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DIARY Book 405 June 5 and 6, 1941 - Book Page 405 441 Appointments and Resignations Ferguson, Vaughn B.: Personnel record - 6/6/41 Argentina See Latin America -BBarth, Alan "Faltering in the Ranks" - 6/6/41 443 -Camp, John F. (San Antonio, Texas) See War Conditions: Purchasing Mission Colombia See Latin America Contracts, Government Eglin Field, Florida, contract for asphalt: Correspondence between FDR, Carmody (Work Projects Administration), Mack (Director of Procurement), and HMJr - 6/6/41 434 -DDefense Savings Bonds See Financing, Government -E- Eglin Field, Florida See Contracts, Government -FFerguson, Vaughn B. See Appointments and Resignations Financing, Government Defense Savings Bonds: HMJr's radio speech at end of first month of program - 6/5/41 a) Drafts b) Reading copy 1) Reaction - 6/9/41: See Book 406, page 196 Treasury Department "Voluntary Purchase Plan": First report on pledges - 6/5/41 Conference with staff on progress - 6/6/41 123.135.147. 158,169 184 303 324 a) Advertising plan for defense bonds and stamps. 362 for assistance c) Grace Moore asked to sing d) Count Sforza's address to Italians of America e) Paderewski's address to Poles of America 373 b) Letter to president of United Press asking 375 377 380 - 7 - (Continued) Financing, Government (Continued) Book Page Proposal to include request for cash position in monthly schedules sent to banks requesting detail of their Government bond portfolios - Haas memorandum - 6/6/41 405 315 White survey of non-defense expenditures 6/6/41 385 Florida - Eglin Field See Contracts, Government -G- - Gallup Poll See Revenue Revision Germany See War Conditions: Foreign Funds Control Gibara, W. V., & Company See War Conditions: Foreign Funds Control -LLatin America Argentina: Movement of dollar funds to - Cochran 452 memorandum - 6/6/41 Colombia: Stabilization Fund conferences urged by State Department - 6/5/41 12 a) Cochran memorandum recommending postponement until after Congress has extended Fund - 6/7/41: See Book 406, page 19 1) Colombia proposal: Book 406, page 21 2) HMJr so advises' State Department 6/9/41: Book 406, page 230 -MMoore, Grace See Financing, Government: Defense Savings Bonds Morgenthau, Henry, Jr. Tea for Treasury personnel - news release - 6/5/41.. -0Oil See War Conditions: Oil; Purchasing Mission 212 -PPaderewski, Ignace Jan See Financing, Government: Defense Savings Bonds Book Page Pepper, Claude (Senator, Florida) See Contracts, Government Personnel, Division of Ferguson, Vaughn B.: See Appointments and Resignations Price Control See War Conditions -RRevenue Revision HMJr anxious to state at press conference his disappointment at action of Ways and Means Committee; Sullivan advises against it - 6/5/41 Gallup reaction reported by Odegard at 9:30 meeting - 6/5/41 Estimates of income tax deposits, June 1941 405 1 13,21 209 -Secret Service Additional protection for FDR described in Gaston memorandum - 6/5/41 211 6/6/41 290 (See also Book 406, page 379 - 6/10/41) Raise in base pay of guards from present $1280 to $1500 per year discussed at 9:30 meeting Sforza, Count See Financing, Government: Defense Savings Bonds Shipping See War Conditions Speeches by HMJr Defense Savings Bonds: Radio address at end of first month of program - 6/5/41 184 a) Reaction - 6/9/41: See Book 406, page 196 State Department Diplomatic relationships with Japan and U.S.S.R. - Steel White memorandum - 6/6/41 See War Conditions -Treasury Department See Financing, Government: Defense Savings Bonds -UUnited Press See Financing, Government: Defense Savings Bonds 471 WBook Page War Conditions Airplanes: Shipments to British, January 11-May 10 by sea, February 1--June 1 by air - Kamarck report 405 6/5/41 Exchange market resume' - 6/5/41, 6/6/41 Foreign Funds Control: Proposed Executive Order authorizing Attorney General to investigate and require reports as to transactions and property involving foreign interests - Budget Bureau asks Treasury for expression of opinion - 6/5/41 265 274,491 260 (See also Book 406, page 381 - 6/10/41) a) Jackson-HMJr conversation - 6/11/41: Book 407, page 33 1) Conversation discussed with 9:30 group - 6/12/41: Book 407, page 110 b) HMJr-Bailey (Budget Bureau) conversation 6/11/41: Book 407, page 37 Germany: Transactions in German securities by W. V. Gibara & Company, New York City 6/6/41 (See also Cochran memorandum - 6/14/41: Book 408, page 130) 467 Military Planning: War Department bulletins: German infantry battalion in the attack in Belgium - 6/5/41. 275 6/6/41 493 German traffic and march discipline Oil: Japanese invasion of Manchukuo: Sir Henry Dedering, of Dutch Shell, and Teagle, of Standard 011 of New Jersey, conversation with Ickes recalled in Ickes-HMJr conversation - 6/6/41 Price Control: Minutes of June 3 meeting - 6/5/41 a) Discussion of 311 213 1) Lead - stockpile of 2) Automobile prices 3) Coffee 4) Hides 5) Shipping shortages 6) Aluminum scrap b) Department of Justice memorandum formulating policy with regard to its relations with Office of Production Management, Office of Price Administration and Civilian Supply, etc. (April 29, 1941) 220 cotton yarn 223 containing nickel 231 c) Ceiling fixed for various grades of combed d) Ceiling fixed for wide variety of scrap, etc., e) Aluminum price schedule amended f) Copper civilian allocation program 244 248 - W - (Continued) Book Page War Conditions (Continued) Purchasing Mission: Transfer of defense articles to United Kingdom authorised by FDR a) Texas crude oil: FDR authorizes acceptance of this defense article from John F. Camp, San Antonio, Texas, and immediate transfer to United Kingdom - 6/5/41 1) Clifton Mack memorandum on 405 84 transfer - 6/20/41: See Book 411, page 72 Lease-Lend purchases - weekly report - 6/6/41.. 321 Shipping: Act authorizing acquisition by United States ***** of domestic or foreign merchant vessels ***** - 6/6/41 451 6/6/41 440 Steel: HMJr's memorandum to FDR on Dunn (Gano) reports - White, Harry D. For survey of non-defense expenditures, see Financing, Government For suggestions of diplomatic relationships with Japan and U.S.S.R., see State Department 1 June 5, 1941 9:30 a.m. GROUP MEETING Present: Mrs. Klotz Mr. Foley Mr. Odegarde Mr. Thompson Mr. Bell Mr. Haas Mr. Gaston Mr. Sullivan Mr. Graves Mr. Viner Mr. Cochran Mr. Stewart Mr. Schwarz Mr. White H.M.Jr: John, unless you emphatically ask me not to, I am going to tell my press conference at ten-thirty that I am very much disappointed in the action that the Ways and Means Committee took and I think that sooner or later as this show goes on they will have to come to the Treasury. Sullivan: I think the last half of it is all right. H.M.Jr: What is the matter with the first half? Sullivan: Well, I mean they are going to take it as a spanking. We are a long way from reporting that bill out. It is possible that something might happen between now and three weeks from now when we report the bill out -- 2 2H.M.Jr: Well, it won't unless I express my displeasure. (Mrs. Klotz entered the conference.) Sullivan: That is all right. I think you could say you are disappointed and that you think that eventually we will have to come to it, but I hope you don't do it in terms that make it a personal fight between you and the Committee. H.M.Jr: Couldn't you say, Mr. Secretary, you are disappointed and you think that a number of Americans will be disappointed? When it goes on the floor, they might hear from -Then I can -- Sullivan: I haven't yet heard how many votes we had. Bell: The paper said five. Sullivan: I know, but only one paper said that and I don't know if it is true. None of us were Schwarz: there, you know. They had us out and the clerk of the Committee called me on instructions from the Chairman and read me the motion, so afterward I talked with Cooper and he didn't tell me how many votes we had. H.M.Jr: Herbert, what do you think? Do you think if Gaston: Well, I would say - I think I pretty well agree with John. I think I would say that I am asked - what would you say? you are disappointed at the result and as the needs increase we think we will have to Sullivan: come to a plan of that sort. I think it is all right. Just leave out the bitterly. 3 -3H.M.Jr: The who? Sullivan: I understood you to say you were going to H.M.Jr: No, I didn't say "bitterly." Did I? Gaston: No, you used some other qualifying word. H.M.Jr: Deeply. Sullivan: Well H.M.Jr: Well, John, I can't be milk and toast on this thing. Sullivan: No, I agree with you there but -- H.M.Jr: I can't always be pulling my punches. Sullivan: What I am trying to suggest to you is this, sir, that I think you can still express your disappointment without their taking it as a say, "I am bitterly disappointed. personal public spanking. H.M.Jr: Well, I am disappointed. I am deeply dis- Sullivan: Well, maybe it was the way you said it that made me think you used the word "bitterly." H.M.Jr: Well, you know the old story that I tell about the parent that got the letter from his son appointed. I feel terrible about it. at boarding school? His wife came in and found him pacing. He said, "This is the last time I am going to stand for this from your son." She says, "What is the matter, darling?" He says, "Look at this letter. It says, 'Daddy. Please send me ten dollars as soon as possible. , If 4 -4- "What is the matter with that? It only says, 'Please, Daddy, send me ten dollars as soon as possible. in (In different tone of voice.) You (Klotz) have heard it about ten times, but that expresses it. It is just your little - well, anyway, I will do the best I can not to make it too difficult for you on the Hill. Sullivan: Thank you. We are starting on income taxes this morning. H.M.Jr: Good. Who has got something important instead of my going around the room? We will do my check-up first. Foley was going to do something about Senator White and that organization of yours that reads the record every day and keeps it a great secret. Foley: It wasn't any secret. I don't know what White said to you, but he didn't say anything very glowing about you. H.M.Jr: Didn't he? Foley: No, he didn't. He made a speech for us on the floor, as did several others when the Stabil- ization Bill was up, but here is the record and there is nothing to bring to your attention. H.M.Jr: Foley: Bell: Isn't there? No. Here is a letter to Cochran thanking him for what he did on the floor in handling the bill, but I don't even think White deserves a letter. He called me up and asked me to read his speech and I said I would and I have got the notation on my desk to read it. 5 -5Foley: It is there, and I marked the -- H.M.Jr: Man to man, if I hadn't called you would you have written this letter to Cochran? Foley: H.M.Jr: Oh sure. I told Larry Bernard - I told Larry to get up the letter several days before. All right. Foley: Yes, the letter was prepared. H.M.Jr: Now, watch me closely, Herbert, when I do this, see. This is from the President this is from Harold Ickes to the President of the United States. "My dear Mr. President: "I wonder if you remembered to give a tip to Henry Morgenthau that you are interested in the election of Lynden Johnson of Texas. Sincerely, (signed) Harold Ickes" "H.M.Jr: "Do what you can. (signed) F. D. R." Foley: You are a softie. H.M.Jr: Why? Foley: Well, I would do it. H.M.Jr: All right. I am a softie. 6 -6Foley: Sure. H.M.Jr: We have never done that kind of thing. Sullivan: Do you think it would be proper for me to ask Secretary Ickes if an increased tax on gasoline would be helpful to him in handling the problem? H.M.Jr: In electing Lynden Johnson? Sullivan: No, he has another problem besides electing Lynden Johnson. H.M.Jr: Well, it is too subtle for me. Sullivan: No, Henderson opposed an increase in gasoline. H.M.Jr: Opposed? Sullivan: Opposed it, yes. Now, it appears there is going to be a shortage and it might be helpful to Ickes in handling that shortage if there were an increased tax on gasoline. H.M.Jr: There is no harm in asking him. Sullivan: That is what I thought. H.M.Jr: George, you were to let me know today about whether we could make a survey of banks and insurance companies, how much on invested bonds. Haas: Oh, I didn't know that was today. I am working H.M.Jr: All right, he gets a bad mark. Haas: I have got something else that is due today, on that. though. H.M.Jr: What is that? 7 -7Haas: That letter on the steel capacity. Miss Chauncey has it. She is going to bring it in with your letters this morning. H.M.Jr: All right. Thank you. What are we doing about getting Irving Berlin on the radio? Foley: Huntington has been working on it. He worked on it all day yesterday and Irving Berlin's lawyer is flying down here this morning and arrangements have been made with CBS and with NBC for them to plug the song not only on the thirteen Texaco programs, but also on their sustaining programs. They like the song very much. They want to be helpful. ASCAP is going to release the automatic copyright that they have. H.M.Jr: It is under control? Foley: Everything is under control. H.M.Jr: While we are on that, I don't know - there is Graves: I didn't know that. Kuhn: It has been stopped. H.M.Jr: I don't want to do it. I mean, that is -- Kuhn: Yes. H.M.Jr: I decided I wouldn't do it. a letter coming to me to ask Paul Robeson to go on the Texaco hour. This thing here of White's -Klotz: He wants to talk to you about it. 8 -8H.M.Jr: Well, Harry, about this list of people that are coming, there is a little mix-up on the date because it seems now that the radio correspondents are going to give a dinner for the President on that night. If he is going to go, all the people we want to have will be there also. I am trying to find out whether the President is going to go, but will you see me today on it, Harry? White: I will see you today on that. H.M.Jr: Please. Now, Dan, the most important thing is in the first place see that Walter Stewart is brought up to date on the English treasury matter, Bell: will you, both the six fifty and on the -Three fifty, yes, sir. H.M.Jr: And then for this meeting - I thought I would like to see you people on that at eleven-thirty today. Bell: All right. H.M.Jr: Foley: Walter, will you bring yourself up to date on that thing, please? And, Ed, I want you to sit in here at eleven o'clock today. What is it? H.M.Jr: Just be here. Foley: What is it? H.M.Jr: Well, Morgan Stanley is coming. As long as he is bringing somebody - he is bringing his partner - I want somebody. If it is going to be two to one, I want two to two. If it were one to one, that would be all right; but 8 -8H.M.Jr: Well, Harry, about this list of people that are coming, there is a little mix-up on the date because it seems now that the radio correspondents are going to give a dinner for the President on that night. If he is going to go, all the people we want to have will be there also. I am trying to find out whether the President is going to go, but will you see me today on it, Harry? White: I will see you today on that. H.M.Jr: Please. Now, Dan, the most important thing is in the first place see that Walter Stewart is brought up to date on the English treasury matter, Bell: will you, both the six fifty and on the -Three fifty, yes, sir. H.M.Jr: And then for this meeting - I thought I would like to see you people on that at eleven-thirty today. Bell: All right. H.M.Jr: Foley: Walter, will you bring yourself up to date on that thing, please? And, Ed, I want you to sit in here at eleven o'clock today. What is it? H.M.Jr: Just be here. Foley: What is it? H.M.Jr: Well, Morgan Stanley is coming. As long as he is bringing somebody - he is bringing his partner - I want somebody. If it is going to be two to one, I want two to two. If It were one to one, that would be all right; but 9 9- I thought, Dan, at eleven-thirty we ought to go over that thing once more, and I would like the same people. All right? Thompson: Ray Ballinger is transfering to the Quarteras Personnel Director. They have a civilian master General's office in the War Department personnel of eighty-five thousand employees, larger than the Treasury Department. I was amazed to find that out. H.M.Jr: What else? Thompson: That is all. Bell: We had our conference yesterday afternoon. It was over two hours. It was with Dean Acheson on the agreement. I think it was an excellent conference. Nothing is really set. He has his difficulties in the State Department and he said even Mr. Hull, while he approved it, probably had some doubts about some of the provisions in that agreement. He agreed that there might well be two agreements, one on the quid pro quo and the other one on the economic provisions. H.M.Jr: That would be excellent. Bell: And he agreed to go back and write a memorandum H.M.Jr: of the various points in the two agreements, or the two points, so that you and Mr. Hull could sit down and talk with the President about matters of policy and then the two staffs can get together and draft the agreement. Who suggested I be put in a vacuum until this gets around? Bell: I don't know. 10 - 10 H.M.Jr: It was either White or Viner, I don't know which. Viner: The opponent sayeth not. H.M.Jr: People wonder why I am so subdued and never speak or never do anything. Here Viner comes from Chicago and I wanted to go to town on this thing and they are very nice about it, but just say, "You keep out of this and leave it to me, which I did, and now they have got results. It is fine. Bell: The other thing is that the State Department, Mr. Hull, has sent us a draft of a press release regarding the amounts due from foreign governments on June 15. What they would like to do is to announce to the public that they are not sending notices to certain of the governments and that they are sending notices to Germany and Italy, Hungary, and Rumania. H.M.Jr: Dan, whatever it is, if it is all right with you it is all right with me. Bell: I would like to answer that letter and just say that we feel in view of world conditions that there isn't any sense in giving out any notices at all or sending any notices to the government 8, merely making public the amounts due from each of the governments. H.M.Jr: Would you mind, as long as we have a group, the same group that is working with you on this thing, just ask their advice. Bell: O.K. H.M.Jr: And whatever that groups agrees on, I will Bell: All right. Is that all right? H.M.Jr: take it. 11 - 11 Bell: Fine. H.M.Jr: You might have them meet a few minutes ahead of eleven-thirty in your room and just put it up to the, but whatever they agree to, I will take it. Bell: Suits me. H.M.Jr: Harold? Graves: I have nothing. H.M.Jr: Unless you want to do what that certain gentle- man asked you to do - you know what I mean, the letter. I mean, if you feel that is something that you want to do, otherwise I am just a hundred percent opposed to it. Graves: I would like, if I may, to talk with you about that. H.M.Jr: Really? All right, that is your privilege. Graves: I don't mean soon, necessarily, but before long. Graves: Well, will you arrange it? Yes, sir. H.M.Jr: You are going to have trouble with me. Graves: Well, I would like to talk it over with you. H.M.Jr: Sure, that is your privilege. Graves: I would like to ask whether you signed our let- H.M.Jr: ter to this New York gentleman yesterday? H.M.Jr: New York gentleman? 12 - 12 Graves: Donovan. H.M.Jr: No. I will have it sent in. Graves: That is all. H.M.Jr: Harry? White: You received a letter from the State Department according to Mr. Collado who called up this morning saying that Colombia wanted to take up the matter of Stabilization Fund. H.M.Jr: Columbia Broadcasting? White: No, Colombia, C-o-1-o-m-b-i-a. The reason he called me was to say the Ambassador was around and raring to go, and he hoped that he would be able to see somebody in the Treasury very soon. The amount they are interested in is not very large. H.M.Jr: Well, again, as long as there is this group meeting, let them meet ten minutes earlier. Bell: Wait a minute. H.M.Jr: I am not interested. Cochran: The letter came only yesterday. H.M.Jr: They can meet at eleven-fifteen and settle the thing. Bell: Eleven-seventeen. H.M.Jr: All right, Harry, that is taken care of. I think we ought to wait until after the Bell: Stabilization Fund is extended. 13 - 13 White: You might want to wait until you go into it seriously, but I think somebody ought to see the Ambassador and talk with him. H.M.Jr: Which Ambassador? White: Because it is probably a large program, and the Export-Import Bank is doing everything but that, and I think there ought to be some discussions going forward if there are no commitments. They are only asking for two million pesos. H.M.Jr: As I say, take it up with the Bell group. What else, Harry? That is settled. White: That is all. H.M.Jr: Chick? Schwarz: As soon as it is copied, I will have a draft of the letter from you to Mr. Elmer Twitchell. That is the Phillips character. H.M.Jr: Is it funny? Schwarz: H.M.Jr: I hope. (Laughter) I would like to let Herbert and Harold and Ferdie have a copy. Make it funny. Viner? Odegarde? Odegarde: Several weeks ago you asked for a survey by Gallup on tax reactions. H.M.Jr: Yes. Odegarde: I have that here. It hasn't been published 14 - 14 yet. H.M.Jr: Would you just state it for the group? Odegarde: They asked the following questions: "Do you think Federal Government spending, except for defense, should be reduced at this time? Yes, 66 percent. No, 26 percent." "Do you think Federal spending should be reduced on farm benefits. Yes, 35 percent. No, 53 percent." White: What district? Odegarde: This is the nation-wide returns. "On public works not connected with defense? Yes, 6 percent. No, 27." "On WPA? Yes. 63. No, 32." "On CCC? Yes, 41. No. 52." "On NYA? Yes, 38. No, 45." "Have you heard or read anything about the new taxes which are being discussed in Washington to pay for the increased cost of defense?" Seventy percent of the people said, "Yes." Thirty percent hadn't heard of it. "If 'Yes', how should the Federal Government pay for the increased cost of defense, chiefly by extra taxes or chiefly by borrowing more money? Chiefly by extra taxes, 72 percent. Chiefly by borrowing, 17. "In order to meet increased costs of defense, would you be willing to pay or have your husband 15 - 15 pay a tax of about two weeks salary per year in addition to the taxes you have been pay- ing? Yes, 59 percent. No, 33 percent. H.M.Jr: That is awfully good. Bell: Isn't that interesting? H.M.Jr: Would you turn it in? Odegarde: Yes, I will give it to you. H.M.Jr: Are they going to publish that? There is a note at the bottom. Odegarde: "These results are the property of the American Institute of Public Opinion and not to be printed in any form until after released by the Institute." H.M.Jr: Fine. Bell: That is interesting on WPA and CCC and farm benefits. H.M.Jr: Right. Odegarde: The survey on our bond program is now being made. H.M.Jr: Grand. Odegarde: Incidentally, these surveys, Mr. Secretary, White: How much are they worth? (Laughter) Some of those answers are diametrically opposed to the deductions one would make on a lot of cost us nothing. other bases. That is why I asked. The methods of sampling on many of these problems need to be carefully examined before you place too 16 - 16 much emphasis on their findings. I.M.Jr: George? Haas: I have this letter you wanted to see me about. H.M.Jr: Well, do you want to give him those things? Haas: I have no objections. Phil Young called me yesterday-H.M.Jr: Three aircraft. What does he want three for? Haas: I think what he is asking for is the regular industry report on aircraft and also the British report. H.M.Jr: Oh, take care of it. Haas: Phil asked for a copy yesterday, too. He said the copy you sent to Hopkins goes to Lubin. H.M.Jr: Well, if Cox wants a set and Young wants a Haas: set, let each one have a set, a set a piece. That is all I have. H.M.Jr: Roy? Blough: Nothing this morning. H.M.Jr: Merle? Cochran: I spoke to Sir Edward Peacock last night. He and Mr. Jones are going to be in touch - Mr. Bell spoke to Mr. Jones on that loan proposi- tion. I had this letter from Mr. Welles yesterday that Harry spoke of on Colombia. H.M.Jr: Ed? 17 - 17 Foley: I sent to Harold Ickes the information I had about the overlapping stock holdings in the two aluminum companies, and he sent me back a copy of the letter he wrote to Jesse, which you might be interested in listening to. H.M.Jr: Go ahead. Foley: "My dear Jesse: "When you said at Cabinet meeting recently that you had bought a large tonnage of alumi- num from the Canadian Aluminum Company, I asked you whether there was any connection between that company and the Aluminum Company of America. Since you answered in the nega- tive, I am afraid that some of your boys have misinformed you. "My information is as follows: A. K. Davis, younger brother of Arthur Davis, president of Alcoa, has been president of the Canadian Company since its formation in '28. The holders of eighty-one point fifty-three percent of the common stock of Alcoa hold eighty-three point ninety-three percent of the stock of the Canadian Company. "From this it would seem to me that they are twin brothers in monopolistic iniquity. Harold Ickes." H.M.Jr: Wonderful. (Laughter) In order to help me, couldn't Foley and White get together with Mrs. Klotz on what she has, to see if there is anything-Foley: I have these files, and, Mr. Secretary, we have 18 - 18 never made a study of the conservation powers in so far as oil is concerned. We did have papers prepared-H.M.Jr: Pardon me. Mrs. Klotz says she has the story. If you and White could talk - have you done anything on it, White? White: We did something on it, but it was a very side issue. She has the main stuff. Klotz: This has been going on now-- H.M.Jr: Have you got the story? Klotz: I think so. H.M.Jr: Did I do anything? Klotz: Well, there are various angles. I don't know what you-H.M.Jr: Do you think I had better look at it myself? Klotz: Oh, definitely. H.M.Jr: Oh, wait until I get a look at it. I will get to it. Klotz: Because I know exactly what you had in mind. H.M.Jr: I will get together - the four of us will get together. Foley: All right. H.M.Jr: I did do something on it, though, didn't I? Klotz: Yes. H.M.Jr: Go ahead. 19 - 19 Foley: I have a memorandum on the state taxation of the defense activities. Now, Bob has been illusive and we haven't seen him since you asked us to see him. I have had I have called up every day and he is either tied up or he is out of town. I don't know whether the creation of the vacancy on the court makes him less interested in his Department or not, but I haven't been able to see him. Now, we are not far apart, Mr. Secretary. There is no need of carrying on this difference between me and Bob. We are together. The difference is between ourselves and the War Department, and Bob substantially agrees with us, but there hasn't been a clarification of hisposition and ours. H.M.Jr: What do you want to do? Foley: I thought for your information you would like to read this memorandum which shows the two positions (dated June 4). H.M.Jr: Anything else? Foley: No. H.M.Jr: Herbert? Gaston: Jim Rowe wrote you a letter asking you to men- tion the matter to the President. I don't see why you should mention this matter to the President. H.M.Jr: I was handed this letter as I walked in to the President for lunch, and I just saw it was not from the President, so I stuck it in my pocket and I didn't read it. 20 - 20 Gaston: Yes. Well, the facts are that Ed Flynn and he tell me the two Senators, Herring and Gillette, and Wallace, they say, are very anxious to get this old man, eighty years old or more, removed as Collector of Internal Revenue in Iowa so that they can appoint the present State Chairman, Birmingham, in his place, so that they can get a different kind of a state chairman and Flynn spoke to me about it, and he had Rowe call me up about it, and I told Rowe, "It is something they will have to first clear with the President before we can do anything." If the President says, "Yes," he wants that man dismissed, then we can proceed to examine the merits of their candidate. H.M.Jr: Well, I am not going to get into it today. Gaston: Yes. H.M.Jr: All right. Gaston: I don't see why we should take any - here is H.M.Jr: a little memorandum of some Secret Service things. You may know about them already. Thank you all. Hunded to me by21 Questions from Gallup poll. Peter Odejuid Interviewing done during middle of May 1941 June Questions sent to Dr. Peter Odegard with permission of Dr. G.11up S.MYI 1. Do you think federal government spending, except for defense, should be reduced at this time? Yes 66 No 26 No 8 opinion 2. Do you think federal spending should be reduced: On farm benefits? On public works not connected with defense On WPA? On the CCCT On the NYA? Yes 35 No 53 No opin. 12 Yes 66 Yes 63 Yes 41 Yes 38 No 27 No opin. 7 No 32 No opin. 5 No 52 No opin. 7 No 45 No opin. 17 3. Have you heard or read anything about the new taxes which are being discussed in Washington to pay for the increased cost of defense? Yes 70 No 30 If "Yes": How should the federal government pay for the increased cost of defense - CHIEFLY by extra taxes, or CHIEFLY by borrowing more money? Chiefly by extra taxes 72 Chiefly by borrowing 17 No opinion 11 4. In order to meet the increased cost of defense, would you be willing to pay (or have your huband pay) a tax of about two weeks' salary or income per year, in addition to the taxes you have boon paying? Yes 59 No 33 No opinion 8 THESE RESULTS ARE THE PROPERTY OF THE AMERICAN INSTITUTE OF PUBLIC OPINION AND ARE NOT TO BE PRINTED IN ANY FORM UNTIL AFTER RELEASE BY THE INSTITUTE OR AFTER OBTAINING WRITTEN PERMISSION FROM DR. GALLUP (Hadley Cantril) 22 JUN 5 1941 by dear Mr. Contents Upon - return to Mashington - Monday, the members of - who with you - the Mill extend the Stabiliation Fund and dollar devaluation powers, told me how admirably you managed the legislation on the Floor of the House. Because you were called - to substitute for Chairman Samers at the last moment in handling this complex measure the superas of your effort becomes even more notemently. Please accept w sincere thanks for a very difficult job well done. Sincerely, (Signed) H. Morgenthan, 327 Secretary of the Treasury. Benerable Jaha do House of Representatives. LJB:KHFtmp 6/4/41 By Messenger File to Mr. Thompson AND conference report EXTENDING TIME WITHIN WHICH POWERS RELATING TO BTABILIZATION FUND AND ALTERATION OF THE WEIGHT OF THE DOLLAR MAY BE EXERCISED Mr. COCHRAN. Mr. Speaker, I move that the House resolve itself into the see of the Whole House on the Com state the Union for the further con- sideration of the bill H. R. 4646, to extend the time within which the powers relating to the stabilization fund and alteration of the weight of the dollar may be exercised The motion was agreed to. Accordingly the House resolved itself into the Committee of the Whole House on the state of the Union for the further consideration of the bill H. R. 4646, with Mr. RAMSPECK in the chair. The Clerk read the title of the bill. Mr. REED of Illinois, Mr. Chairman, I yield 14 minutes to the gentleman from Ohio (Mr. SMITH]. (Mr. SMITH of Ohio asked and was given permission to revise and extend his own remarks in the RECORD.) Mr. SMITH of Ohio. Mr. Chairman, 2 years ago, as a member of the Coinage, Weights, and Measures Committee, I op- posed before that committee and on the floor of the House the continuation of the stabilization fund and also the Prestdent's power to further debase the coin. Since that time my convictions have been strengthened on the need of abol- ishing these extraordinary and dicta- torial powers. I know of no evidence to substantiate any claim that any of the alleged purposes for which these powers were ostensibly created has been achieved in whole or part. It should now be needless to d. As this point. On the other hand, the evidence is conclusive that the use of these powers has already caused incal- culable damage to our monetary and financial processes. This point It is vital that we consider and discuss most seriously. see pages 4575 76 77 79 23 did 24 EVER CONGRESSIONAL RECORD-HOUSE wige Section 10 (a) of the Gold Reserve Act of 1934 states the only purpose for which the stabilization fund was created, namely, "for the purpose of stabilizing the exchange value of the dollar." I know of nothing to indicate that even a single dime of the total $2,000,000,000 composing the stabilization fund was ever used for this purpose. The fact is that none of it was ever so used and never could have been The gold-buying program at the fixed high price of $35 an ounce obviated that possibility. The high fixed premium on gold offered by the Treasury quickly brought on the gold rush into the United States. More than a billion dollars was imported in 1934. The rest of the story of the gold avalanche is too well known to require repetition. The point is, the rate of gold imports, immediately upon the adoption of the gold-buying program, which provided for the buying of foreign and domestic gold at a permanently fixed premium of $14.33 an ounce, rose sufficiently to restore full confidence among foreign countries in the ability of the United States to fully meet any gold-payment demand that might have been made upon us. This made the stabilization fund wholly useless and unnecessary, so far as the statute which created it was concerned. The truth is that the stabilization fund has been used for ulterior purposes and utterly in violation of the act which created this fund. Instead of using this fund for the only purpose the law presumably directs it shall be used, namely "to stabilize the exchange value of the dollar," to give strength to our own economy, it has been used exclusively to bolster and support foreign paper currencies, French paper francs, Belgian paper belgas, British paper pounds, Argentine paper pesos, Brazilian paper milrels, Chinese paper yuans, and so forth, to bolster and support the economies of other nations In purpose, spirit, and letter. the stabilization fund has been operated in complete violation of the law. The real purpose for which this fund has been used is, in my opinion, now too evident to be concealed any longer. We shall see as we go along what this is Before the Coinage, Weights, and Measures Committee, March 3. 1939, the Secretary of the Treasury. Mr. Morgenthau, was asked the following question by the gentleman from Minnesota (Mr. AUGUST H. ANDRESEN], member of this committee. In connection with the stabilitation fund. has any of the stabilization fund been used in any manner to finance a foreign govern- ment in the purchase of armaments or any other war supplies? Mr. Morgenthau raised his right hand as is done in taking an oath and saidI can answer that under oath to that ques- 'tion: No. And I will answer further As long as I am Secretary of the Treasury and as long as Congress gives me that responsibility. the answer is, "No." Now consider this statement in connection with a news item appearing in the Washington Herald, May 5, 1938, which reads in part as follows: United States and Britain back Paris in devaluation of franc; new dollar slash denied; tripartite agreement stands first test: move aids French armament drive. United States consent to a steep devaluation of the franc and the promise to support it at new lower level were announced last night by Secretary of the Treasury Henry Morgenthau. Morgenthau's announcement came at a press conference conducted jointly by him 4561 House Committee on Coinage, Weights, and Measures to make a statement about the pro- posed stabilization arrangement with China. Then note particularly he added the following revealing statement, which shows that 3 years after he had used the fund to aid France militarily he still had in mind using it as a means to interfere in foreign wars on the side of one of the and French Ambassador Rene de St. Quentin The French Ambassador, his beaming face expressing pleasure and gratitude, said be was "not a monetary technician and am thus unable to give the details." He added: "I am only a diplomat, but the principle diplomacy, statesmanship. and business is frankness. This principle did not fall in our negotiations I want to convey the thanks of the French treasury to the United States Treasury and its able leader, Mr. Morgen- of thau." Other officials declared the Roosevelt administration considered the agreement essential for the success of the 15,000,000,000 franc loan the French Government will float for additional armaments against its dictator neighbora Also note May 5. 1938, Washington Post Associated Press dispatch with a Paris date line in which the British belligerents as against the other. Mr. Morgenthau said: I had previously stated to this committee that I would not consent to the use of the stabilization fund to assist any foreign coun- try in prosecuting a war without first con- suiting with the congressional committees July 14. 1937, $48,000,000 was made available from the stabilization fund to China; April 25. 1941, $50,000,000 more was made available to China. As everyone knows, the Government of the United States is openly and avowedly giving mili- tary aid to China against Japan. Therefore, It is apparent that the stabilization fund is being used to aid China in making Chancelor of the Exchequer, Sir John Simon, is quoted as having said before the House of Commons the following A major factor in the swift British and war. to devaluate its currency was the desire to of defense in our international economic rela- the world's three democratic powers to the dictators Premier Benito Mussolini of Italy built up to protect the dollar and the Amer- American approval of the proposal of France present a semblance of economic unity among and Chancelor Hitler of Germany It was stated in informed official quarters yesterday The critical status of the French franc coincided with the Mussolini-Hitler conversa- tions which began last Tuesday in Rome If these news items are correct, and there is no reason to believe that they are not, Mr. Morgenthau's denial to the con- trary notwithstanding the stabilization fund had already been used by him when he made the above statement- To finance a foreign government in the purchase of armaments or any other war supplies And- as part of the foreign policy of this Gov- ernment with reference to supplying war supplice to any other country. In this connection let us consider the operation of the stabilization fund in Latin America. There can be no ques- Recently before the Coinage, Weights, and Measures Committee Mr. Morgenthau stated further: Our stabilization fund is a potent weapon tions. This is hardly the time to abandon the machinery of control which we have loan economy When all these transactions and circumstances are considered together, can there be any question that the stabilization fund has been illegally used and is now being so used as a means of aiding certain nations in their war efforts, instead of for the legal purpose that is provided in the statutes, namely to "stabilize the exchange value of the dollar,' in the interest of our own economy? Does it not appear that we have here revealed at last the true answer to the big question that has been confounding the whole Nation, namely, Why is the Government buying all this gold and pay- ing such a high price for it? Is this great American riddle, the program of buying up all the gold of the world, at last unfolding itself to our understanding? Did the authors of this monstrous tion that the $700,000,000 made available scheme have as their secret and sinister Grande through the Export-Import Bank monetary gold stock solely as a weapon as loans to the states south of Rio purpose the cornering of the world's is designed specifically to aline these of war? on the side of the United States and Eng- ther recently before the Committee on land against the Axis Powers; likewise, there can be no doubt that the stabilization fund is being used in those countries Totaling the balance from July 1939. to April so. 1941. the stabilization fund pur- states, both economically and militarily, for the same purpose. Fifty million dollars of the stabilization fund was made available December 27. 1940, to the Argentine Government; October 18, 1940, $10,000,000 was made available to Brazil. May 8, 1941, Secretary of the Treasury, Mr. Morgenthau, in his testimony before the Committee on Coinage, Weights, and Measures of the House, where he was advocating the continuation of the stabilization fund and the power to debase the dollar, said: The first arrangement is with China You will recall that on December 2. 1940 I appeared before a joint session of the Senate Committee on Banking and Currency and the Said the Secretary of the Treasury fur- Coinage, Weights, and Measures: chased approximately $3,920,000,000 of gold This gold was bought from 23 different coun- tries. Incidentally, the existence of the stabilization fund made It possible to carry out. with the essential speed and secrecy three large acquisitions of gold from hardpressed friendly countries Why secret transactions in the purchase of gold by the stabilization fund agency? If these transactions were on the square, was secrecy necessary?secrecy to carry out three large acquisitions of gold from hard-pressed friendly countries Was France one of these hard-pressed countries-France, which may now soon be our mortal enemy? Is this not addi- tional evidence that the whole gold- MAY 27 CONGRESSIONAL RECORD-HOUSE 4562 manipulating process had from the be- Mr. MORGENTHAU. Yes: I think the rate would go up. That is just my belief. ginning for its purpose the making of Certainly the possession by the admin- war? This transaction of the stabilization needs some another fund as nation in agency the from gold purchased standpoint. careful by the Federal exami- Here. Reserve banks for the Treasury. is one of the darkest chapters in all the history of governments' monetary policies In reality, no gold purchased by the stabilization fund agency is actually finally paid for with any money from the stabilization fund. Only $200,000,000 are used by the stabilization fund agency in its operations. The remaining $1. istration of the stabilization fund of 2.000,000,000 gold dollars and the power to further debase the gold dollar is a most powerful means for holding interest rates down. But not in the way Mr. Morgenthau would have us believe. If I interpret his position correctly, he means to indicate that the $2,000,000,000 he already has, and the additional $4,000,000,- 000 he would have if the content of the dollar were reduced to the limit allowed by the present law. could be used by him to finance a part of the deficit instead 800,000,000 of the fund has been lying of having to borrow this amount. idle ever since its creation. that an additional amount of about $5. 000.000.000 of so-called profits is available to the Treasury through the use of How could $3,920,000,000 of gold be pur- chased with $200,000,000? It is. of course, impossible to buy three billion. nine hun- dred twenty million gold dollars, each weighing 13.71 grains of fine gold with $200,000,000 of the same weight and fineness. So far as the mere transaction of purchasing gold is concerned the Stabilization Fund Agency merely acts as buyer for the Treasury. The awful truth is the Treasury pays for the gold purchased by In this connection it should be noted the power of debasing the silver dollar Were this power to reduce the content of the silver dollar exercised, Mr. Morgenthau would have in all about $11,000,000.000 of clippings. If this amount were used to finance the deficit instead of resorting to borrowing. we are supposed to believe, it would so glut the money market as to force in- this agency. as it does for all the other terest rates down. gold it purchases, with flat currency. socalled gold certificates, and by the most devious and sinister trickery. in complete tion undertook to use this political windfall to finance the deficit, it would collide violation of the statutes, shifts the cost of all the gold to the bank depositors of the United States. This group of people, bank depositors. now carrying the cost of the roundly $14,000,000,000 of gold that has been bought under the gold-purchase program. This means nothing other than the creation of $14,000,000,000 of the purest kind of inflation in the banking system. It means that the remaining bank deposits are diluted in value by $14,000.000,- 000. which make the total bank deposits, as a whole, worth no more than about 75 cents to the dollar In the first place, if the administrahead-on with its claim that it does not intend to use the powers of debasement to produce inflation. For every dollar of this windfall that is spent to pay Government costs. current or past, a dollar of inflation is produced. There is no escape from this. It is, of course, the strangest and most stabilization fund and the powers to fur. ther debase the dollar to hold down in- terest rates on Government obligations: Mr MORGENTHAU I feel about both of them in the same way. Under conditions as they are today there is not very much use for people, and say to them, buy my bonds The important cause for low interest rates is lack of demand by private industry for loans and new capital, which is dependent upon the more basic cause. the destruction of the standard unit of value and the free contract process. Some of the other less important fac- tors in holding interest rates at a low level are the large volume of Government them on a day-to-day basis In the case of the stabilization fund. as said, earlier this loans at low interest rates arbitrarily fixed by the Government; forced bond morning it is that reserve power which deposits, falsely called loans, in the bank. we have which I believe is one of the factors ing system by the Government bearing which makes it possible for us to carry a public debt at an average rate of 2.5 percent rates of interest arbitrarily fixed by the administration take those various emergency powers away Therefore. the present low interest rate is mostly a symptom of a gravely diseased I think that is very important I do not say It would happen. but If Congress should from the President such as the stabilization fund, I think there is a fair chance that we would have to pay more for money because I should find myself in the position that the owners of the money. the people who own the money would so to speak "have me." Mr.interest? WORLEY You would just have to pay more ican people of the destructive nature the stabilization fund and the desperate need for its prompt abolishment? The power to further clip the coin debase the gold dollar should forthwith be abolished. Why is the President asking that the power which he now has to further clip the coin be continued? It is remarkable that this request should be made at the present time, when the whole country is becoming apprehensive of the dangers of inflation, when the Federal Reserve authorities see these dangers and are asking for legislation cope with them, and when the administration itself openly recognizes the dan- gers of inflation and is trying to head them off by instituting the most drastic and far-reaching measures ever adopted in this country. some of which are: First. A tax bill to increase our annual taxes three and a half billion dollars the largest increase in our history Second. A price-control agency with totalitarian powers to be found only in dictator nations. And to avert inflation the administration has also inaugurated a program to raise a huge amount of money by selling bonds directly to the public. At this very time, perhaps more than ever before, supreme confidence is needed in money and Government bonds. Yet and Government securities. Consider the experience of some of the and out of the other corner says, "But time that this deplorable condition in the banking system be given serious consid- the following shows, that he needs the Should anything more than the fore. going be required to convince the Amer. me keep the power to debase the dollar.' will not produce any inflation if you let in the amount I tell you to buy and on my own terms, or I will give you a big dose of inflation eration by Congress and that steps be the need of much deficit financing, while of at thetaxes, same time this would also yield more here is the Secretary of the Treasury asking Congress to extend the most danger- must have this power continued so that can use It is a club over the heads of the promptly taken to correct it? Mr. Morgenthau tried to make out, as and unemployment would end, which would in turn relieve the Government anomalous position for the administration to take. to say out of one corner of its mouth, "You can trust me fully that I Is it any wonder the Federal Reserve authorities and other informed bankers and persons are worried? Is it not high process, private industry would go again monetary process. Nor is the low rate necessarily helpful to the Government The Treasury is now losing more in taxes because of the destruction of the free contract process than it is gaining in reduced interest rates. If the standard unit of value were restored so as to again permit the operation of the free contract ous power to further clip the coin and destroy the future value of our currency nations whose political authorities have had the power to clip their coin-de- valuation is a term used to deceive the people and to hide from them what is really being done. In Italy there is this power. At a single stroke, in one instance, her politicians clipped three and five-tenths billion dol- lars off the -Italian money-a thereby destroyed that much value of the currency and Government securities The Russian dictator has the power to clip the coin. In one Instance he clipped more than $9,000,000,000 off the ruble- Russian money- and thereby destroyed that much value of the currency and Government securities. the the franc The political authority of France had times it used War the During money). power the Three to World clip this franc (French power. was the worth nearly 20 cents. By 1938 French politicians had it clipped down to where it was worth less than 3 cents That meant a bond which was worth about $20 during the World War was in about $3. The peasants had for Government savings of worth, France 1938, who given freely bonds every of lost their $20 by these clippings about $17 on worth of bonds they purchased. The 25 CONGRESSIONAL RECORD-HOUSE 1941 The gold-purchase provision in the 4563 United States Government authorities condoned and actually promoted the French clipping of the coin in 1938. Gold Reserve Act of 1934 nowhere provides that the Treasury may print paper tain of gold now in their possession to (See Washington Evening Star, May 5, 1938, and Washington Herald, May 5. 1938, as previously quoted.) 