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DIARY
Book 269
June 5 and 6, 1940
-ABook
Page
Appointments and Resignations
Nelson, Donald M.:
Appointed Assistant to the Secretary and Acting
Director of Procurement - 6/5/40
269
1
a) Correspondence between General Wood (SearsRoebuck) and HMJr concerning length of time
appointment covers - 6/6/40
b) Appointed to committee to study IHHH* general
problem of purchases by Federal Government 6/7/40: See Book 270, page 100
Parker, Dale:
Federal Reserve Board inquires concerning position
in Treasury - 6/5/40
237
133
Atkins, E. C., Company (Saw Manufacturers
-
Indianapolis, Indiana)
Federal Bureau of Investigation report
361
-B Belgium
See iiar Conditions
Business Conditions
Economic Developments: Noble (Commerce Department) report 6/6/40
386
-CCanada
See War Conditions
China
See War Conditions
Coast Guard
Weather reporting to be continued by Coast Guard because
of rejection of additional funds asked for by Civil
Aeronautics Authority - 6/6/40
354
-DDestroyers
See War Conditions: Ships
-FFinancing, Government
6/15/40:
Bell memorandum on possibilities - 6/5/40
Discussion by Treasury group of possibilities based
on European situation - 6/6/40
Foreign-Owned Securities
See War Conditions
166
291
-GBook
Page
269
108
Gas, Natural
Utilisation of for chemical products:
Bureau of Mines circular
General Counsel, Office of
Report of studies for May 1940
393
Germany
See Var Conditions
Great Britain
See War Conditions: United Kingdom
-
Italy
See War Conditions
-KKnudsen, William S.
See War Conditions: Airplanes (Procurement)
-LLee, Josh (Senator, Oklahoma)
Draft wealth legislation: Discussion between Lee,
Frank, and Currie explained for HMJr - 6/6/40
370
Letter of appreciation to HMJr - 6/6/40
232
Leroy-Beaulieu, Paul
-M-
Maritime Unions (Atlantic Seaboard)
Federal Bureau of Investigation report
Methodist Episcopal Church (Philadelphia)
Women's Foreign Missionary Society: Federal Bureau of
Investigation report acknowledged - 6/6/40
363
356
Mexico
Attitude toward foreigners: Federal Bureau of
Investigation report
Mt. Sinai Hospital (New York City)
HMJr inquires concerning sending unit to France 6/6/40
321
NNavy
See War Conditions: United States
Nelson, Donald M.
See Appointments and Resignations
Netherlands
See Var Conditions
-0011
See Var Conditions: Italy
365
-PBook Page
Parker, Dale
See Appointments and Resignations
-R- Remboursen Industrie Bank
See War Conditions: Netherlands
-SShips
See War Conditions
Steel
See War Conditions: Italy
-UUnited Kingdom
See War Conditions
United States
See War Conditions
W
War Conditions
Airplanes:
Procurement (future) - authority over to be transferred
from HMJr to Knudsen - HMJr's letter to McReynolds -
6/5/40
1-A
269
a) FDR's original memorandum placing
responsibility on HMJr attached
1-B
b) FDR's press conference
1-C
c) Contracts to clear through Knudsen: HMJr
relieved of further responsibility - 6/6/40
189
Bombers (Dive):
Conference; present: HMJr, Towers, Kraus, and Anderson 6/5/40
156
Conference at HMJr's home on availability for French and
British; present: HMJr, British Ambassador, French
Ambassador, British Air Attache, Jacquin, Towers,
Stark, Welles, Purvis, Bloch-Laine, Nelson, and Young 6/5/40
184
a) Supporting memoranda provided by Marshall 6/6/40
197
b) Leroy-Beaulieu's letter of appreciation 6/6/40
232
c) Navy releases fifty; delivery to Buffalo starting;
Purvis told to begin preparations for flying
bombers to Halifax - 6/6/40
1) Picture
d) Navy release in preparation for questions at
FDR's press conference on surplus materiel
concerning these surplus planes - 6/7/40:
See Book 270, page 1
e) Conference at HMJr's home on equipping planes with
bombs: present: HMJr, Woodring, Marshall, Stark,
Nelson, Foley, Cox, and Young - 6/9/40: Book 270,
page 172
1) HMJr tells Purvis outcome of conference 6/9/40: Book 270, page 193
373
377
- W - (Continued)
Book
Page
269
189
War Conditions. (Continued)
Airplanes (Continued)
Contracts to clear through Knudsen; HMJr relieved
of further responsibility - 6/6/40
Engines:
Rolls Royce: Ford now thinks they can manufacture 6/5/40
24,26
a) HMJr tells Knudsen to tell Ford they
must manufacture - 6/6/40
Army Air Corps types: HMJr acknowledges Woodring
memorandum - 6/5/40
Requirements and Sources: Cover-all report prepared
by Aeronautical Section, National Defense
Commission - 6/6/40
Ford Motor Company: "Educational order" suggested by
80
95
253
Arnold (Chief, Air Corps); transmitted to Louis
Johnson by HMJr; later withdrawn by Arnold 6/5/40
15
Requirements and Sources: Cover-all report prepared
by Aeronautical Section, National Defense Commission6/6/40
Belgium:
253
Situation in face of King's surrender discussed by
Belgian Ambassador and Berle (State Department) 6/6/40
329
Family of King Leopold: Federal Bureau of Investigation
report
366
Canada:
Empire Training Program: Serious situation because of
transportation problem from United Kingdom - 6/6/40.
a) Situation discussed by Knudsen and HMJr 6/6/40
195
246
b) Knudsen, Purvis, and HMJr discuss placing of
order with Jacobs Manufacturing Company for
2000 engines - 6/7/40: See Book 270, pages 121
and 123
China:
Burma Road: Transit trade with China in supplies other
than war materials during April 1940: American
Consulate, Rangoon, memorandum - 6/5/40
101
Industrial Enterprises: Removal of to unoccupied areas
by the Government: American Consulate, Yunnanfu,
memorandum - 6/5/40
Exchange market resume - 6/5/40, et cetera
Foreign-Owned Securities: Ruling relative to importation of,
et cetera - 6/6/40
98
172,310
343
a) FDR's added suggestion for guidance of Treasury,
Securities and Exchange Commission, and Federal
Reserve Board
345
Germany:
Economic conditions reviewed by American Embassy, Berlin 6/5/40
134
Funds for German Consulate General in New York:
Federal Bureau of Investigation report acknowledged 6/6/40
358
- W - (Continued)
Book
War Conditions (Continued)
Page
Italy:
Steel orders now on hand in United States
a) HMJr discusses possible embargo with Hull -
269
6/5/40
42
57
Oil: 175,000 tons trans-shipped to Germany within
last few months: Bullitt cable - 6/5/40
Stock prices charts - 6/5/40
Machine Guns:
83
127,384
See War Conditions: United States (Surplus Materiel)
Netherlands:
Remboursen Industrie Bank: Resume provided by
French Financial Counselor, New York City 6/6/40
324
Ships:
Destroyers: Purvis asks HMJr as to possibility of
getting some
a) HMJr asks FDR who will see Stark and may be
able to release ten - 6/5/40
58
Expansion Program (Navy): Compton memorandum
a) Knudsen provided with copy by HMJr 6/5/40
United Kingdom:
Bank of England account with Federal Reserve Bank
of New York: Arrangements made for authorizations
in case communications are cut between England
and United States - 6/5/40
a) Proposed instructions from HMJr to Federal
Reserve Bank of New York sent to FDR for
approval - 6/6/40
1) Approval
61
177,314,315
206
343
United States:
Navy: Observers with British fleet - permission at last
granted - 6/5/40
Purchasing: Coordination discussed by HMJr and
McReynolds - 6/6/40
84
252
Surplus Materiel:
Conference on details of transportation; present:
representatives of Purchasing Mission, Treasury,
and Colonel Burns (now Aide to Knudsen and
Stettinius) - 6/5/40
Agenda discussion
Bullitt-HMJr conversation - 6/5/40
18
37
145
FDR's memorandum expressing great satisfaction 6/6/40
Thompson Machine Guns: Availability of in Navy
Department - 6/6/40
Publicity in London: Early advises how to handle 6/6/40
208
233
235
Weather Reports (Atlantic)
To be continued by Coast Guard because of rejection of
additional funds asked for by Civil Aeronautics Authority 6/6/40
354
MC.
JUN 5 1940
Mr. Donald M. Nelson,
Washington, D. C.
Sir:
You are hereby appointed, effective June 5, 1940,
an Assistant to the Secretary, in the Office of the Secretary. For such services as you may perform during
the period of your appointment you will be paid the sum
of $1.00, from the appropriation, "Salaries, Office of
the Secretary".
You are hereby authorized, until further notice,
to perform the duties of Acting Director of Procurement.
Very truly yours,
(Signed) H. Morgenthan. Jr.
Secretary of the Treasury.
FIWNTines
Orig file to Thompson
1
I-A
THE SECRETARY OF THE TREASURY
WASHINGTON
June 5, 1940.
My dear Mr. McReynolds:
On Monday, June 3rd, while lunching with the President, we came to
a mutual understanding as to the future procurement of airplanes and
engines for the Government. In this connection I BE enclosing a copy of
the President's remarks on the subject at his press conference on
June 4th.
There is much of this business pending and I think it important
that the instructions which the President gave to the Secretary of War
and the Secretary of the Navy on May 24th be revised so that the authority which the President placed in me in coordinating these matters will,
in the future, be vested in Mr. Knudsen.
In order to expedite this matter, I am enclosing herewith for your
ready convenience copies of the President's memorandum of May 24th to
the Secretary of War and to the Secretary of the Navy, which instructed
that pending the setting up of final machinery this coordination would
clear through the Secretary of the Treasury direct to the President.
In view of the great responsibility which I have been carrying in
connection with these airplane and airplane engine problems I would like
to receive formal notice from the President relieving me of this.
Yours sincerely,
Secretary of the Treasury.
File to Bundette
6-22-40
Honorable William H. VeReynolds,
Administrative Assistant to the President,
The White House.
Copy to:
Mr. Knudsen
Secretary of War
Assistant Secretary of War
Chief of Staff, U.S.A.
Chief of Naval Operations
Admiral Towers
General Arnold
General Brett
Captain Kraus
Assistant Secretary of the Navy Colonel Burns
Secretary of the Navy
Dr. George Mead
(with enclosure - copy of verbatim report of the President's press
conference of June 4th)
1-B
C
0
May 24, 1940
MEMORANDUM FOR
THE SECRETARY OF BAR
THE CHIEF OF STAFF
Please let me have on Monday the
program of requirements in aircraft by
types which will be ordered as soon AS
possible as a result of the new legislation. I understand that the Army has
placed orders for all of the 5,500 planes
under last year's expansion program. I
understand that the new legislation
authorizes the purchase of 2,400 additional planes.
I understand that such a program
of requirements by types has been
initiated.
It is of the utmost importance that
no contracts be entered into from now on
either for planes or engines or for the
development of new types of planes or
engines without coordinating this with
the general program as a rule.
For the time being, until the final
machinery is set up, this coordination
will be cleared through the Secretary of
the Treasury to me as Commander-in-Chief.
Please see that this is carried
out in toto.
F. D. R.
1-C
EXCERPT FROM PRESIDENT ROOSEVELT'S
PRESS CONFERENCE OF JUNE 4, 1940:
Oh, look! There is one thing I want to get in the record.
You needn't bother to listen to it but I want Kannee to put
this in the records of the press conferences. It has to be
said and it doesn't affect the newsmen here at all.
About three weeks ago, about a week before I went up to
the Hill with a message on National Defense, we started in to
do some very quick surveying on certain subjects. One of them,
for example, was the question of personnel. I asked Harry
Hopkins to handle that, temporarily. Well, we got everything
tied together so that we were able to get a general program.
Another thing I turned over to him, temproarily, was this
question of getting these materials together that we were short
of in the country. Well, I worked on that for about a week and
that was all solved and settled, practically.
At the same time I asked the Secretary of the Treasury to
do a quick survey job for me on airplane engines, temporarily,
and also on machine tools, temporarily. This was merely a survey
so that we could put together with some intelligence our requests
for appropriations for national defense. Now, the newsmen were
not responsible in any way but there were certain commentators
and certain editorial writers who proceeded to write absolutely
false statements of fact against Hopkins and Morgenthau that
they were going to run the national defense. Of course, they
I-D
-2knew that was not so, every one of them who wrote these stories.
They were told, incidentally, that it was not so, that these
various things would be turned over to the machinery which was
being prepared at that time. When the Commission of the Council
(for National Defense) was set up last week, of course, the
original intention of the previous three weeks was put into
effect. On airplane engine business, there had been a lot of
work, very excellent clearing work had been done by Lorgenthau
and that was turned over to Mr. Knudsen, and the machine tool
work was turned over to Mr. Knudsen, and Mr. Hopkins is turning
over the personnel to Sidney Hillman and the materials--what do
you call the materials?
R. Strategic materials.
Strategic materials. The only thing that now remains outside
the Commission of the Council is the coordination of the foreign
government purchases in this country, which has, primarily,
a financial aspect and that will remain in the general coordinating
field of the Treasury Department, of course, letting both
Mr. Knudsen and Mr. Stettinius know at all times what is proposed
in the way of additional orders and also how the actual production
and deliveries are going, of course, in accordance with schedule.
The reason for keeping that in the Treasury is, of course, it is
primarily financial and, secondly, because--what do you call it?
The Allied Purchasing Commission has been working with the
Treasury since the beginning of their purchasing program. So
we proceeded in accordance with plan outlined a month ago and
1.E
-3I don't believe, on the part of these commentators or editorial
writers, that there will be any apology or any retraction of the
false news that they have been disseminating for three weeks.
Q. Thank you very much.
-00o-
2
June 5, 1940
My dear General Watson:
I am inclosing herewith a memorandum which
I would appreciate your reading yourself and then
putting it in the hands of the President.
To get this surplus material cleared has been
one of the most difficult undertakings and I am
pleased to be able to report that at last the ma-
teriel is rolling.
Yours sincerely,
General Edward M. Watson,
The White House.
3
June 5, 1940
My dear General Watson:
I am inclosing herewith a memorandum which
I would appreciate your reading yourself and then
putting it in the hands of the President.
To get this surplus material cleared has been
one of the most difficult undertakings and I am
pleased to be able to report that at last the ma-
teriel is rolling.
Yours sincerely,
General Edward M. Watson,
The White House.
4
June 5, 1940
My dear General Watson:
I am inclosing herewith a memorandum which
I would appreciate your reading yourself and then
putting it in the hands of the President.
To get this surplus material cleared has been
one of the most difficult undertakings and I am
pleased to be able to report that at last the ma-
teriel is rolling.
Yours sincerely,
General Edward M. Watson,
The White House.
Sey the st onig of This 5
list rubton we coff made for garlwater a
CONFLICERIAL
June 5, 1940
To:
The Secretary
From:
Mr. Young
Attached herewith is a list of the ordnance material
released for sale or exchange by the War Department. The
Anglo-French Purchasing Board has agreed to take every
item listed, including the additional items added by the
Chief of Ordnance.
Colonel MacNorland issued telegraphic instructions
to the various Army depote last night to pack and ship
the material listed to Raritan Arsenal (New Jersey) ismediately.
Mr. Purvis made an urgent plea for tremendous quan-
tities of additional small arms ammition and for additional
rifles if they could be released.
PTIbj
6
6-3-40
0-4
ORDNANCE MATERIEL TO BE RELEASED FOR SALE OR EXCHANGE
Condition (Estimated)
Unit
Quantity
Item
1,157 Cal..30. Lewis mach. gun, ground, M1917
7,071 Cal..30, mach. gun, Vickers, ground type
2,602 Cal..30, Marlin tank machine gun
15,638 Cal..30, Marlin airer. machine gun
5,124 Cal..30, Vickers airor. machine gun
38,040 Cal..30, Lowis aircraft machine gun
10,000 Cal..30, Browning machine gun M1917
25,000 Cal..30, Browning automatic rifle M1918
500,000 Cal..30, Rifle M1917 (Enfield), used
395 75 - Field Guns (British)
308
3* Stokes Trench Mortars
100,000,000 Rounds Cal..30 Ball Ammunition - per M
20,000 Cal..45 Revolvers
1,000,000 Rounds 75 - H.E. Shell
10,000,000 Lbs. TNT (per pound)
8,693,000 Lbs. Smokeless Powder (bulk) for 155 Oun
(per pound)
1,000,000 Lbs. Smokeless Powder (bulk) for 155 How. (per pound)
97,680 Rounds Shell H.E. for 3" Stokes Mortar
Sales Price
$ 33.92
131.23
74.35
23.16
33.92
33.92
215.49
60.76
7.50
1,527.60
12.50
30.00
7.25
10.45
Serv.
Unserv.
18%
82%
43%
57%
67%
33%
94%
6%
70%
30%
34%
66%
Unmodified
Unmodified
Serviceable
Serviceable
Serviceable
Deteriorated
Serviceable
.15
Deteriorated
Deteriorated
.42
Deteriorated
.42
1.28
Deteriorated
ADDITIONAL ITEMS ADDED BY CHIEF OF ORDNANCE 6-4-40
Accessories for Browning Machine Gun M1917
100,000 Ammunition Belts
100,000 Ammunition Chests
10,000 Water Chests
10,000 Steam Condensing Device
3,333 Belt Filling Machines
10,000 1918 Tripods
Accessories for Browning Automatic Rifle M1918
1,000,000 20-Round Magazines
1.81
3.60
12.90
1.96
48.69
26.00
.95
Accessories for 75 - Field Gun (British)
600 Caissons
600 Caisson limbers
NOTE:
125.00
75.00
All prices are "as is" and "where is", exclusive of packing. handling,
and shipping charges. Any reconditioning must be effected without expense
to the U. S. Government subsequent to sale and removal from War Department
depote and by non-Yar Department agencies.
7
June 5, 1940
part of the but
My dear Cordell:
am
by theat Purmay its
meeting twd ay
I am inclosing herewith photo-
static copies of the two memoranda on
alloy steel and molybdenum for Italy
about which I spoke to you on the telephone this morning.
Yours sincerely,
Hon. Cordell Hull,
Secretary of State.
8
June 5, 1940
My dear Cordell:
I am inclosing herewith photo-
static copies of the two memoranda on
steel and molybdenum for Italy
about which I spoke to you on the telephone this morning.
Yours sincerely,
Hon. Cordell Hall,
Secretary of State.
9
June 5, 1940
Ky dear Gordell:
I am inclosing herewith photo-
static copies of the two memoranda on
alley steel and molybdenum for Italy
about which I spoke to you on the telephone this morning.
Yours sincerely,
Hon. Cordell Hull,
Secretary of State.
C-1
Washington, D. C.
June 5, 1940.
ALLOY STEEL FOR ITALY
We are advised that Italy has outstanding in the
United States Alloy Steel orders of vital importance
to her war potential. The fact that, against her
standard practice, she is now buying these steel al- -
loys in the finished from is a proof of the urgency
of her needs. It is understood they are required for
aeroplane manufacture and the extent to which Germany's
requirements are involved is of course difficult to
assess.
The orders on hand with the five most important
steel companies, i.e. with Republic Steel, Crucible
Steel, U. S. Steel, Bethlehem Steel and Timken Roller
Bearing of Canton, Ohio, have a total value between
$4,000,000 and $5,000,000.
It has been ascertained that the steel companies
in question would be prepared not to ship this steel
if it were intimated to them that it is against the
United States Administration policy that such aircraft
steel should be shipped out to Italy.
Actually the Allied Governments are prepared to
buy this steel themselves as they themselves have need
of it for aircraft purposes.
C-2
MOLYBDENUM FOR ITALY
Italy has already purchased this year enough
Molybdenum to take care of more than her total
domestic requirements. There is every reason
to believe in fact the producers themselves strongly
suspect) that she is buying for Germany.
There are two shipments projected in the near
future amounting to some 200 tons which it is under-
stood the producers would be quite willing to refrain from shipping if they thought this was in accord with U. S. Administration policy.
In the present circumstances, would it be
possible to stop these shipments?
It may be of interest to note that all the
producers have recently agreed not to accept any
further orders for Italy, so only the outstanding
shipments referred to are in question.
Washington, D. C
June 5, 1 40.
12
AM
CONFIDENTIAL
June 5, 1940
To:
The Secretary
From:
Mr. Young
THOMPSON SUB-MACHINE GUNS
I have been advised by the Office of Admiral Spear
that the Navy has on hand 426 new Thompson sub-machine
guns at a book value of $321.00 each. If orders were
received from the proper authority, these guns would be
released for transfer, provided that the Navy received
the money for replacement orders.
Under existing legislation, it is possible for these
guns to be transferred from the Navy to the Army. but the
pending Army authorization bill would have to become law
before the Navy could receive the exchange value of these
guns for replacement orders.
Colonel Burns informed me that the Army has no
Thompson sub-machine guns to release.
TNT
Colonel Burns informed me tonight that, although the
Var Department could not release delivery on 1500 tons of
new TNT as requested by the Anglo-French Purchasing Board,
it would release immediately 3500 tons (7 million pounds)
of grade 3 TNT. It is my understanding that this TNT to
be released, although old, is in serviceable condition.
ARMY MACHINERY
I was advised by Colonel Burns that the War Department
had no objection to the release of the powder machinery
including the nitro-cellulose and ammonia oxidization equip-
ment, over and above that machinery needed for the new Army
13
-2powder plants. I have not yet been able to determine
how much of this machinery will be so utilized.
Mr. Cox is working with General Gullion and Colonel
Cremer of the Army on a procedure for the legal transfer
of such equipment.
P.Y.
14
CONFIDENTIAL
June 5, 1940
To:
The Secretary
From:
Mr. Young
CURTISS-WRIGHT CORPORATION
The British have exercised an option dated May 31,
1940, for 1,450 propellers (three different models), including 10 per cent spare parts. This contract has a
total value of $7,456,000 with delivery scheduled from
September 30, 1941, through December 31, 1941.
The French exercised an option dated May 31, 1940,
for 1,890 propellers (two models). Total value of the
contract amounts to $8,240,000 with delivery to be made
some time during 1941 (exact schedule not yet available).
The total value of these contracts amounting to
$15,696,000 includes $1,000,000 of development costs
heretofore incurred by United States Government.
In addition to this total value, $2,080,000 has
been contracted for expansion of plant capacity, $245,000
for personnel training and overtime, and $336,000 for income taxes.
The total value of these contracts plus capital
assistance items amounts to approximately $18,357,000.
NORTH AMERICAN AVIATION
On May 28, 1940, the French contracted for 450 NA-76
trainer airplanes, and 550 Pratt & Whitney 1340 S-3H1
engines. Delivery of this order to start August, 1941,
and to be completed in June, 1942, (for the airframes) and
August, 1942, (for the engines). Total value of the contract amounts to $16,386,000; no capital commitment involved.
P.4.
Dram 15
June 5, 1940
CONFIDENTIAL
Dear General Arnold:
Based upon your conversation with Mr. George J.
Mead this morning, and at his direction, I am returning herewith your memorandum to the Assistant Seare-
tary of War under date of June 1, 1940, in which you
discussed the advisability of placing an educational
order with the Ford Motor Company for the fabrication
of P-38 (Lookhead) two-engine pursuit airplanes, together with a letter from Assistant Secretary Johnson
addressed to Secretary Morgenthau of the Treasury.
It is Mr. Morgenthau's understanding that this
disposition of the matter is satisfactory to you as
you do not desire any action to be initiated at present.
Sincerely yours,
(Signed S. M. Kraus
8. M. Kraus
Enclosures
Major General H. H. Arnold
Chief of the Air Corps
War Department
Washington, D. C.
00: Hon. Henry Morgenthau, Jr.
16
0
0
P
X
June 3. 1940
Dear Mr. Secretary:
What do you think of attempting
to give Ford the educational order set
forth in the attached memorandum?
Sincerely yours,
(Signed) Louis Johnson
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Treasury Department
CONFIDENTIAL
War Department
Office of the Chief of the Air Corps
Washington
June 1, 1940
MEMORANDUM FOR: The Assistant Secretary of War
SUBJECT: Educational Order for Ford Motor Company.
1. The discussed emergency airplane procurement programs
indicate a requirement for approximately 2600 two engine
pursuit airplanes. The P-38 airplane manufactured by the
Lockheed Company is the only airplane of this type now in
production in this country. The Lockheed Company's capa-
city is largely obligated for the production of export
bombers.
2. The immediate placing of an educational order for this
model of airplane 16 essential to expand productive capacity to meet indicated requirements. Statistical data indicate that the P-38 airplane as now fabricated by the Lockheed Company requires an excessive number of man-hours compared with other similar types. The Ford Motor Company's
previous experience in the construction of all metal airplanes and their experience in mass production in the automotive industry 18 considered to qualify the company as
a logical source of additional capacity for this type of
airplane.
3. It is recommended:
a. That authority be granted to negotiate with the
Ford Motor Company for the placement of an edu
cational order for the fabrication of the P-38
(Lockheed) two engine pursuit airplane.
b. That the negotiations provide options which may
be exercised to secure the necessary production
tools.
c. That funds in the amount of $750,000 be made
available to provide for the cost of re-engineer
ing to facilitate the application of mass production methods.
4. If the foregoing be approved it is recommended that
no announcement be made pending the completion of negotiations with all interested individuals, including the
Lockheed representative,
H. H. Arnold
Major General, Air Corps
Chief of the Air Corps
17
18
June 5, 1940.
10:15 a.m.
RE BRITISH PURCHASING PROGRAM
Present:
Mr. Purvis
Mr. Bloch-Laine
Mr. Ballantyne
Colonel Jacquin
Mr. Nelson
Mr. Young
Admiral Spear
Colonel Burns
H.M.Jr:
Shall we start right in? What I have done is
this: I have invited for 10:30 Colonel Burns,
who has been put on this committee in place of
the Quartermaster General and Armiral Spear,
so they are coming in. I thought they could
sit here, and incidentally, Colonel Burns has
been assigned to be Aide to both Knudsen and
Stettinius, so that makes it perfect.
Purvis:
Yes, perfect.
H.M.Jr:
So they are coming in to sit in on this meeting.
Young:
May I make one comment?
H.M.Jr:
Please.
Young:
The telegraphic orders to start the T.N.T. and
the smokeless powder rolling were not issued
due to the objection by the Chief of Staff that
he did not wish to have a hundred and twenty
carloads of T.N.T. sitting in such a congested
area as Raritan for an uncertain period of
time. However, warning telegrams were sent
to have the stuff ready for shipment, so all
they have to do is just put it on the car and
it will come.
H.M.Jr:
In other words, it is up to the Allies to let
them know when they have got a shipment ready.
Purvis:
From my knowledge, that sounds extremely
sensible.
19
-2Bloch-Laine: The first thing would be who would we put in
charge to get in touch with all those move-
ments of trains and things. We can't --
H.M.Jr:
Well, may I make a suggestion? No. 1, that
I would work out with Mr. Nelson afterward
and with Colonel Burns that situation.
Nelson:
Yes, sir. Can we not, Mr. Secretary, use
Mr. Budd and his group in arranging that?
H.M.Jr:
Fine. This thing, if the Allies will appoint
somebody and then afterwards, Mr. Nelson has
the room next to Philip Young, and afterwards -
just that question -Nelson:
We can take all those questions and get them
settled.
H.M.Jr:
Mr. Nelson and Mr. Young. The two of them
will continue it. As they say, I will pass
that one. Anything else, Phil?
Young:
No, sir.
H.M.Jr:
Now, Agenda. "Supplies: Small Arms Ammunition
(See memorandum).
Purvis:
Would you like to glance at those? They are,
none of them, long. I thought we would just
take a series of things.
H.M.Jr:
"Amonget the stocks which we arranged to
purchase yesterday were some 80,000 machine
guns, 25,000 Browning automatic rifles, 500,000
Lee Enfield rifles." And those are all .30
calibre. "Normally a minimum of 10,000 cartridges
per machine gun and 1,000 cartridges per rifle
are required.
