Full text of Diaries of Henry Morgenthau, Jr. : Volume 347 : Part 2

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219

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.
As Secretary of the Treasury, I have been in touch with

this vosition 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 Government.

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

availability 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.

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

amole 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 relationship with
foreign purchasers, particularly the French and British, I
have also had to keep myself informed continually about their
position 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 the 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

220
2-

the see routes. we shall have to scrape our cupboards to cover
these three critical months for them. Beyond this three-month
veried, they tell me that they will need weapons and materials

of all descriptions, in quantities beyond all our previous
concentions, 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
contime this war.

I can tell you gentlemen, quite deliberately
and ouite solemnly, that unless the British can have
such assurance, they will have to make peace. And
if they make peace - a "dictated peace" as the

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 an going to put before you
everything which is in our possession so that you
DED see the situation for yourselves.

221

DOLLAR EXPENDITURES AND RECEIPTS OF STERLING AREA FROM DECEMBER 1, 1940 TO SEPTEMBER 1, 1941

(In Millions of U.S. Dollars)

Dollar Receipts of Sterling Area
A. Dollar receipts by U.K. from U.S.

Dollar Expenditures of Sterling Area
LL payments to be made on total purchases from the U.S.
L

Same to be paid between December 1, 1940 and Sept. 1,
1961 on orders already placed.

1. U.K. exports of merchandise to U.S.
2. Net balance from U.S. to U.K. OL.

$1,035

(In addition, $266 million is expected to fall due

after Sept. 1, 1941)
2. Same to be paid in next nine months on additional orders

- under negotiation.
(In addition, $684 million is expected to fall due
on this program after Sept. 1, 1941)

3. Summ to be paid by Sept. 1, 1941 on contemplated "X"
program.
this

invisible items

Purchasing Commission.

1. Commodity exports

2. Australian gold exports to U.S
3. South African exports of gold

959

$2,745

186

2. Payments by sterling area (mostly U.K.) to Canada and

660

Cheeser Department, Division of Monetary Research

Total dollar deficit of sterling
area with U.S
Total dollar deficit of sterling

$1,166
2,213
465

2,678

Total receipts and deficit on

operation from Dec. 1, 1940 to

$3,844

Sept. 1, 1941
Special Note

In addition to the deficit expected to
accrue before Sept. 1, 1941 there will

250

be payable after Sept. 1, 1941 (on orders

indicated in A 3 in opposite col-

3

253

GRAND TOTAL

transactions

Total dollar receipts of U.K. and
sterling area

GRAND TOTAL

846

Total U.K. payments outside U.S. requiring dollars

Dollar requirements of sterling area for all

195

deficit of sterling area

C Purchases by sterling area (excluding U.K.) from U.S.

Total
payments to U.S. by sterling area (excluding
U.K.)

836

Total U.S. and Canadian dollar

1. Purchases by sterling area (mostly U.K.) outside the U.S.

L Commodity imports

360

area with Canada (in U.S. dollars).

or dollars

2. Invisible items

56

C. Canadian assistance to U.K

210

Items 2 and 3 above do not include $709 million
of capital assistance, Whatever part of this is to
be paid before Sept. 1941 must be added to this total.
& L.L. purchases from areas outside the U.S. requiring gold

Dec. 1940 to Sept. 1941)

420

Total

from U.S

ferfoundland

$ 135

B. Dollar
receipts by sterling area from
U.S.

Total payments to be made on U.K. purchases

and Canada requiring dollars

12

Total
541

(In addition, $1,103 million will be payable on

program after Sept. 1, 1941)
4 Imports from U.S. not purchased through the British

$123

$3,844

unn) a total of $2,762 million. This does
not include any deficit accruing from additional orders expected to be placed by
the British but not yet decided upon.
Anticipated deficit prior to Sept. 1, 1941
Minimum deficit after Sept. 1, 1941
Minimum total deficit

$2,678
2,762
$5,440

222 3

The forced liquidation of all of the holdings of British
nationals in this country at this time would have serious dis-

advantages to us. Many of the holdings of these British
citizens is in commanies 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 citizens 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 uo some rather than all of their property.

Wherever 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 practicable for US to take the non-liquid holdings of

British nationals in this country as collateral, that can be

done under the processed legislation. Under the procosed legislation, the President can also, for example, authorize the Army

or Navy to supply airolanes to the British in exchange for rubber,
tin, nickel or 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

223

-2into 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 employed, and our croduction
capacity will be expanded and ready for our own direct uses at a

moment's notice.

1/13/41

224
BRITISH EMBASSY,
WASHINGTON, D.C.

Personal and Secret

January 13th, 1941.

Dear Mr. Secretary,

I enclose herein for your
personal and secret information a copy

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

Dear Mr. Secretary,

Very sincerely yours,

have Bather

The Honourable

Henry Morgenthen, Jr.,

United States Treasury,
Washington, D. C.

225

Telegram received from London
dated Jennessy 12th, 1941.

Naval

1. Reference to Regal Air Force attack
OR Naples sight of January 8th - January 9th. EA:
telegram January 10th at least one hit on sters of

Littorio class, one his on near store of Littorio
class.

2. Convey from west successfully passed

through Sicilian Chessel assorted by cruisers and
destroyers.

3. January 10th. South Pantellaria - two
Italian destroyers sighted and engaged - one was sunk,

the other escaped. Piftern since were out off
Pentellaria. During three operations eight enery
aircraft attached - foress, two shipe nearly missed
no damage so casualty. Two enery aircraft shot does

by naval sircraft.
4. Incomelesance Kiel on January 10th
showed floating docita is the fore of the Oneisenan and

the Scharmhoret to be - empty. Lutsov and two old

battleships sightee. Seles is dry dock. Part of
harbour not covered.

so During the above operations
the Illustrious hit w a boab January 10th, has
arrived in the barboar. Extent of damage unknown.

Five sireraft fiona off the Ask Royal have arrived
safely at Helte. callent stand or torystoes south of
Pestellaria had has bee New off and to proceeding to
harbour in too.
6. Eight of January 10th-21th. Beavy air
attend

226

-2-

attack on Portamouth - preliminary reports
considerable damage to Bookyard, R.Y. barracts Person,

3.3. hospital and oil fuel depot. Minor damage to
Dolphin. St. Vincent Royal Clarence Yard, photographic
school.

7. Military. Rumenia. It now seens clear
that the total number of divisions in Sumania has
increased to at least eight of which three have arrived
during the past two weeks.

8. Royal Air Porce. Night of January 10th11th. Sixteen heavy and 10 medium bombers were sent

to attack enemy cruiser at Breat. All returned safely
and . preliminary report claims two direct hits - the
cruiser. Some nine-laying was also carried out.
9. Libya. On night of January 8th-9th four
Wellingtons attacked Benina aerodrome; large fires were

started and at least 12 enemy aircraft were set alight.
sight more Wellingtons dropped more than 8 tome of

bombs on Bengasi harbour and hit 5 large shipe. Da
January 10th Elembeias attacked Tobruk three times

hitting the barracks and some small shipe is the
harbour. Da the night of January 9th-10th sellingtons
again attacked Benins serodrone causing considerable
damage to aircraft and also Berks aerodrome where large

fires were started.

10. airily. On the same night " toms of
bombs and incendiaries were dropped at Messime harbour.

Cruisers and shipe were straddled and bombs fell scross

the oil tanks.
11. Berman AIF Force. January 10th. Some
recommissances were carried out but enery activity was

negligible.

12./

set

12. High of Jenness 10th - 11th About
146 - aircraft were operating of which 25 were
also-laying. The attack - almost estirely confined
to Postmouth
13. Halta. On January 9th about 12

Italism bonbers approached the Inlant. Six attacked
the serviness where three grounded Tellingtons were

damaged. Six of our fighters interespied and shot

down four enery sircraft - anti-sireraft fire
destroyed a fifth. Same afternoon 9 terms-type Give

bombers - attacked a earnay. Two further
formations were sighted later but did not attack.

14. Aircraft casualties is operations over

and from British Inles. by night of January
9th - 10th: 3 destroyed - by anti-sireraft 2:
January 10th - 11th: destroyed - by anti-aireraft 2
probable; destroyed by fighters 1; by day January 10th.

destroyed by fighters 2, probable 2. Bruch Lost 2
fighters - pilots safe.
15. Name Security. Portawouth In addition
to neval damage already reported, large fires took

place at Central and Barbour stations, at Guildhall in a Limber year. The power station was damaged water, gas and electric services were interrupted. The

hospitals were hit - communities. Fires were still
burning at 4.30 a.m. but were is hand is spite of lack
of water. Cosualties - for reported are TO killed,
230 seriously injured.

228
G-2/2657-220

RESTRICTION

SITUATION

No. 291

LLA, U

January 13,
12:00 I

This military situation report is issued by the I

Intelligence Division, General Start. In view of the consideral
inclusion of political information and of opinion is is claudified

as Restricted.

I. Western Theater of Tar.
1. Air Force Operations,
On the nights of January 12th-12th and 12th-13th the
German air force was principally active over southeastern English

On Saturday night the London - the objective of a carpentimily

short but very sharp attacit. Bant might the relieve - the have
kept to the east of London fur the most part. The British dialis that
their defense diverted most of this letter attack from Lemitom Other
points in England were raided Highilly m both nights.
The R.A.F. continued daylight operations allong the

occupied coasts on the 11th and Birth In the night of the
Wilhelmshaven was attacked. Last right E normal effort - made
against oil targets in Germany and Religion, against submitte on the French coast and airdress in compled France.

II. Greek Theater of Tar.
1. Following the Green consultion of Illison, Invail cleaning
up operations were carried out January 11, 1947 Patrol mi
action took place January 12, 190.

General Toeldin Smith who succeeded General -

Comander-in-Chief of Italian in Albania = November a BUT
has been succeeded by General Tigro Devallers, who because cities of
staff December 6, 1940.

2. Air activity apparentily minur.

III. African and Theeters of is
1. British preparations for the attack - Total -

continuing. Patrol activity - the Sudan-Tanga front is reported

2. The Italiana claim the successful booking of a cruiser, "Birmingham" type - Juman II by German

British air superiority in Like is increasing.
On the night of the B2th the R.A.F. attached the RESISTENT

229

- att Partico Marghare, - Verican Sidily - also

attached

3 The Italians claim that their boats petrolling

the Shirt of Sicily damaged a British and tame destroyers.

CONFIDENTIAL

230

of Date Children
= the for Department

at ne J 23, 2002

- filed new J n BG

1 a Santy, January 2, / of the Constal Common

- attention - - - bests off the coast of
During the preming sign - - of the December

- - - in plasting - n I be Dally mides - - at Taste, - 36 I business attented

the Serves I - and the decis at
with universal remits. a is - I that during
the British raid against Brest - - sign of January 10-11, a

- onion - is by - been
2 Daring deligion I of - 22, High - air
- assistal place of patrick - the Down Straite
- the Baglish I Beginning - 6 1 that signs, 8 -

- - in a - made - all sections of I but - - - reported - - a for firm - started.
3 Daring the right of January I2-32 and - the following

- the legal Air Person drugged as - of basis - all reservaire

- the better at I - - fine skips in the batter at
Bangard - eight tes of bate - dropped A repair depent

for street - - in Deliver - also attention. A total
of 22 Italian - - destroyed by the British in the middle

- Member data Skin parties Stree - in 12

- - the - a Date - - - in the area.
IN
Secretary of -

- Pass Division

I Sea. of -

- Days -2

State Signature
Security of Summary

- of Staff

Office of Maral Inbelligence

as

CONFIDENTIAL

231
of Code Ballegreen
Deceived as the War Department

at SiDC, - 18, 1963

SECRET

By authority A. C. of 5.0-2

Date JAN 4 1941
(n
Initials
Leader, filed 15:89, January 28, 1962

1. During deflight hears of J 10 Italian and

- airplanes the 22,000-ton absurant enrier
Illustries and seared six direct hits which resulted in
heavy assumities to the area and in considerable damage to

the vessel. Please from the Illustrious interespeed the
attachers and destroyed sins of the attacking planes. The

Illustrious reached part.

I

2. a the - date the 1886-tem destroyer Gallens

suffered healthy commities - considerable damage as a result

of being Shis 1 also - part.
&. Share are - at loast eight - divisions in

L

Metributions

Secretary of -

State Department
SecretaryofTreasury

Secretary of -

Shief of Staff

Yes Please Division

office of Email Intelligence

M-8
451

SECRET

232
January 14, 1941
9:06 a.m.
H.M.Jr:

Hello.

Operator:

Mr. Henderson.

H.M.Jr:

Hello, Leon.

Leon

Henderson:

Hello, Henry.

H.M.Jr:

Did you get those notes?

H:

They're going to send them over this

morning. I had a little bellyache and

didn't want them sent out to the house.

H.M.Jr:

Oh.

H:

But I saw it in the paper this morning and

so did some of my boys, John and Dave, and
they were very much pleased.

H.M.Jr:

Good.

H:

a little editorial on the matter.

H.M.Jr:

Who does - the Washington Post?

H:

Yeah.

H.M.Jr:
H:

I notice also that the Washington Post ran

I didn't see that.
Well, it was based on - it didn't relate
to your statement - that's where it was
based though.

H.M.Jr:
H:

I see. Well, I thought you had it coming
to you and I was glad to say it.
Well, thanks very much. We're going to
meet with the lumber people today. They're

really getting a little bit concerned.

H.M.Jr:

Well, I thought it was time somebody said
you were doing a good job.

H:

Well, thanks very much, Henry. I'll say
the same for you.

H.M.Jr:

Thank you.

333
January 14, 1941
FOR THE SECRETARY'S DIMITY

Secretary lbrgenthau and lit. Roley attended a meeting

this wining at 9:15 in Secretary Hill's office. Others

present were: Secretaries Stinson and Knox, and lesses. Fels
and

Secretary liorgenthau stated that the PERSON he had

asict for the meeting was to go concern that he proposed to If

its the rithers, and learn that the uncrosed to SET so State

FOULD not be duplication and overCaming. He said he had tallad
the million over with his association and and come to the conclu-

sion that it was obsolutely necembers for him to give to the The

mittaes If Congress the balance Silumitus showing the condition I

the Treasury, including direct and indirect in-

testimentis in this country. He thint he would ultimately laws

to give the Committees this information and thought it
creace 1 much better impression iff in volunteered it cheerfully

rather that to force them to drug Bitt out of him. is nest III to

SINT la IRE nut the matter up the thise Brütish and had saled for
complete authority from London the miles available in his Essure

undiscential information communicated to him In the British

in repair to their finances.

Secretary Knox said that like inco had dinner last night all

the British with Secretary Stimson, Sir Frederick Ballins,

Purvis, and others. For the first time he said it had been
brought home to him that the Brittiest difficulty NES lack of

in this country rather tilam complete in
this important since the miblic generally, like

the British Empire to the with and powerful and therefore

faumi it quite difficult to grade readily that England is instal.
thought it WES important to paint out the amount of taxes
EnglamE is collecting, the cost of the war per day, their Invit
of iniliar exchange, to emphasize think it is = potent of dollars
and not of pounds, and call attention to their inability, iieCAURE If the Johnson Act, to flouit honds in this country. Incon
said that he had developed at this meting last night the kinds

of collateral the British might It seemed to him Sat

234

-2these fall into three categories: First, the British pos-

sessions in the Testern Hemisphere, such as the West Indian

Islands; Second, encounting of pounds to the full value of
goods purchased in ITS for the British; and Third, hypothenation of from 24 to $5 billions of investment value of
in South America. He said he had obtained the inpression last evening that the British were prepared to do

I = all of these things.

Secretary Stimson then said he preferred to place
arrangement we night work out with the British - a much

level. In thought we were trying to save a living
entity, i.e., the British Empire, with ideals similar to ours,
so size could live after the war; that investments in the

hamis of Great Britain were worth much more than in our hands

as a foreclosing mortgagee, since they would constitute in

hamis of the British their proper part in international
trade. is continued that, of course, Great Britain must do

share; she cannot slough off on us the whole financial
burden of the wart on the other hand, we can't become penn-

trabers. The future relations of the two countries-the
continuation of the partnership arrangement-is vital not
only new, but after the - is over. To a large measure,

he said, the difficulties we were faced with now and had been
faced with during the early thirties were the evil consequences
the international change between the United States and
Great Britain which WES brought about by the World Mar. Be

said it TES his impression historically that Great Britain
always subsidized her allies and did not lend to her allies.
opinion, this is a much more normal relationship be3 metrol country and one such as England which is

fur her life. lie thought we should give England
-with which to do our fighting, since we
to by time to prepare ourselves adequately. In his
the quid are que-whether it was gold, direct or

investments, or sterling-zas insignificant in
relationship to the larger intangible values. In other words,
he thought - should not, for the sake of a sharp trade, derpartnership. In his opinion we could not give the
incression to the people of Great Britain that we were comGreat Britain at this time. He continued by saythat it - much more economical for us, as well as for
British, fur as to order and buy for them.

235

-3At this point Herbert Feis referred to an article
which appeared in Foreign Affairs some seven or eight years
ago, by Edwin Gay, which contained the history of England's

of her allies as evidence of the point which Secretary

had made. Feis thought we should not permit Congress

to specify the collateral, since there were many ways that
collateral could be obtained for our aid--some superficially
attractive and basically worthless, and others more worth
while. Any discussion along this line in Congress, he said,
would lead to endless debate. Feis did say, however, in
line with Secretary Knox's observation, that he didn't quite
see my England is out of dollar exchange. Secretary .orgen-

than said that, rather than to take the time to explain it,

he would have Walter Stewart come over and satisfy Feis on

this point. For his part, Secretary Morgenthau said he was
satisfied that he had not been misled by the British.

Secretary Knox then said he thought that psychologically
some collateral ought to be put up and that the impression
should not be given to our people that we were being out-traded.
Secretary Morgenthau then said that he wanted to put the aid
we propose to extend to Great Britain on a high moral plane
and that he, for one, would not do it as a banker and demand

in the legislation that the aid be collateralized. If that

NES the Administration's position, he said he would ask
President Roosevelt to send someone else to do this for him.
Here Secretary Stinson asked Secretary Morgenthau to

state his position. Secretary Morgenthau said that England
should use every dollar she has available to pay for goods
already ordered; but that any additional dollars which she
:pocures should be used to buy in this country non-standard
materiel, and that all new standard orders must be placed and
paid for by us on the new basis. He pointed out that in his
opinion such a procedure would exhaust England's dollar

resources.

Secretary Hull then said that it was not necessary to

settle the questions of collateral at this time but that could

be done as we move along. Secretary Stimson then said (1) that
it IS only common honesty for England to keep her dollars to

DAY her outstanding commitments, (2) that new non-standard

materiel should be paid for in the ordinary way, and (3) after
that comes the lend-lease arrangement, and we should be ready

4-

236

to take charge of orders and the maintenance of a much

quantity of weapons which will be useful for our-

if we have to up

larger selves take and the until burden of fighting-- off
weapons
which we order own they come the
assembly lines--and then we can determine what we shall
keep, what we shall give to the British, and on what basis

they shall be made available, in the light of the facts as
they exist at that time.

Secretary Hull then said that we would be making a
great mistake if we made it appear that Great Britain cannot do anything more. He thought Great Britain should say:
We shall do our part and as evidence of our ood faith we
are turning over on any basis that your country might think

acceptable, any collateral that your country should require.
Secretary Morgenthau then said that he had been

exerting great pressure on the British for a number of months

to sell their securities on our markets before the world

knows that they need the money. He said it was only yesterday that Sir Frederick Phillips obtained permission from

London to sell their direct investments in this country, and

only last week, as a result of pressure Secretary Morgenthau

had put on Gifford, the weekly sales of British securities

had been stepped up from around $2 millions to $10 millions

per week. At this point Secretary Stimson said that Secretary Morgenthau had done a perfectly grand job and if it was
ever necessary for anyone to testify in an impeachment proceeding, he would be the first to come forward and ell the
extent to which Morgenthau had gone in squeezing the British

and forcing them to liquidate their holdings. Secretary
Morgenthau said, speaking quite frankly, that he didn't want

the Birmingham crowd to quite because we were taking everything
from them and making it appear to them quite unworthwhile to
continue fighting.

Secretary Knox thought that there was a difference
between the people in the country who elected the President
and the people on the Hill, and while the people in the

country might be willing to do this on an idealogical basis,

he thought the Congressmen would want it done on a banking

237

-5basis. Secretary Hull then said that this was for the

Treasury to handle and that he was going to r estrict his

comments before the Committees to the national danger with
which we are faced and leave to the Treasury the explana-

tion of the technical aspects of the bill except for a brief

explanation on his part of the clause "except any other law
to the contrary not withstanding."
Here Secretary Stimson said he could not see the difference between the position of Hull and Morgenthau. Secre-

tary Hull then said he would like it to appear that Great

Britain was one hundred per cent disposed to do her share

willingly. Secretary Morgenthau then said he thought the

British had done this when yesterday they gave him permission

to sell their direct investments. Feis then spoke up and

said that Secretary Morgenthau was quite right; that Congress

must know that the British gold and her direct and indirect
investments were available, but if we as creditors of all the
other nations in the world insisted upon taking collateral
now for what we might do in the future, he thought we would

be making a great mistake. Even now, he pointed out, we are
making new funds available to other countries through the
Export-Import Bank rather than enforce the collection of our

outstanding credits. He said it was his opinion that if we

deprive Great Britain of investments they have, it raises the
terrible question of economic adjustments which must be made
in the post-war period.

Secretary Morgenthau then pointed out that arrangements
were being made through Secretary Jones for the purchase of

future supplies of tin, rubber and wool from the British Empire
on a dollar basis. Secretary Hull said he was merely trying

to point out that the question of British collateral was the

weak part of our case and that we should recognize that this
must be handled as skilfully as possible in order that we might
reach our objectives, but t hat fundamentally there was no difference at all between the position of himself and Secretary

Morgenthau.

Secretary Stimson said that the British now are especially pressed for dollars; that it would be a mistake to
force them to enter into time agreements through which they

-6-

238

would be deprived of their investments when they needed them

for foreign exchange in the post-war period.
Secretary Hall said he will attempt to convince
Congress (1) of the grave dangers to the United States, (2)

that Great Britain needs the maximus of help in the minimum

of time, and (3) that the United States and the British
people must accept the spirit of the actual understanding
of (a) production, (b) deliveries, and (c) agreement on terms,
since there is DO time for anything else.
It TES agreed by all that if we departed from these
principles the debate would become endless and we might lose

control of the hill.

The meting broke up about 11:00 s.m.
After the meeting Mr. Foley ment to Congressman Bloom's
office where be made arrangements with Congressmen Bloom to

call Secretary Hull E.S the first witness at the hearing, which

will commence at 10:00 o'clock tomorrow morning. Secretary

lorgenthan willfollow immediately after Secretary Hull finishes,
and Secretary Stimoun will go on in the afternoon around 2:00

o'clock. For Thursday, the first witness will be Secretary

Knox, to be followed by Mr. Knudsen. After that Mr. Bloom
might want to hear from Willkie, Al Smith, and other supporters

of the bill. Floor pointed out that he would not turn the
hearings into 3 circus by permitting people like Terme larshall
to use his committee room as E sounding board.

Mr. Falay suggested that Mr. Bloom arrange to have

Beaman and Eachworth sit in at all of the hearings, including
the Executive Sessions. Bloom asked Foley to participate
personally since be had started with him.

239

January 14, 1941
11:07 a.m.
E.N.Jr:

Hello.

Operator:

Senator Miller.

E.N.Jr:

Hello.

Sen. John E.

Miller:

Mr. Secretary.

E.M.Jr:

Talking.

N:

This is Senator Miller.

H.N.Jr:

Sorry I was out when you called.

N:

That's all right. I'm sorry to bother you
and I do want to apologize to you for doing
it but it seems like a matter that I've

E.M.Jr:

almost got to take up with you.
You can't bother me ever. What is it?

