The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
DIARY
Book 46
November 21 - November 30, 1936
-1Book
Page
XLVI
260
Argentina
See also Book LII, page 145
HMJr cables FDR need for $45 million by end of month to
be used by Argentine Government to redeem the total
of a loan in this market; they will sell sterling in
London and purchase dollars in New York; use of United
States and English Stabilisation Funds will prevent
any disturbance to exchange market - 11/27/36
Bewley discusses with HMJr, Taylor, and Lochhead
question of publicity at press conference 11/30/36
280-282
-B- -
Bailie, Earl
HMJr and Bailie discuss whether Arthur Sulsberger knows
of Morgenthau news stories before they appear in print11/30/36
Buck, J. Lossing
HMJr asks to return to United States for one month - 11/30/36.
324-328
284
-cChina See HMJr-Chinese delegation conversations, Book LXXVIII, page 190
HMJr requests Buck (J. Lossing) to return to United States
for one month - 11/30/36
284
-DDebts, Foreign
Amounts due under funding and moratorium agreements as of
12/15/36, prepared on 10/21/36
France: resolution introduced inviting resume' of negotiations
with United States. 11/27/36
a) Cochran discusses with HMJr - 11/30/36
1) Approach from "commercial side" touched upon
Italy: indebtedness to United States - 11/20/36
22
274-276
285-290
17-21
Drought
See Unemployment Relief
-FFinancing, Government
See also Book XLV
12/15/36 - Memorandum to Rentschler concerning existing United
States Government issues, as well as suggestions to be used
in December 15th financing - 11/27/36
Haas memorandum (preliminary) - 11/28/36
Gaston memorandum - 11/28/36
261
265-270
271-273
- F - (Continued)
Book
Page
Financing, Government (Continued)
HMJr tells Burgess he is going to announce tentative
decision to ask for $300 million new money at press
XLVI
conference this afternoon - 11/30/36
Estimates discussed at conference; present: Bell, Upham,
Haas, Taylor, et cetera - 11/30/36
Conference in HMJr's office; presents Gibson (President,
Manufacturers' Trust Company, New York), Parks (principal
bond expert, Manufacturers' Trust Company), and D. W. Bell11/30/36
310-316
339-352
353-356
a) See Burgess' opinion of ability, Book XLVII, page 22
Conference in HMJr's office; present: Charles A. Miller
(President, Savings Bank Trust Company, New York City, and
a Trustee of the Savings Bank of Utica) and D. W. Bell 11/30/36
a) Memorandum attached on New York State savings banks'
investments in United States Government obligations,
as of 11/28/36
360-362
363-372
Foreign Capital: Restriction of Inflow
Discusseat luncheon: HMJr, Eccles, Ransom, Landis, Williams
(Harvard), Taylor, Viner, Upham - 11/23/36
Conference: Treasury, Federal Reserve, and Securities and
Exchange Commission - 11/23/36
a) Report of study
1-3
98-113
114-123
France
See Debts, Foreign
. Stabilisation
-GGold
See also Stabilisation
"Bob" Warren's article concerning possibilities of isolating
and sterilising gold discussed by HMJr with Bell, Viner,
Williams (Harvard), Taylor, Haas, and Lochhead - 11/23/36..
a) See article from The Annalist - 11/13/36
Great Britain
See Stabilisation: England
137-140
141
H-
Holland
See Stabilisation: Netherlands
Italy
See also Debts, Foreign
. . Stabilisation
Ambassador Suvich calls on HMJr - 11/20/36
a) Enlargement of Tripartite Agreement discussed
40-42
-LBook
Page
Leon, Rene
Article on "Government's new anti-inflationary policy* 11/23/36
XLVI
54-55
-PProgress Reports
HMJr tells McReynolds each Treasury activity should submit
weekly report on all research studies: who are engaged
in study and cost - 11/30/36
309
-S--
Secret Service Division
Wilson memorandum (supplemental to October 29) to Graves
Silver
with reference to activities - 11/27/36
262-264
Senator Pittman has approached Moore (State Department) 11/30/37
a) HMJr tells Moore frankly he can't say what
Treasury is going to do
Stabilisation (arranged chronologically)
293-295
(See Cochran resume September-December, 1936, Book XLIII)
Auriol writes appreciation in longhand to HMJr.
Market reaction discussed by HMJr with Burgess - 11/23/36
12-16
74-83,
128-136
HMJr-Harrison 'phone conversation concerning market reaction11/23/36
Sterling movements reported by Lochhead - 11/23/36
150-153
86-87
"Bob" Warren's article concerning possibilities of isolating
and sterilising gold discussed by HMJr with Bell, Viner,
Williams (Harvard), Taylor, Haas, and Lochhead - 11/23/36..
a) See article from The Annalist - 11/13/36
Dow-Jones and United Press comment - 11/23/36
Cochran resume of reaction in Europe
137-140
141
142-149
154-164,180-
184,235-243,
256-259
Press release by United States Treasury of extension of
Tripartite Agreement to Belgium, Netherlands, and Switzerland11/23/36
Conference on future policy; presents HMJr, Bell, Upham, Opper,
Haas, Taylor, Williams (Harvard), Viner, White, Seltser, and
Lochhead - 11/24/36
a) General Fund could sell securities to market in order
to reduce bank reserves on occasion of gold inflow
(and vice versa)
b) Stabilisation Fund could obtain Government obligations
from Treasury in exchange for gold; sell to market to
reduce bank reserves (and vice versa)
193-198
199-214
S - (Continued)
Book
Page
Stabilisation (Continued)
Conference on future policy (Continued)
c) Federal Reserve Banks could obtain Government
obligations from Treasury in exchange for gold
certificates and sell securities to the market
in order to decrease bank reserves on occasion
of gold inflow (and vice versa)
d) As initial operation, Federal Reserve Banks could
increase reserve requirements to the limit now
permitted by law, or could sell Governments
HMJr thanks State Department and Cochran for cooperationXLVI
11/25/36
Moody's Bond Survey of 11/23/36 discusses problem of
handling gold exports and imports and their relation
to the Stabilisation Fund
244-245
338
Argentina:
See also Book LII, page 145
HMJr oables FDR need for $45 million by end of month to
be used by Argentine Government to redeem the total
of a loan in this market; they will sell sterling in
London and purchase dollars in New York; use of United
States and English Stabilisation Funds will prevent
any disturbance to exchange market - 11/27/36
Bewley discusses with HMJr, Taylor, and Lochhead
question of publicity at press conference - 11/30/36..
260
280-282
England:
Embassy, London, reports British Treasury contemplates
no similar arrangements with Scandinavian countries
"which naturally pivot on London"; feels that, since
issuance of decree compelling owners of international
securities to deposit them with foreign exchange banks,
in Germany, at least, there can be no devaluation until
the securities have been taken over from their present
owners - 11/20/36
Resume of attitude toward extension of Tripartite Agreement 10/30/36 - 11/18/36
6-7
52-53
France:
Actual communique with regard to adherence of Holland,
Switserland, and Belgium to the three-power monetary
agreement, together with intentions of French Government 11/28/36
HMJr and Cochran talk over possibilities of representatives
of Treasuries of various foreign countries coming to
United States to talk informally - 11/22/36
297-304
56-57
a) Cochran says Baumgartner does not have confidence
of Blum
b) British consider Sweden their protege but HMJr
Italy:
is going to ignore this
HMJr asks Lochhead whether October 13th statement was sent to
Italy - 11/20/36
a) Lochhead reports "yes"
Enlargement of Tripartite Agreement discussed by HMJr and
Ambassador Suvich - 11/20/36
&
40-42
- S - (Continued)
Book Page
Stabilisation (Continued)
Netherlands and Switzerland:
Copies of telegraphic instructions to be sent to
diplomatic representatives at Washington, London,
and Paris, cabled to HMJr by Cochran
Cochran 'phones HMJr "everything is sewed up" and HMJr
so informs Taylor - 11/21/36
a) HMJr asks Taylor to call Moore (State Department)
that messages will be coming in tomorrow (11/22)
from Holland and Switzerland; asks Legation to
XLVI
10-11,50-51
43-47
stand by
b) HMJr will now draft cable for FDR (see page 47)
c) Asks Taylor to notify British Embassy
Documents dated November 21st, from Swiss Government
and Dutch Government, discussed in HMJr's office;
present: Viner, Lochhead, Taylor, Gaston, Haas, Opper,
Upham, and White - 11/23/36
Switzerland's actual approval of tripartite monetary
agreement
Sulsberger, Arthur
HMJr and Earl Bailie discuss whether Sulsberger knows of
62-73
185-186
Morgenthau news stories before they appear in print -
11/30/36
Switzerland
324-328
See Stabilization
-
Unemployment Relief
Lonigan map showing states having highest per capita
expenditures in September - 11/20/36
Lonigan charts and tables showing present status of relief
and welfare programs - 11/20/36
Conference: HMJr, Aubrey Williams, Ross (Finance Officer,
Works Progress Administration), Bell, and McReynolds 11/24/36
a) 250,000 drought farmers to be dropped from
Works Progress Administration rolls, 125,000 of
whom will need relief
1) Table showing approximate time limit of
operations under present funds
2) Analysis of Works Progress Administration funds
3) Employment quotas and budgets for state Works
Progress Administration programs
Second conference: HMJr, Williams, Ross, Bell, and McReynolds11/25/36
a) Williams states Works Progress Administration plans
for reducing expenditures
23-25
26-39
169-179
215-217
---Book Page
War Debts
See Debts, Foreign
Warren, Robert B. (Economist - Case, Pomeroy, and Company)
See Gold
Works Progress Administration
See Unemployment Relief
1
November 23, 1936
Following a meeting in the office of the Secretary of
the Treasury, attended by, Chairman Eccles and members of his
staff, and Chairman Landis and members of his staff, and
Treasury representatives, the following had luncheon with the
Secrotary of the Treasury at one o'clock:
Chairman Eccles of the Federal Reserve Board.
Chairman Landis of the Security Exchange Commission.
Governor Ransom of the Federal Reserve Board.
Professor John H. Williams of Harvard Unitersity.
Wayne C. Taylor, Assistant Secretary of the Treasury.
Professor Jacob Viner of the University of Chicago.
C. B. Upham, Assistant to the Secretary.
There was a rather continuous but somewhat disjointed
discussion of the problems involved in any regulation or control
of the flow of foreign funds into the United States, particularly
that which is brought in and used in stock market speculation.
All seemed agreed that the problem is one which merits consideration
and attention but no one claimed to know what the solution is. It
was pointed out that it would be much more difficult to control the
dealings in American securities abroad than to curb the use of
foreign funds in our own markets.
There was some discussion of the possibility of using the
tax method for regulation of this kind, but doubts were generally
expressed as to the practicability of carrying out effective
measures. It was mentioned that since the passage of the Revenue
Act of 1936, which granted certain leniencies to non-resident
2
-2-
aliens, it appears that such individuals have some preference
over American citizens in connection with the payment of taxes
on stock market gains.
Mr. Taylor was definitely of the opinion that the adminis-
trative difficulties in taxing foreigners are so great as to
make that method of approach almost futile.
Discussion centered for a time around the situation which
would result in case of a general European war.
Dr. Viner was inclined to think that the situation might
be handled as it was in 1914 by the stock exchange closing for
a short period. That did not meet with general favor.
It was pointed out that probably foreign governments will
appropriate American securities held by their Nationals and exchange them in this country for war materials. It was agreed
that this would raise important questions with respect to our
neutrality.
The Secretary told the group that he plans to announce
his December 15th financing on December 7th. He further made
known that he is going to refund on December 15th, the notes
which mature next February. He also said that in this financing
he is going to try the idea of giving no preferences in allotments
to those who subscribe for $5,000 and less. There was some discussion of the abuses which had developed in connection with
these small allotments. It appears that there are very few for
less than $5,000 and there is considerable evidence that the
volume of $5,000 subscriptions comes in from banks and business
-3-
3
houses who put in subscriptions in the names of a number of
employees, the bonds allotted finding their way very shortly
into the open market.
Upm.
4
November 20, 1936
3:40 P.M.
Operator:
Mr. Lochhead.
H.M.Jr:
Archie?
Lochhead:
Yes, sir.
H.M.Jr:
Call up New York and ask them if the October 13
statement
not.
wasn't sent to Italy and if not why
L:
October 13. Right?
H.M.Jr:
Yes
L:
Right away.
H.M.Jr:
You know, they sent it out to about twelve or
thirteen different governments.
Right. They sent out to the Central Banks.
L:
H.M.Jr:
To the Central Banks?
L:
I'll check right away.
And why didn't they send it to the Central Bank
of Italy?
I'll check immediately.
And - will you find out?
Right, sir.
H.M.Jr:
L:
H.M.Jr:
L:
H.M.Jr:
And then let me know.
L:
Right, sir.
H.M.Jr:
Please.
5
November 20, 1936.
3:49 p.m.
H.M.Jr:
Hello.
Operator:
Mr. Lochhead.
H.M.Jr:
Yes
Operator:
Go ahead.
H.M.Jr:
Hello?
Lochhead:
H.M.Jr:
L:
Mr. Morgenthau, Lochhead speaking.
Yes, Archie.
The Federal Reserve Bank of New York sent them
the notification of the October 13 release.
H.M.Jr:
They did?
L:
They sent it by mail.
H.M.Jr:
L:
H.M.Jr:
L:
Oh
They sent most of those banks by mail.
Oh
They're looking up to find out whether they have
an acknowledgment from them. And for your informa-
tion the Bank of Italy only has a nominal balance
of about a thousand dollars; they never hear from
them
or practically have any correspondence with
them.
H.M.Jr:
O.K.
L:
"ight, sir.
6
LMS
GILLY
London
Dated November 20, 1936
Rec'd 3:37 p. m.
Secretary of State,
Washington.
551, November 20, 7 p. m.
FOR TREASURY.
In a conversation with British Treasury today Waley
said that they WERE glad Everything had gone so WELL and
that the arrangements for Monday were entirely satisfactory. HE added that now that these reciprocal purchase
arrangements had been concluded, he assumed that that
phase of Endeavor was for the time being terminated and
that it was not our intention to make similar arrangements
with the Scandinavian countries which naturally pivoted
on London.
