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DIARY
Book 115
March 16 - March 20, 1938
-ABook Page
Austria
Butterworth reports on British Treasury's concern over
political developments - 3/16/38
American Embassy, Berlin, reports on laws signed
yesterday with respect to absorption of Austria 3/18/38
Vienna reports on absorption of Austrian National Bank
by Reichsbank - 3/18/38
CXV
23
437
442
-B- Banking Legislation
See also Monopolies
Treasury informs FDR Oliphant's suggestions for proposed
message have been transmitted to Justice Department;
draft includes recommendations of Interdepartmental
Committee on Banking on subject of bank holding
companies.
112
Conference regarding "bank holding company legislation";
present: HMJr, Taylor, Upham, Gaston, Foley, Diggs,
Ransom, Jones, and Crowley - 3/17/38
a) Revised draft of proposed message which Jesse
256
Jones will submit and which is satisfactory to
Federal Reserve Board, Reconstruction Finance
Corporation, and Comptroller of Currency,
provided FDR is made aware that last paragraph
will raise branch banking question - 3/16/38
Ransom sends HMJr copies of material prepared in
connection with discussion of bank holding companies 3/17/38
Recommendations transmitted to FDR by HMJr - 3/17/38
280
291
293
Belgium
See Housing: Cement
Budget
Haas memorandum: "Comparison of the Budget estimate of
the corporate net income for calendar year 1937 with
the corporate income for that period indicated by the
published reports of corporations" - 3/19/38
Business Conditions
See Capital Markets
Housing
Monopolies
480
-0-
Capital Markets
Douglas discusses with HMJr idea he has already
discussed with FDR - 3/16/38
Book
Page
CXV
40
a) Large reservoir of capital which is not going
into industry
b) Inadequacy of investment banking machinery and
psychology of that business: only $60- to $100
million of capital at present time
c) Douglas thinks business needs junior or equity
money not increase in debt: lending more money
to industry will not rectify matters
d) Douglas suggests that Government step in for a
limited period of time and, through regional
industrial finance banks, purchase securities
from underwriters and engage in open market
operations
Cement
See Housing
China
Butterworth reports on British Treasury's concern over
political developments - 3/16/38
Current United States trade with Japan and China 3/17/38
Foreign exchange situation - memorandum - 3/17/38
23
336
342
Comptroller General
See General Accounting Office
-DDebts, Foreign
Hungary:
Proposed Presidential message to Congress discussed by
Taylor, Bell, Bernstein, and Livesey; Feis assumes
responsibility for State Department; memorandum to
be presented to Treasury - 3/18/38
a) Draft of proposed message, approved by State
and Treasury, transmitted to FDR by HMJr 3/18/38
414
420
-FFlood Control
HMJr transmits to FDR memorandum from Bell and himself
in accordance with FDR's request - 3/17/38
a) Wallace memorandum to FDR
b) Bell
c) Douglas
France
See Stabilization
298
384,387
389
394
-GBook Page
General Accounting Office
Memorandum on disallowances - 3/17/38
CXV
351
Gold
See also Sweden
FDR asks for study as to effect on England, France, and
United States if United States refused to receive all
gold - 3/16/38
a) HMJr asks White and Lochhead to study - 3/18/38.
27
433
Government Bond Market
See also Great Britain
Selling in New York discussed by HMJr and Burgess 3/16/38
174,181,190,
193,247,254,
327,417
Great Britain
Kennedy tells HMJr British have begun to appreciate
"they've got an economic situation very much worse
than anyone has been willing to admit" - 3/16/38
183
a) Kennedy tells HMJr he is giving dinner for
heads of all the big banks; Butterworth will
be present
b) Selling in New York discussed by HMJr and
Burgess
174,181,190,
193,247,254,
327,417
-HHousing
Cement:
Blaisdell report prepared with the advice and counsel
of the subcommittee named by HMJr - 3/16/38
a) HMJr transmits copy of report to Robert H.
Jackson, Acting Attorney General - 3/17/38
b) Jackson considers plan an excellent one and
offers complete cooperation of Anti-Trust Division
and Justice Department - 3/17/38
c) Hull letter to HMJr concerning request for possible
reopening of trade agreement with Belgium to reduce
further duty on cement - 3/18/38
d) HMJr transmits to FDR report with his own approval 3/21/38
e) FDR approves recommendations - 3/21/38
f) Procurement Division memorandum: "Consolidated
contract cement"
FDR's memorandum from Warm Springs, Georgia, to HMJr
giving permission for conference with some of leading
48
103
104
105
109
110
111
122
cement people
a) Copy of letter dated 5/17/34 read into the record
in the cement case before Federal Trade Commission
125
- H - (Continued)
Book
Page
CXV
127
Housing (Continued)
Cement (Continued):
Cement specifications and proposals as issued by
Procurement Division
Treasury press release
157
Conference on housing costs; present: representatives
of Treasury, Procurement Division, Tariff,
Agriculture, Works Progress Administration,
Federal Reserve, and Public Roads - 3/16/38
a) Blaisdell presents report of subcommittee
(see page 233)
Conference; present: HMJr, Haas, and Blaisdell - 3/18/38.
a) Memorandum attached: "Beginnings of a program
for steel"
General Wood and L. R. Walker suggest to HMJr that he
consult McQueen (Pittsburgh) concerning cement 3/18/38
United States Housing Authority: HMJr congratulates Straus
on "first commitment" - 3/18/38
195
403
413
434
415
Hungary
See Debts, Foreign
JJapan
Current United States trade with Japan and China - 3/17/38..
336
-MMonopolies
See also Banking Legislation
Treasury informs FDR Oliphant's suggestions for proposed
message have been transmitted to Justice Department;
draft includes recommendations of Interdepartmental
Committee on Banking on subject of bank holding companies.
112
-RRailroads
FDR tells HMJr he wants Interstate Commerce Commission's
ideas on situation, which are then to be criticized by
Jesse Jones (lending) and Douglas (security); report
then to be sent to Congress for study - 3/16/38.
27
a) HMJr thinks problem serious enough so that new post
in the Cabinet (Minister of Transportation) should
be created
Conference suggestions as made by Henry Bruere - 3/17/38
Interstate Commerce Commission memorandum showing railway
tax accruals for year ending 12/31/36
345
348
- R - (Continued)
Book Page
Refugees
FDR suggests at Cabinet that quotas of Germany and
Austria be combined so that Austrian refugees may
come in under the combined quota - 3/18/38
CXV
330
a) Miss Perkins says not possible legally at
present time
b) HMJr discusses possibilities with Irving Lehman
c) FDR and HMJr discuss entire situation;
FDR suggests that HMJr confer with Summer Welles
Research and Statistics, Division of
Reorganization: Full report on tax division submitted
by Shoup - 3/17/38
353
Revenue Revision
Three memoranda transmitted to FDR: (1) a proposed
message on tax exemptions; (2) a brief discussion
of the basic principles of the undistributed profits
tax and the tax on capital gains as embodied in the
House bill; and (3) a brief commentary on the need
for a special undistributed profits tax on closely
held corporations - 3/19/38
455
-SSpain
Butterworth reports on British Treasury's concern over
political developments - 3/16/38
Stabilization
23
France:
Cochran reports to HMJr sentiment improving on basis
of belief that Daladier will head a National Union
Government before end of week - 3/16/38
10
Exchange market movements resume - 3/17/38
Cochran reports to HMJr on Blum's appearance in Chamber
310,312,315
financial and monetary policies) - 3/17/38
Cochran reports on: long talk with Bonnet; formal vote
318,322,326
(general in terms, giving little indication of
won by Blum Government - 3/18/38
Switzerland:
445,450
State Department asks Legation to report to Treasury
on monetary developments and movements of capital
in and out of the country - 3/16/38
Steel
22
See Housing for memorandum presented at conference
between HMJr, Haas, and Blaisdell: "Beginnings of a
program for steel" - 3/18/38
413
Sweden
HMJr reports to FDR sale of additional $2,500,000 worth
of gold, making total of $7,500,000 on deposit with
United States - 3/16/38
Review by S. Adler (Division of Research and Statistics)
of "How Sweden Overcame the Depression," by Arthur
Montgomery - 3/19/38
Switzerland
See Stabilization
251
419
-TBook Page
Taxation
See Revenue Revision
Transamerica
HMJr asks Upham and Folger to study annual statement,
out today - 3/16/38
CXV
38
-UUnemployment Relief
Works Progress Administration memorandum showing
preliminary results of study, indicating high rate
of turnover - 3/17/38
United States Housing Authority
HMJr congratulates Straus on "first commitment" 3/18/38
--W--
War Debts
See Debts, Foreign
Works Progress Administration
See Unemployment Relief
331
415
1
Wednesday
March 16, 1938
9:12 a.m.
Jacob
Viner:
Hello.
HMJr:
Hello, Jake.
V:
Hello, how are you?
HMJr:
I'm pretty well. Jake
V:
Yes.
HMJr:
As
understood
it, you gave me a choice of coming
thisI week
or next.
V:
Well yes, except that if it were at all possible
that I would like to make it next.
HMJr:
That's what I thought.
V:
Yes.
HMJr:
V:
And that's why I'm calling you up to say make it
next.
Make it next?
HMJr:
I mean, this French thing I don't think will break
in the next couple of days.
V:
Yes.
HMJr:
And it might be - as I understood it you said you
could come comfortably next Monday, isn't that
right?
V:
I can come Monday and Tuesday.
HMJr:
Well, I'd do that.
V:
Yes.
HMJr:
Now, what we did was this. We put a question up
to our friend over there, see?
V:
Yes.
HMJr:
This way - "Would you care to have us put the
following thing to you?" Do you see?
2
-2V:
Yes.
HMJr:
And then we put it to him.
V:
Yes.
HMJr:
That's - on the subject that we were talking
V:
Yes, I understand.
HMJr:
And he was most appreciative and said he'd keep
V:
Yes.
HMJr:
about.
it in his vest pocket and would not mention it
to any of his associates
It was most useful to have it, but he wasn't
quite sure that he wanted to use it at the
present time.
V:
Yes.
up
HMJr:
But that it/was very useful and then the next day
he called/Fournier in the Bank of France and said,
"Well, I've got direct assurances from the Secretary
of the Treasury that he is going to stand behind us
and it's most reassuring and most helpful. So
Fournier said, "What is it?" and Mr. Blum said, "I'm
sorry, I can't tell you, but I have a direct communication from Mr. Morgenthau.
V:
Uh huh.
HMJr:
So, what it did was it was - it put some backbone in
him
V:
Yes.
HMJr:
And now he can decide if and when he is going to do it.
V:
Uh huh.
HMJr:
You see?
V:
Yes.
HMJr:
And I think it was a rather nice way to do it, don't
you?
-3V:
Yes, I think so.
HMJr:
I mean, he can decide now - in other words he's
got to ask us to do this - which it leaves it
so that we're not trying to force anything on
him
V:
Yes.
HMJr:
and he can decide if and when he wants to. But he
knows that if he has to resort to that the United
States Government will stand behind him.
V:
Yes.
HMJr:
What?
V:
Yes. What I hope is that he won't use it simply to
HMJr:
Well, that I don't know, but it certainly has given
V:
He certainly does. Well, they need it, I don't care
HMJr:
Well, I mean they need it.
V:
Yes.
HMJr:
avoid the necessity of coming to an agreement with
the center people.
him moral, and God knows he needs it now.
about him.
But it worked out very nicely, the President was
delighted at the whole idea
V:
Yes.
HMJr:
And therefore, until he makes up his mind we sit
tight, so there's really no use of discommoding
V:
yourself at this time.
Tell me, this wasn't told to the other party?
HMJr:
It was not.
V:
Yes.
HMJr:
No, because this was put up purely as a question.
V:
Yes.
3
4
-4HMJr:
See?
V:
Yes.
HMJr:
No, it was not. And, in fact nobody knows it.
V:
Yes.
HMJr:
No. There's no reason to put it up to them until
V:
Yes.
HMJr:
V:
the time should come.
But - so, I thought I'd tell you that.
All right.
HMJr:
And - on the price thing
V:
Yes.
HMJr:
We're concentrating on cement.
HMJr:
.
V:
That's right, yes.
They're not ready yet on the steel - or even
structural steel or reenforcing bars - they were
going to do that. So the whole thing is being
concentrated on cement. So, we'll see - we're
having a meeting on that this afternoon.
V:
Yes.
HMJr:
That seems to be the easiest thing to work with.
Any ques
V:
HMJr:
That's under Federal Trade Commission investigation
now, of course.
Well, they're all sitting in - the Tariff are and
everybody S...
V:
Yes.
HMJr:
...in agreement. I mean, there's no disagreement.
V:
Yes.
HMJr:
And it's particularly good because -- the Government
itself buys fourteen million barrels.
5
-5V:
HMJr:
Yes.
And the Federal Aid to State Highways - although
we haven't now got the control - they buy another
fourteen million.
V:
HMJr:
Yes.
And
me.
-
there, the White House is calling. Excuse
I'll see you Monday.
V:
All right, I'll see you Monday.
HMJr:
Goodbye.
V:
Goodbye.
THE EUROPEAN CRISIS PRECIPITATED BY GERMANY'S ABSORPTION OF
6
AUSTRIA MAY HAVE A DIRECT EFFECT UPON THIS COUNTRY'S MONETARY AND CREDIT
POLICIES.
SECRETARY MORGENTHAU ALREADY MARASSED BY INTERNAL FINANCIAL
PROBLEMS, IS NOW CONFRONED WITH THREE PRESSING PROBLEMS RESULTING
FROM EUROPEAN DEVELOPMENTS OF THE LAST FIVE DAYS. THESE ARE:
1. THREATENED EXCHANGE CONTROL IN FRANCE--AN ADHERENT TO THE
TRI-PARTITE MONETARY UNDERSTANDING WITH GREAT BRITAIN AND THE U.S.
2. THE WHOLESALE FLIGHT OF EUROPEAN CAPITAL TO THE U.S.
3. THE POSSIBLE EFFECT OF AUSTRIA'S ANNEXATION UPON THAT COUNTRY'S
INDEBTEDNESS TO THE U.S.
THE FRENCH SITUATION HAS BEEN THE SUBJECT OF SEVERAL CONFERENCES
DURING THE LAST 48-HOURS BETWEEN MORGENTHAU AND REPRESENTATIVES OF
THE PARIS GOVERNMENT. IT IS UNDERSTOOD THAT TREASURY OFFICIALS HOPE
THAT THE BLUM GOVERNMENT WILL AVOID STEPS THAT MAY UPSET THE TRIPARTITE MONETARY ACCORD.
3/16--R942A
7
LONDON.--PRIME MINISER NEVILLE CHAMBERLAIN IS CONSULTING THE BRITISH
DOMINIONS PREPARATORY TO MAKING A STATEMENT NEXT WEEK OF GREAT BRITAIN'S
FOREIGN POLICY, IT IS REPORTED.
IT IS SAID THAT THE STATEMENT WILL MAKE CLEAR TO THE COUNTRY AND
THE WORLD, BRITAIN'S POLICY TOWARD OTHER NATIONS AND SOME PARLIAMENTARY
QUARTERS EXPRESS BELIEF THAT IT WILL SPECIFY:
1. THAT BRITAIN CAN NOT IDLY WATCH WHILE OTHER NATIONS ENGAGE IN
REPEATED ACTS OF UNPROVOKED AGGRESSION.
2. UNDER WHAT CIRCUMSTANCES BRITAIN WOULD FEEL IT NECESSARY TO
INTERVENE IN EUROPEAN AFFAIRS.
3. UNDER WHAT CIRCUMSTANCES BRITAIN MIGMT AID A NATION WHICH WAS
THE VICTIM OF AN ATTACK.
THERE IS ACTIVE DISCUSSION IN PARLIAMENTARY QUARTERS OF THE ADVISABILITY OF CREATING A UNITED FRONT ON FOREIGN POLICY.
THE INTERNATIONAL SITUATION WAS THE MAIN TOPIC AT THE REGULAR
WEEKLY CABINET MEETING TODAY (6:00 A.M. EST).
3/16--R907A
m Live bleed
2.60M 9.37
FEDERAL RESERVE BANK
OF NEW YORK
FICE CORRESPONDENCE
CONFIDENTIAL FILES
L. W. Knoke
DATEMARCH 16, 1988.
SUBJECT TELEPHONE CONVERSATION
WITH BANK OF ENGLAND
I called Mr. Bolton at 10:15 today. There was no real inprovement in the situation, he said. The only change in evidence
was that interest in Austria had faded and the situation in Spain
had taken the place of that in Austria. This no-intervention business in Spain was becoming a farce and the opinion was growing that
Mussolini and Hitler were trying with all their might to liquidate
the Spanish Republican Government. There had been rumors all day
that the French Army Council was in session and was contemplating
some measure of assistance to the Spanish Republican Government.
But, in spite of that, things on the whole were a little calmer in
Paris and people "in the know" were convinced that Blum would resign
very shortly and that France would have a national government in
power before the end of the week. If and when that happened, and
provided a new government would be strong enough to assert itself,
the atmosphere in Europe in general would probably change for the
better. Meanwhile, he thought we must expect disorderly and fluetuating markets. The London stock exchange today had been weak, with
prices dropping in every department due in part to continental selling.
The British 3 1/2% War Loan was down to 99 5/8 today. (About a week
ago it had stood close to 104.) The anxiety had spread to Amsterdam
this morning and the guilder had been heavily offered down to below
59.20 in our terms. It was his impression that the Dutch were getting
ready to come in and support the rate but had not as yet made up their
minds as to the rate at which they should act. It was his guess that
9
1.2.60M 1.37
FEDERAL RESERVE BANK
OF NEW YORK
DATE March 16, 1938.
FICE CORRESPONDENCE
SUBJECT: TELEPHONE CONVERSATION
CONFIDENTIAL FILES
WITH BANK OF ENGLAND
L. W. Knoke
-2they would not let the guilder slip below 55 cents. In Switzerland,
things were fairly quiet. He had not heard from Budapest or Prague
and concluded that there was no new excitement in those two places
because, otherwise, they would have called him on the telephone.
He had sold a few dollars this afternoon, so far, about a million.
I referred to our cable of last night, renewing our gold
order at $84.77, and explained why we wanted this limit to include
cost of brokerage, if any. Bolton seemed grateful for the prompt
attention we had given his request of yesterday. Discussing capital movements, he expressed the opinion that, barring another change
in conditions in Europe, we must figure on the reversal of the recent
capital outflow and expect a renewed inflow instead. That, of course,
might not be the case if France should manage to form a strong government.
There was nothing new as regards Russian gold, he said, in
addition to the three shipments previously mentioned to me. The last
one of these (21,000,000), the Russians were now selling piecemeal
in London, always giving the Bank a crack at it.
LWK:KMC
10
Wednesday
March 16, 1938
11:48 a.m.
HMJr:
All right. Tell the boys to come in.
HMJr:
Hello.
T.O.:
I have Mr. Cochran.
HMJr:
All right.
T.O.:
Go ahead.
Cochran:
Hello.
HMJr:
Hello, Cochran.
H.M.
HMJr:
Hello, Mr. Secretary. Yes.
Well, what's new today? Don't tell me that you've
sent such and such a cable, tell me what's new.
(Laughs) All right.
Because a cable isn't news, you might as well send
C:
Yes.
Well, they're still pretty slow?
HMJr:
Yes.
Well - anything happen?
C:
What's that?
HMJr:
Anything happening?
C:
HMJr:
C:
C:
it by letter.
Ah - nothing very exciting. The Swiss sold some
francs this morning but there has been some profit
taking from London since.
HMJr:
C:
HMJr:
C:
HMJr:
C:
Yes.
So on the balance five minutes ago the control had
only lost twenty-eight thousand pounds for the day.
Well, that's not bad.
No, no, not at all bad.
Yes.
The sentiment has improved a little bit on the belief
that Daladier will head a National Union Government
before the - by the end of the week.
11
-2HMJr:
C:
HMJr:
C:
Now, is Daladier - what's his policy on money?
He's sound. Well, I mean, he's conservative, he
will be against exchange control.
Against it?
Yes, he will be against it. On the other hand,
since he has been Minister of National Defense
he would be strong on conserving the gold resources
of the bank.
HMJr:
Well, hasn't he been Minister of War under Chautemps?
C:
Yes, he's the one.
HMJr:
C:
HMJr:
Well, isn't he a pretty strong fellow?
Very strong, he's the strongest man in the country
in my estimation.
Yes. How old a man is he?
HMJr:
He's about fifty-two probably.
Yes.
Just a young fellow?
C:
Yes.
HMJr:
Yes.
C:
C:
HMJr:
C:
And if he can head a National Government
they think it's as good a chance as they would have.
Yes. Now listen
-
You see, the Extreme Left Communists dislike
him very much.
HMJr:
C:
HMJr:
C:
HMJr:
Uh huh.
So there might be some trouble but I think he could
handle it.
What do you think about - if you can talk about it -
about the Spanish situation?
There's been a lot of uneasiness here. That's concerning them more now than Czechoslovakia or Auatria.
Uh huh.
12
-3C:
There was a request for arbitration, you see?
HMJr:
Yes.
C:
That came from Barcelona.
HMJr:
Yes.
C:
But the Ambassador of the Country across the
HMJr:
Yes.
C:
HMJr:
Channel
was consulted and he said, "Don't do anything
until you hear from us."
I see.
HMJr:
That's the latest word we have this afternoon.
Uh huh. Well
C:
And tomorrow things won't be any too good here.
C:
The market will continue a little nervous, you see?
HMJr:
C:
Yes.
And there'11 be a statement gotten out at noon, you
know, the usual one.
HMJr:
Yes.
C:
which will show one billion even
HMJr:
Yes.
C:
taken by the powers.
HMJr:
Right.
C:
You see.
HMJr:
Uh huh.
C:
So that doesn't help a lot.
The Guaranty has financed six hundred thousand
dollars of gold from Belgium
HMJr:
C:
Yes.
...to be shipped on the PENN LAND Saturday.
13
-4HMJr:
Yes.
C:
And
they
may bring this up to one billion dollars
by that
date.
HMJr:
Uh huh.
C:
There's
a cabinet meeting going on at five o'clock
this evening.
HMJr:
Yes.
C:
Then the full Council of Ministers meets in the
morning.
HMJr:
Yes.
C:
And Parliament convenes at three-thirty, when
Blum
is supposed to go before them with his
statement.
HMJr:
I see. What statement is that?
C:
Well, his Ministerial policy.
HMJr:
Oh, I see.
C:
I mean, there's a fair possibility that he might
not will.
go before them, but most people think that
he
HMJr:
Go before whom?
C:
Before Parliament.
HMJr:
Oh, before Parliament?
C:
Yes. He appears before Parliament tomorrow after-
noon at three-thirty.
HMJr:
Tomorrow?
C:
Yes.
HMJr:
Uh huh.
C:
And so there's a meeting of his cabinet at five
o'clock this evening
HMJr:
I see.
14
-5C:
Then a full Council of Ministers..
HMJr:
Yes.
C:
at which he is to be present
-
tomorrow
morning.
HMJr:
C:
I see.
Then they go before Parliament at three-thirty
tomorrow afternoon to state their policy.
HMJr:
I see.
C:
But the belief just now is that he might get a
HMJr:
Yes.
C:
vote of confidence
but just on a general statement but even then
he would get out by the end of the week making way
for Daladier.
HMJr:
I see.
C:
Herriot is the only other man mentioned.
HMJr:
Is this a good time to call you?
C:
This is very good, because I have the market news
at this time you see.
HMJr:
C:
HMJr:
Yes.
And I don't leave the office until half-past six.
But this is usually a good time.
Now, that - those numbers I supplied you with.
C:
Yes.
HMJr:
Those are only to be used on telephone conversations.
C:
All right. I didn't know and I sent that one message
HMJr:
That's all right.
C:
HMJr:
But I'll use them just on the telephone.
No, we've got a ruse here and that's what they call
"number rackets", you know?
15
-6C:
HMJr:
Yes. (Laughs)
You know what a number racket is?
HMJr:
Yes, very well.
Well, we only play it on the telephone.
C:
Good. All right, I'11 try to pick it up then
HMJr:
All right. All right.
C:
Fine.
HMJr:
Goodbye.
C:
Goodbye. Oh, Mr. Secretary.
HMJr:
Yes.
C:
Thanks a lot for that cablegram; that helps a lot.
HMJr:
Well, I - that went directly to your chief.
C:
Yes.
HMJr:
And I thought that in view of a certain incident
C:
and cover my side of it.
that happened a couple of months ago that this
might be helpful.
C:
I think I need my stock raised a little bit.
HMJr:
What's that?
C:
HMJr:
I think my stock needed a little raising.
Ah - I don't think it hurt any.
C:
No, no.
HMJr:
I think it gave your commodity index a little boost.
C:
HMJr:
C:
(Laughs) All right. All right. Just so there's
no crash later.
All right.
Good. Well, thanks a lot. I'll send a message
yet this evening.
16
-7-
C:
All right.
All right.
HMJr:
Goodbye.
C:
Goodbye.
HMJr:
REB
GRAY
17
m
Paris
Dated March 16, 1938
REC'D 2:44 p. m.
Secretary of State,
Washington.
415, March 16, 5 p. m.
FROM COCHRAN.
Swiss were early sellers of francs at 163 but
control had at 10:30 met this demand with small amount
of sterling and had brought rate to 162.50. Since then
the market has been quite nervous and jumpy. For a
while the control gained SOME sterling as a result
of profit taking from London and brought a little here
through Comptoir. As usual, with End of WEEK approach-
ing and crisis not yet solved there is speculation as
to some.important MOVE such as increasing of super-
vision of exchange dealings within such limits as may
be possible without législation, it being clearly
understood that full Exchange control requires
parliamentary action. Also gossip that Government is
considering revolution of Bank of France gold stocks
from 43 to 27 or 28 milligroms to the franc. While part
of
REB
2-#415, From Paris,Mar.16,5p.m.
of market and part of press SEEM under the impression
that revaluation can be made at will by the Government
and Bank of France, my idea of the situation, which I
have not checked with French officials, is as follows:
(ETD SECTION one)
WILSON
SES
KLP
19
REB
GRAY
Paris
Dated March 16, 1938
Rec'd 3:11 p. m.
Secretary of State,
Washington.
415, March 16, 5 p. m. (SECTION TWO)
Monetary law of October 1, 1936, provided that the
weight of the franc may not be Either less than 43
millegrams nor more than 49 millegrams and that the
new gold content of the franc would be fixed later on
by a decree taken in Council of Ministers. Law of
June 30, 1937, modified above provision to provide that
the new gold content of the franc would be fixed later
by a decree issued by Council of Ministers. DECREE
of July 22, 1937, issued under full powers granted to
the Chautemps Government on June 30, 1937, approved
convention between Government and Bank of France dated
July 21, 1937, under which it was agreed that the bank
would proceed to revalue its gold reserves upon the
basis of 43 millegrams. The full powers under which
such a decree could be issued expired on August 31,
1937. Therefore, it SEEMS any further revalorization
of
20
REB
2-#415, From Paris, March 16,5pm
of the gold reserves requires parliamentary authority.
When and if de jure stabilization should be decreed
then entire profits of devaluations would become
available for amortization of public debt only.
WILSON
SES
KLP
21
PARAPHRASE OF SECTION THREE, TELEGRAM NO. 415 OF
MARCH 16, 1938, 5 p.m., from Paris.
Guaranty has financed shipment of $600,000 of gold
from Belgium to New York for PENNLAND sailing Saturday and
may bring this figure to $1,000,000. Guaranty shipped
57 bars yesterday on QUEEN MARY.
Cabinet meeting this evening and Council of Ministers
tomorrow morning to protest against ministerial declaration
to be made before Chamber tomorrow afternoon at 3:30. Even
if Blum should get by Parliament on first appearance market
does not expect his Government to last.
I have been told by my official contact that conferences yesterday and today of financial officials have been
for the purpose of estimating what funds the government
will need. He said that revaluation of gold stocks was
not officially considered 80 far as he knew. By 4:40 this
afternoon the control had regained all but 28,000 pounds
of the sterling it lost this morning. Tomorrow's statement of the Bank of France will show that the Treasury
withdrew 1,000,000,000 francs. In the opinion of bankers,
Daladier will be the head of the next government, a
national union government.
END MESSAGE.
WILSON.
EA: LWW
22
REB
TELEGRAM SENT
GRAY
March 16, 1938
5 p. m.
AMLEGATION
BERN (SWITZERLAND)
8
Department's 3. February 4, 11 a. m.
Treasury would WELCOME telegraphic reports on Swiss
monetary developments and sentiment, , particularly information and comment on movements of capital in and
out of the country. You need not touch on B.I.S.
matters which are covered by Cochron.
Treasury is arranging to pay costs through Disbursing Agent at Paris.
HULL
(HF)
EA:FL:DJW EU I3A
23
REB
M
PLAIN
London
Dated March 16, 1938
REC'D 5:40 p. m.
Secretary of State,
Washington.
RUSH
222, March 16, 8 P. m.
FOR TREASURY FROM butterforth.
One. I had 9 word with Valey this morning who
did not attempt to conceal his concern OVER recent
political developments and throughout our talk he kept
referring in pessimistic terms to the course of EVENTS
in Spain, Austria and China. The British Treasury is
not given to this type of talk and I report it for this
reason and because today's market movements reflected a
similar attitude of mind on the part of the city.
Two. The period of political markets referred to
in the final paragraph of my 213, March 14, 8 p.m., went
on today with a vengeance. Contrary to yesterday (paragraph 3 my 215, March 15, 2 p.m.) selling today was by
no means mainly from the continent although continental
selling was heavy. Var loan at one time touched 99 3/8
and it closed at 99 5/8 a fall of 3/16 since Friday.
Likewise
24
REB
2-#222, From London, Mar. 16, 8p.m.
Likewise such classically stable stocks as Imperial
tobacco lost as much as 10 shillings. The EXTENT of
declines were caused by what can be fairly described
as war scare selling on a basically weak market. The
news from Spain following so closely on the Austrian
coup has suddenly made the city take stock anew of the
international political situation and of its Economic
and financial implications.
The city SEES the situation roughly as follows:
at best, an international arcament race -- a British
arrisment program with no perceptible limit impinging
increasingly on the margin of profit and requiring
oppressive taxation and OVER borrowing in a period of
declining Economic activity; at worst, the spectre
of war with Great Britain for the first time in its
history potentially menaced in three areas of the world
by totalitarian states with whom the initiative lies
and who are prepared to Employ force as an instrument
of policy, viz. Austria, Spain and China. The demand
for dollars was Exceedingly heavy and the rate moved
to 4.96-1/2. If today's atmosphere holds WE can EXPECT
a large movement of flight capital. Cons equently the
demand for gold was tremendous and the British authorities
gave
25
REB
3-#222, From London, Mar. 16,8p.m.
(9-12?)
gave freely while moving the price up from 139/9-1/2
to 140 shillings. Gold is also going from Belgium to
NEW York on the PENFLAND sailing Sunday. The franc
was slightly bid most of the day and moved from a
high of 164 5/8 to 160 on recurring rumors that arrangements had been virtually completed for the formation of
a broadly based French Government probably with Daladier
as premier.
Three. As regards Austria, Waley mentioned that
no decision had yet been sent to the British Treasury
by the Foreign Office about the legal recognition of
the inclusion of Austria in the German Reich but he
anticipated that sooner or later it would Entail many
adjustments, including the Anglo-German payments agree-
ment. HE said that their information was that the
German military preparations for taking OVER Austria
had been more carefully worked out in advance than the
Economic and financial arrangements and therefore the
German authorities themselves were probably not in a
position to discuss such adjustments. Neverthrless he
foresaw complications, particularly as regards the
Austrian league loans which, he pointed out, had really
been made in order to stave off the Anschluss.
Four.
26
REB
4-#222, From London,Mar. 16, 8p.m.
Four. Waley termed "incredible" the constitution
of the present French Government under the given circumstances; Blum had himself referred to it as a shadow
-- 2 description which the British Ambassador in Paris
said no one in the world could deny. Waley added that
he hoped that it would be speedily replaced by a more
broadly-based government and the chances for one SEEMED
good. Valsy also referred to the recent rapid depreciation of the franc about which AE was somewhat disturbed
from a long-range point of view. HE said that in his
opinion at the present level the franc was probably
over-valued and in regarding it as such he did not think
he was motivated by "the selfish point of view" of a
forsigner. HE went on to say he feared that if the
frare were further depreciated, a rise in costs would
inevitably occur in France which in turn would create
further internal controversies and difficulties and
also have an adverse Effect on such countries as Belgium.
KENNEDY
NPL
27
March 16, 1938
9:20 am
The following is record of conversation be-
tween the President and HM,Jr:
President: What would be the effect of our
declining to receive all gold? I wish you would make
a study of it for me.
HM,Jr: I will make a study of it for you, but
my first blush is that it does not sound very good to me.
President: But I do want to know what would
happen.
It may not necessarily affect us much.
HM,Jr: I think it would upset everything terribly in this country. Let us make a study of it anyway. The gold would go to England. All my reactions
are against it.
President: I want to see what would happen to
England, France and ourselves.
I think Germany will take Czechoslovakia in its
stride. I have said 80 three months ago and I also said
at Cabinet a week ago that it is perfectly clear that
Hitler has made a deal with Mussolini by which Hitler
gets a complete free hand in Central Europe and Mussolini
in the Mediterranean. I am sending word over to Freud,
who is being held in Vienna and is probably under arrest.
He is a friend of Bullitt's and I understand that he is
ill and may be under arrest.
HM,Jr: I liked your railroad meeting.
President: I don't think we got very far. I
want to get the ideas of I.C.C. That body knows the
railroad situation. I want to get a recommendation
from them. I also want to get it criticized by Jesse
Jones, on the lending part, by Douglas, on the security
part, and then send it to Congress and ask them to study
it and say this is what these people recommend and it is
up to them to do something and let them have the responsibility until next January.
28
-2-
HM,Jr; I think that problem is big enough and
important enough that you create a new post in the Cabinet
of Minister of Transportation and get a very capable fellow and not wait until next January.
President: You would not get it through. How
can he operate over I.C.C.?
HM,Jr: The I.C.C. made that suggestion at the
meeting yesterday. I was just dumbfounded at the vastness of that problem. To think that Congress sits back
and keeps talking about the surplus tax and they don't
realize the vastness of this railroad situation.
c0o-o0o
28
March 16, 1938.
9:30 A. M.
GROUP MEETING
Present:
Mr. Magill
Mr. Oliphant
Mr. Gaston
Mr. Haas
Mr. Taylor
Mr. Lochhead
Mr. Upham
Mr. Bell
Mr. McReynolds
Mrs. Klotz
H.M.Jr:
I think we'd better take up this matter tomorrow.
Only two people who knew where I was
I was home last night with a very high administra-
tion official, and if the people here in the
Treasury sat around. and belly-ached and
Magill:
criticized, and had their jaw hanging down to
here (indicating chest) the way that fellow
did, and with no suggestions, I'd be so ashamed
of my Department that I couldn't keep my head up.
I had to listen an hour and a half - "Nobody's
got anything" - and finally I got so mad - I got
mad but I don't think I showed it, did I? Mrs.
Morgenthau said I didn't.
No, you didn't show it.
H.M.Jr:
I said that as long as there is all this criticism
I will say this much, that the only reform that's
been accomplished by any Department in this
administration the last four years has been the
Treasury. He sat there an hour and a half - I'd
have liked to get what we could do, and didn't
get a suggestion. That hour and a half did more
to me than all the day in the Treasury. I heard
that everything was wrong - but no suggestion.
Magill:
That was absolute zero in social relaxation.
H.M.Jr:
I haven't been - I suppose those things are going
on, but if that is the way the people close to the
President feel, God help the President - that is
all I can say.
-2-
Magill:
I swear, working all day long the way I work I came back - Mrs. Klotz said yesterday she had
never seen me so busy - the President wrestling
with this thing, wrestling with the Public Utility
thing, with taking care of the able-bodied people
who want work, taking them on - and taking them
on. We are doing everything we can - fixing up
Jesse Jones - it's terrible - I mean, to think
that people like that would just sit around and
talk the way that he did, and they had not wasn't a single - no suggestion was there.
To spend a little money - that was sort of the
H.M.Jr:
Yes.
Magill:
Couple billion or so.
30
inference.
McReynolds: And we don't know where you were? (Laughter)
Magill:
Where were we, Mac?
