Full text of Diaries of Henry Morgenthau, Jr. : Volume 271 : Part 2

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165

June 10, 1940
9:22 a.m.

H.M.Jr:

Hello.

Operator:

Go ahead.

H.M.Jr:

Hello.

Marriner S.
Eccles:

Hello.

H.M.Jr:

Marriner?

E:

Yes, Henry.

H.M.Jr:

How are you?

E:

Well, I'm pretty good. I just got in about
2:00 this morning from the Springs. I was down
there for about a week and I just got in last
evening.

H.M.Jr:

E:

H.M.Jr:
E:

Good for you. Marriner, I've got to make up
my mind whether I'm going to do any refunding
today or not. Hello?
Yes.
you

And I wondered if/and Ronald, or anybody else,
could come over around 11:00 and talk about it.

Well, I'll be glad to do it and I know Ronald
18 here and I'm sure he will. Would you --

do you want anybody else?
H.M.Jr:
E:

H.M.Jr:

Anybody you care to bring.

All right. Eleven o'clock?
Eleven o'clock. The first decision 18 whether
we want to do anything or not, and the second,

what. See?
E:

H.M.Jr:

Yeah. Uh-huh. Well, it's on that $380 some odd
million.

That's it.

-2E:

Uh-huh.

H.M.Jr:

That's it.

E:

H.M.Jr:

Well,
then. it's -- well we'll come over about 11:00
If you'd come over about 11:00, yeah.

E:

O. K.

H.M.Jr:

Thank you.

166

167

June 10, 1940
9:25 a.m.

H.M.Jr:

Hello.

Operator:

Mr. Jones had an appointment outside this
morning and he hasn't reached his office.

H.M.Jr:

Operator:

Oh. Is somebody there?
Ah --

H.M.Jr:

At his office?

Operator:

His secretary?

H.M.Jr:

Yes.

9:25 a.m.
H.M.Jr:

Mr. Morgenthau.

Jesse Jones'
Secretary:

Yes, Mr. Morgenthau.

H.M.Jr:

S:

Would you tell Mr. Jones that at 11:00
o'clock I'm having a little informal meeting
to decide whether we will or will not do a

financing today, and I'd like him to sit in
on it.
Yes, sir.

H.M.Jr:

At 11:00 o'clock.

S:

Yes, sir.

H.M.Jr:

Thank you.

S:

Yes. sir.

167-A
TREASURY DEPARTMENT

Washington

Press Service

FOR IMMEDIATE RELEASE

Tuesday, June 11, 1940.

No. 21-28

Secretary of the Treasury Morgenthau announced today that

the subscription books for the current offering of 1 percent
Treasury Notes of Series C-1943 will close at the close of
business Wednesday, June 12, 1940. This offering is open only
to the holders of Treasury Bonds of 1940-43 called for redemption on June 15, 1940.

Subscriptions addressed to a Federal Reserve Bank or branch,

or to the Treasury Department, and placed in the mail before
12 o'clock midnight, Wednesday, June 12, will be considered as
having been entered before the close of the subscription books.
Announcement of the amount of subscriptions and their

division among the several Federal Reserve districts will be
made later.

-000-

168

June 10, 1940
10:03 a.m.

H.M.Jr:

Hello,

Operator:

Congressman Cochran.

H.M.Jr:

Hello.

Congressman

John J.

Cochran:

Hello, Mr. Secretary.

H.M.Jr:

How are you?

C:

H.M.Jr:
C:

Fine. Say, what I wanted to know was, can't
you get some more money for that Bureau of
Internal Revenue and for Irey?
Well, of course
Now, if we can get a -- if you could get down
a budget estimate, we could get it in the

Deficiency Bill, because you could make a

showing, your broadening the base and we've

got to stop these fellows from making excess

profits in this emergency, and it's an ideal
time. Now, we'll give the Bureau of Investi-

gation about $10 million and they're going to
have about $3 million more in this emergency

bill -- in this deficiency bill.

H.M.Jr:

Yeah.

C:

Bo I wrote the President and sent you a copy

of my letter.
H.M.Jr:
C:

H.M.Jr:
C:

H.M.Jr:

I know you did.

I talked to Helvering and I talked to Smith.
Yeah.

I don't think you'd have any trouble in the
world getting some money if you got down a
letter right away -- a budget estimate.
I see. Well, I'll call up Guy immediately and
see what I can -- if I can push him.

169

-2C:

Well, now let him -- he can ask for some
money for himself as well as for the whole

thing and make sure that part of it is
allocated to Irey so he can keep up with this
work.
H.M.Jr:
C:

H.M.Jr:
C:

H.M.Jr:

Right.

Why this fellow gets enough money out of
Annenberg to pay -- to cover all the money
we've appropriated for his unit for the last
ten years.

You're right.
However, we can get twenty and thirty times

as -- for every dollar that we spend, it looks
like it's sound business judgment to spend
plenty, don't it?
You're right. I appreciate very much your

calling me and I'll go after it right away.
C:

I'm very much interested in that and I've
been making speeches down here about that
fellow for years trying to show them that they
ought to be giving him some money because he
breaks up all these racketeers and political
groups that should be broken up and he don't
have any publicity agents like other people,
but he goes and he does the work.

H.M.Jr:

That's right.

C:

And I know the President knows all about his

activities

H.M.Jr:

O. K. I'll see what I can do. I'm tickled
to death that you called me.

C:

All right. I talked to Helvering, but it looks

like there's a chance to get some money not only

for the Bureau of Internal Revenue to -- that'11
have to do additional work under this new tax
bill. Look at the number that are going to come
in under the -- when we broaden the base, so we

ought to have some emergency money to carry us

170

-3 on this fall when the time comes for making
the returns. Well, I'll do everything I can
down here, if you' 11 get a letter down.
H.M.Jr:
C:

H.M.Jr:

Swell, thank you so much.

All right.
Thank you.

171

June 10, 1940.
10:05 a.m.

H.M.Jr:

John, I've just got through talking to

Congressman Cochran of Missouri who wants

more money for Irey

John

Sullivan:
H.M.Jr:
S:

H.M.Jr:

Yes, I've tried very hard to get hold of him
both Friday and Saturday.
get hold of who?

Cochran.

Well, I've just talked to him. Now, this is
my suggestion. You -- if we're going to

broaden the base and add two or three million

more tax payers, we need more money.
S:

Oh, yes. And I have been working up over
there in the Bureau what their request will
be in the deficiency appropriation.

H.M.Jr:

How much?

S:

oh it will go a great deal more than that,

you see, you're going to have eight million
additional returns.

H.M.Jr:

Well, you ought to get it out of this -session, right now.

S:

H.M.Jr:
S:

H.M.Jr:

Oh, yes. That's right.
And all the money -- if you get some extra

money for Irey, I'm for it.
Oh, well, we need it all the way along the line.
Well, let me know tomorrow morning how much you

need. They oughtn't to take more than two days

S:

to figure that out.
NO, that's correct. I expect to have it today. .

172

-2H.M.Jr:

Come in in about three minutes. I'd like to
talk to you.

H.M.Jr:

You want me to come in in three minutes?
If you would.

S:

Yes, sir.

S:

173

June 10, 1940
10:07 a.m.

H.M.Jr:

Hello.

Operator:

Mr. Rentschler. Go ahead.

H.M.Jr:

Hello.

Gordon

Rentschler:

Hello, Henry. Good morning.

H.M.Jr:

How are you?

R:

They just told me that you were trying to
reach me in New York, and I'm calling you
back from Princeton.

H.M.Jr:

Gordon, if you had to make up your mind for
the Government whether we should or shouldn't
do a refunding today, what would you do?

R:

I would do it.

H.M.Jr:

You would.

R:

In spite of the fact that Paris might fall
and all the rest of it.

H.M.Jr:

I see.

R:

I mean, 1f you don't, everybody knows, Henry,
you need the money.

H.M.Jr:
R:

Uh-huh.

And if you don't get it now, why it will
cause more comment than if you do. I think
you'll have to pay a pretty decent price for

it.

H.M.Jr:
R:

Yeah.

But if I were you, Id try -- whatever maturity
you use, I'd try to leave not less than half

or three-quarters from where the market closes.

H.M.Jr:

Yeah.

174

-2R:

And
then I think I'd do it and get it out of
my way.

H.M.Jr:

I see.

R:

That would be my judgment, Henry.

H.M.Jr:

Well, that's what I wanted.
Yes, that's what I would do.

R:

H.M.Jr:

O. K.

R:

All right. How are you, Henry?

H.M.Jr:

I'm standing up.

R:

All right, boy. Well, you take good care of
your health.

H.M.Jr:

Right.

R:

Because we're going to have a lot of tough
days.

H.M.Jr:

You bet.

R:

Well, good luck to you, Henry.

H.M.Jr:

Thank you.

R:

Right.

H.M.Jr:

Good-bye.

175

June 10, 1940
10:27 a.m.

H.M.Jr:

Hello.

Operator:

All right.

H.M.Jr:

O. K.

0:

Go ahead.

H.M.Jr:

Hello.

C. J.
Devine:

Hello, Mr. Secretary.

H.M.Jr:

Go ahead, Chris.

D:

H.M.Jr:
D:

Now, I think that you can positively, regardless
of
Italy even entering the war, sell a three-year
note.
Uh-huh.

Now, I say sell a three-year note and not put a
long bond in there with it which can be done,
because I just checked the National Bank of

Detroit who own 25 million Junes, as an example.

H.M.Jr:

How many?

D:

25 million.

H.M.Jr:

Yeah.

D:

H.M.Jr:
D:

And since I talked with you I add up --oh, to about
100 million June three and three-eighths.
Leah.

And of that 100 million I do believe that some of
them, at least the National Bank of Detroit told
me they would take 25 million twos at $48.50 if
they could get them.

H.M.Jr:

Yeah.

170

-2-

D:

Now, what I would be fearful of in offering a
bond would be that some holders of Junes being
speculators would take and turn them in for the

bonds and buy notes in the market and hammer the

bond market which has held its own splendidly.

H.M.Jr:
D:

Yeah.

I would rather see the - market die in case
Italy did enter the war and handle itself, which
it could, - I think the market wouldn't go off any

more than a half a point.
H.M.Jr:
D:

H.M.Jr:
D:

Right.

But if you sold a three and a quarter seven-eighths,
for a one per cent note, which would be quite
attractive -- a seven-eighths note I figure would
be worth somewhere around sixteen to twenty and a
one per cent note twenty-four to twenty-eight.
But, after all, when they -- when the Germans
marched into Norway the market on forty-three
notes only went off six thirty-seconds, and when
they marched into the low countries they only went
off ten thirty-seconds.
Yeah.

So that I -- even if Italy declared war at noon
today I wouldn't be afraid to sell a one and I
think it would hold its own somewhere between

par and a half and par and five-eighths through
H.M.Jr:

the whole thing.
Par and a half.

D:

In other words

H.M.Jr:

A three-year one.

D:

A three and a quarter year one.

H.M.Jr:

Right.

D:

Now, I still think that if you don't want to give
that much away that you can sell a seven-eighths.

177

-3H.M.Jr:
D:

H.M.Jr:
D:

H.M.Jr:
D:

Right.

But I'm fearful of supplying the market with an
option on a long-term bond to sell what few you
might sell to prune that market so it upsets it.
I'd rather see it die and no business and be
quiet the way it is because it has held its own
pretty well.
But a note would go?

A note would definitely go.
Right. Thanks, Chris.

Now, one other thing, Mr. Secretary. I just
checked with the people that I know of that have
100 million dollars' worth of those notes aside
from the National Bank of Detroit.

H.M.Jr:
D:

Yeah.

And I know that every one of them will take a note
and I think they'11 even take a seven-eighths

without quivering, and I'm speaking Italy is in
the war.

H.M.Jr:

Right. Right.

D:

All right, sir.

H.M.Jr:

That's just exactly what I wanted.

D:

Thank you very much.

H.M.Jr:

Thank you very much.

D:

Right.

178

June 10, 1940
12:07 p.m.

H.M.Jr:

Hello.

Operator:

Harrison. Go ahead.

H.M.Jr:

Hello.

Pat

Harrison:

Henry.

H.M.Jr:

Well, Mussolini has just declared war on

H:

Who did?

H.M.Jr:

Mussolini.

England and France.

H.M.Jr:

Well, that isn't news, is it?
Well, it's news that he just did it. Just

H:

On France and England.

H.M.Jr:

On France and England.

H:

I see.

H.M.Jr:

Yeah.

H:

H:

announced it.

Why, Henry, we -- I want to start this thing
off tomorrow morning at ten o'clock. I think
that, of course, you ought to start. Now, Bell
was up this morning and Bell told me that he had
to go up to get a degree, of course. I have -the quicker I start over here the better. I
wonder if it would be all right to have Sullivan

over here just to explain this bill.

H.M.Jr:

Yeah, and then have me Wednesday?

H:

Well, Wednesday, yes. I want to get through

H.M.Jr:

Well, when did you -- when did you want me?

with it as quick as I can.

179

-2-

H:

I thought if you wanted to come tomorrow, all right,

H.M.Jr:

I don't think I could be ready before Wednesday.

H:

I see. Well, will it be all right to explain just --

but Danny said you'd probably want to come Wednesday.

H:

take Sullivan just to explain the thing?
Sure ! Definitely, yes.
Well, I'm going to call the meeting for ten o'clock

H.M.Jr:

All right.

H:

All right, Henry.

H.M.Jr:

Thank you for calling me.

H:

Good luck.

H.M.Jr:

tomorrow morning.

180

June 10, 1940
12:18 p.m.

Pat

Harrison:

Henry.

H.M.Jr:

Yes.

H:

I'll start this hearing Wednesday morning
at ten o'clock.

H.M.Jr:

You're starting it Wednesday at ten o'clock.

H:

H.M.Jr:
H:

Yeah. I want you first.
All right.
All right, and then have Bell here. He'11
be back by then.

H:

I'll have the whole gang.
And the whole crowd. All right.

H.M.Jr:

Thank you.

H.M.Jr:

181
June 10, 1940
2:24 p.m.

Operator:

Go ahead.

H.M.Jr:

Hello.

Dudley

Mills:

Hello, Mr. Morgenthau. This 18 Dudley.

H.M.Jr:

Yeah, how are you?

M:

Fine, thank you.

H.M.Jr:
M:

Now, how do you feel now after Mr. Mussolini
has said his piece.

Well, I think just the same as I did this
morning.

H.M.Jr:

You don't feel any different?

M:

No.

H.M.Jr:

Uh-huh.

M:

H.M.Jr:
M:

The market has held up remarkably well and
faces shock after shock.
Really.

And we feel that no refunding might give
rise to the opinion that conditions are 80
bad that the United States Government might
feel it unwise to even refund as small an
amount as $350 million.

H.M.Jr:

I see.

M:

Now the stock market, the corporate bond
market and our markets have all showed today.
They have

H.M.Jr:

Yeah.

M:

We have -- I have in front of me a list of

holders of $175 million.

182

-2H.M.Jr:

How much?

M:

$175 million of these.

H.M.Jr:

Yeah.

M:

That's half the issue, and looking over the
type of holder, it is our belief that everyone
will do their share and come along. Now, this
morning we suggested that December 44, 1-1/8,
and we still think it would go well and sell
at about 3/8th of a point premium. But if you

think that Italy's action requires a little

added protection, September 143, 1% issue

would go well, it's clear on the maturity

would sell about par 3/4th, and yield about
.35 of 1%.

H.M.Jr:
M:

I see.

And then you'll be in a position to withstand
any further shock that might come over these
two days if the public should interpret Italy's
action differently from the action that the
markets have shown today.

H.M.Jr:
M:

H.M.Jr:
M:

H.M.Jr:

Right.

And there'll be a better secondary market
for 143 note than a 44 note.

Better for a 43?
There's a secondary market to develop, you see,
potential buyers would be greater there than

they would be in 44.
Right. O. K., Dudley. Thank you.

M:

All right, sir.

H.M.Jr:

Thank you.

183
June 10, 1940
2:28 p.m.

H.M.Jr:

Hello.

Operator:

Devine. Go ahead.
Hello.

H.M.Jr:

C. J.

Devine:

Hello, Mr. Secretary.

H.M.Jr:

Chris, do you feel any different since this

D:

I don't feel any different really at all.

morning?

The only thing, I thought that if you wanted
to extend that 1% certificate to December 43,
the December 143 is just as attractive as a
September, and you could, if you wanted to,

without any trouble at all sell a 1-1/8 of
September 144.

H.M.Jr:

Uh-huh.

H.M.Jr:

But I don't see bonds at all.
You said -- what did you say in 43?

D:

December or September, one a 43, or a 1-1/8

H.M.Jr:

Yeah.

D:

D:

of 44.

The best choice would be in the middle there,
you wouldn't be giving too much away in
December 43 except that you have a maturity
in there of $400 and some odd million.

H.M.Jr:

Yeah, that's right.

D:

Whereas, in September you only have $200 million.

H.M.Jr:

Now a 1-1/8 of 44 would be just as well.
Well, that September 143, what do you figure --

D:

Well, here's -- I took the 7/8th coupon which

how much premium is that?

I mentioned this morning in September and I

184

-2threw it away because I thought a split
coupon doesn't go so well at this time.
H.M.Jr:
D:

Yeah. How about the 1%?

Now, the 1% is worth from 24 to 28. I'm
figuring that if the news gets bad, they'd
move off 8/32nds. That would still make them

between 16 and 20. In the case of the December,

they' re worth 1/16 less only -- 22 to 26. If

the news gets bad, they'11 settle from 14 to 18.
H.M.Jr:
D:

H.M.Jr:
D:

H.M.Jr:
D:

H.M.Jr:
D:

Yeah.

In the 1-1/8th, they're worth from 24 to 28.
If the news gets bad there, they go from 18 to
22.

Right. O. K., Chris.
On the other hand, Mr. Segretary, there's been
some talk of bonds and I still feel the same
as I did this morning
Well, the bonds are out of the window.
Oh, I can't see them, I wouldn't want to see
you -- the market's -- I'm 80 pleased with the
market -- there's no business.
No.

But I'm tickled to death the market acts as
well as it does.

H.M.Jr:

It acts well, does it?

D:

Beautiful.

H.M.Jr:

O. K

D:

Right, sir.

H.M.Jr:

Thank you.

D:

Thank you.

185

June 10, 1940
2:30 p.m.

H.M.Jr:

Hello.

Operator:

George Harrison. Go ahead.
Hello.

H.M.Jr:
George

Harrison:

Hello, Henry.

H.M.Jr:

George?

H:

Yes, sir.

H.M.Jr:

With this announcement on Italy -- you know,

we're seriously thinking of refunding this
afternoon -- announcing refunding. Hello.

H:

You mean, with cash?

H.M.Jr:

No, refunding.

H.M.Jr:

Oh, yes. Well, I hope you do.
Well, we're thinking, George, of this 3-1/4 year

H:

Well, let's see. I don't think -- I haven't

H:

H.M.Jr:
H:

H.M.Jr:
H:

H.M.Jr:
H:

note, 1%.

got the prices of that.
Well, it's 24 to 28/32nds -- it's good for 24
to 28/32nds, somewhere in there.

Well, I -- Henry, I hope you do it. Everybody
really thinks you can do it. I believe you can.
You have no worries since Mussolini came out,
I mean, the market behaved all right?

Very beautifully.
Very beautifully.
from
Considering, I mean, it went off/1 to 4/32nds
lower than Saturday.

186

-2H.M.Jr:
H:

Yeah.

But 1 also to 4/32nds above the lows of the
afternoon, I mean, they had quite a come-back.

H.M.Jr:

But the market's in good shape, George?

H:

The market's in good shape, it's expected. It

H.M.Jr:

Thank you.

H:

And I'11 go ahead with it.

H.M.Jr:

Thank you, George.

H:

That's the 3-1/4 year at what rate?

H.M.Jr:

1 -- 1%.

H:

1%.

H.M.Jr:

Yeah.

H:

That's all right.

H.M.Jr:

Yeah.

H:

First rate.

H.M.Jr:

I'11 make up my mind between now and 3:00

H:

Uh-huh. Well I hope you don't change it.

H.M.Jr:

All right, George, thanks.

H:

Goodbye.

could almost be underwritten.

o'clock Standard time.

187

fits PARAPHRASE ataint this OF TELEGRAMLondon
RECEIVED m

Secretary of State,
Washington.

1578, June 10, 8 p.m.
CONFIDENTIAL AND SECRET FOR SECRETARY MORGENTHAU AND
THE SECRETARY OF STATE.

The plans for Halifax and Rolls Royce bomber planes

as you requested are already at Halifax and the Sterling
bomber, Bristol Bull fighter, Sterling Turret, Hawker
Hurricane and the Super Marine are in transit. The
Paul Turret and the Boulton are being packed to go.
KENNEDY

187-A
BRITISH EMBASSY,
WASHINGTON, D.C.

June 10th, 1940.
Secret.

Dear Mr. Secretary,

I enclose herein for your personal
and secret information copies of the three
latest reports received from London on the

military situation.
Believe me,

Dear Mr. Secretary,

Very sincerely yours,

The Honourable

Henry Morgenthau, Jr.,

United States Treasury,
Washington, D. C.

187B

Telegram despatched from London

on the evening of June 8th.

Two German armoured divisions are making

determined effort to reach Rouen through breakthrough between Poix and Liomer. Enemy tanks reported

to have reached Formerie. Infiltration of tanks also
reported between Roye and Nesle and in Noyon area

towards Compiegne. As result of infiltration along
River Ailette French withdrew in good order to line
Aisne and in order to conform line now runs CompiegneNoyon-Hargicourt-Ailly-Poix-Hornoy-Blangy-River Breale.

British front elements of enemy armoured divisions
which broke through near Poix reached Forges and

Neufchatel where portion of British reserve line was
forced out. These reserve posts carried out demolition
at both places before retirement. Other parts of same
enemy attack did not proceed so well and as result
French counter-attacked and number of enemy tanks

surrounded at Formerie were being systematically
destroyed.

2. Yesterday Blenheims attacked with success
enemy tanks transports and communications in Abbeville

area. All aircraft returned. Last night Wellingtons
attacked enemy troops moving over Somme crossings,

Whitleys attacked railhead at Hirson and other

Wellingtons attacked to fire the woods north of Hirson.
All the above aircraft returned. Hampdens attacked oil
targets/

187-C

targets at Hanover and carried out mine-laying

operations last night. Fighters operating over
battle area yesterday shot down 18 aircraft confirmed and 5 unconfirmed. Twelve British
fighters missing.
8. Last night considerable number of
enemy raiders recorded from Flamborough Head to

Themes estuary and inland over Lincolnshire and
London. Minor activity from Beachy Head to
Portland Bill. Bombs reported on Bury St. Edmunds,
Peterborough, Boston, Market Deeping, King's Lynne,

and near Spelding also near four aerodromes in
eastern counties. No serious damage and no

casualties reported up to present. Enemy aircraft
carrying mines crashed in Suffolk. Fighter aircraft
sent up during above raids but no interceptions made.
June 7th signal station at Fair Island machinegunned but no damage reported.

4. British armed merchant cruiser
toppedoed on June 6th and subsequently sank. All
crew except two officers and two ratings saved.
Small steamer sunk by shell fire on June 5th.
Trawler sunk by mine on June 6th. One small
steamer sunk by mine on June 7th and one other
steamer and one other torpedoed and subsequently

beached. All the above in home waters.

Telegram despatched from London

187-D

late on the evening of June 8th.
German attack along whole front from Laon

to the sea continues. Germans have secured bridgehead across the Ajane at Pommiers (went of Soissons)

and reached the river in several places between Soissons
and Boug et Comin.

South and southwest of Amiene

heavy attack with armoured units penetrated so Forges,

Argeuil, and Neufchatel. Number of German tanks
destroyed at Formorie. German armoured units made no

further progress on Breale front, where British division

is still holding the line of the rivor. British
reserve units were still holding the river Bethune
this morning. Fighting was in progress at Formorie
where German artillery and tanks were in action. Other
reserve units holding from Serquex to but excluding
Neufchatel. Armoured units holding road blocks from

Vascoeuil (12 miles east of Rouen) to Serquex. British
destroyers carried out indirect bombardment of road to
Abbeville, Treport early today. Although the damage
could not be observed, moral effect is thought to have
been considerable. Although the present German
thrust still appears to be directed south and southwest
of Amiens, one of the objectives being Rouen, reports
indicate that enemy may attempt to cross the Ajene between Soissons and Compiegne in the near future.

Altogether six or seven armoured divisions believed to

be operating in the above attacks but all reported very

reduced in strength. Thirty-one divisions of all types
now identified. Local German attack of June 6th
penetrated to Puttelange (southeast of Sumemburg) .

2. Blenheima/

-2-

187- E

2. Blenheime successfully attacked enemy

concentrations in the Poix area this morning, obtaining
direct hits on tanks, transport and troop column.
Two Byenheims missing. Further attacks by
Blenheims in the same area and on petrol dumps in

Abbeville area this afternoon but no reports yet available. Eighty-two fighters employed today in escorts
and offensive patrols in Poix, Treport area. Preliminary reports give one enemy aircraft destroyed and one

British fighter missing. Reports on yesterday's
attacks not complete. Poor visibility made
observation of results difficult but bombing on the
Some crossings and operation to fire woods at Hirson
both apparently successful.

3. No relaxation in scale of German air operations
of heavy long-range bomber Geschwader, except those

undergoing re-equipment, believed to be operating in

France. Bombing attacks made on railways in Paris
region and on targets in Cherbourg, Orleans, Evroux and
Lyons.
Railways leading to battle area and between
Paris, Chalons, Troyes, Soissons, and Rheims also

Bomber reconnaisnance aircraft particularly
active over the area south and southwost of railways

bombed.

in east and in Troyes-Dijon area. Estimated there are
about 350 German fighters on aerodromes in area of St.

Omer, Namur, Mezieres, Laon and Abbeville. Transport
activity normal.
4.

Corrigendum. Last word of third paragraph

of my last telegram but one should read Amiens and not
Rheims.

Telegram despatched from London late

187-F

on the evening of June 9th.

German communique claims that H.M.S. "Glorious"

one destroyer and S. S. "Orama" sunk, No confirmation
or otherwise of this claim received,as wireless silence
is enforced during naval operations.

2. British division, with some French troops,
were on line of River Bethune early today, but indications they are withdrawing westward. British armoured
units and reserve units are reforming in area LouviersE1bouf.

Elements of two German armoured divisions

have entered Rouen and early today were reported at

Duclair (west of Rouen) and further north, between Duclair and the sea. Enemy attacked across River Avre
southwest of Montdidier. Enemy crossed over River
Aisne at Sermoise and Pommiers reported last night to
have advanced ten miles south of river.
3.

Two main German thrusts are: (a) southward

across Aisne between Bourg Comin and Vio-Sur-Aisne,

Estimated strength 12 infantry divisions and one

armoured division. (b) on axis Poix-Rouen direction
southwest, two armoured divisions engaged while flank
protection to the northwest believed given by one motor-

iced infantry division. Number of infantry divisions
engaged not definitely known.
Blenheims attacked this morning and this
afternoon German tanks and columns northeast of
4.

River Bethune. Results not yet known. Three aircraft missing. Last night attacks by Wellingtons
were successful.

Among other targets on which

direct hite were secured are bridges over Some, oil
tanks near Le Chateau, aerodrome and ammunition dump
near/

187-G

-2-

near Abbeville.
Little information available regarding German
5.

air activities in France yesterday.

Known that

Germans are having some difficulty in supply and mainten-

ance of their air units in Northern France. Priority
given to fighters and dive bombers, and long-range bom-

bers are having to return to bases in Germany. Transport aircraft continue operating between Western Germany
and Brussels, and evacuation of wounded by air continues.
Germans are reinforcing troops in Narvik area from Bodo.