8 of the act specifically provides that the gold purchased by the Treasury shall be day sun shall glow from the mist of morn- ing sky. with any direct obligations, coin. or currency Some students of our diseased money and finances assume it would be neces- Is it right that the American middle and working classes should be subjected to even the possibility of such treatment? The testimony given in support of this bill by Mr. Morgenthau, Secretary of the Treasury. and by Mr. Bell, Under Secre- tary of the Treasury. as shown in the hearings, should in itself be sufficient to convince any unblased person of the need of refusing the request for a continuation of this power. Neither of these gentlemen gave the slightest reason for its continuation. Both made out the most damaging case against its continuation On page 5 of the hearings, Mr. Morgenthau says: There have been persistent critics who said that the President's power to devalue the gold content of the dollar would be used to bring about inflation. There is no basis for believing that we are going to have inflation in this country because the President pos- sesses this emergency power. I am sure the President will be as zealous as Congress in taking the steps to prevent inflation. Now. the reduction of the content of the gold dollar by 40 percent is the same thing as raising the paper currency price of gold 69 percent, or of raising the paper currency price of gold from $20.67 an ounce to $35 an ounce. Since the increase in the price of gold is predicated on the clipping of the gold coin, any use which the President makes of his power to purchase gold at the increased price necessarily involves to the same degree the use of the power to clip the coin. In other words, the purchasing of gold at a premium is merely the active process which puts into effect the coin-clipping decree of the President of January 1934. Therefore, the use of the power to purchase gold at a premium is the use of the power to clip the coin. Already, as previously stated, the goldpurchase program of the coin-clipping process has created in the banking system $14,000,000,000 of flat credit; that is, inflation. Therefore, the power to give effect to clip the coin has been used to bring about inflation, and in an amount many times greater than our banking system had ever experienced before. What is more, this power is being used now. Through its daily operation a constant stream of additional inflation is being pumped into the banking system. To the extent that the content of the gold dollar is further reduced. additional inflation will be pumped into the banking system through further gold purchases, It is, I think, advisable at this point to again call attention to the fact that there is no warrant in law for the pay- ury it of the Treas- to the and creating a dollar of inflation the ment itors, for cost with the of gold flat the gold currency purchases, by bank finagling depos- in the banking system for every dollar's worth of gold purchased. No. 2 currency to pay for any gold. Section paid for- of the United States, authorized by law, or with any funds in the Treasury not otherwise appropriated. By no stretch of the imagination is it possible to read into this provision flat currency or flat payment of any kind. I believe the purchase of this great, useless, and menacing hoard of gold, and the payment therefor with flat currency in direct and flagrant violation of the stat- utes, and finagling the actual cost to the bank depositors of the United States, is one of the worst breaches of public trust of which the world has any record. Yet, in view of the glaring fact that the President has already produced the enormous amount of $14,000,000,000 inflation by the use of the power to clip the coin, and that he is using this power now to produce more inflation. Mr. Morgenthau, Secretary of the Treasury. makes this unbelievably astounding statement: There is no basis for believing that we are going to have inflation in this country be- cause the President possesses this emergency power. fly resist the temptation to use the moun- steal the remainder of our apples? But the shepherda know how hot the mid- sary to enact additional legislation to give the President the power that would be required to clip the coin sufficiently to wipe the debt out completely. The law now in operation, and which he is asking to have continued, permits him to debase only to the extent where no more than about $4,000,000,000 of clippings from the gold dollar and about $5,000.000,000 from the silver dollar will result. This, of course, would be but a drop in the bucket. To provide enough political windfall to repudiate all of the present and assumed Federal debt would require sufficient debasement to produce a total gold stock of no less than $90,000,000,000 instead of the twenty-two and five-tenths billions which our political rulers now have. The present pygmy gold dollar, containing only 13.71 grains of gold. would have to at least be quartered and made into midget gold dollars containing only about 3.5 grains of gold. I do not believe new legislation would be required. I think the President can, with the power which be has under section 8 of the Gold Reserve Act, to raise With this picture of debasement and inflation before us, with a rapidly mounting public debt that is already well out of control, and the Treasury becoming as he could with an amendment that should it be expected or believed that the would give him specific authority to reduce, without limit, the content of the increasingly hard pressed for funds, President will not, and in due time, use the power to further clip the coin, if he is permitted to retain it? Obviously- Mr. Morgenthau says in the hearings on this bill- the administration has no present intent whatsoever to devalue the gold content of the dollar. Obviously, I would say, if the power to clip the coin down to half of its original value is continued, it will be almost certainly used in the future. The truth is that unless the nature of the Government's monetary and financing policies are, in the very near future, radically altered, repudiation by some means or other will be inevitable. In that event, the administration in power, regardless of party label, will most likely pursue the course of least effort and minimum loss of political prestige and resort to debasement to cancel out the public debt. The political authorities of Italy, France, Russia, and other states have, in recent years, taken this tempting course to repudiate their public debts. In this connection it should be pointed out that the administration has already used the power of debasement to repudiate $675,000,000 of the public debt. This was done by using a part of the clippings from the 40 percent debasement that it has already produced So that our political rulers have already "stolen the first apple." Would it not be a miracle if they should voluntar- the price of gold to any figure he may determine, achieve precisely the same thing gold dollar. Section 8 reads in part as follows: With the approval of the President, the Secretary of the Treasury may purchase gold, in such amounts, at home or abroad . at such rates and upon such terms and conditions as be may deem most advantageous to the public interest; any provision of law relating to the maintenance of parity to the contrary notwithstanding. Certainly if we consider the common practice of our political rulers in circum- venting and twisting the laws to suit their fancles and to serve their own political fortunes, especially with respect to their handling of the gold transactions, I know of nothing in any law that would prevent the President from using his powers under section 8 of the Gold Reserve Act to repudiate a part or all of the Federal debt. Would this require anything more than to raise the price of gold and change in the figures in the books of the Treasury? The following soliloquy between the gentleman from Idaho, Congressman WHITE, and Under Secretary of the Treasury. Mr. Bell, as given on page 12 of the hearings on this bill, should be most helpful in answering this question. Mr. WHITE In the event of that proceeding (reduction of the content of the gold dollar from its present weight of 13.71 grains to 11.61 grains). what happens to our gold certificates held in the Federal Reserve Banks? How by a stroke of the pen can this $4,000,000,000 by devaluing the dollar be added when certificates are out against the dollar? 4564 CONGRESSIONAL RECORD-HOUSE Mr. BELL As look at 11. title in the gold is in the United States Government. If gold were devalued the profit out of the devalua- tion would go to the Government and the Federal Reserve banks would be paid in dol- lars available at that time for the face amount of the certificates they hold I am just wondering Mr. WHITE with those gold certificates out. and you say by a stroke of the pen that Mr. Morgenthau could increase the Treasury to the tune of $4,000,000,000 just how that can be done with all this gold obligated to the Federal Reserve aries of life than were required to buy them before the debasement. By some mysterious act in "changing their books" it was the same franc when it had been cut to less than 3 cents, as it was before its value was tampered with. It was the same frane, though a bond for which the faithful peasants had paid $20 finally fetched less than $3. because "they could change their books. If Mr. Bell is correct, then no one in Germany was hurt when her political in the form of gold certificates I cannot understand, unless we went through the me- rulers had clipped the mark to a trillionth chanica of acquiring title to those certificates and reissued them Mr BELL A gold certificate calls for $100 in took a basketful of paper marks to buy a loaf of bread where before 1 mark would buy several loaves, it was still the same gold It would just call for 8100 of the new value: that is all. It calls for $100 in gold at the new value. Mr. WHITE Then the gold certificates handied by the Federal Reserve are a very inse- cure thing if It is just on the value which is determined to a large degree by the President with the power to devaluate gold Mr. BELL They can change the books could they not? Mr. WHITE They could not change their books but It would change the security Mr. BELL They would still have $17,000,000,000 of gold certificates in their possession (about this amount of gold certificates Mr. White had previously stated was held by the Board of Governors of the Federal Reserve). They could change the books, indeed. So this is the security back of the dollar-the simple matter of bookkeeping. By means of Treasury bookkeeping the number of dollars can be increased at the whim and caprice of the President. But everybody is secure in the posses- sion of his dollars. because no matter how many times the President might halve or quarter the dollar, that you and I possess. or have contracted for, we are always left with the same number of dollars as we had before they were halved quartered The dollars we have invested in life insurance. in social security, in savings part of its original content. Although it mark. Nobody lost, and everybody was secured because "they can change their books" in Germany, too. It is highly important that we examine somewhat in detail Mr. Bell's magic formula, for it is the heart and core of every monetary fallacy of the past, and it is precisely the same devise that every corrupt government which has tinkered with its money has used to secretly tax its people. At the present time the gold dollar is defined in the law as being 13.71 grains of gold. At present, according to law. every silver dollar. and every kind of paper dollar, including the gold-certificate dollar, is supposed to have a value equal to the value of 13.71 grains of fine gold. Note I did not say has this value, but is supposed to have it. Mr. White says a $100 gold certificate "calls" for $100 in gold when the legal content of the gold dollar is 13.71 fine grains of gold. He says the same $100 gold certificate will still "call" for $100 in gold should the legal content of the gold dollar be reduced to 11.61 fine grains of gold. There is no question that Mr. Bell wants accounts, Government bonds, and so forth, are all perfectly secure, because dollars will still be dollars, though each us to believe that the $100 gold certicate books does the trick content is 13.71 grains. dollar might be cut into two or four at every full moon. Just a change in the According to Mr. Bell's proposition It was the same ruble and nobody was cheated after the Bolsheviks halved, quartered, and made It into mincemeat, so that in 920 it took 1,700 rubles to buy the same amount of the necessaries of life as 1 ruble bought in 1917. Though the people in Soviet Russia starved by the millions it was still the same ruble because the Communist rulers could change their books. Mr. Bell would have us believe the Italian lira, which has been more than quartered- valued against our own debased coin-since the World War is the same lira that It was before that war: that values and property were kept secure by just "changing their books," though all industry and property in Italy was communized to a great extent. According to Mr. Bell's formula, the clipping of the French frane from about 20 cents to less than 3 cents still left the French people with the same franc, notwithstanding that after the debaseit took more than six francs to purchase the same amount of the neces- would be the same in value should the content of the gold dollar be reduced to 11.61 grains as it now is when the gold What Mr. Bell really asks us to believe MAY 27 Excelsior! Excelsior! Then why wait? Why not cut the content of the dollar down to, say, about 3.5 grains? gold This would produce $90,000,000,000 Gold so-called liabilities twenty-three billion, leaving sixty-seven billions DOlitical windfall, enough to pay off the present direct public debt given Treasury obligations. books and twenty billions for additional But why bother with a little political windfall of sixty-seven billions when It just as easy and just as honest to get twice that amount and have one hundred and thirty-four billions, or 6 times that amount and have four hundred billions or 25 times that amount and have more than a trillion? The fact that these last dollars would become microscopic in size would not need to bother us, because gold dollars have now become imaginary things anyway, wholly imperceptible the senses. According to Mr. Bell, a gold dollar is something created on the books of the Treasury by some occult process the hand and brain and which can be divided and subdivided any number of times, and each subdivided part always retain the same quality and perform pre- cisely the same amount of work as the very first lump of gold before any division whatsoever was made. If there is a trick in Treasury book. keeping. that can clip the coin a little but without lowering the purchasing power of the domestic dollar, without lowering any values, then with that same trick it ought also to be possible to clip and clip the coin in a never-ending clipping process and always maintain the same security and values. Carried to this stage, of course, the fallacy of the proposition becomes evident and ridiculous on its face. But why? Upon what ground could the Secretary of the Treasury say this is fantastic and impracticable? On ground of principle? Surely he would not wish to be understood as advocating his formula on any other premise. The Secretary of the Treasury. fiscal agent of the United States Government, would not in value to 13.71 fine grains of gold; that wish to defend his formula for giving potency to the hoard of stored gold by diluting and attenuating it with a little amount and kind of money work as 13.71 ing the books. is that 11.61 fine grains of gold are equal 11.61 grains of gold will do the same grains. He asks us to believe this be- cause of some kind of change the Secre- tary of the Treasury can make in the Treasury's books, How is it possible to otherwise construe his testimony than that he is asking us to believe this astounding proposition? Referring again to the $17,000,000,000 of gold certificates which Mr. White had stated the Federal Reserve banks hold, note carefully again in this connection Mr. Bell's statement: Mr. WHITE Then the gold certificates han- died by the Federal Reserve are a very insecure thing If It is just on the value which is determined to a large degree by the President with the power to devaluate gold Mr.they BELL They can change their books, could not? Mr. WHITE They could not change their books but It would change the security Mr. BELL They would still have $17,000,- 000,000 of gold certificates sleight-of-hand performance in "chang- If it is a principle that some peculiar change can be made on the books of the Treasury that will reduce the legal weight of the gold dollar by 2.1 grains, and at the same time keep the purchasing power of the domestic dollar and values in gen- eral at the same level as before the reduction, It should be possible to use the same formula for changing the Treasury books to maintain the same level of purchasing power and values If the content of the gold dollar were reduced by 3 grains, 5 grains, 10 grains, to one-tenth grain, or to any fractional part thereof. Of course, Mr. Morgenthau would not claim for his Treasury bookkeeping formula any such extreme application as the simple reason that it is not based on any principle, or on anything remotely related to principle. This being true his formula is no more applicable where the content of the gold dollar is 1941 CONGRESSIONAL RECORD-HOUSE reduced by 1 grain than If It were reduced to one-millionth part of a grain. In other words, Mr. Morgenthau and Mr. Bell have no trick by which they can change the books of the Treasury so as to debase the gold dollar in any/amount and at the same time maintain the purchasing power of the dollar and all values at their former level. of course, there is a trick in this socalled devaluation scheme. It is, how- ever, not a new trick. It is as old as coinage itself, and perhaps older. It is the trick that has been played by dishonest and corrupt rulers and governments since barter has been replaced by the exchange of commodities through the that man's higher value sense is developed. The free contract process is the foundation of human liberty and civili- zation itself. The gold policy of this administration having destroyed the free-contract process, has ipso facto destroyed all these great sources of human achievement and happiness. The debasement of money. in whatever form, always involves the destruc- tion of the free-contract process. All As heretofore pointed out, the Treasury has already used $675,000,000 of clippings to pay off bonds, Now, what has the whole gold and monetary policy of this administration done to our Nation? What has been its effect upon our economy? It has destroyed our standard unit of value. Nothing that their political rulers could visit upon them could be more fatal to the happiness and welfare of any people. It has destroyed the free and voluntary contract process and replaced it with po- in the development of the individual and All of them have recognized the evil the lives of the destruction of pro- ductive industry. the oppression and tyranny, and the deterioration of the morals of the people. But, more particularly, all of them have recognized that the evil effects of debasement fall more cruelly upon the poorer and more industrious classes, that they press less seriously upon the rich, and that they always inure to the benefit of the more dishonest and cunning of the race. Said the great Mr. Horner in the House of Commons in his famous speech on the need of his country returning to specie payment, or the free circulation of gold: With respect to the word "coin," what is It? Does It make any difference as to the standard? The coin is the King's assurance to his subjects that their property shall be pro- tected, that the coin shall be of that fineness and weight necessary to give to all in their litical coercion and regimentation. The objective evidence of this is manifest everywhere. We see it in the moribund dealings an equal security and an equal participation of justice. condition of new long-term contracts and mittee of the House of Commons, which I years have averaged annually less than 20 percent of what they were in the 10 regard as the most profound study ever made of money, and which I think is so regarded generally by students of money, in referring to the evil effect of the debasement which was then afflicting Eng- the new capital market. Long-term private contracts in the last 10 or 11 preceding years. We see it in the huge volume of idle funds in the banking system. the like of which our country never before experienced. It should be noted, however, that the vast bulk of the idle funds in the banking system does not represent real savings or material assets, but represents the inflation created by the gold-buying policy. The destruction of the free-contract process is even more manifest in the de- terioration of old capital, capital already invested in industry. The National Industrial Conference Board shows there was a shrinkage in net capital in manufactuing industry of about $14,000,000,000 during the period from 1929 to 1937. We see it in the wholesale taking over of private industry by our political rulers. We see it in the rapidly progressive regimentation of all groups- business, labor, and agriculture. The free contract process is the well- spring of human and property rights. It is the source of the highest wages for labor and the fullest employment. It is man's basic protection to keep what be produces and to maintain the most equitable distribution of wealth It is through and by means of this process them with paper money. This is the most effectual of inventions to fertilize the rich man's field by the sweat of the poor man's brow. Ordinary tyranny. oppression, excessive taxation. these bear lightly on the happi- ness of the mass of the community, compared with fraudulent currencies and the robberies committed by depreciated paper. Our own history has recorded for our in- struction enough, and more than enough, of the demoralizing tendency. the injustice. and rency. authorized by law, or any way effects which debasement has had upon them been more effectual than that which deludes subject have recognized this and the vital role the free-contract process has played masses of people. Being afraid to tax the people outright, the political rulers in some devious way clip our coins. Then in payment of present purchases of our goods, services, and labor, or to pay off bonds we previously purchased from tion. or all the contrivanoes for cheating the laboring classes of mankind, none has the intolerable oppression on the virtuous given consideration to this important civilization. they give these clippings back to us either 4565 the great thinkers of the world who have use of money. That trick is to lay a secret and deeply hidden tax on the great 26 The bullion report of the select com- land, says: By far the most important portion of this effect it appears to your committee to be that which is communicated to the wages of com- mon country labor, the rate of which, It to well known, adapts itself more slowly to the changes which happen in the value of money than the price of any other species of labor or commodity. Pelatiah Webster, who, as recall, was merchant in Philadelphia during colonial days, and who experienced the evil effects of debasement, which was in the form of inconvertible paper currency known as bills of credit, had this to say of it: We have suffered more from this cause than and well disposed, of a degraded paper cur- countenanced by government. President Cleveland, who by his brilliant and noble leadership in repealing the Silver Purchase Act, which caused a serious debasement of the money, in his message to Congress urging its repeal said: There is one important aspect of the subfect which especially should never be overlooked At times like the present, when the evils of unsound finance threaten us. the speculator may anticipate a harvest gathered from the misfortune of others, the capitalist may protect himself by hoarding or may even find profit in the fluctuations of values: but the wage earner-the first to be injured by a depreciated currency and the last to receive the benefit of its correction- is practically defenseless He relies for work upon the ventures of confident and contented capital. This failing him, his condition is without alleviation, for he can neither prey on the misfortunes of others, nor board his labor. In referring to previous debasements of the coin, the Earl of Lauderdale said, in a speech during the debate on resumption in 1811: Every such instance of reduction was a fraud on the people: and it was remarkable in looking back to those periods. when such deteriorations were established, that they were uniform periods of discontent and turbulence. Said Joseph Harris, one of the great money prophets, in his Essay Upon Money and Coins: The measures in a kingdom ought to be constant: It is the justice and honor of the King: for If they be altered, all men at that instance are deceived in their precedent con- tracts. either for lands or money, and the King most of all: for no man knoweth then, either what be bath, or what he oweth. Then, referring to an attempt which had been made by some in Queen Eliza- beth's time to debase the coin, Harris said further: This made Lord Treasurer Burleigh, in 1573. when some projectors had set on foot a matter of this nature, to tell them that they were worthy to suffer death, for attempt- from every other cause or calamity. It has ing to put so great a dishonor on the Queen, and detriment and discontent upon the peo- choicest interests of our country more, and done more injustice than even the arms and leave all the markets of the kingdom unfur- killed more men, pervaded and corrupted the artifices of our enemy. Daniel Webster was no more sparing in his condemnation of debasement. Said he: A disordered currency is one of the greatest political evils. It undermines the virtues necessary for the support of the social system and encourages propensities destruc- tive to its happiness. It wars against indus- try. frugality, and economy. and it fosters the evil spirits of extravagance and specula- ple. For, to alter this public measure is to nished Queen Elizabeth, in considering the reforming of the debased coin of England, referred to it as "Conquering all that monster." On the monument of that illustrious Queen are inscribed these prophetic words: Moneta in justum valorem reducta. Money restored to its just value. 4566 CONGRESSIONAL RECORD-HOUSE Mr. COCHRAN. Mr. Chairman, I yield 10 minutes to the gentleman from California (Mr. VOORHIS) Mr. VOORHIS of California. Mr. Chairman, it would take a lot more than 10 minutes to try to make this matter really clear, especially in view of some of the things that have been said. In the first place, I wish to say that inflation does not take place just because an expansion of the money supply of the country takes place. You might have a very marked expansion of the money supply of a nation and if the production of wealth of that nation were expanding as fast as that in proportion, you would get no inflation at all. The sign of inflation is when you begin to get a sharp rise in the general over-all price level. Let us nail that down first. In the second place. it ought to be made plain that the stabilization fund is not used to purchase gold. that what the stabilization fund resulted from was the profit that accrued to the American Mr. AUGUST H. ANDRESEN. Mr. Chairman, will the gentleman yield? Mr. VOORHIS of California. Yes. May I say that I am the first gentleman who has spoken on this bill, so far as I know. who has yet yielded. Mr. AUGUST H. ANDRESEN. I am very glad that the gentleman has yielded, but I believe the gentleman is very unkind in his remarks in impugning the motives of the Members who want to have this power returned to the Congress so that Congress can legislate. Mr. VOORHIS of California. If lap- peared to impugn the motives of any gen- Mr. VOORHIS of California. Perhaps I might have meant to question their understanding of the situation a little bit. Mr. DEWEY. Mr. Chairman, will the gentleman yield? Mr. VOORHIS of California. should President and not renewed, we have pres- sibility to be the agency that controls their money. I want to preserve that right just as much as I can I think that to take away those powers from the House, that some of the monetary powers tion is that I vastly prefer to see the power that have been vested in the President are an effective means of preventing the financial interests of this country from causing a sufficient restriction of available credit to compel those rates of interest to rise. When we view the matter from the standpoint of the general wellbeing of the American Nation as a whole, It seems to me the case is very clear and plain as to where the national interest lies. Of course, at this very present moment, the Federal Reserve Board has the power to go into the open market and purchase with the national credit which it has been empowered to use, any amount of Government obligations that It wants to. If you want to know what the real pos- sibility of inflation is in this country, I could tell you in a few words. It is the possibility of an inflation of private bank credit on the basis of fractional reserves you want to control it, it is very simple to see how that can be done. It has to be done by means of a real program of dollar-for-dollar reserves behind those deposits. A number of gentlemen have gotten up here and opposed this bill on the ground that Congress ought to retain its constitutional powers and that by pass- ing this bill we give to the President certain powers that belong to the Congress. As a matter of fact, I think that is true, but the gentlemen who make that argument have no more intention of having Congress exercise these powers than they have of making an alliance with the Eskimos. and left in the hands of all private banks the power to create bank credit, which a substitute for money, on the basis of fractional reserves Now, we have in this legislation and in certain other types of legislation a very partial recognition of the fact that the sovereign people of a great nation have a right and a duty and an economic respon- every other thoughtful gentleman in this the World War. I know, and so does to the privately owned central Federal it will not be so necessary. ently no machinery in the hands of Congress or in the hands of any agency of Congress whereby an effective control over any of these matters can be exerclsed We could, it is true, set up such a control; and we could, it is true, set up such a monetary agency of the Congress; and I should like to see that done, but we do not have that under consideration today and until we do, my post- paid on some of the Liberty loans during was when it passed the National Bank Act of 1863, which empowered the tional banks to create banknote money on the basis of Government bonds the enabling them to literally buy the inter. test-bearing debt of the Nation with Nation's power to create money. The third time Congress did it was when the gentleman measure which at the time met with uni- Another thing I wish to say is that I. for one, am going to be against- am against it now and I am going to keep on being against it seeing this country at any point in the procedure pay the kind of rates of interest that had to be Bank that Alexander Hamilton had chartered, and the second time did Reserve banks the power to create money What I want to make clear is this: If these powers are taken away from the added to the general over-all economic health of the United States. Mr. VOORHIS of California. I think it has been on three major occasions our history. The first time when Congress set up the so-called United States passed the Federal Reserve Act and gave Mr. AUGUST ANDRESEN. I thank like to make my point clear, then maybe versal approval and which certainly power over the coining and the valuing of money tleman, I am very sorry and I apologize, because that was not my intention at all. people from the first and original devalu- ation of the gold content of the dollar. a MAY 27 over the gold content of the dollar or any other similar power in the hands of the President of the United States, who at least represents the people of the Nstion, rather than to see the power go back into the mercy of the manipulation of private and in many cases, international banking houses, which is precisely where it would go if you take this power away from the Government official. Now I yield to the gentleman from IIII. nots. Mr DEWEY. May I ask the gentle- man If he does not believe that the Congress of the United States also represents the people, and, also, if the writing up of assets, gold, is not liable to raise interest rates? It always has, If you cheapened the currency. Mr. VOORHIS of California. Is not the gentleman asking me two questions? My answer to the first one is that be- lieve the Constitution charges Congress with the responsibility of coining money and regulating its value. should like to see Congress exercise that power. but Congress is not exercising it. Until it takes the steps have outlined briefly, it will not be exercising that power. As long as Congress does not propose to do that job. would rather have the President do it than have It in the hands of private financial institutions. Mr. MASON. Mr. Chairman, will the gentleman yield? of California. Mr. Mr. VOORHIS yield, I justMASON want toI know when it was in the gentleman's opinion that the Congress really relinquished its President now would be decidedly a step in a backward direction rather than forward. Mr. COCHRAN Mr. Chairman, will the gentleman yield? Mr. VOORHIS of California. I yield to the gentleman from Missouri Mr. COCHRAN. I have just at this moment read a letter, dated in April 1939. signed by Mr. Edward A. O'Neal, presi- dent of the American Farm Bureau Federation, where he used almost identically the same words that the gentleman just used in reference to taking this power away from the President at that time, and this period is more critical than # was then Mr. VOORHIS of California. It is and I hope to get to that before I get through and now I would like to ask to be permitted to proceed for a few moments without interruption. Throughout the years the most in- excusable economic power that has ever been exercised by private individuals has been the power of the international bankers to purchase and sell gold and to ship that gold from country to country where the currency of those various countries was directly dependent upon and in many cases redeemable in. gold, thus either expanding or contracting the monetary bases of those countries, depreciating or appreciating the value of their currency and making millions of dollars of profit out of such transactions to the economic loss of the people of the nations. No one knows what the situation might have been in the United States if those powers had not been in the hands of some agent of the Government. As long as the money of any nation bears any reis- tionship whatsoever to gold, there will be this danger. and therefore my belief is that never should the money of the United States be made redeemable in gold. 1941 CONGRESSIONAL RECORD-HOUSE But gold is important in the settlement international balances, and unless you are going to go to the barter system, It is going to continue to be useful in the settlement of international balances. (Here the gavel fell.) Mr. COCHRAN. Mr. Chairman, I yield the gentleman 5 additional minutes. Mr. VOORHIS of California. After all, when we come right down to it, the real reason why so much gold has come into the United States is one and a very simple reason. and Congress is largely responsible for the situation. It is because we have insisted upon exporting more of than we wanted to import. I am not going into the question of whether that has been a good or a bad policy, but do say that the imports of gold have represented the excess of exports over imports to a very large degree. The question is whether you want to start importing more than you export or whether you want to loan money or give more money to the British to assist them, as our policy indicates we want to do, or whether you want to continue to buy gold. Unless we do one of these three things aid to England is impossible and so are any Ameri- can exports. I could make a criticism of considerable force here on what we ought to do with this metal once we get it into the country, and I would say that I believe if you are going to spend what really is the substance of America-the is, the produc- tion of America-to pay for this gold, once you get it here you ought to use it as a base for Government credit instead of using interest-bearing bonds for that purpose, but I am not going into that today. So this whole matter has to do with whether you want the control of the international exchange value of the American dollar under the control of a Govern- ment official. like the President of the United States, or whether you want it to be subject to the manipulation of private financial interests. That they will speculate in dollars the minute they believe it is opportune to do so goes without saying. To refuse a continuance of these line of reasoning with regard to the 27 4567 of France, and the other two-thirds being hazard of removing these powers from the hands of the President and leaving private individuals. The Bank of France was responsible and was in a position to It to the manipulation of speculators, that the gentleman means to imply by that, that that great grant of power be responsible for refusing credit to the nation, and indeed, when the Prime Minister of France at that time, Mr. Blum, President and taken away from the made, proposed a sharp increase in the should remain permanently vested in the against whom so many charges have been Congress. national-defense budget in 1936, I believe Mr. VOORHIS of California. I think what happened was a vast export of gold out of France 80 that it was not possible I made myself clear in the beginning of my speech. Was the gentleman present then? Mr. WILLIAM T. PHEIFFER I was. Mr. VOORHIS of California. Then I shall say it again. My belief is that this Congress should consider a piece of over-all legislation which would set up as an agent of the Congress operating under direct mandate of the Congress, a monetary agency charged with all of these powers, concentrated in the hands of that agency. and exercising exclusively the right to create money. to get that bill through I do not want our United States left in a position like that. That is another reason why I am in favor of this bill. When the Treasury makes gold purchases, as a matter of fact, when that gold comes into the country It comes into some bank some place. According to law. It must be delivered to the Treasury. The Treasury takes the gold, pays for the gold with a check on its balance with the Federal Reserve bank of the district in ques- tion, then replenishes its account with That is my position and I would hope that very many of the advocates of the that Federal Reserve bank by delivering to that Federal Reserve bank gold certificates. In my view, such payments should present bill would support such a proposition. But I am by no means convinced that they would. I have been appealing for such legislation regularly ever since be made in United States currency and not in gold certificates, for I believe that gold ought to actually be in the hands of the American people. If that were true, I think we would be in a clearer position and would understand the whole thing better. But what we are paying for the gold, as I have pointed out already. is not the bank deposits of America, but America's power to produce wealth which we send out of the country in greater quantity than we import. As long as we want to do that you will have a situation where gold will flow into the United States. If you want to change that, you might as well understand that, in the long run, the only way we can do it is by importing more than we export. I could make a long speech about how that might be made possible and still economically desirable for the American people, but I shall not do it. I close by saying that, as have already I came here. Mr. WILLIAM T. PHEIFFER. Then do I understand that the gentleman favors the present bill? Mr. VOORHIS of California My position is that this bill is vastly better than what would otherwise result in financial chaos. In other words, it is vastly better. if I cannot get all I want, to at least have an official responsible to the American people exercise these powers, rather than leave the power of manipulation in the hands of private financiers. If gold is to be used at all and undoubtedly It will be to settle international balances, then the only way in which our domestic currency can be protected against international gold manipulation is by control over that gold to be exercised by a representative of the people, responsible to them and I would add to have ownership of it vest absolutely suggested, I think we could vastly improve the use to which we put these metals once in the people as a whole. we have acquired them. I think they be- powers means, in effect, to freeze the gold Mr. THOMAC F. FORD. Mr. Chairman, will the gentleman yield for a sug- long to the American people. I think they once that has been done every nation in the world will know that by depreciating its currency it can put the American pro- gestion? credit instead of interest-bearing bonds. I think we need to think thoroughly about some of these matters. As a matter of ducers in the position of paying their cost of production in money of greater value in international exchange, that is, Mr. VOORHIS of California I yield to the gentleman, my good colleague from California. stabilization fund, brought down to brass tacks, just a shotgun in the corner? action would put the producers in foreign countries in a favorable position not only most of these things are that: yes. son interested in the welfare of American farmers or hopeful that our trade can be revived will not want our people to be caught where they have no protection against such a situation. Mr. WILLIAM T. PHEIFFER. Mr. Chairman, will the gentleman yield? Mr. VOORHIS of California. Yes. Mr. WILLIAM T. PHEIFFER. I would like to know whether it is the gentleman's Idea, in following out his fact, today we have $3,781,000,000 of en- Mr. THOMAS F. FORD. Is not the than foreign currency. Clearly such in the world market but in the American market itself. Should this war come to a close, there is every chance that real devaluation of currencies will take place in many parts of the world, and any per- should be used as a base for Government Mr. VOORHIS of California. I think The CHAIRMAN. The time of the gentleman from California has again expired. Mr. COCHRAN. Mr. Chairman, yield the gentleman 5 minutes more. Mr. VOORHIS of California I hope shall not use all of that time. I want to make a couple of observations about some things that have been said concerning the purchase of gold. First of all let me say this: We hear a great deal about the downfall of France. I do not know how many Members of the House realize the fact that the Bank of France was controlled by a board of directors, one-third of whom had to do with the Government I content of the dollar where it is, and tirely free silver seigniorage and gold in the Treasury which can be used for any of these purposes, if necessary. It is a good idea that the American people find themselves in as independent a position as they do with regard to dependence upon private manufacturers of credit. I would wish they were in a still more independent position. but I am going to vote for this bill because I certainly do not want them to be in a more dependent position than they are now. This is no time to remove these powers. It will be no time, especially should this war come to a close, for at that time the welfare of any American producer who has anything to do with foreign trade is going to depend on our Nation being in a position to protect its currency against the devaluation of other foreign currencies. To my mind, these powers should not only be kept in I 27 MAY CONGRESSIONAL RECORD-HOUSE and power gentleman California from Mr. Mr. first May California VOORHIS Mr. think gress upAlexander United States minutes in COCHRAN. Mr. the the things useful balances be our history. first when Con- as far VOORHIS 10 But gold is the settlement unlets the system valuing and Yes California VOORHIS the of 4567 CONGRESSIONAL RECORD-HOUSE 1941 It Mr. COCHRAN Mr. Chairman Mr. AUGUST H. ANDRESEN Mr. entleman yield? 1 4566 27 line reasoning withthese regard to the hazard that, grant the imply to the United That our debt that of owned Treasury hands in policy, that into comes country to law the The the exports of the its the of Fed- in with right delivering and them. fact gold the for gold the The start degree the profit left gold when of the bad good create States this question the Mr in favor of this bill. Mr import into MinBlum, of of Was country marked the to have been the increase believe 1936. gold export possible buy takes credit Prime time. taken VOORHIA France of position refusing of means Bank The was hands of the President and VOORHIS that France. and the other two thirds removing certifi- gold advocates the of do should buy of controls that believe hands were true. and of that the and three these added WILLIAM health Another position Then thing the the for than for not against the really Mr will pay which quan we this for Amer- but of the is. yield we States this might power the States. United the people the that the want taking the the power this to mercy that at under time official, period is more critical than a of which take you about then the still American the like ecopeo- whether United to California of the the to than run. importing this almost the already improve have That and ) to to the from It they so few for the FORD effect. May ask Throughout the years the believe not vest of like the dollar think Mr. where bonds done that about it of hat also, the liable It has, from to gold and and of from ship currency ) VOORHIS of California the currency. directly the VOORHIS of the the world those of of that the the If States in hands of Mr. these they have of making an alliance with the Eskimos long As Mr when yield of MASON want In the of any nation tionship VOORHIS was the the be this to and bears gold, therefore any relaWID there my belief that the Congresa really relinquished its is that never should the money of . United States be made redeemable gold. Mr. WILLIAM T PHEIFFER Mr. Chairman will the yield? WILLIAM sentlemen's Idea, in following out his First of France Bank trolled board trade know WM one third of going depend pro- to position Nation House of PHEIFFER would like know whether It is the time France Mr. VOORHIS of California. Yes. Mr the opinion that been situation in fact. of of hopeful that our trade not want our people where they have no might of situation world. welfare more COCHRAN will the the people credit. California every of time The the but Should the that: are favorable of Mr FORD Mr If not by the currency against foreign currencies to devaluation the To my mind. of of of whom had to do with the Government these powers should not only be kept in 4566 CONGRESSIONAL RECORD-HOUSE Mr. COCHRAN. Mr. Chairman, I yield 10 minutes to the gentleman from California (Mr. VOORHIS) Mr. VOORHIS of California. Mr. Chairman. it would take a lot more than 10 minutes to try to make this matter really clear. especially in view of some of the things that have been said. In the first place, I wish to say that inflation does not take place just because an expansion of the money supply of the country takes place. You might have a very marked expansion of the money supply of a nation and. if the production Mr. AUGUST H. ANDRESEN. Mr. Chairman, will the gentleman yield? Mr. VOORHIS of California. Yes. May I say that I am the first gentleman who has spoken on this bill, so far as I know, who has yet yielded. Mr. AUGUST H. ANDRESEN. I am very glad that the gentleman has yielded, but I believe the gentleman is very unkind in his remarks in impugning the motives of the Members who want to have this power returned to the Congress so that Congress can legislate. Mr. VOORHIS of California. If ap- peared to impugn the motives of any gen- of wealth of that nation were expanding as fast as that in proportion, you would get no inflation at all. The sign of infla- tleman, I am very sorry and I apologize, because that was not my intention at all. tion is when you begin to get a sharp rise in the general over-all price level. Let us the gentleman. nail that down first In the second place. it ought to be made plain that the stabilization fund is not used to purchase gold, that what the stabilization fund resulted from was the profit that accrued to the American people from the first and original devalu- ation of the gold content of the dollar. a measure which at the time met with uni- versal approval and which certainly added to the general over-all economic health of the United States. Another thing I wish to say is that I, for one, am going to be against-I am against it now and I am going to keep on being against it -seeing this country at any point in the procedure pay the kind of rates of interest that had to be paid on some of the Liberty loans during the World War. I know. and so does every other thoughtful gentleman in this House, that some of the monetary powers that have been vested in the President are an effective means of preventing the financial interests of this country from causing a sufficient restriction of available credit to compel those rates of interest to rise. When we view the matter from the standpoint of the general wellbeing of the American Nation as a whole, it seems to me the case is very clear and plain as to where the national interest lies. Of course, at this very present moment, the Federal Reserve Board has the power to go into the open market and purchase with the national credit which Mr. AUGUST H ANDRESEN. I thank Mr. VOORHIS of California Perhaps I might have meant to question their understanding of the situation a little bit. Mr. DEWEY Mr. Chairman, will the gentleman yield? Mr. VOORHIS of California. I should like to make my point clear, then maybe it will not be so necessary. What I want to make clear is this: If these powers are taken away from the President and not renewed we have pres- ently no machinery in the hands of Con- gress or in the hands of any agency of Congress whereby an effective control over any of these matters can be exerclsed. We could, it is true, set up such a control; and we could, it is true, set up such a monetary agency of the Congress; and I should like to see that done, but we do not have that under consideration today and until we do. my position is that I vastly prefer to see the power over the gold content of the dollar or any other similar power in the hands of the President of the United States, who at least represents the people of the Nation, rather than to see the power go back into the mercy of the manipulation of private and, in many cases, international banking houses, which is precisely where it would go if you take this power away from the Government official. Now I yield to the gentleman from IIIInois, Mr. DEWEY. May I ask the gentle- MAY power over the coining and the valuing of money Mr. VOORHIS of California, I think it has been on three major occasions our history. The first time when Congress set up the so-called United States Bank that Alexander Hamilton had chartered, and the second time it was when it passed the National Bank Act of 1863, which empowered the ns. tional banks to create banknote money on the basis of Government bonds, thus enabling them to literally buy the inter. est-bearing debt of the Nation with Nation's power to create money. The third time Congress did it was when passed the Federal Reserve Act and gave to the privately owned central Federal Reserve banks the power to create money and left in the hands of all private banks the power to create bank credit, which a substitute for money, on the basis fractional reserves. Now, we have in this legislation and in certain other types of legislation a very partial recognition of the fact that the sovereign people of a great nation have right and a duty and an economic respon- sibility to be the agency that controls their money. I want to preserve that right just as much as I can. think that to take away those powers from the President now would be decidedly a step in a backward direction rather than for- ward. Mr. COCHRAN. Mr. Chairman, will the gentleman yield? Mr. VOORHIS of California. I yield to the gentleman from Missouri Mr. COCHRAN. I have just at this moment read a letter, dated in April 1939, signed by Mr. Edward A. O'Neal, president of the American Farm Bureau Federation, where he used almost identically the same words that the gentleman just used in reference to taking this power away from the President at that time, and this period is more critical than # was then Mr. VOORHIS of California It is, and I hope to get to that before get through and now I would like to ask to be permitted to proceed for a few moments without interruption man If he does not believe that the Con- Throughout the years the most in- amount of Government obligations that gress of the United States also represents excusable economic power that has ever been exercised by private individuals has If want to know what the real possibility of inflation is in this country, I rates? It always has, If you cheapened bankers to purchase and sell gold and to Mr. VOORHIS of California. Is not ship that gold from country to country where the currency of those various countries was directly dependent upon, it has been empowered to use, any it wants to. could you in a few words. It is the possibility of an inflation of private bank credit on the basis of fractional reserves. If you want to control it, it is very simple to see how that can be done. It has to be done by means of a real program of dollar-for-dollar reserves behind those deposits. A number of gentlemen have gotten up here and opposed this bill on the ground that Congress ought to retain its constitutional powers and that by passing this bill we give to the President certain powers that belong to the Congress. As a matter of fact, I think that is true, but the gentlemen who make that argument have no more intention of having Congress exercise these powers than they have of making an alliance with the Eskimos. the people, and, also, if the writing up of assets, gold, is not liable to raise interest the currency. the gentleman asking me two questions? My answer to the first one is that I believe the Constitution charges Congress with the responsibility of coining money and regulating its value. I should like to see Congress exercise that power, but Congress is not exercising it. Until it takes the steps have outlined briefly, it will not be exercising that power. As long as Congress does not propose to do that job, I would rather have the Prestdent do it than have It in the hands of private financial institutions. Mr. MASON. Mr. Chairman, will the gentleman yield? Mr. VOORHIS of California. I yield, Mr. MASON. I just want to know when It was in the gentleman's opinion that the Congress really relinquished its been the power of the international and in many cases redeemable in, gold. thus or contracting the or the those their preciating monetary either currency bases expanding appreciating and of making countries, millions value de- of of dollars of profit out of such transactions to the economic loss of the people of the nations. No one knows what the situation might have been in the United States if those powers had not been in the hands of some agent of the Government. As long as the money of any nation bears any rela- tionship whatsoever to gold, there will be this danger, and therefore my belief is that never should the money of the United States be made redeemable a gold. 1941 CONGRESSIONAL RECORD-HOUSE But gold is important in the settlement of international balances, and unless you are going to go to the barter system, it is going to continue to be useful in the settlement of international balances. (Here the gavel fell.] Mr. COCHRAN. Mr. Chairman, I yield the gentleman 5 additional minutes. Mr. VOORHIS of California. After all when we come right down to it, the real reason why so much gold has come into the United States is one and a very simple reason. and Congress is largely responsible for the situation. It is because we have insisted upon exporting more I than we wanted to import. I am not going into the question of whether that has been a good or a bad policy. but I do say that the imports of gold have represented the excess of exports over imports to a very large degree. The question is whether you want to start importing more than you export or whether you want to loan money or give more money to the British to assist them. as our policy indicates we want to do, or whether you want to continue to buy gold. Unless we do one of these three things aid to England is impossible and so are any American exports. I could make a criticism of considerable force here on what we ought to do with this metal once we get it into the country, and I would say that I believe if you are going to spend what really is the substance of America-the is, the produc- tion of America- pay for this gold, once you get it here you ought to use as a base for Government credit instead of using interest-bearing bonds for that purpose, but I am not going into that today. So this whole matter has to do with whether you want the control of the in- ternational exchange value of the American dollar under the control of a Govern- ment official, like the President of the United States, or whether you want it to be subject to the manipulation of private financial interests. That they will spec- ulate in dollars the minute they believe it is opportune to do so goes without saying. To refuse a continuance of these line of reasoning with regard to the hazard