In regard to the German situation, Waley said that
Pinsent, British Financial Attache at Berlin, had recently
pointed out that with the issuance of the decree compelling owners of international securities to deposit them
with foreign Exchange banks, one could at least be sure
that Germany would not devalue until these securities had
been taken OVER from their present owners. However, Waley
felt that devaluation would not be of any appreciable
assistance
7
LMS 2-No. 551, November 20, 7 p. m., from London.
assistance to Germany; it might simplify the system in
that it would Eliminate the labor of fixing Export subsidies, Et cetera, but it would not under the German closed
Economic system change matters appreciably. Waley in
general agreed with a Foreign Office opinion, namely, that
there was no desire on the part of Germany to change the
direction of her Economic movement; that her present position was not 00 much forced on her by Economic and
financial EVENTS as of her own making which, because of
its military value, she in any case would be unwilling to
change.
BINGHAM
GW:CSB
8
November 20, 1936
3:40 P.M.
Operator:
Mr. Lochhead.
H.M.Jr:
Archie?
Lochhead:
Yes, sir.
H.M.Jr:
Call up New York and ask them if the October 13
statement wasn't sent to Italy and if not why
not.
L:
October 13. Right?
.M.Jr:
Yes
L:
Right away.
H.M.Jr:
You know, they sent it out to about twelve or
thirteen different governments.
L:
Right. They sent out to the Central Banks.
H.M.Jr:
To the Central Banks?
L:
I'll check right away.
H.M.Jr:
And why didn't they send it to the Central Bank
L:
of Italy?
I'll check immediately.
And - will you find out?
Right, sir.
H.M.Jr:
And then let me know.
L:
Right, sir.
H.M.Jr:
Please.
L:
H.M.Jr:
9
-23:49 P.M.
H.M.Jr:
Hello.
Operator:
Mr. Lochhead.
H.M.Jr:
Yes
Operator:
Go ahead.
H.M.Jr:
Hello?
Lochhead:
Mr. Morgenthau, Lochhead speaking.
H.M.Jr:
L:
Yes, Archie.
The Federal Reserve Bank of New York sent them
H.M.Jr:
They did?
L:
They sent it by mail.
H.M.Jr:
Oh
L:
They sent most of those banks by mail.
H.M.Jr:
Oh
L:
the notification of the October 13 release.
They're looking up to find out whether they have
an acknowledgment from them. And, for your information, the Bank of Italy only has a nominal balance
of about a thousand dollars; they never hear from
them or practically have any correspondence with
them.
H.M.Jr:
O.K.
L:
Right, sir.
10
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Legation, The Hague, Netherlands
DATE: November 20, 1936, 5 p.m.
NO.: 63
FROM OOCHRAN.
FOR THE SECRETARY OF THE TREASURY.
In accordance with the schedule which I telegraphed
to you from Brussels yesterday, this noon I was received
by Trip and Beaufort at the Netherlands Bank at Amsterdam. I was accompanied by Trip to The Hague, where Premier
Colija and Minister of Finance Oud received us at three
p.m. The technical declaration in exactly the terms
quoted in my telegram No. 1075 of November 4, 10 a.m.,
was signed and delivered to me by Oud and Trip.
An official of the Ministry of Foreign Affairs was
then called to Prime Minister Colijn's office, and Colijn
instructed him to send telegraphic instructions immediately to the diplomatic representatives of the Netherlands at Washington, London and Paris, to deliver the
following message to the respective Foreign Offices not
later than Sunday forenoon:
"The Government of the Netherlands has cognizance of
the declarations by which the Governments of France, of
Great Britain and of the United States of America have
seen fit to express their intentions with regard to their
11
-2monetary policy and adheres to the general principles
stated in their tripartite declaration of September 25".
I made a request for a long distance telephone
connection with you from the Legation at The Hague, and
if the connection is received before my train leaves for
Switzerland I shall endeavor to give you any information.
I understand that the Dutch will not until Monday
give publicity to their adherence to the tripartite
agreement. The Dutch anticipate that the above-mentioned
statement of adherence will meet your requirements and
that in your declarations of Monday night or Tuesday
morning you will therefore include the Netherlands.
I gave the Dutch officials copies of your proposed declarations, as I did at Brussels. I am to telephone summary
from Paris giving them any available texts of communiques
of the British and French. If any communique is given
to the press by the Dutch, it will not be long.
I have fully informed Minister Emmet of the proceedings.
EMMET.
EA:LWW
12
November 20, 1936.
Monsieur Vincent Auriol,
Ministere Des Finances,
Paris, France.
My dear Monsieur Auriol:
I was very much pleased and encouraged by your very
fine letter to me of October 5th and I must ask your pardon
for not having acknowledged it sooner. It gave me great
satisfaction to learn that the French Parliament had given
its approval to the steps which you and your colleagues had
planned so wisely.
I appreciate very greatly your kind expression of the
thanks of Mr. Blum, your colleagues and yourself for the part
we were able to play in the satisfactory result. I am very
much encouraged by the smooth course of events since our understanding was reached and I share your hope that our nations
may continue to work together effectively for better world
relations in the economic sphere.
Your personal expression of friendship touches me
deeply and it is a feeling which I reciprocate most fully.
Sincerely,
/8/ HENRY MORGENTHAU, JR.
13
November 13, 1936.
MEMORANDUM
TO:
Mrs. Klotz
FROM: Mr. Gaston
The letter from Vincent Auriol to the Secretary is, I
notice, entirely hand written, which was no doubt intended as
a high compliment and a mark of Monsieur Auriol's sincere regard for the Secretary. If there has been no acknowledgment,
I think there should be one.
of letter.
Attachment.
I am attaching a proposed draft
Hay
) 14
TRANSLATION
Finance Ministry
October 5, 1936.
The Minister
id
Dear Mr. Morgenthau
The French Parliament has enacted our proposal for the realignment
of the franc.
It is delighted with the agreement of the three great democracies,
the United States, Great Britain and France.
In turn, I congratulate myself on the adherence of almost all the
nations of the world to our common declaration which puts a definite
end to the monetary war and opens the road toward the "economic Peace" -so essential to peace among nations.
I was deeply moved, the other day, by hearing your voice on the
telephone and by receiving your good wishes for France and for the
success of our endeavor, wishes which Mr. Coohran had already transmitted to us in the course of his mission which he performed so splendidly.
I do not know how to find words sufficiently expressive to convey
to you the thanks of President Loon Blume and his Government, and of
myself, for the energetic, enthusiastic and wholehearted collaboration
which you have given us.
I hope that this collaboration will continue in the work toward
world economic peace which must be achieved if peace amont peoples
is to be attained.
Your eminent President, Mr. Roosevelt, has sounded the call for
human prosperity and for international accord.
We will not be far behind on this road.
And, giving you this assurance, I beg you to accept, my dear
Mr. Morgenthau, with my heartiest wishes for your great nation and
for its President, the expression of my sincere friendship.
(signed) Vincent Auriol
(
15
Ministere des. Finances.
Cabinet du Ministre.
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Washington
MINISTĂRE DES FINANCES
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private FORMASTER
OSTINS 1936 TASK SINBUNDS YOUR BAKINGS
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
November 20, 1936.
17
INDEBTEDNESS OF ITALY TO THE UNITED STATES
I. CASH ADVANCES:
Pre-armisticePost-armistice
$1,031,000,000.00
617,034,050.90
1,648,034,050.90
Interest accrued and unpaid at is
per annum to December 15, 1922
251,846,654.79
1,899,880,705.69
Interest accrued and unpaid at 3%
per annum from December 15,
1922 to June 15, 1925
142,491,052.93
2,042,371,756.62
Less:
Payments made on account of
principal from December 15,
1922 to June 15, 1925
- $164,852.94
Interest at 3% allowed on
principal payments to
June 15, 1925
7,439.34
Payment made upon execution
of funding agreement of
November 14, 1925
Total indebtedness funded into
bonds as of June 15, 1925
199,466.34
1,371,858.62
$2,042,000,000.00
18
INDEBTEDNESS OF ITALY TO THE UNITED STATES
II. FUNDED INDEBTEDNESS:
Principal amount of debt as fundedLess:
Principal payments
$2,042,000,000.00
37,100,000.00
Principal amount of bonds now held-
$2,004,900,000.00
Interest due and unpaid:
Semiannual installments
postponed under the
moratorium agreement - - $2,506,125.00
Balances of semiannual
installments due June
15 and December 15,
1933, and installments
due June 15, 1934 to
June 15, 1936
6,718,041.74
Amount of interest in-
cluded in moratorium
annuities due December
15, 1933 to June 15,
1936
Total indebtedness June 15, 1936
1,428,363.44
10,652,530.18
$2,015,558,550.18
19
INDEBTEDNESS OF ITALY TO THE UNITED STATES
III. TOTAL PAYMENTS RECEIVED:
Principal
Interest
Total
Payments made prior to
June 15, 1925, (date
as of which the debt
was funded)
$164,852.94
$57,598,852.62
199,466.34
---
$57,763,705.56
Payments made upon exe-
cution of funding
agreement
Payments made under
funding agreements-
- 37,100,000.00
Total
$37,464,319.28
199,466.34
5,766,708.26
42,866,708.26
$63,365,560.88
$100,829,880.16
20
INDEBTEDNESS OF ITALY TO THE UNITED STATES
IV. AMOUNTS DUE AND UNPAID UNDER FUNDING AND MORATORIUM AGREEMENTS:
Funding Agreement
Date due
June 15, 1933 /
December 15, 1933
June 15, 1934
December 15, 1934
June 15, 1935
December 15, 1935
June 15, 1936
TOTAL
Principal
Interest
Moratorium
Agreement
Annuities
$12,300,000
$245,416.74
-
245,437.50
$896,155.88
-
1,245,437.50
896,155.88
1,245,437.50
896,155.88
13,000,000
1,245,437.50
896,155.88
--
1,245,437.50
896,155.88
13,500,000
1,245,437.50
896,155.88
12,600,000
$51,400,000 $6,718,041.74
Total
--
$5,376,935.28
$63,494,977.02
1/ Partial payments made on account of interest due on these dates.
21
INDEBTEDNESS or ITALY TO THE UNITED STATES
V. Payments received under funding agreement:
Interest
Principal
June 15, 1926
June 15, 1987
June 15, 1928
June 15, 1929
June 15, 1930
Dec. 15, 1930
June 15, 1931
$5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
-
12,100,000
-
$
-
-
1,260,625.00
1,260,625.00
Total
$ 5,000,000
5,000,000
5,000,000
5,000,000
5,000,000
1,260,625
13,360,625
Dec. 15, 1931) (a)
June 15, 1932)
-
1,245,437.50
June 15, 1933
-
Dec. 15, 1933
-
(b) 1,000,020.76
(e) 1,000,000.00
Dec. 15, 1932
Total:
$37,100,000
$ 5,766,708.26
1,245,457.50
1,000,020.76
1,000,000.00
$42,866,708.26
(a) Amounts due postponed under moratorium agreement, principal $12,200,000;
interest, $2,506,125.
(b) Partial payment. (Received silver for this payment).
(c) Token payment.
November 20, 1936.
22
PAYMENTS DUE DECEMBER 15, 1936
The following statement shows the amounts due under the funding and moratorium agreements on December 15, 1936:
Moratorium
Funding Agreements
Principal
Belgium
Czechoslovakia
--$1,500,000
Interest
$4,158,000.00
---
Agreements
Total
$484,453.88
$4,642,453.88
182,812.78
1,682,812.78
Estonia
126,000
286,265.00
36,585.29
448,850.29
Finland
67,000
145,285.00
19,030.50
231,315.50
---
19,261,432.50
3,046,879.72
22,308,312.22
32,000,000
75,250,000.00
9,720,765.05
117,670,765.05
13,820
33,185.08
4,225.58
51,230.66
1,245,437.50
896,155.88
2,141,593.38
52,500
119,609.00
15,274.26
187,383.26
---
107,783.67
13,683.26
121,466.93
3,582,810.00
456,229.71
5,559,039.71
48,750.08
48,750.08
France
Great Britain
Hungary
---
Italy
Latvia
Lithuania
1,520,000
Poland
Rumania
Yugoslavia
TOTAL
Accounts and Deposits
October 21, 1936
---
---
---
---
$35,279,329 $104,889,807.75 $14,924,845.99 $155,093,973.74
23 F
TREASURY DEPARTMENT
gf
INTER OFFICE COMMUNICATION
nj
DATE November 20, 1936
TO
The Secretary
FROM
Miss Lonigan
SR
The attached map shows which States had highest per capita expenditures from WPA funds in September.
There is no evidence of unemployment or other need to explain expendi-
tures west of the Mississippi at a rate much higher than those in the South
where rural overcrowding and poverty are extreme.
The rate of expenditure in the Eastern and Midwestern States is far
higher than that required in 1935 when unemployment was more severe.
WORKS PROGRESS ADMINISTRATION
Average Work Relief Expenditures
September 1936
N.DAX.
MINN
WYO
WYO
MICH
IDAHO
NEV
NESS
COLO.
WIS.
L DAN.
-
IOWA
OHIO
MO
KANS.
IND.
K.V.
ARIZ
TENN
N.MEX.
CAL
OKLA
TEXAS
ARK.
MISS
ALA
OA
FLA
Per Capita Expenditures
LA
$1.00 - 1.50
Over $1.50
Under $1.00
U.S. Average $1.34
Office of the Secretary of the Treasury
Devision of Research and Statistics
Z - 193
II
25
#
FEDERAL EMERGENCY RELIEF ADMINISTRATION - WORKS PROGRESS ADMINISTRATION
September 1936
Average Expenditures Per Inhabitant
Expenditures
Highest
South Dakota
North Dakota
Montana
New York
Pennsylvania
Colorado
Massachusetts
Nevada
Ohio
New Jersey
California
Per Inhabitant
$2.72
2.59
2.57
2.24
1.96
1.91
1.79
1.75
1.70
1.58
1.53
Lowest
.99
.88
Idaho
Nebraska
Kentucky
.86
Louisiana
South Carolina
.85
.78
.75
.74
.73
.72
.72
.70
.69
.61
.58
.58
.52
Maryland
Maine
Arkansas
Alabama
Mississippi
Tennessee
Delaware
Georgia
Vermont
Iowa
Texas
.49
Virginia
North Carolina
United States Average
.36
$1.34
Source: WPA Checks Issued - Treasury Department
26
m
TREASURY DEPARTMENT
EE
INTER OFFICE COMMUNICATION
DATE November 20, 1936
TO
FROM
The Secretary
Miss Lonigan
eh
Attached are four charts showing the present status of the relief
and welfare programs.
Expenditure of Federal funds by FERA-WPA was $60,000,000 higher
in October 1936 than it was in October 1935.