187-H
BRITISH EMBASSY,
WASHINGTON, D.C.

Secret

11th June 1940.

Dear Mr. Secretary,

I enclose herein for your
personal and secret information copies

of the two latest reports received
from London on the military situation.
Believe me,

Dear Mr. Secretary,

Very sincerely yours,

holican
xThe
find
was
following wore delayed in transmission.
In Canadar air love is immunity Halifes u

find has boxes of Drawings A lom -

by an lorale lines let for know ,
the Honourable

hymil mue a at one

Henry Morgenthau, Jr.,
United States Treasury,
Washington, D.C.

187-I

Telegram despatched from London on the evening of
June 9th, 1940.

British Expeditionary Force.
Armoured units have withdrawn from road

points Vascoeuil Serquex to the South of River Seine.
The British Reserve unit on the River
Bethune withdrawn and formed bridge-head at Pont de
1'Arche (South of Rouen).

No information regarding 51st Division.
Enemy pressure yesterday on the French

10th Army front South and South East of Amiens in the

direction of Flers Bonneuil and Merville au Bois on
Compiegne Ailly front the enemy reported to have
crossed the River Aure at Davenescourt Pierre Pont
de l'Arche Braches.
The depth of penetration not known.
Enemy also crossed the River Aisne during

the night of June 7th - 8th at Sermoise and reached
Courcelles at 1645 hours yesterday the enemy troops of
all arms had reached Nampteuil Villemontoire and Missy
and about 100 AFV's were in Cramaille area.
2.

Last night Wellingtons attacked crossings

over the River Somme between Piequigny and St. Valeri
and enemy movements on the roads leading thereto from
the North.
Hampdens attacked roads leading to Amiens

on the north.

Whitleys attacked railway junctions in
the rear of German attacking troops and also woods South

of Abbeville.

/All

187-J

-2All aircraft returned but no reports
yet available. Yesterday attack on enemy concentrations in Poix area and on petrol dump at Abbeville
now
reported successful. Petrol dump was left
burning.
Now reported enemy aircraft casualties
from British fighters yesterday were 10 confirmed
and 2 unconfirmed.
Three British fighters
missing. Last night Whitleys and Hampdens also
bombed railway marshalling yards junctions in the

Rhine-Meuse area. All aircraft returned but no
reports yet available.
Mine laying operations also carried

out last night.
3.

Several German aircraft over England

last night between Cromer and Poole, and mine laying
suspected between Dungeness and Poole. Aircraft
did not proceed far inland and no bombs reported

dropped but searchlight post at Dover attacked by

machine gun fire. British fighters sent up but no
interceptions.

Anti-aircraft guns fired at Do ver. In
France enemy attacked Rouen, Cherbourg and Havre with

approximately 34 aircraft last night.
4.

One small steamer which had become

separated from her convoy due to fog was mined and
The crew were
sunk in home waters yesterday.
saved.

187-K

Telegram despatched from London on the evening of
June 10th, 1940.

German communique also claims to have

sunk S.S. "011 Pioneer" and a submarine-chaser in

addition to H.M.S. "Glorious", S.S. "Orama" and one

destroyer, but there is still no confirmation of
these claims.

Early this morning British convoy
attacked off the East Coast of England by enemy motor

torpedo boats but believed the convey still intact.
One British and one Norwegian ship, neither in convoy

sunk by mines in home waters. British ship subsequently beached. Shipping has been evacuated from
Rouen and petrol tanks fired.
2.

British Division with French troops holding line River Bethune last night are withdrawing
southwestwards. All bridges over the Seine between
Mantes and excluding Rouen destroyed but situation

regarding Rouen uncertain. Enemy were crossing the
Seine mid-day yesterday by pontoon bridges in Port de
1'Arche area.

Number and position of German troops

south of the Seine uncertain but no doubt some A.F.V.s
are across.
British armoured units and reserve
units now under command of General Laurencie, though

some elements of reserve units probably still north
of the Seine.

Evreux heavily bombed yesterday after-

noon and all British troops have been evacuated, on

the front north of Oise strong enemy attack with tanks
has reached St. Just and Crevecoeur.

Troops in

this area reported tired and considerably intermingled.
/on

187-L

-2On Alane south of Soissons, Germans have

reached line of Oulchy Le Chateau-Berneuil, but the
French think that they have this attack under control.

The enemy have also carried out intense artillery
preparations on Alane front between Vousiers north of
Rheims area.

Attacks in Rheims area have however

been held, except for a small bridge-head at Rethel
and Chateau Porcien.
3.

Last night Whitleys attacked crossings

over the Rivers Somme and Aisne, also northern

entrances to Amiens. All aircraft returned but no
reports available.

Early to-day Blenheims attacked

the enemy troop concentrations and armoured fighting
vehicles east and northeast of Rouen but no reports

yet received. Last night, Wellingtons again dropped
bombs on woods between Hirson and River Mouse. Pre-

liminary reports indicate number of large fires and

several big explosions were caused. All aircraft
returned safely. Marshalling yards in the Ruhr area
also bombed last night by Hampdens. No reports yet
received. One Hampden missing. Early yesterday
Beauforts bombed oil targets at Ghent, causing large

fires and numerous explosions. All aircraft
returned safely.

Mine-laying operations also

carried out last night.

71 fighters carried out

patrols connected with home defence and a further 191
operated over French and Belgian coasts. No combats

reported, and all aircraft returned. Attack by
Blenheims on the enemy transport and tanks northeast
/of

10%
187-M

-8 of River Bethune reported in my immediately preceding telegram was successfully carried out.
4.

No enemy air activity over British

Isles except for reports of aircraft over Kirkwall
considerable German air activity over northwest

France yesterday and last night, but no details yet
available.

Large fires seen in Rouen and Havre.

187-N
BRITISH EMBASSY,
WASHINGTON, D.C.

Secret.

June 11th, 1940.

Dear Mr. Secretary,

I enclose herein for your
personal and secret information a copy

of the latest report received from
London on the military situation.
Believe me,

Dear Mr. Secretary,

Very sincerely yours,

Honourable

Henry Morgenthau, Jr.,
United States Treasury,
Washington, D.C.

18750

Telegram despatched from London late in
evening of June 10th.

No further news of His Majesty's
Ship "Glorious". the presence of strong German

naval unit at Trond jhem is reported. It is
also reported that Germans are buying up every
available motor boat and that naval yerds are

working 24 hour shifts to turn out motor boats
and shallow draft vessels.

British Division operating with the
French troops and reported in my immediately
preceding telegram as withdrawing southwestwards,

today continued its withdrawl and was not hard
pressed during the morning. Bridges at Rouen have
been blown up. Strong enemy columns observed
yesterday on the roads approaching Rouen from the

northeast. This morning enemy tanks were reported

in Yvetot. South of River Seine enemy tanks are
reported to be advencing from Louviers to Neubourg.
Some of the British reserve units under the command
of General Laurencie reported to be considerably

spread out still, end some troops appear to have
been cut off on the north side of the River Seine.
This afternoon, Blenheims were sent to
bomb the enemy motor transport on the river approaches

between Rouen, Les Andelys. No reports received yet.
All /

-2-

187-

All our sircraft returned safely. Whitleys which
attacked crossings over the Rivers Somme and Aisne

last night obtained hits on bridges over River
Somme and on the road and railway communications in

southern Belgium. Big explosions were also caused
at Amiens end Picquigny. Blehheims which attacked
troop concentrations northeast of Rouen this morning
bombed enemy motor transport near Forges at Le

Feville and at southern end of the Forest of Bray.
Aircraft observed oil tanks at Rouen on fire and
that there were large columns of German motor transport on the road to Buchy-Rouen, heading southwest.
Wellingtons which bombed Hirson and River Meuse last

night caused large fires in woods attacked and at
least 12 explosions, one of which at Rocroi was

particularly violent. Hampdens having already attacked marshelling yards last night in Ruhr area
obtained direct hits on yards at Duren, Aachen,
Julich and one or two others. A large fire was
observed at Duren. Direct hits also obtained on
aerodromes at Flushing.

It appears that German air-force operations on June 9th were on as high a scale as on any
day since May 10th. Dive bombers and twin engined

fighters were operating on an apparently increased

scale, chiefly in northern France. Transport aircraft activity between western Germany, Brussels,

Lille, and as far west as the coast continues, and
evacuation of wounded by sir also continues.

₽

188

June 11, 1940

The attached memo prepared by Brigadier General

R. C. Moore was brought in this morning by Major Brooks
during the Allied Purchasing Commission meeting at

about 11:00. I then sent for Major Smith and asked
him to take it over to General Watson and to put it

up to the President whether he would approve 500 more

75mm guns. Major Smith volunteered his opinion that the
Army could easily sell up to 1,000 of these guns.
By 12:00 the President had approved the memo.

General Watson called me at 12:10. He had been in
to see the President and the President okayed 500
more 75mm guns for the French. Watson argued with me as

to who should tell Woodring and I said he shouldtell

Woodring, and he said he would.

G-4

WAR DEPARTMENT

RCM

WAR DEPARTMENT GENERAL STAFF
SUPPLY DIVISION G-4

WASHINGTON

SECRET

189
June 11, 1940.

NOTE FOR THE CHIEF OF STAFF:

Subject: Sale of 75 mm Guns.

The Chief of Field Artillery
also concurs in the attached
memorandum.

Remain
R. C. MOORE,

Brigadier General,

Assistant Chief of Staff.

Qef

Incl.
Memo fm.G-4 to C.of S.,
6/11/40.

SECRET

WAR DEPARTMENT

G-4

WAR DEPARTMENT GENERAL STAFF

RCM

190

SUPPLYDIVISION

WASHINGTON. D.C.

SECRET

June 11, 1940.

MEMORANDUM FOR THE CHIEF OF STAFF:

consentents
missing
6/11

Subject: Sale of 75 mm Guns.

1. It is my opinion that no further 75 - guns should be declared
surplus, obsolete, or placed in any other category that would render them
available for sale.
2. There are 3450 of the French mm guns on hand, of which 1439 are

required initially for the PMP and 1671 additional are required for

augmentations. It is estimated that maintenance and wastage for one year
would require about 2400 guns. It would take 2 years for production to

catch up with requirements. Furthermore the delivery of 37 - anti-tank
guns is very slow and it will be at least 18 months before the requirements
for existing units will be filled. There is at present a shortage of 860
of the 37 - anti-tank guns for existing units based on the present numbers
allotted to anti-tank battalions and infantry regiments (8 instead of 12
per regiment has been recommended by WPD). There is an additional shortage

of 300 of these guns for PMP. The only existing substitute for the 37 anti-tank gun is the 75 - gun. Therefore 2599 of the 75 mm guns would be
required immediately upon mobilisation and the remainder very shortly
thereafter.

It would be dangerous to national defense to decrease the number
of 75 - guns available. WPD concurs.
3.

Table of 75 - gun statistics
3450
1439

On hand

Initial Requirement PMP

2011

Remaining

Required as substitutes for 37 - antitank guns PMP

1160
851

Remaining

1671

Required for augmentation

820

Shortage

Required for 1 year's operation in field
Shortage

2400
3220

It will take 2 years for production to meet requirements.

Rellow
R. C. MOORE,

Brigadier General,

mef

SECRET

Assistant Chief of Staff.

WAR DEPARTMENT

0-4

WAR DEPARTMENT GENERAL STAFF

RCM

SUPPLY DIVISION as

WASHINGTON

SECRET

June 11, 1940.

NOTE FOR THE CHIEF OF STAFF:

Subject: Sale of 75 - Guns.
The Chief of Field Artillery
also conours in the attached
memorandum.

Remains
R. C. MOORE,

Brigadier General,

O

Assistant Chief of Staff.

mef

Incl.
Name fa.G-4 to C.of 8.,
6/11/40.

SECRET

am

192

WAR DEPARTMENT

G-4

WAR DEPARTMENT GENERAL STAFF

RON

SUPPLYDIV
WASHINGTON. D.C.

June 11, 1940.

SECRET

MEMORANDUM FOR THE CHIEF OF STAFF:

Subject: Sale of 75 - Guns.
1. It is my opinion that no further 75 - guns should be declared

surplus, obsolete, or placed in any other category that would render them
available for sale.
2. There are 3450 of the French - guns on hand, of which 1439 are
required initially for the PMP and 1671 additional are required for
augmentations. It is estimated that maintenance and wastage for one year
would require about 2400 guns. It would take 2 years for production to
catch up with requirements. Furthermore the delivery of 37 - anti-tank
guns is very slow and it will be at least 18 months before the requirements

for existing units will be filled. There is at present a shortage of 860

of the 37 - anti-tank guns for existing units based on the present numbers
allotted to anti-tank battalions and infantry regiments (8 instead of 12
per regiment has been recommended by WPD). There is an additional shortage

of 300 of these guns for PMP. The only existing substitute for the 37 anti-tank gun is the 75 - gun. Therefore 2599 of the 75 - guns would be

required immediately upon mobilisation and the remainder very shortly
thereafter.

3. It would be dangerous to national defense to decrease the number
of 75 - guns available. WPD conours.

Table of 75 - gun statistics
On hand

3450
1439

Initial Requirement PMP

2011

Remaining

Required as substitutes for 37 - antitank guns PMP

1160
851

Remaining

Required for augmentation

1671
820

Shortage

Required for 1 year's operation in field
Shortage

2400
3220

It will take 2 years for production to meet requirements.

Relloon
R. C. MOORE,

Brigadier General,

not

SECRET

Assistant Chief of Staff.

193

June 11, 1940

My dear Mr. President:

Sunday night, June 9th, Secretary Woodring,
General Marshall and Admiral Stark met with Treas-

ury officials and myself.

When the meeting started, it had been the

intention of the Navy only to give the Allies 68

1,000 pound bombs. I showed them your telegram
and insisted that the Allies be given 750 bombs.

Admiral Stark readily agreed to this.

Monday morning, 180 bombs moved out of York-

town, Virginia, for Rouses Point. I was informed
they were having difficulty with the movement of
this shipment and I immediately got in touch with

John Pelley who promised me that he would run this
shipment through at passenger schedule. The rest

of the bombs are coming from Hawthorne, Nevada, and

John Pelley has also promised that this movement

will be expedited. The last I heard the point of

destination was New York.

All but 30 of the fuses necessary for these

bombs are coming via destroyer from Panama and the
30 which were in San Francisco are coming by Navy

air transport ship.

Admiral Stark has been most cooperative, not

only in the assembly of the 50 planes at Buffalo,
which was done in record time, but also in working
out the formula for the exchange of the bombs and
fuses with the manufacturers.
This completes this mission.
Yours sincerely,

The President,
The White House.

194

June 11, 1940

My dear Mr. President:

Sunday night, June 9th, Secretary Woodring,
General Marshall and Admiral Stark met with Treas-

ury officials and myself.

When the meeting started, it had been the

intention of the Navy only to give the Allies 68

1,000 pound bombs. I showed them your telegram
and insisted that the Allies be given 750 bombs.

Admiral Stark readily agreed to this.

Monday morning, 180 bombs moved out of York-

town, Virginia, for Rouses Point. I was informed
they were having difficulty with the movement of
this shipment and I immediately got in touch with

John Pelley who promised me that he would run this
shipment through at passenger schedule. The rest
of the bombs are coming from Hawthorne, Nevada, and
John Pelley has also promised that this movement

will be expedited. The last I heard the point of

destination was New York.

All but 30 of the fuses necessary for these

bombs are coming via destroyer from Panama and the
30 which were in San Francisco are coming by Navy

air transport ship.

Admiral Stark has been most cooperative, not

only in the assembly of the 50 planes at Buffalo,
which was done in record time, but also in working
out the formils for the exchange of the bombs and
fuses with the manufacturers.
This completes this mission.
Yours sincerely,

The President,
The White House.

195

June 11, 1940

My dear Mr. President:

Sunday night, June 9th, Secretary Woodring,
General Marshall and Admiral Stark met with Treas-

ury officials and myself.

When the meeting started, it had been the

intention of the Navy only to give the Allies 68

1,000 pound bombs. I showed them your telegram
and insisted that the Allies be given 750 bombs.

Admiral Stark readily agreed to this.

Monday morning, 180 bombs moved out of York-

town, Virginia, for Rouses Point. I was informed
they were having difficulty with the movement of
this shipment and I immediately got in touch with

John Pelley who promised me that he would run this
shipment through at passenger schedule. The rest
of the bombs are ooming from Hawthorne, Nevada, and
John Pelley has also promised that this movement

will be expedited. The last I heard the point of

destination was New York.

All but 30 of the fuses necessary for these

bombs are coming via destroyer from Panama and the
30 which were in San Francisco are coming by Navy

air transport ship.

Admiral Stark has been most cooperative, not

only in the assembly of the 50 planes at Buffalo,
which was done in record time, but also in working
out the formula for the exchange of the bombs and
fuses with the manufacturers.

This completes this mission.
Yours sincerely,

The President,
The White House.

196

WASHINGTON D C 11 JUNE 40

SECRET:-

FOR THE SECRETARY OF THE TREASURY:IF

I WANT TO I NFO RM YOU THAT/THAT HISPANO MOTOR WHICH

YOU ARE INTERESTED IN DOES NOT TURN UP OR IF IT TURNS UP
LATE IT IS BECAUSE THE STATE DEPARTMENT POSITIVELY FORBADE IT
TO BE SHIPPED ON THE WASHINGTON IN SPITE OF MY URGENT APPEAL
IT IS NOW ON THE DOCK AT BORDEAUX AND WE ARE TRYING TO SEND
IT ON A FRENCH STEAMER.

BULLITT.

TOR:- 1835

197

RE DEPARTURE PERMITS

Present:

June 11, 1940
4:20 p.m.

Mr. Harris

Mr. Puleston
Mr. Cairns
Mr. Foley
Mr. Young
Mrs. Klotz
Mr. Berle

Mr. Bell

H.M.Jr:
Foley:

Is Knudsen coming back or isn't he?
He said he wouldn't co me back. He wanted
the answer and I met him in the hall and
he asked me if --

H.M.Jr:

What about those g questions?

Foley:

Well, these 8 questions, Mr. Secretary,
we can't answer offhand. I think these

are fundamental and the answer to most of

them 18 no. What I want to do is to send
this over to Tim Mooney, who is the head
of this Committee, and let them study it.
H.M.Jr:

Will you stay behind after this is over?

Foley:

Yes.

H.M.Jr:

I wish Mr. Berle would be on time.
(Mr. Bell entered the conference.)

Bell:
H.M.Jr:

It has gone up.
What is it now?

Bell:

Three billion one forty.

H.M.Jr:

Well, Dan, just as soon as the Vel-Ragnar,

198

-2- if that 18 the way you pronounce it, has
discharged her ammunition, I will say now
that she can sail. She 18 discharging her
ammunition. Does anybody know what the
rest of her cargo 18?
Bell:

Somebody said gas masks this morning.

H.M.Jr:

Well, I had better not ask.
Thirty-three thousand gas masks is all I know.
I'm not interested in gas masks. Well, if
that 18 done, they took your (Harris') suggestion

Young:

H.M.Jr:

and it was a very good suggestion.

Harris:

That simplifies it.

H.M.Jr:

That takes care of it. Has anything happened
since then on any of the other ships?

Cairns:

We have the' "Nevada". That was the vessel we

H.M.Jr:

Off Key West?

Cairns:

No, it has not departed from Port Arthur.

H.M.Jr:

That makes two. What 18 the other?

Cairns:

The Aryan.

H.M.Jr:

Why were you so dramatic about stopping the
ship off Key West?

Cairns:

I was told it had departed and it would be

H.M.Jr:

Who told you?

Cairns:

The boys downstairs.

H.M.Jr:

Have you learned anything since this morning?

Puleston:

Yes, I saw Mr. Dunn in the State Department
and found out that everything was in motion
over there toward doing just what you wanted

gave the permit to.

at Key West today.

199

3-

and I have a little memo here on what they

are doing.
H.M.Jr:

If they are, Mr. Hull doesn't know about it.

He doesn't know they are doing anything.
Puleston:

Yes, because Mr. Dunn said that he was working
on orders from him, said that you had called
him up and he sent for them and told them
to get busy.

H.M.Jr:

Maybe, because the President, after I told the

story in Cabinet, told Mr. Hull to do it and

Mr. Hull acted as though he had never heard
about it.
Puleston:

Well now, did you speak to Mr. Hull at the

H.M.Jr:

Yes.

Puleston:

Puleston:

Then that is what started it, because I was
over there just before noon.
No, this was just a half hour ago.
Well, Dunn told me that Mr. Hull - that you

H.M.Jr:

I talked to Mr. Hull twice on the subject,

H.M.Jr:

Cabinet on this?

had --

yesterday and the day before.

Puleston:

Then that is it.

H.M.Jr:

But at Cabinet today when I brought it up
he acted as though he didn't know anything

about it, but I talked to him twice.

Puleston:

He must have forgotten it then, because there
were Dunn and Hickerson and one other official
working on it and he said everything is in
motion over there and he told me that.

H.M.Jr:

I will read it to pass the time until Mr. Berle
comes.

200
4

"Petroleum and its products reaching the
ports of Bilbao, Santander, Corunna and
Vigo, in Spain, by steamers could easily
be transported in the same steamers to
Bordeaux or St. Nazaire; similarly, oil
landed in Valencia or Barcelona could be

transported either to Marseilles or to
Genoa. Therefore, these Spanish ports
are practically terminal points for Germany
and Italy."
(Mr. Berle entered the conference.)

H.M.Jr:

Good afternoon, Mr. Berle.

Berle:

My apologies, Mr. Secretary.

H.M.Jr:

Berle, at Cabinet I covered the ground
once more and I am very glad that I did,
because it cleared the atmosphere. You
know everybody here, don't you?

Berle:
H.M.Jr:

Yes, sir.
And I mentioned the fact that we were
holding two American flagships with oil
from Texas. They are both at Port Arthur,
aren't they?

Cairns:

Yes.

H.M.Jr:

Who were on their way to Spain, and that
got the President's approval. I then
mentioned the fact that there were these a tanker flying a Swedish flag also some-

Cairns:

where in Texas. Is that right?
Yes, I think that is at Galveston.

H.M.Jr:

That we were holding, didn't know what we

were going to do about it, but it was

scheduled to go to Spain. We would hold
There was a steamer loaded with sugar for
Casa Blanca, which we were holding. Is
that an American flag?

it until - well, until we got some help.

Cairns:

No, it is Greek.

201

5H.M.Jr:

The point that I made was - and I then also
mentioned the fact that I had been told that
these five oil companies doing business out
of South and Central America, if they would
get the wink of the United States to just
stop shipping oil to Spain, would be very
glad to do 80, and the President instructed
Mr. Hull to send for these companies and
tell them that, to give you the whole story,
and I also suggested that the Secretary of
the Navy send one of his destroyers down

to the Canary Islands on the excuse of having

a refuel to see what the refinery looks like.

Now, while we have just the legal authority
to hold these ships, I realize perfectly well
that I am - how should I say? - pushing a
policy matter, because I feel that the amount
of oil which seems to be rushing toward Spain
is 80 far in excess of what she can use that
it must be for re-export, and I just don't
make any bones about it. It seems to me that
the next weeks or months are the critical ones
and we desperately need two years to get our
own country in shape to defend ourselves. If
we can protract or prolong England's life,

I think it 18 - by just an order to hold up
the oil, I think it is the smartest thing we
can do. I realize that what I am saying in
confidence is what everybody in the Administration
agrees on, but I wanted to tell you how I felt,

you see, and then inasmuch as Mr. Hull said
that he would delegate you to work with me

personally on this thing - and I said - "Well
now, all of this 18 basic facts and these things
are going to come up every day and there will
proposal. American flagships to Spain is

be more and more of them. Casa Blanca 18 one

another proposal. Foreign flagships with oil
out of the Unite States is another proposal.
American-owned foreign oil vessels out of
Venezuela and Colombia is another one.

Fortunately, the Swedish one, we don't have
to worry about the one to Petsamo. She is
tied up at the dock and she is unloading her
ammunition and when it is unloaded we will

let her sail. She is doing that voluntarily

on the suggestion of Mr. Basil Harris. I

don't know whether he held a pistol to their

heads or not.

202

-6Harris:

I move that be deleted from the record.

MoKay:

I have a different story from that right now.

A call from Mr. O'Keefe came in and he said
they had ten hundred and ten detonators and
depth charges and they had a license from
Colonel MacMoreland and they wanted to know

whether they had to take that off, too.
H.M.Jr:

Come on, Brigham Young.

Young:

How many?

McKay:

Ten hundred and ten depth charges and detonators.

Young:

Sure, take them off. Are they for the Swedish

Government?

Berle:

Where are they going?

Harris:

Gothamburg, via Petsamo.

Berle:

What is going to happen to this ship? She

H.M.Jr:

Yes, she is a Finnish ship.
The British let her go?

Berle:

1s a blockade runner, I suppose.

H.M.Jr:

One a week has gone and to the best of my
knowledge they have gotten into Petsamo,
haven't they?

Harris:

Yes, but we don't know what they have carried.

Foley:

Well, there is all assurance that this boat

Harris:

I would think so. Otherwise I wouldn't think

will be given safe passage through the blockade.
they would attempt to make it.

H.M.Jr:

What is this again?

MoKay:

Ten hundred and ten detonators and depth
charges.

H.M.Jr:

How many cases?

203

-7McKay:

Mr. Pollio said he wasn't sure whether it
was two or four.

H.M.Jr:

When they put the question to us, we certainly
don't want to say, "Yes, let her go," do we?

Berle:

No, keep them here. We would prefer they
were kept here, I would think.

H.M.Jr:

Well, it is the question about loading them.
Of course, if they have a license, plainly
that problem is gone into as a matter of law.

Berle:
H.M.Jr:

But they have a license on all of this stuff
that they are taking off. I will get to
that. I have been trying to get the license
revoked and I want it on the dock and then
I am going to argue.

Berle:

That 18 right, we will take them off.

Harris:

Because they can go on the next ship if

H.M.Jr:

they are all right.
And that gets to the next point that I have
been arguing at the White House, where we
are in complete disagreement with the State

Department. We say that all outstanding
licenses to everybody should be canceled,
as prior to July 5th, and then the people
come in fresh and say, "We want a new
license," and that gives us a chance to

pass on them and we can't get it by Joe Green.

Berle:

I think you are right. What has Joe Green
got to do with it?

H.M.Jr:

Joe Green has everything to do with it.
He is to issue a license in accordance with
the law, but there is nothing to prevent
Colonel Maxwell from pulling an export control

Berle:

order through on the whole shooting match.

H.M.Jr:

This 18 what happened: General Watson called

me up and said, "I don't want to bother the

204

8-

President, and this is Directive No. 5,
as they call it, to cancel the license on
this particular thing," and Watson said he
didn't want to bother the President and if
he could clear it with Mr. Hull and me, he

would clear it. I said, "Cancel it, this

one license. Colonel Maxwell or somebody
representing him went to see somebody in
the State Department and he reported to
General Watson that Mr. Hull said as long

as this had been issued, let it go. Now,
to circumvent this situation, we will have
this stuff on the dock and then it is again

back in your lap, whether you want - now,
the President of the United States has said

he does not want any ammunition manufactured

in the United States to go to Sweden at
this time. We have got it off the ship
and we have got it on the dock, and I am

putting it back in your lap to see if we
can't cancel it. In order to save this
situation, the suggestion I have been

pleading with, Mr. Maxwell and Joe Green,
is that all outstanding licenses be
canceled and then they go to Maxwell and

have - start all over again. It would
save us all of this trouble. But I can't
get it by the State Department.

Berle:

Mr. Secretary, I might as well tell you that
that setup represents to me a major diplomatic
defeat. I have had many, and this one I took
hard.

H.M.Jr:

You and me both.

Berle:

I wanted that licensing in Maxwell's hands.

