The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
DIARY
Book 206
August 1 - August 31, 1939
2
-ABook
Page
Agriculture
Drought: Wallace memorandum on conference of
regional executives - 8/2/39
206
65
Annenberg, Moe
See Tax Evasion
Anti-Dumping (Matches)
See Finland
Appointments and Resignations
Lochhead (Archie) resignation and Cochran (H. Merle)
appointment reported on Dow-Jones ticker - 8/8/39.
Virginia: Heath (James Elliott), Norfolk, recommended
by Governor Price for Collector of Customs, Norfolk;
and Jones (Allan D.) recommended by Governor Price
and R. Walton Moore for Collector of Internal Revenue,
Richmond, reported on by Hanes to FDR - 8/22/39
a) FDR instructs Hanes to proceed with
appointments of Heath and Jones - 8/25/39
82
181,314
401
Argentina
Argentine Financial Counselor inquires what United
States intends to do in financial markets in event of
outbreak of war - 8/26/39
413
-BBank of America
Conference on Jones' suggestion that application for new
capital be considered; present: Hanes, Upham,
Mulroney, Foley, and Gaston - 8/11/39
122
a) Treasury opposed until Bank of America has made
satisfactory reply to Comptroller's letter of
criticism of 7/31/39; Jones so informed in
Los Angeles
Banking Study
HMJr and Hanes discuss: HMJr thinks only idea is to
take away as much as possible from Treasury; Hanes
offers to talk to Byrnes - 8/1/39
2
Business Conditions
Memorandum on situation for week ending 8/18/39
"
II
"
8/25/39
150
386
"
"
"
-CChina
Conference on malaria situation - 8/1/39
a) Resume of situation from Ministry of Foreign
Affairs, Chungking - 8/7/39
Chinese Embassy asks State Department for cooperation
of United States Government - 8/16/39
21
79,90
142
- C (Continued)
Book
Page
206
160
China - (Continued)
Resume of Wang Ching-Wei's important mission in
Canton - 9/18/39
a) Italian agent tells Nicholson that fifty
Italian and German aviators have joined
Japanese air force in Shanghai - 8/19/39
162
Japanese renewing peace campaign with China in view
of Russo-German rapprochement (Nicholson cable) 415
8/26/39
Coast Guard
New plane for HMJr discussed by HMJr, Hanes,
McReynolds, Waesche, Ligutenants Burke and
Bowerman - 8/1/39
Cochran, H. Merle
See Appointments and Resignations
38
Colombia
HMJr's letter to Welles regarding possibility of
financial assistance from Federal Reserve Bank of
New York after settlement of outstanding debt and
exchange matters - 8/1/39
46
Hanes' memorandum to FDR: Treasury tax expert will be
sent to Colombia; well qualified to advise on
subject of depletion and depreciation basis for
property of foreign oil companies - 8/2/39
a) FDR also informed $50,000 item in Deficiency
Bill to defray this and similar expenses was
rejected
b) Welles so informed
61
62
Cuba
FDR asks Hanes to send financial experts to Cuba and
South America in accordance with State Department's
request - 8/1/39
1
Customs, Bureau of
Mexico:
McAdoo, William Gibbs: Suggested reply by FDR to
McAdoo concerning Treasury Decision 49925 providing
for exemption of $100 ***HH* on articles acquired in
Mexico by returning resident - 8/3/39
a) Gibbons' draft of reply to Congressman Kramer on
same subject sent to FDR - 8/11/39
67
101
b) For protest from entire California delegation
10/25/39:see Book 219, page 124
1) Conversation between Johnson and Foley:
Book 219, page 126
2) HMJr talks to Downey: Book 219, page 135
3) Press conference: HMJr says postponed
until 12/1/39
4) Kramer tells HMJr of Tom Ford's statements
10/26/39:Boo 219, page 228
5) Lea told of postponement until 12/1/39:
Book 219, page 230
204
-DBook
@
Page
Denmark
Memorandum of call by HMJr on Danish Minister of Finance 8/11/39
206
Memorandum of call by HMJr on Governor of National Bank
of Denmark - 8/11/39
96
99
Drought
See Agriculture
-FFarley, James A. (Postmaster General)
Ambrose O'Connell tells Hanes Farley has changed his
plans from SS HARDING to SS MANHATTAN; Hanes thinks
mail should be transferred also - 8/29/39
465
a) Basil Harris tells Hanes "if there is any time
mail should be on American ships, it is now" 8/29/39
503,513,514
Financing, Government
9/15/39: Hanes' resume of situation in view of foreign
situation - 8/16/39
136
Finland
Wood-pulp: Dumping discussed at 9:30 meeting; if injurious
to Finland, HMJr asks delay until after he has been there8/1/39
5
Matches: Anti-dumping: Minister of Finland discusses
situation with Hanes - 8/2/39
59
Gaston memorandum to HMJr giving resume of debt situation 8/16/39
130
List of guests at luncheon and dinner given in HMJr's honor
France
in Helsinki - 8/31/39
544
See War Conditions
-Germany
U.S.S.R.-German Negotiations: See U.S.S.R.
Gold
See also War Conditions: Great Britain - Stabilisation
FDR's memorandum concerning friend's statement that
totalitarian states have been strengthened by
United States purchases of gold ***** - 8/5/39
74
Japan: Hanes' memorandum to FDR concerning cessation of
purchase of gold - 8/11/39
Government Bond Market
See War Conditions: United States
Great Britain
See War Conditions
119
-HBook
Page
206
103
Heath, James Elliott
See Appointments and Resignations
-JJapan
See China
" Gold
Jones, Allan D.
See Appointments and Resignations
-KKlaus, Samuel
See Tax Evasion: Annenberg, Moe
-LLegislative Program (Treasury)
Foley resume at end of 76th Congress first session 8/11/39
Lochhead, Archie
See Appointments and Resignations
-Mt
Mail, United States
See War Conditions: United States Mail
McAdoo, William Gibbs
See Customs, Bureau of: Mexico - $100 exemption only
allowed under new Treasury Decision 49925 - 8/3/39.
67
Mexico
See Customs, Bureau of
-NNational War Resources Board
See War Conditions: United States
Netherlands, The
Mannheimer, F. (Managing Director of private Mendelssohn Bank):
Death reported - 8/11/39
122A,122F,
1220,128A,144A
Neutrality
See War Conditions: United States
New Zealand, Dominion of
Walter Nash (Minister of Finance) resume of discussions
between HMJr, Hanes, and himself in connection with
trade balances, et cetera - 8/9/39
-P-
Panamanian Registry
See War Conditions
86
-SBook
Page
206
532
Scandinavia
See War Conditions
Ship Movements
See War Conditions
Siam
Rentschler tells Hanes of Siam's wish to earmark gold
with Federal Reserve Bank of New York - 8/31/39
Silver
Director of Mint authorized to use silver bullion to
extent necessary to meet coinage needs - 8/30/39
a) FDR's enthusiastic approval
527
526
South America
FDR asks Hanes to send financial experts to Cuba and
South America in accordance with State Department's
request - 8/1/39
1
a) Hanes' memorandum to FDR: Treasury tax expert
will be sent to Colombia; well qualified to
advise on subject of depletion and depreciation
basis for property of foreign oil companies 8/2/39
61
1) FDR also informed $50,000 item in
Deficiency Bill to defray this and
similar expenses was rejected
2) Welles so informed
62
-TTax Evasion
Annenberg, Moe:
Indicted in Chicago, charged with evasion of taxes
from 1932 to 1936 inclusive; Walter H. Annenberg,
Arnold W. Kruse, and Joseph E. Hafner also included 8/11/39
95
Hanes congratulates Campbell, Irey, and Attorney General8/14/39
123
a) Campbell's reply - 8/16/39
Klaus, Samuel: Campbell praises services highly -
8/31/39
Transamerica
144
522
See Bank of America
UU.S.S.R.
German-U.S.S.R. negotiations "in purely preliminary stage
although they have been in progress a month" - so Barbarin,
head of Russian delegation, insists to American Embassy,
Berlin - 8/2/39
American Embassy, Moscow, reports on signing of German-U.S.S.R.
commercial credit agreement - 8/21/39
a) Paris reaction reported - 8/22/39
-VVacation: HMJr
See War Conditions: United States
66-B
164,174-A
176-A
- V - (Continued)
Book
Page
206
128
Venezuela
Government inquires of Welles, who inquires of Hanes,
whether gold earmarked with Federal Reserve Bank
(approximately $6 million) is free for export under
any and all conditions: Hanes' answer - 8/15/39
Viner, Jacob
Viner in Bergen; HMJr asks Treasury for his address 8/25/39
344
-WWar Conditions
Federal Reserve System: Eccles sends Hanes copy of
self-explanatory letter and confidential memorandum
addressed to Attorney General explaining means
available through the System to protect the public
interest in event of European war - 8/30/39
518
France: Gold removal from Bank of France reported on
by American Embassy, Paris - 8/30/39
521-A,D
German-U.S.S.R. Commercial Credit Agreement:
American Embassy, Moscow, reports on signing of 8/21/39
164,174-A
a) Paris reaction reported - 8/22/39
Great Britain:
Collins' memorandum on visit of Lord Riverdale and
Sir Owen Chalkley to Procurement Division - 8/2/39
176-A
63
a) Hanes' memorandum on Treasury call - 8/3/39
Exchange market resume in view of threatening war 8/10/39
70
92,139,146,
167,175,177,
178,293,319,470
a) Proposed German-Russian treaty discussed - 8/22/39
175
a) Hanes and Lochhead discuss
b) Hanes and Feis discuss
307
Stabilization: Gold resources gaining rapidly; therefore
British will let sterling depreciate beginning August 25th
c) FDR informed
d) Butterworth talks to Hanes as United States
market opens - 9:30 A.M., 8/25/39
e) Kennedy asks Hanes to consult with him before
any decision is made - 8/25/39
f) Gaston explains situation to HMJr - 8/25/39
g) Butterworth and Lochhead discuss statement that
311
315
320
329,332
337
Tripartite is still in existence and United States
does not consider this competitive devaluation 8/25/39
352
Emergency Powers Act passed - reported on by American Embassy,
London - 8/26/39
411-A
8/27/39
426-A, 521-K
Foreign securities ordered registered by British residents London Stock Exchange will close tomorrow, September 1st,
indefinitely; reason - evacuation of women and children
from ten points: Chief of Naval Intelligence tells Hanes
this message has been received from District Intelligence
Officer, New York - 8/31/39
535
W - (Continued)
War Conditions - (Continued)
Neutrality:
Berle, for Interdepartmental Committee, transmits
to Hanes complete set of documents relating to
- 8/28/39
Panamanian Coast
vessels are commanded
by German crews -
Book
Page
206
445
Guard
report
Scandinavia:
Central
Banks will meet secretly in Stockholm August 27;
446
8/28/39 neutrality from that Registry: officers HMJr German under approximately and tells approved Norddeich Panamanian Message and Hanes manned by thirty-five intercepted headSof station Committee registry, by German supporting four German by
very much worried about their relationship to
British pound
a) Bank of Norway announces Norwegian pound no
longer linked to pound sterling; dollar rate
fixed at 4.40 - 8/29/39
Butterworth reports on cutting loose of Swedish
currency from sterling - 8/29/39
417
468
474
Ship Movements:
See also War Conditions: Panamanian Registry
Coast Guard reports on movements of German, Italian,
and Japanese ships - 8/28/39
United States:
Vessels belonging to belligerent powers in United
States ports: Hanes advises FDR as to possible
action - 8/8/39
Treasury asked to head informal committee of Federal
Reserve, State, and Justice (later possibly
447,448,449
450,451,507
80
Securities and Exchange Commission and Commerce)
to study and complete plans for control over
transactions in foreign exchange, transfers of
credit, export of coins and currency, sale of
securities in American market by foreign holders,
et cetera - 8/17/39
145
Hanes' memorandum on second conference in office
of Welles: (1) personnel of main Interdepartmental
Committee; (2) Financial Affairs Subcommittee
arranges for first meeting; (3) Aviation Committee
arranges for first meeting - 8/22/39
180
Measures to protect various markets in event of war
in Europe:
First conference; present: Hanes, Gaston, Bell,
Cairns, Glasser, Feis (State), Townsend, (Justice),
Thomas (Federal Reserve) 10 A.M., - 8/23/39
Second conference; present: Hanes, Bell, Glasser,
Thomas, Parry, Leon Henderson, Green, and Feis 3 P.M., 8/23/39
a) Recommendations approved
Third conference - 10:50 A.M., 8/24/39
a) Resume of London-Paris-Washington arrangements
made during March and April
182
223
254
260
282
W - (Continued)
Book
Page
206
257,407
War Conditions - Continued)
United States - (Continued):
Glasser memorandum: "United States action taken in
field of foreign exchange during the Great War" 8/23/39
HMJr and Hanes talk by telephone concerning HMJr's
return by plane, et cetera - 8/24/39
295
8/25/39
316,317
Ships suspected of carrying armaments will not be
given clearance papers until complete search
has been made: FDR's instructions to Treasury -
a) All Collectors of Customs to be notified
318
1) Attorney General approves instructions 8/26/39
406
b) SS NEW YORK: Hanes tells Durning FDR does
not wish it to go out - 8/25/39
356,400,482
c) FDR told Collectors of Customs are under
Commerce Department with respect to clearance
of vessels and so letter has been sent to
Commerce - 8/28/39
427
d) SS BREMEN: FDR tells Hanes to instruct
Customs to use plenty of time in exploration
for offensive armaments - 8/28/39
1) Durning tells Hanes in order to maintain
semblance of consistency he will have to
hold up NORMANDIE and AQUITANIA also 8/29/39
429
478,490,501
505,506
a) FDR informed
2) Hanes discusses situation with Feis
495
481
3) Signing on SS BREMEN as members of crew
of about thirty technical men and
physicians, presumably all American
citizens, discussed by Hanes with Field
Service, Department of Labor - 8/29/39.
e) Welles tells Hanes to use care that wording
"offensive armaments" is used; this in
connection with confidential information that
British Government is arming some of its
merchant ships defensively - 8/28/39
1) Attorney General's opinion - 8/29/39
f) Los Angeles: Collector of Customs William Jennings
Bryan, Jr., makes certain inquiries with regard
to Japanese vessels, et cetera, coming in through
Los Angeles harbor - 8/30/39
g) Coast Guard authorizes clearance of all boats
National War Resources Board: Harold Moulton (Brookings
Institution and a member of the Board) gives Treasury
resume of program in process of formation at request of
Stettinius - 8/25/39
486,491,492
458
475
516
530
398
W - (Continued)
Book Page
War Conditions - (Continued)
United States - (Continued):
Government Bond Market:
Hanes gives FDR complete resume following criticism
by Securities and Exchange Commission - 8/25/39
a) Discussion with Federal Reserve Board
b) Discussion with Harrison
Eccles, with whole Board listening, advises Harrison
to support market "if anything happens"; Harrison
tells Hanes he differs because he cannot go in
until he finds out where the level is; Hanes suggests
that perhaps Eccles has talked to FDR - 8/31/39
a) Hanes and Ransom discuss this conversation
Resume - 1:45 P.M., 8/31/39
206
400
402
404
524,537
539
529
Memorandum to FDR containing recommendations concerning
(1) foreign exchange; (2) control of vessels in
territorial waters of United States and of shipments
of arms - 8/28/39
United States Mail: Ambrose O'Connell (Second Assistant
Postmaster General) tells Hanes Farley has changed his
432
plans from SS HARDING to SS MANHATTAN; Hanes thinks
mail should be transferred also - 8/29/39
a) Basil Harris tells Hanes "if there is any time
mail should be on American ships, it is now" 8/29/39
Vacation - HMJr: See War Conditions - United States
War Resources Board, National
See War Conditions: United States
Wood-pulp
See Finland
465
503,513,514
1
THE WHITE HOUSE
Washington
August 1, 1939
MEMORANDUM FOR
ACTING SECRETARY OF THE TREASURY HANES
I understand the State Department is very
anxious to have the Treasury send some financial
experts to Cuba and South America, but that people
"down the line" in the Treasury say you cannot
spare any.
will you find out what the State Department
wants and see if you can find a few to fill their
bill? Surely it can be done.
F.D.R.
2
GROUP MEETING
Present:
Mr. Hanes
August 1, 1939.
9:30 A. M.
Mr. Gaston
Mr. Foley
Mr. McReynolds
Mr. Bell
Mr. Gibbons
Mr. Duffield
Mr. Graves
Mr. White
Mr. Haas
Miss Chauncey
H.M.Jr:
(To Hanes) I think this comes under the head of
new business (handing Hanes a memorandum).
(On phone) I'll talk to George Harrison a little
later. But remind me. I'll talk to him.
Think we ought to do anything? I don't want to
Hanes:
H.M.Jr:
Hanes:
H.M.Jr:
get in on it.
I agree with the sentiment expressed here. I
don't know if we ought to do it or not.
Turn it over to
I can go up there and talk to him if you want me
to. Jimmy Byrnes called me up. I'll find out what
he's got on his mind.
Jimmy Byrnes. Why don't you do that? I think that
would be the best.
Hanes:
(Several words spoken too low to be understood) I'm
opposed to it.
H.M.Jr:
I kept saying, if they do it, we'll cooperate, but
I think it's a silly piece of business. This is
this banking study. The whole thing is just a
study of what they can take away from the Treasury,
that's all.
Sure that's all. There's no use instigating it.
Well, if you could talk to Jimmy Byrnes, I think
Hanes:
H.M.Jr:
it would be nice.
3
-2Hanes:
I'll be glad to, yes.
H.M.Jr:
Thought if you could get away with it
Hanes:
Is anybody else on the Committee? Is Jimmy Byrnes
the
H.M.Jr:
No. Would you talk to Crowley, too? Maybe Crowley
can
Hanes:
Yes.
H.M.Jr:
What?
Hanes:
Yes.
H.M.Jr:
Supposing you - will you handle it? Do you want
Hanes:
I'd better have that.
Duffield:
Crowley's trying to get it stuck in that Committee.
It's his hope it will never come out of that Com-
that to remind you?
mittee.
Hanes:
Leo?
Duffield: Yes.
H.M.Jr:
Well, Hanes will handle this.
Hanes:
I'll get a copy and I'll give this back to you.
I'd like you in at 10:15. I've got the Chinese
coming in. I got this memorandum from Parran.
I want to sew that up. Ten fifteen.
H.M.Jr:
Herbert?
Gaston:
H.M.Jr:
No, I haven't anything. I notice they put - make
our new bonds under the Senate bill subject to
taxation. Might make a little problem in connection with the issue.
Well, I called up Senator Barkley last night on
the phone to thank him for everything he's done,
and he said he was sorry about - that they made
4
-3-
Gaston:
these bonds taxable, because it was entirely the
President's fault, the way he had handled this
thing at his press conference, and the President
had nobody but himself to blame. And I was surprised to hear Barkley be so positive.
That's the truth, of course.
H.M.Jr:
What?
Gaston:
That's the truth, of course.
Now, I understand - I think I'm right - I don't
know where Foley is - I think he's going to try
to handle it in the House. But Barkley was surprisingly - he was really quite bitter about it.
What I was thinking about - if that sticks, we may
have to take some unusual steps in the way of
publicity and advertising of the first offering
H.M.Jr:
Gaston:
when we put it out.
H.M.Jr:
White:
H.M.Jr:
Gaston:
I'm waiting for Foley (on phone) - - What?
Oh, all right.
Well, we've been talking that point over and wanted
to raise that issue. The House Committee changed
that "not more than half percent" to "not less than
half percent" and
Let's wait until Foley comes, because he's talking,
she says, to Steagall right now. Let's wait, huh?
Yes. The point is, it seems to me, that not only
the idea of putting out the issue but the fact that
it will furnish a criterion, a test; if it shouldn't
go too well, if the spread should be too great, it
will hurt us terribly on the problem of removing of
exemptions. If we should find a quarter of a point
spread there, we may have to take steps to prevent
-
-
it.
H.M.Jr:
Well, let's wait until Ed comes in. He's my "selfliquidator."
Hanes:
Be a funny thing to have some Government bonds outstanding, non-taxable, and some taxable.
5
-4H.M.Jr:
Yes. I think it's silly.
Hanes:
I think so, too, but I don't think it will ever
get by the House.
Gaston:
I suggest if it sticks we might want to use Jim
of the securities to try to bring the - get some
good distribution at a low rate.
Bryan's list and use some widespread advertising
H.M.Jr:
Well
Bell:
In the first issues, it will probably be for a
Haas:
short term, low rate.
Be money market issues.
Bell:
Won't make much difference on short term.
Hanes:
I don't think it will make much difference in the
pricing, but it will make some difference in
keeping the thing straight in the market. Be an
1
awful nuisance, headache.
White:
I think it's undesirable, but I don't think it's
important, particularly if we can get something
for it, which I think we ought to try to do.
H.M.Jr:
What is it?
White:
I think we ought to - I was going to raise that
issue, of swapping that for something worse that
they have.
H.M.Jr:
Let's wait.
Herbert, any other good ideas?
Gaston:
No. I suppose on this question that Harry brought
up the other day, of injury on wood pulp - we may
have to do something on that matter.
H.M.Jr:
Well, if it's injurious to Finland, wait until
Gaston:
Well, it's coming along.
after I've been there.
6
-5White:
No, it isn't yet.
Gaston:
The point is
H.M.Jr:
It would be just like the Treasury - just as I
Bell:
stepped off the boat - saw off wood pulp.
Just as you sit down at the table.
H.M.Jr:
What pals, what pals.
White:
Let me say something on that that will assure you.
The evidence so far indicates there is a dumping
Gaston:
White:
from British Columbia and Germany.
That's right. Now, the question - we first have
to find a dumping price from the Scandinavian
countries before this injury will apply. We have
not yet found any dumping price.
H.M.Jr:
White:
Isn't that what I'm going there for?
You can make that one of your investigations, but
you'll have a hurdle over here. Johnson has quite
a strong cultural tie with the Scandinavian countries.
He has to find the dumping price.
Gaston:
That Scotchman?
White:
Huh?
Gaston:
That Scotchman? No, but the mere leaking out of
the information about extra bonds on the other
Gibbons:
White:
countries is going to hurt the Finnish.
It will take another year to find out whether there
is dumping in any of these countries.
They doubtless will raise the question with you somebody in the Scandinavian countries, because
pulp exports are important. You can assure them.
H.M.Jr:
I'll do just as I did when I arrived in Paris.
I was traveling with a tennis racket and no
experts. That's what I told them.
7
-6White:
And batted the ball around.
H.M.Jr:
So that's what I told them in Paris, that I left
White:
Except that they know that the Treasury - this
is dumped right in the Treasury's lap, so
We are getting a number of letters now applauding
the abrogation of the treaty with Japan, but
Gaston:
all the experts home.
demanding to know why we don't stop buying gold
and silver from Japan.
H.M.Jr:
White:
Well, I gave a - you know the answer; I gave it to
you, gave it to the boys for background in the
press. We stand ready to buy all gold at thirtyfive dollars an ounce until further notice. And
barring, I told them, a war - world war with a
country or going to war with a country, we will
continue to buy gold. That's a monetary matter,
not a foreign policy matter. I think it's important to keep dinning that in, too, that we
don't mix our gold and our politics.
Particularly since it wouldn't do them any harm
if you stopped buying it. They'd just sell the
gold elsewhere.
Gaston:
Yes, yes. But it's interesting that that comes
up.
H.M.Jr:
Gene?
Duffield:
One time
H.M.Jr:
You got anything else, Herbert?
Gaston:
No, I haven't.
One time you said you'd like to see things on this
Greenlee - stories on this Greenlee fight. Do you
Duffield:
want to see them?
H.M.Jr:
No, from now on, my - Mr. Hanes would like to see
them.
Duffield:
Did you see the Kiplinger tax letter on 102?
8
-7H.M.Jr:
No.
Duffield:
It's pretty good.
Good? They liked it?
I mean they don't take any swings at us for per-
H.M.Jr:
Duffield:
H.M.Jr:
Duffield:
Hanes:
H.M.Jr:
secuting business.
Good. I was amused at Nelson in the New York Times -
God, if that fellow ever writes anything nice about
what we do in the Treasury, I'd just pass out.
Right on the front page they start off
Did Nelson criticize 102?
This ruling, yes. This was wrong - about three
different things wrong with it. I almost sat
down and wrote him a letter - "My dear Mr. Nelson:
As a Government employee, what do you think I'm
hired to do, look after - collect revenue, or not,
and carry out the law?" But I didn't. He's
treasurer of the New York Times, I think, or auditor.
(After glancing at Kiplinger letter) Who talked
to Kiplinger?
Duffield:
Mr. Gaston and I.
Gaston:
What do you want to tell on me for?
Duffield:
H.M.Jr:
So sorry - just I.
Well, if I read this, I would understand what it's
all about, so I'd better not read it.
Duffield:
At some time somebody mentioned that you might want
to make public your letter to Matthew Woll. I don't
see any reason to unless you want to.
H.M.Jr:
No.
Did you (Graves) talk to Kiplinger?
Graves:
No.
9
-8Duffield:
That's all I have.
H.M.Jr:
George?
Haas:
I have nothing this morning, Mr. Secretary.
Ballantine, State Department, in charge of Far East,
was in to speak of that problem with respect to
marking, and we are reconsidering it. The only
thing of interest he said was that they didn't want
to do anything at this stage of the game which might
White:
annoy the Japanese, because they might retaliate.
H.M.Jr:
That's that. We're not going to do anything until
you come back on that - just on that
Harry, I've told - sent word to George - his business
review of the week - I want him to have it ready
Saturday noon and have it go on the Clipper for me.
Just the business review - have it in there. You
want to put a page on movement of capital or some-
thing like that - you see?
White:
Yes.
H.M.Jr:
Not the one that I usually get, but
White:
A summary.
H.M.Jr:
But anything that's outstanding in the foreign
field - one page. What?
White:
O. K.
H.M.Jr:
Or two pages. George takes about six.
White:
O. K.
H.M.Jr:
Incidentally, that report this week I thought was
very interesting.
Haas:
Thank you.
(Foley comes in)
Foley:
I was talking to Steagall. I'm sorry.
-9H.M.Jr:
Foley:
10
I know. I checked up on you. We're all sitting
here a-quiver, waiting for you to tell us what's
what on your bill.
Steagall called up - I mean Sabath called up last
night and said he wanted the people that came down
to the Rules Committee room with you to come down
at half past ten this morning, because he has to
defend the rule on the floor and he has to get some
material. So that, I suppose, will be Dan and Doc
(White) and myself.
Steagall asked a lot of questions. We're going to
get him some material. He's going to bring it up
today. He can't pass it today. He says it will
have to go over until tomorrow, because there will
be six hours and he won't be able to get through
today.
H.M.Jr:
Oh.
Foley:
He says it isn't going to be easy, but he thinks
that that provision in regard to refinancing farm
mortgages, that Dan is opposed to, is going to
pull the bill through.
Dan isn't opposed to it any more.
If it wasn't in there, he says, he couldn't get
the bill through.
White:
Foley:
H.M.Jr:
I really think the way this bill is handled - I
really get a great kick out of this bill. Here
we go along and we decide all these things and
what we decide usually happens, and we don't say,
"Please" to anybody, or how, and nobody says to
us "Thank you" or "Good boy." " We just go ahead.
It's one of the most important bills. I mean
it's really very amusing.
Go ahead.
Feley:
The vote in the Rules Committee was 6 to 4, and
Cox of Georgia and Smith of Virginia voted - I
think they voted with the Democrats in the
Rules Committee, but they reserved the right to
oppose the rule on the floor when it came up for
debate. Steagall told me that Cox rode down
11
- 10 -
H.M.Jr:
with him this morning and Cox is not going to
oppose the rule on the floor.
You know, Cox after that meeting the other day
came up to me and shook hands with me, and he
said, "You most likely are not going to believe
what I am going to say, but,' If he says, "I'm
still for you.
White:
H.M.Jr:
If
Maybe he's got another member of his family that
wants a job.
Well, Mac will be glad to take care of him at the
White House.
All right, boys. Now, what are you going to do
with this taxing RFC bonds?
Foley:
Well, I don't know whether that can be taken out
in conference or not. The interest formula is
different in the two bills. In the House bill
there is a flat one half of one percent that has
to be added to the cost of the money to the Govern-
ment.
Foley:
"Not less than," isn't it?
It's "not less than."
White:
"Not less than half." You might add more.
Foley:
I mean you have to add at least a half.
You have to add at least a half.
White:
White:
White:
That's right. That's going to under some circumstances make the interest rate on the House bill
higher than the interest rate on the Senate bill.
I think that's much more important than the other,
H.M.Jr:
What?
White:
Than the tax provision.
Foley:
I think if we can get that thing out, we might
leave the tax provision in.
Foley:
Mr. Secretary.
12
- 11 White:
Swap one for the other.
H.M.Jr:
Now listen, gents, I think that to have these
things a special classification of bonds, specially
taxed - I think it's a mistake. Don't you, Johnny?
Hanes:
Yes.
H.M.Jr:
I'd vote for both, but - I didn't have a chance to
tell you (Foley) - that's what I'm raising - that
Barkley feels sore because the President made the
statement about the
Foley:
At his press conference.
