Full text of Diaries of Henry Morgenthau, Jr. : Volume 2 : Part 2
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0421 January 25, 1940 11 am Present: Mr. Sullivan Mrs. Klotz HM,Jr: John, sit down. In order to kill two birds with one stone, I thought I would take you into my confidence. Just let me repeat my conversation with the President this morning, and I have that confidence in you. Mr. Sullivan: Thank you, Sir. HM,Jr: I told the President that I was here to see him this morning as the representative of the State of New Hampshire. He said, "For which faction, the Murchie faction?" (Until yesterday I did not know who Murchie was or what he represented?) I told him no, I was here representing the Sullivan-Brown faction and that New Hampshire would be the first State in the Union to select its dele- gates. The President did not seem to be aware of that fact and I said that Sullivan said. he was ready to move in any direction that he, the President, would like him to. He said to tell Sullivan that "I would like him to do in New Hampshire what Duffey is going to do in Vermont and what Oregon is going to do, namely, that whatever delegates are selected, they should be for a. ticket and platform which will continue the policies of the Roosevelt Administration. If He said, "We have tried to give it a name and in Oregon they are going to call the delegation 'Roosevelt Policies Delega- tion'.' He then went on to say that he had not yet met Sullivan and I said I would be glad to bring him over after lunch on Monday and he said he wanted to tell Sullivan one of his best stories about his namesake, John L. Sullivan. Mr. Sullivan: I will go to work on that and we will get a better name than that. HM,Jr: My reaction is -- uninstructed as to candidate. 0422 -2- Mr. Sullivan: What he wants, he wants a group of delegates up there that he can get word to and they will HM,Jr: of thing he is for.who are for the continuance of the kind The President said, "I spoke to Jerome Frank on the telephone last night about the receiver for Associated Gas, also about trying to get a change of venue. He said, this bringing it down before Judge Cox, he didn't think, was such a good idea. But that there was another Federal Judge there -- oh, I can't remember his name, but he used to be connected with the Finger Lakes Park Commission. He would be all right, but the President was chiefly interested in who was to be receiver. He said he has never seen so much pressure from all directions for Johnnie Hanes; that Jesse Jones has talked to him very forcibly about Johnnie sure. Hanes; that Jerome Frank says they are under terrific presSo I said, What do you think about the S.E.C. becoming the Receiver and the President said, "No, I don't want the S.E.C. to get into the management of utilities." But we did talk about Randolph Paul. So I said, "Did Jerome Frank tell you that that was my suggestion?" and he said yes. He said, "Well, I think Randolph Paul would be fine. " I told the President what you (Sullivan) did about Johnson for me and he was very much pleased. 000-000 0423 March 3, 1940 I saw the President at five minutes to four and he asked me how things were getting along and I said pretty good. He said, "What about business" and I told him that all the economists in town were pessimistic and I wasn't sure that they were right and I was having a recheck. I told him about such things as the exports; told him that the freight on wheat 100 pounds - from this country to Belgium had jumped from 10 to $1.00. He had heard nothing about big increases in freight rates; was amazed. He asked me how the aeroplane thing was coming. I told him about the meeting in my room here where the allies told the engine people and the machine tool people to go ahead and spend whatever money was necessary in order to get ready for the big order; told him that Johnson, of the War Department, all the time is trying to undermine me through the press. I then gave the President a memorandum on the powder and he told me to go ahead with it. I said I would do it. He said do it the way you usually do it and I said I would do it through Watson. He said, "That's all right". I said, "It seems strange that here you have told me to do everything I can to help the allies and Hull and Wallace are doing everything to urge them to buy more pork products, tobacco and apples and about a month ago you told me if you were in the position of the allies you would buy only what you needed in this country and tell us to go jump in the Potomac if we didn't like it. " He said, who is doing all this and I told him Mr. Hull and Wallace were and he said you know more about these things than I do, don't you think we ought to get together. He said, "How do you know it is going on?" I said, "I have a memorandum from Feis on it". He said, "Well Tuesday tell Pa Watson that Hull, Feis, Wallace, Collins and myself will discuss this". So I said, "Collins is away - have Spear". He asked me how good Spear was and I said he was very good. It seemed to surprise him. I found the President in excellent humor. When I first went in, Miss LeHand was there and he said, "I wonder if Henry got my joke?" He told about the ides of March and that's when they stabbed Caesar. He said, "I wonder if Henry got the joke" and I said, "No". Missy said, "I don't blame him". We then got on the financing and he said, "I need a lot of figures". I said, " Well I think on this one page memorandum from Bell (which I gave him and he kept - plus two tabulations which he kept) you will find everything that you need". He read -2- 0424 it very very carefully and, when he got through, I said, "To sum the thing up, if you will give me the 700 million from RFC and Farm Credit that is my cushion of safety and I think that is ample". He read it over again and he said, "Yes, I think it is". I said, "I want to go ahead now", so then he said, "Couldn't you do half the amount?" I said, "What I can do and what I am inclined to do is to refund only the note on account of the difference in the coupon and the note and the bond". The President said, "That sounds all right, but give me 24 hours, as I want to check these figures against the figures that Currie gave me". I said, Well I would like ference at four. I want to get this thing started. Won't you see us right after Church?" He said he would and I said, If Could I bring Bell" and he said, "All right". He said, "Why don't you sell more bills?" I said, "Well, if anything, I would let our bills run off". He said, "Why?" and I said, "If there is any criticism of carrying too big a balance, the thing to do is to let the bills run off". He came back to the bills two or three times - why didn't I sell more bills. He said, to get a clearance in the morning, because I have a Press Con- "Why you used more bills when we were first doing our spending" and I said, "Yes, because our credit was bad and I had to use bills." I said, "I can refund the 738 million dollar note issue now at three quarters of a percent for five years. Certainly you can't get money any cheaper than that". I then said to the President, "I don't agree with some people that this debt limit is so important" and, to my surprise, he said, "Neither do I". I understood him to say that"sometime before Congress goes, I will write them a letter and simply point out to them what the expenditures are and how much borrowing power we have left and put it up to them to increase the debt limit at this session of Congress or the next one in '41". So I said, "I think that's what you should do". He said, "Oh, I have every intention of doing it". 0425 Sunday, March 3. (Appointment with the President at 4 o' 'clock) I asked the President how the Welles thing was going and he said not 80 good. He said he did all right in Italy, but in Germany they just wanted everything. shook his head two or three times and said Not 80He good". 0426 March 4, 1940 2:45 p.m. Present: Mr. Bell Mr. Gaston Mr. Haas Mrs. Klotz HM,Jr: Well, you fellows will still have to bear with me. Read this to them, Dan. Mr. Bell: (Reading) "My dear Mr. President: Purely on a fiscal basis, Marriner Eccles would favor doing a refunding for both notes and bonds. However, with the use of part of the Stabilization Fund in mind, Eccles prefers only refunding the bond issue equal to $353,000,000. As your Secretary of the Treasury, I am recommending that we go ahead with the refunding of the $738,000,000 notes. I cannot take the responsibility of having such a large amount of Government securities hanging over the Treasury at this time. I would appreciate your O.K. on this program before four o'clock, at which time I have a press conference. Sincerely yours, (Sgd) Henry Morgenthau,Jr." The President says, "HM,Jr. O.K., F.D.R." HM,Jr: Dan, thank you. a 0427 -2- Mr. Bell: That tells the story. HM,Jr: When I wrote this thing, thingamabob, Currie, said, "Well, that's the same as resigning if you don't get it." And he said, "We might as well take it you resign." have won." I said, "I don't threaten to Mr. Haas; Well, you got it anyway. HM,Jr: Well, anyway, Dan, talk to Miss Chauncey. Mr. Bell: You know all the back history. You are all familiar with the history of it. First we got a note, "No financing and no talking to the banks. The Secretary then cabled the President for permission to do the refunding. Came back, "No. Wait until I come back. I have no figures out here and I can't tell anything about it." And yesterday the Secretary had a conference with the President and I think in their conference mentioned refunding of the notes. So he told him he would have a conference today with the Secretary, Lauch Currie and myself to discuss this whole matter. When we walked into the President's room there stood Marriner Eccles, also part of the reception conference. There was some discussion before we went into the President's office and it was quite obvious from the dis- cussion that this thing had been rehashed before between Eccles and Currie and that the whole question boiled down to the one of using the gold of the Stabilization Fund. We did get this important admission out of both Eccles and Currie, was like pulling teeth out of Currie. The although Secretaryitsaid HM,Jr: Divide it up between what he admitted before the President and what he admitted in the Cabinet Room, because I think it is terribly important. What went on in front of the President and what he told us afterwards. office. Mr. Bell: This is on the outside of the President's HM,Jr: Oh, I am sorry! Mr. Bell: The Secretary told Eccles and Currie that he was on record before the Committees in Congress that he would not use the Stabilization gold except for 0428 -3- stabilization purposes unless he came to Congress first, and while there may be legal authority for using that gold he felt morally bound to carry out that promise. Eccles says, "I fully agree with that. I think that is absolutely right. You should not use it unless you go to Congress." Before we went into the President's office, Currie also admitted that he should do that. Then we went into the President's office. HM,Jr: Excuse me. Eccles said that from one of his attorneys he had an opinion in which there was some doubt as to whether legally I could use the Stab- ilization Fund to retire the debt. Mr. Bell: That's right. HM,Jr: He mentioned the attorney's name. Mr. Bell: Mr. Dreibelbis. The Then we went into the President's office. President started the discussion by asking Currie all about the business situation and whether or not the war was having any effect on it. Currie gave some various opinions from some economist that the decline had been rather rapid and probably would continue, although others thought maybe it was levelling out. Then Ecoles said that he thought we had to watch the situation very closely that there was a possibility that the second quarter would be even much lower than the first quarter and we might see this Federal Reserve index go to 90. And there was a long discussion on inventories and other factors in the business situation and it was quite obvious, I think, to us that the President was delaying this conference and he did not want to come to the question at issue at all. But finally he got to some estimates of the cash position which the Secretary, I assume, had left with him yesterday and started comparing them with some memoranda that Currie had left and they came from Eccles because Currie used the Treasury's estimates as the basis for his memorandum and there was no point in comparing them at all. Finally, the President asked about paying off the bonds and notes maturing on June 15th. He seemed quite 0429 -4- surprised to find that these securities could not be paid off out of the present working balance, and wound up with the statement, "Well, there isn't anything for us to do but refund them". HM,Jr: Excuse me. Then didn't he say "If we did pay them out of the working balance there would be nothing left of the balance"? Mr. Bell: That's right. He was surprised to find they were not in the cash position. Mr. Currie then said that what he had in mind was paying them off, was to do this out of the Stabilization Fund gold. Eccles said that it was his recommendation that the refunding be delayed at this time until we find out what the March tax receipts are going to amount to and whether or not the President would not want to later use some of the Stabilization Fund gold to meet these maturities. If we refund them now, there will be no opportunity to use this gold to retire the debt until December. We told him that we could retire Treasury bills, but he said he would not object in savor of that because their cost was very little at the present time. He did say, however, that if the President decided not to use the gold for this purpose then from a fiscal point of view he would be in favor of refunding both maturities. Currie stressed the importance of keeping this $1,100,000,000 of maturing securities open until the President had an opportunity to see what Congress was going to do and keep the gold for use later on. It was my impression that the President was in favor of refunding the $737,000,000 of notes, although Eccles and Currie had a different impression. In discussing the amounts the President said he did not want to be bothered with details and asked us to go into the Cabinet Room and discuss amounts and where we should go from that point. It was quite clear that he did not want to make a decision on the gold