Full text of Diaries of Henry Morgenthau, Jr. : Volume 427 : Part 2

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120

August 1, 1941
Dr. Feis
Mr. Cochrea

will you kindly send the following eablegree, at the expense of the
Treasury's Stabilisation Funds
American Endascy,
London.

For Coe from the treasury Department.

Secretary Morgeathan wishes you to be is a position to
report ea conditions is the field as seen as possible. There-

fore, subject to the approval, pressed to cover

items 1, 2, 3 and 5 of your proposed agenda at once. Please
note particularly second sentence is last paragraph of your
copy of instructions from Secretary Morgeathen."

mag.

MC:da:8/1/41

121

August 1, 1941
Dr. Feis
Mr. Cochran

will you kindly send the fellowing message at the expense of the treasury's
Stabilisation Fund:
"American Tebasay,
Chungking.

For Fox from Secretary of Treasury.

Newlett was interviewed is the treasury today and is agreeable
to preceeding at as early date to China to set as your secretary at
a salary of $3,500 and $6.00 per day V. s. currency plus transportetion both ways. Dr. Seeng has been informed of year urgent seed
for a secretary and of your preference for Bowlett. Dr. Seeng will
receive Newlett Monday afternoon to dicress possibility of employment .
on above terms and travel arrangements if contract is consumered.

ENC: dm:8/1/41

122

August 1, 1941
Dr. Feis
Mr. Cochras

will you kindly send, with the approval of your Fax Bastera Division
and Dr. Currie, and at Treasury expense, the following eablegram:
"American Rabasay,
Changking.

For Fox from Secretary of Treasury.

Please keep us currently informed regarding effects of freesing
orders on China and forward any suggestions regarding the administration and application of these orders. We are especially interested
is the operations of the various general licenses. It would be helpful if you could discuss with year colleagues and evaluate frequently
the wisdom of continuing or amending each of the general licenses and
keep us informed of views on this matter. Also relay say information
to us of dollar situation is Hong Kong resulting from exclusion of
Hong Kong free our Freesing Centrol."

HMC:dm:8/1/41

123

CONFIDENTIAL
0

PARAPHRASE

A telegram (no. 324) of August 1, 1941 from the American
Ambassador at Chungicing reads substantially as follows:
The American Ambassador was confidentially informed by Quo Tai-chi

(Minister for Foreign Affairs) during the course of a conversation
recently of a proposal by the British to send to China an economic
mission headed probably by Otto Niemeyer or some other British economist

equally as prominent. It was Quo's understanding that the British
Government is taking the matter up with the American Government with

the suggestion that the consonance should be Anglo-American. Although
Quo Tai-chi did not know what could be accomplished in a substantial way

by the mission at this time, he was of the opinion that its coming might
have a good psychological effect. He said in reply to inquiries from
the Ambassador that the mission would come as in response to an invitation
extended by General Chiang Kai-shek about a year ago.

Although it might be considered advisable to join in this proposed
economic mission if only for the purpose of showing solidarity in the
attitude of assistance to and sympathy for China on the part of the
United States and Great Britain, the Ambassador is of the opinion that
such a mission could do little more than point out China's need for
financial assistance and recommend at least (?) financial reforms, the
effect of which however on the economic and financial position, even if
the reforms could be adopted, would be limited. In this connection
there is a suspicion that to some extent the British proposal may
represent another attempt to embarrass the present Minister of Finance.

The economic and financial position of China is most unsatisfactory

-2-

124

it is true, inflation is going on at the rate of about 400,000,000
Chinese dollars new note issue
until each month, price levels are increasing
in en alarming manner, and/ recently nothing in the way of instituting
financial reforms has been done by the Government. It must be remembered
that the usual revenue sources of China--salt, customs and consolidated

taxes-have now to a great extent fallen into the hands of the Japanese;

that it is not in position now to reduce military expenses; and that
the fiscal and economic organization (?) (8) the adventage under control

of the national Government is such that it will be difficult if not
impossible to introduce new revenue producing measures and even if such

measures are introduced they will do little to improve the real financial
situation.

Currency inflation is not the sole cause of the rise in price levels.
A serious shortage of commodities actually exists and this brings about
a very competitive demand and hoerding. The route of supply from
Hunan Province and the other areas up the Yangtze River was blocked

about a year ago by the loss to Japan of Ichang. The food situation
would no doubt be improved by the recapture by the Chinese of Ichang.
However this seemingly cannot be undertaken without artillery which China

does not have at this time. In the opinion of the American Ambassador
we are faced with the unfortunate picture of Government expenditures (i)
more than income and available revenue (?). Some persons estimate that

the ratio of expenditure to revenue is as high as two to one. He sees
the resort to printing money as the only means available by which to
meet the deficit. A foreign economic mission may recommend fiscal
measures and reforme which could bring about little actual improvement

125
-3in the situation in the near future even if it was found practicable to
introduce such reforms in this area of China. The American Ambassador

is of the opinion that the principal recommendation to be made by such

a mission must be for outright financial assistance to keep the Chungking
Government operating and to keep China in a condition of continued resistance
to the Japanese. Already the American Government is aiding China substantially

under the stabilization loan, the Import-Export Bank credits and the LendLease Act. In case we join the economic mission it must be expected that
it would be found necessary to give China further substantial financial
assistance and that we will probably be expected to supply the greater

part of this assistance. The suggestion that we join the mission may
have been prompted to some extent by this consideration.

chicony

126

DEPARTMENT OF STATE

Washington

August 1, 1941.

In reply refer to
EA 840.51 Frozen Credits/2796

The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and encloses
six copies of telegram No. 194, dated July 31, 1941,
D

from the American Embasey at Peiping, China, reporting

that the enforcement of certain retaliatory freezing
measures will be entrusted to a new group of persons
known at the "Central Special Assets Commission."

Enclosure:

From Embassy, Peiping,

No. 194, July 31, 1941.
(6)

eh:copy

PLAIN

127

Peiping via NR

Dated July 31, 1941.
Rec'd 11:50 p.m.

Secretary of State,
Washington.

194, July Thirty-first.
It was announced here today that enforcement of the retaliatory
freezing measures mentioned in the Embassy's 189, July 29, 5 p.m.,

will be entrusted to a new group of persons known as the "Central
Special assets Commission" composed of North China representatives
of the Japanese Army, the Japanese Embassy, the China Affairs Board,

the Japanese Ministry of Finance and the Federal Reserve Bank. The

head office of the Commission will be in Peiping: branches will be
established at other places in North China under supervision of the
special affairs section of the Japanese Army.

Other local developments resulting from the retaliatory measures

which came into force July 28 include the freezing of substantial
American deposits held by Chinese and Japanese banks, the suspension

of foreign exchange transactions for American citizens, and the
impounding of American travelers baggage at the railway station in
Peiping.

This office made inquiry of the Japanese Embassy yesterday in
regard to the impounding of baggage. Part of the baggage was released
this morning.

before 5W 3 as

Sent to the Department, repeated to Chungking, Shanghai, Tientsin.
Copy airmailed to Tokyo.
KLP

eh:copy

BUTRICK.

128
0

DEPARTMENT OF STATE

Washington

In reply refer to

August 1, 1941.

Ea 840.51 Frozen Credits/2793

The Secretary of State presents his compliments to
.

the Honorable the Secretary of the Treasury and encloses
three copies of telegram No. 45. dated July 30, 1941,
from the American Consulate at Tsingtao, China, in regard

to an official announcement by the Japanese Consul General
which was published in a local newspaper and which gives

the regulations governing the dealings of other nationals
with British and American promoters.

Enclosure:

From Consulate, Tsingtao,

No. 45. July 30, 1941. (3).

129
GRAY
BS

Tsingteo via N.R.
Dated July 30, 1941
Rec'd. 8:45 p.m.

Secretary of State,
Washington.

45. July 30, 3 p.m.
Official announcement by the Japanese Consul General published

in local newspaper gives regulations governing dealings of other

nationals with British and American promoters. Principle provisions
forbid transactions involving transfer of movable or immovable property,
loans or collections licentious payment of debts, payment of deposits
and general business or collections investment in business or other
enterprises without the permission of the Japanese Consul General.
Japanese banks are reported to allow withdrawals up to $500 FRB

currency to individual depositors per month which is the amount RB

currency to individual depositors per month which is the amount

currency allowed per family. Certain exceptions are provided for but
Chinese and Japanese firms and banks are on the side of caution in

dealing with British and American nationals. Regulations are doubtless
the same as those enacted elsewhere in occupied China and will not be

supplied in detail unless the Department so instructs.

Travel by rail is still prohibited to British and American
nationals although permission has in one case been granted to an

American traveller for the journey to Shanghai by steamer. 011

companies are still forbidden to remove stocks from their installation

and local retail supply is practically exhausted. Sent to the Dept.
Repeated to Peiping, Chungking and Shanghai.

PES

MEYER eh:copy

(EA:COPY:CD)

840.51 Prosen Credits/2809

130
TELEGRAN RECEIVED
From

STWO X 71, 3 Ex.

SI-New York, N. Y., 11:39 A.M., Aug. 1, 1941.
Department of State,
Washington, D. G.

In view of Finland's position, believe you are considering
order freesing Finnish funds in this country. There is now
pending in this city an arbitration in which an American
firm for whom we are counsel is seeking to recover several
hundred thousand dollars from Pulp Sales Corporation

representatives Finnish Gellulose Association. Unless
freesing order is entered immediately recovery of any
amount which may be awarded may be impossible,

Mendes Krisel & Lessall,
1450 Broadway,

New York City,
12:10 P.M.

THE

LECHNIC

8 bW ! 31
RECEIVED

131

PARAPHRASE OF TELEGRAM RECEIVED
FROM:

AMLEGATION, BUDAPEST

TO:

Secretary of State, Washington

DATED:

August 1, 1941

NO.:

471

STRICTLY CONFIDENTIAL

The Hungarian Government pursuant to the Economic
Agreement between Germany and Hungary which ended recently

has decided to unify the exchange premium on all foreign
exchange. No premium is received by Russia, which is the

only exception to the foregoing. The average unified
premium will be 21 3/4 per cent, the same as the existing
reichsmark premium. The order becomes effective August 1

with respect to the Swiss frenc and the Swedish kroner.

Since it is understood that the premium upon Italian
exchange must be agreed to by both parties, the authorities
are seeking an exchange agreement with Italy. Since
quotations have been suspended with respect to the American

dollar and pound sterling, the foregoing has no application
to those currencies. The non-existence of trading possi-

bilities with the United States and the British Empire,
together with the freezing measures of those countries,
have been given as reasons for the non-application of the
measure. It has been pointed out that except for small

132

-licenses obtained in the United States there is no possibility of receiving
payments therefrom. Neither pound sterling nor dollars will therefore be
bought by the National Bank, There will be no alteration in the Hungarian

debt service, to which the last quotation will be applied.

PELL

Copy:ja:ala 8-8-41

133
C

STRICTLY CONFIDENTIAL
17531

PARAPHRASE OF TELEGRAM RECEIVED
FROM: AMLEGATION, BUDAPEST
TO:

Secretary of State, Washington

DATED: August 1, 1941
NO.:

472

STRICTLY CONFIDENTIAL

I was told today by the Governor of Hungary's National Bank,
Doctor Baranyai, that Germany had insisted upon the action taken by
the Hungarian Government as reported in my earlier telegram of today,

and that Clodius had insisted upon the reduction to the 20 odd per
cent granted Germany of premiums for all countries mentioned. Rather
than meet the alternative German ultimatum of increasing the premium
to Germany to the percentage granted free devisen countries, the Gov-

ernor preferred the discontinuance of quotations on dollars and
pounds, since the alternative would result in the economic breakdown
of Hungary. The Germans had been very rough according to Baranyai,

who implied that if there had been refusal on the part of the
Bardosay Government acquiescence might be obtained from an Imredy
Government.

There is no doubt that a European financial leadership is being
attempted by Germany, and the hope that his action in discontinuing

quotations with respect to dollars and pounds will be understood by
other

134

-other countries was expressed by Baranyai. If and when Hungary is

permitted to deal with and settle its own questions concerning politics and finances, the Governor's action undoubtedly will permit
greater freedom of action than would the alternative. Agreement as

to the fixing of prices for quotas agreed upon and that no further
currency fluctuation would be permitted was provided by the accord
between the two countries.

PELL

Copy:1g 8/8/41

135
Treasury Department

Division of Monetary Research
Date
To:

From:

August 1, 1941

Secretary Morgenthau
Mr. White

You may be interested in the
attached estimate which indicates that

the six principal concessions which

are being offered to Argentina in the
current trade agreement negotiations

will involve a calculated loss of
revenue to the Treasury of about
$11 million.

Attachment

MR. WHITE

Branch 2058 - 2141

TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION

A
DATE

Mr. White

FROM

Mr. de Beers

136

August 1, 1941

Estimated Loss in Customs Revenues from Six

Principal Concessions to Argentina 1

(thousands of specified units)
Imports
Tariff

Calculated

Old

New

loss of

1941

rates

revenue

Estimated

Item

Calculated duty

Unit

1940

casein

lbs.

$ 690

canned beef

lb.

$ 4,500

$ 2,250

762

flaxseed

bu.

25,000
1,300
75,000
8,000
14,000
10,000

$ 1,380

706

24,518
1,243
61,317
6,908
11,825
14,121

$ 9,100

$ 4,550

15,584
4,995

20,000
5,500

$ 4,600

$ 2,400

$ 2,220

3,894
1,509
16,915

5,500
1,800
20,000

$ 1,560

$ 900

$ 660

$ 2,000

$ 1,000

45,691

46,600

$23,140

$11,790

$11,350

paragraph

1101(a)

wools, not

finer than

40s

1102(a)

wools, not
finer than
448

1530(a)

cattle hides

1b.
$

Total
$

Treasury Department, Division of Monetary Research.

1/ No allowance is made for any increase in imports arising from the reduced so
rates of duty. Actually imports may be expected to increase somewhat, that indicated

that the probable loss of customs revenues will be less than
above. On the other hand, no allowance has been made for possible decreases
in imports as a result of shipping shortages.
the
2/ On basis of estimated imports in 1941. On the basis of 1940 imports

duties at old rates total $19,256,000, duties at new rates total $9,863,000,
and the calculated loss of revenue totals $9,393,000.

137
5/1/41
C
0

MEMORANDUM
Y

1. The Department of State has been considering with other agencies
of the Government of the United States measures which might appropriately

be included in a long-term plan of collaboration to foster continued mutually
beneficial economic relations between the United States and Bolivia and to
develop the national economy and national resources of Bolivia.

2. It is believed that the basis of such a plan must be in the development of communications - largely of highways, but perhaps including certain

railway facilities. The report of the United States Army engineers who
studied the Vila Vila-Senta Cruz railway project does not support the construction of such a railway, but suggests as an alternative consideration of

the construction of a highway joining the two points. It is believed that a
decision regarding a long-term program for the development of communications

in Bolivia can best be taken after a general survey by competent engineers.
The Bolivian Government has recently inquired concerning the possibility of
a general survey by highway experts, and there is attached a memorandum out-

lining the studies which the appropriate officials of this Government believe
may be practicable at this time. The Government of the United States is

prepared to detail qualified experts to Bolivia under the provisions of
Public No. 63 (76th Congress) to carry out this survey work.
3. The development of communications should encourage an expansion and

diversification of agricultural production in Bolivia, involving both an
increased degree of self-sufficiency and perhaps the development of certain

tropical products for export. It is believed that this development might
be advantageously speeded up and assisted by a comprehensive survey of the

138

-several potentially important agricultural regions of Bolivia. The Government
of the United States is prepared at the request of the Bolivian Government

to detail competent agricultural experts to carry out such a survey in cooperation with the Bolivian authorities.
4. It has been suggested that it may be feasible and desirable to stimulate production of tin, tungsten and certain other minerals in Bolivia of
small ainers by assisting them in improving their methods, providing them
with appropriate machinery, and possibly erecting a reduction plant for the

treatment of low-grade tin ores. Such possibilities of course would require
careful study, and the Government of the United States would be glad to consider any request that may be made by the Government of Bolivia for the

services of a qualified expert.
5. The Government of the United States is prepared to cooperate in
giving effect to the recommendations arising out of thorough technical and
economic surveys of Bolivian communications needs and agricultural and mineral

potentialities by the extension of financial and technical assistance in
appropriate manner and amounts for the execution of individual projects which

are considered desirable, useful, and practicable by both the Bolivian and
United States Governments.

6. The Government of the United States is prepared to consider the
practicability of measures which may be suggested for cooperation with the

Government of Bolivia in the stabilization of the Bolivian currency in its
relation to the United States dollar.

Department of State
Washington.

RA:EGC:NJC 8-1-41
Copy:alm 8-4-41

139

PARAPHRASE OF TELEGRAM RECEIVED
Y

FROM:

AMEMBASSY, Rio de Janeiro

TO:

Secretary of State, Washington

DATED:

August 1, 1941, 10 p.m.

NUMBER:

990

CONFIDENTIAL, NOT FOR PUBLICATION

Negotiations will in the near future be initiated
by British cotton firms with Brazilian cotton exporters
for the purchase of (*) approximately one million

sterling area of Sao Paulo cotton. This (1) differs
from the British cotton deal referred to in my telegram

of June 16, no. 673, in that the cotton will not be
purchased through the Brazilian Government but will be
purchased direct.

I was told today by the French Commercial Attache
that the Vichy Government will next week begin negotia-

tions to buy 52,000 contos worth of Sao Paulo cotton

to be paid for by the redemption of part of the French
bonds of the Sao Paulo-Rio Grande railway. This cotton

will be stored here.
CAFFERY

Apparent omission.

COPY:alm: wec:8-15-41

140
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION

DATE August 1, 1941.

Champoor:
Miss
TO

Secretary Morgenthau

FROM Mr. Cochran

CONFIDENTIAL

Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
Purchased from commercial concerns

£89,000

£ 9,000

The Federal Reserve Bank of New York sold £15,000 in registered sterling to the
American Express Company.

Open market sterling remained at 4.03-1/2. Transactions of the reporting banks

were as follows:

Sold to commercial concerns
Purchased from commercial concerns

£ 1,000
£ 1,000

In New York, closing quotations for the foreign currencies listed below were
as follows:

Canadian dollar
Argentine peso (free)

Brazilian milreis (free)

Uruguayan peso (free)
Colombian peso
Mexican peso
Cuban peso

11-3/8% discount
.2380
.0505
.4380
.5800
.2070

1-1/16% discount

In Shanghai, the yuan remained at 5-3/16 and sterling was again quoted at
4.02-1/2.

According to a cable received from London, Hong Kong was brought into the
sterling area today. One of the New York banks received cable advice from Hong Kong
stating that no exchange business had been transacted there today, "due to confusion"
Since the extension of our freezing control to Japan and China, the Hong Kong dollar
has shown a firm tendency in terms of our currency, and yesterday's quotation was

25-1/44, as compared with 24-11/16 at the end of last week. Sterling in that
center has also advanced against the dollar, rising from 3.95 on July 26 to 4.04
yesterday.

We sold $10,000,000 in gold to the Central Bank of Java, which was added to its

earmarked account.

141
2-

The Treasury issued licenses under both the Gold Reserve Act and Executive

Order No. 8389, as amended, permitting the Federal to effect the following transfer
of gold in its vaults:
$409. 342 from B.I.S. account No. 6 to the account of the Central

Bank of E1 Salvador. This gold, which constitutes the
remaining balance in account No. 6, is to be transferred
on August 22.

Gold in B.I.S. account No. 6 was pledged to the B.I.S. by the Salvadorean bank last
December and January as collateral for B.I.S. dollar loans. On August 21, the

$400,000 loans still outstanding will be repaid by a dollar transfer from Salvador's
account at the Federal to the B.I.S. account, and the gold transfer represents a
release of the collateral.
No new gold engagements were reported to us today.

In London, spot and forward silver were priced at 23-7/16d, off 1/16d. The
U.S. equivalent of this price is 42.55*
The Treasury's purchase price for foreign silver was unchanged at 35 Handy
and Harman's settlement price for foreign silver was also unchanged at 34-3/44.
We made seven purchases of silver amounting to 970,000 ounces under the Silver

Purchase Act, all of which was bought for forward delivery. Of this amount, 700,000
ounces represented new production from Peru, And 270,000 ounces consisted of new
production from Honduras.

mm
CONFIDENTIAL

142
BRITISH EMBASSY,
WASHINGTON.

August 1st, 1941.
Personal and Secret.

Dear Mr. Secretary,

I enclose herein for your
personal and secret information a copy

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

Dear Mr. Secretary,

Very sincerely yours,

Halifax
The Honourable

Henry Morgenthau, Jr.,

United States Treasury,
Washington, D. C.

143

Telegram from London dated July 31st.

Naval. Naval aircraft attacked Kirkenes p.m. July

30th. Two hits made on Brense and one hit each on 4 merchant

vessels. Other results unobserved. We lost eleven torpedo
aircraft and two fighters. Two Messerschmidt 109's, one
Junker destroyed.

Another force of naval aircraft attacked Petsamo

same time. Jetties torpedoed and fire started in oil tanks
and warehouse. Three aircraft lost, one Messerschmidt 109
destroyed.
3.

Royal Air Force. Two attacks were made by bomber

command on convoy of five ships and U-boats D.M. July 30th off

Heligoland. First attack two merchant vessels claimed hit with
bombs.

Second attack U-boat attached by (word omitted] but

not hit. 1500 ton merchant vessel claimed as total loss.
Altogether Royal Air Force on July 30th claims to have destroyed
5 ships totalling about 6000 tons.
4.

Night of July 30th/31st heavy attack made on Cologne

industrial area. one aircraft lost and two overdue.
5.

on July 29th when strong force of dive-bombers and

fighters attached British convey off Libya, our fighters shot
down four Junkers 87, two Kesserschmidts 109 for loss of two
Tomahawks.
6.

On July 30th six Beaufighters attacked Elmas (Sardinia)
aerodromes and seaplane base destroyed five aircraft and
damaged seven. Large fire started hangars.
7.

Military. Tobruk. Night of July 28th/29th fighting

patrol evicted large party of Italians from position 4000 yards
east of Perimeter. Enemy essualties unknown, ourselves 2.
Some arms captured. other patrols penetrated deep into enemy
lines south of Derna Road without making contact. July 29th
enemy/

144

-2-

enemy shelled harbour demolishing secondary pumping plant.
8.

Eladem area.