"The complement of small arms ammunition for
the above would therefore be of the order of
Purvis:
one billion three hundred million cartridges."
That would bring us to three hundred fifty
million against what would be a normal complement of one billion three hundred million, but
on the other hand we realize there 1e a shortage
20
-3- -
and it is only an appeal for a little further
help in that very important line.
H.M.Jr:
Again, take that up with Burns.
Purvis:
Yes.
H.M.Jr:
And don't think I am just side tracking - go
Young:
This particular problem of small arms ammunition,
.30 calibre is now being studied and looks
ahead, Phil.
hopeful even since last night.
Purvis:
Thank you very much. We entered that plea but
I thought that as everything else had gone very
well --
H.M.Jr:
But I want from now on twenty-four hour service
instead of one day.
Purvis:
Incidentally, he has been doing pretty well.
H.M.Jr:
Who?
Purvis:
This fellow.
H.M.Jr:
Oh, Phil? He is swell, I am talking about the
Army. I think the Treasury is good.
I think the Treasury is fine.
No, I am talking about the Army. I mean, there
is no reason why a question like that can't get
Purvis:
H.M.Jr:
an answer in twenty-four hours.
Young:
It looks hopeful.
H.M.Jr:
All right.
Airplanes: "We have received further cables
expressing great anxiety as to the possibility
of obtaining immediate release of 100 or more
A17A Northrop Dive Bombers, 200 P36 along with
any quantities of pursuit planes and bombers
which could be made available.
Now, where are those Northrope? Are those
Army or Navy?
21
4-
Bloch-Laine: Army.
H.M.Jr:
The reason I wanted Colonel Jacquin was this,
Colonel. I don't think you can get these
Northrops, but you can take it up with the
-
this committee when you leave the room, but
I have got another idea which I want to handle
alone; and if you will tell me about it - I am
seeing, very confidentially, at a quarter of
twelve, Admiral Towers, and I have asked him
whether he would look over and let me know Admiral Towers and Captain Kraus - if they
would start with their oldest dive bombers
that they have got, the very oldest, and how
many of those could they spare, give them to
manufacturers, and get other ones for immediate
release.
Jacquin:
Yes.
H.M.Jr:
Are you familiar with what the Navy has?
Jacquin:
No, I am not familiar with that.
H.M.Jr:
Would you mind being back in Mr. Young's office
at a quarter of twelve in case I say - in case
they say this is what they have got, I can tell
it to you.
Jacquin:
Yes.
H.M.Jr:
But if it is fairly recent stuff, wouldn't you -
Purvis:
and you could get it at a reasonable price,
wouldn't you be glad to get it?
I should think the answer 18 definitely yes.
H.M.Jr:
I mean, the dive bombers are a Navy creation,
you know, it is not an Army creation. It is
a Navy creation. If I could start with the
stuff that they have on hand and could get that
for you immediately - they turn it in to the
manufacturer and the manufacturer would give
it to you. That, I think, is feasible. This
other thing we can try, but I am not very
hopeful.
Jacquin:
On this paper you will see that we are asking
delivery dates on the Navy dive bombers.
22
- -5 H.M.Jr:
We will have to study this, but I was thinking
of something that I might be able to get you
in the next day or two.
Purvis:
Yes, quite.
H.M.Jr:
But this combat thing, we will have to study.
This is the best shape you have ever presented
it to me in. I think you did it to make a
good impression on Mr. Nelson.
Purvis:
That is a thought there. I said the same
thing this morning. You let the cat out of
the bag. The only thing is, they changed the
paper on me on the way, after I had changed
it another way.
H.M.Jr:
Now, this comes from the President at 9:35.
Here is a message from Mr. Bullitt.
"I urgently request Thompson Machine Guns.
Can you take 5,000 from the stocks of the
Navy or at least a thousand _" I mean he
says, "well, I will take a thousand - five
thousand or at least a thousand - and send
them in the most rapid manner to Paris.
Well, I will take this up with Admiral Stark,
myself, see.
Purvis:
Yes.
H.M.Jr:
Purvis:
I will take this up with Admiral Stark myself.
I take it if we can get it, the fact that
Bullitt asked for it three times now -A check will be in the hands --
H.M.Jr:
This is Thompson sub-machine guns.
Purvis:
We are trying to get every one we can.
Now, the next thing, "A certain amount of
bombs, and ammunition, as otherwise the planes
would be of no use for a long time." Is that
the same stuff?
H.M.Jr:
Purvis:
It is the same stuff, and the Chief of Staff
said last week - and that is the reason I am
23
-6bringing it up again - it means much earlier
deliveries and he was much more hopeful,
apparently, that something could be done,
because after all, he said, this was bought
for an emergency and yet it seems impossible
to get it direct since it is potentially there
for the Army to use, and if ever an emergency
arose, this is the one.
H.M.Jr:
Well, I think after you gentlemen get through
here, if you adjourn down to Mr. Nelson's
room and take Admiral Spear and Colonel Burns
with you, and take this memorandum with you -Nelson:
Purvis:
H.M.Jr:
We will go through it, piece by piece.
My understanding is that both - I don't know
about the Navy, but the Services are very
anxious to get it. It is purely one of these
legal works which is holding this thing up.
If it is legal, then get our good friend
Ed Foley in this.
Young:
That is just what I had in mind. I would like
to see our own legal staff working on that
question.
Purvis:
The Chief of Staff thought that one very hopeful
thing might be that the United States Administration
might own the equipment in the plants of the makers
in special circumstances.
H.M.Jr:
In the room, it is our own legal staff who worked
out this surplus thing, you know that.
I suspected it.
That opinion was written - the opinion of the
Solicitor General was written at the other end
Purvis:
H.M.Jr:
of this hall.
Purvis:
I see.
H.M.Jr:
So I mean, when you get ready, get Ed Foley in
to be with you.
"Trinitrotoluol: When I last saw General Marshall
24
-7on May 31st, he indicated - ", , incidentally,
I talked to General Marshall this morning
and he is simply delighted that Colonel Burns
is going to work on this committee. He says
he is the best man and it is going to be helpful
to him to have Colonel Burns.
Purvis:
H.M.Jr:
Yes, quite. We are delighted.
"When I last saw General Marshall on May 31st,
he indicated that in addition to the 5,000 tons
of old stock trinitrotoluol (which we have since
been given the opportunity to acquire) it might
be possible to let us have priorities during the
next few months on delivery of 1,500 tons of
new trinitrotoluol with the understanding this
will be replaced in a few months' time when our
new factories come into production.
"It would be very valuable if this priority
Purvis:
could be granted us."
That would enable us to make use of it for
H.M.Jr:
Did you see that Mr. Parrish from the Standard
shells. The others are good for shells.
011 of New Jersey said he could make T.N.T. the president of Standard 011 of New Jersey
said that he could make any quantity of it?
Purvis:
We are going to need a great deal. Bombs have
got to be made on this side of this side of the
water and we have got to add tremendously to
the quantities. I will follow that up.
H.M.Jr:
Standard 011 of New Jersey.
Purvis:
They can make toluol, too. Of course, they
have cracking refineries and the trinitrotoluene
is merely another step.
Nelson:
He said yesterday they were prepared to make
any quantity for the Government that they want.
H.M.Jr:
Just let me stop here a minute before these
other people come in. The other thing that I
wanted was this, Mr. Edsel Ford telephoned
yesterday that he - he has changed his mind
and his engineers now say that they can do
-8Rolls Royce. They have changed their mind,
although we have this - this Hispano 18 on its
way over.
Jacquin:
I don't know.
H.M.Jr:
Oh, I got the cable.
Jacquin:
You have an answer on that?
H.M.Jr:
Yes, didn't we give it to you?
Purvis:
You told me yesterday, yes.
H.M.Jr:
It is coming over, the Hispano, but we here
feel - we may be wrong - that the Rolls is
better. What do you think?
Jacquin:
Oh, I think the Rolls 18 better.
H.M.Jr:
Good. Well, then, would you - could you get
me an answer by Monday morning that if we go
into production in Rolls, whatever the latest
model 18 - I guess it is the --
Jacquin:
The Merlin --
H.M.Jr:
It is one we have got here.
Bloch-Laine: The Merlin?
H.M.Jr:
Yes. Pieces of it are right downstairs here,
if you want to see it. Incidentally, we have
got the crankshaft of the Rolls alongside the
crankshaft of the Allison. They are downstairs
if you care to see them. It is very, very
interesting to see them and the connecting
rods. They are both there.
Purvis:
The Merlin 20, I think, was what you had. How-
H.M.Jr:
ever, that is details.
Well, you could get - arrange, Phil, that he
(Jacquin) sees George Mead so he will know
which one it 18. It is the one which 18 over
here now. Which is the one we have over here
now?
Purvis:
I am not sure whether you have a Merlin 12 or
a Merlin 20 has since come in or whether the
25
26
-9things are the same.
H.M.Jr:
Well, get the thing, because what I would like
to know more than anything else, is how many
would the Allies like to have, if any, per
month, of Rolls Royce engines, see. Edsel
Ford is supposed to be coming back here Tuesday,
and again, very much in this room, he dropped a
remark that he might be willing to make it for
the United States Government. He didn't know
whether he would make it for the Allies. I told
him that the British Government had done me the
honor of giving me the patents, and I wouldn't
give him the patents unless he would make them
for the Allies, and furthermore - he said,
"Well, I will tell you, we could maybe sell
them to you and then you could sell them.
I said, "Nothing doing, I want a yes or no."
He wants to manufacture for the Allies or he
doesn't. If he doesn't want to manufacture
for the Allies, I certainly wouldn't give a
Purvis:
license to Ford to manufacture an English
engine which he wouldn't make for the Allies.
What is his objection to us?
H.M.Jr:
Well, look at the decoration his father has
from Hitler. What do they call it, "Black
Eagle" or something? He and Lindbergh both
have the same.
Bloch-Laine: I think they have the same.
H.M.Jr:
They have the same, but we are doing a little
gossiping here, but by Monday, gentlemen, do
you think we could have an answer?
Purvis:
I was speaking on the telephone this morning
and he was all prepared to come down and talk but this you want especially for Monday --
H.M.Jr:
I want to know Monday if we go into production,
how many you want per month.
Jacquin:
I know the number for the French, eight hundred.
Purvis:
Eight hundred a month, well, it will be easy--
H.M.Jr:
You want eight hundred a month?
- 10 Jacquin:
Purvis:
27
Yes.
It will be easy to do that. My experience with
Jacquin, when he says he knows what the French
want, he knows it very well.
H.M.Jr:
Well, I don't have to wait until Monday. I
Purvis:
Well, we will see if we can get it in a rush.
H.M.Jr:
Purvis:
Can't you get it right from Lord Beaverbrook?
I have already got some of it.
H.M.Jr:
There is no trouble. I mean - this fellow
love to be rushed.
Olley, he is here, he knows. He knows what
we have got and he knows - he talked 45 minutes,
$247.50 worth of my time to his factory, 80 he
ought to know.
Purvis:
I gathered it was a long telephone message.
H.M.Jr:
Yes. I don't know what was the matter with the
British Embassy telephone. He must like mine
better. But you want 800 a month?
Jacquin:
Eight hundred a month.
Purvis:
Beginning when?
H.M.Jr;
Tomorrow?
Jacquin:
Yesterday.
H.M.Jr:
"Recently we have found difficulty in getting
machine tool manufacturers to accept orders
we have wished to place with them.
"We now see from press notices that the
Administration has put an embargo on the
export of machine tools from the United States.
If interpreted as applying to Allied orders,
such an embargo might have a vital effect in
slowing up production in Allied countries, and
80 make a material difference to the war situation."
Well, the answer is this: In order to be strictly
28
- 11 -
neutral, most likely they are going to take one
tool that is going to the Allies that you most
likely couldn't possibly use, and one tool that
18 going to France, and then they can say they
have taken a little bit of everything, but the
orders that they have got is not to take your
stuff.
Purvis:
I see.
H.M.Jr:
This is on machine tools. I say, the orders
are they may take one French tool and one
English tool and then say, "Look how neutral
we are,' but I think you have got to watch
that Navy crowd. This Captain Almy - this
again would be Knudsen, but this Captain Almy
has got a long arm. I think he might grab
something. His orders were not to grab your
stuff.
Purvis:
Thank you, that is all we want.
H.M.Jr:
But I wouldn't guarantee it. I think --
Purvis:
We should be watchful.
Young:
Japan and Russia don't like it either.
Purvis:
That will break my heart.
I read this "B" before, Combat Planes.
H.M.Jr:
Purvis:
This is the one that was changed. That is
probably where you got it. I gave you an
extra one. This 16 the one that was changed
when I was on the telephone.
H.M.Jr:
Then this should come out, shouldn't it?
Purvis:
I think I shall have to fix up your sheets
H.M.Jr:
But that is the wrong one, isn't it?
This is the right one, but you have got
another copy of it. I gave you another
Purvis:
by mail and give them back to you.
copy.
23
- 12 H.M.Jr:
Is this the right one?
Purvis:
No, the second sheet.
H.M.Jr:
"We are advised that Italy has outstanding in
the United States, Alloy Steel orders of vital
importance to her war potential. The fact
that, against her standard practice she is
now buying these steel alloys in the finished
form is a proof of the urgency of her needs.
It is understood they are required for airplane
manufacture and the extent to which Germany's
requirements are involved, is, of course,
difficult to assess."
Mr. Nelson, ask any questions you want.
Nelson:
Thank you, sir.
(Admiral Spear and Colonel Burns entered
the conference.)
H.M.Jr:
Let these gentlemen read this thing. While
you are reading this, I am going to ask to
be excused. I want to get a little guidance
on Italy, and I will be back in the room in
a minute. So possibly - Colonel Burns and
Admiral Spear, what we are trying to do here,
we are doing a little bit differently. The
Allied Purchasing Commission have come in
and given us an Agenda, and we are going over
it. They I give them my reaction and then I
thought you would adjourn down the hall with
Mr. Nelson and Mr. Young and sit down and take
pieces of this at a time, and then we could
follow through and work that way. Some of it
has to go over to Knudsen and some goes to
Stettinius, and so forth and so on, but I
know if we can work this way we can get
results. If you will just excuse me a minute,
I will be back.
(The Secretary and Mrs. Klotz retired briefly
from the conference.)
H.M.Jr:
Mr. Purvis, do you know where there are any
shipments in the next couple of days on Alloy
Steel for Italy?
- 13 Purvis:
The one that was going immediately, I understand
on the telephone from Mr. Blume, they had decided
to sell to us, that particular shipment. There
was a car on the road to the Seaboard, 50 tons.
He held it over Sunday. I got a cable Sunday
morning. They agreed this morning to sell it
to us.
H.M.Jr:
Anything else?
Purvis:
There is nothing, I think, that wouldn't have
H.M.Jr:
Because if, as I understand it, the bill will
pass in two or three days, so if there is any
taken a week or 80 to build.
particular shipment that you think might slide
through this week, we would be glad to help
you.
Purvis:
H.M.Jr:
I think we can probably take care of it under
those conditions. May I count on you if I need
you and not if I don't?
If you need any help, until we get this law
through Congress, we will help you. But then,
as of today, you don't need any help, is that
right?
Purvis:
I think that is right. It is up to us to come
to you if we really need it for the next two or
three days.
H.M.Jr:
That takes care of Alloy Steel.
Now, molybdenum. Are there any shipments on
that?
Purvis:
There are two shipments. I have managed to
get the producers to agree not to take any
more orders, but there are two shipments at
the moment which are very near to going. One
of them, I think, will not go until the 15th,
which will be all right from the point of view
of what you are talking about. The other one
I had better check again in the light of what
you are saying. Let us perhaps come to you
only if it is really essential. I will check
on the other shipping date.
30
31
- 14 H.M.Jr:
Right. In other words, what I am asking is,
between now and Monday if there is any shipment
of either molybdenum or special steel and you
would like us to use our offices behind the
scenes --
Purvis:
H.M.Jr:
Purvis:
I see exactly.
We are ready to do it.
I will check immediately on that, and we will
hope it doesn't become necessary.
H.M.Jr:
Okay.
Purvis:
Fine. That answers point three, perhaps, the
Spear:
That was on your C-2, your Agenda here.
Purvis:
Yes. C-3 was to ask the status of legislation
H.M.Jr:
C-4 is tungsten.
Purvis:
Tungsten is merely a report. There is nothing
to be done there. It is merely a report -- I
cabled immediately last night.
Going back to it again, this thing gets down
H.M.Jr:
status of legislation.
and you told us that.
to planes and ammunition.
Purvis:
Burns:
Purvis:
Small arms ammunition, planes, and their
equipment and the trinitrotoluene.
You would be just as well pleased to get some
more of that TNT?
Absolutely, anything that you can release we
will take it all just like that.
H.M.Jr:
Well --
Purvis:
And nitrocellulose, probably the same way.
H.M.Jr:
Well, the next thing to do is to go down to
Mr. Nelson's office.
Nelson:
And we will arrange the details of it.
32
- 15 H.M.Jr:
And Mr. Young will go with you. Did you
(Jacquin) learn anything about the engines?
Jacquin:
About what?
H.M.Jr:
You don't know anything about the enginee?
Jacquin:
You mean the number of enginee?
H.M.Jr:
Oh, one other thing, weren't you going to
Purvis:
Well, I am a little worried about Canada in
this way. I have delivered to Mr. Mead last
night the memorandum on the trainer situation
for France, Canada, Australia. England hasn't
talk about engines for Canada?
got any demands or requests to make, so he now
has that. I don't want to -H.M.Jr:
I want it, please.
Purvis:
Yes. All right, I didn't want to bother you
about it until he had digested it, but I will
give it to you immediately.
H.M.Jr:
Purvis:
No, if you don't give it to us, we can't push
it.
True. I will see that copies are delivered
immediately. I am a little worried about
Canada for this reason, that the new munitions
supply has come in very well in a very cooperative manner, but it just happens that
the first two things he has asked whether we
could help him with, we have really been the
H.M.Jr:
cause of his being held up. Otherwise, his
Jacobs engine order is held up. I wondered
whether it would be possible to let them put
it all over the Jacobs, say for the next two
or three months. The quantities are very small
while the thing is being worked up.
Could you, while you are back, send for a copy
of this memorandum and put it in the laps of
these gentlemen?
Purvis:
We couldn't get it photostated, I suppose,
because I don't think we have any more copies
over here.
- 16 H.M.Jr:
Well, Mead's offices are still in the building.
Purvis:
Yes, have you a copy by any chance, Bloch-Laine?
Young:
Do we have a copy of it?
H.M.Jr:
No.
Purvis:
What happened, Mr. Young, is this: When the
Secretary called for me yesterday on the tele-
33
phone, they were preparing the memorandum. As
I ran to the elevator to try to catch a plane,
they handed me the only copy which was finished,
and that was the original which was addressed
to me and that was the one I showed you yesterday
afternoon, but the copies haven't come down be-
cause of the confusion of our leaving last
night.
Young:
I gave it to Mead this morning. We can get
H.M.Jr:
I think while you have everybody together you
ought to make the most of this opportunity.
Purvis:
Very good.
H.M.Jr:
And if it is a question of clearing for a
that back.
couple of months, I am sure you can get a
Purvis:
clearance. You ought to get it right away.
I think it would be a very good thing.
H.M.Jr:
For the morale.
Purvis:
Yes.
H.M.Jr:
I think you ought to get a clearance right
away, and I am afraid - you see, Mr. Knudsen
just coming down - they tell me he is 80 bogged
down and Mr. Mead, I think his group will
all move over there, so if you just want a
few engines, I don't see why you can't get a
clearance on them.
Purvis:
It is really all it is, is tell Jacobs they
can go ahead for the time being for the next
two or three months.
34
- 17 H.M.Jr:
Purvis:
I should think they could get a clearance on
Jacobs, because the figures that I have seen
80 far, neither the Army or Navy want anything from Jacobs, what I have seen so far.
Well, if we may take that up with - Mead along
Nelson:
that line of thought, I think it would be -Well, I would give it to this group.
We will take care of it.
H.M.Jr:
Mr. Nelson, Colonel Burns, Admiral Spear, give
H.M.Jr:
Purvis:
it to them so that they can fight your battle.
Yes, excellent. The only reason we sent it
to Mead was that after we left your room the
other day before Mr. Nelson came, we went
straight to his and he asked us to put this
memorandum on the table, but now the circuit
is duly filled.
H.M.Jr:
Do you want to ask anything, Admiral Spear?
Spear:
I have nothing, no sir. Of course, the
smaller ammunition, that is passed right back
in the Army because the Navy gets all its
smaller ammunition through the Army.
H.M.Jr:
Colonel Burns?
Burns:
No comment.
H.M.Jr:
Mr. Bloch-Laine, anything you want to ask?
Bloch-Laine: Only this, that you will think we are extremely
well stocked with questions.
H.M.Jr:
The only thing we haven't asked for is the
thing the President sent me this morning from
Ambassador Bullitt, can we get 5,000 submachine guns, 1f not from the Navy - if not
5,000, at least a thousand, and I have a
special memorandum from the President on it.
How about that, Admiral?
Spear:
I will have to look it up, sir. That is the
Thompson.
35
- 18 Purvis:
The Thompson.
H.M.Jr:
The Thompson. Now, couldn't I have an answer
80 I could reply to the President by tomorrow
morning?
Spear:
I will get it to you this afternoon, sir.
H.M.Jr:
Wonderful. Well, the best way - on those sort
of things, would you send them to Philip Young,
please, and he will get them to me.
Spear:
To Mr. Young, yes..
H.M.Jr:
But I would like to answer the President. They
Spear:
Or any part.
H.M.Jr:
Or any part. I don't know why - doesn't the
say they want 5,000.
Navy have Thompson sub-machine guns?
Spear:
The Army.
Burns:
Yes, sir. All we have are in the hands of
H.M.Jr:
Does the Navy have any reserve?
Spear:
I think there are some at the Naval Aircraft
H.M.Jr:
troops right now. We don't have any reserve.
Factory. I don't think they are the latest.
They don't care. And then the question of
munitions, too. In fact, if it isn't the latest,
it is all the better from the standpoint of the
facturer and let him turn them over to the Allies,
Navy, because you can turn them in to the manu-
and you can place an order for new ones.
Spear:
I will find out the whole situation.
Purvis:
Spear:
We have large orders on hand, but it is just a
question of - Mr. Hitler won't wait.
If you could give me a picture for the President
I will give you the whole picture.
H.M.Jr:
And, Phil, you hang on to the President's
H.M.Jr:
- 19 memorandum, will you, and then when you get
the one from Admiral Spear, put the two together
and then I can see them.
Well, I think this is very good.
Purvis:
Very. Might I have one word about that special
message that came in to me?
H.M.Jr:
Sure.
36
(COPY)
37
AGENDA
Discussion with The Secretary
10 A.M., , June 5th, 1940
--
A. Supplies
1. Small Arms ammunition - ex stock (See memorandum)
2. Aeroplanes - ex stock and priorities (See Memorandum)
3. Spare manufacturing equipment for explosives and
small arms ammunition (See memorandum)
4. Trinitrotoluol - Priority on 1500 tons
(See memorandum)
B. United States Defense Programme
1. Machine Tools - projected embargo (See memorandum)
2. Aeroplanes
(a) Trainer planes (Memorandum already given
to Dr. Mead)
C. Strategic Materials
1. Alloy Steel for Italy (See memorandum)
2. Molybdenum for Italy (See memorandum)
3. Status of legislation to control exports
and re-exports
4. Tungsten Co-operative Purchase
(See memorandum)
Washington, D. C.
June 5, 1940.
38
COPY)
A-1
SMALL ARMS AMMUNITION - EX STOCK
Amongst the stocks which we arranged to purchase
yesterday were some 80,000 machine guns
25,000 Browning automatic rifles
500,000 Lee Enfield rifles
- all .30 calibre.
Normally a minimum of 10,000 cartridges per machine
gun and 1,000 cartridges per rifle are required.
The complement of small arms ammunition for the
above would therefore be of the order of 1,300,000,000
cartridges.
The actual complement of ammunition which has
been included in our purchases for these machine guns
and rifles is but 100,000,000 rounds. In order to
render the purchase effective further quantities of
.30 calibre ammunition are very urgently desired.
Would it be possible to enagle us to acquire
say an additional 250,000,000 - .30 cartridges?
Washington, D. C.
June 5, 1940.
39
OPY)
A-2
COMBAT AEROPLANES
We have received further cables expressing great
anxiety as to the possibility of obtaining immediate
release of 100 or more A 17 A Northrop Dive Bombers
200 P-36
along with any quantities of pursuit planes and
bombers which could be made available.
If it be impossible because of training requirements to release existing pursuit planes from stock,
18 there any chance of our obtaining some additional
priorities even if comparatively small for Curtiss p-40 pursuit planes which will be
delivered very soon
under deliveries
Douglas Navy dive bombers which are now
and/or
Douglas A 20 and Glenn Martin B-26 which
will be delivered during the next three
or four months
If some of the above planes are available, it will
be necessary to have at the same time their normal combat
equipment, i.e.
Arms for all the planes
Bomb racks, release mechanism, bomb and/or
gun sights,
A certain amount of bombs and ammunition,
as otherwise the planes would be of no use for a long time.
Washington, D. C.
June 5, 1940
40
A-4
TRINITROTOLUOL - PRIORITY ON 1500 TONS
When I last saw General Marshall on May 31st,
he indicated that in addition to the 5,000 tons of
old stock Trinitrotoluol (which we have since
been given the opportunity to acquire) it might
be possible to let us have priorities during the
next few months on delivery of 1500 tons of new
Trinitrotoluol, with the understanding this would
be replaced in a few months time when our now
factories come into production.
It would be very valuable if this priority
could be granted us.
Washington, D. C.
June 5, 1940.
41
B-1
MACHINE TOOLS - PROJECTED EMBARGO
Recently we have found difficulty in getting
machine tool manufacturers to accept orders which
we have wished to place with them.
We now see from press notices that the Admin-
istration has put an embargo on the export of
machine tools from the United States. If inter-
preted as applying to Allied orders, such an embargo
might have a vital effect in slowing up production
in Allied countries and so make a material difference to the war situation.
Can it be assumed that Allied requirements will
not come under this embargo?
Washington, D. C.
June 5, 1940.
42
C-1
ALLOY STEEL FOR ITALY
We are advised that Italy has outstanding in the
United States Alloy Steel orders of vital importance
to her war potential. The fact that, against her
standard practice, she is now buying these steel alloys in the finished form is a proof of the urgency
of her needs. It is understood they are required for
aeroplane manufacture and the extent to which Germany's
requirements are involved is of course difficult to
assess.
The orders on hand with the five most important
steel companies, i.e. with Republic Steel, Crucible
Steel, U. S. Steel, Bethlehem Steel and Timken Roller
Bearing of Canton, Ohio, have a total value between
$4,000,000 and $5,000,000.
It has been ascertained that the steel companies
in question would be prepared not to ship this steel
if it were intimated to them that it is against the
United States Administration policy that such aircraft
steel should be shipped out to Italy.
Actually the Allied Governments are prepared to
buy this steel themselves as they themselves have need
of it for aircraft purposes.
Washington, D. C.
June 5, 1940.
43
Excerpt from meeting of June 5, 1940
at 10:15 a.m.
Present:
Mr. Purvis
Mr. Bloch-Laine
Mr. Ballantyne
Colonel Jacquin
Mr. Nelson
Mr. Young
Admiral Spear
Colonel Burns
H.M.Jr:
Just let me stop here a minute before these other
people come in. The other thing that I wanted
was this. Mr. Edsel Ford telephoned yesterday
that he - he has changed his mind and his engineers
now say that they can do Rolls Royce. They have
changed their mind, although we have this - this
Hispano is on its way over.
Jacquin:
I don't know.
H.M.Jr:
Oh, I got the cable.
Jacquin:
You have an answer on that?
H.M.Jr:
Yes, didn't we give it to you?
Purvis:
You told me yesterday, yes.
H.M.Jr:
It is coming over, the Hispano, but we here feel we may be wrong - that the Rolls is better. What
do you think?