matter at that time. 0430 -5- HM,Jr: Let me go on. In summing up, while we were still there, the President said practically word for word what I said to him yesterday. He said with the European situation as it is, we don't know what's going to happen and it looks very black from all reports and he said that if something should break in the spring, why we might not be able to do a refunding at that time and he could see every reason why we should do it now, at least in part, and he said he would like to be like Henry Clay, who was a compromiser, and do 50/50 and why couldn't we do $500,000,000, at this time. We all agreed we could not do $500,000,000. Right at the end it came out that, both in the outer room, you would have thought that Eccles was strongly in favor, in the waiting room, that he was strongly in favor if we did anything on gold we must get Congress' approval, but at the end there both Eccles and Currie said, "Well, 1f they do this refunding now, this is our last chance to use the gold" and they said that once or twice. And in summing up for the President-said, "Well, I pointed out that I could not do any of this without authoritizati on from Congress" and I said, "I make the flat statement in your presence that 1f you ask Congress' approval on this matter itthat they will take it away from you. They will take away from you. Somebody said, "What will they do with it?", 80 Bell suggested they might earmark it or that Glass would use it for debt retirement or something else, but I said, "They will take it out of your hands, Mr. President. So in summing up he said, "You could not go up to Congress at this time. It would stir up a hornet's next. You just could not go to Congress at this time." Then, right at the end -- at no time did he say that he, himself, wanted to use the gold, but he said this would be the worst time to use it because, he said, "I have to keep all these white rabbits in case of an emergency." But he said, "This isn't the time to use it," and he used the term "white rabbits". And then when I said, "But, Mr. President, don't you want to decide what we want to do?" -- "No. No. No. I don't want to be bothered with details." And, of course, 0431 -6- what he did say, he left the thing right up in the air. I suggested we go into the Cabinet Room and Eccles made one of his long-winded speeches in which he said that he admitted that this was the sole responsibility of the Treasury, but he had not offered his opinion; the President had asked him and Currie backed him up on that. And then Currie said, "I don't apologize to anybody for what I have to think on this. So I said, "Well, Currie, you are in a little different position than Mr. Eccles, because you are an adviser to the President. And then, as Bell and I pressed them, the pattern became clearer and clear that the two were playing 100% alike, namely, that they wanted this, the sole reason they wanted this financing postponed -- and I am now convinced why they urged the President to postpone it before he went away -- because they felt this $1,100,000,000 was the money that they needed to use the gold. Eccles said several times that on a purely fiscal basis he would refund both of them, but as a monetary matter and in other to withhold debt obligations he thought we had better do the $353,000,000 so we would have the $738, 000,000 falling due. So then, little by little, Currie began to say, then the final thing was, the final thing which completely showed his hand, he said, "with this inventory situation, if we use the gold at this time it will give the commodity markets a sort of impetus and people will hold their inventory and not sell it," and I said, "Well, at last, "Well, what about unemployment and inventories?" And the fat is in the fire". And I said, "Currie, I can understand you when you take this language. When you talk about a shot in the arm and for using the gold for you are telling me what you think. But when you talk that purpose, I can understand you because then I know about using the gold because we are criticized too much for paying the interest rates," I said, "I just can't follow you.' But, to wash the whole thing up, these people had practically sold the President a bill of goods to again, in the year of our Lord 1940, to again try a 0432 -7- shot in the arm. And the reason I was 80 weak this morning was that for 45 minutes Harry White practically gave me the same thing. Harry did not know that I had seen the President yesterday and he wanted once more to sell this to me and he tried everything possible to convince me that there was no harm and some good in doing this by using the gold, but Harry's whole argument was that I was being severely criticized by his friends for not using the gold and paying interest on money when I did not have to. But Harry and Lauch Currie think ab- solutely the same on this thing. I told Harry that had made my testimony on the Hill on the Fund and Harry said, "I never agreed with your testimony". I said, I "Why didn't you tell me so at the time?". The other idea I used, you see, they have been telling me this morning -- for instance, Harry, that we should use bills and I was able to get over the point to the President, this morning, that if things got bad in April and May, as he thinks they may, and weneeded to raise money, that was when we could use our bill money and not now. I also pointed out to him that private refunding has been going along beautifully for the last month or two and this would upset private refunding. And Ecoles and Currie laughed at that. I may be wrong. I take this thing terribly personally, because I don't make any bones about it. What happened is I was asking the President to decide. He put me in such a position that I had to ask him to decide whether he was going to follow the Eccles-Currie school of thought or hether he was going to follow my advice. This is quite an interesting document (Letter to the President from HM,Jr which the President approved.) This is a document. I read this to Eccles and Eccles agreed this was his position. I read it to him twice. Mr. Bell: We read it to him two or three times. He knew what was in it. HM,Jr: And Currie quite insistently asked me to 0433 -8- change the sentence, "I cannot take the responsibility of having such a large amount of Government securities hanging over the Treasury at this time. "He said that was the same as saying, "If you don't do it I will resign." I said I was not threatening the President to resign and when I got ready to resign, I would resign. He said, "with that sentence in there, there 18 only O. K. it."one thing for the President to do and that is Mr. Gaston: He did not want you to use your force getyour thiscards. thing this way. He did not want you to to play HM,Jr: Oh, Herbert! If you have principles and you stick to them, the chances are you win, but the fellow who keeps his eye on the gallery never wins. I said this to you yesterday, this is so good, the $738, 000, 000-5 year is so good he just can't refuse it and you said, "Why not do the whole thing?" And when he said, "Well, do you have to do it all at once?", I said, "No." And the beauty of this, both settles the argument for the rest of the year about gold it. because there won't be another opportunity to use Eccles and Currie said 1f we do $738, 000, 000 that I should call Eccles and tell him this orDo justyou letthink it go? Mr. Bell: I think I would call him. (At this point, HM,Jr spoke to Mr. Eccles on the telehone. 000-000 0434 March 4, 1940 My dear Mr. President: Purely on a fiscal basis, Marriner Ecoles would favor doing a refunding for both notes and bonds. However, with the use of part of the Stabilization Fund in mind, Eocles prefers only refunding the bond issue equal to $353,000,000. As your Secretary of the Treasury, I am recommend- ing that we go ahead with the refunding of the $738,000,000 notes. I cannot take the responsibility of having such a large amount of Government securities hanging over the Treasury at this time. I would appreciate your O. K. on this program before four o'olook, at which time I have a press conference. Sincerely yours, The President, The White House. 0435 March 4, 1940 My dear Mr. President: Purely on a fiscal basis, Marriner Ecoles would favor doing a refunding for both notes and bonds. However, with the use of part of the Stabilization Fund in mind, Eocles prefers only refunding the bond issue equal to $353,000,000. As your Secretary of the Treasury, I am recommend- ing that we go ahead with the refunding of the $738,000,000 notes. I cannot take the responsibility of having such a large amount of Government securities hanging over the Treasury at this time. I would appreciate your O. K. on this progran before four o'clock, at which time I have a press conference. Sincerely yours, The President, The White House. 0436 March 4, 1940 My dear Mr. President: Purely on a fiscal basis, Marriner Eocles would favor doing a refunding for both notes and bonds. However, with the use of part of the Stabilization Fund in mind, Eocles prefers only refunding the bond issue equal to $353,000,000. As your Secretary of the Treasury, I am recommending that we go ahead with the refunding of the $738,000,000 notes. I cannot take the responsibility of having such a large amount of Government securities hanging over the Treasury at this time. I would appreciate your O. K. on this program before four o'clock, at which time I have a press conference. Sincerely yours, The President, The White House. 0437 March 12, 1940 3:50 pm Present: Capt. Collins Mr. Gaston Mr. Schwarz Mrs. Klotz HM,Jr: I have been with the President. What I am saying is triple confidential. The President devoted an hour and a half to this airplane business. I told him the whole business and I gave him -- and I want a copy of it -- your memorandum (Schwarz') to me which he made the charter. And gradually I got the stuff back and forth from Collins. You (Collins) had better dictate when you get home what you told Steve Early. randum. Capt. Collins: I was reading from this memo(re increase in prices) HM,Jr: Incidentally, I gave the President -- I had two pieces of paper, one with the engine business and there was something attached, an ex- planation. He has that and I haven't got that. The gist of it is this: I told the President -- this 18 all in the room -- that if he wanted me to do this job, that my effectiveness was just being ruined by Johnson and Arnold and I can't function that way. I just can't function. I was trying to do this job for him. I told him that Lauch Currie said that both from a strategic standpoint and business recovery, this was the most important thing in Washington. And 1f he wanted me to do this thing, he would just have to do something. Well, he was tremendously impressed with these airplane production figures and employment figures 0438 -2- and he immediately tried to get hold of Steve Early and Pa Watson and could not get them until a quarter of three, but they were there from a quarter of three to now, ten minutes of four, and the President reviewed to them the whole thing. He said -- this is very interesting, the way he reviewed it -- if we had had a war you know we would have had all this machinery set up, but lacking a war I had to coordinate the purchase of cotton, this thing and that thing. We had Procurement in the Treasury and I set up an independent board with Captain Collins, Admiral Spear and General Gregory and he said, "I can't see them so I have them report to me through the Secretary of the Treasury, because so much of this affects the Treasury anyway." He said, "That's the machinery I am using as a stop gap"- he didn't use that word, but that', what he meant, "lacking a permanent war board. He said, "It's functioning all right. This fellow Johnson and Arnold don' like it and they are doing everything they can to sabotage it and they have to stop it. He said, "I want you fellows to go over to see them" and they said no, they would have Johnson come over to see them. And Early reminded the President that he was in the War Department at the time Arnold was there and Arnold was running a mimeograph machine on Government time and Government stationery sending out propaganda against the coordinated air force, and was working against, at that time, Secretary Weeks. And the President said, "Well, if Arnold won't conform, maybe we will have to move him out of town. He said, "I did that with Admiral Dubose. He said, "If Arnold won't conform, maybe I will have to move him out of town." And the upshot of the meeting was Early and Pa Watson have sent for Louie Johnson now. And the President, in very forceful langunge, said that Johnson has to announce that he likes this Board; he likes to have Secretary Morgenthau in charge of it; he likes to have Captain Collins in charge of it, and that it is functioning well and that he and Arnold are going to conform. Furthermore, Early is going to tell him that from now on, no 0439 -3- publicity from the War Department except from the central bureau and Arnold has to keep his mouth shut. He can't see the press any more. And they are going to announce that there were 25 P-40's released over there and Early is going to announce the airplane production figures. That's all to be done this afternoon. I was amazed! The President went so far as to give the hint that if Arnold did not con- form he would be removed as head of the Air Corps. That's how near to being out he is! I went in at 1:30 and left there at 10 minutes of four, and certainly from half past 1, from a quarter of 2 on, until 10 minutes of 4, the President talked nothing but this and he said, "Let's be very frank." He said to Early and Watson, "These foreign orders mean prosperity in this country and we can't elect the Democratic party unless we get prosperity and these foreign orders are of the greatest importance. He said, "Let's be per- fectly frank." And he's right! Johnson has now been sent for and he's going to be read the riot act by Steve Early and Watson and neither of them like him. Neither of them have any use for him, but they -- Watson says, you can't at this time let either Woodring or Johnson go, politically. What's going to happen to you with Crider when all the stuff he told you about Baldwin is going to be answered by the White House and Johnson? Mr. Schwarz: He told me what the Army is going to say. They want your comment on it. HM,Jr: I am not going to see Baldwin. Mr. Schwarz: I will tell him you-have a prev- ious appointment. HM,Jr: I wouldn't give him anything. Just tell him I just got back from the White House and 0440 -4- that all my appointments are off and if you will bring him outside, to McKay's room, I will shake hands with him, but Ambassador Bullitt and everybody has been upset because I have been over to the White House, from one o'clock to now. But I am not going to give him any interview. Steve or Johnson are going to answer every one ofthese statements. Mr. Gaston: Of course, the stuff that Baldwin got over at the War Department is going to be very useful. His story will be the Presi- dent took command to iron out the difficulties between the Coordinator and the War Department and he gave out "so and so" from the War Department and the fact that this is what the Army people have been saying - that's his story. It's perfectly all right. Mr. Schwarz: It's better to have it that 0 than to have it learned from high Administration sources that Secretary Morgenthau was doing "so and so" over the protest of the United States way Army. HM,Jr: I simply told the President, "You have given me a job to do and I can't function for you as long as this is going on. Now, I consider this the most important thing that I know of in Washington and my usefulness is being ruined." Which is the truth! Mr. Gaston: Either you say nothing to these job to do and I am doing my best to carry it out fellows or you say "The President has given me a effectively. I think in this situation probably nothing at all is best. HM,Jr: You see, what Steve Early said two or three times, "Arnold is running true to form. gathered, they dropped a remark there, that Craig had made such an issue of appointing Arnold as Chief that he threatened to resign if he did not appoint I Arnold and neither Steve Early or Pa Watson wanted him and they warned the President and Craig made it 0441 -5- an issue up to the point of resigning himself. me on the Hill, was part and parcel of it although That shows that Craig, when Arnold was pilloring he pretended not to be. And the man they wanted was the General they had up for lunch that was down in Virginia; head of the special flight at Langley Field. That's the man Watson wanted. The General in charge of Langley Field. Capt. Collins. General Andrews. HM,Jr: Andrews. They wanted General Andrews. But Craig made it up to the point of resignation. Steve kept saying, over and over again, "This is just Arnold running true to form and he did it under General Mitchell and under Secretary Weeks and he will do it as long as he is there. I was 0 surprised for the President to drop the hint that if Arnold does not behave himself, he will remove him. "He's here," he said, "subject to the pleasure of the President of the United States." Arnold never objected to this P-35, P-36. Mr. Schwarz: He's telling the press he did. HM,Jr: He never did and Steve Early will tell him, and Towers jumped all over him. Well, the President was swell. It was a question, just the question of either backing me up or not and it shows when the President wants to he can take two hours to get a thing straightened out. That's what he can do when he wants. He did not do that for me last year. (At this point all left with the exception of Mrs. Klotz and the Secretary dictated the fol- lowing. ) What I said to the President was this: This the way I started: I said, "Now look. Last year I went through all this for you and," I said, "I got is 0442 -6- crucified up on the Hill for a month and when I got through, " I said, "for some reason I have never understood you were very angry with me for a month or two. And I said, "I have never understood it." So he said, "Well, you would have to give me more details. I can't remember. This is the first time that I have ever re- ferred to the fact that the President was so angry with me last year. 000-000 0443 March 12, 1940 5:15 p.m. (The Secretary dictated the following in the present of Mr. Bell, Mr. Foley, Dr. White and Mrs. Klotz.) Steve Early called me up to say that he just had a long talk with Louie Johnson and he thinks he was a little unfair to Louis Johnson in what he said about him at the White House; that Louie Johnson is sending for General Arnold and he's going to pin his ears back and tell him he is to keep his God damn mouth shut and if he does not, he is to fish or cut bait. I said, "Does that mean he's going to get his sailing orders?" and he said yes. This is all in the room. He said Louis Johnson said when he does this to Arnold, he's going to get hell from Woodring, but he, Johnson, is going to have a press conference at 9:30 tomorrow morning and he's going to tell the boys he believes in the Coordinating Committee; he believes in what Secretary Morgenthau is doing. And Steve feels that Johnson is a little sore because he says General Brett knows what's going on, but he does not. And Steve says tht if Johnson goes through with what he says he's going to go through with, he thinks I could use a little soft soap to sweeten him up. And then Watson said, as to these Brewster planes, that he talked to Louis Johnson and that he, as I understood him to say, that he, Watson, had given the orders for Brewsters. I said, "I told you I did not have anything to do with them." Louis Johnson is also going to appear on the Hill and testify as to Arnold's testimony about the foreign orders interfering with the 0444 -2- planes and, on advice from the White House he' 8 going to go down the line. 000-000 04 45 March 11, 1940 3:55 a.m. The President phoned the President and when he found he was in Dr. McIntyre's office for a treatment for his call, he asked that the call be trans- ferred there. The following is the Secretary's side of the conversation: "George, is the President in there? Well, tell him this -- and I will hold on -- for what it is worth, we have just gotten a flash from Copenhagen that the Russians and Finns have concluded a peace and ask him if that is news to him. Yes. You told him, did you? O. K. Thank you. " (HM, Jr said the President said he"would speak to me later. ") 0446 March 14, 1940 HM,Jr called the President at ten minutes of The President was not available and asked Pa Watson to inquire whether the President could talk to the Secretary at 4:30. To save time, HM,Jr told Pa Watson what he wanted to talk to the President about, so that when he talked to the President at 4:30 the President could have an answer for him. four. HM,Jr said to General Watson, "I want to tell to the regulations of the Comptroller of the Currency and they are announcing it publicly tomorrow. Here's the next move -- I have to write a letter, which the the President that the Bank of America has agreed President has to approve, to Jesse Jones asking him to advance $30,000,000 to the Bank, and I would like to come over tomorrow morning with Preston Delano, Bell and Foley and present this letter to the Presi- dent and if he has any questions he could ask them at that time. It will not take more than fifteen minutes and this is something that he is vitally interested in. The publicity will break and I want this letter signed and approved and get it over to Jesse Jones tomorrow. The President has wanted this straightened out for two years and the boys have done a good job. ### HM,Jr also said to General Watson: "Edison and Woodring were here for lunch and Edison says that he understands that the 600,000 pounds of powder that the Navy were to have gotten from DuPont are back again in the hands of the Navy; that the 600,000 pounds is the 600,000 pounds that I cleared with the President and you on March 5th, and I want word to go from the President to you to Edison that he can go through with the arrangements of March 5th and tell DuPont that they can sell this to the English. General Watson said he did not remember the thing at all, whereupon HM, Jr said: "I have several 0447 -2- memoranda covering this. Would you like to have them? What are you doing right now? If I came over to your room at 4:15, what would happen? All right, then I will be there at 4:15." 0448 March 14, 1940 4:45 pm General Watson just phoned me and said he told the President I wanted to come over with Mr. Bell, Preston Delano and Foley on the Bank of America matter with a letter to Jesse Jones. He said the President said, "Tell the Secretary that he, the President, does not want to get in on this thing and that I should handle the matter entirely. If I said, "O. K. I will take it. If On the 600,000 pounds of powder manufactured by DuPont on order for the Navy, he gave the documents to the President and the President, "O. K.; that the Navy should release this powder to the English" and he, General Watson, would so inform Secretary Edison. March 15, 1940 My telephone conversation with Edison today confirms the above. March 19, 1940 2449 (Mr. Bell and Mrs. Klotz present. Mr. Bell left as indicated in the transcript.) At lunch today with the President I told him I was ready to do something on Baby Bonds and he interrupted me to say, "Don't do anything until I can buy mine. I said, "Well, I have a long memorandum here which you can read at your leisure, but the gist of it is we would like to go ahead, on April 1, and make it only available to individuals. If He said, "Go ahead. " Then the President wants the Treasury -- he said, "it may be cock-eyed, there may be nothing to it, but it's financial" -- he said, "I want the Treas- ury to work on a scheme whereby every man or woman who is over 60, or every man or woman who becomes sick, will get $1.00 a day." He said, "This may cost about $2, 000,000,000 and he said, "My thought in the way of financing it would be a percentage tax on all payrolls" and he said, "This would apply to housewives as well as to women who work in factories." If (He's got two things in mind: the thing then he has the idea of sick benefits.) about people over 60 who will get $1.00 a day and And he said, "No reserve fund." He says, "If we use a little bit more one year, we increase the tax by 1%." He said, "It may be cock-eyed. don't say there is anything to it, but,' he said, I "I want you to study it.' I said, "I will be de- lighted," and he said, "We have to do something like this.' He also wants some plan for the Youth. I am to call up the President on Saturday from Sea Island and ask whether he does or does not want to see me and he's thinking of leaving on the 26th for Warm Springs. (Mr. Bell and Miss Chauncey left and the Secretary a few later called Miss Chauncey in and dictatedminutes the following. 0450 -2- I said to Steve Early, I said, "Steve, I am going to say something to you, considering we are both friends of the President." I said, "I think it is simply terrible that the President has never answered the Ernest Lindley article and I think that the President should say that a Catholic can hold the highest office there is in the country. " So Steve said, The President is going to. He's going to do it this afternoon. You know he never had a chance. He never had a press conference since that article appeared." (That isn't true.) He said, "What he's going to do is approve of Farley's statement. 0451 March 21, 1940 I saw the President today and I asked him if he read my letter about Finland and he said he had not. I described to him the idea that I had in mind and he thought extremely well of it. I gathered that two nights ago he had a talk with Harry Woodring. Said he was very tough with him. Woodring said that he was thinking of holding up certain secret devices. The President said, "What?" He said, "Well, bomb sight". President said, "What else?" He said, "Supercharger." President said, "Who told you that the supercharger was a secret device?" He said that he, the President, wanted to pass on every single thing and he said he left Harry Wood- ring has it with both guns. I- march 31.1940 the 0452 THE CLOISTER SEA ISLAND GEORGIA Jelephoned 7.40 R. about 11. A.M. got three at once He some did in grand human. Hepaid he was not entirely well yet. Expected to go to Hyde Park next Sunday or monday to see about spring planting Lad not ex heet to so ta Warm Springs until after our wedding Isaid Iconsidered it a mile stone but did not know he did. # Isaid I thought he with had the had arhlanes a good week trade espencially bill He said would tell me and some time about the airplane. He said "Popa had to get angry and the them that if they did with get to together snne was have very leave Jersimis of thesaid themhe would Wooh." Ge abulit Enothe Thought the was migect burst loose any time in next 30 - days II 0453 THE CLOISTER SEA ISLAND. GEORGIA Iashed if there was anything I could do. Hesaid no things were quiet . #w He was sending of may 2 regarization bills they affecting 7. m a. accounting control under procedure me. said and I would but have to take care of alexander, H epaid neither I were matters for me to worry about Tasked him about unix playment He thought even though it summed that business was getting better he was going to have cal. Harrington tell Congress this wark he wanted the / billion asked in fudget made available June 1.1940, that Harrington at last would they would last next until say March 1941. giving congress 2 maths to dedice what to do from there m. Itold about Hellinins callin me any my belling him that III in 0454 THE CLOISTER I thought what SEA ISLAND he GEOROIA had due by declaring 41. 00 extra divident was a damn good letter bet as far as M.S.a. is concerned This seemed to please the Pres. Pres. said nothing about bill so Idid not ask. however till we would Tax did him I have break down in march I tat cripts monday and at would once send re them over to him HML April 9, 1940 0455 (Dictated April 10,1940) In talking to the President last night I said that Captain Puleston says that he thinks we ought to make sure that the English do not let the Germans take Iceland. The President said, "What do you want the English to do? Break the Neutrality Law the way the Germans have?" I said no, but from our own standpoint I think it is terribly 1mportant that the Germans do not get Iceland as an air base. The President said, "Well, possibly we could get the Icelanders to invite the English to come in to protect them, If and I said yes; something like that, as I think it is terribly important. 