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Volume 333, November 29 – November 30, 1940
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Volume 333, November 29 – November 30, 1940
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Henry Morgenthau, Jr. Papers
Diaries of Henry Morgenthau, Jr.
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DIARY
Book 333
November 29 and 30, 1940
- C -
Book Page
Canada
See War Conditions: Airplanes (Engines)
China
See War Conditions
Coast Guard
Appropriation cut discussed at 9:30 meeting - 11/29/40.. 333
3
Consolidated Aircraft
See War Conditions: Airplanes
- D -
Denmark
See War Conditions: Shipping Conditions
Donovan, Air Marshal
See War Conditions: Purchasing Mission
- F -
Financing, Government
$100 million National Defense series 91-day bills:
Notice that tenders are invited - 11/29/40
101
Finland
See War Conditions
French Indo-China
See War Conditions
- G -
Germany
See War Conditions: Foreign Funds Control
Gulick, Luther
HMJr tells 9:30 group of Gulick's report on New York
State taxation made for FDR as Governor: HMJr to
invite him to Treasury to work on overlapping taxes -
25
11/29/40
- I -
Indo-China, French
See War Conditions: French Indo-China
Italy
See War Conditions: Foreign Funds Control
- J -
Japan
See War Conditions: Export Control
- L -
Book Page
Liaison Committee
See War Conditions
- P -
Pickett, Clarence
See War Conditions: Refugees
- R -
Refugees
See War Conditions
Revenue Revision
Gulick, Sullivan, Tarleau, and Blough discussion
of "comprehensive review of taxation" covered in
Sullivan memorandum (taken to White House
conference) - 11/29/40
333
125
Roumania
See War Conditions
- S -
Shipping Conditions
See War Conditions
Siam
See War Conditions: Thailand
Stabilization Fund
See War Conditions: China
Sweden
See War Conditions
- T -
Tax Research, Division of
Report on projects during November 1940
297
Taxation
See Revenue Revision
Thailand
See War Conditions
- U - -
United Kingdom
See War Conditions: Military Planning
Regraded Uclassified
- W -
Book
Page
War Conditions
Airplanes:
Allocation of extra aircraft capacity: Young
memorandum - 11/30/40
333
291
Consolidated Aircraft: Major Fleet, in conference
with HMJr and Young, states that "log-jam is
breaking"; entire situation reviewed - 11/29/40.
29
Engines:
Canada: Howe (Minister of Munitions and Supply)
letter on manufacture of engines in Canada -
11/30/40.
288
China:
Loan discussed by HMJr, Foley, Cochran, White, Bell,
and Bernstein - 11/29/40
31
a) Statements relating to uses of Stabilization
Fund made by HMJr before committees, in
letters, speeches, and press conferences
75
b) Hull told by HMJr that FDR has ordered loan
of $50 million
94
c) Expiration on December 31, 1940, of agreement
to purchase yuan by Stabilization Fund and
renewal thereof discussed in Cochran memorandum -
11/29/40.
96
d) Loan discussed by above group and Soong -
11/30/40
228,251
e) Loan discussed by above group and Welles
259
FDR's statement on proposed loan - 11/30/40
283
a) Welles told of preparation of statement
286
Exchange market resume'- 11/29-30/40
109,295
Export Control:
Japan: Cargoes of gasoline, fuel oil, and lubricating
oil but no scrap iron discussed at 9:30 meeting -
11/29/40
8
Finland:
Debt to United States discussed in connection with
payment on December 15th - 11/29/40
113
Foreign Funds Control:
Germany:
Decline of German balances by more than one-half
discussed at 9:30 meeting - 11/29/40
10
Transactions with Chase National Bank - 11/29/40.
111
Italy: Transactions with National City Bank - 11/29/40
112
French Indo-China:
Pressure to join yen bloc discussed in memorandum
from Hanoi - 11/29/40
122
Liaison Committee:
Nelson "looking for a man to take over all purchasing
activities, leaving Treasury only as figurehead or
eliminating it entirely" - Young reports - 11/30/40
294
Military Planning:
Observations on British Tanks in France: War Department
bulletin - 11/29/40,
147
Reports from London transmitted by Lothian - 11/29-30/40.
153,190,309
- W - (Continued)
Book
Page
War Conditions (Continued)
Purchasing Mission:
Air Marshal Downing invited to United States as
adviser: manner of transportation discussed by
Welles and HMJr - 11/29/40
333
27
Layton confere with HMJr and Young - 11/30/40
200
a) Statement of estimated value of additional
orders to be placed under the air, munitions,
and shipbuilding programs recently under
discussion
211
1) Copy sent to FDR "in view of British
claim of no funds to meet payments"
...
213
b) Discussion by HMJr. Gaston, White, Cochran,
Bell, and Young - 11/30/40
218
Refugees:
9:30 group advises HMJr to hear Clarence Pickett's
side of problem - 11/29/40
18
Red Cross tells Treasury representatives of FDR's
expressed wish that milk, codliver oil, and
concentrated vitamins be sent to children of
unoccupied France - 11/29/40
97
Roumania:
Bank of England-National Bank of Roumanie agreement
concerning certain payments within the sterling
area - 11/29/40
120
Shipping Conditions:
Denmark: Purchase of Danish ships if money goes into
frozen funds will be approved by FLR - 11/29/40
9
Sweden:
Bank of England-Sveriges Riksbank agreement relating
to payments between Sweden and United Kingdom -
11/29/49
118
Thailand:
State Department reports to Cochran on conversations
with Frederick Dolbeare, adviser to Government of
Thailand - 11/29/40
107
United States:
Limison Committee:
See War Conditions: Lisison Committee
Regraded Uclassified
1
GROUP MEETING
November 29, 1940
9:30 a.m.
Present:
Mr. Gaston
Mr. Haas
Mr. Pehle
Mr. Thompson
Mr. Foley
Mr. Cochran
Mr. Chamberlain
Mr. White
Mr. Sullivan
Mr. Wiley
Mr. Graves
Mr. Schwarz
Mr. Bell
Mr. Young
Mrs Klotz
Mr. Robert Morgenthau
H.M.Jr:
What is new?
Bell:
In arranging for the Open Market meeting on
Wednesday of next week, did you want me to
ask Jones? I didn't.
H.M.Jr:
No. I don't see any reason.
Bell:
I think he was at the last one.
H.M.Jr:
Well, that was a little --
Bell:
That was the reason I asked you.
Did you want any memoranda or papers on the
Argentine matter that you would like to read?
H.M.Jr:
Well, is Espil - he is coming in at 10:00
just to introduce this fellow, and I think
if I could honestly say I don't know, it
would be much better, but I would like you
here when he comes.
Bell:
At 10:00, you say?
H.M.Jr:
Yes. I am waiting to hear from you, you know,
on that now.
Regraded Uclassified
2
- 2 -
Bell:
You are waiting to hear from me?
H.M.Jr:
Yes. I asked you to look up what they did
on Chile.
Bell:
Oh, yes.
White:
That is ready this morning. I can tell you
orally, or it is ready in a memo.
H.M.Jr:
Well, that is the way we left it.
Bell:
That is all right. We are ready any time that
you want to sit down and go over the whole
matter.
H.M.Jr:
May I just say for everybody, this telling
me you are ready - if you don't mind my using
you (White) as an example - you mentioned to
me in passing, riding up to the house, some-
thing about Dr. Soong, but you don't tell
McKay - if you don't mind my using you as an
example. If anybody wants me to see anybody
and make an appointment, I can't remember these
things, so if somebody wants - besides men-
tioning it to me, would you mind mentioning
it to McKay.
White:
I merely wanted to know whether you would
like to see him and I told him to get in
touch with Mr. McKay. I didn't expect you
to make the appointment.
H.M.Jr:
Well, he did call up either last night or
this morning, but I can't remember. But it
helps me.
White:
Right. So I understand, Mr. Secretary, that -
aren't you going to have a meeting on Argen-
tine?
H.M.Jr:
Yes.
Regraded Uclassified
3
- 3 -
White:
I mean nothing definitive is going to be
done until --
N.M.Jr:
lio, no. They are coming in this morning
just to introduce this fellow.
White:
Ed, that is what they told ne last night.
But there is nothing going to be said about -
no definite opinion?
E.K.Jr:
Well, I wouldn't think of approving it with-
out first talking to you.
Unite:
I Gidn't mean that, but I dian't think you
would turn it down without giving me a hear-
inc.
H.M.Jr:
Oh, Harry, you are so suspicious.
White:
! A.T. "lad it is just suspicion. (Laughter)
M...Jr:
All right.
dell:
That is all.
All right.
Thompson:
The Dureau 01 the Sudget yesterday gave us our
figures on our '42 estimates. I think there
is only one bureau in the whole department,
possibly Coast Guard, that might want to pro-
test.
Geston:
There are two thin S there that are rather
serious. The aids to naviration they cut
down to about a third and they have got 8.
terrific problem in Alaska and on the Mississippi
River and some other places, and the other thing
is that on harbor boats they allowed us only
two of that ice-breaking type of tugs. We
asked for four. ..e asked for 30 78-foot boats
for harbor police work and they allowed us 10.
Regraded Uclassified
4
- 4 -
They cut out the infirmary at the Academy.
They can get along without that.
Those particular things are rather serious
items. They cut out all the additional light
senders and lighthouse vessels which is -
which the Navy particularly asked for.
H.M.Jr:
Well, I don't often do any boasting but I -
we had a little time to spare at San Juan
and I asked to be taken around on the A.B.
boat. It was awfully noisy and I said, "There
is something the matter with the engine, and
the fellow said, "Oh no, no." I said, Yes,
there is. There is a piston rod bearing loose,"
and there was. He didn't know I used to play
around with marine engines when I was a kid.
But here they are running this boat day and
night and boarding all of these Army trans-
ports that are coming in and they have got
an engine running around with a piston rod
bearing loose.
Gaston:
There isn't any crank.
H.M.Jr:
So I think you ought to go after that stuff,
Herbert.
Gaston:
You mean after the --
H.M.Jr:
More boats.
Gaston:
Yes.
H.M.Jr:
I think you ought to go after them.
Gaston:
They gave us the three big cutters, but I think
we really need the ice-breakers and harbor
boats more than we need the three big cutters.
It is the Navy that needs the three big
outters.
5
- 5 -
H.M.Jr:
If you want some help, let me know.
Gaston:
Right.
Thompson:
We asked for 19 airplanes and we got 17.
They cut out two training planes.
H.M.Jr:
But if you need some help, let me know.
Gaston:
Yes.
Thompson:
That is all.
H.M.Jr:
Can I leave this in your (Thompson's) lap?
This is a man, and if we could find him some
work, I would like to do it. He lives in my
district. This stuff keeps flowing in to me
from Leon Henderson. This isn't you, Norman,
this is price stabilization division. Who
would get that?
White:
They mostly deal with foreign countries, yet.
H.M.Jr:
This is price stabilization.
White:
No, that is the name of the committee, isn't
it?
H.M.Jr:
No, finance and amortization of capital ex-
pansion, private and government equipment,
government plants operated by private firms.
White:
Oh, that is the latest report.
Bell:
I would like to see it.
H.M.Jr:
Supposing I start with you, and can somebody -
I mean, that wouldn't interest you (Foley).
Young:
I would like to see it also.
H.M.Jr:
Excuse me?
Regraded Uclassified
6
- 6 -
Young:
I would like to see it also.
H.M.Jr:
Oh.
White:
I am wondering whether there might be a criti-
cism in the digest appended, and then it would
be pretty easy --
H.M.Jr:
Would you handle it, Bell?
Bell:
All right.
H.M.Jr:
I mean, when I get those things, should they
go from Mrs. Klotz to Norman and then let
Norman Thompson find out who wants them?
Bell:
Just get the one copy?
H.M.Jr:
Evidently.
Foley:
I think that Leon Henderson sends us copies of
those things and I send them to Chuck Kades.
White:
I get one, too. I think he will be glad to
send them to whoever you want to indicate.
H.M.Jr:
I want somebody to read it for me.
White:
:We have four now, and they are being digested
and comments made, and then they will be sent
to whoever is interested.
H.M.Jr:
All right.
Bell:
Would you like to get a memorandum back only
in case there is something --
H.M.Jr:
Which I am working on. Okay, Norman?
Thompson:
Yes.
H.M.Jr:
Harold?
7
- 7 -
Graves:
Nothing.
M.K.Jr:
Harry?
White:
We would like to got your permission, if you
think it is desirable, to examine the income
records of numerous companies who are recorded
in - as being among the British assets, as
being the only way that We can get an idea of
their current value. There are quite a few
of them.
L.H.Jr:
Well, I would like you to take it up through
Sullivan and he will get you what you want.
I want you to have what you want.
Give him whatever he wants.
Sullivan:
Okay.
White:
All right.
Here is the thing from Kamarck on the shipping
which shows much less destruction and --
H.M.Jr:
Isn't that funny? I was going to ask you about
that last night. I dreamt of that.
White:
It is another dream. It seems to be much less
than what the press seem to be reporting, but
as you know, those come from our Naval Intelli-
gence, so - I mean - (Laughter)
If the press is right, they are wrong, or vice
versa.
Schwarz:
Which do you think?
H.M.Jr:
I want you to know we have a - what are you,
able seaman? Mr. Robert Morgenthau, apprentice
seaman.
Regraded Uclassified
8
- 8 -
White:
This was before he joined.
H.M.Jr:
I don't want him discouraged.
Gaston:
Harry is just pointing out that the intelligence
is only relative.
H.M.Jr:
What do you mean, total excluding the Axis?
White:
Well, those are the shipping - not including
German ships sunk and Italian ships sunk.
H.M.Jr:
That is surprising, isn't it?
White:
If those figures are at all right, the situa-
tion is not - won't be critical for some time.
The shipments of lubricating oil to Japan
have been tremendous, a quarter of a billion
barrels in the last four weeks.
H.M.Jr:
Can I have it for lunch? Frank Knox is having
lunch with me.
White:
Yes. But scrap iron has stopped.
H.M.Jr:
Scrap iron has stopped?
White:
In the last three weeks, no scrap iron.
Gaston:
We are still granting courtesies of the port
to official Japanese vessels which come in on
the Pacific Coast to take on- cargoes of gaso-
line, fuel oil, and lubricating oil.
H.M.Jr:
But scrap iron is stopped?
White:
In the last three weeks there has been no
scrap iron.
Gaston:
October 16 was the cut-off date on licenses.
Regraded Uclassified
9
- 9 -
H.M.Jr:
What happened yesterday interests a number
of people. It is supposed to be secret.
Admiral Land was in here and there is evi-
dently 8. deal on for us to buy the Danish
ships which were in our ports. The President
has approved it providing that the money that
we pay goes into the frozen funds. That is
why I mention it here, it will affect so
many people. Philip Young has it and he is
going to ask Foley to look up the law on
the thing, how it can be done, because Land
didn't know just how to do it. He said
nobody in his shop was working on it.
Sullivan:
Who owns the ships?
H.M.Jr:
I believe it is an American company.
Pehle:
Isbrandtsen & Moller, isn't it?
H.M.Jr:
Yes.
Gaston:
Do they own any ships or are they simply
operating agents for those Danish ships?
Pehle:
I think some are one way and some are the
other.
H.M.Jr:
Well, the point is, I gather from what he
said that the English have tried unsuccessfully
to buy these and now I think he is talking,
isn't he, about having the Maritime Commission
buy them?
Young:
Yes, anybody buy them that could get them
away from the Danes to resell to the British.
H.M.Jr:
But I am mentioning it because so many people
will be interested.
Gaston:
He did have a good many questions come up
about these ships. They are considered
10
- 10 -
generally rather bad actors.
Sullivan:
What goes into the frozen funds, the gross
or the net?
H.M.Jr:
I don't see why either should if it is an
American corporation.
Pehle:
It is owned beneficially by Moller, who is
in Denmark. He has a very large interest in
it.
B.M.Jr:
Well, Phil, you can see how many people are
interested. We threw it into Foley's lap,
didn't we?
Young:
Yes, sir.
White:
In the last three weeks - four weeks, there
has been - German balances here have declined
by more than half.
H.M.Jr:
Where did they go?
White:
Either into American sources or out of the
country. I wouldn't know. But they have
disappeared SO far as our control is con-
cerned.
Bell:
They have gone into Swiss --
H.M.Jr:
Wiley, in your letter for me, you might see
whether you could use that.
Wiley:
Yes, sir.
White:
And also the Italian balances, you know,
have declined.
H.M.Jr:
Pick that up, too, will you?
11
- 11 -
Wiley:
There was one big Italian movement to South
America recently, B. million and a half.
Cochran:
The German balance has gone to Switzerland,
Sweden, and Portugal.
White:
And that does not include the last two weeks.
We can't get those figures until a week from
now, so it might be substantially more than
that.
H.M.Jr:
Mr. Wiley is writing me a letter over the
week-end for additional arguments on why
we should freeze all funds, so if anybody
has any ideas, if they would give them to
Mr. Wiley, he can incorporate them in the
memorandum for me. It is a follow-up letter
on the one which was written before.
White:
I think we could take a list - there are at
least 15 or 20 cables that indicate what is
happening to funds that would be very effective
and they just could be listed and appended to
the letter.
H.M.Jr:
If anybody has any ideas, if they would give
them to Mr. Wiley, he can incorporate them
for me so I can have it Monday.
I was surprised to see in Time Magazine this
week an article on freezing all the funds,
by a State Department Aide.
Caston:
That has been going around to all the papers,
the Star, the Merry-Go-Round, and the Newsweek,
last week.
White:
You would be interested in Lindley's column
this morning.
H.M.Jr:
I haven't seen it.
Regraded Uclassified
12
- 12 -
White:
It is on the British assets.
I just want to call your attention to the
fact that there is --
H.M.Jr:
Chick, fish it out of here.
White:
I think you would be interested, if you
haven't noticed it. We have got a billion
eight million dollars of gold on earmark.
H.M.Jr:
Who has?
White:
The United States has, on earmark. Oh,
various countries. France has 500 million
or so, but it amounts to a billion eight.
H.M.Jr:
Good.
On that note that you sent me up to the
house, if you would have him come down, I
would be glad to see him.
White:
I will do that.
H.M.Jr:
I take it you know him personally.
White:
That is right. I will make an appointment
with Lieutenant McKay.
H.M.Jr:
If you would, please. He is now a Commander.
White:
I beg his pardon.
H.M.Jr:
What else?
White:
That is all I have.
Bell:
You read, of course, the article on aluminum?
H.M.Jr:
Yes.
Regraded Uclassified
13
- 13 -
Bell:
He said nothing about steel.
H.M.Jr:
You would be interested - at luncheon yesterday
I said to the President, wouldn't he get after
him, and he said, "I have been after him on
steel and I can't get him to do anything."
Sullivan:
Ed Boots, Vice President of United States Steel,
was in about ten days ago. I asked him about
it and he said they couldn't possibly hope
to meet the demand.
H.M.Jr:
Well, I read while I was away a story where
one of the branches of U. S. Steel is increasing
their production by 400,000 tons in the Alabama
district.
Bell:
That is half of one percent.
Haas:
One percent of the total steel industry.
H.M.Jr:
But it is 25 million dollars.
Sullivan:
He said they couldn't handle it.
H.M.Jr:
Well, you boys have got to feed me this stuff
and I will feed it to the President.
Haas:
They will need all that, I guess.
H.M.Jr:
Are you through, Harry?
White:
Yes.
H.M.Jr:
George?
Haas:
I have got a very short version of Mr. Sexaur's
troubles. It is very urgent.
H.M.Jr:
Well now, we will go from frozen funds to
ice cream.
14
- 14 -
White:
They melt the same way.
H.M.Jr:
Is that funny?
White:
They are melting almost as rapidly.
That is an exaggeration.
H.M.Jr:
What does he want me to do, George?
llaas:
He would like to have you - there is political
pressure trying to force a decision and by
putting the pressure on, they will force &
decision that he doesn't want. It will be
a hasty one. What he would like to have you
do is to hold it up to give him time to work
on them over there and really get his case
over, and he thinks if they take time out
to go into the problem they will decide it
his way.
H.M.Jr:
Do you know Paul Appleby?
Haas:
No.
H.M.Jr:
Call him up and say --
Haas:
I met him once in your office here.
H.M.Jr:
Call him up and tell him the thing and say
that you don't know - I would tell him Sexaur
is the president of the Dairymen's League
Co-op, of which I am a member, and I would
like to bring this matter to his attention,
and could you come over and see him so he
can get both sides of the story, and I would
like to know, you see. Call up Paul Appleby
and tell him who you are, and could you come
over and see him.
Haas:
Fine.
15
- 15 -
H.M.Jr:
"I don't know the pros and cons, but just what
is the situation?"
llaas:
I will be glad to do that.
1...Jr:
Isn't he the Under Secretary now?
Haas:
He is the Under Secretary.
Gaston:
Yes.
I.K.Jr:
He is a smart fellow. Call him up when you
go out.
leas:
All right, I will do that.
I have got one other thing. I an running into
some difficulty on this Transamerica chart,
in getting material. All the material the
SEC has collected is now on the Pacific Coast.
They are hearing a case. And all the men who
know the subject are out there, 30 we won't
be able to get the chart for you by Monday.
H.A.Jr:
That is all right. Foley is breathless about
it, but Tuesday or Wednesday will do just as
well.
Foley:
Well, I suggested to George that he send the
chart to the Chief Examiner out on the West
Coast and let him bring it up to date, and
then check it with the SEC people and have
it brought back here by Wednesday or Thursday
of next week.
H.L.Jr:
Good.
llaas:
That is all I have.
H.E.Jr:
Philip?
Young:
I am practically swollen with a lot of foreign
Regraded Uclassified
16
- 16 -
purchasing items you ought to know about.
H.M.Jr:
You are what? What was the word?
Young:
I said swollen.
H.M.Jr:
You look normal to me, Take his pulse, Pro-
fessor Chamberlain, will you?
Chamberlain: I haven't got a license to practice medicine.
I am afraid I would get arrested.
H.M.Jr:
It did look a little crowded, with the four
of you on that bench there.
Young:
It is very congenial.
Are you having lunch with Secretary Stimson
today?
H.M.Jr:
I am not.
Young:
Are you going to see him, on his letter?
H.M.Jr:
No.
Young:
What has happened on that?
H.M.Jr:
He called me up, and I will repeat the con-
versation as near as I can remember it. He
says, "I feel like a fox, and I said, "Well,
I have been trying to smell you all day," and
he says, "I am so busy I can't even smell
myself. That was our conversation. (Laughter)
So he said, "Will you approve of that letter?"
I said, "I do." He said, "Well, you will do
me & great kindness to let me out of lunch,"
so the letter is approved.
Gaston:
I have an appointment with Budd at 10:00 o'clock.
17
- 17 -
H.M.Jr:
Okay.
(Mr. Gaston left the conference.)
So, Philip, you will have to be good until
tomorrow morning at 9:00, and like it.
Toung:
llight. That is all.
Chamberlain:
I haven't anything particular, Mr. Secretary.
we are working over this problem - the divi-
sion is working over the problem of the
wider freesing, but t.e haven't any --
B.U.Jr:
Is there anything doing that you know of? I
saw Norman Davis and Lamont were over there
to see the President. Is there anything doing
on food?
Chamberlain: I wanted to call your attention to that.
H.M.Jr:
What is happening?
Chamberlain:
All I know is that the Quakers are very en-
thusiastic about it, and I heard en interesting
comment on Ir. lloover that I think would be
interesting to you from a ,,uaker friend of
mine who had had a long talk with him. lle
said Hoover saiá that the food for Europe
ought to go particularly tu Belgium and per-
haps to Holland, and he took the position
it shouldn't go to occupied - unoccupied
France. I wasn't able to get the arguments,
but it was - he was obviously interested
particularly in Selgium.
I saw Kr. Dave Hannon Morris several days
ago, who told me that he ano another group
of people were getting up a memorandum on
the Belgian needs, which he promised to
send ше. I haven't had it yet.
Regraded Uclassified
18
- 18 -
H.M.Jr:
Well, as far as you know, nothing has been
decided, has there?
Chamberlain:
As far as I know, nothing has been decided.
If you like, Mr. Pehle and I could go over
and see Mr. Davis and ask him.
H.M.Jr:
I wish you would.
Chamberlain:
I wouldn't want to do it without speaking
to you, but if you would like to have me,
I will see if I can get it.
H.M.Jr:
Pickett, is that the name?
Chamberlain:
Pickett is the Quaker.
H.M.Jr:
If he has a memo why he thinks these people
should be fed, I would like to see his memo-
randum.
Chamberlain:
I can get that as soon as I can get in touch
with Pickett, and I can find out through the
Registrar's Office where he is.
Pehle:
We have a memorandum with regard to unoccupied
France that Pickett prepared. It was entirely
definitive.
Chamberlain:
I think I know generally what view --
H.M.Jr:
I saw that Mrs. Roosevelt saw him, or some-
thing or other, and I think he is leaning
toward doing it.
Chamberlain:
He is not leaning, Mr. Secretary, he is
strongly and openly advocating it.
H.M.Jr:
Oh, he is?
Chamberlain:
Ile is going to speak at a meeting of the
Association a week from tomorrow.
Regraded Uclassified
19
- 19 -
H.M.Jr:
Has anybody in the Treasury got the reasons why
he is for it?
Chamberlain:
I think generally he is in favor because he
thinks that in the first place, as a Quaker,
he naturally leans toward taking care of
people. lle thinks that there is not only
this great weight of refugees from northern
France but - and from Belgium - but there
also is this new weight from Lorraine. How
big that is, I don't know.
H.M.Jr:
Do you think I ought to see him?
Chamberlain:
Pickett? I think it would be interesting for
you. You would get probably the most vigorous
presentation of the cause for relief.
H.M.Jr:
Well, could you arrange the next time you are
here to have him here?
Chamberlain:
I think - I am quite sure that I could, one
way or another, yes. I expect to come down
next Tuesday. That would be next Wednesday,
Mr. Secretary?
H.M.Jr:
Yes.
Chamberlain:
I will try to arrange that, and then Mr. Pehle
could come with him. I think it would be a
good plan for both of us to be here, and pro-
bably Mr. Cochran, too.
H.L.Jr:
I will set it tentatively for 3:00.
Chanberlain:
On Wednesday?
H.M.Jr:
Wednesday.
Chamberlain:
I think we can produce him easily enough on
Wednesday at 3:00.
Regraded Uclassified
20
- 20 -
H.M.Jr:
Do you think I should see him?
Klotz:
I think it would be very interesting. I think
you would get an amazing picture.
H.M.Jr:
Have you seen him?
Klotz:
No, but I have heard so much about it.
H.N.Jr:
I like to get both sides of the story, and if
there is somebody out advocating it, I would
like to listen.
Chamberlain: Well, we will see that he is here, and I will
try to get to see either Norman Davis or
Earnest Swift, of the Red Cross, today and
find out what happened.
Bell:
Some think that by withdrawing all help from
France we are pushing the French people into
the arms of the Nazis.
Chamberlain: You see, Mr. Secretary, the point is not only
have they got to take care of their own people
but they have this number estimated around &
million of refugees from different parts of
Europe there and the Germans are just - but
the serious thing, the Germans have just sent
over this ten thousand people who are living
in very bad conditions in various camps in
France. The Germans sent over from towns in
the southern Rhineland, upper Rhineland - sent
nearly 10,000 elderly non-Aryan refugees to
camps in southern France where they are living
under very difficult conditions. We have had
that matter up and have authorized the sending
of relief.
I knew of one case that came to my attention,
and no doubt Mr. Pehle has had others, of &
man of over 80 whose family in the central
21
- 21 -
part of the United States wanted to send him
money. We did what we could to take care of
the situation.
But you can see the argument that is going to
come is two-edged. One is, the Germans are
loading these people into France to help eat
up what the - unoccupied France has got in
the way of food, and if you send food freely
into France and don't arrange that that shall
be stopped, then you will run into some diffi-
culty.
Now, I was talking with Admiral Warren, of the
State Department, who has been about there
and tells an interesting picture of the way
the Germans have been getting food for them-
selves, and he says that he thinks this ten
thousand-odd people were sent to France as a
warning to the French that they had better be
good, and the Germans could send other people
in.
H.M.Jr:
Who is that?
Chamberlain: Admiral Warren, who is the head of the Visa
Division of the State Department.
H.M.Jr:
Ought I to see him? Has he got a story?
Chamberlain: Well, he has got a story but whether it would
be worth - it would interest you very much
to hear what he has to say about the condi-
tions in Germany and the food conditions
in other parts of Europe - I don't know of
any one who has been through the country --
H.M.Jr:
I would like to see him.
Chamberlain: All right, I will try to make an appointment
with him. He may have to clear with the
Regraded Uclassified
22
- 22 -
State Department. When would you like to
see him? That would be next week, I suppose.
H.M.Jr:
Yes, next week. How long would Pickett take,
half an hour?
Chamberlain: Oh, I know Pickett very well. He would take
as much time as you have got to give him,
Mr. Secretary, but I think half an hour would
be all you need.
H.M.Jr:
Why don't we have Pickett from 3:00 to 3:30
and then bring Warren in at 3:30?
Chamberlain: I will try to get them.
H.M.Jr:
Anything else?
Chamberlain: No.
Pehle:
There has been one development in connection
with that France matter that you will probably
want to know about. Pickett has been talking
to the French here, with a view to getting
some funds from them out of their frozen funds
here to use in France, unoccupied France, and
apparently he now says they would be willing
to give him, say fifty thousand dollars and
maybe that much a month, but the French will
not make an application to do that until they
are advised that the application will be
approved. Pickett wrote a letter to that
effect and we wrote back and told him that
we were glad to know about the matter and we
would consider it if any application were
filed. We would indicate obviously how it
would be decided. That would raise the
problem in a more difficult way, I should
think.
H.M.Jr:
Well, nothing was decided?
Regraded Uclassified
23
- 23 -
Pehle:
No, I just vanted to tell you.
H.M.Jr:
How did that deal ever work out? Was it
Lithuania where we gave the people some
money to pay off a debt and they were going
to move a certain number of people out?
Chamberlain:
Mr. Secretary, that has not yet been settled.
White:
That went through.
Pehle:
No.
Chamberlain:
It hasn't yet been settled, because that was
to help them arrange for wider exodus from
Lithuania.
H.M.Jr:
Does Mr. Wiley know about it?
Chamberlain:
I don't know. We will talk to him.
H.M.Jr:
That is why I brought it up.
Chamberlain:
I will be very glad to talk to him about
it, because the matter hasn't yet gone through.
H.M.Jr:
He is the Minister to Lithuania.
Wiley:
No, sir, it is Latvia and Esthonia.
H.M.Jr:
Oh, I am sorry.
Chamberlain:
We are waiting for word that the deal can go
through. There is no use sending this amount,
forty thousand dollars, over unless it is an
inducement to make a further deal, and so far
they haven't got clearance from us --
H.M.Jr:
You might mention it to Mr. Wiley.
Chamberlain: I would be very glad to talk to him.
Regraded Uclassified
24
- 24 -
H.M.Jr:
Anything else?
Chick?
Schwarz:
If you have no objection, I think it would be
a good idea if I could tell the boys that
Ambassador Espil is coming in, because the
Argentine Embassy will tell them.
H.M.Jr:
He is bringing this - what is his name?
Schwarz:
Prebisch.
H.M.Jr:
He is bringing Prebisch with him.
White:
I might tell you, Mr. Secretary, that Mr. Pre-
bisch, if you haven't heard before, is an
extremely able and very competent man,
straightforward and very competent.
Schwarz:
I think you will want to see Joe Driscoll's
story in the Herald-Tribune. He took over
Gregory's notes from the press conference.
He emphasizes a different fact about the
base at Port Royal.
H.M.Jr:
I was amazed. It was 8. very friendly story.
Cochran:
Did you see the Argentine story in the Wall
Street Journal?
White:
Yes.
Schwarz:
Yes.
H.M.Jr:
Wiley?
Wiley:
How long should this letter be, or how short
must it be?
H.M.Jr:
Long enough to be convincing. How is that?
Regraded Uclassified
25
- 25 -
Wiley:
Very good, sir.
H.M.Jr:
Does that answer you?
Wiley:
It does.
H.M.Jr:
Merle?
Cochran:
Will you sign the Canadian silver letter?
The purchase of silver so far in these
eleven months was 109,000,000 ounces as
against 151,000,000 last year. That is
total purchases from Canada.
H.M.Jr:
I see.
Cochran:
We had a report from Jay Crane's expert in
Paris on Russia. Does that interest you
today?
H.M.Jr:
At the house.
Cochran:
All right.
H.M.Jr:
Sullivan, I announce here to you that I want
you here after the Argentinians. I don't
think I told him about this, but back in
1928, I think, Dr. Luther Gulick did a per-
fectly amazing job. He gave me a report on
the taxation of New York State for the great
sum of six hundred dollars. It was the best
report that I have ever had and we have used
it in New York State on Roosevelt's tax pro-
gram, the basis of it. Gulick gave a report
that was the basis for all we did on schools
and highways, and 80 on. He has agreed to
come to work for me on overlapping taxes. He
is outside now. I am finally going to do it,
after seven and & half years, so after I see
the Argentinians, I want you to sit in. He
is 8. perfectly grand fellow. He is on the
26
- 26 -
President's committee of three, of reorganiza-
tion. He did the job that Harry Byrd took all
the credit for in the State of Virginia. He
is really a grand fellow on taxes and he came
in and volunteered his services, and after
seven and a half years we are going to go to
town. The reason I asked him to come in this
morning, I wanted to know how far he could go,
so we could use it tonight.
Sullivan:
Is there anything else you are going to want
tonight?
H.M.Jr:
Yes, but I can't tell you.
Ed?
Foley:
Here is the correspondence with Tom Beck on
that matter that he came in and spoke to you
about. He seems to be satisfied in submitting
the thing to the Bureau.
H.M.Jr:
Did we get an honorary subscription to Life
or Collier's?
Foley:
It hasn't come in yet.
H.M.Jr:
Hold it up until you get it.
All right, you are staying, Bell, aren't you?
27
November 29, 1940
10:45 a.m.
H.M.Jr:
Hello.
Sumner
Wellee:
Henry, first of all, welcome back.
H.M.Jr:
Thank you.
W:
Did you have a good trip?
H.M.Jr:
I had a very good trip.
%:
Well, I'm awfully glad.
H.M.Jr:
Little bit too hot down there to be active
but a pleasant place to relax.
W:
Well, I'm delighted - glad you're back. Henry,
I wanted to ask you about a matter that's just
been brought to me. I'm told that you've invited
Air Marshall Downing to get here 88 quickly 88
possible and the question arises in connection
with his coming back on one of the Pan-American
Clippers.
H.M.Jr:
Well, what happened was, oh I think maybe six
weeks or two months ago, I suggested that they
bring somebody over here from the air fighting arm
who could advise with us as to that type of
plane and out of that I take it has come this.
W:
I see. I understand. I tell you, what worried
me was this.
H.M.Jr:
This suggestion 1s at least six weeks or two
months old, and it was made when Purvis was here
and then they sent me over a man - I can't
remember his name. There has been a man here
for some time - an Air Commander.
W:
Yeah.
H.M.Jr:
But I did make the suggestion that they send
us a responsible officer - I didn't name
anybody.
W:
Well, the British Embassy is using your name in
Regraded Uclassified
28
- 2 -
vain. What happened 1s this. At the beginning
of the war the State Department reached an
agreement with the Pan American Airways that they
would not transport members of the armed forces
of the belligerent powers without obtaining a
statement from such individuals that they were
not members of the belligerent armed forces,
because otherwise the airships would be in
exactly the same situation 86 ordinary merchant
vessels, subject to seizure and search. And now
that the Germans are occupying Southern France
and in view of the importance of thie man, it
wouldn't be difficult for them to send a squadron
of fest planes to force the Clipper down and take
the man off, and I think that would endanger the
lives of the passengers and be a precedent that
might create & good deal of trouble, 80 my
suggestion was going to be that we tell him
to go with the rest of his people on the boat
and not on the Clipper.
H.M.Jr:
Well, it's all right with me because there can't
be any hurry because, I don't remember the date,
but it's at least six weeks or two months ago.
W:
Well, thanke a lot, Henry. That clears it up
perfectly. They were using your name in vsin and
saying that you wanted him to go on the Clipper.
H.M.Jr:
Oh, no. It's the first I've heard about it - I
mean that he wants to get on the Clipper
.....
W:
Yeah. That takes care of it perfectly. I Just
wanted to be sure that you didn't have some
particular reason.
H.M.Jr:
I'm very anxious to see him when he comes here
but I've waited two months and BO whether I wait
a week more or less doesn't make any difference.
W:
All right, Henry.
H.M.Jr:
Thank you.
W:
Thanks so much. Good-bye,
29
Notes on Conference in the
Secretary's office 11:15 A.M., Friday,
November 29, 1940.
Those present nt this meeting Here, Secretary Morgenthau,
Najar Flast, Mr. Schnacke, and Philip Young.
Mnjor Fleet onened the conference by saying that the log
JAM was breaking, that the new Consolidated B-24 had just broken
the world's record by carrying 53-1/2 mounds per square foot of
45mg area. The Secretary inquired as to arrangements which Fleet
had ande with Sperry for the installation of the Sperry bomb
vight, and Fleet renlied that you would have to catch the planes
two months before delivery in order to get the thing installed
BA the production line.
The Secretary said that he had flown in one of Major Fleet's
Consolidated PBY's from the Virgin Islands, and in talking with
the Seve neoble down there he bad gotten the impression that the
Sherry stablizer and borth sight WAS just as good if not better
than the Norden stablizer which newmed to be a very tricky in-
servicit. Pleet said that the Norden was very tricky.
Then Major Fleet went on to SAT that all the verious changes
wre responsible for his production difficulties, but that the
wings vere nov beginning to come through from Drewster. The
Secretary asked him if he vera going to extend the wing contract
with Brewster, and Fleot replied that he WAS AS Browster had all
the tonls, Jige. etc. Further, that Brewster would have done
the job All right except for Mr. Work being sick and out of the
victure.
Fleat snid that he would have the first six 3-24's done
infore the first of the year. and the Secretary asked him if he
would really have all twenty B-24's delivered by March. Fleet
realied that the Secretary vos UD on everything. The Secretary
smid that he should be for he had spent A year and A half at It.
Flest anid that the Treasury had done more for him in the lnst
two months than everyone else nut together.
Fleet added that Foley, Buckley, end Kades had done a good
Job out on the coast. and that he thanked his stars for the day
he came into see Mr. Young because the latter wrote such n. good
renort on his problems. Fleet said that he wished he could get
these people away from the Secretary to go to work for him because
Regraded Uclassified
30
- 2 -
he knew what it was like to work for the Government as he had
done it himself for six years.
Fleet said his airport was coming along fine, and that Foley
had the whole story about it, but, of course, the runways were
not as important as the sewer. Fleet stated that there were 500
people sick every day from the sewer and that it should be fixed
by private rather than public contracts. The Secretary sent for
Foley who joined the conference. Foley assured the Secretary
that Fleet's problems were being worked out satisfactorily.
ooOoo
P4.
31
RE LOAN TO CHINA
November 29, 1940
11:30 a.m.
Present:
Mr. Foley
Mr. Cochran
Mr. White
Mr. Bell
Mr. Bernstein
H.M.Jr:
The President just called me up and told me
in strictest confidence - and this is in
strictest confidence - that he is sending
part of the fleet to the southern part of
the Philippines. He is worried about China
and he is evidently worried about something
going on between Wang and Chiang, and he
wants me to make a stabilization loan of
fifty million dollars to the Chinese in the
next 24 hours, and I know Jones was sitting
there, and he is telling Jones to make another
fifty. It would be a hundred million dollar
loan, and he says Cordell Hull insists that
we put somebody in there to manage it. We
lend them the money, but it would be under
our direction, so he said I should get hold
of the committee chairmen and notify them
that I am going to do this.
Bell:
You mean the Congressional committee?
H.M.Jr:
Yes.
White:
Oh yes, I think the statements you made about
countries being at war requires that. I
think you made it also to the House committee
and to the Senate committee.
Foley:
George?
H.M.Jr:
George?
Foley:
No, that was Foreign Relations. Wouldn't
it be Wagner?
Regraded Uclassified
32
- 2 -
Bell:
It would be the Wagner committee and the
Somers committee in the House. Of course,
at the time you made the statement you had
a loan outstanding to China.
White:
Not from the stabilization fund. It was &
collateralized loan. You said, "If at any
time I buy foreign currency to stabilize
a country at war, I will come to you, and
the Congressmen replied by asking you again -
they said they were very glad to hear that
and said that your word was as good as your
bond, or something like that.
Bell:
That was Wolcott of Banking and Currency.
H.M.Jr:
Where could we get this?
Bell:
It is in my papers that I was giving you over
the week-end to read on Argentina.
White:
Culled out all the statements that you made.
K.M.Jr:
llave you got that statement? (See attached copy)
White:
Yes.
H.M.Jr:
Is it in your room?
Bell:
It is in my room. I will get it.
White:
It is absolutely essential that you have an
American in charge of that fund, because it
could be SO handled that it would flicker
out without doing any good very quickly.
Cochran:
Did they specify or did they suggest it should
be through the stabilization fund or is it
in the central bank, or how?
H.M.Jr:
I didn't care. Ile wants to be able, evidently,
to send word to Chiang Kai-shek that he will
Regraded Uclassified
33
- 3 -
make that loan.
White:
We can tie that up so that they can use it
only gradually and it will have considerable
effect. I would be strongly opposed to, it
seems to me, using any rate which would let
them use it as quickly as they want to. It
won't serve the purpose.
Bell:
It has got to be announced at once?
H.M.Jr:
He says he doesn't want to wait more than
24 hours, but I don't know. Of course, he
was talking there for Jones' benefit.
White:
Here is one statement which bears on it. Shall
I read it? This might be interpreted to be
that we were at war, but there are others
that are clearer.
H.M.Jr:
Who is Mr. Reed?
Bell:
Reed is --
Bernstein:
A Congressman.
Foley:
Reed comes from New York. He is a Republican.
Bell:
What is that, the Ways and Means?
White:
No, that is Banking and Coinage.
Foley:
Banking and Currency.
Bell:
Reed is on Coinage, Weights & Measures.
H.M.Jr:
This is on Coinage, Weights & Measures.
Bell:
I think that is a different Reed.
H.M.Jr:
In case of war.
Regraded Uclassified
34
- 4 -
Foley:
Is China at war?
H.M.Jr:
Yes.
white:
It is not clear whether you meant we would
be at war, but there are statements that
are a little clearer. That is the thing
you really had in mind at the time, was this
European war.
H.E.Jr:
That is one. Where is the other thing? here
is the next one. liere it is again. llerc I
an saying to Townsend, "If there should be a
war, I would certainly come before the proper
committee and ask them how we should conduct
ourselves. That is in connection with our
being at war.
White:
The implication, I think, at the time was
your being at war.
M.M.Jr:
Here, Townsend says, "Does the Treasury con-
strue its authority under the stabilization
fund to include the power to deal with war-
time problems of international exchange pre-
cisely as with peacetime exchange without
further instructions from the Congress?
"Well, the best way I can answer that ques-
tion is this: In the Treasury, nobody is
thinking of war.
"Townsend: Thinking of war?
"Secretary Morgenthau: Of war.
"Senator Glass: You had better be."
Townsend says, "Well, you are different from
anybody else in the country, aren't you?
35
- 5 -
"Secretary Morgenthau: Well, I mean that in
our operations we are not making any plans
for war, in the Treasury. And if there should
be a war, I would certainly come before the
proper committees and ask them for direction
as to how we should conduct ourselves."
White:
That was war with the United States. The con-
text was that you were speaking of the United
States getting involved.
H.M.Jr:
No. But he was reading from the other statement.
White:
You will remember the discussion, in general,
at the time was about whether you would help
France and England and buy sterling if we be-
came involved in the war.
H.M.Jr:
Here: "Secretary Morgenthau: Senators, if
there is a war in any foreign country, before
we would use the stabilization fund or any
money in the Treasury to assist a country in
prosecuting that war, I would come up before
the proper committee and ask for guidance."
That is the statement.
White:
That is a clear-cut statement.
H.M.Jr:
I would ask for guidance. Now, I can't do
this thing.
Bell:
You were there before the war was declared be-
tween England and Germany, too.
H.M.Jr:
I can't do this thing without coming up before
the proper --
White:
I don't think you have to go before Congress,
but I think you ought to go before those com-
mittees, or at least before the heads of
them.
36
- 6 -
II.M.Jr:
This is the statement. I mean, that certainly
is clean-cut enough, isn't it?
Foley:
Yes. Then the only other thing would be
whether or not a state of war exists there.
H.M.Jr:
Well, that is pretty much begging the point.
White:
Except that when you made that statement there
was fighting going on there.
Bell:
And you did have the Chinese loan.
White:
No, but when you made that statement there was
fighting going on, so therefore the implication
might well be that what you were thinking of
was not of the Chinese-Japanese fighting but
of the European war.
H.M.Jr:
That doesn't make any difference.
White:
I still think you ought to go before the com-
mittee, but I doubt in my mind whether you
ought to go before Congress.
Foley:
Well, you can't go before Congress.
White:
I thought the Secretary said he was going be-
fore Congress. Maybe I misunderstood him.
Foley:
Well, I think that he meant only the com-
mittees.
H.M.Jr:
Well, - "Townsend: Does the Treasury con-
strue its authority under the stabilization
fund to include the power to deal with war-
time problems of international exchange pre-
cisely as with peacetime exchange without
further instructions from the Congress?"
White:
Yes, but you don't say no. I think you dodge
Regraded Uclassified
37
- 7 -
that question, and in any case you aren't now
dealing with it precisely as --
H.M.Jr:
But this thing, you know I asked you once be-
fore. You looked through it before and you
couldn't find anything that time. You used
to argue with me about this.
White:
I have said that there is never any reason why
you should undertake stabilization operations
with either China or Japan.
Bell:
Didn't you look through it on South America?
White:
Chile was the question.
Cochran:
The twenty million dollar arrangement you have
for purchasing yuan expires at the end of
December. There might be some possiblity of
working in a new arrangement there. I suppose
this would be one without collateral.
White:
Well, it would have - no, you might be able
to work something.
H.M.Jr:
Just & second, gentlemen. Let me just read
this. Here is the final thing which just
clinches this thing. There are two places
here. Just reading it casually - I know
when the President wants something, he wants
it. Here is the one. It is in my letter
to Vandenberg. (See attached copy)
White:
Letter to Vandenberg?
