The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
DIARY
Book 344
January 1-3, - 1941
-A-
Book Page
Advisory Commission, Council of National Defense
See Defense, National
American Friends Service Committee
See War Conditions: France
-BBank Holding Company Legislation
Conference with Glass: Foley nemorandum - 1/2/41..
344
a) Proposed bill
Memorandum on legislation for FDR - 1/3/41
"Padding" on subscriptions to Government securities
98
103
296
to be used as example of great evil of holding
companies (Bank of America) in testimony before
Congress - 1/6/41: See Book 345, page 64
Treasury memorandum to Barkley as to type of bill
Treasury prefers - 1/6/41: Book 345, page 74
Senate Bill: Book 345, page 76
Belgium
See War Conditions: Gold
Brandeis, Louis D. (Justice)
Approves HMJr's ideas - so Frankfurter tells HMJr 1/2/41
91
-CChina
See War Conditions
-DDakar
See War Conditions: Gold
Davis, Chester C.
See Defense, National
Defense, National
"Decentralization of Defense Production Memorandum
sent to HMJr by Davis (Advisory Commission,
Council of National Defense) (12/27/40)
170-3
Advisory Commission, Council of National Defense:
Davis asks that relationship to Office of
Production Management be clearly defined (12/27/40).
Defense Production
See Defense, National
Defense Savings Bonds, United States
See Financing, Government
Dowding, Sir Hugh (Air Marshal)
See Mar Conditions: Airplanes
Dutch East Indies
See War Conditions: Netherlands East Indies
170-J
-PFederal Bureau of Investigation
Kieus nemoranda - 1/3/41.
Financing, Government
Book Page
344
United States Defence Savings Bonds: Advertising
calpaign discussed at 9:30 meeting - 1/3/41
France
317,318
208
See Var Conditions: France: Gold: Shipping
-GGeneral Counsel, Office of
Legislative program for 1941: Polay memorandum 1/3/41
310
Germany
See Var Conditions: Foreign Funds Control; Shipping
Gold
See War Conditions
Government Pay-Days
See Pay-Days, Government
-HHungary
See Var Conditions: Foreign Funds Control
-IItaly
See War Conditions: Foreign Funds Control; Shipping
-JJapan
See War Conditions
-LLegislation
See General Counsel, Office of
Lend-Lease Legislation
See War Conditions
-IMartinique
See Var Conditions: France: Gold
Monnet, Jean
Letter of appreciation for assistance and HMJr's
reply - 1/3/41
292
-NBook Page
Netherlands East Indies
See War Conditions
-0Oil
See War Conditions: U.S.S.R.
Ordnance
See War Conditions: Purchasing Mission
-PPay-Days, Government
Staggered pay-days discussed at 9:30 meeting 1/3/41
344
210
Production, Defense
See Defense, National
-RRevenue Revision
Tax-exempt Securities: Legislation discussed by
Treasury group - 1/3/41
a) Sullivan draft
211
224
-SShipping
See War Conditions
-Tax Research, Division of
Report on projects during December 1940
Taxation
See Revenue Revision
Tax-exempt Securities
See Revenue Revision
-UU.S.S.R.
See War Conditions
United Kingdom
See War Conditions: Military Planning
327
-VBook Page
Mar Conditions
Airplanes:
Air Marshal Sir Hugh Dowding (plane production
expert) arrives in United States - 1/1/41
a) HUJ and Purvis discuss - 1/6/41:
344
4
See Book 345. page 100
b) Bowding, Purvis, and Young confer with
HNJr - 1/7/41: Book 345, page 216
c) Press comment on Dowding arrival:
Book 345. page 307
d) Number of P-40's turned over to British Young memorandum - 1/10/41:
Book 346, page 376
P-40 Pursuit Planes: Need for increasing deliveries
to England and Middle East emphasized in Wilson
memorandum - 1/2/41
66-A
China:
Soong. HMJr. Young, etc., confer at HMJr's home 1/1/41
12
a) Bombers (long-range heavy): Doubtful if
any can be turned over
b) Burma Road protection discussed
c) "Leak" to newspapers explained by Soong 1/3/41
Purchases discussed by HMJr. Purvis, Wilson, Young,
and Ballantyne - 1/2/41
258
46
HMJr tells Soong of conference with Purvis 1/2/41
86,171
a) Hopes 2 planes can be delivered to China
for each of 18 working days and 1 plane each
day for the next 10 weeks - 100 in all
b) Ammunition also discussed
Financial position reviewed by Y.C. Koo. Vice
Minister of Finance - 1/2/41
Exchange market resume' - 1/2-3/41
Foreign Funds Control:
126
118,319
Germany:
Transaction with Chase National Bank - 1/2/41
122
Hungary:
Transactions with Guaranty Trust Company 1/2/41
120
Italy:
transactions with Chase National Bank 1/2/41
121
France:
American Friends Service Committee: Milk
distribution to French children reported on 1/2/41
136
a) Copy to Mrs. FDR - 1/6/41:
See Book 345, page 182
Pickett asks for release of additional $50,000 1/10/41: Book 346, page 297
Martinique: Rehabilitated planes to be exchanged in
Cuba for food discussed in Young memorandum -
1/2/41
145
- W - (Continued)
War Conditions (Continued)
Book
Page
344
140
Gold:
Germans demand Belgian gold held at Dakar 1/2/41
Martinique: Tentative arrangement between
French Ambassador and Welles reported to
HMJr - 1/3/41
196
a) Cochran memorandum - 1/7/41:
See Book 345, page 308
Japan:
Agreement with Netherlands East Indies to
facilitate monetary traffic reached - 1/2/41
Lend-Lease Legislation:
131
Frankfurter asked to review proposed legislation 1/2/41
91
Resume' of events - 1/2/41
149
Foley told to contact Beaman, of Drafting
Committee; FDR wants appearance of originating
in House - 1/3/41
Military Planning:
Reports from London transmitted by Butler 1/2/41, 1/3/41
Netherlands East Indies:
Agreement to facilitate monetary traffic reached
with Japan - 1/2/41
391
173,400
131
Ordnance:
See War Conditions: Purchasing Mission
Purchasing Mission:
See also War Conditions: Lend-Lease Legislation
Ordnance:
Coordination and advance ordnance preparations
for United States defense program and British
Purchasing Commission discussed by HMJr,
Purvis, Foley, Cox. Young, and Ballantyne 1/2/41
67
a) HMJr's illustration: Steam-shovel
actually ready to start on post-offices
when bill is finally signed
Requirements: Churchill's message to FDR, copy
of which is given to HMJr simultaneously,
discussed by HMJr. Bell, Phillips, Ballantyne,
Purvis, Kuhn, White, and Foley - 1/3/41
$230 million still available: McCloy (War Dept.
memorandum on use thereof - 1/3/41
237,261
351
Knox tells HMJr he has "cracked whip" and
binoculars, 4-inch guns, forgings for flasks
for torpedo boats, etc., will be turned over
to British - 1/6/41: See Book 345, page 86
Statement showing dollar disbursements transmitted
by Federal Reserve Bank of New York - 1/3/41
Vesting Order: Official sales of British-owned
dollar securities - 1/2/41
320
123
- W - (Continued)
Book
Page
344
185
War Conditions (Continued)
Shipping:
Immobilised Shipping: HMJr's memorandum to FDR
suggesting procedure discussed at 9:30
meeting - 1/3/41
a) German and Italian ships: HMJr tells
Gaston to inform Navy well in advance
of any sailing - 1/3/41
1) Memorandum for FDR (not sent)
349
350
2) Gaston memorandum on possible
procedure - 1/3/41
Convoyed Shipping to Britain: Report on - 1/3/41
Resume of situation in American ports - 1/3/41
354
342
393
Losses - British, Allied, and neutral - 1/3/41
397
Oil: Confidential report by White - 1/2/41
272
U.S.S.R.:
1
January 1, 1941
I called up Jerome Frank today, and asked him
please to hurry up and get this Bethlehen crowd ready
so that by Monday I would be able to tell the British
that they were lined up. They gave Quinn the authority
and their blessing, and it is up to him to line up the
rest of the crowd.
Frank asked me whether I had done anything about
Beardsall, the attorney who used, to be with FDIC.
I said he should keep his fingers crossed and look
out for him. He is a great friend of Jesse Jones,
and it probably was Jones who got him the job with
the Bank of America.
2
January 1, 1940
From nine until ten o'clock Wednesday night, Bell
and White were at the house with me discussing what we
should do about the Eccles' article.
3
THE
TRUSTEE SAVINGS BANK
GAZETTE
RETRUSTEEN
VOL. XI. No 1.
JANUARY, 1941
SAVINGS
BANKS
H
INTERIOR OF THE SAVINGS BANK OF GLASGOW'S NEW PREMISES AT HILLHEAD
PAGE TWO
PAGE THREE
OFFICIAL ORGAN OF THE
TRUSTEE SAVINGS BANKS ASSOCIATION
NEW YEAR'S MESSAGE
It has been customary for the Chairman of the
Association to address a New Year's message to
and the oppressed nations of the world the ft
and the tolerance for which we fight, and for which
fight, money is so vitally important
No words in this message are needed to tress
or augment this national appeal. I would add only
the encouragement and good wishes which With
place owing to current conditions.
our Chairman's intention and is my privilege
Hull
express to all who are to-day putting so much into
the work of the Banks, and for the success of their
co-operation in the National Savings Movement
CLAUD L. C. HAMILTON,
the Trustee Savings Banks through the medium of
the GAZETTE. This is no matter of form, and we
all recognise the sincere feeling with which these
Departy Chairman
messages have been written.
his own message. I feel sure that every one connected with the Trustee Savings Banks sincerely
looks forward to his speedy recovery, and wishes
him, as far as the circumstances of the time permit,
a happy and prosperous year in 1941, and many to
follow. We owe him heartfelt gratitude for his
leadership and indefatigable work
On behalf of the Trustee Savings Banks Associa-
tion, of the Chairman, and in all humility on my
own behalf, 1 send our best wishes to the Trustee
Savings Banks for their prosperity, their protection,
and all peaceful blessings in the year upon which we
have entered Further, I express what I know was
in the Chairman's mind, namely his consciousness
of the loyal support and assistance which he received
from the Banks and from our colleagues, to all of
whom be would wish to tender his very grateful
thanks.
When last year's New Year message was sent out
NEWS FROM THE BANKS
The Glasgow Savings Bank recently opened new
premises at Hillhead, and the capacious and well
fitted interior which is depicted upon our frontis
piece would admittedly do justice to many a head
office. The office, which is one of the finest, if not
the finest, of the Glasgow Savings Bank, is the work
of Mr. Eric A. Sutherland, Architect, and it was
the last piece of work he executed The branch
suddenly, and his passing will be great loss to the
Glasgow Savings Bank, for he had been for mans
OBITUARY
at night,
have no opportunity to use ordinary bank
ing
facilities.
Mr. John Baxendale
We regret to record the death of Mr. John
operating a big Direct Transfer Scheme, and within
Baxendale, which occurred on November 27th last.
the first few days of commencement over six hundred
to be open during the lunch hour 12 to p.m.
Mr. Baxendale was a member of the Association
representing the Chorley Trustee Savings Bank,
and was a Custodian Trustee of that Bank.
each day from Monday to Friday inclusive, and
Mr. George Gibson
of the employees opened accounts. The branch is
will be interesting to follow the progress of this
novel experiment.
The Galashiels Savings Bank has suffered a
severe loss in the death of their Chairman, Mr.
George Gibson, which occurred on November 19th
Mr. Gibson had a long connection with the Bank,
WAR SAVINGS
having been elected a Manager in 1889, a Trustee
in 1919, and Chairman since 1934 Of the Trustees
and Managers in office at the time of his election
the Exchequer announced the floating of a new
Government loan to help finance the
he was the sole surviving member.
We reproduce below a photograph of the new
premises of the Falkirk Savings Bank at Whitburn
war. The new security, to be known as Three
Per Cent. Savings Bonds, 1955-1965," was opened
for subscription on January and. Speaking of the
progress of the War Savings Campaign, to date, Sir
SAVINGS
Kingsley Wood said
Just six months ago I came to the microphone
to tell you of a new War Loan which was about to
be launched Recalling the great success during
the last war of the plan of borrowing from day to
day by National War Bonds, I placed on sale the
Two-and-a-Half per Cent. National War Bonds,
great as that raised by them in the previous yearand that a record year. This has not been achieved
without great effort and indeed sacrifice on the part
1941-47. In the 26 weeks which have passed since
then we have raised in these bonds no less than
£419,000,000. A fine achievement
of the Banks, their staffs and their depositors. In
This is, as you know, only one part of all we
expressing gratitude and pride in this achievement,
FALKIRK'S NEW PREMISES BATHGATE
of those in higher authority, by whom the effort
Road, Bathgate. After being in existence for twenty
three years as a separate concern, Bathgate Savings
savers has brought a magnificent response through-
Bank amalgamated with Falkirk in 1927. and the
total funds at that time were £29,000. Since then
out all the country, in the year that has passed,
the Bank has been open full time and the progress
but we have got to keep it up-more, we have to
go one better, in our effort to retain for ourselves
lending
year let us see to it that 1941 beats even
this fine record."
In a broadcast on December 27th, the Chancellor
belief has been amply proved by their contribution
And now for the second year: the courage, the
and think that it will meet every need and circum-
stance. We have had a great savings and
Falkirk
to the war effort last year, when they placed in
the Government's hands a sum nearly twice as
determination and the hope of the workers and
As an example of the way in which the Savings
Banks can adapt themselves to the present conditions, it is interesting to note that the Hull Savings
Bank have decided to open a branch actually within
one of the large works in Yorkshire, for the benefit
years their skilled adviser and friend.
War Savings Campaign ever launched, and Sir
is most appreciatively recognised
continue on their successful course. You will see,
therefore, there is a large list from which to choose,
had just been completed when Mr. Sutherland died
George expressed the belief that the Banks would
prove themselves worthy of the place they hold in
one cannot but feel that this is the echo of the feelings
and Trustee Savings Banks will, of course, continue
to be available, and I have no doubt all of these will
opened on October 17th, no formal ceremony taking
In conjunction with this branch, they are also
Glasgow
to the Banks we were at the outset of the greatest
the national life. How well founded was this
National Savings Certificates, Three per Cent.
Defence Bonds, and the facilities of the Post Office
convenient premises. The new branch office was
of the three or four thousand employees, who,
being on duty from early in the morning until late
Unfortunately, Sir George Rainy has been laid
up for some weeks and is unable this year to write
dequate to cope with this expansion of business,
and the Trustees decided to secure larger and more
it
TRUSTEE SAVINGS BANK GAZETTE
has been extraordinary, for the funds of the Bank
amounted at the end of September last to no less
than (260,000. The existing accommodation proved
are doing to provide money for victory. Since
Mr. James Maxtone Graham
We record with the deepest regret the death,
which occurred on October 18th last, of Mr. James
Maxtone Graham, Chairman of the Scottish Savings
Committee. Mr. Maxtone Graham joined the Committee in 1922, succeeding the late Sir Alexander
Wright as Chairman in 1933. Members of the
Association will join with the members of the
Scottish Savings Committee in extending sincere
condolences to Mrs. Maxtone Graham and family
in their great loss.
Dr. John Lamont
It is with deep regret that we record the death,
which occurred on November 27th, of Dr. John
Lamont, M.B.E., J.P., F.S.A. (Scot.), L.D., Chairman of the Bute Savings Bank, Rothesay.
November, 1939 we have raised through Savings
Certificates, Defence Bonds, and increased deposits
In the Post Office and Trustee Savings Banks a total
of £11,000,000. With the £300,000,000 raised by
the Three per Cent. War Loan, the £429,000,000
from National War Bonds, and about £21,000,000
from loans free of interest, the total reaches
£1,269,000,000 really wonderful result."
Sir Kingsley Wood proceeded to explain the
advantages of the new security, and continued
WAR WEAPONS WEEKS
As it well known, War Weapons Weeks are being
held throughout the country: up to the end of
December no less than one hundred and twentytwo such Weeks had been celebrated, and there
are many more to follow. However varied have
been the results in the cities and towns in which
PAGE FIVE
PAGE FOUR
amazed even the most sanguine organisers among
the National Savings Committee, to whom we tender
our respectful congratulations upon the success of
their efforts.
Trustee Savings Banks, too, have played their
part, and it is gratifying to note how many Actuaries
have been upon the special committees set up
locally for this special purpose, and have been in
the forefront in making arrangements, participating
in the publicity, the business accruing to the Bank, and
the resultant success of these magnificent war efforts.
large portable hut and having it alongside the
The whole exhibit was arranged on a site i
and was quite apart from the displays arrange by
the Lincoln War Weapons Committee, as this was
so large that it could not be accommodated in this
city centre. This was a great advantage to u
To support and stimulate the appeal of the Tank
insertion of paragraphs and small editorials in the
local papers during the fortnight preceding Weapon
Week and by advertisements during the week itself.
We also carmarked some of the excess of Deposits
over Withdrawals in the Special Investment Depart-
Banks retain their place as one of the principal
thrift agencies in the country and enjoy to the full
the fresh business made available, it was felt essential
that full advantage be taken of such appeals. There
is also the fact to consider that, unless the services
of the Banks be constantly brought before the public,
special National Savings efforts might cause
serious withdrawal of deposits for the purpose of
purchases of National Savings Certificates, for,
despite the Daily Press advertisements issued by the
National Savings Committee and local efforts, many
people still think of National Savings only in terms
of National Savings Certificates. It was bearing these
points in mind that I planned the campaign for
Lincoln War Weapons Week.
From the commencement I had the advantage of
being on the local Savings Committee and the
appropriate Special War Weapons Committees, and
ment for the quarter ended November zoth, 1940,
for the purchase of a substantial amount of Two
and half per Cent. National War Bonds during the
Week, and this fact was also given wide publicity.
The Weapons Week opened in torrential rain,
but despite this fact, the public were so aware of
the Tank and its purpose that we actually did six
times as much business there than was transacted
at the official booth at the Weapons Exhibition
On the Wednesday of the Week I had been at
to arrange for a leaflet raid over the city by
Hampden Bomber. The leaflet drew attention to
the facilities of the Bank and the special attraction
which we were making for new accounts, to which
I have already referred
This, to my mind, was the high spot of the week
The public simply surged in great masses to obtain
the leaflets as they fell and I must admit that, from
my viewpoint on the Speaker's platform, I felt some
anxiety as to the safety of the crowd as they struggled
to obtain one.
The days following the leaflet raid proved to be
a nightmare to the Staff. The Bank was practically
disorganised owing to the rush of the public to
so knew exactly what form Lincoln's effort was to
conduct business through us and, notwithstanding
take. I also had the advantage of knowing and
the fact that everyone worked until very late at
having the sympathies of several members of
engineering directorates and, by exploiting this to
the full, we were able to have a modern Cruiser
Tank placed at our disposal for War Weapons Week.
I intended the tank to be used as a sub-office of the
Bank for the Week and to have business actually
transacted at the Tank Gun Turret. However, the
latter idea had to be scrapped owing to the fact
a prominent and very important part in the Lincoln
War Weapons Week but it had also fared extremely
expense, and to present the purchaser of each
thousandth unit National Savings Certificate with
are from different standpoints, they give what must
be typical examples of the ways in which the Trustee
Savings Banks have responded to this further oppor-
Weapons Week, and in order that Trustee Savings
in the darkness for not only had the Bank played
C. R. STILES,
respective War Weapons Weeks. Viewed as they
During the past year special efforts have been
minated our campaign, but it was with quiet satis-
faction that one made one's way carefully homeward
well in the process. What a week
public was acquainted of these arrangements by the
made to stimulate National Savings on two
occasions : National Savings Week and War
The black-out was hailed with relief on the
closing Saturday by the exhausted Staff for it ter-
opened at the Tank or Bank with C1 at the Bank's
one National Savings Certificate free of cost. The
Lincoln
try for free 1.
it was decided to credit every hundredth new account
We have pleasure in reproducing below the
tunity to share in the great work for the national
the
middle of the main shopping centre of the wn,
experiences of two of our Banks during their
cause.
viously opened for the sole purposes of having
nk
night, it was quite impossible to complete the records
of each day's business before the next day's work
was before us.
It all proved well worth while, however, the
total expenses for the whole week were about Lis
and this expenditure resulted in our figure for the
week being four times as great as the average weekly
figure taken over the preceding ten weeks, which
that the War Office suddenly realised that the Tank
were in themselves well above the average We
embodied several new ideas, and consequently that
also opened a very large number of new accounts,
it must be mounted by a twenty-four hours a day
and of these I have only found two which were
Acting Actuary Lincoln Savings Bank.
Wolverhampton
When it was announced that War Weapons Week
was to be held in the period November 16th-23rd,
The efforts of that week were well worth while.
Wolverhampton aimed at £1,000,000 and raised over
(1,116,000, and our share in this was as follows :
Cash Deposited
The staff remaining was the Actuary, one clerk, a
junior of three weeks' experience, and a temporary
assistant. No help being available from our
Branches we had to carry on to the best of our
ability.
The rush of business started immediately the doors
day the Bank was full of people and our accommodation, inadequate even for normal business was taxed
to the utmost on occasions, It was impossible for
more people to get in and the staff had time for
nothing but the selling of certificates and dealing
with depositors. Most days lunch had to be postponed until after closing time.
To add to our difficulties throughout that week
we had a period of early .. alerts,' and it was feit
that the staff could not be kept on the premises to
deal with the accumulated work. As a consequence
work piled up and it was not possible to bring down
the interest or do anything towards the Annual
Balance.
By the end of the week the rush was at its height
and on the last Saturday morning, in the three hours
10 a.m. to p.m., we had 224 transactions of deposit
or repayment plus a much increased sale of Certificates, etc.
£2,023 o
Two and a Half per Cent. National War Bonds
£,2,000 o o
Total for Week
£52,943 IS 11
I have nothing but praise for the way in which
my depleted staff worked, but I should not like to
face the prospect of another War Weapons Week
in the immediate future.
ALBERT HARRISON,
Actuary Wolverhampton Savings Bank.
Appended below is a list of forthcoming War
Weapons Weeks which have been arranged in the
places at which there are Trustee Savings Banks and
branches.
Jan. 18-25
Burnley
Worcester
opened on the 16th and throughout the week the
essure increased. From the time of opening each
£112 11
Three per Cent. Defence Bonds
busy time.
We suffered a severe blow in the first week of
£19,743 o o
16,324
Savings Stamps sold
it was realised that, with the year end falling midway in the period, we could expect an unusually
November, when the senior assistant was called up.
£28,663 o 11
National Savings Certificates sold
Jan. -Feb. 2
Feb. 9-16 (cont.)
Rotherham
Wakefield
Wallasey
Walsall
Blyth
Colne
Kettering
Feb. 16-23
Aberdeen County
Pembrokeshire
Exeter
Preston
Kincardineshire
Southport
Feb. 2-9
Altrincham
Bedford
Bootle
Dundee
Februa-March
Dartford
Stockport
Wednesbury
East Lothian
Neath
Feb. 9-16
Aberdeen City
Accrington
Bridgwater
March 2-9
Audenshaw
Camborne
Denton
Dunstable
East Retford
Carlisle
Chatham
Gosport
Croydon
Darlaston
Doncaster
Morayshire
Kelso
St. Helen's
Numerous enquiries had to be answered and normal
Little Lever
business of cashing cheques etc. carried on.
Newbury
Stretford
Thorne
We opened 92 New Accounts and dealt with 1,127
transactions of deposit and repayment plus 1,722
Direct Transfer transactions These figures do not
give a true impression of the number of people dealt
with, as it has to be realised that most of the Certificates sold were to individuals and groups for cash.
Luton
Redear
Redruth
o
of success, for the response has, we understand,
guard. We overcame this difficulty by botro
o
they have been held, the variations are but degrees
PAGE SIX
the Glasgow Savings Bank, to be a member of
March 30-April 6
March 9-16
Committee in the place of the late Sir Villian
Newark
Middlesbrough
Henderson.
Northwich
Morley
New Banks
St. Austell
Although details of the funds of the 1 nks 21
April 20-27
March 16-23
November 20th last are not yet available, it open
Dewsbury
Bury
likels that the combined funds of the Ne Bank
Melton Mowbray
Sale
May 4-11
Torquay
Bideford
Radcliffe
March 23-30
Ellesmerc Port
j
Exmouth
May 8-17
Harrogate
Loughborough
will show an increase of approximately £ 00,000
over the previous year. Outstanding achie menty
include Portsmouth, highest in total funds Luton
highest increase for the year Cardiff, exce ds the
£200,000 mark in its third year. Congratuistions!
Amalgamation
As from November 21st last the Luton Savings
Bank is amalgamated with the London Savings Bank
New Zealand -A Kindly Thought
The Association Office was cheered recently to to
ASSOCIATION NOTES
ceive the following letter from Mr. F. E. Sutherland
General Manager of the Auckland Savings Bank
Election of Officials for 1940-41
President
New Zealand
Sin SPENCER J. PORTAL
Executive Committee
The GAZETIE issued in October last reached the this
morning and wasamazed to read on remarkable growths
deposits during the twelve months ending August 31st last
Six GEORGE RAINY (Chairman)
I think that this instance where figures speak volume
in regard to the Banks themselves and their depositors
Col.
HAMILTON (Deputy Chairment
MajorC.B.L.L.C.FLETCHER
Ms. W. Louis LAWTON (How. Treasurer)
It is difficult for those of us so far from the present
theatres of War fully to appreciate how the Old Country
is carrying on with the effects and ravages of the War
Mr. 1. R. FIDDES (How. Secretary)
ever present The bombing of non combatant. and the
Mr. 11. SANDERS (North-East Irea)
MR. E. C. C. EVANS (North-West Inva)
wanton destruct tion of the old landmarks fill us with grief
and yet. amidst all this turmoil ordinary business
COUNCILLOR W. I. WING (Seathern Area)
proceeding and new high limits are being attained Th
Ms. H. OLIVER HORSE (Scottish Irea)
Mr. 11. B. ROBINSON (Northern Ireland Irea)
of the country
figures are further evidence of the confidence of the people
the standing of the Banks and the financial structure
The writer was in the last War and enjoyed on
Co-epted Members
numerous occasions the hospitality of the people of both
England and Scotland The personnel of our own Bank
has responded splendidly and at the present time to pet
cent of the made staff are in uniform and we have been
oblived to engage men above the War age and have de
MR. E. M. CAMPHELL (Edinburgb)
\mm L A. B. DONALDSON (Nor Banks)
SIR lous MANN (Southern Irra)
Ma. W. Hall
SIR KENNETH STEWART (Manchester)
had to adapt ourselves to using female assistance in
positions that were never dreamer of prior to the Wat
MR. T. 11. 11. ALKER (Dander)
Out own savings are on the upward trend and month
the Trustee Savings Bank in New Zealand offered De
Inditors
co operate with the N.Z Government Treasury in a
MESSER THOMAS Coovers & Sox, Chartered
National Savings Scheme This theme has now best
Accountant
inaugurated and beside the sale of War Honds National
Investment Accounts are being opened and any related
Scottish Savings Committee
with interest annually at per cent but the principal
Lord Alness, who has been appointed Chairman
sum is not payable until June goth 1915 the maximum
balance being , 1,000 This money is immediately past
ever to the Treasury and the Bank receives 3 per cent
only on the lodements It will thus be seen that the while
of the work that the Trustee Savings Banks are doing
without cost to the Government
hope you do not mind my writing to you personally
in this manner but felt that something more was called
for than just ordinary business contacts
do not know whether you are still productive the
Year Book but if so should be glad if copies from 1013
until
onward. could be forwarded to me together with
of the Scottish Savings Committee to fill the vacancy
created by the death of Mr. Maxtone Graham, has
had distinguished legal and business circer. He
is former Lord Advocate for Scotland, and during
the years 1916 to 1922 he was Secretary for Scotland
Trustee Savings Banks Inspection
Committee
The Trustee Savings Banks Inspection Committee
have co-opted Mr. R. C. Greig, C.A., a Trustee of
for same
by the Trade Banks American 3.
Lendon
Reading
and
Buildings Gray Inn. W.C. and Printed In Wyman A 100m Ltd.
Fakerdars
du 4
BRITISH EMBASSY,
WASHINGTON, D.C.
January 1st, 1941
My dear Mr. Secretary,
As you have perhaps already heard,
my Government are sending Air Chief Marshal Sir
Hugh Dowding to this country to act as head of
the British Air Commission at Washington on
technical matters. According to our latest
information he is expected to arrive very
shortly after the New Year. As you know, Sir
Hugh Dowding is one of the most distinguished
officers of the Royal Air Force and was in
charge of the Fighter Command during last
summer's battles over Britain.
Believe me,
My dear Mr. Secretary,
Very sincerely yours,
Harle Butter
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D. C.
Read Jan 3, 10.09
5
THE WASH
Bardia Pubs
Open?' Shout
Australians
Anzacs in High
Spirits Awaiting
Attack Order
ATTACK. from Page 1.
vidually by merely whirling their
they related
These troops had an eerie appear-
with their knitted
protecting them against sand
and as in the last great war
they didn't consider it enough to
eMain objectives set for them. but
usually charged on to gain additistal ground
Italian resistance the British said.
meatly was lackadaisical but there
some instances of unusual
One Fascist officer kept shooting
revolver they said. until it was
from his hand. Others resisted
Air Marshal Dowding Arrives
For Plane-Production Talks
Sir Hugh to Confer
With Morgenthau,
Army, Navy Officials
Air Marshal Sir Hugh Dowding
former chief of Britain's sky defenses. arrived in Washington yesterday to confer with Treausry Sec-
retary Morgenthau and officials of
the Army and Navy on plans for
intergration of American plane pro-
duction with England's supply
needs
Sir Hugh. the tall. thin World
War pilot whose genius for organization and understanding of plane
design is credited with developing
Britain's valiant air defense. declined to see reporters until after
his conference with Morgenthau
He said as yet no appointment
had been made for him to see the
Treasury chief. but Brtish Embassy
sources said the conference probably would be held tomorrow. He
is expected to spend about a week
GEN. DOWDING
chasing Commission here and after-
"On Tuesday at 3 p. m. after my
visit with Morgenthau I expect to
grant a kind of general interview
plane factories.
tions. Sir Hugh promised.
with officials of the British Purward to visit several American
and. perhaps. to answer some ques-
CONFIDENTIAL
Paraphrase of Code Indiagram
Received at the War Department
at 1:46 P.M., January 1, 1961.
London, filed January 1, 1941.
1. On Tueeday, December 51, 29 planos of the Coastal
Command were active and the Fighter Command engaged in miner
activities only. The Bomber Command launched day attacks against
airdromos in Holland and France and against oil installations in
Germany without a great deal of success. During the night before
the British operated only nine patrols and engaged in no bombing
activities because of unfavorable conditions.
2. During daylight hours of December 31, 22 German
planes were plotted over Britain, practically none of them were
fighters. During the preceeding night no German planes of any
sort were over Britain because of adverse weather.
3. Ten ships in a convey from Sierra Leone arrived in
Britain without mishap.
4. On December 31 a tanker of British registry was damaged by a mine off Liverpool.
5. A total of 314 individuals were seriously injured
and 89 were killed in the recent raids on London. All of the
fires: started by these raids had been put out by December 31.
Food warehouses and three minitions plants were damaged severely
and there was some damage to dook facilities. The lack of high
water pressure in the "city" was the most serious damage to utility
services. Service is still not available in subway stations at
six points, but services have now been resumed at three railroad
CONFIDENTIAL
6
7
CONFIDENTIAL
stations which were damaged. The central telegraph office has
resumed service after having been knocked out temporarily, but
as yet there are no telegraph connections with Southeastern and
Southern England. Telephone communications between London and
Southeastern England have not yet been resumed and one London
exchange is entirely out of commission. Other types of communications are now in order.
6. On December 31, British bombers based in Malta
attacked Torre Annunziata, a suburb of Eaples. Attacks were also
made on a chemical plant at Cotrone and against Palermo and Taranto.
LEE
Distribution:
Military Aide to the President
Secretary of War
State Department
Secretary of Treasury
Asst. Secretary of War
Chief of Staff - 2
War Plans Division
Office of Naval Intelligence
AC 2
G-3, 1
-2-
CONFIDENTIAL
8
GRAY
JR
Caracas
Dated January 1, 1941
REC'D 7:20 a.m., 2nd.
Secretary of State,
Washington.
1, January 1, 7 p.m.
Following his annual NEW Year's reception the
President of VENEZUELA formally inaugurated the new
Central Banks in the presence of high Government officials,
the Diplomatic Corps and "representatives of all national
activities". During the CEPEMONY it was announced that
& loan had been concluded with the National City Bank
thus providing exchange which will make possible the
immediate can cellation of foreign commitments already
contracted and restore normal conditions of commercial
interchange. I was informed by one of the directors
that the loan is for $10,000,000.
CORRIGAN
TFV
9
FAR EAST BULLETIN
No. 25
1st January, 1941
CHINA'S NATIONAL CURRENCY AND NATIONAL UNITY
The reported opening of the long-heralded "Central Reserve Bank" in Nanking on
21st December has not only ushered in a new phase in the currency war between China
and Japan, but has also brought added importance to the problem of China's war-time
monetary policy. Like its counterpart, the "Federated Reserve Bank of North China".
the new bank is obviously designed to obtain at China's expense foreign exchange to
support a currency which is otherwise without any backing. and more significantly, to
create out of the note-issues a weapon wherewith to consolidate the economic harvests
of the military aggression. But unlike its counterpart in the North, it has never
been much favoured by the Japanese military who feared, legitimately enough, that the
new Bank may be availed of as a source of revenue to finance an "independent" army
of the puppet Government, which Japan can never afford to tolerate.
Though in many respects the prospects of the new Bank are no brighter than its
predecessor. the Hua Hsin Commercial Bank of Shanghai, its immediate and implied
threats to the position of the national currency are no less obvious and the probabil-
ity of its success would appear to depend not so much on what the puppet Government
desires to do. as on the ability or inability to appreciate the bearings of monetary
policy and currency control upon the larger national issues at stake and to examine the
problem in the light of these broader considerations. The problem is admittedly as
serious as the need for solution is urgent.
Proposed Exchange Certificate
One of such solutions, reported in the Chinese press to have received the serious
consideration, if not the approval, of the authoritative quarters, is the proposed
issue of the 80-called "Ner-Time Exchange Certificates", into which only the national
currency circulating in the unoccupied areas, will be made convertible at certain fixed
rates. In its essence, it amounts to an artificial differentiation of the national
currency according to the temporary political conditions obtaining in the areas in
which they happen to circulate, and an arbitrary discrimination against those circulating in the occupied areas. In the ultimate analysis. however, it amounts to an abandonment of the national currency in the occupied areas and with it, a complete abandonment of the national currency policy.
Sino-Japanese Currency War
Obviously, such an approach to the currency problem not only fails to understand
the basic political significance of a unified currency, but also overlooks commetely
the political implications of China's war-time monetary policy and the grave repercus-
sions, once that policy is lightly discarded. It must be recognized at the outset
that the unified national currency system, introduced in November 1935. is at once the
symbol and the instrument of national political unity. It is by concerted choice. not
by pure chance, that the national currency came to possess such an immense and invisi-
ble power. The unique and unified national currency occupies a position which is in
influence as unrivalled as it is historically unprecedented. It is not therefore
a
mere coincidence that the reformed currency has been known as the national currency,
-2-
10
use there is in effect the larger national as contrasted with the pure currency aspect
the problem.