0456 April 10, 1940 The Secretary spoke to the President at 12:10 p.m. and the following is the Secretary's side of the conversation: "Hello, Mr. President. I am all right. And you? I am back. I have been back since yesterday. today. I thought I would tell you what I have done Oh, he told you? I wanted to make sure that that was all right with you. We froze the balances for both Denmark and Norway and we are holding all ships in ports which would be sailing for Scandinavia, on a twenty-four hour basis. What I cannot understand is that he said that the Germans have taken Oslo. To let them walk in quietly and take it seems ridiculous. After all, the Germans had 50 ships to go up there and where was the English blockade? I don't see how you could do anything else. We are holding all ships. I am available and am willing and anxious to be helpful. The Government bond market is off, but that 1g all right. There is institutional buying. The only thing that I am looking into, and I will have the answer later on, is that the Army has not yet signed the rules and regulations on how to -2- 0457 release these planes. I have Collins working on thattotoday. withmore this red thing blowing now, we ought not have any tape. As of last night they had not signed. I want to check my facts and will let you know tonight. (HM,Jr explained later that the President said, "The thing that has made me hopping made is where was the British fleet when the Germans went up to Bergen and Oslo. It 1s the most outrageous thing I have ever heard of. I am just hopping mad!" (Summer Welles had already told him of the information I had given him. (Refer to telephone conversation of today between Welles today.) (The President said that he would call me when he got back to Washington tonight.) 0458 1940 Hope to Pres fundus say 7. 20 P.M. strugly uged him to give we nitt leave of obsure Doed him in detail what he had m me with it meltale me Kinny + said Elder wh granter Habirity . t grant there prant this Pre said refeated twice don't else know. He at wasanytog veryfield 0459 April 15, 1940 (Dictated April 16, 1940) Spoke to the President last night at around ten minutee past six and told him I wanted to clear two matters with him, one, that on advice of the State Department we now wanted to announce that we did not consider Iceland a part of Denmark and the President came right back at me and said, "But I said that publicly." I said, "I know you did, but, 1f you remember, when we brought you that Executive Order you asked specifically 1f Iceland was included as a part of Denmark and we told you yes and Berle concurred. It now seems that the rest of the State Department has overruled Berle and Mr. Hull has formally notified us, so we want to go ahead. " The President said, "Fine!" He said, about Greenland?' I said, "I really don't know."What II I said, "We met in Hull's office today with perts and we all agreed that we should use the official rate of the pound, but we also agreed that in case the situation should change that our hands were not tied and that we could adjust ourselves accordingly." The President said, "All right. Go ahead with that. Welles and Bob Jackson, myself and half a dozen ex- 0460 PRESS RELEASE ed The Treasury Department - today instruct Collectors of Customs and others concerned that the "official" rate for the British pound sterling as certified to the Treasury Department by the Federal Reserve Bank at New York is to be used in the collection of estimated duties, appraisement of merchandise and the final liquidation of duties wherever the conversion of British pounds sterling into United States dollars is necessary for such purposes. Similar instructions were issued with respect to the Canadian dollar, Newfoundland dollar and the Australian pound, for all of which currencies the Federal Reserve Bank at New York has been reporting two rates of exchange to the Treasury Department. The Treasury Department will carefully observe future developments with respect to those foreign currencies for which more than one rate of exchange is reported by the Federal Reserve Bank with a view to examining the situati on with respect to any of such currencies if changed conditions warrant it. Sirth HOW Both 0461 General Ruling No. 1 under Executive Order No. 8389, April 10, 1940, and Regulations issued pursuant thereto, relating to transactions in foreign exchange, etc. The Secretary of State has advised me as follows: "Denmark and Iceland are two separate political entities. Acting under the authority of a provision of the Icelandic Constitution the Icelandic Parliament has within the past few days passed a resolution stating that since the King of Iceland is not now in a position to carry out his Constitutional duties with respect to Iceland, the Icelandic Government has assumed for the time being the exercise of the Royal prerogatives and the entire control of Icelandic foreign relations. "In view of the foregoing it would not appear that Iceland falls within the definition of the term Denmark' in Section 11 of the above-mentioned Executive Order." In view of the foregoing, the Treasury Department construes the term "Denmark" as used in the above-mentioned Executive Order and Regulations as not applying to Iceland. Dated April 15, 1940. E.v.th you Secretary of the Treasury ADDRESS OFFICIAL COMMUINICATIONS TO 0462 THE SECRETARY OF STATE WASHINGTON e.c. DEPARTMENT OF STATE WASHINGTON April 15. 1940 In reply refer to Eu My dear Mr. Secretary: Mr. Vilhjalmur Thor, the Icelandic Trade Commissioner in New York City, has telephoned this Department that banks in New York, including the Federal Reserve Bank, have interpreted the President's Executive Order of April 10, 1940 and the regulations issued thereunder regarding Norwegian and Danish credits in the United States as applying also to Iceland and to Icelandic subjects. In the view of the Department of State Iceland is a sovereign and independent Kingdom. The King of Iceland is also the King of Denmark, and by the terms of the Act of Union between Denmark and Iceland the Danish Foreign Office and its representatives abroad carry on the foreign relations of Iceland, which are, however, determined by the Icelandic Government itself. Denmark and The Honorable Henry Morgenthau, Jr., Secretary of the Treasury. -A 0463 and Iceland are, however, two separate political entities. Acting under the authority of a provision of the Icelandic Constitution the Icelandic Parliament has within the past few days passed a resolution stating that since the King of Iceland 1s not now in a position to carry out his Constitutional duties with respect to Iceland, the Icelandic Government has assumed for the time being the exercise of the Royal preroga- tives and the entire control of Icelandic foreign relations. In view of the foregoing it would not appear that Iceland falls within the definition of the term "Denmark" in Section 11 of the above-mentioned Executive Order. B Since the Icelandic Trade Commissioner has urgent need of Icelandic Government funds now on deposit in New York, it would be appreciated if appropriate action could be taken to release the funds in question as soon as possible. Sincerely yours, 0464 April 16, 1940 Just went over to see the President. General Watson took me aside and said, "Louie Johnson is going to be as sore as hell on account of the memorandum we sent him turning him down on his idea about Hercules and Du Pont Powder building a plant first in the United States in- stead of Canada. The President signed the memorandum prepared by Harry Collins in which he recommended against what Johnson wanted and that we tell Hercules and Du Pont to go to Canada first." Watson said to me, "You agree." He I said, "What do you mean I agree?' said, "Well, didn't Collins show that memorandum to you.' I said, "I never saw it.' He said, "Well, gee! That's terrible," And he said, "Wait a minute" and calls up Collins while I am standing in there and said, "The Secretary of the Treasury is in with the President and I asked him about that memorandum and he says you never showed it to him." I gathered Collins thought it was confidential between the President and himself and Watson said, "Why? The Secretary of the Treasury is liaison for the President between you and the President." And Watson said, "I will show the memorandum to the Secretary when he comes out." When I came out he called up Louie Johnson and said, "There has been some mix-up and Mr. Morgenthau did not see that memorandum and I want you to send that memorandum back.' Johnson must have said something because Watson said, "Just keep your shirt on, Louie, until Mr. Morgenthau sees the whole business because," he said, "he wasn't consulted." " And Watson said he would tell the President I had not been consulted and to give me a chance to look at it, because I agreed with Louie Johnson in this matter and not with Collins. General Watson was very much upset because the thing involves, I believe, a $30,000,000 plant expansion for these two companies. As I told him, 0465 -2- the thing I can't understand is that Collins was in my office as late as 10:15 this morning and never said a word to me. I said to Watson, "You had better route those memos through me from now on," If but I said, "Don't worry. Collins will never do a thing like that again. April 18, 1940 0466 Last night I said to the President, "If things get worse I suppose you have to wait until after the Convention to get rid of Harry Woodring;" and, much to my surprise, he said, "No, if things get worse I will form a National Cabinet." I said, Is that a new idea?" and he answered, "No, I told you about it last September. At that time I was thinking of taking in Colonel Knox and Landon.' He said, What I'm thinking of now would be to replace Woodring with a man whom you would never dream of, a Republican, Gill Winant. I know he is not a good administrator but he's a dreamer and will appeal to the youth that Eleanor keeps speaking about. (Personally I do not think so much of him.) He said, "Bill Bullitt for Secretary of the Navy because he will do just what I tell him to. Colonel Knox for Secretary of Commerce. Then he said, "Strictly confidentially, I have this in mind for Hopkins." He said, I'm going to give him one of the cottages on my place and I'm going to ask MacCracken to make him a professor at Vassar, and then I am going to have him help me at my library." The President was in great doubt whether he should leave Washington tonight on account of the European situation. I said, "What about Frances Perkins?" and he said, "I had not thought about that, but I am not at all sure that it is just as well not to have a two-fisted man as Secretary of Labor.' He said, in making a toast for the evening, "Next year's wedding anniversary will be at Fishkill Farms, and he repeated that two or three times. I believe he was sincere contradicted hisalthough toast. his plans for a National Cabinet He was kidding about that he might run for Vice President in order to help the ticket and that it would be an easy job. And then he kidded me and said, "I have a good job for you as head of the Park Service." So then I told him about my idea of possibly the two of us going into a bank for North and South America, and he liked the idea immensely. He said, "Would it take all my time?" and I said, "No." 0467 -2- He then told me that Welles had suggested some kind of committee of five to study trade in North and South America, and on this committee Welles had recommended Sloan Colt. I told him of the plan of Wall Street to grab off this bank. Eleanor Roosevelt said very enthusiastical- ly, "What does Sumner Welles know about business? He doesn't know anything." So the President said, "I sent the list back and told Sumner Welles to talk it over with Harry Hopkins, and Eleanor Roosevelt said, "What does Harry know about business?" The President said, "He has people in the Department of Commerce America. He said when come what I it is to be a sort of steering committee) he is going to back something with about their South recommendations (from gather who they know take it up with me. 0468 April 29, 1940 I told the President that I did not think well of his suggestion of Winant. My No. 1 suggestion is Ickes and No. 2 LaGuardia for Secretary of War. 0469 April 29, 1940 Saw Ed Foley Sunday Night (April 28) at a quarter of nine and he brought me up to date on the amendments that Senator Danaher of Connecticut wanted. Called the President at nine, as I wanted to post him on it before he saw the leaders on Monday morning. The President seemed to be entirely familiar with it and did not seem to be the least worried. I told him briefly something of the amendments. The President said, "Call up my friend, Charlie McNary, and tell him I say he should be a good boy on this bill. = The President said he came back earlier because he had the jitters about the European situ- ation. He said, "I want you to do something for me in strictest, strictest of confidence." He said, "I want you to take care of Italy." I said, "Well, I don't understand what you mean. How take care of Italy?". "Well," he said, "same way you take care I said, "I still don't understand what you mean. He said, "Don't let any of their money of Germany. get out of this country. I said, "Well, now I understand. You give me the damndest assignments I ever received." He said, "Well, take care of it and don't let anybody know you are doing it." (It's only ten days ago or two weeks ago that Sumner Welles asked me to mitigate the narcotic fine on four Italian steamers as part of a plan to increase Roosevelt's influence with Mussolini. Times change fast!) I then called up Bell and told him what the President said and he frankly admitted that they knew nothing about whether Italian balances were coming in or going out but he thought if there was trouble in the offing that possibly the Italians might be moving money over here. I again talked with Bell Monday morning and suggested he talk with Mr. Knoke and have him quietly find out just what is happening to Italian balances in this country. 