N:

There is a man named Frank E. Jackson who

has been in the Secret Service for about

two years under Special Emergency - being
paid from emergency funds. He was given
the highest assignment, you might say in other words he was assigned to the White
House and accompanied the President and, I
understand, made a most excellent record

and Mr. Wilson, the Chief, would like very

much to keep him
E.M.Jr:
N:

I see.

but he doesn't have civil service

status and the funds from which he was

being paid are exhausted, or will be
exhausted shortly, and he came up here and
talked to me. He used to be a United States
Marshall - Deputy United States Marshall.
About two or three years ago Mr. Wilson got

in touch with him, or as a result of the
President's trip through Arkansas in 1938,
and thought a good deal of his ability, and
I just happen to know that Mr. Wilson would
like - I think I know that Mr. Wilson would

240

-2like to take care of him although I have
not talked to him, and I was just wondering
if there was some way that we might manage
to do that. He seems to be too good a
man to let go under the circumstances.

H.M.Jr:
M:

H.M.Jr:
M:

H.M.Jr:

Well,
I'll be very glad to look into it,
Senator.
That's all that - I don't ask you to do

anything that you

I'm not familiar with it, but I'll be

delighted to look into it.

He just seems to be, from what I get, a
man that we need in that set-up, and I'll
appreciate it very much.

I'll be glad to look into it and let you

know.
M:

I'm sorry to have bothered you.

H.M.Jr:

No bother, Senator.

M:

Much obliged, Mr. Secretary.

H.M.Jr:

Thank you.

241

January 14, 1941

To:

Herbert Gaston

From:

Secretary Morgenthau.

Please look into Senator Miller's request
and handle it for me.

242
January 14, 1941
11:09 a.m.
H.M.Jr:

Hello.

Operator:

Justice Frankfurter.

Felix

Frankfurter:

Hello. I want to talk to you about that -

H.M.Jr:

You do.

F:

H.M.Jr:
F:

about freezing on a nice day.

I hope it's nice where you are. Hello?
It's nice, but busy.
Listen, Henry, Herbert was down with the
flu and that S why I didn't have a chance

to talk with him until yesterday - last

H.M.Jr:
F:

night.
I see.

I nosed around and sniffed around and
I don't know whether what I'm about to

tell you is any news to you or not, but

I'll tell it because that is the quickest

way to save your time.
H.M.Jr:

Please.

F:

It is not true that Herbert is the only

fellow, or indeed the main fellow, who
raises difficulties. Between you and me,

a gentleman named Hornbeck is very much

concerned because of the Japanese relation.

H.M.Jr:

I see.

F:

I don't know whether you know that Hull

has sent a memorandum to the President on
the whole business
H.M.Jr:
F:

No, I don't know it.

I think, in reply - this I's not

dead sure - I think the President sent on
your letter to him and the Order to the

243
- 2Secretary of State and he replied in a

memorandum. Now that memorandum is very

friendly and certainly very complimentary

to you - I don't mean just lip service and states certain difficulties that they
have. It is cooperative and collaborative,
and if you take my judgment - what I gather
from the whole situation - it's a question,
as so many of these things are, of time.

H.M.Jr:

Yeah, I see.

F:

Next week rather than this week, you know.

Now, I'd like to make a practical suggestion,
Henry.

H.M.Jr:

Please.

F:

It is this: instead of back and forth and -

you know - I suggest that you ask the
President - maybe he can't do it this week,
but as soon as he can, to say why don't you
let Cordell and me come before you and talk

this out and you listen to the reasons that
lead me to propose this and the difficulties
that Cordell sees - Mr. Hull sees, or whatever
his name is - in some of the practical things

that will arise under it. You see? What

are you going to do about the South Americans?
Are you going to give them a general license,

et cetera. You see?

H.M.Jr:
F:

Yeah.

And talk it out in front of the President
and then at the end of the talk he can
settle it, and decide, and dispose of it.
instead of just letting it run as a one way
street - your street - and another one way
street - his street, Hull's street - and
the two never meeting. You see?

H.M.Jr:

Yes, but

F:

What's that?

H.M.Jr:

Have you ever known the President to work

like that?

244

-3F:

H.M.Jr:
F:

H.M.Jr:
F:

Now, well here's
Have you ever known him to do it that way?

(Laughs). Well, all right. Then I have
two or three other suggestions because what
Ialong,
thinkyou
willsee.
happen here, this will drag

I know it will.
Now, you're younger and - you know - you've

got humor and he hasn't. My wife tells me

you've got a quiet, sly, little humor.
H.M.Jr:

What kind of humor?

F:

A quiet, sly, little humor.

H.M.Jr:

Sly, huh?

F:

Sly means - you know - you look it up in
the dictionary, sly in that sense means that
you don't use a club.

H.M.Jr:

(Laughe).

F:

H.M.Jr:

See?

Well, coming from your wife whatever it is
it sounds good to me.

F:

Yeah. Well, she says he's got a st.y. little

humor. Sly is a term of commendation.
H.M.Jr:
F:

H.M.Jr:
F:

Right.

Want an opinion on that subject?

Coming from your wife it's all right. From
you, I'd be suspicious.

(Laughs). But I'd take the lead and sit

down with him - with Hull. See?
H.M.Jr:

Well, that's all right.

245

F:

And then, listen, his difficulties - I think
I've got to the bottom of it. The difficulties
are what kind of trouble they will have the
day after that order is issued. You see?
They will have; not you; they. Get me?

H.M.Jr:
F:

I understand.

All the South Americans will come and say,
what about it. And Switzerland. Apparently
they"ve had - Switzerland is very much

troubled. I think if you took the initiative

with that strange mountaineer from Tennessee

......

H.M.Jr:

I've just come from an hour and three-cuarters

F:

On another subject.

H.M.Jr:

Well on how to testify before the

F:

H.M.Jr:

with him.

How did that go. All right?
It went all right because I had a brain

storm when I asked Knox and Stimson to be
there and Stimson was an enormous help.
Enormous help.

F:

Well, you know, that help you can always
tap, Senry.

H.M.Jr:

Well, what this other fellow wanted - he
wanted me to go up there and ask for

collateral.

F:

Teah

H.M.Jr:

Hall.

F:

Yeah, me eye!

H.M.Jr:

that?

F:

Me eye, I say.

H.M.Jr:

And I said, this either goes through on an

idealistic basis or the basis that it'11

246

-5give us time to get ready - but if it needs
a banker to go up there and put it on a
banking basis, I said, the President will
have to get somebody else to do it because

F:

I won't do it.
You can at least be as idealistic as Willkie

H.M.Jr:

Well, I said, I won't do it.

F:

You're 100% - no, I change my mind, 106%

H.M.Jr:

was in his statement, can't you?

right.
Yeah. But I get what you say and 1f it

works out well this way, until we get this

bill going, see, I will let the other thing

F:

slide. Then I'11 take your suggestion and
ask Hull again to see are.
Yeah, but you do it yourself, Henry.

E.M.Jr:

I'll do it myself.

F:

That already will make a difference.

H.M.Jr:
F:

I'11 do it myself. I've done it once but
I'll do it two or three times again.
Well, listen, Henry, just remember one thing
that (laughs) No. 1, you can afford to do

anything in the cause, No. 2, you're thirty
years younger than he is.

H.M.Jr:

Right. Well, what happened was this: the

President would have signed it last Thursday
but Hull said he was so busy he needed more

time so I said I'd call up the President
and ask him to postpone it until this week,

which he has done. Now the President told
me on the way up he expects to get in on it
himself when he gets back. Hello?

F:

Yes.

H.M.Jr:

But knowing how he hates to settle rows
I think what will happen is that when we

get this other bill going along a little

247
-6-

hit further I'll go over and - Hall as

often as necessary to get this Withing actived.

F:

Well, may I make one more suggestions

H.M.Jr:

Please.

F:

You know, in view of what you milk, the

President hates rows and SO am, the my in
the meantime suggest some compremian that

won't suit you and so on. I what you're
think about saying to the President, suppose
you hold off anything until I get a chance

to get together with Hull, you - ED that

be won't make any commitment that my be
inadequate for your purposes.
E.M.Jr:

Well, he's apt to do that too.

F:

Pardon.

H.M.Jr:

Be's apt to

F:

In other words to put in a attorn conter there.

E.M.Jr:

Well, I appreciate tremendousLy I the

F:

trouble you've gone to.
It ween't any trouble. If I GRIT the of any

further use, you know how to get -

H.M.Jr:

I don't suppose I'm lucky enough that by
any chance you're going to the at the
Acheson's tonight.

F:

I'm sorry not.
Oh, well that's too bad.

H.M.Jr:
F:

But I think we're all going a the Thurking
enough I, (laughs) - maybe before Long to
have Acheson where he'll help

H.M.Jr:

Oh, really?

F:

Ub-huh.

H.M.Jr:

Really?

248

#:

Team.

Tip with you fellows, huh?

#

Partion?

Tip with you fellows?
3:

No. Well, that would be

3:

It's not very good at guessing.
Well, are you very good at forgetting?

Where he'11 help you more than me.

Is it a secret?
F

Yeah.

ELE

Oh, I'm the best sort.

F:

(Laughs). He may be a very helpful new
influence in the State Department.

Oh, that would be too good to be true.
#:

Pardon?

That would be too good to be true.
3:

ELI
3:

Well, the one difficulty is - needless to
say, when I talk to you I talk to your wife,
although that is not true, to my sorrow I mean, that's only partly true, to my
(Laughs). That's true so far as you're
concerned but not 80 far as I'm concerned.

(Laughs). Well, it would be too good to

be true.

But I think that one is coming, Henry.

Well, I said to Elinor yesterday, I said,
if there were a number of things different I said - now get this - if there were only
one person to whom I could go in the State
Department who I know is as loyal to the
.....

President as I as that I could talk to

249

F:

Well, be is that, BE you know.
And Elinor's answer was, well, there isn't
anybody that you can talk to on any basis
over there.

F:

Well, you know, he's proven - he's gone

3.7.0%

Ch. yes.

F:

Acc I have a very great stake in this

.

too far, hasn't be.

thing because - I mean, my over relations
with Dean because be knows the difficulties

with that job but I'm using all my pressure
to make his E°. Are you for that?
S.M.Sr:

Oh, yes, 100%

F:

Well, I think that unless - you know the
WEI these things must be talked about unless something goes very wrong I think
that'11 happen.

E.M.Sr:

Acd while you're on that, a thing that I'm
pushing with not too great a success - the
President, you know, wants to send in
addition to an Ambassador a Minister to

London, and I've suggested John Wiley.
Do you know him?

F:

Yes. I think highly of his.

E.K.Jr:

Well, you know he's on loan with me.

?:

Yes, well, what's the matter? I should

E.M.Sep
F:

E.F.C.

think that would be very
Well, the President - you know be did that

magnificent job at Vienna, you remember.

Do I not because I was the beneficiary of
it - I mean some of my people.
Well, be says the State Department says
that wherever Wiley is there's trouble.
Well of course that s nonsense.

250

-9F:

H.M.Jr:

Oh, I think that's a first-rate thing.
If I can put in an oar, it'11 be a joy to
me.
Yell, the President would have somebody
over there who would be 100% loyal to him.

F:

Well, is there any other contender?

H.M.Jr:

Messersmith, in whom I don't have any
confidence.

H.M.Jr:

The other thing is all settled I suppose.
I believe so but Hull has not accepted it.

F:

Has not?

H.M.Jr:

No.

F:

Really. Whom does he want?

H.M.Jr:

Oh, such people as Owen D. Young or Governor

F:

Cox.

F:

I tell you a fellow that - you put a thought
in my head. You wouldn't feel badly if Harry
Stimson went, would you?

H.M.Jr:

Ch, he'd better stay around here.

F:

Yeah, that's the answer.

H.M.Jr:

No, he'd better stay around.

F:

H.M.Jr:

He's real help, isn't he?
Ch, like this thing this morning, he was

an enormous help. Enormous help. You know,

Felix, on this thing Aid to Britain there is

more - well I don't know - dishonest thinking
going on on this thing and a man like Stimson
he's just as clear as crystal, you see.

F:

Oh, yes. Never pulls any punches where he

thinks clearly.

251

- 10 H.M.Jr:

And he's far more use here than he'd be

H.M.Jr:

Well, I'm agreed.
Se's far more use.

F:

Yeah, I'm agreed.

H.M.Jr:

Teach

F:

Well, Henry, once more if you see any use

F:

H.M.Jr:
F:

for me in this situation, you know
Well, there will be and as I go along on
this thing I'm going to call on you.

Just remember that people are touchy and (laughs) - in a strange kind of way forgetting
that - you know the Germans have a word which

is good -

H.M.Jr:
F:

Now what in the hell do you translate that?
I mean the thing - the purpose is bigger
them any individual.

H.M.Jr:

Ch, yes.

F:

You know.

H.M.Jr:

I agree.

F:

And that's the thing to fasten on altogether.

H.M.Jr:

Well, I'll be calling on you again.

F:

Good luck.

H.M.Jr:

Thank you.

252

January 14, 1941

11:20 E.I.
E AID TO PRITAIN
Present:

Mr. Tourne

Yr. Sttemart
Yr. Coultrer
Mr. Class

Mr. Kahm

Dr. White
Mr. Shilliwer
Mrs. Klattz

H.N.Jr:

How much have you people got? Have you gutt
something four me

Cochran:

Here is the one m Canada I mentioned
yesterday- (See attachment No. 1)

E.N.Jr:

Tell, II had - hour and a half or am hour
and three marters of a very interesting

session with hill, Stimson and Knox; and
Stinsom and I teamed up like brothers am this

thing of colleteral. All I can do is to sum
up after they got through what I teld them
over titers. I said that either this thing

was am am idealistic mlane, if we thought it

was to seve the Democracies from

the Termination and if it was, I wasn't going um

am the HEIR - e banker and ask for colleteral.
If the President wanted somebody to & that,
he would have to get somebody else to do it.

I refined minithin to do it. And I had
Stinumos - will, I mean he set the stage fur
me to - that but I just wanted to gett that
over.

253

-2Now, there is one thing, Merle, I want you
to do as soon as you get out of here. Herbert

Feis says he still cannot get into his head

why they have so few dollars, and I said that
you would sit down with them. So the minute

you leave, will you get in touch with him;
and he said he would write a memorandum on it
to Mr. Hull.
Cochran:

May I show him that table we had?

F.M.Jr:

Show him anything we have got, but he says he

just can't get it through his head; so I think
It is important and I find that Feis talked us.

He was completely on my side on collateral. Be

argued with Mr. Hull. I mean, I found - this
was in front of Mr. Full that he was taking
exactly the same attitude that I was. There
was no difference between Feis and myself,
and he did it before Mr. Hull, which isn't easy.
I mean, Feis seems to be - certainly wouldn't
take my side against Mr. Hull unless he felt

pretty deeply on it.

Cochran:

No, he talked that same way with me the other
day.

H.M.Jr:

He stuck by his runs in front of Full and in
front of Hackworth after we got through. For
an hour and three quarters Hackworth summed

up and you would have thought he had cotton

in both of his ears and he hadn't heard a thing.

Now, what have you gentlemen got for me? Just
out this in your pocket, Harry, and whenever we

get a breathing spell, see, I want to go over
that letter with you, but I don't want to be

bothered with it now. It is the Eccles letter.
dated bad fled 1/13

254

-3White:

All right. I have the table that you looked
at last night altered to exclude the orders
which they have not yet placed, of their current
excenditures and receipts. That is what you

asked for, which you may want to give to members
of the committee.

H.M.Jr:
White:

All right, let me have it.
The final copy is being typed, so we pieced
this together. Now, this we have done in two
ways. One way it includes Canada and the other
way it excludes Canada. Though we thought
Canada might be excluded, the reason why I

have done it in two ways so that you can

choose either was because if we excluded Canada,
the picture seems to be much more favorable to

the U. K. That is, they will have much more
assets. They will have even a surplus; whereas,
if we include Canada, it shows a more realistic
picture, since they have to pay Canada in dollars.

H.M.Jr:

Well mos, before we get on this thing, have you
(Kuhn) got Odegarde busy?

Kuhn:

Yes, he is in there and coming to see you this

H.M.Jr:

Is he busy

Kuhn:

Yes.

H.M.Jr:

I want his curbstone reaction, but not at this

afternoon.

stage, later on. Before I cross that, this is
what I said over there; and then after it I
will ask you - that the position I was going
to take on the Hill was that England had enough
dollar assets, and Knox kept stressing that.
They won Knox over to the point now that he

255

4

is all right, since he understands the thing.

They have enough dollars am home to pay for

the orders they have on our books. That is

No. 1. I further said that they should be
permitted to husband whatever other dollar

assets they had that they could liquidate in
order to pay for the British standard munitions
that they want to buy in this country, you see,
things which the Chief of Staff would not
certify to - as necessary to our Army.
(Mr. Young entered the conference.)

H.M.Jr:

Now, they asked me how much that would amount

White:

They may not have enough for that.

H.M.Jr:

Just a second, Harry. Let THE get my thought

to, and I don't know; and I said, " the time
you do that, it doesn't leave any collateral.

over. So I said, "Whatever is left over - you
talk about collateral - would go toward the

placing of these orders. For much there would be,
I don't know; but I want to make this plain and
you fellows have got to re-examine this thing
in the light of that, you see, because subsecuently if they don't have it, they may have

to do something about it; but I think that the
strong point that Stimson wents to take is that

Knox, he is going to R up and sit back and
say, "Now, we are going to place the orders

we need and we think the English need and then

we are going to sit back amt WE will give them
so many guns and so many planes off our line of
manufacture, and if they had to talk about making
303 ammunition, which we don't use, or 25 round

guns, which we don't use, or other stuff that

we don't use and we consider obsolete, it would

CRAID their style. I think I have to take the
position that whatever dollars are left, if they

255
5-

have got any wool to sell, any gold to miline

or tin and so forth, that that will - the

British standard munitions, and the thing

that I also - Stimson asked me and I SALE

that - listen to this, Philip - I thought

that would become less and less, whereupum

Trank Knox went through the ceiling and mill,
"Well, they never learnanything. Look at
those 50 destroyers we gave them. They lind
to rebuild them all before they would Invent
them." And I said, "Well, if we are raine the

tell stories, look at the 300 French P-40's
that they wouldn't use until February
they had to rebuild them. So Stimson smilt,
W God, you fellows aren't going to this
like that on the Hill, are you? (Laughter)
I said, "No, but I just want to let you know
that I am as realistic as Frank Knox..

Tourne=

EM

Twenty Boeings?

Nov, with those introductory remarks, attat
do you think, Walter® Do you think TE

to leave the Canadians in or out of this
mixture
Stampto

I think it depends on how the figures sitence

m If you show a position larger than is

described in your earlier statement, them II

think you may have to put it in.
I would rather have it out unless it changes
the nicture.

tell, what does it amount to in dollars Is
this going to be January 1°

little

ELI

That is January 1, yes.
Way is it January 1 to September 1er That item
going to satisfy them.

257

-6White:

The have another one that is open end, but
the nigate you make it an open end, you can't

talk about current receipts. You have to

steak about how much they will get per month.

Well, Barry, I cannot be stumbling up there.

As some as I sey January 1 to September 1, they

are imediately going to say, "that happens

after that?

inite:

well, we have another table then in which that

Sentenber 1 is left out, in which it takes a
very different form. It is how much they owe

DIE - commitments which they already have
made.

That is right.
White:

Box much they will have to pay out each month,
assuming things remain the same on other items,
have much they will get each month, assuming
things remain generally the same, and then a

senarate table of what their assets are or
we can lum the two tables and put what their
assets are on that same table. Now, that is a

summary table which would be much simpler than

this.

For wait E minute, what I want is - because I
box what is going to happen - I want the one
FOR are describing, a monthly one, and then

let's have their assets on a separate table,

I think. But that table is no good to me.
Right.

I would discard this one.

little

The only value -

258

-7H.M.Jr:

Heit a minute, Harry, wait a minute. And

then my own idea, I would leave Canada out

of this picture because I feel this way, if
this - by doing that it gives England a little
bit the break. I think she needs it, and it
&pess't bring in the whole question about

Canada anyway; and if Canada has a few resources

left, I think it is all to the good. This table

you are talking about, was that going to include
Canada We are not talking about Canada.

White:

Yes, it included Canada as part of the dollars
which she will have to pay out each month.

H.M.Jr:

Now, if they say, "What about Canada," I can say,
Gentlemen, Mr. Clark, the second in command
of the Canadian Treasury, was down and told me,

looking ahead for 12 months, they will come
out just about even."

White:

with us

H.M.Jr:

Yes.

White:

But they still --

H.M.Jr:

Tell, I don't know any more about Canada and

Great Britain than I do about India and Great

Britain. I can't go into the whole Empire;

and anyway, there are always things that are

between the Empire and the mother countries

that they can do if they have to. Let me just
stop there a minute and let me check. Do you
(Cox) have any ideas on that?

Cox:

No, I agree with you because if you include
Canada they will say, "Why did you leave out
India and Australia and Africa and so forth?"

259

-8Thite:
E.M.Jr:
Young:

Kuhn:

The answer is simple.

Just a second. Let's don't give all the
answers. Just relax a minute. Philip*
I think it ought to be out. You can drag

it in if you have to, if they insist on it,
but I would certainly start off with it out.
I was only wondering about future questions
that they might ask you about South Africa
and so on. They know that South African gold

is a factor in all this.

H.M.Jr:

The answer that I am thinking of making is

this: "Look, Gentlemen, I am here to exlaim
to you what is the relationship between the

British Treasury and the United States Treasury
and the tronosal the President is making as to
furnishing then with `munitions of war yet to
be made and yet to be ordered, or stuff that
we may have on hand.

Now, what the relations are between the Cominion
and the mother country and so forth and $0 mm

I don't think it is un to me to discuss that.
I mean, I have got to stop somewhere, and I

don't think it is uo to me to discuss that.

I mean, I have got to stop somewhere, and I

don't think that I an not being frank with them
because how do I know whether Canada or
Australia or South Africa can't make a sterling
loan and so forth and so on as between all the

rest of it. I don't know. Merle

Cochran:

I think Canada is in a particular vosition
and I think you ought to be able to exilain

to them if they press you too much that they
have made certain payments there in dollars
and gold and if we tress Cenada to rive too
much assistance, we may eventually have her

on the sterling standard instead of a dollar
standard, which we certainly don't want.

260

-9 THe don't want to depreciate a sterling

commetitor up North. If she has paid in
sterling notes and so on, it is what you

might have some day.
H.M.Jr:

Walter?

Stewart:

I have nothing more.

H.M.Jr:

Mrs. Klots®

Klotz:

No.

H.M.Jr:

Now, Mr. White, you can STATE up on both sides

-hite:

I think so.

H.M.Jr:

That?

Thite:

In the first place, if you leave Canada out,

1

against the middle.

England will arrear to have - will have more
dollars available and more gold available than

she would have if you out Canada in, in as much
as England maintains that she has to meet these
Canadian payments mostly in dollars, you would
make it seen that England has less funds avail-

able if you include Canada, which is the reality
of the case. However, I think you are right in

sajing that if you don't want to get into the

relationship between the mother country and the
Dominions, you have got to leave Canada out if
you leave the others out.

It so happens that with regard to the other
countries, she doesn't have out payments. In

many of then she has in payments, so that her
inclusion of Canada sakes it more favorable to
her.

H.M.Jr:

If I have to fudge anywhere with the picture

so terrible and so tragic, I would like to

261
- 10 -

fudge a little bit on the side of making it
look as good as possible. It is had enough
whichever way you paint it. I don't want to
make it any worse. Does that shock you,
Talter?

Stewart:

No, I agree and I also say that you have got
a sufficiently complicated and commer victure
so the simpler you can make it the better.

H.M.Jr:

Then if we all agree just as quickly BS possible,
I would get somebody started to set this thing
us, this is their monthly - or a monthly basis,
running as far out as their contracts run.