In whatever form or disguise, the Japanese currency maneuvers in China have been in-
ariably directed towards destroying the integrity and uniformity of the national currency
an instrument of political and economic control, in order to capture the last weapon
by need to complete their military conquest of a large and rich part of China. It is
the credit of the policy of persistently maintaining under extremely difficult condiions the integrity of the national currency. that the Japanese have been prevented from
exping as great economic benefits as their initial military success would superficially
:
crear to suggest. The so-called occupied areas are controlled by the Japanese only at
ertain well garrisoned points and lines of communications. In these areas the unshalable
with in the national currency has been responsible for the continued loyalty and alledance to the National Government and for the continued maintenance and activities of the
arrilla forces.
Indeed, the Japanese have completed, for example, the use of the "Federal Reserve
notes in connection with the import and export trade of North China, but that
rade remains in the last analysis to be financed through the national currency. Because
E national currency remains the only acceptable circulating medium to the peasants,
be exporters who receive the "F.R.B." notes from the importers for their link transacdons have to sell the "F.R.3." notes to obtain the national currency. while the importwho receive the national currency have to sell it for the "F.R.B." notes to the exerters with whom their transactions are linked. The continued practice of quoting forexchange in Tientsin in terms of the national currency. the 20 percent premium in
No of foreign exchange of the national currency in Tientsin as compared with Shanghai,
the large volume of the national currency still circulating in the North, estimated
$300,000,000. notwithstanding legal prohibitions and severe punishments to the conmy all speak of the unshalable confidence in the national currency.
cuture consequences
To introduce the "Yar-Time Exchange Certificate". or for that matter any other kind
new currency in the unoccuried areas alone would at once destroy the unique position
the national currency, thereby impairing its effectiveness as an instrument of political
economic control, which Japan has repeatedly attempted to do in vain. More dangeronly. it is tantamount to a complete abandonment of the people in the occuried areas
tends to encourage political regionalism. The temporary loss of territories would
bear to sink into comperative inconsequences when compared with the loss of support
lead
allegiance of the people. Psychologically. the shock to confidence, which any sudden
unexpected change in the traditional policy is bound to entail. would inevitably
to a scramble for foreign exchange and a competitive hoarding of whatever commodities
can be had, leading to a runaway inflation and social unrest, with consecuences no
serious than political non-allegiance.
That is more, under the present international alignment, the course to the ultimate
detory would appear to be an active guerills warfare, and an intensified economic warare, in combination with a large-scale military counter-offensive. But neither the
Merilla warfare nor the economic varfare would be possible without maintaining the inerrity and continuity of the national currency, which as we have seen is at once the
herstone of the undaunted loyalty to the National Government and the mainspring of
11
-3guerilla activities and economic non-cooperation in the occupied areas. It is the
imperative to preserve a weapon that has more than proven its effect.
China's war-time currency is no longer a pure and simple monetary problem. It is
efinitely a much larger problem involving much wider issues and more far-reaching conthan was generally recognised. To study the currency question, it is essential
ecuences
examine it in the light of past experience and accomplishments from a much wider angle
the possible political stakes and political consequences involved. Anything short
each broad considerations is certain to miss the issue and the essence of the looming
urrency war.
I
PT:lap
12
Notes on Conference at the Home of
the Secretary, 6 P.M., January 1, 1941
Those present, Secretary Morgenthau, Dr. T. V. Soong,
General Mow, Colonel Chennault, and Philip Young.
Secretary Morgenthau opened the conference by stating that
it looked very doubtful if any of the long range heavy bombers
could be made available to the Chinese. He added that, although
the idea had the backing of the President, the Army felt that it
just couldn't release any of those ships at the present time.
The Secretary said, however, that there was a good possibility
of getting some P-40 pursuit ships, and he inquired from Dr. Soong
as to how many ships they would have to have in order to start
operations. Dr. Soong and General Mow carried on quite a conversation discussing the various uses and tactical maneuvers for
which the P-40 would be used and then decided that probably twentyseven ships would be required.
The idea of using these P-40's was to protect the Burma Road
from Japanese raids, and twenty-seven ships would mean three
squadrons of nine each. Both General Mow and Colonel Chennault
felt that that number of ships would be required before any could
be put into the air. The general theory was that two squadrons
totaling eighteen ships would operate at a relatively low level
while one squadron of nine ships would operate at a high level to
protect the lower ships from attack.
The Secretary inquired as to whether that number would include spares, and General Mow replied that it would not. It was
General Mow's feeling that there should be nine more bringing the
total up to thirty-six if spares were to be included. The Secretary
explained that these ships would have to come from British deliveries, that the situation was a very complicated one because, in order
to get the British to release the planes, arrangements would have
to be made for doing more for the British at a later date. Dr.
Soong said he realized the complications involved and greatly
appreciated the efforts of the Secretary and the President in
attempting to work out something.
The Secretary went on to say that it would probably be pos-
sible to get a few ships at a time after the initial batch so that
the number would probably be increased up to about one hundred over
13
2-
the next three months. The Secretary inquired as to the number
of spare engines which would be necessary and asked the Chinese
as to whether they wanted to purchase all of the 150 so-called
"rejects" from Allison. General Now said he thought ten or
twelve engines would be sufficient for spares, but the Secretary
said it seemed to him the Chinese should have an allowance of
at least fifty per cent for spares. Colonel Chennault agreed
with the Secretary that fifty per cent was the proper proportion.
The Secretary asked Philip Young to tell the Chinese about
the guns. It seemed that there were 132 machine guns suitable
for aircraft and of an odd calibre already manufactured and available at the Colt plant. These guns had been made by Colt on a
rumor that the Chinese or some similar nation would like to buy
them, and as no order had ever materialized the guns were still
on the shelves, Preliminary investigation had shown that these
guns could be used in the P-40. and that they could be sold to
the Chinese who presumably had ammunition for that particular
calibre.
In this way, it was pointed out that the British could be
asked to release less guns than they would have to otherwise, and
at the same time it would be helpful to the Chinese who, according
to Colonel Chennault, were in a position to supply the ammunition.
After conferring with Colonel Chennault and General Mow, Dr. Soong
said that, of course, they would be delighted to buy the guns.
After some general discussion which brought out no new facts,
it was agreed that the Secretary would talk with the interested
Government Departments and with the British in an effort to see
if the latter would release the P-40's for the Chinese. The understanding was that the planes would be released with guns, except for
the 132 guns at Colt, and with a reasonable amount of .50 calibre
ammunition. The definite statement was made at this conference
that the Chinese had or could supply .30 calibre ammunition for
the wing guns so that the British would not have to part with that.
The Secretary in closing the conference promised Dr. Soong
that he would get in touch with him as soon as he had any informa-
tion to report as to the attitude of the British.
ooOoo
Qu
14
January 2, 1941
9:00 a.m.
RE ECCLES' ANNOUNCEMENT OF FEDERAL RESERVE BOARD'S REPORT
Present:
Mr. Gaston
Mr. Bell
Mr. Haas
Mr. White
Mr. Kuhn
Mrs. Klotz
H.M.Jr:
Have you had a chance to read this?
Kuhn:
The Eccles thing?
H.M.Jr:
Yes.
Kuhn:
Yes.
H.M.Jr:
Have you read it all?
Kuhn:
Yes. That is, I read what is in the Times this
morning.
H.M.Jr:
No Times has come yet.
Kuhn:
I also read that Krock was all sweetness and
light this morning on the Treasury.
H.M.Jr:
On what?
Kuhn:
Did you see that?
H.M.Jr:
I can't get a copy of the New York Times.
Kuhn:
He said it is widely assumed that this means a
battle between the Treasury and the Federal
Reserve, but, as a matter of fact, there is reason
15
-2to believe that the Treasury is going along
with Mr. Eccles as Mr. Morgenthau himself has
expressed similar opinions, and that the whole
thing was done very politely and sweetly, that
Mr. Eccles had seen Mr. Morgenthau before his
report, and this is politically very bold but
very good.
White:
H.M.Jr:
White:
Sweetness and light with a sting, with a purpose.
Why?
Well, I mean his sweetness and light consists in
saying
in
this.that the Treasury is going along with them
(Mr. Heas entered conference)
H.M.Jr:
You don't understand, Harry. Ask him afterward,
and don't worry. Harry is always - says what he
thinks. He thinks it is a trap, that is what he
means. He thinks it is a trap.
Kuhn:
It was in a sense of pressure to get the Eccles
thing pushed through.
White:
It would be hard now for the Secretary to disagree with that.
Haas:
There is a drop in excess reserves. Then over
here, you remember the long debate where we de-
cided to do it in two bites but announced it all
at once? (Exhibiting chart to Secretary)
H.M.Jr:
Yes.
Haas:
That is there.
H.M.Jr:
It is not much ahead.
Haas:
Not much ahead of that one.
16
-3H.M.Jr:
Isn't this the one?
Haas:
H.M.Jr:
Yes, but that has no effect, the excess reserves.
It is the same.
Haas:
Right there on that one.
H.M.Jr:
I mean the net cash deficit did start.
Haas:
That started about the first time, the first one.
The first one had no effect. The bond market
reached a new high. Then they started really
tipping it up, you see. They took it in two
bites. Then they announced both bites at the
same time. So the effect of it all came at once.
H.M.Jr:
Do you think this is safe, Harry? I mean, you
see, the first time--
Haas:
That is that same story. You helped write it.
H.M.Jr:
Here is the first announcement, and, of course,
there is where the cash deficit went off. Here
is where they began to really reduce this thing.
White:
I shouldn't draw on those charts to support your
position, Mr. Secretary. It seems to me it is
a general position you take. Because the minute
they begin arguing about--
H.M.Jr:
Am I safe to say that the last time they had
this thing, it took 18 months to get the bond
market straightened around?
White:
I would be a little reluctant to make that state-
ment.
Haas:
The bond market took it up to there. That is
right. To get up there again it took it over
18 months.
17
-4White:
But I think your strongest position--
H.M.Jr:
To give you a little of the background, I am see-
ing the President at 9:30. I want to hit this
thing, and hit it just as hard as I can, but I
am not going to do it unless I have got a hundred
percent backing of the President, you see. We had
this meeting, this dress rehersal last night.
(Mr. Gaston entered the conference.)
White:
Do you want any figures in your mind?
H.M.Jr:
Yes.
White:
Do you (Gaston)--
H.M.Jr:
No, he hasn't had a chance.
Haas:
Go ahead, Harry.
White:
Do you want to ask me or do you want a table?
H.M.Jr:
Go ahead.
White:
You would like to know what is the percentage of
reserve which is required now.
H.M.Jr:
I didn't ask George that.
White:
The maximum which they can do now is 26 percent
on the two cities, New York and Chicago, 20 on
the Reserve cities, and 14 in the country banks,
and they have got it about a sixth or a seventh
under that, that is, 22and three-quarters, 17 and
a half, and 12.
H.M.Jr:
What does that amount to?
White:
In terms of amounts, what it is is the total reserves - required reserves are seven billion,
18
-5-
H.M.Jr:
White:
seven point one, a little more than that.
If they went the whole-If they went the whole hog, the the total reserves would be five point seven. In other words,
they would reduce it about a billion dollars.
They would increase the reserve requirements by
about a billion if they went the whole hog without any new legislation.
H.M.Jr:
That is the only figure I want. Now, wait a
minute, that isn't right. The statement, as I
remember it, is this: If they can increase them
another billion they have the power. That is
number one.
(Mrs. Klotz entered the conference.)
H.M.Jr:
White:
H.M.Jr:
Number 2, where this statement is a trick is that
if Congress took this thing at its face value,
it would automatically raise it a billion-That is right.
White:
and freeze it at that point.
On the lower limit. It would freeze the florr and
raise the ceiling--
H.M.Jr:
By another seven million.
White:
Raise the ceiling from the present ceiling of
eight billion two required reserves to 16 billion
five. In other words, it would take-H.M.Jr:
Where do you get your 82? I thought you had six
now.
White:
Six is what the excess is, that is, what is left.
I am taking how much--
19
-6H.M.Jr:
Now wait a minute, how much is locked up now?
White:
There is now required seven billion one.
H.M.Jr:
Seven billion one? And how much are they?
White:
There is 14 billion total reserves.
H.M.Jr:
Yes, but we haven't got locked up 17 billion one,
have we?
White:
Seven billion one.
H.M.Jr:
Then if they raise it, they raise it to eight.
If they raise it, they will raise it to eight
White:
point two.
H.M.Jr:
Oh, because you fellows were talking six last
night.
Bell:
Yes, I thought it was six. I was thinking of
13 billion. You say the reserves are 14 billion
now?
White:
The present reserves that are held are 14 billion,
and there is required against that seven point
one.
H.M.Jr:
What is the situation now? What is the technical
description of the situation?
White:
The situation now is that the reserve requirements are seven point one billion. They have to
keep those in reserve.
H.M.Jr:
Today, and they could raise them about another
White:
And they could raise it about another billion.
billion.
20
-7H.M.Jr:
Interrupt, George, if you want to.
Haas:
That is all right.
H.M.Jr:
They could go to eight.
White:
They could go to eight.
H.M.Jr:
And leave an other six.
White:
If they
eight
point two, they would leave
a
little went
less to
than
six.
H.M.Jr:
And this authority they are asking gives them ad-
ditional authority to lock up another eight?
White:
Another eight which doesn't exist so that there
would be two and a half billion shy.
H.M.Jr:
That is different than last night's figures.
Bell:
And the eight billion would be frozen.
H.M.Jr:
I understand.
Bell:
Under this proposal.
White:
Yes. You asked how much total deposits there were.
About 40 billion demand deposits in the member
banks. That does not include non-member banks.
H.M.Jr:
Dan, will you read this for me? This was the
first - are you through, Harry?
White:
Yes, unless you want some other figures.
H.M.Jr:
This was the first memorandum of the Federal Reserve that the same crowd gave me on December 3;
and, if my memory serves me right, and I want you
to read this thing, what they recommended at that
time was - I had better take it with me. I want
-8-
21
to show what - it was a long-term bond that they
recommended at that time.
Bell:
You mean on the financing?
H.M.Jr:
Yes.
Bell:
Yes, they recommended that you sell a bond that
would appeal to the private investor, but Eccles
has put a memorandum on there for consideration
in favor of the short term.
H.M.Jr:
A long bond should be issued at this time, they
say. He says here, "Due to the large volume of
excess reserves of bank deposits, it is possible
that inflationary tendencies will develop some-
time in the future. There will be other uncer-
tainties regarding the banking situation. Unless
these questions are settled the market can't be
expected to take a long-time bond."
The point I am thinking about is this. This is
what I am proposing to say. Here on December 3
they come in and recommend a long-term bond,
knowing that they are going to come along and do
the other thing, see, and if we had done that,
followed their advice, what would the purchasers
of these bonds say to us two weeks later?
Bell:
In view of this recommendation--
H.M.Jr:
Yes.
White:
They recommend a long-term bond, realising at
the same time that interest rates will rise and
knowing at the same time that they are going to
recommend measures which will tend to rise, both
of which the bond prices will fall, so if they
expect bond prices to fall, why should they recommend a long-term bond? If they don't expect
interest rates to rise, why are they worring about
22
-9 the prices of bonds?
H.M.Jr:
I mean it is definitely insincere and bad advice.
White:
I have one bit of information that might come up.
There is a lot of talk about how the falling
bond prices are going to ruin institutions. I
had one of the boys look it up. One percent of
the assets of endowed institutions consists of
governments.
H.M.Jr:
Now, I have got five minutes. Dan, on sleeping
over this, what is your advice?
Bell:
Well, I still feel that we should say as little
as possible on it. I still feel that we should
say that it is being studied and that--
H.M.Jr:
That is your advice?
Bell:
Yes.
H.M.Jr:
Are you through, or did you just drop your voice?
Bell:
I am through.
H.M.Jr:
All right. Herbert?
Bell:
But I have no other thoughts.
H.M.Jr:
Have you got another thought?
Bell:
No.
H.M.Jr:
Herbert?
Gaston:
It goes back to Eccles having submitted this to
you. The fact that he did submit it to you,
which was quite proper, didn't imply your approval. You didn't give your approval.
H.M.Jr:
I very, very carefully said that I felt free to
23
- 10 -
say anything - I would only accept it on the
basis - I was free to say anything I wanted.
Gasten:
Yes. Now, as to this thing, it has to be very
carefully studied. Certainly you are not going
to assent to anything that will force an artificially higher level of interest rates which you
do not believe to be justified.
H.M.Jr:
When I come back on my table, Mrs. Klotz, have
that part underlined where he talks about
"together we stand or divided we fall." It is
right in the last page of the statement, you
see, right at the end. The point that I have
in mind is--
White:
There are two ways of ending the division.
H.M.Jr:
Yes. I have told this to Eccles, there can only
White:
Aren't you thinking of raising that with the
H.M.Jr:
No. That gets it on a personal basis. This is
an attack on him, this isn't an attack on me.
This is always after the horse is gone. When
I read all of this stuff, I think I should have
be one Secretary of the Treasury in twon.
President?
put up a tougher fight on the whole question.
White:
In the expectation that he would have changed
his mind?
H.M.Jr:
No. Well, I might have.
White:
Well, he claimed he was speaking for 30 men,
and he wouldn't change his mind.
Klotz:
He wouldn't change his mind.
H.M.Jr:
Well, he is in the position he can say that I put
24
- 11 -
up no fight. I think I should have put up more.
Bell:
Well, that is a good statement, Mr. Secretary,
but about 90 percent of it should have come from
the President rather than Eccles. That is the
trouble, I think.
H.M.Jr:
Kuhn, would you, when I leave here, go with White
and soak up as much as you can in the next half
hour, please? He will give you how my mind is
running, what I am thinking of, see. You know,
Herbert, because I told you over the telephone.
Gaston:
Yes, I have the impression it goes a little too
far at this stage of the proceedings.
H.M.Jr:
My feeling is this, I mean - always depending
upon what the - if the President says hit it and
hitit hard, then I think the thing to do is to -
I have two chances. I have this morning or
Monday, and I think if I wait until Monday, then
everything is going to Jell and there will be
other articles like Krock's and so forth and so
on, and if I am going to hit it, do I hit it this
morning or do I hit it Monday? Do you want to
give a curbstone opinion?
Kuhn:
You should do it this morning.
H.M.Jr:
If I am going to do it?
Kuhn:
Yes, because tomorrow morning editorials and
columns will be out.
H.M.Jr:
All right, I will let you know when I come back.
I am going to go over to the White House.
Gaston:
Yes.
NEW YORK TIMES - January 2, 1941.
25
26
In The Nation
yealed this week when it was so- income is on the rise and there is anxquainted with details of the board's re- lety that runaway prices may develop
port unless that should be made ad- as a result of consumers' goods abort.
ministration policy once more.
ages, overloaded production plants and
The Federal Reserve Board Will Oppose Politics
what may soon have to be a rigid system of priorities. Therefore, the clubs
This was construed in some quarters
and the Treasury
in the closet have been reversed as
to mean that the Treasury is not set,
psychological weapons in support of
as a matter of 1941 monetary philosoBy ARTHUR KROCK
the general welfare. This is the opinphy. to insist on continued authority to ion of the Federal Reserve Board
WASHINGTON Jan. 1-The anti-in
devalue, but that It would make the
flation recommendations of the Federal fight in Congress again if any political And # is the opinion of its chairman,
Eccies, who did not accept it until
JAN 1941 x
ny James
Reserve Board to Congress today came
so suddenly, and politically seemed so
effort were made to represent the proposal as part of an anti-Roosevelt pro-
he concluded that new conditions had
made it sound.
bold, that the immediate and general gram.
expectation was of a bitter battle over
Finally, the Federal Reserve Board The Eccles Theory
the proposals between the board and observed the full amenities in talking In supporting the new proposals Mr.
the Treasury. This was prophesied in over its recommendations with the Eccies has been faithful to a monetary
several places. Yet there are good rea- Secretary in advance of publication. By philosophy which has brought him
sons to expect the contrary unless the
the terms of the Banking Act of 1935, much praise and blame from time to
President himself instructs the Treas- the Treasury's head ceased to be an ex- time and has confused or angered.
ury to oppose the board's report. officio member of the board and there- often both, more conservative econoAmong the reasons are these:
fore to have any responsibility for its mists and financiers. It was consistent
The Eccles recommendations include
acts and statements. Nevertheless, as to his theory to advocate spending, inrepeal of the Treasury's power to issue matter of cooperative courtesy, Mr. creased government deficits and execusilver certificates against the seigniorEccles consulted Mr. Morgenthau in tive inflationary powers in one period,
age of silver, and currency against what is said to have been a most and it is consistent to his theory
chases of foreign silver; also that
friendly conference.
take an opposite position now. For
stabilization fund be used to hold down For these several reasons the propheMr. Eccies is generally a believer in
to
the mounting excess reserves which, by cles of drawn battle may be more than
the Keynes idea. This is that governments should spend their way out of
depressions and keep taxes light, but
that when national income rises governments should move toward a paycussed the excess reserves with him are its fiscal and business advisers.
as-you-go tax system and put sharp
sure he acknowledges that these cannot Hitherto Mr. Roosevelt has been un- checks on inflationary influences. His
be held down or absorbed without some willing to surrender any of the powers
basic philosophy has thus impelled him
extra tools.
granted or loaned by Congress, includ- to refer at one dime to a huge national
The Federal Reserve Board proposes ing the monetary controls which have
debt as a "blessing" and at another
that the President's authority further always constituted a basis of inflation.
time to propose measures to cut down
to devalue the dollar be allowed to He has referred to the two which the
that debt.
lapse next June, and that his power un- Federal Reserve Board would-now anThe President has always seemed to
der the Thomas amendment to issue $3 nul as "clubs in the closet," useful be impressed with Mr. Eccles's theory
billions In greenbacks be withdrawn. things to possess in case they might and practice, though the administration
When the devaluation clause came up be needed, but not necessarily sughas occasionally intervened to prevent
for extension last year, and strong op- gestive of any intention to use them.
the accomplishment of some of his
position to this showed in Congress, the But this view was expressed in a period
ideas. The fact that no bank in the
administration made a hard fight to of depression, when the effort was to
Federal Reserve chairman's chain ever
retain the power which was narrowly raise prices and increase the national
failed is cited frequently by the Pressuccessful. But It is said that no dis- income.
ident as one reason why he thinks Mr.
position on the Treasury's part to Now, because of the defense spend- Eccies must be a pretty good financier.
initiate such a battle again was re- ing and for other causes, the national
their very existence, are an inflationary premature: they may never come true
threat. But Secretary Morgenthau has unless the President decides to put the
never seemed personally to like the sil-weight of the administration against
ver program; and some who have dis- the unanimous views of the board and
26
EXCESS RESERVES, BOND YIELDS, NEW ORDERS,
PRODUCTION AND NET CASH DEFICIT
Treasury
1-90-1
27
EXCESS RESERVES. BOND TIELDS,
PRODUCTION AND NET CASH DEFICIT
1030
am
1-90-1
28
January 2, 1941
10:56 a.m.
RE ECCLES' ANNOUNCEMENT OF FEDERAL RESERVE BOARD'S REPORT
Present:
Mr. Foley
Mr. Sullivan
Mr. Haas
Mr. Gaston
Mr. Bell
Mr. White
Mr. Kuhn
Mrs. Klotz
H.M.Jr:
The President's first reaction was that this
thing was under study. He said he didn't want
to get into a fight, that it was too unimportant. He said, "After all, what is the Federal
Reserve Board anyway." He was under the im-
pression that he could control this thing through
the Senate Banking and Currency, and I disil-
lusioned him as to that. I said they would like
this. He said, "What about Wagner?" and I said,
"Wagner will like this." Then he said, "What
about Steagall?" and I said, "You can't count on
Steagall." He pointed out something which I
hadn't thought of before, that it was up to his
administrative assistant, who is a monetary
expert, to have brought this matter to his at-
tention. He said, "Why didn't he?" I said,
"I can't tell you. I know we gave him a copy.
It is a very good point, too.
Bell:
That is what the papers are contending, that
they are assuming it had the approval of the
President because Currie was here. I think that
is a little unfortunate.
29
-2H.M.Jr:
Well, after all, being absolutely down Currie's
line, I had a perfect right to bring him in and
consult with him and get his ideas.
Bell:
Yes, I think you had too.
H.M.Jr:
But, after all, if Currie knows anything, if his
training is good for anything, this is his field,
but the President raised the point, why didn't
he bring it to him. I said, "Well, I didn't
know." Do you know?
White:
H.M.Jr:
Well, I knew the President would raise that point.
Well, it never occured to me.
White:
There are certain difficulties. The thing was
told to him in confidence.
H.M.Jr:
By me?
White:
Oh, no.
H.M.Jr:
It wasn't told to him by me. I furnished him a
copy of it.
White:
I see. From that point of view--
H.M.Jr:
Didn't I furnish him with a copy of it?
White:
Not to my knowledge.
H.M.Jr:
Didn't you let him see a copy?
White:
No.
H.M.Jr:
Oh, yes.
White:
I didn't have to because he had seen a copy, but
he didn't see it from me.
H.M.Jr:
You (Klotz) just look up our records. I gave you
30
-3(White) a copy.
White:
Oh, yes. You didn't say that I couldn't show it
to him but that wasn't in the picture because he
had already seen it, but he had seen it in confidence.
Klotz:
That is what I did. You said to show the copy to
Mr. White and to tell Mr. White that you wouldn't
you told Mr. Eccles you wouldn't do anything until
you consulted with Mr. Currie and Mr. White.
White:
But I wouldn't have hesitated to have shown him
a copy in the light of that statement had I not
learned that he had seen a copy. But he didn't
get it from me.
H.M.Jr:
But my record is perfectly clear. I consulted
Currie at least on two occasions. Well, anyway,
the President wants our analysis of what this
means and its implications for his own confi-
dential use. If you boys will have it ready
Monday, I will go over it with you. Now, I
would like White and Haas to collaborate on it
and show it to everybody here before I see it on
Monday, and sometime Monday we will go over it
together. Now, I tried my best to get the
President to let me come out with a - I said that
the thing would jell and the press would like it,
Banking and Currency of the Senate is going to
like it, you can't rely on Steagall. I pointed
this out to him. His first reaction was, well,
all of these things which he did were when we
were at the bottom and he might have needed them
to get the country going, but he says, "Now there
is no depression in sight." So I said, "Well,
how about if England went under tomorrow." Of
course, he hadn't thought of that. And I had
ample opportunity - I took an hour to tell him
about - I think this is a fight of the money
owners against the money borrowers and that the
only thing that Aldridge evidently wasn't successful in putting over was free coinage of gold,
31
that I thought he had kicked the money changers
out in 1933 but they are back knocking on the
door again. So I had ample chance and I had time
to explain to him what the locking up of this
money, the seven or eight, meant. I told him I had
no objection, that if the Federal Reserve wanted
the authority to handle excess reserves - but I
said I did strenuously object to freezing it at
the lower level, automatically raising it another
billion, and I said the chances were one in three
that the bond market would go down, go down very
sharply, but I said if they simply wanted the
power to increase, if and when it is necessary,
leaving
it flexible, that I had no objection to
that.
Bell:
That is right.
H.M.Jr:
And I haven't now.
Bell:
And the increase might not do any harm, a bil-
lion dollars at this time; but, nevertheless,
locking it there might do some harm at a time
when you would want to unlock it and couldn't.
H.M.Jr:
Well, I explained to him, and the more I talked
the more he seemed to get it, that suppose
England went under. He said, "If all the banks
in the English banking system were under control
of the Germans, what would we need?" The man
hadn't thought about the thing, you see, about
having his hands untied. I said, "Do you think
you can go back to Congress again and get the
right to devalue the dollar?" I said, Wouldn't
that be a terrific fight?" He said, "You bet
your life it would." I said, "You have demonstrated to the country over eight years that you
can be trusted to these powers and not abuse
them, so why take them away from you. I said,
"You have demonstrated for eight years you can
handle this power." I said, You put me in the
Treasury so that you could be free, and you have
32
-5been free from that day to this. Well, what
he feels is this, you see. This comes so sudden.
He said he wants to put it on the table and keep
walking around it and taking a look at it. If
Arthur Krock wants to make a hero out of me and -
I carried the torch on the Hill and got the
President's power renewed twice or three times.
Bell:
Twice.
White:
That was an inspired story by Krock.
H.M.Jr:
He got that from Elliott Thurston. He is his
pal and the stories are being made about the
conservative Secretary of the Treasury, and
so forth and so on. It is all right with me,
but I told the President on the question of
public reaction; timing, he is a past master
and I wouldn't argue with him, that if he wanted
to withhold saying something at this time, that
is all right with me.
Gaston:
Jr:
That reserve requirement thing can be fixed up
very simply, giving them complete power over
reserves with the approval of the President.
Well, you see his attitude is this, "Henry,
this is so unimportant, the Federal Reserve
system is so.unimportant, nobody believes anything that Marriner Eccles says or pays any
attention to him.' He said, "The important
thing is the war. England, that is the important thing." He said, "Don't give the newspapers
the satisfaction of getting into a POW with him.
Don't give them that satisfaction. If you talk,
.
you will give then another headline tomorrow,
and on the question of public reaction, I can't
hear a better public relations counsel than Mr.
Roosevelt, and I an willing to take his advice.
White:
that happened at the press conference?
33
6H.M.Jr:
I simply said three words, "No comment on the
matter.
Klots:
No, "The matter is under study."
H.M.Jr:
You have got the press conference?
Reporter:
It is in the office.
H.M.Jr:
Are the girls doing it?
Reporter:
Yes.
Klotz:
"The matter is under study."
Bell:
And there were no questions after that?
H.M.Jr:
Oh, plenty of questions, but I said it would
just make the matter easier for discussion.
Are we going ahead with our study with Mr.
Wagner? Yes. Is it finished? No.
Bell:
The bond market went off half a point in the
first 45 minutes. It is churning around a little.
Well, we had a nice statement all fixed up for
you to make at the press conference.
H.M.Jr:
Had you? Let's see it.
(Mr. Kuhn handed statement to the Secretary)
White:
Well, it was only to be made orally. If you
were going to give it as a release, it would
be improved.
H.M.Jr:
"Chairman Eccles showed me the special report
of the Federal Reserve Board on monetary and
reserve matters before making it public. This
was a courtesy that I appreciated.
"I was not asked to give my approval to it and
it was clearly understood that I reserved my
34
-7opinion as to the merits of the various
proposals made by the Board of Governors.
"I have very serious doubts as to the wisdom of
some of the Board's recommendations. I cer-
tainly don't think this is a time to lock up
financial resources any more than it is a time
to lock up any physical resources that we shall
need in our defense effort; nor is it a time
to increase the cost to the government and the
people of making full use of any resources.
"In so far as this report draws public attention
to the danger of inflation in our defense effort,
I am glad that it has been made. You will remember that I mentioned it to you weeks ago, and
said that it was one of my chief concerns. I
have been having constant discussions about it
with Leon Henderson, a nd both of us are determ-
ined to nail any sign of rising spiral, and to
nail it hard, as soon as it appears. Specifically,
what I have in mind is the sudden rise in one or
two commodities that are essential to the defense
effort. There has been no all-round rise; we
are seeing to it that there shall be none. We
are not going to let prices run away or even
begin to run away. Where they show signs of
doing so, we are determined to stop the process
at the very beginning.
"That to my mind is the first and best way to
guard the people of this country against infla-
tion. The first and best way, in other words, is
not to let it start. That is another reason why
I have doubts, serious doubts, about the reconmendations in Mr. Eccles' report. Moreover, a
rise in interest rates at the present time would
tend to push prices up at the very moment when
we want to keep them down. It would hamper the
defense effort and create the very evils which
the Treasury and the Defense Commission are work-
ing to avoid. This is not the time for tinkering
35
-8with money rates. It is the time for a resolute
job on the prices of physical things. That is
the job the Administration is now doing."
(Mr. Foley and Mr. Sullivan entered conference)
H.M.Jr:
It is a very nice statement. Now, just so there
can be no misunderstanding as to the Treasury
helping any columnists or anybody else, let me
tell you a little story that happened at my
house last night between six and seven. I
mean it just happened to come to my mind at this
moment. I had General Mow and Mr. T. V. Soong
and General Chennault there, and we were talking
about the planes and so forth and so on, and
then I got on to a matter which is very confidential. Having no ulterior motive in mind, any
more than I have now, I simply said, "As you know,
Mr. Soong, if what I am saying to you now ever
appears in the paper or you ever say you talked
to me about it, I will just say I never saw you."
I repeated it three times, and he got it. So
then he looked at me and he said, Well, Mr.
Secretary, I want to tell you that I can't tell
you how disturbed I was when that story appeared
in the paper about the Chinese planes and what
they needed," and he said, "General Mow talked
to a newspaper man and after I saw it, I sent
for General Mow and I said, 'General, you are
a military man. You go back to China for court
martial, and he said, "You know in war times
what that means. And ae said, "General Mow
should be very, very grateful that you received
him so graciously, because now he does not have
to go back to be court martialed." So Chennault
stayed behind and I said, "Well, what is all this?
He didn't tell it half to me." He said, "The
true story, after this appeared in the paper,
General Mow shot his mouth off." He said Soong
sent for him, and he says, "General, here is a
pistol. You are a soldier. You know what to do."
Klotz:
No!
-9H.M.Jr:
White:
Bell:
H.M.Jr:
Yes.
What was the matter with the pistol.
No report was there?
He
thought
so he
didn'tthedoChinese
that. would get a bad press,
Klotz:
He didn't say that, that is cute.
H.M.Jr:
Yes. (Laughter)
No, he said, "That is impossible. You can't do
that. The Secretary wouldn't like it."
Klotz:
H.M.Jr:
Klots:
White:
Klotz:
H.M.Jr:
That sounded like you.
I told the story to the President this morning,
and
liked
it very
use ithethe
next
time.much. He thought he might
I think they all got it.
So if we are sent a pistol, I gather, from this
Office, we all know what to do with it.
You will do what Mow did. (Laughter)
I don't think we would - I thought it was a very
amusing story.
Foley:
Don't look at me. (Laughter)
He
that.takes all the humor out of it when he does
Sullivan:
Gaston:
I don't even know what he is talking about so he
shouldn't look this way.
He wasn't looking at you. Don't worry. Or should
you worry? (Laughter)
36
37
- 10 H.M.Jr:
Don't you think it is a good story, Dan?
Bell:
It is a good story. I think it went over pretty
well.
white:
I think we all got it any way. (Laughter)
You don't have to repeat it.
Bell:
H.M.Jr:
Well, I feel lots better, and I know General
Mow did too. So if you people - before we get
on
- I sent for you two people. How is your old
stomach?
Sullivan:
Oh, the stomach is fine.
Foley:
It was, not now. (Laughter)
Sullivan:
Just the same.
White:
You know something you are not telling us, Ed.
H.M.Jr:
There is a man up at Amherst by the name of
Professor Peter Odegarde who, I think, teaches
social science, but what he really teaches is
propaganda. If you could call up both Professor
Viner and Walter Stewart on the phone and ask
them whether they know anything about him, see,
or who he is, or if you can call up - do you
know anybody in Columbia? Do you know the head
of the school of journalism up there?
Kuhn:
Ackerman? No.