Our mechanised patrols have des-

troyed 2000 gallons of aviation spirit, 600 gallons of
oil at landing field 50 miles south east of Eladem.
9.

Russia. Estonia. slight German progress towards

Tallinn and southwest Lake Ilmen. Smolensk area heavy

fighting but apparently no important change. To southwest of Smolensk Russian counter attacks believed
slackening.
Ukraine.

Some German progress south Kiev against
stubborn Russian resistance.

145
NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS

TENTATIVE LESSONS BULLETIN
No. 139

MILITARY INTELLIGENCE DIVISION
WAR DEPARTMENT

0-2/2657-235

Washington, August 1, 1941

NOTICE

The information contained in this series of bulletins
will be restricted to items from official sources which are
reasonably confirmed. The lessons necessarily are tentative
and in no sense mature studies.

This document is being given an approved distribution,

and no additional copies are available in the Military Intelligence Division. For provisions governing its reproduction,
see letter TAG, 350.05 (9-19-40) M-B-M.

LEWIS AND BREN GUN SUCCESSES
AGAINST ENEMY AIRCRAFT
SOURCE

This is the third and last of a series of three bulletins
based upon information contained in a British handbook for light
machine gunners. The handbook was written by a retired English army
officer and its publication in March, 1941, was exproved by the
Ministry of Information.

The first bulletin of the series, Tentative Lessons Bulletin
No. 124, covered date on the Lewis light machine gun. The second,
Tentative Lessons Bulletin No. 132, contained similar data on the
Bren and Hotchkiss light machine guns, together with firing instructions.

Intended propagandistic effects in this bulletin should not
be overlooked.
CONTEITS

1. GENERAL
2.

LEWIS GUN

3. BREN GUN

NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS
-1-

146
NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS

LEWIS AND BREN GUN SUCCESSES AGAINST ENEMY AIRCRAFT
1. GENERAL

Single Lewis and Bren Guns, manned by gunners of the fighting forces on land and sea, the mercentile marine, and trawler
flotillas, have been handled with outstanding success.
2. LEWIS GUN

a. With Infantry Column

During the withdrawal to the coast of the Allied Forces
in Belgium, in May, 1940, a column of French infantry was moving up
to the front line when it was attacked with bombs and machine guns by
low-flying enemy aircraft. The column was obliged to scatter, and

each soldier had to rely on his own initiative.

One of the soldiers, a private armed with a Lewis gun,

settled himself at the side of the road and put his gun into position.
Then, after waiting until one of the German planes dived sufficiently
low, he took careful aim and brought it down with his first burst of
fire. Another German plane arrived at full speed, skimming over the
ground. Again the private took aim; and the second machine fell. He

had demonstrated that an infantry man armed with a Lewis gun can
destroy these formidable machines.

b. At Dunkirk
During the Evacuation of the British Expeditionary
Forces from Dunkirk, a Lewis gunner on a small British ship successfully fought relays of bombers for several hours. An evacuated
B.E.F. soldier told this story at an East Coast port, on May 30, 1940:
"Every one of us owes his life to that single man. When

we reached the coast we were exhausted, having been fighting and march-

ing day and night for several days. A small British ship had come
inshore, stern first, as close as she could. Half wading, half
swimming, we clambered on board. Then the bombers came. But as they

roared towards us a Lewis gunner in the stern of the ship replied.

"Because of the tide we were unable to sail for several
hours, all the time that Lewis gun was answering. At least four of
the planes were very badly damaged. Bombs were throwing up spray all
around us and making the ship tremble from stem to stern. Finally
the ammunition began to run low, so we took rounds from our own
pouches, and spent the time between attacks refilling the Lewis drums.
NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS
-2-

147
NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS

"At last we sailed, but not until we were a long distance
away did the Germans cease attacking. By then the gunner was almost
dropping from fatigue. When we all gathered round and cheered him,

he did not hear us. The noise of continuous firing had left him
temporarily deaf."

C. On Fishing Trawlers
Now that they have been given arms for defence against

air attacks by Nazi planes, the men of Britain's fishing fleet fight
enemy aircraft as a sideline.

(1) A trawler was fishing peacefully when she was attacked
by two German airplanes. The first came very low over the trawler,
and one of the fishermen opened fire with the Lewis gun. His bullets
ripped into the plane, and in a matter of seconds black smoke poured
from both of its engines and a trail of dirty white smoke from its

fuselage. The aircraft, crippled, tried to fly away to the eastward,
but it lost height rapidly and could not climb. The second plane
abandoned its attack on the trawler when it saw how effectively the
fishermen could hit back.

(2) Another fishing vessel, attacked by a Heinkel-111 bomber,
opened such effective fire with its Lewis gun that it brought the
attacker crashing down into the sea. The crew of the Heinkel were

picked up and are now prisoners in England.

(3) A Goole motor ship was machine-gunned less than half an
hour after it left port. The enemy plane swooped down with engines
cut out. Though taken by surprise, the chief engineer jumped to the
ship's Lewis gun, and poured four drums of ammunition into the tail
of the plane as it made off astern.

Tracer bullets were seen entering the tail, and, as the
rear gunner never fired a shot, it seems probable that he was hit.
While the Lewis gun was firing the plane dived within a few yards of

the surface and then banked and turned. Bullets penetrated many parts
of the ship, but there was only one slight casualty aboard.

d. At Airdrome
Useful lessons, on the subject of defending airdromes
from attack by air-borne troops, have been learned from operations
in France. In recent operations south of the Somme it was obvious

that attacks by parachutists, and possibly by airplane carried troops,
would be made on certain large airdromes situated in the heart of
the lines of communication of the B.E.F. at Rouen.

At one airdrome the infantry personnel was largely that
NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS

-3-

148
NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS

of a Divisional HQ. Included were clerks, cooks, drivers, and

storemen, armed with rifles and a few Lewis and Bren guns. Since
most of the men were old soldiers, the Lewis guns were particular
favorites with them.
At about five o'clock a most determined attack was made
from very low altitudes by some 30 German planes. Two or three
mechines were shot down with small arms and light automatic fire by
the troops guarding the airdrome.

One particular airplane was felled by the lone efforts
of a corporal who was in charge of the Divisional HQ cook-house.
This corporal was a particularly expert Lewis gunner who was firing
a Lewis gun which he had "borrowed" from somewhere. The plane fell
in flames not many yards away from his post.

After this attack had been repelled the enemy confined
its efforts to bombing from very high altitudes.
e. In North Sea
On August 2, 1940, the S.S. Highlander, of Aberdeen,
reached port with the wreckage of a Heinkel-115 bomber lying across her
broken bridge and afterdeck. The rest of that Heinkel and the wreckage
of another were in the North Sea, shot down by one Lewis gun manned
by two gunners.

The first plane appeared soon after midnight on August 1.
Twice it swooped across the ship, coming lower each time, but the

gunner held his fire until it came a third time; then he opened
fire. The plane attacked and dived from bow to stern; the gunner

aimed at the spot at which he judged the airplane would come into
sight over the superstructure of the ship. The machine came right

into his line of sight as he opened fire. It lurched over the ship

about 30 feet away and then crashed. One wing caught the side of the
bridge, the other wing fell over the deck and smashed the railings;
the body then broke away, and bursting into flames, crashed into the
sea.

While the crew was looking for survivors, a second Heinkel
appeared and dived to the attack. The second gunner persuaded his

comrade to hand over the Lewis gun to him; and the new marksman like-

wise held his fire until the plane was really near. He scored hits
with his first burst, and the second Heinkel crashed straight into
the sea - the whole action was over in 20 minutes.

f. At a Sussex Airfield
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149
NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS

In August, 1940, an officer of the Royal Engineers was
in command of a party of sappers working on the defenses of a Sussex
airfield, when it was suddenly attacked by German planes. The officer

got into a pillbox of his own construction, with a Lewis Gun in hand.

The planes were swooping down almost to the level of the chimney

pots. He winged one, and then fired on the next one, a Dornier, it
crashed three-quarters of a mile away. The crew of three WAS killed
by Lewis gun fire, and the officer was officially credited with the
Dornier.

6. Off the Cornish Coast
It was learned on February 5, 1941, that a German bomber,
which had crashed shortly before that date in the sea off the Cornish
coast, had been shot down by a Norwegian Merchant ship. Diving out
of the clouds, the bomber had dropped four bombs which fell in the
sea around the vessel, and had then made off into the clouds again.
A few seconds later it had returned to rake the vessel with machine
gun fire. A Norwegian sailor stuck to his post at a Lewis gun; he

hit the raider, causing it to dive, and then riddled it with bullets
as it was coming down. The crew of four vas killed.

3. BREN GUN

a. With the B.E.F.
At 6 A. M. on Sunday, May 12, 1940, eleven Dornier -

215s flew at a height of about 50 feet very near to a gun position
at which was stationed a lance-bombardier of the British Expeditionary Forces in France. The bombers appeared to be planning to

attack the gun site, since they were flying in line estern formation
in the direction of the site. Although a burst of machine gun fire
came from one of the planes, and although he was standing quite unprotected by any form of emplacement, the bombardier opened fire
with his Bren gun.

Because of this action the approach of the aircraft was
turned away from the site, five planes flying away to one side and
six to the other. The bombardier engaged each plane as it arrived,
and one plane appeared to be hit a number of times. By his exemplary
conduct and coolness in action, this NCO set a very high example to
the section and saved the gun site.
b. At Abberton
In the early hours of November 8, 1940, at Abberton,
near Colchester, a corporal, operating a Bren gun, shot down a big
German bomber, a Dornier - 17, carrying a crew of six. The machine
was badly damaged as it crashed. Two of the crew were taken to a
hospital, and the other four were made prisoners.
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150
RESTRICTED

G-2/2657-220; No. 456

M. I. D., W. D.

12:00 M., August 1, 1941

SITUATION REPORT

Eastern Theater.

Ground: German forces advancing on the Leningrad front
south of Lake Ilmen reached the areas just west of Steraya-Russa

and Cholm on July 28th.

Russian forces, including Siberian divisions, are counterattacking along the axis: Kaluga-Smolensk, in order to free Russian
forces encircled by German columns between Smolensk and Vyazma.

Strong Russian forces hold the area Rogachev-Gomel on the southern
flank of the German salient pointing towards Moscow.
A German mechanized force advancing southeastward through

the Russian Ukraine has reached the area just east of Svenigorodka.
Another German infantry force has reached Umen east of Tultschin.
Behind these columns, considerable Russian forces continue to resist
strongly in two well defined preas:

(1) Southeast of Berdichev,
(2) East of Winnica.
It is not known whether these Russian forces are encircled or whether
they have still communication with the interior of Russia. A German
column advancing eastward from Balta reached a point 25 miles east of
that city on July 28th.

Air: No change in the general situation.
II. Western Theater.

Air: German - A few local night attacks on English ports

and airfields.

British - Very limited activity by day and night.
III. Mediterranean Theater.
Ground: Nothing of importance.

Air: Widespread small Axis raids over Egypt, including
Alexandria and the Suez Canal. The British raided Benghazi and points
in Sicily.
RESTRICTED

151

TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE

FROM

August 2, 1941

Secretary Morgenthau
Mr. Cochran

STRICTLY CONFIDENTIAL

At 9:20 this morning Mr. Loy Henderson telephoned me from the Department
of State. He said that after our conversation some days ago he had sent a memorandum to Acting Secretary Welles in regard to the suggested exchange of notes
between the Secretary of the Treasury and the Soviet Ambassador concerning gold.

Mr. Welles had today referred to this memorandum for the first time, informing Mr. Henderson that he opposed the idea of such an exchange. It was my
impression from what Henderson said that there was a general opposition on the
part of Mr. Welles to the Treasury Department undertaking to consummate a binding
agreement through direct correspondence with the diplomatic representative of a
foreign government. Mr. Henderson gave me this information on a personal basis,
and asked how it should be conveyed to Secretary Morgenthau. I told him that if

either Mr. Bell, the Acting Secretary, or I should be speaking by telephone this
morning with Secretary Morgenthau, who is in the country, we could pass on the
word.

I was with Mr. Bell when the Secretary called him shortly after 11 'clock
and Mr. Bell mentioned to the Secretary that Mr. Welles was opposed to the idea
of the exchange of notes with the Soviet Ambassador. The Secretary told Mr. Bell

that he did not want to go into this until Monday. Mr. Bell gave the Secretary

the message which I had received from Henderson to the effect that the question
of the signing of the trade agreement by the Soviet Ambassador and the Department
of State might very likely come up on Monday, so there was some urgency involved.

BMP.

152
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION

DATE July 26, 1941
TO

FROM

Secretary Morgenthau
Mr. Cochran

STRICTLY CONFIDENTIAL

At 11 o'clock on July 22 the following officers met with Secretary Morgenthau
in preparation for his conference with the Soviet Ambassador to be held at 3 o'clock
that afternoon: Messrs. Bell, Foley, White, Bernstein and Cochran.
I showed to the Secretary the attached memorandum dated July 19, 1941, in
which I had recounted our earlier negotiations with the Soviet Ambassador on the
question of gold. The Secretary did not read the memorandum entirely, but I sum-

marised it to him.

I also explained to the Secretary that we had drafted three alternative replies
to the letter of July 16 from Acting Secretary of State Welles on the above subject.
In drafting each of these alternative letters we envisaged that the Secretary would
first have a private talk with the Soviet Ambassador. He could then decide which
of the three might be suitable. Copies of the draft letters are attached. The
Secretary preferred to have no documents before him upon receiving the Ambassador,

other than the original letter of July 16 from Mr. Welles. He hoped to discourage
the Ambassador from asking for anything in writing from the Treasury at this time.
It was the opinion of all of the Secretary's advisors that no special commitment
should be given the Soviets unless the Secretary felt bound by his conversation
of last October with Ambassador Oumansky.

AMP.

153

TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION

DATE July 19, 1941
Secretary Morgenthau

Mr. Cochran

FROM

STRICTLY CONFIDENTIAL

In August of 1940 the State Department raised with the Treasury the request of
the Union of Soviet Socialist Republics as presented by the Soviet Ambassador in
the United States, for assurances from the Government of the United States that the
State Bank of the U.S.S.R. would be permitted without hindrance to export gold to
the United States, that the Treasury of the United States would purchase such gold,
and particularly that the Government of the United States would not take with
respect to the U.S.S.R. any measures prohibiting or curtailing imports or exports

of gold or silver which should not be applied with respect to all other countries.
This question was discussed by the State and Treasury Departments at some length.

With the Secretary's approval. there was sent to the Department of State
under date of September 11, 1940, the Treasury Department's suggestion for a draft
letter to the Soviet Ambassador, amending the draft received by the Treasury from

the State Department. This draft letter is quoted herewith:
"Sir:

1940, in which
The receipt is acknowledged of your note of
you state that the Government of the Union of Soviet Socialist Republics
would appreciate certain assurances from the Government of the United States
relating to the purchase of Soviet gold in the United States.

In announcements of January 31 and February 1, 1934, the Secretary of

the Treasury stated that, until further notice, the United States would buy
gold imported from abroad at the rate of $35 per fine troy ounce, less the
usual mint charges and less one-fourth of one percent, all subject to compliance with the regulations issued under the Gold Reserve Act of 1934. Such
gold purchases have been made continuously thereafter and without discrimination.

The foregoing continues to be the policy of the Government of the United
States and it is also the established policy of the Government of the United
States not to enter into any undertaking which might tend to limit its freedon of action in the purchase of gold."
On October 22, 1940, Mr. Page of the Russian Division of the Department of of
State telephoned me that the Soviet Ambassador was requesting Under above Secretary

State Welles a further sentence in the contemplated draft quoted,
treatment by the United

the draft which we had already approved had, its

pledging most to favored insert nation according States. to my recollection, I told gold Mr. purchases. Page made that

it clear that the Treasury does not practice discrimination in

154

-I added that Mr. Henderson of the Department of State and I had had several conversations over our attitude toward Russia on this question of trying to bind the
Treasury exceptionally, and that I was convinced that Secretary Morgenthau would

make no pledge in this direction beyond that incorporated in the draft letter to
which we had already agreed. I told Page this was my personal reply, but that if
Mr. Welles felt that their negotiations with the Russians importantly depended
upon our attitude on gold, and if he desired that this question be again submitted
toState.
Secretary
of

Morgenthau, I would gladly do so on hearing further from the Department

On October 24 Mr. Page telephoned me, and later came to discuss with
Mr. Bernstein and me a redraft of the proposed letter to the Soviet Ambassador, in

which it was contemplated that the following text should replace that of the third

paragraph of the letter above quoted:

"The foregoing continues to be the policy of the Government of the United
States and assurances are given to the Government of the U.S.S.R. that no pro-

hibitive or restrictive measures will be applied to the export or import of
Soviet gold or silver which will not be applied to all other countries."

I took this draft to Secretary Morgenthau, who approved it, stating that this

vas the text which he had agreed to in a private conversation with the Russian
Ambassador.

As indicated in my memorandum of July 14, 1941, and Mr. Welles letter of July 16,
1941, the draft letter to which Secretary Morgenthau gave his approval was never
sent the Soviet Ambassador. The Department of State now raises the question with
this Department as to whether we have any comment to make on this draft, since the
Soviet Ambassador has reopened the question and desires an early answer. It will be
noted that the proposed exchange of correspondence may be connected with, or form
a part of, the commercial agreement between the Soviet Union and the United States
which is to be renewed in the immediate future.
Some seven months have elapsed since the Secretary was requested by the State

Department to consider what assurances the Treasury could give in the proposed exchange of letters with the Soviet Ambassador. Since the exchange of letters was
not consummated at that time, presumably because of other political questions of

interest to the Department of State, it is only fitting that the whole subject should

be restudied at this later date before the Treasury gives any commitment. During
these seven months there have been important international developments, including
the attach of Germany upon Russia and consequently the latter's involvement in the
European var. The outcome of this war is still very uncertain insofar as Russia is
concerned. Should Russia be partly or wholly occupied there is the chance that the
present government will either fall or be so dominated by Germany that it could no
longer exercise the authority of a government. In such event it would be very much
to the advantage of the Russian people that the United States freeze Russian assets

and hold them intact for the benefit of such people. Consequently it is not desira-

ble from the standpoint of the Russians themselves that the Secretary of the Treasury
now give an undertaking which would tie his hands if the freezing of Russian assets

155

-3might become urgently desirable. It should be realised that an undertaking such
as is now proposed would conceivably bar the Treasury from putting Russian funds

in this country under its freezing control unless the funds of all other countries in the world were similarly treated. The Russians should realize that they

are asking treatment of this Government which would constitute a definite exception to our rules. At the insistence of the Treasury Department. he trade agreement so far consummated between this and foreign countries has included therein
provisions which would bind this Treasury insofar as its treatment of gold and
silver is concerned. The Russians should not ask that this exception be made.
In present circumstances such an exception would embarrass us vis-a-vis our
other friends who might logically expect to receive as favorable treatment as that

accorded Russia. Furthermore, it is definitely to Russia's interest to let this
Treasury, which has constantly manifested its sympathy with Russia, have its
usual free hand to protect Russian funds in this country through the freezing or

other means considered most effective.

AMS.

156
THE SECRETARY OF THE TREASURY
WASHINGTON

My dear Mr. Secretary:

The receipt is acknowledged of your letter dated
July 16, 1941, with which you enclosed draft copies of a
proposed exchange of notes between the Soviet Ambassador

and yourself, wherein this Government gives assurances to
the Government of the Union of Soviet Socialist Republics
that no prohibitive or restrictive measures would be

applied to the export or import of Soviet gold or silver
which would not be applied to all other countries.

It is noted that your draft reply is in the

exact terms to which I gave my approval when this matter
was discussed in October 1940. Insofar as the Treasury

Department is concerned, I find this draft still acceptable.

Sincerely yours,

Secretary of the Treasury.

The Honorable
Summer Welles,

Acting Secretary of State.

157
THE SECRETARY OF THE TREASURY
WASHINGTON

My dear Mr. Secretary:

The receipt is acknowledged of your letter dated July 16,
1941, with which you enclosed draft copies of a proposed exchange
of notes between the Soviet Ambassador and yourself, wherein this
Government gives assurances to the Government of the Union of Soviet

Socialist Republics that no prohibitive or restrictive measures would
be applied to the export or import of Soviet gold or silver which
would not be applied to all other countries.
In agreement with your office, and upon an appointment
made at my request by the Department of State, Ambassador Oumansky

called on me this afternoon. I thought it desirable that I should

discuss with him personally the matter of assurances which he desires
on the part of the Treasury, since this matter had been the subject
of a personal talk between the Ambassador and myself last October.
At our meeting today the Ambassador agreed that the following text
would be acceptable to replace the third paragraph of the draft letter which accompanied your communication of July 16:

"The foregoing continues to be the policy of the
Government of the United States and it is also the established policy of the Government of the United States not
to enter into any undertaking which might tend to limit
its freedom of action in the purchase of gold."
With this amendment, I find your draft reply acceptable
to the Treasury Department.

Sincerely yours,

Secretary of the Treasury.
The Honorable
Summer Welles,

Acting Secretary of State.

158
THE SECRETARY OF THE TREASURY
WASHINGTON

My dear Mr. Secretary:

be applied to the export or import of Soviet gold or silver which
would not be applied to all other countries.
In agreement with your office, and upon an appointment
made at my request by the Department of State, Ambassador Oumansky

called on me this afternoon. I thought it desirable that I should

would be acceptable to replace the third paragraph of the draft letter which accompanied your communication of July 16:

"The foregoing continues to be the policy of the

Government of the United States and assurances are given
to the Government of the Union of Soviet Socialist Repub-

lice that no prohibitive or restrictive measures will be
applied to the export or import of Soviet gold or silver
which will not be applied to other countries in similar
circumstances."

With this amendment, I find your draft reply acceptable to
the Treasury Department.

Sincerely yours,

Secretary of the Treasury.
The Honorable
Summer Welles,

Acting Secretary of State.

TREASURY DEPARTMENT

159

INTER-OFFICE COMMUNICATION

DATE July 21, 1941
TO

FROM

Secretary Morgenthau
Mr. Cochran

STRICTLY CONFIDENTIAL

At the Staff meeting this morning I raised the question of Russian gold.
I thought the Secretary might desire to resolve this before he leaves Washington.

I told him that I had drawn up a memorandum on Saturday, giving the background of
the Russian gold case, and indicating reasons for opposing guarantees on the part
of the Treasury incorporated in the draft notes for contemplated exchange between
the American and Soviet Governments. I told the Secretary, however, that I had
not yet had a chance to submit my memorandum to Mr. Bell and Mr. Bernstein, who
had been the other members of the Committee which had discussed this question
with the Secretary last week.