White:

I am not sure that it can be done that way.
The way I had in mind is that this is going
to be the position each month. This is what
she will have to meet, this is what she will
get.

H.M.Jr:

For how long?

White:

You can't project it if you don't mit an end
date on it.

H.M.Jr:

well, can you do it to December 31, NOT

White:

Yes, we can do it for one year.
I think that is reasonable, and them at the end,
but there are still this many contracts which
will run over into '42 and lump them into one
figure.

H.M.Jr:

White:

I think we could get that.

E.Y.Jr:

You could add them to the December month.

White:

I don't know whether they have the mayments
that will be due in October, November and

262

- 11 December, but if they haven't, we can pro-rate

it and then say it is an estimate and that will

be adequate, I think, because it may be possible
that the actual commitments may be more or less.
H.M.Jr:

Ee don't have much time. If their stuff only
runs until September 3, I would do it only until
September 3.

White:

I will find out. We selected September because
that was the year which they were using. Te
selected from September to September.

F.M.Jr:

tell, if you can do it to December 31, I would

like it. I certainly want by this afternoon -

by 2:30, I certainly want the monthly one,
you see what I mean?

White:

Yes.

E.Y.Jr:

And then if we can go further, we will go
further.

Stewart:

You can make September look reasonable by making

H.M.Jr:

As a metter of fact, I am going to have to
discuss this again at two o'clock.

White:

Yes. Well, then if I understand it, the way -

it the first and the second years of the war.

there will be two methods, one is what the

situation will be each month. That is, what

it is today and how much they have to pay
out and how much they will get currently each
month without specifying what month they have
to pay on what they owe. The other way will

be if we can get it to have similar to this
but December 1.

H.M.Jr:

If possible.

263

- 12 Thite:

January 1, rather. If we can't get it, do

you want it September 1°

E.M.Jr:

Yes.

White:

Then it will be the same as this - well, it

will be the same as what I have in my hand.

E.M.Jr:

On a monthly basis. No

Thite:

No.

E.N.Jr:

I don't care.

Thite:

I will have it three ways, and you take it the
way you like it best.
It doesn't have to be monthly. That gives
unnecessary figures. If it runs from now
until September 1, that is all right. Do you
think there is any particular use of making

E.M.Jr:

it monthly?

Stewart:

I think it is more difficult. I think you

could have in your mimi something you could

refer to on a monthly basis. I think spreading
it out involves a lot of unnecessary work.

H.M.Jr:

I would like it to September 1 without fail,
and if we could have it to January 1, I would

like it.

White:

Well, here is September 1 now. It is being
retyped. Without Canada and without - and
September 1.

Young:

I don't see why you couldn't do it on a quarterly

Thite:

You can. It just means you will have to read

basis.

264
- 13 -

each quarter. After all, all Congress wants
to know is how much it will be during the

year. I think the best thing would be for
the coming year, to January 1, if we can
net the figures.

E.M.Mr.

How much deficit does this show?

White:

Well, it shows a --

E.V.Jr:

Total deficit of 714 million° Is this the
figure

White:

That is the total dollar deficit of the sterling

area of the United States. The sterling area
does not include Canada. That is what they
claim they have to meet.

H.M.

What is the sterling area

white:

India, Australia, Canada - U.K., South Africa.
If you don't include those areas, then you

run into difficulty about the cold they get
from them. All you would be including is

what they get and not what they have to pay,

so you have to include those, but it is practically

U.K.

H.M.Jr:

Now, Mr. White, they are short 714 million
dollars between now and September, and how

are they going to meet that?

White:

Well, they have these dollar assets.

-ell, have you got them listed
Thite:

Not on that page.

E.V.Jr:

will you have them listed?

White:

Yes. Now, those dollar assets will have to

265

- 14 be higher because some of the deficit some of the payments will extend beyond
September 1.

H.M.Jr:

Sure.

White:

Therefore, the fact that they have dollar

assets in excess of this 714 doesn't mean
they have got it to spare, because they will
have to meet their payments falling later,
aside from the payments to Canada.

H.M.Jr:

That is why I would like to have a December 31
and say, "Now look, gentlemen, they have given

me this thing until the end of the year, which

is as far advanced as anybody can look in these
times.

White:

"ell, we easily can pro-rate it if we can't get
the exact figures, and a difference of plus
or minus 50 or a hundred million dollars I
don't think is significant, because what we

don't put before the first will fall after,

so the total won't be altered. The only problem

will be whether we are a hundred million too
much or too low of the amount that has to fall
due before January 1, and that assumes that

they haven't got the figures. They may have

them, in which case we can get an approximate.

Young:

They have got all the figures on payments coming

H.M.Jr:

we are going to have to move a little faster,

due on their contracts.

gentlemen. At two o'clock I want something.
White:

If they have got it, you will have that because

H.M.Jr:

Do you think at two o'clock is the time to have

that won't be difficult.

Purvis and Phillips sit in, or is that too early?

266

- 15 White:

To go over this?

H.M.Jr:

Yes.

White:

No, they can go over this.

Stewart:

I think it depends on whether you are still
clarifying your own statement. I wouldn't
have them in while I was clarifying my own
statement.

White:

I am hoping very much that you will leave at
least two hours to go over questions that I
am certain they are going to ask on a number

of financial matters which I think that you

ought to consider. You may not want to answer

them now, but I certainly think that you ought
to go over the questions that they are likely
to ask, because some of them are going to be

sufficiently difficult so that you will want

to give them a little thought before you are
asked them.

H.M.Jr:

Have you got your questions?

White:

Yes, I have. I am just lumping them up in
their proper categories and the duplications
cut out and the unimportant ones cut out.

H.M.Jr:

Well, I am ready to start again at two.

White:

On these questions?

H.M.Jr:

On anything.

White:

Well, we will have the questions ready at two,
and I certainly don't think they ought to be
in while you are going over those questions.
We will also have this ready at two, and you
can take up either one you want and then there

is still the statement.

267

- 16 H.M.Jr:
Kuhn:

Well, what about the statement
The statement you can have by two. I wasn't
writing much of it this morning because I
don't think we are clear exactly on what you
are going to say and what you are not.

H.M.Jr:

Bell, do you think you will have something*

Kuhn:

Oh yes. I have some already. It will be
short, shorter than it was last night.

H.M.Jr:

Well, we are making some progress.

White:

I take it you will want copies of whatever of
these tables you have to distribute among the

members.

H.M.Jr:

I will think about it. I suppose so.

Kuhn:

You won't want to anticipate any of those
questions by putting them into the prepared
statement

White:

Thy not go ahead, if it belongs in the prepared
statement. But there are - the more I have
thought about it, and I have had a couple of

the boys in this morning and we have been going

Kuhn:

over the sort of questions that we think, and
there are a lot of very troublesome questions
which they can ask on - right in your tailwich.
Then it is better to disarm them first by
putting in some kind of an answer.

White:

Insofar as you can. I think you will find

H.M.Jr:

Now, this is some of the things that I want

that in most cases you can't do that.

to get in and I think this ought to be in the

268

- 17 statement.

Kuhn, if you will listen, get your pencil and
get after these boys. I think this is important.
I would like to show what England is spending
each day and how she raises it.

Kuhn:

Spending on the war?

H.M.Jr:

Yes, how much is she spending each day and how

does she raise it. In other words, this thing well, I have heard it until I am sick of it,
but they keep throwing it in my face, that
England is just going to lay down on us and
let us do it from now on. The answer is,
before they say that, in my prepared statement,

I just want to let you know, this is what
England is spending each day and this is how
she raises it.

Kuhn:

Forty-two and a half per cent income taxes
and that kind of thing you mean?

H.M.Jr:

Yes.

White:

It is being prepared by Sullivan.

E.M.Jr:

Well, it ought to be ready now.

White:

I told him this morning.

H.M.Jr:

I was supposed to testify today. I have got

to push on all of this stuff instead of being

pushed.
White:

Well, you just decided on it last night.

H.M.Jr:

What, the tax thing?

White:

Or was it Friday or Saturday Well, we did

269

- 18 something to meet that and we are dressing

it up a little bit more.

H.M.Jr:

Well anyway, I want to say, "Now look, England
is spending -" somebody said 50 million dollars
a day.

White:

Ten. We have got those facts already.

H.M.Jr:

I gave Cochran his message. And then I don't
want to overlook the point that she has got
enough dollars to pay for her outstanding
contracts.

Kuhn:

I have got that.

H.M.Jr:

In American assets. And she is going to need
money to pay for goods manufactured to British
standards.

Kuhn:

That includes a lot of other tax stuff, doesn't

H.M.Jr:

I was thinking more in terms of military stuff.

White:

They claim she will also need dollars to meet
other types of commitments in the rest of the

it?

world.

Kuhn:

Philip gave me a statement yesterday of how
much that non-military stuff amounted to and

in this year it is a sizable amount, 450 million

dollars.
H.M.Jr:

Well, when they talk about having them put up

collateral they are going to need every dollar

they can to take care of that. Philip, you
will just have to ride me on this until I get

to it. I won't get it today.

270
- 19 Cox:

On the husbanding of resources for the non-

American specification thing, that is a little
bit inconsistent with the other part of the
United States placement of orders. Do you
want to have that toned down so that it goes
to absolutely essential stuff which they need
according to their own specifications?

H.M.Jr:
Cox:

I am not sure if I follow you.
well, the policy of the United States place-

ment and the Administration policy has been
to get them to conform to American specifications so you come off one assembly line with

the same stuff. Now, for that purpose we are
going to place orders. At the same time, you
say that they ought to have available assets

to place orders for British specification
materials. I should think that ought to be
limited.

H.M.Jr:

It weakens it.

Cox:

Yes.

White:

Well, they are bound to have some things.

Cox:

I think if you limit it to things which they

H.M.Jr:

Why not make a general statement that whatever

have already got and that type of thing, you
don't want to go out again now -

dollars they have got left over, which will be
damned few, they are going to need those to
purchase day to day necessities.

Cox:

That is right.

H.M.Jr:

That would cover it, day to day necessities.

O.K.?

271

------

p.a.
(limited
12:3513.
w Mr19th.)
January Probates milling to w. - is the - as

- balgo - as - as she - w /
alligition - w allening has starting - to rises the of be - So only Limited w have ability to suise State Internally.

. to date, is this my. do has families - with I - - FREE millions since the Degister of the wa.

- undertest is She - - to equity - deflect of Creation
delivers for the first half of the - ver year to the - of Can.
as millions (mg U.S. 4130 millions). a had strends provided this

- - is - and - had to start saying have - again.
is via . - critical position, - asked - to give - further boxy,

- the - - underteat to funda a further - e
millions. - they work not add to thats total help without 1

-

ing Shake - - - - shie - - anticipation of the

baby which they works give - daring the - half of the - -

year. This - is - - and - - - have acted then
for father is - to would having to you that - - of
This struction has the especto of -

(a) the - discriming the - - w selding -

to - - as - repla . pass. M. for - - - to

- the to - - - 0521 the - of as would
- that they would have furnished as with a further - 875

millions 1.a. - 8275 millions in all. against Shake original

272

- of - sage millions. We & see believe that we -

- - for - 1 - though they - be able to give further hole. we - almost certificity w then sens was in
February

(w as almost asset. - I take more than a tate total of starting and committee is - for Quantian
dollars is the year. The extra help the has given us is
Number 19to. and any further immediate help she may give.

- therefore only take the form of anticipating the help -

sign give - is the resulator of the - war year. three
daring the resulting months of that year w was - on Loss

to -

bots. and the drain - - gold and v. s. dellar reserved will

British Machington
1200 January. 19th

entitle

Bollar

Hill -

Brookpla of Streeting Apra VISA All Countates - Than Canada free January 1, 1943 to September 4
definites balee do not take into account prepared program or orders not yes planed)

(In Millions of 8. 8. Dollars)
Dollar Receipts of StepLing Area

&. Dollar by U.K. from U.S.

to be - - Dotal perchases from the S.S.
paid betroom Bod. 2983 1.Jan.

optars

1. U.E. exports of merchandise to The
L

100

atos million is - fall -

12,000

2. Not balance from U.S. to U.I. III
invisible items

Sept. 1. 1943

from U.S. not - British

ing

187

81,157

lare

-adaby itemLine - (metty U.E.) outside the U.S.
requiring

165

Total

373
50

320

73

Total dollar receipts of J.L. and

J stepLine
APOS (eveloting U.L) from U.S.
Sept. BAS

starling area from countries TOTAL
that Canada

222

$ 863

Total dollar defieit of starting -

with U.S., Jan. 1 to Jept. L. THE

La 19oma

724

3

GRAND TOTAL
225

AND TOTAL

Total receipts and deflatt operations with all countries
other than Ganada from in. 2
1941 to Sept. 1, 1982

Dollar regulations or abouting area for all

mean, Metalo of -

1. Commodity exports

2. Instrulian gold exports to U.S.
3. Borth African exports of gold.

nos from aposs entaldo the U.S. and Ganota requiring

with combrine other Shan Ganada

1 120

B. Dollar reseipts by sterling area Cream LL

O.D

7- purseate to U.S. by starting APOS (excluding

10

Total

tal parents to be made - U.E. parabacco

to

T 110

11,577

11.577

January 14, 199

Dolser / and Deeriate of Morting APR Free MAPT 1, 1942 to September 1, 1962
( ovildates below do not / Into - proposed program OF orders not yet placed)
(In Hillions of B. a. Dollars)
n MerLine Area

be - - Both / from the U.S.
MALL and Dept. L
1,

1942

So expected to fall -

Pollar Receipts of Sterling Area
A. Dollar receipts by U.E. free U.S.
1. U.K. experts of merchandise to U.S.

⑉ 61,000

0 110

2. Net belamo free U.S. to U.K. on
Lavisible items

not produced Strength the British

10

Total

120

AST

to to made - U.E. perchasse
81,187

- - -The
outsta the U.S. requiring gold
Purchase be stooding - (nortly U.E.) orieide - U.S.

B. Dellar receipts by storling APGA from U.S.
1. Connodity exports

37

2. Australian gold exports to U.S.

50

3. South African experts of gold

320

Total

165

743

Property W stocking - (mostly S.L.) to Gannda and

C. Canadian assistance to U.K
567

total L.L. payments outside U.S. requiring dollars.

752

steeLing RPOS (emitating U.E.) from U.S.

Total dollar receipts of U.K. and
storling area

$1,036

Total dollar defield of storling

apta 2 Sept. 1012)

1. Superto.

173

area with U.S

714

Total dollar definit of sterling area

222

with Canada (is U.S. dollars).

B. Inviaible Stone.

414

Total dollar definit of sterling

MAY Sobal to U.S. by storting area

- TOTAL

Dollar of storting - for all

Department, Division of Snowarch

area Jan. 1, 1941 to Sept. 1, 1941
223

M.16

1,126

GRAND TOTAL

Total receipts and definit on
operations from Jan. 1, 1941 to
Sept. 1, 1942

$2,160

January 14

275

January 14, 1941
2:00 p.m.
RE AID TO BRITAIN

Present:

Mr. Young

Mr. Bell

Mr. Cochren
Mr. White
Mr. Falley
Mr. Com

Mr. Stewart

Mr. Sullivan

Mr. Tulm

Mrs. Klots

H.M.Jr:

Foley, what kind of a fellow are you to
get a bill introduced with reservations"
Glass introduced the bill by request with
reservations. The measure was reported
drafted by General Counsel Edward Foley.

Have you seen this (indicating ticker message)
H.M.Jr:

No, I heren't seen it.
You think I am kidding

Foley:

Yes, I think so.

H.M.Jr:

All right, look at that. "Chairman Floor
said that the Bill prepared ty Edward Foley -"

Foley:

listen, how many times an I going to get
this?

Sullivan:

I had him out to lunch.

H.M.Jr:

Honestly. Is it there

276

-2Foley:

Yes, it is here in the one I have, but it

H.M.Jr:

Want to bet?

is not there.

Foley:

Sure.

E.M.Jr:

How much

Foley:

I wouldn't take you up this morning. I don't

White:

Knights of the Garter.

Foley:

My garter?

White:

Well, it isn't yours.

H.M.Jr:

Keep it clean, boys. (Laughter)

think I had better take you up now. (Laughter)

Did you sell Bloom?
Foley:

Sure. He called un Hull and told him he

had to be the first witness, it was very

important, the country was waiting to hear
from him.

H.M.Jp:

When is he going?

Foley:

Ten o'clock tomorrow morning.

H.V.Jr:

When do I go?

Foley:

Right after him.

H.M.Jr:

Is it public?

Foley:

Public, and Hull called him back and had
some talk about that and he said that any
time he wanted to go off the record, he

277

-3would go into executive session; but he said,
"Fith Eam Fish and Tinkham on my committee,

what good does it do to go into executive

session? It is just the same as if you are
talking to the world, except they won't get

it first hand."
H.M.Jr:

well now, what have you got now, Harry?

White:

that would you like to see first, the cable?

H.M.Jr:

That statement.

White:

Here is the one form of the statement covering
the whole year and excluding Canada. (see
attachment No. 1 to conference on "Aid To Britain",
January 15, 1941, 9:35 a.m.)

H.M.Jr:

Let Dan take a look at that. Do you see

White:

anything the matter with it, Bell?
lie have got that same thing in a different

H.M.Jr:

This is all right. What else have you got?

White:

Eas this the kind of a summary (see attachment 1)

Bell:

Mr. Secretary, I forgot to tell you that
Merle Cochran had to go to Baltimore with
his wife. He will be back about three or four.

H.M.Jr:

That is the matter?

Bell:

He had to go over for another examination at
two o'clock, and it was the only time he could
get the doctor.

H.M.Jr:

Today of all days, couldn't wait until tomorrow.

Bell:

It was the only time he could get the doctor.

form.

278

4H.M.Jr:

Is his wife at the hospital?

Bell:

No, he took her and is bringing her back at

H.M.Jr:

Then he didn't see Feis?

Bell:

I don't know. He didn't leave until about

Stewart:

No, he said he would see Feis as soon as it
was possible to see him upon his return this

3:30.

12:30.

afternoon.

H.M.Jr:

Well, let me collect all these pieces and

then I am going to read them. What else have

you got?
White:

Well, we have got a table like this that you

H.M.Jr:

What is this, the questions?

White:

No, that is just a table you will find useful,

H.M.Jr:

Who else has anything?

Kuhn:

I have a preliminary statement with some of

might want to have. (see attachment 2.)

and then we have the questions.

these figures in just briefly. I have got

two more points to bring in at the end there.

H.M.Jr:

Well, I want everything. I am going to read
it by myself. She has anything else?

Sullivan:

You wanted a comparison on taxes, sir. Now,
I am getting the same thing prepared on

comparisons between Canedian taxes and ours.

This is the estimated tax collections that
end on March 31. (see attachment No. 3)

279

-5- E.M.Jr:

Now, where is the thing, how such they are

Talm:

I have got that in my piece.

H.M.Jr:

Have you got anything for me, Ed?

Foley:

No.

H.M.Jr:

Have you got anything for me that you prepared?

Foley:

No, Oscar has been working on that with

Kuhn:

Yes. A lot of that is Oscar Cox's stuff.

E.M.Jr:

What I suggest, if you people will leave me

spending per day?

Ferdie.

alone, I will read this stuff and as I need

more I will send for you.
Sallivan:

Do you want the Canadian figures Shall I

H.M.Jr:

Well, he (Kuhn) is writing the thing. Give

Sullivan:

Yes, sir.

Kuhn:

And I am finishing two points on there,

send them in?

them to Ferdie Kuhn, will you?

Mr. Secretary, that I will send in to you.

Bell:

You don't want to hear about Jesse Jones

H.M.Jr:

You stay. When you (Kuhn) have that, give

Kuhn:

Foley:

All right.
It is all right to distribute to this meeting --

E.M.Jr:

I will see you afterward.

at this time?

Mrs. Klotz a ring, will you?

280
Summary Table of Current Parelgo Backage

Situation of United Riggies

(In millions)
Dollars das - U.E. Government orders already placed

82,348

(or this - $1152 millies have to be art during 1941

and the resalader falls due between Jan. - August, 1942)

British estimated not dellar application of U.S. - all other
starling area transactions during 1942

430

United Kingdom's liquid dollar exchange assets - January 1, 1941,
were as follows:

$245 million
Gold in U.S. or - route
.
54
official dollar balances
American securities - reported w British
.
as of Jan. 6.

616

935

Total

Other dollar exchange assets - January 1, 1961 were as follows
Direct and Other Investments

(The British have given - - figures - this item bas
the Department of Commerce extinates are - a Millies
additional. This figure of $2 Millies does not include
any of the assurities in the above total. The waist

value of those investments is but 11 is probably

more than - Millie.
Private dellar balances.

8304 million

(This is the sua of British privite dellar
balances in N.I.F.R. Matrict - Doe. 32

and outside E.Y.F.B. - Dec. 18. The British
state that these funds are not available because
they are nooded for the continued conduct of

British insurance companies - other

Tester

1/2//12

281 2
STAR - DEMO MA = Since street - . 2 Milis

L-

-

2 I differ balmes

3. - adder -

4- -w dollar /

(mg saw million of Eggs -

s Direct Investments, etc.

s . adidas
s 546 million

$ 13 Millin
over a Million

to Dept. of Commerce estimates $150

1 direct investments pize $330 million

- cash - - adidas have Jafa
L. one

2. - differ I

$ 25 allia (ML)
$ 56 million (MMJ)

3. Rebella Mile -

$ 302 millie

s - - etc.

- a Millie

4 I monthlee

-L any- -

2 - diller balances
3. abute diller balances

4 I mustine a

s - - etc.
sea Jaso

8 - william

- 52995 million

is 4 million
s - million
$ - million seed
-

- million

Vw- -Digital
problem
a
I
of
1
- - cold to the Relat -

aI SM
- - -ofI -- - -- -- as
I of- ----- of

282 3

COMPARISON or CANADIAN AND SEATED STATES TAXES

I

1. is - A meried people with two children

- 1.

- the following terms in Centre - the United States under

:

Constitue tax

#

B. s. tax

a

$ 1,500
2,500
5,000
10,000
20,000
50,000
100,000

.

$ 14

-

$

46

-

$91

75

1,780
5,962
20,998
50,880

2,148
18,741
42,948

440

& December income
Canada

#

5. 3.

a

Ingular rate

Consolidated returns

106

205

as
as

s. I arefite - The Centities - profits tax is

75 personal of the - over standard prefite, which are the

- posite for the years A states tax of 12 p

- is imposed - total precite before deducting iscase tax where
such anthod results in a greater tex. The United States prefits tax reages from 25 to so percent of earnings in - of
the - base period earnings for 1986-1980, or 8 percent of

invested capital, whichever - is higher.

do
sales
Canada
imposes
a
sales tax of percent - the sale price of all goods produced or

- in - Feststaffs - -

is

1/24/02

Suggested draft of statement to House Foreign Relations

Oittee - NOT USED

283

284

to lay before you all the facto

Gentlemen, I have come here today to tell you all
1

that I know's all that I have in my possession, about the

British financial position. I have with me all the information.
If you don't find all that you want in my preliminary statement

and in the tables which I an going to submit to you, I - shall
do my best to supply you with detailed and definite answers to
questions.

Before we begin. let me remind you for just a moment

of the Treasury's place in this picture. The Secretary of the 1

Treasury is in touch with - the British position in two ways.
The first is the obvious one. that he is the chief fiscal office:
of the United States Government and so is directly concerned

with government financing. The second is that ever since the
Fall of 1938. the Treasury has been the connecting link between
foreign purchasers and our Government.

Every foreign government wishing to place orders here

has had to 50 through the State Department to the Treasury. The
Treasury has then consulted other government departments - as

to the availability 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 Government.

direct

This - job has placed a responsibility
upon the Treasury to see that no orders are
sanctioned unless there are ample liquid funds available to
be sure that
meet them. I have wanted always to

the foreign

purchasers can - pay for what they are buying. That
applies not only to the British but to all the fifteen or twenty
foreign purchasing missions with which we have had dealings.