H.M.Jr:
Ask him and ask Stewart. I understand he is a
great friend of Justice Frankfurter. They all
say he is good. I would like to get him down
here Tuesday to stay a day or two and talk things
over generally. What I want him to do is sort
of make a study of what is the best method of
approach for us on getting over the selling of
bonds and taxes and that. He isn't a man that
38
- 11 -
could do the thing, but he is the outstanding
authority on Russia, Germany, South America,
Mexico, the whole art of propaganda. They say
he is a wonder. I think if we could get him
down here a couple of days, he would be very
useful.
Kuhn:
I will find out about him and let you know.
H.M.Jr:
Would you? Now, the other thing, Ed, the President says he doesn't need me Saturday and Sunday.
I will check with him before I go away. And -
but at nine thirty Monday morning, he wants a
finished, complete plan on the fire hose for
England.
Foley:
You were going to give me a memorandum and then
H.M.Jr:
Is that the story? I have got Purvis in the
other room, and I will see him about fifteen
talk to me.
minutes, something I want to clear up with him
on the planes for China, and then I will have
him in and I will give it to you verbally. Now,
so much for that. Now, who has - this thing
which I gave to you, is the Bureau of the Budget
waiting on that?
Foley:
No, they have got a copy, and Smith has gone over
it, and we have also cleared it informally with
Justice, but this is to put the thing formally
on the record, and that letter is only an incorporation of what you signed.
H.M.Jr:
Whether it goes half an hour earlier or later
doesn't make any difference.
Foley:
No.
H.M.Jr:
Then the other thing, John, who do I look to
for the legislation on the debt limit and the
tax exempts on Federal securities and guaranties?
39
- 12 Sullivan:
We have the one on tax exempts prepared, sir.
H.M.Jr:
Is it finished?
Sullivan:
That is finished, sir.
H.M.Jr:
How about the debt limit?
Sullivan:
I got your note of the thirtieth this morning,
and that is being worked on this morning.
H.M.Jr:
When will that be ready?
Sullivan:
I hope it will be ready this afternoon. There
won't be any figures though.
H.M.Jr:
Those two pieces of legislation I would like to
take with me when I go to the country.
Bell:
We are going to finish this afternoon on the
Foley:
We prepared a letter on both of those, and we
had a meeting in Dan's Office on Tuesday afternoon, and we spent several hours on it, and we
debt limit.
are redrafting it in the light of that conference. That will be ready--
Bell:
..this afternoon.
Foley:
We are going to have another conference this
afternoon so I think we had better draw John in
on what we have already done, and then consolidate these two proposals.
H.M.Jr:
All right. Well, let's say tomorrow morning at
ten thirty. We will take an hour and go into
the question of legislation, anything that the
Treasury wants, thinks we need, you see. That
will include our bank holding thing, too.
Foley:
Well, we saw Glass at ten thirty this morning,
40
- 13 and we left our bill with him and a comparative
analysis of our bill and the bill he introduced
two years ago. He says he wants to talk to
Wagner and Adams and Byrnes and Crowley, and I
asked him if he would want us to talk to those
gentlemen or help him, and he said, no, he
didn't want us to do anything until after he
had seen them and talked with them and then he
would get in touch with us again, and I reminded
him that after seeing hin the other time we had
called Senator Wagner and we had that request
for a conference with Senator Wagner still outstanding and undoubtedly he would get in touch
with us when he got in town next week, and he
said that would be all right, but, otherwise,
he doesn't want us to do anything until after
he has checked with these people and then come
back and talked to us further.
H.M.Jr:
Don't you think you had better try to do a job
on Leo just the same?
Bell:
Delano has done something on that.
Foley:
Delano talked with Leo just before we went over
there, and he has already explained the thing to
him and he is going to call Leo now and tell him
the result of this conference. The only thing
I think we want to be careful about is not to
give Glass the impression that we are running
around trying to sell a bill of goods, and I
don't want to get the bill out all over town.
I think we ought to be careful just to leave
the bill with the Senator until he wants us to
give it to somebody else, but we can talk to
Leo generally.
H.M.Jr:
You mean you believe in the Chinese system?
Foley:
Yes, I believe in the Chinese system.
Bell:
I think Leo is a little luke warm, although he
41
- 14 -
said he would go along. He probably will tell
a different story to Glass.
Foley:
On the liquidation of the voting stock in insured banks held by holding companies, after
the cut-off date, Leo is disinclined to go
along with it. He says if the quarterback
tells him to carry the ball through that hole,
he will go through that hole, and if that is
what you and the President want, he will go
along, but he wants it clear that that is so.
Now, Glass says that he doesn't want to introduce something he can't pass, and I think maybe
these people are going to tell him that our bill
is too drastic. It is much more drastic than
the bill McAdoo joined with him in putting in
in 1938, but if we could get him to agree to
give the Comptroller negative control over the
payment of dividends by national banks and the
FDIC over the payment of dividends by state
insured banks, and get that into his bill that
he introduced in 1938, I think we have enough
to control the situation and maybe that is the
way the thing will work out.
H.M.Jr:
Early was there also. He says that the report
to Congress yesterday was made with the knowledge
of the President, but that the President studied
it before approving or disapproving the program.
Now, I say I can only say that we have the matter
under study and that is all. That ties it up.
Well, let's anybody who has any ideas as to what
they need in the way of legislation - those of
you who are here are invited back at ten fifteen
tomorrow, but for God's sake get together, as
much as possible, between now and ten fifteen,
see, so that we don't - at least in the Treasury
we are working together.
Sullivan:
Is that going to include the tax program, too?
H.M.Jr:
Anything. Tomorrow morning. Anything that
- 15 -
42
anybody has got in mind. Come in at ten fifteen
tomorrow morning.
Bell:
We have got the Chinese agreement in the mill,
and Dr. Soong would like to sign it before Monday.
Monday is the day that the puppet bank goes into
operation.
H.M.Jr:
Why not?
Bell:
I think maybe we will clean it up either today
or tomorrow morning.
H.M.Jr:
I an here.
Bell:
We might be able to sign it tomorrow afternoon
after Cabinet. What time are you leaving.
H.M.Jr:
Well, depending upon the weather or the trains
and so forth. I am going to take a reservation
for the four and five o'clock trains. Bob,
my son Bob, wants to go with me. It will be
four or five.
White:
If there is to be any publicity to avoid the
repetition of the last difficulty, maybe it
could be done now.
H.M.Jr:
Difficulty on what?
White:
Didn't you have to do it over twice.
H.M.Jr:
What?
White:
If there is to be any publicity.
H.M.Jr:
On what, Harry.
White:
On the signing of the agreement.
H.M.Jr:
Yes. Well, that is Kuhn.
43
- 16 Kuhn:
Any movies this time?
White:
Sure, why not?
H.M.Jr:
Well, whatever there is - I am willing to do the
movies, but I think White's point is good, but
I am going to take reservations on the four
o'clock and the five o'clock train.
Bell:
Better try to do it in the morning then.
Gaston:
It ought to be done tomorrow morning if it is
H.M.Jr:
Well, Ed, I want to clean up this thing with
to be done.
Purvis, and then I will have you come back. Now,
is there anybody else here on this English plan
except Ed? Well, I want you (Kuhn) to sit in
so that you have the background. I will let you
know.
Klotz:
How about Philip Young.
H.M.Jr:
Oh, yes.
44
- Books should - the goods report of the
Redever Disease Board on montasy and seconve matters before
withing as public. This see . wasters that I appreciated.
I we - school to sin - - to ss and as we
clearly material that I received - opinion as to the write
of the vorious proposals - w the Board of Government.
I have very serious
some doubte as to the visites of -
the Smart's -
w-1
- replaced as - - - offect of of / ent foreing - -
- webs w - - -
(certainly)
/ I doe's Minis shis is a time to look - financial
- - more thea so is a time to look - any structual
- that we shall need in - defense efforts - is as
A
a the to increase the cost to the government and the people
of miling full - of any -
2
In - for as this report trees pullie attention to the - of
inflation in our defense offers, 2 - did this " has been sale.
You will remember that I - so to - - ago. and sold that 11
- one of - did - I have born having constant discussions
about 11 with Lean Beaterson, and both of - are accounted to was -
sign of a rising - and to sail 11 hard, as teen as 20 appears.
Specifically, what I have in stat is the solden rice in one or committee that are countial to the defense effort. There has boss
no all-round rions - are seeing to 11 that there shall be -
We are not ming to let prices - - or even begin to F any.
so,
determined
There they show sign of delney we are - stop the process at the
very beginning
That to - mini is the first and best - to - the people of
this country against inflation. The first - best my, in other words,
is not to let 18 start. That is another reason why I have doubte, serious
doubte, about the recommendations in Mr. Nooles' report.
these
program remine with hage - effects Noreover, a rise in interest
rates at the present time would send to push prices up at the very moment
when - mat to keep them - It would happer the defense effort and
create the very evile which the Treasury - the Defense Commission are
working to waid. This is not the time for tiskering with money rates.
It is the time for a resolute Job - the prices of physical things.
That is the w the Mainistration is new doing.
46
January 2, 1941
11:35 a.m.
RE CHINESE PURCHASING PROGRAM
Present:
Mr. Purvis
Mr. Wilson
Mr. Young
Mr. Ballantyne
Mrs. Klotz
.
H.M.Jr:
What about these letters that I am to write on
Young:
Yes. We have worked up some cases on some forms
priorities?
which blew up to some extent last night because
BPC didn't want to sign the form which was made
up. However, we shall have some revised cases
made out on a comparable basis by noontime, I
hope.
H.M.Jr:
Well, you are carrying it?
Young:
Yes.
H.M.Jr:
It is up to you to get it to me.
Young:
Yes.
H.M.Jr:
Does that mean, for instance, that in the case
of Consolidated, they are being help up on putting the Sperry bomb sights into Consolidated?
Young:
How soon will you be held up on Sperry sights
because of priorities? Do you know?
47
-2Ballantyue:
Until the spring.
Purvis:
What is the difficulty? I hadn't heard about it.
They have to take - see if I am right - the
Ballantyne:
Norden sight out of these planes and put in the
Sperry.
Purvis:
Well, we knew that.
H.M.Jr:
As I understand, the Priorities Board is holding
the thing up.
Young:
You have got more bombers coming on; and, while
there are enough Sperry sights released by the
Army at the moment to cover the immediate planes,
the bombers coming out in the spring will not be
equipped with Sperry bomb sights because of the
bottle neck on optical instruments, primarily,
over which the Army and Navy have assumed first
class priority, and you can't get the lenses in
your Sperry bomb sights.
H.M.Jr:
But right now is there a delay in those 20?
Young:
No, I think they have adequate sights.
H.M.Jr:
I understand that Sperry had some of these on
the shelves.
Young:
The British have taken over all the Sperry
sights that the Army had on order plus what they
had in stock.
H.M.Jr:
How many is that?
Young:
It is about a hundred.
H.M.Jr:
Well, that keeps them going for a while.
Purvis:
But that doesn't take care of the spring deliveries?
None of the spring deliveries.
Young:
48
3-
H.M.Jr:
Well, we can get it cleaned up. And there is a
good chance of getting you 9 more Consolidated
bombers. There were 29 in that order. There is
a good chance of getting another nine. Is there
any little thing that you want to take up before
Morris Wilson comes?
Purvis:
Well, I would like to ask you, for instance, you
H.M.Jr:
Very well.
Purvis:
Would there be any harm - our people are prepared to take those. Would there be any harm in
my opening that ball with Secretary Knox again?
H.M.Jr:
remember the old motor torpedo boat question?
Not whatsoever. I think this - it is quite all
right. I think that when we do this thing now,
whatever you do, if you don't mind--
Purvis:
Quite.
H.M.Jr:
I would open the whole thing. You see, when I
get into this thing - as soon as we get Wilson
and get this Chinese thing, I want to make a
little speech for the benefit of Foley who is
doing the legislation and the deadline on it,
the President wants it at nine-thirty Monday
morning, and I would like to have you here, and
then you can fill in, you see.
Purvis:
May I ask this question on that, then? The intention - could the intention be handled, perhaps, a little less dangerously from the British
viewpoint? My understanding is that if the
weapon could be returned as is, if it could be
repaired, bearing in mind the President's case,
however, as he put it on Sunday, could we not achieve
the simplification that it would go if it was
agreed that it was America's contribution to keep-
ing it - its defenses intact? That would get
rid of an amful lot of difficulties we will other-
wise get into. Because I see already that
- 4.-
49
especially difficult thing creeping in, tin and
rubber. Tin and rubber, after all, will be our
working capital.
H.M.Jr:
Look, don't take too seriously anything you see
in the paper on this thing. I am going to make
a little speech for the benefit of Foley and
whoever is going to work with him on it, and,
after you hear it, if you don't mind--
Purvis:
Quite.
H.M.Jr:
If I am any use to Mr. Roosevelt, it is that he
says these things, and he knows perfectly well
when he says them if I don't think they are
workable, it is up to me to tell him so. He has
often said to me, "I have a hundred ideas, and,
if two of them are good, I think I am lucky."
But he has a press conference the way I do, and
they press him and he has got to think of something, and he hasn't thought the thing through.
Well, tin and rubber come to his mind. Well,
that doesn't mean it is going to be tin and
rubber.
Purvis:
No. As a matter of fact, I think it was put in
H.M.Jr:
And you can't--
Purvis:
But it would be a tremendous simplification if
it were made that way. I believe I could give
the Chinese story sufficiently and the note would
come along with him, that is all.
Let's do that because I am awfully tight on time.
H.M.Jr:
Purvis:
his mind.
Yes. The situation is that at the present time This is really off the record, because they
don't want to put this in writing for certain
reasons, but what his happening is the P-40's
are being built up in England for squadron
50
-5-
purposes. The first deliveries took place in
September, the second in October. It takes about
a month for them to get there. They then have
to have certain tuning up done in conformance
with British practice, and then they have got
to be formed in squadrons, and we can't hope,
ever, in shipping planes over there of a new
type like that to build them into squadrons
under two or three months, so that they are
actually flying. Now, actually, they are, however, being used, I understand, in the Far East
and the last 44 are in this number. I believe,
off the record again, the 44 have gone already
down there and that 50 more are routed under
construction, which I am not supposed to put on
the record because it is information for the
enemy.
H.M.Jr:
Well, you know my record.
Purvis:
Fifty being sent, to be perfectly frank, to
Takoradi from which they are flown across the
desert to Khartoun up into the campaign.
H.M.Jr:
Just where is Takoradi?
Purvis:
Takoradi is on the West Coast of Africa. It is
around about here (indicating on map). Then it
is flown right across the desert.
H.M.Jr:
How do they get them there? I have seen dispatches that planes were going there.
Purvis:
By boat.
H.M.Jr:
By boat?
Purvis:
Yes. Morris Wilson is supposed to give you some-
thing on this, see, but actually then what is done
is to take that right across to Khartoum and into
the campaign.
51
-6H.M.Jr:
Purvis:
Do they fly across?
Yes. Takoradi is farther down. It must be in
British territory.
H.M.Jr:
I thought it was right in around here.
Purvis:
Probably in Nigeria. It must be in British
territory.
H.M.Jr:
I think it was somewhere around here.
Purivs:
That is what it would be. It is well around into
British territory. It has got to be, I think.
H.M.Jr:
And the boats go from us to there?
Purvis:
We have got direct boats to Takoradi.
H.M.Jr:
I have seen that in dispatches, and I just
wondered.
Purvis:
That is it. That is the fellow.
H.M.Jr:
Here is the British mandate, the Cameroons.
Purvis:
That is what it is, I am sure. It would be either
Cameroons or Nigeria.
H.M.Jr:
Haven't they taken over the French somewhere here?
Purvis:
Yes, but you see I would think they wouldn't come
too far down because then you get into Equatorial
Africa with jungle, whereas here you can fly over
the desert.
Young:
I have got an atlas in my office.
H.M.Jr:
Oh, no.
Purvis:
I am sure that is the answer. That is really
what is happening. The result is that our people
52
-7are rather coming into an active compaign. They
are genuinely worried about loss of planes in
the very critical three months that we talked
about.
H.M.Jr:
Well, here is the thing. They think the Far
Eastern thing is critical, the Administration
does. We think the drive on Singapore is critical, you see, and we are very anxious to give
these people a hundred of these P-40's. Now,
how many have you got on the docks in New York
awaiting shipment, do you know?
Purvis:
That I don't.
Ballantyne:
Forty-four.
Purvis:
Forty-four is it?
Ballantyne: Yes.
Then that is the 44 for Takoradi.
Purvis:
H.M.Jr:
There are 44 there?
Ballantyne:
There are 44 on the docks.
H.M.Jr:
I am surprised you have so few. There are 44
there, and those are going to Takoradi.
Purvis:
That is probably the difficulty of shipping,
probably, to get frequent opportunities to Takoradi.
H.M.Jr:
Well, do you want to make a counter proposal?
Purvis:
Well, what I would like to do is, I have put this
up to Morris and he may bring in that, but that
is your problem, is to get something to the
Chinese immediately, is that right?
H.M.Jr:
Yes. Have you got a proposal? I wish he would
be waiting here instead of my waiting for him.
53
-8Purvis:
I am sorry. I didn't know quite where we were
going to tackle the legislature first.
H.M.Jr:
No, I want to get--
Purvis:
Yes. I can put something on the table on that.
Can we assume that I will get you before lunch
some suggestions?
H.M.Jr:
But you don't know what the answer is.
Purvis:
Well, England won't give way to us in any way.
Otherwise, every plane that is lost to them is
a loss from the point of view of the campaign.
Therefore, as a proposal, it just doesn't work
out. Anything that has got to go is that amount
lost to the campaign.
H.M.Jr:
You mean we have got to take it.
Purvis:
I mean, we shall - either Morris has got to take
the responsibility with me or it has just got to
be put up to us that this has got to come.
Young:
Here is Takoradi on the map.
H.M.Jr:
Gold Coast?
Purvis:
Gold Coast, yes. That is just where you said.
H.M.Jr:
A little bit further around. Gold Coast.
Purvis:
This is a vital matter, is it?
H.M.Jr:
If I tell you that we had a meeting in Mr. Hull's
Office at which Secretary Stimson and Secretary
Knox, General Marshall, two or three of his top
people, Admiral Stark, two or three of his top
people, plus myself and after this meeting, running an hour and a half, it was decided with that
number of people there that they thought this
was a good move.
-9-
54
Purvis:
Yes,
yes. Did they weigh, at that time, the
possible detriment to the--
H.M.Jr:
Yes. Here is what they weighed. The proposal
was to take 12 of your Consolidated bombers.
That was the proposal, to take 12 of these
Consolidated bombers. And they said no, they
thought you needed those more and could put them
to better use than the Chinese.
Purvis:
Yes, quite.
H.M.Jr:
And is a compromise rather than taking these 12
from you General Marshall said no, you ought to
have those. The compromise was that here are
three hundred planes which can come along in
May, June, and July.
Purvis:
Yes.
H.M.Jr:
And we will be giving you two for one.
Purvis:
Yes. Could we spin them out over a greater period so as to give them at least some of these go-
ing directly?
H.M.Jr:
Yes.
Purvis:
If we could spread it over six instead of three -
as I say, I am not authorized to make any-H.M.Jr:
What do you mean.
Purvis:
Six months.
H.M.Jr:
No, they have got to have enough, you see, to do
a job on the Burma Road. That is where they are
going to go, to keep that thing open. I don't
know--
Purvis:
And the United States hasn't any further stuff?
55
- 10 H.M.Jr:
Purvis:
I have got a terrible job to do for the Greeks
next. I am blocked up on time.
I am sorry. He said he could be here in five
minutes flat. We have been much more. He can
say very little more than I have said. It is
simply that I told him that he had to have a
written statement of a position that could be
put oninthe
record.
more
it than
that.But there is really nothing
H.M.Jr:
Incidentally, the Chinese will take the contract
over. They pay direct.
(Mr. Wilson entered conference)
Purvis:
Morris, I have just said to the Secretary we are
not empowered to make any counter offer to this
suggestion because everything is a drop of blood
out of the thing--
Wilson:
You are speaking for China now?
Purvis:
Yes. And these are really needed for the campaign in the Far East, the ones that are cur-
rently going, is that right?
Wilson:
The Middle East. I have a memorandum. May I
read this?
H.M.Jr:
Please.
Wilson:
"A squadron of fighters are 16 aircraft on the
front line with at least 32 to 40 aircraft in
reserve to insure serviceability of the front
line during continuous periods of enemy action.
Behind each service squadron there has to be a
training squadron equipped with the same type
in order that pilots may be fully trained in
battle tactics on the new aircraft type before
taking their place in the battle line. There
are on order for England under present contracts
56
- 11 -
eight hundred eighty P-40's. This total is
roughly sufficient for 16 squadrons with a
total establishment of 54 each. Present con-
tract totals would thus equip eight front-line
squadrons and eight training squadrons behind
them. To build up the strength of these squadrons will involve a period extending to June
1941. Allowing for the time required for
delivery by sea, re-erection in England, and
delivery to service squadrons, the time required
to build up even this limited number of squadrons
by June 1941 makes it overwhelmingly important
that there should be no interruption in the
flow of aircraft during the early months of
1941, if we are to be prepared for this serious
enemy pressure in the several theaters of war
which will develop in the early spring. So far
as deliveries already made might have been
expected to come into the battle line, it is
pointed out that shipments were not made until
the beginning of October 1940. We got deliveries
in September, but they only shipped in October.
Allowing 60 days for shipment, re-erection, and
delivery to service units, the first aircraft
were with the training squadrons by December
1940. The training of personnel on this new
type had then to take place so it would not be
possible to have battle experience of that type
in the front line before February 1, 1941, or
thereabouts." These figures don't include any of
the three hundred that we have been discussing in
the last few weeks. This, in answer to your
query, Arthur, yesterday, have any of these
planes actually been in the front line and where
are they? This was prepared by Self and me,
some of it from information off the record. We
are told they are going to the Far East. We
learned that through service men who come out
here. London doesn't tell us where they send
these things. We just learn it through conversations.
57
- 12 H.M.Jr:
Is that the whole memorandum?
Wilson:
That is the whole thing, yes. In other words,
they are busily engaged at the present time
building up a fighting line of these planes
down in Egypt.
Purvis:
I understand from the Secretary that the first
thought had been to take Consolidated bombers
from us, but that the point was made that they
would be less - the Chinese would have less I mean that we would loose more with bombers
and they would get less.
Wilson:
Purvis:
H.M.Jr:
Yes.
And the
thatBurma
this was
reached as something to help
with
Road.
And I might say that this whole thing started
with the President and then people who sat in on
this were Mr. Hull, Mr. Stimson, General Marshall,
Admiral Stark and his staff, so it has been something which has gone all over the - I mean it
isn't just a thing lightly arrived at.
Wilson:
If this were just an ordinary trade that came
across the street, from the Mar Department or
the Navy, you would deal on it at a different
level, but this comes from the highest level
and
that is why I say your people over there are
so disturbed.
H.M.Jr:
How many days do they work, six, Curtiss?
Young:
Six, yes.
H.M.Jr:
You see, what they asked to do, the original
proposal, was to get these over there in January,
February, and March, wasn't that it?
58
- 13 Wilson:
Fifteen in January, twenty-five in February, and
twenty-five in March.
H.M.Jr:
What I would like to do - this is my proposal,
that we take two a day for 18 days, that is
three weeks. It gives them 36, and that is what
they need. I mean, I asked him how many they
needed to - before they could put them in the
air, you see what I mean, and they have three
squadrons of nine each. They figure three
squadrons of nine each would give them three
reserve for each squadron.
Wilson:
That is about right.
H.M.Jr:
And he said with that number, they are prepared
to defend the Burma Road, and then the proposal
is one a day after that, so the thing, the way
I figure it, would run about 13 weeks. It would
take about 13 weeks, the way I figure it. The
first would take three weeks, and then one a
day after that would take 10 weeks, so it would
be 13 weeks to complete the thing. On the machine
guns--
Wilson:
That would be 36 in June.
H.M.Jr:
Instead of 50.
Wilson:
It wouldn't be feasible to delay the whole thing
for 30 days?
H.M.Jr:
No. the whole thing is - you know, you people we think you have got even more at stake than we
have. All military information shows that the
march is to the south by the Japanese. The
only way they can get this thing in is through
the Burma Road, and these people haven't got a
thing to keep that Road open. Given these planes,
they can keep that Road open and keep these fellows occupied, and we think it is a tremendous
influence in the whole Far Eastern picture, and
59
- 14 both Hongkong and Singapore are at stake.
Purvis:
The situation is developing very fast whereby we
ought to have, surely, over here sitting with your
people, General Staff people, who could help us
in a situation of this kind because, Mr. Secretary, you can see that from an argument - from
a purely supply angle without due appreciation
of the joint general staff view on such a proj-
ect
this, it is awfully difficult for us,
isn'tas
it Morris?
Wilson:
Oh, we are just messenger boys in things like this.
H.M.Jr:
So am I.
Wilson:
Oh, no, you can make decisions. But we can't make
any.
H.M.Jr:
Oh, no, this isn't - I didn't have a bad night
and wake up in the morning and say, "I want the
Chinese to have so many planes," but this meet-
ing took place in Mr. Hull's office where all
these people sat around and everybody sat around
and discussed this thing after we were asked to
do it by the President, and as a result of a
long conference where everybody had his oar in,
they started to take 12 Consolidated bombers,
and they thought they could be used better. It
isn't a question of that or this. The President
is determined that China get something at this time,
and he has the full backing of his military ad-
visors, you see. He has the complete backing of
the Army and Navy general staffs on this, that
this is highly important. I don't know - I know
your staff knows how far we have gone on the
Philippines, but I am not even going to mention
it. We have gone our limit that we can as far
as the Philippines go, and this is a general staff,
Army and Navy - they are completely back of the
President. Now, I had the Chinese in and this is
60
- 15 the minimum. I said, "How much do you think is
the minimum?" and they are going to ship these
things by boat to Burma and then they go up the
Irawadi River and they are in there and they
have got a factory right in there and they have
the aviators. This isn't an idle gesture. It
means a diversion as far as the Japanese are
concerned. I can't weight the military thing,
but I know that after very, very careful consideration, this is what Mr. Roosevelt wants, with
the complete backing of the Secretary of State and
the Army and Navy.
Purvis:
I think we must feel it that way. There is no
way - could you make it one every two days after
the--
H.M.Jr:
No, because my instructions are to clean this up
Purvis:
I see.
Wilson:
This is just 50, 25, and 25.
N.M.Jr:
Well, it isn't quite that. It is 36.
Purvis:
Thirty-six in the first three weeks.
H.M.Jr:
First three weeks, and then one a day after that.
Wilson:
Oh, yes, yes. Oh, however, we are not quibbling
about that. The last word, Mr. Secretary, that--
H.M.Jr:
What I am saying is two a day for three weeks,
and then one day, and then this would - as to
in the first three months.
when it would go into effect, Philip has found a
hundred and twenty-five machine guns which Colt
ordered - built without any order for China, and
they are on the shelves, and those can go into
the wings, so that takes care of the wing guns;
but the 50-caliber guns, when they are going to
come, I don't know, but all I know is each plane
- 16 -
has to have two 50-caliber guns. That is all I
know. They have got to have two 50-caliber guns,
but the wing guns, we found a hundred and twentyfive, and we are giving them also - they haven't
said yes, but I think they will. They are going
to take 50 of these so-called rebuilt Allison
engines for spares.
Purvis:
It really comes to this, Morris, we have no
Wilson:
Oh, no, Mr. Morgenthau has said to us what Beaver-
option.
brook asked us to find out. He said, "Find out
from Mr. Morgenthau, is this what we call palace
command? If it is, then there is no use to discuss it."
H.M.Jr:
This is - what the President and his Cabinet and
his Army and Navy officials think that with these
very scarce, that this is the best distribution at
this time.
Purvis:
Then so far as--
H.M.Jr:
I mean, I, as I say, can't say - all I can assure
you is, it has been very, very carefully weighed
and in return, for whatever it is worth, you get
two for one. I mean you do get three hundred in
May, June, and July for whatever it is worth.
Wilson:
Oh, yes.
H.M.Jr:
Do you see?
Milson:
Well, I will get on the air with him.
H.M.Jr:
You can get three hundred planes by giving up
one.
Wilson:
Curiously, this command crossed a report that we
had from the other side, Beaverbrook saying that
he had just put up to the Cabinet the statement
62
- 17 -
of our position in regard to the deliveries from
the United States and so on and so on, and asking,
this sound somewhat ironic, asking if you could
do anything to speed things up.
H.M.Jr:
I am going to tell you, I have got another order
from the President which I got on New Year's Eve,
and I an not looking to you, I am looking to the
Army, but just how I am going to do it - he told
me he wants 60 planes for the Greeks. The Greek
Minister came in on New Year's Eve, and the President was in a good humor, so he said, "We will
double what we are going to give you." So I
said, "Well, double zero is zero.
Purvis:
I suppose the British feel they have got their
RAF actually down there.
H.M.Jr:
I know. I needn't tell you how I feel, but here
is the situation and carefully weighed, and I
have got to see that it is carried out, that is
all.
Wilson:
Well, apropos of that, is it fair for us to
infer from what you have just said that we can
forget about the Greek thing so far as we are
concerned, that you are going to deal with that
across the street?
H.M.Jr:
No, I can't give you a promise.
Wilson:
But we need do nothing about it at the moment.
H.M.Jr:
Purvis:
There is nothing you need to do about it. It is
my baby, and I don't like it.
Either its face or its form.
H.M.Jr:
What I SIR thinking of doing is, I am looking my father, when he was ambassador in Turkey used
to have an Armenian secretary, whose name I can't
63
- 18 -
Purvis:
think of, but I an thinking of retaining him
to fight the Greeks for me. (Laughter)
Yes, and a very good time to do it too.
Wilson:
We would be very glad to pay half the salary.
H.M.Jr:
The Armenians are the only people I know that
can out-trade the Greeks. Andonian, that is
his name. He was his secretary the whole time
he was there.
Purvis:
Well, let us put this to London clearly as it
is, Morris. It has just got to be done.
Wilson:
Oh, yes, oh, sure, there is nothing - we will
tell them there is no further discussion about
it.
H.M.Jr:
Now, can I, so that I won't be getting too many
details, can I leave it between the Mission and
Philip Young so that this thing can begin to
go at once? I don't know how long it takes to
put - to beging to crate these things for China,
you see what I mean, so that these first - they
make use of the 125 guns which will be for--
Wilson:
If you are thinking of us, we will act the
minute I get back to the office. I will get on
the telephone and then the idea is, I will tell
you (Young) right away.
H.M.Jr:
I would like to tell it to the President, and I
would like to tell T. V. Soong that it is accomplished. If I could be kept out from now on, I
mean, because there are details to be worked out.
Do they need the thing in Chinese marking and
that sort of stuff?
Young:
No, They can take them the way they are.
H.M.Jr:
Well, what I was figuring, two a day for three
64
- 19 weeks, and then six a week after that. That
gives them their first squadron and after that
they are--
Pervis:
Quite.
H.M.Jr:
Now, could I--
Purvis:
That is that. We fully appreciate your position.
H.M.Jr:
When you first smell ether, it smells sweet.
Wilson:
Well, I think the first thing I will say to the
Minister is that the Greek thing is in cold
storage just at the moment.
H.M.Jr:
Right at the moment I want to get this thing
sewed up, and then we are going after these
Brewsters, are they?
Young:
Republics.
Wilson:
Arthur, have you got that Greek thing? I had
Purvis:
I am sure you had.
Wilson:
You are through with me?
H.M.Jr:
Yes.
Wilson:
Good morning.
H.M.Jr:
Remember in your talk that we first were going
to take 12 of your Consolidateds.
Wilson:
I will tell him that.
H.M.Jr:
Now, we have a good hope to get you nine more
Consolidateds.
great difficulty in getting it.
- 20 Wilson:
I won't forget to tell him that.
H.M.Jr:
There is a good hope of getting you nine more.
65
As a matter of fact, Phil, General Marshall said
if he got some good trade - well, he is two-
Purvis:
thirds committed to it, you see, so I think that
might cheer them up a little bit.
He will need all the cheer.
H.M.Jr:
There is a sixty-six and two-thirds percent
chance of getting you nine more Consolidateds.
There are twenty-nine in that run and the suggestion I made is that you get all twenty-nine,
and I think there is a sixty-six percent chance
that you will get them.
Wilson:
Thank you. I will tell them that.
H.M.Jr:
It was carefully weighed, and they thought you
should have these Consolidated rather than China,
but that was the original proposal. I am going
to try my best to get you the other nine, and
those will be coming immediately, you know.
Purvis:
Morris, we are going to get a half ownership in
the Burma Road.
Wilson:
Thank you.
H.M.Jr:
I thought you had that now. And they have the
ammunition and all that, but I would like, if I
could, to be able to tell T. V. Soong this is an
accomplished fact, you see.
Wilson:
I will get after it right now.
H.M.Jr:
Thank you.
(Mr. Wilson left conference)
- 21 H.M.Jr:
Philip, I would like it if those two a day for
the Chinese could start next Monday.
Purvis:
I wonder whether we have any that are packed
that could have markings changed or something
like that
want.
in order to get the feeling that you
H.M.Jr:
That would be swell.
Purvis:
We
might explore that as a thought, don't you
think?
66
66-
t
ON NEED FOR BUILDING UP DELIVERIES OF
this 11 am me NOTE
P.40'S TO ENGLAND AND MIDDLE EAST
7/H
A squadron of fighters has 16 aircraft in the front line
1.
1
with at least 32 to 40 aircraft in reserve to ensure serviceability in
the front line during continuous periods of commany action.
Behind each service squadron, there has to be a training
2.
squadron equipped with the same type in order that pilots may be fully
trained in battle tactics on the new aircraft type before taking their
place in the battle line.
There are on order for England under present contracts 880
3.
P. 40's. This total is roughly sufficient for 16 squadrons at a total
establishment of 54 each.
4.
Present contract totals would thus equip 8 front line squad-
rons and 8 training squadrons behind them.
5.
To build up the strength of these squadrons will involve a
period extending to June 1941.
6.
Allowing for the time required for delivery by sea, re-erection
in England and delivery to service squadrons, the time required to build
up even this limited number of squadrons by June 1941 makes it overwhel-
mingly important that there should be no interruption in the flow of aircraft during the early months of 1941 if we are to be prepared for the
serious enemy pressure in the several theatres of WET which will develop
in early spring.
7.
So far as deliveries already made night have been expected
to come into the battle line, it is pointed out that shipments were not
made until the beginning of October 1940. Allowing sixty days for
shipwere
ment, re-erection and delivery to service units, the first aircraft/with
the training were squadrons by December 1940. The training of personnel
on this new type had then to take place, SC it would not be possible to
have battle experience of the type in the front line before February
1941 or thereabouts.
NOTE: The total of 880 aircraft given in Program 3 does not include
any of the 300 aircraft now being discussed for additional deliveries
in May, June and July, 1941.
January 2, 1941
12:05
RE ATD TO PRITAIN
Present:
Mr. Purvis
Mr. Foley
Mr. Cox
Mr. Young
Mr. Ballantyne
Mrs. Klotz
H.M.Jr:
You gentlemen sit still while I give you a
little speech.
Here is the thing. And I say, we have to have
it by 9:30 Monday morning. As I get it, what
I think the President wants and he is groping
for is legislation which would give him a free
hand to have the Army and Navy place orders
in this country for the material that they
need, and adding to these orders as much more
of a particular commodity as they think we will
be called upon to lend to England or to China
or to Greece.