The Secretary instructed me to ask Mr. Welles' office to arrange for Ambassador
Oumansky to come to the Treasury and see the Secretary tomorrow afternoon at 3:00.

Mr. Bell made the suggestion that I give the reason for this appointment, to which
suggestion the Secretary agreed.

Upon coming out of the meeting at 10:25. I called Miss Clarkson in Mr. Welles'
office and referred to the letter of July 16 which Mr. Welles had addressed to
Mr. Morgenthau in regard to the proposed exchange of notes between the Department

of State and the Soviet Ambassador concerning most favored nation treatment for

Russian gold and silver. I told Miss Clarkson that since the question of assurances
on the part of the Treasury involved in this correspondence had been discussed personally between the Soviet Ambassador and Secretary Morgenthau some months ago,

it was desirable that a further conversation be held between these two officials
before anything further is done. She said she would give this message to Mr. Welles.
I asked that the appointment be arranged by the Department of State for tomorrow

afternoon at 3 o'clock. Miss Clarkson reminded me that the letter under reference
had not been drafted in the Under Secretary's office. She asked that I speak also
with Mr. Henderson, and transferred me to him. I repeated to Mr. Henderson what
I had said to Miss Clarkson. Both Miss Clarkson and Mr. Henderson promised to
call me back as soon as the appointment with the Soviet Ambassador is confirmed.
*

At 12:30 this noon Mr. Henderson telephoned me back to the effect that the
appointment had been made for Ambassador Oumansky to call on the Secretary of the

Treasury at 3 o'clock on Tuesday. Mr. Oumansky had not been informed as to the
subject which Secretary Morgenthau desires to discuss with him.

KMR

160

TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION

DATE July 26, 1941
TO

FROM

Secretary Morgenthau
Mr. Cochran

STRICTLY CONFIDENTIAL

The Secretary received the Russian Ambassador at 3 o 'clock on Tuesday,

July 22, on an appointment made through the Department of State. To a group of
us on Wednesday morning the Secretary stated that Mr. Foley or Mr. Bernstein could

give the story of the interview. The Secretary summarized it in a few words and
asked that this report be communicated orally to the Department of State.
After talking with Mr. Bernstein, who told me that he and Mr. Foley were
present during part of the interview with the Ambassador, I telephoned Mr. Loy
Henderson in the Department of State at 10 o'clock this morning. I told
Mr. Henderson that it was my understanding that the Russian Ambassador had been

insistent upon an undertaking from the Treasury Department in the terms formulated
at the time the Ambassador called on Secretary Morgenthau last October. Mr. Morgenthau had, however, objected to any such arrangement being included in the proposed trade agreement between the United States and Russia. The Secretary and the
Ambassador had agreed on the idea, therefore, of an exchange of confidential letters between the Treasury Department and the Soviet Embassy incorporating the terms

set forth in the draft letters last fall. The Ambassador is to submit this pro-

posal to his Government, and also, as a second point, ascertain whether his

Government would consider that such an arrangement be terminable with the commercial

agreement. I told Mr. Henderson that we would let the State Department know when
further word is received from the Ambassador. Mr. Henderson thought that if the
Treasury is disposed to give some undertaking to the Russian Embassy on gold and
silver, it would be preferable to do it in some manner other than through the medium
of the trade agreement. He wondered whether the Russians might try to tie an exchange
of letters between the Treasury and the Embassy up with the trade agreement, if the
two arrangements are made to terminate simultaneously. Henderson asked whether the

Treasury had made in the past any written agreements of this sort directly with
foreign embassies. I told him that the only arrangements in the past with which I

was familiar had been the Tripartite Agreement, which had been between Ministries
of Finance and the Stabilization arrangements.

At my request. Mr. Henderson promised to bring the above information promptly
to the attention of Acting Secretary Welles.

amp

161

Serie reply
filed aug.8 attached
to Corhrais memo

162
EMBASSY OF THE

my to folder with

UNION OF SOVIET SOCIALIST REPUBLICS
WASHINGTON, D.C.

August 2, 1941

My dear Mr. Secretary:

For a number of years purchases by the Union of

Soviet Socialist Republics in the United States of
America have greatly exceeded exports from the Soviet

Union to the United States and it is probable that this

condition will continue to exist for some time. In view
of this situation the Government of the Union of Soviet

Socialist Republics may find it desirable to export gold
to the United States of America in an amount sufficient

to enable it to meet obligations which it has already
made or the making of which is under contemplation. It
would, therefore, appreciate assurances from the Govern-

ment of the United States that the State Bank of the

Union of Soviet Socialist Republics will be permitted
without hindrance to export gold into the United States
for
The Honorable

The Secretary of the Treasury

163

-2-

for the purpose indicated, that the Treasury of the
United States will purchase such gold, and in particular that the Government of the United States of

America will not take with respect to the Union of
Soviet Socialist Republics any measures prohibiting

or curtailing exports or imports of gold or silver
which shall not be applied with respect to all other
countries.

I am, my dear Mr. Morgenthau,

Very sincerely yours,

C. amanony

164

TREASURY DEPARTMENT
COUNTRY

INTER-OFFICE COMMUNICATION
Miss

DATE August 2, 1941.

For

Secretary Morgenthau

FROM Mr. Cochran

STRICTLY CONFIDENTIAL

Mr. Bewley, Financial Counselor of the British Embassy, called on me at
10:30 this morning. He showed me a confidential cablegram dated July 29 from
Eden to Halifax, which read, in paraphrase: "Please inform the United States
Government of the acceptance by the Chinese Government of the proposal to appoint Mr. Hall-Patch, and emphasize temporary character".
Mr. Bewley also showed me a second confidential cablegram dated July 31
from Eden to Halifax which reported that the British Embassy at Chungking had

asked for the letter of appointment for Mr. Hall-Patch.

Thus the formalities for Hall-Patch becoming the British member, although
only temporary, of the Stabilization Board in China, are apparently being completed. Mr. Bewley said that Sir Otto Niemeyer will discuss with us upon his
contemplated early arrival in Washington British plans for permanent representation on the Board.

Mr. Bewley also permitted me to make the attached photostat copy of a
message from his Government to Chungking, and requested our reaction to the suggestions made therein with respect to Chinese exchange control and its relation

to the working of our stabilization agreements. I told Mr. Bewley that I would

circulate this cablegram to my colleagues in the Department in order that we
may discuss the matter later next week with Messrs. Phillips and Bewley.

KMP.

Mr. Eden

Viscount Halifax,
6.40 p.m. July 25th, 1941.
2.11

(Decyphered July 25th)
Addressed to Hong Kong telegram No. 742

of July 25th repeated to Washington for Phillips

and Chungking,
Secret.

Following for Hall-Patch from Treasury
Foreign Office telegram No. 4193 to Washington.
As we see it the plan to freeze Chinose
assets will mean that:

(1) prime function of Stabilization Board
will largely disappear and the Board will be
left holding sterling and dollars to be used
directly for account of Chinese Government.

(2) Shanghai and they will cease to function

88 heretofore, the Fapi will no longer be freely
convertible and normal banking machinery will be

suspended.

We t ink that confusion must result unless
the Chinese are able to give rapid and positive
directions immediately Chinese assets are frozen

in United States or sterling area.

As soon, therefore, as we decide to freeze
Japanese assets in sterling area we would propose
(1) to ask the Chinese Government to make to

us request parallel to that already made by them
to the United States Government that Chinese assets

in sterling area be also frozen, explaining to them
objectives and consequences we have in mind;
(2) to advise them (a) to appoint a central
body (e.g. Chinese members of Stabilization Board)
to be responsible for administrating a Chinese

exchange control in cooperation with sterling are
(b) to set up subsidiary offices of their exchange
control in London and Washington and possibly
Singapore and Rangoon;

(3) if possible reaching a provisional agreement

fix

with the Chinese Government that the Central body
appointed under (2a) above would immediately/raise

objections of official rates of exchange for

sterling and dollars in terms of yuan. We would
suggest that rates not dissimilar to those quoted
in Shanghai market today with the exception that
the official rate of net .03 for dollars against
sterling must be taken Into account.
We should need a personal link with the
new Chinese Exchange control. Presumably this

BBB

/Bould

would be automatically member of new

Stabilization Board as soon as it is set

up (meantime it clearly ought to be
Rogers /but this/ng doubt should not be
specifically proposed but left to committee
as only possible solution).

In spite of temporary loop-hole that
will be left for Japanese evasion of freezing
via occupied China, we do not believe it
would be wise to impose a Chinese freezing

and payments order alongstde Japanese

order. A gap of at least 8 few days will be
required to dissociate the LWO actions
in the public mind and to Ive us a little

/?more/time to make the necessary arrangements.

Lven a week or two's interval mi ht be

preferable to 8 chail state f affairs which

itself would cost time and trouble to clear up.
Please let us know your views and those

of Rogers. Phillips will no doubt Five us his
views and repeat to you.

167
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION

DATE August 2, 1941.
TO

Secretary Morgenthau

FROM Mr. Cochran

STRICTLY CONFIDENTIAL

Mr. T. J. Carlyle Gifford called on me today to say good-by. He re-

gretted very much that you were absent from the city so that he was unable to
tell you personally how much he had enjoyed his association with and assistance

from you during the past two years. Mr. Gifford will fly directly to Scotland

next Tuesday, and his return to the United States is uncertain. He is leaving
his assistant at the New York office to carry on the business which he has
conducted.

In answer to my inquiry, Mr. Gifford estimated that the British have
vested and still on hand in New York approximately $30,000,000 of American se-

curities. He estimated at $100,000,000 the total of such securities which are
still available for vesting and sale. He does not include in this latter amount
a large variety of practically untradable securities held in very small amounts
by British subjects. The sale of the above-mentioned securities is continuing
at the rate of approximately $1,000,000 per week, and will be carried on as
heretofore There is no immediate need for pressing such sales since the
British have just now received the check for $100,000,000 covering the first
installment due from the Reconstruction Finance Corporation on account of the
securities and properties against which the $425,000,000 loan was recently consummated. To my final question, Mr. Gifford replied that all direct investments
had been included in the collateral given Mr. Jones except those concerns whose
annual gross income is less than $100,000 annually.

R. m.P.

168

August 2. 1941.
Files
Mr. Cochran

Reference is made to my memorandus dated July 30. with respect to my conversation with Mesers. Blaisdell and Edminster of the Department of State concerning an inquiry from the Consul General at Calentta in regard to our Lend-Lease
policy.

Yesterday evening Mr. Blaisdell sent no the State Department copies of
certain messages received from Calcutta, together the the State Department's contemplated reply. At a meeting held in Acting Secretary Bell's office this morning
I read this correspondence to the Group, which included Miss Kistler of Mr. White's
office and Mr. Kades from the General Counsel's office. It was agreed that I should
check with Mr. Cox of Lend-Lease to see whether he was entirely familiar with the
contemplated reply. Following the meeting I telephoned Mr. Gox and learned that he
had actually written the cablegram under reference. Consequently I then telephoned
Mr. Blaisdell to let his know that the Treasury Department had no objection to the
outgoing cablegram to Caloutta, and I returned the file of correspondence to Mr.
Blaisdell by special messenger. Photostat cepies of the incoming and outgoing
messages are attached. While speaking with Mr. Blaisdell, I referred to my conversation with Mr. Edminster, and to the memorands of which Mr. Edminster had previded ae with copies. I told Mr. Blaisdell that since the Treasury was working

is direct contact with the Lend-Lease officials, and since the latter were consulting
the State Department on matters of policy involved, including the draft letters to

Mr. Parvis now under consideration, there appeared to be no need for the Treasury
Department to give say reaction directly to the State Department with reference be to
Mr. Idminster's memoranda. Mr. Blaisdell agreed that these matters appeared to
in the way of being worked out, and that he would tell Mr. Edminster not to expect
anything from the Treasury, unless he may specifically request it.

Asp
HMC:dm:8/2/41

FROM
TO BE TRANSMITTED

PREPARING OFFICE

TELEGRAM SENT

FILL INDICATE WHETHER

CONFIDENTIAL CODE

NONCONFIDENTIAL CODE

rate

PARTAIR

letter

Department of State

letter
rtment:

PLAIN

Washington,

Auguet 1, 1941

letter

ERICAN CONSUL,

CALCUTTA, (INDIA). .

The subject matter of your telegram of July 24,
to a.m. and of July 26 in clear has been discussed
"tith Lease-Lend officials and, in reply, you are advised
8.8 follows:

QUOTE Only those defense articles which are essen-

ially needed in relation to the war effort will be suoLied under the Lend-Lease Act to India and to the

Dominions. To obtain such defense articles it is necessary for the Government of India to requisition them
through the Division of Defense Aid Reports of the Office
of

Emergency Management--the agency administering the

nd-Lease Act. Private individuals or firms cannot
quisition or receive aid under Lend-Lesse. Although
the aid will be asked for and received directly by the
Government of India the British Supply Council will assiet

the preparation and filing of the requisitions and in
the other required administrative steps.
Because of inadequate supplies for our own defense

M.,

OFFICE

erposes, including lend-lease aid to Britain, China, etc

PREPARING OFFICE

TO BE TRANSMITTED

TELEGRAM SENT

WILL INDICATE WHETHER

CONFIDENTIAL CODE

rate
Day

NONCONFIDENTIAL OODE

letter

Department of State

Night letter
Charge

Department:
rate

-2-

letter
letter
Charge

PARTAIR
PLAIN

Washington,

it is daily becoming more difficult for any Government, including India, to get any defense articles unless they are

essential to the war effort. In view of this situation
and also in order to conserve dollar exchange the British
have urged all parts of the Empire in the sterling area to
obtain through lend-lease those articles which are

lend-leaseable--that is, those essential to the war effort.
To execute this proposition, it is necessary for the Government of India not only to centralize its purchasing and its
consignment of articlee essential to the war effort through
a branch of ite Government, as contrasted with private im-

porters, but also to. represent that it will (a) use the
defense articles for a purpose essential to the war effort;
(b) use them directly and not distribute them through commercial channels unlees that is the most efficient method

of distribution and no profiteering results or is likely
to result from such commercial distribution.
The entire subject of a more clear-cut understanding
between UE and the Britieh with respect to these and other
conditions designed to safeguard American interests is now

under active discussion here with British officiale, and

M.,

GOVERNMENT PRINTING OFFICE

PREPARING OFFICE

TO BE TRANSMITTED

TELEGRAM SENT

VILL INDICATE WHETHER

CONFIDENTIAL OODE

rate

NONOONFIDENTIAL CODE

letter

Department of State

letter
rtments

PARTAIR

Washington,

-3you will be informed further concerning them. The
Department fully recognizes the danger of discrimination

against American intereste, to which you allude in your
telegram of July 26, and will endeavor to see that
assurances on this score are included among the con-

ditions referred to above.
Steel and steel products are in the same situation as
other defense articles which are lend-leaseable, UNQUOTE

itw

RE
SA/E:DCB:MHL

operator

M.,

GOVERNMENT

OFFICE

PLAIN

SAE
TELEGRAM RECEIVED
Calcutta
telegram must be

Dated July 24, 1941

cly paraphrased be-

E being communicated

anyone. (br)

FROM

REC'd 8:58 p.m.

ASSISTANT

man

cretary of State,

OFFICE

JUL

THIS

Washington.
L

S JUL

1941

MR.

1941

EDMINSTER

DEPARTMENT uf STATE

July 24, 10 a.m.

BECAUSE of confusing reports and increasing

inquiries here, the Department is requested to

inform by telegram with details by air mail what
requirements and procedure are contemplated for

lease-lend Exports to India. Understand Govern-

ment India preparing limited list of importers
authorized to handle lease-lend business and Expect

requests from American firms for Consulate Generol's

support of their applications for inclusion.
Instructions are requested C 8 to proper degree of
support.

Supply department has announced that placing

teel orders through private channels discontinued
lly 15th et the request of United States Government.
This ends business of local representative's of
irrocan steel mcnufacturers including SOME Americans

ind makes steel controller sole buyer. Full
background

July 24, 1941, from Celcutta.
round desired on our Government's request.
WILSON.

174

AFTER DISTRIBUTION
PLEASE RETURN TO

16923

TELEGRAM RECEIVED
a Cam
DEPARTMENT

FROM

DIVISION

SA/E

PLAIN

Calcutta AUG 1 941

JUL 81'1941

the

COMMERCIAL AFFAIRS

DIVISION OF COMMERCIAL

secretary of State,

Recording Desk

Washington.

File-J.P.F.

Dated July 26, 1941
Rec'd 7:12 p.m.

apartment of State
DCA

Twenty-sixth. (SECTION ONE)

TREATIES AND LI:PE MUNTS

UBL? I 1941

DEPARTMENT GI STATE

GAZETTE OF INDIA EXTRAORDINARY of July 21st

extends Part Two of import restrictions gazetted

May tenth to include the following tariff positions
and portions thereof. Five, forty seven subs two
five six and seven, forty eight sub three A B and C,
forty eight subs five seven eight nine and ten,
forty nine, forty nine sub one A and C, forty nine
sub two, fifty one, fifty one subs two and three,
fifty three, eighty two. Positions together run
from serial number one hundred nineteen to one

hundred thirty eight inclusive. Prohibitions not
applicable to Foods shipped before August first
next. Accompanying announcement attributes these
restrictions to necessity conserve exchange and to

educe adverse balance trade with certain countries,

particularly Japan. Open general license provided
or Chinese goods imported via Burma Road.
LLC

WILSON

Cam
Terify

TELEGRAM RECEIVED

CALCUTTA

This telegram must be
closely paraphrased be-

Dated July 28, 1941

to anyone. (br)

Rec d 11:28 R.M.

fore being communicated ROM

DEPARTMENT OFSTATE

Secretary of State,
Washington.

U 1941
WHOOL DIVISION OF

NEAR EASTERN AFFAIRS

July 28, 10 a.m., (SECTION TWO)

This Consulate General's telegram of July 26

in clear regarding import restrictions: Representatives of American firms here and at Bombay are

convinced that Government of India in continually

expanding the scope of import restrictions is not
unaware of collateral benefits accruing to British
and Indian interests at the expense of the United

States. If as appears likely the present trend
toward channeling trade through Indian Government

agencies continues direct business contacts will
be severed or useless and American firms which have
developed markets at great expense may be forced

out. Getz Brothers, Muller, Phipps and Dodge, Soy-

mour and others fear that further restrictions may
necessitate closing of offices in India. American
businossmen here feel that even present degree of

restriction is out of all proportion to admittedly
abnormal increase in American trade in theand
last year

-2-, Unnumbered from Calcutta, July 28, 1941; 11:28 a.m

and that lasting and harmful effects on normal
business will result. Consensus is that somo quid
pro quo should be obtained in orchango for loase-

lend benefits which probably possible only with the
approval of the British Goverrment.
The above is given a representative of Amorican firms' sontiments here. Theso concerns are

being askod to report moro full; to thoir homo of-ficos and to provido mo with dotailod statomonts

their position.
(END OF MESSAGE.)
WILSON
GW

PARAPHRASE OF TELEGRAM RECEIVED

American Consul, Calqutta, India
Secretary of State, Washington
July 28, 1941, 10 a.m.

SECTION TWO. Refer this office's telegram of

26 regarding restrictions upon imports:
Bombay and local representatives of American firms
AND convinced that the Indian Government in expanding

An import restrictions is aware that these restrictions
at the expense of the United States result in collateral
benefits to British and Indian interests. A continuation
of the present trend of forcing trade through agencies
of the Indian Government may result in the severance of
direct business contacts and the forcing of American
firms out of markets which they have developed at great
pense. It is feared by such firms as Getz Brothers,
ller, Phipps and Dodge, Seymour and others that the

Losing of their offices in India will be necessary if
her restrictions are imposed. Local American business

believe that even present restrictions are out of all
ortion to the abnormal increase in American trade in

last year and that the result will be lasting and
ful effects upon normal business. The feeling is
that

179

exchange for lease-lend benefits some quid pro

14 be given. It is possible that the Britte
eat would have to approve such an arrangement.

regoing reprepents the consensus of opinion of

an firms in

Those firms here been requested

ort to their home offices more fully and to
de detailed statements of their position to the
late General.
WILSON

180

August 2, 1941.
MEMORANDUM FOR THE SECRETARY'S FILES:

A meeting relative to the administration of Executive
Order No. 8389, was held in Mr. Foley's office at 3:00 P.M.,
July 31, 1941, and was attended from time to time by the fol-

lowing:

Messrs. Foley (Chairman), Delano, Pehle, B. Bernstein,
E. M. Bernstein, White, Viner, and Timmons for the Treasury;
Messrs. Acheson, Luthringer, Fisher, and Miller for the State
Department; Messrs. Shea, Rosenwald, and Juranev for Justice.

Mr. Foley called attention to the fact that a number of
telegrams have been received from American importers who have

paid for goods now on board the "Tatuta Maru", which is at
present docked in San Francisco. In many cases it is indicated
that drafts drawn in payment for such merchandise have been paid
and the relative documents turned over to the American purchasers. The question that is being raised in such telegrams is
whether all or part of the cargo will be discharged from the

"Tatuta Maru". If such is not the case, there is every chance
that the cargo will be libelled. After discussion, Mr. Acheson

called Mr. Maxwell Hamilton of the Division of the Far East
Affairs in the State Department, and informed him of the views of

the committee; namely, that the Japanese Ambassador should imme-

diately be informed that if the "Tatuta Maru" does not discharge
cargo already paid for by Americans, it is most likely that the
importers will pursue their legal remedies in the courts. Thus,
if the Japanese do not unload the cargo, they are running a
chance of having the boat tied up by court proceedings. After
talking with Mr. Hamilton, Mr. Acheson reported that the Counselor
of the Japanese Embassy was then on his way to the Treasury to
discuss the matter. He was received by Messrs. Acheson, Foley,
and Shea, who informed him that insofar as the Government was concerned, the "Tatuta Maru" would be given the necessary licenses
and allowed to sail whenever she wished. Obviously, however,

this government could not forbid private citizens taking legal
action to protect their rights. It was made clear to the Counselor
that the purpose of this conversation was merely to make perfectly
clear to the Japanese Government the facts involved in the question

of the disposition of the "Tatuta Maru's" cargo. Mr. Shea and

Mr. Staelly informed the Committee that the United States Marshal
in San Francisco had inquired of the Justice Department whether
he could proceed to serve libel attachments against cargo on
board the "Tatuta Maru". It was agreed that the Marshal should
be informed that this was not a case in which the Department of

181

-2Justice could offer any instructions and that he should consult
the presiding judge of his district.