0470 April 29, 1940 The President wanted me to find out when the harbor conditions are such in Greenland that it land. is safe to let a Coast Guard cutter sail for GreenI have asked Mr. Gaston to do this. 0471 April 29, 1940 (Dictated April 30th) At lunch with the President he said he was very worried about the English situation and he said 1f things kept up the way they were going, the English were going to get licked. He said that this English general in charge of the expeditionary forces in Norleg way was really a Belgian. He was minus an eye, and an arm. Sumner Welles told him that this general's mother was English, but that for the last 20 years he had been farming in Poland where his family had an estate. That to put a man of this kind in charge of an expeditionary force seemed just unbelievable. The President said, "I can't get out any orders telling everybody to take a very, very gloomy and serious a ttitude towards this matter, but, he said, "I feel that that's what we should do. I said, "Well, frankly, Mr. President, I don't see why you a want us to take that attitude." He said that by taking the attitude that England is going to get licked we prepare sentiment in this country. (I think the President is entirely wrong and I am going to make an effort to talk with Eleanor Roosevelt this evening, if she agrees with me, in order to get the President to change his defeatist attitude. I said to the President, "Well, while you are talking about military affairs, etc., you just got to do something about your War Department. I said, "I know I have said it before and I can't say I have been thrown out of better places than the White House.' He said, "You are right. You are right. Hé said, "Maybe I will have to have a National Cabinet.' I said, "I know. You told me about that." He said, "Did I tell you recently who I had in mind?" I said, "Yes," and I said, "To make G11 Winant Secretary of War is terrible.' I said, "My first choice is Harold Ickes and my second choice is La Guardia." He said, "They are both good suggestions." He said, "I have got one suggestion. He said, "Simpson." I said, "WHAT!" He said, "Yeh." 0472 -2- He said, "He's a New Dealer and a very good executive." He said, "I knew you would be surprised." (I mentioned this at home to Mrs. Morgenthau and Ruth Schmuck 1s a great friend of Simpson and she had told Mrs. Morgenthau that he 1s violently antiRoosevelt and makes the most sneering, dirty remarks about him whenever he gets a chance. Also, Mrs. Morgenthau remarked, "And you tell me the President isn't interested in re-election if he has Simpson in mind?") I then told the President what I was doing in airplanes. Showed him the latest reports. Very much interested. Told him about the powder deal. Very much interest. And then he took a long time to tell me how disgusted he was with MacKenzie King. He said that all MacKenzie King would talk to him about at Warm Springs was what a great man he, MacKenzie King, was and how he pulled this trick and that trick to get re-elected and Roosevelt said it took him two or three days to get MacKenzie King talking about the war. So I told him about my conversation with MacKenzie King and what I told him about gold. The President said that was good. The President said, "You know, the new Minister of Munitions of Canada is a protegee of MacKenzie King. What would you think if I got him down here and talked to him and gave him a good pep talk?" I said, "No, please don't do that because, I said, the Minister of War of Canada is one of the troubles that Arthur Purvis has and," I said, "we have to do everything we can do to build up Arthur Purvis' hands." And the President said, "All right. I won't ask him down. The President, in discussing the War Department, said, "Have you heard anything about whether Louie Johnson is going to run for office in West Virginia?" I said "No. I also said, while we were discussing the War Department, I said, "If you want to use Gil Winant, make him Assistant Secretary of War." In discussing the War Department I said, "You know, I am your one-man Munitions Board." He said, "I know 0473 -3- it and aren't some of the other Departments jealous of you as they always are when another Department does their work." So I said, "Well, as far as I am concerned, I am willing to drop it at any"Thetime. War I said, "Who' 8 jealous of me?" He said, Department. I again said, "I am willing to drop it." He said, "No, you don't drop it for a minute." He said, "As a matter of fact, when I talked to you Sunday night, If he said, "Harry Hopkins was sitting next to me and"he said, "he paid you a great compliment in that he said anything you give Henry to do he does it and if something goes wrong and he's attacked on the floor of the Senate or House he takes it right on the chin'. If And the President said, "I thought that was pretty nice what Hopkins said about you. If (It has taken the President one year to admit that he was wrong and that he did not treat me nicely one year ago when I took it on the chin and not only without any help from the President but, I suspect, some encouragement from him to the War De- partment to give it to me on the chin. But instead of his saying it to me directly, he puts it into the mouth of Harry Hopkins. As a matter of fact, this is the first time he has ever told me he was pleased with what I was doing as far as the Munitions Board goes.) 000-000 0474 May 1, 1940 I went to Indian Head with Assistant Secretary of Navy Compton and Chief of the Bureau of Ordnance Rear Admiral Furlong. May 2, 1940 I saw the President and told him (1) that another shift at Indian Head would increase the powder production per day from 15,000 pounds to 25,000 pounds, or 2,500,000 pounds increase per year. This could be accomplished in 30 days. (2) To increase production to 40,000 pounds per day, additional machinery would have to be obtained at a cost of approximately $75,000. Five months would be necessary to obtain the machinery. I recommended that all this be done and the President took it all down in long hand. I think it was on Thursday (May 2nd) about noon that I called General Watson on this. General Watson called me back on Friday relative to this. I telephoned Mr. Purvis, May 2nd. 0475 May 1, 1940 HM, Jr called Pa Watson about four o'clock. The Secretary's side of the conversation was as follows: "I am scheduled for a speech Friday morning at 10:30 before the lady Democrats and I think it is going to be on gold. Do you think the President could give me an hour tomorrow afternoon to take a look at it? I would not want to give it without his looking at it, but I really think he ought to allow about an hour. It is a speech on the Administration's policy on gold. if Pa Watson called back and told HM,Jr to come over tomorrow at 9:30. Pa Watson also said that the President said to"lay off the gold subject. This 18 no time to do it. He personally does not knoa anything about it. If M 0476 May 2, 1940 Called on the President this morning and he greeted me cordially. Went over my speech and approved it. I then showed him a copy of the letter prepared for me to send to the Director of the Budget. The President said he was opposed to our building four new ships for the eventual use of the Navy in connection with the laying of nets. He said we could either buy or rent some fishing boats for that purpose. As far as the additional guns for the Coast Guard are concerned, he approves of this project. I told the President that Helvering had settled a couple of days ago with Paul McNutt for $3,000. He seemed surprised, did not say anything for a couple of minutes and then said, "Well, I guess it's all for the best." He said, "We have been very dignified -- (I suppose he means me ) -about the whole matter and have said nothing. I told him we still had these other cases pending in Indiana. I said that if McNutt should continue to feed criticism of the Treasury to these columnists I would send for him and read him the riot act. The President said, "That's right. If I told the President as far as I was concerned that I was sure that the money he won in gambling in the Philippines and the money that will Hays' firm paid his father and the half interest in one of the brewcries or ports of entry in Indianapolis, he shared in this money, but our men were unable to prove it. 0477 MAY 2 1940 The Director, Bureau of the Budget. Sir: There are forwarded herewith supplemental estimates for the Coast Guard for the fiscal year 1941, required to place the Coast Guard fleet in condition for service with the Navy. These estimates are based on specifications furnished by the Navy for the emergency conversion of Coast Guard vessels for Naval use, upon specific requests by the Navy for certain equipment and construction deemed essential to such use, and on the installation of the most modern and effective antiaircraft ordnance on Coast Guard vessels. Under the appropriation "Special Projects, Vessels and Aids to Navigation, 1941" an additional sum of $4,124,860 is required for the construction of four large seagoing tenders, which in addition to being urgently needed by the Coast Guard for the replacement of obsolete vessels, have been specifically requested by the Navy for national defense purposes, and for two hundred buoys also requested for Naval purposes. Under the appropriation "General Expenses, Coast Guard, 1941" an.additional amount of $7,766,900 is required for the revision of the armament and ammunition stowage arrangements on vessels of the Coast Guard, which involves the installation of guns, enlargement of magazines, fitting of depth charge racks, installation of underwater sound detection apparatus, and structural changes incident to these instal- lations. The estimates also provide for the installation of highintensity and signal searchlights and for antiaircraft range-finders which are essential for use in connection with the type of antiaircraft guns to be installed. Proposed language, schedules of obligations and projects (Standard Form No. 3a), and justifications of itemized estimates under each appropri tion are submitted herewith. It is requested that these supplemental estimates, totalling $11, 891, 760, be included in the Second Deficiency Bill, 1940. Very truly yours, $ File to Mr. Thompson (Segned) H. Morgenthan, Jr. (?) HENRY MORGENTHAU, JR., Taken Seey H hite by House Secretary of the Treasury. PRESENT GUN LOCATIONS 50 CAL MACH.GUN 6 PDR GUN 51 CAL GUN 50 CAL MACH.GUN 6 PDR. GUN PROPOSED GUN LOCATIONS I.I.A.A.GUN 50 CAL.MACH.CUN I.I.A.A.GUN 50 CAL MACH.GUN L.I.A.A.CUN 5"-51 CAL.GUN 5'-51 CAL.GUN (a) THU (B) O I.I.A.A.CUN 50 CAL,MACHGUN 50 CALMACH.CUN U.S. COAST GUARD CUTTERS HAMILTON CLASS (7) 327 FT. LONG GUN LOCATIONS LEGEND PRESENT PROPOSCO MAY,1940 PRESENT GUN LOCATIONS 5'-51 CAL 6 POUNDER 5 5" SI CAL 6 POUNDER PROPOSED GUN LOCATIONS I.I A.A. GUN 5"-51 CAL .50 CAL.MACH.SUV 5"-SI CAL 5" - 51 CAL 150 CAL JACH GUN 1.1"A-A.GON U.S. COAST GUARD CUTTERS ITASCA CLASS (10) 250 FEET LONG LEGEND GUN LOCATIONS PRESENT PROPOSED MAY 1940 PRESENT GUN LOCATIONS 5' 51 GAL GUN "AA GUN POUNDER SI CAL GUN 6 POUNDER PROPOSED GUN LOCATIONS 50 CAL MACH GUN MAA GUN 5' 51 CAL GUN 5" 51 CAL SUN 5' 5/ CAL QUN 50 CAL MACH GUN US COAST GUARD CUTTERS TAMPA CLASS (4) LEGEND PRESENT PROPOSED 240 FT LONG GUN LOCATIONS MAY 1940 PRESENT GUN LOCATIONS 3" A.A. GUN 3* A.A.GUN PROPOSED GUN LOCATIONS 50 CAL. MACH, GUN 1.1"A.A.GUN 1.1" A.A GUN T and H 50CAL.MACH GUN 1.1"A.A.GUN U.S.COAST GUARD CUTTERS AL GONQUIN CLASS (6) LEGENO PRESENT PROPOSED 165 FEET LONG GUN LOCATIONS MAY 1940 PRESENT GUN LOCATIONS. IPDR.GUN 3"-23 CAL.GUNS IPORGUN LEO o PROPOSED GUN LOCATIONS. 50CAL MACH.GUN I.I A-A GUN. .50 CAL MACH.GUN LEGEND. I , U.S. COAST GUARD PATROL BOATS THETIS CLASS (17) PRESENT .0 /65 FT LONG GUN LOCATIONS. MAY, 1940. PRESENT GUN LOCATIONS 6 POUNDERS 3'50 OAL GUNS PROPOSED GUN LOCATIONS MAAGUN CAL MACH GUNS 9'50 CAL GUNS U.S. COAST GUARD CUTTERS TALLAPOOSA CLASS (2) 165 FT LONG GUN LOCATIONS MAY 1940 PRESENT GUN LOCATIONS NO GUNS INSTALLED AT PRESENT PROPOSED GUN LOCATIONS 4"-50 CAL. .50 CAL. MACH.GUN << e .50 CAL MACH GON 4" SOCAL - U.S. COAST GUARD CUTTERS NORTHLAND (1) 216 FEET LONG LEGEND PRESENT PROPOSED GUN LOCATIONS MAY 1940 PRESENT LOCATION 6 PDR GUN . 6 PDR GUN PROPOSED LOCATION L.I.A.A.GUN 50 CAL MACH GUN Q I.I.A.A.GUN 0 E FI 50 CAL MACH GUN LEGEND PRESENT PROPOSED 11 A.A.A. GUN U.S. COAST GUARD CUTTERS UNALCA (1) 190 FT. LONG GUN LOCATIONS MAY, 1940 PRESENT CUN LOCATIONS / POUNDER A.A. GUN . I / POUNDER 3"AA.GUN PROPOSED GUN LOCATIONS 50 CAL NACH.CON 1.1"AR.GUN C -0 (FD) 50 CAL MACHGUN U.S. COAST GUARD CUTTER REDWING (1) 188 FT. LONG CUN LOCATION. MAY, 1940 PRESENT GUN LOCATIONS. / POR. GUN PDR GUN. LEC I PROPOSED GUN LOCATIONS IIAAGUN LIAAGUN U.S. COAST GUARD CUTTER SHAWNEE LEGEND 158 FEET LONG PRESENT PROPOSED. GUN LOCATIONS MAY 1940. 0499 May 3, 1940 EXTRA CONFIDENTIAL My dear Mr. President: I am sending you enclosed herewith a very confidential memorandum entitled "How to Beat the Horses." I am going to ask you as a personal favor not to show this to General Watson or Early as I am afraid they would getSteve too excited. Yours sincerely, HD Encl. The President, The White House. 0500 May 3, 1940 EXTRA CONFIDENTIAL My dear Mr. President: I am sending you enclosed herewith a very confidential memorandum entitled "How to Beat the Horses." I am going to ask you as a personal favor not to show this to General Watson or Steve Early as I am afraid they would get too excited. Yours sincerely, as Encl. The President, The White House. 0501 May 3, 1940 EXTRA CONFIDENTIAL My dear Mr. President: I am sending you enclosed herewith a very confidential memorandum entitled "How to Beat the Horses." I am going to ask you as a personal favor not to show this to General Watson or Steve Early as I am afraid they would get too excited. Yours sincerely, HD Encl. The President, The White House. Apr 0502 CONFIDENTIAL!! HOW TO BEAT THE HORSES The "System" Place a show bet on the outstanding favorite provided that the pari-mutuel odds to win as shown on the board just before closing time are even money or lower - in other words, when the favorite according to the posted odds has a 50-50 chance, or better, to win over the field. Note: Under this system it will be possible to place bets only in about one race out of ten on the average. Therefore it should be played through a bookmaker who has a wire service to all tracks. According to our analysis of this system in respect to more than 12,000 races it will net a profit of from 4.4% to 6% on all money bet. The average number of "eligible" bets per annum should run from 1,200 to 1,500 (includes tracks in Canada, Mexico, and Cuba). P.S. Unfortunately the bookies no longer have a wire service. 