Now, in the conversations that we had with them,
he said quite frankly that he couldn't envisage
even what we might need. Do you remember?
Purvis:
Yes.
H.M.Jr:
And that when Mr. Purvis told him that he was
going to give him an inventory- he finally
got to the inventory as to what the English need-
68
-2he said, "Well, that is fine, because we
don't have such a thing ourselves." And I
am getting the thing - I am going to tell
him it the way I see it, and then Purvis,
who was with me, can fill in.
As I see it, for instance, what he could say
is this, that we need a thousand tanks or
ten thousand tanks. Well, that is what we
think we need, and the English say they need
five thousand. "Well, all right, Army, create
the facilities for 15,000 tanks and go ahead
and build those facilities, the Army placing
the order for that.
Now, the President was very clear in his
discussions with us that he wanted the extra
facilities built and that it is just too bad
if the manufacturer is going to worry what
happens afterwards, because nobody can tell
anyway, but he very definitely wants these
additional facilities created so that we can have
the capacity to take - build as much as we now
see that we need, plus what we know that the
English want, or any other country that might
need it.
Now, I think that that is as to the - I mean,
this is the way I assimilated it, after thinking
it over, what he needs and what I think he
should want.
Purvis:
Yes, and he visualizes sacrifices of civil
goods, luxury goods, in doing it.
H.M.Jr:
He gave examples and said, "After all, people
can get along without cream separators, but
after all, they are people that make a highly
technical piece of machinery; I am sure they
can make gun mounts or anything else."
69
-3But then the point that he made, which I
thought was significant to show how he was
thinking, he wants Congress to leave it to
him to say, "Well, of these 15,000 tanks,
as the situation arises I may want to give
so many to England, so many for ourselves,
and so forth. n He says, "You can't tell from
day to day," and he wants a blanket authority
from Congress. He, as Commander in Chief,
should have the discretion to say how much
he can distribute. In other words, he doesn't
want to tie it down that the English get so
much, the Greeks get so much, China gets so
much. In other words, after thinking the
whole thing over and getting all the infor-
mation, we need 15,000 tanks and we need them
in a year.
All right, go ahead and build the canacity.
The Army places the order, and then he, the
President of the United States, can say,
"Well, of those I am going to lend so much to
this and so much to that. Are we together
so far?
Purvis:
Correct.
H.V.Jr:
Now, as to the lending and the method of
repayment, I don't know any law but if the
word can be simply lend and leave it very
much up in the air as to how they should be
repaid, I think that that is what he wants,
because it is to show that he doesn't know
and he hasn't got anybody else working on this,
as far as I know. It is very much up in the
air, and how can he say if and when the war
is over what England will want to give back to
us, what she wants to do about the civil
population, whether it is wise to build up a
big force in India or Australia, where the weak
70
-4spots are that have to be strengthened, or
just how quickly we want the thing back, what
do we need for the reconstruction period
and what does England need, and one of the
things that is worrying England and after all,
certainly talking for myself, we are not going
to be short sighted and I think in my prognostication so far I said what would happen. I
don't think I have been very far wrong.
Purvis:
Correct.
H.M.Jr:
Certainly there will be every reason in this
country to do everything possible to help England
during the reconstruction period, provided there
is a just peace.
Purvis:
Yes.
H.M.Jr:
I add that. So I think - and I am sure that they
will want a just peace after going through
Versailles. We are certainly not in our
generation going to make the same mistake
twice.
Purvis:
Never.
H.M.Jr:
Now, this part I haven't studied, but I have
looked a little bit ahead and I certainly think
that that - we will throw our weight of our
influence on that side. In other words, to
go back to the free trade as far as possible and
raising the standards of living of the people
of the world so there isn't over again - I hope
in the time of my life and the time of my
children - a repetition of what happened due
to the shortsightedness of Versailles.
Purvis:
Right.
71
-5H.M.Jr:
And no one has discussed this with me, but
this is my OWN feeling, and I think that that
is where we will want to throw our weight in
and I am sure that it will be sympathetically
received on that side, but if there was this
thing of again setting the stage so that in
another 20 years we would be right where we
are now, I don't think we would want to be a
party to it. So I don't think that England
and Sir Frederick Phillips, who is here for
the Treasury, want to worry too much. They
have just got to trust Mr. Roosevelt and this
thing of lending and how it is to be repaid,
the words 'in kind" - the most elastic words.
Foley:
On such terms and conditions as the President
H.M.Jr:
I think I have outlined what he has told us,
shall prescribe.
vlus what I have added of my own interpretation
to what I think he wants, plus what I think
is good.
Now, I have finished. You were there, you
heard the whole thing.
Purvis:
I think cutting out all the necessary detail
that surrounded it, I think that - and certainly
that last thought of yours is very definitely
what he had in mind, because he said we would
have to perhaps trust - I mean he made a very
significant remark.
H.M.Jr:
About being trusted and about if he knew the
English people, the English knew that he knew
them.
Purvis:
That is right, I remember that part of the
H.M.Jr:
You know he said to Lothian, "I know the English
people," and Lothian said, Yes, they know
conversation.
72
-6that you know them."
Purvis:
That is what he said.
H.M.Jr:
But isn't that about the thing?
Purvis:
Yes. I think that is what he has very definitely
in mind. The thought I would like to introduce which was not said by him at all, in fact
the reverse, but it does seem to me - think it
over - that if the situation could be left so
elastic that he could decide either at that
time or that there would be nothing said that
would destroy the possibility of his deciding,
that where weapons have actually been demolished
they wouldn't necessarily have to be rebuilt
and replaced as such or in kind - I mean,
otherwise that might go as America's contribution
to the war. What could be returned, what still
existed, or what had to be repaired, but the rest
might be -H.M.Jr:
Look --
Purvis:
It is the same thought you have to leave it open
H.M.Jr:
I wouldn't worry too much about this thing. I
so that he can do it that way.
was with the President for an hour this morning
on another matter. The only thing that all of
us are worrying about is, we want to make sure
that you win.
Purvis:
That is right.
H.V.Jr:
And I know that he is not worrying, and neither
am I, what is going to happen after you win.
All of our thought and all of our energy and
everything we have got has got to go toward
that one thing, and certainly as long as I am
here there will be everything that I can do
73
-7-
after the war is over to see that there will
be some kind of a rationalized world where
people like the English and ourselves can live
and let other people live.
Purvis:
That is right.
H.M.Jr:
And to try to set the stage when we might hope
to go for 40 years instead of 20, but I mean and that gets down to a question of just how
broadminded all of us are in trying to make
room for everybody so that everybody can have
enough to eat and enough to wear and a house
over his head, and not have this economic
pressure which drives people to war.
Now, that is the whole thing.
Purvis:
That is right, that is the whole thing; and
there is nobody, I believe, that the British
people would rather trust in that regard than
the President of the United States.
H.M.Jr:
Well, they have got to trust him.
Purvis:
But I mean I don't think there is anybody they
would rather trust.
H.M.Jr:
Here I am and whatever authority or capacity
I have, I am letting you know how I feel.
Purvis:
Can Congress be expected to grant powers of
a broad kind?
H.M.Jr:
Well, that is what the President wants. Now,
he can see, and then he wants me at 9:30 so
that immediately after he can give it to the
leaders, Monday morning.
Now, am I asking you something which is impossible?
74
-8 Foley:
No, not at all.
H.M.Jr:
When do you gents think you could have some-
Foley:
When do you want it? You tell us.
H.M.Jr:
How long since you have worked all night,
thing for me to look at?
Cox?
Cox:
Three days. I am getting out of training.
H.M.Jr:
I mean counting New Year's Eve out. (Laughter)
Foley:
H.M.Jr:
That was only night before last.
Well --
Foley:
We can do it.
H.M.Jr:
Here is the thing. I am giving you people
tomorrow morning for Treasury legislation,
10:30.
Foley:
We can have something on this by 10:30 in the
morning.
H.M.Jr:
I don't mean a finished document with all your
Foley:
No, it won't be finished, but we know now
what we want to do, and how we would like to
references.
go ahead and I would like to tell you a little
bit of what I have in mind if I may.
H.M.Jr:
If you will. I waited until Purvis was here.
Purvis:
This was quite in accord with the general picture.
H.M.Jr:
If they gave you a memo, and all the details with
what you have read in the paper, I think it would
75
-9be misleading.
Previs:
Quite.
H.M.Jr:
Go ahead, Ea.
Foley:
Last June, a statute was passed which gives
the President in his discretion certain powers,
and the statute is entitled "to authorize the
Secretaries of war and of Navy to assist the
governments of the American Republics to increase their military and naval establishments
and for other purposes. " Now, that discretion
is given to the President and then he may
authorize the Secretary of War to use the
facilities of our arsenals and our gun plants
and the things that are operated and controlled
by the government to produce for sale to the
South American republics war supplies and
things that they need to build up their
defense, and the same thing is true in so
far as the Navy is concerned. He may authorize
the Secretary of the Navy to use our ship yards
and our navy yards and our gun plants and so
forth to build for South American order and
for their use, gun boats and war ships and
airplane carriers and submarines and all the
rest of it.
Now, I think that if we start with that statute
which is a legislative framework, and we enlarge
it to include such countries as the President
in his discretion may deem proper and necessary
and then enlarge it further to permit orders
to be placed with private manufacturers for
airplanes and guns and every other thing that
is necessary to carry on a war, and then to
sell or otherwise lease or dispose of on such
terms and conditions as he may prescribe that
materiel, and then --
76
- 10 H.M.Jr:
Can I interrupt you? One point the President
made very clear, he wants this direct, no RFC,
no monkey business. Remember?
Purvis:
That is right.
H.M.Jr:
No monkey business. Army places the contracts
direct, no corporations, no monkey business
and no - he said, "We don't want to fool the
public, we want to do this thing right out and
out."
Purvis:
He went so far as to say the Neutrality Act would
probably have to be amended to permit of a
belligerent - of the United States Government
loaning goods to a belligerent government.
Foley:
That we would have to trim out of this statute.
This statute has that in there. It says,
"Provided further that no transactions authorized
herein shall result in expense to the United
States nor involve the extension of credits
by the United States," and that, of course, we
will have to get out of there.
Purvis:
It does not contemplate any change in the
H.M.Jr:
And also he said, "I want to do this right out
in the open. This will be an order of the Army
Johnson Act.
to the manufacturer.
Foley:
In so far as expanding the plant facilities are
concerned, I should think that within what we
have now we have got all the power we need. I
don't think we need any additional power to do
that. We have got the full resources of the
RFC available through the Defense Plant Corporation
to build and to lease or to otherwise dispose.
of under some kind of a management operation,
77
- 11 contractor or something of that character,
plant facilities that are necessary to meet
these orders that would be placed not only
for our own use but for your use or any other
country's use. So I think we can limit it
to enlarging the countries, this statute,
and also enlarge the powers in the statute
by authorizing the work to be done under
private contract with private manufacturers
and then get a large appropriation, whatever
is necessary, to carry out the purpose of
this act.
H.M.Jr:
Well, it sounds all right. I will tell you,
Arthur, if you would be in here tomorrow, you
may have to wait a little bit, about a quarter
of eleven.
Purvis:
Yes, I will.
H.M.Jr:
And then I would be glad to have you listen
and we will do some of the other Treasury
things first, you see.
Purvis:
Thank you very much.
H.V.Jr:
You come in at quarter of eleven, you see. We
will have something for you to see.
Now, while I am hitting on all six - are you
through? (Foley)
Foley:
Yes, I am through.
H.M.Jr:
There is an entirely different thing which I
want you to be thinking about which also the
President hasn't thought through. During this
interim - and Cox is in on this and Phil -
we have got to find some way that these orders
can be placed, legally.
78
- 12 -
Now, Phil has managed a letter of intent, but
this whole thing has bogged down and there is
some way certainly amongst us here, there are
brains enough and hearts here to do this thing.
There are brains enough to find an interim
plan, letter of intent, or something you see,
like you did with the airplane people. You
give these fellows a letter and you say, "Go
ahead and get everything lined up."
Purvis:
In many cases that would involve the putting
down of a much lesser sum if the President's
prohibition did not apply against the signing
of a letter of intent as we have viewed it as
applying against assigning of a contract. If
we could get it to that point that a letter of
intent could be used, undoubtedly the sums that
could be required to ease us over, it would be
a palliative.
H.M.Jr:
If by chance we could also have that by 9:30
Monday, you see, so he could lay this before
the Congressional leaders and say, "Now look,
here are two things, the permanent legislation
and the emergency act, and the Army is going
to go ahead and get a fellow _" well, they are
short on machine guns. Now, all right, we
have got to have double capacity of machine guns
and they are going to tell such and such an
organization to go ahead and build a plant in
Kansas City and St. Louis to do the thing up
to the point of actually spending the money, but
they have got to get the materials and the plans
drawn and so forth and so on. I mean, they are
not going to spend the money, but they are going
to have everything so that when the day comes
that the bill passes, the whistle blows and the
steam shovel begins to function. I mean, to
use an example, when I had Procurement and
79
- 13 Buildings and they voted so many hundred post
offices that we should build and the bill was
going through, the day the President signed
the bill they started to dig for a post office
in every congressional district in the United
States. They voted 150 million for national
defense in July, and they haven't, I don't
believe, spent a dollar of it yet. What I
envisage is that everything will be done up to
the point that when he signs the bill, they
have gone so far that the steam shovel will
begin to work that day, which would save you
three months, wouldn't it?
Purvis:
Oh, undoubtedly. That would bridge the gap
if we can get a situation which is sufficiently
substantial for the manufacturer to see that
it is going to mean business.
H.M.Jr:
My post office example is very good. I mean,
they vote 360 post offices or whatever it is.
Now we go ahead and get the contractor, get
the design, we get everything down until
actually the fellow was ready to start the
steam shovel when the President signed it.
Which would save six months.
Purvis:
Knudsen is the man who has got to understand
that or whoever is the Procurement head.
H.M.Jr:
I hope - you see, the Budget - this is Treasury
gossip and White House Budget - is over there
right now seeing the President, trying to get
an Executive Order fixed up which will say
what Mr. Knudsen's duties are. That hasn't
been signed yet. But once we know that, whoever
the person is we work with, I take it if I have
such and such a plan the President will say
this is fine and go ahead and do it.
Purvis:
That is right, get it all up to date.
80
- 14 H.M.Jr:
But no one else is thinking on this thing the
Purvis:
Don't let's muddy the issue.
H.M.Jr:
Here is what the British want, this is their
priorities, this means additional plant capacity;
way you and I are, so if we could have something for him, you knowing what your needs are and that is why I shied off doing torpedo boats
because we don't want to --
now why can't we go ahead up to the point of
putting the steam shovel to work, which would
mean from three to six months argument, etc.,
etc.
Now, I don't - I know it can be done.
Young:
Well, the RFC is ready to go ahead now and
H.M.Jr:
The President doesn't want the RFC.
Young:
Not on building capacity?
build the capacity.
Purvis:
Yes, he did mention that we might get some
money in the interim.
H.M.Jr:
That is right. He asked did they have any
Young:
Jesse will build plants without any orders being
authority left.
placed.
H.M.Jr:
He raised that.
Purvis:
He raised that. He said he felt that there was
the unexpended contractual balances wherever
they might exist. He mentioned his own in
connection with ships, merchant ships. He then
referred to the possibility of also getting
from the RFC certain interim funds and then he
81
- 15 -
raised himself the difficulty which he said
ought to be legally considered as to whether
one had the right to use balances totally in
the construction of a plant without including
any payment for the actual goods that come
out of the plant.
Foley:
Well, that the RFC clearly has, and that is why
the RFC is ideal and that is why I mentioned that
I didn't think we needed to have any additional
authority in so far as the capacity of production
is concerned. RFC has not only the funds, but
they have the power to build a plant now, even
though no orders are in sight for the plant.
They have got the power to do it, and they
wouldn't have to wait until this money was
available and this authority - they could start
right now and they could begin to build all
over the country different kinds of manufacturing
plants with a view to authority being placed
for the orders.
H.M.Jr:
If Congress decided in its wisdom to do it.
Foley:
But they could build them and just leave them
there and wait.
Purvis:
I think it is hopeful. I am delighted to see
H.M.Jr:
the way you are tackling it.
While I happened to be hitting on all six, I
wanted to go through the whole line. I think
that is the thing. Do you think of anything,
Philip?
Young:
No. Jesse told McCloy over at the War Department
he was ready to go ahead on that basis. It might
take a little persuading.
H.M.Jr:
When did he tell him that?
82
- 16 Young:
Oh, about a week ago. .
H.M.Jr:
Well, this would be a whole program, you see.
Now, what I think the President should do,
when he sees the leaders at ten o'clock
Monday, say, "Well now, here is what - the
kind of legislation I want and this is what
I am proposing to do in the interim. Can I
get backing on the Hill for it?" you see.
And if they would say, "Yes, it is all right."
Purvis:
Yes.
Cox:
Does the President have any objection to using
the monies over in the War Department which
have been scraped together for Fourth Quarter
maintenance to place orders pending the RFC's
production capacity expansion?
H.M.Jr:
I thought they had done that.
Purvis:
I used the terms that contractual balances might
be available.
Foley:
That would be for the orders and the RFC funds
Purvis:
That is right.
Foley:
So you could go ahead on both fronts to some
H.M.Jr:
Well --
Purvis:
Now then, could we - if we could get a talk could Sir Frederick Phillips join with the
for the plants.
extent, to a limited extent.
crowd where there is any - so that he can come
into this thing and realize how it is going?
H.M.Jr:
Let him come in at eleven tomorrow. Anybody
83
- 17 -
that you want to pull along with you, bring
them at eleven. Not too many. Weir and
Phillips?
Purvis:
That would be the maximum.
H.M.Jr:
I don't think you need any help between now
Purvis:
Well, if you do, we are available at any point.
H.M.Jr:
and eleven, do you, Ed?
"ell, fairly early in the game I think we ought
to have somebody from the Attorney General's
office sit in with us. How about eleven tomorrow?
Would that be a good time? Think it over.
Foley:
All right. I don't think it is necessary at
eleven tomorrow, because if we draw them in
they will want to do it their way and not our
way. Let's get something down. There won't be
any question of legality here. This isn't like
an executive order that has to be approved. We
can draft it so it is constitutional all right.
H.M.Jr:
There are two ways in Washington to do a thing.
Go around and tell everybody what you are doing
and ask for their cooperation and get nowhere,
or do it as secretly as possible --
Purvis:
And fight it out to a finish.
H.M.Jr:
And then give it to the President.
Purvis:
Yes. Well, I must say I am very relieved and
I think it is quite in accord with the spirit
of what he has said. Now, I think we should
leave you and I thank you very much.
H.M.Jr:
Well, that is the thing.
84
January 2, 1941
2:10 p.m.
H.M.Jr:
Hello.
Wn. S.
Knudsen:
Hello.
H.M.Jr:
Bill?
K:
I just wanted to wish you a Happy New Year.
H.M.Jr:
That's what I wanted to wish you.
K:
Thank you 80 much.
H.M.Jr:
How are you?
K:
Pretty good, sir.
H.M.Jr:
And your family?
K:
Fine, thanks.
H.M.Jr:
I'd like to see you sometime, whenever it's
K:
All right. Later in the afternoon?
H.M.Jr:
What's that?
K:
Later in the afternoon?
H.M.Jr:
Today?
K:
Yes.
H.M.Jr:
I'd rather do it the first thing in the morning.
K:
Fine.
H.M.Jr:
How about 9:15?
K:
I'll pick you up.
H.M.Jr:
You want to pick me up at the house?
K:
Un-huh.
convenient.
85
-2H.M.Jr:
K:
H.M.Jr:
What time?
You set the time.
Oh
K:
8:30?
H.M.Jr:
8:30 will be all right.
K:
All right, sir.
H.M.Jr:
Because I'd like to tell you what the status
of the English situation 1s.
K:
Yeah. All right, sir.
H.M.Jr:
I'll see you tomorrow morning.
K:
Yes, sir.
H.M.Jr;
Good-bye.
86
January 2, 1941
3:45 p.m.
RE CHINESE PURCHASING PROGRAM
Present:
Mr. Soong
Mr. Young
H.M.Jr:
This is what happened this morning. I saw
Mr. Purvis and I told him it was the wish
of this Administration and I hope that
not later than next Monday, if possible,
they would give you two planes a day for
18 working days, that is three weeks, or
36 planes, and then one plane a day for the
next ten weeks, or a total of a hundred;
that there were these 125 guns which Colt
had and which were available; but that these
planes must have - how I don't know, but
they just must, each of them, have two 50
calibre guns.
Now, they agreed to this program. I said
the final details would be between you and
Mr. Purvis, with Mr. Young assisting you, but
I considered it an accomplished fact, that I
could say it was finished. As to the details,
that was between you and them and the Curtiss
Company, and Vr. Young can assist you.
Has anything happened since then
Young:
Not that I know of.
H.M.Jr:
So the rest is up to you. But that is the
proposal. Two a day until the 18 working
87
2-
days are over, which would be three weeks,
when you will have 36, and then one a day
for ten weeks; so in is weeks, beginning
Monday, you ought to get a hundred planes,
13 weeks. That is that.
Now, have I stated it all, Philip?
Young:
H.M.Jr:
That is all there is to it.
So I think if you - any time you can call up
Mr. Purvis and say you want to talk to him
about it. He is here in Washington now.
Soong:
I thank you for it.
Young:
No ammunition included.
H.M.Jr:
No, except that I said each plane must have
two 50 calibre guns. Those are the two that
fire through the propeller.
Soong:
No ammunition for that?
Young:
For the 50 calibre? No.
H.M.Jr:
Who has the ammunition?
Young:
The British have some 50 calibre ammunition.
H.M.Jr:
Well, they will have to give it to them. There
Young:
You don't have 50, but you do have 30, don't you?
Soong:
Yes.
H.M.Jr:
But no 50?
Young:
No.
is no use of giving them the planes and guns
without the ammunition.
88
-3H.M.Jr:
We will have to, Philip. There is no use
doing this thing half way. Enough ammunition
to keep the planes going. It will have to
come out of that pool. We have gone to all
this trouble now, and I don't want to have
planes without any ammunition. So that is
that.
Soong:
Well, thank you very much, Mr. Secretary.
H.M.Jr:
I hope with Mr. Bell that we will get - when
are we going to be ready on that?
Soong:
I hope it will be tomorrow.
H.M.Jr:
Is that when it is? I hadn't heard.
Soong:
Thank you.
H.M.Jr:
Good-bye.
89
January 2, 1941
3:55 p.m.
H.M.Jr:
Hello.
Operator:
Harold Smith.
H.M.Jr:
Hello, Morgenthau.
Harold
Smith:
Yes,
H.M.Jr:
How are you coming?
S:
Pretty good.
H.M.Jr:
S:
H.M.Jr:
Anything
interestednew
in? on that Order that I'm personally
No, there isn't. We just took over this
Defense Commission order and that's gotten a
little snarled up and I think he wants to
straighten that out first.
I see. So there's nothing new on the one I'm
interested in.
S:
No, no.
H.M.Jr:
How do you feel about it? Have you had a chance
S:
to read it?
Yeah. As I look over it as it stands now, I
just have one quick reaction to it, that the
factor of production ought to be left out of
it and that it ought to be solely on the
Cabinet level.
H.M.Jr:
Well, that's something that I wouldn't fight
about.
S:
Yeah. Well, that reaction comes out of trying
to balance off a little pulling and hauling
that has been going on this week in connection
with reorganization of the Defense Commission
itself.
H.M.Jr:
S:
Just a little pulling and hauling, huh?
(Laughs). I just got through telling the
President that my shoulder sockets were all
sore I'd been yanked around so much.
90
2H.M.Jr:
S:
Well,
I'll call you again or if you happen to
have anything on that
Yeah. Well, I tell you, I think there is no
use in taking it over to him until he gets
this other - now he's revised this and I
think there is going to be a little struggle
over it and we thought the other Order would
be signed today in which event we'd get this
other one into the hopper. But it wasn't
signed today and he's going to see Hillman
and Knudsen and I suspect there's going to be
some fireworks in other directions, I don't know.
H.M.Jr:
S:
H.M.Jr:
O. K.
All right.
Thank you.
91
January 2, 1941
I spoke to Justice Frankfurter tonight, and
asked him whether he would be ready to look over our
proposed legislation on how to lend war materials to
England. He said he would be very glad to have it left
with him so that he could read it.
Justice Frankfurter also was kind enough
to say that he had a conversation with Justice Brandeis.
Justice Brandeis told him that after having talked with me
he found that I seemed to have ideas which fitted in with
his more closely than anybody else connected with the
Administration. I evidently had made a hit with the
old man.
92
January 2, 1941
MEMORANDUM
wer
TO:
Secretary Morgenthau
FROM:
Mr. Gaston
Supplementing my previous memoranda, the following
charter of a vessel of the United States to an alien is
considered of interest:
SS SCHOHARIE (Official No. 217799) - Application
filed by the South Atlantic Steamship Company for
approval of charter to Mitsubishi Shoji Kaisha, for one
voyage with a cargo of gasoline and lubricating oil from
a United States Gulf port or ports to a port or ports in
Japan, loading commencing on or about December 15, 1940.
Approved 12/7/40.
93
HAROLD K. HOCHSCHILD
SUITY-ONE BROADWAY
NEW YORK
January 2, 1941
Honorable Henry Morgenthau,
Washington, D. C.
Dear Henry:
Enclosed is a brief memorandum on the silver
item I mentioned to you this afternoon. If I get any
more reasonably authentic dope I'll pass it on to you.
Your suggestion that we go out to La Ose together on January 30th or 31st for a week or so hit the
bull's eye with me and immediately filled me with a
yearning for the great open spaces. Following our talk
I made inquiries from counsel about the case I referred
to and find it is more than likely that I can get away
for that week, but I won't know positively until January 20th. In the meantime, please make my plane reservations with yours on the assumption that I will be
able to go. Aside from the pleasure of being with
you, the trip is really important to me because I have
practically run out of my supply of stories, and I
want to replenish it from Dick at the earliest possible
moment. Incidentally, I am confidentially informed
that one or two of our old ranchmates (no, I don't
mean Flora) are going to be at La Osa around the end of
the month.
Sincerely,
Harold
Inc
94
New York, January 2,1941
To the Honorable Henry Morgenthau:
I understand that during the past few months the
airplane industry has been using increasingly important
quantities of silver solder. This is made of an alloy containing 50% silver and 50% zinc and cadmium combined.
The indications given to me of quantities of
silver being consumed for this purpose sound so fantastic
to me that I hesitate even to quote them without further
investigation. I am making inquiries through various chanmels and will transmit any further information received that
sounds reliable.
Harold K. Hochschild.
9
95
January 2, 1940
Messrs. Kuhn, White and Bell prepared the attached
drafts for the Secretary's use at his press conference when
he expected to be asked for comment on the Eccles' statement.
However, the Secretary was at the White House while the men
were working on the drafts and returned just in time to hold
his press conference. He, therefore, did not have an opportunity to see these drafts before he met with the newspaper
men. His comment at the press conference was, "I would say
that the matter is under study."
96
Chairman Eccles showed me the special report of the
Federal Reserve Board on monetary and reserve matters before
making it public. This was a courtesy that I appreciated.
I was not asked to give my approval to it and it was
clearly understood that I reserved my opinion as to the merits
of the various proposals made by the Board of Governors.
I have very serious doubts as to the wisdom of attemptsome
of the Board's recommendat tions, This
to
increase
with
particular
If
requirements.
applies
to
of
in interest mater the monitor would be very unfortunate in my
certainly
opinion I don't think this is a time to lock up financial
A
resources any more than it is a time to lock up any physical
resource that we shall need in our defense effort; nor is it
a time to increase the cost to the government and the people
of making full use of any resource.
97
In so far as this report draws public attention to the danger of
inflation in our defense effort, I an glad that it has been made.
You will remember that I mentioned it to you weeks ago. and said that it
was one of my chief concerns. I have been having constant discussions
about it with Leon Henderson, and both of us are determined to nail any
sign of a rising spiral, and to nail it hard, as soon as it appears.
Specifically, what I have in mind is the sudden rise in one or two
commodities that are essential to the defense effort. There has been
no all-round rise; TO are seeing to it that there shall be none.
Ta are not going to let prices run away or even begin to run away.
so,
determined
There they show signs of doing, A we are going stop the process at the
very beginning.
That to my mind is the first and best way to guard the people of
this country against inflation. The first and best way, in other words,
is not to let it start. That is another reason why I have doubts, serious
doubts, about the recommendations in Mr. Eccles' report. accept #*
these
proposed - Moreover, a rise in interest
&
rates at the present time would tend to push prices up at the very moment
when we want to keep them down. It would hamper the defense effort and
create the very evils which the Treasury and the Defense Commission are
working to avoid. This is not the time for tinkering with money rates.
It is the time for a resolute job on the prices of physical things.
That is the job the Administration is now doing.
carbonwith
98
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
free Becameria 2.
DATE January 2, 1941
Secretary Morgenthan
Mr. Foley
Memorandum for the Diary
Re: Meeting with Senator Glass on
Bank Holding Company Legislation.
Messrs. Delano, Foley, and Sherbondy discussed the Treasury De-
partment's draft of the bank holding company bill with Senator Glass in his
suite at the Mayflower Hotel on Thursday morning, January 2, 1941, at 10:30.
Mr. Delano opened the discussion by explaining briefly the necessity for legislation to control adequately holding companies of banks, after
which Mr. Foley pointed out the differences between the Treasury Department
draft of the bill and S. 3575, introduced in 1938 by Senators Glass and
McAdoo. A comparative summary of the Treasury draft, the Treasury draft
bill and S. 3575 (a copy of each are attached to this memorandum) were left
with the Senator.
Mr. Foley emphasized that the Treasury draft would require all
companies to reduce their holdings of stock in insured banks to 10% by June
30, 1944, while S. 3575 would, in effect, freeze the existing situation in
that it would not require holding companies to dispose of any stock in insured banks which they now hold.
Mr. Foley also pointed out that the Treasury draft contained a
provision prohibiting insured banks from paying dividends over the objection of the Comptroller of the Currency with respect to national banks,
and the Federal Deposit Insurance Corporation with respect to State insured
banks. Mr. Delano stated that, although he was aware of the arguments
against concentrating too much authority over banks in an administrative
agency and he recognised that veto power over dividends paid by insured
banks was a rather powerful sanction, he felt sincerely that such control
was necessary if the problem were to be effectively net. He pointed out
that such veto control over dividends was necessary prior to June 30, 1944,
in order to prevent holding compenies from bleeding banks prior to the date
of the termination of holding company control, and that it Was also needed
as a general sanction of indefinite duration for the Comptroller of the
Currency over all national banks. Mr. Foley emphasized that the dividend
control was a negative sanction, and did not require the approval of all
dividends paid by insured banks.
99
2-
At one point, Senator Glass stated that he was impressed by
the fact that much of this expansion of holding company systems had been
permitted .he various Federal banking agencies. In reply, Mr. Foley
pointed out that, although the Comptroller of the Currency had certain
sanctions, such as appointment of a conservator, publication of the report
of examination of a national bank, and a proceeding before the Board of
Governors of the Federal Reserve System to remove directors and officers,
those sanctions were either too drastic or too cumbersome to be used.
Senator Glass indicated that he was entirely in sympathy with
the purpose of the legislation, namely, to restrict the concentration of
control of banks in the hands of a small group, and he stated specifically
that no man should have the control over banking presently held by A. P.
Giannini. He stated, however, that he was desirous of introducing a bill
which would pass, and would not want to introduce a bill that would result
in excessive opposition.
Mr. Foley pointed out that the Treasury draft had not been
shown to anyone outside the Treasury Department, because it was desired
to discuss it with Senator Glass first, since he might care to suggest
certain changes. Mr. Foley informed Senator Glass that the matter had
not, as yet, been discussed with Senator Wagner, pursuant to the understanding with Senator Glass, because Senator Wagner had not been available. The understanding was that Senator Wagner would return to Washington
shortly after January 1, and that he would call and arrange to see Secretary Morgenthau, Messrs. Delano and Foley.
Senator Glass stated that he desired to discuss the legislation
with Mr. Crowley and with Senators Wagner, Adams, and Byrnes. He indicated
that he preferred that the Treasury Department not discuss the bill with
persons outside the Department, until he indicated that the time to do so
was appropriate. It was agreed, however, that when Senator Wagner telephoned the Treasury Department the general character of the problem would
be discussed with him, but that he would not be given a copy of the Treasury
draft of the bill.
In terminating the conference, Senator Glass said to Mr. Foley
that it would appear from glancing at the Treasury draft that it was
simpler than his bill.
E.nth
100
January 2, 1941
TREASURY DRAFT
S. 3575 - INTRODUCED BY SENATORS GLASS
AND McADOO
DEFINITIONS
VINITIONS
omany means any bank, corporation,
artnership, association, joint stock
company, business trust or organized
group of people, or any receiver,
trustee, or other liquidating agent
of any of the foregoing. Sec. 2(1),
page 1.
"Control" defined as ownership of more than
10% of voting stock for electing directors, or domination of election of majority of directors, of an insured bank
or any other company. Sec. 2(7), page 2.
"Holding company of an insured bank defined as:
(1) Any company which "controls" insured
bank.
(2) Any company which "controls" another
Company which "controls" insured
bank.
(3) Every company in a system of "oontrolled" and "controlling" companies,
in which any company or combination
of companies "controls" the insured
bank. Sec. 2(8), page 2.
"Affiliate" of an insured bank defined as:
(1) Any "holding company" of the insured
bank.
(2) Every company in a system of "controlling" and "controlled" companies
in which any company is "controlled"
by the insured bank or by the "holding company" of such insured bank or
by any company or combination of
companies in the system.
(3) Any company having one or more shareholders who own more than 50% of the
voting stock for electing directors
of both the company and the insured
bank. Sec. 2(9), page 3.
BOLITION OF HOLDING COMPANY CONTROL OF
RESTRICTIONS UPON HOLDING COMPANIES
BANKS
effect, abolishes holding companies,
effective June 30, 1944, by providing
that, after June 30, 1944, it shall be
unlawful (1) for any company to own, con-
tol, hold, or more than of
securities of insured bank,
more
than 10% an of the 10% voting
or the (2)for
voting
acquire
securities of an insured bank to be held
for the
holdare
by any
trustees
of benefit of
stockone company,
or the
(3) for
any
001 of ny to cont rol in any manner the election
o majority of the directors of an insured
bank or the management or policies of an insured
bank.
(Thus holding companies would have to reduca
to 10% all or their less) holdings Sec. 3, in page stock 2. of insured banks
Does not abolish existing holding COMpanies, nor require them to dispose of any
bank stock which they now hold, or which
they may acquire before the effective date
of the Act. but morely imposes the follow
restrictions upon holding companies and insured banks "controlled" by holding
companies:
(1) holding companies
may any
more voting
Existing acquire any stock of not
insured bank, and no company may ac-
quire sufficient voting stock of an
insured bank to become a holding company.
101
-2(Thus existing holding companies are
not abolished, although they may not
acquire any additional voting stock
in insured banks and no now holding
companies may be established.) Sec. 4,
page 4.
(2) An insured bank controlled by a holding
company cannot make loans to or col-
lateralized with securities issued by,
purchase securities from, or invest in
securities issued by, the holding com-
pany or any other "affiliate" of the
bank. Sec. 3, page 3.