2
Up to now the British have paid, and have paid the-third cash

down for every contract they have signed. by have already

spent $1,850,000,000 in this country since the - bagac. Their
present commitments are about $1,300,000,000 for orders not yet
completed and delivered.

The British have enough dollar assets to take care of these
convertise
commitments, but they have dipped so damly fats TheirAresources

that they are not able to 50 much further. Sec are HD les =
available assets that they have not been able to place orders

/ for materials which they - need urgently for

their - survival.

Let me give you an example. The British are realy to sign
contracts for 4,000 aircraft enginee from Studehairer and 3,000
from Buick. The United States Army is ready to sign contracts

for 2,000 aircraft engines from each of time factories. The
2.F.C. is ready to lend money to the manufacturer for the
necessary plant expansion. The sub-contractors are realy and

waiting for orders to make parts of these englishes. But the

British can't sign because they haven't the I, the can't sign because it hasn't enough morey to take OVER the Birth

as well a.it. owns

shale of these orderea the manufacturers can't put out their

subcontracts. - because they are not assured of being
paid. In other words, the British shortale of money now affects

not only the British war effort. but it delays and distracts
to
own defense. That is why the President has CODE Congress

to ask for this unprecedented legislation. = tragic and
terrible fact is that unless this bill is passed and passed with

385

286

. Mace - resident there.
- the British4 ablewill
--1

plan z www order
- - - -- they
have told - that

se - - be able to - on

$ II have Invoice with - same figures - which II -

- - will - to have, and eight to have - - - have been strictly confidential until - tedde

= - = confinence by the British, kept by - in confidence.

- The British Government has authorized = place - figured before you Them your see them. II

- - - understand the - of what change athes.

System Initially, they show that the British Government holds

as - Hollans in gold, of which about 100 million the needed

- . words balance for its equalization fund. (- conseilves feel

that . 200 million balance is needed for - stabilitation in addition to the gold, the official British dailar Universe -

is - = 1 Million Private individuals hold 3121 million
= allas balances. - of which are medical to: finance Britten

da

- - the United States.
Signature this, British citizens held THE million in Meeting

monition, of with 240 million - not De saleabile and - still

large - - is of doubtful artistability. Than will
- of course, that it is not possible to - will these
billings - cour security mailsta in a harry without discripting
America price

Finality. I - to the - no-called direct investments,
the - and properties in the United States commit the British

3

288

-5the United States. This liquidation will proceed as
expeditionaly as possible free the standpoint of our national
interest.
The lead-lease bill supplies the methods by which most

of those disabvantages, of immediately stripping Britain of
her oversees investments, can be eliminated. If it is deemed
wise and practicable for as 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, authorise
the Aray or Havy to supply airplanes to the British in exchange

for rubber, tim, nickel or the various other materials which
the British produce, over a reasonable time. In this may can get the may things which - seriously need and cannot
produce. We - also get them without disrupting our markets

or foreing the British into appressment. & this and other
similar ways - shall also keep open the channels of laternational trade se that they my be readily available to us

in the post- period. At the - time our workson will be
trained and employed and our production capacity will be

expended and ready for our - direct uses at a months
notice.

289

January 14, 1941
2:30 a.m.
RE AID TO BRITAIN

Present:

Mr. White
Mr. Kuhn

Mr. Foley

Mrs. Klotz

H.M.Jr:

Now, gentlemen, I can be polite, but I can't
try to save anybody's feelings, see? What I
have got here so far, I can't use.

Now, what I am thinking of doing, if you will

listen closely, is this. I will just try

this out. Just sit down, Harry, you don't

have to write anything yet. Come closer, I
can't see you people. I have got my new
glasses.

I thought I would simply say this without any

written statement. I am going to try it out
on you, see. I will simply say this, "Now
look, gentlemen, I have come up here to give

you the benefit of what information I have

about the British financial situation. I
take it that that is why I have been invited

here. Now, I have before me a statement which

shows the dollar expenditures, receipts of

sterling area, of all countries other than

Canada, from January 1, '41, to January 1, '42."

Now, Harry, make a note, sterling area. They
don't know what the sterling area is. The

Congressmen don't know what the sterling area is.

Define it.

290

-2 White:

H.M.Jr:

We will have to list the countries.
Yes. I mean, I am going to throw the thing
out. As I read it aloud, it isn't clear, you
see. Sterling area, whatever that is. Maybe

that is Japan. She is on sterling. So all right.
"The estimates below do not take into account
pronosed programs or orders not yet mlaced.

Well, I don't think that I would out that in the
statement. I think it is gratuitous. I mean,
I went as little on here - "Now, gentlemen, first,
the dollar expenditures of the sterline area

which will be made - our best estimate starting
with January 1, '41, during that 12 months,
(See attachment No. 1) United Kingdom, payments

to be made on total purchases from the United
States. (1) Sums to be paid during 1941 on
orders already placed before January 1, 1941;

amount, one billion 152 million. (In addition,
241 million is expected to fall due after

January 1, '42. That is all right.

"(2) Imports from the United States not purchased
through the British Purchasing Commission." I
would out in there, "but purchased through

trivate sources. Put that down, will you,
280 million.

"Total payments to be made on United Kinrdom

purchases from the United States, one billion
432 million.

"(B) United Kingdom purchases from areas outside

the United States and Canada requiring sold or

dollars. (1) Purchases by sterling area (mostly

U.K.) outside United States and Canada requiring

dollars, 247.

291

-3 Now, the first question they are zoinz to ask
is There are they going to buy 247 million

dollars

White:

South America, Dutch East Indies --

H.N.Net

In dollars

White:

They claim that they have to meet those payments

F.V.Nr.

in dollars.

Now
youthe
see,
isn'tStates
that aand
slipCenada"?
here to 5%
"outside
United
haven't treated Cameda senerately before.

White:

Well, I wanted to make sure there was no misunderstanding. You can leave Canada out. The
sterline area does not include Canada.

All right. I an esking you. I see. And then if

it isn't - they may SAY, Tell, how much are they
going to buy in Canada, and that is another story.

White:

That is another story.

E.M.Net

"(1) Purchases by sterline area (mostly U.E.)
outside the United States, 247.
"(C) Purchases by the sterline area (excluding

U.E.) - that would be South Africa and India
from the United States. Right?
Thite:

That is right.
And therefore if you define it, it will help me.
*(1) Commodity imports, 388.

Now, Mr. Thite, what are those commidities
Have you not those

292

-4White:

We have a list of them.

H.M.Jr:

Well, I am putting you on warning - if they

White:

Right.

H.M.Jr:

What are those Well, just a second and here
they are, see.

say, What are they, I will say, "Harry,
slip me that piece, and you will have the
stuff and I will lean over to you, see?

"(2) Invisible items, five million dollars."
Now, invisible items is a term Congress doesn't
know, such as what?

Thite:

Diplomatic expenses, moving picture rights,

H.M.Jr:

Instead of using the word "invisible", which

interest on --

might get a titter, can't you cite two or
three things and say, "etc"?

White:

That is right, tourist expenditures, diplomatic
expenditures, moving picture rights, etc.

Foley:

You can say, "Miscellaneous, such as -" and give
the general character.

H.M.Jr:

"Total payments to the United States by sterling

area, excluding -" stuff that they buy from us,
right?

White:

I didn't hear that.

H.M.Jr:

"Total payments to the United States by the

sterling area, excluding U.K." I see.
"338 million. That is what they pay us.

283

-5White:

That is what they buy from us. They don't pay
itother
because
it is net, They get receipts on the
side.

H.M.Jr:

Well, total payments to us. They are paying

us 338 million dollars worth of dollars. Tell,
why do you add what they pay to us, plus what
they buy from us Why should those be added
together?

White:

They shouldn't be. They are probably different
items. I haven't got the table with me.

H.M.Jr:

Well, come over here. That doesn't look right.
This is what they are going to buy from us

White:

Right.

H.M.Jr:

And this is what they are paying to us.

White:

This is what - yes, but this doesn't include

H.M.Jr:

All right.

White:

Then this is what U.K. buys from other places.

U.K. This first one is just U.K.

This is what the rest of the British Empire
buys from us.

H.M.Jr:

I see. All right, that is all right.
"Dollar requirements of sterling area for all

transactions with countries other than Canada.
Two billion 017.

"Dollar receipts of sterling area. (A) Dollar

receipts by United Kingdom from United States.
(1) U.K. exports of merchandise to United States,

165 million. (2) Net balance from United States
to United Kingdom on invisible items, 15 million,

total, 180."

294

-6You mean to say of their whole receipts that
we only export them a hundred and 80 million?
White:

That is all they export to United States. That
15 million is their figure, which is a lot less
than our estimate.

H.V.Jr:

"Dollar receipts by sterline area from United

States."

White:

That is from their investments here.

H.V.Jr:

well, commodity exports.

Thite:

No, commodity exports was just 187.

H.M.Jr:

No, 560. The other was merchandise.

"(1) Commodity exports, 560.
White:

Not of United Kingdom to United States.

H.V.Jr:

"Dollar receipts by sterling area to United

States, 560.

White:

That is by sterling area. It is such things

H.M.Jr:

Why couldn't you out that in°

White:

Yes. I didn't know you were roing to read from

as rubber and wool.

it that way, but we could out in a lot of

explanatory material.
H.V.Jr:

I am just trying it.

White:

I think it is & good way to do.

F.M.Jr:

What do you think

295
7Flots:

that is all right. That is terribly important.

H.M.Jr:

"Australian gold, exports to United States, 75

million. South African export, 480. Total,
one billion 115 million dollars. Total dollar
receipts to United Kingdom and sterling area
during '41 from countries other than Canada,

one billion 295. Total deficit, 722. So you

see, gentlemen, that this very condensed balance
sheet of the requirements of the United Kingdom
show that during this coming year they will have

a deficit of 722 million dollars worth of dollars.
"Now, let's take a look at where they can get

that 722 million dollars from."

Now, so far how do you gents like it?
White:

A deficit from the transactions of the year.

Yes, I think that is the way to put it.

H.M.Jr:

How do you like it?

Foley:

It is all right. O.K.

H.N.Jr:

What are you eating?

Foley:

Gum.

H.M.Jr:

I just wanted to know. If we are sharing,

we share alike.

Foley:

I haven't got another stick.

H.M.Jr:

Well, you can keep it. (Laughter)

Foley:

I thought that was what you would say.

H.M.Jr:

I have got to believe what you tell me, like
the English.

What do you think?

296

8-

Kuhn:

I think that is a good clear way of doing it.

Let's see now what - how the other part of the
story goes.

H.M.Jr:

Now the 722 million dollars.

Kuhn:

Do they understand the full meaning of a deficit
of 722 million°

H.M.Jr:

Tell, if they don't, they will ask me.

White:

In other words, there is 722 million dollars
which they have got to raise during the year

out of sale of their assets.

H.M.Jr:

You see, there is one thing, Ferdie, on this

sort of thing. I am very patient when I testify.
I don't mind answering the same question five

times, over and over again. That kind of thing I don't lose my patience. I go over it and over
it again, and when I get stuck, Harry tells them
a story about a sandwich.

White:

H.M.Jr:

I have the sandwich story. It is a little old.
Go over it and over it. After all, I have tried

this thing on Purvis, and he was up with me until

two crafting the cable and the way I out it to

him was, "You have got two choices here, to show
them the balance sheet, show them just what you
have and haven't got, and that is why we have

to make it possible for you to get them to us,
or say you have got 18 billion dollars worth of
assets, and you can out up a couple of billion
dollars worth of collateral and you have got
lots of money."

Which way is the bill going to get through the
best? My way. Tell them what our situation is.

297

-9Thite:

Did he get an answer from his cable yet

H.V.Jr:

Not yet. Now, how are they going to make un

this 722 million?

"This is a summary or table of current foreign
exchange situation in United Kingdom. Dollars
due on United Kingdom Government orders already
placed.

Well, this isn't what I want now, is it
White:

If you want to follow that, I would skin the
first two items.

H.V.Jr:

Skin it and come down to here

White:

Right here, that is right.
All right. "United -- how are they going to

F.M.Jr:

raise this money?

"United Kingdom liquid dollar exchange assets on

January 1, 1940, were as follows: Gold in
United States or enroute, 245 million. Official
dollar balances, 54 million. American securities
reported by the British as of January 6, 616 or

a total of 1,915 million dollars. So you see,

gentlemen, that given the time they can easily

raise the dollars in order to take care of their
estimated deficit of 722 million which faces

them between now and the first of January next.
"Now, other dollar exchange assets on January 1,

'41, were as follows: Direct and other investments. The British have given us no figure on
this item, but the Department of Commerce

estimates over one billion. This figure does
not include any of the securities of the above

total. Market value. I would say - I would

298
- 10 have a figure and I would make the British

give us a figure.

White:

H.V.Jr:

The have asked them for it a courle of times.

All right, I will get it for you. I wouldn't

have all this --

White:

They say they haven't got it.

Foley:

Let them estimate it. Let the British estimate
this, and let them adopt that estimate; because

I think it is better than to say they won't give
it to us.
White:

Yes, I think it is, too; but I think you might
say they are working on one now.

H.N.Jr:

No, no, no, Harry. Good God, they can't -

if I ever begin to let them lift the lid and
see how the British operate --

White:

You are right. Well, they have given us some

H.M.Jr:

After you leave me, you fellows are going to

data and they will give us the totals.

out it right on the line with them.

"Other dollar exchange assets as of January 1,

direct and other investments.

I want a firm figure.
White:

Right.

H.M.Jr:

"Private dollar balances. Would you put that

hite:

in?

Somebody else may speak of it if you don't, and

since you speak of it and dispose of it in their

terms, I think it is better to mention it. We

298

- 10 have a figure and I would make the British

give us a figure.

White:

The have asked them for it a courle of times.

H.V.Jr:

have all this --

White:

They say they haven't got it.

Foley:

Let them estimate it. Let the British estimate

All right, I will get it for you. I wouldn't

this, and let them adopt that estimate; because

I think it is better than to say they won't give
it to us.
White:

Yes, I think it is too; but I think you might
say they are working on one now.

H.M.Jr:

No, no, no, Harry. Good God, they can't if I ever berin to let them lift the lid and
see how the British overate --

White:

You are right. Tell, they have given us some

H.M.Jr:

After you leave me, you fellows are going to

data and they will give us the totals.

out it right on the line with them.

*Other dollar exchange assets as of January 1,

direct and other investments.

I want a firm figure.
White:

Right.

H.M.Jr:

"Private dollar balances." Would you put that
in?

White:

Somebody else may speak of it if you don't, and

since you speak of it and dispose of it in their
terms, I think it is better to mention it. THe

299
- 11 -

published
it in our
will
ask about
it. bulletin and a lot of people
H.M.Jr:

I wouldn't put it in.

White:

O.K.

H.M.Jr:

This is what the Government can lay their hands

White:

Then you will have to say that, that this is

on. It is only 340.

what the Government can get.

H.V.Jr:

Can realize.

White:

Can use.

H.M.Jr:

Can lay their hands on. I am going to say it.

But you have got here 915 million dollars worth
of gold, American securities, and they have got
somewhere between 900 and a billion dollars

worth of direct investments in this country.
White:

Now, they may put that down to 500 million;

but even if they do, it is enough to cover you
when you come to the statement or if it is
asked, that you saw that they had enough to

cover their commitments because some of these

commitments fall due after the first of the year.
H.M.Jr:

There is this figure, 900 million°

White:

Where is it?

H.M.Jr:

I am carrying a figure in my mind of --

White:

Well, it is over a billion. He sometimes use

H.M.Jr:

Why not put down 900 million? You say the

900 million.

Department of Commerce says how much?

299
- 11 -

published it in our bulletin and a lot of people
will ask about it.
H.M.Jr:

I wouldn't put it in.

White:

O.K.

H.M.Jr:

This is what the Government cam lay their hands

White:

Then you will have to say that, that this is

H.V.Jr:

Can realize.

White:

Can use.

H.M.Jr:

Can lay their hands on. I am roing to say it.

on. It is only 340.

what the Government can get.

But you have got here 915 million dollars worth
of gold, American securities, and they have got
somewhere between 900 and a billion dollars

worth of direct investments im this country.
White:

Now, they may put that down to 500 million;

but even if they do, it is enough to cover you
when you come to the statement or if it is
asked, that you saw that they had enough to
cover their commitments because some of these

commitments fall due after the first of the year.

White:

There is this figure, 900 million
There is it?

H.M.Jr:

I am carrying a figure in new mind of --

White:

Well, it is over a billion. We sometimes use

H.M.Jr:

Thy not put down 900 million? You say the

H.M.Jr:

900 million.

Department of Commerce says how much

300
- 12 White:

As a matter of fact, they say it is about
1,100 million.

H.M.Jr:

Why not say a billion

White:

You can use "about"

H.M.Jr:

No, I have got to have something.

White:

It is so uncertain a figure that you have to
use an about or an over or an almost or something
of that character.

H.M.Jr:

We will put down a billion, and don't give me
500. Don't give me less than 800, because right
away they will say - Jones will come along and

White:

testify there is a billion one.
Well, that is why we are putting over a billion --

H.M.Jr:

Well, I would say about a billion.

White:

Now, if they ask you,"Is that their market value --"

H.M.Jr:

Well, I would say the nominal value.

White:

It is more like book value.

H.M.Jr:

All right, but I certainly wouldn't have Jones
follow me and say there is a billion. I would
rather use a billion.

White:

They won't give us a figure of a billion dollars,
the British won't.

H.M.Jr:

Well, we will use a billion.

Thite:

And we will get their figure anyway. If it is

a billion, we will use it; and if it isn't, we

will just --

301

- 13 E.M.Jr:

Forget about it. But I wouldn't use their
private dollar balances.
Now, "Mr. Morgenthau, this is everything that

White:

E.M.Jr:
White:

H.M.Jr:

Thite:

they have in this country? "Well, this is
everything they have other them what their
private citizens have."
That is right. Then that takes care of it.
No, what their private citizens have in dollars
because these securities, a good many of them,
are still owned by private citizens.
Hell, what their private citizens have in
dollars.

Except what their private and business corporations
have in dollar balances here, which they claim
they must have to continue business.

Does that include the gold, too, that the private

businesses have?

They don't have any, and you can give them the

figures on it.

H.M.Jr:
White:

H.M.Jr:

Private businesses have about 300 million dollars

in dollars, is that right?
That is right.
All right.

"Now, Mr. Morgenthau, what have they got in you have been kind enough to tell ISS what they

have in the United States. That have they got
in South America?"

White:

I have got a very nice table in which you can
just read for any question, what they have got,
what they have got in South America, Africa,
China, what the nominal value is.

302

-14Toley:

Thite:

Like a wither. (laughter)
Hat off the griddle.

E.M.Ir:

le have a - very nice speciality today.
Te can gile you the -

Thite:

Served - in Pica type. (Laughter)

E.M.Jr:

Te have something very, very nice. Can I

Polay:

Valie = suggesation like they do at the Hitz.

E.Y.Jr:

You noticed II said our 1942 wines That is
what they milll give us next year.

Thite:

But you all have to comment on them. Those

E.Y.Jr:

Now, you have the very nice figures.

White:

The very Time figures, but the coments you
will have the make

E.M.Jr:

How soon all the lists be ready

Thite:

They should the meady non.

E.M.Jr:

I can for untill three o'clock.

Note:

Maybe they same out there.

White:

No, I Him/H mak them to send them in.

E.M.Jr:

Now, that - mean. You called his bluff. (Laughter)
I - at you that you go back on your
alit friend Harry white.

Flotz:

Yes, I didn't mean that.

recommend the you our 1942 wine, and $0 forth

are only the figures.

303

- 15 They are basting it, you see. Ee rushes
back and says, For God's sake didn't I tell
you to do that yesterday9* (Laughter) "Here
the boss asked me for it, and I told him it
was being typed!"

White:

I will have it to you in five minutes after
I leave here.

Anyway, the list she will be ready? (Facetiously)
White:

She will be ready.

Now, I think this is going to be all right if
I could just have a little more time to do this
kind of thing. I have just got to do Mr. Bunker
of Lehmen Brothers, and then we can kind of

continue this way, kind of easy like.

hite:

I think you might try a comment now on those
assets, because what we have will be the figures

and their nominal value, but I think - well,
I have some statements there that maybe we

can work out to indicate that these are nominal
values.

Where are those statements
White:

It is also on the same table. It is there.
I see.

Table:

I can postpone that until the next session.

E.W. ir:

What do you think, Mrs. Klots®

Klate:

I think it is all right, I really do.
I think it is all right.

304

- 16 Foley:

I like it because it will play down your part
in this thing, and I think that is just as well.
I think this thing has got momentum now, and I

think it is rollong; and I think it will go
through, and I think it is just as well all the

way around if the accent wasn't on this part
of it but more on the danger to the country

and what we can accomplish by way of placing

these orders and making the stuff available

to them and all of that. I think it is a little

better.
White:

Now, you say that Bloom wants some questions.
We can give him some questions --

Foley:

Bloom wants to have some questions he can

white:

He can ask you one question on taxes, how much
do they pay taxes compared to what we pay. Well,

ask you?

we will give you that.

H.M.Jr:

We have got that.

White:

We will have several other questions with the
answers so that --

H.M.Jr:

Now, where is the question on how much they
spend a day?

white:

Where is the answer?

H.M.Jr:

Where is the answer to that?

White:

I didn't give you that table. I have that

Kuhn:

A day?

White:

Two billion seven is what they have lost.

table, two billion seven.

305

- 17 Kuhn:

How such are they spending a day? Fifty

million dollars a day?

H.M.Jr:

That is the figure I want.

Foley:

And what are the daily receipts?

H.M.Jr:

Well here, estimated revenue of Great Britain
for the fiscal year ending March 31, '41.
Total England revenue, two billion 900 million.
Customs, excise, total customs - total receipts

from taxes, five billion dollars. It is four

billion 955 million. The question is how much
they spend, you see. We don't have that.
Kuhn:

They are spending 60 per cent of their national

Foley:

Sixty?

White:

Almost two thirds.

H.M.Jr:

That is a good figure.

Kuhn:

And they are raising five and a half billion

income on the war.

by taxation.
H.M.Jr:

This is four billion 955.

Kuhn:

About a third of what they spend on the war from
taxation.

H.M.Jr:

I think if we could have it in terms of spending what did you say?

White:

Almost two thirds, 60 per cent.

H.M.Jr:

How much are they spending a day?

Kuhn:

Fifty million dollars.

306
- 18 H.Y.Jr:

And they raise how much a day"

Thite:

About 15 million, on = daily

H.M.Ne:

And what percentage of the national income

Thite:

Sixty per cent.

Tuhn:

Do you also like when you are multime commerisons

that they have one third our that

what they are smending is emitment to HI
excenditure of 48 or 50 billion dmIller's E year

in this country

Foley:

Yes, that would be good.

Kuhn:

To show the burden that they are currying.

F.M.Se

Yes, that would be good.

Kuhn:

I have also got that in there.

H.M.Fre

Have you?

Kuhn:

Yes. I will find it for you.

H.M.Jr:

I have got to look to Harry for by statistics

Thite:

The will try to have everything ready-

H.M.Jr:

You know if Full starts at ten tomorrow, I will
never get on until after lunch.

Thite:

They may take a lot of questions for tim which

when I get up there.

they would have given you.

H.M.Jr:

He will go for at least two hours, and they will
adjourn at twelve.

Foley:

Tell, they have got - don't you think it would

302

- 19 be
good for you to be there while Hill is
there
Oh definitely.
I told Bloom I thought you two would - down
together, and you would follow rüght alone. Be

thought that would create a very more impressi If
if the two of you were tagether.

fulling

lack, I think for I testifying - you

had better call up Mr. Flynn and BEER that the

chances are I will be un on the HEIR all day,
could we make it Thursday for Danch. Tell
him I am testifying all day tomorrow.

