parts and
michine tools that 1 can lay B. hand on. The situation is quite critical B.II to
ports of entry of material. The Burma road is closed, several bridges and 9. total
of 13 miles of road washed out. The worst rain in forty years.
The Chemin De For from Hanoi to Kumming had several land slides and
:s out of service for any freight for at least two weeks. The rumor has it that
will be closed to China by the French in another tendays, which all adds
- to the finish? Jack, you don't want any "Kaeshin Oriental lines" If you don't
believe me I suggest you come over for a little look yourself.
I suppose Maurice told you of the contemplated combination of
Finistry and other governmental civil agencies, being thrown into B. corporate
structure including Foo Shing and operated along functional lines instead of
livisional, tie certainly fought them to a standstill. Shall I say action be-
cause "standstill" is really what they always want to do.
After the organization of the Administrative body there is going to
be 5. tough job for the General Manager who dares to assume the responsibility of
running this thing. We still don't have B. satisfactory explanation on who is
resoonsible for the Dodge order and there has been a lot of hell raised up and
Cown the line. Maybe by this time M. E. S. has the answer.
=ore intrigue and undercover stuff going on at all times, mostly for
the yurpose of outting themselves in on B. piece of cake in the form of a soft job
with a lot of authority and then do nothing about getting the job done.
We talked about a freight and or bus transportation system over here
rember? Well China is for Chinese and nobody but Chinese can get even B. square
Tool of China. Some of the old corporations like Socony and Asiatic Petroleum have
In the old days obtained property and concessions, but we will see the day of ex-
appropriation in our life time. I am not pessimistic but there is no reason to
herbor any illusions no I'm going to do the best I can for one year (dating of course
from August 16, 1939) and then we shall 600, Van Patter has [one down to Kwieyang
to ret B. Central Shop pulled together with what they have on hand and I will see
the about the 16th of the month.
-2-
238
That's about all I know and I will let you hear from me how I make out
on this trip.
Don't let the Mrs. in on the "air raid" stuff.
Sincerely,
(Signed) Andrew Bassi
COPY
39
Chungking, China,
October 9, 1939
AT. Reeanint
our plans et the moment include the organization of a National Corporation to
be known 48 China Transport Corporation. Into this one company we are in general
agreement should be included the many and diverse operations presently conducted
by the various branches of the National Government including the Postal Service.
1 hope to establish an Express Company or division and of course freight and
passenger transport will be the first consideration. I have recommended to Mr.
K. Y, Chen over the protestations of G. few of the local officials the inclusion
in the new company of the Foo Shing operations. With Foo Shing included thore will
be 8. total of approximately 3500 units. of course only about 40% will be capable
of oberation, an satimated 30% is under repair and 30% awaiting essential repair parte
or in dome instances reclamation.
Dr. Van Patter ie now in Rwelyang laying the ground work for the centralized
Am also attempting to insugurate & central store to avoid the present dupli-
gation of fuollities and purchases that has resulted in over C. N. $1,000,000.00
purplus of apare parts that are not usable. Expect Van Patter will be away for at
least two weeks as he must secure inventoires of available shop equipment, etc., 86
well as needed machines and spare parts. Mr. Bassi is presently in Halphong secur-
(ne almilar inventories of available machines and spart parts at that port awaiting
whimont, "hen they return we can concentrate on moving the cosontial parts from
Hainliong and get started.
1 plan to leave Chungking by plane tomorrow morning for Kuming, thence to
Lashio in Surma, From Lashio we go by train to Mandalay and Bangoon to inspect cargo
at that point as well 0.8 facilities, Expect to return to Lashio by rail, thence by
car over the Surma route to Kunming and by air to Chungking. This trip will take
approximately two wooks, During this intorim 1 am hopeful all necessary Executive
action will have been taken by the National Government authorities to set up the new
corporation, There is also under way the adoption of our recommendations relating
to !loonsing of drivers and equipment; The establishment of Highway Traffic Polloe:
the drivers relay plan of operation and the inauguration of night driving or 24 hour
service, The crying need for transportation compels G. longer period of operation
NE well as repair of existing trucks.
From what we have seen, em certain there is plenty of equipment here in China
ir we can only get it running. by plan is, of course, to recommend heavier equip-
for replacement purposes. Our projected Corporation will include only the
Seuthwestern Provinces and operations via French Indo-China and Burma in the be-
siming. However, upon my return from Burma it is my intent to travel to the North-
west, perhaps to the Russion border or beyond. Am not at all familar with the
possibilities of China's foreign trude with Russia and believe such 8. study is of
importance in view of present European hostilities. The Northwest is now operated
vita Russing trueks but I am given to understand the scarcity of gasoline and other
crientials to the conduct of highway operation are as bad a state B.G. is the case in
the Southwest.
E endeavored almost every night to write to you but these continual air raids
are most tiring. During an eight day stretch we more raided every night and some-
times twice during 6. night. The enemy planes come up from Bankow in batches of 18
% 27 planes and we have had as many as 5 batches in one night. It in not at all
comforting to roalize the enemy is using Amorican planes, American bombs and most
=2-
fortunate of all American methods of operation. They hold to e rigid formation at
altitude of 12,00 feet and proceed to reise hell with the whole countryside. The
issue have a wonderful system of protection. The enemy planes are hardly clear of
Langow airfield before word is flashed to all possible objectives. The course of
planes is closely watched and reports come in regularly of the progress of the
batches. When the planes are within an hour of Chungking, the first alern
sounged. when 16 to 20 minutes away the urgent alarm is sounded and within two
nutes there is a. complete blackout, all electric current is out off and even the
icker of a light might bring a shot from the Gendarmes. We usually stand outside our
yout until the enemy planes are distinctly hoard then we dive for safety. The sound
shock of bombs fulling in the distance is all we have heard so far as the enemy
not bombee Chungking proper for some time now. Nevortheless it is B. distinctly
pleasant feeling to sit and wonder when they will release bombs over Chungking again.
suburbs from two to fifteen miles around seem to be the objective at this time
though we are promised more action shortly. Such promises are made by Radio from the
w/ troudoasting stations, When the city is completely blacked out the Chinese pur-
lit elips can be heard circling the city much in the manner of the American Indian
tactjos, single file. They can be plainly heard and not infrequently we hear them
wor Living to the attack. de have watched severe bombing from a safe distance and the
the 10 оде to remember. The entire sky is illuminated by the bombs. One night we
injued to drive our into the country and attempt to see what was going on, We left
sity at about 9:30PM and reached our vantage point in the hills within an hour and
fore the urgent alarm. At times there seemed to be literally B. hundred planes over-
ind, out of course there were far less. The noise of the motors is so amplified when
A70 in the mountains. There WAS action most of the time until 4:30AM when the all
car signal was givenand we started back to the city for some much needed sleep.
Chungking is perhaps one of the best protected cities from air raids. The dugout
adations are ample for over 250,000 people. Invitations to social functions
earry the line "Dugout facilities available to our guests". The entire popu-
La Indeed dugout conscious. We occupy dugout with the higher Government officials
are in constant communication with all that in going on. When the time between
When permits, we usually have coffee or brandy.
About the recent replacement of an order for 500 Dodges. I find that this per-
loular order for the Ministry of War was placed on Sept. 1 before we arrived in Hong
onc. Pressure WILD brought on Mr. Chen by the Government officiáls here in Chungking
the Manufacturers insisted they might not be able to fill the order if any further
Mays were encourtered due to the grave possibilities of European war, increased prices.
rates, oto. Am still endeavoring to have stronger front ends on this order but
afraid it is too late. lione the less I have frankly discussed the matter with most
the Covernment officials, his Excellenty Dr. H. H. Kung the Premier, the Minister
Anr, and all others in any way interested. I told them quite frankly that the present
lent equipment was unsatisfactory and unless heavier and more power equipment was
ace souilable there WBG little that could be accomplished in my opinion.
It has Deen suggested and you will shortly be approached on the subject of pro-
onging my stay in China. Frankly would like to aid in starting the new organization
I am fearful that red tape will slow their efforts if we are not watchful, One of
principal reasons for suggesting the Corporate orm is to escape Governmental redtape.
da 16 juite a job end delays experienced in flying the Pacific badly delayed us. It
herefore seems essential that we do all we to make our venture a success. 1 also faol
hat with the changed status in Europe and the increased business for our company that
DU will find it quite difficult to come here yourself. In any event please give the
Atter your serious consideration when and if it is brought to your attention. I feel
list our reputation is at stake and we are by no means in 6 position to leave now und
durit think I will be until near the end of the year.
-3-
Meanwhile we are all well and doing our best. Remember us kindly to all
ad believe me it would be 8. pleasure to hear from you also. So drop a line to me
Chungking and let me know our September results.
241
Sincerely,
(Signed) Maurice E. Sheahan
142
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE October 21, 1939
TO
Secretary Morgenthau
FROM
Mr. Haas OR.
Employment under the Works Progress Administration
increased to 1,874,000 persons during the week ended
October 11, 1939 from 1,833,000 for the previous week,
a gain of 41,000 persons, as is shown on the attached
tables and chart.
Attachments
WORKS PROGRESS ADMINISTRATION
Number of Workers Employed - Weekly
C43
United States
Week Ending
Number of Workers
1939
February 4
(In thousands)
2,966
February 11
2,966
February 18
3,011
February 25
3,043
March 4
3,032
March 11
3,009
March 18
3,015
March 25
3,009
April 1
2,980
April 5
2,906
April 12
2,761
April 19
2,752
April 26
2,751
May 3
2,734
May 10
2,660
May 17
2,622
May 24
2,609
May 31
2,598
June 7
2,594
June 14
2,590
June 21
2,578
June 28
2,551
July 5
2,388
July 12
2,290
July 19
2,250
July 26
2,200
August 2
2,081
August 9
2,053
August 16
1,976
August 23
1,896
August 30
1,841
September 6
1,661
September 13
1,694
September 20
1,733
September 27
1,788
October 4
1,833
October 11
1,874
Source: Works Progress Administration.
WORKS PROGRESS ADMINISTRATION
Number of Workers Employed - Monthly
C44
United States
1936
Number of Workers
June
(In thousands)
July
2,256
August
2,249
September
2,377
October
2,482
November
2,581
December
2,483
1937
2,192
January
February
2,138
2,146
March
April
2,115
2,070
May
June
1,999
1,821
July
1,569
August
1,480
September
1,451
October
1,476
November
1,520
December
1,629
1938
January
1,901
February
2,075
March
2,395
April
2,582
May
2,678
June
2,767
July
3,053
August
3,153
September
3,219
October
3,346
November
3,319
December
3,094
1939
January
2,986
February
3,043
March
3,009
April
2,751
May
2,598
June
2,551
July
2,200
August
1,841
September
1,788
Source: Works Progress Administration.
Monthly figures are weekly figures for the latest
week of the month.
They include certified and noncertified workers.
WORKS PROGRESS ADMINISTRATION
Number of Workers Employed
United States
Monthly W.P.A. Employment
Weekly W.P.A. Employment
1936
1937
1918
(939
1938
1939
**
M
7
>
.
J
-
#
J
&
N
J
E
-
J
=
-
,
M
-
al
&
4
MAR,
MAY
JULY
SEPT.
NUY.
-
-
MAY
JULY
SEPT.
NOV.
WILLIONS
MILLIONS
FORS
ut
or
of
OF
-
WORKERS
WORKERS
3.5
3,5
3.4
3.4
JA
3.2
3.3
3.1
J.2
3,7
2.8
3.1
3.1
3.0
3.0
xrá
2.4
2.9
2.9
2.8
2.8
2.0
2,7
2.7
2.6
2.6
2.5
1.6
2.5
2.4
2.4
el
2,3
1.2
2.2
2,2
24
2.1
.8
2.0
2.0
1.9
1.9
A
1.8
1,5
1.7
1.7
1.6
0
1.6
JAN.
MAR,
WAY
JULY
SEPT.
NOV.
MAK.
JAY
ECPT-
NOV.
-
E
3
-
E
a
-
-
1930
1935
15
1936
1937
1938
1939
SOURCE: WORKS PROGRESS ADMINISTRATION
line al the Secretary of the Treasury
2
- of - - -
(00PT:FE:HJM)
Original by Air Mail
245
No. 9
AMERICAN CONSULATE
AIR MAIL
Banoi, French Indochina, October 22, 1939
Subject: Reamples of Missanagement at Exiphong Contributing to Congestion of Cargo.
The Honorable
The Secretary of State,
Vashington.
notread
Siri
I have the honor to refer to my despatch No. 5 of October 15, 1939, outlining
the general situation at Haiphong and mentioning the confusion and disorder which has
prevailed at that port. As of possible interest to the Department and in slabo-
ration of the implication that the Chinese are themselves partially responsibe for
the conditions at that port the following is 8. summary of a confidential conversation
with an American engineer, now in the employ of the Poo Shing Company.
The informant stated that when he first visited the assembly plant of the Foo
Shing Company at Haiphong, where the trucke purchased under the Universal Trading
Company loan are being assembled, he was appelled by the lack of order and general
inefficiency. There vas scemingly no attempt to keep track of the large amounts
of accessories and spare parts, in consequence of which much had been lost or mis-
laid, One notable example vas the mislaying of 400 steel cab bodies, which were only
found after some weeks of searching.
The informant then took over direction of the assembly plant and in two weeks
he vas able to assemble and prepare 60 trucks, as against approximately 120 trucks
assembled and transitted to China in the preceeding two months.
During this period the informant made a survey of conditions prevailing in the
various assembly plants at Haiphong and he found that the incident mentioned above,
the mislaying of 400 steel cab bodies, vos quite symptomatic of conditions at
Haiphong. For example, he found in the Foo Shing assembly plant all the truck side
racks belonging to the Ministry of Communications, he found in the establishment of
one of the other Chinese ministries all the truck side boards belonging to the Foo
Shing Company. The informant attributed much of this confusion to an absolute lack
of cooperation and coordination between the various Chinese agencies, stating that
there had not been a general meeting of these agencies, to discuss their several and
individual problems, for at least three months.
The informant wentioned inter alia the fire which destroyed soma 1,000 tires at
Halphong on October 16, 1939 (my despatch No. 7 of October 15, 1939). He said that
he had observed these tires some days before the fire and at the time wondered why
they had been ordered, as they did not seem to be standard equipment for any of the
trucks used by the Chinase National Government. He said that he had heard the ruser
subsequent to the fire that certain Chinese were responsible for the fire, thus cover-
ling up A 00% inconsiderable mistake by some Chiness agency. Es hastened to reiterate
that this was only a rumor, but one which sprang from A prevailing belief in Chinese
inefficiency, at least insofar as conditions in Haiphong are concerned.
Regraded Unclassified
- 2 -
247
The informant said that in his experience, end from what be bad heard from non-
binsed sources, the French were cooperating to a much greater extent than conceded
by the Chinese. As a matter of fact, he believed that the plea of lack of cooperation
from the Indochina authorities was in some instances an attempt to excuse inefficiancy.
Ee cited the claim by the former Chinese manager of the Foo Shing plant that the
dearth of chauffeurs was 8. factor militsting against speeding up the assembly of
trucks and he added that this was only partially true.
However, the informant concluded, these are the glaring example of the
blunderings which have caused the unprecedented confusion and disorder at Haiphong.
To the contrary, the Chinese are working hard to ameliorate the situation and are
succeeding to a certain extent.