Jacquin:
Oh, I think the Rolls is better.
H.M.jr:
Good. Well, then, would you - could you get me
an answer by Monday morning that if we go into
production in Rolls, whatever the latest model
is - I guess it is the --
Jacquin:
The Merlin --
H.M.Jr:
It is one we have got here.
Bloch-Laine: The Merlin?
-244
H.M.Jr:
Yes. Pieces of it are right downstairs here,
if you want to see it. Incidentally, we have
got the crankshaft of the Rolls alongside the
crankshaft of the Allison. They are downstairs
if you care to see them. It is very, very
interesting to see them and the connecting rods.
They are both there.
Purvis:
The Merlin 20, I think, was what you had. However,
H.M.Jr:
Well, you could get - arrange, Phil, that he
(Jacquin) sees George Mead so he will know which
one it is. It is the one which is over here now.
that is details.
Which is the one we have over here now?
Purvis:
I am not sure whether you have a Merlin 12 or
a Merlin 20 has since come in or whether the
things are the same.
H.M.Jr:
Well, get the thing, because what I would like
to know more than anything else, is how many
would the Allies like to have, if any, per month,
of Rolls Royce engines, see. Edsel Ford is sup-
posed to be coming back here Tuesday, and again,
very much in this room, he dropped a remark that
he might be willing to make it for the United
States Government. He didn't know whether he
would make it for the Allies. I told him that
the British Government had done me the honor of
giving me the patents, and I wouldn't give him
the patents unless he would make them for the
Allies, and furthermore - he said, "Well, I
will tell you, we could maybe sell them to you
and then you could sell them." I said, "Nothing
doing, I want a yes or no." He wants to manufac-
ture for the Allies or he doesn't. If he doesn't
want to manufacture for the Allies, I certainly
wouldn't give a license to Ford to manufacture
an English engine which he wouldn't make for the
Allies.
Purvis:
What is his objection to us?
H.M.Jr:
Well, look at the decoration his father has from
Hitler. What do they call it, "Black Eagle"
or something? He and Lindbergh both have the same.
-3Bloch-Laine: I think they have the same.
H.M.Jr:
They have the same, but we are doing a little
gossiping here, but by Monday, gentlemen, do
you think we could have an answer?
Purvis:
I was speaking on the telephone this morning
and he was all prepared to come down and talk but this you want especially for Monday --
H.M.Jr:
I want to know Monday if we go into production,
how many you want per month.
Jacquin:
I know the number for the French, eight hundred.
Purvis:
Eight hundred a month, well, it will be easy --
H.M.Jr:
You want eight hundred a month?
Jacquin:
Yes.
Purvis:
It will be easy to do that. My experience with
Jacquin, when he says he knows what the French
want, he knows it very well.
H.M.Jr:
Well, I don't have to wait until Monday. I love
Purvis:
Well, we will see if we can get it in a rush.
H.M.Jr:
Can't you get it right from Lord Beaverbrook?
Purvis:
I have already got some of it.
H.M.Jr:
There is no trouble. I mean - this fellow Olley,
to be rushed.
he is here, he knows. He knows what we have got
and he knows - he talked 45 minutes, $247.50
worth of my time to his factory, so he ought to
know.
Purvis:
I gathered it was a long telephone message.
H.M.Jr:
Yes. I don't know what was the matter with the
British Embassy telephone. He must like mine
better. But you want 800 a month?
Jacquin:
Eight hundred a month.
45
-4Purvis:
Beginning when?
H.M.Jr:
Tomorrow?
Jacquin:
Yesterday.
(Admiral Spear and Colonel Burns entered
the conference after the above had taken
place.)
*********
46
0-2
COPY)
47
MOLYBDENUM FOR ITALY
Italy has already purchased this year enough
Molybdenum to take care of more than her total domestic
requirements. There is every reason to believe, in
fact the producers themselves strongly suspect, that
she is buying for Germany.
There are two shipments projected in the near
future amounting to some 200 tons which it is under-
stood the producers would be quite willing to refrain
from shipping if they thought this was in accord with
U. S. Administration policy.
In the present circumstances, would it be possible
to stop these shipments?
It may be of interest to note that all the
producers have recently agreed not to accept any
further orders for Italy, 80 only the outstanding
shipments referred to are in question.
Washington, D. C.
June 5, 1940.
has carbon
young all the
48
AGENDA
Discussion with The Secretary
10 A.M., June 5th, 1940
--
A. Supplies
1. Small Arms ammunition - ex stock (See memorandum)
2. Aeroplanes - ex stock and priorities (See memorandum)
3. Spare manufacturing equipment for explosives and
small arms ammunition (See memorandum)
4. Trinitrotoluol - Priority on 1500 tons (See memorandum
B. United States Defense Programme
1. Machine Tools - projected embargo (See memorandum)
2. Aeroplanes
(a) Trainer planes (Memorandum already given to
Dr. Mead)
(b) Combat planes (See memorandum)
C. Strategic Materials
1. Alloy Steel for Italy (See memorandum)
2. Molybdenum for Italy (See memorandum)
3. Status of legislation to control exports and re-exports
4. Tungsten Co-operative Purchase (See memorandum)
A-1
SMALL ARMS AMMUNITION - EX STOCK
Amongst the stocks which we arranged to purchase yesterday were some 80,000 machine guns
25,000 Browning automatic rifles
500,000 Lee Enfield rifles
- all .30 calibre.
Normally a minimum of 10,000 cartridges per machine
gun and 1,000 cartridges per rifle are required.
The complement of small arms ammunition for the
above would therefore be of the order of 1,300,000,000
cartridges.
The actual complement of ammunition which has
been included in our purchases for these machine guns
and rifles is but 100,000,000 rounds. In order to
render the purchase effective further quantities of
.30 calibre ammunition are very urgently desired.
Would it be possible to enable us to acquire
say an additional 250,000,000 - .30 cartridges?
Washington, D. C.
June 5, 1940.
COMBAT AEROPLANES
We have received further cables expressing
great anxiety as to the possibility of obtaining
immediate release of 100 or more A 17 A Northrop Dive Bombers
200 P-36
along with any quantities of pursuit planes and
bombers which could be made available.
If it be impossible because of training requirements to release existing pursuit planes
from stock, is there any chance of our obtaining
some additional priorities even if comparatively
small for Curtiss P-40 pursuit planes which
will be delivered very soon
Douglas Navy dive bombers which are
now under deliveries
and/or
Douglas A 20 and Glenn Martin B-26
which will be delivered during
the next three or four months
If some of the above planes are available,
it will be necessary to have at the same time
their normal combat equipment, i.e.
Arms for all the planes
Bomo racks, release mechanism,
bomb and/or gun sights,
A certain amount of bombs and ammunition,
as otherwise the planes would be of no use for
a long time.
Washington, D. C.,
June 5, 1940.
50
51
A-3
SPARE MANUFACTURING EQUIPMENT FOR EXPLOSIVES AND
SMALL ARMS AMMUNITION
It is understood that certain spare new equipment is held in reserve by the U. S. Army for
emergency purposes. We have reason to believe that
this equipment includes machinery required for the
production of -
Nitrocellulose Powder
Nitric Acid - Ammonia Oxidation process
Small Arms Ammunition (this may be old
equipment)
If this equipment could be installed by U. S.
manufacturers who are building new plants for the
Allies, some months could be saved in increasing
the output of Nitrocellulose Powder, Trinitrotoluol
and Small Arms Ammunition.
Some legal difficulties have arisen in getting
this equipment into circulation, though I understand
from General Marshall it would suit the U. S. Army
very well indeed (now the emergency for which it was
bought has arisen) to see such equipment installed
ready for use.
General Marshall on May 31st indicated that
further efforts were being made to overcome the
legal difficulties. One thought was that the U. S.
Government might own such equipment as it released
to United States manufacturers for immediate installation to increase the productive output of the country.
We believe the possibilities in this regard
represent a very important contribution to building
up United States potential.
It would be most helpful if a way could be found
promptly to overcome the existing difficulty.
Washington, D. C.
52
A-4
TRINITROTOLUOL - PRIORITY ON 1500 TONS
When I last saw General Marshall on May 31st,
he indicated that in addition to the 5,000 tons
of old stock Trinitrotoluol (which we have since
been given the opportunity to acquire) it might
be possible to let us have priorities during the
next few months on delivery of 1500 tons of new
Trinitrotoluol, with the understanding this would
be replaced in a few months time when our new
factories come into production.
It would be very valuable if this priority
could be granted us.
53
B-1
MACHINE TOOLS - PROJECTED EMBARGO
Recently we have found difficulty in getting
machine tool manufacturers to accept orders which
we have wished to place with them.
We now see from press notices that the Admin-
istration has put an embargo on the export of
machine tools from the United States If interpreted as applying to Allied orders, such an embargo
might have a vital effect in slowing up production
in Allied countries and so make a material difference to the war situation.
Can it be assumed that Allied requirements will
not come under this embargo?
54
C-4
TUNGSTEN - CO-OPERATIVE PURCHASE
On receipt of the advice of the United States
Administration's willingness to join in a cooperative purchase of Chinese Tungsten, I cabled
London asking for concrete suggestions.
In replying London has asked me to inform Mr.
Morgenthau how delighted the Allied Governments
are to learn of the U. S. Administration's intention.
The Allied Governments are approaching the
Chinese Government in the immediate future with a
view to buying Chinese Wolfram for their own requirements.
They are at the same time ascertaining what can
be expected to be available for purchase and will
cable a definite proposal for joint action as soon
as possible.
Washington, D. C.
June 5, 1940.
55
C-1
photostitite
peer
ALLOY STEEL FOR ITALY
We are advised that Italy has outstanding in the
United States Alloy Steel orders of vital importance
to her war potential. The fact that, against her
standard practice, she is now buying these steel al-
loys in the finished from is a proof of the urgency
of her needs. It is understood they are required for
aeroplane manufacture and the extent to which Germany's
requirements are involved is of course difficult to
assess.
The orders on hand with the five most important
steel companies, i.e. with Republic Steel, Crucible
Steel, U. S. Steel, Bethlehem Steel and Timken Roller
Bearing of Canton, Ohio, have a total value between
$4,000,000 and $5,000,000.
It has been ascertained that the steel companies
in question would be prepared not to ship this steel
if it were intimated to them that it is against the
United States Administration policy that such aircraft
steel should be shipped out to Italy.
Actually the Allied Governments are prepared to
buy this steel themselves as they themselves have need
of it for aircraft purposes.
&
58
C-2
to per
MOLYBDENUM FOR ITALY
Italy has already purchased this year enough
Molybdenum to take care of more than her total
domestic requirements. There is every reason
to believe in fact the producers themselves strongly
suspect) that she is buying for Germany.
There are two shipments projected in the near
future amounting to some 200 tons which it is under-
stood the producers would be quite willing to refrain from shipping if they thought this was in accord with U. S. Administration policy.
In the present circumstances, would it be
possible to stop these shipments?
It may be of interest to note that all the
producers have recently agreed not to accept any
further orders for Italy, so only the outstanding
shipments referred to are in question.
Washington, D. C
June 5, 1 40.
57
June 5, 1940
Leaving the meeting in his office with the
Allied Purchasing group, Mr. Nelson, Admiral Spear
and Colonel Burns, HM,Jr went into Mrs. Klotz' office
and
spoke to Secretary Hull at about 25 minutes of
11.
The following is HM,Jr's end of the conversation:
"The Allied Purchasing Board made-a request
of me in connection with molybdenum and alloy steel
going
to Italy. Are we pro-Mussolini today or antiMussolini?
"I will send you the two memoranda which they
have given me over to you personally.
"In both cases I don't think you would have
to do anything. I think a word to both of these
companies and they would be willing to do it on their
own initiative. Would this be agreeable to you, if
I ask these companies to hold off for the rest of the
week? I will do it so that the Italian Ambassador
will not come around to see you. Then in a couple
of days you will know better."
(Mr. Hull said that he will know better in
a few days. He hopes to get something through Congress
which will permit him to put on an embargo. )
June 5, 1940
After the meeting at 10:00 a.m., with the Allied
purchasing group, Purvis stayed behind and asked the Secre-
tary whether they could have any of our destroyers. The
Secretary told him that he would ask for an appointment 1m-
mediately to see the President and when he returned he would
call Mr. Purvis, who was going to wait in Mr. Nelson's office.
*****
Upon his return, at 11:30 a.m. from seeing the
President, H.M,Jr., sent for Mr. Purvis and said, "I saw
the President and spent 20 minutes with him, although I
had only asked for 45 seconds. He stopped everything. He
said I could tell you this, and you only, although I see
no reason why you cannot repeat this to Lord Lothian. There
13 a slight ray of hope. The trouble is with Admiral Stark.
On the Hill, he was asked the question about selling destroyers. "Did they need them all?" And he answered yes.
The President ordered Stark over at 1:45 and he
will try to find out a way to work out getting ten for you.
That is the first time he has ever given me any ray of hope.
If there is any way possible he is going to do it. He is
using the opinion of the Attorney General as a basis for it.
58
Ree'd 59
THE WHITE HOUSE
WASHINGTON
June 5, 1940
MEMORANDUM FOR
THE SECRETARY OF THE TREASURY
FOR YOUR INFORMATION.
F. D. R.
June 6
3141
60
JUN 4 1940
The President,
The White House.
Dear Mr. President:
In accordance with your letter of June 4,
1940, concerning the substitution of the Executive
Assistant to the Assistant Secretary of War for The
Quartermaster General on the Committee to represent
the American Government in its contacts with in-
terested foreign governments in all matters pertaining
to the purchase of war materials in the United States,
I have this date designated Colonel James H. Burns as
a member of this Committee in place of General Gregory.
Respectfully yours,
(8gd.) Harry H Woodring
HARRY H. WOODRING,
Secretary of Mar.
61
June 5, 1940.
Dear Mr. Kandsens
The Secretary has asked me to transmit the enclosed
photostate. They include menoranda and figures from
the Department of the Navy, as well as a confidential
memorandum submitted to the Secretary of State from the
American Consulate at Birmingham, England. I am very
glad to send these in accordance with Mr. Morgenthan's
request.
Sincerely yours,
H. S. Nets,
Private Secretary.
Mr. William S. Kandson,
Advicer on Industrial Production,
Advisory Commission to the Council
of National Defense,
Federal Reserve Building,
Washington, D. c.
Enclosures.
OKF/dbs
62
June 5, 1940.
Dear Mr. Knowsens
The Secretary has asked me to transmit the enclosed
photostate. They include memoranda and figures from
the Department of the Navy, as well as a confidential
memorandum submitted to the Secretary of State from the
American Consulate at Birmingham, England. I - very
glad to send these in accordance with Mr. Morgenthan's
request.
Sincerely yours,
H. S. Klots,
Private Secretary.
Mr. William S. Kandsen,
Adviser on Industrial Production,
Advisory Commission to the Council
of National Defense,
Federal Reserve Building.
Washington, D. C.
Enclosures.
O
63
That copy
64
THE ASSISTANT SECRETARY OF THE NAVY
WASHINGTON
17 May 1940
MEMORANDUM TO SECRETARY MORGENTHAU
In compliance with our former conversations, I am transmitting,
herewith, two preliminary programs of expansions in facilities
and structures in private ordnance and shipbuilding plants
that the Navy would like to finance out of any funds that may
become available in addition to the $250,000,000 allotted to
the Navy to meet supplementary emergency requirements.
Naval ordnance equipment that might be needed for installation
on Coast Guard vessels might logically be financed from this
same fund, if and when it becomes available.
Respectfully
demis Lewis Compton
Attachments (2)
65
PRIVATE PLANT EXPANSIONS
TO BE FINANCED FROM PRESIDENT'S $100,000,000 FUND, OTHERWISE FROM ITEM B
(1) For 5"/38 Single Mounts - Destroyers 1941 Program + 11% Expansion
General Electric Erie Plant
Buildings already up, need machine tools, etc. $700,000
Goss Printing Press (Chicago)
For Twin Mounts for battleships, cruisers, and aircraft
400,000
carriers, and
For 900 - 3" gun conversion to AA
Baldwin Locomotive
William Engineering Co. with Otis Steel Co.
500,000
500,000
500,000
500,000
National Tube, Forging Press
50,000
500,000
Robbins & Meyers (subcontractor of Norden)
500,000
500,000
Allis Chalmers
Blaw Knox (Union Steel Casting, Pittsburgh)
Torpedo Flask Forgings
Midvale Draw Bench
Bomb Sights
Norden Co.
4,650,000
(2) Government Plants
New York in Fire Control Shop
Newport in Torpedo Station Shops
100,000
500,000
600,000
(3) Armor Facilities for Private & Government Plants
In Authorization Bill now pending
6,000,000
SUMMARY
(1) Private small guns, etc.
(2) Government machine tools, etc.
(3) Armor Plants now pending
$4,650,000
600,000
(4) Govt. plant facilities gun factory Charleston
private operation
(5) Mine Assembly Plant Mare Island
& improvements Yorktown
Coast Guard Ordnance $10,135,000)
6,000,000
5.000.000
$16,250,000
915.000
$17,165,000
10,135.000
15,000.00
$42,300,000 Told.
ADDRESS REPLY TO
66
THE SECRETARY OF THE NAVY
AND REFER TO INITIALS
AND No.
NAVY DEPARTMENT
WASHINGTON
CONFIDENTIAL
May 17, 1940.
MEMORANDUM
For:
The Assistant Secretary of the Navy.
Subject: Machine Tools.
1. It is estimated that the Navy will find it necessary
to finance the machine tool program of certain shipbuilding
andfollows:
Navy contracting firms to the extent of about $15,000,000.00
as
Bethlehem Shipbuilding Company
(Quincy)
Bethlehem Shipbuilding Company
(Staten Island)
Bethlehem Shipbuilding Company
(Union Plant)
$2,500,000.00
1,000,000.00
500,000.00
New York Shipbuilding Company
2,000,000.00
Newport News S.B. and D.D. Company 3,500,000.00
Electric Boat Company
1,500,000.00
Bath Iron Works
500,000.00
Total
$11,500,000.00
In addition it is expected that Navy machinery and equipment
manufacturers will require financing for purchase of machine
tools, total of about $3,500,000.00. These firms will be
General Electric, Westinghouse, Allis Chalmers, De Lavel,
Worthington, Farrel Birmingham, Falk, Hyde Windless, American
Engineering and others.
2. In obediance to your orders, I have proceeded with
the task of acquiring machine tools being manufactured in
this country for export. Through an understanding with the
manufacturers, this equipment now ready for shipment is being
held for one reason or another until the Navy can complete the
machinery of f'requisition. The stop orders now total about
$6,000,000.00
of heavy machinery suitable for heavy gun manufacture.
67
-23. In this connection it may be of interest to
Mr. Morganthau that the gun lathes being manufactured
by General Machinery Corporation, in which he is interested
and which will be ready for shipment to a foreign Government within a week, will not be exported.
Copy to:
Coordinative Shipbuilding.
Shot copy
to
68
Knuds
No. 385
C9
American Consulate,
Birmingham, England, March 19, 1940.
CONFIDENTIAL
69
Subject: Birmingham Area Shadow Factories and
Character of Work Done Thereat.
THE HONORABLE
THE SECRETARY OF STATE,
WASHINGTON.
SIR:
I have the honor, with reference to the Department's telegram no. 3 dated March 1, 1940, herewith
to transmit a memorandum treating of Birmingham area
shadow factories and character of work done thereat.
While the enclosure represents the final of a
series of memoranda prepared in line with the sugges-
tions contained in the Department's telegram, the
Consulate will endeavor to supply the Department with
supplementary or additional information bearing on
the subjects dealt with in those memoranda as and
when such becomes available.
Memoranda in the series previously submitted were
transmitted with Birmingham despatches nos. 381, 383,
and 384, dated, respectively, March 7. 13, and 14,
1940 (file 824.2).
As can readily be imagined, considerable difficulty
was encountered in obtaining information on the subject
with/
-70
-2-
with which the enclosed memorandum deals. It was
found that many of the statements made by persons
interviewed were conflicting or at material variance,
but it was considered unwise to go too far in the
direction of getting at the precise facts by cross
questioning.
An attempt was made to exclude from the memoran-
dum discussions or treatments of controversial points,
and it is believed that the memorandum does not give
a very inaccurate picture of the general situation
of which it treats.
Respectfully yours,
James R. Wilkinson
American Consul
Enclosure : Memorandum
JRW:mec
824.2
71
American Consulate,
Birmingham, England,
March 19. 1940.
71
CONFIDENTIAL
BIRMINGHAM AREA SHADOW FACTORIES
AND CHARACTER OF WORK DONE THEREAT
Census.
In so far as it has been possible to ascertain,
the only true shadow factories in the Birmingham area
are one and all directly or indirectly engaged in operations looking towards the completion of fighting air-
craft. The following is a list of these factories:
The Austin Shadow Factory, Birmingham,
The Nuffield (Morris) Shadow Factory,
Birmingham,
The Rover Shadow Factory, Birmingham,
The Standard Shadow Factory, Coventry,
The Daimler Shadow Factory, Coventry,
The Rootes Shadow Factory, Coventry.
The name of each of these factories indicates
the private enterprise with which the factory is
identified. For example, the Austin Shadow Factory
is identified with the Austin Motor Company, Limited,
manufacturer of motor vehicles.
Moreover, each of these factories is managed on
behalf of the Government by a comptroller prominently
associated with the private enterprise with which the
factory is identified. For example, Lord Nuffield,
who is prominently associated with the Morris
automotive interests, manages the Nuffield Shadow
Factory.
What Birmingham Area Shadow Factories Do.
Fighting aircraft, ready to take off. emerge
from/
-2
72
from the ends of assembly lines at the Austin and
Nuffield factories. However, were these completely
unassembled and the parts and components separated into
two piles, one representing what was and the other
representing what was not manufactured at these
factories, the result would clearly indicate what a
relatively small contribution the factories had made,
in the actual manufacturing fields, towards the completion of the machines.
At the Nuffield factory, the pile representing
what that factory had manufactured would contain little
other than fuselage members fashioned at the factory
from metal bars, blocks, rode and sheets produced
elsewhere from raw material. At the Austin factory
the corresponding pile would be much smaller but would
consist largely of similar members.
At the Rever, Daimler, and Rootes shadow factories,
aircraft motors are assembled from parts and components
most of which are manufactured elsewhere. The complete
power units emerging from the ends of production lines
at these factories are sent to shadow factories and to
private plants and are there incorporated into fighting aircraft. The Standard Shadow Factory manufactures
carbureters.
Principal Feeders.
The Austin Motor Company produces a great many of
the parts and components which find their way into aircraft completed at the Austin Shadow Factory. At the
Nuffield Shadow Factory, however, fewer parts and
components/
components come from the private interests with which
73
that factory is identified.
Many of the motor parts and components which find
their way into the motors assembled at the Rover,
Daimler, and Rootes shadow factories come, respectively,
from the private enterprises with which these factories
are identified.
Sub-Feeders.
Motors assembled at the Rover, Daimler, and Rootes
shadow factories by no means consist entirely of parts
and components manufactured either at those factories
or at the private enterprises with which those factories
are identified. In many instances the task of manufacturing parts of larger parts and components of larger
components are farmed out by big producers to little
producers. For example, a magneto attached to the
motor in a shadow factory aircraft may be assembled from
parts and components manufactured by a dozen private
enterprises most of which, before the shadow factory
scheme came into being, had never engaged in the production of those magneto parts and components. However,
since shadow factory production began, the tendency has
been towards rather than away from cutting down the
number of producers who in one manner or another con-
tribute to the task of making all the things which are
found in a shadow factory aircraft. But it is understood that the clamor among small enterprises for a
larger share in war contract work may in the near
future reverse this tendency.
Shadow
Shadow Factories Supplementary.
74
While it is true that some shadow factories
completely assemble aircraft, the same is true of some
private enterprises. Moreover, private enterprises
perform operations which are virtually duplicative of
or comparable with most operations performed by shadow
factories. But certain shadow factories confine their
assembling activities to the completion of certain types
of fighting aircraft - the Hurricane and Spitfire types,
for example. However, it need not necessarily follow,
just because a shadow factory makes or assembles a
given thing, that no private enterprise does the same.
Shadow Factory Limitations.
The motor in a Rover automobile is not composed
of parts and components all manufactured by the Rover
company. The oil seals, the gaskets, and the poppet
valves, as well as other parts and components in the
Rover motor, may be manufactured for the Rover company
by others. However, the Rover motor is not known in
trade parlance as an "assembly job". But the aero
motor which is completed at the Rover Shadow Factory is
known as an "assembly job" because, although the factory
may manufacture a few of the parts or components in that
motor, the main function of the factory is to assemble
into the complete propulsion unit parts and components
most of which are obtained by the factory from outside
sources.
From the foregoing, it will be clear why the Rover
Shadow Factory is not, in the same sense that the Rover
company/
-
company is, manufacturing motors. What has just been
said applies with about equal force to the Daimler and
the Rootes private enterprises and shadow factories at
Coventry. Moreover, for comparable reasons, the
Austin and Nuffield shadow factories at Birmingham can-
not be considered as aircraft manufacturing plant.
Birmingham Area Aircraft Output Expansion.
While it is true that the output of aircraft in
the Birmingham area has tremendously increased in the
last year or so, outside of plant expansion necessitated
by the shadow factory scheme, there has been relatively
little plant expansion in the area for aircraft production purposes. In private industry, the situation
has been largely taken care of through plant adaptation.
In the latter connection, it should be pointed out, the
falling off of the demand for industrial products has
gone a certain way towards freeing workmen as well as
plant for aviation production by private enterprises.
The Principal Contributions of Local Shadow Factories.
(a) Facilitation of Assembly.
Owing to such factors as frequent change in
design and type and the nature of fighting aircraft,
it was never envisaged that such could be turned out
on a mass production basis comparable with that upon
which motor cars are. However, spheres existed in
which there was promise of plant being able greatly to
lower tremendous costs and to speed up operations by
introducing mass production methods. Considerable
technical success was achieved at local shadow
factories/
75
factories in the spheres referred to. In one such
factory's assembly plant, for example, machinery was
designed and installed which rendered it feasible
substantially to reduce the percentage of uninterchangeable metal fuselage members. In another's plant,
assembly procedure was made the subject of scientific
study and mechanical obstacles in the way of orderly
and quick assembly largely removed. But the full
benefits of efforts in these directions have
not, on account of serious labor difficulties, as yet
accrued.
(b) Feeder Control.
The fact that shadow factories are encountering
little difficulty in promptly obtaining from private
enterprise all they need in the way of parts and
components shows what they have contributed in the
reals of feeder control.
(c) Part and Component Stocks.
The gradual building up of part and component
stocks is another contribution. These stocks not
only allow gradual improvement in labor conditions
fully to be taken advantage of along assembly lines
but also much facilitate the maintenance of aircraft
used in the fighting services.
(d) Public Confidence.
The very existence of the shadow factories has
served much to fortify public confidence. While it
is true that rumors as to their inefficiency constantly
circulate, it is also true that the public believes
that/
76
--
77
that should the war take on a horrible aspect, the
shadow factories would at once begin to function
according to original plan and keep the air forces
supplied with craft as needed.
In Concl usion.
Even among local industrialists who, when the
shadow factory plan was in the making, loudly protested
that it simply would not work, there has been some
revision of attitude. In so far as are concerned
functions which private industry could not, in all the
circumstances, quickly adapt itself to perform, the
original opponents of the whole scheme concede that
the shadow factories, though they are not yet making
a good enough showing, are gradually doing better.
These opponents further concede that the technical side
of the shadow factory plan has been splendidly executed
and that labor difficulties are very largely responsible
for the fact that the plan has not produced the results
promised. They fear, however, that those difficulties
will continue very adversely to affect shadow factory
operations as long as the war situation does not develop
into one which, in the opinion of the Government, leaves
the Government no course other than that of using
special powers to force labor to do the Government's
bidding in the matter. If things come to such a pass,
the Government, in their opinion, will have to meet labor
shortage by drafting workmen from private industry and
will have to overcome the obstacles which labor union
rules constitute by suspending them.