of removing these powers from the hands of the President and leaving made, proposed a sharp increase in the Mr. VOORHIS of California I think what happened was a vast export of gold out of France so that it was not possible should remain permanently vested in the CONRESS I made myself clear in the beginning of my speech Was the gentleman present then? Mr. WILLIAM T. PHEIFFER I was. Mr. VOORHIS of California. Then I shall say it again. My belief is that this Congress should consider a piece of over-all legislation which would set up as an agent of the Congress operating under direct mandate of the Congress, a monetary agency charged with all of these powers, concentrated in the hands of that agency, and exercising exclusively the right to create money. That is my position, and I would hope that very many of the advocates of the present bill would support such a proposition. But I am by no means convinced that they would. I have been appealing for such legislation regularly ever since I came here. Mr. WILLIAM T. PHEIFFER Then do I understand that the gentleman favors the present bill? Mr. VOORHIS of California My position is that this bill is vastly better than what would otherwise result in financial chaos. In other words, it is vastly better, if I cannot get all I want, to at least have an official responsible to the American people exercise these powers, rather than leave the power of manipulation in the hands of private financiers. If gold is to be used at all and undoubtedly it will be to settle international balances, then the only way in which our domestic currency can be protected against international gold manipulation is by control over that gold to be exercised by a representative of the people, responsible to them and I would add to have ownership of it vest absolutely in the people as a whole. content of the dollar where it is, and gestion? than foreign currency. Clearly such action would put the producers in foreign countries in a favorable position not only in the world market but in the American market itself. Should this war come to a close, there is every chance that real devaluation of currencies will take place in many parts of the world, and any person interested in the welfare of American farmers or hopeful that our trade can be revived will not want our people to be caught where they have no protection against such a situation Mr. WILLIAM T. PHEIFFER Mr. Chairman, will the gentleman yield? Mr. VOORHIS of California. Yes. Mr. WILLIAM T. PHEIFFER. I would like to know whether it is the gentleman's Idea, in following out his private individuals. The Bank of France was responsible and was in a position to President and taken away from the once that has been done every nation in value in international exchange, that is, of France, and the other two-thirds being be responsible for refusing credit to the nation, and indeed, when the Prime Minister of France at that time, Mr. Blum, Mr. THOMAC F. FORD. Mr. Chairman, will the gentleman yield for a sug. ducers in the position of paying their cost of production in money of greater 4567 It to the manipulation of speculators, that the gentleman means to imply by that, that that great grant of power powers means, in effect, to freeze the gold the world will know that by depreciating its currency it can put the American pro- 27 Mr. VOORHIS of California I yield to the gentleman, my good colleague from California Mr. THOMAS F. FORD. Is not the stabilization fund. brought down to brass tacks, just a shotgun in the corner? Mr. VOORHIS of California I think most of these things are that: yes. The CHAIRMAN. The time of the gentleman from California has again expired. Mr. COCHRAN. Mr. Chairman, I yield the gentleman 5 minutes more. Mr. VOORHIS of California I hope shall not use all of that time. I want to make a couple of observations about some things that have been said concerning the purchase of gold. First of all let me say this: We hear a great deal about the downfall of France. I do not know how many Members of the House realize the fact that the Bank of France was controlled by a board of directors, one-third of whom had to do with the Government against whom so many charges have been national-defense budget in 1936, I believe to get that bill through I do not want our United States left in a position like that. That is another reason why I am in favor of this bill. When the Treasury makes gold purchases, as a matter of fact, when that gold comes into the country It comes into some bank some place. According to law It must be delivered to the Treasury. The Treasury takes the gold, pays for the gold with a check on its balance with the Federal Reserve bank of the district in question, then replenishes its account with that Federal Reserve bank by delivering to that Federal Reserve bank gold certificates. In my view, such payments should be made in United States currency and not in gold certificates, for I believe that gold ought to actually be in the hands of the American people. If that were true, I think we would be in a clearer position and would understand the whole thing better. But what we are paying for the gold, as I have pointed out already. is not the bank deposits of America, but Amerlea's power to produce wealth which we send out of the country in greater quantity than we import. As long as we want to do that you will have a situation where gold will flow into the United States. If you want to change that, you might as well understand that, in the long run, the only way we can do it is by importing more than we export. I could make a long speech about how that might be made possible and still eco. nomically desirable for the American people, but I shall not do it. I close by saying that, as have already suggested, I think we could vastly improve the use to which we put these metals once we have acquired them. I think they belong to the American people. I think they should be used as a base for Government credit instead of interest-bearing bonds. I think we need to think thoroughly about some of these matters. As a matter of fact, today we have $3,781,000,000 of en- tirely free silver seigniorage and gold in the Treasury which can be used for any of these purposes, If necessary. It is a good idea that the American people find themselves in as independent a position as they do with regard to dependence upon private manufacturers of credit. I would wish they were in a still more independent position, but I am going to vote for this bill because I certainly do not want them to be in a more dependent position than they are now. This is no time to remove these powers It will be no time, especially should this war come to a close, for at that time the welfare of any American producer who has anything to do with foreign trade is going to depend on our Nation being in a position to protect its currency against the devaluation of other foreign currencies. To my mind, these powers should not only be kept in I 28 MAY CONGRESSIONAL RECORD -HOUSE trusted of which the and hands promptly by the Chinese who 4569 CONGRESSIONAL RECORD-HOUSE 1941 the of given was this to National to to Attney. of are rillation is 4568 27 help than Influx with of from our REED an of raining and the future the Mr owners friends of profits the the least burden. on richer make the Republic of the the And Mr. will CHAIRMAN The work Gov of repeatedly Economists by that bees Na the Policy, We monetary spe- AUGUST H. ANDRESEN Mr. gentleman I vield yield? the will the AUGUST H ANDRESEN Japan used this exchange Already against build China, up very our arm but fleet which doors and which defend to himself B huge out of the Axis ourselves should The him thank his for to of Sap. now vote for the dollar devaluation pow- 11 lavish in this bill is vote to put day Congress of the Treasury the power. find policy inflation of I financing the inflation ) been as pro- with raised the price all newly mined in its our woes, and this an defense The value of the dollar to the temptation to buried lost to led the votes politi- roll of what hand, benefits Mr any will yield the Mr recom- as Chairman, from gentleman I and is of Chairman of the for of My Federal the of time has ex- the version bility is known that that buy in the line, fuel all, and other materials gaso- with ADT At into of option the of gold, or foreign country paid vict holder. Second as to the proposed limitation of the stabilization fund to the highest Degerdemain on to the part of finanUncle devalue dollar the now re the Preside and the Becretary Treasury. of opinion this would lead because to inflation their And back time I full yield Mr. COCHRAN Mr. Chairman yield minutes to the gentleman from Texas (Mr. PAYMAN] I Chairman specie the 28 MA CONGRESSIONAL RECORD- HOUSE the and hands the to given the by expected promptly 4569 CONGRESSIONAL RECORD- -HOUSE 1941 which of these to National to 4568 27 Amer. of of help Influx of the of Mr.REED raiting grave and not future the charitable the owners of toss- billion dollars efficiency United friends best these the same burden carry least Uncle Republic The Cos- will The buying the de- destrable of advice has repeatedly been given the Na Monetary Policy outstanding monetary Congress AUGUST H ANDRESEN Mr build will the gentleman yield? would I yield ADOUST H ANDRESEN Japan used this to taking of against 2% idea would began himself but out the of build doors our of arm SCOTT 71/2 outselves The thank him for in dollar the this in secured from devalue the Congress dollar of It last and defend to of bill put the The in the of the dollar to raised at with its over and ) know to by burled policies ground at It the the of this in in inflation all of gold Knox Ky. to six politi- and of - hand, gavel You Mr. and the banks. rate of is minority who of Mr for- than My is the standard bility of that main in continuous likely session during Japan the line, con- which currency gaso were viot Second, as to the proposed limitation of the stabilization fund to the highest the devalon any $34.33 finanAt or veras, the option of the holder. buy fuel all, and other materials with Chairman, which full and the paid clai legerdemain on the part of Uncle dollar the this would lead the Secre- their Treasury. opinion re- to inflation And back balance of COCHRAN time my Mr. yield Chairman. 10 minutes the gentleman from PAYMAN]. I posto the time the the the I bill the Mr. billions 29 MAY CONGRESSIONAL RECORD-HOUSE paid in the history 1941 It 4570 4571 CONGRESSIONAL RECORD-HOUS 27 say available dollar should be government and supplant It for building country with dictatorial totals Is Mr. following ob defense an that other sinle the balance passage the ml- of this should fallow instance. to one bill the comHouse mem. on friend friend they en the the gavel the the to Mr that not of the Mr. the from Mr day day conhis about the of of this and that country Man What cases of Smith the right that put fund the Govern- the first Treasury the farmers of any country Repub licans, states that this bill is bad because made have continually deplored the tendency of the majority to scrap con- the the no This own it than time has ment terest there has been and is shocking that in these days the to 60 dollar evate bond will dollar will point have where no is this the not her fixed CONGRESSIONAL RECORD-HOUSE 4572 likewise. the threat of confisca- taxation and the fixing an tory ernment value: price possibility makes hazardous. of invest- Gov- ment in real estate equally Thus the poor widow knows not where she may safely invest her mite. I appeal to you, my fellow Members, to consider carefully your decision on this subject Forget about the center aisle and realize and weigh the consequences of your vote. Let us restore to the Congress its rightful prerogatives and constitutional control over the monetary system of our country. And, for one, I assure the country that Congress will the President of the United States, and that idea we are being asked here today fund which is also being considered today for renewal. to continue until June 30, 1943. of Ohio. Mr. Chairman willMr. theVORYS gentleman yield? gentleman yield for a correction? ANDRESEN, I yield to Mr. the AUGUST gentlemanH.from Ohio. Mr. WHITE. Mr. Chairman, will the Mr. AUGUST H. ANDRESEN. I am sorry: I cannot yield. I will discuss a little more of the policy along. and what has been done. The hearings before our committee to have Mr. Eccles, the Chairman of the and raised the price $50, that is, mark them up, then you will have in your Federal Reserve Board, one of the great- est monetary experts in the United States, as claimed by some. to come be- fore the committee, but he refused. I asked that other witnesses might appear, I yield 20 minutes to the gentleman from but a majority of the committee decided Mr. AUGUST H. ANDRESEN Mr. Therefore the only record you have be- Chairman I am not an expert on money. I leave that title for my distinguished friend the gentleman from Missouri (Mr. COCHRAN). who has received his instruc- tions from his collaborators down at the other end of the Avenue. I approach this problem and the money question from the viewpoint of a layman trying to use good, common horse sense in analyzing what should be done for the best interests of our country Many of the experts who were in favor of this present monetary scheme which has operated for the past 7 years and 4 months are no longer for it. The only remaining ones of the so-called monetary experts who are supporting the program are the ones who are on the Government pay rell. They could not very well do otherwise and maintain their positions. So we cannot help but appreciate that they are biased in their opinion when they recommend that Congress continue this authority in the President of the United States for another 2 years. I am going to give you just a little history of this legislation and why and who put it on the statute bocks In 1932 Candidate Franklin Delano Roosevelt, who was then running for President, said he wanted sound money in this country He ran on the famous Democratic platform and most of the people subscribed to that platform They wanted sound money. Mr. Roosevelt against any continuation of the hearings. fore you today as to the working out of the monetary policy and what the administration expects to do is found solely in the testimony of Secretary Morgenthau. The advisory committee of the Federal Reserve Board recommended that the power now lodged in the President to further devalue the dollar should be discontinued and allowed to lapse on June 30 of this year. Mr. DEWEY. Mr. Chairman, will the gentleman yield? Mr. AUGUST H. ANDRESEN. I yield to my colleague. Mr. DEWEY. Is it not true that all the monetary gold in the United States is under the control of the Federal Government, and not being in circulation this authority might permit the Treasury Department, the President or the person in power, to write up that asset to any amount he might think well, and having started and having had a taste of such writing up of an asset, might it not be possible for that asset to be written up where it could cover the entire public debt of the United States and gold certificates issued against the gold and the public debt paid off in that way? they discovered there was a noted Eng. lish economist who had come to the which we have today. John Maynard Keynes, a recognized au- thority in England on the money question: and, by the way. he is now in the United States advising the administration on what kind of a tax bill we ought to put through At that time he thought it would be a good idea if we would adopt cent dollar instead of a 59-cent dollar, There is $22,568,000,000 worth of gold in the ownership of the United States Treasury. a large portion of which is pledged to the Federal Reserve System Should the President take advantage of the authority given in this bill to further devalue the dollar an additional 9 cents, it would mean that the Treasury a new monetary policy in this country. particularly with reference to the pur- would be able to take a profit of $4,100.000,000 from the American people on that British Empire produces two-thirds of the world's supply of gold. So he sold his Ideas to Professor Warren and another distinguished monetary professor of Cornell, who in turn sold the idea to a profit of $2,800,000,000 on the $4,000.000,000 worth of gold we had on February chase of foreign gold. for England or the not sell the gold to anyone in the world and we are buying all the gold of the world. In fact, we now have between and 85 percent of the supply of gold world. Mr. VORYS of Ohio, I do not under stand this monetary theory very well but when you mark it up. when you give yourself a profit, all you do is to inflate is it not? You simply issue more money for the same value than there was before so that if everybody was smart and the thing worked perfectly, prices would change accordingly, because there is no more value behind the money than there was before. Mr. AUGUST H ANDRESEN. shall go into the details of that in a little while. and I believe that I can explain it to the satisfaction of the gentleman Mr. JONKMAN. Mr. Chairman, will the gentleman yield? Mr. AUGUST H. ANDRESEN. I shall yield in a few moments. I am going to refer now to the $2,000,000,000 of profit taken in 1934 and used as a stabilization fund. Some of my colleagues have already pointed out that only $200,000,000 of the $2,000,000,000 has been used as capital for the stabilization fund. One billion eight hundred million dollars has been lying dormant. During all this 000,000 of interest on that dormant fund in the stabilization fund held by the Sec- value the amount of gold in the dollar an additional 9 cents so as to give us a 50- liant ideas about money. His name is $50 for each horse, and that is about way this has happened, because we can might be possible to do that if Congress would give the President the additional authority to reduce the number of grains people tion. In the search for ideas United States and who had certain bril- mind a paper profit on your own books et time we have sold billions of dollars of Interest-bearing bonds to the American of gold in the dollar below 50 cents. Under the existing law or the bill we have before us. the President can de- searching around for ideas to give the that those horses are worth $100 aplece Mr. AUGUST H. ANDRESEN It 1933 He and his associates began was elected and took office on March 4. Mr. AUGUST H. ANDRESEN that I mean that if you have horses that cost you $50 apiece, and decided trol fairly and squarely (Applause.) Here the gavei fell.) Minnesota Mr ANDRESEN Mr. VORYS of Ohio. The gentleman uses the "make a profit off of is suing goldphrase, securities." were very brief. The only one permitted to testify before the committee was Secretary Morgenthau I wanted exercise those prerogatives and that con- Mr. REED of Illinois. Mr. Chairman, MAY gold. Now, originally the Treasury took 1, 1934. after devaluation. Approxi- mately $800,000,000 of the profit went to the general revenue fund, and $2,000.000,000 was retained in the stabilization people, and each year we have lost $45.- retary of the Treasury. The Secretary of the Treasury does not propose to use that $1,800,000,000 for any other purpose. He says that $200,000,000 is sufficient capital for all the operations of the fund The fund ceased to operate at the begin- ning of World War No. 2, so that there is no reason at all for the stabilization fund in any manner whatsoever. Originally the purpose of the fund was to equalize foreign exchange in relationship to the American dollar. We depreciated our money to meet the British pound and the French franc in 1934- meet their devaluation, so that our money in Amer1ca would be on a par with the French franc and the British pound and other currencies where they had devalued in 1932 and 1933. Mr. MAAS. Mr. Chairman, will the gentleman yield? Mr. AUGUST H. ANDRESEN. same In moment. Since that time these countries like England and France and 1941 CONGRESSIONAL RECORD-HOUSE every other country in the world have again devalued their currency and their money is now out of line with the Ameri- would rather leave It to experts like the gentleman from Missouri (Mr. COCHRAN] monetary policy of the United States and and those down in the Treasury to dictate just what should be done. That nest egg to which the gentleman referred represents simply clipping the dollars held by the American people to the tune of $1,800,000,000. The Secretary said he was holding that in trust for the American people, that it was not drawing interest, and that some day he erated it. I called to his attention the dire need can dollar. If we are to be consistent here and make our theories work, we should have another devaluation in the United States, but, after all, when we have another devaluation just as we had the first one, we are letting the bankrupt countries of the world dictate the such action should not be again tolMr. MAAS. And does not the gentleman fear that that will prove to be the fact that there will be a devaluation to meet the depreciated currency of the other countries? Mr. AUGUST H. ANDRESEN. That has already taken place. Take, for instance, the Canadian dollar. There is a 10-percent premium on the American dollar in Canada. An ounce of gold is now worth, as fixed by the President and the Treasury. $35 in the United States, and an ounce of gold in Canada is worth $38.50. Why? Because $35 in American money will buy $38.50 worth of Canadian money. and so we have caused a boost in the prices in Canada and given them the benefit of our monetary policy without a return benefit to the American people. If we want to get even with Canada, we should have another 10-percent devaluation on our gold. and so it would go on. Mr. MAAS. What would happen if we attempted to restore the original price, if this Government ever attempts to do that? Mr. AUGUST H. ANDRESEN. If we would go back to the original amount of gold in the dollar, which was around 23 grains, the price of gold would be brought back to $20.67 an ounce, as against $35 an ounce at the present time. We have 644,000,000 ounces of gold. For every dollar you reduce the value of gold we lose $644,000,000. So you can figure it out. Take 14.33 cents and multiply that by 644,000,000 ounces and you will see the tremendous loss the Treasury would have to take Mr. GIFFORD Will the gentleman yield? Mr. AUGUST H. ANDRESEN. I yield. Mr. GIFFORD Following all the reading I could find from the beginning of this stabilization fund, it was to stabilize the currencies of the world. Mr. AUGUST H. ANDRESEN. That is right. Mr. GIFFORD. For the first time at your recent hearings we find It is to be used entirely for another purpose. Morgenthau says that this $1,800,000,000 is sort of a nest egg. "When we have to borrow money and pay too high interest, I will buy bonds with it." It is entirely apart-from the original thought and it is held as a nest egg to buy bonds if he has trouble buying from the public and he has had that four times already. Does the public know he has had trouble four times already? Mr. AUGUST H. ANDRESEN. No. The public knows very little about money or what the Treasury is doing. In fact, most of the Members of Congress, unfor- tunately, rather feel that the money problem is so complicated that they 30 4573 have been enjoyed save by a complete despot.' said It then, and I say it now. Mr. AUGUST H ANDRESEN. I thank the gentleman for his contribution Mr. YOUNGDAHL Mr. Chairman, will the gentleman yield? Mr. AUGUST H. ANDRESEN I yield. Mr. YOUNGDAHL Was it brought out in the hearings or does the gentleman know how much is lost each year, was probably going to do something with based upon the average interest rates of for money to pay for our national defense $1,800,000,000? today. as a result of the nonuse of the and I asked him who this national defense was for: if that was not for all the Mr. AUGUST H. ANDRESEN. Fortyfive million dollars a year. or a total over American people: and I suggested to him that we use this $1,800,000,000 to help the 7 years of over $337,000,000, has been American people. He said we would not do that; that he wanted to keep this for a nest egg. Maybe, later, it will come in handy some day when we figure that our national debt will soon reach $100,000,000,000. if it is not there already. Per- Treasury on bonds. pay for the national defense of all the haps it is there today. But I say if we lost to the American people and has been paid out in interest by the United States Now I want to discuss the devaluation proposition, in which you are all inter- ested (Here the gavel fell.) Mr. REED of Illinois Mr. Chairman, I yield the balance of my time to the are in danger in this country, particularly gentleman from Minnesota (Mr. ANDRE- when we are spending about $50,000,000.- SEN]. American people, then we should use available money. without continuing to pay interest and raise exorbitant taxes. I strongly favor complete defense for our country. but I want to get full value for recognized for 11 additional minutes. 000 for national defense to protect all the every dollar spent for this purpose. Mr. GIFFORD Did the gentleman hear the gentleman from Texas when he said this means that a householder could save $1,600 on a $5,000 mortgage in 20 years, and connected this with it? Can you connect it with this? Mr. AUGUST H. ANDRESEN. Not at all, because, after all, the agencies of the Federal Government during the past 7 1/2 years have really taken over the function of loaning money to the people on all investments, as most of you know, so that it is impossible for an individual or a bank or an insurance company to go out in the market and compete with the Government Mr. CURTIS. Mr. Chairman, will the gentleman yield? Mr. AUGUST H. ANDRESEN. I yield. Mr. CURTIS. Does this bill carry a continuation of the authority for the purchase of foreign gold? Mr. AUGUST H. ANDRESEN. It does, and I am coming to that in just a moment. Mr. CURTIS. will the gentleman tell us what the effect of that has been upon the Japanese-Chinese situation, when he reaches that? Mr. AUGUST H. ANDRESEN. I hope to discuss that in just a moment. Mr. PLUMLEY. Mr. Chairman, will the gentleman yield? Mr. AUGUST H. ANDRESEN Yes: I yield. Mr. PLUMLEY. I was surprised to The CHAIRMAN The gentleman is Mr. AUGUST H. ANDRESEN One of the main reasons for the devaluation program of the dollar was to bring about an increase in the price levels of farm products in this country. and the other reason was to stimulate exports. The theory back of all of it was this: That if we would raise the price of foreign gold from $20.67 an ounce to $35 an ounce the foreigners would sell us their gold and that the money we gave them would be used to buy our farm and manufactured products. In that way we would get recovery in the United States. We would dispose of our surplus farm products, we would dispose of our manufactured products, start the unemployed men back to work, and we would again have good old American prosperity. That was the theory on paper as advocated by money experts and the men in the administration who sponsored the idea in 1933. It did not work that way. We got the gold, yes: we purchased nearly $15,000,000,000 worth of gold from foreign countries at $35 an ounce. What did they do with it up to the time the war started? Mr. Keynes, the noted English economist, was, of course, interested in the Idea. Great Britain produced two-thirds of the gold of the world The British Empire sold us between $10,000,000,000 and $11,000,000,000 worth of gold during the last 7 1/2 years. And how much did we pay them as a premium? The difference between $20 and $35 an ounce. We gave them a premium of around $4,400,000,000. It was an outright gift from the American people. They owed us from the last World War $4,200,000,000. without interest. So, in fact, we find. Mr. Chairman, that on the 7th day of October 1940, I said in this Congress that a subservient Congress granted the Secretary of Agriculture the right to impose taxes. That is up your alley. "They gave to the President authority to fix canceled the debt: not only canceled the the lives of men as never heretofore to man, will the gentleman yield? the value of money, a power so great over debt but gave them. on top of that, $4,400,000,000 a gift from the American people. No wonder Mr. Keynes was over here to recommend the passage of this type of legislation. Mr. REED of New York. Mr. Chair- 4574 CONGRESSIONAL RECORD-HOUSE Mr. AUGUST H. ANDRESEN yield. Mr. REED of New York We also have lent them $7,000,000,000 recently. Mr. AUGUST H. ANDRESEN. That is on top of this Mr. JONKMAN Mr. Chairman, will the gentleman yield? Mr. AUGUST H. ANDRESEN. I am sorry: I cannot yield. I have but 7 minutes left. Mr. Chairman. I will name some of the other countries that benefited by our generosity. At the time we started this New Deal scheme Japan was not armed and did not have an adequate army and navy. They had to get their raw war materials from other countries. Before World War No. 2 started we sold Japan 65 percent of her supplies of war materials, England sold her 15 percent of her supplies and the balance of her war sup- plies came from other countries in the world: but now WY are selling Japan pretty nearly 80 percent of her war sup- plies. In the last 4 years Japan has sold us $700,000,000 worth of gold, and we have given them a premium of $280,000.- 000 just to take that gold off their hands: and right today they are buying increasing quantities of gasoline steel products, and scrap iron. all things she needs to carry on her war listened to the radio the other night and heard Col. "Wild Bill" Donovan, the man the administration sent overseas to induce the Yugoslav Government to get into the war. Somebody asked him the question in the "round table. Why does the United States continue to sell war materials to Japan? He said, "I do not know He said, "I cannot understand it. I asked Mr Morgenthau the same ques- tion when he was before our committee. He said, You will have to ask Mr. Hull.' Here we have Japan, a recognized potential enemy of the United States, and we are cooperators in the partnership to bring destruction to America by furnish- ing her with the war materials that may be used to shoot down our boys and destroy our own ships. (Applause.) I should like to have some man on the majority side answer the question why the United States is buying Japanese gold at a premium and selling our essential war supplies to them I should like to know the reason for helping Japan build up a navy big enough to some day at- tack us. Mr. WHITE Mr. Chairman, would the gentleman care to answer a question? Mr. AUGUST H ANDRESEN I cannot yield, Mr. Chairman; I am sorry. The gentleman can answer in his own time We are friends of China, and God knows we want her to win. At last we are going to give her some credit. $50.000,000 out of the stabilization fund but we did not sell her war materials or give it to them. During the last year alone we sold Japan more than $54,000,000 in gaso- line and lubricating oils and more then $247,000,000 worth of war supplies they are getting ready to use against us Mr. REED of New York. I hope the gentleman will not forget the supplies we furnished Russia at the Finland was making her gallant fight for life. Mr. AUGUST H. ANDRESEN. No. I was coming to that. Russia has produced $1,250,000,000 worth of gold since we inaugurated this policy-$1,250,000,000. Much of it found its way into the United States Treasury. Russia benefited for all of her gold production, because our Treasury fixed and maintained the world price at $35 per ounce. So every country in the world. including Japan, Germany Italy. and England, now drawing dividends. We have to Day are those dividends in gold. You will find for instance, that as a result of the Amer. Ican securities these people purchased with that premium money we them for their gold, we will probably pay close to $300,000,000 worth of American gold as interest and dividends. We are again playing the "Uncle Sap." as one of my colleagues stated a short time ago. I ask you to vote for the amendments that will be offered to the bill. I am sor. ry I have not more time to finish my argument. [Applause.] amounts to a gift of over $6,000,000,000 a gift from the American people. yield myself 5 minutes. profit on their gold. This profit alone Our duty as Members of Congress is to stop such a program. We should take this power away from the President, and we can take it away from him if we adopt amendments that will be offered here today. Mr. JONKMAN. will the gentleman yield? Mr. AUGUST H. ANDRESEN. I yield to the gentleman from Michigan Mr. JONKMAN. Is it not possible that some of these war materials furnished to Japan during the last few years might have found their way to some of the other Axis powers? Mr. AUGUST H. ANDRESEN. There is no question about that, because once those materials land in Japan, the record [Here the gavel fell.) Mr. COCHRAN. Mr. Chairman, I Mr. Chairman, the gentleman from Minnesota certainly has my sympathy I realize that he cannot be an expert on too many questions. Naturally, when be gives so much of his time to the farm problem, he has little time to spend in studying monetary problems. I appreclate the gentleman's reference to my ability on this subject. He is extremely kind in his remarks. But I want to ask the gentleman from Minnesota if it is not true when he has great farm problems before him if he goes to the farm organizations to find out how they are going to look at the question, and then, when he determines how the great farm organizations feel, If he does not follow the leaders' advice in the interest of the shows they are finding their way into farmers. Russia, Germany, and even down to Italy, where they are now using those materials against friendly democracies. I call the gentleman's attention again to the letter the American Farm Bureau wrote to every Member of this House- Mr. Chairman, for the benefit of my good friends from the South, I want to point out one more thing. I have stated that we purchased between fourteen and fifteen billion dollars' worth of foreign gold. most of which lies burled down here in the ground in Kentucky. Do you know how much that is? I am going to tell you how much it is. All of the real estate, the personal prop. erty, the farms, the mines, the railroads, the furniture and everything else of any value in the following Southern States does not equal the value of the gold that we have purchased from these foreign countries under this fantastic New Deal monetary scheme: Alabama, Delaware, Florida, Georgia, South Carolina, North Carolina, Louisiana, Mississippi, Virginia, and West Virginia. The total value of everything in those States amounts to about $12,987,000,000; yet through our beneficence we have purchased $15,000. 000,000 worth of foreign gold that now lies buried down in the ground in Ken- tucky. You can guess as to its real value, We have given away the equivalent in value of 11 fine States in the United States. Who got it? People who were only interested in the United States for It is high time we stopped this policy Mr. REED of New York Mr. Chair- the United States or increase exports? It did not. Foreigners sold us $15,000,000- man, will the gentleman yield? Mr. AUGUST H. ANDRESEN. I yield. and American securities with terest in American business. They took in. the stock back with them and they have been parties to selling the United States $15,000,000,000 worth of gold They have enjoyed our bounty and the what they could get out of her. of giving aid to a potential enemy. MAY 27 Did this program increase prices in 000 worth of gold. They put the money in the banks and bought war materials and it has never been recalled or changed-in which that organization appealed to us in the interest of the farmers, and the merchants, to pass this very legislation 2 years ago, fearing grave results if we did not do so. The gentleman is rather critical in his remarks of me because he said I go up to the other end of the Avenue to secure my information on this subject. I confess that when I am seeking information I go to the best available source, and I feel in this instance the best available source is the Secretary of the Treasury and the Treasury Department Yes, I go there: yes, I secure my information there; and the information I secured is sound in this instance. Follow that advice with me and you cannot go wrong. The gentleman spoke of Japan. Are we at war with Japan? Does the gentle- man want to create a situation that might force Japan to declare war upon us? The gentleman says that we are selling our goods to Japan. So long as we are at peace with Japan, should we not sell our goods to Japan? Does the gentleman demand we stop all trade with Japan? I do not know where the gentleman gets his information but I want to know before I will admit what we are selling to Japan today is going through Russia and finding its way into Germany. do not know whether that is true or not, and I venture the assertion that he does not know positively that it is. 1941 CONGRESSIONAL RECORD-HOUSE So far as I am concerned, I am not a bit backward in telling the gentleman that the information I have given to the House upon this very delicate subjectupon a subject that concerns every man, woman, and child in this country subject which the Secretary of the Treasury told me and told you is just as essential to our financial program as our Navy is to our national defense- came from the Secretary of the Treasury, and I say the Secretary of the Treasury is the man to get this information from. I pass It along to you and hope at this critical period you will accept it and not try to make a political football of this bill. Mr. AUGUST H. ANDRESEN. Will the gentleman yield? Mr. COCHRAN. I yield to the gentleman from Minnesota. Mr. AUGUST H. ANDRESEN I certainly would not cast any reflection on the distinguished gentleman from Missouri, because I recognize that he is a sincere, conscientious Member of the House, and that he is performing his duty and working with the majority. Naturally he must go down and have a talk with the Secretary of the Treasury and the other experts in the Treasury De- partment before advocating legislation. sterling. In the collapse of sterling the Bank of (Mr. WHITE]. Mr. WHITE Mr. Chairman, it is very interesting to listen to the distinguished gentleman who preceded me, the gentle- man from Minnesota (Mr. AUGUST H. ANDRESEN]. It is also very interesting to hear so many statements in disregard of the mechanics of money. We are told that we must no do business with foreign countries because they may be potential enemies. eign exchanges by throwing across frontiers capital without any relation to foreign trade. France lost several times its capital and the Government had to make good its capital The Netherlands Bank lost its capital and the Government made good half of it. One hundred and fifty million pounds is a goodly sum, but that was soon found not to be enough. It was quickly increased by In the trouble that followed they could £200,000,000 so that the stabilization fund, not trust sterling. amounting to one and three-fourths billion When they are talking about sterling they are talking about the notes of the Bank of England. Gold was so scarce as a result of the war. there had been such a strain placed upon gold, the law dollars, is dropped into the foreign exchanges. to be handled by a gentleman sitting in the chair as the governor of the Bank of England. It is a movement of capital across borders, that today is as dangerous as an armada of airplanes. It is moved for the one purpose of the welfare of English commerce Now you may say that is also for the welfare of of supply and demand had made gold so increasingly high in terms of commodities or anything else with which you may measure gold, that its value had gone way past the price we finally legalized, $35 an ounce. If you followed the press reports the world. It may be or it may not be. It certainly was not moved with any design for our welfare, and has demonstrated that It is a force that the gold standard must be of that day. you know that the French guarded against hoarders were paying $25 for one of our Quoting further from Mr. Vanderlip: $20 gold pieces. So the fact that gold was increasing in value and everything It was an account that placed in the hands of the governor of the Bank of England the else was falling. that depression and dis- ability to buy exchange in one country or sell exchange in another and to bring an tress were overtaking this country, was one of the reasons that some monetary legislation and some monetary plan had element into the foreign-exchange situation having as I have repeatedly said, no relation at all to foreign trade movements to be worked out. (Applause.) Mr. Chairman, I yield the balance of my time to the gentleman from Idaho of preventing violent fluctuations of the pound in foreign exchanges. How could they prevent it? Only by manipulating for- had a tremendous lot of both dollars and ucts, and made a sale, the customer with sue. You know how you are going to vote. The sooner we vote the better. doubtedly. It was for the ostensible purpose sterling and dollars, and the Bank of France Mr. COCHRAN. And the gentleman's duty is to work with the minority. He is going along with the minority leader, and I compliment him for going along with his leader. At the outset the gentleman from New York made this a political is- 4575 ration fund. That sounds innocent, and Parliament had a perfect right to do It, un- sterling Instead of holding gold in their own vaults. The Netherlands Bank had a lot of Let me tell you something about the operations in gold and how they affected our business Gold was so scarce that banks in other countries had very low gold reserves covering their currency. If an exporter in this country found a customer in another country, particularly in central Europe, for any of his prod- 31 Now. there is another attack on the mone- tary gold stock that is fatal to it. If it is brought in large enough volume. as it was little over a year ago. Hoarders may withdraw gold. If all currency is redeemable in gold, and do that without any question as to the purpose for which the gold is to be used. Hoarders may invade your monetary gold stocks in a way that would threaten or might actually put you forcibly off the gold standard Hoarders withdrew in the neigh- the currency of his own country went to his bank and asked for exchange with which to remit to America for the goods we wanted to export and he wanted to borhood of six hundred million of gold a year ago. Now. remember that $1,000,000,000 of gold may be multiplied into 16 times that demand import. The man at the bank simply on your bank loans, and you must reduce your bank loans forcibly. if you are down issue you foreign exchange because it will come back here as a draft on our gold supply. and we are so short of gold we cannot permit any gold to flow out. That condition, due to the shortage of times as much as the gold withdrawal A shook his head and said, "No: we cannot without any surplus reserves, let us say. 16 withdrawal of six hundred millions by board- ers becomes an enormously important force under such a situation. So that I believe that if you do not want gold, just simply stopped business. set up an impermanent gold standard. you must insulate it against these two forces of We have gone back a thousand years I tried to ask a question two or three times but no one would yield. Speaking of money. when a man is accused of a in international transactions. We are reduced to the expedient of barter. We are going through the clumsy process hoarding and of an irresponsible interna- robbery and pays a lawyer a fee to defend him, I am wondering if that money should be retired and go out of circulation because it had been connected with some nefarious operation. We are dealing here with the function of money, the most important function that is supplied by the today of gathering up our cotton and our authority as the London Times that there is at the present time ten billions again that would be on the old gold figure ten billions of liquid capital that flows across the borders, actuated sometimes by fear. country. For the benefit of the members of the committee, I should like to read a few statements that were made at the time this legislation was first under consideration. May I remind the gentlemen who were speaking about gold that due to the shortage of gold at the time this legislation was under contemplation many of the currencies of Europe were unable to obtain the necessary gold reserves. I read from a statement by Mr. Benjamin Anderson, economist of the National City Bank of New York: There grew up a very wide practice of central banks in Europe holding dollars and wheat and bartering them for tin and rubber, whereas if we had the proper system of international exchange we would pay cash and eliminate all those expenditures and chances for profiteer- ing that exist in the barter system. just call the attention of the Members to that situation, and ask for this legis- I Government to the business of the tional movement of capital that has no reintion to foreign trade. Now, It has been estimated by as high an lation. Let me read a little further. This is Mr. Vanderlip testifying. He was former Assistant Secretary of the Treasury, president of the National City Bank of New York, and chairman of the New York Clearing House. I am speaking now about the situation that made the stabilization fund a necessity in this country: But there came another influence of that International capital movement which was much more menacing than these more-or-less normal movements of capital. When England went off the gold basis. Parliament almost at once appropriated £150,000,000 as a stabili- sometimes by astuteness, sometimes by Government policy That is as dangerous to the financial ship of state as a cargo of loose cannon balls that cannot be controlled If you allow It to attack your monetary gold base. That makes this section of the bill. I believe, an absolutely essential one Now. the gold standard worked for a cen- tury. but in that century we had no such movement of liquid capital It did not exist. In the movement of liquid capital is also reflected the work of exchange speculators. We have not in this country any large specu- lation in foreign exchange In Europe that is a very favored form of speculation Our speculators do not understand foreign exchange very well. and we have never de- veloped that form of speculation But in France, in Belgium in Switzerland, in Holland, and to some extent in England, there 4576 CONGRESSIONAL RECORD-HOUSE 1941 CONGRESSIONAL RECORD HOUSE 32 4577 4578 CONGRESSIONAL RECORD-HOUSE other countries. The stabilisation fund has proved 16 value during years of unparalleled crisis in International trade and finance and potent weapon of defense in our interna- tional economic relations. Your committee believes that It would be unwise at this time to abandon the machinery of control which we have built up to protect the dollar and the American economy. It would surely be an inopportune time to let private speculators or foreign governments determine the exchange value of the dollar. The bill also extends for 2 years the author- sty of the President to alter the gold content of the dollar. The President's authority, as under existing law, will be limited to fixing the gold content of the dollar between 50 and 6 percent of its former weight The Preal- dent exercised this authority on January 31, 1994. by fixing the gold content of the dollar at 15% grains of gold. nine-tenths fine. which approximately 59 percent of its former weight. The Secretary of the Treasury as sured your committee that there is no present destre or intent on the part of the adminis- tration to alter the gold value of the dollar However, as was stated by the Secretary of the Treasury. this is no time for the United States to surrender any of its instruments for deal- ing adequately and promptly with Interna- tional economic and monetary problems. We are facing a period of inevitable economic warfare of world-wide extent, the like of which has never been known in all recorded history. The time will come when our factories must change from the manufacture of instrumentall- ties of destruction to something else. Our production of materials of peacetime economics must compete with almost pauper labor from most of the other na- tions of the world. We must not sur- render or freeze the value of our gold and aliver. I earnestly ask this body to fully approve the bill as presented to the House. [Applause.) The Clerk read as follows: Be # enacted, etc. That subsection (c) of section 10 of the Gold Reserve Act of 1934. approved January 30, 1934, as amended is further amended to read as follows: "(c) All the powers conferred by this section shall expire June 30, 1943, unless the President shall sooner declare the existing emergency ended and the operation of the stabilisation fund terminated Mr. AUGUST H. ANDRESEN Mr. Chairman, I offer an amendment. The Clerk read as follows: Amendment offered by Mr. ADOUST H. AN. DESSEN: On page 1, in line 9. before the period, insert , comma and the following "and after June 30, 1941. such funds shall be reduced by $1,800,000,000 and such sum shall be credited to the general fund of the Treasury." Mr. AUGUST H. ANDRESEN. Mr. Chairman, the purpose of this amend. ment is to reduce the stabilization fund to its capital amount of $200,000,000, taking the balance, $1,800,000,000, which has been dormant for 71/2 years, and is now dormant, and placing It in the general fund of the Treasury to be used for national-defense expenditures. When Secretary Morgenthau appeared before our committee be stated that this $1,800,000,000 was being held in trust for the American people and that he wanted to keep It intact for the American people. During this critical time when we are spending billions of dollars for national defense, when the Congress proposes to increase tremendously the levies of taxes upon the rank and file of the people for national defense, It seems to me this money that is now lying dormant and not drawing any interest, could well be used to defend and protect all American citisens. MAY 27 mittee. report, and dering what big business say, such By not using this fund for the past 7 Co., If they and had $45,000,000 a year of interest. The tax bill that will come before the House will contain many provisions. The committee is searching around trying to find additional sources of taxation so as to raise just a few million dollars here and position, and years and 4 months the Treasury has lost a few million dollars there. By using this money we can at least save the taxpayers $45,000,000 a year and at the same time spend this money so that it will be for the welfare of all the American people. The purpose of the stabilization fund was to stabilize foreign currencies in their relation to the American dollar. The Government of the United States optered into an agreement with Great Britain and France called the tripartite agreement. That was an arrangement between the countries whereby we would seek to have a normal and stable exchange rate between the French frane, the British pound, and the American dollar. The operations under that agreement ceased when the World War No. 2 started, and since that time the fund has not functioned in any manner to stabilize the American dollar with relation to for- eign currencies. All of these foreign currencies have depreciated in value. Many of the countries have issued block money where the country that gets the block money in the normal channels of foreign trade must spend such money in the country of origin. There are now no foreign currencies to stabilize, Secretary Morgenthau said that the main reason he needed the stabilization fund was to handle a $50,000,000 item for China. We are going to help China stabilize its currency and provide them with some foreign exchange so they can purchase war materials here in the United States. Another reason was that we were lending about $40,000,000 to the Argentine to help them stabilize their currency and get foreign exchange in the United States. happen to the big companies during their of their mining operation. this country in of world war If we fund security that has 2306 the American people a cent from It has been the greatest bulwark and the greatest instrument to stabilize our foreign relations, Insofar as our currency is concerned, we have ever had. Why, Dr. Sprague, from our own Treasury Depart ment, was a man from this country who went to England and who helped the Bank of England out of a hole by estab- lishing a stabilization fund when that country went off the gold standard We have had to match the machinations of these countries by setting up our own stabilization fund. Listen to this inconsistent report. They advocate two principies that are ametrically opposed to each other. Let me you: We oppose the of the Preat- dent's power to reduce the gold content of the dollar for two I shall not read the whole report. I have not the time Quoting further: Thus as a consequence of the defense effort the dangers of inflation are much more actual and imminent than they were 2 years ago. Don't overlook the point. They are talking about Infistion To continue with the report: Although Infiation did not result from dovaluation of the dollar in January 1934, the situation now existing to in no way compare able. In the years prior to the defense - gency the economic system was operating far below full capacity, wheresa at present we operating very closs to capacity As production approaches capacity, the danger of These two items and any other Items that they might want to use can be han- infiation becomes ever more acute. Since died through the $200,000,000 capital stabilization fund which will be left and which Secretary Morgenthau indicated would be sufficient to take care of any of the needs they might have for such = defense program, administrative spokesmen fund in the Treasury. I may be mistaken in my theory of the use of this money. It seems to me a good business judgment that If we have money that is not drawing any interest, we should use it rather than borrow money and pay interest. If we have to borrow the money, It costs us $45,000,000 a year, and If we use It, save that money to spend for national defense. The CHAIRMAN. The time of the gentleman from Minnesota has expired. Mr. WHITE Mr. Chairman, this is a novel proposition and a novel position taken by the minority members of the Coinage, Weights, and Measures Com- the increment in the devalued gold dollar infiation can ruin the efficiency of our entire repeatedly emphasise that a major objective of governmental price policy today is to pre- vent infiation. For major purpose of the Office of Price Administration and Civillan Supply created by Executive order re April 11. 