On the whole I am in agreement with the opinion of my informant. There are
striking examples of inefficiency and mismanagement. There is 8. proneness to blame
the French for delays and non-cooperation. But the prospect is far from pessimistic
and there is at present a tendency toward coordination and efficiency which should
prove of inestimable value to the Chinese National Government insofar as the
obtention of supplies through Indochina is concerned. At this time the acceleration
in the transitting of supplies across Indochine is strikingly noticeable.
Respectfully yours,
CHARLES S. REED, II,
American Consul
Original and 2 copies to the Department
Copy to Embasay, Chungking
Copy to Embassy, Peiping
Copy to Consulate, Saigon
CSR/CJ
815.6
(Draft of this despatch received at Saigon
November 6, 1939; mailed November 7, 1939).
C48
QUOUP meeting
October 23, 1939.
9:30 a.m.
Present:
Mr. Graves
Mr. Thompson
Mr. Foley
Mr. Riefler
Mr. Caston
Mr. Cochran
Mr. Cotton
Mr. Duffield
Mr. Hanes
Mr. Haas
Mr. White
Miss Chauncey
Mr. Bell
H.K.Jr:
Herbert?
laston:
I don't believe I know anything. There was 8 false
rumor of & submarine, Friday. That is all I know
of.
H.M.Jr:
Stay behind a minute, please.
Foley?
Voley:
Nothing.
Duffield:
Nothing.
Cochran:
I just had that cable that I showed you.
M.M.Jr:
Are you here on a lone watch?
Riefler:
For the morning.
1.2.Jr:
Would you like to sit in at 10:00 when we discuss
financing?
Riefler:
Yes.
H.M.Jr:
I would like to have you.
Cotton:
There was a change of signals on the country to be
taken up on this South American business over the
week-end.
E.M.Jr:
My God, I spent the whole week-end studying Colombia.
Cotton:
It 18 now Peru, not Colombia.
249
- 2 -
n.M.Jr:
Now, just remember this, I don't know who changed
the signals but I told Summer Welles the first
country had to have a 75 percent chance of winning.
Perul If I am not mistaken, their chief export is
guano.
White:
No, no longer.
E.K.Jr:
I think somebody is giving me the bird. Who called
you?
Cotton:
Well, Collado was sent over to tell us that Peru was
considered more pressing.
11.M.Jr:
Well, If I am going to discuss financing - I was going
to discuss financing all day. You boys can do a paper
on Peru and we will take a look at it. I am still
going to insist on 8. 75 percent chance. Do you think
they have B, 75 percent chance?
Cotton:
No, it 1s very bad.
H.V.Jp:
My understanding with Summer Welles was, the first
one at 75 percent chance, isn't that right?
Hanes:
Yes, sir. That is what you said.
H.M.Dr:
Got any other good news?
Harry, you might take a look at Peru.
White:
We already have.
R.K.Jr:
Am I about right?
White:
You are wrong on the guano, but you are right on the
conclusion. 011 and cotton are their main exports.
R.M.Jr:
What country is it we get guano from?
White:
Chile.
0.W.Jr:
George, you be ready at 10:00 o'clock, you and Henry
Murphy. I also want to take a look at the RPC.
Haas:
I am working on it (handing report to Secretary).
- 3 -
I don't know who 18 doing the job, but while I am
right in that neck of the woods, I would like to
pin on somebody the Job of taking everything that
comes in on Germany of economic value and evaluating
it, Is anybody doing that?
White:
Taking what?
S.M.Jr:
Evaluating all the economic news that comes out of
Germany. I mean, for instance, I saw in the paper
today some German economist makes the statement
in Chicago as to fats, how long people like that
will get them, et cetera.
Nues:
There is an article in the "Iron Age" on the same
thing. Are you fellows doing anything?
deflor:
We are following it the way anybody else is, but not
analyzing it.
Well, I tell you
9100:
lie are analyzing
R.M.Jr:
Harry, 1f you and George and Riefler could talk to-
gether sometime today, see, and bring Puleston into
the meeting too, will you, and Cotton. You can have
a meeting sometime today and talk about it. Merle
Cochran, too. Let's see If we can't - as far 88 the
Treasury goes - and then I would like to out it on
some one fellow. That will be White, Haas, Cotton,
Riefler, Merle Cochran and Puleston. Maybe sometime
tomorrow we will get together. I had better give
you an appointment now. I would like to control
everything and have it flow to hanes and me. I mean
just as to the set-up, you 300. I will put down
10:30 tomorrow morning, how is that for you John?
Hunes:
0. K.
10:30 tomorrow morning. Have R talk during the day
and sort of get it organized.
Anything else, George?
LBHS:
I have nothing else.
251
4
M.N.Jr:
Harold?
graves:
This is n memorandum (handing memorandum to Secretary)
of the automobile situation you asked me about Thursday.
N.H.Jr:
oh, yes. The President asked ne about this manganese,
this other stuff. Could you have a thumbnail thing
for me a little before 12:00?
naves:
You spoke of tungsten Friday and manganess Thursday.
m.M.Jr:
Let's have a page on each one,
reves:
Very well. You said specially on Thursday you wanted
to CO over those tunesten bids.
You and Collins come in at a quarter of 12:00 and ive
me B page on each.
araves:
Very well. You asked me to prepare for you today a
memorandum for the President on the Navy contract for
tungsten.
Malade:
Bring it all in at 11:30.
reves:
I was talking to Collins on the telephone before we
came in and he had some kind of EL meeting with the
State Department. I an not sure that that 11:30 won't
conflict.
T.1.Jr:
He ought to have a deputy to go to those things.
Irves:
It may be too late to get him because he was just on
his way.
4,M.dr:
Go find out.
Dan Bell?
Bell:
The librarian seems to think we ought to take some
action on the Hegeman property, the Cosmos Club.
W.M.Jos
Who thinks 30°
Bell:
The librarian. lie would 11ke to have B. meeting either
Monday or Tuesday of next week. Mrs. Meyers won't
be back in town until Sunday, but she will be avail-
able Monday and Tuesday.
252
- 5 -
E.M.Jr:
Next week?
Bell:
Yes,
R.M.Jr:
That is B. long way off.
Bell:
Well, he wanted to*give you plenty of time.
|\.M.Jr:
Well, Tuesday at 10:30?
Bell:
That 1s all right.
H.R.Jr:
Let me tell you something which is very much in
the room. Somebody has been going to see Mrs. Roose-
velt and telling her that this librarian was crooked.
I told her we had nothing to do with it, but if he
was crooked - I don't believe he was - is there any-
thing he could do to these funds?
Bell:
No.
S.M.Jr:
Would he have any access to those funds?
Bell:
No. His disbursing officer disburses the income of
these investments.
H.M.Jr:
Who audits that?
Bell:
The Comptroller General audits the disbursing officer's
accounts,
H.M.Jr:
Are we fourth or fifth removed?
Ball:
You have nothing to do with it at all, After the
funds are invested, the income goes into the fund,
It is just like any other appropriation.
H.W.Jr:
Is there any other possible way he can put his hands
on them? Think about it.
Bell:
He could, through collusion with other employees. lie
couldn't do it by himself.
H.M.Jr:
That 1s what she meant.
Bell:
It would have to go hrough somebody else first. He
is not 8. disbursing officer and he never gets his
hands on a dollar.
553
- 6 -
H.2.Jr:
Think about it.
Bell:
Unless it goes through some third party.
1,2.Jr:
Do we audit?
Tall:
No, we don't audit it. The Comptroller General does
that.
M.M.Jr:
Could you ask the Comptroller General if there is any
question about that? How recently was It audited,
that is more important.
Poll:
Well, he probably hasn't audited any accounts, the
disbursing officer, since this fellow came in.
S.M.Jr:
Then I am going to ask for an andit up to the time
this fellow left. When was that, October 1st?
oll:
Well, sometime around there. It might have been
September 1st, I don't know which.
H.M.Jr:
There are two questions: When was that fund audited
last, and I would like to have It audited up to date.
When we were In Farm Credit we found there were
accounts which hadn't been audited in a long time
and I made them audit everything for me. Everything
was audited up to date. Different accusations would
came in and they were settled. Will you do that?
Would that be a good way to do it? I might say in
passing that this woman who came in is a mystic,
who made the complaint. I don't happen to belong to
that cult. That would be a good way to do it.
Mrs. Roosevelt has it very much in her mind. I
would like to be sure - you know, it is like being
EL director and trustee. "Why didn't you see it was
audited," and all that sort of thing.
Harold?
raves:
He will be here at 11:30 with those two memoranda.
H.V.Jr:
Wasn't there something
Craves:
As it turned out, his engagement with the State
Department had been postponed until 3:00.
Regraded Unclassified
254
- 7 -
H.M.Jr:
oh, sure, Dan postponed it until 3:00 because he
has got to hold my hand all morning.
Thompson:
Senator Vandenberg made a remark Saturday about
gold purchases. He expresses the hope that a reply
will be received before the neutrality debate is
completed.
H.M.Jr:
Say that again.
Thompson:
He expresses the hope that a reply will be received
before the neutrality debate is completed.
H.M.Jr:
Say it again.
Thompson:
He expresses the hope that & reply will be received
before the neutrality debate 13 completed.
H.M.Jr:
That goes for Vandenberg and me both.
White:
I will get busy on it today.
Duffield:
The newspaper men, Mr. Secretary, will have the....
H.M.Jr:
It was very funny, Harry was day-dreaming. It 1s
& good place to rest in here in the morning.
White:
It 1s, after 8. busy week-end.
Duffield:
The newspaper men are saying since the Senator was
so impolite as to read his letter before he got an
answer or you had had a chance to see it, how about
them seeing your reply.
H.M.Jr:
The answer 18, the Senators can afford to be impolite
and I can't. Vandenberg called me. What shall I
tell him?
White:
Well, I will have something ready today.
H.M.Jr:
Well, I saw him at the theater Wednesday night and
he was kidding me about it, 80 I will kid him when
I call him up. I said I thought we could get it
out by Christmas.
White:
Tell him he shouldn't ask such tough questions and
it wouldn't take so long to answer.
255
- 8 -
Thompson:
We were given three weeks on that new car of yours
instead of four weeks.
H.M.Jr:
We will launch it with a bottle of coca cola. Any-
thing else?
Thompson: That is all.
H.M.Jr:
Has Mr. Irey moved over?
Thompson:
He is already here.
H.M.Jr:
That fellow had a lobbying machine which is par
excellence.
Hunes:
We ought to get out some sort of an answer today on
that other thing.
H.M.Jr:
Have you talked to Riefler?
Hanes:
No, I haven't said anything to anyone.
H.M.Jr:
I thought Welles left town.
Hanes:
He did. He is coming back on Thursday and 1s anxious
for us to come in with Herbert Feis just as soon as
we have made a decision.
H.M.Jr:
(on phone) Hello. (Telephone conversation with
Senator Vandenberg follows:)
-
256
- 9 -
White:
He won't be so cocky when he reads the answer,
because he lays himself pretty wide open.
H.M.Jr:
What he said was this, that 1f there is nothing
to it the country is entitled to know it and the
sooner the better. I wish all opponents would
be as square as he is.
You (Hanes) have a talk with Win, will you, this
morning?
Harry, if you will sit down outside, I want to
see you in a couple of minutes.
October 23, 1939
257
9:45 a.m.
HMJr:
Hello.
Arthur
Vandenburg: Good morning, Henry.
HMJr:
Hello, Arthur.
V:
How are you?
HMJr:
Oh, I'm wonderful!
V:
Well that -- that's Just the way to be on Monday
morning.
HKJr:
Thanks for the publicity on Saturday.
V:
Well, I thought it was about time.
HMJr:
Yeah. Now listen, if you could put me in touch with
the fellow that writes your letters, I'll put you
in touch with the fellow that prepares my answers
to you. You see?
V:
Well, I write my own.
HMJr:
Oh, do you?
V:
Yeah.
HMJr:
Well, then -- then
V:
I Just have these brain-storms. I wake up on bright
mornings with them and I let them go.
HMJr:
Well, far be it from me to question it, but I get
help.
V:
Well, I don't blame you. You need help to answer
that letter.
HMJr:
Yeah, Yeah.
V:
(Laughs) Well anyway
HMJr:
Well, anyway it'll be along shortly. If you can tell
me when you'll kill off that debate, I'll have my
letter ready for you.
258
- 2 -
V:
Well you mean I don't get the letter until after
the debate?
HMJr:
No, you'll get it before.
V:
Well I'd like it very much before, Henry, because
I -- I do think that there's an awful -- if there's
nothing to it the country ought to know it because
there are an awful lot of people worrying about it.
HMJr:
I'll try to get it up to you tomorrow.
v:
Fine !
HMJr:
How's that?
V:
Bully.
HMJr:
And that will be in time, the debate will still
be on, won't it?
V:
Oh, yes,
HMJr:
What?
V:
Yes.
HMJr:
All right, Arthur.
V:
Much obliged, Henry.
HMJp:
Goodbye.
V:
Goodbye.
TREASURY DEPARTMENT
159
INTER OFFICE COMMUNICATION
DATE October 23, 1939
TO
Secretary Morgenthau
FROM
Mr. Cochran
The Secretary telephoned me at 9:45 Saturday morning, October 21, from
the farm. He asked me to obtain from Mr. Welles a copy of the cablegram from
Ambassador Bullitt in regard to joint French and British war purchases, along
sie plan of Monnet, which message Mr. Welles had brought over on Wednesday.
The Secretary also wanted me to be sure that WE had at least B. paraphrased
copy of the two Kennedy messages of last week on the manner in which the British
should handle their bank deposits and dispose of their securities in this
country.
The Secretary instructed me to prepare cablegrams to the Embassies in
Paris and London, letting them know what our discussions this past week had
been with their financial representatives in this country in regard to hand-
ling payments for war materials.
Furthermore, the Secretary asked me to obtain certain data from Mr. Haae
with respect to the price, at Saturday's closing, at which 4-year 11-month
Notes would sell, carrying 1% and 1-1/8%. The Secretary said he would call
ne back at 12:30 noon,
Before preparing B. draft of the cablegrams, I talked by telephone with
Mr. Knoke at 11 c'clock to confirm that the present airplane purchases are
taken care of with funds placed in the general accounts of the Bank of England
and the Bank of France with the Federal Reserve Bank of New York. Mr. Knoke
and I agreed on our understanding that the new account or accounts should be
exclusively for the purchase of war materials. Mr. Knoke stressed the do-
sirability of someone on the Purchasing Commission having authority to draw
against these new accounts. He also emphasized that our inspection of these
accounts would not give us all of the information which we may desire. Conse-
quently. we should make arrangements with the Purchasing Commission to keep
us informed of their orders, contracts, etc.
When the Secretary called at 12:15 I gave him the preliminary figures which
Mr. Hass had submitted to me,
I read to the Secretary the draft cablegrams which I had prepared for
London and Paris, He O.E.'d them at read, and agreed that they should be for
the confidential information and guidance of the Ambassadors, with no reference
being made therein to Measre, Butterworth and Matthews.
CONFIDENTIA
Regraded Unclassified
260
-2-
In closing, I let the Secretary know that Mr. Livesey had telephoned me
at 12:15 from the State Department and had summarized to me the reply from
Ambassador Kennedy in regard to the plan for the disposition of British held
American securities on the American market. I gave the Secretary the high
points of this cablegram, as I had received them over the telephone from Mr.
Livesey. The Secretary told me that this matter would be taken up on Monday
morning.
16.10l.
CONFIDENTIAL
TREASURY DEPARTMENT
361
INTER OFFICE COMMUNICATION
DATE October 23, 1939
TO
Secretary Morgenthau
FROM Xr. Cochran
The foreign exchange market resumed the quiet condition which prevailed
Test mes. The sterling rate fluctuated within a aarrow range, and closed
et 4.01-1/4.