James R. Wilkinson,
American Consul.
77
78
June 6, 1940
11:20 a.m.
H.M.Jr:
Hello.
Operator:
Purvis. Go ahead.
H.M.Jr:
Hello.
Arthur
Purvis:
Good morning. I Arthur, I got your message
and, frankly, checked with Mr. Early about
this.
P:
Yes.
H.M.Jr:
P:
I asked what he'd do if he was over there,
and he said he doesn't -- what he would do
18 simply say that the English Government
has a purchasing mission over here and they
are buying whatever planes, or guns, or
surplus material that they can buy.
Yes, exactly.
H.M.Jr:
Yes. See?
P:
I think that's very good. Yes, I'll ring
Monnet. Monnet just wanted to be super-careful,
you see.
H.M.Jr:
P:
Well, I appreciate it. He said that's what he'd
say if it was his responsibility.
Yes. Now, then, up at this end the reporters
are rushing us a lot and, of course, we
refuse to do anything. What -- shall we go
on just
H.M.Jr:
P:
I urged Mr. Early to get in touch with
Woodring and get him to give a statement.
Then we can follow on that and be comparatively
safe. Yes, it would be awfully helpful, of
course.
H.M.Jr:
I think I'd sit tight another day.
-2-
79
P:
Sit tight another day.
H.M.Jr:
Yes.
P:
We'll do it, with a kick. By the way, on that
little matter of the daily report, that will
come to you every day with the greatest
pleasure.
H.M.Jr:
Thank you. Now, thank you 60 much. Look, I
called up Knudsen this morning and told him
that by tonight
P:
Yes.
H.M.Jr:
I wanted an answer on these 2,000
engines.
P:
H.M.Jr:
Yes, yes, yes. I see.
And I don't know where Mead got the figures
from, but Mead told them that you people
wanted 1400 Rolls Royce a month.
P:
It was -- I think as a matter of fact it's
1800. It was 800 for the French and 1,000
for the British.
H.M.Jr:
Well, I didn't know that.
P:
We -- I got the British number from Self
on the telephone immediately after we talked
yesterday. Now for instance, we understood
it a preliminary
build up the program.
H.M.Jr:
so that you can
Yeah. Ah -- do you want to see me this
afternoon?
P:
Well, the only thing that -- that, I mean,
I will fly up to New York and come back again
unless there is something on that very, very
vital matter that I mentioned -- ah -- that
you made a special visit on.
H.M.Jr:
No. No.
80
-3P:
Nothing yet.
H.M.Jr:
No, and -- do you want to have a laugh?
P:
H.M.Jr:
I'd love to have a laugh?
I told Mr. Knudsen this morning that I thought
he'd better see -- ah -- Mr. Ford rather than
I on Tuesday.
P:
Yes, yes.
H.M.Jr:
And he said, what you want me to tell him,
P:
H.M.Jr:
by golly, he's going to build those for the
Allies and no fooling. I says, you' ve got it.
(Laughs) He'll do it, too.
I says, you've got it. I said, that's just
right. I said, I want you to tell him.
P:
Very good.
H.M.Jr:
What?
P:
Very good. (Laughs) Is there anything that I
could usefully talk over with you or am I
better to leave you alone? I have nothing
special except -- ah -- the going on getting
all we can. You see?
H.M.Jr:
Well, just -- I'm trusting hard on the Canadian
thing.
P:
Yeah.
H.M.Jr:
I have no memorandum just what you want on that.
P:
Well, now, the copy of the Mead memorandum 18
rather too long for that purpose.
H.M.Jr:
Couldn't you give me a one-page?
P:
I'll give you a half-page one and send it over.
H.M.Jr:
Will you?
P:
I will.
81
-4H.M.Jr:
That's all I need right now.
P:
Thank you very much, indeed. And then in that
case, I'11 just run back to New York, get myself
a little straightened out because I gather that
the skies have fallen down there, and then be
ready to come down any instant you can tell me
anything on that very important question.
H.M.Jr:
Good.
P:
Thank you very much.
H.M.Jr:
Good luck.
P:
Thanks. Good-bye.
TREASURY DEPARTMENT
WASHINGTON
June 5, 1940.
MEMORANDUM FOR THE SECRETARY:
The Italian Steamship ARSA is scheduled to sail
for Italy June 8th, carrying 778 barrels of molybdenum
concentrates.
Bail Marin
82
PARAPHRASE OF TELEGRAM RECEIVED
83
Paris
Secretary of State,
Washington.
1036, June 5, 11 a.m.
SECRET AND PERSONAL FOR THE SECRETARY OF THE TREASURY
AND THE PRESIDENT.
According to absolute and authoritative information
received by the Ministry of Blockade which was just telephoned to me by Charles Rist, the transshipment during the
past few months to Germany of 175,000 tons of oil products
has been effected by the Italian Government. The Ministry
states that all the good lubricating oil imported by Italy
originates in the United States and considers especially
serious such shipment of lubricating oils by the Italians.
I was asked by Professor Rist whether it might be possible
for the United States to cease shipment of oil and petroleum products to Italy at this moment when Mussolini had
definitely stated he was about to make war on England and
France, even though the date was not fixed.
BULLITT
84
June 5. 1940.
Ny dear Mr. Comptons
I was about to write you this morning in regard
to a letter just received from Mr. Purvis when your
letter of June 4th came to my desk.
I am sending you a copy of Mr. Purvis' letter,
which is self-explanatory. In accordance with his request, I would appreciate it if you would advise - as
to the names and rank of the Navy officials you select
as available for observation work with the British Fleet.
I can then in turn pass on this information to Mr. Purvis
for him to convey to the British Admiralty,
With cordial regards,
Sincerely,
Honorable Lewis Compton,
Assistant Secretary of the Navy,
Navy Department,
Washington, D. C.
Enclosure.
ORF/dbs
By Messenger
05
June 5. 1940.
Ny dear Mr. Comptons
I was about to write you this morning in regard
to a letter just received from Mr. Pervis when your
letter of June 4th came to my desk.
I am sending you a copy of Mr. Purvis letter,
which is self-explanatory. In accordance with his noquest, I would appreciate 11 if you would advise me as
to the names and rank of the Newy officials you select
as available for observation work with the British First.
I can then in turn pass on this information to Mr. Pervis
for his to convey to the British Admiralty.
with cordial regards,
Sincerely,
(Signed) H Morganthan,Jr.
Honorable Lewis Comptom,
Assistant Secretary of the Mary,
Navy Department,
Washington, D. C.
Reclosure.
Dr Messenger 415 on 6/6
ORF/dbe
86
THE ASSISTANT SECRETARY OF THE NAVY
WASHINGTON
4 June 1940
My dear Mr. Morgenthau:
Thank you so much for your thoughtful letter
of May 31. I regret very much indeed that
my attendance at the launching of the U.S.S.
WASHINGTON in Philadelphia precluded the pos-
sibility of my receiving your telephone message
on Friday.
I want you to know how much the Navy appreciates
your efforts with the British Admiralty through
Mr. Purvis. It will be very helpful to us to
have Observers in the British Fleet at this time.
Sincerely yours
Snow
Lewis Compton
Honorable Henry Morgenthau, Jr.
The Secretary of the Treasury
of 87
May 31, 1940
My dear Mr. Compton:
I attempted to get in touch with you by telephone today, but I VRS advised that you were out
of the city until Monday. Mr. Purvis, Chairman
of the Anglo-French Purchasing Board, has just
informed me that the British Admiralty has reversed
its decision AS to the desirability of receiving
Naval Observers in the British Fleet.
I believe you will encounter no difficulties
in this respect in the future.
Sincerely,
(Signed) H. Morgenthan, Jr.
Honorable Lewis Compton,
Assistant Secretary of the Navy,
Navy Department,
Washington, D. c.
By Messenger 1015 am
P4.
PY:bj
88
May 31, 1940
My dear Mr. Comptons
I attempted to get in touch with you by telephone today, but I was advised that you were out
of the city until Monday. Mr. Purvis, Chairman
of the Anglo-French Purchasing Board, has just
informed me that the British Admiralty has reversed
its decision as to the desirability of receiving
Naval Observers in the British Fleet.
I believe you will encounter no difficulties
in this respect in the future.
Sincerely,
Honorable Lewis Compton,
Assistant Secretary of the Navy,
Navy Department,
Washington, D. C.
PY:bj
89
May 31, 1940
My dear Mr. Comptons
I attempted to get in touch with you by telephone today, but I was advised that you were out
of the city until Monday. Mr. Purvis, Chairman
of the Anglo-French Purchasing Board, has just
informed me that the British Admiralty has reversed
its decision as to the desirability of receiving
Naval Observers in the British First.
I believe you will encounter no difficulties
in this respect in the future.
Sincerely,
(Signed) H. Jr.
Honorable Lewis Compton,
Assistant Secretary of the Navy,
Navy Department,
Washington, D. C.
PY:bj
-90
May 9, 1940
My dear Mr. Comptons
I have your letter of May 3rd
in which you suggest that I take up
with the Allied Purchasing Commission
the desirability of having United States
Naval Observers with the British Fiest.
I have made the request of Mr.
Purvis, the Chairman of the Commission,
and just as soon as I hear from him I
will communicate with you further.
Yours sincerely,
(Signed) H. Morgenthau, Jr.
Honorable Lewis Compton,
Assistant Secretary of the Navy,
Navy Department.
By
Messenger 2 15 form
91
May 9, 1940
My dear Mr. Comptons
I have your letter of May 3rd
in which you suggest that I take up
with the Allied Purchasing Commission
the desirability of having United States
Naval Observers with the British Fiect.
I have made the request of Mr.
Purvis, the Chairman of the Commission,
and just as soon as I hear from him I
will communicate with you further.
Yours sincerely,
(Signed) H. Morgenthan, Jr.
Honorable Lewis Compton,
Assistant Secretary of the Navy,
Navy Department.
By Messen
2 is form
32
May 9, 1940
My dear Mr. Compton:
I have your letter of May 3rd
in which you suggest that I take up
with the Allied Purchasing Commission
the desirability of having United States
Naval Observers with the British Fleet.
I have made the request of Mr.
Purvis, the Chairman of the Commission,
and just as soon as I hear from him I
will communicate with you further.
Yours sincerely,
(higned) H. Morgenthau, Jr.
Honorable Lewis Compton,
Assistant Secretary of the Navy,
Navy Department.
By Messenge.
2 15
from
Curris 93
THE ASSISTANT SECRETARY OF THE NAVY
hed and
WASHINGTON
3 May 1940
Print
My dear Mr. Secretary:
With further reference to our recent conversation on
the subject of obtaining Naval Intelligence information from Great Britain and France, I am advised by
the Office of Naval Intelligence that from time to
time the British Admiralty has been approached as to
its willingness to permit one or more United States
Naval Observers with the British Fleet. Comparatively
recently this has been politely refused.
I believe you could be most helpful in this connection
if you could find it possible to have the British
Purchasing Commission convince the British Admiralty of
the desirability of receiving Naval Observers in the
British Fleet in consideration of steps taken in the
United States to facilitate the British Defense Procurement program.
Please accept my sincere thanks for your thoughtful
consideration of the Navy in this regard.
With kindest personal regards, I am
Sincerely yours
High m Entris
frim myson
Lewis Compton
94
ANGLO-FRENCH PURCHASING BOARD
Congtin
WASHINGTON
725 15th ST., N. W.
NEW YORK:
15 BROAD STREET
6629
This letter from
June 1, 1940
Dear Mr. Secretary,
On May 14th at your request I asked the
assistance of the Anglo-French Co-ordinating Com-
mittee in obtaining a reversal of the decision
previously given by the British Admiralty to the
request that one or more of the United States observers be allowed to be with the British fleet.
I am glad to confirm the message which I sent you
yesterday that the British Admiralty has agreed to
reverse its previous decision and that I am authorized so to advise you.
I assume the United States Navy will be
in touch with the British Admiralty as regards personnel. However, I would like in due course to be
able to advise M. Monnet in this regard so that we
can make doubly sure of the appropriate welcome.
Yours sincerely,
anther Blancia
Arthur B. Purvis
Chairman
Henry Morgenthau, Jr., Esq.,
Secretary of the Treasury,
Washington, D.C.
95
- a, 1940.
My dear Mr. Secretary
I want to admoniedge your letter of
May 28th, which has reference to the different
types of engines used by the Away Air Corps.
Sincerely,
(Signed) H. Morgonthan. N
Menorable Heavy H. Woodsing,
Secretary of Well,
Washington, D. C.
GEF/dbs
Photost
WAR DEPARTMENT
& com Individual
to m 6/7/10
WASHINGTON
MAY 28 1940
The Honorable,
The Secretary of the Treasury.
Dear Mr. Secretary:
With reference to the general subject of types of airplane engines which came up at the last Cabinet meeting, a con-
ference with the Chief of the Air Corps indicates the following
types of engines used by the Army Air Corps:
There are four classes of engines utilized by
the Army Air Corps -- the 1500 horsepower class; the
1000 horsepower class; the 600 horsepower class; the
400 horsepower class; and the 200 horsepower class.
These are used for respective types of training and
operations in accordance with the class of aviation
and the airplane used.
Within the 1500 horsepower class there are
two types -- the Pratt and Whitney R-2800 and the
Wright Corporation R-2600.
Within the 1000 horsepower class there are
three types -- the Allison liquid-cooled 1710, the
Pratt and Whitney R-1830, and the Wright Corporation
R-1820.
Within the 600 horsepower class there is
only one type -- that is the Pratt and Whitney R-1340.
Within the 400 horsepower class there is only
one -- that is the Pratt and Whitney R-985.
Within the 200 horsepower class there are
the Lycoming, the Jacobs, the Continental, etc.
To clarify, there may be many models of the same type
engine. These models are necessary to meet installation requirements, questions of supercharging, carburation, ignition, etc.
The question of right-hand rotation and left-hand rotation in
propellers may cause a slight change in type to affect the model.
The question of whether the engine flies at low altitude or high
altitude may make a difference, therefore causing a change in model.
of
97
For purposes of mass production, there are only five
classes of engines which can be reduced to four by combining
the 400 to 600 class. However, in doing this, productive
capacity of plants producing different types would have to be
converted in order to produce the same type.
Sincerely yours,
Maning
Many Secretary of Ware
98
No. 86
AMERICAN CONSULATE
Yunnanfu, China, June 5, 1940
STRICTLY CONFIDENTIAL
SUBJECT: Removal of Industrial Enterprises
to Unoccupied Areas by the Chinese
Government.
The Honorable
The Secretary of State,
Washington.
Sir:
I have the honor to submit for the Department's information
a table containing information concerning the removal of
industrial enterprises to the interior of China under the supervision of the Industrial and Mining Adjustment Commission of the
Ministry of Economics. It should be noted that the table relates
only to enterprises removed under the supervision of this Commission and does not include those removed without its assistance.
10 It should also be noted that the item "Number of Workers Removed"
refers to the number of workers actually removed to the interior,
and does not necessarily indicate the total number of persons now
25
employed by the enterprises in question.
It
99
-2It is requested that this information, which was obtained
through the courtesy of a member of the faculty of Nankai University
in Yunnanfu, be kept strictly confidential.
Respectfully yours,
Troy L. Perkins,
American Vice Consul.
Enclosure:-
1/- Table of the number of
factories and mines
removed to and reconstructed
in the interior.
In sextuplicate to the Department.
Copy to Embassy, Peiping.
Copy to Embassy, Chungking.
Copy to Commercial Attache, Shanghai.
860
SCB:Epy
21
Enclosure to despatch No. 86, dated June 5, 1940, from Vice Consul Troy
L. Perkins, Yunnanfu, China, to the Department of State, entitled: "Removal
of Industrial Enterprises to Unoccupied Areas by the Chinese Government".
Number of Factories and Mines
Removed to & Reconstructed in the Interior
As of the end
As of the end
As of the end
of Dec. 1938
of June 1939
of Dec. 1939
Number of Factories
& Mines Removed
Total Weight of
Machinery (tons)
304
386
418
51,182.50
67,254.30
70,037.30
Number of Workers
Removed
Number of Factories &
Mines Reconstructed
Value of Production
Average Monthly Value
1,793
8,015
11,413
81
229
274
NC$5,512,541
NC$16,079,810
NC$34,268,223
NC$11,682
NC$14,749
NC$17,721
of Production per
Factory or Mine
Number of Factories and Mines
Removed to and Reconstructed in the Interior
(Classified according to provinces
and kinds of industry)
Iron & Steel
Machinery
Electrical Ins-
Total
Szechwan
1
1
168
96
28
18
54
34
Hunan
Kwangsi
Shensi
Others
-
-
-
-
11
50
8
3
truments MarmChemical
Textile & Dye
Food & Beverage
Educational
supplies
Others
Mining
Total
92
20
22
12
31
26
14
12
3
1
3
9
52
-
3
122
1
3
4
1
1
4
223
16
4
1
8
418
-
6
7
facturing
1
Kind of Industry
3
-
1
23
1
27
1
1
23
100
COPY
No. 318
101
Rangoon, Burma, June 5, 1940.
Burma's Transit Trade with China in
SUBJECT:
Supplies Other Than War Materials
During April, 1940.
THE HONORABLE
THE SECRETARY OF STATE,
WASHINGTON, D. C.
SIR:
I have the honor to report that the transit trade
of Burma with China in supplies other than war materials
during April, 1940, the first month of the current fiscal year, amounted in value to Rupees 11,034,807, or approximately $3,310,442 at average rates of exchange for
the period.
As is shown in the enclosed detailed table, these
re-exports were received from the following countries
listed in order according to the value of materials supplied: United States, Hong Kong, French Indo-China,
Netherlands East Indies (exclusive of Java), Italy, China,
Germany, United Kingdom, Straits Settlements, Java, and
Russia. The motorcars received from Indo-China were reshipped to Burma because of the impracticability of delivering them to China from Indo-China. Goods of German
origin were ordered before the outbreak of war in Europe,
and permission to import them through Rangoon was grant-
ed by the British Government. Shipments from the Netherlands East Indies were mostly of German origin and were
brought to the Netherlands East Indies by German ships
taking
102
taking refuge in ports there.
Respectfully yours,
W. Leonard Parker
American Vice Consul
Enclosures:
Statistics of Burma's transit trade with China.
Distribution:
1.
In triplicate to Department.
3.
Copy to Embassy, London.
Copy to Embassy, Chungking.
4.
Copy to Consulate, Yunnanfu.
2.
800-600
WLP/cp
BURZA'S TRANSIT TRADE WITH CHINA DURING APRIL, 1940
(Sources of Supplies. Quantities. and Values of Re-Exports from Rangoon)
Hong Kong
States
Quantity
Indochina
East
(Value)
Quantity
Indies
(Value)
Quantity
Quantity
Commodities
Italy
Dutch
French
United
(Value)
China
Germany
Quantity
Quantity
(Value)
(Value)
United
Quantity
Kingdom
(Value)
Quantity
(Value)
Total
Straits
Java
Settlements
Quantity
Quantity
Quantity
Quantity
(Value)
(Value)
(Value)
Russia
(Value)
(Value)
86
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(40)
-
-
-
(40)
-
-
(Ceta.)
-
-
Cocoa &
-
-
-
-
-
-
-
-
-
(Carts.)
(5)
-
-
-
-
-
-
1
-
-
-
-
-
1
-
(9)
-
-
-
-
-
-
-
-
(9)
-
-
(Rs.)
(5)
-
(Rs.)
(Lbs.)
-
280
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1,979)
-
(1,979)
-
-
-
(Rs.)
260
-
-
(Gals.)
-
tables
-
-
-
(Rs.)
Oils, vage-
(5)
-
(5)
Farinaceous
Cigarettes
-
-
-
(Cetc.)
-
(Rs.)
chocolate
-
-
-
-
foods
-
-
-
(1,932)
-
Timned or canned
fish
(1,932)
-
-
(Rs.)
-
-
-
Condensed milk (Ceta.)
-
-
86
-
Chemicals,
(Rs.)
(137,785)
(73,782)
Drugs & medi-
(83)
(2,947)
(358)
-
(215,763)
-
-
-
-
-
-
(108,801)
(1,477)
-
(491,002)
-
(Rs.)
-
-
(19,177)
-
(620,457)
-
cines, all
kinds
(808)
-
-
all sorts
-
4
-
-
-
-
-
-
-
(356)
-
-
-
-
-
-
-
(Rs.)
Painters'
materials,
not elsewhere speci-
6,500
-
-
-
Dyes
(Lbs.)
6,500
-
-
(Rs.)
-
-
(6,869)
-
-
(Cats.)
(356)
-
-
-
Glue
4
-
-
-
(Orts.)
(Rs.)
700
(48,392)
54
-
(1,151)
(6,869)
754
(49,543)
fied
03
Burma's Transit Trade
h
Hong Kong
United
States
Quantity
Commodities
1940, Continued - Page 2.
China During
Quantity
(Value)
(Value)
Italy
Dutch
East
French
Indochina
Quantity
Quantity
(Value)
Indies
Quantity
(Value)
Germany
United
Quantity
Quantity
Kingdom
Straits
Settle-
(Value)
(Value)
Quantity
ments
China
Total
Russia
Java
Quantity
Quantity
(Value)
(Value)
Quantity
(Value)
Quantity
(Value)
(Value)
(Value)
-
-
-
-
(61)
-
-
-
-
-
237
-
-
(Rs.)
-
-
(2,652)
-
-
-
-
(1)
-
-
-
-
(2,651)
-
(Rs.)
237
-
(Gale.)
-
-
-
1,320
-
-
Oils, essential
-
-
ink
(61)
-
Painters' &
lithographers'
-
-
Pneumatic
-
-
-
-
-
-
1,320
-
-
-
(110,600)
1,320
-
-
(No.)
(Rs.)
-
motor covers
(110,600)
-
-
-
-
-
(10,634)
3
-
-
-
-
3
-
-
-
-
(83)
-
-
-
(Rs.)
-
bedsteads
(6,115)
(4,446)
-
(Rs.)
(60)
-
factures
Furniture,
(369)
(1,076)
(20,262)
-
Rubber name-
(32,268)
-
(Rs.)
(83)
-
(Ort.)
-
factures
-
Cork name-
1,320
-
(Rs.)
-
(No.)
-
motor tubes
(10,634)
-
Pneumatic
-
-
-
-
(60)
14
-
-
-
(509)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(150)
171,731
-
-
-
-
-
-
-
-
(85,354)
-
-
-
-
-
-
-
-
-
128,756
68,950)
-
-
-
-
-
-
-
(16,404)
-
(150)
-
-
-
(Rs.)
9
9
42,975
-
(Rs.)
(Yds.)
-
(Owts.)
(119)
(119)
-
for sewing
-
(508)
-
Cotton twist &
yarn, colored
Flax thread
-
(Cats.)
(Rs.)
Cotton waste
(1)
-
factures
(Rs.)
-
Leather manu-
14
(Outs.)
-
factures
-
Paper name-
251
(425)
(Lbs.)
(Rs.)
251
(425)
th China During Continued - Page
Quantity
(Value)
French
Indochina
Quantity
(Value)
(Voine)
Dutch
East
Indies
Quantity
Italy
China
Quantity
Kingdom
Straits
Settle-
(Value)
Quantity
ments
(Value)
Quantity
Germany
Quantity
Quantity
(Value)
(Value)
United
(Value)
37,000
65,148
-
-
-
-
(6,998)
-
(Yda.) 814,262
(Rs.) (408,341)
Total
Quantity
(Value)
(Value)
(Value)
-
colored
(Value)
(14,123)
-
Cotton shirtings,
white, dyed, &
Quantity
Ruggia
Java
Quantity
-
Commodities
Hong Kong
-
916,489
-
-
United
States
Quantit
-
Burma's Transit Tre
(429,462)
-
Cotton long
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
66
-
(5)
-
(5)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(36,170)
-
-
-
(Rs.)
Belting for
-
(4,357)
(565)
1,500
(2,505)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
110
-
-
(463)
-
-
(Rs.)
-
(
(2,505)
-
-
(Rs.)
Haberdashery &
millinery
-
1,500
-
-
-
(565)
(Lbs.)
-
-
-
-
-
(Rs.)
-
Apparel
Cotton blankets
(715)
-
-
(36,170)
-
3,642)
-
-
(Rs.)
191
(278)
-
manufactured
66
-
Other textiles,
-
(274)
-
a
(Yds.)
(Rs.)
119
-
-
Ribbons
(Yds.)
(Rs.)
(4,943)
(340)
Cotton, other
manufactures
20,500
1,025
-
-
(340)
-
-
-
-
(4)
1,025
-
12
(4,043)
-
(Rs.)
20,500
-
(Yds.)
-
-
Cotton piece
goods, dyed
(Yds.)
(Rs.)
-
cloth, white
463)
Boots & shoes,
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(384,093)
-
(Gals.) 576,375
dangerous
(84)
-
Petroleum,
(18)
-
(Rs.)
4
-
(Pairs)
-
all sorts
114
(102)
576.375
(384,093)
Oils. mineral,
(Rs.)
1,200
(3,263)
178
(505)
32
1,411
(80)
(3,953)
-
-
1
other than danger(Gals.)
ous petroleum
(85)
is
0
5
Burma' Transit Trade-into
(Value)
(Value)
Germany
United
Straits
Quantity
Kingdom
Settle-
(Value)
Quantity
ments
(Value)
Quantity
-
-
-
-
-
-
-
-
-
-
-
-
-
(138)
-
-
-
-
-
-
-
-
-
-
(18,915)
-
-
-
(Rs.)
(1)
-
(40,320)
-
Glassware, all
-
sorts
(3,084)
-
(Rs.)
-
gineering -
-
(5,657)
Building & on-
terials
Total
Quanti
(Value
255.68
-
-
-
(78.72
(43.40
(19.00
-
-
(3,369)
-
(69,702)
22,861
-
(Rs.)
-
-
14,180
-
218,640
-
(Lbs.)
(Value)
Puggia
Quantit
(Value)
(Value)
(Value)
Mineral grease
Java
Quantity
-
Indies
Quantity
Quantity
-
(Value)
China
Quanti
-
Quantity
(Value)
Italy
Dutah
East
-
(Value)
French
Indochina
-
Quantity
Quantity
-
Hong Kong
-
Commodities
United
States
Iron & steal
bars, beams,
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
-
-
-
-
(1,844)
-
-
-
(40,064)
(443,63
(
-
-
(2,931)
16,6
-
-
-
-
(52,580)
(842)
-
-
-
(274,267)
(2,041)
-
-
-
-
(86,799)
(9.3
-
-
-
(30,715)
1
-
-
-
-
-
(274,487)
-
-
(4.403)
-
-
(Rs.)
-
(118,386)
-
(79.480)
-
(Rs.)
-
(48)
Hardware, all
kinds
(8,351)
-
-
(Onts.)
(Rs.)
(852)
4.3
(106,60
-
enumerated
16,634
(Rs.) (443,626)
165
-
Metals, un-
(Owts.)
14
(180)
40
(3,698)
5
(108,4
-
Zino or spelter
(3,676)
-
(Rs.)
(99,227)
(7,471)
2.55
(1,641,8
-
etc.
130
4,151
-
(4.736)
-
(Orts.)
-
tubes, wire,
(61,586)
(44.035)
-
(Rs.)
(39,370)
-
(Onts.)
100
185
259
(61,590)
-
21
-
(Rs.)
(155,502)
-
etc.
etc.
(112,426)
114
44
361
-
-
(Orts.)
Copper, rods,
327
(Rs.) (1,263,571)
sheets, plates
Bress rods,
sheets, wire,
1,688
-
Aluminum, ignots,
(Tons)
-
hoops, tiles
pipes, plates,
bolts. etc.
(321,19)
Machinery &
parts, all
-
-
kinds other
-
-
-
-
-
-
-
-
-
-
(8
-
-
-
-
-
-
-
-
-
-
-
-
5
-
(16,160)
-
(No.)
(Rs.)