The FERA-WPA program is taking care of fewer families than a year
ago. This reduction takes the form chiefly of a decline in relief for
the most needy. The number employed on FERA-WPA works programs is
higher by more than a million than the workers employed in October 1935.
In order to compare full relief and welfare expenditures this year
with those of a year ago, it is necessary to include the relief grants
to farmers made by the Resettlement Administration, and grants to the
aged, the blind, and dependent children by the Social Security Board.
These figures are shown in the third and fourth graphs.
Expenditures of all relief and welfare agencies were $85,000,000
higher in September 1936 than in September a year ago.
The combined relief programs were taking care of over half a million
more families than a year ago. This is contrary to the conclusion reached
by Mr. Hopkins on the trend of relief.
Employment supplied by Federal emergency employment programs other
than WPA is still rising.
FEDERAL EMERGENCY RELIEF ADMINISTRATION - WORKS PROGRESS ADMINISTRATION
Expenditures
United States
All FERA-WPA Programs
Federal
Funds
State and
Local Funds
1935
July
August
September
October
November
December
Total
All Funds
$123,604,000
117,680,000
106,188,000
120,979,000
124,478,000
167,266,000
$36,942,000
36,092,000
31,870,000
35,241,000
31,800,000
39,641,000
$160,545,000
153.772,000
138,058,000
156,220,000
156,278,000
206,907,000
178,320,000*
168,924,000*
194,630,000*
185,670,000*
176,102,000*
170,804,000*
49,200,000*
51,400,000*
49,800,000*
44,700,000*
39,400,000*
38,100,000*
227,520,000*
220,324,000*
244,430,000*
230,370,000*
215,502,000*
208,904,000*
163,806,000
158,362,000
165,324,000
35,500,000*
34,800,000*
199.770.000*
193,322,000*
Direct Relief
Works Programs
FERA
WPA
$66,427,000
49,589,000
27.959.000
23,181,000
11,016,000
3,053,000
-
$5,975,000
16,960,000
Total
Total
$66,427,000
$160,545,000
147,797,000
121,098,000
120,524,000
95,210,000
69,952,000
55,564,000
44,919,000
58,877,000
35,696,000
61,068,000
136,955,000
72,084,000
140,008,000
167,920,000
164,324,000
191,530,000
182,570,000
173,702,000
169,104,000
167,920,000
164,324,000
191,530,000
182,570,000
173,702,000
169,104,000
59,600,000*
56,000,000*
52,900,000*
47,800,000*
41,800,000*
39,800,000*
162,870,000
157,422,000
165,039,000
180,897,000
162,870,000
157,422,000
165,039,000
180,897,000
36,900,000*
35,900,000*
1936
January
February
March
April
May
June
July
August
September
October
181,125,000
-
-
-
-
Source: FERA Obligations Incurred 1935 - 1936 - FERA
FERA-WPA Checks Issued - Treasury Department
State and Local Funds - FERA
*Direct relief expenditures estimated by FERA.
Reports on direct relief are incomplete in 14 or more States after November 1935.
November 13. 1936
FEDERAL EMERGENCY RELIEF ADMINISTRATION - WORKS PROGRESS ADMINISTRATION
Expenditures
United States
Dollars
Willions
July Sept. Nov. Jan. Mar. May
ellars
July Sept. Nov. Jan. Mar. May
Illions
Dollars
Willions
F.E.R.A. - W.P.A.
F.B.R.A. - W.P.A.
All Programs
July Sept. Nov. Jan. Mar. May
F.E.R.A. V.P.A.
All Programs
Federal Funds Only
Works Programs
250
250
250
200
200
200
1936 '37
1938 -'36
1936 37
150
150
150
1936 37
1935 -'36
100
100
100
1935 -'36
50
50
so
July Sept. Nov. Jan. Mar. May
o
o
July Sept. Nov. Jan. Mar. May
July Sept. Nov. Jan. Mar. May
0
F.E.B.A. Obligations Incurred-F.E.R.A.
S.P.A. Checks Issued Treasury Department
Reports on Direct Relief are Incomplete in 14 OF sore
states after November, 1935.
Source:
- of - - I
- of the Secretary of the Treasury
z 107 1
FEDERAL EMERGENCY RELIEF ADMINISTRATION - WORKS PROGRESS ADMINISTRATION
Number of Families or Workers Receiving Aid
United States
All
Programs
Works Programs
FERA
Direct Relief
2,484,000
2,740,000
1,999,000
1,664,000
1,345,000
1,422,000
2,830,000
2,800,000
3,063,000
3,286,000
3,342,000
3,289,000
3,260,000
2,563,000
2,927,000
3,039,000
2,877,000
2,586,000
2,340,000
2,256,000
2,927,000
3,039,000
2,877,000
2,586,000
2,340,000
2,256,000
2,210,000*
2,130,000*
1,985,000*
1,830,000*
1,660,000*
1,550,000*
2,248,000
2,371,000
2,477,000
2,539,000
2,248,000
2,371,000
2,477,000
2,539,000
1,466,000*
1,452,000*
1935
July
4,459,000
August
September
October
November
4,495,000
4,381,000
4,502,000
5,958,000
5,349,000
December
1,929,000
1,411,000
889,000
645,000
346,000
60,000
ERA
Total
WPA
70,000
253,000
456,000
777,000
1936
January
February
March
April
May
June
July
August
September
5,137,000*
5,169,000*
4,862,000*
4,416,000*
4,000,000*
3,806,000*
3,714,000*
3,823,000*
October
-
-
-
-
-
-
-
-
Source: Direct relief and FERA works programs - FERA
WPA works programs - WPA
*Figures for direct relief estimated by FERA.
Reports on direct relief are incomplete in 14 or more States after November 1935.
November 13. 1936
FEDERAL EMERGENCY RELIEF ADMINISTRATION - WORKS PROGRESS ADMINISTRATION
Number of Families or Workers Receiving Aid
July Sept. Joy. Jan. Mar. May
OF
workers
Millions
Willions
F.B.R.A. - W.P.A.
All Programs
July Sept. Nov. Jan. Mar. May
Families
July Bees, Nox, Jea. Mar. May
Millions
F.E.R.A. - W.P.A.
B.R.A. Direct Relief
Works Programs
7
-
Families
United States
5
65
6
1935 - 36
4
4
1936
3
3
1936 '37
2
2
a
1
1935 -'36
1
1
o
July Sept. Nov. Jan. Mar. May
.
1935-'30
1936 -'37
JOS Sept. NOT. Jan. Mar. May
o
July Bee . Nov. Jan. Mar. May
source: Direct Relief - F.E.R.A.
N.P.A. work Progress - V.P.A.
Reports on Direct Relief are incomplete is 14 or sore States after Nov. 1936.
- of - -
office al the Secretary of the Treasury
2-107
ALL WORK AND WELFARE PROGRAMS
Number of Families or Workers Receiving Aid
United States
All
Relief and Welfare
Emergency Employment
Excluding FERA-WPA
Total
Work and Welfare
Programs
1935
July
August
September
October
November
December
4,461,000
4,545,000
4,427,000
4,560,000
6,000,000
5,505,000
901,000
1,027,000
964,000
998,000
993,000
963,000
5,387,000
5,609,000
5,437,000
5,616,000
7,057,000
6,525,000
1936
January
February
March
April
May
June
July
August
September
5,316,000*
5,624,000*
5,418,000*
5,129,000*
4,740,000*
4,609,000*
1,041,000
1,135,000
1,194,000
6,296,000*
6,605,000*
6,357,000*
6,231,000*
5,955,000*
5,906,000*
4,615,000*
4,881,000*
4,965,000*
1,213,000
1,188,000
1,094,000
5,954,000*
6,216,000*
6,205,000*
933,000
938,000
892,000
Source: Number of workers - U. S. Bureau of Labor Statistics and WPA
Number of families aided - direct from the agency
*Direct relief estimated.
Relief and welfare includes all programs replacing FERA programs for 1933 - 1935 - FERA-WPA,
Resettlement loans and grants, and Social Security programs.
Emergency
employment includes - PWA under the 1933 and 1935 Acts, Federal projects under the
1935 Act. COC. and RFC.
ALL WORK AND WELFARE PROGRAMS
Number of Families or Workers Receiving Aid
United States
Sept.
Nov.
Jan.
Mar
or
Relief and Welfare
WORKERS
Millions
July Sept. Nov, Jan. Mar, May
May
All Programe
WORKERS
FAMILIES
July Sept. Nox. Jan. Mar. May
or
Millions
Emergency Employment
All Programs
7
July
Work and Welfare
WORKERS
Millions
ALL Programs
7
FAMILIES
Excluding F.E.R.A. - W.P.A.
1936
37
NY
6
6
1935
30
1936 '37
5
5
1935 '36
4
4
4
3
3
2
a
1936 '37
1
1
1
1935 '36
o
o
July Sept. Nov. Jan. Mar. May
Including F.E.R.A. - V.P.A., Resettlement
Leans and Grants, and Social Security
July Sept. Nov. Jan. Mar. May
o
Including P.W.A., Federal Projects (E.R.A.A.),
c.c.c., and R.F.C.
July Sept. Nov. Jan. Mar. May
Including Relief and Welfare, Energency
Employment, and Governmental Construction
Progress
Source: Number of Workers - U.S. Bureau of Labor Statistics and N.P.A.
Number of Families Aided - direct free the agency
- of I - -
Office of the Secretary of the Treasury
187-2
ALL WORK AND WELFARE PROGRAMS
Expenditures
United States
Relief and Welfare
All Emergency
Employment Pay Rolls
Excluding WPA
Agricultural
Payments
1935
July
August
September
October
November
December
$160,558,000
154,843,000
138,935,000
157,729,000
158,343,000
211,821,000
$48,318,000
53,765,000
51,890,000
53,719,000
52,864,000
49,331,000
$30,878,000
46,940,000
63,766,000
65,738,000
62,500,000
62,537,000
234,249,000*
236,483,000*
268,036,000*
47,856,000
46,140,000
46,581,000
54,672,000
61,324,000
67,388,000
3,637,000
5,631,000
24,248,000
38,934,000
53,582,000
48,164,000
68,150,000
18,173,000
1936
January
February
March
April
May
262,499,000*
237,441,000*
June
228,020,000*
July
215,811,000*
214,113,000*
224,048,000*
August
September
67,605,000
64,803,000
12,193,000
Source: FERA - WPA Checks Issued - Treasury Department
Emergency employment pay rolls - U. S. Bureau of Labor Statistics
All others - direct from the agency
*Direct relief estimated.
Relief
and welfare
includes
all programs
program for 1933 - 1935 - FERA-WPA,
Resettlement
loans
and grants,
Socialreplacing
SecurityFERA
programs.
All the emergency
employment programs includes PWA under the 1933 and 1935 Acts, Federal projects under
1935
ALL WORK AND WELFARE PROGRAMS
Expenditures
United States
July Bags.
Nox,
Jan,
Mar.
July
May
DOLLARS
Best.
Nov,
DOLLARS
T
Millions
Millions
Relief and Welfare
All Programp
for
July
Max
Payrolls
DOLLARS
Beek
Millions
pay
Mar.
Bax
Agricultural Payments
Emergency Employment
All Programs
ass
Excluding F.E.R.A. - W.P.A.
ass
base ''27
200
960
200
see
150
100
180
100
100
100
1938 'ss
31936
'37
1938 'as
so
so
so
1938 'ss
1996
.
o
Including F.E.B.A. - N.P.A., Resettlement Loans and Grants, and Social Security
July Sept. Nov. Jan. Har. May
0
July Sept. Nov. Jan. Mar. May
'97
July Sept. Nov. Jan. Mar. May
Including P.W.A., Federal Projects (E.R.A.),
c.c.c., and R.F.C.
Progress.
Source: U.P.A. Checks Issued - Treasury Department
Enorgency Employment Payrells - U. s. Bureau of Labor Statistics
All others direct free the agency.
-.---
3
Office of the Secretary of the Treasury
1 - 187 - 1
SUPPLEMENTARY TABLES
Relief
Welfare
Emergency Employment
35
RELIEF AND WELFARE PROGRAMS
w
o
Number of Families or Workers Receiving Aid
United States
Total
FERA
WPA
FERA-WPA
Resettlement
Loans and Grants
Social
Security
Total
Relief and Welfare
Programs
1935
July
4,389,000
August
September
4,242,000
3,925,000
3,725,000
3,474,000
2,609,000
October
November
December
70,000
253,000
456,000
777,000
2,484,000
2,740,000
4,459,000
4,495,000
4,381,000
4,502,000
5,958,000
5,349,000
1,000
51,000
46,000
58,000
43,000
156,000
5,137,000*
5,169,000*
4,862,000*
4,416,000*
4,000,000*
3,806,000*
180,000
180,000
232,000
210,000
177,000
159,000
275,000
324,000
503,000
563,000
644,000
5,316,000*
5,624,000*
5,418,000*
5,129,000*
4,740,000*
4,609,000*
3,714,000*
3,823,000*
3,907,000*
91,000
96,000
81,000
809,000
962,000
978,000
4,615,000*
4,881,000*
4,965,000*
-
-
-
-
-
-
4,461,000
4,545,000
4,427,000
4,560,000
6,000,000
5,505,000
1936
January
February
March
April
May
June
July
August
September
October
2,210,000*
2,130,000*
1,985,000*
1,830,000*
1,660,000*
1,550,000*
1,466,000*
1,452,000*
1,430,000*
November
2,927,000
3,039,000
2,877,000
2,586,000
2,340,000
2,256,000
2,248,000
2,371,000
2,477,000
2,539,000
-
1,094,000
1,174,000
Source: Number of workers - WPA
Number of families aided - direct from the agency
*Direct relief estimated.