(3) An insured bank "controlled" by a hold-
ing company cannot establish any new or
additional branches. Sec. 5, page 5.
(4) No "voting permit* to a holding company
to vote the stock of a bank, under existing legislation, may be granted or
extended by the Board of Governors of
the Federal Reserve System without the
consent of the Board of Directors of the
Federal Deposit Insurance Corporation.
Sec. 8, page 7.
DIVIDEND RESTRICTIONS
After the date of approval of the
Act it shall be unlawful for any
national bank to declare or to pay
any dividend over the objection of
the Comptroller of the Currency,
or for any State insured bank to
declare or pay any dividend over the
objection of the Federal Deposit
Insurance Corporation. (This section
will prevent holding companies from
bleeding insured banks through ex-
cessive dividends prior to the termination of holding company control
DIVIDEND RESTRICTIONS
Insured bank may not pay any dividends
to any holding company so long as such
holding company holds any voting stock
of such insured bank, or of any holding
company of such bank, acquired in viola-
tion of this Act. (This section only pro-
hibits payment of dividends to the holding company if it has acquired additional
voting stock in the insured bank after
the effective date of the Act, and has,
accordingly, acquired the stock in violation of the Act. Otherwise, the section
does not cut off dividends from insured
on June 30, 1944, and will protect
banks on stock now held by holding com-
insured banks against payment of
effective date of the Act.) Sec. 10,
excessive dividends after June 30,
1944, if groups of persons should devise
means to circumvent this Act and con-
their control over insured banks.)
Se
5, page 3.
panies or acquired by them prior to the
page 8.
102
-3-
SANCTIONS FOR ENFORCING ACT
SANCTIONS FOR ENFORCING ACT
Board of Directors of Federal Deposit
Insurance Corporation can obtain in-
junctive relief from courts to enjoin
violations of Act. Sec. 6(3), page 5.
Board of Directors of Federal Deposit
Insurance Corporation can obtain
injunctive relief from courts to
enjoin violations of Act. Sec. 9,
page 7.
If an insured bank or any holding
company of such insured bank violates
the Act, the insured bank may become
ineligible to receive deposits of
public funds of the United States,
and may have its insurance terminated
by the Federal Deposit Insurance Cor-
poration. Sec. 11, page 9.
Company violating Act subject to fine of
not exceeding $100,000. Individual
violating Act subject to fine not exceed-
ing $10,000, or not exceeding five years'
imprisonment, or both. Sec. 6(1), page 4.
Violation of Act a misdemeanor.
$5,000 fine for each violation by
a company, and $5,000 or not exceeding
one year's imprisonment, or both, for
each violation by a natural person.
Sec. 14, page 12.
Board of Directors of Federal Deposit Insurance Corporation may remove from office,
after hearing, any officer or director of
an insured bank, who is responsible for,
or fails to disclose to proper authorities,
any violation of the Act. Sec. 6(2), page
4.
ACT TO BE ADMINISTERED BY THE FEDERAL DEPOSIT ACT TO BE ADMINISTERED BY THE FEDERAL
INSURANCE CORPORATION
DEPOSIT INSURANCE CORPORATION
O
103
S. 3575
75TH CONGRESS
3D SESSION
IN THE SENATE OF THE UNITED STATES
JANUARY 5 (calendar day, MARCH 2), 1938
Mr. GLASS and Mr. McApoo introduced the following bill; which was read twice
and referred to the Committee on Banking and Currency
A BILL
To provide for the regulation of bank holding companies and
affiliates, and for other purposes.
Be it enacted by the Senate and House of Representa-
1
2 lives of the United States of America in Congress assembled,
3 That this Act may be cited as the "Bank Holding Company
4 Act of 1938".
SEC. 2. (1) "Insured bank" means any operating
5
6 bank, banking association, trust company, savings bank, or
7 other banking institution, the deposits of which are insured
8 in accordance with the provisions of section 12B of the
9 Federal Reserve Act, as amended.
10
(2) "Person" means any individual, partnership, asso-
11 ciation of persons, or company.
104
2
8
(3) "Company" means any corporation, incorporated
1 any company or combination of companies control the in-
1
2 bank, banking association, insured bank, joint-stock com-
2 sured bank.
3 pany, business trust, or trustees of any voting trust.
(9) "Affiliate" of any insured bank means any com-
3
(4) "Director" means any director or trustee of any
4 pany which with respect to the insured bank is a holding
4
5 company, or any individual who performs similar functions
5 company, every company in any series or succession of com-
6 in respect of any company.
6 panies constituting any system of controlling and controlled
7
(5) "Securities" include notes, drafts, acceptances,
7 companies, in which any company is controlled by the in-
8 bonds, debentures, capital notes, voting trust certificates,
8 sured bank or by such holding company or by any company
9 capital stock, treasury stock, warrants, and rights to sub-
9 or combination of companies in such system, and any com-
10 scribe to or certificates of deposit for any of the foregoing.
10 pany having one or more shareholders who have legal or
11
(6) "Capital stock" includes common and preferred
11 equitable ownership of more than 50 per centum of the
12 stock, capital notes, and debentures.
12 number or par value of the outstanding shares of capital stock
13
(7) "Control" means the legal or equitable ownership
14 or holding of more than 10 per centum of the total number
(
13 or voting rights for electing directors of both the company
14 and the insured bank: Provided, That notwithstanding the
15 or par value of the outstanding shares of capital stock or total
15 foregoing, any company engaged solely in the business of
16 number of voting rights for electing directors, or the domina-
16 (a) operating a safe-deposit vault; or (b) holding or op17 tion, directly or indirectly, in any manner of the election of
17 erating the building and premises occupied by any insured
18 a majority of the directors of an insured bank or any other
18 bank, shall not be an affiliate of the insured bank.
19 company, and wherever used in this Act the word "control"
19
20 in any grammatical form shall have this meaning.
(10) "Effective date" means the date of enactment of
20 this Act.
21
(8) "Holding company" of any insured bank means any
21
SEC. 3. It shall be unlawful for any insured bank,
22 company which controls the insured bank or controls any
22 directly or indirectly or by any device whatever (1) to
23 other company which in turn controls the insured bank, and
23 make any loan or extension of credit to any of its affiliates
24 every company in any series or succession of companies in
25 any system of controlling and controlled companies, in which
{
24 or to invest any of its funds or any funds administered by
25 it, in any securities issued or guaranteed by any of its
105
5
4
1 affiliates; or (2) to purchase any securities from any of
2 its affiliates: or (3) to make any loan or extension of
1 insured bank, if such company is or upon such acquisition
100
2 would become a holding company of any insured bank.
3 credit to any person secured by any collateral consisting
SEC. 5. No insured bank shall establish or operate or
3
4 of any securities issued or guaranteed by any of its affiliates.
4 be permitted to establish or operate any new or additional
5 Notwithstanding the foregoing, any insured bank, which
5 branches while such insured bank is controlled by any hold-
6
prior to the effective date, shall have made any loans, exten-
6 ing company.
7 sions of credit, or investments which by virtue of this section
7
SEC. 6. Every company shall before the expiration of
8 would constitute prohibited loans, extensions of credit, or
8 sixty days after the effective date cause to be filed with the
9 investments if made after the effective date, shall have three
9 cashier or secretary of every insured bank as to which it is
10 years after the effective date within which to collect, sell,
10 an affiliate, an affidavit to be signed by one of its executive
11 or otherwise dispose thereof, During said three-year period
11 officers having knowledge of the facts, which shall set forth
12 any such loans or extensions of credit may be renewed or
12 as of the effective date (1) the total number and par value
1.: extended, but no renewal or extension shall be given beyond
(
13 of the outstanding shares of capital stock and total number
14 said period. Within two years after the effective date,
14 of voting rights for electing directors of such insured bank,
15 where necessary to save itself from loss, any such insured
15 which such company owns or holds, the names of the per-
16 bank may accept securities issued or guaranteed by its
16 sons in whose names such shares or rights are issued and a
17 affiliates, as payments to apply on or as collateral security
17 full description of any instruments evidencing such shares
18 for loans or extensions of credit made prior to the effective
18 or rights; (2) the amount of any indebtedness of such com-
19 date to any person other than one of its affiliates, and in
19 pany to the insured bank, direct and indirect, the maturity
20 such event the insured bank shall collect, sell, or otherwise
20 dates, and the person in whose name such indebtedness
21 dispose of such securities within three years after the
21 stands, if other than the company; and (3) an itemized
22 effective date.
22 statement of its assets and liabilities as of the last day of the
23
SEC. 4. It shall be unlawful for any company to acquire
24 any capital stock, or voting rights for electing directors,
25 of any insured bank or of any holding company of any
23 preceding month and of its earnings for the current fiscal
24 year to the last day of the preceding month, if the company
25 be directly or indirectly indebted to the bank. Within
106
201
7
6
1 twenty days after the close of each calendar month there-
2 after, if there has been any change in any of the matters
VI
1 the books and records thereof, as shall be necessary or
2 proper to disclose the condition of any insured bank or the
3 effect of the relations between any holding company or
3 covered in such affidavit, except item 3 thereof, during such
4 affiliate and any insured bank, upon the Federal deposit
4 month, the company shall file a like report, so long as
5 insurance system or any insured bank. And such investi-
5 shall continue to stand in the relation of an affiliate to such
6 gations shall be made at the expense of the Corporation;
6 insured bank. Every company shall file within thirty days
7 and it shall be unlawful for any insured bank, holding com-
7 after the last day of June and December of each year with
8 the cashier or secretary of every insured bank as to which
8 pany, or affiliate knowingly to make any false statement
9 it is an affiliate a like sworn itemized statement of its assets
9 or report to the Corporation or to refuse authorized repre-
10 and liabilities as of the last day of June and December of
10 sentatives of the Corporation access to any information re-
11 each year and of its earnings for the current fiscal year to
11 quired in connection with any such investigations.
13 insured bank shall retain such affidavits and statements on
14 file as a part of its records for at least three years.
15
SEC. 7. Every insured bank, holding company, and
SEC. 8. After the effective date, the Board of Governors
12
12 the last day of June and December of each year. Every
13 of the Federal Reserve System shall not, without the consent
(
14 of the Board of Directors of the Federal Deposit Insurance
15 Corporation, grant or extend the operative effect of any
16 affiliate shall file with the Federal Deposit Insurance Cor-
16 voting permit to any holding company affiliate under the
17 poration such annual, semiannual, quarterly, and other
17 provisions of section 2 of the Banking Act of 1933, as
18 periodic and special reports, the answers to such specific
18 amended (U. S. C., title 12, sec. 61).
19 questions and the minutes of such directors', stockholders',
20 committees', and other meetings, as the Corporation by
19
SEC. 9. Whenever it shall appear to the Board of Diree-
20 tors of the Federal Deposit Insurance Corporation that any
21 order may prescribe as necessary or appropriate for the
21 person is engaged or about to engage in any acts or practices
22 proper consideration of the condition of any insured bank
22 which constitute or will constitute a violation of the provi-
23 or for the proper supervision of the Federal deposit insur-
23 sions of this Act, the Board in its discretion may bring an
24 ance system, and the Corporation may make such investiga-
24 action in the proper district court of the United States or the
25 tions of any insured bank, holding company or affiliate, and
25 Supreme Court of the District of Columbia, to enjoin such
107
9
8
1 acts or practices and to enforce compliance with this Act,
2 and upon a proper showing a temporary or permanent injune-
VI
1 holding company shall continue to hold any shares of the
2 capital stock or voting rights for electing directors of such
3 insured bank, or of any company which is a holding company
3 tion, decree, or restraining order shall be granted without
4 with respect of such insured bank, acquired in violation of
4 bond. The Corporation may transmit such evidence as may
5 any provision of this act.
5 be available concerning such acts or practices to any United
6 States attorney or to the Attorney General, who, in his dis-
SEC. 11. Whenever the Board of Directors of the Fed-
6
7 eral Deposit Insurance Corporation shall determine, after
7 cretion, may institute appropriate criminal proceedings under
8 reasonable notice to the company affected an opportunity for
8 this Act, The proper district for the commencement of any
9 a hearing, that any insured bank or any company which with
9 injunction proceeding pursuant to this section shall be any
10 district wherein any act or transaction constituting the viola-
10 respect to any insured bank is a holding company has violated
11 tion occurred or in which the defendant is an inhabitant or
11 any provision of this Act, and that such action is necessary
12 transacts business, and process in such cases may be served
12 for the protection of the public or the safety and integrity of
13 the Federal deposit insurance system, it may make a finding
13 in any district in which the defendant is an inhabitant or
(
14 transacts business or wherever the defendant may be found.
15 Judgments and decrees so rendered shall be subject to review
14 of the facts of such violation. Upon making such finding,
15 the Board of Directors of the Federal Deposit Insurance Cor-
16
as provided in sections 225 and 347 of title 28 of the United
16 poration may cause the same to be published in the Federal
17 States Code, and section 7, as amended, of the Act entitled
17 Register and thereafter the insured bank shall be ineligible
18 "An Act to establish a court of appeals for the District of
18 to receive deposits of public funds of the United States or of
19 Columbia", approved February 9, 1893 (D. C. Code, title
19 any public officer, agent, or instrumentality of the United
20 18, sec. 26). No costs shall be assessed for or against the
20 States. Upon making such finding, the Board of Directors
21 Corporation in any proceeding under this Act brought by it
22 in any court.
21 of the Federal Deposit Insurance Corporation may proceed
22 to terminate the insured status of the insured bank, in like
23
SEC. 10. It shall be unlawful for any insured bank to
23 manner as provided in subsection (i) of section 12B of the
24 pay to any holding company, directly or indirectly, any
24 Federal Reserve Act, as amended. Upon notification in
25 dividend on any shares of its capital stock so long as such
25 writing by the Board of Directors of the Federal Deposit In-
108
11
10
1 surance Corporation to the Board of Governors of the Fed2 eral Reserve System of any such finding of such violation on
VI
1 Board, or upon any officer thereof designated by the said
2 Board for that purpose, and thereupon the said Board shall
3 the part of any holding company and request for such revoca-
3 certify and file in the court a transcript of the record upon
4 tion, the Board of Governors of the Federal Reserve System
4 which the order complained of was enjered. Upon the
5 forthwith shall proceed to revoke any voting permit thereto-
5 filing of such transcript such court shall have exclusive
6 fore granted to such holding company as a holding company
6 jurisdiction to affirm, modify, or set aside such order, in
7 affiliate under the provisions of section 2 of the Banking Act
7 whole or in part. No objection to the order of said Board
8 of 1933, as amended (U. S. C., title 12, sec. 61) The
8 shall be considered by the court unless such objection shall
9 Board of Directors of the Federal Deposit Insurance Cor-
9 have been urged before said Board or unless there were
10 poration shall have the right, upon such terms and conditions
10 reasonable grounds for failure so to do. The findings of
11 as may be consistent with the publie interest, the safety and
11 the said Board as to the facts, if supported by substantial
12 integrity of the Federal deposit insurance system and the
12 evidence, shall be conclusive. If application is made to the
13 purposes of this Act, to review, suspend, modify, or revoke
13 court for leave to adduce additional evidence, and it is shown
(
14 any order or finding made pursuant to this section,
14 to the satisfaction of the court that such additional evidence
15
SEC. 12. Any person or party aggrieved by an order
15 is material and that there were reasonable grounds for failure
16 issued by the Board of Directors of the Federal Deposit
16 to adduce such evidence in the proceedings before said Board,
17 Insurance Corporation under this Act may obtain a review
17 the court may order such additional evidence to be taken
18 of such order in the circuit court of appeals of the United
18 before the said Board and to be adduced upon the hearing
19 States within any circuit wherein such person resides or has
19 in such manner and upon such terms and conditions as to
20 his principal place of business, or in the United States Court
20 the court may seem proper. Said Board may modify its
21 of Appeals for the District of Columbia, by filing in such
21 findings as to the facts by reason of the additional evidence
22 court, within sixty days after the entry of such order, a
22 so taken, and it shall file with the court such modified or
23 written petition praying that the order of said Board be
23 new findings, which, if supported by substantial evidence,
24 modified or set aside in whole or in part. A copy of such
24 shall be conclusive, together with its recommendation, if any,
25 petition shall be forthwith served upon any member of said
25 for the modification or setting aside of the original order.
109
13
12
2 or setting aside, in whole or in part, any such order of said
wholly owned, directly or indirectly, by any one or more of
UT
1
1 The judgment and decree of the court, affirming, modifying,
2 the foregoing, or any corporation which is managed by a
3 Board shall be final, subject to review by the Supreme Court
3 person or persons appointed pursuant to law by the Presi-
4 of the United States upon certiorari or certification as pro-
4 dent of the United States or the Governor of a State or the
5 vided in sections 346 and 347 of title 28 of the United States
5 chief executive of any political subdivision of a State, or any
6 Code. The commencement of proceedings under this section
6 officer, agent, or employee of any of the foregoing acting
7 shall not, unless specifically ordered by the court, operate
7 as such in the course of his official duty or to any company
8 as a stay of said Board's order.
8 which is determined by the Board of Directors of the Fed-
9
9 eral Deposit Insurance Corporation, on application for
SEC. 13. It shall be unlawfulefor the individual directors,
10 officers, or agents of any company to authorize, order. or do
10 exemption or of its own motion, to be only incidentally a
11 any act constituting in whole or in part a violation of the
11 holding company and to be primarily engaged in business
12 provisions of this Act by such company.
13
12 other than holding the stock of or managing or controlling
ST
SEC. 14. Any person who knowingly violates any pro-
(
13 banks, banking associations, savings banks, or trust com-
14 vision of this Act shall be guilty of a misdemeaner; any
14 panies, or to be only incidentally or temporarily an affiliate
15 company which knowingly violates any provision of this
15 of any insured bank.
16 Act, upon conviction thereof. shall be punished by fine of
16
17 not exceeding 85,000 for each violation, and any natural
17 of such provision to any person or circumstances shall be
18 person who knowingly violates any provision of this Act,
18 held invalid, the remainder of the Act and the application
19 upon conviction thereof, shall be punished for each violation
19 of such provision to persons or circumstances other than those
20 by fine of not exceeding $5,000 or by imprisonment for not
20 as to which it is declared invalid shall not be affected
21 exceeding one year, or by both, in the discretion of the
21 thereby.
22 court,
ti
23
SEC. 15. No provision in this Act shall apply to, or be
24 deemed to include, the United States, a State, or any politi-
25 cal subdivision of a State, or any corporation which is
SEC. 16. If any provision of this Act or the application
poses.
ap SESSION
75TH CONGRESS
A BILL
Banking and Currency
S. 3575
By Mr. GLASS and Mr. McADOO
JANUARY 5 (calendar day, MARCH 2), 1988
Read twice and referred to the Committee on
companies and affiliates, and for other pur-
To provide for the regulation of bank holding
111
January 2, 1941
A BILL
To regulate the control of insured banks by
holding companies, and for other purposes.
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
Section 1. This Act may be cited as the "Bank Holding Company
Act of 1941".
Section 2. Definitions. When used in this Act unless the
context otherwise requires
(1) The term "company" means any bank, corpora-
tion, partnership, association, joint stock company, business trust,
or organized group of persons, whether incorporated or not, or any re-
ceiver, trustee, or other liquidating agent of any of the foregoing
in his capacity as such, but shall not be deemed to include the United
States, a State, any political subdivision of a State, or any agency
of the United States, of a State, or of any political subdivision of a
State.
(2) The term "insured bank" means any bank
the deposits of which are insured under the provisions of section 12B
of the Federal Reserve Act, as amended.
(3) The term "voting security" includes any
security entitling the owner or holder thereof to vote in the direction
112
-2or management of the affairs of a bank, either directly or through
any other person or company, and any security issued under or pursuant to any trust, agreement, or arrangement whereby a trustee or
trustees or agent or agents for the owner or holder of such security
are entitled to vote in the direction or management of the affairs of
a bank.
(4) The terms "own", "control", "hold", and
"acquire", as applied to voting securities are intended and shall be
deemed to include the receipt, possession or enjoyment, directly or
through any other company, entity, device, or status whatsoever, of
any legal, equitable, or beneficial right, title, or interest in any
voting security.
(5) The term "Board" means Board of Directors
of the Federal Deposit Insurance Corporation.
(6) The term "State" means any State of the
United States or the District of Columbia.
The preceding definitions shall be broadly interpreted so as to prevent the evasion or circumvention by any device wha-
soever of the provisions of this Act or of any rule or regulation thereunder.
Section 3. Prohibitions. After June 30, 1944, it shall be unlawful (a) for any company to own, control, hold, or acquire more
113
-3than 10 per centum of the voting securities of an insured bank, or
(b) for more than 10 per centum of the voting securities of an insured bank to be held by a trustee or trustees for the benefit of the
shareholders, members or participants of any one company, or (c) for
any company to control in any manner, either directly, or indirectly
through any other company or individual, or otherwise, the management
or policies of an insured bank, or the election of a majority of the
directors of an insured bank.
Section 4. Exemptions. Notwithstanding the foregoing, the prohi-
bitions contained in section 3 of this Act shall not apply to any company which is determined by the Board (a) not to control the management
or policies of any insured bank, or (b) to control only incidentally the
management or policies of one or more insured banks, the company being
primarily engaged in business not closely related to banking, when
such control will not, in the opinion of the Board, adversely affect the
banking business or the public or be inconsistent with the general pur-
pose of this statute. In addition, section 3 of this Act shall not be
construed as prohibiting any company from acquiring in good faith any
voting securities of an insured bank in satisfaction of debts previously
contracted in the course of its business, but no voting securities so
acquired in excess of the amounts prescribed in section 3 of this Act
shall be owned, controlled, or held by such company for a longer period
than six months.
Section 5. Dividend Restrictions. After the date of the approval
of this Act, it shall be unlawful for any insured bank, over the objection
of the Comptroller of the Currency if such bank is a national banking
114
-4
association, or a bank or trust company doing business in the District
of Columbia, or over the objection of the Board if such bank is not a
national banking association, or a bank or trust company doing business in
the District of Columbia, to declare or to pay any dividend on any of its
capital stock when, in the opinion of the Comptroller of the Currency
or the Board, as the case may be, the declaration or payment of any
such dividend would not be compatible with the best interests of such
bank, its depositors or other creditors, or with the public interest.
Section 6. Sanctions. (1) Any company which knowingly violates
any provision of this Act or of any rule or regulation thereunder, upon con-
viction thereof, shall be subject, for each violation, to a fine of not exceeding $100,000, and any individual who knowingly violates any provision
of this Act or of any rule or regulation thereunder, upon conviction
thereof, shall be subject, for each violation, to a fine of not exceeding
$10,000, or to imprisonment for not exceeding five years, or to both, in
the discretion of the court.
(2) Whenever, in the opinion of the Board, any
officer or director of an insured bank is responsible for any violation
of any of the provisions of this Act, or of any of the rules or
regulations thereunder or, having knowledge of a violation, fails to
disclose such violation to the proper authorities, the Board may cause
notice to be served upon such director or officer to appear before the
Board to show cause why he should not be removed from office. A copy
of such order shall be sent to each director of the bank affected, by
registered mail. If after granting the accused director or officer a
-5-
115
reasonable opportunity to be heard the Board finds that he is respon-
sible for, or having knowledge thereof has failed to disclose to the
proper authorities, any such violation, the Board in its discretion,
may order that such director or officer be removed from office. A
copy of such order shall be served upon such director or officer.
1 copy of such order shall also be served upon the bank of which he
is a director or officer, whereupon such director or officer shall
cause to be a director or officer of such bank. Any such director
or officer removed from office as herein provided, who thereafter
participates in any manner in the management of such bank, shall be
deemed to have violated this Act and shall be subject to the penalties
prescribed in subsection (1) of this section.
(3) Whenever it shall appear to the Board
that any person is engaged in or about to engage in any acts or prac-
tices which constitute or will constitute a violation of any of the provisions of this Act, or of any rule or regulation thereunder, the Board
may in its discretion bring an action, in any court granted jurisdiction in such cases by this Act, to enjoin such acts or practices and to
enforce complaince with the provisions of this Act or of any rule or
regulation thereunder, and upon a proper showing a permanent or temporary
injunction or decree or restraining or mandatory order shall be granted
without bond.
Section 7. Jurisdiction. The District Courts of the United States,
and the United States Courts of any Territory or other place subject to
the jurisdiction of the United States, shall have original jurisdiction
over any proceedings instituted under any of the provisions of this Act or
of any rule or regulation thereunder, and, concurrently with State and
116
6-
Territorial courts, of all suits in equity and actions at law
brought to enforce any liability or duty created by, or to enjoin
any violation of, any provisions of this Act, or of any rule or
regulation thereunder. No costs shall be assessed for or against the
Board in any proceeding under this Act brought by or against the Board
in any court.
Section 8. Administration. (1) The administration of this Act
is hereby vested in the Board which shall have authority to make, issue,
amend and resoind such rules and regulations (including definitions
of banking, technical and trade terms used in this Act) as may be
necessary or appropriate to carry out the provisions of this Act.
(2) The Board, in its discretion, may investigate any facts, conditions, practices, or matters which it may deem
necessary or appropriate for the purpose of determining whether any
company or individual has violated or is about to violate any provision
of this Act or of any rule or regulation thereunder, or for the purpose of aiding in the enforcement of the provisions of this Act, or
aiding in the prescribing of rules and regulations thereunder, or in
the obtaining of information to serve as a basis for reconsending further legislation concerning the matters to which this Act relates.
For the purpose of any investigation or any other proceeding under
this Act, any member of the Board, or any officer thereof designated
117
-7by it, is empowered to administer oaths and affirmations, subpoena witnesses, compel their attendance, take evidence, and require the production of any books, papers, correspondence, memoranda, contracts, agreements, or other records which the Board, or any such member, or any such
officer, deems relevant or material to the inquiry. Such attendance of
witnesses and the production of any such records may be required from
any place in any State or in any Territory or other place subject to the
jurisdiction of the United States at any designated place of hearing.
In case of contunacy by or refusal to obey a subpoena issued to, any person, the Board may invoke the aid of any District Court of the United
States or of any United States Court of any Territory or other place sub-
ject to the jurisdiction of the United States, in requiring the attendance
and testimony of witnesses and the production of books, papers, correspondence, memoranda, contracts, agreements, or other records. Any such
Court may issue an order requiring such person to appear before the Board,
any member of the Board, or any officer thereof designated by the Board,
there to produce records, if so ordered, or to give testimony touching
the matter under investigation or in question; and any failure to obey
such order of the Court may be punished by such Court as a contempt thereof.
Section 9. Separability of Provisions. If any provision of this
Act, or the application of such provision to any person or circumstances,
shall be held invalid, the reminder of this Act and the application of
such provision to persons or circumstances other than those as to which it
is held invalid, shall not be affected thereby.
118
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 2, 1941
Secretary Morgenthau
CONFIDENTIAL
Mr. Cochran
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
1133,000
Purchased from commercial concerns
L 73,000
the sterling sold, 190,000 was used to cover the importation of tin, and the rest
for various commercial purposes.
The Federal Reserve Bank of New York sold 120,000 in registered sterling to
non-reporting bank, and bought 120,000 from another non-reporting bank.
Open market sterling was quoted at 4.03-3/4 until late afternoon. It closed at
4.03-1/2. Transactions of the reporting banks were as follows:
110,000
Sold to commercial concerns
L 2,000
Purchased from commercial concerns
Closing quotations for the other currencies were:
Canadian dollar
Swiss franc
Swedish krona
Reichsmark
Lira
Argentine peso (free)
Brazilian milreis (free)
Mexican peso
Cuban peso
Chinese yuan
14% discount
.2321
.2385
.4005
.0505
.2365
.0505
.2066
8-11/16% discount
.05-5/8
There were no gold transactions consummated by us today.
The Federal Reserve Bank of New York reported that the Bank of Canada, Ottawa,
shipped $1,006,000 in gold to the Irving Trust Company, New York, for account of the
Banque Mellie Iran, Tehran, for sale to the New York Assay Office.
The State Department forwarded a cable to us stating that the Chase Bank, Hong
long, shipped $742,000 in gold from Hong Kong to the Chase National Bank, San Francisco,
sale to the U.S. Mint.
119
from
A gold price equivalent to $33.93 was received from Bombay this morning, unchanged
the quotation of December 28. Silver in Bombay was 1/2 higher at the equivalent
of 44.314.
In London, the prices fixed for spot and forward silver both declined 1/16d, to
23-1/48 and 23-3/16d respectively. The dollar equivalents were 42.22 and 42.104.
Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44.
The Treasury's purchase price for foreign silver was also unchanged at 354.
Te made six purchases of silver totaling 1,280,000 ounces under the Silver Purchase
Act. Of this amount, 720,000 ounces represented sales from inventory, and the other
560,000 ounces consisted of new production from foreign countries, for forward delivery.
CONFIDENTIAL
120
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 2, 1941.
TO
Secretary Morgenthan
FROM Mr. Cochran
STRICTLY CONFIDENTIAL
The Federal Reserve Bank of New York reported the following transaction in the
account of the Penzintezeti Kaspont, Budapest, maintained with the Guaranty Trust
Company, New York:
Date
Amount Debited
December 31
$20,000
Paid To
Chase National Bank, N.Y.,
for account of the Reichs-
bank, Berlin, in favor of
mm
Reichspostrentralaut Auslandsabrechungen, Berlin, for
account of the Director General
of the Royal Hangarian Posts,
Budapest in accordance with
letter of December 2.
121
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 2, 1941
Secretary Morgenthan
Mr. Cochran
FROM
STRICTLY CONFIDENTIAL
The Federal Reserve Bank of New York reported the following transaction in
the account of the Credito Italiano, New York, maintained with the Chase National
Bank, New York.
Date
December 31
Paid To
Amount Debited
$300,000
Check in favor of Banco
di Napoli Trust Co., N.Y.
mmf
122
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 2, 1941.
Secretary Morgenthan
Mr. Cochran
STRICTLY CONFIDENTIAL
The Federal Reserve Bank of New York reported the following transaction in the
account of the Deutsche Asiatische Bank, Shanghai, maintained with the Chase National
Bank, New York.
Date
Amount Debited
December 31
$70,000
Paid To
Chase National Bank, N.Y.,
for the account of the
Credit Suisse, K.Y.
BMP
123
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 2, 1941
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
Official sales of British-owned dollar securities under the vesting order
effective February 19:
December 23
24
1,154,861
111,682
82,966
2,450
H
25
26
27
28
d
o
Sold
Nominal Value
of Bonds Sold
$ Proceeds of
Shares Sold
1
1
No. of Shares
$ Proceeds of
Bonds Sold
5,000
2,766
Nil
Nil
a
y
Nil
Nil
Nil
Nil
Nil
Nil
185,785
45,683
59,562
376,446
3,785,724
1,234,392
1,170,817
7.457.476
5,000
2,776
2,731,346
93,030,725
5,897,500
4,515,322
3,107,792
100,488,201
5,902,500
4,518,098
Sales from
February 22 to
December 21
Total February 22
to December 28
Miss Poate reported sales of non-vested securities for the week ended
December 21 totaled $950,000.
124
PLAIN
Panama via N.R.
Dated January 2, 1941
Rec'd 8:35 p.m.
Secretary of State
Washington
RUSH
2, January 2, 4 p.m.
In his address this morning at the ceremony of taking the oath of the
new
constitution President Arias devoted the following paragraph to the foreign
debt:
"Almost no progress has been made with respect to the foreign debt which
as you will recall amounts to a very heavy sum for us Panamanians a people
small as respects population and area and little developed commercially and
industrially. The principal of over twenty-one millions without counting
interest which is accumulating month by month bears heavily upon us for which
reason we have made a special effort to effect a conversion of the debt on
terms as favorable as possible for Panama without prejudicing the. creditors.
Unfortunately our efforts have not met on the part of the bondholders with the
full cooperation which we have hoped in order to reach a solution satisfactory
for all interested parties. That is what has induced us to grant on different
occasions an extension of the period of expiration of the proposed readjustment
plan for successive periods of one month and the present extension runs until
January 25. But this expedient necessitated particularly by the stagnation
of stock exchange operations in the United States during the recent presidential
campaign is not to be continued indefinitely: Our Government will not avoid the
imperious duty of seeking a rapid and definite solution for this urgent problem."
UNSIGNED
NPL COPY:ala
125
GRAY
RDS
MOSCOW
Dated January 2, 1941
Rec'd 9:50 p.m.
Secretary of State
Washington.
7. January 2, 5 p.m.
Embassy's 1665. (27576) December 3.9 p.m.
The collection of laws No. 31, December 19, 1940
which has just been received contains a resolution of the
Soviet of Peoples Commissars in accordance with which
by
the customs tariffs of Lithuania, Latvia and Estonia are
replaced by the customs tariffs of the Soviet Union as
MOL
&
of December 10, 1940. The Chief Customs Administration
in Moscow has informed the Embassy today that the customs
frontiers between the former Baltic states and the Soviet
Union proper and between those territories themselves
were abolished on the date indicated.
STEINHARDT.
EMB
eh:copy
126
Chungking, January 2, 1941
No. 738
Subject: Opinion of Vice Minister of
Finance Regarding China's
Financial Condition.
AIR MAIL
The Honorable
The Secretary of State,
Washington, D. C.
Sir:
I have the honor to refer to a conversation between Mr. Y. C. Koo,
Vice Minister of Finance, and an officer of the staff of this Enbassy
regarding the financial condition of the Chinese Government. During the
interview the above-mentioned official expressed his personal opinion
that China needs additional American financial advisers to assist the
Government in utilizing the new loans and to aid the country in conducting
economic warfare against Japan.
Mr. Koo expressed considerable satisfaction over the American and
British loans and stated that it is his personal opinion that the financial
position of Government is stronger now than it has been for some time.
According to him the consistent attempts of Japan to weaken the national
currency and undermine the Chinese economic system almost met with success
and were as serious, if even not more so, than the military operations.
The two new loans, in addition to the fact that China has been able to
resist Japan for almost three years and a half, leaves no doubt in the
Vice Minister's opinion that the country is in an excellent position to
hold out for another year.
In connection with this Anglo-American assistance he stressed, however,
that Jayan will undoubtedly direct now economic measures against China in
the hote of mullifying any benefits which may be derived from the loans.
It is therefore necessary that every effort be made by the Chinese Government to obtain the maximum advantage from the loans and at the same time
combat Japan with economic warfare as well, He considers the establishment
and early operation of the stabilization fund of utmost importance and
stressed the necessity of American assistance and advice in this matter if
the fund is going to be operated properly.
127
With regard to the Japanese economic warfare, Mr. Koo referred to
German economic advisers in Japan and in particular to a person who
recently arrived there who is believed to have been the second man in
the Reichsbank and an expert on economic
warfare. The
to assume
that is
official leads the Chinese Government Japan presence contemplating of this
additional economic measures against China. The Vice Minister felt that
if additional measures are taken against this country his Government will
not know how to retaliate and will have to depend solely on the recent
financial assistance to help it survive which will weaken the nation's
financial position again. Rather than continually absorb these repeated
Japanese attacks at the expense of weakening the financial and economic
position of the country, he proposes that China retaliate by starting
economic warfare against Japan which will help counteract all such enemy
a At present he is convinced that China can accomplish something in
that way and claims it is only along these lines that his country can win
the struggle. The difficulty of conducting such a policy, however, rests
in the fact that China lacks men with sufficient training to compete with
the German experts who are directing Japanese policy. The Vice Minister
elaborated at considerable length on this topic and said that he has been
giving it closer attention than any official since the conflict started and
as a result of his observations and studies he has reached the conclusion
that China must have the assistance of expert economic advisers who can
assist the country in counter economic warfare. He requested that his
remarks be made known to the Department and that they be given serious consideration. The above statements are Mr. Koo's personal views and as far
as is known do not represent the official attitude of the Government. It
is not at all improbable, however, that Mr. Koo intends to make suggestions
along these lines to his superiors. Mr. Koo's closing remark was: "We
deeply appreciate the valuable assistance you have given us in the form
of loans but unfortunately we need more. We now require American brains
to show and to help us use the money to the best advantage".