H.M.Jr:
Yes. Vandenberg writes me, "I should like
to inquire - if I am entitled to the informa-
tion - whether the stabilization fund is now
being used in connection with the stabilization
of the British pound and the French franc; and
whether there is any stabilization agreement
Regraded Uclassified
38
- 8 -
under which we continue to operate in con-
junction with England and France or any other
foreign countries."
"When I appeared before the Senate Committee
on Banking and Currency last March, Senator
Taft raised the following question:
"Suppose there is 8. foreign war and suppose
you go out and do what you can to buy two
billion dollars worth of pounds: Isn't the
effect of that to give England the power to
buy two billion dollars worth of goods in
this country under the cash-and-carry pro-
visions?"
Then I say, "I would like to reaffirm the
position which I took at that time. My reply
was, and still is, as follows:
"'Senators, if there is a war in any foreign
country, before we would use the stabilization
fund or any money in the Treasury to assist
any country in prosecuting that war, I would
come up before the proper committee and ask
for guidance."
White:
I say we are committed to that.
H.M.Jr:
That covers the whole thing.
White:
I think that one statement --
H.M.Jr:
No use going through the whole thing.
White:
And that letter has better status, anyway,
than oral statements before the committee,
because it refers back to another reference.
H.N.Jr:
Speak out loud, Bernie, I can't hear you.
Regraded Uclassified
39
- 9 -
Bernstein:
I didn't think you said that in the letter.
H.M.Jr:
All this whispering - either talk so I can
hear, or not.
(Miss Chauncey entered the conference)
Get me these two letters, please: Morgenthau,
dated October 24, to Honorable Arthur Vanden-
berg. That is 1939. Also Senator Vandenberg's
letter to me, October 17, 1939. Get those
two, will you? And hurry.
What is it, Bernie?
Bernstein:
I thought the statements could be made orally.
I don't know whether it is much different
whether it is oral or in writing.
H.M.Jr:
But this goes back to my conversation where
I reaffirm it. Senator Taft asks me and I
repeat in my answer. It is much better to
have the two letters and show them to the
President. I have got to ask to come up to
this committee for guidance.
White:
I think there is no way out. Your honor is
at stake on that matter of coming to them for
guidance. It is not 8. legal question. It
is a question of a promise that you made,
and you might not take their guidance. After
you have presented it to them, you can act
accordingly, but I think you are morally
committed to come before those committees and
state your case, as a personal matter.
H.M.Jr:
I can't do it any other way.
Cochran:
No, it is such a departure from your practice
with the fund that you should.
White:
And it is up to the President to get that
Regraded Uclassified
40
- 10 -
committee to acquiesce, although you can act
without their acquiescence. I don't know
that you are committed to taking this guidance.
I don't know what the status of that is, but
you are certainly committed to talk to them
about it.
Bell:
If you ask their guidance, are you going to
ask it and then ignore it?
White:
It is quite possible. The responsibilities
of the Secretary are not theirs.
Aside from that one point, if there are any
funds to be extended, there are ways of
partially protecting it and there are other
funds available which if, let us say, 50
million dollars were made here, that thing
could be made to 100 million dollars or
150 million, using funds which they promise
they would ship in, the Chinese banks.
H.M.Jr:
Well, look, I can't do this in 24 hours. I
can't get - no committee is going - I can't
get this committee.
Bell:
They are not in town. They can't get a full
committee. You might get the chairmen. A
lot of these people have gone home.
White:
Well, you might announce - this is a possi-
bility. You might announce that you are
going to undertake stabilization operations.
Now, the terms and the conditions, which
don't have to be announced, can be such that
in effect there will be no risk unless and
until the committee - 80 that you could get
the effect. There is no sense - they don't
need the money right away, anyway, Mr. Secre-
tary.
H.M.Jr:
Now, wait a minute. Why can't Jones do this
Regraded Uclassified
41
- 11 -
thing? Why does he sit there and tell the
President, "Why don't you call up Morgenthau
and get him to chip in 50 million?"
Bell:
This is probably a fifty-fifty proposition
with Jones, the same way as the Argentine.
White:
I think there is a substantial difference
between the stabilization operation and
their loan and I don't think they serve
the same purpose, and I think that particu-
larly if they are going to chip in fifty
I think that you can SO arrange the stabiliza-
tion that there is very little risk, very
little risk, that the risk will be borne
by him, not by the stabilization fund.
Bernstein:
Merle, were the original terms of the Chinese
loan 50 million, rather than 20 million, to
which it is now reduced?
Cochran:
I don't recall.
Bernstein:
If it were 50 million, could you simply
announce that you were prepared to extend
that loan - the outstanding stabilization
arrangement of 50 million dollars, and as
Harry says, you don't have to announce the
terms, and then when you rearrange your
terms perhaps you can eliminate the gold
provision.
White:
You can either fix the terms so that you can
be a substantial help, or you can fix the
terms so that all it amounts to is publicity,
without any actual content. It doesn't re-
quire any action now.
H.M.Jr:
What you fellows are saying doesn't make
sense to me, because I don't know what
you are talking about.
Regraded Uclassified
42
- 12 -
White:
I mean you could make an announcement that
you were going to extend the stabilization
loan or undertake stabilization agreements.
I wouldn't say stabilization loan. And if
you don't mention the terms and the condi-
tions now, but leave that for subsequent
decision on your part, you can later decide
upon such terms and such conditions that
will yield no risk or loss.
H.M.Jr:
Well, let me just - let me do a little ques-
tioning, will you, so I can get this thing
in my own way? Isn't that a 50 million
dollar loan now?
Cochran:
It is twenty. They have borrowed twenty
from us.
H.M.Jr:
I thought it was a 50 million dollar loan.
White:
It originally was more than that. They have
paid part of that back.
H.M.Jr:
Wasn't it & 50 million dollar loan?
White:
It was almost. I think it was 47.
Cochran:
I will have to check up on that.
Foley:
Can't you reinstate that?
H.M.Jr:
That is what Merle was saying.
Foley:
Let's find out.
Cochran:
Let me find out.
H.M.Jr:
Go find out.
Cochran:
Because it expires, you see, and we have to
fix it up by the 15th.
Regraded Uclassified
43
- 13 -
H.M.Jr:
Of what?
Cochran:
Of December.
H.M.Jr:
If that could just be extended --
Foley:
It was outstanding at the time you appeared
before the committees, and this statement
of yours could apply to future operations
and not to operations that have been made
before.
White:
If they collateralize that with gold and
silver, they haven't got that now, but they
may have the other things that they may be
able to collateralize the --
Bell:
You can change the collateral.
White:
You can change the collateral, possibly, so
if they have got 20 million collateral that
can go against the 50 - but my point is
that when it comes to the actual use of
those funds, you can hedge it in so that
you aren't taking any risk.
H.M.Jr:
No, but you have got this statement in this
letter from Vandenberg. I have got to cross
that thing and I am not going to go around
the block about it. I have got to do it.
(Miss Chauncey reentered the conference)
Look, Miss Chauncey --
Chauncey:
Give you a copy of that?
H.M.Jr:
How long will it take you to give me a copy?
Is that Vandenberg's letter to me?
Chauncey:
That is your letter to Vandenberg. Maybe
Regraded Uclassified
44
- 14 -
I can get a copy from Mr. Foley's office.
Bell:
Not that one, I don't think.
H.M.Jr:
That isn't the part I want.
Chauncey:
Here is the incoming.
H.M.Jr:
This isn't the right letter.
Bell:
That is the gold letter, isn't it?
H.M.Jr:
This isn't Miss Chauncey's fault. The person
who has done the reference is wrong.
Bell:
That is the gold letter.
H.M.Jr:
Letter from Secretary Morgenthau dated
October 21. Well, whoever did this is wrong.
I mean, they have done - whoever did this
reference work here is --
White:
Your (Bell's) batch contains the letters.
H.M.Jr:
Who did this work?
White:
It is either the stenographer's fault or
the typists's fault or the man who copied
it, but I gave him the original batch of
the letters so he can have the letter from
which that was excerpted.
H.M.Jr:
It is the answer to this letter.
Chauncey:
That is right.
H.M.Jr:
Yes, but this is - where is the answer to it?
Chauncey:
This is your answer, right here.
H.M.Jr:
No.
Regraded Uclassified
45
- 15 -
Chauncey:
You are replying to Senator Vandenberg.
H.M.Jr:
Yes, but look, Miss Chauncey, then We go on
here. This is an extract from it that has
to do with the stabilization.
Here it is; it is here. It is all right.
I have got it. Now, what I want is a copy
of my letter to Vandenberg and Vandenberg's
letter to me. I want this and I want a copy -
maybe it is here.
What are they looking for now?
Foley:
They are getting the information in regard
to the stabilization loan to China, when it
was made and the terms.
White:
I think both committees might acquiesce, but
if you are going to bring it before the com-
mittee, I would like to prepare the kind of
plan you are going to show them. There
wouldn't be 8 great deal of risk.
H.M.Jr:
That goes without saying.
Foley:
Well, if the chairman would assume the re-
sponsibility --
White:
Could he?
Foley:
Yes.
White:
Chairman of the minority committee?
Foley:
Yes.
Cochran:
Yes, that was up to 50 million dollars. Then
they paid back some of it. They have reduced
it down to 20 million. The original agree-
ment was for 20, and then they increased it
to 50, and now it is down to 20 again.
Regraded Uclassified
46
- 16 -
H.M.Jr:
Well, is the original for 50?
Cochran:
No, the original was for 20 and then they
increased it to 50 and they went up as high
as 48, utilizing that. Now they have reduced
it down by repayments to 20.
H.M.Jr:
I mean, have they got, 80 to speak - have we
got an agreement with them? Have we ever
cancelled the 30 million outstanding?
Cochran:
I would have to look through this whole thing.
Bernstein:
The agreement is for 50 million and that has
been extended from time to time, but as Merle
says, they only took up to 20 if their present
commitments --
H.M.Jr:
Could they come in tomorrow and say, "We
would like to have the balance of the 30"?
Bernstein:
Sure.
White:
They left the gold for collateral for that
amount.
H.M.Jr:
Is the gold here?
White:
Twenty million of it. It is all covered.
It really isn't a loan. They have covered
with gold for the value of the loan now. You
described that operation specifically before
the Senate committee. That operation was
described in detail, that kind of operation.
It isn't quite the kind of operation which
is contemplated now.
Foley:
It is a revolving fund, Mr. Secretary. It
says the total amount purchased by them and
standing to their credit on our books.
Bell:
It shall not exceed fifty.
(Telephone conversation with Jesse Jones
follows:)
Regraded Uclassified
47
November 29, 1940
12:15 p.m.
Jesse
Jones:
Hello, Henry.
H.M.Jr:
Are you just back from the White House?
J:
Just back. How are you?
H.M.Jr:
I'm all right. How are you?
J:
Oh, I'm pretty good. Been romped on a little bit.
H.M.Jr:
What?
J:
I got romped on a little bit.
H.M.Jr:
Romped on?
J:
Yeah.
H.M.Jr:
How much?
J:
I couldn't tell whether it was 10, or 25, or 50
or 100 or a billion. Different figures - different
amounts.
H.M.Jr:
Well, I don't know just - are you alone?
J:
Yeah.
H.M.Jr:
Here's my situation. Of course, you were there
when the President wae talking to me. I've got
a letter that I wrote to Arthur Vandenburg. See?
In which I - I won't read the whole letter - but
I simply say this - I say: "I'd like to reaffirm
the position that I took at that time". That
was before I appeared before Senator Taft. I say,
"Senators, if there 1s a war in any foreign country,
before we would use the Stabilization Fund or any
money in the Treasury to assist any country in
prosecuting that war, I would come up before the
proper Committee and ask for guidance." Now,
that's pretty plain ien't it?
J:
Why don't you do that? Who is your Committee,
Henry?
Regraded Uclassified
48
- 2 -
H.M.Jr:
Well, it's Banking and Currency in the Senate
and Weights, Coinage, and Measures in the House.
Now, I can't make any commitment before - I've
given my word I'll ask for guidance. You
wouldn't, would you?
J:
No, I certainly wouldn't, but I would go see
the Committee.
H.M.Jr:
Oh, I'm perfectly willing.
J:
Yeah, I'd do that.
H.M.Jr:
But I can't do that between now and tonight.
J:
Well, no, I don't think you could possibly.
H.M.Jr:
Can't even locate Wagner. I've been trying to
locate him ever since the President called me,
but how are you fixed on your borrowing power.
J:
Well, what I have told Soong - Cordell wanted us
to get up a minimum of $100,000
......
H.M.Jr:
$100 million.
J:
$100 million, and I had Soong down and I told him
I didn't see how we could go beyond another 25.
That would be 100 total for the bank.
H.M.Jr:
You've already given them 50.
J:
We've already given them 75 - 70 maybe, and 80 I
suppose we could work around and commit a little
bigger crime and make it 50 if that is absolutely
necessary and it seems to be pretty necessary
because they're saying they are going to send
these shipe and things all of which 1s a good big
move and so
H.M.Jr:
Well, I tell you, I'm certainly going to bring it
up at Cabinet and I'm going to read this letter.
I'll cheerfully go before the Committee and ask
for guidance and I'm perfectly willing to recom-
mend it but I can't do this until I get a chance
to appear before the Committee.
J:
Well, I think you can get that Monday.
Regraded Uclassified
49
- 3 -
H.M.Jr:
Oh, sure, if they'll come to town.
J:
Yeah. I think there ought to be enough of them
come - I would think.
H.K.Jr:
Well, we need some Republicans.
J:
That's right. Poor John Townsend - he's always
pretty cooperative and he's just had e very
serious - loss of his son. But anyway
......
H.M.Jr:
Well, I'm going to bring it up.
J:
O.E. Anything you want me to do you let me know.
H.M.Jr:
Yeah. But I don't see that there 1s any - I
told the President I'd ask you to come - get
together with you, me and Soong, but I don't
see any sense in it until I get before the
Committee, do you?
J:
No, I don't think SO. Anyway I saw Soong day
before yesterday and he 1s coming back here about -
I told him to see what he could work out on e
basis of 25 and when he comes back why - that'll
be the first part of the week, I suppose, or it
might be before. But whatever tack you want me
to take why let me know and I'll try to do it.
H.'.Jr:
Well, that's fair enough. Well, I tell you, I'm
going to try to get these Committees and I'll see
you at 2.
J;
O. K.
R.M.Jr:
Thank you.
J:
Thank you.
Regraded Uclassified
50
- 17 -
H.M.Jr:
Well, I think the thing to do, gentlemen,
is this.
(Telephone conversations with Tom K. Smith
and Senator Wagner's secretary follow:)
51
November 29, 1940
12:20 p.m.
Tom
Smith:
Henry?
H.M.Jr:
Yeah.
S:
This is Tom Smith. How are you, Henry?
H.M.Jr:
I'm all right.
S:
Henry, I wanted to see you a moment and I thought
if you had a moment tomorrow morning I'd come
down to Washington.
H.M.Jr:
I can't do it Tom.
S:
Can't do it.
H.M.Jr:
No, I'm all tied up tomorrow. What's on your
mind?
S:
Well, here is the point. I didn't want to
talk to you about it over the telephone but I'll
have to. My son has applied for a commission
in the Ordnance and he's been recommended by the
local area and I understand that there are 80
many applications in there that unless some
interest is taken in it they never get anywhere.
I wondered if you could help me out on it.
H.M.Jr:
An application for what?
S:
Second Lieutenant in the Ordnance Department,
in the Ordnance Corps.
H.M.Jr:
Well, I tell you what let me do, Tom.
S:
What did you say?
H.M.Jr:
Let me switch you on to McKay and he can make
notes of the son's name and all the rest of
that, you see, and then I don't know whether I
can do anything but I'll take a look at it.
S:
Well, I'll give it to McKay then.
H.M.Jr:
Just a second.
S:
All right. I hope you can, Henry.
Regraded Uclassified
52
- 2 -
H.M.Jr:
I'd see you any time but I just can't do it
tomorrow.
S:
I see.
H.M.Jr:
Just a minute. Hello.
Operator:
Operator.
H.M.Jr:
Give Mr. Smith to Mr. McKay please.
0:
All right.
Regraded Uclassified
53
November 29, 1940
12:23 p.m.
H.M.Jr:
Hello.
Sen. Wagner's
Secretary: Yes.
H.M.Jr:
Miss Ruppert, Henry Morgenthau.
Miss
Ruopert:
Yes, Mr. Secretary.
H.M.Jr:
I wonder if you can help me out. The President
has asked me to make a Stabilization loan to
the Chinese Government. When I appeared before
the Finance Committee - Banking and Currency -
during the course - I said to Senator Taft that
before I would make any loan to any country that
was at war, I would come up and ask for guidance.
See?
R:
Come up and do what?
H.M.Jr:
Ask for guidance. Then I followed it up and
confirmed that in a letter to Senator Vandenburg.
R:
Yeah.
H.M.Jr:
Now, inasmuch as this 1e up and the President
wants action, I wondered if I can't get possibly
a joint meeting between both Banking and Currency
and Weights, Coinage and Measures in the House
and let me appear before both of them or as many
of them 88 can come on Monday.
R:
You want that meeting arranged Monday.
H.M.Jr:
Yeah.
R:
You want to get a joint meeting of the Banking
and Currency and Wages
H.M.Jr:
Weighte, Coinage and Measures.
R:
and Coinages of the House. Did the
Senator reach you?
H.M.Jr:
You mean in the last half hour?
Regraded Uclassified
54
- 2 -
R:
Yes, in the last half hour.
H.M.Jr:
No, I've been trying to .....
R:
Well, I gave him your message - District 2626.
Now, he was just about to go into the Senate.
I'm going to have him call you again. He
probably tried to reach you but maybe your line
was buey.
H.M.Jr:
No, no, no.
R:
He didn't try?
H.K.Jr:
No.
R:
Well, he's got the message and I'll call him
back and see - but this 18 really what you want -
you want a joint meeting and you want to appear
before that meeting to present to them the plan
for making a loan to the Chinese Government.
H.M.Jr:
That's right. Out of the Stabilization Fund.
R:
Yeah. All right. I'll call you back 88 soon
as I can reach him.
H.M.Jr:
Right. Hello.
12:25 p.m.
H.M.Jr:
Hello, Miss Ruppert.
R;
Yes.
H.M.Jr:
If this is going to be held, I just wanted to
tell you that I want it kept confidential.
R:
Yeah. Well, what I had intended to do - I'm
trying to reach the Senator now - to get him and
talk to him.
H.M.Jr:
Right, but I just - it was stupid of me not to
say it in the first place, because this 18 B.
highly confidential matter.
Regraded Uclassified
55
- 3 -
R:
Well, I'm not mentioning it to anybody except
the Senator and I'll say to him that this is
very confidential.
H.M.Jr:
Yeah, it's dynamite.
R:
Right.
H.M.Jr:
T.N.T.
R:
I understand.
H.M.Jr:
O. K.
1
R:
Thank you.
56
November 29, 1940
12:55 p.m.
H.M.Jr:
Hello.
Senator
Wagner:
Hello.
H.K.Jr:
Hello, Bob.
W:
Hello, Henry.
S.N.Jr:
It never raine but what it pours.
%:
What's the trouble?
3.1.Jr:
Well, strictly in confidence, the President
called me up this morning and he said it is
very important that Jesse Jones and I together
make a loan to the Chinese and he wente me to
make a Stabilization loan out of the Stabilization
Fund.
3:
Yeah.
H.M.Jr:
Well, in going through my correspondence I find
that I wrote a letter to Speaker Bankhead and
one to Arthur Vendenburg in which I said I would
not make any loan out of this Fund to any country
at war without coming before the Committees and
asking for their guidance.
Yes.
H.M.Jr:
Now, China may not have Geolared war on Jepan
or vice versa, but she 1E certainly at war, 1sn't
she?
#:
on, I suppose so. I don't know as anybody would
raise any question.
M.M.Jr:
And the thing that I had in mind was that if you
end Somers would call a meeting Monday I'd abbear
before them and ask them for guidance.
W:
Yeah, if I can get anybody here. You know there
are only a few fellows here now but I'll do it,
Henry.
H.M.Jr:
Well, you think in view
......
Regraded Uclassified
57
- 2 -
W:
Well, you wrote to Vandenburg - I don't think
the Committee would - you didn't say anything that
you would - oh, you said you would come before
the Committee.
H.M.Jr:
Just a minute and I'll tell you exactly what I
said. In a letter I said, "I want to reaffirm
- it was in answer to a question originally
from Taft. You see?
W:
Yeah.
H.M.Jr:
I said: "Senators, if there is a war in any
foreign country, before we would use the
Stabilization Fund or any money in the Treasury
to assist any country in prosecuting that war,
I would come up before the proper Committee and
ask for guidance."
W:
Yeah. Well, do you think you ought to try and
have a meeting - call a meeting for Monday?
H.M.Jr:
Well, I'd like it - the President wanted me to
do it in twenty-four hours but I wanted
.....
W:
Well, hell, I haven't got anybody here.
H.M.Jr:
No, but I wanted to tell him that I could do it
Monday morning or Monday afternoon.
W:
Yeah.
H.M.Jr:
Now, I got in touch with
.....
W:
I tell you, Henry, what I could do - let me try
in the next hour to find out how many members -
I'm sure there aren't more than three or four
out of the nineteen that are here. That wouldn't
be quite enough, do you think so?
H.M.Jr:
I don't think 80 in view of
......
W:
And I can understand your position - having said
that you've got to keep straight with Congress.
H.M.Jr:
Well, after all, the only thing I've got is my
word .....
W:
Yeah, that's right
.....
58
- 3 -
H.M.Jr:
and that's the most valuable
.....
I think It 18 very important.
And you EEP Taft asked ze, then Vandenburg
went after me and I made all of this correspondence.
What I've read to you I gave out to the newsoapers,
at the time,
1eah. Well, must it be done SC acon?
H.D.Jr:
According to the President, yes.
Well, I tell you what I shall try to do - today
1s Friday. I can send some telegrame to the
absent members and ask them to be at a Committee
meeting on Monday morning to heer the Secretary
of the Treasury. How would that be?
H.W.Jr:
On 8 confidential matter.
Yeah, on a confidential matter, and see how
much response I DAT. get.
Well, and I'll appear before whoever 1s there.
Yeah. Tuesday, of course, would give them a
little more time, but you think that would be
too late.
H.M.Jr:
Well, the way the President 1e telking, I'd
rather have it Konday.
=
Ca, all right, Henry.
And the way I feel about it is we've given them
notice. You and I keep feith with them. If they
don't show up well
Yeah. That's All right, that ien't your fault.
That Len't my fault. And Somers office 16 weiting
to be advised by you what you'd like to do and
he'll do whatever you do.
K:
Well, I'll call a meeting for Monday,
H.M.Jr:
It'd be B joint meeting.
Regraded Uclassified
59
- 4 -
W:
Well, I don't know about & joint meeting.
H.M.Jr:
Well, I don't want to appear twice - once before
W:
Yeah.
H.M.Jr:
Why can't 1t be a joint meeting?
W:
Well, except that I - you know those boye over
there are their own masters and
.....
H.M.Jr:
Well, Somers is
......
X:
What Committee over there was it - Banking?
H.M.Jr:
No, it's Weights, Coinage, and Measures, and
Somers 18 willing to do it.
W:
Oh, Somers! The Judiciary, is 1t?
H.M.Jr:
No, Somere of Brooklyn.
W:
Oh, it was his Committee. I eee. Oh, yes.
H.M.Jr:
And he's willing to come to any place that you
designate.
W:
All right. Well, that's fine.
H.M.Jr:
No, it's Somers of Brooklyn.
W:
Oh, I see, it's that Committee. I was thinking
of Banking and Currency.
H.M.Jr:
It's not Steagall.
W:
All right.
H.M.Jr:
And Somers will come and call his meeting at
any place that you say. Don't you think it's
easier than to have to do the damn thing twice?
W:
Oh, yes. Yes, well, I was thinking of Henry
Steagall.
H.M.Jr:
No, no.
W:
Terrible man to handle.
60
- 5 -
H.M.Jr:
No, Somers 18 B nice fellow,
#:
on, yes. I know him very well. Yee, I can
work with him.
H.M.Jr:
And his girl talked to him and said whatever
you say, If you'll let her know, his secretary,
she'll get out the word - whatever Senator
Wegner wents - time and place.
%:
All right.
R.M.Jr:
Cf a joint meeting and simply say 8 confidential
matter.
%:
Yeah. All right.
9.1.Jr:
0. K.?
%:
All right, Henry.
H.M.Jr:
You BAW the President?
%:
I SDW him. Yeah. Say, the General came after
me. My God, you know, a little bluffing, but I
didn't know how to get out of it. I said, oh,
I was only fooling.
H.M.Jr:
Well, you saw him, didn't you?
%:
But I was on the level - yes, I talked to him
and now what he said - he seld, 80 right on with
1t. Well, I told him I was kind of working with
you on the thing.
H.M.Jr:
Good.
%:
But he said, I don't see any objection to going
into these money questions - we've got to know
something about them, and of course, he said
one thing which was true - he said, you know
neither you nor I know an awful lot about this.
I seld that's true. (Laughs). All right.
S.N.Jr:
Bob
V:
Finally the General apologized in every way and
said I got in the house whenever I wanted and
Regraded Uclassified
61
- 6 -
all that - - you know.
H.M.Jr:
Yeah.
V:
Cheer up. Yeah.
H.M.Jr:
You'll let me know what time it will be.
W:
Well, I'll tell you know. It'll be 10:30 on
Monday.
H.M.Jr:
10:30 Monday.
W:
And if I'm the only one there I can't help it.
H.M.Jr:
I can't either.
V:
Yeah. All right.
R.M.Jr:
All right.
W:
Good-bye.
Regraded Uclassified
62
- 18 -
H.M.Jr:
I think that is the thing to do, don't you?
Foley:
Yes.
E.M.Jr:
I am thinking when I go to Cabinet I will
tell the President I have asked for this
now, and he will just have to be patient
until Monday.
"
Foley:
shall not at one time exceed in the
aggregate one hundred million dollars."
It does call for gold as collateral.
R.K.Jr:
Ed, I don't want to see it. I will tell
you why in a minute.
Suppose I worked out B. way and said, "Well,
we had an outstanding loan, and so forth.
Vandenberg could just take it and tear me
to pieces. Damn it, these fellows have
given ne this loan three times on the good
faith in Henry Morgenthau, Jr. Even if I
didn't hold my word as the highest thing I
have got, it would still be stupid to do it,
because I have got to go up again in June
and that is all these fellows would need to
take it away from me.
White:
Each one of the years would be sufficient.
Foley:
Well, I am merely showing you what you have
got.
(Telephone conversation with Congressman
Somers follows:) from pape,
Regraded Uclassified
63
November 29, 1940
12:27 D.M.
Operator:
Miss Roche, Congressman Somere' secretary.
H.W.Jr:
Hello.
Miss
Roche:
Yes, Mr. Secretary.
H.M.Jr:
How-do-you-do. Miss Roche, I want to talk to
you about a highly confidential matter which I'd
like you to get to the Chairman.
R:
Yes.
S.M.Jr:
When I appeared before the Committee for the
extension of the Stabilization Fund, I said before
I would make any loan to any country which was
at war, I would come up and ask for guidance.
R;
Yes.
H.K.Jr:
Now the President has asked us here to make a
loan to the Chinese Government. I'd like to do
it but I don't want to do it without doing what
I said I would do. You see?
R:
Yes.
H.M.Jr:
Now, I've spoken to Senator Wagner's secretary
and the suggestion I've made is that if possible
Monday a joint meeting be held between Mr. Somers'
Committee and Senator Wagner's Committee which
I could appear before and explain what the loan
is and carry out what I sald I would - 86k them
for their guidance.
A:
Yes.
H.M.Jr:
Now do you suppose you could get that word to
Mr. Somers?
R:
Yes, I shall call him right away.
H.M.Jr:
Will you? And have him get together with Senator
Wagner on the possibility of arranging it, and
possibly Monday.
Regraded Uclassified
64
- 2 -
R:
Yee.
H.M.Jr:
And will you also stress that this is terribly
confidential because if by any chance it were
turned down, I mean, it would be very harmful
R:
Yes.
H.M.Jr:
.....
to our whole position in the Far East.
R:
Yes, I understand.
H.M.Jr:
And you'll let me know.
R:
Yes, I will.
H.M.Jr:
And if for any reason you get word and I should
be at Cabinet, would you speak to Mr. Bell, the
Undersecretary?
R:
Yes, I will.
H.M.Jr:
Thank you.
2:
All right. Thank you.
Regraded Uclassified
65
November 29, 1940
12:50 p.m.
H.M.Jr:
Hello.
Operator:
Miss Roche.
H.M.Jr:
Hello, Miss Roche.
Miss
Roche:
Mr. Secretary, I have just called Mr. Somers
on long distance and given him your message and
he has given me instructions to call the
Committee members and have them ready for a
Committee meeting - Executive Committee meeting I
Monday morning and has asked me to get in touch
with Senator Wagner and have him decide the hour
and the place and the meeting. However, I didn't
want to call the Senator's office without advice
from you as to whom you had spoken to over there.
H.M.Jr:
Yeah. Well, it's Miss Ruppert.
R:
Miss Ruppert.
H.M.Jr:
I couldn't locate the Senator. Mise Ruppert
knows all about it.
R:
Well, then I shall get in touch with her and
leave the plans of the meeting up to her.
H.M.Jr:
Do you know Mise Ruppert?
R:
Yes, I do.
H.M.Jr:
Good. Well, then if you'll talk to Miss Ruppert -
I say, would you talk with Miss Ruppert.
R:
Yes, only.
H.M.Jr:
Only.
R:
Yes.
H.M.Jr:
Thank you.
R:
All right, sir.
66
- 19 -
White:
Ed doesn't disagree with that.
Foley:
I don't disagree with that at all. I just
wanted him to know all the tools that he
has.
M.M.Jr:
Well now --
.hite:
You speak of it as a loan, Mr. Secretary.
I wonder in the light of what - if you may
do it later, in the realities of the case
anyhow, if you could refer to it as stabiliza-
tion operations? It is not really wrong.
lie get yuan for it. If you are going to
meet them Monday, I think we will have to
concentrate on getting as comprehensive and
specific and clear-cut 2 proposal between
now and then as we can.
11,11,Jr:
She has got this thing mimeographed.
Mite:
Yes, we released the letters.
Bernstein:
You also have a letter to the Speaker. (See attached
copy)
EMP:
Have I?
Bernstein:
Yes.
E.V.Jr:
What does it say?
Bernstein:
Same thing. You nuote from your letters to
the Senate.
M.D.Jr:
What do I say to the Speaker?
Bernstein:
You say - it is right here. On top of that
is a letter to Congressman Somers.
11.20.Jp:
A letter to the Speaker would be ample. I
can't keep getting - Harry, you and I argued
Regraded Uclassified
67
- 20 -
about this once and you kept saying I never
said I wouldn't make 8. loan.
Bell:
I think it was on South America.
White:
That was Chile. You said, and I said, it
wouldn't apply to Chile.
H.M.Jr:
Well, it doesn't apply to South American
countries.
White:
It doesn't apply to any country that is not
at war. And you remember when the China case
was up before, Mr. Secretary, and I recommended
the loan, I said I also recommended that you
first go before the committees.
H.M.Jr:
I don't remember that, but I will take your
word for it.
White:
That would be a necessary step in the process
if you thought you wanted to do that.
H.M.Jr:
Miss Chauncey, if I could have this by five
minutes of two. This is from Bernstein's
files. You may be able to find it in our
own. This is my letter from Speaker Bank-
head. I want that copied.
This is & nice job I have as Secretary of the
Treasury!
White:
24-hour policy.
H.M.Jr:
Why does anybody want it?
Foley:
Plenty do.
H.M.Jr:
As I tolá Fleet --
White:
There is a waiting line from here up to
Johnny Hanes.
Regraded Uclassified
68
- 21 -
H.M.Jr:
Major Fleet was in, thanking me for every-
thing, and 80 forth, and I said, "Major,
I am sore at you." "Why?" I said, Because
everybody you meet in the Treasury you have
offered a job to, except me." He had no
answer, did he?
Foley:
No.
White:
He was pretty nice to the Commandant out
there. Maybe he was offering him a job.
H.M.Jr:
He offered Foley $30,000 a year, didn't he?
I am not going to help anybody get any com-
missions (referring to Tom K. Smith, Jr.).
White:
He can get a commission on his own merit.
Is that what he wanted, or to get put in
the Ordnance?
H.M.Jr:
Put in the Ordnance.
White:
Then he has no commission.
H.M.Jr:
He has applied for B. second lieutenancy. He
has been drafted, you see,
White:
Maybe you can get him a commission in the
infantry.
Foley:
This was a New York Times headline last time.
H.M.Jr:
Who said that?
Foley:
You did.
H.M.Jr:
What did I say?
Foley:
It is right here (indicating newspaper clip-
ping). (Laughter) That is what I say, who
is at war?
Regraded Uclassified
69
- 22 -
White:
Mr. Secretary, you didn't tell him to tell
that to Knox, did you?
H.M.Jr:
What?
White:
What you just said about that commission?
I mean, for Smith.
H.L.Jr:
Oh, no.
White:
I was afraid for & moment you sent the message
back that way. Excuse me.
H.M.Jr:
I don't see what else there is we can do right
now. I will simply go to Cabinet with these
two documents, that is all, and simply say to
the President, "I have gotten busy and I have
asked them for a chance to appear before them
and I have got to carry this thing out."
Foley:
Don't you think we could go ahead and set this
up the best way we can?
H.M.Jr:
Oh, sure.
Bell:
It may be that when we find that you have got
to go to Congress - when the President finds
that, that he would rather get it through
some other means. You don't think there is
a chance?
ILM.Jr:
What?
White:
It is the committee, not Congress.
U.M.Jr:
I had a dream about it.
Bell:
Is this another dream come true?
H.M.Jr:
No, I said I had a dream about this. If I
have to go to Congress, maybe we could put
the screws on Jesse Jones. When we go up,
Regraded Uclassified
70
- 23 -
I an going to ask Mr. Hull to go with me,
or send somebody with me, to explain the
necessity as B. foreign policy.
Cochran:
Let them decide whether they want the fund
to be used for a political loan.
H.M.Jr:
Let who?
Cochran:
The committee up there.
White:
We have been following their price movements.
They are getting very bad and there are good
economic reasons if there are no political
reasons.
H.E.Jr:
It is & loan of expediency.
Look, if I hadn't, in order to get this thing
through, tied myself up this way, if you said
to me, Mr. Morgenthau, do you think it is
worth a hundred million dollars to keep Chiang
Kai-shek fighting?" You don't have to ask me
that. Who the hell got through the first loan?
I got through the first loan and I couldn't
get it until Hull was out of the way down to
Lima. There is no question of how I feel
about the thing, but these fellows up in
Congress believe me, and when I say that I
won't make this kind of & loan without ask-
ing them for their guidance, they take me at
my word and that is what my whole standing
in town is based on and I am not going to
dodge around that. I don't think any of you
would recommend it.
White:
There is no reluctance on your part to go
before the committees?
H.M.Jr:
None whatsoever. I never had any reluctance
on this thing.
Regraded Uclassified
71
- 24 -
Bernstein:
If Mr. Hull insists that there is no state
of war existing in any sense and is pre-
pared to take the responsibility for the
statement that no war exists, they will
put the question to you under those cir-
cumstances, and you still feel committed
to go up to the Hill? Supposing that ques-
tion was put to you in Cabinet?
H.M.Jr:
That what?
Foley:
That there is not a war.
H.M.Jr:
I still feel I have to go up.
White:
You do?
H.M.Jr:
Sure.
Bell:
There is a lot of fighting going on.
White:
Sure.
H.M.Jr:
I mean that again is a technicality and I
am going to say, "Leave everything else aside,
Mr. President. If you want this thing ex-
tended and - don't ask me to do this thing
without appearing, and the die is cast. I
have asked for the meetings anyway."
White:
I think you are committed to it. I think
you should. You can't slide out of it. And
I think they will give it. They will give
you guidance.
H.M.Jr:
Well, there is nobody here who has the
slightest doubt that I should go up before
Congress and carry out what I said, is there?
Bell:
No, sir.
Regraded Uclassified
72
- 25 -
White:
Before the committees.
H.M.Jr:
Yes. And I have asked for it jointly. Don't
you think that is the way to do it?
White:
I think so, because Congress will talk less
than would the Senators probably.
R.N.Jr:
Well, it saves time. What is the use of
doing it twice?
Foley:
It is a matter of expediency if you can do
it all at once.
White:
They will have to communicate that by tele-
phone to the various Congressmen. If that
doesn't leak out and probably - it will be
very difficult. I don't know what the effect
will be if it does leak out.
H.M.Jr:
Well, if it leaks out, it is all right. I
personally would say that the chances are
three out of four I can get it.
White:
I think SO.
Foley:
Well, I wouldn't put it on that basis. I
would say, "Gentlemen, this is what I pro-
pose to do. And when I was here I said
before that if I had anything of that kind
I would come down and lay the matter before
the committee."
H.M.Jr:
Now --
Foley:
"And I want you to know what I am doing."
H.M.Jr:
Now, what I think a good way to do it when
we go up is to say, "Gentlemen, this is
the position. We have got an outstanding
commitment of 50 million dollars and they
Regraded Uclassified
73
- 26 -
have got 20 million of collateral up. Now,
what I am proposing to do is lend them
another 50 million, but we will keep the
20 million against the whole 70, plus the
yuan, whatever they put up.
White:
Or you will agree to undertake those opera-
tions over 8. period of time. Don't you
think it would be helpful, Mr. Secretary,
if before you went up there you had at least
explained the matters and got the leaders
to support you there, SO they will understand
it before you go there?
H.M.Jr:
Oh, yes. I have got to understand it myself
and I want to get the one that sounds the
best.
White:
We will have that.
H.M.Jr:
Jesse Jones - Export-Import has already loaned
them 75.
White:
Seven of which - yes. 30, 25 and 20.
H.K.Jr:
And the 25 which you heard about from Soong
is --
White:
This last 25 that he is talking about.
H.M.Jr:
Yes.
White:
Well now, that could protect - that is why
I say you can so arrange this loan that if
you use the 20 million in gold and if you
let the Export-Import Bank take the impact,
the thing can be undertaken at little risk.
H.M.Jr:
My loan is going to be to the Central Bank
of China, anyway, isn't it?
Regraded Uclassified
74
- 27 -
White:
Guaranteed by the Government, and it will
be an arrangement to buy yuan if and when
and as needed, so it is not alone and they
may not get any of it. Besides, if you
make any such arrangement, they will be
able to put up anywhere from 25 to 40 million
of their own, so you can make - the sum can
look like a very large amount before it comes
to you.
B.M.Jr:
Well, you fellows who work on this better get
busy.
White:
Yes. Fortunately, we did a lot of work on
it a couple of months ago, so it won't take
us very long.
What I would like to do is get together with
the boys and prepare & plan and have it -
today is Thursday.
Foley:
Friday.
Bell:
You have lost a day, Harry, some place.
H.M.Jr:
Well, I guess that is all for now.
Regraded Uclassified
STATEMENTS MADE BI SECRETARY MORGENTHAU BEFORE COMMITTERS,
IN EXTTERS, 37RECHES AND PK&O Conferences, HELATINO
TO THE U.S. TV B. MADE of The STABILIZATION FUND
Report of Decretary Morgenthall's Prese Conference,
warch 21, 1940, Pages 11-13, 15-16
I have never felt that the stabilisation fund WAS designed to
oarn money. 14 have earned noney and a lot of money, but I have
never relt that that was the purpose of it and : still feel that the
stabilisation fund, DE long as : an here and trustee of se, 1 am going
to guard it with the last breath in ey body -gainst unforeseen
energency. nut to use up that noney now when there is no evergency
and no particular purpose would seen to me unwise. That 1a there :or
some national crisis or emergency which I don't see today and 1 don't
soe it on the horizon, but it 10 there and in this crasy world the
unforessen and the impossible is happening every day and that money
in there and I feel Congress aid ne the great honor to make taxe the
trustee for that fund. I - otill going to guard it carefully and
not use it when there 1a no national emergency.
4. sould you then, Jr. Secretary, have any objection in principal
to Congress, which set up the trust fund, by its own initiative de-
creasing the size of the fund and turning 11 into the general fund for
use for these other purposes?
A. I believe the most sensible thing 10 to leave the stabilization
fund alone. Now it is there; NO have guarded its " have been fortunate
enough to have it increased slightly and I repeat that in this crasy
world the time may come where - say get down on our knees and be
thankful for the fact that it is there against something I don't ...
now but which may happen. There is no need to use that instead to
circumvent the debt lieit or anything like that. After all, france
held on to its gold - the Bank of France - until recently and they
resisted all similar pressure to take the enlo away from the Bank of
France. It is there atvl : ao sure they vore vory leased that they
had 1% there to use it at this time.
Extension of Labilization Fund and Powers, atc.
learing before the Committee on Coinage, soights, and secures
clube of Representatives - barch 3, 1934, DATES 10-62, 62, 42-43
m. Then this fund is not used to stabilize Mederal
securities so as to afford a better market for the Treasury 1004887
INDESTANT It Date never been used for that purpose.
ni not only - : would like to Die this opportunity to say - net
Regraded Uclassified
Division of Constary
- 2 -
Research
only DAS this fund not been used for that purpose, but - have
scrupulously avoided, to use the market term, we have never sitempted
to "rig" the Government market because I have felt it Far unwise.
And wo have never used any of our various trust fundo other than to
lovent the as wisely as no thought possible. As you may know, we
ATO custodians for BUSE () different trust fumie. In those funds
- have three and one-half to four billion dollars' worth of securities.
And I A/t very happy that those trust funds are worth sore today then
the time st which no bought the securities. But we have never (cone
into the market to support an issue and wa have never attempted FOTS
than to stabilize the market, in that be try to buy when the Govern-
sent bonds are down. to don't try to buy when they are at the highest.
246 ve have been very, very careful, to use the market term, not to
"rig" the market. And as long as I 40 secretary of the Treasury
I never will.
un. ANDRESSN. or has my of this $200,000,000 been used to affect
dollar exchange credit for any foreign power or group of individuals
in other countries?
SEGRETARY MONORSTHAP. No. what we try to no, sir, is 09 I say,
the purpose of this fund is in order to keep the sinisum of fluetus-
tions in the dollar. And I think wg have done it. So that the dollar
today 10, or ranks, as the next stable currency in the world. And all
of our afforts are directed toward that and. I do not feel it 10 my
duty to assist other countries to attain that end. But under the so-
called Tripartite Agreement w do offer them certain technical mushinery
80 that they Jan, with their own Doney, stabilies the dollar, the
pound, the guilder, Chimo franc, or the Melgian franc, but always with
their own money.
Mr. AO I understand it, then, under no circumstances
10 any of this fund used to give aid directly to the sritiso Covern-
cant to stabilise their money or their pound starling?
M. LECKE. That money is not being used by We Pressury for
that purpose.
211. ANDRESEN. Yes. Inc ve hear - good many TONATIS made don't
the activities of the Treasury and other agencies of the Government,
and I want to ask you this: In connection with the stabilisation fund,
has any of the stabilization fund been used in any cannor to finance
a foreign government in the purchase of armesents or any other sur
supplies?
Regraded Uclassified
77
Division of Monetary
- 3 -
Research
Regraded Uclassified
SUCRETANT MORONTHAU. I can answer that under oath to that
questions no.
And I will answer further. is long as I an Secretary of the Treasury
end all long U Congress gives M that responsibility, the INSURER is no.
I answered yesterday to it before the Senate committee, and I would
like the privilege of answering here again. If no over because involved
in any war, I would come to this committee, and to the coundttee before
the Senate, and ask for guidance and directions as to how I should con-
dust ayself in relation to the stabilization fund.
va. ANDRESEN. Then this fund, from your answer, is to the effect
that it 10 not used in any manner M part of the foreign policy of
this Government with reference to supplying war supplies to any other
country?
SECRETARY MONGENTHAU. M. Congressman, under eath, it is net
used that way, directly or indirectly.
MR. ANDRESSN. New let - turn just for 4 few questions with
reference to the gold matter which is up before the consittee.
SECRETARY May I -
20% Yes.
SECRETARY HORGENTEAU (seating). Offer information, because I
also read the compapers?
MIL. ARTRESEN. I an glad to have 10.
SECRETARY MORGENTEAU. In connection with the se-called Franch
planes, the French are paying each. The summy is provided in their
budget. They are using the same machinary all Kngland is velas, namely,
they authorise the Bank of France to pay on presentation of certificates
of the namufacturers to the Federal Recerve Bank of in York. The manufacturer
of the planse will indicate on that certificate that be has finished
so any planes. And the money is en deposit, or will be on deposit
in the Federal Reserve Bank of New York, to mest those payments. and
that Se the exast manner in which England not buying planse here. And
I would like also to add, if I may volunteer, in 80 for as the
Johnson ist is concerned, I - in hearty syspathy with the Johnson
Act. And as long as I - Secretary of the Treasury I will not permit
any country that ones Me cae dollar to break in any may the law or
the spirit of the Jehnson let. And I will defend that just as long
as I 42 there. There have been consions which countries have attempted
so circumsent the Johnson let and I have refused to let then do 11.
78
Division of Nenstary
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Research
Extension of stabilization Fund and Imm. M.
Bearies Refure the Committee an Cainage, Feights and Measures
Benee of hepresentatives - March , 1939. men 18. 77-78. 80
MR. REED. Mr. Secretary, last week when you were here, as I
recall, you stated that in case of war, ao for as the Administration's
stabilization fund was concerned, you would feel it to be your daty
to como to the Congress and ask advice and ideas as to how this fund
should be administered.
SECRETARY MORGANTHAU. That is right.
MR. REED. I think that every member of this condittee has
confidence in your integrity and your good faith.
SECRETARY MORGENTHAU. I thank you for that statement.
Mr. Secretary, did I understand you to state to this condittee
on March 3 that the stabilisation fund 1a never used to support
foreign currency?
SECRETARY MORGENTHAU. I said that to de not use the stabilisation
fund to support foreign currencies.
MR. SMITH. The law provides that the fund shall be used for
the stabilisation of the exchange value of the dollar, dose 11 net?
SECRETARY MORGENTHAU. That is correct.
REVALUATION OF DOLLAR AND STATEMENT FUND
liearing before 4b. Subsmmittee of the Condittee on Pasking and Currency
United States Senate - March 2. 1939. mess 17-18. 37-24.32
SEMATOR TOWNSAND. Maren't the year transactions, above referred
to, the equivalent of leans to a foreign government for the purpose
of stabilising & foreign currency of minor world importance, rether
then operations designed to s tabilise the incriess dellar?