-
(Rs.)
(870)
-
-
Motor oars
-
12
-
(No.)
-
Cycles
(647.6
-
than motor
vehicles
-
(16,1
Burna's Transit Trademy th cat
Commodities
United
Hong Kong
States
Quantity
Quantity
(Value)
(Value)
(Value)
China
Germany
United
Quantity
Quantity
Quantity
Kingdom
Straits
Settle-
(Value)
(Value)
(Value)
Quantity
ments
Italy
Dutch
French
Indochina
Quantity
East
Indies
Quantity
(Value)
Russia
Java
Quantity
Quantity
(Value)
(Value)
Total
Quantity
(Value)
Quantity
(Value)
(Value)
Instruments & ap-
-
-
-
-
-
-
(3,140)
-
-
-
-
472
-
3
-
3
(2,246,182)
(14,552)
-
-
-
-
-
-
-
-
-
-
500
-
-
-
-
(11,330)
(11,689)
-
-
-
-
-
-
-
-
-
-
(322,762)
-
(Rs.)
-
(1,974,113)
(911,882)
-
-
8
-
(672,389)
(1,547,911)
500
(Rs.
-
-
264
202
-
(No.
(11,689)
-
(Rs.
(30,974)
-
8
(No.
(579)
-
(No.
(26,782)
-
(3,140)
(50,147)
-
-
(Rs.)
(Rs.
Motor cars imported with bodies
Motor chassis
(331,409)
-
(471,991)
-
(Rs.)
-
Carriages, carts,
for railways
Motor cycles
-
-
scientific, etc.
-
paratus, including
electrical,
(1,974,113)
-
Vehicles, parts of
(348,972)
(901)
-
-
-
-
-
-
77
-
-
-
-
-
-
-
-
-
-
-
-
(
-
-
-
-
5,123)
-
-
-
-
-
6
-
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3.967)
36,000
(44,048)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
9
9
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(861)
(869)
-
-
-
(44,048)
-
-
-
-
(1,459)
-
-
-
(Owts.)
(Rs.)
(3,967)
-
36,000
-
-
-
(Feet)
(1,430)
(7)
-
(Rs.)
-
-
-
-
-
(4.736)
(5,061)
-
-
-
-
-
-
-
(325)
-
-
(Rs.)
-
-
-
-
-
($464,373)
($168,908)
(809)
-
-
-
($589.505)
-
563,028
-
1,547,911
-
($1,912,305)
1,965,016
(698)
-
6,374,351
(3,135)
-
(Rs.)
(4,103)
272,865
170.453
71,880
($81,860)
($51,136)
(21,564)
-
(Rs.)
-
-
-
(22)
-
(Rs.)
All other articles
Total
-
Toilet requisites
-
(22)
(Rs.)
Provisions, canned
& bottled
Stationery
-
(Cetp.)
-
Cinema Fax films
77.
-
-
-
-
-
(5,123)
-
(Cetp.)
(Rs.)
(901)
(133)
-
-
(Rs.)
(862)
-
-
etc.
-
matter
Clooks & watches,
-
(Rs.)
Books & printed
-
Gums & raisins
(2,912)
-
parts of
(7,840)
-
-
Vehicles ships,
(14,463)
-
-
-
mechanically propelled vehicles
(22)
(34,168)
(25,492)
35,136
19,177
14,910
($10,541)
($5,753)
($4.473)
80
11,034,807
($24) ($3,310,442)
JUN 5 1940
108
1. C. 7108
APRIL 1940
UNITED STATES
DEPARTMENT OF THE INTERIOR
HAROLD L. ICKES, SECRETARY
BUREAU OF MINES
R. R. SAYERS, ACTING DIRECTOR
INFORMATION CIRCULAR
UTILIZATION OF NATURAL GAS FOR CHEMICAL PRODUCTS
OF
C LINES DEPARTMENT
THE
OF
BY
HAROLD M. SMITH
AFTER THIS REPORT HAS SERVED YOUR PURPOSE AND IF YOU HAVE NO FURTHER NEED FOR IT. PLEASE RETURN IT TO
THE BUREAU OF MINES, USING THE OFFICIAL MAILING LABEL ON THE INSIDE OF THE BACK COVER.
109
I. C. 7108
April 1940.
INFORMATION CIRCULAR
UNITED STATES DEPARTMENT OF THE INTERIOR - BUREAU OF MINES
UTILIZATION OF NATURAL GAS FOR CHEMICAL PRODUCTS
By Harold M. Smith
Natural gas has been used as a fuel and source of energy almost from
its discovery, but its use as a chemical raw material may be said to have
begun in 1918, when Brooks and Humphrey showed the presence of alcohols
in the "diluted acid oil obtained by the sulfuric acid treatment of cracked
petroleum distillates. However, development of the utilization of natural
gas for chemical syntheses was slow, partly because erroneous ideas
existed regarding the nonreactivity of the hydrocarbons composing natural
gas. Data accumulated by petroleum chemists throughout the world, particularly since about 1930, have shown that these hydrocarbons will react
when activated by the effects of heat, pressure, chemical reagents, and
light; also that the reactions can be mede to proceed at practicable
speeds and to provide good yields of useful products with moderate operating
conditions, especially if catalysts are employed. As these results became
known, the possibility of a synthetic organic chomical industry based upon
these reactions became apparent, and today this industry is large and
growing rapidly in importance.
In this paper the story of the manufacture of chemical products
from natural gas is told simply in graphic form. The industry is develop-
ing so rapidly that some products may have been omitted, but every effort
has been made to include all that are important or likely to become so.
The difficulty of keeping information of this type up to date is shown
by reference to an information circular4/ on the some subject published
by the Bureau of Mines in 1930, in which the important products are shown
on a single chart, whereas five cherts are employed for the same purpose
at present.
The Bureau of Mines will welcome reprinting of this paper, provided the
following footnote acknowledgment is used: "Reprinted from Bureau of
Mines Information Circular 7108."
2 Petroleum chemist, Bureau of Mines, Bartlosville, Okla.
3, Brooks, B. T., and Humphrey, I., The Action of Concentrated Sulfuric
Acid on Olefins, With Particular Reference to the Refining of Petroleum
Distillates: Jour. Am. Chem. Soc., vol. 40, 1918, pp. 822-856.
Smith, H. M., Possible Utilization of Natural Ges for the Production
of Chemical Products: Bureau of Mines Inf. Circ. 6388, 1930, 5 pp.
1/
4
7520
I. C. 7108
It would be desirable to include brief descriptions of some of the
processes, but operating conditions are so varied that no simple method
of explanation seems possible. The subject of catalysts also is so complex that it cannot be covered adequately in a report of this type. The
nontechnical reader is interested mainly in the general picture shown by
the 10 charts; the technical reader will be able to obtain from the references given such chemical and engineering information as is generally
available.
Chart I.
Chart I shows the general composition and major uses of natural gas.
The percentage of the various components in natural gas varies greatly,
but "wet" gas typical of much of that produced lies within the following
limits in percent by volume: Methane, 80-90 percent; ethane, 5-10 percent;
propane, 3-5 percent; isobutane and butane, 1-2 percent: pentanes and
hexanes, 1-2 percent. Chart I also indicates that portion of natural
gas, namely, "dry" and "liquefied" gas, with which this paper deals.
Chart II.
The upper graph of chart II shows the consumption of natural gas in
1938 for domestic, commercial, and industrial purposes. Unfortunately,
figures for the quantity of natural gas used in the manufacture of synthetic chemicals have not been segregated, but are included under "other
industrial uses. The graph at the lower left shows the great increase
in production of non-coal-tar synthetic organic chemicals from 1925 to
1938. However, statistics showing the proportion of increase due to
synthesis from natural gas are not available. The graph on the right
shows the consumption of liquefied propane and butane; statistics of the
amounts used in chemical manufacture indicate a considerable increase
from 1936 to 1938. The 31 million gallons used in 1938 would represent
about 1 billion cubic feet in the gaseous state.
Chart III.
At present there are four basic methods of converting natural-gas
hydrocarbons to other products. These are named, defined, and illustrated
by examples in chart III. "Dehydrogenation" is considered as one type
of "decomposition" and included under that heading. A few words concerning methane may be needed. Although it is the major constituent of natural
gas, it was not chosen to illustrate the reactions because in most instances
it requires severe operating conditions, and the reactions are difficult
to control. Methane can be decomposed by heat to give unsaturated gases
and aromatic liquids, but extreme temperatures are necessary, and the
processes are not economically feasible at present. Oxidation of methane
is being carried out at present, and chlorination of methane is possible,
but it is difficult to control the conditions so as to give a good yield
of a single product rather than a mixture of three or four products.
7520
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CHART I
NATURAL GAS
Hexanes
NATURAL GAS IS A MIXTURE OF HYDROCARBON
Propane
THERE IS SOME OVERLAPPING BETWEEN
sopentane
THESE GROUPS. AS SHOWN BELOW.
AND NON-HYDROCARBON GASES.
BY FURTHER FRACTIONAL DISTILLATION
THE INDIVIDUAL COMPONENTS CAN BE
ISOLATED WHEN DESIRED.
THE SEVERAL HYDROCARBON COMPONENTS
MAY BE SEPARATED FROM EACH OTHER BY
FRACTIONAL DISTILLATION.
SOME NON-HYDROCARBON GASES ARE SEP-
IN THE FIRST SEPARATION THREE GROUPS
OF PRODUCTS MAY BE MADE.
ARATED BY EXTRACTION WITH SOLVENTS.
GROUP SEPARATION
EXTRACTION
RACTIONAL DISTILLATION
LIQUEFIED GAS
DRY GAS
Helium
Propane
Isobutane
Butane
Methane
Nitrogen
Ethane
Propane
NATURAL GAS IS A SOURCE OF
ENERGY WHIGH CAN BE EASILY
UTILIZED.
NATURAL GASOLINE
leobutane
Butane
Isopentane
Pentane
Hexanes
Heptanes
NON HYDROCARBONS
Carbon
Dioxide
HydrogenSulfide
ENERGY USE S
ENERGY USES
VOLATILE ANTI-KNOCK
DOMESTIC & INDUSTRIAL FUEL
POWER PLANTS
BLEND FOR MOTOR FUEL
GAS ENGINES
IN THIS USE THESE NATURAL
LIQUEFIED GASES
GAS HYDROCARBONS INDIVIDU-
REFRIGERATION
OIL FIELD OPERATIONS
ALLY OR COLLECTIVELY SERVE
THEIR MOST IMPORTANT FUNCTION.
HOWEVER THESE HYDROCARBONS HAVE
BECOME IMPORTANT AS RAW MATERIALS FOR
CHEMICAL SYNTHESES.
CHEMICAL USES
DIRECTLY AS SOLVENTS
SYNTHESIS OF ORGANIC CHEMICALS
CHARTS I THRU IX SHOW THE USE
OF "DRY" AND LIQUEFIED GAS FOR
THE PRODUCTION OF SYNTHETIC
ORGANIC CHEMICALS.
110
111
CHART II
800
CONSUMPTION OF NATURAL GAS
1938
700
Bureau of Mines-Minerals Year Book-1939
600
500
400
300
200
100
O
COMMER-
DOMESTIC
CARBON
FIELD
BLACK
CIAL
2800
REFINERIES
ELECTRIC
CEMENT
UTILITY
PLANTS
OTHER
INDUSTRIAL
70
CONSUMPTION OF LIQUEFIED PROPANE AND BUTANE
1937 & 1938
NON-COAL TAR
2400
Bureau of Mines Minerals Year Book-1939
60
SYNTHETIC
ORGANIC
2000
CHEMICALS
50
1600
40
1200
30
U.S. Tar iff
Commission
800
20
Report No 132
400
10
0
0
1925-30
AVERAGE
1934 1938
DOMESTIC
GAS MAN-
INDUS-
UFACTURE
TRIAL
FUEL
CHEMICAL
MANUFACTURING
ENGINE
OTHER
FUEL
USES
CHART III
"DRY" AND "LIQUEFIED" NATURAL GAS
IS COMPOSED OF
ISOBUTANE
BUTANE
PROPANE
ETHANE
METHANE
NITROGEN
Cate
HH
988
H-C-H
H-C-C-H
HC-C-C-H
H-H
HHH
N.
CARBON DIOXIDE
HYDROGEN SULFIDE
CH.
CH,
H HC-H
CO2
METHYL MERCAPTAN
CH,SH
HELIUM
He
THESE HYDROCARBONS
MAY BE CONVERTED TO OTHER PRODUCTS BY
molecule into fragments by
heat (pyrolysia) with
the catalyate elec-
discharge, and generally
catalysts
whereby
molechanged
hydrogen
in pyrolysis,
fragments into new products
cule,
or
to
or
finally
dioxide
and
molecule with nitric acid in the
activated by heat
generally chlorine, activated
by heat. light or catalysts
hereby one or more halogen
group,
atoms are introduced into
carbon molecule by replacing a hydrogen atom.
the hydrocarbon molecule by
replacing on equivalent number
vents may commercially
sufficient
present
in
quantities
Modern solvent extraction
methods have made the utiligation of hydrogen outfide of
industrie interest and the Gov
ernment has extracted helium
from for inflation of
of hydrogen atoms.
craft and for oth
or uses for more than 20 years
SEE CHART IX
SEE CHART VIII
SEE CHART VII
NO...s
the hydro-
water
SEE CHART VI
These usually minor constit-
Reaction of the hydrocarbon
molecule with halogen,
compounds
the recombination of these
NITRATION (4)
HALOGENATION (3)
Reaction of the hydrocarbon
OXIDATION (2)
Reaction of the hydrocerbor
with oxygen air,or
DECOMPOSITION (1)
Splitting the hydrocarbon
SEE CHART X
EXAMPLES OF THESE REACTIONS WITH ETHANE ARE
thane
(1)
CzHs
Ethane
(2)
Oxygen
2 C,He
Ethane
(2)
Heat, Catalysts
C2He
Ethane
O2
Steam
2 H2
Chlorine
(3)
C2H6
Ethane
(4)
C2H4
Cl2
Nitric acid
HNO3
Ethylene
Hydrogen
Heat,Pressure
C2H4
H2
Ethyl alcohol
Catalysts
Heat Catalysts
Heat, Light
Catalysts
Heat
Hydrogen
Carbon monoxide
2CO
Ethyl chloride
Hydrogen chloride
HCI
C2H3CI
Nitroethane
Water
C2H3NO2
112
RADICAL
-2H
I-I
SEE CHART N
CARBON
ACETYLENE
ETHYLENE
ETHYL
DECOMPOSITION
44
HCI
VINTL
VINTL
ACETALDEHYDE
ACETYLENE
CHLORIDE
CHYCHCACH
CHg*CHC
-NC
*HgO
MC
ETHYLENE
CHLOROHYDRIN
ALCOHOL
ETHANE
*
ETHYL
ETHYLENE
ETHYL
ETRACHLORD
NECHEJAME
ETHYL
BUTENE
CHLORIDE
OXIDE
CH2
CH2
OH
+CgHgOH
e
CH2
-HC
+MgO
ETHYLENE
(THYL
+2Hg0
(THER
-HC
+H2O
GLYCOL
OH
HO-
H2O
OXIDATION
(THYL
ETHANE
ACETALDEHYDE
ACETIC
CARBON
MONOKIDE
ALCOHOL
ACETYLENE
HCI
HYDROGEN CHLORIDE
ISO-CaHo
170
*20
SEE CHART .
CARBON
DIGAIDE
CgH4
3HgC
ISOBUTANE
ETHYLENE
CHICI
ETHYL ALCOHOL
ACETIC ACID
ETHYL CHLORIDE
Pb
LEAD
CaHgOH
2CO2
WATER
WATER
C2H2
HCHO
FORMALDEHYDE
H250.
SULFURIC ACID
ETHM
CHLORIXE
2-8-a
HALOGENATION
SEE CHART YE
+C
+CI
CHART IN
ETHYLENE
(THYL
-
CHLORIXE
HEXACLORD
CHLORIDE
FOUR CHIEF REACTIONS
66
AS APPLIED TO ETHANE
+Pb
4C1
TE TRACTINE
LEAD
CHLORICE
CaMe
NITRATION
2-NITRO
SEE CHART IX
-
THESE REACTIONS ARE PURPOSELY SIMPLIFIED FOR
COMPARISON REACTIONS OF THE CONVENTIONAL TYPE
MAY N FOUND IN TEXT BOOKS or ORGANIC CHEMISTRY
SULFATE
ACETIC ACID
2-AMINO
HPROPANCL
113
CHART V
ACETYLENE
Formula of primary
product
Direct use of primary
product
[Direct use of secondary
product]
Primary product
C2H2
Methane, Ethane
Preferred source of
primary product
FUEL FOR CUTTING AND
WELDING
ACETALDEHYDE (see Chart VII)
Secondary product made
from primary product
[solvent, medicinal
acetic acid, resins
Derivative manufactured from
the secondary product
rubber substitute(Neoprene)
(Common name or use)
VINYL ACETYLENE
114
I. C. 7108
115
Nitration of methane is possible if operating conditions are drastic
enough. Thus, methane, the most prevalent of all hydrocarbon gases, is
more resistant to chemical treatment than the others, and its reactions
are less typical as is often true for first members of an homologous
series of compounds. The utilization of methane other than as a gaseous
fuel is still a problem awaiting solution.
This brief discussion regarding methane also brings out the fact
that for each hydrocarbon there is one set of operating conditions temperature, pressure, and contact time - that will provide optimum yields.
For this reason it is often desirable to segregate the hydrocarbons as
individuals or smell groups. For example, if it is desired to decompose
propane thermally to produce propylene, then any butane, pentane, or other
higher-molecular-weight hydrocarbons should be removed. These heavier
compounds react to produce undesirable products under conditions suitable
for propano, On the other hand, methane and ethano would react very
little, and would serve largely 28 diluents to decrease the extent of
the propane decomposition.
Chart IV.
Chart IV gives in some detail the relationship between various
reactions that may be applied to ethane. No attempt is made to show the
mechanism of the reactions indicated - simply the over-all results. The
(+) sign before a product name means that the product is added, and the
(-) sign means that the product is removed. Text books on organic
chemistry describe the conditions under which such reactions will occur.
The chart is by no means complete and is presented only to illustrate
the types of reaction possible in the synthesis of products from gaseous
hydrocarbons.
Chart V.
Chart V should be used for reference in studying charts VI to X, as
it indicates the significance of the several "boxes," brackets, and types
of lettering used in them. In chart V the terms used have the following
meanings:
Primary product.- A product obtained directly by the application of
one of the four basic methods of conversion given in chart III.
Preferred source.- Not necessarily the only source, but the material
reacting most easily or with the best yields.
Direct use.- A use, (1) in which no chemical change occurs in the
substance, as when it is used as a solvent or anesthetic; or, (2) when
the substance is completely destroyed, as when used for fuel. The direct
uses of secondary products are indicated in brackets.
7520
-3- -
I. C. 7108
Secondary product.- A product made from the primary product. Common
names and uses of secondary products and their derivatives are indicated
in parentheses.
Charts VI - IX.
Charts VI, VII, VIII, and IX show the development of chemical syntheses
the primary products obtained by the application of the four methods
from of hydrocarbon conversion shown in chart III. Space does not permit naming
all secondary products. For example, one company lists about 85 organic
chemicals, of which they say: "In producing all those chemicals, olefins
derived by processing natural gas are used either directly or indirectly
as raw materials and in most cases as the most important raw material."
Williams- shows a chert of 71 products that can be made, beginning with
just one olefin, isobutylone. A company menufacturing nitration products
lists 54 derivatives as on incomplete list of those that can be made
available easily. These data show the impracticability of listing all the
products, and indicate the magnitude of the industry being built with
natural gas as a raw material. It should be mentioned that a well-established group of organic compounds also is being prepared from the
pentness, which are not constituents of "dry" or "liquefied" natural gas.
They are present, however, in natural gasoline.
Chart X.
Certain constituents of natural gas are not hydrocarbons and usually
are present in relatively small amounts. Some of these materials, such
as helium, are valuable even when present only to the extent of a few
percent. Others, such as hydrogen sulfido, are a source of trouble and
must be removed even when they are present in small quantities. Hydrogen
sulfide is on example of one of the generally objectionable nonhydrocarbon
gases, which may become valuable when it is removed from the other components of natural gas and converted into useful products.
Some natural gases have e composition of nearly 100 percent carbon
dioxide. Carbon dioxide from this source may be of value if the wells
from which it is produced are geographically situated so that the gas
may be utilized economically. So far, no economic use for nitrogen in
natural gas has been developed.
ACKNOWLEDGMENTS
Collection and arrangement of the information presented in this
paper were carried out under the general supervision of R. A. Cattell,
chief engineer, Petroleum and Natural Gns Division, Bureau of Mines,
Washington, D. C., and N. A. C. Smith, supervising ongineer, Petroleum
Experiment Station, Bartlesville, Okla.
5/ Williams, E. C., Creating Industries, 1919-1939 - Petroleum: Chem.
Ind., vol. 44, May 1939. p. 495.
7520
-4-
CHART VI. PRODUCTS OBTAINABLE FROM NATURAL GAS HYDROCARBONS BY DECOMPOSITION
THERMAL-CATALYTIC-ELECTRIC
GASES
ACETYLENE
HYDROBEN
ETHYLENE
GM,
Natural
FUEL FOR CUTTING AND
Methore Ethans
Ethans Rutana
FUEL FOR CUTTING AND
FUEL FOR CUTTING AND
WELDING
WELDING
BUTYLENE
CaMe
C.M.
Prepare Butanes
medicine
FOR
RIPENING
FRUIT
ISOBUTYLENE
4%
leabutare
Butana
WELDING
REAGENT
(See Chart VI
of
PROPYLENE
C,He
-
SOPROPYL
MECONDARY BUTY ALCOHOL
ANESTHETIC
MINERAL
esters
gass
TERTIARY BUTYL ALCOHOL
eafers
CHLORIDE
CHLORIOR
COAL
fuel, fuel all
bee
givee
-
Chart
derivatives
-
MALIDES
THANES
mediates)
(selvent)
for
fuelal
dry
-
cells
ARODUC
(motor
DIOXIDE RESIDES
Chart
moulded plastics
fuels
anhyoride
DIOXIDE RESINS
synthetic rubber
maided plastice
(solvents
cleaners
RESIDE
BUTADIENT
BUTTL
SOPROPYL ETHER
(anti-knowk
MAY
molded
CHLORIOR
compound
CHLORIDE
reain
plastics
CLUBITS
ACETATE
LIQUIDS
BUTADIENE
BENZENE
CH,EMB.CH
CM
TOLUENE
C,M,
XYLENE
STYRENE
GROW,
CHHCHCH,
(there
SOLVENT
SOLVENT
MOTOR FUEL
PATHETIC PUBBER
MOTOR
BENZENES
ALAPY TOLUENES
SOLVENT
REAGENT FOR ORGANIC
SYNTHESES
POLYSTVRENE RESIDE
(moulded plastics
TOLDENE
SENZENE
BENEW
polvent
beet
motor
HALOES
fuel)
transfer
medium)
EMES
INTI
TOLUENE SULFONIC ACIDS
BENZENE SULFONIC ACID
derivatives
MIROBENZENE
SOLIDS
ANTHRACENE
Coffe
Cotto
Natural
Natural day
INSECTIONE
PATIALIC
moulded
VALOGEMATED
NAPHTHALENE
LIMINGANTS
Natural Ses
PIGMENT IN INK AND PAINT
CHEMICAL USED
AMERICAN
plastice
CARBON BLACK
c
NAPHTHALENE
eyestuffs
COMPOUNDING RUMBER
DES
CHART VII
PRODUCTS OBTAINABLE FROM NATURAL GAS HYDROCARBONS
BY
OXIDATION
THERMAL-CATALYTIC-PRESSURE
METHYL ALCOHOL
ETHYL ALCOHOL
Methane, Ethane
Methane Ethane
ANTI-FREEZE
SOLVENT
SOLVENT
ANTI-FREEZE
MALIDES
[refrigerents,solvente]
selvente
BUTYL ALCOHOLS
C,H,OH
CH,OH
Propone Butone
Butone
SOLVENT
SOLVENT
PROPYL COMPOUNDS auth
BUTYL COMPOUNDS such
MOTOR FUEL
PRESERVATIVE
PARALDEHYDE
disinfectant
hoperifié
ETHYL ALCOHOL
Synthane
ETHER
MIRROR SILVERING
REAGENT
PHENOLIC RESINS
fanasthetic
Ethone Propone
MEDICINAL
PARAFORMALDEHYDE
Formaldshyde
[refrigerent, selvent
CHYCHO
Methore, Ethane
ACID
Natones
chart
ACETALDEHYDE
ACETALDEHYDE
HCHO
PHOTOGRAPHIC CHEMICAL
FORMALDEHYDE
this
chart
METHYL ETHER
FORMALDEHYDE
DISINFECTANT
ACETIC ACRO-sea Acetic
ESTERS
Because
PROPYL ALCOHOLS
CHOO
CH,OH
this chert
ACETIC ACID
solvent
HEXAMETHYLENE
CHLORIDE
TETRAMINE
anesthetic]
(medicinal)
Dolvent) and tetroathyl
RESIDE
DYESTUFFS
AMINES
IOOIDE and BROMOE
ETHYL ESTERS
RESINS
andOCTYL
ALCOHOLS
METALLIC ETHYLATES
ACETONE
CH COCH,
Propone
SOLVENT FOR
FORMIC ACID
Lithone
Propone
CHEMICAL USED
alla,waves,
electroplating
tanning
MEDICINALS
sulfanal (soperific)
DIACETONE ALCOHOL
haxyl alcohols
KETENES
anhydride
diketenee
ACETIC ACID
HCOOM
ACETYLENE
CHLCOOH
Co.H.
Butane
Methene
SEE ACETYLENE CHART V
SOLVENT
CARBON DIOXIDE
HYDROGEN
CO2
Natural Gas
H2
CARBON MONOXIDE
FIRE EXTINGUISHER
CO
MEDICINAL
REFRIGERANT DRY ICE)
Methane
METALLIC SALTS
Insecticides dyestuffs
Acetone-this chart
ANHYDRIDE
acetvisting
METHYL ALCOHOL
Methyl
Alcohol
readent
CELLULOSE ACETATE
A-PROPYL ALCOHOL
films
ALKYL ACETATES
ACETAL DEHYDE
see acefaldehyde
this chart
Propyl Alcohol
chart
ISOBUTYL ALCOHOL
Alcohols
this chart
MYDROCAR
alcohols
117
CHART VIII
PRODUCTS OBTAINABLE FROM NATURAL GAS HYDROCARBONS
BY
HALOGENATION
THERMAL-CATALYTIC-PHOTOSYNTHETIC
METHYL CHLORIDE
METHYL BROMIDE
CH3CI
CH,Br
ANESTHETIC
CARBON TETRACHLORIDE
CHCI.
CCI.