McReynolds: I say that was a - (inaudible)
Magill:
I'll tell you you're wrong before you say it.
H.M.Jr:
You think you know?
McReynolds: I was just guessing, from his spending money.
H.M.Jr:
Well, any way - I felt like saying, "Well, if I
felt the way you do I'd resign - go home," but
I didn't.
You (Magill) better go on the Hill.
Magill:
Yes.
H.M.Jr:
Anything you got?
Magill:
Well, I've got a letter here perhaps I should talk
to you about. Mr. Gaston framed it, after discussion. The President has a long letter from
Congressman McFarlane, and he sent it over here
for us to answer, on the tax bill, but the
President's views are which I presume Congressman
McFarlane wants to put in the record.
-3-
31
H.M.Jr:
What do you want me to do about it?
Magill:
I expect I'd better speak to you about it. Herbert
H.M.Jr:
wrote it out yesterday.
You two agree? I've got to rely on you fellows.
Have you initialed it?
(Mr. Magill initials the letter.)
My morale is all right if I don't talk to some
of these so-called "New Dealers." God help keep me away from the New Dealers - that's all
I can say. (Laughter)
Anything else?
Magill:
H.M.Jr:
I talked to Mr. Doughton - he's back now - very
much excited about all the publicity.
Well, you fellows give me advice and get all that follow the outlook. I thought tomorrow afternoon I want to keep this thing moving, and I want you
fellows to get together in Mr. Taylor's office
and - that is Upham, McReynolds, Bell, Taylor,
Haas, and you (Oliphant) on this Fahey thing
tomorrow sometime - between now and tomorrow, and
I will meet with you fellows at three tomorrow but before that - (notes on calendar) "Home
Owners' Loan" - and for God's sake loosen up with
each other - don't send me special memoranda that
nobody else has seen.
Oliphant:
Well
H.M.Jr:
Did everybody else see your memo?
Oliphant:
That was a chart which Ed (Foley) made yesterday
afternoon - on yellow paper, did you (Upham) see
it?
H.M.Jr:
Loosen up a little bit between now and then.
Come in tomorrow afternoon at three and at least
say you are together or not together, but let each
Oliphant:
fellow see what the other fellow's got.
I think it's been discussed so much during the
last two years if there is anything everybody's
mutually informed on it's that.
-4H.M.Jr:
Gaston:
At least do it tomorrow afternoon and by that
time we'll be ready to see Fahey tomorrow.
Didn't you have Banks set tomorrow at three?
Upham:
Eleven.
H.M.Jr:
Banks at eleven; railroads, twelve - oh gee!
(To Mrs. Klotz) On the architects - better postpone that because the meeting lasted two hours
yesterday - (inaudible) - and ask Mrs. Morgenthau
personally -
32
We've got Jesse Jones at 11:00 - banks - banks
at 11:00; railroads at 12:00;-Home Owners' Loan
at 3:00.
(Over telephone:) Chief Wilson - ten-twenty-five.
Klotz:
What about the Cabinet?
H.M.Jr:
Prices at 3:00 this afternoon.
I'd better go.
Magill:
H.M.Jr:
Oliphant:
H.M.Jr:
All
right. You're not in - you're just on
taxes.
I
have this --- (Inaudible) -(Hands Secretary memo.)
If it's all right, it's all right with me.
(Reading) "I am proceeding on the assumption that
these special instructions do not apply to new tax
cases for subsequent years involving the same
individuals covered by the original investigation."
You mean if something turned up since we - what
would be subsequent? I don't know what that is.
Oliphant: (Inaudible)
H.M.Jr:
Let me know what the "subsequent years" mean.
Subsequent to that? All right, put your (Magill's)
initials on it. See, I don't know what the words,
"subsequent years" mean. Get me, Herman?
Oliphant: Yes.
(Secretary and Mrs. Klotz converse - inaudible to
reporter.)
33
- -5
H.M.Jr:
(To Magill) 0. K., and don't hesitate to phone me
if there is something important.
Magill:
There may be today - there wasn't yesterday.
H.M.Jr:
They haven't go to deciding anything.
Let me ask you a question outside here.
Magill:
Excuse me.
H.M.Jr:
H.M.Jr:
Excuse me. I just want to satisfy myself.
(Secretary and Mr. Magill leave the room.)
(Returning) Herbert?
Gaston:
No, I have nothing.
H.M.Jr:
George?
Haas:
H.M.Jr:
Haas:
I have nothing. (Hands Secretary notebook)
I'm covered with cement.
You are covered with cement? You know, that
stuff's hard to scrape off.
I know. We'll have a report for you - the
Blaisdell Committee.
H.M.Jr:
Take it (the notebook) away George - my twentyfive companies
Haas:
We ran into fourteen companies that are not
included in the Federal Trade - cement companies.
H.M.Jr:
That were not?
Haas:
Yes. I am trying to find out whether they just
didn't have money to pay dues or whether they
didn't amount to anything. - Quite a few
interesting things we'll bring up at three
o'clock.
H.M.Jr:
Wayne?
Taylor:
During this meeting of Jesse's this morning on
bank business at eleven, we are going,-I think
the way that is going to work out is that we will
deliver a collection of views rather than what I
might describe as a unanimous report.
34
-6H.M.Jr:
Incidentally, Jesse had a few minutes to talk
to me on that thing, and he has written a report
in which he is for the death sentence.
Taylor:
Oh, yes, but I don't know whether he's going to
be able to deliver that as a uninimous report.
H.M.Jr:
All right. He has a letter - you are a little
confused - he has a letter in from Crowley in
which Crowley is willing to leave that to the
Committee.
Taylor:
To the Congress.
H.M.Jr:
To the Congress - that's right.
What else, Wayne?
Taylor:
H.M.Jr:
That's all. I don't think I'll be back at
eleven-forty-five.
What's at eleven-forty-five?
For your own information, Welles has asked me,
when anything is important on that French thing to
let him know, which I will do. He just called me
up to read a paragraph on Wilson, on the French
situation, which doesn't check with what we've
got from France.
All right. Now we all understand each other on
Home Owners' Loan? You fellows are going to get
together by three o'clock tomorrow - at least so
every fellow will know where everybody else stands.
Oliphant:
Do you want it from the group in the Treasury
that is working with you on the bank holding
companies - our opinion on the bank ...?
Taylor:
That will be after this collection this morning -
why, then we'll be able to deliver you something
tonight.
Oliphant:
Before your meeting.
H.M.Jr:
Then why not let's say - because these dates are
so crowded, why not say instead of having the
nine-thirty, let's devote the nine-thirty to
-7-
35
bank holding companies, and if that runs over we
can talk on the Home Owners' Loan. All right,
Wayne?
Taylor:
(Nods "Yes.")
Bell:
Under this recent bill signed by the President
on commodity credit, you are to determine the
impairment of capital, if any. I'd like to get
started on that right after April first so that I
can send an estimate to Congress in the next
efficiency bill.
H.M.Jr:
Will you do so?
Bell:
I assume you'd like to have someone from Farm
Credit on that committee.
H.M.Jr:
Yes.
Bell:
And Agriculture?
H.M.Jr:
Yes.
Bell:
And that ought to be sufficient.
H.M.Jr:
And R. F. C.
Bell:
You want R. F. C.?
H.M.Jr:
I think so.
Bell:
Well, that's all right - a party in interest.
H.M.Jr:
Make them feel happy.
What else, Dan?
Except
Bell:
Nothing./ I have an interesting side-light on
the reorganization report if you would care to
hear it.
H.M.Jr:
I'd love it.
Bell:
This is a good one. Apparently someone - probably
Byrd - asked for a report of the savings the
Comptroller General has effected on disallowances
in direct settlements. He sent this report up,
which was never printed. Byrd gave Byrnes a copy -
36
-8Byrnes turned it over to us to check - to see
what made up those disallowances. It ran about
three or four million dollars a year up to 1931 and we can check - and then it suddenly jumped
to eighteen million in 132 and fifty-six million
in '34. We couldn't find anything to make up
those huge disallowances. One of the assistants
to Byrnes asked Yates to explain how they got
those two large disallowances in those years. Of
course their records are not up to date on
recent years, so what they did, they went back
and found out what the ratio of disallowances
was to the previous years, and then applied
that ratio to '32 and '34 figures; and in '32
we had five hundred million subscriptions in
capital stock of the R. F. C.; one hundred twentyfive million subscriptions of Land Bank stock;
and in '34 we had the two billion dollar stabilization fund. The ratio applied to those huge
totals would, of course, present huge potential
disallowances.
H.M.Jr:
Did that come out?
Bell:
Well, I think it will in the debate.
Gaston:
Better appoint a committee to see that it does.
H.M.Jr:
Have a committee over the examiner's head.
Bell:
The man responsible for it wouldn't go to the
capital and explain it. He sent a clerk down to
do it. Mr. Byrnes said, "It really doesn't
mean much, does it?"
H.M.Jr:
Dan, write me a little memo on that, and I'll
send it to the President tonight. Will you get
it to Mrs. Klotz personally? I'd like to send
it to the President.
37
-9 Dan, on this bill business, the present - I
mean, we meet ourselves coming around the corner
the first ninety days when? When would it be to
fifty million?
Bell:
The twenty-third.
H.M.Jr:
If we did it on the twenty-third, would it - I
Bell:
No - twenty-third - a hundred fifty.
H.M.Jr:
Then under my program - are you sure?
Bell:
Yes. The one going out today will be the one
hundred fifty million.
H.M.Jr:
Oh. We meet ourselves coming around today. You're
sure of that?
Bell:
Yes sir.
H.M.Jr:
Well, that's all right, but I told the boys two
thought we had another week.
Bell:
hundred million of this series will end on the
twenty-third.
That's right.
H.M.Jr:
Then we'd decide whether we go any further?
Bell:
That's right, yes sir.
H.M.Jr:
Then there will be one week at least for the
hundred fifty million.
Bell:
Yes sir. That was contemplated.
H.M.Jr:
I am not going to give any explanation for this
statement, but I just think it's worthy of passing
the milestone, that Mr. McReynolds, at five o'clock
last night, blushed. I am not going to explain
it. The only person present was Mr. Bell, but he
blushed. He was so worried at a certain letter -
Dan said Mac was so excited that he thought he had
signed his own resignation - but he did blush.
I did think it is important and I want a record
of it on the Stenotype. I am not going to
explain it, but am I in any way exaggerating?
It happened, didn't it?
- 10 Bell:
(Laughing) Yes.
McReynolds: I have nothing to say.
H.M.Jr:
We are not going to add any explanations, but it
did happen. I wanted you to know he did blush.
We'll go to the next situation.
Lochhead:
Very heavy pressure developing on the Dutch Guilder
in Amsterdam, and we are getting quite a few
cables from China. I won't bother you on
China until I have to.
H.M.Jr:
Bell:
Upham:
(To Lochhead) Have Harry White in your office. I
want to see him.
By the way, we deposited seventy-four million in
gold since January first. Got twenty-six million
left on the hundred million.
There is quite a campaign concentrating on the
President which you may know about, for a banker
named Elliot for Comptroller of the Currency.
H.M.Jr:
Where is he from?
Upham:
Georgia.
Bell:
He is an old Civil Service man.
H.M.Jr:
Any good?
Bell:
Well, he has a passion against branch banking.
That is about all I know about him. I've heard
him at the A. B. A. conventions.
H.M.Jr:
What's his position - what is he campaigning for?
Comptroller of the Currency.
You got my message last night? I didn't know I
was dining out with Mr. "X" until I got home.
Upham:
H.M.Jr:
Upham:
Yes.
H.M.Jr:
I had forgotten about it. Incidentally I see in
the paper Trans-America report is out. Will you
get a copy of it and you and Folger study it? It
is out. It's their annual statement.
38
- 11 Upham:
Yes.
H.M.Jr:
It is just out today. Right on the surface it
Upham:
I - then they take in - allow us forty-three per
cent of the profits of the Bank of America.
We'll get it.
H.M.Jr:
Mac?
looks phoney.
McReynolds: I still have nothing to say.
H.M.Jr:
All right.
39
40
March 16, , 1938
At 10:45 a.m. Mr. William O. Douglas, Chairman of
the Securities and Exchange Commission, was a visitor
in Mr. Morgenthau's office. Mr. Upham was present.
Mr. Douglas said that he had had a forty-five minute
talk with the President recently while on an automobile
ride and that the President had suggested that he talk
over his idea with the Secretary of the Treasury.
Mr. Douglas said that while the SEC has nothing to
do with capital markets as such, their job does impinge
on the capital market and that serving as a sort of
lightning rod because the public identifies them with
business conditions, they get a considerable amount of
correspondence with complaints and suggestions.
Mr. Douglas said he had told the President that as
we have been going along for the last few years with consuming power falling off and without any sufficient backlog
of capital expenditures, we have reached the place where
there is no longer any capital market. While he thinks
it is necessary to spend to increase the consumers' purchasing power, he feels very definitely we can never pull
41
-2out of the depression by that method. The key is the
opening up of the capital markets and getting a regular
flow of funds back into industry. We are very foolish
if we sit back and hope and pray that business will
"catch" as it has in the past.
The reasons for this are several. One of them is
the volume of tax-exempt securities. This constitutes
a huge reservoir of money all dammed up. Secondly, the
capital gains tax may have had some influence too. That
may be a psychological dam, however. Third, the investment bankers , machinery is completely paralyzed. They
got stuck on Pure 011 and Bethlehem. They still have
445,000 shares of Pure 011, only about 7,000 shares having
been taken by shareholders. The investment banker is
geared up psychologically and capitalwise to having sold
yesterday what he commits himself for today. That means
considerable capital and eager customers and operating at
the crest as things boom along. Things won't boom along
until investment banks are operating and they won't oper-
ate until things boom along--a vicious circle.
It all boils down to two things. (1) A large reservoir of capital which is not going into industry and won't;
and (2) the inadequacy of the investment banking machinery
and the psychology of that business.
42
-3There is only $60 to $100 million of capital in the
investment capital business. This is wholly inadequate.
Bank affiliates were properly taken out of the business
but have not been replaced. Floyd Carlisle of Consolidated Gas says that his company needs $50 million of
common stock. Their stock is selling around 18 to 20.
It pays $2. They can't afford to offer new stock at 20.
But it is movement of the money into industry like that
which will pull us out.
Mr. Douglas said that there has been a hell of a
lot of talk about lending money to industry. He does not
think it can be done that way. The debt structure is in
good shape. Considerable refunding has been done. Business needs junior or equity money, not an increase in debt.
Lending more money to industry will not pull us out of the
slump.
Mr. Morgenthau interrupted to inquire if he meant the
proposals for RFC lending and he said he did.
Mr. Douglas said he gave the President a scheme and
a memo. The Commission has not approved it and some of
the members have not seen it, it not being officially their
job, but representing an attempt on the part of the Chairman
to help solve present difficulties.
43
-4Mr. Douglas proposed that at least for a limited
period of time the Government step in and through regional
industrial finance banks for the purpose of cooperating
with local investment bankers and underwriters, purchase
securities from underwriters, and engage in open market
operations.
Mr. Douglas said that many utility stocks are way
below their real value. If we are to continue a "capitalistic system under a Democratic form of government,"
something must be done about this. The industrial bank
could buy for investment purposes. This would bring back
investor confidence. They could participate in underwriting
issues but not distributing or selling to the public. They
would perform the function which the investment banking
machinery theoretically provides. Mr. Morgenthau said that
Jesse Jones has an idea along these lines. He wants to
supply capital to business just as he did for the Northern
Pacific. He proposes to stand behind underwriters.
Mr. Douglas said that that would take care of a part
of it but sometimes there are no underwriters.
Mr. Morgenthau said that Mr. Jones is going up to ask
for legislation. He told Mr. Douglas that small businesses
are giving the expense of SEC registration as one of the bars
44
-5to financing. He said he has been asking Ben Griswold of
Baltimore for a single solvent company that wants money now,
but Mr. Griswold has been unable to produce one. Mr. Douglas
said that many of them come to the SEC with registration
statements for securities that they cannot sell.
Mr. Morgenthau also referred to the complaint about
the limited powers of bank investment. Mr. Douglas said
the companies should have preferred stock. It is a place
for the play of the investment banker's mind, not the commercial banker's mind.
Mr. Morgenthau said that the best way he could operate
was to take a specific case and asked Mr. Douglas if he
had one. Mr. Douglas said there are several types of
situations. He referred again to the $50 million common
stock issue desired by Mr. Carlisle and said that the
regional industrial finance bank could help in that situation. He thought the stock of the regional banks could be
subscribed by Treasury or RFC and that two or three times
this amount could then be raised by the public offering of
the securities, probably debentures, of the financial bank.
Let national banks invest in these debentures and make use
of some of the "productive capital now locked up."
45
-6Mr. Morgenthau said that this type of suggestion did
not frighten him.
Mr. Douglas suggested that three of five directors
could be named by the Government, the other two being
local investment bankers, thus making it a real cooperative venture. He said that one of the basic economic
problems is the rebuilding of industrial regions like
New England. The investment bankers won't do anything
for the reconstruction of that industrial area.
Mr. Morgenthau suggested that Joe Bodell of Providence
is already operating in this field. He makes five-year
loans to industry. He is a very high-class man and would
be helpful in developing this.
Mr. Morgenthau said that Mr. Jones is suggesting the
making of loans to municipalities. Mr. Douglas' comment
was "Nuts." He agreed with the Secretary, however, that
"Oh, they help," but what we need is a direct frontal attack on junior capital. Mr. Morgenthau asked him if he had
his proposal in black and white; to which he replied, "Sure."
Mr. Morgenthau said he would like to see it and told him
that we can move fast. Mr. Douglas said it would require
legislation.
4S
-7Mr. Morgenthau said that he is now engaged in working
on holding companies, the Home Loan Bank Board, the European
situation and prices. He said that confidentially we expect
to move shortly, first, in the field of cement prices with
later attention to other building materials and rackets in
the industry.
Mr. Morgenthau said we could take $100 million gold from
the Federal Reserve and use it as capital for the regional banks
and "go places." " Mr. Douglas said that the political angle
comes in on the regional basis and suggested that there would be
a good deal of political advantage to a Government bank in the
South. He thought the Treasury or the RFC might be the "holding
company" for the regional banks.
Mr. Morgenthau said that Jesse Jones would give it good
management but that he might be too strict; to which Mr. Douglas
replied that he was imbued with the idea of sound loans and the
commercial banking system could never do the job. Mr. Morgenthau
said that he was tickled to death to have this idea and that he
has the money. Debentures would provide another ten times the
capital. He said that Preston Delano would make a. good man
if one were needed. Mr. Douglas said that of course this would
raise the cry of state socialism but he wasn't afraid of that.
Mr. Morgenthau said that Farm Credit is state socialism
in many of its aspects and that he passed that bridge when he
came to Washington.
47
-Mr. Douglas said he was enough of an optimist to believe
that we are on the verge of an era of the greatest prosperity
this country has ever seen. If we had the railroads to build,
wouldn't we be going places. Suppose his men are only 50 per
cent right and only half of the railroads have to be rebuilt,
won't we go places. We must move into the natural point where
capital moves into industry. Mr. Morgenthau asked what he
wanted us to do. He said it sounds damned interesting and asked
if Mr. Douglas would send over his memorandum. Mr. Douglas said
the statute has been all prepared and he can send it over. There
has been a good deal of brewing around on this matter--on the
Hill by Senator Pepper and Congressman Hill and Senator Voorhis
of California. Voorhis wants to see the President for his endorsement so that it will be an Administration measure. It has
nothing to do with the SEC officially and they are not looking
for anything. Mr. Morgenthau said when he received it he would
have Oliphant go over it and suggested to Mr. Douglas to tell
Jones about it since Jones moves fast. He thought that he, Jones
and Douglas could get together later.
Mr. Douglas said he had also discussed it with Mr. Eccles,
at the President's request, and Mr. Eccles thinks there is
"something there." Mr. Eccles thought the Federal Reserve might
do the job but Mr. Douglas' comment to that was "Nuts."
48
March 16, 1938
To: The Secretary of the Treasury
From: Thomas C. Blaisdell, Jr.
The attached report was prepared with the
advice and counsel of the sub-committee named by
you, i.e., Messrs. McReynolds, Collins, Oliphant,
Edwards (F.T.C.), Piquet (Tariff Commission) and
Blaisdell. Assistance was also given by Admiral
Peebles, Messrs. O'Connell, Curtis (Public Roads)
and Haas.
For the final draft and form I alone must
assume responsibility.
49
March 16, 1938.
REPORT OF THE SUBCOMMITTEE ON CEMENT PRICES
1. RECOMMENDATIONS
1.
Centralized purchase. That there be immediately centralized in
the hands of the Director of Procurement the maximum amount of
purchases of cement, including -(a) All cement now being purchased by any Federal agency
in the regular course. A list of such agencies and
the amounts they purchased is attached.
(b) All cement which, by change in the present practice
of any agency, could be purchased by the Government
rather than by the contractor. A list of such agencies
and the amounts they purchased is attached.
These two combined would give the Procurement
Division a total of 15,730,000 bbls per annum,
which constituted about 14 percent of yearly sales,
For the rest of the fiscal year the Government has
approximately 3,395,000 bbls to purchase.
-22. Trade Agreements. The State Department should be asked to
reopen the question of further reduction in the tariff on cement
under the Belgian Trade Agreement. This would involve the
issuance of notice to negotiate the general provisions of the
Agreement, and the simultaneous announcement of the reopening
of the cement concessions. Althouth the time involved in negotiation would be considerable, the announcement itself would
have value.
3. Anti-trust action. The program of coordinated purchases should
be carried out in such a fashion as to preserve all evidence of a
new and distinot illegal combination or of any continuance of
any practice which may be found to be illegal (as distinot from
evidence pertiment to the pending FTC complaint) encountered in
the course of carrying out this program, having in mind immediate action by the Department of Justice in the event such
6ombination is so disclosed.
As a corollary to this, all conferences and communications with
the cement manufacturers and dealers should be carried on in
50
-3such a way as to avoid anything which would be later oited as
formal or informal official approval of illegal practices or
combinations in the industry.
4. Public Roads. The details of the program in connection with
public roads cannot be stated sharply, but follows three possible
lines:
(a) Possible purchases by states under a Federal Government
open contract.
(b) A conference by the Secretary of Agriculture with the
state road commissioners explaining the Federal Government
program and endeavoring to secure cooperation in its
development.
(o) Legislation would be necessary to enable the Federal Government to purchase cement used in highway construction under
grants by the Bureau of Public Roads. As to approved
projects, this legislation could authorize the Secretary of
the Treasury to negotiate with states an arrangement for
them to take cement in lieu of money; and, as to projects
51
-not yet approved, such legislation could authorize the
Secretary of Agriculture to make grants of monby oonditioned upon the Federal Government's supplying the
oement. Legislation of the former sort could and should
be put in the present Agricultural Appropriation Act
pending before the Appropriations Committee of the House.
II. PROCEDURE
1. Personnel. The Secretary of the Treasury should name one or more
men thoroughly familiar with the cement industry, including the
organization, banking, and other financial connections of cement
concerns, and the marketing of cement. This person to function in
the Procurement Division directly under the authority of the
Secretary.
2. Competitive Bidding. All purchases should be made in such a manner
as to secure bona fide competitive bidding.
3. Collusion. If indications of collusion appear in the original
bidding, these bids should be rejected and readvertised.
52
--
53
4. Independent Negotiation. If tie bids or other evidences of
collusion are still present, negotiations for the letting of
independent contracts should be undertaken.
5. Preservation of Evidence. While the preceding steps are being
taken the Department of Justice should be in constant consultation
with the Treasury Department in order that legal action under the
anti-trust laws may be taken if illegal actions are found.
6. Trade Agreements. The announcement of the reopening of the
Belgian Agreement should be made as quickly as possible so that
the present FTC action, the previously mentioned negotiations,
and corollary actions are proceeding at the same time.
7. Public Roads. Further exploration and action in connection with
the public roads program should be continued while the other
activities are under way.
8. Effective Coodination. All persons participating in the program
should be aware of the fundamental objectives involved.
9. Publicity. The amount of publicity and its character will
become apparent as the program develops.
-6- III. OBJECTIVES
1. Cement prices at present are regarded as being "out of line"
and hence are a blook to business recovery.
2. The fundamental aim of the program is to lower the price of
oement for all purchasers, not only the Federal Government.
3. The secondary purpose is to establish conditions in the industry
which will bring about competitive conditions.
54
CEMENT
AGENCY
Barrels
Veterans Administration
Department of the Interior
Department of Agriculture
War Department
Est. Balance Fiscal Year 1938
1937
Value
Barrels
Value
31,147
$68,523*
5,000
$11,000*
1,250,000
2,750,000*
850,000
1,870,000*
219,541
842,990*
102,670
225,874*
2,575,458*
421,620
927,564*
22,865
50,303*
1,170,663
Navy Department
97,615**
214,753*
Farm Security Administration
94,000*
206,094**
1,400*
3,000*
D. C. Government
27,170*
59,778
9,090*
20,000*
11,000,000*
24,200,000
1,818,181*
4,000,000*
Works Progress Administration
Tennessee Valley Authority
762,514**
1,372,321**
164,400
292,557
3,395,226
$7,400,298
.
TOTALS
*
14,652,650
$31,929,917
Denotes figure estimated by Procurement Division.
Denotes calendar year.
In estimating values and quantities price has been figured at $2.20 per barrel.
One barrel equals 376 pounds.
CEMENT CONSUMED IN GOVERNMENT CONSTRUCTION CONTRACTS
DURING YEAR 1937
Total amt. of
AGENCY
Construction Contracts
Barrels
$ 6,654,641
72,004
Veterans Administration
12,829,973
138,820
War Department
32,226,882
348,695
Department of Agriculture
3,500,000
37,870
Department of the Interior
9,962,763
107,797
34,471,008
373,003
$99,645,267
1,078,189
Navy Department
Procurement Division
TOTALS
57
PORTLAND CEMENT
Use in building industries
About one-third of the United States production of Portland cement
is used in the building industries, the rest being used largely in
paving and in sewerage, water, and power developments. The estimated
distribution of the total production in 1936 is shown in the following
table, based on analyses of construction figures and other data:
Classification
Percent
of total
Barrels
Residential - One and two-family dwellings and
housing projects
Structures - Commercial, industrial, educational,
etc., including hotels and apartment houses
Paving - Highways, streets, runways, etc.
10
11,257,000
24
27,016,000
25,890,000
4,503,000
2,251,000
7,880,000
23
Bridges
4
Railroads
2
Sewers and water supply
7
Conservation - Waterfront developments, irriga-
tion, drainage, flood control, light and power
projects
Rural
14
9
Miscellaneous - Incinerators, airports, miscellaneous public works, small uses, etc.
Total
7
100.0
15,758,000
10,131,000
7,880,000
112,566,000
Source: Cement and Concrete Reference Book, 1937 (published by
Portland Cement Association, Chicago).
The bulk of the Portland cement is used in concrete, a mixture of
cement, sand and gravel or crushed stone, the cement normally consti-
tuting by volume only about one-ninth to one-seventh of the total mix.
Large quantities of cement are used in the manufacture of many types of
concrete products such as blocks, tile, cast stone, and numerous other
58
-2articles. According to the Census Bureau, about $10,000,000 of all
concrete products, which totaled $43,000,000 in 1935, were classified
as "building materials."
The quantity of cement used in residential dwellings varies
greatly, depending upon the type of construction. The cost of cement
used in a house may vary from a few dollars in those using only a small
amount for foundation work, to several hundred dollars in those built
of concrete blocks or reinforced concrete.
Organization of the domestic industry
The 160 or so Portland cement plants in the United States are
located in 35 States and are owned by 89 companies. The accompanying
map, Chart 1, based on the year 1929, shows the locations of practically
all these plants. There has been relatively little change in manufacturing centers since that year.
In 1936, 149 of these plants produced and shipped cement. Slightly
more than one-third of the total output in that year was produced by
the country. It is estimated that the capacity of these five companies
accounts for about 38 percent of the total cement capacity of the
country. The relative importance of each, as indicated by total plant
capacity, is shown below:
Company
Universal Atlas Cement Company
Lone Star Portland Cement Company
Lehigh Portland Cement Company
Alpha Portland Cement Company
Penn-Dixie Cement Company
Total capacity,
barrels
31,000,000
20,000,000
22,000,000
13,000,000
12,000,000
.
five large concerns which normally operate about 50 plants throughout
59
-3 About 20 other companies operate two or more plants: the remain-
ing number, about 60, operate one plant each. According to the
Federal Trade Commission, 75 cement manufacturing concerns belong to
the Cement Institute, a very active trade association, the policies
of which are influenced in considerable degree by the five large
companies previously mentioned. About 14 companies, the names of
which are given in the Appendix, Table 1, were not among those cited
by the Commission in its complaint of unfair price combination, presumably not being members of the Institute.
The cement industry is burdened by high surplus capacity,
operating even in the peak year of 1927 at only 76.1 per cent of
capacity. It dropped to a low of 23.5 per cent in 1933, and rose to
42.7 per cent in 1936.
The principal raw materials for cement manufacture, obtained
from limestone, cement rock, clay, etc., are widely distributed over
the country, hence raw material cost is of less importance than fuel
(usually coal or natural gas) and transportation cost.
Production, imports and exports
The total production of Portland cement in the United States is
shown in Chart 2, compared with imports and with production in the six
coastal areas, where competition is provided by imported cement.
The relative importance of the various cement producing areas in
the United States, based on the year 1936, is shown in the Appendix,
Table 2. The coastal districts are segregated from those in the
interior, as imported cement competes directly only with plants situated in the six seaboard or coastal areas.
60
-4In the appendix, we show in Table 3 the United States production
and shipments of hydraulic cement (practically all Portland) by years
from 1926 through 1937. In Table 4 we show the total imports for
consumption for these same years, and in Table 5 the total exports.
As compared with a domestic production of 116,478,000 barrels in 1937,
we imported 1,779,211 barrels, and exported only 200,096 barrels. The
importe into continental United States alone were 1,257,852 barrels, about
500,000 barrels in the total being represented by imports into Porto Rico,
which showed a large increase in 1937.
Table 6 shows the imports from principal sources in specified years.
Belgium is the principal source of our cement imports, supplying 56
per cent of our imports in 1937.
Transportation problems
The cost of transportation is sufficiently high in relation to
the value of the product that most areas are served by nearby plants.
An average railroad revenue of 51 cents per barrel, or about 34 per cent
of the average factory value, was shown by ICC studies of revenue re-
ceived by Class I railroads from cement hauling in 1929 and in 1937.
The average haul was found to be 195 miles. Comparisons indicate that
in recent years the freight burden has tended to increase, which has
been intensified by recent freight rate increases.
In view of the relatively high transportation costs, competition
from foreign cement has been limited largely to Boston, New York City,
and Florida. The combined importations into these three markets in
1936 and 1937 accounted for 77 per cent of total imports, the remainder
being distributed at many ports of entry.
61
- -5 -
For many years Boston has been one of the most important, if not
the most important, United States market for imported cement. This
has been largely because of two factors: (1) metropolitan Boston is a
sizeable market for cement, normally accounting for over a million
barrels annually, (2) the principal sources of domestic supply, namely,
"the Hudson River District of New York State" and the "Lehigh Valley of
eastern Pennsylvania, New Jersey, and Maryland", are located at points
from which rail hauls to the above market range from 58 to 72 cents
per barrel, as compared with ocean rates from Antwerp, Belgium, to the
same point of about 50 cents per barrel.
To a considerable extent, the same two factors apply to the situation in New York City. However, this is a much larger market than
Boston, normally using over 6,000,000 barrels annually, and is more
advantageously located with respect to domestic sources of supply.
Imports have never supplied as large a share of the huge consumption
in New York City as they have in the case of Boston. A factor of
considerable importance in connection with the competition offered by
foreign cement at such a large market as New York City is the reluc-
tance on the part of domestic producers to cut prices in that area.
In Florida the competitive situation between domestic and foreign
cement has changed greatly since 1934. Imports into that State increased from 10,000 barrels in that year to 351,000 and 298,500 barrels,
62
-6- respectively, in 1936 and 1937. These imports supplied about one-fifth
of the State's total cement consumption in those 2 years. Before the
only cement plant in Florida was established (at Tampa) in 1927, the
bulk of that State's requirements of domestic cement was obtained from
Georgia and Alabama plants at rail rates ranging from about 60 cents to
$1 per barrel. During the Florida building boom of 1925-26, however,
about 2 million barrels of foreign cement (largely from Belgium) entered
that State.
Prices and pricing policies
Following a price war in the industry in 1931 and 1932, cement
prices rose sharply in 1933 and 1934 despite the fact that the industry
was operating at an extremely low rate. In Chart 3 the average factory
price of cement in bulk is compared with the operating rate and with
payrolls in the cement industry. A further comparison is made in Chart 4
with prices of building materials as a group and with the all-commodity
index. Cement prices in 1933 and 1934, under the NRA code, rose sharply
above both these indexes, and have since held steady around the 1934 high
level.
A more detailed picture of cement price trends is shown in Chart 5.
The price to dealers in one city (Chicago), as reported by the Engineering
News Record, is shown to give an exhibit of changes in quoted prices.
From three-fifths to two-thirds of the domestic Portland cement is
normally sold through building supply dealers who handle it along with
many other building materials. The remainder is generally sold direct.
On the same chart is shown the average United States price F.O.B. mill,
as computed by the Bureau of Mines.
63
- -7- -
to large consumers such as the United States Government, State
Governments, municipalities, and railroads, sometimes at lower prices
than those quoted to dealers.
The great bulk of the United States cement is sold on the basis
of prices F.O.B. destination. The mill nearest the market generally
establishes the price, which is usually met by competing mills less
advantageously located. In large cities on the seaboard, the laiddown price of foreign cement has considerable bearing on the local
price, but such effects are always of a highly localized nature. High
transportation charges prohibit foreign cement from reaching interior
markets.
The domestic cement industry, in setting prices, generally has
operated on the multiple-basing-point system. there being in the neighborhood of 65 basing points. The five largest companies, operating about
50 plants in the United States and accounting for about 40 percent of
the country's total capacity, wield considerable influence on the prices
at which cement is sold throughout a large portion of the American market.
Price combination
The Federal Trade Commission is now studying price combination among
United States cement producers. The Commission's complaint has been
issued against the Cement Institute and 75 cement manufacturing member
corporations, reported to produce 95 percent or more of all the cement
made in the United States. About 14 companies operating roughly the
64
- -8same number of plants are not included in this investigation. The
complaint alleges violation of the Federal Trade Commission Act and
Section 2 of the Clayton Act, as amended by the Robinson-Patman Act.
Reasons for believing prices too high
Our belief that cement prices are too high is based on the following considerations:
1. The rigidity of the price structure, and the fact that
prices have not varied in accordance with changes in demand and supply
conditions, tends to indicate that prices have been maintained at
artificial levels. (See Chart 3)
2. The high level of cement prices at mills since 1932, as
compared with the general commodity price level, suggests that prices
are too high. (See Chart 4).
3. Known price-making policies of the industry, in which a
few large companies wield considerable influence on prices through
a trade association, which prices are adhered to by all producers,
suggest the maintenance of semi-monopoly price levels.
4. Inefficient marketing policies developed under the
basing-point system tend to keep prices unduly high. In attempting
to expand sales without reducing prices to consumers, cement com-
panies compete in territories outside their natural boundaries,
absorbing the increased freight costs. Under freely competitive
conditions the extra freight costs absorbed by the cement companies
would go to the benefit of consumers in nearby areas in the form of
lower prices.
65
-9 5. The Federal Trade Commission's study of the cement industry,
which led to complaint of unfair price combination, indicated that
prices were being maintained at too high a level. (See Appendix,
Exhibit A).
Tariff considerations
Under the Tariff Act of 1930, Portland cement is dutiable at
6 cents per 100 pounds, which rate was reduced to 4 cents per 100
pounds on May 1, 1935, under the trade agreement with Belgium. The
ad valorem equivalent of this duty averaged 21 per cent in 1936 and
1937.
A lower tariff rate would tend to lower prices at seaboard
points, but probably would have little effect in interior markets.
Were the duty reduced to 3 cents per 100 pounds, the maximum reduc-
tion permitted by law, it would be equivalent to less than one-fourth
of the average domestic rail charge (51 cents per barrel) as reported
by the Interstate Commerce Commission, which would compare with
one-third of the average rail charge under the present rate.