MR. LOCKHEAD. I could not put them just on that basis, sir.
SENATOR TURNSEND. Wall, will you please say what basis you
would pet then on?
SECRETARY Well, I can anover that: To do not
consider it anything formally loaned. I seen, the Chinese Government,
Regraded Uclassified
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through their central bank, wishes to acquire dollar exchange and,
in order to acquire this dollar exchange, they sell us a fixed
exount of yuam) and in exchange for then, we give then a fixed
amount of dollars. Now, in order to be Rure that - are still
protected, they not only put up the year as collateral, but they
also put up, to at least 100 percent in gold, collateral equaling
the amount of dollars finished.
In other words, if they bought a million dollars' worth of
collars, they would pay for then with a million dollars' worth of
yuan, and they would put on deposit with the Faderal Reserve of
New York a million dollars' worth of yuan, plum - million dollars'
worth of cold as collateral.
SANATON TAIT. what 1a the use of the stabilization fund? If they
have that gold, why de they to to New York to buy dollars, or buy dollars
in China? Why is there any use of the stabilization fundy
SECRETARY MORGENTRAU. sell, the answer is that the Chinese Govern-
sent evidently feels that it is e service that they need. It gives
them dollars with which to buy our merchandise. If they could get it
any other may, I take st, they would not come to no. the did not sook
the business. But in their desire to get dollar exchange, in order
to pay our merchants, they use this device.
AND as far as we are concerned, you night any that the risk is
nil. To have not only the 100 persent gold collateral but the full
abount of the juan.
SENATCH TAPT. But they could do the same thing if there were
no stabilization fund? They perhaps would de it in a. different may,
but it would be 5 very simple thing to do, would it not?
SECRETARY MORGENTHAU. I do not know.
JUNET Kr. Secretary, Tenator Tandenberg placed
in the Congressional Record four questions which he said you ware
willing to answer: This is the first one of thems
Is the Government of the United tates under agreement with the
Governments of Great Britain and France to sustain the value of the
French frane and the Brittish pound In relation to the value of the
instions dollar?
ASCENTARY MONGENTHAD. The answer to that question is "no".
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Division of Monotary
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Research
SERATOR TURNSEND (reading):
What is the nature and extent of this agreement, if any) and if
any, is it summarily revocable in the event that any of these nations
because invelved in wart
You say there is nons?
Are there any agreements of this Dane general nature with eng
other foreign governments?
DECRETARY INFORMATHAU. No, air.
SEMATOR TOWNSEND(reading):
Does the Treasury construe its authority under the stabilisation
Fund not to include the power to deal with wartine problems of inter-
national exchange precisely as with pessetive exchange without further
instructions from the Congress?
SECRETARY well, the best may I can answer that question
1a this: In the Treasury, nobody In thinking of war.
SEMATOR TURNSEND. Thinking of war?
SECRETARY MORGENTRAU. of war.
SENATOR CLASS: You had better be.
SENATUS TUWNSEND, well, you are different from everybody also in
the country, aren't you?
SECRETARY MORGENTHAU. Nell, I mean that in our operations we are
net making any plans for war - in the Treasury. And if there should
be a mar, I would certainly come before the proper committees and ask
them for direction as to how my should conduct ourselves.
DERATER TAFT. There 18 & purely hypothetical question which I
should like to ask you, Suppose there is A foreign war and suppose
you 20 out and do what you can to buy $2,000,000,000 worth of pounde:
Zen't the effect of that to give Ingland she power to buy $2,000,000,000
worth of goods in this country, under the eash-and-earry provisions?
SECRETARY Benatore, if there is & war in any foreign
country, before we would use the stabilization fund or any noney in
the Treasury to cusist any country in prosecuting that war, = would
come up before the proper committee and ask for guidance.
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Division of Memotary
-
Besearch
SERATOR TAFT. I have no doubt you mould, perhaps. Date nover-
theless, the authority granted in this extension would give you
power to do that, would it not, if you aid choose to do not
SECRETARY MONGENTHAU. To de what?
SEMATOR TAXT. that I suggested: To bay pounds, and in effect,
create an Inglish credit here of $2,000,000,000, and - would wake up,
in the mi, and Find ourselves with $2,000,000,000 worth of permis
that were worth nothing? I an net asking whether you would do 12.
My question is whether that is not legally possible. Isn't that
legally possible?
DECRETARY MORGENTHAU. well, if I lost all - OF reason in
the performance of my duty, I wight do a lot of taings.
SENATOR TAFT. In other words, it Le legally possible?
SECRETARY MORORNTHAU. Hell, a lot of tidnes are legally possible,
which you would not do under the rule of someon sense.
STATEMENT OF SECRETARY MONORNTHAU BEFORE THE SUB-COM/CITTER OF
POLICY. BAME INO AND DEPOSIT IMSURANCE OF THE SEXATE COMMITTEE ON RANKING
AND CURRENCY. March 2. 1939. 10,30 A.M.
During these operations it is frequently assessary for the
stabilisation rund to sequire foreign surrencies. The Fund attempts
to earry out all such transactions with . sinism of risk. Im the
past, ve have been successful in avoiding risk of exchange less
through special resiprooal arrangements between cooperating Treasuries
under which foreign exchange is immediately convertible into gold at
4 price fined each day. Insidentally, it should be pointed at that
because 96 wish to avoid the possibility of an exchange less VI fre-
quently forego the possibility of an exchange profit.
There are also occasions when the exchange rate between the
dollar and the surrency of a country with small gold holdings is nb-
jested to pressure because of unfavorable political or economic develop-
ments. The Fund can be employed, and has recasionally been employed
in each circumstances, to help stabiliss the dollar exchange.
For emample, var arrangement with China ww just such an upare-
Lien. There was strong pressure against the dollar-yuan exchange and
China needed dollars in order to strengthen the dollar-yean exchange
rate, the avoiding additional chatesles to our trade. to eliminate
Regraded Uclassified
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Division of Monetary
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Research
any risk of exchange less, China agreed to reparabase the years at the
- rate at which the United States purchased then and Chima's premies
w backed by adequate gold and silver collateral, which - keept on
deposit with Federal Reserve Banks.
An arrengement of like character - made with Brasil in 1937,
but owing to subsequent developments the arrangement was not utilized.
A similar arrengement was made with Mexico. the purchased Mariean
peace and in enchange unde dellare available. Again, as in the case
of China, the Hexican Government agreed to repurchase the posca at
the price - paid for them and deposited adequate sollsteral with
the Federal Reserve banks.
Letter to Home William B. Bankband. Speaker of the House - Mr. 1. 1932
is is mde clear by the above-quoted prevision, the stabilisstion
fund may lawfully purchase foreign exchange only for the purpose of
stabilizing the exchange value of the dollar. It has been for tide
purpose and not for the purpose of supporting the surrensies of any
foreign country that the Fund has from time to time asquired foreign
currencies. Purthermare, I should like to state that the stabilisation
fund is net acquiring any currensies of belligerent countries and to
at present holding 745 pounds sterling (approximately $2,980) and
3,652 French france (appreximately 882) which were asquired Long
before the outbreak of the var.
Letter from Secretary Marganthan, dated October 24. 10 Fenerable Artist
i. Vandenberg (Replying to Benster Vendemberg's latter of October 17. 1932.)
You write:
ay should like to inquire if I an entitled to the
information - whether the stabilisation fund is -
being used in connection with the stabilisation of
the British pound and the French (rane) and whether
there is any stabilisation agreement under which vo
continue to operate in conjumction with England and
France or any other foreign countries."
When I appeared before the Senste Committee on Banking and
Currency last March, Senstor Tafe reised the following questions
Regraded Uclassified
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Division of Monstary
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Research
"Suppose there is a foreign war and suppose you go out
and de what you can to buy $2,000,000,000 worth of
pounds: Isn't the effect of that to give England
the power to buy $2,000,000,000 worth of goods in
this country under the cash and carry provisions?"
I would like to reaffirm the position which I took at that
time. My reply was, and still 10, as follows:
"Senaters, if there is a mr in any foreign country,
before - would use the stabilization fund or any
money in the Treasury to assist any country is prose-
outing that was, I would come up before the proper
committee and ask for guidance."
The stabilisation fund is not acquiring any currensies of
belligerent countries and 10 holding only a trifling amount of
foreign currensies of belligerent countries sequired long before
the outbreak of the mr.
I trust that this furnishes you with the information you
requested.
00:esh
11/25/40
Regraded Uclassified
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UNITED STATES SEPATE
Committee on Finonce
October 1% 1939.
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Rachington, D. C.
by dear R. Secretary:
I should like to Inquire - if I An ontilled to the
information - whether the stabilization fund is view being
uned in connection with the stabilization of the Pritish
pound and the French tranc; and whether Lhere is any
siabilization agreement under which WE contirme to operate
in conjunction with England and France or any other foreign
countries,
I should also approcial your Viergini on another
phase of this problem. 1 name that of 61% continuing
to purchase at 35 an munch, all foreign gold that is
offered. In view of depreciated forei- correncies, is
not this equivalent to paying consideration noni then '35
an curice so far as the foreign seller is concerned? If we
put our foreign trade with belligerents 0% P strict "cash
and carry" basis, will it sot be libely to substantially
increase this inflow of foreign gold - -pacheps to so dan-
perous an extent that ve finally shall practically nonopo-
lise the world's gold suply? could this not seriously
threaten the world's subsequent return to the use of
monetary gold - and thus relatively the -Itimate
value of our orn enormous gold hoar? Should not the mr-
chase of foroign gold ha curtailed and re-priced at loast
for the period of the ar?
I am not asserting any pro-connelined judgente of
by om in submitting these questions to you. J RUF simply
secking information from authontic sources EIXI ! shall
grently approciate a reply within the naxt. IC-
With warm personal regards and best wished.
Cordiolly and faithfully,
(Signed) A. H. VANDENBERG
Regraded Uclassified
85
October 24, 1939,
My dear Senator:
I should like to answer in some detail the questions in your
letter of October 17, so as to clarify certain aspects of problems
relating to gold.
You write:
"I assume that you are continuing to purchase at (35
an ounce, all foreign gold that is offered. In view
of depreciated foreign currencies, is not this equiv-
alent to paying considerably than 135 An ounce
80 far an the foreign seller is concerned?"
I am uncertain what you hear: be- this question. It in subject
to several different interpretations and to make certain that you
obtain the information you as! I will endoavor to answer each of
then separately.
1, Does the quention ank whether the foreign seller
of gold receivos more purchasing power over zuots and ser-
vices here than he did prior to depreciation? If that is
the sense of your question then the answer 18 "No". The
835 per ounce (less 1/4 of 1 percent) which the foreign
seller of gold receives probably represents less and cer-
tainly not more purchasing power in terms of goods and
services in this country thon it USA before the depreci-
ation of currencies in recent months. Such purchasing
power of 635 in the United States varies, of course, with
changes in prices of goods and services in the United States.
Since most goods and services that CPD be purchased here by
a resident of A foreign country have risen in price during
the past two months, it follows that the foreign seller of
gold probably gets less coods and services for his 035 now
than he did a few months BCO.
2, Does the question esk whether the foreigner can get
more units of his ovn currency for gold by selling it in the
United States than by selling it in i.to own country? If this
is the sense of your question, again the answer is "No". We
pay no higher price for gold (allowing for commissions, hand-
ling charges, etc.) than other countries do, After a foreign
seller of gold converts the dollars he obtains for his gold
into sterling, for example, he Minds that he has approximately
Regraded Uclassified
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the same amount of money ns he would have had if he
had sold that gold in London, (For a further expla-
nation of this I refer you to perea 7, 8 and 9 of my
letter to Senator Wagner, dated arch 22, 1939, 8
copy of which is enclosed for your convenience.)
3. Does the question ask whether the foreign
seller of gold gets more unito of his local currency
for his gold now than he did before the depreciation
of his currency? If this is the sense of the question,
the answer is clearly "Yes", That is' exactly what de-
preciation of a currency in terms of gold means, namely,
that each unit of & depreciated currency is exchangeable
for less gold.
4. Does the question ASK whether the greater number
of units of the depreciated currency which the foreign
seller obtains for his pold can nurchase more goods and
services at home than could the smaller number of units
he obtained for his gold before depreciation? The answer
to this question in "Probably yes". Prices in the country
of a depreciated currency de not usually rise as much as
the currency derrecintes for a considerable period of time,
if at all, During that period the holder or producer of
gold will Bet more local goods and services for an ounce
of gold than he did before. But he rets more goda only
if he buys goods at home; Aurthermore, he gets more goods
for an ource of gold not because ve continue to may 035
an ounce for gold, but because his ovn country gives more
units of its currency for an mince of cold,
When taken in the context of your whole letter one further
possible interpretation of your question suggeste itself. You may
belasking whether the recent depreciation of foreign currencies will
of itself load to an increased inflow of gold. If this is the sense
of your question, the answer is "Probably no". It is, of course, im-
possible to foretell at this time the total effect of a Europe at war
upon our balance of payments. The specific effect of the recent de-
precistions of foreign currencies, however, would clearly seem to
operata in the direction of a reduction in gold offerings. Depreci-
ation of foreign currencier vis-s-via the dollar means that American
goods and servions are less attractive to the foreigner because he
must give more of his OWT currency in exclange for a dollar's worth
of merchandise than fornerly. In other words, the depreciation of
foreign currencies is a factor which operates in the direction of
reducing our exports to and increasing our importe from the countries
involved. Thus the effect of the change will tend to reduce our
favorable balance of trade and consequently such inflow of gold as
may be attributable to our export surplus. It is true that price
changes may in time offset the effect on the relative attractiveness
of foreign and American goods initiated by the depreciation of foreign
currencios. But even In normal times this adjustment usually does not
take ilace for some time.
Regraded Uclassified
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You ask the further question:
"If we put our foreign trade with belligerunte on
a strict 'cash and carry' basic, will it not be
likely to substantially increase this inflow of
foreign gold - perhaps to so dangerous an extent
that we finally shall practically monopolise the
world's gold supply?"
The prohibition of credits to belligerent governments may
possibly have the effect of reducing our exports to belligerent
countries, This might in turn reduce the value of our total ex-
ports compared with what our exports would be were the prohibi-
tion not included in the Poutrality Act. Were the belligerent
governments to purchase some, of their imports from the United
States on credit, a portion a? the payments due us might be
postponed. Howover, whether this postponement would result
evon in a temporary reduction in the inflow of cold cannot be
forecast because:
(1) It is not. Inorn what proportion of the dollars
used for yayments would be acquired from the SALC to us
of gold, and what proportion would be acquired from other
sources.
(2) It is not Imom whether an oxtension of credite
to bolligerents would rosult in greater purchases from the
United States or whether there would simply be a substity-
tion of SOME credit nurchases for cash purchases. Only in
the latter instance vould it be possible for part of the
inflow of gold to the Duted States to bc postponed. In
the former caso it mill nonn that the vold inflow would
be the same over the short period of time and would be
greater at some subsequent time whon credits vere liqui-
dated.
You ask this further question with respect to gold:
"Would this (increased inflow of gold) not ser-
iously threaton the world's subsequent roturn to
the use of monetery gold - and thus relatively
threaten the ultimate value of our own enormous
gold hoard?"
This war demonstrates, if any demonstration were needed, that
gold constitutos tho best form in which foreign exchange resources
can be held. Even under the most difficult conditions of war, bel-
ligerent governments which possess gold can buy with it anything
that is for sale.
Regraded Uclassified
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- 4 -
The new situation in world trade brought about by the war in
Europe will, of course, introduce some changes in the distribution
of gold among, the nations of the world, Palligorent countries will
probably lose gold, but numorous neutral countries, which now have
little gold, may be put in a position to increase their holdings as
a result of improvements in their trade balances, As a consequence,
the war may well have the effect of causing a wider distribution of
gold among the countries of the world, Such an increase in gold
holdings by many countries would give more countries a stake in the
continuation of gold as a nodium of international payments. The
gold producing countries, of course - including the British Empire,
which new produces half the world's gold - vill continue to have a
vital interest in the use of gold as a monetary metal,
These considerations, an well as others, indicate that gold will
amorge from this disturbed period with addod prestige as the inter-
national medium of exchange. For further discussion of the future
usefulness of gold as a monetary motal, you may wish to refer to
pages 16, 17, 18 and 19 of my lotter to Senator Vagner referred to
above.
Your last question on 3016 relates to R. suggested change in
our monetary policy, You ask:
"Should not the purchase of foreign gold be cur-
tailed and re-priced at least for the period of
the war?"
I an not clear whether by re-pricing cold you have in mind an
increase or a docrease in the price of gold. 1 judge from the con-
text of your letter, however, that you are inquiring about the ef-
fucts of a reduction in the dollar price of gold.
My views with respect to the consequences of reductions in the
price of gold are fully set forth in V letter to Senator Wagner re-
forred to above. The discussion appears on pages 13 to 16 of that
letter, and I think it may be appropriately ro-read in connection
with your inquiry.
You raiso the question of the advisability of reducing the price
of gold "for the period of the war". Any substantial change in the
price of gold which is known to be temporary would have seriously dis-
rupting influonces on trade and international capital flows, It would
introduce a still greater risk element in business relations with for-
eign countries and would, moreover, increase world speculation in
dollar exchange.
I now turn to the question in your letter reforring to the
Stabilization Fund.
Regraded Uclassified
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- 5 -
You write:
"I should like to inquire . - if I am entitled to the
information - whether the stabilization fund is now
being used in connection with the stabilization of
the British pound and the French franc;and whether
there is any stabilization agreement under which we
continue to operate in conjunction with England and
France or any other foreign countrios."
When I appeared before the Senate Committee on Banking and
Currency last March, Senator Taft raised the following question:
"Suppose there is a foreign war and suppose you go out
and do what you can to buy $2,000,000,000 worth of
pounds: Isn't the effect of that to give England
the power to buy $2,000,000,000 worth of goods in
this country under the cash and carry provisions?"
I would like to reaffirm the position which I took at that
time. Ny reply was, and still is, as follows:
"Senators, if there is a war in any foreign country,
before we would use the stabilization fund or any
money in the Treasury to assist any country in prose-
cuting that war, I would come up before the proper
committee and ask for guidance."
The stabilization fund is not acquiring any currencies of
belligerent countries and is holding only B trifling amount of
foreign currencies of belligerent countries acquired long before
the outbreak of the war,
I trust that this furnishes you with the information you
requested.
Sincerely,
Enclosures,
(Signed) HENRY MORGENTHAU, JR.,
Secretary of the Treasury.
Honorable Arthur H. Vandenberg,
United States Senate.
-000-
Regraded Uclassified
90
COPY
November 1, 1939
My dear Mr. Speaker:
You have informed me that in connection with the
present consideration of the neutrality legislation by
the House of Representatives there has been discussion
concerning the use of the stabilization fund as & means
of lending money to and aiding a belligerent country to
finance the war. You have asked no for an expression
of my views concerning this matter.
The stabilization fund was created pursuant to
Section 10 of the Gold Reserve Act of 1934 which pro-
vided in part as follows:
"For the purpose of stabilising the
exchange value of the dollar, the
Secretary of the Treasury, with the
approval of the President, directly
or through such agencies as he may
designate, is authorised, for the
account of the fund established in
this section, to deal in gold and
foreign exchange and such other in-
struments of credit and securities
as he may deem necessary to carry
out the purpose of this section. ***,*
Congress by legislation in 1937 and 1939 has continued
these stabilisation powers until June 30, 1941.
As is made clear by the above-quoted provision,
the stabilization fund may lawfully purchase foreign
Regraded Uclassified
91
-2-
exchange only for the purpose of stabilizing the ex-
change value of the dollar. It não been for this
purpose and not for the purpose of supporting the
currencies of any foreign country that the Fund has
from time to time acquired foreign currencies. rur-
thermore, I should like to state that the stabilization
fund is not acquiring any currencies of belligerent
countries and is at present holding 745 pounds sterling
(approximately $2,980) and 3,652 French france (approxi-
mately $82) which were acquired long before the outbreak
of the war.
when I appeared before the House Committee on
Coinage, Weights and Measures last March in connection
with the bill to extend the stabilization powers, the
following collequy took place between Congres
Andresen and myself:
"MR. ANDRESEN. Yes. And we hear a
good many remarks made about the no-
tivities of the Treasury and other
agencies of the Government, and I want
to ask you this: In connection with
the stabilization fund, has any of the
stabilization fund been used in any
manner to finance a foreign government
in the purchase of armaments or any
other war supplies?
"SECRETARY MORGENTHAU. I can answer
Regraded Uclassified
92
that under oath to that question. No.
"And I will answer further. As long
as I as Secretary of the Treasury and
as long as Congress gives me that responsi-
bility, the answer is no. I answered yes-
terday to it before the Senate Committee,
and I would like the privilege of answering
here again. If we ever become involved in
any war, I would come to this Committee,
and to the committee before the Senate, and
ask for guidance and directions as to how I
should conduct myself in relation to the
stabilization fund.
"MR. ANDRESEN. Then this fund, from
your answer, is to the effect that it is not
used in any manner as part of the foreign
policy of this Government with reference to
supplying war supplies to any other country?
*SECRETARY MORGENTHAU. Mr. Congressman,
under oath, it is not used that way, directly
or indirectly."
When I appeared before the Senate Committee on Bank-
Lng and Currency, Senator Taft raised the following questions
*SENATOR TAFT. Suppose there is a
foreign way and suppose you go out and
do what you can to buy $2,000,000,000
worth of pounder Isn't the effect of
that to give England the power to buy
$2,000,000,000 worth of goods in this
country under the eash and carry provi-
sions?
My reply was as follows:
"Senatore, if there is a war in any
foreign country, before we would use the
stabilization fund or any money in the
Treasury to assist any country in pros-
souting that war, I would come up before
the proper committee and ask for guidance."
Regraded Uclassified
93
My replies to the foregoing inquiries remain the
same, and I would like to reaffirm the position which I
took at that time before the House and Senate counittees.
I am also enclosing as of possible interest in
this connection copies of a recent exchange of corres-
pondence which I have had with Senator Vandenberg.
I trust this furnishes you with the information
that you desire.
Very truly yours,
(Signed) H. Morgenthau, Jr.,
Secretary of the Treasury.
Hon. William B. Bankhead,
House of Representatives.
Regraded Uclassified
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November 29, 1940
1:02 p.m.
Cordell
Hull:
Hello, Henry.
H.M.Jr:
Hello, Cordell.
H:
What's doing?
H.M.Jr:
Well, the President had me on the wire and said
I had to make a loan to China today for $50
million.
H:
Well, I haven't gone into the technical side of
that. I have been giving attention - talking
to Jesse Jones about his branch of it.
H.M.Jr:
Well, this is the point, and I wanted just to
tell you. I've looked up my correspondence and
I wrote both to Speaker Bankhead and Vandenburg
a letter that before I would make any loan out
of the Stabilization Fund to a country which was
at war, I would come up before the Committee and
ask for guidance.
H:
I Bee.
H.M.Jr:
Now in view of that I've got to appear before
these committees and I've asked Senator Wagner
and Somers of New York to call a meeting for
Monday morning - a confidential meeting, and
I'll appear before it and tell them the story
and ask for their guidance.
H:
Yes.
H.M.Jr:
But I couldn't get my legislation through
originally unless I gave them my word that I
would do that.
H:
Yes, I Bee.
H.M.Jr:
I'm going to tell that to the President too,
but I wanted to tell you before hand so you
could be thinking about it.
H:
Yes.
H.M.Jr:
And he seems in such a hurry, and I'll want
somebody from the State Department pretty high
up to go along with me and say that this 1s
necessary as a matter of foreign policy.
Regraded Uclassified
95
a I I
Hi
Well, I think the President - - he probably when
he finds out the extent of your commitments,
he'll understand that.
H.M.Jr:
But I'll want somebody that you'll let me have to
go along and say how you feel.
H:
Yes. Well, I think - - do you and Feis - do you
confer any/these days?
H.M.Jr:
Well, I haven't seen him but I'd rather have
- I think it's important enough that Sumner
Welles go or
.....
H:
Oh, I see. This 18 BO technical I don't know
much about it.
H.M.Jr:
Well, it isn't on the technical end
H:
You mean somebody to go up with you before the
Committee.
H.M.Jr:
Yeah and Bo if they say, well, does the State
Department say that this is a matter that they
approve on the foreign policy not on the
.....
H:
I see. All right. I'll take it up with my folks.
H.M.Jr:
And because - - I say I'm going to bring it up at
2 because the President shot this at me and I
wanted you to
......
H:
Yeah. They've got an emergency situation in the
Far East. I guess that's the reason he's in a
hurry.
H.M.Jr:
Well, help me out now. I need some help.
H:
Yeah. Much obliged, Henry.
H.M.Jr:
Thank you.
Read to mm8 Secy
96
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 29, 1940
TO Secretary Morgenthau
Mr. Cochran
FROM
TRICTLY CONFIDENTIAL
Reference 1s made to our conference this morning in which I reported that our
agreement to purchase yuan by the Stabilisation Fund from the Central Bank of China
expires on December 31, 1940. If the Chinese wish a renewal of this agreement they
are supposed to request such a renewal thirty days prior to the expiration date.
which would be December 1. In the past the Chinese have usually overlooked this
stipulation in the agreement and we have consequently let ten days elapse before
inquiring whether they desired a renewal of the agreement. Our present plan is to
have the Federal Reserve Bank of New York cable China on December 10, if they may
not have had word by that date that the Chinese desired the renewal.
In view of the new situation, however, it is suggested that you might immediately,
or simultaneously with Mr. Jones' ennouncement of a new credit by the Export-Import
Bank, give out B. press release along the following lines:
"Secretary Morgenthau announced today that he is offering to extend
(or is extending) for a further period beyond December 31, 1940, the
arrangement made public on July 9, 1937, under which the Central Bank of
China 1s enabled, under conditions which safeguard the interests of both
countries, to obtain from the Stabilization Fund of the United States
$50,000,000 of dollar exchange for currency stabilization purposes."
We have issued communiques on certain occasions in the past when this arrangement
has been renewed. This new extension, in the sum of $50,000,000. requires no further
authorization or even consultation with Congressional committees.
A.M.
Regraded Uclassified
97
CONFIDENTIAL
TREASURY DEPARTMENT
WASHINGTON
November 29, 1940,
DEMORAWDUM YOR THE secretary
Conversation with Mr. Swift of the American Red Cross. (Mr.
Twyis the not available today, BO that Ar. Pehle and I had E tall with
=.
(p. Swift said that this information WAS highly confidential and
that he WAS carticularly anxious that it should not be widely known or
tent to the press.
(4) Thomas Lamont cad been to Hoover about relief matters
101 wented to come here and wanted to find out the Administra-
tion's point of view. So he and Hr. Davis any the President.
The President is definitely in fevor of sending et this time
12 inscunsied France for the use of the children milk, cod Liver
01:, PAS concentrated vitamines, end so informed Xr. Lamont and
1/y. Dovis.
A short time before this conference, Mr. Davis ned written
to THE British Ambasandor surgesting that the British ergend their
definition of medical supplies to include milk, cod liver oil, nná
concentrated vitamines. The letter suggested that these supolies
should be sent to France both occupied and unoccunied. They
would be sent in packages under the suspices of the Red Cross,
on 3ed Cross ships, would be received in France by the Red Cross,
end would be distributed under Red Cross suspices and on Red Cross
regonsibility to saire it certain that only children would receive
Viete supplies. In the event of any interference with the Red
Crows control either by the French or by the Germen authorities
the shipments would be stopped. The letter WAB in the form of
a suggestion to the British that the action be taken by the
with Government on ito own accord and not that it be telcen
of e consequence of pressure in this country or even es e con-
semience of a request from the American Red Cross.
Ar. Swift told UF that he understood that the Ambassador
VAE favorable end Hr. Swift thought it quite likely that the
British would add these articles to their list of medical
supplies allowed to TO through the blockade.
Regraded Uclassified
98
in Swift further told 115 that the Letters with the 202
- were receiving indicated that the people in this country.
- favorable on sending supplies to the children, but were
not fevorable to general relaxation of the blockade.
Te understood that Fr. Hoover favored sending food to
Holland, Norwey, Sweden, and possibly Tennark. He was
not concerned with Finland, nor with unoccupied France. This
meres 91th o conversation reported to no, that Hoover said
the greatest need was Belgium, end that he wanted to stert there.
dy personal comment or Mr. Lamont's interest is e guess that
DP has been talking to Hoover, tast that he is personally strongly
pro-British and may have been concerned in the result of Hoover's
excession end that he wanted to find out how much effect it WEE
to have 1n Washington. Mr. Swift had no opinion on this
vites. It is bneed on e conversation with Mrs. Lemont recently
1% which the expressed herself very strongly against any relaxation
of the blockede, suggesting even that she hell been told that
there YES olenty of wilk in Switzerlend which could be ourchased
111 use 10 Prance. (r. Swift definitely arid that to- milk supply
is byitzerland is limited, mut perhnes there Le ovoilable twenty-
!!ve thousand dollars worth r month for the next three months,
sovirely LA insufficient amount, EO that in nie Judiciat there
IV great need of milk from this country. It will interest you
(JLOW that the Red Cross sent milk to Polent previously in tin
crso, The Aritish Government objected to their sending the milk
in 7158 07 time 300 Red Oross sent then dry wilk 16 In
-ther that the Germans would not at the cane. If the +112 mes
" it vold nine no in paner or cardboary include IF
by as.
Joseph Chambritain
John w. Pille
Regraded Uclassified
99
JT
PLAIN
LONDON
Dated November 29, 1940
Rec'd 4:15 p.m.
Secretary of State,
Washington.
3900, November 29.
FOR TREASURY.
Mr. Morgenthau's press conference of yesterday is
reported in some of the London papers today. The
FINANCIAL TIMES quotes the passage stating that the
Secretary of the Treasury is "not ready to EXPRESS any
views on possible financial aid to Britain. HE suggested
that the United States should look at some of the cash
assets of the British before considering the purchase of
any of Britain's WEST Indian Islands in order to facilitate
war purchases." The same passage is quoted also by the
FINANCIAL NEWS and the Washington correspondent of the
TIMES. Both financial papers state that Mr. Morgenthau
declined to answer a question as to whether he was prepared
to reply to Senator Wagner's forthooming request for a
statement of the EXACT extent of British investments in
the United States. The FINANCIAL NEWS in the same article
quotes
100
-2- 3900 November 29, from London
quoted Senator George's statement that he favors aid
to Britain and will "go the distance with the Chief
Executive" and infers from this that "something definite
will bE done as soon 88 the new Congress meets in January".
The Washington correspondent of the TIMES pointe out that
the Senate Banking Committee was authorized more than a
year ago to investigate formign capital in the United
States and quotes Senator Wagner as saying that, "The
study of how Germany, England and the other nations are
financing their costly outlays and avoiding inflation"
will be included "on the ground that legislation in the
United States may be necessary to control any tendency
towards inflation" there. Of particular interest in the
TIMES report from Washington 18 the following statement:
"Mr. Morgenthau's reference this morning to liquid assets
carried the official implication that there would be
discussion between the governments on the next and proper
step towards some settlement".
JOHNSON
NPL
Regraded Uclassified
101
TREASURY DEPARTMENT
FOR RELEASE, MORNING PAPERS,
Friday, November 29, 1940.
The Secretary of the Treasury gives notice that tenders are
invited for Treasury bills to the amount of $100,000,000, or there-
abouts. They will be designated National Defense Series, 91-day
bills; and will be sold on a discount basis to the highest bidders,
Tenders will be received at the Federal Reserve Banks, or the
branches thereof, up to two o'clock p. m., Eastern Standard time,
on Monday, December 2, 1940. Tenders will not be received at the
Treasury Department, Washington.
These bills will be issued pursuant to the provisions of
Section 302 of the Revenue Act of 1940, approved June 25, 1940.
Under the authority of that section "National Defense Series"
obligations may be issued to provide the Treasury with funds to
meet any expenditures made, after June 30, 1940, for the national
defense, or to reimburse the general fund of the Treasury therefor,
The Treasury bills will be dated December 4, 1940, and will
mature on March 5, 1941, and on the maturity date the face amount
will be payable without interest. They will be issued in bearer
form only, and in amounts or denominations of $1,000, $10,000,
$100,000, $500,000, and $1,000,000 (maturity value).
It 1s urged that tenders be made on the printed forms and
forwarded in the special envelopes which will be supplied by the
Federal Reserve Banks or branches upon application therefor.
No tender for an amount less than $1,000 will be considered.
Each tender must be in multiples of $1,000. The price offered
must be expressed on the basis of 100, with not more than three
decimal places, e. E., 99.125. Fractions must not be used,
Regraded Uclassified
102
- 2 -
Tenders will be accepted without cash deposit from incor-
porated banks and trust companies and from responsible and
recognized dealers in investment securities, Tenders from others
must be accompanied by a deposit of 10 per cent of the face amount
of Treasury bills applied for, unless the tenders are accompanied
by an express guaranty of payment by an incorporated bank or trust
company.
Immediately after the closing hour for receipt of tenders on
December 2, 1940, all tenders received at the Federal Reserve
Banke or branches thereof up to the closing hour will be opened
and public announcement of the acceptable prices will follow as
soon as possible thereafter, probably on the following morning.
The Secretary of the Treasury expressly reserves the right to re-
Ject any or all tenders or parts of tenders, and to allot less
than the amount applied for, and his action in any such respect
shall be final, Those submitting tenders will be advised of the
acceptance or rejection thereof. Payment at the price offered for
Treasury bills allotted must be made at the Federal Reserve Banks
in cash or other immediately available funds on December 4, 1940.
The Treasury bills will be exempt, as to principal and 1n-
terest, and any gain from the sale or other disposition thereof
will also be exempt, from all taxation, except estate and inheri-
tance taxes. (Attention is invited to Treasury Decision 4550, rul-
ing that Treasury bills are not exempt from the gift tax.) No
loss from the sale or other disposition of the Treasury bills shall
be allowed as A deduction, or otherwise recognized, for the pur-
poses of any tax now or hereafter imposed by the United States or
any of its possessions,
Regraded Uclassified
103
- 3 -
Treasury Department Circular No. 418, as amended, and this
notice prescribe the terms of the Treasury bills and govern the
conditions of their issue. Copies of the circular may be obtained
from any Federal Reserve Bank or branch thereof.
-o0o-
101
FOR YOUR INFORMATION
November 30, 1940
To:
The Secretary
Sropt Mr. Young
Re: Economic Defense
During your absence I endervored to keep in touch with
developments concerning economic defense outside of the
Pressury. I understand that preparation hes been made and
some sort of n Dlan set un for the establishment of an
Teonomic Defense Boerd, presumably under the direction of
Colonel Maxwell and with the help of Mr. Alexander Henderson
of the Defense Commission. In addition, I understand that
Mr. Stettinius hes asked the Budget for An extra appropria-
tion for carrying on economic defense activity.
: have talked with Mr. Berle several times concerning
this subject, And he is insistent upon the fact that the job
stould be done by the Treasury Department with the help of
the State Department and possibly Jesse Jones. Ee is definitely
отровой to anything being done on it, excent in 7L mechanical
vay, by either the Defense Commission or by Export Control.
of course, the logical place for this job is the Treasury
être to frozen funda control, foreign purchnsing coordination,
and other activities which tie in on that nicture. Incidentally,
the Department of Justice has *150 contacted me indirectly in
order to confer on the undercover espects of economic defense.
or course, if extension of exchange control 1s approved, it vill
tend to throu the whole situation into our hands.
It would seem to me that perhaps some errangement sould be
made whereby you would be apprised of what Stettiniue and Mazwell
propose to do before A definite recommendation is sent to the
President,
DY
Regraded Uclassified
see
105
November 29, 1940.
MEMORANDUM
TO: Secretary Morgenthau
mr
FROM: Mr. Gaston
I called Ralph Budd's office yesterday and suggested to
his assistant, Fisher, that Waesche and I would be glad to come
over and see Kr. Budd to talk over the Lakes ice breaking situ-
ation. As a result Budd's office called me this morning and
asked if we could come in at ten o'clock. The result was, I
think, an entirely satisfactory solution all around. Budd talked
to A. T. Wood in Cleveland over the phone and at Wood's suggestion
we agreed to transfer the TAHOMA, now at Cleveland, to Sault Ste.
Varie and bring the OSSIPEE, which is an old coal burning cutter
with reciprocating engines, down to Cleveland for the winter.
The TAHOMA is one of the class of five 165 ft. cutters which were
designed with a view to having pretty good ice breaking qualities
along with sea worthiness. She is of the same class as the
COMANCHE, which was the pioneer boat to Greenland. We also
agreed that Coast Guard would pay the cost of hiring from the
Pennsylvania Railroad, for ice breaking purposes in the spring,
the car ferry, Chief Wawatam, which regularly runs from St. Ignace
to Mackinaw City, across the Straits of Mackinac. This is a
good sized ship, about six to eight thousand tons, with two pro-
pellers aft and one in the bow, having been designed especially
as an ice breaker. It will walk right through ice that would
stall any of our cutters.
I told Budd that you were anxious that we should work out
an arrangement completely satisfactory to him and he seemed entirely
pleased by this plan, as did A. T. Wood.
I an attaching a copy of a letter that I wrote to Budd today.
Attachment.
106
November 29, 1940.
Dear Mr. Budds
For record purposes, in view of our meeting this morning,
I M writing to acknowledge on behalf of Secretary Norgenthau
receipt of your letter of November 23rd on the subject of Les
breaking in the Great Lakes, with which you enclosed & copy of
your letter of November 16 to the Commendent of the Coast Guard
and a copy of a telegram from Mr. 4. T. Wood of the Lake Carriers
Association.
In accordance with our understanding today orders have
been issued by Mairal Wassche that the outters TAHOMA and
OSSIPEE are to exchange stations, the TAHOMA, which has better
qualities as - iss breaker, to winter at Sault Ste. Marie and
the OSSIPEE to winter at Cleveland.
It is our understanding that Mr. Wood will ask the Penn-
sylvania Railread whether the Streits of Mackinso car ferry, the
Chief Krestan, can be engaged to supplement the ice breaking work
of the Coast Ouard cutters. the Coast Ouard will undertake to
ascertain from Canadian authorities what facilities they will
have available for this work in the spring.
I believe these steps premise the best solution that could
be reached under all the circumstances and w greatly appreciate
your help and suggestions.
Very truly yours,
Herbert s. Gasten
Assistant Secretary of the Treasury.
The Honorable Ralph Buid,
Transportation Commissioner,
the Advisory Commission
to the Comeil of National Defense,
Federal Reserve Duilding,
Washington, D.C.
107
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 29, 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
Mr. McKey of the Par Eastern Division of the Department of State talked with me
by telephone at 10:30 this morning. He wanted to bring me to date in regard to con-
versatione between his Department and Mr. Frederick Dolbeare, Advisor to the Government
of Thailand. He had instructions from Mr. Hemilton, Chief of his Division, to refer
To my conversation with Mr. Livesey, and to let me know the oral message which
17, Hamilton had given Mr. Dolbeare 8.8 A consequence of my message to Livesey. It
vill be recalled that there has been an interchange of information between State and
Terraury in regard to Dolbeare's interest in obtaining a loan for Thailand. When
Livesey talked with me lost he let me know that Dolbeare had told the Department of
State that he hoped to obtain such e. loan either from the Export-Import Bank, the
Federal Reserve System, OF commercial banks. The State Department had promised to
give him its views on these three alternatives. When Livesoy mentioned these to me he
**ferred particularly to the third alternative, which would involve the use of Thailand's
10,000,000 of gold on deposit with the Federal Reserve Bank of New York B.S. collateral
(
"or loans which might be given to Thailand by commercial banks. I have told Livesey
.hat the Treasury would not discuss such a possibility with Dolbeare or with the Federal
Reserve Bank of New York or with commercial banks until or unless the Department of
State might let us know definitely that it favored the Treasury giving such exceptional
consideration to a recuest of Thailand. I reminded Livesey that we had not followed
the practice in the past of permitting gold held by the Federal to be used to collateral-
Ige a loan privately made, We had refrained from going ahead with our contemplated
meroval of n Spenish proposition in this respect when the State Department hed let us
now that they objected to such B. plan on political grounds. I told Livesey that the
conditions in the Jer Zost are such at the present time that the State Department must
surely have some visitive views D.B to what the attitude of the Treasury should be in
the premises.
fr. Melay told me that, following un the idee of my conversation with Livesey,
it, Builton had canvassed the opinion in the Department of State and had then tele-
honed Dolbeers in New York along the following lines. The idea of E: loan from the
Bank or from the Federal Reserve System had been deemed not advisable.
With respect to the third alternative above listed. the State Department did not feel
that present circumstances would warrant it to recommend to the Treasury Department
that any measures be taken in the present instance which have not been taken in the
bast. Hemilton did not preclude the possibility of Mr. Dolbeare reopening this nues-
:103 with the Department of State at some more propitious date. Likewise he did not
discourage Fr. Dolbeare when the latter suggested that he might take uo the matter
directly with the commercial banks. with the request that they in turn avoroach the
Trensury through the Federal Reserve Bank of New York. Mr. Hamilton asked, however,
that we in the Treasury let him know before we give any definite answer to a request
accived through such channels.
Regraded Uclassified
108
- 2 -
I told Mr. McKay that if one of the private banks got in touch with us now we
would definitely discourage such & bank from making a formal application, consider-
ing the political factors involved. I told him that we had preferred a year ago,
when this question came up, that the National City Bank should not file a formal
application. Our advice to the National City or whatever bank might apply in the
present circumstances would be the same. I promised to let Mr. Hamilton know if the
question might be posed to us. Mr. McKay understood what the Treasury's answer would
be if this question comes up immediately, but hoped we would consult with Mr. Hamilton
before giving any answer if the matter is dropped for the present but should be revived at
some later date when conditions are different. I gladly agreed to this.
70mg
109
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 29. 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
CONFIDENTIAL
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
£19,000
Purchased from commercial concerns £31,000
Open market sterling remained at 4.03-3/4 until late in the day. It closed
at 4.04. Transactions of the reporting banks were as follows:
Sold to commercial concerns
£7,000
Purchased from commercial concerns £2,000
Ae for the other currencies, there was a slight weakening in the rates for
he Canadian dollar, Swiss franc and Cuban peso. Closing quotations were as follows:
Canadian dollar
13-1/16% discount
Swise franc
.2321
Swedish krona
.2386
Reichamark
.4005
Lira
.0505
Argentine peso (free)
.2350
Brazilian milrois (free)
.0505
Mexican peso
.2070
Cuban peso
8-5/8% discount
There were no gold transactions consummated by us today.
The Federal Reserve Bank of New York reported that the Bank of Canada made two
shipments of gold totaling $9,117,000 from Canada to the Federal, for account of
the Government of Canada, for sale to the New York Assay Office.
The Bombay gold price was unchanged at the equivalent of $33.77- Silver in
Bombay was also unchanged at 43.71#.
In London, a price of 22-7/8d vas fixed for both spot and forward silver,
representing a decline of 1/8d in each case. The dollar equivalent of this price
is 41.544.
Handy and Harman's settlement price for foreign silver was unchanged at 34-3/40.
he Treasury's purchase price for foreign silver was also unchanged at 354-
Regraded Uclassified
110
- 2 -
We made ten purchases of silver totaling 834.934 ounces under the Silver
Purchase Act. Of this amount. 200,000 ounces represented a sale from inventory,
and the remaining 634,934 ounces consisted of new production from foreign countries.
for forward delivery.
We also purchased 250,000 ounces of silver from the Bank of Canada under our
regular monthly agreement, raising the total bought from that source this month to
350.000 sunces, as against the agreed monthly limit of 1,200,000 ounces. It will
be observed that, in the past four months. the Bank of Canada has sold us only
2,175,000 ounces of silver. compared with a limit of 4,800,000 ounces. At the end
of September. an official of the Bank of Canada confirmed that the Canadian Mint
had acquired substantial amounts of that country's newly mined silver for coinage
purposes. In view of the fact that its sales to us during October and November
vere far short of the limit allowed by the agreement, it is apparent that Canada
is still using much of its silver production for coinage.
During the month of November, we purchased 7,348.700 ounces of silver under
the Silver Purchase Act. The sources of these purchases were as followe:
Type of Silver
Ounces
New Production
1. From various countries
6,124.700
2. From Canada under agreement
350.000
Inventory
874,000
Total
7,348.700
CONFIDENTIAL
Regraded Uclassified
111
TREASURY DEPARTMENT
195
INTER OFFICE COMMUNICATION
DATE November 29, 1940
TO
Secretary Morgenthau
STRICTLY CONFIDENTIAL
FROM Mr. Cochran
The Federal Reserve Bank of New York reported the following transactions in
German accounts maintained with the Chase National Bank,
Date
Amount Debited
Account Debited
Paid To
Nov. 28
$ 41,425
Deutsche Golddiskontbank,
Irving Trust Co., N.Y.,
Berlin
for account of Vongibara
750,000
.
Brown Bros. Harriman Co.,
N.Y., for account of
Stockholms Enskilda Bank,
Stockholm
500,000
Narodni Banka pro Csechy
Chase National Bank, N.Y.,
B. Moravu, Prague
for account of Credit-Suisse
Zurich for account of
Narodni Banks pro Czechy
a Moravu, Prague
R.M.P.
112
FOR Miss Chaunoos
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 29, 1940
TO
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
The Federal Reserve Bank of New York reported the following transactions in
Italian accounts maintained with the National City Bank of New York.
Amount
Date
Debited
Account Debited
Paid To
November 27
$200,000
Banco di Napoli Trust Co.,
Check to order of Banco
N.Y.
di Napoli Trust Co., N.Y.,
deposited for its account
with Federal Reserve Bank
of New York
November 28
29,858.55
II
Check to order of Swiss
Bank Corp., N.Y.
29,857.95
a
Check to order of Credit
Suisse, N.Y.
33,000
Banco Nazionale del Lavoro,
Chase National Bank, N.Y.,
Rome
in favor of Sussana A.
Mattheiu
76mg
113
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 29, 1940
TO Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
Reference is made to earlier memoranda in which Minister Procope of Finland has
discussed with Under Secretary Bell and myself the questions of Finlend's payment due
December 15, end the reopening of the whole debt question by Finland.
Kinister Procope called on me at 3 o'clock yesterday and left with no the
attached cooles of notes which he has now addressed to the Department of State on the
above-mentioned subjects. Although the first of these is undated, I understand that
the two letters were filed simultaneously. The second is dated November 25. 1940.