Foley:

It should be --

Berle:

And let Green and his division do the purely
mechanical work. I did not want Green in
there to determine policy because frankly,
I don't think that kind of policy making belongs

Foley:

in that kind of an office.
The only really effective control 18 through
Maxwell and Maxwell has to pass on these things
in the first instance, and if he says they are
not needed for national defense, then I think
that Joe Green can go ahead and let the stuff
go as he does with every other request.

-9Berle:

My second point 18 that I do not think that
Mr. Green in matters of policy can speak for
the State Department.

Harris:

Well, if it will throw any light on this situation,
I called up Green's Department yesterday about some

film support which is known as nitro-cellulose.
I told him this fellow from Eastman was flying

down and they would hear his story and do what

they could for him and I said, "If there is any
difficulty, will you let me know, because I can
take it up with Maxwell's office," and they said,
"Oh no, we will decide that.'

H.M.Jr:

Who is "we"?

Harris:

Green's office, a man named Price. They gave me
the impression that Maxwell just had no say at

H.M.Jr:

all in the matter, that they would be the
deciding boys on it.
Well, if we could get it this way - Maxwell 18

scared of his shadow and at the moment General
Watson 18 making the decisions based on - if he

can get yes from Mr. Hull and me, he gives anything that we want, or that is what he has told me.

Berle:

Well, I may say that it seems to me when you

are considering the national interests and the
national emergency and you are shipping munitions
out, all or part of which you may want or which
might be used against you 1f they wind up in the
wrong place, or for any one of a dozen perfectly

legitimate and strictly national interests, the
first thing to do is to call a halt on the whole
shooting match and take account of stock.

H.M.Jr:

Berle:

That is what we have been saying, but we cannot

get to first base and if you can get somebody,
Mr. Hull or yourself, to say to Colonel Maxwell,
"I am in accord with the Treasury on this thing,
all outstanding licenses should be canceled," he
18 ready to get out Directive No. 6 and that
cancels everything. Then we start fresh.
I don't think that Joe Green ought to do that any
more than - if you want to appoint a Secretary

of State, that 1s all right with me.

205

206

- 10 H.M.Jr:

No, but if Mr. Hull would say to you, "Berle,

I will give you the authority to work with

Morgenthau," and if General Watson calls up,
what does he want Colonel Maxwell to do, you
can talk to the State Department.
Berle:

All right, sir.

H.M.Jr:

So that if Mr. Hull will tell General Watson

Berle:

on these matters of licenses what Berle says
goes for the State Department, then General
Watson says he will tell Maxwell what to do
and all he does is to call me up and say,
"Well now, what do you want on this?" "Well,

I want all outstanding licenses cancelled.
"Well, if Mr. Hull will go along." He didn't
turn me down on that yet, but he did turn
me down on this Swedish thing, but the Swedish
thing - these things are going to be on the
dock as of tonight and they have got a license
issued against them and I am sure the Swedish
Minister, Bostrom, is most likely on your doorstep and the easiest thing to say is that we
didn't do anything against Sweden. We cancelled all licenses.
I don't undertake to say anything about the
particular case, because I don't know. Plainly
the situation today in Sweden is radically
different than it was when those licenses were

issued. They were issued some time ago. There

ought, of course, to be some arrangement made

by which if you do that the Swedes can get
their money back.

H.M.Jr:
Berle:

Oh, that can be done. I have a customer.
That is, I think, in common fairness to these
countries, we shouldn't first take their
money on the basis of a license issued and
then say, "I am sorry, we will have to keep

this in the United States."

H.M.Jr:

Well, I have a cash customer.

207

- 11 -

Young:

H.M.Jr:
Berle:

Harris:

You might even make a profit out of it
before we got through.

No, I don't want to make a profit.
Splendid. That will help, too.
Mr. Secretary, if you go back to the oil
situation - if you have finished with that.
Have you?

H.M.Jr:

Yes, but --

Berle:

I will endeavor to do that. I will ask if

Harris:

Mr. Secretary Hull will give me that authority. I may say that my personal view
is in accord with yours. The export of any
kind of munitions ought to be scrutinized

and the position or place where they are
going might be of importance to us one day.
I think if you followed the plan you suggested
on the shipment of oil, we should carry that

a bit further and carry the British along with
us and get them not to grant any charters to
British ships or ships which they control to

load any oil in South America or Central America
for Spain or Canary Islands, because there are
independent companies and if they do it, it

will upset the apple cart.

H.M.Jr:

(To Lieutenant McKay) Tell Mr. Purvis to come

over to my office now. I want to see him,
please.

Berle:

We will do that. We will take care of that.
It seems to me that on that oil situation,
if I may speak of that, the British are

blockading the Continent of Europe. I had
not heard they have applied their blockade
to Spain yet. Theoretically they would do
so if the destination of this stuff were
assumed to be to an enemy country. There is
some doubt as to what the status of Spain

may be in a relatively short time. I should

208

- 12 -

assume, therefore, that their policy would
be one of two things, either absolutely no

oil at all - it is merely a guess as to
their policy - or the alternative of a

rational arrangement by which Spain bought

oil for her own purposes and nothing else.

That is their funeral.

On our side, it seems to me that our

strictly national interest calls for two

things, first that we don't have American

flag or American owned ships floating around
in areas where they stand an awfully good
chance of being snagged by one or the other -H.M.Jr:

That is the position that Harris pointed out
today.

Berle:

The second one, I think, is that we also were
not happy about having refueling stations
located around the Atlantic islands or the

Atlantic Coast, which might later turn up to
curse us. Both of those things, I think,
are --

H.M.Jr:

At Cabinet, I asked the Secretary of the Navy
if one of these destroyers around here couldn't
drop down to the Canary Islands and see the
set-up, what it is. We don't know. He said
he would do that.

Puleston:

I asked Mr. Dunn and he said they have sent
a cable to get some more information so that

we may not need to send that destroyer down
there.

Berle:

We are not wholly without information about

that refinery. If what I understand is true,
it is not a large one and actually the British
fleet has been putting in there to refuel. I

am not sure whether they can now or not.
Puleston:

We have that in order.

H.M.Jr:

What is the suggestion? Let's take this
suggestion of ours on this additional combat
zone.

203

- 13 Cairns:

I suggested a qualified combat zone, a
combat zone saying American ships carrying
the following products could not enter this
qualified zone. Other American vessels could.
That would give us control over petroleum and
other products that we wanted to control.

Berle:

I think the idea merits serious consideration.
It seems to me there are two lines. One is

possibly using the combat zone and the other

is the control of the ships as ships on the

ground that we didn't want American flagships
floating around that area.

Harris:

Mr. Berle, the immediate result of that is
if you barred the American ships out of that
zone, these companies would simply just switch
over to some of these other foreign ships for
the same identical port, so that you wouldn't
accomplish your purpose of keeping the oil
out. You would accomplish the purpose of

Berle:

keeping an American flagship out, but that is
only part of the major picture.
This is my impression, that that zone would do
the trick.

Harris:

That almost coincides with just about what we
have arrived at.

H.M.Jr:

"The problem is - in view of this country's intention to prepare itself for defense, do we
want to allow oil (a fundamental necessity of
war) to reach those countries most likely to
attack us.

"If we prevent exportation of oil from U. S.
to Canary Islands and/or Spain, whether on
U. S. ships or foreign ships, will this solve
the problem? (No)
"will not the same companies who export oil

from U. S. ports, if prevented, simply ex-

port from Central and South American fields?
(Probably)

210

- 14 "Who are these companies?

"Gulf oil; Texas Company; Standard of New
York; Shell 011 Company; Standard of New

Jersey.

"Possible procedure: Call representatives

of above companies to Washington, outline
Government's policy and ask their cooperation.

"Have British not allow charters to British
or other foreign flag tankers which they

control, to fly in this trade.

"Have British Government seize all other

oil ships in above waters."

At Cabinet, you see, I mentioned that and
the President asked Mr. Hull to do just
that.

Dan, are you satisfied vd th what I am talking about?

Bell:

Yes.

H.M.Jr:

Any suggestions?

Bell:

No, I think it is very good.

H.M.Jr:

Ed?

Berle:

I should suggest we leave it that way. I
think that is a better dodge than the qualified zone.

Cairns:

Unless you wanted to get all the commodities
that were available in the United States.

Berle:

That is another story.

H.M.Jr:

Do you also think that about Casa Blanca?

Berle:

Yes. I am looking at the Casa Blanca situa-

tion with this in mind --

211

- 15 H.M.Jr:

Is 2:15 a good or bad hour for you tomorrow?

Berle:

It is quite all right.

H.M.Jr:

Is that all right?

Berle:

Yes.

H.M.Jr:

Before I leave town tomorrow, I would like

to go over this with you once more. I will

tell your office. Is that all right with

you?

Berle:

Fine.

H.M.Jr:

I would like to talk with Mr. Berle alone

and Phil, if you will wait outside until

Purvis comes, and then if you will come in
with him. Will you please?

212

HONORABLE HERBERT E GASTON

CTING SECRETARY OF THE TREASURY
ASHINGTON DC

INNISH STEAMSHIP VELI RAGNER DOCKED AT PIER 24 BROOKLYN AT 5.00
M ON JULY 10TH. INSPECTOR ASSIGNED THERE REPORTS VESSEL WILL
OMMENCE DISCHARGING AMMUNITION 8.00 AM JULY 12th
HARRY DURNING
COLLECTOR OF CUSTOMS
NEW YORK

213

June 11, 1940
10:30 a.m.
RE ALLIED PURCHASING PROGRAM

Present:

Mr. Young

Mr. Nelson

Mr. Purvis
Mr. Bloch-Laine
Mr. Ballantyne
Mrs. Klotz
Purvis:

I think I had better hand a copy of this memo
to you. There will only be one for two or
three of you. We haven't any more.

H.M.Jr:

This 18 the summary, a break-down, is that

Purvis:

Yes. The first is a summary on the airplane
memo that is being typed and will be over in

it?

a few minutes.

H.M.Jr:

"I have been asked to express the great
appreciation of the Allied Governments for
the release from stocks of the various war
equipment with special reference to the
75 millimeter field guns. Three hundred
forty-seven guns with all the ammunition
are being shipped to France and the remaining
48, without ammunition, to England.
"I have received urgent cable and telephone
messages asking whether it would be possible
to release a further five hundred or more of
these guns with appropriate ammunition. From
the Army angle, I understand this item is the
most vital to holding the enemy.'
Well, Young, have you got my message from

General Marshall's office?

Young:

No.

214

-2Purvis:
H.M.Jr:

The last sentence in that memorandum describes

the situation 8.8 the cable developed it.
Well, I asked them. They were over at ten
o'clock this morning, and I haven't got
anything from General Marshall. I asked
them on that and I asked them on those

Thompson machine guns.

Bloch-Laine: Yes.
H.M.Jr:

What else.

Young:

The machinery, he was going to find out

H.M.Jr:

Machinery?

Young:

Yes. How much, definitely, as a matter of

Purvis:

as to how much --

policy. He wanted to know what was available.
I wondered whether by any chance you had a

list of what is available. Even if you did,
you probably wouldn't tell us, but it might
be very useful if you had it.
(Telephone conversation with General

Marshall's office follows.)

215

June 11, 1940
10:38 a.m.

H.M.Jr:

Hello.

Operator:

General Marshall's Aide is in the building
somewhere. I have his secretary on theline.

H.M.Jr:

All right.

Operator:

His secretary?

H.M.Jr:

Go ahead, somebody.

Gen. Marshall's
Secretary:

Hello.

H.M.Jr:

Hello.

S:

Yes, sir, Mr. Secretary.

H.M.Jr:

I spoke to General Marshall yesterday and

he promised to have for me last night or
before 10:00 o'clock this morning a memorandum particularly on the .75 millimeter
guns.

S:

H.M.Jr:
S:

H.M.Jr:

S:

Particularly on the subject of what?
.75 millimeter guns.
Oh, yes.

I have nothing from General Marshall. I told

him that Purvis would be here at 10:00 and I
am very much disappointed that I had nothing
to take up with the Allied Purchasing Mission.

Well, I'll see about that right away,

Mr. Secretary.
H.M.Jr:

He promised he'd sent it last night or the
first thing this morning and I have nothing
from General Marshall.

-2-

S:

Well, I'll see about that right away. I'll

H.M.Jr:

I'm very -- pardon? I wish you'd tell the

get someone on that.

General when he gets there I'm very much

disappointed that I had nothing.
S:

Yes, sir. Well, I'll see about that right
away and see what's happened about it.

H.M.Jr:

Thank you.

S:

Yes, sir.

216

217

June 11, 1940
10:46 a.m.

Operator:

Go ahead.

H.M.Jr:

Hello.

Colonel
Ward:

Mr. Morgenthau, this is Colonel Ward in
General Marshall's office.

H.M.Jr:

Yes.

W:

The General was delayed on account of

weather and I suppose -- he didn't tell us
about having this paper over there. I can
give you the information on it, though.

The summary of it is, it would be dangerous
to national defense to decrease the number
of .75 mm guns available.

H.M.Jr:

Well, I want that in writing.

W:

All right, sir. Now, I'll send that thing

right over by special messenger, at once, to

you.

H.M.Jr:

Would you?

W:

Yes, sir, I will. I'm sorry about the delay,
but he didn't expect to be delayed on the

weather and he would have been in here before
then.

H.M.Jr:

And then plus a lot of other things which we
talked about Sunday night which I've had no
answer on -- that machinery on the powder

factories and a whole list of things that he
took away with him Sunday night.

W:

H.M.Jr:

All right, sir, well, I'll check
I can't remember them all off-hand, but there
were a number of things that he was going to -and, of course

W:

Machinery

218

-2H.M.Jr:
W:

Machinery for -- to make powder.

Yes, sir, I understand that.

H.M.Jr:

And then this question of bombs for the 93

W:

I think I've got that for you. I can get

H.M.Jr:

And then the machinery to make small arms.

planes.

that over to you.

small arms. All right, sir. I'll get

W:

all I can immediately over to you and check
on the others.
H.M.Jr:
W:

Would you, please?

Yes, sir, I will. I'll get this man right

over.
H.M.Jr:

I was disappointed it wasn't here.

W:

Well, I am too, sir. It's one of these
things that couldn't be avoided.

H.M.Jr:

Thank you.

218

-3H.M.Jr:

Well, now, to call a spade a spade, Mr. Purvis,
the figures that we have on the losses of the
English and French destroyers, do not seem
to impress us, the President to be exact.

Purvis:

Well, now, I am glad you said that because

H.M.Jr:

all I can judge 18 by the growing tone of -He is not impressed with the fact that you
have great losses.

Purvis:

Then it 18 up to us to supply you with more
data, I think, is the answer to the actual
position.

H.M.Jr:

The thing he has doesn't show that the
English and French losses in destroyers
have been very great.

Purvis:

I am glad to get that angle, because I
think that is very much un to us to show

our hand.
H.M.Jr:

Definitely. There is something wrong
somewhere.

Purvis:

Yes.

H.M.Jr:

Well, you have got all the motor boats?

Purvis:

Yes, we have all of those on order, it
seems to me. That is almost what it
means. They just asked - I have got a
cable in asking whether there are in stock
anything of the type of that kind that you we are also trying to place orders for
fresh ones.

H.M.Jr:

We had 24 on order and we gave you 20.

Purvis:

It was only a request that came in by
cable. Is there anything actually on
hand today that would be of a similar type
of thing, even though not nearly as perfect.

H.M.Jr:

Well, I will send a copy of this over to

Admiral Stark and Phil, you might walk that
over yourself and get an appointment to see

-4-

Young:

H.M.Jr:

Admiral Stark and ask him if there is
anything he can do on the motor boats.
Just take this sheet of paper over.
Yes, sir.
And ask him - and leave a copy with him,

will you? I won't leave a stone unturned.

Purvis:

Thank you very much. The Channel and

Mediterranean situation now, of course,

for that kind of thing - 1f they don't
exist, they don't exist.

H.M.Jr:

When you go over, Phil, walk over - this
one on motor torpedo boats and also the
one on destroyers.

Purvis:

I will meantime go a little further on

H.M.Jr:

the destroyer thing.
Leave both of them with Admiral Stark, will
you?

Young:

H.M.Jr:

Yes. There are mosquito boats.
I would leave it over there and see what he
has to say and ask him if he will communicate

with us, with me directly.
"Rifles and Ammunition:

"Further releases of Lee Enfield Rifles,

with ammunition wherever possible, over
and above the five hundred thousand already
released, would be much appreciated.
Purvis:

We asked that when we first talked with
Colonel MacMoreland and I gathered from

him that it wasn't altogether out of the
question, that there 18 quite a large
assignment. The ammunition admittedly
is a short thing, but I think even with
or without they would take 8.8 many more
as it is possible to get.
H.M.Jr:

Do you know the situation, Mr. Nelson,
on that? You have been following that
ammunition thing.

220

-5Nelson:

Yes. The ammunition is the bottle neck.

Purvis:

Yes.

Nelson:

It 18 very short, as you know.

Purvis:

I do know, yes, and we are doing it --

Nelson:

They have a very short supply themselves,

Purvis:

but there is a list in the Navy which, I

think, has been given to Mr. Ballantyne,
of sub-machine guns, quite a quantity.
Yes. Do you think some of the - there
are many more rifles, are there not?

It is the ammunition that is the difficulty.

Nelson:

The ammunition.

Purvis:

What we are doing is trying to use every
endeavor we can to get Remington and

Winchester - we are putting down quite a
little money to enable them to go quickly

ahead to produce more ammunition for all
these things you have released, and we
think we can collect some quite appreciable

balances.
Nelson:

Ag soon as you finish here, I will get

Purvis:

Thank you very much. But we would even

H.M.Jr:

They are taking the position no more

Colonel Burns on that.

take the rifles, I think, anyway.

seventy-fives, but I will take it up

H.M.Jr:

with the President and see if I can't
get you five hundred. That is what I
AID after. I don't know about the ammunition.
You take care of that, don't you?
Well, I believe for the French, they need
the shelle very badly.
Is there such a thing? Are there shells?

Purvis:

I think there are shells. I think the

Purvis:

shortage is in small arms ammunition.

221

222

-6Bloch-Laine: But there probably are shells.
H.M.Jr:
Did
you get any shells for the other seventyfives?
Purvis:

We got a million with the 395. We got a
million. All those were shipped with the

347 - they are no doubt speeding up on that
because that gun takes British or American
ammunition.

Nelson:

H.M.Jr:

We will go into that situation right away,

Mr. Secretary.

Well, Nelson, find out what is the situation.

I am going to concentrate on this five hundred
seventy fives and see 1f we can get some

shells for them. All of this odds and ends you see, General Marshall was away yesterday
and he is away today, and it is very difficult to operate without him.

Purvis:

Yes, quite.

H.M.Jr:

I don't know what he has been doing, but he

has been flying all over the country.

Purvis:

You --

H.M.Jr:

I think we ought to get up a list for

Purvis:

General Marshall and say, "I am waiting
to hear from you on the following things." .
Could we, after this meeting, perhaps, get that
into a document and then use these and perhaps

give you a - one of these?

H.M.Jr:

Yes. I would make a list and I would send it

Purvis:

Yes. Then in that way, we would attack it
perhaps slightly differently 80 that we could

over and say, "My dear General Marshall:
Where do we stand on the following things
for the Allied Purchasing Commission?"
use the memorandum we have to attack it.

H.M.Jr:

That is all right.

223

-8H.M.Jr:

You are in luck, because what they were going
to ask you for, they wanted you to give 50%

of your trainers that you had on order --

Purvis:

Yes.

H.M.Jr:

So you are in luck. So you don't have to
build anything, if I understand it, with
Douglas. So luck is with you on that one,
anyway.

Purvis:

Yes.

H.M.Jr:

Well then, I think you ought to go over this,

Nelson:

Well, air, as soon as we finish here.

Purvis:

We have, meantime - I would like you to know
that we have meantime given every sort of
green light to our people to go ahead adding

gentlemen, this ammunition situation.

to the productive capacity of this 30
ball ammunition. Remington and Winchester
are getting into action, and we are putting
forward whatever money may be necessary for
expansion and complementary work --

Nelson:

That 30 ball 16 a bad situation.

Purvis:

In every way they can they are trying to
add to production in every way.

Nelson:

As soon as we finish here, we have some

questions and I would prefer to have

Mr. Ballantyne and you.
Purvis:
H.M.Jr:

Purvis:
H.M.Jr:

Thank you, Mr. Nelson.

Well, this thing on the Swedish thing,

I am blocked on that.

That 18 pretty difficult, is it?
I just don't see how - I don't think the
Army wants them, that is the answer.

-7Young:

We have run into certain legal difficulties
on the motor boats which we may be able to
clear.

Purvis:
H.M.Jr:

Here 18 Item 1-C, which was missing.
"We have understood on June 10th that

some legal difficulties are standing in

the way of delivery of the 93 bombers.
Transport has been arranged for these
planes by ships available in June and
we would appreciate anything that can

be done to clarify the situation."

But you don't say when.
Purvis:

All through. We have got steamers lined

up for the balance of the month. It takes

three or four steamers, and they are being take off their wings and put them on that

we have made arrangements with a firm to
way.

H.M.Jr:

Well, these things - Phil, make a note,
they are ready, he said, at dawn as of

Friday, all ninety-three.

Purvis:

What?

H.M.Jr:

At dawn as of Friday.

Purvis:

This legal difficulty then is something
that we just --

H.M.Jr:

As I understood last night from Phil Young,

Young:

Northrup turned them down but they are going
to go ahead with Douglas.
North American turned them down.

Purvis:

The difficulty being that it had to be a

Young:

Yes, unfortunately they had a very narrow
interpretation of the law when there was

Purvis:

bomber for a bomber.

no reason for it.
That is what our people said, too.

224

225

-9Purvis:

I see. That is really the difficulty, yes.

H.M.Jr:

I don't think they want those, do you?
At one time they said they would take them.
I don't know whether they want them. They
said they could use them, that was the
impression I got.

Young:

H.M.Jr:

Look, let's clean up the ninety-three. And
after the ninety-three, there is another
eighty odd.

Young:

Yes.

H.M.Jr:

There 18 another eighty. You get the
ninety-three. You know they have brought

them in. They have put in equipment and
machine guns and wireless and everything.
You see, they were training planes, and
they have equipped them for fighting planes
and turned them over to you as fighting
planes.

Purvis:

Excellent.

H.M.Jr:

And we get those off and get the bombs for
those and then do the eighty on the Northrup
and then in the meantime do as much as you

can on the Swedish, but I just don't see --

Bloch-Laine: The Swedish are coming out, the first ones,
by the end of August.
Purvis:

So we have time.

Bloch-Laine: We can exchange them for something else.
Purvis:

By that time the situation may have moved

H.M.Jr:

What kind of an engine goes in the Vultee?

Purvis:

I don't know that.
If we cleaned up the ninety-three and the

H.M.Jr:

on quite a lot.

eighty and got everything equipped, we
could take these on in August.

- 10 Purvis:

Yes.

H.M.Jr:

Now, this number of bombs, Phil, that you

Young:

Yes, sir. Those have Pratt & Whitney

H.M.Jr:

No, the bombs for these ninety-three. Have
you cleared that with anybody, the bombs
for the ninety-three, the A-17-A?

Young:

They don't say there how much they are
getting.

H.M.Jr:

You have got down here how many they

Young:

Yes. It 18 the number of bombs requested

H.M.Jr:

Has Colonel Burns or anybody worked on this

Young:

Major Brooks gave me that, and I asked him

have given me.
engines.

requested.

by the Allied Purchasing Commission.
with the bombs?

point blank last night where it stood or
who was carrying it from then on, because
the Army isn't going to do anything until

they can find out how many bombs they can

H.M.Jr:
Nelson:

get from the Navy. The Navy isn't going
to give them bombs until they find out
how many the Army will give them. That is
why I put the note on the bottom of that.
Can you fellows put a little blast behind
this today?

We can, yes. You give us a clearance to
go and I have been wanting to find out how
many were there, and you thought we ought

to do this the other way. Now, if we can't
do it the other way, we will do it this way.

H.M.Jr:

Do it any way.

Young:

This bomb thing we are going to have to
do between Marshall and Stark.

H.M.Jr:

I don't see how you are going to get any
more bombs out of Stark. It is up to the

226

- 11 -

Army. And, of course, the ninety-three

insofar as Woodring is concerned, he hasn't
cleared those yet, has he?

Purvis:

Not the Northrups.

Nelson:

They haven't been cleared yet, no, sir.

H.M.Jr:

We will get into it right away, Mr. Secretary,
and find out what the legal difficulties are.
I would rather wait until Marshall gets back,
but if you fellows could just push on the
ninety-three up to the point that Marshall
says he has got to get something out of
Woodring - but certainly between now and
Friday we ought to have a clearance on that

stuff. Did they get those three cars through

Richmond?
Nelson:

They are moving them very rapidly. I have

been in touch with Kelly's office. I am
trying to get Mr. - the man I called early

this morning to get the car numbers on the
stuff from Hawthorne, and they will be

expedited the same way.
Purvis:

I had a man sitting at the Canadian border
to get on those and take them all the way
through to Halifax.

H.M.Jr:

I think the best thing to do would be for

you to adjourn this meeting and then put
it down in a memorandum what we really want
from General Marshall and including it when

you have got to start, I would start off
with the first thing is those ninety-three

Northrups and the bombs can go with them.

If you will give me a list, I will write

him a formal letter - what did I say? I
think I had better write him a letter,
don't you think so?

Young:

Yes.

H.M.Jr:

Have I written him any letters?

Young:

No.

227

228

- 12 H.M.Jr:

All right, then I think you could ask to

go over and see them and then say this is

what Mr. Morgenthau wants and he would like

to have an answer just as soon as possible,

not
later than tomor row, on all or part of
this.
Purvis:

There are just two small points verbally.
Monsieur Renault is over here. He came
to see me. He 18 very distressed.

Bloch-Laine: As far as I can make out, the story is
this: Mr. Renault applied for an appointment
with the President on Friday night. The
Ambassador told him he hadn't a shadow of
a chance. He said he didn't even think he
could ask for it, 80 Monsieur Renault went

back to New York and the audience was granted
and nobody told him.

H.M.Jr:

It was granted? For when?

Bloch-Laine: Saturday morning, and he wasn't there 80
he 18 immensely distressed and he would

like the President to know that it is no
fault of his own.

Purvis:
H.M.Jr:

He had been sitting here, and very, very
worried.

Who told him that? How do you know that

he had an appointment?

Bloch-Laine: Nobody told him he had an appointment.
Purvis:

How does he know now?

Bloch-Laine: Because in the evening when he phoned the
Ambassador he said, "Haven't you been to
your appointment?", and he said, "What
appointment?" and the Ambassador said,
"You had one this morning."
H.M.Jr:

Well, that is between the Embassy. I don't

Purvis:

No, but if it did come up --

think I better get in it.

- 13 -

223

Bloch-Laine: I wanted to tell you.
Purvis:

If it were raised with you, I would like you
to know that he is very distressed about
the fact that he unwittingly did not attend
an appointment, the reason being that he
was not told of his appointment by the
Embassy.

H.M.Jr:

Because I am going to talk very frankly and
I have got to tone down my remarks because

of Mrs. Klotz. I think it is just plain

silly to bother the President with seeing
are here. Now what the devil is the use of
bothering the President of the United States
in these times, with a man like Mr. Renault?
I mean, you people are here. If the situation the situation is so bad that if I say I want you
people to see the President and explain it to
him face to face, that is one thing, but why
take up his time with a man like this? I
mean, it 18 just silly. The President is
doing everything possible he can. I am doing
everything to the end of my physical strength
and nervous system to do everything I can and
then they bring in a man like Mr. Renault.
It is just - I know you people well enough

a man like Mr. Renault when you two gentlemen

now that you don't misunderstand what I say.