0503 May 3, 1940 After Cabinet, Harry Hopkins stops and tells me this: "I do not know anything about it and I am not asking you, but the way you handled the McNutt case was marvelous and everything that you took from the columnists." If Then he said, "The only thing that matters This proves my hunch that the line of talk that the President gave me Monday for lunch must have been due to having Hopkins with him the evening before. Hopkins also said, "I am not saying that Hull could not be elected for President, but the only man who understands this situation is Roosevelt and he has got to run again. is to take care of the war situation. Nothing else.' # 0504 May 8, 1940 HM, Jr called the President at 9:25. The following is the Secretary's side of the phone conversation: "I am very well, Sir. And you? "George Harrison just called me on the telephone. He had a cable from the Minister of Finance of Holland asking him to transfer $6,000,000 80 that the Minister of the Netherlands in Washington could draw $132,000 a month for the next four years. I thought that that was fairly significant. The cable just came through. For what it 18 worth, I give it to you.' (HM,Jr explained that the President said "I knew that the Minister of Netherlands in Washington was made Paymaster of the whole works. I knew that he had gotten it yesterday. The President said, yesterday. ) (In this connection, note the conversations between HM Jr and George Harrison at 9:22 am and between HM, Jr and Sumner Welles at 9:30 a.m.) 0505 May 8, 1940 9:22 a.m. H.M.Jr: Hello. Operator: Go ahead. George Harrison: Hello, Henry. H.M.Jr: Good morning, George. H: Good morning. I called you up only because this H.M.Jr: Please. H: We got it -- it was dated yesterday from Amsterdam, particular cable I think is interesting. from de Nederlandsche Bank. H.M.Jr: H: Yeah. It says, "By order of our Minister of Finance, we request you to open a credit for 6 million 360 thousand in favor of the Netherlands Minister in Washington. This credit is valid until further notice and may be disposed of by drawings not to exceed 132 thousand dollars each month. If H.M.Jr: H: Well, I'll be damned. "In case the balance of our dollar account is not sufficient to cover said drawings, you are authorized to take over as much gold from our gold account as may be necessary." Now, we -- I don't know what we can do under the circumstances. We don't ordinarily open accounts for individuals, but we may be better off in the event of an invesion there to have had this arrangement in advance than to try to work it out H.M.Jr: afterwards. But the important part 18, I think, the implications in their asking us to do it. Well, yes, and I'm very glad to get it because evidently they know about the troubles that the Finns have had. H: Yeah. 0506 -2H.M.Jr: And the Norwegians. H: H.M.Jr: I mean the Norwegians. H: Yes. H.M.Jr: And -- you're going to do it, I take it. H: Well, we're working on it now. We'll have to dress it up in some way. I don't know whether we can legally open it or not. We couldn't open a credit. What it really means is that we will block a certain amount of the -- the Dutch account -- block the account available only for the Minister. H.M.Jr: And that's for how many dollars? H: Well, 6 million 360 thousand, but he's not to be permitted to draw more than 132 thousand a month. H.M.Jr: And that's from the Central Bank of of Netherlands. H: H.M.Jr: H: H.M.Jr: H: I see. In favor of the Dutch Minister in Washington and by order of the Dutch Minister of Finance. I see. Well, I'm very glad to get it. I'll We just got it, so we're working on it. Don't know interested in the cable itself. how we can work it out but I thought you would be H.M.Jr: I'm going to tell the President right away. H: All right. H.M.Jr: Thank you. 0507 May 8, 1940 9:30 a.m. H.M.Jr: Hello. Operator: Mr. Sumner Welles. H.M.Jr: Right. Hello. O: Go ahead, please. Summer Welles: Hello. H.M.Jr: Sumner W: Hello, Henry. Good morning. H.M.Jr: Good morning. I just called up the President to tell him that we got a cable in Federal Reserve in New York setting up 6 million dollars for the Netherland Minister. W: H.M.Jr: W: H.M.Jr: W: H.M.Jr: W: H.M.Jr: The Minister is sitting with me now and he had that message last night. The President said he had it yesterday and I was dumbfounded to think that he'd had it vesterday. I never knew it until now. (Laughs) All right. How could the President get it yesterday? I don't know, But you just found it out now. That's right. Well, maybe he'd like to know that the Minister -- or maybe he knows or doesn't know that the Minister of Finance of Netherlands has cabled and set aside 6 million dollars and he can draw 132 thousand a month W: H.M.Jr: Yes. for four years. 0508 -2W: Yes. The Minister tells me that that is undertaken simply as an emergency measure in case the need arises. H.M.Jr: Well, the President must be a mind-reader or some- W: Yes. H.M.Jr: (Laughs) I guess -- you have company, haven't you? W: What? H.M.Jr: You have somebody there with you. W: The Minister of the Netherlands is sitting with me. H.M.Jr: Righto. Thank you, Summer. W: All right, Henry. Thanks. thing. 0509 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE May 9, 1940. Secretary Morgenthau Mr. White TO FROM Subject: Re-exports of Rubber. During the first quarter of 1940, re-exports of crude rubber amounted to $1,494,952. The largest exports were to Belgium, Canada, Spain, Finland and Mexico. Following is a list of principal countries to which rubber was re-exported in the first three months of 1940. (In thousands of dollars) January February $448 $600 $447 137 131 - 37 65 146 151 28 March Total Three Months Total re-exports of crude rubber Belgium Canada Spain Finland Mexico Latvia Switzerland Estonia U.S.S.R. Netherlands Sweden Lithuania Yugoslavia Italy Portugal 8 100 $1,495 268 248 187 168 161 - 68 43 10 108 - 99 - - - 75 - - 37 37 26 26 11 24 77 - - 11 - - 2 23 - 8 - 14 1 18 - 17 - - 99 77 75 23 22 19 17 m 0510 -2- Division of Monetary Research Total January February March Three Months France Chile 1 1 Norway Cuba 5 - Morocco - 8 1 5 - 9 7 2 ? 5 1 5 - 3 5 6 5 All other countries CO: Mr. Gaston 2 Mr. Basil Harris Mr. Cochran Mr. Young 10 0511 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE May 9, 1940 TO Secretary Morgenthau FROM Mr. White Subject: Re-exports of Tin During the first quarter of 1940, re-exports of tin amounted to $2,541,086. Russia was by far the largest buyer, followed by Sweden and Canada. Following is the list of principal countries to which tin was re-exported in the first three months of 1940. (In thousands of Dollars) March Total Jan. Feb. of tin $1,662 $395 $484 $2,541 U.S.S.R. 1,403 1,835 Total re-exports 3 months 187 245 95 99 5.5 88 89 66 1 Belgium - - Spain - - 47 47 30 - 11 41 3 - 27 22 Sweden Canada Argentina Norway 24 Uruguay - Finland 11 Brazil Switzerland Hungary Cuba All other countries CC: Mr. Gaston Mr. Basil Harris Mr. Cochran Mr. Young 52 22 - 9 1 - 4 8 5 - - 13 - - 11 - - 2 4 282 156 52 21 17 13 11 9 9 2 8 0512 1 H.M.Jr has original; keep photostat until decision is made. 1585 THE WHITE HOUSE WASHINGTON May 3, 1940. MEMORANDUM FOR THE SECRETARY OF THE TREASURY FOR REPORT F. D. R. April 30, 1940. My dear Mr. President: In checking various things in the Army we find that all our troubles are not in the 30-called critical arms and equipment. I was so much impressed by General Gregory's story AS to clothing and blankets that I asked him to give me 2 memorandum thereon. It is so definitely to the point that I sending you the original herewith. At your convenience, I should like to talk with you further about this matter. Sincerely yours, Revis The President The White House Enclosure Memo. 1/30/.00 from the Cwartermaster General. Thust WAR DEPARTMENT OFFICE OF THE QUARTERMASTER GENERAL WASHINGTON April 30, 1940. MEMORANDUM FOR THE ASSISTANT SECRETARY OF WAR: I am very much concerned about our lack of reserves of woolen cloth and clothing for the Regular Army and National Guard. We emerged from the World War with large stocks of both woolen cloth and uniforms. Even ten years ago we had over $100,000,000 worth of clothing in stock. These stocks have now been exhausted, so that, with the exception of approximately 1,200,000 yards of 20 oz. Olive Drab Melton (suitable for coats, trousers or lining mackinaws), our stocks of cloth and clothing are sufficient only for current needs. Our annual requirement of clothing for the present army amounts to about $15,000,000. The value of clothing now on hand is about $18,000,000 - only enough for a little more than a year's issues, but not enough for a complete outfit of clothing for our present army. A complete set of clothing for one man costs $45.00; for the entire army (Regular plus National Guard) the cost would be about $21,000,000. Should the army be suddenly increased to the requirements of the Protective Mobilization Plan, we might be able to clothe nearly 1,000,000 men with one set of clothing, including garments already in their possession, but we could not until nine months have passed provide them or their replacements with additional clothing. It takes at least six months to procure cloth and another three months to manufacture this cloth into garments. Men in civilian clothing, even though armed, do not constitute an army. They must be provided with military clothing as soon as they are Memo. for The Assistant Secretary of War - #2. enlisted. Lowered morale and injury to health will result if adequate clothing is not supplied. The least we can do for a new soldier is to clothe him properly. The public reaction to an improperly clothed army would be immediate and justifiably unfavorable. I consider that we should have on hand, available to be made into garments, at least enough woolen cloth to furnish one garment each for a million men. To furnish one woolen cap, coat, shirt, trousers, and overcoat. to 1,000,000 men would require approximately $20,000,000 worth of woolen cloth. As you know, there are no large stocks of raw wool in this country and we are dependent upon Australia, through England, for a considerable por- tion of our wool requirements. A reserve of at least $20,000,000 worth of woolen cloth should be secured at once. The Administration has taken steps to secure reserves of practically all strategic materials except wool. Koolen cloth does not deteriorate in storage, and the expenditure of at least $20,000,000 would help our wool growers and our wool manufacturers, as well as provide an indispensable item of national defense. Also our present stock of blankets is only 200,000. Ten years ago we had over 2,400,000. I further recommend that there be purchased 85 soon as possible at least 2,000,000 blankets at a cost of approximately $12,000,000. These blankets would form not only a very essential reserve for military requirements, but would also furnish a stock available for floods or other public disaster, which our present stock of blankets would not be able to meet. If some definite action is not taken at once to correct the obvious deficiencies in our stocks of military clothing, the unfortunate experiences of the Civil War and the World War will be repeated. E B. GREGORY Major General The Quartermaster General DRAFF_T_ MEMORANDUM SUBJECT: Estimate of Funds for Procurement of a Stock of Woolen Uniform Cloth. The Assistant Secretary of War. 1. At various times in the past The Quartermaster General has submitted estimates and recommendations for the establishment of Nstocks of the various wool cloths for Army uniforms in quantities necessary to meet the initial issues for a mobilization pending the receipt of deliveries from the textile industry under emergency procurement and the manufacture of uniforms therefrom. To date these efforts have been unavailing. The extreme shortage of stocks of cloth for making the uniforms and the long length of time required by the mills to produce this cloth, and the garment manufacturers to turn it into uniforms presents a situation which, if a hurried mobilization were ordered, it would be impossible to meet. Our Procurement Planning statistics show it would take industry almost a year to manufacture the cloth and turn out completed uniforms for an increase in the Army of a million men, and that 2. for the first six months very little can be expected in the way of a completed garment. This presents a very serious situation and one which would subject the War Department to extreme criticism for failure to have adequate stocks on hand of essential types of cloth. 3. The present stocks of the required types of cloth, including the quantities due under current contracts, consist of: Serge, o.d., 18 oz. Elastique, o.d., 18 oz. Melton, o.d., 30-32 oz. Shirting, worsted, o.d. 306,281 yds. - For Caps and Coats 364,042 yds. - For Breeches and Trousers 153,667 yds. - For Overcoats 551,283 yds. - For Shirts The Serge and Shirting is barely sufficient to provide the additional number of garments required for the ordinary maintenance during Fiscal Year 1941 of the authorized strength of 227,000 men. The Elastique and Melton on the other hand is not sufficient, and substantial quantities must be purchased to meet the maintenance requirements for that period. 4. In the event a major emergency comes into being, or the Army is further increased in strength with accelerated recruitment, the situation to be confronted may be briefly stated as follows: a. There is no stock of uniform clothing in reserve for immediate issue. b. There is no stock of cloth for beginning the immediate manufacture of uniforms. -1- Memo. to Ass't. Secretary of Ear cont'd. c. The type of cloth required is not available in the commercial market and is manufactured by textile mills only on order. ₫. Mills require at least 60 days from receipt of order for production of the first yard and another 30 days for developing a steady flow to capacity. Thereafter 30 to 45 days is required for organizing the Sewing Industry and distribution of the cloth to it for the manufacture of the garments; another 30 days will pass before this phase of production is assured, and adding the time necessary for shipment and distribution, 6 months will have passed before piecemeal supply begins to reach the troops. This schedule would hold for war-time procurements; in peace, under the laws requiring competitive bids after due advertising, an additional 4 months would be required. 5. This situation will make for haste, waste, inefficiency and the opposite of economy, which can be largely avoided by a timely procurement of a reasonable stock of the basic cloth needed. The quantity should be thatcost required for one million uniforms, which at current market prices would as follows: CLOTH GARMENT Serge, o.d., 18 oz. If II If Elastique, ,o.d.,: oz. UNIT TOTAL YDS. YARDAGE Cap Coat 0.1583 1.791 Br.