In Sew York, the banks again reported on chaence of any substantial orders
from stroné. The only transaction of interest was the purchase by the Guaranty
That Company of 160,000 cable transfer for 90 days delivery from Anderson
Classon end Company. Ordinarily the banks would not purchase a contract for
dollvery AS far ahead 0.8 90 days, but in this case the Queranty Trust Company
ovidently did not object to making the contract on that basis. This transaction
VAF cut through at E. discount of 3# per pound for 90 days.
The other important currencies closed at the following rates:
French france .0227-1/8
Guilders
.5309
Swiss france
.2243
Belgas
.1677
Canada
10-1/2% Discount
The Chinese yuan has shown some improvement during the past week, advancing
Too 07-9/16 on October 16, to 08-3/16 today.
Reporting banks in Lew York end the Federal Reserve Bank remorted sales
totaline 1238,000. from the following sources:
Commercial concerns
1 213,000
Foreign banke (Europe)
1 25,000
Total 1 238,000
Purchases of sterling amounted to L348,000 88 indicated below:
By commercial concerns
1 242,000
Ey foreign benks (Fer East. South America and Europe)
I 106,000
Total 1 348,000
202
- 2 -
The banks also reported that the British Control purchased sterling amount-
ing to L10,000 at the official rate of 4.02.
The Swiss National Bank sold $10,000,000 gold from their earmarked account.
The Bank advised the Federal Reserve Bank that this sale of gold was necessitated
by its operations in the foreign exchange market in support of the Swise frenc.
The Federal Reserve Bank informed us that they had not received any reports
of gold shipments to this country.
JM.H
TREASURY DEPARTMENT
Ift
INTER OFFICE COMMUNICATION
263
DATE October 23. 1939
TO
Secretary Morgenthau
FROM
Mr. Cochran
This afternoon Mr. Knoke told me by telephone that Mr. Osborne of the
Bank of England, at present in Canada, with the British Purchasing Commission,
called him from Ottawa. Mr. Osborne stated that the Commission was placing
8. $10,000,000 order for machine tools with the Bristol Airplane Company.
This calls for delivery over 14 months, $1,000,000 would have to be paid on
account over the next six or eight weeks. Unless Washington raised some
opposition to the plan, the British would like to convinue to handle these
payments through a continuation of their arrangement with the Federal Reserve
Bank of New York, debiting the Bank of England account with that institution.
This plan would be followed pending a consummation of the arrangement which
12E discussed with us last week, I told Mr. Knoke that this plan was agreeable
to us.
S.M.H
CONFIDENTIAL
264
October 23, 1939
8:55 a.m.
H/Jr:
Hello.
Jesse
Jones:
Hello, Henry.
HWr:
Jesse?
J:
Yeah.
HMJr:
How are you?
J:
Pretty good. How are you?
H.Jr:
I'm about -- pretty good would describe me.
3:
Are you back?
SMr:
I'm at the Treasury.
J:
Yes, sir.
HWr:
Jesse, do you remember about ten days ago I asked
you if we wanted to borrow some money from you
could you use more than 250 or 1s 250 your price?
J:
That's about our price, Henry, but can I call you
back?
HMJr:
Yes.
J:
I'll call you back within an hour.
HMJr:
Right. Will you, because I may want to do you
next.
J:
All right. I'll call you back within an hour, Henry.
HMJr:
Thank you.
J:
Goodbye.
265
October 23, 1939
9:06 a.m.
Operator:
Yes, sir.
HMJr:
Hello.
Jesse
Jones:
Henry
Wr:
Yes, Jesse.
J:
Would this afternoon do to tell you?
SMr:
Oh, yes.
J:
Ah -- Mulligan 18 out of town this morning, will be
back at noon.
HVJr:
Oh, yes.
J:
I don't think there's going to be any difference.
IDWr:
No, no. This afternoon would be fine.
J:
In all events it would not be over 300.
HWr:
That's all right, I'm just looking -- trying to look
a little -- a couple of days ahead.
J:
Yeah.
HiJr:
This afternoon will be perfect.
J:
Well then I'll call you.
MiJr:
Thank you.
J:
Goodbye.
10/23/39
leashow copy given to Mr.
shompson per McHughs
instructions. H.H.
10:20 and
October 23, 1939
LEB
10:03 a.m.
H/Jr:
Hello.
Operator:
Go ahead.
Jere
Cooper:
Hello.
MJr:
Good morning.
C:
Hello, Henry. How are you feeling?
I'm fine, how are you?
0:
Well, I picked wy a cold over the weekend. Feeling
kind of tough today but otherwise all right.
SNr:
Yeah.
C:
I hope you had a nice trip up in the country.
MJr:
Very nice.
3:
Well, that's fine. Henry, I want to call on you
for a little favor.
2 Jr:
Go ahead.
as
I have an awfully good friend, Rice A. Ingram --
I-n-g-r-a-m
We:
Yeah.
D:
He has applied to your man Wilson down there for a
place with the special agents or secret service --
whatever it 1s, the proper designation there.
HMr:
Yeah.
C:
And he's from my district, an exceptionally fine
high type fellow
HWr:
Uh-huh.
is
and I'm mighty anxious to help him every way
I can and if you cen give me & lift on that I'll
certainly appreciate it.
- 2 -
267
HMJr:
Well, I'll -- I'll look into it right away.
0:
I brought him up here in 1931 or '32 I guess it
was and he was superintendent of the postoffice
here in the House office building, and then later,
about three or four years ago I guess it was, why
he got a place as investigator with the coal com-
mission and did some fine work with them there;
but of course that's about folded up now you know.
HMJr:
Well, Jere, I'll have the boys take a look at it
and -- and I'll look into it right away.
C:
Well, thank you very much. I sure appreciate your
kindness. I'm sorry to bother you but
HMr:
No bother.
C:
it's a matter of sufficient importance to me
that I wanted to ask you to help me with it.
HMr:
O. K., Jere. I'll be glad to look into 1t.
C:
Thank you so much.
HMr:
Goodbye.
C:
Goodbye.
68
October 23, 1939
11:40 a.m.
Operator:
Operator.
HVJr:
George Harrison,
N
Right.
(Brief pause)
HWr:
Hello.
0:
Mr. Harrison.
Hello.
George
Harrison:
Hello, Henry.
SWr:
I tried to get you before Ecoles. I won. Hello?
E:
Yes.
H.Jr:
I say, I've won. I called you back before Ecoles
could.
%:
Oh, you won. Yes.
M/Jr:
Yeah. George, let me ask you B. question. You
fellows who are in touch in the market - which
issue has the better under-pinning, March '44 or
September $447
H:
March.
RMr:
March.
H:
That's the area of the best demand right now.
HMJr:
Right.
is:
And that wes another reason we favored that over
the September.
HMr:
Uh-huh.
in
We think that it will go better anyway. Not that
you won't have -- not that you'll have any trouble
with the September 144, Henry, you won't.
- 2 -
C9
THE
No.
in
That'll go all right. In fact, it may go a little
too well at that price. That's the reason we felt
the premium W&B high. The March one seems to be
just the right price; it hits the value of the
rights right on the head.
MJr:
Does it?
S:
Isn't that -- just about. The rights are about --
just the same.
"Wr:
Well, I tell you, George -- excuse me; did you want
to say something else?
H:
It's Just -- it's just slightly a little lower than
the value of the rights.
HWr:
That's all right.
11:
But it's near enough to the value of the rights.
HWr:
Well, you like that. You'd rather have it under
than over.
as
Yes.
BWr:
Well you did me a real favor, George, by bringing
this to my attention.
Well, I -- we felt it quite strongly BO I wanted to
let you know right eway.
HWr:
And 1f you don't hear from us by twelve o'clock,
we'll take your advice.
in
All right.
H/Jr:
Very, very much obliged.
H:
All right. Good work.
HWr:
Thank you.
Goodbye.
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
CONFIDENTIAL
DATE October 23, 1939
TO
Secretary Morgenthau
PROM
Mr. Hass RA
Subject: The Business Situation,
Week ending October 21, 1939
Summary
(1) The business prospect for early 1940 18 being strength-
ened by: (a) a new wave of steel buying for delivery after
Jenuary 1, stimulated by the belief that any increase in steel
prices at that time will be moderate; (b) a rising volume of
orders in "secondary" industries; (c) definite orders being
placed in this country by belligerents and by South American
countries; and (ã) automobile strikes, and a recent moderation
of the speculative buying movement, which are tending somewhat
to restrain productive maladjustments this fall.
(2) Steady liquidation of American securities by Great
Britain since early September, which shows evidence of organized
selling, has been a factor in causing a levelling-out of the
stock price trend in recent weeks.
(3) The trend of business activity continues to rise; car-
loadings have increased to 8. new nine-year high under an in-
cressed movement of export freight to the seaboard; electric
power production continues to establish all-time high records;
and the actual production of steel 1s apparently greater than
at the 1937 peak.
The general outlook
While the business prospect continues to indicate some
slackening in the first half of 1940 following expected further
gains during the last quarter of 1939, this elackening will be
moderated by several strengthening influences.
An important development has been 8. new wave of inquiries
end orders for steel products for delivery during the first
quarter of 1940 at whatever prices may be in effect at that time.
The impulse to order now has arisen partly from B. fear that
production of steel for the first quarter may be sold out shortly
after the books are opened at the new prices, and partly from B.
growing belief that any increases in price will be moderate.
Regraded Unclassified
Secretary Morgenthau - 2
Most important among the products in demand for early 1940
Are railroad steel, automobile steel, and tin plate. Automobile
essembly plants are reported to be ordering for 1940 delivery
based on the expectation that this will be B. 4,500,000 to
5,000,000 car sesson, versus 3,470,000 care (including trucks)
in the 1939 season.
Opinion is gaining ground in the steel industry that any
First-quarter increase in steel prices will be held to a moderate
$2 to $3 a ton, which steel makers say will not cover increased
costs. While major steel companies favor 8. policy of restraint
on price increases, some of the smaller companies are already
asking and getting increased prices for delivery in 1939.
There is some feeling in the industry that raw material
prices may work lower efter current shortages have been cor-
rected by increased supplies, thus reducing steel costs, Steel
sorep has declined $1.50 a ton, according to the Iron Age averages,
after reaching a top at $22.50 during the week of October 3.
Demand spreading to "secondary" industries
A second factor tending to strengthen the business outlook
for early 1940 is an increasing volume of orders now going to
"secondary" industries, which make materials and equipment for
the companies producing finished products, The filling of these
orders will continue to offer support to the steel industry and
various other industries after new orders for finished products
Lave fallen off.
In addition to expanding orders for semi-finished products,
end for such products AS automobile parts and railway car parts,
there has also been an increasing volume of orders for business
machines, heavy trucks, electrical equipment, and agricultural
implements, derived from the rising trend of business.
An illustration of the lag between primary and secondary indus-
trial orders was given last week by the comptroller of the American
Steel Foundries Company, makers of railway equipment, whom I called
by telephone to inquire about their orders in September, which
were lower than in August despite the marked increase in new freight
car orders in that month. He explained the discrepancy by saying
that after the railroads had placed orders with the freight car
Regraded Unclassified
Secretary Morgenthau - 3
builders, the car builders would place orders with his
company for necessary couplings, wheels, etc., but that these
were not entered 88 orders until after they had passed through
the engineering department and were approved for production.
The lag in getting production of "secondery" meteriale
under way tends to cause a temporary shortage of such materials
during the early part of & ravid business rise, which is
robably one reason why prices of semi-finished goods recently
have risen more rapidly than prices of finished goode or raw
acterisls.
Foreign orders increasing
The first large war order to be plecein this country
since the outbreak of the war, or at least the first to receive
sublicity, appeared last week with the news that the French
Sovernment had signed e $3,500,000 contract for 2,000 trucks,
to be delivered early in 1940.
Other large truck orders by that Government are reported
to have been placed or in prospect, but details are not yet
available. The company with which the 2,000 truck order has
been placed is reported to be making incuiries from parts
suppliers for parts to make en additional 2,500 trucks. A
news item last week mentioned that the allied governments are
considering the purchase of sirplanes totalling $350,000,000
in this country upon repeal of the embargo. Since these war
orders will obviously be pressed for early delivery, they will
tend to support business activity early next year.
A recent survey of various industries in the 12 Federal
Reserve districts, summarized by the Federal Reserve Board in
e confidential report on October 14, mentions other inquiries
and orders from belligerent nations 8.8 well as from South
American countries.
Reports from companies in the New York district mention
that recent inquiries from European countries for electrical
equipment have now been translated to e large extent into
actual orders. In the Chicago district, sizable orders for
power equipment are being negotiated by South America,
Acceptance being dependent upon the availability of dollars,
Regraded Unclassified
73
Secretary Morgenthau - 4
In the farm equipment industry, the Chicago district
reports that the British and French Governments have asked
for bide on crawler type tractors, light trucks, and other
equipment for delivery before November 15. Substantial orders
have come from Canada, and an increasing volume of inquiries
18 being received from all world points formerly supplied by
Germany and the other belligerents.
Overproduction threat moderated
The threatened development of serious overproduction this
fall in various industries, due to inventory accumulation, has
been moderated somewhat by the more conservative attitude taken
by many buyers recently, since prices in the stock and commod-
ity markets have failed to show continued improvement. There
has even been some discussion in trade papers of the possibil-
ity of hedging accumulated stocks of goods in the commodity
markets. As a consequence, the business foundation for the
first part of 1940 appears somewhat improved over earlier in-
dications.
The automobile strikes which have reduced automobile out-
put two weeks in succession, at a time when the seasonal tend-
ency is strongly upward, will also tend to restrain too rapid
a business rise this fall and strengthen the later outlook
Carloadings reach 9-year peak
Freight car loadings last week reached the highest level
in 9 years (see Chart 1) as an increased freight movement to
seaboard points added its influence to an already high level
of domestic traffic.
Exports of gooda to Canada and South America -- largely
coal and manufactured products such 8.8 farm machinery, steel
products, and chemicals -- appear to be expanding rather
rapidly. This movement, reflecting the reduced export sales
of belligerent European countries in the Western Hemisphere,
is becoming a factor of some importance in the demand for
available freight cars.
Stock market activity increases
A sharp upturn in stook prices early last week, accom-
panied by A general improvement in commodity prices, gave some
indication of an increasing optimism in this country over the
potential effect of more intensive war operations on our busi-
ness outlook.
174
Secretary Morgenthau - 5
The stock market upturn, however, met considerable 1'0-
sistance, and stock prices sagged during the rest of the week.
The resistance was due in part to an increased volume of
stock sales by Great Britain, which has appeared on all up-
turns in the market since early September. Instead of general
public selling, which would tend to be heavier on declines,
this selling gives the appearance of an organized liquidation
of American securities held in Great Britain, since the volume
is consistently reduced whenever the market declines and in-
creased when it rises, with the net always on the selling side.
Transactions of no other foreign countries show this tendency.
This 1s clearly evident in Chart 2, in which the daily and
weekly movements of industrial stock prices are compared with
the net volume of transactions in American securities by the
principal foreign countries.
Despite the fact that stock price averages have made no
further gain since their sarly-September rise, in part because
of the resistance mentioned above, the foundation of the market
has been strengthened by:
(1) the continued improvement in business activity,
and consequently in the outlook for corporation earnings;
(2) 8. relatively small volume of margin speculation.
8.8 indicated by the fact that brokers' loans have been
declining steadily during the year, and at the end of
September reached the lowest figure since the apring of
1933;
(3) & large volume of capital available for invest-
ment, with excess reserves up to new record highs.