When cement was entered free of duty under the Tariff Acts of
1913 and 1922, relatively little was consumed at markets other than
those on or adjacent to the seaboard.
66
- 10 Profits of cement companies
The net incomes of leading cement companies are shown in the
appendix (Exhibit B). A study of the earnings of these companies
in relation to cement prices and to the rate of operations in the
industry suggests that while the price received for cement is an
important factor in earnings, the volume of sales is perhaps of
equal importance. Earnings improved sharply in 1936, with no increase in cement prices, as the result of an increase in produc-
tive activity to 58 per cent of capacity from 38 per cent in 1935.
Activity in 1937 averaged 59 per cent of capacity, suggesting that
considerable possibilities exist for further improvement in earnings through increased volume.
GEOLOGICAL DATA
By Herbert P. Woodword
PORTLAND CEMENT PLANTS of the UNITED STATES
By Ellis C. Soper
1929
CHART
1
67
68
CHART 2
PORTLAND CEMENT
U.S. PRODUCTION AND IMPORTS
MILLION
BARRELS
180
170
160
PRODUCTION
150
140
130
120
110
100
90
80
PRODUCTION IN
6 COASTAL AREAS
70
60
50
40
30
20
IMPORTS
10
0
1926
1927
1928
1929
1930
1931
1932
1933
1934
1935
1936
1937
69
CHART 3
PORTLAND CEMENT
PRICE TREND ANO ACTIVITY OF INDUSTRY
(1926=100) 7
DEX
PAYROLLS 1925-2 27 AVERAGE - 100
IBERS
PRODUCTION
.
D
PRICE
PAYROLLS
PERCENT
D
OF CAPACITY
1926
1927
1928
1929
1930
1931
1932
YEARS
1933
1934
1935 1936 1937
70
Table 1
Portland cement companies not included in the study of the
cement industry now being conducted by the Federal Trade Commission:
American Portland Cement Co., West New York, N. J. (Foreman, Ark.)
Cowell Portland Cement, Cowell (San Francisco), California.
Blue Diamond Corporation, Los Angeles, California.
United States Portland Cement Co., Denver, Colorado.
Washington-Idaho Lime Products Co., Spokane, Wash.
Louisville Cement Co., Louisville, Ky.
Ford Motor Company, Dearborn, Mich.
Allentown Portland Cement, Catasaqua, Pa.
South Dakota Cement Plant, Rapid City, S. Dakota.
San Antonio Portland Cement Co., San Antonio, Texas. (Cementville).
Gulf Portland Cement Co., Houston, Texas.
Longhorn Portland Cement Co., San Antonio, Texas. (Longhorn).
Western Portland Cement Co., Salt Lake City, Utah. (Bakers)
Olympic Portland Cement Co., Seattle, Wash. (Bellingham)
Standard Lime & Stone Co., Baltimore, Md. (Martinsburg, W. Va.)
National Portland Cement Co., Philadelphia, Pa. (Broadhead)
71
Table 2. - Portland cement: United States production, estimated
capacity, and percentage of capacities utilized by
producing districts in 1936
Estimated :Percentage ratio
Number
capacity, : of output to
Output
rated end :estimated capa-
of year 1/:city end of year
Thousand
barrels
:
active
plants
Thousand
barrels
:
United States
producing areas
of
Percent
Coastal districts
New York and Maine
11
Eastern Pn., N.J., and Md.
23
6,111
21,360
17,024
50,756
35.9
42.1
10,078
5,840
13,379
4,003
25,555
11,492
22,980
7,295
30.0
34.2
35.0
25.7
79
60,791
135,102
45.0
18
10,641
7,673
11,795
28,177
16,400
29,502
26.0
26.8
27.5
11
10,515
22,867
33.9
12
8,219
17,157
34.3
3,016
6,217
37.6
70
51,859
120,402
43.1
149
112,650
255,504
44.1
Va., Tenn., Ala., Ga., Fla
and La.
17
Texas
9
California
Oregon and Washington
Total, coastal districts
10
9
terior districts
Ohio, western Pa., and W. Va.
Michigan
10
Ind., Ill., Wis., Ky.
11
Eastern Mo., Iowa, Minn
and S. Dak.
W. Mo., Nebr., Kans., Okle
and Ark.
Colo., Mont., Utah, Wyo., and
Idaho
8
Total, interior districts
Grand total
1 As reported by individual producers to the Bureau of Mines.
Source: U.S. Department of Interior, Bureau of Mines.
72
Table 3. - Portland cement: United States production and shipments
Number
127,150,534
:
:
:
:
:
:
:
:
:
80,843,187
64,282,756
75,901,279 :
75,232,917 :
112,849,979 :
2/114,010,000 :2
$277,965,473:
278,854,647:
275,972,945:
252,153,789:
228,719,756:
140,959,906:
82,021,723:
85,600,717:
116,921,084:
113,372,182:
170,415,302
169,807,000:
:
:
1
159,059,334
:
152
171,864,728 :
175,838,332 :
169,868,322 :
:
:
1933 :
1934 :
1935 :
1936 :
1937 :
160
162,187,090
:
:
160
Value
:
2/116,478,000
163
:
1932
:
1931
:
:
1930
163
Quantity
Barrels
:
149
153
156
:
150
1927
1929
Barrels
150
140
Shipments
Production
164,530,170
173,206,513
176,298,846
170,646,036
161,197,228
125,429,071
76,740,945
63,473,189
77,747,765
76,741,570
112,649,782
1926
1928
:
plants
:
: of active
Year
:
Not available.
1
2 Preliminary.
Source: United States Department of Interior, Bureau of Mines.
;Unit value
:Per barrel
$1.71
1.62
1.57
1.48
1.44
1.11
1.01
1.33
1.54
1.51
1.51
1.49
73
Table 4. - Portland and other hydraulic cement: Total United
States imports for consumption, including imports
into territorial possessions
:
Barrels
:
:
:
:
:
:
:
:
:
:
:
1,779,211 1,341,344 :
1937
:2
:
:
:
1,654,504 : 1,408,545 :
1936
.76
.82
.97
.99
.85
.75
:2
:
:
935
:
934
:
1933
507,918
351,133
387,991
253,775
607,760
:
1932
1,673,411
1,045,091
:
831,927
457,238
462,496
471,949
261,884
616,423
3
1931
1
1,236,203
:
1930
1/
:
1929
:
1928
$1.59
1.44
1.36
1.35
1.26
1.11
:
1927
six seaboard districts
Percent
3,232,494 $5,128,061
2,050,328 : 2,960,577
2,286,421 : 3,099,160
1926
Percentage ratio (in quantity to Production of mills in
Total domestic
barrel:
production
per
:
:
Quantity
:
Value
:
: Value :
Year
1.96
1.18
1.30
1.01
.60
.37
.61
.74
.34
.80
1.47
1.53
Percent
3.66
2.18
2/
2
2.51
1.98
1.21
.67
1.19
1.43
.63
1.52
2.72
2.87
Does not include imports of cement clinker amounting to 474,095 barrels,
valued at $257,510.
Ratio based on combined importation of cement and cement clinker.
not include imports of cement clinker amounting to 143,623 barrels,
valuedDoes
at $90,880.
Source: Compiled from official statistics of the United States Department of
Commerce.
74
Table 5. - Portland and other hydraulic cement:
United States exports 1
barrel
:
1933
1934
1935
1936
1937
802,205
1,487,707
1,333,381
1,012,942
271,031
397,615
:
1931
1932
:
1930
3,083,911
2,454,605
1,220,600
0.59
.47
.47
:
1929
2,938,702
:
1928
$3.07
3.42
3.56
3.48
3.25
2.84
:
:
:
1927
$2,995,833
2,796,717
Percent
:
974,326
816,726
824,656
886,172
755,708
429,653
374,581
680,302
566,171
416,099
152,803
200,096
1926
of domestic
production
:
per
Percentage
:
:
Barrels
Value
:
Quantity
:
Year
Value
2.14
2.17
2.35
2.43
1.77
1.99
.52
.47
.34
.49
1.07
2
2
.73
.54
.14
.17
1 Exports shown for years 1926-35 consist largely of relatively expensive
specialized types of portland cement; for 1936 and 1937 they consist largely
of the standard product.
2/ Percentages not comparable with previous years since figures do not in-
clude the preponderant specialized cements.
Source: Foreign Commerce and Navigation of the United States.
Imports are very small compared to either total United States production
or to production of the seaboard areas in which they compete. (See chart I).
75
Table 6. - Portland and other hydraulic cement and cement clinkers:
Imports into the United States, from principal sources
1927 1/
Belgium
1,487,014: 4/1,186,166
238,663:
55,022:
7,623:
Denmark
United Kingdom
Germany
Other
Total
261,858
2,050,180:
Percent of total quantity:
Belgium
Denmark
United Kingdom
Germany
Other
Total
319,679
178,415
18,186
25,454
1,727,900
:
Quantity (barrels) 3/
1933 1/
1929 1
154,953
221,071
51,225
15,188
30,113
472,550
1936 2/
1937 2/
846,172:
1,004,290
328,958
280,140
6,782
159,210
328,789
15,286:
257,048:
207.040:
1,654,504: 1,779,211
72.5
11.6
2.7
68.6
18.5
10.3
32.8
46.8
10.8
51.2
19.9
56.4
15.7
.9
.4
.4
1.1
12.8
100.0
1.5
100.0
3.2
6.4
15.5
12.5
100.0
9.0
18.5
100.0
1 General imports.
2 Imports for consumption.
100.0
3 Quantities reported in tons or pounds converted into barrels at 376 pounds
per barrel.
4 Includes 474,095 barrels of cement clinker.
Exhibit A
For Release in MORNING NEWSPAPERS of Monday, July 5, 1937.
FEDERAL TRADE COMMISSION
Washington
PRICE COMBINATION AMONG CEMENT
PRODUCERS ALLEGED IN F. T. C. COMPLAINT
Charging a combination to eliminate price competition, resulting in
increased prices for cement, the Federal Trade Commission has issued a
complaint against The Cement Institute, an unincorporated association, its
officers, and 75 cement manufacturing member corporations, producing 95 per
cent or more of all of the cement made in the United States. The complaint
alleges violation of the Federal Trade Commission Act and Section 2 of the
Clayton Act, as amended by the Robinson-Patman Act.
The complaint charges that the chief means employed for carrying the
oement combination into effect is concerted use of the multiple basing
point system of quoting prices. Under this system, it is alleged, identical
delivered prices are made by every quoting producer entering into the oom-
bination, to any given destination in the United States. Instances of
identical bids made by many producers to various Federal and State agencies
are set forth in the complaint.
The Commission's complaint sets out, in effect, that each producing
company knows that, when it refrains from offering competitive prices in
the consuming areas where it has a natural advantage and receives its
highest actual price, it will receive the same freedom from price competition when the situation is reversed. In this way there is everywhere a
reciprocal
waiver of natural advantages with no competition in price
anywhere.
COOPERATIVE METHODS EMPLOYED
The following cooperative methods. it is alleged, have been used by
the producers in support of their combination:
They have refused to sell f.o.b. mill and will sell only at
formula delivered prices;
They have employed the Institute's freight rate books for the
computation of identical delivered prices regardless of whether
the rates contained in the books are officially correct or not;
They have penalized customers where customers use trucks for
delivery, but have monopolized for themselves the benefit of
cheaper transportation when available by highways and waterways;
They have prohibited diversion of cement in transit;
They have resorted to misleading propaganda as to the oampe-
titive character of their practices;
7S
-2They have deprived branches of the Federal government buying
cement for numerous western projects of part of the benefit of
land grant railroad rates;
They have arbitrarily divided customers into classes - those
who may buy direct and those who may not;
They have made arbitrary definition of what middlemen shall
be regarded as "oement dealers". Others have not been permitted
to buy;
They have made uniform terms and discounts;
They have at times used boyoott and espionage of dealers to
eliminate the competition of foreign oement importers.
The system is also alleged to be one of price discrimination since
under it the true or net prices received by each producer, from various
customers, are substantially different. Customers nearest the mills are
obliged to pay higher net prices than are made by a local mill to distant
customers.
As to the public interest in support of the case, the following
allegations are made:
The direct and immediate result of the said combination has been and
is restraint upon interstate commerce with respect to cement manufactured
by any of the producing respondents to be transported beyond the State in
which the oement was made. Such confederated action exercises a power
which individual action could not exercise or possess, and the necessary
tendency and the direct and substantial effect of the combination are
injury to the public.
The effect of the respondents' combination upon the public interest
has been and now is:
(1) To bring about the disappearance of prices arrived at through
the play of competitive forces, and the adoption by concert of organized
producers of prices calculated to preserve the more poorly located, equipped,
and conducted units at the expense of the buying public;
(2) To lessen the demand for cement and the volume of public and
private construction in which cement is used;
(3) Correspondingly to lessen the opportunities for employment, both
in the cement industry and in the construction industry;
(4) To raise the cost of public roads and projects and private
structures in which cement is used and thereby either to make them less
available to the public or to raise the taxes and rents by which the public
pays for them;
(5) To encourage the development of excess capacity by the inducement
of high prices and of fictitious freight charges obtainable by mills not
located at basing points.
77
78
-3- RESPONIENTS NAMED IN THE COMPLAINT
The Cement Institute, an unincorporated association, whose membership
comprises practically every producer of cement in the country, divided into
Northeastern, Southeastern, Chicago, and Kansas City divisions, each with
its office, with freight rate bureaus located at Bethlehem, Pa., and Chicago,
is named as a respondent, as are S. W. Storey and G. H. Reiter, president
and secretary, respectively, of the Institute.
Manufacturing companies named as respondents are:
Aetna Portland Cement Company, Detroit; Alpha Portland Cement Company,
Easton, Penna.; Arkansas Portland Coment Company, Denver, Colo.; Ash Grove
Lime & Portland Cement Company, Kansas City, Mo.; Beaver Portland Cement
Company, Portland, Ore. Bessemer Limestone & Cement Company, Youngstown,
Ohio; Calaveras Cement Company, San Francisco; California Portland Cement
Company, Los Angeles; Castalia Portland Cement Company, Pittsburgh; Colorado
Portland Cement Company, Denver, Colo.; Consolidated Cement Corporation,
Chicago; Coplay Cement Manufacturing Company, Coplay, Penna.; Cumberland
Portland Cement Company, Cowan, Tenn.1 Dewey Portland Cement Company,
Kansas City; Diamond Portland Cement Company, Middle Branch, Ohio; Edison
Cement Corporation, New York; Federal Portland Cement Company, Inc., Buffalo,
N. Y.; Florida Portland Cement Company, Chicago; Georgia Cement & Products
Company, Atlanta; Giant Portland Cement Company, Philadelphia; Glens Falls
Portland Cement Company, Glens Falls, N. Y.; Great Lakes Portland Cement
Corporation, Buffalo, N. Y. Green Bag Cement Company of West Virginia,
Pittsburgh, Penna.; Hawkeye Portland Cement Company, Des Moines, Iowa;
Hercules Cement Corporation, Philadelphia;
Hermitage Portland Cement Company, Nashville, Tenn.; Huron Portland
Cement Company, Detroit; Idaho Portland Cement Company, Inkom, Idaho;
International Cement Corporation, New York; Keystone Portland Cement Company,
Philadelphia; Kosmos Portland Cement Company, Louisville, Ky.: Lawrence
Portland Cement Company, Siegfried, Penna.; Lehigh Portland Cement Company,
Allentown, Penna. Marquette Cement Manufacturing Company, Chicago; Medusa
Portland Cement Company, Cleveland, Ohio; Missouri Portland Cement Company,
St. Louis; Monarch Cement Company, Humboldt, Kansas; Monolith Portland
Cement Company, Los Angeles; Monolith Portland Midwest Company, Los Angeles;
National Cement Company, Birmingham, Ala.; Nazareth Cement Co., Nazareth,
Penna.; Nebraska Cement Company, Denver, Colo.; North American Cement
Corporation, Albany, N. Y.; Northwestern Portland Cement Company, Seattle,
Wash.; Northwestern States Portland Cement Company, Mason City, Iowa;
Oklahoma Portland Cement Company, Denver, Colo.; Oregon Portland Cement
Company, Portland, Ore.; Pacific Portland Cement Company, San Francisco;
Peerless Cement Corporation, Detroit; Pennsylvania-Dixie Cement Corporation,
New York: Petoskey Portland Cement Company, Petoskey, Mich. Pittsburgh
Plate Glass Company, Pittsburgh; Portland Cement Company of Utah, Salt Lake
City; Riverside Cement Company, Los Angeles;
Santa Cruz Portland Cement Company, San Francisco; Signal Mountain
Portland Cement Company, Chicago; Southern States Portland Cement Company,
Rookmart, Ga.: Southwestern Portland Cement Company, E1 Paso, Texas;
79
-4Spokane Portland Cement Company, Spokane, Wash.; Standard Portland Cement
Company, Cleveland, Ohio; Superior Cement Corporation, Portsmouth, Ohio;
Superior Portland Cement, Inc., Seattle, Wash. Three Forks Portland Cement
Company, Denver, Colo.; Trinity Portland Cement Company, Chicago; Union
Portland Cement Company, Denver, Colo. , Universal Atlas Cement Company,
Chicago; Valley Forge Cement Company, Catasauqua, Penna.; Volunteer Portland
Cement Company, Knoxville, Tenn.; Vulcanite Portland Cement Company,
Philadelphia; Wabash Portlard Cement Company, Detroit; West Penn Cement
Company, Butler, Penna.; Whitehall Cement Manufacturing Company, Philadelphia;
Wolverine Portland Cement Company, Coldwater, Mich. and Yosemite Portland
Cement Corporation, Meroed, Calif.
All of the foregoir named corporate respondents are producers of
cement and members of the Institute. Many of them have mills in more than
one locality.
The respondents have been allowed twenty days from date of service
of the complaint in which to file answer to the allegations contained therein.
(3167)
Exhibit B
Attached are tables showing for the years 1929 to 1937 the financial
and operating data available in published reports for the following five
large cement companies:
Alpha Portland Cement Company, Easton, Pennsylvania
Lehigh Portland Cement Company, Allentown, Pennsylvania
Lone Star Cement Corporation, 342 Madison Ave., New York, N.Y.
Pennsylvania-Dixie Cement Corporation, 60 E. 42nd St., New York, N.Y.
Universal Atlas Cement Company, 208 So. LaSalle St., Chicago, Ill.
The last-named company is a subsidiary of the United States Steel
Corporation, which controlled 71.72 percent of the voting power on May 2,
1935, according to information available at the Securities and Exchange
Commission. No separate financial information for the company is available.
In terms of the size of financial operations, the Lone Star Cement
Corporation is the largest of these companies, reporting net sales of
$21 millions in 1937, and net income of $3.9 millions. In 1936 the company
had 10 plants, employed 3,800 people, and had total assets of $46 millions.
The second largest company, the Lehigh Portland Cement Company, reported
net sales of $12 millions in 1937. and net earnings ef$1.3 millions. In
1936 it operated 13 plants, employed 2,900 people, and had total assets
of $36 millions.
No evidence was found, from the information available, that the
directors of these five companies were directors of other non-subsidiary
cement companies. The interlocking directorates were mainly with subsid-
iaries and with banking and local affiliations.
The table below shows for the four companies for which the data are
available, the net sales, the net operating profit, and the net income
for the years 1929 to 1937.
Four Large Cement Companies
:
Net Sales
Net Operating
Profit
(Millions of dollars)
1929
1930
1931
1932
1933
1934
1935
1936
1937
68.7
62.3
44.5
24.8
24.1
32.5
33.1
44.8
46.4
11.4
10.6
.6
- 5.7
- 1.6
Net Income
:
Year
9.8
8.5
- .7
- 7.1
- 3.4
2.2
.7
2.1
7.8
7.0
.6
5.7
5.6
80
1929
1930
1931
Balance Sheet Data (Thousands of dollars)
Total assets
32,730
31,684
Bonded debt
-
Preferred stock
Common stock
Minority interest
Surplus
Operating profit
Net income
Preferred dividends
Common dividends
1933
1934
1935
1936
1937*
29,011
26,960
25,757
21,439
-
-
-
-
-
-
-
-
26,197
21,239
21,457
2,000
24,135
2,000
24,135
2,000
18,486
2,000
18,486
2,000
18,486
2,500
18,486
-
-
-
16,760
16,760
16,760
-
-
-
76
66
57
55
-
5,602
7,534
4,761
7,550
3,681
5,082
3,455
5,407
3,603
6,840
3,249
6,632
4,715
9,220
3,896
9,396
7,500
8,145
11,369
1,733
1,815
9,937
1,233
1,248
6,013
3,858
- 1,003
140
140
779
140
- 1,862
- 1,764
2,133
1,600
711
Net working capital
Operating Data (Thousands of dollars)
Net sales
1932
Other Financial Data
Earnings per share - common $ 236
Preferred - high
-
$ 1.56 1.33
140
4,075
-
735
750
140
171
-
4,712
-
-
367
163
4,971
7,140
6,724
-
265
330
-
180
879
862
-
-
-
645
645
645
163
161
d.$2.84 d.$ 1.35 d.$ 0.51
-
d.$ 0.30
1.34
353
$ 0.55
low
Common - high
low
36
42
11
23
18 7/8
7 5/8
10
20 1/8
24
11
54
22 see
343
39%
14
192
8
Other Data
Number of employees
Number of plants
Annual capacity
(Millions of barrels)
1,448
1,223
1,081
10
10
10
10
13
13
13
13
10
10
13
13
9
13
9
13
Number of stockholders
Preferred
Common
Plants: Owns 9 plants, 1 in Cementon, N. Y., 1 in Jamesville, N. Y., 1 in Manheim, W. Va., 1 in La Salle, Ill.,
1 in Ironton, Ohio, 1 in Alpha, Mo., 2 in Martin's Creek, Pa., 1 in Birmingham, Ala.
1937 data for year ending September 30.
Source: Moody's Manual of Investments.
*
82
ALPHA PORTLAND CEMENT COMPANY
Easton, Pennsylvania
Chairman of Board -- G. S. Brown, Easton, Pennsylvania
President -- F. G. McKelvy, Easton, Pennsylvania
Vice-President -- F. M. Coogan, Easton, Pennsylvania
Vice-President -- J. F. Magee, Easton, Pennsylvania
Secretary -- Robert S. Gerstell, Easton, Pennsylvania
Treasurer - J. J. Matthes, Easton, Pennsylvania
Sales Manager -- J. G. Bragg, Easton, Pennsylvania
Accountants Certifying Statements -- Haskins & Sells,
15 Broad Street, New York City
Directors -- G. S. Brown, Easton, Pennsylvania;
F. G. McKelvy, Easton, Pennsylvania; F. M. Coogan,
Easton, Pennsylvania; Robert S. Gerstell, Easton,
Pennsylvania; C. K. Boettcher, 828-17th Street,
Denver; Robert Struthers, 20 Pine Street, New York City:
Louis H. Porter, 60 East 42nd Street, New York City:
J. M. Lockhart, 1507 Union Bank Building, Pittsburgh;
J.H. Lockhart, 1507 Union Bank Building, Pittsburgh;
J. F. Magee, Easton, Pennsylvania.
Source: Poor's Register of Directors, 1938.
83
Alpha Portland Cement Co., Easton, Pa. - 1938
Brown. G. S. - (Chairman of Board and Director)
First National Bank & Trust Co., Easton, Pa. - Vice-president and
Director.
Yale & Towne Manufacturing Co., Stamford, Conn. - Director.
Vendor Slate Co., Easton, Pa. - Director.
General Supply Co., Easton, Pa. - Director.
McKelyv. F. G. - (President and Director) No other connections.
Coogan. F. M. - (Vice-president and Director)
2nd National Bank, Phillipsburg, N. J. - President and Director.
Magee. J. F. - (Vice-president and Director) not listed.
Gerstell, Robert S. - (Secretary and Director)
General Supply Co. - President and Director.
Alpha Supply Co. - President and Director.
Phoenix Gypsum Co. - Vice-president and Director.
Riverwood Beach, Inc. - President and Director.
Easton Trust Co. - Director.
Hotel Easton Co. - Vice-president and Director.
Green Pond County Club, Inc. - President and Director.
Matthes. J.J. - (Treasurer)
Phoenix Gypsum Co., Inc. - President and Director.
Bragg. J. G. (Sales Manager) not listed.
Haskins & Sells. Accountants
Boettcher. C. K. - (Director) - President and Director of Boettcher Corp.,
Denver, Colo.
American Crystal Sugar Co. - Chairman of Board, Chairman of Executive
Committee and Director.
Boettcher & Co. - Chairman of Board and Director
Denver Tramway Co. - Director.
Denver & Intermountain Ry. - Chairman of Board and Director.
General Securities Co. - President and Director.
C. Boettcher Investment Co. - President and Director.
Fifteenth St. Investment Co. - President and Director.
New Markham Investment Co. - President and Director.
New Windsor Investment Co. - President and Director.
Big Horn Cattle Co. - President and Director.
84
Alpha Portland Cement Co., Easton, Pa. - 1938 (continued)
Boettcher C. K. (continued)
Brown Palace Hotel Co. - President and Director.
Dome Investment Co. - Vice-president and Director.
Ideal Corp. - President and Director.
Ideal Cement Co. - Vice-president, Treasurer and Director.
Sixteenth St. Realty Co. - President and Director.
Colorado Portland Cement Co. - Vice-president and Director.
Nebraska Portland Cement - Vice-president and Director.
Union Portland Cement Co. - Vice-president and Director.
Three Forks Portland Cement Co. - Vice-president and Director.
Oklahoma Portland Cement Co. - Vice-president and Director.
United States Portland Cement Co. - Vice-president and Director
Ritz Carlton Investment Co. - Vice-president and Direbtor
Denver Dry Goods Co. - Director.
Alpha Portland Cement Co. - Director
Rocky Mountain Motor Co. - Director.
Graysonia, Nashville & Ashdown Railroad - Vice-president and Director.
Moffat Coal Co. - Director
San Luis Valley Southern Railway - Vice-president and Director
Boettcher Realty Co. - President and Director
Cement Investors Inc. - President and Director
Potash Co. of America - Director
Struthers. Robert - (Director)
Wood, Struthers & Co. - partner.
Hans Rees' Sons, Inc., Ashville, N. C. - Director.
Yale & Towne Manufacturing Co. - Director
Alpha Portland Cement Co. - Director.
Porter. Louis H. - (Director)
Porter & Taylor - senior partner.
Yale & Towne Manufacturing Co. - General Counsel and Director.
Alpha Portland Cement Co. - General Counsel and Director.
Hans Rees' Sons, Inc. - General Counsel and Director.
Atlantic, Gulf & Pacific Co. - Director.
Lockhart. J. M. - (Director) not listed
Lockhart. J.H. - (Director)
Union Savings Bank - Director.
Union Trust Co. - Director.
Mellon National Bank - Director.
Lockhart Iron & Steel Co. - Vice-president and Director.
Pittsburgh Steel Foundry Co. - Director.
Alpha Portland Cement Co. - Director.
1929
Balance Sheet Data (Thousands of dollars)
Total assets
55,122
53,800
Bonded debt
Preferred stock
Common stock
Surplus
21,119
22,517
8,424
16,963
Net working capital
Operating Data (Thousands of dollars)
Net sales
Operating profit
Net income
Preferred dividends
Common dividends
20,497
22,517
8,360
17,419
19.347
2,316
2,737
1,485
1,124
16,700
1,848
2,106
1,450
1933
50,946
45,599
42,861
19,759
22,517
15,956
22,517
5,386
11,365
15,782
22,517
2,617
6,980
14,835
12,292
-
1934
1932
1931
1930
262
-
1935
1936
42,777
37,122
36,480
35,878
12,174
22,517
11,281
14,885
22,517
3,149
12,867
11,516
9,076
15,848
9,396
12,087
5,675
19,249
9,303
12,583
6,456
9,492
9,002
12,779
847
577
849
206
496
2,201
2,161
12,401
1,005
1,251
557
535
438
334
245
-
-
-
1,127
1,099
d$7.09
a$4.43
a$0.44
d$0.82
$2.91
$1.33
90
107
180
94}
6,386
2,318
-
891
79
- 1,998
1,404
1,137
786
112
-
$2.78
$1.46
d$2.96
110
108
101
75
78
72
40
34
73
18
11
27
20
-
466
1937
Other Financial Data
Earnings per share common
Preferred - high
Preferred - low
Common - high
Common - low
Other Data
Number of employees
Number of plants
Annual capacity
(Millions of barrels)
100
98
65
40
30
12
5/8
5
3 5/8
5 7/8
11
5/8
89
17 3/8
10 5/8
45
15
3,264
3,071
2,533
1,900
2,100
2,400
2,700
2,900
16
16
16
16
16
16
13
13
25
25
203
97
51
14
Number of stockholders
Preferred
Common
Plants:
Owns 13 plants: Ormrod (2), Fogelsville, New Castle, Pa., Sandt's Eddy, Pa., Mitchell, Ind., Oglesby, Ill.,
Mason City, Iowa, Iola, Kansas, Metaline Falls, Washington, Union Bridge, Md., Fordwick, Va., Birmingham,
Ala.; Owns 50.2 percent interest in Great Lakes Portland Cement Corp., which operates a plant at
Buffalo, N. Y.
Controls the Inland Portland Cement Co., Lehigh Lime Co., Eclipse Lighterage & Transportation Co., and
Allen County Supply Co.
Source: Moody's Manual of Investments.
86
LEHIGH PORTLAND CEMENT COMPANY
Allentown, Pennsylvania
President -- Joseph S. Young, Young Building, Allentown,
Pennsylvania.
Vice-President & General Manager -- R. R. Bear, Young
Building, Allentown, Pennsylvania.
Vice-President -- B. L. Swett, Young Building, Allentown,
Pennsylvania.
Vice-President -- B. H. Rader, 111 West Washington Street,
Chicago, Illinois.
Vice-President - John C. Bowen, Young Building, Allentown,
Pennsylvania.
Secretary -- C. C. Long, Young Building, Allentown,
Pennsylvania.
Sales Managers -- B. L. Swett, (Eastern Sales Manager),
Allentown, Pennsylvania; B. H. Rader, (Western Sales
Manager), Chicago, Illinois.
Accountants Certifying Statements -- Price, Waterhouse
& Company, 56 Pine Street, New York City.
Directors:
Joseph S. Young, Young Building, Allentown, Pennsylvania.
R. R. Bear, Young Building, Allentown, Pennsylvania.
George K. Mosser, Jr., Commonwealth Building, Allentown,
Pennsylvania.
B. F. Fackenthal, Jr., Riegelsville, Pennsylvania.
Robert A. Young, M. S. Young & Company, Allentown,
Pennsylvania.
Source: Poor's Register of Directors, 1938.
87
Lehigh Portland Cement Co. - 1938
Allentown, Pennsylvania
Young, Joseph S. - (President and Director)
Allentown Steam Heating and Power Co., (President and Director)
Great Lakes Portland Cement Corp., (Director)
Lehigh Lime Co., (President and Director)
Eclipse Lighterage and Transportation Co., (President and Director)
Inland Portland Cement Co., (President and Trustee)
Pennsylvania Water and Power Co., (Director)
Bear. R.R. - (Vice-President, General Manager and Director)
No other connections
Swett. B. L. - (Vice-President and Sales Manager)
No other connections
Rader, B.H. - (Vice-President and Sales Manager)
No other connections
Bowen, John C. - (Vice-President)
Great Lakes Portland Cement Corp., (Director)
Eclipse Lighterage and Transportation Co., (Director)
Long, C. C. - (Secretary ) - not listed
Price. Waterhouse and Co., Accounts
Mosser. George K. - (Director)
behigh Valley Trust Co., (Chairman of Board and Director)
Lehigh Brick Works, (Partner)
Lehigh Lime Co., (Director)
Inland Portland Cement Co., (Trustee)
Allen County Supply Co., (Director)
Eclipse Lighterage and Transportation Co., (Director)
Fackenthal. B. F. Jr., (Director)
Eclipse Lighterage and Transporation Co., (Director)
Lehigh Lime Co., (Director)
Inland Portland Cement Co., (Trustee)
Easton (Pa.) Trust Co., (Vice-President, Chairman Exec. Comm.
and Director)
Young. Robert A. - (Director)
M. S. Young and Co., (Partner)
Lehigh Valley Trust Co., (President and Director)
342 Madison Aven
1929
1930
Balance Sheet Data (thousands of dollars)
Total assets
55,625
57,675
Bonded debt
Preferred stock
17,996
17,996
-
-
New York City
1931
1932
1933
54,251
17,996
52,413
17,996
51,721
17.996
1934
51,763
17,730
-
-
1936
1935
-
44,695
12,000
-
1937
46,189
428
-
-
Common stock
Surplus
21,449
13,802
8,210
21,851
15,008
9.779
21,885
12,879
8,343
21,546
11,128
7,457
21,410
10,577
8,544
21,410
10,973
11,711
21,410
9,610
6,853
32,559
10,862
9,994
Net sales
28,370
6,200
4,950
2,485
27,038
6,130
4,540
2,529
20,087
2,556
1,358
2,357
11,109
10,852
1,091
13,649
2,162
102
667
14,085
2,437
1,048
21,249
5,208
3,914
-
157
626
18,516
4,238
2,893
1,947
$ 7.88
$ 7.19
$ 2.16
$ 3.02
61-7/8
35-1/2
$ 4.07
Net working capital
Operating Data (thousands of dollars)
Operating profit
Net income
Common dividends
-
197
- 1,436
-
313
Other financial data
Earnings per share
common
Common - high
low
102
75-3/8
62
48
49-1/2
16
d$ 2.29
d$ 0.16
$ 1.06
18
40
37%
3-5/8
6-1/8
18-3/8
$ 1.67
36-7/8
22-7/8
75
32
Other data
Number of employees
Number of plants
Annual Capacity
(millions of barrels)
3,800
10
24
Number of stockholders
Preferred
Common
Plants: Owns 10 cement plants located in New York, Pennsylvania, Kansas, Texas (2), Virginia, Indiana, Louisiana,
Alabama (2), and controls through stock ownership four others located in Cuba, Uraguay, Argentine and
Brazil. During 1936 domestic plants operated at 38.5 percent of capacity and foreign plants at 72 percent of capacity, an average of 48 percent of capacity.
Source: Moody's Manual of Investments.
89
LONE STAR CEMENT CORPORATION
342 Madison Avenue, New York City
President -- Charles L. Hogan, 342 Madison Avenue,
New York City.
Vice-President -- Harry C. Koch, 342 Madison Avenue,
New York City.
Vice-President -- Ejnar Posselt, 342 Madison Avenue,
New York City.
Vice-President -- Thorkild Avnsoe, 342 Madison Avenue,
New York City.
Vice-President -- Ragnar A. Hummel, 342 Madison Avenue,
New York City.
Vice-President -- John R. Dillon, 25 Broad Street,
New York City.
Secretary & Treasurer -- Hans H. Muehlke, 342 Madison Avenue,
New York City.
Accountants Certifying Statements -- Loomis, Suffern &
Fernald, 80 Broad Street, New York City.
Directors:
Charles L. Hogan, 342 Madison Avenue, New York City.
Leavenworth P. Sperry, Waterbury, Connecticut.
Rosser J. Coke, First National Bank, Dallas, Texas.
Henry J. Wolff, 25 Broadway, New York City.
Robert G. Stone, 75 Federal Street, Boston, Massachusetts.
John R. Dillon, 25 Broad Street, New York City.
Erle V. Daveler, 120 Broadway, New York City.
Louis H. Carter, 50 Church Street, New York City.
Irving M. Felt, 25 Broad Street, New York City.
Source: Poor's Register of Directors, 1938.
90
Lone Star Cement Corporation - 1938
Hogar, Charles L. - President, General Manager and Director.
Manufacturers Trust Company, New York City, Director.
Argentine Portland Cement Company, President and Director.
Uruguay Portland Cement Company, President and Director.
National Portland Cement Company (Brazil), President and Director.
CubanPortland Cement Corp. President.
Koch, Harry C. - Vice-president.
International Cement Coro. Vice-president.
Lone Star Cement Co., New York, Inc., Vice-president and Director.
Lone Star Cement Co., Texas, Vice-president.
Lone Star Cement Co., Indiana. Inc.: Vice-president and Director.
Lone Star Cement Corp., Vice-president.
Cuban Portland Cement Corp., Vice-president.
Posselt, Ejnar - Vice-president.