Mr. Delano reported that the Comptroller's office has at

present 12 men in 6 Japanese banks on the West Coast. Frozen

assets of such banks total nearly $15,000,000, and most of the
depositors concerned are Japanese nationals. Mr. Delano stated
that he thought that the banks could be closed without disturb-

ance, if such was decided to be the proper course of policy. All
but two of the banks in question are banks of deposit, but are
not members of the Federal Deposit Insurance Corporation. Inquiry
was made as to the conditions under which American banks in Japan
are being allowed to operate. It was reported that our banks were
allowed to open this morning under almost similar arrangements to
those which had been applied to the Japanese banks in the United
States. The point was made that this Government's policy in
administering the freezing control should not be guided by the
retaliatory measures taken by Japan. The question is not whether
the Japanese Government is allowing American citizens the same
amounts as allowed in General License No. 11, nor whether the
foreign banks in each country are operating under similar condi-

tions; but is rather one of influencing and controlling as much

as possible, through the medium of the freezing control, Japanese
economic and political policy. With respect to the Japanese banks
on the West Coast which have general licenses, it was noted that
there will be a policing problem as long as such general licenses
are outstanding. Such general licenses could be revoked, and
arrangements made whereby local depositors can withdraw funds in

limited amounts. It was mentioned that consideration should be
given to amending the licenses issued to the Banco di Napoli so
as to prohibit such banks from conducting a remittance business.

Mr. Pehle distributed to the committee two schedules, listing applications involving imports from and exports to Japan. It
was explained that such applications were still being held pending a general policy decision.

Mr. Pehle referred to an application filed by an importing

concern in the United States which seeks permission to import
approximately $72,000 worth of scrap steel from a firm in Cuba on

the "Proclaimed List of certain Blocked Nationals". Approval of

such application has been urged by the Office of Production

Management and the State Department. The problem involved was made

the subject of general discussion during which it was pointed out

that the policy of denying all transactions with firms on the

"Proclaimed List" should be maintained as far as possible. It was

182

-3agreed that the application should be discussed again with OPM
to determine the necessity of the proposed purchase in this
particular case.

Reference was made to a request by the Italian Government, transmitted through the Department of State, for a license
to permit a shipment of models of certain machines and inventions of Leonardo da Vinci to Japan. These models had previously
been exhibited at the New York World's Fair. It was agreed that
such shipment should be licensed.

Mr. Foley reported that the action taken by this committee

in the Silesian-American Corporation case had been discussed with
Secretary Morgenthau, who approved of the action taken. The
Secretary was also informed of the sending of Treasury representa-

tives to the Philippine Islands and Hawaii to aid in the administration of the freezing control in those areas. The Secretary had
also approved of this action, and thought that this Committee
hould discuss the making of arrangements to place observers in
certain neutral countries in Europe, such as Sweden, Switzerland,
and Portugal. Such men could observe and report proposed transactions such as the Silesian-American deal, and observe the workings of the various General Licenses issued to neutral countries,
as well as furnish the Treasury with many types of information

which it is impossible to procure in the United States. It was

agreed that this proposal should be further discussed as soon as

possible.

It was agreed that telegrams should be sent to the United
States High Commissioner of the Philippine Islands, and to the

Governor of Hawaii, to the effect that the British officials there
are willing to furnish to our men in the Philippines certain types
of confidential material.

Mr. Bernstein read a telegram which it was proposed to send
to Collectors of Customs at various West Coast ports, stating that
Japanese diplomats who desire to leave the country may take with
them not more than $1,000 in currency, drafts, and travellers' checks;
other Japanese nationals may not take out more than $200.00. Specific
licenses must be secured to take out larger amounts on securities.

Mr. E. M. Bernstein referred to a recent meeting held with
representatives of the various New York banks, during which it was

183

-4reported that several of such banks hold approximately 1,000 sealed
instructions relative to property held by such banks, which instructions were not to be opened except under certain conditions. It
was agreed that the banks should not be asked to open such instructions for the purpose of obtaining information with respect to

on
was
agreed that banks requested inventory securi-

property required to could be reported not be Form TFR-300. to It all also

ties in their possession in order to report the numbers of such

securities.

Mr. Acheson referred to the discussion that had been held
regarding the issuance of a general license in Portugal. He
said that the State Department did not desire to see Portugal
receive a general license more liberal in any way than those
previously issued. Mr. Pehle confirmed Mr. Acheson's understand-

ing that, if a general license similar to General License No. 52
is issued to Portugal, such general license would not require the
presence of a representative of the Bank of Portugal in the United

States. Such a general license will, of course, force Portugal
to institute some sort of exchange control.

184
TREASURY DEPARTMENT
WASHINGTON

August 2, 1941

Memorandum for THE SECRETARY:

The following report is made of Stamp sales
at "Treasury House":
$23,684.90

July 1-31

699.15

August 1
Total

$24,384.05

GRAVES

185
FORDEFENSE

BUY
STATES
SAVINGS

FIELD ORGANIZATION News Letter
DEFENSE SAVINGS STAFF

BONDS

TREASURY DEPARTMENT, WASHINGTON, D. c.

August 2, 1941. Number 11.

TO THE FIELD STAFF:

The Defense Savings organizations created in the field continue to
furnish encouraging reports of progress. Extensive educational programs

are carrying our message to increasing numbers of citizens who now under-

stand better than ever the part to be played by the individual in these
critical times. This educational
program is enlivening the great
confidence in the future of our
nation, in our ability to meet every
challenge with united strength, in
CENTER

the practice of thrift today and its

bearings on each individual's future.
At the same time, members of

the committees are busily engaged in

establishing plans that will afford

the most convenient methods for the

public to purchase securities regularly and systematically. The cooper-

ation of financial, labor, industrial,

mercantile, professional, and the

other groups that are making these
methods available will chronicle an

important chapter in the nation's
history. The ownership of Defense

securities is becoming more and more
widespread daily. Many dollars are

THE

FAMILY

being laid aside regularly through

payroll allotments and stamp purchases

which will increase materially, in the

near future, the number of bonds owned.
Courtesy of Detreit Free Press

The plans of organization, the
educational programs, and the methods

of marketing which your committees are

following are certain to produce excellent results when coupled with the
enthusiasm and patriotic devotion so characteristic of those engaged in this
important work.

Sincerely yours,
GALE F. JOHNSTON

Field Director, Defense Savings Staff

186
LEADERS APPOINTED IN OREGON AND VERMONT

Governor Charles A. Sprague of Oregon has accepted the Honorary Chairman-

ship of the Defense Savings Committee for that state. At the opposite side
of the continent, Levi P. Smith, President of the Burlington Savings Bank,
has accepted Secretary Morgenthau's appointment as Chairman of the Defense

Savings Committee for Vermont.

IN THIS ISSUE

ALLOTMENT DEVELOPMENTS--

Recent reports from Vermont - page 3; Florida - page 4;
South Carolina - page 5; Missouri - page 6.
Sample allotment plan to bankers - page 13

Posters for factories and offices available - page 13

Submarine builders launch Defense Savings drive - page 13

BANK NEWS--

Defense Savings Bond clubs in Vermont - page 3
Bankers Set Example - page 8

Elkhart bank display - page 14
State banking associations act - page 15
Investment of business reserves in Defense Bonds advised - page 15
COMMITTEES REPORT -- Vermont - page 3; Florida - page 4; South

Carolina - page 5; Missouri - page 6.

DRAMATIZING DEFENSE SAVINGS--

Four generations make investment - page 4
Stamps are prizes at union meetings - page 6
Treasury House attracting thousands - page 11
Can your band play "Any Bonds Today?" - page 12

Prizes in Defense Securities - page 12
MISCELLANEOUS--

Georgetown alumni "provide for the common defense" - page 7
Milk truck bumpers boost bonds - page 7
Rand-McNally employees receive bond albums - page 14
POST OFFICE AND TREASURY JOINT COMMITTEE - Page 3
PRESS-Page 10
QUOTABLE QUOTES--

E. G. Grace, President, Bethlehem Steel Corporation - page 16
Robert E. McConnell, Conservation and Substitution
Section, Office of Production Management - page 16
RADIO-Page 9

187
VERMONT
First Report from the Green Mountain State
VERMONT BANKERS, through the Vermont Bankers Association, have pledged
their support.

DEFENSE SAVINGS BOND CLUBS are being organized in all Vermont banks, ac-

cording to Levi P. Smith, President of the Burlington Savings Bank and Chairman of the Defense Savings Committee for Vermont. These clubs will be very
similar to the Christmas Savings Clubs, with which all banks are familiar.
WINDSOR COUNTY is reported to be the first in the state fully organized
for Defense Savings. Frank W. Corliss, the County Chairman, has organized
Defense Savings Committees in each of the towns of the county.
TOP FLIGHT MACHINE TOOL MANUFACTURERS of the United States are among the

Vermont firms which are installing Defense Savings Payroll Allotment Plans.
The first list of Vermont companies which have offered such plans to their
employees includes:

Every Mutual Savings Bank in the State
Bryant Chucking Grinder Company - Springfield
Cone Automatic Machine Company - Windsor

Fellows Gear Shaper Company - Springfield
Jones & Lamson Company - Springfield

National Life Insurance Co. of Vt. - Montpelier

Parks & Woolson Company - Springfield

J. B. Ripley Brass Foundry, Inc. - Windsor
Rutland Railroad Company - Rutland

John T. Slack Corporation - Springfield
Vermont Foundry Company - Springfield

Windsor Foundry Corporation - Windsor
*

CHURCH LAWN FESTIVALS held this Summer in the Diocese of Burlington will

award prizes of Defense Savings Stamps and Bonds. With the permission of
Bishop Matthews F. Brady, all priests in this diocese are being asked to suggest
to committees sponsoring festivals for church support the use of Defense Savings securities as prizes.

$1,000 in Defense Savings Bonds were awarded "holders of the lucky numbers"
at the "Pyrocade of America" fireworks display in Waterbury, Connecticut, which
herelded the opening of the state convention of the American Legion.
GOVERNMENT PRINTING OFFICE

-3

188

FLORIDA
Some "Firsts" in the Peninsula
FOUR GENERATIONS in Mayor L. H. Zinsser's family in Safety Harbor lined
up at Postmaster Dwight W. Shower's window to purchase Defense Savings Bonds,

making one of the first "human interest" photographs in the campaign.

THE FIRST SERVICE CLUB in Florida to report purchase of Defense Bonds

was the Florida District Kiwanis Club. The Rotary Club in Orlando quickly
followed suit.

THE FIRST THREE COUNTIES to report substantial purchases of Defense

Savings Bonds were Duval ($50,000), Orange ($25,000), and Lake ($50,000). In
addition to making these purchases, the county commissioners adopted resólu-

The town of
tions calling upon all citizens to "invest in Defense.
Alachus claimed the distinction of being the FIRST CITY in the state to invest
in Defense Bonds.

AMONG THE FIRST retail outlets in Florida to establish stemp banks or
depots were:

Lane Drug Stores (60 retail stores in Fls., Go., and Ale.)

Wehlgren Drug Stores

Dode Pharmacies (40 stores in Miami and Southeastern Florida)
Red Cross Pharmacy in Miami (This store is advertising Defense
Savings Bonds and Stamps on its large, well-lighted
posterboard on the Miami-Miami Beach Causeway)
Morgaret Ann Stores

Piggly Wiggly Stores
Florida Power & Light Company (40 offices in Miami)

A SALARY ALLOTMENT plan has been offered to the 3,000 employees of the

Florida Power & Light Company in Miami. Other large concerns in Florida
which are installing Defense Savings salary allotment plans include:
American Fire and
Casualty Company, Orlando
Wahlgren Drug Stores
Margaret Ann Stores

Southern Brewing Company, Tempo
Dade Phermecies, Miami

Union Trust Company, St. Petersburg

First National Bank, Leesburg

Piggly Wiggly Stores
THE PENSACOLA CENTRAL LABOR UNION recently indicated its endorsemont of
the Defense Savings Program by purchasing a Defense Bond.

inconclusive

FORDEFENSE

FLORIDA

BUY

UNITED

DEFENSE

STATES

SAVING C
BONNS
D STAMPS

SAVINGS

COMMITTEE

An interesting use of the official

Minute Men poster is illustrated by the
sketch at the left. Superimposed upon en

outline of the State of Florida, the poster

becomes the device or emblem of the Florida
Defense Savings Committee. Local engravers

contributed the art work and three sizes of
mots were made and distributed to state
committee members and others authorized
to uso them.

GOVERNMENT PRINTING OFFICE

-4-

189

SOUTH CAROLINA
Defense Savings Making News

BUSINESS, LABOR, and a wide variety of organizations in ell perts of the
state are cooperating with the Defense Savings Committee, reports State Administretor W. F. Bowers. Here are n few highlights from one of his recent reports:
CHARLESTON

The United Brotherhood of Carpenters and Joiners of America, Local No. 159,
has subscribed to 34,000 in Defonse Savings Bonds.
COLUMBI

Duck Mill Local No. 254, Textile Workers Union of America, has purchased

a $1,000 Defense Savings Bond.

Schulte United's Columbia store presented an attractive window display,
showing flags, stemps, rifles, machine guns and grenodes. At the same
time, the store announced 100 per cent employee participation in a
systematic Defense Bond and Stamp purchase plan.
The South Carolina American Legion has purchased a $3,000 Bond.

HARTSVILLE--

Company sponsors essay contest. The Sonoco Products Company is offering
prizes of from $5 to $100 for the best essay on why Americans Should
Buy Defense Savings Bonds." The contest is open to company employees
and, of course, prizos will be paid in Defense Savings Bonds or Stemps.
NNING-

Clarendon County has invested 330,000 in Defense Savings Bonds from
county funds.
SP RT/NBURG-

The South Carolina Federation of Labor (AFL) endorsed the Defense Bond
Program at its annual convention here and subscribed to a $1,000 Bond.
Fifty-two Spartenburg County business concerns are selling Defense
Savings Stemps.
*
*

SAL'RY ALLOTMENT PLNN continue to gain favor. The following concerns,
not previously listed in the NEWS LETTER, have now made it possible for their
employees to join in the Defense Sevings Program in this way:
Eckerd's, Inc., Columbia
Kohn's Department Store, Columbia
McKesson-Robbins, Columbia

National Benk of South
Carolina, Sumter
Palmetto Bank, Laurons

Pearce-Young-Angel Company,
Orangcburg

Schulte-United Store, Columbia
Seibels, Bruce & Company,
Insurance agents, Columbia
Shorwin-Williams Company, Columbia

LABOR DEPARTMENT HELPS

INSTALL ALLOTMENT PI MS

The State Commissioner of Labor, W. Rhett Harley, who is a member of labor the

State Defense Savings Committee, has given the services of three of his the

inspectors to explain the allotment plan to largo industrial plants in state.
DEPARTMENT PRINTING OFFICE

190

MISSOURI
Stamps Are Prizes at Union Meetings
ATTENDANCE PRIZES of two $100 Defense Bond stamp albums, each containing

a one dollar stamp, are awarded at each bi-monthly meeting of the Moving

Picture Operators Union in St. Louis. Also the following resolution was adopted

by unanimous vote at a recent meeting:

"That all persons working under the jurisdiction of Local 143,

do hereby pledge to buy each week either a Defense Stamp or Defense

Bond and the amount shall be to their best ability."

Harvard O'Laughlin, secretary of the union, writing to Deputy State

Administrator Shackelford, said:

"We are happy and pleased to assist the Government in its
defense preparation for the safety of this country and we hope

that all labor organizations will follow the action of Local 143."
*

MISSOURI PUBLIC UTILITIES are helping to keep the message of Defense
Savings before the public:
ARM FOR DEFENSE
Buy

United States Defense Savings Bonds
The above message now appears on the statements of the Missouri Power &

Light Company. Similar messages appear on the statements of the Laclede Gas
Light Company of St. Louis, Kansas City Power & Light Company, Kansas City
Gas Company, Carl Junction Gas Company, and Clarksville Light & Water Company.

450,000 Missouri families are now reminded each month by their utility
bills to "Buy Defense Savings Bonds."
*

EVERY OIL COMPANY in Kansas City has placed in operation a plan for the

purchase of Defense Savings Bonds by its employees, reports J. W. Wilson,
manager of the Kansas City branch of Standard Oil of Indiana and chairman of
the oil industry group for the Kansas City Defense Savings Committee. In
some companies an allotment plan is used; in others, employees pledge themselves to buy stamps each pay day and the companies make these stamps
conveniently available.
*

set

REPRESENTATIVES OF THE NINE BREWERIES in St. Louis met on July 16 and

up a Defense Savings Committee under the chairmanship of Joseph Hauser,

International Vice-President of the Brewery Workers Union, and with Walter

Pierce, coordinator of brewing interests for Missouri, as liaison officer
Each of
between the brewing interests and the Defense Savings Staff.

the brewery workers unions in the nine plants will be represented on this
Advertising managers of the breweries will develop a

committee.

publicity program.
The payroll allotment plan has been endorsed 100%
by union representatives.
And the International Union started the ball

rolling by purchasing $35,000 worth of Defense Savings Bonds.
GOVERNMENT PRINTING OFFICE

-6-

191
"TO PROVIDE FOR THE COMMON DEFENSE"

UNIVERSITY

GEORGETOWN
TO THE FUTURE SONS OF GEORGETOWN

This about filled with United States Defense Stamps

his faith in the values feught by Georgetown University and
develop to the permanence of democratic Institutions

Justines

1789

Alumni American

NATIONAL

No.

FOR

DEFENSE

The special jacket for a $25 Defense Bond stamp album, shown above, was prepared by the Georgetown
University Alumni Association in its plan "to provide for the common defense" and raise funds for the university. These albums are being distributed to Georgetown Alumni by the Hon. Martin Conboy, Alumni
Association president, with the suggestion that they be filled with stamps and returned to the university
where they will be converted into Defense Savings Bonds registered in the name of the alumni fund.

A BUMPER BOOST FOR DEFENSE SAVINGS

STAMPS

BUT DEFENSE

YOUR COUNTRY AND YOURSELF

DEFENSE BONDS AND STAMPS

T1066

PROTECT AND'YOURSELF
BUY DEFENSE BONDS AND STAMPS

Red. white. and blue bumper strips, pictured above, are now carried by all milk and ice cream trucks which in

Indianapolis. On the right, holding one end of a strip, is President Hunt of the Milk Foundation,
contributed this attractive bit of advertising.
OFFICE

192
POST OFFICE AND TREASURY DEPARTMENTS
ESTABLISH JOINT COMMITTEE

A Joint Committee has recently been established for the purpose of coordinating Treasury and Post Office plans for the sale of Defense Savings Bonds
and Stamps. Both the Field and Information Divisions of the Defense Savings

Staff are represented on this committee.

LETTER CARRIERS REQUEST PERMISSION TO SELL STAMPS

Members of the Houston, Texas, local branch No. 283, of the National
Association of Letter Carriers, have presented Secretary of the Treasury

Morgenthau, Postmaster General Walker, and Postmaster Dunlop of Houston with

a resolution asking for permission to sell Defense Savings Stamps to patrons
on their routes in the manner that postmen during the World War sold War
Savings Stamps.

"We wouldn't go around ringing doorbells," said Fred F. Thompson,

president of the local. "Rather, we would be in the nature of
order takers. We could save our patrons trips to town."

The Post Office Department has authorized postmasters to instruct rural
mail carriers to sell Defense Savings Stamps. (NEWS LETTER Number 5, June 21,
Page 10.)
*

BANKERS SET EXAMPLE
WITH THEIR OWN ALLOTMENT PLAN

ALL COMMERCIAL AND SAVINGS BANKS in New Haven, Connecticut, are repre-

sented on the bankers committee which has been formed there to cooperate with
the general Defense Savings Committee for New Haven in boosting the sale of
Defense Bonds and Stamps.

NOT CONTENT merely to serve as issuing agents, New Haven banks have

adopted salary allotment plans as an example to all employers and employees
and are working together to publicize and encourage systematic purchasing of

Defense Savings Securities. J. H. Allen, assistant cashier of the First

National Bank and Trust Company, is the chairman of this active committee.
*

THE LETTER read by President Roosevelt at a recent press conference which in

ended "I'd rather be an American than anything elso on Earth" was reprinted
full by the Crocker First National Bank of San Francisco in a newspaper
advertisement devoted exclusively to Defense Savings Bonds.
*

ADDRESS PLATES can reduce errors and save labor for banks which sell

substantial blocks of Defense Savings Bonds. The Bowery Savings Bank reports
that whenever a person purchases ten or more bonds, a stencil is cut giving etc.
the name of the purchaser, his address, name of co-owner, beneficiary,
PRINTING OFFICE

-8-

193
DEFENSE SAVINGS ON THE AIR

Leading Programs for the Coming Week
FOR AMERICA WE SING

Tuesday, August 5

7:30-8:00 P.M. (EST)

NBC Blue Network

A
musical program
featuring
conducted
by Dr. Frank
Black.a 44-piece NBC symphony orchestra and chorus,
GUEST STARS: Rose Bampton and Robert Weede.

This program, dedicated to Defense Savings, has been contributed by the
National Broadcasting Company. It will be heard regularly each week.
*

Wednesday, August 6

MILLIONS FOR DEFENSE

8:00-9:00 P.M. (EST)

(The Treasury Hour)

CBS Network

GUEST STARS: John Charles Thomas, Robert Ripley, Miriam Hopkins, Fanny

Brice, with Al Goodman and his band, Barry Wood and Ray Block's choir.

Time for this program is contributed by the Texas Company. This is the
sixth in a 13-week series.
*

5:00-6:00 P.M. (EDST)

MILLIONS FOR DEFENSE

Sunday, August 10

WORL - Boston

New England's own hour-long "Millions for Defense Program" has been on the

air every Sunday since June 15th. Station time, artists, speakers, and
broadcasting facilities are all donated to the Defense Savings Program.

The

program is directed by Gordon Wayne of the WORL staff, and is under the
immediate supervision of Massachusetts Defense Savings Administrator
Daniel J. Doherty and Internal Revenue Collector Thomas B. Hassett.
*

In addition to radio shows devoted entirely to Defense Savings Bonds and
Stamps, radio stations and the sponsors of some of the most widely listened
to radio features continue to give powerful support to the Defense Savings
Program.