November 13. 1936
ALL EMERGENCY EMPLOYMENT PROGRAMS - EXCLUDING FERA-WPA
Number of Workers
United States
Works Program,
Other
PWA
CCC
Federal Projects
1935 Act
Total
PWA
1933 Act
RFC
Emergency
Employment
Regular
Governmental
Construction
1935
July
August
September
October
November
December
481,000
590,000
534,000
551,000
544,000
507,000
1,000
3,000
7,000
5,000
33,000
77,000
129,000
168,000
217,000
405,000
395,000
345,000
307,000
268,000
224,000
10,000
9,000
9,000
9,000
10,000
479,000
454,000
356,000
391,000
408,000
383,000
21,000
35,000
61,000
108,000
144,000
169,000
249,000
299,000
326,000
376,000
401,000
453,000
177,000
141,000
142,000
157,000
172,000
180,000
8,000
8,000
8,000
10,000
11,000
9,000
1,041,000
1,135,000
1,194,000
47,000
44,000
48,000
60,000
80,000
102,000
404,000
384,000
321,000
181,000
184,000
176,000
452,000
452,000
440,000
167,000
159,000
147,000
10,000
9,000
10,000
1,213,000
1,188,000
1,094,000
126,000
147,000
145,000
-
-
-
8,000
901,000
26,000
36,000
46,000
59,000
64,000
57,000
1,027,000
964,000
998,000
993,000
963,000
1936
January
February
March
April
May
June
July
August
September
933,000
938,000
892,000
Source: Number of workers - U. S. Bureau of Labor Statistics
November 13, 1936
RELIEF AND WELFARE PROGRAMS
Expenditures
United States
Federal Funds
Total
FERA-WPA
Resettlement
Loans and Grants
Social
Total
Security
Federal
Grants
Funds
State and Local Funds
ERA
Relief
Total
Social
Total
State and
Local Funds
Security
1935
July
August
September
October
November
December
$123,604,000
117,680,000
106,188,000
120,979,000
124,478,000
167,266,000
$13,000
-
1,071,000
-
877,000
-
107,065,000
-
122,488,000
126,543,000
1,509,000
2,065,000
4,914,000
-
6,729,000
-
-
$123,617,000
118,751,000
172,180,000
$36,942,000
36,092,000
31,870,000
35,241,000
31,800,000
39,641,000
- $36,942,000
- 36,092,000
- 31,870,000
- 35,241,000
- 31,800,000
- 39,641,000
1936
January
February
178,320,000*
168,924,000*
194,630,000*
185,670,000*
176,102,000*
170,804,000*
March
April
May
June
July
August
September
October
November
163,806,000
158,362,000
165,324,000
181,125,000
11,611,000
18,387,000
24,222,000
12,969,000
$2,176,000
2,504,000
3,818,000
4,338,000
8,730,000
4,385,000
1,935,000
6,773,000
8,804,000
9,225,000
10,250,000
10,973,000
2,561,000
4,824,000
185,049,000*
182,710,000*
215.520,000*
213,710,000*
193,410,000
183,919,000*
172,513,000
169.727.000
179.372.000
49,200,000*
51,400,000*
49,800,000*
44,700,000*
39,400,000*
38,100,000*
35,500,000*
34,800,000*
-
$2,373,000
2,716,000
4,088,000
4,631,000
6,001,000
7,333,000
9,426,000
10,061,000
11,156,000
11,931,000
Source: FERA - WPA Checks Issued - Treasury Department
All others - direct from the agency
*Direct relief estimated by FERA.
Division of Social Security Grants into Federal and non-Federal funds is estimated by the Treasury.
49,200,000*
53,773,000*
52,516,000*
48,788,000*
44,031,000*
44,101,000*
42,833,000*
44,226,000*
ALL EMERGENCY EMPLOYMENT PROGRAMS - EXCLUDING FERA-WPA
Pay Rolls
United States
Works Program,
Other
PWA
CCC
Federal Projects
1935 Act
Total
PWA
1933 Act
Emergency
Employment
RFC
Regular
Governmental
Construction
1935
July
August
September
October
November
December
$22,071,000
26,236,000
24,405,000
24,831,000
23,958,000
21,906,000
$54,000
145,000
332,000
21,427,000
20,484,000
17,252,000
18,058,000
18,610,000
17.948,000
18,418,000
17,846,000
16,371,000
$277,000
1,216,000
3,755,000
6,243,000
8,392,000
10,196,000
$24,969,000
25,293,000
22,772,000
21,638,000
19,368,000
16,028,000
$1,002,000
1,020,000
1,579,000
2,864,000
6,097,000
8,748,000
10,866,000
11,180,000
12,529,000
14,432,000
16,564,000
19,161,000
22,658,000
13,425,000
10,642,000
11,117,000
12,819,000
13,843,000
14,975,000
850,000
905,000
916,000
11,727,000
12,386,000
12,122,000
22,700,000
22,795,000
22,585,000
14,242,000
13,530,000
12,639,000
-
-
-
$48,318,000
53,765,000
51,890,000
53,719,000
52,864,000
49,331,000
$1,890,000
962,000
942,000
47,856,000
46,140,000
46,581,000
54,672,000
61,324,000
67,388,000
3,991,000
3,619,000
3,675,000
5,205,000
6,243,000
8,631,000
1,064,000
1,048,000
1,085,000
68,150,000
67,605,000
64,803,000
12,425,000
13,000,000
12,659,000
958,000
953,000
1,001,000
869,000
2,695,000
3,200,000
4,193,000
4,077,000
3.708,000
1936
January
February
March
April
May
June
July
August
September
974,000
1,134,000
Source: U. S. Bureau of Labor Statistics
November 13, 1936
40
November 20, 1936
The Italian Ambassador, Mr. Fulvio Suvich, called on
the Secretary this afternoon at 3:30. Mr. Taylor was
also present.
The following is stenographic transcript of the con-
versation:
Ambassador: I was with Count Volpi for some years
and afterwards I turned to a diplomatic career. I am
a
Member of Parliament in Italy. This is just a courtesy
call.
HM,Jr: Do you care to talk about the financial conditions in your country?
Ambassador: I should like to say that the newspapers
here say that I am here with special tasks. I came here
without any special instructions in these financial matters.
The thing we like to have at the moment is a commercial
agreement. Mr. Phillips is negotiating this in Rome -the commercial treaty.
(Explanation: The Ambassador was Under-Secretary of
State in Italy. He discussed the commercial trade treaties
with Phillips in Italy. They agreed that the first thing
the Ambassador would take up was the commercial trade
treaty, but Mr. Phillips is conducting these treaties
in Italy.)
I understand that in Rome they examined it with greatest interest and with the hope that it will bring a solution of our relationships.
I have a specific question to put to you because I
received yesterday a telegram after I had asked for this
interview. They heard that you wish to enlarge this
tripartite and that you already informed other countries
about your intention to extend. In Italy they know nothing about it and have asked me if I could get some infor-
mation.
HM,Jr: I will be glad to explain it to you. The
way we have divided the responsibility here on purely
financial matters, as between the United States and other
41
-2-
countries, 18 that the President has given me that
authority, including the war debts, but when it comes
to the commercial treaties or private debts, I do not
interest myself. The State Department does. I do
in Government debts and also in this question of stabilization of currencies. When it comes to trade
treaties or debts between your citizens and ours, I
do not interest myself. It is something which has
developed since President Roosevelt has been in.
On September 25, Great Britain, France and ourselves
got out a joint statement. As I understand it, a notice
fiscal agent. They sent a copy of that to twelve or
thirteen of the principal central banks in the world.
I take it for granted that your Bank in Italy got one.
went out from the Federal Reserve Bank in New York, our
Ambassador: I do not know.
HM,Jr: I will make inquiries.
(At this point, the Secretary asked Mr. Lochhead to
bring in the various declarations.)
In this statement of September 25, we welcomed the
cooperation of other countries. So far, the only country
that sent a statement was Belgium and they, through their
Foreign Office, to the State Department sent this statement. We have not sought out any other countries, but
they have sought us and without disclosing names, we are
in the midst of discussions with other countries who have
sought us and who want to get the understanding of exchange of gold between Governments. The point we stress,
which is new, 18 that whatever we do we wish to do between
Treasuries and not between Central Banks.
Ambassador: You wish to make agreements between
Governments and Treasuries?
(Note: The statements were brought in, at this point,
by Mr. Lochhead. The Secretary read aloud the September
25th announcement, the statement which went out to the
Central Banks, and the statement from the Belgians.)
You see, we call them declarations and not treaties.
We have signed nothing. It is purely a gentlemen's
42
-3-
agreement. We do not have to go to Congress to get
anything confirmed. It is all on a day-to-day basis.
What we are hopeful of doing is through these understandings between these countries we can gradually by
adding one country after another steady the exchanges.
That is about all we can do. We have taken it out of
the hands of the speculators. There are no regulations
about gold coming into the country; only about going
out.
If, for instance, the Panama Republic should say
that they wish to have the privilege of taking gold
from the United States, then we would say that before
we will do that we would like to have the Government
of Panama say to us they will give us that privilege
of receiving gold when the dollar falls and in that
way we can stabilize the dollar and the Panama "coin".
I am just using that as an example. Here we do business with the British Embassy. In Paris I have my
own man who contacts the French. And if your Government is interested, we can do business with you.
Ambassador: They wish to be informed of the general
movement.
HM,Jr: You can feel free to come in here without
instructions from your Government. If I cannot answer
your questions, I will say so, but feel that you can
come in whenever you like. Don't feel that you have
to have anything special in order to come in.
the
Ambassador: I thank you very much. I think it is
best way. I prefer that I say directly what I have
to ask.
HM,Jr: Your people might have rumors of what we
are trying to do with the other countries. Your man
in Italy, Pennachio, knows Cochran. I understand he
is a very capable man. That is the only contact we
have had with the Bank of Italy -- through Pennachio.
We have received information and given information.
time.
Ambassador: Now, I will not take any more of your
43
November 21, 1938
The Secretary talked to Cochran from his home today
at about 9:45. Lochhead was present.
Following
18 a stenographic report of Mr. Morgenthau's
remarks
to Cochran:
"Hello, Cochran.
You saw President Bachman this morning? You see, I
am at home and I am repeating it.
Yes.
Good.
Let me see if I understand this. I will repeat.
You met Mr. Bachmann this morning and Mr. Myers, who is
the Minister of Finance and who is also President of the
Swiss
Council. You submitted to him a proposed draft
of
a cable.
Bachmann and you drew up the draft and you submitted
it to Myers. I am just giving it roughly. You will
confirm this in a cable?
As I understand it, the draft has been submitted to
the Foreign Office?
Yes, and it's going to come through.
When are they going to send it?
You mean it is to be delivered before Sunday?
Fine.
I will. And I am going to tell them to tell both
of those Legations that we expect something 80 that they
won't be closed up.
You
That's fine.
That finishes it, doesn't it?
had no trouble?
I think that's fine.
And then they give it out for Monday morning's papers?
44
-2-
That's all right.
About noon Monday.
Well, noon there 18, of course five hours earlier
here. What we will do -- you tell the French we will
give it out (our statement) at four o'clock Monday afternoon and I am telling the British the same. That will
be 9 o'clock Paris.
Yes.
That's right.
Well, I am simply delighted. And I think you have
done a grand job.
I didn't get that.
Yes. I wish you would.
Well, if he has that, cable that.
Yes.
(To Mr. Lochhead: Have we got what the British are
going to give out? Mr. Lochhead: No. The way they
spoke, it was not going to be a formal statement.)
Well, whatever you get from the French and British,
send it along.
Yes. Yes. All right.
I will. I tell you what you had better do. Just
to make sure that everything is all right, supposing you
call me at 12:30, Washington time, tomorrow. That will
be 5:30 your time. Call me at home. North 8898.
That's right.
How are you standing all this jumping around?
Good. Well, we are making monetary history now.
Fine.
I know.
45
-3-
Tell me, how worried are you on the political thing?
I see. But would that affect the French?
Yes. Fine. Now Cochran, can you file a cable still
from Switzerland?
No. To State. Because Mr. Moore reads every cable
very carefully. I mean he likes to get them.
Good. Now, when are the Swedes coming to see you?
Good. Good. Well, I am simply delighted.
Good-bye.
Upon the completion of this telephone conversation,
the Secretary called Mr. Taylor and said to him: "Good
morning. I have just heard from Cochran. I am at home.
And everything is sewed up. I think it's pretty fine.
Now, will you do two things for me. Will you call up
Mr. Moore and tell them we have just heard and would he
designate somebody to be at the State Department tomorrow
who can be available so that he can receive the messages.
There will be messages coming in tomorrow from Holland
and Switzerland. I wish that he would have whoever this
person is that he designates call up the Swiss Legation
and the Dutch and tell them that we expect messages tomorrow and that they are urgent, so that as soon as they
come Mr. "X" will be at the State Department waiting to
receive them; otherwise, the Swiss and Dutch may be out
shooting quail or something like that and I think it's
perfectly proper and if he would say that whoever Mr.
Moore designates, Mr. "X", will be here; we have received
word that there will be messages for the Treasury Department and we are very anxious to get them, or have Mr. "X"
contact me direct. I am going out for a ride and I will
be back here at noon and when I get back I will call you.
I have Archie here. I sent for him.
Then I am going to draft a cable for the President
which I will send.
46
-4-
I think that's about all.
Oh, yes. will you notify the British. And have
we got anything from the British which shows what they
are going to say? You might be looking it up. You
might ask Moore whether there is any change in that and
tell him it is all set for the French, British and our-
selves to give out the announcement at four o'clock,
Washington time, Monday; nine o'clock, Paris and London.
And that the Dutch and Swiss are going to release it to
their papers for Monday morning. But the various Foreign
Offices will get these messages Sunday, so you contact
Moore.
And then the other thing. Marriner Eccles read a
statement to me that he is releasing, notifying the public
that there is a chance that they are doing something. He
called me up at 8:30 this morning. He is going to do it
today.
So I will call up around noon. You will still be
there? All right. Thank you.
*****
The Secretary then dictated the message to the President, which is attached hereto.
47
November 21, 1936
MESSAGE FOR THE PRESIDENT:
DELIGHTED TO BE ABLE TO INFORM YOU THAT THE PLAN
WHICH I SUBMITTED TO YOU AND WHICH YOU APPROVED ON TUESDAY
NOVEMBER SEVENTEENTH FOR THE UNITED STATES TO GIVE BELGIUM
HOLLAND AND SWITZERLAND RECIPROCAL GOLD FACILITIES HAS BEEN
SUCCESSFULLY CULMINATED STOP THESE COUNTRIES ARE GOING
TO NOTIFY US ON SUNDAY OF THEIR ADHERENCE TO THE PRINCIPLES
EXPRESSED IN THE TRIPARTITE DECLARATION OF SEPTEMBER
TWENTY FIFTH STOP THIS DECLARATION ON THEIR PART WILL
BE MADE PUBLIC BY THEM ON MONDAY MORNING STOP FRANCE
+
MR CHAMBERLAIN AND YOUR SECRETARY OF THE TREASURY WILL
MAKE A SIMULTANEOUS ANNOUNCEMENT MONDAY FOUR OCLOCK
WASHINGTON TIME WELCOMING BELGIUM HOLLAND AND SWITZERLAND
AND AT THE SAME TIME ANNOUNCING THAT WE HAVE EXTENDED TO
THEM RECIPROCAL GOLD PRIVILEGES STOP BEST REGARDS
MORGENTHAU
Department of State
EA
BU
}
DIVISION
ENCLOSURE
TO
Letter drafted
ADDRESSED TO
TREASURY
.. GOVERNMENT PRINTING OFFICE
1-1023
Transmitted
state Department beforet
(see nov. 30,1936.)