International Cement Corp., Vice-president.
Lone Star Cement Corp., Vice-president.
Lone Star Cement Co., New York, Inc., Vice-president.
Lone Star Cement Co., Indiana, Inc., Vice-president.
Lone Star Cement Co., Texas, Vice-president.
Avnsoe, Thorkild - Vice-president
Cuban Portland Cement Corp., Vice-president.
Hummel, Ragnar A - Vice-president.
Cuban Portland Cement Corp., Vice-president and Director.
National Portland Cement Co. (Brazil), Vice-president and Director.
Argentine Portland Cement Co., Director.
Uruguay Portland Cement Co., Director.
Dillon, John R. - Vice-president and Director.
Hayden, Stone & Co., Partner.
Continental-Diamond Fibre Co., Director.
Crocker-Wheeler Elec. Mfg. Co., Member Executive Comm. and Director.
Lone Star Cement Corp., Vice-president, Chairman Exec. Comm. & Director.
National Theatres Corp. Director.
Southern Phosphate Corp., Director.
Raybestos-Manhattan. Inc., Member Finance Committee & Director.
Twentieth Century-Fox Film Corp., Member of Executive Committee. and
Director.
American Agricultural Chemical Co., Director.
Curtis-Wright Corp., Member Executive Committee and Director.
Wright Aeronautical Corp., Director.
91
Lone Star Cement Corporation - 1938 (Continued)
Muehlke, Hans H. - Secretary and Treasurer.
Cuban Portland Cement Corp., Secretary-Treasurer & Director.
Loomis, Sufferns & Fernald, Accountants.
Sperry, Leavenworth P. - Director.
Scovill Mfg. Co., Treasurer, Comptroller & Director.
Hamilton Beach Mfg. Co., Vice-president and Director.
Waterbury Button Co., Director.
Citizens & Mfrs. National Bank, Director.
Waterbury Savings Bank. Director.
A. Schraders Son. Inc., Vice-president and Director.
Union Hardware Co., Director.
Lone Star Cement Co., Director.
American Hardware Co., Director.
Coke Rossar J. - Director
Coke & Coke. Senior Member.
Universal Mills, Fort Worth, Texas, Attorney, Vice-president & Director.
(First National Bank in Dallas, Dallas, Texas, Attorney.
Member Trust Committee & Director.
Dallas Ry. & Terminal Co., Director.
Lone Star Cement Co. (Texas) Director.
Automotive General Corp., Attorney, Secretary-Treasurer & Director.
International Cement Corp., Director.
Olmsted-Kirk Co., Dallas. Texas, Director.
(
Wolff, Henry J. - Director - Not listed.
Stone Robt. G. - Director.
Hayden, Stone & Co., Partner.
Adams Express Co., Member Board of Managers & Executive Committee.
American International Corp., Member Executive Committee & Director.
American Pneumatic Service Co., Director.
Amoskeag Co., Trustee.
Arlington Mills, Director.
Atlantic Gulf & West Indies S.S. Lines, Director.
Colombian S.S. Co., Director.
Eastern S.S. Lines, Chairman of Board,- Director.
International Cement Corp., Director.
Kennicott Copper Corp., Director.
Mathieson Alkali Works, Inc., Director.
Arthur D. Little, Inc., Director.
Waltham Watch Co., Director.
92
Lone Star Cement Corporation - 1938 (Continued)
Daveler Erle V. - Director.
Nevada Consolidated Copper Corp., Vice-president & Director.
Utah Copper Co., Vice-president, Treasurer, Assistant General
Manager & Director.
Bingham & Garfield Railway, Vice-resident. Treasurer & Director.
Nevada Northern Railway, Vice-president & Treasurer.
Butte & Superior Mining Co., Director.
Ray & Gila Valley R.R., Treasurer and Director.
Santa Rita Store Co., President & Director.
Ray Electric & Telephone Co., First Vice-president & Director.
Gibson Stores Co., President & Director.
Gallup American Coal Co., Vice-president, Treasurer & Director.
Lone Star Cement Corp., Director.
Carter, Louis H. - Director.
American Agric. Chem. Co., President & Director.
Felt, Irving M. - Director.
Adams Express Co., Vice-president.
Southern Express Co., Vice-president.
General Realty & Utilities Corp., Director.
60 E 2:2nd Str
1929
1930
Balance Sheet Data (Thousands of dollars)
Total Assets
Bonded debt
Preferred stock
Common stock
Surplus
Operating profit
Net income 1
Preferred dividends
Common dividends
1931
1932
1933
1934
share
per
common
Preferred - high
low
Common - high
1935
1936
1937
31,621
10,743
13,589
4,000
2,598
6,119
29,296
10,123
13,099
4,000
1,552
5,458
27,099
0,655
12,500
4,000
25,426
9,557
12,120
24,410
9,242
12,120
23,099
8,634
12,120
22,745
8,288
12,120
12,460
7,476
3,030
400
400
400
400
400
516
2,174
3,991
1,465
3,915
1,261
4,705
2,839
4,118
4,567
1,005
4,295
9,611
1,101
8,625
1,361
6,118
2,736
5,025
6,392
5,977
- 730
3,477
325
435
502
332
712
587
-1,359
250
28
- 1,276
- 1,866
4,642
- 1,098
- 1,675
-
-
160
-
692
-
797
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
d.$1.55
d.$0.91
d.$5.68
d.$6.85
d.$6.31
94
551
29
Other financial data
Earnings
Ner York City
31,869
11,564
13,589
4,000
1,936
5,591
Net working capital
Operating Date (Thousands of dollars)
Net sales
Cement Corporation
20
1/8
27
low
16
12
2
d.$3.85
32
g
L
3
2
2+
9
4
1
1
Other Data
Number of employees
Number of plants
Annual capacity
(millions of barrels)
Number of stockholders
Preferred
Common
1/8
d.$4.11
d.$2.74
-
-
32
30
74
76
12
18
28
15
7
2 7/8
5
3
10
12
44
24
1,500
8
12.2
1,834
3,808
Plants: owns 8 plants - 2 in Nazareth, Pa. 1 each in Bath, Pa., Portland Pt., N. Y., Richard City & Kingsport, Tenn.
Clinchfield, Ge., and Des Moines, Ia.
Subsidiaries: Dixie Sand & Gravel Coro. (Tenn.) Varcem Quarrier Corp. (Va.): Winterset Limestone Co. (Ia.).
1 After Federal income taxes but before survis adjustments.
Source: Moody's Manual of Investments.
94
PENNSYLVANIA-DIXIE CEMENT CORPORATION
60 East 42nd Street, New York City
Chairman of Board -- Victor N. Roadstrum, 60 East 42nd Street,
New York City.
President -- John A. Miller, 60 East 42nd Street, New York City.
Secretary & Treasurer -- George Kilian, 60 East 42nd Street,
New York City.
Vice-President & Sales Manager -- Walter S. Wing, 60 East 42nd
Street, New York City.
Vice-President & General Manager -- William H. Klein,
Nazareth, Pennsylvania.
Accountants Certifying Statements -- Price, Waterhouse & Company,
56 Pine Street, New York City.
Directors:
Edward P. Alker, 60 East 42nd Street, New York City.
Guy Cary, Shearman & Sterling, 55 Wall Street, New York City.
George Kilian, 60 East 42nd Street, New York City.
William H. Klein, Nazareth, Pennsylvania.
John A. Miller, 60 East 42nd Street, New York City.
Jansen Noyes, Hemphill, Noyes & Company, 15 Broad Street,
New York City.
T. R. Preston, Hamilton National Bank, Chattanoogs,
Tennessee.
Victor N. Roadstrum, 60 East 42nd Street, New York City.
Stanley A. Russell, Lazard, Freres & Company. Inc.,
15 Nassau Street, New York City.
Walter S. Wing, 60 East 42nd Street, New York City.
N. Baxter Jackson, Chemical Bank & Trust Company,
165 Broadway, New York City.
Source: Poor's Register of Directors, 1938.
95
Pennsylvania Dixie Cement Corp. - 1938
Roadstrum, Victor N. - Chairman of Board
Abercrombie & Fitch Co., Member Executive Comm. and Director.
Gotham Silk Hosiery Co., Director.
Clinchfield Coal Corp., Director.
Securities Investing Fund, Inc. New York City, Vice-president and Director.
Miller, John A. - President
Nazareth National Bank, Director.
Kilian, George - Secretary and Treasurer.
T
None
Wing, Walter S. - Vice-president and Sales Manager. - Not listed.
Klein. Wm. H. - Vice-president and General Manager - Not listed.
Price, Waterhouse and Company - Accountants - Not listed.
Directors
Alker, Edward P.
Anderson, Reilly & Company, Partner.
Bank of Great Neck. Director.
Cary, Guy
Air Reduction Company, Inc., Director
Alabama Great Southern R.R. Co., Director.
National City Bank of New York, Director.
National City Safe Deposit Co. Director.
Southern Railway Co., Director.
Virginia and Southwestern Railway Co., Director.
Noyes, Jansen
American Chain and Cable Co. Inc., Director.
Doehler Die Casting Co., Director.
Fishers Island Corp., Director.
White Sewing Machine Corp., Director.
Merritt-Chapman & Scott Corp., Director.
North American Cement Corp., Director.
National Horse Show of America, Inc., Treasurer and Director.
Madison Square Garden Corp., Director.
96
Pennsylvania Dixie Cement Corp. - 1938 (Continued)
Preston, T.R. -
Hamilton National Associates. Inc., President and Director.
Nashville, Chattanooga & St. Louis Railway, Director.
Provident Life & Accident Insurance Co., Director.
Ross-Meehan Foundries, Director.
Tennessee Electric Power Co., Director.
Standard-Coosa-Thatcher Co., Director.
0. B. Andrews Co., Director.
Hamilton National Bank, Knoxville Tennessee, Director.
U. S. Chamber of Commerce, Director.
Crown Cotton Mills, Dalton. Georgia. Director.
Russel, Stanley A. -
No other directorships.
Jackson, N. Baxter -
American Water Works & Electric Co., Inc., Director.
Chemical Safe Deposit Co., Inc.
North Star Insurance Co., Director.
General Reinsurance Corp., Director.
McCrory Stores Coro., Director.
Gulf, Mobile & Northern R.R., Director.
Standard Surety & Casualty Co., Director.
97
UNIVERSAL ATLAS CEMENT COMPANY
Subsidiary of U. S. Steel formed October 1, 1906 as the Universal
Portland Cement Co., name changed to present title after acquisition of
Atlas Portland Cement Co., . on January 1, 1930. Payment for the acquisition of this company was made in the form of 176,265 common shares of the
U. S. Steel Corporation.
According to S. E. C., U. S. Steel controlled 71.72 percent of the
voting power on May 2, 1935.
The Universal Atlas Cement Company operates nine plants located as
follows:
Hudson. N.Y.
Buffington, Ind.
Independence, Kans.
Northampton, Pa.
Duluth, Minn.
Leeds, Ala.
Universal, Pa.
Hannibal, Mo.
Waco. Texas
Annual productive capacity totaled 12,114,000 barrels.
Source: Moody's Manual of Investments.
98
UNIVERSAL ATLAS CEMENT COMPANY
208 South LaSalle Street, Chicago, Illinois
President -- Blaine S. Smith, 135 East 42nd Street,
New York City.
Vice-President -- A. C. Cronkrite, 208 South LaSalle Street,
Chicago, Illinois.
Vice-President -- George H. Reiter, 208 South LaSalle Street,
Chicago, Illinois.
Vice-President -- O. H. D. Rohwer, 208 South LaSalle Street,
Chicago, Illinois.
Vice-President -- A. O. Stark, 135 East 42nd Street,
New York City.
Vice-President -- F. L. Stone, 208 South LaSelle Street,
Chicago, Illinois.
Vice-President -- P. C. Van Zandt, 208 South LaSalle Street,
Chicago, Illinois.
Comptroller & Secretary -- O. N. Lindahl, 208 South LaSalle
Street, Chicago, Illinois.
Treasurer -- T. E. O'Connor, 208 South LaSalle Street,
Chicago, Illinois.
Accountants Certifying Statements -- Price, Waterhouse &
Company, 56 Pine Street, New York City.
Directors:
B. F. Affleck, 208 South LaSalle Street, Chicago, Illinois.
W. A. Irvin, United States Steel Corporation,71 Broadway,
New York City.
J. H. Kempster, Buffington, Indiana.
K. K. Knapp, 208 South LaSalle Street, Chicago, Illinois.
Blaine S. Smith, 135 East 42nd Street, New York City.
O. N. Lindahl, 208 South LaSalle Street, Chicago, Illinois.
Edward R. Stettinius, Jr., United States Steel Corporation,
71 Broadway, New York City.
Source: Poor's Register of Directors, 1938.
93
Universal Atlas Cement Co. - 1938
Smith, Blaine S. - (President)
Atlas Lumnite Cement Co., New York City, President and Director.
Republic Portland Cement Co., S. A., Havana, Cuba, President and Director.
Potomac Cement Storage Co., Washington, D. C., President and Director.
Walworth Co., New York City, Director.
Cronkrite, A. C. - (Vice-President) - Not listed.
Reiter, George H. - (Vice-President) - Not listed.
Rohwer, 0. H. D. - (Vice-President) - Not listed.
Stark, A. 0. - (Vice-President) - Not listed.
Stone, F. L. - (Vice-President) - Not listed.
Van Zandt, P. C. - (Vice-President) - Not listed.
Lindahl, O. N. - (Comptroller and Secretary)
Atlas Lumnite Cement Co., Auditor, Secretary, and Director.
O'Connor, T. E. - (Treasurer)
Atlas Lumnite Cement Co., Treasurer
Price, Waterhouse and Co. - (Accountants)
Affleck, B. F. - (Director) Not listed.
Irvin, W. A. - (Director)
American Iron and Steel Inst., Director.
American Bridge Co., Director.
American Steel and Wire Co. of N. J., Director.
Bradley Transportation Co., Director.
Canadian Steel Corp., Ltd., Director.
Carnegie-Illinois Steel Corp., Director.
Chickasaw Shipbuilding and Car Co., Director.
Chickasaw Land Co., Director.
Chickasaw Utilities Co., Director.
Columbia Steel Co., Director.
Cumberland Coal Co., Director.
Cyclone Fence Co., Director.
Fairfield Steel Co., Director.
Fairfield Utilities Co., Director.
Federal Steel Co., Director.
100
Universal Atlas Cement Co. - 1938 (Continued)
Irvin, W.A. - (continued)
H. C. Frick Coke Co., Director.
Gary Land Co., Director.
Illinois Steel Co., Director.
Isthmian Steamship Co., Director.
Lake Superior Consolidated Iron Mines, Director.
Michigan Limestone and Chemical Co., Director.
Minnesota Iron Co., Director.
Minnesota Steel Co., Director.
Morgan Park Co., Director.
National Tube Co., Director.
N. J. Steel and Iron Co., Director.
Oil Well Supply Co., Director.
Pittsburgh Steamship Co., Director.
Scully Steel and Iron Co., Director.
Seventy-One Broadway Coro., Director.
Sharon Coal and Limestone Co., Director.
Tennessee Coal, Iron and R. R'd. Co., Director.
Trotter Water Co., Director.
U. S. Coal and Coke Co., Director.
U. S. Steel and Carnegie Pension Fund, Director.
U. S. Steel Corp. of Del., Director.
U. S. Steel Products Co., Director.
Universal Atlas Cement Co., Director.
Universal Exploration Co., Director.
Virginia Bridge Co., Director.
Kemoster, J. H. - (Director). Not listed.
Knapp, K. K. - (Director)
Knapo, Beye, Allen and Cushing, Partner.
Carnegie Illinois Steel Corp., Div. Counsel.
Gary State Bank, Gen. Counsel and Director.
South Chicago Savings Bank, Gen. Counsel and Director.
Universal Portland Cement Co., Attorney and Director.
Clark Equipment Co., Attorney and Director.
Interlake Iron Corp., Gen. Counsel.
U. S. Fuel Co., Attorney and Director.
Stettinius, Edward R. - (Director)
National Industrial Conference Board, Member Executive Committee and
Director.
10:
Universal Atlas Cement Co. - 1937 (Continued)
T. A. Irvin - (continued)
Bradley Transportation Co., Director.
Canadian Steel Corp., Ltd., Director.
Carmegie-Illinois Steel Corp., Director.
Chickasaw Shipbuilding and Car Co., Director.
Chickasaw Land Co., Director.
Chickasaw Utilities Co., Director.
Columbia Steel Co., Director.
Cumberland Coal Co., Director.
Cyclone Fence Co., Director.
Fairfield Steel Co., Director.
Fairfield Utilities Co., Director.
Federal Steel Co., Director.
H. C. Frick Coke Co., Director.
Gary Land Co., Director.
Illinois Steel Co., Director.
Isthmian Steamship Co., Director.
Lake Superior Consolidated Iron Mines, Director.
Michigan Limestone and Chemical Co., Director.
Minnesota Iron Co., Director.
Minnesota Steel Co., Director.
Morgan Park Co., Director.
National Tube Co., Director.
New Jersey Steel and Iron Co., Director.
011 Well Supply Co., Director.
Pittsburgh Steamship Co., Director.
Scully Steeland Iron Co., Director.
Seventy-One Broadway Corp., Director.
Sharon Coal and Limestone Co., Director.
Tennessee Coal, Iron and R. R. Co., Director.
Trotter Water Co., Director.
United States Coal and Coke Co., Director.
United States Steel and Carnegie Pension Fund, Inc., Director.
Universal Atlas Cement Co., Director
Universal Exploration Co., Director.
United States Steel Products Co., Director
Virginia Bridge Co., Director.
J. H. Kemoster - (Director) - Not listed.
K. K. Knapp
Knapp, Beye, Allen and Cushing, Partner.
Carnegie Illinois Steel Corp. Div. Counsel.
Gary State Bank, Gen. Counsel and Director.
South Chicago Savings Bank, Gen. Counsel and Director.
Universal Portland Cement Co., Attorney and Director.
Clark Equipment Co., Attorney and Director.
Interlake Iron Corp., Gen. Counsel.
United States Fuel Co., Attorney and Director.
Universal Atlas Cement Co. - 1937 - (Continued)
0. N. Lindahl - (Director)
Atlas Lumnite Cement Co., (Auditor and Director)
Atlas Gypsum Corp., Auditor.
Edward R. Stettinius, Jr. - (Director)
United States Steel Corp. - Chairman Finance Committee and Director.
Essex Terminal Ry. - Director.
National Industrial Conference Board - Director.
102
103
Confidential
March 17, 1938
ity dear Mr. Jacksons
I attach hereto copy of a report of an Interdepartmental
Committee outlining a project for reducing the price of cement
as a first step in a program for lowering building costs. You
will note that one phase of is envisages the cooperation
of the Department of Justice as well as other Departments. Before
presenting this plan to the President for formal approval on
Monday, March 21, I should appreciate your writing me your re-
actions to this plan, and, if it meets with your approval,
indicating for the information of the President the approval
and cooperation of your Department.
Sincerely yours,
(Signed) Henry Morgenthau, Jr.
Non. Robert H. Jackson
Acting Attorney General
Washington, D.C.
Attachment (1) The Secretary has the original of the report.
The Treasury's copy is in Mr. G. C. Haas' office.
ND/fa
Typed 3/17'38
This letter was carried to Mr. Jackson by Mr. Oliphant at
11:10 A.M., 3/17'38 (Mr. O'Connell also there.)
104
THE SOLICITOR GENERAL
WASHINGTON
March 17, 1938
My dear Mr. Secretary:
I have examined the confidential copy of
the report of the Interdepartmental Committee pro-
ject for reducing the price of cement, particularly
the third paragraph thereof which relates to cooperation by the Department of Justice.
Personally, I think the plan an excellent
one and, while I have not had an opportunity to discuss it with Thurman Arnold, which I will do as soon
as he reaches here, I can promise you complete co-
operation of the Antitrust Division and of the
Department, as outlined in the memorandum.
Sincerely
The Honorable,
The Secretary of the Treasury
Washington, D.C.
acting allow Every
105
TO
SECRETARY OF STATE
WASHINGTON D.C.
DEPARTMENT OF STATE
WASHINGTON
STRICTLY CONFIDENTIAL
March 18, 1938
My dear Mr. Secretary:
I have had laid before me at your request the question of a possible re-opening of the trade agreement
with Belgium for the purpose of reducing further the duty
on cement, as one element in the program on cement prices
which you expect to lay before the President.
I am wholly in accord with the general objectives
of this program. It would be technically possible to
announce the re-opening of the Belgian agreement with
reference to cement in connection with announcement of in-
tention to negotiate general provisions for that agreement.
I strongly doubt its feasibility, however, for two reasons,
namely, (1) the maximum contribution which could be made
by this method to a reduction of domestic cement prices
would be negligible, and (2) since such action could not
significantly
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
10S
-2significantly contribute to your objective, it would not
seem to justify the difficulties that almost certainly
would be created for the trade agreements program.
In connection with the first of these points, I believe the following brief summary will indicate conclusively
to you that further possible tariff action would have only
little significance in a few areas in the United States
and would Jer of no significance whatever throughout most
of the country.
The duty on portland cement was reduced from 6 cents per
one hundred pounds to 4.5 cents per one hundred pounds in the
Belgium Trade Agreement, effective May 1, 1935. The maximum
duty reduction that could still be made under the Tariff Act
of 1930 would be a reduction of 1.5 cents per pound, which
would leave a duty equivalent to 14 percent ad valorem. (The
present duty is equivalent to 21 percent ad valorem.)
Imports into continental United States, valued at about
$1,000,000 annually in 1936 and 1937, are entered and consumed chiefly at three seaboard points, Boston, New York
City, and Florida. Inland penetration of imports is prevented by heavy transportation costs. Imports are equal to
less than 2 percent of United States production and less than
3 percent of the production in the Coastal States in which
they are partially competitive.
Even with free entry, which could not be obtained except
107
-3cept by congressional action, there could be no appreciable
penetration of imports into interior markets because of the
limitation of railway transportation costs.
The maximum possible additional reduction in the rate
of duty on cement might increase to a limited extent the
competition from imports at certain border points. But
such a reduction would not even be as great as the usual
railway switching charge in carload lots within metropolitan centers on the seaboard.
To re-open the Belgian Agreement would be inopportune
at this time because of negotiations which are now active.
Numerous domestic interests have been greatly agitated
by opponents of the trade agreements program over possible
concessions in the agreements now pending with the United
Kingdom, Canada, and Turkey, and I believe that it would
be unwise to add to such opposition, unless there is some-
thing substantial to be gained thereby. Furthermore, to
re-open an agreement already in effect for one commodity
would give rise to a whole series of demands that that
agreement and other agreements be re-opened with respect
to other commodities with a view to increasing rather than
decreasing rates of duty. The importance of the United
Kingdom and Canada in the trade of this country far outweighs any advantages to be achieved by re-opening the
Belgian
108
-4Belgian Agreement. In the negotiation of these agreements
and in any future negotiations we shall be glad to cooperate
in all practicable ways toward attaining the objectives
of the President and yourself with respect to prices of
building materials.
Sincerely yours,
0
109
THE SECRETARY OF THE TREASURY
WASHINGTON
March 21, 1938.
MEMORANDUM TO THE PRESIDENT:
Accompanying this memorandum is a report prepared by
a Committee designated by me to investigate and report on
the possibilities for an immediate drive on cement.
I concur wholeheartedly in the recommendations of the
Committee and, if you also concur, will you please so
advise me. A summary of the Committee's recommendations
Mt.
is appended to the report, with a space provided thereon
for your approval if you do approve and are willing that
we proceed along the lines indicated.
Secretary of the Treasury.
110
SUMMARY OF RECOMMENDATIONS OF COMMITTEE ON CEMENT
1. Cement requirements for all Government agencies to be
contracted for by the Procurement Division of the Treasury Department,
thus obtaining the benefits inherent in large-scale buying.
2. Increase the amount of cement to which the Federal Government
price,as a maximum, applies by requiring successful bidders on contracts
for cement for the Federal Government to make the price given to the
Government available to any and all people and agencies using cement on,
or supplying cement to, projects for which the Government is paying in
whole or in part. It will be the duty of the various Departments and
agencies of the Government to see that the contractors and other people
concerned do not buy cement at a price in excess of that at which it would
be obtainable under the Federal Government bid.
3. Grand Jury Investigations by the Department of Justice should
facts developed in negotiating cement contracts warrant it (this has been
taken up with the Department of Justice and they are in complete accord).
APPROVED: March 21, 1938.
111
March 25, 1938
Neurorandum to the Secretary:
Subject: Consolidated Contract Cement
Immediately upon receipt of memorandum of March 21, 1938 with regard to
cement, the heads of all government departments and independent establishments
were furnished by circular letter with a brief outline of the action to be
taken instructing then to make no contracts, to report every purchase of cement,
whether made for immediate use or under term contracts which certain of then
had in effect.
A conference was then called in the Procurement Division of representatives
of the principal departments, such as Far, Navy, Interior, Agriculture, Veterans
Administration, District of Columbia Government, and Tennessee Valley Authority
from whom was ascertained their past procedure together with their probable requirements. From these data a conference was held with the Bureau of Mines and
the Bureau of Standards, as a result of which specifications are being prepared
and requests for bids will be issued on or about March 30, being advertised for
opening on April 15. As these proposals must go to the West Coast and return
this is the earliest date that the opening can be held.
The proposals will invite bids on the basis of f.o.b. mills only, in carload
lots which it is estimated will amount to approximately 3,000,000 to 5,000,000
barrels and for approximately 500,000 to 750,000 barrels in less than carload
lots during a period of four months from date of contract.
The country will be divided into districts as far as practicable to allow
for consideration of freight rates.
The proposals will be submitted to all cement companies throughout the
United States, about 90 in all, of whom probably 75 are, or were, members of
the Cement Institute, the remainder being so-called Independents. The 75
companies nor members of the Cement Institute control and operate 150 cement
aills in 34 states, and the non-member companies operate 15 millasin 12 states.
The Reclamation Service is sending a representative from Denver to confer
with us concerning cement requirements of large projects in the Western Area in
which they are interested. Similar action is being taken by T.V.A.
Director of Procurement.
112
March 26, 1938
My dear Mr. Presidents
No have today transmitted to the Department
of Justice Mr. Oliphant's suggestions for a proposed
message on the subject of monopolies. In this draft, a
copy of which is enclosed, is included the recommendations
of your Interdepartmental Committee on Banking on the
subject of bank holding companies.
Faithfully yours,
(Signed) Wayne C. Taylor
Acting Secretary
The President
The White House
HEGIS Typed 3/25/38
113
MAR 2 6 1038
Dear Bob:
The President's Interdepartmental Committee on Banking
agreed on the text of the portion of his proposed message on
aonopolies deeling with bank holding companies. The Secretary
sent this to the President who returned it to him with the
direction that the monopoly message be prepared and forwarded to
Warm Springs, you to contact the Attorney General.
I enclose herewith a draft of a message all of which is
my personal suggestion except the portion dealing with bank holding
companies. The part beginning "The establishment and meintenance
on page 7 and ending "served by holding company banks* on page 8
is in the exact words agreed to by the President's Interdepartmental Committee on Banking.
Pursuant to the Secretary's request, a copy of the
enclosure has been sent to the President.
Sincerely yours,
(Signed) Herman Oliphant
Hon. Robert H. Jackson
Acting Attorney General
Department of Justice
Washington, D. C.
Enclosure
NOTE: This letter was read and
Sec'y Morgenthan
after approved the by second Staff
HO/L Typed 3,266388
on 3/25/38.
Meeting
114
Final draft 3/26/38
DRAFT OF ANTITRUST AND BANK HOLDING COMPANY
Is my message of January 3, I said I expected later to address
the Congress in a special message on the relationship of government
to certain practices of business. I commerated practices which most
people believe should be ended, and pointed out that, when attacks
are made on certain wrongful business practices which are scrupulously
avoided by all businessmen and bankers intent on the persuit of good
citisenship, there are those who are eager to call this an attack on
all business. I said then and I say now that this is wilful deception
which will not long deceive.
Our people have set their faces against undne concentration of
wealth and economic power since the Government was founded. Washington
bitterly inveighed against monapolies. Jefferson feared the encroachsents of an industrial organization that would reduce the abundant
opportunities of free enterprise. Jackson challenged the ruthless power
of the few over the many concentrated in those who controlled and misused
the United States Bank. Lincoln held the money power at bay while fighting for the preservation of the Union. Theodore Roosevelt attacked mal-
feasance of great wealth in all quarters.
Behind Wilson lay a century of struggle to preserve industrial
democracy as the only environment in which political democracy could
survive, and, with his election, the forces championing the rights of
the many as against the few had at last been marshalled for the decisive
battle against the autocracy of monopolies which threatens to destroy
- -2-
115
that abundance of modest opportunities for the many, and so to destroy
the American way of life. But the cataclyss of the World Tar turned
his and the forces he led off the main course. We are now at the end
of that detour and can now move forward against those uncervented concentrations of wealth and economic power which must be reduced to keep
open the highroad along which lies the destiny of democracy in America.
We have taken up the unfinished work of Andrew Jackson and Weedrew Wilson
in the new moral climate which TO have in America today.
Undue concentration of wealth and economic power has many phases
and manifests itself in many ways. Those to which I would direct your
attention today are monopolistic organisations and practices in the
fields of industry and banking.
The problem of somopolies and of combinations and other arrange-
sents for fixing prices and otherwise stifling competition should be
freakly recognised as but one part of the larger problem of current
lawlessness - the lawlessness of a relative few - and it should be
dealt with as such. Consideration of collateral phases of the general
problem should not delay dealing effectively with this central aspect
of the growing strangulation of competition.
Such combinations and practices have been condemned for centuries
in Anglo-Amerienn law and government, and the record of the struggle
of public authority against then runs back to the Year Books of the
Thirteenth Century. Scattered throughout American history are easet-
sents of legislatures and decisions of courts labeling them unlesfal,
-,-
11S
and this age-old attitude was embodied in Federal law by the easetsent of the Sherman Act almost 50 years ago.
Our historic position on this question is not to be lightly
altered. Some today, inpatient with immediate difficulties and
unmindful of the riches of wisdow to be distilled from our centuries
of experience with this problem, speak of regulating monopolies.
They would allow those who should compete to fix prices if they did
not fix them too high. and would permit this and other restraints
on competition if they net some vague standard of reasonableness.
To heed such novel counsel and to abandon ancient landmarks for
such untried compromises with economic lawlessness would be no part
of wisdom. The fight, as old as lawlessness itself, must go on. It
must be won. And it can be if we improve our weapons as our experi-
once in their use has taught us they can be improved. Moreover, this
more determined fight with better weapons can be undertaken with the
support of present wide-spread public disapproval of lawlessness of
all kinds in all quarters.
The more effective weapons needed are of two sorte. In some
cases, the substentive law condeening . particular sonopolistic organ-
isation or practice is clear and explicit enough, but the difficulties
of investigation, proof and enforcement largely stay the Government's
hand. More effective procedures and sanctions are needed. The abasdant experience of the Department of Justice and the Federal Trade
Commission with these difficulties will afford an ample basis on which
-4to formulate then. Simplifying the problem of detection and proof,
and improving the effectiveness of sensitions to discourage violations
and to compel compliance with judgements and decrees a avait legisletive resourcefulness guided by experience.
But our major problem in devising more effective weapons to put
down unlawful restruints on competition is that of returning to the
policies and objectives embodied is the underlying Federal legislation
beginning with the Sherman Act, and of erecting upon these general
à series of specific provisions which will serve the twofold purpose of arming the law-enforcement agencies of the Federal
Government with a code of substantive low which they can effectively
enforce and of explicitly advising the business community what specifie types of conduct are prohibited.
The general policies and objectives of our Federal legislation
in relation to sonopolistic organisations and practices and to other
restroists on competition should not be in doubt. They are set forth
in most comprehensive terms in the Shorean Act, which sweeps in all
contracts and combinations in restrict of trade, and in the Federal
Trade Commission Act, which condeens all unfair methods of competi-
tion. But our experience with these ensetments at the heads of the
courts demonstrates that specification, such as was begun in the
Clayton Act, is necessary to make these policies and objectives offeetive.
117
118
-5Accordingly, it is suggested that the Congress do two things. First,
that it go through all of the decisions purporting to construe our antianopoly legislation which have pared off bit by bit the area of condenned conduct that they were intended to embrace. Each of these de-
cisions should be carefully serutimised and if, is the light of experience,
such narrowing of Federal control seems to have been unwise, then, by
specific ensetment, that decision should be changed. In the second place,
each business organisation and practice, which the unreviewed decisions
of the Federal Trade Commission have condomed, should be carefully exanimed, and, if that decision seems sound and wholesome, there should be
added to the effectiveness of condemnation by the Federal Trade Commission
the potency of explicit statutory condometion.
This two-fold undertaking onn give us immediately a specific code
of law covering most of this field. We know now what we want to do about
lawlessness therein. Uncertainty is limited to the periphery of this
expanding area of condemned conduct. Attempting definitive legislation
covering these nerrow outer limits sould not be verrented at this time.
Instead the Federal Trade Commission should be adequately equipped to
continue its serutiny of business conduct and to go forward with the
gradual process of identifying novel and additional practices which
should be stopped. At a later time, another Congress eas incorporate
these new prohibitions into detailed and explicit legislation. Thus,
step by step, will the law advance as the need arises and as experience
guides.
-6-
119
Beyond these threshhold problems celling for preapt and specific
answers, is the broader task of dealing with those conditions that
have accelerated the suppression of competition. The use of otherwise
lawful legal forms and of artificial seens to throttle cospetition require attention. From this standpoint, we should reexamine our patent
laws and the laws governing the organisation and intertying of corpo-
rations. The impact of Federal taxes on the over-eleberation of ear-
porate organisations serits attention. The tariff treatment of articles
that are being monopolised needs serutiny. Strategical control of credit
to foster monopolies should not be negleeted, and other underlying causes
and conditions whose tendencies are to BAFFOW opportunities by destrey-
ing small businesses call for consideration.
Turning now from the general problem of the unwarranted extension
of economic power over the processes of trade and industry, there has
been a development in our banking system that seems to hold elements
of very serious danger to our economic life. This development is the
extension of bank holding companies.
It is hardly necessary to point out the great economic power that
sight be wielded by a group which may succeed in acquiring domination
over beaking resources in any considerable area of the country. That
power becomes particularly dangerous when 11 is exercised from a dis-
tance and notably so when effective control is maintained without the
responsibilities of complete overship.
-7-
120
We have goos the multiplied evile which have arises from the holding company system in the ease of public utilities, where a small simority
ownership has been able to dominate a far-flung system.
To do not want these evile repeated in the banking field, and we
should take steps now to see that they are not. It is not a sufficient
assurance against the future to say that no great evil has yet resulted
from holding company operations in this field. The possibilities of
great harm are inherent is the situation.
Both the Congress and the legislatures of & number of the states
have deemed it wise to place limits on branch beaking, but adequate limits
have not been placed on the holding company system, which accomplishes a
similar result without a similar measure of responsibility, and permits,
with no greater capital investment, domination of a such Breader field.
The establishment and maintenance of a sound banking system which
would serve the public interest have been a constant objective of this
Administration. In furtherance of this objective Congress should again
give consideration to the bank holding company problem, and determine
in what manner existing laws, including legislation dealing with these
companies enacted during this Administration, should be strengthened.
I recommend that the Congress emect at this session legislation
that will effectively control the operation of bank holding companies
and prevent holding companies from acquiring control of any more banks,
--directly or indirectly, or beaks controlled by holding companies from
establishing any more brenches, and that will make it illegal for a
holding company, OF any corporation or enterprise is which it is
financially interested, to borrow free or sell securities to a bank
in which it holds stock.
Believing it to be a sound principle of government, I recommend
that this beak legislation aske provision for the gradual separation
of banks from holding company control or overship, allowing a reasonable time for this accomplishment, time enough for it to be done in an
orderly asaner and without causing inconvenience to communities served
by holding company banks.
0
It is in the interest of no group or close of our people, but
in the public interest, that I commend to your attention these grosing evils of undue concentration of wealth and economic power in
industry and banking. While government is irresolute, they grow. Let
us, by opposing, end them - and and them now. The determination to
do this is but the will to serve the ends of democracy and thus the
public welfare.
