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211
January 3, 1941
10:20 a.m.
RE LEGISLATION
Present:
Mr. Bell
Mr. Kuhn
Mr. White
Mr. Sullivan
Mr. Foley
Mr. Gaston
Mr. Gaston
Mr. Bernard
Mr. Young
Mrs. Klotz
In order not to overlook Mr. Sullivan, let's ào
you first. When I get into this English thing,
I don't know how long it is going to last. Incidentally, that water picture was narvelous.
Sullivan:
I am sorry I couldn't get the original.
K.M.Jr:
Narvelous plus what was in it. It was most
attrative the way it was fixed up. It made a
big hit.
Sullivan:
I hope you got a laugh out of it.
You wanted a copy of the draft of the second
bill.
H.M.Jr:
Which is this?
Sullivan:
This is the one that allows states to tax our
212
-2securities and allows us to tax future issues
of state and municipal securities.
Foley:
I would like to take a look at that, John.
Sullivan:
Yes, I want you to.
Foley:
I gave him a look at mine, I don't know why I
H.M.Jr:
can't look at his. (Laughter)
Well, it is wonderful. This isn't the State
Department you know. We talk to each other
here.
Sullivan:
I didn't think it was.
H.M.Jr:
Well, I am not sure. This is wonderful. Well,
Sullivan, what does this say?
Sullivan:
Well, I will get you an outline. You asked for
a copy of the bill to take with you today.
H.M.Jr:
Yes, but I will never read this.
Sullivan:
All right, I will get you an outline.
H.M.Jr:
What does it say?
Sullivan:
This is the bill, as I understand it, the procedure
is that the first bill will be Mr. Foley's, the
one he is going to present here today, which
makes it mandatory to federally tax future federal
issues.
H.M.Jr:
Yes.
Sullivan:
Then after that is passed, we then go in and say,
"Now, we are taxing our own issues, we want the
states to be able to tax our future issues, and
we want to tax future state and municipal issues.
H.M.Jr:
How are you going to do that?
213
-3Sullivan:
And
that will be done through this measure
there.
H.M.Jr:
Have you (Bell) seen this?
Bell:
No, but I think that is the right procedure, to
Sullivan:
We will have to allow then the right of refinancing outstanding issues that are callable. In
other words, if they have an issue outstanding
that matures in 1950 that they are paying four
percent on and they can float a new one for two
and a quarter, they should be allowed to call
separate then.
in that one and be allowed an exemption on the
new ones to the amount of the outstanding to the
date of maturity.
H.M.Jr:
Now, Mr. Sullivan, in the first place I want my
own crowd to see this first and chew it over
and then after we have chewed it over and have
a one-page memorandum I want to ask the Presi-
dent is this the way he wants it done, but first
I want an agreement among our own people.
Sullivan:
Right.
H.M.Jr:
Now, let everybody have a copy that wants a copy,
you see.
(Mr. Kuhn entered the conference.)
Foley:
I have got three things, Mr. Secretary.
H.M.Jr:
Kuhn, we have just talked about a reciprocal bill
for the Federal Government to be able to tax future
issues of State and municipals and they would have
the right to tax us, you see, and I have referred
it back to some of the people who haven't seen it
yet. You have got a what?
Foley:
Well, I have got the counterpart to that bill
214
-4which we have all been over several times. That
is the one that raises the debt limit and removes
the exemptions in so far as all of the future
federal and federally guaranteed obligations are
concerned.
(Mr. White entered the conference.)
Foley:
It provides for the issuance of saving certificates, it provides for the issuance of savings
bonds, either on a coupon basis or a discount
basis or partially coupon and partially discount
and-Bell:
Foley:
Savings stamps?
Savings stamps. It will permit us to do the
small borrowing and bring the little fellow into
the picture that you discussed. If you want us
to hold that one until we are in agreement on
John's and then put it all into one memorandum
for you to take to the President and say, "Is
this the way you want to proceed?"--
H.M.Jr:
Yes, that is the way.
Foley:
We will do it that way.
H.M.Jr:
Well, he won't receive this Monday, but he might
be willing to take this up Tuesday.
Foley:
We can be ready to take this up Tuesday, can't
we, John?
Sullivan:
Bell:
I think so.
I was hoping you might have a hearing before the
Ways and Means Committee Thursday or Friday of
next week.
H.M.Jr:
That is all right.
215
-5Foley:
I hope to have a statement ready for you over
the weekend too, because nobody knows how
quickly we will get it rolling.
H.M.Jr:
Any statement I am going to give in the future,
before it comes to me I want Kuhn to go over
it. You can give it to him in technical form,
but I would like him to go over it for me. You
will always have to put the beefsteak in it, but
they can give you the technical one.
Sullivan:
Well, now, in that statement, are you going to
let them know that you are coming along with
this other one next?
Bell:
I shouldn't think so.
H.M.Jr:
Personally, I think we ought to dump them all in
their lap at the same time.
Bell:
Have a hearing on them all at the same time?
H.M.Jr:
Sure.
Bell:
Why don't we rush this debt limit thing and get
it out of the way?
Sullivan:
That wasn't the understanding you had with the
group in the Senate, Mr. Secretary.
Foley:
The only understanding we had was that they would
be separate bills, John, and they can take them
up separately if they want to or they can put one
ahead of the other.
H.M.Jr:
I have refused to tell the Press for weeks now
how we are going to handle this thing. When I
go up on a hearing or a debt limit or anything
else, they are going to say, "Mr. Morgenthau,
what do you propose to do? I can say, "Well,
if you are ready, here it is. I have got to
have it. I can't say my crowd hasn't told me
216
-6yet or I haven't made up my mind yet, but I have
got to have an answer.
Bell:
I see no objection to having the bill introduced,
but I should think the hearings ought to be
kept separate and let's not confuse the two
because it is important that the two get through.
H.M.Jr:
I am with you a hundred percent, but supposing
I sent you up there alone. Would you want to go
up there and not know where Mr. Roosevelt and
I stood on the question?
Bell:
I think you have got to tell them, but not have
a hearing on it.
H.M.Jr:
I want to be in a position to give them a complete
program and say I am not going to push the thing.
There is no difference, but I can't go up there
and play dumb on it.
Bell:
That is right.
H.M.Jr:
O.K.?
Bell:
Yes.
H.M.Jr:
We are together. It is just a question - here
is a complete program, gentlemen, how do you
want to proceed?" And not push it. Is that all
right.
Bell:
It is all right with me.
Foley:
Now, you wanted a memorandum of all the legis-
lation in this session that the Treasury wants
and I have that. It is quite a long memorandum. 1/21/11
gymen
H.M.Jr:
You are putting words in my mouth, but it is all
right.
Sullivan:
Oh, I beg your pardon, my ears got it the same
way.
217
7-
Foley:
I understood you to say this morning at tenfifteen you wanted to know from us all the
legislation the Treasury wanted at this session.
That was my understanding.
H.M.Jr:
Just check the notes, will you (Reporter)?
Foley:
Isn't that right, Dan?
Bell:
Yes.
H.M.Jr:
I am not going to argue. If you are right, you
are right.
White:
But check the record. (Laughter)
Foley:
Like that time he told the Secret Service fellow
Sullivan:
He did it. We will have to correct him on that.
Foley:
I won't ask him until he gets back where he took
he didn't care where he went, he could go anywhere, and he wasn't going to ask him until he
got back. (Laughter)
you.
H.M.Jr:
I will say this, Bell was an hour late to dinner.
Bell:
Riding them around town. (Laughter)
H.M.Jr:
I never did have a chance to ask him.
Sullivan:
I think he had the Secret Service fellows fol-
I don't know where he was.
lowing the wrong track.
Foley:
Yes.
White:
Well, what are these bills concerned with? Is
there anything the rest of us ought to know.
(Laughter)
218
-8 Foley:
Well, you would like to know what is going to
happen to the Stabilization Fund and the power
to devalue the dollar and things like that.
H.M.Jr:
Now listen, just a second. Let's do - if you
fellows haven't got it ready yet because you
haven't talked to each other, let's get the
debt limit and the tax question, you see, in
such shape that we can - I can have something
on
Tuesday, you see, and I will put the date
down now.
Bell:
That includes Sullivan's bill, too?
H.M.Jr:
They will all be one. It is debt, taxing of
future federal, taxing of--
Foley:
Reciprocal, non-discriminatory--
Bell:
There will only be one?
H.M.Jr:
It will be a joint memorandum.
White:
When you speak of a debt limit, do you have in
mind a ceiling as well as removing the partition?
Foley:
Yes.
H.M.Jr:
A specific ceiling?
Foley:
Yes. Don't ask me. One might ask him.
Bell:
I am not in a position to tell you yet.
H.M.Jr:
Dan is getting good. You know, that Chinese
story was wonderful. (Laughter)
What did you say, Harry?
White:
I am not in a position to comment.
H.M.Jr:
You know, that Chinese story was marvelous.
219
-9 Have you heard it?
Bernard:
No.
H.M.Jr:
You had better learn it.
Have you (Cox) heard it?
Cox:
Yes.
H.M.Jr:
Well, tell it to him when you get out.
Bell:
I really don't know, Harry, it sounded a little
Gaston:
The matter is under study.
H.M.Jr:
You have heard the Chinese story, haven't you?
Sullivan:
Yes. I didn't know of what it was applicable,
but I later discovered. I am glad I was in
sarcastic.
New Hampshire last week.
H.M.Jr:
I am going to put down ten-thirty Tuesday for
legislation, you see.
Foley:
Ten-thirty?
H.M.Jr:
Yes.
Sullivan:
Tuesday?
H.M.Jr:
Yes, Tuesday at ten-thirty, and that means at
that time we will take up other things that anybody is interested in, but not to get my docket
too crowded, is there anything that is more press-
ing than - for the Treasury this comes first,
doesn't it, Dan?
Bell:
Yes, that is the first thing on the docket.
220
- 10 H.M.Jr:
I can't assimilate more than that because I have
Foley:
Right.
H.M.Jr:
So, Herbert, have you got anything that is
got to do this English stuff, you see.
pressing?
Geston:
I have nothing that is pressing.
H.M.Jr:
Then
at ten-thirty we will take up the rest of
this stuff.
Bell:
We are going to have a lot of chairs, Mr. Secretary, on the balcony and front which are
excellent seats.
H.M.Jr:
Well, it made a big hit last year.
Gaston:
Don't they take care of the Secretaries up on the
Hill at the Inauguration Ceremonies?
Bernard:
They may at the Inauguration Ceremonies.
H.M.Jr:
But not for the parade.
Bernard:
I don't know whether they could physically get
down here in time for that.
H.M.Jr:
They did last time.
Gaston:
That was for the King and Queen.
H.M.Jr:
The point is, it doesn't do a bit of harm to offer
it to them.
Foley:
I was both up there and down here last time. There
was plenty of time to get down.
H.M.Jr:
Well, if you will talk to Mr. Thompson.
Bell:
There is one thing I would like to raise on this
221
- 11 -
debt limit thing. We are taxing whole obligations issued by corporations or any agencies
of the Federal Government, and that means
Federal Land Banks and some of the other agencies
like Farm Credit.
H.M.Jr:
I took that up with the Secretary of Agriculture.
Bell:
Well, we will send it down also to Governor Black
and I think they are willing but they call at-
tention to the fact that the Federal Land Banks
are, in part, privately owned, and as to whether
or not we should apply the guarantee to those
obligations. I think we should.
H.M.Jr:
The guarantee?
Bell:
We should guarantee the Federal Land Bank obliga-
H.M.Jr:
You haven't reached me, Dan.
Bell:
You see the obligations now standing in the Federal Land Banks do not have the guarantee.
H.M.Jr:
That has always been a question, but it is always
considered that they do.
Bell:
And we have always given the money to add to their
surplus.
H.M.Jr:
But we have always said if they ever went broke
the Federal Government would have to do that.
Bell:
There is a moral guarantee.
H.M.Jr:
I used to be over there.
Bell:
And I think when we take out this tax exemption
feature, we ought to add the express guarantee.
tions that are issued and outstanding rather than
having the tax exempt features.
222
- 12 Foley:
You mean they are trading on that. They say if
you ask us to give up the tax exemption, you
give use the guarantee.
Bell:
White:
No, they are not trading, they just asked the
question, and in John's bill last year we admitted that they ought to add the guarantee.
It is virtually
well
add it. there any how, and you might as
The idea being, it night depress the prices if you
had removed the tax exemption, and you will compensate by giving a guarantee which you are
already obligated to any how.
Bell:
That is right.
White:
What interest do they borrow at.
Bell:
Well, they get down around three percent.
White:
Three percent for a Government guarantee?
Bell:
No, lower than that if they had the guarantee.
They get around two and three-quarters now.
H.M.Jr:
Bell:
Well, I wouldn't want to give a snap answer, but
it sounds all right.
All I want to do is tell them that we will go
along with this letter on that.
H.M.Jr:
Have you got anything, Herbert, on this, before
we go to the English?
Gaston:
No.
H.M.Jr:
Well, now who is here helping me on the English?
Foley:
Oscar and I.
H.M.Jr:
You (Sullivan) have got a bill of goods to sell
223
- 13 these boys, John.
Sullivan:
H.M.Jr:
I don't think so.
I had more fun over that picture. I had almost
as much fun, I think, as you had making it.
Sullivan:
I doubt it.
H.M.Jr:
It was very clever.
Sullivan:
Well, I will have copies made and sent to the
boys.
H.M.Jr:
O.K. Now--
m Sullivans draft
224
(the dates herein - - beend - the - that
the MII will be - in April 100. - on Interest of about w days will with between see
- and the date signature the I
issues from the A NELL
To provide for the income termities of while Name, and for other -
is as - by the Smith not I of I of the
Dated States of America in Dentist america That this Ast - to
cited as the #Public Bend Tax ABS of 1941.
See. 2. Section 22(b)(4) of the Internal Revenue Date is
to read as follows
*(4) TAX-FREE I To the extent provided in motion 120(b).
interest upon obligations issued w (a) a State, Territory, or -
political subdivision thereof, or the Metrict of or agency or instrumentality of - - or more of the foregoing or (3)
a corporation organized water not of Congress, 18 - corporation is
as instrumentality of the United States (as defined is methon 110(b))s
or (c) the United States - - of its personactions. Every person -
ing - of the obligations - in class (a). (2). or (c) shall,
in the return required w this a statement aboving the
were and - of 1 obligations - w his and the income entered thereform, in 1 form and with 1 as the - require.
See. s. Sections 20(a)(2) - (2) of the Internal Revenue Cade
are to read as follow
225
+3+
w - of - - mas -
I remites as - - different w - mind
States If - is instaled in - I when
1
as
I
the - - - 1 of - 4
motion n, and as water the - - the I of
of the Public - set of 19(1), - submit is -
from - -
*(2) INDIRESS or UNITEATIONS OF or
- - - - method as Internal -
obligition of a - organized water we of If (a) - organition is as Instrumentality of the States (as defined in and 110(b)): - (a) - Interest
is installed in - I water - - - (c) the not authorising the 10000 of - alliation as I
- - (installing the - - medical of acction 4 of the Public - Age of 2001. -
is - - 1 -
- 4 Section 116 of the Internal - Date is I w
inserting after subscrition (a) a - - to - as failous
Y(N) - - - difference I (2)
(a) before July 2. 1962, w a state, or - /
abilities thereof. or the Metrict of - or - or information of - - or - of the transplace w
(2) w a expension organised et not of - as -
.3.
corporation is an instrumentality of the United States, or
(3) w the United States or any of its persessions. In the
case of obligations of the United States issued after
September 1. 1917 (other than postal savings certificates
of deposit). and in the case of obligations of a corporation
organised water Ast of Congress the interest shall be exampt
only if and to the extent provided in the respective Acts
authorizing the issue thereof, as amenied and supplemented
(including the amenistory and supplementary provisions of
section 4 of the Public Debt Ast of 1941), and shall be ex-
cluded from gross income only if and to the extent it is
wholly exempt from the tames imposed by this chapter. The
term #instrumentality of the United States' means instrumentality, corporation or agency of the United States, or
any other corporation or entity created by. organised unier,
or established pursuant to authority contained in, any Act
of Congress. For the purposes of this subsections
*(1) In determining abother as obligation
is issued after June 30, 1941, and whether an obli-
ation is issued after the date of enectment of the
Public Board Tax Act of 1941 (hereimafter called
lenantment date'). 11 shall is either case be come
sidered to be issued after such date, if any part of
the payment therefor is received by the obliger after
such date, or delivery thereof is made by the obliger
after such date.
226
227
*(2) obligations shich merely replace lost,
multilated, defeced, or declared obligations, or or
ligations of larger or smaller demonisations, and or
ligations is registered form or with coupons which
a replace obligations with compone or in registered form, shall be treated as if they were the a
ligations replaced.
"(s) (A) If the terms of an obligation issued before
July 1, 1941, the maturity of which on enectment date is
later than June 30, 1941, are, after emetaent date,
changed so as to increase the principal amount or interest
rate or to extend the maturity, then such obligation shall
(as to interest searning for any period after the date of
the change or June 30, 1941, whichever is later) be can
sidered as issued after such later date.
*(3) In the case of an obligation issued after the
enastment date and before July 1. 1941, such obligation
shall (as to interest accruing for any period after June 30,
1941) be considered as issued after June 30, 1941, if any
part of the preceeds of the issue of which the obligation
is a part, or if any obligation of the issue, is devoted
to the retirement or refunding of an obligation the maturity
of which on exastment date was later than December 31, 1941.
For the purposes of this subparagraph, December 31, 1941,
shall be considered the maturity. on assetment date, of
an obligation the interest on which ceases to FOR before
+8+
- 2. mm, w - of - aditation being
salted for releages in - wa the -
thereof as - misted - - *(4) If - officities is after - mg
1941 selled instructing differtion). -
if (w) the 1 of which 11 is a part
(horeimatter called - is is issued for
the of refunding one or - obligations
(horeimater salled systemical obligations) and
((2) all returns obligations have the -
- expiration date, as defined is sulpara
- w and
#(6) no obligations, other than these of the
- is have been is for the purpose of funting - of the returned obligations ml
"(s) the accreate principal - of the
- i is not in - of the aggregate principal
- of the refunded obligations and
((2) interest - - of the refundable -
time - (w - of - obligation, being
called for relation, is - with the thorest as that existed - - date, or the
date of is / is later) to - - a
date not - - - - after the date -
228
229
with Internal - the refunding / Regise
to - 1
(c) Saturday on - of the statement /
Mom, - the posited as the - of - 20 -
to - w - of - call - - to
/ as submit - - I not 2. 2043 ml.
((a) the refunding alliation in the I
status the - expiration date w. - 1
firs, the refunded ((I) the interest sate - the referting /
time for - period enting - or before the expiration date of the reference obligation is me
higher than the Subsract rate which - of the w
funded obligations India or world us had not been called for relection) have hade for the
converpenting posicis
then the suffenting officition shall be considered as issued
before July 2, was as to w - of the - as for - parted enting before or - the - expiration
date of the sufferial obligations, and shall to as is after Jean no was as to the resister of -
Laborest. For the - of this 1
((1) - obligations shall to as one is only as - is with all
.9.
the others is mindy, Submit - - ml
contitions, - restate, we the that that the
- affer, or that - are registered
and - is exages form shall be /
((3) - expiration date "(1) with request to a referted oblig
tion 1 before July 2. 1941, the date of
minity which the obligation had - June so,
1941
((11) with respect to a refunded oblig
tion issued after June so, 1941, the date as
of which interest thereon would (as the abite
gation had not been called for reterption)
have more to be considered as interest as obligation issued before July 1, 1941.
See. 5. (a) the Metal States have - to the l
water - income tax, of interest upon and gain from the sale or
other disposition of, obligations is after June so, 1941, w
the United spates, - Territory or or political division thereof, the Metrict of Calumbia, or any - or is
struntality of - - or - of the foregoing. w - only
constituted taxing authority having juristiction to tax 1
interest and give if 1 temtion does not disartistic against
- interest or gain - of ste secure. the - sive
is this action shall - affect these I after
230
231
June ⑉ you - - made - or - - or 1
I I Inc you to June ⑉ 1943 - to I
as a Submit date mm - I / with to tomotion w - state, - or 2001 testing
month as are 1 in the Law authorizing their 1
as I and - As - in this minution or of the milled States instales of the missel States and - compension or with w.
organized when, or - to - contained
in, - not of Congress.
(w) For the of this (2) In commining abother - obligation is
after June 30. 1942, as shall to - to to team
after - date 18 any part of the - therefor is extract w the obilion after - date, or delivery thereof
is with w the obilion after - date.
(a) obligations which work replace see milisted.
or destroyed obligations, or alliation of -
or smaller - and obligation in registered
- or with company 1 monty supless allotics with
- or in received form, shall to treated as is they
were the obligations registered
(a) the providers
of this motion shall, mm - to
- obligation, to / as - of and to the - sate w parts of sabe authorizing the - of
- obligation as I - -
232
A BILL
To
amend the Second Liberty Bona Act, as
amended, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled, That section 21(a) of
the Second Liberty Bond Act, as amended, is hereby further amended to
read as follows:
"Sec. 21. The face amount of obligations issued
under the authority of this Act shall not exceed in
the aggregate $
outstanding
at any one time."
Sec. 2. Section 22 of the Second Liberty Bond Act, as amended
(U.S.C., title 31, sec. 757c) is hereby amended to read as follows:
"Sec. 22. (a) The Secretary of the Treasury is
authorized to issue, from time to time, through the
Postal Service or otherwise, United States savings
bonds and United States Treasury savings certificates,
the proceeds of which shall be available to meet any
expenditures authorized by law, and to retire any outstanding obligations of the United States bearing
interest or issued on a discount basis. The various
issues and series of the savings bonds and the savings
certificates shall be in such forms, shall be offered
in such amounts, subject to the limitation imposed by
section 21 of this Act, as amended, and shall be issued
in such manner and subject to such terms and conditions
consistent with subsections (b), (c), and (d) hereof,
and including any restrictions on their transfer, as the
Secretary of the Treasury may from time to time prescribe.
"(b) Savings bonds and savings certificates may be
issued on an interest-bearing basis, on a discount basis,
or on a combination interest-bearing and discount basis
and shall mature, in the case of bonds, not more than twenty
years, and in the case of certificates, not more than
ten years from the date as of which issued. Such bonds
and certificates may be sold at such price or prices,
and redeemed before maturity upon such terms and conditions as the Secretary of the Treasury may prescribe:
233
-2Provided, That the interest rate on, and the issue
price of savings bonds and savings certificates and
the terms upon which they may be redeemed shall be
such as to afford an investment yield not in excess
of three per centum per annum, compounded semiannually.
The denominations of savings bonds and of savings
certificates shall be such as the Secretary of the
Treasury may from time to time determine and shall be
expressed in terms of their maturity values. The
Secretary of the Treasury is authorized, in his discretion, at any time or from time to time, by regulation to fix the amount of savings bonds and savings
certificates that may be held by any one person at
any one time.
"(c) The Secretary of the Treasury may, under such
regulations and upon such terms and conditions as he
may prescribe, issue, or cause to be issued, stamps, or
may provide any other means to evidence payments for or
on account of the savings bonds and savings certificates
authorized by this section, and he may, in his discretion,
make provision for the exchange of savings certificates
for savings bonds.
"(d) For purposes of taxation any increment in
value represented by the difference between the price
paid and the redemption value received (whether at or
before maturity) for savings bonds and savings certificates shall be considered as interest. The savings
bonds and the savings certificates shall not bear the
circulation privilege.
"(e) The appropriation for expenses provided by
section 10 of this Act and extended by the Act of
June 16, 1921 (U.S.C., title 31, secs. 760 and 761),
shall be available for all necessary expenses under
this section, and the Secretary of the Treasury is
authorized to advance, from time to time, to the
Postmaster General from such appropriation such sums
as are shown to be required for the expenses of the
Post Office Department, in connection with the handling
of bonds, certificates, and stamps or other means provided to evidence payments.
"(f) The board of trustees of the Postal Savings
System is authorized to permit, subject to such regulations as it may from time to time prescribe, the withdrawal of deposits on less than sixty days' notice for
234
-
the purpose of acquiring savings bonds and savings
certificates which may be offered by the Secretary
of the Treasury; and in such cases to make payment
of interest to the date of withdrawal whether or not
a regular interest payment date. No further original
issue of bonds authorized by section 10 of the Act
approved June 25, 1910 (U.S.C., title 39, sec. 760),
shall be made after July 1, 1935.
"(g) At the request of the Secretary of the
Treasury the Postarster General, under such regulations as he may prescribe, shall require the employees
of the Post Office Department and of the Postal Service
to perform, without extra compensation, such fiscal
agency services as may be desirable and practicable
in connection with the issue, delivery, safekeeping,
redemption, or payment of the savings bonds and savings
certificates, or in connection with any stamps or other
means provided to evidence payments."
Sec. 3. Notwithstanding any other provision of law all obligations issued under authority of the Second Liberty Bond Act, as amended,
and all obligations which by their terms bear interest or which are
sold on a discount basis issued by any corporation, instrumentality
or other agency of the United States under authority contained in
any other law, shall, as to both principal and interest or other
increment, be subject to all taxes now or hereafter imposed by the
United States: Provided, That any such obligations which the United
States, or any corporation, instrumentality or other agency thereof,
has, prior to the effective date of this Act, contracted to issue at a
future date shall when issued bear such tax exemption privileges as are
provided in the law authorizing their issuance.
Sec. 4. Section 32 of the Act approved June 13, 1898, as amended
(U.S.C., title 31, sec. 756); section 6 of the First Liberty Bond Act, as
amended (U.S.C., title 31, sec. 755); section 6 of the Second Liberty Bond
235
-4Act, as amended (U.S.C., title 31, sec. 757); section 5(d) of the
Second Liberty Bond Act, as amended (U.S.C., title 31, sec. 754(d));
and sections 301 and 302 of title III of the Revenue Act of 1940 (54
Stat. 526); are hereby repealed.
Sec. 5. Nothing contained in this Act shall be deemed to alter
or amend in any way the terms of any of the obligations described in
section 3 hereof, issued prior to the effective date of this Act, or
to impair or otherwise affect any rights, privileges, or remedies accruing to the holders of such obligations under the terms thereof or
under the laws authorizing their issuance.
Sec. 6. This Act shall become effective on the first day of
the month following the date of its approval by the President.
JJO'C:LJB:mfw
1/3/41
Copies 2/11/41 to
236
January 3, 1941
10:50 a.m.
RE AID TO BRITAIN
Present:
Mr. Bell
Mr. Phillips
Mr. Ballantyne
Mr. Purvis
Mr. Kuhn
Mr. White
Mr. Foley
Mrs. Klotz
H.M.Jr:
Let me say it once for the record, if I overlook
you (Bell) it is innocence.
Bell:
Don't you worry about it.
H.M.Jr:
Well, I mean, it is never deliberate, and I look
up and half the time I don't know who is here.
Yesterday Kuhn wasn't here, and I told him I
would have him here, and then after the thing
was over I suddenly remembered.
Kuhn:
This was the English meeting that you spoke to
me about yesterday?
H.M.Jr:
Yes, and which I thought you were at, and I
never realized you weren't.
Kuhn:
I was waiting for a call.
Bell:
Well, there is no hard feelings. You don't have
to worry about it at all.
(Mr. Young entered the conference.)
237
-2H.M.Jr:
I will read this out loud. I want to give you
the background to show you the seriousness of
the situation. He said, "I have probably
strained once more the narrow path of diplomatic rectitude. I am sending you enclosed a
copy of the message to my Prime Minister which
I am forwarding to the President this evening.
In other words, he gave it to me as soon as he
gave it to the President. Now, I want you
(Foley) to read this out loud in order to let
you know how serious this thing is. This is
not child's play. This is a cable from the
Prime Minister to the President. (in pafe
Foley:
*
*
*
#
"Meanwhile I learned with pleasure from Mr.
Purvis of his talk with you and Mr. Morgenthau
on Monday. Instructions have been given to
furnish you with any further figures about our
requirements which you may seek.
"We are deeply grateful for all your understanding of the problems which will be thrown up in
the interval before Congress approves your pro-
posals. It is not only a question of total amounts
but of how we are to live through a period which
may perhaps extend to February 15th. What would
be the effect upon the world situation if we had
to default on payments to your contractors who
have their workmen to pay? The idea that in the
interval we shall either have to default or be
stripped bare of our last resources is full of
danger and causes us profound anxiety. I feel
sure this will be ever in your thoughts.
"Furthermore apart from the general totals and
interim period there arises a group of problems
about the scope of your plan after being approved
by Congress. What is to be done about the inmensely heavy payments still due to be made under
238
-3existing orders before delivery is completed?
Substantial advance payments on those same
orders have already denuded our resources. We
have unceasing need for various American com-
modities not definitely weapons; for instance
raw materials and oil. Canada and other Dominions, Greece and also Poland and Czechoslovakia,
have clamant dollar needs to keep their war ef-
fort alive. I do not seek to know immediately
how you will solve these later questions. We
shall be entirely ready for our part to lay
bare to you all our resources and liabilities
around the world, and we shall seek no more
help than the common cause demands. We naturally
wish to feel sure that the powers with which you
propose to arm yourself will be sufficiently wide
to deal with these larger matters, subject to
all proper consideration. Without prompt and
effective solution of these problems Hitlerism
cannot be extirpated from Europe, Africa and
Asia.
H.M.Jr:
I just wanted to give you this as a background.
Now, I think we might just as well do the thing.
(Mr. Phillips, Mr. Ballantyne, and Mr. Purvis
entered conference)
H.M.Jr:
Now, one thing we call the interim plan and the
Purvis:
Oh, yes.
other we call a joint resolution.
(Cochran entered conference)
H.M.Jr:
I will read this out loud.
"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
239
4plan can be used for (1) The expansion of productive facilities for defense material; and
(2) The procurement of such material.
(1)
"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 expansion. 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." If
Foley:
That, Mr. Secretary, is this. If Jones put up
10 million dollars to build a plant, which he
would own, he asks the Army or the Navy, which-
ever is the procuring department, to set aside
out of their plant expansion funds three-fifths
of that 10 million dollars to reimburse him if
he should have any loss. In other words, if the
emergency should be over quickly and he had to
get salvage value for his plant, he wanted money
to be set aside by the Army or the Navy up to
three-fifths of the capital outlay to take care
of any possible loss that he might undergo.
H.M.Jr:
What is the expression, "take-out funds?"
Foley:
Well, that is to take him out of any loss that
he might incur.
240
-5H.M.Jr:
Isn't there something that could be used there to
describe that better?
Foley:
Well, it is reimbursement for loss, contingency
amount, or something like that.
Young:
That
tion. term is recognized as applying to this situa-
H.M.Jr:
Is it?
"There would appear to be ample funds for the ad-
ditional 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.
"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 ordnance items."
H.M.Jr:
You mean that they haven't spent?
Foley:
That they could make available. It hasn't been
spent, and it is only there for bookkeeping purposes.
H.M.Jr:
Are you familiar with that two or three hundred
million that they were going to spend on the socalled 10 Divisions? Are you sure that they
haven't used that? Talk with Philip Young about
that afterward and make sure that they haven't.
Foley:
All right.
H.M.Jr:
You (Young) know what I am talking about?
Young:
Yes.
Foley:
We had Phil in last night when we were putting
these figures together.
241
-6Young:
I don't believe that is part of the 230 million.
H.M.Jr:
Well, make sure.
It might be.
"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 Mar 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 expansion,
the program can be carried forward so that the
necessary deliveries can be made as soon as the
proposed joint resolution is enacted."
Do you want to ask any questions before I read
the so-called Joint Resolution?
Purvis:
Defense material includes any material, for
instance, iron and steel, I suppose, or things of
that kind?
Foley:
Anything that is necessary.
H.M.Jr:
Do you want to ask anything, Sir Frederick?
Phillips:
Oil?
Foley:
Yes.
Phillips:
That is all I want to ask.
H.M.Jr:
All right?
Bell:
Could these orders be put in on behalf of the
242
-7War and Navy Departments and when they come out
of the shop they would be leased under the
Joint Resolution? In other words, what you want
to do is advance the date of production?
Foley:
Advance the date of production, Dan, and anticipate their needs by making them our needs until
such time as legislation is enacted which will
permit you to dispose of them under a lease or
some other kind of arrangement.
Bell:
My question goes to the use of funds, because I
Foley:
That is right, they would have to be for them-
don't think they can use the funds for the
British.
selves.
Bell:
And then you hope your Joint Resolution will be
through and they can give them to the British?
Purvis:
Mr. Bell, that is a terribly vital point, too.
If we lose that two months, it might be very,
very bad.
Foley:
And obviously with the few hours we had last
night, we couldn't any more than outline the
possibilities. We would have to get the Army
and the Navy in just to see what could be done
and the way they figure to carry this out.
Bell:
H.M.Jr:
Yes, I realize that.
Now, this is a public resolution entitled
"Joint Resolution to authorize the Secretaries
of War and of the Navy to assist the governments
of the American republics to increase their
military and naval establishments, and for other
purposes.
Foley:
We are amending an existing statute which lays
down the principle that can be carried forward
243
8
to meet this expanding situation.
H.M.Jr:
I see.
"Resolved by the Senate and House of Representa-
tives 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 Mar 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 con-
cerned, any other law to the contrary notwith-
standing, to: manufacture in arsenals, factories or 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, servic-
ing or operation thereof, or any other article
or commodity needed for defense, on behalf of
the government--
"Any other commodity would take care of oil.
Foley:
We through that in there to take care of oil and
ships and anything that isn't specifically mentioned there.
H.M.Jr:
"....of any American republic, of Great Britain,
China or
Greece,
any forces
other country
whose
defense Presithe
against the
of foreign
aggression
dent 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
9-
244
government any such article, or like article
which the United States now has or hereafter
acquires, 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--
I don't get that. "To any such government."
Foley:
That means he could dispose of any of this material to any government whose defense against the
forces of aggression he believes to be related
to the dfense or welfare of the United States
on such terms, either for direct or indirect
consideration of any kind or character, as he
night feel to be satisfactory under the circumstances.
Purvis:
For instance, if a country had nothing to give
but its fighting ability, it is conceivable that
that would come under that.
White:
That is why I think that is a little broad. It
will raise trouble, Mr. Secretary. What he virtually can do under those circumstances is give
it away because the ultimate indirect benefits
are in the nature of general stability of democracy, and I am merely wondering whether that is
as far as you want to go?
H.M.Jr:
You don't mean that, you mean do I want to go as
White:
I mean whether you want to go that far.
H.M.Jr:
Which is something different.
White:
Yes.
far.
245
- 10 H.M.Jr:
Do
far? I want to go that far or do I want to go as
White:
I meant do you want to go as far as that.
H.M.Jr:
I would much rather make it as broad as the world,
and then let somebody else tighten it up.
Well, that is what we had in mind when we drafted
this.
Foley:
H.M.Jr:
It is easy to tighten the thing up. Congress
can tighten it up.
White:
Well, it was their reaction I had in mind. But
that is what it is saying.
H.M.Jr:
No, I am willing to go as far as this. I am willing to let it go wide open.
White:
Is it necessary to mention Great Britain? Then
you would have to mention Greece-Foley:
Harry, the reason I wanted to mention Great
Britain, Greece, and China is to make darn sure
that I was repealing the Neutrality Act for this
purpose and that the question of extending help
to a belligerent wouldn't come back to plague us
afterward. If we just said any other government,
then they would say, "You mean any other government like the South American Republics that are
at peace? You couldn't possibly mean that you
were trying to override the Neutrality Act.
H.M.Jr:
He also wants to make good on my press conference.
(Laughter)
Kuhn
Greece and China?
H.M.Jr:
That is what I said.
Phillips:
Might I put two quite short questions on that?
246
- 11 H.M.Jr:
Please.
Phillips:
In the first place, I am not very familiar with
how these matters work, but does that give the
President power to make terms?
Foley:
Yes. The broadest power we could possible do
White:
Practically?
Phillips:
The other question, does Great Britain cover
White:
Not unless you define it that way.
Foley:
We say any other country, Sir Frederick.
Phillips:
All right.
Foley:
We say "on behalf of the government of any
American republic, Great Britain, Greece, China,
or any other country--" the government of any
other countries - "whose defense against the
forces of foreign aggression the President
deems to be related to the defense or welfare
that. That is practically a blank check.
the Dominions and so on?
of the United States."
Foley:
Ed, is that a continuing authority? Supposing
he makes a lease of this material to be returned
in kind and later he wants to modify that. Has
he exhausted his authority with respect to that
particular property?
I don't think so, Dan.
Bell:
You think it is a continuing authority right
Bell:
straight through?
Foley:
And he can modify it. I think that is his,
Sir Frederick's question.
247
- 12 White:
When you say foreign aggression, Ed, there is
no question that that means aggression from a
foreign power, is there?
Foley:
That is what we intended it to mean.
White:
I mean there is no doubt in your mind?
H.M.Jr:
Don't look at me. I don't know. I don't know.
Mind you, these boys have had one night. They
have got until nine-thirty Monday morning to
examine each word over again.
White:
Yes.
H.M.Jr:
I think when you see what they have done in the
short time, it is amazing.
Bell:
What harm would be done if you took out the word
foreign.
White:
Well, it may not be any harm, but it makes a
tremendous difference.
Bell:
Yes, sure it does.
White:
A tremendous difference. We certainly would want
Foley:
Well, I wanted a little come-on in there, Dan,
a little appeal to this, and that was why we
to discuss it.
threw in foreign aggression.
H.M.Jr:
"....to repair any such article, and otherwise
to treat any such article as if it were for the
use of the United States, on behalf of any such
government; and to communicate to any such govern-
ment plans, specifications, or other information
relating to any such article:
White:
In other words, a Greek battleship could be repaired in an American harbor indefinitely.
243
- 13 Foley:
Yes, that is what we had in mind. That was
Stimson's suggestion before he became Secretary
of War, and we thought he would like it. They
could use our bases and our yards for repairs.
H.M.Jr:
Over the weekend I would show this to Stimson.
Foley:
All right.
I would get it to him over the weekend.
White:
You
mean international law would have no bearing
on this?
H.M.Jr:
I would show it to him Saturday or Sunday.
Cochran:
Not if it is for your own defense.
Foley:
We have got that in here too, Harry.
H.M.Jr:
.Provided, however, that no such transaction
shall be entered into in violation of interna-
tional law as interpreted by the Department of
State: And provided further, that no action
shall be taken hereunder which shall be inimical
to the defense or welfare of the United States.
"Section 2. In carrying out the transactions
authorized by section 1, the Secretary of Nar,
the Secretary of the Navy and the head of any
department or agency concerned are authorized,
in their discretion, and provided that it be not
inconsistent with any defense requirements of the
United States or its possessions, to comunicate
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 govern-
ment any information pertaining to any article,
therein referred to, for the use of such government in using any such article, or manufacturing
such article and information for the use of any
such government."
249
- 14 White:
Foley:
Just one question. Further back, who makes the
decision as to whether or not the granting of
certain assistance is inimical or may be inimical?
The President.
White:
I wanted to raise that question too.
Is that clear? Is it stated somewhere?
Foley:
Yes, we say that the President may, when he deems
Bell:
it in the interest of national defense and so on
down, and finds that their defense and oursare
related and it is for the welfare of the United
States, all of those are determinations the
President makes.
White:
And then you go and you put certain limitations
upon it.
Foley:
That is right.
White:
And I thought that was a limitation upon the
President's power.
Foley:
Well, shall be entered into in violation of
White:
That is a limiting factor on the President's
international law as interpreted by the Department
that no action shall be taken hereof State.
under which shall be inimical to the defense or
welfare of the United States."
power, as I first hear it.
Purvis:
It might be a Congressional limitation.
White:
Do you want that limitation? In other words, is
Foley:
Well, Harry, I think that that - those are just
words, and I don't think that they really curtail the President at all, because I think if he
it clear that--
250
- 15 can determine in the beginning that any other
country - the defense of any other country is
related to our defenses, he can then make this
determination that that action is compatible
with our defense and our welfare.
White:
Well,
then it is either limiting or it is redundant.
Foley:
Well, it is window dressing.
White:
Oh! (Laughter)
H.M.Jr:
He uses a two dollar word and you answer him and
say it is window dressing.
All right? That is settled.
"Section 3. All contracts or agreements made for
the disposition 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 without
the consent of the Secretary of War, the Secretary
of the Navy or the head of the department or agency
concerned.
Foley:
That is in the statute now, Mr. Secretary, and
we are merely carrying it forward, and I think
they want it there so that if we lease something
you couldn't sell it without getting our permission.
Purvis:
It seems reasonable.
H.M.Jr:
"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
251
- 16 President to administer 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."
Now, if he signs that order, would that come under
that?
Foley:
Yes, that would be in the Treasury.
H.M.Jr:
That would be in the Treasury?
Foley:
That is right. That is Maxwell, Export Control.
H.M.Jr:
"Section 5(a). There is hereby authorized to be
appropriated from time to time, out of any moneys
in the Treasury not otherwise appropriated, such
amounts as may be necessary to carry out the pro-
visions and accomplish the purposes of this joint
resolution."
Foley:
That is merely an authorization for an appropri-
H.M.Jr:
"(b) All moneys, and all property received from
ation.
any government to which section 1 applies and
which is converted into money, shall, with the
approval of the Director of the Budget, 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."
How about that, Mr. Ex-Director of the Budget?
Bell:
I should think the Budget might object to that.
252
- 17 H.M.Jr:
Bell:
Too blank?
Yes. You may get this back three or four years
later and the Bar and Navy may not need it to
carry on their program and again you may double
up on their funds for that particular fiscal year.
I don't think they will agree to that. It might
be available for the year in which it was ap-
propriated and do no harm.
H.M.Jr:
Well, do you want to take a look at that section
in
a way that you think it would be acceptable to
the Budget?
Bell:
Yes.
H.M.Jr:
Would you do that?
Bell:
Yes.
Foley:
You see, this makes it a two-year revolving fund,
Mr. Secretary. The Budget is always against re-
volving funds. Isn't that right, Dan? You told
me that once.
Bell:
That is right, always.
Foley:
When he was Director of the Budget.
Bell:
It is a good objection.
H.M.Jr:
Well, anyway, let Dan take a look at it.
Bell:
All right.
H.M.Jr:
"Section 6. The secretary of War, the Secretary
in all or
the of all United
of the Navy and head of the department or agency
of any such
for protect concerned the disposition shall rights contracts citizens article of agreements the fully
States who have patent rights in and to any such
article which is hereby authorized to be disposed
253
- 18 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 Mar and of the
Navy are hereby authorized to purchase arms,
ammunition 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."
Foley:
That is in the existing law and that was put in
there as a little good neighbor stuff for the
South American republics. In other words, we
turn over machinery to them and we permit them
to manufacture stuff in their own country and
this would make it reciprocal. If that stuff
couldn't be manufactured here, we might buy it
and use it ourselves, buy it from them and use
it.
H.M.Jr:
But under this thing, for instance, we could manufacture some - if our shops were full we could go
to Canada.
Foley:
That is right.
H.M.Jr:
Which would be good.
Foley:
That is right.
H.M.Jr:
"Section 8. The President may, from time to
time, promulgate such rules and regulations, not
inconsistent with law, as may be 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."
I would say you fellows certainly caught the
251
- 19 -
spirit of what I said yesterday.
White:
They certainly left nothing out. (Laughter)
H.M.Jr:
Well, I gave them a little stump speech yesterday.
Bell:
It is a good bill.
H.M.Jr:
Well, now, what I would like to suggest is, if
you would like to go back to Mr. Foley's office
and go over this sentence by sentence, he would
be glad to have you do that.
Purvis:
It would be excellent.
Phillips:
Yes.
H.M.Jr:
If any of you people would want to go over there,
because you can't get it from my poor reading.
I read badly. I think the thing to do is - nothing
is more important than this, if you get it right.
I want to have it right by Monday, and you people
might have some ideas. You might see some loopholes.
Purvis:
And we do appreciate the opportunity.
H.M.Jr:
If you would do that. Just one thing before you
go back with Mr. Foley, have you got the answer,
what you would like to give in exchange for nine
planes?
Purvis:
Yes, I just got it from Morris Wilson. They would
like to give a hundred - the equivalent of which
they consider to be a hundred Allison "C" engines
for May, June, and July.
H.M.Jr:
Now, really--
Purvis:
It just came through from them just as I cameover
here, so I didn't have any time to do any checking.
- 20 -
255
They took it that the planes had engines in them
and guns the same as the previous 26.
H.M.Jr:
They are offering a hundred Allison engines?
Well, they might use them for spares.
Purvis:
How does that sound? I am afraid I am not as
Young:
familiar with it - does it sound all right.
Yes.
Purvis:
Can you leave - should Young and I have a little
talk about this before we confer further with you?
H.M.Jr:
No, you go even further than that. If you two
Purvis:
I thought we had better have a little private
H.M.Jr:
decide that you can say it and look General Marshall
in the face and not laugh-- (Laughter)
meeting on that.
But I would give it to General Marshall before
sunset, but I will leave it with you two gentle-
men.
Purvis:
As I say, I just got this five minutes before I
H.M.Jr:
Well, it is there, but I think, as I say, that
I would like to leave it with you, but I think you
came. May we just get together?
ought to get some word to him before sunset.
Purvis:
Yes. Well, we could get Fairey down here, Young,
Young:
All right.
H.M.Jr:
Now, Bell, you have a copy of this, haven't you?
and just sort of finish it, make sure that we
are on the right track.
Who else has a copy?
Foley:
Well, I gave a copy to Dan and a copy to Ferd
256
- 21 (Kuhn) and a copy to Harry and a copy to Oscar
and I have a copy and you have a copy. Those
are all the copies there were.
Bell:
Shall we turn them back?
H.M.Jr:
No, it is not necessary, but before it breaks
up in it?
my room - do you see anything the matter
with
Bell:
No, I think it is a good bill.
H.M.Jr:
Well, I think that if you gentlemen could go over
this thing word by word--
White:
Do you feel you want that done, Mr. Secretary.
What is that?
H.M.Jr:
White:
Do you feel that you want that done.
H.M.Jr:
Oh, yes.
Foley:
Harry is worried a little bit about the reaction
there might be if it got out that we were working
on this jointly, but I don't see, as it is, any
more than what we have done right here.
H.M.Jr:
Who is going to know what goes on in Mr. Foley's
office?
Foley:
We are all very careful.
White:
Well, I am wondering whether we might not get the
same results by just avoiding that possibility?
H.M.Jr:
Well, they are meeting here.
White:
That is a different story.
H.M.Jr:
You are my attorney, Ed. What do you think?
257
- 22 Foley:
Well, I don't feel that it is any more than what
we have done here. If they asked us if we have
worked this out in conjunction with the British,
we didn't, we drafted it ourselves. We discussed
the matter, talked it over, found out your need
and requirements.
Purvis:
There would be actually nothing we have said that
would induce any change in any way whatsoever.
H.M.Jr:
What you can do, if you don't want to be seen,
they can use the conference room immediately
below me.
Foley:
That would be all right and then I could go down
White:
I think it is better.
H.M.Jr:
Well, they came in this way. Why not let them use
there.
the conference room immediately below?
Purvis:
We might go out the same way.
H.M.Jr:
Yes. Would that make it any better?
White:
Well, those things have a way of getting nasty
when they get out.
H.M.Jr:
All right. Well, they can meet in the room immediately below.
Purvis:
We can undertake on our behalf that it won't get
Phillips:
That is understood.
Purvis:
I would almost be willing to go bail for you.
H.M.Jr:
My crowd are a little bit - how should I say thin-skinned about a story I told them. Did I
out, Sir Frederick.
tell you my Chinese story?
253
- 23 Purvis:
No.
H.M.Jr:
I told you my Chinese story?
Purvis:
No.
H.M.Jr:
Well, I told this story, and I look up at the
ceiling when I told it. I wasn't looking at anybody. (Laughter)
White:
Everybody's face got red.
H.M.Jr:
I just looked up at the ceiling like this. I
White:
And you are not going to look at anybody now,
either.
H.M.Jr:
No. (Laughter)
White:
All right, now you can tell the story.
H.M.Jr:
I want you to know why Harry White brings this up,
you see, because he is afraid of a leak and then
didn't look at anybody. It only happened yesterday, and since then they are all thin-skinned
about it.
he is afraid of this story, the moral of the
story I told. It seems that - in the paper you
may or may not have seen it, about a week ago
there was a very accurate account of what the
Chinese wanted in the way of planes and it was
a little embarrassing for me because I had to
explain that the Chinese hadn't got any, and
what I could and couldn't do and all the rest of
it. They asked me a lot of questions, but the
story was pretty accurate, and I figured it either
came from T. V. Soong or General Mow, I didn't
know which, but I knew one or the other, so the
other day when they were at the house to find
out what was the minimum which they needed, when
they got through I happened to say something
about, we have never met here and so forth, and
259
- 24 -
if it got out, why I never saw you." I wasn't
thinking of anything, but evidently Soong thought
I was. So he turned to Mow, and he says, "You
know, you can thank the Secretary of the Treasury
for inviting you here because that shows that
he has no feelings because you know I ordered
you as a soldier back to China for a court
martial in view of that story which appeared in
the paper the other day, and you know what hap-
pens to a soldier. But the Secretary of the
Treasury being so gracious and inviting you to
his house shows he has no ill feelings. And
he said it three times, looking at Mow, and Mow
got the silly giggle the way all Chinese do, so
they have an American advisor, and he stayed be-
hind. He said, "Do you really want to know
what happened? I said, "I would love to. He
said, Well, what Soong really told him was, he
said, 'Mow, you are a soldier. Here is a pistol.
Go to your hotel room and shoot yourself.
(Laughter) So this American advisor told them I am now stretching a little bit on my imagination. He said, "You mustn't do that, Soong.
Think of the bad press that you will get.
White:
Well, correlary of that story is that the Secretary has ordered a stock of pistols.
H.M.Jr:
I don't know what is the matter with this crowd.
Foley:
When he told the story, Sir Frederick, I asked
him if he wouldn't mind looking at Harry instead
of me.
H.M.Jr:
I just, you know, believe in keeping up the Treasury
reputation for being a grave for all secrets. I
know that you share that with me. (Laughter)
Purvis:
You are keeping up your reputation for having a
good atmosphere.
H.M.Jr:
Everything is true expect that he would get a bad
press. What he did say was that it would be a
260
- 25 -
very bad reaction if he shot himself. Well, we
have got to keep a little light tone. Other-
wise, we would all be weeping on each others
shoulders. But if you people want to go below.
Purvis:
Thank you very much indeed.
H.M.Jr:
In order to keep up the grave.
261
British Embassy
SECRET
Washington, D. C.
January 2, 1941.
Dear Mr. Secretary,
I am probably straying once more from the
narrow path of diplomatic rectitude in sending
you the enclosed copy of a message from my Prime
Minister, which I am forwarding to the President
this evening.
I would add my respectful good wishes for a
year that must mean much to both our countries.
Very sincerely yours,
(Signed) Nevile Butler
The Honourable
Henry Morgenthau, Jr.
2211 30th Street, N. W.
Washington, D. C.
262
"Meanwhile I learned with pleasure from Mr. Purvis of his
talk with you and Mr. Morgenthau on Monday. Instructions have
been given to furnish you with any further figures about our
requirements with you may seek.
"We are deeply grateful for all your understanding of the
problems which will be thrown up in the interval before Congress
annoves your proposals. It is not only a question of total
amounts but of how we are to live through a period which may
perhaps extend to February 15th. What would be the effect upon
the world situation if we had to default on payments to your
contractors who have their workmen to pay? The idea that in
the interval we shall either have to default or be stripped
bare of our last resources is full of danger and causes us pro-
found anxiety. I feel sure this will be ever in your thoughts.
"Furthermore apart from the general totals and interim
period there arises a group of problems about the scope of your
plan after being approved by Congress. What is to be done about
the immensely heavy payments still due to be made under existing
orders before delivery is completed? Substantial advance payments
on those same orders have already denuded our resources. We have
unceasing need for various American commodities not definitely
weapons; for instance raw materials and oil. Canada and other
Dominions, Greece and also Poland and Czechoslovakia, have
clamant dollar needs to keep their war effort alive. I do not
seek to know immediately how you will solve these later questions.
We shall be entirely ready for our part to lay bare to you all
our resources and liabilities around the world, and we shall
seek no more help than the common cause demands. We naturally
wish to feel sure that the powers with which you propose to
arm yourself will be sufficiently wide to deal with these larger
matters, subject to all proper consideration. Without prompt
and effective solution of these problems Hitlerism cannot be
extircated from Europe, Africa and Asia."
262.1
(Excernt from meeting on January 3, 194 at
10:20 a.m., entitled Aid To Britain.")
#
H.M.Jr:
*
#
#
Now, I want you (Foley) to read this out loud
in order to let you know how serious this
thing is. This is not child's play. This is
a cable from the Prime Minister to the President.
Foley:
"I agree with your proposal to stave off our
difficulties by sending a warship to Came Town
to collect the gold at our disposal there
amounting, I believe, to about 30 million
sterling. I ought to let you know that this
transaction will almost certainly become known
to the world with varying reactions.
H.M.Jr:
I didn't even know that was in there. Vv God.
All right. I had forgotten it. You will all
have to forget that, too. That is a deer Newy
secret. My God. All right. For God's sake,
don't anybody tell that in here, will you, or
I will get shot at dawn.
Bell:
You will be given a Chinese vistol. (Laughter)
H.V.Jr:
Don't ever breathe that to anybody.
Foley:
I knew that. You told me.
H.M.Jr:
That is right.
262.B
BRITISH EMBASSY,
WASHINGTON, D.C.
January 2nd, 1941
SECRET
Dear Mr. Secretary,
I am probably straying once
more from the narrow path of diplomatic
rectitude in sending you the enclosed copy
of a message from my Prime Minister which
I am forwarding to the President this evening.
I would add my respectful good
wishes for a year. that must mean much to both
our countries.
Kay minuty yours.
have Bath
The Honourable
Henry Morgenthau, Jr.,
2211, 30th Street, N.W.
Washington, D.C.
262-C
I agree with your propocal to stave
off our difficulties by sending a warship to Cape Town
to collest the gold at our disposal there assenting, I
believe, to about so million storling. I ought to 200
you know that this transaction will almost certainly
become known to the world with verying resetions.
Meanshile I learned with pleasure
from Mr. Purvis of his talk with you and Mr. Morgenthes
on Monday. Instructions have been given to furnish
you with any further figures about our requirements
which you may seek.
We are deeply grateful for all your
understanding of the problems which will be thrown up
in the interval before Congress approves your proposals.
It is not only a question of total amounts but of how
we are to live through a period which may perhaps extend
to February 15th. what would be the effect upon the
world situation if we had to default on payments to your
contractors who have their workmen to pay? The idea
that in the interval we shall either have to default or
be stripped bare of our last resources is full of danger
and causes us profound anxiety. I feel sure this will
be ever in your thoughts.
Furthermore apart from the general
totals and interin period there arises a group of
problems about the scope of your plan after being
approved by Congress. what is to be done about the
issuanle heavy payments still due to be made under
existing orders before delivery is completed?
Substantial advance payments on these same orders have
/already
262-D
already - - w have unseesing need
for verious American commitities not definitely weepens:
for instance - materials and oil. Canada and other
Dominions, Greese and also polant and Caechoelovakia,
have element dollar noods to keep their war effort alive.
I do not seek to know immediately how you will solve
these later questions. we shall be entirely ready
for our part to lay bare to you all our resources and
liabilities around the world, and we shall seek no more
help than the consion cause demands. THE naturally wish
to feel sure that the powers with which you propose to
are yourself will be sufficiently wide to deal with
these larger matters, subject to all proper consideretion. without proupt and effective solution of these
problems Hitlerism cannot be extirpated from Europe,
Africa and Asia.
263
MEMORANDUM FOR THE SECRETARY
Interim Plar
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)
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 expansion. In addition to other plant extansion 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.
(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 ordnance items. The War
264
(2)
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 expansion, the program can be carried
forward so that the necessary deliveries can be made as soon
as the proposed joint resolution is enacted.
265
January 3, 1941.
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 es-
tablishments, 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 authorise 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
lem to the contrary notwithstanding, to: manufacture in arsenals,
factories or shipyards under their jurisdiction, or otherwise
procure, any weapon, ship, boat, aircraft, munitions or equipment
or component parts thereof, or machinery, tools, or materials or
supplies necessary for the manufacture, servicing or operation
266
-2
thereof, or 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 govern-
ment any such article, or like article which the United States
now has or hereafter acquires, 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 re-
payment in kind, or property, or for any other direct or indirect
consideration or benefit to the United States which the President may deem satisfactory; to test or prove any such article
prior to disposition or delivery to any such government; to re-
pair any such article, and otherwise to treat any such article as
if it were for the use of the United States, on behalf of any
such government; and to communicate to any such government plans,
specifications, or other information relating to any such article:
Provided, however, that no such transaction shall be entered into
in violation of international law as interpreted by the Department
of State: And provided further, that no action shall be taken
hereunder which shall be inimical to the defense or welfare of
the United States.
267
S-
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 department OF agency concerned are authorized,
in their discretion, and provided 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 informa-
tion pertaining to any article, therein referred to, for the
use of such government in using any such article, or manufactur-
ing 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 dis-
position 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 without the consent of the Secretary
of War, the Secretary of the Navy or the head of the department
or agency concerned.
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
268
-4President to administer 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 appropristed from time to time, out of any moneys in the Treasury not
otherwise 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, with the approval of the Director of the Budget,
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
269
-5hereby 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, ammunition and implements
of WST produced within the jurisdiction of any country to which
section 1 is applicable if such ares, 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
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.
1/3/41.
270
January 3. 1941
12:31 p.m.
H.M.Jr:
Hello.
Operator:
Secretary Stimson.
H.M.Jr:
Hello, Henry talking.
Henry L.
Stimson:
Hello. Yes.
H.M.Jr:
This is Henry.
S:
Yes, I get you.
H.M.Jr:
S:
H.M.Jr:
S:
H.M.Jr:
The reason I'm calling, Harry, is this: we
have
Can you speak a little bitlouder? This
telephone doesn't seem to be good.
Hello!
Yes, all right.
We have a preliminary draft of the legislation
which we've done at the request of the President
to give the English what he said he would in
his speech. Hello?
S:
H.M.Jr:
S:
H.M.Jr:
S:
H.M.Jr:
Yes.
I'd like very much to have Mr. Foley, my
General Counsel, bring it to you tomorrow
morning and then maybe leave it with you, or
at least get your criticisms and your suggestions.
Yes, I'd be very glad to see it. I'd like to
see it.
What time tomorrow morning would be convenient
for you?
I don't know what time - I'm just trying to
see what time. I have one interview early in
the morning. I've got to stop on my way down.
Would you want him to call you? Could you
give him an appointment now?
271
-2I think I could probably give him one now
S:
if you'll hold the wire just a minute.
H.M.Jr:
S:
H.M.Jr:
I'll hold the wire. (Pause).
(Talks aside). I have one at 10:30 - that's
the only one I have now, and then I have this
morning one. I think perhaps he'd better come
in at 11:00. Would that be all right?
It'11 be all right. His name is Edward Foley.
S:
Oh, yes, I know him.
H.M.Jr:
Edward Foley. He'll be there at 11:00.
S:
Now, this is legislation to cover the arrange-
ment the President proposed about the lease
and
H.M.Jr:
That's right.
S:
The whole business?
H.M.Jr:
The whole business.
S:
The whole business.
H.M.Jr:
Yeah.
S:
All right. I'll try to be ready for him.
H.M.Jr:
And as I say, I'd like very much to have you
go over it and give us the benefit of your
experience.
S:
All right. I'm very much obliged to you for
giving me a chance to see it.
H.M.Jr:
Thank you.
S:
Thank you.
Treasury Department
Division of Monetary Research
Date
272
January 22, 1941.
19
Kiss Chauncey
Mr. White
You might want to keep this for the
record. I have raised the subject with the
Secretary, as requested, but other things
have been more important.
(Tie may have occasion to utilize this
report in the future if the question of Soviet
oil comes up azain. If so, we will ask for it.)
273
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 3, 1941
TO
Mr. White
FROM
Mr. Ullmann
Subject: Confidential Report on Soviet oil
1. The report indicates that Soviet crude oil production in the first
six months of 1940 was 6.5 percent above production in the corresponding period of 1939.
2. The report indicates that production in 1939 amounted to 30 million
tons - or approximately 210 million barrels. This corresponds with
information we already had. (My memorandum to you, dated July 26,
1940, indicated 1939 Soviet production of 212 million barrels.)
3. The report, it is felt, is based on information in the publications
of the various Soviet oil trusts. However, analyses of Soviet oil
publications (made by our Embassy in Moscow and by the Bureau of
Mines) indicates that oil production in the first six months of
1940 did not rise above the first six months of 1939. (As far
as can be determined, however, these other analyses were not as
thorough as the confidential report, and could easily include a
6 percent error).
4. The report forecasts total 1940 output at 32.7 million tons (229
million barrels). This appears to be a reasonable estimate. It
contemplates an 8 percent rise over 1939 - in contrast to the 14
percent increase that was planned for Soviet industry in general.
(The "plan" for the oil industry's increase is not available).
5. The report indicates improvement and modernization of refineries
in the U. S. S. R. It fails to mention specifically, however,
some new cracking plants that were installed early in 1940. Refinery output, according to the report, increased only 4.6 percent
in 1940, in comparison to the 6.5 percent rise in crude output.
274
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE November 26, 1940
TO
FROM
Secretary Morgenthan
Mr. Cochran
STRICTLY CONFIDENTIAL
There is attached a single copy of a highly confidential report which was prepared in Paris by a Russian for the information of Mr. J. E. Orane. When the matter
of an application was up a few days ago for a license to permit the Standard 011 Co.
to pay for this document, Mr. Pehle obtained this confidential copy. It is my understanding that this report is not otherwise made available to this Government.
BMR
White and
Herry
Road reviser to AM
04908030
to
downs -
275
BRIEF REPORT ON TEE SITUATION OF THE SOVIET OIL INDUSTRY
DURING THE FIRST SIX MONTHS OF 1940.
I.
PRODUCTION AND EXPLORATION OPERATIONS.
The total production of crude oil in Soviet Union (including the Russian share in the Northern Sakhalin) during the first
six months of 1940, as compared with the same period of 1959, was
ES follows:
In Metric Tons.
1940.
1939.
January
2,685,100
2,515,400
February
2,559,700
2,288,800
March
2,726,900
2,528,500
April
2,647,500
2,502,200
May
2,738,500
2,648,900
June
2,694,800
2,595,600
16,052,500
15,075,400
The total production during the first half of 1940 showed
an increase of 976,900 tons, or 6.48% in comparison with the corresponding period of 1959. The average daily production increased
from 83,621 tons during the first six months of 1939 to 88,188 tons
during the first half of 1940. If compared with the second half
of 1959, the crude production during the first six months of
1940 increased by 68,200 tons, or 0.43% In spite of this substan-
tial increase of crude oil production, the rate of the official
program has not been reached by more than 1,500,000 tons, what
shows that the real possibilities of the Soviet oil fields are still
far below the plan figures. Although, the production situation
was, generally, satisfactory during the analyzed period, and the
gradual rise of production could be maintained in the most part of
the Soviet Oil Trusts, with the exception of the Middle Asia, where
a further decline of production has taken place, due to the exhaus-
tion of old fields situated in this region.
The following table supplies detailed information on the
crude oil production of the various Soviet State Oil Trusts, during the first six months of 1940, as compared with the first and
second halves of 1959.
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276
1st half
In Metric Tons.
Asneft */
1940
1st half
1939
2nd half
1939
11,592,500
10,965,800
11,295,900
Grosneft **/
1,174,200
1,231,800
1,224,700
Maineft
1,408,100
1,130,800
1,444,000
Embaneft
389,700
343,200
588,000
Bashneft
935,400
737,500
924,600
57,000
43,100
40,600
neft, Tuimazyneft, and
Buguruslanneft)
124,800
88,500
95,700
Turkmenneft
252,300
244,200
249,300
98,600
102,600
106,700
15,832,600
14,877,500
15,769,500
219,700
197,900
214,600
16,052,300
15,075,400
15,984,100
Prikament
Volga Region (Sysran-
Middle Asia (Kalininneft and Voroshilovneft)
Grand Total Russia
Russian share in
Northern Sakhalin
*/. Together with the Gruzneft (Georgia).
**/ Including The Dagneft (Daghestan).
A. AZNEFT.
The total production of the Azneft Trust during the
first half of 1940 reached 11,592,500 tons, as against 10,955,800
tons obtained during the same period of 1959 (an increase of
436,700 tons, or about 4.0%). In spite of this increase, the
rate of the official production's program has not been fulfilled,
owing to the slow development of production in various oil fields
exploited by this trust. The average daily production of the
Azneft during the analyzed period equalled 62,576 tons, as against
59,748 tons during the same period of last year.
The main reasons which were responsible for the non-ful-
fillment of the official production program by the Asneft can be
summarized as follows: The delays in bringing into production of
new wells, the slow progress of exploitation drilling operations,
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277
The insignificant number of temporarily suspended wells which have
been put again on regular production, and the anticipated abandon
of non-completely exhausted wells. To these main reasons should
also be added - in 1940 - the difficulties to secure an adequate
trained labour, due to the mobilization and other military measures,
which have been taken by the Soviet authorities.
As regards the discovery of new oilbearing areas in the
old exploited fields of the Azneft, the situation has much improved during the last 2 or 3 years; favourable results which were
recently obtained in various old fields of the Azneft have made the
Soviet geologists to change to a great extent their point of view
regarding the conditions of oil accumulation in the lower horizons
of the Baku fields. As a matter of fact, commercial accumulations
of oil were discovered in areas, which had been heretofore considered as bearing no oil whatsoever. At present, however, a great
number of non-working and partly waterlogged wells are being gradually brought back into production, and these wells, generally, give
small yields from the horizons which have been formerly considered
as being absolutely non-productive. More than 1000 wells of the
Azneft are being exploited now by means of secondary methods (air-
lift, gas lift, "plunger-lift", etc.). It is expected that about
500 previously abandoned wells can be put again on production
in 1940.
1. Lenin Fields.
The production operations developed satisfactorily in
these fields, and this in spite of usual fluctuations of the rate
of daily yield. The further development of production WES somewhat hindered in Lenin Fields owing the delays in bringing into
production of new oilproducing areas well saturated with oil; this
is particularly the case in the Southern flank of the anticlinal
structure, where a number of test wells have been completed during
the last few years, but, so far, the exact contour line of the Lower
Kirmakinsky series could not be established. Five test wells were
under drilling in this part of the field in summer 1940. These
wells should explore a large area extending from Hamanour, located
in the South-East, - to Romany (in the Eastern section of the Lenin Fields). The fact that, the Upper Kirmakinsky series proved
to be oilbearing in the flank of the Balakhany anticline (the well
No. 1648) seems to authorize to expect the discovery of oil in the
Lower Kirmakinsky series. As to the Northern flank of the Lenin
structure, the obtainment of oil flows from the well No. 1561 (with
an average daily yield of 80 tons), and - the well No. 1590 (about
175 tons per day), which were considered earlier as having been
drilled outside the limits of the oilproducing area,- makes possible
not only a considerable extension of the exploited surface of the
Lower-Kirmakinsky series over a territory of about 30 hectares large,
but also would facilitate the contour drilling operations all
along the Northern limits of these oil fields.
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278
2.
Surakhany field.
Although several successful completions have been
lately achieved at Surakhany, the average daily yield of this
field did not such increase since 1959. Contour drilling operations were chiefly concentrated in the Southern part of Surakhany, where the Lower Kirmakinsky series proved to be exceptain-
ally well saturated with oil. As to the test of the Eastern
flank of the structure, favourable results were recently obtained in the vicinity of the well No. 1092, which yielded the ini-
tial daily production of 100 tons. Efforts are being made now
in this area in order to determine the possibility of a supplementary oil production from the so-called "Surakhany series", which
have been considered heretofore as being entirely exhausted.
The obtainment of commercial production from this series would
be particularly interesting, in view of the fact that the average depth of wells does not exceed here some 300 to 400 meters,
as against 2,000 to 3,000 meters which have to be drilled to the
Lower Kirmakinsky series. Several wells which have been drilled
to the "Surakhany horizon" yielded fair initial production
of an order of 20 to 30 tons (the well No. 554 and others).
3.
Kara-Chukhur & Zykh fields.
In these fields the crude oil production continued
to increase, and it has even exceeded during the examined period
the rate of the official program. Large new oilbearing areas
have been prepared for exploitation at Kara-Chukhur in result of
successful achievement of test and contour drilling operations.
Especially promising discoveries were made in the Eastern flank
of the Kara-Chukhur folding. In addition, the oil producing
area of Zykh has been also enlarged, following the successful
completions of the test wells Nos. 39, 29, 73, etc. Although,
the further increase of Kara-Chukhur's production is somewhat
hindered by the fact that new exploitation wells are being put
on regular production with considerable delays, whereas numerous
temporarily suspended wells are being brought back into production with an extreme slowness.
4.
Kala field.
The production situation remained unsatisfactory at
Kala during the first six months of 1940. The preparation for
exploitation of new oilbearing areas located in the North-Western extension of the field and the test of the Lower-Kirmakinsky
horizon in the so-called "Old Kala" area, situated to the South
-East from the exploited oilfield, - were not, so far, completed.
The problem of exploration of recently discovered "Kala series",
which - according to the Soviet geologists - is underlying the
Lower Kirmakinsky series and is thus striking above the Pontic
formations, seems to be of a particular interest.
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279
The "Kala series* are also being encountered in other oil areas
located as well in Eastern as in Western direction of the Kala field.
Thus, for example, this series was discovered at Surakhany by the
wells Nos. 1102 and 1107. The thickness of this series at Kala
reaches about 120 meters. In spite of the fact that, for the time
being the commercial importance of the "Kala series* was not yet
established, there are reasons to expect that - in anology with the
Lower Kirmakinsky series - considerable oil accumulations would be
discovered there. The wells which have drilled, so far, the
"Kala series", are all situated in a rather unfavourable part of the
structure, as they were not spudded in with the purpose of testing
this series. At present, test drilling operations are being car-
ried out with the special purpose of exploration of the "Kala series".
5.
Artema Island.
The production operations developed normally in this field
and showed a new increase in comparison with the first six months
of 1939. In addition to a large oilproducing area situated in the
part of the structure striking under the sea bottom ( the Northern
folding), a new oilbearing area has been discovered in the Southern
flank of the structure, - located mostly within the territory of the
Island. Technical difficulties which have been met during the
drilling in the sea area handicapped, however, a more rapid development of crude production in the Artema Island.
6.
Binagady.
Production developed quite satisfactorily in new oilbearing
areas situated in the Western and the South-Western directions of
the Binagady field, (Griamaya Gora, Zigil Piri, etc.). Parallely
to an intensive exploitation drilling, contour drilling operations
are also being carried out to these structures. A number among
new wells which have been completed in recently discovered oilpro-
ducing areas, proved to be particularly prolific. Thus, for instance, the well No.349 and others, drilled at Griaznaya Gora, gave the
initial daily production of 1,000 tons of oil. Proportionally speaking, the increase of the Kirovneft trust's Binagady etc.) production during the first six months of 1940 was the most important of
all fields of the Azneft.
7.
Bibi-Fibat fields ( Old and Bay ).
The exploitation of these fields continued successfully
during the analyzed period. The exploration of the Kirmakinsky
and of the Lower Kirmakinsky series - on which the further production of Bibi-Eibat will mostly depend, was not yet achieved. Contour drilling operations in the Northern, North-Nestern parts of
this field ( "Gora" and Volchyi Vorota" areas), in the North-Eastern
flank of the anticline (Bay) and in the sea area are being carried
out. In the Bay field several new successful completions were
achieved in 1940. Among these can be especially mentioned the obtainment of a flow-yielding 200 tons of oil per day - from the well
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280
No.1541, drilled to a depth of 1824 meters. These prolific flowa
contributed to a considerable extension of the oilproducing area
of the Bay part of Bibi-Eibet, and they confirmed that the lower
section
of the productive thickness of this field is well saturated
with oil. A large number of formerly shut in wells have been
recently put again on production at Bibi-Fibat.
8.
Lok-Baten & Puta fields.
The production of Lok-Baten showed a decline during the
first six months of 1940, as compared with the corresponding period
of the last year, due to a very slow preparation for production of
new oilbearing areas, and - to the delayed development of the Yassamalskaya Valley's exploitation. As to the immediate prospects
of this field, the Yassamalskaya Valey, precisely, is the most promising oil area; several flows were obtained there early in
1940, and the new wells, generally, gave good initial yields (wells
Nos. 315, 699 etc.)e the average daily yield of these wells is varying from 100 to 250 tons. The exploration drilling operations
are also being continued in the old exploited areas of Lok-Batan
and Pute, in order to test the sands of Kirmakinsky and Lower-Kirsakinsky series. A new small oilbearing area has been recently
discovered at Puta in the vicinity of Kushhana. Numerous temporarily suspended wells are being brought back into production.
9.
Ker-Gez and Kisil-Tepe fields (The Kergezneft).
The production situation in the fields of the Kergezneft
such improved during the first half of 1940, following the bringing
into production of the new oil area of Kara-Deg. (cf, our Annual
report for 1939), where interesting results were also obtained in
1940. Several new wells have been drilled at Kara-Dag early in
1940, and 3 more wells have been put on regular production during
last summer. The development of crude production is being hindered here, due to the inexistence of storage reservoirs and pipe-
line. So far, large quantities of crude are being stored in earthen pits. The wells Nos. 10 and 11 yield oil and large quanti-
ties of gas. Furthermore, the exploration of the Shongar area,
adjacent to Kisil-Tepe has started also, but for the time being, these
operations are carried out on a small scale ( the test wells
Nos. 164, 170, etc.). At shongar oil is being produced from the
horizon V; while test drilling is being continued there to Kirmakinsky series.
10.
The Exploration Areas of the Axneft.
The exploration of the Lower-Kirmakinsky series was
continued in the old areas of the Asneft; the tectonics of this
series, however, could not be quite determined yet in all areas.
Moreover, in some fields ( Lenin Fields, Surakhany, for instance)
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281
the test of the upper productive series was also continued, and
the exploration drilling operations to the recently discovered
"Kala series" have been started. Among the new exploration areas
of the Axneft can be particularly mentioned the following:
a/. Fatway-Mahomedly,
After the obtainment of favourable results in 1939 the
test drilling was continued at Fatawy-Mahomedly during the first
half of 1940, but, for the time being, no new discoveries were
made there.
b/. Baladjary.
At baladjary, the commercial accumulations of oil have
been encountered already last year ( the wells Nos.1204,1321, etc.).
Although, the bringing into production of this new oil area is
much delayed, due to the lack of: good roads, pipe-line, crude reservoirs, and power-station. The contour drilling operations
are being carried out with an extreme slowness.
c/. Gurgany.
The test of the sand horizons belonging to the lower
productive series was continued at Gurgany during the examined
period, but no positive results were yet obtained in this area.
a/. Siasan.
This exploration area has been put on regular production early in 1940. Commercial accumulations of oil were discovered at Siasan ( Maikopian formations ) late in 1939. The construction of a power-station and of a system of roads is being car-
ried out now in this area. A new Soviet oil trust, "The Siasan-
neft" has been organised with the purpose of exploitation of this
field. Contour drilling operations are continued at Siazan.
The average daily yield of producing wells reaches about 100 tons.
e/. Shin-Kai.
The test wells Nos.13 and 16 permitted to establish the
direction of the oilbearing structure. Two new wells, which
have been drilled at Shin-Kai in 1940, have not been tested yet,
but they showed good oil indications.
1/. In this area (Cape Biandoven is located outside the Apsheron Peninsula) commercial quantities of oil were obtained from
the wells Nos 8 and 9, but the further yield of these wells pro-
ved to be insignificant. The exploration work is being continued at Biandovan.
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282
B. Grusneft (Georgia).
The production of this small Soviet oil trust continued
to grow during the first six months of 1940, mainly in the new
producing fields of Norio-Martkobi and Subsa-Ompareti, which have
been put on regular production late in 1939. Although, the further development of crude production in this region is being much
hindered due to the delayed construction of drilling installations
and the lack of an adequate equipment. Geological exploration
work and test drilling operations were carried out in various areas
of Georgia, which have been described in details in our special
report "Russia 17", but, so far, no definite results were obtained
there.
C. GROZNEFT.
The total crude production of the Grozneft (including
the district of Daghestan) during the first half of 1940 reached
1,174,200 tons, as against 1,231,800 tons produced during the corresponding period of 1939 (a decrease of 57,600 tons, or 4.7%).
This unsatisfactory situation in the fields of the Grozneft was
chiefly due to a very slow development of crude production in the
new oilproducing areas controlled by this trust, and - to the gra-
dual exhaustion of the old field ( "New" Grozny and Molgabek ).
According to the official program, the production of theGrozent
should have been considerably increased during the period 1958 to
1942, but, for the time being, the continual decline of the trust's
yields could not be stopped. The production situation in separate
fields of the Grozneft can be summarized as follows:
1.
Old Grosny.
Following a number of successful completions, which have
been achieved late in 1939 and early in 1940, the oil production
of the Old Grozny field much improved during the examined period,
thus that it exceeded the total production which has been obtained
during the first six months of 1939, as well as that of the second
half of 1939. The new wells are being drilled now almost exclusively in the so-called "Grozay-overthrust zone", which proved to
contain several horizons well saturated with oil. Among the wells
which have been drilled in 1940 to the "Grozny overthrust can be
mentioned the well No. 4/35, which gave an initial yield of 80 tons
of oil per day; the well No. 7/129, with a daily yield of over 100
tons, the well No. 4/37, etc. In spite of a, generally, satisfac-
tory situation, many difficulties were met at Old Grozny, as far
and the technical equipment of new wells is concerned, and a considerable number of producing wells were temporarily suspended in
this field.
2. New Grozny.
Notwithstanding the recent discoveries made in the ho-
rison XXII, which yielded fair oil production, and in a few other
horizons,- the yield of this field continued to decrease during
-8-
the first six months of 1940, and the average daily crude oil pro-
duction of New Grozny did not exceed in summer 1940 some 2,000
tons, as against 2,200 tons during the same months of 1939.
3. Gora-Gorakaya field.
As to Gora-Gorskaya, the production of this field - after
a temporarily decline, which have taken place early in 1939,
resumed its growth late in 1939. This progress continued during
the first six months of 1940, but the rate of the official program
was far from having been reached at Gora-Gorskaya. The test
and the contour drilling operations are being delayed in this area,
though these operations are organized there on a large scale.
4. Malgobek field.
The production's rate somewhat decreased at Malgobek during
the analyzed period, as compared with the first half of 1939.
New oil areas well saturated with oil, located in the vicinity
of Voznessensky and of Bori-Su mountain, are being brought into
production with an extreme slowness. The drilling of test and
exploitation wells is much hindered by usual difficulties, such
as lack of technical equipment and the inefficiency of local management, etc. Favourable results have been obtained by the test
drilling to the Southern flank of the Voznessensky anticline,
where several horizons well saturated with oil have been discovered already in 1959. A number of new wells have been spudded in
Bori-Su area during the examined period.
5.
The Exploration areas of the Grosneft.
Geological exploration work and test drilling operations
were continued by the Grozneft Trust during the first six months
of 1940 in the following areas: At Gunushki, Naiberdy, Gudermes,
Taimaz-Kala, Adu-Yurt, Benoy, Gora Orlinnaya, etc. Among these
the exploration areas of: Gudermes, Gunushki, and Taimas-Kala are
of a particular interest, in view of favourable results which have
been obtained there late in 1939 and early in 1940. Test drilling operations were carried out at Gudermes during the first half
of 1940, and a vast area has been prepared there for the exploita-
tion drilling. A number of new oil flors were obtained at Gudermes. This field, however, could not be put, so far, on regular
production, owing to the slow progress of contour drilling and
of construction work.
D.
MAINEFT.
The production situation of the Maineft trust was quite
satisfactory during the analyzed period. The total production
of thos oil trust during the first six months of 1940 reached
1,408,100 tons, as against only 1,130,800 tons produced during
the same period of last year, and thus showed an increase of
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283
284
227,300 tons, or 24.5% New fields of the Maineft (Asphaltovaya
Gora, Kutaisskaya, Shirokaya Balka and Abusy) were mainly respon-
sible for this substantial increase of the crude production.
At present, the relative importance of this trust is second only
to the Asneft, while the Grozneft occupies the third place among
the Soviet oilproducing organizations. In view of the fact that,
the largest part of production is still being yielded in the field
of the Maineft by flows, the daily average yield of same is subject to considerable fluctuations (from 7,500 to 7,900 tons).
Test and contour drilling operations were continued in various
fields and exploration areas exploited by the Maineft, but no par-
ticularly intesting results were obtained there during the first
six months of 1940.
E.
EMBANEFT.
The total production of the Embaneft (including the two
small fields located in the Northern part of the Emba region -
the Aktubneft - during the first half of 1940 equalled 389,70 tons
as compared with 343,200 tons produced during the first six months
of 1939, an increase of 46,500, or 13.5%
In spite of this increase of crude production, the exploi-
tation operations in various new fields of the Embaneft developed
with an extreme slowness; thus, for instance, the new fieids of
Kul-Sary and Sagis, which seem to be very promising, have been
brought into production only in March 1940, whereas the operations
in the fields of Iskine and Koschaghyl were far from being satisfactory. Exploitation drilling was also much delayed in new producing areas of the Embaneft. No special discoveries were made
during the examined period.
In addition to various exploration areas, which have
been mentioned in our annual report for 1939 (Kara-Chungul,
Kizil-Kudak, Kurgus, Djussa, Uil, Dongulak-Sor,Kis-Xul, and
Sor-Kuduk, test drilling was also organized, early in 1940, at
Skachek and at Gas-Kuduk. Although, no definite results were yet
obtained in these areas. At Baichunas and at Koschaghyl large
quantities of crude are being stored in earthen pits, where light
fractions are being wasted in the air, while considerable amount
of oil is being absorbed by the earth. The construction of sto-
rage reservoirs is still being delayed in these fields.
F. BASHNEFT.
The total crude oil production of the Bashneft trust during
the first six months of 1940 reached 955,400, as compared with
737,500 tons obtained during the corresponding period of 1939 and
thus showed an increase of 197,800 tons, or 26.8% Nevertheless
the work of this trust was not quite satisfactory during the analyzed
period: frequent drilling accidents, a considerable num- 10 -
NOTE: This page was missing (original) but was included in the copy,
and copy made here in N.Y.O. Oct. 22, 1940. This report came
in diplomatic pouch. (sah)
number of temporarily suspended wells, and a slow progress of
construction work handicapped to a great extent the further de-
velopment of the Bashneft's production. The drilling operations
in the new oil fields of Termen-Yelga, Buranchino, and Kusminivka,
and their technical equipment were also much delayed.
At Ishimbaevo, the Southern anticline is now the main
producing area of the field; its exceptional prolificy was confir-
med by a number of new completions, which were achieved there in
1940; the average initial yield of recently completed wells is VArying from 300 to 600 tons per day and well. Several new flows,
which have been discovered at Termen-Yelga during the first half
of 1940 also yielded good initial daily production ( from 400 to
500 tons). Contour drilling was continued in producing fields
of the Bashneft, whereas test drilling operations are being carried
out on a large scale in various exploration areas controlled by
this trust ( Smokaevo, Shikhan, Pokrovka, Kossiakovka, Yuldashevo,
Allaguvatovo, etc, all located in the Ishimbaevo district. So
far, no definite results were obtained in these areas. Test drilling operations are being continued also at Ishimbaevo proper with
the purpose of exploring the deeper lying series.
G.
PRIKAMNEFT.
The Prikamneft's crude oil production showed a new in-
crease during the first six months of 1940 ( 57,000 tons, as against
43,100 tons in 1939.). Commercial quantities of oil are being
yielded at Krasnokamsk by the Carboniferous deposits. In addition
to the Krasnokamsk field, a few other oilbearing structures strike
along a tectonis line extending for a general length of some 80
kilometers (Severokamsk, Polazna, Shilovo, Overista). The exploration work was carried out in these areas, and several oilbearing
structures have been discovered there, thus that a large number
of wells can be drilled to this tectonic line. Although, the
average initial yield of new wells, generally, does not exceed
from 10 to 25 tons per day and per well. Therefore, the fields
of the Prikamneft should be considered as being of a definite interest, but the development of these oilbearing areas would, naturally, require many years. This year the total production
of the Prikamneft Trust will reach about 130,000 tons, and, conse-
quently, this district - with its continually growing and to a
great extent mechanized production - will cease to be an oil area
of a minor importance.
The main object of exploration is represented by the
exploited fields of the Prikanneft (Krasnokamsk, Severokamsk, and
Polazna, where very large crude oil reserves have been discovered
during the last few years, and where contour drilling operations
are being actively carried out. As regards the test drilling to
Devonian formations, striking at Krasnokamsk at & depth of over
2,500 meters, the drilling is being continued to these strate, but,
for the time being, no positive results were obtained there.
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285
286
H.
Volga Region.
The total production in the Volga region (the Soviet
State trusts of The Sysranneft, The Tuimasyneft, The Buguruslan neft) during the first six months of 1940 reached 124,800 tons,
as compared with 88,500 tons produced during the same period of
the preceding year, and thus showed an increase of 36,300 tons,
or 4.1% The crude oil production continued to increase in the
fields of these three trusts, and particularly in those of the
Sysranneft.
1. Systanneft.
The Sysranneft Trust is second only to the Bashneft
among the oil producing organizations of the Ural-Volga region.
The further development of this trust's production, however, is
handicapped by delays in the construction of an electrical cen-
tral, of workshops, crude reservoirs, and of a cracking plant (in
the town of Syzran). After the achievement of this construction
work, the total crude oil production of the Syaranneft would rapidly reach 300,000 to 400,000 tons per annum.
Exploration operations were continued in various structures (Zaborovskaya, Troekurovskaya, Usolye, Zolny and Yablonovoy
Ovrag, etc.), situated within the Samarskaya Luka (the curve of
the Volga river). The results so far obtained by the test dril-
ling seem to confirm good prospects of these exploration areas.
Commercial accumulations of oil have been discovered at Yablonovoy Ovrag, Zaborovskaya, and, apparently, the Shiriaevskaya struc-
ture is also oilbearing.
2. Tuimazyneft.
In spite of the increase of production at Tuimazy, the
rate of the official program has not been fulfilled there during
the examined period. In addition to technical reasons, which are
mainly responsible for this situation, geological difficulties, i.e.
an insufficient study of the local tectonics, - contributed to the
extreme slowness of the Tuymazy's development. Furthermore, test
drilling operations were continued at Tuimazy, as well as in the
adjacent structures (Ardatovskaya, Seraphimovskaya, Boltayevakayn,
etc.) but no positive results were yet obtained in these exploration areas.
3. Buguruslanneft.
The general situation was unsatisfactorily at Buguruslan, though the production of this field somewhat increased dur-
ing the analyzed period. The further exploitation drilling
operations were temporarily discontinued in this area. On the
contrary, exploitation wells are being drilled now to the Novo-Stepanovakaya structure, situated in the immediate vicinity of the
Buguruslan field, but in this area also the exploitation could
not be developed, for the time being, on a large scale, as the
test drilling was not achieved there.
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287
I. UKRANIA.
Geological and geophysical researches were continued
during the analyzed period in various exploration areas of the
Ukrania (Romny, Loubny, Chernigov district, etc.). A number
of new wells have been drilled in the vicinity of the town of
Romny, where small oil production is being obtained now from
the wells, which have been put there on regular production
early in 1940. First commercial quantities of oil were also
discovered in the Loubny area in summer 1940. As regards the
exploration operations in other districts, they were limited
there to the preliminary geophysical and geological investigations. The production of the Romny area is still insignificant.
J. TURKMENNEFT.
The total production of the Turkaenneft (Neftedag
field & Cheleken Island) during the first six months of 1940
reached 252,300 tons, as compared with 244,200 tons produced
during the corresponding period of 1939, an increase of 8,100
tons, or 3.2% Parallely to the exploitation of the Western
Neftedag, the exploration of the Southern flank of this struc-
ture was carried out. In spite of the fact that, the wells
(Nos. 63, 25, etc.) which have been drilled there earlier proved
to be dry, it is expected to discover in this part of the struc-
ture good oil accumulations.
K. MIDDLE ASIA.
The total production of the Middle Asian trusts during
the first half of 1940 equalled 98,600 tons, as against 102,600
tons obtained during the same period of 1939. This small decrease of production was mainly due to the gradual exhaustion of
Haudag and Uch-Kizil fields.
L. Sakhalinneft.
The production of the Sakhalinneft (Hussian share of
the Northern Sakhalin) developed satisfactorily during the first
six months of 1940, and reached 219,700 tons, in comparison with
197,900 tons produced last year, and thus showed an increase of
21,800 tons, or 11.0% It should be emphasized that the exploitation of the Sakhalin fields much proved during the examined
period: the speed of drilling has much increased, and the number of drilling accidents has been less important than during
the same period of 1939.
SUMMARY ON THE EXPLORATION WORK IN RUSSIA DURING THE FIRST SIX
MONTHS OF 1940
Favourable results have been obtained by the
exploration operations during the analyzed period in the old
areas of the Azneft (Surakhany, Kara-Chukhur, Binagady, and
Bibi-Eibat fields), in the fields of Maineft, and those of Bash-
neft. Successful development of contour drilling operations
- 13 -
288
in various fields controlled by these Soviet Oil Trusts has
permitted, in many cases, to enlarge to considerable extent
their respective exploited areas. As regards the exploration
work in new areas, no sensational discoveries were made there;
although, the obtainment of & number of satisfactory results
in certain areas during the last several months authorize to
expect new interesting discoveries in the immediate future.
As to the general production situation, in many fields the
number of temporarily suspended wells was much reduced during
the first six months of 1940, in comparison with the corresponding period of 1939. According to the Soviet Oil experts
an additional amount of crude oil varying from 10,000 to 12,000
tons per day could have been obtained in the fields of the Azneft from the temporarily suspended wells and by means of a more
rapid bringing into production of new wells. At present,
measures are being taken in order to remedy to this unsatisfac-
tory situation.
Revised Forecast of Russian Crude Oil Production During 1940.
This forecast can now be established as follows:
Trusts.
Metric Tons.
Azneft
22,900,000
Grozneft
2,300,000
Maineft
2,950,000
Embaneft
850,000
Bashneft
2,150,000
Prikameft
135,000
Volga Region (Sysranneft,
Tuimazyneft & Buguruslanneft)
300,000
Turkmenneft
500,000
Middle Asia (Kalininneft &
Voroshilovneft)
Total Russia:
Russian share of
190,000
32,275,000
the Northern Sakhalin 450,000
Grand Total:
32,725,000
As it can be seen from the above table, the Grand
Total has been reduced only by 35,000 tons, in comparison with
the previous total which was given on page 38 of our Annual
Report for 1939. Whereas the total of the Azneft was increased
by 70,000 tons, that of the Grozneft was reduced by 100,000 tons,
that of the Maineft was reduced by 50,000 tons, and, finally,
a few other minor alternations were made.
- 14 -
289
II. REFINERY RUNS AND PRODUCTS OBTAINED
A.
The total refinery runs in Soviet Russia during the first
six months of 1940, as compared with the corresponding period
of 1939, were as follows:
In Metric Tons.
1940
1939
January
2,496,300
2,410,000
February
2,345,800
2,164,800
March
2,504,100
2,392,300
April
2,453,700
2,339,700
May
2,550,400
2,432,200
June
2,462,500
2,409,600
14,812,800
14,148,600
The above table shows that, the refinery runs increased
by 664,200 tons, or 4.6% in comparison with the same period
of last year. The crude left unrefined amounted to 976,900
tons, as compared with 868,600 tons during the corresponding
period of 1939.
The refinery runs by trusts were as follows:
In Metric Tons
1st half
1940
1st half
1939
Azneft
8,604,800
8,332,400
Grozneft &
Maineft
4,546,500
4,473,300
Inland
Refineries
1,432,700
1,167,800
228,400
175,100
Middle Asia
Total:
14,812,400
- 15 -
14,148,600
290
B. Output of Finished Products.
Below are given the figures of the Output of finished
products during the first six months of 1940, in comparison with
the corresponding period of 1939.
In Metric Tons.
1st half
1st half
1940.
1939.
Straight run bensine
1,602,500
1,563,600
Cracked gasoline
1,317,500
1,185,300
Total benzine
2,919,800
2,748,900
Kerosene
5,142,100
3,077,500
Lubricating Oils
1,056,200
1,036,700
Gas 011 & Dist.F.O.
1,201,500
1,167,500
Residual F. O.
5,016,700
4,863,200
Other Products
352,400
329,400
C. General Summary of the Refining Industry during the First
Six Months of 1940.
As it can be seen from the above tables, the refinery
runs developed satisfactorily in various groups of the Soviet
refineries during the first six months of 1940. The proportion
of crude treated in refineries, in comparison with the crude produced decreased from 94.2% in 1939 (for the whole year), to
92.3% This relative decrease can be explained as follows:
whereas in 1939 the crude production was not sufficient to load
to their full capacity the Soviet refineries, and, consequently,
considerable amounts of crude had to be drawn on stocks, which
have been previously accumulated, - during the first half of 1940
the balance has been somewhat re-established between the crude
production and the refinery runs, and the stocks of crude oil
have been renewed (increased).
The increase of refinery runs in the Azneft refineries
was mainly due to the operation - at their full capacity - of new
refining installations which have been completed in Baky late in
1939, and, partly also due to the further modernization of the
old refining units. As regards the increase of runs in the
Grozneft - Maineft group of refineries, it could be obtained thanks
to the development of the intake capacity of the Grozny plants.
-16-
291
The Inland Refineries have also intensified their operations during the analysed period, when new installations
sere loaded almost to their full capacity, while the old ones - and the cracking plants particularly - considerably improved
their working methods. In this group, the Habarovak refinery,
which is being re-constructed, aerits a special mention, as the
intake capacity of this plant is being rised to such an extent,
that it would be able to cover the entire demand for gasoline
and kerosene in the Far East.
And, finally, the Middle Asian refineries have been
modernised too, and they are operating at present at their
respective full capacities. Moreover, the Neftedag plant has
been equipped with extra-heaters and its heating system has
been generally improved.
The output of benzine showed during the first six months
of 1940 a new increase of 171,000 tons, in comparison with the
same period of 1939, whereas that of kerosene increased by
64,600 tons, and that of Labricating Oils - only by 19,500 tons.
As to the black products, the output of Residual Fuel Oil
during the first half of 1940 reached about 53.6% to the crude
treated, as against 34.7% - during the same period of 1939.
This decline of percentage of the Residual F.O.'s yield was due
to the further intensification of crude's treatment and partiaularly - to a continual development of the Cracking Process,
of the output of Lubricating Oils, and of Asphalt. The output of All Other Products (mainly asphalt and paraffin ) increased
during the examined period by 22,700 tons.
Respectfully submitted by:
Signed: N. K. WASSILIEFF.
August, 1940.
292
January s, 1942.
Dear Mr. Memners
Your letter of December Slot has given
- the greatest Newsure. I - greater to you
for year kind thought of writing to - as this
time, and also for what you have said about work.
my one hage, as you know, is that the
Bee Year will bring your country and our world
into happier days. Please accept - personal
greetings and good wishes, and - theate for
all that you have dene.
Sincerely yours,
(Signed)
Mr. Jess Beanet,
British Purchasing Commission,
William Rebel,
Backington, D. C.
PK Jr/hkb
293
January 5, 1941.
Dear Nr. Monnets
Your letter of December Siet has given
no the greatest pleasure. I - grateful to you
for your kind thought of writing to me at this
time, and also for what you have said about day
work.
my one hage, as you kase, is that the
Bow Year will bring year country and our world
into happier days. Please accept - personal
greetings and good wishes, and my thanks for
all that you have done.
Sincerely yours,
Mr. Jeem Meanot,
British Purchasing Commission,
Willard Hotel,
Bashington, D. c.
FK Jr/hkb
294
January 3, 1941.
Dear Mr. Messets
Your letter of December Sist has given
- the greatest pleasure. I - greater to you
for your kind thought of writing to - as this
time, and also for what you have said about work.
n - hage, as you k is that the
Bee Year will being your country and - world
into happier days. Please accept - personal
greetings and good vishoo, and - thanks for
all that you have done.
Sincerely years,
(Signed) a
Mr. Jean Meaner,
British Purchasing Commission,
Willand Hotel,
Backington, D. e.
RxJr/hkb
295
TELEPHONE REPUBLIC 7860
WILLARD HOTEL WASHINGTON, D. c.
BRITISH PURCHASING COMMISSION
310 December 1940.
Dear a secretary.
7do not amount To at the
fatiful zear finish Tozace my
feeling of for what you have done for
France and for KriVani
More Than almostang are)
know how much has at time depended are The
mean of more effects The american assurement
of which you aftained The release withmolder
of the year represented at that time avital
material and psychological
the Have That in 1941 will be such a
cancral cantribution refeat Britain : resistance
would not he There without you.
Now That th Bistid resistance
has themmed anelaught and that
has solidating
the hope of final pritacy > feel that
me can enter This shaw year with
full confidence.
with my faithful Th
please accept for you and weer
family my but wishes for the law
been However
296
was By dear Mr. Presidents
You will resall our recent discussion relative to the
need for legislation dealing with the bank holding company 1
lea. Since talking with you a bill has been drufted to seet this
situation. The Comptroller of the Currency and I have discussed
the measure with Senator Glass who has indicated compatity with
the general purposes of the proposed legislation but has withhold
final approval until be has had as opportunity to compare draft with his less drastis seasure of 1938 and obtain the views
of some of his associates.
The bill which we have prepared prohibits any company,
after June 30, 1944, from owning or controlling sere the tea
per east of the voting securities of any bank issured by the
Federal Deposit Insurance Corporation. It also confers - the
Comptroller of the Carrency with respect to andional and
the Federal Deposit Insurance Corporation with respect to state
insured basis, authority to ferbid the payment of any /
which would impair the stability and somenness of 1 banks. IS
is believed that such dividend central is accided not only in acction with bank holding company legislation but also as Original signed by Secretary and sent to White House by Secret
Service Agent Raum at 10:45 a.m. - 1/3/41.
297
authority to Suplement the I of the of
the - and - Patersal Deposits I Corporation.
Sectoring mile falliding - - - of the
Pederal Deposit I Organition, be meposited that your
- to the - - . - that legisla
Man be - to estimal effectively - question of beak holding
companies. I agree with Mr. - You will reall
that your manage of April 29, 1938 combined . states -
time Per - - I - attacking a - of that Mr. Greeting - I believe that a - indicating
that logistation of this d Ins your approval would be -
valuable in receiving - of 1 a - in - - language - along the following 1 would - to
be appropriates
" - - to the Congress - , 1998
& - commiss to all to the attention of the Omgress
-building
- Saharent
in
the
of
companies operating in the booking field. I
the - that legislation be - to - the
problem
- - of the problem involved in the
- of busine by building companies bas, if anything,
Increased alass 1930. accordingly, I strongly -
- - Omgress - at this - legislation that
sill effectively the - of bank building
-building
problem
the
of
I
centralled
by
companies - - prevision for the 1
298
- of I from belding - - -cantralled
- white -wand
1
-
- allening california - - this a
I to - - w I 1 -
I
be
(Signed) H. it
Secretary of the I
- President
- Shile -
- - 1/2/43
SENATE
CONCERNS
3d
Session
No. 173
{
LAWS
STRENGTHENING AND ENFORCEMENT
OF ANTITRUST
MESSAGE
FROM
THE PRESIDENT OF THE UNITED STATES
TRANSMITTING
RECOMMENDATIONS RELATIVE TO THE STRENGTHENING AND
ENFORCEMENT OF ANTITRUST LAWS
USI 20 calendar day. Aran 29). 1938.-Read; - referred to the Committee OD
the Judiciary and ordered to be printed
the Congress of the United States:
Unhappy
events abroad have retaught us two simple truths about
sheets of a democratic people.
first truth is that the liberty of a democracy is not safe if the
the growth of private power to a point where it
than their democratic state itself. That, in its
ownership of government by an individual, by a
other controlling private power.
truth is that the liberty of a democracy is not safe if
item does not provide employment and produce and
in such . way as to sustain an acceptable standard
BY
hit board
-day & concentration of private power without equal
national is seriously impairing the economic effectiveness
represe as & way of providing employment for labor and
way of assuring a more equitable distribution of income
among the people of the Nation as a whole.
STRENGTHENING AND ENFORCEMENT OF ANTITRUST LAWS
2
1. THE GROWING CONCENTRATION OF ECONOMIC POWER
Statistics of the Bureau of Internal Revenue reveal the following
amazing figures for 1935:
Ownership of corporate assets: or all corporations reporting from every part
of
the Nation, one-tenth of 1 percent of them owned 52 percent of the assets of
all of them.
And to clinch the point: or all corporations reporting less than 5 percent of
then owned 87 percent of all the assets of all of them.
Income and profits of corporations: Of all the corporations reporting from every
part of the country, one-tenth of I percent of them earned 30 percent of the net
income of all of them
And to clinch the point: Of all the manufacturing corporations reporting less
than 4 percent of them earned 84 percent of all the net profits of all of them.
The statistical history of modern times proves that in times of
depression concentration of business speeds up. Bigger business then
has larger opportunity to grow still bigger at the expense of smaller
competitors who are weakened by financial adversity
The danger of this centralization in a handful of huge corporations
not reduced or eliminated, as is sometimes urged, by the wide public
distribution of their securities. The mere number of security holders
is
gives little clue to the size of their individual holdings or to their
actual ability to have a voice in the management. In fact, the CODcentration of stock ownership of corporations in the hands of a tiny
minority of the population matches the concentration of corporate
assets
The year 1929 was a banner year for distribution of stock ownership
But in that year three- tenths of 1 percent of our population received
78 percent of the dividends reported by individuals This has
roughly the same effect as if, out of every 300 persons in our population. one person received 78 cents out of every dollar of corporate dividends while the other 299 persons divided up the other 22 cents between them
The effect of this concentration is reflected in the distribution of
national income.
\ recent study by the National Resources Committee shows that
in 1935-36Forty-seven percent of all American families and single individuals living alone
had incomes of less than $1,000 for the year; and at the other end of the ladder a
Little less than 11/2 percent of the Nation's families received incomes which is
are and cents reached the same total as the incomes of the 47 percent at the
buttom
Furthermore, to drive the point home, the Bureau of Internal
Revenue reports that estate tax returns in 1936, show thatrty-three percent of the property which was passed by inheritance was found
percent of all the reporting retailes (And the figures of concentration
be far more impressive, if we included all the smaller estates which. under
sw. do not have to report.)
We believe in a way of living in which political democracy and free
rivate enterprise for profit should serve and protect each other-to
re a maximum of human liberty not for a few but for all.
it has been well said that, "The freest government, if it could exist,
Id not be long acceptable, if the tendency of the laws were to
te a rapid accumulation of property in few hands, and to render
great mass of the population dependent and penniless."
301
STRENGTHENING AND ENFORITEMENT OF ANTITRUST LAWS
3
Today many Americans ask the uneasy question: Is the vociferation
our liberties are in danger justified by the facts?
oday , answer on the part of average men and women in every part
country is far more accurate than it would have been in 1929
the the very simple reason that during the past 9 years we have been
with $ lot of common-sense thinking. Their answer is that if there
that danger it comes from that concentrated private economic
$ was . 5ch is struggling so hard to master our democratic governIt will not come, as some (by no means all) of the possessors
sent
that private power would make the people believe-from our demoratic government itself.
11. FINANCIAL CONTROL OVER INDUSTRY
Even these statistics I have cited do not measure the actual degree
of concentration of control over American industry.
Close financial control, through interlocking spheres of influence
set chantees of investment, and through the use of financial devices
at holding companies and strategic minority interests, creates close
metrol of the business policies of enterprises which masquerade as
iddependent units
That heavy hand of integrated financial and management control
La upon large and strategic areas of American industry. The smallsuspess man is unfortunately being driven into a less and less indesendent position in American life. You and I must admit that
Private enterprise is ceasing to be free enterprise and is becoming
daster of private collectivisms; masking itself as a system of free
enterprise after the American model. it is in fact becoming a concealed
artel system after the European model.
We all want efficient industrial growth and the advantages of mass
production No one suggests that we return to the hand loom or
and force A series of processes involved in turning out a given
sufact red product may well require one or more huge mass-pro-
tion plants Modern efficiency may call for this. But modern
doint mass production is not furthered by a central control which
destroys competition between industrial plants each capable of effiyet ma roduction while operating as separate units. Industrial
Griency does not have to mean industrial empire building.
And ind -trial empire building. unfortunately, has evolved into
tanker control of industry. We oppose that.
Such control does not offer safety for the investing public. Investment judge ent requires the disinterested appraisal of other people's
It becomes blurred and distorted if it is combined
managem
acting duty of controlling the management it is supposed
with the
judge
later
corth
of
are
state
Bu-in
50
states
The
the
2 financial controls have taken from American business
traditional virility, independence, adaptability, and
ut compensating advantages They have not given
they promised.
terprise needs new vitality and the flexibility that comes
versified efforts, independent judgments and vibrant
housands upon thousands of independent businessmen.
lual must be encouraged to exercise his own judgment
his own small savings, not in stock gambling but in
are
I
I
302
4
STRENGTHENING AND EXPORTEMENT OF ANTITEUST LAWS
DEW
investment. Men will dare to compete against but
notenterprise
against giants.
= THE DECLINE OF COMPETITION AND ITS EFFECTS ON EMPLOYMENT
In output
per man or machine we are the most efficient industrial
nation
on earth
theamong
matterthe
ofleast
complete
mutual employment of capital and labor
weInare
efficient
Our difficulties of employing labor and capital are not new. We
have had them since good, free land gave out in the West at the turn
of the century. They were old before we undertook changes in our
tax policy or in our labor and social legislation. They were caused
not by this legislation but by the same forces which caused the legis-
lation The problem of bringing idle mm and idle money together
will not be solved by abandoning the forward steps we have taken to
adjust
the burdens of taxation more fairly and to attain social justice
and security.
If TOO believe with me in private initiative you must acknowledge
the right of well-managed small business to expect to make reasonable
prodits You must admit that the destruction of this opportunity
fallows concentration of control of any given industry into a small
number of dominating corporations.
Our of the primary causes of our present difficulties lies in the disappearance of price competition in many industrial fields particularly
= basic manufacture where concentrated economic power is most
evident-and where rigid prices and fluctuating pay rolls are general
Managed industrial prices mean fewer jobs It 25 no accident that
in industries like cement and steel where prices have remained firm
a the face of a falling demand pay rolls have shrunk as much as 40
and 50 percent in recent months Nor is it mere chance that in most
competitive industries where prices adjust themselves quickly to
falling demand, pay rolls and employment have been far better -
tained By prices we mean. of course, the prices of the finished
articles and not the wages paid to workers
When prices are privately managed at levels above those which
would be determined by free competition everybody pays
The contractor pays more for materials: the homebuilder pays IDDITY
for
work his house: the tenant pays more rent: and the worker pays in issua
Ever the Government itself is unable in a large range of materials
to
obtaintocompetitive
identifical
the last cent. bids. It is repeatedly confronted with bids
Our housing shortage is a perfect example of how ability to custrol
prices interferes with the ability of private enterprise to fill the needs
of the community and provide employment for capital and labor
Oz the other hand, we have some lines of business large and small,
which are genuinely competitive. Often these competitive industries
But buy their basic products from monopolistic industry, thus
issue and causing the public to lose. a large part of the benefit of
their competitive policy. Furthermore in times of recession
the practices of monopolistic industries make it difficult for business
agriculture, which is competitive and which does not curtail prodoctive below normal needs, to find a market for its goods even at
303
STRENGTHENING AND ENFORCEMENT OF ANTITRUST LAWS
5
moleced prices. For at such times a large number of customers of
riculture and competitive industry are being thrown out of work
those noncompetitive industries which choose to hold their prices
rather than to move their goods and to employ their workers.
If private enterprise left to its own devices becomes half-regimented
and salf-competitive, half-slave and half-free, as it is today, it obmously cannot adjust itself to meet the needs and the demands of the
country.
Most complaints for violations of the antitrust laws are made by
businessmen against other businessmen. Even the most monopoistic businessman disapproves of all monopolies but his own. We
may smile at this as being just an example of human nature, but we
cannot laugh away the fact that the combined effect of the monopdistic controls which each business group imposes for its own benefit
inevitably destroys the buying power of the Nation as a whole.
IV. COMPETITION DOES NOT MEAN EXPLOITATION
Competition, of course, like all other good things, can be carried to
excess. Competition should not extend to fields where it has demonstrably bad social and economic consequences. The exploitation
child labor. the chiseling of workers' wages, the stretching of workis hours, are not necessary, fair, or proper methods of competition.
I have consistently urged a Federal wages-and-hours bill to take the
minimum decencies of life for the working man and woman out of the
field of competition.
It is of course necessary to operate the competitive system of free
enterprise intelligently. In gaging the market for their wares busiassemen, like the farmers, should be given all possible information by
government and by their own associations so that they may act with
knowledge and not on impulse. Serious problems of temporary overproduction can and should be avoided by disseminating information
that will discourage the production of more goods than the current
can possibly absorb or the accumulation of dangerously large
for which there is no obvious need.
It is, of course, necessary to encourage rises in the level of those
competitive prices, such as agricultural prices, which must rise to put
our price structure into more workable balance and make the debt
burden more tolerable. Many such competitive prices are now too
be.
It may at times be necessary to give special treatment to chronically
ack industries which have deteriorated too far for natural revival,
specially those which have a public or -public character.
But generally over the field of industry and finance we must revive
and strengthen competition if we wish to preserve and make workable
traditional system of free private enterprise.
The justification of private profit is private risk. We cannot
safely make America safe for the businessman who does not want to
take the burdens and risks of being a businessman.
v. THE CHOICE BEFORE US
Examination of methods of conducting and controlling private
enterprise which keep it from furnishing jobs or income or opportunity
for one-third of the population is long overdue on the part of those
6
STRENGTHENING AND ENFORCEMENT OF ANTITRUST LAWS 304
who profit. sincerely want to preserve the system of private enterprise for
No people, least of all a democratic people, will be content to
without work or to accept some standard of living which obviously go
and woefully falls short of their capacity to produce. No people,
least of all a people with our traditions of personal liberty, will endure
the slow erosion of opportunity for the common man, the oppressive
sense
of helplessness
under the
domination of a few, which are over.
shadowing
our whole economic
life.
A discerning magazine of business has editorially pointed out that
big-business
in
government.collectivism in industry compels an ultimate collectivism
The power of a few to manage the economic life of the Nation must
be diffused among the many or be transferred to the public and its
democratically responsible government. If prices are to be managed
and administered, if the Nation's business is to be allotted by plan and
not by competition, that power should not be vested in any private
group or cartel, however benevolent its professions profess to be.
Those people, in and out of the halls of government, who encourage
the growing restriction of competition either by active efforts or by
passive resistance to sincere attempts to change the trend, are shouldering a terrific responsibility. Consciously or unconsciously they
are working for centralized business and financial control. Con-
seiously or unconsciously they are therefore either working for control
of the Government itself by business and finance or the other alternative a growing concentration of public power in the Government
to cope with such concentration of private power.
The enforcement of free competition is the least regulation business
can expect.
VI. A PROGRAM
The traditional approach to the problems I have discussed has
been through the antitrust laws. That approach we do not propose
to abandon. On the contrary, although we must recognize the inadequacies of the existing laws, we seek to enforce them so that the
public shall not be deprived of such protection as they afford. To
enforce them properly requires thorough investigation not only to
discover such violations as may exist but to avoid hit-and-miss prosecutions harmful to business and government alike. To provide for
the proper and fair enforcement of the existing antitrust laws I shall
submit, through the Budget, recommendations for a deficiency approprintion of $200,000 for the Department of Justice.
But the existing antitrust laws are inadequate most importantly
because of new financial economic conditions with which they are
powerless to cope.
The Sherman Act was passed nearly 40 years ago. The Clayton
and Federal Trade Commission Acts were passed over 20 years ago.
W have had considerable experience under those acts. In the mean-
time we have had a chance to observe the practical operation of
large scale industry and to learn many things about the competitive
system which we did not know in those days.
We have witnessed the merging-out of effective competition in
many fields of enterprise. We have learned that the so-called competitive system works differently in an industry where there are
NING AND ENFORCEMENT OF ANTITRUST LAWS
305
lent units, from the way it works in an industry where
ducers dominate the market.
learned that a realistic system of business regulation
that
T
to
who
more than consciously immoral acts The community
economic results It must be protected from economic
wrongs We must find practical controls over blind
as well as over blindly selfish men.
can deal and should deal with blindly selfish men
comparatively small part-the easier part- of our probarger. more important and more difficult part of our prob-
deal with men who are not selfish and who are good citizens,
cander see the social and economic consequences of their
in modern economically interdependent community. They
gin-P the significance of some of our most vital social and
problems because they see them only in the light of their
experience and not in perspective with the experience
perother thet and other industries They therefore fail to see these
for the Nation as a whole.
meet the situation I have described, there should be a thorough
the concentration of economic power in American industry
elies of that concentration upon the decline of competition.
be an examination of the existing price system and the
of industry to determine their effect upon the general
upon employment, upon long-term profits and upon
The study should not be confined to the traditional
The effects of tax, patent, and other Government
so
of
be ignored.
should be comprehensive and adequately financed I
=0 appropriation of not less than $500,000 for the concomprehensive study by the Federal Trade Commission,
of Justice, the Securities and Exchange Commission,
each the agencies of government as have special experience in
of the inquiry.
summered some of the items that should be embraced in the pro-
The items are not intended to be all inclusive. One or
ems. such as bank holding companies and investment
already been the subject of special study, and legislation
time need not be delayed.
ment of antitrust procedure.-! revision of the existing
should make them susceptible of practical enforcement
those charged with violations the burden of proving
within their knowledge. Proof by the Government
tods. uniform price increases, price leadership, higher
export prices, or other specified price rigidities might
prima facie evidence of unlawful actions.
timent of Justice and the Federal Trade Commission
more adequate and effective power to investigate
is reason to believe that conditions exist or practices
violate the provisions or defeat the objectives of the
If investigation reveals border-line cases where
perative efforts to eliminate socially and economically
de of competition in particular industries are thwarted
technical violations of the antitrust laws, remedial
le
d be considered.
VOOG
STRENOTHENING AND ENFORCEMENT OF ANTITRUST LAWS
8
As & really effective determent to personal wrong-doing. I would
suggest that where a corporation is enjoined from violating the law,
the court might be empowered to enjoin the corporation for a
fied period of time from giving any remunerative employment speciany official position to any person who has been found to bear or a
responsibility for the wrongful corporate action.
As a further deterrent to corporate wrong-doing the Government
might well be authorized to withhold Government purchases from
companies guilty of unfair or monopolistic practice.
(2) Mergers and interlocking relationskip.-More rigid scrutiny
through the Federal Trade Commission and the Securities and Ex.
change Commission of corporate mergers, consolidations, and acquisitions than that now provided by the Clayton Act to prevent their
consummation when not clearly in the public interest; more effective
methods for breaking up interlocking relationships and like devices
for bestowing business by favor.
(3) Financial controls.-T operations of financial institutions
should be directed to serve the interests of independent business and
restricted against abuses which promote concentrations of power over
American industry
(a) Incestment trude.Investment trusts should be brought under
strict control to insure their operations in the interests of their inrestors rather than of their managers. The Securities and Exchange
Commission is to make a report to Congress on the results of a comprehensive study of investment trusts and their operations which it
has carried on for nearly 2 years The investment trust, like the holding company, puts huge aggregations of the capital of the public at the
direction of a few managers Unless properly restricted, it has potentialities of abuse second only to the holding company as a device
for
the further centralization of control over American industry and
American finance
The tremendous investment funds controlled by our great insurance
companies have a certain kinship to investment trusts, in that these
companies invest as trustees the savings of millions of our people. The
Securities and Exchange Commission should be authorized to make an
investigation of the facts relating to these investments with particular
relation to their use as an instrument of economic power.
Bank holding companies is hardly necessary to point out the
great economic power that might be wielded by a group which may
succeed in acquiring domination over banking resources in any con-
siderable area of the country. That power becomes particularly
dangerous when it is exercised from a distance and notably so when
effective control is maintained without the responsibilities of complete
ownership.
We have seen the multiplied evils which have arisen from the hold-
ing mpany system in the case of public utilities, where a small
II
ab
not a sufficient assurance against the future to say that no great
en
vet sulted from holding company operations in this field.
T
I
.
ownership has been able to dominate a far-flung system.
do not want those evils repeated in the banking field, and we
take steps now to see that they are not.
cossibilities of great harm are inherent in the situation.
ommend that the Congress enact at this session legislation that
Tectively control the operation of bank holding companies; pre-
307
9
STRENGTHENING AND ENFORCEMENT or ANTITRUST LAWS
bolding companies from acquiring control of any more beaks
indirectly; prevent banks controlled by holding companies
establishing yor any more branches; and make it illegal for a holding
or any corporation or enterprise in which it is financially
to borrow from or sell securities to a bank in which it holds
that this bank legislation make provision for the
of banks from company or
a reasonable time for
at recommend allowing separation holding this accomplishment- control time enough owner
- to be done in an orderly manner and without causing inconvenia THE communities served by holding company banks
the
trade associations, a of
(4) to Trade of canciations.-Supervision and clarification and effective and publicity delineation of
spheres of activity
evities - legitimateof
butcompetition,
which which will will enable guard them against to combat their
with legitimate
laws. -Amendment prevent their
(5) this parference Patent methods competitive of the patent practices. laws to
to suppress inventions, and to create industrial monopolies Of
- are such amendment should not deprive the inventor of his royalty
but, generally speaking, future patents might be made available
- by anyone upon payment of appropriate royalties. Open
and pools have voluntarily been put into effect in a number of
1
partant industries with wholesome results.
Tax correctives.-Tax policies should be devised to give affirmaencouragement to competitive enterprise.
Attention might be directed to increasing the intercorporate divi-
- tax to discourage holding companies and to further graduating
corporation income tax according to size. The graduated taxbe
not be so high as to make bigness impracticable, but might
enough to make bigness demonstrate its alleged superior efficiency.
We have heard much about the undistributed profits tax When
was enacted 2 years ago, its objective was known to be closely
to the problem of concentrated economic power and a free
C:
market.
in purpose was not only to prevent individuals whose Ecomes were
arable in the higher surtax brackets from escaping personal income
JAN by letting their profits be accumulated as corporate surplus
1 purpose was also to encourage the distribution of corporate profits
that the individual recipients could freely determine where they
would reinvest in a free capital market.
is true that the form of the 1936 tax worked a hardship on many
1 the smaller corporations. Many months ago I recommended that
earned an
the inequities be removed.
But in the process of the removal of inequities, we must not lose
- of original Obviously the nation must have some
against objectives. special privileges enjoyed by exceedingly small
or
an
taxmethod.
has value in
a
Prep of individuals under the form of the laws prior to 1936, whether
x deterrent take the form of an undistributed- profits tax or some
the tributed equally profits more efficient a real working And obviously against further -
Incentration of economic power and in favor of a freer capital market
(7) Bureau of Industrial Economica.-Creation of a Bureau of
Industrial Economics which should be endowed with adequate powers
a supplement and supervise the collection of industrial statistics by
308
10 STRENGTHENING AND ENFORCEMENT OF ANTITRUST LAWS
trs associations. Such a bureau should perform for businessmen
functions
similar
to those performed for the farmers by the Bureau of
Agricultural
Economics
It should disseminate current statistical and other information
regarding market conditions and be in a position to warn against the
dangers of temporary overproduction and excessive inventories as
well as against the dangers of shortages and bottleneck conditions
and to encourage the maintenance of orderly markets. It should
study trade fluctuations, credit facilities, and other conditions which
affect the welfare of the average businessman. It should be able to
help
menbig
to keep
themselves as well informed about
tradesmall-business
conditions as their
competitors.
No man of good faith will misinterpret these proposals. They
derive from the oldest American traditions. Concentration of
economic power in the few and the resulting unemployment of labor
and capital are inescapable problems for a modern "private enterprise"
democracy. I do not believe that we are so lacking in stability that
we will lose faith in our own way of living just because we seek to find
out how to make that way of living work more effectively.
This program should appeal to the honest common sense of every
independent businessman interested primarily in running his own
business at a profit rather than in controlling the business of other men.
It is not intended as the beginning of any ill-considered "trust-
busting activity which lacks proper consideration for economic results
It is a program to preserve private enterprise for profit by keeping
itat free
enough to be able to utilize all our resources of capital and labor
a profit.
It is a program whose basic purpose is to stop the progress of
collectivism
in business and turn business back to the democratic
competitive order.
It is a program whose basic thesis is not that the system of free
( private
for profit has failed in this generation, but that it
bas notenterprise
yet been tried.
Onice it is realized that business monopoly in America paralyzes
the system of free enterprise on which it is grafted, and is as fatal to
those who manipulate it as to the people who suffer beneath its
impositions, action by the Government to eliminate these artificial
restaints will be welcomed by industry throughout the Nation.
For idle factories and idle workers profit no man.
FRANKLIN D. ROOSEVELT.
THE WHITE HOUSE, April 29, 1938.
o
,TO:
MISS CHAUNCEY
1/24/41
309
The Secretary was told about this and
Mr. Foley has the original. This copy
for your files.
MR. FOLEY
310
JAN 8 1941
Secretary Morganthes
Mr. Felay
Res Legislative progress for
coming session.
There follows, in tabular form, a list of proposed legislation
which the various bureaus and divisions of the Department contemplate
submitting to Congress during its next session.
Legislation to be
litted to Consteas.
1. Customs Leases.-To authorise Customs to enter into ten year
leases on buildings and grounds. At present they must be renewed
usually. (Customs)
2. Settlement on Last or Stelen Checks.-So authorise the
Treasurer to make settlements in advance of reclanation with payees
of last or stolen checks which have been paid on forged endorsements.
(Treasure)
3. Centerfeiting Conspiracion.-To make the penalty for
conspirecy to violate the laws relating to counterfeiting the sase
as for violating the substantive offense. (Secret Service)
4. Elimination of eliminate certain oaths
required of vessels and shippers of eargo in certain cases because
they are - burdensone, and administratively impossible
of enforcement. (Customs)
311
5. factors at International fall
To require international sell betages to free inspea-
tion facilities for customs and officers. (Custome)
6. Administrati is manda America to authorise
crediting the accounts of the Treasurer of the United States
to ovver cartain types of payments made by his in good faith
and without neglignes. (Streetmen)
7. Exchange of Geart authorize the exchange
of two Goast Guard sites in Florida for other property in the State
more adventegeous to the Government. (Coast Guard)
6. least Grant Awalliary and learn. amount the Coast
Guard Reserve Act by substituting a Goest Guard Ammiliary for
the existing Reserve and creating a new Coast Guard Reserve pat-
terned after the Naval Reserve. (Coast Goard)
9. Death and Examine Benefits for Last Referement
official authorise as increase in the disability and death
componential payable to Federal police officers and their dependents
share wash officers are disabled or killed in hasardous work.
(Coordinator of Treasury Informant)
312
New
Prememia.
1. Registic of Parent of the United States.
To preseribe the conditions under which payment to eleissate against
the Government will be withhold because of adverse alaine of third
parties. (Durees of Accounts)
2. Legan Revelence to Reference the Mailing of To safeguard checks sent through the mails by permitting the
Division of Disbursement to dispatch then in envelopes bearing
the legend now printed on envelopes used for mailing checks for
the Vetereas Administration. (Dureau of Accounts)
3. Prohibition of Fithholding Retirement Benefits-to
prohibit the withholding of amounts is the civil service retiremont fund to the credit of disbursing officers of the Treasury
Department on account of suspensions or disallowances raised by
the General Accounting Office. (Bureau of Accounts)
4. Government Fidelity Bonding Exam establish a selfsupporting fidelity bonding system for employees of the United
States is lieu of the present system of requiring surety company
bonds. (Dureas of Accounts)
5. Reculating Hours of Yerk and Time of Payasat of Backeress in the Bistrict of Calambia to authorise the President
to establish a five-day week, great evertime leave, and stagger
paydays for the various departments and agencies of the Government
in the District of Columbia. (Mr. Bell)
-6-
313
6. Barries Barentia Ast provide a separate
tax classification for hospitals and similar institutions and thus
relieve certain hospitals from double compational tax classifiestions classify nowly discovered aschpine derivatives, and prevent
the abusive use of marcotic comedity tax stemps. (Herection)
7. Restriction of Restatiation under Maraotis Previsions of
the Internal Revenue authorise denial or revoestion of
registration under the acrestic provisions of the Internal Revenue
Code to persons convicted of violating Federal or State nareotic
laws. (Bareoties)
8. Second Liberty Dead Act to increase the debt
limit, consolidate the borrowing authority of the Government, make
Federal obligations subject to Federal tames, and give the Secretary
of the Treasury more flexible authority in connection with the issuance and sale of savings bonds. (Secretary)
9. Carriage into Suralma Part of Certain frest Funds Derived
from Compensation eliminate certain trust funds by authorising the carrying into the surplus fund of certain compensating
taxes collected under the Agricultural Adjustment Act on commudities
imported from the pessessions of the United States. (Bureau of
Accounts)
10. Bank Helding Company Legislation To regulate bank holding
companies. (Couptroller of the Currency)
314
-5.
11. I of Jame Relating to the Inspects of Televal
generally revise and bring - to date the laws governing the deposit of Federal funds in banks throughout the country.
(Dareas of Accounts)
12. - Report of the Countreller of the
authorise the Couptroller to submit his annual report on . calender
year basis (as the P.B.I.C. and the F.B.B. do) rather than at the
beginning of each session of Congress. (Comptroller of the Currency)
13. Present authorise the Director of
Precurement, with the approval of the Secretary, to make purchases
- the open market in certain cases where competitive bidding
proves montinfectory. (Preserement)
14. Stabilization extend the stabilisation fund and
dollar devaluation powers. (Secretary)
15. In authorise the establishment of a new sint
is the made Best. (Mint)
16. Cartons facilitate administration of the Customs love by clarifying and bringing up to date a
number of the love regulating procedure. (Customs)
17. Kileage Permanents to Customs officers.-to / paymont to Customer officers of alleage for use of their own ears or
for official toural within the limits of their poots
of date.
18. Goost Guard Nights of Reg.-To give the Coest Guard the
- authority to enchange Coast Guard rights of way as 18 has with
respect to the enchange of Lighthense rights of my. (Coast Goard)
-6-
315
19. Passas to Coast Guard Presents by Private
give the Coast Guard the same authority in connection with the
handling and disposition of money collected from private persons
in payment for damage done to Goest Guard property as 18 has when
Lighthouse service property is involved. (Coast Guard)
20. Intension of Coast Guard Indictants.--fo clarify the law
governing extension of Coast Guard enlistments. (Coast Guard)
21. Coast Guard Contracts.-% extend to the Coast Guard the
law authorising the Havy to enter into negotiated contracts.
(Coast Guard)
22. Coast Guard Enforcement Jurisdiction.--fo remove existing
limitations on the authority of the Coast Guard to enforce the law
of the United States on "inland saters". (Coast Guard)
23. Status of Coast Guerd.-So amend existing law so as to sake
it clear that the Coast Guard is a part of the military forces of the
United States. (Coast Guard)
24. Zareim Funda Control.-The is a possibility that we
may submit legislation expanding our foreign exchange control powers,
vesting in the Treasury in a #modernised form powers exercised by
the Alien Property Custodian during the first World Far, setting up
a machinery for determining American claims against foreign countries,
giving the President and the Treasury authority to enter into umilateral
and bilateral clearing arrangements with foreign countries, and authority
to set off foreign property here against American claims abroad.
Complete powers of economic defense should also include the power
316
of - Sush possion will also assist in the minister of the
problem of submersive activities end So subsidies to
Justice a draft of provisions to to included is on /
bill.
25. Defence Legislation my also be meeted
for another phase of the progres of - defence, meely, -
sirable inflation, eredit and price risse.
(Initialed) R.H.T., Jr.
1/2/42
317
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
STRIOTLY CONFIDENTIAL
TO
Secretary Morgenthan
FROM
Mr. Klaus
DATE January 3, 1941
FBI reports:
December 31. Several German firms in Bogota handling American goods
are said to be assigning their business to native Colombians to obviate
a possible pre-war black list, on the understanding that the property
will be returned after the crisis passes.
It is possible that a strike will be called at the
Ryan Aeronautical Company works in San Diego as result of inability of
the CIO union and the President of the Company to agree on wage scales;
the union asks for a minimum of 75 per hour, the plant is now paying
a minimum of 504 per hour.
The CIO is endeavoring to organize workers at the
Douglas plant in Santa Monica, but there is considerable feeling against
the CIO there although the employees desire a wage equivalent to that
received by the Vultee employees. It is said that the CIO has given up
an attempt to organise the North American Aviation Company at Inglewood,
California, as result of a recent crash of a North American plane, the
union feeling that the CIO would be blemed for any airplane accidents
at this plant occurring during a strike.
gire
318
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
CONFIDENTIAL
TO
Secretary Morgenthau
FROM
Mr. Klaus
DATE January 3, 1941
FBI reports:
December 8-19. Special Agents' reports show FBI is looking into Soviet accounts in San Francisco; accounts of the German Consulate and the German Consul
Federal in Boston, of the Italian Consulate and Consul General in Seattle; of
the German Consulate and Consular employees in New Orleans (where it would seem
the employees from the Consul General down have been decreasing their bank balLICES); of the German Consulate General and its employees in Chicago (where there
1614 withdrawals of almost (19,000 in currency in November); of the Japanese Embeary and its chief employees it Washington (among items of interest are the cashing of a 20,000 check on November 19, a $15,000 check on November 29 in $100 bills,
the serial numbers of some of which are known to FEI, and the payment November 28
20,000 to the First Secretary by check which has not yet been cashed); and
Russian and Italian accounts in Washington, including the accounts of employees
it my be noted that the Italian Abbassedor's personal account shows deposits
.POO July 1939 through November 1940 of $111,485 and withdrewals of (44,247).
December 26. More on Rueckwanderer marks. Agents advertise in German-language
lowspapers, forward circulars to prospective customers, and thereafter make personal
calls, presenting applications for signature; it is not always clear whether the
purchaser gets 4.1 marks to the dollar clear or whether he bears expenses. The
Classe Bank is used to forward the application to Germany for the necessary approval
the German government while the customer applies to the German Consul for what
amounts to a re-immigration permit, which is in effect an approval of his making
the purchase. FBI says the persons involved in these transactions might be prostects for internment should an energency arise requiring internment; that the German
government apparently pays 7% commission to the bank and the agent in the United
tates. There have been a few instances of disapproval of the customer by the
Consul. FBI suggests that where applicants have not received citizenship
case be made for denial of citizenship and where possible for revocation of
citizenship on the ground of intended expatriation within five years of naturalNation. Hans W. Ritter, an active solicitor for this business, intends to leave
the United States for Germany via San Francisco January 8, 1941.
December 28. Somebody connected with the German Embassy is reported to have
said that should the United States take steps to use the Navy for convoy purposes
to the British Germany would take action involving bringing Japan into the contro-
Tersey; that Hitler was not likely to invade Greece through Bulgarit since this
would create a war on two fronts which Hitler wishes to avoid and might bring
Hurkey into the war; Russis will not be ready to fight any major power for at
REST a year; Germany will continue the present type of warfare until she is
fititely sure that invesion of Britain would be successful.
Al.
319
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
Miss
For
DATE January 3. 1941
TO Secretary korgenthau
CONFIDENTIAL
FROM Mr. Cochran
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
Purchased from commercial concerns
$120,000
6 14,000
In the open market, sterling was first quoted at 4.03-3/4. It moved to 4.03-1/2
around noon-time, and closed at that level, There were no reported transactions.
here was no appreciable movement in the other currencies, and closing quotations were:
Canadian dollar
14% discount
Swiss franc
Swedish krona
Reichamark
Lira
Argentine peso (free)
Brazilian milreis (free)
Mexican peso
Cuban peso
Chinese yuan
.2320-1/2
.2385
.4005
.0505
.2360
.0505
.2066
8-9/16% discount
.05-9/16
Te sold $5,000,000 in gold to the Bank of Java, to be added to its earmarked account.
There were no new gold engagements reported to us today.
No gold or silver prices were received from Bombay.
The prices fixed in London for spot and forward silver both advanced 1/8d, to
3-3/8d and 23-5/16d respectively. The dollar equivalents were 42.44 and 42.334.
Eandy and Harman's settlement price for foreign silver was unchanged at 34-3/44.
The Treasury's purchase price for foreign silver was also unchanged at 35#.
We made six purchases of silver totaling 750,000 ounces under the Silver Purchase
Act. Of this amount, 350.000 ounces represented a sale from inventory, and the
recaining 400,000 ounces consisted of new production from foreign countries, for forward
delivery.
KMR.
320
J 3.194
COMPET Dear Mr. Mashes
Permit me to - Behalf of the
Secretary. the receipt of your letter of January 2.
19th. enclosing your compliation for the work ented
December 24. 1940. aboving dollar disturements out
of the British Repire and French - at this
Federal Secure Bank and the I w which those
compositives were finance.
Faithfully yours.
R. Herlo Continue
Technical Assistant to the Secretary
S.V. I Require.
Ties President.
Federal Secure Book of New York,
New York, New York.
copy for bey i sited
321
FEDERAL RESERVE BANK
OF NEW YORK
January 2, 1941.
CONFIDENTIAL
Dear Mr. Secretary: Attention: Mr. H. Merle Cochran
I am enclosing herewith our compilation for the
week ended December 24, 1940, showing dollar disbursements
out of the British Empire and French accounts at this bank
and the means by which these expenditures were financed.
Faithfully yours,
L. F. Knoke,
Vice President.
Honorable Henry Morgenthan, Jr.,
Secretary of the Treasury,
Washington, D. C.
e
Enclosures
Mr.
INSURANCE
well
3803
322
ANALYSIS OF BRITISH AND FRENCH ACCOUNTS
(In Millions of Dollars)
1939
31 Sept.27
1
Sept.28 Nov.
Nov. 29
No. 30 Jan. 3
40
Jan. 4-31
Feb. - 28
Feb. 29 Apr. 3
Apr. 4 May
1
May 2-29
May 30 July 3
July 5-31
in 1 - 28
First year of war
aug. 29 Ost.
2
Oct. 3 30
Oct. 31 Nov. 27
Debits
Total
Credits
Other
Gold
94.3
3.6
90.7
207.8
185.4
106.7
5.8
100.9
3.2
191.7
97.7
8.9
8.7
182.8
89.0
142.0
105.8
54.8
124.2
115.5
113.4
100.9
283.2
249.7
261.1
1793.2
16.8
15.4
14.5
38.0
108.8
101.0
26.1
23.6
145.3
156.7
180.2
605.6
87.3
77.3
137.9
93.0
80.9
1,187.6
316.8
244.3
72.5
196.7
241.0
167.8
201.1
28.9
39.9
75.2
43.4
103.3
94.0
86.4
126.2
319.3
225.0
294.8
828.2
308.9
198.5
259.5
Other
Credits
Securities (insl.
(Est.) (b)
adj'ts)
33.6
52.6
Net Inor.
(+) or
Dear. (-)
in Balance
+113.5
-11.2(d)
CREDITS
Net Intr.
Total
Debits
+ 35.3
88.6
85.9
-22.5
86.8
Proceeds
Gov't
Expendi-
Other
tures(s)
78.6
(+) OF
of Gold
Other
Debits
Credits
Sales
Credits
in Balance
13.4
11.3
11.3
- 8.1
76.2
35.0
41.2
12.4
82.9
55.1
93.9
27.8
. 4.3
51.8
105.4
28.1
58.7
109.2
31.5
32.8
35.9
29.4
57.0
30.0
39.9
55.9
71.5
105.0
78.7
145.4
-
57.8
50.6
25.0
23.0
14.2
10.4
20.6
56.7
60.9
46.8
17.8
17.9
21.5
13.4
93.2
7.1
25.9
301.8
212.2
267.4
356.1
271.5
160.5
210.0
5.1
12.9
36.1
156.7(1)
127.3(1)
2.0
10.3
- 24.7
7.3
1.0
26.4(1)
+ 33.7
+ 35.0
8.9
6.3
0.5
8.4
3.2
10.9
666.3
$16.6
449.7
1,99.3
900.2
195.1
8.6
4.4
4.2
1.3
0.5
0.8
0.3
0.1
0.2
0.5
0.7
0.7
211.2
- 11.4
15.9
21.5
27.0
25.3
5.0(f)
33.7
11.6(E)
26.2(h)
260.9
- 7.9
6.0
31.4(k)
32.0(1)
18.0
31.5(m)
+ 18.5
2.0
7.0
9.1
7.0
-31.9
6.0
+ 1.8
61.5
72.7
99.6
84.8
101.4.
Detr. (-)
Total
6.0
19.4
85.2(e)
+
tures(a)
Proceeds of
Sales of
Susfidential
PRACE
OF
DEBITS
CREDITS
Strictly
Doe. 24, 1940.
63.7
55.4
44.4
29.4
345.1(1)
1,0
15.3
50.1
5.8
54.8
75.4
16.7
9.6
. 22.4
5.6
-
1.2
-
3.4
-
Total
Debits
PERIOD
Gov't
Expendi-
BANK
BANK OF ENGLAND (BRITISH GOVERNMENT)
)
DEBITS
Week Ended
- 6.1
60.7
18.0
126.2
335.6
19.2
3.0
0.3
+168.4
4.1
10.4
0.5
2.0
1.3
-
44.0
9.5(1)
-209.0
-
7.3
0.5
-
0.7
- 0.1
-
0.3
-
0.1
-0.3
-1.2
-
Nov. 28 Dec. 31
HERE ENDED
Dec. 4
42.3
31.7
10.6
11
42.4
5.4
18
47.8
39.6
36.1
3.5
24
54.8
50.1
4.7
10.4
14.4
71.2
1.4
1.3
60.2
27.5(n) 0.2
Average eekly Expenditures Since Outbreak
of War
$19.6 million
(through June 19)
4.0
4.0
8.0
-33.4
+31.6
19.3(n)
0.6
1.3
0.2
-27.3
-
(through June 19)
England (since June 19)
0.3
-
1.3
-
0.2
0.1
0.1
0.1
-
(o)
Transfers from British Purchasing Commission to
Bank of Canada for French Account
million
eek ended Dec. 24
million
110.5
Cumulation from July
6
27.6 million
58.2 million
0.6
-
-
-
-
0.1
0.1
-01
0.1
(See footnotes a reverse side)
(a) Includes payments for account of British Purchasing Commission, British Air Ministry, British Supply Board, Ministry of Supply Timber
Control, and Ministry of Shipping.
(b)
Through June 19, these figures represent total sales of American securities in Second District reported for assdunt of the Unitedweek
Kingdrm.
(Proceeds of these sales, however, may not have been credited to the Bank of England's account in all cases.) Beginning with the ended
June 26, the figures represent transfers from the Bank of Montreal, New York Agency, which is custodian for requisitioned American securities
held in this country. The transfers apparently reflect proceeds of official security sales, including those handled through private deals.
From June 17 to July 19, transactions in securities payable in specified foreign currencies, including dollars, by United Kingdom residents
were prohibited.
(e) Includes payments for account of French Air Commission and French Purchasing Commission.
(d) Includes adjustment for (b) above.
(e) About $85 million transferred from accounts of British authorized banks with New York banks.
About $11 million transferred from accounts of British authorized banks with New York banks.
(f)
(g) About $8 million transferred from accounts of British authorized banks with New York banks.
(h) About $10 million transferred from accounts of British authorized banks with New York banks.
(i) Adjusted to eliminate the effect of $20 million paid out on June 26 and returned the following day:
(1) About $2 million transferred from accounts of British authorized banks with New York banks.
(k) About $2 million transferred from accounts of British authorized banks with New York banks.
About $4 million transferred from accounts of British authorized banks with New York banks.
(=) About $6 million transferred from accounts of British authorized banks with New York banks.
(1)
(n) Adjusted to include $6 million received on December 24, but not-actually credited until December 26
(o) About $12 million transferred from accounts of British authorized banks with New York banks.
ANALYSIS OF CANADIAN AND AUSTRALIAN ACCOUNTS
(In Millions of Dollars)
BANK
DEBITS
OF
Transfers
to
Total
Debits
Official
British
Other
Debits
Total
Credits
A/C
PERIOD
CANADA
CREDITS
Strictly
Confidential
COMMONWEALTH BANK OF AUSTRALIA
DEBITS
Proceeds Transfers from Official
of
British A/C
Gold
Week Ended Doe. 24, 1940.
Net Inor.
(+) or
Credits Dear. (-)
Other
CREDITS
Transfers
For Own
For French
Sales
A/C
A/C
15.1
7.3
0.8
-
5.9
4.3
-
7.3
+ 7.1
1.1
6.5
4.5
-
7.2
2.5
2.2
6.1
in Balance
Official
British
Net Inor
Proceeds
to
Total
Debits
Other
Debits
Total
Credits
of
Gold
Other
Credits
in Balance
Sales
A/C
(+) or
Dear. (-)
1939
17.5
1
2 - 29
30 Jan.
9.6
9.9
3
0.6
0.3
0.7
30.0
-
23.5
-
16.9
21.8
9.3
16.7
9.2
14.4
22.8
13.3
15.3
25.7
17.0
29.5
42.9
50.2
30.0
2.1
-
-
3.0
-
21.1
-
-
4.6
16.1
-
-
0.9
-
-
-
-
-
31 Sept. 27
0.28 Nov.
-
-
-
-
-
-
-
-
-
1.9
1.9
-
2.5
5.8
5.8
-
-
-
-
+1.9
+3.3
-
-
1940
31
1 28
29 Apr.
4 May
23.1
3
1
2 - 29
30 July
4- 31
1- 26
first year of war
2.
42.3
-
38.2
-
37.9
3
29 Oct. 2
3 - 30
it. 31 Nov. 27
v. 28 Dec. 31
23.5
23.2
15.0
44.1
28.2
18.7
523.0
44.3
26.7
35.2
23.1
42.3
-
37.9
44.1
-
28.2
-
18.7
-
306.4
44.3
26.7
16.6
-
-
35.2
-
72.5
117.6
73.6
504.7
43.9
28.6
69.6
29.3
24.8
50.0
72.2
96.3
53.9
412.7
16.4
14.0
49.2
15.0
0.2
3.1
-
-
-
-
-
20.9
-
-
4.7
12.3
+ 28.4
+ 89.4
+ 54.9
0.3
4.9
3.3
3.0
0.3
0.1
3.2
2.4
2.2
2.7
2.2
1.6
0.2
0.6
2.3
2.0
2.6
1.8
1.7
0.9
5.9
4.4
1.5
4.2
0.8
3.4
30.0
1.6
6.1
6.7
6.5
1.4
2.1
1.5
2.3
4.6
0.3
0.2
-
27.3
14.3
32.4
0.2
0.3
- 0.4
8.7
2.5
6.2
1.9
10.1
2.6
7.9
16.7
3.7
+ 34.4
31
7.5
0.6
19.5
38.7
2.1
0.2
-
+181.7
6.8
31.2
3-9
3.8
27.3
3.0
DOX ENDED
Dec. 4
10.8
11
5.4
18
24
11.0
7.1
-
-
-
-
21.4
21.4
14.4
10.4
5.8
11.0
10.3
-
7.1
12.4
3.4
-
10.8
5.4
teelly Average of Total Debits Since Outbreak of War
Through Dec. 24
$ 6.7
million
-
-
1.0
2.3
4.6
5.0
5.0
36.1
8.0
19.2
-
-
0.2
0.3
12.8
5.2
3.3
3.0
2.3
1.2
-
-
4.5
4.1
0.1
-
8.9
0.1
+10.6
+90
0.8
0.8
+5.3
1.7
0.1
0.6
2.5
3.6
as
0.1
0.8
03
-
1.1
6.0
4.7
-
0.1
03
0.1
-
-
0.2
1.3
-
0.1
-
0.3
1.3
0.2
-1.9
-0.9
-0.8
-0.3
+1.4
+3.6
+0.4
-1.8
+4.9
-0.7
-2.2
+05
-07
-05
*4.3
+ 02
I
323
FEDERAL RESERVE BANK OF NEW YORK
January 2, 1941
CONFIDENTIAL
Dear Mr. Secretary: Attention: Mr. H. Merle Cochran
I an enclosing herewith our compilation for
the week ended December 24, 1940, showing dollar disburse-
ments out of the British Empire and French accounts at
this bank and the means by which these expenditures were
financed.
Faithfully yours,
(Signed) L. W. Knoke
L. W. Knoke,
Vice President.
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury.
Washington, D. C.
Enclosures
COPY:lap
ANALYDIU
MOTTONorAND
ACCOUNTS
In Millione
Dollars)
PERIOD
turea(a)
1939
1
Aug, 31 Sept.27
Sept.28 Nov.
Nov. 2 - 29
Nov. 30 June 3
1940
Jan. 4 - 31
94.3
3.6
106.7
1..8
191.7
97.7
H.5
54.11
Feb. 1 PH
Feb. 29 Apr. 3
Other
Inhita
Credits
90.7
100.9
207.15
148.0
Gold
185.4
3.:
(mt.) (b)
33.6
52.6
105.6
57.8
16.0
8.7
1⑆.8
19.0
7:00:
50.6
14.H
16.
38.0
43.4
:0.6
15.4
108.11
100.3
56.7
17.8
17.9
14.5
101.0
94.0
60.9
HI.
26.1
177.3
116.4
4⑆.11
13.4
100.9
23.6
99.3
126.8
93.1
7.1
May 30 July 3
203.1
137.0
310.3
301.8
n.1
93.0
8.0
261.1
280.0
894.0
BIG.B
Aug. 10
140.3
100.7
100.2
666.6
189.6
244.3
167.8
201.1
72.5
E0.9
300.0
871.0
6.0
190.0
160.0
39.9
259.5
210.0
10.4
14,4
71.2
I
May 2 - 29
July D - 31
First year ut wir
Aug. EP Ost.
Oct. B - 30
Oct. 31 - Nov. 27
Nov. 20 Dec. 31
249.7
1993.8
316.0
196.7
241.0
WIKE ENDED
Dec.
11
18
24
42.3
47.8
39.6
54.8
100.0
31.7
10.6
42.4
36.1
5.4
50.1
3.5
4.7
Net Inor.
(+) or
nd ''tn)
in Balanco
-11.2(d)
RS.2(a)
23.0
113.5
35.3
85.9
22.5
10.4
Total
Debits
Gov't
Expendi-
tures(-)
19.4
88.6
51.8
58.1
50.7
31.5
30.0
33.7
11.6(g)
81.5
17.0
26.3
114.11
29.4
101.4
57.0
36.1
(no.7(1)
7.3
1.0
n.u
0.5
11.4
116.6
419.7
4.0
31.4(k)
7.9
0.6
4.4
6.0
18.0
32.0(1)
1.8
0.5
0.3
31.5(m)
18.5
0.8
0.1
1.4
2.0
7.0
1.3
4.0
4.0
9.1
7.0
+31.6
8.0
19.3
-27.3
60.2
-31.9
-33.4
(8)
44.4
41.4
19.4
G.3
66.5
.856.1
65.7
127331
33.7
36.0
160.9
39.9
38.H
35.9
20.1(J)
1.
211.5
105.4
HG.R
14.7
567.3
13.4
Total
of Gold
Other
Credit
Calon
Credits
THE
34.0
76.
US
61.5
78.7
99.6
10.9
12.9
Debit:
70.6
11.4
15.9
:.((o(f)
0.2
0.7
109.:
H.1
12.4
17.1
4.3
15.3
50.1
1.11
71.1
10:40
16.7
9.6
5.4
6.1
741.7
60.7
145.4
126.1
ID.:
34fl. 1(1)
3.2
335.6
10.9
30
10.4
POO.E
1.5
1.3
0.2
0.1
44.0
11014
0.1
0.0
120.
4.1
6.0
HLP.O
9.3
0.0
0.7
0.1
0.1
p.n(1)
1.3
U.D
0.3
0.6
75.4
1140
0.6
Cumulation ended Dec. From July 24 6
93.9
in Balance
11.3
54.0
1.3
0.2
Transfera from British Purchasing Commission to
K.
Dear. (-)
41.
517.9
0.6
Bank of Canada for French Account
(Q) M
Prv seeds
Other
6.0
10.1
27.5(* 0.2
Average lookly Exponditurep Since Outbreak
of Unr
$19.6 mi'llon
France (through June 10)
27.6 million
England (through June 19)
58.2 million
Ergland (since June 19)
Credits
Securities (inal. Dear. (-)
Total
124.0
115.5
113.4
Apr. 4 - May
DEBITS
Other
Proceeds of
Sales of
FRAICE
CREDITB
OF
-
0.7
0.3
-
... DIE
Gov't
Expendi-
BANK
GOVERNMENT
DEBIT
Total
Debita
Week Parted Des. 24, 1940.
-
-
0.1
- 0.3
0.1
0.1
-1.2
0.1
0.1
0.1
(See footnotes 16 reverse side)
Billion
(a) Includes payments for account of Brissiah Purchasing Commission, British Air Ministry, Britinh Dupply Board, Ministry or Supply Timber
Control, and Ministry of Shipping
(b)
week ended
June 19, these figures represent total sales of American securities in Second District reported for account of the United Kingdom.
(Proceeds of these sales, however, may not have been credited to the Bank of England's account in all cases.) Beginning with the
June 26, the figures represent transfers from the Bank of Montreal, Now York Agency, which in oustodian for requisitioned American securities
Through
held in this country. The transfer apparently reflect proceeda of official security sales, including those handled through private deals.
From June 17 to July 19, transactions in securities payable in spocified including dollars, by United Kingdom residents
(o)
were prohibited.
Includen payments for account or French Air Commission and French Purchasing Complianion.
(d) Includes adjustment for (b) above.
About BEC million transferred from accounts of British authorized bank with New York banks.
(e)
(r) About 811 million transferred free accounts IT British authorized bankn with Now York banks.
(g) About BE million transferred from accounts of British authorized banks with New York banks.
(h) About $10 million transferred from accounts of British authorized banka with Now York banks.
(1) Adjusted to eliminate the effect of $20 million paid'out on Jinne 26 and returned the following day
(j) About $2 million transferred from accounts of British authorized bank with New York banks.
(k) About $2 million transferred from accounts of British authorized banks with New York bank .
(1) About $4 million transferred from accounts of British authorized bank with New York bankd.
(m) About 06 million transferred from accounto of British authorized banks with New York banka.
(n) Adjusted to include 86 million received on December 24, but not-actually credited until December 26
(o) About 812 million transferred from accounts of British authorized banks with New York banks.
ANALYSIS OZ GANADIAN AND AUSTRALIAN ACCOUNTS
Week Ended Dec. 24, 1940.
Tillions of
Transfers
to
Official
Debits British
Total
1939
17.5
9.6
1
Aug. 31 - Dept. 27
Sept.28 - Nov.
0.6
0.3
Sales
A/C
A/C
5.9
4.3
9.3
2.1
-
7.3
7.1
-
-
1.1
4.0
-
-
6.5
7.2
P.5
-
4.6
2.2
6.1
5.2
Jan. 4 - 31
23.5
25.7
17.0
21.1
16.1
Feb. 29 - Apr.
23.1
42.3
23.5
23.1
42.3
29.5
29.3
1
Apr. 4 - May
3
May 2 - 29
May 30 - July
3
July 4 - 31
Aug. 1 - 1 26
First year of war
Aug. 29 Oot.
Oot. 3 - 30
Oct. 31 - Nov. 22
Nov. 28 - Doo. 31
WIKK ENIED
38.2
37.9
44.1
20.2
18.7
23.2
42.9
24.8
37.9
50.2
50.0
72.2
44.1
72.5
26.7
28.2
18.7
306.4
44.3
26.7
117.6
35.2
35.2
69.6
523.0
16.6
44.3
Dee. 4
10.
II
304
18
24
15.0
10.8
73.6
96.3
53.9
504.7
412.7
43,9
16.4
28.6
14.0
49.2
21.4
-
-
0.9
-
0.2
-
15.0
-
3.1
-
0.2
19.2
5.1
19.5
38.7
0.2
54.9
0.3
-
20.9
27.3
14.3
16.1
5.8
4.5
11.0
11.0
10.4
10.2
0.1
1.1
101
12.4
380
8.9
million
32.4
0.2
0.3
3.7
Debits
Total
Credits
3.3
3.0
of
Gold
Sales
2.5
Other
1.9
1.9
1.9
5.8
5.8
3.3
4.9
3.3
3.0
0.3
0.1
3.2
E.P
0.2
0.3
2.7
2.4
2.2
2.0
1.6
0.6
0.8
0.2
0.3
1.4
943
2.6
2.3
5.9
4.4
0.9
1.5
4.6
4.6
4,2
0.8
6.8
3.4
2.3
0.2
1.0
3.0
18
5.0
5.0
36.1
30.0
1.6
6.1
3-9
27.3
8.7
2.5
6.2
U.O
6.7
1.3
1.9
10.1
7.5
2.6
7.9
1,4
34.4
31
0.6
2.5
6.5
2.1
181.7
0.4
31.8
3.6
1.5.
+10.6
O. I
0.8
0.1
0.1
4.1
O.B
0.8
0.3
6.0
0.3
0.1
(35)
1.1
1.9
0.3
1.8
1.7
2.3
1.2
(+) or
Credits Deor. (-)
in Balance
+9.9
21.4
14.4
0 6.7
12.8
4,7
12.3
28.1
89.4
504
Heekly Average of Total Debits Since Outbreak of War
Through Ded. 24
3.0
Other
A/C
7.3
15.3
Feb. 1-28
British
16.7
22.8
1940
in Balance
-
30.0
3
Credits Dear. (-) Debits
official
0.8
30.0
Nov. 30 - Jan.
Total
15.1
13.3
0.7
Proopeds
to
21.8
14.4
9.9
Other
Net Inor,
(+) or
16.9
9.2
Nov. 2 - 29
Transfers
Proceeds Transfers from Official
of
British A/C
Total
Other
Own Fer French
For
Gold
Credits
Debite
A/C
PERIOD
COMMON BAN ADDREALTY
DESIGN
UNITED
DEBI
strictly
Confidential
0.9
3.6
0.4
-1.8
4.9
-0.7
-2,2
t.as.
- al
:TEI
.005
327
January 3, 1941
MEMORANDUM FOR THE SECRETARY:
Attached is a summary report of the projects
which have been worked on in the Division of Tax
Research during December, 1940.
RB
Attachment
Monthly Report on Projects in the
328
Division of Tax Research
December, 1940
I. New projects
1. Tax-exempt securities
Tables were prepared showing the amount
of tax-exempt securities of the U. S.
Government and Federal agencies outstand-
ing at the close of selected fiscal years
1913-1940, together with the net changes
in such amounts. A list of the principal
State and local officials appearing before
congressional committees in opposition to
the proposal to discontinue the issuance
of tax-exempt securities was also prepared.
Under direction of the Committee appointed
by Mr. Sullivan, sample cases were outlined
for Mr. Walker Stone of the Scrippe-Howard
newspapers to show the tax advantage result-
ing from the exemption of interest on
governmental securities.
(Mr. Ecker-Racz and staff members)*
#
Persons listed as working on the different projects
do not include those who acted largely or exclusive-
ly in a consulting or reviewing capacity. In general,
the person, if any, actively in charge of the project
1s listed first.
329
-2 2. Survey
of published corporation tax items
and articles
For the week beginning December 1, 1940,
the leading New York newspapers were inspected each day, and brief comment on items
for the attention of the Secretary was pre-
pared. Thos. P. Swift's article "Tax Rise
Wipes out Gains by Utilities' and Kenneth L.
Austin's article "Chemical Trade Feels Tax
Burden", both appearing in the Financial
Section of the New York Times of December 1,
1940, were critically reviewed, as was also
the National Industrial Conference Board's
study on corporation profits and taxes.
(Mesers. Atlas and Copeland)
3. Tax data for 1920 and 1940
Tables requested by Mr. Frank King of the
Office of Press Relations, covering certain
data on taxes during 1920 and 1940, were
prepared. (Mesers. Gordon and Zorach)
4. The averaging device
The suggestion outlined in Mr. Surrey's
memorandum of November 30, 1940, entitled
"Suggested Averaging Device under the
Income Tax" were examined. (Mr. Atlas)
330
- -3 -
II. Continuing projects
1. Tax-exempt securities
Drafts of four radio addresses on the subject
of tax-exempt securities were revised to give
effect to Mr. Sullivan's comment.
(Mr. Ecker-Racz)
2. Relief provisions of the excess profits tax
The study of how certain abnormalities in
income and invested capital which may cause
inequities should be treated under the relief
provisions of the excess profits tax was continued. (Messrs. Blough, Shere and Campbell)
3. Article for Treasury Bulletin
A first draft of an article on individual
income tax returns for 1936 classified by
state of filing and by state of residence
was prepared for possible publication in the
Treasury Bulletin (Miss Coyle and Mr. Zorach)
4. The war and excess profits taxation
(a) Materials to serve as basis for a memorandum analyzing the problems involved
in imposing an excess profits tax on
individual proprietorships and partnerships
331
and on non-business incomes of
individuals were prepared.
(Mr. Farioletti and Mr. Mills)
(b) An analysis of special treatment
afforded financial, personal service
and public utility companies, the
professions and agriculture under the
World War and present excess profits
taxes of the United States, Great
Britain, and Canada, is in process.
(Mr. Mills)
(c) Other phases of the issues involved
in war and excess profits taxation,
including studies of amortization
and inventory problems, analysis
of statistical information relating
to business profits and failures,
and consideration of methods of
possible tax avoidance under the
Excess Profits Tax Act of 1940,
are continuing.
(Staff members)
332
-5 5. Tax-exempt securities outstanding
An estimate of outstanding tax-exempt
securities as of June 30, 1940, was com-
pleted and put in form for publication in
the Secretary's Annual Report.
(Mr. Mannen)
6. Income Tax Study--..V.P.A.
The work of the Philadelphia project has
been divided in the last six months between
continuance of the study of income tax returns
in process since October 1938 and a special
analysis of statistics relevant to excess
profits taxes. These studies are now in
final stages of completion. A study of investment practices as reflected in estate
tax returns is also in process.
(Mr. Blough, Mr. Shere, and Miss Coyle)
7. Fluctuations of large incomes
An analysis of statistical data relating to
the fluctuations of large incomes over a
period of years is in process. In this connection, the publication "Million Dollar
Incomes* by L. H. Parker will be reviewed.
(Miss Coyle)
333
-68. Federal sales taxes
A memorandum on a value added and other
possible forms of Federal sales taxes 18
in preparation. (Mr. Farioletti)
9. Foreign taxes
(a) A memorandum on the latest changes in
British income, excess profits and other
taxes was completed. Similar memoranda
on Canadian and Australian taxes are in
preparation. (Mr. Atlas and Miss Hughes)
(b) In collaboration with the Division of
Monetary Research, a study of the Haitian
fiscal system is in process. (Miss Wells)
10. Articles
(a) An article entitled "Problems of Federal
Tax Administration" for the March 1940
issue of the Annals of the American Academy
of Political and Social Science was completed.
(Mr. Blough, Mr. Ecker-Racz, and Mr. Campbell)
(b) Articles treating on trends and developments
in the field of taxation during 1940 for
the Britannica Book of the Year and the
National Year Book were completed. (Mr.
Atlas and Miss Wells)
334
-711. Treatment of shared taxes in Bureau of the
Census Reports
In compliance with the request from the Bureau
of the Census, a memorandum containing sugges-
tions as to the treatment of shared taxes in
Bureau of the Census reports 18 in preparation.
(Mr. Mannen and Miss Wells)
12. Inventory of tax proposals
Compilations of proposals for raising add1tional revenue and for improving the tax
system have been prepared and are pending
review. (Mr. Zorach and Mr. Copeland)
13. Undistributed profits, income, estate taxation
Reports on the following subjects have not
been actively prosecuted during the month:
(1) Analysis in the light of issues raised
by the undistributed profits tax of the
statistics made available from income
tax returns and other sources.
(Mr. Atlas and Mr. Copeland)
(2) Analysis of the proposal to allow corporations with five or less shareholders to be
treated for tax purposes as partnerships.
(Mr. Mills)
-8-
335
III. Routine assignments
1. Review of publications
(a) The following publications were reviewed
during the month:
(1) Galley and page proof for various
sections of the Secretary's Annual
Report. (Messrs. Mannen and Zorach,
and Miss Hughes)
(b) The following publications are in process
of being reviewed:
(1) The estate and gift tax sections of
Statistics of Income for 1938, Part I.
(Miss Coyle and Mr. Mills)
(2) The report "Concentration and Composition
of Individual Incomes 1918-1937" prepared
by the T.N.E.C. (Miss Coyle)
(3) The report "Study of the Delaware State
Income Tax Yields" by Walter C. Wilson.
(Miss Coyle. )
2. Statistics
(a) In connection with the supervision of
the statistical work of the Bureau of
Internal Revenue, various proposals for
336
-9statistical compilations were examined
including suggested early tabulations
from the corporation income and excess
profits tax returns. (Measrs. Blough
and Shere)
(b) Suggested tabulations showing the relationship between size of gross estate and size
of decedent's income, and comparing holdings
of tax-exempt securities as reported in
income tax and in estate tax returns, were
submitted to the Clearing Division of the
Bureau of Internal Revenue for comment.
(c) Administrative reports and statistics of
the Bureau of Internal Revenue are graphed
and commented upon for Mr. Sullivan's
information. (Mr. Campbell)
(d) Data relating to different taxes, digests
of tax items, and congressional activity
of tax items of interest to the Division
are currently prepared. (Staff members)
3. Correspondence
The Division handled correspondence pertaining
to tax matters. (Staff members)
337
January 3, 1941
My dear Mr. President:
I am sending you herewith three clippings which
bear out my "hunch" that the so-called Eccles plan is
really a fight over interest rates.
Clipping No. 1, from today's Tribune, prints
the following:
"National City Bank of New York says,
in its current monthly letter, that such
a move would be beneficial in three prin-
cipal ways as follows: It would relieve
the pressure upon interest rates,
Clipping No. 2 from the financial page of today's
New York Times says:
"The market for United States Government bonds appeared yesterday to exagger-
ate the possibilities of sharply firmer
interest rates as a result of the proposals
for further control over bank-reserve
requirements submitted by the Federal
Reserve Board,
Clipping No. 3 from today's Washington Post
says:
"Obviously if such appeals are to
bring results, a higher rate of interest
will have to be paid by the Government
for borrowed funds.
Yours sincerely,
(Signed) H. Morganthan, Jr.
The President,
The White House.
Enclosures.
Taken by Secret Service Mr. Rawn
to Head Usher at 10:45
338
January 3, 1941
My dear Mr. President:
I am sending you herewith three clippings which
bear out my "hunch" that the so-called Eccles' plan is
really a fight over interest rates.
Clipping No. 1, from today's Tribune, prints
the following:
"National City Bank of New York says,
in its current monthly letter, that such
a move would be beneficial in three prin-
cipal ways as follows: It would relieve
the pressure upon interest rates,
Clipping No. 2 from the financial page of today's
New York Times says:
"The market for United States Government bonds appeared yesterday to exagger-
ate the possibilities of sharply firmer
interest rates as a result of the proposals
for further control over bank-reserve
requirements submitted by the Federal
Reserve Board,
Clipping No. 8 from today's Washington Post
says:
"Obviously if such appeals are to
bring results, a higher rate of interest
will have to be paid by the Government
for borrowed funds.
Yours sincerely,
(Signed)
Jr.
The President,
The White House.
Enclosures.
Taken by Secret Service Mr. Baum
to Head Usher at 10:45
.
339
JAN 3
.
NEX YORK HERALD TRIBUNE
Eccles's Plan
To Cut Excess
Funds Praised
In any action upon reserve requirements, the bank says, it is particularly
important to take
surface."
of excess
"On of the the location says use reserves account with
appear that
excess reserves
National City Bank Letter
Cites 3 BeneficialResults
of the Reserve Proposal
York the "it would
City belong
banks
Whileabout to New half
of these
true as
theirreserves is true
it as is tonot
the location
thisto
ultimate
ownership and control
to the
"A reference interbank figures of do-
In an article praising the proposal
of Marriner S. Eccles chairman of
the Federal Reserve Board. for redueing excess reserves. National City
Bank of New York says in its cur-
rent monthly letter that such a
move would be beneficial in three
principal ways. as follows: It would
relieve the pressure upon interest
rates it would enable the Treasury
to place a larger proportion of its
securities with the public and it
would tend to moderate the expan-
sion of bank credit
With much of the Eccles program
as revealed in his speech before the
mestic deposits reported
by the large New York City banks
will show that the
amounts due
chiefly
up to
mately other Institutions-foo banks out-of-town approxi-
$3,800,000,000 or more than
excess reserves
In other
York to the
Newbanks
total York
words accredited New
City
have
over and
sums excess deposited funds little above or the no
here by out-of-
correspondents some
is a normal
ance. of town course. the
Muchsame
working of which bai-
Chicago.
fore. exist in Actually conditions there-
a major part of the excess
serves is owned by the banks in the re-
National Industrial Conference
smaller cities and towns.
of the Federal Reserve System to
Congress on Wednesday there
bank says: The record of 1940 will the
ceeded 1939 by 13 per cent and 1929 ex-
Bank "little reasonable basis for
cent. New all-time peaks per
Board here (and embodied in considerable part in the special report
would seem to be says National City
difference of opinion."
Certainly the silver program has
been a failure." says the article.
"which has proved costly to the
Treasury and added to the prob-
lems created by surplus funds While
the authority to issue $3,000,000,000
greenbacks has never been utilized
its existence on the statute books
is a disturbing element in the background
The proposals as to member
bank reserve requirements are sound
as to the major objective- re-
capture of control of the money
market. The precise character and
timing of steps to reach this objective call of course, for careful
study of all possible consequences
Presumably. any legislation that
might be adopted would place upon
the supervisory authorities the responsibility for basing their action
on just this sert of study: and it
may be fairly assumed that any action would be gradual over a period.
without drastic moves that might
give a shock to the bond market or
impede Treasury financing.
As to the business situation
show that industrial output has
the previous peak year. by 10
in production of
machine
steel made
have irontools,
electrical been and
equipment, aircraft aluminum
ton and rayon goods, rubber prod- coc.
ucts, chemicals and electric
other cases, where the
has not fully
records, as and a whole in equaled power year past
the current rate is at a
high. Shipbuilding has revived new
about 1920 levels. New building to is
the highest in eleven years, and
dustrial and engineering contracts in-
are
two
to three times as large as
a
year
ago."
340
NEW YORK TIMES
TOPICS IN WALL STREET
They're Off!
The first trade on the New York
Stock Exchange this year was 200
shares of Radio Corporation of
America common stock at 4% unchanged from the last price of 1940.
A year ago Coty International
started the ball rolling. From
Gen Motors.
17,700 45% -3%
12,000 10% + %
Param Pict
U Steel 10,400 68 -1%
Socony Vac. 7,800 8%
tion: It was the eleventh most as
tive stock last year, trading 1,944,
300 shares: Coty International
traded 141,000 shares in 1940. Yes
Larday Radio hit 4% and closed at
Curtiss Wright 7,300 916
..
Bald Loo et.
7,200 18%
Cons Edis
Gen Elso
Chrysler
6,300 3316 + %
Loft
6,000 184 + %
7,200 22% - 4
6,200 69% -2%
N x Central
5,400 13% + 14
Stand OIL Cal 5,400 18% + 1/6
Anaconda
5,100 26%
-%
Excess Reserves
Temporary checks on the expansion of excess reserved of member
Beth Steel 4,800 86% -14
banks of the Federal Reserve Bys
Yest'd'y 740 313 262 *14 2
Dec. 31 908 386 286 11 4
Dec. 30 928 487 207 20 4
Average price, $32.25
Ad.
Treasury financing and the holiday
expansion in money in circulation,
are now at an and and the upward
climb of those reserves has been re
sumed. On the basis of figures re
vealed yesterday, excess reserves
for the entire Federal Reserve Sys-
tem jumped $180,000,000 in the
final week of 1940 to a total of
$6,620,000,000. highest since the
week ended on Dec. 11. The rise
mainly reflected the contraction of
$84,000,000 in money in circulation
after the Christmas holiday, a drop
of $118,000,000 in Treasury deposits
with the Reserve banks, and an
increase of $65,000,000 in the mone-
tary gold stock to a total within
$5,000,000 of the record $22,000,000
000 level. The chief-offsets
reduction in the Federal Reserve
"float" of $62,000,000 and an increase of $16,000,000 in nonmember
deposits, presumably mostly forsign deposits. Excess reserves of
the thirty-six Reserve city banks in
the New York Federal Reserve District rose $115,000,000 in the week
to $8,465,000,000.
Treasury Bonds
The market for United States
Government bonds appeared yester-
day to exaggerate the possibilities
of sharply firmer interest rates as
result of the proposals for further
control over bank-reserve require-
Do
Larges
ten. such as the increased Treasury
deposits Incident to the recent new
New
Data
New
rowing by the government in connection with the defense program
as an influence toward stiffer
money rates.
Federal Oil Legislation
With the publication yesterday of
a letter from President Roosevelt
to Chairman Cole of the House Oil
Committee urging Federal oil leg-
Islation in the interest of national
defense, there is little doubt that a
determined effort will be made by
the Administration to obtain a
greater control over the all Industry
at the session of Congress that will
open today. Oil executives generally are of the opinion that no further control of the industry is neces-
sary, since at no time has the industry failed to meet the demands
made upon it. In this connection,
they state that crude oil production
can be increased immediately and
that refining capacity can be increased 25 per cent without new
capital expenditures. In addition,
stocks of oil products in storage
are at or near record levels for this
period of the year. Also they hold
that the industry is in position to
meet all requirements of the de
fanse program which may material-
inc. In anticipation of increased de
mand for aviation fuel, the oil in
dustry last year increased these
stocks by 2,000,000 barrels to around
government bond experts. Despite
manufacture of 100-octane gasoline
support was in evidence at times in
the day as several of the longer
term loans showed declines of more
than a full point. Moderate recoveries lifted prices of most of these
issues before the close of the Exchange, while the recovery move
ment was continued in the over-the
counter market, where the net
losses in the long-term loans were
reduced to between 1/4 and % point.
Although there was comparatively
little selling. most of what did de
velop is understood to have come
6,000,000. At the same time, It installed additional facilities for the
and by March, this year, It will be
in position to turn out 35,000 barrels
daily of this product.
Eallway Wage Rises
Rises in pay for 70,000 track
workers, porters, dining-oar walters, office and other employee to
take effect on March 1 will cost
the railroads $7,000,000. The increases were ordered under the
Fair Labor Standards Law. Most
of the larger disbursements will be
paid by the Southern and Southeastern lines because in the past
they have paid lower wages than
are received by railroad employee
in other parts of the country
Moreover, because of lower wages
paid, these companies have emfrom the smaller out-of-town banks, played
more labor and used fewer
machines,
which view the potential heavy box
you
LOVE
*1940-1941.
ments submitted by the Federal Re
serve Board, in the opinion of some
the exceptionally light turnover in
Treasury issues yesterday on the
New York Stock Exchange, little
-
Net
Volume Close Class
Stand OU J N J 8,700 34% + %
volumn standpoint, Radio appears
to have more right to the rall post-
4%: in 1940 Its range was T16 to 4%
Stock Exchange Leaders
341
The report emphatically calls for
For Control Of, Credit
Washington Post, 1/3/41
(341)
The board of governors of the Federal
Reserve System, the presidents of the
Federal Reserve Banks, and the Federal
Advisory Council have sent to Congress
a joint report containing various important recommendations designed to
strengthen the present inadequate machinery of credit control and remove the
inflationary menace of excess bank
reserves. Congress is urged to increase
existing reserve requirements at once
and to empower the Federal Reserve
authorities to make further increases up
to double the suggested statutory percentages. This proposal would immediately effect a limited reduction in the
huge volume of excess reserves, now in
the neighborhood of $7,000,000,000, and
financing the defense program insofar
as possible by drawing upon existing
deposits instead of by creating additional
deposits through bank purchases of Government securities. In other words, our
fiscal policy must "tie in" with our
monetary policy if inflation is to be
avoided. To the extent that individuals
and nonbanking institutions respond to
an appeal to invest in Government securities, a check to the creation of a new
inflationary kind of purchasing power
will be avoided.
Obviously if such appeals are to bring
results, a higher rate of interest will
have to be paid by the Government for
borrowed funds. That, however, is a
change greatly to be desired as the
present absurdly low rates can no longer
be justified as a stimulus to employment
permit further reductions as occasion
of capital. On the contrary, they have
demands. The report also suggests that
the new reserve requirements be made
Reserve authorities are now ready to
applicable to all banks outside the
Federal Reserve System which accept
demand deposits. Such an extension of
Federal control over State banks would
be a desirable move in the direction of a
more unified banking system.
Besides asking for new powers that
would make it possible to reduce the
existing volume of excess reserves to
manageable proportions, the Federal
Reserve authorities seek abandonment
of certain Administration policies that
are sources of potential increases in
excess reserves, such as the power
further to devalue the dollar, to issue
greenbacks and to monetize foreign
silver acquired by purchase. The Post
enthusiastically indorses the proposed
repeal of these measures which it has
for years opposed as a threat to the
stability of the country's monetary and
credit structure. These recommendations are all the more gratifying because
their far-reaching character indicates
that the Administration must have been
consulted and should be prepared to
support them wholeheartedly.
become a distinct menace, as the Federal
admit. Interest rates in some cases, they
confess, are "well below the reasonable
requirements of an easy money policy
and are raising serious long-term problems for the future well-being of our
charitable and educational institutions,
for the holders of insurance policies and
savings banks accounts, and for the
national economy as a whole." This is
indeed a sweeping indictment which is
especially impressive coming from
officials who wholeheartedly indorsed
low-interest policies during the depression years.
Now that depression has been succeeded by a business upswing that will
undoubtedly call for restraints rather
than stimulation, an about-face is imperative to avert the danger of disastrous
inflation. The country should regard
as most encouraging to have such
forthright acknowledgement of that
danger, and a program for avertin it,
ready for presentation to Congress it
reassembles today.
Paraphrase of Code Radiogram
Received at the War Department
January 3, 1941.
342
London, filed January 3, 1941.
EXTRACT
As
These are the official statistics on conveyed
shipping into Britain,
A total of 48, 810 vessels of all registries
have been brought in. Gross tennage of these vessels amounts
to 165,000,000 tens and cargo capacity to 250,000,000 tons.
A total of 987,000 tons has been lost.
LEE
Distribution,
Secretary of War
State Department
Secretary of Treasury
Asst. Secretary of War
Chief of Staff - 2
War Plans Division
office of Naval Intelligence
CONFIDENTIAL
343
JAN 3" 1941
Dear No. Smiths
Further reference is mile to your letter of December
n. 19to, to Mr. c. Name, is which you point out
that anticipated shipments are short of earlier estimates
because of the failure to obtain elequate deliveries of
magnesium eastings for whichease sections.
I should appreciate 10 very mach if yes would advise
- the reasons for the delay in the delivery of these
eastings, and the applier of such material. will you
please also include in your letter detailed information
concerning the extent to which these delays are interfor-
ing with year production warm.
Sincerely,
(Signed) H Morgonthan Jr.
w.s. Story Smith. President,
Jamabe Assorted Regise Company.
Pottetom,
airmail
565 WH amm
FILE COPY
344
JAN 3" 1941
Dear Mr. Smither
Further reference is sade to your letter of December
n. 1940, to Mr. Sester c. Base, is which you point out
that antisipated chiposate are short of earlier estimates
because of the failure to obtain electrate deliveries of
suggesium eastings for - sections.
I should appreciate 18 very - If you would advise
me the reasons for the dolar in the delivery of these
eastings, and the supplier of such material. will you
please also include in your letter detailed information
concerning the extent to which these delays are intention
ing with year production -
Sincerely,
(Signed) E Jr.
No. 3. Story Smith, President,
Jacobe Mineraft Engine Company.
Pottetown, Pennsylvania.
aimail
345
JAN 3 1941
Dear No. Nurther reference is - to your letter of I
so. 19to, to M. - c. Name, in which you point out
that the other is the reseipt of State has artified
airplase deliveries in recent weeks.
8 should - 10 very - If you would africe
- the - of Claste on add deliveries are Subtot
-
schedule. the explies of these Items, end 28 possible the
- See - delay is delivery. WEEE you please also
instate in - letter Information concerning the extent
to which these delays - interfering with year probution
mom
- ofState.
airplanes that are on
handthe
- for
Sincerely.
(Signed) E
Metalos - Mount Gary..
Connections.
anmail
1565 IA awer FILE COPY
346
JAN 3- 1941
- n Natural
Norther reference is - to your letter of Describe
no. note. to No. - 6. Rase. in which you point out
that the other in the reseign of State has ourtailed
in recent -
8 should appresiate 19 very - as you would atvice
- the - of State - which deliveries are bubine
the supplies of these items, and sr possible the
- for the dalay in calivary. WEEK yes please also
Instate in your letter information committee the extent
to which these delays - interfering with - production
- Influenting the - of airplanes thas are on
- Implete - for State.
Sincerely,
(Signed) E Jr.
max. I
Division United Monroft Gary..
Connections.
airmail
347
JAN 3 1941
Dear Mr. Johnsona
Nurther reference is made to your letter of December
n. 1940, to Mr. Goorge c. Mass, in which 19 is pointed
out that withial delays in the reseipt of F materials
will accountate a revised estimate of deliveries on year
motal 3-172 enloss the situation is improved immediately.
I should appreciate 10 very much is you would advise
me just which you materials are being delayed, the amount
of the materials involved. the applier of such materials,
and as possible the reasons for the delay in delivery.
will you please also include in your letter information
concerning the extent to which those delays are interfering
with your production program.
Sincerely,
(Suggest) Jr.
N.P.O. Johnson, President,
Beeing Miscraft Company.
Station,
Seattle, Washington.
airmail
565 DH
FILE COPY
348
JAN 3 1941
Dear Mr. Johnsons
Further reference is made to your letter of December
n. 1940. to No. Goorge c. Nean, in which ss is pointed
out that critical delays in the reseipt of you materials
will account tate a revised estimate of deliveries on year
motal 3-172 unless the situation is improved immediately.
I should appreciate 18 very much is you would advise
me just which - materials are being delayed, the amount
of the materials involved. the supplier of such materials,
and If possible the reasons for the delay is delivery.
will you please also instate in your letter information
conserving the extent to which these delays are interfering
with your production program.
Sincerely,
(Signed) H Morganthan, Jr.
M.P.S. Johnson, President,
Beeing Mineraft Company.
Georgeterm Station,
Seattle, Machington.
airmail
-
THE WHITE HOUSE
349
O
gaston If any : german
or Italian ship
sails let the
Mary knowing
plenty of time
thin.
-
not out
350
By dear Mr. President:
Do only my the Federal Government can be assured that German and
Italian a vessals immobilized is our ports will be incapable of
causing serious damage to channels, terminale, merchant shipping, or inter
front property generally, is to seins these vessels immidiately end remove
their officers and cross, and I therefore recome that I be empowered to
take this sta. for which I now have legal authority.
There are two German a ships and twenty-eight Italian nor-
elect shipe at present immobilised in our harbors. One German ship is is
Boston barber, and the other at Port Iverglades, Florida. The Italian
shipe are scattered along the Atlantic and Gulf coasts, with the exception
of one Italian ship at Portland, Oragon, one in the Panama Canal Zone, and
are
Puarte Rico.
I - attacking
hereto
theirislocations,
and other
partisent
data.a list of these vessels by name,
All these vessels are under as close surveillance by the Coast Guard
as ear be gives without actually placing guards on board or seising the vessels. Placing guards on board without taking possession of the vessel
would only result, I feel sure, is sabotage, which could not be prevented
as long as officers and crows remained OE board.
As - example, the Italian teaker loaded with lubricating
oil, is immobilised at Port Heart, New Jersey. There is nothing, short of
seisure or maintaining armed guards on board, to prevent this vessel from
getting underway end charging along the waterfront at Bayonne, New Jersey,
where there is the greatest concentration of oil terminals is the world
and, where a serious fire would be a national disaster. While this vessel
Right be moved to a point where the possibility of damage would be less,
only actual seizure would be complete assurance against destructive acts.
A very careful study has been made of the situation presented by
those immobilized vessels, and I therefore recommend that you give instructions to proceed immediately to seise these shipe.
Faithfully yours,
The President,
The White House.
Copy to - The Resorable,
The Secretary of State.
Secretary of the Treasury.
ordnance
WAR DEPARTMENT
mm young has
WASHINGTON
com 351
January 3, 1941
Mr. Philip Young
Treasury Department
Washington, D. C.
Dear Mr. Young:
Yesterday we had & conference relating
to the utilization of the $230,000,000 fund which
we found that we had available in the Ordnance
Department, and the conclusions that we reached
are set forth in the attached memorandum which I
BE sending to you for your information. Similar
arrangements have been made, in consultation with
the British, for the expenditure of the $60,000,000
fund for air ordnance. I think we made real progress.
Sincerely yours,
2.0lln
John J: McCloy,
Special Assistant to
The Secretary of War
1 Encl.
Memo. of conference
352
January 3, 1941
Memorandum of Conference in Mr. MoCloy's Office on
January 2, 1941, at which Mr. Weir, of the British
Purchasing Commission, General Wesson, General Burns,
and Mr. McCloy were present.
As a result of the discussion it was determined that:
1. Out of the $230,000,000 (approximately) available for
ordnance items, in view of the great need of both the United States
and Great Britain for such items, expenditures should first be
made to increase capacity for airplane ordnance and at the same
time place orders for this type of equipment, including suitable
ammunition - i.e., 50- and 30-calibre.
2. In this connection, and as the best means of accomplishing the objectives promptly, the $230,000,000 should first be devoted
to taking over (by cancellation and replacement through new orders)
existing British contracts for this material and increasing those
contracts both as regards facilities and the number of guns and
amounts of ammunition, to jibe with the British aircraft program.
3. As regards the 20 mm. aircraft gun, increased facilities
should be created and orders should be placed by the Ordnance
Department without delay. The gun and ammunition to be produced
will be American type, 20 mm. gun, subject to any changes suggested
by the British to which the American Government agrees. The British
are to supply the Ordnance Department with their requirements for
20 - guns and ammunition.
4. Mr. Weir will undertake to formulate immediately the
British requirements for bombs, flares, signals, etc., for the
aircraft program.
5. The funds available from the cancellation of the British
machine gun and ammunition orders referred to in paragraph 2 above
will be made available for expenditure by the British on such other
orders of the British program as should be cleared up immediately,
and for which those funds are sufficient, with particular emphasis
353
2
-
on the completion of the tank program.
6. Is is recognised that the British ege program, which
is for American non-standard items, will have to be carried out w
the British without any aid from the Ordance Department. Mr. Weir
stated that it seemed that the only funds which would be available
for this purpose would be the proceeds arising from cancellations
of contracts by the British.
7. To the extent that the $230,000,000 was not exhausted
by the above program, the next items upon which expenditure should
be made were heavy ordnance items, particularly the heavy anti-aircraft
guns and field houitsers. Mr. Seir agreed that with part of the cash
that becomes available to his as a result of the Ordnance Department
taking over some of his existing contracts, he will place an order
is this country for 1000 Before 40 - anti-aireraft guns, with
assumition at the rate of 1000 rounds per gun, out of the proceeds
of these cancellations. This order will take priority over other
items, after the task program is completed.
8. All poesible expedition in the completion of the above
outlined progres would be undertaken.
-
FACT
gower
see Hogie what of 354
1-3 where he
gave Presatt
copy
of but
heretol
January 3, 1941.
german
DICRANDIN
TO: Secretary Morgenthan
FROM: Mr. Gaston
wh
The President's Proclamation of June 27, 1940, based on Section 1
of Title II of the Espionage Act of 1917, gives you authority: (1) to
place guards on any vessel, foreign or domestic; (2) to take possession
of any vessel and remove the crew. The latter authority, to take fill
possession and control and to remore the crew, can be exercised only
by and with the consent of the President."
Placing guards on the German and Italian vessels would assure as
that the vessels would not be taken out of port without our permission and
would assure us against the vessel being put in motion in the harbor in
such a way as to cause damage. It would not give us full insurance against
determined afforts at sabotage to the vessal and might not prevent a determined attempt to sink the vessel by some means. We have to consider too
that the presence of guards aboard might possibly incita the very acts of
sabotage which we wish to prevent.
Seisure of the vessels and reneral of the crews would, after it had
been accomplished, give us complete protection against any damage to the
ships themselves, to other vessels, or to the harbors in which the ships
are located. It is possible that acts of sabotage might be committed
while we were in the process of seising the vessels. The only protection
against this would be the element of surprise and determined and effective
action by the rien sent aboard. The seizure of the vessels would probably
raise serious questions of international law and International relations
and night conceivably stimulate acts of sabotage to other property than
ships. Seizure and removal of the crews would, of course, raise the two
problems of the cost of maintaining the ships under seisure and of caring
for the crews.
In so far as the Coast Guard personnel required is concerned, the
seisure of the ships and removal of the crews would be the less expensive
of the two devices. To guard the vessels adequately without removing the
crews we should need not less than six men, including a petty officer,
on each ship at all times and three shifts, saking a total of eighteen men
for each ship. This sould be the least number advisable and for the thirty
ships would require a force of 540 INC. Under complete seisure we would
anchor the ships in groups, with shipkeepers aboard for a group of ships,
and me would need probably not more than a fourth as many man.
355
January 3, 1941.
for the Files
The attached two drafts of a letter prepared at the Secre-
tary's instruction but not sent.
Following a conference with Admiral Waesche, Commander Derby,
Captain Koester from Berfelk, and Coast Guard officers from New
York and Philadelphia, yesterday, I explained to the Secretary
that while versure taking all possible precautions within our power
against the eccept of German and Italian ships, as well as French,
we could not shealstaly guarantee, particularly as to the five
Italian shipe at Berfalk, that they would not slip out some dark
night and that of course sabotage could be committed aboard any of
the ships. The Secretary was greatly concerned about our respon-
sibility and asked - to prepare a letter from him to the President
recommending that we be permitted to place men aboard and (as I
understood it) formally take possession of all these ships. No
asked also for a list of all the German and Italian vessels and
their locations.
I told him that I was opposed to seising the ships at this
time, but said I would have the letter and memorandum prepared.
I at once called Admiral Manache and he agreed to get up the register and draft of letter, which he would get to me the first thing
in the marning. I made some minor changes and presented the draft
to the Secretary at the 9:30 meeting, saying that I still thought
it was weise to de this. There was some discussion, after which
the Secretary asked that Weeeche come over at 11:30 so that the
Secretary could get his views. Waesche's views were identical with
sine, as expressed in the attached amorandum to the Secretary.
The Secretary said be would not take either of the alternate drafts
of the letters attached, but would take only the amorandum as to
the names and positions of the shipe and would lay the problem be
fore the Cabinet. On his return from the Cabinet, he had to rush
to make a train and sent - only the attached a telling
- to notify the Bary as seen as possible if any German or Italian
ships should sail.
1-3-41
356
My dear Mr. President:
The only way the Federal Government can be assured that Connea and
Italian merchant vessels immobilized in our ports will be incapable of
causing serious damage to channels, terminals, market shipping. or vatesfront property generally, is to seise these vessels immediately and remove
their officers and arous, end I therefore recommend that I be empowered to
take this step, for which I now have legal authority.
There are two German merchant shipe and twenty-eight Italian norchant shipe at present immobilised in our harbore. One German ship is in
Boston harbor, and the other at Port Everglades, Florida. The Italian
shipe are seattered along the Atlantic and Gulf coasts, with the exception
of one Italian ship at Portland, Oregon, one in the Peness Canal Zone, and
one is Puerto Rico. I - 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 seising 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 crows remained on board.
As as example, the Italian tanker BRENKERO, loaded with lubricating
oil, is immobilised at Port Newark, New Jersey. There is nothing, short of
seisure 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 concentration of oil terminals is the world
and, where a serious fire would be a national disester. While this vessel
night be moved to a point where the possibility of damage would be less,
only actual seisure would be complete assurance against destructive asts.
A very careful study has been made of the situation presented by
these immobilised vessels, and I therefore recommend that you give no
instructions to proceed immediately to seise these ships.
Faithfully yours,
Secretary of the Treasury.
The President,
The White House.
Copy to - The Honorable,
The Secretary of State.
357
Ny dear Mr. President:
Recent published reports that this Government is contemplating the
seisure and acquisition of foreign ships immobilised in our parts give
reason for the fear that serious acts of damage may be committed by the
Masters and crews of German and Italian vessels, either to the vessels
themselves or to our channels, terminals, merchant shipping, or water-
front property generally.
Under your Proclamation of June 27, 1940, putting into effect the
provisions of Section 1 of Title II of the Espionage Act, we have authority to place armed guards aboard these vessels, or even to take full
possession of the vessels putting our own crews aboard and removing the
present Masters and crows. I recommend that you authorise me immediately
to take the first step, that is, to put armed guards aboard all the German
and Italian vessels in our ports.
There are two German merchant ships and twenty-eight Italian marchant ships at present immobilised in our harbors. One German ship is in
Boston harbor, and the other at Port Everglades, 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 Panana Canal Zone, and
one in Puerto Rice. I an 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 seising the
vessels.
As an example, the Italian tanker BRENNERO, loaded with lubricating
oil, is immobilised at Port Newark, New Jersey. There is nothing, short of
seisure 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 concentration of oil terminals in the world
and, where a serious fire would be a national disaster.
A very careful study has been made of the situation presented by
these immobilised vessels, and I therefore recommend that you give instructions to proceed immediately to place guards aboard these ships.
Faithfully yours,
The President,
The White House.
Copy to - The Honorable
The Secretary of State.
Secretary of the Treasury.
1-2-41
GROSS
2772
NAME
LEMOTH TONKAGE HOME PORT
PRESENT LOCATION
DATE OF REG. No. No. NOW ON
ARRIVAL IN CREY
BOARD.
BOSTON. KASSACHUSETTS
8
ID
ss
PAULINE FRINDERICH
F
GERMAN
376.7
4,654
Commonwealth
Hasburg
Pier No. 1
9/3/39
40
20
12/19/39 35
35
6/5/40
45
PORT EVERGLADES. FLORIDA
GERMAN
SS ARAUGA (F)
398.3
4,354
Hamburg
BOSTON. KASSACHUSETTS
ITALIAN
ss DINO (F)
415.5
5.592
Genoa
Hodge Boiler Works
East Boston.
45
NEW YORK, N.Y.
ITALIAN
88 ALBERTA (F)
ss ARSA (F)
ss AUSSA (F)
ss BREENERO (2)
ss SAN LEONARDO (F)
417.7
6,131
Trieste
Pier 2. Noboken N.J. 6/5/40 31
30
404.1
5,441
Genos
Fier 2. Noboken N.J. 6/5/40 33
36
5.441
Trieste
Pier 2, Noboken N.J. 6/6/40
33
32
343.5
4,946
Genea
Nevark Terminal N.J. 5/30/40
40
38
400.0
4,657
Genoa
Pier 2. Noboken N.J. 6/2/40
36
36
404.1
PHILADELPHIA, PA,
ITALIAN
ss ANTONINITA (F)
in
Vessel
(9)(F) - Freight
ank Vessel
398.9 4,423
Genoa
Sherwin Williams
Dock. Gloucester N.J. 7/24/40 29
28
GROSS
RIPA
NAME
LEBOTH
TORKAGE
IS
HOME PORT
DATE OF REG. NO. No. NOW
PRESENT LOCATION ARRIVAL IN CREW ON BOARD
PRILADELPHIA. PA. (cont.)
ITALIAN (Cont.)
ss BELVERKER (F)
437.8 6,889
Genca
Nat. Metals Co.,
6/7/40 37
37
Tacony, Pa.
ss MAR OLAUCO (F)
ss SANTA ROSA (F)
403.9 4,690
344.0
3,027
Genea
Sherwin Williams
Dock. Gloucester N.J.8/10/40
Genoa
Shervis Williams
Dock, Gloucester N.J.8/6/40
30
30
28
29
BALTINORS, ND.
ITALIAN
as BURO (F)
406.4 4,687
Genoa
Anchorage No. 3
8/19/40
45
45
ss PIETRO CAMPANELLA (F)
430.2
6,140
Genoa
Dead Anchorage
8/9/40
50
50
Anchorage "G"
off Newport News.
6/11/40 50
50
Anchorage "g"
off Newport News.
6/9/40 58
58
6/8/40 45
45
NORFOLK VIRGINIA
ITALIAN
as OTHAN (F)
ss GUIDCHIA (F)
ss SAN OIUSEPPE (F)
382.9
434.2
413.2
5,473
5.060
5.074
Genoa
Naples
Genoa
Anchorage ege
off Newport News.
(F) - Freight Vessel
-2-
GROSS
NAME
LEMOTE TONUAGE HOME PORT
PRESENT LOCATION
DATE OF REG. NO. NO. NOW on
ARRIVAL IN CREW BOARD
NEWPORT NEWS, VIRGINIA
ss LACONIA (F)
ss VITTORIN (F)
430.8
350.7
5.932
3,349
ITALIA
Trieste
Genoa
Anchorage "O"
off Newport News.
6/9/40 50
50
Anchorage "g"
off Newport News.
6/11/40 35
35
WILMINGTON, N.C.
ITALIAN
KS VILLARPEROSA (F)
396.7
6,255
Genoa
Vest Bank,
Cape Year River.
6/4/40 50
35
SAVANNAH. GEORGIA
ITALIAN
ss CLARA (F)
401.0
6,131
frieste
Seaboard Airline
R.R. Dock
6/9/40 50
Anchored St. Johns
River.
6/7/40 31
31
6/6/40 40
40
50
JACKSONVILLE, FLA.
ITALIAN
ss COMPIDENEA (F)
ss IRCANIA (F)
412.4
413.1
6,458
4,815
Genoa
Genoa
Asshored St. Johns
River.
MOBILE, ALABAMA
ITALIAN
ss IDA % o (F)
(F) a Freight Vessel.
403.4
4,935
Genoa
Mobile & Ohio R.R.
Pier No. 8.
6/6/40 45
45
DATE OF REQ. NO.
IN GREM
PRESENT LOCATION ARRIVAL
GROSS
TIPE
NAME
LEMOTE TONNAGE HOME PORT
NO. NOW ON
BOARD
NEW ORLEANS, LA.
ITALIAN
ss ADA 0 (F)
as MONFIORE (F)
373.0 5,234
423.7
5.498
Anchored Miss. River
Genoa
Algiers Point.
5/30/40
45
45
48
48
Anchored Miss. River
Genoa
Algiers Point.
5/31/40
HOUSTON, TEXAS
ITALIAN
ss MONOIOIA (F)
392.4 6,113
City Deck. No. 7 7/21/40
Genoa
50
50
SAN JUAN, P.R.
ITALIAN
ss COLORADO (F)
386.2 5,039
Anchored off
Iela Orando.
Genca
6/1/140
50
50
COLON, PANAMA.
ITALIAN
ss CONTER BIANCANANO (F) 650.9 23,255
Anchored off
Genoa
Cristobal.
6/27/40
500
500
6/19/40
55
55
PORTLAND, OREGON.
ITALIAN
NS LIME (F)
(F) - Freight Vessel
(P) - Passenger Vessel
467.6
8,059
Trieste
suppage 2 of att 362
underseared
TREASURY DEPARTMENT
Washington
FOR IMMEDIATE RELEASE
Friday, June 23, 1940
Press Service
No. 21-43
Secretary Morgenthau today issued rules
and regulations for control of foreign and domestic
vessels in United States harbors and waters, carrying
out the provisions of the proclamation signed yesterday
by the President.
The Secretary also set up an Office of
Merchant Ship Movements to enforce the regulations under
the supervision of Assistant Secretary of the Treasury
Herbert E. Gaston. Three Coast Guard officers assigned
to duty in the new office are Commander W. N. Derby,
assistant chief personnel officer of the Coast Guard;
Lieut.-Commander A. C. Richmond, who has been on general
duty at Coast Guard headquarters, and Lieut. F. E. Pollio,
acting chief intelligence officer of the Service.
The regulations will provide increased
control through Captains of the Port over the anchorage
and movement of vessels in United States harbors and
over handling and loading of explosives and other
dangerous cargo.
The President's proclamation and the
Treasury regulations read as follows:
363
CONTROL OF VESSELS IN TERRITORIAL WATERS
OF THE UNITED STATES
BY THE PRESIDENT OF THE UNITED STATES OF AMERICA
A PROCLAMATION
WHEREAS, A proclamation issued by me on September 8, 1939,
proclaimed that a national emergency existed in connection with
and to the extent necessary for the proper observance, safe-
guarding and enforcing of the neutrality of the United States
and the strengthening of our national defense within the limits
of peace-time authorizations, and that specific directions and
authorizations would be given from time to time for carrying
out these two purposes,
WHEREAS, The continuation of the conditions set forth in
said proclamation of September 8, 1939, now calls for additional
measures within the limits of peace-time authorizations,
WHEREAS, Under and by virtue of section 1 of title II of
the Act of Congress approved June 15, 1917, 40 Stat. 220 (U.S.C.
title 50, sec. 191), it is provided as follows:
"Section 1. Whenever the President by proclamation or Executive order declares a national emergency
to exist by reason of actual or threatened war, insurrection, or invasion, or disturbance or threatened
disturbance of the international relations of the
United States, the Secretary of the Treasury may
make, subject to the approval of the President, rules
and regulations governing the anchorage and movement
of any vessel, foreign or domestic, in the territorial
-2-
364
waters of the United States, may inspect such vessel
at any time, place guards thereon, and, if necessary
in his opinion in order to secure such vessels from
damage or injury, or to prevent damage or injury to
any harbor or water's of the United States, or to secure the observance of the rights and obligations of
the United States, may take, by and with the consent
of the President, for such purposes, full possession
and control of such vessel and remove therefrom the
officers and crew thereof and all other persons not
specially authorized by him to go or remain on board
thereof.
"Within the territory and waters of the Canal
Zone the Governor of the Panama Canal, with the
approval of the President, shall exercise all the
powers conferred by this section on the Secretary
of the Treasury."
AND, WHEREAS, It is essential, in order to carry into effect
the provisions of said Act, which are quoted herein, that the
powers conferred therein upon the President, the Secretary of
the Treasury and the Governor of the Panama Canal be at this
time exercised, or available for exercise, with respect to
foreign and domestic vessels.
NOW, THEREFORE, I, FRANKLIN D. ROOSEVELT, President of the
United States of America, by virtue of the powers conferred upon
me by the provisions of the said Act of Congress quoted herein,
do hereby declare the continuation of the conditions set forth
in my proclamation of September 8, 1939, and the existence of
a national emergency by reason of threatened disturbance of the
international relations of the United States.
AND, I therefore consent to the exercise, with respect to
foreign and domestic vessels, by the Secretary of the Treasury
and the Governor of the Panama Canal, of all the powers con-
ferred by the provisions of said Act.
365
-3IN WITNESS WHEREOF, I have hereunto set my hand and caused
seal of the United States to be affixed.
DONE at the City of Washington this 27th day of June
in the year of our Lord
nineteen hundred and forty
and of the Independence of
the United States of America,
the one hundred and sixtyfourth.
FRANKLIN D. ROOSEVEIT
By the President:
CORDELL HULL
Secretary of State.
366
(T. D. 50182 )
Anchorage Regulations
Regulations for the control of vessels in the
territorial waters of the United States.
TREASURY DEPARTMENT,
Washington, D. C.
To Collectors of Customs, and Captains of Ports and Others Concerned:
Section 1, title II, of the so-called espionage act, approved
June 15, 1917, 40 Stat. 220 (U.S.C. title 50, sec. 1911, provides
in part as follows:
"Whenever the President by proclamation or Executive
order declares a national emergency to exist by reason of
actual or threatened war, insurrection, or invasion, or
disturbance or threatened disturbance of the international
relations of the United States, the Secretary of the Treas-
ury may make, subject to the approval of the President,
rules and regulations governing the anchorage and movement
of any vessel, foreign or domestic, in the territorial
waters of the United States, may inspect such vessel at any
time, place guards thereon, and, if necessary in his opinion
in order to secure such vessels from damage or injury, or
to prevent damage or injury to any harbor or waters of the
United States, or to secure the observance of the rights
and obligations of the United States, may take, by and with
the consent of the President, for such purposes, full
possession and control of such vessel and remove therefrom
the officers and crew thereof and all other persons not
specially authorized by him to go or remain on board thereof."
By virtue of a proclamation issued on the 27th day of June, 1940
the above quoted provisions of law are now in full force and effect.
Pursuant to the authority contained in the above quoted act,
the following rules and regulations are hereby promulgated:
(1) All existing rules and regulations of any department,
agency or instrumentality of the United States governing anchorage
and movements of vessels in the territorial waters of the United
-2-
367
States are hereby reaffirmed and continued in force during the
period of the present emergency, except as modified by these rules
and regulations.
(2) The rules and regulations governing the anchorage of
vessels herein reaffirmed or promulgated shall be enforced by the
captain of the port, or where the port has no such officer, by
an officer of the Coast Guard or the Customs Service designated by
the Secretary of the Treasury. In any case where there are no
applicable rules or regulations governing the anchorage of vessels,
all anchorage shall be in accordance with the directions of the
captain of the port or other officer designated by the Secretary
of the Treasury pursuant to this section.
(3) The movement of any vessel between points within the
area of a port, and the movement, lading, and discharging of explosive or inflammable material or other dangerous cargo shall be
under the supervision and control of the captain of the port, or
other officer designated by the Secretary of the Treasury pursuant
to section (2) hereof.
(4) The captain of the port or other officer designated by
the Secretary of the Treasury pursuant to section (2) hereof is hereby authorized to cause to be inspected and searched at any time
any vessel, foreign or domestic, or any person or package thereon,
within the territorial waters of the United States, to place guards
upon such vessels, and to remove therefrom any or all persons not
specially authorized by him to go or to remain on board thereof.
(5) The collector of customs, through the captain of the port
or other agency acting for the collector, is hereby directed, subject
-3-
368
to the approval of the Secretary of the Treasury, to take full
possession and control of any vessel, foreign or domestic, in the
territorial waters of the United States, whenever it appears that
such action is necessary in order to secure such vessels from damage
= injury, or to prevent damage or injury to any harbor or waters
of the United States, or to secure the observance of the rights and
obligations of the United States. Pending action by the Secretary
of the Treasury, the collector of customs is authorized to detail
any such vessel and is directed to communicate the facts by the
most expeditious means available to the Secretary of the Treasury.
(6) The Secretary of the Treasury may require all lighters,
barges, ferries, tugs, motor boats, ssilboats, and similar craft
operating in the harbor or waters of any port of entry, to be
especially licensed by the collector of customs for such purpose
and may revoke any license so granted for any failure to comply
with the anchorage or harbor rugulations for such port, or to obey
the orders issued thereunder by any duly authorized officer, or
for any act inimical to the interests of the United States in the
present emergency.
(7) No vessel shall depart from any port or place in the
United States, or from any port or place subject to the jurisdiction of the United States, on a voyage on which clearance by
a customs officer of the United States is required, unless the
369
-4principal customs officer in charge of the port of departure shall
have been authorised by the Secretary of the Treasury to permit
the departure.
H. MORGENTHAU, JR.
Secretary of the Treasury.
Approved June 27, 1940.
FRANKLIN D. ROOSEVELT,
President.
370
January 3, 1940.
Mr. Gaston
Secretary Morgenthau
If any German or Italian ship sails let the
Navy know in plenty of time.
H.M.Jr
1/3/41
371
Budget
Sept with pay state
by m Cox this am
after signature by
Hm but letter was
not dated
(this is persion of
12/28/40 memo
(pap 1-2-10 changed )
also reasised draft filed
under date of 17/30/40
372
1/3/41
Through the Bureau of the Budget
Attorney General
Division of the Federal
Register
My dear Mr. President:
There is respectfully submitted to you herewith for
your signature, if it meets with your approval, a proposed
Executive Order establishing an Economic Defense Board,
regulating transactions in foreign exchange, foreign property
and foreign buying, controlling the export and other dealings
in defense materials, the requisitioning thereof, ship movements,
and related matters.
Briefly summarized the proposed Order provides the
following:
(1) Creation of an Economic Defense Board. This
bontal is to consist of the Secretary of State,
the Secretary of the Treasury, the Secretary
of Mar, the Secretary of the Navy, the Secretary
of Commerce, and the Director of the Office of
Production Management. The board will formulate
all the policies relating to the administration
of the order by the Secretary of the Treasury.
(2) Extension of Freese Controls. The order proposes
to extend freezing control to all foreign
countries and nationals. As you know, the
Treasury organization is now controlling the
property in this country belonging to invaded
countries and their nationals. Such organisation
can be readily expanded to handle the increased
work of an extended control.
373
-2(3) Coordination of Foreign Buying and Ship
Control Movements. These functions are, as
you know, already carried on by the Treasury
Department through the medium of the President's
Limison Committee and through the Coast Guard.
The order continues such administration in
the Treasury, but subject to the policy deter-
minations made by the Economic Defense Board.
The proposal does not cut across the contemplated
functions of the Office of Production Management.
(4) Export Embargo and Requisitioning. These functions
are now being administered by Colonel Maxwell as
Administrator of Export Control. The order
transfers such functions to the Treasury and
Colonel Maxwell will administer the powers under
the supervision and control of the Secretary of
the Treasury. Here again the administration will
be subject to the policy formulations of the
Economic Defense Board. At the present time
the policy on requisitioning of defense materials
is determined by the Secretary of War and Secretary
of the Navy acting through the Army and Navy
Munitions Board. Under the proposed order such
policies would be determined by the Economic Defense
Board of which both the Secretary of War and the
Secretary of the Navy as well as the Director of
Production Management would be members.
I believe that the proposed Order offers two primary and
over-all advantages. It meets the need of a coordinated formulation
of this Administration's policy on problems of economic defense.
The proposed six-member board would be the cabinet officers most
directly concerned with this problem and the Director of Production
Management. They would meet periodically and consider jointly current
problems against a background of our whole picture of economic
defense.
374
-3The coordination of the .administration of these
problems as envisaged by the order would eliminate a vast
amount of the red tape and "running around now required of
Americans as well as foreign governments and foreign nationals
who desire to purchase or sell materials, etc., in this country.
For example, today an American manufacturer selling defense
materials to a country covered by the foreign exchange control
would have to go through the following cumbersome procedure:
(1) file an application for a license with the foreign exchange
authorities to make it possible for him to be paid out of
blocked funds and to be able to transfer bills of lading and
other shipping documents to the purchasers; (2) obtain a
clearance from the President's Liaison Committee to negotiate
the contract with the foreign country; (3) secure a license
from the Administrator of Export Control; (4) obtain a license
under the Neutrality Act from the Division of Controls of the
State Department; and, finally, (5) assuming that the manufacturer
has obtained these four licenses from four different sources
and has put his goods on a boat destined for the purchaser,
the Treasury would have to determine whether the ship would be
permitted to sail.
375
-4-
Inevitably, public criticism will be directed at
such uncoordinated activities by the Government in such closely
related fields. In these days, when our export trade has
dwindled appreciably, we should endeavor to make it as simple,
not as difficult, as possible for a manufacturer to sell his
goods abroad.
The proposed Order would make it possible for an
American manufacturer to go to one place, such as the Customs
House in his district, for an appropriate application and thereby
ascertain at one time whether he will be permitted to take all
of the necessary steps to consummate a sale of the goods abroad.
The advantages both to the Government as well as the public from
such a more simplified and speedy procedure are obvious.
Faithfully yours,
(Signed) H. Morgenthau, Jr.
Secretary of the Treasury.
The President,
The White House.
376
EXECUTIVE ORDER
ESTABLISHING AN ECONOMIC DEFENSE BOARD,
REGULATING TRANSACTIONS IN FOREIGN EXCHANGE,
FOREIGN PROPERTY AND FOREIGN BUYING, CONTROLLING THE EXPORT AND OTHER DEALINGS IN DEFENSE
MATERIALS, THE REQUISITIONING THEREOF, SHIP
MOVEMENTS, AND RELATED MATTERS.
By virtue of and pursuant to the authority vested in
me by the Constitution, by section 1 of Title II of the
Act of June 15, 1917 (40 Stat. 220), by section 5(b) of
the Act of October 6, 1917 (40 Stat. 411), as amended, by
section 2(a) of the Act of June 28, 1940 (54 Stat. 676),
by section 6 of the Act of July 2, 1940 (54 Stat. 714),
by the Act of October 10, 1940 (54 Stat. 1090), and by
virtue of all other authority vested in me, and by virtue
of the continued existence of a period of national emergency,
it is hereby ordered as follows:
TITLE I
Section 1. There is hereby established an Economic
Defense Board (hereinafter referred to as the "Board").
The Board shall consist of the Secretary of State, the
Secretary of the Treasury, the Secretary of War, the
Secretary of the Navy, the Secretary of Commerce and
the Director of the Office of Production Management.
The Board shall formulate and determine all questions
of policy relating to the carrying out of the purposes
of this Order.
377
-Section 2. The administration of the Order shall
be vested in the Secretary of the Treasury acting in
accordance with the policies formulated by the Board.
TITLE II
Executive Order No. 6560 of January 15, 1934, as
amended, is amended to read as follows:
Section 1. All of the following transactions are
prohibited, except as specifically authorised by the,
Secretary of the Treasury by means of regulations, rulings,
instructions, licenses, or otherwise, if involving property
in which any foreign country or any national thereof has
at any time on or since the effective date of this Order
had any interest of any nature whatsoever, direct or
indirects
A. All transfers of credit between any banking
institutions within the United States; and all transfers
of credit between any banking institution within the
United States and any banking institution outside the
United States (including any principal, agent, home
office, branch, or correspondent outside of the United
States, of a banking insitution within the United
States);
B. All payments by or to any banking institution
within the United States;
378
-3
c. All transactions in foreign exchange
by any person within the United States;
D. The export or withdrawal from the United
States, or the earwarking of gold or silver coin
or bullion or currency by any person within the
United States;
E. All transfers, withdrawals or exportations
of, or dealings in, any evidences of indebtedness
or evidences of ownership of property by any person
within the United States; and
F. Any transaction for the purpose or which
has the effect of evading or avoiding the foregoing
prohibitions.
Section 2.
A. All of the following transactions are
prohibited, except as specifically authorised by
the Secretary of the Treasury by means of regula-
tions, rulings, instructions, licenses, or otherwise:
(1) The acquisition, disposition or
transfer of, or other dealing in, or with
respect to, any security or evidence thereof
on which there is stamped or imprinted, or
to which there is affixed or otherwise
attached, a tax stamp or other stamp of a
foreign country designated in this Order or
a notarial or similar seal which by its
contents indicates that it was stamped,
379
-
imprinted, affixed or attached within
such foreign country, or where the attendant
circumstances disclose or indicate that such
stamp or seal may, at any time, have been
stamped, imprinted, affixed or attached
thereto; and
(2) The acquisition by, or transfer to,
any person within the United States of any
interest in any security or evidence thereof
if the attendant circumstances disclose or
indicate that the security or evidence thereof
is not physically situated within the United
States.
B. The Secretary of the Treasury may investigate,
regulate, or prohibit under such regulations, rulings,
or instructions as he may prescribe, by means of
licenses or otherwise, the sending, mailing, importing
or otherwise bringing, directly or indirectly, into the
United States, from any foreign country, of any securities or evidences thereof or the receiving or holding
in the United States of any securities or evidences thereof
so brought into the United States.
Section 3.
A. The Secretary of the Treasury may require
any person to furnish under oath, in the form of
reports or otherwise, from time to time and at such
time or times as he may designate, complete informa-
tion relative to any transaction referred to in
380
-5- -
subdivision (b) of section 5 of the Act of
October 6, 1917 (40 Stat. 411), as amended, or with
respect to any property in which any foreign country
designated in this Order or any national thereof
has any interest, including the production of any
books of account, contracts, letters, or other papers,
in connection therewith, in the custody or control
of such person, either before or after such transaction is completed.
B. Every person engaging in any of the
transactions referred to in sections 1 and 2 of this
Order shall keep & full record of each such transaction
engaged in by him, regardless of whether such trans-
action is effected pursuant to license or otherwise,
and such record shall be available for examination
by a representative of the Treasury Department for at
least one year after the date of such transaction.
Section 4.
A. The term "effective date" means with respect
to any foreign country or any national thereof, the
date specified in the following schedule: (a) Norway
and Denmark - April 8, 1940; (b) the Netherlands,
Belgium and Luxembourg - May 10, 1940; (c) France -
June 17, 1940; (d) Latvia, Estonia and Lithuania July 10, 1940; (e) Rumania - October 9, 1940; (f)
any other foreign country -
, 194 .
381
6-
B. The term "transactions * * * involving
property in which any foreign country or any national
thereof has *** any interest shall include, but
not by way of limitation, (1) any payment or transfer
to such foreign country or any national thereof, (ii)
any export or withirawal from the United States to
such foreign country and (iii) any transfer of credit
expressed in terms of the currency of such foreign
country.
C. The term "United States" means the United
States and any place subject to the jurisdiction
thereof; the term "continental United States means
the States of the United States, the District of
Columbia, and the Territory of Alaska, and the term
#person" means an individual, partnership, association,
corporation, or other organization.
D. The term #foreign country* shall include,
but not by way of limitation, the state and the government thereof on the effective date of this Order as
well as any political subdivision, agency or instrumentality thereof or any territory, dependency, colony,
protectorate, mandate, dominion, possession or place
subject to the jurisdiction thereof; and shall also
include any other government (including any political
subdivision, agency, or instrumentality thereof) to
the extent and only to the extent that such government
exercises or claims to exercise de jure or de facto
382
-sovereignty over the area which on such effective
date constituted such foreign country; and shall
further include any person who is, or has been, or
who there is reasonable cause to believe is, or has
been, acting or purporting to act directly or indirectly for the benefit or on behalf of any of the
foregoing.
E. The term *national shall include any person
who has been domiciled in, or a subject, citizen or
resident of a foreign country at any time on or since
the effective date of this Order, but shall not include
any individual domiciled and residing in the United
States at all times on and since such effective date,
and shall also include any partnership, association,
corporation or other organization organized under the
laws of, or which on such effective date had its principal place of business in such foreign country, or
which on or after such date was or has been controlled
by, or a substantial part of the stock, shares, bonds,
debentures, or other securities or obligations of
which was or has been owned or controlled by, directly
or indirectly, such foreign country and/or one or
more nationals thereof as herein defined; and shall
383
-8further include any person who is, or has been,
acting or perporting to act directly or indirectly
for the benefit or on behalf of such foreign country
or national thereof; and shall further include, any
other person who there is reasonable cause to believe
is a *national as herein defined. In any case in
which by virtue of the foregoing definition a person
is a national of more than one of the foreign countries
designated in this Order, such person shall be deemed
to be a national of each of such foreign countries.
The Secretary of the Treasury shall have full power
to determine who is or shall be deemed to be a
*national" within the meaning of this definition.
F. The term "banking institution" shall include
any person engaged primarily or incidentally in the
business of banking, of granting or transferring
credits, or of purchasing or selling foreign exchange
or procuring purchasers and sellers thereof, as principal or agent, or any person holding credits for
others as a direct or incidental part of his business,
or brokers; and, each principal, agent, home office,
branch or correspondent of any person so engaged shall
be regarded as a saparate "banking institution".
Section 5. The Regulations of November 12, 1934,
and the general license therein granted, are hereby revoked.
All licenses, rulings, and instructions issued pursuant to
384
-9Executive Order No. 8389, as amended, which were in effect
as of the date of this Order, are hereby continued in full
force and effect, subject to amendment, modification or
revocation pursuant to the provisions of this Order.
TITLE III
Section 1. Coordination of Foreign Buying. Pursuant
to the policies formulated by the Board, and in accordance
with the provisions of Title II hereof, the Secretary of
the Treasury shall coordinate the buying, or other
acquisition, by or on behalf of any foreign country or
national thereof, of all defense materials, including all
military equipment and minitions, component parts thereof,
and machinery, tools, and material and supplies necessary
for the manufacture, servicing or operation thereof, and
shall prescribe the procedure for the negotiation and
execution of contracts for the foregoing, in such a manner
as will most effectively further the interests of national
defense. For such purpose the Secretary of the Treasury
shall serve as the exclusive liaison officer between this
Government and foreign countries and nationals thereof, and,
in accordance with policies formulated by the Board, the
Secretary shall give consideration to the requirements of
such foreign countries and nationals thereof for the afore-
mentioned materials in relation to (a) availability of the
desired articles; (b) priorities, and (c) prices. The
Secretary of the Treasury shall keep the Board currently
and fully informed of his activities in connection herewith.
385
- 10 -
Section 2. Export Embargoes. The Proclamations,
Orders and Regulations heretofore issued under section 6
of the Act of July 2, 1940 (54 Stat. 714) shall, except
as herein or otherwise amended, remain in full force and
effect and the administration thereof shall be subject
to the supervision and control of the Secretary of the
Treasury acting in accordance with the policies determined
by the Board.
Section 3. Requisitioning of Materials Denied Export.
The Executive Order and Regulations heretofore issued under
the Act of October 10, 1940 (54 Stat. 1090) shall, except
as herein or otherwise amended, remain in full force and
effect, except that the powerstherein vested in the Secretary
of War and the Secretary of the Navy, acting jointly through
the Army and Navy Munitions Board, are hereby transferred to
the Economic Defense Board and the administration thereof shall
hereafter be exercised by the Administrator of Export Control
under the supervision and control of the Secretary of the
Treasury acting in accordance with the policies determined
by the Board.
Section 4. Control of Ship Movements. The Proclamation
and the regulations issued under section 1 of Title II of the
Act of June 15, 1917 (40 Stat. 220) shall remain in full force
and effect, except that the powers conferred upon the Secretary
of the Treasury shall hereafter be exercised by him in accordance
with the policies determined by the Board.
386
- 11 -
Section 5. Recommendations by the Board. The Board
shall engage in such studies and shall make such recommenda-
tions to the President, to the Congress and to the appropriate departments and agencies of the Government as the
Board deems in the interests of the economic defense of
the United States.
Section 6. Continued Validity of Prior Actions.
Except as otherwise provided herein, all regulations,
licenses, rulings, instructions and other actions issued
or taken pursuant to any Proclamation, Order or Regula-
tions hereinbefore referred to which were in effect
as of the date of this Order, are hereby continued in
full force and effect subject to amendment, modification
or revocation pursuant to the provisions of this Order.
Section 7. Regulations. The Secretary of the
Treasury is authorized and empowered to prescribe from
time to time regulations, rulings, and instructions to carry
out the purposes of this Order, and to provide therein or
otherwise the conditions under which licenses may be granted
by or through such officers or agencies as the Secretary of
the Treasury may designate. In so far as possible in admin-
istering this Order, the Secretary of the treasury shall
limit the number of applications and licenses required for
the performance of acts covered by this Order. The decision
of the Secretary of the Treasury with respect to the approval
or disapproval of any application for a license shall be
final.
387
- 12 -
Section 8. Revocation. This Executive Order
and any regulations, rulings, licenses or instructions
issued herounder may be amended, modified or revoked
at any time.
THE WHITE HOUSE,
194 .
Jaw 3, 1941
THE WHITE HOUSE
388
WASHINGTON
gave Pres. copy of two
plans to help British
also copy of hot of
British f Malian ships
given )
see att. to gaston's
mem to pery of 1-3
the but is attached
to that)
0
389
STRICTLY CONFIDENTIAL
FOR - SHORETARK
Interio Plan
Peaking the essetment of the proposed joint resolution
authorising the placement w the United States of ordere on behalf
of foreign governments and leasing to foreign governments the
urticles so ordered, the following interis plan can be used for
(2) The expension of productive facilities for defense asterial;
and (2) The prosurement of such material.
(1)
Remensies of Protection
The R.F.C. end the Was and Havy Departments presently
have funds available for the expension of defense production. The
R.F.C. has & revolving fund of $1,500,000,000 for such purposes.
or this - approximately $400,000,000 is probably still evails
able.
By a recent desision of the R.F.C. to reduce the take
out obligations of the for and Many 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 w releasing all R.F.C. take out funds which
have been not aside w Any and New.
There would appear to be ample funds for the additional
plant expension program. If any more funds become necessary, the
note Leaving power of the R.F.C. could be increased by the amount
necessary to accomplish this objective.
390
-2(2)
Presurement
For the actual placement of additional orders the
War Department has availables (a) $60,000,000 for the procurement
of aircraft, aircraft enginee and aircraft parts, and (b)
$430,000,000 for the procurement of ordnance items. The Bar
Department is prepared to sake 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 san get further appropriations later for such
maintenance and similar purposes.
In all probability, the Havy Department can make similar
funds available.
By spreading the procurement orders with these funds
and dovetailing them with plant expension, the program can be earried forward so that the necessary deliveries can be made as soon
as the proposed joint resolution is enacted.
1/3/41
391
THE WHITE HOUSE
WASHINGTON
FobyPresident
says get in touch
7 with Buman
of
Bill
drafting
Came. Pres. wants
aid to Britain" "
bill have the 'look'
of originating in
House Dr this
Solum day Hm.g
392
January 3, 1940.
Mr. Foley
Secretary Morgenthan
President says get in touch with Beemen of
Bill drafting Comm. Pres. wants "aid to Britain"
bill have the 'look' of originating in House.
Do this Saturday.
H.M.Jr.
393
THE SECRETARY OF THE TREASURY
WASHINGTON
January 3, 1941.
Memorandum to The President:
Ganson Purcell phoned to the Treasury several days ago the same
report regarding French ships as the attached, which comes through
Lauchlin Currie. We have had somewhat similar reports over the last
several months and have taken all precautions short of placing armed
guards aboard or actual seizure to prevent unauthorized departure of any
of these vessels. We sent out a special warning to all District Commanders
of the Coast Guard on November 16, stating that concern had been expressed
about departure without proper clearance of German, French and Italian
merchant vessels and ordering special precautions to prevent such depart-
ures. Coast Guard Port Officers have been making frequent visits to all
immobilized vessels to see that the seals on the radio remain intact and
that there are no other suspicious circumstances. A more intensive check-
up of this kind has been in progress in the last ten days. It has not
revealed any evidence of plans for abrupt departure, nor anything suspicious about the French ships. Herve Alphand, the French Financial Attache,
did ask Collector Durning in New York some two weeks ago whether we would
permit the shipment to Martinique, for transshipment to Casablanca, of
some materials stored in New York, which are the leftovers of the purchases
of the French Purchasing Mission. Collector Durning was instructed to
inform Alphand that we would not permit the shipments.
The Purcell-Currie memo refers to a ship, "the Belian d'Estambue,"
said to be "in an unnamed American port loading fuel oil." The reference
is undoubtedly to a small French Line motor vessel, Belain d'Esnambue,
(321 feet, 2900 gross tons, 715 net tons) which has made several voyages
between New York and Martinique. We were informed in advance by the
French Naval Attache that this vessel was to be put on the MartiniqueCasablanca run and on December 26 she cleared St. Thomas for Casablanca
with a cargo of bananas laden at Martinique. She took on from the Standard
Oil depot at St. Thomas 310 tons of diesel oil, which was about the normal
amount for her anticipated voyage. On December 18 the French Line motor
vessel Quercy (315 feet long, 3100 gross tons, 1800 net tons) took on 191
tons of diesel oil at St. Thomas, making a total in bunkers of 551 tons,
and cleared for Casablanca with a cargo of coffee and sugar from Martinique.
A transfer of funds was permitted for the fueling of the Quercy and a
similar application has been made to pay for the fueling of the Belain
d'Esnambuc. The State Department was consulted and saw no objection either
to the funds transfer or to the fueling of the vessels at St. Thomas.
394
-2- -
Every request for departure by a French vessel is referred to the
Department and in all cases the State Department is consulted. A number
of departures of French vessels, from onc port to another within the
United States, have been permitted for purposes of more convenient anchorage and in each case the vessel has arrived at the declared destination.
By special request of the French and British Ambassadors, and on approval
of the State Department, three good-sized passenger-cargo ships were permitted to depart, two from New Orleans and one from New York, to go to
Liverpool to repatriate French military and naval refugees in England.
Regular voyages of the steamer Fort de France between New York and Martinique
have been permitted, but we have lately refused permission for that ship to
take any goods at all for transshipment at Martinique for Casablanca.
In short, we have found no evidence which would support the rumor
Mr. Purcell heard. It is unlikely that any of the French vessels in the
United States could depart without proper authorization. Certainly, it
would be impossible for any of them to take cargo or supplies without our
knowing it.
395
THE WHITE HOUSE
WASHINGTON
December 31, 1940
MEMORANDUM FOR THE
SECRETARY OF THE TREASURY:
What do you think about this?
F.D.R.
396
THE WHITE HOUSE
WASHINGTON
December 30, 1940.
MEMORANDUM FOR THE PRESIDENT:
Re: Report of projected movement of
French ships in American harbors.
Mr. Ganson Purcell of the SEC has a
friend very close to French interests in
this country. His friend has just informed
him that orders have come through that all
French ships in American ports are to load
up with war materials and attempt to run the
blockade to the nearest German port. In
case of interception the instructions are
that they should be scuttled. One ship,
the Belian d'Estambue, in an unnamed American
port, is loading fuel oil. This part of
the story received some collaboration from
the fact that an application is pending at
the Treasury for a license to release French
exchange for the purpose of buying fuel oil.
January
Lauchlin Currie in
397
WAR DEPARTMENT
G-2/2267-115
WAR DEPARTMENT GENERAL STAFF
MILITARY INTELLIGENCE DIVISION G-1
WASHINGTON
I.B. 11
January 3, 1941
MEMORANDUM FOR THE SECRETARY OF THE TREASURY:
Subject: British, Allied and Neutral
War Shipping Losses.
The following is a tabulation of British, Allied and
neutral shipping losses for the weeks ending on the dates
indicated:
December 22, 1940
December 29, 1940*
Gross
15
32,849
0
Gross
Number
Tons
22,484
---
(
Allied
Tons
?
British
Number
(15,938
?
10,451
3
TOTAL
18
(
Neutral
43,300
38,422
Unofficial tabulation subject to correction.
Blooman
miles
SHERMAN MILES,
Brigadier General, U. S. Army,
Acting Assistant Chief of Staff, G-2.
TREASURY DEPARTMENT
398
INTER OFFICE COMMUNICATION
DATE January 3. 1940
TO
Secretary Morgenthan
FROM
H. D. White
abject:
British Shipping Situation -- Conclusions Drawn From
Appended Memorandum Prepared by Mr.
Summary Conclusions:
(a) The total amount of merchant shipping available to the British
for the carrying of commodities decreased by about 10 percent
in the first fourteen months of the war (from 21 million tons
to slightly less than 19 million tons). Although a large
increase took place through capture, purchase, charter, and
construction, this increase was more than offset by the
decrease through sinking, damaging and diversion to the Army
and Navy.
(b) Merchant shipping tonnage available for imports into the
United Kingdom was reduced by about 12 percent during the
first fourteen months of the war. Formerly, 9.5 million
tons of ships larger than 1600 gross tons were used in the
direct carriage of imports (other than oil) into the United
Kingdom, and 3 million tons of foreign ships were used in
this carriage. At the present time, about 11 million tons
of British ships are so employed.
(c)
(d)
The British estimate their import requirements for a full
war effort at 30 percent less than the tonnage which they
imported in peacetime (43 and 60 million tons respectively).
The British estimate that their shipping is about one-third
less efficient than before the war. However, reorganization
can eliminate some of this loss.
(e) Approximately 2 million tons of Allied shipping could be
diverted from foreign routes to the supplying of the United
Kingdom. If this were now done, there would be 12.5 million
tons of ships available for the direct imports into the
United Kingdom -- the same total as was used in the pre-war
period.
(f)
Tonnage now being used for direct imports into United
Kingdom plus that which can be diverted from foreign routes
is just about sufficient to handle what the British state
to be their full requirements.
399
Division of Monetary
-2-
Research
(g) The rate of loss through sinking was at the rate of
4.8 million tons annually in November and in the four
months preceding November. New British construction
is only one-fourth of this, or 1.2 million tons. New
construction in the United States at the present time
is only 0.5 million tons. Therefore the net reduction
of tonnage -- mostly of tonnage used for direct imports
into the United Kingdom - is now running at 3 million
tons yearly. Despite the fact that the British shipping
situation is not immediately critical, the present rate
of net loss of tonnage is severe enough to cause a 12
percent deficit within the next six months.
In view of the fact that the rate of net loss through
sinking may increase, and the rate of new construction
in the United Kingdom may decrease, the request by the
British that the United States should increase its
rate
construction by 3 million tons annually seems
to beofconservative.
400
BRITISH EMBASSY,
WASHINGTON, D.C.
3rd January, 1941.
Personal and Secret
Dear Mr. Secretary,
I enclose herein for your
personal and secret information a copy
of the latest report received from
London on the military situation.
Believe me,
Dear Mr. Secretary,
Very sincerely yours,
work Bother
The Honourable
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D. C.
401
Telegram received from London
dated Jenners let. 1941
Navel.
West Africa. British Naval Control officer
Lisbon reporte that a French submarine was torpedoed and
suak off Rie de Oro while on the surface escorting a French
tanker which was also sunk. No British submarine was in
the vicinity.
8.
Attacks on shipping. A Norwegian ship (5500
tone) and a British tanker (8500 tons) were both torpedoed
and sunk by a German submarine west of Dakar on December
21st and December 31st, respectively. A Swedish ship
(5600 tons) was damaged by a mine in Liverpool Bay yesterday
afternoon.
3.
The west-bound channel convey was unsuccessfully
attacked by enemy aircraft in the Themes Estuary.
4.
Military. No operations of importance reported
from any front officially.
5.
Royal Air Force. During daylight on December
Slat, 22 Blenheime were sent out. Fourteen were forced
to abandon their tasks owing to weather. Six acting
independently claim the following hits. An anti-aireraft
ship at Flushing, a building at a Dutch aerodrome, a
factory at Cologne and a bridge near Americh. Two failed
to return.
6.
Night of 31st /1st. All operations were cancelled.
7.
Libya. On the night of December 29th/30th Tobrak
and as Italian landing ground were bombed and a member of
fires started.
a.
Italian somaliland. Four Harricanes of the
south African Air Force attacked Barder an aerodrome on
December/
402
December 89th where they destroyed one bomber and
possibly damaged two others. They were intercepted
by Italian fighters and two failed to return.
Night of 31st/lst. No enemy activity
reported.
9.
Italy. Italian air activity was very
strong on December 29th and efforts were made to
hemper the Greek offensive along the whole front.
An Italian naval boubardment of Himara was covered
by continuous strong patrols over Corfu.
10.
London. Night of 29th/30th. Having regard
to the severity of the attack it is considered that
the amount of damage to food in warehouses is
surprisingly small.
403
of Code
Reserved as the New -
I 30 1962
CONFIDENTIAL
filed J 3, 1941.
1. a Thousand, January 2, the British operated a petrols.
The presenting night 128 have and milia bubers retaliabed - the
- vald on Louisia of December 29-30 w leanching - intense
attack on - High explosive bobb and a total of 20,000 i
Maries, twise the nonber used by the Germane against Lenter, were
used in the attack. One of the principal targits was the
Walf plant which has been engaged in the manfacture of two types
of - planes; a new two-engine fighter plane and the Center
air suider. Other important targete weres railway conservation
points, shipperia, oil refining plants, rise mills, and
The British alain that severe damage was inflicted on Brown. Three
British heavy boubers crashed on the return Journay but - other
places were missing. On the same night nine please of the Gonetal
Counted attacked the compled Channal parts and 14 attached the
Flooking train ferries.
2. During daylight hours of January 2, 105 General planos
were pletted over Britain. That night German planes made neveral
attach, principally in the visinity of Cardiff.
3. As of December 3, the British have captured the follow
ing Italian gave in the Libyan theaters 48 ankitank g 20 heavy
CONFIDENTIAL
CONFIDENTIAL
adidasm - and all - and field - May of these
- are not in a service condition.
4. a Thorning J 2, a large midentified venuel
awaying supplies of american for British small
- seak as the result of a solliates at - - patab.
Millional recent noral lessee instate one flest acailiary two treders.
5. On December 2 - associate of General de Gaalle,
Admiral was placed under arrest for treachery. It is
probably the assitule of the War office that negotiations with
General Haygend and with the government at Vishy have been him-
dered by the activities of General de Gaulle. It is probable
that be - - be deftly shoved into the background.
(Signal Office cannot designer last
four lines. Correction requested
from London)
LEE
Metribution:
General Miles
Secretary of Mar
State Department
Secretary of Treasury
Asst. Secretary of War
Chief of staff
War Plans Division
office of Naval Inbelligence
Air Gerys
0-3
CONFIDENTIAL
-2-
404
RESTRICTED
405
of Code Poliogram
I as the - Department
as
11.69 - -
I filed January 3, 1942.
a - with your ambled request of - 26,
1969, eaging of career British proposed peoplete - n
probled to you today w diplomitie people r disominating Severable to the English - to opposing treese and to both
- and compared civilian populations, - effort is made to way the confidence placed in the Fastet and Mast Governments.
IN
Matributions
Secretary of Year
State Department
Secretary of Treasury
A Secretary of Year
chief of Staff &
Mar Please Division
office of Isval Intelligence
6-2
M-8
:
as
RESTRICTED
CONFIDENTIAL
Perspheres of Code Cablegreen
Reserved as the War Department
as 12:40 p.m., J 3, 1941
I filed 27:55, January 3, 1941.
with reference to telegram 441. See dispatch 311110
from the naval attache. The only information available is a trustworthy report that trainlands of German troops, thought to be air
earge, are moving towards Sieily in increasing numbers. There is
a similar steady movement of antiaircraft and mutions in the same
direction. On the Passer divisions, no information can be had, but
is is reported that two such divisions are expected and that at
Venice tank debarkations have been observed. Chemisals (gases) in
large quantities are new being sent from Italian gas damps to
South Italian aviation wits, I - reliably informed.
A further reliable report has it that Italian troope and
equipment are being concentrated near the French border in western
Liguria. They are supposed to be meant for an occupation of Fice.
BENTIEY
Distributions
Military Aide to the President
Secretary of Bar
State Department
Secretary of Treasury
A Secretary of War
Chief of Staff
Bar Please Division
office of Naval Intelligence
C.W.S.
CONFIDENTIAL
406
G-2/2657-220
No. 283
407
RESTRICTED
SITUATION REPORT
M.I.D., W.D.
January 3, 1941.
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 the night of January 2-3 the R.A.F. again successfully
attacked Bremen starting new fires and adding to those caused by the
bombing on the night of January 1-2. Further attacks were made on
naval and military objectives at Emden, especial attention being
paid to docks and oil storage.
During
the night January 2-3 Dublin was again bombed by
unidentified
aircraft.
The German High Command announced that Cardiff was blast-
ed by bombs of all calibers dropped by successive waves of German
bombers.
attacked. Other objectives on the East Coast of England were also
German sources indicate that since June 24, a total of
279 British planes have been brought down in German territory.
II.
Greek Theater of War.
Local ground operations were reported.
British planes severely bombed the center of Elbesan.
III. Mediterranean and African Theaters of War.
Advance elements of the German Air Force are now in Italy.
No other change in the situation.
RESTRICTED