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210
TREASURY DEPARTMENT
Washington
Press Service
No. 19-52.
FOR IMMEDIATE RELEASE,
Monday, December 4, 1939.
Secretary of the Treasury Morgenthau today announced the subscription
figures and the basis of allotment for the cash offering of 2 percent
Treasury Bonds of 1948-50.
Reports received from the Federal Reserve banks show that subscriptions
aggregate $6,263,000,000 Subscriptions in amounts up to and including
$5,000, totaling about $21,000,000, where the subscribers specified that
delivery be made in registered bonds 60 days after the issue date, were allotted
in full. All other subscriptions were allotted 8 percent, on a straight
percentage basis, with adjustments, where necessary, to the $100 denomination.
Further details as to subscriptions and allotments will be announced
when final reports are received from the Federal Reserve banks.
-000-
#
211
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE December 4, 1939
Secretary Morgenthau
TO
Mr. Haas D.A.
FROM
Subject:
Wheat export sales and other market data from the
Federal Surplus Commodities Corporation.
Nov. 20: Export sales of Canadian wheat are estimated at
about
500,000 bushels with 112,000 being worked
to Scandinavia.
Nov. 21: The total Argentine crop has been estimated at
202,000,000 bushels which would compare with
336,000,000 bushels the past year and 185,000,000
bushels two years ago.
It was estimated that 350,000 to 400,000 bushels
of Manitobas were sold, mainly to the Continent.
Some purchases were made with the idea of moving
the grain into an export position before the close
of navigation.
Reports show that South Russia has shipped only
about 1,000,000 bushels of wheat since August 1,
while last year they had shipped 28,500,000 bushels.
Nov. 22: It is estimated that sales of Canadian wheat the
past two days amount to about 500,000 bushels,
and are understood to have been sold for JanuaryFebruary shipment from New York.
Nov.
24: Sales of Canadian wheat the past two days are
estimated at about 1,500,000 bushels.
Owing to lack of shipping space to handle the new
season's wheat the Australian government is con-
fronted with a serious problem in the disposal of
its exportable surplus.
Nov. 25: Sales of Canadian wheat today are estimated at
about 250,000 bushels.
12
Secretary Morgenthau - 2
Nov. 27: Today Europe was in the market for Canadian wheat
and bought an estimated 1,500,000 bushels of wheat
and flour.
Nov. 28: Approximately 10,000,000 bushels of North American
grains were taken yesterday by foreign buyers most
of which was taken by the United Kingdom. Great
Britain took about 8,000,000 bushels of Manitoba
wheat and about 750,000 bushels of United States
corn. The Continent bought 500,000 bushels of
Manitoba wheat. This sudden re-entry of Europe into
the North American grain markets 16 believed due in
part to the desire of Great Britain to get as large
supplies of grain as possible from nearby points in
order to conserve shipping facilities.
The periodic waves of buying in domestic markets
are associated with the functioning of the convoy
system. Between two and three weeks ago Great
Britain bought 5,000,000 bushels of Manitoba wheat.
Since then until yesterday they have been inactive.
The interval between buying movements suggests that
foreign buyers are following the practice of getting
supplies together at eastern seaboard points and
after shipping arrangements have been completed and
the convoy arranged, they are moving their supplies
through the combat waters at one time.
Nov. 29: Several cargoes of Canadian wheat have been worked,
but actual figures are not obtainable.
Nov. 30: Very little export business was done in wheat today
but a report was out, though not definitely confirmed,
that as much as 1,000,000 barrels of Canadian flour
had been worked, supposedly to England. It was finally estimated that about 250,000 bushels of Canadian
wheat had been sold to the United Kingdom today.
A British grain man has stated that reserves of grain
are being accumulated for a long war and that new
food credits are being arranged between England and
twelve exporting countries.
STRICTLY CONFIDENTIAL
TREASURY DEPARTMENT
213
INTER OFFICE COMMUNICATION
DATE December 4, 1939.
TO Secretary Morgenthau
FROM Mr. Cochran
Some days ago, the Embassy in Paris informed us that France planned to
ship gold to Canada by warship, in charge of a Bank of France official.
Mr. Knoke told me this forenoon that the Deputy French Consul in New York
yesterday telephoned a message to him from the French Minister in Ottawa,
requesting that the Federal Reserve Bank receive 2,036 cases to be delivered
to it today by Mr. Rousseau, the Bank of France official in charge thereof.
The gold is this morning being taken into the Federal and will probably amount
to between $110,000,000 and $140,000,000. The above mentioned French officials
have asked that the gold be put under earmark, and this will be done. The
Federal Reserve Bank had received no preliminary advice from France, obviously
lest there might be some interception of the message. It will be interesting
to learn whether the French trusted so large a shipment on one warship, or
whether more than one vessel was utilized. It is the impression of the Federal
Reserve Bank that the $50,000,000 of gold which the British brought down from
Canada and sold to the Federal Reserve Bank a few days ago had likewise arrived
recently from the other side of the Atlantic by warship.
KWR
STRICTLY CONFIDENTIAL
214
December 4, 1939.
Secretary Morgenthes
Mr. Cochras
Some days age, the Babasay in Paris informed as that Frence pleaned to
ship gold to Canada by wasship. in charge of a Bank of France official.
Mr. Knoke told me this foresoon that the Deputy French Consul is New York
yesterday telephoned a massage to his from the French Minister in Ottame,
requesting that the Federal Reserve Bank receive 2,036 cases to be delivered
to it today by Mr. Roussean, the Bank of France official is charge thereof.
The gold is this morning being taken into the Federal and will probably amount
to between $110,000,000 and $140,000,000. The above mentioned French officials
have asked that the gold be put under earmark, and this will be dane. The
Federal Reserve Bank had received no preliminary advice from France, obviously
lest there might be some interception of the message. It will be interesting
to learn whether the French trusted se large a shipment on one warship. or
whether more than one vessel was utilised. It is the impression of the Federal
Reserve Bank that the $50,000,000 of gold which the British brought down from
Canada and sold to the Federal Reserve Bank a few days age had likewise arrived
recently from the other side of the Atlantic by warship.
K.M.X.
HMC/rmm
12-4-39
215
The Swedish Minister presented to Secretary Morgenthau a
message received today from the Swedish Foreign Office which
reads in translation "Rooth for Merle Cochran, Treasury. Do
you buy Swedish or Finnish gold with delivery Stockholm".
While the Treasury has not done this so far, Secretary
Morgenthau proposes, subject to approval of the President, that
the United States is ready to buy any amount of Finnish gold in
Stockholm and to pay for it on delivery in Stockholm, provided
that
(a) Bank of Finland pays all expenses of transportation and insurance from Stockholm to New York,
shipping the gold on first available steamer
from Bergen.
(b) Pending arrival of gold in New York, the Bank
of Sweden segregate corresponding amount of
Sweden's gold earmarked with the Federal Reserve
Bank of New York in favor of the United States
Treasury to constitute a guarantee for full delivery
of the gold in the United States by Finland.
(c) That preliminary safe conduct for the gold through
Norway be obtained.
The foregoing memorandum was dictated principally by Secretary
Morgenthau in the presence of the Swedish Minister and Mr. Cochran,
December 4, 3 p.m. It was shown to the President by the Secretary at
4:45 p.m. At 5:15 p.m. the Secretary telephoned the Swedish Minister
that the President had approved the proposal.
At 4:30 p.m. the Swedish Minister had telephoned Mr. Cochran, while
preparing the cablegram to his Government, and had been advised by
Mr. Cochran to inform the Swedish Government in his cablegram that if
this proposal was of interest, Governor Rooth of the Bank of Sweden
should cable a formal request to the Federal Reserve Bank of New York,
which bank would work out the technical details and contract, under
instructions from the Treasury.
B.CHERES DOCHRAN.
216
the Swedish Minister presented to Secretary Morganthes a
message received today from the Swedish Foreign Office which
reads is translation "Reath for Maria treasury. Do
you buy Swedish or Finnish gold with delivery Steekhela'.
While the treasury has not done this se far, Secretary
Margonition proposes, subject to approval of the President, that
the United States is ready to buy any amount of Finnish gold is
Stockhola and to pay for is on delivery is Steekholm, provided
that
(a) Beak of Fialand pays all expenses of transportetion and insurance from Steekhels to New York,
shipping the gold on first available stoames
free Bergen
(b) Pending arrival of gold in New York, the Bask
of Seedes segregate corresponding amount of
Seedsm's gold casmarked with the Federal Reserve
Bank of New York is favor of the United States
treasury to constitute a guarantee for full delivery
of theggold in the United States by Finland.
(e) That preliminary safe conduct for the gold through
Morway be obtained.
TREASURY DEPARTMENT
217
INTER OFFICE COMMUNICATION
DATE December 4, 1939.
Ats
TO Secretary Morgenthau
FROM Mr. Cochran
At 10:30 this morning, I telephoned Mr. Pinsent, Financial Counselor
of the British Embassy. I thanked him for his letter of December 1, and
let him know that the method suggested therein with respect to the Treasury
receiving security sales figures from the British, and in not passing them
on to the Securities and Exchange Commission unless Mr. Frank should request
them, was satisfactory to the Secretary. Pinsent explained that Mr. Frank
evidently desires to receive them only if the Treasury ties them up in such
a way that they cannot be given any publicity by him.
In answer to my inquiry, Mr. Pinsent stated that he had no further word
in regard to the arrangement for handling the securities. He plans to go to
New York on Wednesday and will remain there the remainder of the week. I
told him that Governor Harrison had decided to remain in New York this week
and that we had asked him to give his personal attention to straightening out
the details with the Bank of England so that the British account can be
opened shortly. Pinsent promised to keep in touch with Governor Harrison and
to do anything possible to expedite this matter.
Following the conversations which Mr. Stewart and I had with Governor
Harrison last Friday and Saturday, in which we stressed the interest of the
Secretary in seeing the bank account matter settled quickly, the Governor told
me that he was calling off the hunting trip which he had planned for this week.
13mg
December 4, 1939.
10:47 a.m.
H.M.Jr:
Hello.
218
Mr.
Campbell: Hello. Hello, Mr. Secretary.
H.M.Jr:
C:
H.M.Jr:
C:
H.M.Jr:
C:
H.M.Jr:
C:
H.M.Jr:
C:
H.M.Jr:
C:
H.M.Jr:
C:
H.M.Jr:
C:
How are you?
Fine, thank you. How's yourself.
Oh, I'm - I'm very well.
I hear you couldn't place any bets in New Mexico or
Arizona. I'm awfully sorry about that.
(laughs)
I'm taking them all myself here
I see. Get any good odde?
Oh yes, yes, I'll quote you higher odds than the former
administration ever did.
I bet you.
But your chances aren't so good.
I sec.
We may not run the race.
Well, what is the present status of the Annenberg case?
Well, I tell you, they've been making certain overtures
toward a plea and as far as I'm concerned I am willing
to make absolutely no deal at all for a plea and the
Attorney General has backed me up on that so I don't
think much will come of it.
Good.
But there seems to be an awful fear on the part of
Mr. Annenberg that he's going to go to jail and I think
his fear is very well founded and he's almost moving
any possible pressure he can get to avoid that. Now
he's been down offering, I talked to Ed Foley about it,
offering settlements and can he get a plea and get off
with a fine and all of that stuff, the answer to all of
which has been definitely no.
H.M.Jr:
Ed's here in the office with me now. He -
-2C:
H.M.Jr:
0:
H.M.Jr:
0:
H.M.Jr:
0:
H.M.Jr:
219
oh good, well he's a fine fellow. He's been backing me
up one hundred per cent all along the line.
Well, he's not bad.
Well no, he's, you know considering where he came from.
That's right.
So - but here's the - here's our situation on Annenberg
and it's the only deal we offer and it's something he
could do without a deal. If he wants to file a plain
unvarnished plea of guilty Yes.
With no recommendation whatsoever from the Government Yes.
It would be perfectly all right with us if he makes
proper arrangement to pay for his civil liability for
his taxes those arrangements of course will be up to
you people, I don't care what they are and - in return
for that, if such a plea is filed we might consider
letting out some of the lesser people involved in the
thing principally the sons.
H.M.Jr:
I see.
Now that's the only proposition that we will consider
but that's only on a plea without recommendation while
he comes back that he wants to make sure that he isn't
going to jail and he wants recommendation of leniency
from the Government and all of this stuff which we have
absolutely refused. Upon that refusal they have
grown very cold toward the plea of guilty so I think
the whole thing has blown over.
H.M.Jr:
Well, the way I feel is this. If there ever was a case
that the Government should let the jury decide this is
the one.
0:
H.M.Jr:
I quite agree with you.
And if the - if we're going to keep the respect of the
man on the street we can't make any deal with this
fellow.
C:
There can't be any deal. On top of that, although this
-3-
220
is a purely selfish reason nevertheless I'm entitled
to
it Ithis
think
by thus
reason
into
case
far.of the hard work I have put
H.M.Jr:
Yes.
If a deal
I'm that
ruined,
and I'm- not going to have
any
deal16
I'llmade
tell you
because
C:
H.M.Jr:
Well, you won't be the only person that's ruined.
I beg your pardon.
0:
H.M.Jr:
C:
H.M.Jr:
C:
You'll have lots of company.
Yes, indeed I will.
Yes.
And I feel that in view of the summer I put in here,
about twenty hours a day for four months straight, that
I have a personal interest in this case and I'm entitled
to be a little selfish when my own reputation is at
stake.
H.M.Jr:
0:
I don't think it's selfish. Why the hell - just because
a man's worth millions should we make a deal with him.
Well I don't see any reason why we should, and on top of
that he pulled this stuff down before the Attorney General
and I gave the Attorney General a few facts to the
contrary, I mean Kirkman comes in with this stuff, this
poor old man who can't stand going to jail, I said,
poor old man hell, I'll give you the name of three people
that he has had killed in the City of Chicago in the
last five years.
H.M.Jr:
0:
H.M.Jr:
C:
Yes.
And I said, "He won't be able to successfully deny it
either".
Yes.
I said, "You're representing a murderer and a thief,"
and I said "Don't come down here telling me the poor
old man."
H.M.Jr:
Good for you.
4
221
So the Attorney General said, "Well," he said, "Are these
things 809". I said, "You're damned right they're
C:
80". I said, "I can give you a whole lot more too".
H.M.Jr:
C:
H.M.Jr:
0:
So he said, "Oh well, he said, "Of course, Mr. Kirkman,
you're not representing the kind of man you say he 18".
And Kirkman said, "Well I'll admit he's done some things
he
ought
tohung".
be sorry
I said, "Sorry hell, he
ought
to be
So for".
Well, there you are -
So I think - I think this thing will blow over. I don't
I don't know - if he has to go to jail anyway, he's
better off to take his chances with the jury.
Yes. Well, I was sure everything was all right, but
I just wanted to be reassured by you direct.
Well, I'm awfully pleased that you called and as far
as I'm concerned the only deal Moe Annenberg will get
here is something that he can do himself without us
anyway at any time. He can walk in and plead guilty
any time he wants to.
H.M.Jr:
0:
Right.
But if he does he'll get no recommendation of leniency
from me, and if I find anybody else trying to make one -
H.M.Jr:
Yes.
C:
Over my head, I'm going to come hollerin' to you for
a little support in a hurry.
H.M.Jr:
Well you'll get a hundred and one per cent support from
me.
C:
Well I know that and I tell you thus far, and I must
say this truthfully, although I was a little bit worried
for a while, I must say that the Department, the
Department of Justice and the Attorney General personally
have coincided with my views.
H.M.Jr:
C:
I'm glad to hear that.
I did have to do a little arguing down there once or
twice and I had to get our mutual friend Tommy in the
picture to do a little back of the scenes work.
H.M.Jr:
I see.
-5-
222
But it worked out perfectly and I am receiving one
0:
hundred per cent cooperation from the Attorney General.
H.M.Jr:
Wonderful. Now, I'm glad. Now one other thing. When
are you going to get started on Mr. Skidmore?
Well here's the thing, I want to try Mr. Skidmore personally, and I can't take the two of them at once. Now
C:
as soon as I get this case in such shape, you see,
we're still arguing pleas and abatements.
H.M.Jr:
Yes.
And special dilatory pleas here, which I am arguing
personally. Now 88 soon as I get this in shape why
we're either waiting for a jury or where the thing
is actually placed on trial calendar and we have a
C:
little time to spare, I'll go to work on Skidmore.
H.M.Jr:
C:
Good.
That's another case like the Annenberg one, that I
don't want to entrust to anyone else, because there's
too much danger in both of those of a fix.
H.M.Jr:
Now, how's my friend Sammy?
0:
Oh, say, he's marvellous. I've got him running after
all the bookies in town.
H.M.Jr:
C:
Good.
He's doing a grand job and I really would be very shorthanded without him. He's doing splendid work. I'm very
pleased with him.
H.M.Jr:
Well now, we are going - we hope to start a case in
New York, not - almost as important as this - not we may want to borrow Sammy.
C:
Well that's fine, but you leave him with me for a little
while longer, will you?
H.M.Jr:
Well, we won't need him this month anyway.
C:
Oh fine, well that's good, and you - by the time the
first of the year rolls around why maybe I'll get on
down there and I'd like to have a talk with you before
you take Sammy away because I depend an awful lot on
him.
223
-6H.M.Jr:
C:
Well I won't do anything until I do see you.
Well that's awfully kind of you and I appreciate it,
and once again I want to thank you for the wonderful
help I've received from you personally and from every-
body in your organization. It's been wonderful.
C:
Well I've put my money on you and I'm not sorry.
Well thank you very much and I'll assure you this, I'11
H.M.Jr:
All right.
C:
O.K. Mr. Secretary.
H.M.Jr:
Goodbye.
0:
Thanks for calling.
H.M.Jr:
never let you down.
224
December 4, 1939.
12:14 p.m.
H.M.Jr:
The President of the United States asks me at one o'clock
today, what the Treasury thinks that the revenue will
George
Haas:
be for the next fiscal year as compared to this fiscal
year what should I tell him?
Well you'd have to tell him we're working on it.
H.M.Jr:
Oh, shush, George, you haven't worked for me that long.
H:
Well I'm afraid 1f I give you anything else I'll get you
H.M.Jr:
in a hole.
No.
But if you - if I must - have to make a horseback
opinion on it.
H.M.Jr:
Yes.
H:
I would say that 1941 would probably be somewhat under
H.M.Jr:
H:
H.M.Jr:
six billion dollars.
Under six billion.
Yes. And the 1940, if you took a figure of five
billion six, say - let him give the two figures.
Well Danny's using a figure - the same 88 this year.
Well, Mr. Secretary, it will be between this year and
six billion, but not over six billion, I don't think.
H.M.Jr:
Well, he used the figure of five billion five twenty-
H:
Five twenty-five. We may raise that a little bit,
H.M.Jr:
How much?
H:
H.M.Jr:
H:
H.M.Jr:
five.
I don't know -
Well that's why I gave this five - six hundred million
instead of five hundred twenty-five.
Well you're only seventy-five million apart.
Well, Dan just used that figure, I'm not sure we'11
raise this, maybe you'd better keep it five hundred
twenty-five. Five million five hundred twenty-five.
I see.
-2H:
225
I'd leave it there. But now the other figure which,
for 1941, I told Danny, would not be above six million
dollars and probably less, it'd be somewhere between
this five billion, five hundred twenty-five million
and six billion dollars.
H.M.Jr:
H:
H.M.Jr:
H:
I see.
That's about the best I can do now.
All right George, thanks.
I'm sorry.
226
December 4, 1939.
12:51 p.m.
Capt.
Collins:
Yes, Mr. Secretary.
H.M.Jr:
you know on that matter I saw you about at
ten o'clock.
C:
Yes, sir.
H.M.Jr:
How far have you gone in that?
Well I've just - I've just gotten the name s of the
C:
interested companies that 18- - gave them a list of them.
H.M.Jr:
Yes.
And I'm waiting now for the memorandum from Mr. White.
C:
H.M.Jr:
Well you don't know who was the President of the company.
C:
No, sir.
H.M.Jr:
Well when you find that all out come over and see me,
I may want to do this myself. I don't want to put too
much on you.
0:
Aye aye, sir. Now Mr. Secretary, that is on the one
company whose name appears through those papers.
H.M.Jr:
Yes, Climax.
C:
Not the big company.
H.M.Jr:
This is the Climax.
C:
Yes, that's the one I'm speaking of, yes, sir.
H.M.Jr:
I don't - I think you'll find there's only one
C:
Yes, sir.
H.M.Jr:
I think it's a monopoly. I think -
C:
There's two or three people I know that have been on
company in the world who makes that stuff.
it in the past and I'm getting - getting the dope out
of the Navy, we have not bought any but they have.
H.M.Jr:
When you've got it all come over and see me.
C:
Aye aye, sir.
H.M.Jr:
Righto.
227
December 4, 1939.
3:37 p.m.
H.M.Jr:
Hello.
Operator:
Mr. Jones is in New York until tomorrow.
H.M.Jr:
0:
H.M.Jr:
oh Gee, I thought he was going to be here today.
I expect him at three tomorrow, see?
Well leave word. See if they can get word. Tell him
All right.
I'd like very much if he could drop in tomorrow for
fifteen minutes around ten-fifteen.
0:
All right.
H.M.Jr:
See?
H.M.Jr:
Yes, sir.
Get that word to him.
0:
Right.
0:
228
December 4, 1939.
3:50 p.m.
H.M.Jr:
Hello.
Operator: Mr. Hochschild
Harold
Hochschild:Hello Henry.
H.M.Jr:
How are you?
H:
Fine thanks, how are you?
H.M.Jr:
Very well. Harold, are you the Mr. Harold Hochschild
H:
I am.
H.M.Jr:
You are. All right.
H:
I'm the same one.
H.M.Jr:
When can you come down and see me?
H:
Huh?
who was secretary to the Climax Molybdenum?
H.M.Jr:
I want to see you.
H:
You want me to come down and see you.
H.M.Jr:
Yes.
H:
All right.
H.M.Jr:
Nothing to be frightened about, I want some cooperation
on this
H:
When Henry?
H.M.Jr:
Well to give you time, could you come down Wednesday?
H:
Wednesday; - what time morning or afternoon?
H.M.Jr:
Well, which is more convenient to you?
H:
What time would you -
H.M.Jr:
Come down and have lunch with me Wednesday, one o'clock
at the Treasury.
H:
All right, Henry. If that's convenient to you. Otherwise
229
-2I can come down H.M.Jr:
No. Come down and have lunch with me and I'll take a
chance on the phone, see?
Yes.
H.V.Jr:
But I don't want you to tell this to any of your
H.M.Jr:
Nobody.
associates, Harold, see?
I won't.
I won't.
H.M.Jr:
It's in regard to the recent sales to Amtorg.
Oh, yes.
H.M.Jr:
See?
Yes.
H.M.Jr:
H.M.Jr:
H:
H.M.Jr:
H:
H.M.Jr:
H:
But, GO you might have that prices and the quantity
and all the rest of that.
All right, Henry.
But don't, 1f you I won't say anything about why I'm asking for it until
after I've seen you.
Right. And the other thing, I wasn't going to ask you
this, but our mutual friend K. P. Chen.
Yes.
Can't get any zinc in this country and I don't know
anything about the zinc situation but he can't get zinc.
Well he may have trouble in getting it from
H.M.Jr:
Yes.
H:
But he can buy zinc now if he's - if he wants to pay
the market price for it.
-3H.M.Jr:
H:
230
Well, I think that We had some talk - somebody in our office had a talk
with him about it not long ago and I'll check up on it.
H.M.Jr:
Check up on that.
H:
Yes I will.
H.M.Jr:
And
this
other
thing, if you'd have the facts but keep
it very
very
secret.
H:
O.K. Henry.
H.M.Jr:
Be glad to see you Harold.
H:
One o'clock at the Treasury.
H.M.Jr:
That's right. Right in my office.
H:
On Wednesday.
H.M.Jr:
Right.
H:
All right, Henry. Goodbye.
231
December 4, 1939.
4:37 p.m.
H.M.Jr:
Hello.
Operator:
Mr. Hochschild
H.M.Jr:
Thank you.
0:
Go ahead.
H.M.Jr:
Harold
Hello.
H.M.Jr:
Hello Harold.
Hochschild: Hello.
H:
I'm sorry to bother you again.
H.M.Jr:
No bother.
H:
It would make it somewhat easier for me to be sure that
I have all the information, if I can tell one person in
strict confidence and I can rely on that person.
H.M.Jr:
That's all right.
H:
O.K. Henry.
H.M.Jr:
That's all right.
H:
O.K. See you Wednesday.
H.M.Jr:
Thank you.
H:
Goodbye.
232
December 4, 1939.
H.M.Jr:
Hello.
Operator:
The Swedish Minister.
H.M.Jr:
Hello.
W.
Bostrom:
Hello.
H.M.Jr:
Is this the Minister?
B:
Oh yes, Mr. Secretary.
H.M.Jr:
I just saw the President.
B:
Yes.
H.M.Jr:
And he O.K'd that.
B:
Thank you so much.
H.M.Jr:
So you -
B:
Then I can add that in the same telegram.
H.M.Jr:
Yes, you can make that as a firm offer.
B:
As a firm offer, yes. And I spoke to Mr. Cochran.
H.M.Jr:
Yes.
B:
He suggested that I should, in case it was O.K'd by
the President, that I should suggest to the Bank of
Sweden to make a formal request to New York.
H.M.Jr:
B:
H.M.Jr:
B:
H.M.Jr:
B:
That's right.
And then they refer it to you.
That's right.
Thank you very much, Mr. Secretary, I'm very much
obliged.
Well, that's pretty good service.
Yes, it's very good. I think we all ought to help them
as much as we can.
H.M.Jr:
Yes, we must.
B:
Thank you very much, Mr. Secretary. Goodbye.
233
THE AMERICAN METAL COMPANY. LIMITED
01 BROADWAY
NEW YORK
HKH:AA
December 4, 1939.
TELEPHONE BOWLING GREEN 0-1800
CABLE ADDRESS: EFFLUX. NEW YORK
Honorable Henry Morgenthau,
Secretary of the Treasury,
Washington, D. C.
Dear Henry:
Sometime ago I requested our Sales De-
partment to cooperate with our friend, K. P. Chen.
Lately I have been so busy with other matters that
I had not made any inquiries as to recent developments. After you telephoned today I found that
Universal Trading Company wants high grade spelter,
which is produced only by the New Jersey Zinc,
Anaconda and Bunker Hill Companies and of which
there is now a shortage.
We have interceded with the New Jersey
Zinc in behalf of Universal Trading Company and are
negotiating an exchange whereby we give the New
Jersey Zinc Company ordinary zinc and they give the
Universal Trading Company the high grade which the
Chinese desire. It so happens that at the very
time I was talking with you one of our men was up
at the Universal Trading Company's office in con-
nection with this matter.
at 1 P.M.,
Looking forward to seeing you Wednesday
Sincerely,
Haroed
234
December 4. 1939
Dear Mr. Phillips:
I just finished reading year column
on the Budget conference and hasten to let
you know that it will be impossible for to get along with one less stonegrapher.
Your column furnished - with a such
needed laugh.
Sincerely yours,
Mr. N. 1. Phillips,
Care, The New York Sun,
280 Broadway,
New Yesk, N.Y.
The Once
Over
By H. I. Phillips
Budget Conference
("Harold D. Smith, director of
the budget, flew to Warm Springs
at Presidential summons and dis.
cussed with the President the cut.
ting of the budget."-News
item.)
Franklin-Good morning. Har-
old. I sent for you to discuss cutting the budget
Harold.-Well, we've got a
lovely day for it.
Franklin like clear day
like this for going over figures.
You can see the decimal points
for miles. Are we all set?
Harold- think so.
Franklin.-Have you got plenty
of erasers?
Harold.-Yep! Blue pencils and
everything too. But let's decide
how we work
Beanklin.-What do you mean
€herold.-Which
work? of us wipes out
figures and which of us puts em
in?
Franklin.-Let's not pin each
other down. You erase something or add something as you
think best and I'll do the same.
Harold.-But won't this mean
confusion?
Franklin-Don't talk like a
Republican
Harold (holding the budget).It's quite a nice budget, eh1
Franklin (admiringly) Must
be a fifteen pounder. A little
fat for this time of year.
Harold-Nonsense Our budgets
are fat in all times of the year.
Franklin.-Now. let's get down
to carving. Have you brought
the necessary surgical instruments?
Harold.-I got an axe. four
hatchets and
Franklin.- So you're a Repub-
lican at heart, ehl
Franklin (after a few moments)
-I thought you'd do some cutting
on the way down in the airplane
Harold.- tried to but It was up
so high.
Franklin.- The plane?
Harold.-No. the budget.
Franklin.Let's get down to
business, Where can we start to
cut?
Harold.-We can cut expendi-
Indians should be willing to econo-
mize; they're used to it And we
can cut some of the Treasury De-
partment estimates, Morgenthau
could get along with one less
stenographer.