I will excuse White and Tunn, - I want you

(Foley) to stay. How do you think

this is going to work out

I think it is all right.

Dollar Expendinerve and Receipts of storitar Area wish All Countries Other Tidn Canada from January 1, 1944 so January 1, Law

(the estimates below do was take into account Playpood or ordere - yes placed)
(In Millione of 8. ⑆
Dellar

poller American of StepLine ACED

A. Dollap procepts by U.E. from S.S.
1. D.K. exports of arrobands so to U.S

A. U.S. / to be made on total purchases tron the U.S.
1. - to be pale buring 1941 on orders streety planed
before in La 1941.
(2 aditime 8241 million is expected to fall due
the Jan. 1, 1942)
2. Importa fros B.B. not parchased through the

$1,252

2. Bet balance from U.S. to U.E. on
invisible 18000

15

I 150

Total

D. Dellap receipts by storting area from U.S.

200

Commission,

9 165

total payarate to be made on U.K. purchases

$1,432

from

1. Commodity exporte

2. Aastrollas gold exports to U.S

B. U.S. repaired free SPOES outside the U.S. and Gabada requiring
gold -

3. South African exports of gold.

1. Particupes by aborting area (mostly U.E.) outside the U.S.

247

- Cannie requiring

560
75

400

1.115

Total

Total dellar receipts of U.E. and

storting APPO during 1941 from countries

c. Purchases be starting area (excluding U.K.) from U.B.

- 2P43

1. I Saporto

other than Canada.

Total dollar deficit of stepling area

333

11,295
722

with U.D. during 1941

2. Invoice 10mm

5

-

GRAND TOTAL

Total payable to U.S. by storting APPA (excluding
L.L.

13

that

operations am countries
Jan. 1,

1943 - Jan. 1, 1942

State TOTAL

Deller of
storting - to all
with

Total reseipts and defieit -

12,017

82,017

June 24, 1942
Middleton of Monday

309

January 14, 1941
3:05 p.m.
BE BRITISH PURCHASING PROGRAM

Present:

Mr. Bell
Yr. Foley

Mr. Bunker
Yr. Schenker
Mr. Bellamy
Mr. McGrath

H.M.Jr:

Tell, Mr. Schenker, have you got these
fellows lined up?

Schenker:

As I tried to explain, Mr. Secretary, in

some respects the situation that was created
was in my opinion due to two factors.
One was the fact that there was an imposition
of secrecy upon Mr. Quinn, in which he couldn't

fully disclose all the details, you know; and
secondly, I think as a matter of pragmatic
consideration he had to take certain steps that is the way I see it, I may be all wrong to ascertain whether the idea was feasitle
and so on so that it may have been a condition
which existed where everybody didn't start off

at a parallel and so forth and so on; and I

also believe that there may have been some
erroneous conception as to what the contemplated
group was. Some idea might have been inferred
that there was some compulsion or that the
Government considered it desirable that they
do so and that therefore some moral persuasion

that they do it, and I think these gentlemen
feel, Mr. Secretary, that any such Impression

310

-2or inference as to compulsion, pressure,

or inadvisibility would be most unfortunate
both from the point of view of the British
and the point of view of the investment
companies and from the point of view of the

Government.

I think Mr. Bunker can very briefly explain
what his position in the matter is.
H.M.Jr:

Which concern is Mr. Bellamy with?

Schenker:

He is with National Bond & Shares. He is a

partner of Dominick & Dominick. Mr. Raymond
McGrath and --

H.M.Jr:

I know him.

Bunker:

Mr. Secretary, we came down a week ago, more

or less, to discuss the matter with the SEC
because we had not heard of the situation
directly from any branch of the Government;
and in the first place the problem, as we
understood it, was the problem of handling
those securities which were not listed and
which were not registered and possibly not
known, but were more or less lock-up situations.
The listed situations seemed adequately
handled, and they are being disposed of
day by day and that wasn't the problem.
But I think Mr. Schenker could corroborate
the fact that we were really confused when

we came down as to what was in the Government's
mind. We would have been delighted to have
joined any plan or group which the Government

might have evolved and which they felt was

the best thing for the industry or the best
thing for the Government and the British or
the combination of those forces. We did feel
that we wanted to first find out what the

311

-3Government point of view was and also to
express our own as members of an industry.

e didn't want the industry cast in any
possible sense in a false situation, and we
wanted to express our views as to what we
thought was the best method of absorbing

with the greatest rapidity large amounts of
British securities of that nature with the
least disturbance to the regular American

markets.

So we pointed out that talking as an industry
problem, that it might be very possible to
band together investment trusts with aggregate
assets of 500 million, 800 million, and vet

that it would be unfortunate if the public

gained the impression that that was 500 million
or 800 million dollars worth of buying power
or available power for absorbing British
securities because of at great many things.
One is that every one of those trusts today
is invested to the extent which their managements
deem advisable for them to be invested, and

there is nothing inherent in the British

situation which would in my opinion make them

deem it wise to be invested to any greater

extent. Therefore, they would disinvest to
whatever extent they wished to buy American

securities.

Tell now, it isn't possible to compute how
much that might be but I think if a man said,

looking carefully at all of the various in-

vestments which they hold, the special situations
which the have, if a man said somewhere between

five and ten per cent of their assets that he
would be within the realm of reality.

Well, obviously I had no information as to the

size of the British situation of that class of

312

-4securities. I assume it was a big one, as

I told the SEC. If it was a little bit of

a one, there would be no problem; but I
assumed it was one of several hundred million

dollars, and I realized that the investment
trusts on their own couldn't begin to cope with
anything of that nature, that maybe they
could buy - handle over the course of time,
50 million dollars. But there was another

thing that I was anxious to point out. I
think that there are all kinds of people from

my own company. He have always been interested

in special situations, whether they are
domestic or foreign situations. That has
been true for ten years. There isn't any

question about whether we would be interested
in examining and arranging to bid on special

British situations, but in putting together
all the investment trusts in one group, I

tried to analyse what they could do. Obviously
they would never make, on this pre-combination

affair, they would never make it possible for
any leader of that group to comit them in
advance of examination for any situation to
any amount. I don't believe anybody would
abrogate his own corporate rights and say,

"I am interested in buying British securities.

So far they haven't been designated as to

whether it is Lever Brothers - whether that
is owned by the British or the Dutch, I don't

know, but I use it only in illustration of a
name of a security that is not now listed in
the United States and might be owned by the
British.
Well, therefore it seemed to me that on the

constructive side, the only thing that they

could do would be to say, The stand ready to
quickly examine, to report back to the various
members of the group, and to offer them an

313

-5opportunity for participation as they may
wish it in each situation, but it was suggested
to us, and we felt it would be unwise, that
one of the precedents for joining that group
would be that for the duration of liquidation
for these securities, that we would be stopped

from taking any action except through the group,

that is, any action in initiating other bids
or joining any other groups who might even,
not as members of that group, be bidding on

British securities.

H.M.Jr:

well, that didn't come from Washington.

Bunker:

Oh no, I know that. I didn't suggest that
any of it did, sir. I just came down to express
our confusion perfectly frankly and say that
the only invitations which I had to join a

group were invitations based upon that assumption,

and I thought it was important to point out
that - two things, one that forming a large

group that had any such understanding with its
component members would tend, in my opinion,

to greatly diminish the number of possible

bids on British securities.

Now, it seemed to me that even if a group

like that functioned extremely well, they

might be able to examine and bid on maybe

two situations at a time, but in the normal
course, if the British said, "THe have situations that is, corporations and companies, all of
which we would like to liquidate in the normal
course," our corporation might start forming a

group and maybe Mr. Bellamy's would form a group

on something else. Ten or twelve, it might be.

In the normal course, they would be going on
at the same time. There would be a great many

more interesting situations.
H.M.Jr:

Can I interrupt you? I may be able to help you.

314

-6Let me just take a minute and tell you what
happened.

Mr. Quinn asked to see me, he wanted to come

down, and did I know whether the British were

interested in selling any of their direct
investments in this country and I said, "Up
to the time - that time, they hadn't said
that they were. There had been lots of talk,
you see.

Well, he wanted to find out about it, and I

said he couldn't quote me because - or refer

to me in any way, because I knew that up

until 2:30 yesterday, the British had never
said that they would sell anything. It was
only at 2:30 yesterday that they got the word
that these things were for sale, so you
gentlemen haven't lost anything up until now.
Today it is three o'clock, and yesterday it
was 2:30. So I immediately turned him over
to SEC because under the law, they supervise

the investment trusts. I don't know all the
ramifications.

Finally, what ment on I didn't ask about or

it didn't particularly interest me. It doesn't

really interest me now, with this exception.
All I was trying to do was to find myself in
the position with the help of the SEC that I
could say to the British, "If and when you make
up your mind to do business, there is a group
in the United States that are ready to buy.
In other words, I was trying to get them up
to the water trough and have the water in the
trough, but I couldn't make them drink.

Now, that is what I was trying to do, and I

wanted a group so they couldn't keep saying

315

7

to me the way they said three weeks ago,

Gifford, that you couldn't sell more than
a million and a half to three million dollars
worth of listed securities a week. I mean,
that was his position up until three weeks
ago. It is no secret. You know he is selling
three times that or four times that now. But
I mean they kept saying and they were told by

their financial advisers that they couldn't
sell more than a million and a half to three
million dollars a week, because American
markets wouldn't take it.
Now, sitting here I felt that the American

public would take them and I proved to be
right, and I have also been begging them for
over a year to announce what they have sold
once they have sold it, because I figured
once the people knew what was sold, at least
they would say, "The English are not in that

security, I can buy that security, knowing

that there won't be several thousand shares
dumped on the market; and it took me over well, since last December to convince them of

that. I mean, they moved that quickly. I

mean, it has taken from last December until
now to convince then that they should publish

the securities that they had sold.

Now, as I say, only yesterday at 2:30 did
they say that they are - have been authorized
by their Government to sell a list which I
haven't got of investments in this country.
Now, there are certain things where there is
an agency which isn't a very good thing to

buy and I don't suppose anybody wants to buy
an agency. On the other hand, they have some
very good buys and they have to raise the cash

and it has taken them all of this time to make

up their minds that they are willing to do it.

316

-8- Now, they are, and my attitude for them,
wanting to be sure they get the best buy,
that the more groups the better.
Bellaxy:

Right.

McGrath:

That is right.

H.M.Jr:

And what your fights are or your competitive

situation is, doesn't particularly interest

me, bit it may SEC; and I think all that SEC
wants to make sure is that they don't get hit
below the belt, but there are at least two
fighters in the ring anyway. I want to make

it plain. How you fellows do it, that is
your business. It is your money, you don't
have to do it at all. Your responsibility
to your stockholders for this capital. Nobody
is going to put any pressure on, but here is
a situation.
The English as of yesterday made un their

mind that they want to sell some of this
stuff, and I want to see them get as good a
price as they can; and at the same time get
it with the amount of rapidity which after

I testify tomorrow - you will see why it is
necessary, because I expect to lay all the
cards on the table. So there is a situation
which is their situation as to having to raise
cash.

Now, if you gentlemen represent a group and
another group should come in tomorrow - and

as I said yesterday Mr. Gifford is here until

they send somebody else over, who is on his
way over. They are sending another person

over to handle the thing. In the meantime,
Gifford is the man. I guess you all know

him and know where you can get at him, and

he is the man to see until this other gentleman

317

-9arrives who is leaving on the Clipper, on
the 19th; and when he gets here, he will

handle the situation. But it is that new.

Now, I know that the SEC is delighted if there

are three or four groups. It doesn't have to

be just the - I mean anybody. If a man has

some money and he wants to go and see Mr. Gifford
and he wants to buy some of these things as an

individual, that is his business; but we had
to develop a group so that they couldn't keep
saying to us, "Well, nobody buys this stuff.
Does that explain it?

Bunker:

I think your position is very clear.

Bellamy:

I think it is entirely clear. May I say just

H.M.Jr:

And if it happened to be Mr. Quinn that called
up and asked to see me, it might just as well

one word, Mr. Secretary?

have been Mr. Smith or Mr. Jones; but he

happened to have the initiative. He said,
"Here we are, can we do the thing?" It could

just as well have been Smith or Jones or Brown.

And there is no inside track, there never has
been since I have been here; and I don't think
we will start to have one now, and all you have
got to do is to pick up the telephone and ask

to talk to Mr. Gifford. If you have any trouble
to locate him, we can do that for you; but I
don't think you will have any trouble. Everyone
in the Street knows where he is.

Bunker:

There will be no trouble.

Bellamy:

Mr. Secretary --

H.M.Jr:

That is the story. Please.
I don't think there was in any one of our minds

Bellamy:

318

- 10 a desire to get some business for ourselves
by coming down here or anything like that.
The only thing I think we wanted to know was,
did the Government have any fixed belief as
to any one method in which this thing could
be best done, because if it did we wanted to
know it and cooperate with it.
H.M.Jr:

It can be a partnership, an individual, a

bank, a trust company, it can be an investment

trust. I don't give a damn as long as you have

got the money.
Bellamy:

That is all I want to know.

Bunker:

As long as the British really have plenty of
tenders and bids against their securities.

H.M.Jr:

That is all.

McGrath:

Would it be proper to ask what the size of this
transaction is?

H.M.Jr:

Well, all I can do is, I can give you the figure
which the Department of Commerce uses, which

is the only figure that we have, and that is,

The Department of Commerce uses a figure of a

little over a billion dollars. That includes
everything.

Schenker:

On that aspect, Mr. Secretary --

H.M.Jr:

That includes everything, so you might cut

McGrath:

That wouldn't include gold or anything like

H.M.Jr:

Oh no, these are businesses.

it in half.
that.

319

- 11 McGrath:

And it doesn't include the marketable stuff.

H.M.Jr:

No, businesses.

Schenker:

On that aspect, I have seen some things in

the Department of Commerce which they say
they don't have. The Department of Commerce

has Lever Brothers.
H.M.Jr:

I, haven't been up to this hour been able to
get the English to give me a figure. Some
of these things when you hear them are un-

believable, but I just cannot get a figure

out of them. We have made our own studies,

we have our own ideas, but somewhere around

a billion dollars.

Now, whether it is - certainly you wouldn't
expect then to sell them all in one day, but
there are a lot of very fine businesses there

and it has taken then all of this time to

make up their minds to let then go.
Bunker:

Bellamy:

In other words, it is a big situation.
Is there one that they are definitely offering
now?

H.M.Jr:

I mean, it has taken them all of this time

to make up their minds to let one go.. From

this stage on, I keep out of it. I don't know

whether it is one or two. They let me know how
many dollars they raise after they have got the

dollars. I an interested in that because I

have got my contractors here in the United
States, and Bill Knudsen looks to me to see
that they get paid, and I have assured him

that they will get paid. That is where I
come. in the picture. That is why I am in it.

He looks to me to make sure that these American
businessmen get their money, and I want to

320

- 12 make dann sure that they do.
VcGrath:

Is there some urgency, Mr. Secretary, about

how quickly this be done
H.M.Jr:

Well, I think after I have testified tomorrow
you will get the whole picture. I don't think

there will be any secrets left. I think if
you will wait 24 hours, you will get it.

Bellamy:

I think that it is very clear what we can do
as individuals, either alone or in groups or
any other way. We will interest ourselves in

whatever there is. He marketed some stuff for
you yesterday, Montgomery Ward.
H.M.Jr:
Bellamy:

I saw it in the paper. It went all right?
Oh, it went fine. It is perfectly surprising
how it goes. There is e security that is

available every morning, anybody can buy it,
the market isn't big enough to take two or
three thousand shares, perhaps, and yet after
three o'clock, me sold 80,000 shares.

Bellamy:

Eighty thousand.

H.M.Jr:

You know, that is the thing which makes me

think there is something the matter with the

New York Stock Exchange. I don't know what

it is, but there is something wrong somewhere. (Laughter)

As I say, I don't know all these techniques
and never expect to learn them. I haven't
the time. But there is something wrong some-

where.

Funker:

That is a very curious psychology. After
three o'clock we sell 30,000 shares.

321

- 13 Bellamy:

It is perfectly surprising, and I think we

H.M.Jr:

And you can't explain it either.

Bellamy:

I can only explain it this way, Mr. Secretary.
I think that the mind of the average stock
investor is very confused at the present time
and I think that it takes the added pressure

can sell very much larger amounts.

that a salesman makes to make him move. It

is just like walking and you pass an automobile
in a store window. You are apt to walk by
unless the fellow comes out and grabs you and
says, "Now, you ought to have this automobile,
and for this reason and that reason and the

other reason, and I think that is the explanation.

H.M.Jr:

How many outlets do you have on a thing like
this?

Bellamy:

To how many individuals is that sold?

H.M.Jr:

No, I mean how many places do you offer this
for sale?

Bellamy:

Well, the first thing we did was to form what
we call an underwriting group, and I think
there were 25 firms in that underwriting group,
and they took very - we parceled it out so

that each one's commitment would be very small,
so that you see we had - I say 25 firms and
they had, say, an average of 3,000 shares apiece.
No one had more than - except the two firms that
did this, had more than 4,000 shares. We had
15,000 shares apiece. The rest had 4,000.
Their highest was 4,000.

Well, usually you form also a selling group.
You invite perhaps a hundred firms to come

in and participate. Well, we didn't need the

322
- 14 hundred firms, because each underwriter

wanted to take for his own clientele all

of that stock, so that we may have asked
15 or 20 outside firms. So my guess is
that there were not over 40 firms, and we
were expecting that we would ask a hundred
and 50.

H.M.Jr:

Do you (Schenker) know for. instance how much
margin they buy on?

Bellamy:

I know. I will tell you gladly. There was
a spread of a dollar and a half, and that

was divided, Mr. Secretary, 87gc a share to

the firm that actually sold the stock to a

retail client. The 25 firms received 50
a share - 40 a share for underwriting it,
and then the two firms that managed the

business and did all the work in arranging for

the stabilization and all that, got 123c.

Bell:

How close to the market were you?

Bellamy:

I beg your pardon?

Bell:

How close to the market

Bellamy:

Right on the market.

H.M.Jr:

You offer them at a point and a half below the

Bellamy:

regular price, isn't that what you do?
The retail client pays the market for it.

H.M.Jr:

But I mean you paid the English a point and a
half below?

Bellamy:

That is right.

H.M.Jr:

The reason I asked, we had a terrific discussion
here with the English. They were complaining

323

- 15 so bitterly. They were complaining about
the points.
Bell:

It was two points a day when you discussed

Bellary:

That goes right back to the British way of
doing business, the jobber over there.

E.M.Jr:

Well, they complained hitterly and I said if

it, but it is a point and a half now.

I had to sit here and argue about a point and
a half when we were trying to win the war,
the day wasn't long enough.

Bellamy:

That is right, that is absolutely right.

E.M.Jr:

Well, are you gentlemen satisfied?

Bunker:

I think we are completely, Mr. Secretary.

E.V.Jr:

Thank you for casing down.

324

January 14, 1941
4:00 p.m.
RE AID TO BRITAIN

Present:

Mr. Cochran
Mr. Kuhn

Mr. white
Mr. Foley

E.M.Jr:

Now, Harry, so we keep everything together,

E.M.Jr:

this will be, if you don't mind, Table No. 1.
This is Table No. 2. I don't expect to see
this until I come to the office tomorrow
morning at a quarter of nine.
It will be ready in a few minutes.
I don't want to see it.

White:

I called the British up about the direct

E.M.J.:

I an giving you all of this. The next thing

White:

investments and they were very reluctant to
give it to me, but they promised to give me
something within ten minutes.

we are going to do is to do South America.

Hill you have time to have it done?
White:

Yes.

H.M.Jr:

And I don't want you people to work tonight,

because I want you fresh tomorrow when I have

got to answer these questions. I went you to
get a good night's rest tonight, Earry.
White:

I will put everything in order.

325

-2H.M.Jr:

I want you to go to bed by ten o'clock

White:

Yes.

H.M.Jr:

Please.

White:

Yes, quite.

H.M.Jr:

I am serious.

White:

O.K. These are the assets, not only in South
America, but broken down, in the British
Empire. (See attachment No. 1.)

H.M.Jr:

Now, "Estimated Long Term Foreign Investments

tonight, do you hear me?

of the United Kingdom Outside of the United
States.

"The following estimates are based on a number
of studies, most of which were made by British
economists before the outbreak of the war."

Well, I can't read that out loud.
White:

That is for your own information.

H.M.Jr:

I only want to hear what I can read, because
otherwise I may read it and it may be wrong,

see. I mean, this is a sneech.

White:

As long as we don't give it out. If we give
it out we will have to protect - that statement

can come out. I don't know about the others.
Draw a line through those statements that you
don't want to read.
H.M.Jr:

Well, I am going to cross that out.
"For convenience in reading, the estimated
nominal value of investments which are mostly

326
-3in sterling securities has been converted into
dollars at current rates of exchange.

Well, that is all right to say that, don't
you think so?

White:

Either that or you could say that most of these
securities are in sterling. That makes a lot
of difference.

H.M.Jr:

Oh yes.

White:

But we have to - if we add them up, we have to
use one unit.

H.M.Jr:

Well, you know, I don't know but what the -

in order to get this into their nuts, you see the one thing that Frank Knox said that was

good, that they drove into him last night,
was that what they are short of was dollars.
He got that. So I don't know but what in talking
about the foreign securities if they are sterling
I would use the sterling and say, Gentlemen,
you can multiply that by $4.00 and you get
approximately what the figure is," you see, but

to keep driving - when I am talking sterling
I want to talk sterling and not dollars.
Otherwise these babies are going to get it

mixed up themselves.
White:

A good many of them are the unit of the
country, milreis, pesos. We can out them

all in sterling if you like.

H.M.Jr:

I would put it all in sterling. The reason
is - I have listened now to this so much.
Where it is sterling I want to talk sterling,

and then I want to get over to these fellows
that what these people are short of is dollars.
What they are busted in is in dollars, not
in sterling. As somebody says, "You can't

327

White:

say a nation that spends 12 million rounds
a day is busted," but they are spending 12
million pounds a day in their own country.
No country is ever busted.

E.M.Jr:

But I want to say that. When I am talking

about England, I am going to talk in pounds;
and if they say, "What do you mean, 12 million,

I will say, "Well, for a rough figure you can
just multiply it by four and you will have it
in dollars; but when I an talking about England,
I want to talk in sterling; and when I am talking
about our own - and I think in that way they
won't get confused.

Kuhn:

It is a good point. would it help to have

H.M.Jr:

The less questions Bloom asks the better. He is
a joke up there.

Foley:

But he wants some questions. You have got to

Bloom ask a question, How did the British
Empire get this way, and you can say --

give him something. If we don't indicate what
he is to ask, he is liable to ask you some
crazy thing that may be most embarrassing.

White:

Te have picked out some questions.

Foley:

I think when you are dealing with a fellow like
bloom who wants to help, it is much better to
show him how be can help than it is to leave
him to his our resources; because then he could
be awfully dangerous.

Kuhn:

Then you could answer that the British resources

are not the same as British dollars, and it is
dollars that we are talking about.

328

-5H.M.Jr:

I am going to say it about ten times in ten
different ways. Dia you get Bloom to ask for
them
to send a State Department fellow up
there?

Foley:

He said he would. He is going to ask for

H.M.Jr:

Good.

Hackworth.

"For convenience in reading, the estimated
nominal value of investments, which are mostly

in sterling securities, has been converted

into ---

White:

We have changed that.

H.M.Jr:

Yes.

"The market values, where given, are calculated
from current market quotations of the securities.
Since market quotations are not available for a

large vert of the investment, no total market
value can be calculated.