Bloch-Laine: Oh no, Mr. Secretary. It is none of our
faults. We didn't ask for him.
Purvis:

We pass the fault.

H.M.Jr:

But it is just - I mean for the Embassy to

take up the time - and when he got through,
where was I? Nowhere. I mean, he made a
very courteous, beautiful speech about

liberty and 80 forth and so on, but --

Bloch-Laine: Then we all agree on that.
H.M.Jr:

Well, I feel better now.

Nelson:

I suppose when Henry Ford goes to France

it is the same thing, Mr. Secretary.

- 14 H.M.Jr:

230

Well, it 18 like this. I feel better. I

let it out on somebody and I let it out at
the expense of Mr. Renault.

Bloch-Laine: All I can say is that it has been absurdly

useless, because they had a meeting yesterday
with Major Gillespie and Major - someone else,

who I understand are the specialists in things.
They have studied this situation. They have
gathered a certain amount of useful information. They had with them an English
Colonel - I don't know who it was - and they
came to the conclusion, all of them, I mean
the Army Ordnance and the French and the
British, that about the way to go ahead was
tanks. The Army said that tanks they had
already made were not for England because
they were too light and that another one and
a bigger one was under study, but still under

study, and they all felt that the best thing

to do was to see what the French had and see and the last French model of which the drawings
are here, already 18 to be the one and everybody

felt - thirty thousand tons, and everybody
seemed to be agreed that it is the thing

to do, 80 immediately the Army Ordnance walked

into it. People were saying that they felt
they ought to be rid of the whole affair, and

I understand today that your Army people will
probably release some of their people - then
the Army plate, I understand - and the Army

would be not only willing but desirous to

supervise that and inspect it 80 I think it

is underway not badly.
Purvis:

On machine tools, now, I mentioned this, but it is merely to ask - two of the companies,
Brown and Sharpe, and Warner and Swasey, have

now taken the position - Brown and Sharpe
said, "We can't keep any further orders from
governments pending the development of the
French program. Warner and Swasey haven't

definitely refused it, but said, "Well now,
we are going to wait. We can't do it."
Would it be wise - I believe Baker Machine

Tool man and the Frenchmen are down seeing

Knudsen's organization this morning. Would
it be wise for me to talk with Knudsen?

231

- 15 H.M.Jr:

I would talk it over with Mr. Nelson.

Purvis:

All right, we will talk about that after.

Nelson:

I had breakfast with a few of the machine
tool people. They were having the meeting
in Mr. Knudsen's office at nine o'clock
this morning.

H.M.Jr:
Nelson:

Purvis:

I believe I would talk that over with

Mr. Nelson.

I had breakfast with the machine tool group.
Later on when things aren't quite 80 pressing.
Before he goes back, I think Mr. Elliott, who
came over on steel from the British Isles

Steel Federation in order to tie in with us

H.M.Jr:

Purvis:

and who 18 in New York, a very nice fellow,
I think he would like very much, if it happens
to fit in some time, to shake hands with you.
I would be delighted, and if you gentlemen

are in town or whenever you get this list,
if I hear anything today -I think I will stay over until tomorrow and
just get in touch with New York in the
meantime.

H.M.Jr:

You get this list down, and if I can get

Purvis:

Phil Young to take it over to General Marshall
and I will call General Marshall and ask him
if he can't give me an answer today.
We will wait until tomorrow morning, I think.

H.M.Jr:

I am going on the Hill to testify all morning

Purvis:

Then today is the day or tomorrow afternoon.

H.M.Jr:

Yes, this afternoon or tomorrow afternoon.

Purvis:

In which case, if I get word from you that
there is nothing this afternoon, I will
probably fly back this evening and fly down

tomorrow, 80 I --

at midday tomorrow.

232

- 16 H.M.Jr:

Yes. You see, we might be able to arrange
a meeting with General Marshall for tomorrow
afternoon and have everybody here just go
through the thing one, two, three.

Purvis:

Quite.

H.M.Jr:

He won't get his feet on the ground until

Purvis:

Yes.

H.M.Jr:

That memorandum was a very discouraging one

tomorrow, you see. Excuse me a minute.

on the seventy-fives, and I will have to get
the President - they have turned us down.
I will have to get the President to turn
them down. They have turned it down flat,
and I will just have to go over to the
President on the seventy-fives.

Purvis:

Right.

H.M.Jr:

I mean, they have turned it down but I saw

Purvis:

Yes, I noticed that yesterday. We listened

H.M.Jr:

I say that this comes under materiel, and I
am going to definitely ask for 500 and then

by the papers the President made a speech.

to it with great --

let the Commander in Chief decide.

Purvis:

Yes.

H.M.Jr:

Because you see, you skimmed the cream

Purvis:

Yes, the cream, I admit, was there. We
didn't leave much for the Venezuelans.

H.M.Jr:

Did you read that column?

Purvis:

No.

Young:

Purvis:

pretty well.

It 1s right here.
I didn't see that. Did somebody get that
phrase?

- 17 H.M.Jr:

What is it?

Young:

That question on the Rolls that came up
this morning.

H.M.Jr:

Oh yes. Now here 18 the situation on the
Rolls. It 18 all right. It doesn't do you
a bit of harm. You can send it across the

waters. Incidentally, who did you tell me
was Minister of Defense for Canada, the
man who you said came down to see us?

Purvis:

The Minister of Supply, Norman Rogers. He

was the Minister of Labor at the time I
had that Employment Commission job.

H.M.Jr:

Minister of Supply 18 something different?

Purvis:

Quite. It 18 a newly created Minister of

H.M.Jr:

If you people would give me something in
writing, how many Rolls Royce engines you

Supply.

want, Mr. Edsel Ford is in town right
now.

Purvis:

We have cleared to meet that same day that
you asked the question of 800 a month for

the French and 1,000 a month for the British.

We gave the answer within an hour and a half.
H.M.Jr:

That is firm?

Purvis:

Firm to the extent of a planning operation.
Here 18 the point. The Army and Navy don't
want any, 80 Mr. Ford is going to make up
his mind today whether he wants to sell to

H.M.Jr:

the Allies or not.

Purvis:

The Army and Navy don't want them?

H.M.Jr:

They want the 1600 horse Rolls.

Purvis:

Oh.

H.M.Jr:

They want the 1600, they don't want the
1200. The English won't be ready for
six months.

233

234

- 18 Purvis:
H.M.Jr:

I see what you mean, they prefer to wait -No, they say that there is six months more

in developing it. You don't want to wait
six months, do you?

Purvis:

We would like to discuss that when you are
planning what your attitude would be, because
we might prefer to go in on some other type

1f it is going to be a smaller one. We will
try and fit in with whatever you want to do

there, but we, after meeting with Mead, took
exactly the same position. We said, "We are
very discouraged to hear that you are concentrating on that small engine."

Purvis:

May I offer a little advice without explaining
it? Stick by your 1800 for today. It won't
hurt you to do that.
I think I understand.

H.M.Jr:

It won't do you a bit of harm.

Purvis:

I see.

H.M.Jr:

(Telephone conversation with Mr. Knudsen follows. )

235

June 12, 1940
12:45 p.m.

H.M.Jr:

Hello.

Operator:

Mr. Knudsen.

H.M.Jr:

Hello.

Wm. S.

Knudsen:

This is Knudsen.

H.M.Jr:

How are you?

K:

I thought you'd be interested in this,

Mr. Ford came around 100%.

H.M.Jr:

Did he?

K:

Yeah.

H.M.Jr:

Oh, swell. Now what does that mean?

K:

That means that he's willingto sign a contract

with the Allies and one with the U. S.
Government.

K:

Oh, I'm tickled to death.
So that confirms what I told you yesterday.

H.M.Jr:

What was that?

K:

That I was sure he'd come around.

H.M.Jr:

Yes.

K:

Well, after I got a chance to talk to him --

H.M.Jr:

you see, there wasn't any sense in him taking
that English engine.

H.M.Jr:

No.

K:

And

and then refuse to sell it

to the English.

236

-2-

H.M.Jr:

Well, now, that's fine. I talked to

K:

Yeah.

H.M.Jr:

Joe Kennedy this morning -- I was a little
bothered
about this price that I asked,
you see?
And I told him what I was asking, and I
told him to speak to the Rolls Royce people
to find out whether they wouldn't be willing
to take a lump sum. Hello?

K:

Take what?

H.M.Jr:

A lump sum.

K:

Yeah.

H.M.Jr:

K:

H.M.Jr:

I had in mind a lump sum and then we could
make as many as we wanted. I think that that

might be better, don't you think so?
Well, I don't know. Well, it might be cheaper.
Well, anyway, I talked to Joe and Arthur
Purvis

Well, I think from your standpoint, Mr. Secretary,
if you are paying the lump sum and have it on
the Government side, then you can license any-

body you want.

K:

That's right.
That gives you the exclusive license and that

H.M.Jr:

Well, that's what I meant.

K:

Yeah.

H.M.Jr:

Now, that's just what I meant. Let's say
that I paid them a million dollars to let

H.M.Jr:

is really better.

us manufacture any or all Rolls Royce as long
as the war lasts

237

-3-

K:

Then that makes you the licensee.

H.M.Jr:

That's right.

K:

H.M.Jr:

K:

That's
right. Well, that's the way to have
it.
Well, the plans are on the way -- Arthur Purvis
found to
them
-- they're
in Montreal and they
ought
be here
tomorrow.
And then we expect to get word from them

now that they are willing to go along.

H.M.Jr:

I'll talk to them right away.

K:

All right, thank you very much.

H.M.Jr:

I'll callthem up right away.

K:

Thank you very much.

H.M.Jr:

Thank you.

238

- 19 H.M.Jr:

If you just take a little friendly advice,

stick by that 1800. What else, Phil?
Purvis:
You were going to tell the Secretary -Bloch-Laine: I am planning to fly back by the end of
the week, just in general terms. I don't
know if I can get to Paris.
Purvis:
We are getting action fast.
H.M.Jr:
That is fast. Now listen, you fellows said
before he started, "Sure, we want 1800
engines."

Purvis:

If you remember, I said that it wasn't

H.M.Jr:

I don't know. Well anyway, you gave him
an answer in an hour. Now he is holding

absolutely firm.

the fellow here and I think --

Purvis:

We may be able to do that very quickly.

It 18 just that I think at that stage you
have got to say to them, "Look here, here
is what can be done." If it had been eight
months, it would have been a cinch. It
would have fitted right into the order.

H.M.Jr:

This 1s faster than I thought you would

Purvis:

Twelve to fourteen means June to August,

get it.

and that is very interesting. Eight months

would have been a cinch.
H.M.Jr:

Anyway, Mead is on his way over and I do
think as long as Knudsen is moving so fast

and Ford is moving so fast, and you see -

60-40, which is certainly a fair break,

and they divide 60-40 on the machine tools
too.

(Following the conference, Monsieur
Bloch-Laine whispered to the Secretary
that he is going back to France, because

he thinks it is important to find out

whether they should continue to send all

- 20 -

of this raw steel to France and all of

these machine tools, and whether it isn't
more important to keep the stuff here and
manufacture
it into a finished article and
then send it over.

233

yeay

has

statto
6/11/40

61"

too

240

AGENDA

Meeting with Mr. Morgenthau on
June 11th 1940.

1) ORDNANCE MATERIAL

(a) 75 mm. guns and shells

(see memo)

(b) Destroyers

(see memo)

(c) Aeroplanes
(d) Motor torpedo boats

(see memo)

(e) Rifles and ammunition

Sub-machine guns and ammunition (see memo)
(see memo)

(f) Spare equipment

2)

DEFENSE PROGRAMME

(a) Machine Tools

(see memo)

(b) Tanks

( M. Renauld, M. Planise.)

(c) Steel

( Mr. Elliott )

as
241

I (a)

has copy
FIELD GUNS AND AMMUNITION

75 m.m.

I have been asked to express the great

appreciation of the Allied Governments for the
release from stocks of the various war equipment,

with special reference to the 75 m.m. field guns.
347 guns with all the ammunition are being shipped
to France and the remaining 48, without ammunition,
to England.

I have received urgent cable and telephone
messages asking whether it would be possible to

release a further 500 or more of these guns with
appropriate ammunition. From the Army angle, I

understand this item is the most vital to holding the
enemy.

WIR

242

I(G,

SECRET

holiday
no
has 6/"

DESTROYERS

Great anxiety is being expressed in
the cables received from the other side in

regard to the possibility of obtaining destroyers
from the existing United States Naval stocks.
It has been pointed out to me that the published
figures of English and French losses in this

particular field will of themselves emphasize
the need.

Aid along this line would be invaluable
and the considerations governing any choice on

the part of the United States Administration, if
there be a choice, would be for vessels with the
maximum possible readiness for actual service and
the greatest steaming endurance.
A simultaneous supply of ammunition and

torpedoes would greatly facilitate the immediate
putting into service of any destroyers which might
be released.
June 11, 1940

243

lat to Phil young
look soul

or

(cc)
AEROPLANES

6/11

Northrun Bombers

We have understood on June 10th that

some legal difficulties are standing in the way of
delivery of the 93 bombers. Transport has been
arranged for these planes by ships available in June
and we would appreciate anything that can be done to

clarify the situation.
Swedish Fighters, Vultees

The British Minister to Sweden has reported
that it has proved impossible to obtain the assignment

of the Swedish order for Vultee Fighters to the Allies:
a. because Sweden considers its Air Force its weekest
point; and,
b. because of Sweden's fear of Germany hearing of the
assignment.

Seizure by blockade action of the planes

will probably result in the cutting off of certain
important Swedish supplies to the Allies and would
probably be ineffective since shipment from the United
States would be stopped via Sweden as soon as any planes
were seized.

It is suggested that the only method of taking

care of this situation (and perhaps of preventing additional Fighters falling into the hands of the Germans)
would be for the United States Army to exercise its
priority rights on the whole, or part, of the Swedish
orders and the sale to the Allies of a corresponding
number of aeroplanes belonging to the United States Army.

244

6/11/40

m
has

6111

(AEROPLANES Cont'd)

Further Releases

Further releases of Fighters or Bombers

are of the greatest importance.

June 11, 1940

245

I (d)

tostat to Philoyoung
6/11/40

MOTOR TORPEDO BOATS

10111 cells
Arrangements are being made to look at
motor torpedo boats which are to be made

available from the works at Bayonne, N.J.
The question of equipment such as torpedoes,

war heads, etc. for these boats is of great
importance. Any steps that could be taken in
the meantime to insure the supply of such
equipment would be very valuable.

Has the United States Administration any

stocks of a similar article to the motor torpedo
boats which they have been good enough to release

to us? At the moment, pending completion of
boats now being built, these represent a most

important arm in the defence of the southern
coast of England.

June 11, 1940

246

toolat to Phil young

/ (e)

2/11/40

belong

RIFLES AND AMMUNITION

a 6/11/40
Further releases of Lee Enfiled rifles,
with ammunition wherever possible, over and
above the 500,000 already released, would be
much appreciated.

SUB-MACHINE GUNS AND AMMUNITION

There is a great need for such sub-machine
guns and ammunition if they could be spared.

June 11, 1940

Hmp. has

List of items pending, including new
items for which
application is being
made

A. ORDNANCE ITEMS

Field Guns and Ammunition

75 m.m. guns with 1,250,000 shells.
Any number of 3" anti-aircraft or 37 m.m.
500

anti-tank guns (either from stock or

from priorities)

Small Arms and Ammunition

500,000 Lee Enfield Rifles with 500,000,000
.30 ball ammunition
5,000 Thompson sub-machine guns, or any

part thereof, with 1,000,000 rounds

of ammunition (from Army or Navy)

Spare Manufacturing Equipment (new or old)

For nitrocellulose powder manufacture
For ammonia oxidation
For small arms manufacture

Nitrocellulose powder

Any further quantity of nitrocellulose
powder.

June 11, 1940

247

248

B.

AEROPLANE ITEMS EX U.S. ARMY OR NAVY

Ex Stocks

Northrup Bombers with equipment

93

and the following bombs:
30 1b.

83,700

100 1b. 58,590
Any number of additional combat machines

(fighters or bombers, e.g. Boeings)

Ex Priorities
500

North American Harvard Trainers for
Canada

4

6

Allison Engines

Pratt & Whitney (double Wasps) amy

There is a further list of priorities for which
application has been made and so far refused or remains

unanswered (see list (a) of May 21st of which a copy is
attached) .

June 11, 1940

249

C. NAVAL ITEMS

48

Destroyers (complete with torpedoes;
spare torpedoes; ammunition,

especially anti-aircraft ammunition)
Equipment (torpedoes, war heads, depth
bombs, guns and ammunition) for

the priority granted on 20
motor torpedo boats.

Any number of boats similar in type to the
Motor Torpedo Boats for which

a priority for 20 has already been
granted (e.g. mosquito boats).

June 11, 1940

250
1940 JUN 11 PM 12 31

Distribution
original to Sicty Wooding )May
via
photostal
copy toben MarshallSmilt
"
Mr Forster
"

"

.

"

"

"

"

"

Mrs Klote
Mr young
Seene tony Morgattan

251

AGENDA
Meeting with Mr. Morgenthau on
June 11th 1940.

ORDNANCE MATERIAL

(a) 75 mm. guns and shells

(b) Destroyers

(see memo)
(see memo)

(c) Aeroplanes

(d) Motor torpedo boats

(see memo)

(e) Rifles and ammunition

Sub-machine guns and ammunition (see memo)

(f) Spare equipment

(see memo)

2) DEFENSE PROGRAMME

(a) Machine Tools

(see memo)

(b) Tanks

( M. Renauld, M. Planise.)

(c) Steel

( Mr. Elliott )

252

I (a)

FIELD GUNS AND AMMUNITION

75 m.m.

I have been asked to express the great

appreciation of the Allied Governments for the
release from stocks of the various war equipment,

with special reference to the 75 m.m. field juns.
347 guns with all the ammunition are being shipped
to France and the remaining 48, without ammunition,
to England.

I have received urgent cable and telephone
messages asking whether it would be possible to
release a further 500 or more of these guns with
appropriate ammunition. From the Army angle, I

understand this item is the most vital to holding the
enemy.

June 11, 1940

ak- execute la

AIR

IG,

SECRET

DESTROYERS

Great anxiety is being expressed in
the cables received from the other side in

regard to the possibility of obtaining destroyers
from the existing United States Naval stocks.
It has been pointed out to me that the published

figures of English and French losses in this
particular field will of themselves emphasize
the need.

Aid along this line would be invaluable
and the considerations governing any choice on

the part of the United States Administration, if
there be a choice, would be for vessels with the
maximum possible readiness for actual service and
the greatest steaming endurance.
A simultaneous supply of ammunition and

torpedoes would greatly facilitate the immediate
putting into service of any destroyers which night
be released.
June 11, 1940

AEROPLANES

hrup Bombers

We have understood on June 10th that

legal difficulties are standing in the way of
livery of the 93 bombers. Transport has been
ranged for these planes by ships available in June
Ind we would appreciate anything that can be done to

clarify the situation.

Any

Swedish Fighters, Vultees

The British Minister to Sweden has reported

that it has proved impossible to obtain the assignment
of the Swedish order for Vultee Fighters to the Allies:
a. because Sweden considers its Air Force its weekest
point; and,
because of Sweden's fear of Germany hearing of the
b.
assignment.

Seizure by blockade action of the planes

will probably result in the cutting off of certain
important Swedish supplies to the Allies and would

probably be ineffective since shipment from the United
States would be stopped via Sweden as soon as any planes
were seized.

It is suggested that the only method of taking
care of this situation (and perhaps of preventing additional Fighters falling into the hands of the Germans)
would be for the United States Army to exercise its

priority rights on the whole, or part, of the Swedish
orders and the sale to the Allies of a corresponding
number of aeroplanes belonging to the United States Army.

the

(AEROPLANES Cont'd)

ther Releases

Further releases of Fighters or Bombers
are of the greatest importance.

June 11, 1940

I (d)
MOTOR TORPEDO BOATS

Arrangements are being made to look at
motor torpedo boats which are to be made

available from the works at Bayonne, N.J.
The question of equipment such as torpedoes,

war heads; etc. for these boats is of great
importance. Any steps that could be taken in
the meantime to insure the supply of such
equipment would be very valuable.

Has the United States Administration any

stocks of a similar article to the motor torpedo
boats which they have been good enough to release

to us? At the moment, pending completion of
boats now being built, these represent a most
important arr in the defence of the southern
coast of England.

RIFLES AND AMMUNITION

) (e)
Further releases of Lee Enfiled rifles,
with ammunition wherever possible, over and
above the 500,000 already released, would be
much appreciated.

SUB-MACHINE GUNS AND AMMUNITION

There is a great need for such sub-machine

guns and ammunition if they could be spared.

June 11, 1940

258
THE SECRETARY OF THE NAVY.
WASHINGTON

June 11, 1940

My dear Mr. Secretary:

Thank you for your letter of June
10th, regarding the assignment of

Commissioner Knudsen by the President

for clearing all contracts for purchases

by the War and Navy Departments.

Your remarks concerning the able
assistance rendered by Captain S. M.
Kraus, U. S. Navy, are much appreciated,

and will be transmitted to the Chief

of the Bureau of Aeronautics.
Sincerely,

Chadolson
Charles Edison

Hon. Henry Morgenthau, Jr.,
Secretary of the Treasury

Treasury Department
Washington, D.C.

259

June 11, 1940
3:30 p.m.
RE FREEZING ORDER

Present:

Mr. Viner

Mr. Coohran
Mr. White

Mr. Bernstein

H.M.Jr:

Now, where are we at, gents?

White:

I thought you might first be interested in

H.M.Jr:

Italy doesn't have very much.

White:

Then there are two drafts. I think you might
glance at the brief one first.

what those balances were. They are yesterday's
figures.

(Telephone conversation with Lord Lothian follows.)

June 11, 1940
2:31 p.m.

H.M.Jr:

Hello.

Operator:

Lord Lothian 18 in the residence. She'll

H.M.Jr:

Thank you.

Operator:

Right.

230

locate him and have him call you.

2:36 p.m.

H.M.Jr:

Hello.

Operator:

Lord Lothian.

H.M.Jr:

Thank you. Hello.

Lord

Lothian:

Yes.

H.M.Jr:

Good morning, Mr. Ambassador.

L:

Good morning, Mr. Secretary.

H.M.Jr:

I've just gotten a cable from Kennedy in
which he says the plans for the (Laughs) -I don't know what he means -- for the Halifax
and Rolls Royce bombers -- planes -- are in
Halifax.

L:

H.M.Jr:
L:

H.M.Jr:

sup.

Will you repeat that? I didn't quite get it.
The plans for the Rolls Royce and Halifax
bomber are in Halifax.
I think that must be a mistake.

At Halifax, and I'll read you exactly what
it says: "plans for Halifax and Rolls Royce
bomber planes as you requested are already
at Halifax."

-2-

261

That first word, "Halifax" 18 a

L:

Yes.

H.M.Jr:

I think so too.

L:

That must be some other bomber.

H.M.Jr:

And these are just the plans, you understand?

L:

Yes.

H.M.Jr:

And, of course, we're -- you know the arrange-

L:

Yes, about the Rolls Royce.

H.M.Jr:

mistake.

ments I have with your Government

Yes, they're turning the plans over to me,
and I'm terribly anxious to get them.

L:

Well, I'll get on to that and -- are they

H.M.Jr:

Well, I don't know. That's just the trouble.

L:

Yes, I see.

H.M.Jr:

They may be lying on the dook up there.

L:

Well, you wanted to get them as soon as

addressed to you, do you think?

I don't know to whom they're addressed. I
suggested originally they address them to
your Air Attache, but I've tried to -- and
instead of answering me and saying they're
addressed to so and so, they just come back
and say they're at Halifax.

possible?

H.M.Jr:

Yes.

L:

I'll make inquiries into that at once.

H.M.Jr:

And if there was some way of flying them

down, I think it's that important. If they
could fly them down, I really think it's
terribly important we get them.

L:

Yes, I'll get onto that at once, Mr. Morgenthau.

H.M.Jr:

Thank you so much.

L:

Right.

2H.M.Jr:

They come back and say they are at Halifax,
but he says, "To whom are they addressed?",

and I have got to say, "I don't know." It
is the stupidest piece of business. You
gentlemen can see where most of my time

goes. I got a great kick this morning. The

Army sent me over a very formal document.

No more 75 millimeter guns, so I sent it over
to the President and said, "In the light of
your speech, how about this request asking
for 500 more?" I got the answer back in

five minutes, "Okay, F.D.R. I wanted to
see whether he meant his speech.

White:

It must be about ten degrees too hot here.

H.M.Jr:

Let me get McKay.

(Mr. McKay entered the conference.)
H.M.Jr:

Mac, if that air is coming in here, I will
buy the engineer's supper. I will murder
the engineer.

Viner:

Before or after you buy his supper?

White:

They usually give them a meal before.

H.M.Jr:

Damn it, I argue about this thing every day.

Bernstein: Put a piece of ribbon out there and then you
H.M.Jr:

can tell whether the air is coming in.
You see, there is a separate switch, and it
is 80 complicated. There is a separate fan
which blows for this room, and somebody is

always monkeying with it. That is a good

idea to put a little piece of ribbon up there.
White:

This small memo 18 designed for a discussion
with the State Department because it brings

out all the problems and conditions. I am

opposed to doing Switzerland alone.

Bernstein: Mr. Secretary, the Counsellor of the Swiss
Legation came in to see me yesterday, and
Harry came in for the discussion. He wanted
to learn how the thing had been working out
in connection with the other countries, and

262

-3-

263

wanted copies of the documents and 80 on. In
the course of the discussion, he made it clear
on several occasions that although it would be

an unneutral act for his country to ask us to
apply the freezing control to his country, they
would be very delighted to see it done.

H.M.Jr:

Well, gents, I am not in very good absorbent

condition. Let this filter through Mr. Hull

and Mr. Jerome Frank, and by the time it comes

White:

back, maybe I will be in better shape.
There 18 no conclusion there, 80 it will be
all right, in the second document. They are
merely the pros and cons and we don't take any
position on it. Supposing we send it to
Mr. Frank and Mr. Berle and say this is just
for discussion.

H.M.Jr:

That is right.

Cochran:

Do you repeat that statement in respect to
Switzerland in the long memo?

White:

No.

H.M.Jr:

These are both private and Government funds?

White:

Yes, they are Government funds. You see,
the Government funds are negligible.

264

Possible courses of action in extending freezing control to:
(1) Switzerland. This would seem clearly desirable and

would face no objection from any source.

(2) Also France. We have reason to believe that Germany may
have been able to get control over some securities and property by

its capture of the northern departments. If Paris were to be
overrun, it would seem desirable to extend the control to France
unless it would create a defeatist attitude in France.

(3) Also Germany, Poland, Czechoslovakia, Italy and Albania.
This would be something of a departure from the basis on which

existing freezing control has been extended, but could be justified
on the ground, among other things, that we can not completely
prevent the aggressor from realizing on looted assets without
controlling the accounts of the aggressors. By extending freezing
control to these countries, we can considerably control propaganda

activities in this country and exports of products by way of the
Far East.

(4) All of Europe except Great Britain and Ireland.
(5) All of Europe and issuing immediately a general license
for Great Britain and Ireland and possibly Turkey.

(6) All of Europe and Asia.
If we followed the last three approaches we would thereby avoid
having to extend the Order from time to time and we could take a

census over a wider area of foreign assets. On the other hand, it
will considerably increase the administrative problem both to the
Government and to American business institutions. It might also
create antagonisms and annoyances in certain of the European

countries. It should also be recalled that when a country is
included, its possessions and colonies are also included.

265
Italy's participation in the war makes desirable the consideration
of the following alternatives with respect to the extension of exchange
control over the American assets of European countries.

1. Extension of control over assets of countries invaded
by Italy.
We have no official information as to Italy's invading any
country as yet. Therefore, no action would be called for at
this time.