H.M.Jr:
Yes. Now, why don't I call up the President and
ask him whether he'd say something to Steagall
that there are two things that he - now what about well, the things we want are these RFC securities
tax-free
Foley:
Right.
H.M.Jr:
What?
Foley:
Yes.
Haas:
Same as they are now.
Foley:
Same as they are now, tax-free.
H.M.Jr:
Same as now, yes. What else?
Foley:
And the other thing,
White:
Changing interest rates.
that the Senate interest formula be substituted
for the House interest formula in conference.
Foley:
....
H.M.Jr:
Senate
Foley:
interest formula be substituted for the House.
Senate interest formula.
H.M.Jr:
13
- 12 Duffield:
Well, if you're going to give in - I mean when
you go to conference it's a trade between the
House and the Senate, and you want one Senate
provision and you don't want the other Senate
provision. I don't see why the trade should
be trading the tax-exempt for the lower interest
rate.
White:
Unless there is some other comparable thing.
H.M.Jr:
Yes, but let's ask for both.
The second, I think, is particularly important,
because there was another change made - did it
catch your notice - of the forty-year PWA -
White:
needs Jones's O.K. on whether it can be repaid.
Now that means that he has a much larger measure
of control than was anticipated to begin with.
H.M.Jr:
Now, just wait a minute. As to the - don't - let's
talk about not what goes to conference, but as to
what happens in the House while they're arguing
about the bill. What can they do in the House?
Not in conference, but what can they do in the
House?
Foley:
H.M.Jr:
I don't think they can do anything. I wouldn't
bother them. Let him get his bill out, because
he's all up in the air and you can't talk to him
about it. The only thing to do is let him get
his bill out, let him fix it up in conference.
All right, you're the doctor. Don't you (Hanes)
agree?
Foley:
The House isn't the same as the Senate. You can't
amend the bill on the House floor the way you can
on the Senate floor. If you open it up to
amendments, then they just walk all over you. You've
H.M.Jr:
White:
got to hold your lines in the House.
All right. Then you boys will have to do the work
to get the President to help in conference.
Well then, you'll have to decide ahead of time just
what the compromise will be, because there will
have to be a compromise.
14
- 13 H.M.Jr:
White:
I can't decide ahead of time. It changes every
minute. How do you know what amendments will be
made on the floor?
I mean before the conference takes place, you may
have to decide as to what you will give up for
these things.
H.M.Jr:
I'm not - I can't - I'm not going to tie anybody's
hands after I leave. I mean it isn't practical.
White:
You may have to make a decision as to which of the
H.M.Jr:
White:
H.M.Jr:
two you think is more important to retain.
If you heard Danny Bell trying to get something
over to me about the TVA - all he was trying to
do was to tell their story; then when he got all
through he said, "Now, I've told you their story,
but you don't have to do anything."
They have this provision in there about the use
of the Export-Import funds for promoting - only
for the purpose of promoting trade. Chuck called
me up. They wanted to introduce another amendment.
We decided on that one as being the least undesirable, and that's the way it's gone in. They can
use the funds now only for the promotion of trade.
You know, you fellows are here and I'm not going
to lay down the law on a thing that shifts every
five minutes. I'm just going to - it isn't
practical. That's all.
White:
Well, would you care to express an opinion as to,
if it should come to a matter as between the two those two provisions, which you would rather retain?
H.M.Jr:
No. Who thought that we'd open - we'd make Tia Juana
24 hours away from Los Angeles in order to get a
self-liquidating program through? You can think
of the most peculiar things these days. Was Ford
appreciative?
Foley:
He was enthusiastic. I understand, according to
Steagall, he was so enthusiastic that he isn't
going to put him up this morning to let him
defend the rule; he's going to put Williams up,
because he says Williams wasn't so enthusiastic
15
- 14 -
for the bill in the House, so they'11 listen to
him better. So I think we've got Ford oversold.
Gaston:
Should have held it in San Isadro; took in too
much territory.
McR:
You don't mean we did more than we ought to?
White:
I think Williams is Ed's pet achievement - getting
him for it.
H.M.Jr:
Did Steagall know the price we paid?
Foley:
No, I didn't tell him.
Boy, if that ever got out, it would be a terrible
Gibbons:
thing.
H.M.Jr:
Hanes:
White:
Would it? I just think they'd say, "Well, Morgenthau at last has gotten practical."
Gotten to be a politician.
As a matter of practical politics, Mr. Secretary,
if the bill fails, are the promises held to - if
the bill fails - or are all bets off? I was just
curious. I was wondering how you operate.
Gibbons:
If the bill fails, you're stuck with your 24 hours.
Haas:
Twenty-four hour basis.
McR:
One way out of it.
We collected 53 thousand dollars at Tiajuana and it
cost us 37 thousand dollars to do it, and we collected
53 thousand dollars from three million six hundred
Gibbons:
thousand people coming in.
McR:
Gibbons:
H.M.Jr:
One way to get out of it, you know, Steve; that is
while this thing is in ninety-day
I mean putting 24 hours on it.
I mean why should they go - leaving this thing out
entirely, the President of the United States,
16
- 15 when Mr. Hull passed on it - why should we permit
people to go across and buy at a duty-free port
Japanese, German goods, Mexican, and have them pay
duty into the country and don't pay any to us, and
come into competition with our own people? They
can't bring it in through the port of Los Angeles,
but they can through the port of Tia Juana. I mean
on that argument you can say the Customs service
collects so much and the whole business - why not
Gibbons:
let everything come in free?
If a person goes over and buys - they'11 have to
stay 24 hours. It becomes from a practical standpoint
H.M.Jr:
Well, you can figure the whole duty. Why not let
the people go down to Panama? And we stopped this
liquor racket from Bermuda, people going down there
and bringing it in. I mean if the theory of having
duties to protect our home industries is true, why
shouldn't we protect the department stores in
Los Angeles?
Gibbons:
H.M.Jr:
of course, the tourists - hotel business in Southern
California would be hurt by it. It balances
Well, both the President and Mr. Hull gave it very
careful consideration on its merits, not in connection with this. They both felt - the President
was shocked to learn that you could go down to
Tia Juana and buy all these Japanese and German and
Mexican goods.
White:
If they were going to be determined by their inability
to bring that back, they're hardly tourists, they're
something else.
H.M.Jr:
If you're going to go across and stay 24 hours and
bring it across, we'll collect the duty.
Gibbons:
There's a hundred dollar exemption even if he stays
Hanes:
As it is now, a fellow could go across four or five
24 hours.
times a day.
Foley:
Back and forth.
17
- 16 Gibbons:
H.M.Jr:
No way you can identify him except to remember
him.
Well, purely on its merits, I'm willing to defend
it publicly - on its merits. And the President is.
So is Mr. Hull. He didn't object. So I'm not
going to worry. That's the least thing that I have
to apologize for.
Ed? You're all right.
Harry?
White:
Want to raise that matter again of the dumping duty?
Foley:
What?
White:
Aren't you going to
Gibbons:
We saw the picture.
H.M.Jr:
Yes?
Gibbons:
Terrible.
H.M.Jr:
O. K., I'm not going to worry about it.
Graves:
(Nods nothing).
Bell:
There's the Chairman of the Indiana Bankers Associa-
tion writing about Postal Savings rates. He wrote
to Congressman Ludlow, he wrote to all the other
Congressmen and Senators, I guess, from Indiana.
And I thought I'd check up on what kind of a reply
Postal Savings System has made. They made a very
good reply. So I had Mr. Kane down there send
me in the form of a memorandum answers to the ques-
tions he raised in the Ludlow letter. So I'm just
enclosing a copy of that saying that he has met
all the points and adding that, after all, the rates
are fixed by the Banking Act of 1935.
(H.M.Jr. signs letter)
Bell:
H.M.Jr:
I finally talked to Governor Harrison about your
gold coins. Did he call you yesterday?
Got a call in now.
18
- 17 Bell:
Well, he just wants to say goodbye, wish you a
pleasant trip. He says that he has those two
sets, that he did talk to you about it and you
had a gentlemen's agreement that he would pick
out two sets and that one would be kept at the
Bank and the other would be brought down here
in some way.
H.M.Jr:
Library of Congress.
Bell:
He didn't know
H.M.Jr:
Library of Congress.
He said he didn't know whether legislation would
be necessary, but he thought maybe the General
Counsel ought to try to find some way to keep
those collections, and that when you get back
and he is down here at some meeting, why, he '11
Bell:
H.M.Jr:
Bell:
talk to you about it.
He sure does hang on to that collection, though.
He says he's perfectly willing to put them - he'd
like to keep one collection for the Bank.
Gaston:
Are we going to waive the penalty?
Bell:
That'
H.M.Jr:
There's a law on collector's coins.
Bell:
Well, you'd have to determine if the Federal Reserve
H.M.Jr:
Well, I think that - I think it ought to be worked
out. They're entitled to keep one complete set of
Bank is a collector.
gold coins.
Bell:
And he doesn't think that you want to ask legislation
H.M.Jr:
Well, take it up with our General Counsel.
McR:
You '11 find that Herman had some study made of
for the Federal Reserve Bank to keep them.
that and came to the conclusion that he didn't
need legislation - about two or three years ago.
19
- 18 H.M.Jr:
Anything else, Dan?
Bell:
That's all I have.
H.M.Jr:
Mac?
McR:
I told Miss Lonigan to stand by for a talk with
Harry.
H.M.Jr:
(Words not understood).
McR:
(Words not understood).
H.M.Jr:
Anything else?
McR:
No.
H.M.Jr:
Mac, if any of the Bureau chiefs in the Treasury
McR:
want to say goodbye to me - 3:00 o'clock.
3:00 o'clock.
H.M.Jr:
Or anybody else. You're all expected at one.
Well, this will be the last serious
Foley:
H.M.Jr:
Foley:
H.M.Jr:
White:
Mr. Hanes
will be in charge while I'm gone, and I'm not
going to worry and I'm sure everything will go
along fine.
There is one thing, Mr. Secretary; I don't know
whether you want to take it up or do anything
about it now; and that's the amendment of the
law to take care of goods that do not originate
in the country that makes the subsidy.
Well, the President wants that.
And which are imported into the United States.
(To Hanes) This is - we put a countervailing duty
on Italian silk, then they ship that Italian silk
in the raw state to England and they manufacture
it and dump it.
Ed, you better straighten that out. That's what
the President wanted, and we're giving him something else; what the President wanted was not sound.
- 19 Foley:
Harry's Committee passed on the two proposals.
H.M.Jr:
I can't absorb this.
White:
It can go until the fall. There's nothing
H.M.Jr:
I'm not going to absorb anything new.
White:
The only reason we suggested it to you - wanted
to make sure you knew the President had asked you,
H.M.Jr:
and it's on your desk. So you can drop it
No, it ain't on my desk. You're wrong.
20
21
RE MALARIA IN CHINA
Present:
August 1, 1939.
10:15 a.m.
Mr. Hanes
Dr. Parran
Dr. Louis Williams
Dr. Charles Williams
Mr. Maxwell M. Hamilton
Dr. Hu Shih, the Chinese Ambassador
Mr. K. P. Chen
H.M.Jr:
I'm going away this afternoon. Do you know anything
about what I'm trying to do, Mr. Hamilton?
Hamilton:
Mr. Chen told me briefly just in a word what it was.
H.M.Jr:
Well, from Mr. Chen and Mr. Buck I learned about
this malignant malaria on the Chinese border, and
I put them in touch with Dr. Parran, who sent me this
very excellent report to the house last night, of
which I'll have a copy made to give to Mr. Hamilton.
And before leaving, 1 did want to make an effort to
tie this up and see whether I couldn't leave it in
such shape that if the Chinese Government wanted to
avail themselves of this opportunity, it would be available.
I think if Dr. Parran would take a minute, just
sketch what you think could be done, why,
Parran:
I shall be very glad to, Mr. Secretary. Dr.
Williams, who is our malaria expert, has been quite
familiar, through conversations with many people
who have been in Burma, with the general malaria
situation there. Dr. Williams served on the League
of Nations Committee on Malaria, and so on. And
immediately upon being informed about the epidemics
of malignant malaria which exist on the Burma-Chinese
border, he undertook to gather together the best
available information.
It does not appear to be an insuperable problem.
It is a problem that is susceptible to control if
funds and expert assistance are available. It is
a seasonal problem. Dr. Williams has pointed out
that at the present time, when the monsoons are on,
it is difficult to do anything more than emergency
quinine prophylaxis, but that immediately after the
monsoon season it should be possible to make intensive studies of malarial breeding immediately along
the highway. The mosquito which transmits this
22
-2-
malaria has a flight range of only about a half
mile, certainly not more than one mile, so that
one could restrict controlled areas.
It should be possible to locate the camps - because
it is a night-biting mosquito, I take it -
Louis W'ms: Night-biting mosquito.
Parran:
... on high grounds, and particularly to protect
the areas around the camps by screening or actual
control measures, or both.
H.M.Jr:
Those would be the work camps.
Parran:
Yes, the work camps, and barracks in which presumably the workers are housed.
The information we have through Dr. Chen and Dr.
Buck is that when a few deaths occur, the laborers
leave, go back to their hills.
Since I talked with the Secretary on Thursday, I've
been in touch with Dr. Wilbur Sawyer, who is a
director of the International Health Division of
the Rockefeller Foundation. Dr. Sawyer's representative in China is one Dr. R. A. Balfour, who is one
of the leading malariologists of the world; for
seven or eight years was in charge of malaria control
work in Greece or elsewhere in the Eastern Mediterranean. His headquarters are in Shanghai.
Just last week Dr. Sawyer received a report from
Dr. Balfour. Balfour had been to southwest China
and had conferred with the governmental officials in
the "New China," as he expressed it, and has recommended to the Aockefeller Foundation that it enter
into a cooperative arrangement with the Chinese
Government next year for studies of malaria and
control methods. Dr. Sawyer felt that if this
were an urgent situation in which our Government
were interested, it would be possible for them to
expedite their assistance, to have Dr. Balfour return
either alone or with any commission that we might
wish to send out.
The question as to the costs of control and that
sort of thing, of course, is a matter which can be
taken up only after a preliminary survey is made.
-3-
23
So, briefly, Mr. Secretary, I'd say that if it
is the wish of the Administration that Public
Health Service give some assistance in connection
with this matter, I would suggest that two of our
experts, possibly Dr. Williams and either an
entomologist or an engineer, preferably an entomologist, who is familiar with the intimate breeding
habits of the mosquito, go to this area; that we
seek to have Dr. Balfour join them, make a preliminary
survey and recommendations.
H.M.Jr:
Parran:
H.M.Jr:
Well, in reading this thing very carefully - would
you give Mr. Hamilton a copy of this?
I shall be very glad to.
In reading this thing - if I might make a suggestion,
Mr. Ambassador - I see that Mr. Buck suggested doing
something with the League of Nations. Well, inasmuch
as you - I take it the Public Health Service and the
Rockefeller are available, I wouldn't wait for the
League of Nations.
Now, another thing. I also gathered in reading this
I don't see why the Ambassador couldn't
report
have a copy of this. Could he?
Parran:
Perfectly all right.
H.M.Jr:
The reason I called this meeting - it seems in order
to meet this thing this survey ought to be made really
between now and the first of January. Right?
Yes, and the earlier the better.
The earlier the better.
Parran:
"illiams:
H.M.Jr:
That's why I took the liberty of calling this meeting,
because if you're going to do something, it really
ought to be done immediately.
Hu Shih:
Mr. Secretary, last week-end I sent - when Mr. Chen
told me of your very kind efforts, I immediately
sent a telegram to the Chinese Minister of Health,
Dr. F. C. Yen, who is a very well trained scientific
man. I asked him for information concerning three
things. First, the time element in that particular
24
-4-
disease in that region. Second, what the Chinese
doctors under his administration have been doing
in this matter. And thirdly, what his experts think
would be the best kind of aid desirable from this
end.
So far we didn't get a report, because probably Dr.
Yen, being a scientific man - probably was gathering
reports from his experts.
I know there are Chinese doctors working on this
road, because there is an American friend, Mr. Nepper,
who is employed by the Chinese customs service Nepper - and he told me that he saw the Chinese doc-
tors working on this road for two things. One is on
this malignant malaria; second is on this goiter. In
this region the people suffer from the lack of iodine,
and sixty percent of the people suffer a kind of a
goiter. end they'r working on it - tried to put
iodine in the salt which the people consume.
But so far I didn't get the reply. I hope to get it
in a day or so, and as soon as I get it I'll submit
it to the health authorities and also to the State
Department.
H.M.Jr:
You see, my interest in this, Mr. Hamilton, is purely
commercial (with mock seriousness). You see, all
we're trying to do is protect our loan from the
Export-Import Bank, so that tung oil will come out.
You see? It's purely a commercial interest, you see.
I'm very much worried about this loan, and this is
the road, and if we don't help the Chinese fight the
malaria, why, the tung oil won't come out and we may
suffer loss. It's purely commercial interest. And
if you could take the broader viewpoint, you see,
and help the Treasury out, why - because I suppose
they'11 have to get some kind of a clearance. Won't
Public Health have to get a clearance to let these
doctors go?
Hamilton:
I think so. I think I'd want to speak to Mr. Welles
about it and to the European Division. There has
been - we are tied in some way or other with the
League of Nations health activities in China, aren't
we, Dr. Parran?
Parran:
We have membership on the Health Committee of the
League, and Dr. Cumming has been able to represent us
-5-
25
on it. The Health Section recently had the
resignation of Dr. Rotman; the Director has
resigned, and I fear it would be difficult to get
promptly any cooperative arrangements.
The League is maintaining at Singapore an epidemic
intelligence service. Any of our people who went
over there would certainly wish to get in touch with
them to ascertain whatever information they have.
damilton:
Have they any representatives in China now?
Hu Shin:
Yes, they have two units. One is essentially French,
the other is international. They have two units
working in China.
damilton:
Under League auspices.
au Shih:
Under League auspices.
Parran:
From a legal point of view, Mr. Secretary, all of
our consuls have the responsibility to report
promptly to us the prevalence of communicable
diseases in that area. If in this instance the
consuls need medical help in ascertaining the
prevalence of epidemic disease, the legal status
of such an officer would be fully clarified. And
in addition, of course, we have responsibility for
quarantine service and - not necessarily malaria,
but certainly plague and cholera, which are more
constant threats from the Orient; and a first-hand
study of the amount of those diseases would begvery
appropriate purpose for
H.M.Jr:
well, that plus our financial interests ought to be
overwhelming.
Parran:
I should say, however, that we'11 need - I don't
know just the mechanism, ar. Hamilton - but
probably executive approval, or certainly a request
from the Secretary of State for such action. I
hardly know how the initiative should come, but in
any event I should think we would need the Secretary's
approval.
H.M.Jr:
I'm sure Mr. Hamilton knows. And I should think we'd
need a formal request from the Chinese Government to
do something.
-6-
Hamilton:
Yes, I certainly think that would come from the
Hu Shih:
That's why I'm ascertaining from the head of the
26
Chinese Government.
Chinese Health Department the facts about this
malaria.
H.M.Jr:
This is the confidential report from Dr. Parran
(handing report to Dr. Hu Shih).
You (Parran) give me another one for my files.
Farran:
This one do?
H.M.Jr:
Give me that one.
Hamilton:
This is a chronic situation. AS I understand it,
this malaria has existed there for years.
For centuries. It is one of those historical
Hu Shin:
diseases in Chinese literature which made that
region famous.
H.M.Jr:
Parran:
well, would these same malaria people be able to
take a look at the goiter situation?
les, sir. That's relatively simple, Mr. Secretary.
It's a matter of iodine in salt.
Hamilton:
This contemplates an expert survey, not the financing
H.M.Jr:
The Chinese Government - it would cost them $25,000
of the work to be done, as I understand it.
to have a three-months survey made. Is that right?
$25,000 for the three-months survey?
Parran:
Yes. It would - it probably will be less, because
with the aid of the Rockefeller people now on the
ground we could reduce the cost.
H.M.Jr:
That's the outside. I'd rather tell them twenty-five
and charge them less than tell them less and find it
would be fifty.
Hamilton:
Your (Parran) thought would be to work in cooperation
with the Rockefeller people?
H.M.Jr:
Mr. Hamilton is asking about cooperation with the
Pockefeller
27
-7-
Hamilton:
Your thought would be to work in cooperation with
the Rockefeller people?
Parran:
It would be, yes, sir.
I know the Rockefeller people fairly well. they
Hu Shih:
have the P.U.M.C., one of the largest endowed
institutions in China, and they have a very compe-
tent staff. I was thinking of asking their partici-
pation when I thought of this idea. And Dr. F. C.
Yen's hospital has received ample aid from the
Rockefeller Foundation from time to time. This will
be - I'm sure they'11 be quite willing to supply at
least Dr. Balfour if we get Dr. Sawyer's cooperation.
H.M.Jr:
Well, Mr. Ambassador, thanks to Dr. Parran, we're
Hu Shih:
"onderful.
M.Jr:
Hamilton:
giving you this survey on a silver platter.
All ready to serve, see?
What is the advantage, Dr. Parran, of doing this as
a cooperative matter as, say, contrasted with the
Rockefeller people doing it themselves? Are they
prepared to do it, do you know?
Parran:
I don't think they are prepared to do it. Normally
the request for aid which Dr. Balfour recently has
forwarded would not receive action until about the
first of next year. Considering the time element
plus the number of people available, I doubt if they
would find it possible to take experts from elsewhere
to send into this situation.
H.M.Jr:
Time is the important factor here.
Hamilton:
Yes.
H.M.Jr:
Because if our tung oil can't come out through
Indo-China, the only way it can come out would be
through Burma. I'm serious. And, reading this
report last night, what got me excited - I'm leaving
I realized that if they're going to do it, they'v
got to do it immediately; the survey ought to be done
in October, November, December, if they're going to
find out how to handle it before the next rainy sea-
son. I realize it has to be done during the dry
-
28
-8-
Hu Shih:
season. So the time factor is really something.
Thank you very much, Mr. Secretary. We are, I
feel - I'm sure Mr. Chen joins me in our feeling
of gratitude for your interest.
H.M.Jr:
No, it's part
Hu Shih:
I have told Dr. Yen about this very great sympathy
and interest on your part, and I am really asking
exactly what we are prepared to make a formal
request for, because we must know what kind of
assistance is desired by our experts at the other
end to give us a basis for making a formal request.
And I'm sure, in your absence, Mr. Hamilton and I
will - we'll try to, with the help of the doctors I'm sure
H.M.Jr:
well, we're going to step out, because, as I say and I'm sure Mr. Hamilton will do everything possible
to help. But, time being so short - Mr. Hanes is
available, but it really is a State Department stamp of approval (demonstrating with gesture).
Hamilton:
All right, we'11 be glad to look into it.
A.M.Jr:
What? You heard about our mission going out there
on - these truck experts?
Hamilton:
Oh yes.
H.M.Jr:
Fine.
du Shin:
H.M.Jr:
And shall I - may I read this, or shall I
Keep it. Keep it.
Hu Shih:
I'll have a duplicate made and send it back to you.
H.M.Jr:
Dr. Parran gave me a duplicate.
du Shih:
H.M.Jr:
You keep this original copy, and may I keep that?
No, no, you keep that.
Hu Shih:
Thank you very much. I wish you a very pleasant trip.
29
July 29, 1939
Confidential
The Secretary of the Treasury
Reference is made to our telephone conversation on July
26th, concerning the epidemic of malignant malaria near the Burna China border.
Attached is a memorandum from two of my experts, which is
self-explanatory.
I have not yet been able to communicate with Doctor Sawyer
of the Rockefeller Foundation, but expect to reach him later today.
If the President desires, we have some competent personnel
to assist in dealing with this situation. May I talk with you Monday
and get further sailing orders?
(sed Thouge Perren
Surgeon General
TP:eh
Att.
P.S. Since writing the above. I have talked with Doctor Sawyer who
has just received a report from Doctor R. A. Balfour, in charge of
Rockefeller health work in China. Doctor Balfour recently visited
southwest China by airplane and has recommended that the Rockefeller
Foundation undertake a study of malaria in that area. Doctor Sawyer
is willing to start such a study promptly, especially on the Burma
road, or would join with us in a project such as outlined in attached
memorandum.
30
July 28, 1939
Assistant Surgeon General C. L. Williams
The Surgeon General
Subject: Epidemic diseases in West China
As requested, a conference was held between Dr. L. L. Williams, Jr.,
Dr. C. L. Williams, Dr. J. L. Buck, and Dr. K. P. Chen.
Dr. Buck and Dr. Chen informed us that in the area through which
passes about 150 miles of the new automobile road from Rangoon into
China, there is an endemic disease which may cause death within a few
days. It has been diagnosed by the local Chinese medical service as
malignant malaria. Apparently the disease has not become epidemie because as soon as one or two deaths occur in a community, the entire community migrates to the hills. The same thing happens in the labor camps
along the new road and in consequence this roadway passage has not been
placed in good condition. Dr. Buck visited this road within the past
month and said that from personal observation he could testify that
there was a mere handful of road workers throughout the 150 miles adjacent to the border.
We were also informed that similar conditions appear to be present
in a considerable portion of Burma through which this road also passes.
A new railroad is under construction through this territory and
work on it is likewise very greatly hampered on account of desertion of
laborers when one or two deaths occur. The natives apparently regard
the disease as indigenous to the country and due to mists arising from
the ground.
Dr. Buck was reasonably certain that the disease was malignant
malaria and said there was little likelihood of obtaining from local
sources any very accurate description of it. We are inclined to be-
lieve that he is correct in the belief that it 18 malaria.
Conditions
The Burma-Vunan border near Mungting is about 200 miles northeast
of Mandalay, The elevation of the river valley is about 1800 feet a-
bove sea level and the plateuus about 3000 feet. These elevations and
the climate are approximately those of the Assam Tea Garden section
(with which Dr. L. L. Williams, Jr. is familiar) with a comparable
malaria problem.
31
.2Reports from Dr. Rice and Dr. Mayne confirm the assumption that
the section in question is a bad "minimus" territory. Anopheles
minimus is the principal vector of malaria and there is a possibility
that Anopheles maculatus is also present. The two mosquitoes have
similar breeding and flight habits and may be considered together.
They breed through the colder months of December, January, and February,
supplying a large and long-lived, winged population for the warmer
months of March to July. Breeding is reduced with the onset of the
monsoon, due to flushing of streams and ditches, but the already present
adult forms persist through warm weather. During the spring and early
summer 0001 weather slows development of malarial forms in the mosquito
and reduces transmission of malaria, which, however, increases sharply
with the commencement of the monsoon early in July, reaching a peak in
August and September and falling off at the termination of the monsoon
about October 1st. Transmission of malaria ceases by the first of December.
The situation is peouliar. In the winter and spring many mosquitoes
are bred but cool weather slows development of malaria forms in them,
hence, little malaria transmission. The monsoon starts bringing warm
weather but so much rain that breeding places are washed out, hence,
production of mosquitoes is reduced. The long-lived adult forms already
on the wing, however, persist and at the higher temperatures now pre-
vailing malarial parasites rapidly develop in them, the result being
a shary increase in malaria transmission despite a decrease of breeding of amosquitoes.
There is a high endemic index of malaria in this area, much of the
disease of the malignant tertian type (Aestivo-autumnal).
A well-planned attack on malaria would contemplate anti-lerval
measures commencing about January 1st and continuing at top speed until
the commencement of the monsoon about the middle of June. At that time
anto-larval measures would be reduced to cover only local drains and
seepages which trickle in the monsoon and are not subject to flushing
effect of the heavy raine.
Fortunately, the usual infective flight range of both minimus and
nagulatus is confined to approximately 1/2 mile from their usual breeding places. Advantage may be taken of this as an emergency malaria con-
trol campaign for a construction project. As a matter of fact this
forms the basis of the principal malaria control measures during the
monsoon if nalaria control must start at that time (and the monsoon is
on at present). The infected camps have a heavy density of mosquitoes
and must be moved to points at least 1/2 mile away from areas where
heavy breeding has occurred. Local monsoon breeding places must be
oiled or dusted. Quinine in prophylactic doses should be given to all
workmen to control to a reasonable extent the acute illness and death
32
-3rates. Such measures if immediately applied are likely to cause a
marked reduction in the malaria rate, but good control is not likely
before the next season, when inauguration (beginning January 1) of
effective anti-breeding measures will prevent production of a new lot
of adult mosquitoes.
It is possible that construction of the road and railroad over a
150-mile stretch may need 200 camps. All camps should be located or
relocated after a careful mosquito survey.
Recommendations
From our conference, it appears reasonably certain that no very
definite picture of the actual conditions can be secured at this distance. It is recommended, therefore, that as a first stop, officers
be sent to the locality involved for the purpose of making a survey of
conditions as they exist and to outline and place in operation an organization for their control. It is suggested that the delegation consist of Drs. L. L. Williams, Jr., Bruce Mayne, J. A. Crabtree, J. R.
Murdock, and H. J. Bush. It is our opinion that the survey is a job
for expert malariologists and that while an administrative officer could
organize and conduct a control campaign, that his presence would add
little to a survey and might hamper it.
It is suggested that the first two named in this list need hardly
remain longer than three months which should be sufficient to complete
the survey. One or more of the remaining three might be retained either
in charge of the control organization or as advisors for an additional
period of approximately six months.