Sir:
I acknowledge the receipt of your note of November 21, 1936, informing me of the Swiss Government's
policy with respect to international monetary and
economic relations.
The Secretary of the Treasury associates himself
with me in expressing this Government's appreciation of
your communication and our gratification concerning
this declaration.
Accept, Sir, the renewed assurances of my highest
consideration.
R. Walton Moore
Acting Secretary of State.
The Honorable
Maro Peter,
Minister of Switzerland. (nov. 21, 1936)
48
49
November 30 1930
stre
I acknowledge the receipt of your note of Never
ber n. 1936, informing me of the Netherland Government's
policy with respect to international monetary and economic
relations.
The Secretary of the Treasury associates himself with
me in expressing this Government's appreciation of your
communication and our gratification concerning this doclare
sion.
ACCEPT, Sir, the renoved assurance of my highest sideration.
R. Walton Moore
seting secretary of state.
The Honorable
Saran - Revegel Dengine.
Change e'Affaires ad interis of the
II-IF
AND
50
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Consulate General, Zurich,
Switzerland
DATE: November 21, noon
RUSH. FOR THE SECRETARY OF THE TREASURY FROM COOHRAN.
President Bachmann and Pfenniger, his assistant, received me at the Zurich office of the Swiss National Bank
early this morning. I gave them copies of such draft
announcements as I had left with the Dutch and Belgian
officials and explained to them our plans for further
statements.
A telegram to the Swiss Ministry of Foreign Affairs
was then drafted, directing that Ministry to send telegraphic instructions immediately to the Swiss diplomatic
representatives at Washington, London and Paris to deliver
to the respective foreign offices not later than Sunday
forenoon a message of adherence to the general principles
of the tripartite monetary declaration of September 25th.
In terms, this message is identical with the Dutch message
which was cabled to you yesterday from The Hague, except
that instead of beginning "The Government of the Nether-
lands", it begins "the Government of Switzerland".
Meyer, the President of the Swiss Federal Council and
also Chief of the Swiss Federal Department of Finance and
Customs, came to the bank at nine o'olock this morning
and ordered the sending of the above-mentioned instruction
to
51
-2-
to the Swiss Ministry of Foreign Affairs at Bern.
We understand that the Swiss will not give publicity
to their adherence to the tripartite agreement until Monday.
The Swiss anticipate that the above-mentioned statement
of adherence will met with your requirements and that you
will, through the proper channels therefore, include
Switzerland in the list of countries to be announced
Truesday morning as eligible for reciprocal gold dealings
with the United States. Any available texts of French and
British communiques will be telephoned to Bachman from
Paris on Monday. Probably, the Swiss Government will give
very little comment to the press accompanying its official
declaration of adherence.
This morning at 11 o'clock, I telephoned the substance
of the above to Minister Wilson at Bern.
I shall return to Paris by night train and shall see
Baumgartner at eleven o'clock Sunday morning.
EA:DJW
November 21, 1936.
52
)
October 30, 1936
Mr. Mallet said to the Secretary, "We have got an answer for you,
Mr. Secretary, to the question you put to the Chancellor. The Chancellor
wishes to thank you for the further information regarding the present
position and he says that when you make the announcement about any
countries named acceding to the reciprocal arrangement about sales of
gold, he would certainly consider making simultaneous declaration in
London, but the wording of the declaration will require consideration in
the light of the actual circumstances.
"The Chancellor thinks he would be in position to say, if you so
desire, that he welcomes the extension by the United States Treasury of
their arrangements to the countries named, which is in harmony with the
arrangements already made between United States and Great Britain and
United States and France. The extension of this arrangement is also in
harmony with the general basis of mutual cooperation which exists between
British monetary authorities and the monetary authorities named in the
United States announcement. Perhaps you may need an amplification of this
and I will asic Mr. Bewley to amplify certain technical points."
November 5, 1936
The Secretary gave to Mr. Mallett a copy of proposed statement by the
Treasury which was intended to cover the release of gold for export to
France and England in addition to Holland, Switzerland and Belgium.
(Superceding the announcement made by him on January 31, 1934 and October
13, 1936, etc.)
November 10, 1936
Mr. Bewley's meeting with Mr. Taylor while the Secretary was at Sea
Island:
"Mr. Bewley: Well, the first thing was that the Chancellor
wants to tell Mr. Morgenthau that he had no suggestion to make on
the now draft announcement which seems fully to meet the case. If
Mr. Morgenthau will tell Mr. Chamberlain when he is going to issue
his announcement, Mr. Chamberlain will issue a statement at the
same time in the terms which he has already told you. I think you
have got more or less a draft of it. And Mr. Chamberlain is telling the French Government the same thing."
53
November 16, 1936
Cable to Cochran giving draft of proposed statement by Secretary
Morgenthan. ("Supplementing the announcement made by him on October
13, 1936, etc.")
November 18, 1936
Mallet's letter to the Secretary as follows:
"My dear Mr. Secretary,
In confirmation of my telephone message of this
morning I am writing to tell you that we have had a telegram
from the Chancellor of the Exchequer in which he asks us to
inform you that he notes that your object in revising the
draft agreement announcement is to adapt it to the case of
Belgium. Provided that the new draft is satisfactory to the
Belgian Government Mr. Chamberlain concurs in its terms. He
also agrees to the procedure and time table suggested by you.
Believe me,
My dear Mr. Secretary,
Very sincerely yours,
(Signed) Victor Mallet."
54
11/22/36
you're
MONEY
Swight my to
GOVERNMENT'S NEW ANTI-INFLATIONARY POLICY.
***
Washington advices indicate that an imminent change
is about to take place in Government's monetary policy. Fundamental
as this change will probably prove to be, it is certain to impose no
readjustments upon finance or industry but, on the contrary, by injecting into the situation an element of stability, will provide ample
justification for greater confidence in the future.
Government has recognized that there are inflationary
forces in the making which, if permitted to gather momentum, would
without doubt ultimately so alter our price structure as to enforce
severe readjustments throughout the entire economy. Government realizes
that a violent rise in the price level, like a violent drop, tends to
set in motion a series of forces which, as they feed on one another, gain
strength and velocity until, like the tornado, they sweep everything
before them. That is precisely what Government wants to prevent and what
it is in a very fair way of preventing.
The difference between the American and the British money
systems may seem to lie in the fact that while the Dollar is rigidly
linked to gold, the Pound Sterling is not, yet if, owing to the recent
tri-power pact, approximate stability is maintained in the Sterling-Dollar
rate of exchange, then it may truly be said that the Pound, because it
is linked to the Dollar, is in effect also linked to gold. Our stabilizing
mechanisms also differ. America operates through a Fund which has actual
money in it, while the British function through an Account which was started
without a farthing. Whereas London pays for incoming gold with the cash
proceeds of short Treasury bills which take out of the money market funds
in amounts which exactly correspond to the cash paid for the gold, we, on
the other hand, issue $35. additional currency for every ounce of yellow
metal that enters our borders, and thus inflate the currency as fast as
gold comes in. When, as and if alien gold is returned to points of origin,
we shall be forced to deflate the currency in proportions equal to the outflow of metal. Thus it will be seen that both the inflow and outflow of
gold, by altering our reserves, unnecessarily disturb our financial and
price structures and expose our economy to forces outside our jurisdiction,
but over which we happily have a good measure of control the very moment
they cross our borders.
55
2.
In seeking the proper corrective, our approach via the
security markets was patently erroneous; we could not, without placing
ourselves in an nwkward position, pursue a tariff reduction policy on goods
and, at the same time, erect tariffs against capital movements. To attempt
so to act was incongruous, expecially in view of the fact that there was
always available another method, the effectiveness of which was obvious.
Apparently this very method is about to be adopted:
The Treasury will very likely issue short bills (90-120 days)
in amounts corresponding to the volume of incoming gold, and will keep
ronewing them as long as the metal stays in America. The Treasury will
thus be taking out of the money markets exactly as much money as it issues
when it purchases incoming gold. When the metal flows out, the bills will
be permitted to run out and will be paid at maturity. In the present and
prospectivo state of the money market these bills can be sold at not moro
than 1% per annum, which means that if one billion of gold comes in, we
would pay ten million dollars per annum premium for the privilege of con-
trolling the situation, avoiding unnecessary disturbances to our financial
and price structures, and undoubtedly saving the nation many times that
amount by noutralizing the inflationary and deflationary force of gold
movements which originate outside our borders.
The raising or lowering of reserve requirements, while
a useful device, is not as effective as the procodure above described because
it is, of itself, highly disturbing to the banking mechanism, whereas the
complete neutralization of undesired gold imports ronders the money market
imporvious to their influence without requiring suddon readjustments by the
banking mechanism. This now orientation in the Treasury's monetary policy
should not be onstruod as deflationary; it is merely anti-inflationary
and, as such,it is sound, conservative and far-sighted and will provo to be
another stabilizing factor in both the national and international situations.
RENE LEON
November 23, 1936.
56
November 22, 1936
From his home, the Secretary called Cochran at
12:45.
Following 18 transcript of Secretary's remarks
to Cochran:
What is new?
They were not as smart as we were. We sent them
a notice, but it was unnecessary because the Swiss and
Dutch notes were delivered to the State Department at
noon Saturday. We arranged and asked them to have somebody there Saturday and Sunday and at noon they walked
in and handed it to Moore at the State Department.
The Swiss in Paris are not on the job.
We have both.
I am sorry that it does not appear until Monday noon.
I will give it
I think I will wait until tomorrow now. Supposing
I say
out about 10 o'clock tomorrow morning.
that you can tell them that we will give it out at the
Treasury 10 o'clock tomorrow note. That is the note of
Switzerland and Holland to us.
We will not give out the tripartite one until 4 o'clock
Monday night for Tuesday morning papers.
Can you sound out Baumgarten before he takes his new
position as to whether he would not like to come over to
America for a week? My thought is I expect from now on
to ask some of these countries to send somebody from their
Treasuries just to come over and give me information casually.
Has he not the confidence of Blum?
Then he would not be 80 good.
What about Professor Riszt?
Well, I mean, if Baumgarten came he would not have
the confidence of Blum. I have something in my mind
57
-2-
which I do not want to say over the 'phone, but I may
be able to talk to you about it in a day or two. What
I want to find out is -- and I am not prepared to talk
yet myself -- whether they are ready. If things
quiet down there for a couple of weeks, I would like
you to come over for a week.
Butterworth sees the British Treasury, Waley, over
there and Waley dropped a hint that they felt that
Sweden was their baby, but I am just going to act as
though I never heard it. It will have to come more
officially than that and if it does, I do not know
whether I will pay any attention to it. I do not
think they control and own Sweden. This information
is just for you. I want to go after the Scandinavian
countries. I am very anxious to.
I will call you again Tuesday and let you know how
it went on this side.
EXPLANATION: In substance, the important thing that
Cochran conveyed to the Secretary is the following: Blum,
while he is getting a promotion, is being put out of his
present position by political pressure due to the fact
that his wife is a member of the 200 families that rule
France. Cochran questions the advisability of Baumgarten's
coming over here. In any event, there is no use taking
up war debts with France until after they get their budget
through in December.
58
GRAY
MA
Paris
Dated November 22, 1936
Rec'd 10:35 a.m.
Secretary of State
Washington
RUSE
1138, November 22, 1 p.M. SECTION ONE
FOR THE SECRETARY OF THE TREASURY FROM COCHRAN.
Baumzartner of the French Ministry of Finance COME
to my office at 11 o'clock this morning. I told hin
of the results of my trip to Belgium, the Netherlands
and Switzerland. Baungartner telephoned the French
Ministry for Foreign Affairs and learned that the Dutch
declaration of adhErEncE to the tripartite agreement
had been received through the Dutch Legation in Paris.
The French Ministry for Foreign Affairs is asking the
Swiss Legation in Paris to watch for and Expedite a
similar message.
Since the Dutch and the Swiss will not be able to
have their declarations published in their own countries
until afternoon on Monday, the French will not have any
statement in regard thereto appear in the French press
until after noon on Monday.
Bawagartner submitted to ME the text of the communique
which
59
4. -2- 1138, November 22, 1 p.m., from Paris
which the French plan to give to the press at 15
o'clock Monday night for publication Tuesday morning.
HERE follows my English translation of the French
communique
On the day after the Franco-i.nglo-American
declaration of September 25th last the Belgian Government
announced that it was according its adherence thereto.
The Dutch Government and the Swiss Government have just
now made known their decisions likewise to join in.
ThE Governments of France, of the United States
(END SECTION ONE)
BULLITT
KLP
60
GRAY
Paris
MA
Dated November 22, 1936
Rec'd 10:50 a.n.
Secretary of State
Washington
RUS
1138, November 22, 1 p.m. (SECTION TWO)
of America and of Great Britain WELCOME the declarations
by which the Governments of Belgium, Switzerland and
the Netherlands thus EXPRESS their adhErence to the
principles stated in the tripartite declaration of
September 25th.
Following these adhesions provisions have been
made to EXTEND to these three countries the arrangements
which assure Exchange relations between the markets of
Paris, London and NEW York which were the subject of a
communique dated October 12, and to establish
collaboration between the interested Exchange
Equalization or stabilization funds and institutions of
issue.
These provisions are the subject of the two
following communiques of the American and British
treasuries".
(Then follow translations of the declaration
which the American Treasury will make to supplement
its Earlier declarations on gold, and of the declaration
in
61
M.
-2- 1138, November 22, 1 p.m., from Paris
in regard to the addition of the new countries to the
Department's list. NEXT will follow a translation of
the British communique which has not yesterday been
received by the French Ministry of Finance.)
"As for as it is concerned the French Government
has taken the necessary measures in order that the
technical cooperation instituted between the French
Exchange stabilization fund and the American and British
Equalization funds is EXTENDED to the institutions of
issue stabilization funds of Belgium, the Netherlands
and Switzerland. The monetary authorities of these
countries will from now on Enjoy the same facilities
insofer as the delivery of gold against Exchange is
concerned, and they assure analogous treatment to the
French stabilization fund". (END MESSAGE)
BULLITT
KLP
62
November 23, 1936
9:20 A.M.
Present:
Mrs. Klotz
Mr. Opper
Mr. Upham.
