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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

-2-

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

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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

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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

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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
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250
250

240

260

240

260
230

230
240

240

220
220

210

220

210

220
200

200
200

200

190
190

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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.