It is recommended that the survey party directing the survey undertake to train local personnel both in survey methods and control methods
with the intent that in time an entirely local organization or a local
organization supervised by one or two Service officers finally take
over all control measures.
Costs
The costs of the survey, which is projected to take about three
months, would include:
(1) Salaries of the officers concerned approximately $9,500.00.
(2) Travel expenses of officers concerned to and from the
locality of the survey approximately $10,600.00.
(3) Field expenses related only to the survey approximately
$5,000,000.
33
...
Probably expenses of a survey could be paid from P.S.E.D. but
would require release of a portion of the reserve in this appropriation.
The cost of a control campaign can hardly be assurately estimated
until the survey has been completed. on the basis of information furnished by Dr. Buck and Dr. Chem, however, a tentative figure of $850,000,
is estimated.
League of Nations
Dr. Buck is of the opinion that the survey might best be handled
under the sponsorship of the Eastern Bureau of the Health Seption of
the League of Nations, which is directed by Dr. C. L. Park and has headquarters at Singapore. It is a matter, however, which probably might
best be determined by the State Department.
Assistant Surgeon General C. L. Williams
Senior Surgeon L. L. Williams, Jr.
CLW:HW
34
August 1, 1939.
11:09 a.m.
H.M.Jr:
Hello.
Operator:
George Harrison.
H.M.Jr:
Thank you.
0
Go ahead.
H.M.Jr:
Hello.
George
Harrison:
Hello, Henry.
H.M.Jr:
How are you?
First rate, thank you. I've been away for about
a month trying to get a rest. I was tired out.
H
H.M.Jr:
Did you get one?
Oh, I had a fine time. I had very good weather
for the first three weeks and the last week
H
was hellish.
H.M.Jr:
Where have you been?
H
I've been off on my boat.
H.M.Jr:
Oh really?
H
Yes.
H.M.Jr:
H
Did you go out pretty far?
New
Well, I plied back and forth to/London and
Fisher's Island and Black Island and did a lot
of fishing at Nantucket, Narraganset Bay - I've
been all around. Just wherever I felt like going
and the wind let me go.
H.M.Jr:
H
Well, that's interesting.
But I got a good rest and lost seven pounds,
worked hard
H.M.Jr:
H
Well.
and I feel fine. I called you up yesterday
just to let you know I was back; so, you can go
now if you want.
-235
H.M.Jr:
H:
H.M.Jr:
H:
Good.
(Laughs)
Well, Marriner tells me he's going too.
When is he leaving? I forgot to ask him the
other day.
H.M.Jr:
He said the fifteenth.
H:
I see. Well, Henry, I just want to tell you
I hope you have a fine vacation and a good rest.
You certainly deserve it.
H.M.Jr:
H:
H.M.Jr:
H:
H.M.Jr:
H:
H.M.Jr:
Well, I know I need it and I've done the best
I could.
You've done a fine job and I - you know, I feel
very happy about the fact that I've counted you
one of my real friends, just as you have done.
Some day I'll really tell you about it.
Well, George, we've put over a number of things
together and we have our hones differences of
opinion but we always end up friends and that's
the way I want it to stand.
Well, I hope so because I'm very proud of our
friendship.
Well
We - I've been sorry not to see you because I
wanted to talk to you since we finally made a
sectional portfolio in the Federal Reserve System.
Oh, yes - yes.
H:
But I think it's going to work out all right.
H.M.Jr:
Well, will you be here for the September financing?
H:
H.M.Jr:
I'll be here right along now.
Well then, Johnny Hanes will get in touch with you
I don't look for any great trouble.
-3H
H.M.Jr:
H
H.M.Jr:
36
I don't think so.
But I've left word
You won't be back until after that?
No, this will be the first one that I've missed.
But I think if things stay the way they are,
I think we ought to try to get out a long bond
this time. We haven't got out one since last
December.
No, I knew you hadn't, and I hope you're able to
H
do that.
H.M.Jr:
Well, that's the word I've left, but I've told
them that
Well, I'm glad to hear that. I felt that after
H
the last one that you might not want to.
H.M.Jr:
No, no. We're very versatile down here, you know.
H
Very what?
H.M.Jr:
Versatile.
H
I know that. (Laughs). Well, if
I'd love to come down there any time.
H.M.Jr:
Well, I've left - he will - I've told him he
H
All right. I'll be around here all the time and
should talk to you.
I'll go down there sometime and talk with him
anyway.
H.M.Jr:
H
H.M.Jr:
H
All right.
I'd like to bring Ralph down again too because
I'd like the fellows down there to know him better.
He's going to do a good job.
That'll be good.
And I talked to Danny yesterday about the gold
coin thing.
-4H.M.Jr:
H
H.M.Jr:
H
H.M.Jr:
H
Gosh, you do hate to give those up.
No, I don't, I want to give them up.
Well, he's going to - they're going to take
another look at it.
But I - what I wanted to do was to be sure that
neither you nor I get into any trouble about it.
That's right.
And I thought we might just go easy on it until
perhaps we had a chance to let the lawyers look
into it a little.
H.M.Jr:
That's what they're going to do.
H
Yes.
H.M.Jr:
All right.
H
Well, have a good time and give my best regards
to Mrs. Morgenthau.
H.M.Jr:
Thank you.
H
Goodbye.
H.M.Jr:
Goodbye.
37
38
August 1, 1939
2:30 pm
Present:
Admiral Waesche
Mr. McReynolds
Lieut. Burke
Lieut. Bowerman
Mr. Hanes
HM,Jr: Well, where are we on the plane?
Admiral W: After talking to Burke and the
rest of our people over there -- I was guided
largely by Burke's judgment on this thing -- Burke
feels, and I agree, that the Lochheed 14 is the
plane for you.
I talked to Admiral Towers' office today
after I talked to Burke. He's away and I talked
to his First Assistant. They said they probably
could get from the Lochheed people, with cyclone
engines, a new plane as Burke recommended, in two
or three months if they could take one out of pro-
duction from some other company that was manufacturing.
HM,Jr: Some other contractor?
Admiral W: Under contract to some other
company. I think the Army have some under con-
tract and Burke said the Canadian Airways have some
under contract. If they could not get one under
contract, he thought 5 or 6 months, but it will
still a guess. He would have to get in touch
with the company, but Burke thinks there should
be no difficulty in getting one of those planes
in 2 or 3 months.
HM,Jr: I am in no sweat about it. After
all, I will only do a little flying in September.
Maybe use a plane two or three times, but if it
39
-2-
could come along in two or three months I think
it would be very nice and, if you want a little
help, Captain Collins, over in Proc rement, I am
sure could help.
Admiral W: Yes, sir. I know Collins very
well. I will make a memorandum over to Navy, Chief
of Aeronautics, that you decide you would like the
Lochheed 14 with a description Burke will give me
and ask them to take steps to advise me how long it
will take to get it and when I get word back, if I
think it is unreasonable, I will get in touch with
Collins.
HM,Jr: This Lochheed 14 takes off on 650 feet?
Lieut. Burke: Yes, sir.
HM,Jr: What does our present plane?
Lieut. Burke: 900 and some.
HM,Jr: That Doughlas 65 that they want me to
take is about three times as big?
Lieut. Burke: That's tremendous.
Lieut. Bowerman: A 20,000 pound plane as compared to 15,000 on the Lochheed.
HM,Jr: What does our present plane weigh?
Lieut. Burke: 10 to 11,000.
HM,Jr: A bigger plane. You don't think a
little Lochheed would do?
Lieut. Bowerman: No, sire.
Lieut. Burke: Much smaller. Cramped pilot's
quarters.
Lieut. Bowerman: As good performance, but it
18 small.
40
-3-
HM,Jr: You don't think it would be big
enough for me?
Lieut. Bowerman: No, sir; I don't.
MM,Jr: The other one is so expensive.
Lieut. Bowerman: You can carry all the
equipment you want in it, Sir. Radio, all your
accessories, de-icers.
Lieut. Burke: Without worrying about how
much it weighs.
Admiral W: The objection to the Lochheed 12
was more on the weight, getting radio equipment in
there readily and without having to squeeze it in
and keep cutting down.
HM,Jr: Have the Navy in any way raised any
question about what I want?
Admiral W: No, sir. They simply -- Admiral
Towers said he got word from the President through
Secretary Edison to get you the plane you wanted and
all we are supposed to do 18 tell them what you want.
HM,Jr: Mac, do you think it's a mistake to
GET ONE AS BIG AS THIS?
Mr. McReynolds: I would hate to see you take
the little one. After all, you are looking for a
margin of safety and if you get an overload you are
taking your safety out.
HM,Jr: Johnnie, I asked them if Martin made
any passenger plane and he said they don't.
Mr. Hanes: He only makes the bomber.
HM,Jr: Our present Lochheed takes off in
940 feet and the Lochheed 14 will take off in 650
feet.
Mr. Hanes: Wonderful! And what will it
cruise at?
41
-4-
Lieut. Bowerman: 233 miles per hour at 10,000
feet, dropping down to 211 at sea level.
HM,Jr: And at 5,000?
Lieut. Bowerman: It will be somewhere in between there.
HM,Jr: That's using how much power?
Lieut. Bowerman: 75% power.
HM,Jr: Fast! Does that mean when you get
going, that you will really be doing 220 or 200?
Lieut. Bowerman: If you use that power you
will get that speed.
Lieut. Burke: At 5,000 miles you are making
220 miles.
Mr. Hanes: With a little tail wind, take you
about 40 minutes to go home.
HM,Jr: All right. I think we will do that.
Now, if you have any question, which I don't
think you will, Mr. Hanes will be here, because you
have a written order from the President.
Admiral W: All right, Sir. I don't antici-
pate any because Admiral Towers says there 18 no
question in their mind.
order?
Mr. Hanes: The Navy have any of these 14's on
Admiral W: Navy have none at all. Only have
one, a year old, which Towers uses.
Mr. Hanes: How much horse power?
Admiral W: Towers' plane? 850, and the cyclone engine which we will put in your plane is
1,000 horsepower.
42
-5-
Lieut. Bowerman: Actually gives you 1100
for take-off.
HM,Jr: Have they improved this Lochheed 14
since Howard Hughes used it?
Lieut. Burke: Yes, sir. They have improved
the take-off characteristics and have improved the
landing characterists, landing speed, by the addition
of slots.
HM,Jr: Does this have wing slots?
Lieut. Burke: Yes, sir.
HM,Jr: Is that what makes it take off so fast?
Lieut. Burke: Enables you to maintain control
over the airplane at very low speed.
HM,Jr: No question in either of your minds
that this model 1s a successful model?
Lieut. Bowerman: Yes, sir; it 1s.
HM,Jr: Johnnie?
one.
Mr. Hanes: I agree I wouldn't take the little
I would take the 14.
Mr. McReynolds: After all, in flying you should
have the safest thing and this is the best you can get.
HM,Jr: Where are you going to have your cutters
this year, around Greenland or Iceland?
Admiral W: We can have one there.
HM,Jr: Any excuse to have one?
Admiral W: Sure! We can have a survey on
this ice patrol. That's right up in the iceberg
region and some of the oceanographers would be tickled
to death to go up there and make some observations.
43
-6-
HM,Jr: Do you need it?
Admiral Waesche: Yes, sir.
Mr. McR: He's a good officer!
land.
Oslo?
HM,Jr: Where would you be doing this studying
Admiral W: Up around the west coast of Green-
HM,Jr: How long is it from there over to
Admiral W: I should say, roughly, about 1,000
or 1,500 miles.
HM,Jr: Seriously, is there work to do up there?
Admiral W: Yes, sir.
HM,Jr: Don't you think it 1s a good idea?
Mr. Hanes: Yes.
Admiral W: As a matter of fact, The International
Ice Patrol, original plans were we would have a cutter stationed at Nova Scotia and Azores and when the war broke out
one of their ships started to the Azores, but under international treaty and under the law we have the authority to
maintain North Oceanic control all the year round.
HM,Jr: But on this Ice
Admiral W: There is some scientific work that
could be done to great advantage in this general Ice Patrol
set-up.
HM,Jr: I think it would be a good idea if you
really have justification.
Admiral W: Yes, sir; we have.
There is just one more point. These Hall
44
-7-
aluminum planes, when we had a crash a month or 80 ago
they found a weakness which is being corrected. I have
issued instructions not to fill those planes or land
them in heavy water until that work 18 done and in the
course of two or three days some of them will be completed.
I have limited them to smooth water landing until that
part is strengthened.
Mr. Hanes: What's the matter with the Grauman?
Admiral W: The only reason we suggested to the
Secretary not to fly in that was because we wanted the
pilots to have more experience with the planes. Apparently
easy planes to fly. We felt, as a matter of safety, that
our pilots should fly them quite a few hours before the Secretary flew in them.
HM,Jr: Is it all right?
Lieut. Bowerman: Oh, yes, sir!
HM,Jr: I asked for it in connection with going
to Bar Harbor.
Mr. Hanes: They don't care 1f I fly in it, but
won't let you fly.
HM,Jr: Be careful during Augyst because if anything happens I don't want to have to come back!
Admiral W: We:will take care of him.
HM,Jr: I understand a Grauman will be stationed
in Washington to take care of Mr. Hanes, back and forth over
week-ends.
Lieut. Bowerman: I think the pilot should have
plenty of training in it. They have been flying it almost
every day.
101% sure.
HM,Jr: Don't let Mr. Hanes go until you are
000-000
45
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 1, 1939.
Secretary Morgenthau
TO
FROM
Mr. Haap Of
Subject: Reasons for using the "Food Stamp Plan" for the
distribution of surplus commodities to privately
employed, non-relief families in low income groups -report of telephone conversation with Mr. Milo Perkins,
President of the Federal Surplus Commodities Corp.
The first reason Mr. Perkins gave me for using the "Food
Stamp Plan" for the distribution of surplus commodities to
privately employed, non-relief families in low income groups
was that prior to this year the Appropriation Act of the Department of Agriculture limited surplus food distribution to families
receiving public aid. This year that limitation was removed.
In view of this he said they felt obliged to at least make a
start in the distribution of surplus commodities to low income
groups in addition to relief groups.
The Shawnee, Oklahoma, area program, he pointed out, was a
very small experimental test which would get under way around
the first of September. They plan to use it as a study case,
and he felt that even with the most favorable results it would be
some time before a similar program would be initiated elsewhere.
The Shawnee city region was selected because the local
groups in that area, such as the retail and wholesale grocery
trade, bankers, etc., had expressed their eagerhess to cooperate
in the operation of the plan.
I raised the question as to why they had not taken care of
all the people receiving public assistance first. Mr. Perkins'
reply was that even though more rapid progress is being made
than is apparent from the immediate results, it will take several
months before the stamp plans are operating effectively in the
various cities. It is necessary to organize trained forces to
set the plans up, but once the personnel is trained the program
will go along at a geometric rate. He felt that the study case
on distribution to non-relief families should be started simultaneously with the development of the distribution to relief
families.
46
8/1/39.
My dear Mr. Welles:
I wish to acknowledge your letter of July 22, requesting the
Treasury Department's suggestions as regards the inquiry of the
Colombian Minister of Finance as to the possibility of financial
assistance from the Federal Reserve Bank of New York after settle-
ment of outstanding debt and exchange matters. I appreciate your
referring this inquiry to me since, as I am sure you will agree,
it is appropriate, as a matter of general policy, that matters of
this sort should be considered in the first instance by the Treasury
Department and, to the extent practicable, handled by the Department rather than through the Federal Reserve Bank of New York or
other agencies.
I take it from your letter, although I am not quite clear
about the matter, that the Colombian inquiry relates to two distinct
problems: (1) the possibility of a gold bullion loan, and (2) the
possibility of obtaining dollar availabilities against gold collateral. In the absence of specific congressional authorisation such as
envisaged in the case of Brazil in the Aranha agreement of March 9,
1939, the Treasury probably would not be in a position to make a gold
bullion loan. Whether or not the Federal Reserve Bank of New York or
-2 other agencies would be in a position to make such a loan would
require further investigation, which I have not initiated pending
clarification of the Colombian request and of the general nature of
the cooperative program. As regards the possibility of dollar
availabilities against gold, the Treasury would be in a position to
render effective assistance along these lines through Stabilisation
Fund operations and would be prepared to render such assistance
provided other aspects of the general settlement between the United
States and Colombia appeared satisfactory.
I trust that the above provides a sufficient basis to enable
you to put the American Ambassador in Colombia in a position to reply
satisfactorily, at this preliminary stage of negotiations, to the
Colombian inquiry. However, at this time, I should like to take the
opportunity to explain the Treasury Department's views as to how the
settlement of financial and monetary problems, involved in the working out of programs for cooperation and settlement of outstanding
questions between the United States and Latin American countries,
should be approached.
Once decision has been taken by the President of the United
States and the Secretary of State to go ahead and attempt to work
out a program, and the general scope of the program determined upon,
I feel that the question of financial assistance and other financial
and monetary aspects are primarily matters of concern to the Treasury
Department and that, insofar as practicable, the Treasury Department
41
48
-3- from the outset should be in a position to attempt to work out these
matters with the authorities of the country concerned. There is also
a further point which I should like to stress. In most of the Latin
American situations, debt defaults involving United States investors
constitute a major obstacle to the working out of the kind of program
which is necessary to obtain our objectives. The autual trade
relations between the United States and the countries concerned, as
well as the long-run interests of the private bondholders, can only
be served, in my opinion, by a policy of financial cooperation which
aims primarily at an increase in the long-run productivity of those
countries. Unless the problem of private debt adjustment is
approached on this basis, which seems to me the only practicable
one, I feel that there is little hope of achieving substantial results
in the attempt to work out programs for economic cooperation with
Latin American countries. Accordingly, if the Treasury Department
is to be in a position to attempt to work out arrangements for
financial and monetary cooperation on a sound basis, I consider it
essential that the Treasury, before going into any of these situations, should have information which gives assurance that the
private debt question is being approached on a basis which is in
harmony with our long-run objectives.
I trust that my views as to how problems of financial assistance and other financial and monetary aspects of United States'
49
-4cooperation in Latin America should be approached, as outlined above,
are in accord with your own. As I see it, it is only along these
lines that the Treasury Department can participate effectively in
the hope of achieving constructive results.
Sincerely yours,
(Signed) H. Morgenthan Jr.
Secretary of the Treasury.
Honorable Sunner Welles,
Under Secretary of State.
JPC,Jr.:laf
P.p. my
7/31/39.
0
AUG 1 1939
My dear Mr. Helles:
I wish to acknowledge your letter of July 22, requesting the
Treasury Department's suggestions as regards the inquiry of the
Colombian Minister of Finance as to the possibility of financial
assistance from the Federal Reserve Bank of New York after settle-
ment of outstanding debt and exchange matters. I appreciate your
referring this inquiry to me since, as I an sure you will agree,
it is appropriate, as a matter of general policy, that matters of
this sort should be considered in the first instance by the Treasury
Department and, to the extent practicable, handled by the Department rather than through the Federal Reserve Bank of New York or
other agencies.
I take it from your letter, although I em not quite clear
about the matter, that the Colombian inquiry relates to two distinct
problems: (1) the possibility of a gold bullion loan, and (2) the
possibility of obtaining dollar availabilities against gold collateral. In the absence of specific congressional authorization such as
envisaged in the case of Brazil in the Aranha agreement of March 9,
1939, the Treasury probably would not be in a position to make a gold
bullion loan. Whether or not the Federal Reserve Bank of New York or
-2other agencies would be in a position to make such a loan would
require further investigation, which I have not initiated pending
clarification of the Colombian request and of the general nature of
the cooperative program. As regards the possibility of dollar
availabilities against gold, the Treasury would be in a position to
render effective assistance along these lines through Stabilisation
Fund operations and would be prepared to render such assistance
provided other aspects of the general settlement between the United
States and Colombia appeared satisfactory.
I trust that the above provides a sufficient basis to enable
you to put the American Ambassador in Colombia in a position to reply
satisfactorily, at this preliminary stage of negotiations, to the
Colombian inquiry. However, at this time, I should like to take the
opportunity to explain the Treasury Department's views as to how the
settlement of financial and monetary problems, involved in the working out of programs for cooperation and settlement of outstanding
questions between the United States and Latin American countries,
should be approached.
Once decision has been taken by the President of the United
States and the Secretary of State to go ahead and attempt to work
out a program, and the general scope of the program determined upon,
I feel that the question of financial assistance and other financial
and monetary aspects are primarily matters of concern to the Treasury
Department and that, insofar as practicable, the Treasury Department
51
52
- -3 -
from the outset should be in a position to attempt to work out these
matters with the authorities of the country concerned. There is also
a further point which I should like to stress. In most of the Latin
American situations, debt defaults involving United States investors
constitute a major obstacle to the working out of the kind of program
which is necessary to obtain our objectives. The autual trade
relations between the United States and the countries concerned, as
well as the long-run interests of the private bondholders, can only
be served, in my opinion, by a policy of financial cooperation which
aims primarily at an increase in the long-run productivity of those
countries. Unless the problem of private debt adjustment is
approached on this basis, which seems to me the only practicable
one, I feel that there is little hope of achieving substantial results
in the attempt to work out programs for economic cooperation with
Latin American countries. Accordingly, if the Treasury Department
is to be in & position to attempt to work out arrangements for
financial and monetary cooperation on a sound basis, I consider it
essential that the Treasury, before going into any of these situations, should have information which gives assurance that the
private debt question is being approached on a basis which is in
harmony with our long-run objectives.
I trust that my views as to how problems of financial assistance and other financial and monetary aspects of United States'
53
-4. cooperation in Latin America should be approached, as outlined above,
are in accord with your own. As I see it, it is only along these
lines that the Treasury Department can participate effectively in
the hope of achieving constructive results.
Sincerely yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
Honorable Sunner Welles,
Under Secretary of State.
JPC,Jr.:laf 7/31/39.
54
August 1, 1939.
8:55 a.m.
H.M.Jr:
Hello.
Butterworth:
Hello, sir.
H.M.Jr:
How are you?
B
Very well, sir. I'm looking forward so much to
seeing you.
H.M.Jr:
Good. We're off tomorrow.
Fine.
B
H.M.Jr:
B
Butterworth, I have received a message from
Sir John Simon,
Yes.
both from Johnson and from the Embassy here.
H.M.Jr:
B
H.M.Jr:
B
H.M.Jr:
B
H.M.Jr:
B
H.M.Jr:
B
H.M.Jr:
B
H.M.Jr:
Yes.
And Sir John Simon - are you familiar with it?
Oh yes, I know about it all.
I take it it came through you.
That's right.
Now, what I'd like you to do is this: tell them
we appreciate very much their kind invitation,
but we don't expect to get to England until about
the first of September.
The first?
Yes. Until about September 1.
September 1. I see.
So, inasmuch as his invitation is for August,
Yes.
....We won't be able to accept.
55
-2-
All right, I'll
B
H.M.Jr:
But if and when we do get to London and he's
there and his engagements are not too pressing,
Yes.
B
H.M.Jr:
B
H.M.Jr:
B
H.M.Jr:
....maybe I can see him officially.
Right, I'm sure that will be arranged.
What's that?
I'm sure that will be arranged.
Well, what the State Department is telling the
various people that I will do only those official
things which are absolutely necessary. See?
And nothing else.
B
H.M.Jr:
B
H.M.Jr:
B
H.M.Jr:
B
Yes, sir.
But, I'll have a chance to talk to you when you
meet us.
Yes, I'll meet you at Southampton.
Now, we have three or four hours in London,
haven't we?
Yes, your train doesn't leave until a little
after eight, I think.
At night?
From London. It depends upon what time the
Normandie docks.
H.M.Jr:
I see. Well, then we can go to some hotel and
stay there for a couple of hours, can't we?
B
Easily.
H.M.Jr:
What?
B
Oh, easily, or you could come to my house.
56
-3H.M.Jr:
B
H.M.Jr:
Well,
we can - we'11 talk it over when you
meet us.
Right.
We don't want to put you to too much trouble.
No, it won't put me to any trouble at all.
B
I'm looking forward 80 much to the pleasure
of seeing Mrs. Morgenthau and the children
as well as yourself.
H.M.Jr:
Now let me ask you this - this is very important in September in London do you need a heavy winter
overcoat?
B
No.
H.M.Jr:
You do not.
B
No.
H.M.Jr:
Well, that's important.
B
Perhaps you should take a spring overcoat with you.
H.M.Jr:
Well, I have that - a black overcoat.
The Ambassador is down at the Mediterranean?
B
H.M.Jr:
B
Yes, he's down in Cannes.
When does he get back?
On - well, he didn't say when he left here, but
I should think it would be about that time. What
he said was that he hoped to stay on and get a
good vacation, but he was not setting any particular
time for his return because he didn't want to if he did have to come back - people to say, "Well,
the crisis must be awful because he's come back."
H.M.Jr:
I see. Well, answering Sir John this way is all
B
Oh yes.
right, isn't it?
457
H.M.Jr:
B:
H.M.Jr:
B:
And you'll tell Johnson?
I will indeed.
All right. Now
He asked me to say to you how much he was looking
forward to the pleasure of seeing you.
H.M.Jr:
Good. Well, I think we're going to have a good
time. There's no use, once we're on the boat,
worrying whether there's going to be a war or
not.
B:
Oh, no.
H.M.Jr:
There's time enough to worry if there is one.
B:
Oh, I agree.
H.M.Jr:
B:
What?
Yes, I agree, sir. They keep pushing the date
back now.
H.M.Jr:
They do.
B:
Yes.
H.M.Jr:
How far back have they got it now?
B:
Well, they say that things are going to be
quiet they hope until the party rally.
H.M.Jr:
When is that?
B:
You know - the Nuremberg rally.
H.M.Jr:
That's in September, isn't it?
About the - well about the 7th of September,
I think.
B:
H.M.Jr:
I see.
B:
No one really knows because it all depends on
H.M.Jr:
Right. All right, I'11 see you then in about a
Hitler.
week.
-5B
H.M.Jr:
B
H.M.Jr:
Goodbye, sir.
Goodbye.
And bon voyage!
Thank you.
58
for Secu
August 2, 1939
MEMORANDUM TO THE FILES:
The Minister of Finland Game in to discuss the question of the
anti-dumping day orders against the import of matches from Finland.
The following/Aresume of Finland's position in this matter.
In 1931 Anti-dumping Duty Orders were issued concerning the
import of matches from the following eight countries Finland, Sweden,
Norway, Esthomia, Latvia, the Netherlands, Austria and Poland. Already
previously such an Order had been issued concerning importe from Russia.
Those orders were revoked as far as Sweden is concerned August 12th,
1933 and in respect of Ruesia January 24, 1934.
Japan, which seems to be the third biggest of match importers to
this country, is also exempt from Anti-dumping Duty Order.
The total value of matches produced in the United States is about
30 millions. The total value of importe of matches during 1938 was
$255,000.
Importe from Finland were in 1938 $31,000, which corresponds to
only a fraction of one per cent of the value of the total production
in this country and to some 11 per cent of the total imports.
of the total imports of $285,000 almost all or about $250,000
comes from Sweden, the U.S.S.R., and Japan, 1.8. from countries not
under Anti-dumping Daty Orders.
The Finnish price is considerably higher than the price for
matches from the above mentioned countries.
It is argued that American matches are sold cheaper than the
Finnish price free duty paid eastcoast porte.
The present Finnish price for matches exported to this country is
higher than the corresponding price on the Finnish home market.
It is evident under these circumstances that the Finnish importe
cannot constitute an injury to the American industry.
It is furthermore argued by the imports of Finnish matches that
the Finnish home k market is a closed market as the home market prices
are fixed by a Joint committee representing all the factories and that
the price on the Unite States market is no lower than theoorresponding
price for corresponding grades of matches to other markets in general.
59
60
It is respectfully requested
1) that the Anti-dumping Duty Order concerning Finnish
matches be repealed at the earliest possible
opportunity, and
2) that still unliquidated entries be finally liquidated
without requiring payment of any additional duty.
Miss C.
61
August 1. 1939
MEMORANDUM FOR THE PRESIDENT:
In answer to your memorandum dated August 1st regarding
the request of the State Department for financial experts to
be sent to South America, this is to advise that I have taken
this matter up with Under Secretary Summer Welles and I am
advising him today that we will send a Treasury tax expert to
Colombia well qualified to advise on the subject of depletion
and depreciation basis for property of foreign oil companies
in Colombia.
For your information, the Secretary asked for an appro-
priation of $50,000 in the Deficiency Bill in order to defray
expenses of Treasury employees loaned to the State Department
for South America work. I have just learned that the
Deficiency Bill which was introduced in the House today at
noon denied our appropriation for this additional $50,000.
However, I feel sure that we can find ways and means of
assisting the State Department in this work.
(Signed) John W. Hanes
By spic me. 8-3-39
JWH: ce
82
August 2, 1939
Dear Summers
Just after I talked with you on the telephone today I
called the Appropriations Committee and learned that the
Deficiency Bill in which we had made a request for $50,000
to take care of the expenses in connection with the South
American Department has been denied. The only hope we have
of getting this appropriation as I understand it is that we
get it included in the bill when it reaches the Senate
Appropriations Committee. I will try to have it included
there but the prospect is not bright unless we can get some
assistance perhaps from the President.