On the other hand, our index of confidence (see Chart 3),
which represents an evaluation of the outlook for corporate
earnings 8.8 measured by the relation between prices of second
grade bonde and prices of high grade bonds, has tended downward
in recent weeks (lower section of chart), after gaining sharply
in September. This represents an apparent trend toward invest-
ment in high grade bonds (for safety) rather than in second
grade bonds (for profits), and therefore 1s assumed to indicate
some loss of faith in the profits outlook.
Further evidence of recent inventory socumulation, an
unfavorable business and market factor, appears in B. continued
rise in commercial loans. (See Chart 4). In the past two years.
as shown on the chart, commercial loans have gone through a
cycle of expansion and contraction, associated with speculation
on price movements through expansion and contraction of inventories.
275
Secretary Morgenthau - 6
The price situation
Commodity prices, as measured by the BLS all-commodities
index, dropped alightly the second week in October, B. movement
followed by most of the subgroups. Textile and metal products
were among the few exceptions.
Silk prices provide the primary explanation for an increase
in prices of textile products. Advances in prices of raw silk
have been very considerable recently, reaching the highest level
in almost ten years on the expectation of & gain in raw silk
consumption in the United States in October, combined with A
continued small margin of surplus silk available in Japan for
near-term delivery.
Cotton textiles also contributed somewhat to the increase
in textile prices. Present orders in the industry are reported
as sufficient to maintain production of cotton print mills on
an 50-hour, two-shift basis for the rest of this year. Mills
are hesitating about adding a third shift, since they recall
that it web overproduction resulting from the use of a third
shift which precipitated the difficulties of 1937-
A second exception to the general sluggishness in commodity
markets 18 copper. Though the domestic price continues at
12.50 cents, to which it was recently raised, there 18 an up-
ward tendency in futures and export prices. The amount of
copper for 1939 delivery 18 definitely limited, and some of
the export inquiries are for large amounts which may be diffi-
cult to provide. Japan 1B prominent as B. potential buyer; some
reports say inquiries from this source last week were as large
as 5,000 to 7,000 tone. Estimates put Japanese purchases in
this country in October as high as 20,000 tons. Exports of
copper to England are now out of the question because of e wide
discrepancy between the officially fixed price of approximately
9 cente per pound in England and the price of 12.50 for export
from the United States.
Meanwhile domestic copper producers are rapidly increasing
their output, rationing sales for the present on 8. daily basis.
September sales of 184,000 tons established a record, but ac-
cording to commentators only 75,000 tone were for immediate use.
Regraded Unclassified
76
Secretary Morgenthau - 7
Current business news
The New York Times index for the week ended October 14
gained an additional .8 point, reaching 103.2, which was the
highest since the week of October 2, 1937. The indices of
automobile production and lumber production showed rather
sharp declines, miscellaneous carloadings were off slightly,
while all other componente showed improvement.
Electric power production continues to establish new
all-time high records (see Chart 5), influenced by an expand-
Ing use of electric power in steel plants and other industries.
The rate of steel output last week climbed 1.7 pointe to
90.3 per cent of industry capacity, which compares with 8. 1937
high of 92.3 per cent reached during the spring seasonal rise
in April of that year. Because of 8. recent increase in capac-
ity, the industry 1s actually turning out more steel tonnage
than at any time since 1929. The main bottleneck in preventing
an increase to full capacity 18 a lack of sufficient pig iron,
but this 1s being gradually overcome as more furnaces are blown
in. Lack of coke for making pig iron is being remedied by
pressing into service large numbers of long-idle beehive ovens,
of which 4,000 are now in operation, and by importing coke from
Canada for the first time on record.
Our weekly index of new orders (see Chart 6) has declined
slightly, despite an upturn in steel orders, because of a
further decline in textile orders and a. slight downturn in
orders for products other than steel and textiles.
Regraded Unclassified
FREIGHT CAR LOADINGS
CARS
THOUSANDS
Total
900
'37
800
700
'39
600
500
'38
Am. Ry. Assn.
400
JAN. MAR. MAY JULY SEPT. NOV.
Chart
1277 1
Office of the Secretary of the Treasury
Division of Rasearch and Statistics
C-233 Regraded Uncla
NET FOREIGN TRANSACTIONS AND STOCK PRICES
Net Purchases ( (*), Net Sales T-1
Daily Average by Weeks
Daily
1930
1936
1940
13,6
SEPTEMBER
DETORER
NOV.
14h,
ass,
MAY
JULY
SERT. NOV.
JANG
IS 23 su 7 14. 21 «
DOLLARS
DOLLARS
Industrial Stock Prices
Dow-Jones
160
160
150
150
140
140
130
130
120
120
110
110
16 23 30 7 14 21 28
SEPT. NOV, JAN. MAR. MAY JULY SEPT. NOV. JAN.
DOLLARS
DOLLARS
MILLIONS
BILLIONS
United Kingdom
2
2
o
o
-2
-2
T
1
France
o
o
-2
-2
Netherlands
o
0
-2
Beltserland
0
0
L
&
Canada
o
o
-2
-2
SEPT.
§
JM.
il
MAY
JULY
SERT.
NOV.
JAN.
IS 23 30 7 14 21 28
1938
1939
1940
SEPTEMBER
OCTOBER
Γ serve
1938
Regraded Unclassified
78
279
INDEX OF CONFIDENCE* AND BUSINESS ACTIVITY
Chart 3
CONFIDENTIAL
1933
1934
1935
1936
1937
1938
1939
PER CENT
RATIO
(PER CENT)
Monthly
120
75
110
70
100
65
90
60
INDEX OF CONFIDENCE
80
55
70
50
INDUSTRIAL PRODUCTION, F.R.B.
1923-125 - 100, ADJ.
60
45
50
40
1933
1934
1935
1936
1937
1938
1939
1937
1938
1939
PER CENT
RATIO
(PER CENT)
Weekly
110
70
100
65
BUSINESS ACTIVITY, N.Y. TIMES
EST. NORMAL - 100, ADJ.
90
60
80
55
INDEX of CONFIDENCE
70
50
60
45
J
F
M
A
M
J
J
A
$
o
M
D
J
F
E
A
M
J
J
A
$
o
BE
D
J
F
M
A
M
J
J
A
5
o
M
D
1938
1939
1937
. RATIO or VIELD ON MOODY'S AAA BONDS TO YIELD ON BAA BONDS,
Office of the Secretary of the Treasury
C - 264
Date of - end -
2E0
Chart 4.
CONFIDENTIAL
COMMERCIAL LOANS AND SENSITIVE INDUSTRIAL MATERIALS PRICES
1937
J
M
M
J
$
N
1938
J
M
1939
M
J
S
N
J
M
M
DOLLARS
5
N
PER
BILLIONS
(LOANS)
CENT
(PRICES)
5.4
180
5.2
170
5.0
160
COMMERCIAL LOANS
WEEKLY REPORTING MEMBER BANKS
BILLIONS OF DOLLARS
4.8
150
4.6
140
4.4
130
4.2
120
4.0
110
3.8
100
3.6
90
SENSITIVE INDUSTRIAL MATERIALS
1936 = 100
3.4
80
3.2
70
J
M
M
J
$
N
J
M
M
J
5
N
J
M
M
J
5
N
1937
1938
1939
Office of the Secretary of the Treasury
Division of Research and Statistics
C 283
ELECTRIC POWER PRODUCTION
KW. HRS.
BILLIONS
39
2.4
2.3
37
2.2
2.1
2.0
1.9
38
1.8
Edison Elec. Inst.
1.7
JAN.
MAR.
MAY
JULY
SEPT.
NOV.
Chart 5
Office of the Secretary of the Treasury
Division of Research and Statistics
C-233
281
Regraded Unclassif
282
(last 6
(tegntial
INDICES OF NEW ORDERS
Combined Index of New Orders end Selected Components
1938
1939
1940
A
M
J
J
A
$
o
NE
a
J
,
M
A
M
J
J
A
o
#
D
J
,
M
PERCENTAGE
PERCENTAGE
POINTS
POINTS
160
160
150
150
140
140
130
130
120
120
TOTAL (COMSINED INDEX)
1936 . 100
110
110
100
100
90
90
BO
BO
70
70
60
60
TOTAL EXCLUDING STEEL AND TEXTILES
50
50
40
40
STEEL ORDERS
30
30
20
20
10
10
TEXTILE ORDERS
o
o
A
M
D
J
F
.
A
M
J
J
A
$
o
.
D
J
F
.
J
J
-
A
1
o
.
1940
1938
1939
I as a
No of the Secretary of the Treasury
- of - - -
83
October 23, 1939.
MEMORANDUM
TO: Secretary Morgenthau
FROM: Mr. Gaston
I think you may be interested in glancing over
the attached photostats and explanatory letter to
Captain Nixon of Naval Intelligence. As a result of
our conversation with Captain Nixon we relinquished
this particular investigation to him.
Elmer Irey and Chief Wilson are anxious to know
whether they should go further with the other investi-
gation you committed to then. Wilson has some ideas.
The report from Boston is a blank and they have not
heard from Chicago.
Regraded Unclassified
284
October 23, 1939.
TO: Secretary Morgenthau
FROM: M. Gaston
I think you may be interested in glancing over
the attached photostats and explanatory letter to
Captain Nixon of Neval Intelligence. As a result of
our conversation with Captain Nixon we relinquished
this particular investigation to hime
Elmer Trey and Chief Wilson are anxious to know
whether they should go further with the other investi-
gation you committed to them. Wilson has some ideas.
the report from Boston is a blank and they have not
heard from Chicago.
HEG/mah
284A
October 23, 1939.
Prench purchases in the United States.
Since October 16, the French missions have placed to date the
following orders, subject to a contingent clause in case the arms
should not be lifted.
I. CONTRACTS SIGNED,
1.- ATIONAL ACME CO., Cleveland, Ohio,
75 automatic turning Iathes. Gridley
910,515.00
2.- BROWN & SHARPE MFO.CO., Providence R.I.
020 machine tools
2,572,735.00
3,- CINCINNATI MILLING MACHINE & CINCINNATI CRINDERS INC.,
Cincinnati, Ohio.
56 machine tools
374,480.00
4.- Prefe BLISS & CO., Brooklyn, N.Y.
100 torpedoes
1,800,000.00
D.. STUDEBAKER CORPORATION, South Bend, Indians.
2.000 trucks and spare parts
3,540,600.00
6.- WRIGHT AERONAUTICAL CORPORATION.
455 motors, double speed
4,829,300.00
7.- UNITED AIRCRAFT CORPORATION.
Pratt & Whitney Propellers
5,890,703.35
II. CONTRACTS TO BE SIGNED.
DOUGLAS : 100 motors DB7, motor wright.
Regraded Unclassified
TREASURY DEPARTMENT
185
INTER OFFICE COMMUNICATION
DATE October 23, 1939.
TO
Secretary Morgenthau
FROM
Mr. Haas 9014
At the meeting Mr. Murphy gave you an "off-the-cuff"
estimate of 100 28/32 as the probable selling price of a
1 percent Treasury note due March 15, 1944. Upon a more
careful examination we think that this figure is probably too
conservative and feel that the estimate should be revised to
101 1/32.
TREASURY DEPARTMENT
86
INTER OFFICE COMMUNICATION
DATE October 23, 1939
TO
Secretary Morgenthan
FROM 1. B. Hadley
TREASURY NOTES
Maturity
Compon
Tield
Market Price
Premium
3 yrs. 10-1/2 mos,
7/8%
0.65
100.26
26/32nds
(Sept. 15, 1943)
15
0.65
101.11
1 pt. 11/32
1-1/8%
0.65
101.25
1 pt. 25/32
4 yrs. 5 mos.
7/8%
0.75
100.17
17/32nda
(March 15, 1944)
1%
0.76
101.
1 point
1-1/8%
0.75
101.20
1 pt. 20/32
*4 yrs. 10-1/2 mos.
1%
0.85
100.23
23/32nds
(Sept. 15, 1944)
0.90
100.15
15/32nde
1-1/8%
0.85
101.11
1 pt. 11/32
0.90
101.3
1 pt. 3/32
1-1/4%
0.85
101.29
1 pt. 29/32
0.90
101.22
1 pt. 22/32
. Note:
An interest adjustment on a 1% note would add only 3/64ths to the
"rights" value on an exchange.
Double interest, 1. e. giving both 1% and 1-3/8% through December 15
would add about 5/32nds to the "rights" value.
Regraded Unclassified
TREASURY DEPARTMENT
187
INTER OFFICE COMMUNICATION
DATE October 23, 1939
TO
Mr. White
FROM
Mr. Eesse
Subject: Percentage change in exchange rates, August 24 to October 21, 1939
Percentage
Percentage
Change
Change
leitish Emire:
Other Countries (Cont'd.):
Kingdom
- 14.3
Sweden
- .6
of South Africa
- 14.5
Switzerland
- .5
Asimlia
- 14.4
Poland
Settlements
- 14.3
Germany
.
Yugoslevia
-
2' Zenlnnd
- 14.3
Tritish India
- 13.4
Quatomala
-
Dong Long
- 11.9
Venezuela
-
Critic
- 10.4
Chile, Official
+ .03
Chile, Export
-
Ulhor Countries:
Colombia
+ .1
Groece
- 15.6
Brazil, Official
-
Dolivin
- 14.3
Trazil, Free
+ .8
Partugal
- 14.4
Argentina, Free
+ 1.1
Trance
- 14.1
Perd
+ 1.3
Usean
- 13.7
Imminia
+ 2.1
Hungary
- 8.9
Cuba
+ 2.5
Finland
- 8.2
Chinn
+ 7.4
Denmark
Uruguny, Controlled
.
- 7.7
Spnin
- 7.5
Uragony, Uncontrolled
+ 9.3
Inly
- 4.1
Mexico
+ 18.7
Ecundor
- 3.6
Norway
- 3.5
Bulgaria
- 2.0
Motherlands
- 1.3
Belgium
1 is
(*) - No rate quoted.
(-) - Indicates no change.
Source: Noon buying rates of New York Federal Reserve Bank, when available.
Otherwise closing rates quoted in Journal of Comerce are used.
88
PAP
GRAY
PARIS
Dated October 23, 1939
Rec'd 8 p.m.
Secretary of State
Washington
2550, October 23, 5 p.m.
FOR THE TREASURY.
The securities market was strong today with industrial
shares advancing from 2% to 5%. Rentes were up from 70
centimes to 1.30.
The Journal Official publishes private saving banks
withdrawals during the period September 16 - 30 at 735,000,000
francs with deposits at 92,000,000. This represents a alight
improvement over the preceding fortnight (our telegram No.
2291, October 3, 5 p.m.) and the Paris deposit and with-
drawal figures for the period ending October 14 as reported
in our telegram No. 2513, October 18, 6 p.m. indicate a more
serious trend for the current month.
It is reported that as forecast Swiss banks have taken
firm (?) Treasury notes of one, two, and three year maturity
from the
in the amount of 200,000,000 Swiss francs at par bearing
interest rates of 21%, 31% and 37% respectively. As indicated
in our telegram No. 2499, October 17, 6 p.m. the proceeds
are
Regraded Unclassified
289
PAP -2- 2550, October 23, 5 p.m. from Paris
are to cover the general mobilization costs for the coming
months.
The French Treasury statement for September has still
not appeared in the Journal Officiel and Couve de Murville
tells us that its publication will be delayed "a few days"
more.
BULLITT
EMB NPL
J
PERI
is
290
AO
GRAY
London
Dated October 23, 1939
Rec'd 2:56 p.m.