NO/L
Typed 3/26/38
12:45
COPY
121
THE WHITE HOUSE
WASHINGTON
Warm Springs, Ga.,
March 28, 1938.
MEMORANDUM FOR
THE SECRETARY OF THE TREASURY
That is an amazingly interesting letter written by the cement
man in 1934. If you want to arrange a conference with some of
the leading cement people, I would
be glad to have it.
F. D. R.
123
THE SECRETARY OF THE TREASURY
WASHINGTON
March 24, 1938
My dear Mr. President:
The inclosed correspondence was given
to us from the files of the Federal Trade
Commission.
I was particularly interested in this
correspondence because it shows that as far
back as 1934 you were trying to get the cement
industry to give the Federal Government an
F. 0. B. Mill price.
I hope that this time you will be suocessful in getting the cement industry to see
the light.
Yours sincerely,
The President,
Warm Springs, Georgia.
3-22-38
FROM: MR. O'CONNELL'S OFFICE
124
Mr. Oliphant
:
The attached letter, read into the
record in the cement case before the
Federal Trade Commission, is of interest.
The background, as given to me at the
F. T. C., is as follows:
In January, 1934, the N. R. A.
Administrator wired the Code Authority
to the effect that the President was
disturbed about the cement situation
and that he saw no reason why the
Government should not get F.O.B. mill
prices. The reply (written to Mr. Rader,
who was the Code Authority as well as
one of the 12 Trustees of the Cement
Institute) was very uncooperative and
led to the attached letter from Mr.
Treanor (now dead) who was also one of
the 12 Trustees of the Institute and
President of the largest cement company
on the West coast.
John
$30'0
Form B-72
125
THE CODE AUTHORITY
for the
PORTLAND CEMENT INDUSTRY
CHICAGO
RIVERSIDE CEMENT COMPANY
621 South Hope St.,
Los Angeles, Calif.
May 17, 1934
Mr. B. H. Rader, Regional Manager,
The Cement Institute
Room 748, 111 West Washington St.,
Chicago, Illinois
Dear Bud:
I have been thinking about your telephone call, from which I
get the impression that you sent a pretty unyielding telegram to
Murray -- as you say at least that you "did not intend to make any
concession before the 'trading' starts."
Now I would have conceded the mill price at once on Federal
business and I would have indicated a very open-minded attitude
toward the larger question; and this to create the impression,
deliberately, that something besides obstruction and short range
trading can be had out of the cement industry. I would have taken
advantage of thi great opportunity to lay a telegram on the Presi-
dent's desk which he would have read. We know he is watching the
cement question. I would have tried to strike a new note of COoperation and reasonableness, in contrast with what Ickes and the
Federal Trade Commission tell him about us. This could have been
the beginning of a real campaign for better public relations. I
don't think this chance is yet lost -- that is why I am writing
you. The only thing that I think has been lost is a neat opportunity
to score our point wi th the President himself.
As a member of this industry, my fate is to a considerable
extent in your hands, so that I have both a right and a duty to let
you know my views.
If we were a generally well regarded industry, we might be
justified in taking a stiff trading position upon the President's
request. However, we are anything but popular, we have a very
difficult position to maneuver out of, and we should not gamble un-
necessarily, running as we do the risk of a blast from the President's
office that may be ruinous.
The f.o.b. mill price on Federal business is of no real importance, is entirely practical to grant, can and I think will be forced
out of us -- therefore good trading would have been to give it without
any trading.
-2-
126
Now, when it comes to the larger question of mill price on
commercial business, much as I would like to think otherwise, I am
convinced that we will have to maintain our basing point position
and refuse the President's request. It will not be an easy refusal
to defend upon economic grounds. It will be almost impossible to
persuade an unsympathetic government that we are justified in our
refusal. But the least we can do is to prepare the way by an
initial showing of open mindedness, which might entitle our later
arguments to sympathetic hearing.
Do you think any of the arguments for the basing point system,
which we have thus far advanced, will arouse anything but derision
in and out of the government? I have read them all recently. Some
of them are very clever and ingenious. They amount to this however:
that we price this way in order to discourage monopolistic practices
and to preserve free competition, etc. This is sheer bunk and
hypocrisy. The truth is of course -- and there can be no serious,
respectable discussion of our case unless this is acknowledged --
that ours is an industry above all others that cannot stand free
competition, that must systematically restrain competition or be
ruined. We sell in a buyers' market all the time. The capital cost,
as distinguished from the out-of-pocket cost, of producing cement is
extraordinarily large. In free competition this capital cost is
whittled away and this means loss and ruin.
Now an industry in this fix needs some sympathetic understanding
on the part of the government. I think our case can be made out, but
it is not going to be done by the route of hard boiled short-range
trading. We are either dealing with a very important large question
of public relations or we are not. If we are not, we don't have to be
so careful of our methods. If we are, then we had better approach
the question in a large way; and the first approach is to acquire some
good will in governmental quarters. All that we need for our reasonable
prosperity is consistence with the President's original plan for NRA.
I haven!t seen the telegram you sent. This letter may be unwarranted and is pretty sure to make you sore, but it is based upon
your remark about "trading" and upon some general views of industry
policy which I heard advanced by some of the very influential men of
our industry.
Yours truly,
(Signed) John Treanor.
127
SPECIFICATIONS AND PROPOSALS FOR CEMENT
ISSUED MARCH 30, 1938
By The Treasury Department, Procurement Division
Branch of Supply, Washington, D. C.
CEMENT, PORTLAND
For the Period
May 1, 1938, to August 31, 1938.
For use by the executive departments and other establishments of the
Government of the United States of America: by the Government of the
District of Columbia; by any other governmental activity (except
Government commissary stores).
BID OF
ADDRESS
(To be submitted in duplicate)
OPENING 10 A. M., FRIDAY, APRIL 15, 1938
128
standard Form No. 81
word by the President
June 10. 1937
STANDARD GOVERNMENT FORM OF BID
(SUPPLY CONTRACT)
ORIGINAL Indicate which
DUPLICATE by erasure
To PROCUREMENT DIVISION.
Branch or Supply, 7th & D Sts., s.w.,
Washington, D. C.
In compliance with your invitation for bids to furwan materials and supplies listed on the accompanying schedule,
the undersigned,
& corporation organized and existing under the laws of the State of
& partnership consisting of
an individual trading as
of the city of
hereby proposes to furnish, within the time specified, the materials
and supplies at the prices stated opposite the respective items listed on the schedule, and agrees upon receipt of notice of the
acceptance of this bid (by the date beginning the contract period), to execute, if required, the Standard Government Form of
Contract (Standard Form No. 32) in accordance with the bid as accepted, and to give bond, if required, with good and sufficient
surety or sureties, for the faithful performance of the contract, within 10 days after the prescribed forms are presented for signature.
Discount will be allowed for prompt payment as follows: 10 calendar days
percent; 20 calendar days
percent; 30 calendar days percent; or as stated in the schedule. (Time will be computed from date of the delivery of the
supplies to carrier when final inspection and acceptance are of point of origin, or from date of delivery at destination or port of embarkation whenif final
inspection
those points, or from date correct bill or soucher properly certified by the contractor is
received
the latter
date is and
lateracceptance
than the dateare
of at
delivery.)
The undersigned represents that the prices in this bid are neither directly
nor indirectly the result of any agreement with any other bidder.
(Witness to signature)
(Full name of bidder)
IMPORTANT State below address to which orders should be forwarded.
(Address)
(
NOTE-See Standard Government Instructions to Bidders and copy of the Standard Government Form of Contract, Bid
prompt payment, bills should be certified
payment
therefor
not been received."
To and
insurehas
Performance
Bond, which may be obtained upon as follows: application. "I certify that the above bill is correct and just and that
129
CONDITIONS
1. Bids are solicited on the basis that acceptance of the offer to furnish any or all
the articles described there in shall constitute a contract between the bidder and the
United States Government, which will bind the bidder to furnish and deliver the articles for
which his offer is accepted, The placing in the mail of a list of awards. properly addressed
to
the bidder whose proposal is accepted, shall be considered a sufficient notice of acceptance.
of
2. Cement will be ordered from time to time in such quantities as may be needed. As
is impossible to determine the precise quantities of different kinds of cement described
in the Specifications and Proposals for Supplies that will be required during the contract
term. each bidder whose bid is accepted will be obligated to deliver all cement of the kind
it
contracted for, that may be ordered from him during the contract term.
3. There shall be a formal contract, signed by each bidder whose proposal is accepted,
and by the contracting officer on behalf of the United States of America and the Government
of the District of Columbia, which formal contract is to be considered as additional and
further evidence of the agreement made by the acceptance of the proposal. Such formal contract
shall be executed and returned by the contractor within 10 days after receipt thereof, and
shall be supported by a performance bond to the United States of America on U. S. Standard
Form or annual performance bond on U. S. Standard Form No. 35, in an amount not to
exceed $10,000. subject to the discretion of the contracting officer and shall be signed by
the contractor and a corporate surety, which has been approved by the Secretary of the Treasury,
or
two or more individual sureties, and be conditioned for the faithful performance of said
contract
provisions.
InDepartment
lieu of
pay
with
Treasury
or notes the United States. ("Bond's or notes of the UnitedCircular
States means 6,
935 bonds and be all deposited of its of (in conditions accordance and suroties No. on performance 154, dated bonds Feb.
"any public debt obligation of the United States and any bonds, notes or other obligations
which are unconditionally guaranteed as to both interest and principal by the United States."
Certified check drawn payable to the order of the Treasurer of the United States will be ao-
cepted when the bonds of contractors are signed by two individual sureties, in which event the
individual sureties will not be required to furnish affidavits of justification as to their
financial responsibility.
or
4. The contractor shall hold and save the Government, its officers, agents, servants,
employees, harnless from liability of any nature or kind, including costs and expenses,
or on account of any patented or unpatented invention, article, or appliance manufactured
used in the performance of the contract, including their use by the Government.
5. No oral statement of any person shall be allowed in any manner or degree, to modify
or otherwise affect the terms of these conditions, the specifications, or the contracts.
6. Successful bidders shall not use awards as a basis for advertising.
7. Proposals, after being prepared and signed in accordance with conditions herein given,
shall be placed in the special envelope provided, which shall be properly sealed, marked on
corner with the name and of the bidder and the class number, and
or delivered to the
the sent upper by mail, left-hand postage prepaid, personally, address Treasury Department, Procurement
Division, Branch of Supply Seventh and D Streets, SW., Washington, D. C. As openings commence
a,m, proposals, to receive consideration must reach the Division not later than that
on
the date of opening. An addressed envelope, which should be used for mailing, is enclosed herewith.
8. Representations and stipulations pursuant to Public Act No. 846, Seventy=fourth
Congress:
(a) The contractor is the manufacturer of or a regular dealer in the materials, supplies,
or to be manufactured or used in the of the contract.
or in the
of
the
contrac
deductio
not
less
than
the wages
the Secretary of Labor be the minimum wages for persons employed
work or in the articular of industries
persons employed
the in the
or furnishingof the
articles, anterials.
(b) All equipment
bymanufacture
contractor performance
in
articles,
or
are
or
under
the
That
this
as wagos shall to or contracts
therelating
of to
similar determined without supplies, by subsequent articles, equipment or rebate to used on any prevailing account, performance minimum currently will be
manufactured operating respect to in minimum the furnished locality which the or contract; materials, similar Provided, industrios supplies, however, or groups equipment stipulation such industries to with be
person the contractor in the manufacture or furnishing materials, to
pplies, have (c) been No the subject employed matter by apply of a only determination purchases by Secretary Labor. shall of be the permitted
articles. or equipment used in the performance of the contract such
in excess of 8 hours in any 1 day or in excess of 40 hours in any 1 week, unless Labor.
on is paid such applicable overtime rate as has been set by the Secretary of
(d) No male person under 16 years of age and no female person under 18 years of age furnishing and no
convict labor will be employed by the contractor in the manufacture or production or
any of the materials, supplies, articles, or equipment included in the contract.
(Over)
-3-
will any of the materials, supplies.
equipment to or under pricing conditions
fabricated articles, or in any plants factories, building, or health safety of employees engaged
or
(o) No part of the contract will performed or furnished under said contract be manufactured
in
or hazardous with safety, sanitary, and factory inspection
State
of
evidence
in
any
breach
Any
or
the
render
damages,
for
any
of
the
in
broach
each
the
into
person
fanale
the
of
formance
addition,
contract
have
shall
right
lotion
contracts
cancel
to
the
of
as
States
deductions,
account
contract
contract
America
of
States
purchases
any
States
stipulations
the
on
the
United
the
to
due
and
United
of
the
by
refunds,
effect in defining bid areas.
The zones and sub-gones numbered from 1 to 30-B follow herewith.
COD-
be
Attorney
ZONES AND SUB - ZONE:
TO-
General
ments
of
Secretary
the
of
of
the
underpal
or
order
on
and
of
may
or
bid zonos, therefore, do not define the areas in which deliveries any bo taken.
limits of the ones and sub-zones use has been made of the terms
Zone example,
includes New York State east of Utica.
State
which
straight
running
north
that
11-B
Similarly
Zone
south
Ution.
Tulsa:
Oklahous which is south of straight line running to east and
City of Tulma. In all cases, use of points of the compass his the same
of
to
employee
make
to
original
due
the
wages
agency
and
money
day
18
equal
the
sare
of
suns
Any
shall
per
under
of
in
the
and
of
contract.
the
of
refunds,
deductions
formance
States
Uni
the
to
the
laborer
octor
engaged
any
representations
forogoing
the
of
1table
other
age
each
each
subsection.
this
with
Liance
of
purchases from successful biddurs will be made from the contract-holding mill
Contract lusted that the contract price of the cemen plus the transportation
be LOVO than price clus transpor rtation from any other ding mill.
which the are formance insani of contract. Compliance part thereof is to be performed shall be prim-facie
laws
deposit have boop paid less than isun rates of pay as_set
who
the account such inna
were withhold
recover
ided,
shall entertained
clossormade
within
year
actual
employees
Territory
No.
notice for to such the payments contractor of the withholding or recovery of such iruns
Maine
by
of America.
New Hampshire
A
of
copy
work
post
stipulations
the
shall
and
in
prominent
a
shall
contractor
The
loyment
such
keep
read
and
records
Massachusetts
access
ly
are
as
Vermont
sito of the under contract the available for inspection by authorized representati
of Labor.
Connecticut
Rhode Island
B
New York (cast of Utica)
valuesales month during a the written
bidders will be required to furnish on
dollar tenth day of of each
the theamount
Western New York
report of mibitos comint and number upon which an award is received as a result of
should directed to the Treasury Department, Procurement Division.
(between Utica and
A
Rochester
C.
D.
Western New York
2
10. Unloss otherwise anterials,
specified by
the
bidder. itasishave
understood
and agreed
that onlyinUnited
and
supplies
been mined
or produced
the such
(West of Rochester)
B
articles, materials, and suppl as have been mafactured
from
or supplies, mined, produced,
the United States shall be delivered pursuant to
New Jersey
A
3
a
Pennsylvania
B
bid.
(Northampton County only)
tax heretoi imposed by the Congress which is
and
the
the
prices
number
contractor
as
such
articles
increased
will
bid
of
manufacture,
the
on
this
result
change
not
will
or
or
entured on vouchers (or invoices) as separate items,
the
sale
accord=
require
the
it;
also
of
the
any
right
declare
to
has
to
fiction
the
in
impose
taken
any
perform
the
upon
the
contractor
of
cont
(west of Altoona)
Delaware
Maryland
West Virginia
(east of Reyser)
do-
in
any
faithfully articles
Government
Western Pennsylvania
the
to
12. reserved to the officer to reject any
and all
bids,
to waive
if.
his
bid.
judgment,
part
(east of Altoons except
Northampton County)
of
supplios
decrease
charged
be
Eastern Pennsyl vania
charge,
for
or
the
Eastern Virginia
(east Richmond)
ficer,
affect or immir any right or claim of the
breach any of the coverants of the contract by the con' tractor.
agreed that when contractor has been declared in fault by the CODduring minder of the contract period the several executi
North Carolina
Western Virginia
B
then
due
data
7
amount
any
the
A
for,
and
the
justment
tax.
6
the
upon
this
after
producti
engress
5
tax,
the
by
4
sales
other
ingly,
130
the Government of the United States pay purchase the
articles defaulting
without
furnishing said default]:
that any excess in cost over the original contract price
(west of Richmond)
shall
Georgia
to said defaultin contructor and his suretion.
South Carolina
A
ZONES
For the purpose of receiving bids and making awards, the United Statos has been divided isto
zones, and zones have been, in many cases, subdivided into sub-zones listed below.
Florida
B
Eastern Tennessee,
A
(cast of Harriman)
Every mill any submit a bid on each item for the zone in which it is located and for the
Central Tennessee
9
any). Award
made to
the lowest acceptable bidder in the zone and/ of will
the be
contracti
officer.
(west of Harrison, east
B
of Murfreesboro)
and A company having 2010 than one mill in & Zone or sub-zone must state the exact location of,
West Tennessee
C
quantity offered each
whose
product
is being
offered.
The requirement that maximus
shall mill
stated
applies
to each
separate
mill.
(west of Murfreembaro)
(Continued)
(Over)
131
ZONES AND SUB-ZOSES
ZONES AND SUB-ZONES
Torritory
No.
Territory
No.
Alabama
Jofferson County (cast of
A
Indiana(north of
A
Ensley) only
Indianapolis)
17
B
Alabama - Jefferson County
10
Indiana
Kentucky (south of Indianapolis)
(west of Ensley) and all
B
other counties
A
Wisconsin
Mississippi
18
Louisiana
C
B
Minnesota
Arkansas
Illinois
A
A
Town (east of Cedar Rapids)
Southern Oclahona
19
(south of Tulsa)
B
11
Missouri (cast of
B
Jefferson City)
Northeastern Texas
north of Austin, east of
A
Town (west of Cedar Hapida)
A
Abilene)
20
B
Kebracks
Northwestern Texas
12
north of Austin, vest of
A
B
Abilene)
Missouri (west of
Jefferson City)
21
Southenstern Texas
Kansas (Leavenworth, Johnson,
and @yandotto Counties)
(south of Austin, east of
Corpus Christi)
A
B
Kansas (Allen, Anderson,
13
Southwestern Texas
Bourbon, & Linn Counties)
3
(south Austin, west of
Corpus Christi)
C
Kansas (except Coupties
named in Zones 21-4 & 21-3)
West Virginia
Oklahoma (North of Tulsa.)
(west of Kayser)
Southern Chlo (south of Marico,
A
cast of Portmenth
North Dakota
South Dakota
A
14
Southern Chio
22
3
(south of Marion,
Montana (north of Helena)
3
west of Portsmouth)
C
Montana (south of Helena)
Northeastern Ohio
(north of,Marion, east
A
A
of Lorain)
Colorado
(south of Denver)
New Mexico
15
23
Northwestern Ohio
B
B
(north of Marion
wost of Lorain)
Colorado (north of Denver)
Wyoming
A
A
Southeastern Michigan
(south of Muskegon, east
Idaho (north of Boise)
24
of Atrian)
B
16
Idaho (south of Boise)
B
Southmostern Michigan
(south of Muskegon, west
A
of
Washington (east of Yakims,
north of Newport)
Adrian)
a
Washington (east of Takina,
south of Newport)
C
Northern Michigan
(north of Maskegon)
(Continued)
(Over)
-6132
ZONES AND SUB-ZONES
In order that & successful bidder may not obligate himself to supply quantities in
of his capacity each bidder is instruct ted to state in his 51d the maximum
Territory
and excess guaranteed monthly deli very which be will agree to furnish from each mill. The quantity
which the bidden agrees to furnish will be cons Idered by the contracting officer in determin- quantity
ing whether awards shall be made on the zone or sub-zone basis.
Western Washington (west
SAMPLING AND INSPECTION
No.
of Yokina, north of Everett)
A
Sampling, inspections, and testing of cement to be furnished under contracts resulting
from this proposal will be made in accordance with Federal Specification SS-C-158.
Southwestern Washington
26
(west of Takina, south of
The ordering office shall have the right to waive inspection required under Federal
3
Everett)
Specification SS-C-158, and where inspection is waived the purchase order shall so state.
WAITER OF INSTECTION
Northwestern Oregon
(west, of Pondleton, north of
There inspection is waived the ordering office may call on the contractor for name
Salem)
A
27
facturer's specification,
certificate of compliance, certifying that the cement delivered complies with the
applicable
Southwost Oregon
DELIVERY
B
(west Pondlaton, south
of Salem
Cement under Specifications SS-C-191a and SS-C-201 shall be delivered to carrier wi thin
24 hours from receipt base order in cases where inspection is waived. and
Eastern Oregon
C
(cast of Pondleton)
California (north of Bakers
field, except Counties in
A
Zone 28-B)
20
cepent under Specifications SS-C-206 and SS-C-21 shall be livered to carrier within 15
calendar days from time of receipt of purchase order in cares where inspection is raived.
All cement
shall
be delivered
toiscarriers
within
8 purchaser.
hours of tine of release by Government
inspector
in cases
where
inspection
required
by the
The bidders shall be prepared to submit bins for test within 15 calendar days after
receibids.
of purchase order, or at such earlier date as the bidders may have specified in
their
California (Contra Costa,
B
Alameda, San Mateo, Santa Crus
Counties)
made
California (south of Bakers=
field, north of Santa Barbare
A
29
California (south of Santa
The in contractor such shall prepare the railroad cars or bances in which shipments are to be
responsi for manner as to prevent loss, damage, or deteriorati on in transit and shall
any such loss, damage, or deterioration due to improper preparation of the
railroad cars or bargos.
EDERAL SPECIFICATIONS
the Frocurement
Copies of Federal
Specifications referred to berein are obtainable upon application to
Division, Branch of Supply, Washington, D. C.
Barbara)
QUOTATION OF PRICES
Utah (Boxelder, Cache, Rich,
Morgan, & Sunmitt Counties)
spaces
provided
therefor the location of mills in each zone and sub-gone and the
shipping
points
involved.
the
Bids are requested f.o.b. carrier at bidder's mill only and bidderp will insert in
B
A
30
DUNEAGE
B
Utah (except Counties in 30-A)
Novnda
Payments
forthe
railorigin
shipments shell be on the basis of reilroad scale weights at point
or points
nearest
Arizona
a
securate targe delivering item from the rai lrond of not shirment weights The in issuing weight of invoices. dumange shell Payments be deducte for total
andcertified
shall based
on weights determined at the Con tractor plant, checked
by the duly designated agent of the ordering office.
QUANTITY TO BE PURCHASED UNITED CONTRACT
The
DESCRIPTION OF ITEMS IN SCHEDULES
Procurement
quant city be purchased Division will not undertake to furnish bidders an estimate of the
ever, experience Federal from successful bidlers during the 4-month contract period.
Government consumption activities during carrels, agencies the This for contract will be Seriod the sole indicates an source proximate
How
tone The and bidding schedule is so arranged that bidders my insert prices in each bidding
of gub-zone
opposite
item numbers, "1", "2", 33th and "4". Complete description
each of these
items follows:
specifi-
tati one herein mentioned, except contract for requirements period for covered cement by of existing quality contracts. covered
1. Cement: Portland: shall be in accordance with Federal Specification SS-C-191a
contracts. In addition successful to purchases bidders by shall Government agenc les for their own use under the proposed
2. Cement Portland,
high-ear
rength: shall be in accordance with Federal
Specification
SS-0-201.
tenant contract on or supplying cement to, projects furnish cement the construction to any and of all people and agencies provided using
3. Cement:
in part by or the Federal sybsequent to date of this contract and which which is financed
The Government, at prices not to exceed those stated are in the bid. in
effective will depend delivery entirely area on to the be obtained by the lowest bidders within zones and/or
price, sub-comes. plus cost Government of transportation agencies will to take relationally destination, delivery of from is lowest. low those bids mills of adjoining whose P.o.b. zones contract and/or
(Continued)
whole
Portland, moderatemheut-of-hardoning: shall be in accordance with
Federal Specification SS-C-206,
4. Cement:
Portland, photo-repisting:
shall be in accordance with Federal
Specification
SS-C-211.
BID F. O. B. MILL
(Bbls.)
PRICE PER BBL.
IN PAPER SACKS
MONTHLY
BID
DELIVERY
ZONE
ITEM
L.C.L.
NO.
2
1
3
4
2
1-A
3
4
2
1-B
3
4
I
BID ON
I
RAIL CONNECTION
PRICE PER BBL.
IN CLOTH SACKS
GUARANTEED
I
MAXIMUM
QUANTITY
I
MILL LOCATION &
2
2
3
4
CARLOAD
L.C.L.
LOTS
PRICE
CARLOAD
LOTS
1 TO
100 AND
MORE THAN
1 TO
100 AND
MORE THAN
99 BBLS.
MORE BBLS.
100 BBLS.
99 BBLS.
MORE BBLS.
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
134
BID F. O. B. MILL
(8bls.)
DELIVERY
ITEM
BID
ZONE
1 TO
99 BBLS.
2
2-A
-
3
4
2
2-B
3
4
2
3
3
4
2
3-A
3
4
IN PAPER SACKS
CARLOAD
L. C. L.
NO.
I
BID ON
I
RAIL CONNECTION
QUANTITY
I
MILL LOCATION &
PRICE PER BBL.
PRICE PER BBL.
IN CLOTH SACKS
GUARANTEED
MONTHLY
I
MAX IMUM
L.C. L.
LOTS
100 AND
MORE THAN
1 TO
MORE BBLS.
100 BBLS.
99 BBLS.
100 AND
MORE BBLS.
PRICE
CARLOAD
LOTS
MORE THAN
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
BID F. O. B. MILL
MILL LOCATION &
RAIL CONNECTION
MAXIMUM
QUANTITY
BID ON
(Bbls.)
GUARANTEED
PRICE PER BBL.
PRICE PER BBL.
IN CLOTH SACKS
IN PAPER SACKS
PRICE
MONTHLY
DELIVERY
ITEM
BID
ZONE
CARLOAD
L. C. L.
NO.
1 TO
99 BBLS.
CARLOAD
LOTS
L.C.L.
LOTS
100 AND
MORE THAN
1 TO
MORE BBLS.
100 BBLS.
99 BBLS.
100 AND
MORE THAN
MORE BBLS.
100 BBLS.
I
2
3-B
3
4
I
2
4
3
4
I
2
5
3
4
I
2
i
6
3
,
4
PER BBL.
IN BULK
CARLOAD
LOTS
BID O. B. MILL
DELIVERY
BID
ZONE
ITEM
IN PAPER SACKS
2
7
3
4
2
7-A
3
4
2
7-B
3
4
2
8
3
4
CARLOAD
L. C. L.
NO.
I
BID ON
(8bls.)
I
RAIL CONNECTION
PRICE PER BBL.
MONTHLY
I
MILL LOCATION &
PRICE PER BBL.
IN CLOTH SACKS
GUARANTEED
I
MAXIMUM
QUANTITY
1 TO
100 AND
MORE THAN
99 BBLS.
MORE BBLS.
100 BBLS.
CARLOAD
L. C. L.
LOTS
TO
99 BBLS.
PRICE
LOTS
100 AND
MORE THAN
MORE BBLS.
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
BID F. O. B. MILL
ZONE
8-A
2
3
4
8-B
2
3
4
9
2
3
4
9-A
2
3
4
PRICE PER BBL.
IN PAPER SACKS
CARLOAD
L.C. L.
NO.
I
DELIVERY
ITEM
I
(8bls.)
BID
I
BID ON
:
MILL LOCATION &
RAIL CONNECTION
PRICE PER BBL.
IN CLOTH SACKS
GUARANTEED
MONTHLY
I
MAXIMUM
QUANTITY
L.C.L.
LOTS
1 TO
100 AND
MORE THAN
1 TO
99 BBLS.
MORE BBLS.
100 BBLS.
99 BBLS.
PRICE
CARLOAD
LOTS
100 AND
MORE THAN
MORE BBLS.
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
BID F. O. B. MILL
BID ON
(8bls.)
PRICE PER 88L.
PRICE PER BBL.
IN CLOTH SACKS
IN PAPER SACKS
PRICE
MONTHLY
DELIVERY
BID
ZONE
ITEM
2
9-B
3
4
2
9-C
3
4
2
10
3
4
2
10-A
3
4
CARLOAD
L. C. L.
NO.
I
RAIL CONNECTION
I
QUANTITY
I
MILL LOCATION &
GUARANTEED
I
MAXIMUM
CARLOAD
LOTS
L. C. L.
LOTS
1 TO
100 AND
MORE THAN
1 TO
100 AND
MORE THAN
99 BBLS.
MORE BBLS.
100 BBLS.
99 BBLS.
MORE BBLS.
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
BID F. O. B. MILL
BID ON
(8bls.)
DELIVERY
BID
ZONE
ITEM
L. C. L.
NO.
1 TO
99 BBLS.
2
10-B
3
4
2
10-C
3
4
2
11
3
4
I
RAIL CONNECTION
I
QUANTITY
I
MILL LOCATION &
PRICE PER BBL.
IN CLOTH SACKS
GUARANTEED
MONTHLY
I
MAX IMUM
2
11-A
3
4
PRICE PER BBL.
IN PAPER SACKS
CARLOAD
CARLOAD
L.C. L.
LOTS
PRICE
LOTS
100 AND
MORE THAN
1 TO
100 AND
MORE THAN
MORE BBLS.
100 BBLS.
99 BBLS.
MORE BBLS.
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
140
BID F. O. B. MILL
ITEM
BID
ZONE
2
11-B
3
4
2
12
3
4
2
12-A
3
4
2
12-B
3
4
PRICE PER BBL.
PRICE PER BBL.
IN CLOTH SACKS
IN PAPER SACKS
CARLOAD
LOTS
L. C. L.
NO.
-
(8bls.)
DELIVERY
I
BID ON
I
RAIL CONNECTION
QUANTITY
I
MILL LOCATION &
GUARANTEED
MONTHLY
I
MAXIMUM
PRICE
CARLOAD
L. C.L.
LOTS
1 TO
100 AND
MORE THAN
1 TO
100 AND
MORE THAN
99 BBLS.
MORE BBLS.
100 BBLS.
99 BBLS.
MORE BBLS.
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
BID F. O. B. MILL
(8bls.)
DELIVERY
BID
ZONE
ITEM
2
13
3
4
2
13-A
3
4
2
13-B
3
4
14
2
3
4
PRICE PER BBL.
IN PAPER SACKS
CARLOAD
L. C. L.
NO.
I
RAIL CONNECTION
BID ON
I
QUANTITY
I
MILL LOCATION &
PRICE PER BBL.
IN CLOTH SACKS
GUARANTEED
MONTHLY
I
MAXIMUM
CARLOAD
LOTS
L.C. L.
LOTS
PRICE
1 TO
100 AND
MORE THAN
1 TO
100 AND
MORE THAN
99 BBLS.
MORE BBLS.
100 BBLS.
99 BBLS.
MORE BBLS.
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
142
BID F. O. B. MILL
(Bbls.)
DELIVERY
BID
ZONE
ITEM
IN PAPER SACKS
14-A
2
3
4
14-B
2
3
4
2
15
3
4
2
15-A
3
4
L.C.L.
CARLOAD
LOTS
L. C. L.
NO.
I
BID ON
I
RAIL CONNECTION
PRICE PER BBL.
MONTHLY
I
MILL LOCATION &
PRICE PER BBL.
IN CLOTH SACKS
GUARANTEED
I
MAX IMUM
QUANTITY
1 TO
100 AND
MORE THAN
1 TO
99 BBLS.
MORE BBLS.
100 BBLS.
99 BBLS.
100 AND
MORE BBLS.
PRICE
CARLOAD
LOTS
MORE THAN
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
143
BID F. O. B. MILL
PRICE PER BBL.
IN CLOTH SACKS
IN PAPER SACKS
PRICE
MONTHLY
ZONE
ITEM
L.C. L.
NO.
1 TO
99 BBLS.
15-B
2
3
4
16
2
3
4
16-A
2
3
4
I
DELIVERY
BID
I
BID
ON
(Bbls.)
PRICE PER BBL.
GUARANTEED
I
RAIL CONNECTION
MAXIMUM
QUANTITY
I
MILL LOCATION &
2
16-B
3
4
100 AND
MORE BBLS.
CARLOAD
CARLOAD
LOTS
L. C. L.
LOTS
MORE THAN
1 TO
100 BBLS.
99 BBLS.
100 AND
MORE THAN
MORE BBLS.
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
BID F. O. B. MILL
(8bls.)
PRICE PER BBL.
IN PAPER SACKS
IN CLOTH SACKS
MONTHLY
DELIVERY
BID
ITEM
ZONE
L. C. L.
NO.
1 TO
99 BBLS.
16-C
2
3
4
17
2
3
4
17-A
2
3
4
I
BID ON
I
QUANTITY
I
MILL LOCATION &
RAIL CONNECTION
PRICE PER BBL.
GUARANTEED
I
MAXIMUM
17-B
2
3
4
100 AND
MORE BBLS.
CARLOAD
L. C. L.
LOTS
MORE THAN
1 TO
100 BBLS.
99 BBLS.
100 AND
MORE BBLS.
PRICE
CARLOAD
LOTS
MORE THAN
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
145
BID F. O. B. MILL
(8bls.)
PRICE PER BBL.
PRICE PER BBL.
IN CLOTH SACKS
IN PAPER SACKS
PRICE
MONTHLY
DELIVERY
BID
ZONE
ITEM
L. C. L.
NO.
2
18
3
4
2
18-A
3
4
2
18-B
3
4
I
BID ON
I
RAIL CONNECTION
QUANTITY
I
MILL LOCATION &
GUARANTEED
I
MAXIMUM
2
19
3
4
CARLOAD
L. C. L.
LOTS
1 TO
100 AND
MORE THAN
1 TO
99 BBLS.
MORE BBLS.
100 BBLS.
99 BBLS.
100 AND
MORE BBLS.
CARLOAD
LOTS
MORE THAN
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
BID F. O. B. MILL
DELIVERY
BID
ITEM
ZONE
L. C. L.
NO.
1 TO
99 BBLS.
2
19-A
3
4
2
19-B
3
4
2
20
3
4
I
(Bbls.)
PRICE PER BBL.
IN CLOTH SACKS
I
BID ON
MONTHLY
I
RAIL CONNECTION
PRICE PER BBL.
GUARANTEED
I
MILL LOCATION &
MAXIMUM
QUANTITY
2
20-A
3
4
100 AND
MORE BBLS.
IN PAPER SACKS
CARLOAD
L. C. L.
LOTS
MORE THAN
1 TO
100 BBLS.
99 BBLS.
100 AND
MORE BBLS.
PRICE
CARLOAD
LOTS
MORE THAN
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
147
BID F. O. B. MILL
DELIVERY
BID
ZONE
ITEM
L.C. L.
NO.
1 TO
99 BBLS.
2
20-B
3
4
2
21
3
4
2
21-A
3
4
I
(Bbls.)
PRICE PER BBL.
IN CLOTH SACKS
IN PAPER SACKS
MONTHLY
I
BID ON
PRICE PER BBL.
GUARANTEED
I
RAIL CONNECTION
QUANTITY
I
MAXIMUM
MILL LOCATION &
2
21-B
3
4
100 AND
MORE BBLS.
CARLOAD
L.C. L.
LOTS
PRICE
CARLOAD
LOTS
MORE THAN
1 TO
100 AND
MORE THAN
100 BBLS.
99 BBLS.
MORE BBLS.
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
140
BID F. O. B. MILL
DELIVERY
BID
ZONE
ITEM
L.C.L.
NO.
21-C
2
3
4
2
22
3
4
2
22-A
3
4
2
22-B
3
(Bbls.)
IN PAPER SACKS
MONTHLY
I
BID ON
PRICE PER BBL.
IN CLOTH SACKS
I
RAIL CONNECTION
PRICE PER BBL.
GUARANTEED
I
MAXIMUM
QUANTIT
I
MILL LOCATION &
4
CARLOAD
L.C.L.
LOTS
PRICE
CARLOAD
LOTS
1 TO
100 AND
MORE THAN
1 TO
100 AND
MORE THAN
99 BBLS.
MORE BBLS.
100 BBLS.
99 BBLS.
MORE BBLS.
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
149
BID F. O. B. MILL
BID
ITEM
ZONE
L. C. L.
NO.
1 TO
99 BBLS.
2
22-C
3
4
2
23
3
4
2
23-A
3
4
I
(8bls.)