In the meantime, I have a tax expert available who is
well qualified to go to Colombia to advise on the subject
of depletion and depreciation of oil properties. This, I
understand, is what the State Department desires. If you
will advise me when you are ready to see him in order to
give him instructions, I will arrange the details.
With warm regards,
Sincerely yours,
(Signed) John W. Manos
John W. Names
Under Secretary of the Treasury
The Honorable Summer Welles,
Under Secretary of State,
Washington, D. C.
JWHICE
TREASURY DEPARTMENT
63
PROCUREMENT DIVISION
OFFICE OF THE DIRECTOR
WASHINGTON
August 2, 1939
MEMORANDUM FOR THE SECRETARY
This morning at 10:30 Lord Riverdale and Sir Owen Chalkley called
to discuss the functional organization of the Procurement Division.
Lord Riverdale stated that it was contemplated to establish in
this country a Mission which would operate in the event of war as
the sole purchasing agent of the British Government. As an alternative he stated they had also considered the creation of a corporation
similar to Universal Trading. He was particularly interested in the
functional organization of the Procurement Division with particular
reference to those parts of it which might be applicable to any
procurement agency that might be set up by his Government. The information given him was of a very general character and answered
the questions which he asked.
In leaving he stated that the results of his visit to this country
would be presented to the British Cabinet upon his return to England
with recommendations that either a British Mission or a British
Company be formed in lieu of having their purchasing done by a
private American corporation as was the case in the last war.
Lord Riverdale further stated that he had had similar discussions
with representatives of the War Department and is planning to call
on the Paymaster General of the Navy this afternoon.
None of our publications was asked for or given.
Director 6f Procurement
8-2-39
OFFICE OF
THE SECRETARY OF AGRICULTURE
64
Pecretary Morgenthau:
Secretary Wallace asked
me to send you the enclosed
Mus
M huss
Personal Secretary
8-2-39.
65
The drought conference, comprising representatives from states
of the North East region, met with Director A. W. Manchester and
regional executives at 9:30 this morning.
Reports of drought damage to farm crops were made by state repre-
sentatives and discussion of extent of damage and proposals for special
soil-building practices to repair damage to spring seedings of biennial
and perennial legumes and grasses were heard.
The conference adopted the following program for recommendation
to Administrator R. M. Evans at 2:30 p.m. today:
1. Designation of drought-damaged counties
a. Upon recommendations of State Committees
2. In designated drought areas
a. Establish rate for midsummer seedings to
replace spring seedings killed by the
drought at a rate of $3.00 per acre.
b. On farms on which the regular soil-building
allowance has been used for other soilbuilding practices, pay for midsummer
seedings in excess of the allowance up to
a maximum of one-half of the allowance.
The representatives from the states pointed out that not only would
such seedings quickly put the farmers back into their normal rotations and
repair some of the more lasting damage of the drought, but they would prevent pressure for abnormal expansion of wheat and corn acreage in 1940 on
-2-
66
the land left bare by the failure of 1939 spring seedings.
As midsummer seedings, while entirely practical, are unusual
in much of the area, a large amount of educational work will be necessary
if they are to be widely adopted by farmers.
Heaviest participation in the proposed special program is indicated by New Jersey and Connecticut, with lesser participation by New
York, Pennsylvania, New Hampshire and Massachusetts.
Estimated seedings:
New Hampshire 3,000 acres
Massachusetts 2,000 .
Rhode Island 300 #
Connecticut
1,500 .
New York
30,000 .
New Jersey
15,000 .
500 N
Pennsylvania
Total
56,300 acres.
#
Dear H I I
thought
you
might
be interested in the enclosed who in
believe is satisf acting to m labcock
H aw allaw
66-1
PARAPHRASE OF TELEGRAM RECEIVED
FROM:
American Embassy, Berlin
NO.:
723
DATE:
August 2, 1939, 3 p.m.
698
Reference is made to my telegram no. 609, of
July 26, 1939, 3 p.m.
No. 51. FOR TREASURY FROM HEATH.
An officer of the Schroeder Banking Corporation
who is in Berlin at the present time informs us that it
is doubtful that banks in the United States will be
willing to make any of their credit lines covered by
the standstill agreement available to finance purchases
of American cotton by Spain or that it will be insisted
by the Reichabank that they do so. Spanish firms importing cotton from the United States are already receiving
"considerable credits" from Swiss banks, the informant
stated. He said that banks in Switzerland had had a
good deal of experience with business firms in Spain,
and he remarked that if necessary, the Swiss Government
could include such credits in some kind of a clearing
arrangement to protect them.
KIRK
EA:EB
66-B
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Berlin
NO.:
724
DATE: August 2, 1939, 4 p.m.
Reference is made to my no. 583 of July 3, 6 p.m.
It is insisted by Barbarin, head of the Russian
delegation to the German-Russian trade negotiations in
Berlin, that the negotiations are still in a purely
preliminary stage, in spite of the fact that they have
been in progress for more than a month. When a member
of the Embassy staff talked with him regarding the
prospects of the negotiations, Barbarin was extremely
reticent but the impression was gained that it was
expected by the Russians that they would be able to
agree with the Germans on some increase in trade.
A conversation was held yesterday with an authoritative German source, who said he was optimistic over
the outcome of the negotiations, maintaining that the
Soviet Union is in a position where it has to import
industrial equipment and machinery for replacements,
and Germany is either the only source of supply or is
the most economical source of supply of these goods.
The prediction was made by the informant that the result
of the agreement would be that Germany would again
import
66-C
-2-
import 200,000,000 marks worth of goods a year from Russia,
which was the figure attained during the period 1933-1935,
while German imports from Russia in 1938 reached a total
of only 47,000,000 marks. It was indicated by our informant
that the Germans are chiefly interested in increasing
imports of petroleum, lumber and manganese.
Please repeat to Treasury from Heath.
KIRK
03V13038
and
EA:EB
67
COPY
August 3. 1939
MEMORANDUM FOR THE PRESIDENT:
I suggest the attached telegram as the reply to
Senator McAdoo's wire which was read to me over the
telephone by Miss Tulley.
(signed) John W. Hanes
Under Sec'y's office sent to
White House - 8-3-39 - 5:45 P.M.
initialed file to Foley's office
EHF:ce 8/3/39
68
COPY
Hon. William G. McAdoo
311 California Street
San Francisco, California
Treasury Decision 49925 published today provides that the
exemption of A hundred dollars accorded residents of the United States
shall not he applied to any port in Collection District No. 25 (San
Diego) to articles acquired in the Republic of Mexico by a returning
resident of the United States, unless such resident has remained
beyond the territorial limits of the United States for a period of
not less than twenty-four hours STOP The regulation is effective on
the day following the expiration of ninety days after July 26, 1939.
with respect to goods arriving at any port in the United States
when free entry under the hundred dollar exemption is claimed by
reason of the arrival of a resident of the United States who has
returned to S port in Collection District No. 25.
Since the decision has been published, I suggest you submit
to Treasury Department before the expiration of the ninety day period
any matters which in your opinion bear upon the advisability of the
issuance of the Decision.
Franklin D. Roosevelt
EHF/cp 8/3/39
69
Copy
August 3. 1939
Memorandum for Mr. Hanes
Miss Tulley, White House, called at 3:08 and gave me this
message: The President asked me to call the Secretary and read
him a wire received from Senator McAdoo which reads as follows:
"It is reported that the Treasury Department proposes promilgation
August 3d regulations requiring visitors to Mexico along Southern
California boundary to remain 24 hours in Mexico before they can
bring in to United States purchases less than $100, however, small,
without paying duty. I hope this report is incorrect. Such
discrimination against Southern California and many tourists who
come here is in my opinion of doubtful constitutionality and is not
justified on economic or political grounds." - He also saye that
he will greatly appreciate it if the President will authorize the
Treasury to delay this order until the President can acquaint him
fully regarding this.
The President would like to know what kind of Answer (wire)
should be prepared for his signature to the Senator - would like
to have this today.
for Sidy
August 3. 1939
70
MEMORANDOM TO THE FILES:
Lord Riverdale came to pay his respects to the Secretary of
the Treasury and to thank him for the cooperative manner in which
the Procurement Division had handled his request for information.
It seems that the British are desirous of setting up a purchasing agency in this country for the purpose of buying raw
materials. It is their desire that they cooperate with the purchasing department of the Federal Government here in order that
their purchases may not be competitive or in conflict with the
purchases of this Government. He stated that they had not made up
their minds definitely as to how they would proceed with this com-
mission, but that he had gained a great deal of benefit from his
visit at the Procurement Division and was on his way back to
England via New York and Canada and the decision would not be made
until he reached London.
Lord Riverdale stated the British were terribly desirous of
increasing their purchases from this country and were in a position
to do so immediately, but that the one thing which continued to
bother them was the matter of foreign exchange. He stated that
the unfavorable balance of trade against England between the two
countries militated very largely against their making extraordinary
large purchases at this time.
He referred to the difficulty under the Johnson Act and stated
that in his opinion it was a calamity that the two countries could
not arrive at a satisfactory settlement of the debt. He seemed
extremely anxious to talk about the debt question. He referred to
it many times during his conversation and I gained a distinct impression that he wanted me to make the suggestion that we enter
into informal negotiation or discussion upon the question of a proper
settlement. My impression may be incorrect, but I believe the British
are thinking in serious terms of starting conversations with our
Government looking toward an adjudication of this question.
JWH
For Secy
71
August 3. 1939
MORANDUM TO THE FILES,
Oaptain Colline came in to advise us officially that the
representatives of the British Government, who had been sent to
us by the State Department, headed by Lord Riverdale had finished
their work at the Procurement Division. Captain Collins said that
he had answered all questions by giving them such information as
was made available to the general public. He stated that the
British representatives seemed entirely satisfied with the infornation they had received.
JWH:
71-A
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Berlin
NO.: 728
DATE: August 3, 1939
Reference is made to my no. 654 of July 15, 10 a.m.,
paragraph 7.
CONFIDENTIAL. A member of the Embassy staff has
been informed by an authoritative German source that
because of the armament boom in other European countries
German firms had very recently received increased export
orders and opportunities. He said, however, that the
fact that there was an accumulation of orders for the
German army (which still receive priority) made it
impossible for most German export manufacturers to take
advantage of the increased opportunities because they
were unable to offer delivery terms that were satisfao-
tory. It was asserted by the informant that military
supplies and machinery for foreign armament industries
were not the only lines in which there was improvement
in the opportunity for export but that an increasing
demand for non-military goods was accompanying the
armament booms* which were taking place in foreign
countries. It was stated that, for example, if it
were
71-B
-3-
were not for the refusal of the German Government to out
down on its domestic armament program, it would be possible for Germany to increase by a considerable amount
its exports even to England.
With reference to the trade agreement with Japan
which was recently announced
expenses Xour source of information stated that since the
trade is on a one to one basis, the ratio of German
exports to imports from Japan is calculated at a little
less than four to one. He stated that he was optimistic
as to Japan's ability to secure for a considerable time
sufficient foreign exchange to cover this deficit in
German-Japanese trade relations.
As yet there has been no solution of the problem of
German trade and payments with the new State of Slovakia,
according to this informant, and he indicated that an
early solution is not foreseen since the German Government
does not wish at this time to infringe upon the sovereignty
of Slovakia by insisting that that State enter into a
currency and oustoms union with Germany. The question is
not only one of Germany's desire to import much more from
Slovakia than the Slovak market can absorb of German goods,
but Germany has admitted 70,000 laborers from Slovakia and
these laborers must be allowed to send their savings to
Slovakia
71-C
-3-
Slovakia or to return there with them. He stated that an
infringement of Slovak sovereignty would not necessarily
be involved in a currency union if Germany had a free
monetary system. However, he stated, if a customs union
with Slovakia were brought about in order to prevent the
German exchange control system from collapsing it would
be necessary for Germany to have, say, 3,000 foreign
exchange control officers in Slovakia in view of the
present
import exchange restrictions, which he thought would oontime for a considerable time even if there were a real
relaxation of international tension.
It was also stated by the informant that as long as
the 25-percent additional duties were imposed by the United
States there was no prospect of increasing German exports
to the U.S. He stated that the German economic authorities
had received a great many proposals for reciprocal trading
schemes from German exporting firms and also from American
exporters and importers. All of them, however, involve
practices defined by the United States Treasury Department
as constituting export subsidies. He stated that the United
States was the only country where the boycott of German
goods was still of decisive importance.
Please repeat to Treasury as no. 52 from Heath.
KIRK
EA:EB
72
To:
The Secretary
From: Mr. Hanes
Cabinet meetin-
Faid
August 4th, 2 o'clock
Present: The President, Under Secretary of State Welles,
Under Secretary of the Treasury Hanes, Assistant
Secretary of War Johnson, Attorney General Murphy,
Assistant Secretary of the Navy Edison, Secretary
of Agriculture Wallace, Under Secretary of Commerce
Noble, Secretary of Labor Perkins, and Vice
President Garner
The President brought up for discussion the suggestion that
has been made to him on several occasions concerning the formation
of the governmental commission for the purpose of studying the
possibility of the Federal Government fostering art educational
projects all over the country. It is the President's idea that
perhaps from the storerooms of the various art museums can be gathered
together a good representative collection of works of art from all
parts of the world that might be transported from one part of the
country to the other, accompanied by lecturers, which would be of
great educational value to the people. Quite a lengthy discussion
ensued with the net result that the President suggested the appointment of a committee under the leadership of Mr. Ed Bruce of the
Treasury, and to consist also of a representative from the Departments of Commerce, Agriculture, Education and Security. (I have
asked Ed Bruce to come to see me in order that I might explain this
mission more clearly to him.)
Under Secretary Welles reported the largest mobilization by
Germany in peace time history, to be completed about September 2d,
and involving the mobilization of 2,300,000 men. He stated in his
opinion the critical period with which the world is confronted would
be between the 2d and 15th of September. He reported that the German
financial condition was getting steadily worse.
Louis Johnson talked for a few minutes or the subject of airplane
production and progress being made in the purchase of planes.
The following persons had nothing to report: Frank Murphy, Edison,
and Ed Noble.
73
-2Secretary Wallace urged that all departments interested should
cooperate with the Department of Agriculture in encouraging the
production of non-competitive products in South America. The
President made the specific request that Treasury, Commerce, and
Agriculture cooperate in every way possible for the purpose of
creating closer contact with South America. He suggests that we
give all possible aid to the State Department, especially in man
power and experts, in order to foster a better feeling in South America
toward the United States. The President stated that for every one
man that this Government sends to South America, the Germans are
sending ten.
Madame Perkins reported to the President an agreement had been
reached in committee on the General Motors strike, and that announcement would probably be made over the week-end to that effect. She
reported further that she had learned that there was a pick-up throughout the whole steel industry. Lastly, she informed the President
that the Bethlehem Steel Company was the lowest bidder for the
Maritime Commission's three new ships.
It was a short meeting and adjourned at 3:20.
J. w.t.
73-A
GRAY
ML
Paris
Dated August 4, 1939
REC'D 2:35 p.m.
Secretary of State
Washington
1444, August 4, 6 p.m.
FOR THE TREASURY.
This morning's Journal Official publishes a list of
about 60 industrial products on which quota restrictions are
removed. The Commerce Ministry Explains that the items
affected which include certain textiles, hides and skins and
machinery are those for which the quotas WERE not fully
utilized. The importance of the measure which is taken in
conjunction with similar steps by the Belgian Government
(abolition of fiftEEn out of Eighty products hitherto subject
to quota restrictions) lies in the fact that it constitutes
a reversal of the general policy hitherto pursued by the
French Government and may be an opening . wedge in the freeing
of foreign trade from existing Encumbrances. There remain
another two hundred forty odd industrial quota restrictions
and abolition of most of these will, however, prove more
difficult partly because of opposition of affected manufacturers and partly if duty increases in ligu thereof are
contemplated
73-B
ml 42- from Paris, Aug. 4, 2:35 p.m. #1444 SEC. 1
contemplated because of Existing commercial treaty obligation
Care has been taken in selecting the list to avoid unduly
alarming domestic manufacturers and no agricultural quota
restriction has been removed.
(END SECTION ONE).
BULLITT
KLP :DDM
73-C
GRAY
JR
Paris
Dated August 4, 1939
REC'D 2:55 p.m.
Secretary of State,
Washington.
1444, August 4, 6 p.m. (SECTION TWO) .
A move in this direction has been urged by Reynaud
for SOME time partly to increase the Treasury's customs
revenue but mainly as a means of keeping down prices.
On this latter point Rist, writing in the bulletin
DE LACTIVITE just published, states that "while the
cost of living has risen but 8% in the past year which
is less than had been feared, if this increase is
continued an increase in the SIZE of certain agricultural
quotas to the extent that increase in national production
do not Equal demand would be the most natural solution
and the only Effective one". HE continues that this should
be "accompanied by an enlargement of industrial quotas
or by the suppression of industrial quota restrictions
which hinder or render more onerous plant renovation.
In the absence of such measures the present increase of
labors income instead of producing a real improvement in
the standard of living will bE lost in a general rise in
prices
73-D
-2- #1444, August 4, 6 p.m. (SECTION TWO) from Paris.
prices with all the well known consequences which this
rise brings". Referring to the methods of financing
this mad rearmament race Rist writes that according as
governments "content thems elves with capital voluntarily
furnished from savings or have recourse under more or
less disguised forms to the 'creation of credit' the
rise of prices and a monstary depression will bE more or
less rapid in each nation."
BULLITT
MNC:KLP
73-E
PARTIAL PARAPHRASE OF TELEGRAM RECEIVED (SECTION THREE)
FROM:
American Embassy,
Paris
DATE:
August 4, 6 p. m.
NO.:
1444
FOR THE TREASURY
The aforesaid bulletin estimates that in spite of
the rising tendency of the French cost of living wholesale prices here are still 12% and retail prices 19%
below British prices (as against 17% and 27% below last
September and 10% and 20% respectively last January).
Again today the exchange market was very quiet.
In view of Monday's British bank holiday sterling was a
little more bid partly on short covering. (However, the
French fund gained about a half million pounds last
evening). On buying by the fund for interest payments the
Swiss franc was more bid. The florin was stronger at
20.10 3/4 and the belga was unchanged. offerings for the
forward franc were made at 8 1/2 and 24 centimes respectively
for one month and three months. Again the security markets
were slow with a decrease of 35 centimes on rentes and
closing down 15 centimes.
The National Bank of Belgium's return for a period of
nine days ending July 27 sets forth increases of 385,000,000
Belgian france in gold holdings and 222,000,000 Belgian
france in foreign exchange. (END OF MESSAGE).
NPL EMB
FL:lar
BULLITT
THE WHITE HOUSE
WASHINGTON
CONFIDENTIAL
August 5, 1939.
MEMORANDUE FOR
THE ACTING SECRETARY OF THE TREASURY
A friend writes that the
structure of the totalitarian
states has been strengthened, if
not upheld, by the United States
through its purchases of gold,
and that on this gold price is
based the price of everything in
the world. He asks "Why should
States
that it
position not the United will buy take gold the
only from those nations with whom
we have fair, cooperative relations?"
He goes on to say that if the
United States should refuse to
buy Japanese gold, the Japanese
economy would be seriously affected, and the same in regard to
Germany and Italy. He suggests
that in case such a course were
followed with Japan, the United
States would not purchase gold
from any country that buys gold
from the Japanese; also, that it
would tend to stop a Nazi-Russian
economic deal.
What is your slant on this?
for F. D. R.
For Secing
To:
The Secretary
From Mr. Hanes
Cabinet meeting. Friday, August 4th. 2 o'clock
Present: The President, Under Secretary of State Velles,
Under Secretary of the Treasury Hanes, Assistant
Secretary of Var Johnson, Attorney General Murphy,
Assistant Secretary of the Navy Edison, Secretary
of Agriculture Vallace, Under Secretary of Commerce
Noble, Secretary of Labor Perkins, and Vice
President Garner
The President Brought up for discussion the suggestion that
has been made to him on several occasions concerning the formation
of the governmental commission for the purpose of studying the
possibility of the Federal Government fostering Art educational
projects all over the country. It is the President's idea that
perhaps from the storerooms of the various art museums can be gathered
together a good representative collection of works of art from all
parts of the world that might be transported from one part of the
country to the other, accompanied by lecturers, which would be of
great educational value to the people. Quite a lengthy discussion
ensued with the net result that the President suggested the appointment of a committee under the leadership of Mr. Ed Bruce of the
Treasury, and to consist also of a representative from the Departments of Commerce, Agriculture, Education and Security. (I have
asked Ed Bruce to come to see me in order that I might explain this
mission more clearly to him.)
Under Secretary Velles reported the largest mobilization by
Germany in peace time history, to be completed about September 2d,
and involving the mobilization of 2,300,000 men. Re stated in his
opinion the critical period with which the world is confronted would
be between the 2d and 15th of September. He reported that the German
financial condition was getting steadily worse.
Louis Johnson talked for a few minutes on the subject of airplane
production and progress being made in the purchase of planes.
The following persons had nothing to report: Frank Murphy, Edison,
and Ed Noble.
--
76
Secretary Wallace urged that all departments interested should
cooperate with the Department of Agriculture in encouraging the
production of non-competitive products in South America. The
President made the specific request that Treasury. Commerce, and
Agriculture cooperate in every way possible for the purpose of
creating closer contact with South America. He suggests that we
give all possible aid to the State Department, especially in man
power and experts, in order to foster a better feeling in South America
toward the United States. The President stated that for every one
man that this Government sends to South America, the Germans are
sending ten.
Madame Perkins reported to the President an agreement had been
reached in committee on the General Motors strike, and that announcement would probably be made over the week-end to that effect. She
reported further that she had learned that there was a pick-up through-
out the whole steel industry. Lastly, she informed the President
that the Bethlehen Steel Company was the lowest bidder for the
Maritime Commission's three new ships.
It was a short meeting and adjourned at 3:20.
(Signed)
JWH:ce
John
W.
76-A
GRAY
RFP
Berlin
Dated August 5, 1939
REC'D 10:40 a.m.
Secretary of State
Washington
737, August 5, 2 p.m.
Referring to a report appearing in the "NEW YORK
JOURNAL AMERICAN" to the Effect that the British Government
had invited Secretary Morgenthau to initiate negotiations
with a view inter alia to "adapting the Tripartite
Monstary Agreement to new conditions" and to "financing
British row material purchases in CASE of war," this
morning's BERLINER BOERSEN ZEITUNG comments that such
suggestions are not at all surprising in the light of
the current policy of Great Britain which would like to
Entice the United States to add new was debts to the old.
Great Britain is SEEN as desiring ONCE again to obtain
raw material against credit although it is pointed out
that a problem would arise in that at least a formal
assurance of payment of former debts would probably have
to be arranged before new credit could be granted. The
reference to the Tripartite Monstary Agreement is regarded
by the BOERSEN ZEITUNG as signifying an intention to
prevent the "limited degree of currency stability"
provided
76-B
rfp -2- #737, August 5, 2 p.m. from Berlin
provided by that agreement from being disturbed by such
debt payments as might be made with a VIEW to obtaining
new credits.
Repeat to Treasury.
KIRK
GW
G
76-C
PARAPHRASE OF TELEGRAM RECEIVED
FROM
American Embassy,
DATED:
August 5, 1939, Noon
NO.1
735
Berlin
(part air)
No. 53 FOR TREASURY FROM HEATH
Reference is made to my No. 723, August 2, 3 p. m.
A member of the Embassy staff was informed yesterday
by a German banker whose past information has been
reliable that offerings to German banks of "dollar cotton
acceptances of the Spanish Government are being made at
a discount of 18% payable after one year. The informant
asserted that, as a personal investment, he was purchasing
some of these acceptances with some dollar exchange allowed,
by the German Government, to be retained by him. He
regards it a fair risk, he said, since he believed special
efforts to establish the credit of the Spanish Government
would be made by Franco for the first year at least. It
was also stated by the informant that it was his belief
that he would be able to regain his money in reichsmarks
through the Spanish-German clearing arrangement even if after
a year there was a default as regards foreign currency
payments of these acceptances.
RR
FLilar
KIRK
77
DEPARTMENT OF STATE
DIVISION OF FAR EASTERN AFFAIRS
August 7, 1939
To:
Mr. Hanes
From:
Mr. Hamilton
Referring to the conference held in
Secretary Morgenthau's office on August 1,
there are enclosed a copy of a telegram sent
by the Chinese Ambassador on July 28 to the
Chinese Ministry of Foreign Affairs and a
copy of the Ministry of Foreign Affairs'
reply of August 7. The Chinese Ambassador,
when leaving these copies with me on
August 7, said that on August 5 he had sent
a second telegram to the Chinese Ministry of
Foreign Affairs, informing the Ministry of
Foreign Affairs of the conference in
Secretary Morgenthau's office on August 1.
to receive a reply to his second message
ithin a few days, at which time he would get
in touch with me again.
The Chinese Ambassador said that he expected
M.M.H.
(Y:FE:HJW)
78
TEXT OF A TELEGRAPHIC MESSAGE TO THE MINISTRY OF
FOREIGN AFFAIRS, DATED JULY 28, 1939.
Also for Minister Yon Fu-ching.
Secretary Morgenthan yesterday in interview with
K. P. Chen and Dr. Buck expressed special concern over
reported prevalence of malignant malaria on Yunnan side
of Burma route. Secretary went so far as to invite
experts of Health Service to confer today to discuss
how American Government might help combat this disease.
Kindly cable immediately information concerning
disease, what has been done by our health authorities
and what kind of aid American Government can best
render.
Hu Shih.
July 28, 1939.
79
TEXT OF A TELEGRAPHIC MESSAGE FROM THE
MINISTRY OF FOREIGN AFFAIRS, DATED CHUNGKING, AUG. 7, 1939.
Referring to your telegram of July 28th, the Chinese
Government deeply appreciates Secretary Morgenthau's concern
over the malaria problems in Yunnan. Malignant malaria is
prevalent in Yunnan, Kwangsi, Kweichow; it is worst in Southwestern Yunnan traversed by the Yunnan-Burma Highways, the
Yunnan-Indochina Railway, and the Yunnan-Burna Railway now
under construction. In many districts as Ning-Erh, Sze-Mao
and Yun-Hsien, morbidity reaches 85% with high mortality.
Extensive and severe incidence greatly hampers Government's
program of railway and highways construction, mining and
heavy industry development. By combined efforts of Central
and Provincial Governments, a five-year Anti-malaria campaign
and three-year research program with intensive anti-malaria
work in the more heavily infected region have just been started.
However available fund and experts are insufficient to meet
the needs. Will heartily welcome American Government collaboration
with malarialogists, sanitary engineers, quinine and sanitary
equipments and materials for sanitary construction.
Above from Wei-Sheng-Hsu (Public Heath Administration)
with our endorsement.
Waichisopa
79-A
PARAPHRASE OF TELEGRAM RECEIVED
The American Embassy,
FROM:
Rio de Janeiro
DATE:
August 7, 1939, 2 p. m.
NO.:
238
The first renewal drafts and instructions to pay
ten percent of the face amount of the original credit are
being sent today, in accordance with the terms of the
arrangements, to the commercial banks participating in
the 19,200,000 dollar acceptance credit by the Bank
of Brazil.
I have been informed, confidentially, by the
Director of Exchange that authorization from April 10
to date has been made by the Bank of Brazil of remittances
totalling approximately 3,500,000 dollars for earnings,
seventy-five percent of which represents profits, granted
by the Embassy's request, of American companies.
CAFFERY
CSB
EA:FL:1ar
80
THE UNDER SECRETARY OF THE TREASURY
WASHINGTON
August 8, 1939
Dear Henry:
I am attaching hereto a memorandum which I sent
to the President on August 4th, in response to his
request for certain information as to the right of
the President in case of an emergency to take control
of the vessels of any belligerent powers in our ports.
I am passing this along to you as a matter of interest.
Hoping you are having a swell time and with best
regards, I am
Sincerely,
Johnnie
The Honorable Henry Morgenthau, Jr.,
c/o American Embassy,
London, England.
81
August 4, 1939
MEMORANDUM TO THE PRESIDENT:
Title 50, sec. 191 of the U. S. Code provides in part
that, whenever the President by proclamation or executive order
declares a National emergency to exist by reason of actual or
threatened war, or disturbance or threatened disturbanace of
the international relations of the United States, the Secretary
of the Treasury may take, by and with the consent of the
President, full possession and control of any vessel, foreign
or domestic, in the territorial waters of the United States
to secure the observance of the rights and obligations of the
United States.
A proclamation to accomplish this objective has been
prepared and is in the Treasury safe.
A draft of telegram to Treasury enforcement agents has
been prepared and is in the Treasury safe, directing them to
detain, intercept if under way, and turn over to local
collectors of customs possession of the vessels of the
belligerent powers in territorial waters pending further
instructions.
/s/ John W. Hanes
sent by special messenger
8-4-39 - 11:40 A.M.
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE August 8, 1939
TO
Secretary Morgenthau
FROM
Under Secretary Hanes
The following news item regarding Lochhead and Cochran appeared on
the Dow Jones News Ticker this morning.
"Stabilization Fund Director expected to resign this fall.