&Trousers 1.4644 Shirt Shirting,worsted Melton, o.d.30-32 oz. Overcoat 1.6053 3.375 UNIT AMOUNT PRICE 158,300 1,791,000 1,464,400 1,605,300 3,375,000 TOTAL $2.59 2.59 3.06 2.13 2.14 $ 409,997 4,638,690 4,481,064 3,419,289 7,222,500 $20,171,540 6. Due to the very limited stocks which can be carried over from year to year, when purchasing cloth it is so essential to get quick delivery that it puts the mills in an embarrassing situation by throwing a peak load on them during one part of the year with nothing to do the remainder of the year. For this reason higher prices have been consistently paid than if procurement could be made over a long period of time in an orderly manner. 7. At the present time there is large unemployment in the woolen mill industry. In EL recent letter from the Divisional Manager of the American Woolen Company he states as follows: -2- Memo. to Ass't. Secretary of War cont'd. 7. Cont'd. "In our opinion there are many sound reasons for believing that the present moment is the psychological time to place orders for woolen and worsted goods. The whole industry at the present time is in a condition of low machinery operation. We are right between seasons, and there is consequently wide spread unemployment, and always at such a time the Government tenders get a price advantage in their bids that are not obtainable when the machinery in the industry is filled up with plenty of bonafide orders." Wool is a strategic material and there are not sufficient stocks in this country to meet a quick program. There is no better war reserve of the strategic item wool than to carry on hand this wool in the form of cloth. This cloth is a very valuable asset and will never become a loss. If future world conditions do not justify carrying this reserve that is 8. asked for it could be very readily and easily consumed by our normal peacetime Regular Army and National Guard as the quantities requested would normally be consumed in a period of about four years. In other words buying this quantity of material now represents purchasing our requirements in advance for the next four years. 9. It is strongly urged that steps be taken to secure this important item at the earliest possible date in order that the Quartermaster Corps may be prepared to carry out its mission. B. GREGORY, Major General, The Quartermaster General. May 10, 1940 This was handed to HM, Jr by Colonel Johnson this morning. -1.0 set 0521 APPROPRIATIONS REQUIRED FOR AN INCREASE OF 15,000 ENLISTED MEN IN THE REGULAR ARMY FOR ONE FISCAL YEAR FIRST YEAR COSTS Salaries, Adjutant General's Office Salaries, Chief Signal Officer Printing and Binding, War Department Contingent Expenses, War Department $ 25,560 4,320 40,414 3,000 Special Field Exercises 900,000 Welfare of Enlisted Men 22,800 6,237,914 Pay of the Army 468,498 Travel of the Army Finance Service, Army Subsistence of the Army Regular Supplies of the Army Incidental Expenses of the Army 607,278 50,000 4,539,839 Army Transportation Horses, Draft and Pack Animals Barracks and Quarters ($3,831,000 immediately available) Construction and Repair of Hospitals Signal Service of the Army Medical and Hospital Department, Army Engineer Service, Army Ordnance Service and Supplies, Army Chemical Warfare Service, Army B&LP Br 5-10-40 2,126,697 4,135,657 Clothing and Equipage Organized Reserves 30,750 TOTAL 272,850 4,211,857 324,500 536,969 306,661 1,608,685 1,301,350 64,985 2,369,766 $30,160,350 May 10, 1940 HM, Jr gave this to the President at 10:30 today. 0523 710 The Civilian Conservation Corps has the following equipment: 400,000 blankets in stock 855,000 blankets on issue 135,000 comforts in stock 280,000 comforts on issue C.L.D. May 9, 1940 May 10,1940 This was given to HM, Jr by General Marshall at 10:30 a.m. today. 0525 ESSENTIAL ITEMS REQUIRED FOR INCREASE OF REGULAR ARMY FROM 227,000 TO 280,000 MEN Army Transportation Motor $ 13,000,000 Clothing & Equipage 14,350,000 Temporary Shelter 8,000,000 Regular Supplies 2,135,000 Horses, Draft & Pack Animals C & R of H (Temporary Hosp. Shelter) Signal Service Army 300,000 1,100,000 850,000 Med. & Hosp. Dept. Army 1,000,000 Engr. Service Army 1,000,000 O. S. S. A. (Ordnance Supplies) 2,250,000 225,000 CWS TOTAL $ 44,210,000 May 10,1940 This was given to HM,Jr by General Watson at 10:30 today. 0527 6110 May 9, 1940. MEMORANDUM FOR THE PRESIDENT: Subject: Status of Antiaircraft artillery and Ammunition. 1. In compliance with your request, transmitted by General Watson, regarding the status of antiaircraft artillery and ammunition, the following information is furnished: Caliber In Service and under Order June 30. 1940 ARTILLERY Included in Total Re- Total 1941 quirements Estimates 1,140 0 1,140 37 sua 564 408 972 3 inch 508 .50 90 mm 72 508 161 350 Total 41,535,000 .50 37 - 706,000 843,000 24,000 3 inch 90 - AMMUNITION (Complete Rounds) 2,740,000 44,000,000 100,000,000 85,000 800,000 2,500,000 0 20,000 quired for Shortages 2,710 $ 5,500,000 1,493 11,500,000 508 0 89 Funds Re- 0 10,000,000 $27,000,000 Total - $ 7,000,000 8,500,000 2,500,000 4,000,000 $22,000,000 Grand Total - $49,000,000 842,000 45,000 952,000 160,000 2. Time, in material requirements, is of course the dominant factor, and approximately two years will elapse after appropriations are made before deliveries can be secured on most of these items. This period could be reduced by increasing the number of working shifts - and by paying more for such procedure, and also by the adoption of industrial mobilization methods. This antiaircraft materiel is of great importance. It is largely defensive in nature, though most of it is of types essential for the field army. Franklin D. Roosevelt Library ASSINES DEEL DOG 5280.9 (9/07/88) Date- 8-2-71 Signature- RHP 0528 In submitting this statement of purely antiaircraft defi- ciencies, I would like to comment on the fact that there are equally serious shortages of other items of material. For examples 32 million dollars for ammunition for 105 - howitzers, 155 - guns, and 75 - guns, 32 million dollars for 48 - 105 - howitzers, - 155 - guns, 24 - 8-inch howitsers and 12 - 75 - pack howitzers; 8 & million dollars to modernize 3-inch antiaircraft ammunition (change fuses to mechanical type); 25 million dollars for guns and ammunition for aircraft. (sga.) Harry H. Woodring Secretary of War Franklin n. Roosevelt Library DECLASSIVES DOD 5200.0 (9/27/88) Date- 8-2-71 Signature- RHP -2- green by may 13, 1980. genera10A.M. mainhal ADDITIONAL NATIONAL DEFENSE REQUIREMENTS 0529 $657,787,257 As to personnel -- the above sum provides for increasing the Regular Army to peace strength (280,000). No increase is provided for the present National Guard (235,000). Total force provided for is 515,000 men. As to materiel -- the above sum provides all items of equipment for the 515,000 men. It also provides critical (non-commercial) items for the Protective Mobilization Plan Force of 750,000 men plus replacements. It does not complete the essential (commercial) items for the Protective Mobilization Plan Force. In addition, it will modernize existing combat airplanes and provide an operating reserve of 27 heavy bombers; it will provide additional sea- coast defenses at accelerated rates for the United States and Overseas Departments) the Anchorage Air Base project and the accelerated program for Procurement Planning and Industrial Mobilization. The above sum will permit expansion of the Regular Army to 280,000 men by September 30, 1940, and the mobilization with complete modern armament and equipment of a total of 750,000 men plus replacements by December 31, 1941. Seacoast Defenses in overseas departments and in the United States will be strengthened. In other words, these are the essential steps to wipe out the present ragged, unbalanced state of the Army as to organization and materiel, in order to establish a practical base of departure for a possible mobilization. A further preparatory step towards mobilization, to be taken when the situation becomes more serious, involves a sum of $265,000,000 required to complete essential items of equipment for the Protective Mobilization Plan Force. Actual mobilization will require immediate provision of approximately $2,000,000,000 over and above the present annual costs,for the maintenance, shelter, and training of the Protective Mobilization Plan Force for one year and for active operations in the field for six months. B&LP Branch 12 May 1940 0530 SUMMARY OF ADDITIONAL REQUIREMENTS FOR NATIONAL DEFENSE IN ADDITION TO THE 1941 BUDGET AND THE SUPPLEMENTAL ESTIMATES OF $18,000,000. Provision by Joint Resolution for the immediate increase of 15,000 enlisted men Additional funds to speed up production on current contracts for materiel Additional funds to speed up production of materiel in the Military Appropriation Bill and the $18,000,000 of supplemental estimates now before the Senate Remaining requirements in critical items for existing units of the Regular Army and National Guard * Remaining requirements in essential items for existing units of the Regular Army and National Guard weapons for combat planes Remaining requirements in critical items of equipment for the Protective Mobilization Plan Force * * Essential facilities to speed up ammunition production Additional amounts for seacoast defenses for Puerto Rico and Panama Additional amounts for seacoast defenses, Atlantic Coast, Continental United States * Restoration of project as submitted to Congress for the Anchorage Air Base, Alaska Restoration of the program as submitted to Congress for Procurement Planning and Industrial Mobilization 74,321,054 15.229.000 112,736,717 240,009,000 277,009,368 44,225,000 44,275,000 6,144,000 -15,890,125 6,799,000 18,467,415 8,752,560 7,739,950 TOTAL ADDITIONAL REQUIREMENTS $657,787,257 Cash appropriation 560,027,623 97,759,634 $657,787,257 Contract authorizations TOTAL Including speed-up. P.Y. 1,454,000 7,159,584 23,000,000 Provision during fiscal year 1941 for the increase of 53,000 enlisted men to include critical items Revised 5/13/40 16,918,168 5,000,000 26,188,200 Modernization of existing combat airplanes B&LP Branch 12 May 1940 15,000,000 14,182,304 Momitted 27 heavy bombers as an operating reserve * $ 17,146,812 ant. - overaft- Mobile - 42, 754,000 # Seacoost 21, 404,000 Total-"546,137,136 0531 May 13, 1940 (Dictated May 14, 1940) Met with the President yesterday morning, Woodring, Johnson, Marshall and Harold Smith. When we got in to see the President, Johnson had not seen Marshall's memorandum and I don't think Woodring had seen Johnson's memorandum as there was constant disagreement and bickering before the Presi- dent. At first, the President was entirely opposed to Marshall's program and when I put up a strong argument for it he said, with a sort of smile and a sneer, "I am not asking you. I am telling you. And my reply was, "Well, I still think you are wrong." He said, "Well, you filed your protest.' The trouble was this memorandum of Marshall's took him entirely unawares and it was quite evident that he was really not familiar with the problem, but as time wore on he did really accept everything in Marshall's program with the exception that he said he was willing to ask for the money for the plants, to get them started, but not the money with which to manufacture the article in the plant. He said that could be done next January or March. For example, he was willing to build a powder factory, but he did not want any money for powder in the factory, same as ammunition. He said we should get together and come back tomorrow. When I left the room, first Woodring and then Johnson said would I please call them together. So did Harold Smith. Johnson then saddled up to me and said, "You had better do this, because after all you are really the Assistant President, and I vehemently told him if he wanted to ruin my usefulness all he had to do was to say it out loud. He said, "Oh, won't say it to anybody, but that's what you are." At lunch I asked the President whether he would not send word to Wagner and Steagall that he I 0532 -2- did not want these two provisions -- the one on the real estate loans and the other taking away authority from me to exclusively subscribe to preferred stock. The President said sure he would phone them. I said no, that wasn't necessary; did not want to bother him; would he have Pa Watson do it. He said he would. He rang for Pa and Pa had left, so I dictated a memorandum to Kannee and later on in the afternoon Watson carried out the order. The President immediately said something about the difference in the War Department and I said, "Mr. President, you just have got to do some- thing about it." He said, "Well, you know I talked to you about it before. And he said, "I am think- ing now of Colonel Knox as Secretary of the Navy. (This was a new one. The last time he mentioned Bullitt, and Knox for Secretary of Commerce.) And he said, "La Guardia for Secretary of War.' And I said, "Both would be swell." Then he said, "What would you do with Woodring?" I said, "You have a vacancy in Canada. Send him up there as Minister to Canada.' He said, "I think I should send a career man like Moffatt. Previously when I was pushing that he do this thing he said, "Why even Winston Churchill keeps Chamberlain in his Cabinet. So I said, "No. Send Woodring up to Canada. After all he can't do much harm up there." I said, "You have got to get rid of Johnson too. He said, "Well, he has been loyal. "Yes," I said, "but he does not tell the truth. So the President said, "He hasn't lied to me. I did not want to pursue it. He said, "What would you do with Johnson?" I said, "Frankly, I don't know. I said, "I don't suppose you will do anything about this until after Congress leaves. He said, "No. I can't. Then the President started to tell me -- he said, "You can't ever take the word of the Admirals or the Generals. They will ring in money for a brass band or something else." I said, "Maybe they will, but I think Marshall did a good job." 0533 -3- I think the President spent more time yes- terday on the Army program than he ever had before. It seems that they gave him a memorandum which Woodring, Johnson and Marshall signed early last September for $800, 000, 000, increasing the Army to its full strength with all the necessary equipment up to, I think, 750,000, which the President brushed aside. The