Minister Procope realizes that the subject matter of these notes must be dis-
cussed by the Department of State with the Treasury Department. He reminded me that
December 15 is not very faraway, and he hopes that he may have an answer from our
Government before the press may start bringing pressure upon him for information as
to what he will do on December 15 with regard to the installment then falling due.
The Minister referred in passing to the resignation announced yesterday morning
of President Kellio of Finland. He thinks that our friend Ryti will succeed to the
presidency. He regretted that the outlook for the British giving considerate treat-
sent to Finland's shipping request was not as bright 88 he thought it was two days ago.
Again he stressed the difficult economic situation of Finland, and hoped that the
Department of State would increase its efforts with the British to obtain permits for
Finland to buy fate and other necessities from the United States, utilizing funds
allotted by the Export-Import Bank for this purpose. The Minister reiterated his hope
that if the United States extends its control of foreign funds, Finland may be given
exceptional freedom.
3ml
Regraded Uclassified
114
11046
Excellency,
Referring to Your Excellency's note of June 22nd, 1940 regarding
the Public Resolution No. 54 approved on June 15th, 1940 by the
President of the United States to authorize the postponement of payment
of amounts payable to the United States by the Republic of Finland
during the period from January 1, 1940 to December 31, 1940 under the
agreements dated May 1st, 1923 and May 23rd, 1932, I have the honor to
submit to Your Excellency the following.
In spite of the many difficulties confronting Finland at present
and notwithstanding her limited resources that are badly needed in the
rehabilitation of the country, it is the firm intention and desire of
the Finnish Government to maintain her credit record and to keep all
her obligations in the same way as she has always done in the past.
However, the Finnish Government has with sincere gratitude noted
the above mentioned Resolution, which, having been passed by both Houses
of the Congress, was enacted by the President of the United States on
the 15th of June, 1940, and offers the Finnish Government the opportunity
of the postponement of payments specified therein. My Government appre-
clates this renewed proof of understanding and sympathy, 80 much the
more as They see in this Resolution itself and in the debates which pre-
ceded it a sign of willingness on the part of the United States Govern-
ment for & more extensive consideration of the two debt agreements to
which the Resolution refers.
Under these circumstances and taking into consideration the present
difficulties confronting Finland, my Government most gratefully accepts
the offer contained in the said Resolution.
In consequence of the aforesaid I have the honor, under instruc-
tions from my Government, most respectfully to inform Your Excellency
that my Government 10 ready to enter into an agreement for the postpone-
ment of the payment of amounts payable by Finland to the United States
on December 15th, 1940, as provided for in the Public Resolution No. 84.
Accept, Excellency, the renewed assurances of my highest considera-
tion.
His Excellency
The Hon. Cordell Rull
Secretary of State
Department of State
Washington, D.C.
copy-lan;11/28/40
DOPY
115
November 25th. 1940
Excellency.
Referring to previous verbal exchanges of viows I have the honor,
under instructions from my Government, to bring to Your Excellency's
attention the following considerations in regard to Finland's indebted-
ness to the United States under the agreements dated May 1, 1923 end
Kay 23, 1932.
During the years 1917 to 1920 Finland made purchases in the United
States in the amount of some $36,000,000. The greater part of these pur-
chases were paid in the ordinary way of business. For commodities valued
at $8,281,926.17. received through the American Relief Administration,
the latter took obligations of the Finnish Government in that amount.
By an agreement made on Kay 1, 1923, this credit was funded, accrued
and unpaid interest at 44 percent being added to the principal amount of
the obligation and B cash payment made to round off the resulting smount
to the exact figure of $9,000,000 which with interest at 3 percent per
Annus from December 15, 1922 to December 15, 1932, and thereafter at 3/2
percent per annum, was to be repaid over a period of 62 years. Each
semi-annial instalment has been promptly paid by Finland except the
instalments in the fiscal year 1932 that were postponed under the mora-
torium proposed by President Herbert Hoover and approved by the United
States Congress. The postponed amounts are being repaid in ten annuities
with interest at 4 percent per annum from July 1, 1933.
An appears from the above Finland has to pay interest upon interest
and in addition to this compound interest Finland, in meeting her obli-
gations, has had to make the payments at an unfavorable rate of exchange
between the Finnish markka and the dollar, Furthermore it is to be
noted, that the commodities in question were purchased at the high prices
prevailing at the end of and just after the war 1914-18.
On the original indebtedness of $8,281,926.17 Finland has paid to
the United States the sum of $6,050,689.77. of which only $960,398.17
represented repayment of principal and $5,090,291.60 represented interest.
The principal unpaid is still $8,039,601.83 and in addition there remaine
& balance of $87,021.03 of the interest postponed under the Hoover mora-
torium. Under the agreement of May 1, 1923 payments in the amount of
approximately $355,000 per annum, apart from the Hoover moratorium annui-
ties, will continue through the year 1984 in order to extinguish the
remaining indebtedness with interest at 30 percent per annum. Of the
21a Excellency
Cordell Hull
Secretary of State
Department of State
Washington, D. C.
Regraded Uclassified
116
- 2 -
$356,735 payable in 1940 under the agreement of May 1, 1923, $76,000 is
for reduction of principal and $280.735 is interest.
It will be recalled that Finland vas one of the first countries to
fund its indebtedness to the United States and that subsequent agreements
with other countries have granted concessions which in come cases have
been much more favorable to the debtors as to the calculation of interest
and the apportionment of payments between interest and principal.
The recent difficulties of Finland have received a sympathetic recog-
nition in the United States which is deeply appreciated by the Government
and people of Finland. In connection with the indebtedness of Finland
the President of the United States in December 1939 in a statement expressed
the opinion that Finland's payments, both for principal and interest, should
be used for the benefit of the Finnish people. On June 15, 1940 the President
approved a resolution, unanimously adopted on the previous day by both
Houses of Congress, affording Finland the option of postponement of instal-
ments payable during the period from January 1, 1940 to December 31, 1940
under the debt agreements of 1923 and 1932, with provision that the amounts
thus postponed should be repaid within ten years with 3 percent interest.
In the discussion of this resolution in the Congress, all who spoke were
unanimous in regard to the desirability of helping Finland to maintain her
record with the payment of her relief indebtedness under the tremendous
difficulties she faces today. Statements were unde to the effect that the
resolution under consideration ought to be only An intermediary measure and
that the relief indebtedness of Finland incurred in 1919 and 1920 should be
entirely readjusted. It was also suggested that this debt should be entirely
canceled.
The Senator reporting the Joint Resolution from committee also intro-
duced into the Congressional Record the report thereon of the Secretary of
the Treasury which stated that the Treasury Department would be very pleased
if B more liberal measure of assistance to Finland than contemplated in the
Resolution were granted.
In view of these developments I have had great satisfaction in bring-
ing these expressions and manifestations of authoritative opinion to the
notice of my Government. Having carefully noted the same and being under
the impression that an adjustment in their indebtedness to the United States
could be expected, my Government, which always has faithfully and scrupu-
lously carried out their obligations under the agreements in question, has
now instructed me most respectfully to inform Your Excellency that Finland
would greet with deep satisfaction and be sincerely grateful if, in the near
future, negotiations be entered into between the two Governments for the
reconsideration of Finland's indebtedness to the United States under the
agreements outlined in the foregoing paragraphs.
I should be highly obliged to Your Excellency for information in what
way such negotiations could be taken up.
Please accept, Excellency, the renewed assurances of my highest con-
sideration.
du
Regraded Uclassified
117
LONDON, November 29, 1940.
No. 6320
SUBJECT: Transmitting Anglo Swedish Payments Agreement
and Anglo-Rumanian Payments Agreement.
STRICTLY CONFIDENTIAL
The Honorable
The Secretary of State,
Washington.
Sir:
I have the honor to refer to the Embassy's strictly
confidential despatch No. 6263, November 19, 1940, with
which was enclosed the Anglo-Portuguese and Anglo-Rumanian
1/
Payments Agreements, and to transmit herewith, in the same
manner, the Anglo-Swedish Payments Agreement and the Anglo-
Rumanian Payments Agreement.
Respectfully yours,
Herschel V. Johnson
Charge d'Affaires ad interim
Enclosure:
1. Sealed envelope addressed to Dr. Herbert Feis, Department
of State, containing the two Agreements, as noted above,
in duplicate.
WCF/JC
eh:copy
118
Enclosure No. 1 to despatch No. 6320 of Nov. 29, 1940, from the
Embassy at London, England.
ANNEX VI
AGREEMENT between THE BANK OF ENGLAND AND
SVERIGES RIESBANK RELATING TO PAYMENTS
BETWEEN SWEDEN AND THE UNITED KINGDOM
1. Payments to Sweden by or for account of E.M. Government (other
than payments in respect of goods purchased on behalf of a third country)
vill be made -
(a) if the debt is expressed in sterling, by payment to a "Special
Account" of Sveriges Riksbank at the Bank of England;
(b) if the debt is expressed in Swedish kronor, in kronor purchased
from the Bank of England.
2. In the case of other debts expressed in Swedish kronor due to persons
in Sweden from persons in the United Kingdom, Swedish kronor may be bought by
the United Kingdom debtors from the Bank of England through the ordinary
channels. Debta covered by this article are those in respect of trade, freight,
insurance and of financial payments of a recurrent nature which, in the opinion
of Sveriges Riksbank and the Bank of England, are reasonable in character and
amount.
3. The Bank of England will use for the purpose set out in Articles 1(b)
and 2 any Swedish kronor balances coming into their possession: in DO far as
such balances are inadequate Sveriges Riksbank will sell Swedish kronor to the
Bank of England at the London middle rate for Swedish kronor on the day of
purchase against credit of sterling to the Special Account. This rate should
continue to correspond approximately to a parity calculated with the London
middle rate for U.S. dollars and the official rate for U.S. dollars in Stockholm.
24. Sveriges Riksbank may credit to the Special Account sterling purchased
from Swedish commercial banks or other sellere in Sweden, arising, as from the
date of the Agreement, out of payments between Sweden and the United Kingdom in
respect of trade, freight and insurance, and of financial transactions of &
recurrent nature which, in the opinion of Sveriges Riksbank and the Bank of
England, are reasonable in character and amount, provided that the exchange
has not already been covered. Sveriges Riksbank will arrange, 80 far as possi-
ble, that sterling obtained by Swedish commercial banks from these sources will
not be used otherwise except for the purposes set out in Article 5 below.
5. The Special Account may be used for all kinds of commercial or finan-
cial payments by persons in Sweden within the British Empire (except Canada,
Newfoundland and Hong Kong) and in Brasil, Egypt and Belgium. Sveriges Riks-
bank vill take stops to ensure as far as may be possible that the Swedish
119
payments in sterling referred to above shall be made by use of the Special
Account and not otherwise, subject to the provisions of Articles 4 and 10.
6. If at any time after the existing sterling balances of Sveriges
Riksbank have been used in accordance with the provisions of Article 10, the
balance on the Special Account should be temporarily insufficient to met
the needs of Sveriges Rikebank, the Bank of England will sell to Sveriges
Rikebank against Swedish kronor the sterling required at the London middle
rate on the day of sale. Sveriges Rikebank will agree to re-purchase against
sterling at the same rate or rates the Swedish kronor thus sold as and when
monies are received for the credit of the Special Account.
7. Amounts in excess of L100,000 standing to the credit of the Special
Account may at the option of Sveriges Riksbank be transferred to & special
Money Employed Account in multiples of L25,000, where amounts so transferred
vill be employed by the Bank of England for Sveriges Rikebank in the usual
manner. Such amounts may be retransferred to the Special Account.
E. On expiry of the Agreement Sveriges Rikebank will have the right to
obtain payment in gold for any balance on the Special account and the special
Money Employed Account and the Bank of England will have the right to obtain
payment in gold for any Swedish kronor balance held with Sveriges Riksbank.
9. When the balance on the special Money Employed Account has reached
and so long as it remaine at 63,500,000 Sveriges Rikebank will have the right
to obtain payment in gold for any amount in excess of L100,000 on the Special
Account. Similarly the Bank of England shall have the right to obtain payment
in gold for any Swedish kronor standing to the credit of its account at Sveriges
Riksbank in excess of Swedish kronor 58,800,000.
10. Sveriges Riksbank will have the right to transfer up to L200,000 every
month from its aristing sterling balances to the Special Account. Sverigee
Rikebank will not sell its existing sterling balances to third parties. but if
at any time the balance on the Special Account is insufficient, they may be
used for the purposes set out in Article 5. Forward sterling, arising from the
contracts entered into by Sveriges Riksbank before the date on which this Agree-
sent entera into force and proceeds of sterling securities held by Sveriges
Rikabank on that date will be considered as part of their existing sterling
balances.
11. All gold sold to Sveriges Riksbank under any of the terms of this Agree-
ment vill be provided by the Bank of England in London or in South Africa at
the option of Sveriges Rikobank. Gold sold to the Bank of England will be pro-
vided by Sveriges Riksbank in London. The Bank of England vill, however, accept
delivery in South Africa to the extent that Sveriges Riksbank had exercised ite
option to receive gold there in accordance with the terms of this Article.
12, Throughout this Agreement the price of gold will be reckoned at 168/6
per fine 0%. against sterling and at Sv.Kr. 142.3825 per 05. fine against Swedish
kronor.
13. This Agreement will enter into force on the 20th December 1939 and if not
renewed will expire on the 20th June 1940.
Bank of England
Sveriges Rikebank
Copy:als
Governor
Governor
Regraded Uclassified
120
COPY
Enclosure No. 1 to despatch No. 6320 of November 29,
1940 from the Embasay at London, England.
AGREEMENT BETWEEN THE BANK OF ENGLAND AND
THE NATIONAL BANK OF ROUMAL CONCERNING
CERTAIN PAYMENTS WITHIN THE STERLING AREA
1. The Bank of England shall, at the request of the National Bank
of Roumania, open in its books an Account to be entitled National Bank of
Roumania Special Account (hereinafter called the Special Account).
2. The National Bank of Roumanie undertake to ensure that all sterling
arising from the following transactions and only such sterling shall be paid
to the credit of the Special Account:-
(a) Sterling in respect of debts due to persons in Roumania from per-
sons in the sterling area (other than the United Kingdom) in
respect of trade and of financial transactions of 8. recurrent
nature.
(b) All sterling balances belonging to the National Bank of Roumania
at the date of this agreement which are not required to neot any
Roumanian sterling debts outstanding at this date to persona
ordinarily resident in the sterling area (other than the United
Kingdom).
3. of the sums received for the Special Account 25% shall be transferred
on the day after receipt to the National Bank of Roumania No. 1 Account, al-
ready opened in the books of the Bank of England, the balance on which is at all
times convertible into gold to be delivered in London at the Bank of England's
selling price obtaining on the day on which amounts were credited to the Account.
4. Sums standing to the credit of the Special Account may be used for any
payments in respect of trade or financial transactions of a recurrent nature
due by persons in Roumania to persons within the sterling area. The National
Bank of Roumania undertake to ensure that payments referred to in this paragraph
shall be made only by the debit of the special Account and not otherwise, except
as is provided in the Anglo-Roumanie Transfer Agreement of the June
1940.
5. Payments under the previous paragraph will be made by the Bank of Eng-
land on instructions from the National Bank of Roumania and shall be accompanied
by a brief description identifying the character of each payment.
6. Any sums standing to the credit of the Special Account after the lapse
of a period of three months from the date of this Agreement shall be credited to
the National Bank of Roumania No. 1 Account up to & maximum figure of 25% of the
amounts received for the Special Account.
7, For the purposes of this Agreement the sterling area shall mean the
United Kingdom and any other part of His Majesty's dominions (except Canada,
Newfoundland and Hong Kong), any territory in respect of which a mandate on be-
half of the League of Nations has been accepted by His Majesty's Government in
the United Kingdom or in any Dominion, any British protectorate or protected
state, Egypt. the Anglo-Egyptian Sudan and Iraq.
121
- 2 -
Any alteration which His Majesty's Government may make in the
definition of this area shall apply equally to this Agreement.
8. This Agreement shall come into force on the 17th June 1940 and may
be terminated on the 16th day of any month by either party giving notice to
the other on or before the 16th day of the previous month beginning 16th
December 1940. At the termination of this Agreement any balance standing
to the credit of the Special Account shall only be used as may then be
agreed between the two parties to this Agreement.
clp
122
PARAPHRASE
The following is the substance of a telegram no. 54, dated
Rovember 29, noon, received from Henoi:
The Jaranese forces in northern Indochine have received,
according to 9. banking source who is well informed, advances of
3,000,000 yen. Japanese importations will be used to repay the
first 500,000 yen. The balance of this advance is to be repaid in
United States currency, the equivalent of 500,000 yen per month.
Although the first payment is due November 30, the Banque de
l'Indochine has received notification from the Jenanese that they
desire a three months' extension as they are unable to make this
payment. Political considerations will probably compel the bank
to grant this extension, although it is opposed to such action.
The blocked funds in the United States belonging to the
Benque de l'Indochine are causing that institution great anxiety.
The bank states that it is compelled to accept yen payment for gold
contracted for in 1941 to the value of autroximately 1,500,000
United States currency, as the Japanese state that they are unable
to obtain from the American Treasury Department a license permitting
the transfer of American money to the credit of the French bank.
Indochine 18 being gradually compelled to join the yen bloc, a
high official of the Banque de l'Indochine states, because of the
difficulty of securing transfers of American currency to its free
account in the United States and because of the freezing of its own
deposits in the United States.
I am forwarding by air mail & report setting forth & number of
memoranda from the bank.
COPY
Regraded Uclassified
123
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
STRICTLY CONFIDENTIAL
DATE November 29, 1940
TO
Secretary Morgenthau
FROM Mr. Klaus
November 2. Naval Intelligence reports from Guatemala that Herman Mex,
e Chilean of German parents but staunchly pro-Nazi, has been employed by the
Nicaraguan government preparing a reorganisation of the financial system and
was several years ago employed by the Costa Rican government as an adviser
on financial matters. Max has returned to Chile and President Somosa has
stated that "it was not definite" that Max would return to Nicaragua.
FBI reports:
November 6. Agent's report on foreign funds in Cincinnati indicates
additional instances where German "travel agencies" have been inducing Germans
to turn over their dollar savings for mark credits in Germany; these are addi-
tional instances of the Rueckwanderer mark practice.
015
12/3/40
124
Took this to the conference on taxes held
at Qhe White House on November 29th at
7:30 p.m.
note: on the me WH meeting is filed 12/2-
pullivans report
125
MEMORANDUM
November 29, 1940.
TO:
Secretary Morgenthau
FROM:
Mr. Sullivan
After leaving your office this morning, Dr. Gulick, Mr.
Tarleau, Mr. Blough and I discussed the project of a comprehensive
review of taxes for about an hour. No all feel that the creation
of a Temporary National Tax Commission is by far the most desirable
of the four methods of procedure outlined in Dr. Gulick's memoran-
dum.
Mr. Tarleau, Mr. Flough and I wish to recommend that as
soon as Dr. Gulick and his associates are able to come to Washington,
they immediately proceed to familiarize themselves with the studies
that have thus far been made in the Treasury, and proceed to a
completion of the preliminary work as outlined in Method 4 of Dr.
Gulick's memorandum. By the time this part of the work is completed
we will have had a vote on the elimination of tax exemption of future
issues of Federal, State and local securities. At that time we should
ask Congress to create a Temporary National Tax Commission as out=
lined in Dr. Gulick's memorandum as Method 1.
Mr. Tarleau, Mr. Blough and I all feel that if the creation
of a Commission to study this problem is announced before such a final
vote on elimination of tax exemptions, the Congress will sieze upon
this Commission as an easy way of avoiding the issue and will direct
the Commission to study the problem of tax exempt securities and report
back to some future session or to some future Congress. We recommend
that the bill to eliminate tax exemptions of future issues of govern-
ment securities (which 1s completely drafted and upon which we are
ready to go to work the day Congress convenes) be introduced as a
separate measure. If this is done we anticipate an early vote.
If you approve this we would like to discuss this with
Congressional leaders next week.
I am returning herewith the papers Dr. Gulick delivered
to you this morning+
Ths
Regraded Uclassified
126
DATA REQUESTED BY SECRETARY MORGENTHAU,
NOVEMBER 26, 27, 1940
1. Ascertain how much money not now shown in the Budget as
being spent on national defense 1a actually being BO spent, for
example, by the W.P.A. and by the O.C.C.
2. Select those inequities in the income tax and other taxes
each of which, if corrected, would increase the revenue by not
less than $5 or $10 million. Using one page for each item,
describe the item in three or four lines. Give an example
illustrating the inequity and indicate the estimated revenue
that would be derived from correcting it. Items to be included
are community property, percentage depletion, ultimate trusts,
multiple
etc. On a covering page make a list of the inequities and the
revenue estimates.
3. Calculate for (a) the Federal Government, and (b) Federal,
State and local governments combined, the indirect taxes, that is,
those believed to be shifted to consumers.
4. Indicate how much a sales tax imposed only on articles
costing over one dollar would yield.
5. For each year beginning with 1932, show:
(1) For individuals, the number filing income tax
returns and the number paying a tax;
(2) For corporations. the number filing income tax
returns and the number paying tex;
(3) For individuals, the number in each major
income class and the taxes paid by the
individuals in such class;
(4) For corporations, the number in each major
income class and the taxes paid by the
corporations in such class;
6. For the fiscal year 1940-41 show (a) the revenue estimate
for the tax system prior to the Revenue Acts of 1940, (b) the
estimated revenue to be derived from the first Revenue Act of 1940
divided into earmarked taxes and nonearmarked taxes; (c) the
estimated revenue for the second Revenue Act of 1940; and (d) the
latest overall revenue entimate.
7. Compute the amount of taxes earmarked for national defense
and the amount of other taxes and show the extent to which the
budget for national defense is balanced and the budget for other
purposes is balanced.
ESTIMATED FEDERAL, STATE AND LOCAL TAXES ON CONSUMPTION
127
Federal Taxes: Federal taxes on consumption collected during the fiscal
year 1940 amounted to $2,563,000,000. or 45% of total collections. The
additional taxes on consumption imposed under the two Revenue Acts of 1940
were estimated to yield $364,000,000, or 25% of the total estimated additional
revenue. Including the additional taxes imposed under the two 1940 Acts, it
is estimated that approximately 40% of all Federal taxes will consist of taxes
on consumption.
Federal, State and Local Taxes: Total Federal, state and local tax
collections at present amount to approximately $14,400,000,000. It is estimated
that nearly 42% of this amount are taxes on consumption. The inclusion of
property taxes with consumption taxes raises the percentage to approximately
75% If the estimated yield from the two 1940 Revenue Aots is included, the
proportion of consumption taxes in total Federal, state and local tax collections
is estimated at approximately 40%, and together with the property taxes at
over 70%
The data are presented in tabular form below.
FEDERAL, STATE AND LOCAL TAX COLLECTIONS
(Money figures in millions of dollars)
Before the 1940
Inculding the 1940
Acts
Acts
Amount
Percent
Amount
Percent
Federal, State and local taxes
14,441
100.0
15,870
100.0
Taxes on consumption excluding
property taxes
6,047
41.9
6,411
40.4
Taxes on consumption including
property taxes
10,820
74.9
11,183
70.5
Federal taxes
5,689
1
100.0
7,118
100.0
Taxes on consumption
2,563
45.1
2,927
41.1
State and local taxes
8,752
3
100.0
-
-
Taxes on consumption excluding
property taxes
3,484
39.8
-
-
Taxes on consumption including
property taxes
8,257
94.3
-
-
Piscal year 1940
Fiscal year 1940 collections, plus estimated yield of First Revenue Act of 1940,
in first full year, plus highest estimated net yield under Second Revenue Act
of 1940 at 1940 levels.
State tax collections for fiscal year ending in 1939; local tax collections
for fiscal year ending in 1938.
Regraded Uclassified
128
SALES TAX ON ARTICLES RETAILING OVER $1.00
Efforts to secure information of use in considering a
sales tax on articles selling for over $1.00 have been
unsuccessful.
An examination of material available and a check with the
Commerce Department indicates that there are no data on the
volume of retail sales on articles selling for $1.00 and over.
An estimate on the yield of such a tax would, therefore, be
highly conjectural.
Any estimate based on present sales would, of course, be
subject to large error since the imposition of a tax only on
articles priced at more than $1.00 might induce changes, for
example, in size, to reduce the price of the article below $1.00.
Since many necessities sell for over $1.00 and many luxury
items sell for less than $1.00, the exemption from sales tax
of articles selling for $1.00 and less would not affect the
distribution of the burden as much as would the complete
exemption of certain classes of items.
Regraded Uclassified
129
Number of individual income tax returns showing total number
filed, number taxable and number nontaxable, 1932-1940
: Total number of
:
Number of
:
Number of
Year
:
returns
:
taxable
:
nontaxable
:
filed 3/
:
returns
:
returns
1932
4,083,723
1,936,095
2,147,628
1933
3,892,007
1,747.740
2,144,267
1934
4,198,590
1,795,920
2,402,670
1935
4,669,621
2,110,890
2,558,731
1936
5,486,771
2,861,108
2,625,663
1937
6,434,052
3,371,443
3,062,609
1938
6,303,890
3,048,545
3,255,345
1939
7,721,429
3,932,647
3,788,782
1940
Est. 15,000,000
Est. 6,000,000
Est. 9,000,000
Source: Statistics of Income
Filed through September 30, 1940 (Source: Accounts and Collections
Unit, Form 6919).
Estimated. These returns will not be filed until 1941.
Includes returns with no net income.
Note: Major changes affecting the number of returns filed during the
period are:
(1) the extension of the Federal income tax to compensation
of state and local employees for 1939 and subsequent
years; and
(2) the lowering of personal exemptions from $1,000 and
$2,500 to $800 and $2,000 respectively for 1940 and
subsequent years. For the years 1932-1939, inclusive,
an individual was required to file a return if his
net income amounted to $1,000 in the case of a single
individual or $2,500 in the case of married persons
(or if gross income was $5,000 or more). For 1940 and
subsequent years single and married individuals are
required to file returns if their gross income amounts
to $800 and $2,000 respectively.
Division of Tax Research, Treasury Department
November 28, 1940.
Regraded Uclassified
130
Corporation income tax returns, showing number filed,
number taxable, and number nontaxable, 1932-1939
:
Number of
=
Number of
:
Number of
Year
:
returns
:
taxable
I
nontaxable
:
filed
:
returns
:
returns
1932
508,636
82,646
425,990
1933
504,080
109,786
394,294
1934
528,898
145,101
385,797
1935
533,631
164,231
369,400
1936
530,779
203,161
327,618
1937
529,097
192,028
337,069
1938
520,500
169,885
350,615
1939
508,306
191,277
317,029
Source:
Statistics of Income
Preliminary data, number of returns for 1938 filed
through December 31, 1959.
Filed through September 30, 1940 (Source: Accounts
and Collections Unit Form 6919).
Includes returns of inactive corporations.
The classification of taxable and nontaxable returns
is based upon returns "with net income" and "with no
net income." A negligible amount of excess-profits
tax was reported on returns with no net income in
1934 and 1935. The classification of returns with
"net income" and "with no net income" is based upon
"net income for income tax computation" for 1936 which
includes dividends received on stock of domestic
corporations and interest received on certain Govern-
ment obligations and excludes contributions or gifts.
For 1937, the classification is based upon "net income
for excess profits computation" which is greater than
"net income for income tax computation" by the amount
of the excess profits tax. For years prior to 1936,
the classification is based upon taxable net income.
Deturns with BFT Local nurker of DETURNS, net Income
nol the be ant Increase classes, 1932 - 108 1)
(25ee license classes and - Plaims 1= of Antion)
Not income
=
=
=
1934
:
1932
1935
:
1936
:
1937
:
1933
1938
classes
:
E
=
:
:
:
:
Number of Returns
Under
5
3,520,988
3,391,666
3,671,773
4,074,897
4,736,488
5,645,115
5,611,211
5 -
10
251,014
293,754
290,024
339,842
40,886
471,171
415.596
10 -
25
79,210
75,643
102,892
123,564
176,649
178,446
140,781
25 -
50
18,480
18,423
20,931
26,029
41,137
38,948
26,336
50 -
100
5,902
6,021
6,093
8,033
13,620
12,318
7,259
100 -
150
995
1,084
982
1,395
2,606
2,269
1,326
150 -
300
595
695
690
896
1,544
1,358
766
300 - 500
140
141
116
206
330
312
207
500 - 1,000
86
81
86
109
178
162
115
1,000 and over
20
50
33
41
61
49
57
Total
3,877,430
3,793,558
4,094,420
4,575,012
5,413,499
6,350,148
6,203,657
Net Income
Under
5
$ 7,412,140
$ 6,861,120
$ 7,796,038
$ 3,814,418
$10,345,482
$12,422,513
$12,099,184
5 -
10
1,677.039
1,537,875
1,952,891
2,283,402
2,977.790
3,170,571
2,783,893
10 -
25
1,160,398
1,112,086
1,513,592
1,822,271
2,628,692
2,639,518
2,059,779
25 -
50
629,639
630,005
708,530
882,309
1,400,493
1,319,431
886,398
50
-
100
393,206
401,049
405,976
535,772
913,518
824,261
1184,768
100 -
150
119,896
129,159
117,744
166,379
311,279
272,264
158,413
150
-
300
118,008
139,215
140,960
179,911
307.930
272.724
154,996
300
-
500
52,469
54,570
43,832
77,907
124,523
117,477
78,441
500 - 1,000
57,874
56,700
59,464
73,811
122,762
114,399
81,396°C
1,000 and over
35,240
86,857
57,775
73,630
107,641
85,416
110,103
Total
$11,655,909
$11,008,638
$12,796,802
$14,909.812
$19,240,110
$21,238.574
$18,897.374
Tax
Under
5
$ 43,074
$ 36,549
$ 34,686
$ 40,232
$ 60,561
of
72.204
$ 63,630
5 -
10
35,615
35,077
43,086
48,728
79,369
83,529
71,654
10 -
25
50,150
54,977
83,960
103,754
175,613
175,709
134,163
25 -
50
43,546
52,355
84,907
106,670
191,339
179,395
120,594
50
-
100
47,150
57,491
$4,792
112,816
216,045
194,507
116,989
100 -
150
24,469
30,369
38,166
54,132
116,156
102,062
58,224
150
-
300
31,912
40,412
57.995
74,039
147,381
131,060
69.743
300
-
500
18,554
17,910
20,854
37,245
71,470
67,489
39,832
500 - 1,000
19,016
21,221
30,745
38,323
78,945
74,156
42,353
1,000 and over
16,476
27,759
32,211
41,499
77,138
61,457
48,035
Total
$329,962
$374,120
$511.400
$657.439
$1,214,017
$1,141,569
$765,218
Source: Statistics of Income
1/
The year to year comparability of the data are affected by changes in rates, exemptions, and
definitions of taxable income, The date for 1938 reflect the introduction of HD optional
alternative tax on net capital gains from assots held more than 18 months,
Regraded Uclass
Corporation income tax returns with net income showing mumber or returns,
not income and tax. by not income classen. 19'2 - 1938
(Wet income classes and noney from s in thousande ni inllars)
Net income
:
:
1932
1933
:
1934
:
:
1935
1936
:
1937
:
classes
1938
:
:
:
:
=
:
:
Ihmber of Returns
Under
5
84,027
2,504
103,031
113,893
132,205
125.644
5 -
10
5.259
9,143
13,191
16,014
21,438
20,538
10 -
25
5,930
8,794
13,157
15,751
21,688
20,341
25 -
50
2,700
4,245
0,425
7,547
10,959
9,679
50 -
-
100
1,023
2,633
4,080
4,840
7.046
0.377
100
-
250
1,159
1,958
2,940
3,445
5,233
4,878
250
-
500
429
T.2
1,092
1,335
2,107
1,938
500 - 1,000
235
385
539
096
1,197
1,139
1,000 - 5,000
225
718
483
597
1,058
1,046
5,000 and over
59
S
97
113
230
246
Total
32,646
109,730
145.101
164,231
13,161
192,228
169,685
1
Income
Under
5
"I
64,816
1
80,081
-
117,234
&
133.678
=
170,457
$
162.932
to
5 -
10
44,505
05,169
93,673
114,074
153,967
148,16
2
10 -
25
93,642
139,617
208,490
249,713
345,663
326,762
25 -
50
94.913
140,596
220.765
206,200
300,413
350,281
50 -
100
113,645
184,378
280,729
330,824
498,682
449,225
100
-
250
170,676
192,402
457.010
532,038
813,120
750,190
250
-
500
150,666
254,594
379,419
464,391
738,805
052,512
500 - 1,000
105,507
203,857
424,504
485,093
835,894
790,055
1,000 - 5,000
464,892
636,480
943,413
1,160,0
2,145,833
2,133,892
5,000 and over
783,775
903,781
1,137,754
1,417,077
3,387,367
3,82,519
Total
$2,153,113
2,980,972
34,275.18
25,160.723
1,278,241
49,634.637
Dat Lisbility
Under
5
$ 6,936
: 12,123
$ 16,409
$ 18,944
21,701
& 20,650
5
10
5,137
9,21
13,265
10,323
20,071
19,490
n
-
25
11,344
19,817
29,44
35,007
40,143
44,206
25
1
50
11,906
21,240
31,000
36,235
53,687
49.979
5V
1
100
14,555
2.135
40,399
40,700
72,100
65,777
100
1
250
25,719
42,994
54,165
70,483
119,028
116,038
250
I
500
20,196
30,064
52,977
66,726
105,604
103,203
500 - 1,000
21,970
37,324
59,065
68,804
117.712
116,505
1,000 - 5,000
62,455
89,990
170,881
184,018
273.402
289,237
5,000 and over
107.814
123.166
157,337
201,408
301,202
450,088
Total
$28.034
$423.008
$590,048
8735,125
$1,191,375
$1,276,172
$859,566
Source:
Statistics of Incone
Includes $38,000 excess profits tax liability reported on returns with TO ± income.
Includes $20,000 excess profits tax liability reported on returns with no net income.
Preliminary data, returns filed through December 31, 1939. Classification of Rate By he: Income classes
not available.
Note: The figures showing tax liability includes normal tax, surtes on undistributed profits and excens profite
tax. The classification by not income classes for 1936 1s based unon "net income for income tax coa-
gutation" which includes dividends received on stock of condatic corporations and interest received on
certain Government obligations and excludes contributions or cifts. For 1937, the classification is
based upon "not income for excess roitts com option" which is renter time "an income for income tax
commination" by the abount or to project 113. Ree years rice to 1930 to classisication is
based was trasile net income.
Regraded Uclas
133
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE November 28, 1940.
TO
Mr. Plough
FROM Mr. Hass MA
Subject: Estimates requested informally by Mr. Shere on November 27, 1940.
1. (For the fiscal year 1941)
(a) It is estimated that the net receipts to general
and special accounts for fiscal year 1941 under
the revenue system which existed prior to the
Revenue Acts of 1940 would be
$5,636.6 millions
(b) The first Revenue Act of 1940 is estimated to
have added $746.2 millions to the estimated
revenues for the fiscal year 1941, and of this
increase $557.1 millions is the portion which
will be earmarked under Title 2 of the Revenue
Act of 1940. This would have made the net
receipts to general and special accounts for the
fiscal year 1941 under the Revenue Acts which
existed prior to the Second Revenue Act of 1940
$6,382.8 millions
(c) It is estimated that the Second Revenue Act of
1940 would increase the receipts in the fiscal
year 1941 by
$ 209.6 millions
(d) Latest estimate of net receipts to general and
special accounts is
$6,592.4 millions
which is a preliminary and tentative estimate
prepared a couple of months ago,
The net appropriation for Federal old-age and survivors' trust fund
representing an amount equal to the taxes collected and deposited under the
Federal Contributions Act less reimbursement to general fund for administrative
expenses is estimated at $631.5 millions, which makes the estimated total
receipts to general and special accounts for fiscal year 1941, $7,225.7 millions.
2. (For the fiscal year 1942)
A preliminary and tentative estimate prepared a
couple of months ago for fiscal year 1942 indicated
net receipts to general and special accounts of : .
$7,972.1 millions
of which it is estimated that $756.7 millions will
be earmarked under Title 2 of the Revenue Act of
1940.
134
- 2 -
Mr. Blough:
The net appropriation for Federal old-age and survivors' trust
fund representing an amount equal to the taxes collected and deposited
under the Federal Contributions Act less reimbursement to general fund
for administrative expenses is estimated, for the fiscal year 1942, at
$641.3 millions, which makes the estimated total receipts to general
and special accounts $8,615.4 millions.
3.
You ask us to "indicate how much a sales tax
imposed only on articles costing over $1 would
yield". We tentatively estimate that for the
fiscal year 1942 a tax of 1 percent on retail
sales in the United States of articles (tangible
personal property) valued at over $1 would amount
to about
$500 millions
4.
We now estimate that the increased revenue
for the fiscal year 1942 to be obtained by
dropping the exemption under the admissions
tax from 20 cents to 10 cents would be ...
$ 24 millions
135
(In millions of dollars)
Fiscal
Fiscal
Fiscal
Year
Year
Year
1940
1941
1942
(actual)
Receipts (net)
$5,387
$6,950
$8,000
Deduct Defense Taxes
-
530
670
5,387
6,420
7.330
Expenditures
General
7,439
6,708
5,500
National Defense
1,559
5,000
8,000
Too high
8,998
11,708
13,500
Deficit
3,611
5,288
6,170
Under Secretary
November 27, 1940
Regraded Uclassified
136
Large Items of estimated expenditures
included in $6,708H estimated for
1941
A.A.A
$ 950 H
C.C.C.
275
N. Y. A
100
Social Security Board (grants)
405
Rivers and Harbors and flood control
215
W. P. À
975
$ 2,920 H
1/ Received approximately $40M for national
defense training in addition to above.
Under Secretary
November 28, 1940
Regraded Uclassified
137
SOME INEQUITIES UNDER THE FEDERAL TAX SYSTEM
AND REVENUE EFFECTS OF CERTAIN REMEDIAL
PROPOSALS
Estimated revenue effect
of certain remedial
proposals 1/
(In millions of dollars)
Tax-exempt securities
179 - 337 (ultimate yield)
Capital gains on assets
held over 18 months
13.1
Percentage depletion
32.0
Community property
3.9
Life insurance companies
Not available
Coordination of estate
and gift taxes
23.7 - 70.2
Insurance exclusions under
estate tax
13.8
Powers of appointment
Not available
Stock and bond transfer tax
51.3
1/ Revenue estimates as of varying dates before
enactment of the first Revenue Act of 1940.
Regraded Uclassified
138
TAX-EXEMPT SECURITIES
The exemption of interest received on govern-
ment bonds from income taxation makes it possible
for some members of the community to avoid their
just share of taxation. As a result, Federal and
State governments are deprived of income tax revenue,
necessitating correspondingly more extensive use of
other, less desirable revenue sources.
Example:
When an individual, who paid a total Federal
income tax of less than $1,000, died the year follow-
ing, his estate was found to contain nearly $35,000,000
of assets consisting almost exclusively of tax-exempt
government bonds.
Revenue Estimate:
The exemption of interest on Federal, State,
and local obligations was estimated, under the indi-
vidual income tax rates in effect prior to the
Revenue Aot of 1940, to cost the Federal Government
from $179,000,000 to $337,000,000 in annual tax
revenue. (Estimate as of 6/28/39.)
Regraded Uclassified
139
CAPITAL GAINS
At present only two-thirds of the capital gaine
realized from the sale of stocks, bonds, real estate
or other forms of property held over 18 months but
not over two years, and only one-half of the gains
realized from such property held more than two years
is taken into account for individual income tax pur-
poses. Moreover, the maximum rates imposed on such
capital gains are in effect limited to 22 percent and
16% percent of the full amount of the capital gains.
This special treatment impairs the progressiveness of
the individual income tax. It discriminates against
some taxpayers receiving ordinary income and in favor
of those receiving incomes from certain types of
investments.
Exemple:
In 1938 a certain individual realized a total
capital gain of $15,355,000, all on assets held more
than two years. His net income from other sources
was $250,000. If his total income had been taxed at
the regular rates, his tax would have been $12,141,000.
The tax actually assessed WAS $2,430,000, or 80 percent
less.
Revenue estimate:
If the law providing for alternative taxes on
capital gains and losses were amended to change the
maximum effective rates from 22 percent and 161/2 per-
cent to 36-2/3 and 27a percent, respectively, the
increase in revenue would amount to approximately
$13.1 million. (Based on calendar year 1939 -
estimate as of 5/5/39.)
Regraded Uclassified
140
PERCENTAGE DEPLETION
Under present law, operators of oil and mining
properties are allowed to take as deplation of property,
income tax deductions equal to certain specified per-
centages of the gross income, without reference to the
cost of their property. The percentage allowed varies
from 5 percent for coal mines to 27% percent for oil
and gas wells. As a result, B. taxpayer owning an oil
well or mining property may deduct the cost of his
property from the income tax base several times Instead
of only once.
Example:
In 1936, a sulphur company took percentage deple-
tion of $4,267,000, whereas the depletion necessary
to return the cost would have been $614,000. Percentage
depletion in this case deprived the government of
$557,000 revenue for that year alone.
Revenue Estimate:
The elimination of depletion allowances other
than depletion on the basis of cost or March 1, 1913
value would produce $32 million (estimate as of
12/4/39).
Regraded Uclassified
141
COMMUNITY PROPERTY
In nine States income earned by the husband 1s
treated under the property laws of those States as
belonging one-half to the husband and one-half to
the wife. In these States, the combined Federal
income tax on the incomes of the husband and the wife
1s in general substantially less than in the other
States. On a $20,000 salary all earned by the husband,
for instance, the combined tax in the community property
States is $1,320 compared with $2,336 in the other
States.
Example:
In 1938, a certain husband and wife in one of the
community property States reported a combined net
income of $289,000, practically all of it salary,
which apparently was earned by the husband. If a
joint return had been filed, or if separate returns
had been filed in a State not having a community property
law, the tax would have been $154,000. Actually the
combined tax was $121,000, or 21.4 percent less.
Revenue estimate:
If the income reported in community property States
were taxed to the persons earning it and were divided
between husbands and wives in the same proportion as in
other States, the increase in revenue would have amounted
to $3.9 millions on the basis of 1935 returns. At the
higher income levels of the present time and with the
addition of Oklahoma to the community property States,
the amount of revenue would be greater than that
figure.
Regraded Uclassified
142
LIFE INSURANCE COMPANIES
At present life insurance companies are per-
mitted to deduct for income tax purposes from
3-3/4 percent to 4 percent of their reserve funds,
depending upon the anticipated rate of return used
in arriving at the premium rates. This exemption
discriminates in favor of investment in life insur-
ance as against other forms of investment. As a
result of this deduction, none of the sixteen largest
life insurance companies paid any Federal income taxes
for 1938.
Examples:
Total reported (interest, dividend and rent) income,
reserve fund earning allowance, total deductions,
and shown losses of the 5 largest life insurance
companies for 1938 1/
(In millions of dollars)
:
: Reserve:
:
I Total
: fund
: Total
:
Shown
Name
: reported: earning: deduc-
losses
: income : allow- : tions
:
:
: ance
:
:
Metropolitan Life
$206.9
$159.4
$228.0
$21.1
Prudential Insurance
Company
157.8
126.3
190.8
33.0
New York Life
115.0
79.2
119.7
20.4
Equitable Life
89.7
75.5
103.2
13.5
Mutual Life,
New York
51.0
45.1
64.1
13.1
1
Data taken from transcript cards of individual
companies.
Revenue Estimate:
Not available.
Regraded Uclassified
143
COORDINATION OF ESTATE AND GIFT TAXES
At present the Federal estate and gift taxes are
in pressing need of coordination. The gift tax,
initially enacted to make the estate tax effective,
still affords substantial opportunities for tax
avoidance. These opportunities are especially great
for the holders of large fortunes. The advantages of
transfers by gift during life increase more than in
proportion to the amount of the property transferred.
Example:
At present the Federal tax on an estate of
$10,000,000 1s $5,430,000. If, however, half of the
property 18 transferred during life the tax is out to
$3,200,000. Moreover, if the distributions during life
and death are made with a view to minimizing the total
tax, the Federal taxes can be reduced to $2,580,000.
Revenue Estimate:
If the estate and gift taxes were integrated 80
that the estate were taxed as though it were the last
gift superimposed upon prior net gifts cumulated from
the effective date of the Revenue Act of 1932, if only
one $40,000 exemption were allowed (whether taken for
gift tax or estate tax purposes), and if gifts were
taxed at the same rates as estates, the net increase
in gift tax and estate tax revenue under the rates of
the Revenue Act of 1935 was estimated between $23.7 mil-
lion and $70.2 million (on the basis of fiscal year 1940
collections, estimate as of 3/17/39).
Regraded Uclassified
144
ESTATE AND GIFT TAX EXEMPTIONS
Present laws provide three different exemptions
which can be utilized in minimizing the taxes on trans-
fers of property from one generation to the next:
Estate tax exemption of $40,000; estate tax insurance
exclusion, $40,000; gift tax exemption $40,000. In
addition, individuals are permitted to distribute each
year, free of tax, $4,000 gifts to each of any number
of individuals.
Insurance 18 favored under the estate tax as
against other forms of property. The other exemptions
result in great differences in the amounts of tax
imposed on property transfers, depending upon the time
and manner of distribution.
Example:
An individual with a $500,000 estate, who retains
title to all property until death, is liable to a
$88,400 tax. If he makes systematic property dis-
tributions to his wife and three children during the
ten years before his death, he can reduce his tax
liability to $18,856 or by 79 percent.
Revenue Estimate:
Disallowing the $40,000 insurance exclusion
would produce $13.8 million (estimate as of 1/24/39).
Providing only one $40,000 exemption for both
estate and gift tax purposes would produce $11.2 mil-
lion (average of calendar years 1937 and 1938).
Regraded Uclassified
145
POWERS OF APPOINTMENT
At present, limited powers of appointment enable
the passage of property ithout payment of estate or
gift taxes through more than one generation. For
example, a father by his will may leave his property
to his son to be enjoyed by the son during the son's
life; he may at the same time give this same son the
power to leave that property at the son's death to
such of the son's children as the son wishes to. In
such an instance the tax is imposed when the father
dies but there is no tax when the son dies and leaves
the property to the grandchildren.
Example:
At present rates, the passing of a $1,000,000
estate by limited powers of appointment to a third
generation results in the avoidance of a $232,000
estate tax (or a $140,000 gift tax) on the passage
of the property from the second to the third generation.