DELIVERY
PRICE PER BBL.
IN PAPER SACKS
IN CLOTH SACKS
MONTHLY
I
BID ON
PRICE PER BBL.
GUARANTEED
I
RAIL CONNECTION
MAXIMUM
QUANTITY
I
MILL LOCATION &
2
23-B
3
4
100 AND
MORE BBLS.
CARLOAD
L.C.L.
LOTS
MORE THAN
100 BBLS.
TO
99 BBLS.
100 AND
MORE BBLS.
PRICE
CARLOAD
LOTS
MORE THAN
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
150
BID F. O. B. MILL
(8bls.)
IN PAPER SACKS
MONTHLY
DELIVERY
BID
ZONE
ITEM
2
24
3
4
2
24-A
3
4
2
24-B
3
4
25
2
3
4
CARLOAD
L. C. L.
NO.
I
BID ON
PRICE PER BBL.
IN CLOTH SACKS
I
RAIL CONNECTION
PRICE PER BBL.
GUARANTEED
I
MAXIMUM
QUANTITY
I
MILL LOCATION &
L.C.L.
LOTS
1 TO
100 AND
MORE THAN
99 BBLS.
MORE BBLS.
100 BBLS.
TO
99 BBLS.
PRICE
CARLOAD
LOTS
100 AND
MORE THAN
MORE BBLS. 100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
101
BID F. O. B. MILL
(8bls.)
DELIVERY
BID
ZONE
ITEM
PRICE PER BBL.
PRICE PER BBL.
IN CLOTH SACKS
IN PAPER SACKS
CARLOAD
L.C.L.
NO.
L. C. L.
LOTS
1 TO
100 AND
MORE THAN
99 BBLS.
MORE BBLS.
100 BBLS.
TO
99 BBLS.
PRICE
CARLOAD
LOTS
100 AND
MORE THAN
MORE BBLS.
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
2
25-A
3
4
4
2
25-B
3
4
2
26
3
4
I
BID ON
MONTHLY
I
RAIL CONNECTION
QUANTITY
I
MILL LOCATION &
GUARANTEED
I
MAX IMUM
2
26-A
3
4
15%
BID F. O. B. MILL
DELIVERY
BID
ZONE
ITEM
L.C.L.
NO.
1 TO
99 BBLS.
2
26-B
3
4
2
27
3
4
2
27-A
3
4
I
(Bbls.)
IN PAPER SACKS
PRICE
MONTHLY
I
BID ON
PRICE PER BBL.
IN CLOTH SACKS
I
RAIL CONNECTION
PRICE PER BBL.
GUARANTEED
I
MILL LOCATION &
MAXIMUM
QUANTITY
2
27-B
3
4
100 AND
MORE BBLS.
CARLOAD
L.C.L.
LOTS
MORE THAN
100 BBLS.
TO
99 BBLS.
100 AND
MORE BBLS.
CARLOAD
LOTS
MORE THAN
100 BBLS.
PER BBL.
IN RULK
CARLOAD
LOTS
153
BID F. O. B. MILL
(Bbls.)
IN PAPER SACKS
PRICE
MONTHLY
DELIVERY
BID
ZONE
ITEM
L.C.L.
NO.
1 TO
99 BBLS.
27-C
2
3
4
2
28
3
4
2
28-A
3
4
I
BID ON
PRICE PER BBL.
IN CLOTH SACKS
I
RAIL CONNECTION
PRICE PER BBL.
GUARANTEED
I
MAXIMUM
QUANTITY
I
MILL LOCATION &
28-B
2
3
4
100 AND
MORE BBLS.
CARLOAD
L.C.L.
LOTS
MORE THAN
1 TO
100 BBLS.
99 BBLS.
100 AND
MORE BBLS.
CARLOAD
LOTS
MORE THAN
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
154
BID F. O. B. MILL
(Bbls.)
PRICE PER BBL.
IN CLOTH SACKS
MONTHLY
DELIVERY
BID
ITEM
ZONE
L. C. L.
NO.
1 TO
99 BBLS.
2
29
3
4
2
29-A
3
4
2.
29-B
3
4
I
BID ON
I
QUANTITY
I
MILL LOCATION &
RAIL CONNECTION
PRICE PER BBL.
GUARANTEED
I
MAXIMUM
2
30
3
4
100 AND
MORE BBLS.
IN PAPER SACKS
CARLOAD
LOTS
L. C. L.
PRICE
CARLOAD
LOTS
MORE THAN
1 TO
100 BBLS.
100 AND
99 BBLS.
MORE THAN
MORE BBLS.
100 BBLS.
PER BBL.
IN
RULK
CARLOAD
LOTS
155
BID F. O. B. MILL
MONTHLY
DELIVERY
BID
ZONE
ITEM
L. C. L.
NO.
1 TO
99 BBLS.
30-A
2
3
4
30-B
2
3
4
2
3
4
I
(8bls.)
PRICE PER BBL.
IN CLOTH SACKS
I
RAIL CONNECTION
BID ON
PRICE PER BBL.
GUARANTEED
I
MILL-LOCATION &
MAXIMUM
QUANTITY
2
3
4
100 AND
MORE BBLS.
IN PAPER SACKS
CARLOAD
L.C. L.
LOTS
MORE THAN
100 BBLS.
1 TO
99 BBLS.
100 AND
MORE BBLS.
PRICE
CARLOAD
LOTS
MORE THAN
100 BBLS.
PER BBL.
IN BULK
CARLOAD
LOTS
Address to which sacks may be returned
Price to be allowed for return of usable cloth sacks
Table of discounts, in addition to all other discounts, to be allowed by the contractor for large
quantities in excess of 200 barrels:
Bbls.
Item No.
Zone
$
per bbl.
157
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE.
Thursday, March 31, 1938.
Press Service
No. 12-84
Secretary Morgenthau announced today that, by direction of the President,
additional measures had been adopted to protect -legitimate bidders for Govern-
ment contracts against unfair trade practices and to insure free competition
among contractors and suppliers of material for Government construction or other
construction for which the Government supplies all or part of the funds.
The measures adopted follow rocommendations made by the President's interdepartmental price study group.
Effective April 1, the Procurement Division of the Treasury Department will
undertake the purchase of all cement to be used directly by Government departments
or agencies. In advertising for bids for cement the Procurement Division will
request bidders to agree to enter into on "open contract," under which contractors
on Government work and contractors on other work for which the Government supplies
all or a part of the funds may purchase cement at the pricos quoted to the Govern-
ment. Bidders for the cement contract or contracts will also be requested to
quote on the basis of delivery at the place of manufacture of the coment.
As an initial step in revision of the procedure with respect to construction contracts in which the Government has an interest, the Procurement Division
will give effect, beginning April 1, to a now policy in relation to bids for the
construction of Government buildings.
In the case of contracts for building construction proposals for which are
to be advertised after that date bidders will be asked to certify that there has
been no collusion with other bidders or prospective bidders in the preparation
of their bids and they will also be asked to presont similar assurances with
-2-
158
respect to subcontractors undertaking mechanical work on the building for the
general contractor.
In the event any evidence of collusion may be indicated,
both contractors and subcontractors will be asked to make records available so
that the Government may assure itsolf that no unfair and discriminatory trade
practices are boing pursued.
-000
159
MEMORANDUM
April 29th, 1938.
To:
The Secretary
From: Mr. McReynolds
An agreement was reached between the Director of
Procurement and the General Counsel this morning on the
form of an invitation for bids on cement for the State
of California. The quantity asked for is 250,000 bbls;
the deliveries to be made of specific amounts stated
covering the period from June until November. The bids
are invited f. O. b. mill - (1) for the entire quantity,
or (2) the quantity required in any one month, or (3)
units of 5,000 bbls each for delivery in any one month.
There are four separate projects on which this
cement will be used and it is unlikely that any bidder
will be able to identify the point of delivery for any
particular lot.
My
160
SPECIFICATIONS AND PROPOSAL FOR CEMENT
ISSUED
By the Treasury Department, Procurement Division
Branch of Supply, Washington, D. C.
April 29, 1938
CEMENT, PORTLAND, MODERATE-HEAT-OF-HARDENING
for
USE BY THE
EXECUTIVE DEPARTMENTS OF THE FEDERAL GOVERNMENT
IN CALIFORNIA
Bid of
Address
(To be submitted in duplicate)
To be opened at 10 a.m., May 12, 1938, at the office of the
Procurement Division, Branch of Supply, 7th and D Streets, SW.,
Washington, D. C.
--
161
standard Form No. 31
cloved by the President
Jane 10. 1987
STANDARD GOVERNMENT FORM OF BID
(SUPPLY CONTRACT)
ORIGINAL Indicate which
DUPLICATE by erasure
To PROCUREMENT DIVISION.
Branch of Supply, 7th & D Sts., s.w.,
Washington, D. C.
Is compliance with your invitation for bids to furnish materials and supplies listed on the accompanying schedule,
the undersigned,
corporation organized and existing under the laws of the State of
partnership consisting of
M individual trading as
of the city of
hereby proposes to furnish, within the time specified, the materials
and supplies at the prices stated opposite the respective items listed on the schedule, and agrees upon receipt of notice of the
acceptance of this bid (by the date beginning the contract period), to execute, if required, the Standard Government Form of
Contract (Standard Form No. 32) in accordance with the bid as accepted, and to give bond, if required, with good and sufficient
varety or sureties, for the faithful performance of the contract, within 10 days after the prescribed forms are presented for signature.
Discount will be allowed for prompt payment as follows: 10 calendar days
percent; 30 calendar days
percent; 20 calendar days
percent: or as stated in the schedule. (Time will be computed from date of the delivery of the
applies to carrier when final inspection and acceptance are at point of origin, or from date of delivery at destination or port of embarkawhen final inspection and acceptance are at those points, or from date correct bill or voucher properly certified by the contractor is
received if the latter date is later than the date of delivery.)
THE UNDERSIGNED REPRESENTS THAT THE PRICES IN THIS BID ARE
NEITHER DIRECTLY NOR INDIRECTLY THE RESULT OF ANY AGREEMENT
WITH ANY OTHER BIDDER.
(Witness to signature)
(Full name of bidder)
MPORTANT State below address to which orders should be forwarded
(Address)
NOTE- See Standard Government Instructions to Bidders and copy of the Standard Government Form of Contract, Bid
7 To and Performance Bond, which may be obtained upon application.
Tment insure prompt payment, bills should be certified as follows: "I certify that the above bill is correct and just and that
therefor has not been received."
-3 INVITATION
Sealed bids, in duplicate, are invited for the purchase of
Portland cement, moderate-heat-of-hardening, in paper sacks, for
use by executive departments of the Federal Government at such
point or points in the State of California as may be hereafter
specified. Bids will be opened at 10 a.m., May 12, 1938, by the
Procurement Division in Washington, D. C.
Bids will be received and considered for the (a) total amount
of 250,000 barrels shown in Schedule No. 1; (b) or for any or all of
the quantities shown in Schedule No. 2. Award may be made as the
interests of the Government may dictate.
162
163
-4SCHEDULE NO. 1
TOTAL QUANTITY BID
Article
Cement in paper sacks,
in accordance with
Quantity
Unit
250,000
Bbl.
Unit
price
Federal Specification
SS-C-206, delivery
f.o.b. cars at mill
location specified
below:
Deliveries to be made as follows:
Mill location
Rail connection
First month
40,000 Barrels
Second month
40,000 Barrels
Third month
45,000 Barrels
Fourth month
50,000 Barrels
Fifth month
35,000 Barrels
Sixth month
40,000 Barrels
Amount
-5-
164
SCHEDULE NO. 2
SPECIFIED QUANTITY BID
Item
Article
No.
Quantity
Unit
Cement in paper sacks,
in accordance with
Federal Specification
SS-C-206, delivery
f.o.b. cars at mill
location specified
below:
For delivery in
1.
First month
40,000
Bbl.
40,000
Bbl.
45,000
Bbl.
50,000
Bbl.
35,000
Bbl.
40,000
Bbl.
For delivery in
2.
Second month
For delivery in
3.
Third month
For delivery in
4.
Fourth month
For delivery in
5.
Fifth month
For delivery in
6.
Sixth month
Mill location
Rail connection
Unit
price
Amount
-
165
GENERAL CONDITIONS
1. Acceptance of bids. Bids are solicited on the basis that
acceptance of the offer to furnish any or all of the articles des-
cribed therein shall constitute a contract between the bidder and
the United States Government, which will bind the bidder to furnish
and deliver the articles for which his offer is accepted. The placing in the mail of a list of awards, properly addressed to the bidder
whose proposal is accepted, shall be considered a sufficient notice
of acceptance.
2. Bid guaranty. Guaranty will be required with each bid in an
amount not less than ten percent of the total price bid.
3. Execution of contract and performance bond. There shall be a
formal contract, signed by each bidder whose proposal is accepted, and
by the contracting officer on behalf of the United States of America,
which formal contract is to be considered as additional and further
evidence of the agreement made by the acceptence of the proposal. Such
formal contract shall be executed and returned by the contractor within
10 days after receipt thereof, and shall be supported by a performance
bond to the United States of America on U. S. Standard Form No. 25, in
an amount not less than 50 percent of the estimated aggregate payments
to be made under the contract and shall be signed by the contractor and
a corporate surety, which has been approved by the Secretary of the
Treasury, or two or more individual sureties, and be conditioned for
the faithful performance of said contract and all of its conditions and
provisions. In lieu of sureties or performance bonds there may be deposited (in accordance with Treasury Department Circular No. 154, dated
Feb. 6, 1935) bonds or notes of the United States. ("Bonds or notes of
the United States" means "any public debt obligation of the United States
and any bonds, notes, or other obligations which are unconditionally guar-
anteed as to both interest and principal by the United States.") Certi-
fied checks drawn payable to the order of the Treasurer of the United
States will be accepted when the bonds of contractors are signed by two
individual sureties, in which event the individual sureties will not be
required to furnish affidavits of justification as to their financial
responsibility.
or or
4. Patents. The contractor shall hold and save the Government,
its officers, agents, servants, and employees, harmless from liability
of any nature or kind, and for or on
of tured any patented unpatented including invention, cost article, expenses, appliance account manufac-
used in the
by the or
Government.
performance of the contract, including their use
5. Oral statements. No oral statement of any person shall be allowed in any manner or degree, to modify or otherwise affect the terms
of these specifications, or the contracts.
-2
166
Advertising.
basis6.for
advertising. Successful bidders shall not use awards as a
7. Proposals. Proposals, after being prepared and signed in
accordance with conditions herein given, shall be placed in an envelope which shall be properly sealed, marked on the upper left-hand
corner with the name and address of the bidder and the class number,
and sent by mail, postage prepaid, or delivered personally, to the
Treasury Department, Procurement Division, Branch of Supply, Seventh
and D Streets, SW., Washington, D. C. As openings commence at 10
a.m., proposals, to receive consideration, must reach the Division
not later than that hour on the date of opening. An addressed envelope, which should be used for mailing, is enclosed herewith.
8. Representations and stipulations pursuant to Public Act. No.
846, 74th Congress. It is understood and agreed that this bid is
submitted, and any contract awarded thereon in any amount exceeding
$10,000.00 will be performed, subject to the representations and
stipulations of Public Act No. 846, 74th Congress, and regulations
issued by the Secretary of Labor pursuant thereto, as follows:
(a) The contractor is the manufacturer of or a regular dealor in
the materials, supplies, articles, or equipment to be manufactured or
used in the performance of the contract.
(b) All persons employed by the contractor in the manufacture or
furnishing of the materials, supplies, articles, or equipment used in
the performance of the contract will be paid, without subsequent do-
duction or rebate on any account, not loss than the minimum wagos as
determined by the Secretary of Labor to be the provailing minimum wages
for persons employed on similar work or in the particular or similar
industries or groups of industries currently operating in the locality
in which the materials, supplies, articles, or equipment are to be nanufactured or furnished under the contract: Provided, however, That this
stipulation with respect to minimum wagos shall apply only to purchases
or contracts relating to such industries as have been the subject matter
of a determination by the Secretary of Labor.
(c) No person employed by the contractor in the manufacture or
furnishing of the materials, supplies, articles, or equipment used in
the performance of the contract shall bo permitted to work in excess of
eight hours in any one day or in excess of 40 hours in any one work, unless
such
personofisLabor.
paid such applicable overtine rate as has been set
by
the
Secrotary
(d) No nole person under 16 years of age and no female person under
18 years
of and labor willor
be or
employed
by the contractor
manufacture
of
any
in the age no production convict furnishing of the materials,
supplies, articles, or equipment included in the contract.
167
(e) No part of the contract will be performed nor will any of the
materials, supplies, articles, or equipment to be manufactured or furnished under said contract be manufactured or fabricated in any plants,
factories, buildings, or surroundings or under working conditions which
are insanitary or hazardous or dringerous to the health and safety of employees engaged in the performance of the contract. Compliance with the
safety, sanitary, and factory inspection laws of the State in which the
work
or part thereof
to be performed shall be prima-facie evidence
of compliance
with thisissubsection.
(f) Any breach or violation of any of the foregoing representations and stipulations shall render the party responsible therefor
liable to the United States of America for liquidated damages, in addition to damages for any other breach of the contract, in the sum of $10
per day for each male person under 16 years of age or each female person
under 18 years of ago, or each convict laborer knowingly employed in the
performance of the contract, and a sum equal to the amount of any deductions, rebates, refunds, or underpayments of wages due to any employee
engaged in the performance of the contract; and, in addition, the agency
of the United States entering into the contract shall have the right to
cancel same and to make open-market purchases or enter into other con-
tracts for the completion of the original contract, charging any additional cost to the original contractor. Any sums of money due to the
United States of America by reason of any violation of any of the representations and stipulations of the contract as set forth herein may be
withheld from any amounts due on the contract or may be recovered in a
suit brought in the name of the United States of America by the Attorney
General thereof. All suns withheld or recovered as deductions, rebates,
refunds, or underpayments of wages shall be held in a special deposit account and shall be paid, on order of the Secretary of Labor, directly to
the employees who have been paid loss than minimum rates of pay as set
forth in such contracts and on whose account such sums were withheld or
recovered: Provided, That no claims by employees for such payments shall
be entertained unless made within one year from the date of actual notice
to
the contractor
of the withholding or recovery of such sums by the
United
States of America.
(g) The contractor shall post a copy of the stipulations in a promi-
nent and rendily accessible place at the sito of the contract work and
shall keep such employment records as are required in the Regulations
under
the actofavailable
the Secretary
Labor. for inspection by authorized representatives of
9. Delivery reports. Successful bidders will be required to fur-
nish on the tenth day of each month a written report of the number of
barrels of cement and the amount in dollar value of sales during the
preceding month under each item upon which award is received as a
168
9
result of this proposal. The report should be directed to the Treas-
Department, Procurement Division, Branch of Supply, Washington,
D. ury C., and a copy of the report shall be furnished to the ordering
officer.
10. Domestic materials. Unless otherwise specified by the
bidder, it is understood and agreed that only such unmanufactured
articles, materials, and supplies as have been mined or produced in
the United States, and only such manufactured articles, materials,
and supplies as have been manufactured in the United States substan-
tially all from articles, materials, or supplies, mined, produced,
or manufactured, as the case may be, in the United States shall be
delivered pursuant to a contract awarded as a result of this bid.
11. Federal tax. Prices bid herein shall include any Federal
tax heretofore imposed by the Congress which is applicable to the
material on this.bid. If any sales tax, processing tax, adjustment
charge, or other taxes or charges are imposed or changed by the Con-
gress after the date set for the opening of this bid, and made applicable directly upon the production, manufacture, or sale of the supplies covered by this bid, and are paid by the contractor on the supplies herein contracted for, then the prices named in this bid will
be increased or decreased accordingly, and any amount due the contractor as a result of such change will be charged to the Government
and entered on vouchers (or invoices) as separate items.
12. Rejection of bid. The right is reserved to the contracting
officer to reject any and all bids, and to waive technical defects,
if, in his judgment, the interests of the Government shall require it;
also the right to declare any contractor in default if, in his opinion,
there has been at any time a failure to perform faithfully any of the
contract stipulations, or in case of a willful attempt to impose upon
the Government articles inferior to those required by the contract; and
any action taken by the contracting officer, in pursuance of this lat-
ter stipulation, shall not affect or impair any right or claim of the
United States to damages for breach of any of the covenants of the contract by the contractor. It is understood and agreed that when a con-
tractor has been declared in default by the contracting officer, thereafter during the remainder of the contract period the several executive
departments and other establishments of the Government of the United
States may purchase the articles covered by the contract of the defaulting contractor without furnishing said defaulting contractor orders
therefor, and that any excess in cost over the original contract price
shall be charged to said defaulting contractor and his sureties.
- 10 -
162
13. Shipment. Material furnished and delivered f.o.b. cars at
the shipping point shall be shipped on Government bills of lading.
The contractor shall prepare all materials for shipment in such manner as to protect them from damage in transit, and shall be responsible for and make good any and all damage due to improper preparation
or londing for shipment.
14. Comparison of bids. Whenever applicable, equalizing elements or factors not specifically mentioned or provided for herein,
such as the cost of transportation or of inspection (including salaries,
travel, and subsistence expenses), or any other element or factor in addition to that of price which would affect the final cost to the Government, will be taken into consideration in making award of contract.
15. Increase or decrease in quantity. The Government reserves the
right to increase or decrease the quantity specified by not to exceed 15
percent.
16. Contracting officer. The term "contracting officer" as used
herein shall include his duly appointed successor or his authorized
representative.
SPECIAL CONDITIONS
17. Deliveries. (a) No bids will be considered unless based on a
price delivered f.o.b. cars at the bidder's mill or mills. Deliveries
shall be made in carload lots as ordered by the contracting officer.
(b) The contractor will be notified by the
contracting officer approximately fifteen (15) calendar days in advance
of the date of shipment of the first noeds for cement. The contractor
will thereupon proceed to manufacture the cement and place it in storage
for test and delivery. Thereafter, the contracting officer will, on
Wednesday of each week, notify the contractor of the amount to be de-
livered each calendar day of the following week. The contractor shall
of any day's such notice of can-
been
received
or
in
at
mill within twenty-four hours of the normal time of dispatch of
his celation accept cancelation has by telephone, shipment provided telegraph, writing
rail shipmonts.
(c) It is estimated that the first delivery
of cemont will be required on board cars at the shipping point about
June 15, 1938, and that deliveries will extend from that date over a
period of 5 to 7$ months. The estimated monthly requirements for
cement are as given in schedules, but due to uncertainties as to the
progress of the construction work, this schedule cannot be guaranteed,
and the Government reserves the right to increase or decrease this
The schedule ns may be necessary to meet the requirements of the work.
maximum required rate of delivery will not exceed 3,000 barrels
per day.
-11-
170
18. Failure to meet delivery requirements. In the event any bidder
to whom contract is awarded fails to begin delivery as directed by ordering officer within the schedules of deliveries made a part of this
proposal and/or to meet the guaranteed maximum monthly requirements when
requested to do so, the Government reserves the right to secure the deficiency elsewhere and to charge to the contractor the difference in delivered cost to the Government. Whatever sums may be due as difference
in delivered cost to the Government may be deducted from payments due to
the contractor or may be collected from the contractor or the contractor's
surety or sureties.
19. Sampling and inspection. Sampling, inspections, and testing
of cement to be furnished under contracts resulting from this proposal
will be made in accordance with Federal Specification SS-C-158.
20. Rejection Cement may be rejected at the discretion of the
contracting officer if it fails to meet any of the requirements of the
specifications.
21. Federal specifications. Copies of Federal specifications
referred to herein are obtainable upon application to the Procurement
Division, Branch of Supply, Washington, D. C.
171
March 16, 1938
Mr. Morgenthau had as guests for luncheon Henry
Morgenthau, Sr., Ronald Ransom, Chester Davis, Wayne
Taylor and Upham.
Most of the discussion had little to do with monetary
and banking matters and the relationship of the Treasury
with the Federal Reserve.
There was considerable discussion of the political
and military situation in Europe.
Mr. Taylor told the Secretary that the meeting this
morning had pretty well reached a conclusion on bank
holding companies which would be reported to him tomorrow.
Mr. Morgenthau told the group of the proposal made
by Mr. Douglas in his office this morning, and suggested
the possibility of withdrawing $100 million in gold which
is now available to the Federal Reserve banks for indus-
trial loans, to be used as capital for the regional industrial credit banks suggested by Mr. Douglas.
During the course of the luncheon Mr. Morgenthau noted
that the situation in Government bonds was unsatisfactory,
and he and Mr. Ransom, Mr. Davis and Mr. Taylor went upstairs
to telephone to Mr. Burgess and consult on measures to be
taken.
172
March 16, 1938
12:55 pm
Present:
Mr. Ransome
Mr. Davis
Mr. Taylor
The Secretary spoke on the telephone to the
President and told them that he would like to buy Government bonds aggressively.
The following is a transcript of the balance
of their conversation:
HM,Jr: All the nervousness is from London.
That's in the stock market.
President: When did they sell. I thought
they were buying.
HM,Jr: Today all the selling comes from England
and it just was 80 important I bothered you, interrupted
you, and I wanted to tell you what we are doing.
President: Why do you think it is necessary?
HM,Jr: Oh, the Government bond market is off
about 1/3 to 1/2 a point. We are fearful if it gets
worse, it will get into the banks and everything else.
President: Your bond market is higher than
it was two months ago.
HM,Jr: Well, I don't think it is too high.
President: Well, tell the boys I think the
Government bond market is too high.
HM,Jr: We are going to try it just for one
day.
President: A11 right.
173
-2-
HM,Jr: We have only got one hour.
President: But tell the boys I still think
your bond market 18 too high. (Laughing)
HM,Jr: (Also laughing) One of us 18 wrong.
President: Anything from abroad?
HM,Jr: Nothing. I have nothing, except you
know Blum has a Cabinet meeting this afternoo and he goes
before Parliament tomorrow and the franc, incidentally,
is quite strong. The franc is quite strong.
President: Good!
I got a letter from Joe Kennedy in which he
says that conditions, industrial conditions in England
are far worse than he had any knowledge of before he left-and Iwould tell the boys that -- far worse than at home.
Isn't that interesting? And it is only maintained by
the rearmament program. Everything else is flat. Very
interesting.
HM,Jr: Yes. Thank you.
Wednesday
174
March 16, 1938
1:45 p.m.
HMJr:
W.
-
Ransom and Davis here and Taylor.
R.
Burgess:
Good.
HMJr:
They
lunching with me and I saw this break
in the were
market
B:
HMJr:
B:
Yes.
And
of it.we wanted to know first what's the description
Well, there isn't very much volume this week. I
think a reflection largely of the London situation.
HMJr:
Yes.
B:
You know the London Market has been quite weak.
HMJr:
B:
HMJr:
I don't.
And the British War Loan is off under par.
Can you talk a little louder, please?
B:
The British War Loan was off under par.
HMJr:
Yes.
B:
But there's not very much offered, there's nothing
very heavy; there's been some buying in the market.
HMJr:
Uh huh.
B:
Now, my feeling has been that there was nothing to
do about it at the moment, these things have been
very high and some readjustment is probably desirable.
HMJr:
Uh huh.
B:
I think there is enough buying in the offing so
it will come in.
HMJr:
Uh huh.
B:
Now if it shouldn't I think we need to be ready
to see that the market is kept orderly, but I
think it might be undesirable to go in yet.
-2-
175
HMJr:
Well now, I differ with you, but let me talk with
B:
Yes.
HMJr:
Do you mind holding on, please.
these two gentlemen, and after all, they've got
minds of their own.
B:
All right.
HMJr:
They may even want to talk to you.
(Short pause)
HMJr:
B:
HMJr:
B:
Chester Davis asks a question - how much does the
break amount to?
Oh, it's only three or four or five points thirty-seconds.
It's more than that, I believe.
Of course, it':
HMJr:
You're two and a half
B:
you know it's dull, you know there aren't very many
sales; it's a fairly quiet market.
HMJr:
Yes.
B:
There's no great volume of stuff being pushed out.
HMJr:
Well, let's just see - well, yes, let's see,
B:
HMJr:
they're running - well, our sheet shows from nine
to sixteen thirty-seconds off.
Well, there'11 be some quotes of that sort, yes.
Well, these are the ones that Harris gave me quotes from dealers.
Yes.
B:
Yes.
HMJr:
Well now, just a minute. Mr. Ransom wants to talk
to you.
B:
Ronald
Ransom:
Yes
Randolph, it appears to me we've got something of
the same problem to deal with in this situation
that we had once before, you remember.
-3B:
Ransom:
176
Well,
we've had the same thing a good many times,
Ronald.
Yes, I know that. But it seems to me that with
the advance in the price that we have had over
the last few months a too rapid decline is going
to
set off a great volume of stuff.
B:
Ransom:
Yes.
And it seems to me that it's got to be eased down,
that it can't go down quite as much as it has
today. It surprises me very much, because watching
it every day I was wholly unprepared for what looks
to me like a substantial enough break for the dealer
to interpret it to the outlying banks as a rail
break.
B:
Yes
Ransom:
And again we've had the problem that the dealer
doesn't care very much which way his customer is
dealing if he can stir up sufficient volume.
B:
Yes.
Ransom:
Now, I know perfectly well from my past experience
that the situation like this develops and these
dealers get on the wire and they talk to their
customers out in the country
B:
Yes.
Ransom:
they paint it in a much different picture from what
we would see it - talking to you.
B:
Ransom:
Yes. Yes.
So, I think we've got to be very very careful with
that situation and not let it get out of hand. I've
been uneasy about it.
B:
Yes.
Ransom:
There's even...
B:
It's very high, you know.
Ransom:
Very.
B:
But, it doesn't seem to me they have - to be similar
to times when it has gone in long plunges; you never
can tell about that, though. I don't feel very
177
strongly. It's very hard to tell if it's the way.
Ransom:
B:
Ransom:
B:
Ransom:
B:
Ransom:
Well, I can't
Well, I think a strong argument is in favor of
keeping it from getting out of hand.
Yes.
That - that's the thing that appeals to me.
Yes. Well, that of course, is possible.
You didn't - I was quite surprised to see
what you did today.
Yes. Yes.
And I - we really haven't had a chance to discuss
it, any of us; it just happened that the four of
us were here together.
B:
Ransom:
Yes.
And I don't even know Mr. Davis' views on the subject. He hasn't had a chance to express them.
B:
Yes.
Ransom:
He's got the same thought I've got, he doesn't
want to see the banks get started selling and I
know how damned easy it is to get them started.
B:
Yes. Yes. Well, I'm - I think it's a nice
question. I was just wondering a good deal about
it myself.
Ransom:
Yes.
B:
And was hesitating because the market had been so
high because I thought that - that there was a
good deal of buying in the offing that would come
in, in fact there was some little evidence - a
little - a few minutes ago of some buying coming in,
and general reluctance to go into it if you don't
have to, but if you people feel the way you do I
think we'd better - better do a little something.
Ransom:
I think you'd better do something in that situation.
I wouldn't hesitate to do something, I'd go out and
do it. The events are recurrent to what has happened
to us a time or two in the past.
-5-
178
B:
Well, we may not be able to prevent it but we
Ransom:
Well, now my own thought is that when it reaches
B:
Yes.
Ransom:
But that before it reaches that point there's often
can
a certain point there's very little we can do.
a good deal we can do.
B:
Yes. I agree with you.
Ransom:
I think it's a question of doing it in time.
B:
Yes. Yes.
Ransom:
B:
Ransom:
B:
HMJr:
All right.
All right, sir, do you all feel that way?
Yes. Just a minute.
All right.
Ransom has expressed what I felt although I don't
know whether he's going to nod his head. I feel
strongly enough about it that I'd say I'd put a
floor under that market right now.
B:
Yes.
HMJr:
You've got - I'd put a floor right under it right
now and I wouldn't be mealy mouth about it.
B:
Well now, let me get just what you mean, Henry.
HMJr:
Well, I'd go in and buy.
B:
Yes.
HMJr:
I'd stop this thing right where it is, right where
it is. I mean, you - the first thing you say is,
"Look at the English - the bonds are off three or
four points." I mean, I want to try one day to see
if we really go in aggressively and try to stop this
thing whether we can do it. But today is the day to
try it, not tomorrow and not the next day, the first
day they hit us.
-6B:
HMJr:
B:
Now,
do you
us to buy anthing for you or
shall we
do itwant
all ourselves?
I'm willing today to go - Ransom says he doesn't
care if we go fifty-fifty with you.
Yes.
HMJr:
We'll go fifty-fifty with you.
B:
Yes.
HMJr:
179
But I want Mr. Ransom to confer - what I'm saying
is that - well, Chester Davis says get offers on
the market. I say, put a floor right under it and
try to stop it right now.
B:
Yes.
HMJr:
And really be aggressive.
B:
Yes.
HMJr:
Now I don't know whether Mr. Ransom
B:
no, I
don't mean doing it the way we used to do it, Imean
-
really go in and see if we can't stop it the first
day they hit us. Ransom says it's worth the try.
Yes. Well now, when are we going to start in?
HMJr:
What?
B:
We'd better start in - the sooner the better.
HMJr:
Yes. We'll go fifty-fifty with you, and I don't I can tell you now, without consulting me, we'll
take up to twenty-five million.
B:
Yes. Yes.
HMJr:
What?
B:
All right.
HMJr:
But I don't mean the way we did it before - I mean
really
go in and see if you can't stop this thing
right now.
B:
Yes. Well, you people - well, these people those people there are all agreed on that, are
they?
180
-7HMJr:
B:
Ronald
Ransom:
B:
R:
B:
Well, I'll let Ransom talk to you himself.
Yes.
Yes,
Chester and I are both in full agreement
with that.
Yes. Yes. All right, sir, we'11 go right ahead
And he says that's the time to tackle the problem when you've got it.
All right.
R:
Mr. Taylor says he agrees to that fully.
B:
Yes.
R:
All right. Let's see what happens.
B:
R:
B:
Yes. All right.
All right.
Very good.
Wednesday
March 16, 1938
2:16 p.m.
HMJr:
W. R.
Burgess:
181
Hello, Randolph.
Yes.
HMJr:
I've still got the same people here with me.
B:
Yes.
HMJr:
What's happened?
B:
Well, let me call you back in just a minute, will
you Henry?
HMJr:
I will.
B:
I'll - I'll call you right back.
HMJr:
All right.
2:21 p.m.
Burgess:
Hello, Henry.
HMJr:
Yes.
B:
HMJr:
B:
HMJr:
B:
We bought six and a half.
Six and a half what?
Ah - bonds - millions.
Millions?
The market is a little steadier, some
of the quotes are a thirty-second or two better.
(Laughs)
HMJr:
Yes.
B:
They 've not dropped down any further anyway.
HMJr:
Well, nobody around here is worried, in fact they've
got a little smile on their face.
B:
HMJr:
(Laughs) That's good. So have I.
Now, for God's sake, Randolph, don't back away from
this thing!
-2-
B:
HMJr:
No, we aren't.
What?
B:
No, we aren't.
HMJr:
I mean, take it like a man now.
B:
Yes. (Laughs)
HMJr:
For today anyway.
B:
Yes.
HMJr:
What?
B:
All right.
HMJr:
I'm serious.
B:
Yes, I know.
HMJr:
Let's try it once really doing it.
B:
Yes.
HMJr:
Now let's see if either of your board members have
B:
HMJr:
got an idea.
What's that?
No, they're both very happy and both satisfied and
Ransom says, "Stick to it."
they say -
B:
All right. (Laughs) Very good.
HMJr:
0. K.
182
Wednesday
March 16, 1938
2:31 p.m.
T.O.:
Operator.
HMJr:
Hello.
T.O.:
I have Ambassador Kennedy.
HMJr:
Thanks.
T.O.:
All right.
HMJr:
Hello. Hello.
T.O.:
Go ahead.
Joe
Kennedy:
Hello.
HMJr:
Hello.
K:
Hello, Henry1
HMJr:
How are you?
K:
HMJr:
K:
HMJr:
By God! it's good to hear somebody's voice from
that place again!
Well, I thought it was about time I called you up.
(Laughs) Well, you called me up on a great day.
Well, that's why I'm calling you.
K:
Yes.
HMJr:
Because it - everything we've got here looks as
though the selling was coming from London.
K:
HMJr:
K:
Well, there isn't any question about that, they're
selling the hell out of this market over here.
And I wondered if there was anything other than
just the war scare.