For example, Bulova Time Signals now promote Defense Bonds and Stamps

regularly at the rate of 100 announcements per week over more than 200 radio
stations.

#
#

Is Thursday A Big Day in YOUR Community?

Thursdays are big days for the sale of Defense Bonds in many cities,
according to reports being received here from banks and local committee chairmen. The Wednesday night program "Millions For Defense" is apparently
proving to be very effective.
: GOVERNMENT PRINTEN OFFICE

-9-

194
PRESS CONTINUES ITS POWERFUL SUPPORT
CONNECTICUT-

"By the purchase of these Defense Savings Bonds the individual not only
renders the Government a patriotic service but he creates a reserve for himself that he will find mighty good to have."
--The Hertford Courant.
GEORGIA--

"These facts should be borne in mind: America needs your help and through
the purchase of Defense Savings Bonds and Stemps, your money is immediately

put to work for Uncle Sam; moreover, you have an opportunity to invest your
savings in a safe and conservative investment program. Uncle Sam has 0 big job.
Let's help him do it!"
--The Atlanta Constitution.
INDIANA-

"More people must constantly recognize the double purpose served by these
bonds, and old purchasers must keep coming back, making a weekly or monthly
habit of buying them.
"Put Defense Savings Bonds or Stamps on your budget!"

--The Terre Haute Star.

MASSACHUSETTS-

"Every man, woman and child can make a direct and important contribution
to the gigantic effort of National Defense by purchasing a Defense Savings
Bond or Stamp, the denominations of which are within the financial reach of

virtually all."

--The Lynn Telegram-News.

NORTH CAROLINA

"Defense Savings Bonds enable the individual purchaser not merely to assist
with his ready money in paying for the defense program, but, more important for
him, it becomes an utterly safe and profitable means of laying by in store for
future needs.

"It is primarily a saving venture for the people of this country and as

such deserves universal acclaim and support."
--The Charlotte Observer.

DEFENSE BOND QUIZZES REACHING MILLIONS

From all parts of the country come reports that Defense Bond Quizzes, now
appearing in daily - and weekly - newspapers, are proving to be a highly effective way of presenting the facts which folks want to know about Defense Savings
Bonds and Stamps.

Large metropolitan dailies, small country weeklies, foreign language of journals, trade papers and many other types of periodicals - more than 5,000
them - are using this material.

Clippings and letters from newspaper editors indicate that this feature
is being used more widely than any feature ever before syndicated.
PRINTING OFFICE

- 10 -

195
TREASURY HOUSE ATTRACTS THOUSANDS DAILY

Treasury House and the exhibits in Defense Square, Washington, D. C., are
proving increasingly popular. Military equipment of the Army, Navy and Marine
Corps is on display at all times with trained service men on hand to explain
the various pieces and answer questions.

Defense Savings Stamps are sold at the attractive pavilion (pictured in
NEWS LETTER No. 8), and those who begin their Defense Savings programs here

are given albums stamped with the Treasury House imprint. Well-known figures
of the entertainment world frequently appear at Treasury House and autograph
the albums.

The most exciting taxi ride in town! Those who invest the price of a
bond in Defense Savings Stamps are taken in an Army "jeep" car to the Treasury
where they exchange their stamp albums for a bond. This proves to be such a
thrilling experience for some that they comc back for more.

Colorful and highly-varied programs are presented at Treasury House and
in Defense Square. Here is a typical day's program:
10:15-11:30 A.M. - Loew's Theater Cadet Band

1:00-2:00 P.M. - Concert by U. S. Navy Band
4:45- 5:00 P.M. - Treasury House Quiz
The right answers win Defense Stamps as prizes

for the persons interviewed.

5:00- 5:30 P.M. - Concert by U. S. Army Band
5:35 P.M.

- Retroat: Colors lowered with full military honors.

7:30- 8:00 P.M. - Elks Boys Band
8:30- 9:30 P.M. - Variety Program with singing and dancing

During the intermissions on this program, Treasury
House hostesses appear on the stage and invite

the audience to purchase Defense Savings Stamps.

Every hour

- There is a five-minute news broadcast over the
Treasury House public address system.
*

The first "block party" in Washington was held recently in the square
adjacent to Treasury House. There was dancing in the street and the party
was pronounced a great success by the service men and all others in attendance.
*

Plans are now being made for the erection of Treasury Houses Boston. in several

of the large cities throughout the country, including Now York and of War and
Arrangements have been made through the offices of the Secretary military
the Secretary of the Navy to duplicate as nearly as possible the
exhibits in Washington's Defense Square.
. GOVERNMENT PRINTING OFFICE

- 11 -

196

CAN YOUR BAND OR ORCHESTRA PLAY "ANY BONDS TODAY?"

Complete musical scores of the song "Any Bonds Today?" are now available

for distribution to bands and orchestras. Forward your requests for copies

of
the band and orchestra arrangements to the Defense Savings Administrator
for your state.

Within a few weeks, it is hoped that every orchestra and band, including
school, college, and other amateur musical organizations, as well as professional
bands and orchestras, will be equipped to play this tuneful air as it deserves to
be played.
*

TEAM WORK

MOVIE TRAILERS devoted to Defense Savings, the contribution of radio
station KHUB, being shown in Watsonville and Santa Cruz, California, say:
"Buy National Defense Bonds. Defend America and
you defend your home. Listen to Hollywood stars

asking your cooperation several times daily over

KHUB, the voice of the Monterey Bay Area.

"ROCHESTER," of radio and movie fame, (Eddie Anderson) is boosting
Defense Savings Bonds and Stamps on the broadcasts he gives during the
personal appearance tour he is now making.

HOLLYWOOD STARLETS MAKE DEFENSE SAVINGS BANNER

Recent releases of "News of the Day" and "Movietone News" show four
Hollywood starlets completing the sowing of a huge silk banner bearing the
slogan, "Buy Defense Savings Bonds.
*

MORE PRIZES BEING AWARDED IN BONDS

According to Variety, news magazine of the entertainment world, there is
a growing tendency in show business and radio to substitute Defense Savings
Bonds and Stamps for cash in giving prizes, premiums and bonuses.

A SUGGESTION

Have you arranged for the awarding of Defense Savings Bonds and Stamps as

prizes in some local contest? - (Remember that by notifying the Defense Sav-

ings Staff in probably can be made to cover such

eventsWashington,
in thenews
reel
companies
reels, arrangements
All five news have expressed a desire

to include "shots" of the awarding of Defense Savings Bonds in their regular
weekly releases.)
GOVERNMENT PRINTING OFFICE

- 12 -

197
SAMPLE PAYROLL ALLOTMENT PLAN DISTRIBUTED
BY AMERICAN BANKERS ASSOCIATION

IN A SPECIAL COMMUNICATION to leaders of the banking fraternity, William T.

Wilson, Director of the Public Relations Council of the American Bankers
Association, says:

"Payroll deduction plans will become an increasingly important
factor in the Defense Savings Program. Bankers can do much to

promote such plans, first, by installing them in their own

organizations, and secondly, by encouraging and assisting their
customers to do likewise.
"The A. B. A. has received numerous requests from member banks

for payroll deduction systems, and with the hope of being helpful, WO have worked out a simple plan, which is enclosed. We
hope that it will be helpful in suggesting procedures which may

be adapted to banks and recommended to bank customers for appli-

cation to their own personnel. Supplies of the plan are being

furnished to all state associations for distribution."

SUBMARINE BUILDERS ESTABLISH DEFENSE BOND LEAGUE

A DEFENSE BOND LEAGUE has been established by the Groton Shipbuilders

Federal Credit Union. According to The Sub, magazine of the Shipbuilders Union,
the Credit Union Defense Bond League has formulated plans for an "all-out drive"
to promote the sale of Defense Savings Bonds to all Electric Boat Company
employees.

Honorary chairman of this Defense Bond League is L. Y. Spear, Vice
President of the Electric Boat Company. In a memorandum to all employees,
Mr. Spear said:

"I take pleasure in accepting the Honorary Chairmanship of
the current Defense Bond drive and to express my whole-hearted
endorsement thereof. It is my recommendation that each employee

support this worthy move in order to insure the fullest possible

representation of purchasers."
SUBMARINE OFFICERS at the United States Naval Submarine Base in New London,

Connecticut, are purchasing Defense Savings Bonds. Their "Ships Service Club"
recently made a substantial investment in these bonds as one way of bringing
the Defense Savings Program to the attention of its members.
POSTERS FOR FACTORIES AND OFFICES

The official Minute Man poster is now available with a new last line.
Instead of reading "For sale at your post office or bank," the now posters read:
"Ask About Our Payroll Allotment Plan."

These posters are appropriate for display in factories, large stores and

offices which have Defense Savings allotment plans.

GOVERNMENT PRINTING OFFICE

13 -

198

ELKHART AND NATIONAL DEFENSE

Display of national defense products made in Elkhart, Ind., in lobby of First National Bank of Elkhart
Note the A. B. A. poster "Here's How YOU Can Help." The display greatly increased sales of Defense
Bonds, according to George S. Anderson, bank president

MAPS BOND DRIVE

SOMETHING VENTUREDSOMETHING GAINED
PARCEL
OS

DEFENSE

BUY
UNITED
STATES

SAVINGS

Andrew McNally, III. vice president of Rand McNally
& Co., presents an album containing $1 in Defense
Savings Stamps to Miss Catherine Elliott. Each of
the 1.000 employees of this 70-year-old company
received a similar start towards a Defense Savings

on sale in in

BONDS

Bond To Defense Stamps

were placed encourage regular the firm's saving, offices and plants

Chicago, New York, Washington, Los Angeles, San
Francisco and Nashville.

John Richard Anderson, 7. of Superior, Wis.,
"buys a share in America."

199
STATE BANKING ASSOCIATIONS TAKE ACTION
YORK

In a message to all member banks, Eugene C. Donovan, President of the New
York State Bankers Association, urged them to qualify as issuing agents for

Series E Defense Savings Bonds. Mr. Donovan said;

"I certainly look forward eagerly to the time when

substanti-

ally all, if not actually all, the banks in this State are on the
job as issuing agents for the Series E bonds,

"Personally, I feel this work presents one of the greatest opportunities banks have had in a long, long time to do a vitally important and tremendously constructive job in the nation's interest. We
can pull a mighty strong oar, and I feel sure we will."

OKLAHOMA

The Executive Committee of the Oklahoma Bankers Association has pledged

unanimous support to the sale of Defense Savings Bonds. R. B. Patton, president, and Eugene P. Gum, executive secretary of the Association, have suggested
that all bankers enclose descriptions of the Bonds and Stamps with monthly
statements, make talks before civic clubs, and arrange for the systematic purchase of Defense Savings Bonds by bank employees.
PENNSYLVANIA

The Administrative Council of the Ponnsylvania Bankers Association has
adopted a resolution urging all member banks to qualify as issuing agents and to
encourage bank customers to purchase Defense Savings Bonds.
VERMONT

Resolutions expressing "gratification for the opportunity afforded to assist
the Defense efforts of the United States Government in the salo and distribution
of Defense Bonds" have been adopted by the Vormont Bankers Association and the
National Banks of Vermont.
*

"A LIQUID INVESTMENT FOR BUSINESS RESERVES"

The South Carolina National Bank in Columbia, S. C., has addressed the following message to several hundred business firms in that states
"Almost every business in the country makes a charge annually or
more frequently against operating expenses and sets aside a proper
sum to a reserve for depreciation, and in some cases also a reserve for depletion.

"The best asset available today for the purpose of conserving these
reserves is United States Defense Savings Bonds. Any monies invest- and

ed in these securities will be stored away with absolute safety

will always be available to be taken down in any amount needed or
required and plowed back into the business. In the meantime, monies
so invested will be earning good interest,"

GOVERNMENT PRINTING OFFICE

- 15 -

200
QUOTABLE QUOTES-

"To assist the Government in financing the immense cost of the defense program, as well as to afford employees a convenient method of purchasing these
Bonds
and encourage the practice of thrift, a Defense Savings Plan has been established for Bethlehem employees.

has all your part. President

"Participation in the Plan is entirely voluntary on
Roosevelt, however, urged of us to purchase the Bonds, and I hope that

your response as individuals will be comparable to the great effort which you
as Bethlehem employees are making toward the realization of national defense."
E. G. Grace, President,
Bethlehem Steel Corporation.
*

"You and I and RCA are now cooperating with the Government's National Dofense program through our engineering and research, through our production facilities and plants and through our man power. Now our Company is cooperating
with our Government in making it convenient for the RCA Family to purchase and
invest in U. S. Defonso Savings Bonds through regular salary allotments."

-You and I and RCA, Number 82 of a serios of
booklets for employees of Radio Corporation
of America.

"In cooperation with the Government's defense efforts, Schenley Distillers
Corp. has adopted a plan by which employees at the plants will be enabled to
purchase Defense Savings Bonds by payroll allotment.

"Those who save a larger share of their earnings today will be lending real
aid to the cause of defense. Lost hardships be created, prices must be kept at
a sane level. The most effective way of keeping prices down is by reducing the
heavy demand for articles of everyday consumption. Save your extra dollars today, for they will buy more commodities when the defense offort is over."
-From Remarks of Merit, magazine for Schenley
employees.
*

"For the past several months it has been clear that the size of the defense
job this country has undertaken would involve considerable sacrifice on the part
of the general public.

"Faced with this situation, there are a number of solutions which will go

part way to meet the deficiencies.

"However, the people of the United States might just as well face the simple
fact that this defense program is going to mean that they will have fewer of the
luxuries, comforts, and conveniences to which they have become accustomed. No
batter how hard we try to avoid it, production of consumer goods is bound to be

curtailed to an increasing extent. Every patriotic American should start
right now to save our resources for the defense effort."

Robert E. McConnell, Chief of the
Conservation and Substitution Section, OPM

- 16 -

201

DEPARTMENT OF STATE

Assistant Secretary

August 2, 1941

To:

Mr. E. M. Bernstein

From:

Adrian S. Fisher

202
C
0
P

Since Iceland was occupied by British forces in May, 1940, the
British Government have regarded thomselves as responsible for Icoland's

welfare and have done their best (a) to buy Iceland's products and (b) to
supply her needs, including the purchase in the United States and Canada
of goods which could not be supplied by the United Kingdom.

At the time of the landing of their forces in Iceland, the United
States Government undertook to further the interests of Iceland and by

every means in their power to supply the country with sufficient
necessities to provide shipping and to make favourable commercial agreements.

His Majesty's Government in the United Kingdom now proposes to the
United States Government that the two Governments shall cooperate closely

in fulfilling under present conditions the parallel obligations which
both Governments have undertaken at different times. With this object
in view, His Majesty's Government in the United Kingdom suggests

immediate discussion so that a plan satisfactory to all parties can be
drawn up.

The present position appears to be that the British Government must

continue to carry fish and fish oils to the United Kingdom from Iceland
and there will, therefore, be a certain amount of tonnage available for
carriage to Iceland of those goods which we can still supply, but, owing
to the limitation of available supplies in the United Kingdom, most of
Iceland's requirements must to an increasing extent be drawn from the
United States and Canada.

203
-2The British Government, therefore, hope that the United States will
assume the responsibility for providing the tonnage necessary to supply
from North America Iceland's civil requirements and would also welcome

United States' assistance in shipping those military requirements which
could be drawn from America. The British Government has in the past had to
supply Iceland with some American dollars in order to meet the cost of her

purcheses in the United States. It is likely that as a result of the United
States occupation, Iceland will have increased dollar resources and the

British authorities hope that the United States Government will be prepared
to assist Iceland to obtain such additional United States and/or Canadian
dollars as may be needed to meet her purchases. The British Government

wish still to pay in sterling for vital supplies of mutton, fish and fish
oil which are imperative for the British food programme.
The following figures give BOMO general indication of the tonnage re-

quired both for Iceland's civil cargoes and for British military supplies:
The volume of goods at present moving annually from the United Kingdom

to Iceland is 170,000 tons of coal, and 65,000 tons of coke, salt, fertilizer,
cement and general cargo. In addition, moving from the United States and
Canada there are about 40,000 tons of timber and general cargoes. A good
deal of this programme has to be lifted in the summer months when weather
conditions are favourable.

Finally, London hopes that the Maritime Commission will be able to

find tonnage for British military requirements to be purchased and shipped
under Lease-Lend arrangements. These requirements are approximately

70,000 tons of coal and colo per annum, and stores averaging about 6,000
tons a month.

British Embassy

29th July, 1941
Copytime.9.30.41

204
P

MEMORANDUM
With reference to conversation with Mr. Hugh S. Cumming Jr.

last Saturday regarding refunds of dollars to the British Government the Delegation referring to a Memorandum, dated August 26,

1941 to the Department of State, Section I.c. has the honor to
quote here the exact wording of the British clause in question:
In the event of a surplus of foreign exchange
accruing to the Icelandic Authorities, the Icelandic
Authorities will at the request of the United Kingdom
Government re-sell against sterling to the British
Authorities any sums in foreign exchange previously

made available by the latter as far as the surplus
will permit. In computing the amount to be repaid
under this provision, account shall be taken of any
payment made to or by residents in Iceland in sterling
which carries with it a right of conversion into the
currency in question through a registered account or
otherwise.

The Icelandic Government is desirous of having this obligation
cancelled, but should this prove impossible, the Delegation venture
to request on behalf of the Icelandic Government that the United
States Government agree to purchase from the Icelandic sterling
holdings in London, such an amount which would be needed to refund

the dollars obtained according to this clause.

The amount rendered until September 1st is equal to Can $ 1.525.000

and U.S. $ 663.000. In addition to this the Icelandic Banks in conformity with the Committee of Two have already bound themselves to
transfer $2.071.000.

Washington

September 9. 1941

COPY - dm - 9/30/41

205
C

THE ICELANDIC GOVERNMENT TRADE COMMISSION
THE MAYFLOWER

WASHINGTON, D. C.

August 26, 1941.

My dear Mr. Cumming:

I have the honor to enclose a memorandum giving

more details on the principal points which are going to form

the basis of our discussions. The Delegation is at your
service for any further information which it can give and you
might desire.

Sincerely yours,

/s/ Vilhjalmur Thor
Vilhjalmur Thor,

Chairman of the
Icelandic Government
Trade Delegation.

Mr. Hugh S. Cumming, Jr.,

Division of European Affairs,
Department of State,
Washington, D. C.

The Icelandic Government Trade Commission,
The Mayflower,
Washington, D. C.

MEMORANDUM

The Trade Delegation has the honor to submit the

following information and would greatly appreciate that the
subjects are discussed as far as possible in the same order
as they appear hereafter.

I. Transfer of L Sterling to Dollars.
During the year 1940 and the year 1941 until now,

Iceland has sold the bulk of her fish products to Great Britain
and they are meeting there an urgent need. Recently an agreement was signed between Iceland and Great Britain concerning

the sale of the majority of this production for one year,
from July 1, 1941 to July 1, 1942. This sale is estimated to
amount up to L 5.000.000 in an average fishing season.

Last month Icelandic sterling holdings in British
banks amounted to about L 5.000.000.

Great Britain has endeavored to sell to Iceland most
of the necessities which are required for the maintenance of
Iceland's production and to the sustenance of the people. But
because of obvious reasons this has become more and more

difficult as the war goes on, and now the situation has become
so serious that a number of commodities which are urgently
needed in Iceland cannot be purchased from Great Britain. Due

to this situation, no supplies are available of various
commodities and this scarcity has become embarrassing in many
fields.

206

207

-2In the opinion of the Icelandic Government the only

way to help this situation and enable Iceland to obtain her
supplies from America, is to find means to transfer Icelandic
Sterling holdings into U. S. Dollars.
Whereas the United States Government has decided to

render Great Britain all possible assistance because of the
war, not only in war equipment, but also in food products (The
lend-lense Act), and whereas the exportation from Iceland to
Great Britain of food products lessens the British requirements
from the United States as far as these necessities are concerned,
the Delegation ventures to make the following requests:
a) that the United States Government purchase or arrange

the purchase of a certain amount of sterling, of the
Icelandic holdings in London in order that the Icelandic
Government could immediately nake necessary preparations

to purchase commodities in the United States. At present
the Icelandic banks have undertaken obligations for dollar
transfers far exceeding the holdings which they have
available in New York besides owing to the Export-Import
Bank in Washington, D. C. over $ 500.000

b) that the United States Government agree upon trans-

ferring into dollars all Icelandic holdings deposited in
British banks after July 1, 1941 for commodities sold to
Great Britain from Iceland.
c) In accordance with an agreement between Iceland and
Great Britain, dated March 14, 1941 Iceland has promised

to refund when possible to Great Britain the U. S. and
Canedian dollar currency which Great Britain has made

- -3 -

208

available for the Icelandic banks. Should Great Britain
not be willing to cancel this stipulation the Delegation
in addition to items a) and b) above ventures to request
that the United States Government agree to purchase from

the Icelandic sterling holdings in London, in addition
to the aforesaid, such an amount which would be needed in

order to refund the dollar credits which have been made

available for Icelandic nationals by the British Government.

II. The Sale of Icelandic Products.
As previously stated, Iceland has by special agree-

ment sold to Great Britain the majority of the fish products
which will be produced from July 1, 1941 to June 30. 1942.
The Delegation shall be glad to furnish the Department of

State with a copy of this agreement if desired.
There are several Icelandic export products which

have not yet been disposed of. It is very important to find
markets where these commodities can be sold at remunerative

prices. Failing that, the inevitable consequences will be a
serious dislocation in the standard of living of many sections

of the Icelandic people specially the rural population. This
would constitute a great danger for the future economic life
of the country.

There are still various agricultural export products
undisposed of from last year as well as the entire production

of this year. In order to obtain a natural balance it is
considered very urgent to find without delay a market for
these commodities at remunerative prices.

Last year Great Britain paid Iceland 200.000 as

209

compensation or subsidy for lost markets. Close to 95% of
this amount is being disposed of as a subsidy to the agricultural products and the remainder as a subsidy to the special
fish products.

This year Iceland has not received any promise as to
such compensation from Great Britain. Therefore Iceland must
rely on the help which the United States Government may be

able to give her in order to overcome or lessen the above

mentioned difficulties. The Icelandic Government trusts that
the United States Government will see their way to facilitate
the sale of Icelandic products concerned in the United States.
The Delegation ventures to make the following proposals:

a) Reduction of import duties to be made on specially

mentioned Icelandic products, or if this is impracticable
b) Direct purchasing by the U.S. Government at prices
which are considerably higher than ordinary market prices

to cover cost of duty

c) Purchases of Icelandic food products for the military
forces in Iceland at ruling domestic market prices
The Commodities which first come into consideration

are principally the following:
1. Frozen Lamb:

Samples of this commodity have been brought to

the United States and the quality found suitable for the market.