"Even where estimates of market value have been

made, they have only a limited significance, for
the future merket or collateral value will depend
on the rapidity with which the securities are
liquidated, on the general course of the war, and
on many other unpredictable factors. Of course,
the figures of nominal values are of even more

limited significance.
Now, what I think is this, what I would do - let
me just see, Canada. Well, you have got it
there, Barry. You don't need all this explanation
of the nominal market, you see. I would cut out
all that introduction stuff. They may say,

"Give me that piece of paper that you are reading.

329

-6"hite:

That is why I think it ought to be on there.

.....r

Do you

White:

Yes, because otherwise other teople will mis-

interoret it. You don't have to read it as
long as it is on a table. Then when it is out -tell, then out in this last one. Start "Even
where the estimates of market value have been
made. Put that in. 0.3.
British Empire: Canada, 8 billion nine.
lustralia, two billion. New Zealand, 585.
Canadian, 282. British Africa, one, seven.

Malay - total, eight billion 950.

"Latin America: Argentina, a billion and a half.

Brasil, 163, Chile, Universay, Mexico, Peru, Cuba,
Tenesuels, Colombia, Ecuador, Bolivia, Paraguay,

Central America, total - four billion eight.

"In Asia: China, Japan, Netherlands East Indies,

Philippines, total - 15 billion.
Thite:

That is nominal?

E.M.Jr:

That is nominal.

White:

which would make that sterling be about four

H.M.Jr:

I would use sterling.

White:

A good many of them are not sterling, but we

billion --

will convert them into sterling, milreis, and
mesos and yuans and so on.

H.M.Jr:

Now, what else?

330

7White:

Now - well, the only other thing I have,
the questions which I would like to emphasize,
I think you ought to run over.

E.M.Jr:

You are going to lose out, Harry.

White:

You will just get them cold. Some of them

H.M.Jr:

That is 'all right.

Thite:

I don't mean they are factual questions.

E.V.Jr:

I will tell you what I will do with you. I

are troublesome.

will make a bet, you see. How many questions
have you got°

11.5141

Thite:

Well, there are a hundred, more than a hundred,

E.V.Jr:

All right. I will let you pick - how many of
the 150 do you think they will ask me, and I
haven't seen it

Thite:

I am sure they will ask you 50. I will bet
you anything you like. I will leave a copy
with you and I will bet they will ask you 50

about 150.

out of that 150, sometime between the House

and the Senate. I don't know where they will

be at.
H.M.Jr:

Now, I haven't seen it and you want to bet me what kind of Argentine wine did you get°

Thite:

I think I got Champaigne, I am not sure.

H.M.Jr:
White:

All right, I have it too. I will bet you a

bottle of the Argentine Champaigne.
Fine.

331

-8H.M.Jr:

That they don't ask me 50.

White:

Fine. With this qualification, it doesn't

Foley:

have to be the identical words. (Laughter)
No, wait a minute, you have got a better
chance to win your bet if it is both committees,
you see.

H.M.Jr:

He said both committees.

Foley:

O.K.

White:

I said --

H.M.Jr:

And he said to ask me.

White:

That they will ask you, that is right.

H.M.Jr:

Not Hull or somebody else.

White:

No, we haven't tried those kind of questions.
These are just questions on the financing and

on how we are going to be revaid and the booking
of the Budget and so on.

H.M.Jr:

Harry, I have inside information as to my

own mental condition and physical, and the

best thing I could do is to walk home, get
a good night's rest, forget about this thing,
take a fresh look at this thing at about a
quarter of nine tomorrow morning, and do no

more about it. You can't pump any more into
me. There is such a thing, you know, as

when the well is full, they say, and you can't
add any water. And when I get a question, I

will just turn and ask them, what the hell.

And don't forget, it is going to be liberal
education. If I was less tired - but I have
been through plenty, and I know when I am

332
-9-

tired, and I would either get irritated or
I wouldn't absorb it.
Thite:

Yes. I have got this table on their assets,
a very simple table if you want to see it.

E.M.Jr:

All right.

Thite:

The changed table.

H.M.Jr:

Now, the important thing here - that is all
right. Now, the important thing is, I thought
what I would do is, in order to save you - I
would tell Cochran it is up to him to show
them these tables I an going to use. I promised
to show them to the English. Don't leave anything on my desk.

Thite:

Well, those are the two important tables. I

E.M.Jr:

Let me have Cochran come in, and we will just

just put it on in that form.

tell him, if he is here, that it is up to him

to show these tables to the English. Wouldn't
you rather do it that way so that you can keen
working?
White:

Oh, much rather. They won't agree with that

Foley:

Well, how about some questions for Bloom.

H.M.Jr:

Oh, you fellows --

Foley:

Hill you let US pick them?

H.M.Jr:

Sure.

Foley:

And give you the answers?

H.M.Jr:

Sure.

billion figure, but that is

333

- 10 White:

Well, we are picking them now. Te have
boiled them down to three or four, and we
will have the answers tomorrow morning.
(Mr. Cochran entered the conference.)

H.M.Jr:

These are two statements that I propose to

Cochran:

All right.

H.M.Jr:

And also serve notice on them, you see, that
I am going to use them.

Cochran:

Have you heard from them as yet?

H.M.Jr:

Not a word. And I am invited to go up there
tomorrow morning, and this is what I en going

use, see, two tables, and I am going to
let you show them to the English.

to do.

Cochran:

Would you like that I try to get them right

E.M.Ir:

Yes. If there is any question on them, you will
be here and I can't be reached until E quarter

over?

of nine tomorrow morning other than if you hear

that they are going to --

Cochran:

If they have a message --

H.M.Jr:

If they have a message, I an at Dean Icheson's

Cochran:

I see.

H.M.Jr:

Anything in particular wrong with Yrs. Cochran?

Cochrane

No, we are just having another checkup between

tonight for supper.

the X-Ray man and the doctor. There is nothing

to be done today. I just got back from Baltimore.

331

- III White:

If this form in all right, we will have it

E.M.Jr:

Yes. Just SED theit all sources of information

mimeograment.

are there, with Harry, anything that he is to

need to feed - thomorrow morning, anything that

I - to use at E muater of nine with you

teonle - but what you ought to do, Ferdie,
when I leave team is to get hold of Chick

Schwars and twill him what has happened so that

he inconclusive what the program is for tomorrow.
Tube

Yes.

Tell Chick just what is going on.
fulm:

Sure.

White:

And you will the here at a cuarter of mine
tomorrow, in which case we will give you

& few answers the the few questions which we

are going the riwe Bloom tonight.

That is rürüt.
You (Foley int better get to bed early, too.
Foley:

O.K.

E.M.Jr:

I will let you stay um until eleven, how is

Foley:

All right. Time,, Prn. (Laughter)

that

Do you want I the show Feis these things

arain" I sent him some.

H.N.Jr:

Sure.

Cochran:

I asked him if I should come right over, and

335

- 12 he said no, Mr. Hull was going to leave to
us everything financial; and I said we wanted
them to have the right background just the
same, so I will see him again this evening.
E.M.Jr:

White:

E.M.Jr:
White:

E.M.Jr:

Sure, because no one was more surerised than

I was that Hull took the attitude that he knew
nothing about it and we hadn't given him anything

in writing. It struck me down.
I am afraid we will have to put those private

balances on here in parenthesis, Mr. Secretary.

All right.
will that be all right?
All right.

White:

If they don't agree with that billion, which
they probably won't, shall we use the billion
or shall we use the figure of --

H.M.Jr:

Tell, the trouble is this, you see. Jesse
is going to follow me, and - is he going to
follow me?

Foley:

No, they haven't said anything about Jesse.
I haven't mentioned his name. Bloom hasn't
called me. Bloom said, "How about Knudsen,

and I said, Well, he was over at the White
House, of course, but he hasn't been in on this,"

and I said, "Well, I think they would like to

hear from Knudsen; so he thought he would call
Knox and Knudsen for Thursday morning.

Now, do you think we ought to - he asked me we talked to Knudsen about the background and

so forth, and I told him I thought he ought

to do that; and he said he would call Knudsen,

336
- 13 -

but he would like to have us tell him what
is going on.
White:

If Jones doesn't testify, he will do his

H.M.Jr:

Let's see how it goes.

White:

I think that you can fix that by saying direct
investments are about a billion. "Of course,

darndest to ball things up outside.

gentlemen, that is an approximate figure. We
are making a study of it now."

Foley:

Would you want to warn Knudsen that he might
be called on Thursday so he can get ready?

H.M.Jr:

Yes.

337
Solicated

Long-term
Harding I of - - - the Builded States
the following estimates are based - a - e - - of which
were - w British commiste batter the / = -

for
to
the
estimated
of
the
which are antiy is starting - - - - take differe at -

rent notes of -

The mater value, where - - - - - quotations

of the remition. Since - questions - - Sar a large part of
the investment, - total market value - be minimul

Many of the securities are is complete - - defect
Even share estimates of material value - - - the - only a list-

ted significance, for the future - - million will depend - the

rapidity with did the countities are - - - - of the

war,
and
factors.
of and
values
are- -ofother
- - limited
/ or - the - millers)

- - State State

Canada

Bentral
Market

Instrults

Seximal

New Zealand

Beneficial

Booker

Market

India
Market

British Africa

Mentional

Total to Deplare

am

-

--

750

875

1,995

10

300

2,500

4

96

Beneral

-

V

1,000

2,500

v

1,000

1,790

me

25

Halage
Other

-L-(
1
(--

-

125
The

use

4,000

:
If in
15
Ss g is

En
BE

EE

SH

I
3.

al
IIII III

f

25

in

il il 1

II

JUNI

Estimated Dollar Expendituros and Receipts of
British Enpiro, Excluding Canada, from January

339

1, 1941 to Jenuary. 1942.

(in Killions of U. S. Dollars)
Dollar Expenditures
A. U.K. payments to be made on total purchases
from the U. S.
L. Suns to be paid during 1941 on orders
$1,274
placed before Jan. 1, 1941.

(In
will
fallmillion
1942)

2. Imports
purchased
through
the British
Commission,
largely on accounts.

B.U.K.
Purchases
(excluding
and Canada) during 1941
1. Commodity

280 $1,554
333

by addition, from Empire due imports. private Purchasing U. after from S. countries $119 U.S. Jan. not 1,

2. Payments for shipping, tourist expenditure, interest payments, etc

5

338

C. Purchases by Empire Countries, excluding
Canada, from areas outside the U.S. requir-

ing gold or dollars
1. Purchases by Empire countries (chiefly
U.K.) from areas outside the U.S. and
Canada requiring dollars.
2. Payments by Empire Countires (chiefly

247

880

U.K. to Canada and Newfoundland.

1,127
$3,019

Total dollar requirements for all transactions.
Dollar Receipts

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
shipping, tourist expenditures,
interest payments, etc.

$ 165
15

$ 180

B. Dollar receipts by Empire countries (excluding Canada)

1. Commodity exports

2. Australian gold exports to U.S.
3. South African exports of gold

560
75

480

260

C. Canadian assistance to U.K.

Total dollar receipts by Empire countries,

$1,555

excluding Canada.

Total dollar deficit with countries other

844

Total dollar deficit with Canada during

620

than Canada during 1941

1941

Total dollar deficit of British Empire,
excluding Canada, during 1941

1,115

1,464

Total receipts and deficit on operations
with all countries other than Canada
during 1941

Treasury Department,

Division of Monetary Research,

$3,019

January 14, 1941.

340

CONFIDENTIAL
CONFIDENTIAL

UNITED KINGDOM'S AVAILABLE DOLLAR EXCHANGE ASSETS

ON JANUARY 1, 1941

(In Millions)
Gold in U. S. or en route
Official dollar balances

205

American securities -- reported by British
as of January 6

616

Total liquid assets
Direct and other investments

Total dollar exchange assets

875

about

900

$ 1,775

The British Government has 333 million of gold scattered in

various parts of the world. Most of this gold, however, is in
areas from which it cannot be shipped quickly or safely to the

United States.

British banks, private persons and corporations have balances
in the United States of $305 million. The British Government
feels that these balances are at the minimum level necessary for
the continued conduct of business and are therefore not
available for use by the British Government.

Treasury Department,

Division of Monetary Research.

January 14, 1941.

341
January 14, 1941

Don't close on a note of despair like Kennety.
Mr.were
Secretary,
British
a goodwhat
rightdid you mean when you said the
Up to now, with the money we got from the French

and British, we were able to start on our our expension.
Now
with
whattime
we to
land
them, even if it is eight billion,
we
are
buying
rearn.

Harry would have you only a statistician and dispenser of figures with no opinions, but, as our fiscal

advisor, I think you must evaluate the figures, not behalf of what they will do for British economy, but

for American democracy. This should be conducted like
a debate with State Department, Treasury, War and Many

each taking up different aspect, but central them "Keep England Going in Order to Let Us Prepare.

Prepared by Mrs. M.

342
January 14, 1941

Don't close - a note of despair like Benefity.
Mr. Secretary, what did you most when yes said the
British were a good risk?

Up to now, with the money - get from the French

and British, - were able to start - - - expension.

Now with what - land them, even if it is eight Million,
we are buying time to rearn.

Harry would have you only a statisticism and die-

peaser of figures with no opinions, but, as - fiscal
adviser, I think you must evaluate the figures, not -

behalf of what they will do for British - but

for American Jenecrosy. This should be contacted like
a debate with State Department, Treasury, Year - Berry

each taking - different aspect, but central these "Leep England Going in Order to Let Us Prepare."

Preferred by Mrs, M.

343
January 14, 1941

2
Don't close on a note of despair like Leanery.
Mr. Secretary, what did you mean when you said the

British were a good risk?

Up to now, with the money we got from the French
and British, we were able to start on our own expension.

Now with what we land them, even if it is eight billion,
we are buying time to rearn.

Harry would have you only a statistician and dispenser of figures with no opinions, but, as our fiscal
advisor, I think you must evaluate the figures, not on
behalf of what they will do for British economy, but
for American democracy. This should be conducted like
a debate with State Department, Treasury, War and Havy

each taking up different aspect, but central them -

"Keep England Going in Order to Let Us Prepare."

Prepared by Mrs. M.

344

January 14, 1941
4:20 p.m.
H.M.Jr:

Hello.

Operator:

Mr. Knudsen.

H.M.Jr:

Hello, Henry talking.

Wm. S.

Knudsen:

Yes, Henry.

H.M.Jr:

How are you?

H.M.Jr:

Pretty good. How are you, sir?
I'm alive.

K:

(Laughs).

K:

H.M.Jr

Bill, I thought you'd like to know that
they are thinking of calling you on this
bill maybe Thursday.

K:

All right.

H.M.Jr:

I thought you might like to know it.

K:

All right, sir. I'll bare my chest and

H.M.Jr:

That's all right. Got any hair on your

K:

(Laughs). Tell me this. You have issued
an order that no more British orders can

let them shoot.
chest?

be signed, huh?
H.M.Jr:

No.

K:

I've heard from the Buick and Studebaker

contract that while the British are willing
to sign up for their portion of it you
said they couldn't sign any more.

H.M.Jr:

Well, look, Bill, just as soon as this

thing is over can you and I get together
and talk about that?

345
-2
K:

You mean when the bill

H.M.Jr:

Well, I mean, just as soon as I've testified

I'd like to tell you - I'd like you to get

it to me what I have said and what I'm
thinking about.

What should I read up on for this testimony?
H.M.Jr:

Well, I don't think you've got to read up
on anything. I think what they're going

to ask you is about the placing of these
of the orders for the United States Army
and for England too, you know. That sort
of thing.

orders and how you figure you can take care

K:

All right.

H.M.Jr:

And after all they will have heard from

K:

I see. All right.

H.M.Jr:

Hull, Stimson and Knox and me first, 80
that will give you some idea.

But I'd like to get together with you

very soon
Yesh.

H.M.Jr:

Are you busy Thursday for lunch?

K:

I don't know. Just a minute. (Pause)

No, not for lunch.

H.M.Jr:

You are or are you not?

K:

No, I'm going out at night but - I'm going
to Jesse Jones' dinner but I's free for
lunch.

H.M.Jr.

Want to have lunch with me around 1:00
o'clock?

K:

All right.

H.M.Jr:

Then we can talk about that.

346

K:

I go up there in the morning I suppose.

H.M.Jr:

I think so.

K:

All right.

H.M.Jr:

Thank you.

347
January 14, 1941

4:26 p.a.

H.M.Jr:

Hello.

Operator:

Mr. Jones has a group in his office and
he's
going to go to another phone and call
you.

H.M.Jr:

Thank you.

4:29 p.m.
H.M.Jr:

Hello.

Operator:

Secretary Jones.

Jesse

Jones:

Hello, Henry.

H.M.Jr:

How are you?

J:

All right.

H.M.Jr:

Now, Jesse, I'm going up on the Hill tomorrow

to testify on this bill and I just wanted
to tell you myself if at any time you want

any figures that have to do with the finances
of England, if you will ask me I'd be more
than pleased to furnish them to you.
J:

O. K.

H.M.Jr:

And whenever you can within a reasonable

J:

Yeah.

H.M.Jr:

But any time you want the picture of what

time let Bell or me know if you can do
something on that wool. That would be
helpful.

their day-to-day situation is all you've
got to do is to pick up the phone and

you'll get it.

348

-2J:

H.M.Jr:

O. K.

Who's going to testify tomorrow?

Well, as I understand it, they're calling
on Hull, then me, and then Stimson. But
what I imagine will happen 18 that Hull

will take all morning and if they get to
me in the afternoon I'll be lucky.
J:

Is this the House?

H.M.Jr:

This is the House.

J:

I see.

H.M.Jr:

Thank you.

Thank you very much.

349
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION

CONFIDENTIAL

DATE January14, 1941
TO

Secretary Mergenthau

FROM

Mr. Haas

Subject: Employment in the Aviation Manufacturing Industry
Employment in the aviation manufacturing industry has
increased by more than 100,000 factory workers during the
past twelve months. In December 1940, approximately 168,500*
factory workers were employed in the entire industry, including
the plants of manufacturers of parts for airplanes and airplane
engines. A year ago the number of factory workers employed in
all plants was 65,400.

1.

The increase in employment during the year was distrib-

2.

uted among all the plants in the industry. The largest

increase in employment at a single plant occurred at the
Consolidated Aircraft Corporation where 10,500 factory workers

were added to the rolls during the year. The Curtiss-Wright

group of companies, however, added 11,800 workers to the rolls
during the same period.
In December 1940, employment in the industry as a whole

3.

rose by approximately 10,800 factory workers. The largest
increase in employment during the month - approximately 1,400
factory workers - occurred at the Douglas Aircraft Company.
Other large manufacturers of bombers -- Martin and Consolidated
also showed substantial increases in employment during the
month.

Two charts are attached to this memorandum. The first
shows total employment in the industry and the employment of
selected companies since January 1937. The attached tables

4.

give the figures plotted on the chart. The second chart

presents total employment in the industry by geographic areas
for December 1938, December 1939, and December 1940.

Attachments

The figures in this memorandum and on the attached charts

differ from those recently released by the Department of Labor

in its report on labor requirements estimated for the aircraft
industry because the latter figures include estimates of the

number of persons employed by subcontractors. Figures on this
basis, however, are not available prior to September 1940.

350
Employment in Aviation Manufacturing Industry
(Airplanes and Airplane Engines)
1937-1940
:

1937

1938

22,100

23,700

25,251

24,100

24,200

27,875

25,200

22,800

35,973

23,400

22,050

41,425

23,800

24,450

52,800

58,000
60,500
64,500
67,000
73,000
80,000
90,000
97,448
105,362
115,241
123,492
132,432

5,500

6,500

6,989

13,900

6,000

6,600

7,825

6,600

6,900

8,727

6,400

6,772

9,289

28,981

October

32,633

November
December

12,600

36,035

1939

1940

:

Airplanes
January
February
March

April
May

June

July
August
September
October
November
December

Airplane Engines
January
February
March

April
May

June

July
August
September

34,199

6,600

6,847

Total Industry - Airplanes and Airplane Engines
27,600

30,200

32,240

30,100

30,800

35,700

31,800

29,700

44,700

August
September
October

29,800

28,822

50,714

November
December

30,400

31,297

65,400

January
February
March

April
May

June

15,800
17,300
18,600
20,300
22,900
25,400
27,019

July

Office of the Secretary of the Treasury,
Division of Research and Statistics.

71,900
76,300
81,800
85,600
93,800
102,900
115,400
124,467
134,343
147,874
157,691
168,467

January14, 1941.

351
Employment of Selected Aircraft Manufacturing Corporations
1937-1940
1937

1938

1939

1940

January
February

615

222

654

March

850

290

912

808

859
865
896
840
873

440

1,410

718

235

703

Bell Aircraft Corp.
April
May

June

July
August
September

October

1,192
1,480
1,963
2,413

3,355

November
December

3,597
606

799

3,865

1,834

1,493

2,380

5,137
4,942

1,726

1,700

2,749

4,759
4,198
5,190

1,249

1,736

2,989

5,882
6,571

213

Boeing Aircraft Co. - Seattle
January
February

March

April
May

June

July

6,926
6,940

August
September

1,109

1,798

3,985

November
December

1,380

2,285

4,749

3,169

2,540

968

2,837
3,477

3,246

2,518

819

3,807
4,349
5,040

3,099

2,104

832

5,821
6,743

October

Consolidated Aircraft Corp.
January
February

March

April
May

June

July
August
September

2,617

989

1,408

November
December

2,580

981

2,540

October

6,391
5,351
5,657

7,836
9,289
11,018
12,355
13,039

352
Employment of Selected Aircraft
Manufacturing Corporations
1937-1940
(continued)
:

1938

1939

:

1937

1940

:

Curtiss-Fright Corp. - Buffalo
January
February
March

1,241

2,211

3,802

1,500

4,380
4,744

2,347

2,939

5,016
5,213

1,933

2,310

2,848

April

May

June

5,698
6,314
6,531
6,597

July
August
September
October

2,202

2,736

1,562

November
December

2,007

3,491

3,447

5,591

6,328

4,334

5,961

6,173

4,177

6,653

4,672

5,445

August
September
October

5,532

4,028

6,318

November
December

6,771

4,110

10,362

910

1,577

2,305

1,094

1,594

3,509

1,338

1,797

5,699

1,383

1,997

5,324

5,157
4,768
4,362
4,400
5,016
5,591
6,599
7,296
7,582

5,156

10,056
10,904

6,824
7,682
7,889
8,010

Donglas Aircraft Co., Inc.
January
February
March

April
May

June

July

Lockheed Aircraft Corp.
January
February
March

April
May

June

July
August
September

October

November
December

1,428

2,123

11,952
12,077
13,119
14,033
14,656
14,957
14,662
14,898
14,219
14,158
14,726
16,120

8,517

353
Employment of Selected Aircraft
Manufacturing Corporations
1937-1940
(continued)
=

:

:

:

:

1938

1939

:

:

1937

1940

:

Glenn L. Martin Co.
1,364

1,814

2,905

1,716

1,892

4,092

2,044

2,134

6,029

September

2,032

2,341

10,070

November
December

1,818

2,777

11,174

January
February
March

April

May

June

July
August

October

10,984
9,407
9,133
9,010
9,357
9,133
9,513
11,200
10,019
11,414
12,871
13,800

North American Aviation, Inc.
January
February

829

1,713

2,223

March

889

1,935

2,457

841

2,400

3,125

April
May

June

July
August
September
October
November
December

1,272

2,685

2,992

566

2,530

3,795

2,350

2,245

1,826

2,444

2,168

1,766

2,497

1,972

1,952

2,439

1,880

2,123

United Aircraft Corp.
(excluding Pratt & Whitney)
January
February

March

April

May

June

July
August
September
October
November
December

4,049
4,324
4,154
4,371
4,336
4,782
4,918
4,916
5,111
5,828
6,064
6,867

2,757
3,051
3,468
3,735
3,912
4,282
4,823
5,016
5,445
6,010

6,105

2,338

1,774

2,588

6,405

354
Employment of Selected Aircraft Manufacturing Corporations
1937-1940

(continued)
:

:

:

1938

:

1939

: 1940

:

:

:

:

1937

Fultee Aircraft, Inc.
January
February

364

March

440

742
938
959

533

1,008
1,334
2,127

April
May

June

560

July
August
September

430

288

November
December

334

662

October

2,618
2,857
3,531
3,652
3,733
3,916

355
Employment of Selected Airplane Engine Corporations
1937-1940
:

=

1938

January
February

218

262

454

March

229

297

466

238

339

558

1939

=

1937

1940

:

:

:

Allison Engineering Co.