Secretary of State
Washington
2130, October 23, 7 p.m.
FOR TREASURY FROM BUTTERWORTH.
1. The confidential information supplied in your
1244 of October 18 was for a responsible official of
the Ministry of Economic Warfare who in turn states in
confidence that his computations to date indicate that
Germany possesses about 175 million dollars of gold and
about 75 million dollars made up of scattered foreign
balances and some readily marketable securities. The
above are admittedly estimates but have been checked as
carefully as possible. An attempt is being made to
ascertain the available direct investments.
Today's FINANCIAL NEWS contains the purported text
of the German-Estonian agreement for the repatriation
of the German minority and Einzig draws the conclusion
that this constitutes a method of Germany securing
foreign Exchange and that between 10 million pounds
and 20 million pounds will bE obtained from Estonia
and that if the same policy 1s applied to the other
Baltic
291
- 2 - #2130, October 23, 7 p.m. from London
Baltic states between 80 million pounds and 100 million
could be acquired. "If the German Government was suc-
cessful in persuading Italy, Denmark, Hungary, Rumania
and Yugoslavia to agree to similar measures the total
assets controlled by the various German trusts would
reach something of the order of one hundred (*) pound
starling provided all German minorities were resettled."
This 1s, of course, nonsense but no doubt the kind of
nonsense that will bE republished - because there is no
possibility of the requisite net increase in production
and exports from these countries within a measurable
length of time. In the CASE of Italy, a reliable but
unofficial source states that some 80 thousand persons
will probably bE moved from Italy to Germany in accordance
with the recent German-Italian agreement and that the
debit item created in the (?) will be between 500 and
1000 million lira, that this will in the main be a book-
keeping item which Italy will SET off against the sums
due her nationals arising out of the German acquisition
of Austria, Czechoslovakia and Poland.
2. All the officially fixed Exchange rates have
remained unchanged throughout the pust week with the
EXCEPTION of the belga which was quoted 23.80-24 on
Wednesday, 23.65-90 on Thursday and returned on Friday
to
292
- 3 - #2130, October 23, 7 p.m. from London
to its Wednesday quotation where it remained on Saturday;
today's rate is 23.75-90.
KENNEDY
KLP
(*) Apparent Omission
GIVEN
RPO1 IS
93
NE VISANCING
October 23, 1939.
10:00 a.m.
Present:
Mr. Hans
Mr. Murphy
Mr. Riefler
Mr. Hanes
Mr. Bell
Mr. Hadley
H.W.Jr:
Dan, what is the money picture? I see our balance
is one million one hundred sixteen.
Bell:
That is right.
(Discussion off the record)
R.V.Jr:
Well now, Dan, 11 tomorrow I should refund 526
million dollars worth of December notes and if
I should next sell 250 million dollars of RFC
notes, and I would like to do it Thursday or Friday
of this week, and then 1f the following week I
should raise 100 million dollars for U. S. Housing,
and 1f we should sell 500 million dollars worth of
notes on the 15th of December to raise our cash,
where would that leave us? How would we be sitting
from now until the 15th of March?
Bell:
Where would you start the bills?
H.M.Jr:
Let's say we'd sell 200 million in stock.
Bell:
I have got into this picture 450 million dollars
in bills, 250 million dollars in RFC and 100 million
dollars in Housing, with no other cash up to the end
of the year, I mean no Treasury cash.
H.M.Jr:
Well, let's say we'd sell 200 million dollars worth
of bills and stop.
Bell:
Yes.
B.M.Jr:
And raise 500 million dollars of new cash, five-year
money, on the 15th of December. Do a little adding
and subtracting. Where would we be on the 15th of
Bell:
December?
H.M.Jr:
of March. Well, December
Bell:
We would go into March
294
- 2 -
H.M.Jr:
Ahead of tax receipts. Don't figure the tax
receipts.
Bell:
We would go into March with a little less than a
million and a half dollars. I'd figured a million
and it. 230 and you add 250 million extra money into
H.M.Jr:
Only 200 million worth of bills.
Bell:
No, I got 450 and 200 million - I am adding 500,
see?
H.M.Jr:
But we don't figure 450,
Bell:
I am taking 250 out of this picture and adding 500
back.
H.M.Jr:
And you figure between now and the 15th of March
these 200 million dollars worth of bills would run
off?
Bell:
Well, then your balance would come back down to
about a billion and a quarter.
Hanes:
Is that including the 500 million?
Bell:
Yes, sir.
H.M.Jr:
But I mean, 1f we keep on a 100 million a week from
now until the 15th of March, let the 200 million
extra run off, we would have....
Bell:
....about a billion and a quarter going into March.
H.M.Jr:
That would be very nice.
Bell:
Now, in that picture I have got another 150 million
dollars for U. S. Housing in February.
H.M.Jr:
Yes.
Bell:
That is about the time you want to sell.
H.M.Jr:
What is the matter with that picture?
Bell:
It is all right.
Riefler:
Why not keep up the bills?
_35
- 3
That would come under the hoad of politic. I
would say It would be not politic for mo to have
more than a billion and & quarter balance.
Let the 500 70 in December,
I would like to sell 500 million 1f we could get
it on a five-year basis, then 20 back to a hundred
million and when we raise five or six hundred million
b7 billo again - we are always going under the
assumption we can sell a five-year note on the 16th
of Décember. If we let the bills run off again, we
are back again to & hundred million and as time comes
and we have got to raise several hundred million in
bills, we can do it. We are not makin any commit-
ments today of any kind. Today, 1 announce we will
sell another 50 million dollars worth of bills next
Monday, 30 everybody has not - woll, we have got
today and Tuesday and maybe (ednesday to think about
whether we are going to sell Thursday or Friday that
RFC issue, but I am thinking out loud so that every-
body can think and I just wanted to see where we
would be 10 we did it by "Plan A."
463:
Where does the Harch refunding fit into that, after
the first of the year?
1,0 would do It just the first time we got & chance
to sell ten or twelve-year bonds. That 1s the way
I feel today. Just as soon as the thing looks as
though the bond thing had leveled off and the market
would take B. ten or fifteen-year bond at EL reasonable
rate, I would let her go. Then they would come out
and say with the exception of 500 million cash in
December, the Treasury 18 out of the market until the
15th of March, with the exception of this Housing
issue. That ought to be good news.
ell:
We have a little issue here, Mr. Secretary, for PVA.
That could be kept out of the picture almost in-
definitely. It is only 60 million. I have left it
out of here.
Henry, will you share your wisdom with me?
arphy:
I have no dissent.
296
- 4 -
H.M.Jr:
George?
Haas:
I have none. I agree with you.
H.M.Jr:
Hadley?
Hadley:
Sounds satisfactory.
H.M.Jr:
Dan?
Bell:
I think it is a good program. I question a little
rushing the market this week on RFC.
Haas:
It isn't firm, I mean he is just thinking.
H.M.Jr:
Oh no, I am just mapping it out. It doesn't rush
me any to do it Friday.
Hanes:
You can change as late as Thursday if it doesn't
look good at that time. It looks pretty good to
me right now.
Bell:
Well, 1f we did it Thursday it might be a good thing
for the market.
Hanes:
Yes.
H.M.Jr:
Well, this is all tentative. I want to get it in my
'noodle' - I have got it there now. If that is all
right, then let's talk about tomorrow, what we are
going to do tomorrow. Right, Johnny?
Hanes:
Right.
H.M.Jr:
I don't kick myself. It looks lovely today, but these
storms come up 80 quickly.
What do you say, Dan, what should we do on this 526
million? Has Mr. Hanes got a copy of this?
Hadley:
They are making up some more copies.
H.M.Jr:
I will give him mine in a minute.
(Mr. Haas hands copy of memo to Mr. Hanes)
Is there agreement amongst us that one and an eighth
will have a market price between 11/32nds and 3/32nds?
297
- 5 -
Hadley:
That ties in - New York has exactly the same answer;
1,3 to 11.
11.11.Jr:
How is the Haas Division?
Heas:
I don't know whether we agree with that or not. On
19. the close of Saturday on one percent we figured par
Pell:
Is that EL minimum or B maximum?
Hans:
Well, I don't think you can - I think it is misleading
Bell:
That is all right, that is between what Hadley had,
15 to 23.
Murphy:
It is the most probable figure.
Reas:
That is all right.
H.M.Jr:
What have you got on one and an eighth?
Hadley:
We had 101,9.
H.M.Jr:
He has got from 3 to 11.
Emas:
All right, we can't quarrel with that.
E.M.Jr:
He would have a mean at 7.
Bell:
That is all right.
5.F.Jr:
Does anybody here think they ought to do B. one percent?
dell:
That is just E. little thin.
Haan:
The rights are over....
P.M.Jr:
Don't cloud the issue, George, I hate to hear -
seriously, forget what the rights are. I don't
want to make the market. If you tell them,
whisper it to me.
Hass:
I thought you knew. I know approximately what they
are.
Hadley:
I think that B. one percent is a little thin on the
basis, not only of the price but the fact that we
298
- 6 -
just put out a two-year issue for one percent and
here we are adding three years on at the same
coupon, even though it 1s a different type of issue.
The fact that we make it one and an eighth would,
aside from the price, decrease the attractiveness.
I believe it is & little thin.
H.M.Jr:
You don't want to tell us, Dan, what the instructions
were that went out? It would guide me in my think-
ing. I don't get all through and Dan says, "Well,
that is what I wired last Saturday."
sell:
No, to tell you the truth these instructions have
been out since we first considered this matter of
EL five-year note. September 15th, 1944.
E.M.Jr:
What were they?
Bell:
We didn't put out any rate in it. We will just have
to amend that form.
H.M.Jr:
This is about B. quarter better, isn't it?
Bell:
Yes.
M.M.Jr:
Supposing I call up Professor Recles and see what
he thinks.
Bell:
If you gave double interest, Mr. Secretary, you would
add 5/32nds to the holders. That wouldn't make any
difference in the price of your new issues.
H.M.Jr:
(On phone) Hello. (Telephone conversation with Ronald
Ransom follows:)
Regraded Unclassified
299
October 23, 1939
10:19 a.z.
HMr:
Good morning.
Ronald
Ransom:
Hello, Mr. Secretary. How are you today?
HWr:
I'm fine. How are you?
is
I'm fine. I hope you are really feeling better
these days.
HWr:
Yes, I am.
R:
That's good.
SWr:
Ronald, we are just in the midst of making a price
on this refunding for tomorrow.
R:
Yes.
MJr:
Have you fellows given it any thought?
R:
I've thought -- we discussed it pretty fully the
other day before George and Marriner went over to
Bee you.
EWr:
Yeah.
Did they -- did they discuss price with you?
MWr:
Yes, they did.
R:
Yes.
HKJr:
And they -- we were talking about & September 15th
44
R
Yes.
HAJr:
and they at that time said 1 1/8.
of
That's right. That's -- that's my recollection of
what our technicians told us would be the price
which they thought had 2. margin of safety
- 2 -
300
HMJr:
Well, the foeling here is mutual.
R:
Well, of course, Marriner being e. true Scotch and
always wanting to get things as cheaply as possible,
he thought maybe that price could be shaded a little
bit, but I got the impression from listening to our
own technicians that they thought it took about that
to give it that assurance that you -- you would of
course want it to have.
HMJr:
Well
R;
Speaking for myself alone I'm not, as you know,
serving on the executive committee when Marriner
18 in town. I just give you my own opinion for
what it might be worth. I should think that price
would be just about right.
HMJr:
Well, he isn't in that's why I've asked for you.
R:
Yes. That's my own opinion about it and while I
think there was 8. little feeling that -- on the
part of my associates over here that it might be
done & little cheaper, I don't think that it was
impressive enough to influence my own thinking
about it, and relying on what the tecnical people
told me it would seem to me that that was about
right.
HMJr:
Well, Ronald, let's be
R:
Isn't that about your feeling?
HMJr:
Yeah. Yeah.
R:
And I hope you do get -- get it behind you this
week.
HMJr:
Well, we're planning to do it tomorrow morning.
R:
Fine.
HMJr:
And then, if everything goes well, Thursday or
Friday we may --we're thinking now of selling
250 or 300 million dollars' worth of three-year
notes for the R.F.C.
R:
Yes.
- 3 -
301
HXJr:
So you boys will have to be good all week.
R:
We'll have to sharpen up out pencils and behave
ourselves.
Midri
That's the idea.
R:
Now, I'd like to tell you if you've got just A
moment, what my own feeling 1s about our own posi-
tion regarding any sales which we might make.
HVJr:
Yeah.
R:
I think our own position would be strengthened and
the market would be strengthened
HWr:
Yesh.
R:
if the public interested in the government
bond market thought that we did sell when the
opportunity presented itself.
MJr:
Yeah.
3:
Now we've abandoned completely the 1dea of E fixed
portfolio.
ISSUe:
Yeah.
R:
It might have hed some advantages at times and I
had thought it did have. I think perhaps there you
and I might have had a slight difference of opinion.
H&Jr:
Well I never was for a fixed portfolio.
R:
No, it -- it had some merit but it -- merit
over the dam and that's all right. Now,
unless we operate both ways there will be a growing
impression that it's fixed on the up side but -- the
policy 18 fixed on the up side but there's & complete
rigidity on the down side, which I think yould be
very bad psychologically for the market. But of course,
we can't be stepping in and doing something when you
boys are selling over there unlese the situation was
very peculiar end you would suggest to us that you
thought it would be helpful. Such a situation might
arise but I don't think it exists right now.
HNJr:
Mo.
Regraded Unclassified
302
- 4
R:
But I do hope we will find an opportunity to sell
some of the securities we've bought because we
may very well find ourselves later on in a position
where we want to buy a lot more.
MiJr:
Yeah. Well
R:
So much for that.
HWr:
I understand.
R:
(Laughs) All right.
MMr:
I just want to say, let's leave it this way - 1f I
don't hear from the Federal Reserve Board, or
rather Danny Bell
B:
Yes.
M.Jr:
between now and twelve o'clock
R:
Yes.
IMJr:
we'll take it that you fellows are in sympathy
with our offering tomorrow, & September 15th, 444 at
one and an eighth.
R:
All right, sir. You'll hear from us by twelve if I
develop any difference of opinion.
HWp:
And if the thing continues the way it is for the
rest of. the week, why we are seriously thinking on
Friday -- Friday or Thursday -- Thursday or Friday
of offering 250 to 300 million of R.F.C. three-year
notes.
R:
Yes. You hadn't started figuring on a price yet.
HWr:
Well, the boys have done a little preliminary and
it would -- it looks like -- it looks like about --
oh, let me see, one and -- I'd say somewhere between
one and one and an eighth.
a:
I see. One and one and an eighth. Thanks very much.
EWr:
Between one and one and an eighth. Somewhere in
that neighborhood.
- 5 -
303
R:
All right. I'll check up with my associates right
away.
HMr:
Now if we don't hear -- Dan doesn't hear from you
by noon
2
Yes.
HMr:
we -- we take it that everything is lovely.
R:
All right. Thanks, Mr. Secretary.
IDWr:
Thank you.
304
- 7 -
Bell:
Are you going to talk to New York?
H.S.Jr:
Yes. I think we are all right on this. I haven't
had a chance to say anything to the President, but
I think you could get out....
Bell:
a letter for him before you go to lunch?
H.M.Jr:
And I think you could send a telegram to tell them
to put in one and an eighth. We will give them a
release on it right after lunch. Don't you think
so, John?
Hanes:
Right.
Bell:
We ought to charge a little premium on this. It
is B. little rich.