2. Extension of control over assets of countries likely to be
invaded by Italy or Germany.

Exchange control could then be applied to any of the
European and North African areas. However, such a step would
constitute a departure from policy hitherto adopted of applying
exchange controls over the assets of only invaded countries.

In view of Mussolini's statement that Italy did not intend to

drag her bordering countries, like Switzerland, Yugoslavia,

Turkey, etc., into the war, it might be difficult to justify

the application of exchange control to selected countries not

yet invaded. It is believed that extending the control to
Switzerland would not meet with objections.

3. Extension of control only over the assets of Germany, Italy
and countries under their control.
This step would be a definite departure from policy pursued

up to now. Justification of such a step before the public on

political grounds could be in terms of reducing the economic
power of the aggressor nations by withholding from them the use
of their dollar assets and in terms of more effectively preventing Germany and Italy from realizing on looted assets.

4. Extension of control over American assets of all countries
in Europe (including territories and dependencies outside
of Europe).

Such extension of control could be immediately followed by
the issuance of general licenses which, in effect, would exclude
selected countries from exchange control. This likewise would

constitute a distinct departure from the policy hitherto pursued,
inasmuch as the exchange control would apply to the invader

countries as well as the others.

The economic advantages of extension of the "freezing" control.
1. The dollar assets of Germany and Italy, amounting to between
one hundred and two hundred million dollars, could be used

-2only under conditions satisfactory to the American
authorities. Financial and trade transactions between
the United States and Italy and Germany could be controlled
and remittances to Italy and Germany could be reduced.
Money could be sauggled from this country to Italy and

Germany through the mails.

The control of trade to European countries through
the medium of exchange control would not be important so
long as England and France maintain an effective blockade,
but in the event such blockade is weakened or in the event
attempts are made to use dollar assets to obtain goods
through third countries exchange control would help to

restrict exports to Germany and Italy.

2. Presumably the assets of Germany and Italy could be held
until such time as government policy crystallized with
respect to the ultimate disposal of those funds.

3. Security markets would be protected against the large scale
selling of American securities held by residents of Switzerland
or in Swiss names. In the absence of such control the market
may fear the possibility of such sales since it is generally
known that Switzerland holds large volumes of American

securities. Germany and Italy could be prevented from selling
American securities looted in France and other areas in Europe

not yet protected by regulations. It is possible to reduce
the selling of looted American securities through the control
over imports of securities without the addition of exchange

control. However, the application of exchange controls narrows
the channel of evasion. Furthermore, most securities owned by
Swiss already are in this country and import control is

therefore of limited value.

4. The assets of European countries that would come under the
control of Germany in the event of a German victory amount to

several billion dollars. This sum would constitute a source
of a possible offset for losses of American assets in Europe
that may develop as a result of German governmental action.

The economic disadvantages are:

1. The burdens and costs of administration to the Government.

2. Additional interference and burden to exporters and importers
and banking institutions dealing with Europe.
3. Possible impairment of the status of New York as an important
free international market.

266

-3-

267

4. The possibility of retaliatory measures against American
balances in areas now under Italian or German control or
areas that may come under Italian or German control.

An examination of the economic advantages and disadvantages leads

to the conclusion that the net balance is somewhat in favor of extending
exchange controls to include the aggressor countries and Switzerland,
but the economic benefits are not sufficiently important as compared

with the political considerations to be an important factor in the
ultimate decision. It is the political considerations, both domestic
and international in character, which appear to be determining. The
political considerations are:
Advantages:

1. Removal of one incentive to further territorial invasion by
the aggressor countries. This would be particularly true
of Switzerland, whose dollar assets total more than one

billion dollars.

2. It would provide an important bargaining element in peace
talks, should Germany emerge the victor. The United States
would have over $2,000,000,000 of assets belonging to the
European countries, exclusive of France and England, which
could serve as a bargaining point with Germans during such
negotiations as we may wish to enter upon after the cessation

of hostilities.

3. Through the information and administration which the control
would provide and which, apparently, is not obtainable in
any other way, it would enable our Government to restrict
objectionable propaganda operations of the German and

Italian governments in this country and also to some extent
in Latin America.

4. It would indicate to the American public that the Administration
is continuing to take whatever measures are within its power
short of involvement to meet the emergency situation.

5. Application of exchange controls would provide adequate

instruments with which to control all trade and financial

transactions between the United States and Europe and also
countries outside of Europe when funds of European countries
are involved so as to check evasion of moral or other
embargoes.

268

4-

Disadvantages:

1. It would be an overt step definitely unneutral in character,
inasmuch as any general licenses that would be granted
subsequent to the "freezing" of all European balances would

be withheld from Germany and Italy. In the light of the

President's speech of June 10 this consideration seems to

have little force.

2. It would create an obstacle to the placing of assets in a
safe status for some of the individuals in threatened
countries during the intervals between our application of
the control and actual German or Italian invasion. If,
upon the cessation of hostilities, this country would find

it expedient to resume normal relations with the government
of the aggressor countries, the control might have the effect
of holding safely for Germany and Italy some assets that
otherwise would have eluded their control.

269

June 11, 1940

(Dictated June 12,1940)
Yesterday Admiral Noyes came to see me

with a personal message from Admiral Stark. To
insure complete safety of their vessels, they
wanted six days and I granted that.

270

June 11, 1940

Admiral Stark, at my request, called for

me this morning.

He told me that the two ships had left yes(I am leaving it a little vague. ) I told
him that I did not want to inform the Federal Reserve
of this movement until the ships were 48 hours out.
He said they might have to stop en route for refueling.
terday.

I said, "Well, then, I will not report to the Federal

Reserve in New York until you personally phone me that
they are out of the danger zone."
He said the fuses for the bombs for the
Allies were on their way from Panama with the ex-

ception of 30, which I understood they would fly in
from San Francisco. He said this really brought
them down to rock bottom and that they were short
4,000 - 1,000 pound bombs. So I said I would like
to know how soon they were going to order new ones
to replace the old ones. He said he did not know,
but he would have Furlong get in touch with me.

I said that U. S. Steel today was going to sign a
contract for $50,000,000 for the surplus war materiel
and I thought it would be very nice if we could get
a part of this money devoted to the manufacture of
1,000 pound bombs.

I asked him if the Army and Navy used the

same bombs and he said they did.

271

June 11, 1940

HM, Jr called General Watson and not being

able to get him, spoke to Miss Barrows. The following is the Secretary's end of the conversation:
Watson.

"Would you take this message for General

"Colonel Burns brought over a letter to me,
at the suggestion of General Marshall, written on
White House stationery, to the President of the United
States Steel thanking him for what he had done in connection with the swapping of War Department used ma-

teriel for the Allies and I said that I thought the
President ought not to write such a letter; that it
would be quite sufficient if it was signed by the
Secretary of War, Woodring; that they ought not to
ask the President to sign it. I am sure that they
will go around and ask General Watson to do it some
other way. I am curious to find out 1f they should
go some other way. I think it is asking too much of
the President. "

272

NUMBER OF BLAST FURNACES IN THE U.S.
Distribution by Districts

WASH

MONT

NOAN

MINN

wis

S DAN
MICH

DAHO

NEW

- and

IOWA
NESS

UTAH

<<<<<<<
ILL

Chicago

COLO

MO

KANS

ARIZ

OKLA
TEXAS

"

ARE

LA

FLA

LEGEND

Furnace in blast
Furnece ide

Furnace blown in since lost report
Furnace blown out since lost report

O
O

Each dot represents one furnace

--

As of June 11,1940

Total Furnaces in Blast 179
Total Furnaces Idle 53
Preliminary
C.322

Treasury

273

SEARS, ROEBUCK AND Co.
EXECUTIVE OFFICES
CHICAGO

June 11, 1940.

Fon. Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D.C.
Dear Mr. Morgenthau:

I have your letter of June 6th, and I am
sorry that our understanding of our 'phone
conversation was at variance.

You understand, of course, that Mr. Nelson

is a free agent. I can only speak for

our Company, which is, that I can only agree
to give Mr. Nelson a leave of absence with

pay for a period of two months. I could

arrange to give him a leave of absence

without pay at the expiration of that period,
and it then depends on him whether he is

able to, or willing to, make the personal
sacrifice involved by staying beyond that
time.

Very truly yours,

Axward
R. E. Wood.

274
June 11, 1940
9:01 a.m.

H.M.Jr:

Hello.

Edward

Stettinius:

Here's the list: 30,000 500's.

H.M.Jr:

What's that?

S:

Take this down -- the list of these bombs.

H.M.Jr

Yes, you mean that

S:

Here are the quantities that are on the list
tentatively that are to be ordered.

H.M.Jr:

Oh.

S:

30,000

500's.

H.M.Jr:

30,000

500's.

S:

60,000

300's.

H.M.Jr:

60,000 300's, yes.

S:

400,000

H.M.Jr:

400,000 100's, yes.
Now, the 1,000-lb. -- pounders that were turned
over to you were mostly obsolete thin wall

S:

100's.

stuff that's out of date.

H.M.Jr:
S:

Yeah, I know.

And they feel that their present supply of
good 1,000's is pretty adequate in relation to

this other list.

H.M.Jr:

Who says that?

S:

But -- the Ordnance fellows.

H.M.Jr:

I mean, Army or Navy.

S:

Army. Now -- and I checked our own fellows.

Now, the thing -- but I still will argue our fellows
into putting in a few 1,000's anyway, but

275

-2I wanted you to get this list of the 500,

because your conscience ought to rest at ease

H.M.Jr:

on this whole thing.
Yeah, but not on the 1,000's, and Admiral Stark

who came down with me this morning and certainly
knows his business and used to be the head of
Ordnance for Navy, gave me the figure on how
many short he is.

S:

On 1,000's?

H.M.Jr:

On 1,000's. And I gathered that he is short

S:

Right.

H.M.Jr:

He told me this morning that he's short

S:

between 4 and 5,000.

between -- right now.
Well, now they've committed to me to put some

1,000's in this order.

H.M.Jr:

Good.

S:

O.K.

H.M.Jr:

Thank you.

276
June 11, 1940
3:16 p.m.

H.M.Jr:

Hello.

Operator:

Admiral Furlong.
Hello.

H.M.Jr:
Admiral

Furlong:

This is Admiral Furlong.

H.M.Jr:

Morgenthau. Admiral?

F:

Yes, sir.

H.M.Jr:

What's new on the bombs.

F:

Well, there's nothing new. Admiral Stark

said that you had some idea about helping

me buy some replacement bombs.
H.V.Jr:

Yeah.

F:

The bombs that we have given up, the 750

1,000-pounders, they -- I understand that
the Army has arranged that in turning those

over to DuPont to have them replaced by

TNT, and so that's all right for that.

H.M.Jr:
F:

Yes.

And, but I had a call from the Army the other
day for all the light bombs I could give them,
and I told them they could have 5,343 30pounders and

H.M.Jr:

Wait a minute. Wait. Do you mind if I put
you on my loudspeaker here so that Colonel

Burns can hear you?
F:

Colonel who?

H.M.Jr:

Burns, you don't mind his listening to this?

F:

Oh, no.

277

-2H.M.Jr:

All right, let's let him listen to this.

Now, how many bombs did you say you'd turn
over to the Army?

F:

H.M.Jr:

I'd turn over -- this is a new query now?
Yeah. This is for those 93 planes.

F:

93?

H.M.Jr:

Well, to go with those 93 planes that the
Army's going to swap to the Allies.

F:

That's right.

H.M.Jr:

Now how many --

F:

I presume that's what they wanted them for.

They just asked me for some bombs.
H.M.Jr:

Yeah. Now, how many

F:

Well, I've got 5,343 30-1b. bombs and fuses,
and I have 565 100-1b bombs and fuses, and
they amount to about $150,000.

H.M.Jr:
F:

H.M.Jr:
F:

Yeah.

And I would like to have them replaced by
bombs. The others were replaced by TNT.
I see.

And if these could be replaced by bombs,
1,000-lb. bombs, they run around $130 apiece,

that's the way I would like to have it
replaced in kind. Now the fellow that you
sell it to is the next question.

H.M.Jr:

Well

F:

I mean, that the Army sells it to.

H.M.Jr:

Well, just a minute. Let me ask Colonel Burns.
(Talks aside) Colonel Burns says he'11 give

278

-3-

F:

1,000-lb. bombs dollar-for- dollar.
That's right.

H.M.Jr:

O. K.?

F:

That's right. But, look, the bombs he gives
me, of course, are to my specifications.

H.M.Jr:

Yes. He says, yes.

F:

Yeah.

H.M.Jr:

Got any more you want to put in?

F:

Well, no. The only other thing that I wanted

H.M.Jr:
F:

Colonel Burns is in a good humor, you might
as well ask him.

Well, the only other think that I wanted to
say to him was that Mr. Stettinius, who helps
us a lot on all these things, his old company,
the National Tool Company, have some trouble

making the bombs.
H.M.Jr:

I see.

F:

And I mention that simply because he might

H.M.Jr:

be dealing with that -- with those people.
Just a moment, please. (Talks aside).
He says U. S. Steel, the parent company,
has agreed that they will make the 1,000-1b.
bombs.

F:

Yeah, they'11 make them, but they had some
trouble making them meet the specifications.

H.M.Jr:

I see. Well, he says, they've got to trust

U. S. Steel to come through.

F:

We can make them come through on that.

H.M.Jr:

Right.

279

-4-

F:

So now -- then there was another thing that
I thought -- I have had no word from anybody
to give those bombs to them and I suppose

if they do it like we did before, I'11 tell
these different stations of mine throughout
the country to send them over to a shipping

man.

H.M.Jr:

Well, now, just a minute. (Talks aside).
When Colonel Burns returns to his office,
he's going to telephone you.

F:

All right.

H.M.Jr:

He'll telephone you.

F:

All right. Now here's something that you may

H.M.Jr:

Yes, I heard that.

F:

And that those from Hawthorne got under way,

H.M.Jr:

Oh, they crossed at Minnesota.

F:

H.M.Jr:

F:

be interested in, maybe Colonel Burns has
told you that the 180 from Yorktown crossed
the border this morning.

and that the fuses were being flown from
Mare Island to Hawthorne to catch the last
train out of Hawthorne, and they crossed the
border of Minnesota out there.
Yes, that gets them up there at about
Well, they tell me that they -- you know,
I called up John Pelley myself and they tell
me that they've run those things up from
Yorktown to the border in 24 hours quicker
than it has ever been done before.
Well, you know, the man -- the transportation
man that we deal with on that why he was just

elated. He never saw anything like it.

H.M.Jr:

Well ......

230

-5F:

H.M.Jr:
F:

Well,
of course, it was due to that phoning
of yours.
Right.

And he said everything at the ammunition
depots was ready to move and he was just
tickled to death about the way everything
was handled there.

H.M.Jr:

Well, then I can call up Pelley and thank

F:

Yes.

H.M.Jr:

I mean, you people are pleased.

F:

Oh, yes.

H.M.Jr:

Swell. Well, thanks ----

F:

Now, wait. There's one more thing I want

him.

to tell you about, Mr. Secretary, and that
18 this: there's a sort of a backhanded

rumor coming around about some motor boats

for the British.

H.M.Jr:

Really?

F:

Those Scott-Bain boats (?)

H.M.Jr:
F:

Well, I don't -- you've given them 20 out
of the 24.
Oh, yes, but there hasn't anybody found time
or none of those fellows haven't said anything

about the -- really gotten down to brass tacks
about the equipment to go into them.

H.M.Jr:

Well, I don't know anything about that but

F:

That's up to them, isn't it?

H.M.Jr:

Well,

F:

I mean, I'm just a little ahead of them I

I'll

suppose, but they ought to be asking for

281

- 6torpedoes and depth charges and where they

H.M.Jr:

can get them and all that.
Well, you don't have to tell me?

F:

No, I don't, but

H.M.Jr:

I get you.

F:

But I suppose they ought to come around and
say what they want.

F:

Well, I'll get that word to them.
They're not definite yet.

H.M.Jr:

And they're not dumb.

H.M.Jr:

F:

H.M.Jr:
F:

Well, all right. (Laughs)
O. K. I'll get that word to them.
All right.

H.M.Jr:

Thanks for the tip.

F:

All right.

H.M.Jr:

Thanks for the tip.

F:

Good-bye.

H.M.Jr:

Good-bye.

282

June 11, 1940
9:30 a.m.
GROUP MEETING

Present:

Mr. Sullivan
Mr. Viner
Mr. Foley

Mr. Schwarz
Mr. Cochran
Mr. Gaston
Mr. Thompson

Mr. White
Mr. Nelson
Mr. Graves

Mr. Harris
Mr. Haas
Mr. Young

Mrs. Klotz

H.M.Jr:

I can see you at 10:15.

Thompson:

All right.

H.M.Jr:

Harry?

White:

Are you going to raise the question of --

Foley:

Go ahead.

White:

If anything is going to be done, speculatively
again, and I think it looks a little more likely
in light of the speech, do you want to get in
touch with Harrison to informally freeze any
balances until they hear from you today or
tomorrow?

H.M.Jr:

No.

White:

That is all. We will have the draft of it --

H.M.Jr:

I don't see on what grounds.

-2White:

Well, whatever grounds you may do it on later

H.M.Jr:

Whenever you are ready, I am ready.

White:

And there will also be a draft of the tax

H.M.Jr:

I am supposed to - where is Sullivan? I'm
supposed to see you people at eleven-thirty
on the tax statement.

White:

Eleven-thirty this morning. Well, we will
be ready before then with respect to the
other. Would you rather take it up later

283

in the day, until action is taken. We will
have this draft - a draft will be ready -statement. When do you want to --

or before then?

H.M.Jr:

That tax statement can't take over fifteen
or twenty minutes, can it?
Oh, I don't think so.
Then we will do it right afterward.

White:

All right.

H.M.Jr:

Basil?

White:

And you don't feel that you want to take any
informal action?

H.M.Jr:

No.

White:

Okay.

Harris:

You don't know anything about any blueprints
on those Rolls Royce engines, do you?

H.M.Jr:

Who wants to know?

Harris:

Have you got any correspondence on how they

H.M.Jr:

Who is asking, Basil?

Harris:

on yes, it was Phil. I had to think who it was.

H.M.Jr:
White:

are coming?

-3H.M.Jr:

284

Well, I sent a cable this morning to Ambassador
Kennedy and asked him how they were coming.

Harris:

Oh.

H.M.Jr:

Iasked
just sent
a cable this morning, because Merle
--

Harris:

It is pretty vague the way it 18. I wouldn't
know where to start looking for them.

H.M.Jr:

I don't either, but I have just sent a cable.
George?

Hans:

I wonder if you still wish to receive that

H.M.Jr:

cable from Milan, Italy?
No, cancel it.

Hass:

All right. That is all.

Nelson:

There has been a policy, Mr. Secretary, that
our strategic minerals shall be brought in
American bottoms. Now, we all feel that that that the emergency is 80 stringent in that,
that that ought to be rescinded. I haven't yet
found out where the policy came from, but I
would recommend to you, sir, that if there is

such a policy that it be rescinded. I have

been working with Mr. Harris.
H.M.Jr:

Why?

Nelson:

Because we have quite a problem of getting in
very quickly some of these strategic minerals
which have been ordered. I am very fearful
that many that we have on order we are not

H.M.Jr:

going to get. I feel that the program is
very vital at this time. Now, I have been -I think you will have to tell me the story.
I don't know A thing about it. You and Basil
Harris will fight it out. Can you get by
with the Maritime Commission --

Harris:

Well, the difficulty as I view it, Mr. Secretary,
18 that up to date there has been the inability

4

to put their hands on quick, ready money
where they can go right out and make the
purchases, and they keep continually talking
about tremendous quantities that they are

going to purchase and the stuff is still in
the mines and still on the trees, and it is
nowhere near the docks. Well, you can't
start a boat out to load cargo like that
and as soon as they know that the cargo is

Nelson:

available and know it is going to be ready
at a certain time, there is no trick in
getting the boat there; but I think Nelson's
people or whoever he cooperates with have
been handicapped by the inability to put their
finger on a certain definite sum of money.
That, plus the fact that each of the producers
come in and tell us we could have had that
in here but we haven't been able to get the
bottoms. If we had been able to use this,
that, or the other ship, we could have had
that in here. There are a bunch of alibis.
I haven't had time to get to the bottom of
it except that this request came to me this
morning at breakfast from Dr. Leith and Mr.
Stettinius, who have also been going into
this. You see, the responsibility - at the
present time Mr. Jones has responsibility
for tin, rubber, and manganese. Now, we
also have tin on order and manganese on

order, and they are going into it. The

request came to me at breakfast. I'm just
merely passing it on. Perhans I shouldn't

have brought it up at this time.
H.M.Jr:

No, it is all right. I just don't happen

to be familiar with it and if you and
Basil Harris want to take that battle on,
all power to you. I have no interest other
than to see the stuff come in.

Nelson:

All right. I am merely pointing out that the

H.M.Jr:

I should think Jerry Land would be the first
fellow to get in touch with.

orders that have been placed - there are many
of them that are not going to come in and --

285

-5 Nelson:

H.M.Jr:

Then Mr. Harris and I will iron it out.
Right. I don't know what the policy is. All

right on that? You know Purvis 18 to be here

at ten?
Nelson:

At ten o'clock.

H.M.Jr:

I would like to have you and Phil Young here.

Young:

Ten or ten thirty.

Klotz:

Ten thirty.

H.M.Jr:

Ten thirty, that 18 it. Anything else, Nelson?
No, sir. I have a few things to discuss with

Nelson:
Cochran:

you but not matters of general policy.

Jack Pederson telephoned a while ago that
Governor Towers of the Bank of Canada is

coming in at twelve thirty-five today. He

is going to be over at the State Department
at two thirty, and he has asked to see you
this afternoon while he is here, and he will
have had lunch on the train 80 he will be

available at two or three thirty. The State

Department would be willing to shift their
hours so as to meet his convenience.

H.M.Jr:

I can see him at three fifteen.

Coohran:

All right. The State Department will probably

H.M.Jr:

If you would, please.

Coohran:

Three fifteen. That is all.

H.M.Jr:

Sullivan:
H.M.Jr:

Viner:
H.M.Jr:

move their hour up, then.

Will you (Sullivan) be ready at eleven thirty?
Yes, sir.
Are you (Viner) in on this tax set-up?

I am perfectly willing to be.
I definitely want you in. Please let

Herbert Gaston see it early and White also.

286

-6-

287

Sullivan: They are working on it.
H.M.Jr:

Ed, I saw George Mead this morning and they

are fussing about this Rolls Royce contract.
Without my knowing it, they sent word to the

Rolls Royce Company, to whom is the license
going to be issued, and the answer came back,

it was issued by the British Government to
the United States Government. Is that right?

Am I quoting it right?
Young:

Yes.

H.M.Jr:

I don't think he should have communicated

directly with them the way he did, but that
is over the dam. Then he is seeing Edsel Ford
this morning, and the way the matter stands
now, the Army and Navy doesn't want the 80-

called Merlin engines, but the Allies do want
a large quantity and I said - when they draw
the contract up, I want you to sit in, because
the British Government has given the license
to me, 80 - there 18 a cable available which
Mrs. Klotz will show you which covers this
thing, which is the only thing that I have
got. I didn't particularly like it that they
went directly to the Rolls Royce when I had
already got it. The Rolls Royce came right
back and said this was between Governments.
Now, it 18 going to be very interesting
this morning when we see what Mr. Ford's
attitude is going to be when they find out
the Army and Navy don't want any, but the
Allies do. Who is watching this contract
with U. S. Steel on this exchange for surolus
materials? Is anybody watching that?

Foley:

Phil Young 18 --

Young:

No one is actually in on the deal. It is

General Wesson's entire baby and responsibility

over there in the War Department. That situation
has bothered me a good deal, Mr. Secretary, and

it is perfectly likely that we might be able to

work out some system whereby the Liaison Committee
could have a legal sub-committee of Treasury,

Army, and Navy to iron out legal problems coming
up in connection with requests by the Allies
which would give some shadow of authority for

288

-7our perhaps helping the War Department slightly

H.M.Jr:

in working out some of their difficulties.
Well, that would be up to Ed, wouldn't it? It
would be up to our General Counsel.

George, this thing that you put on my desk

about the rest of the statistics, does this
fit into this book or 18 this separate?

Haas:

That 18 separate. That gives you somewhat

H.M.Jr:

God, do I want more than what 18 in that book?

Haas:

One time you asked for it. You may not want
it now. You see - that 18 an old one.

H.M.Jr:

more than is in the book.

It just came in this second. It only reached

me now.
Haas:

Here, that 18 what I meant. These two columns
here are orders from the beginning until

June 1st.
H.M.Jr:

This is really what I want.

Haas:

Oh, all right.

H.M.Jr:

It 18 getting to be too much.

Haas:

All right. It 18 all in this book except
those two columns.

H.M.Jr:

Right. It 18 getting to be too much.

Haas:

All right.

H.M.Jr:

Herbert?

Gaston:

Nothing.

H.M.Jr:

Okay.

TREASURY DEPARTMENT

28S

INTER-OFFICE COMMUNICATION
DATE June 11, 1940
TO

FROM

Secretary Morgenthau
Mr. Cochran

STRICTLY CONFIDENTIAL

At 5 o'clock this evening. Dr. Somary, the Swiss banker who is acting as
financial adviser to the Swiss Legation and purchasing agent for Switzerland
in this country, called on me. He stated that it had been necessary to spend
considerable sume the past few days to support the Swiss franc on this market.
The principal cause for weakness in the Swiss franc had been the flight from
this currency on account of fear that Swiss assets might be blocked in the
United States if Switzerland should be invaded. While admitting that some
benefits might come from such blocking, during hostilities, the Swiss are
worried lest this system result in funds being held by the United States in
such a manner that they might necessarily be turned over to the German govern-

ment at the end of the war if Germany is victorious. That is, our system as
it now works takes funds out of the control of the individuals and leaves such
control to the governments. Post war arrangements between governments might
conceivably result in the funds going to Germany. Dr. Somary wished that the
United States might be able, in some way, to give assurance that foreign funds

would simply be blocked for the duration of the war and that thereafter the
original holders would be entitled to dispose thereof.

Dr. Sonary mentioned that the Counselor of the Swiss Legation had called
Mr. Bernstein in the Treasury Department yesterday, and had talked over
various matters, but that upon his return had mentioned parts of his conversation to Dr. Sonary in a manner which caused some anxiety to Dr. Somary lest the
Counselor may have not understood thoroughly what he was discussing. I told
Dr. Somary that Mr. Bernstein had gained the impression from the Swiss Counselor
on

that. while Switzerland could not ask for it. the Counselor was at least personally of the opinion that the imposition of our freezing control now on

Switzerland might be welcomed. Dr. Sonary most emphatically denied any such

feeling on the part of responsible Swiss officials. He said that it would be

serious enough to block Swiss assets in case the country is invaded for the
reasons indicated above. To block Swiss assets now when the country is not
invaded. and hopes to avoid invasion, would be disastrous. It would immediately
force Switzerland to go off the gold standard; would handicap the country

seriously in its financial transactions, both as an international center and as
a country obliged to buy importantly on foreign markets to keep its population
fed and to keep its economic life sustained. Dr. Somary hoped that we could
straighten out this misunderstanding at once.

In our conversation. Dr. Somary reverted to the question of getting gold
out of Switzerland. He estimates that the National Bank of Switzerland still
holds approximately $250,000,000 of gold in Switzerland. He is not willing

290
2-

that this gold, representing more than the holdings of the Bank of Italy, should
now be sent out through an Italian port even if the Italians might agree to a
treaty now under negotiation, which will permit Switzerland to use Genoa as a

port during hostilities. Dr. Sonary would prefer to see a special train, requiring eight or nine cars for the gold and perhaps additional cars for securi-

ties, to leave Geneva some night, cross France during the night 80 that bombing
would not be possible, arriving at the French-Spanish frontier. Hendaye-Irun,
the next morning, and then proceeding to Lisbon. Dr. Somary would want our
assistance in arranging for such a train. I promised to learn as soon as
possible whether American vessels would continue to visit Lisbon. I shall
speak with Mr. Basil Harris on this point tomorrow morning.