Harold.-We could set an ex-
ample by doing our part
Franklin.-That's a good idea
I'll cut out a couple of radio
hookups and use a smaller cruiser
for fishing. What can you economize on. Harold?
Harold (thinking hard).- can
save little gas.
Franklin.How?
Harold.-By not flying around
in airplanes to talk about cutting
the budget.
Franklin-Good I don't know
why I didn't think of that first
December 4, 1939
235
The following is a copy of the original news despatch from
Chungking, China, dated November 30th, following the interview between
Mr. Maurice E. Sheahan and the Press representatives
The temporary suspension of the flow of supplies over the
Nanning highway occasioned by the military operations in that vicinity
is distinctly of minor importance, it was stated today by Mr. M. E.
Sheahan, American highway transportation authority.
Mr. Sheahan, who is Vice President of the Keeshin Freight Lines
of Chicago, has recently completed a tour over the existing highway
transport routes in China, dech red that with the close of the rainy
season in South China an unlimited quantity of goods may be brought into
China over other more thoroughly conditioned roads.
Throughout the rainy season, despite the heaviest rain ever
recorded which even suspended operations of the Burma Railway, the
Yunnan-Burma highway remained open and in use, he said.
After completing his inspection tour in the southwest,
Mr. Sheahan said he observed as many as forty or fifty landslides in a
space of twelve kilometers along tie now highway but none were allowed
to impede the smooth flow of traffic pouring into China from the south.
"The Nanning highway was only one of the many strands in the mesh
of highways ensuring China adequate supplies of foreign goods," he stated.
"The highway has been in a state of ill repair for several
months and since the spread of war into that neighborhood has fallen
into a state of complete disuse.
"The officials and people of Kwangsi Province with the past
few weeks allowed the highway to be flooded and the roadbed has reverted
to its original state--paddyfields--that preceded its construction, thus
rendering it useless for Japanese operations.
-2-
236
"One of the most amazing features of the South China countryside
is the multitude of backroads and country routes that may be linked up to
ship goods in any direction desired," Mr. Sheahan continued. "These
traditional back country roads may be linked within a few weeks to provide
any imaginable detour.
"These roads consist of stone-paved paths over which animal traffic
coursed for centuries. It is only necessary to lift the stones out of
their bedding, ph ce them on the side of the old road-bed as hard
shoulders and fill in the space with gravel, and then you have roads
that are fit for motor traffic.
"The existence of such backways and paths enable some of China's
new roads in the Southeast to be built with great rapidity. The backroads
and byways constitute only a reserve insurance for the flow of supplies
through Kwangsi for in addition to them the end of December will
see the completion of a new motor road which has long been planned and
almost completed as a substitute for the old highway. It will actually
shorten the distance between the Chinese border and Cochin-China
to North Kwangsi province by a couple of hundred kilometers.
"The now road will be smoother, with fewer hairpin curves and
will be distinguished by its excellent profile engineering," Mr. Sheahan
said, adding that at least four other rout es are said to be in process
of construction.
"Throughout the Chinese Southwest, the work under the direction
of the Ministry of Communications is progressing rapidly. The Minister,
Mr. Chang Kia-Ngau, has taken personal charge of a gradual drive for
increased efficiency and speed in Chinese transport. During the past few
months preparations have been approved for centralizing the supply of
spare parts among fourteen hitherto independent Government transport agencies.
-3-
237
"By dividing the highways into sections so that individual drivers
traverse only sectors instead of the entire trips, it is expected that
day and night operations will soon commence over China's southern arterial
highways, " he said.
Mr. Sheahan also revealed that "amazing success" had been achieved
in experimental operation of duck-bottomed Chinese junks powered with
American outboard motors.
The Ministry of Communications, assisted by the American highway
experts, M. E. Sheahan, A. B. Bassi and C. W. Van Patter, has been taking
full advantage of the stability within China during 1939 to improve and
construct almost all of China's principal highways and reorganize the
various regional managements into one centralized, more economic and
efficient transportation agency. Chinese leaders believe a new era of
highway service is dawning for the la sting benefit of China.
238
TREASURY DEPARTMENT
WASHINGTON
December 4, 1939.
MEMORANDUM FOR THE SECRETARY:
Re: Overtime Work--Procurement Division.
A total of 54 employees, exclusive of executives, out of a force
of 283 in the Administrative Section, were involved in overtime work,
on Friday, Saturday, and Sunday, as follows:
5 employees worked 8 hours overtime Friday night (from 4:30
p.m. Friday to 12:45 a.m. Saturday).
18 employees worked 9 hours overtime Saturday and Sunday (from
1:00 p.m. to 4:00 p.m. Saturday, and from 9:00 a.m. to
3:00 p.m. Sunday).
4 employees worked 6 hours overtime on Sunday (from 9:00 to
3:00 p.m.).
19 employees worked 12 hours overtime Saturday night (from
8:00 p.m. Saturday to 8:00 a.m. Sunday).
7 employees worked 10 hours overtime Saturday night (from
9:30 p.m. Saturday to 7:30 a.m. Sunday).
1 employee worked 22 hours overtime Saturday and Sunday (from
1:00 p.m. Saturday to 11:00 a.m. Sunday).
All the above employees volunteered for the overtime work. No
employee was required to work overtime. The rule was to use the employees in shifts so as not to cause any undue strain. Time was taken
out at will for rest and refreshment. Some employees were able to sleep
during intervals of inactivity.
There was no case of collapse, as reported in the newspaper. Care
was taken that no one should over exert. All female employees were
taken to their homes upon completion of night duty.
All employees who contributed overtime work are being given time
off correspondingly.
GRAVES.
39
December 4, 1939.
MEMORANDUM FOR THE SECRETARY:
Re: Overtime Work--Procurement Division.
A total of 54 employees, exclusive of executives, out of a force
of 283 in the Administrative Section, were involved in overtime work,
on Friday, Saturday, and Sunday, as follows:
5 employees worked 8 hours overtime Friday night (from 4:30
p.m. Friday to 12:45 a.m. Saturday).
18 employees worked 9 hours overtime Saturday and Sunday (from
1:00 p.m. to 4:00 p.m. Saturday, and from 9:00 a.m. to
3:00 p.m. Sunday).
4 employees worked 6 hours overtime on Sunday (from 9:00 to
3:00 p.m.).
19 employees worked 12 hours overtime Saturday night (from
8:00 p.m. Saturday to 8:00 a.m. Sunday).
7 employees worked 10 hours overtime Saturday night (from
9:30 p.m. Saturday to 7:30 a.m. Sunday).
1 employee worked 22 hours overtime Saturday and Sunday (from
1:00 D.M. Saturday to 11:00 a.m. Sunday).
All the above employees volunteered for the overtime work. No
employee was required to work overtime. The rule was to use the employees in shifts so as not to cause any undue strain. Time was taken
out at will for rest and refreshment. Some employees were able to sleep
during intervals of inactivity.
There was no case of collapse, as reported in the newspaper. Care
was taken that no one should over exert. All female employees were
taken to their homes upon completion of night duty.
All employees who contributed overtime work are being given time
off correspondingly.
GRAVES.
HNG/mff
WASHINGTON HERALD
240
DEC 4 1939
TALLY
Us
D RILEY
Collapses
Employe
Section Brocure by put GEOROE
Administrative
last
alike.
ment's in women 79 hours Saturday's week, men hours back and
8:30 a.m. to 12:30 p.m.;
at were 8 p.m., off Sunday 8 a.m. This collapsed for several under weeks. the grind. A woman
but Employee
9
king
unual
haurs
ha haves worked
241
December 4
M
11:30 am
Miss Tully phoned that sometime ago the President
asked Secretary Morgenthau to let him know the value
of the Post Office in Poughkeepsie. HM,Jr may have
reported, but the President does not remember it and
asks that HM,Jr send the President a memorandum on it.
nmo
1. affiained by Procurement Division accured
may 15,1939 as #83, 000
2. Letter for Presidents signature to atty Geu. an
May 15,1939 requesting latter to advise
whether old bldd. is desired for Branch
Court. no information as to whether
President signed letter.
3. harmady is sending complete report to
President not later than tomesnow
4. Imore Tully advised of above
swB
12/4/39
242
December 4, 1939.
Dear Mr. Keeshin:
On behalf of the Secretary, I am acknowledging
your letter of December 2nd, which encloses copies of
original reports from Messrs. M. E. Sheahan and
C. W. VanPatter, from China, dated November 14, 16 and
21st, respectively, and also a copy of a report from
Mr. Earl H. Leaf, New York City, dated December 1, 1939.
These documents will be studied with much interest.
Sincerely,
(Signed) H. S. Klotz
H. S. Klots,
Private Secretary.
Mr. J. L. Keeshin, President,
Keeshin Freight Lines, Inc.,
221 West Roosevelt Road,
Chicago, Illinois.
OKFilmf
243
December 4, 1939.
Dear Mr. Keeshin:
On behalf of the Secretary, I am acknowledging
your letter of December 2nd, which encloses copies of
original reports from Measrs. M. E. Sheahan and
C. W. VanPatter, from China, dated November 14, 16 and
21st, respectively, and also a copy of a report from
Mr. Earl H. Leaf, New York City, dated December 1, 1939.
These documents will be studied with much interest.
Sincerely,
(Signed) H.S. Klotz
H. S. Klots,
Private Secretary.
Mr. J. L. Keeshin, President,
Keeshin Freight Lines, Inc.,
221 West Roosevelt Road,
Chicago, Illinois.
OKFiled
244
December 4, 1939.
Dear Mr. Keeshin:
On behalf of the Secretary, I am acknowledging
your letter of December 2nd, which encloses copies of
original reports from Mesers. M. E. Sheahan and
C. W. VanPatter, from China, dated November 14, 16 and
21st, respectively, and also a copy of a report from
Mr. Earl H. Leaf, New York City, dated December 1, 1939.
These documents will be studied with much interest.
Sincerely,
(Signed) H.S. Klotz
H. S. Klots,
Private Secretary.
Mr. J. L. Keeshin, President,
Keeshin Freight Lines, Inc.,
221 Most Roosevelt Road,
Chicago, Illinois.
OKFilaf
KEESHIN FREIGHT Lines, INC.
J.L.KEESHIN
245
221 WEST ROOSEVELT ROAD
PRESIDENT
CHICAGO
December 2, 1939
The Honorable Henry J. Morgenthau, Jr.,
Secretary of the Treasury,
Treasury Building,
Washington, D.C.
My dear Mr. Secretary:
I am enclosing herewith copies
of original reports which I received from
Messrs. M. E. Sheahan and C. W. VanPatter, from
China, dated November 14, 16, and 21st, respect-
ively, also a copy of a report which I received
from Mr. Earl H. Leaf, New York City, dated
December 1, 1939. This is being forwarded to
you for your information.
Very truly yours,
J./L. Keeshin
JLK:LR
Enc. (4)
adidas.
CERTIFIED
COPY
c/o Ministry of Communications
Chungking, China
November 14, 1939
Mr. K. P. Chen
Universal Trading Corporation
246
630, 5th Avenue
New York City, New York
U. S. A.
Dear Mr. Chen:
I have read your telegram of November 10th which was delivered
to Dr. H. H. Kung, Minister Chang Kia-Ngau and Mr. P. W. Tsou, which
telegram was received in Chungking November 13th, and with particular
reference to that portion thereof referring to the necessity of my return
to the United States. I should like to make it clear that the suggestion
that I return to the United States was not entirely my own. Itwas felt that
the trip would be beneficial to China:
1. In compliance with your desires as expressed in your
several cables of October 8th and 10th, and your letter
of October 23rd wherein you infer that we jointly
present the merger proposition to the Treasury Department;
2. To more thoroughly discuss with your engineers and others,
essential changes in truck specifications and assist in CO-
ordinating the functions of U.T.C. with the needs of the
National Government in so far as they concern transportation,
3. Assist through visiting the various truck manufacturers in
progressing the plan recommended to the Minister of
Communications of utilizing Foo Shing through U.T.C. as the
purchasing agent for all governmental transporting agencies
including the military through a 6entral Material and Supply
Store and specifically to secure if possible from the
manufacturers their agreeableness to the plan of forwarding
essential parts and supplies on consignment, the payment for
which could be made as the supplies are consumed;
247
-24. To inform you and your staff as well as our Treasury
Department of the current status of the transportation
facilities of China.
This program I realize would involve perhaps 30,000 miles
of almost continuous travel within a period of approximately 45 days
with very little time to inform Mr. Keeshin of the various plans we have
under consideration to the end that we can secure his advice and counsel
as contemplated in our Agreement. I also had in mind to visit several
aircraft manufacturers particularly Mr. Howard's plant in Chicago as I
understand he has commenced construction of an aeroplane exclusively for
the handling of freight in competition with surface transportation. From
what I have been able to learn regarding cost of operation and doubling
Mr. Howard's estimates, freight could be hauled more economically by
aeroplanes than by truck and granting the loss of a single plane through
no
the actions of the enemy, the economical loss over all would be more than
the present losses to equipment and cargo that are apparent on every highway
over which I have travelled.
I hope with the foregoing at hand you will perceive a
desire on the part of those of us in China to cooperate fully with
you in economizing time and expense. With kindest personal regards to
yourself and staff, I remain
Sincerely
(signed)
00. H. E. Dr. H. H. Kung
H. E. Minister/Chang Kia-ligau
Mr. J. L. Keeshin
M. E. Sheahan
248
COPY
Chungking, China
November 16, 1939
Dear Mr. Keeshin:
I returned from Iweiyang to Chungking on November third, and since
that date have been working on plans for the organization of maintenance, shops,
locations, equipment, parts and shop capacities that will be necessary to maintain
approximately five thousand trucks and buses that will be consolidated from six to
eight government owned transportation companies into one corporation which will
operate under the Ministry of Communications. This plan will eliminate much bidding
for mechanics and drivers and will also eliminate duplication of shops, garages and
equipment in the same location. It will also be much easier to control under this
system of organization rather than to have competitive government organizations
operating the same kind of trucks and buses and also running over the same highways,
duplicating all operating necessities. Mr. Sheahan and Mr. Bassi have been working
very diligently to bring about this new form of organizing. I, of course,mean new
to the Chinese. They are very peculiar and erratic in many ways and it has been
most difficult to bring about the proper coordination. It is my opinion that at
last this part of the job is under control and I also believe we have accomplished
as much as any one could in this length of time.
It has been decided that major shops shall be located in Kunning,
Kweiyang, Chungking, Hwanghsien and Lanchow. Shops of a major nature will be
located in Luhsien, Poocheng and Lashio or the termini of the Hunnan-Burma route.
It will also be necessary to establish twenty-five to thirty minor repair sectional
garages in order to eliminate delays to equipment operating between principal
terminals. If arrangements can be made with the French Government, a major shop will
be erected at Phulongchong, Indo-China. In view of the Japanese invasion at Bakhoi
it would be folly to establish a shop of any consequence on the Chinese side of the
border until it is determined how they will come out with their battle for this
territory. I am thinking of the road between Kweiyang through Hochih to Nacham
-2 -
249
north of Haiphong, Indo-China. The bombing at present in this area is very
consistent making day travel on the highway impossible, and the condition of the
road makes night traveling very S low. In the daytime the Japanese planes will fly
very low and straf with machine guns anything they can see on this highway.
A new outoff is being built from Nacham to Hochih which will be much better unless
the Japs push too far inland from Pakhoi. The Chinese government officials are
very optimistic and believe that they will soon be able to drive out the invaders
of this section. the highway causes this to be a very important battle but we are
all optimistic about the outcome.
It is planned that I will leave Chungking the first part of next week to be
in the territory for quite some time. The fourteen shops that were purchased by UTC
have arrived in Haiphong but will be immediately shipped to Kweiyang and from this city
distributed to the shops. in other localities as the buildings are completed. It will
be necessary for me to follow through with each one as they are being set up. I will
also have to make a survey of the shop buildings and repair sheds that have been
erected by the different government transportation administrations to determine how
they can be used to the best advantage and still exercise as much economy as possible.
Many shop sites have been purchased and quite a few repair sheds built before we
arrived in China. The consolidation of those Ministry organizations will effect great
savings in this alone. Most of the repair shops are built without walls, making it
possible to move them without great expense. The moderate winter weather permits the
use of a building so designed. From Chungking, south, the temperature is known to stay
about forty degrees except the mountain tops - they will have slight freezes from time
to time through the winter months. The northwest highway is routed through a colder
climate, also heavy snows in the winter months. The buildings in this territory are
better constructed. The machine shop buildings in southern China are enclosed to
prevent stealing. I might mention that all of the motor equipment on the northwest
highway is of Russian manufacture.
The two hundred D50 Internationals have arrived in Haiphong and it is
-3 -
250
expected that they will be assembled within the next two months. The trailmobile
trailers have also arrived. They will be completed before the tractors are ready.
The plan to operate this equipment from DongDang to the mountains on the north is
given up for the present in view of the Japs attempted invasion to cut off this
road. Three hundred kilometers north from Kurming will permit tractor-trailer
operation but they would have to be turned back from south of Annam due to the
treacherous mountain roads. A limited section of two highways in the Chungking
area will also permit the use of this equipment.
I would like to again assure you that I an doing my best to accomplish
the big undertaking that is ahead of me and I feel very confident that if you were
here you would be well pleased with the results to date.
Wishing you and yours the finest kind of a Thanksgiving day, I am
Sincerely yours,
(signed)
C. W. VanPatter
251
December 4, 1939.
MEMORANDUM
TO:
Secretary Morgenthau
FROM: Mr. Gaston
mr
m
The present status of the matter of the trawlers and other
vessels transferred to the French flag under approval of the Maritime Commission is as follows:
(1) All Collectors of Customs and all Coast Guard Commanders
have been instructed not to permit any vessel which has been transferred from American flag and registry to a foreign flag to clear
or depart from an American port or territorial waters without
specific instructions from the Treasury Department so to do.
(2) Specific instructions have been sent with respect to the
trawlers LOON and PENGUIN and the tugs KENNEBEC, DEBARDELEBEN and
BARRENFORK that they are not to be permitted to depart without
authorization from the Treasury.
(3) We are awaiting further advices from the Department of
Justice as to:
(1) What agency of the Government shall conduct
a detailed investigation to learn whether the transfer
of these vessels was legal;
(2) What further steps should be taken by the
Treasury in the matter.
A copy of the attached memorandum is being sent to Judge
Townsend in Justice, who will then immediately take up with the
Attorney General the question of further procedure. Judge Townsend
and Kemp, Special Assistant to the Attorney General, are both inclined to the view that further investigation should be by the
Bureau of Investigation of the Department of Justice.
TREASURY DEPARTMENT
252
WASHINGTON
MEMORANDUM OF FACTS ON SALE TO FRENCH INTERESTS OF TRAWLERS
On December 1, there was received at the Treasury Department
from the Coest Guard at Boston a message to the effect that three mine
sweepers, sold to the French Government by the Portland Trawling Company,
had passed Cahoon's Hollow going south. Upon receipt of that information,
steps were taken to ascertain the nature of the transaction and whether
other vessels were involved. As a result of those investigations, the
following facts were developed.
The three vessels sighted off Cahoon's Hollow were the trawlers
Brant, Coot, and Plover, which had cleared for Havre, France, from
Boston on November 29. The sale of those three trawlers had been approved by the United States Maritime Commission on November 14. In
the application for approval of sale, it was stated that the vessels
were being sold to the Compagnie Generale Transatlantique to be placed
at the disposal of the French Government for use in French territorial
waters and vicinity. The Coast Guard station reporting the passage of
the three vessels was asked why the vessels had been referred to as
mine sweepers. The station reported that the transaction had been
mentioned in newspaper accounts in New England and that those newspaper
accounts had referred to the vessels as mine sweepers. The nationality
of the crews of the three trawlers is French. Members of the crew were
apparently secured from French lines at New York.
Further investigation showed that five other vessels had been
sold to French interests to be placed at the disposal of the French
Government in French territorial waters and vicinity. They are the
Loon, a trawler, the Penguin, a trawler, the Kennebec, a tug, the
Debardeleben, a tug, and the Barrenfork, a tug. The Kennebec, while
she is described as a tug, is said to be, for all practical purposes,
a trawler. The Loon and Penguin are, at the present time, at the
Atlentic Works, East Boston, Massachusetts. The Kennebec is at a drydock
in East Boston. The Debardeleben is in New Orleans, reportedly in the
Mississippi River under trial by French agents. The Debardeleben has
not yet been transferred to French registry, but the bill of sale has been
filed in the Custom House at New Orleans. The Barrenfork is in Charleston,
South Carolina. The Loon and the Penguin have been transferred to French
registry and flag. This transfer was approved by the United States
Maritime Commission on November 14, 1939.
From information secured from the Coast Guard, it appears that
the only reasonable use to which the trawlers and tugs could be put by
the French Government in French territorial waters and vicinity is use
-2-
253
as mine sweepers or patrol boats. According to Jane's Fighting Ships,
the French mine sweepers are armed with a 65 millimeter gun. The Coast
Guard advises that such mine sweepers would probably also carry a
machine gun for anti-aircraft purposes (unless the 65 millimeter gun
were a dual purpose gun) and a Y-gun for the discharge of depth bombs.
The Brant, Coot, Plover, and Loon were built by the Foundation
Company in Savannah, Georgia. The Penguin was built in Cleveland.
The Brant, Coot, Plover, and Loon were four of thirty-eight vessels
contracted for during the World War. Ten were never finished. Most
of the twenty-eight that were finished were sold to various trawling
and fishing companies. It appears that those vessels were designed
for the French Government as mine sweepers. Their dimensions are
139 feet long with a 25-foot beam.
The Loon, Kennebec, Penguin, Debardeleben, and Barrenfork are
being held in port pending further instructions. Instructions have
been issued to the Coast Guard to detain the Brant, Coot, and Plover
if they are found within the 12-mile limit. No effort is being made
to locate the position of the three latter vessels beyond the 12-mile
limit.
The Department of Justice and the State Department were informed
of the developments immediately. Acting Attorney General Kemp approved
the detention of the five vessels still in port pending further investi-
gation. There appears to have been a possible violation of section 11
of the Criminal Code (U.S.C. title 18, sec. 23), which makes it a crime
knowingly to be concerned in the furnishing of any vessel with intent
that such vessel shall be employed in the service of any foreign state
to cruise or commit hostilities against the subjects, citizens, or
property of another foreign state. Paragraph 8 of the President's
general proclamation of neutrality of September 5, 1939, provides that
it is forbidden knowingly to be concerned in the furnishing of any
vessel with intent that such vessel shall be employed in the service
of a belligerent to cruise or commit hostilities against the subjects,
citizens or property of an opposing belligerent.
The Department of Justice has under consideration the question
as to which agency of the Government should conduct the investigation
of the matter.
1cc
his
Oe care
12th
12/3/139
from 400 amer
Certificate
)
Miss
January
folfe
M.P
The Swedish Minister presented to Secretary Morgenthau &
lassage received today from the Swedish Foreign Office which
reads in translation "Rooth for Merle Cochran, Treasury. Do
you buy Swedish or Finnish gold with delivery Stockholm",
While the Treasury has not done this BO far, Secretary
Morgenthau proposes, subject to approval of the President, that
the United States is ready to buy any amount of Finnish gold in
Stockholm and to pay for it on delivery in Stockholm, provided
that
(a) Bank of Finland pays all expenses of transportation and insurance from Stockholm to New York,
shipping the Cold on first available steamer
from Bergen
(b) Pending arrival of gold in New York, the Bank
of Sweden segregate corresponding amount of
Sweden's gold earmarked with the Federal Reserve
Bank of New York in favor of the United States
Treasury to constitute & guarantee for full delivery
of the gold in the United States by Finland,
(c) That preliminary safe conduct for the gold through
Norway be obtained.
JR
her 4th 1939
December 4, 1939.
255
MEMORANDUM
TO: Secretary Morgenthau
FROM: Mr. Gaston
The present status of the matter of the trawlers and other
vessels transferred to the French flag under approval of the Maritime Commission is as follows:
(1) All Collectors of Customs and all Coast Guard Commanders
have been instructed not to permit any vessel which has been transferred from American flag and registry to a foreign flag to clear
or depart from an American port or territorial waters without
specific instructions from the Treasury Department so to do.
(2) Specific instructions have been sent with respect to the
trawlers LOON and PENGUIN and the tugs KENNEBEC, DEBARDELEBEN and
BARRENFORK that they are not to be permitted to depart without
authorisation from the Treasury.
(3) We are awaiting further advices from the Department of
Justice as to:
(1) What agency of the Government shall conduct
a detailed investigation to learn whether the transfer
of these vessels was legal;
(2) What further steps should be taken by the
Treasury in the matter.
A copy of the attached memorandum is being sent to Judge
Townsend in Justice, who will then immediately take up with the
Attorney General the question of further procedure. Judge Townsend
and Kemp, Special Assistant to the Attorney General, are both inclined to the view that further investigation should be by the
Bureau of Investigation of the Department of Justice.
256
MEMORANDUM OF FACTS ON SALE TO FRENCH INTERESTS OF TRAWLERS
On December 1, there was received at the Treasury Department
from the Coast Guard at Boston a message to the effect that three mine
sweepers, sold to the French Government by the Portland Trawling Company,
had passed Cahoon's Hollow going south. Upon receipt of that information,
steps were taken to ascertain the nature of the transaction and whether
other vessels were involved. As a result of those investigations, the
following facts were developed.
The three vessels sighted off Cahoon's Hollow were the trawlers
Brant, Coot, and Plover, which had cleared for Havre, France, from
Boston on November 29. The sale of those three trawlers had been approved by the United States Maritime Commission on November 14. In
the application for approval of sale, it was stated that the vessels
were being sold to the Compagnie Generale Transatlantique to be placed
at the disposal of the French Government for use in French territorial
waters and visinity. The Coast Guard station reporting the passage of
the three vessels was asked why the vessels had been referred to as
mine sweepers. The station reported that the transaction had been
mentioned in newspaper accounts in New England and that those newspaper
accounts had referred to the vessels as mine sweepers. The nationality
of the crews of the three trawlers is French. Members of the crow were
apparently secured from French lines at New York,
Further investigation showed that five other vessels had been
sold to French interests to be placed at the disposal of the French
Government in French territorial waters and vicinity. They are the
Loon, a trawler, the Penguin, a trawler, the Kennebec, a tug, the
Debardeleben, & tug, and the Barrenfork, a tug. The Kennebec, while
she is described as a tug, is said to be, for all practical purposes,
a trawler. The Loon and Penguin are, at the present time, at the
Atlantic Works, East Boston, Masanchusetts. The Kennebec is at a drydock
in East Boston. The Debardeleben is in New Orleens, reportedly in the
Mississippi River under trial by French agents. The Debardeleben has
not yet been transferred to French registry, but the bill of sale has been
filed in the Custom House at New Orleans. The Barrenfork is in Charleston,
South Carolina. The Loon and the Penguin have been transferred to French
registry and flag. This transfer was approved by the United States
Maritime Commission on November 14, 1939.
From information secured from the Coast Guard, it appears that
the only reasonable use to which the trawlers and tugs could be put by
the French Government in French territorial waters and vieinity is use
257
-2as mine sweepers or patrol boats. According to Jane's Fighting Ships,
the French mine sweepers are armed with & 65 millimeter gun. The Coast
Guard advises that such mine sweepers would probably also carry a
machine gun for anti-sireraft purposes (unless the 65 millimeter gun
were a dual purpose gun) and a Y-gun for the discharge of depth bombs.
The Bront, Coot, Plover, and Loon were built by the Foundation
Company in Savunnah, Georgia. The Penguin was built in Cleveland.
The Brant, Coot, Plover, and Loon were four of thirty-eight vessels
contracted for during the World War. Ten were never finished. Most
of the twenty-eight that were finished were sold to various trawling
and fishing compenies. It appears that those vessels were designed
for the French Government as mine sweepers. Their dimensions are
139 feet long with a 25-foot beam.
The Loon, Kannabee, Penguin, Debardeleben, and Barrenfork are
being held in port pending further instructions. Instructions have
been issued to the Coest Guard to detain the Brant, Goot, and Plover
if they are found within the 12-mile limit. No effort is being made
to locate the position of the three letter vessels beyond the 12-mile
limit.
The Department of Justice and the State Department were informed
of the developments immediately. Acting Attorney General Kemp approved
the detention of the five vessels still in port pending further investi-
gation. There appears to have been a possible violation of section 11
of the Criminal Code (U.S.C. title 18, sec. 23). which makes it a crime
knowingly to be concerned in the furnishing of any vessel with intent
that such vessel shall be employed in the service of any foreign state
to cruise or commit hostilities against the subjects, citizens, or
property of another foreign state. Paragraph 3 of the President's
general proolamation of neutrelity of September 5. 1939, provides that
it is forbidden knowingly to be concerned in the furnishing of any
vessel with intent that such vessel shall be employed in the service
of a belligerent to cruise or commit hostilities against the subjects,
citizens OF property of on opposing belligerent.