H.M.Jr:
No.
Bell:
Twenty-five cents wouldn't hurt them.
H.M.Jr:
Are you serious?
Bell:
I thought we might bring it down & quarter of G.
point, down to par or EL little lower.
H.M.Jr:
(on phone) Hello. (Telephone conversation with
George Harrison follows:)
305
October 23, 1939
10:27 8.m.
HMJr:
Hello.
Operator:
Mr. Harrison. Go ahead.
George
Harrison:
Hello.
HYr:
George
a
Good morning, Henry.
KYJr:
Good morning. We're sitting here - you're on the
loudspeaker and serious conclave on tomorrow's
refunding, and I Just wanted to know whether you
had changed any since Eccles told me how you and
he felt.
H:
No, I haven't changed at all, Henry.
TWr:
Yeah.
I haven't talked with Sproul or Rouse this morning
though.
Wr:
Yeah.
3:
And I'd rather have a last-minute session with them
before I say anything BO formal at the loudspeaker.
MJr:
Right. Well, after you've had your conclave with
them, let's leave it this way -- if -- if we don't
hear from you between now and twelve o'clock
H:
Yes.
HMJr:
we take it that you fellows feel one and an
eighth for September 15th 44.
H:
That's right.
HMJr:
And if you do feel differently would you call Dan
Bell, please?
H:
I shall be glad to do BO.
HIWr:
Now
- 2 -
306
And I hope you'll be able to do it, but I see no
reason why you shouldn't.
SWr:
Ah -- Danny thought we might oven charge the fellows
twenty-five cents or a cent and a quarter; -- too rich.
(Laughs) What's he going to do? Is he going to
get sharp now?
No:
I don't know. He Just said that just EL second
before I picked up the
I see.
HWr:
-- the receiver.
Well let me talk to the boys here who have no doubt
seen the dealers this morning whom I haven't seen.
Ther:
Well now, the other thing is this, we're seriously
considering Thursday or Friday offering either 250
or 300 million of three-year R.F.C. notes.
H;
Yes.
Think that one over.
Three-year R.F. 0. on Thursday or Friday.
MJr:
Yeah.
That isn't too close?
Oh, I don't think 80. You fellows have got to ad-
just yourselves to what's going on abroad.
(Laughs)
Hilder:
(Laughs)
I get the point. It's not fair to throw an argument --
my own argument back in my face.
HMr:
Well you know I -- you've got some that I haven't.
Yeah, well, I think that this
Oh, yes, I know. But we like to get it between
bombings.
307
- 3 -
H:
Yeah, Well I think it's entirely possible because
they are two different kinds of issue anyway.
HMST:
Yeah.
H:
One's a new.
EWr:
That's right.
Really.
HWr:
Yeah.
And we had thought that you would wait probably B
week between the two.
EWr:
oh, no.
But I'll -- I'll chat that over with Sproul and
Rouse too.
HNr:
Well, we would -- that I don't have to have an
answer by twelve o'clock.
of
No, I understand.
TJr:
I can talk to you about that again tomorrow.
All right, well if you hear nothing from ne within
the next hour, it will mean definitely that we
feel the same.
Ther:
Wait a minute. (Brief pause while :01, Jr talks to
one of men in his office.)
Bell spoke to them about an idea I raised Saturday -
Just raised the question about selling extra notes
to raise cash on this same note, but that's out.
Bi
Well, I hope it 1s.
-Mr:
That's out.
H:
Yes.
MJr:
That's out.
in
First-rate.
HMJr:
O. K.
B:
Goodbye.
308
- 8 -
H.M.Jr:
Now, what you do is put in one and an eighth. At
five minutes of 1:00, be here with B. letter for
me to give the President to sign and then I will
come back.
Bell:
At 2:30, we can give them the final one.
H.M.Jr:
Yes, and then following your plan which was so
successful last week, I will tell them at 4:15.
Fell:
We will make this B. release.
H.M.Jr:
But tell the men we will release it as of 4:30,
Eastern Standard Time. It gives the men in the
Street a little chance to get it out. I thought
it went over all right last week. It gives the
fellows & chance to write a letter to their cus-
tomers and makes them feel good. The market is
closed. It just gives them a chance to get them
together. I think it is a kind of courteous thing
to do.
Hanes:
The mechanics are all settled. All you have got
to do is just amend to get the rate.
H.M.Jr:
Yes, but I mean in the Street and the Government
bond business, it gives them a chance to write a
letter to their customers, which they will get in
the mail the next morning.
309
E PINANCING
October 23, 1939.
Mr. Haas
11:15 a.m.
Present:
Mr. Murphy
Mr. Bell"
Mr. Hanes
Mr. Hadley
Mr. Riefler
"TO THE SECRETARY:
"Governor Harrison just called me and gave
me their estimates of what the proposed
1-1/8% September, 1944, note would sell for
in the market. His prices agreed with Had-
ley's. He said he thought it was too rich
and that 8 1% was entirely too thin. He
18 not in favor of a premium on the 1-1/8%
but feels that B. 1% March, 1944, would be
just about right for this market.
"They are not opposed to your issuing the
1-1/8% September, 1944, note, but want you to
know that the New York Bank feels it 1s entirely
too rich.
/8/ DWB"
R.M.Jr:
I think George is right. March 15th is four years
and five months. How does that figure out for the
Government if we did 1t in four years and five
months at one percent 8.8 against four years and
ten and B. half months at 1 and 1/8th? What is the
difference in the coat to the Government, covering
both periods, I mean? How much interest would we
have to pay, four years, ten and B helf months at
1 and 1/8th? I would like to know how much interest,
how much Interest we would pay at four years and five
months at one percent. Take your time and get it
right, boys.
Bell:
You are paying B. difference of $650,000 EL year.
H.M.Jr:
For the full period. You have got to multiply it
out. Between four years and five months at one per-
cent and the other is four years, ten and a half
at 1 and 1/8th.
Hadley:
I get B. little over 23 million on the four year,
five months at one percent. That 13 the total
interest payment for the issue, and the other is
- 2 -
about 26 million or 27 million, about three million
and three difference.
R.M.Jr:
Counting that you have to pay interest on that monthly
basis?
Mefler:
What would be the difference for the four years, five
and a half months between the two?
Ball:
About $2,400,000 for the four years, five and B. half
months, saving in interest. You could use that two
million 400 thousand.
Befler:
That is the saving you could refund in March, 1944,
at 1 and 1/8th?
Murphy:
Comparing the four and a half and the five year bond
and assuming that you have to pay an eighth more
over the whole period, I get two and D. quarter as the
rate you would have to pay during the term on a
six months period in order to break even, 1.noring
compound interest.
What do you fellows think?
(iefler:
It would probably be a roal saving.
E.M.Jr:
Which, the one percent?
Riefler:
Yes.
Hadley:
I think the March, 144, is a good date and gives you
a nice coupon, but 1t might be Et date to have open
for the billion four that you have coming due in
March.
C.V.Jr:
I wouldn't swap a billion three and B. billion four
in at one date.
Sudley:
Bit you might went that date open.
b.h.Jr:
But are faced with a picture which Marrison, being
8. good you friend, points out. You have got this peculiar
situation.
What is your reaction? Do you want to listen to the
other fellows talk?
311
October 23, 1939
11:25 a.m.
HMJr:
Hello.
Operator:
Mr. Harrison.
HMJr:
Hello.
0:
Go ahead.
HMJr:
Hello.
George
Harrison:
Hello, Henry.
HMJr:
Well I appreciate your note and your message very
much, George.
H:
Yes.
HMJr:
The only thing is I've let all my charts go so I'm
absolutely sunk.
H:
You've let all what go?
HMJr:
All my charts.
H:
(Laughs) Well, I tell you, Henry, I wanted to check
on the prices and did so as soon as I talked with you.
HMJr:
Yeah.
H:
And found that the premium on the four-year 101 at
1 1/8 was raised from 1 and 2/32nds to 11/32nds.
It appeared to me to be a little rich. One per cent
on that same issue would be too thin
HMJr:
Yeah.
H:
for these times. And the only issue that we
could find that we could price decently, and the
next longest one, would be the four-year 41 at one.
HMJr:
Yeah.
H:
Which would go from 1 and 2/32nds to 27/32nds, which
seems about right.
HMJr:
Yeah.
12
- 2 -
H:
And I didn't see enough advantage in the extra six
months to warrant your giving up the opportunity to
getting one that you could price well.
MIJr:
That's right,
That's about the way we both felt here.
War:
I see. Well, I'm impressed - one percent for four --
what 1s it, four and a half years?
It would be four years and 43 months.
Yes. It's awful good.
I think it makes B. lot of sense, really.
I think it does. I'm impressed.
Yes.
That's why I'm celling. Well I'll tell you what I'll
do, George.
Yes.
Mr:
Stand by, will you, and I'll cell up Chairman Ecoles
and listen.
Yes.
I'm listening -- I mean, I'm calling up Chairman
Ecoles.
Yes.
And after I've listened to him I'll call you back.
All right. First-rate.
Thank you.
313
- 3 -
Hanes:
Yes, I would like to.
H.M.Jr:
Shall we put George on here?
Hanes:
Yes.
H.M.Jr:
It kind of shook me.
Hanes:
It is upsetting.
Bell:
They are in conference also at the Board. Eccles
just called me and wanted to know if you had decided
to eliminate the cash about which I talked to him
on Saturday and he said he would call me back in a
few minutes.
H.M.Jr:
(On phone) Hello. (Telephone conversation with
George Harrison follows:)
14
- 4 -
Bunes:
It makes a lot of sense. Has 8. good deal of this
happened in the last two days?
Bell:
It hasn't changed since Friday, the market hasn't.
Radley:
There has been more change in the area that covers
that market than there has in the September one.
The March isn't
Endley:
I don't think so, because they have been trying to
buy into that area.
I checked these things. I just had Mr. Moffett here.
We are just sitting on a volcano. Nobody knows.
Everything right now looks lovely but I just want
to go on record that we are sitting on & volcano
and we just never know what that crazy man Vitler
Is coing to do next. I just wanted to make sure,
I would rather be criticized than have it 80. I
want everybody to be a thousand percent sure that
this March, 144, is enough cushioning. Have you
any doubts?
arphy:
I haven't made any attempt to measure the cushioning,
Mr. Secretary, I just took Mr. Harrison's word for
it.
Get busy. Don't take anybody's word for it. hat 13
what you are here for.
fler:
Because the market is expecting the other maturity
that they built up a. price here which gives a cushion,
it wouldn't be there if you put it in.
Endley:
I think there in B. better cushion on this one because
there wouldn't be outstanding issues.
Mirphy:
We would get about par 28.
Vell:
That is pretty close.
What, lienry?
Emphy:
About par 28.
E.M.Jr:
You could always sweeten it a little and give these
boys their interest, 3/8tha at the ond, 1f you wanted
to.
Regraded Unclassified
315
- 5 -
Hadley:
Your interest adjustment would only make a 64th.
Bell:
You difference. would have to double up on it to make any
B.M.Jr:
I wouldn't be afráid of that, would you?
Hanes:
No, I wouldn't be afraid of that. As you said
before, I think you have got to bear in mind that
you are liable to run afoul of black spells here
any minute. Personally, I don't think you are
going to until the neutrality fight is over, but
that is guesswork.
H.M.Jr:
Would you be afraid of - the bottom is 28/32nds?
Hanes:
That is the least premium.
Murphy:
That is just about probable, I would say.
H.M.Jr:
George Harrison is all right, he always tells you
B. few things.
Hanes:
What was your statement 8.8 to the saving in interest?
Murphy:
The most significant figure that I have been able
to derive on the saving of interest is this, 1f by
shortening our maturity six months we save an eighth
in coupon over the whole book, that is equivalent to
24 percent interest during the six months we shorten
out, In other words, we do ourselves well If when
we put out the shorter note, it matures and we have
broken even.
H.M.Jr:
(On phone) Hello. (Telephone conversation with
Mr. Eccles follows:)
316
October 23, 1939
11:34 a.m.
HMJr:
Hello.
Operator:
Chairman Eccles.
HMJr:
Hello.
0:
Go ahead.
HMJr:
Hello.
Marriner
Ecoles:
Hello.
HMJr:
Good morning, Marriner.
E:
Good morning, Henry.
HMJr:
Marriner, we've been doing & little figuring here and
the wind has shifted & little bit and we thought --
pulling in our sails a little bit and we're talking
about March 144 at one percent.
E:
Well, that's -- that's -- I'm tickeled to death.
I -- that's what I was going to recommend anyway.
I -- we've just been discussing it here and I've
taken -- I've taken -- personally I've just been
telling how much we're going to pay for this extra
six months and it figures about 2 million 800
thousand dollars premium
HMJr:
That's right.
E:
that you're going to pay.
HMJr:
That's right.
E:
And there's just any justification -- it means that --
for that six months' period you're -- you're going
to pay about six percent interest.
HMJr:
No, the boys said we could afford to pay two and &
half percent.
E:
Well I think if -- I don't know, but I think that
extra
317
- 2 -
EWr:
Well, they said if we'd take the sevings and had to
pay two and E. helf percent on that six months
in
Yeah, which
TWr:
-- two and B. cuarter.
M
-- W ich 1a hardly conceivable.
Mr:
Two and a quarter Henry Murphy BAYS.
is
For B1X months. Well, I
HWr:
That If we Day two and B. cuarter on those six months
we'd break even.
in
Yeah. Well I'm -lad you've -- you're coming to
that conclusion because I -- I told Don on Saturday
in telking to him that personally I -- I felt that
we should change to a one percent and save that money.
I hadn't had E chance to talk to the other members
of the committee because they weren't -- this WAB
Saturday morning, but I've been -- in fact, I'm with
then now. We were just going over this thing ene we
hadn't taken e vote on it, but we were discussing
the advantage of the one percent and the one and 1/6th.
now
Midr:
Well, I think my crowd here 16 leaning/towards the
one percent and 44.
is
Just a minute, do you want the to find out just how
everybody feels here?
Yeah, please.
a
Just EL minute.
(Brief pause.)
H.Jr:
Hello.
is
Everybody feels that way -- Szymozak indicated that
he'd just as soon see the extra six months - the
one and 1/8th. He thought possibly he preferred
that. All the rest are in favor of the one, John
MoKee feels that this would be & good time to get
B. little new money. I don't think anybody else
feels that way.
- 3 -
-18
HMJr:
Well, Ronald Ransom told you what we're thinking
about doing on the R.F.C. the end of tije week.
E:
Yes, that's right; on Thursday. You think in lieu
of the R.F.C. financing Thursday that it would be
inadvisable to increase the note issue at this time.
HVJr:
Yes, because it's -- it wouldn't
is
Well I feel that way about it. I -- I feel
HMr:
Yes.
Et
personally that it would be B mistake to get
-- to get any new money but -- but John MoXee and
Natt Saymezek both think that nome new money --
this would be a good time to get some new money and
Mar:
Well
in
test the market out. I don't t'iln's it would be
& test of the market.
Well, we could test the warket with the R.F.C.
N
Yes.
Wr:
You see, the R.F.C. owes us e little over two hundred
and fifty million dollars.
is
And you're going to have to do that anyway soon, aren't
you?
HMJr:
Yeah.
is
Well, we -- you've got our view we -- we
SMJr:
Well, if you don't hear from ne again by twelve
o'clock you can put it down on your docket that it
will be one percent.
is
That's the view of the Board here. Of course, George
Harrison 1sn't down here and
MAJr:
I talked to George; he likes the one percent.
to:
He likes the one?