Washington. Archie Lochhead, Director of the Treasury's
$2 billion Exchange Stabilization Fund during recent years is
expected here to resign from that post some time this fall in
order to return to private business. The expectations here are
that Mr. Lochhead will be succeeded by H. Merle Cochran, the
First Secretary of the U. S. Embassy at Paris. Mr. Cochran has
functioned as an economic adviser in his present post and is
understood to have been close to the operations of the Stabilization Fund."
Chick Schwarz believes that this information emanated from someone
in the State Department, and I feel quite certain that there has been no
leak from the Treasury.
We have received several inquiries regarding this report and we
have neither confirmed nor denied it. However, we are handling the matter
as a strictly personal one between yourself and Lochhead and therefore have
no comment to make.
J. w.t.
82
for Secin
August 8. 1939
MEMORANDUM FOR THE SECRETARY:
On August 8th I received a memorandum from the President written
in his handwriting as follows: "E.M.Jr. - Coll. of Port - Norfolk Eliet Health - with - good lawyer - Norfolk - friend of Class but
Walton Moore says very good - will 8 with us. Seems good - check."
Also, a memorandum of transmittal to the Acting Secretary of the
Treasury, stating - will you speak to me about this at your convenience?
The President left last night for Hyde Park. I called General
Wateon and told his that I was having the check made and would report
to the President on his return to Washington August 26th. General
Watson said this would be the proper way to handle it. I have written
his a memo Pandum which he will take with him to Hyde Park tomorrow.
see and again appts story
JWHICE
mis for complex
83.
84
COPY
August 8, 1939
Dear Henry:
I am attaching hereto E memorandum which I sent
to the President on August 4th, in response to his
request for certain information as to the right of
the President in case of an emergency to take control
of the vessels of any belligerent powers in our ports.
I am passing this along to you as a matter of interest.
Hoping you are having 2. swell time and with best
regards, I am
Sincerely,
(signed) John W. Hanes
The Honorable Henry Morgenthau, Jr.,
c/o American Embassy,
London, England.
To McHugh to send to Sec'y
8-8-39 - 4:10 P.M.
COPY
85
August 8, 1939
MEMORANDUL TO THE PRESIDENT:
At Cabinet on Friday you soked us to organize a
committee from Agriculture, Commerce, and Treasury,
with Mr. Ed Bruce LE chairman, to study and report on
art educational projects. I find Mr. Bruce is absent
from Washington on vacation and will return in about
two weeks. Without instructions to the contrary, I will
await Mr. Bruce's return before starting this committee
at work, because I think he is undoubtedly the best
qualified man for this job.
(signed) John 7. Hanes
85-A
CABLE
From: Bankers Trust Co. of N.Y.
London Office
Date: August 8, 1939
Tue sday
CONTROL COMPELLED SELL MODERATE AMOUNTS OF DOLLARS AT 468-1/8.
FORWARDS WANTED AS CONTROL NOT OPERATING. SPOT FORWARD FRANCS STEADY.
DE CASTELLANE REPORTS CONTROL CONTINUES RECEIVES FOREIGN EXCHANGE IN
SUBSTANTIAL AMOUNT. TREASURY PURCHASE SATISFACTORY AND BUSINESS CON-
DITIONS IMPROVING. INTERNATIONAL SITUATION CONSIDERED VERY SERIOUS
AS GERMANY WILL SHORTLY HAVE COMPLETED GENERAL MOBILIZATION. FRENCH
PRESS REPORTS EXTENSIVE REQUISITIONS YESTERDAY IN BERLIN OF CARS,
LORRIES AND CHAUFFEURS.
CONFIDENTIAL
Seen
86
DOMINION OF NEW ZEALAND
OFFICE OF MINISTER OF FINANCE
WELLINGTON N.Z.
At Washington, D. C.
9th August, 1939.
Secret and Confidential
Mr. John W. Hanes,
Acting Secretary of the Treasury,
Washington, D. C.
Dear Mr. Hanes:
Following the discussions between Mr. Henry Morgenthau, Jr.,
Secretary of the Treasury, yourself and myself in connection with the
trade balances between the United States of America and New Zealand,
I am writing to set out the purport of our conversation and the suggestions which I made in connection therewith.
The value of imports from the United States into New
Zealand during the ten-year period 1929-1938 in New Zealand currency
amounted to
B 55,671,000
The exports from New Zealand to the United States
in the same period were valued at
Total in favor of the United States
20,692,000
E 34,979,000
The figures for the last calendar year (1938) were:Imports into New Zealand from the United States
Exports from New Zealand to United States
E 6,859,000
1,405,000
Balance in favor of United States
E 5,454,000
Some of the principal imports in 1938 into New Zealand from
the United States of America were:Tractors
Motor Spirits
Motor Vehicles and parts
Leaf Tobacco
Cinema Films
Lubricating Oils
E 699,000
528,000
771,000
320,000
228,000
212,000
Exports from New Zealand to the United States of America
declined from E4,772,000 in 1937 to E1,405,000 in 1939.
87
-2The major items showing decline were:1938
Sheep Pelts
Sausage casings
Rabbit Skins
Wool
E477,217
217,662
203,350
168,212
1937
$1,167,018
304,011
399,925
2,281,082
There are many commodities produced in New Zealand in
which our trade could be extended to the advantage of both the
United States of America and New Zealand. Wool, mutton and lamb,
butter and cheese are commodities which New Zealand produces in
excellent quality and in large volume, and if facilities were pro-
vided to extend the purchase of these goods by the United States
of America the present disparity in trade figures could be considerably reduced.
I pointed out during our conversations that the United
Kingdom purchases the major proportion of New Zealand's exports;
between 1929 and 1938 the proportion ranged from 73% to 88% For
many years the value of importe into New Zealand from the United
Kingdom has left a large balance of sterling funds in favor of
New Zealand out of which purchases from other countries, partionlarly the United States of America, have been financed. To a
certain extent due to the fall in returns from the sale of wool
there has been a decline in the sterling fund reserves from which
our imports are financed.
The amount of sterling funds declined to such an extent
last year that the New Zealand Government were compelled to take
steps to regulate imports and in addition to provide further funds
to enable the importation of essential commodities to continue.
During the past month the United Kingdom Government have
arranged special facilities to finance the importation of essential
commodities of United Kingdom origin and with these arrangements it
will be possible to continue the usual trade between the United
Kingdom and New Zealand.
The trade between my country and the United States of
America has been valuable to both our countries for many years
and New Zealand is particularly desirous of maintaining and ultimately
--
88
extending the trade, but it will not be possible to do so unless
either the purchase of our produce by the United States of America
is extended or some procedure is arranged that will enable the
balance of our purchases over our sales to be financed.
After pointing out the difficulty of raising foreign
loans through the usual private channels in the United States of
America I suggested to you that arrangements should be completed
whereby the Government of the United States loaned to the Government
of New Zealand the sum of $25,000,000 for a period of either ten or
twenty years at a rate of interest not exceeding 4% per annum.
This sum would be used in the ordinary course of trade
to finance purchases by New Zealand traders from United States producers. A direct loan of this nature would be the most convenient
and advantageous method of assisting the United States exporters who
desire to maintain their trade with New Zealand.
If it is not possible in accord with United States statutes
or it is not considered desirable to make a direct loan, I suggested
that the United States Government should recommend that the facilities
of the Export-Import Bank should be used to finance, under agreed conditions, United States exporters against the usual shipping documents
and under usual trade terms, subject to a guarantee by the New Zealand
Government to reimburse the Export-Import Bank the sums so paid as
overseas funds became available.
In any case, the necessity to reconcile imports into New
Zealand with the amount available from the sale of our exports will
entail some regulation and reduction of imports into New Zealand from
all countries; but if the funds are made available in the United States,
as suggested, the extent of the reduction will be reduced to a minimum
and the normal procedure for the financing of trade could be reintroduced
at a reasonably early period.
I have to leave the United States of America by the "Mariposa"
from Los Angeles on the 16th instant, and it would facilitate considera-
tion of the future policy in connection with our mutual trade if it were
possible for a reply to reach me prior to that date.
May I in conclusion say how much I appreciated the friendliness
of my discussions with the Secretary and yourself and express the hope that
it will be possible to extend and maintain the happy and frinedly nature
of our trade relations which have existed for 80 many years.
Yours sincerely,
signed
W. NASH
Minister of Finance.
Marier Nash
DEPARTMENT OF STATE
DIVISION OF FAR EASTERN AFFAIRS
August 9, 1939.
To:
Mr. Hanes
From:
Mr. Hamilton
Referring to my memorandum
of August 7, there is enclosed
herewith a copy of a further
telegram under date August 8
received by the Chinese Embassy
from the Chinese Ministry of
Foreign Affairs in regard to
the malaria problem in southwest
China.
3.7/d
89
Left with me by Mr. Tsui
of the Chinese Enbassy
August 9. - MMH
on
TEXT OF A TELEGRAPHIC MESSAGE FROM THE
MINISTRY OF FOREIGN AFFAIRS, DATED CHUNG-
KING, AUGUST 8, 1939.
Referring to your telegram of August 5th, the
Chinese Government's request for assistance contained
in our telegram of August 7th is formal and with the
full approval of Dr. H. H. Kung who deeply appreciates
American concern over the malaria problem. Preliminary
surveys have already been made, but they need to be
followed by more thorough survey and research and
control. Assistance is urgently desired in carrying
out this double program of research and survey and
control at the earliest time. When Dr. Balfour
visited China's South-west last May, he expressed
his personal interest in the malarial work. We will
communicate with him at once and work out a plan
for presentation to the Rockefeller Foundation for
its co-operation.
The Chinese Embassy,
Washington, August 9. 1939.
90
90-A
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Berlin, Germany
[Partly by Air]
DATE: August 9, 1939, 6 p.m.
NO.: 757
Reference is made to my telegram No. 724 of August
2, 7 p.m.
Today a member of the Embassy staff was informed by
the Charge d'Affaires of the Soviet Embassy that rapid
progress was being made in the German-Russian trade nego-
tiations here. He said that it was quite probable that
they would conclude a trade arrangement shortly. The
Charge said that new machinery was needed for a large
number of German designed and equipped factories, and
the Soviets could get long term credits only from Germany.
There were being discussed credits by Germany of five,
six and seven years duration, Russian commodities to be
used in payment.
The Charge added that Germany was not insisting that
payment be made solely in important commodities such as
manganese and petroleum products. The Germans were quite
willing to accept almost anything that Russia had to dispose
of, including such products as cotton waste. Russia had
a surplus of this, which could not be easily sold abroad
and which she could not use herself.
It is requested that this telegram be repeated to the
Treasury as Heath's No. 54.
EA:LWW
KIRK.
91
GRAY
JR
Rio de Janeiro
Dated August 10, 1939
REC'D 2:40 p.m.
Secretary of State,
Washington.
241, August 10, 3 p.m.
My telegram No. 230, July 29, noon.
The Director of Exchange informs ME that the German
compensation mark is now crossed with the dollar at
the rate of 3.53, The spread between the buying and
selling rates for compensation marks is fixed at 450
reis.
CAFFERY
DDM:WWC
51(e)
32
FEDERAL RESERVE BANK
OF NEW YORK
DATE
OFFICE CORRESPONDENCE
CONFIDENTIAL FILES
To
FROM
L. W. Knoke
SUBJECT:
August 10, 1939.
TELEPHONE CONVERSATION WITH
BANK OF ENGLAND.
Mr. Hawker called me at 12:34 today. War fears on the
Continent and in the Far East were developing as the recently much
talked of August 15 (the day on which German mobilization supposedly
reaches its climax) was approaching and the Japanese situation was
steadily growing worse. As a result of all this, the demand for
spot and forward (for end August and for three months delivery)
dollars today, both from the Far East and from the Continent, had
been heavy and the British fund had sold about $30,000,000 in support
of sterling. In other words today had been a real bad day; the first
one, as a matter of fact, in many weeks. Talk in the street and in
the press about a possible further devaluation of sterling in the
next three months was increasing and Morgenthau's visit to Europe
was causing further rumors. Up to today they had been doing a good
deal of business in the forward market but, not wishing to encourage
speculation by offering the market a chance to operate for forward
delivery, they had withdrawn today with the result that three months
dollars were now quoted at a discount of 2 3/8 points, equivalent to
about 2% per annum. All one could say as to the future of sterling
was that it really should be weak in view of all these fears and
talk of war the world over and of the strain on Britain's finances
which the rearmament program was bound to cause. One must expect to
see sterling under attack so long as this war fear and tension in
Europe continues. The French franc was firm and return of capital
to France continued. Belgium was likewise experiencing a reflux of
FEDERAL RESERVE BANK
OF NEW YORK
DATE August 10, 1939.
OFFICE CORRESPONDENCE
To
CONFIDENTIAL FILES
SUBJECT
TELEPHONE CONVERSATION WITH
BANK OF ENGLAND.
L. W. Knoke
FROM
93
2
money, partly due to repatriation, partly, however, also to substantial sales by Belgium of steel to England. At one time these
sales had represented about 60% of Belgian production but British
orders had recently been considerably reduced and the demand for
belgas might, therefore, ease up some hereafter. The Dutch guilder
was steady as a result of the formation of de Geer's cabinet, which,
however, was not expected to last very long. Demand in the London
market for gold coin was increasing and sovereigns and eagles were
particularly wanted at prices which represented a premium of nearly
1%.
I referred to the arrangements recently made by Glynn
Mills and Samuel Montagu for the earmarking of gold in Uruguay and
Argentina respectively and asked Hawker, if possible, to let me
have copies of the certificates issued in London in connection with
such earmarks abroad.
LWK:KW
03V13038
PERI SI our
94
August 10. 1939
Mrs. E. S. Friedman
Mr. Dietrich
Confirmation of telephone conversation.
will you please send the following cable. to Lt. McKay.
"Newspaper item states Secretary 111. President
anxious about his condition. Please cable rush.
Hanes"
Denna
Phoned to Mrs. Friedman - Aug. 10/39 - 11:25 a.m.
95
Copy
32w
Y156BU 52 GOVT
CHICAGO ILLS AUGUST 11 39 1251p
1939 AUG 11 PM 3 22
HON EDWARD FOLEY JR
GENERAL COUNSEL TREASURY WASHN D
C
RE M L ANNENBERG PLEASE BE ADVISED THAT THE GRAND JURY
RETURNED AN INDICTMENT AT NOON TODAY AGAINST THIS
INDIVIDUAL, CHARGING EVASION OF TAXES FOR YEARS 1932
TO 1936 INCLUSIVE, AND THAT WALTER H. ANNENBERG, ARNOLD
W KRUSE AND JOSEPH E HAFNER WERE ALSO JOINED AS AIDERS
AND ABETTORS. KINDEST PERSONAL REGARDS.
WILLIAM CAMPBELL
310 P
96
Memorandum of call of Secretary Morgenthau
on Mr. Vilhelm Buhl, Danish Minister of Finance, 11 a.m., August 11, 1939 (accompanied
by Mr. Perkins, Charge d'Affaires a.i.).
With regard to general conditions in Denmark, Mr.
Buhl said that there had been a very satisfactory harvest
and that export prices were well maintained, especially
for bacon. Prices for butter were not so good. As it is
the Danish practice to feed milk to hogs, there is a close
relation between the prices of butter and bacon. Mr. Morgenthau said that this was unlike the situation in the United States, where a close relation exists between the prices
of corn and hogs. He also mentioned that there was a large
production of pork in the United States and that the price
might conceivably drop to five cents per 1b.
Mr. Buhl continued that the Danish unemployment con-
ditions are not critical at present, inasmuch as the total
number of unemployed is now only about 50,000 as compared
with 100,000 during the early part of the year.
The Minister then said that the paramount question of
interest at the moment is that of peace or war and referred
to the large accumulations of gold and silver in the United
States.
Secretary Morgenthau said that it was true that we had
enormous amounts of gold and silver in the United States but
that
-2-
37
that this was better than having quantities of worthless
paper: in the last few years the countries which had possessed gold reserves had not done so badly in an economic
way. He added that large amounts of gold in the United
States were earmarked as belonging to foreign governments
and that, if there was an assurance of peace, a billion
or two of gold would leave the United States within a month.
Several foreign governments had been sending gold to the
United States for some time - the Swiss Government, for
example, which had been doing so for the last two years.
Reference was also made to the improved financial position
of France and to the competency of M. Reynaud in effecting
this very remarkable recovery.
Mr. Morgenthau remarked that, in distinction from the
policy followed in the Hoover Administration, the United
States had been building up its fleet and that this was not
for aggressive purposes or with a view to a conflict with
any particular country. It was simply for general defensive
purposes. The Secretary added that Japan was becoming weaker
constantly, for the Japanese were under the expense of main-
taining in the field an army of one million and a half men,
and that their credits in foreign exchange now amounted to
only some $150,000,000. It was due to this shortage of gold
that the Japanese were so desirous to take over foreign
concessions
-3-
98
concessions in Tientsin where there are stored very large
amounts of silver and jewels. In reply to Mr. Buhl's inquiry, the Secretary said that it was of course impossible
to comment as to the likelihood of the United States becom-
ing involved in a European war. He could say, however, as
a plain matter of fact, that England and France were today
more popular in the United States than at any time in the
past twenty years, and that Germany was correspondingly less
popular.
Mr. Buhl remarked that it was not feasible at the
present time for the Danish Government to refund any of its
outstanding indebtedness in the United States on account of
the fear of war and a possible aggression of Germany against
Denmark. This apprehension in the United States rendered
it quite impracticable to undertake any refunding operations
at the present time.
M.F.P.
99
Memorandum of call of Secretary Morgenthau
on Mr. C. V. Bramsnaes, Governor of the National Bank of Denmark, 11:30 a.m., August
11, 1939 (accompanied by Mr. Perkins, Charge
d'Affaires a.i.)
Mr. Bramsnaes said that the foreign exchanges had late-
ly been very quiet. In 1931, following the depreciation of
the British pound, the Danish crown had been devalued to
about 51% of its former value. Just lately the American
dollar had appreciated somewhat but, even if the dollar
should appreciate more, this would not have a very impor-
tant effect on Danish finance inasmuch as the majority of
Danish trade is with England, and the crown would simply
follow the pound pari passu.
Mr. Morgenthau asked whether it might not be necessary
for England to purchase supplies abroad in increasing quantities on account of their armament program, and whether
this might not cause the pound to depreciate. Mr. Bramsnaes
said that this was quite likely but that, for the reasons
stated, he did not consider that this would be an important
matter for Denmark. He believed that the British would try
to supply their wants from the home market to the greatest
extent possible. Most of the northern countries were in the
same position as Denmark with regard to following the British
pound, and he believed that they were generally content with
this
-2-
100
this situation with the possible exception of Sweden,
which had a crown of somewhat higher value.
With regard to Danish agricultural loans, Mr. Bramsnaes
said that these were not made in the form of credit grants
to farmers but in the shape of bonds which the farmers sold
on the exchange for cash. Thus the National Bank of Denmark was not concerned with this procedure, although they
were accustomed to buy these bonds on the exchange as suit-
ed their purposes from time to time. Mr. Bramsnaes said
that there existed a double national budget in Denmark;
one for operating expenses and another for capital account.
This was done not only under the present Socialist Government but also under a preceding Conservative Government.
Mr. Morgenthau remarked that the United States Government
was accused of being a Socialistic Government for even sug-
gesting the use of this form of a double budget. If the
United States had a separate capital outlay budget, it would,
of course, make our books look better. However, even then,
the annual operating expenses would cause somewhat of a defi-
cit.
M.F.P.
for Sech
101
COPY
MEMORANDUM TO GENERAL WATSON
$
SECRETARY TO THE PRESIDENT:
I refer further to your memorandum of August 7, 1939, to the
Secretary, inclosing a letter of August 5, 1939, from Congressman
Charles Kramer with regard to the recent Department ruling requir-
ing persons in this country to remain in Mexico for 24 hours before
being entitled to the $100 traveller's exemption when returning
through ports in the San Diego customs collection district.
Attached is a draft of a reply which I believe would be appropriate.
/p/ Stephen B. Sitton
WRJ/mgp 8-11-39
(COPY)
.02
My dear Mr. Kramer:
I refer to your letter of August 5, 1939, requesting revocation of
the Treasury regulation recently issued to limit the allowance of the
$100 traveller's exemption with respect to articles acquired in Mexico by
a traveller who returns to the United States through a port in the San
Diego customs collection district to cases in which the traveller has
remained abroad at least 24 hours.
I am advised that the factors stated in your letter were carefully
considered by the Treasury Department before the regulation in question
was issued and that the Treasury reached the conclusion that the regula-
tion, as issued, was necessary to enforce at the ports where it is to
be effective the requirement of law that the exemption be applied only
to articles acquired as an incident of a foreign journey. I am further
advised that under section 321 of the Tariff Act of 1930, as amended,
tourists bringing articles, of an aggregate value not exceeding $5, from
Mexico for their personal use into ports in the San Diego district can
receive free entry. It appears that this should cover in large measure
the incidental purchases of bona fide tourists spending but a short time
in Mexico.
In the circumstances, the Treasury regulation appears to be consistent
with law and not a matter in which any intervention on my part would be
appropriate.
Very sincerely yours,
Hon. Charles Kramer,
House of Representatives.
WRJ/mgp 8-11-39
TREASURY DEPARTMENT
103
INTER OFFICE COMMUNICATION
DATE AUG 1 1 1939
TO
Secretary Morgenthau
FROM
Mr. Foley
Re: Final report on status of Treasury Department's
legislative program at the end of first session
of 76th Congress.
I attach herewith in tabular form a final report on the status of
Treasury-sponsored legislation at the end of the first session of the 76th
Congress. This report is as of the date of adjournment on August 5, 1939.
I am glad to be able to report that the past session has been the most
successful one we have had since the establishment of the Legislative
Section in the summer of 1934 and the centralization in it (with some
exceptions) of Treasury legislative activities. The following tabulation
succinctly tells the story:
Session
year
Number of
bills handled
Number of
bills enacted
Percentage of bills
handled which were enacted
1939
31
27
87%
1938
24
13
54%
1937
32
22
69%
1936
29
21
72%
1935
31
19
61%
Some extremely important Treasury legislation was enacted during the
last session. The Stabilization Bill was of course, as you aptly put it,
our "Harvard game" and no one knows better than yourself of the stormy passage which that bill had through Congress.
-2- -
10
While the session would not have been a success without the enact-
ment of that bill, it is gratifying to be able to report that we were
able also to secure the enactment of some other very constructive Treasury
legislation. I think it worth picking out from the attached tabulation a
few of the more important of these bills, and briefly describing them to
you.
Notable among these was the Second Liberty Bond Act amendment re-
moving the $30,000,000,000 bond limitation partition from the Public Debt.
This bill, of course, served as a sounding board for a good deal of Public
Debt oratory of the obvious sort. However, the bill's chief troubles came
from the fact that it got mixed up with the highly controversial T.V.A.
legislation authorizing the issuance of T.V.A. bonds for the purchase of
certain private utility properties. Senator Norris added the T.V.A. bond
amendment to our bill in the Senate but this was eventually dropped after
an agreement was reached on the separate legislation on this subject.
An important, but little publicized, Treasury bill enacted into
law was the one extending and streamlining the Government Losses in
Shipment Act which the Department got through Congress in 1937. This
session's bill was hailed with general enthusiasm by members and committees of Congress when we told them that losses payable out of the
revolving fund set up by the 1937 Act have been less than $500 all told,
whereas prior to 1937 we were paying insurance premiums to private
interests of over $200,000 a year to insure against losses on Government
shipments of valuables, a net savings to the Government of almost half a
million dollars in two years.
--
105
Another major bill enacted was our big relief bill to cover disallowances and adjustments in the accounts of present and former
Treasurers, disbursing officers, and others. This bill, one of the
longest of its kind on record, covered over $1,100,000 in disallowances
and adjustments, and dealt with matters which have been hanging fire
for many years, some of them dating back to war-time days. Almost half
of this amount resulted from losses of receipts from sale of securities
by the postal service. The bulk of the remainder covered unavailable
items in the accounts of present and former Treasurers resulting from
what are known as "check reclamation" cases. These are usually checks
bearing forged endorsements for which the Treasurer, without having any
means to detect such forgeries, is held responsible. This relief bill
also contains an item validating salary payments made to the late Captain
Sayles in his capacity as Assistant Deputy Commissioner of the Alcohol
Tax Unit. This, you will remember, was a somewhat controversial matter
and efforts to obtain legislation on the subject several years ago
failed due to congressional opposition.
A number of important Coast Guard bills were enacted. These included the so-called Coast Guard National Defense Bill, which authorizes
the Secretary of the Treasury to construct three large Coast Guard cutters,
establish an Alaska base and air station, and purchase fifteen seaplanes.
Over $14,000,000 is involved. Another Coast Guard bill increased the
line officers of the Coast Guard by 154 and established the rank of rear
admiral for the offices of Assistant Commandant and Chief Engineer of the
100
-4- Coast Guard. A bill was also enacted establishing a voluntary and involuntary retirement system for Coast Guard enlisted men of twenty years
or more of service, as well as another bill establishing the Coast Guard
Reserve to be made up of private yachtsmen and motorboat owners who will
voluntarily assist the Coast Guard and encourage law observance. Several
bills were also enacted designed to perfect the consolidation of the
Lighthouse Service with the Coast Guard provided by Reorganization Plan
No. II, particularly with respect to the integration of the personnel
of the two services.
Finally, several important Treasury-sponsored law enforcement
measures were enacted into law, notably the so-called forfeiture bill to
subject to forfeiture vessels, vehicles and aircraft used to facilitate
violations of the narcotic laws, the counterfeiting laws, and the National
Firearms Act. A Treasury bill on this subject was pending during the
entire life of the last Congress, the 75th, but our repeated efforts to
secure its enactment during that Congress were unavailing.
Of the four Treasury bills still pending in Congress, two have
passed one House. Since the recent adjournment marked the end of a
session and not the end of a Congress, these will retain the same
status in the next session which they have achieved in this.
We also, of course, did a great deal of work on other legislation,
notably the Social Security Act amendments, the Revenue Act of 1939, and
the big Lending Bill, the first two of which were passed by Congress.
None of these bills, however, was, strictly speaking, a Treasury bill.
107
-5 Aside from the foregoing, the Legislative Section of this office
handled a total of 691 Treasury reports on legislation during the past
session. This compares with a total of 402 during the 2nd and 3rd
sessions of the 75th Congress (which you will remember were virtually
consecutive). Of the 691 reports handled during the session just ended,
440 were reports to committees of Congress, 135 were reports to Budget
on pending or proposed legislation, and 116 were reports to Budget on
enrolled bills to assist the President in determining whether or not to
approve these bills.
The Legislative Section transacted legislative business with
legislative counsel and worked with and appeared before virtually all
the major and many minor committees of both houses of Congress during
the session. In addition, it drafted or assisted in drafting much
legislation not covered by this report, such as bills which are still
in process, bills which were completed but which for one reason or
another you or Mr. McReynolds decided not to submit at this time, bills
prepared as a courtesy accommodation to members of Congress, etc. The
Legislative Section also opposed legislation objectionable to the Treasury
Department and drafted or participated in drafting a considerable number
of executive orders, proclamations, and proposed reorganization plans.
In addition, this section did a large amount of miscellaneous research
work on legislative and other problems of interest to the Department and
generally strove to keep the various bureaus and branches of the Department
advised about all phases of legislative matters in which they were
interested.
108
-6 The foregoing summarizes the legislative activity of this office
during the past session. To get a complete picture of all Treasury
legislative activity during the session, it will be necessary for you
to consolidate this report with the corresponding report of Mr. Tarleau's
office.
F.N.Th
109
FINAL PROGRESS REPORT ON TREASURY LEGISLATION DURING THE
FIRST SESSION OF THE 76TH CONGRESS
A. Treasury-sponsored legislation enacted during the session.
The bill first mentioned in each case is the bill which was
enacted. If there was a companion bill in the other House
it is cited in parentheses.
BILLS
BRIEF EXPLANATION
APPROVED
PUBLIC OR
PRIVATE NUMBER
Mar. 28, 1939
Private Res.No. 1
Apr. 15, 1939
Private No. 26
May 15, 1939
Public No. 77
May 22, 1939
Public No. 84
Lizzie Beck bequest
Authorizes the U. S. to accept certain real
estate devised to it by Lizzie Beck, Mena, Ark.
May 24, 1939
Public No. 89
5. S. 1876 (H.R.4982)
Increases line officers of Coast Guard by 154,
Establishes voluntary and involuntary retirement
system for enlisted men with 20 years or more
May 24, 1939
Public No. 87
Compensates enlisted man for personal property
May 31, 1939
Private No. 46
1. H. J. Res. 110
(s. J. Res. 75) Coyle,
Permits acceptance of medal from Greece.
Commander Henry - foreign decoration
Authorizes payment of balance due as compensa2. S. 529
Relief of Margaret Rose tion for post office site.
Uncapher
3. H. R. 3231
Coast Guard Mailing
of firearms
4. S. 2244 (H.R.5836)
Coast Guard readjust
commissioned personnel
6. S. 595
Coast Guard 20 year
retirement
7. H. R. 4131
Relief of Melvin
Extends to Coast Guard officers privleges en-
joyed by officers of other military services
of sending firearms through mails.
and establishes rank of rear admiral for offices
of Assistant Commandant and Chief Engineer.
service.
lost in fire at Nome, Alaska.