Dr. Somary wants to call again to talk over this matter and would like
some day to give the Secretary his personal impressions of the European situa-

tion.

291

June 11. 1940

Mr. Bell
Mr. Cochran

STRICTLY CONFIDENTIAL

AS the suggestion of the Under Secretary, I telephoned Mr. Barle Bailie in
New York this morning and requested his epinion of Mr. Freak Stemple, as applicant

for a position is the Treasury, who had given Mr. Beilie as a reference.

Mr. Bailie told no that Mr. Stemple had worked only on Government bonds when
he was employed by Bailie's concers. He was a good Government trader, competent to

move is and out of the market quickly. No is a hard worker, but emart rather than

wise. He is entirely heart. Mr. Bailie advised us, however, that if we had other
people almost as good as Stemple, we night be wise to take them. When I asked if

Stemple would be a man who could be relied upon to understand and pass upon the

various types of applications which we receive, this position requiring a thorough
knowledge of foreign exchange transactions and good judgment in addition, Bailie

hesitated to recommend Stemple.

C:da:6.11.40

292

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE June 11, 1940
TO

Secretary Morgenthau

FROM Mr. Cochran

STRICTLY CONFIDENTIAL

Mr. Leroy-Beaulieu telephoned me from New York at 11:15 this forenoon. He
as
stated that he had cabled to Paris again yesterday in regard to the suggestion
to E departmental freezing in France, along the lines which he had advanced to
Measrs. Bernstein and myself last Friday. Since he had received no word from his
Government on this subject, he asked whether the Treasury felt that it should get
in touch with the American Embassy in Paris with the idea that the latter discuss
the advisability of departmental freezing with the French Government.
I told Leroy-Beaulieu that when we were reviewing the general European
situation yesterday and I had mentioned the idea of freezing only certain parts
of France, the Secretary had not received the idea very favorably. Such a system

would be difficult of administration because of the shifting battle lines and the
flight of refugees. I also thought there was no need for the Treasury to ask our

Embassy in Paris to take the matter up with the French Government since cablegram
No. 1125, dated June 5. from Matthews had reported fully his talk with Couve de

Murville, and also the latest movements and preparations of the French Ministry of
Finance, Bank of France and American banks in Paris. When I read this message to
Leroy-Beaulieu, he agreed that his people had undoubtedly had the benefit of all
the information that we could give them, and that there was no need for further

cabling. Incidentally, Matthews had called on Leroy-Beaulieu just before sailing

from New York and had been asked by the former to acquaint Couve de Murville
thoroughly with the Treasury's freezing system. The one point Leroy-Beaulieu made
YES that precautions taken to date do not protect French holders of American securities

against disposing of these securities under duress-if the enemy get hold of the
owners and bring pressure on them to give instructions for disposing of securities
in the United States or elsewhere.
In closing our conversation, Mr. Leroy-Beaulieu mentioned that Mr. Christiansen disand a Commercial Counselor of the Norwegian Legation had celled on him and had
cussed the possibility of having Norwegian bonds floated on this market stamped.

Leroy-Beaulieu does not think this suggestion is at present of any merit with respect
to French securities. It was the understanding of Leroy-Beaulieu that the Norwegians and
had discussed this matter with Mr. John Haskell of the New York Stock Exchange
that the latter had agreed to be of any possible service if the Norwegians might
decide upon the scheme. When I suggested to Leroy-Beaulicu that the Norwegians already ought

to discuss this matter with the Treasury before taking any steps. since we are

taking such measures as we can to safeguard their assets and are even contemplating already men-

further measures, Leroy-Beaulieu said he understood the Norwegians had anything

tioned this to Mr. Bell. I told Mr. Leroy-Beaulieu if there was to

further that project they desired, either directly or through him, we should be glad do
what ve could to satisfy them.

BMR.

293

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE June 11, 1940
TO Secretary Morgenthau
FROM Mr. Cochran

STRICTLY CONFIDENTIAL

Mr. Jack Hickerson telephoned me at 9:15 this morning that Governor Graham
Towers of the Central Bank of Canada was arriving in Washington at 12:35 today and
had an appointment for 2:30 at the Department of State to discuss trade agreement

questions. Governor Towers had asked for the opportunity of an interview with
Secretary Morgenthau.

I mentioned this matter to the Secretary in the 9:30 meeting pointing out that

Governor Towers will have had luncheon on the train and could be available here at
two o'clock, or after his State Department appointment. The Secretary suggested
3:15. I telephoned Mr. Hickerson at 9:45 and it was agreed that this hour was acceptable. Mr. Hickerson thought that Governor Towers might broach the subject of further
devaluation of the Canadian dollar.

BMP

294

TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION

DATE June 11, 1940
TO

FROM

Secretary Morgenthau
Mr. Cochran

STRICTLY CONFIDENTIAL

Mr. Knoke spoke to me this evening at 6 o'clock. He stated that the first
consignment of Vatican gold is due to arrive in New York tomorrow, shipped by
Grenfell from London. The total shipments will amount to ten or eleven million
dollars. Morgan & Company have delivered to the Federal Reserve Bank a cable-

gras received this afternoon from the Administration of the Holy See in the
Vatican. to the effect that the written instructions which were being sent to

the Federal in regard to opening of the account would undoubtedly be delayed in
receipt. In these circumstances and to preserve secrecy the Holy See desires to
communicate with the Federal through the Apostolic Delegate in Washington. The
Federal is sending us a copy of this message tonight. When I shall have received
this message Knoke asks that I inquire through the State Department whether the
Federal may communicate through it with the Apostolic Delegate. The Federal
prefers to deal through our Embassy in Rome, as originally anticipated, but if

this is not practicable, the alternative is to work with the Apostolic Delegate.

295

TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION

DATE June 11, 1940
TO

Secretary Morgenthau

FROM

Mr. Cochran

STRICTLY CONFIDENTIAL

Mr. Irigoyen telephoned me from Buenos Aires at 5:45. He asked me for
the day's political and market news. He said Argentina had now lost 60% of
its markets. The people are calm, awaiting developments. He was particularly
concerned as to whether American stock markets might experience any sort of

a panic which would lead to their closing. I remarked upon the improved sentiment on the market today and told him that the Treasury was opposed to any unnecessary restrictions on our market.

B

Jeanny

295-A -

14099
GRAY

CK

Mexico City
Dated June 11, 1940
REC'D 7:23 p.m.

Secretary of State
Washington

191, June 11, 3 p.m.

Since report of June 11th about condition of Bank

of Mexico dollars continue to bE offered in large
quantities and Bank of Mexico daily has been adding

substantially to stabilization fund. President Cardenas
reported to preum Monday morning June 10th as stating
that higher value of peso could be EXPECTED this month.
At the close of business June 10th Bank of Hexico had

acquired $2,400,000. Bank opened quotation this morning

at 5.50 per dollar later reducing it to 5 per dollar,
By noon it had acquirEd $900,000 and withdrew quotations

to allow peso to find its natural level. Latest available
quotation 5.10 per dollar.
BOAL

EMB

296

June 11, 1940

Mr. Bell
Mr. Spice
Mr. Public
Mr. Cochrai

STRICTLY CONFIDENTIAL

Then I talked with Berie Bailie this surning is regard to Mr. Steeple, I
mentioned that Mr. Dale Parker was also as applicant.

Ballie stated that he know Parker only slightly. but that he considered his
both a bress hat and a fathoad.

HMC:da:6.11.40

297

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE June 11, 1940
Secretary Morgenthau
FROM

Mr. Cochran

STRICTLY CONFIDENTIAL

At the suggestion of Under Secretary Bell, I telephoned Mr. Warren Pierson,
President of the Export-Import Bank, this morning. I told him that an inquiry had
been received indirectly from him with respect to the credit which his concern had
extended for the sale of American products to Italy. He said that he had not mentioned this to the Treasury, but had talked with the State Department about it.
In response to my offer to be of any assistance, he said there was nothing the
Treasury could do now, unless I might be able to tell him how much money private

Italian banks have on deposit in New York. In confidence, I told him that as of

May 29 Italian private banks held approximately $62,000,000 on the New York market.

In answer to Mr. Pierson's inquiry as to whether there was any prospect of our
freezing Italian balances, I replied that no decision in that direction had been
taken. It was understood that we would keep in touch with each other.

BMR.

298

TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION

DATE June 11, 1940
TO

FROM

Secretary Morgenthau
Mr. Cochran

STRICTLY CONFIDENTIAL

Mr. Knoke referred in a telephone conversation at 6 o'clock this evening
to the transaction reported yesterday by the Chase Bank involving a payment of
$480,000 to a Japanese in New York, under instructions from the German Asiatic
Bank in Shanghai.

After the Chase took this matter up with the Federal, they cabled the
Shanghai Bank and were informed by the latter that the transaction was not
for hoarding. The Chase has now learned through its own secret channels that
the individual to whom the payment is to be made is the purchasing agent for
the Japanese army.

TREASURY DEPARTMENT

293

INTER-OFFICE COMMUNICATION

DATE June 11, 1940
TO

Secretary Morgenthau

FROM

Mr. Cochran

STRICTLY CONFIDENTIAL

Mr. Knoke told me by telephone at 6 o'clock this evening that Italian
deposits in New York are down approximately $20,000,000 for the week ending
June 5. Some $7,000,000 went into securities and several millions were withdrawn for hoarding.

300

TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION

DATE June 11, 1940
TO

Secretary Morgenthau

FROM

Mr. Cochran

STRICTLY

At 3:15 o'clock this afternoon, the Secretary received Governor Graham
Towers of the Central Bank of Cannda. Mr. Cochran was also present. The
Governor presented his respects to the Secretary and also a message of good
vishes from Colonel Ralston, the Canadian Minister of Finance. After a

short but cordial visit, Governor Towers went to Mr. Cochran 's office to
give in detail certain information which he wished Secretary Morgenthau to
receive. The following is a summary of the conversation in Mr. Cochran '8

office.

Governor Towers stated that, as could be imagined, his foreign exchange
resources had declined since the beginning of the war. There was no present
reason to worry, since there was foreign exchange enough to carry on for
some time. but the diminution of the supply has been at such a rate that the
Bank of Canada feels that immediate steps should be taken to check it.
Toward this, three alternatives have been considered: (1) to levy on immorts;
(2) to reduce travel out of Canada: (3) to save on the conversion of Canadian

dollar income, which is now converted at the official rate. With respect to
the third alternative, Governor Towers stated that it was costing approximately
1260,000,000 Canadian dollars for the year 1940 to pay dividends, interest and
profits from Canada, converting these items into United States dollars. This
total includes service on Canadian bonds which are specified in United States
dollars.

With respect to alternative (1). Governor Towers anticipates the imposition of a ten percent special war exchange tax on imports into Canada from
non-Empire countries. The Canadians favor that this measure be designated as
above so that it may be interpreted as conserving exchange rather than

changing the tariff. It will be applied to non-dutiable as well as dutiable

goods. The tendency will be to increase the use of domestic products. There

is also e proposal to put an excise tax on many manufactured products. such the

08 motor cars. This tax will be graduated, the highest rate applying to
expensive cars. This will be applicable to foreign and domestic products.
The production of motor cars, for example, will be cut down. but such factories
are needed for war purposes. The income tax will also be raised.

As to alternative (2). there is no present plan for restricting travel
out of Canada or the amount of foreign exchange that travelers may take at its with

them. As to whether the tourist traffic into Canada will continue
former level is quite uncertain. considering war conditions. Tourists may
still travel in Canada on unofficial Canadian dollars.

301

-2-

There is no intention of resorting at present to the third alternative.
In speaking of the general balance of banks, Governor Towers thought
that the deficit vis-a-vis the United States in 1940 would be approximately
$175,000,000. Canada is importing from the United States this year approxi-

mately $720,000,000 Canadian dollars, as compared with $485,000,000 in 1939.
1940 production of gold in Canada will be around $203,000,000 Canadian dollars.

Governor Towers said that we could obtain more details on the Canadian
trade situation from the State Department, where this subject was particularly

discussed today.

In answering my inquiry, Governor Towers confirmed that some $200,000,000

in gold had been received last week from Halifax for earmarking for the
account of the Bank of France. At least one more shipment is shortly expected.
In this connection, the Governor told me in strictest confidence that he does
not believe that the Bank of England has much more gold to ship out. considering
the quantities which he has already received.
The Governor stated that he was happy to make the foregoing information

available to the Secretary in strictest confidence, but requested that it go

no further.

BMR.
STRICTLY CONFIDENTIAL

302

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE June 11, 1940

Secretary Morgenthau
FROM Mr. Cochran

CONFIDENTIAL

The rate for the pound sterling continued its uncertain trend. From an
opening of 3.53, it advanced steadily to 3.83 shortly before noontime. After
reacting to 3.71, it again improved, reaching a high of 3.85-1/4 late in the
afternoon. The rate then eased to close at 3.78.
The turnover figures given below show that reported sales of sterling
were almost double purchases. The difference, in all probability, represents

covering of short positions by the reporting banks, their activities for their
own account not being included in the figures. In addition, non-reporting

banks were probably buyers of sterling on balance.

Sales of spot sterling by the six reporting banks totaled 1362,000. from the

following sources:

L 92,000

By commercial concerns

By foreign banks (South America and Europe)
Total

& 270,000
L 362,000

Purchases of spot sterling amounted to 194,000, as indicated below:
L 98,000

By commercial concerns

L 96,000

By foreign banks (Far East, South America and Europe)
Total

L 194,000

There were no reported sales of sterling to the British Control on the
basis of the official rate of 4.02-1/2.
Spot sterling in the amount of 68,000 was purchased from the British Control

at the official rate of 4.03-1/2 by the following banks:

L 43,000 by the Guaranty Trust Company (for rubber)
25,000 by the Bank of Manhattan (for rubber)
L 68,000 Total
Developments in the other currencies were as follows:

The French franc moved with sterling and closed at .0216.

The Swiss franc was steady all day at an offered rate of .2243.
The Canadian dollar improved slightly to close at a discount of 21-1/2%.
The lira and reichemark were offered at .0505 and .4000 respectively,
throughout the day.

303
2-

CONFIDENTIAL

The Cuban peso has had a decidedly weak tendency in the last two days.
As compared with Saturday's discount of 9-5/16%, the quotation for that
currency today was 10-15/16%. The Mexican peso was unchanged at 1672.

The yuan in Shanghai was quoted at 6$ off 1/8 from the quotation

received on Saturday.

We purchased the following amounts of gold from the earmarked accounts of

the banks indicated:

$5,000,000 from the Central Bank of the Argentine Republic
700,000 from the Central Bank of the Colombian Republic
$5,700,000 Total

The Federal Reserve Bank of New York reported that the Bank of England
shipped $2,084,000 from England to the Federal, to be earmarked for account of
the Swiss National Bank.

The report of June 5 received from the Federal Reserve Bank of New York,

giving the foreign exchange positions of banks and bankers in its district,
revealed that the total position of all currencies was short the equivalent of
$19,239,000, a decrease of $363,000 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 29

$ 6,077,000
9,144,000
226,000 (Long)
178,000

3,463,000
955,000
11,000

$19,602,000

Short Position
June 5

$ 5,981,000
8,760,000
135,000 (Long)
180,000
3,606,000
816,000
31,000
$19,239,000

Decrease in

Short Position
$ 96,000
384,000

91,000 (Decrease in
Long Position)
2,000 (Increase)
143,000 (Increase)
139,000

20,000 (Increase)

$363,000

The report from the Federal Reserve Bank of New York listing deposits for
the account of Asia as reported by the New York agencies of Japanese banks on
June 5. showed that such deposits totaled $46,227,000, an increase of $6,719,000
since the last report as of May 29. Included in this total were $29,153,000 in
deposits with the Yokohama Specie Bank, New York, made by its branches in China
(an advance of $976,000 since May 29) and deposits of $8,460,000 made by the
head office and Japanese branches (up $7,158,000). The overdraft of the head
office and Japanese branches on the books of Yokohama's New York agency was

$82,525,000. a decrease of $3,000 since May 29.

As anticipated, India's precious metal prices experienced an improvement
under the influence of the latest European war developments.

304

-3The Bombay gold price advanced the equivalent of 81 to $36.31.

Spot silver in Bombay worked out to the equivalent of 45.41 up 3/4
In London, spot silver was unchanged at 23d. Forward silver, however,
dropped 11/16d to 21-3/8d. The exceptionally wide spread between these quotations
was reported as being due to the fact that no silver was available in London for
spot delivery, calculated while Indian interests were sellers of forward silver. The U. S.
equivalents,
at the official sterling-dollar rate, were 41.81 and
38.86$ respectively.

Handy and Harman today raised its settlement price for foreign silver by
1/4 to 35 Some silver trading reportedly took place in New York at 35-1/44.
and it is believed that moderate Indian demand lies behind the present upturn.
The Treasury's purchase price for foreign silver was unchanged at 35.
We made two purchases of silver totaling 100,000 ounces, under the Silver
Purchase Act, both of which were new production from foreign countries, for
forward delivery.

KMR.

CONFIDENTIAL

305
June 11, 1940
8:40 a.m.

H.M.Jr:

Hello.

Operator:

Mr. Stettinius.

H.M.Jr:

Hello.

Edward

Stettinius:

Good morning, sir.

H.M.Jr:

How are you?

S:

Fine, thank you.

H.M.Jr:

Ed, look. I may need a little help from
you.

S:

H.M.Jr:

Right.

We've squeezed the Navy dry on 1,000-lb.
bombs for these 50 ships that you saw in
the papers that are going over to England and
France.

S:

Yes.

H.M.Jr:

And I rode down with Admiral Stark this
morning and he tells me he's about 4,000
short, and we're going to squeeze the Army
dry too this week on some of their bombs

to accompany some other ships that we expect

to transfer Friday. See?

S:

Right.

H.M.Jr:

Now, I wondered if -- I understand that today
they're going to sign a contract with your
former company and for $50 million, and I
wanted to put in a plea -- very strong one,
that a good piece of this money immediately

be -- go for these 1,000-lb. bombs. See?
S:

Right.

306

-2H.M.Jr:

Because I think, if and when I'm investigated,

the rest of us are, if we can say that within

the week from the time we transferred these we
immediately placed orders for others
S:

I understand -- I get it.

H.M.Jr:

it would help tremendously.

S:

I get it.

H.M.Jr:

And, now

S:

Do you know -- have any idea how many bombs

they were planning to make out at Christy Park

H.M.Jr:

S:

out of this $50 million?
No, but Furlong -- I just -- I understood the

contract was going to be signed, now I didn't
know whether it specified what material
they were going to get.

It will specify -- it'11 specify -- itemize

it to the last detail as to what we have to

deliver to Ordnance in return for having
Ordnance deliver to us the stuff to turn over
to Purvis.
H.M.Jr:

Well, then, could you just hold that thing
long enough -- until I can get in touch with
Colonel Burns?

S:

Correct.

H.M.Jr:

And I've got Furlong working on it, you see.

S:

Yeah.

H.M.Jr:

And I want a good chunk of that

S:

Good.

so that the President can say, well, sure
we gave those to the Allies, but within two
or three days we placed an order to make up
for the other.

307

-3H.M.Jr:
S:

You get it.

Yeah, I get it. Now Burns is, I tell you

who is better still, Wesson.

H.M.Jr:

Huh-uh.

S:

Huh?

H.M.Jr:

Huh-uh.

S:

Well, he's got the whole thing in hand.

H.M.Jr:

Well, let -- well, Burns

S:

Burns can olear it for you.

H.M.Jr:

Burns is my contact.

S:

All right. Well, then you just tell Burns

and then I'll see that from the standpoint
of the steel corporation that they do hold.

They do what they're asked to do.
H.M.Jr:
S:

Right. Now, we have a little joke around here.

It takes too much Wesson oil to make Wesson work.

(Laughs) O. K. Well, the reason I said that
was that he's got this whole contract in hand

H.M.Jr:

I know, but

S:

O. K., I get it.

H.M.Jr:

What?

S:

I get it.

H.M.Jr:

I'll -- I just thought if you could hold the
thing an hour or two over there.

S:

Right.

H.M.Jr:

I mean, have U. S. Steel hold it.

S:

Right. That'll be done.

308

-4H.M.Jr:

Thank you.

S:

Now, do we lunch today or not?

S:

Lunch today at 1:00 o'clock.
1:00 o'clock.

H.M.Jr:

1:00 'clock.

S:

Your place.

H.M.Jr:

It's a chance mainly to give Mr. Stettinius

H.M.Jr:

a chance to unburden himself on Wages and
Hours and Vinson-Trammell
S:

Right-o.

H.M.Jr:

I mean, Knudsen and give you as much time as
you want.

S:

Right. Knudsen is coming with me.

H.M.Jr:

Knudsen is coming and so is Sidney Hillman.

S:

Swell.

H.M.Jr:

And the purpose is to take our hair down on
whatever you have in mind as far as the
Treasury is concerned.

S:

Right. Here's Bill Knudsen now. I'll tell
him.

H.M.Jr:

Thank you.

S:

Thank you.

H.M.Jr:

Good-bye.

303

June 11, 1940
8:46 a.m.

H.M.Jr:

Hello.

Operator:

Colonel Burns.

Colonel James
Burns:

H.M.Jr:
B:

H.M.Jr:

B:

H.M.Jr:
B:

H.M.Jr:
B:

Good morning, Mr. Secretary.
Colonel Burns.

Yes, sir.
Here's something I want you to help on. As
you know, the U. S. Steel is signing a

contract, I think, for roughly $50 million.
That's right.

Now, we wrangled out of the Navy 750 1,000-lb.
bombs, as you know.

Yes, sir.
And I hope the Army is going to do as well
by me in connection with these 93 planes.

Well, that's being worked out now, as you
know.

H.M.Jr:

I know. Now, here's the idea I've got. If
and when I'm investigated -- the rest of us
are all investigated, if we could say, well,

within two or three days of the time we

turned these 1,000-1b. bombs over, we immediately ordered at least as many more. You see?

B:

H.M.Jr:

Yes, sir.
And I rode down with Admiral Stark this morning
and he tellsme that both the Army and Navy now
use the same 1,000-lb. bomb.

B:

Yes, sir.

310

-2H.M.Jr:

B:

H.M.Jr:

Now, he's talking to Furlong, and I thought

if you and Furlong could put your heads
together and figure out how many the Army's
going to give up with those 93 planes, see?

Yes, sir.
And then get included in this U. S. Steel
contract which is going to be signed today,

at least as many bombs as we're turning over

B:

H.M.Jr:

to the Allies if not more.
Yes, sir. I'm sure we can work that out.

I talked to Mr. Stettinius two minutes ago

and he said he'll tell U. S. Steel to hold
that contract until Army and Navy say how

many bombs they want. See?
B:

H.M.Jr:
B:

H.M.Jr:
B:

Yes.

Now, I'm going to come back, undoubtedly,
for more.
Yes.

I don't -- on these 93 Northrop planes, I
don't think they use 1,000-lb. bombs.

No, sir, they don't. The 100-1b. 18 all
they use.

H.M.Jr:
B:

I thought they used 500-lb.
No, sir, 100-1b. and 30-1b.

H.M.Jr:

Well, then figure out what has to go with that

B:

Well, I understand your principle. You want

H.M.Jr:

to order immediately at least as many as we're
releasing.
At least as many and as I'm going to come back

most likely for some more, I'd order at least
as many as we're releasing plus 50% more.

311

-3B:

H.M.Jr:
B:

H.M.Jr:
B:

H.M.Jr:
B:

All right, sir. As many as we release, plus
50%
more. All right, sir, I think we can work
that out.
And that's the combined Army and Navy release.

Yes, sir.
And get that stuck into the U. S. Steel order.
Yes, sir.
Now, they're signing that today SO you're
going to have to move fast.
Well, I don't think we'11 have too much
worry about it, Mr. Secretary, because that's

a flexible contract and all we've got to do
is enter the bomb as one of the things that

we want -- of the various types of bombs as

those things we want returned, and then we can

H.M.Jr:
B:

H.M.Jr:

give a written order later on.
Well, Mr. Stettinius said they were getting
right down to the most minute detail.

Well, that's right, except that we can't tell
them right now exactly how many of an item
we're going to get, we're telling them -maybe they worked it out that way. But anyhow
I'll check it up right away.
And whatever the bombs that have gone with

the Navy's plus the bombs that go with these

93 ships, if they can put an order in for
the same amount plus 50% extra.

B:

H.M.Jr:

Yes, sir, I'll see about that right away.
And when you hear, will you talk to me direct
on it?

B:

Yes, sir.

H.M.Jr:*

Thank you.

312

June 11, 1940
10:02 a.m.

H.M.Jr:

Hello.

Operator:

Mr. Harrison. Go ahead.

H.M.Jr:

Hello.

George

Harrison:

Hello.

H.M.Jr:

Hello, George.

H:

Hello, Henry?

H.M.Jr:

Yes. Good morning.

H:

When I first called you I had something
specific to put up to you, but I haven't
now, and these notes -- the new notes we're

floating around here this morning -- just a
lot of the little holders, you know, offering
them around, and the big buyers haven't come

in and they went off from 23 down to, well,
really 16 or 17.
H.M.Jr:
H:

Yeah.

And 80 that they were selling on an 85 basis

here, which was all out of line.
H.M.Jr:

Yeah.

H:

We were going to -- we were considering picking
up a few ourselves largely as an investment,
and not as a support of the market, but we

didn't want to do it without talking to you.

H.M.Jr:
H:

H:M.Jr:

Yeah.

In the meantime, people have caught on to the

fact that they're out of line and they've gone
up again now to 19 or 20 and I think we'd
better not do anything.
I'd much prefer that you didn't have to.

313

-2H:

Yes.
Well, I think under the circumstances
we won't.

H.M.Jr:

I'd much prefer you to

H:

And I didn't want to do anything even as they
were without consulting you first.

H.M.Jr:

Right:

H:

But as it is, we won't do anything.

H.M.Jr:

Right.

H:

First rate.

H.M.Jr:

Thank you, George.

314

June 11, 1940.
11:33 a.m.
H.M.Jr:

Hello.

Operator:

Go ahead.

H.M.Jr:

Hello.

Gen. John J.
Pershing:

Hello, Mr. Morgenthau?

H.M.Jr:

Talking.

P:

General Pershing.

H.M.Jr:

Good morning. Glad to hear your voice.

P:

Good morning, Mr. Secretary. I am not trying to
break in on any plan or system you have of

letting these poor Allies have airplanes, etc.,
but it seems to me, Mr. Secretary, that if
there was a way -- any way -- by which we
could let them feel that they wouldn't have

to pay gold dollars for all these things, it

would be a great stimulus to them.
H.M.Jr:
P:

H,M.Jr:
P:

Well

I wondered if there's any way of getting
around that for the time being.
Not, General, as long as we have the Johnson

Act. We just can't get around that one.

You mean, it would have to take some action
by Congress.

H.M.Jr:

It would have to take action of Congress.
As a matter of fact, right now they have
plenty of money here. The money question
isn't bothering them.

P:

Yes.

H.M.Jr:

They've got plenty of money here, on deposit
with us.

315

-2P:

H.M.Jr:

Yes.

And the trouble -- all of my troubles and
what's wearing me to a frazzle 18 trying to
pry it loose from the United States Army.
That's my trouble.

P:

Yes.