1941, is according to the President avoid "unwarranted price rison Birth larty, the President created the Priorities DI vision of the Office of Production Manage ment to allocate certain scarce materials prevent the prices of such materials from being grossly inflated by unusual and - equitable demanda Certainly the adminis- tration is aware that Inflation must be against now, more than ever before in the Nation's history. That is a fine principle, that is the basis of the report, but listen to the inconsistency of the thing. I turn now to another part: In effect the remaining $1,800,000,000 in the exchange stabilization fund is lying Idile 33 CONGRESSIONAL RECORD-HOUSE 1941 in the Treasury at the very time when taxes on the American people are being greatly in- Mr. AUGUST H. ANDRESEN. The gentleman asked me a question, and I creased for defense purposes The interest want to answer him. $45,000,000 a year. Consequently we recommend that this $1,800,000,000 in the inactive courtesy. on this sum at current rates is more than account of the exchange stabilization fund should now be used by the Federal Government to reduce the amount of borrowing that will have to be done through the banking system. This will be highly advantageous for there are certain inflationary tendencies re- suiting as a consequence of governmental deficit financing The Secretary of the Treasury asserta that the money in this account to a "nest being held in trust for the benefit of the American people as . whole, and that the money should only be spent for a worthy pur- poor. There can be no more worthy purpose, benefiting the whole Nation. than financing national defense. Certainly If the money In this fund is used for this purpose now It will remove all temptation to use It for a less worthy cause on some unforeseen future occasion What would happen if $1,800,000,000 of gold were dumped into the money stream, into our currency? It would operate to make an inflation of eleven and one-half billion dollars, and I would like to ask the gentlemen how they reconcile this proposition of being opposed to inflation and wanting to dump $1,800,000,000 in gold into the currency stream, thereby causing an inflation of eleven and one-half billion dollars. Consistency, thou art a Jewel. Mr. WORLEY. Mr. Chairman, will the gentleman yield? Mr. WHITE Yes, Mr. WORLEY Is it not a fact that the Secretary of the Treasury testified in the committee as follows: The very fact that-1 have this reserve is kind of a cap on the market to keep the people who own the money from running the rates up on me, because they know I have It. If the amendment should be adopted. the Secretary would be doing exactly as he said he would be doing. paying through the nose for higher interest rates, He would find himself in the same position as the Richfield Oil Co. with all their assets, all their oil wells, and all their business, when they had no re- serves. The CHAIRMAN. The time of the gentleman from Idaho has expired. Mr. WHITE Mr. Chairman, I ask unanimous consent to proceed for 2 ad. ditional minutes. The CHAIRMAN. Is there objection? There was no objection. Mr. WHITE The Public Lands Com- mittee had to pass bill Yeve the Mr. WHITE The gentleman would not yield to me, but I will show him that Mr. AUGUST H. ANDRESEN. I just wanted the gentleman to know that I the American people. I do not think I ment. It is foolish Let us follow the plan we started. Mr. AUGUST H. ANDRESEN. will the gentleman yield? Mr. WHITE I will yield, but the gen- Deman would not yield to me, No morning about President Roosevelt when he criticised Mr. Hoover and his ad- ministration as he said, for 3 long years? You remember what he said. I say to Mr. Hoover was in all his administration rency and protect our national economy. Let us continue the stabilization fund. (Here the gavel fell. Mr. RICH. Mr. Chairman, I move to strike out the last three words. Mr. Chairman I cannot help but refer the statement that the gentleman from Idaho (Mr. WHITE) just made, "Consist- ency, thou art a jewel. When think of the gentleman asking the question why the Standard Oil Co. had great reserves, why any other great corporation had great reserves, in order to be in good flnancial position we all know that it was to protect business in time of depression. But I want the gentleman from Idaho to take up the daily statement of the United States Treasury and see what con- dition you have It in. It is simply awful. Every time you mention the Treasury statement they all start to run away: they do not want to hear about what they are doing to it. When I speak of "they," I mean the New Dealers. Mr. WHITE We are just running for the statement Mr. RICH Yes; you Just are running it in the red every minute. I will give you one Pick up the statement of the United States Treasury and see what this New Deal administration has done to this country in the last 8 years. It is a sorry-looking statement. They all ought to blush with shame. Then the gentleman from Idaho, with all the gen- tlemen on that side, has voted for the great waste and extravagance that this administration has put on this country When you look at the national debt that we have of over $58,000,000,000 caused by the New Deal and then make the statement, "Put your house in order, and then say, "Consistency, thou art a jewel," I wonder if they should not put their heads on their arms and weep crocodile tears and really be ashamed of what they have done. I think It is time for the American people to wake up to these Members of Congress who say one thing and do something else. I am sick and tired of all the talk we have on the floor and then they say, "Consistency, thou art Bon. have to ask you to vote down the amend- Now you have been in power for 8 years. Did you hear my statement this Mr. WHITE Well, let us protect the American people and protect our cur- ple than I am in foreigners. them over which they could do with their cash reserves. Here in this great crisis, bulwark against the national economy of of myself. you, for a long years you have been in the a Jewel.' with the world aflame, when nobody knows what is going to happen. we are asked to dissipate and throw away this Nation in Jeopardy, I would be ashamed am more interested in the American peo- Richfield Oll Co. of $1,500,000 of royalties that the Standard Oil Co. might take 4579 Mr. MASON. Squandering thirty bil- Mr. RICH. They have squandered thirty-three billion and they will continue to do It as long as the President asks them to do it, because they do not have enough backbone to say to the gentieman in the White House "no." If my people would send me to Congress and I did not have enough backbone to tell the gentleman in the White House that I would not do the things that are wrong, do the things that would wreck this coun- try and put my children and my children's children in Jeopardy and put this red every year. You are going in the red right now for this year more than of * yours. have been in fine red UD the average every year since this admin- istration has been in office more than Mr. Hoover was in his 4 years. Yet Mr. Roosevelt said when he came in office he was going to balance the Budget. He has not said a word about it for the last 4 years. Now, you Democrate want to give this administration the power to regulate money. Perhaps I had better say New Dealers, in case there might be some Jef- fersonian Democrats who are opposed to the squandering and spending of this ad- ministration I hope there are a few of them left and I hope that the people back home will recognize those few and spare them for posterity, because I do not know what will be done with all the New Dealers that have supported this administra- tion. You come in here and you want to give this administration. the President, the power to regulate money. It is simply absurd. I would not give the President of the United States this power any longer. Certainly not this third termer. If the people in my district said that should, I would resign my seat in Congress. I am sure they would not ask it: they are too sensible in my district Mr. WHITE. will the gentleman yield? Mr. RICH. No: I do not yield. Mr. WHITE. How do you expect to get an answer if you do not yield? Mr. RICH. I want to tell you something. I do not want to hear you any more. (Laughter and applause.) Mr. WHITE. That is very apparent. Mr. RICH. It is ridiculous. It is ridiculous and embarrassing the things you say. Mr. WHITE. I know it is always embarrassing to a Republican to have his record pulled on him. Mr. RICH. You will find that the Republicans have always been able to take care of themselves If had to turn into a New Dealer to keep my seat in Congress I would not be here; I just would not have the job at that price. [Applause.] Let us vote for this amendment. [Here the gavel fell.) Mr. GIFFORD. Mr. Chairman, I rise in opposition to the pro forma amendment. Mr. COCHRAN. Mr. Chairman, will the gentleman yield? Mr. GIFFORD yield. Mr. COCHRAN. Mr. Chairman, I find that six gentlemen desire to be heard on this amendment. I ask unanimous consent that all debate on this amendment and all amendments thereto close in 30 minutes. The CHAIRMAN. Is there objection to the request of the gentleman from Mis- sourl? There was no objection. CONGRESSIONAL RECORD-HOUSE 4580 Mr. GIFFORD Mr. Chairman. support the amendment offered by the gentieman to use this $1,800,000,000. We note that the Secretary of the Treasury acknowledged that he does not need It for the purpose for which It was set up. He may need It possibly sometime after the war is over, but at the present time $200,000,000 is sufficient. To our amaze- ment he acknowledged for the first time in the last 7 years that he wants to buy I have read you what John C. Calhoun Thomas H. Benton said: This new page opened on the book of pub- at least $12,000,000,000 under our present almost the same words. lic expenditures, and this new departure taken-which leads into the bottomless gulf of civil pensions and family gratuities The driver of this automobile has been scattering free rides and free lunches un- was denied when the purpose for which this money was to be used has been dis- of us suggested It might be used for that as to the exact road he is to follow in this t it If be finds the public does a high rate of interest. I recall that this cussed on the floor of Congress. Many purpose. We should not continue this power. I suggested yesterday that the only way to stop the joy ride was to arrest the chauf- feur or take his license away from him. And that is what some of us are trying to should be given direction by the Congress experimentation of coin clipping and other acrobatics with the Nation's money and credit. Mr. PATMAN. Mr. Chairman will the gentleman yield? Mr. GIFFORD I yield. Mr. PATMAN. Does the gentleman do here. That is the necessity of the moment. When license is given to him, let us point out the roads that he must necessarily travel. These new untried thoroughfares which have led us into this mountainous debt and into a dangerous financial situation must be avoided. Congress should again take the wheel and assume its responsibility. He should now be our servant and not our master. Many Presidents seem to like to get into a position where they are the master. Woodrow Wilson, speaking in St. Louis, said: Things get very lonely in Washington some- times The real voice of the great people sometimes seems faint and distant in that strange city. You have politics until you wish that both parties were smothered in their own gas. That is the respect President Wilson had for Congress Mr. WHITE Mr. Chairman. will the gentleman yield? Mr. GIFFORD Mr. Chairman, I do not yield. Mr. Chairman, I propose to read a few things said by your old masters of finance, great men of the Democratic Party, whose opinions no longer prevail. The principle of spending money to be paid by posterity under the name of fund- ing. is but swindling posterity on a large scale That was said by Thomas Jefferson. John C. Calhoun said A power has risen up in the Government greater than the people themselves, consist- ing of many and various powerful interests combined into one mass and held together bythe thebanks cohesive power of the vast surplus in favor the amendment to put this $1,800.000,000 into circulation? Mr. GIFFORD. I favor using this to buy bonds now instead of paying interest. Mr. PATMAN. I do not believe the gentleman has answered my question. Mr. GIFFORD. will the gentleman repeat his question? Mr. PATMAN. Does the gentleman favor the amendment or is he opposed to it? Mr. GIFFORD As read the amendment I favor it if the money would be used to buy bonds instead of having to Mr. GIFFORD Yes: I am answering It: it is the gentleman who attempts to not that kind of an inflationist. I find myself now opposed to those who have opposed me in the past. The truth of the matter is, and the Members of the House might just as well recognize it now, the Federal Reserve Banking System is in the hands of the big banks of this country. When you hear the voice of the Fed. eral Reserve Board you hear the voice of the biggest bankers in this Nation. They are jealous of the United States Treasury They want this amendment in here. Why? Because the Treasury If it has this $1,800,000,000 will have some influence over the United States bond market That is admitted I am glad of it. It something to do with interest rates, and But if this amendment is adopted. then the Federal Reserve will have succeeded in taking away from the Treasury an I have many notations here. I have read the hearings, not only the current hearings but the hearings back in the other years when these powers were granted and renewed. Still again the President wants to extend this power against the advice of his own Federal enormous power which they. representing Reserve Board. Well do we now realize that this President of our desires all kinds of delegated power and once given he will never consent to give them up. It is necessary to take them from him. (Here the gavel fell.) The CHAIRMAN. The Chair recognizes the gentleman from Texas (Mr. PATMAN] for 4 minutes. LOW INTEREST IN PEOPLE'S FAVOR Mr. PATMAN. Mr. Chairman, I do not believe that the gentleman who has time when I offered a bill to pay the World War veterans much less than earnestly recommended that many so- $1,800,000,000 it was branded as an infle- tinued. Board. tionary measure. This proposal would pay into circulation more than would Mr. GIFFORD In just a moment I 000,000 of new money without any brakes whatsoever. However, those of you who want $12,000,000,000 pushed into circu. lation immediately should vote for this particular amendment. Although I have been branded as inflationist many times, I am certainly becloud my answer. petent advisers who have warned us and shall be pleased to. country seems to be going along now rather smoothly and I do not know what kind of a shock it would be to our eco. nomic and financial system to have in. jected into its economic veins $12,000,- I am glad for the Treasury to have it. Mr. PATMAN. I do not believe the put into circulation $1,800,000,000. One Mr. PATMAN. Mr. Chairman will the lieve in a certain amount of expansion of currency when it is needed, but the gentleman is answering my question. a party in power opposing it, scorning the recommendations of their own com- gentleman yield for a question? do it immediately, quickly, overnight, should vote for this amendment. I be. has a good, wholesome influence, It has just spoken can consistently be for this amendment. This amendment would I refer to the Federal Reserve system. If you want to inflate the cur. rency to the extent of $12,000,000,000 an borrow that much and pay interest on it. And today we are trying to do something to reduce that surplus and we find called emergency powers be now discon- consistently argue in favor of this amendment, I cannot understand The payment of $1,800,000,000 into culation means inflation to the amount said. Grover Cleveland repeated It in til the supply has run out, and now he asks you to furnish him more gasoline and oil to go perhaps over exactly the same road and scatter more largesse. It is high time the driver was deprived of his license and when it is reissued he not buy readily or If he is forced to pay MAY 27 have been paid to the World War soldiers on their so-called bonus certificates. I do not know of any amendment that has ever been offered that is half as inflation- ary as this particular amendment, and how those who want to avoid inflation can the big banks of the country. want for themselves. Those who favor the big banks against the people should vote for this amend- ment. Maybe I am wrong about it I know that they are just as honest in their views as I am, but I am telling you the effect of it: and if you favor high interest and are against low interest, you should vote for this amendment because it will have a tendency to bring about high interest. Mr. DEWEY. Will the gentleman yield? Mr. PATMAN. I yield to the gentleman from Illinois. Mr. DEWEY. Might not the $1,800. 000,000 be applied to the retirement of that amount of public debt now held by the Federal Reserve System. which certainly would not be inflationary? Mr. PATMAN. It could be done, yes: but then the Treasury would be deprived of a great power and I am not willing to deprive the Treasury of it. If I had the confidence in the Federal Reserve Board that some people have I would be willing to strip the Treasury of all its power, but this means stripping the United States Treasury, which is supposed to represent the people and does represent the people, of an enormous power and turn It over to representatives 1941 34 CONGRESSIONAL RECORD-HOUSE of the big banks, and I am opposed to it. [Applause.] (Here the gavel fell.] The CHAIRMAN. The Chair recognizes the gentleman from Mississippi (Mr. RANKIN] for 4 minutes. (Mr. RANKIN of Mississippi addressed the Committee. His remarks will appear hereafter in the Appendix.) The CHAIRMAN. The Chair recognizes the gentleman from Ohio (Mr. SMITH). (Mr. SMITH of Ohio asked and was given permission to revise and extend his remarks in the RECORD.) Mr. SMITH of Ohio. Mr. Chairman, the claim that is made here that the Republicans are inconsistent in asking that the $1,800,000,000 stabilization fund that not being used be spent, and that it will produce inflation if It is spent, if it is used to pay for current or past bills, is very foolish. Mr. WHITE. Mr. Chairman, will the gentleman yield? Mr. SMITH of Ohio. No: I cannot yield. I have said it for the last time now. Mr. WHITE Mr. Chairman Mr. SMITH of Ohio. Mr. Chairman, The CHAIRMAN. That is not a point of order. The gentleman from Ohio will proceed. Mr. SMITH of Ohio. You talk about inflation, you talk about the danger of Mr. WHITE How am I going to answer it if the gentleman will not yield? Mr. SMITH of Ohio. I ask for order, 000,000,000 of inflation in the banking system. I challenge you to deny that. What have you done with the bank deposits of the United States? You have reduced them in value. You have depreclated them in value so that the bank deposits, taken as a whole, are worth only 75 cents on the dollar, and you are talking about $1,800,000,000 here producing a dangerous inflation. Further, the statement was made that this would be paid to the Federal Reserve banks. It would not be paid to the Federal Reserve banks. It would go into cir- culation The Federal Reserve banks would have nothing whatever to do with it. Here is another thing about inflation. What is being done at the present time by the process of depositing bonds in the banks? The Treasury simply deposits the bonds in the banks and checks I should think that the New Deal inflation that already exists of about Mr. Chairman. $400,000,000,000? Then you talk about the danger of inflation. from Ohio declines to yield. the gentleman yield? are you going to do with this $1,800,000,- yield at the present time. will have to spend it. It is an act that $1,800,000,000 will be used as inflation amounts to this. You have already spent $675,000,000. In other words, you have already stolen the first apple. What can we expect you to do following that? We The CHAIRMAN. The gentleman Mr. SMITH of Ohio. I ask you, what 000? It is created. Sooner or later you is completed. It is not as though we intended to create that fund; it is here. Therefore, all the Republicans, if you want to make it party issue, are asking is that it be used and spent now, when it is needed. That is all they are asking. Furthermore, why talk about $1,800-000,000 producing inflation? What about the $675,000,000 of the so-called profit that has already been spent to pay off bonds? What have you to say about that? What have you to say about the $145,000,000 the Treasury is carrying in its general fund? Talk about inflation. Mr. WHITE rose. Mr. SMITH of Ohio. Mr. Chairman, I refuse to yield. Mr. WHITE. Mr. Chairman, I rise to question of personal privilege. The CHAIRMAN. The gentleman from Idaho cannot raise that question while the gentleman from Ohio has the floor. The gentleman refuses to yield and will proceed. Mr. WHITE. Mr. Chairman, a point of order. The CHAIRMAN. The gentleman will state It. Mr. WHITE. The gentleman has ad- Mr. PATRICK Mr. Chairman, will Mr. SMITH of Ohio. No: I will not So that your argument that this expect you, of course, if you have the op- portunity, to steal the remainder of our apples. (Applause.) (Here the gavel fell.) The CHAIRMAN. The Chair recognizes the gentleman from Texas (Mr. WORLEY). Mr. WORLEY. Mr. Chairman, I wish I knew more about the monetary system in America than I do. I wish I could H. ANDRESEN). the Secretary of the kind of a cap on the market to keep the people who own the money from running the rates up on me, because they know I have It. It seems to me that an analogous situation would be that of a farmer who went to a bank to borrow money to buy threshing machine. Suppose the farmer had $200. You know good and well that the banker would be inclined to give him a cheaper rate of interest If he had some- thing in reserve than he would if the farmer did not have a dime in his pocket and had to rely entirely on the beneficence of the banker. You take away this $1,800,000,000 from the Secretary of the Treasury and he will necessarily have to go where he can get the money. and he will have to pay a higher rate of interest than the 21/2 percent he is paying now. It is perfectly true that the money in this stabilization fund is not earning any interest and the interest would run approximately $45,000,000 a year, but you must bear in mind at the same time that If this money were taken away the $45,000,000 would be about one-half of what he would have to pay in interest. We had to pay 434 percent during the World War for money similar to this, and I say, in all fairness and in all candor. the amendment offered by the gentleman from Minnesota (Mr. AUGUST H. ANDRESEN) should be defeated because I believe it to be a short-sighted amendment, and in spite of the fact this money would revert to the general-revenue fund, I still believe and I think the majority of the membership of this side, and I hope a majority of the membership on the minority side, will concur in the proposition that it is a short-sighted policy to try to take this $1,800,000,000 away from this fund. (Applause.) (Here the gavel fell.] The CHAIRMAN. The Chair recognizes the gentleman from South Carolina (Mr. HARE) for 2 minutes. Mr. HARE. Mr. Chairman, I am very grateful for the invitation to speak on the subject now under consideration, and say the bill under consideration is a per- I appreciate the compliment the chairman pays in suggesting by implication done toward this particular piece of leg- the difference of opinion on the subject. However, I have never heard the fect bill, but I cannot. I wish could say that everything the majority party has islation has been perfect, and I wish I could say that it would be a panaces for all of our economic ills, but, in all fairness and in all candor, I cannot do and I do not believe anyone else can. The amendment which was offered by the gentleman from Minnesota was also offered in the Committee on Coinage, Weights, and Measures by him. Testimony was obtained from the Secretary of the Treasury. Mr. Morgenthau, relative to this particular amendment, and I dressed a question to me, and I want him to yield so I can answer it. quote from the hearings of the commit- dressed a question to anybody. these: Mr. SMITH of Ohio. I have not ad- Continuing after a colloquy with the Treasury said: The very fact that I have this reserve is a from Ohio declines to yield. you going to do with the $1,800,000,000? to borrow, except at very unreasonable rates. purchase program you have created $14.- this afternoon that through the gold- Party would be the last on earth to talk about the danger of inflation. Do you know that the President of the United States has today the power, if he cares to use it, to set into motion a potential Mr. SMITH of Ohio. I am going to country one that we could use in case the time might come when I might not be able gentleman from Minnesota (Mr. AUGUST against them. What is that but inflation? ask you this simple question. What are I have felt that this $1,800,000,000 is a sort of nest egg that belongs to the people of this inflation If this $1,800,000,000 should be used to pay off bonds. I explained to you refuse to yield. The CHAIRMAN. The gentleman 4581 tee. Mr. Morgenthau's reasons are that my views may operate to harmonize theory of money discussed. but what I am reminded of the observation made by that great humorist. will Rogers, when he said: There are two classes of crazy people in this country: one class is confined to our asylums and the other class is made up of those who claim to know all about money. (Laughter.) Therefore, in order to avoid being placed in the latter classification, I shall forego the pleasure of discussing this subject at present, but at some unguarded moment in the future I may be prevailed 4582 CONGRESSIONAL RECORD-HOUSE upon to express my views on the matter. (Laughter and applause.) Mr. COCHRAN. Mr. Chairman, I do not belong to either class that the gen- tleman from South Carolina referred to. (Laughter.) I make no pretense of being an authority on money. We have the amendment at this this amendment all amendments thereto close in 30and minutes. want time I am and to offering explain We I have have al- Mr. AUGUST H. ANDRESEN Mr. Chairman, several other amendmentsthere to beare proposed. Mr. COCHRAN. Mr. Chairman, ask in the few minutes I It to you. COCHRAN for 4 minutes. ready under the New Deal monetary policy with respect to gold purchased nearly $15,000,000,000 worth of foreign gold at an ounce. Our total gold sup- ply in the Treasury is $22,568,000,000 as 414 percent I do not believe we can of May 22, a few days ago. In addition recall them until 1952. In the meantime to the gold in the Treasury there is we must keep that obligation and pay around $1,900,000,000 in earmarked gold in the banks in New York, earmarked and held for foreign countries and individuals. 41/4 percent interest on those bonds until the time arrives when we can recall them. us. "Let me have this money and as long as I have the money I am not going to be dictated to by the money interests of this country as to the rate of interest I am going to be required to pay to run your Government when I need money. The Secretary of the Treasury also states that an increase of one-tenth of 1 percent in the average rate of interest on the public debt would more than offset the entire interest saving that might re- sult from the use of the stabilization fund to retire a small part of the national debt. With your Secretary of the Treasury making this statement, it seems to me we should follow him and there- fore I hope the amendment will be defeated Mr. Chairman, I ask for a vote. The CHAIRMAN. The question is on the amendment offered by the gentleman from Minnesota (Mr. AUGUST H. ANDRESEN) The question was taken: and on a division (demanded by Mr. AUGUST H. AN- DRESEN) there -ayes 95, noes 118. So the amendment was rejected. The Clerk read as follows: Sec. 2. The second sentence added to para- graph (b) (2) of section 43. title III. of the act approved May 12. 1933 by section 12 of said Gold Reserve Act of 1934. as amended is further amended to read as follows: The powers of the President specified in this paragraph shall be deemed to be separate, distinct. and continuing powers, and may be exercised by him, from time to time, severally or together. whenever and as the ex- pressed objects of this section in his judgment may require: except that such powers shall expire June 30. 1943 unless the Prestdent shall sooner declare the existing emergency ended. Mr. AUGUST H. ANDRESEN Mr. Chairman, I offer an amendment, The Clerk read as follows: Amendment offered by Mr. AUGUST H. AN. DRESEN On page 2. at the and of line 9. insert: "No foreign gold shall be acquired by the United States after the date of enact- an ounce." ment of this act at a price in excess of 835 Mr. AUGUST H. ANDRESEN Mr. Chairman, the amendment which I have just offered was proposed in the Com- mittee on Coinage. Weights, and Meas. ures and was adopted by a majority of that committee a week ago last Tues. day. I believe, The majority of the committee apparently regretted their action and on the next day they called a special meeting and rescinded It and the amend- This money will eventually find its way into the United States Treasury and we The Secretary of the Treasury has told Mr. COCHRAN. Mr. Chairman, unanimous consent that all debate against the amendment. The CHAIRMAN The Chair recognizes the gentleman from Missouri (Mr. one outstanding bond issue now, paying ment was then defeated by a strict party vote. the majority at that time all voting MAY will soon have between 85 and 90 percent of the total world supply of monetary gold in the Treasury of our country. My amendment seeks to peg the price The CHAIRMAN. Is there objection? unanimous consent that all debate this amendment close in 30 minutes. The CHAIRMAN. Is there objection? There was no objection. Mr. WORLEY Mr. Chairman It It not my purpose to attempt to monopolise any of the time which belongs to mittee, but there are two phases of this bill in which I am particularly interested and upon which I tried to inform myself officially so that I can at least give my views, which I think and hope are sound paid for future purchase of foreign gold During the discussion of the bill in the committee several amendments were amendment fixes It so that the Treasury cannot pay more than $35 an ounce for All of them were defeated until this at $35 an ounce. In other words, my foreign gold in the future. We are the only purchasers of gold in the world. We take it all at $35 an ounce. We fix and maintain the price. Under the bill before us, If continued, the President still has the right to raise the price of gold from $35 an ounce to $41.34 an ounce. The only ones who would bene- fit by such an increase in price of ap- proximately $7 an ounce are the foreign- ers and a few domestic mines. Is there any reason in the world why we should raise the price of gold $7 an ounce and give the foreigners who are mining gold and gold speculators the advantage of it? My amendment here does not de- prive the domestic miners of an increased price for their gold. It is somewhat similar to the proposition we established a few years ago when we discontinued buying foreign silver metal at 50 cents to $1 an ounce. We buy foreign silver at the world price, while in this country we continue to pay something like 71 cents an ounce for domestic-mined silver. My amendment pegs foreign gold at $35 an ounce so that the United States Treasury cannot pay more for it. That will give some stability to our American dollar and to our foreign exchange and will give stability to the contracts en- tered into between this country and citizens of foreign countries. Everyone will know that the gold dollar which we hope will be continued as a medium of international exchange will have a definite, fixed value. Therefore, I am proposing that this amendment be adopted by both sides of the aisle, so that we can stop the Iniquitous practice of further devaluation of the dollar and increase in the price of gold. I believe it is our duty now to begin working for American citizens, and we can do it by adopting this amendment. (Applause.) Mr. WORLEY rose, The CHAIRMAN. For what purpose does the gentleman from Texas rise? Mr. WORLEY. Mr. Chairman, I rise in opposition to the amendment. COCHRAN theMr. gentleman yield? Mr. Chairman, will Mr. WORLEY. Yes, offered by members of the minority side. amendment was offered along toward the last of the morning session. Frankly, sounded very good to the members of the majority side of the committee, and even better to the Republican members of the committee. Consequently n was adopted It was adopted without a great deal of thought being given to it, and it was adopted by a two-vote margin, as recollect. Shortly after its adoption the chairman asked the Secretary of the Treasury for his opinion as to the exact effect the amendment would have on the bill. The answer which the Secretary gave I shall read, because I think it expresses concisely the proper objections. The Secretary said: Section 2 of H. R. 4646 extends the power to reduce the gold content of the dollar. To this same section has been added a committee amendment which provides that no foreign goldan can be acquired at a price in excess of $35 ounce The effect of the amendment is to multify completely the power to devalue the dollar given to the first sentence of section 2 since any dollar devaluation necessarily increases the price of gold. This is true, of course, be cause the value of the dollar is expressed is terms of gold and when the gold content of the dollar is reduced It means that you have to pay more dollars to buy an ounce of gold. Congressman ANDRESEN'S amendment also constitutes a pro tanto repeal of section 8 of the Gold Reserve Act which is permanent legislation and which authorizes the Secretary of the Treasury acting with the approval of the President to purchase gold at home or abroad "at such rates and upon such terms and conditions as he may deem most advantageous to the public interest The reasons for the continuation of the President's power to devalue the dollar were fully explained by the Secretary of the Treas- ury in his testimony before the committee on May 8. 1941. The Secretary stated that the administration has no present intent whatsoever to devalue the gold content of the dollar, but that this is not the time to remove flexible power from the Executive when heads of other nations possess virtu ally complete powers over the domestic and external monetary affairs of their countries The power to devalue the dollar is a strong reserve weapon and is much needed to pro- in- tect American tereats monetary and economic There is no basis whatever for believing that the continuance of these existing more 1941 CONGRESSIONAL RECORD-HOUSE tary powers will have any inflationary effect. On the other hand, to take away these pow- been repudiated by every leading econo- mist in the world. The Board of Gov- ers may well affect the interest rates which ernors of the Federal Reserve gave the President an out when they advocated is embarking Surely If we are ever going to have any stability in the world's money market we have to let this power lapse, or at least take the first step toward stabilization of the Government will have to pay on the enormous financing program upon which it At a time when the United States owns over 22 1/2 billions of gold, constituting about 80 percent of the world's monetary stocks of gold, Congress should not hastily adopt legislation limiting existing Executive powers to deal with gold. I trust that that answer from the Treasury Department, which is charged with knowing. along with the Congress, the effect of different amendments of fered to legislation which comes before this House for action. will be accepted as the most expert opinion that anybody in the Government can offer. I think the reasons advanced why this amendment should not be adopted are sound and sane, and I hope that the Members will vote against the amendment. (Ap- that this power be allowed to lapse. the dollar value of gold. This amend- ment puts a celling on the dollar value of gold and may alleviate the fears ex- pressed not only by the Board of Gover- nors of the Federal Reserve but their advisory council, by all the leading econo- mists, bankers, and money men in the United States, that we are approaching a situation which may result in having to take very drastic steps to prevent inflation. prevail. As understand it, it is a com- The purpose of gold devaluation originally you understand was to inflate, and the President still thinks that by devaluing or revaluing the dollar price of gold, the commodity price index will fluctuate proportionately. It is a fallacy. and we, the Congress, who have this power to do so should today initiate the movement the Board of Governors of the Federal [Applause.] plause.) Mr. WOLCOTT. Mr. Chairman, I move to strike out the last word. Mr. Chairman, this amendment should promise between the recommendation of Reserve and those who want to continue this power. May I take just a moment to tell you the history of this legislation? I will do it as briefly as I can. In 1933 the House Committee on Banking and Currency divided itself into subcommittees for the purpose of discussing several issues which were confronting us at that time. One of them was a bill to establish a Federal monetary authority. which the gentleman from Maryland, Judge Goldsbor- ough. introduced We worked for 7 weeks on that bill to establish a Federal nionetary authority. We had all of the leading economists of the Nation before the committee at that time, including Professor Pierson, who collaborated with Professor Warren in advising the Prestdent on the gold policy which the Presi- dent later put into effect. It was con- tended at that time by Professor Pierson that to devalue gold would result in an immediate increase in the commodityprice index. That is what we were very much concerned about in those days, the purpose being to create a situation where the equivalent of an ounce of gold was $35. Anything you formerly bought with an ounce of gold would have to be purchased with $35 instead of $20.67. The whole theory of gold-devaluation legis- lation was to increase the commodity price by 59 percent. It failed. The Treasury has admitted that it failed and I am told that one of the sponsors of the plan who advised with the President now admits privately to his colleagues that in practice the plan has failed, dis- proving the theory that the fluctuation in the dollar price of gold will necessarily cause a fluctuation in the commodityprice index. It did not accomplish its purpose and the only single individual in the world today who still believes that it did or will is the President of the United States. In his stubbornness and contrary to his inaugural address of March 4. 1933, he insists upon following a plan which has for stabilization of world currencies. 35 4583 jected into the discussion If are trying to understand this matter. It was said a little while ago that we should do something for the American people. I have heard speeches on the floor of the House over and over again wherein It was said that we should do something for the American people along the line of raising tariff barriers against the importation of certain products. and that we should try to encourage exports from our own country at the same time we discouraged imports into it. That is supposed to be doing something for our country. the idea being somehow or other that the more goods you send out of the country the better off you are and that the less you bring into the country the better off you are. I think that is open to some question. On the other hand, if we do not let other countries send their products to this country to pay for what we send out we have got to have some means by which they can pay. Under present existing circumstances the United States is, because of two reasons, export- ing a very large quantity of goods. The main one of those reasons is that we are selling a great quantity of war goodsmostly. of course, to the British. The other is that we are trying to hold on to some markets for some of our products which are produced in real, actual surplus. If you are going to do that, and if (Here the gavel fell.) The CHAIRMAN. The Chair recognizes the gentleman from California (Mr. VOORHIS] for 4 minutes. Mr. VOORHIS of California Mr. you are not going to import a correspond- Chairman, I am more interested in the stability of the American dollar in our own markets and our own business than I am in an arbitrary figure with regard to its gold content. Furthermore, what the American people are interested in and all they are interested in- is how much bread, meat, clothing. and shelter those dollars will buy. It makes no difference to them how the relationship of the dollar to grains of gold is arranged. The whole purpose of this legislation is to enable the American Government to prevent some other nations in the world from devaluing their currencies in terms of gold, which is used to settle international balances, and thus in effect raising the cost of production to the American producers in terms of international exchange without our being able to take compensatory action. The adoption of this amendment will practically nullify the purposes of the legislation. It seems to me, therefore, it should be defeated. If we are ever going to arrive at a reasonable stability of the relationship between the currencies of the world it has got to be done by means way of agreement, and cer start out is not to tie the hands of your own country so it will not have any basis or bargaining power on which to make to such an agreement. It is obvious to me, at any rate, that an attempt to influence the price level by changing the gold content of the dollar is likely to be a fruitless or, at any rate, an inadequate attempt. do not believe it will do it. I think the thing that controls the price level is the relationship between the quantity of money in circulation and its velocity. on the one hand, and the quantity of goods and services, on the other. That is not the purpose of this legislation, and ought not to be in- ing amount. which clearly is impossible, you have got to make it possible for the purchaser to pay for the purchases: and under those circumstances there must be some means of payment, and so far it has largely been gold. Furthermore, we have got to be able to protect our producers against monetary manipulation from abroad This need seems to me to justify the continuation of this power not only during the war but after the war is brought to a close. Mr. AUGUST H. ANDRESEN. Mr. Chairman, will the gentleman yield? Mr. VOORHIS of California. I yield. Mr. AUGUST H. ANDRESEN. Does the gentleman believe there would be any danger of manipulation of gold from abroad due to the fact we have such a large proportion of the gold right here in this country? Mr. VOORHIS of California. I am not speaking of the manipulation of gold from abroad. I am expecting that the time will come, If this war should cease, as I hope it soon may. that there will probably be a tendency in many nations to devalue their currencies. It will be one easy way to discharge their debts. I think the result would be and I believe the gentleman will agree that the result would be that of raising the cost of production to the American producer. We should be able to prevent that. That is the purpose of this power. Here the gavel fell.] The CHAIRMAN. The Chair recognizes the gentleman from Ohio (Mr. SMITH) for 4 minutes. (Mr. SMITH of Ohio asked and was given permission to revise and extend his remarks.) Mr. SMITH of Ohio. Mr. Chairman, the argument of the gentleman from California who just preceded me CONGRESSIONAL RECORD-HOUSE amounts to this: That If other nations debase and clip their coins, we want to be in position to debase and clip our coins. That is exactly what It amounts to. There is not a student of money who has not pointed out and who does not realize that no government ever benefits from such a policy. They know that the benefits that are supposed to be attached thereto are very temporary; that in the long run It costs them more than they get out of it I have heard It said here this afternoon. Mr. Chairman that we have great people working at the Treasury. I am not going to dispute that, but I want to read a little testimony from the hearings held by the Committee on Coinage, Weights, and Measures. One of the members asked a question of Mr. Bell. Under Secretary of the Treasury. and I presume Mr. Bell was speaking for Mr. Morgenthau, Secretary of the Treasury. The question is as follows: Then the gold certificates handled by the Federal Reserve are a very insecure thing. if It is just on the value which is deter- the free-contract process- the very basis of civilization itself. [Applause.] I believe the President could, under section 8 of the Gold Reserve Act, debase to any degree he might determine the gold dollar. (Here the gavel fell.] The recogfrom nizes The the CHAIRMAN. gentleman Chair Texas (Mr. PATMAN] for 4 minutes. Mr. PATMAN. Mr. Chairman, I cannot add anything to what my colleague the gentleman from Texas (Mr. WORLEY] has already said in opposition to this amendment. He gave a logical, convincing reason why the amendment should be defeated, and I, too, want to commend him for the ability he has demonstrated upon this occasion in support of the bill now under consideration. think he has made a wonderful and effective fight. The principle of this bill involves 640.000,000 ounces of gold approximately 40,000,000 pounds. If that gold were shipped from New York to Fort Knox, Ky., in railroad freight cars, it would require 8 railroad trains carrying 50 cars mined to a large degree by the President each. each car containing 100,000 pounds Mr BELL They can change their books. of gold. So does involve a commodity that is very valuable- something that with the power to devaluate gold? could they not? They could not change their books, but it would change the security Mr. BELL They would still have $17,000.- 000,000 of gold certificates in their possession. Let us reduce this proposition to common sense. In substance. the Secretary of the Treasury says that a $100 gold certificate is of the same value whether it calls for a hundred dollars of gold with a content of 13.71 grains to the dollar or whether It calls for a hundred dollars of gold with a content of 11.61 grains to the dollar. That is precisely the proposition we have here. If that is the case, then a gold certificate for $100 ought to call for the same value dollars if the gold content of the dollar is cut in two or in four or into a millionth part of its present content Either Mr. Bell's formula stands on principle or it does not stand on principle, but by some sleightof-hand performance they can change their books The politicians changed their books in France. They cut down the value of the franc so that at one time they took three and one-half billion dollars from the people. Furthermore, they could change their books in France so that the French peasants who bought bonds at $20 had to sell them for $3. They could also change their books in Russia. The Russian Com- should be given great consideration. I was surprised at the desperation of my friend the gentleman from Minnesota (Mr. AUGUST H. ANDRESEN] in his effort to get some kind of an amendment to this bill and in order to get some kind of an amendment he is willing to submit an amendment which means putting this $1,800,000,000 into the general fund of the Treasury, then issuing what I have always understood from friends on his side of the aisle to be printing-press money. I hope that the gentlemen who voted for that amendment will never again condemn printing-pres money. Mr. AUGUST H. ANDRESEN. will the gentleman yield? Mr. PATMAN. will be glad to yield to the gentleman If he has not a long. involved question. Mr. AUGUST H. ANDRESEN. The gentleman knows that that $1,800,000,000 is in gold and that the money which would be issued would be gold money. Mr. PATMAN We cannot issue gold money. Mr. AUGUST H. ANDRESEN. It would have gold backing. It would not be flat money. Mr. PATMAN. No: because gold is not in circulation any more and we could munists changed their books so that at not issue gold certificates That is 11legal. What the gentleman is talking books they cheated and stole from the but that law has been repealed. one time when they did change their poor Russian peasants over $9,000,000. 000. So did the Germans change their books so that the German mark, or the content of the mark, was reduced a trilMonth part of its original value. Now, with regard to the limitation this amendment would place of $35 an ounce. Of course, it should be pegged at that figure. As far as I am concerned, I would take all of these powers away from the President. We should coin the gold and return it to circulation. That would bring back the free-contract process. The gold-prohibition law has destroyed MAY 27 bargaining power which he needs to take care of the United States of America. Mr. AUGUST H. ANDRESEN, WIII the gentleman yield? Mr. PATMAN. For a brief question. Mr. AUGUST H. ANDRESEN, Does the gentleman favor paying foreigners more than $35 an ounce for their gold? Mr. PATMAN. My time has about expired. This is question of helping the people of the United States and question of giving the President sufficient power to deal with a great situation when this emergency is over. Mr. Chairman, I hope the pending [Here the gavel fell.] The CHAIRMAN. The Chair recog. nizes the gentleman from Idaho [Mr. amendment will be defeated. WHITE]. Mr. WHITE. Mr. Chairman, in listen. ing to the eminent gentleman from Michigan [Mr. WOLCOTT] was reminded of what will Rogers said in the midst of the last depression. He said: Too much wheat. too much cotton, too much beef, too much wool, too much pork too much of everything. and we are going through the unique experience of starving to death in the midst of plenty. The gentleman from Michigan says that this program of our administration is a failure. Well, if $22,000,000,000 of gold in our Treasury and a prosperous country with a national credit that sustains the borrowings of the Treasury represent a failure, then our program must be a failure, but I do not know how the gentleman from Michigan measures failure if that is evidence of a failure. Let me contrast for a moment what happened when the gentleman from Michigan (Mr. WOLCOTT] was in the House and a Republican President was in the White House with what the situation is now. Let me contrast what his administration accomplished and what he probably rates as a success in contrast to his idea of the failure of this administration. In that administration the surplus exports of this country just equaled the bonds we bought from foreign countries in lending them the money with which they bought our surplus goods. We all know what happened to the foreign bonds. When they were defaulted and we found that we had simply made those countries a present of these surplus ex- ports that were exported during that great, successful administration. Now we have been sending our surplus exports abroad and having them paid for in good about would be good under the old law, hard cash in the form of gold, and we have that gold safe in our vaults in this Mr. AUGUST H. ANDRESEN. I country. I wonder If the gentleman recognize that Mr. PATMAN. Now, the only thing you could issue is what the gentleman has always referred to as printing-press money for the purpose of making these payments. When this emergency is over, I do not know what kind of situation will confront us, but we do know that the President as the Chief Executive of this Nation should have some bargaining power. If you were to adopt this amendment, you would deprive the Chief Executive of the from Michigan (Mr. WOLCOTT] would say that is a failure. If he does, who will accept his verdict? But I believe the rating of economics will show that this program we are advocating here has been one of great success. I hope this amendment will be voted down. (Applause.) [Here the gavel fell.] The CHAIRMAN. The Chair recognizes the gentleman from Massachusetts (Mr. McCORMACK] Mr. McCORMACK. Mr. Chairman. (Mr. the gentleman from Minnesota a 4584 1941 CONGRESSIONAL RECORD-HOUSE ANDRESEN] made the statement that his regret it very much. In the last vote dollar and to our foreign exchange the amendment I do not know what amendment would give stability to our one Republican Member voted against The adoption of his amendment in these days of uncertainty and rapid changes would have the opposite effect. It would have a tendency to unstabilize our currency and have an adverse effect upon our foreign exchange. The amendment which was offered a few minutes ago, and which the Committee of the Whole in its wisdom rejected, would have taken $1,800,000,000 from the will happen on this amendment so far as a party vote is concerned. However, the continuation of this power, limited now to a fraction of one-fifth of what was before, to devalue the gold content of the dollar, is necessary, and the power will be exercised only in the event that future happenings compel it. The original bill passed in 1934, the establishment of the stabilization fund, and the devaluation of the gold content stabilization fund. If that amendment had been adopted it would have been fatal. The purpose of that fund is to protect the economic life of America in these trying days. It has played an im- of the dollar, were necessary as the result of actions abroad. Such action was in the best interests of our country. The amendment offered by the gentleman from Minnesota (Mr. AUGUST H. ANDRE- portant part during the past 7 years, and SEN] should be defeated and the bill it might play a more important part in passed. [Applause.] [Here the gavel fell.] The CHAIRMAN. The question is on the amendment offered by the gentleman from Minnesota (Mr. AUGUST H. ANDRE- the future If certain events happen abroad which we all hope will not hap- pen. The pending amendment is aimed to take away the authority of the President to further devalue the gold content of the dollar. The purpose of the original SEN). The question was taken; and on a divi- sion (demanded by Mr. AUGUST H. ANDRESEN) there ere-ayes 100, noes passage of this legislation in 1934 was to protect our economic system. England had gone off the gold standard, France 120. Mr. AUGUST H. ANDRESEN Mr. had gone off the gold standard, and other countries had gone off the gold standard, Chairman, I demand tellers. Tellers were ordered, and the Chair but the United States had remained on the gold standard. The result of these competing countries going off the gold standard was that their production costs appointed as tellers Mr. COCHRAN and Mr. AUGUST H. ANDRESEN The Committee again divided: and the tellers reported that there were-ayes were lowered, they were able to underbid 116, noes 131. American manufacturers and producers So the amendment was rejected in the foreign markets, and they were Mr. AUGUST H. ANDRESEN Mr. able to get over our tariff protection and Chairman, I offer an amendment. The Clerk read as follows: Amendment offered by Mr. AUGUST H. ANDRESEN: On page 2, after line 9. insert The first sentence of such paragraph (b) send their products into continental America. By reason of their lowered production costs in consequence of the action they had taken, what we did then we had to do as a measure to protect ourselves and lowing the passage of the law relating to the devaluation of the gold content of the dollar. the President issued a proc- rather than dollars, and I ask unanimous consent that all debate on this amendment close in 10 minutes. events that may happen abroad. We The CHAIRMAN. Is there objection to the request of the gentleman from do not know what day in the future some country abroad in competition with our country may bring about some kind of a further devaluing influence which may compel the limited power extended to the Missouri? There was no objection. Mr. AUGUST H. ANDRESEN. Mr. Chairman, the amendment that was defeated provided only that $35 should be paid for foreign gold, while the amendment that is now before the committee President by the pending bill for the next 2 years to be exercised in our interest. This bill simply extends the present proposes to fix the weight of gold for both the dollar in this country and the amount paid to foreigners. In other words, the unit of value for gold will be 15% grains of gold nine-tenths fine. This is the present weight of the gold law. In 1934 the original act was passed to remain in effect for 2 years, with the power in the President to extend It for 1 year, which he did. That was one ex- tension. The Congress of the United States in its wisdom gave to the Prestdent two additional extensions. This is nothing but an extension of the present law. necessary by reason of world conditions, and in the best interest of the economic life of our Nation. it, this is a plain, simple question of common sense. I am surprised to see that a party issue is made of it. I expires on June 30. 