The import duty is, however, 7 cents a 1b., which is entirely

prohibitive for any import to this country. Total yearly output is approximately 5,000 tons. The home consumption is about

1,000-1,500 tons. For export (or sale to the military forces

-5in Iceland) can be calculated 3,000-4,000 tons.

210

2. Wool:
The wool is of rather course quality. It has
been imported to this country for carpet-making. The wool may

also be used for the manufacture of winter apparel. It might
be excellent for military winter uniforms and blankets. There
is now available in stock approximately 500 to 600 tons.
3.

Sheep Skins:

They are mostly exported with the wool on. If

the wool is partly cut, the skins are excellent for the manufacture of fur garments. The pelts are considered excellent
for the making of gloves or garments.
What is said above about the wool applies also to
the skin-wool.

The sheep skins seem to fit excellently for military
outfit, both naval and aerial, when military forces are
operating in a cold climate.
The estimated output this year is 500,000 pieces or

1,500 tons. It will be ready for shipment during October.

4. Casings:
The yearly output is 400,000-500,000 pieces.
They are shipped fully prepared.
5.

Fishmeal and Herringmeal:

These commodities are free of duty but the

interest in this country of purchasing them has not been sufficient to obtain favorable prices. They have proved excellent

for feeding cattle and chickens in other countries, as for
instance, Holland and Belgium. Would it be possible for the
United States Government to invostigate the possibilities of
purchasing these commodities and use them for agricultural

211
-6-

purposes where it is of interest to increase quickly both the
milk production (herringmeal) and the stock of poultry (fishmeal)?

This year's production is estimated at approximately
25,000 tons of herringmeal and 6,000 to 7,000 tons of fishmeal.

6. Salted Herring:
This commodity has during the last few years had

a fairly good market in the United States, but the import duty
is high and therefore this commodity becomes too expensive.

The output could be 250,000 barrels but this year it will
probably not exceed 25,000 to 35,000 barrels because of lack of
markets.

7. Canned Fish:

Iceland now has facilities to produce considerable quantities of this commodity and could therefore replace

those countries which are cut off from delivering their product to this country. Owing to the high duty, the prices on
this commodity produced in Iceland become too high on the
American market.

8. Frozen Fish:
Only small quantities have been shipped to the United

States in previous years. It has proved very satisfactory.
Because of the high duty the prices which the Icelandic producers

obtain for this commodity are too low.

9. Herring Oil:
The duty and excess tax on this commodity makes its

importation entirely prohibitive. On the other hand, this
product forms one of the most important items in Iceland's exports.

-7-

2/2

III. Iceland's Need of Imported Goods.
The present quantitative requirements of Iceland are
estimated at about 350,000 tons annually. The most important
items are as follows:
1. Coal

170,000 Tons

2. Salt

40,000 #

3. Fuel 011 and Gasoline

30,000 "

4. Cereals

16,000 #

5. Grain and Feeding Stuffs

4,500
7,000

7. Lumber

20,000

8. Cement

20,000
8,000

10. Lubricating Oils

2,000

11. Artificial Manure

4,500

12. Paper

2,500

13. Fruit, Vegetables and Potatoes

4,500

14. Fats and Oils (Animal & Vegetable)

2,000

9. Iron and Steel

6. Sugar and Coffee

15. Ropes, Nets & Yarn (Manila, Sisal,Cotton)2,500
16. Hemp (Manila, Sisal)

500

17. Textiles, Clothing, Footwear

2,000

18. Machinery, Electrical Goods

3,000 #

19. All other commodities

11,000 .
350,000 Tons

With regard to lumber, this figure may have to be

revised later owing to severe import restrictions in the past
on this commodity.

The quantitative statistics of imports for the last
year, showing the sources of import, are not yet available.

213
-8-

But according to preliminary statistics of import value during period of 12 months, from July 1, 1940 to June 30, 1941,

the figures are as follows:

Other Sources
Total

5.789.919.00
451.352.00

Brazil

21.831.002.00

Canada

United States

Kronur 54.446.807.00
II

Imported from Great Britain

10.023.455.00

Kronur 92.542.535.00

The imports from the United States during this period

include nearly all classes of goods but due to limited dollar resources the importation from the United States had to be

restricted considerably.
During the war, Iceland has been gradually cut out

from all supplying markets other than Great Britain, the United
States, Canada and Brazil. The principal imports from Canada
have been as follows:

1. Cereals
2. Lumber
3. Rubber Footwear

The imports from Canada have mostly been paid in

Canadian dollars and free sterling made available to Icelandic
banks by the British Government and financed out of Icelandic
credit balances in London.

The most important items supplied by Great Britain

during the period July 1, 1940 to June 30, 1941 are as follows:

-91. Coal

Kromur

Salt, Cement

Textiles and Clothing

Ropes, Nets and Yarn

214
9.557.000
2.309.000
13.199.000
4.586.000

5. Footwear

1.221.000

6. Tobacco

1.535.000

7. Chemicals

1,444.000

Dyeing Material, Soaps, Etc.

9. Paper

1.096.000
1.597.000

10.

Iron and Steel

11.

Different Iron Goods

2.839.000

12,

Machinery, Electrical Goods

3.788.000

971.000

1,491,000

13. Vehicles

950.000

14.

Sugar and Coffee

15.

Miscellaneous Other Goods
Total

8,163,000

Kromur 54.446.000

During the last few months it has become more and

more difficult to obtain these supplies from Great Brital n.
This applies almost to every item of the list above although a
limited quantity has been made available in most classes up to

the present time. However, the situation is fast becoming so
precarious that means must be found to place the supply problem
of Iceland on a more secure basis.
The question of financing purchases in the United

States has been dealt with above and if that problem finds a

satisfactory solution, the Delegation wishes to point out that

it is of most vital importance that means are found to facilitate deliveries of commodities now subjected to priorities.
This applies especially to goods needed by the fishing industry

10 -

215

in Iceland such as iron and steel for repair of the fishing
vessels, raw material for fishing tackle and implements for
agricultural purposes.

The Delegation therefore takes the liberty to request
that the comparatively small supplies needed by Iceland are

given A-1 priority.

IV. Shipping Facilities.
The annual tonnage requirements are estimated as
follows:

1. Coal

170,000 Tons

2. Salt

40,000 #

3. Fuel Oil and Gasoline

30,000 "

4. Lumber

20,000 "

5. Cement

20,000 .

7. Sugar and Coffee
8. All Other Commodities
Total

16,000

6. Cereals

7,000 .
47,000 .
350,000 Tons

As regards the first two items, the Delegation has

every reason to believe that most of the salt required for fish
curing can be obtained in Great Britain and transported to
Iceland by British vessels employed to carry fresh fish to Great

Britain. The situation as regards coal is more uncertain but
the Icelandic Government is negotiating with the British Govern-

ment on this question with a view of having the situation clari-

fied. At the present time there are practically no coal stocks
in Iceland whereas normally 60-80,000 tons should have been

accumulating to meet the winter requirements. If the coal prob-

216
lem cannot be solved by immediate supply from Great Britain and

the coal carried in British-controlled vessels, there will be an
urgent and immediate need for American vessels to carry coal to
Iceland as follows:
September

33,000 Tons

October

20,000 If

November

20,000 #

December

20,000 II

As to the items 3-8, it is now generally anticipated
that these commodities must be mostly bought in the United

States. Iceland has now few small steamers in regular trade.
It is estimated that these steamers can carry annually about
50,000 tons, of general cargo, lumber and cement (Items 4-8).
As the annual requirements of tonnage for these items are esti-

mated at about 110,000 tons, Iceland is in need of additional
tonnage to carry up to about 60,000 tons. To solve this problem,
the Delegation would propose:

a) That 2-3 steamers, each about 2000-3000 tons can be

bought by Iceland at reasonable prices and transferred to

Icelandic Flag, or
b) That 2-3 steamers, each about 2000-3000 tons are now

made available to Iceland for the duration of the war on a
charter basis, excluding officers and crew, in which case the
steamers should be transferred to Icelandic Flag during charter.
If this can be arranged, the tonnage problem with

exception of tonnage for coal, fuel oil and gasoline, could be
considered as solved as far as the situation is now and provided
no special events happen. As regards tankers to carry oil the
most suitable size of a cargo is 4000-6000 tons. The size of

- 12 -

vessels carrying coal should vary according to ports of destination. Steamers 5000-6000 tons can be discharged at Reykjavik
whereas steamers of about 1000-3000 tons are required for other
ports.

This estimate of tonnage is based on the immediate
prospect of the country's need but on account of previous years

severe restrictions on the import of building materials, the
estimate may have to be revised at some later date.

We also wish to draw attention to the fact that owing
to the presence of the military forces in Iceland, the demand

for various goods is likely to increase to a considerable extent.
V. Direct Mail and Telegraph Connection.
As the mail and telegraph service is now between Ice-

land and the United States it takes three months to send letters

and receive replies by return mail. A telegraphic reply to a
telegram sent from one country to the other can never be expected

in less than one week and often with further delay. It is
evident that this situation causes 80 great inconveniences and
is such an obstacle to the normal trade between Iceland and the

United States that it has become intolerable.
Therefore the Government of Iceland emphasizes

especially the desire of having opened a direct radio service
between the two countries and that all conventional mail and
parcel post be forwarded through the shortest possible route.

Washington, D. C.
August 26, 1941.

217

218
MEMORANDUM

September 25, 1941

A/B - Mr. Berle:
Due to the reorganization of OPM and the absence from their
offices of most of the higher officials of OPM and DAR who are

testifying on the Hill on the new lend-lease bill, a settlement
of the details of our proposed purchases from Iceland for British
account has been unavoidably delayed. It is hoped, however, that
discussions between DAR, the Icelandic Delegation, and possibly

the British, may take place early next week, if not at the end of
this week.

In the meantime, the Icelandic Delegation has pointed out to
us that the present is one of the heaviest shipping seasons for
goods bound from Iceland to Britain and that, accordingly, several
weeks delay means a further addition to their already very large
blocked sterling balances in London.
At the same time, Iceland must in the very near future commence her purchases in the United States. Mr. Meltzer of Mr. Acheson's
office has made considerable progress in working out with OPM and

DAR the details of the procedure to be followed by Iceland in procuring supplies in the United States and expects to have a draft
agreement to that end ready for presentation to the Icelandic
Delegation very shortly.

219

-2The most pressing need of Iceland at the moment is for dol-

lars with which to make their purchases in the United States.
In response to the request which you made of the Icelandic
Delegation when they called on you earlier this month, the Dele-

gation has now informed us that Icelandic sterling holdings in
London on July 1, 1941 were about 24,903,057. During July and

August, 1941 the Icelandic banks have purchased a total of 21,871,256
making an approximate total as of September 1 of 26,774,313. The

British Embassy has also sent in their estimate of the Icelandic
sterling balances but have warned me that since their telegram from
London was badly garbled, their figures should not be considered

strictly accurate. According to the Embassy's statement, Iceland's
sterling balances have increased by only 28,000 since July 1 and

the total sterling balances are said to have been 25,800,000. For

our purposes, I believe it would be safer to take the Icelandic
figures.

In addition to the above-mentioned sterling balances Iceland

is obligated to resell against sterling to the British authorities
from any surplus of foreign exchange accruing to Iceland's foreign
exchange previously made available to Iceland by Great Britain. The
Icelandic Delegation informs me that up to September 1, 1941 Great

Britain had made available to Iceland Can. $1,525,000 and U.S.
$663,000. Since September 1, the Icelandic banks have bound them-

selves to repay to the British $2,071,000 should the British make
this sum available to Iceland to cover purchases in the United States.

220
-3In view of Iceland's pressing need for dollar exchange and

the possibility that dollars will not accrue to Iceland as a result
of our lend-lease purchases in Iceland for British account as rapidly
as we had expected, it is suggested that you may wish to sound out

the Treasury on the possibility that through the stabilization fund
the United States might purchase Icelandic sterling balances to
the extent necessary (a) to enable Iceland to repay the Canadian

and United States dollars already advance by the British prior to
September 1, 1941; (b) to enable Iceland to repay such dollar exchange as may have been advanced by the British since September 1;

and (c) to provide Iceland with the approximately $1,250,000 which
the Icelandic Delegation informed you they needed to cover imme-

diately necessary purchases in the United States.

While it is possible that such a transaction by the Treasury
may run counter to policies already determined upon in connection
with sterling balances belonging to some of the American republics,

it would seem on the basis of the facts available to us to be the
only procedure by which we might immediately give to Iceland some

of the financial and economic aids promised by the President in

his exchange of notes with the Prime Minister of Iceland.
Ray Atherton

Eu:HSC:TMT

COPY:1ap-9/30/41

221

-COPYTELEGRAN SENT
GRAY

AUGUST 2, 1941, 1 p.m.

AMERICAN EMBASSY,

CHUNGKING, VIA N.R.
178.
FOR FOX FROM SECRETARY OF TREASURY.

Please keep us currently informed regarding effects
of freezing orders on China and forward any suggestions

regarding the administration and application of these
orders. We are especially interested in the operations

of the various general licenses. It would be helpful
if you could discuss with your colleagues and evaluate
frequently the wisdom of continuing or amending each

of the general licenses and keep us informed of views

on this matter. Also relay any information to us of
dollar situation in Hong Kong resulting from exclusion
of Hong Kong from our Freezing Control.
WELLES, ACTING
(HM)

EA:HF:PAK

222

COPY

TELEGRAM SENT
GRAY

August 2, 1941, 6 p.m.
AMEMBASSY,

CHUNGKING (CHINA) VIA NAVAL RADIO.
179.
FOR FOX FROM SECRETARY OF TREASURY.

Hewlett was interviewed in the Treasury today and
is agreeable to proceeding at an early date to China

to act as your secretary at a salary of $3,500 and
$6.00 per day U.S. currency plus transportation both
ways. Dr. Soong has been informed of your urgent need

for a secretary and of your preference for Hewlett.
Dr. Soong will receive Hewlett Monday afternoon to
discuss possibility of employment on above terms and

travel arrangements if contract is consumated.
WELLES, ACTING
(DA)

EA:HF:MMM FE

223

DEPARTMENT OF STATE

Washington

August 2, 1941.

In reply refer to
EA840.51 Frozen Credits/2784

The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and encloses three
copies of telegram No. 52, dated July 30. 1941, from the American
Embassy at Nanking, China, concerning regulations adopted by the
Nanking Government affecting foreign assets in China.

Enclosure:
From Embassy, Nanking,

No. 52, July 30, 1941. (3)

eh:copy
8-4-41

224
PLAIN

TEM

Nanking via N.R.

Dated July 30. 1941

Rec'd 7:23 a.m. 31st.
Secretary of State,
Washington.

52, July thirtieth.
Following is rough translation of an item in this morning's local
Chinese press: Concerning the freezing of Chinese assets by the
United States and other countries, country measures were discussed and
adopted at the 70th Executive Yuan meeting held yesterday. "The regu-

lations governing the disposition of assets of designated persons" as
proposed by the Ministry of Finance were adopted and promulgated. The

full text of the regulations are given below:
Article one. Only person designated by the Ministry of Finance

shall be affected by this regulation. The approval of the Ministry of
Finance must be obtained before designated persons may acquire or dispose

of assets of the following varieties (1) immovable property rights: (2)
enterprises, businesses and investments in enterprises or business; (3)
government bonds; (4) domestic and foreign exchange; (5) banknotes over

Chinese dollars five hundred in value per month; (6) foreign banknotes;
(7) other movable properties over one hundred Chinese dollars in value.
Article two. Only persons designated by the Ministry of Finance

shall be affected by this regulation. The approval of the Ministry of
Finance must be obtained when designated persons engage in the following

activities except for those who have obtained the approval of the Ministry

of Finance for the items provided in article one.

-2-

225

One. Issuance and recall of loans. Two. Contracting and repayment

of loans. Three. Deposit and withdrawal of funds. Four. Receiving and
payment of deposits. Five. Settlement of loans between creditors and

debtors. Six. Guarantee and transfer of loans. Seven. Acquisition And

disposition of all credit rights and loans which are not specified in the
items mentioned above.

Article three. Only persons designated by the Ministry of Finance

shall be affected by this regulation. The approval of the Ministry of
Finance must be obtained before designated persons may engage in the

following activities in connection with assets as specified in article
one except for those who have been given special permission in accordance

with the provisions of articles one and two.
One. Request for the custody of properties and the exceptance

of trusteeship. Two. Return of properties which are entrusted to or
by others. Three. Loans rents consumption indirect loans, etc.
Article four. Items mentioned below are exempted from the pro-

visions stipulated in the preceding articles.
One. The receipt of various taxes. Two. The receipt of salaries
expenses and other similar payments by employees of or persons specified

by the Ministry of Finance. Three. Cases specially permitted by the
Ministry of Finance.

Article five. Any one who violates the provisions of the preceding
articles shall be punished with a fine of not more than Chinese dollars
five thousand or a sum equivalent to and amount more than three times and

less than five times the value of the assets involved or sentenced to no
more than one month penal servitude.

Article six. These regulations shall be enforced on the day they
are promulgated.

Sent to Department. Repeated to Chungking, Peiping and Shanghai.
By mail Tokyo.

PAXTON

eh:copy

COPY

227
DEPARTMENT OF STATE

Washington

August 2, 1941

In reply refer to
EA 840.51 Frozen Credits/2805

The Secretary of State presents his compliments to
the Honorable the Secretary of the Treasury and transmits
herewith copies of telegram no. 53. dated July 31, 1941,
from the American Embassy at Nanking concerning a statement

in the Chinese press with regard to foreign funds control.

Enclosure:

No. 53 from Nanking,

July 31, 1941.

eh:copy
8-4-41

228
PLAIN

Nanking via N.R.

Dated July 31, 1941

Rec'd. 7:48 a.m. Aug. 1st.
Secretary of State
Washington.

53, July thirty-first.
My 52, July thirty, regulations concerning assets.

Following is rough translation of an item in this morning's
local Chinese press: The Ministry of Finance has made the following announcement concerning those affected by the regulations (issued yesterday) (One)

the United States of America and all its possessions, the Philippines
Common Wealth, Canada, Great Britain and Northern Ireland are referred to

below as designated countries; (two) administrative areas of designated

countries and their quasi administrative areas; (three) countries other
than those mentioned above to be added later; (four) other nationals who

are in reality in a status resembling that of the nationals mentioned
above; (five) branch offices and other business establishments of nationals
concerned which are located in the designated countries; (six) nationals
of the designated countries and those who reside or sojourn in the
designated countries.

Sent to the Department. Repeated to Chungking, Peiping and Shanghai.

By mail to Tokyo.
PAXTON

eh:copy

229
C

FOREIGN EXCHANGE CONTROL BOARD

Ottawa

August 2, 1941.

PUBLIC CIRCULAR NO. 13
KINDS OF FOREIGN CURRENCY WHICH MAY BE SOLD
OR USED FOR VARIOUS TRANSACTIONS

Effective August 1, 1941, Hong Kong has been included

in the sterling area for foreign exchange control purposes.

Accordingly the definition of sterling area in paragraph 1
of Public Circular No. 10, dated April 2, 1941, is amended to
read as follows:

"1. The expression "sterling area" means and

includes any territories under the sovereignty, protection, suzerainty or mandate of His Majesty (except

Canada and Newfoundland) and also includes Egypt,
the Anglo-Egyptian Sudan, Belgian Congo, Ruanda-

Urundi, Iceland, Faroe Islands, and the 'Free French'

Colonies of French Cameroons, French Equatorial Africa
(composed of Chad, Ubanghi-Chari, Middle Congo and

Gaboon), French Settlements in India and French

Oceania (composed of New Caledonia, New Hebrides and

Tahiti)."

FECB-686-2-8-41-DJG

COPY: 8/7/41

PLAIN

DES

230

TIENTSIN VIA N.R.

Dated August 2, 1941

Rec'd 3:20 p.m. 3rd.
Secretary of State,
Washington.

89, August second.

Following from Tientain American Chamber of Commerce, which requests
copy be given United States Chamber of Commerce:

"On July 23rd Japanese military refused to allow bristle shipments
from this port to United States notwithstanding cargoes were already
sold to American buyers and shippers have complied with all exchange

control regulations and other formalities. It is our opinion that
Japanese action in prohibiting shipments of bristles from Tientain to

United States indicates prior to the freezing order a definite policy
on the part of the Japanese to prevent shipments of essential material
to United States.

Effective July 28th Japanese controlled authorities prohibited
exportation of all goods by any nationality to United States or by any
American from Tientsin to place and have given no intention that shipments might be resumed even under licensing system. Japanese sponsored

exchange control bank states that no imports by American firms will be
allowed into Tientain except possibly those shipments enroute and for which
Japanese controlled bank has received through linking benefit of United
States dollars exchange.

Japanese controlled post office has denied parcel post facilities,
both local and international, to Americans.

-2-

D 231

Japanese action is effectively and rapidly bringing American
business in North China to complete standstill. Japanese military

authorities require permits for travel in China which permits with
few exceptions are presently withheld from Americans. Despite
resultant difficulties suffered by American businessmen in North China
this Chamber heartily endorses all measures taken or to be taken by
our Government".

CALDWELL

CSB

eh:copy
8-15-41

232
PARAPHRASE OF PERTIMENT PARTS OF TELEGRAM RECEIVED

FROM: American Legation, Bangker, Thailand.
DATE: August 2, 1941.

NO.1 see.
THE FOLLOWING IS STRICTLY CONFIDENTIAL.

This afternoon after the close of office hears I
was called to the Foreign Office by the Deputy Minister
of Foreign Affairs to impart to my Government, on behalf
of the Minister of Foreign Affairs and of the Prime
Minister, the suggestion that the Government of the
United States establish as Babasay in Bangkek.
Among the things the Deputy Minister said were the
following: The Government of Thailand has refused to
recognise the Banking Government, bus has agreed to

recognition of Japan having requested the for
nation of a syndicate of three That banks, the National
and city Bank, Bank of Asia, and the That Commercial Bank,

with a view to extending credits up to 10,000,000 baht to
facilitate Japan's purchase of such connodities as rubber
and rice, the Government of Thailand has insisted upon
gold as security; Japan has agreed with this understanding;
an arrangement has been made wish
IO THEthe Yokohana Specie Bank,
and the syndicate has been DELIVERING LECHNICVT ot THE

04/206

KAINGE

bill

RECEIAED

GRANT

233

PLAIN

Tokyo via Shanghai

and N.R.