Revenue Estimate:
Not available.
146
STOCK AND BOND TRANSFER TAX
At present transfers of stocks and bonds are
taxed on the basis of the face or par value of the
securities. In the case of stocks, an additional
determinant 18 whether the selling price 16 above
or below $20. As a result, the tax is largely
independent of the value of the financial trans-
action and frequently varies inversely with the
selling price of the security. Replacing the present
taxes on stock and bond transfers by one based on the
value of the transaction would contribute to both
revenue and equity.
Example:
: Market :
:
:Tax as per-
: price :Par :Tax : cent of
:11/22/40:
:
:market price
Liggett & Myers
Tobacco, Pf.
$187
$100
$.06
00.032%
Kelsey-Hayes
Wheel "B"
9-1/8
1
.05
00.548
Seaboard Air Line
(common)
1/4 no .05 20.0
par
Revenue estimate:
If the present taxes on stock and bond transfers
were replaced by & tax of one-fourth of one percent
on the sale price, the increase in revenue would
amount to $51.3 million in the first full year.
(Estimate as of 1/24/1939.)
Regraded Uclassified
147
CONFIDENTIAL
TENTATIVE LESSONS BULLETIN
MILITARY INTELLIGENCE DIVISION
No. 70
AR DEPARTMENT
G-2/2657-235
ashington, November 29, 1940.
NOTICE
The information contained in this series of bulletins
will be restricted to items from official sources which
are reasonably confirmed. The lessons necessarily are
tentative and in no sense mature studies,
This document is being given an approved distribution,
and no additional copies are available in the l'ilitary In-
telligence Division, For provisions governing its repro-
duction, see Letter TAG 350.05 (9-19-40) M-B-M.
OBSERVATIONS ON BRITISH TANKS IN FRANCE
SOURCE
These observations were made by a British officer in
France late in May, 1940.
CONTENTS
1. INTRODUCTORY REMARKS
2. REMARKS ON TYPES OF TANKS
a. Light Tanks, Mark VI-B and VI-C
b. Cruiser Tanks, A,9 and A.10
C. Cruiser Tanks, A.13 Mark I and A.13 Mark II
d. The French Char B
3. GENERAL NEEDS
a. Vision Arrangements
b. Revolver Portholes
C. Armament
CONFIDENTIAL
-1-
Regraded Uclassified
148
CONFIDENTIAL
1. INTRODUCTORY RELARKS
"
In the battle whose results I saw, tanks were
used as infantry tanks supporting an infantry attack, but without
adequate fire or infantry support."
"It should be noted that German antitank gunners, who
from all accounts are very well disciplined, hold their fire until
tanks are within 50 to 100 yards. In doing this, they not only
reap the benefit of high penetrating power at close range, but
also get several tanks before tank personnel realize they are on
top of an antitank position."
2. REMARKS ON TYPES OF TANKS
a, Light Tanks, Tark VI-B and VI-C1
"I saw a number of British light tanks Mark VI-C
which had been put out of action by enemy fire. I came to the fol-
lowing conclusions:
"One direct hit was sufficient to put the tank out of
action, and, in four cases out of seven that I saw, the tanks were
set on fire as a result of the shot's going either through the gaso-
line tanks or into the engine compartment. According to a French
staff officer, the Germans fired all captured tanks which were not
already burned out.
"An officer on General de Gaulle's staff told me he
had information that German staff officers had been seen inspecting
British tanks put out of action, so it must be presumed that they
have the details of
light tanks.
"I saw a CTA plate-a face-hardened 14-mm, plate serving
as the upper rear offside side plate of the light tank Mark VI-B--
which had been struck by a 37-mm. shot at an angle of 30° to 45° to
1, Each of these tanks weighs 6.27 tons, has an armor basis of 14 m.,
and a speed of 30 miles per hour. The only difference between the
two is that the Mark VI-B carries Vickers guns while the Mark VI-C
carries Desa guns. As to the current manufacturing program, both
tanks are obsolete, although Great Britain is still using those she
has. G-2,
CONFIDENTIAL
- 2 -
Regraded Uclassified
149
CONFIDENTIAL
Me normal. It was badly shattered, and, in addition to the hole
made by the shot, a piece of plate 4 inches by 4 inches had been
knocked out.
"On the whole, Cavalry units
have no use
whatsoever for the light tank Mark VI-B."
b. Cruiser Tanks, A.9 and A.10²
"I have no information regarding the performance of A.9
and A.10 tanks, but I have come to this very definite conclusion:
"It is a waste of lives and material to send to France
anything with armor less than 30 mm. if it is to come into contact
with forward antitank defenses, I think the French are right when
they say the minimum armor thickness for any armored vehicle should
be 40 mm.
"Cavalry units
find the A.9 and A.10 a nuisance
on account of their slow speed. I am convinced that most of their
running troubles with these cruisers result from their efforts to
keep them up with the cruiser A.13."
C. Cruiser Tanks A.13 Mark I and A.13 Mark II³
"I did not see a Mark I which had been hit, but I con-
sider it quite as vulnerable as the light tank Mark VI-B.
"The method of spacing armor on the turret of the
Mark II appears to be successful in holding out 37-mm, fire at
2. The A.9 has a weight of 14.56 tons, a speed of 23 miles per hour
and armor of 14 m. The A,10 has a weight of 15.9 tons, a speed of
18 mileo per hour, and armor of 30 mm. Great Britain has a number of
these cruiser tanks in use, but they are no longer being manufac-
tured. 0-2,
3. These are tanks of British Christie design, each powered by one
400-horse power Nuffield Liberty engine. The Mark I has a weight of
14.56 tons, a maximum speed of 50 miles per hour, and armor of 14 non.
The Mark II has a weight of 16.24 tons loaded, an ungoverned speed
of 40 miles per hour, a governed speed of 30 miles per hour, and armor
on a 30-mm. basis. The tanks are no longer in production. G-2,
CONFIDENTIAL
-3-
Regraded Uclassified
150
CONFIDENTIAL
400 to 600 yarda. I was told, however, that at close range one
turret, which I did not see, was pierced in three places and that
the shots dropped inside with sufficient velocity to produce only
slight bruises, No bones were broken, but all three members of the
turret crew became slight casualties,
"I saw three shots through the wheels of B. Christie
suspension. It looked as if they had done little damage beyond
drilling holes through the wheels. Whether this happened after the
tank camo to a standstill, I do not know, but it looked to me as
if the tank could have run some miles after this damage had been
inflicted.
"On the whole, Cavalry units seemed delighted with
the cruiser A.13 Mark II and with the power traverse gear. They
only wished we could overcome clutch and steering troubles."
d. The French Char B4
"Neither 37-mm. nor 47-mm. ammunition will pierce the
armor of the Char B, although the shot makes a maucer about 10 to
15 mm. deep in the armor.
"I saw two direct hits by explosive shell probably of
75-mm. to 105-mm. caliber, One struck on the front plate a foot
below the driver's lookout, scored the armor, blackened the peri-
scope mirror, and smashed the object glass of the left hand 75-mm.
sighting telescope but apparently left the right telescope intact.
The other burst, which was registered on the front sloping plate of
the turret above the mounting, scored the armor badly and blew the
cupola completely off the tank-where to, I was unable to find.
"One Char B had been put out of action by a shot
straight through the face of the sprocket wheel. The hole measured
45 m. in diameter, and the final reduction was all jarmed up. On
the name tank a 45-mm. shot had penetrated the machine gun protect-
ing mask, but it had not gone through the mounting into the tank.
4. According to a British official report, the Char B is a heavy
Renault tank, Its weight is 31 tons; armor, 60 m.; maximum speed
on road, 17 miles per hour. For full characteristics of the tanks
and for improvements the French intended to effect, see SPECIAL
BULLETIN NO, 12, Par. II.
CONFIDENTIAL
Regraded Uclassified
151
CONFIDENTIAL
"On another Char B--whose engine had been fired, pre-
emably by the crew before leaving-there were imprints of sixteen
37-mm. or 47-mm. shots which had done no damage whatever except that
one may have jammed the turret. It was interesting to note that one
of the shots had struck the track rail obliquely and had heavily in-
dented the end of the track pin. It had not, however, broken the
track.
"Since the French attack was in progress while I was
malding my observations, I was unable to get first-hand information
as to the result achieved by a battery of 105-mm. field guns firing
solid shot on Char B's. I was told they were putting the tanks out
of action. An unconfirmed report indicated that one shell had
passed in one side of a Char B and out the other side."
3. GENERAL NEEDS
a, Vision Arrangements
"It is early to give a definite opinion on vision
arrangements, but the impression I gained was that, although the
periscope was as good as the triplex block for vision, the triplex
block was preferred in a roomy cupola.
"It is our contention that a tank cannot be controlled
from the gunner's position. This can be confirmed by the fact that
in one tank, with the commander killed, all sense of direction was
lost, and the only way to get out of the battle was for the driver
to turn about and follow tracks to the rear. For this reason, as
well as for the reason that German antitank gune are so well hidden
as to be extremely difficult to locate, it is quite essential to
have as many alternative methods of vision as possible in the tank."
b. Revolver Portholes
"A good many of the German casualties were actually in-
flioted by personnel leaning out of tanks and, with revolvers, shoot-
ing Germans who were taking cover in slit trenches AS tanks came by.
"In one case, where a tank commander with his head out
of the cupola was shot, the Germans were so close that the gun could
not be depressed on them. The tank driver raised his visor and shot
six of them before closing it.
"This emphasizes the need for good revolver portholes
in as many directions as possible. As always suspected by us, a
casualty in the turret of the tank prevents its rotation through
CONFIDENTIAL
- 5
Regraded Uclassified
152
CONFIDENTIAL
becoming wound up in it. In such circumstances, all round revolver
portholes are essential for defense.
C. Armament
"I am convinced that it will be a grave error if any
infantry tank of the future is not equipped with at least a 75-mm.
shell-firing weapon. Neither slugs nor machine guns can put out of
action antitank crew members who drop into their slit trenches when
necessary. Thus, unless the antitank gun is overrun in actual fact,
its crew pops up in time to bag the next tank. On the other hand,
if half a dozen 75-mm. shells could be burst on the antitank gun
position, chances are that the crew would be knocked out."
CONFIDENTIAL
-6-
153
BRITISH EMBASSY,
WASHINGTON, D.C.
Personal and Secret
November 29th, 1940
Dear Mr. Secretary,
I enclose herein for your personal
and secret information copies of the reports
from London on the military situation received
on November 14th, 15th, 16th, 17th, 18th, 20th, 20th,
21st, 22nd, 23rd, 24th, 26th and 27th.
Believe me,
Dear Mr. Secretary,
Yours sincerely,
Lolaza
The Honourable
Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D.C.
both 2269/57/40
154
TELEGRAM RECEIVED FROM LONDON
DATED NOVEMBER 27th,1940
1.
Naval During the night of November
enemy surface vessols sank Dutch ship
(2,000 tone) off Pensance. (Some) fishing trav-
lers also reported sunk in the same area. Dup
naval forces carried out . sweep but failed to
intercept the enemy.
:
Air reconnaissance of Taranto thus
far reported 2 battleships and 7 cruisers in
the barbour.
3.
Greece, Situation report to 8.00 Delho
November 25th.
4.
In northern sector Greek reconnaissence
troops have reached Pogradee and penetrated fifteen
kilometres west of Viskopjao. In Pindus sector
progress continues. Creek advance on Argyrokastron
road encountered reinforcements. In constal sector
Creeks have passed Philistes and have landed a de-
tachment behind the Italian flank.
D.
Our air reports indicate that Italians
are trying to retrieve the situation by landing
large reinforcements at Durasse and Valona, since
November 10th at least 81,000 (in) formations
have arrived.
:
Royal ALP Force. wight of 25th/26th.
36 heavy beebera wase sent to the following targets,
shipbuilding yards at Kiel (95) naval bace at wilholm-
abaven (11). In addition 5 aircraft were given a
mine-laying task. All but one returned.
German/
Regraded Uclassified
155
7.
German Alr Force, Night of 24th/25th.
Town Hall and a club at Croydon were bit, 85
people being killed and as injured.
8.
Bristol.
Casualties reported: 44 killed,
142 seriously injured.
:
Night of 25th/26th.
Pos was widespreed and except for a
few aircr-ft operating in the Bristol area no
enemy activity, London was "all clear" all night.
A few small fires from incendiary bombe were re-
ported from Bristol area.
10.
Aircraft canialties in operation over
the United Kingdom.
Enemy:
By our fighters,
Destroyed
Probable
Danaged
Bomber
1
2
all
By anti-aireraft (24th/25th)
Unspecified
3
TOTAL I
4
1
British:
Three bombers missing.
11.
Shipping Cosumities,
On the 23rd a ritten ship of 3,100 tone
in convey vas torpedoed and sunk in the northwestern
approaches. November 24th British ship of 6,000 tone
was eined in home waters and beached.
12.
Three conveys totalling 95 ships have
arrived is have waters from (Weetern) Atlantic.
13.
Helta. Nove ber 26th six Italian fighters
made . low flying attack on Luge aerodrome; one
Wellington was destroyed and three others damaged.
14.
The sens day our Blenheims successfully
attached/
Regraded Uclassified
156
attacked four Italian bases in Libya and the
following day bombed transport park at Assab with
good results.
Regraded Uclassified
With 2269/56/10
157
TELEONAM RECEIVED FROE LONDON
DATED NOVE AER 25th, 1940
1.
Royal Air Force.
Night of Nove ber 24th/25th,
Fifty-one aircraft were despatched to
Hamburg shipyards oil plants and g-aworks (44
combers); the remainder went to attack shipping
et Houlonge. In addition 3 heavy combers were
minelaying. One medium bomber is missing also
1 heavy bomber.
2.
German Air Force.
November 23rd/24th. Further reports.
Southampton. Casualties no far reported are 63
killed and 250 seriously injured. Damage to rail-
way ad residential property 10 serious but our-
prisingly little damage has 11:00 done to docks and
factories. General morale 1a good and civil defence
services worked with great courage and suffered
numerous casualties. Troops are assisting.
3.
Night of 24th/25th,
About 90 machines were operating of which
50 attacked Bristol. Commercial and residential
property mainly suffered and several fires were
caused. Casualties so far reported are about 40
killed and 150 seriously injured. Damage to industry
was not serious a d war production is unlikely to be
greatly affected.
4.
Aircraft casualties (in operations against
British Isles)
Enemy by days
Destroyed
Bombers
8
Pighters/
Regraded Uclassified
158
Enemy by day:
Destroyed
Fighters
1
By night, by anti-aircraft
Unidentified
1
TOTAL #
4
Probably destroyed,
nil
Damaged: by day
Fighter
1
By night
nil
TOTAL t
1
Our losses. 8 combers missing.
8.
Shipping casualties.
British 8.5. "Port Robart" 7500 tona
reported being shelledby enemy relder 600 miles
south east of Bermuda on the aftern in of November
24th. Two Britlah ships 6200 tons total were ined
in home waters yesterday. One was abandoned the
other sank.
6.
Greece.
The situation to 8 p.m. November 24th.
Northern Sector, Mopping up continues.
Pindus Sector. Greeks have taken high
ground ten kilometers north of Sreek near Breek-
Kovitam road.
Epirus Sector. Greeks have advanced an
average of 8 kilomstres and have occupied heights
north east and south weat of Leskovik. Near the
Cosst the Italians from Kalamas area reported re-
treating along Sarande road. The Greeks have sent
small force with artillery from Corfu to out the
road.
Regraded Uclassified
buth 2269/55/HO
159
TELEGHAM FROM LONDON
DATED november 24th, 1940.
1. Complete inactivity of the Italian
Air Force along the whole front on the 21st heavy
clouds and snow in the mountains rendered air
operations difficult for both aldes. On the 22nd
the Royal Air Force suctemsfully bombed military
concentration at Argyrocastron.
2. Royal Air Vorce
VIGAL of 25rd/24th.
Seventy aircraft were sent out as
follows:-
Three oil-plants (29 machines);
targets at orlin (10 heavy hombers): Royal
Arsenal at Furth (10 heavy combers): and smoller
numbers to various other objectives, which in-
cluded minelaying. One Aircraft is missing.
3. Jorman Air Force
Night of 22nd/23rd.
Casuelates reported in London area
were: 6 killed, 16 injured. Birmingham rellef
services atill havily engagen but are dealing
with the attuation adequately. Utility services
especially water, suffered severely although
several factories have been affected, later reports
indicate alight damage In most cases and in others
less severe then at first thought. Ossualties
reported over 100 killed and 900 injured.
4. liove oer 23rd several high altitude
fighter swoops took place but only one reached
Regraded Central Uclassified
160
Central London. Attacks also attempted on
shipping in the Thames Estuary. These for-
mations included Italian fighters.
During the day our fighters des-
troyed 11 enemy without loss.
5, Night of 23rd/24th.
Weather was favourable to the
enemy during the early part of the night but
later ground mist developed and his activity
slackened. About 190 enemy aircraft were oper-
ating 60 of which were mine laying. Southampton
was chosen for attack which started at 6.40 pame
Several fires were started but were all under
control by the morning. Burst water mains caused
temporary Lack of water for fire fighting. In
& hospital ship in the dock area, a fire was
started but was soon put out and some damage
was caused to the Fleet Air Arm and the Admiralty
Stores. Casualties so for reported are 40 killed
and 150 injured.
6. Aircraft casualties during the
above operations (home front):
Enemy 1-
Destroyed Probable Damaged
(German) by day-
Fighters
4
=
1
Italian fighters
9
0
2
British - 1 bomber missing.
7. Shipping casualties. By submarine
November 23rd, 2 Norwagian ships (5,000 tons total)
honeward bound in convey terpedoed North-Western
approaches. 2 British ships (10,800 tons total)
and 1 Swedish ship (5,100 tons), belonging to out-
ward/
Regraded Uclassified
161
vard -bound convoy torpedoed North-Western
approsches.
by line L?Sovember 2204/1-
1 aritish ship (3,700 tona) suok
off South-West Caglish coast.
B. Hiddle Last
Italy. in if 076 or 2nd/23rd,
our heavy Dembers attacked eari. Pires were started
on jet:les and explosion neer the rellway station
1:1 up the Town, and bomba which ourst near oil
refinery caused large explosions and fires.
V. Kenya.
in Vove ber 22nd, two stallan
bombers stracged ura. One was destroyed.
Regraded Uclassified
with 2269 /+o
162
Telegram from London of the 23rd
November, 1940.
1. Malta twice reided by enemy aircraft night
of 20th/21st, no damage service or civillan property.
2. Netherlands momarine 021 10 predumed lost.
M/L 127 mined and sunk off Harwlek 22nd.
3. Royal Air Force, November 22nd.
Roat of our daylight bombers were Forced to
abandon tasks owing to lack of cloud cover.
A factory, a convey, harbours and barges at 3
ports, and 2 aerodromes were however attacked. Bursta
WGTW seen on docks at one port, and also upon one
merodroms. All our aircraft returned safely.
Night of 22nd/23rd. 95 aircraft more sent
out as follows: Airoraft assembly plant, Bordeaux
(43 heavy bombers): 2 Synthetic oil plants 34 medium
bombers); wharves at Duisberg-Ruhrort: shipping at
2 "invesion ports". Other machines were sent to lay
mines and drop pamphlets In Northern rance and Paris
area. One beavy bomber bas not returned.
4. German Air Force, November 22nd.
Enemy activity very slight. Constated mainly
of reconnaissance flights to the Southeastern and South
coasts In small numbers. 09 aircraft penetrated
inland, no bombing of Importance reported.
8. Night of 22nd/23rd. Enemy activity was princi-
pally concentrated on the Midlends, and especially
against Birmingham. About 265 machines operated during
the/
Regraded Uclassified
163
- 2 -
the night, of which so were mine-laying, 48 crossed
over London area, and 100 attacked Birmingham.
individual aircraft visited several other towns and
districts.
6. Only minor incidents are reported from London
area. At Birmingham bembing began at seven thirty p.m.
and serious fires were caused. At ten thirty p.o.
when all fire fighting services ware fully occupied,
there was 8. further heavy raid. By five s.m. all fires
were under control, although the attack did not finish
until five twenty five a.m. From preliminary reports,
damage appears to have occurred chiefly in the center
of the city, affecting Munteipal and public buildings
and two railway stations. Six factories reported as
hit, three of them severely. Fires were caused at
two gas works. Elsewhere in England bombing was alight,
although damage was caused et one dock, and to a ship
at Liverpool.
7. Aircreft casualties.
(In operation against British Isles).
Destroyed
Probable
Damaged
Enemy (by day)
Bombers -
2
nil
2
Our losses:
the bomber missing.
8. Riddle East, Libya.
Reference paragra, to 8, summary of November 221
eight Libyans killed not one hundred and eight. on
night/
Regraded Uclassified
164
- 3 -
night of November 20th/21st, single aircraft
attacked Italian bases and aerodromes. At one
place a barrack building was set alight and at an
aerodrome the control building was hit and several
aircraft on the ground damaged. At Benghast the
custom house was hit and another large building
blew up after being bombed.
Malta.
On November 22nd, twelve Italian bombers
flew over the Island: one was destroyed by anti-
aircraft fire.
Regraded Uclassified
165
Telegram received from London dated
November 28nd, 1940 (delayed in transit).
Naval.
1.
One armed drifter off Herwich mined and sunk
p.m. Plat and on 90th H.M.A.S. Goorangal minesweeper
sank with all hands after collision in port Philip Bay
Victoria. British ship "Port Brisbane" reported being
attacked by armed raider 1,000 miles west off Preemantle
S.H. 21st.
8.
Estimated that, in acdition to Admiral Scheer
who may still be out, there are now certainly three and
poesibly five raiders at large. The certainties:
1 in Indian Ocean;
1 in South Atlantic;
1 in Australasian waters of Pacific.
Possibles are:
1 in North Atlantic and
1 additional in Indian Ocean.
3.
A.M. 2lst two convoys attacked by 4/0 off
Harwich and in Themes Estuary respectively. One ship
damaged by gun fire.
4,
Military. Greece, Situation to 8.8 p.m. Plst.
5.
Since our Gladiator action on 19th, reported
summary of 21st, Italian fighters neem to have almost
ceased to operate; only two have been seen.
6.
On November 19th one of our patrole met enemy
somewhat south of Bidi Barrani, machines included 16
medium tanks and 60 mechanical transport. We destroyed
5 tanks and one 80 m. gun, damaged six tenks and took
1/
Regraded Uclassified
166
-8-
1 20 mm. gun and eleven prisoners; 108 Libyans were
killed. Our losses were 1 officer killed, 1 officer
and 3 other ranks wounded, one tank and one truck
destroyed.
7.
Night 21st/22nd. All operations cancelled
owing to weather.
8.
German Air Force. Night 20th/21st. Further
reports. London area: total casualties reported 11
killed and 45 injured.
9.
Further reports from Birmingham indicate that
house property was chiefly concerned. Damage and casualties
were caused by parachute mines and bombing Kenilworth and
Wolverhampton districts.
10.
Night of 21st/22nd. Only about 115 aircraft
were operating.
11.
Aircraft casualties in above operations
(home front):
Enemy:
Destroyed
Probable
Damaged
Nomber
1
nil
1
British: 1 fighter
1 bomber missing.
Regraded Uclassified
will 2269/22/40
167
Telegram received from London
dated November 21st, 1940.
1.
British ship Medmos at 8.30 November
20th reported being chased by raider 750 miles west of
Preemantle. Another energ surface vessel probably
raider was 1200 miles east of River Plate Dalla
November 19th.
2.
E-boat awak by "Compbell" night of 19/20th
was engaged at close range, she endeavoured to essape
behind smoke screen. Chased at high speed she soon
caught fire and having been badly damaged espaised and
cank.
3.
Emerge aircraft made low bombing attacks on
Alexandria night of November 18/19th. similar attempt
on the herbour abandoned when anti-aircraft barrage put
up.
4.
Convey in Themes Fatuary was dived bombed
by two aircreft same November 20th. Ro damage.
Greene, Achievements to 6 Della Number 19th.
5.
Horthern sector. Operations such retarded by
enery sir action. Greeke have not attempted to advance
from the high ground immediately cast of Koritsa.
Hopping up continues; large quantities of supplies
captured, including 35 anti-tank guna with ammunition
and 20 mountain guns.
60/
hrs
Regraded Uclassified
168
÷
7.
Pindus Doctor. The Creeks have oronsed
the frontier in many places and have out the main
north-south road near Leakovik.
8.
Epirus Bector.
The creeke have occupied
Visani.
General. Troope have been ordered to be as
notive as possible over the whole front in order to
disperse the Italian air activity.
9.
Royal Air Force. Night of November 20/21et.
Eighty-nine machines were sent out (es followe)
et German inland port (43 aircraft); aerocromes in
occupied territory (38 medium hombers); submarine base
at Lorient: gun emplacements near Calais: fuel installa-
tions in Holland.
10.
German Air Force. might of November 19/20th.
Further reports. Casualties in London areas
26 killed, 29 injured; Birmingham area, 193 killed,
688 seriously injured; Leicester, 55 killed, 181 injured
11.
Hight of November 20/21 midespread attacks
by about 230 enemy machines; the industrial miclands was
the main objective. The attack on London was on a small
scale and chiefly before micnight. From preliminary
reports it appears that the attack on Birmingham was
chiefly confined to the East of the city, end although
several factories mere affected, very little important
damage has been reported. At Leicester two parschute
mines did considerable damage to residential property
and caused a serious fire which was soon under control.
Aircraft casualtion in the above operations
(home front).
Enemy
instroyed
Tky our fighters
Domber
1
Our/
Regraded Uclassified
169
Our loss is N11.
12.
Attacks on shipping - A British ship 10,000
tons, reported she was being chased by a raider 750
miles west of Freemantle at 8.30 Bellia November 20th.
13.
Middle East
Greeos. on the night of November 17/18th our
heavy bombers successfully attacked Valona; one crashed
on a mountainside in Yugoslavia, the rest returned
safely.
On the afternoon of November 19th ten
Gladiators which had only arrived at their forward
camp the same morning, intercepted a superior minber
of Italian fighters and destroyed nine for certain
and two more probable. All our aircraft returned
safely.
Libya. Reported four Gladiators of the
Australian Air Force shot down five enemy fighters.
One Cladiator missing, another forced landed, pilot
safe.
Regraded Uclassified
with 2269/31/40
170
Telegram received from London
dated November 20th, 1940
During nir raid night or November 13th/
14th at Alexandria four heavy delay action mines
or bomba dropped in the harbour, they exploded Dalla
November 16th: slight damage and doek out of use
for short time.
2. your merchant ships have been
torpedoed within about 250 miles of Preetown during
the last rive days by U-boat probably German.
5. "Campbell" Bank AD k-bost off
Southwold night of November 19th/20th and picked up
survivors.
4. Three M.G. trawlero off East const
attacked by onemy aircraft November 19th one sank.
5. Alexandria bombed night of November
16th/17th damage alight except to BODE private
property. At about 5:30 Hovember 17th believed
mines or torpodoco wore dropped in the harbour.
6. Convoy off Hartlepool attacked D.m.
November 18th by ono aircraft and "Lowestoft" bagged
it. Later convoy damaged another aircraft as it
returned from Tyne.
wrb
7. Royal Air Yorce. Night of November
19th/20th. Sixty-nine aircraft were sent to the
following objectives. A power station and a military
objective at Berlin: Krupps and mother ahipbuilding
yard at Kiel, 3 synthetic oil plants in Germany:
Skoda works at Pilson: submerine base Lorient. your
heavy bombern are missing.
8./
Regraded Uclassified
171
-2-
8. One heavy bomber made 6 daylight
reid on Bari on November 19th.
9. German Air Force. Night of November
18th/19th. Casualties in London area were 3 persons
injured.
10. Deylight November 19th. memy
activity consisted of reconneissance flights in
emall numbers over the Seet and Southeast cosets.
There was no penetration inland. In the afternoon
6 formation of about 50 approached Portsmouth but
turned back before reaching the cosst. No bombing
was reported during the day.
11. Night of lovember 19th/20th.
nemy
activity WELB heavy ano widespread, especially before
midnight: about 400 aircreft operated chiefly in
the Widlands and especially against Birmingham.
Pive enemy aircraft were destroyed during the night.
12. In London hish explosive bombs were
dropped in Strand and Covent Garden districts at
B p.m.: and a large fire was started in asrylebone.
A heavy attack on Birmin, ham started at 7:25 p.m.:
house and shop property suffered considerably but
damage to factories was only slight. Reilways were
hit and several large fires were started, but all
are either put out or under control. à boot factory
was set on fire at Leicester and cosumities
resulted. A few bombs were also dropped on Coventry.
13. Aircraft casualties in above operations
(home front) all during night of November 19th/20th:
anomy/
Regraded Uclassified
172
-3-
Enemy:
Destroyed Probable Damaged
Destroyed by
balloon barrage
Bomber
1
Other causes
Bomber
1
Unidentified
3
-
Total
5
British: 4 bombers missing.
14. Middle East. western Desert. Sive
was bombed on the night of November 17th/18th and
aerodrome is temporarily out of action.
Regraded Uclassified
With: 2269/50/14
173
Telegram received from London
dated November 20th, 1940.
Neval.
Four more ex-American destroyers have
arrived.
8. Greece
Situation to 6 Dame the 17th.
Northern and Pindus Sectors.
No change.
Epirus Bector
(a) Greeks continue progress along Permet
road.
(b) Opportunity to capture large number of
enemy in Koritsa area has been lost owing to heavy
Italian dive-bombing and machine gun attacks pinning
troops to the ground during greater part of the day.
3.
Yugoslava deny the report that Italian tanks
retired into their territory.
4.
On November 17th our medium bombers attacked
supply dumps in Albania, and fighter patrols were
maintained over Athens.
5. Royel Air Force November 18th.
Two Blenheims of Coastal Command attacked
and probably destroyed 8 Heinkel bombers off the Dutch
coast. Three other Blenheims destroyed a flying boat
and demaged another off the Danish coast) all of our
aircraft returned safely.
6. mont of 18th/19th.
Projected operations were mostly cancelled
owing to unfavourable weather, nome heavy bombers were
sent to the Leuna oil plant, and others on a mine-
laying/
Regraded Uclassified
174
laying mission.
All returned.
7.
German Air Force.
Coventry. Casualties 80 far reported are
380 dead and 800 injured. Several important factories
resumed work on November 18th. The morale of the
public and A.R.P. services is reported to be magnificent.
8.
At military billots mentioned yesterday 87
soldiers were killed and 35 seriously wounded.
9. Night of 18th/19th.
About 150 enemy aircraft were employed of
which an unusually large number were apparently mine-
laying off the East Coast.
10. Shipping Casualties.
A north bound convoy was attacked 10 times
by aircraft in the Thames Retuary during the early
afternoon of November 18th. Three ships were damaged.
A south bound convoy was similarly attacked in the
same area but sustained no damage. One British ship
was sunk by air attack off southern Ireland early on
November 18th.
11. During the night of 17th/18th.
our medium bombers attacked Italian sea
bases.
12. audan.
Libyn. Night of 16th/17th and during the 17th
our bombers attacked various military and railway targets
in Ethiopis with observed successful results.
Regraded Uclassified
with 2269/49/40
175
Telegram received from London
dated Kovember 18th, 1940
Naval. In spite of extensive search
in area of attack on convoy HX 84, no trace of
further survivors has been Found.
2. It is rumoured that e pocket battle-
ship is in the vicinity of the Asores and the
German tanker Germania is reported to have left
the Azores P.M./17.
3. On November 16th H.M.S. Colombo sholled
a merchant vessel of 1500 tone enchored off Mogadishu
and obtained at least 2 hits. Shore batteries opened
fire without result.
4. Naval mine sweeper shot down 1 enemy
aircraft yesterday.
5. Royal Air Force.
Night of November 17th/18th. Vifty-two
aircraft were despatched by bomber commend; 43 to
Gelsenkirchen oil plant and others to Homm marshelling
yards and Lorient submarine base. All returned
safely.
6. German Air Force.
Night of November 16th/17th. Further
reporte. Casumlties in London aree ao far reported
are 44 killed and 155 injured. At Southampton
extensive damage to property was done by 8 land mine,
hrs.
18 people being killed and 30 injured.
7. Daylight of November 17th Pifty eneey
streraft approached Maidetone end a further 60
consisting/
Regraded Uclassified
176
&
consisting of Italian bombers escorted by German
fighters were spread over southeast area but did not
penetrate beyond Tilbury. The gas works at Rocheater
and power station at Newhaven were hit. Elsewhere,
there was no damage of significance.
8. Eight of November 17th/18th. About
280 sircraft were engaged.
9. No important damage was reported in the
London area. At Southampton 19 persons were killed
and 20 injured and damage was caused to residential
property. In Essex, a parachute mine dropped on a
billet containing 260 soldiers; there were many
casualties.
10. Coventry. Later news. Estimate of
industrial damage specifies 6 factories. 1 reported as
gutted; at the machine tool fectory previously reported
as gutted, damage is less serious than was thought and
a large part of the stock will be salvaged. At the
other 4 factories damage is only partial and production
is continuing. At Courtalds, the munitions section
was almost untouched and is in full production; 71 of
production from the remainder of the factory is expected
from today.
11. In all factories production is
temporarily hindered by partial interruption of public
utility services.
12./
Regraded Uclassified
177
-3-
12. Aircraft battle casualties in the
above operations (home front).
Enemy
Destroyed Probable Damaged
By our fighterst
Fighters
12
5
6
Bomber (Italian
heavy bomber)
-
-
1
By Minesweeper
Unspecified
1
-
-
By Anti-Aircraft fire
Bomber
1
-
-
Crashed (cause
unknown)
Fighter
1
-
-
Totale
15
5
7
British 5 fighters (4 pilots safe).
13. Shipping Casualties. A British ship
(3000 tons) has been sunk by a U boat 350 miles
southwest of Freetown.
Regraded Uclassified
178
Telegram from London dated
November 17th.
Naval.
A navel trawler was blown up and one Polish
and one British destroyer damaged as a result of a
collision in the Clyde on November 16th.
A British cruiser force has arrived in Pirasus
with troops from the Middle East.
During an enemy raid on Alexandria on November
13th H.M.S. "Decoy" was damaged - two decks and the
bottoms holed.
Royal Air Porce,
On November 16th enemy AC/ shelled N.E. Swin
light-vessel and machine gunned Butt of Lewis light-
house - no casualties but light vessel sustained hits
above the water line.
Convoy in Thames estuary twice bombed a.m.
November 16th. One ship had engines disabled and
another, not in convoy, was bombed but no damage reported.
Daylight November 16th.
A small number of medium bombers attached
shipping at 3 Dutch ports.
Night November 16th, 17th.
128 heavy and medium bombers were sent to
continue the attack on military objectives in Hamburg
and in addition 22 were detailed to attack aerodromes
and Antwerp dockyard and 3 to lay mines. No outstanding
results observed mainly owing to heavy clouds over the
target area. 3 of our sircraft missing.
German Air Force, Night of November 15th, 16th.
It is now known that 3 enemy aircreft were shot
down by anti-aircraft fire. Total casualties reported
in Londonerea were 95 killed and 510 injured. There
were said to have been 33 fatal and 14 serious casualties
at Bournemouth. About 300 incendiary bombs were dropped
on Windsor but damage end casualties were alight.
Night of 16th, 17th,
93 aircraft were plotted, of which 16 were mine
WHB shot down by anti-aircraft. Parachute mines were again
laying and 48 operating over London. One enemy machine
used, but few cases of important damage were reported
from London area.
Coventry.
All fires under control,
Aircraft battle casualties in above operations
(home front):
Enemy
Destroyed.
By anti-aircraft
Unspecified
4
Greece/
Regraded Uclassified
179
-2-
Greece, Northern sector.
Greek troops are within 12 kilometres of
Koritza. Near Bilisht stiff opposition encountered
from Italians in prepared positions.
450 prisoners,
10 guns captured this area. Commander-in-Chiof Batis-
fied with progress.
Pindus sector.
No change.
Epirus sector.
Greek advancing from Dolians nearly reached
Basilikon and have taken Delvinakion,
Further south
175 prisoners taken by one Greek battalion. Coastal
sector, advance towarde Egoumenitsa continues.
The 47th Italian division has been brought from
Valona to Pindus front.
Middle East.
On November 15th Blenheims escorted by fighters
attacked 2 enemy aerodromes; and on the night of November
15/16 successful air attacks were made on 5 Italian sea
bases in Libys.
Sudan.
During the night of 14th, 15th, an unidentified
aircraft was reported off Port Suden believed to be mine
laying.
Itelian East Africa.
On the night of 14th, 15th and on 15th our
medium bombers attacked various military targets in
Ethiopie and 6 machines of South Afridan Air Porce bombed
an aerodrome in southern Ethiopia destroying 2 Italian
bombers and damaging 3.
Roumania.
Evidence has accumulated to show that German
forces in Roumania are being continually increased.
Although it has not been possible to identify any more
units it is possible that there are now elements of
several more divisions in the country representing
a strength of approximately 80,000 men, including
instructional troops and troops required to man anti-
aircraft defences. There are also fears that rein-
forcements are passing through Hungary at the rate of
1 division per week.
Regraded Uclassified
180
Telegram received from London
dated November 10th, 1940.
Daylight 18th.
A Hudson on reconnaissence off the Norwegian
coast destroyed a Heinkel bomber.
B.
Night of November 15th/16th.
In good weather heavy and successful atteck
made against transportation, oil and shipbuilding targets
at Humburg. In attack on trunsportation targets in
Linlwarder and Moorfleth areas, burste seen in target areas,
hits scored on marchalling yarde and large building blew
up and appeared to be completely wrecked. At Rhenania -
Dobag oil refinery many fires and emall explosions caused.
At Blohm and Vess shipyard several fires were started at
four military objectives in the city. Many serodromes
were attacked. Results observed were as follows.
Schipol aerodrose buildings and hangars; Socatorberg
buildings on the east side and railway straddled, explosion
and fires were caused; Sindhlown, direct hito scored on the
railways and buildings; Borkum semplane base, hits made on
elipways and hangars and buildings at the top of the slipway
set on fires Beauvais, bursto seen amongst fourteen twin-
engined enemy aircraft, two bursting into flames) Alox,
direct hit made on an enemy aircraft taking off. Channel
ports of Calais, Boulogne, Dunkerque, Ostend, Meebruge and
Cap Orie Nes, boats also attacked. Two of our nivereft
are missing.
3.
German Ar Force
Night of November 14th/10th.
Total casumlties 80 far reported were 23 killed
and 64 seriously injured.
mrs
4/
Regraded Uclassified
181
4.
The raid on Coventry was the most serious the
City has experienced and lested for over eleven hours.
In addition to meserous high explosive bombs, about 50
parachute mines were dropped and exploded, as well as
about 90 unexploded mines and many unexploded bombs. All
factories closed down during the daylight of November 15th,
and it was not until the morning was well advanced that all
fires were brought under control. Production at a number
of factories will probably be affected by shortage of
electricity. There has been some private evacuation, but
the morale is good. Amongst the most important items of
damage were railways and reilway property, which is now
open. One machine tool factory is reported as burnt out,
and the Cathedral is almost destroyed. Three hospitals
were hit, two of which have been temporarily evacuated.
Serious damage was caused to gas and electrical services,
Bone of which will take some time to repair. Bo for two
hundred bodies have been recovered and there are several
hundred injured.
3.
Other Midland towns, Leanington, Nuneston and
Birminghem were also bombed, but damage was not abnormal.
6.
At a Royal Air Force aerodrome in ylintohire
many incendiary bombo end name high explosives were
dropped, seriously damaging two hangare and eight aircraft
in them, besides two other aircraft on the ground. There
were no casualties.
9.
Deylight of November 18th.
A total of about 350 enemy aircraft operated in
three phanes. Our fighters intercepted with considerable
sureess. Bombing was on a minor scale, alight damages
being caused in London docks area. Comunities were sew.
8/
Regraded Uclassified
182
-3-
8.
Night of November 15th/16th.
It 1s estimated that 340 enemy aircraft were
employed. Feature of the attack was the number of
parachute mines both exploded and unexploded which fell
in the London area and the number of fires.
9.
From preliminary reports there were several
cases of damage to railways chiefly to suburban lines,
two as works were hit and a fire, which is expected to
affect production was caused at Firestone Tyre Works.
Three serious fires were. caused in Central London area
and many other small ones elsewhere; all are under control.
10.
Aircraft battle casuelties in these operations
(home front).
Enemy
Destroyed
Probable
Demaged
By our fighters
fighters
16
2
4
bombers
1
(Night 15th/16th)
By Hudsons
1
bombers
1
By A.A. fires
bombers destroyed
1
Totals
20
=
4
British Three fighters (two pilots safe).
Two bombers missing.
11.
shipping casualties. A homoward-bound convoy was
attacked on the morning of November 15th in the North=
Western approaches. One British ship, 9300 tone, was set
on fire and subsequently sank.
18.
Oregon and Albania
On the night of November 12th/13th our aircraft
attacked/
Regraded Uclassified
183
attacked Bari, causing much damage and setting fire to
oil refinery. On November 13th two medium bombers bambed
Valono harbour, destroyed a jetty and sinking a barge. on
November 14th six medium bombers destroyed a road bridge
near Koritza and hit a convoy of sixty motor transport]
two machines did not return.
13.
Kiddle East
On night of November 14th/15th our aircraft
bombed Italian sea bases in Lybia; Alexandria was raided
six times by single aircraft but no damage 18 reported.
14.
Malta
On November 16th enemy fighters approached the
island but were driven off by anti-aircraft fire.
Regraded Uclassified
184
14th
TELEGRAM THAT LONDON DATED NOVEMBER 16th 1940.
1. NAVAL.
Further to fine exploit of noval aircraft
attack at Taranto examination of photographs shows1
One Cavour class bettleship apparently abandoned
heeled to starboard with only the superstructure and port
upper deek from storn to after funnel above water,
Another Cavour eless battleship is bonched -
the ship 18 upright with an auxiliary alongaide, note
loid around her. Littorio class battleship bown now
well above water ship has amall list to port on auxiliery
alongside presumably pumping out note laid round her.
Other battleships and light inch cruiser and probably
the two demaged six inch cruisers have left Teranto.
2.
During the course of the recent operations
seven anamy sireraft were shot down and two unsuccessful
attempts ware ande to bonb floot.
5. Alexandria WILD twice attacked by enemy
sirereft on the evening of the 18th. Slight damage WEB
caused to dook sheds and shore base.
4. WAIT AFRICA.
Port Centil WOD occupied by free French
forees early on November 14th.
5. The sens morning our neval airoreft
reported sighting two destroyers end one merchant vessel
about two hundred miles west of Takoradi steering southwest
6. ROYAL AIR FORCE.
Hight of 14811/2004.
Berlin/
Regraded Uclassified
185
of I I
Berlin area. Wellingtons attacked Schlesischer Station.
Several explosions and may large fires. Whitleys bonbed
Putlitzatresse, Lehrter, Tempelhof mershelling yards and
Anhalter Station with similar effect.
7. A large number of aerodromes were attacked.
hangers and buildings damaged and runways bombed as
enemy aircraft were taking off.
8. Shipping in Channel ports end submerine bese
at Lorient were also attacked.
9. GERMAN AIR FORCE.
Daylight November 14ths Energy activity
consisted mainly in reconnaissance and attempted attacks
upon shipping off southeast ecest. Some reiders
penetrated inland over Kent and as far south as London.
Bombo were dropped at several pleces is Kent mainly on
seaside tomas without causing serious damage or d estruction.
10. Night of 14/15th. 350 enemy reraft operated
over England. 500 of these were employed in Midlands and
remaining 50 against London end southeastern counties.
104 sorties were flown by our fighters but no interesptions
have been reported.
11. A very severe attack wes made against Coventry
where extensive damage 10 reported mainly by fire over a
large area of the city. Several factories ware involved
and extensive Samage was done to utility services, A
large number of fire pumps brought in from other areas but
operations were rendered more difficult by the presence
of persebute rines and look of witer. Done fires were still
burning at 9.0 some to-day. Main line reilway services are
being diverted and necessary troops are cooperating with
the pelice. Details concerning damage end onsualties have
not yet been reserved.
12/
Regraded Uclassified
186
- a -
12. Bombing we reported from other towns in the
Vidlands and 0180 in Yorkshire but only slight damage and few
o sualties resulted. In the London area a school wis hit
and a fire caused at an ammunition works.
13. Aircraft casualties 1a the a bove operations.
(Home Front).
Destroyed. Probable. Denaged.
Enery
Bombora
16
3
5
3
5
4
Fighters
19
B
9
Total
Outr Loases. 2 mircraft, pilots anfo. 12 bombers nicsing.
14. minning Compunities,
There LTO now only five ships from the convoy
att aked by enemy nurfuce reider unascounted for.
15. Convoys. 3 outward bound convoys totalling
124 ships have cleared North estern pprosches.
16. Middle Dist. цанд. Sous essualties were
inflicted on the early by ours of the Suden Defence Force
in the APOR sonth of on the 13th November.
13. Libya, On the night of November 18th/18th
our modium boabers shipping it Benghaj1 and started
e large fire as Derma where berracks were bombed.
19. They fighters attacked one of our acrodromes
on the 18th Movember end destroyed one bonber.
Regraded Uclassified
187
Telegram from London dated November 14th.
Regraded Uclassified
1. Regarding the French submarine "Poncelet" which
had souttled herself off the coast of French Equatorial
Africa, H.M.S. "Milford" heard under water explosion and
subsequently saw the "Ponoolet" on the surface who dis-
regarded signal to stop. The "Milford" fired on her
pieroing the hull with unexploded shell. The submarine
dived but owing to water entering, surfaced and was
engaged again. The grew surrendered. All saved
except one officer drowned.
2. Submarine's logbook osptured showed orders
to fire two torpedoes at the "Milford".
5. Bad weather prevented further attack on Italian
warships in Terento harbour by Naval aircraft. Night
of the 12/13th.
4, It now transpires that the losses from the
convoy attacked by the ensay raider amount only to five
out of 37 ships.
5. During November 13th, attacks were made
on Caen Aerodrome, docks at Feasup, Boulogne Aerodrome
and Amsterdam Canel. all aircraft returned sufely.