Mr. Koo is considered one of the ablest younger men in the Government
and his opinion is highly regarded by the Generalissimo. In addition to
holding the position of Vice Minister of Finance he is Manager of the
Farmers Bank of China and Director of the Central Planning Board which is
commonly referred to as the "Brain Trust of China". Not only is he noted
for his ability but also for his honesty and opposition to official graft
and corruction.
It is felt that his opinions regarding the present financial position
of the National Government present a clear and correct picture. He might
be over optimistic in believing that American advisers would accomplish
all he thinks they could in preserving China's financial position and
waging economic warfare against Japan. However, he is correct in feeling
that the Chinese are rather dazed by some of Japan's moves and the mereof
presence of foreign advisers with whom the Chinese could discuss some other
their problems-would have a splendid psychological effect. On the
128
there seems little doubt that foreign advice would be extremely
hand, at this time when there is a certain amount of dissatisfaction
helpful with officials in high positions and an apparent lack of harmony.
Respectfully yours,
Nelson Trusler Johnson.
and two copies by air mail to the Department
air mail
Original Two copies
by via Hong Kong
Copy to Embassy, Peiping
851
JJM:HHK
True copy of signed original.
COPIED: aja
-
Noted
N. N. Cochras
----
TREASURY DEPARTMENT
UNITED STATES COAST GUARD
WASHINGTON
HEADQUARTERS
2 January, 1941.
SECRET
From:
To :
Spagent, Shanghai, China.
Secretary of the Treasury.
Message from Mr. Nicholson.
Cyril Rogers, Chairman of the Sino-British Stabilization Fund Committee, left Hongkong for the United States by clipper
on December 28th and is due in Washington about January 5th, where,
it is believed, he will join T. V. Soong and then proceed to London.
Rogers' departure from Hongkong was quite secret and, I understand,
H. H. Kung is greatly displeased because Rogers did not advise him
of his intended trip when the latter was in Chungking a few days
before his departure. This disclosure is liable to reflect on
Soong who will be blamed for conspiring with Rogers to keep his
departure secret from Chungking authorities. The American Consul
General in Hongkong states that Rogers was most disagreeable and
assumed a high-handed attitude, demanding all kinds of special
privileges when applying for a visa to the United States.
129
130
TREASURY DEPARTMENT
United States Coast Guard
Washington
SECRET
2 January, 1941
From: Spagent, Shanghai, China.
To : Secretary of the Treasury.
Message from Mr. Nicholson.
Cyril Rogers, Chairman of the Sino-British Stabilisation Fund Committee, left Hongkong for the United States by clipper
on December 28th and is due in Washington about January 5th, where,
it is believed, he will join T. V. Soong and then proceed to London.
Rogers' departure from Hongkong was quite secret and, I understand,
H. H. Kung is greatly displeased because Rogers did not advise him
of his intended trip when the latter was in Chungking a few days
before his departure. This disclosure is liable to reflect on Soong
who will be blamed for conspiring with Rogers to keep his departure
secret from Chungking authorities. The American Consul General in
Hongkong states that Rogers was most disagreeable and assumed a
high-handed attitude, demanding all kinds of special privileges
when applying for a visa to the United States.
eh:copy
B11
S
bill
IBE
RECEIVED
TH
ve
131
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Consulate General, Batavia
DATE: January 2, 1941, 2 p.m.
On the twenty-fourth of December an agreement was
entered into by the Yokohama Specie Bank of Tokyo and the
Java Bank, the purpose of the agreement being "facilitating
monetary traffic (omission) the Netherlands Indies".
The Japanese Bank, under the terms of the above-
mentioned agreement, will have with the local bank an open
account for 2,000,000 guilders. The local bank will in
turn have 4,500,000 yen in a similar account in Japan.
Dollar exchange on the New York market will be eliminated,
until further notice, by using these balances and with the
two currencies stabilized. Under the agreement the excess
must be paid in dollars if either balance should exceed
the limitations aforementioned.
The agrement was negotiated with the advice and
consent of the local authorities, although it is called
a private arrangement between the two banks. It is my
opinion that the agreement is of considerable value to
Japan financially and as a propaganda instrument, although
in local circles there is a tendency to regard it as having
little or no importance.
At the present time the text of the agreement 18 not
available;
132
-2available; as further details become known I shall report
them.
On the twenty-eighth of December Yoshizawa arrived
here, but there has been no resumption of negotiations.
Probably because he thinks the conference will go on for
several months, he has taken a large residence. European
developments will no doubt be anxiously watched by
8 both
sides.
FOOTE.
EA:LWW
133
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
EA 856D. 5151/18
January 4, 1941.
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury, and
encloses ? copies of paraphrase of telegram of January 2,
1941, from the American Consulate General, Batavia,
Java, reporting on an agreement concluded by the
Yokohama Specie Bank of Tokyo and the Java Bank.
Enclosure:
From Batavia,
January 2, 1941.
If
134
GRAY
RDS
(PARIS)
VICHY
Dated January 2, 1941
Rec'd 5 a.m., 3rd
Secretary of State,
Washington.
8, January 2, 9 p.m.
FOR THE TREASURY FROM MATTHEWS.
Expenditures during the first quarter of 1941 in the
total amount of 39.7 billion francs are authorized in the
ordinary and extraordinary budgets which WERE published
in yesterday's Journal Official. Of this amount, 12.1
billion francs are allocated for the liquidation of EXPENSES resulting from the war; 10 billions for the army,
navy and air force, 5.1 billions for the national debt
and 3.1 billions for public works and other unemployment
projects. The sums needed to meet the costs of the German
army of occupation are not included in the budgets, being
carried in a special account with the Bank of France.
MATTHEWS
EMB
135
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, (Paris) Vichy
DATE: January 2, 1941. noon
NO.: 2
CONFIDENTIAL.
80 E MAC us
3HT RO 301990
JADIMHOBT
IT
Reference is made to telegram of December 23, 10 p.m.,
No. 877 from the Department.
I have been told by a high official of the French Finance
Ministry that an attempt has in fact been made by the Germans
to buy the block of shares which the Schneider-Creusot
Munitions Corporation holds in the Hungarian Credit Bank.
Authorization for the deal was, however, refused by the
Finance Minister, to whom the matter had been referred
in accordance with the recent changes in France's exchange
control regulations.
My informant said he doubts whether the Marshal's
personal attention was brought to the proposed transaction,
and he said he does not believe that the Germans actually
have custody of the managing director general of the
Schneider-Creusot Munitions Corporation.
I was told by the Finance Ministry official that
apparently the Germans merely consider the aforementioned
changes in the exchange measures as unimportant modifications
in the existent system, and do not yet realize that their
primary purpose is to prevent the sale to them of French
owned foreign and French securities.
END OF MESSAGE.
MATTHEWS.
EA:LWW
136
PARTIAL PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, (Paris) Vichy
DATE: January 2, 1941, 5 p.m.
NO.: 4
FOR THE TREASURY FROM MATTHEWS.
Reference is made to telegram of December 18, 8 p.m.,
No. 856 from the Department.
There is no representative of the American Friends
Service Committee stationed at Vichy. Therefore I asked
our Consul General at Marseille to keep a close eye on
milk distribution to French children; the headquarters
of the Committee 18 at Marseille.
In a letter from the Consul General at Marseille
he reports that a "great difficulty confronts Mr. Kershner,
the head of the Quakers organization in France, in view
of the fact that milk exports from Switzerland are not
permitted by the Swiss Government. Seventy tons of
milk were purchased in Switzerland by the Committee,
and this purchase has been paid for in full, but delivery
has not been made. The letter from the Consul General
continues that with past supplies "gubstantial stocks of
which are apparently still on hand Mr. Kerahner and his
associates have been making distribution through the Secours
National in a large number of centers in unoccupied France
and a considerable shipment of milk was sent recently
to Paris where its distribution will be supervised by two
members
137
members of Mr. Kershner's organization. The Quakers are
not only distributing milk but clothing and such medicines
as are available to them.
END SECTION ONE.
MATTHEWS.
EA:LWW
00
138
PARTIAL PARAPHRASE, SECTION TWO, TELEGRAM No. 4,
January 2, 1941, from the American Embassy, Vichy
"Mr. Kerschner said that although the Secours National
was in active charge of the distribution of supplies in
unoccupied France, his own people kept a close personal
check on this distribution also and that no case had arisen
as yet where he had any reason to believe that the relief
went elsewhere than to the French children for whom it was
intended. He also expressed his conviction that whatever
was being sent to Paris would be given only to French dhildren
there. Up to this time his organization has had no difficulty
whatever with the German authorities and has, apparently,
been impressed with the correctness of the latter with
respect to this distribution".
Kerahner himself, says his executive secretary,
personally oversees a "great variety of projects such as
delivery of food to 140 school canteens in Marseille where
10,000 children receive a noon day meal; delivering milk
to 90 nurseries and clinics in Marseille where 4,000 children
receive half a liter of milk a day".
I am making attempts to check milk distribution through
other sources, and shall try to keep as careful a watch
as possible on this matter.
END OF MESSAGE.
MATTHEWS.
EA:LWW
139
GRAY
JR
(Paris)
Vichy
Dated Jenuary 2, 1941
Rec'd 11:15 a.m.
Secretary of State,
Washington.
1, January 2, 11 a.m.
Barlin's 5071, December 16, 6 p.m., repeated to
Vichy.
French Ministry of Finance confirms that negotictions
have been concluded for the sale of Mines DE Bor stock
to Germans. French owned bonds in the Skoda Werke of
Pilsen have also now been sold to them. As French
held stock in that enterprise was sold to German
interests after Munich the Ministry considers the
present transaction of "minor importance".
Repeated to Berlin.
MATTHEWS
TFV
140
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Embassy, (Paris) Vichy
DATE: January 2, 1941, 10 p.m.
NO.: 9
FOR THE TREASURY FROM MATTHEWS.
Tonight I had dinner with Couve de Murville. He
is leaving again for Paris and Wiesbaden. In confidence
he admitted that demand had been made by the German
authorities, and they are receiving, the Belgian gold
which was held at Dakar and which totalled about
8,000,000,000 French francs, he said. However, with a
smile he remarked that he had proved to the German
authorities that to transport it by airplane it would take
two years. I said that I presumed ship transportation
would be employed for the part that had not yet reached
metropolitan France. He said that delays were quite
likely even then, considering transportation difficulties.
Couve continued that he was encouraged by the tactics of
delay being developed by the French in complying with
requests from the German authorities. In defense of the
earlier French attitude he said that in 1918 it had taken
the Germans far longer than six months to develop their
"passive resistance" to the demands of the Allies. Despite
curiosity concerning French gold, Couve said that the
Germane really had not asked for any of it.
At
141
-2At dinner Guindet, who is chief of the Foreign Exchange
and Foreign Finance Section of the Finance Ministry, was
with us. He said that the Germans had finally stopped
altogether with their issues of kredit kassenchein. Since
the beginning of the occupation he said the total amount
which had been put in circulation was around 12,000,000,000
francs, which he did not think was really excessive.
As for German purchases of French securities, Couve
said that they are not using the 400,000,000 francs being
accumulated daily under costs of the army of occupation
in more than moderate quantities for buying into French
industries. He said that the Germane did not seen to be
in a great hurry to do so, but that he feels they are vexed
with the fact that industry in France is operating at only
10 percent of normal operation; the Germans are in fact
bending effort to increase production in France. In Germany
he said he thought there is a real shortage of labor, and
he believed that no negligible number of allegedly "volunteer"
French workmen 18 being taken from occupied France to work
in factories in Germany. From his experiences at Wiesbaden
Couve does not think that the civilian population in Germany
will suffer any serious privations this winter. The Germans
are better off in many respects than before, he said, thanks
to the occupied countries, but he feels shortages are
developing
142
-3developing particularly in rubber, and in wool, cotton,
lubricating oils and ferro-alloys. Certain amounts of
aluminum are being obtained from France, he said.
Couve remarked that he has much more optimist now
than he had when here last, about the British powers of
resistance. The speech of the President of course delighted
him.
When I asked how Lacour-Gayet and Alphand were getting
along, both Couve and Guindet remarked laughingly that
it seemed to be just a question of asking that dollars
be unblocked and getting the same answer that they could
not be unblocked. They did not show the slightest annoyance
about this matter.
END OF MESSAGE.
MATTHEWS.
EA:LWW
143
PLAIN
AC
London
Dated January 2, 1940
REC'D 7:18 p.m.
Secretary of State
Washington
11, second.
FOR TREASURY.
1. The payments agreement with Paraguay mentioned
as under negotiation in the Embassy's telegram No.
3673 of November 7, 11 p.m. is now in operation. A
Bank of England notice to banks stating that "as a
result of arrangements made with the Argentine
and Paraguayan authorities the sterling proceeds of
entrepot trade undertaken by Argentine firms who
export goods of Paraguayan origin to the sterling
area may be credited to Argentine special accounts.
"The agreement includes arrangements for individuals
resident in Paraguay to open sterling area accounts.
Total government ExpEnditure in the thirty-one days
of DECEMBER was sterling 387.2 million as compared
with the sterling 423.7 million reported in the
Embassy's telegram No. 3945 of December 4. For the
five WEEKS ended November 30 revenue totalled sterling
94.7 million leaving a deficit of sterling 291 million
per cent or sterling 105 million of which was financed
by
144
- 2 - #11, January 2, from London
by savings and 63.8% per cent or sterling 186 million
by increases in the floating debt as compared with the
respective November percentages of 41.3% and 58.7% The
weekly average supply Expenditure remained at the high
level of about sterling 81.2 million in DECEMBER which
WAS slightly above the record level of sterling 80.8
million established in November as compared with about
sterling 6B million the weekly averages in August and
October. The total expenditure in the first nine
months of the fiscal year was sterling 2.708 million if
the present level of total Expenditure is maintained
and account is taken of debt services the total
expenditure for the fiscal year ending next March 31
will be OVER sterling 3.760 million or close on sterling
295 million MOTE than the Estimates contained in the
supplementary budget of July 13 the deficit for the
mine months stands at sterling 1,955.7 million. About
sterling 835 million of this deficit has been raised by
savings net and the remainder by an increase in the
floating debt. The pace of the increase in the floating
debt gives rise to comments on the need for much greater
savings if the inflationary trend is to be held in check
Especially in the absence of any indication that a further
supplementary budget is likely before the End of the
fiscal year.
JOHNSON
NPL
145
Ace memo n 1-17-41
MEMORANDUM
TO:
January 2, 1941
The Secretary
FROM: Mr. Young
RE: Planes At Martinique
From time to time we have talked to Mr. Hodgkin of the
Bellanca Aircraft Company, which is seeking orders from the
British and other foreign governments.
On December 20 he said that they had been approached
with reference to their willingness to recondition the
planes at Martinique for a South American country and
wondered if we were interested. We said that we should
be glad to learn about the proposal informally.
On December 23 and December 28 he gave us further
details, which are summarized as follows:
1. They have been discussing the possibility
of Bellanca reconditioning the French planes
at Martinique with Mr. Levine of Ladenberg
Thalmann, a New York banking house.
2. The deal presumably is to be one between
Martinique and the Cuban Government, whereby
the planes will be sold to Cuba in exchange
for food for Martinique.
3. Apparently, this deal has the blessing of
the Vichy Government.
4. Mr. Hodgkin does not know the person in the
French Government who is negotiating the
deal, nor does he know who is negotiating
the deal for Cuba.
5. Ladenberg Thalmann come into the picture
because the bulk of the food to go to
Martinique will have to come from the United
States and some financing arrangements will
be necessary.
Mr. Hodgkin inquired whether we were interested in the
transaction and indicated that he and Ladenberg Thalmann
would be willing to be guided in any way we might suggest.
146
-2I pointed out very definitely that we had no interest in
the transaction formally in any way and had not the power
to do anything about it or to issue any instructions. In
the course of our discussion, however, it was indicated
informally to Mr. Hodgkin that the picture would be much
clearer if there were available the following additional
information:
1. The name of the agent acting for the Cuban
Government.
2. The name of the agent acting for the French
Government.
3. The type of financing which would be required
and the method by which it would be worked out.
4. The technique proposed for getting the planes
to the United States in order that they could
be reconditioned by Bellanca.
I gather that Mr. Hodgkin will be in sometime soon
and pass on to us any additional information which he may
have picked up. Have you any suggestions with reference
to the course you would like to have me follow?
N.B.
Since the above was dictated Mr. Hodgkin called to say
that later information indicates that the French may not be
in this deal at all yet, but that possibly the British have
a hand in it. He expects to be in town on January 3 with
complete information.
T.4.
Jan 2, 941
147
KING'S HOUSE,
JAMAICA.
2.1.41
My dear w Morgenttan,
Twrite to thank for
and your wife very much
indeed for your kindly gift
of apples L chocolates Sees , both
of a quality one never been immune
are They have
by appreciated . by all
of us . what a magnificent made
speech the President
the other day. It will understand
-ly rank with the greatest
speeches of all time -
My wife & I enjoyed to
privilege of meeties him
ch the Turcaloosa Very much
It is generally supposed to
be mistake to meet a
man a for when che has
long chericked a deep
admiration . / but / as in
so many other respects
he is an exception You
indeed lucky to have
such are a man at the head
of your matech in there
Kine's HOUSE,
JANAICA.
148
days when moral leadership
may make or mar a
nation
Our beat workes to you
all for the New Year
fours very Sincerely
O
149
MEMORANDUM FOR THE SECRETARY'S DIARY
Lend-Lease Logislation to Aid England
Thursday, January 2, 1941
After the meeting in Secretary Morgenthan's office from
12:10 to 12:40 p.m., and pursuant to the Secretary's and Foley's
suggestion, Cox prepared the first draft of the legislation to
carry out the policy stated by the Secretary at that meeting.
From 4:20 to 11:50 p.m., Foley and Cox revised the proposed
joint resolution and prepared a memorandum on the plan to be used
in the interim--until the legislation is passed.
Annexed are copies of the draft of the resolution and the
interim plan prepared today.
Friday, January 3. 1941
After the meeting in the Secretary's office from 11:28 to
11:25 a.m., the following met from 11:30 a.m. to 12:30 p.m. and
went over the legislation in detail: Mr. Foley, Dr. White, Arthur
Purvis, Sir Frederick Phillips, D. W. Bell, and Oscar Cor. It was
suggested by Dr. White that Purvis get up the detailed reasons why
the joint resolution should be passed quickly. From 12:40 to 1:05
p.m., Cox discussed with Mr. Foley the implications of the section
which authorized the United States to procure arms, munitions, and
implements of war in a foreign country when they cannot be produced
in the United States, indicating to him that if our tank capacity
were fully used we could procure tanks from Canada and lease them
to the British under the proposed legislation as it stands.
Between 2:15 and 3:00 p.m., Foley and Cox made several cor-
rections in the proposed legislation. Cox cleared with D. W. Bell
and Mr. Foley the change in section 5(b), providing that the approval of the Budget is necessary in order that the moneys resulting from a lease, etc., can be used by the War Department or Navy.
From 3:05 to 4:25 p.m., Foley and Cox went over the bill with
B. V. Cohen. He suggested that the proviso suggested by Bernstein
that "no such transaction shall be entered into in violation of inter-
national law as interpreted by the Department of State" be omitted.
He also suggested the broadening of the powers of the President by
making it clear that vessels now owned by the British, for example,
-2-
150
can be repaired and outfitted in our navy yards and that a case
such as a bare boat charter by the United States be covered so
that the United States could sub-charter.
From 4:35 p.m. to 5:35 p.m., Mr. Foley, Benjamin V. Cohen,
Felix Frankfurter, and Cox went over the joint resolution again.
Mr. Frankfurter made the following comments: (a) Should the various powers and methods of acting on behalf of or on the part of a
foreign government be so particularized; (b) Should there be a
particularization of the countries; (c) Shouldn't the word "consideration* be omitted; (d) That a title such as "Joint Resolution
to Promote the Defense of the United States" might be used. Mr. Cohen
suggested that section 1 of the resolution state that "This act shall
be known as an act to aid nations whose defense is related to the defense of the United States"; (e) It might be a good idea to have a
preemble stating in quotable language the need for and purposes of
the resolution; and (f) That the word "welfare" be omitted on the
first page of the joint resolution reading "whose defense the President deems to be related to the defense or welfare of the United
States".
From 5:50 p.m. to 6:50 p.m., the joint resolution was revised
by Foley and Cox in the light of this afternoon's conference.
Saturday, January 4, 1941
At 9:45 a.m., Secretary Morgenthau telephoned Foley from
Fishkill, suggesting that he get in touch with Speaker Rayburn about
the proposed legislation.
At 10:54 a.m., Foley and Cox went over to the office of
Secretary of War Stimson. be called in Mr. McCloy and they both
went over the proposed joint resolution. When Mr. Stimson finished
going over it, he said that he thought the proposed resolution was
broad enough. Mr. Stimson said that McCloy was ready to go over
the resolution in more detail at any time we wanted him to do so.
At 11:30 a.m., Foley and Cox left Secretary Stimson's office
to go to the office of Speaker of the House--Samuel Rayburn. They
conferred with him and Mr. Beaman, the Legislative Counsel, from 11:55
to 12:10. Mr. Foley told Mr. Rayburn that he had just talked to
Secretary Morgenthau, who advised him that in yesterday's Cabinet meeting with the President, he suggested that Mr. Foley talk to the Speaker
about the legislation to execute the lease-lend policy.
Mr. Rayburn said that he would be pleased to have Mr. Beaman
assist in the drafting of the legislation.
151
-3-
From 12:20 to 1:10 p.m., Foley and Cox had lunch with Mr. Beaman,
Mr. John O'Brien, Mr. Morgan, and Mr. Perley, of the Legislative
Counsel's Office, and discussed the proposed legislation. They then
adjourned
Beaman's office and continued going over the draft
until
aboutto
5 Mr.
o'clock.
Upon returning to the Treasury, Foley and Cox had the redraft
typed up. Copies of it were sent to Felix Frankfurter, Benjamin V.
Cohen, and McCloy.
At 7:00 p.m., Mr. Charles Ballantyne dropped in to present to
Cox several questions which were raised by Sir Frederick Phillips:
(1) Whether the act was broad enough to authorize the take-over of
existing orders, and (2) whether the legislation was broad enough to
authorize the Army and Navy to dispose of property which it now has.
Cox pointed out to him that question (1) was answered by existing
legislation and that the only issue presented was whether or not
enough funds were available to do the taking over, and that question
(2) is completely covered by the proposed legislation.
About 8:00 o'clock, John O'Brien called Cox at home to say that
he would be available tomorrow. Cox said that we would not bother
him unless it was necessary. O'Brien added that he might feel hurt
if we did not call on him for help tomorrow.
Sunday, January 5, 1941
From 11:15 to 11:44 a.m., Foley and Cox went over the draft.
At 11:48, Mr. Foley telephoned Felix Frankfurter at his home and advised him of the changes made in the bill, particularly the addition
of the new subsection 6--the catch-all section. Mr. Frankfurter said
he liked it very much and suggested that we add the words "to effec-
tuste the purposes of this act" at the end of the section. He also
said that he had only one other suggestion to make--that the word
"vital" be used in the place of "related" in the title of the bill.
At 11:50 a.m., Mr. John O'Brien came in and with Foley and Cox con-
tinued going over the draft until 1:35.
At 12:45 p.m., Secretary Morgenthau called Foley to ask him
how he was getting along.
From 2:20 to 7:10 p.m., Mr. Foley, Mr. O'Brien, Mr. Bernard,
Mr. McCloy, Colonels Greenbaum and Quenton, B. V. Cohen, and Oscar
Cox went over the resolution again and prepared several redrafts.
At 4:25 p.m., Secretary Morgenthau called Foley and asked him
to show the bill to Dean Acheson.
152
-4From 5:42 to 6:25 p.m., Mr. Foley discussed with Secretary
Knox the latest draft of the bill, which Mr. Foley delivered to
him. Mr. Knox thought the bill was satisfactory. At the Secretery's suggestion, Mr. Foley also spoke to Secretary Hull, who
asked to have Green Hackworth go over the bill in his behalf.
Mr. Hackworth was satisfied with the proposed legislation.
Between 7:10 and 7:30 p.m., Foley and Cox prepared the first
draft of a memorandum to the President summarizing the proposed
legislation.
At 7:26, Dean Acheson came in and went over the proposed bill.
He could find nothing wrong with it and said that he wished he could
make a brilliant suggestion, but that he had none to make.
At 8:15 p.m., Secretary Morgenthan called Foley from Ossining
and told him that the meeting at the White House on the legislation
was postponed from tomorrow until Tuesday morning.
From 10:00 p.m. to 11:50 p.m., Foley and Cox revised the
memorandum to the President and the summary of the bill.
Monday, January 6. 1941
Foley and Cox worked on the revision of the joint resolution
most of the morning.
'At 3:40 p.m., Cox discussed with Mr. Foley the memorandum on
.
the resolution which we had revised this morning. During the afternoon O'Brien, McCloy, and Greenbaum called Cox about changes which
they thought ought to be made in the resolution.
At 4:15 p.m., Secretary Morgenthan went to the White House
with Foley to discuss the joint resolution.
Tuesday, January 7. 1941
Foley and Cox spent most of the morning revising the bill and
talking to John O'Brien about changes.
At 11:00 a.m., Secretary Morgenthau and Mr. Foley went to
Secretary Hull's office to discuss with him the draft bill to give
aid to the democracies. Hull called in Hackworth, and after Secretary Morgenthau had explained in particular detail all that had transpired at the White House the afternoon before, the bill was taken up
153
-5section by section. Hull thought it would be better to make the
measure an independent one rather than an amendment to Public
Resolution No. 83. This would enable us to steer it to the proper
committees. It was thought that the Foreign Affairs Committee in
the House and the Finance Committee in the Senate would be ideal.
Hull remarked that Garner had permitted the Foreign Relations Com-
mittee to be packed with isolationists and he wanted, if possible,
to avoid the difficulties he had encountered with the amendments
of the Neutrality Act.
Hull also thought we should not name the countries we desired
to aid but make the language general. This change was agreed to by
Secretary Morgenthau. Hackworth had a suggested change in regard to
the consideration language which was also adopted.
It was decided that Foley would redraft the bill and bring it
back as soon as possible for Hull's initials.
It was also decided that Hull would ask Rayburn, McCornack,
and Deschlor to meet with him and Morgenthau in Hull's office tonorrow morning and later with Senators Barkley, Harrison and the
Senate Parliamentarian to discuss legislative strategy. The meeting broke up at 12:30.
At 12:37 p.m., Speaker Rayburn telephoned Mr. Foley to learn
the latest status of the legislation. Foley said that it stands
this way: Foley had a very good afternoon with Beaman and his boys
all afternoon on Saturday. Mr. O'Brien, Mr. Beaman's assistant,
came to the Treasury on Sunday and we worked all day on the bill and
got a general agreement with the boys and with Knox, Stimson, and
Hull. Yesterday after the speech Foley said they had a good session
with the President. Stimson had raised the question of making this
an amendment to existing legislation and suggested this be made independent legislation and then hand it to you fellows and let you decide where it could best be handled. Speaker Rayburn said that he
would have to know where it is to go before the bill came up to him.
He thought it wise to decide which committees were to handle it, and
then before the President did anything more, to call in the members
of those committees. Foley said that the Secretary and he had just
had a long conference with Secretary Hull and there were a few changes,
but they were in language and not in substance. Hull wanted to get
in touch with Rayburn and McCormack either in his office or the
Speaker's, whichever arrangement would cause the least publicity, and
discuss possible strategy. Foley thought that this meeting would
probably be tomorrow morning. At that time they could discuss the
committee to handle the legislation. Rayburn said if they had the
meeting in his office, he wanted to have the parliamentarian there.
Foley said that the Secretary had suggested that if Rayburn came
down town he might want to bring his parliamentarian. Rayburn said
that would be fine.
-6-
154
At 1:07 p.m., Foley spoke to Middleton Beaman, the House
Legislative Counsel, on the telephone, bringing him up to date on the
status of the legislation and discussing further changes which Beaman
and his staff had in mind.
At 1:55 p.m., Foley discussed with Eddie Greenbaum some of the
changes which the Army wanted made in the proposed legislation.
At 2:10 p.m., Foley and Cox spoke to Beeman and O'Brien about
further suggested changes in the bill.
At 2:35 p.m., Foley told Hackworth that he had made the changes
which were agreed upon. Foley talked with Beaman and made some other
word changes to satisfy him. Foley is having it typed up now and would
like to take it over to Hackworth's office a little after three to show
it to him. Hackworth said he would see Foley at that time.
Mr. Foley and Mr. Cox went to Mr. Hackworth's office at 3:15 p.m.
Mr. Foley explained to Mr. Hackworth the changes that were made in the
proposed bill to embody the suggestions made by Secretary Hull and
Mr. Hackworth, and also the latest changes suggested by Mr. Beaman, the
House Legislative Counsel.
Mr. Hackworth looked over the changes and said they were satisfactory to him. Foley, Cox, and Hackworth then went to Secretary Hull's
office where, at 3:25 p.m., Secretary Hull approved the bill.
After Foley and Cox left Secretary Hull, he called them back and
said that he was a little concerned about the Executive Order because of
the delicate situation vis-a-vis Russia and Japan. Secretary Hull said
he thought, for what it was worth, his men should put before the Treasury
the various considerations which they had in mind on this score. Mr. Foley
said he had already arranged for some of the Treasury boys to get in touch
with State Department representatives to go over the situation. Foley
added, if Secretary Hull still had reservations, he would have an oppor-
tunity to bring them to Secretary Morgenthau's attention at the legislative
strategy meeting tomorrow.
When Mr. Foley returned to the Treasury he obtained Secretary
Morgenthau's approval to the bill.
Foley and Cox then went to Secretary Knox's office where Secretary
Knox's approval was obtained at 4:20 p.m. Secretary Knox asked Foley to
point out the provisions in the bill covering ships. He then initialed the
bill without further comment.
After that, Foley and Cox went to Secretary Stimson's office. At
4:29 p.m., Secretary Stimson initialed the bill after he read it and the
changes were pointed out to him.
155
7-
At 5:05 p.m., Secretary Morgenthau and Foley went to the White
House where the President approved the bill at 5:15 p.m. after a brief
discussion of the changes. The President commented that he was not to
be outdone. He was in a grand humor and joked about the dispatch with
which the draft was initialed and returned to him.
The President then discussed legislative strategy. Secretary
Morgenthau told him that Secretary Hull was calling a meeting of the
leaders in his office tomorrow morning. The President indicated that
the bill should be introduced simultaneously in both Houses. Foley
suggested that the bill be handled by McCormack in the House and Barkley
in the Senate. The President thought it would be good to have Senator
Harrison handle it in the Senate if there was a chance that it might go
to the Finance Committee.
Secretary Morgenthau said he would call Secretary Hull and tell
him that the bill had been approved by the President and see that the
arrangements for tomorrow's meetings were carried out.
156
JOINT RESOLUTION
To amend Public Resolution Numbered 83,
approved June 15, 1940, entitled "Joint
resolution to authorize the Secretaries
of War and of the Navy to assist the
governments of American republics to increase their military and naval establishments, and for other purposes"
Resolved by the Senate and House of Representatives of the
United States of America in Congress assembled, That Public
Resolution Numbered 83, approved June 15, 1940, entitled "Joint
resolution to authorize the Secretaries of War and of the Navy
to assist the governments of American republics to increase their
military and naval establishments, and for other purposes" be,
and is hereby, amended to read as follows:
Section 1. The President may, from time to time, when he
deems it in the interests of the national defense, authorize the
Secretary of War, the Secretary of the Navy and the head of any
other department or agency of the Government concerned, any other
law to the contrary notwithstanding: to manufacture in arsenals,
factories and shipyards under their jurisdiction, or otherwise
procure, any weapon, ship, boat, aircraft, munitions or equipment
or component parts thereof, or machinery, tools, or material or supplies necessary for the manufacture, servicing or operation thereof, or
157
-2-
any other article or commodity needed for defense, on behalf of the
government of any American republic, of Great Britain, Greece, China
or any other country whose defense against the forces of foreign aggression the President deems to be related to the defense or welfare
of the United States; to sell, transfer, exchange, lease, lend, or
otherwise dispose of, to any such government any such article, or any
like article to which the United States now has or hereafter acquires
title, possession or control, upon such terms as the President may deem
satisfactory, including, but not limited to, a sale, transfer, exchange,
lease or loan providing for payment or repayment in kind, or property,
or for any other direct or indirect consideration or benefit to the
United States which the President may deem satisfactory; on behalf
of any such government, to test, prove, repair, outfit and otherwise
to treat any such article owned, leased or otherwise held by any such
government, as if it were for the use of the United States, and to communicate to any such government plans, specifications, or other informa-
tion relating to any such articles: Provided, however, that no action
shell be taken hereunder which in the light of the over-all defense
position of the United States is inimical to the defense or welfare of
the United States.
Section 2. In carrying out the transactions authorized by section 1,
the Secretary of War, the Secretary of the Navy and the head of any depart-
mont or agency concerned are authorized, in their discretion, and provided
158
-3-
that it be not inconsistent with any defense requirements of the
United States or its possessions, to communicate or transmit to the
government of any country to which section 1 is applicable, and to
any duly authorized person for the use of any such government any in-
formation pertaining to any article, therein referred to, for the
use of such government in using any such article, or manufacturing
.
such article within its own jurisdiction, and to export any such
article and information for the use of any such government.
Section 3. All contracts or agreements made for the disposi-
tion of any article or information pursuant to section 1 shall
contain a clause by which the foreign government undertakes not
to transfer title or possession of such article or information
by gift, sale or otherwise, or authorizes the use of such article
by or under the direction of any other foreign government.
Section 4. The Secretary of War, the Secretary of the Navy
or the head of the department or agency concerned, as the case may
be, shall when any such article or information is exported immediately
inform the department or agency designated by the President to ad-
minister section 6 of the Act of July 2, 1940 (54 Stat. 1090), of the
quantities, character, value, terms of disposition and destination
of the articles and information so exported.
Section 5(a). There is hereby authorized to be appropriated
from time to time, out of any moneys in the Treasury not otherwise
159
-4-
appropriated, such amounts as may be necessary to carry out the
provisions and accomplish the purposes of this joint resolution.
(b) All moneys, and all property received from any government to which section 1 applies and which is converted into money,
shall revert to the respective appropriation or appropriations
out of which funds were expended in acquiring the article for which
such consideration is received, and such moneys shall be available
for expenditure for the purpose for which such expended funds were
appropriated by law, during the fiscal year in which such funds are
received and the ensuing fiscal year.
Section 6. The Secretary of War, the Secretary of the Navy
and the head of the department or agency concerned shall in all
contracts or agreements for the disposition of any such article
fully protect the rights of all citizens of the United States who
have patent rights in and to any such article which is hereby authorized to be disposed of and the payments collected for royalties on
such patents shall be paid to the owners and holders of such patents.