Well, it's - it's beginning to be an appreciation
that they've got an economic situation that's very
much worse than anybody has pretended that it was.
HMJr:
I see.
183
184
-2-
K:
And it's going to get progressively worse.
I see.
And there isn't anything in the Christ-World
that's going to save it.
(Laughs) My God, Joe, you're still a..
Criminal.
you
You're still -/ haven't learned how to - I
mean you haven't still got an English accent,
have you?
(Laughs) No. (Laughs) No, but you can get
yourself another big one for this one to go into.
HMJr:
Yes.
Because these boys over here don't know what it is
to have a good declining stock market for the last
eight or ten years.
HMJr:
Yes.
And they're going to get one here now that's going
to make ours look very simple.
HMJr:
Yes.
Of course that's going to have its effect on ours.
And while sterling is going to go down why, the
markets aren't going to do anything.
Yes.
crash
Because they 're going - people are going to
in and buy gold because the hell is scared out of
everybody over here.
I see.
Now that's the condition. I mean, it isn't going it isn't - don't let anybody tell you that nothing
is happening from minute to minute.
HMJr:
K:
Look - a little slower, Joe.
Don't think that it's anything that happens from
minute to minute.
185
-3HMJr:
K:
HMJr:
K:
HMJr:
K:
Yes.
It's a matter that's economically the unsoundness
of the whole economic structure.
I see. This is just the war scare?
It is not just the war scare. I mean, a war scare
is just like anything that hits a declining market.
I see.
The market is bound to go down whether - if you comb
your hair wrong - or you say something cross, Secretary,
you can make the market go down if the market's in a
weak position.
HMJr:
K:
That's right.
But if the market isn't in a weak position you can
pass all the legislation we did in thirty-five.
Well, that's what the conditions are here.
HMJr:
I see.
K:
The conditions are fundamentally just as they were
with us.
HMJr:
I see.
K:
Theirtrade is not sufficient to keep them going
HMJr:
Yes.
K:
They need a good deal more money than they can
possibly get their hands on..
HMJr:
K:
HMJr:
K:
HMJr:
Yes.
And the individual is taking it a good deal gamer
than we are in America, but the conditions are there.
I see.
And you can make up your mind and your plans, I
think, Henry, based on that as a fundamental.
Well, that's what I wanted to get, because I can't I wanted to get it from - as the English say - direct
from the horses mouth.
186
-4K:
HMJr:
K:
HMJr:
K:
(Laughs) Well, it doesn't necessarily have to be
the mouth.
Yes.
But definitely I feel that that's there and they
can talk to me all they want about the political
aspects of everything that's happening, Henry, but
that isn't what the trouble is.
I see.
They can not get this thing going any place in this
continent over here unless they get an acceleration
of business.
HMJr:
I see.
And - so - and I would make that as my guess.
HMJr:
K:
I see.
No matter whether they stop it or - they won't
belly-ache nearly as much as we will.
HMJr:
No.
K:
And they'11 take it a damn sight better.
HMJr:
Yes.
K:
HMJr:
K:
But, nevertheless, that's where it's going to go.
Uh huh. . Well, I'm watching it very closely.
Well, Henry, we will. I'm having - I'm having
the heads of every big bank to my house for dinner.
HMJr:
Yes.
K:
Just a stag party - the Morgans, the Rothschilds,
the McKennas - everybody.
Yes.
K:
HMJr:
K:
And I'm going to have Butterworth there with me.
Good.
And - they gave me a dinner when I was here before
and we're returning it and they're all coming.
187
-5Good.
HMJr:
And we'11 have a pretty good crowd that night -
I don't just exactly - because they're talking
K:
pretty frankly now with us.
Well, now, when you get something like that mark it - show it to the Treasury, see?
HMJr:
K:
Yes.
HMJr:
Because otherwise they may not send it across.
7
HMJr:
K:
HMJr:
K:
On that night?
:
K:
What's that?
I'll call you on the telephone right after I finish.
That's - that will be fine.
Yes. You'll know it. I won't wait to s end any
message, I'11 call you up
HMJr:
Yes.
K:
Because you're more concerned about that than they
are.
HMJr:
Yes. Now, do you want to know how I feel?
K:
Yes.
HMJr:
Now I feel - I feel pretty well, Joe, in this way,
that for about two weeks business has not got any
worse
K:
Good.
HMJr:
See?
K:
Yes.
HMJr:
For a couple of weeks it has. not got any worse.
K:
Yes.
HMJr:
And that's all I can say.
-6-
K:
188
Well, Henry, I - this is the only thing I'm
disturbed - I think you can make your observations from that , I think, fairly accurate, but
you've got to remember that this is going to play
quite considerable part in the future of that
economic situation over there.
HMJr:
I know that.
Because they - whether they like it or not, everybody that has talked to me - and I had a long talk
with Chamberlain
HMJr:
Yes.
.about this particular, and this is the only thing
he gave me an argument on it, because I said to him
I thought that he was headed just as we were headed
so far as the markets go.
HMJr:
Yes.
K:
And no matter what anybody says or does that is
HMJr:
exactly what is going to happen here. They can't
build this thing fast enough to - to get enough
income to take care of these expenditures that
they '11 have go through.
I see.
Whether it's a - don't pay any attention whether
there's a fight in France or anything else - those
are just contributing factors to an otherwise weak
condition.
HMJr:
I see.
But, as to you, why we'll keep you posted, Henry,
but I'd make my plans - I mean I'd be thinking
along that line on anything, because I'll gamble
HMJr:
K:
anything, just as I did on that situation there,
I'll gamble everything I ever saw that that's
what's going to happen here. Now, they may change they may put it up for one day but they'11 - but
the trend is definitely down unless they get together on some economic basis - to hell with the
political.
Well, that's what I want.
Yes.
-7HMJr:
K:
HMJr:
K:
189
That's the kind of information I want.
Yes.
Can I do anything for you?
Oh,
I'd say
hello to Missy if you can transfer
me over
there.
Well,
I don't think I can, because you're on my
switchboard.
K:
HMJr:
K:
HMJr:
Oh, I see.
But, wait a minute - wait a minute, let me try it.
All right, Henry.
I've never done it. Let me try it, you see?
Will you stay on?
K:
HMJr:
I'll stay right here.
All right, just a minute.
T.O.:
Hello.
HMJr:
Ambassador Kennedy wants to talk to Miss LeHand.
T.O.:
HMJr:
T.O.:
K:
HMJr:
K:
Is it possible to put it through to Miss LeHand.
Yes, I can put it through.
Well, if you can will you do that?
Right away. Yes, sir.
I'11 be in touch with you, Henry.
All right. Now just stay on and we'll see.
All right.
190
Wednesday
March 16, 1938
2:44 p.m.
HMJr:
T.O.:
HMJr:
T.O.:
Hello.
Dr. Burgess. Go ahead.
Hello.
Hello. Hello.
Is Mr. Burgess on there? (Spoken to outside operator)
Just a minute.
Secretary Morgenthau is (
Outside
Operator:
"
11
If
"
Operator, I have Dr. Burgess.
(Short pause)
HMJr:
Hello,
T.O.:
Dr. Burgess.
W. R.
Burgess:
Hello.
HMJr:
Yes.
B:
Hello, Henry.
HMJr:
Yes.
B:
Well, I think we've got a floor on this.
HMJr:
You do?
B:
They're all up two or three thirty-seconds.
HMJr:
Uh huh.
B:
And we're just buying mostly off the board; we've
bought twelve and a half.
HMJr:
Are you buying from the dealers?
B:
Yes, we're buying outside mostly.
HMJr:
Uh huh.
B:
But I think we've got the immediate thing cleaned
up and there's some other buying come in; there's
some of these new ones, the Bank of Manhattan took.
HMJr:
Good.
)
B:
HMJr:
:
-2-
191
And there's some other - and Devine had a block
of twooutside.
and seven-eighths, he's got rid of most of
those
How many did he sell?
HMJr:
Well, he had six that we knew of.
Six million?
B:
---
HMJr:
Very good.
B:
But, we've got a floor here.
HMJr:
Good.
B:
And buying was in the offing so some other came in.
HMJr:
Fine.
B:
So right now it's 0. K.
B:
HMJr:
B:
Gardner sold about five of them.
Well,
will it - do you think it will take care of
itself?
Well, I - I'm inclined to think so. But we're
right here watching it
HMJr:
Yes.
B:
And if it starts to dive again we go in again.
HMJr:
That a boy. How much have you bought?
B:
Twelve and a half million.
HMJr:
Cheap.
B:
What's that?
HMJr:
That's cheap.
B:
I think it was pretty cheap, yes.
I mean, if - if we've done the job for twelve and
HMJr:
a half or fifteen million dollars I'd say it was
cheap.
-3-
B:
HMJr:
B:
HMJr:
B:
HMJr:
B:
I think so. Now I suppose it may - it may be
evident that we've been in, but that's all right
at a time like this.
hope it does. I hope they do.
I guess you'll have your wish, I don't know.
I
We've
only hope so. I mean I think that that
-
would at least let them know we've got enough
confidence in our own merchandise.
Well, I think it's justified at a time like this.
Now, who's going to see the press - from the
Journal today?
Ah -
Roelse was going to see them.
HMJr:
Well, you'd better see them, hadn't you?
B:
All right, I'll go in.
HMJr:
Yes. You'd better go in yourself.
B:
Yes. All right. I'll see them.
HMJr:
Who's Roelse?
B:
Yes. Well, I'll go in.
HMJr:
B:
HMJr:
Yes. You'd better do it and you'd better handle
that yourself, if you don't mind.
Yes. All right.
All right. I'll call you - I go into a heavy
meeting at three
B:
Yes.
HMJr:
I'll call you a couple of minutes before.
B:
Very good.
HMJr:
Thank you.
B:
Goodbye.
192
Wednesday
153
March 16, 1938
3:00 p.m.
HMJr:
Hello.
T.O.:
Dr. Burgess. Go ahead.
HMJr:
Hello.
W. R.
Burgess:
Oh, hello, Henry.
HMJr:
Well, how does it look now, Randolph?
B:
Well, there's not much change. They're - they
still remain 1 to three thirty-seconds above their
lows and holding that. I think we've got the
bottom all right.
HMJr:
Yes. Now, Randolph, before you go home tonight
B:
All right.
HMJr:
And also, for instance, what you know - if you don't
B:
HMJr:
B:
HMJr:
B:
HMJr:
B:
HMJr:
would you mind writing me a letter telling me just
what you did for the Treasury.
mind - what the bond dealers did.
All right.
I mean, I'd just like to have it as a matter of
history.
Yes. Yes.
But I'd like you to do it tonight before you go home.
All right.
While it's still fresh in your mind.
Very good.
that
And, as I understand from you,/as soon as we started
buying the other dealers were able to sell.
B:
Ah - almost that, yes.
HMJr:
Well, of course, you have another hour yet.
B:
Yes. That's right.
HMJr:
Well, I'm going into a meeting now that '11 occupy
me at least an hour.
-2-
B:
Yes.
HMJr:
When I am through I'11 call you.
B:
All right. We'll keep on watching.
HMJr:
B:
-But
if you would
I'd appreciate
it.write me a special letter tonight
Very good. Be glad to.
HMJr:
Thank you.
B:
Yes. O.K.
194
195
RE HOUSING COSTS
Present:
March 16, 1938.
3:00 P. M.
Mr. Taylor
Mr. Oliphant
Mr. Gaston
Mr. McReynolds
Mr. Haas
Mr. Daggit
Mr. Peoples
Mr. Barton
Mr. Collins
Mr. Lawes (Procurement)
Mr. O'Connell (Procurement)
Mr. McDonald
Mr. Fisher
Mr. Piquet (Tariff)
Mr. Bean (Agriculture)
Mr. Stone (W. P. A.)
Mr. Loomis
Mr. Hinrichs
Mr. Stinebower
Mr. Currie
Mr. Edwards
Mr. Blaisdell
Mr. Curtiss (Public Roads)
H.M.Jr:
Everybody got a chair? Who's going to - George,
do we start with Blaisdell?
Haas:
Yes sir - please.
Blaisdell: This report of the Committee, Mr. Secretary,
completes some of what was given to you at the
last meeting. It is focused though on the cement
situation. The draft, as I am reading it, is my
own handiwork, although the material that is in
it is supplied by quite a number of men, whose
names I don't think it is necessary to mention the Committee you named, and others.
H.M.Jr:
Has each agency got at least one of these? No.
Blaisdell: These reports have not been circulated to anyone.
-2H.M.Jr:
196
Not will
yet?orI won't?
see. Well, what is your thought you
Blaisdell: I'll read it if you wish me to.
I mean about circulating it afterwards.
Blaisdell: I'll follow your wishes.
H.M.Jr:
H.M.Jr:
All right, let's hear it.
Blaisdell: After all it is essentially an operating statement.
H.M.Jr:
Go ahead.
Blaisdell: "Recommendations
H.M.Jr:
Blaisdell:
"
I think you will have to talk a little louder.
"1. Centralized purchase. That there be immediately
centralized in the hands of the Director of Procurement
the maximum
amount of purchases of cement,
including
-"(a) All cement now being purchased by any Federal
agency in the regular course. A list of such
agencies and the amounts they purchased is attached.
"(b) All cement which, by change in the present
practice of any agency, could be purchased by the
Government rather than by the contractor. A list
of
such agencies and the amounts they purchased is
attached.
"These two combined would give the Procurement
Division a total of 15,730,000 bbls per annum,
which constituted about 14 percent of yearly
sales. For the rest of the fiscal year the Govern-
ment has approximately 3,395,000 bbls to purchase.
"2. Trade Agreements. The State Department should
be asked to reopen the question of further reduction
in the tariff on cement under the Belgian Trade
Agreement. This would involve the issuance of notice
to negotiate the general provisions of the Agreement,
and the
H.M.Jr:
"
Can everybody hear it? All right, go ahead.
-3"
Blaisdell:
197
simultaneous announcement of the reopening
of the cement concessions. Although the time
involved in negotiation would be considerable, the
announcement itself would have value.
"3. Anti-trust action. The program of coordinated
purchases should be carried out in such a fashion
as to preserve all evidence of a new and distinct
illegal combination or of any continuance of any
practice which may be found to be illegal (as
distinct from evidence pertinent to the pending
FTC complaint) encountered in the course of carrying out this program, having in mind immediate
action by the Department of Justice in the event
such combination is so disclosed.
"As a corollary to this, all conferences and com-
munications with the cement manufacturers and
dealers should be carried on in such a way as to
avoid anything which would be later cited as
formal or informal official approval of illegal
practices or combinations in the industry.
"4. Public Roads. The details of the program in
connection with public roads cannot be stated sharply,
but follows three possible lines:
"(a) Possible purchases by states under a Federal
Government open contract.
"(b) A conference by the Secretary of Agriculture
with the state road commissioners explaining the
Federal Government program and endeavoring to secure
cooperation in its development.
"(c) Legislation would be necessary to enable the
Federal Government to purchase cement used in highway construction under grants by the Bureau of
Public Roads. As to approved projects, this
legislation could authorize the Secretary of the
Treasury to negotiate with states an arrangement
for them to take cement in lieu of money; and, as
to projects not yet approved, such legislation
could authorize the Secretary of Agriculture to
make grants of money conditioned upon the Federal
Government's supplying the cement. Legislation of
the former sort would and should be put in the
present Agricultural Appropriation Act pending
before the Appropriations Committee of the House.
-4-
198
"II. Procedure.
"1. Personnel. The Secretary of the Treasury
should name one or more men thoroughly familiar with
the cement industry, including the organization,
banking, and other financial connections of cement
concerns, and the marketing of cement. This
person to function in the Procurement Division
directly under the authority of the Secretary.
"2. Competitive Bidding. All purchases should
be made in such a manner as to secure bona fide
competitive bidding.
"3. Collusion. If indications of collusion appear
in the original bidding, these bids should be
rejected and readvertised.
"4. Independent Negotiation. If tie bids or
other evidences of collusion are still present,
negotiations for the letting of independent
contracts should be undertaken.
"5. Preservation of Evidence. While the preceding
steps are being taken the Department of Justice
should be in constant consultation with the Treasury
Department in order that legal action under the
anti-trust laws may be taken if illegal actions
are found.
"6. Trade Agreements. The announcement of the
reopening of the Belgian Agreement should be made
as quickly as possible so that the present FTC
action, the previously mentioned negotiations,
and corollary actions are proceeding at the same
time.
"7. Public Roads. Further exploration and action
in connection with the public roads program should
be continued while the other activities are under
way.
"8. Effective Coordination. All persons participat-
ing in the program should be aware of the fundamental
objectives involved.
"9. Publicity. The amount of publicity and its
character will become apparent as the program
develops.
-5-
192
"III. Objectives.
"1. Cement prices at present are regarded as
being "out of line" and hence are a block to
business recovery.
"2. The fundamental aim of the program is to
lower the price of cement for all purchasers, not
only the Federal Government.
"3. The secondary purpose is to establish conditions in the industry which will bring about
competitive conditions."
Then there are attached, in the document which we
have given you, Mr. Secretary - the documents
referred to here; also a general statement of the
economic situation in the industry, prepared
under the Tariff Commission and advised by
Mr. Haas. And Mr. Oliphant and Mr. O'Connell have a
memo which is not included in this document which has
not come to me yet, but which I believe is prepared.
H.M.Jr:
Which is O'Connell?
O'Connell:
I have the memorandum. Mr. Oliphant hasn't
H.M.Jr:
seen it yet.
How many copies of this did you have? What did you
do with them?
Blaisdell:
I have all the copies. You (Haas) have one. We
just put that together two minutes of three, and
they are assembling now some of the other copies.
H.M.Jr:
I just wondered. I wanted to ask General Counsel
whether this is a document we want to circulate.
Oliphant:
I think you should have all the copies in your
own hands, Mr. Secretary.
H.M.Jr:
I think it is a little bit like a piece of dynamite.
Haas:
I think Captain Collins
Let me just go back over this thing on the
centralized purchasing. Does anybody - let's just
H.M.Jr:
-6-
200
discuss that - who doesn't think that Procurement,
irrespective of anything else, should be given the
authority to do all their purchasing - all the
purchasing of cement for the Government? Let's
just discuss that one point first. Who thinks
that would be a mistake? Who thinks it would be
good?
(Everybody.)
Peoples:
H.M.Jr:
I think we all do, Mr. Secretary. I think it is
the only way to handle it, sir.
Well, Admiral, supposing you talk for a moment,
seeing it would be your responsibility - I mean,
how would you feel about it if you were given that
authority?
Peoples:
I think it is a perfectly sensible thing to do,
sir, to accomplish the purpose in mind. I don't
see how it can be accomplished any other way, and
in order that all departments of the Government
may know - of course, under the terms of 6166 -
just merely the 0. K. of the President on the
bottom of it would carry it through.
H.M.Jr:
What is 6166?
Peoples:
That is General Order 6166, creating Procurement
Division.
H.M.Jr:
What would he have to do?
Peoples:
Just merely 0. K. that report.
H.M.Jr:
This report?
Peoples: Yes sir.
H.M.Jr:
Doesn't he have to add cement - doesn't he have
to add cement to that? I mean, this report is
more
McReynolds: Nothing in there but cement.
H.M.Jr:
I mean, it would be a supplementary order, wouldn't
it?
Peoples:
No sir. That is sufficient, Mr. Secretary.
-7-
201
McReynolds: The order covers everything.
H.M.Jr:
To give you the authority on cement, what would
we have to give the President?
Peoples:
If he 0. K.'s this Committee's report that is
H.M.Jr:
ample to 0. K. the whole thing.
Well, there are a lot of other things - "Trade
Agreements " -
McReynolds:
Just
the first
page, centralized purchasing
with
regard
to cement.
Peoples:
The only other point involved in there is whether
or not the President would want the State Department to proceed with the reopening of the Belgian
H.M.Jr:
Well, I'll come to that in a minute.
Peoples:
Yes, cement agreement - but everything else, as
pertains to the question of cement
H.M.Jr:
Peoples:
Have you got any person particularly familiar
with cement?
Only fair. There is one man in the Department
of Roads that I think is one of the best qualified
men on cement that there is in the Government
service?
H.M.Jr:
Who is that?
Peoples:
Heltsie.
Collins:
We had him with us about
H.M.Jr:
How do you spell it?
Collins:
H - e - 1 - t - S - i - e.
Peoples:
Like to get him for a while.
That would be possible, wouldn't it?
And, Mr. Secretary, while I am speaking, I think
it would be well to point out, and it might be
well for the Committee to point out in its report
under that subject of Public Roads, that their
total consumption amounts to about fourteen million
barrels per annum, a very big
H.M.Jr:
Peoples:
-8
H.M.Jr:
202
Blaisdell told me
McReynolds: Curtiss is here from Public Roads.
Where is Mr. Curtiss?
H.M.Jr:
Curtiss:
Right here, Mr. Secretary.
H.M.Jr:
Mr. MacDonald out of town?
Curtiss:
He is out of town, yes sir.
Well, we'11 come to that in a minute.
H.M.Jr:
Is the State Department here?
Stinebower: Yes sir.
H.M.Jr:
All right. Well now, on this Trade Agreement thing,
where it says as to the possibility of opening up
the Trade Agreement with the Belgians, what is the
chances on that?
Stinebower: Well, I took that up with Mr. Hawkins, who is the
Chief of the Trade Agreement Division, last
evening, and he thought it was the only place
in which we could get - we could conceivably get
a reduction on cement. We have a pending Trade
Agreement with the United Kingdom, but they are
such a minor supplier it doesn't show much
opportunity. If you ask what the prospects are
that the Secretary of the State will approve
taking on Belgium, before the British Agreement
is out of the way - we just couldn't get to him
last night when this report was being drawn up,
but technically it is completely possible.
H.M.Jr:
Well, I mean, do you think within - how long
before you could let us know?
Stinebower: Oh, be no trouble, I should assume, in letting you
know promptly as to whether it can be done. And
second, if it can be done, I suppose the announcement can be issued fairly promptly - the announcement. As to how soon the reduction could be made that is a longer negotiation.
H.M.Jr:
Well, what I am trying to get at is, so if I take
this to the President and he says, "Well, what
the Belgian?" I want to be able to say the
about See what I
State Department says, "Yes," or "No."
mean?
-9-
203
Stinebower: I can get you that information this afternoon.
H.M.Jr:
Couldn't get it yesterday.
I don't want him to say, "Well, what does the
State Department say?" I want to be able to say
they are or are not willing.
Stinebower: Yes sir. We can get you that within the next
two or three hours.
H.M.Jr:
By tomorrow.
Stinebower: Yes sir.
H.M.Jr:
Well, would there be any discussion on that?
Stinebower: I think the Tariff Commission has some comments
they'd like to make on that.
Piquet:
H.M.Jr:
Mr. Fox is not here, Mr. Secretary - out of town but he asked me to communicate to you his view
in the matter. That is, to reopen the Belgian Agreement now.- he feels it would be quite unrealistic
because of the pending United Kingdom negotiations.
We are right in the middle of it, and he is very
doubtful if the Secretary of State would be willing
to hazard the British negotiation for the sake of
However, that
this one item in the Belgian
is his individual opinion.
Anybody else on that aspect of the report? While
we are on that, did anybody look up whether Mexico
makes any cement?
Haas:
Yes sir.
H.M.Jr:
Do they?
Haas:
I got this information, Mr. Secretary. (Going up
to Secretary's desk.) Don't really know how much
they make but they import from the United States 1935, seventy-five thousand barrels; 1936, thirtytwo thousand barrels, they imported from us. We
imported from them, in 1935, five hundred sixtyfour; in 1936, four hundred forty-six.
H.M.Jr:
What?
Haas:
Barrels of cement. So you see, they are an
importing country. Over here (indicating) - the
imports.
- 10 -
204
H.M.Jr:
What is that, one thousand dollars? Well, that is
Haas:
Nothing.
H.M.Jr:
Mr. MacDonald said Cuba, he thought, made cement.
Taylor:
International
Cement has a plant down there, isn't
that it?
nothing then.
McReynolds: I don't know.
Peoples:
Mr. Secretary, with respect to the Belgian Agreement, if the announcement could be made that the
United States may reopen negotiations that may
help some.
H.M.Jr:
Well, we can't bluff on it, Admiral. We either
got to or not - I mean, it is too important, but
after we get all through this, I am going to ask
some of these gentlemen to weigh these various
things and how much weight they attach to
opening that. You see what I mean? I think we
ought to weight these various things and say, "We'll
be able to buy through the Roads". - I mean, is very
important -"and the Belgian Trade Treaty has so
much weight." I think we ought to put so much
weight on each of these things, and then see if it
is worth while.
Anything else on the Trade Agreement? All right.
Now the Anti-trust action. "The program of coordinated
purchases should be carried out in such a fashion
as to preserve all evidence of a new and distinct
illegal combination " Who is here from the
Department of Justice?
Oliphant:
Nobody. They suggested that - didn't think they'd
serve a useful purpose by attending this afternoon
and asked me to report to them.
H.M.Jr:
Well, Herman, are they in sympathy?
Oliphant: Yes.
H.M.Jr: What?
Oliphant:
I should say "Yes."
H.M.Jr:
They are?
- 11 Oliphant:
H.M.Jr:
It was discussed at lunch yesterday.
I see. Well then, all you can say on that is that
they are willing for us to take the leadership, but
see 11
as distinct from evidence pertinent to
the pending FTC complaint
Oliphant:
205
11
The point to that, I think, is this, Mr. Secretary.
That the proceedings now pending before the Federal
Trade Commission against the cement company are
going to take a lot of time and involve a re-examination of the whole pricing system all over the
country. The idea here would be to forget all
about what's happened in the past, as possible
violations of the anti-trust laws, exposing these
people to grand jury investigation, for example,
and then watch in your dealings with them now
in this program, for a possible violation.
H.M.Jr:
Well, now, I mean just let us - round figures Procurement asks for a bid, say, for three million
barrels. We open them. What is - how many days
do you give them, formally, to bid?
Peoples:
Oh, how many? Ten days.
H.M.Jr:
At the end of ten days we have - all the bids are
the same. Then what do we start to do as far as
the Department of Justice is concerned?
Oliphant:
Well, in the meantime they have been - I am just
assuming in the meantime they have been following along with you, the expert in cement who
is recommended there has collected a lot of
facts with reference to the companies and the
present state of the market. and - lad all that
material before the Department of Justice as it
is
H.M.Jr:
I'd like to have it a little - but I don't want
to be in the same boat I was, on the tire thing.
We went ahead and then because Treasury people
were smart enough, we got somebody to break it,
and the Department of Justice were of no
assistance.
Oliphant:
Well, I didn't think my instructions from you
covered my going over the report of the Committee,
which hadn't yet been submitted to you, with
the Department of Justice.
- 12 H.M.Jr:
Oliphant:
20s
Well, what I'd like to know, I want a clean-cut
answer from the Department of Justice in writing
that if we go ahead with this thing and we ask
for a bid of three million barrels and they are
all
tied bids, what are they going to do about
it?
Well, I should say that definite answer in
writing could not be obtained except on the
basis of our submitting to them this report of
the Committee after you approve it.
H.M.Jr:
Well that - we can do that. Supposing - all
right, supposing we submit this report, and
then put it up to them, and I don't want them
to come back and say they need a half million
dollars more; that they haven't got enough
lawyers over there. I mean I want to know
where the Department of Justice stands before
we start. And not find myself in the same boat
as on the tire situation - and they didn't
want to fight any actions. That's what - of
course what I say in this room is in this room but that's where we were. I mean, I really think
they ought to be here because this thing is I mean, everybody else has got time to come
here except the Department of Justice. I don't
see why they are not here; I don't know what is
more important than this.
Oliphant:
H.M.Jr:
Oliphant:
H.M.Jr:
I understood your instructions were for me to
bring them down to date as to what has happened.
Well, I understood they'd be here today, because I mean, I want to know before I start, are they
going to fight at the end of ten days or are they
just going to say they can't handle it?
Well, I think the appropriate way to get that
answer is to - when you have approved that report
to submit that report to them.
Well, I mean as far as this report is concerned,
it isn't going to help any - I mean, we are
going to go on and ask for this bid on three
million barrels. We get all tied bids. What is
the Department of Justice going to do? It is a
good thing for Thurman Arnold to cut his teeth
on.
- 13 -
Well, the next thing is anti-trust action.
Well that just covers this thing I've been
talking about, doesn't it?
Blaisdell: That's right.
H.M.Jr:
Curtiss:
H.M.Jr:
Curtiss:
H.M.Jr:
Now on Public Roads. Should I read it for you?
Should I read this thing again and see how much
of it you think
I've seen copies of that before.
How much of that would you people be apt to
fight for?
Well, I think the first two proposals could be
accomplished without any legislation, and offer
the most fruitful source of results.
Well, now first is a "Possible purchases by
states under a Federal Government open contract."
Curtiss:
That would be the establishment - would call for
the establishment by the Procurement Division
of an open contract where the prices would be
made available to contractors bidding on Federalaid highway work.
H.M.Jr:
And you don't need any legislation on that?
Curtiss:
I don't think we need any legislation for that.
In fact, our regulations covering the most
recent emergency highway funds that we had,
provided for just such a thing in case the
Federal Government did provide such open
contracts.
H.M.Jr:
Oliphant:
Well, they are not doing that now.
Mr. Secretary, no sir, we can't do it.
You can't do it?
Mr. General Counsel of the Treasury, you want
to give a "horse-back opinion"?
No, I don't want to give a "horse-back opinion."
H.M.Jr:
All right.
Peoples:
H.M.Jr:
207
- 14 Peoples:
They have held already, sir, that in cases that we are not empowered to sell to communities,
municipalities.
Collins:
States and counties.
Peoples:
States and counties.
H.M.Jr:
I remember when Mayor LaGuardia was down
Peoples:
That's the same thing I had in mind.
H.M.Jr:
And we couldn't do it without legislation?
Peoples:
That's the same thing.
H.M.Jr:
Herman, you'll look into that, won't you?
Mr. Secretary, I intended my remarks to apply
to the establishment of an open contract under
which a contractor for a state could purchase
cement - not to the furnishing of the cement.
Curtiss:
208
McReynolds: That is just what's been held.
Curtiss:
That we couldn't do it?
McReynolds: Couldn't make the contract, that is, available
to anybody except the Federal Government.
Curtiss:
I thought you meant furnish the cement.
McReynolds: We have no authority under the ruling made in
Curtiss:
the other case, without legislative authority.
I don't think there is anything in our legislation though, that would prevent our operating
under such a provision if it were possible to
establish such open contracts.
H.M.Jr:
Well, I guess the lawyers better explore that.
Curtiss:
Exactly.
H.M. Jr:
But if it is necessary to get the legislation
as to aid, do you think we could get the Secretary
of Agriculture to recommend ". (a) ?"
Curtiss:
Yes sir, so far as that is concerned.
- 15 209
H.M.Jr:
You'd recommend that to him?
Curtiss: Yes sir.
H.M.Jr:
Now (b) . "A conference by the Secretary of
Agriculture with the state road commissioners
explaining the Federal Government program and
endeavoring
ment."
to secure cooperation in its develop-
Curtiss:
Well, that's a necessary follow-up on number one.
H.M.Jr:
Yes. (c). "Legislation would be necessary to
enable the Federal Government to purchase
cement used in highway construction under
grants by the Bureau of Public Roads. As to
approved projects, this legislation could
authorize the Secretary of the Treasury to negotiate
with states an arrangement for them to take
11
cement in lieu of money
If you don't mind, I am not very crazy about
that. I don't
Blaisdell: involved
It is a very
difficult practical problem
there.
H.M.Jr:
I - no, I'm not very crazy about that. I still
like either a silver certificate or a bar of
gold. I don't want cement. I mean, I'm afraid I lived down the rubber dollar.
(Telephone rings.) Hello; yes. (Phone conversation)
Curtiss:
I am glad you said that first, Mr. Secretary,
because it rather reflects my personal view, but
we haven't had time to give it consideration
in the Department, and I don't know what our
position would be, but I can visualize tremendous
H.M.Jr:
difficulties in attempting to carry out any
provision of that kind because the contracts are
let by the states and the states pay half the
cost of these projects.
Well, this is all right. I mean, as a matter
of fact, I want to say I think it is an
excellent report - delighted with it, and what
they do is - he's put everything in here,
including the kitchen stove and cement money,
and you want - I suppose, put something in so
- 16 -
210
I'd have the satisfaction of throwing one thing
out, and that is the cement money.
As to the next thing, "
such legislation could
authorize the Secretary of Agriculture to make
grants of money conditioned upon the Federal
Government's supplying the cement."
What do you gentlemen think about that? Isn't
that a little drastic?
Peoples:
Makes it mandatory.
H.M.Jr:
What?
Peoples:
H.M.Jr:
Makes it mandatory upon the states, sir.
Do you think we want to do that?
Peoples:
I think so.
H.M.Jr:
Do you?
Peoples:
At least have the option to do so.
Well, now, how do the boys who are on the Hill I mean, you handle the Hill, you are up there
all the time - how about Congressman Jones,
so-and-so, is he going to like this? I mean,
is he going - I mean is he going to swallow
that? It would be nice, but is he going to
take it?
H.M.Jr:
Oliphant:
If it is cheaper cement he will, because with
it you'd have about thirty per cent of total
production.
H.M.Jr:
Peoples:
H.M.Jr:
Peoples:
I am just raising the question.
There may be some little objection from that
point of view, sir, because there is a cement
I just wonder - I don't know.
Mr. Secretary, throughout the Hill, there is
pressure exerted for us to buy within the state;
we are running into itevery day - to buy within
the state, from state sources, materials required
on projects executed within the state, that is
perfectly true.
- 17 Curtiss:
We won't approve any such specification.
H.M.Jr:
Huh?
Curtiss:
I say we have refused to approve any specifica-
211
tions that restrict competition in that way
where Federal money is involved.
Peoples:
You have refused?
Collins:
So do we.
H.M.Jr:
Would you repeat that?
Curtiss:
We have refused to approve specifications that
would mhestrict-competition to certain local
materials.
H.M.Jr:
I see.
Curtiss:
Or to
Peoples:
Or certain locality
H.M.Jr:
I see.
Curtiss:
Or to restrict the competition to local contractors.
There is an attempt to do that on the part of
Peoples:
There wouldn't be so much objection, then,
H.M.Jr:
Curtiss:
H.M.Jr:
Mr. Secretary.
I don't think so.
I think some of the objections would come the same objection that would apply to the
first part would 'tie into the second part also.
Could it be this way also? I am thinking of a supposing the local contractor could give a price
as good as the Federal price.
Curtiss:
Well, I think I would not be in a position to
represent on that final thought, but we would
feel that it should be made optional, because
many times the contractor can get an advantage.
Certainly he has been able to get an advantage
when there have been state contracts for cement,
contracts to buy more cheaply, or some advantage
that would influence him.
- 18 Peoples:
I think the option ought to go in there.
H.M.Jr:
Whose option?
Peoples:
The Government's option.
H.M.Jr:
That would be all right. I am just a little bit
fearful of it. It smacks a little bit too much
212
of
Peoples:
But the Government's option, I think, would make
Oliphant:
Something I am very much interested in. Congress
H.M.Jr:
I don't want to know whether - to make it optional.
Then the pressure is put on us to make exceptions.
I'd rather have it that we got to go through
with it or not. Then we don't have any chance
it all right, which would cover
is interested in how much road it gets for its
money,
isn't it, and the cement item is so large
in the
to crawl out of it.
Edwards:
Couldn't we make it mandatory unless the local
price is as low as the Government price?
H.M.Jr:
Same or less.
Peoples:
Equal to or less.
Equal to or less. That would be the answer.
The local price - then there could be no difference.
Wouldn't you accomplish the same result by giving
the contractor - purchase from the Government
at a certain price?
He wouldn't have to.
He wouldn't do it if he could get it cheaper,
but he'd get the benefit of competition, based
on that competitive price.
No, if you don't mind, I think the suggestion
that they have to take the Federal Government
cement unless they can buy locally at the same
price or less
H.M.Jr:
Gaston:
H.M.Jr:
Gaston:
H.M.Jr:
- 19 Peoples:
Yes sir.
H.M.Jr:
That takes care of what I had in mind. Then the
Congressman has an answer - "Well, hell, if your
bid istakes
lowercare
youofcan get the business." Huh?