Mathana
Methane
Mathana
ORGANIC REAGENT
ANESTHETIC
ANESTHETIC
SOLVENT
FIRE EXTINGUISHER
SOLVENT
SOLVENT
FIRE EXTINGUISHER
Methane
SOLVENT
CHLOROFORM
CH.C.,
Mathana
REFRIGERANT
METHYLENE CHLORIDE
INSECTICIDE
REFRIGERANT
MEDICINAL
MEDICINAL
INSECTICIDE
CHLOROFORM
see chieraferm-this shart
METHYLENE CHLORIDE
see methylene chlorida this
chart
HEXACHLOROETHAME
TETRACHLOROETHYLENE
(selvent)
[refrigerant (Preen)
ETHYL CHLORIDE
ETHYLENE CHLORIDE
POLYCHLOROETHANES
CHLOROPROPANES
C.H.CI,
CHECK
CHECK
CHC
Ethane
Ethane
REFRIGERANT
ANESTHETIC
SOLVENT
LEAD TETRACTHYL
sulfere
ETHYL MERCAPTAN
ETHYL CELLULOSE
Ethane
SOLVENT
SOLVENTS
ANESTHETIC
FLOTATION AGENTS
VINYL CHLORIDE ACETATE
resins (Vinylite)
Propene
SOLVENTS
CHLOROBUTANES
Butanes
SOLVENTS
DICHLOROPROPANE
cycleprepane (anesthetic)
ETHYLENE GLYCOL
(antifreeze) alveet derivatives
ETHER
[selvent(petroleum refining
DIOXAN
[solvent]
ETHYL BENZENE
styrene (polystyrene realina)
ETHYLENE DIAMINE
DI- A TRIETHYLENE CLYCOLS
SUCCINIC ACID
ETHYLENE OXIDE
mone di friethenolemines
WITH SODIUM POLYSULFIDE
rubber substitute (Thisket)
118
CHART IX
PRODUCTS OBTAINABLE FROM NATURAL GAS HYDROCARBONS
BY
NITRATION
THERMAL
NITROMETHANE
CH2NO,
Methane, Propane,
Butane
NITROETHANE
NITROPROPANES
C2H-NO2
Ethane
C3HHNO2
Propane,
Isobutane
NITROBUTANES
C4HgNO2
Butane,
Isobutane
SOLVENTS
PRIMARY AMINES
[Rubber accelerators]
NITROHYDROXY COMPOUNDS
Synthesis of high explosives
AMINOHYDROXY COMPOUNDS
[emulsifying agents]
CHLORONITRO COMPOUNDS
Insecticides]
FATTY ACIDS
Cellulose esters (plastics),
solvents
HYDROXYLAMINE SALTS
Flotation reagents
CHLORONITRO ALCOHOLS
ALDEHYDES and KETONES
Plastics and solvents
119
CHART X
USES OF NON-HYDROCARBON NATURAL GAS CONSTITUENTS
HE LIUM
HYDROGEN SULFIDE
HE
H2S
OXYGEN DILUENT FOR
diving and caisson work
and medical purposes
INFLATION OF
lighter than air ships,
toy and meteorological
balloons
ELECTRIC DISCHARGE TYPE
CARBON DIOXIDE
CO2
REFRIGERANT (DRY ICE)
SULFUR
[nsecticide], sulfuric acid
MERCAPTANS
THIOETHERS
CARBON DISULFIDE
HYDROGEN CHLORIDE
THIOSULFATES
FIRE EXTINGUISHER
FOOD PRESERVATIVE
BEVERAGE CARBONATOR
SIGNS
PRESERVATIVE
120
I. C. 7108
121
Much of the information contained in this circular was obtained
directly from companies in the petroleum and chemical industries in
reply to requests for data relating to hydrocarbon utilization. The response to these requests was gratifying, and the writer is pleased to
acknowledge his indebtedness to all who contributed.
The writer is also particularly appreciative of the criticisms of
the paper by members of the Petroleum Division both at Bartlesville and
the other stations and field offices, by members of petroleum company
laboratories, by Dr. H. B. Hass, head of the Department of Chemistry at
Purdue University, Lafeyette, Ind., and J. C. Walker, general superin-
tendent, Chemical Division, Cities Service Oil Co., Bartlesville, Okla.
Bartlesville Station.
The charts were drawn by Ralph Wright and Russell Himmelright of the
SELECTED REFERENCES
General
1. BROOKS, BENJAMIN T. Synthetic Organic Chemicals from Petroleum - An
American Development. Ind. Eng. Chem., Ind. Ed., vol. 31, No. 5.
May 1939, pp. 515-519.
2. ELLIS, CARLETON. The Chemistry of Petroleum Derivatives. New York,
vol. I, 1934. 1285 pp.: vol. II, 1937. 1464 pp.
3. FROLICH, P.K. Chemical Trends in the Petroleum Industry: Ind. Eng.
Chem., vol. 30, August 1938, pp. 916-922.
4. FROLICH, P.K. and WIEZEVICH, P.J. Chemical Utilization of Natural and
Refinery Gases. Ind. Eng. Chem., Ind. Ed., vol. 24, No. 1, January
1932, pp. 13-17.
5. MORRELL, JACQUE. Developments in Hydrocarbon Chemistry. Oil and Gas
Jour., vol. 37, No. 44, Mar. 16, 1939, pp. 40-42, 55. 57-58.
6. WHITMORE, F.C. Organic Chemistry. D. van Nostrand Co., New York, 1937,
1080 pp.
7. WILLIAMS, E. C. Creating Industries, 1919-1939 - Petroleum. Chem. Ind.,
vol. 44, No. 5, May 1939. p. 495.
Thermal and Catalytic Decomposition
8. DUNSTAN, A.E., HAGUE, E.N., and WHEELER, R. V. Thermal Treatment of
Gaseous Hydrocarbons. I. Laboratory-Scale Operation. Ind. Eng.
Chem. Ind. Ed., vol. 26, No. 3, March 1934, pp. 307-314
9. EGLOFF, GUSTAV. Reactions of Pure Hydrocarbons. New York, 1937.
10. ELLIS, CARLETON. See reference 2.
7520
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I. C. 7108
11. FREY, F.E. Pyrolysis of Saturated Hydrocarbons. Ind. Eng. Chem., Ind.
Ed., vol. 26, No. 2, February 1934, pp. 198-203.
12.
FREY F. E., AND HUPPKE, V. F. Equilibrium Dehydrogenation of Ethane,
Propane, and the Butanes. Ind. Eng. Chem., Ind. Ed., vol. 25, No. 1,
January 1933. pp. 54-59.
13. FROLICH, P. K., AND WIEZEVICH, P. J. Cracking and Polymerization of
Low-Molecular-Weight Hydrocarbons. Ind. Eng. Chem., Ind. Ed., vol. 27.
No. 9, September 1935, pp. 1055-1062.
Polymerization and Alkylation
14. BIRCH, S. F., DUNSTAN, A.E., FIDLER, F.A., PIM, F.B., AND TAIT, T. High-
Octane Isoparaffinic Fuels. Ind. Eng. Chem., Ind. Ed., vol. 31, No. 7.
July 1939. pp. 884-891.
15. ELLIS, CARLETON. See reference 2.
16. FREY, F. E., AND HEPP, J. H. Noncatalytic Addition of Ethylene to Paraffin
Hydrocarbons. Ind. Eng. Chem., Ind. Ed., vol. 28, No. 12, December
1936, pp. 1439-1445.
17. IPATIEFF, V. N. Catalytic Polymerization of Gaseous Olefins by Liquid
Phosphoric Acid. I. Propylene. Ind. Eng. Chem., Ind. Ed., vol. 27,
No. 9, September 1935, pp. 1067-1069
18.
Catalytic Refining Methods. Oil and Gas Jour., vol. 37.
No. 46, Mar. 30, 1939, pp. 86, 88, 91, 93.
19. IPATIEFF, V. N., AND CORSON, B.B. Catalytic Polymerization of Gaseous
Olefins by Liquid Phosphoric Acid. II. Butylenes. Ind. Eng. Chem.,
Ind. Ed., vol. 27, No. 9. September 1935. pp. 1069-1071.
20. KEITH, P. C., JR., AND WARD, J. T. The Thermal Conversion of Low
Molecular Weight Hydrocarbons to Motor Fuels. Chem. and Ind., vol. 44,
No. 27, July 3. 1936, pp. 532-538.
21. RIDGWAY, C. M., WAGNER, C. R., AND SWANSON, H. R. Products of Polymer-
ization. Nat. Petrol News, vol. 28, No. 45, Nov. 4, 1936, pp. 47-48,
50-52, 54-55.
Hydrogenation
22. BROWN, C. L., AND GOHR, E. J. The Hydrogenction of Olefin Polymers
for the Manufacture of High-Octane-Number Fuels. Proc. Second World
Petrol. Cong., Paris, 1937, vol. 2, pp. 289-298.
23. ELLIS, CARLETON. See reference 2.
7520
-6-
122
I. C. 7108
Chlorination
24. ELLIS, CARLETON. Sea reference 2.
25. HASS, H. B. The Chlorination of Methane and Its Homologs. Sci. Petrol.
vol. 4, London, 1938, pp. 2787-2794.
26. HASS, H. B., McBEE, E. T., AND WEBER, PAUL. Syntheses from Natural Gas
Hydrocartons. Identity of Monochlorides from Chlorination of Simpler
Paraffins.
Ind. Eng. Chem., Ind. Ed., vol. 27, No. 10, October 1935.
pp. 1190-1195.
Nitration
27. ELLIS, CARLETON. See reference 2.
28. HASS, H. B., HODGE, E. B., AND VANDERBILT, B. M. Nitration of Gaseous
Parafiins. Ind. Eng. Chem., Ind. Ed., vol. 28, No. 3, March 1936,
pp. 339-344.
Oxidation
29. ELLIS CARLETON. See reference 2.
30. MAREK, L. F., AND HAHN, D. A. The Catalytic Oxidation of Organic Compounds in the Vapor Phase. Chemical Catalog Co., Inc., New York,
1932, 436 pp.
31. WIEZEVICH, P. J., AND FROLICH, P. K. Direct Oxidation of Saturated
Hydrocarbons at High Pressure. Ind. Eng. Chem., Ind. Ed., vol. 26,
No. 3. March 1934, pp. 267-276.
Alcohols
32. BROOKS, BENJAMIN T. Synthetic Alcohola and Related Products from Petro-
leum. I. Olefin Raw Materials. Ind. Eng. Chem., Ind. Ed., vol. 27,
No.
3. March 1935, pp. 278-282; II. Manufacture of Alcohols and Esters:
pp. 282-288.
33. ELLIS, CARLETON. See reference 2.
Glycols
34. ELLIS, CARLETON. See reference 2.
35. McCLURF, H. B. Industrial Applications of the Glycols. Ind. Eng.
Chem., News 3d., vol. 17. No. 5, Mar. 10, 1939, pp. 149-153.
Ethylene
36. ELLIS, CARLETON. See reference 2.
7520
-7-
I. C. 7108
37. LOWY, ALEXANDER. Chart of Recent Aliphatic Chemicals - I. Ind. Eng.
Chem., News Ed., vol. 10, Jan. 10, 1932, p. 6.
Acetylene
38. ELLIS, CARLETON. See reference 2.
39. LOWY, ALEXANDER. Chart of Products Derived from Acetylene. Ind. Eng.
Chem., News Ed., vol. 11, No. 10, May 20, 1933, P. 156.
Water Ges Synthesis
40. EGLOFF, GUSTAV, NELSON, EDWIN F., AND MORRELL, J.C. Motor Fuel from Oil
Cracking. Production by the Catalytic Water-Gas Reaction. Ind. Eng.
Chem., Ind. Ed., vol. 29, No. 5, May 1937, pp. 555-559.
41. ELLIS CARLETON. See reference 2.
Resins
42. ELLIS, CARLETON. Tailoring the Long Molecule. - Plastics. Ind. Eng.
Chem., Ind. Ed., vol. 28, No. 10, October 1936, pp. 1130-1144.
43. INDUSTRIAL AND ENGINEERING CHRMISTRY, INDUSTRIAL EDITION. Symposium
on Synthetic Rubber and Elastic Polymers. Vol. 31, No. 8, August 1939,
pp. 934-968.
44. U. S. TARIFF COMMISSION. Synthetic Resins and Their Raw Materials.
Rep. 131, 2d. ser., 1938.
7520
-8-
123
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m
CATIONS TO
THE SECRETARY OF STATE
WASHINGTON. D
124
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
June 5. 1940
FA 855.01/21
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury and
encloses a copy of a telegram from the American
Ambassador at Paris concerning two decrees drafted at
a meeting of the Belgian Cabinet at Paris on May 30,
1940.
Enclosure:
From Paris,
May 31, 1940.
ng
PARTMENT OF STATE
DIVISION
BUREAU
FA
{
ENCLOSURE
TO
LETTER DRAFTED
ADDRESSED TO
Treasury
125
JR
Paris
Dated May 31, 1940
Rec'd 10:02 a.m.
Secretary of State,
Washington.
971, May 31, 1 p.m.
WE understand that the 100 odd members of the Belgian
Parlicment meeting at Limoges this afternoon will approve two
decrees said to have been draftsi at a meeting of the
Belgian Cabinet here last night.
The first decree will declara in the nome of the
Belgian people and in accordance with Article 82 of the
Belgian Constitution that the King being under the power
of the invader is in a position which makes it impossible
for him to reign.
The second decree will give the Belgian Ministers
assembled in council power to EXECUTE judgements and
mandates in the name of the Belgion people.
The Belgian Cabinet will then proceed to Poitiers where
this EVENING the Ministers will meet to promulgate the decrees.
m
BULLITT
DDM
331790
$ 11.000
BAD
126
REB
GRAY
Milan
Dated June 5, 1940
REC'D 2:55 P. m.
Secretary of State,
Washington.
55, June 5, 5 p. m.
Today's market index 213. 77. Volume 70,725.
Further selling pressure continued decline in quotations
in moderate trading without marked choracteristics.
SHOLES
HTM
eas
45140
127
ITALIAN STOCK PRICES
(Milan)
Daily*
10
Weekly
APR.
MAY
PER
JUNE
APRIL
JULY
6
GENT
SATURDAY FIGURES
PER
PER
GENT
CENT
MAY
20
13
TTTT
27
JUNE
25
18
11
4
MAR.
TTTT
1
FEB.
15
8
JAN.
1 940
22
mm
PER
CENT
270
300
270
300
260
260
280
280
250
250
240
260
240
260
230
230
240
240
220
220
210
220
210
220
200
200
200
200
190
190
180
180
180
180
SHARES
SHARES
THOUSANDS
THOUSANDS
Volume
200
200
160
160
100
100
140
140
JUNE
JULY
0
6
1 940
MAY
13
20
APRIL
27
4
APR.
18
11
MAY
1940
25
1
MAR.
8
FEB.
0
JAN.
15
22
JUNE
SATURDAY FIGURES PRIOR TO MAY 20.
Office of the Secretary of the Treasury
Division of Research and Statistics
FO 141 2
128
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE June 5, 1940
Secretary Morgenthau
TO
FROM
Mr. Haas YOH
Subject: Railroad freight movement for export.
Receipts of freight for export at New York increased
again during the week ended June 1 to reach a new high level
for the period covered by our records. Receipts at 9 other
North Atlantic ports showed even more pronounced expansion.
The total increase for the week was 812 cars, which compares
with an increase of 872 last week. (See Chart 1 and table
attached)
The volume of freight exported from New York increased
last week by only 46 cars (see Chart 2), consequently the
heavy volume of incoming export freight is tending to pile
up at New York. The volume of lighterage freight in storage
and on hand for unloading in New York harbor now totals
8,384 cars, an increase of 527 oars for the week. (See
Chart 3)
129
RECEIPTS OF FREIGHT FOR EXPORT AT NEW YORK
AND AT 9 OTHER NORTH ATLANTIC PORTS
New York 1
(
December 2
December 9
December 16
December 23
December 30
3,435
3,922
4,088
4,848
3,856
9 other North
Atlantic ports 2
Total
1,548
1,658
1,602
1,104
5,470
5,746
6,450
4,960
5,251
5,489
5,617
6,214
In carloads
)
Week ended
1939-40
January 6
January 13
January 20
January 27
4,056
4,060
4,389
1,251
1,433
1,557
1,825
February 3
February 10
February 17
February 24
4,274
4,617
3,974
4,550
1,498
1,590
1,637
1,667
5,772
6,207
5,611
6,217
March 2
March 9
March 16
4,577
4,059
2,388
6,965
6,507
4,000
2,448
4,072
4,424
4,150
1,845
2,033
5,917
6,457
1,492
5,642
April 6
April 13
April 20
April 27
3,979
3,957
4,133
4,346
1,551
1,866
1,557
1,248
5,530
5,823
5,690
5,594
May 4
May 11
May 18
May 25
4,255
3,793
4,165
4,794
1,522
1,619
1,583
1,826
5,777
5,412
5,748
6,620
June 1
5,071
2,361
7,432
March 23
March 30
1 Source: General Managers' Association of New York, Daily
Report of Operating Conditions in New York Harbor.
2 Source: Association of American Railroads, Car Service
Division, Report of Carload Freight for Export
and Coastal Vessel Movement. Includes Searsport,
Portland, Boston, Providence, Philadelphia,
Chester, Wilmington, Del., Baltimore, and Norfolk
(or Hampton Roads).
RECEIPTS OF FREIGHT FO EXPORT AT NEW YORK
AND AT 9 OTHER NORTH ATLANTIC PORTS
1939
1940
JAN.
CARLOADS
THOUSANDS
FEB.
MAR.
APR.
MAY
JUNE
CARLOADS
THOUSANDS
T
DEC.
NOV.
T
5.5
5.5
5.0
5.0
4.5
4.5
4.0
4.0
NEW YORK
3.5
3.5
3.0
3.0
2.5
2.5
9 OTHER PORTS
2.0
2.0
1.5
1.5
1.0
1.0
.5
.5
0
0
25
11
23
9
20
6
3
28
17
2
NOV.
1939
DEC.
JAN.
FEB.
16
30
MAR.
1940
13
APR.
27
25
11
MAY
22
8
JUNE
1.4
Cas
Office of the Secretary of the Treasury
Division of - -
o
C 304
CARLOADS OF FREIGHT EXPORTED FROM NEW YORK
1940
1 939
MAR.
APR.
MAY
JUNE
CARLOADS
THOUSANDS
T
CARLOADS
THOUSANDS
FEB.
JAN.
DEC.
NOV.
T
5.5
5.5
5.0
5.0
4.5
4.5
a
4.0
4.0
3.5
3.5
3.0
3.0
2.5
2.5
1939
Dividen of Research and Statistics
JAN.
17
FEB.
16
30
MAR.
13
27
APR.
25
11
MAY
22
JUNE
1940
.
Office of the Secretary of the Treasury
6
DEC.
20
3
NOV.
23
9
2
25
11
8
28
AS ESTIMATED FROM DATA OF GENERAL MANAGERS' ASSOCIATION OF NEW YORK.
2
C 308
FREIGHT
LIGHTERAGE
IN STORAGE
AND
ON HAND FOR UNLOADING IN NEW YORK HARBOR
1 939
NOV.
DEC.
CARLOADS
THOUSANDS
.
1940
JAN.
FEB.
MAR.
APR.
MAY
JUNE
T
T
CARLOADS
THOUSANDS
10
10
9
9
8
8
7
7
6
6
5
5
B-A
3
20
4
25
11
23
9
20
6
17
16
3
2
NOV.
1939
DEC.
JAN.
FEB.
30
MAR.
1940
13
27
APR.
25
11
MAY
22
8
28
4
JUNE
LARGELY AND EXPORT FREIGHT. BUT ABOUT 10% REPRESENTS FREIGHT FOR LOCAL
Office of the Secretary of the Treasury
- of - - Medicine
COASTAL SHIPMENT. FIGURES EXCLUDE GRAIN.
C - 303
133
June 5, 1940
Under Secretary Bell
Mr. Cochran
STRICTLY CONFIDENTIAL
Mr. Clayton. Assistant to Governor Declee, telephoned me last night
in regard to Mr. Dale Parker, who is recommended both by Governor Ecolos and
Mr. Clayton as an applicant for a position with the Treasury. Mr. Parker is
said to have had experience in London with Samuels & Company and to have
handled foreign exchange business with the Shell 011 Company and later with
Brown Harriman. At present, Mr. Parker is practicing law is New York.
I told Mr. Claytes that the only opening which sight exist here would
be in the Foreign Funds Centrol. I stated that such positions were somewhat
temporary and that the salaries were not above $5,000. If is the circumstances
Mr. Parker desires to submit his application. I suggested that st be sent
directly to Mr. Bell. It could then be considered, and Mr. Parker requested
to come to Washington for consultation if his record and experience seen to
qualify him for a position in the Treasury.
JABUB
13352
134
GRAY
JR
Berlin
Dated June 5, 1940
Rec'd 11 a.M.
Secretary of State,
Washington.
1669, June 5, 9 a.m.
11695
My telegron 1344, May 16, 11 Call.
The NATIONAL SOZILIST I3CHEL.NNPPOST of ilay 31, 1940
publishes an article by Under Secretary of Agriculture
Backe for the announced purpose of refuting the "silly
fairy tales" about the invinence of Germeny's collapse
for lock of food in the caning winter.
Germany will enter the new harvest year on August 1,
1940, with the SCHE grain reserve that it possessed at
the outbreck of the war Back stated and asserting that
no European country had EVER held such a large grain reserve
C.S Germany will have at the beginning of the new crop year.
Backe stated that nothing could be acid JET about the final
outcome of this years crop but contended that the damage
done by an unusually SEVERE winter had been offect by a
nunber of favorable factors. Thus it has been possible
in spite of the war to supply farners with the normal
quantities of SEED and fertilizers. Owing to sufficient
supplies of motor fuel spring planting has been practically
completed
135
-2- 1669, June 5, 9 call, from Berlin.
completed according to Backs who stated that by liny 25
approximately 95 per cent sugar DECT area and about 83
per cent of late potatices had been planted.
Back also claimed that owing to Extraordinary Efforts
on the part of the farmers it had been possible to plant
not only the usual spring acreage but also the acreage
that could not be planted last fall owing to unstiticfactory
weather conditions and that C. decline in wintEr barley
acreage had been offect by increased plantingo of spring
crope Especially of root crops. The area in rcot crops
has been expended by 10 per cent over last year Back
asserted and the acreage under potatoes alone is 250,000
to 300,000 hectores higher than c. year ago while the
acredge under sugar beet has also been increased.
is regards the fat situation Back claimed that
actual developments had been more favorable than anticipated
Increased butter production has resulted in an upward
revision of the butter ration and consequent saving of
margarine. HE announced that beginning July 1 the
margarine ration will be entirely replaced by butter.
Neverthcless at the beginning of the winter 1940-41
Germany will have "a much larger reserve of butter than
at the outbreak of the we.r" Backs stated. HE also
announced that notwithstending the increase in the cheese
ration
136
-3- 1669, June 5, 9 Cell., from Berlin.
tion a month ago (which restored c. like decrease made
several months (20) there will be C. further increase of
25% at the beginning of July.
It is also claimed that Germany will Enter the
winter 1940-1941 with stocks of EGGS at least 50 per cent
bil
42
above those of September 1939.
Backs admitted that the hog population is being
reduced to correspond to the available supply of
feedstuffs but called attention to the large reserve
of frozen pork erected by such sleughter offsetting
reduced supplies of fresh pork during the coming winter.
In addition he claimed there will be evcilable larger
supplies of beef since the number of cattle which was
already viry large at the beginning of the war has
increased in the mentine.
Finally in regard to supplizo of vegetables Backs
stated that the proposed increase of 25 per cent in the
acreage planted will probably be reached. (END SECTION
ONE)
HEATH
DDH
Treasury
13352
Paraphrase of Sections 2, 3, 4, and 5 of telegram No. 1669
from Berlin dated June 5, 1940
137
Secretary of State,
Washington.
STRICTLY CONFIDENTIAL
CONFIDENTIAL.
The statement made by Backe to the effect that Germany's
reserves of grain at the beginning of the second year of
the war will be equal to those a year earlier refers for
both years to the situation which obtained before the
crops were harvested. The grain crop of 1939 was a good
one and amounted to 27,400,000 tons, which amount according
to estimates made by official sources in September 1939
was considered to be at least 1,400,000 tons in excess
of the consumption of the Reich's requirement for a
period of a year. It was made clear by Backe's statement
however that these expectations were not fulfilled, and
that no additional reserves were accumulated which was
probably due to increased requirements in the part of
Poland occupied by Germany. Backe, therefore, admitted
tacitly that the prospects for this year's crop are
unfavorable, though he apparently tried to divert
attention from this fact by making claims that the
farmers were well supplied with seeds, supplied with
fertilizers, gasoline, etc., which it may be taken to
mean at the most that the supply of these factors of
production
138
-2-
production was more or less normal. According to some
agricultural authorities it is practically certain that
the harvest of grain this year in Germany will be very
unfavorable. The publication "Wirtschaft und Statistik"
in its April number reported that the crop prospects were
poor for practically all non-German European countries,
the customary forecast of German crops being omitted from
the publication this year. This is taken to mean that
neutral European countries which are her only other sources
of imports while the war lasts will not be in a position
in all probability to supply Germany with any substantial
quantity of grain. Up to now according to one report
Russia has exported to Germany only 25 percent of the
one million tons of grain which was agreed upon. According
to Backe Germany still possesses the same grain reserves
as last year. At the beginning of the war Darre stated
that these grain reserves amounted to 8.6 million tons
which was equal to almost one third of the grain harvest
of last year. It is doubtful, however, if the war should
be prolonged beyond this summer, whether Germany could
afford to consume this whole reserve in one year. Furthermore, in spite of the record crop, consumption requirements,
which were so great this year that nothing could be added.
to reserves will significantly increase. Possible addi~
tional requirements are indicated by the fact that
Denmark,
139
-3-
Denmark, Norway, Holland, Belgium and Luxenburg, imported
approximately in 1937 6.5 million tons of grain. The wheat
supply of Belgium according to one report is now sufficient
for only 50 days.
The admission made by Backe to the effect that the
hog population had to be reduced is confirmation of reports
to that effect previously received. (In this connection
see my telegram of March 26, 4 p.m., No. 743). This
statement of Backe constitutes a tacit admission that the
fodder situation is not as favorable as was claimed
previously. Backe has also claimed an increase in the
potato acreage which it is stated amounts to an expansion
of 8 to 10 percent over last year which, nevertheless,
seems to fall short somewhat of the plans. It may be
notedifor instance that Goering in his radio address to
the farmers of Germany on February 15 demanded that the
planting of potatoes should be augmented in Germany from
10 to 15 percent.
Apart from increased production resulting from sharp
restrictions on milk consumption the improved butter
situation is probably due to greater supplies from Denmark
and Holland. The total fat rations have not been increased
so far however although the allocation of butter has been
with proportionate decreases in the margarine
ration. Since the ration of fat in Germany is admitted
to
140
to be inadequate the very fact that it has not been increased in spite of the greater supply of butter might
lead to the conclusion that stocks of other fats are not
quite as ample as is claimed officially.
With regard the question of German egg supply it
may be said that the reserves are undoubtedly being built
up and that present stocks of eggs in Germany are 70%
above those of September last year. But the present
improved situation with respect to dairy products and
eggs is due largely however to supplies from which
countries will undoubtedly encounter shortages of fodder,
notably shortages of oil cake on account of the blockade.
In all probability the advantage accruing to Germany is
therefore a temporary one from a half year to a year.
Although the general impression of the food situation presented by Backe is favorable his admissions of weaknesses
may be taken as serious enough and particularly in regard
to bread and feed grains in which Germany's position when
the war started was on the whole considered favorable. As
feared in some quarters if this year's grain harvest turns
out to be as poor as imagined and the war continues it is
not seen how Germany will be able to maintain not only
her
#
Apparent damission
141
her bread but her meat and fat rations at present levels
throughout the winter which will ensue except by making
a heavy demand on her reserve supplies.
HEATH
DCA: RHG:MEK
HHE
07
FL
ADIHH
or
one
142
PLAIN
HSM
London
Dated June 5, 1940
REC'D 1:03 p. m.
Secretary of State,
Washington.
1517, June 5.
FOR TREASURY FROM BUTTERWORTH.
1. In reply to a question in the HOUSE of Commons
the ChancEllor of the Exchequer announced that as a
result of the decision to raise the EXCESS profits tax
to 100 percent on all businesses the limitation of dividends bill SEEMED no longer necessary and the proposal
would be withdrawn, but the prohibition of bonus issues
for the period of the war would remain.
2. In another reply the Chancellor of the Exchequer
stated that under regulations passed under the provisions
of the recent Emergency Powers Act (reported in my 1326
of May 22) he has the power to give directions to the
Bank of England in the fixing of the bank rate. This
statement is in contrast to past pronouncements on this
question which have always Emphasized that the matter
lay in the discretion of the Bank of England.
3.