Dated August 2, 1941

Rec'd. 3:01 p.m., 3d.
Secretary of State,
Washington.

1156, August 2, 6 P.M.

Embassy's 1108, July 28, 8 P.m.

In order render foreigners' transactions control
regulations more flexible general license system has
been established effective July 31 through ordinances
appearing Official Gazette published yesterday.

Permission from Finance Minister will not be required in following cases: (one) payment by bank to
"designated foreigners" their deposits for purposes
payment taxes or salaries Japanese employees, (two)
payment to Government offices by designated foreigners

of cable charges and railway fares; (three) payment by
designated foreigners of loans or deposits to banks

not of designated countries for settlement of bills
for imports under certain conditions.
According today's press exemption from permit

requirements will also be granted for certain domestic
payments freight and storage charges, dividends etc.
When such payments made to Japanese nationals however

latter must obtain permission.
Sent Department via Shanghai.
GREW
CSB

copy:jba-8-6-41

234

TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
For Miss Chaunoey

DATE August 2, 1941
TO

Secretary Morgenthau

CONFIDENTIAL

FROM Mr. Cochran

Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
Purchased from commercial concerns

& 6,000
£11,000

Open market sterling held steady at 4.03-1/2, and there were no reported

transactions.

In New York, closing quotations for the foreign currencies listed below were
as follows:

Canadian dollar

Argentine peso (free)

Brazilian milreis (free)

Uruguayan peso (free)
Colombian peso
Mexican peso
Cuban peso

11-3/8% discount
.2380

.0505
.4380
.5800
.2070

1-1/16% discount

In Shanghai, the yuan advanced 1/32 to 5-7/32. Sterling was quoted at
4.02-3/4. up 1/4
A Hong Kong dollar quotation of 25-11/32 was received from Hong Kong this

morning, representing a gain of 3432 since the quotation of July 31. Sterling
in that center was quoted at 4.05-1/2. or 1-1/2 higher than the July 31 rate.

The Hong Kong office of one of the New York banks reported that inter-bank business

in U.S. dollars had been discontinued; also that it had to sell its dollar balances
to the Bank of England.

There were no gold transactions consummated by us today.

The Federal Reserve Bank of New York reported that the following gold shipments had been consigned to it:
$2,570,000 from Canada, shipped by the Bank of Canada, for account of the Government

of Canada, for sale to the U.S. Assay Office.

2,223,000 from Colombia, shipped by the Central Bank of the Colombia Republic for
its account, disposition unknown.

$4,793,000 Total

ams

235
RESTRICTED

G-2/2657-220; No. 457 M. I. D., W. D. 12.00 M., August 2, 1941

SITUATION REPORT

I. Eastern Theater.
Ground: German forces assigned to clean up Esthonia are
engaged with Soviet forces to the west of Lake Peipus and to the

south of Tallin. Tallin appears to be in Russian hands.

The situation in the Smolensk area appears unchanged.
The German High Command claims that the ring around the Russian
troops encircled between Smolensk and Viasma has been drawn

tighter.
The Russian Army holds Kiev and a bridghead of

considerable radius to the west of the Dnieper.

The German High Command claims that a "battle of annihila-

tion" has begun against strong Russian forces encircled in the

southern Ukraine. German armored forces have crossed the important
Odessa-Cherkassi railroad to the southeast of Zwernigorodka.

Air: No change.

II. Western Theater.

Air: No important operations by either side.
III. Mediterranean Theater.
Ground: Nothing to report.

Air: Usual harassing raids.

RESTRICTED

236

CONFIDENTIAL
Paraphrase of Code Cablegram
Received at the Mar Department

at 12:01, August 2, 1941.

London, filed 17:00, August 2, 1941.

1. Arisish Air Activity over the Continent.
a. Night of July 30-31. In the area around Cologra, 45 tens of
high explosive bember and 2800 incontiaries were dropped. On Cologno were

dropped 44 tens of high explesive bomba, 58 twenty-five pound incentiaries
and 4700 ordinary incondiary bombs. British bombers also dropped leaflets
dver Oobleats, Cologes, Boan, and Aachen.

2. Day of August 1. A total of 279 fighters were dispatched as
follows: 57 on interception patrels, 15 on special missions, 36 on offensive
patrols and 173 in the protection of shipping. Shipping off Exylocate was

attached by , Blenhoins, no results of this raid being given.

2. German Air Activity over Britain.
a. Day of July 31. 15 recommissence aircraft and , long range
bombers were employed.

2. Right of July 31-August 1. Five fighters and 10 long range
bombers were used.
2.

Tax of Amount 1. Defensive patrole were maintained and sea

recommissence carried out.

4. Hight of August 1-2. Operations were principally in southvesters Cornwall and were - a small seals.

5. Aircraft Lessee Reported.

a. British lesses. One Barriesse and gilet were lost on August 1.
D.

Axis lessee. No - reported for August 1.
CONFIDENTIAL TTAT
INFORMATION COPY

CONFIDENTIAL

237

4. British Air Activity. Other Theaters.
a. North African Theater. Strong Axis assort of a convey off
Pantellaria prevented its attack w Blonhoin bombers sent out from Malta.

5. Axis Air Activity. Other Thesters.
a. Middle Rasters Theater. On July 30, eight Axis aircraft
attacked Sues. No damage was reported.

Distribution:
State Department

Assistant Chief of Staff, G-2

Mar Plans Division

Office of Naval Intelligence

G. . . . . .

Chief of the Army Air Forces
Secretary of Treasury

Assistant Spiratory of War for Air
Assistant Chief of Staff, 0-3

Air Corps

-2-

CONFIDENTI AT.

238

PARAPHRASE OF TELEGRAM RECEIVED

FROM: American Enhassy, Panami, Panama.

DATE: August 5, 1941, & n.a.
NO.1 219.

Refer to Department's 161, July 31, 7 p.m.
I received the following information yesterday from

the Minister of Foreign Affairs:
Upon request made by the local representative of
the owner of the Santa Helena the Minister of Finance,

ship-section, on the 14th of May 1941 sent a cable to
the Consul of Panana at Bareelona stating that the ship
would be sold and transferred to the flag of Spain, and,
further, instructing the Consul to revoke the Panamanian

registry. on the 16th of May the Geneul replied that
the Santa Helena was on its way to Port Arthur, Texas,
and that when 18 returned to Spain the instructions
would be complied with.
The Panamanian Consul General in New Orleans

advised the Ministry of Finance yesterday that a cable
from the Panamanian Consul at Madrid, dated the 30th of
July, had been received by the Consul General of Panama

in New Orleans stating that a contract for the sale of
this ship to the Spanish Petreleum Monopoly was signed

in his presence according to the previous authorisation
of the Ministry of Finance to Panama, and, further,
requesting that he communicate with the Spanish Consul at
New Orleans

239

New Orleans in order to effect the transfer of the
registry of the vessel.
It was stated by the Minister of Foreign Affairs
that 18 had not been found possible to comply with our

suggestion concerning a requisition of this vessel
because of the authorisation which was given in May to

transfer the ship's registry. I stated that I was
amazed to be told now, for the first time. that such an
authorisation had been issued in May. The Minister's
reply was that he had Just been so informed. I added

that in accordance with the cable of the 30th of July
from the Panamanian Consul that 18 would appear that

the sale had been effected on that date, in other words,
a number of days after I had discussed the matter with
the Government of Panama, and, that had they wished/ to

do, they could at once have withheld the authorisation
after I had first raised the question with then on the 29nd
of July.
The Minister stated that he did not know on what

date the transaction had taken place, and that it was
not possible for the Government of Panama now to requisition a vessel which had been sold to the Government of
Spain.

The details

240

\
The details of the case hard outlines, as
regards "cooperation" are self-evident.
WILDON

2ECBELVBA

819.852/40
RAIVEL
(moo)

TECHNICYT

OFFICE ot THE

SJ bl. IS ie

RECEIVED

241

August 4, 1941
10:45 a.m.
HMJr:

Hello.

Operator:

British Ambassador.

HMJr:

Hello.

Lord

Hallfax:

Hello. Good morning, Mr. Secretary.

HMJr:

Good morning, Mr. Ambassador.

I rang you, as I threatened I would. Any

chance of your being free tonight or tomorrow

night?
HMJr:

Yes.

Lady Halifax, I'm sorry to say, is away

HMJr:

Oh, I'm sorry.

and therefore if you could - if you

didn't mind dining more or less alone with
me, and I think - I hope to have either
dinner tonight our new Minister, Ronnie
Campbell, who just come out of Belgrade -

rather interested about it all in Italy.

HMJr:

Yes.

I don't know whether

HMJr:

oh, I'd be very much interested.

HMJr:

I think he'd interest you.
Very much. I just was thinking a minute I think that tomorrow night would be fine.

Well, that is all right for me. If you don't
mind quietly, no party - literally no party.
No, I'd much rather. We could talk.

242
-2H:

HMJr:

We can talk, and you'll feel entirely free to I don't know what your habits are - to go early
or work or stay late - just as you like.
What time do you dine.

Whatever time you like. Eight or eight-fifteen?
HMJr:

Either one.

Good.

HMJr:

Good. Eight o'clock?

HMJr:
H:

HMJr:

Eight o'clock's all right for me.
And you dress?

Just as you like. I shall, probably, because
I might indulge in a game of tennis and have
a bath before dinner. But do just as you like.
Well, I'll have on a white tuxedo.
Well, don't bother. Do just as you like.

Then I'll.....
Well then, I'll expect you tomorrow night
at eight o'clock.
I'd love to have a chat either with you or
Campbell. That would be fine.

Right.

HMJr:

Fine.

Very nice.

HMJr:

Thank you.

Right. Tomorrow night.

243

August 4, 1941
10:50 a.m.
HMJr:

Merriner

Good morning, Marriner.

Eccles:

Good morning, Henry.

HMJr:

How are you?

I'm fine.

HMJr:

Good. You called me Saturday. This is in
answer to your call.

on yes. Well, it may be too late now. I-

it's with reference to a vacancy on the Board

here.
HMJr:

Oh.

And I don't know just how it finally ended

up. I talked to the President, I think, last
Tuesday, about two people - one was Wilson

HMJr:

Yeah.

Undersecretary - used to be Undersecretary

of Agriculture
HMJr:
E:

HMJr:
E:

Yesh.

and the other is this fellow they call
Spike Evans. You know Evans - he's head of
the AAA. Fine looking, big, tall fellow from
No. I don't know him.

Well, you just don't place him. He's been over
in the office I know while I've been there, but
anyway he's head of the AAA,

HMJr:

Yes.

And 8 very - he's been there since '38. A

very able fellow. Well, I talked to the President

244

-2about both of them, and checked with Wallace;
and Wallace recommended both very, very highly.
HMJr:

Yeah.

I talked to Wickard about it, and Wickard said,

"Well, before we do anything, let me see you on

Monday. I've got to go out of town, and I'd
like to talk to you." " See?
HMJr:

Yeah.

And he said, "In the meantime, would it be
all right to say nothing about it?" In the
meantime, Wickard talks to the President and

proposes Paul Appleby.

HMJr:

Uh-uh.

(Laughs) And I get a note from the President

in which he said he was making out the papers
HMJr:
E:

HMJr:
E:

Yeah.

saying that Wickard had said he couldn't
spare either of the other two
Yeah.

and that this fellow's been a good administrator

and a lot of other stuff.
Yeah.

And this was Saturday morning I get this. Well,
of course, I wrote a note immediately to the
President and got ahold of Rudolph Foster

HMJr:

Yeah.

had him put one copy on the papers he was

preparing
HMJr:

Yeah.

.....got ahold of Watson finally - I couldn't

245
3-

get him for a time; apparently he was over at
the House, because the President wasn't in his
office
HMJr:

Yeah.

and got an original copy of the letter,
and I haven't heard the results yet.

HMJr:

I see.

And I was trying to get ahold of you to see

HMJr:

Yeah, I know him.

if you knew Paul Appleby very well.

Well, now, he's - he and this fellow Black I mean, I'm told that Wickard has been trying
his best to get rid of him - get him out of
there - and

HMJr:
E:

Well

the way that thing was handled made me

pretty - I was - talked to him, you know

perfectly frank, and he said, "Well, let's -

if it's all right to wait, I'd like to talk

to you about it.' In the meantime, apparently
this 18 what happened.

HMJr:

Yeah.

Well, that isn't very square shooting.

HMJr:

No. I don't think so.

Huh?

HMJr:

I don't think so.

Well, I wanted to - I knew you'd be interested
in - I talked to you about Wilson, you remember.

HMJr:

Yeah, I remember.

And I knew you'd be interested in the thing, and

246

so I was just trying to get ahold of you
to tell you about what the situation was

and see if you had any suggestions.
HMJr:

I got a little note from the President.
Did he send you a copy or was mine a copy
of yours? I guess it's a copy of what he
wrote you about talking with me and

Yeah. Yeah, I got it.

HMJr:

Yeah.

Yeah, I got it Friday.

HMJr:

Yeah.

You mean on this installment credit thing?

HMJr:

Yeah.

Yeah, I got it.

HMJr:

Well, that's all right.

Yeah. Well now, Leon and I talked to him

HMJr:

Yeah.

as we told you we would do

HMJr:

Yeah.

and he was, of course, very much in

favor of doing something about it. We didn't
said that it wouldn't be necessary for us to

have to really do any selling job at all. He
clear it with more than Smith and have him
with the Attorney General

HMJr:
E:

HMJr:

Yeah.

that he wanted to get it signed before
he left.
Yeah.

247
-5See? That - this was Thursday we talked to
him, so it didn't give him much time.

HMJr:

Yeah.

And it was his suggestion that he get it out

immediately before he got away.

HMJr:

Yeah.

Now, this is what he signed it. I asked that
he leave the date of it blank

HMJr:

Yeah.

for the reason that the minute it becomes

public, everybody's going to try to beat the
gun.

HMJr:

Yeah.

You see?

HMJr:

Yeah.

And I felt that we agreed to do some checking

HMJr:

Yeah.

You see? So what we're doing this week and

with the Federal Reserve Bank people before
any regulation was issued.

next week

HMJr:
E:

Yeah.

is getting the regulation in shape to
present and discuss it with the trade and
with the bank people, which I think is a
lot better than just springing something on

these people without giving them a chance to

be heard.
HMJr:

Yeah.

Now, Ronald - I've asked Ronald Ransom if he

248
-6would represent - handle this thing for the
Board. It's going to be a constant job, so

Ronald is going to take this over and handle
it; and who - who do you want to designate
to advise with on it?

HMJr:

Well

I assume you want to designate somebody that

HMJr:

.....on this?

Yes.

HMJr:

I think until further notice, Bell.

Bell.

HMJr:

Yes. Is that agreeable?

Yes, fine.

HMJr:

Is that all right?

HMJr:
E:

So I'11 - well, then I'll advise Ronald to
keep Bell in touch with the situation then.
Yeah.

Let me ask you this. Confidentially, do you
feel that Appleby is a proper representative
of Agriculture on the Board? Is he an agriculturist?

HMJr:

No.

Well, that's just the way I feel about it.

HMJr:

He ran some small town newspaper and

Mostly politician, isn't he?

HMJr:

Well, inclined that way.

Uh huh.

249

-7HMJr:
E:

HMJr:

Inclined that way.

Well, it makes - it upset me. I'm - I don't
know whether the President got my letter and
what he did about it, but I'm just
No, Agriculture wouldn't recognize him as a
representative.

Well, Agriculture's going to be - not going

HMJr:

No.

to like it at all.

Well, if he deferred it, why we've still got
a chance. I don't know whether he did or
not. If he got my letter, I rather think he
did, because it was pretty strong.

HMJr:
E:

Yeah. Be seeing you soon.

All right. Good-bye.

250

August 4, 1941
11:00 a.m.

GROUP MEETING

Present:

Mr. Cochran
Mr. Thompson

Mr. Bell

Mr. Gaston
Mr. Blough
Mr. Odegard
Mr. Kuhn
Mr. Schwarz
Mr. Graves

Mr. Cairns

Mr. Sullivan
Mr. White

Mrs. Klotz
Mr. Foley

H.M.Jr:

Dan, I had a long talk with Eccles.
There is a letter in from the President which
you can see. Mrs. Klotz will show it to you
afterward. Eccles sent me a copy. It said
any move that he should take that might affect
the Treasury, he should first talk with us.

He handled it that way, which is all right.
Eccles wanted to know who would represent

the Treasury on the question of instalment
buying, and I said you would.
Bell:

Is it settled now that way?

H.M.Jr:

What do you mean?

Bell:

I mean that they are going ahead with the
program --

251

-2H.M.Jr:

Well, I gathered he didn't want the President
to date it for some reason or other, but the
President has signed the order.

Bell:

Oh, he has signed it?

H.M.Jr:

But Eccles also wants to see the industry first,

and he said Ronald Ransom would get in touch
with you.
Bell:

I see, so that in effect answers Henderson's

H.M.Jr:

Yes, I am not paying any attention to the

Bell:

All right.

H.M.Jr:

Herbert?

Gaston:

Yes.

H.M.Jr:

What have you got?

Gaston:

Nothing much. That building you spoke about
at Two Park Avenue in New York, they have

letter too.

Henderson letter.

only four thousand feet of space left now.
We need seventy thousand, and also it is
very undesirable space, anyway. That sixtyday cancellation thing bothers me quite a bit.
I don't think we can get any bids. We have
advertised twice now. We have just got a new

set of bids. We will have to re-advertise on
that sixty-day cancellation thing. I don't
think we will get any bids because our alter-

ation expenses are very heavy.
H.M.Jr:

Can you take it for a year?

Gaston:

Oh, yes.

H.M.Jr:

One year?

252

-3Gaston:

H.M.Jr:

We have been on a year basis with a thirty-

day cancellation after the first year.
That is all right. Go ahead on that basis.
Anything else?

Gaston:

Elmer Irey is here and is coming in to see me

soon. I am working on a letter.

H.M.Jr:

I would like to see him this morning. Is he

well?

Gaston:

Yes. He had an appendicitis operation.

H.M.Jr:

He is well now?

Gaston:

He is well now.

H.M.Jr:

I would like to see the two of you at eleven

thirty.

What else?
Gaston:

That is all.

Sullivan:

Here is a memorandum --

H.M.Jr:

Did you go home over the weekend?

Sullivan:

Yes, sir, I went up Friday night and came down

last night.

H.M.Jr:

What is going on on the Hill?

Sullivan:

Oh, I think just people getting more and more

irritated. I had a call from one member of

the Committee this morning, and it seems pretty
clear from his conversation that the Committee
are getting very bitter toward Sam and John

McCormick.

253

-4H.M.Jr:

A little louder.

Sullivan:

They seem to be feeling quite bitter toward
the Speaker and the majority leader. This man,

at least, blamed them for the affair. The
C.I.O. has endorsed the joint returns.

H.M.Jr:

I saw that. Was there anything for me to
do today?

Sullivan:

I don't think so, sir.
I am going to be there at twelve and I will stay
right there through the fight and if anything
develops I will phone. Do you intend to be here?

H.M.Jr:

Sullivan:

Right. What else?

That is all, sir. Mr. Blough has a draft of

your statement for Friday or Monday. This
thing today may result in a postponement. of

a day or two, but I don't think we can rely
on it, and if you have time to get a start
on this today, I think it would be helpful.

H.M.Jr:

Well, I will see Blough and Kuhn right after
press, Mrs. Klotz.

Sullivan:

Thank you.

Schwarz:

I was going to suggest, Mr. Secretary, in
line with that that you will probably be asked
to reconcile possibly the fact that we did not
favor - we did not ask for broadening the
base and the President has. This might be a
good opportunity this afternoon to discuss

that a little bit.

H.M.Jr:

What should I say?

Schwarz:

Ferdie and I have talked about it. We think
you could say that that was in May, when you

254

-5went up on the Hill, and the situation has
changed some and that many people have an

illusion about the amount of revenue that would
be obtained from base broadening, and we didn't
ask for it because we were hoping to get revenue

from the excess profits tax, but that we haven't
opposed it.

Sullivan:

That is not true, Chuck. I have fought it

Schwarz:

By questioning, not by - by examination. Did

tooth and nail for three months.

we fight it?
Sullivan:

Oh, yes.

H.M.Jr:

No.

White:

I hope you don't say anything about it.

H.M.Jr:

No.

Schwarz:

Then even more so I think we should --

Gaston:

thought two or three days ago that you
ought to come out with a statement defending
our position and opposing any so-calle d
broadening of base, but in view of the events
that have happened in the last few days, I

think it is a good spot to say nothing.

H.M.Jr:

Certainly. I agree with you a hundred per cent.

Sullivan:

Well, there is an answer.

H.M.Jr:

Yes, but the answer is to say nothing

Sullivan:

All right.

H.M.Jr:

I mean, I am not going to get into a discussion.
My position would be untenable. Don't you agree?

255
6-

Sullivan:

Yes. I think the place for the answer is on

the Hill. I will tell you later what I have

in mind for you when you are before the Sen-

ate Finance Committee.

(The Secretary held a telephone conversation

with Mr. Early).
H.M.Jr:

A dirty job for you, Herbert. There is a Frank
Smith that the President turned down for SEC
on Steve Early's recommendation. Now he is

trying to get him a job here in the Treasury.

Have you (Bell) got any correspondence from

him?

Sullivan:

Where is he from?

H.M.Jr:

I don't know.

Sullivan:

There is a Frank Smith that has been bothering
me.

H.M.Jr:

Anyway, if you (Klotz) will give the correspondence to Mr. Gaston, he will be delighted to
see him. It comes under politics.
Where were we?

Cochran:

You were starting with me.

Sullivan:

You decided to say nothing?

H.M.Jr:

Sure.

Cochran:

Mr. Gifford was in Saturday to say goodbye.

He is flying to Scotland. tomorrow. He is
leaving his assistant up in New York. They
are still liquidating some. He gave me a
statement as to what they still have. He was
most appreciative of the help you have given

him. I have a letter here --

256
-7H.M.Jr:

I hope when he gets back he will send me a picture. He asked me for a picture of myself,
which I gave him, and out of courtesy I said,
"Well, won't you give me one," and he said,

"Yes, but all of my pictures of myself are in
Scotland." So when he gets back maybe I will
get one c.o.d., collect.