1941, and which the majority seeks by this bill to continue for another 2 years. It is not necessary to have any great discussion on this amendment You know the purpose of it. I believe the amendment should be adopted. The minority on the committee has agreed to it and that is the issue before us now. am satisfied If we could have a secret ballot in this House on this amendment it would be adopted overwhelmingly. [Applause.] Mr. COCHRAN. Mr. Chairman, the gentleman from Minnesota (Mr. AUGUST H. ANDRESEN] is to be complimented on his frankness and his fairness. He tells you just exactly what his amendment seeks to do. He wants to take away the power that section 2 of this bill gives the President There are no ifs and ands about it. The gentleman makes it perfectly plain to you he seeks in this way to take out section 2 and therefore hope the amendment is voted down. Mr. Chairman, I now ask for a vote. (Ap- plause.) The CHAIRMAN. The question is on the amendment offered by the gentleman from Minnesota. The question was taken: and on a division (demanded by Mr. AUGUST H. AN- DRESEN) there ayes 87, noes 105. So the amendment was rejected. Mr. CASE of South Dakota. Mr. Chairman, I offer an amendment The Clerk read as follows: Amendment offered by Mr. CARE of South Dakota: Page 2. line 9. strike out the period and insert: "Provided, That during this extension of time for the exercise of these pow- era, in paying for the gold authorized to be acquired by this act. as amended the Becre- that purpose he is authorized to provide for Mr. COCHRAN. Mr. Chairman, this amendment is Identical with the other amendment except it deals with weight interest of our country is dependent upon power which he now possesses and which less. after June 30, 1941, than 15% grains of gold nine-tenths fine.' the gentleman from Minnesota yield? Mr. AUGUST H. ANDRESEN. yield. pel him to do so. What he does in the The purpose of the minority is to take away from the President the devaluation tary of the Treasury shall use gold coins or gold certificates based on the weight of the Mr. COCHRAN. Mr. Chairman, will lamation. He was authorized to devalue to between 50 and 60 percent, and he devalued to 59 percent plus. He now has that slender margin. He does not intend to exercise It unless events abroad com- 4585 (2) so added is amended to read as follows: Nor shall the weight of the gold dollar be to protect our economic system. Fol- 36 dollar under the proclamation issued by the President in February of 1934. This amendment is broader than the amendment that was just considered and defeated, because It covers all of the gold we have in the Treasury, and I may say definitely prevents the President from devaluing the dollar in terms of gold. gold dollar fixed under these powers, and for the coinage of gold coins of the value of 810 and $20. each of the standard of fineness pro- claimed under these powers and to deliver the same to the tenderer of gold bullion in the amount of dollars to which he is en- titled, or in lieu thereof. the Secretary of the Treasury may cause to be issued and delivered redeemable gold certificates in an amount in dollars equal in value of the gold coins to which the tenderer of gold bullion would be entitled." Mr. COCHRAN. Mr. Chairman, will the gentleman yield? Mr. CASE of South Dakota. Yes. Mr. COCHRAN. Mr. Chairman, this is the last amendment and I ask unanimous consent that all debate upon this amendment and all amendments thereto close in 10 minutes. The CHAIRMAN. Is there objection? Mr. SMITH of Ohio. Mr. Chairman, reserve the right to object. I would like to have 5 minutes. Mr. COCHRAN. I suggest the gentleman take 2 1/2 minutes and I shall take 2 1/2 minutes. The CHAIRMAN. The gentleman from Missouri asks unanimous consent that all debate upon this amendment and all amendments thereto close in 10 minutes. Is there objection? Mr. SMITH of Ohio. I object. Mr. COCHRAN. Mr. Chairman, I move that all debate upon this amend- CONGRESSIONAL RECORD-HOUSE 4586 ment and all amendments thereto close in 10 minutes. it legal, again, to own and use gold exchange, it will find its way into international trade. CASE of South Dakota. Mr. make the point of Chairman. I order thisattime that that motion Mr. is not in order down in world affairs- least one big or until there has been debate. some countries to serve as a base for their is sustained. exchange. They were forced, then, to The CHAIRMAN. The point of order "THE WAY TO RESUME IS TO RESUME" Mr. CASE of South Dakota. Mr. currency and to clear their international take two steps: First, to devalue; second, to resort to barter. So common is the Chairman, this amendment is rather a knowledge of those steps that one hardly needs to mention them. The break-down were complex, I would not be offering it, because I do not pretend to be an expert of Europe can be traced to the breakdown of the London Economic Conference. Other forces enter in, of course. Disaster feeds on disaster. Barter at a bargain, in turn forces another barter at a lower rate of return. In time the de- simple thing. It is not complex. If it in money matters. I listen to the real students of the subject with interest be- cause I am convinced the question is fundamental. I listen and repeat what I read or hear. So this amendment is simple. It simply says, as a President of the United States once said, the way to resume specie payment is to resume it. This amendment restores the use of gold coin and gold certificates as legal tender. That is the effect of it. The amendment provides that when the Treasury buys gold it shall use gold to pay for that gold. by the use of gold coin or gold certificates A purchase will scending spiral spells ruin. Disaster reigns until some way is found to restore trade. Barter limits trade. ordinarily, to two people. A medium of exchange, of a value acceptable to everybody, broadens trades to three, four. five, or more parties, and permits the producers of one kind of goods to get a fair return in goods they want. The value of a medium of exchange is that it re- wash itself. The Treasury will no longer be obliged either to borrow money and duces forced sales. You no longer have to take something you do not want in ex- pay interest on it or to go through some rigmarole with the Federal Reserve bank issuing notes and one thing and another. It provides for a clean-cut transaction change for something you produced. You get, with an exchange medium, The miner or the owner of gold bullion offers the gold to the Treasury and the Treasury will pay for the gold either with gold coin or gold certificates based on the standard of fineness then existing under the powers which the President is authorized under this general act to exercise. The miner, of necessity, pays his expenses with the gold coin he receives, and you have started the circle of gold exchange. Automatically the gold coin and the gold certificate must become legal tender for taxes and all other obligations. Whatever additional legislation is needed to provide a sufficient volume of gold coin and gold currency will follow as a matter of course. Two years ago, when we were debating this same proposition, I remember using the illustration of the boy with the mar- bles, and asked the question what would happen when the boy captured all of the marbles At that time we were increasing our acquisition of gold. We then had between 66 and 70 percent of the world's gold in this country. Some of you were worried then. What do you think of the situation now? Today. 2 years later. we have between 80 and 85 percent of the world's $23,000,000,000 worth of it. We have a tremendous stake, in other words, in the value of the world's gold. This amendment is an attempt, first of all, to underwrite and to protect the value of the goods and labor that we have invested in the gold that we have already bought. The device is simple. It is to distribute the ownership. The amendment is an attempt, in the second place. to provide a medium of ex- change in order that the nations of the world can trade again. When we make Mr. SMITH of Ohio. Mr. Chairman, Iremarks ask unanimous consent to extend my in the RECORD. The reason for the economic break- the lack of sufficient gold in something you can use to buy what you really want. Through the ages gold has been found to be the best medium And that is why many of our respected students of world problems insist that one of the most important steps to world order is the restoration of that medium for international exchange. I have introduced other measures to work in that direction-for instance, the bill to authorize use of gold from the stabilization fund to pay for French possessions in this hemisphere. Other steps, such as the purchase of deficiency metals, must be worked out to distribute the gold by buying what we want or need, if the world is to achieve peace and order again. This amendment proposes a simple step. It proposes to use gold to pay for the gold we buy and start the circle of exchange to that extent. It restores legality to the ownership and use of gold. It is a step that must be taken sometime, It will create a wider interest in the gold in which the United States has invested twenty-two or twenty-three billions of dollars' worth of labor and good. Instead of reaching the point where Uncle Sam becomes the one boy who has cornered all of the marbles and has to quit playing when the other boys resort to trading jackknives, we will be reestablishing a system in which the other boys and the other nations in the world can get gold. and international trade can flow again. The way to resume is to re- sume." I ask for the adoption of the amendment. [Applause.] Mr. COCHRAN. Mr. Chairman, I ask unanimous consent that all debate upon this amendment and all amendments thereto close in 8 minutes. The CHAIRMAN. Is there objection? There was no objection. MAY 27 The CHAIRMAN. Is there objection? There was no objection. Mr. SMITH of Ohio. Mr. Chairman, I am happy to support this amendment There is nothing that the United States of America needs so much today as to return to specie payments. Few people realize what happened to this country the gold-prohibition law. The gold-prohibition law has done nothing less, said awhile ago, than to destroy the free or voluntary contract process, the very basis of civilization itself. The greatest protection the laboring man has to keep what he produces, is to be paid in value money, and the slickest device to cheat him out of what he produces is this which we are on at the present time political promise to pay money, universally condemned by all sound students of money. Not only is the free circulation of gold the basic protection for the laboring man to keep what he produces, but to be paid in hard money, gold, is the greatest protection on earth to main- tain the most equitable distribution of wealth, Mr. WHITE. Mr. Chairman will the gentleman yield? Mr. SMITH of Ohio. No. I do not yield. Mr. Chairman, I do not care to yield at this time, If you will examine the literature on the question of debasement since the coinage of money first began, about 700 years before Christ, and perhaps even before that, you will find that all students have condemned the debasement of money. That is all you are asking for here-to continue to debase money: to clip the coin. That is all you are asking for. What did Daniel Webster say about the sort of money that we are now on and the New Deal party asks to have con- tinued? He said it is the greatest of inventions, to fertilize the rich man's field by the sweat of the poor man's brow. That is what Daniel Webster said on the floor of the Senate about 100 years ago. What did Grover Cleveland say about this kind of money? Grover Cleveland certainly would not support this money scheme that now exists; Grover Cleveland who saved the Democratic Party by abolishing or repealing the Silver Purchase Act. He understood money perhaps as well as most Presidents we have had. He pointed out that this kind of money has its most injurious effect upon the poor and the working-class people. He explained, as all men who study this question know, that the wages of the laborer always lag behind the price increase. Oh, yes: you say you are not going to have any price increase. You are going to have somebody to hold prices down. The very fact that you have set up an agency to control prices shows that you fear inflation. It makes no difference what you do, you are not going to prevent the effects of inflation which the gold policy has produced. [Applause.) [Here the gavel fell.] 37 CONGRESSIONAL RECORD-HOUSE 1941 Mr. COCHRAN. Mr. Chairman, I rise in opposition to the amendment Mr. COCHRAN Mr. Speaker, I move the previous question on the motion to Mr. Chairman, the minority has been arguing against inflation and still it submits an amendment that will provide recommit. inflation. question is on the motion to recommit. This amendment is contrary to the entire monetary policy of this Government now in existence. It provides for the coinage of gold coins in the value of $10 and $20. and delivery of same to in- dividuals for gold bullion. In other words, the men who mine gold out in the Black Hills where the gentleman comes from will get gold coin in return for their bullion rather than paper money they now get. At the present time the Government hoards gold. but if you pass this amendment you pass out gold and the individuals who get it will then hoard the gold. If this was done it would be necessary to call in this gold ordered coined under this amendment, which the President has power to do under this act. So why coin gold and pass it out and have it brought back again? This amendment should be defeated The CHAIRMAN. The question is on the amendment offered by the gentleman from South Dakota (Mr. CASE). The question was taken: and on a division (demanded by Mr. CASE of South Da- kota) there were ayes 84 and noes 108. So the amendment was rejected. The CHAIRMAN. Under the rule, the Committee rises. Accordingly the Committee rose: and Mr. COOPER having assumed the chair as Speaker pro tempore, Mr. RAMSPECK Chairman of the Committee of the Whole House on the state of the Union, reported that that Committee had had under consideration the bill H. R. 4646, and pursuant to the provisions of House Resolution 211, he reported the same back to the House. The SPEAKER pro tempore (Mr. COOPER) Under the rule, the previous question is ordered. The question is on the engrossment and third reading of the bill. The bill was ordered to be engrossed and read a third time, and was read the third time. The SPEAKER pro tempore. The The previous question was ordered Mr. AUGUST H. ANDRESEN. Mr. Speaker, I ask for the yeas and nays. The yeas and nays were ordered The question was taken: and there 144. nays 218, answered "pres- ent" 2, not voting 67, as follows: [Roll No. 57) Gale Gamble Gearhart Anderson, Calif Gehrmann Andresen, August H. Andrews Angell Arends Baldwin Geriach Gilchrist Gillie Graham Guyer, Kans. Gwynne Bates, Mass. Hall Bender Bennett Bishop Hall. Baumhart Blackney Boehne Bolles Edwin Arthur Leonard W. Halleck Hill, Colo. Hope Howell Clason Clevenger Cluett Coffee, Nebr. Copeland Crowther Culkin Curtis Day Dewey Ditter Dondero Dworshak Jensen Johns Johnson. Calif. Johnson III. Johnson Ind. Jones Jonkman Kean Keete Robertson N.Dak. Robertson Va. Whittington Scott Shafer. Mich Simpson Smith Va. Stevenson Stratton Thill Thomas N.J Cox Better Gavagan Creat Crosser Geyer, Calif. D'Alesandro Davis. Ohio Gore Boren Davis Tenn Delaney Brooks amendment: at 9. insert be the with report end the the of following line "No foreign House On forthwith page gold shall 2, acquired by the United States after the date of enactment of this act at a price in excess of $35 an ounce. No 99 5 Brown Ga. Dickstein Dingell Fogarty Forand Gibson Gossett Granger Grant. Ala. Green Bryson Buck Disney Gregory Haines Hare Buckler, Minn Doughton Downs Harrington Bulwinkle Doxey Harris Ark Drewry Duncan Healey Buckley. Burgin Byrne Camp Cannon Mo. Caposzoli Casey, Mass. Chapman Claypool Cochran Durham Eberharter Edelstein Ellot, Mass Elliott. Calif. Ellis Holmes Jarman Romjue Short Jarrett Jenkins, Ohio Jenks. N H. Johnson Lyndon B. Sikes Smith. Pa Smith, W Va Somers N Y Stearns N.H Summers Tex Kee Kirwan Larrabee McGranery McGregor Sweeney McLean Mansfield Wickersham Winter Hancock Marcantonio Harness Woodrum Va. May Domengeaux Douglas Edmiston Gifford Grant. Ind. Taylor Tolan Wadsworth The Clerk announced the following pairs: On this vote: Mr. Stefan for. with Mr. Smith of West Virginia against Mr. Cole of New York for, with Mr. Lar- rabee against Mr. Douglas for, with Mr. Somers of New York against Mr. Short for with Mr. Clark against. Mr. O'Hara for. with Mr. Cullen against Mr Hesa for. with Mr. Pearson against Mr. Hancock for, with Mr. O'Toole against. Mr. Grant of Indiana for, with Mr. Celler against Mr. Holmes for, with Mr. Romjue against. Mr. Winter for, with Mr. Bates of Kentucky against against Hill. Wash Hobbs Holbrock Hook Fitzpatrick Hinshaw Hoffman Oamers O'Toole Pearson Rizley Hess Dirksen Hébert Houston Flaherty Flannagan O'Day O'Hara Dies Heffernan Hendricks Fitageraid Cole, Md. Collins Hart Faddia Coffee, Wash Hartley Heldinger Nichols So the motion to recommit was re- Cravens same back to the Crawford Cullen jected. Beam Weights, and Measures with instructions to Celler Clark Flannery Beckworth Mr. AUGUST H ANDRESEN moves to recommit Boykin Bradley. Mich Cannon, Fla Youngdahl Mr. AUGUST H. ANDRESEN. I am, the bill to the Committee on Coinage Harris Va. Harter Fish Courtney The Clerk read as follows: Arnold Cunningham NAYS-218 Zimmerman Stefan Bates Ky Vreeland Wolfenden, Pa Wright Young NOT VOTING 67 Cartwright Wigglesworth Williams Worley ANSWERED "PRESENT"-2 Cole. N.Y. Wolverton, Woodruff Mich Bradley Pa Schuetz Schulte Mills, Mills, Tibbott Tinkham Treadway Van Zandt Vorys, Ohio Barnes Barry commit Schaefer m Springer The SPEAKER pro tempore. Is the The SPEAKER pro tempore. The gentleman from Minnesota qualifies. The Clerk will report the motion to re- Scanlon Meyer. Md. Wolcott Boggs Sauthoff Merritt Smith Maine Smith Ohio Ford. Miss Ford, Thomas F. Fulmer Gathings Mr. Speaker Mahon Paddock Phelffer, Bland West Sacks Speaker, I offer a motion to recommit. The SPEAKER pro tempore. Is the Rogers, Okia Sanders Sasscer Rogers, Mass. Rolph Cooley Cooper gentleman a member of the committee? Mr. AUGUST H. ANDRESEN. I am, Weiss Robinson Utah Wene McMillan Maciejewski O'Brien, N.Y. Bell Weaver Welch Maclora Magnuson Barden Mr. Speaker Ward Wastelewski Rodgers. Pa. Englebright Costello Vinson, Ga. Voorhis, Calif. Robston Ky. Rockefeller Wilson N. Mex. Traynor Vincent Ky. Whelchel White Mundt Murras Colmer Connery Thomason Russell Sabath Engel William T. Rivers Terry Thom Thomas Tex. McLaughlin Walter Ford, Leland M. Richards McKeough Wheat Oliver Randolph Rankin Miss. McIntyre Moser Fellows Fenton Ramapeck McClehee Mott Eaton Elston Rabaut Ramsay Rich Boland Bonner Michener Joseph L. Lynch Taber Talle Mason Tarver Ludlow McArdle McCormack Sullivan Tenerowics Reece Tenn. Reed, III. Reed, N.Y. Rees, Kans Starnes, Ala. Steagall Peterson, Fla Pfetfer, Lewis Sparkman Spence Peterson, Ga. Priest Sutphin Martin, Iowa Martin, Mass South Lesinski question is on the passage of the bill. gentleman opposed to the bill? Kleberg Knutson Kunkel Maas Snyder O'Leary Pace Kilday Bloom LeCompte O'Brien, Mich O'Neal Kerr Summer. III. Lambertson O'Connor Patman Patrick Patton Keogh Shoridan Smith Conn Smith Wash Powers Allen. La. Anderson, Mr. AUGUST H. ANDRESEN. Mr. Kelly, III. Kennedy Martin J. Kennedy Michael J. Kilburn Kinzer Landis Norton Poage Rutherford Chiperfield Kefauver Kelley, Pa. Lea Satterfield Case, S. Dak Chenoweth Johnson, Okia Nelson Johnson. W. Va. Norrell Leavy Rankin Mont. Scrugham Secrest Shanley Shannon Sheppard Myers, Pa. Plumley Hull Carter Monroney Ploeser Pittenger Jennings Carlson Murdock Pierce Plauché Bolton Burdick Butler Canfield Johnson Kramer Lanham Brown. Ohio Burch Mitchell Kocialkowski Kopplemann YEAS-144 Allen. III. Jackson Jacobsen Luther A The SPEAKER pro tempore. The Andersen H Carl 4587 Mr. Wadsworth for. with Mr. Harter Mr. Stearns of New Hampshire for. with Mr. Bloom against Mr. Harness for with Mr. Tolan against Mr. Hoffman for, with Mr. McGranery Hunter Imhoff against Izac against Mr. Jenkins of Ohio for, with Mr. May CONGRESSIONAL RECORD-HOUSE 4588 Mr. McGregor for, with Mr. Smith of Pennsylvania against Mr. Oamers for, with Mrs. O'Day against. with Mr. for, with Mr. Kelley, Nelson Nichols Kelly, Kennedy Martin, O'Brien, Mich Kefauver Norrell Norton O'Connor Kennedy, Michael J. for. with Mr. Mr. Mr. Mr. Dirksen Hartley Jarrett for. Boland Kirwan Bonner against. against against. Mr. Cunningham for, with Mr. Cannon of Florida against Mr. McLean for. with Mr. Boykin against Mr. Gifford for, with Mr. Woodrum of Virginia against O'Leary O'Neal Keogh Kerr Pace Patman Kilday Kleberg Patrick Kocialkowski Kopplemann Kramer Lanham Until further notice: Mr. Cartwright with Mr. Crawford. Mr. Sumners of Texas with Mr. Jenks of New Hampshire Mr. Arnold wit hMr. Heldinger. Mr. Harris of Virginia with Mr. Bradley of Michigan Mr. Jarman with Mr. Rizley. Mr. Nichols with Mr. Hinshaw Mr. Mansfield with Mr. Marcantonio. Mr. Dies with Mr. Edmiston Mr. Lyndon B. Johnson with Mr. Sikes Mr. Taylor with Mr. Kee Mr. Sweeney with Mr. Wickersham Mr. COLE of New York. Mr. Speaker, Lesinski Heldinger Shanley Shannon Sheppard Hinshaw Hoffman McLean Holmes Marcantonio Sheridan Jarman May Murray Smith Va. Smith. Wash Jenkins, Ohio Jenks, N.H. Snyder Johnson, South Sparkman Starnes, Ala. Spence Steagall Sullivan Pierce Tarver Plauché Tenerowicz Poage Terry Ludlow Lynch Priest Thom Rabaut McArdle McCormack Ramsay Thomas, Tex. Thomason Ramspeck McGehee Randolph McIntyre Rankin Miss. Traynor Vincent Ky. Vinson. Ga. McKeough Richards Voorhis Calif McLaughlin McMillan Maciejewski Rivers Ward Robertson Va. Wastelewski Robinson Utah Weaver Mactors Rogers, Okla. Magnuson Russell Sabath Welss Welch Wene West Mills, Ark. Sanders Sasscer Whelchel White Mills, La. Sauthoff Mitchell Whittington Scanlon swer "present Monroney Schnefer III. Worley Mr. OSMERS. Mr. Speaker. I have a pair with the gentlewoman from New Moser Schuetz Wright Murdock Schulte Young Myers, Pa. Scrugham Zimmerman Allen, III. Gearbart Pittenger Andersen. Geriach Ploeser Gifford Plumley Indiana, Mr. LARRABEE. If he were pres- ent he would have voted "nay." I therefore withdraw my vote of "yea" and an- Merritt Meyer, Md. York Mrs. O'DAY. If present, she would have voted "nay. I therefore withdraw my vote of "yea" and answer "present. Mr. STEFAN. Mr. Speaker, I have a pair with the gentleman from Virginia, Mr. SMITH. If he had been present, he would have voted "nay. I therefore withdraw my vote of "yea" and answer "present. The result of the vote was announced as above recorded The SPEAKER pro tempore. The question is on the passage of the bill Mr. COCHRAN and Mr. AUGUST H. ANDRESEN asked for the yeas and nays. The yeas and nays were ordered The question was taken; and there were-yeas 226, nays 138, answered "present" 2, not voting 65. as follows: Allen, La Anderson, N. Mex. Barden Barnes Barry Beam Backworth Better Bland Boehne Boggs Bonner Bradley, Pa. Brooks Brown. Ga. Bryson Buck Buckler Minn Buckley N. Bulwinkle Burch Burgin Byrne Camp Cannon Mo Caporzoli Connery August H. Andrews Ford, Thomas P. Reed. N. Y Rees, Kans. Baldwin Bates, Mass. Baumhart Creal Crosser D'Alesandro Howell Bolles Hull Bolton Rolph Jennings Rutherford Satterfield Halleck Hope Brown Ohio Burdick Butler Johnson, III. Johnson Ind. Jones Chenoweth Jonkman Chiperfield Clason Kean Keefe Kilburn Culkin Curtis Gossett Day Granger Dewey Grant Ala. Green Delaney Ditter Dondero Gregory Dworshak Disney Harrington Harris, Ark Downs Doxey Drewry Duncan Durham Eberharten Edelstein Ellot Mass Elliott. Calif Ellis Pitageraid Claypool Cochran Flaberty Flannagan Flannery Fitzpatrick Fogarty Forand Ford Miss Hare Fish Hook Houston Hunter Imhort Izac Jackson Jacobsen Johnson Luther A Johnson, Okla Johnson. W.Va Mass Martin lows Martin Mass Mason Michener Mott Mundt O'Brien, Oliver Oamers Robston Ky Rockefeller Rodgets Pa. Rogers Mass Scott Shafer, Mich Simpson Cole.N.Y. Stratton Sumner. III. Sutphin Taber Talle Thill Thomas Tibbott Tinkham Treadway Bates, Ky Bell Bloom Boland Boren Crawford Cullen Boykin Cunningham Bradley.) Mich Cannon,1 Dirksen Dies Domengeaux Woodrum, Mr. Smith of West Virginia for, with Mr. Stefan against Mr. Larrabee for, with Mr. Cole of New York against Mr. Somers of New York for, with Mr. Douglas against Mr. Clark for, with Mr. Short against Mr. Cullen for, with Mr. O'Hara against Mr. Pearson for, with Mr Hear against Mr. O'Toole for, with Mr. Hancock against Mr. Celler for, with Mr. Grant of Indiana against. Mr. Romjue for with Mr Holmes against Mr. Bates of Kentucky for, with Mr. Winter against Mr. Harter for. with Mr. Wadsworth against Mr. Bloom for, with Mr. Stearns of New Hampshire against Mr. Tolan for, with Mr. Harness against Mr. McGranery for, with Mr. Hodfman against Mr. May for. with Mr. Jenkins of Ohio against Mr Kirwan for, with Mr Jarrett against Mr. Boland for, with Mr. Dirksen against Mr. Cannon of Florida for, with Mr. Cun- ningham against Mr. Boykin for with Mr McLean against Mr. Woodrum of Virginia for, with Mr. Hartley against Mr. Smith of Pennsylvania for. with Mr. Bradley of Michigan against Mrs. O'Day for, with Mr Crawford against General pairs: Mr. Sumners of Texas with Mr. Jenks of New Hampshire Mr. Arnold with Mr. Heldinger. Mr. Jarman with Mr. Rizley. Mr. Harris of Virginia with Mr Murray Mr. Dies with Mr. Edmiston. Mr. Taylor with Mr. Kee Mr. Sweeney with Mr. Wickersham Mr. Lyndon B. Johnson with Mr. Boren Mr. STEFAN. Mr. Speaker, I am paired with the gentleman from West Mr. SMITH. Had have voted "yea." ent, Virginia, he would he been vote I voted pres- and Wheat now vote "present. Mr. COLE of New York. Mr. Speaker Wigglesworth Wilson Wolcott Youngdahl "nay." I desire to withdraw my I with the LARRABEE I Indiana, have a Mr. pair gentleman therefore with- from draw my vote and vote "present. The result of the vote was announced as above recorded. A motion to reconsider was laid on the table. NOT VOTINGCartwright Winter Vreeland Walter Stefan Celler Clark Romjue Wadsworth Wickersham So the bill was passed The Clerk announced the following pairs: On this vote: Van Zandt Vorya, Ohio ANSWERED "PRESENT"-2 Arnold Kirwan Sweeney Taylor Tolan Mr. Mansfield with Mr Marcantonio Mr. Cartwright with Mr. Englebright. Gamble William T. Rizley Summers, Tex Mr. Bell with Mr. Hinshaw Woodruff Mich Phelffer O'Hara O'Toole Pearson Smith W Va Somers, N. Stearns Springer Stevenson Wolfenden Pa. Wolverton. N.J Gale Lyndon B. Kee O'Day Short Smith Smith. Maine Smith. Ohio Ford, Leland M Paddock Hobbs Holbrock LeCompte McGregor Fellows Fenton Knutson Kunkel Lambertson Landis Elston Engel Healey Hetternan Hendricks Hill, Wash Kinzer Eaton Hart Hébert Jensen Johns Johnson Calif. Canfield Carlson Davis Ohio Davis Tenn Doughton N. Dak Blackney Gore Haines Robertson Hill, Colo Gibson Dickstein Dingell Hall Bender Bennett Bishop Coffee Nebr. Copeland Crowther Cravens Edwin Arthur Rich Leonard W. Gavagan Gehrmann Geyer Calif. Reed. III. Gwynne Cluett Cox Guyer, Kans. Hall. Clevenger Courtney Rankin Mont Reece Tenn. Angell Fulmer Costello Powers Gillie Graham Arends Gathings Casey,Mass Chapman Colmer Andresen, Cooley Faddia Cole Md. Collins Calif Glichrist Cooper Case. Dak Coffee Wash H Carl Carter (Roll No. 58] YEAS-226 Williams NAYS-138 Anderson Mansfield Jarrett Sacks I have a pair with the gentleman from McGranery Sikes Lewis Mahon Hess Smith Conn Patton Joseph L Les Leavy Recrest Peterson, Fla Peterson, Ga. Pretfer. MAY Larrabee Douglas Edmiston Englebright Grant, Ind Hancock Harness Harris Va. Harter Hartley DISASTER LOAN CORPORATION AND ELEC TRIC HOME AND FARM AUTHORITY Mr. SABATH, from the Committee on Rules, submitted the following resolution (H. Res. 217. Rept. which to the was referred House privileged No. Calen- 641). dar and ordered to be printed: 38 June 5, 1941 11:30 a.m. RE AID TO BRITAIN Present: Mr. Bell Mr. Foley Mr. Stewart Mr. Cochran Mr. Viner Mr. White Mr. Bernstein H.M.Jr: Well, Professor Bell. Bell: I didn't get any help from them on any letter to the State Department at all. H.M.Jr: You didn't? Bell: I think the Bell group, as you called them, is interfering with quick administrative decisions and procedure. (Laughter.) Jake and Walter feel that we shouldn't make any change at this time, we should go ahead and send notices to all governments but not discriminate against some. H.M.Jr: All right. Now this afternoon - let me see if I have got my lesson. We are going to tell Hopkins that inasmuch as I have given my word on behalf of the President and myself that we would try to relieve the British - buy up between three and four hundred million 39 -2dollars worth of their contracts entered into prior to - was the date January 1 or the fifteenth of March? Bell: It is after January 1. White: After. There is no date. You are going to relieve them of that much in contracts. H.M.Jr: And in order to do that he has got to help me out by making it possible for them to postpone these contracts to the extent of two hundred million dollars and he will place orders for similar material with the same manufacturers or with other manufacturers? Bell: Well, that is Cox' proposal. You see, we suggested that the United States Government take over British contracts amounting to three or four hundred million dollars that had been signed after January 1, plus the investment in plant facilities, which would amount to about a hundred million, or including the investment in plant facilities. Oscar Cox said that in reading the testimony he didn't think that they ought to do that but what he would suggest that we do is to take the contracts that had been signed after March 11, the date of the act, and take those over in the amount of about seventy-eight million dollars and to make up the difference, the War Department enter into contracts with the same manufacturers who had contracts with the British for the same identical material, or similar material, and then we postpone the cash liability of the British under their contracts for a later period, say next year or 1942. H.M.Jr: Only seventy-eight million? 40 -3Bell: Seventy-eight million after March 11, and then in addition to that, say we will contract for two hundred million dollars worth of material, the same kind of material with the same manufacturers, as the British have contracts for. H.M.Jr: Is there any disagreement? Bell: The only disagreement there is that we thought H.M.Jr: If Hopkins after giving it careful consideration wants to do it -- Foley: I think it is important, Mr. Secretary, that it be Mr. Hopkins', because it is his responsibility, it was some finagling in order to get around the thing, but I don't think we have got any better solution to the problem. and that he not be able to pin it on you as being your proposal. I think you ought to put it up to him for his consideration, and if he wants to do it, it will be very good. H.M.Jr: I haven't mastered all the details. I think when we meet at two, Dan, I will just raise the question and if Hopkins says, "Well, how do you think it could be done, so that we don't all talk, I will ask you to talk, do you see? Bell: Yes. Do you want me to tell him what we had in mind and then Cox' counter proposal which is all right with us if it is all right with him? Cochran: Or even let Cox put it up. Foley: Why put it on Oscar? We don't know how far Oscar may have gone with Harry and Harry may think Oscar shouldn't have done it. Why not 41 -4say that - give him our proposal and then say the objection was made that that would be relieving the British of those contracts and it would be contrary to the testimony before the committees when the appropriation measure was up, and a counter suggestion was made that a deferment on the part.of the American manu- facturers of three hundred fifty to four hundred million dollars of British contracts would violate what had been said to Congress and would accomplish the same result. What does he think about it? Bell: That is all right with me. I think Oscar has already talked to Harry and told him that he made this kind of suggestion. I don't think White: You doubtless remember also that Hopkins in a subsequent visit reiterated his determination to do if. Bell: The last time he was here he admitted that the commitment had been made and we had got to get out of it. White: He definitely stated we had got to do it. H.M.Jr: I am going to take the attitude that this is a follow-up meeting and they have been working on this thing and this seems to be the way to do it. Here is Maynard Keynes sitting here and wanting an answer, and I would like to give it to him, with Hopkins' help. If Hopkins thinks we will have this if he would send for Maynard Keynes and just tell it to him. Foley: That is right. 42 -5H.M.Jr: Now, of course, with Ben Cohen back, you see, Ben is very much on our side on this thing, so I told him we would use him if necessary but he isn't going to go back right away with Winant so if we want to use him, he is here. He has talked with Brendan Bracken, and he has got all that stuff and it seems as though Churchill is upset with this thing, so that is all - Cohen can tell that to Hopkins if necessary. Now, on the six fifty, have you got that story, too? Bell: Some of it. We went back and had a meeting as to whether or not we should call Keynes and we decided that we should not call Keynes until after this meeting today. We did call Cox last night, and he went over the memorandum, the letter and memorandum which Keynes had given you, plus the list that was attached. He said that he couldn't see anything in that memorandum that presented any difficulties whatever, bringing all those purchases under the Lend-Lease, with the exception of one item, which is the thirty million dollars, for the expansion of the oil well machinery of the Shell plant in South America, which had been disapproved by the President. Thirty million dollars isn't going to make or break the British Government. The only other item that he could think of was the one that Keynes mentioned which is the expenses of the trainees in this country, and Oscar says so far as he can find out, that all their expenses are going to be paid by our Army and the only dollars they will need is what little money that the British Government gives them to spend and they will get the most of their pay, he assumes, in English currency. 43 -6He said that couldn't possibly cost over well, at the most, seven million dollars a year, which would be a thousand dollars a man, and he thinks it will be not half that much. Viner: How can we find out about that? You see, the newspaper stories are not running that way. Bell: About the expenses? White: The newapaper stories would be less than a thousand dollars a year. H.M.Jr: What do you want to know? White: A thousand dollars per man. H.M.Jr: What do you want to know? Viner: What was the arrangement with the British as to the financing of these students? According to his story, only pocket money. According to the newspapers, every time they refer to it it says the tuition and the living expenses of the students are to be paid by the British. H.M.Jr: Well, Cox would know. Bell: I think he does know. He very definitely stated yesterday that the Army was going to feed them. White: Feed them and house them. Bell: He said the only other item in that - it was only a quarter of a million dollars - is the purchase of the land. H.M.Jr: To show how far they are going under the Lend- Lease, somebody told me - this is all in the room - this English naval vessel at Norfolk, 44 7- the sailors had to go ashore - who told me this? Bell: I guess Merle and I. You mean Philadelphia? H.M.Jr: No, this is another story. I got this on the high seas. The men of this ship at Norfolk are housed and fed ashore in Norfolk and paid for by the United States Navy while they repair this ship, which will go on for months. Cochran: Their pay is included, too? H.M.Jr: Not their pay, no, but they are housed and fed and that bill is paid for by the United States Navy. White: They don't get paid in dollars in their salary anyway. H.M.Jr: I tell you who told me. The Commander of this Atlantic destroyer fleet who just came from Norfolk told me they are doing it. (Di scussion off the record.) H.M.Jr: I think we are in pretty good shape. Will you all be back at two? White: There is one -- Bell: After this is over, I should think that Keynes ought to sit down and go over this with Oscar Cox and General Burns. White: Cox seemed to think that they just didn't understand what can be done, what might be done under the arrangement, and that is why Dan thinks they first ought to clear that up, because Cox seems to feel that most of that six hundred would be taken care of. - 45 -8They raised one item - Keynes mentioned one item and Cox had an explanation for it, which indicates that apparently on a number of the things that were troubling the British there is a special and reasonable explanation for. He mentioned the case of agricultural implements, which they apparently are unable to get through Lend-Lease. Cox said the story with respect to the agricultural implements was that they had specified the make and they felt they could buy other makes more cheaply through their routine channels. H.M.Jr: That is the English? White: What? H.M.Jr: The English or Procurement? White: Procurement. They said if the English wanted this specific make, they would be glad to buy it for them; but then the English would have to specify why this special make and not other makes were needed for that particular purpose. Bell: You see, you have got American interests over in London pushing their own sales. H.M.Jr: Well, I have no sympathy with that. Bell: The John Deere Company is over there selling a John Deere plow. H.M.Jr: If you can get the same plow and the same specifications and one is cheaper than the other, they ought to buy the cheaper one. I think this is pretty good. Don't you think we are in pretty good shape for this afternoon, Viner? 46 -9Viner: I think that it is a question there of whether Cox is correct when he says that the administrative problems that concern Keynes are not formi- dable. I am a little nervous as to whether Cox doesn't think that we could easily substitute for all the elaborate English purchasing machinery our own without involving a very serious delay. My guess is that these things come in in thousands and thousands of items and that things aren't going nearly as smoothly here as Cox indicates and that there may be - we may be very casually saying, "We will take over all the elaborate business of selection and specification and so on. H.M.Jr: But you are on another subject. I have passed my word. I want to make good on it. You see, that is my immediate problem. Bell: Well, Jake is talking about the -- Viner: I am speaking of the six hundred. H.M.Jr: Oh, that is something else. White: Cox mentioned something that might be of passing interest. He thought that the British Purchasing Mission here had a large staff with nothing to do now or relatively little to do, and he thought that their desire to handle their own purchases might be related to that in some way, that they felt with that staff they could handle a good deal of it. H.M.Jr: Well, again I have no sympathy with that. You see, if I can just get this thing - after all, I have taken morning after morning on this thing - and get this off my own desk and get it down to a level where Keynes can go to work 47 - 10 and knock this thing out and then I can get on something else, that is what I would like to do, having felt that I have made a contri- bution toward what he has come over here for. He tells me the Chancellor of the Exchequer has a little easier mind on his financial outlook. If I can get it launched in the right direction, he can go back and say, "Well, they are sympathetic, and you have got a little more leeway and things aren't quite so tight as they seem to be, and the British Treasury and Mr. Churchill will feel a little bit more easy about the finance. Then I have done all I can do. White: He has already told me that. He said that he has changed his mind in the few weeks that he has been here. He has got some new slants on the problems and realizes that the view that is held in London with respect to many of these matters is unwise. H.M.Jr: Did he? White: Yes. H.M.Jr: Well, I got it from a friend of mine - he saw him. He seems to feel that he has gotten a very sympathetic hearing here after he got off to a bad start. He didn't mention the bad start, but he mentioned -he was very complimentary, so I don't know how he talked up at Princeton. Stewart: He confirmed that, but he mentioned the bad start and the cordial relationships which now exist. H.M.Jr: Well, it was a bad start. But also the cordial relationships? So he is feeling all right? Stewart: Yes. 48 - 11 H.M.Jr: Bell: Well, I think it is important that he should. Oscar thinks that one difficulty with the British is they have got too many people running around in Washington and haven't got a central man any more like if you dealt with some one, it wouldn't be anybody but Purvis. Bell: That is right. Now there are about six all going in different H.M.Jr: I know. I made Purvis. Bell: Cox said that could be changed. H.M.Jr: I made Purvis in the sense that I would only H.M.Jr: directions. deal with him and they knew that at home in England. I wouldn't deal with anybody else. Well, thank you all. I will see you at two. Used an 49 office 615 an June 4, 1941 TO THE SECRETARY: Subject: British financial requirements in United States and resume of negotiations respecting partial relief therefrom A. Administration commitments to Congress with respect to existing British obligations in this country 1. The Secretary told Congress in January that (a) Great Britain has the dollar resources sufficient to meet the balances due on contracts entered into prior to January 1, 1941 (About $1400M) (b) The British have agreed to sell during 1941 every dollar of property that they own in the United States in order to raise funds for this purpose. (See Appendix A for pertinent quotations and A-2 for excerpt from memorandum handed you by Peacock.) 2. Budget Director Smith told the House Appropriations Committee in March that (a) None of the $7 billion appropriation would be used to pay for any of the goods ordered by the British Government before the Lend-Lease Act (March 11, 1941) (b) The British Government would pay for orders placed before the Lend-Lease Act out of their dollar assets. (See Appendix B for pertinent quotations.) 2- B. Commitments by the Secretary to the British in conference with Sir Frederick Phillips and others on March 19. 1941 The Secretary stated that the President, Hopkins, and himself had agreed to relieve the British of from $300 - $400 million of commitments. (No date was mentioned.) It is not clear from the record as to the basis for the $300 $400 million figure. Phillips did, however, on January 6, 1941, mention the desirability of maintaining a reasonable working balance of $250 million. (See memorandum attached (Exhibit B-2) giving a summary of Secretary's Press conference on March 13, 1941, at which he men- tioned $350M. This figure also appeared in a United Press article of March 17 in Journal of Commerce. The basis for this figure probably came out of the President's memorandum of March 10, 1941, which is attached (Exhibit B-3). See also Secretary's statement on March 19 in diary where $400M is mentioned by Bell which was taken from McCloy's letter of March 17, but which did not exactly cover situation Secretary had in mind.) C. What the British have requested 1. Attainment as soon as possible of a working cash balance of $600 million. This request was contained in an undated Aide Memoire forwarded to us from the White House on March 19, but evidently dating from a prior date. The same request was made in the letter from Waley of the British Treasury to Ben Cohen and included in a cable from London dated March 18. (See Appendix c.) 2. Keynes' letter to the Secretary of May 16 This letter and the memorandum accompanying it made two points: (a) Reference to the Secretary's earlier commitment to relieve the British of $300 - $400 million of contracts. (b) Request for an additional $650 million of relief from contracts. This is to enable the British to place orders outside of Lend-Lease for the following categories of goods: (1) Those difficult to administer, estimated to amount to $400 million for two years ($200M a year) (11) Those giving rise to legal or political difficulties, estimated at $250 million for two years ($125M a year) (The British also stated that if Lend-Lease excluded all shipments to the Dominions, they would require additional relief.) 50 3- 51 D. What can we do for them? 1. With respect to the $300 - $400 million (a) Plant facilities by EFC Already taken over Can be taken over (estimated 48 investment $85 $ 100 M (b) Supply contracts already taken over by War Department 50 (c) Supply contracts entered into by British after March 11, 1941, which can be taken over by War Department 78 $ 228 M (d) Relief by War Department entering into contracts for identical materials now under British contracts and thus deferring British cash liabilities under such contracts to a later date. 200 (See Cox's memorandum, Appendix D.) $ 428 = We have some doubts about adopting proposal (d), but it is added here as a policy matter for discussion. It was discussed with Secretary on June 3 and it was decided to discuss the matter with Hopkins to see if proposal could be adopted. 2. With respect to the $650 million (a) Nothing has as yet been done, but it is clear that you could give them further relief through Mr. Cox's proposal set out under (d) above. We do not recommend this. (b) The purchase of Vultee planes from the British to be sold to China provides for an additional $25 million of cash to be given to the British. It may be possible to expand this a little more by finding other items. (c) Mr. Keynes ascertained that the $650 million relief could be reduced by $50 million by arranging to purchase certain commodities under Lend-Lease. Through administrative arrangements, it would seem to be possible to reduce the $650 million still further, so that even the minor detailed purchases could be brought under Lend-Lease. This device has been only tentatively explored. 52 OFFICE FOR EMERGENCY MANAGEMENT DIVISION OF DEFENSE AID REPORTS WASHINGTON, D.C. MEMORANDUM June 5, 1941 TO: Secretary Morgenthau FROM: Oscar Cox SUBJECT: Deferment of British Contracts Yesterday I spoke to Mr. Hopkins and sent him a memorandum on this subject. I am sure that he is quite familiar with the problem up for decision. He has asked me to attend a meeting with you at the Treasury at 2:00 p.m. today. osc Mr White 53 June 4, 1942 TO THE SPORSTARY Subjects British I requirements in United States and - of respecting partial relief therefore A. Administration commitments to Congress with respect to existing British oblications in thin country 1. The Secretary told Congress in January that (a) Great Britain has the dollar resources sufficient to meet the balancee due on contracts entered into prior to January 1, 1941 (About extenses) (b) The British have agreed to sell during 1942 every dollar of property that they - is the United States is order to valoo funds for this purpose. (See Apponlix A for partiment quotations and A-8 for excerpt from handed you w Peasuck.) 2. Deiget Streeter Smith sold the House Appropriations Committee in March that (a) None of the 87 Million appropriation would be used to you for any of the goods ordered w the British Government before the Lead-Lease Ast (March 11. 1941 (b) The British Government would pay for ordere placed before the Lend-Lease Act out of their dollar assets. (See Appendix B for pertinent quotations.) . 4 3. by thePetiting to the Missis is with not others and C3 the Escretary stated that the President, Hopician, and kinself had agreed to relieve the Bridge of from 8300 - shoo million of commitments. (No date was mentional.) It 10 not clear from the record as to the basis for the 8300 - $400 million figure. Phillips asa, on January 6. 19th. mention the desirability of mistaining a reasonable working balance of $290 million. (See - attached (Maine 3-2) giving a - of Secretary's Press conference - March 13. 1943. at which he - tioned $350W. This figure also appeared in a United Press article of March 17 in Journal of Commerce. The basis for this figure probably case out of the President's memorandum of March 10, 1941, which is attached (Rehibit 3-3). See also Secretary's statement on March 19 is diary where SHOOM is mentioned w Bell which was taken from MeCley's letter of March 17. but which did not emetly cover situation Secretary had in mind.) c. What the British have requested 1. Attainment as SOOR as possible of a working each balance of $600 million. This request was contained in as undated Aide Memoire forwarded to us from the White House on March 19. but evidently dating from a prior date. The same request was made is the letter fres Valey of the British Treasury to Ben Oshea and included is a cable from London dated March 18. (See Appendix c.) 2. Keycan' letter to the Secretary of May 16 This letter and the - accompanying 18 made two points: (a) Reference to the Secretary's earlier commitment to relieve the British of $300 - $400 million of contracts. (b) Request for an additional $650 million of relief free - treets. This is to enable the British to place orders out- side of Land-Lease for the following entegories of goodes (1) These difficult to administer, estimated to mont to $400 million for two years ($200M a year) (11) Those giving rise to legal or political difficulties, estimated at $250 million for two years ($1254 a year) (The British also stated that If Lead-Lease excluded all shipments to the Demisions, they would require additional relief.) 54 55 that 3. 2. mm remest " the 6300 - shap millies (a) Plant fastillies x Already taken over Can be taken over (estimated investment saya) N x 8 100 N (b) Supply contracts already taken ever w 50 War Department (e) Supply contracts entered into w British after March 11, 19th, which can be taken over w 76 War Department $ 225 (a) Relief by War Department entering into contracts for identical materials new under British contracts and thus deferring British cash liabilities under such contracts to a later date. 200 (See Cox's memorandum, Appendix D.) - $ has N We have some doubte about alopting proposal (d). but 11 is added here as a policy matter for discussion. It was discussed with Secretary on June 3 and 10 was decided to discuss the matter with Replane to see if proposal could be adopted. 