H.M.Jr:

But the money thing is no trouble, but our -your Army is my chief trouble (Laughs)

P:

Yes. The point I make is -- 18 -- 18 to

create some encouragement in their minds to

let them feel we're behind them without

demanding cash payments.
H.M.Jr:

Well, I think we're doing everything possible
under the law, but I'm simply delighted that
you called me and any time that you have

any ideas, please call me. I consider it
a compliment.

P:

Well, I'm sorry to bother you about it.

H.M.Jr:

You haven't bothered me at all, General.

P:

These members of the French

--

are plugging away at me from Paris, you
know and I really -- my sympathies all run

in that direction.

H.M.Jr:

I know.

P:

As you can well understand.

H.M.Jr:

I -- well, you call me any time you feel -or any time you'd care to drop in, or I'd

P:

be glad to drop in on you.
Yes. Well, you think for the moment that we'd

better let it lag.

H.M.Jr:

Better let it go for the moment.

P:

Thank you very much, Mr. Secretary.

H.M.Jr:

All right.

316

June 11, 1940
3:25 p.m.

H.M.Jr:

Hello.

Operator:

Mr. Pelley.

H.M.Jr:

Hello.

J. J.
Pelly:

Hello.

H.M.Jr:

Mr. Pelley.

P:

Yes.

H.M.Jr:

They tell me you've done a perfectly
wonderful job.

P:

Thank you.

H.M.Jr:

And everybody is simply delighted. I hear

you've broken all speed records and everything

else.
P:

Well, it's about that way. I was hoping I

H.M.Jr:

Well, I hear they got -- I hear they got

P:

Beg pardon?

H.M.Jr:

I hear they got to Rouses' Point.

P:

No, that's wrong.

H.M.Jr:

Oh.

P:

No, they left Wilkes-Barre at 5:00 o'clock

could tell you by this time when they're
going to be at Rouses' Point, but I
there this morning.

this morning.

H.M.Jr:
P:

Oh.

They ought to be pretty close to Rouses'
Point.

317

-2H.M.Jr:
P:

Well, everybody over at the Navy 18 just

tickled to death.

Well, that's fine and we're going to do the
same kind of a job out West on those others.
We're just getting started on that.

H.M.Jr:

Right.

P:

O. K.

H.M.Jr:

Thank you.

318

JUN 11 1940

My dear Mr. Chairmant

Receipt is acknowledged of your letter of June 5, 1940,
enclosing a copy of S. J. Res. 272, introduced by Henorable
Arthur H. Vandenberg, to authorise the postponement of payment of
amounts payable to the United States by the Republic of Finland on
its indebtedness under agreements between that Republic and the
United States dated May 1, 1923 and May 23. 1932.

The bill provides for the postponement at the option of

Finland of payment of amounts payable to the United States during
the period from January 1, 1940, to December 31, 1940. In the
event of the exercise by Finland of the option to postpone suck
payments the Secretary of the Treasury would be authorised to make,
on behalf of the United States, an agreement with Finland for the
payment of the postponed amount, with interest at the rate of 3 per
centus per annum, beginning January 1, 1941, in 10 annuities, the
first to be paid during the calendar year beginning January 1, 1941,
and one during each of the nine calendar years following.
The amounts payable to the United States by Finland during
1940 which would be subject to postponement under the proposed Joint

Resolution are as follows:
Date Payable

June 15. 1940
Dec. 15. 1940

Funding Agreement,
May 1, 1923

Principal

-

$76,000

Interest

Meratorium
Agreement,

Total

May 23, 1932

$140,367.50

$19,030.50

$159,398.00

140,367.50

19,030.50

235.398.00

The Treasury has no objections to the enactment of the preposed Joint Resolution if the Congress determines to grant a measure

of assistance to the Republic of Fialand. Finland was one of the
first nations to come forward in 1922 to make arrangements for repaying to this Government amounts representing the cost to it of relief

13

2

supplies which it had received. The people of Finland have steadfastly and scrupulously carried out their agreements with this Government. Netwithstanding the difficulties confronting that Government on
December 15. 1939. it made a payment of 23.693 which was due to the
United States. Previous to that date the President announced that the
Treasury would be directed to held this payment in suspense and that
he would recomend to the Congress that the funds be used for the benefit of the Finnish people. While the Export-Import Bank has granted
credits to assist Finland, the payment of the amounts which will soon
begin to nature on such credits, when added to the semiannual payments
due from Finland on her relief indebtedness incurred in 1919 and 1920,
constitute a drain on the limited resources of that Government,
resources which are sorely needed in the rehabilitation of the country.
Finlandie indebtedness for relief supplies aggregated
$8,281,926.17 and was represented by obligations of $3,289,276.98 dated
June 30, 1919 and $4,992,649.19 dated July 1, 1920. As a result of the
negotiations initiated in 1922 by the World War Foreign Debt Commission,
the Congress by an Act approved March 12, 1924, authorised a refunding
agreement with Finland under which interest on the original indebtednews at the rate of 4-1/4 per cent per annum to December 15. 1922
amounting to $1,027,389.10 was added to the original debt, and after a
cash payment of $309,315.27 by Finland, the balance of $9,000,000 with
interest at 3 per cent per annum from December 15. 1922 to December 15.
1932, and thereafter at 3-1/2 per cent per annum, was to be repaid over
a period of 62 years. Each semiannual installment has been promptly

paid by Finland except the installments due in the fiscal year 1932

which were postponed under the moratorium proposed by President Hoover,
and authorised by the Joint Resolution of Congress approved December

23, 1931. The postponed installments are being repaid in ten annuities
with interest at 4 per cent per annum from July 1, 1933. Since 1923,
Finland has paid to the United States the sun of $5,891,291.77 of which
$957,533.23 represented principal and $4,933,758.54 represented interest.
This includes the payment of $234,693 by Finland on December 15. 1939.

It appears that the proposed Joint Resolution affords only

limited assistance to Finland. It imposes a 3 per cent interest rate,
and includes interest on interest, which Finland must pay if that
Government should desire to take advantage of this proposed offer.

hile the proposed interest of 3 per cent is less than the 3-1/2 per

cent rate which is now borne by Finland's indebtedness under the agreenent of May 1, 1923 and the rate of It per cent on the amounts postponed
under the agreement of May 23. 1932, in the light of recent developments

320

-3 in Finland and the problems of reconstruction now confronting that

Government, the requirement that the proposed postponed amounts be
repaid within 10 years does not offer much except & temporary measure

of assistance to Finland.

If the Congress should desire to afford a more liberal
measure of assistance to the Republic of Finland than is contemplated
under the proposed Joint Resolution, this Department would be very
pleased.

The Department has been advised by the Bureau of the Budget

that there is no objection to the submission of this report to your

Committee.

Very truly yours,
(Signed) H Morgenthau, Jr.

Secretary of the Treasury.

Honorable Pat Harrison,
Chairman, Committee on Finance,

United States Senate,
Washington, D.C.

File to Mr. Thompson

By Messenger / 05
P. Messenger / 50

321

C

0

P

UNITED STATES SENATE

Y

Committee on Finance
June 5, 1940

Honorable Henry Morgenthau, Jr.,

Secretary of the Treasury,

Washington, D. C.

Dear Mr. Secretary:

I am attaching a copy of S. J. Res. 272,
introduced by Senator Vandenberg, to authorize the
postponement of payment of amounts payable to the

United States by the Republic of Finland on its indebtedness under agreements between that Republic

and the United States dated May 1, 1923, and May 23,

1932, and I shall appreciate your furnishing the

Committee a report as soon as possible concerning
this proposal.
Sincerely yours,

/s/ Pat Harrison

(Received from Mr. I.C.R. Atkin,
of J. P. Morgan & Co. 6/11/40)

COPY

Received 3 59 PM MRT 4

New York June 11, 1940

Copy of Message FROM Amministrazione
della Santa Sede,
Citta delSpeciale
Vaticano.

Please advise Federal Reserve Bank, New York, that

owing to present circumstances our letter to them with our
instructions, power of attorney and specimen signature may have
delay. In the meantime ask Federal Reserve Bank to receive and

keep in safe custody for our account commodity received. Also
advise Federal Reserve Bank that for the reason of secret we should

like to communicate with them either by cable or letter through
Apostolic Delegate in Washington, D. C. Acknowledge receipt to
us of this cable.

322

323
PLAIN

JR

London

Dated June 11, 1940

Rec'd 2:49 p.m.

Secretary of State,
Washington.

1593, June 11.
FOR TREASURY FROM BUTTERNORTH.

1. The city's preparations both actual and
psychological in anticipation of Italian intervention
cushioned the blow. Ever since the sanctionist period
credits to Italy have been curtailed and recently the
process has been carried almost to its logical conclusion.
2. The clearing bank figures for the End of May show

an unusual Expansion in bill portfolios, discounts totalling
pounds 409 million or pounds 70 more than in April, which

was double the increase in the Treasury bill tender issue,

indicating that banks have been fed direct with bills
issued through the tap, (another indication of the EXTREME

Elasticity of the Government's control of the whole money
market mechanism.) call money meanwhile declined by

pounds 9.8 million. Deposits WERE up by pounds 60 million
at pounds 2,413 million while advances dropped by pounds
22.8 million reflecting a speed-up in Government payments

to contractors. The highly liquid position of the banks,
whose cash, bills and call loans WERE 36.8 per cent of
deposits,

324

#1593, June 11, from London.

E

deposits, points to conditions favorable for the floating
of a loan suitable for bank subscriptions, given the
psychological conditions.
s

3. The total figure for unemployment of 880 thousand

on May 20 WC.S 92 thousand and 611 thousand less than on

April 15th and May of last year respectively. These returns
must now be regarded no more as a measure of business

activity but rather as a measure of reserve labor power,
but they are far from accurate as such C. measure because

of factors such C.S the influx of new labor reflected in the
increase from less than 40 thousand to nearly 69 thousand
in the number of uninsured workers on the register between
August and May, representing chitfly women; the continued

absorbtion of personnel into the fighting services; and
the large proportion of the figure representing turnover
of labor shifting from diminishing non-Essential industries
into cirnament production. The new Board of Trade order

reducing by one third supplies of goods to retailers,
reported in TP 2 of my No. 1549 of June 7 will tend to
increase the total of unemployed if absorbtion into arms
industries and export trades does not KEEP pace with this
trend.
KENNEDY
WWC

325

GRAY

NC

MILAN

Dated June 11, 1940

Rec'd 6:54 p.m.

Secretary of State
Washington

62, June 11, 6 p.m.
Today's market index 218.3 Volume 55,150.

Market elightly firmer in light trading.
SCHNARE

LMS

FILL

etc

326
PLAIN

HSM

London

Dated June 11, 1940
REC'D 9:15 a. m.

Secretary of State,
Washington

1584, June 11.
FOR TREASURY FROM BUTTERWORTH.

With reference to the thing from the last paragraph
of my 1525, Junc 6, regarding the Anglo-Rumanian negotia-

tions there is quoted below the official summary of the
payments agreement now concluded:
"Under a new agreement Rumania has undertaken to

provide sterling to Enable all debts COVERED by the
previous arrangements to bE punctually paid. Debts due

from persons in the United Kingdom in respect of the price
of Rumanian goods Exported to the United Kingdom from

Rumania before June 17 will be payable to the clearing

office and togEthEr with the existing balances will be
allocated in accordance with the Trade and Payments Agree-

ment of July 12, 1939.
On the other hand debts due in respect of Rumanian

goods Exported on or after June 17 will be payable to the
Bank of England to an account in the name of the Bank
National

hsm -2- No. 1584, June 11, from London
327

Bank of Rumania called the intermediate account. MoreOVER payments must now bE made to this for all debts due
from persons in the United Kingdom in respect of goods
other than those already mentioned and in respect of

freight insurance or financial transactions of a revenue
nature.

"No part of the sterling paid to this account will
bE at the disposal of the Exporter for sale at market rates,
for he is now obliged to surrender the whole to the National
Bank of Eumania at the official rate for sterling published
in Bucharest, togEthEr with such premium or premiums on

that rate as, under the Rumanian regulations, are applied

to strong currencies. The rate of Exchange including
premiums is approximately 852 lei to the pound at the
moment.

"A substantial part of the proceeds of the sterling
derived from imports of Rumanian goods is to be available

to pay for United Kingdom Exports to that country. Where
United Kingdom Exporters are selling on credit terms the
Rumanian authorities are prepared to provide a certificate

that sterling will bE available at the due date. A portion
of the sterling arising from Rumanian sales in this
country will also be available to pay for purchases by
Rumania from the sterling area."
KENNEDY
TFV

328

June 11, 1940
9:30 a.m.

GROUP MEETING

Present:

Mr. Bell

Mr. Haas

Mr. Sullivan

Mr. Schwarz
Mr. Thompson

Mr. Harris
Mr. Foley

Mr. Cochran
Mr. White

Mrs. Klotz

H.M.Jr:

Norman?

Thompson:

One of our pay roll changes for July 1st
involves taking off about 60 thousand from

the Stabilization by transfer to the

Foreign Control Fund.
H.M.Jr:

Have they money?

Thompson:

Yes, Congress has appropriated 100 thousand

H.M.Jr:

Picking up some of those?

Thompson:

Yes. They are on other rolls but assigned

H.M.Jr:

Is that all?

Thompson:

Yes.

H.M.Jr:

Dan?

Bell:

We have an application from the Chase National

dollars for Foreign Control operations. We
are picking up about ten thousand dollars
worth on the Stabilization Roll representing
personnel working in Mr. Coohran's office.

to Mr. Cochran.

Bank to operate its Paris office, and that
brings up the question of the Paris offices

of all these American banks and I think we
need more information than we are getting and

329
2

we ought to have some expression from the

other banks as to what they are going to
do. I would like, with your permission,
to get Governor Harrison to call in the
representatives of these banks that have
branches over there and find out just what
the situation is and what we should do about

granting licenses. I will call him today.
Some time ago you expressed an interest in

that other fund. We have an application
from one of the banks down there, although

the information is not sufficient to permit
us to grant the application yet, or grant the
license. Are you still interested?
H.M.Jr:

Yes.

Bell:

Or shall we go along?

H.M.Jr:

How much does it amount to?

Bell:

That is what we are trying to find out.

H.M.Jr:

I am still interested.

Bell:

I will bring it to you.
Then we will be prepared soon to submit to
you the Phillips Agenda, an agenda for the

Phillips conference. I don't know whether
you want to go over it.
H.M.Jr:

Yes.

Bell:

Is there any schedule set for a meeting?

H.M.Jr:

Tomorrow?

Bell:

If you will let me know what time.

H.M.Jr:
Cochran:

I told you about wanting somebody to go

down and meet him.

I spoke to Pinsent and he didn't know

last night.

-3H.M.Jr:

The Ambassador said last night he is sending
Pinsent up to New York to meet him so somebody can go with Pinsent.

Harris:

He is coming in on the Northern boat, isn't

Cochran:

They didn't know the name of the ship. It

H.M.Jr:

Why don't we meet tomorrow at ten thirty and
go over that?

Bell:

All right.

H.M.Jr:

Let me just check that with Mac.

Bell:

I think I just heard him make an appointment

H.M.Jr:

(To Lieutenant McKay) What time was that
appointment tomorrow with Elliott?

McKay:

H.M.Jr:

Bell:

he?

was in a convoy.

with Purvis for 10:30.

Ten thirty, sir. Mr. Wollner at 10:15.
Well, we can make it at 10:45.
In the meeting with Phillips, do you want
anybody outside the Treasury, like Viner
or any of those fellows? He said he would
come down if you wanted him.

Cochran:

He will be here Monday and Tuesday anyway.

H.M.Jr:

Let's talk about a plan tomorrow. I want -

Bell:

Yes, very much.

H.M.Jr:

Ed, is Bernstein?
Bernie has been working with the group,
getting up the memorandum. I haven't seen

Foley:

Bell:

White, are you in on this?

it yet.
It 18 still very rough.

330

-3H.M.Jr:

The Ambassador said last night he is sending
Pinsent up to New York to meet him so somebody can go with Pinsent.

Harris:

He is coming in on the Northern boat, isn't

Cochran:

They didn't know the name of the ship. It

H.M.Jr:

Why don't we meet tomorrow at ten thirty and
go over that?

Bell:

All right.

H.M.Jr:

Let me just check that with Mac.
I think I just heard him make an appointment
with Purvis for 10:30.
(To Lieutenant McKay) What time was that
appointment tomorrow with Elliott?

Bell:
H.M.Jr:

McKay:

H.M.Jr:

Bell:

he?

was in a convoy.

Ten thirty, sir. Mr. Wollner at 10:15.
Well, we can make it at 10:45.
In the meeting with Phillips, do you want
anybody outside the Treasury, like Viner
or any of those fellows? He said he would
come down if you wanted him.

Cochran:

He will be here Monday and Tuesday anyway.

H.M.Jr:

Let's talk about a plan tomorrow. I want White, are you in on this?

Bell:

Yes, very much.

H.M.Jr:

Ed, is Bernstein?
Bernie has been working with the group,
getting up the memorandum. I haven't seen

Foley:

Bell:

it yet.
It is still very rough.

330

-4-

Bell:

All right. What else?
That is all I have.

H.M.Jr:

I got quite a kick out of pricing that bond

Bell:

Bell:

Very interesting.
We kind of fooled the boys, didn't we?
It 18 one of the most interesting ones we

H.M.Jr:

I think so. The first time they say about

H.M.Jr:

H.M.Jr:

issue yesterday.

have had.

five or six years - we gave the market what
they didn't expect and in advance of quotation the lower term bonds strengthened.

They all sold off.
Bell:

Apparently what they are doing this morning

18 selling the '51-'53's -- we have a three

point premium - and buying these we issued.
Foley:

What 18 the rate, Dan?

Bell:

21 for a 3 year longer period, '54-'56.

Sullivan:

Taxable?

H.M.Jr:

Then in December --

White:

What was the answer to that?

Sullivan:

I haven't gotten it yet.

Bell:

June 15th.

H.M.Jr:

Read the circular.

Sullivan:

Where is it, I haven't seen any?

White:

It will be too late then to do anything

about it, if it is in the circular.

Foley:

It is too late now.

Sullivan:

Are they taxable?

331

-5H.M.Jr:

Sure.

Sullivan:

No tax exemption features at all?

Bell:

Oh yes, the usual tax exemption on a bond.
These are not defense notes.

White:

I thought you were establishing a policy

Bell:

No, the law is definite on bonds.

White:

On these bonds?

Bell:

Bell:

That is right.
It is only on the notes.
It is only on the notes.

Foley:

What is the term of these, Dan?

Bell:

22%, June 15, '56, callable in '54.

H.M.Jr:

The people don't seem to appreciate that

White:

with respect to new bonds.

Bell:

to sell a 15 year bond at 21% - I think it
is the best rate we have ever gotten for
the Government, isn't it?
I think 80.

H.M.Jr:

It is something of an achievement.

White:

Particularly in times like these and particularly when it is anticipated there will
be a lot of new financing.

H.M.Jr:

I think it is very cheap.

White:

There hasn't been any change with respect

to the policy of tax exempts on the notes,
has there, because I heard that --

H.M.Jr:
White:

Well, I made a public statement when I was

on the Hill.

And there hasn't been any change, has there?

I heard to the contrary.

332

-6Bell:

No notes have been issued under that

White:

No, but I mean there has been no change

H.M.Jr:

Who has been whispering in your year?

White:

Some people who are going to come out with

authority.

in the division?

H.M.Jr:

some public criticism.
Criticism of what?

White:

Of the fact that they were going to be

H.M.Jr:

How do they want them?

White:

They don't want them tax exempt.

H.M.Jr:

Well, they are not tax exempt.
That is what I thought, but they seemed to
have information to the contrary and I

White:

tax exempt.

didn't know but what there may have been
a change.

H.M.Jr:

It is like the information, maybe, that

White:

It may have come from the same place.

Bell:

The same source.

H.M.Jr:

What else, Dan?

Bell:

That is all.

H.M.Jr:

Harry?

White:

We have had a man in New York who has been

Senator Vandenberg had, that we were going
to do away with the Government bond market.

collecting information with respect to
the transactions with England that are
conducted on the free Sterling and the
other rate. We had a special form put

out which the importers complain a good
deal about. There is some question about

333

334

- -7 -

the legal authority, but the lawyers thought
we could get away with it. In view of the
changed policy of the British Government
that they are going to out down and have
begun to cut down on the free rates and in
view of its reducing importance, would you
want us to continue that?

H.M.Jr:

Why not - why wouldn't that be something to

White:

The last time I heard it was March and I
haven't seen or heard anything since then.
Well, I have got more recent figures here.

take up with Mr. Phillips? I have never
seen the study, Harry. How can I pass on it?
The last I heard, it was the March figures.

There are still a large volume paid in
Sterling, but that still, because of the
transactions, relates to those before the
new order went into effect.

Well, if you had the slightest interest,
since it only involves keeping a man up
there, we can keep it up.

H.M.Jr:

But you took him away.

White:

No, I say we have got somebody up there.

H.M.Jr:

But you did call him back.

White:

But just to talk with him.
There are a lot of complaints on this,

Harris:

I just called him back for a day.

Mr. Secretary, a great many complaints.

White:

Not that can't be handled. We also have
been collecting data on exports to Russia,
Italy, and other various countries.

H.M.Jr:

Is it of any use to you?

White:

The chief use was when we wanted to get

materials in them that we might wish to

335

-8do something about. In view of the fact
that there is an export control and in

view of the fact that the responsibility
for initiating that control, I take it,
is not in the Treasury but merely to

carry out whatever instructions are given,
there is no longer the same need to know.

H.M.Jr:

Any use to you, Dan?

Bell:

No, I thought we were going to bring the

H.M.Jr:

He is back.

Bell:

And we were going to let that --

White:

Bring what man back?

Bell:

And we were going to let that information

White:

We had one man there who was doing all these
things.

Bell:

Weren't we going to bring him back?

White:

If they were on the Sterling - but if he is -

man back.

be gathered by other agencies.

we can stop them on that anyhow, but if we

have to collect the matters on the Sterling,
we will have to keep him up there.
H.M.Jr:

If it is of no use and it is annoying people,

Cochran:

That Sterling business 18 ending now. It

White:

Okay.

H.M.Jr:

We don't want to annoy people unnecessarily.

White:

All right.

let's stop it.

will just be old transactions.

There 18, as you probably know, over a billion
eight in gold held under earmark now and do you
want us again to raise the question of freezing
the balances, German and Italian, as was con-

tained in that letter that you had?

336

-9H.M.Jr:

What letter?

White:

That you received from Lothian.

Bell:

You mean raise it with Phillips?

White:

No, raise it with the State Department again

H.M.Jr:

I am not familiar with it.

or are they going to take care of it?

White:

They got the same letters.
The British have asked us again to freeze the

H.M.Jr:

Of?

White:

Germany and Italy.

H.M.Jr:

I certainly would put that on the agenda for
Phillips.

White:

That is all.

Bell:

He probably will ask about it anyway, without
it being on the agenda.

H.M.Jr:

You have all seen this memorandum about the
Credit Suisse in New York?

Cochran:

I circulated that around.

Bell:

It is probably on my desk. I haven't come

H.M.Jr:
White:

Is that all, Harry?
That is all.

H.M.Jr:

Basil, how many ships are you holding up

Cochran:

balances.

to it yet.

Harris:

illegally this morning?
Well, none illegally.

H.M.Jr:

Good.

337

- 10 Harris:

We always proceed by advice of counsel.

H.M.Jr:

There are two, aren't there?

Harris:

There are three, I think, but Cairns is

H.M.Jr:

H.M.Jr:

oh, really? Did he get in to see him?
I think so, yes.
The last I heard, he wouldn't see him. He

Sullivan:

Cuba.

H.M.Jr:

Is Cairns over there?

Harris:

Foley:

Harris:
Foley:

H.M.Jr:

going over to see Mr. Hull. He may be over
there now. I think we will get a final say
on that.

was getting ready for South America.

Not as far as I know. I haven't heard anything about it.
He called me about 5:00 o'clock last night
and I think that was what he said, that -At that time the appointment had not been

made definite, Basil.
Well, what I thought I would do is, right
after this meeting, on the Finnish ship
for Petsamo, I have got General Watson

working on that and if I don't hear from
him by noon, I will let her go, unless the
President says to hold it.
Harris:

What would you do with one like this? A
Greek ship with American sugar for Casa
Blanca.

H.M.Jr:

I heard about that.

Harris:

That is a tough one. It is an Axis power.

H.M.Jr:

Who put that one up to me?

338

- 11 Foley:

We mentioned that yesterday afternoon and

Harris:

We have a couple of beauties on our doorstep at the moment.

H.M.Jr:

What we will do is this: If I don't hear

you said put that one up to Hull.

from Mr. Hull in a reasonable time - he
said he would let me know last night and
he didn't - I will call him. I had forgotten about this sugar ship. And there

is a ship down at Port Arthur, Texas. I
won't hold them after noon today. I will
let them go, one way or the other. I mean,
between now and noon I will speak to Mr. Hull
and if Mr. Hull won't make up his mind, I
will let them go.

Harris:

Now, on Saturday afternoon, the 27th of July,
the new ship America is going to leave the
yards of the Newport News Shipbuilding Company and go up to New York when she will

shortly thereafter go on a maiden trip.
There will be a special train leaving Washington to connect with it and anybody who

has got business in New York on Monday morning and wants a ride and wants a week-end

off, it is a nice trip, and anybody who
would like to go is invited if you can spare
them.

H.M.Jr:

Let me get this thing. We are invited to go

Harris:

Yes, via Newport News, that is it.

H.M.Jr:

We can --

Harris:

No ladies allowed.

White:

Sullivan:

What kind of a trip is this?
What kind of a trip do you call that, Harry

H.M.Jr:

Wait a minute, let's get this straight. How

from here to New York?

says.

333

- 12 do you get from here to Newport News?

White:

There will be a special train going down.
Did you ever hear of the Fall River line?

Klotz:

What did he say?

H.M.Jr:

Take my advice and don't ask him.

White:

That is a New England joke.

Sullivan:

It is an old song, isn't it?

H.M.Jr:

For myself, thank you, I won't. But if
anybody else wants to be cooled off over
the week-end, it is their privilege. Maybe

Harris:

you can get some customers.

What else?

I will let you know when I talk to Mr. Hull.
George?
Haas:

I have nothing.

Harris:

Did you see the memo about the two fellows

H.M.Jr:

Yes.

who got in a fight?
George?

Haas:

I have nothing.

Schwarz:

I have this notice that Dr. Mead has called

a press conference for 10:30 this morning
and the same boys cover the Defense Commission
that cover the Treasury. Do we want to ask
him if he would like to make a change?

H.M.Jr:

No, let them work it out. They have got a

Schwarz:

I will talk to Wharton as soon as I leave here.

press man over there.

340

- 13 H.M.Jr:

What do you want me to do, cancel mine?

Schwarz:

No, sir, not when we are selling bonds.
You work it out.

H.M.Jr:
Schwarz:

I think they might well postpone it. We
have a regular time. He just overlooked .

it.

H.M.Jr:

He ought to know that.

Schwarz:

He should. He overlooked it.

H.K.Jr:

What else?

Schwarz:

That is all.

Cochran:

I gave Mr. Schwarz that communique on Phillips.

H.M.Jr:

Why not let the newspaper men work it out?
Why should we call up Wharton?

Schwarz:

H.M.Jr:

I will talk to the president of our association

here.

Talk to Perlmeter and let him work it out.
I wouldn't call up Wharton. If they want -

if Mead wants to have a press conference,
let him have one.
Schwarz:

He knows the same people handle the two.

H.M.Jr:

Let Perlmeter call him up.

Schwarz:

All right.

H.M.Jr:

I don't want you to call him.

Schwarz:

All right.

H.M.Jr:

Let Perlmeter do it.

Cochran:

I have given him that thing.

H.M.Jr:

John?