Mr. White.
Mr. Haas.
Mr. Viner
Mr. Lochhead.
Mr. Gaston.
Mr. Taylor.
H.M.Jr:
I have here two documents from the Secretary of
State dated November 21; one from the Swiss
government, which reads as follows: "The
government of Switzerland has cognizance of the
declaration by which the governments of France,
Great Britain, and the United States of America
have seen fit to express their intentions with
regard to monetary policy, and adheres to the
general principles stated in the tripartite
declaration of September 25."
And then on the same date there is exactly the
same thing from the Dutch. Now, we already
received one from the Belgians on September 26,
see?
And then this comes over the ticker this morning: "A dispatch from Bern says Switzerland's
adhesion to the monetary convention between
Great Britain, France, and the United States
has been brought a step nearer today by a communication by the Swiss government to London,
Paris, and Washington. This communication no'tifies the three governments that the Swiss Federal
Council has taken cognizance of the declaration
of September 25 concerning their intentions on
monetary policy, adding that it approves the
general principles contained in the convention.
The Council adds that it is carrying on negotiations already announced which are aimed at bringing about cooperation with other States in adherence by Switzerland with the three-power gold
movements."
Then this one: "Holland Has Joined Tri-power
Agreement. Amsterdam - The Dutch government
63
-2today decided to join the monetary agreement
recently framed by the governments of France,
Great Britain, and the United States. (State-
ment of Dutch government:) The Dutch government
has knowledge of the statement of September 25
in which the governments of France, England, and
the United States explain their intentions regard-
ing monetary management, to which the Dutch government agrees. The Putch government
-
for all the necessary technical cooperation with
the monetary authorities of the countries mentioned
above."
Now, I - originally these statements were supposed
to be given out Sunday night, but they weren't
for - I don't know, they said in Holland and
Switzerland the Monday morning papers weren't any
good, so they wanted to do it for their Monday
afternoon paper. I said that I would give out
these things here which the State Department
has given us this morning; but I'm beginning to
think I'll change it, give it all at 4 o'clock.
That's what I want your advice on (to Gaston).
They've got this thing; if they - I don't want
two press conferences today because my agreement
with the French and the British is that I will
do it at 4 o'clock. What do you think?
Gaston:
H.M.Jr:
I don't see how we lose anything by waiting and
I think will
All right, then we'll wait. Then ifInyou
the first
make notes for this afternoon.
place, I want the January 31, 1934, a copy of
that. I want that. I want whatever we do on
September 25.
Gaston:
September 25 and October 13.
H.M.Jr:
Wait a minute - and I want the Belgian thing.
Gaston:
les, yes.
What they sent to us. And I want the October 13
H.M.Jr:
declaration, including the little statement about the one when we added a couple countries, you see?
Gaston:
Yes.
64
-3H.M.Jr:
Now then, for this afternoon I think we ought to
give out what the Swiss and the Belgians have
sent us, you see. We did that in the case - I
mean what the Swiss and the Dutch, officially -
Gaston:
Yes
H.M.Jr:
We did that in the case of Belgium.
Gaston:
Yes, yes, yes.
H.M.Jr:
What do you mean yes?
Gaston:
Yes, that's what I mean. I first thought we'd
just have a release, but I think we might just
as well give out that text and then have another
release modifying it.
Viner:
H.M.Jr:
Those are communications to the Secretary of
State?
No, but in the case of Belgium the Secretary of
State asked to - they say it's a monetary matter
so they asked me to release it.
We'll release that at 4 o'clock. Please note
that those go back to Mrs. Klotz. I'd like to
have them back at noon, because I want to have
everything.
Gaston:
Yes, I'll copy them and give them back.
H.M.Jr:
In addition to that, there is a new declaration
of the President's, which is approved by the
President, which is dated November 17, but is
for release for tomorrow morning's papers, and
in which he withdraws. Will you give him Mrs. Klotz: I think we'll have to make a copy. You know,
I can make photostats.
H.M.Jr:
I'd have it photostated.
Now, in that thing we withdraw -
Gaston:
The January 31.
65
4H.M.Jr:
- '34 and supplement the October 13, see?
Gaston:
Yes.
H.M.Jr:
Now, we want to have that.
Lochhead:
May I make one question on that? You say that
was dated. It was approved; didn't have any date.
I was wondering whether you should put on any
date of November 17. In other words, that was
done before we got those letters. I don't think
you have to put the date on.
H.M.Jr:
But it should be dated, because the President
can't sign it when he's on the Atlantic Ocean.
Lochhead:
No, but he could have approved of something that -
H.M.Jr:
Just a second.
Lochhead:
That date doesn't go on.
H.M.Jr:
I think it is dated, but the proclamation is
for release for tomorrow morning's papers.
Viner:
H.M.Jr:
Viner:
What about this official bulletin?
That's what we're talking about.
No, but I meant it goes into that. What's the
name of that register?
Gaston:
The Register.
Upham:
Does not. The other one did not. The other one
was signed by the President several days in
advance of its release, and you will find a
disparity of dates.
H.M.Jr:
He can sign it for a week in advance, because
he went away before.
Gaston:
Doesn't seem to me the difference in dates makes
any difference anyway, because the President's
declaration clears the way for the admission of
these nations, which occurred later.
66
-5H.M.Jr:
Now, I want to get you all - And then I think
the thing, Herbert, you've got to do is draft
this and then bring it in to me; that's why I'm
doing this thing now. I have to acknowledge
receipt publicly, welcoming Holland and Switzer-
Gaston:
land. I've got to say something. Make a note of
that, will you; that's important.
Yes, just what I was thinking. The mere fact
that they send you this note - that doesn't conclude things. You have to announce that they
have been accepted into membership.
Lochhead:
H.M.Jr:
You've made a form of that; I think it should
be changed slightly.
Just as soon as this is over I want to personally
give it all to Gaston, and I thought you fellows
could go in the other room, work it out, and then
submit it to me. Huh? And then - I think we've
got it all. You've got all the - I haven't overlooked anything, have I (to Lochhead)?
Lochhead:
H.M.Jr:
Viner:
H.M.Jr:
Gaston:
H.M.Jr:
You haven't overlooked anything that I know of.
I've checked pretty carefully.
Now, there is only one thing, unless we've already
done that. In talking about it, I say that I am
giving out a statement here which is also being
given out simultaneously in England and France.
Now, this is that Holland, Switzerland, and
Belgium have been given a reciprocal - we've got
an agreement on reciprocal exchange of gold.
But I want to word it so - I mean have it so so that they haven't been admitted to the tripartite agreement. I don't know just how to say
that, you see. Jake?
(Nods affirmatively)
I mean they've got this privilege but still they're
not a member. I've gone - I'd rather have that
written out than to try - than to fumble it.
It seems to me it ought to be a formal release.
Well, I don't want to fumble it if - we've got
plenty of time. So I think we'll do - what I
67
-6think we might as well do is get that thing
cleared up, and if you fellows can go into the
other room and let's have the thing done.
Now, the only thing they need from you, Mrs.
Klotz, is that - the President's of November
17, and so that - I think -
Mrs. Klotz: We get quick service on photostating.
H.M.Jr:
Why don't you start it now, photostating, say,
about a half dozen copies, and tell them to
rush it. And then come back.
(Mrs. Klotz goes out)
H.M.Jr:
Well, I had something else, but I think we
better let that something else wait and get
this thing lined up for me. What do you think,
Herbert?
Gaston:
All right.
H.M.Jr:
And do it all at 4 o'clock, not do it piecemeal.
No. I think so, yes.
Gaston:
Lochhead:
Did Livesey send over those cables to you yesterday or did he just read them? I think that's
the last we had - those cables.
(Secretary hands Lochhead cables)
H.M.Jr:
Lochhead:
I think the thing to do is to get it all fixed
up. Now, does the Federal Reserve of New York
begin talking today to these fellows, or do they
only begin talking After you announce it, they will start sending
cables. They can't do much talking on the phone;
they have to go by cable. They're working on
that now.
H.M.Jr:
Gaston:
I hope - I got another meeting at 11:30 on
Can't you fellows Two hours? I should think so.
Associated Gas. You fellows have got two hours.
68
-7H.M.Jr:
What?
Gaston:
I should think so. I'll get it cleaned up in
H.M.Jr:
an hour, I should think.
I mean so that it is written.
H.M.Jr:
Yes, I think so.
You sit in, Clarence, will you?
Opper:
O.K.
H.M.Jr:
What have I overlooked? Anything? Wayne?
Taylor:
(Nods negatively)
H.M.Jr:
Have I overlooked anything?
Haas:
You're still going to keep that 12 o'clock
Gaston:
H.M.Jr:
meeting?
No, I better change that, for another reason.
Let me just think a minute. Now, what I was
going to do - to make the Associated gas 11:45.
Wouldn't 15 minutes be enough on it?
Opper:
I think so, yes, sir.
H.M.Jr:
What?
Opper:
H.M.Jr:
I think so.
All right, Associated Gas - - Then at 12 o'clock
let Landis come. And then at 12:30 Eccles.
After all, a half hour, wouldn't that be time
enough on -
Haas:
On the tax?
H.M.Jr:
Yes
Haas:
It will be if you just want to get the consideration started; in other words, what is the status.
H.M.Jr:
Heas:
That's enough, I think.
That's about all you should do.
69
-8Opper:
It occurs to me that it would only - would be
better to have only 15 minutes with Landis on
Associated Gas.
H.M.Jr:
Well, but - I mean I might want to take a
breath of fresh air; I don't want to crowd
myself. I mean if you people came in at
11:45 and I had Landis here at 12, and then
someone - Eccles - I wouldn't take this thing
up till 12:30. Then you be here (White and
Haas).
Haas:
And the other boys in the Bureau that are
working - there is one King.
H.M.Jr:
That's all right. But you tell Eccles I've
Haas:
postponed this until 12:30 (to Upham).
What time is that?
H.M.Jr:
12:30 - and Landis will be here too.
What they are going to do at 12:30 is present
the Treasury's tax figures - a study on
foreign securities. See, Jake?
Viner:
H.M.Jr:
All right.
All right, if you will go to work on this thing
now.
70
SECRETARY OF STATE
Department of State
DEPARTMENT OF STATE
WASHINGTON
November 21, 1936.
The Acting Secretary of State presents his
compliments to the Honorable the Secretary of the
Treasury, and encloses for his information a copy
of a note (No. 3775 of November 21, 1936) from the
Netherland Legation in Washington, transmitting
upon instruction of the Minister of Foreign Affairs
of the Netherlands, the text of a declaration made
by the Netherland Government with regard to adherence
to the general principles stated in the tripartite
declaration of September 25.
Enclosure:
From Netherland Legation,
November 21, 1936.
of
71
Washington, D.C.
ROYAL NETHERLAND LEGATION
November 21, 1936.
No.3775.
Sir:Acting upon instructions of the Minister of Foreign
Affairs of the Netherlands I have the honor to inform Your
Excellency of the following declaration made by my Government:
"The Government of the Netherlands has cognizance
of the declarations by which the Governments of France,
Great Britain and the United States have seen fit to
express their intention with regard to their monetary
policy and adheres to the general principles stated in
their tripartite declaration of September 25, 1936."
I avail myself of this opportunity to renew to
you, Sir, the assurances of my highest consideration.
B.
w.s. C. van Breugel Douglas.
Charge d'Affaires a.i.
of the Motherlands.
The Honorable R. Walton Moore
Acting Secretary of State
mshinston n .
72
OFFICIAL COMMUNICATIONS TO
SECRETARY OF STATE
c.
DEPARTMENT OF STATE
WASHINGTON
November 21, 1936.
The Acting Secretary of State presents his
compliments to the Honorable the Secretary of the
Treasury, and encloses for his information a copy of
a note dated November 21, 1936, from the Swiss Lega-
tion in Washington, transmitting, upon instruction
of the Swiss Government, the text of a declaration
made by the Swiss Government with regard to adherence
to the general principles stated in the tripartite
declaration of September 25.
Enclosure:
From Swiss Legation,
November 21, 1936.
If
ATION DE SUISSE
WASHINGTON. D.C.
cofy
75
November 91, 1936.
sir :
I have the honor to inform you that I have
been instructed by my Government to convey to you the
following :
. The Government of Switzerland has cognizance
of the declarations by which the Governments of
France, Great Britain and the United States of
America have seen fit to express their intentions
with regard to their monetary poliey and adheres
to the general principles stated in their tripartite declaration of September 25.
Accept, Sir, the assurances of my highest consideration.
(sy) MarePeler
Minister of Switserland.
Honorable
Walton Moore,
Acting Secretary of State,
Washington.
74
November 23, 1936
10:13 A.M.
H.M.Jr:
W.R.
Hello.
Burgess:
Hello, sir.
H.M.Jr:
Hello, Burgess.
B:
Well, we've got - got a little flash on the
opening here, and it looks as though it was
just ,little bit off, about a thirty-second or
two off.
H.M.Jr:
Good.
B:
A little bit nervous. But I've talked to several
of the dealers; they don't anticipate any considerable selling. They say there are no great
offerings around.
H.M.Jr:
B:
H.M.Jr:
B:
Un huh.
Now, it's a little early to tell; it may slack
off a little during the day, but - but it doesn't
look like anything very vigorous.
Yes. Well, what do you think - what do you
think our program should be for today?
Well, I think we ought to - ought to let it find
its level if we can.
H.M.Jr:
Yes
B:
But if the selling gets - well, in the first place,
we ought to see to it that the market is orderly, -
H.M.Jr:
Yes
B:
- and that there are bids in on every issue -
H.M.Jr:
Yes
B:
- at all times.
H.M.Jr:
Well, now - how would this be? Let's say that we we - we take - oh, about two hundred thousand on
every thirty-second down. That wouldn't be too big,
would it?
75
-2
B:
H.M.Jr:
B:
H.M.Jr:
No - something like that. But I wouldn't start
until
it had gone off - oh, two or three thirtyseconds from Saturday's bid.
That's all right.
Yes, yes.
I mean I - I really - my reason for pressing
market find its level.
Exactly, yes.
Eccles so to do this was. to - was to have the
B:
H.M.Jr:
See?
B:
Yes.
H.M.Jr:
Let's keep in touch with each other today, and
if there's any really sharp thing call me, will
you?
B:
I will, yes.
H.M.Jr:
And then - you and Bell made up your mind yet?
B:
H.M.Jr:
B:
Well, I think reasonably well. I - I'm about
prepared to see you - see you give up the
preferred allotment altogether this time.