Gerard Alvey
8. S. 1369
Authorizes Secretary of the Treasury to con-
June 2, 1939
Public No. 104
110
2-
A. Treasury-sponsored legislation enacted during the session (Continued).
BILLS
9. S. 2404 (H.R.6017)
BRIEF EXPLANATION
APPROVED
PUBLIC OR
PRIVATE NUMBER
Public No. 128
Authorizes demolition of old post office building.
June 13, 1939
Establishes voluntary reserve of private yachts-
June 23, 1939 Public No. 152
Portland, Oregon,
Courthouse
10. H. R. 5966
Coast Guard Reserve
men and motorboat owners to assist Coast Guard
and encourage law observance.
July 6, 1939 Public No. 165
Continues powers relating to stabilisation fund,
devaluation of the dollar, and purchase of silver.
Stabilisation Fund
July 15, 1939 Private No. 93
Authorises reimbursement of Coast Guard personnel
12. S. 2167 (H.R. 5349)
Coast Guard Hurricane for losses of personal property in 1938 hurricane.
11. H. R. 3325
Relief
13. H. R. 5346 (s.1953)
Relief of Mrs. A.R.
Provides compensation for loss of life and motor- July 15, 1939 Private No. 95
boat in attempt to help Coast Guard boat.
Barnard and others
(Stephens, Prairie,
and Mrs. Needles)
14. H. R. 5748
Second Liberty Bond
Removes $30,000,000,000 bond limitation parti-
July 20, 1939 Public No. 201
Places District Commanders and constructors in
the line of the Coast Guard and abolishes the
district commander and constructor corps, thus
August 5, 1939 Public No. 292
tion in the Public Debt authorisation.
Act amendment
15. H. R. 5611
Coast Guard District
Commanders and con-
structors
doing away with the last of the special service
corps of the Coast Guard.
111
-3PUBLIC OR
PRIVATE NUMBER
A. Treasury-sponsored legislation enacted during the session (Continued).
BILLS
BRIEF EXPLANATION
16. H. R. 7288 (s.2859) Provides for the induction into the Coast Guard
miltary establishment in ranks, grades, or
Lighthouse Service
personnel
APPROVED
August 5, 1939
Public No. 291
ratings appropriate to their qualifications,
experience and lengths of service as determined
by the Secretary of certain professional, scientific, and other personnel of the Lighthouse
Service which was transferred to the Coast Guard
by Reorganization Plan No. II.
Health Council pay
Health Council at rate of not to exceed $25 per
18. S. 1156 (H.R.2742)
Transfers target range at Morehead City, North
Carolina, from War Department to Treasury.
19. H. R. 5375 (s.2166)
Coast Guard Nautical
Education
21. S. 1899
Surgeon General -
Assistant to
1939 Public No.
August
1939 Public No.
(Coast Guard).
Authorizes Commandant of Coast Guard to detail
officers to state and territorial nautical
schools to give nautical instruction.
Provides for seizure and forfeiture of vessels,
20. H. R. 6556
Seizure and forfeiture vehicles and aircraft used in violating narcotic,
of vessels, vehicles
and aircraft
August
diem instead of $10.
August
1939 Public No.
and counterfeiting laws and National Firearms
Act.
Creates office of Assistant to Surgeon General
with rank of brigadier general and authorizes
August
,
Range
1939 Public No.
,
Morehead City Target
August
,
17. S. 1540
National Advisory
Permits Secretary of the Treasury to compensate
nongovernmental members of the National Advisory
1939 Public No.
detail of Public Health Service officers to
serve in such office.
Where the approval date and public or private number of a bill are left blank it indicates that
congressional action was completed on that bill prior to the adjournment of the session and the
bill needs only the President's signature to become law.
112
A. Treasury-sponsored legislation enacted during the session (Continued).
BILLS
BRIEF EXPLANATION
Permits advance of funds elsewhere appropriated
22. H. R. 6555
Evidence - purchase by Congress to narcotic and customs officers to
of
PUBLIC OR
PRIVATE NUMBER
APPROVED
August - 1939 Public No.
purchase evidence and information of violations
of narcotic and customs laws.
Compensates Coast Guard enlisted man for loss of
August
1939 Private No.
24. H. R. 6614
Extends scope of Government Losses in Shipment
Government Losses in Act of 1937, which was sponsored by the Treas-
August
1939 Public No.
25. H. R. 6021 (s.2473) Repeals law fixing minimum price of $100,000
for sale by Government of old post office
Akron, Ohio, post
office
building and site at Akron, Ohio.
August
1939 Public No.
26. H. R. 7049 (s.2706) Adjusts accounts of present and former dis-
August
1939 Private No.
23. S. 1882 (H.R.5896)
Relief of Thomas A.
personal property in a fire in Nome, Alaska.
Ross
Shipment insurance
bill
Relief of Summers,
Allen, and Sayles,
etc.
ury, and generally streamlines that Act and
remedies difficulties which administration of
that Act has disclosed.
bursing officers and treasurers of the United
States and covers disallowed salary payments
to the late Captain William R. Sayles in his
capacity as Assistant Deputy Commissioner of
Alcohol Tax Unit.
27. S. 2170 (H.R.6747)
Lighthouse Service
retirements
Permits retirement at age of 64 instead of 65
July 27, 1939
Public No. 239
of certain Lighthouse Service personnel who
have 30 or more years of service and whose
positions may be abolished as a result of the
consolidation of the Lighthouse Service with
Coast Guard effected by Reorganization Plan
No. II,
Where the approval date and public or private number of a bill are left blank it indicates that
congressional action was completed on that bill prior to the adjournment of the session and the
bill needs only the President's signature to become law.
-5-
113
B. Treasury-sponsored legislation pending in Congress at the end of session.
BILLS
1. H. R. 2539
D. C. Credit Unions
BRIEF EXPLANATION
Transfers jurisdiction over
District of Columbia Credit
Unions to Farm Credit Admin-
istration.
REMARKS
STATUS
Jan.13, 1939 - Introduced
and referred to House
District of Columbia Committee.
Jen.25, 1939 - Referred to
Judiciary Subcommittee of
This bill has been
stalled by opposition
of D. C. Credit Unions.
Jan.13, 1939 - Introduced
in House and referred to
We expect to get enact-
that Committee.
2. S. 844 (H.R.2541)
To simplify the accounts of the Treasury
(5% bill)
Covers into Treasury balance
of funds deposited for redemp-
tion of national bank notes
House Banking and Currency
(5% fund).
Committee.
Jan.19, 1939 - Introduced
in Senate and referred to
ment of this bill at the
next session. The busy
calendars of the House
and Senate Banking and
Currency Committees
Senate Banking and Currency crowded it out this
session. However, in
Committee.
July 25, 1939 - Favorably securing Senate passage
reported by Senate Committee of the bill more pro(Senate Report No. 928).
August 1, 1939 - Passed
Senate.
gress was made than
during the 75th Congress
when the bill was submitted to Congress but
did not pass either
House.
3. H. R. 6767
Enforcement officers
- death and dis-
ability benefits for
Increases death and disability June 9, 1939 - Introduced This rather controversial
bill was submitted to
in House and referred to
benefits of law enforcement
officers throughout the Govern- House Judiciary Committee. Congress too late to have
June 10, 1939 - Referred to a chance of enactment
ment.
Subconmittee No. III of the during the past session.
House Judiciary Committee.
114
6-
B. Treasury-sponsored legislation pending in Congress at the end of session (Continued).
BILLS
4. S. 2689
Copyright Act
amendments
BRIEF EXPLANATION
Authorizes joint regulations
by Secretary and Postmaster
General to prevent importation
STATUS
June 23, 1939 - Introduced
in Senate and referred to
tations. Also irons out
administrative difficulties
involved in enforcing this law,
particularly those raised by
recent Supreme Court decision
(Washingtonian Publishing Co.
case).
This bill likewise was
submitted too late to
Senate Committee on Patents. be enacted during the
July 11, 1939 - Favorably
of piratical copies of works
copyrighted in U.S. irrespective reported by Senate Com-
of manner of importation. Present law limited to mail impor-
REMARKS
mittee (Senate Report No.
760).
August 1, 1939 - Passed
Senate.
past session. Senate
passage, however, was
secured and we discus-
sed the bill with Dr,
Sirovich, Chairman of
the House Committee on
Patents, and he stated
that he would push it
through for us at the
next session.
115
-7APPENDIX TO FINAL PROGRESS REPORT TO TREASURY LEGISLATION DURING THE FIRST SESSION, 76th CONGRESS.
The following bills, for various reasons indicated below, have not been
included in the general progress report on Treasury legislation during
the first session of the 76th Congress:
BILLS
1. H. J. Res. 308
Toothbrush Bill Customs marking
provisions
BRIEF EXPLANATION
STATUS
Interprets "ultimate purchaser" May 29, 1939 - Introduced
in House and referred to
as used in customs marking law
(section 304 of Tariff Act). Two House Ways and Means Committee.
recent Customs Court decisions
appear to have defeated the con- July 7, 1939 - Favorably
gressional intent in this respect. reported to full com-
mittee by Ways and Means
Subcommittee.
REMARKS
The Treasury is not
pressing this bill.
We submitted it without
recommendation and have
discharged our obliga-
tions in calling the
matter to congressional
attention. The full
Ways and Means Committee
considered the bill at
an executive session
meeting on July 7, and
was unanimously in favor
of the bill but, before
proceeding further, decided to contact the
Senate Finance Committee
to see whether it could
be used as a vehicle for
extensive tariff amendment in the Senate.
2. H. R. 6830
Navy Department -
New buildings for
Secretary of the Treasury authorized to acquire land and to
construct new Navy buildings in
District of Columbia.
June 14, 1939 - Introduced This bill was submitted
in House and referred to
to Congress too late to
House Public Buildings and secure passage during
Grounds Committee.
July 1, 1939 - Reported
favorably by House ComHouse Report No.
the past session. Reorganization Plan No. I
transferring the Public
Buildings Branch of the
116
-8APPENDIX (Continued).
BILLS
BRIEF EXPLANATION
STATUS
Procurement Division to
the new Federal Works
Agency makes this proposed legislation now of
concern to the Federal
Works Agency rather than
the Treasury.
H. R. 6830 (continued).
3. H. R. 6639
Auto Mileage Bill -
REMARKS
Permits the use of privatelyowned vehicles for official
June 6, 1939 - Introduced
in House and referred to
travel when duly authorized
House Committee on Expendi-
order to be used, must be
registered in the name of the
traveler.
favorably by House Committee (House Report No.
without regard to present requirement that vehicles, in
Enactment of this bill
could have been secured
during the past session.
tures in Executive Depart- However, at the time the
ments.
bill passed the House
Representative Taber, a
July 18, 1939 - Reported
1213).
July 31, 1939 - Passed
House.
Republican, tacked on an
amendment reducing the
allowance to Government
travelers for use of their
own cars from 5 cents a
mile to 4 cents a mile.
Rep. Cochran, House
sponsor of the bill and
Chairman of the Committee
that reported it, advised
us that while we were
free to attempt to have
this amendment deleted in
the Senate, in view of
the economy temper of the
House he could not vouch
for his ability to secure
House concurrence in a
Senate amendment strik-
ing out the Taber mend-
117
-9APPENDIX (Continued).
BILLS
BRIEF EXPLANATION
STATUS
REMARKS
therefore, instructed us
H. R. 6639 (continued).
to kill the bill for the
session, although we
could have easily secured
Senate passage of it as
passed by the House. We
will revamp the bill for
introduction next session
in a form in which it will
not readily be amenable
to amendments reducing
the mileage allowance.
4. H. R. 7492
For the relief of
J. Frank Kuner
Validates salary payments made August 3, 1939 - Introduced This bill cannot properly be tabulated among
to Mr. Kuner, a Private in the in the House and referred
Uniformed Force of the Secret
to the Committee on
Service, during the period from Claims.
July 1, 1938 to November 25,
1938, notwithstanding the fact
that he was not a citizen of the
United States and existing law
accordingly prohibited any salary
payments to him. Mr. Kumer believed that he was born in Ohio
and as a consequence was a citizen
of the United States. He subsequently learned of his error from
the census records.
bills during the last
session since it was not
introduced until Aug.3,
1939, two days before the
end of the session.
118
- 10 APPENDIX (Continued).
BILLS
5. International Toll
Bridge Bill (No
number, bill not
yet introduced)
BRIEF EXPLANATION
Requires owners and operators
of international toll bridges
STATUS
July 11, 1939 - Proposed
legislation on this sub-
and tunnels to furnish adequate ject sent to Hill.
rent-free quarters to Government No bill introduced prior
to adjournment.
agencies, such as customs,
necessarily stationed at bridge
or tunnelheads for inspectional
purposes.
REMARKS
Because of its impact on
private interests, this
bill will probably require
public hearings. Under
these circumstances it was
submitted to Congress too
late to secure any consideration during the
past session.
AUG 1 1930
MEMORANDUM ? THE PRESIDENT
This is in response to your memorandum of August 5, requesting
an evaluation of a proposal to cease purchases of gold from Japan.
1. The Japanese industrial organization and military establish-
ment can be maintained only with the continued importation of necessary
raw materials. Japan importe the bulk of its petroleum, metals, ma-
chine tools, lumber, cotton, fertilizers and a large number of vehicles
and airplanes.
To purchase these commodities in foreign countries, a continuous
flow of foreign exchange is needed.
2. Sales of gold to the United States are a current source of
foreign exchange to Japan. However, Japan acquires a larger amount
of foreign exchange from other sources, particularly from her commodity
exports.
In 1938 Japan sold abroad $430 million of commodities, of which
8120 million was sold in the United States. She acquired $185 million
from the proceeds of the sale of gold, all of which was sold to the
United States; $40 million from the liquidation of dollar deposits in
the United States; and $46 million from credit extended to the Yokohama
Specie Bank by New York banks on an overdraft. (It was reported that
this overdraft had full collateral in United tates Government bonds.)
In addition the Japanese may have been liquidating foreign securities
which were owned by the Japanese Government or by Japanese individuals
and institutions.
Japan has already sold two-thirds of the gold stock which she
had accumulated prior to the outbreak of hostilities in China. From
March 1937 through July 1939, Japan sold 8513 million of gold to the
United tates and $4 million to England. It has been estimated that
Japan has about 150 million in gold stocks left. The produces about
$60 million per year.
3. The refusal by the United States to buy Japanese gold could
not prevent Japan from selling her gold in other markets. (Our refusal
to purchase gold from Russia during the period 1920 to 1934 did not
prevent Russia from obtaining the world price for its gold.)
Sent to White House 8-11-39
10:30 A.M.
120
-2The proposal that the United States make effective its refusal
to buy Japanese gold by refusing to purchase gold from any country
which does buy Japanese gold is not administratively fessible for
the following reasons: (a) It is difficult to trace gold, the identity
of which can readily be changed; (b) gold is purchased and sold throughout the world by individuals as well as by governments (e) foreign
governments, particularly England, would probably notcoooperate in a
program involving the sterilisation of Japanese gold because it would
upset their traditional free gold market. When England imposed sanctions and clearing arrangements against Italy in the Ethiopian crisis
the London gold market remained free for the sale of Italian gold. The
expenses of shipping would be greater to Japan but the additional ex-
penses involved would be relatively trivial.
4. Unless this country were prepared to reduce the price of gold
in terms of the dollar, this country, acting alone, could not appreciably reduce the amount of dollar exchange Japan would receive for
its gold. It is assumed that we would not take any action at this time
that would appreciate the value of the dollar in terms of the world's
currencies.
5. The value of gold as a medium for the settlement of international balances would be affected adversely. Since the United States
now holds almost 60 percent of the world's gold this matter is of great
importance to us.
6. The amounts of gold sold by Germany and Italy are not substantial in comparison with the amount of foreign exchange these countries
acquire through exports and the liquidation of foreign assets. Germany
reported sales of $35 million in gold in 1938, in comparison 1 th sales
of commodities of more than $2 billion. Italy reports to have sold less
than $1 million in gold in 1938.
Pussia sold $114 million of gold in 1938 but all of this gold was
sold on the London market and if it came to the United States, came in-
directly as British gold.
7. I cannot foresee any direct effect this proposal might have
upon German-Russian economic relations.
8. The objective sought in the proposal, i.e., that of weakening
Japan, can be achieved more effectively and with fewer disadvantages
to the United States by imposing restrictions on the commodity trade
121
-3of Japan, either by the United States acting alone or acting in
cooperation with other major countries. Some suggested proposals
of this nature are as follows,
Remove Japan from the list of countries obtaining
the benefit of the Trade Agreement tariff concessions
as provided in Section 350 of the Tariff Act.
Imposition of new and additional duties on Japanese
imports to the United States under Section 338 of the
Tariff Act of 1930.
Administrative embargo on the export of arms and
ammunition to Japan.
Administrative embargo on the export to Japan of
materials used in the conduct of war.
Congressional action to embargo the shipment of war
materials and supplies to Japan.
(Signed) John W. Hanes
acting Secretary
8/8/39
122
COPY
August 11, 1939
MEMORANDUM TO THE FILES
In response to a telephone request from Mr. Jesse Jones,
who is now on the Pacific Const, asking whether or not we
should consider at this time application for = new capital
by the Bank of America, Mr. Hanes called a meeting on
August 10th, which was attended by the following: Messrs. Uphan,
Mulroney, Foley, and Gaston. It was the unanimous opinion of
that group that the Secretary should not consider making A requeet upon the Reconstruction Finance Corporation to furnish
new capital to the Bank of America until setisfactory answer
had bean made to the Comptroller's letter of criticism dated
July 31, 1939. Accordingly, Mr. Hanes had the following
telephone conversation with Mr. Jones in Los Angeles on
August 11th:
"Secretary will not request Reconstruction Finance
Corporation to make loan or subscribe to stock of
Bank of America until Bank of America has made
satisfactory reply to Comptroller's letter of
criticism of July 31, 1939."
122-A
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Consulate General,
Amsterdam, The Netherlands
DATE: August 11, 1939, 3 p.m.
The death in Paris on August 9 of the managing director
and guiding figure of the private Mendelssohn bank in
Amsterdam, F. Mannheimer, was sudden but not unexpected.
This morning the bank applied for permission to declare a
moratorium on all debts owed by the bank. At the present
moment this is the only known fact, but it is said that
the amounts involved - particularly large commitments made
under the personal direction of Mannheimer - are enormous
although France, Switzerland and Belgium are the principal
countries interested.
The result of this action may be liquidation, but it
is believed that would be of relatively little direct
importance to the Netherlands and the United States, although
secured loans have been made by some banks in each country.
Apparently the first reactions to the unexpected
announcement by the bank involve no serious concern for
the general situation in banking circles in Amsterdam,
nor is it thought that there will be any important effect
on national confidence.
[Telegram received without
signature.
EA: LWW
122-B
GRAY
CJ
PARIS
Dated August 11, 1939
REC'D 3:55 p.m.
Secretary of State,
Washington.
1488, August 11, 6 p.m. (SECTION FOUR).
ThE markets here WERE nervous today on the suspension of Mendelssohn and Company in Amsterdam apparently
hastened by the death of Mannheimer, (Although he has
long been suffering from a very bad heart rumors of
suicide are not unnaturally circulating), A communique
issued by the Ministry of Finance recognizes the impor-
tance attributed to the suspension in financial circles
and indicates that the French Government is in no way
affected. The Banque de Paris Et des Pays Bas has been
appointed the French Government's fiscal agents in Am-
sterdam in place of Mendelssohn. While little is yet
known here of the reasons behind MendElssohn's suspension
it is felt that that concern may have been biting off
more than it could chew recently on the French and other
loans. There is also a feeling that Mendelssohn's was
pretty much a one man show - Mannheimer - and with his
death
122-C
-2- #1488, August 11, 6 p.m. (SECTION FOUR) from Paris
death the other partners may wish a moratorium to SEE
just where they stand and what his personal commitments
may amount to. The Amsterdan markets SEEMED to have
taken the suspension calmly.
BULLITT
CSB
122-D
GRAY
CJ
PARIS
Dated August 11, 1939
REC'D 4:05 p.m.
Secretary of State,
Washington.
1488, August 11, 6 p.m. (SECTION FIVE).
The fund again gained considerable sterling today
with the pound under pressure held at 176.71 (yesterday's
drop from 176.72 was due to the difference in value date).
The forward dollar was strongly bid and the forward franc
increased its premium to 7 centimes and 121 CENTIMES
for one and three months respectively. The Swiss franc
and belga were unchanged and the florin was strong
closing at 20.22 partly on liquidation of contracts and
short covering on the Mendelssohn failure. Rentes WERE
down about 50 centimes at the opening but closed only
10 centimes on support by the rentes fund.
Today's Bulletin de la Statistique Generale shows
the general industrial production index at 100 for June
(base year 1928) the principal improvement OVER the 98
for May resulting from rises in the rate of operations
in the textile industry, steel, metal working, building,
and mines which offset declines in the chemical and paper
industries
122 - E
-2- #1488, August 11, 6 p.m., (SECTION FIVE) from Paris
industries. The index for miscellaneous industries remained stationary at 110.
Owing to the Assumption Day holidays the markets
will be closed until Wednesday.
(END OF MESSAGE).
BULLITT
NPL:CSB
Mr. Hanes
no3
CORRECTION
Please write "End of Message" at end of Section 3
of Paris cable #1490, Aug.12.
122 - F
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris, France
DATE: August 12, 1939, 2 p.m.
NO.: 1490
FOR THE TREASURY.
This morning Rueff confirmed to us that while as
yet nothing definite is known, the main reason for the
Mendelssohn suspension seems to have been lack of liquidity
resulting from its recent flotations of French and Belgian
loans, and the calling in of short term advances which
had been extended to Mendelssohn on the part of these loans
it still held. Rueff said again that no deposits were held
by Mendelssohn for the French Government, and the suspension
would not directly affect them. It was possible, he admitted, that French loan quotations might suffer, but he said
that in the Netherlands holders of such securities have
formed an organization which will probably be able to prevent
any great drop in the quotations. He did not say anything
about the implications involved in Mendelssohn's retention
of such substantial blocks of their recent issues.
On the Swiss Bourse today, Rueff said, French securities
are strong; the Swiss Bourse was the only one open today.
No evidence of fraud has come to light so far, he said,
and his impression is that Mendelssohn's liabilities will
be about balanced by their assets.
END SECTION ONE.
BULLITT.
EA:LWW
122-G
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Legation, The Hague, Netherlands
DATE: August 12, 1939, 3 p.m.
NO.: 118
STRICTLY CONFIDENTIAL.
The reaction on the Amsterdam market yesterday to
Mannheimer's death and the Mendelssohn firm's application
for suspension of payments was relatively slight, as the
Department is probably aware. After the first flood of
rumors, public opinion here both in and out of banking
circles is that it apprehends no serious repercussions for
other Dut h banks or for the general Dutch financial fabric.
No difficulties are envisaged by the Handel Maatschappy,
which might have been expected to be most adversely affected
by the situation of the Mendelssohn firm; the general view
is that this is the case. Such rumors as there may have
been that Mannheimer committed suicide may be discounted;
his death might have occurred at any moment in view of his
extremely bad health for a long time.
The claim is made by Treasury and National Bank officials
here that they have seen this coming for some time - and
I see no reason to doubt them in this respect. This situation
was foreseen particularly during the last month when
Mendelssohn's private loans to France and Belgium, mostly
to France, were distinctly overdone, according to one
informant. The French Finance Ministry communique of yesterday stated
122- - H
--
terday stated that these private contracts had been executed in connection with the recent public Ilotations of
French loans by a consortium of Dutch and Swiss banks,
including Mendelssohn. Whether or not this is the case,
there naturally is danger of the large amount of French
paper which Mendelssohn holds coming on the market.
Although it has been denied in the press, I have been
informed confidentially that yesterday the French Government gave active support to French issues on the market
in Amsterdam.
The view is also expressed by the officials mentioned
above that the present Mendelssohn situation will have
no serious ill effects for the Netherlands. In addition
they say that there are no Dutch deposits with the
Mendelssohn bank, although there are some foreign deposits,
and Dutch bank loans to this Bank are well covered.
It is noted with some interest that the local press,
in trying to find reasons for Mendelssohn's difficulties,
reports that "according to data of the Securities Exchange
Commission", at the end of May some 550,000 shares of
American Bosch were held by the firm of Mendelssohn in
the name of other Amsterdam firms.
END MESSAGE.
GORDON.
EA:LWW
122-I
PARAPERASE OF TELEGRAM RECEIVED
FROM: American Embassy, Berlin, Germany
[Partly by air]
DATE: August 12, 1939, 4 p.m.
[Received August 14.]
No.: 786
Puhl, the active head of the Reichabank under Funk
the nominal head, said in a conversation with a member
of the Embassy staff that he greatly regretted the publicity
given here to the recent statements by Grady on German-
American trade. He also regretted the Securities and
Exchange Commission's action in refusing to permit registration of German conversion bonds. Puhl said that
the efforts which moderate elements in the Government were
exerting to bring about a "moderation of policy* on the
part of the Reich were weakened by these actions, and
the hands of the extremist influence in the Party and
the Government were strengthened. On both occasions,
he said, he had been the subject of reproaches to the
effect that he could see now that he wasn't getting any-
where with his policy of conciliation.
At the time Grady's statements were published in the
local press, he had been called in by Funk. The latter
wanted to issue a statement "correcting" the reported
statement that no proposals for solving the trade and
economic issues between Germany and the United States had
been put forward by Germany. It was Funk's idea to make
reference
122-J
-2- reference to the proposals suggested last summer, presumably
in a speech by Brinkmann. [Reference: telegram No. 387
of August 16, 1938, 6 p.m., from the Embassy.] A personal
letter had also been addressed to the Ambassador, which it
is understood is in the Department's files, in which it
is suggested as a provisional scheme that German-American
trade be carried out on the basis of a special "Amerika
mark". Funk also wanted to make reference to this suggestion.
Puhl said that he was able to dissuade Funk from
making a public reply to Grady's statements. He suggested
that since he, Puhl, knew Grady personally and favorably,
he might write him a personal letter to try to have the
"misunderstanding" cleared up. In addition, Puhl said
that on both sides there were mistakes and misunderstand-
ings as regards trade relations. He said that he was
thoroughly aware of the disastrous effect on German economic
relations of German policies of exchange control and over-
valuation of the mark. However, it was not possible to
these policies
eliminate *kam/at the moment, even though they were
economically vexatious and disadvantageous to the Germans.
It is requested that you repeat this telegram to
the Treasury as Heath's No. 55.
KIRK.
EA:LWW
c
0
P
Y
August 14, 1939
Dear Mr. Campbell:
I have just had a cable from Secretary Morgenthau
requesting me on his behalf to congratulate you and
those members of your staff who have worked so dili-
gently for the Annenberg indictment. We all think it
a job exceedingly well done.
With kindest regards, I am
Sincerely yours,
(Signed) John W. Hanes
Mr. William Campbell,
United States Attorney,
450 U. S. Court House,
Chicago, Illinois
JWH:ce
123
124
C
0
P
Y
August 14, 1939
Dear Elmer:
I have just had a cable from the Secretary of
the Treasury, asking that I convey to you, to
Mr. Madden, and the agents associated with him, his
warm congratulations on the successful outcome of
several years of diligent and painstaking work leading to the return of a true bill by the Grand Jury
in Chicago against Annenberg.
With every good wish, I am
Sincerely yours,
(Signed) John W. Hanes
The Honorable Elmer L. Irey,
Chief, Intelligence Unit,
Bureau of Internal Revenue,
Washington, D. C.
JWH:ce
C
0
125
P
Y
August 14, 1939
Dear Frank:
I have just had a cable from the Secretary
requesting me on his behalf to congratulate you
and those members of your Department who have
worked so diligently for the Annenberg indictment.
We all think it a job exceedingly well done.
With kindest regards, I am
Sincerely yours,
(Signed) John W. Hanes
The Honorable
The Attorney General.
JWH:ce
C
0
26
P
Y
THE UNDER SECRETARY OF STATE
Washington
August 15, 1939
Dear Johnny:
Thank you for the trouble you took with
regard to my telephone inquiry this morning
in connection with the question asked me by
the Venezuelan Ambassador. The extract from
the letter of the Federal Reserve Bank en-
closed with your letter to me of today's date
gives me exactly the information I needed.
My best regards, and believe me
Yours very sincerely,
(Signed) Sumner Welles
The Honorable
John W. Hanes,
Acting Secretary of the Treasury,
Washington, D. C.
27
August 15. 1939
Dear Summer:
I am enclosing herewith an extract from a letter
dated May 12th from the Federal Reserve Bank of
New York to the Bank of Venesuela, concerning earmarked
gold. This seems to bear out the thought which you had
that earmarked gold could w transferred to the owner
at any time unless there is some change in existing law
or regulation. I think this answers your inquiry.
With warm regards,
Sincerely yours,
The Honorable Summer Welles,
Under Secretary of State.
C
0
P
Y
MEMORANDUM
August 15, 1939
Mr. Welles called Mr. Hanes today and said that the Venezuelan
Government, which has approximately $6,000,000 in gold earmarked with
the Federal Reserve Bank, wants to know whether such gold will be free
for export under any and all conditions.