That
Peoples:
And another thing, Mr. Secretary. Too, the
Government price becomes public property all
over the United States, and every dealer and
every mill knows it, and it will be an incentive
to
people
to underbid
thethose
contract
is entered
into. that price after
H.M.Jr:
Excuse me. If that 4 could be changed a little
bit along the line we are talking about and then
submitted to the Secretary of Agriculture as
soon as possible.
Curtiss:
(Nods "Yes.")
H.M.Jr:
See, there are several people here from Agriculture.
I mean that - I mean I want it so - I don't
want to go into a memorandum to the President
that any agency is quoted as though - if he asked
me, "Is that agency for it?" - I don't want to
have it in there unless the answer is "Yes."
See? You could get maybe a couple days - get
this thing cleared up.
Curtiss:
I think so, yes.
McReynolds: When is he back?
Curtiss:
Next Friday.
McReynolds:
I think he ought to have a chance to get in on
this.
Curtiss:
Bean:
Oh yes.
One question, Mr. Secretary. Does this envision
two sets of bids to the Government, or rather
a set of bidders who will be bidding to the
Government and a set of local bidders who will
be available to the states?
H.M.Jr:
213
Only on Public Roads.
- 20 -
214
Bean:
See,
one proposal is that the Government seek
low bids.
H.M.Jr:
Well, as I envisage it, it would be something
like this. We ask for a bid on three million
barrels, I suppose over a period of what - six
months, say?
Peoples:
It will be three million barrels, Mr. Secretary will be up to June 30 - the remainder of the
current fiscal year. It will have to be divided
up by regions, naturally.
H.M.Jr:
Well, and in that, let's say, region one, - you
check me if I am right - if I see this picture region one, the price is a dollar ten cents,
and if Public Roads are building any in there,
we would furnish them - and I take it you could
ask for bids for three million barrels, as a
minimum, up to a maximum of so much. You are
Peoples:
going - you can ask that way for bids?
There can be leeway, yes sir.
H.M.Jr:
What?
Peoples:
There can be leeway.
H.M.Jr:
Just ask for bids of three to ten million barrels.
Peoples:
That can be done.
H.M.Jr:
Yes.
Peoples:
H.M.Jr:
Peoples:
H.M.Jr:
No, closer to the approximate quantity the better,
Mr. Secretary.
But it could be done?
It could be done, yes sir.
Then the price in District Number One is a dollar
ten; Public Roads are going to build a million
dollars worth of roads there, need a hundred thousand
barrels of cement, and the price is a dollar ten.
If they want to draw on the Federal Government,
or if they .can get it for a dollar ten from their
local merchant, or less, they can buy it locally,
but the price for that region would be a dollar ten.
Is that right?
- 21 Peoples:
Exactly.
Oliphant:
Herman, in this crude way, is that right?
That is exactly the way it is.
H.M.Jr:
What?
Oliphant:
That is exactly the way it is.
H.M.Jr:
Then the Congressman who comes in and kicks
H.M.Jr:
215
because his local merchant can't get the business say, "Well, if you bid a dollar ten you can get
the business. It is up to you to get it." Does
that answer your question?
Bean:
Well, in part.
H.M.Jr:
Huh?
Bean:
In part. I'd like to think about that a little -
H.M.Jr:
a little problem of possibly having the same bidder
involved in the state transaction as involved in
setting the price to the Government.
Well, I mean you will - you will talk about it with
some of these people.
Bean:
Curtiss:
H.M.Jr:
Curtiss:
I'd like to study it.
There is one difficulty involved in that. That
would probably require a change in procedure on
the part of the states in taking bids for any
work that involved cement, in that it is customary
to call for bids on so many square yards of
concrete pavement, or cubic yards of Class A
structural concrete, so they do not actually buy
cement - they buy concrete, which is a mixture of
several materials, plus the manipulation.
Well, if you could get together with Procurement
and our lawyers and some of the other people
work that thing out, you see; I don't
-
Some states actually have a cement item.
It can be worked out, Mr. Curtiss.
Curtiss: What?
Peoples:
- 22 Peoples:
216
It can be worked out.
Curtiss: Oh yes.
There, two things have to be done - have to clear
H.M.Jr:
with the State Department. Are they willing to
open the Belgian Treaty? Is that right? Two this thing has to be cleared with the Secretary
of Agriculture.
Oliphant: And with the Department of Justice.
H.M.Jr:
And with the Department of Justice - and I would
say that the dead-line on this thing is Monday
morning.
Stinebower: May I raise one more question?
H.M.Jr:
And then, with that - on this thing I'd have a
piece of paper that the President can sign; all
he's got to sign is the document amending the
order making all Government cement purchases
through that - just one sheet of paper.
Peoples:
H.M.Jr:
That is sufficient.
But I hope to submit this to him Monday, because
he goes away Tuesday, so that would be the last
day. Now who - who doesn't think we ought to do
cement?
Peoples:
Well, Mr. Secretary, that opens up a question
here we've got which I want you to consider, sir.
While the price of cement may seem to be high, and
the purpose here is to try to get it - to break
the price - to get it lower, if I understood the
President's policy aright with regard to laying
off - declaring a holiday on business reforms
and so forth, in view of the fact that the cement
case is in the courts, is it advisable to agitate
this question now?
H.M.Jr:
Well, in the first place, Admiral, the President
didn't say he'd lay off reforms.
Peoples:
He didn't, huh?
H.M.Jr:
No sir, because I happened to lay before him the
statement by Mr. Rayburn where he said just that,
and asked the President, "If you don't mind, on
account of all the work I am doing, did you say that
- 23 -
217
to Mr. Rayburn?" He said, "I never even hinted
such a thing to Mr. Rayburn." So - I mean - the
President has not said that and after all, I've
kept the President informed what we are doing no later than Monday - and he is simply delighted.
Peoples:
H.M.Jr:
Peoples:
Well, that is the answer to it then.
And the only thing he is regretful about is that
this isn't plaster.
Mr. Oliphant, have you got any ideas about when
the courts may be able to come to a decision in
the cement case?
Oliphant:
I.M.Jr:
I should say in about years. I mean that.
About three years. The cement case will be
concluded in about three years - 1941, I would say.
Well, the President said, "Fine. I'll go along
with you on cement, but when do I get plaster?"
He said, "You haven't got weak-kneed on that?"
I said, "No, but the boys need a little bit more
time."
McDonald:
I just want to ask one question - either Mr.
McDonald or Dr. Fisher. Do you feel, in building,
that cement is important in your program?
I don't think the price of cement, in residential
construction of the smaller houses, makes a great
deal of difference. When you get into large
structures it may. My only observation on this
thing is that we have checked up here and since
the Housing Act was signed on February 12, we
have had, in round numbers, a hundred million
dollars worth of mortgages accepted for appraisal about sixty to seventy-five per cent of that being
new - seventy-five per cent for new construction.
Now, if this is handled in such a way that it is
going to look as if there is going to be an immediate
crusade on building prices, it, no doubt, would
throw a wet blanket upon a great deal of building
that is in contemplation, and we are very anxious
that it be handled in any way that wouldn't do
that.
H.M.Jr:
Well, that would be easy - we could give it a
monopoly flavor.
- 24 McDonald:
H.M.Jr:
Taylor:
H.M.Jr:
218
I think cement would be a very good thing to
confine it to. I am very happy to think that you
decided to select one item rather than scatter
your shot over a lot of them.
Well, Blaisdell felt that they weren't ready on
reenforced steel, so we have postponed that, but
there is no question how the President feels,
because I've kept him posted, and discussed the
thing with him Monday and he is simply delighted
with the prospect, and we don't have to make it I mean if we are doing this for Housing he can
make it part of his
Roads is just where it ties to.
All right. We are doing it all for Roads. This
is part of a subsidy to the farmer. He is only
getting one-sixth of the Government revenue now;
it is not enough. We are worrying - think he ought
to get one-fourth. Give him a little -
H.M.Jr:
Public Roads is the reason why - got roads versus
housing construction.
Part of the Public Works.
McDonald:
You've got my thought, haven't you?
H.M.Jr:
Yes. You and I - Dr. Fisher and I talked it over
the first day. We don't want the psychology that
Gaston)
they have on the automobile thing.
McDonald:
That is right, exactly.
H.M.Jr:
We can make it as Herbert Gaston says, a part of
Public Works. How's that?
McDonald:
I - that is fine. I don't want people sitting
around waiting for prices to come down.
Fisher:
From that point of view cement is a good product
to take because it doesn't bulk large in the usual
house.
H.M.Jr:
Let's just go around, first, before we get on
I again I appreciate tremendously
that's worked on this thing,
rackets.
everybody
Mayjob,
sayand
think,
think it is
a beautiful
I because on I
account of the President going away, if you don't
- 25 -
219
mind, I think we better meet Monday morning on
this thing, about ten-thirty Monday morning.
Blaisdell: (Nods "Yes.")
H.M.Jr:
I mean, with a finished job. Do you suppose you
can get everything cleared through Agriculture,
and, if, for instance, we can't do the Trade
Treaty thing, I'd just leave it out, that is all.
In other words, don't have anything in here by
ten-thirty Monday that I can't go to the President
and say,
See?
Huh?"This Committee is in accord." You see?
Blaisdell:
(Nods "Yes.")
H.M.Jr:
I don't want to have it
Stinebower: Mr. Secretary, would Saturday be too soon?
H.M.Jr:
Bean:
H.M.Jr:
For me? Why? Is somebody going to be away?
I personally will be away Monday.
I've got a Home Owners' Loan job that I promised
Mr. Fahey on Saturday, and he's only been waiting
two years. I'd like to but I really - I mean I
think I ought to take care of Mr. Fahey. Is
anybody else going to be away?
McDonald:
I may be away.
H.M.Jr:
Well
McDonald:
H.M.Jr:
You
will
be
here.
excuse me, can't you? Dr. Fisher will
On Monday, you mean?
McDonald: Yes.
H.M.Jr:
I think we better make it - Mac (McReynolds) you
make a note of it please - ten-thirty Monday, if
you don't mind, because I really got - Mr. Fahey
is really entitled to it; he's been very patient.
Now, are you all clear?
Blaisdell: (Nods "Yes.") Yes sir.
- 26 220
Blaisdell:
Just this, Mr. Secretary. Shall I clear with
Mr. Curtiss for Public Roads, Mr. Oliphant for
Justice, and - has Mr. Stinebower - and Mr.
Stinebower for State?
H.M.Jr:
Yes. Well, let's put it - does anybody else want
to sit in on this before Monday? Well, Mr.
Blaisdell's available if anybody wants to sit in
with him before - huh?
Blaisdell: (Nods "Yes. ")
H.M.Jr:
And I think Admiral Peoples ought to see
Peoples:
It's a bully.good report.
H.M.Jr:
He ought to see it Monday.
Blaisdell:
I'll be very happy to submit it to anyone.
I'll see it through Captain Collins, who is a
Peoples:
Taylor:
H.M.Jr:
Collins:
this before Monday.
member of that Committee.
Don't forget your order.
on the front page an order
And you'll have
giving Peoples the authority to do this.
Mr. Secretary, I'd like to interject one thought
on it, sir. This three million figure we have
used
H.M.Jr:
What?
Collins:
This three million figure for the remainder of
this fiscal year - part of that is unquestionably
covered by contracts existent now which run for the
remainder of the fiscal year. It is the case in
Navy; it is the case in T. V. A., and it may be
in some of the other departments.
.....
H.M.Jr:
Well
Peoples:
Well, you'll have to use whatever the figure may
be.
- 27 -
221
H.M.Jr:
I just used that figure for a figure.
Collins:
I thought
you were quoting the 3,395 that appears
in
the report.
H.M.Jr:
I just was using it, and I asked the Admiral to
check up on how much new business, and stop
whatever buying they were doing.
Peoples:
That was done.
H.M.Jr:
So whatever unfinished - whatever new business is
left come
we will
getroads.
it - what? But the big business
will
from
Where is our racketeer?
Barton:
Peoples:
H.M.Jr:
Barton:
H.M.Jr:
I have a report here, Mr. Secretary.
Reynolds is away - quite ill.
I'm sorry.
Would you like a copy, to follow this?
If you don't mind.
McReynolds: Pardon me - excuse me.
H.M.Jr:
You don't like to sit in on this?
McReynolds: I don't like rackets. Anyhow I've got some rackets
in my own
(Leaves)
Barton:
The Committee
H.M.Jr:
Can I have one second before you start? I've got
a Government Bond market which is also a racket,
if you don't mind. Let me take a look at that just
a second.
H.M.Jr:
(Secretary leaves room.) (Returns, and talks
quietly with Mr. Taylor a minute.)
All right, gentlemen.
- 28 222
Barton:
"This report is limited to practices within the
building industry which add to the burden of costs
and which, if continued and extended, will largely
nullify the effects of those steps which have been
taken to increase the volume of residential construction.
"Present costs of building are probably lower than
in 1926, with retail prices of building materials
as a whole about as low as can be expected without
reduction in wages. Wages of skilled labor are
slightly above the 1926 level, probably 5%; wages
of unskilled labor have increased probably 15 to
20% since 1926.
"Caution must be exercised in the use of much of
the published data regarding the cost of building.
Today the market is highly competitive from the
consumer standpoint and published price indexes
covering building may not accurately reflect the
actual cost to the consumer. Restrictive and collusive practices pervade the entire building industry
and are more prevalent in the larger centers of
population and are made effective through:
(2) contractors,
(1) Distribution practices of producers.
In
are
arrangements
(3)
"These objectionable some which
many Practices with made Restrictions and sub-contractors effective organized instances, between practices, practiced labor through these producers, associations. groups. practices by labor. of
are long established, vary from trade customs to
the corrupt and criminal "rackets." Some of them
may be legal, practically all are difficult to
prove, and some can be cured only by drastic punitive
measures. Their elimination would, in the opinion
of this committee, effect a saving to consumers of
between 20% and 30%, possibly even more.
"These practices may be summarized as follows:
"1. Manufacturers Distribution Practices:
"The following are typical practices under this
classification.
223
- 29 "Restricting the trade through concealed discounts
and rebates to certain groups of contractors to
prevent lower costs which might be gained in
competition. This practice prevails widely in
plumbing, heating, and other mechanical equipment.
"The activities of manufacturers in securing
uneconomic provisions in building codes and other
legislation for purposes of increasing the sale
of their own equipment and restricting use of other
types which may be more economical is one manifesta-
tion of the operation of this type of activity.
"2. Contractors and subcontractors practices.
"General contractors' bids appear to be highly
competitive. One of the most vicious and most
recent types of practice on the part of subcontractors' associations is the establishment in some
places of 'bid depositories. In order to operate
in a territory, a subcontractor must become a
member of such a depository."
H.M.Jr:
Excuse me. Do you define what a "bid depository"
is, because that is a new term to me.
Barton:
It is a collection of the bids prepared by subcontractors generally and they are gone over by the
association's officers.
Oliphant:
Clearing house, isn't it? Sort of a clearing house?
Barton:
Clearing house for bids, and usually operates on
subcontractors bids.
Peoples:
Where the bids are submitted by the subcontractors,
H.M.Jr:
Barton:
usually prior to, also, the opening of the bids of
the general contractors.
I see. Go ahead.
"Bids of subcontractors must be submitted to the
depository, where they are examined by officers prior
to their submission to the general contractor.
Apparently a scale of prices is maintained by the
depository and any bidder whose bid does not conform
to this scale is penalized by fines and other
punitive measures. Organized labor is usually
represented in the control of these depositories,
- 30 -
224
and the penalties exacted of the subcontractor
may extend to a refusal to furnish labor on the
job.
"In some cases, subcontractors associations operate
in open collusion with labor. This collusion may
take the form of agreements with labor not to
operate or supply any help to subcontractors who
are not members of the association or who violate
an agreement not to bid on certain jobs in order
to maintain a system of rotation.
"3. Labor Restrictions.
"The third class of restrictive measures revolves
around working rules of organized labor, which
tend to:
(a) Increase the number of craftsmen
required by measures tending to restrict
output, and requiring unnecessary
helpers and unnecessary foremen and subforemen. Requiring to be done on the
site that which might be more economically done in the shop.
(b) Maintain operations that might ordinarily be done in the lower priced
labor class in the high-priced labor
class.
(c) Require contractors to pay wage
rates prevailing at their place of business
regardless of the location of the operation especially where contractors doing
business in a large city having high wage
rates must pay these wage rates in country
districts having lower wage rates.
(d) Limit the supply by failure to
provide for apprentices and limiting
apprentices in both the number and exces-
sive requirements of apprentice training.
(e) Unnecessary losses due to jurisdictional disputes.
The excessive fees charged for apprentices.
"There are many other abuses than the ones noted,
but these furnish a partial picture of the many
reasons for increased costs in the building
industry aside from the increase due to materials
prices.
- 31 225
"Recommendations:
"Correction of the abuses found throughout the
building industry would be a lengthy task. In some
cases immediate punitive action may be taken where
such punitive action is indicated by illegalities.
"As a point of departure, the committee recommends:
"(1) That the Department of Justice be requested
to investigate with a view to prosecution: (a) the
distribution methods of the manufacturers of plumbing fixtures and supplies; (b) illegal practices
of subcontractors in the plumbing industry, with
particular reference to the organization and
operation of bid depositories;
"(2) That the machinery be established for negotiating with labor organizations for the waiver of
restrictive practices in connection with
the construction of low-priced dwelling units.
This machinery might well take the form of a national
committee with headquarters in Washington and
local sub-committees in different regions or areas.
The Department of Justice should be represented on
such committee.
H.M.Jr:
"(3) That a similar method of action be followed
in connection with the practices in other trades.
Well, as to your first recommendation - that
whole thing resolves itself down to what the
Department of Justice is willing to do, and
they are not represented here. Does anybody have they seen this at all?
Barton: No sir.
Peoples:
Is it a Department of Justice matter, Mr. Barton,
or a Federal Trade Commission matter?
Barton:
Some of it would be handled by the Federal Trade
Commission, many of the practices, and I think
they are doing something along those lines. It
is a long drawn out affair, though. You've got
to have hearings.
H.M.Jr:
Well, what I say, in order to save.time-there's a
lot of people here.- let's take Number One, and
- 32 -
226
Mr. Oliphant, if you could contact the Department
of Justice and see whether they are interested and
if they are would they come over here at tenthirty Monday morning and meet with us, but I
really don't think that until they have seen this
there is much use of our discussing it, but if see? Mr. Thurman Arnold would be the fellow,
wouldn't he?
Oliphant:
Presumably be confirmed before that time. Been
reported out by the full Committee. The full
Committee has reported his nomination.
H.M.Jr:
If somebody could see them and have a chance to
meet with the Committee on Rackets in Building have a meeting with the Department of Justice between
now and Monday, then come back and have another
report - but I think, pending that, I really don't
want to take up people's time here to discuss it
because we may get an answer "We'd be delighted
to," or we may get the answer we've gotten before,
that, "We haven't got enough personnel to handle
Oliphant:
that thing.'
something to be
If you approve that report as
submitted to them, I think it would be feasible to
have a preliminary meeting with these men, say
Saturday, preparatory to their being over here
Monday at ten-thirty.
H.M.Jr:
Well, I'll put it this way: I'm willing to have
Oliphant:
I mean approve for
H.M.Jr:
Oliphant:
them take a look at the report - I mean, I don't
want to approve the report - but because there's
some things in there I'd like to argue about.
I approve it to be shown to the Department of
Justice.
(Nods "Yes.")
H.M.Jr: What?
McDonald:
H.M.Jr:
I say, we have quite an addition to those that
are mentioned there.
You have - well, you're on this, aren't you?
- 33 Fisher:
Yes, I am.
H.M.Jr:
Well, you'd meet with them, wouldn't you?
227
Well, I'd say the next move, unless somebody has
some other suggestion, that the so-called "Committee
on Rackets in Building" representative meet with
a representative of the Department of Justice
just as soon as possible and then come in with -
then we all meet again on that thing at ten-thirty
on Monday. We will have a - we'll clean up
the cement thing anyway, and know where we stand,
and I, personally, seeing how things have happened
before in Washington - I am very much pleased with
the progress. I think we are getting somewhere.
McDonald:
It is excellent.
H.M.Jr:
The thing I am trying to do is to get a formula.
Now, if we can do this thing with cement and it
works, fine. I hope you people aren't going to
forget about steel and steel products.
Blaisdell: We haven't.
H.M.Jr:
What?
Blaisdell:
We haven't.
H.M.Jr:
Has the Tariff Commission come through with their
steel report yet?
Piquet:
We have worked up a preliminary draft. Report
needs some expansion, but you can have it by
Monday.
H.M.Jr:
We can?
Piquet:
Yes sir.
H.M.Jr:
Commissioner Stevens will have that. Is that
going to be released?
Piquet:
Oh, you mean our regular big report.
H.M.Jr:
Now I - I mean this - I understand the Tariff
@
Piquet:
Commission report on steel and steel products
That will be some few weeks.
H.M.Jr:
But the one
Piquet:
Reinforcing bars, I thought you were referring to,
which is simply a brief commodity analysis. We
can have that.
- 34 H.M.Jr:
You haven't had that yet?
Piquet:
Preliminary draft has been submitted.
H.M.Jr:
228
I think we are getting places. And in the meantime
Mr. McDonald is doing a real business. I think
it's all to the good.
McDonald:
We've got a hundred million dollars since the
twelfth of February.
Blaisdell:
How much - total - Mr. McDonald, since the
beginning of the year - since the Act went into
effect?
Bean:
The Act went into effect the twelfth of February.
That was the date it was signed.
How much in excess of last year's figure is that?
McDonald:
I don't know the percentage.
McDonald:
Bean:
McDonald:
Fisher:
McDonald:
Thirty million?
That would be a fair - about thirty per cent, I was
going to say, about - off-hand.
No, I don't think we've got - only got two weeks
higher than last year.
But we've got only that large scale housing stuff
under Title One. I think twenty to thirty per
cent.
H.M.Jr:
How much of the big - large scale thing's gone
through now?
'
McDonald:
We have approved ten million dollars worth of
them since the twelfth of February, and I think
they have even broken ground on about four of
those.
H.M.Jr:
How many projects, approximately, make up the ten
million?
McDonald:
How many apartments?
H.M.Jr:
How many projects?
McDonald: I should say about ten.
- 35 H.M.Jr:
McDonald:
223
Do they average a million dollars apiece?
Yes, run from four hundred fifty thousand to two
million,
so I'd say a million dollars would be a
good average.
H.M.Jr:
Now are those - is that one man doing a lot of
smallhouse?
homes or is it one man doing a big apartment
McDonald:
Those arehouse,
what we
apartment
yes.call "rental projects" - a big
Oliphant:
I want to ask one question on the racket report,
if I might. It seems the major stress-there on
the program of action is legal action, which is
notoriously slow. I wonder what became of the
suggestion
that a very effective thing would be
to have those bids broken down?
H.M.Jr:
What bids?
Oliphant:
The bids on public buildings - broken down to show
up these rackets, which is something that wouldn't
be dependent on the delay in the courts; that, I
thought, was a larger item we were discussing last
week.
H.M.Jr:
What about that?
Barton:
That was on part of the racket - that was another
Well, what is happening on that?
H.M.Jr:
Barton:
I don't think there's been any discussion - not
in our Committee.
H.M.Jr:
Barton:
Oliphant:
I mean, weren't you going to do that?
No. It was discussed here, generally.
I thought the point was that that would show it up that you broke it down to the subcontracts and it
would
show up at once where these costs are due to
the rackets.
Stone:
I think Mr. Reynolds' suggestion on that was that
if that were done it would more or less commit the
Government to accepting those subcontracts that
were included in the bids and would thereby limit
the general contractor.
- 36 Fisher:
230
That subject wasn't assigned anyone but we did
discuss it a little in our Committee, and that was
Mr. Reynolds' comment on it, and it didn't seem
feasible to require these breakdowns, because he
said, "Where are we when we get the breakdowns?
The electrical contract - subcontract is too high,
but what can you do about it? You can throw it
out on that account. If you accept it you've
got to have approval on it."
Oliphant:
Statement made here in one meeting that it ran
up costs as much as a hundred per cent.
H.M.Jr:
Yes. He spoke of somebody here in Washington -
had an electrical contract - I thought - I was
under the impression we were going to have some
concrete cases.
Fisher;
H.M.Jr:
We have a number of those that we have discussed
in Committee. We omitted them here in order to
be as brief as possible in our report. There was
a case reported in the New York Times on Saturday
in New York, of an electrical contractor who was
pulling all the men off his jobs - union men because he says that the practices of the union
and the subcontractors in the electrical equipment
there are too high, and the practices are causing
great waste. He is taking it up with Mr. Dewey
and Mr. Green, according to this newspaper report.
What's going to happen about it, we don't know.
Well, isn't the Department of Justice going to
say, "Well, this is very nice, but where is the
evidence?"
Fisher:
We have a considerable amount of such evidence to
present.
H.M.Jr:
Have you?
Fisher:
Yes, but we haven't any legal evidence. We
H.M.Jr:
Couldn't Procurement give legal evidence?
Peoples:
Not on subcontractors, Mr. Secretary, no.
McDonald:
I think, Mr. Secretary, you'll find that the
haven't subpoenaed any witnesses.
Better Business Bureaus in many of the big
cities have about all the evidence you want.
- 37 -
231
H.M.Jr:
But if I were in the Department of Justice, the
first
thing I'd say - "Well, what have you got
to work on?"
McDonald:
They have been accumulating this information for
H.M.Jr:
Couldn't they be contacted?
McDonald:
I should think so. They have been trying to fight
it for a long time.
H.M.Jr:
Why couldn't somebody - whoever is Chairman of
sometime.
this Bureau - why couldn't the Better Business
Bureau of New York be contacted?
McDonald:
H.M.Jr:
Fisher:
I should think, the proper thing to do.
I think we want some evidence; I don't feel we've
got it yet.
We have - Mr. Reynolds had a considerable file of
cases and of reported cases - but of course we
didn't have power of going out and subpoenaing
people, or discussing it with them, in a legal to get legal evidence.
H.M.Jr:
I think Mr. McDonald has made an excellent sugges-
Fisher:
It may be possible to do that.
I think that case, Dr. Fisher, was Penner Electric
Company. They sent a telegram to you and I sent
a copy over to Mr. Reynolds, and sent the original
over to Labor Conciliation Division.
Gaston:
tion.
H.M.Jr:
Anything else?
Fisher:
Well, for the guidance of this Committee, I'd
like to ask one other question.
H.M.Jr:
Please.
Fisher:
We were trying to establish a pattern in connection with the plumbing situation. We had two or
three recommendations. One was that the Department
of Justice be requested to accumulate evidence;
second, the establishment of Committees to negotiate
232
- 38 -
with local unions; and the third, moving into
other types of mechanical equipment as rapidly as
we can - as you are proceeding on other cases in
connection with cement. Is that general
pattern
H.M.Jr:
Well, to answer very - I just haven't got the feel of
this thing yet, and possibly I'll get it Monday
after the Department of Justice - I mean, I don't
like - I just don't feel this thing yet. Now
these gentlemen have given me something, and I
feel that we are on the right track, but I don't
feel - frankly, no, I can't answer your question,
but because I don't think you have given me enough to
chew on.
Fisher:
Well, Mr
H.M.Jr:
Fisher:
I mean, I haven't got enough.
Sears Roebuck man contributed this to us.
H.M.Jr:
I haven't got enough. You haven't given me enough
Fisher:
Mr
H.M.Jr:
Walker.
Fisher:
Mr. Walker told us this in Chicago, that the Chicago
Building Trades have agreed to remove their restrictions in discussion with Sears Roebuck with respect
to the building of houses under five thousand
dollars. "Give it to you whatever you like."
We are using that as a pattern for this negotiation
with building trade unions; but that has to be done
locally, so we suggested the setting up of the
information - still too much in generalities.
Committee and local committees.
McDonald:
Well, I've got a very excellent plan drawn up for
a permanent committee to sit on this thing, which
Mr. Walker drew up - a very excellent plan, and I
have that, but I still say, Dr. Fisher, that I
can't answer your direct question as to what pattern
you should follow until you give me a little bit
more stuff.
Let's do that.
H.M.Jr:
All right.
H.M.Jr:
march 16, 3:00p.m.233
March 16, 1938.
or
1. RESIDENTIALISM
1. Centraliant - That there be imediately in
the hands of the Director of Presurement the - amount or
purchases of consent, including (a) All coment new being purchased by any Follows agency
in the regular course. A list of such agencies and
the amounts they purchased is attached.
(b) All current which, by change in the present practice
of any agency. could be purchased by the Government
rather than by the contractor. A list of such agencies
and the amounts they purchased is attached.
these too combined would give the Precurement
Division a total of 15,730,000 bble per which constituted about 14 percent of yearly sales.
For the rest of the fiscal year the Government has
approximately 3,395,000 bble to purchase.
234
2. Trade Agreements. The State Department should be asked to
reepen the question of further reduction in the tariff - concert
under the Belgian Trade Agreement. This would involve the
issuance of notice to negotiate the general provisions of the
see
Agreement, and the simultaneous assouncement of the reeponing
of the count concessions. Althouth the time involved in magetiation would be considerable, the assouncement itself would
have value.
3. Anti-trust action. The program of ocordinated purchases should
be carried out in such a fashion as to preserve all evidence of a
new and distinct illegal combination or of any continuance of
any practice which may be found to be illegal (as distinet from
evidence partiment to the pending FTC complaint) concentered in
the course of carrying out this program, having in mini is
diate action by the Department of Justice in the event such
Combination 10 se disclosed.
As a cerellary to this, all conferences and committees with
the ceneut manufacturers and dealors should be earnied on in
235
-30
:
such a way as to avoid anything which would be later eited as
formal or informal official approval of illegal practices or
combinations in the industry.
4. Public Roads. The details of the program in connection with
public reads cannot be stated sharply, but follows three possible
lines:
(a) Possible purchases by states under a Federal Government
open contract.
(b) A conference by the Secretary of Agriculture with the
state read commissioners explaining the Federal Government
program and endeavoring to secure cooperation in its
development.
(e) Legislation would be necessary to enable the Federal Governo
mont to purchase essent used in highway construction under
grants by the Bureau of Public Reads. As to approved
projects, this legislation could authorise the Secretary of
the Treasury to negotiate with states an arrangement for
them to take coment in lieu of moneys and, as to projects
,
-4-
236
:
not yet approved, such legislation could authorise the
Secretary of Agriculture to make grants of money canditioned upon the Federal Government's supplying the
ceneat. 1 Legislation of the former sert could amt should
be put in the present Agricultural Appropriation Act
pending before the Appropriations Committee of the House.
II. PROCEDURE
1. Personnel. The Secretary of the Treasury should name one or more
mon thoroughly familier with the ement industry, including the
organisation, banking, and other financial connections of consent
concerns, and the marketing of cement. This person to function is
the Precurement Division directly under the authority of the
Secretary.
2. Competitive Bidding. All purchases should be made in such a as to secure bone fide competitive bidding.
3. Collusion. If indications of collusion appear in the original
bidding, these bide should be rejected and readvertised.
-5-
237
4. Independent Negotiation. If the bide or other ovidences of
collusion are still present, negotiations for the letting of
independent contracts should be undertaken.
.
5. Preservation of Evidence. While the preceding stops are being
taken the Department of Justice should be in constant consultation
with the Treasury Department in order that legal action under the
anti-trust laws may be taken if illegal actions are found.
6. Trade Agreements. The amountement of the reepening of the
Selgian Agreement should be made as quickly as possible se that
the present FTC action, the previously sectioned negotiations,
and cerellary actions are preceeding at the same time.
7. Public Reads. Further exploration and action in connection with
the public reads program should be continued while the other
activities are under way.
8. Effective Coodination. All persons participating in the program
should be aware of the fundamental objectives involved.
9. Publicity. The amount of publicity and its character will
became apparent as the program develope.
.6.
III. OBJECTIVES
1. ceneat prices at present are regarded as being "out of line"
and hease are a blook to business recovery.
2. The fundamental ate of the program 10 to lever the price of
for all purchasers, not only the Federal Government.
3. The secunitry purpose is to establish conditions in the industry
which will bring about competitive conditions.
238
much 16 3.00
239
Report of the Sub-Committee on Collusive Practices in
the Building Industry.
This report is limited to practices within the building industry
which add to the burden of costs and which, if continued and extended,
will largely nullify the effects of those steps which have been taken
to increase the volume of residential construction.
Present costs of building are probably lower than in 1926, with
retail prices of building materials as a whole about as low as can be
expected without reduction in wages. Wages of skilled labor are slightly
above the 1926 level, probably 5%; wages of unskilled labor have increased
probably 15 to 20% since 1926.
Caution must be exercised in the use of much of the published data
regarding the cost of building. Today the market is highly competitive
from the consumer standpoint and published price indexes covering building may not accurately reflect the actual cost to the consumer. Restrictive
and collusive practices pervade the entire building industry and are more
prevalent in the larger centers of population and are made effective
throughs
(1) Distribution practices of producers.
(2) Practices between producers, contractors, and sub-
contractors associations. In many instances, these
practices are made effective through arrangements
with organised labor groups.
(3) Restrictions practiced by labor.
These objectionable practices, some of which are long established,
vary from trade customs to the corrupt and criminal *rackets." Some of
them may be legal, practically all are difficult to prove, and some can
be cured only by drastic punitive measures. Their elimination would, in
the opinion of this committee, effect a saving to consumers of between
20% and 30%, possibly even more.
These practices may be summarised as follows:
1. Manufacturers Distribution Practices
The following are typical practices under this classification
Restricting the trade through concealed discounts and rebates to
certain groups of contractors to prevent lower costs which might be gained
240
is competition. This practice prevails widely in plumbing, heating,
and other mechanical equipment.
The activities of manufacturers in securing uneconomic provisions
building codes and other legislation for purposes of increasing the
in
sale of their own equipment and restricting use of other types which may
be more economical is one manifestation of the operation of this type of
activity.
2. Contractors and subcontractors practices.
General contractors' bids appear to be highly competitive. One of
the most vicious and most recent types of practice on the part of subcontractors' associations is the establishment in some places of #bid
depositories." In order to operate in a territory, a subcontractor must
become a member of such a depository.
Bids of subcontractors must be submitted to the depository, where
they are examined by officers prior to their submission to the general
contractor. Apparently a scale of prices is maintained by the depository
and any bidder whose bid does not conform to this scale is penalised by
fines and other punitive measures. Organised labof is usually represented
in the control of these depositories, and the penalties exacted of the
subcontractor may extend to a refusal to furnish labor on the job.
In some cases, subcontractors associations operate is open collusion
ith labor. This collusion may take the form of agreements with labor not
to operate or supply any help to subcontractors who are not members of the
association or who violate an agreement not to bid on certain jobs in order
to maintain a system of rotation.
3. Labor Restrictions.
The third class of restrictive measures revolves around working rules
of organised labor, which tend to:
(a) Increase the number of craftsmen required by measures
tending to restrict output, and requiring unnecessary helpers
and unnecessary foremen and sub-foremen. Requiring to be done
on the site that/sight be more economically done in the shop.
(b) Maintain operations that might ordinarily be done in the
lower priced labor class in the high-priced labor class.
(a) Bequire:epsimestors to pay wage rates prevailing at their
place of business regardless of the location of the operation
especially where contractors doing business in a large city
having high wage rates must pay these wage rates in country
districts having lower wage rates.
241
(d) Limit the supply by failure to provide for apprentices
and limiting apprentices in both the number and excessive
requirements of apprentive training. The excessive fees
charged for apprentices.
(e) Unnecessary lesses due to jurisdictional disputes.
There are many other abuses than the ones noted, but these furnish
a partial picture of the many reasons for increased costs in the building
industry aside from the increase due to materials prices.
Recommendational
Correction of the abuses found throughout the building industry
would be a lengthy task. In some cases immediate punitive action may be
taken where such punitive action is indicated by illegalities.
As a point of departure, the committee recommends:
(1) That the Department of Justice be requested to investigate
with a view to prosecution: (a) the distribution methods of the manufacturers of plumbing fixtures and supplies, (b) illegal practices of
subcontractors in the plumbing industry, with particular reference to
the organisation and operation of bid depositories;
(2) That the machinery be established for negotiating with labor
organisations for the waiver of restrictive practices in connection with
the construction of low-priced dwelling units. This machinery might well
take the form of a national committee with headquarters in Washington
and local sub-committees in different regions or areas. The Department
of Justice should be represented on such committees.
(3) That a similar method of action be followed in connection with
the practices in other trades.