But you haven't talked with Bell yet?
Yes - well, I talked to him Saturday and a
little bit this morning.
H.M.Jr:
But -
B:
We'll make a final recommendation to you by noon.
H.M.Jr:
O.K.
B:
Fine.
H.M.Jr:
Thank you.
B:
Good.
76
-310:55 A.M.
H.M.Jr:
New York.
Operator:
All right.
H.M.Jr:
Hello.
Operator:
Mr. Burgess.
H.M.Jr:
Hello.
B:
Yes, sir.
H.M.Jr:
Hello, Burgess.
B:
It's just a little bit more off.
H.M.Jr:
Yes
B:
But there - there are bids in on everything;
there's no volume of selling. They're from one
to three thirty-seconds off from Saturday's
close.
B:
Well, that's not bad.
But things are doing very nicely, I think.
H.M.Jr:
Have you bought anything?
B:
No.
H.M.Jr:
Uh huh.
H.M.Jr:
B:
I think not. Now, we've instructed one of the
dealers, in case any issue doesn't have bids -
H.M.Jr:
Yes
B:
- to put in some bids, small bids, at two or
H.M.Jr:
That's all right.
B:
Under Saturday's bid price.
H.M.Jr:
That's all right.
B:
And we haven't heard from him of any executions. I
three thirty-seconds under Saturday's market.
77
-4 don't think he's made any.
H.M.Jr:
Fine.
Now, I have Mr. Bell, Mr. Broughton, and Mr.
Kilby.
B:
Well, that's a very important galaxy of
gentlemen.
H.M.Jr:
And Mrs. Klotz.
B:
Yes.
H.M.Jr:
Now, they've come to the decision that, for once,
for one issue we'll eliminate all preferences.
B:
O.K. by me.
H.M.Jr:
O.K. by you.
B:
Yes
H.M.Jr:
And - that's number one - and, number two, the
people here have a preference for December 7.
B:
For December 7?
H.M.Jr:
Yes.
B:
Well, darn them.
H.M.Jr:
Yes. Well, you're quite - quite a ways away.
(Laughs) Well, of course, one always has a
preference for a weekend if he can - if he can
B:
do it easily.
H.M.Jr:
B:
H.M.Jr:
Yes, - well, we've gone English here.
But you're going to discourage your boys that that do your work for you.
Well, it's a question of tightening it right.
It - it's - you know, I get very temperamental
before these -
B:
(Laughs)
78
-5H.M.Jr:
I - I - I - I just feel that I'd be - that I'd
B:
Yes
H.M.Jr:
B:
be rushed a little bit too much on December 3.
I'm serious about it.
I just couldn't quite get my house in order.
Of course, I thought with this early announcement
that there wouldn't be much difficulty about that.
H.M.Jr:
Well, I - I just can't quite get ready for it,
B:
Un huh, un huh.
H.M.Jr:
B:
H.M.Jr:
B:
Burgess.
I'd like to be here next week and sit back here
and see a few people from New York and talk it
over and get the feel of the thing. After all,
you know, even if we - without asking for any
new money, I mean, it's a billion one eighty-seven.
Yes, but I think you wouldn't know any more with
the extra two or three days.
Well, maybe not, but I'd feel better about it.
I really feel very badly about - about the - the
kind of job that is done on these things -
H.M.Jr:
Yes
B:
- and I think it's very important to the reputation of the Treasury -
H.M.Jr:
Yes
B:
- that its business affairs should be handled
properly, and I don't think this is being handled
properly.
H.M.Jr:
Well, it's -
B:
I don't think it was last time.
H.M.Jr:
No. Well, of course, there's one way we could do
it, but everybody doesn't - seems to be opposed to
79
-6-
H.M.Jr:
it, and that's make a register.
Oh, these five thousand dollar things.
No. That's out now.
B:
Yes.
B:
H.M.Jr:
No, make everybody register for their bonds.
No, I mean everybody.
B:
Well, I think that's a mess, because that
hinders normal trading in them.
H.M.Jr:
Yes. Well, this is the way I - I mean, you know,
I - I've got to do these things on my feelings.
B:
Yes
H.M.Jr:
And my feeling is that I want a full week, -
B:
Yes
H.M.Jr:
- to sit back here and do this thing calmly.
The other way I'd be rushed.
B:
H.M.Jr:
B:
Yes, yes. Well Now, if the Treasury people all here said, "No they definitely prefer the seventh.
oh well, as far as abstract - abstract preference,
I prefer the seventh; but there's a job to be
done. There are all these subscriptions coming
in, and -
H.M.Jr:
Yes
B:
- and -
H.M.Jr:
Well, it gives you, it gives you -
B:
- and
H.M.Jr:
Well, it gives you a full seven days.
going on here.
80
-7B:
Well, that's - that's not adequate.
H.M.Jr:
What?
H.M.Jr:
That's not adequate to do the job right.
Yes. Well, I'm in entire sympathy with you
that you want to do it right, but I also wanted
to have it priced right.
B:
Yes, yes. Well, I agree to the pricing right,
H.M.Jr:
being able to price it right.
Yes. Well, I - I - I've talked it over here,
B:
and it doesn't seem to me really that those
two or three days would make a difference in
Burgess, and I - I think unless there's some
new reason - I think we'll make it the seventh.
B:
Well,
sir,
I'm
I'm
sorry
for
that.
I
I
don't
like it a bit.
H.M.Jr:
No.
B:
I think it's - I think it's crowding people too
close. It isn't just a question of working
nights and all that; they're glad to do that.
But a man's judgment isn't as good when he's
doing that and - and there's certain things you
have to do in business hours: be checking up
people and so on.
H.M.Jr:
B:
Yes, yes.
And these other banks just haven't been doing the
job as they should.
H.M.Jr:
Yes
B:
Now, what I'd like to see is a -
H.M.Jr:
Well, what about bringing down these various
B:
H.M.Jr:
fiscal officers in advance - bringing them down
here about the - the third, and let's have a
talk to them?
Well, I think there's merit in that Well - well -
81
8-
- so that we standardize the -
B:
H.M.Jr:
Yes
B:
- the method of dealing with these things a bit.
H.M.Jr:
Well, now, we'd have a - an Open Market Committee
B:
Yes
H.M.Jr:
Now - and that doesn't ever last very long.
B:
Yes
H.M.Jr:
meeting on Wednesday, the second.
And why don't I tell Bell, who's sitting here,
listening, that we ask these various fiscal
officers to come in here on Wednesday, the
second, and get -
B:
H.M.Jr:.
All right.
- and meet with you and Bell and Broughton and
Kilby.
B:
Yes, yes.
H.M.Jr:
See?
B:
Yes.
H.M.Jr:
And -
H.M.Jr:
I'm for that.
All right. Bell's making a note.
B:
Yes
H.M.Jr:
See? Let me ask him.
B:
well let's do that. That's time Well, I think that's very desirable.
H.M.Jr:
That's time enough, isn't it?
B:
And have an understanding just what we're going to
B:
think, Bell? Huh?
(To Bell) What do you
(Back to Burgess) All right,
82
-9in each district.
H.M.Jr:
Righto.
B:
And - and then we'll just have to cut our coats to
H.M.Jr:
That's right.
B:
- that's all.
fit our cloth, -
H.M.Jr:
Let me ask you this. This afternoon at my four
o'clock conference I'm going to announce the
date; I said I would, you see?
Yes
B:
H.M.Jr:
Do you think I ought to say anything that we're
going to start on December 2 to sell fifty
million bills into March 15, or just do it and
not say anything about it?
Now, let me think about that.
Well, we won't announce that till Wednesday, you
B:
Yes. That would normally be announced -
H.M.Jr:
Wednesday.
B:
- next Wednesday.
H.M.Jr:
This Wednesday. It'd be announced this Wednesday
B:
Yes
H.M.Jr:
Well, then -
B:
Uh -
H.M.Jr:
B:
see.
for next Monday, wouldn't it?
B:
(Aside) - that there - it'11 be on when?
There's some merit in telling them in advance.
H.M.Jr:
Yes
H.M.Jr:
83
- 10 On the other hand, if this market were very weak -
B:
H.M.Jr:
I don't think it would affect this market any.
Well why not let's just - let it come out normally,
B:
That's all right.
H.M.Jr:
Because -
B:
Maybe that's better.
H.M.Jr:
Just sort of do it normally, then -
B:
Don't throw too many new things at them all at
H.M.Jr:
All right.
B:
Yes.
H.M.Jr:
Then it'd come out Thursday, be in Friday morning's
B:
Yes
H.M.Jr:
- and that's notice to them that we're going to
B:
Yes, yes.
H.M.Jr:
What?
B:
I think that's all right.
H.M.Jr:
All right.
B:
Yes.
H.M.Jr:
Thank you.
B:
All right, sir.
H.M.Jr:
Goodbye.
which the boys here say would be - come out Thursday,
this Thursday.
once.
papers -
pick up some new money through bills.
84
LMS
SPECIAL GRAY and GRAY
Paris
Dated November 23, 1936
Rec'd 2:55 p. m.
Secretary of State,
Washington.
1140, November 23, 5 p. m.
FOR THE SECRETARY OF THE TREASURY FROM COCHRAN.
This forenoon I telephoned to Baudewyns at Brussels,
Trip at Amsterdam and Bachmann at Zurich the text of the
French communique quoted in my November 22, 1 p. m., and
confirmed a schedule for press releases.
JOURNAL OFFICIAL of November 22 announces appointment
of Baumgartner as general manager of the "Credit National".
He will take office December 8. While no official announcement has yet been made the press reports that Rueff will
succeed Baumgartner as Director of the General Movement
of Funds. This is not yet confirmed.
On Paris exchange market today dollars were offered.
French franc was strong also against belga and Swiss franc,
but weak against sterling and florin. Bourse bad. French
rentes down about two francs and international securities
similarly lower because of rumors about Russian and German
difficulties.
This
LMS 2-No. 1140, November 23, 5 p. m., from Paris.
This evening's Paris press carries correct reports
from Amstordam and Born of the official adherence of the
Dutch and Swiss Governments to the general principlos
of the tripartite agreement of September 25.
BULLITT
KLP
86
Monday, November 23, 1936
Sterling opened in the London market this morning at 4.89-1/16
and steadily improved in our market to 4.89-3/4 at about 1 P. M.
Between 1 and 2 P. M. the market was distinctly nervous, with buyers
for sterling in the market without any apparent offers to meet this
demand. The buying apparently came in great part from stock exchange
houses covering sales of stocks in this market by foreigners, but
there was a good commercial demand, mainly from rubber, tin and silk
importers. It was evident that unless sterling was supplied to the
market there might be a sharp run-up in price, which would give rise
to criticism as to the working of the Stabilization Funds under the
tripartite pact. As the price which the British Stabilization Fund,
through the Bank of England, quotes us for gold each morning is their
buying as well as selling price for gold, it is possible to use their
buying price for gold as a means of obtaining sterling to be used to
stabilize the market. After discussing this with the Secretary he
immediately authorised the sale of sufficient sterling in order to hold
the rates within control, which orders were transmitted to the Federal
Reserve Bank. In between the time the decision was made and it was
possible to reach the Federal Reserve Bank by phone, the rate had
advanced to 4.90-3/4, at which price 35,000 pounds were sold, and
another 30,000 pounds were sold at 4.90-3/8. The market immediately
87
-2-
Monday, September 23, 1936
steadied and held between 4.90 and 4.90 1/4 for the rest of the afternoon and an additional 66,000 pounds were sold, bringing the total
sales up to 130,000. In confirming this transaction to the Bank of
England the Federal Reserve Bank was instructed to advise them that
this act on our part had been taken in order to prevent a wide fluctuation
in one day and that the Federal Reserve Bank was not to give the
impression that sterling had been sold because we felt that the level
prevailing at the time of sale was a satisfactory one to us.*
*This transaction was discussed with Professor Viner and Assistant Secretary
Taylor, who also approved of it.
(A. Lochhead)
88
November 23, 1936
10:13 A.M.
W.R.
Hello.
.
H.M.Jr:
Burgess:
Hello, sir.
H.M.Jr:
Hello, Burgess.
B:
Well, we've got - got a little flash on the
opening here, and it looks as though it was
justoff.
a little bit off, about a thirty-second or
two
H.M.Jr:
Good.
B:
A little bit nervous. But I've talked to several
of the dealers; they don't anticipate any considerable selling. They say there are no great
offerings around.
H.M.Jr:
B:
H.M.Jr:
B:
Uh huh.
Now, it's a little early to tell; it may slack
off a little during the day, but - but it doesn't
look like anything very vigorous.
Yes. Well, what do you think - what do you
think our program should be for today?
Well, I think we ought to - ought to let it find
its level if we can.
H.M.Jr:
Yes
B:
But if the selling gets - well, in the first place,
H.M.Jr:
Yes
B:
- and that there are bids in on every issue -
H.M.Jr:
Yes
B:
- at all times.
H.M.Jr:
we ought to see to it that the market is orderly, -
Well, how - how would this be? Let's say that we we - we take - oh, about two hundred thousand on
every thirty-second down. That wouldn't be too big,
would it?
89
-2B:
No - something like that. But I wouldn't start
until
it had gone off - oh, two or three thirtyseconds from Saturday's bid.
H.M.Jr:
That's all right.
B:
Yes, yes.
H.M.Jr:
I mean I - I really - my reason for pressing
Eccles so to do this was to - was to have the
market find its level.
B:
Exactly, yes.
H.M.Jr:
See?
B:
Yes.
H.M.Jr:
Let's keep in touch with each other today, and
if there's any really sharp thing call me, will
you?
B:
I will, yes.
H.M.Jr:
And then - you and Bell made up your mind yet?
B:
H.M.Jr:
B:
Well, I think reasonably well. I - I'm about
prepared to see you - see you give up the
preferred allotment altogether this time.
But you haven't talked with Bell yet?
Yes - well, I talked to him Saturday and a
little bit this morning.
H.M.Jr:
But -
B:
We'll make a final recommendation to you by noon.
H.M.Jr:
O.K.
B:
Fine.
H.M.Jr:
Thank you.
B:
Good.
90
-310:55 A.M.
H.M.Jr:
New York.
Operator:
All right.
H.M.Jr:
Hello.
Operator:
Mr. Burgess.
H.M.Jr:
Hello.
B:
Yes, sir.
H.M.Jr:
Hello, Burgess.
B:
It's just a little bit more off.
H.M.Jr:
Yes
B:
But there - there are bids in on everything;
there's no volume of selling. They're from one
to three thirty-seconds off from Saturday's
close.