6. Night of the 14th. In Berlin area attacks
were made on Schlakascher station. Gruenwald Marchalling
Yard and & military objoctive in the city - good fires
were started at both the station and Marchalling Yard
and buildings to the east of the other target were hit
and set alight. Attacks were also nade on Wordstern
and/
GS
his
188
- 2 - -
end nuer. synthetic oil plants at fires
being storted in both casse; Misburg 011 Refinery. DOGF
Hanover. causing large fires and vivid explosions;
symthetic oil plant at Leuna, large oil fire storted.
single sireraft attacked Cologne (Enspecek) electric
power atotion, inland porte of buisture. Muhrort. Dortaund
and Dusseldorf end n coke oven bettern ot Listfort,
bursta seen on all targets and at Duisburg scall explosions
and fires resulted; susselderf. Derendorf Mercholling Yard
large fire started, two enery servirones and on Hordeneye
secylone base hangurs and that appoared to be the petrol
atore being his at the latter target cousing explosions
and large fires; Calais and outer herbour et Wilholms-
haven. Throe of our aircraft were missing.
7. dermen Are some.
Casualtion from London region during the night of
the are reported ca 157 killed and B19 seriously
injured.
8. Daylicas November 18th. only incident of
Importance WHA Amago to one war fectory but production
will be required within toeaty four hours.
D. They sotivity night of November 13th/14th.
mainly confined to nine loying. seventy-eight aircraft
operated but only five reached London. to serious damage
was done in London or in the provinces.
10. Susuary of aircraft battle excualties in
the above operations (Bace Front).
many/
Regraded Uclassified
189
- 3 -
Insur
Destroyed. Probable Damages.
By our fighters
Bonbers
3
-
5
Fighters
-
-
a
By Ground Defenses
Bonber
1
-
Total:
4
-
6
British: Fighters mile Bombers 3 (one creashed on
landing.)
11. Middle Hant-
Enery aircraft attecked /lexandrie on the night
of Hotember 18th/13th.
12. British aircraft bonbed motor transport
vehicles news Sidi Barent on november 18th.
15. On November 11th Italian Navel Date at
Hassawa and other targets in Abyasimin and Mritree were
attacked. Cae Itelian seeplene destroyed.
14.
71fty-one Itelian prisoners were taken when
Gallabat wes resaptured.
Regraded Uclassified
190
BRITISH EMBASSY,
WASHINGTON, D.C.
PERSONAL AND
SECRET
29th November 1940
Dear Mr. Secretary,
I enclose herein for your
personal and secret information a copy
of the latest report received from London
on the military situation.
Believe me,
Dear Mr. Secretary,
Very sincerely yours,
Loraum
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D.C.
191
TELEGRAM RECEIVED FROM LONDON
DATED NOVEMBER 27th, 1940
Now learnt during night of 24th/25th
what appeared to be 2 enemy destroyers attacked
British S.S. "Apollonia". Two other vessels DOTO
in the company with latter - one reported as
above and second made off to seaward.
a
One Belgian trawler sunk this night.
Two missing but maybe fishing. A tug towing two
barges in the vicinity missing at present.
3.
Pree French training ship "Mdoo"
sunk by torpedo from enemy aircraft in the Channel
in the p.m. of 26th. A convoy of 4 merchant vessels
arrived at Malta on the 26th.
4.
"Rangitane" p.m. 26th reported being
attacked by raider 300 miles ENE of Cape North
Island New Zealand.
5.
An Italian force of two battleships
with 5 cruisers and about 12 Gestroyers was sighted
45 miles south weat of Cagliari Sicilly at 9.32
November 27th, steering mouth west. Enemy was engaged
at extreme range by our surface forces and withdrew
at high speed towards Cagliari. Our air striking
force attacked damaging one enemy cruiser. No
further details yet received.
0.
Dover shelled 5 times 26th 15 rounds
some damage to houses no casmalties.
7.
Air reconnaissance 26th Taranto.
3 battleships 4 cruisers 8 destroyers in outer and
. aruisers and 48 seaplanes in inner harbours.
Trapent/
Regraded Uclassified
192
Trapent 5 destroyers. Palorms 8 cruisers.
Messina 5 dectroyers B U-Boats.
8.
Coastal aircraft scored 2 hits with
bombs on enemy merchant vessels about 4000 tons
in Ema Estuary 5.10 November 26th and another
siveraft believed hit or near miss small merchant
vessel off Gris Nes Delt. 26th. On 26th 3 conveys
in Thanes Retuary were unsuccessfully attacked by
aircraft.
9.
During night of 205h/27th 70 medium
and heavy bombers despatched to attack industrial
and communications turgets at logne (35) Derlin
(10) marchalling yards (8) and targets at Boulogne,
Antworp and Lorient (12). B heavy bombere also
despatched to attack arsenal at Turin. 4 aircraft
creshed on landing.
German AIF Force:
10.
Sight of 95th/27th.
About 70 enemy aircraft mre involved
of which majority were mine laying.
11.
One further Italian division has
arrived in Albania. The total reinforcement sent
la last 3 weeks is considered to De at least
21,000 bringing the total garrison to an estimated
figure of 250,000 less casuelties which have been
sustained during the recent operations.
Regraded Uclassified
193
G-2/2657-220
RESTRICTED
M.I.D., W.D.
November 29, 1940.
No. 257
SITUATION REPORT
12:00 M.
This military situation report is issued by the Military
Intelligence Division, General Staff. In view of the occasional
inclusion of political information and of opinion it is classified
as Restricted.
I. Western Theater of War.
1. Air Force Operations.
German daylight activity over southern England on the
28th resulted in rather heavy air combats. Last night Liverpool and
another northwestern city were heavily bombed; London was subjected
to attacks of moderate intensity.
Last night the R.A.F. attacked many points in Germany,
Holland and France, including Stettin, Mainz, Cuxhaven, Boulogne,
Antwerp and Politz, and airdromes near Coblenz and Eindhoven.
II. Greek Theater of War.
The Greeks are believed to have made little, if any, prog-
ress because of stiffening Italian resistance and counterattacks by
the XI Army Corps. The center of fighting in the north is in the
vicinity of Pogradetz, which is apparently still holding out. In
the south, Argyrokastron is the center of fighting and, apparently,
has not been captured. Strong Italian Air Force reaction is in prog-
ress.
III. Mediterranean and African Theaters of War.
No ground operations and only minor air activity reported.
RESTRICTED
CONFIDENTIAL
194
Paraphrase of Code Radiogram Received at the
Mar Department at 8:51 P.M., November 29, 1940.
Bucharest, Filed 17:10, November 29, 1940.
The German Air Attache who went to Berlin with General
Antoneseu has informed - that the Rumanian asked General Field
Marshal Keitel for German reinforcements for Rummia. This
officer believes that the Germans will acquiesce.
Ratay.
Distribution:
Military Ade to the President
Secretary of War
State Department
Secretary of Treasury
Asst. Secretary of War
Chief of Staff
- War Plans Division
Office of Naval Intelligence
CONFIDENTIAL
Regraded Uclassified
CONFIDENTIAL
194-A
Persphrase of Code Radiogram
Received at the 1gr Department
at 11:51 A.M., November 29, 1940.
Bucharest, filed 7:50 P.M., November 27.
the Oursum General Staff has authorised the German
Military Attachs, Dusharest, to give - an efficial statement
emering the German troops in Rumania as follows:
The German Army has at present - reinferced modern
division organized for training purposes with headquarters at
Branev. The various and (Field Artillery, Piensers, Signal and
mechanized troops) are stationed as the corresponding training
areas of the humin Army. The - of the infantry is in
southern Holdwria.
The - of the air force contingent is located in the
area Fleesti-Campina and in Ciargin. It is organized for defen-
sive purposes with headquarters at Bucharest and censists of 4
flights, of 12 planes each, trained especially for night pursuit
and with - observation planes; 12 very modern antiaireraft
batteries with nermal soarchlights and listening units and -
bettalism of fire fighters. Small detachments for Rumanian air
ferce training are stationed at the principal flying fields.
Thirty thousand so the present total number of efficers
and - of the German Army and Air Force in hummin. End of
statement w German, Military Attache.
I find - reason to deubt the statement of the Geram
Military Attache and regard - abound call remove of great mbere
CONFIDENTIAL
Regraded Uclassified
194.B
CONFIDENTIAL
of German troeps, - say as may as 14 divisions, massed in
Rumania. The - information - given to - privately by
General Speidal, Chief of the German Air Force mission. Leastions
of German write have been definitely made in 20 different places
but in no dose their strength exceed - battalion. Small
details of instructors, supply depeta, etc., are stationed in
about 20 other places. I have checked personally a musber of
these localities. The report of train leads of motor transport
and other types of military equipment seen in Humania has started
rundre of the presence of many German divisions. This is equip-
nent which the Germane have agreed to furnish to the new Rumanian
Army (and which they will of course use themselves if necessary).
These reasries also apply to the may new airplanes now to be som.
Rumania is getting 200 DEW planse from Commany.
I believe that the highly mobile force of 30,000 German
troops is quite adequate to instruct the Rumanism Army, to -
serve order and to maintain General Antenson in pour M 10mg as
the Germans care tos also, to protect the oil fields until addi-
tional reinfercements held in readiness can arrive.
Although, the Remanian Army is being demobilized and
reargmised there are still about 450,000 - under m. The
1941 Class was not called to the colors on November 20th. Due
to the recent earthquales barreshs were not available. Instrue-
tim by Currum troups started en November 11th.
CONFIDENTIAL
Regraded Uclassified
194.C
CONFIDENTI
The German Military Attache gave - what HGM to be
the opinion of the German General Staff about the Oreek-Italian
Har: Italy began the ver without the consent of Gernany whose
desire has always boen to cettle all Balkan problems by peaceful
mans. Our regard for the Italian Army has never been high, but
this operation has antenished w. No hope that it will oure
Musselini's delusions of grendeur and will teach Italy 6. lesson.
Later DO doubt pasoe negotiations will be made more simple. We
will continue to mintain our present diplomatic relations with
Creeks and want the Italians to bear the full consequences of
their actions.
Musselini was irritated that his country - not asked
to supply part of the military adssion to Remania. General
Anteneseu an his recent visit to Name to appeare Masselini asked
as & matter of courtesy for as Italian naval mission and & regi-
met of Alpins Chasseurs. After the Albenien debacle it will be
embarrassing for Rumania if the request is granted.
There are no German troops in Bulgaria. None have
crossed the Derrabe and name have - w my of Tugeslavia. No
antiairsraft listening posts named by Germans. The Bulgarian
Foreign Minister states that Hitler and Boris have agreed that
Bulgaria will refrain from all warlike actions and will not
nove in Thrase.
RATAY
Distribution:
Military Aide to the President
Chief of Staff - 2
Secretary of Har
Var Plans Division
State Department
ONI
Secretary of Treasury
CONFIDENTIAL
Acet. Secretary of Your
-3-
Regraded Uclassified
194D
CONFIDENTLA
Comment by 0-21
Statements by writer concerning German forces in Runsoda
are accepted as substantially carrect.
With regard to Bulgaria, it is believed that no uniformed
German formations are in that country at this time. It is believed,
however, that German agents to the number of several thousand are
now in Bulgaria and that probably they are organised for prempt
military or quasi-ailitary action on short notice. It is further
believed that an unknown number of German technicisms are present
in Balgaria and are used in the training of the Bulgarian Army and
Air Feree.
C. H. M.
Distribution:
Military Aide to the President
Secretary of War
State Department
Secretary of Treasury
Asst. Secretary of War
Chief of Staff - 2
War Plans Division
Office of Naval Intelligence
CONFIDENTIA
+
Regraded Uclassified
CONFIDENTIAL
195
Paraphrase of Code Dispatch
Received at the War Department et
November 30, 1940.
Lendon, filed 16:30, November 29, 1940.
1. Daylight eperations of the Bomber Command en
Saturday, November 28th, were directed against the Belgian coast,
but the primary targets were not reached because of bad westher.
The preceding night almost all of the British bomber effort was
concentrated on an industrial city in Northwest Germany, light,
medium and heavy beabers all being employed. Observations indicated
that this raid vas a success. The operations of the Coastal Command
were routine, with 31 patrols and the usual reconnaissance, convey
escort, and photograph missions. The Fighter Command dispatched
138 patrols.
2. Daylight activities of the German Air Force -
November 28th consisted chiefly of high flying fighter aweeps ever
Sussex and Kent, of patrols over the outer Thanes Estuary, and
attacks en shipping in the Channel. In addition there were small
raids over Bournemouth Bay, Portsmouth, East Anglia and the courts
of Lincolnshire, Harwich and Dover. Only one plans penstrated to
the central London area. The British plotted 75 German formations
consisting of about 200 planes, That night energy activity -
widespread on a heavy scale, The early raids were mostly south
of the lines Bristel Channel-Birminghan-Tue Vash. Later raids
covered the North Wales, Marsay River, Manchester and Presten
creas, and also over Lincolnshire and East Yorkshire. London was
CONFIDENTIAL
Regraded Uclassified
196
CONFIDENTIAL
all clear by 3:30 a.m.
3. No damages from these German raids were reported.
4. German plane lesses were five confirmed and too
probable.
5. On November 27th the Reyal Air Force in Gresse hope
fighter patrols over Janiua and Athens, destroying to Italian
planes. In addition it carried out any small seale booker and
recomaissance missions.
6. The German bombardment of Flymouth during the right
of November 27-28th destroyed two oil tanks and esused & for
casualties mang the Xerry and Marine personnel. Mest of the beabs
fall in the open country.
7. The Home Office has informed - that the bombing of
Birwingham during the night of November 22-234 approximately equaled
the scale in intensity of the attack - Coventry. In varying
degrees 70 bay plants producing war mattions were damaged. Out
of these 70, only four factories are classified as scriously dam-
aged; while - are permanently out of production. The next to
the leagest dalay was caused w the destruction of & rest that
must be replaced. too other $2.000 of serious damage resulted in
partial destruction only but the damaged sestime of the plant
are still in production. About 600 fires ware started but all
of these were under central w the time the raid had ended.
s. It is the - of epinion of my observers
who have observed the results of the recent intensive beninings
CONFIDENTIAL
Regraded Uclassified
of Coventry, Birsingham, Liverpool, Bristol, and Southampton
that while they have resulted in considerable damage to shops,
churches, commercial buildings, houses, etc., they have had very
little effect on aircraft production. In spite of the fact that
2020 aircraft factories are very large and vulnerable targets,
the actual damage and destruction of them or of their component
plants has been of a minor character. A very few plants only
have actually been hit and in these the damage has not been ox-
tensive. Production will be alowed down, but this reduction
will primarily arise from the disruption of public services,
electric power, water, gan, and transportation facilities and
because it will be necessary to make arrangements for housing
and feeding or for the evacuation of the workers and their
families who have been made homeless. Instead of demoralising
the morale of the inhabitants of these cities, the bombings have
increased their will to resist.
9. On llovember 9th and 16th all - who have reached
the age of 20 since July 27th, 1940 and those aged 35 were
registered for military service. The number registered totalled
383,607, which includes 1,964 (or 0.512 percent - G-2) registered
M conscientious objectors. It will be noted that the percentage
of conscientious objectors continues to decrease.
Distribution:
LEX.
Military Aide to The President
Secretary of Mar
State Department
Secretary of Treasury
office of Neval Intelligenes
Asst. Secretary of lar
0-3
Chief of Staff - 2
Air Corps
War Plans Division
Regraded Uclassified
198
Paraphrase of Code Radiogram Reseived at the
Har Department at 14:39 on November 30, 1940.
CONFIDENTIAL
Lendon, filed 18:15, November 30, 1940.
1. Daylight operations of the Bember Command fee
Sunday, November 29th, were cancelled an account of bad weather.
Attacks during the previous night were principally against the
shipyards in North German parts and synthetic oil plants, both
of which were well bombed, as wall - against inland Geram
parts, teme on the Rhine, gas works and railreed yards. Opera-
tiem were reportedly successful. The Coastal Commend operated
42 patrols and earried out photographic and convey excert missions.
The Fighter Command operated 126 patrols.
2. During daylight hours of November 29th the Cerman
Air Foree carried out a for small raids OVER Southeastern England,
with few planes reaching London. About 200 German sertice were
plotted. That night the attacks ware - a heavy scale against
London and Southeast England but the "All Clear" w flashed at
1:45 a.m.
3. or the three British airdress attacked, - is
out for day and night use and the others are partially unservice-
able. Sees fires were net in London,
40 German plane lesses were five enfirmed and -
damaged,
5. Considerable sir activity continued in the Middle
East. On November 20th, 20 Italian planes were intersepted by
British fighters, of CONFIDENTIAL which seven were shot down and the eighth
Regraded Uclassified
199
CONFIDENTIAL
destroyed by 4. collision.
6. The military attache for Rumania in Lendon has
resigned and will return to Rumania.
7. The British have not solved the problem of night
fighter operations but they are increasing this activity. Last
night for the first time aireraft cannon and machine gane were
heard firing over London.
8. The German economic targets for attack by British
bombers are selected by the Ministry of Economic Warfare. The
Minister told - that the principal British effort is to cause a
breakdown in the transportation system in Germany and that his
experts are satisfied that the British attacks are having a great
effect upon all ferms of German transport. It is their epinion
that German difficulties arising from British beabing attacks are
encountered in the following prierities: transportation, lubriest-
ing cils, other forms of petroleum products, foodstuffs, rubber,
wool, and elothing.
LEE
Distribution:
Military Aide to the President
Secretary of War
State Department
Secretary of Treasury
Asst. Secretary of War
Ghief of Staff - 2
Var Plane Division
Office of Naval Intelligence
0-3
Air Corpo - 2
CONFIDENTIAL
Regraded Uclassified
200
RE BRITISH PURCHASING PROGRAM
November 30, 1940
9:20 a.m.
Present:
Mr. Young
Sir Walter Layton
Mrs Klotz
Layton:
There is a note about these things.
H.M.Jr:
Have you (Young) seen this?
Layton:
(Exhibiting document) The maximum figure
they expect is 16%, which compares with the
25% which we put into our program. You re-
member in my memorandum I mentioned that.
the Admiralty's figure is 11%.
Air frames, it goes up to 20. Steel, 12.
Railway traffic dropped down 10.
There are our field guns. Those are the
gun barrels and I put these there because
they are weekly figures.
H.M.Jr:
Which are the weekly figures?
Layton:
The dotted line. The main line is the average
for the month, the point being that you get
them delivered in blocks when they are in
small numbers. It is 8. similar story for
the tank.
I will explain the note. These anti-aircraft
guns have already attained quite & high level.
The interesting thing about this is that
there is no disastrous fall as a result of
the blitzkrieg which comes here in each case.
They ought to be higher, but they are - for
some reason the cables are held up and I
can't exactly give it, but my best guess
is that that is about it. Naturally I am
not showing these to everyone. Those light
cruiser tanks are being superseded by
heavier tanks, but this --
Regraded Uclassified
201
- 2 -
MAIN
This is numbers per week?
Layton:
Numbers per week, and this is the average
weekly in order to avoiù confusion. These
are all average weekly. So that is running
about a --
....Jr:
The solid line is the average?
Layton:
The average of those four points.
Then you come to two bad cases. Now, that
is an example of folly on our part, relying
too much on the Enfield, which is the only
source of production, and wherever you find
that We concentrated too much in one noigh-
borhood, that has been the sort of result.
About July We began to disperse that, to
get more factories, and here you will find
it just coming up and the rifles are the
same. Most unfortunately, they hit our
only rifle factory.
Incidentally, that is one reason why I have
been BO fussy about this rifle story. we
simply haven't made proper preparation on
the rifles and we do want to pick it up
anywhere we possibly can.
That is shell production, which is scattered,
and the effect is good. You can't even see
where the blitzkries starts and it is now
running at - working up to two and 8 half
million rounds. But incidentally, sir,
broadly speaking, the industry of the country
8.8 a whole, there is no disastrous effect.
The explosives factories are more or less
following the expected curve with an occasional
set-back, Something happened here. But it
is not an, very great change. That is a
detail. That particular shell, of course, is
Regraded Uclassified
202
- 3 -
varying from time to time. The filling pro-
gram is one which we dovetail in from time
to time according to what you happen to need
at the moment. That is filling anti-tank -
anti-tank rifles and anti-tank gun ammunition
and small arms, which - there is a pitiful
story about small arms because they provided
three small arms loading plants and two of
them were on the south bank of the river and
that was the result.
Here are grenades. There are representative
curves of the whole picture.
H.M.Jr:
While we are waiting, let me ask you 8. ques-
tion. What do you want ne to do with this?
Layton:
Well, that picture should be in the mind of
the President.
H.M.Jr:
I agree with you. As I say, you know, since
I went away 8. little over three weeks ago,
the atmosphere of this town and the attitude
toward England has changed, the worse for you.
Layton:
I know. I should like to refer that to the
President to counteract the --
H.M.Jr:
It is like the time I wanted them to get out
what Canada was doing on the air training
and everybody said what was the use of giving
them planes because they haven't got the pilots,
and I am sorry that this thing that I asked
for on the 5th or 6th of November isn't here.
Layton:
I think we may be getting something entirely
different.
H.M.Jr:
Have you anything on planes and pilots?
Layton:
I can find out quite quickly whether there
Regraded Uclassified
203
- 4 -
is anything really up to date on that, and we
expected it to be in this week, but we are
really standing by today waiting for it. I
will find out whether the information exists
in this country, whether it is actually here
at all. It is not coming over regularly.
My own department produces that, you see.
H.M.Jr:
I see. Here or in London?
Layton:
Oh, in London. That is all sent to me by the
people in London, every week.
H.M.Jr:
I am just amazed to find the atmosphere as it
is.
Leyton:
I know, and in fact I asked - I suggested that
I should refer that statement to the President.
H.M.Jr:
Well, he is so busy. I mean, he is leaving
at noon Monday. So let's find out. I mean,
I don't even know whether I will see him be-
tween now and noon Monday, but let's find
out - what about the financing of this pro-
gram, while I am waiting?
Layton:
Well, that is the statement which we sent
in. I understand Mr. Knudsen thinks that
that will not be as serious, but this - the
title is here.
H.E.Jr:
"Statement of the estimated value of addi-
tional orders to be placed under the air,
munitions and shipbuilding programs recently
under discussion with the Administration, to-
gether with an estimate of the capital cost
of the further production facilities required
to supplement existing capacity.
"Initial order to be placed, $1,075,000,000.
"Capital investment, $400,000,000."
Regraded Uclassified
204
- 5 -
You told me, Phil, didn't you, about this?
Young:
Yes. Knudsen tells me now that his best
figure is about 70 million capital exis-
tence.
H.M.Jr:
"Armament, ammunition, bombs, --" Well,
Knudsen says it is 70 instead of 400?
Young:
Yes. 400 is the British estimate of it.
H.M.Jr:
Can't they get together? That is quite a
difference.
Layton:
There was quite a new point raised yester-
day on this, but it depends on whether you
can get the sufficient outlook or whether
in fact it is slowing down, the United States
program.
Young:
That is what Knudsen is counting on. He
has been using existing facilities without
expansion.
H.M.Jr:
Well, the 70 million, where was that to come
from?
Young:
70 million represents capital assistance that
would have to be put up by the British for
aircraft plants and against which they would
get a credit for at least part of the capital
assistance they have already put into the
aircraft plants.
H.M.Jr:
Doesn't that come to around 70? I remember
once I looked it up for the English and French
together and it was around 60. So I mean,
if they put up a hundred and they need seventy,
they have still got thirty to their credit.
Young:
I don't think Knudsen is going to give it all
to them.
Regraded Uclassified
205
- 6 -
H.M.Jr:
Well, then right on that particular thing,
if they have a hundred, so to speak, credit,
and he says they only need seventy, if that
agrees with what the English say then there
is no problem there.
Young:
That is right.
Layton:
That is right. There is no problem on capital
assistance.
Young:
If they get adequate credit, there won't be
much additional capital expenditure on the
air.
H.M.Jr:
If you agree.
Layton:
Yes.
H.M.Jr:
"Armament, ammunition, bombs - - $50,000,000."
Are we in agreement on that?
Young:
Knudsen hasn't seen any of these figures.
H.M.Jr:
Oh, he hasn't?
Young:
No one has seen these figures.
Layton:
That figure is the War Department estimate.
H.M.Jr:
What, the 200?
Layton:
Yes, that is the "B" program.
H.M.Jr:
Knudsen hasn't seen these?
Young:
No.
H.M.Jr:
Why not?
Layton:
He will have seen that one, won't he?
Regraded Uclassified
206
- 7 -
Young:
Oh, yes.
Layton:
But not in the form of 8. table. lie will
see them separate. I think he must have
seen the War Department statement.
Young:
Yes, I am sure he has.
H.M.Jr:
Phil, supposing I write a letter something
along these lines, you see, and you will
have to get hold of Harry White, although
he is all tied up on this other thing. Get
Cochran. Something like this. I mean to
bring this thing to a head, you see.
"My dear Mr. President:
"Sir Walter Layton has presented me this
morning with the enclosed statement, which
shows that the English are about to place
$2,052,000,000 worth of orders, which will
require an approximate capital investment
necessary for creating new productive ca-
pacity of $700,000,000.
"I am advised that all of these items con-
tained in the two billion dollar total
have been cleared by the Army and Navy and
National Defense Committee.
"In view of Ambassador Lothian's statement
on arrival in regard to the English finances,
and also in view of what we know the actual
situation to be, before you leave Monday
noon, I would appreciate your advising me
how I should proceed."
Now, you can take that and he can run that
off. I am not putting in the letter what
the English situation is. If he wants to
Regraded Uclassified
207
- 8 -
know what it is, I have got the facts, but
I want to put him on notice because Mr. Stim-
son didn't say it, and I think that that thing
ought to be typed and this thing sent over to
him this morning, rush.
Layton:
I quite agree.
H.M.Jr:
Because I can't pass on the thing, in view of
what Lothian says. Here is the accredited
representative of His Majesty's Government
saying that England is at the end of its
financial Γope.
Layton:
That will bring it to a head, of course.
H.M.Jr:
Well, this, plus what Lothian said, brings it
to a head. I have no authority to say. I
know what Knudsen will say. He will say,
"Will you guarantee this?" That is what he
has said right straight along, but I can't
guarantee it.
Incidentally, I wish you would ask Stimson
whether he has or has not taken over that
French gold in Canada amounting to $650,000,000
which he has kept asking me about, how they
should and how they shouldn't do it. There
is $650,000,000 worth of French gold in
Canada.
Layton:
I know. I wouldn't - this is off the record.
H.M.Jr:
There is no one ever sees this except for
the President. It goes into the safe and
nobody is ever allowed to see it. There is
only one copy.
Layton:
I have not --
H.M.Jr:
It is as sacred as sacred documents.
Regraded Uclassified
208
- 9 -
Layton:
This may be wrong, but I believe the posi-
tion to be that that French gold comes under
two categories. Part of it is deposited in
the name of Great Britain and part of it is
direct from France into Canada. I think you
know the point the Canadians are raising is
that they have
(unintelligible)
H.M.Jr:
That is what we have in this country.
Layton:
It is an acrobat sort which enables you -
which would enable them to squelch this.
Now, the part that is in the name of the
Bank of England can be dealt with and the
only question is whether the other part can
also be handled on the basis that a central
bank's deposit as a central bank's deposit
is on its own, whether the Central Bank of
Canada undertakes to do a particular job or --
H.M.Jr:
Well, they had better make up their minds
whether they are going to stand on central
bank etiquette and protocol, or whether they
want to win the war. It is the same way that
Canada had this gold on board one ship,
French gold, and these airplanes on another
and let them slip through its fingers and go
down to Martinique and give us all this
trouble.
Well look, Sir Walter, why don't we do this
way? I don't see how I can do very much
more this morning than to have you and
Philip Young polish up a letter for me to
the President, with which I will send this,
and get this over to him just as quickly 8.5
possible. Don't you think that --
Layton:
Much the best.
H.E.Jr:
That's serving you the best?
Regraded Uclassified
209
- 10 -
Layton:
It certainly is.
IL.M.Jr:
Philip, do you agree?
Young:
Yes.
H.M.Jr:
So I think if you fix up that letter for
me and - I don't want to go into a state-
ment of how much they have or haven't got.
The President can ask me. But this would
put the thing on his desk this morning
and I want to make it very plain in a letter
until he says yes or no, this whole order
is held up, but I can't say yes unless he
directs me to. You appreciate that.
Layton:
Yes. It has been around the corner all the
time.
H.M.Jr:
Yes, and you see I, not having this - I have
nobody to blame but myself. When Stimson
brought it up, I didn't say anything, but
even if I had had it I don't think I would
have said anything because I don't think
it was the place to bring it up.
Layton:
Yes. But all through, he has been working
all this month - the War Department couldn't
have been more cooperative - on the question
of how far it could be so maneuvered and
manipulated, its own arrangement has to
make way for this program for us, and they
wouldn't say - place their orders on that
assumption until they felt they could
honestly say it. They have done it in this
letter. They have given me a timetable.
They have told me what they are going to
do in the way of helpful inspection on all
the materials. You have seen that. We
have had some minor changes, and so on,
but broadly speaking it is almost ready to
Regraded Uclassified
210
- 11 -
proceed. I have always said that we don't
want to have to put money down at the be-
ginning of this. We want to pay for what
we get.
R.M.Jr:
I think the quickest thing we can do and
the most effective thing we can do is to
get this in a letter from me to the Presi-
dent, which, as soon as you - have it right,
Phil. Bring it in and I will take & look
at it and if it is all right, I will send
it over by special messenger. That gets
us on the way, doesn't it? And then if I
get this other thing which is bothering me
some out of the way, maybe we will have a
chance to talk later in the morning. But
I have got something which won't keep.
All right?
Young:
All right.
Regraded Uclassified
211
PURCHASING COMMISSION
STATEMENT OF THE ESTIMATED VALUE
OF ADDITIONAL ORDERS TO BE PLACED UNDER
THE AIR. MUNICIONS AND SHIPBUILDING PROGRAMS
RECEPTLY UNDER DISCUSSION WITH THE ADMITISTRATION
together with
All ESTIMATE OF THE CAPITAL COST
OF THE TURTHER PRODUCTION
REQUIRED TO SUPPLIMENT EXISTING CAPACITY
Nevember 29, 1940
212
Initial Order
Capital Investment
to be Placed for
necessary for
output (excluding
creating new
capital amortisation)
productive conscity
1. Nex Airplane Program
8. Smaller scheme to produce 12,000
$ 1,075,000,000
$ 400,000,000
aircraft by June, 1942
(NOTE - $100,000,000 paid in capital
on present program. per U.S. Treas-
usy report of Nov. 9, 1940.)
1. Areament, ammunition, bombs. radio
125,000,000
50,000,000
and special equipment for above
1. 0.3.-Troe Ordnance Pressan
a. 10 Divisions equipped with U.S.-Type
600,000,000
200,000,000
vespons (B Program) - Var Dept. estimate
75,000,000
25,000,000
b. Other U.S.-Type ordnance not yet
ordered (including .50 and .30
assusition)
C. Tanks and Tank gune remaining to be
100,000,000
15,000,000
ordered
87,000,000
9,000,000
11. Hersbent Ship Construction
TOTALS
2,062,000,000
699,000,000
This statement is is addition to orders already placed amounting to approximately
$2,800,000,000.
The *Yev Airplane Program represents the first step in the expension of the
British aircraft program already cutablished.
The $U.S.-type Ordnance Program does not include additional items still to be
formulated under the 10 Division Army Plan.
Regraded Uclassified
213
November 30, 1940
My dear Mr. President:
Sir Walter Layton has presented ne this morning
with the enclosed statement which shows that the
English wish to place $2,062,000,000 worth of orders
for aircraft, ordnance and ships. The placement of
these orders will require an estimated capital in-
vestment necessary for creating new productive
capacity of $700,000,000, and In addition advance
payments on signing of the contracts which may amount
to $500,000,000.
I an advised that all of these items contained
in the two billion dollar total have been approved in
principle by the National Defense Committee and with
the concurrence of the Army or the Navy.
As you know, the British claim they have no funds
to meet these payments. I wouldn't bother you over
the weekend if it were not for the fact that you are
leaving Monday. I question the wisdom of letting this
matter hang in the air until you return. Therefore,
if you could spare no & few minutes between now and
Sunday night to discuss this problem with me, I would
appreciate it very much.
Sincerely yours,
The President,
The White House.
Stap
Regraded Uclassified
214
November 30, 1940
My dear Mr. President:
Sir Walter Layton has presented me this norning
with the enclosed statement which shows that the
English wish to place $2,062,000,000 worth of orders
for aircraft, ordnance and ships. The placement of
these orders will require an estimated capital in-
vestment necessary for creating now productive
capacity of $700,000,000, and In addition advance
payments on signing of the contracts which may amount
to $500,000,000.
I am advised that all of these items contained
in the two billion dollar total have been approved in
principle by the National Defense Committee and with
the concurrence of the Army or the Navy.
is you know, the British claim they have no funds
to meet these payments. I wouldn't bother you over
the weekend if it were not for the fact that you are
leaving Monday. I question the wisdom of letting this
matter hang in the air until you return. Therefore,
if you could spare mo a few minutes between now and
Sunday night to discuss this problem with me, I would
appreciate it very much.
Sincerely yours,
The President,
The White House.
ID:p
Regraded Uclassified
215
COPY
November 30, 1940
My dear Mr. President:
Sir Walter Layton has presented me this morning
with the enclosed statement which shows that the
English wish to place $2,062,000,000 worth of orders
for aircraft, ordnance and ships. The placement of
these orders will require an estimated capital in-
vestment necessary for creating new productive
capacity of $700,000,000 and in addition advance
payments on signing of the contracts which may
amount to $500,000,000.
I an advised that all of these items contained
in the two billion dollar total have been approved
in principle by the National Defense Committee and
with the concurrence of the Army or the Havy.
As you know, the British claim they have no
funds to meet these payments. I wouldn't bother you
over the weekend if it were not for the fact that
you are leaving. Monday. I question the wisdom of
lefting this matter hang in the air until you return.
Therefore, if you could spare me a few minutes between
now and Sunday night to discuss this problem with no.
I would appreciate it very such.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Delivered by Philip Young 11/30/40
The President,
The White House.
Enc.
PY:10
Regraded Uclassified
216
BRITISH PURCHASING COMMISSION
STATEMENT OF THE ESTIMATED VALUE
OF ADDITIONAL ORDERS TO BE PLACED UNDER
THE AIR, MUNITIONS AND SHIPBUILDING PROGRAMS
RECENTLY UNDER DISCUSSION WITH THE ADMINISTRATION
together with
AN ESTIMATE OF THE CAPITAL COST
OF THE FURTHER PRODUCTION FACILITIES
REQUIRED TO SUPPLEMENT EXISTING CAPACITY.
November 28, 1940.
Doaradod
217
Initial Order
Capital Investment
to be Flaced for
necessary for
output (excluding
creating new
capital amortimation)
productive capacity
L Ter Airplane Program
a. Smaller scheme to produce 12,000
$ 1,075,000,000
$ 400,000,000
aircraft by June, 1942
(NOTE - $100,000,000 paid in capital
en present program, per U.S. Treas-
try report of Nov. 9, 1940.)
b. Armament, ammition, bombs, radio
125,000,000
50,000,000
and special equipment for above
II. U.S.-Type Ordnance Program
1. 10 Divisions equipped with U.S.-Type
600,000,000
200,000,000
wespons (B Program) - Var Dept. estimate
b. Other U.S.-Type ordnance not yet
75,000,000
25,000,000
ordered (including .50 and .80
amamition)
0. Tanks and Tank game remaining to be
100,000,000
15,000,000
ordered
87,000
III, Merchant Ship Construction
86,000,000
9,000.000
TOTALS
$ 2,072,000,000
$ 699,000,000
2,062,170,00
This statement is in addition to orders already placed amounting to approximately
$2,600,000,000.
The "New Airplane Program represents the first step in the expension of the
British aircraft program already established.
The "U.S.-type Ordnance Program does not include additional items still to be
formulated under the 10 Division Arwy Plan.
Regraded Uclassified
218
RE BRITISH PURCHASING PROGRAM
November 30, 1940
12:15 p.m.
Present:
Mr. Gaston
Mr. White
Mr. Cochran
Mr. Bell
Mr. Young
H.M.Jr:
Does Layton have to come in now?
Young:
No, he doesn't have to come in.
H.M.Jr:
What have you been doing all morning?
Young:
Changing this around.
H.M.Jr:
Phil goes around here and he is all swollen
because he can't see me, and then I sit here
two hours waiting for him to write three
paragraphs.
"Sir Walter Layton has presented me this
morning with the enclosed statement which
shows that the English wish to place
$2,062,000,000 worth of orders for air-
craft, ordnance, ships, and canned pine-
apple."
Why do you put that in?
Young:
Just a slip of the machine.
H.M.Jr:
"The placement of these orders will require
an estimated capital investment necessary
for creating new productive capacity of
$700,000,000, and in addition advance pay-
ments on signing of the contracts which may
amount to $500,000,000."
Is that together $1,200,000,000?
Young:
That is why I put that in, you see, because
it is more than just a capital expenditure
Regraded Uclassified
218
RE BRITISH PURCHASING PROGRAM
November 30, 1940
12:15 p.m.
Present:
Mr. Gaston
Mr. White
Mr. Cochran
Mr. Bell
Mr. Young
H.M.Jr:
Does Layton have to come in now?
Young:
No, he doesn't have to come in.
M.M.Jr:
What have you been doing all morning?
Young:
Changing this around.
H.M.Jr:
Phil goes around here and he is all swollen
because he can't see me, and then I sit here
two hours waiting for him to write three
paragraphs.
"Sir Walter Layton has presented ne this
morning with the enclosed statement which
shows that the English wish to place
$2,062,000,000 worth of orders for air-
craft, ordnance, ships, and canned pine-
apple."
Why do you put that in?
Young:
Just a slip of the machine.
H.M.Jr:
"The placement of these orders will require
an estimated capital investment necessary
for creating new productive capacity of
$700,000,000, and in addition advance pay-
ments on signing of the contracts which may
amount to $500,000,000."
Is that together $1,200,000,000?
Young:
that is why I put that in, you see, because
it is more than just a capital expenditure
Regraded Uclassified
219
- 2 -
that is going to hit them in the face as
soon as the program goes through.
H.M.Jr:
That isn't clear. Do you think it is
$1,200,000,000?
"....$700,000,000, and in addition advance
payments on signing of the contracts which
may amount to $500,000,000."
Well, that can be written in.
"....and in addition advance payments on
signing the contract."
White:
Do we have to send him this now on the
Chinese thing?
H.M.Jr:
No, no, no. I dreamed of that. This isn't
going until the Chinese thing is settled.
No, this is not going until he has cleared
the Chinese thing. I thought of that about
five seconds ago. But in view of that -
supposing he gets it whenever I hear from
Sumner Welles. I mean, Layton comes in
here this morning.
At Cabinet yesterday Stimson reads this
stuff off and says, "Look what a wonderful
boy I am." (Patting self on shoulder) "I
have done all this is what he was saying.
Then Layton walks in this morning and says,
"Yes, but how are we going to finance it?"
White:
Are you called upon for a decision or
action on this in any way?
H.M.Jr:
Yes.
Cochran:
Does Layton raise the question in that letter
as to the financing?
Regraded Uclassified
220
- 3 -
H.M.Jr:
No, but he did here verbally.
White:
He did orally, you say?
H.M.Jr:
Well, tell him what he said.
Young:
Well, Stimson in his reply to Layton said
the financing was up to other government
departments, not in Stimson's realm. Where-
upon, Sir Walter Layton asked for an appoint-
ment with the Secretary to ask how this is
going to be financed, as to what measures
can be taken to finance this program inas-
much as this practically doubles the orders
which the British have placed.
White:
Has he been given that yet? Why can't the
Treasury Department be too busy for the
moment.
Young:
Sir Walter talked with the Secretary this
morning. He has already seen him.
White:
But apparently the Secretary didn't give
him a reply.
Cochran:
Couldn't he intimate in here that this re-
quest is being made, that Sir Walter Layton
wants his explanation from the Treasury as
to how to proceed, and then you ask for
guidance?
Bell:
I have the same feeling Harry does. What
is the President going to do when he gets
your letter? He won't know what to do.
H.M.Jr:
He will send for me. "What about it?" I
can't let the man go out of town. Now look,
if I don't get guidance from the President,
I am not going to tell Knudsen that the
money is here.
Regraded Uclassified
221
- 4 -
White:
Right.
H.M.Jr:
All right. Therefore, for another two weeks
it would mean that everything is stalled until
the President gets back.
White:
That is all right.
H.K.Jr:
No, it isn't all right. I have got to.
Walter Layton runs in here with two billion
dollars worth of materials. There is talk
around town that Lothian made this statement
that if we don't do something they are going
to make peace.
Bell:
Can you ask for an appointment, that it is
important that you discuss this and get a
decision before he leaves town?
H.M.Jr:
I imply that.
White:
You are kind of throwing it in his lap,
Mr. Secretary. It is the last paragraph
that bothers me.
H.M.Jr:
"Frankly, I am stumped and do not know how
to proceed. I wouldn't bother you over the
week-end if it were not for the fact that
you are leaving Monday. I question the
wisdom of letting this matter hang in the
air until you return. Therefore, if you
could spare me a few minutes between now
and Sunday night to discuss this problem
with me, I would appreciate it very much."
And then on the first line instead of,
"Frankly, I am stumped," make it, "As you
know, the British claim they have no funds
to meet these payments."
222
November 30, 1940
My dear Mr. President:
Sir Walter Layton has presented me this morning
with the enclosed statement which shows that the
English wish to place $2,062,000,000 worth of orders
for aircraft, ordnance and ships. The placement of
these orders will require an estimated capital in-
vestment necessary for creating new productive
capacity of $700,000,000, and In addition advance
payments on signing of the contracts which may amount
to $500,000,000.
I am advised that all of these items contained
in the two billion dollar total have been approved in
principle by the National Defense Committee and with
the concurrence of the Army or the Navy.
As you know, the British claim they have no funds
to meet these payments. I wouldn't bother you over
the weekend if it were not for the fact that you are
leaving Monday. I question the wisdom of letting this
matter hang in the air until you return. Therefore,
if you could spare me a few minutes between now and
Sunday night to discuss this problem with me, I would
appreciate it very much.
Sincerely yours,
The President,
The White House.
Htsp
Regraded Uclassified
223
November 30, 1940
10:05 a.m.
H.M.Jr:
Hello.
Cong.
Somers:
Hello, Mr. Secretary.
H.M.Jr:
How are you? I was sorry I wasn't in when you
called but I W8.8 at the White House.
S:
Yes, they said you were at the White House. I
called you at that time with reference to the
announcement you were going to make to the
Committee on Monday. I thought last night
that if there would be a possibility of delaying
any public announcement until after the Committee
announcement was made, it would be better for both
your position and mine, you see.
H.M.Jr:
Well, I agree with you heartily, but did you tell
that to the President?
S:
Yes, I did.
H.M.Jr:
Oh, you did.
S:
Yes, I did, because the President seemed to be
pretty well set and of course I couldn't prolong
an argument over the telephone with him.
H.M.Jr:
Well, you see, he didn't tell me what you said.
S:
Yeah, well, I simply said to him that I thought
it would be much easier for us, especially in
view of the fact that we may have to extend the
Stabilization Fund at a later period. You see?
H.M.Jr:
Well, I'm awfully glad you told me that. You told
him that you'd much rather no public announcement
until after the meeting.
S:
I didn't say not to make it; I said it would be
better if we did not make it.
H.M.Jr:
Well, of course, that's what I've been telling
him.
S:
But I suppose he'e already made it.
H.M.Jr:
No, he has not.
224
2 I I
S:
oh, he hasn't.
H.M.Jr:
No, there has been no etatement made.
S:
Well, of course, you can discuss it further with
him then. I think it would be better because
there is going to be some definite Republican
opposition. I know from my various conversations
with them and some of these Democrate, especially
those who have been against adjournment, and
those of the - let me describe them as the very
conservative type, you know.
H.M.Jr:
Yeah.
S:
They may oppose this thing and they certainly
would oppose extending it if they felt that there
was any likelihood of its being dissipated in
loans for which they feel they have another fund
existing in the treasury of the Import-Export
Bank.
H.M.Jr:
Right. Well, you and I see eye-to-eye. That's
why when the President and Mr. Hull asked me to
do this - hello?
S:
Yes.
H.M.Jr:
I said that I felt absolutely honor bound to
take it up with your Committee first. You
remember the whole incident, don't you?
S;
Yes, I do. I remember it very clearly.
H.M.Jr:
Well, I mean - 18 there any doubt in your mind
that I said I would come to you for guidance
before I made
.....
S:
No, you said it on three occasions to the
Committee.
H.M.Jr:
Well, do you see in view of that how I can do
anything else than come before you gentlemen?
B:
Well, I don't - of course you'll have to make
the announcement to them in keeping with your
word and I thought it might embarrass you a little
if Secretary Hull made another announcement
preceding that, you Bee.
Regraded Uclassified
225
- 3 -
H.M.Jr:
Well, there's no question about it, but I'm
telling you now I am not going to make any
commitment before I see you gentlemen. I have
made none.
S:
Yes.
H.M.Jr:
I have made none and it is now ten minutes past
ten. I have made no commitment, I have refused
to make any commitment and I'm not going to make
any until I come before you people.
8:
Well, that will be fine.
H.M.Jr:
And after all, I have only one thing in this
world and that 1e my word
S:
Surely.
H.M.Jr:
and I never could come before you gentlemen
again.
3:
Surely, because I recall very distinctly the
arguments used at that time when there was some
attempt to restrict the use of that fund against
any such possibility as is now contemplated and
you said at that time that ae long as you were
Secretary of the Treasury you'd never take any
such action without first consulting the Congress.
H.M.Jr:
That's right.
S:
Now you may wonder why it is - I have a very
definite fondness for you because of my association
and I know that you feel
H.M.Jr:
Well, it's mutual.
S:
that you feel that your integrity may be
questioned at the present time and both of us
want to do everything in the world to prevent
any such reflections as that and I don't hesitate
to pledge you that I'm going to do everything I
can to cooperate with you. I know that you're or
a spot and I'll do everything I can to help you.
H.M.Jr:
Well, I'm on 8. hell of 8. spot but I've made no
commitments and I am not going to make any
commitments before I come before that Committee.
Regraded Uclassified
226
- 4 -
5:
Well, that will be fine, and if any newspaper
people should get in touch with me in the meantime,
I know nothing about it - I haven't yet.
H.M.Jr:
Good, but I appreciate it and I'm afraid that
Wagner didn't remember - the President called
him too, you see, and I don't think that Wagner
remembered - up there it was between Taft and me
and Vandenburg and me, and I wrote it to Vandenburg -
my conversation with Taft that I wouldn't do this,
and that all was given out in the papers.
S:
Yes. Well, in the conversation last night over
the phone, I reminded the President - I said it
would be better if it came - because of the
commitment you had made.
H.M.Jr:
oh, you did.
S:
Yes, and he referred to that too.
H.M.Jr:
I see. Well, thanks ever so much. What time
is that meeting Monday?
B:
Ten-thirty, at the Senate Office Building.
H.M.Jr:
Is it going to be joint?
S:
Yes.
H.M.Jr:
Well, don't you think that that ie better?
S:
Yes, it 16 probably better than making announcement
although it has this disadvantage - a joint
Committee has no legislative power and for it
to come before my Committee if the right
psychological impression was made at the con-
clusion of your speech, it might be proper for
me to move or suggest a motion that your action
be approved, you see. However, I don't think
that it would be possible for me to do that in
the Joint Committee.
H.M.Jr:
Well, you could split up.
S:
We might split up. Yes,sir.
Regraded Uclassified
227
- 5 -
H.M.Jr:
But the point, you see, they were such - seem to
think it was such a hurry
.....
S:
Oh, well, I don't know - - it sounds disrespectful
if I say some people seem to be terribly excited
about this but I can't see the action they
anticipate. I don't see what difference the
making of a loan of this sort would have on it.
H.M.Jr:
Well, I can't see the difference between Saturday
and Monday - - why it makes such a difference.
S:
No, I can't either.
H.M.Jr:
I don't. Well, I'm awfully glad I talked to you
and I'm awfully glad to know what you told the
President.
S:
All right, Mr. Secretary. I'll see you Monday then.
H.M.Jr:
Thank you.
S:
I'll see you Monday then and we'll see how it
works out.
228
November 30, 1940
10:20 a.m.
RE CHINESE LOAN
Present:
Mr. Bell
Mr. Gaston
Mr. White
Mr. Coohran'
Mr. Bernstein'
Mr. Boong
Mrs. Klotz
Mr. Haas
H.M.Jr:
Let me tell you in strict confidence what has
happened since I have seen you all. We were
over there last night for supper, as you know,
on this tax matter, and there were about - oh,
maybe ten outsiders there. In the middle of
the supper the President says, "Let me tell you
what happened in Cabinet. I said, 'I want some
money,' and I thought I would have a lot of
trouble with Jesse Jones and it would be very
easy to get it from Henry." Then he went on
and told the story about how nice Jones was and
how he gave him $50,000,000 and what a mean cuss
I was. So I won't tell my answer, but I gave
him an answer, 80 then after supper evidently
he had arranged to speak to Wagner and to Somers.
And to Wagner, evidently, he said, "Tomorrow
Cordell and I want to get out a statement that
we want to do this and we will get out a statement."
Then he called up Somers. I couldn't hear the
conversation, but I gathered that Somers was
giving him an argument. I just got through
talking to Somers. He said, "You know what I
said?" I said, "No." He said, "Well, I'll tell
you." He says, "I told him that you had given
your word that you wouldn't do this without con-
sulting us and I think it would be & great mistake
for any announcement to come out before Monday,
that it would make it very difficult to get the
extension of the Stabilization Fund, and I thought
229
- 2 -
it should wait." He said, "I couldn't press it
too much, but I did tell the President and I
don't think the President liked it," but he says,
"as your friend, I hope that they won't do it
until Monday. Your honor 18 at stake."
I am having the thing typed, what he said.
He said, "You told us three times that you wouldn't
make this and if you do do it, I don't think there
is any chance of getting an extension."
Now, I haven't heard from Hull. Hull 18 supposed
to be drafting this thing. I gave Hull last night
at Cabinet a copy of this memorandum. I thought
that was the best. Don't you think that is the
best one?
Gaston:
It includes the testimony.
H.M.Jr:
And then I said - have you seen what the Wall Street
Journal said this morning, Harry?
White:
Well, just the statement that the committee was
meeting but it might be for Argentine.
H.M.Jr:
No, no. But now you are having a joint meeting
and for the President and Mr. Hull to come out
and make the statement --
Bell:
I think Mike Flynn had the story. He called Ed
last night just before he caught the train, and
Ed called me and he said that Wagner's office
had told him the whole story in confidence and
he said, "I can't use it unless I can get something
from the Treasury."
H.M.Jr:
Sure he knew it.
Bell:
And Miss McGuire told him Ed was on his way to
New York and he couldn't get him, 80 Ed called
me and told me the story.
H.M.Jr:
The thing 18, that Congressman Somers, this little
insignificant Congressman from Brooklyn, stood up be-
fore the President but Wagner just ducked it.
Uclassified
230
- 3 -
Mrs. Morgenthau said she heard that the bill
was going through. She was in the Senate
galleries. She remembers it distinctly.
White:
I think what she has reference to is Senator
Wagner's defense of your handling of the
Stabilization Fund, but not any statement. We
have combed the Senate once and we can't find
it and I am having him go over it again to make
sure, but 80 far we haven't found it, but if it
was said while she was there, that would simplify
our task, because I know when she was there.
H.M.Jr:
It was while she was right there.
White:
You were there, too, Bernie.
Bernstein: They are sending my file up on the extension of
the Stabilization Fund.
White:
Do you remember any statement?
Bernstein: I remember that strong statement he made which
impressed everybody.
H.M.Jr:
Who made it?
Bernstein: Senator Wagner. It was a statement in defense of
your handling the Stabilization Fund. You recall
at the time he had talked to you about it.
H.M.Jr:
Have you got that?
White:
Yes.
Bernstein: That 1s in the record. We will get that.
White:
I just read that.
H.M.Jr:
But there 1s nothing about --
White:
Nothing about the fact that you had guaranteed
that you would not use the fund for such and such
in that place. But we will recomb that. That
narrows it down to one day's discussion.
231
- 4 -
H.M.Jr:
Well now, supposing I just look at all the things
while we are waiting to hear from Mr. Hull. Supposing
they draft the statement and I fix it up the way I
want it 80 that they say they are going to announce
the 50 million loan from the Export-Import Bank and
the Secretary of the Treasury will present to the
Joint Committee on Monday his proposal to also loan
50 million?
White:
That would be all right.
H.M.Jr:
But supposing the President when it comes over there
changes it, you see, and makes it look as though
there 18 & firm commitment.
White:
Well, the President can't do it without you,
Mr. Secretary.
H.M.Jr:
I know. Now, wait a minute. I have done nothing
but think. He changes the statement to make B firm
commitment and it goes out to the newspapers that
the President makes a firm commitment. I know
that he can't do it without me or nobody else.
But here 18 the President of the United States
saying we are going to loan a hundred million and
makes it firm. What do I do between now and Monday?
I want to hear Gaston first.
Gaston:
What do you do between now and Monday?
H.M.Jr:
Yes.
Gaston:
You are not consulted about issuing this statement?
H.M.Jr:
I am consulted. The statement goes over the way
I want it. It is the way I want it. Then the
President changes it.
Gaston:
Without further consulting you?
H.M.Jr:
Without further consulting me.
Gaston:
You can't give out a statement saying that that
isn't true. You can't give out a public statement
saying that is not true. You certainly would protest
Regraded Uclassified
232
- 5 -
to the President about it.
H.M.Jr:
I won't argue. Say I don't, then I go before
the committee.
Haas:
Of course, they have made it more difficult for
you to get the committee's consent.
H.M.Jr:
But supposing I go before the committee. Do I
say - well, the President said 80, but I haven't
agreed to it.
White:
There 16 a way out.
Cochran:
If we could get China to agree over the week-end
or at once to the extension of this $50,000,000
arrangement which expires today, or which expires
at the end of December, and which 1s renewable
today or rather tomorrow, and then you give out
something like this, "Secretary Morgenthau announces
that he 1s extending for a further period beyond
December 31, 1940, the arrangement made public on
July 9, 1937, under which the Central Bank of
China 1s enabled under conditions which safeguard
the interests of both countries, to obtain from
the Stabilization Fund of the United States
$50,000,000 at dollar exchange for currency
stabilization purposes." That could be given
out any time. If we get China's agreement, or
we could say, we are offering to extend, you see,
and that gives you A etop gap if you don't get
through the other.
White:
That 18 right. Then you can go before the
committee and say that this arrangement 1s with
gold collateral. "What I am asking you gentlemen
for 18 the privilege to do what I said I would,
to make an extension of this kind without a gold
collateral. That is just window dressing which
we have done before and 18 not the thing I am
coming to you for. It 18 of no use to China, to
speak of." If you are out in that position, I
don't think you should --
Gaston:
Then it would be 8. question of what kind of collateral.
Regraded Uclassified
233
- 6 -
White:
And in the statement, you have also said this,
which paves the way for that. In your statement
and discussion of the loan that you - the
Stabilization Fund operation which you took with
China, you described the operation, which would
be the same kind of operation, and then you went
on to say, "There has been placed adequate
collateral consisting of gold and silver to
cover the risks, and now you can say that,
"Therefore, that operation was done without you
and that is not the kind of operation you would
disagree with because that 18 nothing new and
doesn't help China. The kind of operation which
I am coming to you for 1a one which they would
not put up gold for and I will not commit myself
to that until I get your consent," BO that even
if the President does make the statement I think
there 1s a way out without trouble.
H.M.Jr:
Let me just think. How would it be if he 1s hell
bent to make 8. statement that the statement be
written something like this, that the agreement
with the Central Bank of China for $50,000,000,
a stabilization loan, expires today.
Cochran:
Expires December 31, but it is renewable. Notice
1e to be given on the first.
Bell:
Renewable 30 days in advance.
H.M.Jr:
And 18 renewable 30 days in advance and that
Mr. Morgenthau is appearing before the joint
committee on Monday to advise them that he is
proposing to renew this extension. Now, I needn't
put in B. public statement that the 30 million
dollars will not be collateralized. That 18 what
it amounts to.
White:
Well, it would be collateralized, if you want to
call yuan collateral.
H.M.Jr:
Won't have gold?
White:
Won't have gold collateral.
Cochran:
of course, the agreement calls for it and you
Regraded Uclassified
234
7
couldn't have the amendment made in that time.
H.M.Jr:
I want to BAY, China hasn't got the gold. "I
would like to have your approval that we extend
this 50 million dollars. In other words, they
can borrow 30 million more without putting up
the gold, just putting up the yuan."
Cochran:
That 1e right.
White:
If the President wants to make the statement to
influence China, then he can inform Soong that
he cannot give him final word until after the
committee hearing. Boong understands that anyway
very well. I'have explained that to him when he
was here last summer, that there were certain
commitments made and they would have to be cleared
before any stabilization - BO it would be nothing
new to him and if on the other hand the President
1s doing it for public effect, the public wouldn't
know the difference and it will get the full effect,
80 that that could be & happy compromise if you
want to make a statement today.
Gaston:
Why couldn't the statement be something like this,
that they announced the loan from the Excort-Import
Bank. In addition, Secretary Morgenthau is renewing
the $50,000,000 commitment to China. This commitment
calls for gold collateral for advances. The
Secretary will discuss with Congressional committees
on Monday the substitution of other forms of
collateral for a part of the --
White:
That 18 too honest. That would defeat the purpose,
H.M.Jr:
I think this: If he wants to announce the 50 million
Export-Import, okay, and Mr. Morgenthau is going to
appear before the committees to recommend that this
50 million dollar Stabilization loan be renewed.
Cochran:
Or to explain the circumstances under which he
proposes?
H.M.Jr:
No.
White:
Ought to be renewed under conditions sppropriate
to the occasion.
Regraded Uclassified
- 8
235
H.M.Jr:
I would just simply say be renewed.
White:
In renewing it, you are asking for something more
than the renewal, because the terms of that par-
ticular agreement call for gold collateral.
H.M.Jr:
Renew it under existing circumstances.
White:
Some such qualifying phrase. There is another
advantage from that even in the President's point
of view and your point of view. If you can
separate the Export-Import loan from Stabilization,
because the proposal that we are developing which
I think will meet with agreement, if anything 1a
going to be done, we want to protect the funds in
the Stabilization Fund and separate the Export-
Import Bank loan which they will have to use first,
provide sort of velvet against the Stabilization
Fund, and that 1s easier done if it 1s an Export-
Import Bank loan and not known as 8. Stabilization
loan but merely as an Export-Import Bank loan to
give China additional funds with which to carry
on. Then when the Stabilization Fund comes along,
we can 80 protect it that it is much less risky
by using those funds 8.6 the velvet and then your
operations will be Stabilization operations as
distinct from Export-Import Bank loans, 80 that
there 18, I believe, some advantage in not mixing
the two up. And we can make the Stabilization Fund
loan look like a hundred million dollar fund anyway,
operations, in ways which are 80 - it can sound very
big without undertaking the risks that you would
undertake if it were the other way.
H.M.Jr:
Let me just see, The first part would come the
Export-Import announcement, do you see, and then
this would go something like this. "The Secretary
of the Treasury will appear before the Senate --"
Bell:
Appropriate committees of the House and Senate.
H.M.Jr:
I think you might name them. "The Secretary of
the Treasury will appear Monday forenoon before
the Senate," and BO forth.
Bell:
In joint session. Is that the way you wanted it?
Regraded Uclassified
236
- 9 -
H.M.Jr:
In joint session. Would you say anything about
carrying out his pledge?
Gaston:
No.
H.M.Jr:
Okay.
Gaston:
The proposed renewal.
H.M.Jr:
"At this time he will bring to their attention the
proposed renewal of the $50,000,000 Stabilization
loan."
White:
I don't like the word "loan". Stabilization
operations.
H.M.Jr:
Stabilization what?
White:
Operations.
H.M.Jr:
Operation with the Central Bank of China which
expires on December 31. Now let me Just see.
"The Secretary of the Treasury will appear Monday
forenoon before the Senate, etc., and House in
joint session. At this time he will bring to their
attention the proposed renewal of the $50,000,000
Stabilization operation through the Central Bank
of China which expires on December 31."
White:
Something of that character. Would this be
helpful, Mr. Secretary, if we withdrew quickly
and prepared a draft of the kind of statement
that the President could issue in which he will
make an announcement about the Export-Import Bank
and --
H.M.Jr:
Let's do it right here, right now. It takes too
damned - excuse me, it takes too long. I want to
call up Hull. Don't worry about the Export-Import.
White:
Well, they go well together.
Bernstein:
I wondered if I might offer A suggestion on
tentative lines so you can have it in mind. The
President would announce the Secretary of the
Regraded Uclassified
237
- 10 -
Treasury had extended the existing Stabilization
arrangements with China, calling for the purchase
of $50,000,000 worth of Chinese yuan against full
security. The Secretary of the Treasury is also
to appear before a joint meeting of the Senate
Banking Committee and of the House Coinage, Weights
and Measures Committee, to discuss further
Stabilization arrangemente with China.
H.K.Jr:
No, because you are putting it in the past tense.
You say, "Has extended."
Bernstein:
That is right. I am saying you can do two things.
You can extend the existing arrangement without
reference to the --
H.M.Jr:
I don't like your suggestion.
Bell:
That is one question I have.
Cochran:
You would have to agree with China before it is
extended.
H.M.Jr:
Well, the Secretary of the Treasury will appear
Monday forenoon before the joint session and at
this time he will bring to their attention the
proposed renewal. Extension?
White:
Proposed extension, because renewal would be the
same - extension might mean --
H.M.Jr:
Renewal will be exactly the same.
White:
Proposed extension of what was to follow it?
Couldn't we merely say proposed extension of
Stabilization arrangements --
H.M.Jr:
The President wants the $50,000,000 in there because
he wants to say he has made it a hundred, you see.
White:
Let's not say it, then. Proposed extension of 8.
$50,000,000 operation.
H.M.Jr:
of & $50,000,000 Stabilization --
White:
Operation.
238
- 11 -
H.M.Jr:
In conjunction with the Central Bank of China.
White:
I don't know about that "in conjunction".
H.M.Jr:
It has to be in conjunction.
White:
With --
H.M.Jr:
Just with?
White:
With.
Gaston:
Stabilization arrangement with --
White:
With, yes.
H.M.Jr:
Instead of Stabilization operation?
Gaston:
Yes.
H.M.Jr:
Stabilization arrangement.
Cochran:
Do you want the date of the original?
White:
I wouldn't be inclined to refer to the original
one at all, because in the public statement one
could leave that vague and you get the full --
H.M.Jr:
He will bring it to their attention - the proposed
extension of the $50,000,00 Stabilization operation -
the arrangement with the Central Bank of China which
expires.
White:
Then that doesn't seem to leave any way for changing
the arrangement. It seems a little misleading.
H.M.Jr:
Why? Would you say, "Which expires on December 319"
White:
It weakens the effect.
H.M.Jr:
Proposed extension.
White:
That is right. Then an extension may be an extension
in that direction.
H.M.Jr:
I am willing to go that far. Proposed extension of
the $50,000,000 Stabilization arrangement with the
239
- 12 -
Central Bank of China.
Gaston:
Or you could say you would come before the
committee to discuss with them terms for the
extension of --
White:
That might be another way. I don't know which
sounds better.
H.M.Jr:
I think this is all right, gentlemen. The Secretary
of the Treasury will appear Monday forenoon before
the Senate and House in joint session. At this
time he will bring to their attention the proposed
extension of the $50,000,000 Stabilization arrange-
ment with the Central Bank of China.
Cochran:
We have never announced, A.8 far 88 I can find it,
that it was A $50,000,000 operation.
White:
Well, that 1s what I --
H.M.Jr:
Now, you take this thing - the Secretary of the
Treasury will appear Monday forenoon before the
Senate Committee --
Bell:
Committee on Banking and Currency.
H.M.Jr:
The Senate Committee on Banking and Currency -
will appear Monday forenoon before 8. joint session
of the Committee on Banking and Currency and the
House Committee on Coinage, Weighte and Measures.
At this time - would you Bay at this time he proposes
to bring or at this time he will bring?
Bell:
Why not just go on with that sentence and say he
is going to appear in order to bring their attention
to the proposed arrangement.
Gaston:
Or in order to propose an extension.
White:
No.
H.M.Jr:
No, I think that 1s all right. At this time he
will bring to their attention the proposed extension
of a $50,000,000 Stabilization arrangement with the
Central Bank of China. I don't object to that.
Regraded Uclassified
240
- 13 -
Gaston:
That is right, but the final thing is --
H.M.Jr:
After all, I have got to be honest with myself.
Now, I don't want them to say we have made this
loan. This committee 18 there and I am going up
to bring this thing to their attention, proposed.
White:
The only thought in my mind is now that I think
it over, do you need the word "extension"? Since
you are going to do that, why can't you say,
"proposed $50,000,000 Stabilization arrangement?"
Bernstein:
But the word "extension" has two meanings. It means
renewal and it also means giving them 8 new line of
credit.
H.M.Jr:
That extension 1e beautiful. It can be an extension
or a renewal.
White:
Either an extension in point of time or an extension
in point of renewal of amount or terms.
Bell:
Will the President be satisfied with an additional
$30,000,000 or does he want 8 full $50,000,000 in
addition to the twenty?
H.M.Jr:
He has got $100,000,000 in his mind, but he knows
that this is an out for him as of today. If he
wants to wait until Monday, he can get $50,000,000
on top of this, but if he wants it today, I think
he will take it and like it.
Bell:
Supposing you go up on this and the committee says
no? I mean, they say, "We can't go along with you."
Does that mean, first, you can't make the $50,000,000
extension, and second, that you can't make the
additional 20 that 1s already on the booke? Are
your hands tied then?
H.M.Jr:
If the committee says no, my hands are tied.
White:
You will meet that difficulty when you get there.
H.M.Jr:
I don't think they will Bay no on the 20.
Cochran:
We have been renewing it every six months.
241
- 14 -
White:
It depends upon what you mean by "guidance" at
that point. But you don't have to decide that
now.
B.M.Jr:
It 18 very interesting. I don't know whether I
told you people, but at the Cabinet the President
said, "Well, I will tell you what I am going to
do. I am going to make this announcement, but
I want your word, Henry, that if I malte the
announcement, even though Congrees turns you down
on Monday, you will go through with it."
Now, wait 8. minute. Before I could aay anything,
Harold Ickes sooke up and he was the only man in
Cabinet who came to my resoue. "Well, that 18
unfair, Mr. President, because how can Henry go
up and ask for guidance if he has Tomised to go
through with it if they turn him down?" And Ickes
was the only fellow that came - that had the gute
to etand up there alongside of me.
Cochren:
Ie the State Department helping with the recommendation,
Mr. Secretary, as to the political reasons?
H.M.Jr:
Well, I asked Mr. Hull to go up with me and Jesse
Jones said he should go. Jones says, "He has put
all the heat on me, let Hull go up with you." Hull
won't do it.
Cochran:
He won't do it?
H.M.Jr:
At least he wouldn't as of yesterday. But the
President's announcement 1s going to say Mr. Hull
and I. The President said, "It 1s A matter of life
and death." He says, "If you don't do it today,
it may mean war in the Far East." I couldn't eay
to Mr. Rull, "Do you agree with that?"
Now, Somere said over the phone, he said, "In the
first place I don't see any hurry and in the second
place I don't think the loan would make any difference
anyway."
made their peace with Wang. It 18 out today. The
Wang Ching-wei. That 18 in the Times today. They
What they were talking about was this fellow
Regraded Uclassified
242
- 15 -
story reads that Chiang Kai-shek isn't going to
recognize Wang Ching-wei.
White:
I think they are putting the screws on unnecessarily.
Soong's man came down to see me and I was trying to
get something out of him and he wasn't specific,
but I am not sure that they are not exploiting the
opportunity.
H.M.Jr:
Who?
White:
China. I mean, that they are not making the situation
appear & little worse than it actually 1s.
H.M.Jr:
Well, Harry, I am used to having you put pressure
on me to rob my Stabilization Fund, but who outside
of the Treasury is doing this?
White:
I think it 18 coming right from Chiang Kai-shek now.
In fact, I know it 18.
H.M.Jr:
What 1a this message that Soong had for me?
White:
I think it relates to that.
H.M.Jr:
I should have seen him, shouldn't I?
White:
Did he call up?
H.M.Jr:
No, I haven't seen him.
White:
He 18 available.
H.M.Jr:
Why don't I get him down?
White:
When his man yesterday spoke to me about it, he
said that Soong was planning to go to New York.
I said, "Of course, I don't know what is doing,
but I think that --"
H.M.Jr:
(To Commander McKay) See if T. V. Soong 18 available,
and if he 18, ask him to come down at once.
White:
I thought this wes & good time for him to be close
to Washington.
Regraded Uclassified
243
- 16 -
Cochran:
Because they have this story in the press of
another loan of a hundred million dollars. That
has been in while you have been away. The fact
18, they can't use a hundred million dollars.
They can't get goods in and the currency 1s fairly
stable right now.
White:
Getting goods isn't their problem. If what they
are saying is the truth, and I don't know whether
it 18, but even if it ien't, it 1s an exaggeration
and even with an exaggeration it 18 etill true that
the domestic situation 1s getting 8. little out of
hand. Prices are rising very rapidly in Chungking,
and I think they are taking advantage of what they
think 18 an appropriate time when they feel they
can 8ay to this country, "Well, you are either
going to tell us you are going to help us in 8
real big way or we will have to come to terms with
the other fellow." Whether they actually mean they
are going to come to terms with the other fellow, I
am 8 little bit skeptical, but I think they are
using the opportunity. Certainly that should be
the State Department's business to find out whether
their threat 1e a real one or not.
H.R.Jr:
Well, the thing I don't understand, evidently
Mr. Hull told the President that he wants U.S to
put our own man in to operate this fund.
White:
I wouldn't think of lending them much money without
doing it, Mr. Secretary, because there are A million
ways of drawing that stuff out 80 it will dribble
right out to the advantage of a good many bankers,
AB did the first Stabilization Fund that WBB set
up.
Mckay:
He will be down just 8.8 soon as he can. He is
coming from the Chinese Embassy. He said he will
be down in five or ten minutes.
R.K.Jr:
All right.
I am all right, you see, because Hull hasn't called
me yet, BO I'm not holding up the President. I
don't know why I didn't think of that earlier, to
call up Soong. When you B&W his man, who do you mean?
Regraded Uclassified
244
- 17 -
White:
He has an advisor.
H.M.Jr:
Oh, you mean that Pole?
White:
Yes, he is a Pole.
H.M.Jr:
Polish doctor.
White:
Polish physician who 1s a financial advisor to
the Chinese. He 16 a smooth boy, but I don't know
whether to trust him around the corner.
H.M.Jr:
I certainly wouldn't.
Cochran:
Is Young still advisor?
White:
Oh yes. Young doesn't come in.
H.M.Jr:
You are seeing this Pole? What is his name,
Doctor --
White:
Rajchman. Soong sends him when he wants to - uses
him sort of as a messenger boy. I don't mean he
uses him actually that way, but in his contacte with
me he has been sent to find out --
H.M.Jr:
If they ask me why I have seen Soong, Soong has asked
to see me and he has a message for me, doesn't he?
White:
He has a message.
H.M.Jr:
From Chiang Kai-shek?
White:
Yes. I don't know whether it 1e for you or not.
H.M.Jr:
But didn't he ask to 800 me?
White:
He asked to see you and he has a message.
H.M.Jr:
(To Commander McKay) Did Dr. Soong call up yesterday
to ask for an appointment?
McKay:
Yes, sir.
H.M.Jr:
What time?
Regraded Uclassified
245
- 18 -
McKay:
I didn't talk to him until, I would say, about
ten c'clock.
H.M.Jr:
He called you?
McKay:
He talked to the operator first and then he called
later on and I told him I wouldn't let him know
until Monday.
H.M.Jr:
All right.
Now look, Gents, while we are waiting, I think if
we go up there we ought to be prepared to alk about
the Argentinian thing too.
White:
That is A very good idea.
H.M.Jr:
Because certainly if I get the joint committee
together and then three days later announce a 50
million dollar loan to Argentine, they will say,
"Well, that 1a A piece of alippery footwork."
White:
Not only that, I think it 1s also good because it
will - it is A loan of a different character and
it 18 well to clear them both off. They are liable
to approve the Argentine one and not the Chinese
one.
Bell:
He can say while it doesn't come within his promise,
he wants to bring it to their attention.
Gaston:
You want to call attention to the fact that you
don't promise to consult them on any such thing
AS that. You only dealt with countries at war.
White:
But I atill think he can inform them that he has
been doing it and that there are several other
Latin American loans that he may be considering
and then that will give you a clear way if you do
want to grant something that they have heard about
and haven't opposed.
H.M.Jr:
Are you fellows going to be ready on the formula?
White:
For China?
H.M.Jr:
No, no, for Monday morning, Argentine.
Regraded Uclassified
246
- 19 -
Bell:
Yes.
White:
Yes.
H.M.Jr:
When are you going to be ready?
White:
I think we are ready.
Bell:
What do you mean, Mr. Secretary, formula? Do you
mean an agreement and everything drawn up?
H.M.Jr:
I want to know what it is all about.
Bell:
We have got that information.
White:
We gave you a proposal, written out.
Bernstein:
When you come to discuss it with them, are you going
to try to get their approval on anything like specific
terms, because you may be tying your hands, because if
you are just in the beginning stages of these ne-
gotiations, you may want to shift your position or
adopt a different approach. Do you need tell them
more than Just the general proposition --
H.M.Jr:
Well, Bernie, I cantdiscuss it because I don't know
what it is all about.
White:
After knowing it, he can pick the general points.
Gaston:
Yes, you can generalize it after you see something
definite.
H.M.Jr:
I think we can Bay we will meet at four o'clock
tomorrow at the house.
White:
Do you want both the Argentine and the Chinese plan?
H.M.Jr:
Definitely. I can't handle more than one crisis
a day.
Bell:
You can't get out of this committee, I don't believe,
any definite approval. They have no authority,
legislatively, to approve anything. I think they
might say that they are not going to object to it.
White:
That is right, and thank him for the fact that he
Regraded Uclassified
247
- 20 -
has come to them to tell them and they will
express individually, not as a committee, but
they will probably express individually their
approval or objection. There will be some who
will object --
Gaston:
You are talking about China or Argentine?
White:
China. I doubt whether any will object to
Argentine.
Cochran:
But on Argentine you will decide tomorrow how
you feel.
H.M.Jr:
Yes. I want to go to school on that, and hear the
whole story. I would like all of you to be there,
if you would, at four o'clock tomorrow.
Bernstein: Ed will be back for that meeting.
H.M.Jr:
Good. We will put him to work.
Bernstein: We have been talking to Ed this morning about the
thing.
H.M.Jr:
Between the financial writers and the football game --
Bernetein:
I don't think he went to the financial writers. He
stayed about here last night.
H.M.Jr:
What happened?
Bell:
I think he left on a nine o'clock train.
Bernstein: I know he was leaving late, although I do notice
that he got referred to by the financial writers
as the author of the legislation that Wall Street
doesn't like.
White:
I have got his train seat, 80 that he can be here
in a few hours, and his seat at the game. We can
get him.
H.M.Jr:
Are you sitting next to him?
Bernstein: Yes, I think we can get that.
Regraded Uclassifie
248
- 21 -
Cochran:
May I mention one thing now about Sir Frederick
Phillips? Pinsent wanted to be informed this
morning whether we approved that communique. I
will show it to you. Because Phillips may leave --
H.M.Jr:
What communique?
Cochran:
Just that one line in the center there, because
Phillips may arrive on Monday in New York.
H.M.Jr:
Incidentally, I will read you the letter when it
comes in. Layton comes in and he dumps on my desk -
I mean, I have been gone over three weeks and just
when I come back here 18 two billion dollars worth
of orders, 700 million dollars worth of capital
assistance. Well, Stimson brings up the ordnance
orders at Cabinet yesterday and gives himself a
wonderful sendoff, what & wonderful job he and the
Army have done, and they don't mention anything
about money.
White:
Two billion seven?
H.M.Jr:
Two billion and seventy. So in the humor the
President was in and in the humor I was in, I
wasn't going to start 8. discussion there yesterday
88 to whether they should or shouldn't place it.
I thought Stimson would BAY something. So I asked
Layton this morning, 80 he said Stimson wouldn't
touch the financial thing. So I have written a
letter, which I will show you, to the President,
sending him a copy of this memorandum from Layton
and saying, "My dear Mr. President, here it 1a.
Please advise me what to do with it."
White:
That 18 two billion in addition to what they have
told us.
H.M.Jr:
Yes,
White:
And they need another billion to meet what they have
told us?
H.M.Jr:
Then I say something about, "In view of what
Ambassador Lothian has said, please advise me how
you wish me to proceed." I am certainly not going
Regraded Uclassified
249
- 22 -
to tell Knudsen or anybody else that the money
18 in the bank. I said to Layton - I B.TO just
killing time - "Have they taken the 650 over in
Canada?" "No," he said. You see, it is a
question of this 18 Central Bank money and Canada
doesn't know whether it can take it and then under
their Trading With The Enemy Act, they haven't yet,
I think, declared their war with France. So I
said, "Listen, do you fellows want to win this war
or don't you want to win this war? When you make
up your mind, let me know, will you?"
Klotz:
You said protocol or something like that.
H.M.Jr:
I said, "Are you fellows going to stand on protocol
and etiquette on 600 million dollars?" I said,
"You let this gold slip through your fingers in
Canada and go down to Martinique and the planes,
because you didn't know whether to send B. shot
across their bow.' Imagine if we did something
like that. It was in Halifax Harbor, you know.
White:
No, I didn't.
Klotz:
What was it he said and you said something about
turned sour? Do you use that in England? He said
no, but they understood what it means. They don't
use that in England.
H.M.Jr:
I told him I didn't know what happened while I was
gone but certainly the attitude in Washington toward
England had turned sour. But imagine, they are going
to stand on protocol as to whether they should take
this gold or not.
White:
And they are losing the gold in Dakar because the
report 18 they are beginning to take it out by plane.
H.M.Jr:
I knew that would happen. Is that what the Consul
18 sending?
White:
There is one cable that A plane 1e reported to have
left with a substantial amount.
M.M.Jrs
They flew it all down, they can fly it all away,
can't they?
Regraded Uclassified
250
- 23 -
Cochran:
No, they didn't fly it all down. It went down
by vessel.
White:
Didn't the Polish go?
Cochran:
No, it went on a ship.
White:
Well, it flew from the Poles, anyway.
Mr. Secretary, we have drafted a plan that I
thought we would have time to clear around and
discuss that I think will meet this British
situation.
Regraded Uclassified
251
RE CHINESE LOAN
November 30, 1940
11:05 a.m.
Present:
Mr. White
Mr. Cochran
Mr. T. V. Soong
Mrs. Klotz
H.M.Jr:
I was sorry I couldn't get to you earlier,
but I have been away and I understand that
you had some message that you wanted to
give me.
Soong:
Yes. General Chiang wanted to send the
statement to the President requesting the
urgency of financial assistance in view of
the urgent situation. It is getting, as
we expected, quite out of hand. I wish to
speak to you on that matter.
H.M.Jr:
Well, would you do it now?
Soong:
Although the foreign exchange rates in
Shanghai have been fairly steady, the in-
ternal prices have gone up very rapidly, es-
pecially noticeably in the last few weeks,
and therefore it seems that unless a very
substantial assistance could be given, the
situation will get out of hand.
H.M.Jr:
Well now, let ne ask you, how much money
have you in mind?
Soong:
Well, General Chiang asked for between two
and three hundred million dollars, that is
what he asked for.
H.M.Jr:
What will you take?
Soong:
Well, we are not choosers, Mr. Secretary.
H.M.Jr:
I see. But as to take care of the immediate
situation, say for six months --
252
- 2 -
Soong:
I should imagine a hundred million dollars.
H.M.Jr:
I see. Well now, let me ask you this, if
you will tell me this. Who else in Washing-
ton have you told this to, I mean officially?
Soong:
Of course, I saw the Secretary of State.
H.M.Jr:
I see. This week?
Soong:
This week. I handed him a memorandum to be
presented to the President.
H.M.Jr:
Oh. Well, I haven't seen that, so I don't
know what it is.
Soong:
May I give you a copy?
H.M.Jr:
I wish you would. Have you a copy?
Soong:
Yes. I can get it, but not here.
H.M.Jr:
I would like to see a copy of that. Would
you want to use my phone? You can talk in
Chinese and then I won't know --
Soong:
Well, I have to go - I have locked the door.
H.M.Jr:
I see, But you have a very good memory.
Approximately what is in it?
Soong:
Well, just two things in it. One is for
airplanes and the second is for stabiliza-
tion.
H.M.Jr:
Well now, was there any time factor in there,
that the thing had to be done today or to-
morrow? I mean, is it a matter of 24 hours
or does a week make any difference?
Soong:
It is very urgent because of the Japanese
253
- 3 -
recognition of Wang Ching-wei, of the puppet
government in Nanking, and at this time any
assistance given now would have very good
effect, both politically and psychologically.
II.M.Jr:
But one or two days, would that make any
difference?
Soong:
Well, I think if we could follow it up im-
mediately, that would have the most desired
effect.
H.M.Jr:
Well now, let's see. You gave that to Mr. Hull
on what day?
Soong:
I gave it to him day before yesterday.
H.M.Jr:
That would be Thursday.
Soong:
Yes.
H.M.Jr:
You gave it to him Thursday?
Soong:
Yes.
H.M.Jr:
But I mean if you knew by Monday or Tuesday,
would that be quick enough?
Soong:
Well, if it at all could be made today, that
would be most desirable.
H.M.Jr:
Why?
Soong:
Because the Japanese have recognized Wang Ching-
wei and have been expecting to see what the
reaction of the rest of the world will be,
particularly that of the United States.
H.M.Jr:
I see. Well, things like this have happened
before and you didn't expect the United States
to - what shall I say - act as quickly as
that.
254
- 4 -
Soong:
You remember after the Japanese aggression,
a loan for 25 million was announced immediately
after the fall of Canton.
H.M.Jr:
Well, that was a happy coincidence.
Soong:
The last loan from the Export-Import Bank came
just at a time when the Japanese were announcing
further steps.
White:
What is likely to happen within a few days?
Supposing people in China and the rest of the
world don't know what the United States is
going to do within 8. few days? What would
you envisage might happen, if anything?
Soong:
Well, even without the Japanese action, the
situation is very, very grave. I don't want
to be an alarmist, but the situation is very
grave. I have been repeatedly saying it
but before it was not impending. Now with
this Japanese move, the pressure becomes
doubly great.
H.M.Jr:
Has England offered to do anything for you?
Soong:
England indicated - I was also negotiating
with England. Our Ambassador indicated that
the British are considering it rather favor-
ably and wanted me to go to England. I told
him it is out of the question now because I
am still negotiating in Washington.
H.M.Jr:
How much do you think they will lend you?
Soong:
Well, I should say between five million pounds
and maybe some additional sum for purchases
in the British Empire.
White:
They have asked for ten, five for stabiliza-
tion and five for other purposes.
Regraded Uclassified
255
- 5 -
H.M.Jr:
Now, as I understand it, the Export-Import
Bank has loaned you so far five million.
Soong:
Since I came, 25 million. Before that, 20
and 25. 45, 70 million.
H.M.Jr:
70 million. And how much of that have you
used?
Soong:
Well, the first two loans, 20 or 25, are all
used. They actually have not been paid to
the manufacturers, but it is all assigned,
so it is all used up.
Shite:
Allocated.
H.M.Jr:
That is 45?
Soong:
Yes. As to the rest of the 25, we have only
just got it about a week ago and for our
purposes it may seem ungrateful to say so,
but to meet such an emergency it is not suf-
ficient. It is not big enough.
S.N.Jr:
Well, the terms that you have, are they
reaching China?
Soong:
They are reaching China. The Burma Road has
been bombed constantly but as constantly it
is being repaired and ferries made to ferry
things over.
H.M.Jr:
And these purchases, do any of these recent
purchases go through the Universal Corpora-
tion?
Soong:
All purchases, as far as I know, have gone
through the Universal.
H.M.Jr:
I see. Are you using K. C. Lee?
Regraded Uclassified
256
- 6 -
loong:
..e are not using K. C. Lee.
S.N.Dr:
You mean the Government?
Soong:
I P.I.1 not, in my negotiations.
II.S.Jr:
Do you use him for purchasing?
Soons:
1 am not using him for purchasing.
S.M.Jr:
Why do you say "I"?
Soong:
I mean there may be small purchases that
don't amount to very much, but as far as
the money that I have secured, I haven't
used him.
M.C.Jr:
You are using Universal?
Joons:
Absolutely.
D.K.Jr:
Good. That is 8 good set-up.
Soong:
I am now asking them to make purchases for
& thousand trucks and also such supplies of
machinery and materials for making munitions
through them.
H.V.Jr:
Well, do you think I have covered the field?
White:
Yes, I think SO. The 25 million dollars
which they have just got hasn't been touched
yet, and all of the loan previous to that
has been allocated in the sense that they
are placing orders but it hasn't been spent.
The only question that I think of raising
is that I am not quite clear why a couple
of days --
S.N.Jr:
Well, would you mind giving ne a copy of
that memorandum?
Regraded Uclassified
257
- 7 -
Soong:
Immediately. I will go back and get it.
H.M.Jr:
And if I should be occupied or not here, if
you will give it to Mr. Cochran.
Soong:
Yes. I may say that this memorandum is only
following up negotiations that General Chiang
had with the American and British Ambassadors
in which he asked for the sum of two to three
hundred million dollars. In the latest memo-
randum I presented to Secretary Hull, the
emphasis was - although both messages were
touched - the emphasis was on airplanes.
H.M.Jr:
I see. Well, I am not familiar with it so I
would like to have it.
Soong:
Yes.
H.M.Jr:
I am supposed to participate in this. Well,
you be available --
Soong:
All the time.
H.M.Jr:
today and tomorrow, because I am working
on this very hard, trying to find a way to
do it.
Thank you for coming down.
Soong:
Should I give it to Mr. White?
H.M.Jr:
Either gentleman. Thank you.
Soong:
May I also say that I have just received E.
telegram from General Chiang. The Export-
Import Bank promised to make some further
loans and his telegram to me was that -
he said, "If you sign this agreement, do
not publish it, because it will have a very
bad effect."
Regraded Uclassified
258
- 8 -
H.M.Jr:
Now, wait a minute. Let's get this. This
is important.
White:
Do you mind repeating that?
H.M.Jr:
Yes, please.
Soong:
I just got et telegram from General Chiang,
because I wired him the other day that the
Import-Export Bank will probably lend us
some more money and he said, "Well, if you
make this agreement, do not have it published,
because immediately following the Japanese
we are expecting substantial support from
the United States." If a sum of, say 25
million is published, that will be worse
than nothing at all, and therefore he asked
me not to publish it.
White:
The thought is that the 25 million dollar
announcement will look to the public as
though that is all the assistance they are
going to get, and it being so small, it
wouldn't help the situation. You would
rather let the situation seem uncertain,
as though the United States was still going
to do something?
Soong:
No, his idea is that even if we get 25, see,
the announcement should be "a very substan-
tial sum." We would announce it as 8 sub-
stantial sum.
H.M.Jr:
What would you call a minimum that would
be helpful?
Soong:
I should say a hundred million.
H.M.Jr:
Okay.
259
RE CHINESE LOAN
November 30, 1940
11:20 a.m.
Present:
Mr. White
Mr. Cochran
Mrs Klotz
Mr. Bell
Mr. Gaston
Mr. Bernstein
Mr. Welles
mite:
+hat is apparently what Soong wanted to see
you about.
D.M.Jr:
Evidently. And his story checks with what
the President told me, other than I don't
see that Monday isn't just as good &8 Sunday.
White:
lle didn't make that clear and I get the
feeling he doesn't either, but at least he
wasn't convincing on that one. But apparently
he wanted to see the Secretary of State and you,
because that is when he spoke to me about
seeing you. ..hat are the ethics of showing
Cabinot members a message that he has for the
President?
Cochran:
It should go through the Cabinet members, or
Mr. Full.
H.M.Jr:
But I mean his position is sort of a peculiar
one. If Chiang Kai-shek has E message, he
should give it to his Ambassador and the An-
bassador gives it to Mr. Hull.
White:
His Ambassador is nothing.
(Telephone conversation with Sumner Welles
follows:)
Regraded Uclassified
260
November 30, 1940
11:20 a.m.
H.M.Jr:
Hello.
Operator:
Mr. Welles.
Sumner
Welles:
Good morning, Henry.
H.M.Jr:
How are you Sumner?
W:
Fine. Henry, I wanted to take up with you the
question of this suggested statement for the
President to make with regard to assistance to
China.
H.M.Jr:
What did they do, dump it in your lap?
W:
Well, as usual, I'm trying to be helpful and I
thought I'd read you this brief statement and
then send you over the text if you wanted to
have it in writing.
H.M.Jr:
Right.
W:
Will you let me have your reaction?
H.M.Jr:
Surely.
W:
"Discussions between financial representatives
of the American and Chinese Governments are
progressing satisfactorily. New credits to the
Chinese Government of $100 million are contemplated,
of which $50 million will be through the Export-
Import Bank against purchases by the Metals Reserve
Company of critical and strategic materiale in
our defense program, and $50 million through the
Treasury for monetary assistance and management
8.8 between American and Chinese currencies"
That's all there is to it.
H.M.Jr.
Now, Sumner, this is terribly important, and I'd
appreciate it if you would bring it over yourself.
I've been sitting here all morning waiting to
hear from Mr. Hull.
W:
Well, I've been trying to get you myself, Henry,
for about ten or fifteen minutes.
261
- 2 -
H.M.Jr:
Well, they told me at ten minutes past eleven that
you called. That's the first time I had gotten
it.
W:
Well, I can't come over myself because I have
people waiting here, but I'll send somebody over.
H.M.Jr:
Well, that's no good.
W:
Well, I'll come over myself then.
H.M.Jr:
Yeah,' because this is - did you read my memo-
randum to the Speaker?
W:
No, I haven't seen it.
H.M.Jr:
That's the whole thing, you see. I gave that
to Mr. Hull.
W:
Well, I'll bring over all the papers I have. I'll
come over right away. Are you free now?
H.M.Jr:
I've done nothing - I've just sat here all morning
waiting to hear from Mr. Hull.
W:
All right. I'll be right over.
H.M.Jr:
Thank you.
W:
All right, Henry.
262
- 2 -
White:
I think your statement, with one slight
change there, could just be added right on
to that. That is perfect, as I got it. The
two statements taken together, I think, would
just fill the bill. It wouldn't commit you.
It says "contemplated."
Cochran:
Where it says "new credits," that is --
White:
Some slight change could be made there.
It is funny, a 50 million dollar loan against
the metal reserves. They have already bor-
rowed for 10 or 15 years in advance.
H.K.Jr:
Welles is on his way over here and he has
never seen this thing I have written to the
Speaker. Hull didn't show it to him.
White:
If we could get a copy of that other and see
whether this could be added, you could con-
front him with that proposition.
H.M.Jr:
I can't in front of Welles show him I have
a copy of that. He will be here in two
minutes. Soong told us on Thursday he was
in to see Hull with a message from Chiang
Kai-shek that they wanted to go the day after
this fellow Wang was set up, and when we
pressed him as to what would happen if they
didn't have it for a day or two, he had no
explanation. Here is the statement.
"Discussions between financial representatives
of the American and Chinese Governments are
progressing satisfactorily. New credits to
the Chinese Government of 100 million dollars
are contemplated, of which 50 million dollars
will be through the Export-Import Bank against
purchases by the metal reserves company of
critical and strategic materials in our
defense program, and 50 million dollars through
263
- 3 -
the Treasury for monetary assistance and
management as between American and Chinese
currencies."
White:
Credits are contemplated, but contemplated
to me would be that they are being proposed.
I am not sure of that.
H.M.Jr:
If he added my statement to that, I would
be satisfied.
White:
Could you read that again, Mr. Secretary?
Just the last two sentences.
H.M.Jr:
"....and 50 million through the Treasury for
=
monetary assistance and management as between
American and Chinese currencies."
Gaston:
It is being thought about.
White:
Thought about; and then your statement added
to that will give force to the word "contem-
plated," and show what is meant by contem-
plated.
Cochran:
Could you say, "and management between the
currencies"? They say 50 million through
the Treasury for monetary assistance.
H.M.Jr:
Currency stabilization.
White:
Currency stabilization would fit the stabiliza-
tion fund and state a legal objective.
H.M.Jr:
For what?
White:
Currency stabilization.
Klotz:
Well, he dictated it and we have been sitting
here taking it down.
264
- 4 -
H.M.Jr:
It is easier just to wait until he comes
and he will give us a copy. And then let
this follow?
White:
I should think 80. There certainly wouldn't
be many changes and I am sure the President
would be satisfied and it would have all the
effect that they want, because they will get
50 million anyway, and the other 50 million
Bell:
They would get the other 50 from the Export-
Import Bank if they didn't get it from the
stabilization fund. They might get the full
100 million under that without touching the
stabilization fund.
White:
You mean they would get the 50 anyway, and the
only question remains about the other 50 in
the public's mind?
Bell:
Yes.
White:
That is why I think it will fill the bill.
Bell:
A hundred million contemplated could be con-
templated from any place.
White:
Does that mean you are planning to, going to?
Gaston:
Contemplate means looking into it, thinking
about it.
White:
I don't know whether he used the word advisedly,
but if he didn't, it is a fortunate word.
Bernstein:
It is probably intended to mean, "This is
what we are going to do." That is what they
will want the public to construe the word to
mean.
White:
It is one of those words that, defined in
265
- 5 -
various languages, can mean any one of a
number of things.
Gaston:
It is a very weasel word.
(Mr. Welles entered the conference)
H.M.Jr:
Sumner, I wish you would read this, my letter
to the Speaker, which he asked for, because
he couldn't get this legislation through with
all of this fear, you see, and he asked me
to write him a letter. I also had to write
a letter to Vandenberg, but this is the best
letter. If you will read that you will get
something - I am not taking this very lightly.
That gives it to you. (See attachment to
meeting re Chinese loan, November 29, 11:30 a.m.)
welles:
That is it.
E.M.Jr:
You can keep that. I want to tell you from
that point. When the President called ne
yesterday - I mean, I take it that Mr. Rull
hasn't given you the whole history. I may
go over it twice, but I would rather take
the time to give you the whole story.
He called me between 11:00 and 12:00, and
Jesse Jones was there with him, and he said
that he would like me to do this thing and
I explained the circumstances and he said,
"Well, get hold of Wagner and the others,
which I proceeded to do. Wagner was in town
and everybody else was out of town, and Somers,
who is the Chairman of this, was up in New
York. The best they could do was get a meet-
ing for Monday morning, which has been called
for 10:30, & joint committee, to hear me on
this question.
This is the press clipping (handing press
clipping to Mr. Welles). You can add this
266
- 6 -
to your exhibit.
Last night while I was there, the President
talked to Wagner and Somers and said he
wanted to make the statement that this had
to be done today, and I don't know what
either of them said except that Somers called
me up this morning and he said, "You know,
I tried to argue with the President and tell
him I thought it was a great mistake for any
public announcement to be made before Monday
because," he said, "if he does it, I have
grave doubts whether I can get this fund re-
newed. It has to come up again this June,
you see, and in view of the fact of what you
told us three times --" He said, "Your honor
is at stake. You assured us three times you
would not make just this kind of loan with-
out coming up for guidance," and he says,
"I can't see why Monday wouldn't be as well,
but if the President does make a statement
I told him this, that he is going to make
it that much more difficult. Y He said, "It
would make it very difficult to get this
fund renewed and I hope very sincerely he
won't." He said he told him that last
night.
I thanked him very much and told him that as
far as I was concerned, in view of what I
had said, that I would not make any commit-
ment before Monday.
Now, to give you the whole picture, I needn't
tell you that I am interested in helping the
Chinese, because it is rather laughable. You
and I got the thing through, originally, when
Mr. Hull was on the water to Lima.
Welles:
I remember well.
267
- 7 -
H.M.Jr:
You remember the trouble we had in getting
the thing through.
Welles:
Very well.
H.M.Jr:
Now, T. V. Soong asked to see me Thursday
and I saw him this morning and I asked him
what the circumstances were and he said that
they wanted 8. couple of hundred million
dollars and the day after Wang Ching-wei was
recognized - I said, "Well, what will you
take?" He laughed and said, "Well, we can't
be choosers, but I am in 8. mood of & hundred,"
and I pressed him pretty hard as to if the
announcement was early next week, what dif-
ference would it make or what would happen
and he couldn't tell me what would happen.
There was no threat or indication of threat
that they would make peace or anything like
that, you see, and he simply said that they
are very, very anxious, and then he said they
had another message, I think he said as of
today, from Chiang that if it was only
25 million not to announce it, but I couldn't
get out of him anything.
Now, while we were waiting, we drew up 8.
suggestion and it is based on this. This
arrangement which we have is & 50 million
dollar stabilization arrangement with these
people, which expires on December 31st of
this year. We are supposed to notify them
today, 30 days in advance, whether we are
going to renew it or not. They have borrowed
20 million dollars from us against gold
collateral. They thought we could tie this
thing up. I take it what the President and
Mr. Hull want is the figure, 100 million,
and I drew up, with the help of these gentle-
men, a statement which I thought would fill
in - I mean, I just can't break my word; it
is impossible.
Regraded Uclassified
268
- 8 -
Have you got your statement there? Well,
the one that you read to me, I just wonder
if this one couldn't follow, and would that
make everybody happy.
Welles:
So far as I am concerned. This is the ori-
ginal form, which I think covers your idea.
H.M.Jr:
"Discussions between American and Chinese
authorities are progressing satisfactorily.
New credits to the, Chinese Government of
100 million dollars are contemplated, of
which 50 million dollars will be through
the Export-Import Bank against purchases
by the metal reserves company of critical
and strategic materials in our defense pro-
gram, and 50 million dollars through the
Treasury for monetary assistance and manage-
ment as between American and Chinese
currencies.'
Well, would that do it?
Welles:
And then I would add right to that this
additional statement of yours.
White:
That is different than --
Bell:
Yes.
Welles:
Let me give you the background of this. This
is what we ourselves - what you have in your
hand is what the State Department thought
was the wise thing to do, in view of your
situation. Then Jesse Jones made the counter
suggestion, which is the one we were speaking
of, and 80 far as we are concerned in the
State Department, our original draft is
entirely satisfactory and we will be happy
to add this to it.
269
- 9 -
Bell:
I am not sure it ties in exactly, does it?
White:
That could be added to either draft and have
the same effect.
R.M.Jr:
I think that would be perfect.
White:
There is a certain amount of duplication.
H.E.Jr:
That is all right.
Caston:
There are some advantages in not having any
statement made at all today, and I think it
would be distinctly better if the statement
were not made until Monday, for two reasons
I am thinking of. One is the attitude of
the committee and our future relations with
the committee, and the other is the adver-
tising the fact so widely that you are going
to hold this meeting with the committee on
Monday and what it is going to be about, so
as to give an opportunity for an opposition
to be built up, if there is to be & real
opposition.
H.M.Jr:
I would say Amen to that, but I don't think
the President will listen to it. I think
llerbert is absolutely right.
Welles:
Well, the situation, I think, is 8. little
more critical than T. V. Soong gave you to
understand.
11.M.Jr:
I see.
Welles:
The Germans have made secret proposals to
Chiang for peace terms and there is & danger
of a real psychological moral lapse as a
result of this recognition of the one regime,
and our hope is, of course, that this will
act as an immediate counteractive. If you
Regraded Uclassified
270
- 10 -
wait for two or three days, the effect
might be too long delayed.
H.M.Jr:
You are arguing about a world foreign affairs
situation, which is your business. I can
only state my position as to what I can do
with the stabilization fund, which I thought
Congress had given to the President and he
gave it to me, but Congress gives the fund
to me. He has veto power, but it is the
fund that they gave to me, and in order to
get it through, I had to make that kind of
a statement.
Welles:
I understand fully.
H.M.Jr:
It is a trust which I feel terribly deeply
that I just cannot --
Welles:
With every reason, and I understand your
situation.
H.M.Jr:
I cannot break a trust like that and look
myself in the face.
Welles:
Exactly.
H.M.Jr:
As I am constituted, it is just impossible.
Gaston:
With that statement that has been outlined
here, you will be keeping complete faith,
and you are perfectly in the clear. It is
just a question of the effect on the com-
mittee. As to that, I think with what
Mr. Welles has said of the urgent critical
situation, that can be explained to the
committee and will go a long way to offset
it.
White:
I presume Mr. Hull or Mr. Welles will be up
there with the Secretary?
271
- 11 -
Welles:
I think Secretary Hull had better go with
you.
H.M.Jr:
I think one or the other of you
Welles:
Right.
H.M.Jr:
It is 10:30.
Welles:
10:30 Monday morning?
H.M.Jr:
It is Room 301.
White:
Now, a statement of that kind, if you could
see fit to make it, you see, would just --
H.M.Jr:
Now look, if the State Department will take
this, the first one, plus what I have added,
I am entirely satisfied.
Welles:
That, then, will be our position. I will
try to arrange it directly with Jesse so
he will agree with it.
H.M.Jr:
Well, I am not worrying about Jesse.
Welles:
No, he has nothing to say about what you
have here, but I mean with regard to what
relates to him it is slightly different
than what he indicated.
H.M.Jr:
Could we leave it this way? If I don't hear
from you again, and I will never be more than
15 minutes off from my telephone, until I
do hear from you it is clear?
Welles:
Your understanding with me is that this
that you have in your hand, plus your state-
ment, is what you and I agree on?
H.M.Jr:
Right. And if it is to be anything else,
you let me know.
272
- 12 -
Welles:
I will let you know immediately.
H.M.Jr:
And for my peace of mind, when it is clear,
will you let me know?
Welles:
I will be glad to do that also.
H.M.Jr:
We feel, in view of the fact that we have to
get on the Argentinian thing immediately,
that I ought to describe to this committee
what I have to do, telling them that I don't
feel, under anything I said to get this legis-
lation, that I am honor bound to do it.
Welles:
Because it is not & belligerent government.
H.M.Jr:
Exactly. But in view of the fact that it is
going to come up - otherwise, they will say,
You had this in your mind and three days
later you announced the thing and you appeared
before this committee and you didn't tell us."
Don't you think so?
Welles:
I think you have every reason to do it, yes.
H.M.Jr:
So we are meeting Sunday afternoon and I am
posting myself on the Argentinian thing so
I will be in a position to recommend it to
the committee Monday morning.
Welles:
Splendid.
H.M.Jr:
And I don't think I will have any trouble.
Welles:
That is encouraging.
H.M.Jr:
On that, at least. I don't know about this,
but I don't think I will on this, either,
because - now, mind you, so that you have
it & hundred percent what we are doing,
273
- 13 -
talking about, it is an extension of this
50 million dollar agreement, of which they
already have 20, 50 it really only gives
them 30. You appreciate that?
Welles:
Yes. In so far as the effect is concerned,
it sounds like a hundred.
H.M.Jr:
You have got it. The President called me
at our meeting yesterday, and I want to
live up to it.
White:
Mr. Secretary, I have just one thought.
Mr. Jones might have had in mind writing in
his draft that he wanted to say there is 8.
phrase there about his giving them this
money in anticipation of buying the metallic
reserve. If he wants to include that in
there, there is no objection, is there, be-
cause after all, the Export-Import Bank
might have something like that.
H.K.Jr:
Well, let's just leave it the way it is.
Bell:
Dr. White's question raises this point.
Jesse is writing a letter to the President,
which can be made public, with regard to
the details of the Export-Import Bank opera-
tion, so I think that will take care of it.
H.M.Jr:
We understand each other. If I don't hear
from you, it is your statement plus mine?
Welles:
Our understanding is broader than that.
You are going to hear from me anyhow.
(Mr. Welles left the conference)
White:
The darkest hour is before the dawn.
271
- 14 -
Jr:
Now, wait a minute. Don't let's whoop
it up got. Ir. Roosevelt hash't accepted
yet.
I don't think It makes of [reat werl of dif-
ference Which of those statements is used.
lot is they use mine.
....ite:
I thought the irport-Import Hank statement
of ours nouts have been better.
nation:
..ith either one, you were safe 11 they use
yours.
,Dito:
Yes. You sea, that is wet the President
might not like. The Sirst part is A little
less certain than Jonesa' first part, therers
your necond part is clear.
They non't -ive him two rieces. nean, they
are ,oin to Cive him C. Pinished statement,
you sec, They ero not -oing to send over
cae from Jones, one from State, and one Iron
me. I don't know yet. I mean, this is all
very nice, X wells saying wat this is e
matter of honor initia the and all that, but I
will let you all know, anyway. You mi -ht
as well sit In on this other thing. Then
I will TO hone.
anstom:
I think even if they ineue this, you are
not bound to anythin nore than En Chinese
agreement - I don't think you will E hound
to anything more than on extension to the
Chinese B reement as it is no.. written, san
you can still talk to the committees shout
modifying it.
I told what's-his-name to get hore. I told
Welles - I mean, I made it perfectly plain
Regraded Uclassified
275
- 15 -
there. there is only 30 million of fresh money in
Bernstein:
Mr. Secrerary, may I mention one point. You
keep referring to the fact in connection with
your extension of the stabilization - you
originally made the statement in connection
with the extension of the stabilization. That
is in those hearings. Then the question came
up again last fall in connection with the
Neutrality Act when they wanted to insert
an amendment which would have specifically
limited the use of the stabilization fund in
this kind of a situation, and it was at that
time that you wrote these two letters re-
ferring back to your earlier testimony and
we kicked the thing out of the bill on the
basis of those two letters, one to the Senate
and one to the house.
H.M.Jr:
Won't you all wait until Young comes in,
please?
Bell:
Shall we send something up to the house this
evening on Argentina that you can look at
before the 4:00 o'clock conference tomorrow?
H.M.Jr:
Why is it when I come back things always
pop?
Bell:
We would like to know.
H.M.Jr:
I would like to tell you something, young
fellow. Do you know what the President said
when I said this at the Cabinet yesterday?
He said, "Did Bell know this?" I said, "Yes."
He said, "Well, why didn't he say something
about it?"
Bell:
About what?
276
- 16 -
H.M.Jr:
About my personal honor, et cetera, et cetera.
Bell:
In connection with what?
H.M.Jr:
When I said I couldn't do this because I
promised the committee. The President said,
"Well, does Bell know all about this? Why
didn't he say something?"
Bell:
In what connection? I had no reason for
bringing it up. I knew nothing about China
until you told me.
H.M.Jr:
I knew that.
Bell:
He would have heard about it, too, I'm telling
you.
H.M.Jr:
What?
Bell:
He would have heard about it if he had asked
me.
H.M.Jr:
These things come to my mind. I felt like
saying it was like he told me the other thing
in Cabinet. He said, "To show you how much Henry
knows, he said, "We are building a base at Port
Royal,' and actually it is 20 miles away from
there.' Now, I didn't say that to the Tribune.
I said we were rebuilding the docks at Port
Royal and that the base was 20 miles away. And
then he said, "Well, the money is mine; I can
do what I want with it," and I said, "Well,
that is nothing new, Mr. President. We had
a good time yesterday.
White:
We knew that, because you didn't call us in
afterward.
H.M.Jr:
Do you know when I got out of there? 5:00
o'clock. And then Kintner and Alsop were
Regraded Uclassified
277
- 17 -
here waiting with two articles on Lothian.
Gaston:
You had better bawl out the Secret Service
for not letting Dan know about this Chinese
thing.
H.M.Jr:
I can't understand that. He knew about it
all the time.
Bell:
I don't have these dreams. I sleep pretty
soundly. I don't dream. (Laughter)
H.M.Jr:
That is 1940, third term. You dream it.
Yes, let Foley come around tomorrow after-
noon.
White:
I don't think he will enjoy the game, if
you ask me.
H.M.Jr:
Why? We haven't told him.
White:
He has got one leg here and one leg there.
Bernstein:
We told him to listen to the loudspeaker
and we were going to have it stated that
Mr. Edward Foley, Jr.'s number had come up
and he was to report for duty at once.
H.M.Jr:
It isn't over yet, but if it is, it is
a narrow squeak. And I will never forget,
Harold Ickes was the only fellow that came
to my rescue.
White:
Did they all have a chance to read the
letter?
H.M.Jr:
I am not going to read this all the way
through. This is B. history. I will read
this at home.
278
- 18 -
I will let you all know if the flag at the
House of Morgenthau is still flying. I an
glad you told me that was the Neutrality
Act.
Bernstein:
The first paragraph tells that.
White:
I thought there was something wrong.
Bernstein:
There was a very heated argument on the floor
of the Senate that we - at the same time that
we were adopting legislation prohibiting loans
to the belligerent countries, that here was
the stabilization fund.
White:
That gives it added effect, because not only
is the stabilization fund involved, but there
is a certain moral commitment on the Neutrality
act.
S.N.Jr:
Well, it shows that in the first instance, I
mean, that they did the drafting and they
kept ne waiting here while they had Jesse
Jones go over it.
Regraded Uclassified
11-20-40
the Rec of Treas
will appear, minday before
the Lenate - and
House, in joint ressim
at the time at this
time he will bing
to their attention
Censum
the propose d, required
of Stabling action, operation
$950 million
arrangement
with the Ential
BK of china m/se31
Dectated by the Secretary // am nov. 30/40.
280
The Secretary of the Treasury will appear
Monday forenoon before a joint session of the Senate
Committee on Banking and Currency and the House
Committee on Coinage, Weights and Measures. At this
time, he will bring to their attention the proposed
extension of a. $50,000,000 stabilization arrangement
with the Central Bank of China.
Regraded Uclassified
281
November 30, 1940
11:20 a.m.
Statement read by Sumner Welles: an phone
Discussions between financial representatives
of the American and Chinese Governments are progressing
satisfactorily. New credite to the Chinese Government of
$100 million are contemplated, of which $50 million will be
through the Export-Import Bank, against purchases by the Metale
Reserve Company of critical and strategic materials in our
defense program, and $50 million through the Treasury for
monetary assistance and management AS between American and
Chinese currencies.
Regraded Uclassified
Mr hels brought this over mler he came the
the Secretary at 11:30 nor 30/40
282
The discussions between the American and the Chinese
authorities in the field of financial cooperation have
progressed. There is contemplated a credit to the
Chinese Government of $100,000,000. of this, a. credit
for general purposes to the amount of $50,000,000 has
been decided upon by this Government. Arrangements for
early allocation of the balance, namely, $50,000,000,
for purposes of monetary protection and management as
between American and Chinese currencies are now in process
in consultation with the appropriate Committees of the
Congress.
Regraded Uclassified
283
TO: THE PAESS
IMMEDIATE RELEASE
NOVEMBER 30, 1940
STATIMENT BY THE PRESIDENT
The discussions between the American and the Chinese
authorities in the field of financial cooperation have progressed.
There is contemplated a credit to the Chinese Government of
$100,000,000. Of this, a credit for reneral purposes to the
amount of $50,000,000 has been decided unon by this Government.
Aprangements for early allocation of the balance, namely, $50,000,000,
for purposes of monetary protection and management 6,5 between
American and Chinese currencies are now in process in consults-
tion with the appropriate Comittees 0.5° the Congress.
The Decretory of the Treasury will uppear Monday fore-
noon before a joint session of the Service Vormittee on Banking
and Currency and the House Conditto on %binage, Reights and
deasures. At this time, in MII bring to their attention the
proposed extension of is 200,000,000 sombilization arrangement
with the Central Dank of China.
The following is She 1,0% of a letter addressed to
the President under date of lioverbar 30, 1040 by the Federal
Loan Administrator:
"Dear Mr. President:
In connection with the purchase of critical and
strategic matorials in our national dofense program,
the Antals Maserve Company, e subsidiary of the UFC,
is arranging for additional purchases of vollramite,
antimony and tin from the intional Ansources Commis-
sion of Chino to the value of 60,000,000, to be
delivered durine the mixt Pun poorá is prices com-
nonsurate with market conVitions 0.M. the metals are
delivered.
To assist China in mutime / present finan-
cial problems. the must and agrood to
1end the of Chine will negitional 550,000,000,
the loans to be NY NO Central Bank of China
and retired through In this country of the
notals covered by tin to contracts.
It is contony Dated the on the loan
will be made in cooperation with e representative of the
Secretary of the Pronsury in connection with further
assistAnce to China by the Treasury of a like amount,
thus providing China with additional aradita in this
country et this tido of 2100,000,000.
You will ba interested to lenon that Chim is up to
her schedule in dolivories of wood oil and tim to the
United States through which method she is making payments
on provious loans mudo against her consitient to sell us
those essential matyrials.
Sincerely yours,
JESSE 11, JCNES"
Regraded Uclassified
284
POR THE PRESS
IMMEDIATE HELEASE
NOVEMBER 30, 1940
STATEMENT BY THE PRESIDENT
The discussions between the American and the Chinese
authorities in the field of financial cooperation have progressed.
There is contemplated B. credit to the Chinese Government of
$100,000,000. or this, a credit for general purposes to the
amount of $50,000,000 has been decided upon by this Government.
Arrangements for early allocation of the balance, namely, $50,000,000,
for purposes of monetary protection and management as between
American and Chinese currencies are now in process in consulta-
tion with the appropriate Committees of the Congress.
The Secretary of the Treasury will appear konday fore-
noon before B. joint session of the Senate Committee on Banking
and Currency and the House Committee on Soinage, Weights and
Measures. At this time, he *ill bring to their attention the
proposed extension of u. 250,000,000 atabilization arrangement
with the Central Bank of China.
The following in the take of 5 letter addressed to
the President under date of Lovember 30, 1940 by the Federal
Loan Administrator:
"Dear Mr. President:
In connection with the purchase of critical and
strategic materials in our national defense program.
the Metals Resorve Company, B subsidiary of the MPC,
is arranging for additional purchases of wolframite,
antimony and tin from the National Resources Commis-
sion of China to the value of 660,000,000, to be
dolivered during the next few years at prices com-
mansurate with market conditions 0.6 the metals are
dolivored.
To assist China in resting her present finan-
cial problems, the Export-Import Bank hns agreed to
Lond the Government of Chine m additional $50,000,000,
the loans to bd -uaranteed by the Central Bank of China
and retired through doliverios in this country of the
metals covered by the Abovi. informed to contracts.
It in conteniplated that on the loan
will be mado in cooporation with e representative of the
Secrutary of the Transury in convection with further
assistance to China by the Treasury of a Tike amount,
thus providing China with additional orddits in this
country at this time of 2100,000,000.
You will be interested to know that China is up to
her schodule in doliveries of wood oil and tin to the
United States through which mothod she is making payments
on previous loans made against her commitment to sell us
these essential materials.
Sincerely yours,
JESSE H. JONES"
Regraded Uclassified
285
FOR THE PRESS
IMMEDIATE KELEASE
NOVEMBER 30, 1940
STATEMENT BY THE PRESTDENT
The discussions between the American and the Chinese
authorities in the field of financial cooperation have progressed.
There is contemplated B credit to the Chinese Government of
$100,000,000. or this, n. credit for contral purposes to the
amount of $50,000,000 has been decided upon by this Government.
Arrangements for early allocation of the balance, namely, $50,000,000.
for purposes of monetary protection enü management as between
American and Chinese currencies are now in process in consulta-
tion with the appropriate Committees of the Congress.
The Secretary of the Treasury will appear Monday fore-
noon before n. joint secoion of the Senate Connittee on Banking
and Currency and the House Committee on Coinage, Deights and
Mensures. At this time, he will bring to their attontion the
proposed extension of e 250,000,000 stabilization arrangement
with the Central Bank of China.
1
-
+
-
-
-
The following is the the of a letter addressed to
the President under date of howerner 30, 1040 by the Federal
Loan Administrator:
"Dear Mr. President:
In connection with the purchase of critical and
strateric materials in our national defense program,
the Retals Resorve Company. a subsidiary of the aFC,
is arranging for additional purchases of wolframite,
antimony and tin from the Fational Resources Commis-
sion of China to the value of 350,000,000, to be
delivered durine the mixt few years at prices com-
monsurate with market conditions us the metals are
delivered.
To assist China in noutine her present finac-
cial problems, the Export-Import Bank has agreed to
land the Government of Chine an additional $50,000,000,
the loans to be by the Central Bank of China
and retired through Moliveries in this country of the
motals covered by the abovil reforend to contracts.
It is contemplated that ulabursamenta on the loan
will be made in cooperation with a representative of the
Secretary of the Tronsury in connection with further
assistance to China by the Treasury of a like amount,
thus providing China mith additional crodits in this
country at this timo of 2100,000,000.
You will be interested to know that China is up. to
her schedule in deliveries of wood oil and tin to the
United States through which or thod she is making payments
on previous loans made against her commitment to sell us
these essential materials.
Sincerely yours.
JESSE H. JCNES"
Regraded Uclassified
286
November 30, 1940
12:17 P.T.
H.M.Jr:
Hello.
Sunner
Welles:
Hello, Henry.
H.M.Jr:
Yes, Sumner.
V:
In accordance with our agreement, the statement
in the form that you and I agreed upon has just
been sent over to the White House.
H.V.Jr:
Wonderful.
So I think that takes care of it for the moment.
You don't want me to send you a copy - you have
the text there.
H.M.Jr:
I have those - in two vieces,
V:
All right.
R.M.Jr:
Well, let's leave it though unless we hear from
the President I take it it 18 O. K.
M1
Well, I think Mr. Hull 18 now talking with him
on the telephone, but you may want to check with
the President yourself.
H.V.Jr:
No, no. What about Mr. Hull going un with me Monday?
I only talked to him in A preliminary way, Henry.
I've got these - about fifteen by now - people
waiting to Bee me and I only told him that you
wanted
H.Y.Jr:
All cash customers?
W:
(Laughs). I don't do the same kind of business,
unfortunately, that you do.
H.".Jₙ:
I'm perfectly willing not to do it and leave it
all to Jesse.
W:
(Laughs).
H.M.Jr:
All right. Thank you.
W:
All right, Henry. Good-bye.
Regraded Uclassified
TO:
Mr young
287
Be ready to
dis cuss with
the Secretary
From: LT. COMDR. MoKAY
Regraded Uclassified
288
OFFICE or
THE MINISTEP OF MUNITIONS AND SUPPLY
OTTAWA CANADA
Personal.
November 30th, 1940.
Dear Mr. Morgenthau:
Re: Aeroplane Motors.
We have on two or three occasiona discussed the subject
of the manufacture in Canada of aeroplane engines. You have expressed
the thought that we would be well advised to undertake substantial
production of aeroplane engines here, and have authorized our entry
into negotiations with the Pratt and Whitney Company to that end.
At our last meeting I explained that we were having some
difficulty in obtaining the co-operation of Messrs. Pratt and Whitney,
and asked for and obtained your verbal consent to opening negotiations
with the Wright Aeronautical Corp. In subsequent conferences, both
Pratt & Whitney and Wright have expressed themselves as entirely willing
to assist in a Canadian enterprise, but both request that Mr. Knudsen
be asked to advise them of his concurrence in our project.
Under date of November 18th, our Mr. J. B. Carswell, Liaison
Officer at Washington, called on Mr. Knudsen. Following is Mr.Carswell's
report:
"I explained to Mr. Knudsen,
1. That our fighting plane engines up until a few months
ago had been coming from England.
2.
That now we must look to the U.S.A. for our supply.
289
- 2 -
#
3. That Mr. Morgenthau had suggested it WED time that Canada
got started on producing horsepower in her own country.
4. That we had asked Ford of Canada to investigate the
possibilities and that the Canadian Government had
approved of the necessary expenditures.
5. That we would like to have formal authority to discuss
the matter with Pratt & Whitney and/or Curtis Wright.
Mr. Knudeen's immediate reaction was that an engine plant
in Canada, starting up at this time, would be 6. great mistake. He
instanced all the other new engine plants starting at this same time,
Ford, Packard, Allison, Studebaker, Buick, together with large expan-
sions of Pratt & Whitney, Curtis Wright, etc., all of which were making
almost hopeless demands on the machine-tool situation. Be was quite
frank in stating that ten million dollars worth of machine tools could
not be found for Canada at this time.
He suggested,
(a) That the subject be shelved now and reviewed again when the
machine tool situation WBS less obscure.
(b) That in the meantime Canada prepare B. complete statement of
her forward requirements in engines and that these be added
to the recent British programme of some 12,000 planes and
30,000 engines which hed just been approved. -
The position of the Canadian Government has been reviewed in the
light of the foregoing. It is obvious that Mr. Knudsen feels that there
will be less strain placed on United States engine situation by their
furnishing us with our engine requirements of United States manufacture,
rather than by permitting us to enter the United States machine tool
market for certain of our machine tool requirements for engine production.
We have no objection to following this procedure, provided we can be
reasonably assured of purchasing our engine requirements in United States.
On the other hand, this Government has approved en appropriation
of fifty million dollars to cover the capital cost and working capital
290
- 3 -
involved in the construction of engine capacity in Canada. We feel that
we should not hold back in the matter of making a Canadian contribution to
engine production, although personally I am inclined to agree with Mr.
Knudsen's contention that our engine requirements can be furnished more
economically from United States production presently and in the future,
owing to the much larger U.S. aeroplane engine industry and the diversity
of engine types and sizes involved in Canadian aircraft.
No doubt you will be discussing our problem with Mr. Knudsen.
I will greatly appreciate your advice as to how we can best obtain our
aeroplane engines, now that we are completely cut off from British supply.
I intend to leave within the next few days for the United Kingdom
in order to better co-ordinate Canadian production with British requirements.
I look forward to a meeting with you on my return.
With kind personal regards,
Yours truly,
W.D.HOWE
Henry Morgenthau, Esq.,
Secretary to the Treasury,
Washington, D.C., U.S.A.
291
CONFIDENTIAL
FOR TOUR INFORMATION
November 30, 1940
To:
The Secretary
From:
Mr. Young
Re: Allocation of Extra Aircraft Capacity.
For some time the Liaison Committee has been receiving urgent
requests from foreign neutral countries friendly to the United
States for the purchase of aircraft and aircraft engines. These
requests have been principally from South America and China. When
the Defense Commission allocated aircraft capacity up through
April, 1942, it made no provision for the allocation of production
for foreign countries other than the British and the Dutch with
the exception of such foreign orders as were already on the books.
It should also be noted that there is considerable foreign business
for commercial aircreft as well as for military aircraft.
At the present time requests are pending from Argentina, Chile,
Brasil, Venezuela, Colombia, Uruguay, Mexico, China, Greece, Turkey,
Philippine Islands, Finland, Sweden, and Portugal for aircraft and
aircraft parts or accessories. A good deal of thought has been
given to the feasibility of arranging to keep a small amount of
production capacity available for foreign orders which might be
approved by the United States Administration.
The thought in mind was that & single type airplane of each
kind should be selected as & standard model and that any foreign
purchaser would have to accept this model or go without. For
instance, there could be 8 general purpose pursuit ship, a general
purpose light or medium bomber, and a standard primary and advanced
trainer, all of which would represent models which had been in pro-
duction and for which the necessary tools, Jigs, dies, and fixtures
are available, but models which would be shortly superseded by more
advenced types.
This plan would satisfy the State Department from the point of
view of aiding foreign policy. It would also tend to satisfy the
Regraded Uclassified
292
- 2 -
the War and Navy Departments because by the use of obsolescent
types the military value of the planes released would be lessened,
and it would satisfy the manufacturers by preserving foreign good
will already established. The same plan could be applied to pro-
duction of commercial ships.
An actual example of how this plan would work has already
developed. The Curties Wright Corporation has given notice that
100 additional P-40 planse, over and above orders already placed,
can be delivered in June, July, and August of 1941, and that probably
another 94 P-40's can be delivered in the fall of 1941. This extra
production has been made possible through the use of mass production
methods and 1a beneficial to the manufacturer in that it will tend
to absorb the tapering off of production as new models are brought
into production.
I wrote a letter to Assistant Secretary of State Berle on
November 15th concerning this situation as the Lisison Committee
had been hard pressed by the State Department to do something in
the way of finding aircraft for China, Greece, and South America.
Mr. Berle replied on November 22nd with the suggestion that he would
like to 800 the P-40's allocated as follows:
30 to Greece
50 to China
20 to Turkey or Greece
10 to Dutch Indies or China
40 to Latin America
Balance would go to the British.
I have talked in a general way with the Washington representa-
tives of Douglas, Lockheed, Boeing, Martin, North American, and Curties
Wright concerning the feasibility from B. production point of view of
the plan outlined above. All of these manufacturers agree that it is
practical and can be worked out without any particular interference
to the production program as established by the Defense Commission.
One difficulty would arise, however, if the manufacturer could
not get a firm commitment from the foreign purchaser in time to pur-
chase materials at the same time that the materials were purchased
for production of Army, Navy. and British orders. In such instances,
it might be possible for the United States Government to assume the
financial risk until such firm orders could be secured, or possibly
the Army or Havy might be persuaded to take over a certain number of
extra ships which could be released for sale from surplus stocks at
the original cost price.
Regraded Uclassified
293
- 3 -
The Curtiss Wright Corporation has been very anxious to have
the first 100 of the extra P-40's definitely allocated immediately
so that materials may be ordered and production continued without
interruption. With respect to the allocation of planes to those
countries which need them immediately, such 8.8 Greece, it has been
proposed that the British or the United States defer current deliv-
eries and substitute deliveries from these extra P-40's next summer.
In the case of Greece, the British Purchasing Commission is now
awaiting instructions from London with respect to this matter.
It is my understanding that the State Department has told the
Greek Minister that he could have some of the P-40 planes, and that
the State Department has also told the Chinese that probably some
of these P-40's could be made available to them. Insofar as I know,
nothing has been said by the State Department to the other countries
listed concerning this matter. I advised both the Greeks and the
Chinese that I did not know when these planes could be made avail-
able and gave the impression specifically that the whole deal was
not as certain as the State Department seemed to indicate.
Dy.
Regraded Uclassified
294
CONFIDENTIAL
FOR YOUR INFORMATION
November 30, 1940
To:
The Secretary
From:
Mr. Young
Re: Priorities
In accordance with your direction at the Staff Meeting,
I asked Don Nelson to give me, so that I could show it to
you, a copy of his recommendation to the President before it
is officially submitted covering proposed treatment of foreign
priorities.
Mr. Nelson said that he would be glad to do this, but
as a precautionary measure it might be wise to ask Mr. McReynolds
to keep a check on Mr. Nelson to see that his recommendation is
not submitted without our approval.
Incidentally, I was informed indirectly last night that
Don Nelson is looking for a man to "take over all foreign pur-
chasing activities", also that Nelson expects to assume active
foreign purchasing negotiations leaving the Treasury only as a
figure head or eliminate it entirely.
P.G.
Regraded Uclassified
TREASURY department
295
quick Secretary Morgenthau
INTER-OFFICE COMMUNICATION
DATE November 30, 1940
TO
FROM Mr. Cochran
confidential
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
L20,000
Purchased from commercial concerns
-
Open market sterling was quoted at 4.04, and there were no reported transactions.
The other currencies closed as follows:
Canadian dollar
13-1/8% discount
Swiss franc
.2321
Swedish krona
.2386
Reichsmark
.4005
Lira
.0505
Argentine peso (free)
.2355
Brazilian milreis (free)
.0505
Mexican peso
.2070
Cuban peso
8-5/8% discount
There were no gold transactions consummated by us today.
The Federal Reserve Bank of New York granted the Central Bank of El Salvador
a three-month loan of $25,000 yesterday, setting aside as collateral $28,436 in gold
from the Salvadorean bank's earmarked account. The total of such loans now out-
standing amounts to $872,000, secured by $975,511 in gold.
No new gold engagements were reported.
No gold or silver prices were received from Bombay today.
B.M.I.
27301
296
EG
GRAY
Berlin
Dated November 30, 1940
Rec'd 7:40 p.m.
Secretary of State,
Washington.
4882, November 30, 1 p.m.
The REichsbank has announced that it will no longer
purchase notes and coins of the formerly independent states
of Estonia, Latvia and Lithuania because of the impossi-
bility of disposing of them nor will it accept orders for
the cale of there currencies. Repatriated German nationals
from these countries who are still in possession of these
currencies are required to communicate with the Deutsche
Umsiedlungstreuhand Gessellschaft, an organization for the
protection of the financial interests of repatriated
Germans.
Inform Treasury and Commerce.
MORRIS
DDM
297
November 30, 1940
MEMORANDUM FOR THE SECRETARY:
Attached is a summary report of the projects
which have been worked on in the Division of Tax
Research during November, 1940.
RoyBlongh
Attachment
Regraded Uclassified
298
Monthly Report on Projects in the
Division of Tax Research
November, 1940
I. New projects
1. Tax-exempt securities
Suggested drafts of four radio addresses
on the subject of tax-exempt securities
were prepared.
(Mr. Ecker-Racz, Mr. Atlas and Mr. Gordon)
2. Inequities in the Tax System
Materials were prepared indicating certain
inequities now existing in the Federal tax
system, together with examples of the
effects of these inequities and their revenue
significance.
(Staff members)
3. Relief provisions of the excess profits tax
A study of how certain abnormalities in
income and invested capital which may cause
inequities should be treated under the relief
provisions of the excess profits tax is in
process.
(Mr. Campbell)
Persons listed as working on the different projects
do not include those who acted largely or exclusively
in a consulting or reviewing capacity. In general, the
person, if any, actively in charge of the project is
listed first.
299
- 2 -
4. Estate and gift taxes
Computations have been prepared show-
ing how estate and gift taxes can be
avoided by distributing property in
certain proportions by gift and by
transfer at death. (Mr. Ecker-Racz,
Mr. Mills, Mr. Zorach and Mr. Copeland)
5. Article for Treasury Bulletin
An article for possible publication
in the Treasury Bulletin analyzing
individual income tax returns accord-
ing to the states in which they are
filed and the states of residence
of the filers of the returns 18 in
process. (Miss Coyle)
II. Continuing projects
1. War and excess profits taxation
(a) A memorandum analyzing the problemsin-
volved in imposing an excess profits tax
Regraded Uclassified
300
- 3 -
on individual proprietorships and
partnerships and on non-business
income of individuals 1s in process.
(Mr. Farioletti and Mr. Mills)
(b) An analysis of special treatment
afforded financial, personal service
and public utility companies, the pro-
fessions and agriculture under the
World War and present excess profits
taxes of the United States, Great Britain,
and Canada, 1s in process.
(Mr. Mills)
(c) A report on the treatment of the issues
raised in the Agenda for the Excess Profits
Tax Committee under the War Revenue Acts
18 in final stages of completion.
(Mr. Ecker-Racz, Mr. Gordon, and Miss Wells)
(a) Other phases of the issues involved in war
and excess profits taxation, including
studies of amortization and inventory
problems, analysis of statistical information
relating to business profits and failures, and
consideration of methods of possible tax
301
4
avoidance under the Excess Profite Tax
Act of 1940, are continuing.
(Staff members)
2. Tax-exempt securities
An estimate of outstanding tax-exempt securities
as of June 30, 1940, 18 in process.
(Mr. Mannen)
3. Income Tax Study--W.P.A.
The work of the Philadelphia project has been
divided in the last five months between con-
tinuance of the study of income tax returns in
process since October 1938 and a special analysis
of statistics relevant to excess profits taxes.
The special study is now in process; the con-
tinuing study 18 in final stages of completion.
Additional text and table forms of the con-
tinuing study were reviewed. A study of invest-
ment practices as reflected in estate tax returns
18 also in process.
(Mr. Blough, Mr. Shere, and Mies Coyle)
4. Undistributed Profits Tax
A memorandum 16 in process analyzing in the light
of issues raised by the undistributed profits tax
Deareded
302
- 5 -
the statistics made available from income
tax returns and other sources.
(Mr. Atlas and Mr. Copeland)
5. Fluctuations of large incomes
An analysis of statistical data relating to
the fluctuations of large incomes over a period
of years is in process. In this connection,
the publication "Million Dollar Incomes" by
L. H. Parker will be reviewed.
(Miss Coyle)
6. Tax on value added
A memorandum 16 in preparation analyzing the
economic and administrative issues which would
be involved if a value added tax were imposed.
(Mr. Farioletti)
7. Foreign Taxes
(a) Memoranda on the latest changes in British,
Canadian and Australian income, excess profits,
and other taxes are in preparation.
(Mr. Atlas and Miss Hughes)
(b) In collaboration with the Division of Monetary
Research, a study of the Haitian fiscal system
is in process.
(Miss Wells)
Regraded Uclassified
303
- 6 -
8. Articles
(a) An article on problems of Federal tax
administration for the March 1940 issue
of the Annals of the American Academy of
Political and Social Science 1s in
preparation.
(Mr. Blough)
(b) Articles treating on trends and developments
in the field of taxation during 1940 for the
Britannica Book of the Year and the National
Year Book are in process.
(Mr. Atlas and Miss Wells)
9. Treatment of shared taxes in Bureau of the
Census Reports
In compliance with the request from the Bureau
of the Census, a memorandum containing suggestions
as to the treatment of shared taxes in Bureau of
the Census reports 18 in preparation.
(Mr. Mannen and Miss Wells)
10. Inventory of tax proposals
Compilations of proposals for raising additional
revenue and for improving the tax system have
been prepared and are pending review.
(Mr. Zorach and Mr. Copeland)
304
- 7 -
11. Income and estate taxation
Reports on the following subjects have not
been actively prosecuted during the month:
(1) Analysis of the proposal to allow corporations
with five or less shareholders to be treated
for tax purposes as partnershipe.
(Mr. Mills)
(2) Distribution of tax-exempt securities by
net income brackets with particular reference
to the holdings of such securities by persons
in high income brackets.
(Miss Coyle)
(3) Analysis of the problems of estate tax payment.
(Mr. Mills)
III. Routine Assignments
1. Review of publications
(a) The following publications were reviewed
during the month:
(1) The page proof of Preliminary Statistics
of Income for 1938, Part 2. (Mise Hughes)
(2) The corporation income, declared value
excess profits and defense tax return
for 1940 - Form 1120.
(Mr. Ecker-Racz and Miss Hughes)
305
- 8 -
(3) The article on Federal receipts during
the fiscal years 1933 to 1940 prepared
for the Annual Report of the Secretary
for the fiscal year 1941.
(Mr. Atlas and Miss Hughes)
(4) The galley proof of the Annual Report
of the Commissioner of Internal Revenue
for the fiscal year ended June 30, 1940.
(Mr. Zorach)
(5) The statistical release Statistics on
Alcohol for the fiscal year 1940.
(Mr. Campbell)
(6) Review of statistical releases on dis-
tilled spirits and fermented malt liquors
for the fiscal year 1940.
(Mr. Campbell)
(7) The portion of a study by the National
Bureau of Economic Research, Inc., dealing
with the Treasury Department Income Tax Study.
(Miss Coyle)
(b) The following publications are in process
of being reviewed
(1) The estate and gift tax sections of
306
- 9 -
Statistics of Income for 1938, Part I.
(Miss Coyle and Mr. Mills)
(2) The report "Concentration and Composition
of Individual Incomes 1918-1937" prepared
by the T.N.E.C.
(Miss Coyle)
(3) The report "Study of the Delaware State
Income Tax Yields" by Walter C. Wilson.
(Miss Coyle)
(4) A memorandum submitted by B. E. Wyatt of
the University of Michigan, entitled
"The Equitable Tax Provisions of the
Pension Trust Plan in Comparison with
the Group Annuity Plan." (Mr. Mills)
2. Statistics
(a) In connection with the supervision of the
statistical work of the Bureau of Internal
Revenue several proposals for statistical
compilations were examined, including
suggested tabulations of estate tax returns.
(Mr. Blough, Mr. Shere, and Miss Coyle)
(b) Administrative reports and statistics of the
Bureau of Internal Revenue are graphed and
commented upon for Mr. Sullivan's information.
(Mr. Campbell)
307
- 10 -
(c) Data relating U different taxes, digests
of tax items, and Congressional activity
of tax items of interest to the Division
are currently prepared.
(Staff members)
3. Correspondence
The Division handled correspondence pertaining
to tax matters.
(Staff members)
308
G-2/2657-220
RESTRICTED
M.I.D., W.D.
November 30, 1940.
No, 258
SITUATION REPORT
12:00 M.
This military situation report is issued by the Military
Intelligence Division, General Staff. In view of the occasional
inclusion of political information and of opinion it is classified
as Restricted.
I. Western Theater of War.
1. Air Force Operations.
Fairly intense air fighting occurred over southeastern
England during daylight on the 29th. Last night the German Air Force
concentrated on the London area; according to British estimates 300
bombers were employed, their attacks centering on rail and water com-
munications.
The R.A.F. last night attacked widespread objectives
in northern and western Germany in normal strength.
II. Greek Theater of War.
The Greek offensive has slowed down almost completely. No
advance is claimed by either side. The Italian Air Force continued
heavy attacks on Greek columns and concentrations.
III. Mediterranean and African Theaters of War.
No ground operations reported. Air activity along the
Mediterranean coast was stepped up noticeably but is still on a
limited scale.
RESTRICTED
309
BRITISH EMBASSY,
WASHINGTON, D.C.
PERSONAL
AND SECRET
30th November 1940.
Dear Mr. Secretary,
I enclose herein for
your personal and secret informa-
tion a copy of the latest report
received from London on the mili-
tary situation.
Believe me,
Dear Mr. Secretary,
Very sincerely yours,
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D.C.
310
TELEGRAM RECEIVED FROM LONDON
DATED NOVEMBER 28th,1940
1.
Reference to action south of
Sardinia s.m./27 Sunderland A/C reported
on return to base one enemy cruiser appear-
ed to be hit and one destroyer damaged.
2.
Enemy first eighted by A/C in
two groups, one to south-west of Cape Spar-
tivento 16 miles consisted of two battleships
five destroyers, second 8 3 W of Cape Spar-
tivento so miles consisted of 5 cruisers, 7
destroyers. Full report not yet received but
Renown who eventually opened fire extreme range
V.I unable to close range and later retired to
rejoin the convoy. She had sighted the battle-
ships and destroyers at 12:39, 20 miles distant,
"Manchester" and "southampton" having sighted
the cruisers and destroyers at 12:18 but 12 to
16 miles distent.
3.
Plymouth heavily air-raided night
of 27th-28th. Two oil tanks alight. Only few
casualties to naval and marine personnel. Fire
in oil tenks under control. Nov. 23rd morning.
Many E È a fell in the open country and damage
slight compared with weight of attack. One
energ aircraft one Hurricane shot down in air
battle over Malta on 26th. Coastal aircraft on
87th sank in visinity Terschelling German 207-
abent vessel about 6000 tons and one large tanker.
Hight of 26th-27th Lorient was well bombed by
coastal/
Regraded Uclassified
311
coastal aircraft in spite of adverse weather.
6.
Italian communique Nov. 28th admits
one Flume class hit and one destroyer severely
damaged. Claim of damage to our ships by air-
craft doubtful. Sunderland aircraft observed
attack and stated that they saw no damage.