MJr:
Yeah.
- 4 -
319
E:
And what does he think about new money?
HMJr:
Well, he -- well, I don't want to talk for him; I
don't know.
is
Oh, you didn't -- you didn't put that up to him?
HMJr:
I don't think so. I -- I wouldn't want to say.
E:
Yes.
HMJr:
I may -- I think I told him we were considering
R.F.C.
E:
Yes, and did he express himself on that?
HMJr:
No.
E:
He didn't?
HMJr:
No expression.
E:
Yes. Well all right then, Henry. Thank you.
HMr:
Yeah. Thank you.
E:
Goodbye.
320
- 6 -
H.M.Jr:
Who isn't happy if We make it one percent?
Hanes:
It is all right.
1.V.Jr:
I think it is all right. Are you happy about it?
Hanes:
Yes, I think 1t is all right.
M.D.Jr:
All right?
Sanes:
O.K.
H.M.Jr:
George?
Fans:
Yes, I think SO.
Madley:
It is all right.
Fell:
Yes.
Henes:
Danny, you like that EL little better, don't you?
That seemed B. little rich to you before.
Ball:
I like it 8. little better because it 10 under the
rights. It is a little more of the rights, I think,
than we indicated. It is about six, 1sn't it?
Hadley:
It is anywhere from five to eight.
Bell:
But that isn't hitting what you call the right values
too much.
H.M.Jr:
The thing that sort of nailed it for me, your saying
it and Harrison confirming it, the underpinning on
the March, '44, 18 better than It is on the
Hadley:
It is in the tested area.
S.M.Jr:
That is what Hanes, I think, had in mind when he
asked how long had they been at that price.
Hanes:
That is right, exactly.
H.M.Jr:
Do you concur that the underpinning is better on
this?
Murphy:
We haven't these direct sources of information, but
I believe so.
Regraded Unclassified
321
- 7 -
Haas:
You can explain the underpinning anyway. That
price - on this other one, you have to use &
projection.
That is still true.
3611:
Your June, '44's, are selling at a discount.
Hadley:
They are at three-quarter percent now. It hann't
quite reached par yet.
H.M.Jr:
But you are not doing any projecting on your
estimates,
Madley:
No, you always have to project on & five-year note
because it is adding on to the list,
1.11.10:
Well, you can call me up in fifteen minutes and
somebody can say, "Sell 7/8ths."
322
TREASURY DEPARTMENT
WASHINGTON
October 23. 1939
TO THE SECRETARY:
Governor Harrison just called ne and gave
as their estimates of what the proposed 1-1/8%
September, 1944, note would sell for in the market.
His prices agreed with Hadley's. He said he thought
it vas too rich and that & 1% was entirely too thin.
He is not in favor of a premium on the 1-1/8% but
feels that a 1% March, 1944, would be just about
right for this market.
They are not opposed to your issuing the
1-1/8% September, 1944, note, but want you to know
that the New York Bank feels it is entirely too rich.
DWB
THE SECRETARY OF THE TREASURY
23
WASHINGTON
October 23, 1939.
MEMORANDUM FOR THE PRESIDENT:
Consideration has been given to the memorandums of Mr. Currie
and Admiral Spear, which accompanied your note of October 13, re-
garding the award recently made by the Navy Department to the Metal
and Ore Corporation for tungsten ore.
As suggested in Admiral Spear's memorandum, the competing bid
of the Wab Chang Trading Company must be adjusted, for purposes of
comparison, by the addition of duty. After this adjustment the
bids were:
From the Metal and Ore Corporation, for ore of
domestic origin, $25 per unit.
From the Wah Chang Trading Corporation, for ore
of foreign origin, $23.68 per unit.
The award to the Metal and Ore Corporation, for domestic ore,
notwithstanding the lower bid from the Wab Chang Company on foreign
ore, appears to have been regular and proper in the light of the
provisions of the so-called "Buy-American" Act.
The Metal and Ore Corporation is a substantial firm of good
standing and reputation. It is understood to be the exclusive sales
agent for the Nevada-Massachusetts Company referred to in Mr. Currie's
memorandum, but there is no evidence of any improper connection.
Regraded Unclassified
Regraded Unclassifie
October 23, 1939.
FOR THE PRESIDENT:
Consideration has been given to the memorendums of Mr. Currie
and Admiral Spear, which accompanied your note of October 15, No
garding the sward recently mde by the Navy Department to the Did
and Ore Corporation for tungsten ore.
15 suggested in Admiral 3pear's memorandum, the compating bid
of the Job Chang Trading Company must be adjusted, for purposes of
comparison, by the addition of cuty. After this adjustment the
bids wore:
Prom the Vetal and Ore Corporation, for ore of
domestic origin, #25 per unit.
Proz the Web Chang Trading Corporation, for are
of foreign origin, $23.68 per unit.
The award to the Netal and Cre Corporation, for domestic oze,
notwithstanding the lewer bid from the Vah Chang Company on foreign
ore, appears to have been regular and proper in the light of the
provisions of the so-sulled "Buy /merican" Act.
The Metal and Ore Corporation is & substantial firm of good
standing and repatation. It is understood to be the exclusive sales
agent for the Company referred to in Mr. Currie's
but there is no evidence of any improper connection.
HNG/mff
TREASURY DEPARTMENT
325
Washington
FOR INVITE RELEASE,
Press Service
Monday, October 23, 1939.
No. 19-15
Secretary of the Treasury Forgenthau announced today the offering
through the Federal Reserve banks, of 1 percent Treasury lotes of
Seried B-1944, in exchange for 1-3/5 percent Treasury Notes of Series
B-1939, naturing )ecember 15, 1930. Exchanges will be made par for par,
and accured interest on the notos exchanged will be paid to November 1,
1939. The offering of the new notes will be limited to the amount of
maturin. notes tendered and accepted in exchange therefor. Cash sub-
scriptions will not be received,
The Treasury Notes of Series B-1944, now offered only in exchange
for Treasury notes maturing December 15, 1939, will be dated l'ovember 1,
1939, are will bear interest from that date at the rate of 1 percent per
annum payable March 15 and September 15. The notes will mature March 15,
1944, and will not be subject to call for redemption before that date.
They will be issued only in bearer form with coupons attoched, in the
denominations of 100, 3500, 1,000, 15,000, 10,000 and 100,000.
The first coupon will he for the fractional period from November 1, 1939,
to Hero 15, 1940, and subsequent coupons will each cover one-half year's
interest.
The Treasury notes will be accorded the same exemptions from
taxation atl are accorded other issues of Trensury notes now outstanding.
These provisions are specifically not forth in the official circular TE-
leased tonny.
326
- 2 -
Subscriptions will be received at the Federal Reserve banks and
branches, and at the Treasury Department, Washington, and should be
accompanied by a like face Amount of 1-3/0 percent Treasury Notes of
Series n-1939, maturing December 15, 1939, with final coupon due December 15
attached. The notos will be accepted at par, and accrued interest on such
notes from June 15 to November 1, 1939, (about $5.22 per 1,000 face amount)
will be paid following their acceptance.
The right is reserved to close the books as to any or all
subscriptions at any time without notico, and, subject te the reservations
set forth in the official circular, All misseriptions will he ellotted in
full,
Treasury Notes of Serior R-1939, returing December 15, 1939, are
now outstan/ling in the anount of 526,232,500. The present offering
will be the only opportunity afforded the holders of those maturing notes
to exchange the for other Interent-bearing obligations at the "nited
States. my maturing notes not so exchanged at this time will be pàid
in cash when they nature.
The text of the official Today follows:
327
UNITED STATES OF AMERICA
1 PERCENT TREASURY HOTES OF SERIES B-1944
Dated and bearing interest from November 1, 1939
Due March 15, 1944
Interest payable March 15 and September 15
1939
TREASURY DEPARTMENT,
Department Circular No. 623
Office of the Secretary,
Washington, October 24, 1939,
Public Debt Service
I. OFFERING OF NOTES
1, The Secretary of the Treasury, pursuant to the authority of the Second
Liberty Bond Act, approved September 24, 1917, no amended, invites subscriptions,
at par, from the people of the United States for 1 percent notes of the United
States, designated Treasury Notes of Series B-1944, in payment of which only
Treasury Notes of Series B-1939, naturing December 15, 1939, may be tendered,
The amount of the offering under this circular will be limited to the amount of
Treasury Notes of Series D-1939 tendered and accepted.
II, DESCRIPTION OF NOTES
1, The notes will be dated November 1, 1939, and will bear interest from
that date at the rate of 1 percent per annum, payable on a semiannual basis on
March 15 and September 15 in each year until the principal amount becomes payable.
They will nature March 15, 1944, and will not be subject to call for redemption
prior to maturity,
2. The notes shall be exempt, both as to principal and interest, from all
taxation (except estate or inheritance taxes, or gift taxes) now or hereafter
imposed by the United States, any State, or any of the possessions of the United
States, or by any local taxing authority.
328
- 2 -
3. The notes will be accepted at par during such time and under such rules and
regulations as shall be prescribed or approved by the Socretary of the Treasury
in payment of income and profits taxes payable at the maturity of the notes,
4. The notes will be acceptable to socure deposits of public moneys, but
will not boar the circulation privilege.
5, Bearer notes with interest coupons attached will be issued in denemina-
tions of 100, $500, £1,000, 85,000, 810,000 and $100,000. The notes will not
be issued in registered form,
6. The notos will be subject to the general regulations of the Treasury
Department, now or hereafter prescribed, governing United States notes.
III. SUBSCRIPTION AND ALLOTVENT
1. Subscriptions will be received at the Federal Reserve banko and branches
and at the Treasury Department, Washington. Banking institutions generally may
submit subscriptions for account of customers, but only the Federal Reserve banks
and the Treasury Department are authorized to act as official acencies. The
Secretary of the Treasury reserves the right to close the books as to any or all
subscriptions or classes of subscriptions at any time without notice,
2, The Secretary of the Trensury reserves the right to reject any subscrip-
tion, in whole or in part, to allot less than the amount of notes applied for,
to make allotments in full upon applications for smaller amounts and to make
reduced allotments upon, or to reject, applications for larger amounts, or to
adopt any or all of said methods or such other nethods of allotment and classi-
fication of allotments as shall be deenod by him to be in the public interest;
and his action in any or all of these respects shall be final, Subject to these
reservations, all subscriptions will be allotted in full, Allotment notices
will be sent out promptly upon allotment.
Regraded Unclassified
- 3 -
32
IV. PAYMENT
1. Payment at par for notes allotted hereunder must be made or completed on
or before November 1, 1939, or on later allotment, and may be made only in Treasury
Notes of Series 3-1939, maturing December 15, 1939, which will be accepted at par,
and should accommany the subscription, Coupons dated December 15, 1939, must be
attached to the notes when surrendered, and accrued interest from June 15, 1939,
to November 1, 1939, (05.221995 per 1,000) will be vaid following acceptance of
the notes.
V. GENNRAL PROVISIONS
1, An fiscal agents of the United States, Fedural Reserve banks are author-
1zed end requested to roceive subscriptions, to make allotments on the basis and
up to the amounts indicated by the Secretary of the Treasury to the Federal Reserve
banks of the respective districts, to issue allotment notices, to receive payment
for notes allotted, to make delivery of notes on full-paid subscriptions allotted,
and they may issue interim receipts pending delivery of the definitive notes.
2. The Secretary of the Treasury may at any time, or from time to time,
prescribe supplemental or amendatory rules and regulations governing the offering,
which will be communicated promptly to the Federal Reservo banks.
HENRY MORGENTHAU, JR.,
Secretary of the Treasury.
oOo
730
TREASURY DEPARTMENT
Washington
FOR DIENTE RELEASE,
Press Service
Tuesday, October 24, 1939.
No. 19-17
Secretary of the Treasury Morgenthau announced today that the
subscription books for the current offering of 1 percent Treasury Notes
of Series B-1944 will close at the close of business Wednesday,
October 25, 1939. This offering is open only to the holders of Treasury
Notes of Series B-1939, maturing December 15, 1939.
Subscriptions addressed to a Federal Reserve bank or branch or
to the Treasury Department and placed in the nail before 12 o'clock
midnight, Mednesday, October 25, will be considered as having beon
entered before the close of the subscription books.
Announcement of the amount of subscriptions and their division
among the several Federal Reserve districts will be made Inter:
-000-*
331
TREASURY DEPARTMENT
Washington
FOR RELEASE, MORNING newspapers,
Press Service
Monday, October 30, 1939.
No. 19-19
10/28/39.
Secretary of the Treasury Morgenthau today announced that
reports from the Federal Reserve banks indicate that $515,210,900
of Treasury Notes of Series B-1939, maturing December 15, 1939,
have been exchanged for 1 percent Treasury Notes of Series B-1944.
Subscriptions and allotments were divided among the several
Federal Reserve districts and the Treasury as follows:
Federal Reserve
Total Subscriptions
District
Received and Allotted
Boston
$ 10,532,500
New York
353,709,300
Philadelphia
6,759,300
Cleveland
11,661,700
Richmond
10,669,800
Atlanta
4,693,900
Chicago
74,933,600
St. Louis
11,452,200
Minneapolis
5,137,000
Kansas City
2,390,300
Dallas
3,628,300
San Francisco
18,718,000
Treasury
925,000
Total
$515,210,900
oûo
332
THE WHITE HOUSE
WASHINGTON
CONFIDENTIAL
October 13, 1939.
MEMORANDUM FOR
THE SECRETARY OF THE TREASURY
Will you speak to me
about this?
F. D. R.
THE WHITE HOUSE
333
WASHINGTON
October 5, 1939.
MEMORANDUM FOR CAPTAIN CALLAGHAN:
Dear Dan:
The President asked if you
would look this up for him and report
on it Monday morning.
Sincerely,
Pa
E.M.W.
34
THE WHITE HOUSE
WASHINGTON
October 5, 1939.
MEMORANDUM FOR THE PRESIDENT:
Re: Navy purchases of tungsten
I have been informed that on Bureau of
Accounts and Supplies Bid Schedule 7066,
opened September 14, an award was made to
the Metal and Ore Corporation of $438,000
for tungsten, at $25 per unit. At the same
time a bid of the Wah Chang Trading Company
of $15.75 per unit in bond was rejected.
In other words, it appears that in a case of
acquiring strategic materials, purchase was
made of stocks already in the country at a
considerably higher price than would have had
to be paid for imported tungsten.
I an also informed that the Metal and
Ore Corporation is tied up in some way with
the Nevada- Massachusetts Company (who owned
the tungsten).
I understand further that there will
be a full story on this in the October issue
of the Engineering and Mining Journal, imply-
ing some connection between the Nevada-
Massachusetts Company and Representative
Scrugham, Chairman of the House Sub-Committee
on Navy Appropriations.
Lauchlin Currie
la reply address - - masser - the
for the Thread of - -
and
date / ,
NAVY DEPARTMENT
BUBEAU OF SUPPLIES AND ACCOUNTS
L4-3(27) (SPC)
WASHINGTON, D.C.
35
7 October 1939
MEMORANDUM FOR CAPTAIN CALLAGHAN
1.
Contract NOS-68968 was made with the Metal and Ore Corpora-
tion on 25 September 1939 on their bid on Schedule 7066, opened
September 14th, for 17,520 units (about 245 tons) of tungaten ore at
$25.00 per unit of 20 pounds contained no3, having an aggregate value
of $438,000.00.
2.