341

- 14 Sullivan:

H.M.Jr:

Sullivan:

Professor Haig of Columbia, whom Randolph

Paul was so anxious to see, is up in the
Canadian woods and I think Randolph is
going up. I hope he doesn't get into
difficulty.
It is one of the nicest pieces
of salmon water in the world.
Listen, where are you going to hold the

meeting?

That is why I say I hope they don't get into
trouble and have to call me up, because it
is such good salmon water.

H.M.Jr:

What is the trouble, John?

Sullivan:

The trouble is, they may not have a boat
up there, so if we can get an amphibian

to fish from, that might help some.

White:

Sullivan:
H.M.Jr:

Why don't you take Basil's boat up there?
I don't know, we might work something out

on that line.

You haven't been around here long enough,

you see. If you could sort of work this
thing out that both men and women are
needed up there, you see, at this place -

in other words, make it coeducational, see we might get a teletype in up there and we
might have to go and all visit Professor
Haig.

Sullivan:

I think perhaps I had better take a reconnaissance trip and report on it.

H.M.Jr:

Sullivan:

And get -Bell wants another Haig there.

H.M.Jr:

Seriously, what are you going to do in

Sullivan:

What am I going to do in the next couple

the next couple of days, anyway?

of days?

342

- 15 H.M.Jr:

Sullivan:
H.M.Jr:

Yes.

I haven't a thing in the world to do. Why,

did you have something you wanted me to do?

I want to know when that bill is going to

be ready.

Sullivan:

9:00 o'clock on the 22nd. That is Standard

H.M.Jr:

With or without gasoline?

Sullivan:

Yes, on a bicycle.

H.M.Jr:

On the 22nd?

Sullivan:

Sure.

H.M.Jr:

Make a double note of that.

Sullivan:

I will sign the transcript.

H.M.Jr:

When do I see it?

Sullivan:

About half past eight that morning, probably.

H.M.Jr:

On Daylight Saving Time.

Sullivan:

No, sir.
I win.

H.M.Jrr

Sullivan:
H.M.Jr:

Sullivan:

Time.

You win, but you haven't seen it yet.
All right, keep up the good work.

It is going to be ready and I think the
fact that the amortization provision is in
there will be very helpful in getting
speedier action on the bill than we other-

wise get.
H.M.Jr:

Well, Mr. Knudsen was at this meeting
last night at the British Embassy and he
tried to put on a show and I am afraid

343

- 16 -

I deflated it. He said that he already

had tackled one business man that wanted

a Government contract and as a result of
this thing his face was beaming and everything was lovely.

Sullivan:

One thing that hasn't been discussed at

all in all of these meetings is whether
or not this amortization is to apply to
excess profits taxes or in come taxes or

both.
H.M.Jr:

Well, you saw the statement that said there

would be no particular falling off of reve-

nues due to this thing?
Sullivan:

I saw it.

H.M.Jr:

Well, don't scare the boys today.
What else?

Sullivan:

Nothing. I was just indicating that there
is a field of compromise if there is too

much trouble on the Hill.
H.M.Jr:

And the interesting thing, a man who knows

last night told me that the trouble with

Packard was not depreciation but that he
didn't want to do business with RFC, and

this fellow that told me that last night

Foley:

knew what he was talking about. He whispered in my ear.
Here is a letter to Congressman Schafer.
He asked you what authority you had to

let contracts for airplanes. I told him

we don't have any.
H.M.Jr:
Foley:

Apparently he has been misled.
He talks about the Rolls Royce engines and

says, "What authority do you have to do it
in the Treasury?"

- 17 344

H.M.Jr:

There 18 a diary for that meeting out at
John's house the other night.
Any jokes in it?

Sullivan:

There wasn't a joke, no fooling. It was

Foley:

Here is that problem we were going to talk
to Hull about, about procedure.

awful.

I thought Mrs. Morgenthau might be interested
in that report of the Committee - the Attorney
General's Committee on Procedure. They are

very laudatory, as far as I have seen, on the
thing, and she was very instrumental in
working out the details with Mr. Oliphant.

H.M.Jr:

I understand you can pay the expenses of
our foreign service people when they come
over.

Foley:

Yes.

H.M.Jr:

That 18 nice. Anything else? Okay.

345

JUN 11 1940

Dear Jesse:

This will acknowledge receipt of your letter
of May 24, 1940. enclosing copy of your letter to

Chairman Schran of the Reconstruction Finance Corporation

concerning the handling of requests of banking institutions
for preferred stock subscriptions, and a copy of your
letter to Chairman Steagall of the Banking and Currency
Committee suggesting that there be eliminated from
H. R. 9687 that section which deals with the request
for purchase of preferred stock in banks and insurance
companies by the Reconstruction Finance Corporation.

I appreciate your action in this connection
and assure you that the Treasury will do all in its power
to give the Reconstruction Finance Corporation 24-hour
You
service on its preferred stock recommendations.
realise, of course, that there may be cases on which we

would want to have conferences and on which we would want

to secure more information than may be in our files. I
am sure you will agree that if any such cases arise they
could not possibly be handled on a 24-hour basis. I feel,
however, that practically all of the cases can be handled

within this time.

incerely yours,

Henry
Honorable Jesse H. Jones,
Federal Loan Administrator,
Federal Loan Agency,

Washington, D. C.

File to Mr. Thompson

DWB:NL2

June 6. 1940

By Messenger

10

PAGES 346 THROUGH 433

DATES JUNE 12, 1940,
PLACED. IN BOOK.272

OF "BALANCES" GOLD AND
INVESTMENTS HOLD FOR FORETON ACCOUNT BY a FEDERAL RESERVE

BANK OF THE CLOSE JUSTINESS.
(000 Omitical

SHORT-TERM INVESTMENTS

(Misturing within one year from

date of this

Original Term One Original Turn More
BALANCES
U

National Bank of Belgium

Year or Lees

RABARKED GOLD
1

ACCOUNTS

170,721

677

1,000

Maria National Bank of Bulgaria

oalovakia, Osechoalovak National Bank
basis, Bank of Dannie

+

1

22,009

2,133
62,931
17,500
46,938

Desmarks Nationalbank
Bank of England

Island, Piolands Bank
crance, Heak of Transe

1 Reichabank
Bank of Greece

50,043
8,355
579.794

323

10.773

(***** Netherlanda Bank
land, Royal Motherlands Government
impart, Bungarian National Bank

338.994

40,057

6,186

-099

only, Bank of Italy
Latvic, Litvijea Banks

3,430

4,612

1

2,307

246

Alimania, Lietuvos Bankas

17,119 (a)

21,962

1
Morges
Bank
- Bank
Polaki

by

24,052
12,114
55,624

1,967

1 Bank of Partugal

266

Rommate, National Bank of Roumania
Buedon, Overiges Rikmbank

WitnerLand, Bank for International Settlements
Buttserland, Swiss National Bank
U.S.A.R., State Bank of the U. S. 8. R.
Yougoslovia, National Bank of Kingdom of Tougoalavia

71,915
11,303
91.458

17,312
157,098

3.921

511

5,251

999

APRICA

5,031

South Africa, South African Reserve Bank

IDAB
69.709

Ganada, Beak of Canada

13,295

596

Maxico, Beak of Mexico
CERTIFICAL

Goata Rion, National Bank of Gosta Rica-

953

ml

Issue Department

m Salvador, Central Reserve Bank of E1 Salvador
Quatemala, Central Bank of Quatemala
Nionrague, National Bank of Nioaragua

4

5,250

428

1,223

BOUT

5,170

Argentina, Central Bank of the Argentino Republic
Bolivia, Central Bank of Balivia
Brazil, Banoo do Brasil as Tiscal Agent of the
Breailian Government

Chile, Central Bank of Chile
Colombia, Bank of the Republic
Poru, Central Reserve Bank of Pora
Unimay, Beak of Republic Oriental Dal Uruguay
Tenance, Bank of Venesuela
ASTA

16

-On

1,270

a
27.

7

-On

17,993

Ohim Central Bank of Chima
Japan,

597

592

67.737
1,236

13,276 (b)
C77

1,415
22,520
3,966

1,107

15,302 (e)

Jank of Japan

563

-0-

4a Javasche Bank

Land, Royal Treasury of Thai

2,133

13,677

Turn, Central Bank of the Republic of
Gouncemeal th Bank of Australia
TOTAL

amount

or this 3,015
is as held 3 Lt: F - Francisco as our against and sor our additional
this amount $902 held by 7.2.3. of San Francisco as our sales -

than one Year

June 11, 1940
9:00 a.m.

Present:

Dr. Mead
Mr. Young

H.M.Jr.:

Hello, how are you?

Mead:

Fine, how are you?

H.M.Jr.:

Hello, Phil.

Young:

Good morning.

H.M.Jr.:

Well, look George, what I want you to do for
old time's sake (laughs) is kind of bring me

435

up to date on these things because I have been

reading a lot of stuff, especially in the

newspapers, which just doesn't make sense -

like Ford building an engine something similar
to the Rolls Royce engine.

Mead:

I haven't even seen this morning's papers
80 I'm not very up to date on them.

H.M.Jr.:

Well, I thought since you were going to see

Mead:

I haven't seen him yet. He's coming into

H.M.Jr.:

Mead:

Ford today that you might know something.

my office around 10 o'clock.

Yesterday I called up Mr. Sloan and talked
to him. I'm going to keep up my contacts
with him since Knudsen isn't there any more.
Mr. Sloan was out there himself two days
last week. Did you know that?
No, I didn't know that but you know what
happened.

H.M.Jr.:

Well, he was under the impression that you
would give him a green light on the 300
engines. He's pinning that on you.

Mead:

Sure.

H.M.Jr.:

I just wanted you to know that.
Yes, Sloan 18 pinning that one on me for

Mead:

some reason or other.

30

-2H.M.Jr.:

Mead:

H.M.Jr.:

Mead:

Now I have an idea which may not be worth

anything but just the same I want to tell
you about it. After all, this C type is
only 750 HP, isn't it?
Well, that's what we have cut it back to.
And the F type - couldn't you get Allison
to say, "All right, we will complete the
contract for the 300 Cs and then 300 of
the higher HP ?

Well, I think the trouble there is this -

the 80-called F engine has a lot of questionable points and they are going to work that
the same way we have run the C engine, but

it will take a little time. They tell me

the 25th is the first date they can get it
going. It will take them some time to
straighten out everything on that type.

H.M.Jr.:

Well, still coming back to the thought - I
just wondered if for fighting purposes a
C engine 18 going to be very useful. It

may be that it would be too slow. What do

Mead:

you think, George?
Here's the trouble. We need some engines
even though they are only 750 HP and we can

get the Cs quicker than we can get the Fs.
Now the Air Attache up there called me up
and said he would like to know about either

one, but with this trouble with the Allison

engine, I told him he would have to wait a
short time and I would let him know later.
I don't think they should get excited about

it.

H.M.Jr.:

Mead:

Young:

You know I went out there to that other plant
about five or six weeks ago, and I told them
they had a very pretty landscape and nice
aluminum fittings on the windows but they
didn't have any planes.
Yes, you told me about it and I agree with
you on that score entirely.
Yes, sir.

-3H.M.Jr.:

Mead:

437

Now about the Rolls Royce engine - what are
you doing for my customers, the Allied Purchasing Mission, on that end?

Well, in the first place, Edsel Ford will be
here at 10 o'clock, and then I will find out
whether his company is going to try to make
Allied engines or not. The Navy doesn't
want any. We have that signed by the proper

official. You saw that, didn't you (turning
to Mr. Young)?

Young:

(Node yes. )

Mead:

The Army didn't want any Merline but they

did order some Griffins. The Griffin is

1600 and the Merlin 1185.
H.M.Jr.:

Is that what they call Model XX?

Mead:

No, the Griffin is a bigger engine than the

H.M.Jr.:

Is that a success?

Mead:

Merlin.

Well now that's the point. That engine is still
in the experimental stage although they used
it for a racing engine, and I get the impression
that with the proper amount of work in six
months it would be a proven engine. The
French and the British wanted 1600 instead

of 1185 80 we had to tell them that it would
be a six-month period at least before they
could get the 1600s, and the only engine we
could build right away would be the Merlin.
That's 800 a month from the French and a
thousand from the British. The French and

H.M.Jr.:

the British said they would take it because
they couldn't get anything else at this time.
On the Merlin engine, when can they start?

Mead:

Well, we hope that Ford will agree to be ready
in a year.

H.M.Jr.:

And the Army and the Navy doesn't want Merline?

Mead:

That's right.
And I will try to find out from Edsel Ford whether
he would go on in 6 months or X months in the
manufacture of these engines.

438
4

Mead:

But now we have no word from them on the Griffin

engines 80 that I am a little at a loss to
understand that point. Do they want this
same quantity of Griffin engines?

H.M.Jr.:
Mead:

H.M.Jr.:

Mead:

Purvis is coming in at 10 o'clock and I could
probably find out from him for you.
If you could let me know then it would be fine.
Yes, Purvis is coming in at 10 o'clock, and I
wanted to get some of the background on this
stuff before I saw him.
Well, in my opinion, Army and Navy are wrong,

especially Army. However, I do think their

conception of this production of Rolls Royce
is nearly five times what we are talking about
over here. Now how the British can use all
those engines, I don't know.
H.M.Jr.:

George, let me ask you another thing. Where
do we stand on the building of those two airplane engine factories somewhere in the
Middle West?

Mead:

Well, the Wright Company has come through very

nicely on that. They have chosen a site out
there around

H.M.Jr.:

Near Cincinnati?

Mead:

In that vicinity.
Do you know this fellow Vance?

H.M.Jr.:
Mead:

Who?

Vance. He has been very helpful. He is running
machine tools for Knudsen. He's a darn nice
fellow and very able. They have a meeting
scheduled for Thursday.

H.M.Jr.:

That's scheduled for Thursday?

Mead:

H.M.Jr.:

That's right - Thursday.
Is the Government going to build that plant for

Mead:

Probably they would finance it.

Wright?

-5H.M.Jr.:

That's still 40 or 45%

Mead:

That's 50.

H.M.Jr.:

But it's still 1200 engines a month.

433

I don't know what Knudsen has been doing along

this line.

Mead:

We are going right along with what we had
started.

H.M.Jr.:

From the way the conversation went, he doesn't
seem to think that a day has passed but almost
10 days have gone by.

Mead:

Now Pratt and Whitney balked. They wanted
somebody to take a license to build the
place and I apparently impressed them with

the fact that while from their standpoint

H.M.Jr.:

Mead:

H.M.Jr.:
Mead:

Look, George - if I may interrupt a moment the more I thought of it the more I was
convinced it is much better to have these
people supervise these things.
It 18 our only chance to get the job done.
Now what about the training plane situation?
Well, it's beginning to settle down now that
we know the data, etc., and I have asked
those two fellows what big engines they
would have to push back in delivery in order
to make these training deliveries on time.
They will know that probably Thursday or
Friday.

H.M.Jr.:
Mead:

I was reading Aviation magazine and I see

this concern - what's its name - Fairfield?
Fairchild.

H.M.Jr.:

Well, their Ranger enginee ran around five
or six hundred hours.

Mead:

Navy uses quite a few of them.

H.M.Jr.:

Is that an engine that could go into production

fairly rapidly?

-6-

440

Mead:

I don't know how many orders they have or just
exactly how fast the work could be done. In
that connection, we have a brand new book that
has all the plans and engine requirements
brought up to date and adjusted. You should
have a copy of that.

H.M.Jr.:

On engines?

Mead:

Engines and airplanes and all the requirements.

H.M.Jr.:
Mead:

Well, what would be my chance of getting one?
I don't see any reason why I shouldn't send

H.M.Jr.:

(Referring to chart) Let's just see now.

you one if you'll sign for it.

Menasco has 7 orders on hand; Ranger has 210.
Mead:

Menasco is down to 7 and Ranger only has 210?

H.M.Jr.:

Yes.

Mead:

H.M.Jr.:

That's quite a different engine.
Isn't it pretty good? The Navy uses them for its

Mead:

They probably are.

H.M.Jr.:

Well, in the meantime, I think we will tell Mr.

Mead:

wants on Griffins.
That's fine.

planes.

Purvis we want a firm answer from him what he

(Thereafter ensued an off-the-record conversation between the Secretary and Dr. Mead.)
H.M.Jr.:

This 18 my suggestion to Mr. Mead - I will take
full responsibility for this - make them put
in $200 as a protection. Maybe the Rolls Royce
people will want to shade that some but I

think they will have to be satisfied.

Mead:

All right. Whatever you say as long as we have
something to work with. Should we write you a

letter so that we will have in our records
something back from you?

H.M.Jr.:

Let Ed. Foley sit in on forming that contract.
He will know all about the legal end.

-7-

441

Mead:

Sure.

H.M.Jr.:

But I would put in $200 an engine.

Mead:

If the price is 20,000, it would be double that.

H.M.JR.:

Oh, well

Mead:

I don't know. I tried to find out yesterday what

H.M.Jr.:

the price was 80 that we could talk to Mr. Ford.
Merlin engine - do you think you could make

Mead:

Allison is 19,000.

H.M.Jr.:

That's 4 million, isn't it?

Mead:

H.M.Jr.:

Something like that.
20,000 times 200 is 4 million.

Mead:

20,000 times 200 would be 4 million.

Young:

That's right.

H.M.Jr.:

That's enough.

Mead:

I should think so.

H.M.Jr.:
Mead:

that for $10,000?

I should think so, too. Would you make it 250?
of course, they might want to shade it some
but I don't know what their price for engines
18.

H.M.Jr.:

Let's make it 250 and you can always knock

off $50. Make it 250. And that would come
to me for the United States Government to
hold in escrow for the British Government.
It would come to me.

Mead:

Now another point - if we are going to do this
much business for the Allies than the English
ought to release the men necessary to come
over here. They said they couldn't let us
have any, you know.

H.M.Jr.:

Yes, they should and may be they will.

442

8H.M.Jr.:

Now I would push just as hard as I could to get

this order in for the Allies. And could you
give me a little ring this afternoon and let

me know how you get along with Edsel?
Mead:

I will do that.

M

June 11, 1940

My dear Admiral Noyes:

will you please send for me by secret
naval code the following message to Ambassador Kennedy:

QUOTE - When and where will I

receive plans and specifications
from the Rolls Royee Manufacturing
Company? UNQUOTE

Sincerely yours,
Rear Admiral Leigh Noyes, U.S.N.,
Director of Naval Communications,
Room 2622,

Navy Department.

443

:
June 11, 1940

My dear Admiral Noyes:

will you please send for me by secret
naval code the following message to Ambassador Kennedy:

QUOTE - When and where will I

receive plans and specifications
from the Rolls Royee Manufacturing
Company? UNQUOTE

Sincerely yours,
Rear Admiral Leigh Noyes, U.S.N.,
Director of Naval Communications,
Room 2622,

Navy Department.

444

445

June 11, 1940

My dear Admiral Noyes:

will you please send for me by secret
naval code the following message to Ambassador Kennedy:

QUOTE - When and where will I

receive plans and specifications
from the Rolls Royce Manufacturing
Company? UNQUOTE

Sincerely yours,
Rear Admiral Leigh Noyes, U.S.N.,
Director of Naval Communications,
Room 2622,

Navy Department.

446

June 11, 1940
11:13 a.m.

H.M.Jr:

Hello.

Operator:

Mr. Knudsen is not in his office, but she
thinks she can locate him in the building.

H.M.Jr:

Well, is Mr. George Mead around?

Operator:

I think that's another branch. I'll try.

H.M.Jr:

Well, I want one or the other.

Operator:

All right.
11:14 a.m.

H.M.Jr:

Hello.

Operator:

Here's Mr. Knudsen. He just walked in.

H.M.Jr:

Hello.

Go ahead.

Wm. S.

Knudsen:

Yes.

H.M.Jr:

Morgenthau.

K:

Good-morning, sir.

H.M.Jr:

How are you? I have the Allied Purchasing
Mission here with me now and I'm authorized

to say that they definitely want to get 1800

Rolls Royce engines a month
K:

Yes.

of the 80-called Merlin type.

H.M.Jr:
K:

Merlin?

-2-

K:

Yes. So if you have a chance to out that
up to Mr. Ford, who I understand will
Well, Mr. Ford is here now.

H.M.Jr:

Yes.

H.M.Jr:

K:

H.M.Jr:
K:

447

And he, of course, doesn't want to deal
entirely with the Allied engine. He wants
some United States engines.
I see.

And Mead and I have been talking it over here
and we feel it would really be prudent to
take six and four -- you know 60% Allied
engine and 40% of United States engines.

H.M.Jr:

Well, that sounds like horse sense to me.

K:

Does that sound reasonable?

H.M.Jr:

Yes.

K:

And then start them off with equipment for
40 a day and two shifts.

H.M.Jr:

40 a day

K:

That's a thousand a month with two shifts.

H.M.Jr:

I see.

K:

You see, when you buy equipment, Mr. Secretary,

you don't get it all in balance and it's better
to buy for a minimum of 40 and then balance it

out after you get in production.
H.M.Jr:

40 a day on two shifts.

K:

That's right.

H.M.Jr:

And 60% for the Allies and 40% for the U. S.

K:

That's right.

Government.

448

-3H.M.Jr:
K:

H.M.Jr:
K:

Well, that'd be for the start on two shifts.
That's right.
And if they went to three shifts, would
that mean 60 a day?

That would mean, perhaps that or more if he

had to put it in, but you see the Griffin
engine comes in about that time.

H.M.Jr:

Oh, then, about that time the Griffin engine

would come in.

K:

That's right.

H.M.Jr:

Well, maybe you can

K:

But then we'll tell them -- excuse me, sir.

H.M.Jr:

Go ahead.

K:

We are telling them to buy equipment that's
large enough to handle the Griffin engine.

H.M.Jr:

Fine.

K:

See? So that all they have to do is change

H.M.Jr:

tools.

Well, could you ask somebody -- George Mead,
or somebody to give me a little memorandum on
that?

K:

H.M.Jr:

Yes, sir, if you agree. If you agree, we'11
tell Mr. Ford he can go ahead and figure on
that basis.

Now, wait a minute, we're talking big business.
Can you hold on a minute or shall I call you
back in a minute.

K:

H.M.Jr:

No, I can hold on.

Because they're sitting right here. I'll talk
SO you hear me and see if I'm repeating it
correctly. What they're going to tell Mr. Ford

443
4

is to put in the equipment to manufacture
a 1,000 engines a month of the Merlin type,
60% for the Allies and 40% to the United
States Government and then, I gather, as
soon as the Griffin engine 18 approved
K:

H.M.Jr:

As soon as we know, yes, as soon as we can
get the drawings.

as soon as they get the drawings for the

Griffin engine, they'11 ask him to go into
production on the Griffin engine. Is that
right?

H.M.Jr:

They're going to take an option for 10,000
engines on the -- an order for 10,000 engines
on the Merlin 20 and an option for 10,000
to be determined later whether it will be the
Merlin 20 or the Griffin engine.
May I repeat this?

K:

Yeah.

H.M.Jr:

They're taking -- will you -- you want to give
Ford an order for 10,000 Merlin engines -10.000 -- 6,000 of which will be for the Allies,
4,000 for United States Government and an
option with Ford that he should produce 10,000

K:

H.M.Jr:

of the Griffin engines.
If it's ready, or we can switch to the same
engine, Merlin 20, 1f the Griffin isn't ready.

And if the Griffin isn't ready, they'11 take

the second 10,000 -- they'11 take Merlin. And
on the second 10,000 will it be 60-40?

H.M.Jr:

Well, we don't have to decide that now.
You don't have to decide that now.

K:

No, sir.

H.M.Jr:

I see. What about delivery on the first

K:

10,000.

450

-5K:

On the third 10,000?

H.M.Jr:

On the first 10,000.

K:

On the first 10,000. Well, they say about

H.M.Jr:

About 8 months.

8 months.

8 months he can get in production.

K:

H.M.Jr:

8 months he can get into production.

K:

And with the 40 a day I imagine that it will

H.M.Jr:

I see.

be at least 12 to 14 months

before he got to 40 a day.

K:

H.M.Jr:

I see. And -- well, now let me see whether
these gentlemen -- we're moving pretty fast.
(Talks aside)
(Purvis: Yes, for the amount of money that is
involved, we will have to get some authority,

but that is the general plan. What commitment
would we have to make with Ford today to place
the orders.)

H.M.Jr:

They want to know how firm a commitment they

have to give, or you will have to give, Ford
today.

K:

10,000 engines, 6 and 4.

K:

Can you translate that into money?
$160 million
Yes.

H.M.Jr:

$160 million

H.M.Jr:

K:

plus the tools.

H.M.Jr:

which -- 60%

K:

That would be $960 million -- an --

H.M.Jr:

$96 million.

451

-6K:

H.M.Jr:

$96 million, and I expect that the tools
will cost something like $30 million which
would be split on the same basis.
(Talks aside.

the same basis.

but it will be split on

Purvis: I think the answer will undoubtedly be,
yes, but let him go ahead but give us a little
chance to get confirmation. That is a considerable
amount of money to spend.)

H.M.Jr:

You have taken their breath away.

K:

I beg your pardon.

H.M.Jr:

You have taken their breath away, they're

K:

Why, sir?

H.M.Jr:
K:

breathless.

Well, I don't-- they say it is a lot of money.
Well, we can't tell yet, sir, we can only put
up a provisional price of $10 a horse power
to be adjusted after they have operated six

months.

H.M.Jr:

(Talks aside

months.

to be cleared after six

Purvis: We can develop this pretty quickly,
but we will have to clear this. Beaverbrook

will be delighted to hear this, but I just
this is possible.)

want to get in touch with Beaverbrook and say

Hello. What he wants to do is either telephone
or cable Lord Beaverbrook at once. Hello?
K:

Yes.

H.M.Jr:

And have him confirm this thing, but he says

they're quite sure that he'11 be delighted to

get -- to get it.
K:

Who says this -- Mr. Purvis?

-7H.M.Jr:

452

Arthur Purvis.
Yeah. Well, now, have you any idea what
the Rolls Royce engine costs in England?

H.M.Jr:

No. No, but he says he'll try to get it.
I see.

H.M.Jr:

He'll get it.
That will help me somewhat.

H.M.Jr:

All right. Well, when he leaves the office

K:

here, he'll get on the telephone and telephone
over there and he ought to get an answer -well, I should think he'd have an answer by
tonight or tomorrow.
Yeah. will I hold the Ford people here?

H.M.Jr :

Yes, yes.

H.M.Jr:

Yes, hold them here.

This is big. I'd hold them here.
I'll ask them to stay over.

All right. And
H.M.Jr:

And the deliveries begin in to months.

H.M.Jr:

Yes, sir.
(Talks aside) Well, beginning in the ninth
month, how many do you think they could
deliver.

K:

oh, I don't know. I suppose 10, or 5, or

H.V.Jr:

I see.

something like that.

Well, you know, I told you I thought that

H.M.Jr:

12 to 14 months would see the 40, and that's
putting quite a load on them.
I sec. Let me ask a question, did George
Mead sit in on this?

453

-8K:

H.M.Jr:

Yes, sir. He's right here with me.
Well, could he come right over now to
Nelson's office 80 he could tell them what
happened 80 then they could get it first
hand and then telephone to London?

K:

H.M.Jr:
K:

H.M.Jr:
K:

H.M.Jr:

Yes, sir.
Could Mr. Mead come right over to Mr. Nelson's
office?
To whose office?

Tell him to his old office.
To his old office.
The one he used to have before Nelson put
him out.

K:

(Laughs) All right, sir.

H.M.Jr:

What?

K:

I'll send him right over.

H.M.Jr:

And he can come over and give it to him

first hand and then they can put in a call
for England.

K:

All right, sir.

H.M.Jr:

And you're going to hold the Ford people
here.

H.M.Jr:

Yes, sir.
Fine. Fine. Thank you so much.

K:

All right.

K: