Full text of Diaries of Henry Morgenthau, Jr. : Volume 347 : Part 1

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DEART

Book 347

January 13 and 14, 1941

-ABook Page

Acheson, Dean

See State Department
Allison Engineering Company

See Mar Conditions: Airplanes (Engines)

-3Bank Holding Company Legislation

Eccles' letter to EUr protesting lack of

cooperation on the part of Treasury in not

consulting Federal Reserve Board concerning

new legislation - 1/13/41

347

152

Book of Knowledge

Knox consults HMJr concerning bona fide nature

of gift planned for FIR - 1/13/41

1

Business Conditions
Haas memorandum on situation for week ending
January 13, 1941
,

138

-CCanada

See War Conditions: Purchasing Mission

Dhina

See War Conditions
Coast Guard

For account of escaped French prisoners,
See War Conditions: France

Convicts

See War Conditions: France

-DDefense Savings Bonds, United States
See Financing, Government

-3Eccles, Marriner S.
See Bank Holding Company Legislation

-7Federal Bureau of Investigation
Klaus memorandum - 1/13/41
Financing, Government
Defense Savings Bonds: Odagard memorandum on wider

distribution of among small investors - 1/14/41

France

See War Conditions

132

388

-GBook Page
Germany

See Mar Conditions

Greece

See War Conditions: Airplanes

--Housing

Palmer's appointment discussed by HMJr and
Henderson - 1/13/41
a) NcReynolds believed responsible

347

78

Hungary

See War Conditions: Foreign Funds Control

-L Latin America

Rockefeller report - 1/13/41

126

War Supplies, Purchase of: Young arranges for

conference with interested parties - 1/13/41.

81

Lend-Lease Legislation
See Mar Conditions

-PPalmer, Charles
See Housing

Philippine Islands

See Mar Conditions

-$State Department
Acheson, Dean: Appointment to State Department

discussed by Frankfurter and ENJr - 1/14/41.

242

-UUnemployment Relief

Work Projects Administration report for week
ending January 1, 1941

133

United Kingdom

See War Conditions: Military Planning

--Vanderbilt, Harold
See Mar Conditions: Airplanes (Greece)

-VBook Page

War Conditions
Airplanes:

Employment in Aviation Manufacturing Industry:
Haas memorandum - 1/14/41
Engines:

347

Allison Engineering Company: Deliveries and
shipments - 1/13/41

349,358

97,98

Greece:

Conference; present: HMJr, Greek Minister,
Admiral Towers, Lieutenant Anderson, and
Young - 1/13/41

a) Greek Minister asked for official
letter expressing satisfaction if

74,77

provided with 30 P-36A planes from
Great Britain and accordingly United

States will be asked for none - 1/13/41.
b) Harold Vanderbilt to be asked to
arrange for "Panama Hattie" to be put
on for Greek relief

76

China:

Central Reserve Bank report after one week of
operation - 1/13/41

Traffic report - 1/14/41

90

370

Exchange market resume - 1/13-14/41
Export Control:

130,366

granted for week ending January 11, 1941
Foreign Funds Control:

135

Exports of petroleum, scrap iron, and scrap steel
from United States to Japan, Russia, Spain,
and Great Britain as shown by departure permits

Over-all control: Conference in Attorney General
Jackson's office; present: representatives of
Justice, Berle, Ginsberg (Counsel to
Henderson), Foley, and Bernstein - 1/13/41
a) Jackson and Berle state objections:

106

See Book 348. page 96

Frankfurter suggests to HMJr that he and Hull
discuss entire matter with FDR - 1/14/41

242

Hungary:

Transactions with Guaranty Trust Company 1/13/41

137

France:

Vichy told United States "desires to protect in

every possible way American property in safe-

deposit boxes in occupied territory" - 1/13/41

French convicts (escaped) who were being deported
to Martinique now aboard Coast Guard cutter:
Gaston memorandum in reply to telephone call
from Mrs. FDR - 1/13/41

a) Discussion at 9:30 meeting - 1/16/41:
See Book 348, pages 111 and 299

b) Housed at San Juan district jail;

maintenance paid for by Immigration Service 1/18/41: Book 349, page 73

91,92,93

103

W - (Continued)
Book

Var Conditions (Continued)

Page

Germany:

Municipal dollar bonds - memorandum on prices
sent to FDR - 1/13/41
Lend-Lease Legislation:
Foley gives resume - 1/13/41
Alsop-Xintner article - 1/13/41
HMJr's testimony before Congress discussed at
conference at home; present: HMJr, Mrs. HKJr,
Stewart, Young, Cochran, Kuhn, Bell, White,
Foley, Cox, and Pinsent - 1/13/41

347

99

7

157

158,275

a) Testimony discussed in Hull's office:

Stimson, Knox, Feis, and Hackworth also
present - 1/14/41
1) HMJr repeats conversation to
Treasury group

b) Can't use statement as now written - so
HMJr tells White, Kuhn, and Foley - 1/14/41.
c) Mrs. HMJr's suggestions with regard to
statement - 1/14/41

Military Planning:
Reports from London transmitted by Butler 1/13-14/41

233
252

289,324
341

224,396

Philippine Islands:
Transfer of funds to United States at increasing
rate reported by Sayre to FDR

a) HMJr's comment on memorandum - 1/14/41

374

Price Control:
Wool:

Agriculture asked for information concerning
250 million pounds Australian wool being sent
here for storage for British Government under
a December 1940 agreement - 1/13/41.

66

HMJr's letter to Marshall, Secretary, National
Wool Growers' Association - 1/21/41:
See Book 349, page 285

Henderson to be sent copy of HMJr's press

conference stating his opinion that Henderson

is doing an excellent job under difficult

circumstances" - 1/13/41
Purchasing Mission:
See also Var Conditions: Lend-Lease Legislation

Contracts with value of $10,600,000 involving
additional amount for capital assistance of
$700,000, or total of $11,300,000 (this excluding
a ship contract). placed since December 19 -

78

1/13/41

85

1/13/41

95

Canadian help by repatriating British-held
obligations and allowing her sterling balances
to rise set forth in Phillips' memorandum -

- W - (Continued)

Book Page

War Conditions (Continued)
Purchasing Mission (Continued):
Assets:

Foreign exchange assets and requirements "as

presented to representatives of Var, Savy,
Defense Council, and State*: Copies sent
to Hull - 1/13/41
Investment bankers' assistance in sales again
discussed by HMJr. Schenker, Bell, Foley,
Bunker, Bellaxy, and McGrath - 1/14/41

347

106

309

a) Wellington Fund, Camden, New Jersey

asks to participate - 1/22/41:

See Book 350. page 144
b) Schenker memorandum on recent

developments - 1/23/41: Book 350, page 235
Shipping:

Losses - British, Allied, and neutral - 1/13/41

Wool

See War Conditions: Price Control
Work Projects Administration
See Unemployment Relief

155

1

January 13, 1941
12:04 p.m.
H.M.Jr:
Frank

Hello.

Knox:

Hello, Henry.

H.M.Jr:

How are you?

Fine. Say, Henry, a fellow was in here the
other day with what looked to me very much
like a racket. He wanted me to subscribe

K:

for a $200 book of some book of knowledge
which was going to be presented with an

H.N.Jr;
K:

H.M.Jr:

inscription by me on the first page to the
President, and it looked to me like a highclass book agent's racket. He said he had
you and Hull and two or three others already
agreed to it.
That's right.

I'm afraid of it, Henry.
Well, I tell you what we did: the person
is Mrs. McAllister.

K:

What?

H.M.Jr:

Mrs. McAllister is behind it.

K:

Who is she?

H.M.Jr:

K:

H.M.Jr:

Well, up to very recently she was Chairman
of the Women's National Democratic Committee.
She's on the level and

Well, she may be getting fooled.

No, I tell you what we did: before
opposed to it just the way you are - she
had MacLeish, the Librarian, look into it

Mrs. Morgenthau would do anything - I was

and he sent the thing to two experts and
he says that they are worth that and more
too. So then they took the thing up with
Miss LeHand to find out whether the President
would really want them, and he said yes, he
would like them.

2

-2K:

I see.

H.M.Jr:

Now, I had the same reaction that you did.

I didn't want to touch it but then Mrs.
Morgenthau went into it further with MacLeish
and he says that they are worth it. Now that's
the

K:

Well, I'm perfectly agreeable to joining
anything that is bona fide but I didn't want
to be a sucker.

H.M.Jr:

Well, neither did I and that's why I insisted

K:

Yeah, sure I do.

H.M.Jr:

The Librarian of Congress.

K:

Yeah, I know him.

H.M.Jr:
K:

H.M.Jr:

on somebody - you know MacLeish.

Well, he sent this to two experts and they
say the binding alone is worth $200.

Uh-huh. All right.
I didn't like it at all, Frank, and my own

reaction was not to touch it but the books
are worth the money and Mrs. McAllister is
the person who is behind it and she is on
the level, and Miss LeHand says the President
would be glad to receive them, so there you
are.

K:

All right. Then that's O. K.

H.M.Jr:

What?

K:

Much obliged.

H.M.Jr:

Now, wait a minute, wait a minute. While

K:

Well, all right. I've issued the orders

you re giving books away, how about a few
planes for the Greeks?

and they're going to take 30 of the planes
off the wharves and send them up to
New York whenever you tell me to.

3

-3H.M.Jr:

K:

Well now look, the Greek Minister is coming
in at quarter of five. You couldn't get
me a little memo or something that I could
tell him what you're doing.
Well, yes, or I can have somebody from our
Aeronautical Department meet with you if you
want me to.

H.M.Jr:

Well, that would be wonderful.

K:

All right. I'll get hold of Towers and see
that somebody comes up there to meet with

you.

K:

Have him here a little bit before quarter
of five.
At your office?

H.M.Jr:

Yeah. Have him here at 4:30.

K:

All right. 4:30 your office.

H.M.Jr:

My office.

K:

All right. I'll either have Towers there

H.M.Jr:

or somebody he sends.

H.M.Jr:

Fair enough.

K:

All right.

H.M.Jr:

Thank you.

K:

All right, Henry.

4

January 13, 1941
12:20 p.m.
H.M.Jr:
James

Listen, did anybody take your bag this
time you went up to New York?

Forrestal:

Well, as long as you aren't going on the
same train I'm safe.

H.M.Jr:

You took a bodyguard with you from the

Treasury, I hear.

That's right. The only way to handle that
situation is to join the Treasury.

F:

H.M.Jr:

What?

H.M.Jr:

The only way to protect yourself now is to
join the Treasury.
Sure, join us.

F:

Yeah. (Laughs).

H.K.Jr:

Right.

F:

F:

H.M.Jr:

Henry, did you know that Maxwell has prepared

some sort of a similar directive in connection
with export control.
I knew he had one and had had one for several

F:

weeks. I don't know that it's anything very
new, is it.
I don't think it's new, no, but it's along

H.M.Jr:

Yeah.

F:

Yeah. Well, I just wanted to be sure you

H.M.Jr:

Thanks for the tip but somebody else told
me that and that he was very ambitions
about it.

F:

Yeah.

the same lines.

knew about it.

5

-2H.M.Jr:
F:

H.M.Jr:

Well, I suppose by now he's seen the one
that the President has.
Yeah, I imagine so.

of course, Bob Jackson is in it now, too,
and he's set up a committee with the
President's approval on this whole question
of listing foreign properties and everything

so just where it will end I don't know.

F:

Yeah.

H.M.Jr:

But I think irrespective of where export
control goes, I think the Administration is
very vulnerable, and Martin Dies knows it,
on all of this money which is going abroad.
No question of it.
And the first thing we're going to find is
that Martin Dies is going to force our hand

F:

H.M.Jr:

and nobody likes that.

F:

Yeah.

H.M.Jr:

F:

So irrespective of the other thing I do think
that this money that is going to Germany and
Italy - sooner or later we're going to be
publicly criticized.
No question about that, but isn't he going

H.M.Jr:

Oh, I don't think so. No, he won't do

to act today on your

anything until tomorrow and the more time
that Hull has the more the people work on
him on the freezing end

H.M.Jr:

That's right.
I mean, on the freezing, and the less he
likes it. Not on this other thing, you
know, but just on the straight freezing.

F:

Yeah.

H.M.Jr:

So I'm very much worried about it because

F:

I think we're very vulnerable and all

6

- 3-

F:

of this money which is being used for propaganda purposes, we could control it overnight
if we froze, and that's where Dies comes in
on the thing.
I wonder if anything that - when the Boss
gets back I suppose he'll be up to his neck
in appointments.

H.M.Jr:

You mean the President?

F:

Yeah.

H.M.Jr:

Well, the President knows about it. Be
said he was going to take it up Tuesday and
Hull has talked to him about it. Hall now
puts it on the basis of the Japanese-Bussian

thing that is so ticklish.

F:

Yeah.

H.M.Jr:

This would aggrevate it. Well, a week ago,
ten days ago, he told ae everything was all
right, but the whole group in the State
Department don't want us to freeze. They
still think that you can appease Japan.

F:

Oh, Jesus!

H.M.Jr:

So there are a lot of cross-currents, but
I appreciate your telling me about this other
thing and as I say there re an awful lot of
cross-currents and I put it in the President's
lap and of course what we're doing here is all of our energies are going on this bill.

Aid to Democracies.
F:

Yeah.

H.M.Jr:

And what I'm doing on that is, I'm trying
to get the President to take it out of IF
lap and give it to Hull because it's foreign
relations, and I haven't been able to get him
to do that, so that's the way she goes.

F:

O. K., Henry.

H.M.Jr:

Thank you.

F:

Right.

January 13, 1941
12:30 p.m.

GROUP NEOTING

Present:

Mr. Bell

Mr. Gaston
Mr. Young
Mr. Haas
Mr. Graves

Mr. Sullivan

Mr. Stewart

Mr. Schwers
Mr. Kuhn
Mr. Cochran

Mr. Wiley
Mr. White
Mr. Pehle
Mr. Thompson

Mr. Foley
Mrs. Klots

H.M.Jr:

Ed, being in charge of the thing that interests
me most at the moment, bring us up to date on
where the bill of aid to democracies stands.

Foley:

Well, I have been down talking to the Speaker
and to Sol Bloom. They were going to vote in a
few minutes on the committee jurisdiction matter,
but Martin has indicated to San Rayburn that he

will support his reference of the bill to the

Foreign Affairs Committee, and they think they

have the votes to keep it in Foreign Affairs.
Now, Bloom would like to start tomorrow, if he
can, and he would like to have Hull first and
then you. He thinks that he could take care of
the two most important witnesses in one day.

(Nr. Bell entered the conference)

8

-2Foley:

I asked him if Hull could be ready tomorrow,
and he said he didn't know, but if he couldn't
he would go ahead with you and I thought that

would be a mistake because this was a Foreign
Affairs Committee matter, and it would be much

better to start off with Hull, and he said he

would go over until Wednesday if it was necessary because Hull couldn't get ready.
(Mr. Gaston entered the conference)
Foley:

Bloom wants to have somebody sit with him all
the time and Sam Rayburn also said that the
departments should get together down town and

designate one fellow that can stay with this,
sit in the executive sessions, stay in the

hearings, and live with it right straight
through.

H.M.Jr:

Well, I agree with you. You know, I talked to
the President last night and suggested to the

President inasmuch as it was Foreign Affairs and
Foreign Relations, that Mr. Hull should watch
the thing from now on the way we have, and the
President said that he would take it up Tuesday

when he got back. I have had & call in for Hull
ever since I came back, and I have been unable

to talk to him, but I am very anxious to talk
to him, and I am trying to get an early morning appointment with him. I don't want you,
see - I don't want to be in the position - if
it is Foreign Relations, I think Hull should do

it. I think he should do it, but I want a

clean-cut understanding with him whether he will
or won't.

Foley:

Well, they are kind of - both Bloom and Rayburn
are kind of looking to us because we have been

in on the thing so far, and they want one of us
to be down there all the time.

H.M.Jr:

You take the old man's advice.

9

-3Foley:

I know it.

H.M.Jr:

I have reasons.

Foley:

I know it.

H.M.Jr:

And I think they are good ones.
(Mr. Young entered the conference)

(Telephone conversation with Secretary Hull follows)

10

January 13, 1941
12:30 p.m.
H.M.Jr:

Hello.

Operator:
H.M.Jr:

Secretary Hull coming on.
Hello.

Cordell
Hull:

Hello.

H.M.Jr:

Good morning, Cordell. How are you?

H:

All right.

H.M.Jr:

How is Mrs. Hull?

H.M.Jr:

Well, thank you, she is improving still.
Is she still at the hospital?

H:

She got up last evening.

H.M.Jr:

Oh, I'm glad.

H:

Yeah. Thank you.

H:

H.M.Jr:

I'm glad. Cordell, you remember I told you
that before I went on the Hill I wanted to

have a chance to go over what I was going
to say with you.
H:

H.M.Jr:

H:

H.M.Jr:

H:

H.M.Jr:

Yes.

And I wondered if the first thing tomorrow
morning I could come and see you and go
over what I propose to say.
Yes. When will they be ready for you to go?
Well, as I understand it, they are voting
now on the question of jurisdiction and they
seen to think that they have the vote.
Yes, I imagine they will.
And they are talking in terms of starting
the hearing either Tuesday or Wednesday.

11

-2H:

Yes, I see.

H.M.Jr:

I also understand they want to start the

hearing with you.

Well, you and Sol Bloom franed that up,
didn't you?

E:

E:

that's that?
You and Sol Bloom fixed that up, didn't you?

H.M.Jr:

No.

H.M.Jr:

H.M.Jr:

Sol said be was going to talk to you about it.
I haven't talked to Sol Bloom.

E:

Ch, haven't you?

H.M.Jr:

No.

is

Well, anybow, my idea was - I don't care when
I 5° and my idea was to discuss the course
of international affairs and our policies
and the conditions we have to desl with that
have led up to these developments of danger

H:

and the need for every possible effort here
and through Britain to protect ourselves

against it.

H.N.Jr:
E:

Yeah.

I would go over all those things and then
say that I have had - that naturally I have
not undertaken to follow the accounting
situation, none of the figures or statistics
or contracts or any of those things. The
technical side of the whole business is
something that has been handled very ably
and capably through the Treasury

H.M.Jr:
H:

Thank you.

and that you people will deal with the

mechanics of the bill and that I will discuss
everything that shows need for the bill and
need for the maximum help to Britain. I'll
go into that mostly, and so on, without going
into these particular mechanics because I
haven't studied those things any.

12

-3H.M.Jr:

I see.

H:

In fact, I've never seen anything of it. It

wasn't my place, you know, to keep up with
those things.

H.M.Jr:

Well, of course, we had a meeting here
and you will remember you were represented
by Summer Welles and Herbert Fels.

H:

H.M.Jr:
H:

Yes, I know, but they didn't bring back
any figures of any kind - no paper of any
kind.
Oh, we gave them figures.

They said you gave them off hand but didn't
give them copies of anything. But I'm not
complaining, you understand, because that
was not primarily my

H.M.Jr:

Well, it is easy enough to rectify that.

H:

That makes no difference with me except

H.M.Jr:

Well

H:

I still think you people are making a mistake
on the other matter, but that's your business.

H.M.Jr:

What is that?

H:

that as that is a good reason why I wouldn't
be expected to discuss all of that - the
needs of the British of different kinds,
what kinds and the terms of payment and all
those kind of things.

I said to Mr. what's-his-name - Phillips I said if you people have in mind to do
anything in the way of payments on any of
this five and a quarter billions during the
next twelve months or so, why now would be

the accepted time for some kind of a general

statement on that. It would help us out
tremendously politically and, I said, I'd
be willing to make a gift of $20 millions
to you as far as the merits of the thing
is concerned on this war, but all I'm
concerned about is winning the war. Right now
I'm not discuesing the other thing at all.

13

H.M.Jr:

Yeah.

H:

At any rate that's a matter with you and Phillips.
Well, did you have a good talk with Phillips?
No,
he didn't talk any. I did the talking.
He never talks you know.

H.M.Jr:
H:

H.M.Jr:

I see.

H:

I got nothing out of him that was worth a

H.M.Jr:
H:

pewter nickel.
I see.

Not a figure of any particular point. I
think you'll have to deal with Britain through
somebody else, just privately speaking, when
you get down to real dealing.

H.M.Jr:

I see. Well, now, Cordell, I still would

like to come over to see you.

H:

Oh, yes.

H.M.Jr:

The first thing tomorrow morning. How early

H:

Well, I can be down here around 9:00 o'clock
if you want.

H.M.Jr:

Well, 9:15?

H:

9:15, yes.

H.M.Jr:

Is that convenient?

H:

That's all right.

H.M.Jr:

H:

can you see me?

Well, I'll come over at 9:15 and then at
that time I'd like to go over what I propose
to say. Now one other thing: you and
Bloom have come to an understanding about
your testifying?
Oh, we didn't have any understanding. He
called me just informally and I told him

14

-5that you people had drafted the bill and
were handling it because it was primarily
a matter pertaining to supplying Britain
like you've been supplying her, and that
I would discuss - I'd be available if and

when meened to discuss the need for all

H.M.Jr:

this thing, which includes all phases of
our foreign policy leading up to it.
Well, I feel very, very strongly that you
should lay the foundation first before
anybody talks.

H:

Well, that's all - of course if I give them
information that they'd really need most,
it'd have to be Executive and still I don't
like to go without having - I don't like to

agen the thing without the public getting a
somewhat elaborate manuscript.

H.M.Jr:
H:

Because you know how enthusiastic I was
when you went up there.

Well, I know, but this is - you see, the
whole thing, Henry, is going to be on your
private list, not don't get that out of your
mind. The whole argument practically is
going to be on this bill - the mechanics of
it. That'11 be based on these different
things about restricting and about collateral
and BD on and so on.

H.M.Jr:
H:

H.M.Jr:

H:

H.M.Jr:

Well, that
I'm not going to worry particularly about
my part of this thing.
Well, if you don't mind, I think you're
wrong. I think that on what you say the
bill will be a success or not, and I
think it will be a success.
I won"t agree with you on that because
they're already up on that part there.
Well, they haven't heard you in some time.

15

-6H:

H.M.Jr:

At any rate you may find it very desirable
and proper to open on the bill and I wouldn't
foreclose my mind if I were you.

Well, I'll never foreclose it but I still

H:

think that after the experience I went
through with on the bill - the Stabilization
Fund - if you would do it first
Well, that was an entirely different situation.

H.M.Jr:

Well, don't

H:

You come over in the morning.

H.M.Jr:

Right.

H:

Yeah.

16

-4H.M.Jr:

Will somebody tell me why, if he wants some

figures - how long is it since Welles has been
here and Feis - that they can't - has either
Welles or Feis or anybody else in the State

Department called up anybody and asked them what

the figures are?

Cochran:

The only request I have had was just after Sir
Frederick had been in here the other morning and

Feis called me, and I said, "Well, Phillips is

coming over, and he is trying to get an appointment today, and I gave Feis two figures then on
which he was uncertain, and when I asked Phillips
just a while ago, he said that he had seen Mr.
Hull, and he told me Saturday night that he had
seen him. I said, "Did you have a good talk?"

He said, "Mr. Hull did all the talking. I didn't
get a chance," but he said that he had asked him
for some more figures and asked if it was all

right to give them in writing, and I told him
to give anything that he asked for.

H.M.Jr:

Well, when you leave this room, will you call
up Herbert Feis and tell him - better yet, I
think the thing to do is to get over to Herbert
Feis today or this morning, within a couple of
hours, whatever the figures are that we have and
put then in his hands and say, *Please get these

to Mr. Hull," or better yet--

Cochran:

You (White) gave him that table that day, didn't
you?

H.M.Jr:

I thought we gave him some figures.

Bell:

No, they weren't passed around.

White:

Well, there was one.

H.M.Jr:

There were two meetings.

White:

At the first meeting we passed around tables, and

17

-5set the second one, we said latt's Have in - =
heart, but the first meeting Indi the
which, I take it, they are must interested in
manely, what are the various of assets
which they have and what are their month
amounts, and I seen to remember definitely Re:
=omenting on them.

H.J.J.

Teall, anyhow, I rest a Letter INSURED for =
Harry, see. It ought to be want -

Mardell: I - enclosing the Intest

figures that we have - the financial station

- furnished to us by the Treasury,

SED that he can't go up on the 4600 and my that
line doesn't know. He is just as and as not in
say that.

Young:

H.J.J.

Gaston:

You sent Secretary Hill that the indic if the
three British future programs in it.
Mrs. Klots, will you have SOME - R through
and see what I have sent Hill in during
the last two months OIL either British orders =
British finances, you see?

Ito you want to add that these - the figure
that we showed to Mesars. Telles and Fails at
our meeting on such and such E data

Cochran:

Too,
because some you will give are subsequent
the that.

H.M.Jre

II don't think so.

White:

I think the figures to give the are mily Class
which the British have given - Such estimate
- the have made on one OWEE Handling BELLEE availaile =

them, the same as they are to us.
Their statement is December II that one sheet.
Thita:

If
their income and outgo, yes. Te - give Sex
that

18

-6H.M.Jr:

Ball II think if - could have an inventory, say,
I have sent you the following things. Now, in

view of our telephone conversation, I SII sending

you this other thing." I might to get it over
the this afternoon. You can see he doesn't
ment the hendle the bill. You can see also

what happened as far as Phillips went. I don't
get the whole thing.
Foley:

H.M.Jr:
White:

Well, I don't get it either, Mr. Secretary, but
I in think it would be criminal if you let this
g by neglect.
Ia are is going to do that. Don't worry about
that
Ism"tt it possible to have two men, State Depart-

month and Treasury IMM there? My should the

Treasury be the only one to carry the ball on

thist
H.M.Jr:

We wor" fin it. It is the penalty I have paid
I office for fining a job too well in Washington.

It regularly. When you do a job really

well, somebody is always jealous. with the help
of Folley and his people and everybody else -

I HEART the thing NES just done absolutely on
time and ame faster than it WES ever done before,

the President didn't have to lift his little

finger, we didn't even bother him with the
changes. You remember Bill said, "Can you do
this without showing it to the President? I

said, "Yer, I will take the responsibility.

Ne make half E doren changes. When I came to

the President and laid it on his desk and said,
"Tare is the bill," and he looked at me and it

SEVEL hix all this anory. The must have made at

least a helf inses important changes. Well,
dam"t MORRY about If letting go. The bull's eye
is there END I CEE see it day and night. Well,-Bell:

Hillcome aid call 20 Saturday.

19
7Foley:

And I promised them I would see then just as soon
as this vote was over and outline the presenting
and so forth.

H.M.Jr:

Don't change one bit, see, until we get a chance
to see the President and see this thing.

Foley:

Now, the way it shapes up, I should think it
would be better to wait until we had to start
these hearings.

H.M.Jr:

Oh, yes.

Foley:

Because I don't think we will all be ready tomor-

H.M.Jr:

No.

Foley:

The Speaker said it was impossible to hold joint

row.

hearings on this bill, it would hurt the bill to

do it that way, and he says he can act much faster
than they can over on the Senate side. The
Senate may drag this thing out a month. He will

get it out - he said he could get a vote this week,
but he doesn't think it would be good to do it

because then they would say we were railroading

the thing and we were putting - he said the one
thing that Martin wanted to know was whether or

not there would be full hearings on this. He
told Martin that there would be plenty of opportunity for the members to talk to you and to
Hull and to Knox and Stinson and Knudsen, but

they weren't going to call in Tom, Dick, and

Harry from the outside. Martin said that is all
he wanted. That was perfectly all right, and he
would go along with the program.

H.M.Jr:

Well, tonight I wish the following people would
hold themselves in readiness for me and that is
Bell, Foley, Walter Stewart, Cochran, Kuhn, and

White at eight-thirty, subject to any change,

at which time I will go - I would like you to

20

-8listen, Bell, in case I got sick or anything, so
that you can carry on. Don't you think so?
Bell:

Yes.

H.M.Jr:

I mean, I am going to carry the brunt of it,

but just in case - you know, something happened.

Bell:

I will be available.

Foley:

Well, Ferdie and Oscar Cox yesterday outlined--

H.M.Jr:

Well, you can bring Oscar with you.

Foley:

dimensions of what they thought you ought to
say, and they have been working with Philip Young

and Harry.
H.M.Jr:

Well, bring Philip Young and bring Oscar Cox,
and bring the Stenotype.

Bell:

You have an engagement Wednesday morning which I

H.M.Jr:

What is that?

Bell:

Open market.

H.M.Jr:

Well, let's wait and see.

Bell:

It will be all right just so you don't change

assume you want to shift to the afternoon.

days because they are coming from out of town.
H.M.Jr:

If we had somebody sit, who is your candidate

to sit for Treasury?

Foley:

Cox. They will have Beaman in there, too.

H.M.Jr:

It is a funny situation. He can carry it. We
have carried it so far.

Foley:

Sure we can do it.

21

-9H.M.Jr:

I suppose it is a financial matter, I don't know.

Bell:

I think SD.

White:

They don't have to have anybody important, but
they certainly ought to have somebody, even if

Cox carries the ball.
Foley:

This is what I would like to see happen, Harry.
I would like to see State, Treasury, Mar, and
Navy agree on somebody to represent then all,
and them he could clear with their representatives the changes, but only have one Yellow that
the chairman of the committee has to work with
and have him in the executive sessions. You
can't have too many people in the executive
sessions. The committee doesn't like it.

White:

Are two too many?

Foley:

Well, I think we could have two.

H.M.Jr:

(To Mr. McKay) Suggest to Mr. Stinson that when
I came at 9:15 tomorrow morning, - I mean to Mr.
Hull, that he have Mr. Stimson and Knox present.
I would like Know and Stimson present then I am
there at 9:15 tomorrow morning.

Schwarz:

Could you get anybody representing the White

House?

H.M.Jr:

No. They never do that.

White:

I don't think you can, by any stretch of the
imagination, say that this isn't as much the
responsibility of the State Department as it is
the Treasury. There are problems of international law involved which they are raising.
There are problems of foreign policy. I don't

think it is only theirs, but I certainly think

it would be a tactical error from our own point
of view not to have them have somebody, it

22
- 10 doesn't matter how unimportant he is, but
they should have somebody sitting with a
Treasury mam - it.
Foley:

Well,
it is E joint process. There isn't any
doubt about it.

H.M.Jr:

I planted the seed last night, and I think the
President is going to take care of that. We
have got to see that Full goes up there first.
You remember how, until the last minute, he
tried not to to there first on the Chinese
thing.

Foley:

Yes.

H.K.Jr:

And we just shored him into it.

Foley:

Bloom says he will do anything you want, but he

H.M.Jr:

I am just positive Hull should go first.

Foley:

Bloom says, "don"t think that I know anything
about it, because I don't, and I want you to

doesn't want any mistakes.

tell me. Don"t consider my feelings at all. I

don't want to make mymistakes at all, and you
just tell me what you went me to do.
E.M.Jr:

I don't need anybody there. Hull should go on

first. I can't understand this false modesty
on his part, that he doesn't want to do it. I
just can't understand it. Now, while we are

waiting, I dom" know who does the job, but we
only have their balance sheets as of December 1,
and I want it as of January 1. Who does that
for me?

White:

Well, I was getting it, but we will need some
figures from Phil Young and some from George.

There are several sources of data that we need

in order to get up the statement. It will be

easy to get IF the statement after we get up

23
- 11 the figures.
Bell:

Harry got up the last one.

White:

Well, it was a joint product.

H.M.Jr:

Well, who--

Bell:

Harry carried the ball on it, but the other two

White:

It is a simple task if we have the figures.

H.M.Jr:

I am serving notice that I want it.

White:

We have already begun.

collaborated.

(Telephone conversation with Secretary Stimson
follows)

24
January 13, 1941
12:50 p.m.
H.M.Jr:

Hello.

Operator:

Secretary Stimson.

Henry L.
Stimson:

Hello, Henry.

H.M.Jr:

How are you?

S:

All right.

H.M.Jr:

Harry, I've asked Cordell Hull to see me
and you and Frank Knox at 9:15 tomorrow
morning.

S;

What's that?

H.M.Jr:

I've asked Cordell Hull whether he would
see you, Knox and me at 9:15 tomorrow

morning. Hello?
S:

Yes.

H.M.Jr:

Can you hear me?

S:

Yeah.

H.M.Jr:

The reason is this - he's given me the time
already, see. Cordell is taking a very
definite stand that the English must put
up collateral. See?

S:

Yes.

H.M.Jr:

I disagree with him. Hello

S:

Yes.

H.M.Jr:

In the first place they haven't got any
collateral except collateral on - outside
of the United States, and I don't think
it is the kind of thing we ought to ask

anyway. Now I don't know how you feel but
I wanted you there to express your own
opinion the way you always do. Hello?
S:

Yes, I'm on. I's listening hard.

25

-2H.M.Jr:

Because my own feeling is to go up and tell

a straight story - this is what we've got,
this is what the English tell us we've got,
and not insist on collateral as though we

were running a pawn shop.
S:

Yes, well of course you know my opinion but

it doesn't help in the parliamentary situation.
My, I would go much further than any of you.
I think that an immediate alliance would be
the best thing possible, but that doesn't
help.

H.M.Jr:

S:

H.M.Jr:
S:

H.M.Jr:
S:

H.M.Jr:
S:

H.M.Jr:

S:

H.M.Jr:

No, but Cordell has got it in his head - I've
tried my best to have Herbert Feis get it out
and Herbert tried to - that the English have
$18 billions worth of securities and Herbert
has been working on it to try to get that
figure out of his head.
How much does he think they have?

$18 billions.
$18 billions? B.
Yes, $18 billions.
Well, of course I don't know the facts
about that at all, but I should have thought
that it was preposterous.
Well, we have the facts
But I don't know. I couldn't stand crossexamination a minute on that.

Well, I can, and it is preposterous. But
the point is, it's the method of approach
and frankly I'm asking you in to say whatever
you think because he's - it's going to be
my testimony, I'll settle and say what I have
to but, naturally, Cordell having a different
opinion I told him I'd come over and listen.
All right. Well, does he want me there?
Well, I've asked to have you there and I'm

sure that you'll get a telephone call.

26

-3S:

H.M.Jr:

Well, of course, I'll come
But I wanted to explain to you what it is:
it 8 what attitude I should take in regard
to what we should ask for England in return
in connection with this bill. Now I don't
feel we should ask them for anything other
than to pay for the orders they already have
on hand, and after that I think it should be
on a lend-lease basis or any basis that they
want.
Yes.

S:

H.M.Jr:

And personally where I differ with Cordell,
I don't think that Congress gives a damn
and he says that he thinks it is the kernel
of the whole thing.

Yes. Well, I don't think it is the kernel

S:

H.M.Jr:
S:

H.M.Jr:

of the whole thing at all.
I don't either.
It may be one of the kernels that is entering
into the opposition in the Congress and the
question would come up there but I think it
would probably, if they put in anything
that was at all like a rigid necessity for
collateral, it would probably defeat the
whole purpose of the bill.
Well, anyway, I've asked Hull to get word
to you to be there and I hope you can come

because I'd like the benefit of your advice.

S:

H.M.Jr:
S:

I was going to tell you one thing to forestall
any apprehensions I fear on your part, but I
don't think that after next week it'11 be
necessary but I'm so anxious not to have you
troubled by anything that I'm doing. I
was invited by Purvis to come to dinner
with him tonight to talk over things.
Good. I'm delighted.

Is that all right?

27

-4H.M.Jr:

Yes. He told me he was going to do it,

S:

Well, you know I'm not going to trench on

and I'm delighted.

your property anyhow.

S:

You can't. It's impossible.
All right.

H.M.Jr:

I'm delighted.

S:

All right. I'll be there tomorrow.

H.M.Jr:

Thank you.

H.M.Jr:

28
- 12 H.M.Jr:

He says, "How I feel, I would just sign an
alliance with him, that is all." He is a grand
fellow.

Cochran:

Phillips had dinner with Jones last night.

H.M.Jr:

You know where all these dinners come from, the
arrangements and all?

Cochran:

Yes, I know.

H.M.Jr:

I mean, I told Phillips to get busy and go out
and do some selling. I have gone as far as I
could. I told him he should see Hull, Stimson,
Knox, and Jones, and he is doing it, but I say
I have gone as far as I could and Hull has this
18 billion dollar thing in his head, and then
I called up Herbert Feis and tried to get him to
dynamite it, and Herbert said he had had the

most disagreeable half hour he had almost ever
had since he had been in the State Department

with Mr. Hull, trying to get the figure out of
his head, but I told Phillips - I am not telling
all of these people - it was my suggestion, but
it sort of spoils the flavor of being invited to
the British Embassy, but they are going there
tonight so that finishes it. He will have seen
all four of them by tonight. Well, anyway, you
people can see some of the troubles. I haven't
given anybody a chance to unburden themselves.

Again I caution you, please be careful. Beware
of the columnists hiding behind the columns. I
have noticed a distinct improvement in Kintner
and Alsop's articles the last week, the fact

that they don't seem to have their facts right.
I am looking right up at the ceiling. (Laughter)

They know there is an Executive order around,

but they haven't got it quite straight. Didyou
read it? It is very funny. They know there is
one to Knox, and they have just - Maxwell -

they haven't quite got it right, and they just

kind of - you know, around.

29

- 13 Bell:

New York called this morning and said that they
had a rumor from Brazil, China, and Sweden, that

the United States was going to freeze the rest
of the world.

H.M.Jr:

Well, if any of you fellows hear that I am having
lunch or supper with Martin Dies, don't be surprised. He is the only pal I have got in town.
I will take care of Knox, and if any of you want
to see me, I will be available today or tomorrow,
but I wanted you to know what I was doing, so

if I don't see you at least you won't think I

am loafing. O.K.?
Cochran:

The British have given us some more material.

H.M.Jr:

Right. Well, Merle, at 2:30 Sir Frederick is

I will bring it in this afternoon.

coming and I want White and I want Walter Stewart

here and Bell, if he is not busy.

30

January 13, 1941
12:57 p.m.
H.M.Jr:

Hello.

Operator:

Secretary Knox is at lunch with Mr. Forrestal

in Mr. Forrestal's office. Want me to call

him there?
H.M.Jr:

Yes, call him there.

Operator:

Right.

1:00 p.m.
H.M.Jr:
Frank

Hello.

Knox:

Hello, Henry.

H.M.Jr:

Frank, I hate to bother you when you're
eating pig knuckles and sauer kraut.

K:

Well, it's no trouble at all.

H.M.Jr:

I'll be enappy. I've asked for an appointment,

and I have it, tomorrow morning with Cordell
Hull at 9:15, and I asked him to have you
and Stimson there. The purpose of the

meeting is this: I want to rehearse my
testimony on this bill, and Hull and I have
a fundamental difference. He wants me to
ask for collateral and I don't, and I want
to air the whole thing before the three of
you and get the benefit of your advice.

K:

All right. Did he tell you that both

Stimson and I were going to meet him at 9:30

anyway?

H.M.Jr:
K:

H.M.Jr:

He did not.
We have a meeting at 9:30 Tuesday morning
with him.

Well, he must have forgot it.

31

-2K:

All right, I'll be there. 9:15 tomorrow

H.M.Jr:

That's what the appointment is, yes.

morning, Henry?

K:

H.M.Jr:

At Hull's office.
At Hull's office and the purpose is I'm

K:

going to rehearse my testimony.
I see.

H.M.Jr:

You see?

K

Yeah.

H.M.Jr:

And Hull disagrees. He wants me to ask for

K:

collateral and I don't.

Well, I'm afraid I - as you may have guessed
from our conversation the other day - I
rather sympathize with Hull's point of view.

H.M.Jr:

Well, I want to listen. That's what I'm

K:

All right.

H.M.Jr:

Thank you.

K:

All right, Henry. Good-bye.

H.M.Jr:

Good-bye.

going over there for.

32
January 13, 1941
2:32 p.m.
H.M.Jr:

Schenker.

David
Schenker:

Yes, Mr. Morgenthau.

H.M.Jr:

Now what I can't seem to get straight -

S:

Yes, I can explain that in a moment.

your message to Harry White.

The Quinn group, Cy Quinds group, have
prepared to come down today, tomorrow and

start doing business immediately. Then

you've got the Arthur Bunker group who have

a little difficulty with the Quinn set-up,

who would like to talk to you about it and,
if I may make the suggestion, I think you
ought to see him for a few minutes and listen
to them. I think we've got it straightened
out. Now you don't want the group that is
ready to do business, do you, tomorrow?

H.M.Jr:
S:

No, because I don't know whether the English

are ready.

Yeah. Well, then I'll have the other group

H.M.Jr:

down tomorrow just for a few minutes. May If
Sure. You think I ought to see them?

S:

Yes, I think so.

H.M.Jr:

3:00 o'clock tomorrow?

S:

Yes. Thank you.

H.M.Jr:

Thank you.

33

January 13, 1941
3:15 p.m.

RE AID TO BRITAIN

Present:

H.M.Jr:

Mr. Young

Mr. Purvis
Mrs. Klots

Everything is going along all right. Do you
want to tell me on the record or off the record
some of the things that you have been doing
behind the scenes? I can't remember these things.

Purvis:

As a matter of fact, here is a thorough indication. I don't think that should go on the indiscretion
record (handing paper to Secretary).

H.M.Jr:

Good. May I read it now?

Purvis:

Yes, please. I got on my horse and went

H.M.Jr:

Now look, I haven't got the time, but there are
some things in here that I don't agree with.

Purvis:

Ithat-would like very much to get them, but I thought

H.M.Jr:

I want you to have that, and I'll tell you what
I would like you to do. I would like you to if you are not busy - to come to lunch tomorrow
at one o'clock.

Purvis:

That would be fine. I wanted to show you this
because I - don't forget, I have got a very

difficult situation over there. I am trying to

/

34

-2break through it first. There are some things
there that-H.M.Jr:

Yes, very definite, that I would like to talk

Purvis:

Isn't this the way to play it?

H.M.Jr:

Yes, but you are going to have to go further,

Purvis:

Are you talking about direct sales, because
please remember that sale of a hundred million
dollars now or something of that kind - are you
speaking of that? Because this was one dable. able

to you on.

at least in a gesture.

Phillips sent it off and I had sent it before
I made this out, another, in which he says that
Purvis insists, and I agree with him, that the
Secretary's view in regard to the sale of a substantial measure of the direct investments be

done and done immediately.

(Discussion off the record)
H.M.Jr:

Let me tell you, this is what I am going to say
on the Hill, and this isn't what my people tell
me. In round figures, you people have nine
hundred million dollars worth of direct investments.

Purvis:

Yes.

H.M.Jr:

In this country, you see. You have got in round
figures 6 hundred million dollars worth of our
securities, or a billion and a half. Those are
the securities which I have in mind, which are
here to pay for the orders you already have
placed.

Purvis:

Correct.

H.M.Jr:

You see?

35

-3Purvis:

Correct. I get you.

H.M.Jr:

Do you see.

Purvis:

That is right.

H.M.Jr:

After all, they are going to say - and by the

way, Mrs. Klots, Mrs. McHugh was working on
Klots:

that stuff up until five o'clock Saturday.
That is all finished.

H.M.Jr:

I should have that for tonight.

Klots:

Home?

H.M.Jr:

Yes.
If I get a chance, I will look at it before,
but I doubt it.

Klots:

Do you want the stuff pulled out or went the

H.M.Jr:

Just the index. And I just want to ask here on
one particular date that I asked for.

Klots:

I will go out and get it.

H.M.Jr:

There was one particular date that I served

index?

notice, and if you could get that date.

Ilots:

Yes.

H.M.Jr:

Now, I am not going to say - I will say those
are direct investments, you see. "Now, gentlemen, the American manufacturer is supply protected on the orders that he has on hand." That
has nothing to do with your cash balances, your
gold, or anything else, you see. We also figure that
outside of the United States it - the best figure
is approximately 10 million dollars. That is the
figure I am using.

36

-4Purvis:

That are they?

H.M.Jr:

Largely sterling securities, the gold, the
Canadian stuff and all that, but I hope they

won't ask for the breakdown because I don't
want to show the Canadian gold and all of that.
Purvis:

In the Empire as a whole, it is as much as that?

H.M.Jr:

Oh, yes. Now, that is the picture, gentlemen.
Now, as to their cash picture, they have enough

out of this billion and a half for taking the

gold here and taking advance payment on their

wool and this and that and the other, to get

Purvis:
H.M.Jr:

along all right.
And if you will fill what they have already
contracted for.

Yes. But as to the future, the things that we
are talking to them about are the 10 million
dollars outside. Now, whether they can sell
their stocks or whether they are going to put
up anyting of what they hold in the Malay
Straits and South Africa and the rest of it,
what good is it to us? If they lose, how are
we going to collect on a gold mine in South
Africa or a tin factory in Malay if they lose?
If they win and the stuff has been advanced, all
of this helps them do business to pay us back

afterward, but I am for leaving them that because if they lose we can't collect anyway.

Purvis:
H.M.Jr:

It is their working capital and their journey-

men's tools.

I don't want to go down below that, and I have

told Phillips he has just got to trust me. Now,
Hull keeps using a figure of 18 billion, and so
what is the difference if they put up two or
three billion collateral. Now, what I told
Phillips, and I think I am right, I don't think

37

-5that Congress is interested in this. What they

are interested in, should Mr. Roosevelt have
this power or shouldn't he.
Purvis:
H.M.Jr:

Oh, I think that is very penetrating.
See?
That is what they are interested in and
all the rest of this is - they may say to me,
"Well, how could you let them buy this stuff
when you knew they didn't have the money?"

Purvis:

And that is where you have to be a guardian.

H.M.Jr:

And that is where I am going to say, "Well,

Purvis:

Yes, and therefore - I think that is a sound
line.

H.M.Jr:

But that doesn't take into account the cash which
you have here, private balances, Government balances, and all the other balances which are a

there is a billion and a half dollars in the
United States, which is worth a billion and a
half--

part of your insurance and all the rest of the
stuff, you see, but I want to explain that to
them.

Klotz:

This is the index. This is the date on which
you first served notice. (Referring to Press

Conference dated October 14, 1940) Then again

here. (Referring to transcript entitled "British
Purchasing Program," " dated October 28, 1940)
And then a third time. (Referring to transcript
entitled "British Purchasing Program," dated

October 29, 1940)
H.M.Jr:

Which is the first?

Klotz:

Oh, that is a Press Conference, Mr. Morgenthau,
at which you mentioned it.

38

-6H.M.Jr:

Did I?

Klots:

Yes, you must have. I remember that ayself.

H.M.Jr:

Will you find it?

Klots:

Yes.

H.M.Jr:

I don't remember that one. I remember this.

(Referring to transcript entitled "British

Purchasing Program," dated October 29, 1940)
You see, I went on record on October 29, American standard equipment, with Knudsen and Stimson.

So you see, I am in a good position.
Klotz:

(Reading from Press Conference dated October
14, 1940) The only comment I have on this and so

forth.

H.M.Jr:

I don't remember that. This is what I want.
(Referring to transcript entitled "British

Purchasing Program," dated October 29, 1940)
Klotz:

Yes.

H.M.Jr:

This is all right. These two.
Well, I will read this and I will see.

Klotz:
H.M.Jr:

Well, so let's do this again because I want you
to know what my mind is. We are not quite eye
to eye on this thing.

Purvis:

I am interested to hear that. If it were the

H.M.Jr:

hundred million of demonstration, willingness,
I think I have succeeded on that, but that was
in a separate cable where I was quoting.

That is all to the good, and I got word from
the SEC that this one investment group are stand-

ing by, ready. Phillips served notice - I told

39

-7him they are ready to do business, and I said,
"Set in touch with them and tomorrow we will
have a second group."
Furwis:

Good.

So that is started.
Furwis:

That is fine. That is on the marketable securities or the direct investments?

h.M.Jr:

Direct.

Purvis:

So we have there straightaway which you want to

Purvis:

be able, as I understood it, to say to the committee, "This an evidence of the way it is being
treated."

That is right.
I have gone after it.
They first turned you down?

Purvis:

Oh, yes. I went into this first, you see. On
Friday I got Phillips first to make his series

of cables. He has got a cable there which quotes
me very strongly on this question of giving you
was you feel is the thing, a demonstration sale
to show that the thing is being done. That has

since, with some difficulty, found its place,
and I take it that Phillips has told you that,

hasn't he?
H.W.Jr:

Tell, he didn't tell me his troubles. You know
Fhillips. All he told me was, he is ready today
and that they are ready to sell 50 to a hundred
million dollars.

Purwis:

That is as recent as eleven o'clock this morning.

H.K.Jr:

They are ready to sell 50 to 3 hundred million

40

-8dollars worth of securities and I told him the
investment group are ready to buy and I got my

notice at 2:30 that they are ready to buy.
Purvis:

I think we have broken through.

H.M.Jr:

Sounds good to me. Now, what I would like to do

at this stage is bring Philip Young in. He is

desperate about something that he needs my help
on.

Purvis:

Yes. I think we have got to orientate it, and
I think it needs getting the War Department into

it.

H.M.Jr:

I don't know what Phil has.

Purvis:

I think we are in a somewhat difficult situation
in that the War Department is asking our men to

go over and talk about this balance of 230 million
dollars. We are sending word across to Phil

Young saying, *We have been asked to go over.

Are you going to have a representative there?
What would you like?" He is telling us to go

ahead across. My men are then coming back to me
and saying, "We can't tell the War Department
anything because we don't know what the finan-

cial negotiations are that you have with the
Treasury, but this is what we are talking about

and I am scared about it. I would like to see
the feeling - have the feeling that the Treasury
and Lovett and Forrestal, whatever it is, or
McCloy, whatever it is, were coming in so that
we are dealing with it with our combined brains,
and I would rather hope that we could then pre-

sent to you some recommendations that would save

your time, but I mean it is not our affair. It

is the-

H.M.Jr:

Well, the thing - let me - let Phil do whatever is
the easy one first.
(Mr. Young entered the conference)

41

-9H.M.Jr:

What is the particular thing, Phil, you said
you needed, something about engines?

Young:

Yes. This morning the Mar Department is putting
the heat on. A joint program has been worked
out in both the case of Studebaker and Buick,
as you know, for building Wright and Pratt and

Whitney aircraft engines, the large size. That

has been going on since about September or October

when we first started talking about working out the
deal. Jesse Jones has gone ahead and arranged

the plant facility contracts for the expansion

of Buick and Studebaker. The Army is ready to

sign up its contract. The British have their
contracts all negotiated, as I understand it,
and they are practically ready to sign.
Purvis:

Yes.

Young:

Studebaker, they are ready. Buick will be ready

H.M.Jr:

How much horsepower is the Studebaker engine going

Young:

That will be the Wright 2600, which is the big
engine. They are about the biggest engines.

H.M.Jr:

The biggest engines?

Young:

Yes.

H.M.Jr:

Both Wright?

Young:

No, the Buick is Pratt and Whitney.

H.M.Jr:

But the largest horsepower?

Young:

Yes, they are the big engines.

H.M.Jr:

They are over two thousand horse.

shortly.
to be?

42
- 10 Young:

Yes, sir, they are the two thousand size.

H.M.Jr:

All right.

Young:

The Mar Department is putting the pressure on
because both Studebaker and Buick say they can't
go ahead and make firm commitments for their
suppliers, who in turn may have to have increased plant expansion, for a certain number

of parts, a certain number of forgings,et cetera,

unless they can get a firm commitment on the

part of the British with the contracts signed.
I talked to Mr. Curtice, who is the President
of Buick, over there this morning and he feels
very strongly that they can't go ahead unless
they can get a contract signed with the British.
The British are in a position where, despite
the fact that these negotiations started quite
sometime ago, they cannot sign a contract under
the present instructions.
H.M.Jr:

What are the instructions?

Purvis:

Sign no contracts.

H.M.Jr:

From whom?

Purvis:

They can negotiate contracts up to the point of
signing.

Young:

Those are your instructions?

H.M.Jr:

Say that again.

Young:

Negotiating contracts up to the point of signing,

Purvis:

When I can back, I can into that situation.

Young:

Which was your December 19 Press Conference.

but not signing them.

Both of those contracts for those engines were
included in the general aircraft program which

43

- 11 you want to get underway.
Purvis:

Yes. Eith a capital commitment of 46 and 36 mil-

Young:

Yes. The down payment that the British would
be required to put up on both of these contracts,

lions or something of that kind.

calling it a third down, would run about 38 to
40 million dollars.

H.M.Jr:

Just do it another way. How many engines will

Studebaker make altogether and how many for
the Army and how many for the English?

Young:

Studebaker is six thousand engines, four thousand

H.M.Jr:

And--

Young:

And on Buick, I think it is three thousand and
two thousand, a total of five thousand.

H.M.Jr:

Hell, the answer is very simple. The answer is
very simple. It is up to the Army to order

for the British and two thousand for the Army.

them.

Young:

The Army hasn't got the money to order the additional number of engines.

H.M.Jr:

Tell, it is just too bad, that is all.

Young:

million dollars which can be returned.

H.M.Jr:

Can be what?

Young:

Which is unexpended appropriation for aircraft,

Now, the Navy has somewhere between 50 and a 100

and they have got a similar amount unexpended

for ordnance, so I found out this morning.

Whether or not that could be made available
and the Havy could order these specific engines,
I don't know.

44
- 12 H.M.Jr:

Well, what I would do is, if you can get have you found whether you can get any action
out of Lovett?

Young:

On these engines?

H.M.Jr:

On anything.

Young:

Oh, yes, he has been very cooperative.

H.M.Jr:

All right then, I would say this to Lovett,

that you have talked to me on the present status
and we are not far enough along, that the Eng-

lish could do this sort of thing, but isn't

there some way, possibly, that the Navy can do

this thing, do you see, with the understanding
that when this bill passes that the Army will

take this contract over because some of these
engines are for the British anyway.
Young:

The Army will take them over from the Navy.

H.M.Jr:

Yes, and reimburse them.

Young:

I think that is the only possible chance at the

present time because that is the only place
there is any money.

H.M.Jr:

And there is no particular reason why the Navy
shouldn't order them for the British anyway,
just as much as the Army should order them.

That is my answer. I am not going to ask the
British to - put up how much?

Young:

About 40 million dollars.

H.M.Jr:

Well, even if they had it - I mean, here is the
Army, got this scheme whereby they are trying
to cancel contracts and take them over and get
you (Purvis) back some money, you know.

Purvis:

That is right.

45
- 13 H.M.Jr:

Now, this leads up to this point, and then if
I haven't satisfied you, you come back again,

Phil. I mean, if I haven't given you a satisfactory answer, you come back. This leads to
this point. This is what is happening, as I
get it. What the Army is doing is, they are
pushing for those things which they are short
of. They are not pushing for the things that
you need the most.

Purvis:

That is right.

H.M.Jr:

Right?

Young:

Yes, I am sure of it.

H.M.Jr:

Now, that is what I sensed. Therefore, I said
to you (Purvis) this morning and I say it to
you again, tell me what are the things, standard,
American things, not the non-standard ones,
but the standard, American things, which you
need the worst which take the longest to build?

Purvis:

Yes.

H.M.Jr:

Then what you ought to do is ask for a meeting.
I would start with Knudsen, which I can start

here if you want to. I would be glad to say,
"Now look, Bill, let's talk turkey. The Army

is doing so and so," which I am sure he doesn't
know. They are pushing for things which they

need the most. "But this is what the English

need and you heard the President. You were

there Thursday. I wouldn't let it go too long.

You were there Thursday." is to what the English
need, we should go ahead and Jones should build

the plants and get ready, pending what action
should take place, and that was - I had this

feeling, that it was very difficult, but we did
get that out, and present were Stimson, Knox,
Jones, Knudsen, and myself. So let - by having

46

- 14 Inulsem here and letting them know that the

Liny is doing - most likely the first time he
finds out about this horse trading which is
going on, which is getting the Aren in the
position - they need 50 caliber guns, so they
are perfectly willing to have the contract
canceled and take it over.

Purvis:

Insetly.

.....

3mt what are the things that 700 meed:

Purvis:

Yes.

1-3 if you could say to me, Lock, these are
the things that we want, in view of =1st the
President said Thursday,

"Now,

Bill, will

you take this thing and carry the ball for us,"
700 see, and : think you will find be will do

it.

Purvis:

.. have three difficulties, : Secretary.
You see.

Purvis:

....r

Yes, : see your point.

Tow, I wanted to give - and this brings out this

viole thin you see. It would be & Histoke to
60 this engine thing. If the Area wants it
baily enough and they need these engines badly

enough, I would force their hand on it. I mean
you can't in one minute say you haven't got this is only for it own record - enough zoney
to pay their bills on Monday unless we give
them credit for this gold today, and the next
thing say, "How much of these two contracts
-

how much do they require:

Young:

Forty million dollars down.

47

- 15 Purvis:

Well, it doesn't matter. It is a very sub-

Young:

It is about that. One is 65 to 70 million.

stantial sum.

That is Studebaker, and I think the Buick is
around 50.

H.M.Jr:

Well, you shouldn't do it.

Purvis:

We are not doing it. There are three difficulties me are in.

H.M.Jr:

Without saying everying that is in my mind, I
think you can read it.

Purvis:

Yes. (Laughter)

H.M.Jr:

What are your three difficulties.

Purvis:

Our difficulties are this. Our men are being

asked to see the War Department at 9 o'clock
tomorrow morning. They have been in there at
eleven. They are getting very embarrassed because they feel they are playing a hand which
is not frank down there, and they come to me
for guidance. When - their problem is number
one. There are the payments against existing
contracts which are going on from day to day.
There are the payments required for new product

to keep existing capacity alive, which is a
problem that Self particularly is worried sick
of because there is capacity for certain airplanes but we can't place the orders and it is
really an impasse. Then we have the things
that require new capacity, every day's delay
in which means a loss of time in the war, and
these are the ones that I take it are particularly in question with what you are talking
about.

H.M.Jr:

New capacity is what I am talking about.

48

- 16 Purvis:

But actually we have got three problems, first.
the payments against existing contract, second,
the orders that should be placed to take acvantage of existing capacity; and third, the
ones the require new capacity, and in each one

of those groups there are terribly important
items.

H.M.Jr:

You have got to save me as much as you CED.

Purvis:

Yes, I have--

H.M.Jr:

You have got to save me as much as possible

Purvis:

You can't do it all.

H.M.Jr:

I can't do it all, but are the things where

because I just--

we have capacity and which are not talcen UP,

which I brought to Lovett's attention - : think
that comes before everything else. There

Purvis:

. Jr:

Young:

Curtiss is running out of - has additional
capacity coming in in April, for instance-So much so that Self didn't include any items
in that 568 million dollars me filed the other
day for new capacity. He only incImied those
that had to come ahead for existing capacity.

If I might suggest, I think list number the,

where American factories are running out of
orders, and when I say out of orders - between

now and the first of July - is that too short$
No, I don't think so.

Purvis:

Six months is & pretty fair thing. You need six
months for most factories to look sheed at least.

H.M.Jr:

You can say from now until September 1. If there

is any factory that is running out of production

49

- 17 between now and the first of September, that is

eight months, I would like that to be brought
to
my attention first.

Purvis:

Yes.

And I think, second, where you need additional
plant capacity, the things that you want, American standards, that ought to be brought immedistely to Mr. Knudsen's attention and let him

take it up with Mr. Jomes. I don't see why I
have to sit in on that. You can work it out
with Phil.
Purvis:

The difficulty there is that the Mar Department

and the Nevy Department haven't any funds which

are available for these things lying in their

jurisdiction. Is that right

Too, the thought that they had HES that ES the
new capacity, it would be EPC.
Purvis:

I see. And that would be entirely Knudsen and
Mr. Jones, subject to the Mar and Navy giving
the appropriate thing.

I can ask them all over here. I would just as

lief start it here.
Toung=

You do run into one added difficulty here, which
is the situation you have in these Studebaker
engines, where they can't go ahead and place

their sub-contracts unless they have got a firm
order.

Phil, the only way to do this thing, and I can't
do it today, is to do what I am telling you to
do. Throw it back into Lovett's lap, this

Studebaker thing - Buick thing, you see, and
then get enough of these cases - I mean, you see,

I don't know - I haven't got E list where it

takes E new capacity, additional capacity to

50

- 18 take care of the English orders. If we had
that, I could call them in one meeting and say,
"Now, gentlemen, here is the thing, and here
are all of the troubles that the English have

pending this legislation. Here is all that

I know of." And get some of these cases one type is this Studebaker that you are talking about. Another type is where they know they
need more tanks or machine guns, new factories,

that would be another thing, and then the other
thing would be where you know existing plants
are going to run out of orders, you see.

Puris:

Mr. Secretary, taking-But I think if you had a good example of each--

Purvis:

That we CST give you very readily.

Give me & good example of each. But this is

Purvis:

going to be difficult, and I say I can only do
so much to help it. I can call them in a meeting and have you people sit in.
I think we should do a little preparatory work

E.M.Nr.

I know you have to.

Puris:

Be have got most of it done, but there is still
more to be done. Could you give me a little advice in what should our men do opposite the ar

first.

Department? They are being called across. They

don't want to spoil their good will. These

fellows have to go over at nine tomorrow morning.
I wonder whether Lovett or somebody - supposing

we were to put some lists forward? Could he

and Forrestal and Phil Young or somebody work up

something for you so that the basis for the meet-

ing is--

E.M.Jr:

I don't know what the meeting is about.

51

- 19 Purvis:

No?

H.M.Jr:

Who is calling the meeting?

Purvis:

Well, it is the har Department. They have had
one this morning, apparently, with two of our

war fellows, Campion and Tatham. They had one
on Saturday morning. I think we sent advance

notices because I put a claim in to see that
you get advance notices of all these meetings.

H.M.Jr:

McCloy is supposed to keep Young posted.

Young:

Mr. Purvis called me and said they had called

this meeting, and he asked Mr. Durand and Captain
Tathan to come over and give me a report on it

afterward, which I haven't yet received, but
that was because I had to go down--

H.M.Jr:

In order to keep this thing - let him go over
there and let's work this thing out in a day
or two. Let them go. Don't keep then away.

Purvis:

No, I see. Let them carry on as best they can.

H.M.Jr:

And you and Phil whisper in each others ears

three times a day what is going on, and let's
just see what happens, but I would certainly
let them go. Don't you (Young) agree?

Young:

Yes. I think you are just looking for trouble

H.M.Jr:

Let them go, and then let's see if we can't
pick this thing up.
Yes. In the meantime, we have still got a
little more - I told our men at the meeting this

Purvis:

if you try to do anything else at the moment.

morning you haven't quite given me what you want.

If you don't give me what you want, I can't
give you what we want. I would like to sit down

with Young now.

52

- 20 H.M.Jr:

Are you busy now, Phil? Do you want to talk

Purvis:

I will go along now if it suits him. You have

to him now?

no specific sum of RFC money in your mind?
H.M.Jr:

Oh, they have got unlimited funds.

Purvis:

I see.

H.M.Jr:

I just want to ask you a personal question.

Young:

May I ask you one other point? George is working again on steel statistics. Can George show
two people in the Advisory Commission the

British programs, one, two, and three, so that
they can help him estimate how much that means

in terms of steel industry?

The answer is yes.

.

H.M.Jr:

53

January 13, 1941
3:30 p.m.

Present:

Mr. Bell

Mr. White
Mr. Cochran

Mr. Playfair
Sir Frederick Phillips
Mr. Pinsent
Mr. Stewart

Phillips:

I got the word on the direct investments.
We understood that Mr. Peacock would be

ready at Lisbon on Tuesday. The State

Department and Mr. Cochran have been in

touch with Pan-American, and the first plane
they can get him on leaves on Sunday.

H.M.Jr:

Which Sunday?

Phillips:

Next Sunday.

H.M.Jr:

Oh, I can do better than that.

Phillips:

Then it is up to you.

H.M.Jr:

Peacock?

Phillips:

Sir Eaward Peacock. There is a fellow with

him called Hanbury-Williams coming with him
on the mission.

H.M.Jr:

Do you want both of them?

Phillips:

Yes.

54

-2H.M.Jr:

Phillips:
Cochran:

No good one without the other?

Hell, if there is only one it should be

Peacock.

We were in touch with New York, and they got
Pan-American yesterday and there isn't a

plane before Thursday or Friday. That is the
earliest plane, and they weren't sure that
that would go and today they told us that
they would take him on Sunday, on the 19th,
and then when we had the other name up, they

said they would do everything possible to
get -H.M.Jr:

The are you working through

Cochran:

Latchford, who is the Communications man in
the State Department. He has been in touch

with Pan-American here. I got Mr. Hull's

office and I told them if it would help any
you would speak directly to Mr. Hull about it

because you had asked personally for that man
to come over.

H.M.Jr:

Hell, I will just tell them. We will do it a
different way, but it is all right.
(To Yr. McKay) McKay, after Mr. Cochran goes

out of here, ask him what he has done. There
is a Mr. Peacock that I am interested in getting
over here. what is his correct name?

Phillips:

Sir Edward Peacock.

H.M.Jr:

And who travels with him?

Phillips:

Hanbury-Williams.

H.M.Jr:

THE will get the right name and find out what

55

-3Mr. Cochran has done. He has done it through

the State Department. You get in on it besides,

will you?

Phillips:

And let me know anything that happens, because

remember London is six hours off from this time

and if there is anything earlier than that, we

must know so they can get them down to Lisbon.
H.M.Jr:

You might start on it, but Mr. Cochran has been

working - find out first what he has done. You

see, Coast Guard, of which McKay is an officer,

we patrol - the cost is about a million dollars
a year to give these - it takes six cutters to

maintain this weather station between the Azores
and Bermuda, and we have two cutters on patrol

there all the time just to give these people

the weather, so when Coast Guard gets in on it,

it means something. I very rarely do it. But
I mean it costs a little over a million dollars

a year to maintain those two ships to give them
the weather. If I ever got up and had a bad

day of it, there would be no cutter - no plane
would go, if I withdrew those cutters. There
would be no plane without the weather report.

But I mean, that is the - I have no influence

other than that Coast Guard is in the Treasury

and they like to get their weather reports.

Phillips:

Well, when I heard this Friday --

H.M.Jr:

Most likely I can't do anything other than what
Cochran has already done, but I just wanted

to make doubly sure, that is all. It looks

like he has done more than I can do.

Phillips:

Well, when I heard this Sunday night, I got

onto London again to make quite sure they had
no objection If Peacock is not here for some

days for Gifford to do any preliminary work
that can be done.

56

-4H.V.Jr:

I see.

Phillips:

They agreed.

H.M.Jr:

Good.

Phillips:

Then they gave me certain assurances to give

you which I will just read out.

H.V.Jr:

Please.

Phillips:

They are as anxious as you are to do with these

investments, direct investments, all that is in
the joint interest of the two countries.
Second, they wish the discussions about these

investments to be realistic.

H.M.Jr:

Really what?

Phillips:

Realistic, and thirdly, that an unreasonable

attitude on the part of anyone concerned would

not be allowed to block an equitable transaction.
H.M.Jr:

What does that mean°

Phillips:

Well, to be sure that the price offered is a

H.M.Jr:

Oh, I see. Well, that is encouraging. Now,

fair one.

I just got word before you came from Mr. Schenker

of SEC that this first group of investment
trusts are organized and ready to do business,
so whoever the British Treasury wants to - they

are ready to begin talking now, and tomorrow he
is bringing over Mr. Arthur Bunker of Lehman
Brothers, who wants to see me; and, of course,

he says he has another group. well, if he has,

that gives you a little competition, which is

good; but the first group, the one headed by
Quinn, they are ready right now as of today,

so will you --

57

-5Phillips:

I will let Gifford know that.

H.M.Jr:

Let Gifford know that, that they are ready.

Phillips:

Now, one last point, sir. They want to give

out a statement in London because they have
got to account for Peacock disappearing, you

see. Do you wish to see the notice? I have

instructions to show it to you if you wish.
H.M.Jr:

I would be glad to see it. Do you mind if I
read it out loud?

Phillips:

Not at all.

H.V.Jr:

"In the light of statements made publicly by
the President of the United States, it may
now be freely published that His Majesty's

Government have realized and disposed of a very

rreat proportion of their gold holdings, and
are steadily realizing American securities
owned by their nationals at every opportunity.
Relying on the guiding principle proposed by
the President and continuing to do so. A
more difficult problem is presented by investments such as business in the United States
and United States companies controlled by
companies in this country whose shares are

not quoted on the stock market. His Majesty's
Government resolve to make the best possible

use of them, and with this end in view, they
requested Sir Edward Peacock, who has great

experience in such matters, to go over to the
United States and examine the possibilities
on the spot. Sir Edward Peacock will be leaving
for America immediately."

Tell, I have got two suggestions, if you don't
mind. I don't like the first paragraph, and
the second, I think I would wait to give out
this statement until - when you know he has

58

-6cleared Bermuda, he is about to arrive. Once
he has cleared Bermuda, you know he is about

to get here, and I would do it but I don't
like the first part of it, bringing in the
President twice. I think it might be misunderstood. I mean, it wouldn't help any over here
and it might do some harm.

Phillips:

Of course, they have drafted this with their

H.M.Jr:

Well, it might do some harm.

Phillips:

That second reference, relying on?

H.M.Jr:

well, it - "can realize and dispose of great -"
no, 'in the light of statements made publicly

own public in view.

by the President, which now may be freely
published." In other words, you were doing

this before the President said anything, but
now that the President has said it, you feel that

you can say this out loud. I tell you, if I

might make this suggestion, it just doesn't
hit me right. If you had time when you left
here to talk with Mr. Kuhn who is here helping
me just on this - whom you know, don't you?

Phillips:

Yes.

H.M.Jr:

I won't even say anything, but I think he
might be helpful.

Phillips:

Right. I will have a word with him then.

H.M.Jr:

You know him?

Phillips:

Yes.

H.M.Jr:

Did you know him in London?

Phillips:

I don't think I met him in London, no.

59

-7H.M.Jr:

I think if you could have a word with him.
Do you like this, Walter?

Stewart:

I think Kuhn is a lot better judge than I
will be.

H.M.Jr:

I think if you could step down. I will find

out if he is there before you leave, but I am
not crazy about it and I certainly wouldn't
do anything until you know that he has cleared
Bermuda.

Phillips:

well, of course that is a week ahead, maybe.

H.V.Jr:

Yes.

Cochran:

It will be a week before he gets there.

Bell:

Has he left London yet?

Phillips:

Well, he was going to leave London today, but
since there is no plane until Sunday, we held
him up.

Bell:

If he could get a plane Wednesday, when would

Phillips:

If he got a plane on Thursday he could leave

H.M.Jr:

There is no trouble on the planes out of London,

he leave London?

London Tuesday night, tomorrow night.

I gather?

Phillips:

No, not unless something went wrong. The plane

H.M.Jr:

Now - but you are not going to wait until
Peacock gets going, you are going to --

Phillips:

They wanted to do something before he left.

on Thursday will certainly get him to Lisbon
in time to catch it Sunday.

60

-8H.M.Jr:

Well, this group is ready. I mean, the socalled, for a better name, the Juinn Group,
which represents at least a dozen or 18 or
more investment trusts.

Phillips:

Yes. I also made sure - to make quite sure
I asked them to send out to Gifford a list
building up something like that figure, 50

to a hundred million dollars, to give Gifford
something to go on, do you see, which they
say they are doing.

H.M.Jr:

Fifty to a hundred million dollars of direct

Phillips:

That was what that group was mentioning. They

H.M.Jr:

That is all right. What else have you got?

Phillips:

Now, you asked me about that - making advance

H.M.Jr:

Yes.

Phillips:

well, I sent Cochran a letter in which I pointed
out the first big thing is a quantity of wool,
Australian wool, which it has already been
agreed shall be sent from Australia and is being
shipped with the intention of storing it in this
country. If it was possible for any United
States organization to buy that wool and the
agreement for storing does contain a provision
under which they might buy, that means a sum,
a new amount - we haven't considered it before as near as we can judge of between 130 and 150
million dollars.

H.M.Jr:

That is a tidy sun.

investments?

didn't make any condition. They simply said
they didn't want the individual names used.

statements under strategic reserves.

61

-9Phillips:

That is a big sum. Then there were those tin

and rubber contracts where the point was rather

different; namely, that you thought it might be
possible to make down payments now instead of

waiting until the goods were delivered. I

haven't got you any good figures there, because

I found I can only get the figures by going to
this International Tin and International Rubber

Committee in London, which would have loaded

the gaffer rather badly but I think Mr. Cochran
is getting some figures from the corporations
and our rough guess was that there might be in

it a total - the total deliveries still to be

made might perhaps be of the order of a hundred

and twenty million dollars, but you have got

to allow for the fact that part of that is

Dutch. You don't buy only from us, you buy

from the Dutch, so the maximum sum there, I

should guess, is 50 or 60 million dollars,
something of that kind. I have got together
one or two other items. The first of those was

lead. The could give you a hundred thousand tons

of lead from Australia at about $80.00 a ton,

roughly, and the other things are all quite
small. I went into them all. There is mica
and that sort of stuff, but they don't amount
to anything in dollars worth talking about.

Then finally, there were two other suggestions.

One was that we were ready and could look into

the question of a further shirment of tin, if

you wanted any more tin; and there is still
another transaction about cross bred wool. It
is rather complicated, and I think you had much
better get on with the ordinary wool propositions,
first, the one I mention to you, the wool which
is coming here for storage anyhow.

H.M.Jr:

Who in our Government handled the wool for
storage?

White:

Council for the Defense.

62
- 10 H.M.Jr:

Who?

White:

Under the Council for Defense.

H.M.Jr:

Not Jones?

White:

I think he advanced the money to pay for the

H.M.Jr:

Well, wouldn't the Secretary of Agriculture

White:

He would know about it, but I don't think it

storage and the shipment.
know?

was under his arrangement.

Bell:

Harry, this was British wool, wasn't it?

White:

Australian wool.

Bell:

Well, the British took it off their hands and
were going to store it here. The United States
Government haven't any interest in it, have

they, except the possibility of taking it off
the British hands.

White:

Well, the arrangement was made with the
Government and that is where they got the

H.M.Jr:

shipping costs, 10 million dollars, I think.
why don't I talk to Wickard?

White:

He would certainly know about it.

H.M.Jr:

He could find out about it. I will call him.

Phillips:

The purchase would be, I take it, on behalf
of the War Department, wouldn't it?

Bell:

Yes. It might go through one of these
corporations of Jesse Jones'.

He is the Secretary of Agriculture.

63
- 11 Thite:

One of the reserve corporati cms.

H.M.Jr:

Well, Tickard could look into it anyway.
If he is out, the man who would know about it

Thite:

is Lester wheeler. He would know. Bow much

of that wool is - has arrived, much of it, de

you happen to know

Phillips:
H.M.Jr:

I think the agreement was dated December 4,

wasn't it? It is probably just being shipped.
They are just beginning to ship it.
well, you would buy it in trensit, isn't that
the idea who could he talk to for the British
Government if Bickard said -

Phillips:

Chalkley.

Bell:

That is a high grade mool, isn't it, at that

Phillips:

Yes. It is used for making cloths and so It isn't blankets and so cm. It is very good

price?

wool.

Bell:

The amount of money you have got in there intlies

it is a pretty high price. It is sixty cents

a pound or something like that.

Phillips:

here is no price haned there. It is singly

storage. The could give you the quality, as
far as we could judge.

H.M.Jr:

Did that go through there?

Cochran:

Yes.

H.M.Jr:

How much was it?

Cochran:

A hundred and forty-two. That recresents 958.

64

- 12 E.M.Ir:

For, what about this rubber reserve? That is
UP, and the tim. who does that over in
Tational Defense, anyway? They have changed
$0 much.

Phillips:

There are two separate corporations. There is
. tim corporation and a rubber corporation.

E.M.Ir:

That is over with Jones.

Bell:

Jones has the corporation, but somebody passes

White:

- it in the first instance in national defense,
dm"t they
I think they do. It is the Metal Reserves
contration that sévances the money.

E.V.Jr:

What is the rubber thin?
(Telenhme conversation with Mr. Olmstead

follows:)

65
January 13, 1941
2:58 p.m.
H.M.Jr:

Hello.

Operator:

Secretary Wickard is out of the city until

S.M.Jr:

Well, give me Paul Appleby.

Operator:

Right.

the end of the week.

1

2:59 p.m.
H.M.Jr:

Hello.

Operator:

Mr. Appleby is at home with a cold. We

H.M.Jr:

Who?

Operator:
Operator:

Mr. Olmstead, his assistant.
Well, put him on.
Right. (Pause) Mr. Olastead.

S.M.Jr:

Hello.

H.M.Jr:

Halph W.

could reach him there if you like, or
Mr. Olmstead, his assistant, is in the
office.

Clastead:

Hello.

H.M.Jr:

This is Mr. Morgenthau talking.

O:

Yes.

H.M.Jr:

Olmstead?

O:

Yes.

H.M.Jr:

I want to get this information from
Mr. Wickard or Mr. Appleby and I'd like

66

-2-

if I could to have it the first thing
tomorrow morning. Hello?

O:

Yes.

H.M.Jr:

The United States Government purchased

- no they didn't, now let me start over

again. The British Government is sending
250 million pounds of Australian wool here

for storage under a December, 1940 agreement.

Hello?
0:

Yes.

H.M.Jr:

Now, I don't know who did it, who's handling

O:

find out from your office just who is
handling it, you see, with this in mind of the possibility of advancing to the British
the dollars for this wool in transit or even
before it leaves Australia, you see, to make
this additional money available to them.
Yes. I understand the R.F.C. is handling

H.M.Jr:

You think the R.F.C. is.

O:

Yes, but by tomorrow morning I can give

it or all the rest of it, but I'd like to

it, but I'll have to check to get it precise.

H.M.Jr:

you a detailed report on it.
I see, but you think that's an R.F.C. trans-

O:

Yes.

H.M.Jr:

Well, could you find out and let me know in

action?

the morning?

O:

Yes, indeed.

H.M.Jr:

Thank you.

O:

You're welcome.

67
- 13 H.M.Jr:

Dan, supposing I have this letter copied, you

Bell:

It is copied.

H.M.Jr:

And on the rubber, which is Rubber Reserves,
and tin, which is Metal Reserves, supposing

see.

you get in touch with Jesse, see, and find out
what the status is. You might also ask about
wool and tell him what we are interested in
and what are the chances of getting this money
to these people right away.
Bell:

I will do this just as soon as I get out of

H.M.Jr:

Will you?

Phillips:

Might I also suggest about lead, sir? I know
your lead stock is very low, and the amount I

here.

suggest, a hundred thousand tons, wouldn't bring
your stocks up to any abnormal figure.

Bell:

I will look it over.

H.M.Jr:

Would you? Tell Jesse just what is the idea and
has he any suggestions, you see.

Phillips:

Then that was all I could find that looked like
strategic reserves, but of course, there are a
lot of other things. There is jute and stuff,
burlap, which is really manufactured jute, and

cocoa, and all these things where we have got
massive supplies, far more than you could possibly

want; but if you want to place any fresh orders,

there the stuff is.

H.M.Jr:

Supposing we try rubber, wool, tin and lead
and see where we get. If we can do one, we

can do the rest. How would that be

68

14 -

Phillips:

That would be all right.

H.M.Jr:

Put the idea in Jesse's head about advancing
the money.

Bell:

Yes.

H.M.Jr:

Right away.

Bell:

It sounds more like the Chinese.

White:

That was exactly what that bill was prepared
for with the note for the other problem which

Foley raised of the Neutrality Act.

Bell:

He said as long as it wasn't a credit.

Thite:

Then there is no question.

Bell:
H.V.Jr:

The advance payment for something to be delivered

within a reasonable time.

White:

Well, this really falls under Jones, I think.
Yes, he is --

Bell:

He would have to furnish the money.

White:

He is the head of that corporation.

Bell:

He would have to furnish the money.

H.M.Jr:

Now, what else have you got there

Phillips:

I have nothing else. There was a small
proposition about Canada, but I really can't
ask you to consider it now.

H.M.Jr:

All right. I want to ask you one thing
personally. That is all.

69
THE UNDER SECRETARY OF THE TREASURY
WASHINGTON

January 13. 1941

office times

1/13/41
2030 pen

MEMORANDUM TO THE SECRETARY:

As you suggested, I conferred with Jesse Jones regarding the
purchase by the United States of some of the commodities set out in
Sir Frederick's letter of January 10, 1941. His comments regarding
each commodity were about as follows:

Wool: He said that the President had allocated to him the sun
of $12,000,000 for the purpose of paying transportation and storage
charges on the Australian wool which the British had acquired to be
stored in the United States. He said that he had turned the $12,000,000
over to the Defense Supply Corporation, which will use it to pay only
the costs of shipment in excess of what the British would normally pay
to transport the wool to Great Britain, and it will also pay the storage
costs in the United States. The Defense Supply Corporation gets for
these expenses an option to buy any part of this wool which the
United States may need. At the time this transaction was up, it was
necessary for Chester Davis to pacify certain Western Senators. He got
them to agree not to object to it if we had the option to buy only in
case the United States actually needed the wool.

I understand that there will be between forty and fifty shiploads
of this wool and that two are now on the water and five are loading.
These seven ships will carry between twenty million and twenty-five
million pounds of this wool to the United States.

Rubber: Mr. Jones said that out of the 150,000 tons of rubber

which were to have been delivered prior to December 31, he believes

that we have received, or there is on the way, approximately ninety
thousand tons, of which we have already paid in dollars for approximately seventy thousand tons. He said that he had agreed to take not
only the 180,000 tons for shipment during 1941 as specified in Sir
Frederick's letter, but he had agreed to take another 100,000 tons in
the calendar year 1941. He said that they had had some difficulty in
getting delivery on rubber as ships were not available. Also, there
was some question about going into full production. He said when they
first started negotiating with the British, production was only running
about equal to consumption requirements, but since then they have increased their production until it is about twice normal consumption
requirements. He said he thought if the British could find means whereby
the rubber could be stored in warehouses in the British Empire, he
could make payment for it immediately. This also applies to the other
commodities listed in this nemorandum.

2

20

Tim: He said that he would The gial to buy 50,000 additional toms
of tim over and above the 75,000 thems agreed upon by the Metal Reserves

Company. He said the British are way slow in getting this tin ONE its
way but if they will produce the this the will be gind to buy it.
Be called my attention to the question also raised by Sir Frederick

in his letter and that is that the raiber and tin come only in part
from British sources. I told Mr. Junes that that had been called to attention and we realised that the British would not get all of the
dollars. He suggested that the British sight make some arrangements
whereby the Dutch or other interest would accept starling in payment

for these commodities and the British could well it to us for dollars
I told him we would have this Incided into.

Lead: I asked Mr. Jones if be thought he could buy 100,000 tons
of lead as Sir Frederick had suggested that he might have that quantity

available. He called Averill Hurrism to ask him if we could use a

substantial amount of lead. Mr. Harriman said that it was not needed
for defense purposes, but Mr. James salt that he was quite certain He
could get a letter from the President authorizing him to buy this addittional stock of lead and he would The willing to do that if we decided
the British needed the money immittately.

He also said that we sight Bank into the question of sinc.
Mr. Harriman suggested we sight the same additional quantities of since

if it is available any place. This committy was not mentioned in
Sir Frederick's list. We should Bank into this.

Mr. Jones said that he would like to have a copy of the list of
commodities given in Sir Fredactor's letter and that be would Look into
the stocks of those commodities in this country to see if we could Have
some of them. I have given his a engage of Sir Frederick's letters
Mr. Jones also said that the would ask his lawyers just how far has
might 8 in making advance payments the the British for these various
commodities. He said his personal opinion was that the commodities

should be delivered on dock or the a warehouse before advance payments
are made. He did not feel that the smight to make advance payments before

production without taking it up with Congress.

Be said that he had had dimer with the British last evening and
had gone over their problem. Be saft the did not feel that it was as
urgent as they had put it and he - quite certain that we would have
the President's bill through Congress within the next two weeks and titem
we could begin to work out our program. I told him that we felt in title
Treasury that it was quite urgent and we thought every means cught to the
taken to provide the British with dellars as SOON as they need them with

out waiting for their entire balances to be exhausted.

71

-3If realit the had suggested to Purvis - - age that the British

- the policy of putting - collateral for - of their contracts

Instres: of putting up cash. E thought that - they had run out of
- - would have already established the without of depositing

milksonnil, which would be - important step They refund
- to do this. He still feels, line sait, that the British should
got - the insbit of putting = collateral for many of these things,

institution the transactions that will take place wither the Lend-Lease
HILL = asked him where he thought they would gest this collateral.

it - they have an interest in many things throughout the world, some
of - may not be of much value, but them the that that they have
the with the United States would have as tremendous effect on

- - membe and also on our Congress.

St regist the would try to let = know in the - as to what they

contin - - the advance payment idea.

= suggest that if you g to the Thirts Fouse - discuss this matter

- - President, you consider taking - Janes with you.

muzz

72

Below
3. 6.

1000 J 19th.
hear

The will resultest - - the morting this warring the ties - abother - Stample relief could be copered

- Institute - for - - the starting area the be
required by the V.S. Importants

The failening - - to not-

1) - w U.S. - of - 1bc.

mel to to stared is the Indian States under the Manage Agreement

signal to - December 9 19th. Possible paraless w V. s.

- to wonders for is shie -

according to - Information the vilas of Made weal 1 be
between age to age millions. s Seatting of the word for d

-yes
to the
Suited
Medico
has
is
he
- - - - - the a Individual
week etts well - - -

29 - Butter - - agree to - 199,000 team
- June - for / when to December Jist. - -

that shipped bee - you been completed. The Company agreed to

-- of. further
- of -- tess for - during 19th.
which has - you base shipped. The value of the

first les of the - who - about 867 millions. and that of

the caused les - millions.

x - Betale Secures - agreed is July 1940 to -

about
millions.
I
to
be
plated - the - of we - that - administral part of

15.000 bees of the n n n LLS. S.S. Parte, total value being

this yet results to be Individual

to are - that - - instate the best - for Itag
application
of - - Mile is - to be of - is the f I of the taborte parted. I have added to

leader
to
10
a
/
of
fister
.
trust for . forther 90,000 - of sis - generally abother -

other articles I to the in particular - - that all the

fullentes which are to - is the starting - - that

73

- - - - enture which U.S. Separate are 1 to place
the them. To w me. haven I - for they are regarded as
I materials enter the - of - ages light.
static Supplies Gotten

finish
Meline

vegetable and as eile.

Sclas
Yes.

I and not restal you that rubber and the seas only is part
from british concess and that w - only count on receiving a
corresponding part of the proceeds. IS seems to me that veel

offers the best Institute possibilities from every potat of view.
Tease electricy,

(Signed) F. milling

no.States
a. States
a. -

-

74
Notes on Conference in the
Secretary's office, 4:35 P.M., Monday
January 13, 1941.

Those present at this meeting were, Secretary Morgenthan,
the Greek Minister, Admiral Towers, Lieutement Anderson, and
Philip Young.
Secretary Morgenthau opened the conference by stating that
the needs of Greece had received earnest consideration and had

been seriously discussed at the last Cabinet Meeting. In the
course of that discussion it had developed that the Army had no
planes which could be released for the aid of Greece, but Secretary of the Navy Knox had suggested the release of certain Eavy

planes which were being replaced by planes of a more modern type

on United States naval aircraft carriers. Because of this stig-

gestion made by Secretary Knox, Secretary Morgenther had asked

Admiral Towers, Chief of the Bureau of Aeronautics, Jerry Department, to attend the present meeting and explain to the Greek
Minister just what planes were available.

Admiral Towers explained that it had been the policy of the
Navy before the 'present serious world situation arose to replace
Navy planes in service with new planes every five years. The
planes so released after their five-year service period were then
utilized for training purposes. Admiral Towers stated that there
were certain Navy planes which were currently being released after
five years of service which might be nade available to the Greeks;

however, these planes were five years old and were based on designs
seven years old.

At this point the Greek Minister inquired as to whether the

planes in question were hydroplanes or land planes. Admiral Towers
replied that they were land planes which were now in service on

naval aircraft carriers but about to be replaced by new planes. He
said they were in good materiel shape but that they were actually

of an obsolete design. He added that the planes had a speed of 233
miles per hour and carried two machine guns. one .50 calibre and one
.30 calibre. Admiral Towers expressed serious doubt as to whether
they would serve the purpose of the Greeks.
The Greek Minister questioned Admiral Teuers more specifically
as to their use and age, and Admiral Towers replied that the planes
had been in service for five years already and that the Eary vas
planning to use then for training purposes in the future. Secretary

Morgenthau asked Admiral Towers as to whether these planes would be

75
-2-

the fighting planes which the Hevy would use today if the United
States were in a state of WAT. Admiral Towers replied that
practically all of these planes had already been removed from

the aircraft carriers and sent to training fields or were in the

process of being overhealed.

The Greek Minister asked Atmiral Towers as to the placement
of the guns, that is, as the whether they were mounted in the
fuselage or in the wings, amt, further, as to whether there was

any protection for the pilot, specifically in the event of a rear

attack. Admiral Tower's responded that these planes had neither

armor nor leak-proof tanica and could not be considered as date for fighting purposes. Admiral Towers further inquired of

the Greek Minister as to whether there was an Air Attache at the
Greek Legation who could talk over the technical specifications.
The Greek Minister replied that be was sorry. but that he had a
Military Attache who would go to see Admiral Towers.

In the asantime, is was the Minister's intention to cable

Athens, and he added that, dempite the great need of Greece for

planes, it was his personal opinion that these particular Mary
planes would not be desirable.

The Greek Minister stated that he had thought Secretary
Morgenthan vas going to speak to him about the offer of the British
to furnish thirty F-354 planes and concerning which he had some
additional information. Secretary Morgenthan asked him to explain

the situation. The Greek Einister said that there had been cansiderable discussion about the release of thirty Defiants by the

British, but that the Great Government had advised him on the 31st
of December that it was not interested.

Further, in conversations with the State Department, the
Greek Minister had been abrised that the United States was defi-

nitely going to fulfil its promise of making planes available to
Greece. Shortly thereafter, the British Embassy had notified the
Greek Minister that the British would release to the Greeks thirty

P-36A's immediately from Innove or from Egypt. Only a few days
ago, the Minister added, the State Department had been advised that
the Greeks would accept this offer.

It appeared, however, that there were certain difficulties
with respect to the transportation of the planes. Part of the deel
was that the United States should replace the thirty P-36A planes
released to the Greeks by giving the British thirty P-400's which
would be shipped on - American ship to Basra, The Greek Minister

76

-3had been advised by the State Department that it was inadvisable
for am American ship to transport these planes, so that the
Minister, after proper consultation with his Government, had
arranged for the planes to be shipped from the United States to
Basra on Greek ships.

Secretary Morgenthau asked the Greek Minister to give him

an official letter, over the Greek Minister's signature, stating

that Greece was entirely satisfied and happy to receive the thirty

P-36A planes from Great Britain, and that the Greek Government did

not look to the United States for anything. Further, Secretary

Morgenthan suggested that the Greek Minister tell the President
that be was happy about the deal and then let Secretary Morgenthau
handle the British end of the transaction.

The Greak Minister replied that he did not feel free to make

such a statement as the State Department had given some indication

in the past that sixty rather than thirty planes would be furnished
the Greeks. Secretary Norgenthau pointed out that Admiral Towers

had just been offering the Greeks thirty additional planes from
the Eavy. At this point Admiral Towers reminded the Greek Minister
that the thirty Havy planes were at least a full 100 miles per hour
slower than the P-36A's which night be released by the British.
The Greek Minister said that he would cable Athens immediately,
but that he would like to know how the thirty Navy planes would be
shipped. Secretary Morgenthan replied that they would be sent to
New York where they could be loaded on Greek ships.

P.4.
00000

77
Notes on Conference in the

Secretary's office, 5:00 P.I., liming.

January 13, 1942.

Those present at this meeting were, Secretary
The Greek Minister, and Philip Young.
H.K.,Jr.:

The President is greatly interested in balying
Greece. Last year he was interested in Pailant.
At that time a play was brought to Weshington for
relief purposes. my don't you bring a play bare
to Washington to be put am Sunday signs, February

16th. Who is your relief - in Ter I can't
think of his name.

Minister:

Harold Tanderbilt.

H.M.,Jr.:

Yes, he is the - New. besides, I have a perticular play called Tanatia Eattle" which you can
put on for Greek relief. You tell E. Tenderbilt
about it. It is a muscal county me both the

President and Mrs. Roosevelt would come.

Minister:

For var relief? That would be underful.

H.M.,Jr.:

Have Mr. Tanderbilt telephone - - Philip Young for
details. Could be put - at the National Theatre.

Minister:

Who would organise?

H.M.,Jr.:

Tanderbilt would have to do it all. E arrangements
have been made. It would fill the Theatre as the

President would be there.
Minister:

The President would be there - is that right

H.M.,Jr.:

Yes, the President would 6. English you could raise
$5000 or $10,000 but leave the details = to the Greek

var relief. The President's being there would wike it
a success.

Minister:

Please thank the President for 32. By country and I
greatly appreciate his interest and his belly.

H.M.,Jr.:

Make sure of the details first before you do anything
I can tell you though that the President wild be pleased
to come.

Minister:

Is everything ready!

H.M.,Jr.:

No. no one knows anything about it. You have to mike
all the arrangements.

Minister:

I understand.

Dy.

78
January 13, 1948
5:21 p.m.
H.M.Jr:

Hello.

Operator:

Learn Benderson:

Leon

Henderson:

Hello, Benry.

H.M.Jr:

Lean, they asked me about prices of inflation,
and I said some very nice things about you
which they didn't run, and I'm semitting you
ower a stenographic report of what II said.
Hellow

#:

Yeah

H.M.Jr:

Where are you, so that it can get the you?
I'm over at the S.E.C.

#:

H.M.Jr:

I'll have it there within fifteem - twenty

minutes. will you be there?

#:

Yes, I'11 wait for it.

H.N.J.:

What?

H:

I'll wait for it.

H.M.Jr:

Because I said, I think, some quite
complimentary things.

#:

H.M.Jr:

#:

Well, I can stand those after
Well, what I said, as best I remember, I said,
Mr. Henderson 1s doing a very excellent job
under very difficult circumstams.
Well, that's very good.

H.M.rr:

That's EF near as I can remember what I said.

#:

New, am another matter. Did you motice what
they did with Palmer?

H.M.Jr:

Yeah, I see that they put him fin charge.

79

-2E:

That thing, and I think friend Mac was

responsible for that. We, specifically, in
the Commission discussed that, decided we
didn't want an Executive Order of that kind,
and had a specific understanding with Mac
that it would not be done, no proposal of

that kind would ever be made to the President
without us being advised, and they chased it
up to Hyde Park and got it signed.
E.M.Jr:
E:

E.M.Jr:
E:

H.M.Jr:
E:

Well, the first I knew about it was when I
saw it in the paper this morning.
Well, wouldn't you fire a fellow that did
that to you?

Well, I wouldn't feel kindly to him.
Well, I'm telling you that's your boy Mac one of the boys that did it.
well, he didn't act like that when he worked
for me.

I guess maybe we don't treat him right,
but you might ask him about it when you

get a chance.
E.M.Jr:

Well, I never see him anymore. I never see

him. But I'll send you over the whole thing
because quite a lot of it had to do with
S.E.C. I'll send over the whole thing,
I'd like to have you see what I said about

you.
E:

All right, fine, Henry.

E.M.Jr:

Good-bye.

80

TO KEEP YOU POSTED

CONFIDENTIAL

January 13, 1941

To:

The Secretary

From:

Mr. Young

Re: Navy Planes for the Greeks.

I received your message concerning the possible release
of thirty Havy Grummen planes from the "Wasp" to the Greeks.

I tried to get in touch with Secretary Knox to find out what
the situation was, but he was unavailable. I contacted Under
Secretary Forrestal, but he had no information as to details
of the situation.
With Mr. Forrestal's permission I called Admiral Towers
who advised me that he knew nothing about it but that he was

seeing Secretary Knox and would let me know what the situation

was.

Subsequently, on Saturday afternoon Admiral Towers called
me back to say that Secretary Knox had promised thirty of the
old Grummens off the "Wasp". which were currently being replaced by new ships. Towers went on to say, however, that he
thought only about seventeen of those planes were any good
and that even those needed a thorough overhauling. Further,
Towers had grave doubt as to their usefulness inasmuch as
each plane carried only one .50 and one .30 calibre gun.
Admiral Towers advised me that he was making a thorough

study of the situation over the week-end.

P.4.

81

TO KELP YOU POSTED

CONFIDENTIAL

January 13, 1941

To:

The Secretary

From:

Mr. Young

Re: Purchase of Var Supplies
by South America.

In line with the President's letter of January 4th

to you suggesting the formation of a committee to handle
policy matters for South America, I have been attempting
to find out just what agencies and groups are interested in
this question.
In this connection I talked with Mr. McReynolds and
advised him that it was I feeling the Liaison Committee

should call together all parties interested in the South
American situation in order to find out just what each does.
Mr. McReynolds thought this to be a good idea and agreed with
me that the formation of any new committee should be tem-

porarily held up pending this survey.

I have called a meeting of parties interested in this

problem for 3 o'clock today.

Is there any objection to forwarding copies of the
President's letter to Mr. McReynolds and Colonel Maxwell?

go M
ahead
to

P.4.

82

TO KEEP YOU POSTED

CONFIDENTIAL

January 13. 1941

To:

The Secretary

From:

Mr. Young

Re: Availability of Eavy Funds
I was advised this morning by Mr. Vise of Secretary
Knox' office that the Mary had no money available for
taking up the bid on merchant ships which was the subject
of = memorandum to you of January 10th.
However, Mr. Vise stated that the Savy had a considerable amount of money which could be expended for both

ordnance items and aircraft. I gather that this amount
may total up to 200 million dollars.

P.4.

83

TO KEEP YOU POSTED

CONFIDENTIAL

January 13, 1941

To:

The Secretary

From:

Mr. Young

Re: Chinese P-40 Planes.

In line with the instructions which you gave me by telephone early Saturday morning, I got in touch with Burdette
Wright at Buffalo, and Bill Goulding, Vice President of Curtiss

Wright, in New York. Guy Vanghan could not be reached by telephone. I explained to both Wright and Goulding the urgency of

the situation and that delivery had to start on the planes

immediately regardless of the negotiations between the parties
or the paper work involved.

Burdette Wright explained that actual physical delivery
of the planes could not be made under the Neutrality Act until
payment had been secured. However, it was his opinion that
delivery of the planes could not be made anyway for a few days
as there had to be certain minor changes.

Mr. Goulding also emphasized the difficulties of working
out the paper part of the transaction and stated that he did not
even know what the price of the engines was going to be or what

changes the Chinese wished in the planes. I told Goulding that
Universal Trading knew both the price for the engines and that
no changes were required in the planes other than the removal

of the British insignia. Goulding said that he would check with
Universal in New York to get the latest word,
In the meantime I had Archie Lochhead call Mr. Ren of

Universal, who in turn called Goulding and straightened out the
mechanics of the situation. Subsequently, Goulding called me
from New York stating that he had talked with Mr. Ren and that
it was all straightened out with respect to the physical delivery.

84

-2Delivery of the planes would start next Wednesday, January
15th, and Curtiss would arrange it 80 that the Chinese would
get ten by the end of the week just as if the two per day rate
had started on Monday. The Chinese were to take the planes
without any change except the removal of the British insignia.
Also the Chinese were to buy engines direct from Allison at a
price of $19,477.10 each. (This compares with the price of
$17,500 each quoted to Universal by Allison on the so-called
"rejects").

In the meantime, Universal and Curtiss Wright are to get
together either in Washington or New York to work out the details
of the transaction.

1.4.

85

TO KEOP YOU POSTED

CONFIDENTIAL

January 13, 1941

To:

The Secretary

From:

Mr. Young

Re: British Orders Placed Since
December 19th.

At your press conference on December 19th, it was

stated that the British were told to go ahead with nego-

tiations on all future orders up to the point of signing
contracts with the exception of the 87 million dollar
contract for the sixty ships.
Since that date, and excluding a ship contract, the
British have signed other contracts with a value of

$10,600,000 which involves an additional amount for capital
assistance of $700,000 or a total of $11,300,000. The
major part of these additional contracts cover iron and
steel orders and the balance is made up principally of
machine tool orders.

Attached herewith is a list of these contracts, but
you will note that the two contracts covering the sixty
ships with Todd are included in the totals.

Ry.

Steak

to me

Methyl Methacrylate resin

21 E. I. duPont de Nemours

72,825.00
60,687.00

70,489.65

95,430.00

75,552.03Dec.

60,575.58

67,852.43

Total

306,953.89

440,825.00

West Hartford. Conn.95 contracts

151,371.00

Hand screw machines with

Greenfield, Mass.

290,325.00

additional equipment

111,840.30Combined total of orders for less than $50,000.00

machines

291,000.00Nilen-Bement-Pond Corp.

112,545.09

Wolf" enginesGrand Total:

additional equipment

January 10, 1941Niles-Bement-Pond Co.,

Jig borers, includingOffice of the Secretary of the Treasury, Division of Research and Statistics

687,530.23Detroit, Mich.

63,668.50

Pratt & Whitney Div. of

291,000.00

Capital

$6,961,118.40 $107,353,653.15the

21

Sec.

steel

75,552.03

67,852.43
72,625.00

type milling machines

34,340.00Cincinnati Grinders, Inc.,

95,430.00

rests and equipment

Niles Tool "orks Div.,

60,575.58

34,340.00

70,489.65
60,687.00

603,861.73
112,545.09

purpose steel

440,825.00

Hamilton, Ohio.117 contracts

123,750.00
151,371.00

111,840.30
238,000.00Pig iron

290,325.00

machines, complete with

Corp. ,Bridgeport, Conn.

123,750.00

equipment

238,000.00

128,686.05

126,686.05

West Martford, Conn.

306,953.89

525,000.00plete with all accessories 1

525,000.00

1,200,000.00

1,200,000.00

line mechanisms, andNiles-Bement-Pond Co.

3,956,600.00Dec. 27 Production Machine Co.,

3,956,600.00

equipment

Hydraulic dual millingLime, Chio,

1,576,325.00Dec. 20 Automatic Machinery Mfg.

1,578,325.00

electrical and other

$98,392,534.75
Surface grinding machines

4,105,000.00 47,150,000.0020 The Thospaon Grinder Co.

43,045,000.00

Primacord instantaneous

# 4,094,000.00 $ 48,836,000.00

Drag abovel units, drag-27 Ensign Bickford Co.,

24 Lisa Locomotive Works,Inc.

# 44,742,000.00

E. W. Blien CoAlloy and special

ft.

production of .50 caliberec.

7
7

4
Commercial carbon20

toneSpringfield, OhioScrap steel & iron

25

38

25

25
10

18

10

30

30

86

15

68

15 mil.

10

140

150

9,019
1,717

3,039
40,000

Quantity

79,132

Product

Kernath 225 h.p. "Sea

Kernath Mfg. Co.,

28

Description
December 19, 1940

As Reported up to December 26, 1940 1/

Steel-hulled cargo steam-

Value of order20 Todd-California Shipbuild-

Orders Placed by the Briti Government

Corp.
GrossDec.

dragline buckets

the Briti Iron & Steel

detonating fuses

ments and clanshell grabeSimabury, Conn.

wiring
deadweight

Iron and steel ordered byNew York, N. Y.

Through the British Purchasing Count ssion after

Contractor

metal sawing machines

Co., Inc. Hatfield, Mass.

lathes

equipment

Turret lathes and extra

West Hartford, Conn.Chain crowd shovel attach-Dec. 26 Internati onal Machine Tool

Micro-speed drive

extra equipment and

ers, approx. 9,300 tonsMilwaukee, Wise.

New York, N. Y.

Co., Indianapolis, Ind.

299,700.00

Simmone Machine Tool Corp.,

#2H milling machines,South Portland, Maine

deadweight

Remington Arms Co. for

Steel-hulled cargo steam-

are, approx. 9,300 tonsnderFour cylinder Diesel enginee20 Todd-Bath Shipbuilding Corp.

Brooklyn, N. Y.

ink Corp., Oakland, Calif.

#K-428 Buda engine com-23 Porter McLeod Machine Tool

Capital assistance to& Co., Arlington, N.J.

Western Cartridge Co.

Two-spindle reasingBridgeton, N. J.

387,449.90

387,449.9020 Pratt & Whitney Div. of

sheets

Ferracute Machine Co.,

Kearney & Treaker Corp.ammunition

been included in the above statement.

British Iron and Steel Corporation aggregating $1, 462,250.00

Time saver lathes,

21 General Machinery Corp

Excludes an indeterminate number of contracts of the British

Excludes orders placed during the week December 16 21 by

Jig borers, including

completely equipped

23

20 Gray Motor Co.,Capital assistance toDetroit, Mich.

20 Pratt & Whitney Div. of

additional equipment

Niles-Bement-Pond Co.

23

20

22

and equipment

Cincinnati, Ohio.

to of

2/

1/
Dec.
Dec. 23

Dec.
Jig borers, including

Dec. 20 Pratt & Whitney Div. of

299,700.00

60

Porter McLeod 8* cold

Vertical high speed dialIron and Steel Corporation, the dollar values of which have

Dec. 26 Cincinnati Milling Moh. &

.

on
what
day
were
H

87

Houstaner
planes dample turned
over?
delay/before
TO LESS YOU POSTED

contract

CONFIDENTIAL

January 13, 1941

in thankthe

To:

The Secretary

From:

Mr. Young

1/10/11

Ee: Leak-groof Taxics for the British
Boeing 3-17.

In accordance with your instructions, I got in touch with
30b Lovett Saturday afternoon and asiced his about the delay
which would be caused in the delivery of the 3-17's to the

British due to the fact that lesit-groof taxis could not be
procured. Lovett said that be was talking with Mr. Johnson,

President of Boeing, and that be would call me back as soon as
be had the complete story.

Subsequently. Lovett called back to any that the British
had asked for a number of changes in the 3-17 and that it was
these changes which were delaying the delivery rather than the

lack of leak-proof tanics. Ee vent or to any that the original

idea was for the British to take the as quickly as pos-

sible, and that the first plane was ready to fly on Saturday,
January 11th. About a veek ago, however, the British advised
Boeing that they vested fourteen changes sade in the planes as
follows:

(1) Camerflage - Boeing advised the British they
could not do cancellage work in
the Seattle plant.

(2) Identification Markings - Agreed to by Boeing.
(3) Special Oxygen Equipment - Agreed to by Boeing.

(4) Change in Flare Installation - Agreed to by Boeing.
(5) Pilot Earness Installation - Agreed to by Boeing.
(5) Very Pistol Anchorage - Agreed to by Boeing.

88

-2(7) Change in Radio Receiver - Agreed to by Boeing.
(8) Special Camera Mounting - Agreed to by Boeing.

(9) Installation of British Type Boab Racks - British
agreed to use the U.S. bomb racks as they were
getting some U.S. bombs: Boeing agreed to supply

drawings for the alteration of the bomb racks to

fit British boabs.

(10) Throttle and Mixture Controls - Agreed to by Boeing.
(11) Collapsible Boats and Special Flares - Agreed to
by Boeing.

(12) Top and Bottom Identification Lights - Agreed to
by Boeing.

(13) Special Armor Plate for the Pilot - Agreed to by Boeing.
(14) Leak-proof Tanks - On this point Boeing advised Lovett

that the installation of leak-proof tanks in the

British B-17C's could not be made without delaying

the B-17's to be delivered to the Army by March. If

tank changes were made, the production line would be

slowed up so that the British would not get the B-17's
until March 22nd instead of March 1st. In this connection Lovett emphasized the desperate need of the

Air Corps for these planes and the fact that the War

Department vas not sympathetic to any delay inasmuch
as twenty planes had been given up to the British
and as the British has then insisted upon the changes

noted above.

Lovett went on to point out that evidently there had been a
good deal of changing on the part of the British Air Commission,

and that there had been some difference of opinion between Fairey

and the British technical people as to what should be done. In
fact it was not until a week ago that there had been any agreement
on these particular changes and this agreement was not actually
signed until Saturday, January 11th.
With respect to the leak-proof tanks, Lovett did not seem to
think that it was worth-while to delay the production of Boeing
to make the change, first, because of the demand on the part of
the Air Corps for those planes, and, secondly, because the leakproof tanks are only in the wings and would not cover the reserve
tanks.

Py.

89
PLAIN

JT

LONDON

Dated January 13, 1941
Rec'd 5:10 p.m.

Secretary of State,
Washington.

132, thirteenth.
FOR TREASURY:

(1) Another vesting order covering OVER 100

American securities is announced today. The list is made
up largely of preferred stocks and bonds including about
30 United States Treasury bonds. Payment will be on
February 24 and may be made in 2) percent war bonds,

3 percent savings bonds *baby" defence bonds, or in

cash. Full list of issues are bring mailed.
(2) Today's FINANCIAL TIMES under Washington

dateline quotes the Associated Press as stating that

"highly-placed federal officials declare that Britain
may be asked to put up $2,000,000,000 of British assets

in the United States as collateral for war materials
supplied under the British aid bill* and mentions direct
investments in addition to the $600.000.000 of securities
noted in the report cited in the Embassy's No. 110 of
January 10.
JOHNSON
NPL

90

PEATS

JI

Tanking

Dated January 13. 1941

Encit 2:14 Secretary of State
Washington

15. January 13. 6 P.E.

The local Chinese press published a report from the

"Central Reserve Beak that during its first week of
operation it issued notes of one dollar and aparts to
the value of five million six Insured thousand dollars
and subsidiary notes to the value of almost eight
hundred and fourteen thousand dollars. The identical

total is significantly gives as the backs current cash
reserve.

Sent to the Department, repeated to

Peiping and Sunglai, AT mil to Shipe.
PAINTS
VSB

eh:copy

10 THE

BE

YEL

91
DEPARTMENT OF STATE

Washington, D. c.

In realy refer to

January 13.

a 1.5151/2660/2669

The Secretary of State presents his committeents to
the Senorable the Secretary of the Treasury and employees

two conies of paraphrases of each of the following talegrans. regarding recent action taken by the German
authorities to examine safety deposit boxes in committee
France.

1. To Ticky. December 23. 1940. no. 375-

2. From Tiely, January 5. 194. no. 38.

Thelosures:

Paraphrases of

two telegrams, as

listed.

DIFT:lap

92
PARENTS OF TELEPRAN SENT

TO:

MEDICAT ENBASSY. VICHT.

DATE:

December 23. 1940. 2 p.m.

NO.:

875

You are requested to inform the Babasay at

Paris that we want it to take all appropriate and feasible
steps toward the protection of the American property in the
safety deposit baxes in the occupied territory. Request

it to make a full report on the matter. You should also
repeat these instructions to the consulates in the occupied

territory.

Ba:LC:RIC
EA:MSG

BEDWELVER

on

COPY:Lap

is ve

93
PARAPHRASE OF TELEGRAM RECEIVED

FROM: American Enbassy, Vichy (Paris).
DATE: January 8, 1941.
NO.:

38

FROM PARIS.

This matter was discussed by one of our staff yesterday
with Kambartel (the Director of the Divisenschutz Kommando).
Kambartel said that the German officials' decision of
Dec. 9th, which was communicated to the banks much later,

related to safety deposit bazes located in the occupied
territory and belonging to people who are actually in this

country. Under the provisions of the decision, after the
10th of January, 1941, safety deposits will be opened by
force if their owners have not presented themselves for
the opening. Steps have been taken by American banks here

to notify their clients in both the unoccupied and occupied
territory of the procedure they should taken in this regard.
It was definitely stated by Kambartel that the German
officials do not contemplate opening forcibly the safety
deposit boxes belonging to neutral persons who are not

in France - or even if they are in France, providing force
majeure prevents them from presenting themselves before the
10th of January. Assurance was given by Koubartel that the

Embassy would be notified if decision is made to open the
deposit baxes of neutrals who are absent; he also gave
assurance that the Germans would allow the absent neutrals
a

94
-2-

a "reasonable" amount of time in which to transmit their
keys and appoint a deputy.
Apparently the position taken by the German authorities
which I have just outlined has also been communicated by

them verbally to American and other banks here, but I think
in a less categorical way. I have been informed that the
National City Bank has taken the precaution of requesting
its N. Y. office to suggest to persons in the United States
who own safety deposit boxes over here that they authorize
the bank's lawyer to represent them here. It appears that
similar precautions have been taken by Morgan & Company
and the Chase Bank.

No stangs steps in this regard have been taken by the
Guaranty Trust Company yet, nor has the Company provided

this Embassy with a list of Americans owning deposit boxes.

This is likewise contrary to the statement made in the
last paragraph of telegram no. 1144 of Dec. 16, 5 p.m.,
from Vichy.

These safety deposit boxes are being examined by the

German authorities for the purpose of withdrawing from them

gold (in the form of coins and bars), unset presious stones,
foreign banks notes and foreign securities, and placing them
in a blocked account in the ovner's name and with the bank

of the base box holders. There can be no withirsuals from
such a blocked account unless the German authorities grant
authorization.
EA:KSG

BARNES

LEARY

95
(Sanded by Sir Frederick Phillips to Mr. Cochran in the Treasury at
12:35 p.m., January 13. 1941.)

THE UNITED KINGDOM DEVICET WITE CANADA

Canada helps us as such as she can. by repatriating British-held

obligations and by allowing her sterling balances to rise: the amount

of her help is only limited by her ability to raise funds internally.
Tip to date, in this way. she has furnished ms with between Can. $350

and $400 millions since the beginning of the war.
Onnada undertook in the same way to supply our deficit of Canadian

dollars for the first half of the second war year to the extent of Can.
$150 millions (say U.S. $130 millions). She had already provided this
amount early in December, and we had to start paying her gold again.

In view or our critical position. we asked her to give us further help,
and the Canadian Government undertook to furnish a further Can. $50

millions. But they could not add to their total help without endangering their own financial structure, and this was an anticipation of the
help which they would give us during the second half of the second war
year. This amount is now exhausted, and once again we have asked them

for further help, in order to avoid having to pay them more gold at
present.

This situation has two aspects of importance:(a) Ve are straining the Canadian economy by asking them

to help us at so rapid a pace. If. for example, we were to
asic them to see us through till the end of February, it would
mean that they would have furnished ms with a further Can. $75

millions: i.e. Can. $275 millions in all. against their original

96

-2promise of Can. $150 millions. We do not believe that we can
ask them for so much, and though they may be able to give us

further help. we must almost certainly pay them same gold in
February.

(b) As already noted, Canada cannot take more than a DET-

tain total of sterling and securities in exchange for Canadian

dollars in the year. The extra help she has given - in
December, 1940. and any further immediate help site may give,

can therefore only take the form of anticipating the help she
might give us in the remainder of the second var year. Thus
during the remaining months of that year we must count on less

help, and the drain on our gold and U. S. dollar reserves will
be correspondingly increased.

British Babasay. Washington
12th January. 194

COPY:lap

97

COMPANY

Delivertime of Airplane Engines

= Actual =
=

deliveries =

IN
January

May 1 - June 1
June 2 - 29.

June 30 - July 27
July 25 - August 31.
September 1 - 28.

September 29 - October 5

October 6 - 12.
October 13 - 19
October 20 - 26.
October 27 - November 2.
November 3 - 9.
November 10 - 16.
November 17 - 23
November 24 - 30.

December 1 - 7
December g - 14.
December 15 - 21

Trensmiber 22 - 28.

December 29 - January #
no
January 5 - 11
January 12 - 31
February
March

April

Estimated deliveries
- extending orders

an
25
31
50

49

fill
48

80

49
19

56
30
So
75
52

12

55

23

400

the

THE
6003

May

June

July
August

September

October

November
December

645
7200

790
Gift
504

have

January
February
March

April
May

320

like
90
77th

two

4

June

Office of the Secretary off the Treasury
Division of Research and Radiaties.

Demandry 13. 19th.

98

STRICTLY CONFIDENTIAL

ALLISON SHIPMENTS

= live.: Nov.: Tow.:Dec.:Dec.: Dec.: Dec.:Dec.29:Jan.: Total
:8-26:17-23:24-30: 1-7:8-14:15-21:22-28:Jan. 4:5-11:

-

40

16

53

29

82

60

46

8

83

426

3

3

1

4

18

6

4

2

41

19

56

86

78

52

12

85

467

30

- of the Secretary of the Treasury,
International of Research and Statistics.

January 13, 1941.

99

January 18, 1941

Ny dear Mr. President:

I - sending you herewith a
due from George Hass on the prices of
German municipal dollar bonds.

There has been no great variation

in their prices. Evidently, the newspaper
story that you read was not based on very
accurate fasts.

Yours sincerely,

The President,
The White House.

Inclosure.

By - 45

100

January 18, 1941

My dear Mr. President:

I - sending you herewith a due from George Hass - the prices of
German municipal dollar bonds.

There has been no great variation

in their prices. Evidently, the newspaper
story that you read was not based on very
accurate fasts.

Yours sincerely,
(Signed)

Jr.

The President,
The White House.

Inclosure.

n/

101

3,194
Secretary Kergenthem
Mr. Easa

subject: Prices of Gereas Municipal Boals.
The attached table has been prepared is accordance

with your receest for as analysis of the recent price

movements of Geruss municipal boards. It above weekly

since the beginning of November and daily for the past
two weeks, the prices of 6 dellar boards of German
municimalities listed on the New York Stock Exchange.
These bonds are the only ones so listed which have
exhibited even a mederate degree of activity during
the period under consideration.
The bonds of the different assisimalities have shown

no consistent treat. Their prices are is general about
the same as at the eat of October - fear being slightly
higher, and two slightly lever. Only the Berlia and
Frankfort bonds have shows substantial intermediate
finsteations - each of these declining by about 6 points
and then recovering this less is the period covered by
the table.

ECK/APLY:
1/11/41

102

Prices Selected - Restrictions Jeller Deads

26-4/2

1980

26-1/2

16-1/2

26-1/2

"

"

26-5/2

M-1/2

26-1/2

- -

15-1/2

26-1/2

20-3/4

29-1/2

27

26-1/2

16-1/4

1940

200.30

25-1/2

a-1/2

15-1/2

15-1/2

25-1/2

15-1/2

as

15-1/2

27

-

.

26-1/2
as

100.11

15-1/2

26-1/2

26-3/4

**
15-1/2

8-1/2

26

Premium .

1941

Inc.

27

N-1A

N

26-1/2

-

last daring - ended

-

-I .

- the New Test Stock -

a

NEW

26-1/2

Mediation

J 11. 1942

as

103

January 13, 1941

My dear Mr. President:
I an inclosing a memorandum from

Herbert Gaston, which is self-explanatory.

Where do we go from here?

Sincerely yours,
(Signed)

The President,
The White House.

Inclosure.

By 5-35- -

104

January 18, 1941

My dear Mr. President:
I an inclosing a memorandum from

Herbert Gaston, which is self-explanetory.

Where do we go from here?

Sincerely yours,

(Signed) E - Jr.

The President,
The White House.

Inclosure.

/

105

January 13. 1941.

NEHORANDUE
Tel Mrs. Elots
Freat Mr. Gaston

The Secretary called me from the form at 10:10 D.B.

Saturday, January 11. He asked if it was true that . Coast
Guard cutter was transporting some escaped French convicts

who were being deported to Martinique. I told his yes and is
response to his questions said that the matter had been orreaged as a result of request by the Department of Justice
supported by the State Department, end that the outter UNALGA
had picked up some of the nes at Miami end was proceeding to

San Just, Puerto Rico, where she would get the others and 8 on
to Martinique with them. The Secretary said he had just had a
call free Mrs. Receevelt who spoite for the President and ested
that we have the ship returned end not . to Martinique with

the prisemers until further orders were received. I told the

Secretary that the UNALGA was either near or at Bee June,

Paste Rice, and that we could hold her there. Be asked me to
have 11 deas immediately and added that 18 was not accessary to

call his back unless I found 11 was impossible to stop the
outter.

I immediately called the duty officer at Coast Guard,

Lieutement Millington. end gave his the message, suggesting
that he check the form of the message with Gaptain Chalker and
report back to no. A few minutes later be telephoned back the
form of the meesage as drafted by Captain Chalkers
To UMALGA: *Proceed to San Jean and queit further
orders before completing veyage to Martinigno Acknowledge
No explained that the UNALGA had arrived at Sea Jusa at 6:50

a.m. Saturday and that Headquartere had received . rostine sage requiring reply which was not sent urgent indicating that
the outter was not to leave Sea Jean Immediately but that the
form of the message as drafted by Chalker would cover the site

-

stica if the UNALOA bad already left. Billington called -

Sunday morning to advice no that the shipper of the SMALLA had
admontedged receipt of the message.

attached file returned to Haston 1/14/41

106
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE January 13, 1941
TO

Secretary of the Treasury

FROM Mr. Foley

There was a 3-1/2 hour meeting at Attorney General Jackson's
office attended by the following: Messrs. Jackson, Arnold, Shea and
L.M.C. Smith of Justice, Mr. Berle, Mr. David Ginsberg, Counsel to
Leon Henderson and Foley and Bernstein for the Treasury. The entire
meeting was devoted to discussing the Treasury's proposed Executive
Order.

Thurman Arnold read a memorandum which he had written describing

the setting up of three or four committees to coordinate and pass on the
policy questions in the three or four fields relating to economic defense.

The subcommittees would take matters up with the Cabinet only when there
was a conflict.

Mr. Jackson and Mr. Berle then proceeded to state their objection
to the extension of the Treesing control, saying that such an Order would
have tremendously unfavorable repercussions in this country. Mr. Jackson
felt that the public would not understand the granting of general licenses
to areas such as the British Empire, Latin America, Japan and Russia, and
would assume that all foreign assets were being controlled, with consequent
widespread confusion in this country on the part of those dealing with
foreign funds. Mr. Jackson also felt that as a result thereof people would
seek to attack the validity of the Orders and the regulatory system and
the informal method employed in carrying out the regulations would result
in considerable support being given to the passage of the Logan-Walter
Bill, which he fears will come up again this session. Mr. Jackson also
felt there were a limited number of things that the Administration should
attempt to do by Executive Order without specific congressional ratification,
and he was inclined to feel that even though there was broad enough legal
power to obtain complete reporting of all foreign assets, nevertheless we
should ask for congressional approval.
Mr. Berle, in indicating his views, expressed agreement with Mr. Jackson

and also felt that foreign relations might be seriously imperiled. Mr. Berle

also claimed that if we extended the Order to Germany, Germany would immediately
seize all American owned assets in Germany and perhaps in German occupied

countries.

(

We pointed out at length how the extended Order could be administered in
such a way as to be completely in accord with the Government's foreign policy,
and at the same time providing a very flexible instrument for imposing controls
and pressures in directions where we wished to do so. We discussed at length
the method of administering the Order and pointed out that as a result of the
issuance of the general licenses, the Order was in effect nothing more than extending freezing control to continental Europe, except Russia, and obtaining
reports for the whole world.

107

-2Mr. Jackson said that if the Order were simply applied to
continental Europe he would have no objection to it. Mr. Jackson
WES also willing to have the control applied to those nationals of
whatever country that the Secretary found were acting in behalf of
a country or national thereof specifically covered by the Order.
Mr. Berle felt, however, that the Secretary of State would have to
decide whether such action would be consistent with our welfare.
Mr. Berle suggested as an alternative giving the Secretary of the
Treasury authority to bring specific persons or classes of persons
under the Order upon determining that such persons were engaging in

activities adverse to the national defense. Mr. Foley pointed out
the impracticability of such a proposal from the administrative point
of view, and in addition indicated that it would impose such a responsi-

bility upon the Secretary of the Treasury that he would recommend should
not be assumed by the Secretary. These difficulties were readily
recognized by the others, particularly by the Department of Justice

officials. Another alternative suggestion was simply to prevent the
withdrawal from the United States of assets belonging to continental
Europe. We pointed out that so long as the property could be dealt
with freely in this country, the property could be readily withdrawn

from the country by sauggling or through the diplomatic pouch or used
in this country for improper purposes.

In connection with the discussion of Title III of the Order,
Berle seemed to feel that the provisions relative to the liaison

work in connection with foreign buying involved impinging on some of

Jesse Jones' activities. Berle indicated that he had discussed this
matter with Jones last night. Mr. Foley pointed/that this provision
of the Order merely formalizes the liaison activities which the
Treasury at the present time is exercising pursuant to authority from
the President, and in no way impinges on Mr. Jones' activities in
purchasing in foreign countries. Justice had no objection to the
transfer to this Department of Colonel Maxwell's export activities.
Mr. Berle did not commit himself explicitly on this point. Mr. Ginsberg
stated that Henderson was all in favor of the administrative powers
being vested in the Treasury, but felt that Army and Navy ought not
be on the Board and Justice ought be on the Board.

It was decided at the end of the meeting that the Treasury should

draft another Order limited exclusively to reporting of all foreign assets
here, and that Berle would take up with the State Department the
advisability of extending the freezing control to continental Europe.
At the next meeting to be held on Wednesday these problems would be

discussed, as well as further discussion of the problem of coordination.

F.N.th.

108

JAN 13 1941

Dear Candall:

For year committees I - enclosing - -

fidential tables of British foreign exchange assets
and requirements which were presented to representstives of Departments of War and Havy, Defence Council
and State Department in my office on December 10.

Meet of the information was supplied to us by
the British and Canadian Governments and 10, of course,
to be treated as confidential material.

If there is any other information that you would
care to have with reference to British expenditures
and reseipts, I shall be happy to send you whatever

we have.

Sincerely,
(Signed)

Secretary of the Treasury.
:

The Benerabile Oardell Ball,

Secretary of State.
Inclusives.

Delivered by Merle Cochran

Midia

1/3/42

How

FILE COPY

109

JAM 13 1941

Dear Cardell:

For your I - enclosing seas can-

fidential tables of British foreign exchange assets
and requirements which were presented to representstives of Departments of War and Navy, Defense Council
and State Department in my office on December 10.

Meet of the information was supplied to as by
the British and Canadian Governments and 10, of course,

to be treated as confidential material.

If there is any other information that you would
eare to have with reference to British expenditures
and reseipts, I shall be happy to send you shatever
we have.

Sincerely,
(Signed) E

Secretary of the Treasury.
The Benerable Oardell Ball,

Secretary of State.
Inclosures.

Delivered by Merle Coohran

1/3/42

110
mis 1061

Dear Cardell:

For your I - emissing - -

fidential tables of British foreign exchange assets

and requirements which were presented to representstives of Departments of War and Havy, Defense Council
and State Department in my office - December 10.

Meet of the information - supplied to - w

the British and Canadian Governments and 10, of course,

to be treated as confidential anterial.

If there is - other information that yes would

care to have with reference to British -

and reseipts, I shall be how to and you statement

we have.

Sincerely,
(Signed) E

Secretary of the Treasury.
The Benerable Gendall Bill,

Secretary of State.
Enclosures.

Delivered by Merle Cochrain

1/3/0

copy"

111

U.S. Treasury Department
Division of Monetary Research

Strictly Confidential

December 16, 1940

SUMMARY ESTIMATE OF FOREIGN EXCHANGE
ASSETS OF CANADA

(Except where otherwise indicated, the figures

below were obtained from the Canadian Govern-

ment.)

(In millions of U.S. dollars)
I. Gold and Assets in U.S.
1. Gold, Dec. 9, 1940

$ 137
190

2. Official dollar balances, Dec. 9, 1940
3. Private dollar balances, Sept. 30, 1940

30

This excludes some $140 million of private
deposits Canada regards as necessary for the
conduct of business.
340

4. U.S. securities, Dec. 9, 1940
Estimated at market value - mostly listed
stocks.

5. Direct investments in U.S
Nominal value, Dec. 31, 1938 - 3328 million

Total (at least)

?

$ 697

II. Long-Term Investments of Canada Outside U.S.

The values indicated below should not be totalled
because they are not reduced to a comparable basis;
some are nominal value, some book value and some
market value.

1. Latin America

Securities, market value as of Dec. 1, 1940
Direct investments, nominal, Dec. 31, 1938

$

6

176

112

-2(In millions of U.S. $)
2. Australasia
Government bonds (par value)

Direct investments (book value)

$6
12

3. Africa
Government bonds (par value)

0.5

Direct investments (book value)

5.0

4. British Asia
Government bonds (per value)

0.5

Direct investments (book value)

5.0

5. Other Asia
Government bonds (par value)

1.2

Direct investments (book value)

0.4

6. United Kingdom
Government bonds (par value)

15

Corporation securities

13

Direct investments

14

7. Europe outside U.K.
Government bonds (par value)
Stocks (estimated)

Direct investments

5

4

7

copy"

Strictly Confidential

U. S. Treasury Department
Division of Monetary Research
December 17, 1940

113

A SUMMARIZED STATEMENT OF THE ESTIMATED

TOTAL OF U. K. DOLLAR DEFICITS

(The figures below are estimates of the British Government.)

This is a preliminary report and will be revised as further
information becomes available to us.

(In billions)
$8.5

Total (at least)
of which,

Amount due on British Government orders

$8.3

Deficit accruing on all other items to
Sept. 1, 1941

.2

1. Deficit accruing to Sept. 1, 1941:
Amount due on British Government orders

All other sterling area expenditures
requiring dollars
Total

$2.5

1.3
$3.8

Sterling area receipts in dollars to
Sept. 1, 1941

1.1

Deficit accruing to Sept. 1, 1941,
to be met by sale of assets

$2.7

2. Deficit accruing after Sept. 1, 1941:
Balance due on Government orders.

$5.8

Net deficit on all other sterling area
dollar expenditures after Sept. 1, 1941
(estimated at $15 million a month on the
assumption of continued net payments by

the U. K. to Canada of $50 million a
month)

Total (at least)

$5.8

114
2-

(In billions)
3. Therefore U. I. must finance:
Deficit accruing by Sept. 1, 1941
Due after Sept. 1, 1941 on British

$2.7

Government orders from U. S. placed
and proposed

5.8

Deficit after Sept. 1, 1941 on sterling
area transactions other than B.P.C.

orders from the U. S. ($15 million
per month)

Total (at least)
To meet this $8.5 billion deficit (plus the monthly
current deficit) the U. I. has assets as shown in the
accompanying table.

$8.5

copy"
strictly Confidential

U.S. Treasury Department
Division of Monetary Research
December 10, 1940

SUMMARY ESTIMATES OF FOREIGN EXCHANGE ASSETS THAT

CAN BE MADE AVAILABLE TO U. K. FOR DOLLAR EXPENDITURES

(Except where otherwise indicated, the figures below were obtained from the British Government.)

This is & preliminary report and will be revised

as further information becomes available to us.

(In millions)
1. Gold held by U.K., Dec. 6, 1940

$ 460

2. U.K. Official Dollar Balances
Bank of England balances on Dec. 4

124
$64

Dollar balances of authorized agents

60

The British feel that a minimum balance of gold

and official dollar balances of $600 million is desirable, but in the absence of other cash items these are
being drawn down and will be exhausted within 3 months.

3. U.K. Private Dollar Balances, Nov. 27, 1940
The above item is from U.S. Treasury data. It

excludes $60 million held by British authorized
agents which amount was included above under

official dollar balances. The British will furnish
their data on this matter.

The British state that these private funds con-

sist of (a) funds in transit, and (b) funds of
business and financial enterorises held under
authority of the British Exchange Control and
deemed essential to the conduct of business.

240

115

116

-24.

(In millions)

American securities held by U.K. which are

$ 660

readily marketable, Dec. 6, 1940

5. Diverse securities held by U.K. -- dollar and
optional dollar -- Dec. 6, 1940
The British state these are not easily market-

140

able.

6. U.K. direct and other investments in the United
States

The United States Department of Commerce estimates

these items at over $1 billion at book value.
The British estimate of this item which is now
being compiled is expected by them to be lower.

The British are of the opinion that the value of
these investments depends especially upon finding

willing buyers. They wish to point out furthermore that a portion of the value of these investments is due to the relationship of the particular
firm to the British parent company.
7. U.K. Investments in Canada

Canadian dollar securities -- Market value
as of Sept. 1940

$427

These are being liquidated at the rate of onequarter billion a year to help meet U.K. 's adverse
balance of payments with Canada.

Canadian sterling securities

British are awaiting data on this item.
Direct investments in Canada

117

-3-

(In millions)

The British are making inquiries with
respect to these three items. The United
States Treasury tentative estimates based on

official Canadian studies are in the neighberhood of $2 billion.
8.

Gold reserves of the Allies held in United

$ 1,055

States and British Empire
Holland

In the United States

In the British Empire

30
100

Belgium

In the United States

168

In the British Empire

348

Czechoslovakis

In the United States

In the British Empire

o

30

Poland

In the United States

In the British Empire
Norway

In the United States

2

T

*
42

In the British Empire
The figures of gold on earmark in the United
States are as reported by the Federal Reserve
Bank of New York.

118

-4-

(In millions)

with respect to the gold holdings of the
Allies, the British Government has not yet been
able to obtain more than an offer of a temporary
loan - three to six months - from some of them,
e.g. Belgium.
$ 650

9. French gold in Canada or the United Kingdom.

In addition France had $502 million of gold
on earmark in the United States on December 4,
1940.

$370 million of this $650 million must be
dealt with under Canadian policy and law, and
the remaining $250 million under United Kingdom
policy and law.

10. Dellar Balances of British Allies
Official, Dec. 4, 1940

20

Netherlands

8

Belgium

1

Norway

12
-

Czechoslovakia

1

Poland.

350

Private, Nov. 27. 1940
Netherlands

161

Belgium

145

Norway

38

Czechoslovakia

-

Poland

2

The above items are from U.S. Treasury data.

The Polish vrivate balances are for the New York

119

- -5 -

(In millions)
Federal Reserve District only and are as of

Sept. 25, 1940, the latest date for which infornation is available.
No statement has been made by the British

Government with respect to the status of these
balances. On November 27, French official
balances in the United States totalled $347

million, of which $97.5 million are held in the
account of the Bank of Canada, and French private

dollar balances to $249 million.
11. U.K. investments in Latin America

Arcentine railways, nominal value -- British
estimate

$ 1,000

The British are at present in the process
of establishing the price which they would nccept from Argentina for these assets.
Other Latin American securities, nominal value,
British estimate
The British estimate the value of the quoted

portion (over 90 percent) of these securities at
$635 million.

These are almost all sterling securities and

for most of them, in the opinion of the British,
it would be very difficult to find buyers outside
the sterling area. Some of them, for example

Argentine Public Utilities, may be salable for

1,800

120

-6(In millions)
dollars. The British state that they would
be glad to sell any of their Latin American
investments except some special and minor items,
for example the Bank of London and South

America. In some cases, a transfer of ownership out of present hands may encounter local

political opposition.
12. U.K. investments outside the Western Hemisphere

The British Government is now making a study
of these investments.

13. Long-term investments in the United States held
1,000

by British Allies
Holland

767

Belgium

203

Norway

32

These figures are the holdings of the United
States securities and direct investments in the
United States, as reported to the Treasury on
form TFR-100 as of the date of the freezing of

their assets. It 1s not known how large a portion
of these investments are accessible to England
and the Allied Governments.

Long-term investments of France in the United

States total $443 million as of June 17, 1940.

121

-7-

strictly Confidential

FOREIGN EXCHANGE ASSETS OF OTHER BRITISH EMPIRE COUNTRIES

WHICH MAY NOT YET BE AVAILABLE TO THE UNITED KINGDOM FOR
DOLLAR EXPENDITURES

Whether or not any of the assets listed below would be

available to meet United Kingdom requirements depends,

according to the British, on the governments of the res-

pective dominions and India. The data are from U.S.
Government reports unless otherwise indicated. (In Millions)
3748

1. Gold
Canada

137

Union of South Africa

314

New Zealand

British India

23

274

These figures are for various dates and
except for Canada are the latest published in the
Federal Reserve Bulletin. The Canadian holdings
are as of December 9, 1940 and were reported to
us by the Canadian Government.

The gold holdings consist in part of monetary
reserves required by the law of the countries.
2. Official Dollar Balances, Dec. 4, 1940
Canada

180

This excludes $97 million held by the
Bank of Canada for French account.
Other

10

A portion of these balances will probably be
needed to conduct current business.

190

122

-8(In Millions)
$ 300
3. Private collar balances
Canada, Nov. 27, 1940
Hong Kong, Nov. 27, 1940
Other

170
ge
37

These figures, the latest reported, are
for N.Y.F.R. District only and are as of Sept. 25
or Oct. 11.

A substantial portion of the above private
dollar balances are doubtless needed in the
conjuct of business.
380

4. American securities
Canada

340

This is the Canadian estimate of market
value. Department of Commerce estimate ad-

justed for net sale is $500 million. Some
part of the Canadian holdings of American securities will probably be needed to help Canada meet
its own payments to the U.S.
40

Other

This is the Department of Commerce estimate.
465

5. Direct investments in the United States
Canada

460

Other

5

These are Department of Commerce estimates of

book value. The Canadian estimate of nominal

value of Canadian direct investments in the United
States as of December 31, 1938, is $328 million.

DOLLAR EXPENDITURES AND RECEIPTS OF CANADA FROM DECEMBER 1, 1940 TO SEPTEMBER 1, 1941

(In Millions of U. S. dollars)
Dollar Expenditures of Canada

Dollar Receipts of Canada

ta to be made to U. S.

A. Dollar receipts by Canada from U. S.
1. Canadian exports of merchandise to U. S.

be paid by Canadian Government
agencies between December 1,

September 1, 1941 for governrehases from the U. S.

ition, Canada is expected to
$297 million on government
mets after September 1, 1940.)

(including silver)

2. Receinte by Canada from U. S. on invisi-

$250

ble items
Interest And dividends

95

to U. S.

350

1. 1941, on interest and
vice account
This is comprised of the following

225

B 64

Tourist travel

10K

Freight and miscellaneous
services

17
37

to be paid to retire Canadian
Mar obligations naturing before
tember 1, 1941

*70

for all transections

Prent Division of Nonetary Research.

2. Invisible items

10
45

Total receipts of U. S. dollars

465

1,075

D. Surclus of U. S. dollars received by Caneda

165

32

40

GRAND TOTAL

GRAND TOTAL

Dollar requirements of Cranda

35

C. Receipts of gold and U. S. dollars by Canada
from U. K. due, according to British figures
supplied us, on balance with sterling area

45

payments, requiring gold OF U. S.
to be made to areas outside the

isible items
Total cryments outside the U. S.
recuiring dollare

1. Commodity exports
Total

Total payments to be made by Caneda
to U. S.

dity imports

$565

B. U. S. dollar receipts by Canada from countries
other than U. S. and U. K.

items:

Interest

145

Total

FULL to be paid December 1. 1940

Dividends

115
20

Tourist travel
3. Cenadian nevly-nined gold to be exported

Merchandise imports from the
States

$305

Dollar receipts minus surplus accruing

8910

from December 1, 1940 to Sent. 1, 1941

$910

December 17. 1940.

AR EXPENDITURES AND RECEIPTS OF STERLING AREA FROM DECEMBER 1, 1940 TO SEPTEMBER 1, 1941

(In Millions of U.S. Dollars)

L.E.

b

payments
to

1.

Expenditures of Sterling Area
to be made on total purchases from the U.S.
paid between December 1. 1940 and Sept. 1,
laced

diffion is expected to Fill due

after Sept. 1, 1941
2. Burea to be paid in next nine months on additional orders

BOB (In $584 million is expected to Paii due

on this program after Sept. 1. 19411
3. Summ to be paid by Sept. 1, 1941 on contemplated "T"

(1)
$1.103 Hiii be payable on this
program after Sept. 1, 19411

L Imports from U.S. not purchased through the British
Purchasing Commission.

Dollar Receipts of Sterling Area
A. Dollar receipts by U.K. from U.S.
1. U.K. exports of merchandise to U.S.
2. Net balance from U.S. to U.K. on
invisible items

$1,035

541

1. Commodity exports

Payments by sterling area (mostly U.K.) to Canada and
Total

A Purchase
Dec.
1. Common

2. Invia

$2,745

Hone

t, Division of Monetary Research

195

Total dollar receipts of U.K. and
sterling area

$1,166
2,213

area with Canada (in U.S. dollars).
Total U.S. and Canadian dollar

465

deficit of sterling area

186

2,678

GRAND TOTAL

Total receipts and deficit on

660

operation from Dec. 1, 1940 to
Sept. 1, 1941

846

$3,844

Special Note

In addition to the deficit expected to
accrue
before Sept. there will

250

be payable after Sept. 1, 1941 (on orders

indicated in 3 in opposite col-

253

unn) a total of $2,762 million. This does

not Inc ude any deficit accruing from additions orders expected to be placed
the British but not yet decided upon.
Anticipated deficit prior to Sept. 1. 1941
Minisus deficit after Sept. 1, 1941
Minimum total deficit
by

PAL

requirements of sterling area for all

836

Total dollar deficit of sterling
area with U.S.
Total dollar deficit of sterling

3

aments to U.S. by sterling area (excluding

360

C. Canadian assistance to U.K

210

U.K. payments outside U.S. requiring dollars
eter) ling area (excluding U.K.) from U.S.
Sept. 19411
orts

56

Total

or dollars

2.

420

2. Australian gold exports to U.S
3. South African exports of gold

Items 2 and 3 above do not include $709 million
of capital assistance Watever part of this is to
be paid before Sept. 1941 must be added to this total.
L LL. purchases from areas outside the U.S. requiring gold
and Canada requiring dollars.

$ 135

B. Dollar
receipts by sterling area from
U.S.

959

from U.S

Purchases by sterling area (mostly U.K.) outside the U.S.

12

Total

Total payments to be made on U.K. purchases

1.

$123

$3,844

$2.678
2,762
$5,440

125
EXPORTS OF PETROLEUM PRODUCTS SBP THE AND see FROM THE UNITED STATES TO JAPANE. STATE, AND me

AS SHOWN BY DEPARTMENT WITH -

Teak mind - 21. 19th
=

JAPAN

=

=

=

BE

=

we

=

MAKER PRODUCTS

fail and Bas Oil (including
Blend Dil)

465.40m Bis

-

Bills.

-

-

-

--

--

-

1

--

90,300 Missing Bils.

State -

Humited or California
High Dotane Cruie

--

- Other Crude
dilline -

Tuesdine Texoline #

Italia

400 Other Gasoline

directing Oil -

intintion Labricating Oil
- Other labricating Oil

Lead

-

such as IsoTattamn, Ino-Hexane, or

Nation 1 Heavy Melting Scrap
an Other Scrap

Bills.
Bills.

miles Bills.

3622 Mis.

-

-

Time-Pentane

BE IRON AND SCRAP STE

139 Bils.

-

-

-

3000 Time

3450 Tons

film of the Secretary of the Treasury = Research - Satisfies.
I 13.
STORE: Office of Merchant Ship Control Sincerely Department

May material from which by commercial distillation there - - -

some than 3 percent of aviation anthon mail. - lights
sticture - President's regulations of July a 100
Intiction Basoline.

as defined in the President's regulations of 20 26.

1941

126
COUNCIL OF NATIONAL DEFENSE
COORDINATOR OF COMMERCIAL - CERTIFICATE RELATIONS
BETWEEN THE AMERICAN REPUBLICS

(- 13-41

You will find, hurmith, fur your
confidential information a engy of our workly

digest of the current activities of the vericous departments and agencies handling matters

on inter-American concern.

Attachment

127

CONFIDENTIAL
2560

COUNCIL OF NATIONAL DEFENSE
COORDINATOR OF COMMERCIAL AND CULTURAL RELATIONS
BETWEEN THE AMERICAN REPUBLICS

DEPARTMENT BUILDING

DC

January 13, 1941
LOOKLY PROGRESS REPORT

ON ACTIVITIES IN RELATION TO THE OTHER AMERICAN REPUBLICS
COMMERCIAL

United States Firms with Non-American Agents

& sufficient number of U.S. exporting firms to cause concern from the
point of view of defense, are represented in Central and South America
by agents with non-American connections. This was disclosed in a press

statement made last Wednesday by the Coordinator concerning the findings

of the mission sent by this office, in cooperation with State and inter-

ested agencies. The statement emphasized that in many cases these firms
have been unsware of their agents' connections with anti-American activities.
The mission was headed by Percy L. Douglas, on leave of absence from the
Otis Elevator Company, and included John Lockwood of the New York law
firm, Milbank, Tweed, and Hope, and George H. Butler of State, as well

as 5 group of technical assistants. It undertook its study of these
practices shortly after the establishment of the Coordinator's office
in August, and returned in December, after visits to eighteen of the
twenty American Republics.

The work of correlating the findings on a hemisphere basis is nearing
completion. Examination of the country by country reports discloses
the following facts:
1. That United States business is frequently represented in Central
and South America by firms and individuals now known to support
objectives contrary to the best interests of the American Republics;
2. That these representatives often use advertising appropriations of
United States business firms to force newspapers and in some instances radio stations to adopt anti-American editorial policies;
3. That many employees of United States companies or their affiliates

in Central and South America are known members of local anti-American
organizations;
4. That many anti-American firms, which formerly sold only European
products, have now succeeded in obtaining agencies for United States
business. These new connections are keeping them alive, and enabling

them to maintain their trade contacts. In many instances, they
openly declare they will return to their former lines at the expira-

tion of the war;
5. That many of these agents who now represent United States firms are
obtaining through this medium confidential trade information which
is made available to anti-American powers;

128
2560

Page 2

January 13, 1941

6. That profits thus derived from representation of United States firms
are being used to finance operations of propaganda agencies in
Central and South America;

7. That many of the firms representing United States companies also

serve as centers for distribution of anti-American literature and

propaganda;

Many of the larger anti-American firms have established their own
purchasing agents in the United States and with the goods obtained
in this market remain in business;
9. Officers and employees of a number of firms, representing United
States businesses, are officials of anti-American powers.

6.

Many United States companies have already taken steps to remedy the situs-

tion by cooperating with the Nationals in the countries in which they
operate to appoint agents friendly to inter-American solidarity. It is
confidently anticipated that our exporting firms CS a whole will cooperate
15 soon as they are apprised of the situation as it relates to their intorests.

Knudsen Sympathetic on Priorities

The Coordinator has given a list of U.S. exports to Latin America in 1938
to Mr. Knudsen (Defense Commission), who has indicated that most of these

materials can still be furnished to Latin America without difficulty.

While there are certain notable exceptions such C.S sircraft, he had indiented that the Priorities Board will give sympathetic consideration to

and difficultics brought to its attention.

Although shipmont of certain goods, such as maintenance parts for acroplanes, have been hold up, Morrill C. Meigs (Defense - Director, Acronautical Section of the Production Division) has helped expedite Army and Navy
clearances of necessary supplies and has appointed an assistant on Latin
American materials.

Commodity Developments

Industrial Diamonds: Leith (Defense) anticipates action on industrial
diamond purchases from Brazil and Vonezuela this week.

Zinc: A solution of the labor difficulties at the Rosits smelter in
Mexico seems imminent. The opening of the smolter may solve the
acute shortage of synthetic zinc.

Tungsten and Antimony: Coordinator's office is investigating the possibility of purchases of tungsten and antimony from Bolivin and
Argentina.

Cotton: Since all agencies are substantially in agreement that there
should be an increase of long-staple cotton importations from Peru,

an early agreement is expected.
Sugar: The Executive committee of the Export-Import Bank has approved
a recommendation for the financing of an extraordinary Spanish quota
of 400,000 long tons of sugar from Cuba.

Coffee: The President sent the Inter-American Coffee Agreement to the
Somete on Thursday.

129

2560
Page 3

Jenuary 13, 1941

Country by Country Studies

Four of the agencies working on the first country by country study,
Colombia, have indicated that their preliminery reports will be ready
in a few days. These studies are designed to give overall economic
pictures of the other American Republics.
Index of Prices

The Coordinator's office is arranging an index of prices for the principal goods shipped to Latin America by this country which will cover the

period from 1938 and will be kept up month by month so that any increase
in our prices to Latin America will be noticeable.
Agriculture Makes Annual Report

The report of Lislic Shooler (Director, Foreign Agricultural Relations)
stresses the advisability of developing complementary products in Latin
America such as rubber, abace, cinchons, numerous agricultural plants

yielding tropical vegetable oils, drugs, herbs, perfumes, flevoring extracts, ten, tropical fruits, and hardwoods. Although U.S. imports of

crude rubber, cinchone, abaes, kapok, rotonone-bearing plants, crude and
refined camphor, tea, and cocon approximated $235,000,000 in 1939, Latin
America, which can produce all of them, supplied only $15,000,000 of the

total, according to the report.

He points out that e large part of agricultural production comes at present from three of the twenty other Ropublics lying wholly or in part in

the Temperate Zone since tropical and semi-tropical regions are undeveloped.
Of this production which makes up as much as ninety per cent of imports
from that region, about one-half is supplementary; i.c., composed of pro-

ducts also produced in U.S.

Concerning the important agricultural commodities now produced within the
Americas in quantities far in excess of existing hemisphere requirements,

Theeler suggests two approaches:

1. "Through an increase in the consumption of such products within the
hemisphere, possibly through the incuguration of intensive inter-

American relief distribution similar to that which alreacy exists

in the U.S. and some of the other American Rupublics";
2. "Through international commodity arrangements, the object of which
would be to reduce the supply of these products more nearly to the
level of existing dumands." He cites the coffee arrangement as an
example.

Agriculture also reports that the RAN has sent a representative, Guy Bush,
on a two months' trip into Brezil and Argentina (and possibly Chile) to
make a survey of agricultural industries in those countries with special

reference to the agricultural situation in corn, cotton, wheat, and live-

make with the loan to

stock. The Department has also selected personnel for the proposed survey

party Cuba
for to anydevelopment.
studies needed
in connection
proposed
agricultural
The
party will include
Dr.Wilson

Popenoe of the United Fruit Company, as well as members of the Department.

Weekly Progress Report No. 16

130
TREASURY DEPARTMENT
ENTER OFFICE

DATE January 13. 1941.
TO Secretary Margenthes
FROM Mr. Cochras

CONFIDENTIAL

Registered sterling transactions of the reporting banks were as follows:
25,000
Sold to commercial concerns
Purchased from commercial concerns

1 6,000

Open market sterling remained at 4.03-3/4. Transactions of the reporting

basics were:

Sold to commercial concerns
Purchased from commercial COMPANY

1 7,000
1 4,000

The Cuben pass discount widened further to 5-5/165. as compared with 8-1/16%

- Saturday.

is for the other currencies, the only appreciable advenents took place in the
Canadian dollar and Swiss franc rates, which declined slightly. Closing quotations

were:

Canadian dollar
Swiss franc
Swelish krona
Belchmark
Lira
Argentine peso (free)

Franilian milreis (free)

Vexican peso
Chinese year

-

14-1/5 discount
2520
2585

J9505

2300
.0505
2000

J05-5/8

The Federal Reserve Bank of Few York reported that the Bank of Canada shipped
$1,820,000 is gold free Canada to the Federal far anoment of the Government of
Canada, for sale to the New York Assay Office. A shippent of gold and silver, with
a combined value of $996,000. was also reported as having been sent from Pera by

the Central Reserve Bank of Pera for its - account... The disposition of the Peru-

viaa shipment, which is consigned to the Federal, is at present unknown.

The Bonbay gold price was unchanged at the of $33.91. Silver was

1/16 higher at the equivalent of 4.116.

131

-2The prices fixed in Leadon for spot and forward silver were both unchanged,
at 23-5/168 and 23-1/201 respectively. The dollar equivalents were 42.33# and
12.216.

Easily and Earnin's settlement price for foreign silver was unchanged at 34-3/44.
a Treasury's purchase price for foreign silver was also unchanged at 354.
We sale four purchases of silver totaling 450,000 ounces under the Silver Purchase Act, all of which consisted of now production from foreign countries, for
forward delivery.

IMMP

CONFIDEIVIIAL

132
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE January 13, 1941
STRICTLY CONFIDENTIAL
TO

Secretary Morgenthau

FROM Mr. Klaus
FHI reports:

January 8. A report on Japanese naval construction says, among other things,
that two capital ships of 42,000 tons each, 30 knots, and 10 heavy gun armament

are under construction. Seven million dollars of asbestos is. imported annually
from Africa, and there is a shortage of shoe leather, matches and rubber in Japan.
January 8. Walter P. Reuther of the Automobile Workers Union is shown to
have been definitely 8 Communist, at least as late as 1937; in 1934 he and a
brother Victor went to Russia and worked two years in a factory there; FBI has
obtained one of several letters written by Reuther from Russia in which the
Soviet system is praised and reference is made to carrying on "the fight for
Soviet America." He is also said to have run for the Common Council in Detroit
in 1937 on the Communist Party ticket.

January 9. Russian balances in the Chase Bank as of December 11, 1940, were
$28,087,133.

January 10. With reference to the withdrawal by the Swiss of $5,000,000 in
currency on December 31 we are told (orally) that this may be for the purpose of

satisfying a Swiss legal provision requiring assets to be in cash for certain

purposes.

January 10. An intercepted letter dated November 23, 1940, from a member
of the Vichy Ministry of Foreign Affairs to someone in Bogota, Colombia, states

that "the very presence of the Germans" makes Paris "like a smouldering fire,"

riots having taken place culminating in a demonstration on November 11th when
machine-gunning killed and wounded several people; in spite of the newspapers
and the radio "everyone is more and more convinced that England will be able
to stand up against Germany in the air."

January 11. On November 20, 1940, a letter was sent by the president of

"Solidaridad Filipina," a Philippine civic association, to Sunder drawing the
latter's attention "to the need of the new order of things" in the Philippinesof
and of the desire of the members of "Solidaridad Filipina" and all the youth
the Philippines to see a free government established under the protection of
"our Mother, the great and immortal Spain."

January 11. Between May 17, 1940, and November 22, 1940, the Norwegian

Legation withdrew $650,000 in $1,000 bills; this is apart from the $105,000 item
reported January 9. (This has been reported to Mr. Pehle by no.)
October 25. Special Agent's report on Russian funds, New York, shows, among
other items, a payment on October 8 of $1,250 to Mrs. Ruther Baker Pratt out of
the account of the New York Soviet Consulate General.

gir.

133
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION

DATE January 13, 1941
TO

FROM

Secretary Morgenthau

Mr. Haas CA-

The attached tables and chart show an increase of 2,000
persons in Work Projects Administration employment for the week
ended January 1, 1941. The number of persons employed during
that week was 1,880,000, compared with 1,878,000 during the

week ended December 25, 1940.

Attachments

134
WORK PROJECTS ADMINISTRATION

Number of Workers Employed - Weekly

United States

week ending
1940

May 1
May 5

May 15
May 22
May 29

June 5
June 12
June 19
June 26

July 3
July 10
July 17
July 24
July 31
August 7
August 14
August 21
August 28
September 4
September 11
September 18
September 25

October 2
October 9
October 16
October 23
October 30
November 6
November 13
November 20
November 27
December 4t
December 11
December 18
December 25

January 1

Source: Work Pro jects Administration

Number of Workers

(In thousands)
2,059
2,009
1,970
1,945
1,926

1,858
1,785
1,714
1,665
1,608
1,620
1,659
1,690
1,701
1,709
1,706
1,698
1,691
1,690
1,687
1,689
1,704
1,747
1,762
1,768
1,776
1,779
1,783
1,785
1,806
1,820

1,832
1,855
1,872
1,878
1,880

135
WORK PROJECTS ADMINISTRATION

Number of Workers
Employed - Monthly
United States
Number of Workers

(In thousands)

1938

July
August
September

October
November
December
1939

January
February
March

April
May

June

July
August
September

October

November
December
1940

January

February
March

April
May

June

July
August
September
October
November
December

3,053
3,171
3,228

3,346
3,287

3,094
2,986
3,043
2,980
2,751
2,600
2,551
2,200

1,842
1,790
1,902
2,024
2,152
2,266
2,324
2,288
2,092

1,926
1,665
1,701
1,691

1,704
1,779
1,820
1,878

Source: Work Projects Administration

Monthly figures are weekly figures for the latest week
of the month.

They include certified and noncertified workers.

137
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE January 13. 1941.
Miss

Secretary Morgenthan

FROM Mr. Cochran

STRICTLY CONFIDENTIAL

The Federal Reserve Bank of New York reported the following transaction in
the account of the Central Corporation of Banking Companies, Budspeat, maintained
with the 3caranty Trust Company of New York.
Date

January 10

Amount Credited
$98,700

Received From

National City Bank by order of
National Bank of Hungary

RM:

138
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION

CONFIDENTIAL

DATE January 13, 1941
TO

Secretary Morgenthau

FROM

Mr. Haas AA

Subject: The Business Situation,

Week ending January 11, 1941.
Summary

(1) The commodity markets show clearer evidence that

a renewed price rise is getting under way. Prices of basic
foodstuffs last week approached the peak of last April,
while prices of industrial raw materials reached a new high
since January. Greatest advances during the week were in
paint materials, fats and oils, and coffee.
(2) Speculative interest in commodities appears to be

increasing somewhat, motivated in part by the uncertain out-

look for speculative profits in the security markets. Interest currently is centered in the fats and oils, a group considered in some quarters as likely to be relatively free from
Government control. The development of widespread speculative
buying would increase the difficulties of stabilizing com-

modity prices.

(3) The steel industry in December fell still further

behind in its attempts to keep up with the volume of orders.
New orders of the U. S. Steel Corporation in that month continued far above shipments, and unfilled orders have accordingly shown a further sharp increase.
(4) Our new orders index rose during the New Year's
holiday week, despite a reduction in steel orders. The turn
of the year has initiated a heavy spring buying movement in
cotton goods. Sales of print cloth last week rose to about
three times the current weekly production, which is already
at a record level.
(5) The New York Times index, which has been basically

revised, continues to indicate an expansion in industrial
activity. In the first week of January, the index rose 1.9
points to a record high of 123.0.

-2Renewed rise in commodity prices

4 further advance in commodity prices last week provides
evidence that a renewed price rise is under way, folloving E period in which prices levelled out for several
(See Chart 1, upper section.) By the end of last week
the foodstuffs index had approached last April's high, while
the industrial materials group reached a new high since
January. In the entire group of 28 basic commodities, only
2 declines were reported, while 16 items showed increases.

Mine pronounced gains were in fats and oils, coffee, and
mint materials. (Lower section of chart.)

Speculative interest in the commodity markets seems to be
increasing somewhat, although trading in the futures markets
the not yet reached the November volume. Some opinion in the

trade attributes a part of last week's rise to speculative infloridas rather than to trade demand. Reduced opportunities
for speculative profit in stock trading have caused a certain
amount of speculative interest to shift to commodity markets,
according to this view, especially markets such as lard and

optionseed oil, where there is believed to be relatively less

citizen of Government intervention in the way of price control.
. videstread speculative buying movement, of course, would in-

the difficulties of stabilizing commodity prices.
Price increases affect many commodities

Factors in the fats and oils market last week included

records that the Finnish Government expects shortly to buy

ourtain quantities of provisions, including 14 million pounds
of lari. An expected reduction of 14 per cent in spring hog
facrowing reasins a bullish influence, particularly for lard
prices. and recent reports of heavy Russian and Japanese
buying of various fats and oils contributes to a bullish background for this commodity group.

The second group of items showing substantial increases
WEITE the paint materials. Shellac prices increased despite
repent trade reports that buyers In this country had purchased
ROST of their 1941 needs in November. The increase in
flammeed prices continues to reflect a short tage of shipping
SCEDE from Argentine, combined with unfavorable crop reports

from that country. Judging by the longer list of paint

materials in the broader ELS index, latest data for which
ower the week ended January 4, increases in prices of paint

materials have been general.

139

140

-3Coffee prices rose last week in response to two successive increases by Colombia in minimum export prices, which
makes four increases since November. According to uncon-

firmed rumors, Brazil is also contemplating the establish-

ment of minimum export prices.

Consumption of copper and zinc sharply increased

A sharp increase in deliveries of copper in December
widened the discrepancy between production and offtake of this

metal. Deliveries of copper of domestic origin increased in

December to a new monthly high of 112,671 tons, representing
8 gain of 10,183 tons over November. Even with so strong an
ispetus, production of refined copper increased to only
97,035 tons in December from 96,283 in November. According to
trade sources, the needs for nearby months, including defense
needs, are substantially in excess of amounts available, so
that manufacturers may request releases of good-sized tonnages
from the 100,000 tons of Latin American copper purchased by
the Metal Reserves Company. This copper is scheduled to begin
arriving in the United States in March and will continue through
September at the monthly rate of about 14,300 tons.

Shipments of domestic zine increased to 65,385 tons in
December, from 62,295 tons in the previous month. While the
production of zine has strongly expanded in recent months,
it is still substantially below the volume of shipments, and
stocks have declined to extremely low levels. Production

reached 59,883 tons in December, having made successive gains
since August when 51,010 tons were produced. While the

quoted spot price of sinc remains unchanged at 7.25 cents a
pound. St. Louis, this price is purely nominal and no metal

is currently available at that price. January futures for
sinc are now quoted at 8.65 cents, with practically no trading.
The American Smelting and Refinining Company is planning

to erect a large electrolytic zinc refining plant in Texas.

Then completed, probably in early 1942, the plant will add
from 24,000 to 30,000 tons to the annual capacity of the

United States. In addition to this new plant, other plans
raisetotal
for expansion
rehabilitating
old
expected
capacity to by
about
900,000 tons
a year.
Recent

retorts are to

estimates by the zine industry of the amount of zinc required
for domestic and foreign purposes in 1941 put the total at
about 380,000 tons, an estimate which is now considered by
some in the trade to have been too low.

141
Moderate gains in broader commodity index

The BLS all-commodity index, which is now available for

the week ended January 4, above an increase of 4.3 per cent

above its 1940 low, as compared with the 3.6 per cent increase shown in the veek ended December 21. Chart 2 shows
those sub-group indexes which have risen further above their
respective 1940 lovs than the rise in the all-commodity index.
The percentage increase from 1940 lows to the week ended
January 4 is indicated for each commodity.
The two group indexes which had increased most on

December 21 -hides and skins, and lumber - declined slightly
over the next two weeks. A sharp rise occurred in the livestock price index, and also in the indexes for meats, grains,
and oils and fats. Dairy products showed the widest decline,
primarily because of a drop in butter prices, and prices of
certain fruits and vegetables were sharply lower.
Cut in steel SERED price requested

In contrast with the rising tendency noted in the prices
occurred in the rise in steel scrap prices. This resulted
from the issuance of a statement by the Price Stabilization
Division of the National Defense Commission on January 7 requesting a reduction in steel scrap prices, with the ultimate
objective of bringing the price for No. 1 heavy melting scrap
at Pittsburgh down to not more than $20 per ton. Prior to
of numerous other commidities during the past week, a halt

the date mentioned, scrap prices had been rising and had
reached $23.50 to $24 for the No. 1 heavy melting grade at

Pittsburgh.

On January 9, dealers in the New York district are reported to have cut prices $1 a ton; on January 10, it was
reported that brokers in the Chicago district were offering
No. 1 heavy melting steel scrap at about $1 under previous
levels; and on January 11 brokers in Pittsburgh quoted a reduction of $1.50 per ton. No actual purchases by mills were
reported, however, at any of these quotations.
New steel production records

The tonnage output of steel ingots last week again
reached a new high record, with a gain of 1.3 points in the
operating rate to 97.2 per cent of capacity. Although am

-5-

142

great higher operating rate was reached in 1929, the tonnage
creamed THE less, because of the smaller capacity of the
informating at that time. Reference to Chart 3 will show that

mustically all districts continue to operate virtually at

penality levels. Steel output in the current week is schedclef E E still further increase, with the operating rate
1.3 points higher at 98.5 per cent of capacity.
Devertheless, the steel industry continues to fall behind
its efforts to handle the incoming volume of orders, judginc fres current trade reports and from reported data of the
I. 5. Steel Corporation. While shipments of finished steel
the I. S. Steel Corporation in December rose 8 per cent
above the previous month, thus attaining the highest December

volume in the corporation's history, the corporation's esti-

unted backlog of unfilled orders showed a further substantial
inspected by the end of the month. (See Chart 4.) The com-

incoming business fell to a little below capacity dur-

inc Dear Year's week, but in view of the tenor of current trade
reports, E rebound to around pre-holiday levels is now probably

taking place.

Defense activity boosts construction
Although bookings of construction steel in the first
THE in January slipped off somewhat from the high levels of
the letter part of December, they were no less than 146 per
DEDIC above the corresponding week of 1940. Further heavy
continues of structural steel will develop as a result of a
DET sourt in heavy construction indicated by the engineering

contracts avarded in the week ended January 9, as reported by
the Engineering News Record. The total for the week mentioned
reached (158,000,000, the third highest weekly total reported
since the defense program got under way. Four large awards
made by the War Department for plants to be operated by priTabe companies accounted for 46 per cent of the total. These
covered 2 powder and explosives plants amounting to
$23,000,000 each, together with an ammunition loading plant
EZ amonia plant costing $15,000,000 and $11,000,000
respectively.

Further evidence of booming construction activity is
direct by the F. V. Dodge Corporation's figures of contract
for December, which rose to the highest level since

June 1930. The monthly total of $456,000,000 WES 10 per cent
above the previous 1940 peak reached last August. It was
estimated that defense construction awards in December amounted

to $165,000,000 or 36 per cent of the total.

143

-6Textile orders sharply increased
4

Our new orders index for the holiday week ended January
increased to 162.8, compared with 144.5 in the preceding

week, largely because of increases in textile orders. (See
Chart 5.) New orders for steel were lower, and the total excluding steel and textiles was practically unchanged.
The increase in textile orders apparently marks the be-

ginning of the seasonal spring buying movement, in which tex-

tiles are usually the leader. Sales of print cloth and related
items last week were estimated at over 60 million yards, three
times the current weekly output of mills, although the output
in December reached a new record level.
New York Times business index revised

In addition to the usual annual revision of seasonal

factors, the New York Times has recently made other revisions
of a more fundamental nature in its weekly index of business

activity. The revisions have been carried back to the beginreported currently for the first time during the past week.
The net result of the revision has been to raise the level
of the combined index, as will be seen on Chart 6, which shows
the index on the revised and on the old bases. While the
revised index has shown a greater rise since the beginning of
ning of 1938, and the results on a revised basis have been

1938, its general pattern is essentially similar to that of
the old index.

The most important change in the revision has been the
inclusion of a new component, paperboard production. The ad-

dition of this item, with a fairly heavy weight, has necessitated revisions in the weights assigned to the other items.
The weight given to electric power production has been cut
substantially. In addition, the estimated normal levels for
miscellaneous freight car loadings and lumber have been
lowered noticeably, with the result that both of these indexes

nov stand at higher levels.

During the week ended January 4, most of the components
of the Times index showed gains, raising the combined index

from 121.1 in the previous week to a new high at 123.0. The

principal factor was a sharp rise in the adjusted index of

lumber production, although good gains were also shown by the

adjusted indexes of electric power, steel ingot, and paperboard
production. The adjusted index of miscellaneous freight car

144
7-

loadings rose fractionally but the index of "all other'
carloadings declined rather sharply, largely as a result of
a lag in coal shipments. In addition, the adjusted indexes

of cotton mill activity and automobile production showed

minor declines.

Barron's index of business activity for the week ended

January 4 rose at a slower pace than the Times index, advan-

cing only fractionally to 125.6 from 125.4 im the previous

week.

Preliminary data for the week ented January 11 reveal a
and a substantially greater than seasonal rise in automobile
production. The week's automobile production of 116,000 units

slightly less than seasonal gain in steel ingpt production,

was the highest January weekly output on record.

145

-/

-

REVENEST OF BASIC COMMODITY PRICES
1947

Daily
IN

125

=

- INSURED

IN

-

120

15
TNE
TEE

Reasons

112

.

1948

--

1947

-

I

.

a

30

#

1548

34

21

INCORPORATE

28

4

"

18

JANUARY

25

.

:

105

Rammurrs

12

110

15

.

194

a

IS

Benefice - Sur - - to J 3. mm. -- to January 10, 2042

-

I MATERIALS

12 Recentures

45

4

.

.

35

BLE

30

22

=

- ZLE
SE

I
IS

SE

J JULY

S/E

$

s
--

J-

- 4%
P-W-41

a

SUBGROUPS OF B.L.S. ALL COMMODITY INDEX SHOWING
GREATER PRICE INCREASES THAN COMBINED AVERAGE
Percentage Increase From 1940 Low To Dec. 21. 1940 and to Jan. 4. 1941
PER
CENT

Hides, Skins 30.1%

30

28

"Lumber 25.7%

26

Cattle feed 25.7%
Livestock 250%
Drugs.etc. 24.8%

24

22

20

18

Grains 17.7%

Meats 16.9%
16

Dairy products 14.7%
14

Oils, Fats 13.7%

Rubber(crude) 128%
12

Other foods 108%
Cotton goods 10.5%
10

Chemicals 84%
Other farm products 73%
(Leather 7.3%
Woolen products 71%
#Nonfer metals 68%
Anthracite fuel 6.4%
Fertilizers 62%
Autos,etc. 5.9%
Other textile products 50%
(Tires. tubes 49%
Bituminous fuel 4.9%
(Gas, fuel 48%
Paper.etc. 48%

8

6

4

Fruits, Vegetables 4.4%
ALL COMMODITIES 43%
2

0

1940 Low

Dec.21,1940

Jan.4,1941

Source Bureau of Labor Statistics
P-209-A

STEEL OUTPUT AND RATED CAPACITY
Weekly Tennage

Total

Copperty

Output

PRINCIPAL PRODUCING DISTRICTS
1948

1441
THIS

TRAUSANDA

THOUSANDS

Chicago
###

###

Pittsburgh

###

###

#48

#48

Butguta

### 100

###

MAN

Buseute

168 100

168

100

"

.

100

Philadelphia

my
Buffale

Cleveland

Sirminghem

Wheeling
Cinsinnati

Detroit
1941

1940

1041

"Beeed
0.044

Chart 4

148

CONFIDENTIAL

REPORTED NEW ORDERS. SHIPMENTS, AND INDICATED

UNFILLED ORDERS OF THE U.S. STEEL CORPORATION
TOMS
TOMS

THOUSANDS

THOUSANDS

2400
2400

2000
2000

REPORTED New ORDERS
1600
1600

1200
1200

800
800

REPORTED SAIPMENTS
400

400

1938

1939

1940

1941

0

0

TORS

TOMS

THOUSANDS

THOUSANDS

3600

3600

3200

3200

2800

2800

2400

2400

INDICATED Unr ILLED Groups
2000

2000

1600

1600

1200

1200

800

800

400

400

0

0

1938
(

/-

- the Security of the Treasury

1939

1940

1941

1-133

149
INDICES OF NEW ORDERS
Combined Indian of New Ordere - Selected Organists
1933

210

190

180

170

160

150

140

130

120

110

100

90

Total emailing Staol

Seattle

1-5-C

Chart 6

150

REVISED NEW YORK TIMES INDEX COMPARED WITH OLD INDEX
ESTIMATED NORTHL . 100

1939
PER
CENT

125

125

120
120

115
115

REVISED INDEX

N

110

110

105
105

100
100

95

as INDEX

1939

C-36

TO:

1/17/41

Mr. Foley

151

Room 268

Mr. White sent the attached letter
of January 13th from Marriner Eccles

to the Secretary in to you for
you to read.
Mc

MR. FOLEY

3 Klotz
152

BOARD OF GOVERNORS
THE

FEDERAL RESERVE SYSTEM
WASHINGTON

OFFICE OF THE CHAIRMAN

January 15, 1941.
Dear Beary:

At our conference on December 4 it was agreed that there
should be full cooperation between the Treasury and the Federal Re-

serve Board in all matters of autual interest. Since them two matters
have arisen which sharply raise the question of how that cooperation
can be brought about. The first relates to banking legislation.
Certainly it would seem that banking legislation sponsored or supported by either agency affecting the other would come within the
scope of what I believed to be our understanding.

In the Tall Street Journal of January 3 there was an article,

under a Washington dateline, stating that "the Treasury Department is
preparing . DBV bank holding company bill", that "such of the preliminary work on the bank holding company legislation has been done",
and that "there have been conferences between Secretary Morgenthau and
Senator Glass." The article also stated that "Secretary Morgenthau is
represented as favoring legislation which would force a break-up of
existing beak holding company systems", and that "yesterday Comptroller
of the Currency Preston Delano and Treasury General Counsel Edward Foley
discussed the holding company legislation with Senator Glass

Assuring that this report is correct, it is the first

knowledge that we had that the Treasury was seeking new legislation at

this time dealing with this subject. As I think you are aware, the
Board is specifically charged under the law with the various legal responsibilities applying to bank holding companies.

Te are advised that the initiation of this bill did not come
from Semator Glass, but from yourself. Ye had recognized the need for
a change in existing legislation and had prepared legislation to deal
with it, and had it been thought desirable to have banking legislation
at this time, this subject certainly should be included. However, it
YES our understanding that the Administration desired to avoid piecemeal legislation and, accordingly, we have not undertaken to push this
particular measure, feeling that it was far preferable that the subject
be taken = and dealt with as part of the program contemplated by the
proposed hearings under the Tagner Resolution.

153
-2The second instance, which I want to mention to you in all
frankness, relates to the special report of the Federal Reserve System which was submitted to Congress after you had had an opportunity

to consider it for a period of some ten days. We, of course, did not
ask you to assume responsibility either for objecting to or approving
of the report. However, had you desired to do so, you could have assumed that responsibility and either approved it or made known the objections you had to it. You advised me that you considered the report
our responsibility and that you reserved the right later on either to
approve or disapprove all or any portion of it.
Immediately after our conference in your office on December
30 you stated at your press conference that we had been discussing
Federal Reserve matters and that I would have an important statement

to make. As a result, even before I had had an opportunity to get
back to my desk, my office was besieged by newspaper inquiries. I
was obliged to tell the press that I had no statement to make that
night and did not know whether I would have any statement to make.
I was especially embarrassed because I was acting in this matter not
only for the Board but for the Federal Advisory Council and the presidents of the Reserve Banks.

I felt, as did Harry White and Lauchlin Currie, that the

President should be advised that a statement was to be issued, though

I did not want to take his time to discuss the many technical matters
involved, unless he wanted me to do so. It was too late that night,
but the next morning I took a copy of the report over to Mr. Early
personally, together with a brief explanatory letter for the President.
Mr. Early advised me that afternoon that he had taken it to the President and that the President had no objection to our releasing the re-

port. Mr. Early felt that we should give it out without further delay,
inasmuch as your statement that an important "move" was to be made was

in all of the papers of that morning. Mr. Early advised making the report for release in afternoon papers of the following day, that is,
Wednesday afternoon.

Accordingly, I called a press conference in my office for
five o'clock on the evening of December 31, and I was at great pains
to avoid either committing the President or yourself to the report or,
on the other hand, to give any indication that there might or might
not be opposition to it. As you know, this was a compromise report
which prevented the Advisory Council from issuing one that they had
previously adopted which was highly critical of Administration policy.

154

-3At "his press conference on the day following publication of
the report, Mr. Early did his utmost to correct erroneous impressions
given by some of the headlines indicating that there might be an Administration fight on the program. He stated that the report had been
issued with the full knowledge of the President, that the President regarded it as "something for Congress to study", and that it was being
studied meanwhile at the White House and at the Treasury. He stated
further, "Despite the headlines I don't think you are going to find
any fight between the Treasury, the Board and the White House." Mr.
Early's statement seemed to me to leave the matter in correct focus,
committing neither the White House nor the Treasury to the report,
but indicating that it would be fairly considered and discussed before
the appropriate committees of Congress.
On Thursday, January 9, however, at your press conference you

went out of your way, as it seemed to me, to belittle the report and to
take pot-shots at me personally. Subsequently the press has uniformly
interpreted this to mean that you propose to fight the program, assuming
that Congress takes it "seriously".

Now, Henry, in all fairness, if this is playing ball, then I

just don't understand the rules of the game. All of us have naturally
been greatly disturbed by your attitude as it was volunteered at this

press conference. Strongly tempted though I was to make public a
statement in self-defense, I have refrained from doing so, though I

think the position attributed to you at this press conference is highly

vulnerable.

I am equally convinced that if there are parts of this program
to which you have serious objection -- though you did not state objections when you had an opportunity to do so in our discussions - a
basis of compromise can be found which will be satisfactory to both of
us and will enable us to present a united front instead of the division
that is now proclaimed to exist between us. I earnestly wish to get together and I do not want to be forced to debate a matter as important as
this publicly or through press conferences. Accordingly, I - writing
this personally to you in an effort to bring about that cooperation which
you have said you desired, but which certainly has not brought satisfactory results in either of these two instances.
Sincerely yours,

Marrier
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.

155
WAR DEPARTMENT
G-2/2267-115

WAR DEPARTMENT GENERAL STAFF
MILITARY INTELLANENCE DIVISION as

WASHINGTON

I.B. 11
January 13, 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 29, 1940

January 5, 1941*

Gross
Number

British
Allied
Neutral

3

18,208

4

19,348

0

TOTAL

Tons

7

-

Gross
Number

Tons

54,875

?

(

?

37,556

(41,042

95,917

Unofficial tabulation subject to correction.

Alasman Suite

SHEEMAN MILES,

Brigadier General, U. S. Army,

Acting Assistant Chief of Staff, G-2.

156
0-2/2267-115

I.B. 11
January 13, 1941

VEMORANDUM FOR THE SECRETARY OF THE TREASURY:

Subject: British, Allied and Neutral
Bar Shipping Losses.

The following is a tabulation of British, Allied and
neutral shipping losses for the weeks ending on the dates
indicated:

December 29, 1940

January 5, 1941*
Gross

Gross

18,208

3

Allied

-

Neutral

0

TOTAL

7

54,875

?

19,348

4

Tons

(

Bri tish

Tons

(41,042

?

(

Number

Number

37,556

95,917

* Unofficial tabulation subject to correction.

SHERMAN MILES,

Brigadier General, U. S. Army,

Acting Assistant Chief of Staff, G-2.

White are these
fc to gunes you of m any use

157

Wash. Post
1/18/41

Capital Parade
By Joseph Alsop and Robert Kintner

Jockeying For Trade Power
certain that the matter will be

OF THE THREE most pressIng British needs- for cash, ship-

put up to Congress If the lend.
lease program goes through without too much opposition.
An American effort of economic

ping and planes and other war
materials-this country can most

easily meet the need for cash

warfare is both fessible and urgently required The British are
running short not only of dollar
exchange but also of all kinds
of cash resources With insum.

Essentially, the President's lend-

Ited way. by giving American
products to the British without
quiring cash payments
A movement is already sfoot in
the Government to meet the Brit-

re-

client cash reserves they cannot
back up their naval blockada of
Germany with almultaneous 600nomie blockade. This country has
the cash reserves. now needs the

1st need for cash abroad M well
as in this country by supplement-

same raw materials that Britain
cannot keep out of the hands of

the the British effort of economic
warfare with an effort of our own

the Axia powers. and le well

And that is why the behind the
scenes jockeying for control of

equipped to handle the situation
No far little has been done. Even

the land-lease program may prove
to have great future significance

In South America where we are
lending huge sums. we have seldom asked for economic conces-

To deal first with the current
aspect of the problem. the prize
departments are competing is the

sions favorable to ourselves and
harmful to the Axis as part pay-

the British must offer us for our
Joaned or leased products The

ALTHOUGH no practical steps

for which the various agencies and

ment for our loans.

power settle what quid pro our

on

have been taken much thought

decision as to what the British are

has been given to the subject,

to get. and what we are to retain

chiefly in the same agencies now

is naturally to be left to the Presi-

in competition for the bargaining
power under the lend-lesse program At the Commerce Depart-

dent and the chiefs of the Army

and Navy But the bargaining

power is anybody's for the taking

ment Undersecretary Wayne

on

Chatfield Taylor has evolved

THE NATURAL competitors are

strikingly interesting over-all

the Commerce Department the

program including both economic

Treasury and the office of the Ad-

warfare and concurrent prepareLion for postwar reconstruction

ministrator of Export Control

Rather different views are held by

At the Treasury there are thoughts

each Secretary of Commerce

of Halson committee with rep.

Jesse H Jones. the best trader in
the Government regards the land

resentatives of all the interested

Government agencies, and an ex-

lease program MA business prope-

ecutive chairman And at the of-

sition, places great emphasis en
the opportunity to improve Amerlea's economic position at Britain's

expense Such at least the im.

pression of Jones' friends at the
Capital where his influence is an

great that the President's plan

may well be altered to place the

bargaining Job squarely in Jones
hands

The Treasury under Secretary

Henry Morgenthau If has always

though first of the broader as

parts of The President's foreign

pattey Morgenthau hales to be
taken in and has never been soft

with the Brittan but his strongest
emphasis 18 on quick aid to BritATM White from about lightdation

of Britten direct Investments in

this country. and Instructions that

the program bring us

adequate crediti of such vital raw
MATHPIATE " rubber and tib. he

would not follow Jones using
the was erials to take Britain's
last wooden sicket

and

JESSE JONES
"The Best Trader

AS FOR THE OFFICE of Ex

port Contro its administrator
Col. Russell Maxwell has proved

fice of Export Control plans are

himself remarkably efficient exerutive who would approach the
problem with cons Iderations of

already laid for practical action
and when the time comes

American military and naval

It will of course be very costly
to embark on economic warfare

Congress last July, strengthened

Cornering the world copper sup-

strategy primarily in mind Since

ply, for example is not cheap

the governmental authority over
Important exports Col. Maxwell

thing to do. None of the estimates

of annual outlay thus far pre-

has worked dire-tly under the

pared are under the billion mark
But before becoming led deeply
alarmed about additional spend.
ng. those who consider the prob.
lear should remember two things

President While Secretary Jones
has the edge on the HIIL Secretary

Morgenthau and Col. Maxwell
have equally good chances of

White House support

By its very nature money spent

Since they are different aspects
of the same problem the agency
which has charge of the bargain.
Ing under the lend-lease program

in economic warfare is not dead

loss In the last war. Indeed the
allied efforts came near, in the

also likely to direct the Amerieffort

economic

warfare

if

can

and, to showing profit And if
the American policy of aid to

elese to the White House the wis

Britain short of war means any.
thing ought to mean American

warfare against the Axis powers

ing Britain's needs for was ma.

such an effort made In circles

dom of participating in economic help in the economic field Meet.
has long been discussed The terials and shipping may be aim.

President has shown lively in. rult Economic aid however, is

terest And " ***** reasonably both simple and deadly effective

a

device meet this need lim-

.

lease plan of aid to Britain is

158

January 13, 1941
8:30 p.m.

(At Secretary's Home)

RE AID TO BRITAIN
Present:

Stewart
Young

15. Cochran

L. Suhn

10. - Bell

- white

Mr. Foley
Jr. Cox

Pinsent
Mrs. Morgenthau

DEE Phillips have any suggestions on how I should

testify:

Ee is very worried and blue about the whole business.

Is he really?
02, he Was worried about Landon, Lendon's state-

zent against the bill.
Is he really blue.

Ea just stood there and seemed awfully blue,
looking out toward the White House, and I

tried to soothe him and cheer him up about it.

them he is in with me, he is rather cheerful.

159
2Mrs. Morg:

Maybe he thinks that is good.

H.M.Jr:

He is very plesant when he is in there. Purvis
said he actually chuckled the other day.
(Mr. Young entered the conference)

H.M.Jr:

Come in, Philip. This is one occasion where you
can use your brain tonight. (Laughter)
On the discussion with the Greeks, we offered

them 30 five year old planes. Philip said he

thought that was an insult. I said, "Philip,
this is a Cabinet decision, and you are not
supposed to think." He said, "If I had only
known that before, look at all the time I
would have saved, and I said he was boasting.
(Laughter) I thought I had the Greek for a
minute, but not on your life. What a man!

Young:

Why?

H.M.Jr:

I thought he would be satisfied when he heard
he was going to get 30 good planes, but he

wanted 60.
Young:

It didn't take him long to get back to that,
did it? The minute he said 30, he said, "Oh,
but the State Department promised us 60."

Cochran:

He raised you 30.

Young:

Merle probably opened all the windows.

Mrs. Morg:

Does he know that they are five years old?

H.M.Jr:

Say, leave that out. Admiral Towers said they

were designed seven years ago and not con-

structed until five years ago. He said, "Not
that I am saying that they are rusty. (Laughter)

He says, "They can fly." But I really think it

is silly.

160

-3Young:

They just go four hundred miles an our slower.

H.M.Jr:

Yes. Can we start without Professor Foley?

Kuhn:

Harry White is coming, isn't he?

H.M.Jr:

Has anybody got a document for me?

Kuhn:

Lots.

Cochran:

I didn't give you that Canadian stuff, did I?

H.M.Jr:

No.

Cochran:

I will give you that as my contribution.

H.M.Jr:

Did you get to see Mr. Hull?

Cochran:

Yes. He had a group in his office, and he had

stepped out to a little anti-chamber to talk to

Douglas, and then when he got rid of Douglas I
went in.
H.M.Jr:

Lew Douglas?

Cochran:

Yes.

H.M.Jr:

And you gave him that?

Cochran:

Yes. I told him that you had told me of your

conversation with him this morning, and that
you wanted to get the data in his hands in regard to what the people had, and so on, and so

I told him that there was this book plus a

letter, and I drew his notice to the fact that
you would give him anything he would be interested
in. He said, "I am sure this will be enough.
The technical end of it, I have to leave to
Secretary Morgenthau. I want to do my part on

the other." And I said, "The Secretary in turn

would be much interested in having anything that
you may have received in the past or made while

161

-4thene negotiations were going - Walt will

The partiment to the probles, that I from
or to the British.' Ind like mit, I
understand."
H.M.Jr:
Cochran:

Meeill that WES good to get in to I in
Min, yes. He TES very nice. Ha the -

for sometime.

(Min- Roley entered the conference)
H.M.Jr:

Frelling, professor.

Cochran:

They were working on a statement. They BEE

the lides this was casing off tomorrow. I -

sure.
H.M.Jr:

II int' know. Foley arranged it. That dit you

Foley:

Tennesing,I told him we wouldn't The reality #

the Charley to do?

- and - wanted to is it after

name.

H.M.Jr:

The State Department will be a little in advance,
them.

H.M.Jr:

Hours who has got something for net

Kuhn:

This is really Oscar's. He wrote in
Team I can't read it unless III initials it.

H.M.Jre

(Maughter) Read it out I

Bell:

Mail is the matter, isn't angeling willing to
differ it?

H.M.Jr:

Somebody read it.

Folay:

I filink Farilie ought to read it. He - it.

162

-5Bell:

Get same young fellow with good eyes.

Taim:

This is just the bare bones - it is an introdoction, and then a whole lot of questions which
- are trying to get the answers for and then a
concluding passage again. Shall I read it?

L.L.I.:

If Jun please.

Tahn:

(See Attachment 1)

I think it may be helpful to the Committee if I
report at the outset, as frankly and fully as I
can, what I know of the British position in its
relation to the bill now before Congress.
"is Secretary of the Treasury, I have been in

touch with this position in two ways. The first
is the obvious one, that the Secretary of the
Treasury is the chief fiscal officer of the

United States Government and is thus directly
concerned with government financing. The second

is that ever since the fall of 1938, the Treasury

has been the exclusive connecting link between
foreign purchasers and the United States Govern-

ment.

Every foreign government wishing to place orders
here has had to go through the State Department
to the Treasury. The Treasury has then consulted
other government departments as to the avail-

ability of the goods needed, the prices to be
paid, and the priorities as among the purchasers
themselves, and between the purchasers and the
United States.

LL.

This has placed upon me a direct and continuing responsibility to American manufacturers.

May I interrupt you there? Ny first reaction,

it is a little bit - well, it gives me a little

163

-6 bit too much credit or whatever the word is.

I mean, it is a little bit bolder than I am

accustomed to being.
Kuhn:

All I was trying to do was to account for the
fact that you were testifying.

H.M.Jr:

Well, I just wanted to give you my first re-

Cochran:

Leave out that word "exclusive" and going
through the State Department.

H.M.Jr:

No, going through the State Department is all

action.

right, if it does, but I just gave you my first
blush.

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

Hello, Harry.

White:

Good evening.

H.M.Jr:

You can come over here and sit next to Professor
Foley.

Foley:

I was late too, Harry. Come on over here.

White:

Sure.

H.M.Jr:

I hear you kept the train waiting the other day

at Poughkeepsie.
White:

Well, I had a good reason.

H.M.Jr:

You made it all right?

White:

Oh, yes.

H.M.Jr:

One minute, was it?

White:

I made it.

164

-7H.M.Jr:

Has White heard this?

Kuhn:

Yes. You (White) saw that introduction this

morning.
White:

Did you change it since I saw it?

Kuhn:

Yes. I put your things into it.

White:
Kuhn:

H.M.Jr:

Then I didn't hear what you have got. (Laughter)
I am just coming to that.

I am surprised Harry didn't say, "Then it is
improved.

Huhn:

"This has placed upon me a direct and continuing responsibility to American manufacturers.

It has been my responsibility to see that no

orders are sanctioned by the Treasury unless
there are ample liquid funds available to meet

them. In all the two years of this work of
coordinating foreign purchases, I have kept this
responsibility in mind in every transaction.
"Having been placed in such a direct relation-

ship with foreign purchasers, particularly the

French and British, I have also had to keep
myself informed continually about their posi-

tion and their prospects in the war. The
British have made it clear to me that they are
still in danger in spite of the wonders they
have performed in their self defense. They

expect that within the next three months they
may be subjected to the most intense strain of
the entire war, perhaps by invasion, perhaps
by a ferocious air attack, perhaps by both.
They believe that they will come through these
three months if we do our very utmost to send
them all the material help that we can. They

are confident that they will survive and stand
to win in the end, if we really make ourselves

165

-8the arsenal of the democracies, as this bill

would have us do.

"The British say that their immediate needs are
merchant ships, long-range bombers, and long-

range seaplanes for patrolling the sea routes.

Be shall have to scrape our cupboards to cover

these three critical months for them. Beyond
this three-month period, they tell me that
they will need weapons and materials of all
descriptions, in quantities beyond all our
previous conceptions, if they are to win.

"But the British have told me repeatedly that
they have another need fully as urgent, fully
as desperate as their need for the weapons of
war. This is the assurance that they can get
the flow of future supplies without which they
cannot continue this war.

"I can tell you gentlemen, quite deliverately
and quite solemnly, that unless the British

can have such assurance, they will have to make

peace. And if they make peace - a "dictated
peace" as they President has called it -- they
will lose the war and we shall be faced with
dangers we have never yet faced in our history
as a nation.
"I have come here today to put this problem
before you with Treasury figures which will,

I think, help you to see the problem in its
true proportions. Up to now, no such accurate
figures have been available. I am going to
put before you everything which is in our
possession so that you can see the situation
for yourselves.
Now, from that point on we have an outline of
all kinds of questions which you may, or may
not, want to answer.

166

9

H.M.Jr:

Just a minute. Do you want to say anything now?

Mrs. Morg:

No.

H.M.Jr:

Well, let me say this. I don't know who is the
author, so I don't - it is a fresh approach.
It is well done, but it isn't me. But I am
perfectly willing to have somebody else argue
why I should say that. Do you want to say anything, Walter?

Stewart:

Not for the moment, I don't think. I think
you are right, that it has to be you. I mean,
it has to be your method and your approach and
your mood and all the rest of it.

H.M.Jr:

I mean, it is extremely well written.

White:

Well, there are some things in there that I
don't think you ought to say, but as far as

a starter is concerned, I suppose you can easily

make it your style by just going over it here

and there, but I am a little bit troubled by
your stepping outside the immediate problem
of this is what the British owe, this is what

they have, this is what they say they will need.
I would leave the rest to the State Department,

the Army, and the Navy, it seems to me, and

Congress. They will be able to think of all
those arguments.

H.M.Jr:

Well, there are two ways to approach this thing.

There is a way to do the written thing. Bell

was the only person that heard me in New York

on this very subject, and there was another way

of doing this thing, the way I did this thing

in New York. I can simply say, "Gentlemen,
I have come up here to put before you any information that you may want pertaining to the
British finances that we have in our possession.
I have got to impress upon you the importance
of the secrecy, because the information which

167

- 10 I an going to give you new is information which
the British people do not have and any leaks

at this time might do then E great, great injury,
which I an sure you don't went to be = part of.
:lay:

They are planning on public hearings. The press

£

in Wednesday, Ed:

will be there.

That is what Sol said today.

Tell, me will talk about that in a minute. Just
hold it = minute.
"los, gentlemen, anything that you want to ask

me, just go ahead and as.c me.

:
lite:

Well, you (Stewart) were there at New York,
that the heck. And then you know what happened.

: think that would be a thousand times the best
347.

You (Stewart) SEE ae before and you (Bell) saw

me before.

It went very well, I think.
Well, I an not asking, but that WES certainly as

intelligent and certainly a far more intelligent because they were only financial people.

Lite:

That certainly is the =17 I would approach it.

think that is the 12 to do it, and I would

leave all the pleading, all the argument either in answer to a question, if they ask

what is your opinion, you can express whatever

you wish to express, but I think that will go
further toward giving then the contribution

waich you can make, which is to show the state
of their finances and WAT they need help, and

168
- 11 I think there will be plenty of others who
will point out the necessity for keeping them
fighting, et cetera.
E.M.Jr:

What do you think, Dan?

Bell:

I think that is all right if it is going to be

an executive session, but if it is going to be

an executive session, then I think you ought to

have that statement. But there is one thing in
that statement that I don't know whether you
want to say and that is that you have watched

these finances from the beginning and you have
always been able to say - I don't know whether

these are the words - that they have had the
funds with which to pay for the contracts. They
haven't got the funds now, have they, with which
to pay their commitments?

H.M.Jr:

Yes, they have.

Bell:

without going into their direct investments?

E.M.Jr:

Oh, no, but I am figuring on those. I figured
this thing two ways. What is the figure of the
contracts that they have on hand. Is it a billion three?

Young:

1 billion three - it is about fifty-fifty either

may, a billion three paid out and 3 billion three
due to come.

E.M.Nr.

But I mean yet to pay for.

Young:

1 billion three, both. It is just out half and

E.M.Jr:

Well, the figure of a billion three is all right?

Young:

Yes.

half now.

169
- 12 LL.R.

Well, this is to show what I have got in if

mind. They have 6 hundred million of securitties,
9 hundred thousand direct investments, is a

billion and a half, and there is total
and

cash of the in English, all accounts, of about private 8 hundred a everything million, of

which is not available but is there, da you
see, in this country.
White:

That seems high.
What is that?

LING

About 8 hundred million dollars worth of dollars.

Winter

That is the Empire?

Bell=

Yes.
White:

British Empire.

Controm:

But that is not immediately available to them.

No, but it is there. They could borrow it if

they have to. But they have got a billion and
a half worth of direct investments and secur-

ities against a billion three, which I would
is enough to PET out their - that doesn't take
in things like the wool we were talking about
today, does it, or the tin and rubber, and title

various things?
Whites

No, nor the French gold or the Belgian gelif

There is plenty there.
Bell:

Little
Whites

Well, you can't take in things of that kini.
No, but there is plenty there.
Can't take them in if you don't want to.

170
- 13 Bell:

Well II wouldn't say it unless you had to.

H.M.Jr:

Weelly, the is a billion and a half dollars

Young:

Oh, yes all indefinite periods, but certainly
the injurity of them do.

H.M.Jr:

There SERVICE a couple of things I want to clear =

worth off investments in the United States
against BE Hillion three of orders, so I would
say tiffery are amply covered. After all, those
main at least for 12 months, don't they?

in If mind that I asked you (White) for, to

see weather you have been able to do your home

work The White. What was the date - I asked
you titlies in the country - that the English took
aver the French contracts?

White:

Tell, iit TEAM between June - it Was in June,
beCamen June 1 and July 1.

Young:

It THE the Fourth of July weekend, wasn't it?

H.M.Jr:

What TREES SET

Young:

I thought it WELLS the Fourth of July weekend.

H.M.Jr:

Well, will somebody make notes of the things
that II marit to answer tomorrow? I want to know
what that date WES. And then the thing that

I unit the ask is, what did it amount to, how

much did the French contracts amount to in dollars?
White:

II Minit iit was about five hundred million dolLars...

H.M.Jr:

The I - making is, you see, when these

continuits were let, we were doing business with

France and England.

171

- 14 Bell:

That is right.

H.M.Jr:

And while they have contracts today of a billion
three, so many were French and we were counting

at that time on the French assets and gold, so
there was ample reason to believe that there Was

plenty of security.

White:

(See Attachment 2)

Five hundred and sixty million dollars of French
Government orders.

H.M.Jr:

On July 4?

White:

June. The June commitments which were allocated

in June included - you see, the comuitments at
the end of May were 397 million. They jumped

to a billion 87. That billion 87 included 560

million of orders assumed from the French Government.
H.M.Jr:

Check that as of July third or fourth.

Young:

Yes.

H.M.Jr:

I want to nemorize these things.

White:

Now, actually they didn't give us records of
payments made on that. I mean, they didn't give
George's men - until they stretched over several
months, but they is why they were assumed.

Young:

They didn't assume all of the French contracts
either.

White:

No, but we allocated to them.

H.M.Jr:

Purvis would know.

Young:

They are still working out those figures.

172
- 15 White:

There is still about 20 or 30 million.

H.M.Jr:

Give me a figure.

White:

Five immured and sixty million. You can say

E.M.Jr:

Well, I would rather be on the short side. A
half a billion dollars, would that be safe?

White:

Over half.

S.M.Ir:

The interesting this is, just to tell you a
minute, I told - I served final notice on October

600 if you want to round it off.

29 to General Marshall that from that time on
the English should only be permitted to buy
standard American stuff, which I think is inportant in view of the way the thing has gone.

White:

October what?

E.M.Jr:

Twenty-nine.

White:

Well, on October 29 they had unpaid commitments,

including the French we talked about, of a billion three. Their assets, of course, were higher
than what they are now. They had a billion
three.

E.M.Jr:

Well, that was the date I served notice on him--

White:

You served notice on them when they had unpaid

comitments of a billion three and assets of at
least a billion and a half?

H.M.Jr:

Well, now, let's just talk a ninute. If this
thing is going to be a public thing, I don't

see how I can testify.
White:

There may be certain figures that the British

Government may want kept confidential. Since

173

- 16 their own ambassador said they would be running

out of funds before June - of course, that is
several months away - they may not mind your

giving most of the figures, and I certainly

think that they will come out one way or another
and they will come out in a distorted way, and
distorted the wrong way. The only figure that
they might mind - that they might be very re-

luctant to permit the public learning is the
amount of gold and the official dollar balances.

The private dollar balances are known anyway.
We have published them. The various assets and

their investments in the United States and else-

where are contained in numerous publications.
Bell:

It is going to be quite a shock, isn't it, Harry,
to the British public to find out that their
gold is exhausted?

White:

I say that one figure they might not want known.
It would be a shock.

Bell:

I should think so.

White:

There are a lot of people who won't believe it.

Ruinn

They are issuing a statement soon on the fact

that their gold is being depleted so fast that
they are going to have to get to their direct
investments.

White:

Yes. Oh, they made a public statement?

Tunn:

They are going to.

L.L.Jr:

That their gold has depleted so fast?

Tuhn:

That their gold and American securities have
depleted.

White:

They haven't said anything like that yet. All

174
- 17 the comments have usually been in the direction

that they have still got quite a little gold.

But they may object to that figure, and that
figure, when you come to that, you might say

you can only give that confidentially.
H.M.Jr:

Well, what I told Phillips today, I said,

"Now look, Phillips, just so we understand
each other, I am going to do everything I can

to protect your interest when I go up and testify,"
but I said, "When the wolves attack me, I don't
know what I am going to do. I will just do the
best I can." His answer was, "Mr. Morgenthau,
if you had seen the cable that I have sent to
England, they know what you have done and what-

ever you do is all right with us," and that was

about what he said.
White:

Well, they are going to press you for information.
They will hold you much more than any one else
who will come before them, not responsible,

exactly, but they will expect to know from you
what their financial status is, and I don't see
how you can withhold anything from them except

at the express request of the British Government that you give certain figures that are
available only to the committee in an executive

session or clear the room, as they do many times.

H.M.Jr:

Well, there is one trouble. I learned my lesson from Senator Couzens. Whenever he said it

was executive session, he always left the room.
He wouldn't participate in an executive session.
You saw, Dan, what happened to me the last time

in an executive session before the committee in

the House. Within 15 minutes after I left it was
on the ticker. So in one way - if I am going to
give it, I would rather let the newspaper men
get it from me than third hand.
White:

Wouldn't
it help their case if the public knew
this?

175
- 18 E.M.Jr:

Wite:

That is the purpose of this meeting tonight.
- "ED see where the British public would be

disturbed, and I can see where the Sermans would

make capital of it, but if assistance is going
to be given, then this would help. If assistance
is not going to be given, it is just too bad.
H.M.Jr:

Just a second, Harry, hold your horses a almte.

I enulin tell which way you (Stewart) were
gaing.

Stewart:

I while have thought it was impossible to say
to any committee what the facts in the CESE are.
is we understand the facts, this is the middle
of January. At the end of January they have
got IND cash at all, and you have get to do same

interin financing by one form or another to
carry them on through this period, SD to as it
is E question of degree as to that you say and

what you don't say.
E.M.Jr:

Well, I never dreamed of saying that to them.

Stewart:

But if you don't say that, which I agree you

can"t SEY, then you come finally to same sort
of statement which carries conviction but does
not give detailed figures in which you assure
them that from day to day you have followed the
position and you have kept yourself informed,
you have talked to them and they wouldn't
expect you to go into the detailed account of
what the position of the British Government is.
White:

But what is the general statement that he would
make, then, that they will be in need of funds
they the and of January?

Stewart:

That they are now urgently in meed of funds,

but The doesn't go into the fact that they are
bankrupt.

176

- 19 White:

That will never satisfy the committee.

Bell=

I don't believe you can get by with that.

Thite:

I don't see why Congress should take the

Secretary's word - E matter of that importance
unless he can say the British Government has

given him these figures in confidence, and if

he says that, they are coming here for money, and

I don't see way they should keep it confidential.

Stewert:

I would testify by E private transaction, or I

would take a - CESE and have a country not
informed as to its country's desperate need

and have it show up in the London newspapers

the next day as to what the position actually

WES.

Bell:

Keeping the public in the dark won't set very
well with our Congress.

Foley:

No, that is sig-

Stewart:

They mouldn't be in the dark. It is just a

question of how much twilight you give them.
They are going to be in the dark because you
are going to give them some facts anyway.

Item:

Aren't there a lot of facts that can be told

publicly, how murh they spent on private plant
expansions and $0 forth?

Stewert:

Yes, that can be told.

White:

But supposing June were on the committee, Kuhn,
and the problem THES that they need cash. Now

wouldn't the very first question which you would
ask be, How march have they got now?" Now, if

the answer to that is, "I can't tell you, but

you will have to taire my word that they are in

urgent need," the friends will be all right,

177

- 20 but I an thinking of those who are not friendly.
Stemart:

by guess is that only the friends are going to
be all right anyway.

B.M.Sr:

Tell, now, let's just - I mean, after all,

Harry keeps saying they are coming here for

cash, which they are not, I don't think he

means that.
Bell:

He means it is equivalent to cash.

White:

that?

Bell:

You mean its equivalent, don't you?

E.M.Jr:

They are not coming for cash. After all--

White:

Call it by any other name.

H.M.Jr:

You either give an accurate balance sheet or

you don't, and I don't see how there is any
two rays, you know what I mean. You either

say, "Well, gentlemen, here is their position,

these are their assets as they have shown them

to us, and so forth." Of course, my own incli-

nation is, I think that if you paint the picture
as bad as it is, nobody is going to believe it.
I have done that on the Hill before. You (Bell)
have seen me do it on the Hill before. I have
told them what the deficit was going to be and
things like that, and they said, "Oh, Morgenthan, he is so blue. He always says it is much
worse. It can't be that bad. You have seen
that before.

Bell:

Yes.

And just thinking out loud, if they are going
to press me, I would much rather trot out this

December 1 statement which I take it is the latest

178
- 21 -

we have, isn't it, Harry?
White:

Well, we brought it up to January 1.

H.M.Jr:

Have you got that?

White:

Yes.
January numbers are in red, if you
want The
it re-done.

H.M.Jr:

I will just take this statement and say, "Here,
gentlemen, here it is."

White:

Of course that doesn't involve telling them what
they have.

H.M.Jr:

Let me just look at this (White's statement) a
minute and see whether this is it. U.K. pay-

ments made total purchases in the United States,

a billion 100 million, sums to be paid in the

next nine months, 296. Sums to be paid by
September 1, 1941, as contemplated in the "X"

program, that wouldn't have to go in at this
time. I mean, imports from U.S. not purchased

through the British Purchasing Commission, 187,
and U.K. purchases from areas outside the U.S.

requiring gold. Purchases by the sterling area.

Payments by the sterling area to Canada and New-

foundland. Do you think that would have to go
in?

White:

No, you can trim very - just two or three items
out of that for your purpose.

H.M.Jr:

I don't see what good it would be. Purchases by
sterling area from U.S. 22. Commodity imports.

Invisible items. Grand total. And dollar
receipts, net balance, dollar receipts sterling

area, commodity exports, Australian gold exports,
South African, Canadian assistance to U.K. I
don't see why we can't leave the Canadian thing

out entirely. Don't you think so, Walter?

179
- 22 Stewart:

I think so.

H.M.Jr:

I don't think they would be smart enough to ask
for that, do you, Dan? I think you could lift
the Canadian thing right out of here.

Bell:

It
probably cause a lot of questions if it
is will
in there.

H.M.Jr:

Why?

Bell:

The
and committee
so forth. would ask you why you bring it in

White:

The trouble is if you don't bring it in they

have more money and-H.M.Jr:

My suggestion is to leave it out.

White:

Well, if you leave it out, then their income

will be larger than it is there, their net income.
You can say they also one suns to Canada without

specifying it.

H.M.Jr:

That is all right. What can you see, Merle, that in those figures that they could object to? I

mean, we are going to take the Canadian figures

out and take out that "X" program thing, Harry.

White:

Oh, I think I wouldn't refer to it that way, but
I think you might make your case - I don't know
whether you want to indicate--

H.M.Jr:

I'll tell you what. One thing the President is

very definite on, and I am ready to go along
with hin on that, he doesn't want to say whether

it is one billion or eight billion.

White:

Well, in that case, I think the only commitments
I would leave in were those orders which have

already been placed, take the others out entirely.

180
- 23 E.M.Jr:

That is right. That is what I an trying to say.

White:

There are two, the "I" program and the orders
under negotiation.

I would take them all out, just what is on hand.
Cochran:

I think you could dress this up by sort of

smoothing it over and making - give them a balance sheet. I agree with one or two of the men

that it is wrong in an open hearing to give the
exact status of their gold and dollar balances.
I don't think we ought to do that.

E.M.Jr:

Well, what I am going to ask is that the Canadian
thing be taken out. Who works on this for you,
Harry?

White:

There are 2 couple of then.

E.M.Jr:

If you got to the office at nine tomorrow morning, how long would it take you before you could

have a statement for me?
White:

Typed?

E.M.Jr:

No, no, in pencil.

White:

Oh, it wouldn't take long, depending upon what

you want. it the most a half hour.

E.M.Jr:

I mean by the time I get back from Bull's, it
will be 10:15 until I can get settled down.

White:

We will have it done any time you want it. If
you want it for Hull, we will get there a little

earlier and do it, that is all. It will be done

any time you specify.
E.M.Jr:

I don't want it at Hull's. I want it when I come

back from Hull's.

181

- 24 White:

I thought you were going to tell Hull what you
were going to do. I thought that was what you
said over the phone.

3.1.Jr:

Oh, yes, but I am not going to - it is the whole
argument - it is over with him, whether I should
recommend that they put up collateral.

White:

Of course, giving them that, Mr. Secretary - they

will be interested in it and it will be helpful

for your purpose in order to show what they will
have and what they will need, but it doesn't
touch on the question which they will follow
that with, how much have they got now?

I.M.Jr:

All right, now, let's do one thing at a time.

Supposing we do that and we meet again tomorrow.
mean, anybody talk up. Can anybody see why
I

that wouldn't be all right? Dan?

Bell:

Eas that got the gold and the cash in it?

Cochran:

Income.

White:

It has income. It has the gold they get from

Australia.
Bell:

But it doesn't have their present gold.

H.M.Jr:

No.

Bell:

No, I certainly don't see any objection to it. I
= not so sure before it is over with you haven't
got to give a complete statement.

Foley:

I think, Dan, that that is absolutely true, and
I don't agree with Walter Stewart. You just
aren't going to get this bill through unless you
come clean, and you can't do it in executive

session, either, because these figures are going
to be out and these fellows have got to use this on

182
- 25 -

the floor. The only thing that Martin said to

Rayburn today was, I will withdraw my opposi-

tion to having this thing put into a fight as
to committee jurisdiction If you will assure

me that there will be full and ample opportunities afforded to the minority members of the
committee to cross-examine Mr. Morgenthau and Mr. Knox and

Mr. Stimson and Mr. Hull, and if there is that
H.M.Jr:
Foley:

opportunity-In that order?

Well, I don't know about the order. But if
there is that opportunity, I am willing to with

draw. And Sam gave him that assurance, and that
is what happened. Now, the one thing they want
to know is, are we being soft-headed about this?
are we being played for suckers? and they have

got to know what the condition of that treasury
is over there before they are going to be willing to underwrite what it costs to carry on
this war. Now, I don't see why the fact that

these figures haven't been made available in
England makes any difference. How long has it
been necessary to have cash to carry on a war?
Germany started this war without any cash. Cash

isn't necessary. And if they have access to us
and if we are willing to give them material aid
and if we are willing to back up what the Presi-

dent has said, that is all they need. Their
morale is all right, and it isn't going to be

helpful to the Germans to know that they haven't
got any money. They have unlimited access to the
resources of the United States, which are prac-

tically boundless. I don't see as it is--

Bell:

Well, you may have to do that to get the bill
through, but it is going to be disheartening to
the British public.

Foley:

But you have thrown it out on the table, and there

183
- 26 -

it is and it has got to go through, it can't
fail.
Cochran:

How
long do you figure, Ed, it will take to get
it through both Houses?

Foley:

I think they can pass it in the House this week.

Cochran:

And then an appropriation is to take care of the

Foley:

Altogether I think it will take from a month to

Cochran:

But it will take that long?

Foley:

Yes, because I think the debate in the Senate
is going to be longer.

Cochran:

This will all reveal that we have to do some-

finances of it.

six weeks.

thing in the interim.

White:

Cochran:

I definitely and categorically disagree that we
don't have to do anything in the interin.
I mean they have got to liquidate some of these

things.
White:

But we don't have to do it.

Foley:

I think--

H.M.Jr:

Wait a minute, I want to make that plain to
Mrs. Morgenthau. The point - there is a difference here. You see, Harry takes the position,
and I largely agree with him, let them do their
own sweating as to how they are going to raise
the money, and I shouldn't worry too much about
it, that they can sell some wool here and some

tin here and securities there and so forth during the next six weeks, you see, and that I

184

-27shouldn't let myself get down the way they keep
working on me all the time, Purvis and the
others, as to how they are going to get tomorrow's

money, you see. I want to explain - isn't that
what you mean, Harry?

White:

Yes. I think that is their problem. I an positive they have got adequate assets which they
can liquidate. They knew what they were getting
into a long time ago. They must be amply pre-

pared. If they are really up against it, they

can borrow from their dominions, from Canada,
they can dicker with the Belgians and borrow from

them, they can do a lot of things to cover the
amount which they have, which is really small,

and I think, speaking quite frankly, I think it is

inexcusable of them to put that in your lap, and
I think it would be - I don't see on what grounds
you should give yourself one moments concern as

to how they raise the money that is necessary in

the next six or eight weeks. It is the British

H.M.Jr:

Empire after all.
On the other hand, Harry, if I hadn't done what
I did last week me wouldn't have gotten to the

point today that for the first time at 2:30
they tell ne they are ready to sell their direct
investments. If I didn't get an investment
trust group together here, there wouldn't be

anybody to buy it. As I told the President
today in no uncertain terms, once I have introduced them to the investment group, how they do
the business is their business. But it was only
today that I understood from Purvis that they that the message they got last night, the treasury
turned them down and they only got a telephone
confirmation at 11 this morning. There is great,
great pressure, you see, just as I have been
explaining over the weekend, to hang on to these
things.

185

- 28 White:

Do you think that the Secretary can divulge
that information which they have given him without the British Government's permission?

Foley:

No, but he has got to tell the British that he

H.M.Jr:

I did this morning.

Feley:

He has got to have his hands untied when he goes

can't go down there and expect success there
unless he is able to make complete disclosure.

down. He has got to be able to use it as he
sees fit and as the situation develops down

there, all or a part of the information they

have given to him.
H.M.Jr:

Ed, I served notice on Sir Frederick Phillips

today that I can not go down there unless I an

prepared to tell all. I am going to do the best

I can.
White:

You have that permission?

H.M.Jr:

No, I have done it and he simply said, "Well,
you have done so much for us, or words to that

effect, "that we have just got to leave it to

you."
White:

I would be inclined to get their express permission to divulge this information because I am a

little in disagreement with Ed. I feel that the
repercussions of this - the British public is going
to - the statement that they are going to be all
out of funds, that they practically have no cash
now, no gold left - I don't know what the moral
effect of that would be. It might be quite dispiriting with this new group demanding an end to

the war on the left and on the right wanting to
appease them - it is a certain responsibility
that I should think I would be inclined to be a

little reluctant to take without their express

permission.

186
- 29 Bell:

Foley:
Cochran:

I think we ought to get up statements to go
along with your prepared statement and the
British ought to approve them.
I do too.

Fix up a statement to go with this first balance
sheet, have his introduction and this first balance
sheet, then have this other statement such as we
worked up two or three days ago showing the exact

situation at the end of February and get the
British approval to submitting that, if necessary.

H.M.Jr:

Well, Foley is right, I think. There are two
ways to do this thing. If the Committee feels
they have to draw it out of me inch by inch,
that makes a bad impression, but if I go up

there and simply say, "Now, gentlemen, there

isn't anything that you can ask me that I am
not prepared to tell you - now, I am here,
realizing the seriousness of this thing, and am
authorised by the British Government to tell you

everything -- now, don't hesitate;" but if I

say, "Gentlemen, I don't know about that one,

and I don't think I can answer this one, and
wait a minute, I have got to ask my lawyer about
that one -- Danny, what do you think about this
one* - they would say, "Good God, what is the

matter with Morgenthau. You know, if you fellows think before I get through, I am going to

have to do it, then I might as well do it and
do it--

Foley:

Come clean.

White:

I don't see how a Congressman or a Senator is

going to let you get away without answering his

question as to how much cash they have got.
Bell:

If you don't do it here, you certainly are going

187
- 30 -

to have to do it in the Senate.
H.M.Jr:

Then you know how the House will feel?

Bell:

That is right.

H.M.Jr:

And then when the thing goes back, after they
have changed it for concurrence in the House,

they will give it to us there. The whole purpose here is to give me a chance to think, and
I think the thing to do is to get up the facts

and say, "Gentlemen, this is what I an going to

do. I want you to initial it."

Cochran:

If you are going to give a straight statement of
what they have, I hope you will stick to what
they had in this statement the other day and not
go on to what they might get from Canada. They
sent a man to Canada and got a very negative

reply. This thing of getting gold from India
would cause a revolution out there if they tried
that and so on.

H.M.Jr:

I am with you on that. What I did Saturday at

the House, when they have the 650 million gold
and the Belgian gold and the Dutch gold, what

they have got outside of that, I don't see any

reason why we have to go into that. If are show
their cash position and show that they haven't
got cash enough to run out the month without sell-

ing these securities, and then , as I say, all
the rest of the stuff, I don't see why I have
to go in there.

White:

Isn't there a half-way position? I quite agree
with you that if you can indicate that the assets
which you regard as available are adequate to

cover the commitments which you knew before, from

that point on I don't think you are called upon,
unless you wish to, to state whether their assets

you regard as available. That is a very dif-

188
- 31-

ferent thing, however, from stating, either
in response to a question or, if you like,

in properly prefaced statement, that they may
or may not have access to the following assets,

or these are the assets of their allies.
These are the assets of their dominions. By
so doing you don't say they are available, but

you give them the facts rather than having somebody else give them to them.

Cochran:

But you put the burden on other people trying
to have them give them. You don't know the

British are going to get those assets. But you
put the burden on the British of trying to de
It and you slow up the whole thing, I am afraid.
H.M.Jr:

I don't follow you Merle.

Cochran:

If you say, "This is what they have, but still

they might approach the dominions for loans,

they might get gold that is hoarded in India,"
I think you give a lead to them there which they
would be prone to follow up.
H.M.Jr:

I don't think that is necessary. I don't think
it is necessary to say that they have so much

gold in India and so much gold in Africa. That
I had thought of saying is this: "To the best

of our knowledge the total assets of the United
Kingdom, outside of the United States, is in
the neighborhood of 10 billion dollars, some of
which they can realize on and some of which they
can't."
White:

Well, 10 billion nominal value. The actual value
is very uncertain. Some depends upon the outcome of the war, and how long.

H.M.Jr:

I know, but that is a rough figure.

White:

I think it would probably be more nearly accurate,

189

- 32 -

and certainly wiser, to say that that is the
nominal value, not the market value.

H.M.Jr:

That is all right. You know what I was thinking,
in order that they could get this message off to
their Government tonight, what would you think
of having - telephoning - I know that they have
a dinner at the Embassy, but I could get hold of

Playfair tonight and then he could give this
message so they could get off a cable that I

want authorization. Playfair is the nan.

White:

Specific authorization to tell them whatever
they have told you in regard to their assets.

Then the responsibility is theirs for the effect of it and not yours.

H.M.Jr:

If I give it to Playfair, he can give it to

Cochran:

He would get any approval he needed from his

H.M.Jr:

He would give it to Purvis when he was through

Purvis.

superiors here when he sent it off.

with the dinner tonight, wouldn't he?

Philip, do you mind going to the phone and trying to locate Playfair and ask him to come to
the house?

Young:

Yes.

H.M.Jr:

If they can't get Playfair, then Pinsent had
better drop over.

Young:

Right.

White:

I don't think it is necessary to give them this
information, but with your purpose, which you
have stated and which I think is the way to
approach this problem, they will ask you the
questions. Now, if they don't ask you about

190
- 33 the Empire holdings, you don't tell them.

If somebody asks you, however, how much gold

does India have, I don't see how you can say

you don't know. You can say you will give it
to them. If they ask you how much gold has

France got in England, you will give it to
them. You don't say at that point or at any
point that that is available to them.
Bell:

But you leave the inference.

E.M.Jr:

ity feeling is that any question that they ask
me about the British Empire, I should say,

"Gentlenen, I will give it to you."

Foley:
White:

I.M.Jr:

That is right.
That is the point.
And I don't believe - if half the story is true
about their morale, them the fact that they are
busted I don't think is going to make them quit
any more - if those fellows could go through
Dunkirk and then face the Germans with nothing,

the way they did for three to six months, I
think they can go through this thing, only
knowing that they are going to get it from here.

Foley:

That is right, that is right, but the chips are
down on that, Mr. Secretary, and they are sunk
anyway, and if you try and you don't get this

thing, they are through, but if we get it for

them, they can keep on going and therefore it
seems to me that the risk is only one of not

getting this, and you can't afford not to be
frank and not to be candid, irrespective of the
effect it may have.

H.M.Jr:

I told Purvis today in the office - after I said
it, I said that was an exaggeration, but I said

by the time that Halifax gets here, which they

191

- 34 say is a month or six weeks, the war will be
wan or lost.
Cox:

Their is true.

H.M.Jr:

I say it is a slight exaggeration, but it will
be won or lost by the time he gets here. They
don"t think he will be here for a month or six

weeks now. What do you think?
Mrs. Morg:

Well, I think it is much more important as to
what effect you think this is going to have on
Congress than what effect it is going to have
on England, because, after all, your whole

point is to get this thing from Congress. The
English can take care of themselves, and they

can interpret it to suit their own public opinion, but for that reason I think you ought to
have E very strong first statement if not the

one that Ferdie Kuhn read, something in your
own language, and then = very full statement of

facts so that they can't pull out questions

miece meal from you, because so often testimony
looks so bad because they will ask one thing and

you will have a lot of unfriendly questions -

1 mean the people who will ask the question are

the unfriendly ones who will try to jockey your
answers into being unfavorable; and, therefore,
I think it is much more important for you to
have a very full statement.
H.M.Jr:

But you wouldn't give that one?

Mrs. Morg:

I wouldn't, for instance, give your views on
peace or war, I mean, I don't think that is your
business, but I would give a pretty clear statenent, and I would give a very full statement of
all the facts that you want to get over to them
before they ask you, because I think when they

ask you, they will ask you in such a way that

your answers may look very unfavorable.

192

- 35 White:

Mrs. Morgenthau, nine times out of ten that, I think,
would be the correct approach, but I will tell
you why I think this is a separate case, because
I believe that the Secretary should confine
himself in his whole testimony to what may go
under the name of facts, whereas, ordinarily,

he is jockeyed into a position with regard to
opinions, in this case he can give them all
the facts and no matter what questions they

can ask him, if they bear at all on England's
position, he has the answer. Either the answer
such as they have given to him, and he will
clearly distinguish between the information
which they have and the information which is

available everywhere, but I think that in
every case the questions will be of that character except of a different category of questions entirely in which they might ask him,
even if he read that or if he didn't, "Do you
approve of this bill?" "Do you think that that
is all they have?" and things of that character,

which they will ask him anyhow, which the statement won't avoid, whereas if he attempts to
give them a full statement, he meets with the

difficult problem: "What shall he include in
the British assets? "Shall he include their

investments elsewhere?" "Shall he include what

their allies have?" "Shall he include what the

dominions have?" and by his very inclusion or
exclusion, he is taking a position which makes
the most for the Congressmen or the Senators

to harp away. They will say, "Why didn't you
include this and why didn't you include that?"

Mrs. Morg:

I wouldn't give any of their assets over here.

Let those be given through questions, because
they might not ask you.
Cox:

Don't you think there is a point to what Mrs.

Morgenthau says, that you get a connected picture

of the facts if you put them in your own state-

193
- 36 ment and those facts - I mean the point to the
facts is that they are persuasive without being

humanitarian. If you leave it to terms of dis-

jointed questions, you are going to get one
question on facts and the next question on
opinion, and you are going to have a completely
mixed up picture where you are going to have to
do quite a construction job to get a connected
picture.

hite:

Supposing he were to say, "I am here to give you
any facts that you want, and I have prepared for
you a statement of what their outstanding orders

are, of what their anticipated expenditures are,
and of what their anticipated income is. I also
have prepared here another statement of their

dollar cash position and their investments in

the United States. I have those prepared," and
give them. "Now, gentlemen, if there are any

other questions relating to the British, financial position, I will be glad to give you the
answers if I have them. And I think I would
strenously avoid speaking for the importance

of it. The facts speak for themselves. Stren-

uously avoid taking the position that we have
got to help England maintain herself. That is
so obvious that other speakers will stress that.

I think in that way, any question they ask - if

they ask him how about the British investments

in Latin America, all right, we have those. The
question of their market ability is a very dubi-

ous one, but here they are, a nominal value, and
he can have something prepared on that. If they
ask him about anything else, he can approach it
that way, and he is expressing no matter of

opinion at all. He is not expressing any judg-

ment which makes it vulnerable to pressure.
Now, they may ask him, Don't you think that the

British ought to first borrow from the dominions
rather than us?" Well, he can answer that as he

would like, but I an inclined to think that in

194
37 -

this particular situation, it is better for him

to have that small amount of material and answer

any questions they like, and then he is not in
any position of either defending the British
Empire or of being either hard-boiled or not.

He is stating the facts as they are. That is
the situation. And he is making his plea, and

I think that is where we might - he might here
a prepared statement. Pointing out, when The
takes this table, the first statement, and he
distributes it and says, "Gentlemen, I went to

call your attention to the fact that the camit-

neats on the outstanding orderswere on January
1st or he can refer back to December 1, which

I think would be better, "were one billion

three. At the point I called attention of the

various Cabinet members to the situation because,
in IN judgment, their liquid assets were not much

more than that and it was necessary to - that I - -

my first responsibility is the protection of the
American manufacturer and to see that they had

sufficient foreign exchange to protect that."
I mean a prepared statement on that. That is

his responsibility. And beyond that - the
character of these questions that were laid
to the British financial situation I think are
very different than the tax program or a imaget

program or any of those questions which they
can push him around on.

irs. Morg:

You assume that they will only ask him questions

that are purely financial? I mean, after all,
the reason for putting through a bill and lening money to a country which is financially at
rock bottom - you must justify it by the reason
that - way you think it is a good policy to contime giving to that country. Therefore, I think

you should have something of that kind in your
introductory statement.
hite:

tell, they will ask him that. I imagine the

195
-38- most effective answer to that can be very

simple. "Gentlemen, unless you extend them aid,

they can't keep fighting."

Mrs. Marg:

That should go in first, though, I think, as to
your reason, because this is going to go all
around the country, isn't it? I mean, the

Congressmen want support in getting this bill
through from their own people at home. If you
give them an awfully sort of jumbled thing which
they can't piece together, I think it makes it
that much harder for them.

Cochran:

But Mr. Hull was undertaking to make that part
of it, Mrs. Morgenthau.

Mrs. Marg:

But they are not just going to leave Henry and
not ask him the questions because they are going

to try to embarrass him, the opposition. That
is what I would think, listening to some of these
redio debates between the senators.

Cochran:
Kuhn:

I heard that last night.
But Mr. Hull won't deal with the financial
reasons, and there are also financial aspects to
the continuance of the war. That is, the continuance of the war is now dependent on the assurance.

White:

In the presence of Secretary Hull and the Secretary of Mar and the Secretary of Navy, I don't

think it is the Secretary's place to take any
position as to whether it is necessary or not.
Each one has a contribution to make. I think
his contribution must be to make clear that
this is what they need and this is what they

have got, they haven't got enough money, and
obviously they will need more money and beyond

that I think the function to sell Congress or

the committee, the other aspects should be left

196

for the other members. That is their job.

It is the Army and Navy's job to show how

important it is to keep England fighting for
our defense, et cetera, and it is Hull's job
to show how important it is for our foreign

policy, and the President has already made it
clear and Congress will make it clear, and I
think that nobody - you see, nobody can share

the Secretary's responsibility on this matter,
the financial aspect, and if he covers that, I
think that is all he should do.

Kuhn:

But you just said before that somewhere in this
statement ought to be the statement that we
ought to have this in order to keep them fighting.

White:

Only in response to a question. His personal
opinion - if they ask him why they need this
money, it is very easy to answer. But why do
you think we ought to extend them more aid?

Well, the simple answer. It is a different

matter when they ask him a question, you see,
than when he makes a statement which goes a

little bit out of his baliwick. It is not a
matter of stabilization, it is not a monetary
matter, it is not a fiscal matter, it is not
a lending matter, the question as to whether
England keeps fighting or not.

H.M.Jr:

There is one thing I want to introduce at this
time, is the thing which - I mean, I may have
said it to some of you, but I want to say it
to all of you, the argument that Hull uses

against my doing this, you see, that you can
have it and you can argue about that a bit.

He says if I go up and tell the facts the way

we are talking about here, he says, "Then you

are just proving that everything that Joe

Kennedy said was so, that they are through,
they are busted, and why throw good money

197
- 40 -

after bad." I just want to give you his
argument.

Whiten

It can't be both.

hilling

Wait a minute, Harry, just give somebody else

Kuline

Kennedy said two things. He said, "They are
busted and they are through," and the two are

a chance.

not synonymous.

Folly:

I agree with that.

Kuime

They can be busted and win the war, but Kennedy
added, "They are through," which you don't agree
with one second.

White

Well, they both can't have money and need it.
If they need money from us, it is because they
haven't got enough to carry on.

Kuhn:

That is all right, but that doesn't mean they
are through.

Bell=

I think Kuhn has the answer, that they may The
busted but they are not through.

Of course the way I feel, we come back on it,

to get this bill through, and that is this:

I think you have got to shock the American
people into the fact that England is busted

financially, as far as cash goes, and then the
Congress has get to decide, do we want to give

them eight, tem, fifteen, or twenty million

dollars worth of merchandise? I mean, give

them the shock, not let it leak out, give them

a shock, and them let the Congress decide, da

we or don't we. I don't think there is any
other two ways. If they drag it out of me, I

think it is bad. I think they ought to get it

198

-41in the filest 10 minutes, and then they have
gat the simply, that is the way the President

know, tillett fies what he knows, and that, gentleman, Es day The has taken this extraordinary

action the - for this thing.

Foley:

Well, titles Tungress is defense minded, and this
Congress reallizes that the defense of Great

Britain fiss withil to our defense, and I believe
that if you show them the necessity for doing

what we wasn't them to do, they will provide INDERS

to I itt, IND matter what the costs.

H.M.Jr:

I think BI, but I may be crazy.

Cochran:

How do you think, Ed? Do you think their

entitions would be chilled if during that
period the British would suffer a terrific beat-

ing are alliance from the Germans, after we had
made Excuse all this?
Foley:

Na, II don't think so, I think that would just
rush it through

Cochran:

I mean if the thing may properly take six weeks
to get through and in that six weeks you my
have a themilfar attack.

White:

Well, II see why--

Foley:

The Females know this, Merle.

Cochran:

Well, II - not sure they know just how low they

White:

are financially.
I don't think anybody would believe it. Kare-

over, II think we have got to distinguish between

what therey claim and what we know, because this is

what therey say- It is possible to check un- It

does unusually low. There are several there is anywhere from half a billion to a billion

dollars you just can't account for, but I dimnt

199
- 42 think the Germans know that is low either.

that I don't see is why that should effect
their - unless they feel that the British
people would be so shocked by it-Scehran:

by question to Ed was whether it would chill
the enthusiasm of Congress to give an all-out
assistance.

Foley:

I don't think so, Merle. You never can tell,
but my judgment is that it wouldn't, and I think
that if the attack - the all-out attack on

Great Britain comes while this measure is on

consideration, this will do more than anything
else to hasten its passage. I think they would

sit nights to put it through.

Tuhn:

I would like to ask you sometime, Mr. Secretary,
about what figures ought to go in this state-

ment, not only to satisfy the objectors in
Congress, but also to help in putting your
case across.

E.M.Jr:

This is the thing where I disagree with the
President and on the basis of all the truth and

nothing but the truth, if they say to me, 25.
Morgenthau, how many orders do they want to
place here, what do they amount to?" I - going
to tell them.

Cox:

Don't you have to add that it is a fast changing
picture and by the time the legislation gets
through, you won't know definitely?

White:

It is a changing picture upward, and the President's reluctance to show the magnitude, so if

he starts with the picture as he has it, and if
you start in by saying it is a fast changing
picture, it can only change one way and that is
worse.

200
- 43 Imhm:

Isn't it also a selling point with the public
to show what the British have put in here in
cash, in orders, to expand plants, to give
employment and so on and so forth?

E.K.Jr:

I think it is a dead turkey. I think it was all

very good when the airplane industry employed a

few thousand people, but I think today the thing
has changed so fast - I used that for all it was
worth two years ago, but I don't think they are
interested today. I mean, they read every day,
80 million dollars for this plant and a hundred

million
dollars for this. I think it is past
that.

Inha:

You don't think in Hartford, Connecticut, or
Boston, or Buffalo that it would have any po-

litical effect to know that this or that plant,

which employs five thousand people, has been

helped by the British?

H.N.

I think what would happen, if Dallas thought
they might get a plant and didn't and Fort Worth

and Oklahoma got one, but if Dallas and Houston
and New Orleans thought they were going to get

them out of this, that might interest them, but

not what was gone behind.
Inha:

It has never been told.

White:

About a half a billion dollars.

Young:

That might have some effect on a quantity basis

rather than a dollar basis in the future, not

what has been done.
White:

I don't think this bill can be sold on the basis
of the economic aid it is going to do the United

States.

(Mr. Pinsent entered the conference.)

201

E.N.Jr:

I thought I could tell you this and then you could
tell it to them after they are through convineing these other pentlemen. After talking here
with my advisors, we feel - whether I like it

or I don't like it - that when I go up on the
Hill, I am going the have to give them an accurate
picture of what the English financial situation
is. They feel - at least they have convinced
me, that lacking that, we can't get the bill
through, that I might to do it willingly and
not have it drawn out of me, but that is what
they expect of my, and as a ,matter of fact, they

only got the hill - the minority leader Martin
came to an agreement to have it go in that
committee if he is given ample time to cross-

examine. Now, we have figures which you have

given us in confidence. is I say, this is only
my judgment after listening and having thought
about this thing for days and nights, that I aught
to be prepared the 5 III and say that I an authorized by the British Government to say that these
are the figures which they have furnished me,
you see, and that IMMEDIATE that anything that I

have. Now, I sure not thinking necessarily, -

less I am asked, have much gold have you in India,

how much in Canada, but if I - asked those
questions, I want to be prepared to answer them.
And I will valunteer to show what your cash position is, and when you are going to run out of
cash and the whale thing because we don't think
I am talking for upself, having given days and

nights to this thing - the only way to get this
thing through is to envince these people, just

the way I SITE trying to get Phillips to convince

the others, that From heven't got the money, and
if we can do that, then it becomes obvious why
Mr. Roosevelt tack such extraordinary steps as

he did in recomenting this legislation, but I
want to be able to dip this thing and not have it
drag out, not have to run down and say, "Can I

say this, can I S that," but do it openly as
though this INES something that I take it per-

fectly for granted that the Congress of the

202

-55United States should inconclusive

Yes, yes, I realized that - similiti the faced with
fils problem.

LL

in now, I said this today the Sir Frederick
put it quite - was II sit the Sir

Emeüerüch is talling you that when
I F m the all, = raing to the asked E

Int of questions and Juli THE INSURED the trust I

because I If have to if - give mil the inform-

time that you have," and in - sinc - to
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in the day fixed jeff

203
- 46 -

Foley:

It is Tednesday, isn't it?
That is the last I heard.

E.L.Jr:

Welnesday.

Pinsent:

Well, I think I will get a cable off, Mr. Secretary- You feel that you would rather have that
agreement rather than do this without it?

E.K.Jr:

Well, that is what the people here thought, that
what I said this morning to Sir Frederick wasn't
sufficiently formal and that I ought to get a
formal release, you see, say, "Well, whatever

we have given you is" - because what the repercussions will be on your own people, that you
will have to decide. But as somebody said here

Pinsent:

L.L.

tonight, my job is to get this bill through, and
I - a thousand percent sure that I cannot get
it through or can't contribute toward getting
it through unless I tell what I know about the
British government's financial position. Lacking that, I don't think there is a chance of
getting this bill through.
Yes. The session will be closed-No. They are going to be open, and they had
much better be open because then they will get
my own interpretation from my lips and not get

it second hand and distorted, because if I told

this in closed session, somebody would leave the
room and it would be on the wires before I got
ant.

Pinsent:

Yes, sir, and in garbled form.
In, they insist on an open session, and I understand that Mr. Bill is insisting on being heard
in the open and I wouldn't talk these figures
unless they are open because then at least the
newspaper men are going to get it from me and

204
- 47 -

not get it from an enemy of this bill.
Pinsent:

Yes.

E.M.Jr:

So this is going to be open and 15 minutes after
they start they are going to know what your

financial position is, and this is such a major
thing that I want your Government to know it.
I am convinced that unless I go the whole way

and have a free hand, I can't get this bill

through. Now, we were saying here, if you people

can do what you did after Dunkirk, I don't think
that whether you do or don't have the cash, it
will make any difference, knowing that it is
coming from here, the munitions.

Pinsent:

I feel absolutely, myself, Mr. Secretary, that
we are in your hands. It is not for us to say
what attitude you have to take.

I.N.J.:

But you know how I have always garded your
secrets.

Pinsent:

I know that very well, and it is my own feeling
that it is for you to judge how far these things
have to be treated as secrets or how far they
have to be treated as necessary to be used in

& situation like this. However, that is a question we must put to London quickly.

I think so, and there ought to be an answer just

as soon as possible.
Pinsent:

Yes. Nell, then, if I may, I will take that back

E.S.Jr:

You are at dinner there, aren't you?

Pinsent:

Oh, well, we were talking and were fully speaking -

to Sir Frederick.

it won't take a very long telegram, I don't
think.

205
- 48 Foley:

You want specifically two things, don't you
Mr. Secretary? You want the clearance of your
formal statement by the British and also

authority, formal authority, from the British

Government, that the information that has been
communicated to you in confidence you may use as

you see fit before the committee.
H.M.Jr:

I didn't think I wanted the clearance of my

Pinsent:

I should rather suggest treating that, if you
want to consult Sir Frederick, treat that as

statement.

a matter for local consultation between you and

Sir Frederick, I mean-White:

Well, it is the second one.

H.M.Jr:

I want formal word from the British Government
saying, Mr. Morgenthau, the information that
we have given you is at your disposal in any

way that you think is necessary in order to get

this legislation through." Now, as to what I

am preparing to say, why then when we get it

in form, I would like you and Sir Frederick to

come down and go over it and get your advice

in the Treasury, but I don't expect London to
pass on it.
Pinsent:

That would be impossible.

H.M.Jr:

But you can tell Sir Frederick that you will
see my prepared statement before I give it.

Pinsent:

I almost feel easier for us if we didn't even
tell London that because it will make it more

difficult for us.

H.M.Jr:

That is all right. I don't want to put that.
All I am asking is for a formal release.

206
- 49 Pinsent:

Yes. I will go back straight and see Sir
Frederick, Mr. Secretary. Can we still commicate with you for a short time if there should
be any question.

H.M.Jr:

Well, everyone of these men - I am going to give

them 20 minutes to drink this drink so they will
be out of here at a quarter past 10. I am glad

you asked me the question, you see. Fifteen
minutes over time, you see. By a quarter past
10 the house will be dark.
Pinsent:

If there is any question, I will be back before

H.M.Jr:

Then we will give you a drink.

Pinsent:

Is that the best way, if I came back?

H.M.Jr:

Yes. And there will be a drink here for you.

then.

Have you a car?
Pinsent:

Yes, I drove my car.

(Mr. Pinsent left the conference.)
Foley:
H.M.Jr:

There shouldn't be any misunderstanding on a

matter like that.

I told it to him once. I, personally, don't
think it is going to have a bad reaction.

Kuhn:

Over there?

H.M.Jr:

Yes.

Knhn:

Only in the city, that is all, for a moment.

H.M.Jr:

And their market isn't open anyway, is it?

They had better close it the day I testify.

207
- 50 Bell:

Well,
this gives
statement
beforethem
hand.an opportunity to make a

E.M.Jr:

That is right, I thought of that, too. I dreamt

Bell:

So did I. I have been asleep too.

Cochran:

We have got competition here now.

Bell:

All these dreams that go around the Treasury are

that one, you know.

really something. (Laughter)

Did you see the Federal Reserve had another

article on this month's bulletin?

Mait until you see the personal letter I got from

Karriner Eccles tonight, three pages.
Cochran:

About the bond market?

No, he doesn't think I have been cooperating with
him. Somebody told him I said a nasty word
about him.

Foley:

His conscience must bother his.

And he brings you (Foley) and Lauch in, too. He
had forgotten all about it was our suggestion.
Not you, he went to see the President.
Foley:

I thought you said Dan Bell was in.

Well, it will take a day to answer that one. He
has got a couple of nice points in it, too.
White:

Bell:

Is that where he brings us in?
That is where he brings in White and Currie.

I see by the Hall Street Journal, he says that

208
- 51 you are thinking of putting in a bank holding

bill, not that I know whether it is so, but we
have something to do with bank holding legislation. Why didn't you consult me?
Foley:

Carter Glass said he didn't want me to.

Kuhn:

I hear you made the newspapers happy.

H.M.Jr:

Somebody planted a story on me about inflation,

and I said I would have told you this long ago
but Harry White didn't want me to sound off. I
got suspicious of who put a job up on me, too.
I got that across, and then I said some nice

things about Leon Henderson. I am serious,
what a wonderful job he had done and under what

difficult circumstances, and the UP ticker didn't

have it so I called up Leon and sent the press
conference to him.

He was home at 5:30.
Foley:

He was home all day.

E.M.Jr:

I sent it over. But I did say some nice things.

I said Mr. Bell has a committee in the Treasury
working on this.
Bell:

That ought to go big too. More committees.

Cochran:

Couldn't the Secretary address us sometime, Dan?
He hasn't honored our committee.

Bell:

I think he ought to quit. Inflation is already

here.
Mrs. Morg:

Young Henry happened to be making a record. He
has the same kind of machine in Cleveland that

we have here. He made a record and mailed it to

209

- 52 -

us. He said he thought that if it worked

well, it would save telephone conversations.
Foley:

Save writing.
(11r. Pinsent returned and held conversation

with the Secretary in the library.)

That is what he said. He said that Phillips'
answer unhesitatingly was yes, but he wanted
me to realize that if me didn't get the legis-

lation through, once having given the informa-

tion to the public, that they were through.

Foley:

They are through anyway.

So I said, "Well, I personally WES absolutely
confident that the legislation would pass and
that _" then he said they were working on a
statement for us, which was Purvis' idea to try
to show, going back to the beginning of the war,
how they got this way, would that be useful?
And I said, "Yes."
Mong:

But they were perfectly willing to have us use

it.

Unhesitatingly.
They are wiring back home.

Yes, tonight. But he had said if they don't get
it through-Foley:

They are through anyway, so don't let that bother
you.

S.M.Jr:

That is not bothering me.

3ell:

Well, I wouldn't say they are through.

210

- 53 White:

I wouldn't say they are through.

Bell:

They
could
gowar.
over to Canada or Australia and
continue
this

White:

The
don'tanswer
get it. is, they will be through if they

H.M.Jr:

Just as a matter of population, a matter of

factories, you can't, on a little bit of an

island, manufacture enough munitions to fight

the area which is now covered by Germany.
White:

And certainly the people would not - the forces
seeking
for peace would unquestionably be able
to--

H.M.Jr:

You can't do it. If their factories could be

spread out, but concentrate all those factories
in a little section with all the convoys having

to go through between Belfast and Liverpool and
down through that north channel, and these poor

devils can't even take Ireland. Even if they
had Ireland, it would be better.
Mrs. Morg:

Cox:

Don't you think if you gave the statement, even
though they give you complete permission, it is
much better not to say that you are giving it
with their permission?
I should think so.

Cochran:

I think so.

Mrs. Morg:

Because that leaves them much freer at home for
their own consumption to say what they want.

H.M.Jr:

I am not sure.

White:

I think you have got to do that for your own

protection. There may be commentators in town,

otherwise, who might critize you for doing that,

211
- 54 saying that you are exposing Great Britain to
a situation in which the enemy knows what her
assets are, so that I think that at sometime
later you would be - have to say that you did
it with their permission and why not say it
to begin with.
Cox:

You could say it was done with their authority.

White:

Well, I mean if it is going to come out in any
case, why not right at first.

Cox:

I think the feeling is that after all the Secretary is a Government officer testifying in our

own national interest and he ought to be able
to do what he wants to with or without the
authority of the British Government in terms

of the really wide-spread aid that is going to
be given to them.

H.M.Jr:

There is this difference. This is their information I am peddling.

Cox:

That is right, and given in confidence.

White:

It is different if you are giving your state-

ment of what they have got, but I take it what
he is going to give them is what they have sub-

mitted to him and it is really of so important

strategic nature that I think some where along
in that either in response to a question or some
where you have got to indicate--

H.M.Jr:

Oh, this is a terrific responsibility. I realize

that. I mean, here you are talking about the
British Empire, the Rock of Gibralter, and the
Bank of England. I had the greatest difficulty
in saying it to him in there, that what I am
proposing to say is that they are busted. It
is just - go back how many years with you

(Stewart) sitting over there in the Bank of

212
- 55 -

England. This isn't something that I do lightly,
but as Mrs. Morgenthau said, That is our objective?" Our objective is to get this bill through.
White:

H.M.Jr:

England has parted with between two and a half

and three billion dollars since the war has
begun in dollar exchange and its equivalent.
I don't think they are busted.

Well, Bill Bullitt always told me that the day
that England, as he put it, welshed on their

debt to us was the day that they crossed the
Rubicon. He always figured from that day on they

lost prestige all over the world.

Kuhn:

There are two points that Professor Stewart

raised. I wonder if I could ask him before the

party breaks up whether it wouldn't be a good
idea to remind the committee of the French holdings here which suddenly vanished as far as the
British were concerned and caused them to find
themselves in their present position, and the

second is, don't you want to deal with the
direct investments here so as to remind the

committee that these investments which look so

large are in reality not all marketable and that

it wouldn't be desirable to have them all dumped

at once?
H.M.Jr:

Good point.

Kuhn:

Now, Oscar has written a passage there which you

might like to have him read. It is a short one
on that very point.
H.M.Jr:

All right, go ahead, Oscar.

Stewart:

May I make those points just a little differently?
What I was saying when you went out WAS this,

that I think a committeeman night even feel as
the American public does, how can it be that the
British Empire has reached the point where it is

213

- 56 as short of money as to require this bill and

why did they get short of money so much earlier

this time than they did last time? I think the
answer is that you are not telling about the

British Empire assets. You are dealing with
dollars. Those dollars represent gold, foreign
exchange and investments. The other is that
the last time you did have an allied cause and
you had it until June of last year. You were
making orders, as you said, against a total as-

set, so if you are going to tell that story of
the total, I would put the total assets there
and have that just drop out of the picture the
middle of last year, so that you are dealing with
the thing as an increased burden with a diminished asset compared with the last mar.

E.M.Ir:
Cochran:

"An increased burden with a diminished asset."
That is a good phrase.

The British put it this my "It should be

borne strongly in mind that since the unexpected
French collapse six months ago, the burden on
the British of financing the war has been doubled
and the resources halved."
E.I.Jr:

I think that all of that, Ferdie, if you could

take tomorrow morning, never mind about the balance sheets, and take what you have listed here
and sit down over again and leaving it more, not
I, but the Treasury, and we and so forth and a

little bit more impersonal, see. I think if you
could take that you have heard here tonight and
try it once more in the morning.

Tahm:

E.K.Jr:
Cox:

Sure. I would like to hear this before me-This is Oscar's swan song.

The difficulty with it is that it is opinion

which is away from the fact.
(See Attachment 3)

214

- 57 -

"Forced liquidation of all of the holdings of
the British nationals in this country at this
tine would have serious disadvantages to us.

Many of the holdings of these British citizens
is in companies like Dunhill's and Jaeger's,

whose main business is to distribute English goods

in this country. They have primarily a going
concern value. If they were forced into liquidation, their value would be nominal. If all of

the other holdings were liquidated immediately,
they would disrupt our securities and other
markets and would drain the resources of the

British so that they could not quickly acquire
indispensible resources in other parts of the

world, such as South America.

"At the same time, such an immediate and forced

liquidation of all of the assets of British
citisens would tend to weaken their will to resist
the aggressors. If the United States required all

of their assets now, some of the English whose
property was being so used might feel that they
would rather appease the dictators by giving

up some rather than all of their property.

"therever it is possible reasonably to do so,

Britain is ready and willing to liquidate the
holdings of its people in this country. Since
last fall it has been liquidating the securities

in American companies held by its nationals. A
special representative is now on the way over
from London to take the necessary steps to liquidate British direct investments wholly owned by
British citizens and doing business in the United

States. This liquidation will proceed as expeditiously as possible from the standpoint of our
national interest.

"The lend-lease bill supplies the methods by
which most of these disadvantages, of immediately
stripping Britain of her overseas investments,
can be eliminated. If it is deemed wise and

215
- 58 -

practicable for us to take the non-liquid holdings of British nationals in this country as
collateral, that can be done under the proposed

legislation. Under the proposed legislation,

the President can also, for example, authorize
the Army or Navy to supply airplanes to the
British in exchange for rubber, tin, nickel OF
the various other materials which the British
produce, over a reasonable time. In this way

we can get the many things which we seriously
need and cannot produce. We can also get them

without disrupting our markets or forcing them
into appeasement. In this and other similar

ways we shall also keep open the channels of

international trade so that they may be readily
available to us in the post-war period. At the
same time our workmen will be trained and en-

ployed, and our production capacity will be

expanded and ready for our own direct uses at a
moment's notice. .
H.M.Jr:

The first part that you read, up to the time that
you got down into - if they forced them that they
might want to go into appeasement, just that first
part, down to there, I mean that was factual.

Cox:

That is right.

White:

Factual, but it wasn't true, part of it wasn't.
(Laughter)

H.M.Jr:

I liked it, Oscar.

White:

When it is corrected, it will be more in accordance with the facts.

Mrs. Morg:

The second part, Henry, was just the thing we
had all the argument about over the weekend.

H.M.Jr:

I say if you take all these good things away
from them, they will say, "What the hell, we
might as well quit now.

216
59 Yrs. Morg:

And then these people would SEY, "ire me going

E.M.Jr:

H.M.Jr:

there will be plenty of theit. As I S&J, I like
that first part, that kime of thing.
It should go in.
I think so. Harry will mail it factual.

White:

Tell, more nearly true... II think something of

Tuhn:

into this thing for the mike of the appeasers.
I think I ought to know SWEET from that. I think

that kind can go in if it is qualified suffi-

ciently.
E.M.Jr:

That is purely financial, kind of ary and you

know (Laughter) - I think that is all right.

When you get into that Emplosement stuff, not

Bell:

Shouldn't you put in statement, that the
urgency of this bill is that the British can't
put any additional orders in until they get it
through.

E.K.Jr:

I think that is a good print.

Bell:

And the second is that they my not use all of

their assets in liquidating their present camit-

ments, but there will The many things they need
which can't be purchased through the Mar and
lavy which will not The standard and therefore
they should have some of their assets.
White:

The trouble with that is, that is committing.
If you want to take that policy, that is a good
point, but the way the present bill is written,
you can sell them agricultural commidities.

E.M.Jr:

Now, he (Young) comes fin today, for instance.
There is a contract with Studebaker and Buick

for two thousand horsepower engines. It is
just blocked because - well, under the rule of

217
- 60 - -

thumb they can't place the order. The Army
hasn't got the orders to place. They need the
English orders in order to get the capacity
and Buick and Studebaker won't sign and here
our com program is blocked up.

White:

Well, that relates to his first important
point, that they must be able to place orders,
but if you say the second thing, It is committing
you to a policy that I don't know whether you
want to commit yourself to, namely, that they
will PAT out of their own assets and current
income for all purchases that are not directly
armaments. You may or may not want to do it,

but that is a definite statement of policy which
I don't think the present bill precludes. The
may the bill is written now, it would be possible to sell them food and sell then on credit.
E.I.Jr:

No, but I think that kind of thing ought to go

into the statement. You can give a few examples
and just show how everything is blocked pending

this thing and how long it takes these things to

get ordered.
frim:

To give a specific example, you mean?

i.I.Jr:

You mean you can always put it in and me can

always knock it out
He can give you anything from 37 millimeter

guns to a two thousand horsepower engine. He

can pull them out of his pocket. He can give
you = five-year-old plane. (Laughter)
Young:

I didn't have anything to do with those five-

year-old planes.
Erin:

Do you want to leave it to Stimson or somebody

to say how the British have given us military
secrets and so on in the course of this help

that we have given them? How they have given

g turrets and so on?

218

- 61 I.M.Jr:

I don't want to get into that.

White:

One horse, one rabbit.

H.M.Jr:

who do you think has given up aore?

White:

Oh, I think the British have given us secrets
that are invaluable. (Laughter)

H.M.Jr:

All right. We will stop.
Now you and Cox are going out and make this

fatuous. (Laughter)

,