April
May

June

July

1,114
1,261
1,610
1,958
2,766

3,254

August
September
October

238

382

642

November
December

266

439

901

3,917
4,595
5,282
6,280
6,295
6,394

January
February

151

153

134

288

March

153

152

138

162

144

171

338
368
375
388
398

Continental Motors Corp.
(Airplane Engine Division)

April

May

June

July
August
September
October
November
December

135

146

203

#
382
567

1x

ST
152

142

243

867

Lycoming Division of Aviation Manufacturing Corp.
January
Fe bruary

March

April

849

729

519

889

704

521

May

June

901

549

573

756

514

644

762

506

689

July
August
September
October
November
December

582
638
657
711

765
819
813
970

1,080
1,459
1,320
1,481

356
Employment of Selected Airplane Engine Corporations
1957-2940

(continued)
=
:

=

1935

:

1939

=

1937

=

1940

=

Pratt & Whitney Aircraft
January
February
March

2,567

2,119

2,489

2,659

2,304

2,555

3,066

April
May

June

2,29

1,552

July
August
September
October

2,402

2,384

3.394

November
December

2,625

2,227

5,022

2,25%

2,607

3,398

2,515

2,705

3,771

2,500

2,930

3,997

5.92

6,599
7,158

7.58
7.70

8,504

9,121
9,449
9,406
9.794
10,377
11,228

Wright Aeronantical Corp.
January
February

March

April
May

June

July
August
September
October

2,690

November
December

2,608

3,184
3,374

4,026
5,142

5,411
6,082

6.55

6,984
7,582
8,682
9.492

10,152
10,726
11,240

11,894
12,408

357

STRICTLY CONFIDENTIAL

EMPLOYMENT IN AVIATION MANUFACTURING INDUSTRY
Factory Wage Earners

EMPLOYEES
Thousands

EMPLOYEES

Thousands

Total Industry (Aircraft and Enginee
175
175

150
ISO

125
125

100
100

75

75

so
10

25

25

0

Selected Aircraft Manufacturing Companies

Selected Airplane Engine Companies

EMPLOYEES

IMPLOYEES

Thousands

The Douglas Aircraft Ca

Wright Aermautical Cary

15 0

...

1937

1934

1934

15 0

....

1941

****

Beeing Aircraft Ca

Press and Whitney Aircraft

US

Consolidated Aircraft Corp

111

1014

1948

1938

Lockhead Aircraft Corp

1939

140

1941

Corp

...
Engineering Ca
10 0

1940

..

...

Press -

United Aircraft Corp

1934

1934

1941

1941

North American Avation Inc

0

1938

"

1981

1938

...

1949

...

1940

..

Lycoming Division of

"
"
1034

1934

1940

1941

1938

1934

1941

..

Ball Aircraft Carp

Vultee

"
o

1940

1937

1938

1934

1941

.

..

Artation Manufacturing Corp

-

1980

1939

Continental Maters

1987 1988 1989 1948 1941

358

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE

TO

January 14, 1941.

Secretary Morgenthau

FROM

Mr. Hass 92

I doubt if these regional figures have any publicity
value in view of the fact that the Bureau of Labor Statistics has

released A regional breakdown of employment in the aviation industry.

The Bureau of Labor Statistics' figures also include an estimate of
persons employed by sub-contractors and since figures on this basis
are not available prior to September 1940 comparisons with previous

years can not be made.

EMPLOYMENT IN THE AVIATION MANUFACTURING INDUSTRY, BY REGIONS
Factory Wage Earners

N.BAR

IONA
NESS

UTAN

COLO

MO

Mountain
Central and Southern

Atlantic

Dec 1930-2,200

12000

Dec 1939-4.400

1940

Dec. 1940-25,100

77,300

DELA
TEXAS

ALA

Total U.S.
Dec 1930-31300

Dec 1939-65400

Dec. 1940-168,500
Including Parts Companies
1-12

.

TO:

1/16/41

at then
glanced The Secretary this only to

handed it back

me It is all covered
by the memos he
took to labinet today.
DEM.

From: LT. COMDR. McKAY

360

January 14, 1941.

MEMORANDOM

TO: Secretary Morgenthau
FROE: Mr. Gaston

Naesche called me up from Jacksonville this morning.
He spent yesterday looking over the situation of the MINATIAN.

Her stern is firmly aground in some six or eight feet of water
and mist be buried deep in the sand. The cutters succeeded in
getting her towed out into water where the bow was afloat andto

she is anchored in that position. They had no luck trying

tow her off this morning and Naesche says it is a dredging
job, which will take three weeks to a month. The Coast Guard,
he says, has done everything possible and there is no criticism

but only the highest praise of their efforts. It is = anasing

instance of negligent and bungling seansnip. The ship went
ashore only eight miles south of Jupiter Light, which is a firstclass light, on a clear, calm, moonlit night. Having just
passed this light they had every opportunity to correct bearings.
Waesche is impressed with the case as striking evidence

of the need for better examination and supervision of officer
personnel and crews of American merchant ships; in other words,

it is a strong argument for the reorganisation order - have
proposed. He is returning tomorrow night with the idea that

we may be able to make a renowed plea that the reorganisation
order go up before January 20, when the President's reorganize-

tion powers expire. He would like, if possible, to see you on
Thursday.

MRS

361

January 14, 1941

To:

Mrs. Klotz

From:

Mr. Young

Attached herewith are seven memoranda for the

Secretary. all dated January 13th. All of these are
of the general information variety and require = action
with the exception of the one on top which is a follownote. With respect to the memorandum entitled Purchase
of Yer Supplies by South America". please note the last
paragraph.

P.

talked with Hong
about this

P4362

ADDICE

CONFIDENTIAL

January 14, 1941

To:

The Secretary

From:

Mr. Young

Ee: British-Yer Department Financing.

Mr. McCloy called - - the telephone about 10:30 this
morning to inquire free the Treasury with respect to three
things. He stated that the View Department had actually
cancelled or had ready to cancel about 9 million dollars

worth of British contracts excluding capital. Further, that
the Yer Department was is a position to take over capital
facilities for which the British had paid out approximately
20 million dollars.
He added that evidently Jesse Jones had hesitated to

buy these facilities due to the fact that the *lend-lease"

bill was pending. but that Secretary Stimson had no objections
to making the purchase.

Mr. McCloy would like to know (1) if the Var Department

arranges to cancel the British contracts, are the British free

to place new orders with the money released on the conditions
given in the KcClay assortantum of January 3rd. (This memorandum provided that money so released should 50 toward completing

the tank program and for Before guns). (2) Is there any reason
why the Var Department should not buy the 20 million dollars

worth of facilities for which the British have paid, especially
with reference to the effect of such a transaction on the pending legislation. (s) Is there any objection to Mr. McCloy talking again with Jesse James to see if the latter would buy these

or other plant facilities from the British.

Note: It would seen to me that if the War Department vent
ahead on this program it would not meet the policy
you mentioned yesterlay. namely. that the Yer Department money should only be used for those items which

the British vest most.

D4.

363

CONFIDENTAL

TO KROP YOU POSTED

January 14, 1941

To:

The Secretary

From:

Mr. Young

Re: Canadian Export Licenses.

With reference to my previous memoranda of Jamery 5th

and 9th, there was a further meeting of Colonel Maxvell's
Advisory Committee on Friday, January 10th, to discuss
regulations covering Canadian export licenses. At this
meeting a draft proclamation was adopted, copy of which is
attached.

This proclamation provides for the issuance of blanket
licenses by the Administrator of Export Control. I consider
this to be a constructive move inasmuch as it represents an
initial step toward the establishment of a quota system which
could be applied to exports in this hemisphere.

Py.

364
COPY

EXECUTIVE ORDER

ADDITIONAL REGULATIONS GOVERNING THE EXPORTATIONS OF ARTICLES
AND MATERIALS DESCRIBED IN CERTAIN PROCLAMATIONS OF THE
PRESIDENT.

Pursuant to the authority vested in me by Section 6 of the act
of Congress, approved July 2. 1940, entitled "An act to expedite the
strengthening of the national defense," I hereby prescribe the follow-

ing additional regulations governing the exportation of the articles
and materials named in my proclazations of July 2, 1940, July 26. 1940.
September 12, 1940, September 30, 1940, December 10. 1940, December 20.

1940, and January . 1941:
(1) The Secretary of State may issue general licenses authorizing
general exportation of certain articles and materials, and forms. conversions and derivatives thereof, and exportation of any such articles
to certain destinations. in accordance with rules and regulations prescribed by the President or such specific directives as may be from
time to time communicated by him to the Secretary of State through the

Administrator of Export Control.
(2) Paragramhs 5. 10 and 11 of the regulations prescribed by the

President July 2. 1940. shall be inapplicable to general licenses.

365

CONFIDENTIAL

TO KEEP YOU POSTED

January 14, 1941

To:

The Secretary

From:

Mr. Young

Re: Priorities
I talked with Mr. Knudsen on Saturday and inquired as
to what had happened on the priority cases submitted by the
Liaison Committee last Tuesday. Mr. Krudsen said he had
turned them over to Stettinius under the new setup and that
we would hear directly from him.

I inquired as to whether these cases in the future
should be sent to Stettinius, and Kandsen replied that they
should but that if we wanted extra pressure or needed his
help, he would be glad to give it.

I propose to have a chat with Stettinins in order to
see if we can make this procedure stick from now on.

P.Y.

366
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE January 14. 1941
Secretary

CONFIDENTIAL

Mr. Dochrea

Registered sterling transactions of the reporting basis were as follows:
106,000
Sold to commercial concerns
Purchased from commercial concerns & 46,000

The Federal Reserve Bank of New York sold 34,000 in registered starling to
non-reporting bank.

In the open market, sterling was first out at 4.03-3/4. It noved to

.

4.05-01/2 in the early afternoon, returning to 4.03-3/4 at the close. Transactions
of the reporting banks were BE follows:
Sold to commercial concerns

48,000

Purchased from commercial concerns -0Except for a slight recovery in the Outsa pess, the other currencies experienced
change. Closing quetations were:
Canadian dollar
Swiss frenc
Swelish krom
Belchmark
Lira
Argentine pees (free)

14-1/85 discount

Mexican peed
Outsu pees

8-1/8% discount
.05-9/16

Irasilian milreis (free)
Chinese you

.2320-1/2
.2365
.4005
.0505
.2360
.0505
.2066

We sold the following amounts of gold, which were added to the exempted

communities of the basics indicated:

$2,000,000 to the Central Bank of Uragrapher Republic
600,000 to the Bank of Portugal
$2,500,000 Total

Tie purchased $1,000,000 in gold from the carmarked account of the Central

amil of Pera

Enday the Treasury increased from $650,000 to $1,150,000 the licenses which
had previously issued under the Gold Reserve Act and Executive Order No. 5369

manded. permitting the transfer of gold from the carmarked account of the

1 Bank of II Salvadar to that of the B.I.S., and the transfer of a similar

367

-2-

Reserve
Bank
represent
the
of
gold against approximately $647.750 worth of gold,

amount of dollars from B.I.S. to Salvadorean account on the books of the Federal
B.I.S. of New York. dollar The credits. above To transfers date, pledging Salvadorean

and a like amount of dollars, have been transferred. The expiration date of the
above licenses is January 31. 1941.

The Federal Reserve Bank of New York reported that the Bank of the Colombian
Republic shipped $3,150,000 in gold from Colombia to the Federal. The disposition
is unknown at the present time.
The State Department forwarded to us a cable stating that the Yokohana Specie
Bank, Coaks, shipped $3,125,000 in gold from Japan to its San Francisco agency for
sale to the U. S. Mint.
The report of January to received from the Federal Reserve Bank of New York,

giving foreign exchange positions of banks and bankers in its district, revealed
that the total position of all countries was short the equivalent of $9,250,000, a
decrease of $708,000 in the short position. Net changes were as follows:
Short Position

Short Position

Country

December 31

January 8

Ingland**

$1,100,000
3,754,000

$ 130,000 (Long)

Europe
useds

atin American

410,000 (Long)
230,000

4,164,000
1,205,000

Japan

Other Asia

all others

85,000 (Long)
$9,953,000

Change in

Short Position*

- $1,230,000

3,535,000
277,000 (Long)

+

119,000

-

4,651,000
1,234,000

+

+

118,000

+

219,000
133,000
111,000
487,000
26,000
206,000

- $ 708,000

$9,250,000

Tlus sign (+) indicates increase in short position, or decrease in long position.
Kinus sign(-) indicates decrease in short position, or increase in long position.
Combined position in registered and open market sterling.

The Federal Reserve Bank's report of January 8, listing deposits of banks in
itis with the Sew York agencies of Japanese banks, showed that such deposits totaled
104,673,000. an increase of $5,194,000 since December 31. Most of the change in
deposits took place on the books of the Yokohama Specie Bank's New York agency. The

atter's principal dollar liabilities to and dollar claims on Japanese banks in Asia
stood as follows on January 5:

January 8

Liabilities: Deposits for Japan & Nancharia
Deposits for China
Mains

$56,246,000
36,759,000

Change from Dec. 31
+ $5,696,000
122,000
269,000

: U.S. Treas. bills, com. paper,etc 30,780,000

-

: Losas

+ $3,432,000

$39,886,000

: Other - mainly Jap. import bills.. 12,854,000

+

CONFIDENTIAL

505,000

-3-

368

line last three categories in the preceding table refer mainly to Japanese benks in
Japan and Manchuria. The rise in deposits of such banks reflected both an increase
in Agency loans and the sale of about $3,000,000 worth of Japanese gold which
arrived in San Francisco on January 7.
The Bombay gold price was 3# higher at the equivalent of $33.94. Silver was

priced at the equivalent of 44.20 up 1/16

In London, both spot and forward silver were fixed at 23-1/4d, representing
decline of 1/16d in the spot quotation and no change in the forward. The dollar

equivalent of 23-1/4d is 42.214.

Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44.
The Treasury's purchase price for foreign silver was also unchanged at 35#.

We made five purchases of silver totaling 425,000 ounces under the Silver
Purchase Act, all of which consisted of new production from foreign countries, for
forward delivery.

CONFIDENTIAL

369
THE SECRETARY OF THE NAVY
WASHINGTON

January 14, 1941

Dear Benry:

Thank you for sending me a photostat

of the initialed copy of the bill to promote the
defense of the United States. I am very glad
indeed to have this document.
Yours sincerely,

Janeskuor
Honorable Beary Morgenthau, Jr.

Secretary of the Treasury

1463

371
PLAIN

Stockholn

Dated January 14, 1941

Rec'd 3:10 a.m., 15th.

Secretary of State,
Washington.

36, Fourteenth.
Fuel Administrator announces coke supplies 300,000

tons shorter than originally expected at this time resulting in a reduction of 5% in new allotments.
Second ten year defense loan 500,000,000 crowns

will be opened for public subscriptions on January 15
in the form of 4% bonds and 3% premium bonds.

Bankruptcies 1940 totalled 1476 against 1272 in 1939.
Stedish-German shipping agreement reached January 13

regulating allocation of tonnage and freight rates in
Baltic traffic for first half of 1941 on same conditions
as agreement for 1940.
Swedish-German negotiators, convened in Stockholm,

are now considering problems connected with the marketing

of lumber and woodpulp for Scandinavian organizations in
European occupied territories.
Many industrial common stocks today boomed to new

highs for the year.
INFORM TREASURY, COMMERCE.
EMB

STERLING

372
PARAPHRASE OF TELEGRAM RECEIVED

FROM: American Legation, Helsinki.
DATE: January 14, 1941, noon.

NO.: 12.
STRICTLY CONFIDENTIAL.

The Prime Minister informed me this morning, in my

first conversation with him since he was appointed to

his office, that his Government is still hoping that
the Government of the United States will grant it
further credits. However, it will not make such a request until a favorable opportunity presents itself.
Finland needs the credits in order to buy mainly civil
supplies that are necessary. Prime Minister Rangell
alleged
said he was concerned over the/possibility that the
United States may sequester American assets of all
European countries, Finland included.

He told me that although the Finnish Diet is agree-

able to authorizing all necessary appropriations for
defense purposes, (and Finland's defense is in much

better condition that it was before its war with Russia
last winter), the local capital market 18 limited in
capacity and presumably it is not ample to x pay both
defense and imports costs. In the meantime, the Finnish Government is proceeding with its defense preparations since Russia has given it no assurance that she

will not again try to conquer Finland when the opportunity
occurs. In this regard, however, I was informed by Rangell
that

373
-2-

that no new and unfavorable developments have come up

in Finland's relations with Bassia. In reply to my
question concerning how much compensation is to be paid

for property removed from the ceded regions of Finland,

Rangell said that he did not know but that even if it
should be as much as one or two billion marks it was
Rexparativate small as compared to the present scale
of expenditures.
SCHOKNFELD

EA:MSG

374

- 14 on

REMORANDES FOR THE PRESIDENT:

Sayre fears that because of the transfer of funds
fres the Philippines to the United States that has been

taking place recently at - increasing rate, the Philip-

pines are considering curbing this flaw by charging .
substantial presium for converting pedis into United States
dollars. So says such action will adversely affect American
business interests and therefore be wishes to discourage the

a by telling President Queson that you will vote any such
action that the Philippines might take.
Interior feels that the action suggested by Sayre is
of doubtful legality and destrability, and has prepared a
letter for your signature to Sayre telling his to comvay to
Queson your hope that before any action is taken - the
matter by the Philippines this Government be given opportunity to staty it is Washington

I concer in Interior's - approach to

the problem and suggest that you sign the letter which it
has prepared for your signature.

Signed E St
Secretary.

BB:33F/wp

Betyped 6435 p.m.

1/8/41

Enclosed
File ut'l
By

Birth

375

JAN 14 1941

- FOR THE PRESIDENT:
Sayre fears that because of the transfer of funds
from the Philippines to the United States that has been

taking place recently at on increasing rate, the Philip

place are considering curbing this flow by charging a
substantial presium for converting pesos into United States
dollars. No says such action will adversely affect American
business interests and therefore he wishes to discourage the

- by telling President Queson that you will vote any 1

action that the Philippines might take.

Interior feels that the action suggested by Sayre is

of legality and destrability, and has prepared a
letter for your signature to Sayre telling him to - to
- your hope that before - action is takes - the
atter by the Philippines this Government be given -

qualitarity to stuty it in Washington

I cause is Interior's - diplomatic approach to

the problem and suggest that you sign the letter which is
has prepared for your signature,

(Signed) R. Morganitas. Jr.

Secretary.

Bolyped 6435 p.m.
1/8/41

Identit

By -

V

376

THE WHITE HOUSE
WASHINGTON

January 7, 1941.

MEMORANDUM FOR H.M. Jr.

Is this all right? Talk to
me in the afternoon.
F.D.R.

V
377

THE WHITE HOUSE
WASHINGTON

January 7. 1948.
KENORANDOM FOR H.M. Jr.

Is this all right? Talk to
me in the afternoon.
F.D.R.

378
THE SECRETARY OF THE INTERIOR

-I

WASHINGTON

JAM -4 1941

the Mile I

n - n Presidents
I - a confidential letter, dated November s,

a to - by the United States High

to the Billippine Islands, with regard to the moralary
situation in the Philippines.

Very briefly 18 may be stated that this letter in

disabre that, - to various conditions, demonds have been

-sale- the
Treasury of the - - for the
of dollar exchange to an extent skich is causing -

disabilities - The - government has adequate

- and is - yet seriously exharressed by the present
attention, w the No Commissioner states that reas have

- Ma - the - authorities, is order to

forestall - night of capital, which - altagether two

probable ultidate the - few years, are considering - error in the produce - emange skick is charged by the
Treasury for the sale of United States dollars.

The High suggests that you arthorise him
to - President - that any increase in the predict
- dollar - would be reveesed by y It will be who
I that the High Condectionar's letter indicates that
Me Information as to the anterplated action of the -

- milerities is based - - and that be has not de
- the watter with President - or other officials of

-serious
- - The
problem - well because
and the - of the Company officials is read

Sty I the action suggested by the High
louisiana - - - water first, 18 is at least
- to - - there is legal authority for such action

- - there my be wide difference of opinion as to ahother
11 is designble - greating that - action would be both

legal and house I do not believe that 18 is abro

dide to - in your - to threates that the pecure
enfered - - by the Independence not will be - - after with $8 has been clearly I that the w
purposes - be complished by friendly

379

-

has
an

Mis

as

I/ -

to

Internation I - the Marky Medium of
pregnand death of a soly. I - - Sampling

which - - deatso w - s - /

-

Sincerely yours,
(Sgd.) E K BURLEW

looking Secretary of the Interester.

380

(DOFT)

THE WHITE HOUSE
WASHINGTON

(Sdg) BURLEY

Dear Franks

I have read with 1 interest your letter of November

5 concerning the influence of current trade conditions and
other factors on the mostary situation is the Philippines,
which has resulted in a steedily increasing doment for dollar
exchange.

I - glad to note that the Commonth government has

sufficient dollar exchange to most any demands that are dis-

cerable at the present time, and that in your opinion the
situation is not dangerous as yet.

The question of the desirability of a change in the treas-

any exchange rate between the United States and the Philippines

is probably only one of may similar problems which will arise
with more and more frequency as the date for Philippine independonce approached. They will all have many remifications and should
be gives most careful study not only as to the immediate problem
involved but as to their relation to the program as a whele. I
suggest, therefore, that you convey to President Quesse my hope

that before taking any action on this matter the Community
authorities will bring 18 to your attention is order that the

proposed action my be given careful consideration by Departments
of this Government which night be affected.

I - convinced that in the adjustment of the may delicate
and intricate questions which are sure to arise, the best results
for all concerned will be achieved only by constant consultation
and close coordination and that the record of American - Philippine

relations in the part justifies the hope that legal technicalities

will not be allowed to obscure the issues.

Sincerely yours,

Freaklin D. Receevelt.
Henerable Francis B. Sayre,
United States High Commissioner

to the Philippine Islands,
Manila, P. 1.

THE UNITED STATES HIGH COMMISSIONER
TO

THE PHILIPPINE ISLANDS
MANILA

November 5, 1940
ICTLY CONFIDENTIAL

My dear Mr. President:

In recent months there has been a substantial net
transfer of funds from the Philippines to the United States
which has doubtless contributed to a general business recession. The amount of Philippine currency in circulation
as of September thirtieth has dropped by 11 percent since
January 1, 1940. As yet the situation is not danrerous

but if continued long enough would impair the liquidity of
the banking system and lead to financial difficulties for
the Commenwealth Government.

Tarious factors have contributed to this result.
Amone the most important has been, first, the desire of
business men to licuidate their investments and withdrew
their capital before the Islands become independent in
1946 and, second, the reduction in the value of the major
Philippine exports. These basic factors have been accentuated recently by the general unsettlement of conditions
in the Far East.
There has been considerable comment and some apprehen-

sion in government and banking circles concerning this

development and it is now rumored that the Commonwealth is

considering the possibility of attempting to ingede this
movement by increasing substantially the premium charzed
bv the revernment for United States dollar exchange. In
effect this would be equivalent to a depreciation of the
currency.