It is suggested that the following reply be made to the Venezuelan
Government:
"The gold which the Federal Reserve Bank of New York is
holding under earmark for you under its special license is,
under the terms of such special license and existing laws
and regulations, subject to export by you at any time. It
is, of course, not possible for us to guarantee the
permanency of existing laws or regulations, or the continuance
of the special license of the Federal Reserve Bank of New
York, or to forecast their change. It seems appropriate for
us to point out, however, that since early in the year 1933
when gold transactions in this country were first placed
under restrictions, the Federal Reserve Bank of New York has
continuously been granted licenses by the Secretary of the
Treasury to export, at the request of the owner, all gold
earmarked in its vaults for account of any foreign government or foreign central bank."
128
128 A
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Legation, The Hague, Netherlands
DATE:
August 15, 1939
NO.:
119
The local press this morning, and I presume the
American press also, carried what purported to be a
statement of assets and liabilities on which the Amsterdam court yesterday granted provisional suspension
of payments to the firm of Mendelssohn; this statement
revealed a deficit of a little over five-and-a-half
million florins. It was further reported that on
November 30, the court after a further hearing of trustees and creditors will make a final decision as to
whether suspension of payments will be granted or not.
(I am informed that if granted such suspension will be
effective for eighteen months with a possibility of
renewal for a further similar period upon request of
the creditors; if refused it means out and out bankruptcy).
I received intimations later in the morning that
the deficit would be nearer to 75 or 80 million florins
than five-and-a-half million florins. An extra edition,
early this afternoon, of the HANDELSBLAD, which purported
to give figures from the list of creditors which was
submitted to the clerk of the Amsterdam Court stated
that
128- B
-2-
that the deficit was much greater than the figure of
five-and-a-half million, and the purported itemization of creditors could be interpreted as substantiating a deficit of something around an additional
seventy million florins. The substance of this special
edition article, I understand, has also been cabled to
the United States for publication in the newspapers
today.
The following portion of the telegram is strictly
confidential.
In view of the above, I took the matter up at
once with the Secretary General of the Foreign Office
and he got into touch immediately with Doctor Trip and
with the Ministry of Finance. According to Doctor Trip
the figures which were contained in the afternoon
special edition were not officially given out by the
court, and the reporters were responsible for erroneously compiling them. A deficit figure of between
five and six million florins is correct, states Doctor
Trip. Apparently short term paper--principally French,
consisting of renewable three-months maturities--had
been sold by Mendelssohn up to an amount which approxi-
mates sixty million florins on the condition of repurchasing it, if requested, at early maturity dates. In
the
PERI 128-C
-3-
the opinion of Doctor Trip, however, it is most unlikely
that the holders will attempt to shove this back on
Mendelssohn (which it is presumed would put them in
the disadvantageous position of competing creditors)
or to realize at an early date of maturity with depression of the price as an attendant risk.
It is generally expected here that the French
Government will issue a statement concerning the
support of these securities, possibly in conjunction
with Dutch banks.
This is the end of the strictly confidential portion of the telegram.
It 18 hoped that the foregoing statements will
prove to present a true picture of the situation, thus
serving to clear up a mass of conflicting local information which has probably been reflected in today's American press, to some extent.
Yesterday and today prices on the Ameterdam stock
market did not decline to any material extent, excepting
the shares of the Handel Maatschappy, such shares de-
clining fourteen points in the last two days; however,
the remainder of the market was not appreciably unsettled.
GORDON
EA:LWW
123-D
GRAY
CJ
BERLIN
Dated August 15, 1939
Rec'd 1 p.m.
Secretary of State,
Washington.
795, August 15, noon.
My 783, August 12, noon.
The Berlin press this morning headlines the Enderis
interview with Funk on German-American trade relations and
these accounts according to Enderis correspond in all ESsential particulars with his despatch to the NEW YORK
TIMES. In addition there is considerable Editorial comment
which is summarized below:
The D A.Z publishes a lengthy front page Editorial Entitled "Commercial Policy Without Doctrine" which recapitulates the German attitude as enunciated by Funk and reviewing the reasons which have led Germany to SEEK "new forms
and methods" in foreign trade quotes Hitler to the Effect
that Germany "has only one doctrine which is that in Econo-
mics there is no doctrine". Citing percentage figures of
the decline of American Exports to Germany the Editorial
contends that the American farmer has been particularly affected by the loss of the German market and is now reacting
against
128.E
-2- #795, August 15, noon, from Berlin
against existing American commercial policy as is witnessed
by the recent activity of 60 WESTERN and southern representatives to restore trade with Germany. Furthermore American
industrialists have recently sharply criticized the Hull
trade policy, notably Howard of General Motors who is re-
ported to have stated that the great mistake of the Hull
policy was the failure to conclude agreements with the to-
talitarian states. While placing responsibility for the
present situation on the United States the Editorial asserts
that as comprehension grows in the United States of German
"forms and methods" it will ONCE more be possible gradually
to reconstruct German American trade and in this connection
the attitude of the sixty congressmen is interpreted by
Funk as a "hopeful sign". Concluding on an optimistic note
the Editorial declares that with good will for cooperation
"sound common SENSE can prevail over the difficulties" and
it will EVENTUALLY be possible to organize the trade anew
in such manner that while taking into account the peculiarities of Each system both parties will benefit.
The VOLKISCHER BEOBACHTER gave a front page spread to
the interview Entitled "dogma is the Enemy of Economics"
but made no Editorial comment. Yesterday's Edition of the
paper however published under a Washington dateline a des-
pate's stating that the "catastrophic" decline of agricultural Exports has moved the Secretary of Agriculture to order
a
128 F
-3- #795, August 15, noon, from Berlin
a thorough investigation of the reasons for this decrease
with particular reference to the possibility of new markets.
Commenting on this report the VOLKISCHER BEOEACHTER states
that "Wallace appears presunably to be more stupid than
he is" as the "catastrophic decline" in American EXPorts
is the result above all of the boycott agitation again.t
totalitarian countries which has made it impossible for then
to COVER as formerly a large part of their import requirements in the United States. The Editorial concludes by
stating that this is particularly true for cotton Exports
which WERE in the past taken principally by Germany and
holds the Roosevelt Administration "fully responsible" for
the boycott as it has countenanced it by word and deed.
The BOERSEN ZEITUNG gives the interview front page
prominence and follows it up by Editorial comment in the
financial section similar to that of the D A Z and concluding with the statement that Germany has found that differences in trade systems have not hindered the development
of trade relations and that the differences bEtwEEN liberal
and totalitarian Economic systems should not in a practical
SENSE stand in the way of a restoration of commodity EXchange.
Repeat to Treasury.
KIRK
CSB
128- G
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Berlin, Germany
DATE:
August 15, 1939
NO.:
799
According to further reports the Russian-German
economic negotiations have been practically concluded,
and it is expected that within a short time an accord
will be signed. One source of information intimates
that the amount of the German credit to Russia would be
200,000,000 marks, approximately.
This message should be repeated to the Treasury
Department.
KIRK
EA:LWW
Via Coast Guard
0
Send by messenger to
Lieut. Pollio,
Room 505,
Liberty Loan Building.
129
-
Room 376)
130
Contingent Expenses
August 16, 1939.
Henry Morgenthan, Jr.,
Grand Hotel,
Stockholm, Sundan.
Your wire 16th. The Act of February 25. 1919 appropriated $100,000,000 as
a revolving fund for the participation by the United States, at the discretion
of the President, in the furnishing of food stuffs and other urgent supplies to
the populations of certain countries of Europe or countries contiguous thereto.
Under the authority of this Act the Government of Finland received from the
American Relief Administration. which had been designated by President Wilson to
administer the appropriation. food supplies amounting to $8,842,202.92 for which
the Government of Finland gave its obligations in the free
principal amount of
$8,281,926.17. the balance of $560,275.75 representing/ommdit delivered
for child feeding. The obligations given to the United States natured June
30, 1921. with interest at the rate of 5 per cent per annum. However, no interest
was paid at this rate. Finland evidenced its good faith by making a payment on
March 8. 1923 of $300,000 on account of interest to the United States and at
the same time designated Mr. Axel Action. its then Envoy Extraordinary and
Mimister Plemipotentiary at Washington, to confer with the World War Foreign
Debt Commission with a view to funding Finland's indebtedness to the United
States. After full consideration of the problems involved an arrangement was
made to fund the obligations of the Government of Finland to the United States
on the basis of the terms previously agreed upon by the United States and Great
Britain. These terms provided that the accrued and unpaid interest to December
15, 1922 should be recomputed at the rate of 4-1/4 instead of 5 per cont, and
131
August 16. 1939
-2from such amount should be deducted the $300,000 paid by Finland in March of
that year, the balance of the debt funded as of December 16. 1922 by Finland
issuing to the United States. after a small cash adjustment of approximately
$9,300. bonds in the principal amount of $9,000,000 to be paid over a period
of 62 years with interest at 3 per sent for the first 10 years and 3-1/2 per
cent thereafter.
It might interest you telknow that the Government of Finland was the
first government to sign a formal agreement funding its indebtedness to the
United States. Its agreement was signed under date of May 1. 1923. whereas
the British agreement was not signed until June 18. 1923. The Government of
Finland has promptly net all of the payments called for under this funding
agreement except during the Hoover moratorium (fiscal year 1931) when payments due from all debtor governments were by agreement suspended. The
Government of Finland has paid under the funding and moraterium agreements
$880,668 on acc unt of principal and $4,466,615 on account of interest.
The principal of the indebtedness today is $8,233,158. including $113,826
on account of interest postponed under the moratorium agreement.
MERBERT E. GASTON
DEB/gm
Room 376
132
CARLNORAK
Contingent Expenses
August 16. 1939.
Henry Morgentham, Jr..
Grand Hotel,
Stockholm. Seedan.
Your wire 16th. The Act of February 25. 1919 appropriated $100,000,000 as
a revolving fund for the participation by the United States. at the discretion
of the President, in the furnishing of food stuffs and other urgent supplies to
the populations of certain countries of Europe or countries contiguous thereto.
Under the authority of this Act the Government of Finland received from the
American Relief Administration. which had been designated by President Wilson to
administer the appropriation. food supplies amounting to $8,842,202.92 for which
the Government of Finland gave its obligations in the principal amount of
free
$8,281,926.17. the balance of $560,375.75 representing commodities delivered
for child feeding. The obligations given to the United States matured June
30, 1921. with interest at the rate of 5 per cent per annum. However, no interest
was paid at this rate. Finland evidenced its good faith by making a payment on
March 8. 1923 of $300,000 on account of interest to the United States and at
the same time designated Mr. Axel Astron. its then Envoy Extraordinary and
Minister Plemipotentiary at Washington, to confer with the World War Foreign
Debt Commission with a view to funding Finland's indebtedness to the United
States. After full consideration of the problems involved an arrangement was
made to fund the obligations of the Government of Finland to the United States
on the basis of the terms previously agreed upon by the United States and Great
Britain. These terms provided that the accrued and unpaid interest to December
15, 1922 should be recomputed at the rate of 4-2/4 instead of 5 per cont, and
133
August 16. 1930
-2from such amount should be deducted the $300,000 paid by Finland in March of
that year. the balance of the debt funded as of December 15. 1922 by Finland
iseaing to the United States. after a small cash adjustment of approximately
$9,300. bonds in the principal amount of $9,000,000 to be paid over a period
of 62 years with interest at 3 per cont for the first 10 years and 3-1/2 per
cont thereafter.
It might interest you to know that the Government of Finland was the
first government to sign a formal agreement funding its indebtadness to the
United States. Its agreement was signed under date of May 1. 1923. whereas
the British agreement was not signed until June 18. 1923. The Government of
Finland has promptly not all of the payments called for under this funding
agreement except during the Hoover monstorium (fiscal year 1931 when payments due from all debtor governments were by agreement compenied. The
Government of Finland has paid under the funding and monsterium agreements
6,880,668 on account of principal and $4,466,615 on account of interest.
The principal of the indebtotness today is 88.233.158. including $113,826
on account of interest postponed under the monsterium agreement.
HEMBERT B. GASTON
DIB/
Room 376
134
Contingent Expenses
August 16. 1939.
Henry Morgenthau, Jr..
Grand Hotel,
Stockholm. Seeden.
Your wire 16th. The Act of February 25. 1919 appropriated $100,000,000 as
a revolving fund for the participation by the United States. at the discretion
of the President, in the furnishing of food stuffs and other urgent supplies to
the populations of certain countries of Europe or countries contiguous thereto.
Under the authority of this Act the Government of Finland received from the
American Relief Administration. which had been designated by President Wilson to
administer the appropriation. food supplies amounting to $8,842,202.92 for which
the Government of Finland gave its obligations in thefree
principal amount of
$8,281,926.17. the balance of $560,375.75 representing/commodities delivered
for child feeding. The obligations given to the United States natured June
30, 1921. with interest at the rate of 5 per cent per ammun. However, no interest
was paid at this rate. Finland evidenced its good faith by making a payment on
March 8. 1923 of $300,000 on account of interest to the United States and at
the same time designated Mr. Axel Astron. its then Envoy Extraordinary and
Minister Plemipotentiary at Washington, to confer with the World War Foreign
Debt Commission with a view to funding Finland's indebtadness to the United
States. After full consideration of the problems involved an arrangement was
made to fund the obligations of the Government of Finland to the United States
on the basis of the terms previously agreed upon by the United States and Great
Britain. These terms provided that the accrued and unpaid interest to December
15. 1922 should be recemputed at the rate of 4-2/4 instead of 5 per cent, and
--
13
August 16. 1939
from such amount should be deducted the $300,000 paid by Finance in March of
that year, the balance of the debt funded as of December 15. 1922 by Finland
issuing to the United States. after a small cash adjustment of approximately
$9,300. bonds in the principal amount of $9,000,000 to be paid over a period
of 62 years with interest at 3 per cont for the first 10 years and 3-1/2 per
cant thereafter.
It night interest you to know that the Government of Finland was the
first government to sign a formal agreement funding its intebtotness to the
United States. Its agreement was signed water date of May 1. 1923. whereas
the British agreement was not signed until June 18. 1933. The Government of
Finland has promptly not all of the payments called for under this funding
agreement except during the Heaver monstories (fiscal year 1932) when par
ments due from all debtor governments were by agreement caspented. The
Government of Finland has paid under the funding and monaterium agreements
$880.668 on accust of principal and $4,466,615 on account of interest.
The principal of the indebtodness today 10 $8,233,158, including $113,826
on account of interest postponed under the moratorium agreement.
MERBERT E. GASTON
DEB/
136
OFFICE OF
TREASURY DEPARTMENT
WASHINGTON
August 16, 1939.
TO THE SECRETARY:
September 15 Financing
Under normal conditions the announcement of the September 15th
financing would be for Tuesday, September 5th. However, you recall
that last year because of the foreign situation you decided that you
did not want to make the decision as to the rate on Saturday and have
all of the documents concerning the announcement lie in the mails for
a period of two days before they were announced to the public. You
decided, therefore, that you would make the decision on Tuesday
following Labor Day, the Federal Reserve Banks notified late Tuesday
afternoon after the close of the market, and the announcement made to
the public on Thursday. This meant that one business day intervened
between the day of the decision and the announcement to the public
just the same as Sunday intervenes under the procedure followed for
the other three quarterly financing dates.
In view of the talk in the press to the effect that we might
expect some foreign disturbance in the early part of September, I
plan the following schedule for the September 15th financing unless
you have some objection.
Bell will probably be in New York on the 28th and 29th at which
time he will discuss the forthcoming financing with representatives of
the Federal Reserve Bank of New York and a few of the dealers and bankers.
We will have an open market meeting on Friday morning, September 1st
-2-
137
and I shall announce informally to the press Friday noon the amount of
the forthooming issue for cash, that the announcement will be released
to the public Thursday, September 7th, and if conditions look favorable
announce at that time that it will be a long-term bond and that the
holders of the December 15th maturities will be given an opportunity to
exchange their holdings for the new issue. If conditions are not
favorable I will hold this last mentioned part of the announcement open
until Saturday, or, possibly, Tuesday. We would determine the rate and
term late Tuesday, September 5th, wiring the Federal Reserve Banks
Tuesday evening after the market closes.
I assume that you will want to telephone me Thursday or Friday,
either the 31st of August or the 1st of September. I shall be glad if
you will cable me the day and approximate hour that you expect to telephone.
The following are for consideration in determining the type of
security to be offered in the September financing:
(1) Conditions being favorable offer a 23% bond for
$500,000,000 cash with as long a term of years as market
conditions will justify, increase the amount of the offering by giving the December 15th noteholders an option to
exchange for the new issue and by reserving not to exceed
$150,000,000 of the new issue for Government investment
accounts. This would make $500,000,000 cash, $500,000,000
exchanges and not to exceed $150,000,000 for Government
-3investment accounts. or a total of about $1,150,000,000
to finance. Present market indications are that we can
sell a 21% 30-35 year bond which would be quoted at about
101-3/4. It might be possible to sell a 2-3/8% 20-25 year
bond which would be quoted at approximately 101-1/2. There
are no maturities at the present time in the 30-35 year
period and the only maturity in the 20-25 year period is
the $1,485,000,000 of 2-3/4% Treasury bonds callable
December 15, 1960 and maturing December 15, 1965.
(2) If conditions are not so favorable yet we can be
assured of success by splitting the issue, offer a longterm bond as above and a 5-year note, probably confining
the 5-year note to December exchanges. September, 1944 is
a vacant date.
(3) If conditions are such that 1 or 2 could not be
adopted, issue a 5-year note for $500,000,000, cash only.
(4) If market conditions are such that no financing
should be done in September, we could go over until October
or November or even carry over to December and raise some
additional money in the meantime through the sale of Treasury
bills if deemed necessary. Our balances would still be about
$500,000,000 going into December if we had no financing
whatever. The present balance is $1,778,000,000.
John WHavesJohn W. Hanes,
Under Secretary of the Treasury.
DWB
138
138 - A
August 16, 1939.
TO THE SECRETARY:
September 15 Financing
Under normal conditions the announcement of the September 15th
financing would be for Tuesday, September 5th. However, you recall
that last year because of the foreign situation you decided that you
did not want to make the decision as to the rate on Saturday and have
all of the documents concerning the announcement lie in the mails for
a period of two days before they were announced to the public. You
decided, therefore, that you would make the decision on Tuesday
following Labor Day, the Federal Reserve Banks notified late Tuesday
afternoon after the close of the market, and the announcement made to
the public on Thursday. This meant that one business day intervened
between the day of the decision and the announcement to the public
just the same as Sunday intervenes under the procedure followed for
the other three quarterly financing dates.
In view of the talk in the press to the effect that we night
expect some foreign disturbance in the early part of September, I
plan the following schedule for the September 15th financing unless
you have some objection.
Bell will probably be in New York on the 28th and 29th at which
time he will discuss the forthooning financing with representatives of
the Federal Reserve Bank of New York and a few of the dealers and bankers.
We will have an open market meeting on Friday morning, September 1st
2-
138-B
and I shall announce informally to the press Friday noon the amount of
the forthooming issue for cash. that the announcement will be released
to the public Thursday. September 7th. and if conditions look favorable
announce at that time that it will be a long-term bond and that the
holders of the December 15th maturities will be given an opportunity to
exchange their holdings for the new issue. If conditions are not
favorable I will hold this last mentioned part of the announcement open
until Saturday. or, possibly. Tuesday. We would determine the rate and
term late Tuesday, September 5th, wiring the Federal Reserve Banks
Tuesday evening after the market closes.
I assume that you will want to telephone me Thursday or Friday,
either the 31st of August or the 1st of September. I shall be glad if
you will cable me the day and approximate hour that you expect to telephone.
The following are for consideration in determining the type of
security to be offered in the September financing!
(1) Conditions being favorable offer & 21% bond for
$500,000,000 cash with as long a term of years as market
conditions will justify, increase the amount of the offering by giving the December 15th noteholders an option to
exchange for the new issue and by reserving not to exceed
$150,000,000 of the new issue for Government investment
accounts. This would make $500,000,000 cash. $500,000,000
exchanges and not to exceed $150,000,000 for Government
138-C
-3investment accounts. or a total of about $1,150,000,000
to finance. Present market indications are that we can
sell a 2% 30-35 year bond which would be quoted at about
101-3/4. It might be possible to sell a 2-3/8% 20-25 year
bond which would be quoted at approximately 101-1/2. There
are no maturities at the present time in the 30-35 year
period and the only maturity in the 20-25 year period is
the $1,485,000,000 of 2-3/4% Treasury bonds callable
December 15. 1960 and maturing December 15. 1965.
(2) If conditions are not so favorable yet we can be
assured of success by splitting the issue, offer a longterm bond as above and a 5-year note, probably confining
the 5-year note to December exchanges. September. 1944 is
a vacant date.
(3) If conditions are such that 1 or 2 could not be
adopted, issue a 5-year note for $500,000,000. cash only.
(4) If market conditions are such that no financing
should be done in September, we could go over until October
or November or even carry over to December and raise some
additional money in the meantime through the sale of Treasury
bills if deemed necessary. Our balances would still be about
$500,000,000 going into December if we had no financing
whatever. The present balance is $1,778,000,000.
(Signed) John W. Hanos
John W. Hanes,
Under Secretary of the Treasury.
DWB:HBW
8/16/39
DWB
ouramerican
to Sicy (replane Embassy
tin.y)
8-17-39
London, England.
R
58(e)
60M 5-39
FEDERAL RESERVE BANK
OF NEW YORK
FICE CORRESPONDENCE
CONFIDENTIAL FILES
M
L. W. Knoke
139
DATE August 16, 1989.
SUBJECT TELEPHONE CONVERSATION WITH
BANK OF ENGLAND.
I called Mr. Hawker at 12 noon today. They were still
having a difficult time, he said, and had so far today sold
$12,000,000 (their subsequent cable gave a total of sales for the
day of $21,000,000). There had been a big demand for forward dollars
and they had intervened from time to time at 1 7/8 but were out of
the market at the moment, having decided it was worth while letting
the rate go a little and make speculative operations more expensive.
It developed from the conversation that the figures for sales which
they cable us daily are spot sales only. However, as most of their
forward transactions, in addition to their spot transactions, are
switches - they buy spot and sell forward dollars - their net dollar
position was not affected by their forward operations. Their outright
sales for forward delivery amounted to no more than $5,000,000 in a
week or so, he added. Their switch operations, Hawker continued,
served a double purposes (1) it, of course, prevented the forward
from
rates/going too far, which would make sterling look very much weaker,
and (2) by means of these switches they put back into the market
sterling funds which otherwise their sales of spot dollars would take
out. I asked whether the question of names on forward contracts
ever bothered them. It did, from time to time, Hawker replied, as
the forward position increased in size. This went especially for
American banks such as the Chase and the Guaranty Trust who were very
heavily in the market at the moment, and quite particularly for people
like Lazard and Dreyfus, who he suspected had very big positions open.
M.60M.5-39
FEDERAL RESERVE BANK
OF NEW YORK
FFICE CORRESPONDENCE
SUBJECT TELEPHONE CONVERSATION WITH
CONFIDENTIAL FILES
OM
140
DATE August 16, 1939
BANK OF ENGLAND.
L. W. Knoke
2
The demand for dollars, Hawker continued, was largely
attributable to press talk on the Continent and in England about the
possible devaluation of sterling, which in turn was closely connected
with Mr. Morgenthau's visit to Europe. People kept on saying he had
come over to discuss the position of sterling and the possibility
of sterling devaluation. British capital was not moving out so far
on a large scale, he thought, although there might, of course, be
some isolated cases of flight of such funds. On the other hand,
there was a big anticipation by British firms of commercial requirements but so far he had not noticed a big exodus of British funds.
The British were playing the game, as he put it. of course there
were no Government restrictions on spot dollar transactions, he was
quick to add.
The demand for gold continued on a substantial scale with
sovereigns commanding a premium of 1 1/4%. Hoarding of gold, he
thought, was an indication that uneasiness on the part of capitalists
was only in part due to the political situation and the uncertainty
of the future of sterling was also a reason. If it was only war
which people feared the whole movement would be into dollars, not
partly into gold.
The French franc and the belga were still strong partly due
to
to repatriation and partly/trade requirements. The guilder had been
firm because of the Mendelssohn situation which had brought on the
60M 5-39
141
FEDERAL RESERVE BANK
OF NEW YORK
DATE August 16, 1939.
FFICE CORRESPONDENCE
SUBJECT TELEPHONE CONVERSATION WITH
CONFIDENTIAL FILES
OM
BANK OF ENGLAND.
L. W. Knoke
8
covering of short sales of guilders for foreign account. He did not
expect any serious repercussions from the Mendelssohn difficulties
although the Paris market might be more badly affected than any of
the others. He understood that Lazard had some quite big commitments
but was expected to come out all right. He had heard of one Hungarian
bank having loaned dollars uncovered in the amount of $1,250,000.
In the general political situation there was nothing new.
"The Far East does not look very nice and neither does Danzig."
Yesterday's wave of optimis was temporary, without much justification,
and possibly was due to the fact that Paris and Brussels were closed
yesterday. The London stock market was holding up fairly well.
LWK:KW
CHINESE EMBASSY
WASHINGTON
August 16, 1939.
Sirs
I am instructed by my Government to inquire
if the United States Government may not be moved to
participate and assist in the scientific and humanitarian campaign of survey and control of the epidemic
disease tentatively designated as "Malignant Malaria",
which is prevalent in the Provinces of Yunnan, Kwangsi
and Kweichow and which is worst in the southwestern
part of Yumman, a region traversed by the YunnanBurma Highways, the Yunnan-Indochina Railway and the
Yunnan-Burna Railway which is now under construction.
In many districts such as Ning-erh, See-mac and Yun-
hsien, the morbidity reaches 85% with high mortality.
Long and sad experience has taught the people to
flee to the hills as soon as one or two deaths occur
in a community. Similar extensive incidence is
taking place in the labor camps along the now motor
roads and the new railway, thus greatly hampering
the Government program of construction.
Preliminary surveys have already been made by
the National Health Administration, but they need to
be followed by more thorough survey, research and
control. By combined efforts of the Central and
Provincial
Honorable Summer Welles,
Secretary of State.
143
-2-
Provincial Governments, a five-year anti-malarial
campaign and a three-year research program with in-
tensive anti-malarial work in the more heavily infected
regions have been started. However, in view of the
very vast extent of the malaria area, the available
funds and experts are insufficient to meet the needs.
Knowing the deep interest of the United States
Government in the study and control of epidemic
diseases, I have been instructed by my Government
to make appeal to your Government that a mission of
American expert malariologists be sent to Yunnan to
make a survey of the conditions concerning this
disease, to check up the results of the preliminary
surveys already made, and, on the basis of their
findings, to advise and assist the Chinese Health
Administration in the organisation and operation of
an effective control.
I have the assurances of my Government and in
particular of the National Health Administration that,
should such a survey mission be sent from the United
States, every courtesy and co-operation would be
accorded to them by all Governmental agencies.
Accept, Sir, the renewed assurances of my
highest consideration.
Hu Shih
C
0
144
P
Y
William J. Campbell
United States Attorney
U. S. Court House
Chicago
August 16, 1939.
Honorable John W. Hanes,
The Under Secretary of the Treasury,
Washington, D. C.
Dear Mr. Hanes:
Many thanks for your letter of August 14th
expressing Secretary Morgenthau's congratu-
lations to myself and my staff on our work
in the Annenberg case. Please convey my
sincere appreciation to him for his thought-
fulness.
I an indeed glad to have your letter of
praise and I hope to merit your continued good
wishes.
With kindest personal regards, I am
Sincerely yours,
(Signed) William J. Campbell
WILLIAM J. CAMPBELL
144-A
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Paris, France
DATE: August 16, 1939, 5 p.m.
NO.: 1499
FOR THE TREASURY.
There is a feeling that the repercussions of the
Mendelssohn situation will not be too serious. The
amount and distribution of Mendelssohn's liabilities
(now estimated at the equivalent of around $150,000,000)
have occasioned surprise even in those financial circles
in Paris which had for some time suspected that the
operations of the concern had been over-extended.
Important reservations concerning the size and the
nature of Mannheimer's private commitments govern
this feeling. Nothing is even yet known here in this
regard. The attitude of the various Dutch banks,
which have "pension" loans constituting substantial
portions of the holdings, will determine the effect
of the suspension on the French and Belgian issues
It 18 felt, however, that any precipitate
liquidation in important volume will be avoided with
involved.
support from the Bank of France and interested French
banking houses. The shock should be prevented from
being too severe on any one market because the liabili-
ties are spread over such a large list of banking institutions and several financial centers. There has
been
144-B
-2-
been a good reception here on the action of Belgium
in making the Handels Maatschappy fiscal agents for
The Mendelssohn difficulties
the servicing of the Belgian issues affected. /is may
well soon be forgotten for more important developments
in the arena of international politics, although the
Mendelssohn difficulties continue to be a principal
topic of interest of the Paris markets.
For the present, the contemplated Belgian loan
in Amsterdam has been abandoned. (See Embassy's tele-
gram No. 1315, July 17, 5 p.m.)
END SECTIONS ONE AND TWO.