The Department of Justice has under consideration the question
as to which agency of the Government should conduct the investigation
of the matter.
ERF/HC/ep 12/4/39
my
258
December 4, 1939
My dear Mr. Secretary:
I am enclosing herewith a copy of the
memorandum which I submitted to the President at
Cabinet on December 1, 1939.
In view of the position that the Treasury
has taken, as outlined in this memorandum, is there
anything further that we can do to be of assistance
to the Navy Department at this time? If there is,
please let me hear from you.
Yours sincerely,
(Signed) H. Morgentban.J
Honorable Charles Edison,
Acting Secretary of the Navy,
Havy Department,
Washington, D. c.
By hand
259
December 4, 1939
My dear Mr. Secretary:
I am enclosing herewith a copy of the
memorandum which I submitted to the President at
Cabinet on December 1, 1939.
In view of the position that the Treasury
has taken, as outlined in this memorandum, is
there anything further that we can do to be of
assistance to the War Department at this time?
If there is, please let me hear from you.
Yours sincerely,
(Signed) H. Morgenthau Jr.
Honorable Harry H. Woodring,
Secretary of War,
War Department,
Washington, D. C.
(m Wording
water receipt
12 - 9-39
Enclosure.
By hand
OFFICE OF
GENERAL COUNSEL
280
TREASURY DEPARTMENT
WASHINGTON
GENERAL SECURITY
December 4, 1939
my
MEMORANDUM FOR THE SECRETARY:
We were advised by the Coast Guard today that the LEKALA,
an auxiliary yawl, was proceeding from Moorehead City to Wilmington,
North Carolina, through the inside passage. It has on board five
weeks' supply of stores and one Blue Diamond generator of 110 volts
which is unattached. It is suspected of being manned by a crow of
seven German reservists. The history of the LEXALA indicates that
it is planning to put to sea possibly to supply a belligerent
vessel with food and men and the generator. This would justify
action under section 10(a) of the Neutrality Act of 1939.
I put the matter up to Mr. Kemp of the Department of Justice,
and we were subsequently requested by Mr. Fisher, Head of the
Criminal Division, to detain the vessel pending investigation.
Appropriate instructions to this effect have been issued to the
Coast Guard.
If you desire further information about the matter, I will
be at home all evening. My home telephone number is North 5533.
Huntington Cairus
BK226
261
December 4, 1939
9:15 am
Present:
Mr. Irey
Mr. Wilson
Mr. Irey: You know what hwe have been doing on
this (Amtorg disbursements for purchases, etc.)
HM,Jr: No.
Mr. Irey: Nothing, according to the arrangements
Herbert Gaston made with the Navy that they would continue with Amtorg and we would continue with the Germans.
We have gotten them to give us these copies on Amtorg,
but have done nothing.
HM,Jr: They come in every two weeks?
Mr. Irey: Yes.
HM,Jr: When did the last one come in?
one.
Mr. Irey: November 20th is the date of the last
HM,Jr: This is a funny thing. The President
brings it up at Cabinet and said he had lists of what
Amtorg is buying and "I see they are buying a lot of
aluminum and he said, "What about it?" I said, "I
get the lists too." He said, "How do you get them?"
I said, "The same way you do. He said, "How do you
get it?" I said, "You sent a man up to the house.
He said, "That's right."
Then he turns to me, in front of everybody, and
said, "Have you contacted Justice?* I said, "No. What
has Justice got to do with it. They arenot breaking
the law." So he said, "well, you see that they stop
buying aluminum. "I can't. It's legal." He
said, "Well, you have done worse things before." But
the understanding with the Navy, it's just as to source?
-2-
262
Mr. Irey: Here is the Climax Molybdenum Company,
less than $600,000.
HM,Jr: The only big thing is Climax. The Pres-
ident said they bought $2,000m000. It's $640,000.
How in the devil does Chase know all this?
Bank.
Mr. Irey: Their accounts are all with the Chase
Mr. Wilson: They might have taken copies of the
cancelled checks, Sir.
Mr. Irey: I imagine those same sheets have been
made available to the President, because they are copies
of what the Navy has.
again.
HM,Jr: I was trying to see if Climax appeared
Mr. Irey: Yes. You will find it several times
in there.
of Climax.
We can take those and get the total amount
HM,Jr: Can you? And the dates? How long would
it take you?
Mr. Irey: Fifteen or twenty minutes.
HM,Jr: Suppose you are back here at ten o'clock
with it.
Mr. Irey: There are payrolls in there. They
have a lot of names on their payrolls.
HM,Jr: Look at the number of Russians visiting.
But that has nothing to do with us.
Mr. Irey: No. We just have done nothing with
that at all. We have not even inquired how they get
it or how Chase National Bank gets it. There are some
things, like the Russians visiting here, I don't see how
they get that.
Mr. Wilson: I think Naval Intelligence gets that
from some other source.
263
-3-
HM.Jr: Well, run through this and give me figures
on
Climax Molybdenum
That's the thing the
President
18 interestedCompany.
in.
What I an interested in is anything that has to
do with airplanes. Here's Volte. $30,000, Aviation
Corporation. Let's see if there are That
any might
names
I know.
be searchTestinghouse Electric, $157,000.
lights. Well, we can find out.
Mr. Irey: General Electric. Lot of electrical
organizations in there.
HM,Jr: Amazing, they are buying 80 much grain!
Bought a little, not very much, Wright Aeruonautic.
Here's United Aircraft. They are buying from them.
$15,000 for Crank Shaft Machine Company. Bridgeport
Brass, $62,000. You might find out what that company,
E. J. Schwabach is. I think it's grain, but you might
find out. Iam having Collins over here and he can take
a look at this stuff.
But get together, just for ten o'clock, the Climax
Molybdenum Company.
000-000
Bx226
264
December 4, 1939
10 am
Present:
Capt. Collins
Mr. Gaston
Dr. White
Mr. Irey
Mr. Wilson
HM,Jr: This is kind of extra-confidential.
We are getting -- not going into the how, where
or what -- the detailed purchases of the Amtorg. Now,
the President told me at Cabinet that he wanted me to
see that the Russians did not get any more aluminum.
They are buying molybdenum, which is the same thing.
Climax -- how much did they get?
Mr. Irey: $3,120,000 since October 24th.
HM,Jr: Is that the same thing?
Capt. Collins: No, sir.
Mr. Gaston: It's a steel alloy.
HM,Jr: The way he put it, he did not want them
to buy stuff which the French or English might be able
to use. I told him I did not have any legal right to
do this thing. He thought it was aluminum. They al-
ways inform him wrong.
Mr. Irey: We found the Aluminum Company of Amer-
ica, but a small amount.
Dr. White: He probably remembers a cable. There
was a cable that Game from Paris in which Rist spoke
for the Government. He was hoping, he understood the
Russians were buying and he was hoping we would find
it necessary to use all those strategic materials ourselves rather than sell it to them and also, possibly,
the cable.
permit them to buy it later. I'11 dig out
-2-
265
HM,Jr: The President said molybdenum, but he
thought it was the Aluminum Company, which I don't think
it is.
Mr. Gaston: It's a tempering alloy for steel.
HM,Jr: Says it's used in the manufacture of air-
planes. We won't do any guessing. I thought what you
would do, Collins, get hold of the Climax Molybdenum Company on an informal basis and task them what orders has
he got internally and externally and that we are interested.
Capt. Collins: Yes, sir.
HM,Jr: Is he crowded? More business than he can
attend to? And if he has, maybe this order for Russia
might be kind of delayed. You get the idea?
Capt. Collins: Yes, sir.
HM,Jr: And maybe he hasn't got all the business and,
he hasn't, maybe I coulg get him a little business. See?
I want you two men (Collins and Irey) to go over
this stuff together. While you (Collins) are here, drop
back to White's office and go over this stuff. I was going over this, and, for instance, I notice they bought a
lot -- make a note, Harry -- E. J. Schawbach. I think
that's grain.
Mr. Wilson: Broker in commodities and metals.
Mr. Irey: 67 Broadway.
Dr. White: They have the items indicated?
HM,Jr: Yes. We have to guard this like everything.
Mr. Irey: Couple of things in there, no need of
passing along.
HM,Jr: Let me go over this myself. They don't
need this. Protect the source as much as possible.
Here: Aluminum Company of America, $139,000. I am
266
-3-
going to give you these lists.
again.
cover?
Climax Molybdenum
Dr. White: How long a period do those lists
Mr. Irey: Two weeks.
HM,Jr: Incidentally, Harry, you will see that
they are buying a hell of a lot of oil from Standard
011 of California. There are orders in here, small
orders, for the Wright Aueronatics, not big. But I
don't understand what they are doing with Schawbach.
I think you will find it's grain.
Mr. Irey: Schawbach 18 a metals and minerals
broker.
HM,Jr: Here it comes again, Schawbach another
$190,000.
Dr. White: Before he moves on that, do you think
it would be a good idea to have a memorandum on the
molybdenum situation in the United States? How much
exported, to whom, etc?
HM,Jr: Yes. But I thought -- take him a day
or two to get this fellow down, or their Washington
representative. Unquestionably they have a Washington
representative. After you have looked at it, return
it to Irey and not let it get out of the building,
items.
Capt. Collins: I will only want to pick out some
HM,Jr: That's all. Then give it back to Irey.
Don't let it get out of the building.
The big interesting thing is why should Russiaare
be buying grain and where it is going. Maybe they
buying it for a friend of theirs.
Dr. White: They have always been buying some grain
which goes, not always, but frequently, to the east coast.
HM,Jr: If it goes to Vladevostok, it makes sense,
267
but if it goes to Bergen, that's something else.
Dr. White: I think we ought to watch it.
000-000
Bx226
TREASURY DEPARTMENT
208
INTER OFFICE COMMUNICATION
DATE December 4, 1939.
Its
Mr. White
TO
Mr. Hooker
FROM
Subject: Molybdenum
1. Uses
Molybdenum is used principally in the iron and steel industry for
making special alloy steels. Improved processes of heat-treating and
fabricating high-speed tool steels, in which part of the tungsten has been
replaced by molybdenum have increased the use of molybdenum in this field.
2. World Production
Production of molybdenum comes from only a few mines. United States
is by far the largest producer supplying 92 percent of world output in
1938. There have been no significant developments in the search for new
sources during recent years.
Principal Producers in 1938
(In metric tons)
Australia
50
Mexico
483
French Morocco
258
Norway
Peru
153
United States
Yugoslavia
450
15,103
19
16,516
The relatively small amount produced by countries other than the United
States comes principally from Mexico and Norway with still smaller amounts
being produced in French Morocco, Peru, Australia, Chosen, Italy, Rumania,
Turkey and Yugoslavia.
3. Position of the United States
(a) Molybdenum is one of the few ferro-alloying elements of which this
country has ample supplies for its own needs. The Climax Molybdenum
Division of
Monetary Research
-2 - -
269
Company in Colorado furnished 78 percent of the world output and
85 percent of the domestic output in 1938.
(b) Exports of molybdenum from the United States are not known
exactly since they are not classified separately in trade statistics but they are believed to comprise 50 to 75 percent of the
domestic production.
S.R. importa
U. S expents of molybdenum concentrates to U.S.S.R. in 1936
and 1937 were as follow:
Thousands
of dollars
Tons
1936
1937
35
14
3,511
3,463
(c) Stocks increased in 1938 due to record production in the United
States in that year. No statistics as to stocks at the end of 1938
are available. Production in the United States in 1938 exceeded
shipments by 7.5 million pounds.
(d) Prices
The price per pound of ferromolybdenum on December 4, 1939 was
$.95. There has been no change in this quotation since the first of
the year and it may be purely nominal.
Bx226
TREASURY DEPARTMENT
PROCUREMENT DIVISION
270
WASHINGTON
OFFICE OF THE DIRECTOR
December 4, 1939
MEMORANDUM FOR THE SECRETARY
The following are the officers of the Climax Molybdenum Company:
- Max Schott
President
Vice Presidents - W. T. Woodside - Research
James B. Thorpe - Sales
Alan Tissock - Operations
C. M. Loeb, Jr. - Development
Secretary
- Harold Hochschild
Treasurer
- William H. Brady
Purchasing Agent - F. W. McCarthy
The address of the company in New York City is 500 Fifth Avenue. The mine
and mill are located at Climax, Colorado, and the conversion plant is at
Longeloth, Pennsylvania.
The company is rated as in excess of $1,000,000 and controls 95% of the
molybdenum produced in this country.
Director of Procurement
Read
by
lu
at
buch
Dec4.
the said TREASURY Bed persemistic
WASHINGTON
m next years businessAms
December 4, 1939.
271
TO THE SECRETARY:
Attached is a statement showing my rough estimates of total
budgetary expenditures for the fiscal year 1941. These estimates
are not, of course, based upon any knowledge of the total estimates
of appropriations submitted to the Budget Bureau nor the action of
that Bureau or of the President on those estimates.
I have taken as a base the 1940 estimates of expenditures
as contained in the budget last January and revised them upward to
include the additional amounts appropriated by Congress for the
agricultural program (approximately $370,000,000) and additional
expenditures on account of national defense due to the recent
Executive Orders increasing the program of the military services.
From this base I have deducted certain amounts which I think the
President might reduce in the 1941 budget, although Congress may
put some of them back, and then added an additional amount for
increased national defense in 1941, interest, social security, etc.
This brings me down to an estimated expenditure for the fiscal year
1941 of $8,480,000,000.
Although the Treasury furnished the Bureau of the Budget early
in October a tentative estimate of revenue for the fiscal year 1941
of $6,300,000,000, I am quite certain, in view of what the group of
272
-2economists advised just a few days ago, that this estimate will not
be anywhere near this figure. For the purpose of this statement, I
have used the same revenue estimate in 1941 as we now have for 1940,
namely, $5,525,000,000. This leaves a deficit of $2,955,000,000 for
1941. If additional revenues are received because of increased business
in the calendar year 1939 or because of additional taxes authorized by
the next Congress, this figure of course would be reduced,
National Defense. There has been some comment in the paper
to the effect that the President contemplates putting certain items
of expenditures increased because of world conditions in a separate
category in the budget and has called it "Budget B". The figure
referred to on several occasions has been $500,000,000. It seems to
me that we might go back to the 1939 actual expenditure of about
$1,000,000,000 for national defense as a base and any subsequent increase
over that figure might be considered as due to the present world situation.
It will be recalled that the $575,000,000 appropriation for this purpose
secured in the last Congress was also based on these conditions. If
the figures for national defense for 1941 as I have indicated go as high
as $1,875,000,000 (81,475,000,000 in 1940 plus $400,000,000 additional
for 1941) I believethat the $875,000,000 should be placed in the category
of Budget B. There may be other items which should also go in this class
such as the increases for Coast Guard, Federal Bureau of Investigation, etc.,
but I am not advised as to what these are likely to be. These would, however,
be relatively small.
dwis
273
ROUGH ESTIMATES OF TOTAL
EXPENDITURES FOR THE FISCAL YEAR 1941
(In millions)
Revised expenditures for fiscal year 1940 as
$ 9,450
a base
Probable reductions in 1941 expenditure
items as compared with the same items
in the 1940 budget:
P. W. A., general public works, etc.
W. P. A., F. S. A., etc.
Agricultural parity payments, etc.
Commodity Credit capital restoration,
included in 1940 budget which
should have been in 1939 budget
$ 500
600
300
120
$ 1,520
Add additional expenditures for 1941 over the
same items contained in the 1940 budget:
National defense
Interest, Social Security, etc.
400
150
550
Net reductions in 1941 budget as
970
compared with 1940
Rough estimate of expenditures for the
fiscal year 1941
Estimated revenue for 1941 (same as for 1940)
Net deficit on this basis
Note: Any additional revenues over and above this estimate
obtained as a result of increased business or as a
result of additional taxes authorized by the next
Congress, will, of course, decrease the above estimated deficit.
Office of
Assistant to the Secretary
December 4. 1939
8,480
5.525
$ 2,955
274
December 4, 1939
3:00 pm
Present:
Minister from Sweden (Mr. W. Bostrom)
Mr. Cochran
Minister: I was sorry that I was not in Stockholm
when you were there.
HM,Jr: I, too, was sorry. I had a perfectly delightful
visit.
Minister: I have a question here from my Government -- if you buy Swedish or Finnish gold delivered in
Stockholm?
HM,Jr: I think what they mean is that every once
in a while some Government wants us to take delivery of
the gold in a country and we have never done that.
Minister: You do not pay for it until it gets here?
HM,Jr: That is right.
I tell you what you do. I can only guess, but my
guess is that what they want to know is whether we will
buy Finnish gold and take delivery in Stockholm. We have
never done it, but the President is in a very friendly
mood towards Finland and you never know. You might ask
them how much it is. I am thinking out loud. I do not
want to give them any encouragement, because it has never
been done. Wouldn't the Central Bank of Norway have gold?
Mr. Cochran: Here?
HM,Jr: No. In Norway.
Mr. Coohran: Yes.
HM,Jr: I am doing my homework out loud. It takes
24 hours from Stockholm to Bergen.
275
-2-
Minister: It takes about that.
A night and a
day by rail.
HM.Jr: For argument's sake, supposing they made
a deal, Finland to Sweden and Sweden to Norway, and we
took delivery of it in Bergen. Those Central Banks can
adjust it among themselves.
Mr. Cochran: Yes. It could be a swap between
the Bank of Sweden and Finland.
HM,Jr: Cochran suggests that Sweden buy $10,000,000
gold from Finland and then you sell us $10,000,000 of gold
here in New York.
Minister: Finland
HM,Jr: You can pay Finland and we can pay you the
same minute here. You have gold here.
Minister: The Finna have to
sheet.
HM,Jr: (To Mr. Cochran) Please go get your gold
(To the Minister) I am trying to find some way of
helping you.
Minister: Why didn't they think of that themselves?
We have considerable gold here. Perhaps they want to
leave it here.
HM,Jr: Find out where they will deliver the gold.
Minister: They say here in Stockholm. I think
they are thinking of selling the gold they already have
in Stockholm to you.
HM,Jr: I think you will have to get more information.
(Mr. Cochran returns with the gold sheet.)
HM,Jr: (Referring to the gold sheet.) You have
$68,000,000 gold. I have just left the President and
I know how he feels about Finland. I want to repeat
276
-3-
that up to now we have never done this. I want to give
you enough information 80 that you can cable back to your
Government. I know that every minute counts.
here?
Mr. Coohran: Is it the desire to get the gold over
Minister: The telegram says "Do you buy Swedish or
Finnish gold delivered in Stockholm?"
Mr. Coohran: There are private banks which have
made advances. That is, private banks in New York have
made dollars available to European Central Banks during
transit of gold to the United States, where it is sold upon
arrival to the Treasury and the advance repaid.
HM,Jr: Where did they take delivery?
Mr. Cochran: They made the advance when gold was
put on at Bergen. It was on a Norwegian or Swedish ship.
Minister: The question seems to me to be perhaps
they wonder, on account of shipping risks these days
HM,Jr: As a thought, inasmuch as this proposal
comes from Sweden and Sweden has $68,000,000 of gold here,
and supposing that Finland wants to sell us $10,000,000
worth of gold, we will pay for it on delivery in Stockholm
provided that the Swedish Government will set aside
$10,000,000 gold here pending the arrival of the Finnish
gold. You would be doing something for Finland and so
would we.
Minister: The insurance 18 very high.
HM,Jr: The Finns would have to pay for it.
Minister: Why can't the Swedish Bank loan that to
Finland themselves? What I am thinking is perhaps it
would be embarrassing in the political situation.
HM,Jr: For Sweden, possibly. If you set aside
$10,000,000 here, nobody would know it.
Minister: We are just the intermediary between
277
-4-
Finland
and you. Shall I ask them, first, how much it
is?
HM,Jr: You could put it this way: I am making this
proposal, subject to the approval of the President, that
we stand ready to buy any amount of Finnish gold in Stockholm and pay for it on delivery in Stockholm, provided
that (a) the Finnish Government pay all expenses of shipping
and insurance of this gold on the first available steamer
from Bergen; (b) pending the arrival of this gold in New
York, the Bank of Sweden segregate a corresponding amount
of Swedish gold in the Federal Reserve Bank to constitute
a guarantee of payment.
I suggest that you and Cochran write a cable in cable
language.
I want to make one more point. Shouldn't we get a
guarantee that Norway will permit the gold to go through
its country? Cochran, you might look up the ships. The
movement of this gold and all expenses would have to be
paid for by Finland; that is, from Stockholm to New York.
After you have written it, while this is going on,
I will ask the President to O. K. it and then Coohran can
call you and give you an O. K. I will try to see the
President tonight if I can. Do you think you ought to
tell the Finnish Minister about this?
Minister: I called him before I came over here to
see you, but he was in New York.
HM,Jr: But you will tell him?
Minister: Yes; I will.
000-000
278
December 4, 1939
My dear Mr. President:
Referring to our conversation at lunch
today, there is attached a statement which I
believe you can make at one of your press conferences regarding the Finnish debt payment.
We have not received official notice from
the Finnish Minister that Finland intends to make
this payment, but he has made a statement to the
press that funds are in this country and that the
payment will be made on December 15 in New York in
the usual manner. The statement is framed so that
you can make the announcement at any time, but it
may be that you will want to wait until you receive
official confirmation that Finland will make the
payment on the due date. If you prefer to wait, the
statement should be revised.
Faithfully yours,
The President,
The White House.
Enclosure
DWB:NLK
279
FOR USE BY THE PRESIDENT IN HIS PRESS CONFERENCE
There is due and payable from the Government of Finland
on December 15, 1939, on account of its indebtedness to the
United States, the sum of $234,693. The Press reports that
the Pinnish Legation has indicated that its Government intends
to make payment on the due date and that funds are in this
country for that purpose.
I have instructed the Secretary of the Treasury to accept
this payment when tendered and to hold the amount theref in
suspense and not to cover it into the Treasury until Congress
has had an opportunity to act on my recommendation, to be
included in the annual message on the state of the Union, that
in view of the herois efforts which Finland is making to defend
its liberty, the amount of this payment be turned over to the
Finnish Red Gross to be used in the relief of suffering.
23887
Treasury
Realt by MK Dea.
CORRECTED COPY
AC
Soe
280
GRAY
Berlin
Dated December 4, 1939
Rec'd 3:30 p.m.
Secretary of State
Washington
2217, DECEMBER 4, 2 p.m.
14
Department's 914, November 18, 4 p.m.
OnE. Only meager statistical data are available
regarding the quantities of potatoes, cabbage, turnips
and other vegetables available for human consumption
in Germany. It is EXPECTED that SOME 28 to 30% of the
1939 potato crop which totaled 56,280,000 tons will be
used for human consumption. Some 76,500 metric tons
of peas and 7,900 metric tons beans WE TE harvested in
1939 in the old Reich all of which WERE available for
human consumption.
Statistics covering the production of other vegetables
are not available but official crop forecasts indicate
that the cabbage crop is between average and good, the
cauliflower harvest is average while the red cabbage
and kale crops are reported to be better than last year.
A satisfactory harvest of onions, celery and carrots is
anticipated. Crops of string beans, tomatoes, and
cucumbers
281
- 2 - #2217, December 4, 2 p.m. from Berlin
cucumbers are all reported to be larger than last year.
In recent years domestic production has supplied
the following percentage of the German consumpt ion of
vegetables, meat, butter and CHEESE: vegetables 93%,
meat 90%, butter 75%, cheese 80%
The greatest deficiency and real danger as regards
food supply is the "gap" in the supply of Edible fats;
only 55% of local requirements are obtainable from domes-
tic production.
Two. The food rationing regulations divide the
civilian consumption groups into the following four main
categories listed in the order of SIZE of their food
allotments: (1) heaviest workers; (2) heavy workers;
(3) ordinary adults: (4) children (rations varying
according to age of child).
Small additional rations (100 grams meat and 20 grams
of fats per WEEK) are granted to persons working a ten
hour day, working on night shift or living considerable
distances from their place of employment.
(END OF SECTION ONE).
KIRK
EMB JRL
282
PARAPHRASE OF PART OF SECTION TWO OF
TELEGRAM
To: Secretary of State, Washington.
Front American Embassy, Berlin.
Dated: December 4, 1939, 6 p.m.
CONFIDENTIAL
Rec'd: December 4, 1939, 11:40 p.m.
No. 2217
CONFIDENTIAL
The heavy workers and heaviest workers mentioned in
the paragraph above work mostly in industries occupied with
mining and metallurgy. When these categories were
inaugurated about 1,100,000 persons were included therein.
However application of the regulations seems to be more
liberal than then contemplated and consequently more persons than the number given may be getting a more liberal
ration. Numbers with regard to other entegories have not
been announced but may be somewhat as follows based on
a population of 80,000,000 with Czechoslovakia and Poland
excluded.
Children's rations are received by about 17,000,000
below fourteen years old.
Mobilized men number about 4,000,000 and the rationing
system for civilians does not apply to them.
The heavy workers' and heaviest workers' rations are
probably received by some 2,000,000 persons leaving 57,000,00 0
to
283
-20
to receive the normal ration with a possible supplement
in individual cases for long employment hours.
END OF CONFIDENTIAL
The importance attached to the proper feeding of
laborers is indicated by the table set forth below
"Taken from the National Sozialist Ischeland Post* comparing
the total number of calories represented by the rations of
the two labor groups with the calories contained in the
rations issued to soldiers:
Heaviest workers 4,206 calories, soldiers in the field
3,665 calories, heavy workers 3,400 calories, soldiers
in garrisons 3,320 calories.
According to this *heaviest workers" are allotted a
greater number of the calories than soldiers in the field
and the total for "heavy workers' exceeds that of "soldiers
in garrisons'.
Three. with the exception perhaps of a small minority
of labor particularly in the textile trade which is handicapped by unemployment and low wages the full official
ration can be obtained by all with the qualification that
perhaps at times it cannot be secured on the particular
day when the consumer desires it and perhaps not always
in the quality preferred by the consumer.
The
284
The cost of the weekly normal food ration when
fully utilized by the consumer can be estimated approxinately at three marks. To this must be added the nonrationed foodstuffs notably potatoes and vegetables which
make up a substantial part of the diet of a worker with
small income. The total outlay of food per person in
the low income groups probably does not exceed four marks
per week.
285
PARAPHRASE OF PART OF SECTION THREE OF
TELEGRAM
Tel Secretary of State, Washington,
From: American Embassy, Berlin.
Dated: December 4, 1939, 2 p.m.
CONFIDENTIAL
Rec'd: December 4, 1939, 10:21 p.m.
No. 2217
CONFIDENTIAL
The amount of outlay for food differs on the basis
differing incomes because foods like vegetables and fruits
which are not rationed and which are somewhat high in price
are for this reason not within the means of persons not in
the higher wage or income groups.
On the basis of a study made in 1937 by the Reich
Statistical Bureau concerning the budgets of the families
of workers, a four person family with annual income of
1500 Reichsmarks was then spending for food 57% of the
income or about 857 Reichemarks or approximately 16 Reicha-
marks each week. This amount slightly exceeds estimates of
14 Reichamarks per week made as a cost of the weekly ration
(for a family of four) taking into account also vegetables
and potatoes which are not rationed. If annual family
income drops below the 1500 Reichsmarks figure as is now
possible in the case of workers in the textile industry
others and
286
-2-
others at present on reduced working hours difficulty
might be met in purchasing the full ration with this
lower income. The fat ration is so arranged at present
that more than 50% is to be availed of in butter rather
than in less costly lard or margerine thus placing low income
groups at some disadvantage in securing the fat ration,
although some people have sufficient means to procure
the present ration.
END OF CONFIDENTIAL
No special provision has been made by the Government
to assure that all are provided with the full ration. It
may be assumed, however, that relief would be given to needy
cases by the labor front or the National Socialist Welfare
Organization.
The sale of whole milk to adult persons is prohibited.
The sale of skimmed milk which has been free is now regu-
lated to the extent that purchasers must register with a
certain store and must confine their purchases to that
particular shop.
Four. In addition to the crop returns given under
heading I it may be stated that the grain crop of greater
Germany in 1939 aggregated 27,400,000 metric tons of which
14,970,000 metric tons were bread grains.
Agricultural
287
-3-
Agricultural production in Poland is reported to have
been well maintained and to have suffered relatively little
despite the war and other adverse influences. The grain
and root crops were harfested and the winter grain was sown.
A good potato crop is reported for the Polish territory
now controlled by German troops. The crop will be used
in the first place to satisfy human consumption needs
of the district and any surplus will be used for industrial and feeding purposes. Losses of livestock, particularly pigs, are reported and measures have been taken
to increase the hog population.
Data on food reserves in Poland are not available.
In the opinion of German experts no food supplies will
be obtained from Poland this year a surplus is anticipated
in 1940 however,
A considerable potential agricultural production
is presented by Poland. It is not expected that this
latent capacity will be touched for some years, however,
dispossessione of Polish farmers and their replacement by
German agriculturists is tending to disturb conditions and
will affect unfavorably this year's and also next year's
farm output.