2. With remeat to the 0650 million (a) Nothing has as yet been done, but 10 is clear that you could give them further relief through Mr. Cax's proposal set out under (d) above. We do not recommend this. (b) The purchase of Vultee planos from the British to be sold to China provides for an additional $25 million of each to be given to the British. It may be possible to expand this a little more w finding other items. (e) Mr. Keynes ascertained that the $650 million relief could be reluced w 950 million by arranging to purchase certain commedities under Lemi-Lease. Through administrative arrangements, 11 would seen to be possible to reduce the $650 million still further, 80 that even the miner detailed purchases could be brought union Lead-Lease. This device has been only tentatively explored. HDW:DWB:ce 56 FEDERAL LOAN AGENCY WASHINGTON JESSE H.JONES EDERAL LOAN ADMINISTRATOR JUN 4 Y 1941 Dear Henry: Reference is made to your letter of May 2, 1941, requesting the latest additional information regarding the progress being made in the negotiations for the acquisition of British-owned facilities in this country. No requests have been received from the War Department for acquisition of any plants other than the five mentioned in my letter to you of March 19, 1941. It is contemplated that these five plants will be taken over by Defense Plant Corporation, an RFC subsidiary, but no payments have as yet been made on account of any of these five plants except that of the Tennessee Powder Company. We believe gen- erally this situation is due to the fact that since the passage of the Lend-Lease Bill the British have been slow to follow through on their desire to realize on these assets and have not yet delivered the necessary cancellation letters with respect to orders they had formerly placed, as is more particularly referred to below. The following is the status with reference to each project. 1. Tennessee Powder Company. Although the agreements for acquisition of this plant and the leasing of the same to E. I. du Pont de Nemours & Company were executed on March 19, 1941, the actual transfer of the ownership of the plant was postponed until its final completion, such transfer taking place on May 23, 1941. The estimated cost was approximately $26,000,000 of which $25,000,000 was paid on the date of actual transfer and the balance will be paid as soon as the RFC auditors have completed their cost survey. 2. Buffalo Arms Corporation. The terms of the lease between Defense Plant Corporation and Buffalo Arms Corporation have been agreed upon by the parties, but the lease is awaiting execution pending receipt of the necessary cancellation letter from the British Purchasing Commission with respect to British orders formerly placed. It is contemplated that Defense Plant Corporation will take over this plant when the construction work is completed in June or July and that the total cost will be approximately $6,070,000. 57 -23. Colt's Patent Fire Arms Manufacturing Company. The terms of the lease agreement between Defense Plant Corporation and Colt have been agreed upon by the parties, but the lease is awaiting execution pending receipt of the necessary cancellation letter from the British Purchasing Commission. It is contemplated that the plant will be taken over by Defense Plant Corporation upon its completion some time next fall, at a purchase price of approximately $6,660,000. 4. Kelsey-Hayes Wheel Company. The terms of the lease agreement between Defense Plant Corporation and Kelsey-Hayes have been agreed upon by the parties, but the lease is awaiting execution pending receipt of the necessary cancellation letter from the British Purchasing Commission. It is contemplated that this plant will be taken over by Defense Plant Corporation in July, upon its completion, at a purchase price of approximately $5,300,000. 5. High Standard Manufacturing Company. Inc. Negotiations are now being conducted with this Company to work out a lease agreement with Defense Plant Corporation. Although the terms of the lease have been agreed upon, it is still necessary for the Company to obtain a cancellation letter from the British Purchasing Commission. It is contemplated that Defense Plant Corporation will take over this plant when the construction work is completed in June or July, at a cost of approximately $4,300,000. Sincerely yours, John Administrator Honorable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. 26,000 6,070 6,660 5.300 4.300 $48,330 58 C 0 P Y Willard Hotel, Washington, D.C., 2nd May 1941. Dear Cochran, 1. I enclose a copy of a sort of programme which was drawn up here of the major British plant facilities which have at various times been mentioned in discussions with the R.F.C. for sale to the Defense Plant Corporation. Of the items in this programme, the Tennessee Powder Company and the four Machine Gun Plants may be regarded as settled. The amount we expect to get from these sales has been included in the figures we have given you of our estimated financial position. As regards the remainder of the list, while all of them have been mentioned at one time or another, there is as yet no expression by the R.F.C. of their willingness to take them over. It is very difficult to give you anything more than rough estimates of the sums we might hope to receive if the transactions were satisfactorily concluded. We know what we have spent or contracted to spend, but we do not know what the R.F.C. would be willing to take over, e.g. they might exclude expenditure on training staff, some of which would be in our total capital figure, they might exclude expenditure on special jigs and tools, and 80 on. The best case I can make of the maximum sums that we should be likely to obtain is - 9.3 24.9 New Jersey Packard Wright Aeronautical Tank contracts Western Cartridge 9.0 4.0 7.0 3.0 Remington Arms 3.0 Corporation General Motors Total 60.2 In the case of the Tennessee Powder Plant, we are asked to pay rental of 20% of capital cost per year so long as the plant is used for our benefit. Accordingly, the nett sum that would be received if this kind of precedent were followed would be below $60 millions. I enclose a second paper showing details of those existing contracts which we think would be most suitable for possible taking over by the War 2. Department. Sincerely yours, /s/ F. Phillips Mr. H. Merle Cochran, United States Treasury, Washington, D. C. Copy:alm 5-3-41 59 0 April 23, 1941. 0 P SATE OF CAPITAL FACILITIES TO R.F.C. The major British financed plant facilities which we have, at one time or another. discussed with the R.F.C. for sale to D.P.O.* are listed below, together with estimated cost, nature of facilities, amounts paid by the British thereon and status thereof: Estimated Name Cost Nature of Facilities (millions) Tennessee $ 25.5 Powder Co. Powder plant Advance Payments by Brit. (millions) $ 24.9 Status DPC has contracted to purchase plant when completed (probably May 1941) 11.5 New Jersey Powder Co. Powder plant 9.3 Preliminary negotiations suspended without apparent reason. British submitted full figures to RFC. Negotiations almost Houde Engineering Co. Colts Patent Firearms Co. concluded. Sale to be ) completed when plant 22.8** High Standard Mfg.) Co. Inc. Kelsey-Hayes Wheel) Machine gun plants 25.7 Plant for Rolls 24.9 completed, which wil not be for several months. Co. Packard Motor 24.9 Royce engines Car Co. Wright Aeronau- No development. 21.9 Wright engine plant 14.4 No development. 7.0 Allison engine plant 6.5 No development. tical Corp. General Motors Defence Plant Corporation, a subsidiary of the R.F.C. This figure includes only recoverable items of cost presently estimated. 60 Sale of Capital Facilities to R.F.C. (cont.) Estimated Name Cost Nature of Facilities (millions) Advance Payments by Brit. (millions) Status Pullman Standard Car Mfg. Pressed Steel Car Co. $ 9.5 Lima Locomotive Tank plants $7.3 No development. 4.8 No development. 4.2 No development. Co. Republic Steel Corp. Blaw-Knox Co. ) 5.6 Western Cartridge Ammunition plants Co. 5.2 Remington Arms Co. TOTAL Arms and ammunition plants $133.9 $122.0 The maximum amount recoverable by the British upon sale of the above plants is the total of British advance payments, less deductions for such items of expense which the R.F.C. is unwilling to bear. Following the pattern of the Tennessee Powder Company arrangement, we would receive no payments until the plants in question are completed. Copy:alm 5-3-41 61 C 0 P Y CONTRACTS SUITABLE FOR THE WAR DEPARTMENT TO TAKE OVER Millions of U.S. dollars. British advances Balance outstanding on product. Contract A 194 Curtiss Wright, Air due Total 23.7 19.3 43.0 29.0 39.6 68.6 28.0 36.3 64.3 21.3 88.7 110.0 A1381 Pullman, Tanks 4.9 10.4 15.3 A1465 Continental, Tanks 8.0 14.0 22.0 A1795 Pressed Steel, Tanks 5.5 11.3 16.8 A1960 Baldwin, Tanks 5.7 15.5 21.2 A1962 Lima, Tanks 4.4 8.4 12.8 A2869 Republic Steel, Tanks 1.8 14.2 16.0 132.3 257.7 390.0 Engines A5103 Option exercised on A194 A 196 General Motors, Air engines, A 787 Packard, Air Engines Total Notes. These figures, which are all subject to revision, relate to product and exclude capital advances. Of the total balance due, about one-third falls due between May and August, one-third between September and December, and the remainder in 1942. Washington, 2nd May 1941. Copytalm 5-3-41 62 JUN 3 1941 my dear General Suras: I have your letter of New 20, 1941, emaloging a draft of the proposed regulations on the valuation of defense articles transferred or received by the United States under the Act of March 11, 1941, and requesting any comments or suggestions which I might wish to make concerning them. I have been over these regulations and de not have any suggestions or amendments to offer. I believe that they fully cover the matters of valuation of defense articles and defense information. Very truly yours, (Signed) H. Morgenthan, Sr. Secretary of the Treasury Major General J. H. Burns, Office for Emergency Management, Washington, D. C. ORIGINAL FORWARDED TO ADDRESSEE FROM OFFICE OF THE SECRETARY File to Mr. Thompson By Memoro 63 EXECUTIVE OFFICE OF THE PRESIDENT OFFICE FOR EMERGENCY MANAGEMENT WAREINGTON. D.C. May 20, 1941. My dear Mr. Secretary: I am sending you herewith a draft of the proposed regulations on the valuation of defense articles transferred or received by the United States under the Act of March 11, 1941. I would greatly appreciate any comments or suggestions which you may wish to make about them. Sincerely yours, Hamm J. H. BURNS Major General, U. S. Army. The Honorable The Secretary of the Treasury. Enclosure 64 OFFICE FOR EMERGENCY MANAGEMENT Division of Defense Aid Reports Regulation No. 1 Evaluation of Defense Articles and Defense Information Pursuant to the Act of March 11, 1941, Executive Order No. 8751, issued by me on May 5, 1941, and the Vilitary Order issued by me on May 6, 1941, I hereby prescribe the following rules and regulations for the valuation of defense articles and defense information transferred or received by the United States: 1. The Executive Officer of the Division of Defense Aid Reports, or his designee from that Division, in consultation with representatives of the Treasury Department and the Bureau of the Budget, shall determine the value of defense articles and defense information transferred or re- ceived by the United States. The Executive Officer is also empowered to obtain the information necessary to a proper valuation from the War, Navy or Agriculture Departments, or the Maritime Commission, in the case of any defense articles or information transferred or received by such departments or agencies. 65 -22. Defense articles transferred or received by the United States under the Act of March 11, 1941, shall be valued by the Executive Officer, subject to the procedure set forth in Section 1, by giving such consideration as he deems necessary to the original cost, the reproduction cost, the age, character and condition of the defense articles, the degree of depreciation or obsolescence, the use or uses to which the articles are to be or can be put, and any other criteria which he deems relevant to the proper valuation of such articles. 3. Defense information transferred or received by the United States under the Act of March 11, 1941, shall be valued by the Executive Officer, subject to the procedure set forth in Section 1, by giving such consideration as he deems necessary to the cost of developing such defense information, the use value of such information, and any plan, specification, design, prototype or other data conveyed in connection with or AS a part of such information, and any other criteria relevant to the value of such defense information. 66 WAR DEPARTMENT WASHINGTON May 20, 1941 My dear Mr. Secretary: Reference is made to your letter of May 2, 1941, in which you request information with respect to the status of War Department arrangements for taking over British contracts. In Mr. McCloy's letter to the Under Secretary of the Treasury, dated March 17, 1941, it was stated that arrangements then under consideration by the War Department and Reconstruction Finance Corporation would relieve the British Government of contracts for supplies and plant facilities to the extent of $427,560,000. Since that date the Congress has appropriated $7,000,000,000 (Defense Aid Appropriation Act, 1941) to carry out the provisions of the Lend-Lease Act, and all of the $427,560,000 program has now been taken over by the use of lend-lease funds, with the exception of $97,900,000. Of the $97,900,000, $49,600,000 represents the actual amount of War Department funds obligated for the purpose of entering into new contracts to replace certain British supply contracts, and $48,300,000 represents the face amount of British plant facility contracts, which are being replaced by contracts with the Defense Plant Corporation. In connection with the plant facility program, it should be understood that the face amount is the obligation of the original British contracts, the ultimate obligation of the Defense Plant Corporation being somewhat less than this, due to the fact that the Defense Plant Corporation will not acquire all of the facilities provided under British contracts. Likewise, in the case of British supply contracts, reimbursements to the British Government will be less than the actual cost to the British due to the fact that War Department procurement agencies are able to contract on a more favorable basis than the British Purchasing Commission. In reference to your inquiry regarding the actual payments that may be expected to be made to the British Government as a result of this taking over of British equipment obligations, it is difficult for the War Department to give any reliable figure as reimbursement to the British Government under British contractual agreements with these manufacturers is a matter to be settled by the British Purchasing Commission and the manufacturers. 67 For your information, the British Purchasing Commission has entered into contracts for certain plant facilities amounting to $85,600,000 in addition to the facilities represented by the $48,300,000 referred to above. Study by the War Department indi- cates that in the interest of national defense the acquisition by the United States of these additional facilities is desirable. Accordingly, steps are now being taken by the War Department which it is hoped will lead to the further acquisition of these facilities by the Defense Plant Corporation. Inasmuch as the $85,600,000 represents the face amount of the additional British facilities, it is not known at this time what the ultimate cost thereof will be, or how much reimbursement will be due the British Government under existing contracts. The foregoing comprises the extent to which War Department arrangements for relieving the British Government of contracts placed in this country by the British Purchasing Commission have been made. Sincerely yours, Henry L Sumson Secretary of War The Honorable The Secretary of the Treasury -2- WAS HINGTON May 31, 1941. Dear Merle: As I told you over the telephone, we have been having some discussions with Messrs. Foley and Bernstein regarding a draft of lease-lend agreement with the British. In their absence I am sending to you a revised draft, together with a memorandum to the President, the original of which Secretary Hull has approved, so that they and Secretary Morgenthau may have it on Monday morning. The President has written Secretary Hull asking him to submit to the President a draft of agreement as soon as possible, after discussing it with Secretary Morgenthau. I believe that he wishes, if possible, to have an agreement under discussion with the British some time during the coming week. If Secretary Morgenthau wishes it, I shall be very glad to go over with him any questions which he may have about the draft before the two Secretaries discuss it. Sincerely yours, Mr. H. Merle Cochran, Room 279, Frim technon Treasury Department, Washington, D. C. Memorandum to the President. The attached draft of lease-lend agreement with the British is submitted in response to the President's letter of May 16, 1941. It is suggested that matters of form - whether, for instance, what is covered in Article IV of this draft should be included in this agreement or in another document - be passed without decision at this time. If decision can be reached now as to the substance of the agreement, so that the Department may discuss that with the British, form and method can be submitted for approval after the British views are known. The substance of the proposal is as follows: First. A joint declaration of a cooperative purpose, between the two nations and all others willing to join, to establish a just peace based on security for all nations and order under law. Second. The considerations moving from the Britishs 1. An undertaking -21. An undertaking by them to supply similar aid to us should our defense at any time require it. 2. An undertaking to examine, with a view to giving full support and assistance to strongthening our defense, any further needs of ours for bases. 3. All material transferred which shall be in existence at the end of the war to be given back to us upon request of the President. 4. All military material destroyed or used up in the war to be written off: 5. Against obligations for other materials - food, non-military material, etc. - the British to receive credits for property, services, information, facilities, or other considerations or benefits accepted or acknowledged by the President. It seems desirable to eep the credit accounting flexible so that, for instance, if the British developed and gave us a workable night bomber detection device, the President might be able to write off a category of obligations without necessarily putting a monetary value upon the device. The final settlement of any balance owed to be made so far as possible in a way not to burden economic -3 economic relations. 6. An undertaking by the Brittah to give full support to us (a) In a program of international trade and financial policies designed to facilitate trade between us and among all nations willing to join. (b) In improving international trade especially where difficulties have arisen from clearing, compensation, or payment agreements made by the British - for instance, the Argentine blocked sterling arrangement. (c) In a program of equitable dealing with surplus commodities and non-discriminatory access to raw materials open to all nations. (d) In a program open to all nations for post war relief and rehabilitation. At may ultimately be thought desirable to formulate these economic provisions in a separate document. Incorporated here, as an un ercuring by the British, they have more solem ty than a mere statement of intention, but are not a commit- nt by the United States requiring ratification as a treaty. Third. shipt The remaining provisions call for periodic - transfer of titte without the Freet to compont, protection of rights of patent owners. May 23, 1941. Pursuant to Section 3 of the Act of the Congress of the United States of America of March 11, 1941, the President has determined that the defense of the United Kingdom is vital to the defense of the United States, and for that reason the United States is now providing, and will contime to provide, aid toward that defense. The United States and the United Kingdom declare that in giving and receiving this aid they are engaged in a cooperative undertaking, open to all nations and peoples willing to join therein, entered upon in defense of national and political freedom, with self restraint and sober purpose, to the end of establishing a just and enduring world peace, based upon security for all nations and order under law. The United States and the United Kingdom here agree to the terms and conditions on which the obligations of the United Kingdom to the United States which arise from the transfer of defense articles and defense information from the one nation to the other shall be discharged. The methods here provided for the discharge of these obligations are devised to make possible for the future the establishment of international economic relationships essential for the intenance of peace with freedom and opportunity 5 -2opportunity for all who walk in the paths of peace. Article I. Should circumstances arise presently or in the future in which the United States in its own defense may require. defense articles or defense information which the United Kingdom is or may be in a position to supply, the United Kingdom will make such defense articles and defense information available to the United States under arrangements similar to those expressed in this agreement. Article II. The United Kingdom will continue to examine with the United States their need for military, naval, or air bases with a view to giving its full support and assistance in strengthening the defense of the United States. Article III. (1) The United States recornizes the benefit to the defense of the United States, contemplated by the Act of Congress of March 11, 1941, of the USE by the United King- doa in its o.n defense and in the defense of free states of the aid given and to be given under the Act. (2) Defense articles transferred to the United Kingdom under the act which si 11 not have been destroyed OF -3or consumed shall be returned to the United States upon request of the President of the United States, whereupon "11 obligation, other than that provided in Articles I and II of this agreement, in respect thereto shall be thereby discharged. (3) In respect of defense articles such as notes the following enumeration is suggested for discussion and intended to cover articles expended or destroyed in mill- tary operations or in preparation for them as distinguished from articles for civilian use J weapons, munitions, aircraft, vessels, and boats, machinery, facilities, tools, material, and supplies for their manufacture, production, processing, répair, servicing, or operation, and their component material, parts, and equipment, all obligation, other than that provided in Articles I and II of this agreement, shall be discharged upon the destruction or consump- tion thereof by act of war or in the defense of the United Kingdom, or in the use for which the said articles were leased or lent. (4) In respect of all oth r obligations arising by reason of transactions or delivery of articles under the said Act of Congress not specified above, the United States and the United Kingdom shall periodically review their accounts Accounts. Against such obligations the United Kingdom shall receive credits, in amounts determined by the Presifant after consultation with the Government of the United Kingdom, for any property, services, information, facilities, or other consideration or benefita accepted or acknowledged the President on behalf of the United States. (5) Whatever balance of obligation may remain at the end of the present emergency shall be liquidated so far as possible in such a way as not to burden the international economic relations between the two countries or between either of them and other countries in the post war period, Article IV. (1) In furtherance of the purpose jointly declared this agreement the United Kingdom undertakes: (a) To give its full support to the United States in a program of international economic, trade and financial policies and arrangements which will reduce and remove wherever practicable obstacles to trade and facilitate the interchange of goods and services between the two nations and among all nations willing to join therein; (b) To aid the United States in improving their trade and financial relations with the British Commonwealth of Nations and with other countries, especially, in those instances in which difficulties exist by reason x -5- reason' of clearing, compensation, payment or similar agreements or arrangements entered into by the United Kingdom; (c) To join with the United States and other nations willing to cooperate with them in devising and establishing fair and equitable methods for dealing with the surplus products of either of them and of other nations, and for providing free and nondiscriminatory access to raw materials. (2) The United States and the United Kingdom have already entered into and will proceed with negotiations looking toward a joint effort by the two countries and other nations willing to join therein to relieve the distress and want caused by the war, wherever, and as soon us, such relief will help the oppressed and not aid the aggressor. Article V. For the purposes provided in Article III of this reement records shall be kept of all defense articles defense information transferred or supplied under this reement, and of all credits and liquidations; and at ervals of not less than every ninety days schedules such defense articles, defense information, credits, liquidations shall be exchanged and reviewed. Article VI. Article VI. The United Kingdom undertakes that it will not without the consent of the President transfer title to or possession of any defense article or defense information transferred to the United Kingdoa under this agreement to, don Article VII. I as a result of the transfer to the United Kingof any defense article or defense information, it becomes necessary for the United Kingdom to take any action or meke any payment in order fully to protect, pursuant to the Act, any of the rights of any citizen of the United States who has patent rights in and to any such defense article or information, the United Kingdom pill so proceed, when so requested by the President. Article VIII. The parties to this agreement, and the officials signing this agreement on their behalf, each for itself, himself, or themselves, represent and gree that the execution and delivery of this greement have in all respects been duly authorized, and that :11 act's, conditions, and legal formalities which should have been performed and completed prior to the making of this experiment have been and completed as regulard by' in confermity respectively, the laws of the United States and the Kingdom, Signed in Washington in duplicate this ON BEHALF OF THE UNITED STATES a (Title) ON BEHALF OF HTS MAJESTY'S GOVERNORK IN THE UNITED KINGDOM (Title) 80 Analysis of Drafts of Lend-Lease Agreement Treasury Draft Preamble. Recital of authority in the President under the LendLease Act and his determination that defense of Great Britain is vital to our defense. State Department Draft Preamble. The President has determined the defense of the U.K. is vital to the defense of the U.S. and that therefore the U.S. is providing aid toward that defense. U.S. and U.K. declare that in doing this they are engaged in a cooperative undertaking open to all nations to establish a just world peace. The obligations of U.K. under the Agreement are to be discharged in such way as to make for the future establishment of international economic relationships essential for maintenance of peace with freedom of opportunity. Article I. The President will furnish Lend-Lease aid to Britain as valued and listed in schedules Article I. U.K. to supply similar aid to U.S. should our defense at any time require it. attached to the Agreement. Article II. Britain agrees to redeliver useful defense articles, equivalent amount of similar defense articles and amounts of tin, rubber, jute and other products produced in the British Empire or elsewhere. To the extent that the foregoing does not constitute full reimbursement, Britain agrees to furnish us other things, services, information, etc., acceptable to the President. Article III. By future agreement the parties may substitute any other arrangement for repayment 1 by Britain for Lend-Lease aid. Article II. U.K. will continue to examine with U.S. need for military, naval and air bases and give support and assistance in strengthening the defense of the U.S. Article III. (1) U.S. recognizes benefit to itself of use by U.K. of aid given under Lend-Lease Act. (2) U.K. will return to U.S. articles which shall not have been destroyed or consumed. This will constitute full discharge of the obligation for such articles. 81 -2Article III - Continued. (3) All military material destroyed or used up in the war to be written off. (4) Against obligations for food and other non-military material, U.S. and U.K. will periodically review accounts and U.K. will receive credit in amounts determined by the President after consultation with U.K. for any benefits or other consideration acknowledged by the President. (5) Obligations remaining at end of emergency shall be liquidated so far as possible in such way as not to burden the international economic relations between the two countries or between either of them and other countries in the post-war period. Article IV. The President is to determine the fair value of any consideration or benefit received by the United States from Britain and to give Britain credit therefor. The status of the account under the Agreement is to be periodically reviewed. Article IV. (1) To carry out the purposes of the Agreement, U.K. undertakes: (a) to give full support to the U.S. in its program of international trade and financial policies which will reduce obstacles to trade; (b) to aid U.S. in improving trade and financial relations with British Empire and other countries, especially where dif- ficulty exists by reason of clearing agreements entered into by U.K. (c) to join U.S. and other countries in devising fair methods for dealing with surplus products and providing non-discriminatory access to raw materials. (2) U.S. and U.K. continue negotiations to relieve want caused by war, as soon as such relief will help the oppressed and not aid the aggressor. 82 -3Article V. Records shall be kept of materials transferred under Agreement and of all credits and liquidationsand every ninety days such accounts shall be exchanged and reviewed. Article V. Britain agrees it will not, without consent of Presi- dent, transfer title or possession of any defense articles, etc. Article VI. Same as Treasury Article V. Article VI. Provision re protecting Article VII. Same as Treasury Article VII. Material delivered by Britain to United States in payment is to be delivered in the State draft has no equivalent patent rights of American citizens. Article VI. provision. United States and such payments are to be exempt from restric- tions, regulations, and taxes of Great Britain. Article VIII. United States may at any time cease furnishing Lend- Lease aid to Britain but this will not affect Britain's obligation to repay. Any default by Britain shall entitle the United States to enforce its rights. rticle IX. President may exercise his power through any officer or agency desig- State draft has no equivalent provision. State draft has no equivalent provision. nated by him. rticle X. Provision re parties giving notice to each other. rticle XI. Formal provision re legality of execution of document. State draft has no equivalent provision. Article VIII. Similar to Treasury Article XI. 83 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE TO Secretary Morgenthau FROM Mr. Cochran June 5. 1941 STRICTLY CONFIDENTIAL of At 11:45 yesterday morning Mr. Bell and I raised the question with the Secretary a reply to Sir Edward Peacock in regard to the proposed transaction involving a loan of $16,000,000 against the Coates-Clark group of thread companies. On May 28 Sir Edward had addressed a letter to the Secretary upon this subject, which had been turned over by the Secretary to Mr. Bell. When Sir Edward had telephoned the Secretary on Tuesday for an expression of his views on the proposal, the Secretary called me in and asked that I get in touch with Sir Edward. Upon telephoning New York, I learned that Sir Edward was in Washington. Consequently, I got in touch with him in Sir Frederick Phillips' office at 12:45 on Tuesday, June 3. He was returning to New York at 3 p.m. I told him that the Secretary planned to study his proposal the following morning, but that if an immediate decision was necessary, the Secretary would change his schedule and do the necessary. Sir Edward said there was no such urgency and that a reply on the following day would be satisfactory. In our discussion yesterday, the Secretary told Mr. Bell and myself that he desired to give no opinion to Sir Edward on this proposal until Mr. Jesse Jones might look it over. Mr. Bell was instructed to get in touch with Mr. Jones on the subject, and I was to phone Sir Edward after Mr. Bell had spoken with Mr. Jones. Mr. Bell succeeded in reaching Mr. Jones at 4:50 yesterday evening. Mr. Jones knew nothing of this proposal. He was willing to look into it, and asked if it would be agreeable for him to get in touch with Sir Edward Peacock thereon. Mr. Bell answered in the affirmative. At 5 o'clock I spoke with Sir Edward Peacock by telephone. He had left his office, but I found him at another address (Pennsylvania 6-4240). I told him that his letter had had the attention of the Secretary, but that the latter would take no decision until Mr. Jones had an opportunity to look at it. Mr. Bell had thereupon telephoned Mr. Jones and it was agreed that the latter should get directly in touch with Sir Edward Peacock for full information concerning the proposed arrangement and the properties involved. Sir Edward told me that he had had no connection with Mr. Jones to date on this matter, but would be prepared to give the latter any information which he might request this morning. Kmp. 84 THE WHITE HOUSE WASHINGTON June 5, 1941 My dear Mr. Secretary: Pursuant to the authority vested in me by the Constitution and laws of the United States, I hereby authorise you to accept delivery of a gift of the defense articles set forth in the annexed schedule from Mr. John F. Camp, 1103 National Bank of Commerce Building, San Antonio, Texas. I find that: (1) The defense of the United Kingdom is vital to the defense of the United States; (2) Sections 4 and 7 of the Act of March 11, 1941 have been complied with by the necessary agreement on the part of His Majesty's Government in the United Kingdom; (3) It would be in the interests of our national defense to transfer the defense articles set forth in the annexed schedule. I therefore authorise you to transfer those articles to His Majesty's Government in the United Kingdom. I would appreciate it if you would arrange with the Chairman of the British Supply Council in North America for the time, method, and other details of the disposition. Very sincerely yours, Franken The Honorable The Secretary of the Treasury. 85 Defense Articles Authorised for Transfer to the United Higgdom by the Secretary of the Treasury Quantity 5,000 barrels Description Texas Crade 011 86 COPY JOHN F. CAMP 1103 National Bank of Commerce Bldg. San Antonio, Texas Washington, D. C. May 8, 1941. My dear Mr. President: In this emergency I desire to make a gift of some of my oil to those who are fighting to save demooracy. In the last few days we have had news which should rouse us to action, and I have been concerned by the casual attitude which so many of my fellow citizens seem to have in this crisis. Radio and newspapers are telling us that the oil supply of Britain is threatened, and daily all of us are becoming more conscious of the fact that oil is the symbol and the key to this current mechanistic war. Without oil, the machines of war and of defense would be stalled. Accordingly, Mr. President, I am impelled to ask you to accept this gift as a token of democracy-inaction. To be specific, I offer five thousand barrels of orude oil from my wells to be delivered at the port of Curpus Christi, Texas, subject to your instructions. Small as my offer is, it is my hope that it may in some way help to attract attention to the vast resources which we have available to defend democracy. I have told my friends about this plan to give some of my oil, and their encouragement leads me to be- lieve that my offer will not be misunderstood. If it is consistent with the policy of the Government, it would be particularly gratifying to me if some way could be found to make my oil available to the fighting forces of Great Britain. However, this is not a condition of my gift. To provide for the national defense the people of America have invoked your leadership in a vast program. It seems appropriate, therefore, that I make this offer directly to my President, since my primary interest is to aid in the defense of my country. Respectfully, JOHN F. CAMP 87 June 5, 1941 11:58 a.m. HMJr: Steve Yes, Steve. Early: As far as I can find out, that's HMJr: Well, then I'm going to call up E: it. Yeah. All right. HMJr: Thank you so much. E: Right. all set for Wednesday night. Mrs. Roosevelt and try to change 88 Treasury Department TELEGRAPH OFFICE 8w FN WY141 24 DL GOVT POUGHKEEPSIE NY JUNE 5/41 224p 1941 JUN 5 PM 2 54 SECRETARY OF TREASURY MRS ROOSEVELT CAN JOIN YOU AT LUNCH WEDNESDAY JUNE ELEVENTH IF YOU CAN HAVE IT AT TWELVE NOON AS SHE HAS TWO OCLOCK ENGAGEMENT MALVINA THOMPSON 251p 89 June 5, 1941 2:00 a.m. RE AID TO BRITAIN Present: Mr. Hopkins Mr. Stewart Mr. Bernstein Mr. Foley Mr. Bell Mr. Cox Mr. Cochran Mrs. Klotz Mr. Viner H.M.Jr: Well Dan, if you will state some of our troubles that we would like Mr. Hopkins' help on. Bell: You know, Harry, the last time we met we discussed the commitment to the British amounting to three hundred fifty million dollars which we would try to relieve them of their burden in this country. Since then, we have been working on it some, and we have found that there has been forty-eight million already taken out by the RFC of investment facilities and there is about eighty-five million investment left, of which Jesse and Phillips estimate that the value of it could only be between fifty and sixty because there are low amounts here and there that Jesse can't take. That would make a total of a hundred million of plant investment facilities. There have been supply contracts already 90 -2taken over by the War Department amounting to fifty million. The last time I think we talked to you we thought that we might get around to this whole thing by taking over all of the British contracts entered into after January 1. Well, after going over the testimony we found that that might be a little difficult, but we don't find any difficulty in taking over the contracts that have been signed since March 11. That amounts to about seventy-eight million. That makes a total of two hundred twenty-eight million that there didn't seem to be much difficulty about. Hopkins: We to take over the contracts? Bell: That is right, the War Department. Then in a discussion there evolved the proposition of allowing the War Department to enter into the contracts with the same contractors that are now under contract with the British and for the identical material and then postponing or deferring the British cash liability, leaving the British contracts in full force and effect, but no further deliveries on them. The deliveries would be made under our contract. The British cash liability wouldn't come until sometime, maybe two years, hence, and by that time we may work out some other scheme to relieve them. We have put down for that category two hundred million dollars, making a total of four hundred twenty-eight million dollars, which is a little more than we promised them, but maybe the method of giving them the relief justifies a little sweetness there. 91 -3That is the first matter that we discussed. Hopkins: Dan, could I ask you this? We are going to buy ninety million dollars worth of oil for which they have been paying dollars. Now, I am under the impression that that is some- thing that they do not expect us to do, and what I would like to find out is whether that ninety million could be included in this item because I never heard of it. They made no requests for oil until they sent a special man over here last week-White: I don't think they expected to pay-- Hopkins: I fancy Phillips is going to say, "Of course, we were planning on that all the time." White: He might say that, but I don't think they expected they would have to pay all dollars for it. I think they thought they might make some deal in which they might pay half in dollars and possibly half in sterling, so he might make that statement. Hopkins: We are not buying all the oil. We are buying a ratio of about five to twelve. They are paying the seven in sterling. They buy it through the Shell. White: Oh, they are paying for the remainder all in sterling? Hopkins: They are paying for all the oil they buy from British companies in sterling. Bell: Does that involve the ninety? Hopkins: No, the ninety is oil that they have got to buy from dollar sources. For instance, they buy oil from Standard Oil of New Jersey down 92 -4in Aruba or somewhere down there, and they have to pay dollars to Standard Oil. They buy from Shell in the same place and they pay sterling. White: You are sure they pay all dollars to Standard, because I think there was some discussion which you will remember, Mr. Secretary, sometime back? H.M.Jr: I remember it very well, and we had it in here. Jay Crane came in here. You (Cochran) check me. They told me at the time that it amounted to roughly fifty million dollars a year, didn't it? Cochran: Yes, sir. H.M.Jr: And that it was a great obligation, and I said to the English, "Now look, when you feel that you can't pay the Standard Oil dollars any more, let's do the whole thing as one and not just single out one particular company." Hopkins: Well, we are not. H.M.Jr: But the point was that Standard Oil of New Jersey alone was receiving at the rate of fifty million dollars a year in dollars. Just that one company alone. Hopkins: That is something because-- H.M.Jr: Is that right, Merle? Cochran: Yes, sir. H.M.Jr: Just that one company alone. Hopkins: They have been getting three million tons from around the - Africa, the Persian Gulf, 93 -5and they have lost so many tankers that they just can't keep that moving that distance any more, so if that oil could be bought in America, the United States. Bell: That wouldn't give them dollars, Harry, or relieve them in dollars, would it? Cox: Sure. Hopkins: It would relieve them in dollars if they didn't think we were going to do it. After all, they have got certain things they pay dollars for. If they had been planning on paying that, this may be-- Bell: But I can't believe that oil was in their normal imports from the United States for which they would have to provide the dollars. White: From Central and South America. Hopkins: It is the dollar area. White: I am inclined to think that they were busy since that time in making arrangements to pay part sterling, but I don't know the facts, and Phillips will doubtless know, but certainly you are relieving them of some dollars. Whether it is the full ninety or not. Hopkins: That wouldn't make any difference with this memorandum. Bell: Not in this particular one. Hopkins: Oscar, do you want to talk now? Cox: I see no legal objection or no policy objection on this particular thing. The only two practical problems are whether we are within the limits of funds in the allocation, and I think 94 -6offhand that the funds are available. The second one is the practical problem of pick- ing up one or two big contracts and working out a three-sided arrangement between the War Department, the British and the LendLease, and I would guess that you could probably do that. It has the advantage-- Hopkins: That would be a standard item, wouldn't it? Cox: Yes, and it has the advantage of backing up the orders so that you can keep your production going. For example, if we picked up a thousand plane order and you have a new order placed under Lend-Lease money for a thousand planes plus the British order, you would be committed to that extent on a post- poned payment. It is not technically bailing out. Hopkins: It will have to be the Army, won't it? Cox: Yes. The biggest item is for the Army. Hopkins: Unless we might pick up those sixty merchant ships. We might get sixty million there by simply increasing the order for sixty more ships. Cox: That is possible. Bell: How would that go? Cox: They have got dollar commitments to pay for the sixty ships. That would be one of the best ways to do it. Bell: That is in the billion four, I take it? Cox: Yes. 95 -7Bell: Made after January 1? Cox: Yes. Hopkins: You are-- H.M.Jr: Just one second on that. I would like to check that. There is a peculiar circumstance on that. Let me just check my memory. That ship order, they said they had money earmarked especially for that. Cochran: Phillips says, "I will put it in this pocket H.M.Jr: Just refresh my memory on that. Cox: That was the thing at the time he didn't over here.' understand what the word "earmarked" meant, and Phil tried to explain it five or six times and he still didn't understand it, and Phil says what it means, you take five bucks and put it in your pocket and say you won't touch it for anything else. H.M.Jr: I just wanted to bring out the fact that this money is the only money that is earmarked. Cox: It is all fundable. All we want to make sure is we can't back up the commitments. H.M.Jr: You think it was a very mental earmark? Cox: Oh, sure. Hopkins: You are convinced about that statement from the - from Jones and the Army that that is all there is in that part, a hundred million over-all. Bell: Well, Phillips agrees with that. He says 96 8- that there must be twenty-five or thirty million dollarsthere of small stuff that he didn't think you would want. H.M.Jr: Since you have been in, we have had a formal letter from Stimson and one from Jones on it. Have you (Cox) seen it? Cox: No. H.M.Jr: Bell, would you furnish Cox with a copy of those two letters? Bell: Yes, I will. H.M.Jr: And one other thing. I don't think I ever gave it to you. This is, so to speak, my sailing orders. You might use it in your files. I promised you that. (Memorandum from the President dated March 10, 1941.) Hopkins: Who could see Phillips about this ninety million dollars worth of oil, but not say to Phillips, "I assume you were planning on this anyway," but say to Phillips, "Well, I have found ninety million of the three fifty"? White: We have got some information as to what he intended already on the record, as to what he intended to spend in his estimate of what dollars he would need during the coming year which he gave the Secretary along in December. They made certain statements about their needs, and oil was one of them. How specific the amount is, how specific the information is, I don't know, but we can look that up. It may answer your question. Cox: Can I put in two words on the general policy thing? 97 -9H.M.Jr: If you didn't I would be very much surprised. Cox: When they made the statement on the basis of which you testified, they had things like oil and steel and other purchases at that end. At this end they have got a lot of fellows in the Purchasing Commission who haven't got a damn thing to do, and whether it is right or wrong, their attitude is the fact that their own men should have free play. I don't think it is essentially a detailed question of whether they are technically justified on this thing. I think it is a question of how much relief we want to give them because there are a lot of those things that they planned in paying in their own dollars which they are not now paying for. Hopkins: This four twenty-eight - if we could get them four hundred twenty-eight million, theoretically that would give Purvis seventy-five million dollars cash to do some purchasing on his own, assuming the three hundred fifty washed up your obligation. Bell: You are assuming that they get their advance payments back from the contractors? Hopkins: Assuming we get four hundred twenty-eight million altogether or whatever figure you have got there. White: The cash would come from the purchase of the plants, Dan, wouldn't it, from that portion of it? Bell: They would get a hundred million cash from Jesse Jones. They have already gotten fortyeight million from him. Hopkins: Well-- 98 - 10 Bell: Then they might get something from the con- Hopkins: You are pretty sure this doesn't violate Cox: No. Hopkins: You have no doubt about that? Cox: No. Hopkins: You haven't been over here ganging up with these Treasury people? (Laughter) Cox: No. H.M.Jr: Who pays you now? Are you paid over here in tracts. Smith's testimony? Treasury? Cox: I only serve one master, and that is my conscience. Hopkins: Well, if we are going to do this, I am for getting it done. Now, can we get the cooperation of the War Department on this? I think we could. It would take us until tomorrow to pick out five or six big items which are standard. Bell: Have you got this list here? Cox: Yes. Hopkins: I don't know. Are you sure the British will agree to this? After all, this is a fancy deal here, Oscar. As far as I can see, Phillips is coming back at you and say, "Well, my God, you aren't relieving me of anything. All you are doing is postponing the evil day 99 - 11 when I have got to pay dollars." Hopkins: If he is smart, he won't say that. If he is smart, he would. Foley: He won't say that. Cox: I am not so sure. Foley: White: He probably will - well, you are not so sure he is so smart or-- (Laughter) Foley: That is the way it begins to look. White: They will be left on rather weak grounds if they protest that because their argument now is that they - they are shy of cash for the next two years. Now, unless they feel that these contracts can't be deferred for more than a year, and there is no grounds for believing that, they would seem to be left with no basis for objecting. You have solved their problem for two years, giving them a hundred million dollars in cash, two hundred fifty in reduced obligations - or a hundred and fifty in reduced obligations and the two hundred in deferred obligations and deferred until, I presume, the end of the war or even after that if necessary, and at that point I think Oscar thought that they could make a settlement with the manufacturers here at which their two hundred million dollar obligation might be liquidated for twenty-five or fifty million dollars. Cox: Well, if they win the war, I don't suppose they need to worry about fifty or a hundred million dollars cash. If they don't win the war, the manufacturer will probably have to worry. 100 - 12 White: H.M.Jr: Another reason they might accept it is, the Secretary has sweetened this by virtue of this fact. Wasn't that your thought? I won't sweeten it. Mr. Hopkins will sweeten it. White: I mean you are suggesting four fifty instead of three fifty by reason of this development. H.M.Jr: That is right. Cochran: But still you are cutting down on this six fifty. H.M.Jr: That is another problem. Cochran: But they add it altogether. H.M.Jr: No, this is different. Hopkins: I don't know if I am right about that. H.M.Jr: This is something where I gave my word with the belief that the President understood me and was back of me so it is a question of my word with the understanding that the President fully understood. Now, this other thing is an entirely new thing. Is that right, Harry? Hopkins: As far as I understand it. H.M.Jr: Yes, that is something entirely new. Hopkins: Well, I think the next thing to do is to find out whether we can pick up the few contracts that this could be done with immediately. H.M.Jr: Now, how do you want to proceed? 101 - 13 Hopkins: I think we ought to have somebody here, Dan, or somebody here at Treasury-- H.M.Jr: Dan has been handling this. Hopkins: Well, I think Oscar can handle this for me, and we will let General Burns find out whether we can pick up the contracts, and I think the less we say to the British about this for a day or two the better. Let's find out where those contracts are and we have got to see Stimson and Bob Patterson and get them to agree to it. H.M.Jr: Hopkins: If it is agreeable to you at the right time, I would rather have you talk to them. To the British? Hopkins: Well, this part of it, yes. This part of it? H.M.Jr: Yes. Hopkins: Because they will have to put in some kind H.M.Jr: of an application, I think, under the Lend- Lease. Purvis will. But I think we will scout around discussing with Purvis until we know we can do it. H.M.Jr: No one here will talk to the British. Hopkins: It is sort of discouraging to do these things unless you can really deliver the goods. H.M.Jr: Don't you think, Dan, in view of Hopkins' position we had better not open up what I call the "Keynes memorandum" and try to get this thing cleaned up first? 