Section 7. The Secretaries of War and of the Navy are hereby
authorized to purchase arms, ammition and implements of war produced
within the jurisdiction of any country to which section 1 is applicable
if such arms, ammunition and implements of war cannot be produced in
the United States.
Section 8. The President may, from time to time, promulgate
such rules and regulations, not inconsistent with law, as may be
160
necessary and proper to carry out any of the provisions of this
joint resolution; and he may exercise any power or authority conferred on him by this joint resolution through such department,
agency or officer as he shall direct.
1/2/41
161
MEMORANDUM FOR THE SECRETARY
Interim Plan
Pending the enactment of the proposed joint resolution
authorizing the placement by the United States of orders on behalf
of foreign governments and leasing to foreign governments the
articles so ordered, the following interim plan can be used for
(1) The expansion of productive facilities for defense materiel;
and (2) The procurement of such material.
(1)
Expension of Production Facilities
The R.F.C. and the War and Navy Departments presently
have funds available for the expansion of defense production. The
R.F.C. has a revolving fund of $1,500,000,000 for such purposes.
Of this amount approximately $400,000,000 is probably still available.
By a recent decision of the R.F.C. to reduce the take
out obligations of the War and Navy Departments about $40,000,000
more has been made available to these departments for defense plant
expension. In addition to other plant expansion funds which these
departments still have available, further funds for this purpose
could be made available by releasing all R.F.C. take out funds which
have been set aside by Army and Navy.
There would appear to be ample funds for the additional
plant expansion program. If any more funds become necessary, the
note issuing power of the R.F.C. could be increased by the amount
necessary to accomplish this objective.
162
-2(2)
Procurement
For the actual placement of additional orders the War
Department has available: (a) $60,000,000 for the procurement
of aircraft, aircraft engines and aircraft parts; and (b)
$430,000,000 for the procurement of ordinance items. The War
Department is prepared to make these funds available for the
foregoing purposes, instead of using them, for example, for April June 1941 maintenance of aircraft, with the idea in mind that the
War Department can get further appropriations later for such
maintenance and similar purposes.
In all probability, the Navy Department can make similar
funds available.
By spreading the procurement orders with these funds
and dovetailing them with plant expension, the program can be carried forward so that the necessary deliveries can be made as soon
as the proposed joint resolution is enacted.
1/3/41
163
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE February 14, 1941
Hiss Characory
F.E.E.Goine
Time Schedule on memo of 1/2'41
re Please-Lead Bill".
REMARKS
PERSONS INVOLVED
-241
Outlined his plan for leasing equipment to Britain.
ident called Secretary
Morgenthan
as
called Poley, Cox
Told them what the President had in mind regarding
leasing of equipment to Britain. Foley to have prepared by
10:30 a.s. tomorrow a draft of permanent legislation giving
the President all the powers that are necessary to get and
lease the equipment to Britain and other democracies; and also
a memorandum on an interia plan for handling the same problem.
3'11
22 L.E.
Foley, Cox
fy's
Gave the Secretary the draft of Joint Resolution amending Public Resolution #83; also an interim plan.
fine
30 S.E.
Foley, White,
Finance
Arthur Purvis,
Sir Frederick
Preparing memorandum setting forth the reasons why the
Joint Resolution should be passed quickly.
Phillips, D. W.
Bell, O.S. Cox
NO
Foley and Cox
Discussed with Eoley the section authorising the United
States to procure arms, etc., in a foreign country when that
can not be produced in the United States.
Page 2
1/2'41 Memo
164
REMARKS
PERSONS INVOLVED
Bell, Foley, Cox
Incorporated changes made by the group at the 11:30
meeting. Cleared with D. W. Bell change in the draft which
would make it necessary to have the approval of the Bureau of
the Budget in order that money resulting from the leases, etc.
can be used by the War and Navy Department.
Cohen, Foley and
Cohen's Cox
Discussed the proposed Joint Resolution. Cohen suggested that Mr. Bernstein's change: "no transaction shall be
entered into in violation of international law as interpreted
ice in
by the Department of State" should be taken out. Cohen thought
the President's powers should be broad enough to permit
Interior
etment.
British owned vessels to be repaired and outfitted in the
navy yards of the United States.
Justice Frankfurter, Cohen,
Foley and Cox
Justice Frankfurter made the following comments:
1. Should the various powers and methods of acting on behalf
of or on the part of a foreign government be so particularized.
2. Should there be a particularization of the countries.
3. Shouldn't the word "consideration" be omitted.
4. That a title such as "Joint Resolution to Promote the
Defense of the United States" might be used.
5. It might be a good idea to have a preamble stating in
quotable language the need for and purposes of the
resolution.
6. The word "welfare" be omitted on the first page of the
Joint Resolution - "whose defense the President deems
to be related to the defense or welfare of the United
States."
Cohen suggested that section one of the resolution state
that "This Act shall be known as an Act to aid nations
whose defense is related to the defense of the United
States."
Foley and Cox
s.m.
called
the farm
ked to
Foley
Redrafted Joint Resolution incorporating the suggestions
made at the conferences.
Asked him to get in touch with Speaker Rayburn. This was
the request from the President made at Cabinet Meeting yester
day.
Page 3.
165
Memo of 1/2'41
REMARKS
PERSONS INVOLVED
n
S.E.
30
har's
Sec'y Stimson, Foley
McCloy and Cox
Speaker Rayburn, Foley
Cox and Beaman
ce
Went over the Joint Resolution and Secretary Stimson
thought the Joint Resolution was broad enough.
Foley passed on the request of the President made at
the Cabinet Metting yesterday to the Secretary - Folay
was to discuss the proposed legislation with Speaker
Rayburn. Speaker Rayburn said he would be pleased to have
Beaman help with the drafting of the legislation.
stative
Foley, Cox, Besan
O'Brien, Morgan and
sel's
Perley
Cox and Charles
Ballantyne (BPM)
Began drafting the Joint Resolution. Copy of the
redraft was sent to Justice Frankfurter, Cohen and McCloy.
Gave Cox questions that had been raised by Sir Fred-
erick Phillips:
1. Is the Act broad enough to authorise the taking over
of existing orders?
This question is covered by existing legislation, the
problem here is enough available money to take over the
existing orders.
2. Is the Act broad enough to authorise the War and Navy
to dispose of property which we have on hand?
Proposed legislation completely covers question #2.
5'41
15 s.m. Foley, Cox and
RT'S
O'Brien
Secretary Morgenthau wanted then to have a draft
ready to be taken to the White House at 9:30 a.m. on Mondays
1/6'41. They were considering the draft written after
conference all Saturday afternoon in office of the Legis-
ice
lative Counsel.
48
# cal-
Justice Frankfurter
Foley told him that a subsection had been added to
section six - a catch-all section. Frankfurter suggested
that there be added at the end of section six these words
"to effectuate the purposes of this Act."
Frankfurter suggested that the word "vital" be inserted in lieu of the word #related" in the title of the
bill.
Page 4-166
Meno on 1/2'41
REMARKS
PERSONS INVOLVED
Toos Foley
Wanted to have a progress report on the bill.
called
is
a
Folay, Bernard, Cox,
John McCloy, Col.
Greenbaum, Col. Quenton,
Working on the preposed Joint Resolution
Ben Cohen, and John
O'Brien
Foley
Secy Hull
Asked him to show the draft of the Joint Reso-
lution to Dean Acheson.
Foley told him that he had tried to get him earlier
but had missed him at the office. Secretary Morgenthan
is in the country and had asked Foley to get in touch
with Secretary Hull. Hull said he had sickness in
his family and wouldn't be able to do much with it.
Suggested th t Foley get a copy of it to Eachworth, and
let him look it over.
Sec'y Knox and
Foley
Eackworth
Foley left him a copy of the latest draft. Seid it
was satisfactory.
Told him of the proposed statute as drafted by
Beaman along the lines suggested by the President.
Secretary Morgenthau out of town and had asked Foley to
get in touch with Secretary Hull and tell him about the
statute. Foley told Hackworth that he had talked to
Secretary Hull who had told him that he had sickness in
his family and suggested that Foley get in touch with
Hackworth and give him a copy of the statute. Foley also
going to give a copy to Secretary Full. The President
wants the draft at 9:30 Monday morning.
Foley & Cox
Dean Acheson
Prepared memo for the President sumarising the
proposed Joint Resolution.
Went over the Joint Resolution; could find nothing
wrong with it and had no suggestions to offer.
Page 5
167
Memo on 1/2'41
PERSONS INVOLVED
Foley
REMARKS
Told him that the President would not see them
on the statute until Tuesday. He had to go over his mea-
sage to Congress to be given at noon on 1/6'41 on the State
of the Union.
Foley who was out
so Backworth talked
with Bernard
Secretary Henry
Spase
largenthau, Jr.
and Foley
Said he had gone over the bill and thought it
was a good job. He had only one suggestion, that section
3(a)(2) was unnecessarily repetitious - Bernard told him
that perhaps he was right, but that seemed the best way to
say it and it was agreed not to change it. Hackworth had
one question about section 3(a)(6). Asked Bernard if he
thought the bill would pass - Bernard said yes. Hackworth replied that be certainly hoped it would, and that
he was glad to hear Bernard say that he thought it would.
Gave to the President the latest draft of proposed legislation. The President asked what Morgenthau
and Foley thought of the idea of setting up a corporation
similar to RFC, Export-Import Bank or Commodity Credit to
handle this whole problem. Foley explained that if this
were done it would be necessary to repeal the Johnson Act
as well as the Neutrality Act. He explained that the Johnson Act did not apply to the Government. After this explanation, the President dropped the corporation plan and
told Secretary Morgenthau to get the initials of the
Cabinet Officers who were also interested in this Joint
Resolution and bring it back to him.
Secretary Hull,
Secretary Morgenthan, Foley and
Fackworth
Morgenthau told Hull what had taken place at
White House yesterday afternoon. Bill was discussed sec-
tion by section. Hull thought it would be wiser to make
the measure an independent one rather than an amendment
to the Pub. Res. No. 83. This would enable the Administration to refer to a more sympathetic committee. Hull
thought the House Foreign Affairs Committee and the Senate
Finance Committee would be the ideal committees to handle
the bill. Hull suggested that the countries we were going
to aid not be specifically set forth. Morgenthau agreed
to this change. Foley was to redraft the statute and bring
it back for Hull's initials. Hull was to ask Speaker
Rayburn, John McCormack, Lewis Deschler to a meeting with
him and Morgenthau tomorrow morning. He was to have
Barkley, Harrison and Matkins for a meeting in the afternoon. The purpose of the meeting would be to decide on
strategy as well as to discuss the bill.
Page 6
168
Memo 1/2'41
REMARKS
PERSONS INVOLVED
Foley
Noon
Foley expressed appreciation for the help of the
Legislative Counsel.
1. Hull, Stimson and Knox are now in general agreement on the
proposed statute.
2. Foley told him that Stimson raised objection to bill's being
handled by committees so antagonistic to the Adminis tration
policy.
3. Stimson suggested that the bill not be in the form of a
Joint Resolution, but as an independent statute.
4. Hull is going to call a meeting of the House Leaders and
the Senate Leaders tomorrow so that there might be an agreement on the strategy of committee assignments.
p.m.
Beaman
Foley told him of suggestions made by Secretary Hull
and Hackworth.
1. On page 2 in subparagraph 1 of section 3(a) Secretary Hull
wanted to omit specific reference to the countries to be
aided. He wanted it to read "for the government of any
American republic or any other country belligerent or
neutral.
2. Hackworth wants to say in section 3(a)(2) "To sell, etc.
to any such government any defense article, and to accept
payment or repayment in kind or property or any other
direct or indirect benefit to the United States which the
President deems satisfactory."
Beaman thought this ought to come out of "2" and be put in
"b" so that it would apply to "3" of section 3(a) as well.
Foley said he was committed on Hackworth's language, but
would see what he could do about "b."
3. Stimson has suggested, and Hull agrees, that the first five
lines be taken out and the statute made an independent
statute rather than an amendment to Public Resolution #83.
They thought this would help on committee assignment.
4. Beaman said he thought section 3(a)(6) didn't make sense.
Foley said it was there to make certain that "food" was
covered. Beaman said he thought that it ought to come out.
Greenbaum
Told him that the new title was "To furnish support
to those nations whose defense is vital to the defense of the
United States."
Told him of the suggestions made by Hull and Hack-
worth. Also that the Congressional Leaders were going to get
together.
Greenbaum said that he thought that section 3(a) (2)
should be put in section 3(b). Foley said that this had been
done.
Page 7
Memo on 1/2'11
169
REMARKS
PERSONS INVOLVED
Beansn and O'Brien
All four of them agreed that section 3(a)(2)
should read "To sel, transfer, exchange, lease, lend,
or otherwise dispose to any such foreign government any
defense article"; and to put in section 3(b) "the terms
and conditions upon which any such foreign government roceives any aid authorized under section (a) shall be those
which the President deems satisfhetory and the benefit
of the United State my be payment or repayment in
kind or property or any other direct or indirect beneft
which the President deens satisfactory.
Foley told Beanan that section 3(a)(6) had been
removed from the bill.
Bennan thought that the ought to strike out
"notwithstanding any other provisions of law".
O'Brion suggested 2 change in section 4 which
provides that contracts must contain s clause by which
the foreign government undertakes that it will not, with-
out the consent of the President, transfer title or
possession of such article or otherwise authorize their
use by any other foreign government. Cost named to
add "or permit its use by anyone not : officer,
employee or agent of such foreign government. O'Brien
thought that there was is marked difference in policy
between the two suggestions.
Foloy and Cox
Folcy and Cox
Showed to him the redraft of the statute containing the suggestions 26.0 by Secretary Hull nd
Mr. Hackmorth at the 11 a.m. conference. The drift was
satisfactory to Hackworth.
Secretary Hull initibled the bill.
After Hull had initialed the druft, he called Foley and
Cox back and told them that he TOS concerned about the
Executive Order on Economic Defense Board because of the
delicate situation vis-e-vis Auscis and Japan. Foley said
he and arranged for some of his people to get in touch
with Present State Department representatives and go
over the proposed Executive Order. Foley said that Hull
would have an opportunity to talk to Mr. Morgenthiu
about that tonorrow.
page 8
Memo on 1/2'41
170
PERSONS INVOLVED
Initialed the draft of the bill.
Secretary Knox,
Foley & Cox
Secretary Simson,
Foley and Cox
Secretary Stimson initialed the draft of the bill.
Secretary Morgenthau
Secretary Morgenthau initialed the draft of
the bill.
and Foley
House President, Morgenthau
and Foley
President also initialed the bill, stating that
he was not to be outdone. Joked with the Secretary about
the `ispatch with which the dreft THE initialed and
returned to him.
They discussed the legislative strategy. Secretary
Morgenthau told him about the procosed meeting tomorrow
with the Congressional Leaders to be held in in Secretary
Hull's office.
President suggested that the hill should be
introduced simultaneously in both Houses.
Foley suggested that the bill be handled by
McCornack (Majority Leader in the House) and by Senator
Barkley (Majority Leader in the Senste). The President
thought it would be good to have Senstor Harrison handle
it in the Senate if there TES a chance of the bill's
being referred to the Senate Finance Committee.
Morgenthau said he would call Hull and tell
him that the President had approved the bill, and see that
the arrangements for the meetings tomorrot were carried
out.
178:
- 1941
w--
- - very mas for your letter of
December 27, emplooing the two a
regarding defende production.
Sincerely,
(Signed) E
Inc. Checter 6. Deris,
-
The the Minissey Council of National to Defense,
Peteral Reserve Building,
Machington, D. c.
In
170-B
2 1941
my dear Chesters
Thank you very much for your letter of
December 27, enclosing the two measure
regarding defense production.
Sincerely,
(Signed) a
Non. Chester c. Davis,
The Mivisory Commission to
The Council of National Defense,
Federal Reserve Building,
Washington, D. c.
HNG/mff
170-C
m 2n 1941
w dear Cheeter -
Think you very - for your letter of
December 27, enclosing the two
regenting defense protection.
Sincerely,
(Signed) E
Man. Chester c. Davis,
The Mivisery Commission to
National Defense,
-
Federal The Council Reserve of Building,
makington, D. c.
170-D
THE ADVISORY COMMISSION TO THE COUNCIL OF NATIONAL DEFENSE
FEDERAL RESERVE BUILDING
WASHINGTON. D.C.
December 27, 1940.
Personal and Confidential
Hon. Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Dear Mr. Secretary:
Pursuant to your telephone call yesterday, I am sending
you herewith two memoranda. Only the first, on Decentralization of Defense Production," deals directly with the question
you posed.
It seems to me that either of two alternative courses
may be taken. Both require that the President issue a strong
directive as to the policy to be followed.
In one case, the President would issue the order directly
to the Secretary of War and the Secretary of the Navy, and
depend on them to see that it is carried out without reference
to or dependence on any outside agency.
In the other case, the directive would be issued to the
Ear and Navy Departments, but the cooperation of an agency outside the service departments would be enlisted to aid in the
development and execution of the policy.
My suggestion follows the second course.
The other memorandum, which is headed "In General," is
volunteered because it seems to me to be very important that
the forthcoming executive order should rationalize the whole
defense picture, as far as possible. It is particularly important,
I think, that the field and functions of the Advisory Commission
be clearly defined, and its relationship to the Office of Production
Management and other defense agencies be definitely stated.
With personal regards and best wishes of the Season, I am,
Sincerely,
Enclosures (2)
Chester C. Davis
170-E
December 27, 1940.
DECENTRALIZATION OF DEFENSE PRODUCTION.
There are two aspects to the problem of decentralization of defense
production: (1) the distribution of supply orders to existing manufacturers, and, (2) the distribution of projects calling for new or expanded
plant facilities. These two aspects will be considered in order.
1. Distribution of Supply Orders.
Large, well-established firms, accustoned to bidding on government orders, and meeting government specifications, have a definite advantage
over new and smaller contractors. Procurement officers of Army and Navy
naturally turn first to accustomed sources of supply. It requires a fresh
point of view and real determination to overcome established habit and
inertia.
The Advisory Commission does not have control over the placing of
supply orders by the Army and Navy. The Coordinator of National Defense
Purchases has had limited authority to advise and coordinate Army and Navy
purchases. Most standard articles are purchased by the Army and Navy on the
basis of competitive bids. While broad authority has been given to negotiate contracts, this has been exercised only where supplies are not normally
available. By inserting some limitations in the invitations for competitive
bids, the Coordinator of Defense Purchases has obtained some wider distri-
bution of orders, notably for shoes and textiles. In most instances
negotiated contracts have resulted in orders being placed with the outstanding
170-F
-2-
firms in the usual well-known industrial areas. Little real effort has
been made to negotiate such contracts with smaller companies outside the
customary areas.
The Production Division of the Commission was authorized by the
President to clear all contracts of any importance which was interpreted to
cover all contracts of $500,000 or more. However, only slight attention
was given by the Production Division to the wider distribution of orders in
order to encourage decentralization of industry.
2. Location of Government-financed Plants.
Under the Appropriation Acts the "recommendation" of the Commission
is required for certain expenditures by the Secretary of War to expedite production. The Commission is therefore given an opportunity to review the
plants and sites proposed under such Acts. However, the Army has consulted
with the Commission only after the requirements have been established and
most of the field work concluded. This has frequently forced the Commission
to recommend the proposed plans in order not to delay armament. Frequently,
however, suggestions are presented in the hope that they may influence
later plans.
As in the case of supply contracts, most of the expansion proposed has been for established industries within well-known industrial areas.
The Commission has not been able to establish working arrangements which would
enable its staff members who are interested in decentralization to work effectively with the Army and Navy.
Naval appropriation acts have not required Commission "recommenda-
tions". Consequently the Navy industrial expansion has largely been without
the knowledge or advice of the Commission.
170. G
-3PROCEDURE TO ACCOMPLISH DECENTRALIZATION
Without a clear sense of the relative positions of the Office of
Production Management and the National Defense Advisory Commission, it
is difficult to recommend procedure to accomplish the desired distribution of supply orders for the Army and Navy and the decentralisation of
new factories and facilities required in the armament program.
The following suggestions, therefore, may be entirely incompatible
with the organization that is visualized for the future. They merely
indicate one way in which the desired policy may be carried into effect.
I. Policy Directive.
The President should issue positive directives to the Secretary
of Mar and the Secretary of the Navy. These directives should establish
& definite policy in two fields:
(a) Supply contracts must be distributed in such a manner as to
make full use of the facilities throughout the country, large and small,
herever they can do an efficient production job at reasonable prices.
(b) Further location of new government-financed defense factories
should be discouraged in regions that are already heavily industrialised
and in which the existing labor supply is certain to be fully employed by
existing factories when the arnament program reaches full stride. The rule
should be laid down that a new defense plant will be placed in such an
industrial area only if no other place for its successful operation can be
found. Even the expansion of existing plants in industrialised regions
should be scrutinised carefully to determine whether the desired production
170- - H
-4cannot be secured as efficiently in a new location.
II. Procedure to Implement Policy.
(a) Distribution of Orders. Authority must be granted to the
Coordinator of Purchases to require procurement officers of the Army and
Bavy to distribute orders in accordance with this policy.
(b) Decentralisation of New Plants. Create a board composed of
members of the Advisory Commission with an administrative officer, similar
in its organisation to the Priorities Board, to work with the branches of
the Mar and Navy Departments in: (1) planning the entire program for ex-
panding industrial facilities; (2) determining the number and size of new
plants required; and (3) participating in the process of selecting sites for
government-financed factories required by the expanded armament program.
Approval by this board of a site finally chosen should be required
in the case of both Army and Navy. The Army and Navy should be directed to
work with this board in their initial consideration of sites for new factories,
and no project should be submitted to the Commission for final approval or
attempts made to negotiate contracts with private companies without the approval of this board.
It would strengthen the hands of this board if future appropriations
to finance new plants and facilities continued the Commission's responsibility
to recommend or approve expanditures. This board would operate along the lines
of the policy laid down by the President and would be in a position to refer
questions of general policy to the whole Commission.
The Coordinator of Purchases should be required to consult with the
board on policy matters relating to the effort to distribute supply orders. If
170-I
-5-
the Coordinator is authorized to give final approval to the contracts for
industrial plants, such exproval should be subject to suggestions as to
policy from the foregoing board.
170-J
December 27, 1940.
IN GENERAL
Creation of the Office of Production Management leaves the Defense
organization picture far from clear. Efforts should be made now before
the looseness of the set-up is demonstrated, to tighten it up; to run a
common thread through the component parts so that the function of each
can be seen in relation to the others.
The Advisory Commission is left floating in the air. Heretofore
it has been in the anomalous position of a commission to advise a non-
functioning, non-meeting body -- the Council of National Defense. It has
drawn what authority it possessed from three sources.
1. Its chairman was the President. It met and advised with
and reported to the President.
2. It exercised functions delegated to one or more of the
Commissioners, for example, clearance of important contracts was delegated to Mr. Knudsen, administration of
priorities to a board composed of Knudsen, Henderson,
and Stettinius, and the basis for cooperation between
the Commission and the Coordinator of Purchases was laid
in an executive order.
3. It was required by statute to "recommend" certain expendi-
tures authorized in three appropriation bills for a total
of $703,000,000 to be expended for new plants, facilities
and to expedite production for the Army. It was also
authorized by statute to issue certain certificates required by the Second Revenue Act of 1940.
Now certain of these functions will pass to the Office of Production
Management, such as priorities and coordination of purchases. Opportunity
for the Advisory Commission to advise with the President will inevitably
be restricted as the work of the Office of Production Management takes more
of his attention.
170-K
-2- Just how does the Advisory Commission fit in? Is it made subordinate and advisory to the Office of Production Management? Is it coordinate with the Office of Production Management, each heading up in and
meeting with the President? Or will it tend to pass out of the picture
from disuse and absorption of its functions elsewhere?
The Advisory Commission has lacked a general nerve center with the
assigned responsibility to see that its functions as a Commission as distinguished from functions of the individual Commissioners were properly
discharged. Unless an executive center is provided for the now Office of
Production Management it is likely to be subject to the same handicap and
develop the same defects. Differences between the representative of
industrial management and the representative of labor, between the Secretary
of War and the Secretary of Navy and between the heads of the armed services
and the other two, will probably develop. They should be resolved wherever
possible without submission to the President. A strong competent organizer,
possibly an executive secretary, is needed.
The Advisory Commission should not be permitted to knock around loose.
Its field of work should be clearly delineated and its tie-in with the new
agency and the old ones in the defense picture should be defined.
There is still the need for someone under the President to run a
common thread through the multiplicity of commissions, committees, and
agencies that have been assigned important defense functions to do.
171
January 2, 1941
At 7:00 o'clock, I called up Mr. Neville Butler
of the British Embassy and thanked him for his note. I
asked him if he had heard of the result of my conference
with Purvis today, and he said that he had not. I told
him that I would tell Purvis tomorrow to send him a
memorandum setting forth the results of our 11:00 o'clock
meeting.
I then called up General Marshall, and told him
that today I had notified the English that they definitely
had to give up a hundred planes to the Chinese, and that
they had taken it very badly. I told Marshall that I was
wondering if there wasn't something we could do to make
them feel better, and I asked him whether he thought it
would be possible to give them the nine Consolidated
4-engine bombers. He said he didn't want to ask the
English for something which was difficult for then to
give up, but if they would tell him what was the least
difficult to give up on their part in exchange for these
bombers, he would be glad to consider it. He said that
after all, when he signs these certificates he has to make
it look fairly realistic.
Marshall then asked me what is going to happen
in the future about these certificates which both he and
Admiral Stark have to sign, and I told him in confidence
what the President had in mind. I said, however, that in
the meantime, during the interim period, I would have to
continue to bother him about nine planes or any other thing
for the English.
I feel that General Marshall's whole attitude is
very friendly, and I couldn't ask for better cooperation.
I then called up Arthur Purvis and told him that
General Marshall's attitude was that he had to get something
from the English, and he would leave it to the English to
say what they felt they could give up most readily. Purvis
thought that that was more than fair, and he would try to
give them the answer by 11:00 o'clock tomorrow.
172
-2-
I suggested to Purvis that he keep Neville Butler
posted. He said that he had already sent him a memorandum
about the meeting this morning, which should reach him in
about a half hour.
I asked Purvis what he thought about our meeting
this morning, and he said that he was much more encouraged
and that he thought it was a splendid meeting. He was really
quite enthusiastic about it.
173
AM
BRITISH EMBASSY,
WASHINGTON, D.C.
PERSONAL AND
SECRET.
2nd January, 1941.
Dear Mr. Secretary,
I enclose herein for your
personal and secret information copies
of the latest reports received from
London on the military situation.
Believe me,
Dear Mr. Secretary,
Very sincerely yours,
Howk Bather
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D. C.
174
Telegram from London dated December 30th.
Attacks on Shipping. British merchant vessel
(5,000 tons) bombed and set on fire in North Testern
approaches yesterday and has been abredone Greek ship
(4000 tons) also attacked in the same area but no report
of damage received.
2.
Yesterday afternoon, a constal convoy was un-
successfully attacked by aircraft in the Thames Katuary.
3.
It is understood that progress is being made with
the clearing of the block in the Kiel Canal referred to
previously.
4.
on December 25th eight enemy bombers and seven
fighters made two attacks on Sollum but only caused ali
damage. Our Hurricanes shot down one bomber and one f1
(confirmed) one fighter (unconfirmed) and damaged four
other bombers.
5.
In the Southern area Italians now have four
infantry divisions, part of one armoured division, and
various other units totalling 80,000 - 90,000 men.
During the night 29th/30th, twenty-seven aircraft
despatched to attack aerodromes in occupied territory,
inland port at Frankfurt, marshalling yards at Hamm and
docks and shipping at Boulogne. Reports not yet received.
Two aircraft missing.
6.
7.
German Air Force.
During raid on Plymouth night of 28th/29th over
a thousand incendiaries but only nine high explosive bombs
were dropped. Most damage was done to dwelling houses.
Casualties now reported at eleven killed and thirty-four
seriously injured.
8.
During December 29th main enemy activity took
place/
175
place over the channel and North Sea, and the majority
of our fighter aircraft were directed against these aircraft for the protection of shipping. One enemy bomber
was probably destroyed and two others damaged. Six
enery aircraft operated inland, and Crowe was bombed, one
war factory being damaged, but not seriously.
9.
During the night of December 29th/30th an
intense but comparatively short attack was made on London
by about 140 enemy aircraft.
Attack developed from
18.00 hours to 22.00 hours. Main attack concentrated
on the City and practically the whole area from St. Pauls
to the Guildhall and from the Guildhall to Finsbury
The roof of the Guildhall was destroyed
was set on fire.
and St. Lawrence Jewry Church gutted. Various key
points including docks were affected but details not yet
available. Up to the present the number of casualties
reported is remarkably small.
Aircraft essualties in the above operations
10.
over and from the British Isles.
Enemy: one bomber probably destroyed, 2 bombers damaged.
British: two heavy bombers miesing. In assessing com-
parative results it will be appreciated the summaries
of casualties do not include enemy night bomber casualties
approaching or returning from this country.
176
Telegram from London dated December 31st.
Naval.
Two remaining ships of convoy referred to in
telegram of December 26th, first paragraph, have been
located and were expected to join the main body this
morning. Senior officer of escort reports that one ship
of the ecavoy was hit above water line and might be one of
the enemy claimed to have sunk.
2.
Attacks on shipping.
A British tankers of
8000 tons was damaged by mine off Liverpool yesterday
morning.
3.
A convey of ten ships has arrived safely from
Sierra Leone.
Royal Air Force.
4.
Home Front. Night of December 29th/30th. Owing
to very bad weather conditions only ten bombers attached
certain targets in Germany and aerodromes in German
occupation.
5.
There were no operations by our bomber command
during night of 30th/31st.
6.
Home Security. London night of 29th/30th.
7.
All fires are now out except for some smoulderings
Factories. One platinum factory: work seriously
reduced from loss of gas pressure. One diving apparatus
and one machine tool factory seriously damaged by fire.
Hailways. Services to three London railway
termini temporarily stopped but since resumed. Six underground stations temporarily closed.
Public utility. NO really serious damage either
to gas or electric services. Water supply normal except
in city and other central areas where pressure is low.
Docks/
177
Deeks. Sens damage to deeks and considerable
damage to certain food verehouses in the deek areas.
Tole-conunieations. One main telephone exchange completely out of service. Central telegraph
office and Phonograme temporarily out of action. London
temporarily not in telephonic communication with South
East England and telegraph service with South and South
East England is severely interrupted. Communication
between London and important towns in other districts
are available.
The Guildhall was burnt out as were several
8.
churches and nine hospitals were affected to a varying
extent by fire.
Casualties so far reported: Killed 89,
9.
seriously injured 314.
10.
Roumania. It now seems probable that German
troops destined for Roumania are those of twelfth army.
This army has recently been in South West Poland and
is commanded by Field Marshal List. Average strength
of an army is 10-12 divisions. Projected train movements
suggest that this figure may be exceeded to allow for
internal security in Rommnia. There are indications
that the Army will include mostly motorised and amoured
divisions.
178
CONFIDENTIAL
TENTATIVE LESSONS BULLETIN
NO. 80
MILITARY INTELLIGENCE DIVISION
WAR DEPARTMENT
G-2/2657-235
Washington, January 2, 1949.
NOTICE
The information contained in this series of bulletins
will be restricted to items from official sources which are
reasonably confirmed. The lessons necessarily are tentative and in no sense nature studies.
This document is being given an approved distribution,
and no additional copies are available in the Military Intelligence Division. For provisions governing its reproduction see Letter TAG 350.05 (9-19-40) B-B-II.
MISCELLANEOUS OBSERVATIONS
ON THE GERUAN ARMY
SOURCES
The sources of these observations are listed in accompanying footnotes.
CONTACTS
1. USE OF THE ARBEITSDIENST
2. NOTE ON MOTORCYCLES
3. NOTES ON CZECH TANKS IN
USE BY GERMANY
4. RAFTING OF HEAVY TANKS
CONFIDENTIAL
-1-
179
CONFIDENTIAL
1. USE 07 THE ARBEITSDIENST
The Reichs Arbeitsdienst is composed mainly of young
men who are undergoing a period of service prior to their entry
upon regular military training and duty. Indications are that
these men are used for miscellaneous tasks in the rear areas and
that they are kept out of combat zones insofar as possible.
The existence of such organizations as the Arbeitsdienst
has enabled the German Pioneers to restrict the number of their
functions as conbat engineers and thus to strengthen their proficiency as an integral part of the combat team.
Among the duties of the Arbeitsdienst in time of war are
the following:
Cultivation of occupied farm areas, as in Poland;
Construction and maintenance of important highways;
Salvage of equipment, munitions, and materiel, both
friendly and enemy;
Policing of battlefields;
Construction of runways for all types of air fields;
Passive protection-including camouflage, sandbagging,
etc.,-of important military establishments;
In emergencies, construction of any type under the
supervision of construction engineers.
2. NOTE OR MOTORCYCLES 2
The field performance of motorcycles in the German Army
has been found generally unsatisfactory, Reliable reports indicate
that a military model of the Volk Eagen 3 is replacing motorcycles
as they become unserviceable.
3. NOTES ON CZECH TANKS IN USE BY GERMANY4
a. Anti-Gas Protection
It is now established that the Czech tank known as
1. From the report of an American official observer in Berlin,
November 5, 1940.
2.
From the report of an American official observer in Berlin,
December 16, 1940.
3.
The Volk Sagen is a very small and inexpensive automobile
manufactured under government subsidy and originally intended
for use by the masses of people.
4. From a British official source, October 10, 1940.
CONFIDENTIAL
-2-
180
CONFIDENTIAL
the C.K.D.V.8 H. has collective anti-gas protection. Since equip-
ment used in Czech tanks can probably be adapted for use in any
type of tank, it may be encountered in later German models.
The interior of the tank can be made gas-proof by
means of fitting gas filters to all louvres and raising the air
pressure to 1/ atmospheres. The fighting compartment is separated
from the engine chamber by an air-tight bulkhead. An electric fan
drawing air through a large gas filter raises the inside pressure,
but if this pressure becomes too high, an automatic release valve
permits air to escape into the engine chamber.
The C.K.D.V.SH. also has an eccentric track adjuster which allows quick slackening of tracks for high-speed road
travel.
b. Vulnerable Points
All Czech tanks appear to have a most vulnerable
point alongside the engine compartment. An attempt has been made
to reduce vulnerability by fitting angle sections in staggered
positions on each side of the gap. Since these restrict air circulation, however, and cause overheating of engines, they have
been removed. There is another vulnerable point behind and between the bogey wheels.
4. RAFTING OF HEAVY TANKS5
Available information indicates that the heaviest load
which can be teken on a standard German ponton bridge or raft is
18 tons. It is known that most German arnored divisions had a
certain number of 22-ton Mark IV tanks, while at least three divi-
sions had Mark V and VI tanks, which weigh about 35 tons. The
strengthening of ponton equipment to meet these heavy loads would
not have been a simple matter. Probably the Germans, having decided that provision of bridging equipment for these comparatively
few but very heavy loads could not be justified, arranged for
their transportation across rivers and canals by rafting.