Five. Nothing is known with regard to the possibility
and practice of mixing inert substances in ground meat
preparations
288
preparations and in bread.
The sise of the food reserves now on hand in Germany
other than grain and potatoes remains an official secret
of great military importance and shall not be divulged
under present conditions.
A bread grain reserve of 8,600,000 was reported as on
hand after this year's harvest. The bread grain requirements of the old Reich were 9,000,000 metric tons yearly.
The average annual consumption of all grain for all purposes equals 25-26,000,000 metric tone.
289
GRAY
HSM
Berlin
Dated December 4, 1939
Rec'd 8:40 D. m.
Secretary of State,
Washington.
2217, DECEMBER 4, 2 p. m. (SECTION FOUR).
A potato reserve of approximately two million metric
tons has been set aside from the 1939 crop. Of this
quantity the association of the German potato trade has
purchased 500,000 metric tons to bE used in supplying
the urban populations with potatoes in May, June and
July of 1940. This step was taken owing to uncertainty
respecting Germany's imports of potatoes next spring.
PEACE time consumption of potatoes for Edible purposes
is reported to approximate 13 to 14 metric tons yearly in
greater Germany. In addition 900,000 metric tons are converted annually into starch and sago.
Owing to the bumper potato crop the authorities have
been able to EASE the marketing regulations some what and
the potato growers may now USE potatoes from their crop
for their own needs and for other apecified purposes.
The failure to include potatoes in the list of rationed
foods
290
hsm -2- No. 2217, December 4, 2 p. M. (Section 4) from Berlin
foods also indicates the favorable reserve position of
that crop.
With reference to reserves of other foods no definite
information is obtainable. In the opinion of local Experts
who WERE consulted on this question there are perhaps large
reserves of lard, bacon and canned pork and SOME reserves
of cold storage Eggs and butter.
In considering possible food reserves mention should
be made of stocks of canned goods. Last SUMMER measures
WERE taken to increase production of canned vegetables
and all this year's production has been stored. Sales
of canned vegetables to the civilian population have been
blocked since the outbreak of war and it is uncertain what
quantities if any will be released for sale towards the
End of the winter when fresh vegetables will be scarce.
Further data on food supplies may be obtained from a
report entitled "Food and feed situation in greater Germany"
dated May 10, 1939, submitted to the Department of Agriculture by Mr. Gordon P. Boals, Assistant Agricultural
Attache, Berlin, Germany.
The present raw material situation demands an Especi-
ally Elastic and adaptable production program. Important
sections of the foodstuffs industry are endeavoring to
meet the increasing demand by means of an improved utilinow
zation of raw material for Example rye, flour mills are
291
hsm -3- No. 2217, December 4, 2 p.m. (Section 4) from Berlin
now required to Extract ten percent more flour from
exactly the same quantity of grain than was the case
a few years ago. The corresponding increase for wheat
is bEtwEEn five and six percent. This has resulted in
flour with a higher bran content. The flour is also said
to be of a poorer grade. In other branches raw materials
which are scarce are being mixed with others which are
more abundant.
The Employment of various conserving methods such
as drying, pickling, production of sugar beet pulp, st
cetera, has permitted a greater USE to be made of root
crops as fodder and thereby has enabled larger quantities
of bread grains to be raised.
Inform Treasury, Agriculture, COMMERCE. (END OF MESSAGE;
KIRK
WWC
292
Dec. 4, 1939
My dear Mr. Attorney General:
A question has arisen in this Department whether
the issuance of a proposed press release, a copy of which
is attached hereto, would violate sections 55(f)(1) and
4047(a)(1) of the Internal Revenue Code. Your opinion is
requested on that question.
There is enclosed herewith a copy of the opinion
of the General Counsel for the Department of the Treasury
on the matter.
Very truly yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
The Honorable
The Attorney General of the United States.
Enclosures
ERF/SWD
Typed: 12/1/39
Copied: 1wb, 12/9/39
Op. No. 415
Dec. 4. 1939
293
My dear Mr. Secretary:
The question has arisen whether Treasury Department
officers may, without violation of sections 55(f)(1) and 4047(a)(1)
of the Internal Revenue Code, issue a press release stating certain
matters that are contained in a closing agreement that has been concluded, under section $180 of the Internal Revenue Code, with the
Colt's Patent Firearms Manufacturing Company. The closing agreement
was concluded in connection with a Var Department contract which is
subject to section 3 of the Act of March 27, 1934, 48 Stat. 505
(U.S.C. title 34, sec. 496). as amended.
The proposed press release would state, in effect, that
the closing agreement provides (1) for Colt's to charge off as a
direct factory expense, against its income from the contract, the
cost of special tools, jigs, dies, fixtures, and gauges which must
be acquired by the company to carry out the contract, and which are
useful only for work under that contract; (2) for the War Department
to certify to the Treasury Department the amount of the allowable
deduction; and (3) that, if the special tools, jigs, etc., are used
on work other than for the Government, a proper portion of their
cost shall be charged against the other work and the deduction allowed under the Act of March 27, 1934, as amended, shall be reduced
accordingly. Further information would be contained in the press
release to the effect that, with respect to additional standard
-2-
294
equipment other than the special tools, etc., which Colt's must
install to perform the contract, the closing agreement provides
that the company will be permitted to charge off 10 percent of the
cost each year as a depreciation allowance; and that, 1f, upon the
completion of the contract, the fair market value of the standard
equipment is less than one-half of the reasonable cost of the equipment, the company will be allowed a further deduction equal to the
difference between the depreciation allowance and the fair market
value.
In my opinion, the issuance by this Department of a press
release containing the above information would not constitute a violation of the above-mentioned sections of the Internal Revenue Code.
Section 55(f)(1) of the Internal Revenue Code provides:
"It shall be unlawful for any collector, deputy
collector. agent, clerk, or other officer or employee
of the United States to divulge or to make known in
any manner whatever not provided by law to any person
the amount or source of income, profits, losses, expenditures, or any particular thereof, set forth OF
disclosed in any income return, or to permit any income return or copy thereof or any book containing any
abstract or particulars thereof to be seen or examined
by any person except as provided by law; and it shall
be unlawful for any person to print or publish in any
manner whatever not provided by law any income return,
or any part thereof or source of income, profits,
losses, or expenditures appearing in any income return;
and any offense against the foregoing provision shall
be a misdemeanor and be punished by a fine not exceed-
ing $1,000 or by imprisonment not exceeding one year,
or both, at the discretion of the court; and if the
offender be an officer or employee of the United States
he shall be dismissed from office or discharged from
employment. (Underscoring supplied.)
-3-
295
So far as that statute is concerned, it clearly does not
prohibit the issuance of the press release. By its very terms it
applies only to matters "set forth or disclosed in any income return"
or "appearing in any income return". The matters in the proposed
press release, being the subject of a contract yet to be performed,
certainly do not appear in any income return. Any matter which
would be disclosed in the press release is certainly not "set forth"
or "disclosed" in an income return before any such return is made.
Those words are in the past tense; they refer to matters already set
forth or disclosed in income returns. The statute does not refer to
the divulgence of matters that may be "set forth" or "disclosed".
To say that it does is to put a gloss upon a statute which is highly
penal. It is well settled, of course, that the meaning of a penal
statute must not be extended beyond its "exact literal sense".
Sarlla v. United States, (1894) 152 U.S. 570, 576. Penal statutes
should be applied only to cases coming plainly within their terms.
United States v. Northern Pacific Railway Company, (1916) 242 U.S.
190, 193.
Although the statute has frequently been the subject of
judicial decisions, an examination of those decisions has disclosed
no instance in which the question is discussed whether the terms
"set forth" and "disclosed" refer to matters other than those that
are already in returns. The reason would seem to be obvious. The
statute so clearly does not prohibit the divulgence of information
296
-4-
which may or may not appear in a subsequent income return that no one
has had the hardihood to argue otherwise to a court.
Section 4047(a)(1) of the Internal Revenue Code provides:
"It shall be unlawful for any collector, deputy
collector, agent, clerk, or other officer or employee
of the United States to divulge or to make known in
any manner whatever not provided by law to any person
the operations. style of work. or apparatus of any manufacturer or producer visited by him in the discharge
of his official duties; and any offense against the
foregoing provision shall be a misdemeanor and be punished by a fine not exceeding $1,000 or by imprisonment
not exceeding one year, or both, at the discretion of
the court; and the offender shall be dismissed from
office or discharged from employment. The provisions
of this paragraph shall apply to internal revenue
agents as fully as to internal revenue officers."
(Underscoring supplied.)
The information contained in the proposed press release does not deal
with the "operations, style of work, or apparatus" of the Colt's
Patent Firearms Manufacturing Company. I am not aware that the per-
sons divulging the terms of the contract have "visited" that Company
in the discharge of official duties. The non-applicability of the
statute is obvious.
Very truly yours,
(Signed) E. H. Foley, Jr.
General Counsel.
The Honorable
The Secretary of the Treasury.
PJW/ERF/AVP
Typed: 12/1/39
Copied: 1wb 12/9/39
297
TREASURY DEPARTMENT
WASHINGTON
December 4, 1939.
MEMORANDUM FOR THE SECRETARY:
Re: Shipping.
STATUS
British Ships Sunk
84
American Ships Laid up
84
Approximate Tons
329,935
536,000
As British ships are now being withdrawn piecemeal, Danish,
Norwegian, Japanese and other neutral tonnage taking over these berths;
1.e. no British ships now operating New York - South America.
PROPOSAL
Substitute American flag ships on trade routes presently
being covered by British ships, 1. e.:
New York - South and South East Africa (52 sailings per year)
New York - Australia - New Zealand (45 sailings per year)
New York - Far East (54 sailings per year)
New York - India - Outbound (30 sailings per year)
Homebound(55 sailings per year)
PURPOSE
Release British ships for more important services from American
ports to United Kingdom and France (where American ships cannot operate
under Neutrality Law).
Place American ships presently tied up in useful operation returning thousands of seamen to employment. Divert outward African and
Australian ships to cover Penang (for tin) and Singapore (for rubber)
homebound. Japanese now carrying large quantity American rubber requirements.
DIFFICULTIES
Obtain full cooperation British Lines, which could only be done by
instructions British Government.
Satisfactory working arrangement present operators of British ships
in U. S. A.
Elimination of petty and selfish interests for good of whole shipping
situation.
Basil Harris
298
TELEGRAM SENT
PLAIN
JT
December 4, 1939
AMEMBASSY
LONDON
1546, fourth.
FROM TREASURY
"American Embassy, London.
The following is from the Treasury Department for your
information and for repetition to the American Embassies at
Paris and Berlin by mail.
On November 27 the Secretary of the Treasury offered
for cash subscription, at par and accrued interest, an issue
of 2% Treasury Bonds of 1948-50. It was announced that the
amount of the public offering would be $500,000,000 or
thereaborts and that in addition 50,000,000 of these
bonds would be sold to Government investment accounts.
For the benefit of small investors preferential allotment
would be given to subscriptions for 5,000 and under where
delivery in registered bonds 60 days after the issue date
is specified.
The Secretary of the Treasury has today announced that
reports received from the Federal RESERVE Banks
show that
subscriptions
299
-2- #1546, December 4, to London
subscriptions to the above mentioned issue aggregate
$6,263,000,000. Subscriptions in amounts up to and including 5,000, totaling about $21,000,000, where the subscribers
specified that delivery be made in registered bonds 60 days
after the issue date, were allotted in full. All other
subscriptions were allotted 8 percent, on a straight percentage basis, with adjustments, where necessary to the
$100 denomination.
HULL
(EF)
EA:FL:EB
PARAPHRASE OF TELEGRAM RECEIVED
300
FROM: American Embassy, Paris, France
DATE: December 4, 1939, 7 p.m.
NO.: 2896
FOR THE TREASURY DEPARTMENT.
Reference is made to telegram No. 2895 of December 4
from the Embassy, with regard to the visit of Andre Jaoul,
the director of an important French electro-chemical and
electro-metallurgical concern, who is going to London as
a French member of the permanent executive committee on
armaments and raw materials. We discussed further the
application of the coordination agreement between the British
and the French. Great things are expected of the agreement
by Jaoul, who is heavily interested; he even visualizes that
there will be a pooling of the resources of the British and
the French which will carry on after the war 18 over.
Jaoul said that although the neutrals have not yet been
approached, they will eventually "be compelled to go along
with the Allies"; Jaoul mentioned the question of cheap
French water power as an example of this "international"
cooperation outside the more obvious factors involved in
the single pooling of resources and purchases. He pointed
out that this could be sold to the British in the form of
products such as electro-chemicals and fertilizer, which
produced in England by the use of British coal would be more
costly - and the coal thus saved could be exported or used
otherwise.
With
301
-2With reference to the neutrals, Jaoul mentioned
Norway as an example, saying that country could be "per-
suaded" to give the British the benefits of her cheap
power in fertilizers, and 80 on, and that payment therefore
could be made in British or French products or in sterlin
or france rather than in the dollars which naturally are
preferred by the Norwegians. It was implied that Norway
would lose her markets, other than the German orbit, 1f she
did not like the arrangement. He said that they could
multiply this example many times. He sketched in outline
a picture of complete reorientation of trade zones, and
remarked that it was his hope that the United States would
"cooperate" to some extent, although he realized there
were obstacles thereto of a political nature.
Jaoul gave the following as the two principal war
objectives of cooperation between the French and the British as distinguished from the long-term peace objectives:
(1) They would purchase as little as possible in
dollars, thereby conserving for "necessary" purchases the
maximum of foreign exchange. Word has just come to us,
in this connection, that a number of import licenses calling
for dollar exchange were recently obligatorily converted to
sterling permits; one of these permits was said to be for
the local Goodrich.
(2) To use any means available for increasing exports
from
302
-3from Great Britain and France.
In some parts of the world, Jaoul said, he imagined
they would run into competition with the United States with
regard to the latter objective. The organization of this
vast plan, he admitted was most complicated, but he was
optimistic that it could soon be accomplished. At lunch
today we were told by Mr. Wayne Taylor, former Assistant
Secretary of the Treasury, (he had just returned from London)
that while he was in London he had talked with both Phillips
and Bewley. He said they both were satisfied with the way
British internal financial problems are progressing, and in
particular with the public response to savings certificates
purchases. For the present, he said, the British prefer
to ship gold to the United States rather than xxxxxxxxxxxing
selling the requisitioned dollar securities, though Bewley
added that the order of procedure is hardly important, that
in the end we would get them both. Mr. Taylor found the
British officials reluctant to give any indication as to when
and how they thought acute pressure on the pound would arise.
Recently when he went to Germany he found things very much
better than the Allies pictured them. He believed that the
morale was "quite good", and saw no indications of weakness,
although the public would like the war to end on Nazi terms.
He thinks that matters are relatively satisfactory in the
economic field also, and that both in general foodstuffs and
in
303
-4in fats Germany should be materially aided by the acquisitions
in Poland.
Mr. Taylor said that in Germany rolling stock is the
one weak spot which 18 causing some anxiety. It is probable
that shortages in oil and steel would develop eventually,
depending on the war's tempo - which Mr. Taylor thinks will
be a long-drawn out affair.
Mr. Taylor had of course left Germany long before the
crisis in Finland became acute and therefore could not discuss
the effect of it.
Both Swift and Mr. Taylor have found a great deal of
cooperation from all governments with whom they have discussed
Red Cross activities, and particularly from Germany.
Wednesday night Taylor leaves for Geneva, and Swift
sails from Genoa.
Yesterday we had lunch with the Inspector General of
Artillery and his staff at his headquarters in the field.
We spoke with General Carence, who at one time was chef de
cabinet for Painleve, and who was called back from retirement
to take his present responsible position. He feels that
without a smashing military victory there can be no peace -
which view is just opposite to that held by Andre Jaoul.
If General Carence's view is typical of the French General
Staff, there is no doubt that it is the wish of the military
that they finish with Germany once and for all and have
a frontier on the Rhine, at least.
General
304
-5General Carence, with his officers, believes that
only through a smashing victory can the Prussians be convinced and can Europe avoid mobilizations every few months
and every twenty years the butchery of its youth. French
will have to develop heavy costs in munitions, artillery
and planes to obtain such a fictory, he said. We asked about
the practicability of using Black and Brown troops when
an offensive came; his emphatic reply was that they could
be used in this way, and that the Germans are terrified
of them. He said they love an attack, and some of them
are better than the French in handling machine guns. This
was General Carence's answer to the winning of the war without
destroying the youth of France completely. We asked him
whether he would invade the Netherlands if he were the
Vuhrer or von Bratisch; he said that he would do 80
immediately, but whether or not this was wishful thinking
we do not know.
END SECTIONS ONE TO EIGHT, INCLUSIVE.
BULLITT.
EA:LWW
305
GRAY
HSM
Paris
Dated December 4, 1939
Rec'd 9 p. n.
Secretary of State,
Washington.
2896, DECEMBER 4, 7 P. III. (SECTION NIFE).
This morning's AGENCE ECONOMIQUE contains the
following paragraphs:
"Indirect transformation of the Johnson Law. The
rumor is circulating in Wall Street that the Federal
RESERVE Board with a ViEW to avoiding the repercussions
of heavy sales (of securities) will authorize in spite
of the prohibition of the Johnson Law advances against
securities to the allies whereas the Johnson Law would
require the immediate sale of such securities to obtain
dollar credits.
From another source press reports mention a proposal to form a Canadian corporation which would become
a holding company for American securities and would
obtain authorization to issue a billion dollars of bonds
at three or three and a half percent in the United Kingdom.
According to these same reports this proposal
would
not
306
ham -2- No. 2896, December 4, 7 p. m. (Section 9) from Paris
not meet any opposition because of the Johnson Law. It
is also thought that among the directors of this future
holding company there would be a certain number of
representatives of large American banks."
BULLITT
RR
307
GRAY
JR
Paris
Dated DECEMBER 4, 1939
Rec'd 10:30 p.m.
Secretary of State,
Washington.
2896, DECEMBER 4, 7 p.m. (SECTION TEN)
Swiss National Bank statement for November 30 shows
gold holdings unchanged at 2,809.8 millions. Foreign
Exchange holdings down 6.8 millions to 341.9 millions.
Note circulation at 2,011.6 an increase of 45.9 millions
and sight liabilities down 48.1 to 827.8 million. Gold
COVER is 88.34.
It is reported that an official announcement
states that following reorganization of the Caisse
Generale de Reports et de Depots of Belgium (our telegram
No. 2625, October 31, 7 p.m.) a new capital structure
will be SET up in the subscription to which the following
will participate: the Banque de la Sociate Generale de
Belgique, the Banque de Bruxelles and the Societe Belge
de Banque. Albert Jean Janssen former Finance Hinister
will head the organization. Belgian reports likewise
indicate that the Government has had to "intervene" in
the face of difficulties confronting the Credit Anversois.
BULLITT
RR:W/C
308
GRAY
HSM
Paris
Dated DECEMBER 4, 1939
Rec'd 8:55 p. 1.
Secretary of State,
Washington.
2896, December 4, 7 p. m. (SECTION ELEVEN)
it is reported that negotiations are under way for an
arrangement which will guarantee 75% on deposits under
10,000 francs and 25% on deposits above that amount.
Favas comments as follows: "The Belgian banking system
SEEMS to be undergoing at present certain undercurrents.
While the Caisse Generale de Reports Et de Depots after
having Experienced important losses following the Mendel-
ssohn crash is counting on reorganization to permit it
to continue operations without interruption, the rumor
is circulating with insistence that another important
Belgian bank the Credit Anversois is in serious difficulties. This establishment appears to have suffered
losses solhigh that not only its capital and reserves
have been lost but also a small part of its deposits may
be
affected" PERI The Belgian journal SOIR reports the
arrest of the two managing directors of the Credit
Anversois, Messrs. Stevens and Joseph Plas. (END MESSAGE).
BULLITT
309
PLAIN
HSM
London
Dated December 4, 1939
Rec'd 12:30 n. 2.
Secretary of State,
Washington.
2532, December 4.
FOR TREASURY.
1. The press reports messages from NEW York
regarding rumors of the formation of an investment
corporation, probably Canadian, to hold and gradually
liquidate British owned American securities or to pledge
the securities against advances by the Federal RESERVE
Banks. The FINANCIAL TIMES, however, under NEW York
date line DECEMBER 3, publishes a statement by Pinsent
that these rumors are wide of the mark and that liquida-
tion has been going on gradually by individual British
holders which will continue. According to the same newspaper NEW York bankers know of no specific plan but state
that large blocks of securities have already been taken
over by banks and groups of individuals at prices below
market quotations. This article concludes: "Wall Street's
understanding is that, if SOME plan is worked out and
adopted,
310
hsm -2- No. 2532, DECEMBER 4, from London
adopted, the United States Government in cooperation
with the British Government will take the initiative.
The auspices, it is believed, will be governmental rather
than private."
2. In spite of heavy speculative orders for silver
from Bombay on Friday and Saturday, which pushed the
Bombay price to 31d. no business was done in London at
that level and the silver price at the London fixing
remained unchanged at 23 1/2d. for spot and 23 3/8d. for
forward. The heavy demand for silver in India is said to
be speculative and a result of a greater realization of
the war since Russia's invasion of Finland. Neverthrless
it is thought that the price increases for SOME of India's
Export commodities Especially jute, cotton and hides may
result in greater hoarding capacity, and though the speculative position in Bombay is considered to be unwarrantably
large the Indian demand may eventually cause SOME increase
in the London price. Meanwhile with the Bombay bullion
market closed until tomorrow, the London fixing price
remained unchanged again today.
3. The TIMES city column and also a special interview with the Minister of Labor printed in the MANCHESTER
GUARDIAN foretell a change in the unemployment trend when
today's count is announced. The Minister of Labor pointed
out
311
hsm -3- No. 2532, DECEMBER 4, from London
out that the turnover of labor being high the unemployment registers are abnormally swollen and stated that
in the last three WEEKS unemployment among men was not
increasing while among women it was decreasing.
JOHNSON
MCL
03/13/33
eeer A 330
in Colon
5.00
FEDERAL RESERVE BANK
Noted
OF NEW YORK
8. M. Coch-an
FFICE CORRESPONDENCE
DATE
December 4, 1939
Nessrs. Sproul, McKeon and CameronSuBJECT
L. W. Knoke
312
Mr. Kobayashi called this afternoon to advise us of
two more gold shipments from Japan as follows:
about I 20,000,000 per as Awata-maru
sailing December 5, due December 19,
about I 20,000,000 per 88 Kinkwa-maru
sailing December 6, due December 20.
Both shipments are for sale on arrival.
Mr. Kobayashi added that these shipments represented
in part new production and, part accumulation of gold; more
shipments were to follow in the near future probably at closer
intervals because the Japanese would, under prevailing circum-
stances, have to avail themselves of all shipping space available.
LWK:KW
hotea
B. M. Cochrar
87(f)
FEDERAL RESERVE BANK
OF NEW YORK
DATE December 4, 1939.
OFFICE CORRESPONDENCE
CONFIDENTIAL FILES
SUBJECT TELEPHONE CONVERSATION WITH
L. W. Knoke
BANK OF FRANCE.
313
I called Mr. Cariguel at 8:10 p.m., after having had
the call delayed by the French Military Censor. I referred to
the 2,036 cases delivered to us this morning by order of
Mr. Rousseaux and pointed out that we had received no instrucfrom Paris
tions/as yet. Cariguel replied that he would ask us to earmark
the gold for account S. I pointed out that if it were a question
of selling the gold in the near future he would save us a great
deal of trouble if he would instruct us to sell right away because
in that case we would not have to weigh the gold, which it would
take a full week to do. I made it clear to him that we would,
of course, follow his instructions whatever they were but that
I wanted him to know the situation. I am sure Cariguel understood;
he promised he would cable or telephone me tomorrow after speaking
to Governor Fournier. Cariguel assumed that we knew why he had
because of
not advised us before, namely,/the obvious necessity to keep
transactions of this nature utterly secret in prevailing circumstances.
LWK:KW
December 4, 1939
314
FOR THE SECRETARY:
I saw Steve Early this morning, following his regular press
conference, and explained to him that the Treasury newspapermen had asked for
Treasury documents which show our preparations prior to the outbreak of war.
I also told him that you would suggest asking his advice about what should
be done. Steve said that he assumed that the Treasury had given nothing which
was secret, confidential, or unneutral to Alsop and Kintner, and that this being
true the same information could not properly be withheld from other newspapermen who requested it. He said that he thought we must maintain our "parity
of treatment." He suggested that I call in the newspapermen who had made the
request and give them an oral summary of the events which were covered by the
Alsop and Kintner material. If we are asked for documents. he suggested that
we say that we are summarizing the material for the newspapermen "just as we
did for Alsop and Kintner." He said that this summary should be prefaced by
the remark that it was historical feature material, not news, and he ventured
the guess that the newspapermen would find very little use for it.
I raised the point of whether we were obligated to Alsop and
Kintner to withhold this material until about the dates that their articles
appear. Steve replied that he did not see how we could do so.
He then called Joe Alsop to tell him what had transpired and also
what he had advised us to do. Steve told me after the conversation that Joe
was inclined to blame Arthur Krock for the leak, but I told him that we had
no knowledge of where the request originated.
From a public relations point of view, I agree with what Steve
suggests with the possible exception of the point about not holding the
-2-
315
the material until approximately the time that Alsop and Kintner publish it.
If you decide to follow Steve's suggestion, I will need a little time to get
clearly in mind the material which I am to give the men orally.
ESD
316
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, Berlin, Germany
DATE: December 4, 1939, 9 a.m.
NO.: 2216
During the last week of November, there was an increase
of 519,000,000 marks in the total Reichabank investments
in bills, collateral loans and eligible securities, bringing
the total to 11,546 million marks. In the last weeks of
September and October respectively the increases in investments
were only 289 million and 159 million.
The above-mentioned increases are not large when compared
with the abnormal enlargement of Reishsbank investments of
2199 million reichsmarks during the last week of August, when
Reichsbank facilities were utilized to the full by banks
and business in a semi-panic for liquidity.
NotwithStanding the fact that there was a substantial
increase in Reichsbank investments for the last week of Novem-
ber, bringing the total for the month-end to 11,546 million
reichsmarks, this total, while greater than that for the
end of October (when it was 11,199 million), 18 still less
than that for the total at the end of September when it
was 11,844 million. This indicates that Government war-time
borrowing has not yet drained the liquidity of the money
market which has resulted from increased rationing restrictions on expenditure.
During the month of November there was an increase of
790
-2-
317
790 million marks in Reichsbank bill holdings, bringing the
total to 10,148 million marks on November 30; this figure
is,however, lower than that at the end of August, when it was
ten thousand two (?) million. The decrease in holdings of
eligible securities, which dropped from 1440 million marks
at the end of October to 1037 million at the end of November
was a considerable offset to the enlargement of the bill
portfolio.
At the end of November, the item "miscellaneous assets",
including direct borrowings from the Reichsbank by the Govern-
ment, was only 1174 million as compared with the figure at
the end of October, when it was 1874 million. The increase
in note circulation was 155 million marks, having been 10,819
at the beginning of the month, and it was 10,974 million at
the end; this figure is still a little bit less than the
record of 10,995 million at the end of September. However,
it 18 probable that the currency circulation would exceed
the September record if we counted in the circulation of
Rentenbank notes which are replacing silver. During the month
of November there was continuation of the steady absorption
of monetary silver by the Central Bank. On the last of the
month the collateral holdings of the Reichsbank in monetary
silver were 393 million marks as compared with the figure
at the end of October when they were 273 million.
During
318
-3-
During the month of November there was only a moderate
increase in the currency issue, but evidently "bank money"
increased a great deal.
For the month of November Reichabank clearings reached
a several-years record of 128 billion marks; this compares
with the October figure of 116 billion and the September figure
of 118 billion. On November 30 the sight deposits at the
Reichsbank were 1574 million marks; at the end of September they
were 1602 million marks, and at the end of October, 1520 million.
It is requested that this telegram be repeated to the
Treasury.
KIRK.
EA:LWW
PARAPHRASE OF TELEGRAM RECEIVED
319
FROM: American Embassy, Paris, France
DATE: December 4, 1939, 6 p.m.
NO.: 2895
PERSONAL AND STRICTLY CONFIDENTIAL.
FOR THE SECRETARY AND SECRETARY MORGENTHAU.
This morning we received Andre Jaoul at the request
of Rist. Jaoul 18 a director of the Societe d'ElectroChimie, d'Electro-Metalurgie et des Acieries Electriques
d'Ugine. He is also one of the Blockade Ministry's leading
technicians, and next week will leave for London as the
French member on the Franco-British Permanent Executive
Committee on Armaments and Raw Materials. With regard to
molybdenum, he went over somewhat the same ground as Rist.
Jaoul seemed to be fully informed as to conditions in the
United States, and as to prices and production. He appeared
to be well acquainted with the molybdenum interests and the
American Metals Corporations.