102 - 14 Cox: Bell: H.M.Jr: I think that is sound. You mean not open it up here or not open it up to the British? Well, I wasn't even going to bother now unless Hopkins wanted to. Bell: I don't think there is any real hurry about the six fifty except Keynes wants to get home, he says. H.M.Jr: Well, do you want to go into the six fifty Hopkins: Not particularly, no. I tell you, I am not I certainly would not want to pick up any back contracts to pay that six fifty. Bell: The six fifty is really Mr. Hopkins' problem anyhow. The three fifty was your (Secretary's) commitment, but the six fifty is a new thing that has been injected and the only way it now or not? can be worked out is through Lend-Lease. Hopkins: What has happened on this six fifty is that all of a sudden out of a clear sky this was dropped in our laps. Purvis had previously talked to us about the fact that he needed cash. When Keynes arrived, the amount of cash was four or five times as much as Purvis ever talked about needing, and Keynes submitted the memorandum and put the amounts in without ever saying a word to Purvis, who is chief of the British Purchasing Commission. Keynes decided that the British Purchasing Commis- sion needed a lot of cash here for a variety of things, some of which were purely our problem, namely, things that politically we couldn't buy or that Keynes thought we could not politically buy under the Lend-Lease even though we had the legal power to buy it, 103 - 15 and there are a lot of odds and ends that Purvis needs, which he undoubtedly does. When I talked with Purvis the other day, he told me if he had twenty-five million dollars cash in the next three or four months in his pocket to buy what he pleased with, he would be the happiest man in Washington. H.M.Jr: How much? Hopkins: Twenty-five million. Cox: Keynes' figures don't add up. H.M.Jr: Well, Harry, it is all the more reason that if we could get this thing cleaned up, then when it is signed, sealed, and delivered, then we can send for - you can send for Purvis and Keynes. Hopkins: I would like to see that Keynes memorandum. Cox: I have got a copy. H.M.Jr: But don't you think so? Then you can say, "Well let's take a look at this thing after this is cleaned up, because this thing we are talking about here today would help out Purvis a lot. Hopkins: May I ask you this about the Keynes' thing? From the Treasury point of view, have you fellows any major interest in that? H.M.Jr: The only major interest that we have is this. Mr. Keynes' walks in here with a cable of introduction from - well, I have got to go back a little bit, you see. Some where along in the middle of March, in fact, we got a cable from Winant as a result of the fact that the British Treasury and Churchill and Brendan Bracken and the Chancellor of the Exchequer talked to him about some reports 104 - 16 that Phillips had sent over, and they sent us this cable on the nineteenth which was marked "Urgent" for the President, Hull, and me, which was delivered to me on the twentyseventh of March by the State Department. It was sent on the eighteenth or nineteenth. Cochran: H.M.Jr: Eighteenth. Eighteenth from London and I got it on the twenty-seventh. Well, the nineteenth we met here with Phillips to go into his troubles, and I went over his situation and that was the time I told him, "Don't worry, I am going to take care of you. Some way, I don't know how, I am going to take care of you." Then he sent a message back that we would work it out some how, and then from that day on, the British Treasury, according to Ben Cohen, felt much better. Bell: But your commitment was only on the three hundred fifty. I don't know whether they got the idea that you were talking about the billion or not, did they? H.M.Jr: Who? Bell: The British Treasury. H.M.Jr: Oh, no, I don't think SO. Then the next thing I know, I get a cable from Winant, would I receive Keynes, and I said "Yes, and they were sending him over here because they felt maybe Phillips wasn't getting everything that he should. Keynes walks in here and dumps this thing on my desk. White: Mr. Secretary, don't you think that it might 105 - 17 - be appropriate to say that we have an interest in the Keynes proposal to the extent that their financial position, if indicated as being inadequate, might justify some attempts at giving them a larger cash balance because right along Phillips has been claiming and hoping that - he has been claiming that they need a larger balance, and he has been hoping that some way would be found to increase their cash balance and their gold balance which was down very low, so there is that interest which antedates the present discussion. H.M.Jr: Well I just-- Hopkins: You wouldn't expect that to be accomplished out of the Lend-Lease Bill, would you? White: Hopkins: Well, it is a point which interests the Treasury-I can see that. White: To the extent that-- H.M.Jr: Just let me answer that, Harry. If I don't answer it right, you supplement it. If it is correct, and I have every confidence in Ben Cohen, that Mr. Churchill and those people are worried, to the extent that we, here in the Treasury ease those worries a little bit, we are interested. That is our - on my front, which is the financial one, if I can ease Mr. Churchill's worries a little bit, then whatever time I can put in is time well spent. But that is my interest in it. Is that right? White: That is right. Hopkins: I think the financial stakes of the British are so grave over here, particularly in the last year - there is one appropriation of 106 - 18 - seven billion that is nearing its end. A new move has got to be made of some kind in very large proportions. I hate to get it compli- cated on the Hill or anywhere else by a minor move at this time which doesn't answer the total picture. Either we are going to finance the British over here or we are not, and that is all there is to it. We are going to pay for everything they buy out of the United States from here on or we are not, but Keynes throws something into this thing at this very difficult time on the Hill and there are a lot of differences of opinion about what is the next move that should be made regarding the Lease-Lend Bill. Many people believe the Lease-Lend thing might better be washed up entirely. Do the whole thing through the regular departments via appropriations. I don't like to get it complicated. I am willing to talk to Keynes, and I would like to get some cash into Purvis' hands in order to help him to do this obligation of yours plus getting some immediate cash for the next few months until the new Lease-Lend Bill is past Congress, and I would be glad to have Keynes or any other Britishers tell us what their headaches are in the present bill and how they would like to see the bill worked out, but to try to find six hundred fifty million cash or any- thing even approaching that sum of money, which would mean our buying something with dollars out of Lease-Lend and putting it in the British Treasury - after all, we have only got two and a half billion left. H.M.Jr: Well, Harry-- Hopkins: And that is going to be all obligated in the next few weeks. The whole business is going to be tied up in bow knots. 107 - 19 H.M.Jr: If we can work this out, and I see now that we can with your help, and I imagine fairly fast, then I think we could have another looksee at the British Treasury procedure. Hopkins: All right. H.M.Jr: In view of this, my guess is that once this is accomplished, they ought to be able to see daylight for a good many months. Hopkins: Now, could I come back to the ninety million? Bell: Harry, I would like for Keynes, sometime along here, to see Mr. Cox and you and General Burns on this memorandum, because I think that they can show them where a lot of this six fifty can be taken care of under the LendLease and allay their fears. Hopkins: We will be glad to do that. What I fear there, is it proper for us to have - there is no reason why Purvis shouldn't know anything that Keynes is saying to us, is there? H.M.Jr: Purvis should? Hopkins: Purvis should know what Keynes is saying. H.M.Jr: Now, do you want us to handle the ninety million. Hopkins: I would like to have somebody in the Treasury. H.M.Jr: Bell? Hopkins: Find out from Phillips-- H.M.Jr: Will you do it? Bell will do it. 108 - 20 Hopkins: Cochran: Igoing couldtowrite a book on what the answer is be. Phillips called this noon, Mr. Secretary, and wanted to know when they could see some of us on this. They wondered what the schedule was so one of us could call and get him over, say, if we want some more information. H.M.Jr: Bell can do it at his convenience, but with the exception of the ninety million we are not going to tell them anything other than that we are working with Mr. Hopkins on it. Is that right, Harry? Hopkins: Yes. H.M.Jr: And that we hope to have an answer early next week. Hopkins: H.M.Jr: Yes. We hope to have an answer early next week. Hopkins: Yes. H.M.Jr: Now, do you want to take five minutes of this thing and hear the Treasury's side of this quid pro quo, what is going on with the State Department? Would you like to hear about it? Hopkins: Yes, I would like to very much because we are going to be in it pretty soon. H.M.Jr: Dan, tell them what happened in your office yesterday. Bell: Well, we got last Saturday a copy of the State Department draft and it has tied up 109 - 21 with the rules of the game to be played after the war. In other words, it is an economic agreement. We didn't like that very well; some of them said they didn't think we could write those rules now. So we asked Dean Acheson if he would come over and give us the background of that agreement and what they were trying to do with that type of agreement. Dean gave a very full explanation of the difficulties he had had in getting the type of agreement drawn like that. Apparently there had been a lot of differences of opinion on that in the State Department. The upshot of the thing was after we discussed it for a long time and asked him whether or not the door was closed, whether we couldn't discuss policy matters with the President and after we got those settled, the two Departments get together and draft an agreement, he said, "Yes, that could be done. He said that he would write a memorandum of the differences involved and the policy matters for the Secretary of State and the Secretary of the Treasury to take to the President and discuss. He has now done that and I have just received a copy of it. I haven't been over it yet. He sent it over here for our criticisms, to change in any way we want to. He is hoping that that will be finished tomorrow morning and the two Secretaries can go see the President tomorrow and after that is done, then the two staffs can get together and draft an agreement. This now envisages two agreements, one on the quid pro quo and the other one on the economic side. It not only involves the British nation on the economic side, but all the other nations that may want to join. Hopkins: On the quid pro quo end of it, have you any reservations about their proposals there? 110 - 22 Bell: Well, I would rather Ed would speak on that. It is a little different from the one we had. Hopkins: I know about that one item in it. Foley: Well, the major difference, as you know, Harry, is whether or not the stuff that is made available to them that is used up for the purpose for which it is made available under their draft is washed up and no account- ing ever has to be made for that. Under the draft that we prepared-Hopkins: We it to them. We give them a shell thatgive is fired. Foley: Yes, or a tank that is lost or destroyed or a ship that is sunk. It doesn't have to have any accounting for those items which are used up for the purpose for which they were turned over. In our draft, which was a little more commercial and which followed what we thought was the way it was to be prepared, the President could take that into account and readjust the whole account that had been made available to the British. In other words, if we wanted a return in kind or the equivalent, he could ask for that, and if he wanted to fix a valuation on stuff that had been used up that would be a nominal valuation, he could also do that. But it left the thing open to a later date for determination. Whereas their draft cuts it off right now and says, "Whatever you use up doesn't have to ever be accounted for." White: Isn't that the distinction rather than calling it commercial? That is, your draft, the early draft, gave the President complete flexibility of decision, complete. He could give it away, make any request at any time 111 - 23 - along the line. The other draft-Foley: Bell: H.M.Jr: The State Department draft wipes off from any further accounting the largest item which is the stuff that is used up. That is a major matter of policy. I just thought you would like to hear that. O.K.? Hopkins: Yes. (Mr. Hopkins left the conference.) H.M.Jr: Hopkins said outside that he thought he would be able to let me know not later than Saturday, and you can see that I didn't want to muddy the water by bringing up this six fifty. I thought it was a mistake. I also thought that if we get this thing through - I have given my word which I take very seriously. I think I can do this, bringing in the President. I want to get off this hot spot. And if we give them this extra money, I really think the British Treasury will be in much better shape than I had any reason to hope for. Now, the thing that I wanted to say while I have got these people here, particularly Viner and Stewart, this has nothing to do with this, but looking forward I think it was Stewart who brought up the question I mean, I am looking six months ahead - of the pros and cons of our possibly buying sterling, taking sterling for some of it, you see. In other words, the point as to do you want to express your own opinion? 112 - 24 Stewart: Go ahead, I will remember it after you outline it, probably. I remember we had a talk. I don't know just what you have in mind. H.M.Jr: Well, the point is this. Supposing that six months from now or a year from now they are really up against it. Are we better or worse off if we begin to take some of their sterling? Bell: You are thinking now, Mr. Secretary, of liquidating their contracts or for a cash balance? H.M.Jr: Anything? White: For providing them with cash, there is no way that you would have of providing them with that cash, assuming that all their Lend-Lease stuff is taken care of, except either by some Government loan or through a stabilization operation. Now, the question is, why would they need cash if the Lend Lease can extend its operations to areas which they are now talking about, namely, purchasing goods in a third country and send- ing it to England. It is a little difficult to see why they would ever need cash. Viner: Well, this is assuming that you will get a new Lend-Lease. White: Yes, of course. Oh, if they don't - if you don't get a new Lend-Lease, there are so many other things that will happen that I don't - but if you are going to lend the money, and I think possibly this is the point, it might be a very much better thing to have some sterling than to have just an I.O.U. 113 - 25 H.M.Jr: That was the point that Stewart brought up. White: It is better security and it gives you better bargaining power and may also give you some control over other matters which you otherwise would not have control of. H.M.Jr: And I also raised the question at this time because if somebody is going to work on an economic plan for the post war period, I think we would bein a better position if we had a billion or two billion of paper sterling than if we just had an I.O.U. White: Then that would be very definitely a viola- tion of the spirit of the use of the Stabili- H.M.Jr: zation Fund to use it for that purpose. I wouldn't do it without a mandate from Congress, and I am not saying - but I just wanted to throw it on the table. Did I refresh your memory. Stewart: Yes, I remember it. I had it in mind chiefly in the event a pinch arose in some way where you were not able to negotiate this with all the other departments and still wanted to make good on your commitment, and you remember my illustration was that it was at least as good a risk as China was. Bell: Or if they found they couldn't dispose of their dollar assets in this country as quickly as they need to meet these dollar contracts, you might temporarily buy sterling until those assets were liquidated. White: Or they could use this new bill. They should no longer be in a position during the next twelve months where they are stuck for immedi- 114 - 26 ate cash in view of the bill and assuming that Jones wants to cooperate with them. Bell: I am assuming that we still want them to H.M.Jr: Well, as I say, I think this thing went along beautifully. I think you presented it very well, Bell, but I mean as long as I have got these consultants here - then the other thing which was a little out of the sell them. ordinary that I wanted to put before you was the thing that Viner said, and Viner says that we have got to watch our step if these Defense Savings Bonds continue to do so well, because I may find myself with four or five billion dollars demand obligations out. Bell: You have got that now. Viner: More than four or five. Ten or twelve. Bell: You have got four billion three hundred million out now. White: That, Mr. Secretary, I think should go on I think the conservative position that has been usually held here with respect to the amount of demand obligations that can be held outstanding needs to be carefully reexamined, but I think the whole question should be raised and reconsidered, and I don't think we should assume that merely because there is an increase in demand obligations that per se that is bad, because I think there is some room for doubt that our whole attitude with respect to the proportion of demand obliga- tions needs some reevaluation, but I think it is very important it should be reconsidered. 115 - 27 H.M.Jr: I think it is a good point to bring up, especially on the idea of my going out and saying how wonderful we are on the sales of Defense Bonds tonight. Bell: Well, it doesn't worry me so much as it did a year ago, I think in the first Savings Bonds we put out, provisions require reasonable notice. What is reasonable notice is in your hands. With the new bonds we are putting out, it is thirty days notice required, I think, and even after the thirty days notice, any volume of them you could delay another two weeks or thirty days before you refund them. You have got to borrow the money and people have just got to wait until you borrow the money. White: That may be just the reason for-- Bell: We could borrow money on Treasury bills pretty fast to meet the demands on this. White: If there is any fear, that is an additional reason for holding on to these additional monetary powers. Probably there has been talk around here about giving up. If there is any doubt in your minds as to the possibility any time in the future of being unable to raise quick cash except at very exhorbitant rates, I think that is an additional very strong argument for maintaining those exceptional monetary powers-H.M.Jr: Who is talking about giving it up in the Treasury? White: Well, it isn't in the Treasury, it is outside and there has been some talk inside. How- ever it is only talk so far. (Laughter) Bell: I hope you are not talking about Thomas currency. 116 - 28 White: That is one of them. H.M.Jr: Well, we got through with this thing, and I was just bringing up a few of these things that had been brought to my attention and which aren't immediate problems, but which should be studied. Now, the only thing you are going to do, you (Bell) are going to talk to Phillips and sound him out on the order, is that right? Bell: I have got to get the story first from Oscar Cox. H.M.Jr: And then we sit tight and hear from Hopkins, Stewart: Yes. White: That is what I would want. H.M.Jr: I did it because I knew that was what Ed wanted. I always do what Ed wants on Thursday and I thought it was good ball to say that he should tell them, don't you think so? afternoon. Foley: That is something new. (Laughter) H.M.Jr: On Thursday afternoons. Stewart: I would like to say that I am in complete agreement with what Hopkins said about the six hundred million. I think that is just the right line to take with Keynes. H.M.Jr: Oh, do you? Stewart: I think that Keynes would make his own ap- praisal of our American situation and he will relieve us of a number of embarrassments, and I think his method is a very tactical thing. 117 - 29 If we can deal with the three of four hundred million, say this is a general thing, the Lease-Lend money is going to expire, we are going to have to deal with this in a larger way, I wouldn't myself deal with it in a minor way. I would deal with it in a larger way myself. I thought his general line was a very effective answer to a visiting economist. I don't think it solves the question of whether or not the British Treasury ought to have cash, and I think there is a question which the Treasury here could easily say, there may be some way of dealing with it, but I wouldn't mix it up with the Lease-Lend which is difficult to administer and therefore that we ought to work out actively some arrangement for it. Bell: I wonder if one of the things that is worrying the British isn't that they are afraid that when this war ends, and it might end some day suddenly, that they will be absolutely broke all. and won't have any cash in the till at H.M.Jr: Well, it would be amazing if it didn't worry them. Bell: And I am wondering if something couldn't be done to make a commitment that as soon as the war is over we will loan them a half billion dollars, two hundred and fifty million dollars gold and the other two hundred fifty million dollars in dollars. White: They will be just as broke today as they will be a year from today if it is a question of to- day. Bell: I mean making the commitment to make them feel easy that when this thing does end, they have got a nest egg of five hundred million dollars 118 - 30 that they can draw and then can show their people that they have got two hundred fifty million dollars in gold. White: I don't see what effect it would have since they already are, in their terms, practically broke so far as foreign exchange is concerned, so that the fact that they will have something after the end of the war won't make them feel any differently toward the war now, would it? Bell: Except that when the war is over, everybody begins to forget about their problems. White: They won't let you forget. Bell: Yes, but we will have a different situation. We will have a political situation which would make it rather difficult. H.M.Jr: Well, Dan, I think this. If we can get over this three or four hundred million dollars and give them four hundred million plus, I personally will be very, very happy, and then after that, if I can direct Keynes, so that he will be going after Hopkins instead of after us and I can also get the British so they won't ask me every time they want to sell a company, get that off my chest, I think that we have accomplished a lot and gotten rid of a lot of difficult and irritating things. The fact that we have handled it this way a little differently - all the rehearsals in your room, made it very easy for me this week, and I appreciate it very much. It has worked better than it has ever worked before. Most of the week the Treasury has spent on this stuff. We - take our tax certificates. You and I haven't been able to sit down and do it bebecause we have been doing the English stuff. If we hadn't had that we would have gotten to it. 119 - 31 - So we have just got to get this out, get them so they don't check with us every time they have got a company and then let it all flow into the Lend-Lease thing, and then we are pretty well rid of the whole business, don't you think so, Walter? Viner: Oh, I would like to see most of that out of the Treasury and let the Treasury concentrate on its Treasury problems. H.M.Jr: But we have had to go through this-- Viner: I would hold it if you think other parts of the Government wouldn't make - wouldn't handle it properly, but if you feel that their spirit is right and their competence is all right, then I would say, "Get it out of the Treasury." H.M.Jr: Wouldn't you say Hopkins' attitude was splendid? Viner: Oh, I have no reason to suppose that he wouldn't handle it with expedition as well as with competence. Cochran: Could we be trying on a draft of that acknowledgment of the Sir Edward Peacock letter to get it out of your hands? H.M.Jr: Please. Bell: Cochran: We are waiting on word from Jones. Yes. I got Peacock last night, and Jones was talking with him directly. Viner: Bell: All meant was, it shouldn't be merely passing the Ibuck. No, it will be handled. They will come here first, you see. 120 - 32 H.M.Jr: Foley: All right. I want to talk with Stewart and Viner. While we are all here together, maybe it would be a good time to raise what we are going to do before the Senate Banking Committee on Stabilization. H.M.Jr: Not today. I just can't. Foley: Are you going to use the old statement, or do you want a new statement? We could start working on it. H.M.Jr: We will use the old statement. 121 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE June 5. 1941 TO FROM Secretary Morgenthan Mr. Cochran STRICTLY CONFIDENTIAL At 12 o'clock today Sir Frederick Phillips telephoned me to inquire whether the Secretary was likely to see him and Mr. Keynes today. I told Sir Frederick that Mr. Hopkins was lunching with the Secretary at 1 o'clock, and that there would be a joint meeting of the Secretary's and Mr. Hopkins' assistants in the Treasury at 2 o'clock to discuss the Keynes memorandum. I promised to let Sir Frederick know our schedule after this meeting. In accordance with the decisions reached at the meeting, I telephoned Sir Frederick at 3:50 p.m. I told him that as a result of our meeting Mr. Hopkins had desired to look into several phases of the matter, and would begin this yet this evening or early tomorrow morning. He promised to let us hear from him the first of next week. There is a possibility that he may get directly in touch with the British. When Phillips mentioned that Keynes desired to start back to England at the end of next week, I told him that Mr. Bell had mentioned in our meeting the urgency of an early clearing up of pending matters on account of Mr. Keynes' plans. During our conversation I told Phillips of the steps which we had taken yesterday with respect to the proposal submitted to us by Sir Edward Peacock in regard to a loan of $16,000,000 to British thread companies in the United States. Phillips said that Sir Edward would be in Washington the beginning of next week and that he would like to have an appointment for Sir Edward and himself with the Secretary on Monday afternoon or Tuesday morning, if at all possible. He did not think that Sir Edward was seeking this meeting because of the thread transaction. I told him I would let him hear as soon as I had spoken with the Secretary about an hour. TMP 122 June 5, 1941 3:39 p.m. H.M.Jr: Hello. Operator: Congressman Thom's secretary would Mr. Hatch: Mr. Morgenthau. H.M.Jr: Talking. H: This is Mr. Hatch in Congressman like to speak to you. Thom's office and there is a man by the name of H. M. Doyle, D-o-y-1-e, who was a teacher in Wooster, Ohio, he says he was in Cornell at the same time you were and he is bringing a bunch of these Future Farmers of America boys here and wants to know if he can shake hands with you. H.M.Jr: When. H: Tuesday or Wednesday. H.M.Jr: Well, as far as I know it's all right. I think I've heard about it once before, I'm not sure. Somebody, I think, was mentioned it. H: Uh-huh. H.M.Jr: But if I can switch you over to Lieutenant Stephens, who handles my appointments, between the two of you you can work it out. H: All right. H.M.Jr: How's that? H: That'11 be swell. H.M.Jr: All right. Operator: Operator June 2. / 941 SECRETARY MORGENTHAU'S RADIO TALK 2.30P.M. ON DEFENSE SAVINGS DRAFT OF 123 file 6/5/11Good evening: Just over a month ago the President of the United States bought the first of the new Defense Savings Bonds and stamps. On that occasion he spoke of the defense savings program as a privilege and an opportunity for every American -- "an opportunity to share in the defense of all the things we cherish against the threat that is made against them." Tonight, from my desk at the Treasury, I should like to report to the people of this country on the way they have answered the President's call. I now have complete figures showing that in the month of May, the first month of what is to be a long and continuing effort, the American people voluntarily bought in defense savings bonds and 124 -2in defense savings stamps. This is more than half again as much as any of us in the Treasury had dared to expect. It is, to my mind, a great demonstration of faith in America. In this first month the people have bought enough stamps and bonds to pay for four of the giant battleships we are now building, or enough to pay for the building of twenty cruisers, or a hundred destroyers to guard the ocean lanes. If this total could somehow take instant shape in new fighting planes, we should have more than 4,000 of them; and if it could be translated into longrange bombers it would buy 1,000 of them, (enough to have a decisive effect on the outcome of the was The sales of the Series E Bond, the new Baby Bond which is within reach of almost every pocketbook, were 125 -3more than twice as much in May of this year as the sales of the old Baby Bonds a year ago. I find it very encouraging also that total sales in the third week were more than in the second, and that the sales in the fourth week were not only more than in the third but more than in any week in the entire month. This makes me feel that there is a steadily growing interest which will show itself in continuing success as the year rolls on. I don't want to say too much tonight, however, about figures alone. We decided long ago that our success should not be measured by the amount sold but rather by the number of people who invest their savings in American freedom. We have found that more than a million individual bonds were sold in the first month and almost ten million savings stamps. Even allowing for duplication, these figures show 125 -more than twice as much in May of this year as the sales of the old Baby Bonds a year ago. I find it very encouraging also that total sales in the third week were more than in the second, and that the sales in the fourth week were not only more than in the third but more than in any week in the entire month. This makes me feel that there is a steadily growing interest which will show itself in continuing success as the year rolls on. I don't want to say too much tonight, however, about figures alone. We decided long ago that our success should not be measured by the amount sold but rather by the number of people who invest their savings in American freedom. We have found that more than a million individual bonds were sold in the first month and almost ten million savings stamps. Even allowing for duplication, these figures show D-A 126 -4that many million men and women and children became part- ners of their Government during the month of May. To those people I say tonight, "You have given direct help in the defense of your country. You have done something worth-while to safeguard your democracy. You have found a way for yourselves and for millions of others to be of real service in the future." If this record can be maintained and even improved in the coming months, I for one will regard our Defense Savings program as a shining success. But there is something else, quite irrespective of any figures, which gives me the greatest pride as I look back over the first month's efforts. This is the spontaneous cooperation of Americans in all walks of life, through their voluntary organizations, in all parts of the country. 127 -5Labor, for example, has proved again what I always knew to be true -- namely, that the patriotism of the American worker fs as sound today as when the Minute Men left their farms and their workshops to fight for freedom at Lexington and Bunker Hill. You may remember that several weeks ago the heads of all the great labor organi- zations in this country came to see me to pledge their unqualified support and help in the Defense Savings program. Mr. William Green of the A. F. of L., Mr. Philip Murray of the C. I. 0., and Mr. J. A. Phillips of the Railroad Brotherhoods could not possibly have been more cooperative or more understanding of the objects of our program. These offers of cooperation have now begun to take tangible form. I read with great pleasure the other day that David Dubinsky, president of the great International 128 -6Ladies' Garment Workers' Union had telegraphed President Roosevelt that the union members are investing $500,000 of union funds in United States defense bonds. Last week I had word from Michigan that 30,000 members of the Team- sters' Union in that state had unanimously endorsed our program and had expressed their wish to set aside a part of their earnings, regularly and systematically, for Defense Bond purchases. Employers in many states, in big industries and small, have reported to us that they are ready to establish systematic savings plans -- in every case -- at the request of their employees. From all parts of the country we are getting reports of this kind of spirit among the men in our factories, the men whose toil and sweat are furnishing the materials that will make this country safe and strong. 129 -7The spirit of American labor and industry has been matched by that of American bankers. No praise of mine can be too high for the willing, helpful cooperation of bankers, great and small, East and West, North and South, in getting behind the Treasury's program. Ten thousand banks now act as our selling agents, without any commission or any inducement except patriotism, together with 16,000 post offices; but they do much more than sell for us. They have helped to educate us all by spreading information about the new bonds and stamps. Every one of the great bankers' associations that has met during May has, without exception, passed a public resolution pledging complete endorsement and cooperation in the Defense Savings program. I should like to tell the bankers of America here and now that I appreciate what they have done. The first month's 130 -8results could not possibly have been so successful if the bankers had not put their shoulders to the wheel. The Treasury has also counted on existing community groups of all kinds to spread information about what these Defense Savings Bonds are, and what they do. The Boy Scouts have distributed a million posters for us; the women's clubs have made our program a part of theirs. The response from foreign language groups has been especially encouraging. It proves again that whatever their origin, and whatever language they may speak, the overwhelming majority of them are Americans, united behind their government in defense of human freedom. All sections, all creeds, all economic groups, all American parties have done their share and will continue to do their share. We have had during this first month a -9- 131 preview of that national unity which this country must have if it is to surmount the crisis that now faces it. We could, of course, have conducted this campaign in a different way, and perhaps we could have sold more bonds. We could have had parades and brass bands, and all the devices of high pressure selling. We could have compiled slacker lists, and we could have coerced or frightened people into buying, whether they could afford a bond or not. But democratic unity and morale are not built in that way. Our results prove that in any case we do not need to employ such methods. This, after all, is a continuing effort. There are no quotas for the country or for any community in it. There is no time limit. The object of this program is to give the American people the habit of systematic saving 132 - 10 - for their country's sake and for their own. I believe that with our present methods we are on the right track. It may interest you to know that the Government has not had to spend one penny on paid advertising in news- papers, radio, movies or in any other field. Everything that we have had in the way of radio time and talent, or newspaper space, or motion picture time and skill, has been contributed freely and generously by the industries concerned, or by other advertisers. At this time I should like to pay my tribute to those agencies which have given us such willing and patriotic service: to the radio chains and independent stations, to the newspapers, great and small, and to all who have been able to bring our message to the American people. They have enabled us to carry on our program more economically than any similar effort in 133 - 11 the history of our country. We have now made a good start. I shall make no predictions as to what the future will bring, but I truly believe that succeeding months will show records just as good and even better. We started this program with only six states organized, because we preferred to start slowly and surely rather than make mistakes which we might later regret. We now have twenty-two states organized with non- partisan committees composed of outstanding citizens. This process of organizing the states and cities will continue throughout the Summer, and I am sure that it will prove its value. We must, of course, continue month after month, and do even better than in the first month of May. The amounts of money needed for our defense program are so vast that 134 - 12 the mind can hardly conceive them. The threat from abroad has come so close to every American home that the President has proclaimed a state of unlimited national emergency. Now, as never before, I believe that all of us are ready to show our partnership with the Government -- a partnership, in the President's words, "entered into to safeguard and perpetuate all those precious freedoms which the Government guarantees." I know of no better way for every American to strengthen those freedoms than by joining the millions who have already bought Defense Savings stamps and Bonds. Thank you all, and good night. DRAFT OF SECRETARY MORGENTHAU'S RADIO TALK ON DEFENSE SAVINGS June L 19FI (a.m) 135 Good evening: Just over a month ago the President of the United States bought the first of the new Defense Savings Bonds and stamps. On that occasion he spoke of the defense savings program as a privilege and an opportunity for every American-- "an opportunity to share in the defense of all the things we cherish against the threat that is made against them." Tonight I think the people of this country would like me to report to them on the way they have answered the President's call. I now have complete figures showing that in the month of May, the first month of a long and continuing effort, the American people voluntarily bought defense savings bonds and in in defense savings 136 -2stamps. This is more than half again as much as any of us in the Treasury had dared to expect. It is, to my mind, a demonstration of faith in America. In this first month the people have bought enough stamps and bonds to pay for all five of the giant battleships we are now building, or enough to pay for the building of twenty cruisers or a hundred destroyers to guard the ocean lanes. If this total could somehow take instant shape in new fighting planes, we should have 4,500 of them; and if it could be translated into long-range bombers it would buy 1,000 of them, enough to have a decisive effect on the outcome of the war. The sales of the Series E Bond, the new Baby Bond which is within reach of every pocketbook, were more than twice as much in May of this year as the sales of the old Baby Bonds a year ago. I find it very encouraging also 137 -3that total sales in the third week were more than in the second, and that the sales in the fourth week were not only more than in the third but more than in any week in the entire month. This makes me feel that there is a steadily growing interest which will show itself in continuing success as the year rolls on. I don't want to say too much tonight, however, about figures alone. We decided long ago that our success should not be measured by the amount sold but rather by the number of people who invested their savings in American freedom. We have found that almost a million individual bonds were sold in the first month and almost ten million savings stamps. Even allowing for duplication, these figures show that several million men and women and children became partners of their Government during the 138 -4month of May. To those people I say tonight, "You have given direct help in the defense of your country. You have done something worth-while to safeguard your democracy. You have found a way for yourselves and for millions of others to be of real service in the future, even though you do not wear a uniform." If this record can be maintained and even improved in the coming months, I for one will regard our Defense Savings program as a shining success. But there is something else, quite irrespective of any figures, which gives me the greatest pride as I look back over the first month's efforts. This is the spontaneous cooperation of Americans in all walks of life, through their voluntary organizations, in all parts of the country. Labor, for example, has proved again what I always 139 -5knew to be the truth--namely, that the patriotism of the American workingman is as sound today as when the Minute Men left their farms and their workshops to fight for freedom at Lexington and Bunker Hill. You may remember that several weeks ago the heads of all the great labor organizations in this country came to see me to pledge their unqualified support and help. Mr. William Green of the A. F. of L., Mr. Philip Murray of the C. I. 0., and Mr. Phillips of the Railroad Brotherhoods could not possibly have been more cooperative or more understanding of the objects of our program. Now these offers of cooperation have begun to take tangible form. I read with great pleasure the other day that the great International Ladies' Garment Worker's Union had telegraphed President Roosevelt that it had invested 140 -6$500,000 of union funds in defense bonds. Last week I had word from Michigan that 30,000 members of the Teamsters' Union in that state had unanimously endorsed our program and had expressed their wish to set aside a part of their earnings, regularly and systematically, for Defense Bond purchases. From all parts of the country we are getting reports of this kind of spirit among the men in our factories, the men whose toil and sweat will furnish the materials that will make this country safe and strong. The spirit of American labor has been matched by that of American bankers. No praise of mine can be too high for the willing, helpful cooperation of bankers, great and small, East and West, North and South, in getting behind the Treasury's program. Ten thousand banks now act as our selling agents, without any commission or any inducement except patriotism, together with 16,000 Post offices; but 141 -7they do much more than sell for us. They have also helped to educate us all by spreading information about the new bonds and stamps. Every one of the great bankers' associations that has met during May has, without exception, passed a public resolution pledging complete endorsement and cooperation. I should like to tell the bankers of America here and now that I appreciate what they have done. The first month's results could not possibly have been so successful if the bankers had not put their shoulders to the wheel. The Treasury has also counted on existing community groups of all kinds to spread information about what these Defense Savings Bonds are and what they are for. The Boy Scouts have distributed a million posters for us; the women's clubs have made our program a part of theirs. The -8response from foreign language groups has been especially encouraging. It proves again that whatever their origin, and whatever language they may speak, the overwhelming majority of them are Americans, united behind their government in defense of human freedom. All sections, all creeds, all economic groups, all American parties have done their part and will continue to do their part. We have had during this first month a preview of that national unity which this country must have if it is to surmount the crisis that now faces it. We could, of course, have conducted this campaign in a different way, and perhaps we could have sold more bonds. We could have engaged in high-pressure tactics. We could have had parades and brass bands, and all the devices of mass hysteria; we could have compiled slacker 142 143 -9lists, and we could have coerced or frightened people into buying whether they could afford to or not. But democratic unity and morale. are not built in this way. The results prove that in any case we do not need to employ such methods. This, after all, is a continuing effort. There are no quotas for the country or for any community in it. There is no time limit. The object of this program is to give the American people the habit of systematic saving for their country's sake and for their own. I believe that with our present methods we are on the right track. It may interest you to know that the Government has not had to spend one penny on direct advertising in newspapers, radio, movies or in any other field. Everything that we have had in the way of radio time, or 144 - 10 newspaper space, or motion picture time and skill has been contributed freely and generously by the industries concerned, or by other advertisers. At this time I should like to pay my tribute to those citizens who have given us such willing and patriotic service: to the radio chains and independent stations, to the newspapers, great and small, and to all who have been able to bring our message to the American people. They have enabled us to carry on our program more economically than any similar program in the history of our country. We have now made a good start. I shall make no predictions as to what the future will bring, but I truly believe that succeeding months will show records just as good, if not better. We started this program with only six states organized, because we preferred to start slowly 145 - 11 and surely rather than make mistakes which we might later regret. We now have twenty-two states organized with non-partisan committees composed of outstanding citizens. This process of organizing the states and cities will continue throughout the Summer, and I am sure that it will prove invaluable. We must, of course, continue month after month and do even better than in the first month of May. The amounts of money needed for our defense program are so vast that the mind can hardly conceive them. The threat from abroad has come so close to every American home that the President has proclaimed a state of unlimited national emergency. Now, as never before, I believe that all of us are ready to show our partnership with the Government-- partnership, in the President's words, "entered into to safeguard and perpetuate 146 - 12 all those precious freedoms which the Government guarantees." I know of no better way for every American to strengthen these freedoms than by joining the millions who have already enlisted in the defense savings army. Thank you all, and good night. Draft 2/2/2 DRAFT OF SECRETARY MORGENTHAU'S RADIO TALK ON DEFENSE SAVINGS 147 June (p.m) V,194, Good evening: Just over a month ago the President of the United States bought the first of the new Defense Savings Bonds and stamps. On that occasion he spoke of the defense savings program as a privilege and an opportunity for every American -- "an opportunity to share in the defense of all the things we cherish against the threat that is made against them." Tonight, from my desk at the Treasury, I should like to report to the people of this country on the way they have answered the President's call. I now have complete figures showing that in the month of May, the first month of what is to be a long and continuing effort, the American people voluntarily bought in defense savings bonds and in defense 148 -2savings stamps. This is more than half again as much as any of us in the Treasury had dared to expect. It is, to my mind, a great demonstration of faith in America. In this first month the people have bought enough stamps and bonds to pay for four of the giant battleships we are now building, or enough to pay for the building of twenty cruisers, or a hundred destroyers to guard the ocean lanes. If this total could somehow take instant shape in new fighting planes, we should have more than 4,000 of them; and if it could be translated into long-range bombers it would buy 1,000 of them. The sales of the Series E Bond, the new Baby Bond which is within reach of almost every pocketbook, were more than twice as much in May of this year as the sales of the old Baby Bonds a year ago. I find it very encouraging also that total sales in the third week were more than in the second, and that the sales in the fourth week were not only more than in 149 -3the third but more than in any week in the entire month. This makes me feel that there is a steadily growing interest which will show itself in continuing success as the year rolls on. I don't want to say too much tonight, however, about figures alone. We decided long ago that our success should not be measured by the amount sold but rather by the number of people who invest their savings in American freedom. We have found that more than a million individual bonds were sold in the first month. Almost ten million savings stamps were sold in the same period. Even allowing for duplication, these figures show that millions of men and women and children became partners of their Government during the month of May. To those people I say tonight: You have given direct help in the defense of your country. You have done something distinctly worth while to safeguard your democracy. If this record can be maintained in the coming months, B 150 -4I for-and will regard our Defense Savings program as a real success. But there is something else, quite irrespective of any figures, which gives me the greatest satisfaction as I look back over the first month's efforts. This is the spontaneous cooperation of Americans in all walks of life, through their voluntary organizations, in all parts of the country. It has made me very happy that labor, for example, has proved again what I always knew to be true -- namely, that the patriotism of the American worker is as sound today as when the Minute Men-left their farms and their workshops to fight for freedom at Lexington and Bunker Hill. You may remember that several weeks ago the heads of all the great labor organizations in this country came to see me to pledge their unqualified support and help in the Defense Savings program. Mr. William Green of the A. F. of L., Mr. Philip Murray of the 151 -5C. I. 0., and Mr. J. A. Phillips of the Railroad Brotherhoods could not possibly have been more cooperative or more under- standing of the objects of our program. These offers of cooperation have now begun to take tangible form. I read with great pleasure the other day that Mr. David Dubinsky, president of the great International Ladies' Garment Workers' Union, had telegraphed President Roosevelt that the union members are investing $500,000 of union funds in United States defense bonds. Last week I had word from Michigan that 30,000 members of the Teamsters' Union in that state had unanimously endorsed our program and had expressed their wish to set aside a part of their earnings, regularly and systematically, for Defense Bond purchases. Employers in many states, in big industries and small, have reported to us that they are ready to establish systematic savings plans -- in every case at the request of their employees. From all 152 -6parts of the country we are getting reports of this kind of spirit among the men in our factories, the men whose toil and sweat are furnishing the materials that will make this country safe and strong. The spirit of American labor and industry has been matched by that of American bankers. No praise of mine can be too high for the willing, helpful cooperation of bankers, great and small, East and West, North and South, in getting behind the Treasury's program. Ten thousand banks now act as our selling agents, without any commission or any inducement except patriotism, (together with 16,000 post offices: but they do much more than sell for us. They have helped to educate us all by spreading information about the new bonds and stamps. Every one leading of the great bankers' associations that has met during May has, without exception, passed a public resolution pledging complete 153 -7endorsement and cooperation in the Defense Savings program. I should like to tell the bankers of America here and now that I appreciate what they have done. The first month's results could not possibly have been so successful if the bankers had not put their shoulders to the wheel. The Treasury has also counted on existing community groups of all kinds to spread information about what these Defense Savings Bonds are, and what they do. The Boy Scouts have distributed a million posters for us; the women's clubs have made our program a part of theirs. The response from foreign language groups has been especially encouraging. It proves again that whatever their origin, and whatever language they may speak, the overwhelming majority of them are Americans, united behind their government in defense of human freedom. All sections, all creeds, all economic groups, all American parties have done their share and will continue to do 154 -8their share. We have had during this first month a preview of that national unity which this country must have if it is to surmount the crisis that now faces it. We could, of course, have conducted this campaign in a different way, and perhaps we could have sold more bonds. We could have had parades and brass bands, and all the devices of high-pressure selling. We could have compiled slacker lists, and we could have coerced or frightened people into buying, whether they could afford a bond or not. But democratic unity and morale are not built in that way. Our results prove that we do not need to employ such methods. This, after all, is a continuing effort. There are no quotas for the country or for any community in it. There is no time limit. The object of this program is to give the American people the habit of systematic saving for their country's sake and for their own. I believe that with our present methods we are 155 -9on the right track. It may interest you to know that the Government has not had to spend one penny on paid advertising in newspapers, radio, movies or in any other field. Everything that we have had in the way of radio time and talent, or newspaper space, or motion picture time and skill, has been contributed freely and generously by the industries concerned, or by other advertisers. At this time I should like to pay my tribute to those agencies which have given us such willing and patriotic service: to the radio chains and independent stations, to the newspapers, great and small, and to all who have helped to bring our message to the American people. They have enabled us to carry on our program more economically than any similar effort in the history of our country. We have just made a good start. I shall make no predic- tions as to what the future will bring, but I am hopeful that 156 - 10 succeeding months will show records just as good and even better. We started this program with only six states organized, because we preferred to start slowly and surely rather than make mistakes which we might later regret. We now have twenty-two states organized with nonpartisan committees composed of outstanding citizens. This process of organizing the states and cities will continue until we have reached every community in the country. We must, of course, continue month after month, and do even better than in the first month of May. The amounts of money needed for our defense program are so vast that the mind can hardly conceive them. The threat from abroad has come so close to every American home that the President