BULLITT
EA:MSG
for Sec
145
VIA NATAL COMMUNICATION
August 17, 1939
To the President
U. S. S. Tuscaloosa
STRICTLY SECRET
CODE
At a meeting called today by Under Secretary Welles at
which representatives of State, Treasury, War, Navy and
Justice Departments were present, it was suggested that
Treasury head an informal committee to be composed of a
representative of Federal Reserve Board, State, and Justice
and possibly to be augmented later by a representative of
Securities and Exchange Commission and Commerce, to study
and complete whatever plans are necessary to exercise, in
case of an emergency, control over transactions in foreign
exchange; transfers of credit; export of coins and currency;
sale of securities in the American market by foreign holders;
other matters arising under section three of the Neutrality
Act; and any other related matters which might arise. I
feel I should have your approval before proceeding to create
such a committee.
(Signed) John W. Hanon
DUB:NLE
Acting Secretary of the Treasury
53(e)
FEDERAL RESERVE BANK
OF NEW YORK
FICE CORRESPONDENCE
CONFIDENTIAL FILES
DATE
SUBJECT:
August 18, 1939.
TELEPHONE CONVERSATION WITH
BANK OF ENGLAND.
L. W. Knoke
Mr. Hawker called me at 10:25 a.m. just to tell me,
as he put it, that things were going on as before; in other words,
they were having a hard time today. So far they had today sold
$15,000,000 spot and the interesting thing about yesterday's and
also today's demand for dollars was that the orders were emanating
from New York. I pointed out that that was difficult to reconcile
with the fact that we had not bought any sterling here at all yesterday in the afternoon. In addition to the $15,000,000 spot, he had
swapped $5,000,000 forward, so that the net picture for the day so
net
far was as follows: sold/$10,000,000 spot, plus $5,000,000 forward,
or total sales of dollars for the day $15,000,000. The difficulty
for them now was that they were building up rather a heavy short
position - they were now from $100,000,000 to $120,000,000 short on
dollars -, they were anxious to get that position down and therefore
thought the best thing for them to do would be to give us some gold
gainst our weekly order. Accordingly, he was going to cable us
sonight that he had today earmarked in his vaults $15,000,000 of gold
nd if the order were renewed for next week, he would earmark a
imilar amount on Monday or Tuesday. He was advising me over the
telephone, he said, so that we could let him know promptly whether
e would wish the gold shipped, in which case he would have it packed
immediately. I replied that as things were abroad at the moment,
the Treasury would undoubtedly want to bring the gold back to the
FEDERAL RESERVE BANK
OF NEW YORK
DATE August 16, 1939.
FICE CORRESPONDENCE
CONFIDENTIAL FILES
M
147
SUBJECT:
TELEPHONE CONVERSATION WITH
BANK OF ENGLAND.
L. W. Knoke
2
United States without much delay. Would he therefore proceed with
the packing as soon as he could? Probably we would ask him to ship
on the Washington on August 24.
I referred to his gold shipment on the Mauritania scheduled
to arrive today and told him that rather than leave the gold on the
pier over the weekend (the Mauritania is scheduled to sail again
tomorrow, Saturday, afternoon) we had decided, if we could do so
before nightfall, to bring it into the Assay Office today, or else,
even though there was a holiday in New York tomorrow, some time early
tomorrow morning. Hawker apologized for the trouble caused but I
replied that we appreciated the difficult times through which they
were passing. My main purpose of telling him was to warn him that
the proceeds of this gold shipment would, under no circumstances, be
available before Monday.
I also made mention of the Laconia, carrying $11,500,000
worth of gold for the Bank of England, which is now scheduled to
reach here late on Monday night. He was going to instruct us, Hawker
said, to deliver it straight to the Treasury upon arrival.
There were no political news at all. The Continent was
getting more and more worried about Danzig and the British also about
the Far East. In addition there was this continual worry and discussion
about the future of sterling which was necessarily having a very bad
effect upon their currency. Their difficulties were added to by the
148
FEDERAL RESERVE BANK
OF NEW YORK
DATE
FICE CORRESPONDENCE
August 18, 1939.
SUBJECT: TELEPHONE CONVERSATION WITH
CONFIDENTIAL FILES
BANK OF ENGLAND.
L. W. Knoke
3
fact that they now had to bear also the brunt of the speculative
movement against the Shanghai and the Hongkong dollars: where a
speculator had previously been ready to hold sterling, he now
wanted dollars, which of course increased the demand for the latter.
Mr. Hawker referred to my recent request for copies of
the certificates issued by Glynn and Montagu in connection with gold
earmarked in Uruguay and Argentina. He had seen Glynn but Glynn's
had told him that they weren't doing anything of the sort for
Uruguay. Should he call on Montagu? I replied that if he felt he
could conveniently do so I would appreciate it, adding that our
interest was, of course, entirely academic and that we were trying
to keep abreast of these things.
LWK:KW
Sept. 15, 1939
To
Mrs. Klotz
From Mr. Viner
Mr. Viner is returning this
material which the Secretary passed
to him on board ship.
149
TREASURY DEPARTMENT
150
INTER OFFICE COMMUNICATION
DATE August 18, 1939.
TO
FROM
Sécretary Morgenthau
Miss Michener
away
In accordance with your request to Mr. Haas, there are
transmitted herewith two memoranda as follows:
1. Current developments in capital movements,
gold, and foreign exchange, prepared in the
Division of Monetary Research.
2. Notes on the Business Situation as of Friday,
August 18, together with accompanying charts,
prepared in the Division of Research and
Statistics.
TREASURY DEPARTMENT
151
INTER OFFICE COMMUNICATION
DATE August 18, 1939.
TO
FROM
Mr. Haas
Mr. Glasser
AS
Subject: Current Developments in Capital Movements, Gold
and Foreign Exchange
1. The inflow of capital into the United States was $24 million
in the week ended August 9, 1939. The inflow was principally
of short-term banking funds for Canadian account. The recent
trend of small but persistent net selling of American securities
by foreigners, which was interrupted during the week of August 2,
was resumed during the week of August 9, sales exceeding purchases by $5.8 million.
2. Net gold imports including changes in earmarking amounted
to $66.5 million in the week ending August 16, 1939, of which
$60 million was for the account of England.
3. Total gold held under earmark for foreign central banks
and governments declined $23 million during the week ending
August 16; the amount held for the Bank of England declined
$36 million and the amount held for Netherlands rose $14
million. England now has $92 million of gold on earmark, a
decline of $93 in the past 3 weeks.
4. There was little activity in the European exchanges during
the week of August 16, 1939. The Netherlands guilder was
strong despite the announcement of the suspension of the inter-
national banking firm of Mendelssohn and Company of Amsterdam
on August 11, 1939. Chinese exchange declined to a new low of
6.08 cents during the last week but recovered to 6.55 cents on
August 17, 1939.
Prepared by: Mrs. Elizabeth May
52
CONFIDENTIAL
Notes on the Business Situation
as of Friday, August 18, 1939.
Commodity Prices
Commodity prices in the United States have risen slightly
this week (see Chart 1), spot prices having risen more than
futures. Reuter's Index, on the other hand, shows a generally
downward trend in United Kingdom prices.
Security Prices
Stock prices in both the United States and the United
Kingdom rose during the first two days of the week but began
falling sharply on Wednesday. (See Chart 2.) ) The decline is
generally ascribed to renewed fears of the European situation.
The suspension of Mendelssohn and Company of Amsterdam,
reported August 11, caused less liquidation than might have
been expected.
After five weeks marked by net sales of United States
stocks by foreigners (see Chart 4), the daily reports show
net
purchases at the end of last week and every day but one
this week.
.
Business Activity
The Federal Reserve Board has announced a preliminary
figure of 102 for its index of industrial production for July,
the highest since the figure of 104 for December 1938. It
compares with 98 for June 1939 and 83 for July 1938. The
London Financial Times index of business activity in July
reached a new high level for the current upward movement,
although
it declined somewhat in the later weeks so far reported.
(See Chart 6.)
The New York Times Index for the week of August 12,
estimated from all componente except cotton mill activity, 18
up 0.2. (See Chart 5.)
-2-
53
The increase in this composite 18 accounted for by a
slight rise in the seasonally-adjusted figure for electric
power production to a new record level not exceeded since
November 1937. (The figure without seasonal adjustment shown
on Chart 5 also increased.) Two other seasonally-adjusted
components of the New York Times Index -- "all other"
carloadings and steel ingot production -- advanced, steel to
a new record not exceeded since December 10, 1938. Lumber and
automobile production both declined.
For the week ended August 19 steel ingot production has
advanced contra-seasonally to another high for this year, "the
most important business news of the week," according to the
Annalist. Orders continue to be well diversified. Automobile
production for this week 18 again very sharply reduced, contrary
to Ward's expectation last week. General Motors has announced
that the Buick plant at Flint will start assembly of new models
on Monday, August 21. The trade expects other manufacturers to
follow shortly.
Petroleum production, which is not a component of the New
York Times Index, showed a very steep increase for the week
ending August 5 followed by a decline for the week ended
August 12. (See Chart 5.) The increase resulted from
cancellation of Saturday-Sunday closings in Texas and served to
increase stocks that were already high. An uncertain market
situation developed when some refiners reduced the price offered
for crude. A fifteen-day suspension of production was later
agreed upon by regulatory authorities in states producing 68 per
cent of the crude petroleum of the United States. Uneven
distribution of stocks is expected to result in the closing of a
large number of refineries, in spite of the fact that stocks
were previously alleged to be excessive.
Daily
THE
United Kingdom
International
Office of the Secretary of the Treasury
- of Research and Statistics
GENERAL BUSINESS
Weekly
-
BUSINESS ACTIVITY
PER
Seasonally Adjusted
CENT
SENSITIVE COMMODITY PRICES
PER
1936-100
CENT
Eat Normal (100
120
110
110
100
100
40
90
80
RO
70
...
Times
-
STEEL INGOT PRODUCTION
Per Cent of Capacity
JAN MAR MAY JULY SEPT NOV
70
JAN MAR MAY JULY SEPT NOV
60
ELECTRIC POWER PRODUCTION
AUTOMOBILE PRODUCTION
U.S and Canada
CARS
THOUSANDS
KW HRS
FULLING
BILLIONS
24
150
N
80
23
25
22
60
100
2
75
20
40
50
1.9
20
w
25
1.8
End -
Were fat
Amer and that
JAN MAR MAY JULY
0 MAR MAY JULY SEPT NOV
17
JAN
NOV
0
CONSTRUCTION CONTRACTS AWARDED DAILY AVERAGE
DOLLARS
MILLIONS
Total
DOLLARS
MILLIONS
Dodge
Residential F Dedge
JAN MAR MAY JULY KEPT NOV
DOLLARS
Heavy Engineering
Eng News Rec
MILLIONS
.
main
0
Eat Normal 00 Adjusted
PER
160
SHORT TONS
1929-31-100 Adjusted
CENT
JAN MAS MAY JULY TEPT NOV
BITUMINOUS COAL PRODUCTION
LUMBER PRODUCTION
-...
COTTON MIL ACTIVITY
CENT
JAN MAS MAY JULY TEPT NOV
2
JAN MAR MAY JULY OF NOV
MILLIONS
100
140
ann
so
120
40
100
40
-
80
.
MYTIMES
Times
20
40 JAN MAR MAY JULY SEPT
-
NOV
PETROLEUM PRODUCTION
PER
1923-25
CENT
JAN MAR
JULY
JAN
MAY
JVLX
SEPT
NOV
FREIGHT CAR LOADINGS
and Miss
CARE
Total
THOUSANDS
400
190
500
00
BOO
170
700
womb
160
150
600
500
-
140
Days of can
130 JAN MAS MAY JULY EFF NOV
400 JAN
U.S.
"MAV
-
300
men
-
200
JAN we MAY Date TEST WAU
excluding Cotton Mall Actuate
Chart 5.
INDICES OF LONDON
UNITED FINANCIAL
KINGDOM BUSINESS
ACTIVITY,
TIMES
Weekly
1939
1938
PER
IT
DEC.
OCT.
TH
FCB.
APR.
JUNE
AUG.
OCT.
11T
DEC.
PER
CENT
CENT
124
124
120
120
UNADJUSTED
116
116
112
112
ADJUSTED
108
108
104
104
100
100
OCT.
Office of the Secretary of the Treasury
Division of Research and Statistics
DEC.
1938
FEB.
APR.
JUNE
AUG.
OCT.
DEC.
1939
c 261 I
Referred to
Commissioner of Customs
For
160
Office of the Secretary
dr. le. lidelism
Shanghai, August 18, 1939.
U.S. TREASURY ATTACHE
SHANGHAI. CHINA
WANG CHING-WEI HAS IMPORTANT MISSION IN
CANTON
Wang Ching-wei's trip to Canton is a matter of great poli-
tical significance and his future career and the future of his proposed federated regime will depend to a great measure on the result of
his present sojourn there. Inside circles report that Mr. Wang is
in Canton for the three following reasons. (1) He is to arrange
for the evacuation of Japanese troops from the occupied areas there.
This is the first step of his understanding with the Japanese army
leaders as this will build up his prestige among the Chinese people,
as most over-seas Chinese are natives of this area, and it is thought
that withdrawal of Japanese troops through his efforts will bring
over-seas Chinese to support him both morally and financially. (2)
Mr. Wang is in Canton in an effort to win over the war leaders such
and Gen. Wu Chi-wei
(
)
Gen. Li Han-huan (
), Gen. Yu Han-mou
(
as Gen. Chang Fah-lovei (
in
),
) which
some time ago he told the Japanese he would be able to do. He has
)
also done considerable work to win over Gen. Chen Chi-tang
in the past and the present trip may complete the deal. He hopes to
secure an understanding with these war leaders 30 that in the event
of Japanese withdrawal from the area, they will help to maintain
peace and order in a neutral capacity. This means that at least
they will promise not to fight and chase the Japanese upon the latter's
voluntary withdrawal. But Mr. Wang's schemes along these lines are already known to Chungking and as a result preceutions have been taken.
161
2
These generals particularly Gen. Chang Feh-kwei and Gen. Chen Chi-tang
openly denounced Mr. Wang to clarify their own stand and to reiterate
their support to Chungking. The Japanese occupation of Shum-chun
(19" ) a few days ago is believed to be an outburst of dissatisfaction over the failure of the Cantonese war leaders to come to
arrangement with Wang Chin-wei. They had hoped that Wang Ching-
wei would succeed in arranging with the Chinese war leaders to take
over the occupied area for the new federated government so as to relieve
them of garrison duty and relieve their government of shortage of men
power. Now they could not withdrew if Wang Ching-wei's attempt fails,
for they will have no reason to do that. (3) Another purpose of Wang
Ching-wei's trip to Canton is to set up a local puppet regime, which
will form a part of his proposed federated government of China. The
failure of his attempt to win over these above-mentioned generals may
cause some delay in the inauguration of his regional administration
there.
Mr. Wang's close associates claim that their leader has now
the necessary and unanimous support of Japanese army in China and the
way for him to set up the federated regime in Nanking is now all clear.
But his attempts in China to win over the war leaders have not been as
smooth as expected.
DAV13038
eas 11073
161-A
GRAY
CJ
BERLIN (Part Air)
Dated August 18, 1939
Rec'd 8:17 a.m.
Secretary of State,
Washington.
829, August 18, 5 p.m.
No. 56. TREASURY FROM HEATH.
Some statistical EVIDENCE of recent Reich budgetary
and monetary expansion has become available during the
past 24 hours. The official statement of tax revenues for
the first quarter of the fiscal year Ending June 30,
1939 gives total collections of 5221 million reichsmarks,
an increase of 1551 million rEichsmarks or SOME 42 percent
OVER the corresponding period of a year ago. It is to be
noted no substantial payments on the new additional income
tax fell due in this period. This tax originally was
scheduled to produce 300 million marks per annum but be-
CAUSE of public objections the tax has been revised and is
now expected to yield only between 100 and 150 (#) marks.
Judging by the collections for the first quarter and assuming on increase from the additional income tax and
stendily improving collection methods of the fiscal authorities it would appear the Reich Treasury forecast of
22
181-B
-2- #829, August 18, 5 p.m., from Berlin (PA)
22 billion marks tax revenue during the fiscal year
would be more or less fulfilled.
In spite of the increased tax revenue there has been
no decrease of Government borrowing. Figures just pub-
lished show an increase for May of 1,223 million marks
in the floating debt alone. No figures have yet been published regarding long term debt for that month but it is
understood there was an issuance of bonds to the saving
banks and insurance companies. In April the increase in
the total disclosed debt both floating and long term was
1210 million marks. It is believed that Government borrowing in June was at an EVEN higher figure and it is
altogether probable that the total Government borrowing
for the quarter will not be far under 4 billion marks.
Adding this figure to the tax revenues indicates a total
Government expenditure during the June quarter of around
9 billion marks and an annual rate of Expenditure of 36
billion marks per annum. The present Central Government
rate of expending would appear to be one third greater
than that of the last fiscal year when total Central
Government outlays WERE Estimated to be between 26 and 27
billion marks. It is to be noted that of the floating
debt increase in May SOME 669 million was in the form of
new financial plan certificates.
As regards monetary Expension the Reichsbank report
for
161-C
-3- #829, August 18, 5 p.m., from Berlin (PA)
for the mid-month shows credits and currency circulation
but little below the record heights of July 31st. Normonth.
mally there is a considerable decline at this period of the/
Total Reichsbank investments (bills and checks, security
holdings and security loans) totaled 9,662 million marks
as compared with 9,711 million marks on July 31st and
9,271 on July 13th. The total currency circulation on
August 15th of 10,895 million marks WC.S ntarly 400 million
higher ther that of July 15th and only 314 million under
the record figure of 11,209 million attained at the End (#)
There have been reports of Reichabank open market
purchases to sustain the sagging prices of the tax certificates of the new financial plan. If they have occurred
they are well hidden in the Reichsbank statement since the
item security holdings shows no large increase. Furthermore there has been only a small improvement in the quo-
tations of tax certificates of class two which today are
quoted between 94 and 94 7/8. This gives the purchaser
an Effective interest rate of 6 percent whereas a year
ago short term investors had to be satisfied with 3 5/10
percent interest on short term Treasury bills and "delivery
certificates".
Repeated to Stockholm for Secretary of the Treasury.
KIRK
GW:CSB
(#) Apparent ommission
181 D
GRAY
EDA
BERLIN
Dated August 18, 1939
RECEIVED 1:45 p.m.
Secretary of State
Washington
826, August 18, 2 p.m.
Since my 795, August 15, noon there has been
relatively little discussion in the GErman press on
GEran-Amsrican trade relations and such as has appeared
was largely a repetition, chiefly in provincial newspapers of what has already been summarized in my
telegrams on this subject. This morning's BOERSEN
ZEITUNG, however, reverted ONCE more to the matter
in a front page Editorial which praising the reply of
Funk to Grady EXPRESSES skepticism respecting American
readiness to replace dogma by practical business consi-
derations. Quoting an A.P. report to the Effect that
the American Government would grant a credit to Germany
and give it access to American goods at cheaper prices
if Germany is ready to disarm and to revise its
commercial policy the Editorial states Emphatically that
Germany "needs no credit and will take no credit" but
does require an outlet for its goods so that it can
buy foreign commodities and further that this condition
is
101-E
EDA - 2 - #826, August 18, 2 p.m. from Berlin
is not linked up with "finance operation" or "cheaper
prices". As to cheaper prices the Editorial finds
that this sounds like an offer to let Germany participate in export dumping instigated by the United
States through Export subsidies, which is nothing more
than an "amusing nuance" and "which is, whether
ordinary or dumping prices, distinctly not the question".
As for disarmament and revision of commercial policy by
Germany, the Editorial characterizes these conditions
as presumptuous and as showing how unfruitful the Funk
statements have been in bringing the discussions to
a factual basis. Funk it is contended has in no way
demanded that the United States modify its system and
he SEES in German methods no dogma which should hinder
cooperation with other countries. In Germany the
Editorial concludes "WE do not make speeches on
credit and systems but only on the useful Exchange of
commodities by both sides" and Mr. Wallace would not
need to investigate on the possibility of new markets
for American fats and cotton if Washington would concern
itself about the preservation of the former great
German market. Inform Treasury.
KIRK
CSB
Commissioner of Customs
For
Office
of
the
me.
162
Secretary
R.
Wilder
U.S. TREASURY ATTACHE
SHANGHAI, CHINA
Shanghai, August 19, 1939.
FIFTY ITALIAN AND GERMAN AVIATORS JOIN JAPANESE
AIR FORCE IN SHANGHAI
According to information secured from Ing. Nini Brondello,
the Italian agent of Mr. Wang Ching-wei, fifty Italian and German aviators
arrived in Shenghai recently to help the Japanese in aerial activities in
China. These avistors came as volunteers from the axis countries as re-
inforcements to Japan's shortage of aviators. In the past week, the
aerial demonstration and daily flights of Japanese military planes above
this city were done by these Fascist aviators and not by the Japanese.
At least two of these avistors lost their lives in the outskirts of
Shenghai a few days ago as result of mishaps in flying. These aviators
will be assigned to bombing and reconnoitering duties around Shanghai
and the Yangtze Valley.
A foreign agent of Mr. Wang Ching-wei states the talk of
American action to ban the exportation of arms, munitions, scrap iron
and other war materials to Japan is nothing more than a farce. Arrangements have already been made by American minition business men to ex-
port their cargoes to the Philippine Islands under the pretext of selling to some buyers there. From the Philippines, these war goods will
be transshipped to Japan without any difficulty, and the Japanese will
get whatever war material they require from the United States under
this new arrangement, the agent alleged.
Gen. Liu Hai-cheng, Wang Ching-wei's future army chief, who
was responsible in recruiting a number of foreign agents and aviators
for the ex-Inomintang leader, is very much upset because Mr. Griffith,
the British agent, through whom many foreign aviators had been engaged
163
2
has sided up with Chungking lately. Mr. Griffith knows all the plans
of Wang Ching-wei's group and throwing his lot with Chungking is a great
blow to Weng Ching-wei's camp. Mr. L1 Fong (4 of ), Manager of the
Lichwang Company ( K ) who went to Hongkong over one month ago
in an effort to win over Mr. Griffith is not returning to Shenghai
because of his failure.
Furthermore, the failure of Wang Ching-wei
to reach an agreement with some Kwangtung and Kwangsi leaders led him
to decide to remain in business for the time being, as he thinks there
is no future for Wang Ching-wei.
CIVISORA
BEEF
03V13038
164
PARTIAL PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Moscow, U.S.S.R.
DATE: August 21, 1939, 3 p.m.
NO.: 453
My telegram No. 452, August 20.
A Tass announcement in today's press reports the
conclusion after long negotiations on August 19 of a
commercial credit agreement between the Soviet Union and
Germany, signed by the Soviet trade representative, Baba
and Schnurer. The report continues: "The commercial credit
agreement envisages the granting by Germany to the Soviet
Union of a credit in the amount of 200,000,000 German marks
at 5% interest maturing in seven years for the purchase of
German goods within two years from the date of the signature
of the agreement. The agreement envisages also the delivery
of goods on the part of the Soviet Union to Germany during
the same period, namely, within two years in the amount of
180,000,000 German marks. . According to the German Embassy
here the agreement was signed at 2 a.m., on August 20 but 18
apparently considered as of August 19.
PRAVDA and IZVESTIYA this morning devote their leading
editorials to the new agreement. Both editorials emphasize that although the negotiations were difficult
because of the strained political relations between the
two countries nevertheless in view of the desire on both
sides to improve the commercial relations an agreement was
successfully
165
-2successfully reached. The IZVESTIYA editorial after reviewing the decline in Soviet-German trade which resulted
from the tension in policial relations states that "it 18
possible to state boldly that the new agreement 18 a turning
point in the business relations between the two countries."
In respect of the agreement itself both editorials state
that the 200,000,000 mark credit is in reality a financial
credit since it 18 guaranteed 100% by the German Government
and will enable the Soviet trade representative in Germany
to pay in cash for the goods purchased. In addition the
editorial states that the German Government has agreed
to prompt fulfillment of Soviet orders and will for this
purpose assist the Soviet trade delegation in its dealings
with individual German firms. Mention also made of the low
rate of interest in comparison with previous credits and
also the length of time for repayment which will be seven
years on an average with 30% repayable within six and
one-half years, 40% in seven, and the remaining 30% within
seven and one-half years. Both editorials forecast that
the credit agreement will result in a wide expansion of
trade between the two countries and PRAVDA concludes with
the following words: "The new commercial credit agreement
between the Soviet Union and Germany which was born in an
atmosphere of strained political relations 18 summoned to
relieve
166
-3-
relieve this atmospherel It may represent a serious step
in the matter of the further improvement of not only the
economic but also the political relations between the
Soviet Union and Germany".
It is not yet possible to get full details of the agreement, but from the information in the Soviet press, it would
appear that in general it follows the lines indicated in
telegram of February 19, 1939 from the Embassy. The agreement presumably provides for purchase of goods by the Soviet
in Germany to the amount of 380,000,000 marks during the
next two years. During the same period the exports from
Russia to Germany would amount to 180,000,000 marks; the
operation of the credit would meet the discrepancy.
STEINHARDT.
EA:LWW
54(e)
FEDERAL RESERVE BANK
OF NEW YORK
OFFICE CORRESPONDENCE
CONFIDENTIAL FILES
L. W. Knoke
DATE August 21, 1939.
SUBJECT: TELEPHONE CONVERSATION WITH
BANK OF ENGLAND.
Mr. Hawker called me at 11:27 a.m. They were having a very
bad time this afternoon, with total cash sales so far of $30,000,000,
which he expected to go up to $40,000,000 by the close. In addition
he had done $14,000,000 switches (bought that amount for cash and
resold for forward delivery).
The Continent was very much more anxious about the political
situation and the result was further increased demand for dollars.
Sterling was definitely weaker all around. Everybody from everywhere,
except the British, was buying dollars.
Had the Cueen Mary arrived? I referred him to our earlier
cable advising that both the Queen Mary and the Laconia were fog bound
and would not reach here before Tuesday and Wednesday, respectively.
That being so, Hawker asked would we take another $15,000,000 of gold
in London. I replied that in my opinion that was the purpose of the
order which we were giving him every week. Then he would earmark
that further amount and cable us today. I suggested that immediately
this amount had been set aside he have it packed, as in all probability
we would request shipment of $25,000,000 on the Washington and
$10,000,000 on the American Banker, both this week. I referred to my
telephone conversation with Bolton of November 28, 1938 in which he
had requested that if at any time we were uncovered, we realize gold
from their earmark and that we consider this as standing instructions.
I pointed out that this had never been confirmed in writing and wondered
MISCELL 6CM 5-39
FEDERAL RESERVE BANK
OF NEW YORK
DATE
OFFICE CORRESPONDENCE
BANK OF ENGLAND.
L. W. Knoke
FROM
August 21, 1939.
SUBJECT: TELEPHONE CONVERSATION WITH
CONFIDENTIAL FILES
To
168
2
whether the order was still good. Hawker replied that that order stood.
There were no news of any kind. He was pessimistic on the
outlook and found it difficult to see how Hitler could climb down and
yet save his face. He didn't even seem to consider the possibility
of England being ready to go to a second Munich. All this is, of
course, Hawker's personal opinion.
LWK:KW
03V13038
169
GRAY
CJ
PARIS
Dated August 21, 1939
Rec'd 3:15 p.m.
Secretary of State,
Washington.
1534 August 21, 6 p.m.
FOR THE TREASURY.
A communique published in Saturday's press informs
holders of French Treasury bonds Expressed in florins,
Swiss francs and dollars issued in Holland on May 31 last,
that interest payments due on these securities from the
interest date of August 30 1939 will be made by the
Banque de Paris Et des Pays Bas and the Nederlandsche
Handel Maatschappy at Amsterdam. The communique adds
that after that date holders may renew the bonds in Paris
at the Banque de Paris Et des Pays Bas and at Lazard
Freres Et Compagnie.
Mendelssohn also floated privately an issue of
Treasury bills renewable up to six years in the amount of
155,000,000 guilders on the face of which no interest
rate is specified, the rate being privately arranged between the French Treasury and Mendelssohn. (END SECTION
ONE).
BULLITT
CSB
170
GRAY
CJ
PARIS
Dated August 21, 1939
REC'D 3:55 p.m.
Secretary of State,
Washington.
1534, August 21, 6 p.m. (SECTION TWO). .
The Government communique at this capitol announced however
that they then bore four percent. Pirase SEE despatch No.
4440 of May 31. Some doubt has row arisen first as to the
rate of interest to be paid thereon in the future and SEcondly to whom it should be paid. Mendelssohn may hold that
as there was no breach of contract between them and the
French Government the interest should legally be paid to
it. On the other hand holders of these bills which WERE
Extensively "peddled" without renewal obligation will
presumably insist that since they cannot obtain repayment
of their advances from Mendelssohn the interest is due to
them. A substantial portion of this issue estimated at
between 80 million and 130 million francs is finding its
way back to the Paris market and is not being too readily
absorbed. Also it appears that the French Government is
loath to take direct measures on a large occle to support
the various Mendelssohn issues. In fact there is noticeable
171
-2- #1534, August 21, 6 p.m. (SECTION TWO), from Paris
able reluctance in official circles to discuss the aftermath of the Mendelssohn difficulties.
BULLITT
CSB