The estimated production for Climax for the year 1940
is 28 million pounds molybdenum content and Climax stocks
were 12 million pounds as of the end of September, 1939.
Their costs, he said, are between 25 and 30 cents a pound,
and about 75 their recent sales price. Minimum consumption
for
-2-
320
for the United States he said would be 10,000,000 pounds.
This amount would be about what the French and British
together would consume. Japan's consumption would be 3,000,000
pounds, and 750,000,000 pounds would be consumed by Canada
and others. There would remain an exportable surplus, he
said, of from fifteen to sixteen million pounds for Germany
and Russia. Certainly after the first year of war, he said
(and Rist had said the same) the Germans would be materially
handicapped through lack of defiling metal unless new supplies
from the United States via Russia could be obtained. Russia
herself is not an important consumer, he said, therefore our
exports to Russia are mainly for Germany. However, he did
not indicate that decision had been reached by Great Britain
France
and Germany to lay out 10,000,000 dollars plus 725 exportable
surplus next year. The supplies of the United States, he
emphasized, are "potentially inexhaustible", and it would
not be difficult to expand production.
It was his feeling that the price which Climax would
ask for any agreement not to expand production over the
next two years would be "very high"; in reply we said that
presumably whether the price was considered "high" would
be dependent on just how vital the Allied authorities regarded
molybdenum to Germany's prosecution of the war, that ten
million dollars was less than a half a day of war. He said
in reply that he was neigher the Ministry of Financethenor
-3-
321
the Minister of Blockade, and that they had not yet reached
a decision. Considerable opposition to such a molybdenum deal
has naturally been aroused because of the necessity for
conserving every available dollar, he said, and remarked
incidentally that the Netherlands is not itself a consumer
of molybdenum but is one of our principal export markets,
and presumably this country passes on to Germany its imports
of American molybdenum.
Tungsten was then discussed by Jaoul; we are setting
forth his comments for whatever they may be worth, realizing
that his viewpoint cannot be entirely objective, though
he impressed us favorably and as an intelligent person.
He said that next year there is going to be a definite
shortage of tungsten, and that molybdenum may be used in part
to replace tungsten equivalents. Around 24,000 tons a year 18
the world production of tungsten, China producing roughly onehalf of this amount. He said that requirements next year
for Great Britain and France would be about 15,000 tons.
He said unless we used molybdenum as a substitute, we should
find it difficult to build up our needs. It 18 noted that
tungsten is considered a strategic mineral.
Jaoul was, incidentally, quite critical of the purchasing
methods of our steel makers with regard to tungsten, saying
they purchase the mineral on a hand-to-mouth basis when they
need it, from a group of tungsten brokers in New York which
18
-4-
322
is well organized and which consequently does quite a profitable
business. Jaoul said that the United States pays on the
average about 50 percent more for its tungsten than 18 paid
by the French under their "purchasing policy" which has been
used for some years; however, such a policy for the United
States might have as an obstacle the restrictions of the
Sherman Act.
We pointed out quite clearly to Jaoul, as we did to
Rist, that the matter was not one in which the United States
Government could appropriately intervene. He said that
he perfectly understood, but added that in airplane manufacture,
as well as in armaments, molybdenum is an important element.
He wondered whether molybdenum might not be included in our
recent "moral embargo" on American exports of airplanes
and arms to Russia; we did not make any comment on this.
END MESSAGE.
BULLITT.
EA:LWW
OFFICIAL COMMUNICATIONS TO
SECRETARY OF STATE
a.c
onz
DEPARTMENT OF STATE
WASHINGTON
323
December 5, 1939.
My dear Mr. Secretary:
I enclose for your information a copy of a strictly
confidential telegram from the American Embassy, Paris,
dated December 4, giving the substance of a conversation
which Ambassador Bullitt had with Mr. Jaoul, a director
of the Société d'Electro-Chimie, d'Electro-Metalurgie et des
Acieries Electriques d'Ugine, and one of the leading
technicians of the Ministry of Blockade.
Sincerely yours,
Herbert Feis
Herbert Feis
Adviser on International
Economic Affairs
Enclosure:
Paraphrase, No. 2895 of
December 4 from Paris.
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
TREASURY DEPARTMENT
324
INTER OFFICE COMMUNICATION
DATEDecember 4, 1939
Secretary Morgenthau
TO
FROM
W. H. Hadley
REFUNDING ISSUES
The following possi ble issues for a refunding operation might be
offered to refund the maturing notes together with a new 1% 5-year
note or reopening the recent 1% note (4 years, 3 months maturity, now
quoted 101) and possibly reopening at a price the new 2% bonds (now
quoted 101.23). The maximum limit on a 2-1/2% would be 18-23 years,
selling at about 1 point 10/32nds to 1 point 17/32nds premium.
A 2-1/4% bond would fall in a rather heavy maturity area while
a 2-3/8% issue or a 2-1/2% issue would allow a wider choice of
maturity dates.
Bond Issues
Offering
Price
Coupon
Terms
Yield
2-1/26
17-22 yrs.
2.39
2,405
100
18-21 years
(12/15/57-60)
2,385
2.400
100
18-23 years
(12/15/57-62)
2.395
2.41
12-15 years
(12/15/51-54)
2.12
2.14
(9/15/57-62)
2-1/4%
100
100
100
100
100
100
Market
Price
Premium
101.19
101.12
1 pt. 19/32
1 pt. 12/32
101.21
101.14
1 pt. 21/32
1 pt. 14/32
101.17
101.10
1 pt. 17/32
1 pt. 10/32
101.12
101.5
1 pt. 12/32
1 pt. 5/32
325
Offering
Coupon
Terms
Yield
2-3/8%
13-17 years
(12/15/52-56)
2.22
2.24
100
13-17 yrs.
(3/15/53-57)
2.24
2.26
131-16 yrs.
2.23
100
(3/15/53-56)
2.25
100
Market
Price
Price
Premium
100
101.24
101.16
1 pt. 24/32
1 pt. 16/32
100
101.16
100
101.11
1 pt. 16/32
1 pt. 11/32
101.18
101.13
1 pt. 18/32
1 pt. 13/32
TREASURY DEPARTMENT
326
INTER OFFICE COMMUNICATION
DATE December 4, 1939.
TO
FROM
Subject:
Secretary Morgenthau
Mr.
Haas lt
Report of Meeting on the Business Outlook, held
Thursday, November 30, 1939, in Mr. Haas' office.
Attending were the following representatives of
the various governmental departments:
Executive Offices of the President:
Lauchlin Currie, Administrative Assistant
to the President.
Bureau of the Budget:
Frederick J. Lawton,
Morris A. Copeland.
Federal Reserve System:
Frank Garfield, Senior Economist.
Department of Agriculture:
Eric Englund, Asst. Chief, Bureau of Agricultural
Economis;
Frederick L. Thomsen, Principal Agricultural Economist, Division of Statistical and Historical Research;
Louis Bean, Head Agricultural Economist, Bureau of
Agricultural Economics.
Department of Commerce:
Robert Nathan, Economic Analyst, Research Division
of the Bureau of Foreign and Domestic Commerce.
Department of Labor:
Isador Lubin, Commissioner, Bureau of Labor Statistics.
The representatives of the Departments of Agriculture, Commerce
and Labor, and the representative of the Board of Governors of the
Federal Reserve System were asked to express their opinions on the
levels of the Federal Reserve index of industrial production and
the Bureau of Labor Statistics index of wholesale commodity prices
for the first six months of calendar year 1940, the last six months
of calendar year 1940 and the first six months of calendar year 1941.
Secretary Morgenthau -2
327
SUMMARY
Present Level:
F.R.B. index of industrial production November, 1939 - 125 (estimate)
B.L.S. index of all commodity prices Week ending Nov. 25, 1939 - 79.0
Department of Agriculture Estimates:
F.R.B. index of industrial production Average for calendar year 1940 - 112
(low of about 100 in mid-year and rise
in last half of year)
First six months of 1941 - 118
B.L.S. index of all commodity prices -
Last six months of 1939 - 77
First six months of 1940 --81
83
Last six months of 1940
First six months of 1941 - 86
Department of Commerce Estimates:
F.R.B. index of industrial production Average for calendar year 1940 - 110
(low in summer of about 100 - 105 and
rise in last half of year reaching
about 115 at end of year)
First six months of 1941 - 115 - 117
B.L.S. index of all commodity prices First six months of 1940 - 78
Last six months of 1940 - 80
First six months of 1941 - 81
Secretary Morgenthau -3
328
Federal Reserve System Estimates:
F.R.B. index of industrial production Average for calendar year 1940 - 116-117
(First six months of 1940 to average about
113 and rise in last six months of year
with last half of year averaging about 120)
First six months of 1941 - 120
B.L.S. index of all commodity prices -
First six months of 1940 - 80
Last six months of 1940 - 83
Bureau of Labor Statistics Estimates:
Dr. Lubin declined to make any forecast of the business or
price indexes. He directed his remarks primarily toward the
discussion of trends in unemployment. In connection with the
discussion of steel, Dr. Lubin pointed out that many of the orders
placed in September and October were large enough to take care of
the full demand of the particular companies for the first six months
of calendar year 1940. He mentioned specifically automobile companies and shipbuilding companies, and he therefore expects a drop
in steel production after the first few months of calendar year 1940.
Mr. Bean stated as his independent judgment, as contrasted
to that of the Department of Agriculture experts represented by
Messrs. Thomsen and Englund, that the sharp recession predicted
by the others would not take place. He places the index for the
first half of 1940 at 120 to 125. He expects a moderate decline
in the last half of the year and placed the index for that period
between 115 and 120. For the first half of 1941 he expects an
average of 115.
Mr. Bean's analysis appears to be based largely on what he
called the course of a typical business cycle.
December 4, 1939.
129
Dr. White
Mr. Cochran
1. Does the Treasury desire to encourage the idea of the creation of a
Latin-American B.I.S.T
2. Would the United States be expected to provide the great part of the
funds involved?
3. If so, would there be any advantage in setting up this new medium
rather than utilizing the Export-Import Bank with which we retain control of
loans in our own hands?
4. Would it not be easier to obtain from Congress an increased allotment
to the Export-Import Bank than capital for a new and still nebulous organization
which may be looked upon with considerable skepticism?
5. Would frequent meetings of the Latin-American Central Bank Governors
be feasible, considering distance and travel difficulties? (This has been
found the chief benefit of the B.I.S. to European Central Bank Governors).
6. Would not the problems of credits likely to be discussed fall more
properly within the field of Finance Ministers?
7. Could not these questions, therefore, be adequately dealt with through
present channels. including the Committee now established in Washington?
8. Could not this Committee also establish, if desirable, an economic
and financial research section? (This has been another of the successful undertakings of the European B.I.S.).
9. Would it be wise for our Government to be a party to continuing illusions
about ameliorating Latin-American conditions through unsound loans, a bookkeep-
ing gold currency, silver, one-way financial cooperation, etc.1
10. Would it not be preferable to:
(a) Support the Bond Holders Council in negotiating settlement
of defaulted Latin-American loans?
(b) Limit direct Governmental financial assistance to ExportImport Bank operations?
(c) Grant no assistance in countries where American property
rights are disregarded and
(d) Thereby prepare the field for genuine long-term private
lending of the type needed to develop Latin-American resources
and exports?
-2330
(e) Concentrate more seriously on improving our own economy and
thus enlarging our capacity for Latin-American goods?
(f) Encourage American firms to act as intermediaries for distribution
of Latin-American goods to countries outside of the United States
when our capacity therefor is exeeded?
HMC/rmm/AMO
Treasury Department
Division of Monetary Research
Date
To:
12/4/39
19
Secretary Morgenthau
From: H. D. White
Appended is a copy of a
letter and a list of questions I am
sending to Mr. Berle.
M
December 4, 1939.
331
Dear Mr. Berle:
Our informal committee of Federal Reserve Board and
Treasury technicians met this afternoon to review a list
of suggested questions which we had agreed to furnish you.
On further consideration of the questions formulated
we feel strongly that the questions to be submitted to the
21 republics should stem from your subcommittee and should
not be identified as coming from any one country, particularly the United States. Accordingly we suggest that each
member of your subcommittee be asked to formulate R list of
questions, that the subcommittee go over all of the lists
with a view to formulating a single list of questions which
the subcommittee will submit to all the countries.
With this reservation we are attaching a list of questions for your guidance in discussing the matter with your
subconmittee. In view of the shortness of time, we have
not sought to obtain the Secretary's approval to the questions, nor do we submit these as a final, exhaustive, or
appropriate list of questions for circulation among the
members of the committee.
While awaiting an indication of further developments
from you, we will proceed with our study of a plan.
Respectfully,
H. D. White,
Director of Monetary Research.
The Honorable,
The Assistant Secretary of State.
HDW:1rs
12/4/39
332
1. If an inter-American banking institution would agree
to buy prime commercial bills from your Central Bank, how large
a volume of business do you estimate this institution would
obtain from your country? How much of that business would be
new and how much is now being handled by existing financial
institutions: (a) foreign banks located within your country?
(b) foreign banks located outside the country? and (c) domestic
banks?
2. What are the prevailing rates of interest (a) for prime
commercial paper; (b) for ordinary commercial paper, of 60- 90120- and 360-day maturities?
3. Ie there a market in your country for short-term bills
of less than 1 year maturity?
4. If an inter-American institution were to guarantee the
prime commercial paper, do you think the rates of interest would
be lower and could a demand for such bills on the part of local
institutions and individuals be developed?
5. Is your banking system subject to such seasonal demands
for financing that temporary credits extended by an inter-American
institution would help to stabilize financial and economic conditions within your country? Do foreign banks adecuately perform
that function now? If these foreign banks do not meet your
seasonal demands how are they met?
6. About a tenth of Latin American trade consists of trade
amone the Latin American countries themselves, -- is this intrecontinental trade of your country materially obstructed at
present by the lack of short-term credits? Are available banking
facilities adequate for rediscounting export bills of intra-
continental trade?
7. A group of service functions has been suggested for the
inter-American institution such as: (1) To function 86 a clearing
house for inter-American payments; (2) to function as fiscal
agent and trustee for Central Banks and government.
How are your inter-American payments now cleared? To what
extent are they carried out by private domestic banks? By
foreign banks with Latin American agencies? Could the mechanism
be improved by Central Banks in each country clearing directly
through balances maintained with one another? What improvements
night be effected by an inter-American Bank?
2-
333
8. Would an inter-American institution which confined
itself to providing short-term credits and performing routine
services be of sufficient value to your country to warrant the
support of the project by your country?
9. Would provision for personal contacts and collaboration
between fiscal and banking officials of the various governments
and for the purpose of studying and exchanging views on fiscal
and banking problems be best provided for by the establishment
of a Pan-American Bank?
10. It has been suggested that there is a considerable
outflow of capital funds from the American countries to New York
and other money centers for investment and security. How large
do you estimate the volume of this outflow from your country in
the past five years? What is the estimate of such funds now being
held abroad?
11. To what extent do you feel that the creation of such
an institution would reduce the fluctuations of the rates of ex-
change in your country on other American countries, or narrow
the spread between the cross rates of American currencies and
also narrow the spread between the buying and selling price of
foreign exchange?
12. To what extent do you think that restrictions on
transfer of funds are due to shortages of short-term credit,
and could be remedied by provision of moderately greater shortterm credit facilities than now exist?
13. What have been the significant developments during
the past three months in the volume of your exports and imports,
and in the gold and foreign exchange resources of your central
bank? Do you consider these tendencies as temporary; are they
likely to continue for the duration of the war; or, are they
likely to be reversed as the war continues?
14. To what degree do you consider trade within this
hemisphere capable of expansion, and in what ways do you consider that a new inter-American financial institution might
increase the expansibility?
15. What specific dislocations and economic losses that
your country is experiencing do you attribute directly to the
war conditions now prevailing? What effect is the war having
on the commercial and financial problems of your country and
to the extent that such problems are being aggravated by the
war,
what steps can be taken to counteract the effect of the
war?
-3334
16. If an inter-American institution were to be developed,
would your country prefer that it (a) deal directly with the
government
or its
agencies, or (b) with the central banks, or
with
the public
at large?
with
Would your country wish such an institution to have relations
government-owned mortgage banks of your country with a
view toward broadening the mortgage facilities in your country?
Does your country have any preference or view with respect to
the proportion subscribed by your country to a bank were one
initiated?
17. What formulae do you suggest for allocating to the
countries the amounts of capital to be invested in the organization
of the bank?
18. If your country is in need of capital, how much
capital do you contemplate that they would borrow through the
medium of such an institution during the next five years?
19. Would your government be willing to submit its program
of the uses of such fund to a special committee of such an
institution created for the purpose of passing on the wisdom and
security of such loans in order to protect the repayment?
20. What are your country's needs, if any, for long-term
investments relating to rehabilitation of industries? Public
works?
21. What are your country's needs for a long-term loan
of gold or other foreign exchange assets for purposes of
currency stabilization? If your country has such need, does
your government contemplate using up those resources within
a year or two or more? What does the rate of utilization of
those resources depend upon?
What criterion or criteria would your government use as
to the rate of utilization of funds borrowed for purposes of
stabilization of their currency?
If it is your opinion that the new institution is to be
employed, among other purposes, for the stabilization of currency
of the American countries, what limit would your government feel
it desirable to impose upon the amount of the funds expended for
any one country for that purpose?
22. What are your country's prospects for working out a
program of lifting foreign exchange control? To what extent will
the establishment of a Pan-American bank help in this direction?
4335
23. To what extent would an institution that confined
itself to short-term operations without putting more funds
into your country than it took out -- except for limited
periods -- meet the financial needs of your country?
24. In your opinion what criteria would be suitable for
the
institution
to use in allocating its lending resources to
the various American countries?
25. What role if any does your government feel silver
should play in the functioning of an inter-American bank scheme
and as a means of settlement of balance of payments among
American countries?
26. What criteria should the bank use to determine when
to operate to prevent short-term fluctuations in the value of
any American currency? Is it expected that the various
countries appeal to the bank to engage in operations or should
the bank arrive at its decision entirely independent from the
wishes and beliefs of the government whose currency is in
question?
12/4/39
COPY
Original by air mail
No. 22
American Consulate
Hanoi, Indochina,
336
December 4. 1939.
CONFIDENTIAL
Subject: Indochina-Yuannan Railway to
increase Freight Capacity.
THE HONORABLE
THE SECRETARY OF STATE,
WASHINGTON.
Sir:
I have the honor to refer to my telegram of December 3. 12 noon,
in which mention was made that the Indochina-Tunnan Railway would increase
its freight capacity and thus alleviate to a certain extent the difficulties
of transportation to China caused by the Japanese capture of Nanning. The
basis of this mention was a statement by Mr. A. Bodin, Managing Director of
the Railway, to the effect that he hoped to ship from 15 to 17 thousand
tons during December, exclusive of service requirements, 18 thousand tone
during January, and from 24 to 25 thousand tons by next April.
For the last few months the Indochina-Yunnan Railway has been active
in securing additional equipment. To date, sufficient freight care have
been obtained to handle the maximum capacity mentioned above. According
to Mr. Bodin, only a lack of locomotives has prevented a great increase
in the railway's freight capacity. However, the railway has secured 6
locomotives from Kenya, which are now in Haiphong, 9 locomotives have
been rented from the Indochina Government Railways, and 6 locomotives
are shortly expected to arrive from Djibouti, where the IndochinaYunnan Railway Company operates another line. Other locomotives are
being sought.
-2337
1
Mr. Lecorche, General Manager of the railway, has expressed the
opinion that the maximum tonnage mentioned by Mr. Bodin is somewhat
optimistic. Other officials of the railway have stated that the
efficient maximum freight capacity is from 18 to 20 thousand tons
monthly. This opinion is based upon operating conditions, that the
railway does not have sufficient sidings to permit extremely heavy
traffic, sufficient yards at Kunming, and adequate trained personnel.
In this latter connection, I am informed that a number of trained men
have recently been mobilized and that the company will be able to
replace them only with considerable difficulty. Under the best
conditions, I believe that an average tonnage of 20 thousand is
rather low.
Whatever the ultimate total tonnage handled monthly, the fact
remains that the Indochine-Yunnanis operating at a higher level than
at any time in its history and that serious plans are being made to
increase its freight-handling capacity. Various important shippers
have stressed their satisfaction with the efforts of the railway to
assist the solution of the problem of transportation to China. The
purpose of these efforts is of course far from being altruistic, but in
effect these efforts will work out to the material benefit of the
Chinese National Government. As I stated in my despatch no. 5 of
October 13, 1939. the French, for one reason or another, appear to
be cooperating with the Chinese in a solution of their problems, particularly under such circumstances that the cooperation does not arouse the
suspicions of the Japanese.
Respectfully yours,
Charles S. Reed II.
American Consul.
-3338
Original and 2 copies to the Department
Copy to Embassy, Chungking
Copy to Embassy, Peiping
to Hongkong
Copy Consulate General,
Copy to Consulate, Saigon
815.4
CSR:car
American Consulate
No. 23
Hanoi, Indochina, December 4, 1939.
339
SUBJECT: Conditions at Haiphong subsequent to the Capture of Nanning.
The Honorable
The Secretary of State,
Washington.
Sir:
I have the honor to refer to my despatch no. 5 of October 13, 1939. depicting
conditions at Haiphong, and to my d espatch no. 21 of December 3, 1939, confirming
the capture of Nanning by the Japanese and the consequent loss of the Dong Dang-
Sanning road as a route of transportation to unoccupied China. As a result of the
latter development, conditions at Haiphong may be described as being perhaps less
satisfactory than on the date of the previous report.
At that time there was some prospect that the Chinese, with the assistance of
the various American transportation experts, might work out a sound plan of transportation, which would enable clearing away the vast accumulation of cargo at
that port. At this time, there appears to be no immediate prospect of reducing
this accumulation, even with the increased railway facilities mentioned in my
despatch no. 22 of today's date, unless a substantial part is transshipped to
Rangoon.
At that time the Dong Dang-Nanning road was carrying about 13 thousand tons
a month, this cargo being handled by trucks purchased by various Chinese governmental organizations. The Indochina-Tunnan Railway was averaging about 10 thous-
and tons a month, (With the exception of October when the railway was not oper-
ating). At this time, and at least for a few months to come, the tonnage that can
be transported to China via Indochina does not exceed 23 thousand tons a month.
If no appreciable diminution of the accumulation of cargo could be effected
at that time, it is only logical to surmize that nothing outstanding will be
-2-
340
accomplished at this time. Moreover, as mentioned above, much of the cargo was
moved in trucks - and trucks formed a not inconsiderable part of the accumulation
of cargo. Trucks can no longer go by road and the Indochina-Yunnan Railway will
not transport trucks, at least for the time being. The 2800 to 3200 trucks now
in and around Haiphong create a problem.
One source of information states that the Chinese are already negotiating
for ships to transport at least a major proportion of these trucks to Rangoon, as
well as tires and other items. With the customary cynicism which seems to prevail
when Chinese efforts to rationalize transportation are the subject of discussion,
the majority of commentators believe that the negotiations will be unduly protracted
or that, if the trucks actually arrive in Rangoon, they will lie idle there as now
in Haiphong.
In connection with this problem of trucks, the Department may be interested to
note that the great majority of observers here, including sellers of trucks, are
agreed that China is over-stocked with trucks and that emphasis should be placed
on the transportation of gasoline and other commodities to the exclusion of additional trucks. Mr. Chen Tea Chen (c. T. Chen), now directing the Southwest Transportation Company at Haiphong, is apparently adopting this belief, inasmuch as he
will allot no space on the railway to trucks.
Up to the time of the closing of the Dong Dang-Nanning road, during the month
of November some progress was made in clearing the congestion at Haiphong, per-
hape a net gain of from 8 to 10 thousand tons. Much of that tonnage is now flowing
back into Indochina from points this side of the Japanese occupation. In many
instances the French authorities, in permitting the return of this cargo, are
specifying that the cargo shall not be stored at Haiphong.
Notwithstanding this small measure of success in clearing Haiphong, the general
situation remains as chaotic as in the past. Within the last few days an American
-3-
341
truck representative having 200 trucks at Haiphong to be assembled found that the
various parts were scattered over a line distance of 4 miles. The Chinese have
indeed made an effort to clear thecongestion but the result has only been superficial.
If the needs of the Chinese are primarily for petroleum products and if the
railway space is alloted primarily and initially to these, the prospects of clearing
the congestion at Haiphong are extremely remote, even though the shipment to Haiphong
of certain commodities destined for China is said to be stopped in some instances
and curtailed in others. A number of the foreignerepresentatives, who have lived
in Haiphong during the all too short life of the Dong Dang-Nanning road, have left
for Rangoon to examine "possibilities" of truck transportation to China.
Respectfully yours,
Charles S. Reed II,
American Consul.
Original and 4 copies to the Department
Copy to Embassy, Chungking
Copy to Embassy, Peiping
Copy to Consulate General, Hongkong
Copy to Consulate, Saigon
815.4
CSR:cer
THE WHITE HOUSE
WASHINGTON
December 4, 1939.
MEMORANDUM FOR
THE SECRETARY OF THE TREASURY
will you read the enclosed
and speak to me about it?
F. D. R.
THE WHITE HOUSE
WASHINGTON
December 1, 1939.
DE RANDUM FOR TH PRESIDENT:
Re: Britten TEX Rates.
I WES tol. by Mr. Smith that you would like some
information on British War Taxes. I am attaching a
summary st tement on the new taxes and the changes in
previous taxes. You may be particularly interested in
the National Defense Contribution, page 4.
~
These new taxes are expected to yield the following amounts:
(Millions of L)
Expected Increases in Yield
Rest of 1939,
Through
April 1, 1940
April,1940-41
Income tax on individuals
and companies
70
146
Surtax
5
8
National Defense Contri-
:
bution enacted in
1937, and Excess
Profits Tax
?
?
Consumption Taxes
1.5
6
30.5
66.5
-
Estate Duty
Laura
Lauchiin Currie
November 30, 1939.
British Taxes for the European Var
The Finance Aot (No. 2) of October 12, 1939, provides for
drastic upward revision of the income tax, surtax, death duties,
and many excises for the fiscal year beginning April 1, 1940, and
milder changes for the balance of the present fiscal year. It was
thus hoped to raise tax revenue by B 107 million from the estimated
b 890 million for 1939-40, and by b 226.5 million for the fiscal
year 1940.
Income Tax
The standard rate of 27.5% in 1938 and 1939 was raised
by the war act to 35% for the remainder of the fiscal year, and to
37.54 for the next year. This rate is subject, of course, to later
revision.
At the same time, the old exemption and personal allowances
were continued until April 1, 1940, but from then on they were reduced as follows:
Former
Exemption
Allowances:
Single person
Married couple
Dependent child
Earned income
(Maximum allowance
Fiscal Year 1940
b 125
b 120
6 100
L 180
b 100
b 170
L 60
one-fifth
L 300
b 50
one-sixth
1 250)
2
Taxable income is income on which the tax remains chargeable
after taking these allowances. Non-resident foreigners are charged
the full standard rate, without allowances, on income from British
sources. Normally, the first 6 135 of taxable income is charged at
11.71, one-third the standard rate, for the remainder of the year.
Income abov.e that is taxed at 35%. Beginning with the 1940-41 fiscal
year, the rate will be increased to one-half the standard rate, or
18.75%, for the first b 165 of taxable income, and 37.5€ on the remainder. The slight reduction in tax allowed incomes under b 140
to one-fifth/the excess of income over the minimum exemption is con-
tinued, but decreased to three-eighths of the excess after April 1.
Further relief is given A person proving that his Actual earned
income for 1939-40 fell by at least 20%, due directly or indirectly
to the war, below his previous year's income; he may then be assessed,
contrary to practice, on his actual earned income. The claim, howover, must be made before April 1, 1941.
Surtax
Surtax is levied on individual incomes (including the gross
income subject to texation at the source) over b 2,000, with no
deductions for personal allowances or earned income. The rate ranged
from 5.754 to 45 on incomes over 6 50,000, according to the first 1939
Finance Act of July 25, 1939, which was never effective for surtaxes.
The rates were raised by the ar Emergency Act of October 12, effective
for the same year (that is, January 1, 1940, when surtaxes on 1938-39
incomes are payable), as follows:
Finance Act
Excess Income
1931 (II)
Finance Act
1939 (II)
First b
500 of excess
5.5 X
6.25 :
Next
500
6.875
7.5
.
1,000
11.0
12.5
1,000
16.5
17.5
1,000
19.25
21.25
2,000
22.0
25.0
2,000
27.5
31.25
5,000
30.25
37.5
5,000
33.0
42.5
10,000
35.75
45.0
20,000
38.5
47.5
41.25
47.5
Incomes above b 50,000
The maximum total rate was 68.75% before the var, becoming 82.5%
for the early war period, and will be 85% with the higher standard
rate of 1940. (See page 9 for table of specimen taxes.)
Company Texas
Companies are taxed at the standard rate of income tax on
total taxable profits, including those distributed. As far as dividends and some other items (reyalties) are concerned, this is morely
a
collection of the tax at the source since the corporations recoup
the tax by deducting it from dividend payments and the stockholder
then calculates and pays income tax on income other than dividends.
Therefore, upon the companies themselves, a tax is imposed only on
the undistributed share of profits. Through the increase in the
standard rates, this tax on undistributed profits has been raised
from 27.5% before the war to 35% for the rest of the fiscal year,
and 37.5% for 1940-41.
National Defense Contribution
This "contribution" is a tax on profits, enacted July 30,
1937, amended July 29, 1938, and partially superseded by the Excess
Profits Tax (see next section) of Finance Act (No. 2) of 1939. By
this last, each of the two taxes continues to be computed independ-
ontly, but only the higher is levied. The older tax remains in
force, practically, for businesses with small or no excess profits.
The defense contribution covers all trades and businesses,
whether carried on by individuals, partnerships or corporations,
excluding only professions but not law as a business. The rate is
5% on companies, 4% on partnerships and individuals, and is levied
on profits arising in each accounting period falling within five
years from April 1, 1937. Enterprises with less than b 2,000 profit
are exempted, and the tax on profits between b 2,000 and b 12,000 is
reduced. Profits are computed as for income tax, but additional
-5options are allowed, for interest, annuities, etc., payable out
if profits, royalties and sometimes rent, nor is the annual value of
remises owned and occupied for business purposes included. But
dividends, distributed profits, and payments to persons carrying on
the business, except for a limited salary to full-time directors,
may not be deducted. There are special provisions for building
societies and financial enterprises. Although the national defense
contribution is deductible from profits computed for the income tax,
neither the latter nor the contribution may be deducted for calculating national defense payments.
Excess Profits Tax
The excess profits tax replaces the armaments profits duty
levied by Finance Act (No. 1) on businesses with total receipts from
armanent contracts of 1 200,000 up.
The new duty levies on all trades and businesses a tax of
60% of the excess profits over the "standard profit".
The profits must be computed on the basis of actual profits.
The same deductions are allowed, or disallowed, as for the National
Defense Contribution. Furthermore, besides normal depreciation
allowances, special ones are given on exceptional depreciation of
plant or machinery installed installed after 1936, which assets will
become obsolete or useless as a result of the var. Provisionally, the
Commissioners may allow not over 10% of the net cost of such assets.
-6Capital for the excess profits assessment is computed as
for regular income tax purposes, i.e., all assets at cost less depreciation allowances under both taxes. Investments are not included
(unless income therefrom is included in excess profits, as for many
financial companies), but borrowed money is not deductible in so far
as it is covered by investments.
Relief is given the corporation with losses or substandard profits in a taxable year by providing that such "deficiencies" may be deducted from the excess profits of the subsequent
year. The relief in case of a marked deficiency may last over
several years, until it is covered by excess profits. Profits made
in an accounting period starting April 1, 1939, or later, or in the
part of a previous period continuing after that date, are subject to
the tax. As also stipulated for the national defense contribution,
the only exempt professions are those in which the profits are dependent mainly on personal qualifications.
The standard profit may be taken as in 1,000, or, for a
partnership or company in which the directors have a controlling
is one-half
interest, 6 750 per working (full-time over more than
chargeable period) proprietor, the total allowance/not to exceed
3,000.
An alternative method of determining standard profits allows
an option to the trader: for 5 business begun on or before January 1,
1935, the profits of 1935, or of 1936, or of either averaged with
1937; if begun in 1935, the profits of 1936, or 1936 and 1937 averaged;
-111 begun after January 1, 1936, and before July 2, 1936, the profits
of any consecutive 12 months ending after June 30, 1937.
If the capital in a taxable year is greater than the
average capital in the standard period, the standard profits are increased by 8% on the capital increase for a company, by 10% for
individuals, partnerships, or companies in which the directors have
a controlling interest. Decrease in capital is likewise compensable
for the assessment by a decrease in standard profits equal to 6%
of the capital decrease. Elasticity to cover special circumstances
is provided by allowing an appeal to the Board of Referees to ⑉
tablish a higher standard profit, although, except in rare cases,
the new standard may not exceed an amount to provide for the standard
period, 6% dividends on paid up ordinary shares, and fixed rate on
other paid up stock.
Estate Taxes
The estate duty has been raised by 10% over the basic 1930
rate on estates of b 10,000 to b 50,000, and by 20% on larger ones,
to reach a high of 60% on estates of b 2,000,000 (as against 55%
under the July, 1939, act covering deaths after April 25, 1939). The
yield from the increases, effective for deaths after September 28,
1939, is estimated at 1 1,500,000 for the rest of the fiscal year,
and at 1 6,000,000 for the next one.
-Consumption Taxes
Consumption taxes were sharply raised, particularly on
leoholic beverages, sugar and tobacco. The additional yield from
increases on these products was estimated at 1 30,500,000 for the
rest of 1939-40, and at b 66,500,000 for the next year well over
a third of these increases was expected from the doubling of tax
on
beer
to 1 d. a pint. The sugar tax was raised oven more
sharply from 1 d. to 24 d. (and sugars in process of manufacture
correspondingly) to give an estimated increased yield of 1 26,500,000
over the fiscal period October, 1939 to April, 1941.
Some Specimen Incomes and Taxes Due as Per Cent of Income
Single Person
1939-
150
300
500
1,000
5,000
10,000
20,000
50,000
100,000
200,000
All
All
Investments
Larned
-
125
1
All
Earned
-
Income
1940-41
1.5
5.8
14.7
21.4
38,9
50.3
62.7
74.1
78.3
80.4
3.9
12.8
21.7
28.4
41.0
51.4
63.2
74.3
78.4
80.4
0.6
3.1
9.4
17.6
24.4
41.6
52.9
65.2
76.6
80.8
82.9
All
Investments
1.5
6.2
14.7
23.8
30.7
43.5
53.9
65.7
76.8
80.9
82.9
Married Couple Without Children
L
200
300
500
4.6
5.0
2.8
8.1
16.1
12.3
18.6
1.2
-
2.3
9.1
(The tax is 1 28 less than in the
corresponding specimen for a single
person.)
-
(The tax is 1 26.5 less
than in the corresponding
specimen for a single
person.)
Karried Couple With Three Children
b
350
500
-
0.9
3.5
(The tax is 1 91 less than in the
corresponding specimen for 8 single
person.)
1.6
-
3.6
7.3
(The tax is 1 82.5 less
in the corresponding
than
single
specimen for
a
person.)
TREASURY DEPARTMENT
Washington
342
December 5, 1939
FOR THE SECRETARY:
Bob Kintner, who will be in at
11:15, has written his column on the
Treasury-White House tax situation -without saying anything about a Hanes
resignation.
ESD
Columbia University
intheCity of Hem Pork
SCHOOL OF LAW
December 5, 1939
343
Dear Henry:
Pursuant to your request I have read over Mr. Randolph Paul's
memoranda addressed to the President recommending a series of
some forty-seven amendments to the Revenue Laws. I take it
that what you want from me are mainly general impressions
rather than a detailed criticism of each of the proposals.
Indeed, to discuss them adequately would require a memorandum
about as long as Mr. Paul's.
The recommendations as a whole are intelligently formulated and
for the most part their adoption would improve the revenue laws.
Any Congressman or Treasury expert would disagree, of course,
with some of the proposals. For my part, I am strongly opposed,
for example, to Recommendation No. 2 and No. 24 in Memorandum A,
and No. 12 in Memorandum B. You will find that the greater part
of these suggestions have been exhaustively considered within
the Treasury in 1937 and 1938 and probably again this year. A
number of the suggestions have actually been proposed to one of
the Congressional Committees and for one reason or another have
been found impossible of adoption. You will undoubtedly find
a great deal of discussion of many of Mr. Paul's points in the
five volumes of recoummendations which Mr. Haas and his staff
prepared for me in 1937.
As a practical matter, Mr. Paul has presented the President with
a rather elaborate tax program such as the Treasury itself might
well wish to present. There are at least three basic questions
with respect to the proposals:
(1) Can the sub-committee of the Ways and Means Committee and the
Committee itself be induced to spend the necessary time on the
consideration, drafting, and recommendation of an extensive tax
program of this sort. Months of hearings in executive session
and in public session would be required. I doubt whether a tax
bill embodying as many detailed recommendations as this could
Hon. Henry Morgenthau, Jr.
-2-
Dec. 5, 1939
344
possibly be submitted to the House in less than three or four
months at the very minimum.
(2) Has the Treasury the necessary time to complete its own home
work on the proposals? The proposals will have to be drafted
in statutory form and in a number of instances this will be a
long and tedious task. Careful estimates will need to be made;
the legislative situation appraised and further consideration
given to the effect of the program upon the economy of the
country. It will take several months to do this work properly
before any recommendations are made to a Congressional committee
at all.
(3) Does the Treasury regard a detailed program of this sort
as the best available recommendation at this time? The proposals
involve a long series of changes most of them comparatively minor
in revenue effect but all of them more or less upsetting to the
businesses and individuals affected. You are already confronted
with a most serious revenue problem in the badly unbalanced
budget which defense expenditures may unbalance to an even more
serious degree. If there is to be a tax program at all, there is
much to be said for a program involving comparatively few, although
drastic, provisions which will really raise a good deal of
additional money, rather than to peck away at taxpayers already
irritated with a series of sections which are annoying but which
individually do not produce much money.
Please do not take what I have said as being critical of the
detailed aspects of Mr. Paul's program. It must represent an
enormous amount of careful work and intelligent thought. What I
have tried to say is that the main question presented to you is on
a large scale a policy question -- whether as Secretary of the
Treasury you wish to recommend a program of this sort at this time.
It was a real pleasure to see you in Washington and to find you
looking 80 well. You certainly have a most difficult post and
so far as I can see your troubles are apt to be greater rather
than less. Nevertheless you can take a lot of comfort in the thought
that those who are familiar with your work admire you greatly for
your accomplishments.
Sincerely yours,
Rumer Magica
Hon. Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
345
December 5. 1939.
Secretary Morgenthes
Mr. Cochras
STRICTLY CONFIDENTIAL
This warning I telephoned Vice President Knoke of the Federal
Reserve Bank of New York and informed his of the Secretary's proposal
of yesterday. made in answer to the inquiry of the Minister of Sueden
is regard to the possible purchase by the United States Treasury of
Finnish gold in Steekhola.
Mr. Knoke called me back this afternoon to let me know that the
Federal Reserve Bank had today received a emblogram from the Bank of
Sweden instructing the sale of $5,900,000 is gold from its earmarked
account with the Federal Reserve Bank. As a supplemental transaction,
the Bank of Seeden had instructed the Federal Reserve Bank to credit the
account of Finlands Bank with $5,000,000. It thus appears that the Bank
of Sweden is taking Finnish gold in Barape, selling its own gold is
New York, and making dollars available to Finland here.
Ye de not yet know whether the preposal developed yesterday may
also be utilised.
RMR.
INCife
346
December 5. 1939.
Dear Mr. President:
I have pleasure in transmitting herevith a memorandum
submitted to no, which refers to our discussion of yesterday
in regard to the inquiry made by the Minister of Sunden with
respect to the disposal of Finnish gold. I shall not fail to
keep you informed of any further developments in the premises.
Sincerely yours.
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
The President,
The White House.
mm
X
Resources 5. 1930
R
347
My dear Mr. Pastern
As a result of our telephone converse-
tion, I - sending you horowith a Manceript
of my press conference plus the
formal release.
1 will again telephone you shortly as
I would 15kc to all down with you and have a
good heart to heart talk.
Years sincerely.
Mr. George 3. Parker,
1840 such Street,
Washington, D. ..
December 5, 1980
348
by tear Mr. Paston
As a result of our telephone reaverse
sion, I as souting you horowith a the
of ay proce conference yesterday pies the
formal release.
I will again telephone you shortly as
I would 14kc to sit down with you and have a
good heart to heart talk.
Yours sincerely,
Mr. George 3. Parker,
1040 seen Street,
Fashington, s.e.
349
Remove s, 1000
w - m. Pasian
As a month of - telephone seen,
1 --posterlay
moding
you
/
of
ag
press
pine
the
formal sclease.
1 will egate telephone you shortly as
1 would 18hm to ett deen with you and have a
good bears to beart Ball.
Yours sincerely.
Mr. George 3. Pasters,
1040 see Street,
D. .
350
FROM: MR. GASTON'S OFFICE
December 5, 1939.
TO:
Secretary Morgenthau
Mr. Cairns called Mr. Berle at the State
Department at 10:15 this morning and read him
the informal opinion addressed to you and
signed by Kemp, holding that we were justified
on the basis of the facts as now known to us,
in detaining the remainder of the vessels
transferred to the French Line. Berle said
that he agreed entirely with this opinion.
Cairns then asked if Berle thought this a
sufficient basis for the State Department to
take up the matter with the French Embassy.
Berle said it was sufficient and that if
Cairns would send him a copy he would take
it up with the French immediately. Cairns
has sent a copy over to him.
us
28(f)
FEDERAL RESERVE BANK
OF NEW YORK
OFFICE CORRESPONDENCE
CONFIDENTIAL FILES
FROM
L. W. Knoke
DATE December 5, 1939.
SUBJECT TELEPHONE CONVERSATION WITH
BANK OF FRANCE.
351
Mr. Carigual called at 11:25 a.s. with reference to
our telephone conversation yesterday. It was Governor Fournier's
wish, he said, that the gold be melted and earmarked for account
of the Bank of France. I replied that melting before earmarking
was unnecessary, that it would cause expenses which might well be
avoided and that we could readily earmark the gold taking the gross
weight as established by us with a notation "said to contain
fine ounces". In other words, there would be no melting new, but
only later on, if and when the gold is sold to the Assay Office.
Mr. Cariguel replied that that would be satisfactory. When the
gold would be offered for sale he did not know. The earmark should
be effected for account 8.
I told Cariguel that the weight list was on the way to
New York from Montreal; that Mr. Roussesux was still up in Canada
but was expected in New York Thursday or Friday. Would I please
try to locate Mr. Rousseuax in Canada and have him informed that
he was not to come back to Europe nor to send back to Europe any
of his associates without first telephoning to the Bank of France
and that he was to telephone Paris when he came to New York.
LIKIKN
B16226
give Purms
the
coff:
December 5,1939.
352
Notes on World Production of Molybdenum
and on Consumption by Certain Countries.
Production
The production of molybdenum for the year 1939, so far as can now
be estimated, will be approximately as follows (figures are in pounds
of molybdenum contained in all forms of molybdenum products):
U.S.A.
Climax Molybdenum Co.
Kennecott Copper Corp.
22,000,000
4,000,000
-
-
Molybdenum Corp. of America
Miscellaneous
-
600,000
200,000
26,800,000
Other Countries
Mexico
Norway
Morocco
1,000,000
1,000,000
-
-
-
Miscellaneous Total for the World -
300,000
100,000
2,400,000
29,200,000 lbs.
As indicated above, Climax accounts for about 75% of the world
production.
Because of business conditions Climax' production in 1939 will be
lower than it was in 1938. During recent weeks, however, Climax has
considerably increased its rate of production and at the moment is producing at the rate of approximately 28,000,000 lbs. per annum.
Kennecott's molybdenum is a by-product of copper in its Utah mine.
Its molybdenum production therefore varies according to its copper
production. Kennecott is known to have increased during the last few
weeks its rate of producing copper and, hence, molybdenum.
Russian Purchases
Climax made a contract in January 1939 with the USSR for the total
is Shipments against
Russian requirements of molybdenum forThe
theproduct
year 1939.
to most in the form of
this as contract European are almost buyers, completed. molybdenum shipped sulphide to concen- Russia,
trates. The requirements were estimated in the contract at 6200 metric
tons of concentrates, with the provision that if the USSR needed more
concentrates they would give Climax a chance to supply the same. They
353
-2-
did need more, so that the total shipments under the contract are estimated, instead of 6200 metric tons, at 8200 metric tons, equivalent to
approximately 9,700,000 lbs. of molybdenum contained.
The molybdenum concentrates are delivered to the Russians f.a.s.
New York or Baltimore, cash against railroad bill of lading. Climax
has nothing to do with the shipping arrangements beyond that.
The total estimated Russian purchases of molybdenum for the past
three years are as follows:
1937
1938
1939
-
-
-
6,700,000 lbs.
5,000,000 "
9,700,000 "
About a month ago Amtorg approached Climax regarding next year's
requirements. They intimated that they would want to make a contract
based on estimated requirements of 3000 tons for the year (which would
be less than 40% of what they took this year) but with a provision
similar to the one in the present contract whereby they might apply to
Climax for further quantities. The discussion on the contract for
1940 was general in nature and came to no conclusion. Nothing further
has been heard from Amtorg on the subject since then.
Under the contract the USSR guarantees not to re-export the
molybdenum products as such and promises to consume the molybdenum in
Russia. Naturally, Climax has no way of checking up as to the fulfillment of this guarantee once the material has been loaded on steamers
for Russia.
In view of Russia's large purchases this year it would seem likely
that she will begin 1940 with a large stock of molybdenum on hand.
Purchases by Certain Other Countries
Climax' sales to Germany, England, France and Japan
fordate)
the last
1939
(to
three years have been as follows (all in pounds
1938 of molybdenum contained):
1937
5,900,000
-
Germany
3,722,000
-
England
France
1,058,000
-
-
580,000
6,840,000
1,681,000
880,000
1,218,000
2,446,000
2,500,000
1,066,000
3,500,000
Japan
The consumers of the above countries, unlike Russia, make purchases
also from other producers than Climax. Since, however, Climax accounts
for 75% of the world production and since the other producers far off sell to part
of their molybdenum in the United States, it would be not countries
assume that the Climax sales to the four above mentioned
account for at least 75% of the total purchases of the said countries.
-3-
354
Sales to Japan are made through the leading Japanese export-import
houses. Deliveries to Japan, like those to Russia, are made f.a.s.
American ports, cash against railroad bill of lading. The Japanese
Lake a guarantee similar to the Russian that the molybdenum will not
be re-exported but will be consumed in Japan.
PLAIN
JR
355
London
Dated DECEMBER 5, 1939
Rec'd 12:18 p.m.
Secretary of State,
Washington.
2542, DECEMBER 5, 5 p.m.
FOR TREASURY.
1. with reference to the third paragraph of
No. 2532 of DECEMBER 4, the unemployment figures for
November 13 published today show a decrease in unemployment
since October 16 of 28,000, the chief improvement being
among women and girls accounting for two-thirds of the
decline. The net increase since the outbreak of war now
stands at 170,000. This is roughly Estimated to include
OVER 80,000 registering for work for the first time. The
improvements were well spread through most industries
EXCEPT for those seasonally slack at this time of the
year such as building, agriculture and tailoring. The
London area still shows an increase but the northern and
Eastern industrial areas show declines in unemployment.
The month's decrease of 28,000 in the total is contary to
a usual seasonal increase of about 20,000. Nevertheless
after allowance is made for persons absorbed into the
armed force3 it SEEMS probable that actual Employment
must be considerably less than before the outbreak of war
though
-2- #2542, December 5, 5 p.m., from London.
356
though in SOME branches longer hours are doubtless
prevailing. In spite of the turn in the trend the press
generally cites the unemployment figures as another
reason strengthening the already strong case for an
Economic general staff and a revision of the Economic
coordination machinery.
2. Orders for SEVER:1 million OUNCES of silver
WERE received in London again yesterday and though London
brokers were unwilling to accept them in full a fairly
large business was done at 23 1/2d. Spot and a small
amount for forward at 23 11/16d, the Indian Government
being prepared to sell at the 23 1/2d. Price for delivery
at the Bombay mint. Today's fixing price Eased to 23 3/8d.
spot and 23 9/16d. forward, and the turnover was very
small, buying from India having practically CEASED there
being only small local London speculative buying today.
3. Exchange rates officially fixed have remained
unchanged since telegram No. 2518 of DECEMBER 1, 7 p.m.,
Finnmarks were quoted 205 to 230 sellers today.
JOHNSON
WWC
030
December 5, 1939.
357
Dear Mr. Keeshins
This will acknowledge your letter of
December 4th, which forwarded to the Secretary
a number of copies of reports received from
Mr. M. E. Sheahan. We are glad to have the
information that they contained.
Sincerely yours,
(Signed) H. S. Klotz
H. S. Klots,
Private Secretary.
Mr. J. I., Keeshin,
President, Keeshin Freight Lines, Inc.,
221 West Roosevelt Read,
Chicago, Illinois.
GEF/dbs
pls add
for Htll
/
KEESHIN FREIGHT Lines, INC.
J
KEESHIN
221 WEST ROOSEVELT ROAD
CHICAGO
RESIDENT
358
December 4th, 1939.
The Honorable Henry J. Morgenthau, Jr.,
Secretary of the Treasury,
Treasury Building,
Washington, D.C.
My dear Secretary:-
I am enclosing herewith copies of original
reports received from Mr. M. E. Sheahan, concerning
the details and outline of the re-organization plans
for the transportation companies in China.
These are forwarded you for your information
and I believe you will find them interesting and also
indicating progress along the desired lines.
Yours very truly,
J.L. Keeshin.
JLK-O.
Encls.
CITY
Piking
BEDI e 030
to
activities
C
359
c/o Ministry of Communications
Chungking, China
November 18, 1939
Kr. K. P. Chen,
Universal Trading Corporation
630, 5th Avenue
New York City, New York
U. S. A.
Dear Mr. Chen,
With further reference to the proposed amalgamation of
various transporting agencies of the Civil Government and Foo
Shing Trading Corporation (Transportation Department) into a new
corporation. The various phases of a merger of the magnitude
contemplated have been given due consideration by ourselves in
drafting suggested agreements and in conference with the various
representatives of the Civil Government as well as the staff of
200 Shing Trading Corporation in China. You may be assured that
it all times we have had in mind your final instructions in our
last discussion prior to our departure from Chicago.
There is enclosed the following documents Numbers 3 to 6
in both Chinese and English;
1. Draft of Agreement concerning transfer of Foo Shing's
transportation assets to the China Transport
Corporation in exchange for capital stock of the
latter company,
2. Draft of Agreement containing China transport Corporation's guarantee to Export-Import Bank of Washington
through Foo Shing and Universal Trading Corporation
of an equivalent capacity to Foo Shing's trucks,
3. Proposed articles of organization of the China Transport
Corporation,
4. Proposed articles of incorporation of the China
Transport Corporation,
5. Proposed rules and regulations of the China Transport
Corporation,
6. Organization ohart of the new corporation,
2
360
with particular reference to the proposed corporation and the
participation therein by the Foo Shing Trading Corporation; the
enclosed documents bear corrections, to and including a conference
between Foo Shing's representatives and ourselves on November 13th.
The drafts of Agreements should not be considered a finished
product as they represent in the briefest form the "meat" of the
intent of the parties and do not include the legal terminology
and protective devises customarily found in contracts of this
nature and embracing as they do extensive operations and properties.
They are in fact a draft of essential points to be agreed upon
after which they should be turned over to competent counsel for
such necessary elaborations as will afford protection to the parties.
In your review of the enclosures you will perceive many
differences in these proposals over customary Chinese procedure,
primarily in simplification, the selection of personnel and our
studied effort to construct the new corporation on a solid base.
This departure from customary procedure while apparently meeting
with the approval of National Government officials with whom I
have discussed the matter presents a managerial task of no small
proportions and even though the properties are for all intents
and purposes the properties of the National Government we were
most anxious to avoid any semblance of partisanship as between
the various divisions within the Government.
Uppermost in mind in all plans and negotiations leading
towards the formation of the new corporation has been the welfare
and particularly the maintenance of China's credit, which can best
be assured through the smooth flow of necessary quantities of
export matter. The continual shifting of the fortunes of war,
in our opinion, require extreme flexibility and freedom of action
without regard to the individual but to the nation as a whole.
Under such circumstances competition between the various branches
of the Civil Government result in economic waste and the sacrifice
of individual ambitions are sometimes necessary in the public
interest, this we have borne in mind at all times.
A word with respect to the Rules and Regulations, Articles
of Organization and Articles of Incorporation might not be amiss.
The Rules and Regulations and particularly Chapter 4 from Article
16 to 24 inclusive set forth very briefly the duties and functions
of various officials.
You will note that it is proposed to operate via highway,
railroad, water or air which accounts for the absence of reference
to purely highway transport. You will also note in Chapter
Articles 25 to 28 that the policy of the corporation is to
predicate the employment of personnel strictly in a businesslike
5
3
361
may
are
and
special position ahead. Salaries in excess of
way and in consideration of fitness and ability only and that
the salaries of positions are to be fixed and the line of succession
through which training promotions for the be secured through seniority
nominal amounts as outlined in Article 28 can only be arranged
through the Board of Directors. While the Board of Directors are
scheduled to meet quarter-annually there is nothing in their
charge to prohibit the organization of a committee within the
Board to pass upon these matters.
In Article 30 of Chapter 6 a definite limitation of
single project expenditures are placed in direct ratio to the
responsibility of the various officials. The retention of a
reasonable proportion of earned surplus is contemplated in
Article 36 this we believe is quite important particularly
under present conditions of fluctuating exchange and prices and
to provide a "backlog" against possible calamititous visitations
or other emergencies.
We anticipate the early translation and adoption of the
United States Interstate Commerce Commissions uniform system of
accounts for highway carriers. We believe through the use of this
system of accounts that it will be possible to secure adequate
control of the various departments and obtain a "yard stick"
for measuring their efficiency. The Articles of Incorporation
and the Articles of Organization while brief are self=explanatory.
In the preparation of all these documents they were first
drafted in English and translated to the Chinese and again
translated back to English with necessary modifications to
accommodate Chinese characters, such precautions should assure
a complete understanding on the part of all concerned.
It is the concensus here that the present is an excellent
time to inaugurate the new corporation for the reason that the
essential discussion period resulted in a considerable cross
current of information both good and bad. This spreading of
rumours and uncertainties has to a certain extent permeated
various transport organizations and a clear decision at an early
date one way or the other will permit either a resumption of
normal operations or the quick commencement of operation by the
new corporation.
362
Trusting the foregoing together with the attachments
will give you sufficient information upon which to base a
decision and that your decision can be made at an early date
in order that
necessary,
andwe will not delay action any further than absolutely
With kindest regards, I remain,
Sincerely,
(Signed) M. E. Sheahan
C.C. H. E. Dr. H. H. Kung
H. E. Minister Chang Kia-Ngau
Mr. J. L. Keeshin
363
Draft of an Agreement between the Foo Shing Trading
Corporation and the China Transport Corporation
THIS AGREEMENT dated this
day of
by and between
FOO SHING TRADING CORPORATION, hereinafter referred to as Foo Shing,
and the CHINA TRANSPORT CORPORATION, hereinafter referred to as the
Transport Corporation, sets forth the understanding between the
Parties with respect to the acquisition by the Transport Corporation
from Foo Shing of its properties used in conducting transportation
and the operations to be conducted by the Transport Corporation
of properties consisting of a fleet of automotive equipment,
leaseholds, land and buildings and appurtenances thereto belonging
together with machinery and tools, and all materials and supplies
on hand or under order to be used in connection with the operation
of the properties, a descriptive list and agreed values are
included and identified as Foo Shing's properties in the list
attached hereto and marked Exhibit "A" and the Parties hereto
represent that all of the items included in Exhibit "A" are
presently owned in fee simple.
In furtherance of a general plan to aid the National Government of the Republic of China in having the benefit of a more
economical unit of transport and in furtherance of the Government's
foreign trade, and for the general welfare of the nation, Foo Shing
agrees to turn over to the Transport Corporation all of its
properties enumerated amongst others in Exhibit "A", and
WHEREAS the values of the properties set forth in Exhibit "A"
are agreed to between the Parties as correctly representing the
value thereof, and
2
364
WHEREAS it is the desire of the Parties that the Transport
Corporation shall operate the properties enumerated in Exhibit "A",
maintaining such properties in good mechanical repair, ordinary
wear and tear excepted, now
I
THEREFORE, as a condition of such transfer of properties by
Foo Shing to the Transport Corporation, Foo Shing reserves the
right within sixty days from due notice given the Transport Corporation to withdraw from this arrangement by returning the capital
stock issued as herein contemplated or such portion thereof that
represents the values of properties withdrawn as set forth in
Exhibit "A" hereof, ordinary wear and tear excepted, provided further
that should any dispute arise with respect to such withdrawal or in
connection with any part of this Agreement, such dispute shall be
referred to an Arbitration Committee comprised of five members, two
of which members shall be selected by Foo Shing and two by the
Transport Corporation the fifth member to be selected by the four
members so selected, should the four members be unable to decide
upon the fifth member, he shall be selected by the President of the
Executive Yuan of the National Government of the Republic of China.
The decision of the Arbitration Committee shall be final and binding
upon the Parties hereto, and
II
Foo Shing is desirous of utilizing the facilities of the
Transport Corporation for the transportation of its own or controlled
cargoes, and
III
As payment in full to Foo Shing by the Transport Corporation
3
365
for such of the properties enumerated in Exhibit "A" as are owned
by Foo Shing, the Transport Corporation shall issue shares of its
capital stock of a value equivalent to the agreed value of the
property of Foo Shing, with the understanding that the issuance of
shares of stock of the Transport Corporation to other parties shall
be on a similar agreed or replacement value basis for property and
cash essential to the satisfactory conduct of transportation by the
Transport Corporation, and
IV
Upon receipt of such capital stock so issued by the Transport
Corporation, Foo Shing shall by a separate instrument transfer and
convey unto the Transport Corporation all its right, title, and
interest to such property so transferred, and
WHEREAS this Agreement sets forth fully the understanding
between the Parties;
IN WITNESS WHEREOF the Parties hereto set their hands and
seals in the City of Chungking, Province of Szechwan, in the
Republic of China this
day of -----
Attest
Seal
Secretary
Seal
Secretary
Chungking
Nov. 15, 1939
Foo Shing Trading Corporation
China Transport Corporation
366
Draft of an Agreement between the Foo Shing Trading
Corporation and the China Transport Corporation
THIS AGREEMENT dated this
day of
by and between
FOO SHING TRADING CORPORATION, (China), hereinafter referred to as
Foo Shing, and the CHINA TRANSPORT CORPORATION, (China), hereinafter
referred to as the Transport Corporation, sets forth the understanding
between the Parties with respect to guarantee by the Transport Corporation to Foo Shing of the fulfilment of Foo Shing's obligation through
the Universal Trading Corporation (USA) to the Export-Import Bank of
Washington (USA), all as contained in Article 9 of that certain
Agreement between Foo Shing and the Universal Trading Corporation,
a copy of which Article 9 is attached hereto and marked Exhibit
"A", and
WHEREAS in furtherance of a general plan to aid the National
Government of the Republic of China in having the benefit of a
more economical unit of transport and in furtherance of the
Government's foreign trade and for the general welfare of the
nation, the Transport Corporation undertakes to supply the transportation needs of Foo Shing amongst others, and
WHEREAS Foo Shing has heretofore entered into an agreement
with the Transport Corporation covering the operation by the
Transport Corporation of automotive and other equipment, and
WHEREAS Foo Shing is obligated by that certain Agreement,
Article 9 of which is concerned herewith and marked Exhibit "A", and
WHEREAS it is the desire of the Parties that the obligation
of Foo Shing be assumed and guaranteed by the Transport Corporation,
now
2
367
THEREFORE the Transport Corporation represents anu agrees to
guarantee to Foo Shing that it will at all times make available for
the transportation requirements of Foo Shing at all reasonable times
and at such points and over such routes as can be traversed with
reasonable safety and when notified sufficiently in advance to
permit the economical adjustment of the balance of its traffic,
trucks of an equivalent capacity to the 1,000 (21-ton capacity)
truck commitment of Foo Shing as set forth in Exhibit "A" attached,
and the Transport Corporation further agrees to at ail times own
and operate a minimum of 1000 trucks of American manufacture and
of a minimum of two and one-half (2) ton capacity.
This Agreement shall become effective on the date of its
signing and shall remain in effect until December 31, 1943, and shall
continue thereafter until Foo Shing and the Universal Trading Corporation shall have discharged their obligations under the Agreement,
an excerpt of which is included in Exhibit "A" hereof.
IN WITNESS WHEREOF the Parties hereto set their hands and
seals in the City of Chungking, Province of Szechwan, in the
Republic of China this
day of -
Attest
Seal
Secretary
Seal
Secretary
Chungking
Nov. 15, 1939
Foo Shing Trading Corporation
China Transport Corporation
Board of Directors
of the China Transport Corporation
368
Articles of Organization
Article 1. The present Articles of Organization are drawn up in
accordance with the stipulations of Article 11 of the
Articles of Incorporation of the China Transport
Corporation Limited.
Article 2. The functions of the Board of Directors shall be:
(1) To approve all plans and budgets relating to the
operation of the Corporation.
(2) To approve all Contracts, Leases and Agreements
relating to the operation of the Corporation.
(3) To approve and promulgate important rules and
regulations.
(4) To make arrangements concerning the financing of
the Corporation.
(5) To decide on distribution of earned profit.
(6) To approve all disbursements in excess of five
thousand dollars ($5,000) for single projects.
(7) To decide on matters relating to the appointment
and dismissal of senior officers above the rank
of Assistant Superintendents.
(8) To approve the salaries of all officers and
officials whose duties require special fitness and
determination of policies.
(9) To study and consider all reports of the Corporation.
(10) To approve all other important matters of the
Corporation.
Article 3. Regular meetings of the Board shall be held every three
months. Special meetings may be convened by order of
the Chairman or motion of not less than two thirds of
the members.
Article 4. The Chairman of the Board of Directors shall preside
at the meetings of the Board. In the absence of the
2
369
Chairman at such meetings, he shall nominate one of
the Directors to preside on his behalf.
Article 5. No meeting of the Board of Directors shall be held without a majority attendance; and no resolutions should
be passed without such resolutions being agreed to by
more than 2/3 of those in attendance.
Article 6. Directors shall serve for a term of three years, and
shall be eligible for re-election.
Article 7. The Corporation shall have one Managing Director who
shall be appointed by the Board of Directors from among
its members and he shall be responsible to the Board
for his conduct and administration of all the affairs
of the Corporation.
Article 8. Under the Managing Director, there shall be a
secretary and necessary assistants to handle confidential
matters which may be assigned to them by the Managing
Director, to keep minutes of the meetings of the Board
of Directors, and to serve all necessary notices.
Article 9. All matters to be submitted to the Board of Directors
for consideration shall first be compiled into an
agenda to be prepared by the Managing Director and
the secretaries.
Article 10. The present articles of organization shall become
effective on the day of their promulgation.
Chungking
Nov. 15, 1939
CHINA TRANSPORT CORPORATION
(Articles of Incorporation)
370
1. The China Transport Corporation shall be a special charter
company to be organised by special action of the Executive Yuan
with the approval of the National Government.
2. The functions of the Corporation shall be:
a. To
operate railroad,
freight, passenger
and express service via
highway,
water or air.
b. To manufacture and assemble automotive or self-propelled
vehicles, and animal or human drawn vehicles.
C. To
manufacture or assemble, store and disburse materials
and supplies.
d. To own, lease or hire land and/or buildings and appurtenances
thereto belonging.
e. To transport postal matters.
f. To construct and operate comfort and rest stations for the
convenience of the travelling public and operating personnel.
g. To invest and hold in its name securities of other companies
engaged in transportation.
h. To undertake any or all things pertaining to the conduct
of transportation of passengers, freight and express service
by highway, railroad, water and air.
3. The charter of the Corporation shall be for a period of 30 years
subject to renewal by approval of the National Government.
4. The total capitalization of the Corporation shall be $100,000,000
Chinese National Currency divided into 100,000 shares of $1,000.
each, to be subscribed and paid for in cash or equivalent values.
5. The shares of the Corporation shall not be transferable unless
with the special permission of the National Government.
6. The Corporation with the approval of the Executive Yuan may
contract foreign loans.
2
371
7. The Corporation shall have a Board of Directors composed of
from five to eleven directors to be restricted to five (5)
in number upon the inception of the Corporation, two (2)
directors to be selected by Foo Shing and three (3) by the
Ministry of Communications. The Managing Director shall be
the ex-officio member of the Board.
8. The Chairman of the Board of Directors shall be elected from
among its members.
9. The Corporation shall have a Managing Director to be appointed
by the Board of Directors and, when considered necessary, the
Board may appoint properly qualified Assistants.
10. The Corporation shall be registered at the Ministry of Communications and the Ministry of Economic Affairs.
11. The by-laws and regulations of the Corporation shall be passed
by the Board of Directors subject to the approval of the
Ministry of Communications.
12. The present articles of incorporation shall become effective
on the day of their promulgation.
Chungking
Nov. 15, 1939
(Original in Chinese)
CHINA TRANSPORT CORPORATION (SPECIAL CHARTER), LTD.
372
Rules and Regulations
Chapter One
General Provisions
Article 1. The China Transport Corporation to be known in the
abbreviated form as C.T.C. and hereinafter referred to
as the Corporation shall be organized by resolution of
the Executive Yuan with a Special Charter sanctioned
by the National Government of the Republic of China.
Article 2. The functions of the Corporation shall be:
a. To operate freight, passenger and express service
via highway, railroad, water or air.
b. To manufacture and assemble automotive or selfpropelled vehicles, and animal or human drawn
vehicles.
C. To manufacture or assemble, store and disburse
materials and supplies.
d. To own, lease or hire land and/or buildings and
appurtenances thereto belonging.
e.
To transport postal matters.
f. To construct and operate comfort and rest stations
for the convenience of the travelling public and
operating personnel.
g. To invest and hold in its name securities of other
companies engaged in transportation.
h. To undertake any or all things pertaining to the
conduct of transportation of passengers, freight
and express service by highway, railroad, water
and air.
2
373
Article 3. The oharter of the Corporation shall be for a period of
thirty (30) years and may be renewed by approval of the
Executive Yuan and the National Government.
Article 4. The Head Office of the Corporation shall be located at
Chungking, Szechwan, but may be removed to other locali-
ties as the Board of Directors may from time to time
direct.
Article 5. In serving public notices of the Corporation, newspaper
advertisements shall be considered as the primary medium.
Whenever expedient, such notification may be served by
mail.
Chapter Two
Capital
Article 6. The total capitalization of the Corporation shall be
$100,000,000 Chinese National Currency divided into
100,000 shares of $1,000. each, to be subscribed and
paid for in cash or equivalent values.
The capitalization of the Corporation shall not be
altered without a proper qualifying resolution of the
Board of Directors.
Article 7. The shares of the Corporation shall be numbered, and
shall bear the official seal of the Corporation and the
signatures of five members of the Board of Directors.
Article 8. The shares of the Corporation shall not be transferable
without the special approval of the National Government.
3
374
Article 9. The Corporation with the approval of the Executive Yuan
may contract foreign loans.
Chapter Three
Organization
Article 10. The Corporation shall have a Board of Directors composed
of from five to elewen members, restricted to five (5)
in number upon the inception of the Corporation, two (2)
Directors to be selected by Foo Shing and three (3) by
the Minister of Communications, who shall select from
among themselves a Chairman. The Board of Directors
shall be the highest supervisory and administrative
organ in the Corporation.
Article 11. The Corporation shall have one Managing Director to be
appointed by the Board of Directors from among its
members, and such Assistants as may from time to time
be appointed by the said Board of Directors.
Article 12. The Corporation shall have under the Managing Director
a secretary and necessary assistants.
Article 13. Under the Managing Director there shall be namely,
(1) an Operating Department, (2) a Traffic Department,
and (3) a Controller's Department, headed by a General
Superintendent, a Traffic Manager and a Controller
respectively. Whenever necessary, the said officers
may have one to two deputies to assist them in the
performance of their duties.
4
375
Article 14. Under the Operating Department there shall be the four
divisions of Maintenance; Transportation; Stations and
Terminals; and, Purchasing and Stores. Under the Traffic
Department, divisions may also be established. Each
division in the Operating Department shall have one
superintendent to be assisted whenever necessary by
Assistant Superintendents. In the Controller's
Department there shall be a Supervisor of Safety and
Insurance, a General Auditor, Treasurer, and an
Auditor of Disbursements and Auditor of Receipts under
the General Auditor. Sub-divisions or sections may be
established under each of the said Divisions in
accordance with the requirements of their respective
functions.
Article 15. The Managing Director and Officers referred to in Articles
13 and 14 shall appoint or hire the necessary number of
qualified staff members or employees to assure proper
and efficient operation of the Corporation.
Chapter Four
Duties and Functions
Article 16. The Managing Director of the Corporation shall be responsible for the administration and operation of the Gorporation, and to execute such resolutions as may be
passed by the Board of Directors. The Managing Director
shall be assisted in the discharge of his duties whenever
5
376
considered necessary by duly qualified Assistants.
Article 17. The Secretary of the Managing Director shall carry out
such confidential assignments as may be assigned to him
by the Managing Director; and shall keep records and
attend to the secretarial duties of the Board of
Directors.
Article 18. The General Superintendent shall report to the Managing
Director and be charged with the following duties:
1. To direct the Operating Department and its personnel.
2. To initiate measures towards the more economical
conduct of transportation in conjunction with
other officers of the Corporation.
3. To inaugurate proper preventive maintenance program
and a plan of general overhaul, repairs, and remanu-
facturing to ensure continuity of operation of all
properties of the Corporation.
4. To direct all transportation functions and be
responsible for the operation of all Corporation
properties.
5. To plan and allocate available equipment to needed
tonnage and other traffic requirements of the
various government departments in cooperation with
the Traffic Manager.
6. To perform such other duties as may be assigned by
the Managing Director.
Article 19. The Superintendent of Maintenance shall report to the
General Superintendent and be charged with the following
duties:
1. To direct the operation of the division and its
personnel.
2. To supervise and direct all maintenance functions
and be responsible for proper maintenance and
repairs of all the properties of the Corporation,
ensuring continuity of operations.
6
377
3. To initiate measures towards the more economical
conduct of transportation and to allocate equipment
best suited for the type of terrain, and lading,
over routes where traffic is intended, in
cooperation with the Superintendent of Transportation
and other officers of the Corporation.
4. To enforce disciplinary action in cooperation with
other officers of the Corporation of personnel
improperly handling the Corporation's properties.
5. To perform such other duties as may be assigned
by the General Superintendent.
Article 20. The Superintendent of Transportation shall report to
the General Superintendent and be charged with the
following duties:
1. To direct the operation of the division and its
personnel.
2. To be responsible for the physical operations of
the Corporation's properties.
3. To work out schedules of allocation of equipment
and personnel in cooperation with other officers
of the Corporation to the end of.effecting a more
economical conduct of transportation and smooth
running operation.
To keep the General Superintendent, Controller and
Managing Director informed at all times of accidents
involving damage to the Corporation's properties,
and estimate of the damage to others and of the
disciplinary action taken against offending personnel.
5. To inform the General Superintendent and the Managing
Director of the status of available equipment
4.
together with his recommendations approved by the
Superintendent of Maintenance for needed replacement
equipment.
6. To perform such other duties as may be assigned
by the General Superintendent.
Article 21. The Superintendent of Stations and Terminals shall report
to the General Superintendent and be charged with the
following duties:
7
378
1. To
direct the operation of the Division and its
personnel.
2. To conduct transportation business at all stations
and terminals; to cooperate fully with the Controller,
Traffic Manager and other department heads concerned
to the end that a dependable and courteous service
may be rendered to the travelling and shipping
public; and to initiate measures leading towards
the more efficient conduct of transportation.
3. To select competent personnel after a study into the
requirements of the travelling and shipping public
and the rules and regulations released by the
several departments and reports incident thereto.
4. To investigate into the competency of the personnel
in the discharge of their duties to the end that
the dependable and courteous service to which the
travelling and shipping public is entitled, shall
result.
5. To perform such other duties as may be assigned by
the General Superintendent.
Article 22. The Superintendent of Purchasing and Stores shall report
to the General Superintendent and be charged with the
following duties:
1. To direct the operation of the Division and its
personnel.
2. To procure and distribute in accordance with the
requirements of other departments, all necessary
materials and supplies, machinery and tools,
instruments, furnitures and stationeries.
3. To maintain at all times as low an inventory as
would be reasonable for the supply of practical
requirements.
4.
To maintain proper and adequate records of materials
and supplies under his direction.
5. To study the kind, price, and service value of such
supplies required to the end that a sufficient and
well balanced stock may be maintained.
8
379
6. To procure supplies of the standard and quality
requisitioned by other department and division
heads; no supplies below such standards shall be
procured without the prior consent of the department
or division heads and the approval of the General
Superintendent or Managing Director in the order
named in event of disputes.
7. To specify procedures relating to the purchase,
transportation, storage, delivery and acceptance
of materials and supplies.
8. To perform such other duties as may be assigned
by the General Superintendent.
Article 23. The Traffic Manager shall report to the Managing Director
and be charged with the following duties:
1. To direct the operation of the department and its
personnel.
2. To direct the preparation of all rates and tariffs
governing the transportation of passengers, freight
and express.
3. To arrange and undertake transportation of mail
matters, and effect all contractual arrangements
with government and commercial agencies.
4. To keep informed at all times in conjunction with
the Controller and General Superintendent of all
expenses of operation, current transport requirements, and the future tendencies thereof, to the
end that references may be had for the preparation
5.
of tariff rates and the formulation of business
policies.
To prepare a uniform classification of freight and
express commodities.
6.
To act as a liason officer of transportation between
the Corporation and the departments of the National
Government.
7. To perform such other duties as may be assigned
by the Managing Director.
Article 24. The Controller shall report to the Managing Director
and be charged with the following duties.
9
380
1.
To
direct the operation of the department and its
personnel.
2. To act as the dustodian of the funds of the Corporation,
and to direct all receipts and disbursements
thereof.
3. To prepare monthly and yearly reports of the current
finances and operating expenses of the Corporation.
4. To be responsible at all times for the insurance of
the properties of the Corporation, and to assure the
safety of personnel, cargo, passengers, mail and
express entrusted thereto.
5. To introduce safety measures and initiate steps
leading towards a more economical conduct of transportation.
6. To prescribe or approve all forms, reports, and
accounting procedures.
7. To devise statistical systems and prepare analyses
of the accounts of the Corporation, to the end that
a clear review of the financial status thereof may
be set forth.
8. To perform such other duties as may be assigned by
the Managing Director.
Chapter Five
Personnel
Article 25. All officers and officials whose duties require special
fitness and determination of policies shall be appointed
and dismissed in accordance with individual contractual
provisions. Any officer of the Corporation may hold one
or more positions subject to the approval of the Board of
Directors.
Article 26. The appointment or employment of all officers and employees
of the Corporation shall be predicated on fitness and
ability only.
Article 27. The fixing of salaries of all staff employees positions
10
381
2
shall be under the direction of the respective department
and division heads of the Corporation and subject to the
final approval of the Managing Director. The appointment,
dismissal, transfer and discipline of staff employees
shall be under the direction of the respective
department and division heads.
Article 28. Salaries of employees under the heads of divisions in
excess of $500 per month; under the heads of Departments
in excess of $450 per month and under the Managing
Director in excess of $600 per month shall be fixed
by the Board of Directors.
Chapter Six
Accounting Provisions
Article 29. All disbursements of the Corporation except such
expenditures from Imprest funds (as may be established
from time to time by the Controller, and in no event
shall individual Imprest funds exceed $500) shall be
evidenced by vouchers approved and signed by duly
designated officials or employes of the Controller's
Department.
Article 30. No paying orders issued by the heads of divisions in
excess of $500 shall be valid unless approved by the
General Superintendent or Managing Director, and by
the heads of departments in excess of $1000 unless
approved by the Managing Director, and by the Managing
Director in excess of $5000 unless approved by the Board
11
382
of Directors. The aforementioned limitations are
maximum amounts and are for complete projects and no
parcelling will be permitted to bring larger projects,
piece-meal within these limitations.
Article 31. Funds of the Corporation shall be deposited only in
such banks as may be approved by the Board of Directors.
Article 32. Checks shall be used for all payments of the Corporation
with the exception of Imprest funds from which emergency
payments are to be made and as established from time to
time and as authorized by the Controller.
Chapter Seven
Closing of Books
Article 33. The fiscal year of the Corporation shall start on
January 1st and end on December 31st. The books of
the Corporation shall be closed at the end of each
calender month and at the end of December, the latter
represents the final annual closing of the Corporation's
accounts. It is to be understood that the monthly
closing shall involve only the taking off and proof
of a trial balance and recordation of such proven
results of operation and current status of the
Corporation's finances and affairs.
Article 34. In addition to the closings aforementioned, there
shall be two estimates of Cash Receipts and Disburse-
ments made, one at the end of April and the other at
the end of October each to forecast the period to the
12
383
next forecast.
Article 35. At the end of the fiscal year, the Managing Director
shall prepare the following statements, and report same
to the Chairman of the Board of Directors for trans-
mittal and final approval by the Board.
1. Report on the year's Operations.
2. Balance Sheet.
3. Inventory of Corporation's Assets.
4. Profit and Loss Statement.
The foregoing statements upon the approval of the Board
of Directors of the Corporation shall be printed in
appropriate forms and submitted to the Ministry of
Communications and the Executive Yuan.
Article 36. Net profits of the Corporation, if any, shall be distributed in the following order: (a) 10% of the profits
shall remain in the earned surplus account, (b) Such
other appropriations as may be resolved by the Board
of Directors. (c) The balance shall be paid out as
dividends on stock outstanding.
Should a loss be sustained at the end of the fiscal
year, the Corporation may petition the National Treasury
for a reimbursement or subsidy.
Chapter Eight
Miscellaneous
Article 37. The Corporation shall be registered at the Ministry of
Communications and the Ministry of Economic Affairs.
13
384
Article 38. Additions to or amendments of the by-laws, rules and
regulations of the Corporation shall be submitted to
the Board of Directors for their approval.
Article 39. These articles shall become effective as of the date
of approval by the Ministry of Communications.
Amendments thereto may be effected by resolution of
the Board of Directors with the approval of the said
Ministry.
Article 40 The provisions of the Chinese Company Law shall apply
to all omissions as may be found in the present articles.
Chungking
Nov. 15, 1939
Nov. 15, 1939
Chungking
Disbursements
Receipts
of
O
or
Auditor
Auditor
CO
3
Stores
and Insurance
Treasurer
Auditor
General
of Safety
Supervisor
Purchasing and
of
Superintendent
Terminals
Stations and Transportation
of
of
Superintendent Superintendent
Maintenance
of
Superintendent
Superintendent
Controller
Controller's Dept,
General
Traffic Manager
Operating Dept.
Traffic Dept
Secretary
Managing Director
Board of Directors
CORPORATION
CHINA TRANSPORT
Organisation Chart
U
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON
386
LEO T. CROWLEY
CHAIRMAN
December 5, 1939.
My dear Mr. Secretary:
Yesterday afternoon I was called to
the White House for a conference with the President. We now have a mutual understanding regard-
ing my future, namely, I have agreed to continue
as Chairman of the Federal Deposit Insurance Corpo-
ration until the problems now confronting us are
disposed of. I had intended discussing the matter
with you prior to seeing the President but I did
not have the opportunity.
With kindest regards, I am
Sincerely,
The Honorable
The Secretary of the Treasury
Washington, D. C.
387
December 5, 1939.
9:17 a.m.
Geo. 3.
Parker:
Very well, and you?
H.M.Jr:
I haven't had the nerve to call you up for a long time.
P:
H.M.Jr:
Well, I don't know why you should say you need nerve.
Well -
But nevertheless I'm glad to hear your voice.
P:
H.M.Jr:
I felt that while editorially we had drifted a little
bit apart.
Well, I don't know where, you drifted down to Texas
the last I traced you. Did you have. a good vacation?
P:
H.M.Jr:
Oh, wonderful. For six days I didn't listen to the
radio and I didn't talk on the telephone, I relied
entirely on the newspapers which were two or three days
old.
Well then that's a real vacation, I took one this summer
- by the way I pretty near crossed paths with you over
P:
there in the Baltic.
H.M.Jr:
Really.
P:
And what I did on my vacation was to read nothing.
H.M.Jr:
Oh I can't get along without the newspapers.
P:
Well, I - I did that, socially.
H.M.Jr:
Mr. Parkerwell I'm glad, you're feeling well then?
P:
Yes, I'm feeling very well thanks.
H.M.Jr:
I gave out something yesterday in the papers in regard
to munition contracts and I had a press conference, and
I went pretty far talking about war profits. I would
like to send you a transcript of my press conference,
plus the formal announcement you see.
P:
Yes.
H.M.Jr:
I don't know how much you're interested in limiting
profits of munitions. I'm very much interested. I
went pretty far in what I said.
-2-
388
I'd like very much to have that.
P:
H.M.Jr:
As far as I know I think I'm the first official in the
Government that has, well demonstrated in a practical
way that we don't want people to make anything above the
normal profit and that I personally don't, won't in any
way go against the intent of Congress in the VinsonTrammell Act, and if you read my press conference I think
P:
you'll see just how far I did go.
I'd like very much to have that.
H.M.Jr:
Now, how can I get it to you?
Well, suppose you just - if you've got a messenger
why don't you send it, I'm out home, I'm not at the
P:
office.
H.M.Jr:
P:
Supposing I send it out there with the messenger.
Yes, 1840 - 24th.
H.M.Jr:
1840 -
P:
24th Street.
H.M.Jr:
24th Street.
P:
North West.
H.M.Jr:
P:
I'll send it out there, and as I say I don't know how
you feel about it, but I think you'd be interested.
Well, I want to - I want to get into it. This particularly refers to the munitions.
H.M.Jr:
Yes. Munition contracts you see.
P:
Yes, well I -
H.M.Jr:
Right off, and if a man wanted to he could be - oh
give these fellows a break and I'm doing just the
opposite, I'm holding very strictly to the law and
as I say, I'm not going to let these fellows make
one penny more, and if I had my way I'd let them make
less.
P:
Huhhuh.
H.M.Jr:
And I think we've got - I mean I think the way, the
-3-
389
only way I know of, I didn't say this to keep us out of
war
is munitions.
to keep the fellows from making excess profits
out of
P:
Yes. At least that's one of the ways. Yes.
H.M.Jr:
Isn't that right?
I think so, that's been my idea. I think there's been kind of cockeyed on the idea of not - of just confis-
P:
well I think Nye for example and two or three others went
cating all profit.
H.M.Jr:
No, no. This permits a man -
P:
This 16 the same breed of cat that that was.
not
H.M.Jr:
Well like all of these things, if you're unreasonable
it falls by the wayside.
P:
That's right. Of its own way.
H.M.Jr:
If you're reasonable and these fellows are entitled
to twelve per cent profit on aeroplanes and aeroplane
parts, I think that's plenty.
of course it is.
P:
H.M.Jr:
And there's a novel thing that I did was that this
was the first contract we signed and I'm making it
public and every contract from now on is going to be
made public, and that's never been done before in the
history of the country.
P:
I'd very much like to have you send that out.
H.M.Jr:
I mean that's the novel part about it, the publicity.
P:
Yes. Now, Mr. Secretary here, whether - you made a
little crack there about drifting editorially apart.
On what - do what particular thing do you refer?
H.M.Jr:
P:
H.M.Jr:
Well, you - let's get together for lunch or some
evening, shall we?
Yes.
How's that?
-4
P:
H.M.Jr:
P:
390
Oh
that's
meant
it. all right. I just wondered whether they
Well I just had a little feeling but maybe I'm wrong.
But I'd love to sit down and talk to you.
Well, that's very nice of you, and I'd love to renew
acquaintance with you, sir. It's been quite a while
since we've been together.
H.M.Jr:
Well, I'll pick the
P:
Well thank you very much and you'll send that out
H.M.Jr:
O.K.
P:
O.K.
today then.
December 5, 1939.
11:17 a.m.
H.M.Jr:
391
he is that I can say yes or no.
-
Farley:
All right. Well I won't be down there for a couple of
days and I just wanted, I was talking to Bill
and I just called to inquire 1f you're protecting my
interests until I get back there.
H.M.Jr:
I always do.
F:
Well that's all right. I knew you did but I just
Jim
wanted to check in with you.
H.M.Jr:
Yes. What are your interests?
F:
Well I haven't any.
E.K.Jr:
(laughs)
F:
All right Henry, I'll see you when I get down there,
I just called you up to say hello, I didn't have a
damned thing on my mind to be honest about it.
H.M.Jr:
F:
H.M.Jr:
F:
I can still give you pigs knuckles and sauerkraut if
you'll eat them.
All right I'll eat it next week with you.
O.K.
Not this week but next week.
H.M.Jr:
All right.
F:
All right Henry, thanks.
H.M.Jr:
Thank you.
F:
Goodbye.
December 5, 1939.
12:17 p.m.
392
H.M.Jr:
Hello.
Operator:
The Cuban Ambassador is with Mr. Welles and he'd like
H.M.Jr:
That's
at home.all right. Tell him that he can call me up
to call you back when he's free.
0:
All right.
H.M.Jr:
I'm going home.
0:
Right.
December 5, 1939.
3:22 p.m.
Traphagen: Hello Mr. Secretary.
H.M.Jr:
This is Morgenthau.
How are you sir?
T:
H.M.Jr:
T:
H.M.Jr:
393
I'm fine. How are you?
I'm fine thanks.
Mr. Traphagen, Mr. Jesse Jones and Mr. Welles are here
with me.
T:
Yes.
H.M.Jr:
And some other gentlemen and we've been talking over
how to go forward from here in connection with
Colombia.
T:
Yes.
H.M.Jr:
And the gentlemen from Colombia is coming in here at
3:30 and before talking to him we wanted to tell you
approximately what we decided amonst the three of us.
T:
Yes.
H.M.Jr:
And that is this. What we'd like to say is this. In
the first place any negotiation that is going to be
carried on we feel that you made an excellent impression
when you came down here and we'd like you personally
to do the negotiations for the bond holders protective
committee.
T:
You'd like to encourage me to do it.
H.M.Jr:
Yes, very much. Individually.
T:
Yes.
H.M.Jr:
The thought that we had in mind was to say to the bond
holders protective committee which means Mr. T
and as far as we're concerned and to the representative
of Colombia that we suggest that the two of you get
together and see if you can't come to an agreement.
T:
Yes.
-2 H.M.Jr:
394
Either one, if either one of you after seeing each
other feel that you've come to an impasse you could
come and see Mr. Welles, Mr. Jones and myself.
T:
H.M.Jr:
T:
H.M.Jr:
Yes.
We hope that that will not be necessary but if either
one of you feel that you're too tough or not generous
enough we are available as a sort of a court of appeal.
Fine.
But we'd like to leave the negotiation in the hands of
this Jarmilo
his name.
T:
Mr. Jarmilo.
H.M.Jr:
And Mr. Traphagen.
T:
Yes.
H.M.Jr:
if that's the way you pronounce
And then we'd like both of you to keep us informed
as to what progress or what lack of progress you
make but put the thing in the hands of you two
gentlemen.
T:
H.M.Jr:
T:
H.M.Jr:
All right. I told you, Mr. Secretary, that I would do
anything I could to cooperate and I'll be very glad to
do this if you want me to do it.
Well all three of us would very much like to have you
do it individually.
All right.
Now -
H.M.Jr:
I take it that I could talk with you from time to time
about it.
You can talk - the three of us will be available at
T:
Yes.
H.M.Jr:
You can talk to the three of us. We thought - anytime
anything important comes up, if - you can either
T:
any time.
-3-
395
telephone, I can pass it on or better yet, if you'd
come down the three of us are available, we'd like to
hear from you.
T:
Very good.
H.M.Jr:
We'd like to hear from you.
T:
All
right, sir, I - I'll take it on, do the best I
can.
H.M.Jr:
We hope that you and Mr. Jarmilo could start at once.
T:
Fine. Now I wonder if he understands that I'm engaged
up here, trying to run a bank, and it's pretty hard
for me to get down to Washington too often. I'll be
glad to come down there as often as I can, but it takes
a whole day away from New York.
H.M.Jr:
T:
Well what would you like me to suggest to him?
Well I was wondering whether - I'd be very glad to come
down in the first instance and meet him.
H.M.Jr:
Yes.
T:
If he - if we could carry the negotiations on in New
York.
H.M.Jr:
Yes.
T:
From that point on. It'd be very much simpler for me.
H.M.Jr:
Well I will tell him that you'll be coming down here -
T:
I'll come down at - almost any time that suits him.
H.M.Jr:
Well supposing I ask him, that we arrange for the first
T:
Yes. Very good.
H.M.Jr:
Now would you - shall we say Thursday?
T:
in a day or two?
appointment.
Let me see - Thursday, yes. I could come down on
Thursday, or I could come down on Friday. Thursday
would be even better for me than Friday.
4-
396
Which -
H.M.Jr:
T:
I could come either day that suits him.
H.M.Jr:
Thursday or Friday.
T:
Yes.
H.M.Jr:
At the Colombian Embassy.
T:
Yes, I could meet him at the Colombian Embassy.
H.M.Jr:
Well I'll tell you what we'll do. He's coming in and
I'll ask him. Did I understand Thursday would be a
little bit better.
Thursday would be a little better for me but I can do
T:
it either day.
Well that's - and then after that I will tell him that
H.M.Jr:
if he could occasionally go up to New York, or be up
there as much as possible, it would help you earn your
salary as President of the bank.
All right. Fine.
Is that all right?
T:
H.M.Jr:
I don't think this negotiation is going to take very
long as a matter of fact.
T:
H.M.Jr:
:
T:
H.M.Jr:
T:
I don't see why, and you understand either side can
appeal to us three.
Very good. I think that's a very good idea.
Do you like this idea?
I think it's all right. I think it's fine. I think,
under the circumstances, that's a very wise way to
handle it.
H.M.Jr:
Fine, and we're putting our money on you.
T:
Very good.
H.M.Jr:
All right.
T:
Right, sir. Nice to have heard from you again.
H.M.Jr:
All right.
T:
Goodbye.
H.M.Jr:
Goodbye.
December 5, 1939.
4:20 p.m.
H.M.Jr:
Hello.
397
Operator: Mr. Edison. (to ahead.
H.M.Jr:
Hello.
Edison:
Hello Mr. Morgenthau.
H.M.Jr:
How are you?
E:
Well pretty good today.
H.M.Jr:
All right.
E:
Say, you remember we were talking at Cabinet the other
day, about the President saying he was going to crack
down on this arrangement that you made for closing on
some of these expenditures that were made by private
companies for claim facilities to make delivery dates.
H.M.Jr:
Yes.
E:
Well, I didn't get from you, from what you said whether
H.M.Jr:
No.
E:
What?
H.M.Jr:
No, and look if you're interested in this and got the
time, why I'd like to have you sit down with me and
we'll tell you just where we are and if you'd bring
some fellow along why I think it's worth all the time -
that was all off or not. I-
I'd be glad to give it all the time you want to give it.
E:
Yes. Well I'll tell you, I would like to get it
straightened out in my mind again. of course that
consolidated aircraft thing you know, that was a
different proposition. That's where the Government
was to advance the money to build these enlargements.
That isn't what I'm talking about at all. Well now
we have a specific case right here, I've been breaking
my neok well, for a long time to try to get these
small boats, you see, and we have a deal with the
Electric Boat Company and they will have to spend
about six hundred thousand dollars to fix that plant
to be able to make these boats in quantities, see?
And as I understand it, they've been over to the Treasury
--
398
and talked to some people over there and they say
yes, we'll make an arrangement with you but we'll have
to take about oh, two or three weeks or months to
look it over.
H.M.Jr:
Oh, no. Look bring anyone that you're interested
andcan
come
over here,
we
or cannot
do. and we'll explain to you just what
E:
Yes.
H.M.Jr:
When do you want to come?
E:
Well now, wait a minute. These gentlemen are here,
wait until I get in touch with them. Well how late
are you going to be there? Going to be there this
afternoon or tomorrow?
H.M.Jr:
No, we have - the tea to the Treasury is this afternoon.
E:
Oh I see.
H.M.Jr:
But tomorrow morning I can do it.
Tomorrow morning. Well now wait until I see how that
strikes them.
E:
H.V.Jr:
E:
H.M.Jr:
E:
Or tomorrow afternoon.
Well tomorrow morning would be all right.
How's about eleven o'clock?
You're not tied up with some picture making are you,
on some kind of
-
H.M.Jr:
No.
E:
Placque awards.
H.M.Jr:
No. No the President said he was going to handle that
himself. He wanted to do that.
H.M.Jr:
Well, eleven o'clock.
Eleven o'clock.
E:
That'11 be swell.
E:
-3H.M.Jr:
399
will you bring your people with you?
Yes. All right fine.
E:
H.M.Jr:
E:
H.M.Jr:
E:
H.M.Jr:
E:
H.M.Jr:
E:
H.M.Jr:
And
thing.I'll have the right people here that's on the same
Yes. All right. Well this is a specific case.
All right, you Perhaps if we talk about that why we'll clear up
the whole subject, don't you?
Yes, which case is it?
This electric boat.
Electric boat.
On the small boats, not submarines, but on small boats.
I know. Eleven o'clock tomorrow.
E:
All right, fine.
H.M.Jr:
Thank you.
E:
Goodbye.
400
GROUP MEETING
Present:
Mr. Graves
December 5, 1939.
9:30 a.m.
Mr. Bell
Mr. Haas
Mr. Cochran
Mr. Thompson
Mr. Cotton
Mr. Harris
Mr. Foley
Mr. Viner
Mr. Riefler
Mr. White
Mr. Gaston
Mr. Duffield
Mrs Klotz
H.M.Jr:
Herbert, how is your cold?
Gaston:
Oh, it is getting better.
H.M.Jr:
Are you going to be able to shake hands?
Gaston:
You bet, thank you.
H.M.Jr:
What else?
Gaston:
We grabbed this yawl, the Lekala, again.
H.M.Jr:
I read it last night.
Foley:
Cairns said so.
Gaston:
They are going to ask them to give a bond,
something that Justice should have done in the
first place.
On the other thing, Justice is waiting for some
assurances from us by which they could go to
the Department of State and ask them to take
the matter up with the French Government to find
out whether they were willing to give assurance
that these vessels are not to be used for any
military purpose, but they would like clearance
from us before doing that.
H.M.Jr:
To take it up with State?
Gaston:
Yes. They have decided that the correct procedure
401
2-
is first to have the State Department take up
the matter with the French Government officially
and ask them whether these vessels are to be
used for any military purpose. If the French
Government gives those assurances, then Justice
considers that the matter will be ended, but if
they will not give such assurance, then they
would
F.B.I. proceed with an investigation through the
H.M.Jr:
Well, let me explain to you why that seemingly
is unnecessary. Mr. Hull told me two things,
number one, that I could say that he and I
wanted an opinion from Justice. That is number
one. Number two, when they got the opinion,
that he felt it was up to them to inform the
French Embassy here and that he would see that
that was done. Now, I told that to Miss - either
to Miss Bumgardner or through - what is his name that we wanted that, on that basis, that Mr. Hull
and I wanted to be advised by Justice. It seems
to me that all this Alphonse and Gaston stuff is
ridiculous. Let them go ahead and do business;
let them inform Mr. Hull, and Mr. Hull knows what
to do. Why don't they just send over a copy of
the opinion to Mr. Hull? He has asked for it
through me.
Gaston:
Yes.
H.M.Jr:
I said, "Can I say that you and I want this," and
he said, "Yes."
Gaston:
They would take it up with the French after getting
H.M.Jr:
Yes, if they haven't already done so.
Bob Jackson signed that opinion last night when
he got back from court and I sent the letter out.
I also sent out the mimeographed drafts of the
Foley:
the opinion?
Giannini stuff to the lawyers.
H.M.Jr:
Good.
Foley:
I sent out the copy of the letter to Sam Clark
to Knollenberg and Greenbaum.
-3-
402
Bob Jackson's office has asked Phil Wenchel
if he would like to argue a case that we sent
over to Justice in the Supreme Court. He would
sort of like to do it, I think.
H.M.Jr:
What case is it?
Foley:
It is not an outstanding case. It is a case
where we asked for a certiorari and they didn't
think it was necessary, but because we insisted,
they did and the Court granted certiorari - it
involves setting aside of a closing agreement
where there is some fraud because all the facts
weren't presented in the first instance.
H.M.Jr:
I will leave it with you.
Foley:
I think I will let him do it.
H.M.Jr:
Last night I did something and cautious, conservative Harry White is worried that possibly
I broke the law. He is very much disturbed, so
now that I have done it I will ask you about it
and Dr. Viner and Dr. Riefler can take a look
at it too. The Swedish Minister came in with
rather a vague telegram asking whether we would
buy Finnish gold in Stockholm and I worked out
a new formula in which I said yes, we would buy
Finnish gold in Stockholm and pay spot cash for
it, provided that: one, the Finns would ship it
on the first available steamer from Bergen, two,
pay all expenses and insurance, and three, that
the Swedes would set aside, segregate an equal
amount of their gold in New York pending the
arrival of the Finnish gold. I walked across
the street with a memorandum and the President
initialed it and we let it go.
Cochran, who takes chance's, went along with me,
but Harry, who is so cautious, always looking
at things - why we can't help the Chinese and
things like that, is worried about it.
Foley:
What is he worried about?
H.M.Jr:
I don't know.
403
-4White:
I merely said that I thought the lawyers ought
to pass on it first as a general principle.
Foley:
You wouldn't disagree with that, would you?
You have got something there.
White:
I thought you would agree with me on point one.
Foley:
Go on.
White:
Point two is not so good.
H.M.Jr:
What did he say, Ed?
Foley:
He said his second point isn't so good.
White:
Well, there was a formation of another government
prior to the purchase and if, as it is possible,
at any rate, they subsequently have control, I
don't know whether there might be some question
of a suit involved. It is the reverse of the
Spanish case.
Gaston:
We didn't recognize that government, I think.
White:
Well, if that is adequate
H.M.Jr:
I was just amazed, but Cochran, will you give a
copy of the memorandum to those two gentlemen
on the mourners' seat and one to Dr. White and
one to the attorneys?
Cochran:
Yes, sir.
I think it is very interesting, because the Swedes
may not go along. At loast it gives the Finns
spot cash for their gold. There is no risk on our
H.M.Jr:
part.
Gaston:
H.M.Jr:
I was called up by Harry Anslinger who told me
they got a request from the Red Cross for a large
amount of narcotics for Finland and they are
going through.
This memorandum I gave the President, the Presi-
dent says, "I have got to legally take that money
from the Finns. " Is that right?
-5Bell:
H.M.Jr:
404
That is right.
And he sort of felt you were throwing it on him.
What he is going to say is that he is directing
me to segregate those funds and then he is going
to ask Congress to appropriate an equal amount
to give to the Finnish Red Cross, but I don't
know why he got a great kick out of the fact. He
says, "I have got no choice, I have to accept it,"
but he told me to segregate it. I don't know
why he seemed to think that was so funny.
Bell:
I don't know either.
H.M.Jr:
But the chances are he will do it today.
You (Foley) were in on that, weren't you?
Bell:
He wasn't in on the memorandum.
H.M.Jr:
Now, this is a good answer to White. Here was a
question, we had the lawyers in and they said,
No, if you want to do it this way you had better
leave the lawyers out." There was some question,
so they just walked out on me.
Foley:
Bell:
I don't think you needed any lawyers in that.
Not seriously.
Foley:
Not in that one, anyway.
H.M.Jr:
Bell:
H.M.Jr:
I will help you out, inasmuch as the instructions
of the President are that he is going to do it.
Is he going to do it before he gets official
confirmation?
He read the letter. He is kind of all worked
up to do it. He said "Leave it to me and I
will take care of it.
Bell:
We ought to get those - that information this
week because they usually come around the sixth
or seventh of the month.
H.M.Jr:
Knowing how worked up he is over this Finnish
405
-6-
invasion, I think you will see he will do it
this morning.
Cochran:
I have a chart showing the silver purchases.
H.M.Jr:
Have you showed it to those two gentlemen?
Cochran:
No, sir.
H.M.Jr:
Will you please?
Cochran:
Yes.
H.M.Jr:
Viner?
Viner:
No thing.
H.M.Jr:
Riefler?
Riefler:
No.
H.M.Jr:
George?
Haas:
I have nothing.
H.M.Jr:
Basil?
Harris:
Nothing.
H.M.Jr:
Gene?
Duffield:
I have got a couple of matters I would like to
H.M.Jr:
Gene, stay after this meeting.
see you about today sometime.
Harry?
White:
Nothing.
H.M.Jr:
Are you going to get that information that the
White:
Yes, we are getting it. The Department of Commerce is already getting most of what we want
President wants?
so it won't take much time, as far as current
material is concerned. The past material will
7406
take about two or three days.
H.M.Jr:
Graves:
Harold? Harold, I don't care what the excuse
is, I don't want women to work the hours that
they did in Procurement.
Yes, I told them.
H.M.Jr:
I don't care what the, circumstances are and I
wish you would explain it to Norman Thompson
and see that that doesn't happen in any other
part of the Treasury. I don't care what the
excuse is, I just don't want it to happen again.
It is the old argument, "Well, if the woman
wants to work ten or twelve hours, that is her
responsibility. I don't agree with that. The
fact that they are willing to work - the poor
things are told, "Are you willing to work all
Graves:
through Saturday night - or else."
It wasn't exactly that way. They called for
volunteers.
H.M.Jr:
Well, I still
Graves:
Yes, I get your point.
I wish you would explain it to Thompson. I don't
want it to happen to any part of the Treasury.
I don't even want them to call for volunteers
H.M.Jr:
to have women work right straight through. With
all the unemployment, it is a most ridiculous
thing that we have people working overtime and
at the same time we have unemployment.
Bell:
It is a little unfortunate in certain spots,
Mr. Secretary, where we need experienced people.
We can't take on people and work them for a week
or two weeks.
H.M.Jr:
I went all through that when I first came here.
Bell:
We have got an annual report to get to Congress
about the tenth of January and we don't get our
material from the field until about the fifth.
There are not so many women working, but the men
in charge of it. We will have to go to it and
-8-
407
H.M.Jr:
we can't get inexperienced people to do it.
I would rather have the report late than not
have the report.
Graves:
Excuse me
H.M.Jr:
You and I worked late, that is different, but
they claim that these women worked 80 hours.
Graves:
Nobody worked that long. As I understand it,
your suggestion applies only to the women.
There is no objection to men
H.M.Jr:
Only to the women.
Viner:
Does that apply to Mrs. Klotz?
Klotz:
Thank you, Doctor.
H.M.Jr:
Yes.
Bell:
The Federal sold 4a million of guaranteed obligathe market. One bank wanted these particular
tions yesterday. It is a sort of a switch in
issues and they wanted to sell the same amount
of the '44 notes, so they let them go. It had
no effect on the market.
If we are going to consider refunding next week,
I think they ought to be out of the market after
today because the report would come out next week
just during the time when our refunding would be
open. They want that information and they are
willing to get out if you say you are going to
consider it.
Here is a letter to Mr. Farley telling him you
are going to consider the sale of bonds.
Thompson:
The House Appropriations Committee is going to
have hearings next Monday on the Treasury budget.
H.M.Jr:
Monday is always a bad day.
Thompson:
I am sure they can set another day. It is only
tentative so far.
-9H.M.Jr:
408
Either Tuesday or Wednesday, but I would like
to take a look at the statement I am going to
read.
Thompson:
H.M.Jr:
Yes.
I would say either Tuesday or Wednesday is clear.
Who works on that?
Thompson:
Mr. Schoeneman's Budget Committee.
H.M.Jr:
Before it comes to me....
Thompson:
Duffield will go over it.
H.M.Jr:
Any good snappy stories in it?
Thompson:
I don't think so this year.
Bell:
We will have to work overtime in order to get
that out.
109
December 5, 1939
MEMORANDUM
RE: COLOMBIA
Meeting in Secretary's Office at 3 o'clock
December 5, between the Secretary, Mr. Welles and
Mr. Jones - Pierson, Cochran, White, Riefler and
Cotton also present.
The Secretary expressed the view that no Government department
or agency should negotiate directly with the Colombian representatives
with respect to a debt adjustment, especially any lending agency of the
Government within the province of which the question of future credits
might fall. The objectives should be to establish a pattern for similar situations in the future, even if it might not be ideal as applied
to the particular case of Colombia now. The Secretary suggested that,
the way having been prepared with the Council, the negotiations should be
conducted directly between Mr. Traphagen and Mr. Jamarillo, the committee
consisting of Mr. Welles, Mr. Jones and himself being informed of the
progress of the talks and both sides having a right to bring their cases
before the committee as a court of appeal should either consider that
the other side is being unreasonable. Mr. Jones expressed agreement
with this suggestion. He said he supposed it meant that no new loan
would be made to Colombia until there was an understanding on the debt,
which was confirmed. He also said that, in his opinion, money could
not be secured for the Export-Import Bank from Congress unless a settlement for Colombia was arrived at which would seem reasonable to the
congressional comuittees concerned.
Mr. Welles expressed agreement with the procedure and suggested
that, in view of the unfortunate past history of negotiations between
the Colombians and the Council, the point should be stressed that
Mr. Traphagen should undertake the negotiations.
The Secretary called Mr. Traphagen on the telephone, outlined
the suggested procedure to him, and asked him whether he individually
would undertake negotiations with Dr. Jamarillo. Mr. Traphagen approved
the suggestion and agreed to undertake negotiations in person. It was
agreed that he would come to Washington Thursday or Friday to meet the
Colombians, he having expressed the hope that subsequent talks might take
place in New York.
Dr. Jamarillo joined the meeting.
The Secretary outlined the suggested procedure for direct negotictions between Dr. Jamarillo and Mr. Traphagen. Dr. Jamarillo indicated
-2-
410
that he would wish to have the Colombian Ambassador in Washington in
on his conversation with Mr. Traphagen. He said he wished to make his
position clear, and outlined it as follows:
At the request of the President of Colombia, at the Panama Conference he took up the question of financial cooperation with the United
States delegation. According to him Dr. Feis indicated that at the
present time "modest" cooperation would be forthcoming and that next
year when the Export-Import Bank was in funds larger cooperation might
be possible. He said that Feis indicated that a debt settlement was
not a necessary condition of such preliminary cooperation but would be
necessary for larger cooperation. Dr. Jamarillo retailed Dr. Feis'
statement to the President of Colombia but at that time expressed his
own frank opinion that Colombia should not ask for new credits without
a debt settlement. The President asked him to come to Washington to
learn the views of the United States Government in these matters with a
view to communicating such views to the President so that the President
could give special instructions to the Colombian Embassy in Washington
presumably with regard to the debt question. Dr. Jamarillo said that
in any event he would be glad to see Mr. Traphagen next Thursday and
would wish to have the Colombian Ambassador in on the conversation. It
was agreed that Mr. Cotton should bring Mr. Traphagen to the Colombian
Embassy at 11:00 next Thursday morning to introduce him.
At the conclusion of the meeting, Mr. Welles and Mr. Jones remained. The question of a loan to Finland Was discussed and it developed
that the President was putting pressure on Mr. Jones to go forward in
this matter. The Secretary explained the proposal recently agreed upon
and made to the Finns with respect to purchase of Finnish gold by this
Government. The Secretary also took advantage of this discussion to
express to Mr. Jones the view that not only Finland but China was in
need of credits to resist Russian penetration and that they had been
asking for consideration of their request for credits for some time.
Mr. Cotton called Mr. Traphagen to confirm the understanding as
to the meeting between Mr. Traphagen and Dr. Jamarillo at the Colombian
Embassy in Washington at 11:00 in the morning next Thursday and to ad-
vance the suggestion that he, Mr. Cotton, should introduce Mr. Traphagen,
which was accepted.
J.PC.Jr.:BJ
December 5, 1939
411
Crowley told me today that the President had told
him that unless the foreign situation got worse, he would
not run again; that he thought Hull was sufficiently liberal for him to back him and that the ticket should be
Hull and Bob Jackson, or Hull and Bill Douglas. And he
said, You know I am my own Secretary of State now and I
would want to continue to work for world peace and, therefore, I would be willing to take the post of Secretary of
State.
pes fleas?
12/5
DEPARTMENT OF STATE
DIVISION OF FAR EASTERN AFFAIRS
12/7
her. Cochran 1
This is the
telegram I phone
you about this
afternoon -
(CONFIDENTIAL)
PARAPHRASE
M
12
A confidential telegram (no. 2907) of December 5,
1939, from the American Ambassador at Paris reads sub-
stantially as follows:
On December 4 the demobilization of Meaux (Colonel
of Engineers) from the French army was arranged by
Mandel at the urgent request of T. V. Soong. Meaux,
who has been instructed at the instance of Mandel to
depart immediately for Indochina, has an intimate
knowledge of Indochinese topography and is an expert
road builder. He is to take personal charge of the
completion of the construction of the highway parallel- ing the railway to Laokay, which is now completed to a
point about half way between Laokay and Hanoi. The
above information was obtained from a reliable source
close to Mandel.
893.154/275
TREASURY DEPARTMENT
Office of the Secretary
Technical Assistant to the Secretary
D
Date 10/6/39
TO:
The Secretary
Room
to note find
parajraph- Pri 3.
KMR
From: MR. COCHRAN
o
TREASURY DEPARTMENT
413
INTER OFFICE COMMUNICATION
DATE December 5, 1939
TO
Secretary Morgenthan
FROM Mr. Cochran
CONFIDENTIAL
The foreign exchange market was quiet today, although the volume of
sterling transactions was larger than that of yesterday. In New York, sterling
opened at 3.89-7/8. During the early part of the morning, the Federal Reserve
Bank disposed of about 53,000, representing the unexecuted portion of the
order received from the Bank of Latvia yesterday. Around mid-morning, sterling
reached the low of 3.89-1/4. It recovered during the afternoon to 3.90.
Toward the close, some moderate commercial buying appeared, and the rate
strengthened further to 3.90-3/8. It closed at that level.
Sales of spot sterling by the four reporting banks and the Federal
Reserve Bank of New York totaled 633,000, from the following sources:
By commercial concerns
By foreign banks (Europe, Far East and South America)
By Federal Reserve Bank of New York (for Latvia)
Total
& 142,000
L 438,000
L 53,000
L 633,000
Purchasesof spot sterling amounted to 4422,000, as indicated below:
By commercial concerns
By foreign banks (Europe and Far East)
Total
L 326,000
L 166,000
L 492,000
Cotton bills totaling 196,000 were sold to the British Control at the
official rate of 4.02 by the following reporting banks:
L 158,000 by the Bank of the Manhattan
L 27,000 by the Guaranty Trust Company
L 8,000 by the Chase National Bank
L 3,000 by the National City Bank
L 196,000 Total
The other important currencies closed as follows:
.0221-3/8
French france
Guilders
Swiss france
.5309
.2242
.1652
Belgas
13% discount
Canadian dollar
The rate for the Cuban peso improved to 11-3/8% discount, which is the
highest price for that currency since November 1.
-2-
414
We purchased the following amounts of gold from the earmarked accounts of the
banks indicated:
$10,000,000 from the Bank of France
5,900,000 from the Bank of Sweden
$15,900,000 Tota?
The Federal Reserve Bank of New York reported to us the following shipments
of gold:
$
9,500,000 representing two shipments from Japan by the Yokohama Specie Bank, Kobe,
consigned to the Yokohama Specie Bank, San Francisco, for sale to the
U. S. Mint at San Francisco.
630,000 from India, shipped by National Bank of India, consigned to the Agent of
the Guaranty Trust Company of New York in San Francisco, for sale to the
U. S. Mint at San Francisco.
563,000 from England, shipped by Samuel Montagu and Company for account of the
Amsterdam Bank, Amsterdam, consigned to Bank of Manhattan for sale to
the U. S. Assay Office at New York.
20,000 from England, shipped by National City Bank, London, consigned to the
National City Bank, New York, for sale to the U. S. Assay Office at
New York.
14,000 from England, shipped by Sharps & Wilkins, London, consigned to the
Guaranty Trust Company of New York, for sale to the U. S. Assay Office
at New York.
$10,727,000 Total
We received from the State Department a cable sent by the American Consul at
Calcutta stating that invoices were certified for the following gold shipments:
$ 814,000 representing 3 shipments by the Australian Bank to Bank of California,
San Francisco.
675,000 shipped by the French Bank to the French-American Banking Corporation
of New York.
2,352,000 shipped by the National City Bank, Bombay, to National City Bank, New
York,
$ 3,841,000 Total
The shipments consigned to San Francisco will be sold to the U. S. Mint in that city,
and those sent to New York will be sold to the U. S. Assay Office there.
The U. S. equivalents of the London spot and forward silver prices were 41.08
and 40.93#, respectively. Handy and Harman's price for foreign silver was unchanged
at 34-3/44. The Treasury's price was unchanged at 35$.
We purchased a total of 658,000 ounces of silver, of which five purchases
amounting to 450,000 ounces were made in New York, The remaining 208,000 ounces
were purchased through the Crocker First National Bank in San Francisco.
CONFIDENTIAL
-3-
415
The Bombay silver market reopened today with the silver price quoted at
45.04 as compared to 44.484 on December 1st. It was reported by a Reuter's dispatch from Bombay that a large amount of business was transacted at 45.04 for
Calcutta and up-country account. Later the price declined to 43.55
Mr. Knoke telephoned me late yesterday afternoon in regard to Russian balances.
He stated that as of yesterday morning, the State Bank of Russia had with the Chase
Bank $13,000,000, including $11,000,000 in the current account and $2,000,000 set
aside for confirmed credits. Of the $11,000,000, $4,700,000 constituted the proceeds
of a gold shipment en route from Scandinavia to New York against which the Chase
Bank had made this advance. The Chase Bank has recently opened unconfirmed credits
for $3,000,000. mostly for copper to be shipped by way of Vladivostok. This will
be paid for out of the $11,000,000. The Amtorg balance of the Chase Bank yesterday
was $1,500,000. Since Mr. Knoke last spoke to me on November 28 in regard to
Russian balances, a payment of $4,200,000 has been made by the State Bank of Russia
to the Amtorg. During the same period the State Bank of Russia has received credits
of $10,700,000, of which the advance against gold accounted for $4,700,000. The
Rotterdam Bank transferred $5,000,000 from its account to the State Bank of Russia
and the Enskilda Bank of Stockholm transferred $800,000 to the account of the State
Bank of Russia.
H.M.T.
CONFIDENTIAL