President has to take a great deal of the itresponsibility that the Army is in as bad shape as is. Before we broke up our meeting, I said, "Gen- eral Marshall, don't you want to tell the President about your having to go on the Hill?" He said "No, I wish you would." So I said, "You know, General Marshall has been sent for on the Hill to tell them what he thinks the program should be." Quick as a flash the President said, "Why do you want to go up on the Hill? Why do you want to go?' So I said, "What do you want him to do?" Marshall did not say a word. He said, "Tell them to wait. I am going to have a message. Don't go up and tell them anything. We met in the Cabinet Room a little after five. (Phil Young should dictate a memorandum on that.) The interesting, human side of the thing was that after I got through Marshall took me aside and he said, "How am I doing?" He said, "What did the President tell you at lunch?" So I said, "I think you did a swell job and I think you are going to get about 75% of what you want.' He said, "Did I do all right?" I said, "Yes, I think you did fine. He said, "That's good." So Watson, whom I got to join us for a short time, came back and said, "I have just showed the President the figures and it's going to be all right; going to be all right." The part that worries me most is the President's statement that he wants to have 50,000 planes and wants the Government to build a lot of factories. I just can't see it and I told him 80. No one has thought the plan through. Nobody in the Army was ready to answer it. When I heard that General Arnold was 0534 1 -4- somewhere in Texas, I asked Marshall if he could not order him back so he would be here in the morn- ing. He said he would. Johnson will go along with anything the President suggests, particularly if he thinks it makes him a big shot. This morning early I got two ideas. (1) That the President should appoint a Committee consisting of the Assistant Secretary of War, and General Arnold and General Brett as alternates; Assistant Secretary of Navy, and Admiral Towers and Captain Krause (who I think is in charge of procurement for Navy) as alternates; and Bob Hinckley of C.A.A., who is to be Assistant Secretary of Commerce, and whoever is his technical man, and possibly make me Chairman so that I can make sure that this program is coordinated with the Allied program. (2) The other thought that I have is, and they may dovetail into each other, that we for a lump sum of $100,000,000 with which to build and equip plants wherever we can't get production fast enough, for instance, machine tools, gun factories, powder fac- tories and airplane factories, and the President to be given this sum to allocate to the plants. This will have a two-fold effect: (1) if the manu- facturers know the President has a program they will want to go ahead themselves and (2) if they don't we can do it. And he might have some kind of a Joint Committee to do a job like this. To show the lack of cooperation, General Marshall told me that only by going to Hawaii himself was he able to get the Navy to have joint Army and Navy maneuvers which they had never had before and they have never had a joint Army and Navy maneuver on the Atlantic Coast and he says, "Until you have these things and work out the problems, you just don't know what they are. If I am tremendously impressed with General Marshall. He stood right up to the President. And, incidentally, at my private meeting with him he said, "I want to ask you something. I want to ask your advice." He said, "I know the Navy gets to the President privately all 0535 -4- the time. I know Stark has already been to see the President on his program. Do you think I should?" He said, "I can do it. I can get there through Watson. But," he said, "I would feel that I was being disloyal to my superiors and it is a If thing I would not stand for from my subordinates. I said, "Well, General, even if temporarily it would retard your program, I advise you not to go direct to the President, because it's a thing I don't stand for in my Department and I think you are quite right if you don't stand for it from your sub- ordinates, why should you do it to your superiors?" I said, "When you go to see the President, stand right up and tell him what you think and stand right there. There are too few people who do it and he likes it. And the interesting thing was he did it. And Woodring sat there in a corner and never opened his mouth. And in the outer room, Johnson and Wood- ring sat there and never talked to each other. 0536 May 20, 1940 Talking with the President at lunch, the question came up about Biggers and Forrestal and the President wanted to take both of them over at the White House, but he said, "I haven't enough vacancies over there for these Administrative Assistants. So I said, "That's all right. Let Biggers come over to me. I have a vacancy. He said, "What will he do for you?" I said, "He will help me on airplanes and airplane engines. He said, "That's all right and I will give Jim Forrestal the job of seeing that there are not too many millionaries created through the War. So I said, "You had better start in by telling that to Forrestal himself.' I said, "You need not worry about that, because John Sullivan is taking good care of that." And I said, "Look at this memorandum he wrote on Louis Johnson's bill. That shows you the kind of stuff he does. Evidently, and from a remark later made by Pa Watson, the President had it in mind to give Forrestal everything that had to do with procurement with the exception of airplanes and engines. He said to me, "How about putting Forrestal and Biggers on the Munitions Board.' I said, "I think going that would be terrible. I said, "If you are to get into the thing, you ought to have a separate Munitions Board." He said, "You have got all civilians and they all get tangled up in each other. So I said, "Let me keep Biggers and I will tell you what to do with Forrestal. Give him the job of seeing how they get along with anti-aircraft and if he makes good you can I said, "Look give him more work, but try him out. If what happened to Henry Bruere and many others. If He said, "O. K. I will do that, but," he said, "I need two more vacancies. He said, "I am bringing down two labor leaders, one this Dan Tobin and the other Sidney Hillman." He said, "I need those as my Assistants. So he said, "And they can work with you and with Forrestal and see that everything is kept O. K. So then I told the President, "Did you know that the shadow factories in England fell down com- pletely due to the way they treated labor?" He said, "No, he did not know," so I said I would send it over to him. 0537 -2- Then I asked him was it all right for me to tell Pa Watson to tell General Marshall to tell General Arnold to stay out of town until the bill passed and he said O. K. and I told it to the Chief Clerk, Mr. Forster, and Forster said "It's about time". Coming back, half way between the White House and the Treasury, I met Pa Watson. He said, "What happened?" I told him. He said, "You know, he has another man in mind. He's going to bring down Knutson r as one of his administrative assistants." I said, "You tell the President for me to let Knutson straighten out Allison Motors and after that is time to straighten out Washington. If When I told Pa Watson that Tommie Corcoran was behind Jim Forrestal, because that's where Tommie Corcoran went to get his money, I thought Pa Watson would pass out and then when I told him the two labor leaders were coming in as administrative assistants he doubled over, bellowed with laughter so loud that anybody in half a mile could hear him. He said, "You have only one man worth a damn. All the rest of them are washouts. That', B McReynolds. I said, "Maybe McReynolds will stay over here permanently now. I gaveDa full report to the President on what I had done on engines, with Chrysler, everything else, and he was very much pleased. Had no suggestions. He said he was going to use it at his press conference tomorrow. P.S. In re first paragraph above, General Watson phoned HM,Jr that General Arnold will be leav- ing town tomorrow until further notice. 0538 May 10, 1940 (Dictated May 11th) At the 10:30 meeting at the White House, May 10th, the following people were present: Roosevelt, Hull, Welles, Bob Jackson, General Marshall, Admiral Stark, Captain Callaghan, General Watson and HM,Jr. The President was very quiet and selfcontained. They discussed for a few minutes the Euro- pean situation. Hull said that he thought that some time in the afternoon they would have ready a Presidential proclamation that the Netherlands was in a state of war. The President said to let it go over until Saturday morning to give the Netherlands a chance to adjust itself. The President said he was see the Netherlands Minister and Mr. Welles said he would like me to see him afterwards. I gave the President my memorandum on tin and rubber and I suggested that Bob Jackson get busy on the question of stopping the re-export of tin and rubber. I also handed the President the figures on Duthc, Belgian and Luxembourg money in this country. Before going in to see the President, I talked with General Watson about the figures the Bureau of the Budget had given me that morning and asked him how I should handle it. After bringing General Marshall over he suggested that I ask to stay behind. Watson said, "Did you get that memorandum that the President received yesterday on ant1-aircraft?" after the meeting had been running for 10 or 15 minutes and seemed to be breaking up, I asked the President if I could stay behind with General Marshall and General I said no. He said, "Be sure and ask for it. So Watson. I then gave the President a copy of everything 0539 -2- I had received from the Bureau of the Budget. We went over it very carefully. It seemed that the President asked for a memorandum on the anti-aircraft situation, copy of which was given to me by General Watson. General Watson was very anxious that I should have this memorandum and he kept whispering in my ear, "Ask for that memorandum. And he said. that what was in that memorandum, if they had this additional artillery and ammunition, they would be all right. In the anteroom I said to General Marshall, "I understand you could only put into the field today, fully equipped, 75,000 troops. He said, "That's S absolutely wrong." I said, "Well, how many could you put in the field today?" He said, "80,000." Marshall also handed me two other memoranda. (The trouble, it seems to me, 19 there are giving the President little pieces and not the whole picture.) He was tremendously interested in the ma- terial that I gave him from the Budget and he said that all Army arsenals should immediately be put on a threeshift basis. He said he wanted the same information on the Navy. I handed him back Louis Johnson's memorandum on blankets. The President said, "What do you think about it?" I said, "I am not sold as to the needs of it." I said, "It seems to me there are lots of things we need worse than blankets. Supposing we don't get the exact shade of clothing they need. Much to my surprise and disgust, General Marshall said, "Of course, we could let the men go around in overalls, but just think of the criticism. It would be a national scandal. If So all I did was to smile. I then handed the President a memorandum showing how many blankets and comforts the C.C.C. has on hand and when General Watson saw it he said, "That's an awful lot of blankets. " As an outgrowth of this meeting, the President 0540 -3- said, "Well, get all of this together, what you need, etc., If and I said, "When do you want it?" He said, Monday. Then I asked General Marshall if he would not come to my office at 9:15 Saturday to work on this thing. Frankly, I don't know how I ended up with this in my lap, but I did. Before Cabinet, Woodring asked to talk to me. He said General Marshall had come to him after the meeting in the morning and said I had received some misinformation and he, Woodring, wanted me to know that anything that I wanted please come to his office and, seeing that conditions were as they were, he would see personally that I got what I wanted. I thought he was criticizing me and I explained that the information I had received was the outgrowth of a mem- orandum from Johnson to the President on blankets which the President referred to me and the only way I had of checking this was through the Bureau of the Budget and I said the information that the Bureau of the Budget had received had been furnished to them by a general who was, I understood, in charge of the Budget work for the Army. I could not remember his name and Woodring said, "Was it General Furrows (?)" and he said, "If he did it, it must be right. So I said, "Woodring, are you trying to criticize me?" He said, "No,no! I want to offer you every assistance you want. If I said, "If you are criticizing me, I can't help it if your Budget officer does not know what he 18 talking about." He said, "If he gave it to you, it must be right. " 0541 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE May 10, 1940 Secretary Morgenthau TO Mr. Cochran FROM Subject: Belgian, Dutch, Luxembourg and Dutch East Indian Assets in the United States The latest available estimates of Belgian, Dutch, Luxembourg and Dutch East Indian assets in the United States are as follows (in millions of dollars): Dutch East Belgium Netherlands Luxembourg Long-term investments 2 Direct Portfolio: Stocks Portfolio: Bonds $ 71.0 $ 178.0 $ 3.0 45.0 5.0 10.0 8.0 480.0 205.0 8.0 2.9 10.9 180.8 195.5 173.1 348.9 Others - Indies 1 2.0 1.0 Short-term investments Balances: Official (At close - 1.7 of May 9) Balances: Private (As of May 1) Gold under earmark (At close of 20.3 - - 17.4 May 9) TOTAL $485.8 $1,426.3 $34.3 $21.1 Gold in transit to U. S. (As of close of business May 9) GRAND TOTAL 1 2 - $485.8 34.0 $1,460.3 - $34.3 4.7 $25.8 Java, a Dutch possession, appears to be the only political subdivision of any of the three countries which has appreciable assets in or in transit to the United States. Estimated assets in the United States of the rest of Netherlands East Indies plus the Netherlands West Indies totaled in the neighborhood of $5.0 million last October. Figures for long-term investments obtained from a Department of Commerce press release published at 12:30 p.m., May 10, 1940. These figures were also checked directly with the Department of Commerce.