The only other bid received in response to this advertise-
ment was one made by Wah Chang Trading Corporation, which bld was
limited to approximately 200 tons of imported tungsten ore et a price
of $15.75 per WO3 unit, duty free, with the duty for the account of
the buyer. The import duty would equal $7.93 per W03 unit, which
would result in E. delivered price of $23.68 per unit on imported ore
against the price of $25.00 per unit for comestic ore.
3.
This purchase is being made from the fund of $500,000.00
made available by the Naval Appropriation Act for 1940, "for the pro-
curement and transportation of strategic and critical materials."
4.
The policy of the Congress in appropriating funds for the
procurement of strategic and critical materials started with the appro-
priation of $3,500,000,00 in the Naval Appropriation Act for the fiscal
year 1938. The sur of $500,000.00 was appropriated in the Naval appro-
priation Act for the fiscal year 1939, and E. like sum in the Naval
Appropriation Act for the fiscal year 1940.
of the 5. strategic and critical materials which may be procured with the
The appropriation acts are silent as to the source or origin
moneys appropriated for this purpose, notwithstanding the free discus-
sion of this phase of the matter in the Committee hearings on the pro-
posed appropriation.
Appropriations 6. indicates that it was the purpose of the appropriation
The report of the Neval Subcommittee of the Committee on
originally proposed in the Naval Appropriation Act for 1938 to en-
private enterprise in the development and operation of domentic bill
courage sources of supply for strategic and critical WELT materials. The avail-
in the House of Representatives provided $5,000,000.00 to be
able for the "purchase of a reserve supply of prepared and eliminated processed
strategic materials of nomestic production." The Senate
-1-
Regraded Unclassified
7 October 1939
336
L4-3(27) (SPC)
this item entirely. Subsequently, after e. conference, the appropria-
tion bill for 1938 included "for the procurement and transportation
of strategic and critical material, $3,500,000.00 to remain avail-
able until expended." The bill as finally passed, therefore, imposed
no restriction on the origin of the material procurable under that
appropriation end, consequently, it became necessary to look to
other laws in the consideration of bide on foreign material in compe-
tition with domestic materials.
7.
That the appropriation was viewed by many as a means of
encouraging the development of domestic sources of supply is evidenced
by the many comments on this phase of the matter when certain bids
were under consideration by the Navy Department. Excerpts from a
number of the communications received on this subject are quoted, as
follows:
Senator Patrick McCarran:
"The Navy Department Appropriation bill of 1938 carries
an item of $3,500,000 for the purchase of strategic and
critical minerals. As e member of the Appropriations Com-
mittee of the Senate I most emphatically protest the purchase
of ferromanganese purchased from foreign ores. It is the in-
tent of Congress that this money should be devoted to the pur-
chase of the domestic product and to the encouragement of the
American industry.
"The testimony and proceedings held before the Appro-
priations Committee of the House of Representatives and the
whole spirit of the Congress in meking the appropriation is to
encourage domestic industry."
Senator James E. Murray:
"I am very much interested in this matter and will
appreciate it very much if you will furnish me with full infor-
mation as to what your policy will be when you make these Dew
purchases. I believe it is quite important to use the American
produced manganese and I sincerely hope that you will give
this matter your very careful attention."
Senator Tasker L. Oddie:
"Will you kindly send me data on the policy of the Navy
in the purchase of the strategic metals and minerals mined in
this country, together with prices the Navy pays for these
metals and minerals.
+
7 October 1939
LA-9(27) (SPC)
"I em under the impression that some legislation has
recently been passed providing for the encouragement of min-
ing these products in our country."
Senator Carl Hayden:
"I am enclosing herewith a letter I have received
from Mr. J. Carson Adkerson, President of the American Man-
ganese Producers Association, National Prese Building,
Washington, D. C., together with & copy of ii. communication
addressed to you on March 12 by that organization protest-
ing against purchase for stockpile purposes of any ferro-
manganese manufactured from foreign manganese ores.
"I shall appreciate your giving careful attention to
the statements made by Mr. Adkerson and advising me fully
with respect to the proposal of the Navy Department in this
instance."
Reuresentative Abe Murdock:
"I have been a member of Congress for a period of five
years. During that time, representatives interested in de-
veloping the mining resources of the United States were suc-
cessful in having $3,500,000 appropriated for the purchase
of strategic and critical minerals. Everything in connec-
tion with this item indicates that the intention of Congress
wee to buy these strategic metals wherever possible in the
United States, and, by so purchasing, to develop the deposits
of these metals within our own country.
"I em writing this letter for the specific purpose of
respectfully requesting that you, as Secretary of the Navy,
Bee that the intention of Congress in this particular matter
is carried out in good faith."
Representative James F. O'Connor:
"I am writing to state that there are several men-
ganese mines which are being operated in my State, and I
therefore believe that purchases of manganese for stockpile
purposes should be made from the domestic supply exclusively
if it is possible to do 80."
Representative Francis Case:
"I BUD thoroughly in favor of our adopting defensive
measures with respect to manganese, but may I suggest that
-3-
Regraded Unclassified
7 October 1939
L4-3(27) (SPC)
338
our best defense on manganese is to encourage domestic
production.
"When the bids are restricted to ferro-manganese,
it means using foreign produced manganese, which does not
do a thing in developing our natural resources, except to
retard them."
Representative Compton I. White:
"I have been furnished with copy of the statement.
addressed to you under date of March 12 by Mr. J. Carson
Adkerson, President of the American Manganese Producers
Association, protesting against the purchase of ferro-
manganese manufactured from foreign ores. I am in thorough
accord with the statements made by President Adkerson and
desire to support the protest of President Adkerson."
Representative N. C. Tarver:
"It is inconceivable that monies provided by Congress
for the purchase of strategic materials 'exclusively of
American production' should be used for the purchase of
foreign ores or of ferromanganese manufactured therefrom."
Representative Martin F. Smith:
"I an advised that funds have been provided, and
that additional funds will be provided, to enable you to
acquire an emergency reserve of strategic and critical
materials, the intention of Congress being to make it
possible for you to search out and develop materials of
domestic production with & view to becoming independent of
foreign sources of supply."
8.
The purchase of strategic and critical materials of domestic
production was emphasized again in the hearings on the Naval Appropria-
tion Bill for 1939. Extracts from these hearings are quoted, as fol-
lows:
"Mr. Scrugham. Admiral, on page 8-5 of the justification,
headed 'Strategic and Critical Materials, Navy,' it reads:
This item is for the procurement of strategic and
critical materials not produced in the United States.
"I am certain that is entirely in error. The object
of Congress was that there might be materials not largely
+
7 October 1939
L4-3(27) (SPC)
produced in the United States but 08 far as practicable it
was distinctly intended we should buy American, it WES dis-
tinctly intended that the 'Buy American' Act should apply, and
the objective was to encourage the production of such mater-
iala in this country. Is that understood by the Navy offi-
cials.?
"Admiral Conard. Yes. That statement as it appears here has
appeared in other parts of the report, and I have personally
corrected it, I simply overlooked its appearance here in
that form. It should be 'materials procurable in the United
States if available.'
"Mr, Scrugham. My only object in pursuing this line of inquiry
is to emphasize the desirability of paying special attention
to the possibility of the development of local supplies, and
by that I mean supplies produced in this country, and I think,
just or not, there is a feeling among local producers that
the specifications were not 80 drawn. I have a number of
letters - 8 or 10 - complaining, from persons who have written
or have come in person to see no, that the specifications as
originally put out, especially for manganese ore, were of such
a character that they would preclude, no matter whoever they
may be or what they may be, that it would preclude them from
bidding under the specifications, and my understanding is that
your answer is that the specifications are now being recast.
Is that correct?
"Admiral Conard. That is correct.
"Mr. Scrugham. And that these redrawn specifications are ac-
signed to be more liberal in their construction so as to per-
mit B. supply of suitable ore by domestic producers. In my
understanding correct?
"Admiral Conard. It is to produce suitable ore, and leaves
the domestic producer in the position of stating his ability
to furnish that ore or not, as the case may be.
"Mr. Scrugham. Well, that is entirely satisfactory."
appropriations 9. were intended to encourage private enterprise in the
Notwithstanding the views 80 freely expressed that these
development and operation of domestic sources of supply for strategic
and critical war materials, the acts appropriating the funds left to
other legislation the control of this phase in the procurement of
these materials. It seems fair to assume that the funds were appro-
priated for the primary purpose of the accumulation of o stock pile
34"
7 October 1939
LL-3(27) (SPC)
of strategic and critical materials. This purpose W&B well expressed
by Representative Scrugham in the hearings before the Subcommittee of
the Committee on Naval Appropriations in the 75th Congress, as follows:
Mr. Scrugham. "Captain, the outstanding feature of the report
of your Board, if I understand its phraseology, is that cor-
tain classes of strategic raw material should properly be
accumulated and stored against the time of military need."
10. The controlling legislation in the procurement of foreign
materials in competition with domestic materials is that contained in
Title III, Section 2 of the Buy-American Act, approved 3 March 1993
(Public No. 428, 47 Stat. 1520), reading as follows:
"Notwithstanding any other provision of law, and un-
less the head of the department or independent establishment
concerned shall determine it to be inconsistent with the
public interest, or the cost to be unreasonable, only such
unmanufactured articles, materials, and supplies 89 have been
mined or produced in the United States, and only such manu-
factured articles, materials, and supplies as have been nanu-
factured in the United States substantially all from articles,
materials, or supplies mined, produced, or manufactured, 8.6
the case may be, in the United States, shall be acquired for
public use. This section shall not apply with respect to
articles, materials, or supplies for use outside the United
States, or if articles, materials, or supplies of the class
or Ind to be used or the articles, materials, or supplies
from which they are manufactured are not mined, produced, or
manufactured, as the case may be, in the United States in suffi-
cient and reasonably available comercial quantities and of A
satisfactory quality."
11.
Acting under the authority of the Executive Order authorizing
the Procurement Division to promulgate procurement regulations, the
Director of Procurement set a price differential of 25 per cent DE &
reasonable differential in determining the reasonableness of the price
of domestic products.
Corporation 12. on foreign ore at $23.68, delivered including the duty, and
The price differential between the bid of Wab Chang Trading
the bid of the Metal and Ore Corporation on domestic ore at $25.00 de-
livered, 16 much under the allowable 25 per cent. Following the general
rule laid down by the Procurement Division, the award of Schedule 7066
was made to the Metal and Ore Corporation on their bid of $25.00 par
unit delivered, which price, when compared with the bid of Web Chang
Trading Corporation, is not considered unreasonable.
-6-
TOC
7 October 1939
L4-3(27) (SPC)
13.
The Metal and Ore Corporation offers tungsten ore from the
following sources:
Nevada-Massachusetts Company, Mill City, Nevada
Rare Metals Corporation, Lovelock, Nevada
Molybdenum Corporation of America, Yucca, Arizona
There is no information of record to indicate that the Metal and Ore
Corporation is connected in any way, financially or otherwise, with
the Nevada-Massachusetts Company. The records indicate that the Metal
and Ores Corporation is a New York corporation engaged in the business
of exporting and importing metals and ores.
RAY STEAR
-7-
TREASURY DEPARTMENT
At
342
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
October 23, 1939
MEMORANDUM FOR THE SECRETARY
On September 20th proposals were issued for the purchase of 100 to 425
short tone of tungsten ore in increments of 25 tons, These proposals were
opened on October 20th, and the following bids were received. The prices
cover the cost of units of contained tungsten.
DOMESTIC
Metal and Ore Corporation
425 tons
$25.00 per unit
Wah Chang Trading Corp.
150 tons
(approx.)
24.50 II "
FOREIGN
Pan American Tungsten Corp.
175 tons
18.00 if "
Wah Chang Trading Corp.
425 tons
(approx.)
15.82 n. "
The above bids are at present under consideration, and no awards will be
made until qualifications in specifications of some of the bidders have been
discussed with representatives of the Bureau of Mines and the Army and Navy
lunitions Board.
Director of Procurement
Regraded Unclassified
343
October 23, 1939
MEMORANDUM FOR THE SECRETARY
On September 20th proposals were issued for the purchase of 100 to 425
short tons of tungsten are in increments of 25 tons, These proposals were
opened on October 20th, and the following bids were received, The prices
cover the cost of units of contained tungsten.
DOMESTIC
Metal and Ore Corporation
425 tons
$25.00 per unit
Wah Chang Trading Corp.
150 tons
(approx.)
24.50
.
.
FOREIGN
Pan American Tungsten Corp.
175 tons
18.00
#
Wab Chang Trading Corp.
425 tons
(approx.)
15.82
.
The above bide are at present under consideration, and no awards will be
made until qualifications in specifications of some of the bidders have been
discussed with representatives of the Bureau of Mines and the Army and Natty
Munitions Board.
Director of Procurement
HECaga
344
TREASURY department
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
October 28, 1959
MEMORANDUM FOR THE SECRETARY
On September 19th a proposal was issued for manganese ore in quantities ranging from
5,000 to 110,000 long tons of three grades or ore for delivery at Baltimore. This pro-
posal was opened on October 19th, and the following bids were received:
BIDDER
DESTINATION
QUANTITY
PRICE PER UNIT
L. J. Buck, Inc.
Baltimore
40,000 LT
$ .49
Cuban American Manganese Corp.
Baltimore
25,000 LT
.612
H. S. Davis Company
Baltimore
25,000 to
80,000 LT
.435
Debevoiss-Anderson Co., Inc
Baltimore
3,000 IT
.50
Derivatives, Inc.
Baltimore
3,400 IT
.598
William H. Mueller & Company
Baltimore
5,000 to
10,000 LT
.5098
Diver and Company, Inc.
Baltimore
10,000 LT
.70
Oliver and Company, Inc.
Baltimore
15,000 LT
.78
The bids of Oliver and Company, Inc., are on domestic ore. All other bids indicated
above are on foreign ore.
It is expected that a recommendation will be made for the award of 10,000 long tons
under the bid of Oliver and Company, Inc.
The unit prices indicated above on foreign ores do not include duty, war risk insurance
or freight. On the basis that imported ores will be bonded and that duty will not be
paid until such time as issues are made, it is indicated that the H. S. Davis Company
is the low bidder and award will probably be recommended to this company for 80,000
long tons.
Director of Procurement
October 25, 1939
MEMORIANDUM FOR THE SECRETARY
On September 19th a proposal was issued for manganese are in quantities ranging from
5,000 to 110,000 long tons of three grades or ore for delivery at Baltinare. This pro-
postal was opened on October 19th, and the following bids were received:
3100 R
DESTINATION
NATTY
PRICE P.M UNIT
1. J. Buck, Inc.
Saltimore
40,000 LT
49
Juban American Manganess Corp.
Baltimore
25,000 LT
.612
11. S. Davis Company
Bultimore
25,000 to
30,000 LT
.455
lebevaise-Anderson Co., Inc
Baltimore
3,000 LT
.50
Derivatives, Inc.
Bultimore
3,400 17
.598
illiam B. Rueller & Company
Saltimore
5,000 to
10,000 LT
.5098
Never and Company, Inc.
Baltimore
10,000 L2
.70
Bliver and Company, Inc.
Maltinore
11,000 12
.78
The bids of Oliver and Company, Inc., are on docustic ore. All other blue indicated
above are on foreign ore.
It is expected that & recommendation will be made for We award of 10,000 long tons
under the bid of Oliver and Company, Inc.
The und prices indicated above on foroign oroo do not include duty, var risk insurance
or freight. On the basis that imported 02-03 will to bonded and that duty will not be
paid until such time as issues are made, it in Indicated that the N. 3. Davis Company
la the low bidder and award will probably Se recomended to this company for 80,000
long tons.
Director of Procurement
Regraded Unclassified