has proclaimed a state of unlimited national emergency. Now, as never before, I believe that all of us are ready to demonstrate, in a concrete form, our partnership with the Government -- a partnership, in the President's words, "entered into to safeguard and perpetuate 157 - 11 - all those precious freedoms which the Government guarantees." I know of no better way for every American to strengthen those freedoms than by joining the millions who have already bought Defense Savings stamps and Bonds. Thank you all and good night 158 DRAFT OF 6 (3/41 SECRETARY MORGENTHAU'S RADIO TALK ON DEFENSE SAVINGS am June 5, 1941 Good evening: Just over a month ago the President of the United States bought the first of the new Defense Savings Bonds and Stamps. On that occasion he spoke of the defense savings program as a privilege and an opportunity for every American -- "an opportunity to share in the defense of all the things we cherish against the threat that is made against them." Tonight, from my desk at the Treasury, I should like to report to the people of this country on the way they have answered the President's call. I now have complete figures showing that in the month of May, the first month of what is to be a long and continuing effort, the American people voluntarily bought ($428,000,000 ?) in defense savings bonds and ($3,428,000 ?) in defense savings stamps. This is a wonderful start. It is more than any of -2- 159 us in the Treasury had dared to expect. It is, to my mind a great demonstration of the desire to serve America. In this first month the people have bought enough stamps and bonds to pay for four of the giant battleships we are now building, or enough to pay for the building of twenty cruisers, or a hundred destroyers to guard the ocean lanes. If this total could somehow take instant shape in new fighting planes, we should have more than 4,000 of them; and if it could be translated into long-range bombers it would buy 1,000 of them. The sales of the Series E Bond, the new Baby Bond which is within reach of almost every pocketbook, were more than twice as much in May of this year as the sales of the old Baby Bonds a year ago. I find it very encouraging also that total sales have held up consistently around $100,000,000 a week. This makes me feel that there is a steadily growing interest which will show itself in increasing sales, day by day, week 160 -3by week, month by month, as the year rolls on. I don't want to say too much tonight, however, about figures alone. We decided long ago that our success should not be measured by the amount sold but rather by the number of people who invest their savings in American freedom. We have found that more than a million individual bonds were bought in the first month. Almost ten million savings stamps were bought in the same period. Even allowing for repeated purchases by the same individuals, these figures show that millions of men and women and children became partners of their Government during the month of May. To those people I say tonight: You have given direct help in the defense of your country. You have done something distinctly worth while to safeguard your democracy. But there is something else, quite irrespective of any figures, which makes me very happy as I look back over the first month's efforts. This is the spontaneous cooperation of Americans 161 -4in all walks of life, through their voluntary organizations, in all parts of the country. Labor, for example, has proved again what I always knew to be true -- namely, that the patriotism of the American worker is as sound today as when the Minute Men left their farms and dropped their tools to fight for freedom at Lexington. You may remember that several weeks ago the heads of all the great labor organizations in this country came to see me to pledge their unqualified support and help in the Defense Savings program. Mr. William Green of the A. F. of L., Mr. Philip Murray of the C. I. O., and Mr. J. A. Phillips of the Railroad Brotherhoods could not possibly have been more cooperative or more understanding of the objects of our program. These offers of cooperation have now begun to take tangible form. I read with great pleasure the other day that 162 -5Mr. David Dubinsky, president of the great International Ladies' Garment Workers' Union, had telegraphed President Roosevelt that the union members are investing $500,000 of union funds in United States defense bonds. Last week I had word from Michigan that 30,000 members of the Teamsters' Union in that state had unanimously endorsed our program and had expressed their wish to set aside a part of their earnings, regularly and systematically, for Defense Bond purchases. Employers in many states, in big industries and small, have reported to us that they are ready to establish systematic savings plans -- in every case at the request of their employees. From all parts of the country we are getting reports of this kind of spirit among the men in our factories, the men whose toil and sweat are furnishing the materials that will make this country safe and strong. The spirit of American labor and industry has been 163 -6matched by that of American bankers. No praise of mine can be too high for the willing, helpful cooperation of bankers, great and small, East and West, in getting behind the Treasury's program. Ten thousand banks now act as our selling agents, without any commission or any inducement except patriotism; but they do much more than sell for us. They have helped to educate us all by spreading information about the new bonds and stamps. Every one of the leading bankers' associations that has met during May has, without exception, passed a public resolution pledging complete endorsement and cooperation in the Defense Savings program. I should like to tell the bankers of America here and now that I appreciate what they have done. The first month's results could not possibly have been so successful if the bankers had not put their shoulders to the wheel. -7- 164 The same is true of the Post Office Department, which has worked cheerfully and efficiently to make the defense savings program a success. The Post Office has been of truly indispensable help, from Postmaster General Frank Walker down to the clerk behind the window in every one of the 16,000 post offices that sell defense stamps and bonds. The Treasury has also counted on existing community groups of all kinds to spread information about what these Defense Savings Bonds are, and what they do. The American Legion has called upon all its posts to give us every possible help. The Boy Scouts have distributed 1,200,000 posters for us; the women's clubs have made our program a part of theirs. The response from foreign language groups has been especially encouraging. It proves again that whatever their origin, and whatever language they may speak, the overwhelming majority of 165 -8them are Americans, united behind their government in defense of American freedom. All sections, all creeds, all economic groups, all American parties have done their share and will continue to do their share. We have had during this first month a preview of that national unity which this country must have if it is to surmount the crisis that now faces it. We could, of course, have conducted this campaign in a different way, and perhaps we could have sold more bonds. We could have compiled slacker lists, and we could have coerced or frightened people into buying, whether they could afford a bond or not. But democratic unity and morale are not built in that way. Our results prove that we do not need to employ such methods. This, after all, is a continuing effort. There are no quotas for the country or for any community in it. There is no time limit. The object of this program is to give the American -- 166 people the habit of systematic saving for their country's sake and for their own. I believe that with our present methods we are on the right track. Everything that we have had in the way of radio time and talent, or newspaper space, or motion picture time and skill, has been contributed freely and generously by the industries concerned, or by other advertisers. No paid advertising of any kind has been used. At this time I should like to pay my tribute to those agencies which have given us such willing and patriotic service: to the radio chains and independent stations, to the newspapers and magazines, great and small, and to all who have helped to bring our message to the American people. They have enabled us to carry on our program more economically than any similar effort in the history of our country. We started this program with only six states organized, 167 - 10 because we preferred to start slowly and surely rather than make mistakes which we might later regret. We now have twentytwo states organized with nonpartisan committees composed of outstanding citizens. This process of organizing the states and cities will continue until we have reached every community in the country. What has been done in the first month is a fine beginning, but it is only a beginning. We must do even better, much better, from now on. Events across the seas cry out to us every day to speed up our effort in every direction. The threat from abroad has come so close to every American home that the President has proclaimed a state of unlimited national emergency. So far our defense production program has only begun to rouse the giant industrial strength of this continent. In the 168 - 11 same way our defense savings program has barely begun to reach the immense earning capacity of the American people. Now, as never before, I believe that all of us are ready to demonstrate, in a concrete form, our partnership with the Government -- a partnership, in the President's words, "entered into to safe guard and perpetuate all those precious freedoms which the Government guarantees." Thank you all and good night. For Release June 5, 9:45 P.M., E.S.T. 6/2/41 (p.m) RADIO ADDRESS BY 169 HENRY MORGENTHAU, JR. SECRETARY OF THE TREASURY Good evening: Just over a month ago the President of the United States bought the first of the new Defense Savings Bonds and Stamps. On that occasion he spoke of the defense savings program as a privilege and an opportunity for every American -- "an opportunity to share in the defense of all the things we cherish against the threat that is made against them." Tonight, from my desk at the Treasury, I should like to report to the people of this country on the way they have answered the President's call. I now have complete figures showing that in the month of May, the first month of what is to be a long D-D 170 -2and continuing effort, the American people bought $ $438,230,000 in defense savings bonds and $3,552,000 in defense savings stamps. This is a wonderful start. It is more than any of us in the Treasury had dared to expect. It is , to my mind, a great demonstration of the desire to serve America. In this first month the people have bought enough stamps and bonds to pay for four of the giant battleships we are now building, or enough to pay for the building of twenty cruisers, or a hundred destroyers to guard the ocean lanes. If this total could somehow take instant shape in new fighting planes, we should have more than 4,000 of them; and if it could be translated into longrange bombers it would buy 1,000 of them. -2- Correcte Common 6/5/41-(an) 171 I now have complete figures showing that in the month of May, the first month of what is to be a long over helf and continuing effort, the American people bought 000.000 $438,250,000 in defense savings bonds and $3,552,000 in defense savings stamps. This is a wonderful start. It is more than any of us in the Treasury had dered to expect d It is a great demonstration of the desire to serve America. In this first month the people have bought enough stamps and bonds to pay for four of the giant battleships we are now building, or enough to pay for the building of twenty cruisers, or a hundred destroyers to guard the ocean lanes. 172 -3The sales of the Series E Bond, the new Baby Bond which is within reach of almost every pocketbook, were almost twice as much in May of this year as the sales of the old Baby Bonds a year ago. I find it very encouraging also that total sales have held up consistently around $100,000,000 a week. This makes me feel that there is a steady interest which will show itself in continuing sales, day by day, week by week, month by month, as the year rolls on. I don't want to say too much tonight, however, about figures alone. We decided long ago that our success should be measured not only by the amount sold but also by the number of people who invest their savings in American freedom. We have found that more than a million 173 -4individual bonds were bought in the first month. Almost ten million savings stamps were bought in the same period. Even allowing for repeated purchases by the same individuals, these figures show that great numbers of men and women and children became partners of their Government during the month of May. To those people I say tonight: You have given direct help in the defense of your country. You have done something distinctly worthwhile to safeguard your democracy. But there is something else, quite irrespective of any figures, which makes me very happy as I look back over the first month's efforts. This is the spontaneous cooperation of Americans in all walks of life, through their voluntary organizations, in all parts of the country. 174 -Labor, for example, has proved again what I always knew to be true -- namely, that the patriotism of the American worker is as sound today as when the Minute Men left their farms and dropped their tools to fight for freedom at Lexington. You may remember that the heads of the three great labor organizations in this country came to see me several weeks ago. Mr. William Green of the A. F. of L., Mr. Philip Murray of the C. I. 0., and Mr. J. A. Phillips of the Railroad Brotherhoods all promised me their unqualified support and help in the Defense Savings effort. They could not possibly have been more cooperative or more understanding of the objects of our program. 175 -6These offers of cooperation have now begun to take tangible form. I read with great pleasure the other day that Mr. David Dubinsky, president of the great International Ladies' Garment Workers' Union, had telegraphed President Roosevelt that the union members are investing the union's funds in United States defense bonds. Last week I had word from Michigan that 30,000 members of the Teamsters' Union in that state had unanimously endorsed our program and had expressed their wish to set aside a part of their earnings, regularly and systematically, for Defense Bond purchases. Employers in many states, in big industries and small, have reported to us that they are ready to establish systematic savings plans -- in every case in cooperation with their employees. From all parts of 176 -7the country we are getting reports of this kind of spirit among the men in our factories, the men whose toil and sweat are furnishing the materials that will make this country safe and strong. The spirit of American labor and industry has been matched by that of American bankers. No praise of mine can be too high for the willing, helpful cooperation of bankers, great and small, East and West, in getting behind the Treasury's program. Ten thousand banking institutions, including commercial banks, mutual savings banks, and savings and loan associations, now act as our selling agents, without any commission or any inducement except patriotism; but they do much more than sell for us. been of real service in They have helped to us spreading information about the new bonds and stamps. Every one of the 177 -8leading bankers' associations that has met during May has, without exception, passed a public resolution pledging complete endorsement and cooperation in the Defense Savings program. I should like to tell the bankers of America here and now that I appreciate what they have done. The first month's results could not possibly have been so successful if the bankers had not put their shoulders to the wheel. The same is true of the Post Office Department, which has worked cheerfully and efficiently to make the defense savings program a success. The Post Office has given truly indispensable help, from Postmaster General Frank Walker down to the clerk behind the window in every one of the 16,000 post offices that sell defense stamps and bonds. 178 -9The Treasury has also counted on existing community groups of all kinds to spread information about what these Defense Savings Bonds are, and what they do. The American Legion has called upon all its posts to give us every possible help. The Boy Scouts have distributed 1,200,000 posters for us; the women's clubs have made our program a part of theirs. The response from foreign language groups has been especially encouraging. It proves again that whatever their origin, and whatever language they may speak, the overwhelming majority of them are true Americans, united behind their government in defense of American freedom. All sections, all creeds, all economic groups, all American parties have done their share and will continue 179 - 10 - to do their share. We have had during this first month a preview of that national unity which this country must have if it is to surmount the crisis that now faces it. We could, of course, have conducted this campaign in a different way, and perhaps we could have sold more bonds. We could have compiled slacker lists, and we could have coerced or frightened people into buying, whether they could afford a bond or not. But democratic unity and morale are not built in that way. Our results prove that we do not need to employ such methods. This, after all, is a continuing effort. There are no quotas for the country or for any community in it. There is no time limit. A major object of this program is to give the American people the habit of systematic 180 - 11 - saving for their country's sake and for their own. I believe that with our present methods we are on the right track. Everything that we have had in the way of radio time and talent, or newspaper space, or motion picture time and skill, has been contributed freely and generously by the industries concerned, or by other advertisers. No paid advertising of any kind has been used. At this time I should like to pay my tribute to those agencies which have given us such willing and patriotic service: to the radio chains and independent stations, to the newspapers and magazines, great and small, to the motion picture industry and to all who have helped to bring our message to the American people. They have enabled us to 181 - 12 carry on our program more economically than any similar effort in the history of our country. We started this program with only six states organized, because we preferred to start slowly and surely rather than make mistakes which we might later regret. We now have twenty-two states organized or beginning to organize with nonpartisan committees composed of outstanding citi- zens. This process of organizing the states and cities will continue until we have reached every community in the country. What has been done in the first month is a fine beginning, but it is only a beginning. We must keep up the good work from now on. 182 - 13 Events across the seas cry out to us every day to speed up our effort in every direction. The threat from abroad has come so close to every American home that the President has proclaimed a state of unlimited national emergency. So far our defense production program has only begun to rouse the giant industrial strength of this continent. In the same way our defense savings program has barely begun to reach the immense earning capacity of the American people. Now, as never before, I believe that all of us are ready to demonstrate, in a concrete form, our partnership with the Government -- a partnership, as the President said, entered into to safeguard and perpetuate all those 183 - 14 precious freedoms which the founders of our Republic gave us as our heritage. Thank you all and good night. 183 - 14 precious freedoms which the founders of our Republic gave us as our heritage. Thank you all and good night. 184 HM,JR's READING COPY OF RADIO TALK AT 9:45 P.M. , JUNE 5,1941, FROM HIS OFFICE IN THE TREASURY 185 RADIO ADDRESS BY HENRY MORGENTHAU, JR. SECRETARY OF THE TREASURY Good evening: Just over a month ago the President of the United States bought the first of the new Defense Savings Bonds and Stamps. On that occasion he spoke of the defense savings program as a privilege and an opportunity for every American -- "an opportunity to share in the defense of all the things we cherish against the threat that is made against them." Tonight, from my desk at the Treasury, I should like to report to the people of this country on the way they have answered the President's call. 1653 91 1562 186 -2I now have complete figures showing that in the month of May, the first month of what is to be a long and continuing effort, the American people bought $438,000,000 in defense savings bonds and over three and one-half million dollars in defense savings stamps. This is a wonderful start. It is more than any of us in the Treasury had expected. It is a great demonstration of the desire to serve America. In this first month the people have bought enough stamps and bonds to pay for four of the giant battleships we are now building, or enough to pay for the building of twenty cruisers, or a hundred destroyers to guard the ocean lanes. 1562 122 1440 187 -3If this total could somehow take instant shape in new fighting planes, we should have more than 4,000 of them; and 1f it could be translated into long-range bombers it would buy 1,000 of them. The sales of the Series E Bond, the new Baby Bond which is within reach of almost every pocketbook, were almost twice as much in May of this year as the sales of the old Baby Bonds a year ago. I find it very encouraging also that total sales have held up consistently around $100,000,000 a week. This makes me feel that there is a steady interest which will show itself in continuing sales, day by day, week by week, month by month, as the year rolls on. 1440 129 1311 188 -4I don't want to say too much tonight, however, about figures alone. We decided long ago that our success should be measured not only by the amount sold but also by the number of people who invest their savings in American freedom. We have found one that more than as million individual bonds were bought in the first month. Almost ten million savings stamps were bought in the same period. Even allowing for repeated purchases by the same individuals, these figures show that great numbers of men and women and children became partners of their Government during the month of May. To those people I say tonight: You have given direct help in the defense of your country. You have done something distinctly worthwhile to safeguard your democracy. 1311 127 1194 189 -5 But there is something else, quite irrespective of any figures, which makes me very happy as I look back over the first month's efforts. This 18 the spontaneous cooperation of Americans in all walks of life, through their organizations, in all parts of the country. Labor, for example, has proved again what I always knew to be true -- namely, that the patriotism of the American worker is as sound today as when the Minute Men left their farms and dropped their tools 1'm three to fight for freedom at Lexington. You may remember that the heads of the three great labor organizations in this country came to see me several weeks ago. 1184 110 1074 190 -6Mr. William Green of the A. F. of L., Mr. Philip Murray of the C. I. 0., and Mr. J. A. Phillips of the Railroad Brotherhoods all promised me their unqualified support and help in the Defense Savings effort. They could not possibly have been more cooperative or more understanding of the objects of our program. These offers of cooperation have now begun to take tangible form. I read with great pleasure the other day that Mr. David Dubinsky, president of the great International Ladies' Garment Workers' Union, had telegraphed President Roosevelt that the union members are investing the union's funds in United States defense bonds. 1074 106 9.68 191 -7Last week I had word from Michigan that 30,000 members of the Teamsters' Union in that state had unanimously endorsed our program and had expressed their wish to set aside a part of their earnings, regularly and systematically, for Defense Bond purchases. Employers in many states, in big industries and small, have reported to us that they are ready to establish systematic savings plans -- in every case in cooperation with their employees. From all parts of the country we are getting reports of this kind of spirit among the men in our factories, the men whose toil and sweat are furnishing the materials that will make this country safe and strong. 968 112 856 192 -8The spirit of American labor and industry has been matched by that of American bankers. No praise of mine can be too high for the willing, helpful cooperation of bankers, great and small, East and West, in getting behind the Treasury's program. Ten thousand banking institutions, including commercial banks, mutual savings banks, and savings and loan associations, now act as our selling agents, without any commission or any inducement except patriotism; but they do much more than sell for us. They have been of real service in spreading information about the new bonds and stamps. Every one of the leading bankers' associations that have met during May has, without exception, passed a public resolution pledging complete endorsement and cooperation in the Defense 856 Savings program. 123 73.3 193 -9I should like to tell the bankers of America here and now that I appreciate what they have done. The first month's results could not possibly have been 80 successful 1f the bankers had not put their shoulders to the wheel. The same is true of the Post Office Department, which has worked cheerfully and efficiently to make the defense savings program a success. The Post Office has given truly indispensable help, from Postmaster General Frank Walker down to the clerk behind the window in every one of the 16,000 post offices that sell defense stamps and bonds. The Treasury has also counted on existing community groups of all kinds to spread information about what these Defense Savings Bonds are, and what they do. 733 125 608 194 - 10 The American Legion has called upon all its posts to give us every possible help. The Boy Scouts have distributed 1,200,000 posters for us; the women's clubs have made our program a part of theirs. The response from foreign language groups has been especially encouraging. It proves again that whatever their origin, and whatever language they may speak, 2 3/12 three the overwhelming majority of them are true Americans, united behind their government in defense of American freedom. All sections, all creeds, all economic groups, all American parties have done their share and will continue to do their share. 608 100 508 195 - 11 We have had during this first month a preview of that national unity which this country must have 1f it is to surmount the crisis that now faces it. We could, of course, have conducted this campaign in a different way, and perhaps we could have sold more bonds. We could have compiled slacker lists, and we could have coerced or frightened people into buying, whether they could afford a bond or not. But democratic unity and morale are not built in that way. Our results prove that we do not need to employ such methods. This, after all, is a continuing effort. There are no quotas for the country or for any community in it. There is no time limit. 508 121 387 196 - 12 A major object of this program is to give the American people the habit of systematic saving for their country's sake and for their own. I believe that with our present methods we are on the right track. Everything that we have had in the way of radio time and talent, or newspaper space, or motion picture time and skill, has been contributed freely and generously by the industries concerned, or by other advertisers. No paid advertising of any kind has been used. At this time I should like to pay my tribute to those agencies which have given us such willing and patriotic service: to the radio chains and independent stations, to the newspapers and magazines, great and small, to the motion picture industry and to all who have helped to bring our message to the American people. 387 139 248 197 - 13 They have enabled us to carry on our program more economically than any similar effort in the history of our country. We started this program with only six states organized, because we preferred to start slowly and surely rather than make mistakes which we might later could regret. We now have twenty-two states organized or beginning to organize with nonpartisan committees composed of outstanding citizens. This process of organizing the states and cities will continue until we have reached every community in the country. What has been done in the first month is a fine beginning, but it is only a beginning. We must keep up the good work from now on. 248 112 136 198 - 14 Events across the seas cry out to us every day to speed up our effort in every direction. The threat from abroad has come so close to every American home that the President has proclaimed a state of unlimited national emergency. So far our defense production program has only begun to rouse the giant industrial strength of this continent. In the same way our defense savings program has barely begun to reach the immense earning capacity of the American people. /36 80 56 199 - 15 Now, as never before, I believe that all of us are ready to demonstrate, in a concrete form, our partnership with the Government -- a partnership, as the President said, entered into to safeguard and perpetuate all those precious freedoms which the founders of our Republic gave us as our heritage. Thank you all and good night. 56 0 Secretary Morgenthan - Room 280 200 SPECIAL NOTICE DEFENSE SAVINGS STAFF ADVANCE NOTICE RADIO PROGRAMS THURSDAY, JUNE 5 Time: 9:45 - 10:00 P.M. Stations: WJSV - WMAL - WOL Program: Secretary Morgenthau speaks on Defense Savings Bonds and Strapps. The Secretary will review the first month's activities of the Defense Savings Bonds and Stamps Campaign. Secretary Morgenthau will be heard coast to coast over the three major networks, National Broadcasting Company Blue Network, Columbia Broad- casting System, and Mutual Broadcasting System. 201 DEFENSE SAVINGS STAFF ADVANCE NOTICE RADIO PROGRAMS THURSDAY, JUNE 5 Time: 4:45 - 5:00 P.M. Station: WJSV. Washington, D.C., And Columbia Broadcasting System Network. Program: Scattergood Baines. THIS PROGRAM PROMOTES SALE OF DEFENSE BONDS AND STAMPS 202 June 5, 1941 11 P.M. ANNOUNCER: WINX The American people in May bought 438 million dollars in Defense Savings Bonds and three million dollars in Defense Savings Stamps, enough to pay for four giant battleships, Secretary of the Treasury Henry Morgenthau said tonight. This is a wonderful start, he said, in a nationwide radio address. It is more than any of us in the Treasury had dared to expect. It is, to my mind, a great demonstration of the desire to serve America. Sales of Defense Bonds and Stamps in May were sufficient to build twenty cruisers or one hundred destroyers to guard the ocean lanes. If this total could somehow take instant shape in new fighting planes, we should have more than four thousand of them, and if it could be translated into long-range bombers, it would buy one thousand of them. More than one million individual Bonds and almost ten million Savings Stamps were bought in May, and allowing for repeated purchases by the same individuals, the figures show that great numbers of men and women and children became partners of their Government during the month of May. Certain labor organizations are cooperating by investing in the Bonds. Employers have indicated they are ready to establish systematic savings plans 203 -2and there has been enthusiastic cooperation by the American Legion and the Boy Scouts, bankers, and others. We have had during this first month a preview of the national unity which this country must have if it is to surmount the crisis that now faces it. June 6, 1941 7:45 A.M. ANNOUNCER: WMAL The Treasury has sold 438 million dollars worth of defense bonds, and that would build several battleships. 204 JUN 5 1941 Dear Colonel Donovan: The President has suggested that we should draft you to serve as Administra- tor for the State of New York for the Defense Savings program. This would be a full-time job, but one which would present an unusual opportunity for public service in these oritical times. I agree enthusiastically with the President. I should like to talk with you about this as soon as possible, or, if it would better suit your convenience, I will be glad to have one of my assistants call on you at your office in New York to explain what we have in mind. With kind regards, I an Sincerely, (Signed) H. Morgenthan, 376 Secretary of the Treasury. Colonel William J. Donovan, No. 2 Wall Street, New York, N. Y. HNG/mff File to Mr. Thompson 205 June 5, 1941 Letter of transmittal signed by the Secretary enclosing the first two issues of Rysold Organization News Letter" sent to the following: (Mailed from Graves' office) The Secretary of Commerce The Secretary of Agriculture The Secretary of Labor The Secretary of War The Secretary of Navy The Secretary of the Interior The Secretary of State The Attorney General The Postmaster General June 6, 1941 (By hand from office of the Secretary) The President The Vice President Dr. Archibald MacLeish Page 1. "Field Organization News Letter" to go to the following: (With Secy's card, mailed 6/5/41 from Graves' office) Hon. C. Rogers Arundell, Chairman, U.S. Board of Tax Appeals, Bureau of Internal Revenue Bldg., Washington, D. C. Hon. Harry B. Mitchell, President, Civil Service Commission, Washington, D. C. Mrs. Jewell W. Swofford, Chairman, Employees' Compensation Commission, old Land Office Building, Washington, D. C. Hon. James Lawrence Fly, Chairman, Federal Communications Commission, Post Office Department Building, Washington, D. C. Hon. Leo.T. Crowley, Chairman, Federal Deposit Insurance Corporation, National Press Building, Washington, D. C. Hon. Emil Schram, Chairman, Reconstruction Finance Corporation, Federal Loan Agency Building, Washington, D. C. Hom. Goorge B. Williams, President, The R. F. C. Mortgage Co., Federal Loan Agency Bldg., Washington, D.C. Hon. Charles B. Henderson, Managing Director, Disaster Loan Corp., Federal Loan Agency Building, Washington, D. C. Hon. Sam H. Husbands, President, Federal National Mortgage Ass'n, Federal LoanAAgency Building, Washington, D. C. Hon. Abner H. Ferguson, Administrator, Federal Housing Administration, Washington, D.C. 206 207 Page 2. Hon. John H. Fahey Chairman, Federal Home Loan Bank Board, Washington, D. C. Hon. Warren Lee Pierson, President, Export-Import Bank of Washington, Washington, D. C. Hon. Leland Olds, Chairman, Federal Power Commission, 1800 Pennsylvania Avenue, Washington, D. C. Hon. Marriner S. Ecoloe, Chairman, Federal RESERVE System Hon. Marriner S. Ecoles, Chairman, Board of Governors of the Federal Reserve System, Federal Reserve Building, Washington, D. C. Hon. Paul V. MoNutt, Administrator, Federal Security Agency, Washington, D. C. Hon. Charles H. March, Chairman, Federal Trade Commission, Washington, D. C. Hon. John M. Carmody, Administrator, Federal Works Agency, Washington, D. C. Hon. Lindsay C. Warren, Comptroller General of the United States, Washington, D. C. Hon. Joseph B. Eastman, Chairman, Interstate Commerce Commission, Washington, D. C. Rear Admiral Emory S. Land, Chairman Chairman, U. S. Maritime Commission, Washington, D. C. Hon. R. D. W. Connor Archivist of the United States, The National Archives Building, Washington, D. C. 208 Page S. Hon. Frederic A. Delano, Chairman, National Capital Park and Planning Commission, New Interior Building, Washington, D. C. Hon. H. A. Millis, Chairman, National Labor Relations Board, Shoreham Building, Washington, D. C. Hon. George A. Cook, Chairman, National Mediation Board, Interior Building, Washington, D. C. Hon. B. F. Burdick, Chief of Office, The Panama Canal, Washington, D. C. Hon. Murray W. Latimer, Chairman, Railroad Retirement Board, Washington, D. C. Hon. Edward C. Eicher, Chairman, Securities and Exchange Commission, Washington, D. C. Dr. C. G. Abbot, Secretary, Smithsonian Institution, Washington, D. C. Hon. Raymond B. Stevens, Chairman, U. S. Tariff Commission, Washington, D. C. Brig. Gen. Frank T. Hines, Administrator of Veterans Affairs, Veterans' Administration, Washington, D. C. The Secretary of the Treasury. 209 CONFIDENTIAL ESTIMATE INCOME TAX DEPOSITS JUNE 1941 Estimate Date Actual Deposits June 1941 June 1941 1 Sunday 2 a 3 4 5 3 $ 2,000,000 73,000,000 4,000,000 5,500,000 9,500,000 13,000,000 Actual Deposits Corresponding Day June 1940 $ 1,539,591.10 72,901,852.95 3,640,662.93 6,189,493.25 1,698,047.19 1,079,060.93 2,495,993.05 2,948,776.68 5,936,826.71 9,057,028.84 6 7 8 Sunday 9 10 11 12 13 14 1 to 14 15,000,000 17,000,000 18,000,000 23,000,000 45,000,000 70,000,000 9,415,478.77 10,031,323.33 8,581,825.52 13,778,467.78 22,407,130.35 23,760,813.03 295,000,000 111,190,772.18 120,000,000 170,000,000 120,000,000 80,000,000 45,000,000 25,000,000 55,677,797.61 92,845,057.81 72,548,160.85 45,272,975.96 33,220,068.46 21,024,114.42 855,000,000 431,778,947.29 20,000,000 10,000,000 5,000,000 4,000,000 2,000,000 1,500,000 12,134,182.11 6,801,051.10 2,659,245.23 3,019,419.73 1,265,110.85 1,702,893.82 1,500,000 1,345,938.76 $899,000,000 $460,706,788.89 15 Sunday 16 17 18 19 20 21 1 to 21 22 Sunday 23 24 25 26 27 28 29 Sunday 30 Total 1 to 5 a/$70,000,000 from General Notors Corp., Detroit, Michigan in payment of nearly all of balance due in 1941. 84,271,600.24 84,500,000 *Ad justed daily to include mail reports from General Depositaries. awB 8,221,877.85 210 tinnich that THE HOUSE PASSED AND SENT TO PRESIDENT ROOSEVELT A SENATE RESOLUTION AUTHORIZING POSTPORMENT OF FIRLAND'S PAYMENTS FOR 1941 AND 1942 CH ITS DEBT TO THE UNITED STATES. THE PAYMENTS DUE IN THOSE YEARS APPROXIMATE $843,000. IF FINLAND CHOOSES TO POSTPONE ITS PAYMENTS, THE SECRETARY OF TREASURY, THE RESOLUTION PROVIDES, IS AUTHORIZED TO NAKE AM AGREEMENT FOR RETIREMENT OF THAT PART OF THE DEBT IN 40 SEMI-ANNUAL PAYMENTS. 6/5--RS422P 6-5-41 FROM: MR. GASTON'S OFFICE TO: The Secretary In connection with Presidential protection it may interest you to know: (1) Packages addressed to the White House are now being examined at the White House garage where X-ray equipment has been installed. (2) Merchants no longer make de- liveries to the White House but a truck, manned by Secret Service personnel, collects the orders. (3) The flow of letters for in- vestigation by Secret Service has multiplied. Average daily examinations 32 during April as compared to 7.3 during April of last year. CARD 212 FOR THURSDAY NEWSPAPERS June 5, 1941 The Secretary of the Treasury and Mrs. Morgenthau will be at home this afternoon to officials of the Treasury Department and allied Bureaus. Two teas will be given - one from 5 to 6 o'clock and the other from 6 to 7 o'clock. Receiving with the Secretary and Mrs. Morgenthau will be Under Secretary of the Treasury Daniel W. Bell and Mrs. Bell, Assistant Secretary of the Treasury Herbert E. Gaston and Mrs. Gaston, and Assistant Secretary of the Treasury John L. Sullivan and Mrs. Sullivan. Assisting at the tea table will be Mrs. H. J. Anslinger, Mrs. Blair Banister, Mrs. E. F. Bartelt, Mrs. Charles S. Bell, Mrs. Roy Blough, Mrs. H. Merle Cochran, Mrs. Preston Delano, Miss Katherine S. Foley, Mrs. George C. Haas, Mrs. A. W. Hall, Mrs. Guy T. Helvering, Mrs. James L. Houghteling, Mrs. Elmer L. Irey, Mrs. W. R. Johnson, Mrs. Ferdinand Kuhn, Jr., Mrs. Clifton E. Mack, Mrs. John W. Pehle, Mrs. Nellie Tayloe Ross, Mrs. Charles Schwarz, Mrs. Thomas Tarleau, Mrs. W. N. Thompson,, Mrs. R. R. Waesche, Mrs. Harry D. White and Mrs. Frank J. Wilson. Generally assisting will be Mrs. Herman Klotz, Miss Nell M. Chauncey, Miss Isabella S. Diamond, Mrs. Arthur R. Forbush and Mrs. Robert McHugh. -000- 213 5053 June 5. 1941 To: PRICE ADMINISTRATION COMMITTEE From: R. K. Thompson, Secretary Attached hereto are the following: 1. Minutes of the meeting of June 3. 2. Price schedule No. 7. 3. Price schedule No. 8. 4. Amendments to price schedule No. 2. 5. General Preference Order and Civilian Allocation Program for Copper. 214 5053 CONFIDENTIAL SUMMARY OF STENOGRAPHIC TRANSCRIPT OF MEETING OF PRICE ADMINISTRATION COMMITTEE June 3. 1941 11:00 a.m. Chairman: Mr. Henderson Present: Secretary Wickard, Mesars. Stevens, Clayton, Nelson Lubin, Ezekiel, Whitcomb, O'Connell, Barnes, Weiner, Galbraith, Ginsburg, Hamm, Hoover, Plummer, Cassels, Thompson 1. Stock pile of lead Mr. Weiner reported that the Canadian Base Metals Controller has urged that the United States pick up approximately 80,000 tons of lead which we have there, before transportation facilities are exhausted. Mr. Clayton reported that the sources in Mexico, Peru.and Bolivia have been explored, that a purchase agreement is about to be worked out with Mexico and that lead is one of the items included. He added that several mines have shut down because of their inability to ship to the United States at a profit on account of the tariff, He added that 100,000 tons of lead may be stock piled during the balance of the current year. A brief discussion followed as to the possibility of reducing the tariff on lead and Mr. Ginsburg pointed out that a bill is being considered to authorize bringing in strategic materials duty free. -2- 5053 215 2. 011 Mr. Henderson referred to the appointment of Secretary of Interior Ickes as Petroleum Coordinator and the effect of such appointment on the work of OPACS and reported that a meeting is scheduled for June 7 with California oil producers at San Francisco to discuss recent price increases on crude oil and gasoline. He indicated that if the recent price increases are found unwarranted and if those who posted the new price do not withdraw it, OPACS will move via selling orders. 3. Railway rates on lumber from the West Coast Mr. Henderson announced that OPACS had been handed a decision by ICC sustaining its request that an increase of one dollar not be granted on intercoastal lumber rates. He added that OPACS representatives are today meeting in Chicago with the Central Freight Association in an effort to have the rates reduced to 72 cents a hundred. 4. Industry committees Mr. Henderson reported that Mr. O'Brien of OPM and Mr. Ginsburg of OPACS have been designated to work out a basis for the selection of industry committees and their functioning within the limits set by the Attorney General's letter (copy attached). He emphasized the necessity of having committees set up which could cooperate with defense agencies in securing and disseminating information and assisting generally in expediting various phases of the defense program, and cited Mr. Nelson's successful use of the industry committee technique in distributing government orders so that production facilities have not been unduly burdened. 5. Autombble prices Mr. Henderson referred to the recent increase in prices announced by the Ford Motor Company and to information from Detroit that other -3- 5053 216 companies are contemplating increases and stated that he would like to write a letter to each company asking that prices not be raised without prior consultation with the Office of Price Administration and Civilian Supply. He inquired whether, in writing such a letter, it should be indicated that the matter had been discussed with the Price Administration Committee and that it was the feeling of the Committee that no increases should be made. Mr. Henderson pointed out the difficulty of handling the problem since changes in the quality of material or the number of appliances used would materially affect the product even though prices remained the same. Messrs. Lubin and Ezekiel pointed out that through the use of substitute materials or nerely changing the name of a model from de luxe to super de luxe price changes could be affected and therefore the manufacturers should be put on notice that such changes would be considered changes in price. It appeared from the discussion to be the general feeling of the Committee that every effort should be made to prevent price increases in automobiles but that a conference with the manufacturers should be held before the proposed letter is transmitted. 6. Coffee Mr. Galbraith reported that representatives of OPACS and of Mr. Nelson's office have been working in conjunction on the coffee situation and that a meeting will be held within ten days with those who have a large amount of the coffee stock to see if the price can be stabilized. Mr. Nelson reported that his division had negotiated for 15 million pounds which they got at 10 3/8 cents per pound, and that the present situation is rather good. 217 5053 7. Hides Mr. Galbraith also reported that, working in collaboration with Mr. Nelson's office, which on May 27 had rejected all bids for it million Army and CCC shoes, OPACS simultaneously announced the intention of placing a ceiling of 15 cents a pound on hides of light native cows and that unless the tanners and others holding inventories release them further steps will be taken. 8. Bill authorizing the President to requisition needed material Mr. Henderson reported that OPACS had participated in drafting the bill just submitted to Congress which would authorize the President to requisition any material needed for defense or security and that, if called upon, his office would strongly support it as a necessary adjunct to price enforcement powers. 9. Appearance of Mr. Henderson before the Senate Committee on Agriculture - and Forestry. Mr. Henderson reported that he had appeared before the Senate Agricultural Committee on May 29 and that the discussion resolved itself to the basis used by the Office of Price Administration and Civilian Supply in the fixing of a ceiling on prices of cotton yarn and its authority to establish such a price ceiling. He referred to the discussions on labor, pipe lines, priority prices and agricultural prices had with the various members of the Committee and suggested that the members of the Price Administration Committee may wish to read the proceedings when they are published. 10. Price control of commodities affected by shipping shortages Mr. Clayton raised a question concerning what would be done to control the prices of commodities, such as coffee, cocoa and the like, -5- 5053 218 which are affected by shipping shortages. Mr. Henderson replied that A ceiling would be fixed in such CASES. Secretary Wickard raised the problem of regulating shipping rates and Messrs. Henderson and Hamm reported that OPACS is participating in rate discussions and in the discussion concerning the creation of an Office of Defense Transportation within the OEM which would coordinate all forms of transportation where price, priority and supply are concerned. 11. Coordination of defense priorities. Mr. Ezekiel raised the problem of a small manufacturer of brass who was unable to secure copper from the big copper companies except by paying a higher price than these same companies have fixed for their own processors and subsidaries for both defense and other needs. He questioned the possibility of tying price control to priorities so that the incentive to bootlegging would be avoided and monopoly control would not be increased. Mr. Weiner pointed out that the civilian allocation order on copper, issued May 31, was worked out on a basis which would give the integrated company and the independent company pro rata shares according to the amount of defense and civilian production each has, but that proportionately the integrated company usually has a greater amount of defense business. 12. Presidential power to suspend tariffs Mr. Stevens reported that he had looked into the President's authority to suspend tariffs and found that in case of an emergency or war he may suspend any duty on food, clothing, medical supplies or medicine necessary for relief. He pointed out that under the present unlimited emergency there are many CASAS in which the President could act under that authority. -6- 5053 219 13. Aluminum scrap Mr. Lubin rasied the question of the possibility of issuing a statement continuing indefinitely beyond June 30 prices on aluminum scrap, previously discussed at the meeting of May 21. Mr. Galbraith reported that as soon as an arrangement has been worked out with OPM concerning the withdrawal of aluminum from civilian use action would be taken concerning the aluminum price schedule. Mr. Henderson announced that a report on Canadian War Finance would be made available to committee members by request to Mr. Thompson. He also introduced Dr. Calvin Hoover who today joined the staff as General Economist. The committee adjourned at 12:10 p.m. to meet Wednesday, June 11 at 11:00 a.m. 220 Office of the Attorney General Mashington,B.O April 29, 1941 Honorable Leon Henderson Administrator Office of Price Administration and Civilian Supply Washington, D. C. Dear Leon: The marshaling of the nation's industrial assets for a maximum productive effort in the national defense will doubtless require the allocation of orders, the curtailment of some kinds of production so as to increase production in defense fields, and the establishment of priorities and price ceilings. Furthermore, many of these steps must necessarily affect the production of goods used to satisfy our normal needs, as well as the production of materials and implements used directly in our defense effort. Some of these acts if accomplished by private contract or arrangement within an industry and carried on for private advantage would probably constitute violations of the antitrust laws. On the other hand, it is obvious that in the present emergency acts performed by industry under the direction of public authority, and designed to promote public interest and not to achieve private ends, do not oon- stitute violations of the antitrust laws. In these circumstances, the Department of Justice recognizes that business interests which are asked to comply with public plans for increasing production and preventing inflation are entitled to the cooperation of agencies of the Government in eliminating any uncertainties which may exist as to the application of the antitrust laws to their activities. Accordingly, this Department has formulated a policy which it proposes to follow in its relations with the Office of Production Management and the Office of Price Administration and Civilian Supply and with all industries or contractors acting in compliance with the orders or requests of either of these organizations. The important points of this policy are: 221 Meetings of the industry with the Office of Production Management and the Office of Price Administration and Civilian Supply or their representatives are not illegal. Industrial committees may be formed at the request of the Office of Production Management or the Office of Price Administration and Civilian Supply, to work with representatives of such offices on problems involving defense. There will be nothing unlawful in the industry cooperating in the selection of its representatives or in selecting members for committees, or in the activities of such committees provided they are kept within the scope of this letter. Questions as to whether there is need for such a committee, and if so, how it shall be chosen, and by whom constituted, shall be the sole responsibility of the Office of Production Management or the Office of Price Administration and Civilian Supply. This Department will not participate in these decisions beyond the suggestion now made that any such committee should be generally representative of the entire industry and satisfactory to the Office of Production Management or the Office of Price Administration and Civilian Supply. Each industry committee shall confine itself to collecting and analyzing information and making recommendations to the Office of Production Management or the Office of Price Administration and Civilian Supply, and shall not undertake to determine policies for the industry, nor shall it attempt to compel or to coorce any one to comply with any request or order made by a public authority. All requests for action on the part of any unit of an industry shall be made to such unit by the Office of Production Management or the Office of Price Administration and Civilian Supply and not by the industry committee. That is to say, the function of determining what steps should be taken in the public interest should in each case be exercised by the public authority which may seek the individual or collective advice of the industry. But the determination shall not be made by the industry itself or by its representatives. Requests for action within a given field, such as the field of allocation of orders, shall be made only after the general character of the action has been cleared with the Department of Justice. If the general plan is approved, thereafter each request for specific action in carrying out such plan shall be made in writing and shall be approved 2 222 by the office of the General Counsel of the Office of Production Management or the office of the General Counsel of the Office of Price Administration and Civilian Supply, but need not be submitted the Department of Justice. In the case of any change in the to personnel of such offices or if serious practical difficulties arise, this latter arrangement may be revoked upon notice from me. Acts done in compliance with the specific requests made by the Office of Production Management or the Office of Price Administration and Civilian Supply and approved by their General Counsel in accordance with the procedure described in this letter will not be viewed by the Department of Justice as constituting a violation of the antitrust laws and no prosecutions will be instituted for acts performed in good faith and within the fair intendment of instructions given by the Office of Production Management or the Office of Price Administration and Civilian Supply pursuant to this procedure. In the case of all plans or procedure, however, the Department reserves complete freedom to institute civil actions to enjoin the continuing of acts or practices found not to be in the public interest and persisted in after notice to desist. With kind personal regards, Attorney Sincerely Town General Justin