White:

He will have to get it away from one of his
relatives, I expect.

Cochran:

Your office referred to me a letter. I drafted
a reply for my own signature (August 2, 1941 to

Mrs. Vinaver-Grinberg). I don't think you know
those people.

H.M.Jr:

No, I don't.

Cochran:

That was just a memo to record Welles' answer
on that Russian thing.

H.M.Jr:

I want to read that memo from Welles (August 2,

1941). (cochrains memo)

Well, now, you can sell them very simply,
every monetary agreement that I have arrived

at, so far, as far as I know, certainly I have
done from Treasury to Treasury.

Cochran:

I mentioned the Tri-partite and Stabilization

agreements. On the other hand, of course,
this is between you and Welles, there is a

little bit to what he says there. They are
consummating an important agreement of which

this was supposed to be a part, and if you do
it separately at the same time and make it
terminate coincidentally with the other agreement, it might be something which they would
prefer to handle themselves.

257

-8H.M.Jr:

Well, you can call up Mr. Henderson and tell him
that I would very much prefer to have it
separate because I don't want the publicity.
I don't want to set a precedent. It means
a good deal to me and unless it means a lot if it means enough to Mr. Welles, then Mr.
Welles should call me himself.

Cochran:

All right.

White:

Isn't there something more than that, Mr. Secretary? The position that we have taken right

along with respect to gold is that it is a

monetary matter. We took that when Mr. Welles
included in his statement on policy on freezing
Chinese and Japanese assets - there was a

statement in there that we would not buy gold
from Japan. Ed Foley called Dean Acheson up
at once and said, "We object to that being

put in there at all because that relates to
an entirely different class of question."

And Dean Acheson replied to Ed Foley's state-

ment that that was all right with them, when

Ed Foley explained to him what we would do,
and what he could say is, that we would block
the dollars which they acquire as a consequence

of the purchase of gold, but that was a separate matter. That was a question of freezing
dollars which they had and I think that we have
a clear record going all the way back that
questions of purchase and non-purchase of gold
has got nothing to do with any arrangements
with any country.

H.M.Jr:

Well, that is the way I feel, but I haven't

discussed it with you. So will you (Cochran)

pass that along to Henderson?
Cochran:

Yes, sir.

H.M.Jr:

Say I feel very strongly about it.

258

-9-

Cochran:

That it should be separate?

H.M.Jr:

Yes. I feel very strongly about it.

Cochran:

All right, sir.

H.M.Jr:

Will you do that, please.
Yes, sir.

Cochran:

That is all I have except that Mr. Bell may
have told you that Hall-Patch has been named
temporarily to the Stabilization Board out
in China for the British, so that finishes
the --

H.M.Jr:

Now, the Russian Ambassador is pushing me for

this thing, so I would like to get an answer

as soon as possible.
Cochran:

The State Department is anxious to have it too,
because he is pushing them for the signing of
the trade agreement today. I will phone as soon
as I go out.

H.M.Jr:

Anything else?

Cochran:

No, sir.

Cairns:

I have nothing.

Kuhn:

I have talked to Howard Dietz about that poem
that the President wanted us to use, and he has
everything ready, but he would like very much
to use it two weeks from Wednesday, instead
of this Wednesday, and wonders if you have

any objection to that.
H.M.Jr:

Yes.

Kuhn:

He says the show is crowded and there is no

logical place for it.

259

- 10 H.M.Jr:

I told the President it would be on this week,
and I want it on this week.

Kuhn:

Right.

H.M.Jr:

I am not going to argue with Howard Dietz. I
told the President it would be there, and the
President can't understand that it won't be
on.

Kuhn:

And he is trying to get Al Freedland and thinks
he can do it.

H.M.Jr:

Tell Howard Dietz that this is a must.

Kuhn:

Right:

I don't know if you saw the two columns yester-

day about the radio shows.
H.M.Jr:

No.

Kuhn:

It is the best piece that has yet been written.

H.M.Jr:

About our radio shows?

Kuhn:

Everything about our radio shows.

H.M.Jr:

No, I would like to read it.

Kuhn:

It did not come from anyone in Treasury, and
I can't find out where it came from, which

makes it all the better.
H.M.Jr:

You tell Howard Dietz this is a must.

Kuhn:

Yes, sir.

H.M.Jr:

What else?

Kuhn:

That is all.

260
- 11 Blough:

You
later?don't wish to see this statement draft until

H.M.Jr:

Not until this afternoon.
Harry?

White:

I called up Feis yesterday with respect to
the matter you spoke of. He was out of town
for the week. I called his assistant and after
quite a little discussion, he remained in doubt
as to whether it would call for an answer or not,
and he said Edmiston was handling it for the
State Department. I called Edmiston and he
was away. I thought that Cox was the important
man and I called Cox and he said that he was

a little bit dubious about whether, A, it called
for a reply from you, and B, whether even if it

did that should be the reply, because he had
some doubts about it and he thought he would

like to have it postponed until Monday, so I

suggested he send a cable saying that a reply

would be forthcoming from Lend-Lease on Monday

morning, which he did, and there is to be a
meeting, I gathered, today, at which the reply
is to be drafted. A good deal of material came
from Coe.

H.M.Jr:

I would like to have it.

White:

Then when you want it summarized --

H.M.Jr:

Thank you.

What else?
White:

I have a - Eccles likewise sent me a draft of
that statement with a personal letter which,
if you don't answer, I would like to answer,
but I would wish you would answer it, and I
drafted a reply, thinking that he must have
sent a letter to you, too.

261

- 12 H.M.Jr:

I will read it.

Gaston:

That is his article, Harry?

White:

Yes, his article in Fortune, which I think is
a very good one.

Gaston:

He sent me one.

Bell:

I got one also. That is not a criticism, it is

White:

We are still getting the daily reports on our

just an acknowledgment of the letter?

trade with Japan and China. They are not
very significant yet, because most of these

H.M.Jr:

Well, when they are will you let me know?

White:

Yes. "nother few days, and we will analyze them
and summarize them for you.

H.M.Jr:

All right.

White:

We cabled the Phillippines to adopt the

organization form. There is this plan which
I think has come to your attention, of deferred
payments which a large number of economists

signed. It is important only because of the
importance of the signers. I personally
am not in agreement with their view. I will

be glad to give you a memorandum why, but I

think that you ought to glance at the summarized plan which I have got for you.

H.M.Jr:

All right.

White:

Are you going to see the Ecuadorian minister?
Is the Secretary going to see him?

Bell:

I don't know.

H.M.Jr:

I have no request.

262
- 13 White:

Well, the State Department called, I understand, and they wanted the Secretary to say

"Hello" to him. I thought you (Bell) were

going to arrange the meeting.
Cochran:

They said they would confirm it today if they
did want it.

Bell:

I understand he was in town and if they wanted
him to see the Secretary, somebody from the
State Department would call the Secretary,
that we weren't to make any appointment.

Cochran:

They were to call back.

Bell:

That is the way I understood it.

White:

If you do have an appointment with him, here is
a one-page statement of the situation.

H.M.Jr:

What else?

White:

That is all.

H.M.Jr:

Harold?

Harold, I don't know whether you have seen this

book or not, but this is my idea of a good book,
all but the last two pages, which we can't use.
(Referring to book on Canadian bond series.)

Instead of fooling around with it for two or
three months, I think the thing to do is to
give Life Magazine the job of making one like

it and we will get it out quickly. That is good.

I don't have to ask anybody's advice. Just
leaf through that once. That is Canada. Instead of taking months and months - not the

first two pages or the last two, but the rest
of the stuff. What?
Graves:

Very good.

263

- 14 H.M.Jr:

Show it to Odegard and Kuhn, but it really is

tops. I think the best place to do it is just

ask Mr. Luce whether he won't do one for us.
Sullivan:

This month's Fortune has a number of reproductions and posters.

H.M.Jr:

But that is a top job.

Graves:

Certainly.

H.M.Jr:

Particularly at the end. Do you think we could
get something out?

Graves:

I think Ferdie would know better than I.

H.M.Jr:

Well, I would put it up to Luce. Give him the
whole job to do.

Have you seen it?
Kuhn:

Yes.

H.M.Jr:

I asked for what Canada was doing. That is my
only copy. You might get more.

Cochran:

I can get more from Coyne. He sent me this

little thing today, too. (Handing pamphlet to
Secretary).

H.M.Jr:

Would you mind keeping them all together? That

is a swell job. I got a real thrill out of it

and I am sure everybody else will that takes a

look at it.

Odegard:

How was it distributed?

H.M.Jr:

That I don't know. I think what they call it

White:

Why couldn't Life devote one of its own issues,

is their working manual, so to speak. I think
it goes to field workers. I am not sure.

264

- 15 -

not wholly but almost wholly, on that special
subject?

H.M.Jr:

Well, we will get out a lot of these. I think
this is the way to do it.
What about this Congressman Kelly and this
F. C. Ratsche?

Graves:

I passed that on to Mr. Boyd Fisher who is

now in Chicago on our work. He knew the man.
The man's name is misspelled, he told me.
He knows about him.

H.M.Jr:

Are we using him?

Graves:

No, no.

H.M.Jr:

Would you prepare an answer for me to tell
Kelly we are not using him? He is under the
impression we are using him.

Graves:

Oh. I didn't get that.

H.M.Jr:

I would like to have a letter prepared saying

we are not using the man and have no intention

of using him, if that is true.

Graves:

Yes, sir.

H.M.Jr:

All right. What else, Harold?

Graves:

I have nothing.

H.M.Jr:

Now, when do you want to bring your group in to
see me?

Graves:

H.M.Jr:

Whenever you like. I would suggest the latter

part of the week, if it is convenient to you.
Well, the latter part of the week I get tuokered
out. How about 10:30 Wednesday?

265

- 16 Graves:

That will be all right.

H.M.Jr:

Dan?

Bell:

We are still having a little difficulty in

Bermuda getting cooperation between the depositaries and the Army and Navy officers and

the contractors. I would like to send one of

my men and an Army and a Navy officer down

there to see if they can't work out the difficulty next week.

H.M.Jr:

Would you like to go down yourself?

Bell:

No, I would not. It is the wrong time. But
I would like to send a crew down there to see
if they can't straighten it out.

H.M.Jr:

All right.

Bell:

The tax notes circular, that is a mechanical

problem in the Government Printing Office.
Those sheets come in blocks of fours; four

eight, twelve and so forth for folding purposes,
and it would have cost us three hundred fortysix dollars more to have put out a six sheet
circular than an eight sheet circular.

Bell:

Would you write that to the Trib?
I don't know whether it is worth that or not.

H.M.Jr:

Yes, it is.

Bell:

All right.

H.M.Jr:

Or give it to Gregory.

Bell:

I can give it to Gregory and he may --

Schwarz:

If you will let me have it, Dan, I will give
it to him. I think it is worth doing.

H.M.Jr:

266
- 17 H.M.Jr:

It
worth
doing, because they will keep at
it is
and
at it.

Bell:

It is a little dirty dig, but he didn't under-

H.M.Jr:

Would you?

Bell:

Yes, I will do that.

stand printing, I guess.

We got subscriptions amounting to forty-eight
million dollars in the two days in New York

alone. I haven't got the reports from the rest

of the country. We won't get any reports except
through our transcripts from the Treasury's

account.
H.M.Jr:

My thought was that at press I would say that I
really don't expect to have anything to say
until the Thursday after Labor Day, because

most of the people will wait until the end of
the month to subscribe.

Bell:

Well, you won't get any large amounts, probably,
for a week or ten days because you see in many

cases, particularly the corporations, the boards
of directors have to meet.
H.M.Jr:

I thought I would withhold any judgment until

after Labor Day.
Bell:

You are going to get a lot of money, though.

H.M.Jr:

What is the matter --

Bell:

I think I will have printed, if you don't mind,
two more denominations, a half million and a

million. We got seventeen million dollars

from General Motors alone. Now, that means a
hundred and seventy pieces where if we have it
in millions we can give them seventeen pieces.

267
- 18 H.M.Jr:

They have come in with seventeen million?

Bell:

Yes, seventeen million, and that is just the
beginning, I understand. The chances are we
will get a hundred and some million dollars from
then in the next few months.

(Mr. Foley entered the conference).
H.M.Jr:

Hello. I will buy you a ferry.

Bell:

We are also getting a number of letters. We
got four or five on Saturday as to why this
doesn't apply to estate taxes and asking us to
give consideration to that question, so we may

want to look at that later on.

H.M.Jr:

Well, you take a look at it.

Bell:

Mr. Callahan says that he has a place on the
radio the nineteenth at 2:45 in the afternoon
and he would like to have a lady speaker and
he wondered if you would like to suggest someone and could we take Mrs. Banister or Mrs.
Ross. We thought the afternoon would be a

better time for the ladies, probably.

H.M.Jr:

Mrs. Banister.

Bell:

I understand she has a very good voice.

Great Britain got its first hundred million
last week of the Jesse Jones loan.

I understand that the President has asked the
Navy to work up a bill to provide censorship
of cables and so forth, and that they have
drafted such a bill and they are now drafting
regulations. They have submitted to me a
copy of that part which covers financial cables
and I think probably what we ought to do is

268

- 19 -

first have a committee in the Treasury to go

over it and after we are satisfied with it get

together with the Federal Reserve Board,
possibly Securities and Exchange, and the Commodity Exchange in the Department of Agriculture
before we have the Navy back and tell them our

views on it.

H.M.Jr:

I will leave it with you.

Bell:

All right. I would like to have a few minutes,

fifteen minutes between now and 11:30 tomorrow,
to go over these South American countries, the

policy matters, particularly Mexico. I think

we have two or three we ought to discuss
before we see the Mexican representative
tomorrow at 11:30.
H.M.Jr:

I haven't got anybody down at 11:30 tomorrow.

Bell:

Well, we are going to discuss --

H.M.Jr:

10:15?

Bell:

Tomorrow?

H.M.Jr:

Yes. How much do you want?

Bell:

Fifteen minutes will be plenty, I think, don't
you Harry?

H.M.Jr:

Sold.

Bell:

All right, that is all I have.

Thompson:

I wonder if you want to select your alternate
on the Economic Defense Board, Mr. Wallace's

board?

H.M.Jr:

My alternate?

Thompson:

Yes.

269

- 20 H.M.Jr:

No, I am not quite ready. Has he written us?

Klotz:

Yes, it came in this morning.

H.M.Jr:

Well, you keep after me, will you?

White:

I think you ought to allocate some time before
you see the British because I think there are
a couple of decisions, Dan, you wanted to take
up, the matter of the French --

Bell:

I would like particularly to speak to the
Secretary on that French thing at 10:15.

H.M.Jr:

All right.

White:

Well, if not tomorrow, then today.

H.M.Jr:

I can give you half an hour tomorrow. What
time?

Bell:

10:15, you said, we might do both.

H.M.Jr:

Supposing I say 10:45?

Bell:

To 10:45?

H.M.Jr:

From 10:15 to 10:45. We will do British and
whatever you fellows have got.

Bell:

That is plenty.

H.M.Jr:

All right?

Bell:

Yes.

H.M.Jr:

Mr. Foley?

Foley:

Here is a memorandum (August 2, 1941) on the

Lazard Freres, that Silesian-American unit you
asked about.

270

- 21 H.M.Jr:

Anything else?

Foley:

No.

H.M.Jr:

Wonderful.

You (Sullivan) let me know as the battle
progresses on the Hill, will you?
Sullivan:

I'will, sir.

H.M.Jr:

Thank you.

271

August 4, 1941
11:10 a.m.
Operator:

There you are.

HMJr:

Hello.

Steve

Early:

Good morning, Henry.

HMJr:

How are you?

Fine, thank you, sir. And you?

HMJr:

Very well.

Henry, about two weeks ago I sent over -

maybe it was eight or ten days ago - I sent
over to you a letter that the President got
from Frank Smith, who had written to the
boss asking him to consider him as an applicant
for the appointment to the SEC.

HMJr:
E:

HMJr:

Oh.

And the boes told me, by memo, which I sent
along to you
Yeah.

that he was committed over the SEC

HMJr:
E:

Yeah.

and to ask you if you had anything over
there in financing, because Smith's whole
experience has been in finance - bonds and
securities and so forth - and I sent along
with it a statement of his experiences, backgrounds, previous connections, his education,

et cetera. Frank is in town today.

HMJr:

Yeah.

And I was wondering if you or anyone else

over there that you d like or might like to
have Frank see and talk to about himself.

272
-2HMJr:

Yeah. I'd like him to see Herbert Gaston.

Would you?

HMJr:

Yeah.

Well, I'll tell him to do it.

HMJr:

And I'll tell Herbert.

Thank you very much.

HMJr:

I'd be delighted.

Thank you.

HMJr:

Thank you.

Good-bye, Henry.

273
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE

August 4. 1941

Secretary Morgenthau

FROM

Mr. Cochran

STRICTLY CONFIDENTIAL

Upon coming out at 11:30 this morning from the Secretary's Staff
Meeting, I telephoned Mr. Henderson in the Department of State. Mr. Henderson

was not in his office so I left word that I urgently desired to speak with him
before he went out for lunch. I succeeded in reaching him at 12:10.

I read to Mr. Henderson the memorandum dated August 2, which I had

prepared on Saturday morning, after my conversation with Mr. Henderson, and which
I had handed to Secretary Morgenthau this morning. Mr. Henderson confirmed the
correctness of my memorandum. I told Mr. Henderson that Secretary Morgenthau felt
strongly that the arrangement on gold should be directly between the Treasury and
the Soviet Embassy. The Secretary stressed his desire that this arrangement should

be kept strictly confidential, and that this could only be achieved through the
separate arrangement. Furthermore, he asked me to remind the State Department that
all international arrangements of the Treasury have been consummated by it directly
with foreign governments. I specifically recalled to Henderson the Tripartite
Monetary Agreement, which had been between Ministries of Finance. I also pointed
out that at least two of our recent Stabilization Agreements had been signed by
foreign ambassadors accredited to this Government, namely, those of China and
Argentina. Such agreements had been consummated by the Treasury and signed by the

Secretary as the one responsible American official.

I asked that Mr. Henderson convey the Secretary's message to Mr. Welles

as early as possible. Furthermore, I said that the Secretary desired that Mr.
Welles telephone him personally if there is still any question about this arrangement.

1mml

274

August 4, 1941
11:40 a.m.

Operator: Mr. Foley
HMJr:

Foley

Edward

Foley:

Yes, Mr. Secretary.

HMJr:

on the men in Frozen Funds, I wish you
would inquire - do they put the men to work

first and investigate afterwards or do they
investigate first and then put them to work?
Well, I think that they have had to hire
people so fast, Mr. Secretary, that they've
been putting them to work and investigating

afterwards.
HMJr:
F:

HMJr:

Yeah. Well, they better stop it.

All right.
They better stop it. Look, I'd rather be that's just damn nonsense, and something's
come to my attention.

All right.
Now, let them - I don't care - put all the

pressure - but don't put anybody on or let
anybody go in there unless they're investigated first.

All right.
And if Pehle's got anybody on now who's
working and hasn't been investigated, you'd

better find out and get a list of those
people

HMJr:

All right.
and you better get a hurry-up investigation or lay them off temporarily.

275

-2F:

HMJr:
F:

HMJr:

All right.
It's just unbelievably stupid.
All right.
I mean, all you've got to do is to be in

there for a month and the fellows get the
investigation and then they find out he's
no good.

Well

HMJr:

Well, just tell Pehle - tell Pehle I want a
list this afternoon of how many people are

working in Frozen Funds
F:

HMJr:

that haven't been investigated. Yes.
And I want that this afternoon and I want it
in my own hands

All right, Mr. Secretary.

HMJr:

What?

All right.

HMJr:

and let him bring it over here and you

and he can bring it in at two-forty-five.

Two-forty-five.

HMJr:

Please.

Okay.

276

August 4, 1941
12:10 a.m.
Oscar
Cox:

Mr. Secretary.

HMJr:

Yes, Oscar.

The President called Wayne Coy and got him

back from Indiana and told him to get onto
this Russian thing and he damn well meant

business.
HMJr:

Yeah.

And also sent him a memorandum which he

dictated off Saturday night.

HMJr:

Yeah.

And I thought I'd bring you up to date on

it, and also I think he'll probably want to
cry for help to you, because you know what
this business is about.

HMJr:

Well, if you and Wayne Coy want to come over

and see me, I'll be delighted to see you.
All right. Suppose I get hold of him and
we fix a date with Mrs. Klotz.

HMJr:

Well, I'd better give you time now.

All right.

HMJr:

What?

All right.

HMJr:

How fast are you moving on it?

Well, he just got going on it and

HMJr:

The President said at Cabinet that he would,
you see.

Yeah.

276

August 4, 1941
12:10 a.m.
Oscar
Cox:

Mr. Secretary.

HMJr:

Yes, Oscar.

The President called Wayne Coy and got him

back from Indiana and told him to get onto
this Russian thing and he damn well meant
business.

HMJr:

Yeah.

And also sent him a memorandum which he

dictated off Saturday night.

HMJr:

Yeah.

And I thought I'd bring you up to date on

it, and also I think he'll probably want to
cry for help to you, because you know what

this business is about.

HMJr:

Well, if you and Wayne Coy want to come over

and see me, I'll be delighted to see you.
All right. Suppose I get hold of him and
we fix a date with Mrs. Klotz.

HMJr:

Well, I'd better give you time now.

All right.

HMJr:

What?

All right.

HMJr:

How fast are you moving on it?

Well, he just got going on it and

HMJr:

The President said at Cabinet that he would,
you see.

Yeah.

277
-2HMJr:

I steamed the President up at lunch, and
for forty-five minutes he gave them
athen
lecture.

Yes. Well, I think you put this one over
the hump, and it' 8

HMJr:
C:

What?

I say, you put this one over the hump and
it's a darn good move.

I think I helped.
Yeah. I'm sure you did.
Do you want to do it today or tomorrow?

Well, I think we'll probably have more facts
tomorrow; because we're putting all the facts
together now in terms of

Well, I'll hold ten-forty-five.
All right.

HMJr:

See?

Fine.

HMJr:

And if you - Coy and Cox

Right.

HMJr:

I'll be delighted if you fellows want to
come over.

HMJr:

Well, that's wonderful of you.

I'll hold it, and then you just let what's-his-

name know and confirm it.

I certainly will.

HMJr:

All right.

Thank you.

HMJr:

Good-bye.