There is evidence of the use of a large raft, probably
designed for this purpose. It consists of box girder sections
about 60 feet in length and supported at the end by piers, each
of which consists of two double pontons. The girder is very
similar to the British small box girder, Mcri II. The exact
load capacity of the raft is not known, but the buoyancy of the
four double-ponton piers would be sufficient to carry a distributed
5. From a British official source, July 25, 1940.
CONFIDENTIAL
-3-
181
CONFIDENTIAL
load of about 45 tons. It can be assumed that the strength of
the super-structure is proportionate.
At the moment when a tank is driven onto such a raft,
the whole weight of the tank must inevitably be taken by only
one pier. The maximum load which could be driven onto the raft
when floating, consequently, would be only about 23 tons. In
order that this difficulty may be overcone, the site chosen is
of such a nature that one pier ground's while loading. It is
known that the pontons used are strong enough to take the load
under these conditions. The unusual length of the raft and the
great strength of the superstructure are required by the method
of loading used. The raft must be so long as to permit the
transference of sufficient weight to the offshore end in order
that the grounded pier may be freed. This effect is accomplished
when the tank is driven beyond the center of the raft.
Shore bays, approximately eight feet long and constructed of fabricated lattice girders, are provided on each
bank for running the tank on and off the raft.
Ferrying is probably effected by means of a cable
stretched across the river; by towing or pushing with a 100 horsepower motor boat, which is part of the ponton equipment; or by
using two or three sualler outboard motorboats.
CONFIDENTIAL
182
G-2/2657-220
RESTRICTED
M.I.D., W.D.
January 2, 1941.
SITUATION REPORT
No. 282
12:00 M.
This military situation report is issued by the Military
Intelligence Division, General Staff. In view of the occasional
inclusion of political information and of opinion it is classified
as Restricted.
I.
Western Theater of War.
On December 31 German bombing attacks on railroad stations
1
and harbors in Southeast England caused some damage and fires in
warehouses. Neither side engaged in bombing on the night December 31January 1.
On January 1 a British bombing of Bremen started large fires.
German planes bombed central and southern England. A series of bombs
were dropped in various parts of Ireland on the night of January 1.
The German High Compand reports that 48,000 tons of high explosive
bombs and 1,800 tons of incendiaries have been dropped on British
territory from August 8 to December 31.
II.
Greek Theater of War.
Local clashes by ground elements in contact were reported.
Italian air attacks against ground troops and materiel continued.
III. Mediterranean and African Theaters of War.
The British siege of Bardia continues. Artillery is shell-
ing the town. On the Sudan and Kenya frontiers patrols are active
and there is some artillery fire.
On December 31 the R.A.F. bombed Valona, Taranto, Palermo,
Naples and Cotrone. Both British and Italian air attacks were made
on ground troops and materiel. The British bombed Italian airdromes
in Libya.
RESTRICTED
CONFIDENTIAL
of Code Radiogram
Received as the War Department
183
as 1.86 Pollo, January 2, 1941.
London, filed 16:55, January s, 1941.
1. a Wednesday, January 1, planse of the British Coastal
Command operated the usual patrols with no important results. Seme
planes were send out - daylight bombing missions but unfavorable
weather conditions prevented them from carrying out these missions.
During the preceding night RO planoe were dispatched because of bad
weather.
3. Party-eight German planes were pletted over Britain -
January 1, but their activity was limited. During the night of
January 1-2, there was no consentration of German raids but attacks
were seattered among many points in Britain.
3. On January 1, a 5,600-ten Swedish ship in Liverpeel Bay
was damaged by a sine. German aircraft attacked, but did no damage,
to a convey traveling westward in "Churchill's Channel". off Dakar
a British 8,800-tea teaker and a 5,800-ten vessel of Norwegian registry were terpedood.
4. In the Lybian theater, the British report that the area
between Bardia and Tobrak is in their hands and that army patrols have
advanced as far west as Tobrak.
S. The British claim to have control of the air in all
Middle Eastern theaters, where they are carrying out normal aircraft
activities.
LEE
Distributions
Military Aide to the President
Secretary of War
State Department
Secretary of Treasury
Asst. Secretary of War
CONFIDENTIAL
Chief of Staff - 2
War Plans Division
office of Naval Intelligence
AC - $
G-S, 1
CONFIDENTIAL
Paraphrase of Code Radiogram
Received at the War Department
184
at 11:08 A.M., January 2, 1941
Berlin, filed January 2, 1941.
Positive confirmation received that advance elements
of the German air force are now in Italy. Aviation Signal
troops have been seen in Venice and it is estimated that more
than 100 Ju-58 transport planes and 3000 aviation personnel
have passed through that city headed south. At Bologna, railread
trains German aviation meter transportation reported moving
south.
PEYTON
Distribution:
Military Aide to the President
Secretary of War
State Department
Secretary of Treasury
Asst. Secretary of War
Chief of Staff
War Plans Division
Office of Naval Intelligence
CONFIDENTIAL
185
January 3, 1941
9:30 a.m.
GROUP MEETING
Present:
Mr. Haas.
Mr. Young
Mr. Cochran
Mr. Gaston
Mr. Sullivan
Mr. Thompson
Mr. Graves
Mr. Kuhn
Mr. Schwarz
Mr. Pehle
Mr. Wiley
Mr. White
Mr. Foley
Mr. Bell
Mrs. Klotz
Gaston:
H.M.Jr:
I have that letter you suggested. I still think
it is wrong.
Well, we will read it out lond. Herbert thinks
this is wrong.
"My dear Mr. President:
"The only way the Federal Government can
be assured that German and Italian merchant ves-
sels immobilized in our ports will be incapable
of causing serious damage to channels, terminals,
merchant shipping, or waterfront property gen-
erally, is to seize these vessels immediately
and remove their officers and crews, and I therefore recommend that I be empowered to take this
186
-2step, for which I how have legal authority.
"There are two German merchant ships and
twenty-eight Italian merchant ships at present
immobilized in our harbors. One German ship is
in Boston harbor, and the other at Port Ever-
glades, Florida. The Italian ships are scattered along the Atlantic and Gulf coasts, with
the exception of one Italian ship at Portland,
Oregon, one in the Panama Canal Zone, and one
in Puerto Rico. I am attaching hereto a list
of these vessels by name, their locations, and
other pertinent data.
"All these vessels are under as close surveillance by the Coast Guard as can be given
without actually placing guards on board or
seizing the vessels. Placing guards on board
without taking possession of the vessel would
only result, I feel sure, in sabotage, which
could not be prevented as long as officers and
crews remained on board.
"As an example, the Italian tanker Brennero,
loaded with lubricating oil, is immobilized at
Port Newark, New Jersey. There is nothing, short
of seizure or maintaining armed guards on board,
to prevent this vessel from getting underway and
charging along the waterfront at Bayonne, New
Jersey, where there is the greatest concentra-
tion of oil terminals in the world, and where a
serious fire would be a national disaster. While
this vessel might be moved to a point where the
possibility of damage would be less, only actual
seisure would be complete assurance against
destructive acts.
"A very careful study has been made of the
situation presented by these immobilized vessels,
and I therefore recommend that you give me instructions to proceed immediately to seize these ships.
187
-3H.M.Jr:
Well,
I didn't know that you had to remove the
officers.
Gaston:
Well, you would have duplicate crews aboard, and
I don't see any point in letting the other crews
remain aboard. They would just create trouble.
You
would have to remove their officers and put
them somewhere.
H.M.Jr:
Well, that I wouldn't do.
Gaston:
I don't think it would do just to put three or
four or half a dozen men aboard a ship and then
rely on their preventing the regular crew of
the vessel from doing damage. The only way you
could be assured that there wouldn't be any
damage done is to take the crews off and put
them somewhere else.
H.M.Jr:
Does Waesche agree with that?
Gaston:
Oh, yes.
H.M.Jr:
Well, I wouldn't do that.
Gaston:
I don't think you can select out the German and
Italian ships without causing very serious com-
plications. I think for one thing you invite-H.M.Jr:
Well, Herbert, then you might just as well say,
which I am not ready to say, that the Coast
Guard cannot do what the President expects us
to do, and that is to see that these ships are
not either scuttled or let out into the channels
and damage the waterways. I will not accept
the responsibility as Secretary of the Treasury.
I will not accept that responsibility.
Gaston:
Scuttling will be minor danger. There are a
lot more things they could do. They could
smash the machinery. They could have done it
at any time, and they haven't done it.
188
4H.M.Jr:
That doesn't mean they won't. Was it the St.
Louis during the War? What was that boat they
smashed the machinery?
Gaston:
All of them.
H.M.Jr:
Well, I an not going to accept it.
Gaston:
The only way you can prevent that sort of thing
from happening is to take the boat, which I
don't think we have any precedent for doing.
We can violate precedents, but I think we will
invite reprisals of different sorts. For
instance, there has never been any sabotage
ordered by Germany or Italy in this country,
none at all.
H.M.Jr:
What about the St. Louis and those boats during
Bell:
After we declared war?
Gaston:
Yes, absolutely, after it was known that we were
When we took them over, the machinery
the War?
was damaged.
declaring war.
H.M.Jr:
In view of the steps and in view of the position
the President has taken, and Secretary Knox, I
am not going to sit there as custodian of these
ships there; I won't take the responsibility.
Geston:
The only way is to take the ships, and of course
in view of our normally neutral position, there
is a question of our authority to do that and
there is a question of whether we want to incur
what will happen if we do that.
H.M.Jr:
Do you mind if I put this up to Waesche at eleventhirty with you here?
Gaston:
No, I don't mind at all.
189
-5H.M.Jr:
Have you any objection?
Gaston:
Oh, no, not at all.
White:
Herbert, if you wanted to spend enough money,
couldn't you put a duplicate crew or a larger
crew on board?
Gaston:
Well, that is what we are talking about. That
means taking posession of the ships and the
safest, most convenient way to do that is to take
the other crews off and then you will be sure
they won't be doing anything you don't want them
to do.
White:
But you don't have to take the other crews off.
Gaston:
It would be the logical thing to do.
H.M.Jr:
Well, that makes it impossible. Well, I am not
going to take the responsibility and not carry
it out.
Gaston:
If we were at war or about to declare war, of
course, we would do it.
H.M.Jr:
Knox is willing today to put the Marines on those
ships.
Gaston:
Sure, they want to get in on the thing. If you
raise the question with them, they say, "Oh,
we will take these ships.
H.M.Jr:
Sure, and the slightest thing happens, Knox is
perfectly justified to say, "I told Morgenthau
I wanted to do it, and he sent for Gaston and
Gaston said everything was all right. He had
charge of the situation."
Gaston:
Well, it is perfectly evident that we are not
in complete control of those ships unless we
have our own crews aboard then. Lots of things
190
-6can be done.
E.M.Jr:
I want to be in a position to say, "Mr. President, I can not guarantee that one or two or
three things will not be done to impede traf-
fic or this or that or the other unless - now,
if you don't want to give me that authority,
all right."
Geston:
E.M.Jr:
We can't guarantee either that there won't be
other kinds of acts of sabotage having nothing
to do with ships occur at any time. Nobody can
guarantee that.
Herbert, if you don't mind, we will bring this
up at eleven-thirty. I won't be in that posi-
tion, that is all there is to it. Eleven-thirty.
I just won't take that. I mean, it is an honest
difference of opinion.
Gaston:
E.M.Jr:
Yes. Well, there is no perfect way of handling
this thing. You can't - the chances you just
can't assure yourself against.
The point is, the Navy is willing to do it.
This is our responsibility. All right. Well,
We have said that we are looking after ships.
now, either we do a good job or we don't.
Gaston:
Yes, we are doing and are prepared to do the
best job that can be done under the present
situation in which we are at peace.
White:
Well, does doing a good job require taking off
their crews? I think it is merely a matter of
expense.
E.E.Jr:
I don't think it does.
White:
Put more men on there.
Gaston:
I don't just get your point, Harry. You have
191
-7got to put an adequate crew aboard to insure
yourself that no damage will be done by the
foreign crew that is on that ship. Why embar-
rass yourself by keeping the foreign crew on and
add to it the number of men you will have to put
on the ship to prevent them from doing damage.
White:
I suppose there is a political, not a military,
reason that the Secretary doesn't want to take
their crew off.
Gaston:
I can't imagine there would be any political
reason, because either our crew is in charge or
they are not. They are mere boarders. The foreign
crew are mere boarders on that ship if our crew
is in charge. We would have to put more men on
to watch that crew if we left them on.
White:
You mean it isn't possible merely to put enough
watchers which would act in the same capacity
that the Marines might act there, that that would
be taking over control?
Gaston:
Yes, certainly. You can't have three men watch
White:
No, but you could have 10 or 15 men watch them.
H.M.Jr:
And make those nen prisoners on their own ship.
thrity or forty.
It is better to have them prisoners ashore.
Gaston:
Sure.
h.M.Jr:
What is the situation with those Latvian ships
up in Baltimore, that one ship?
Gaston:
You mean under the United States Marshall?
H.M.Jr:
Yes.
Gaston:
They have no--
192
8-
H.M.Jr:
Well, Herbert-
Gaston:
They have no guarantee that damage won't be done
to that ship. It is only the interests of the
owners and the crew of the ship.
H.M.Jr:
Well, I have got a definite sense of responsibility on this thing, and I am not going to be
put on the spot by the Navy or Mr. Roosevelt.
Gaston:
H.M.Jr:
Well, I think it may be a good thing to get
their views on the thing.
I won't do it, and, if Coast Guard doesn't want
to do it, I am not going to - then let - say
let the Navy do it.
Gaston:
There isn't any question of Coast Guard not want-
ing to do it. They are perfectly willing to do
anything that they are directed to do and so am
I. I am merely saying I don't think it is a wise
thing to do.
H.M.Jr:
Well, that is your privilege, but I am not saying whether it is a wise thing or not a wise
thing, but I say I am not going to sit in this
chair knowing that any night they might cut the
cables and slip the ship out into the channel
and sink her, and then I am held responsible
for that damage. I will not take that respon-
sibility.
Gaston:
Well, I think it is a good idea to talk it over
with the President or Cabinet, whether they
understand the situation.
H.M.Jr:
I am willing and want to say that we will take
the necessary steps to see that they can't do
it. Then if the Cabinet says they don't want
me to do it, then I am relieved of that responsi-
bility.
193
9Gaston:
Yes, that is right. That is, if they simply
say they want things to go on as they are.
H.M.Jr:
Yes,
but
then it is the Cabinets responsibility
but not
mine.
Gaston:
That is right.
H.M.Jr:
But that was the purpose of the letter to
read it at Cabinet and make a recor mendation
that we be permitted to put enough men on ship
board, not to take the crews off, to put enough
men on ship board, whatever the number is, so
that they can not maneuver the ship around so
it can do any damage.
Gaston:
Well, as to that, I say the logical thing is to
H.M.Jr:
Well, that is where I differ with you.
Gaston:
Because you are taking control of the ship and
those other nen are just prisoners on board that
take the other crews off.
ship?
N.M.Jr:
No.
Gaston:
And there are more convenient and economical
ways of handling those men as prisoners. Instead of having 15 or 20 men aboard the ship,
we can have six men aboard the ship.
H.M.Jr:
As far as handling it, look at the difficulties
of handling those fellows off the Columbus, one
of the most difficult problems the Administration
has.
Gaston:
Exactly. Whether you leave them on or take them
off, you still have a difficult problem. If you
leave them on, you have got to have a much larger
guard on board the ship in order to insure con-
trol of it.
194
- 10 H.M.Jr:
But you have still got the men living in their
own berths, you don't have to try to find a
place ashore for them the way you do for the
crew of the Columbus.
Gaston:
Then you have to have some place for your own
men to live.
H.M.Jr:
They can live in the first class passenger
Gaston:
These are mostly freighters.
H.M.Jr:
Let's do it at eleven-thirty.
Gaston:
Yes, right.
H.M.Jr:
Ed?
Foley:
cabins.
The time to appeal in the Spanish silver cases
expired so the decision in the Circuit Court
of Appeals in our favor stands, and they are dis-
missing-H.M.Jr:
Foley:
What case?
The Spanish silver case that Stimson handled for
us in the lower court.
H.M.Jr:
Did Stinson ever get paid for that?
Foley:
I don't know whether he has been paid or not.
H.M.Jr:
Would you find out?
Foley:
Yes. I don't know if he ever submitted a bill.
I haven't seen the bill.
Has he been paid?
Bell:
I think so. We had a question, you remember,
about charging it to the cost of silver.
195
- 11 Pehle:
It was deferred until the suit was settled. He
has never been paid anything, and we still owe
the Spanish something on the silver that we
never paid to the Loyalists, five percent.
Foley:
I don't t hthink he ever submitted a bill.
Bell:
Oliphant had up the question as to whether we
shouldn't charge it to the Federal Reserve Bank
of New York.
Foley:
I think that was at the time it was retained,
Dan, as to how he would be paid. But I don't
think the bill has been submitted. If it has,
I have never seen it.
Here is a memorandum for the diary on the meeting with Glass yesterday.
All right. Will you give Leo Crowley a copy of
that letter to the President?
Foley:
Yes. And a copy to Delano?
Yes.
Foley:
We will be ready on all that legislation at a
quarter after ten.
Good. I hope I will be too.
Sullivan:
We are ready on it also. And here are some news-
paper articles.
I.N.Jr:
From now on, give those to Kuhn, and I wish you
would talk to Kuhn about this whole subject about
handling this fight, the whole question of this
tax exempt fight, how are we going to handle it
and all the rest of it. Will you have a talk
with him?
c
196
- 12 Sullivan:
Yes.
H.M.Jr:
My mind is running along about the possibilities
of getting a man down here whom Kuhn could
select to do that and nothing else.
Cochran:
I have nothing.
Wiley:
Nothing.
Pehle:
Do you want to see me later on on that letter
you sent down to Mr. Hoover?
H.M.Jr:
Oh, that can wait.
Pehle:
One of our people, Stemple, has an offer to go
with Export-Import Bank in a much better job;
and, as a matter of fact, he has more or less already accepted before he cleared it with us.
Warren Pierson is going to use him as his assistant.
H.M.Jr:
Stemple?
Pehle:
Stemple, yes.
H.M.Jr:
Where does he come from?
Pehle:
New York. He has extensive banking experience.
He is a pretty good man. I don't see that we
can stand in his way.
Lacour Gayet was in the other day and said that
the French Ambassador had a tentative agreement
with Summer Welles with regard to some of the
gold at Martinique. Do you know about that?
H.M.Jr:
Not a thing.
Pehle:
I didn't either. The proposal was to send to
some United States port, apparently Puerto Rico,
some of the gold at Martinique on the condition
197
- 13 that we would release an equivalent amount of
funds that are frozen, the French funds, and
they would use the funds in buying supplies
in this hemisphere to send to North Africa.
Whether Welles agreed to anything like that I
don't know, but I told them we wouldn't do anything or discuss any details unless we heard
from the State Department. It rests there.
On the I. T. & T. matter, Livesey called me
about two days ago and said that the matter had
been put up to the President, who said, "No.
Then he called back to say that that might be a
little premature, and the President had said,
"Not now," so he said they would take it up
again with him when it came to a head. Well,
it is coming to a head right now, because the
I. T. & T. has signed the agreement with the
Roumanian Government, subject to the licenses
being issued, and the cable is coming over from
the Roumanian Central Bank to the Federal to
sell the gold necessary and pay the dollars to
the I. T. & T., so as soon as the application
has come in, we will notify the State Department,
and then we will hear from them again.
That is all.
H.M.Jr:
Phil, Mr. Knudsen called for me this morning,
and he brought up this question of priorities.
It seems that some list that I sent the President was - the President referred it to him.
Was that the list showing the 20 different
countries and the different odds and ends that
they want?
Young:
Those plane tables, did you send that to the
President?
H.M.Jr:
I must have. Well, it is - Knudsen's position
is, if we want anything cleared on any priorities,
send it to him and he will do it at once.
198
- 14 Young:
I will send them about six today, then.
H.M.Jr:
I told him you would. I think you had better
take them over yourself. He said yesterday he
had cleared seven planes of Lockheed.
Young:
H.M.Jr:
I hadn't heard about it.
Well, he seems to think he is going to do it all.
He said certainly any parts for any planes that
have been sold must go. I think I would walk
over there today and just find out what he has
in mind. He says if you will bring them to him
he says, Nobody has asked me to clear anything."
He says, "I am the boss." I couldn't argue with
him. I didn't have my facts. But he seemed
excited about it, so I said, "Well, wonderful,
we will see how good you are. He says, "Try
me, try me."
Young:
That is easy enough.
H.M.Jr:
He says, "Try me." So I would call him up and
go over and see him today.
Young:
Fine.
H.M.Jr:
I won't even stop to sign it because I won't
have time to do it, so while I an at Cabinet
this afternoon, go over and see him.
Young:
Meigs called me yesterday, who is the air man
under Knudsen there. He said he is perfectly
willing to take all the responsibility for clearing all of these smaller requests for planes and
parts. He called me back later to say that he
had talked with Brett about it, and Brett said
it was O.K. with him provided we would accept
his clearance on it.
H.M.Jr:
Well, then, he said, Suppose you had the clearance and you could get it through Colonel Maxwell."
199
- 15 Anyway, I am telling you please to go over
and see
Mr. in
Knudsen
what
he has
mind. this afternoon and see just
Young:
Right.
E.M.Jr:
0. K.?
Eass:
I have nothing, Mr. Secretary.
E.M.Jr:
To bring you up to date, Phil, in talking with
General Marshall, last night, on the nine more
Consolidateds, his position was, if the English
will tell me what they can spare the best - he
says, "I don't want to ask them for something
to embarrass them," in other words, what they
need the least, that he can use for a swap on
the nine, he will do it, and I told that to Purvis
last night and he is to give us an answer this
morning, see. will you follow through on it?
Young:
H.M.Jr:
Yes.
In other words, whatever they can say they can
spare the best - something that he can, as he says,
save his face with, he will release the nine.
Young:
Right.
H.M.Jr:
Harry?
White:
Chen sent back & young man, Chi, who he took
over the Burma Road with him who reported on the
condition of the Road, etc., but he made one
comment that I want to raise here to see whether
anything should be done about it. He mentioned
in the course of the conversation I had with him
that there were quite a few Chinese bankers who
had just come here and wanted to know what convention was going on or whether we were having
a conference, and I began to be curious, and I
said, "No, we haven't, and I asked him now he
knew they were here. He said he had met a few,
200
- 16 -
and I let the matter drop. The idea occurred to
me later, why should they all be coming over here
now, unless they got worried about the possibility
of imposing exchange control and are making arrangements with banks here to get out from under
ahead of time, and I am wondering whether we
could find out about it, because they have got
a hundred and seventy-five million dollars here,
and I am willing to bet a dollar to a doughnut
that over a hundred million of that is in the
hands of individuals who have no business to have
it over here.
H.M.Jr:
You are too suspicious, Harry.
White:
Well, why do they all come over all of a sudden,
Chinese bankers here? (Laughter)
H.M.Jr:
Why are my son and I going up to New York tonight?
White:
You might look these Chinese over. Isn't there
To see "Panama Hattie.
some way we can find out what is going on?
H.M.Jr:
Bob, last night, says, "You tell the President
at three-thirty, Daddy, it is a matter of national
defense, and you want to study the Panama situa-
tion.' He says, "You needn't tell him it is
"Panama Hattie.' Just tell him it is the Panama
situation. So that is a notice to everybody
that the boss is leaving at three-thirty on the
four o'clock train. I will be back Sunday night,
I think, or Monday morning. Well, you have got
all of these would-be detectives around here.
White:
Well, I'll put the proposition up to them.
Sullivan:
Sammy Klaus will take care of that. (Laughter)
H.M.Jr:
All right, Harry.
White:
That is all. Any time you want to know about
201
- 17 -
that Burma Road, I will be glad to report to
you, but on the whole his comments were very
favorable with respect to that.
H.M.Jr:
Would you (Klotz) ask the White House usher
that - Sunday night somebody was in who had been
over to China and taken some remarkable pictures
which they showed Sunday night, and I would like
to get them for downstairs. It is on the bombing of Chungking.
White:
He had a long movie film of the Burma Road.
H.M.Jr:
Excuse me, I am mixed up on Sunday night. I
went to see him yesterday morning. What was
yesterday morning?
Klotz:
Thursday.
H.M.Jr:
He showed it to them Tuesday night.
White:
Chen took a moving picture especially for you.
It hasn't arrived yet. When It arrives, Mr.
Chen would like to bring it down.
Schwarz:
Ren
Sylvia Porter has written a piece in which she
predicts the Fed's recommendations will split
Congress wide open. We are collecting all the
editorials from that all over the country which
will take several days.
White:
Which reminds me of something, Mr. Secretary.
Senator Wagner's secretary called me up and
wanted to know what this was all about, and I
asked him some questions. He said that -
(Laughter) that this fellow, I have forgotten
his name, it sounds like Goldsborough, said that
the Administration was for it, and he was for
it, and he helped write it, and he was going
to push it. Some important Congressman. Isn't
there a Goldsborough.
Foley:
There is a Goldsborough on the FDIC who used to
202
- 18 be a Congressman from Maryland.
White:
No, somebody there now. I am awfully sorry,
I have forgotten the name. But apparently there
is an opinion among many up here that this is
all right with the Administration because the
Administration hasn't said anything to the con-
trary, and I took the liberty of telling him
that if Senator Wagner asked him any questions
about it, he had better ask Senator Wagner to
get in touch with you before he makes any
statement on it.
H.M.Jr:
Let him get in touch with the President.
Bell:
I see Early helped write it. It says in the
paper this morning that Early helped write this
statement.
Schwarz:
It said he helped on the timing.
H.M.Jr:
I saw last night what I called the most exclusive club in Washington, Dr. McIntyre's office,
and he said that the Star was much too enthusi-
astic over what he had said. He hadn't said
that at all. That is the interpretation they
got.
Schwarz:
United Press on the other hand said they concluded that the Treasury was opposed to it
because we had refused to approve it. So you
can get either interpretation.
H.M.Jr:
Well, Harry will give them an interpretation
(facetiously).
White:
I will ask them some more questions.
H.M.Jr:
White:
That is right.
But I don't want any toy pistol.
H.M.Jr:
All right. (Laughter)
203
- 19 Harold? If you and Norman would press McKay
to give you two gents an appointment, I would
like to clean up that thing. I don't know
whether you think I have forgotten about it
or not. On that personnel matter.
Graves:
You mean today?
H.M.Jr:
Not today. Monday. I don't know why you two
Thompson:
There are so many pressing you now.
H.M.Jr:
Well, anyway--
Graves:
O.K.
H.M.Jr:
Dan?
Bell:
George has the annual report ready for release.
are so retiring about it.
He thinks it ought to go out probably tonight
in view of the criticism we had last year that
it was released too late for the boys to read.
Now, it has the eight year review in it which
we talked about before, and I think George has
done an excellent job of it. Is it all right
with you for it to go out tonight?
H.M.Jr:
Sure. I can't look at it.
Bell:
Well, it has the usual release, that it can't
be published until after the Budget message.
H.M.Jr:
It is all right.
Caston:
You know, Steve Early has raised some questions
in the past about the timing of giving that out
in view of the fact that it does have budget
figures in it.
Schwarz:
This copy does not have them.
Gaston:
Oh, that is all right.
204
- 20 Bell:
They eliminated 10 pages of budget figures. I
guess we won't be able to sign the Chinese
agreement today because we have heard nothing
from Soong. It had probably better go over
until Monday.
H.M.Jr:
Bell:
All right.
There is one question raised in the agreement.
We had in the draft that we sent them last week not
to exceed five million dollars a month, and he
said that wasn't enough and that he would like
to see it increased some. So we thought maybe
we would put in eight million dollars a month
so as to get rid of the money by the time the
fund authority expires, which would be June 30.
Now, Harry raises a question of whether that
isn't just a little high and maybe we had better
stick to our original five. Do you have any
feeling about it?
H.M.Jr:
No.
Bell:
We still have control over it even though it is
eight million a month.
H.M.Jr:
Harry thinks it is all right.
Bell:
Well, he raises a question. I think he could
be argued out of it but--
H.M.Jr:
Why can't you do the same as you did with the
Argentinians? I understood it if you thought
the fund was going to lapse you would shovel
it out the last month.
Bell:
We would do that, but he is arguing it would
make his position a little better with his board
and psychologically it would be better for the
timing of this new bank coming in, that a larger
sum would look better. I don't think it makes
a lot of difference.
- 21 H.M.Jr:
We will never get a penny of it back, so what
is the difference?
White:
The thought in my mind, Mr. Secretary, is this:
Not that you get any of it back, but they are
205
constantly teetering on the edge of making peace
with Japan or not, and I thought the longer we
could stretch out our control over them, the
longer we can be certain that they are going to
use the money, they will act in such a way as
we would like them to. It isn't that the money
will be any safer because the money is bound to
fly the coop, but I think it is a question of
10 months rather than six months unless at some
time you feel differently and want to give them
more. That is the only thought I had.
Jr:
With that argument, let's make it 10 months.
It puts off the day until Harry comes around and
asks us to give them some more.
White:
That is right.
Bell:
of course you have the authority to increase
H.M.Jr:
The last month.
Bell:
Well, any time.
White:
No, any time, if you see fit.
H.M.Jr:
O.K. Who is going to watch all of these things?
that five million a month.
Does that come under you (Cochran) that you are
going to match the Argentine and China?
White:
No. We are going to - I mean, as many can watch
it as want to. (Laughter) I mean the fact that
somebody else will watch it won't exclude the
fact that we will, and you remember we are going
to send a man down there.
- 22 E.M.Jr:
206
Yes. Well, I want to get in on that. Before the
man goes, I want to look him over.
White:
Yes. And I was going to raise the question we
would also like - no matter who goes to China,
we would like to send one of our young men down
there to watch a while.
Bell:
Watch him.
H.M.Jr:
Well, in any case, seeing that there are going
Cochran:
All right, sir.
White:
The Stablization Fund, I should think, sir.
Bell:
Merle will spend the money.
H.M.Jr:
All right.
Schwars:
I would suggest Tuesday then, instead of Monday.
The President's message Monday will blanket everything.
H.M.Jr:
What else?
Bell:
Guy Emerson, the vice president of the Bankers
Trust Company, had a great deal to do with the
to be lots of watchers, I still think that besides everybody else watching it, that you ought
to watch it too.
last liberty loan campaign. He was Ben Strong's
right-hand man. He had charge of all the advertising and the forms and so forth. He has got
quite a file on his whole campaign.
H.M.Jr:
Would you give it to--
Bell:
Well, I haven't got it. What I want to do is
send Gene Sloan and Broughton to New York to
see Emerson and Pope, who will report together on
that whole scheme and what they worked out and
was used for the rest of the country.
207
23 H.M.Jr:
Just as long as it is no indication any way
Bell:
Oh, no, not at all. They are perfectly willing
that we are going to use them.
to cooperate and give us anything they have got.
H.M.Jr:
That is all right. So long as there is no indi-
cation. Because those aren't the kind of people
I am going to use this time.
Bell:
Well, you don't have to use them.
H.M.Jr:
I wouldn't
Bell:
Guy Emerson is a good man.
H.M.Jr:
No, I don't want any New York bankers in on this
Bell:
Do you mind if we discuss with them what they
H.M.Jr:
I don't mind your getting what they have, but I
mean there is a conflict between the fellows that
thing. You can't have the money until - you
can't own it and lend it both, so you have got
to be on one side of the table or the other.
have in the files?
have the money to lend and the people that have
got to borrow it, and I am not going to do what
they did in the last one, have the fellows sit
in here from the banks and run this show. So,
if that is understood, just to go down and get
what they have in their files, it is all right,
but there isn't a more vicious, anti-Roosevelt
man in the United States than Colonel Pope.
Bell:
This isn't Colonel Pope. It is his brother.
(Laughter)
H.M.Jr:
But I mean there is no more vicious anti-Roose-
velt man.
208
- 24 Bell:
I don't know how he stands, but it isn't Colonel
Pope.
H.M.Jr:
You know how I feel about those kind of people.
Bell:
Well, I didn't want to make any arrangements with
them to come down here at all. I just wanted
I don't have any objection.
Broughton and Sloan to go to New York and see
what Guy Emerson has in his files. He told me
that he thought he had the most complete file on
the liberty loan campaign because he traveled
all over the country and talked to all the Federal
Reserve Banks and he helped them work out their
systems and arrange their advertising.
H.M.Jr:
I don't mind this, just as long as it is one-way
traffic. If they want to give us something.
Bell:
It really saves a lot of money in advertising
because they got these large firms to give all
of their advertising space to liberty loan and
at the bottom they would just say the space contributed by, say, Sears-Roebuck Company, and it
really saved an awful lot of money.
White:
Mr. Secretary, before final decision is made with
respect to the kind of campaign on bonds, I wonder
whether there might not be a little discussion.
I have, myself, some very serious doubts about
the appropriateness of the kind of campaign that
was carried on during the sar for the sale of
liberty bonds. I didn't know whether you were
making up your mind already or not.
H.M.Jr:
Kuhn is checking on the various people that I
can get down, people like this professor from
Amherst, Odegarde, and several other people who
can sort of advise me as to what is the best
method of approach and study all of this stuff
that has been done before, you see. Now, Odegarde
209
- 25 is a good New Dealer who voted for Roosevelt and
so forth and so on, and there are other people like
that. I asked, a couple of weeks ago, the Librarian, MacLeish, if he could find some Roosevelt
Democrat who was in the advertising business and so
forth and so on and - I mean I am looking for
somebody along those lines. Now, we could to to
the universities and get a couple of people, but
before I make any move or anything else, I want
that kind of an angle, Harry, see. That is the
way I am going at it. And Kuhn is lining these
people up. I am just beginning to get into the
thing. I read Broughton's memorandum, and it is
a very nice memorandum, but there is nothing in
it that would help me.
Bell:
Well, it is a memorandum of what happened dur-
H.M.Jr:
Bell:
That is right.
That is all. We didn't ask him for any sugges-
H.M.Jr:
Well, I didn't know - yes, I think on the last
ing the last Mar.
tions.
page there were some suggestions.
Bell:
Only as to using the present force.
H.M.Jr:
Yes.
Bell:
The organization is much better now than it
was in '17. We have an organization that they
didn't then.
H.M.Jr:
Well, let the boys go up and get what they have,
but I just want to keep the thing wide open.
Bell:
I understand that. O.K.
H.M.Jr:
What else.
210
- 26 Bell:
That is all.
H.M.Jr:
All right.
Thompson:
You have been interested for sometime, Mr. Sec-
retary, in a plan for staggering pay days.
H.M.Jr:
Yes.
Thompson:
Mr. Bell's organization has a draft of legislation which would accomplish that. It goes
a little beyond that. I didn't know but what
you would want to discuss it with--
E.M.Jr:
Bell:
If Bell says it is all right, it is all right
with me.
All it does is submit to the Bureau of the
Budget a proposal for consi deration. It involves a five-day week and staggered paydays,
and it involves the merchants in town and the
bankers and everybody else, and all I want to
do is lay it before the Budget and not send it
to Congress at this time.
White:
Do you approve the five-day week, Dan?
Bell:
Yes, I am approving the five-day week.
Attaboy!
Bell:
I don't see much use of coming down here on
Saturday if you work 39 hours the other five
days. Then I am in favor of it.
White:
I think the Government ought to lead in the
general direction of social progress.
Bell:
Particularly the progress.
H.M.Jr:
He saw you wink, Harry. You didn't get Bell that
time.
O.K., gents.