143
ham -2- No. 1517, June 5, from London
3. AttlEE in reply to a question on the Government's
Economic organization disclosed that an Economic policy
committee headed by the minister without portfolio (Greenwood) will replace the old committee presided OVER by
the Chancellor of the Exchequer as reported in my 1981
of October 9. The new committee will conserve and direct
general Economic policy. Lord Stamp who is to continue
his part-time duties will report to the new committee
and his staff apart from their work on Economic and
financial plans will provide digests and statistics
on the war Effort and progress reports of departments.
KENNEDY
RR
144
ITALIAN STOCK PRICES
(Milan)
Daily*
1 940
Weekly
APR.
APRIL
MAY
JUNE
JULY
JUNE
MAY
20
13
6
MAR.
27
18
11
4
FEB.
25
8
1 40
JAN.
15
22
PER
PER
PER
PER
CENT
CENT
CENT
CENT
270
270
260
260
250
250
240
240
230
230
220
220
210
210
200
200
190
190
180
180
SATURDAY F FIGURES
300
300
280
280
260
260
240
240
220
220
200
200
180
180
SHARES
SHARES
THOUSANDS
THOUSANDS
Volume
200
160
200
160
100
100
140
JUNE
JULY
0
6
1940
MAY
13
APRIL
20
27
4
APR.
18
11
MAY
25
1
MAR.
8
FEB.
0
140
JAN.
15
22
JUNE
1940
SATURDAY FIGURES PRIOR TO MAY 20.
1
Distin
the Secretary of the Treasury
Research and Statistics
FO 141-2
145
June 5, 1940
8:45 a.m.
H.M.Jr:
Ambassador
Hello.
Bullitt:
Hello.
H.M.Jr:
Hello, Bill?
B:
Yes, Henry. How are you?
H.M.Jr:
Oh, I'm fine, and I know you're all right.
B:
Oh, yes. Top of the wave.
I want to thank you very much for that telegram.
Isounded
really real.
appreciated it. I want to tell you it
H.M.Jr:
Sounded what?
B:
Sounded real.
H.M.Jr:
B:
Well, it came from the heart, Bill.
Henry, I really mean that, and I really appreciated
it tremendously.
H.M.Jr:
Well, I've got a little good news for you.
B:
Good.
H.M.Jr:
You know this stuff that you've been so anxious
to get
B:
Yes.
H.M.Jr:
B:
H.M.Jr:
the surplus groceries
What?
the surplus groceries.
B:
Yes, yes.
H.M.Jr:
Well, the telegrams went out last night and the
stuff 18 -- with orders to begin to move it.
-2B:
H.M.Jr:
B:
H.M.Jr:
B:
Oh, that's wonderful.
You never saw such a fight in your life or
how I was blocked.
Oh, how perfectly wonderful.
And they've got a big lot of stuff and it's
beginning to roll as of last night.
Well, I'm perfectly delighted. I can't thank
you enough.
H.M.Jr:
B:
And I'm meeting with them again this morning
to see if we can't help them some more.
Hello. Henry?
H.M.Jr:
Yes.
B:
Can you hear me?
H.M.Jr:
What's that?
B:
Can you hear me?
H.M.Jr:
I hear you very well.
B:
Henry, on another little matter that we're
interested in -- ah -- the question of a
certain title
H.M.Jr:
Title?
B:
passing
the question of a certain title --
H.M.Jr:
Oh.
B:
Hello.
H.M.Jr:
I'm not sure -- yes! Yes, I know.
B:
Well, that's all fixed.
H.M.Jr:
Good.
B:
And, however, concerning the technical question,
the amount 18 one-third.
146
147
-3H.M.Jr:
One-third of
B:
You understand. One-third of
H.M.Jr:
Oh, I get it. Yeah, I know what -- one-third
B:
Yeah.
H.M.Jr:
I understand.
B:
One-third of six.
H.M.Jr:
I understand.
B:
of what we said.
And the -- but that's all fixed now and you'll
have an official word on the subject from me
very shortly.
H.M.Jr:
Well, use the same system of communication, Bill.
B:
Yes, I'm doing so.
H.M.Jr:
What?
B:
I'm doing so.
H.M.Jr:
Yeah.
B:
I will send it by the same method of communication.
H.M.Jr:
Ah -- did you talk to Joe?
B:
No.
H.M.Jr:
I mean, do you talk to Joe at all?
B:
No.
H.M.Jr:
You don't.
B:
No.
H.M.Jr:
O. K.
B:
Henry?
H.M.Jr:
No, I -- all right.
148
-4B:
Henry, there's been some difficulty on -- on
cables today.
H.M.Jr:
B:
Yes.
Ah -- and on ordinary cables 80 that this method
will -- your method 18 much better.
H.M.Jr:
I see.
B:
Now, I suppose you know that the big general
attack began this morning.
Oh, 80 I heard on the radio.
H.M.Jr:
B:
H.M.Jr:
Yes, the big attack on the entire line.
On the entire line.
B:
Yeah, all the way.
H.M.Jr:
Does that include Maginot?
B:
No, not there, but everything except that.
H.M.Jr:
I see.
B:
And they -- there's no real information yet.
H.M.Jr:
Uh-huh.
B:
There hasn't been bad information, there's just --
there's nothing. It's just terrific fighting,
that's all.
H.M.Jr:
I see.
B:
And there you are.
H.M.Jr:
Well, Bill, you can't believe the hurdles which
B:
H.M.Jr:
What's that?
149
-5B:
I'll hear from you on that particular matter
of groceries in the near future.
H.M.Jr:
Say that again.
B:
I will hear from you on the matter of groceries
in the near future.
H.M.Jr:
Yes. Well -- ah -- right, but they -- but the
stuff started to go to -- to move last night.
B:
That's wonderful. I can't thank you enough.
H.M.Jr:
Well
B;
Henry?
H.M_Jr:
Yes.
B:
Were you able to do anything about that particular
little matter which interested me particularly -things that in the old days "Legs" Diamond used
to carry down in
H.M.Jr:
B:
(Laughs) Well, I -- I haven't given up hope.
Yeah, but even if you can scrape up -- ah -- a
very small quantity, it's very valuable.
H.M.Jr:
I understand.
B:
So if you can do that and get action immediately,
it can be extremely valuable.
H.M.Jr:
I understand. I'11 do all I can Bill.
B:
Well, Henry, God bless you, and thank you again.
Take care of yourself.
H.M.Jr:
B:
H.M.Jr:
Ah -- good-bye, good luck.
Good-bye.
150
June 5, 1940
8:52 a.m.
Operator:
Go ahead, please.
H.M.Jr:
Hello.
William S.
Hello.
Knudsen:
H.M.Jr:
K:
Hello. Morgenthau.
Yes, sir.
H.M.Jr:
George Mead is sitting here with me.
K:
Yes.
H.M.Jr:
Now, what I'm writing this morning -- I don't
know whether you got a copy of what the President
said at his press conference yesterday about the
air plane business.
K:
No.
H.M.Jr:
Well, I'll take the liberty of sending you over
a verbatim copy.
K:
Uh-huh.
H.M.Jr:
And -- ah -- my thought was -- I'm also writing
a letter to the President -- McReynolds -- to ask
him to put these orders in reverse, which made
all this authority flow to me from the Army and
Navy, and give it to you. Hello.
Yes. sir.
K:
H.M.Jr:
Now, it may take a day or two, but I thought
pending that, I told George Mead to look to you.
See?
K:
Yes, sir.
H.M.Jr:
And -- ah -- is that all right with you?
151
-2K:
Yes, sir. Because he's coming over here this
morning.
H.M.Jr:
K:
H.M.Jr:
K:
Fine. Well, he's sitting here now
We worked on the Army last night.
He told me that.
And we're going to work on the Navy this
morning.
H.M.Jr:
Yes, and Mr. Knudsen, I just want to say this
thing to you and I'm sure that you'll be in
agreement with me. George Mead tells me that
Ford wants to go ahead with this Rolls Royce
engine, but shows some hesitancy about wanting
to manufacture it for the Allies. Hello?
K:
Yes.
H.M.Jr:
Well, I'm sure that the President will not want
Mr. Ford or anybody else to manufacture anything
-- especially an English engine, unless he's
willing to sell it to the Allies.
K:
I see. Well, Mr. Morgenthau, I thought that all
these negotiations, of course, can be done over
in this office now
H.M.Jr:
That's right.
K:
......
H.M.Jr:
That's right.
K:
And we'll try to get it cleared up.
H.M.Jr:
Well, that's what I'm very anxious that you do.
K:
with George Mead and I and the contractors.
And in the meantime, after Mr. Mead and I get
through here this morning, I want to go over
and look at that motor.
H.M.Jr:
Oh, you mean over -- the
K:
Wherever he's got it. He's got it somewhere.
-3H.M.Jr:
He's -- it's in the Treasury.
K:
Yeah.
H.M.Jr:
K:
H.M.Jr:
152
We think it's so valuable. (Laughs)
(Laughs)
But don't you agree with me, I mean, if Ford
18 going to be choosey about who he sells to -I mean, particularly an English motor which the
Government -- the English Government has given
us this license, if he doesn't want
to sell to
that the British
the Allies, we can't
Government let him make it.
K:
(Laughs)
H.M.Jr:
What?
K:
H.M.Jr:
K:
H.M.Jr:
I don't think that's serious, Mr. Morgenthau.
I think if we get Edsel here we can straighten
that out. Anyway, supposing he makes them for
you and you elect to sell them to the Allies,
what's the difference.
No, I won't -- I'm funny. I'm just like you.
Well, but I mean, I mean, he hasn't any jurisdiction over the order.
No. He's got to come clean. I'm sure the
President will back you and me up on this 100%.
K:
All right.
H.M.Jr:
I mean, he's got to come clean.
K:
Uh-huh.
H.M.Jr:
We've got to find out where he stands.
K:
I don't understand this. I never heard this
before.
H.M.Jr:
Well, it's just between George Mead, you and me.
K:
I see.
153
4H.M.Jr:
O. K.
K:
Yeah.
H.M.Jr:
I'll be seeing you soon.
K:
All right, sir.
H.M.Jr:
Now from now on, it's your baby.
K:
All right, sir. But you don't mind me
H.M.Jr:
Getting a what?
K:
H.M.Jr:
getting a soother once in a while?
A soother -- you know, what they give babies.
(Laughs) Just as long as you think I can give
you them, I'm here.
K:
All right, sir.
H.M.Jr:
All right.
154
June 5, 1940
9:30 a.m.
H.M.Jr:
General
Hello.
Marshall:
Good morning, Mr. Secretary.
H.M.Jr:
Good morning, General. I'm calling you to
thank you for the splendid cooperation you gave
us
on getting that surplus material straightened
out.
M:
H.M.Jr:
M:
Well, thank you very much. The main thing that's
happened there, Mr. Secretary, 18 getting
Colonel Burns moved into the position he's in.
Is that the main thing?
The main thing that has helped out is by getting
Colonel Burns into the position he's in now
as a liaison between you and these other people,
because there we have an effective basis for
management that takes it out of the personal
twists here and there, and I think that we've
gotten the thing so that it will roll.
H.M.Jr:
Well, he's in the position of being in touch
with me and also, I gather, in touch with
Stettinius and Knudsen.
M:
H.M.Jr:
M:
Yes, that's exactly what it 18.
So that will work out
And that enables us to move very much more
rapidly, and also his judgment is excellent
and he provided one of the immediate methods
of getting at this thing without a very serious
complication in the procedure
H.M.Jr:
M:
Fine.
which was quite critical and no one had
been able to suggest a means of getting underway
because of the various involvements that have
to be first settled. He has gotten that 80
155
-2everything has been ordered and he's rolling
today -- he'11 begin rolling today as fast as
he can get the cars in.
H.M.Jr:
Thank you.
M:
Our only trouble 18 finding a safe way to handle
a large mass of powder. That's being fixed up.
H.M.Jr:
Thank you.
M:
All right, sir.
H.M.Jr:
We'11 be back for more requests.
M:
Well, I know that.
H.M.Jr:
All right.
M:
Thank you.
156
June 5, 1940
11:45 a.m.
Present:
Admiral Towers
Captain Kraus
Lieutenant Anderson
Captain Kraus: Lieutenant Anderson did a fine
job for us the other night.
HM,Jr: He did a good job, did he?
Captain Kraus: Yes, sir. A fine job.
HM,Jr: What these people want more than anything else are dive bombers, because the Navy created
them, didn't they?
Admiral Towers: Yes.
HM,Jr: And I wondered if you started taking
the oldest ones that you have and that are safe to
fly, turn them over to the manufacturer and replace
them with up-to-date bombers for yourself
Admiral Towers: Would not handicap us much
more if it is indicated we should give up some of
our planes, give up a modern type dive bomber.
HM,Jr: So much the better.
Admiral Towers: The situation is this. We
have in our organized reserve squadrons, which are
distributed throughout the country at reserve bases,
a total of 91 modern Curtiss scout dive bombers. A
combination of the two. They are dive bombers.
HM,Jr: What are they? Scout dive bombers?
Admiral Towers: Yes.
HM,Jr: That's what they are known as?
157
-2-
as.
Admiral Towers: That's what they are They
known
have
The type we use on the carriers.
very recently been delivered. We have been trying
for years to get those reserve squadrons equipped.
HM,Jr: What do you call them?
Admiral Towers: SBC-4.
HM,Jr: Is that the same as the Curtiss Hall?
Captain Kraus: No. It is a considerably
larger plane. It's Curtiss manufacture and is a
b1-plane however.
HM,Jr: And you could do this?
Admiral Towers: We could spare those without
seriously handicapping ourselves, primarily because
a large percentage of the officers of those squadrons,
the reserve officers, have been called to active duty
as instructors in Pensacola. Therefore, they cannot
now muster full strength for the reserve squadrons.
We actually have more planes than reserves right now.
HM,Jr: Wonderful! And these could be replaced fairly quickly with something better?
Admiral Towers: We feel they could be replaced in about 8 months, but that reserve situation,
the shortage of reserve officers, will continue because we are going to need more and more for in-
structors' duties at our additional aviation training
stations. I have to add, however, that only this
morning, after we had figured out that we could possibly make some of these available, the Army requested
anywhere from one to three squadrons of dive bombers.
HM,Jr: Nuts on the Army! Excuse me.
I have just been to see the President on something else along the same lines.
Admiral Towers; The maximum that we could let
go without having to admit that we have seriously
158
-3-
handicapped ourselves would be 50.
HM,Jr: What does the Army want them for?
Admiral Towers: The Army has just realized
that there is something in this type. They have had
no tactical experience. They have officers with our
carrier squadrons now observing the technique of dive
bombers.
HM,Jr: Fifty is what you decided on?
Admiral Towers: Fifty, in my opinion, is the
maximum we could release without greatly handicapping
ourselves.
HM,Jr: And you would rather let these go than
the old boys?
Admiral Towers: The old boys are divided into
different categories, some of them are so old and slow
I am afraid they would not be of any use. They are
old and slow. The others are a little younger, but
still old, and will be needed very shortly for train-
ing purposes due to our expanded training program and
they are suitable about as much as the newer types.
HM,Jr: For pilots?
Admiral Towers: For pilot training at our train-
ing schools.
HM,Jr: What are you going to do with the other
41?
Admiral Towers: We have some of these reserves
left and, after all, these reserve squadrons are a reserve for the field. They are replacement aircraft
in the field.
HM,Jr: But you could recommend 50?
Admiral Towers: Admiral Stark told me I could
say we would be willing to release the number that I
figured. At that time I had not had a chance to figure.
159
-4-
HM,Jr: Did you talk to Admiral Stark?
Admiral Towers: I did this morning. It is
going to be a very difficult thing to do, of course,
it's subject to agreement with the Curtiss Company.
I think the Curtiss Company will agree. It's subject
also
to including in the turn in, I imagine, the equipment that is on them.
HM,Jr:
them.
Sure! Take them as is and pay for
Are there any spare engines?
Admiral Towers: We must have some spare engines.
Lieutenant Anderson: Yes.
HM,Jr: Is there one or half a one to each plane?
Lieutenant Anderson: 50% -- no, 33-1/3% I think.
Admiral Towers: It's the standard engine. It's
the 1820 engine -- 1820-54.
HM,Jr: What does that equal in horsepower?
Admiral Towers: 950 take-off horsepower; it's
a 230 mile plane at altitude.
HM,Jr: Funny! The President had that figure
and he was saying it wasn't fast enough.
Admiral Towers: You can't get everything in
these planes.
HM,Jr: I know. I am just repeating.
Admiral Towers: Even the German dive bombers
are not fast.
HM,Jr: Could I do this? Am I moving too fast?
Call up General Watson -- I happen to know Admiral Stark
is going to see the President at a quarter of two. Can
I tell General Watson that you are here now and that you
say you can spare 50 scout dive bombers if the thing can
180
-5-
be
worked out with the manufacturer -- and I am sure
it can.
Admiral Towers: Of course, you realize we are
subject to attack on the Hill.
HM,Jr: So are we all. Look what I went through
a year ago.
This fellow (Captain Kraus) saved my life.
Admiral Towers: That is, in this attitude if
it iswill
a National
possibility to do that sort of thing,
we
do it.
HM,Jr: I can say to General Watson that you are
sitting
here -- you will hear me -- and that you can
spare these without
Admiral Towers:
without serious detriment.
HM,Jr: Without serious detriment and you are
willing to recommend that to the President.
Admiral Towers: Yes, sir.
The Secretary does not know anything about it.
HM,Jr: That's all right.
(At this point, HM,Jr placed a call for General
Watson and spoke to his secretary in General Watson's
absence. )
"Would you take this for General Watson and I
will talk to him when he comes out?
"Admiral Towers is here with me and Captain
They inform me that without serious detriment
to the Navy they could swap 50 modern scout dive bombers,
Kraus.
known as SBC-4. That's their actual title. Make a
swap with the manufacturers for a more modern plane and
the manufacturer to turn these 50 over to the Allies
at once. These planes are part of the sequadrons of
the organized reserve of the Navy and at present are
not in use."
(To Admiral Towers) Is that right?
161
-6-
Admiral Towers: The whole squadron is in use.
Make it temporary excess of requirements.
HM,Jr: (Resumed dictating to General Watson's
secretary.)
"Instead of saying "and at present are not in
use"
make it "they are in temporary excess of requirements."
Admiral Towers: They carry -- they only have
two machine guns, but they carry a thousand pound bomb.
That's as big a bomb as any dive bombers.
HM,Jr: Do you mind, I have Colonel Jacquin
down the hall, do you mind if I have him in? Do you
know him?
Admiral Towers: No, sir, I would not mind. Both
Kraus and I know him.
(At this point, General Watson's secretary read
back to Admiral Towers what HM, Jr had dictated to her,
and Admiral Towers made the following suggestion:
"I think we should add "This matter has not yet
been discussed with the manufacturers, but it is believed this can be arranged.'
(At this point, HM,Jr took the phone and said to
General Watson's Secretary:
"What I would like you to do -- I know Admiral
Stark is coming at a quarter of two and I want to be
sure that the President gets this memorandum when he
sees Admiral Stark. The President can decide whether
he does or does not want it. You also might make a
note -- put it on me -- that I have not had a chance
to clear this with Mr. Edison, so if Captain Callaghan
you might tell Captain Callaghan about this and then
tell him to use his common sense and let him decide
what to do, but tell him Mr. Edison does not know about
it, but tell Captain Callaghan and fix it up so Admiral
Towers and I don't get sent to Guam. ")
HM,Jr: God! If I could do business the way
you do business, life would be ten times easier!
162
-7-
Admiral Towers: I did not have a chance to
clear it with Edison.
HM,Jr: Callaghan will take care of it.
(Colonel Jacquin came in to the Secretary's
office at this point. )
HM,Jr: Sit down, Colonel.
There is a possibility -- just a possibility -for you. Admiral Towers will tell you what they are.
that they may be able to get 50 modern dive bombers
Admiral Towers: Roughly, they are Curtiss
SPC-4 model, new practically. They have a top speed
of 230 miles at 18,000 feet; 214 miles at sea level;
950 horsepower at take off.
Colonel Jacquin: What speed?
Admiral Towers: 230 at altitude, 214 take off.
They are big scout dive bombers.
Colonel Jacquin: That's a bi-plane?
Admiral Towers: Yes. They carry a very light
gun equipment in that they have only one 30 caliber
Fitch gun, but 50 can be put in, and one 30 caliber free
but they carry one 1,000 pound bomb and two 100 pound
bomos. It is really a dive bomber. Very sturdy plane.
Colonel Jacquin: Yes, I know him. I have seen
him in construction at the Curtiss plant.
Admiral Tower :: Just delivered to our reserve
squadrons.
to us.
Colonel Anderson: That will be verty interesting
HM,Jr: That would be for the French? Or the
English?
Well, you decide.
Admiral Towers: They are quite long range, incidentally.
163
-8-
HM,Jr: How much range have they?
Admiral Towers: As a bomber
Lieutenant Anderson:
590 miles.
Admiral Towers: Fully loaded.
Lieutenant Anderson: Yes, sir. 554 with the
heaviest load they carry.
HM,Jr: If you get them you would be delighted?
Colonel Jacquin: I will. I will. Sure.
HM,Jr: Because this is something the President
will say yes or no on within 24 hours. And they are
available immediately.
Colonel Jacquin: I will be very pleased.
Admiral Towers: They have them scattered all
over the country, but we could have them flown in.
HM,Jr: That would be a load for your aircraft
carrier.
Captain Kraus: They are carrier airplanes.
HM,Jr: Carrier airplanes?
Admiral Towers: Yes.
HM,Jr: So it would be swell to send an aircraft carrier over. How many can they take?
Colonel Jaoquin: 80 planes.
HM,Jr: Nothing settled yet and don't go to
the manufacturer yet. Please!
While we are here, tell Colonel Jacquin which
is this engine which we have got here. Rolls? Which
Rolls are we fooling with?
164
-9-
Captain Kraus: We have -- actually, the sample
engines we have are the Merlin 10, which is, we understand, very slightly different from the Merlin 20 which
is a higher horsepower, but all different dimensions
with particular change in the supercharger.
Colonel Jacquin: Merlin 10 is 1200 horsepower.
HM,Jr: Not enough?
Colonel Jacquin: No.
HM,Jr: What are you (Captain Kraus) going to do
in the next 15 minutes?
be here.
Captain Kraus: I don't know. I had expected to
HM,Jr: Well, you know the Treasury well enough
that you could sit down with Colonel Jacquin and talk
about the Rolls Royce.
interested?
Would you (Admiral Towers) be
Admiral Towers: I was talking with Mr. Kraus
this morning.
HM,Jr: Well, he's a customer for 800 a month
so I would like him to know about it.
Jacquin.
Captain Kraus: Yes, sir. I can take Colonel
HM,Jr: I don't know whether Admiral Towers
wants to do it or not.
Captain Kraus: I can take Colonel Jacquin down
and talk with Mr. Mead if he has any
Admiral Towers: I was talking about it this
morning in the conference we had with Kraus.
M,Jr: I don't know what the United States
Government is going to do, but here is a customer who
wants 800 a month.
Admiral Towers: I gathered they had not quite
165
-10-
made up their mind this morning as to what they were
going to suggest.
HM,Jr: Could you
Admiral Towers: I would like to hear part of
it at least. I have to go back to Mr. Knudsen's office for a conference this afternoon.
o0o-o0o
166
THE UNDER SECRETARY OF THE TREASURY
WASHINGTON
June 5. 1940
MEMORANDUM TO THE SECRETARY:
There are $353,000,000 of 3-3/8% Treasury bonds
maturing on June fifteenth. This security was issued on
July 16. 1928, and was offered in connection with the
refunding of the Third 4-1/4% Liberty Bonds. It is possible,
therefore, that they are fairly well scattered over the
country although the Federal Reserve Bank of New York advises
me that they have information as to the holdings in New York
City of more than half of the outstanding issue. The Federal
Reserve System does not own any of these bonds.
In your call notice of February 14, 1940, you made
this statement:
"Holders of these bonds may, in advance
of the redemption date, be offered the privilege
of exchanging all or any part of their called
bonds for other interest-bearing bligations
of the United States, in which event public
notice will hereafter be given."
This has led the holders of these securities to believe that
they will be given an exchange offering and the securities are
now selling on that basis with a 17/32 negative yield. The
past practice of the Treasury in extending the exchange privilege to holders of our maturing securities has given a "right"
value to issues naturing over the next two or three years.
For instance, the Treasury notes due December next are selling
on a negative yield basis of 9/32 and the March, 1941, notes
are selling on a basis of a negative yield of 6/32. Even the
notes maturing in March, 1942. are selling on a basis to yield
.15 of 1%, which shows that that maturity also has some right
value attached to it.
To pay off these maturing obligations in cash at this
late date I feel would affect the note market for a period of
two or three years, and might even have its repercussions on
167
-2the whole market. Furthermore, I feel that you, personally,
would have to take a great deal of criticism for this late
action. I strongly recommend that you announce a refunding
offering on Friday morning, June 7: and that the books be left
open Friday and Saturday, with a possibility of providing that
they may remain open longer than this period for any holding
not in excess of $10,000 for each individual. This would
certainly take care of the small individual investor. All
others would certainly receive notice of the exchange offering
and have ample time to take advantage of it. The Federal Reserve
Bank of New York, however, feels that the books should be open
for only one day, with possibly a provision to take care of the
small holder.
We could mechanically handle an offering which would
be announced next Tuesday, but we would not be able to deliver
the new securities. Instead we would have to issue interim
certificates in those cases where the holder wanted to take his
securities on June 15. However, if you go until Tuesday and
then pay off in cash, I believe you would be criticised even
more for allowing the issue to go right up to the maturity date
before making any announcement of it.
We could do one of four things, or a combination. (1) We
could issue a new note for five years at 1-1/8% which would sell
in the market at anywhere from 11/32 to 16/32 premium; (2) we
could reopen the March 15. 1944 one per cent note ($515,000,000
outstanding), which is selling in the market at about 14/32 premium;
(3) we could open the September, 1944, one per cent note
($283,000,000 outstanding - and this is the note New York prefers),
which would sell on the market at about 10/32 premium; or (4) we
could reopen the 2% Treasury bonds of 1948-50 ($571,000,000 out-
standing). which is now selling in the market at 101-13/32. In
this last case we would have to charge a premium of 1/2 or 3/4.
On the other hand we could also offer a combination by reopening,
say, the September, 1944, notes and the Treasury bonds of 1948-50,
and give the holders a choice of either security on exchange.
This last gives greater flexibility to the offering and should
satisfy the market. New York prefers the re-offering at a premium
of the 2% bonds of 1948-50. feeling that this section of the market
is stronger than the note section. Intermediate bonds appear to
have more buying support because of their higher interest return.
The working balance today is about $1,200,000,000 and it
is estimated that it will go below one billion by July first. If
you pay off the $353,000,000 in cash and raise an additional
$50,000,000 each week in bills beginning next week, the balance
on July first would be about $800,000,000.
DWB
168
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 5, 1940
TO
Market Close
Secretary Morgenthau
W. H. Hadley
FROM
3-3/85 REFUNDING
REOPENING ISSUES:
Amount
Outstanding
Issue
1% T/N 3/15/44
Offering
Price
Present
Mkt. Price
Premium
515 mil.
100
100.14
14/32nda
283 mil.
100
100.10
10/32nds
571 mil.
100-1/2
100-3/4
101.13
101.13
29/32nds
21/32nds
Offering
Possible
(3-3/4 years)
1% T/N 9/15/44
(4-1/4 years)
2% T/B 1948/50
(8 1/2-10 1/2 yrs.)
NEW NOTES:
Term
2-3/4 years
(3/15/43)
5 years
100.10
100.8
10/32nds
8/32nda
100.21
100.19
21/32nds
19/32nds
100.16
100.13
16/32nds
13/32nds
100.28
100.25
28/32nds
25/32nds
100
100.16
100.11
16/32nds
11/32nda
100
101.4
1 pt. 4/32
100
101.