Im THE opinion the disadvantages of such a course would

be much greater than if the normal effects of supply and
demand were allowed to run their course and would be partic-

ularly injurious to American interests. it the present time
the premium is only approximately sufficient to defrey the
cost of conducting exchange operations. A smell increase
in the charge would, I believe, be more apt to cause alarm
and

The President,

The White House,

Washington, D. C.

return

the
225
Fiven to the are has been = stable -

rency based Telend States dollar. as the Supreme

Court of the United States has pointed out, *The power to
'coin SOREY emt remulate the value thereof, and of foreign

coin, is a pretecutive of sovereignty and a power CI-

clusively Tested Consess of the United The
the movernment of the Philippine Islands 765

in respect to Local coinere is derived from the express act

of the power to strike cold9522 silver
FUTES

65

19:2
SECTION

215crisis
312.
:-

since the creation
1P05 32 Soct. 9521, HAS test
resident of the
1st

4199 ot the

3461

and States."

shall

commonly
that called the Nones

me

approved retirest

STATES. It ls also to hamma MIAR that
St alter, in the philippine

7 science

pendence Act of 1934 (48 Stat. 456), again provided that,
Acts affecting currency, coinage shall not become law
until approved by the President of the United States" (sec.
2(9)), and that the same provision occurs in the Ordinance
Appended to the Constitution of the Philippines (sec. 1(9)),
so rendering it impossible for the Commonwealth of the

Philippines by legislative act to modify the Philippine
currency system without his consent. And, of course, it is
always to be remembered that any power possessed by the
Philippine Legislature or the National Assembly of the Philippines to legislate respecting Philippine currency is derived
from express act of the Constess of the United States, which,
therefore, at any time before the islands become an Independent Republic, may curtail or modify such power.
While under the above mentioned provisions of the Inde-

pendence Act of March 24, 1934, and the Ordinance Appended to

the Constitution of the Philippines, alteration of the Philip-

pine currency system by the Philippine National Assembly may
be prevented by the President of the United States, through
disapproving acts of the Philippine Assembly, it is doubtful
whether his power under it would extend to disapproving

Philippine executive orders or administrative, as distinguished
from legislative, acts. Since Act lio. 4199 of the Philippine
Legislature, cited heretofore, purports to confer upon officfals of the Philippine Government certain indefinitely defined
powers to determine the premium to be charged in exchange
transactions for the purpose of maintaining the parity of
the Philippine peso with the legal tender currency of the
United States and of keeping the currency ecual in volume

only to the demands of trade, the Commonwealth Government

might attempt unwarranted action under that Act which would

render ineffective the safeguard section 2, paragraph 9,
of the Philippine
ins to indicate what, if any, action might properly be taken

under act No. 4199 (See Line Su For v. United States, It Fould supre;
Clemons V. Nolting, 42 philippine Reports 7021, Government seem

that the possibility exists that the Corrowealth

might attempt to 70 beyond any such action.

If, before taking action, I Tait until e crisis premium, arises

the Consionwealth attempts to raise the exchange serious here
and it probably will already the too late to prevent independent

being done. AS HIGH Commis : 1070 10 not be time
authority in the matter and there would give the
the Congress of the United States to forestell
matter for you due or attention and take the necessary steps to
such

such LE The Commonwealth nisho 100empt. 200 is ruite
possible
THE the Commonwealeb 2012 SC THE in advance
at

= HOLDER tire DO discuss the matter - uezon
State! TITE IIT authority EE Cent in the DE legisls.

bren deposit United THEY take the position than THE United

tion
:214
Construction
TO
montrol
the
action : THE Commonwealth in determining the premium to

be

charget individualize 1 the exchange and - should Like IN be able to

WONLE FUCK better - the part
= the the authority
de Lividine
granted you for DDD 7a (2), 02 sec. 2PM DEPARTATION
(14) of the Philippine Independence Act.

Sex. 77 (2) provides that title Insulidant of

the Tuited States shell have authority to Trugent the taking

effect T II The Distrition of any law CONTRACT no executive

order of THE Dovernment of the Commonwealth 12 the Philippine

Islands with his PLEASE will En I future of

TOTAL Clinic to its conand "Inderest

thereon the Aunda -TE
theWhich
If the seems
currency

MIA i- the vill

dentions : the Surree

THE

is noted Terri mind that you are

(Tade

the ⑇
miss
- I STE New. THE Executive
774 Commonwealth fills white the FY of this

order

the ant

States

continue

to in-

MET

Common-

the

20
--and in

rate from pesos to dollars will be made by the Commonwealth
Government without consulting me in advance.
Sincerely yours,

Mancit B. Sayr

-5-

386

(Handed by Messrs. Pinsent and Playfair of the British Embassy to
Mr. Cochran in the Treasury at 6:10 p.m. January 14, 1941)

We agree that Mr. Morgenthau should

use at his own discretion the information
referred to on the understanding that any
statement will, as he proposes, be shown

to Sir F. Phillips, in order to give him an
opportunity of making any observations upon
them. We would ask that Mr. Morgenthau should,

so far as possible, avoid giving the appearance
of any shortage of cash resources other than
dollar resources.

883
(Seated Mr. by Pissent and Playfair of the British to
Costomer is the Treasury at 6:10 p.a., January 14, 1941

We agree that Mr. Morgenthau should

use at his own discretion the information
referred to on the understanding that any
statement will, as he proposes, be shown

to Sir F. Phillips, in order to give his an
opportunity of making any observations upon
them. We would ask that Mr. Morgenthau should,
so far as possible, avoid giving the appearance
of any shortage of cash resources other than
dollar resources.

10 THE

LECHNICY
OFFICE OF THE

B11 The it EN e 13
IBEYCIGA DELIVERENCE
RECEIVED

388
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

DATE January 14, 1941.
TO

FROM

SECRETARY MORGESTEAD
PROFESSOR ODEGARD

Following are certain suggestions concerning a program to
promote the national defense through a better understanding of
Federal tax policy and a wider distribution of Savings Bonds

- small investors.

Objectives: To give the American people a sense of the magnitude
and importance of the national defense effort.

To do so by immiring confidence rather than fear.
To do so by transforming people from being mere observers

to becoming active participants in this effort.

To do so through existing organizations rather than the

creation of new mechinery.

To do so through the cooperation of local and familiar
functional organizations ,rather that by remote control. To emphasize at all times participation rather than propaganda, voluntary
cooperation, rather than collection.
Relation of the Treasury to these Goals:
These objectives are not peculiar to the Treasury, but are
shared by other departments and agencies of the government now

engaged in mobilizing the will and energies of the nation for mational defense.
Through the Treasury, however, nation-wide participation in
the defense program is made possible in two ways mainly, (a) the
payment of taxes and (b) the purchase of bonds.

The vital significance of this kind of participation should
be brought home to every - woman and child in the nation.
Taxation:

In the case of the first of these, the problem basically is
the description and explanation of the purposes and methods of

389

-2Federal taxation. This must be diame in simple, non-technical
language, understandable to the Lagar and at the same time inoffensive to the trained economist and tax expert.
The emphasis should be am affirmative one, representing taxes
as payments for services remiered and not as compulsory exactions
to support a vast, impersonal bureaucratic machine. More especially,

federal tax policy should be related to the service of government in
defending the American way of life and to bring home to each group
and community the significance of its own contributions to the total
effort.
Savings Bonds:

The second objective of the Treasury program has to do with the
development of a sense of participation in national defense and the
encouragement of habits of thrift, through the sale of savings stamps,
certificates and bonds, to the largest possible number of subscribers.
Such a policy not only contributes to the financing of national defense,
but also strengthens national marale and promotes national unity.
Organization:

So far as possible, the proposed campaign should be carried on
without new and elaborate administrative machinery, but with Maximum
utilization of existing agencies and personnel both within and outside

the Treasury. To facilitate this, the following tentative plan of or

ganization is suggested.
The

Director of Information and Savings Promotion:

The function of the director is to plan, supervise and direct
the entire program, and to serve as limison between the Treasury and
other government agencies whome cooperation may be necessary.

Assistant Director in Charge of Publicity and Promotion:

The work of this division will be:
A. To establish relations with the press, radio, motion pictures,
and advertising agencies, to prepare releases, posters, and other ad-

vertising and publicity materials, to arrange for exhibits at public
places, state and county fairs, teachers' institutes and similar
gatherings.

390
3

B. To arrange for speakers and to supply them with information and
suggestions, to prepare a speakers handbook, to arrange speeking dates,

and to facilitate the organization of public meetings.

C. To enlist the cooperation of civic organizations, trade unions,
farm organizations, schools, colleges, patriotic societies, state amt
local governments, in carrying on the general program.

Assistant Director in Charge of Subscriptions:

It will be the function of this division to make arrangements for

agents and outlets for Savings Bond sales:

A. With federal agencies such as the Post Office Department, Department of Agriculture, Federal Loan Agency, A.A.A.,
B. With state and local governments.
C. With banks, savings and loan associations.

D. With trade unions, farm groups, schools, civic organizations.
Research Assistant:
A young economist might be employed to carry on such research as

may be necessary to provide statistical and other data as required.
Advisory Committee:

It would be advisable to make provision for such a committee to
include representatives of the more important agencies and organisations
cooperating with or interested in the program, plus one or more persons

with special competence in publicity and promotional work. This -

mittee would have no administrative responsibilities, but would meet
from time to time to criticize and evaluate the work being done.

391
Concerning Project Please of the Division of Seriage Bonds and

the Beed for Larielation

With reference to the band sales program, it has been suggestion

that this might be carried - through the expension of the work -

done by the Division of Savings Bonds, under the direction of Mr.
Bryez. My understanding is that this division markets serings Bunds

mainly through post offices and direct mil orders. Mr. Bryan has
available for promotion is connection with his program a miling
list containing in the neighborhood of SEVEN million Dames at the

present time. Unier the IN tax legislation, SEE additional list of

same five million I will be added.

Mr. Bryan has prepared a rather elaburate layout, setting
forth in considerable detail plans for ar extensive promotional
campeign. I think 11 might be well, beftine embarking upon any
more eleberate progress, to consider this layout with the visa to

a. making it a besis of what is to be dime immediately,
and/or

b. integrating it with E more congretensive plan.

To the best of - information, a - extensive and intensive

promotional progress would require - - legislation except far the

following:

a. If the Treasury decides to use Treasury - defense stage
in addition to or in place of present postal savings stage,
- legislation would be required.

b. It is generally agreed that the law authorizing the issue
of BER savings certificates is - sibsolete and would
presumably not Justify the issuance of defense - security
certificates.

c. in preposal to issue benis - certificates in lower

demoninations there $25 would, I believe, also require new

legislation.

d. I - not sure, but - impression is that because of a ralling
of the Comptroller General, - expensiture for redie ad-

vertising would also require - legislation.

applies also to motor production and

Mr. broughter is of the opizion that any extensive sugarine
sivertising would require additional funds and a change is the
attitude of the House Committee.

392
Promotional Problems is Relation to Bond Sales.
Much can be learned from the study of Liberty Loen and Bar Savings
campaigns of 1917 and 1919. But any attempt at this time to duplicate
either the methods or the intensity with which those campaigns were carried on, would, in - judgment, be unwise.
The relation between national defense and individual saving should
be made clear. Any suggestion that the defense progress will involve a
serious lowering of living standards should be avoided. The public should
be confromted not with the choice between guns and butter, but rather,
between non-essential handy expenditures and outlays necessary to insure
the success of the defense program.
The conservation of current savings made possible by the increase
in employment, in peyrolls and general business activity, should be
closely related to the bond purchase plan. Moreover, the effect of the
plan, in checking inflationary tendencies and runeway prices should be
explained in terms anyone can understand. If this is well done, the subscriber can be brought to see that his purchase of savings bonds contributes not only to national defense, but to the maintenance of present
living standards and the security of his own future.
Above all, as strosphere of calm should pervade any promotional
campeign. Anything that spacks of hysteria, or which plays upon hatred,

fear, or horrer, should be scrupulously avoided. It my be that the
campaign will grow is intensity as it advances, but in any case, it will
be a mistake to frighten = ODEIDE individuals to subscribe. Some of the

devices and appeals used is the - Liberty Loan campaigns

were of this nature. It is doubtful that they were either necessary, or

ever effective, and it may be that they actually did more harm then good.
For example, the following quoted from "The Story of the Liberty Loans
by Labert St. Clair illustrates how promotional methods occasionally
bordered on hysteria.
"In some sections of the country, it was deemed necessary to
resort to vigorous methods in order to stemp out unpatriotic and

treasonable activities which were hurtful to the loan

Local

committees sometimes resorted to such stringent methods as placing
German sympathizers who refused to buy bonds on exhibition in wire

corrals in public places until the recalcitrants were prepared to
show their loyalty to the country by investing in bonds."

I doubt that democracy can be defented by vigilantism. Similarly,
strocity stories, barror pictures and posters, may evoke resentment

rather than a sympathetic response.

Honor flags, badges, and buttons, to identify individuals, com-

munities and groups who subscribe should be used with care to avoid
invidious comparisons and high pressure upon individuals who may, for

393

-2perfectly legitimate reasons, be unable to subscribe.
In the Liberty Loan campaigns, employers acting as agents, often
sold bonds and savings certificates to their employees by methods which
in some cases resembled intimidation. The result was not infrequently
to increase enimosity and conflict and thus defeat one of the essential
purposes of the entire program.

Such methods, I believe, should be avoided in the future. It is,
however, perfectly legitimate to use as agents trade unions, employers
associations, farm organizations, and other functional groups. But they
should, in so far as possible, serve as agents only in relation to their

own members, or to others whose trust and confidence they enjoy.

The method of assigning quotas to states, local communities, trade
unions, farm organizations, and other such associations, was employed
with conspicuous success in the Liberty Loan and War Savings campaigns.
This might profitably be done again, and I am sure some equitable basis
for assigning such quotas can be found.

Many other promotional methods are available. Particularly valuable might be the use of public opinion polls to probe public reaction
to the campaign as it progresses. These illustrations as to procedure
and technique merely serve to indicate some of the problems involved.

394
PUBLIC RELATIONS AND TAXATION

The importance of an adequate public relations program, taken for

granted in private business and industry, is only recently being recognized by federal, state and local governments. Most of the major federal
agencies now have in one form or another an office, division or department, responsible for interpreting and explaining their work to the
public. Although less has been done in this direction by state and
local governments - increased interest in improved methods of public
reporting indicates a growing recognition of the importance of sound

public relations.

Public relations work in the field of taxation has made little
progress. But with increased demands for social services of all kinds
from government and the resulting need for greater revenues some attention is being given to this most important problem. David Saxe of
the Federation of Tax Administrators in an article on Public Relations

Activities in Tax Administration says:

"The tax administrator has a broader public relations

task than that of any other governmental official. At
the same time, if this task is properly carried out it
will solve much of the public relations problem of the
other governmental programs."

Tax officials in Mississippi, Kentucky, Idaho, Indiane, Illinois and

elsewhere have made substantial progress in developing better publie
relations. It is my impression that the federal government and more

particularly the Treasury, has lagged behind. It is imperative, therefore, that now, in this time of national emergency, something be done
to make tax policy and administration not only palatable but, what is

more important, intelligible to the public.
lowing:

Foremost among the objectives of such an effort are the fol-

1. To relate tax payments to services rendered.

2. To explain the various kinds of taxes, their efficiency in

raising revenue, and their incidence.

3. To compare costs of governmental with other non-governmental
but comparable services.

4. To mitigate or minimize hostility to tax administrators by (a) removing sources of irritation and obstacles to
courteous and efficient administration
(b) humanizing the tax collector and representing him as
a public servant rather than a public nuisance
(c) minimizing evasion and non-compliance through firm,
consistent and courteous administration.

395

Any promotional program of the Treasury must be viewed

in the perspective of the entire defense effort. Otherwise we
run the risk of competing with other departments and agencies

for public attention and cooperation. As affairs now stand,
no unified plan or organization exists, so far as I know, to
coordinate the information, publicity, end public relations
activities of the government as a whole in the interest of national defense.

According to the most recent available information, there

were on December 15, 1940, same 117 directors of information,
press, and public relations, serving 136 departments and agencies

of the federal government. Some of these are concerned with highly

specialized or technical material of interest to a relatively small,

although in some cases, important segment of the population. The
information services in the Department of Agriculture, for example,
having to do with adjustment payments and land utilization, are of
this nature. Others, however, are concerned with matters of more

general interest, such as conservation, W. P. A., Social Security,
etc.

The over-all administrative problem would be to secure
maximum cooperation of these agencies in the defense program,

and more particularly, the Treasury's pert of that program.

396
BRITISH EMBASSY,
WASHINGTON, D.C.

Personal and
Secret

14th January, 1941

Dear Mr. Secretary,

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

on the military situation.
Believe me,

Dear Mr. Secretary,

Very sincerely yours,

had Bother
The Honourable

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

397

TELEGRAN RIC IVED PROM L NDON

DATED JANUARY 19th, 1941

NATAL. An/10.

Resoue tug "Seansn" attacked by Foker-

Hulf aso miles from North-gost Blald Day. She
shot it down and took three prisoners.
2.
Sunderland aircraft sight d and hit with
machine-gun fire Pokker-sulf air raft North of

Fockall Dello/11th. This aircraft is reported down
in the 266 North of ordeaux,
3.
Night of the 10/12. six Swordfish attacked
shipping and docks at Pelerno. Fits made on jetty
and warehouses - large fires started.
4.
On the 10th Illustrious was attacked four
times by Give-bambers lovelovel bonbers and torpedo
planes BOSS of which were German and sustained six

direct hits by bombs and several more near misses.
she was considerably date ed. Six dive bombers and
two or three other bombers were shot down by Fulmars.

Casualties as killed, 60 seriously wounded and about

40 alightly wounded including several officers.
Gallant has arrived in harbour. Sixty-three
5.

killed or missing - 15 wounded no officer casualties
reported. BOW 51 wn off up to forebulkhead No. 1

boiler room struck but not bridge.
6.

ROYAL AIR FORCE. Night of 10/11. Day-cock

at Brest was beavily bombed by as aircraft. Two bombs

were soon to fall on bow of Gervan criser. Many

fires were started. All our aircraft returned.
January/

398

7.

January 11th. Nine medium bombers

operating singly attacked shipping in Dutch
harbours and off the coast. One is missing.
S.

Night of 11/18. Forty-seven aircraft

were sent out - 36 to attack dooks and Tirpits
at Wilhelmshaven and 11 to Royal Arsenal at

Turing in addition five heavy bembers were sent
mine laying.
9.
LIEYA. Hurricanes maintained offensive
patrols over Tobruk area throughout January 10th.
The shot down one enemy fig ter and destroyed

six others on the ground with machine gun fire.
10.

ERITREA. N1 ht of 9/10. Our bombers

attacked Italian workship and aircraft repair
depot - several fires were started.
11.

ETHIOPIA. On January 9th six of our

aircraft dive-bombed an Italian landing ground
and destroyed two machines on the ground and prob-

ably destroyed a third.
12.

ORRYAN AIR FORCE. Night of 11/12. About

106 enemy aircraft made a short concentrated attack
on London.
13.

Aircraft casualties in operations over and

from British Isles.
Enemy & 1 probably by Anti-sircraft
night 11/12.
Britishs 1 bember missing.
14.

11th HOVE SECURITY. Hight of 11/12. Attack

on London lasted about three hours and both high
explosives and incendiary bombs were dropped in more

than so districts) fires were started but were quickly
under/

399

central. Damage dess not appear to
have been serious. Chief incident consisted

as as underground soilway station is city
heare . bonb ponstrated a subway.

400

TELEGRAY RECEIVED HEON LONDON

DATED JANUARY 18th, 1941

NAVAL

On 12th constal aircraft made the
following attacks. One 4,000 tons merchant

vessel at entrance to songe Fierd - attacked by
fighters, prevented observation results but smoke
came from store of the ship. Another ship of
4,600 tons in the same area a torpedo missed ahead

but one bamb hit the after end of the ship. on
2,000 tens acretant vessel off Borkum a torpedo
missed but bombs were dropped which may have hit.

convey of 31 ships has Just arrived without loss from Sierra Leone.

2.

#peereld was attacked by aircraft off
Lizard on the nicht of the 12th/18th, superficial

3.

damage from near misses.
4.

The *Adventure* was machine gunned the

previous night off the west coast no merious damage

or casualties.
5.

ROYAL AIF FORCE. Night of 18th/15th.

79 aircraft were sent out; 30 to Brest (German equiser)
24 to aerodyones and shipping in occupied France, 7

to Venice (oil target) 2 to arsenal at Turin and 4
to an oil target in Germany, 3 more were sent to drop
leeflets in occupied France. One bomber missing.
LIFYA. on 9th/10th 4 Surricanes in the
6.
course of offensive patrols shot down 7 opency aire aft
and destroye&done on the ground without loss. on
January/

401

January 10th at sone of bombe were dropped on
Toback, one ton on Benghasi harbour and seven

tons on two Itelian serodromes.
7.

GERMAN AIR FORCE. January 18th.

Only a few constal patrols were reported;
1 enemy aircraft was damaged by our fighters off
Libya and another was probably destroyed over
Shetlands.
8.

Night of 18th/15th. A short and concen.

trated attack was made on London docks area and

Themes Estuary by about 120 sircraft.
9.

HOME SECURITY. Attack on London was prin-

eipally incendiary. Fires were caused in a deeks
and at s war industrial factories but all were
quickly brought under control and no serious damage
has been reported.

402
G-2/2657-220

RESTRICTED

No. 292

SITUATION REPORT

E.I.D., W.D.
January 14, 1941.

12:00 M.

This military situation report is issued by the Military
Intelligence Division, General Staff. In view of the occasional
inclusion
of political information and of opinion it is classified
as
Restricted.

I. Western Theater of War.

1. Air Force Operations.
3c important daylight operations.
Last night the Luftwaffe concentrated on Plymouth

in a relatively short, very severe and apparently effective raid.

Activity elsewhere over England was limited.
Dunkirk area.

The Red.F. last night attacked Lorient and the

II. Greek Theater of Sar.
Patrol and artillery activity are reported.
The Italian air force was fairly active.
III. African and Mediterranean Theaters of War.

1. The British report no change in the situation in
Libya. Active patrolling continues in the Kassala and Gallabat
sections.

2. It is believed that the R.A.F. has crippled the

Italian air force in Libya. Scattered British air activity over

East Africa continues.

RESTRICTED

CONFIDENTIAL

403

Paraphanes of Code Bollagree
Received at the The Department
at 12:21, January 14, 1941

Louising filed 14:52, January 14, 1942.

1. a Monday, January 13, - - daylight raid
was earried out against utility installations, parts and airfields
in compled areas of Belgium, Halland and Frence by planos of the

Fighter Command. During the providing night TO planes of the British
Dember Communi were used in attacks against a Venice oil installation,

the Turia arsenal, - oil installation in Germany, a German erviser

at Brest, and shipping facilities and air fields in the occupied area
of France. In addition, propagants pumphlets were dropped in Northern

Premes. One of the TO be failed to return. During the sight please of the Constal Compand attached coopied French parts.

During daylight hours of January 12 Constal Command please did -

- to three a shipe totalling 11,000 tens which they
attached off the coast of Banage

2. On January is the German Air Force engaged in winer ations only. During the night of January 18-14, 24 German please
planted mines and attached marchant shipping in Liverpeal Day. The

-

extent of the damage is - During the - night 38 German
please attached Plymouth but there has been no report of the damage

3. There was no serious damage to war industries and desks as

a result of the Common raid - during the night of January 12-13.
s. The 6,700-tm British order-simplayer Mineature and the
1,000-tm eruiser Berrald were attached and damaged very slightly in
- attack by Common please during the night of January 18-18.

CONFIDENTIAL

CONFIDENTIAL

404

3. At least nine airplanes, seme of which were German, were
destroyed by British bembers based in Malta in an attack on the

air field at Catania, Sisily. In addition many fires were started.
Bungasi in Libya was severely attacked by British be
LEE

Distribution:
Secretary of War
State Department

Secretary of Treasury
Asst. Secretary of War

Chief of Staff

War Plans Division

office of Naval Intelligence
AC - 2
G-S, 1

CONFIDENTIAL