1 point
0.50
0.53
100
0.50
0.53
100
0.72
0.75
100
0.72
100
0.75
100
1-1/8%
1.02
1.05
100
1-1/4%
1.02
1.05
3/4%
7/8%
1
Premium
Price
5/8%
3-1/4 years
(9/15/43)
Mkt. Price
Yield
Coupon
%
100
100
100
169
PLAIN
JT
BERLIN
Dated June 5, 1940
REC'D 8:20 p.m.
Secretary of State,
Washington.
1684, June 5, 4 p.m
My No. 1549, May 26, 4 p.m.
FOR TREASURY FROM HEATH, and also FOR THE INFORMATION
OF THE DEPARTMENT.
ThE Reichsanziger of June 4 has announced the
establishment of in Brussels, Liege
and Namur.
HEATH
NPL
170
GRAY
HSM
Berlin
Dated June 5, 1940
REC'D 11:25 P. M.
Secretary of State,
Washington.
1685, June 5, 5 p. m.
My 1566, May 29, 1 p. m.
FOR TREASURY FROM HEATH, AND ALSO FOR THE INFORMATION
OF THE DEPARTMENT.
The Reichabank statement for May 31 shows a large
increase in investments during the last VEEK of May--
holdings of commercial and Treasury bills, collateral
loans and securities having increased by 980,000,000 to
13,105,000,000 marks which is a record figure 302,000,000
above the position on April 30. Changes in individual
investment items during the last WEEK of May were as
follows: commercial and Treasury bills increased by
963,000,000 marks to 12,568,000,000 marks; Eligible
securities decreased by 2,000,000 marks to 142,00,000
marks; collateral loans increased by 7,000,000 marks to
31,000,000 marks; miscellaneous securities showed prao-
tically no change. This large increase in investments
was to a great Extent offset by a largÉ decrease in
miscEllaneous
171
hsm -2- No. 1685, June 5, 5 p. m., from Berlin
miscEllaneous assets (in which the Reichsbank's operating
credit to the Reichsbank appears) which in contrast to the
usual End of the month increase showed a sharp decline of
359,000,000 marks to 1,434,000,000 marks.
Circulation of Reichsbank notes again reached a new
high at 12,594,000,000 marks compared with 11,767,000,000
marks a WEEK Earlier and 12,480,000,000 marks on April 30.
Furthermore additional coins in the amount of 45,000,000
marks were placed into circulation, holdings of the Reichsbank having declined to 440,000,000 marks on May 31. Holdings of Rentenbank notes a lso decreased by 7,000,000 marks
during the last WEEK of the month to 261,000,000 marks.
Sight deposits decreased during the same period by
168,000,000 marks to 1,470,000,000 marks.
(?) there has been no increase in coinage since
March 30 when it amounted to 2,115,000,000 marks and
that the total issue of Rentenbank notes is the same as
at the End of March and April, 1. E. 1,200,000,000 marks
the total net monetary circulation in Germany after subtracting the Reichsbank's holdings amounted to 15,208,000,00
marks compared with 14,755,000,000 marks on March 31.
HOWEVER, considerable amounts of Reichskmedi trass Enscheine
have undoubtedly been put into circulation in the occupied
areas since the beginning of April so that these figures
alone do not give a complete picture of the situation.
HEATH
EMB
172
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 5, 1940
Secretary Morgenthau
TO
FROM
Mr. Cochran
CONFIDENTIAL
In very light trading, sterling opened at 3.19-1/2 and moved within a narrow
range all day. The final quotation of 3.19-1/4 was 1/2 lower than yesterday's close.
Sales of spot sterling by the six reporting banks totaled 1100,000, from the
following sources:
By commercial concerns
By foreign banks (Europe and South America)
Total
108,000
172,000
180,000
Purchases of spot sterling amounted to 1225,000, as indicated below:
L 69,000
By commercial concerns
By foreign banks (Far East, Europe and South America)
Total
156,000
1225,000
The Guaranty Trust Company reported that it had sold cotton bills totaling
12,000 to the British Control on the basis of the official rate of 4.02-1/2.
Spot sterling in the amount of 127,000 was purchased from the British Control at
the official rate of 4.03-1/2 by the following banks:
116,000 by the Bank of Manhattan (for whisky
and rubber)
11,000 by the Guaranty Trust Company (for rubber)
127,000 Total
The French franc moved with sterling and closed at .0181.
The other important currencies experienced little movement during the day.
They closed as follows:
Swiss france
.2242
Canadian dollars 21-3/4% discount
Lira
Reichsmark
.0505
.4000
Today's discount of 10-9/16% for the Cuban peso represented a moderate improvement
over yesterday's quotation. The Mexican peso was unchanged at .1672.
173
-2The yuan was quoted at 5-1/44 in Shanghai, up 3/16
The Federal Reserve Bank of New York purchased 130,000 French france for account
of the National Bank of Belgium.
There were no gold transactions consummated by us today.
The State Department forwarded to us a cable stating that the following gold
shipments would be made from England, all of which will be sold to the U. S. Assay
Office at New York:
$2,246,000 shipped by Lloyda & National Provincial Foreign Bank, London, to the
Bank of London & South America, New York.
143,000 shipped by the Chase National Bank, London, to its head office at New York.
14,000 shipped by the Westminster Bank, London, to the Chase National Bank,
New York.
$2,403,000 Total
On the report of May 29 received from the Federal Reserve Bank of New York
giving the foreign exchange positions of banks and bankers in its district, the total
position of all currencies was short the equivalent of $19,602,000, an increase of
$473,000 in the short position. The net changes in the positions are as follows:
Short Position
Country
England
Europe
Canada
Latin America
Japan
Other Asia
All others
May 22
$ 6,388,000
8,505,000
614,000 (Long)
Short Position
May 29
$ 6,077,000
9,144,000
226,000 (Long)
178,000
221,000
3,404,000
1,099,000
126,000
3,463,000
955,000
$19,129,000
$19,602,000
11,000
Increase in
Short Position
$ 311,000 (Decrease)
639,000
388,000 (Decrease in
Long Position)
43,000 (Decrease)
59,000
144,000
(Decrease)
115,000 (Decrease)
$ 473,000
The Bombay gold price worked out to the equivalent of $35.86, off 40d.
The Bombay spot silver quotation declined the equivalent of 3/8 to 44.47
In London, the spot and forward silver prices both declined 1/4d to 22-3/4d
and 21-3/4d respectively. The U. S. equivalents, calculated at the open market rate
for sterling, were 32.73 and 31.05 On the basis of the official sterling-dollar
rate, the spot price was equivalent to 41.36
Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44.
The Treasury's purchase price for foreign silver was also unchanged at 35
CONFIDENTIAL
174
3-
We made two purchases of silver totaling 225,000 ounces under the Silver Purchase
Act, both of which were new production from foreign countries, for forward delivery.
Mr. Knoke has telephoned me that since May 27 the Russian State Bank account with
the Chase Bank has declined by $1,940,000 to $5,710,000 as of June 5. During the
same period the Amtorg account declined by $435,000 to $680,000. During the period
under reference the Federal Reserve Bank of New York paid $1,050,000 to the account
of the State Bank of Russia, by order of the B.I.S. One in-payment to the State Bank
account was received from the Credit Suisse of Zurich, by order of the Reichabank,
for $125,000. The account of the State Bank was debited by $436,000 to cover commercial
letters of credit. $1,500,000 was paid out to the Union Bank of Switzerland and
$1,000,000 to the Skandinaviska Bank, Stockholm.
BM.R.
CONFIDENTIAL
175
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
FROM
June 5, 1940
Secretary Morgenthau
Mr. Cochran
STRICTLY CONFIDENTIAL
Mr. Stone, of Secretary Hull's office, told me at 3:15 this afternoon
that a cablegram had been received from our Embassy in Rome to the effect that the
Italian steamship Rex is scheduled to sail for New York on June 12 provided sufficient passengers and freight are obtained to warrant the trip. The Italian
foreign office had confirmed this report. The American Consul General at Genoa
had reported that the Italian line had already sold passengers to full capacity
of the ship, including reservations for 700 Jewish refugees.
176
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 5. 1940
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
Mr. Knoke has telephoned me that on June 4, the Chase Bank paid two checks
drawn on it by the Banco Commerciale Italiano to the order of the Yokohama Specie
Bank for $764,000.
On June 5 four checks had been drawn on the Chase by the Credito Italiano
in favor of Post and Flagg, presunably in connection with Italian Government bonds.
On June 4 four similar checks had been drawn totaling $2,096,000.
The Credito Italiano on June 4 withdrew $660,000 from Irving Trust in currency, mostly in five-hundred-dollar bills.
BMP.
177
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 5. 1940
TO
Secretary Morgenthau
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
Mr. Pinsent of the British Embassy called on me at 3 o'clock this afternoon
by appointment. I gave him information on two or three matters pending between
the British and ourselves.
In regard to the handling of British accounts in this country, Pinsent confidentially volunteered that arrangements were being consummated whereby the Federal
Reserve Bank of New York would be instructed by the British Ambassador in Washington,
unon word that communications have been cut between England and the United States,
that all authorizations to sign for the Bank of England account in New York will be
cancelled. and that thereafter the signing power will be vested solely in the British
Ambassador in Washington and Mr. Osborne, the Bank of England official who is now in
Canada. I told Mr. Pinsent in this connection that we hoped to make an arrangement
very shortly to take care of an account with the Federal Reserve Bank of New York in
the name of the British Government.
I told Pinsent that a new order would likely appear tonight or tomorrow resulting from our study of methods to control the import into and sale within the United
States of securities which mey have been seized in invaded territory. I promised
to send him a text of any documents as soon as possible. I added that further steps
might possibly come in the future to supplement the act now under consideration.
Pinsent referred to the request made in the letter from Lord Lothian to the
President that the United States arrange to block all German balances in this
country. I told Pinsent that, pending a formal reply from the President, we could
not speak authoritatively on the subjects touched upon in the letter under reference.
In the interim, however, I could tell him that in meetings held between representatives
of the State and Treasury Departments the consensus of opinion had been that we should
not at this time take steps to block German balances in the United States. I explained
that any such action could not be isolated and could only be feasible if fitted into
a general policy.
Pinsent then referred to a memorandum of May 27 in which the British had asked
the Treasury to scrutinize gold imports with a view to rejecting those suspected
of German origin. I told Mr. Pinsent that the Treasury found such a step impracticable. In the first place, the Treasury has consistently taken the position, in
letters to various Senators and before Congressional Committees, that it cannot
effectively distinguish gold originating from any one foreign country. An attempt
on our part to prohibit purchase of gold not coming directly from Germany, on the
grounds that it is German gold, would be quite inconsistent with the position we have
hitherto taken. In the second place, it would not be consistent for us to refuse
178
-2to block German balances, and then reject German gold. I added, however, that
Pinsent should not fail to bring to our attention any information which he may
have with respect to shipments to this country of gold which the British suspect
of having come from invaded territory. I added that there were few channels
through which such gold could possibly come, and that I understood the British
or French were already in touch with Swiss officials with a view to checking
exports of German gold through Switzerland to ports of shipment, such as Genoa.
I showed Mr. Pinsent the cablegram which Mr. Bolton addressed to Mr. Knoke
under date of May 31 in regard to the quoting of official and unofficial rates for
sterling in New York.
pm?
179
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE June 5. 1940
TO
FROM
Secretary Morgenthau
Mr. Cochran
STRICTLY CONFIDENTIAL
After A meeting held in Mr. Bell's office at 1:45 yesterday afternoon,
participated in by Messrs. Bell, White, Bernstein and Cochran, I telephoned
Mr. Livesey at the Department of State in regard to the draft agreement by
exchange of notes with Canada which had been submitted to us on May 22, 1940.
I referred to two or three points in the draft note from the Canadian
Minister to the Secretary of State. Mr. Livesey explained that the exchange
of notes would envisage foreign securities even though the Canadian Government
has not yet taken them over. With respect to numbered paragraph 4, I told Mr.
Livesey that the Treasury would be a little happier if it should not be necessary
to have any paragraph in the agreement with respect to reciprocity. I reminded
Mr. Livesey that Mr. Berle's original position had been that Canada had no right
whatever to require American citizens temporarily resident in Canada to
surrender their United States dollar balances and that this paragraph 4 could
be interpreted as a deviation from that position. Mr. Livesey stated that the
draft as it stands was the slightest type of reciprocity that the State Depart-
ment could conceive, and that the Canadian Order definitely envisaged reciprocal
arrangements, so that something of this type was necessary. I told Livesey
that if this paragraph was continued in the draft, the Treasury Department
would be disposed to write a letter to the Department of State, stating that
the Treasury had no objection to the draft, on the understanding that the contemplated arrangement with Canada would not subsequently be interpreted by the
Department of State as in any manner stopping the Treasury Department from
having entire freedom in imposing or applying exchange control.
I also suggested to Mr. Livesey a change in paragraph 4. line 2, to
read "measures" instead of "legislation". Later in the same paragraph it was
suggested that words "continue to" be inserted between the words "to" and
"grant".
Mr. Livesey told me that he would discuss the Treasury's suggestions
with his colleagues at the Department of State and would telephone me. He
thought there was for the present no need for a meeting between the two departments' representatives.
130
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 5. 1940
TO
FROM
Secretary Morgenthau
Mr. Cochran
STRICTLY CONFIDENTIAL
Mr. Leroy-Beaulieu, Financial Counselor of the French Embassy, telephoned
me this afternoon from New York. He had been quite perturbed to read in this morning's
New York Times and other papers a story of the arrival in New York of an important
shipment of gold from France, which had come under convoy via Canada. He was
particularly concerned because of a related report over the radio to the effect that
France now has a second shipment on the ocean under convoy. Not only was the guess
as to the amount of gold arriving in New York fairly correct but this second point
is also in line with the fact that France does have a second big shipment now on the
water destined for Canada and still in a dangerous position. Leroy-Beaulieu told me
confidentially that this second shipment will be held in Ottawa under earmark for
the present, and not be brought on to New York.
I told Leroy-Beaulieu that the Treasury had no information in regard to
the shipment now arriving in the Federal Reserve Bank at New York until a couple of
lays ago when the Federal Reserve was advised by the Railway Express as to the
expected arrival of so many boxes of gold. In answer to Leroy-Beaulieu's request,
I told him that the Treasury would do anything within its power to prevent publicity
on gold shipments and to play down such news as may appear in regard thereto. I
explained further that we had already done much investigating in the premises, and
had found that neither the Federal Reserve Bank nor Customs people were giving out
the news but rather that newspaper reporters who watch the docks, express offices
and arrival of trucks at the Federal Reserve Bank have a way of making their own
calculations and drawing deductions.
RMR.
181
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 5, 1940
TO
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
In talking with Mr. Knoke by telephone yesterday evening, I asked
what action had been taken by the Federal Reserve Bank of New York in regard to
the request from the Curacaosche Bank in the Dutch West Indies for gold earmarking
facilities. Knoke replied that a cable was being dispatched yesterday evening
to the Curacaosche Bank to the effect that it s request was being submitted to
the Board of Directors of the New York Federal Reserve Bank. The cable also
requested certain information in regard to the institution at Curacao which had
been called for in a letter dated May 14. It is my understanding that on May 14
the Federal Reserve Bank sent a letter to a number of small banks, such as the
one under reference, which might conceivably be considered as, or assume the role
of, central banks, requesting information which would enable the Federal to pass
upon their qualifications if the question of doing business with them should arise,
182
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE
TO
FROM
June 5. 1940.
Secretary Morgenthau
Mr. Cochran
STRICTLY CONFIDENTIAL
Mr. Basil Harris told me this morning that the American steamship
Washington is due in Bordeaux tomorrow morning. The present plans are for the
ship to take on American refugees at Bordeaux and then proceed to Genoa pro-
vided that there is no change in the status of Italy by the time the ship is
ready to clear from Bordeaux. After calling at Genoa, the plan would be for
the Washington to proceed to Lisbon, for embarkation of passengers and then
clear directly for New York.
With this information I telephoned Mr. Yost in the Division of Munitions
Control in the Department of State to learn whether there would be any objection
to the Washington taking on gold cargo at Genoa and Lisbon, provided that these
two countries continue to be non-belligerents and not in the combat zone on the
dates on which the ship calls at the ports in question. Upon Mr. Yost's
assurance that there would be no objection in such circumstances, I telephoned
the foregoing information to Dr. Sommary, the Swiss banker. He was much
interested in this information, and said that he would telephone at once to the
National Bank of Switzerland to acquaint them with the tentative schedule, so
that consideration could be given to the idea of getting out a Swiss gold shipment via Genoa. I reiterated to Dr. Sommary that the whole schedule depended
entirely upon war developments.
Mr. Leroy-Beaulieu telephoned me from New York at 11 a.m. I mentioned
the tentative schedule of the Washington to him with the realization that France
would not risk sending any gold out through Italy at present. Leroy-Beaulieu
appreciated the information thinking this might be a good opportunity to get
confidential French mail dispatched via Lisbon to the United States.
7mg
183
June 5, 1940
I talked to the President at 4:15 o'clock
and the President told me that he had talked to Paul
Reynaud on the telephone, and that Paul Reynaud had
told him that for every one of the French planes shot
down they shot down three or four German planes.
That what they most needed were machine guns. That
they could send 8 planes on the Normandie. The President
also asked me what Purvis was doing on jitney planes.
The President told me that Paul Reynaud said
if they could get 200 more planes right away they
could have supremacy of the air.
184
Notes on Conference
at the Secretary's House
6:40 P.M., June 5, 1940.
Those present, the British Ambassador, the French Ambassador,
the British Air Attache, Colonel Jacquin, Secretary Morgenthau,
Admiral Towers, Admiral Stark, Mr. Summer Welles, Mr. Purvis,
Mr. Bloch L'Aine, Mr. Nelson, and Mr. Young.
The group waited a few minutes until the arrival of Admiral
Stark before the purpose of the meeting was discussed. The
Secretary asked Admiral Stark as to whether he would outline the
reason for the meeting. Admiral Stark replied that he would
rather have the Secretary do it.
Secretary Morgenthau stated that Admiral Stark and Admiral
Towers had had a conference during the morning and agreed that
the Navy could release 50 dive bombers of the SBC-4 type made by
Curtiss. These bombers had been ordered for reserve purposes by
the Navy and it was for that reason that the release could be
effected. The President was fully acquainted with the situation
and approved the transaction if it could be worked out with the
manufacturer.
The Secretary inquired as to whether some method of trans-
portation could be found to take those planes to France and suggested that perhaps an aircraft carrier could be sent over to
Halifax. Admiral Stark stated that Admiral Towers was to contact
the manufacturer and acquaint him with these plans for releasing
the planes. Admiral Towers replied that he had not yet been able
to do that but expected to have it worked out in the morning.
The Secretary asked Admiral Stark if orders could be issued
to the manufacturer immediately so that preparations could be
started for flying the planes to Halifax. Admiral Stark agreed
to issue preparatory orders which would warn the manufacturer of
what was coming so that the planes could be made ready for shipment.
Mr. Velles inquired as to whether the planes could be flown
to Canada by the manufacturer's pilots in order to save time. He
added that there might be considerable delay if British or Canadian
pilots had to come all the way down to get the planes and then fly
them back. Admiral Stark saw no difficulty with such a procedure.
Mr. Purvis stated that an aircraft carrier was already at
Halifax. Colonel Jacquin added that it was the "Bearn" and that
it had been there since two days. Secretary Morgenthau said,
"The what?" and Mr. Purvis replied the "B-e-a-r-n". The Secretary
-2-
185
inquired if it were British, and Colonel Jacquin said "No", it was
a French air carrier. Mr. Bloch L'Aine added that we told you she
vas coming in, and the Secretary, startled, replied that he did
not think so. To which Mr. Bloch L'Aine's comeback was that perhaps the Secretary had told him about it. Mr. Young said that
Mr. Bloch L'Aine had told us the "Bearn" vas coming in on May 27th,
but that actually it had not appeared on that date and nothing
had been said about it since; a statement with which Mr. Bloch L'Aine
agreed.
Secretary Morgenthau asked Colonel Jacquin how many plenes the
carrier could take. Colonel Jacquin stated that 40 Curtiss P-36's
were already loaded and that he was going to put on board 40 second-
hand Stinsons that he had purchased. The Secretary asked if he had
room for the dive bombers, and Colonel Jacquin replied that there
would be lots of room for the dive bombers as the Stinsons could
wait as they were not important.
The Secretary asked Mr. Nelson if he had forgotten anything.
and Mr. Nelson said what about the spare engines and spare parts.
The Secretary inquired from Admiral Towers as to the status of the
spare engines and the Admiral assured him that they could be forwarded by express. Mr. Purvis made it very clear that the Purchasing Board would pay all expenses, handling charges. etc., in order
to get the stuff.
Mr. Purvis inquired about the accessories which should go with
the planes, such as bombs, bombracks, bombsights, etc., adding that,
of course, the Navy would be glad to release their bombsight! Admiral
Towers said that the accessories went with the planes, of course, except the new bombsight and added that, fortunately, the engines were
made by the same manufacturer that made the planes, so that there
should be no difficulty. He added that he thought the French could
use their own bombs and bombracks with minor adjustment, and asked
Colonel Jacquin what size bombs the French used. Colonel Jacquin
replied 500 kg. (?). Admiral Towers said he thought so and that the
bombracks could be ensily made to fit the French bombers.
The Secretary asked Colonel Jacquin as to what accessories he
considered of vital necessity and should be included with the planes.
Colonel Jacquin replied that all of them were necessary or the plane
was no good. Whereupon, Admiral Towers said "except the bombsight":
you could use a piece of hollow bamboo for that as long as it lined
up with the pilot, the plane, and the objective. Colonel Jacquin
smiled but admitted that the old bombsights would be satisfactory.
The Secretary inquired from Admiral Stark AS to whether or not
the accessories were part of the plane and included with it. The
186
-3Admiral replied that they certainly should be part of the plane
and that he would check with Admiral Towers in the morning to see
just what accessories were included. Admiral Towers stated that
each plane carried two guns, one 1000-pound bomb, and two 100-pound
bombs. Mr. Purvis asked as to the size of the guns, and Admiral
Towers replied that one was .50 calibre and the other .30 calibre.
The Secretary emphasized the fact that Admiral Stark would see about
the accessories, and the Admiral assured him that he would.
The Secretary asked Mr. Young to see that Admiral Stark got a
copy of the opinion of the Solicitor General, with its accompanying
memorandum, concerning sale or exchange of surplus war materiel the
first thing in the morning.
In discussing possible arrangements for the manufacturer, the
Secretary stated that Guy Vaughn would be in town the following
morning and that it might be a good idea if Mr. Purvis waited over
in order to talk with him about the details. Mr. Purvis said that
he would be glad to do it.
The conference adjourned after some general discussion between
various persons present as to how the planes were to be delivered
to the British, who was to fly them, where they were to be flown.
In that connection, both Colonel Jacquin and Mr. Bloch L'Aine talked
with Mr. Welles at different times to make sure that the State Department would take care of any border difficulties that there might be.
The meeting broke up at 7:28 P.M.
oooOooo
Ry
PY:bj
187
JUN 6 1940
Dear Admiral Starks
I - sending you herewith, for your confidential use,
statistical data on airplanes and airplane engines showing
(1) deliveries and new orders, Kay 1 to June 1, 1940, and
(2) unfilled orders as of June 1, 1940, together with the
estimated deliveries of these orders by months. The tables
are assembled in two volumes - Part 1, which brings together
the data submitted on airplanes; and Part 2, which brings
together the data submitted on airplane enginee. These data
have been compiled from reports submitted by twenty-six
airplane and twelve airplane engine manufacturers.
Sincerely,
(Signed) H Morgenthau,Jr.
to Has has
Admiral Harold R. Stark,
Chief of Naval Operations,
therefore
Navy Department,
Washington, D. 0.
By Messenger
UH
FIIEC0PY
415
188
JUN 6 1940
Dear General Marshall:
I am sending you herewith, for your confidential use,
statistical data on airplanes and airplane engines showing
(1) deliveries and new orders. May 1 to June 1, 1940, and
(2) unfilled orders as of June 1, 1940. together with the
estimated deliveries of these orders by months. The tables
are assembled in two volumes - Part 1, which brings together
the data submitted on airplanes; and Part 2, which brings
together the data submitted on airplane engines. These data
have been compiled from reports submitted by twenty-six
airplane and twelve airplane engine manufacturers.
Sincerely,
How
General George C. Marshall,
Chief of Staff,
Var Department,
Washington, D. 0.
therefort.
By Messenger
HA
FILECOPY
4'5
THE WHITE HOUSE
ongamen 1199 for
WASHINGTON
President seg'
folder
June 6, 1940
MEMORANDUM FOR THE SECRETARY OF THE TREASURY:
I enclose for your information copies of
memoranda r have just sent to the Secretary of
War and the Secretary of the Eavy instructing
them to clear all contracts for purchases
through Commissioner Knudsen.
This will relieve you of the responsibility
of clearing contracts for air craft and engines,
as required in my memorandum of May 24, 1940.
Cofin given
Them Phone: become
How
190
- a 1940.
- or - DATE:
In order that the program of I
in the preparedness field - be constinated and
empolited mot effectively. should you to
obtain the approval of Connicetener Residence, of the
Advisory Condition to the Cometh of National
Defense. on all important estimate for purchases
w your Separtment.
Digned 7 Franklina Rossevert
31
- a. 1960.
in
is the
employed most
obtata the
Common to the Council of
Defense. on all important - See
to
-
w - Department.
20 Rossevert
THE WHITE HOUSE
WASHINGTON
June 6, 1940
MEMORANDUM FOR THE SECRETARY OF THE TREASURY:
I enclose for your information copies of
memoranda r have just sent to the Secretary of
War and the Secretary of the Navy instructing
them to clear all contracts for purchases
through Commissioner Knudsen.
This will relieve you of the responsibility
of clearing-contracts for air craft and engines,
as required in my memorandum of May 24, 1940.
Cofin J
Them
How
June 6. 1940.
NEMORANDOM FOR THE SECRETARY OF THE EATT:
In order that the program of industrial expension
in the preparedness field may be coordinated expedited meet effectively, 1 should 11.100 you to
obtain the approval of Genmicsioner Kamison, of the
Advisory Commission to the Commil of National
Defense, on all Laportant contracts for purehasse
w your Department.
Digned 7
June s, 1940.
NEMORANDOM FOR THE BROKERARY OF WARS
In
is the
amountain
obtata the
met
Mvison
Defence,
on
all
W your Department.
Rossevelt
6-6-45/
photo: m
apps. is Unlto.
CANADIAN EMPIRE TRAINING PROGRAMME
A serious situation has arisen in
connection with the Empire Training Programme
on which Canada has already spent over one hundred
11/16
million dollars, due to the events of the last two
weeks which have resulted in England cutting off
supplies to Canada of advanced trainers on which
supplies the programme depended to an important degree.
The Canadian Government understands the U.S. Government
has a large number of North American Harvard Advanced
no.
Trainers on order and the Honourable C.D. Howe,
Minister of Supplies, has asked whether it will be
possible that priorities be granted for deliveries
during the next two or three months on some 500 planes.
In addition, in order to meet the engine
requirements for the planes which will now have to be
partly built in Canada, Mr. Howe has negotiated
(subject to U.S. Administration approval) a contract
with the Jacobs Company for delivery of 2,000 engines
down
(330 h.p.) prior to the end of December 1941 (312 will
be delivered by end of December 1940). While this
far from meets the Canadian Government's requirements
as regards deliveries, nevertheless there was no better
alternative offered. At the request of the U.S.
Administration, this order has been held up during the
last week or ten days in view of the desire to visualize
the whole aeroplane engine situation.
Because of the urgency of the Empire Training
Scheme in its relation to the supply of combat pilots,
it is requested that the Canadian Government be allowed
to go ahead either with the Jacobs order or with an
195
196
2.
order for some equivalent type of engine which will
fit into the aircraft frames (the latter point is
made because Dr. Meade felt there might be an
alternative that could be worked out for small Wright
or Pratt & Whitney engines).
aBP
A.B.P.
Washington, D.C.
June 6, 1940.