B:
Well, that's not bad.
But things are doing very nicely, I think.
H.M.Jr:
Have you bought anything?
B:
No.
H.M.Jr:
Uh huh.
H.M.Jr:
B:
I think not. Now, we've instructed one of the
dealers, in case any issue doesn't have bids -
H.M.Jr:
Yes
B:
- to put in some bids, small bids, at two or
H.M.Jr:
That's all right.
B:
Under Saturday's bid price.
H.M.Jr:
That's all right.
B:
And we haven't heard from him of any executions. I
three thirty-seconds under Saturday's market.
91
-4don't think he's made any.
H.M.Jr:
Fine.
Now, I have Mr. Bell, Mr. Broughton, and Mr.
Kilby.
B:
Well, that's a very important galaxy of
gentlemen.
H.M.Jr:
And Mrs. Klotz.
B:
Yes.
H.M.Jr:
Now, they've come to the decision that, for once,
for one issue we'll eliminate all preferences.
B:
O.K. by me.
H.M.Jr:
O.K. by you.
B:
Yes
H.M.Jr:
And - that's number one - and, number two, the
people here have a preference for December 7.
B:
For December 7?
H.M.Jr:
Yes.
B:
Well, darn them.
H.M.Jr:
Yes. Well, you're quite - quite a ways away.
(Laughs) Well, of course, one always has a
preference for a weekend if he can - if he can
B:
do it easily.
E.M.Jr:
B:
H.M.Jr:
Yes, - well, we've gone English here.
But you're going to discourage your boys that that do your work for you.
Well, it's a question of tightening it right.
It - it's - you know, I get very temperamental
before these -
B:
(Laughs)
92
-5H.M.Jr:
I - I - I - I just feel that I'd be - that I'd
be rushed a little bit too much on December 3.
I'm
serious about it.
B:
Yes
H.M.Jr:
I just couldn't quite get my house in order.
Of course, I thought with this early announcement
that there wouldn't be much difficulty about that.
B:
H.M.Jr:
Well,
I - I just can't quite get ready for it,
Burgess.
B:
Uh huh, uh huh.
H.M.Jr:
I'd like to be here next week and sit back here
and see a few people from New York and talk it
over and get the feel of the thing. After all,
B:
H.M.Jr:
B:
H.M.Jr:
B:
you know, even if we - without asking for any
new money, I mean, it's a billion one eighty-seven.
Yes, but I think you wouldn't know any more with
the extra two or three days.
Well, maybe not, but I'd feel better about it.
I really feel very badly about - about the - the
kind of job that is done on these things Yes
- and I think it's very important to the reputation
of the Treasury H.M.Jr:
B:
Yes
- that its business affairs should be handled
properly, and I don't think this is being handled
properly.
H.M.Jr:
Well, it's -
B:
I don't think it was last time.
H.M.Jr:
No. Well, of course, there's one way we could do
it, but everybody doesn't - seems to be opposed to
93
-6-
H.M.Jr:
it, and that's make a register.
Oh, these five thousand dollar things.
No. That's out now.
B:
Yes.
H.M.Jr:
No, make everybody register for their bonds.
B:
No, I mean everybody.
B:
Well, I think that's a mess, because that
hinders normal trading in them.
H.M.Jr:
Yes. Well, this is the way I - I mean, you know,
I - I've got to do these things on my feelings.
B:
Yes
H.M.Jr:
And my feeling is that I want a full week, -
B:
Yes
H.M.Jr:
B:
H.M.Jr:
B:
- to sit back here and do this thing calmly.
The other way I'd be rushed.
Yes, yes. Well Now, if the Treasury people all here said, "No they definitely prefer the seventh.
Oh well, as far as abstract - abstract preference,
I prefer the seventh; but there's a job to be
done. There are all these subscriptions coming
in, and -
H.M.Jr:
Yes
B:
- and -
H.M.Jr:
Well, it gives you, it gives you -
B:
- and
H.M.Jr:
Well, it gives you a full seven days.
going on here.
94
-7
B:
Well, that's - that's not adequate.
H.M.Jr:
What?
H.M.Jr:
That's not adequate to do the job right.
Yes. Well, I'm in entire sympathy with you
that you want to do it right, but I also wanted
to have it priced right.
B:
Yes, yes. Well, I agree to the pricing right,
B:
and it doesn't seem to me really that those
two or three days would make a difference in
H.M.Jr:
B:
H.M.Jr:
B:
being able to price it right.
Yes. Well, I - I - I've talked it over here,
Burgess, and I - I think unless there's some
new reason - I think we'll make it the seventh.
Well, sir, I'm - I'm sorry for that. I - I don't
like it a bit.
No.
I think it's - I think it's crowding people too
close. It isn't just a question of working
nights and all that; they're glad to do that.
But a man's judgment isn't as good when he's
doing that and - and there's certain things you
have to do in business hours: be checking up
people and so on.
H.M.Jr:
B:
Yes, yes.
And these other banks just haven't been doing the
job as they should.
H.M.Jr:
Yes
B:
Now, what I'd like to see is a -
H.M.Jr:
Well, what about bringing down these various
fiscal officers in advance - bringing them down
here about the - the third, and let's have a
talk to them?
B:
Well, I think there's merit in that -
H.M.Jr:
Well - well -
95
-8B:
- so that we standardize the -
H.M.Jr:
Yes
B:
- the method of dealing with these things a bit.
H.M.Jr:
Well, now, we'd have a - an Open Market Committee
meeting on Wednesday, the second.
B:
Yes
H.M.Jr:
Now - and that doesn't ever last very long.
B:
Yes
H.M.Jr:
And why don't I tell Bell, who's sitting here
listening, that we ask these various fiscal
officers to come in here on Wednesday, the
second, and get -
B:
All right.
H.M.Jr:
- and meet with you and Bell and Broughton and
Kilby.
B:
Yes, yes.
H.M.Jr:
See?
B:
Yes.
H.M.Jr:
And -
H.M.Jr:
I'm for that.
All right. Bell's making a note.
B:
Yes
H.M.Jr:
See? Let me ask him. (To Bell) What do you
(Back to Burgess) All right,
think, Bell? Huh?
B:
B:
well let's do that. That's time Well, I think that's very desirable.
H.M.Jr:
That's time enough, isn't it?
B:
And have an understanding just what we're going to
96
9-
in each district.
H.M.Jr:
Righto.
B:
And
- and
then- we'll just have to cut our coats to
fit our
cloth,
H.M.Jr:
That's right.
B:
- that's all.
H.M.Jr:
Let me ask you this. This afternoon at my four
o'clock conference I'm going to announce the
date; I said I would, you see?
B:
Yes
H.M.Jr:
Do you think I ought to say anything that we're
going to start on December 2 to sell fifty
million bills into March 15, or just do it and
B:
H.M.Jr:
not say anything about it?
Now, let me think about that.
Well, we won't announce that till Wednesday, you
see.
B:
Yes. That would normally be announced -
H.M.Jr:
Wednesday.
B:
- next Wednesday.
H.M.Jr:
This Wednesday. It'd be announced this Wednesday
for next Monday, wouldn't it?
B:
Yes
H.M.Jr:
Well, then -
B:
Uh -
H.M.Jr:
(Aside) - that there - it'11 be on when?
There's some merit in telling them in advance.
B:
H.M.Jr:
Yes
97
- 10 B:
H.M.Jr:
On the other hand, if this market were very weak -
I don't think it would affect this market any.
Well why not let's just - let it come out normally,
which the boys here say would be - come out Thursday,
this Thursday.
B:
That's all right.
H.M.Jr:
Because -
B:
Maybe that's better.
H.M.Jr:
Just sort of do it normally, then -
B:
Don't throw too many new things at them all at
once.
H.M.Jr:
All right.
B:
Yes.
H.M.Jr:
Then it'd come out Thursday, be in Friday morning's
B:
Yes
H.M.Jr:
- and that's notice to them that we're going to
B:
Yes, yes.
H.M.Jr:
What?
papers -
pick up some new money through bills.
H.M.Jr:
I think that's all right.
All right.
B:
Yes.
H.M.Jr:
Thank you.
B:
All right, sir.
H.M.Jr:
Goodbye.
B:
98
too
November 23, 1936.
12:35 P.M.
Present:
Mr. Opper
Mr. Upham
Mr. Gaston
Mr. Taylor
Mr. Haas
Dr. Lauchlin Currie
Dr. Goldschmidt
Dr. Paul P. Gourrich
Mr. Walter Gardner
Mr. James M. Landis
Dr. E. A. Goldenweiser
Mr. Allan Sproul
Mr. Ronald Ransom
Mr. Marriner Eccles
Mr. Kent
Mr. Zucker
Mr. King
Dr. Williams
Dr. Viner
H.M.Jr:
Haas:
H.M.Jr:
May I say that we are having this meeting - in the
first place, it is confidential, whatever we discuss here. What we say here is confidential. In
the second place, it is the result of the request
of the President of Mr. Landis, Mr. Eccles, and
myself that we study this question of foreign
capital seeking investment in the United States.
I asked our statistical and legal staff to make
this study from two angles: one, from the question
of the matter of the taxes which the foreign investor has to pay at present; and also the second
question, the possibility of American citizens
seeking means of evasion by going abroad and
investing their money abroad - I mean using, say,
London or Paris as a base to operate and invest
their money in the United States as a matter of
tax evasion. Now, that's our angle of approaching this. I don't think we have any recommendation. We just studied the situation as it is
today. And George, are you ready to We have a - it is rather an involved question.
Well, you stand up and do your duty.
98
-2Haas:
I think I'll let Dr. Zucker do it. He wrote this
H.M.Jr:
All right, where's Dr. Zucker?
Haas:
Right here.
Zucker:
This is addressed to the Tax Aspects of International Security Transactions; first, from the
viewpoint of the American taxation of foreigners
under existing and previous legislation on capital
statement.
gains and on income.
(Reads entire statement entitled
"Tax Aspects of International
Security Transactions," copy of
which follows)
100
Asposis we
102
International Security transactions
Page
A. American taxation of foreigners under existing and
previous legislation on capital gains and on income
1
1. The income tax provisions of the 1936 law affecting
foreign individuals and corporations exempt them
from taxation of capital gains to which Americans
are subject and fix a flat withholding tax es income
received consisting of dividends. etc
1
2. The tax on income is a withholding tax of 10 percent
for individuals and 15 percent for corporations
(dividends 10 percent). paid by the American making
the disbursement and applies only to foreignors who
do not transact business in the United States
3
3. The capital gains tax, although applying to Americans,
has no application to a nearesident foreigner whose
only business in the United States is the buying and
selling of securities and commodities on an exchange
4
4. This treatment is radically different from that of
previous tax law which provided for taxation of
capital gains and income substantially on the same
basis as Americans
4
5. The change made by the 1936 Act was due largely to
the feeling that adequate collection of taxes from
foreigners under the previous note had been adminis-
tratively impossible
5
3. Americans may use the device of trading in American
securities abroad in order to ovade taxation
7
1. While the revenue nets require that they file a
return and pay a tax upon such transactions, is
is obviously much more difficult to diseover such
evasions
7
2. Taxation of Americans by foreign countries tends
to encourage such evasions since, in general
Americans dealing in American securities shread
are not subject to my foreign taxation
s
(a) Great Britain
(b) France
8
(e) Ganada
,
(a) Netherlands
9
101
Tax Aspects of
International Security transactions
A.
American taxation of foreigners under existing and previous legisletion on capital gains and on income.
1. The income tax provisions of the 1936 law affecting
foreign individuals and corporations coupt them
from taxation of capital gains to which Americans
are subject and fix a flat withholding tax on income received consisting of dividents, etc.
Decided innovations affecting the treatment of income for tax perpoees have been incorporated into the Revenue Act of 1936. Under its
provisions. acaresident aliens and foreign corporations having income
in the United States. are treated under two categories: (1) Those not
engaged in trade OF business in the United States and not having as
office or place of business therein. and (2) those engaged in trade or
business within the United States.
with respect to the nonresident alien falling into the first group,
Section 211 (a) provides for a 10 percent tax on interest, dividends.
rents, royalties, and other fixed income from sources within the United
States, without the allowance of any deductions for expenses or the
granting of credits for dependents or any amount for personal exemption.
It is, in effect, a 10 percent tax on seees incone from the above-stated
sources. From this it is clear that the nonresident alien not engaged
is trade or business in the United States is not subject to my tax
whatseever on prefite arising from sale of securities. In other words,
he is free free the capital gains tax. Correspondingly, the foreign
corporation having income in the United States and not classified ha
102
104
one company in traile OF business within the United States, designated
under the Iam as a measonident foreign corporation, is subject to a
15 percent tax on its aman income consisting of interest, reats, or
such other fined income. On dividends, the tax rate for the nonresident
corporation is 10 percent. On capital gains is is nothing.
For the relatively small group of maresident aliens and foreign
corporations who classify under the statute in the second category,
1.0., these doing business in the United States, the tax profisions in
the 1938 law, Sections 211 (b) ass 231 (b). are substantially similar
to those in the prior tax laws. This type of nonresident alien is
allowed a personal exemption of $1,000 and also, if a resident of either
Mexico or Canada, the regular credit for dependents. The not income
within the United States of a nonresident alien of this type after such
credite is subject to the regular normal tax and surtax.
For the resident foreign corporation,1e., the foreign corporation
doing business in the United States, the incoue which is earns here is
subject to a flat tax of 22 percent. IS is not subject to the undiatributed prefits tax.
Opportunity to file returns in the - manner as is allowed our
own Nationals and domostic corporations, is given to this type of non-
resident aliented resident foreign corporations. should those foreigners
fail to have filed with the Collector a true and accurate return of not
income, the Commissioner is expovered to collest a tax on the basis of
the group income without allowance for business detections and erolite.
IS my be observed that foreign individuals and corporations doing
103
-3105
business in the United States are subject to the capital grime tax any profit arising from occurity transactions in the United States is
like fashion as our our citizens or donostic corporations.
2.
The tax on income is a withholding tax of 10 percont for individuals and 15 percent for corporations (dividente 10 percent), paid by the American
making the disbursement and applies only to for
eigners who do not transact business in the United
States.
To assure collection, se far as possible the 1936 Revenue Act and
the prior asts centala provisions which permit the employment of the
mechanism of withholding, better designated as "the payment of tax at
source." This applies to nonresident aliens whether doing business
in the United States OF not but only to foreign corporations not gaged in business in the United States, denominated as nonresident
foreign corporations. For the former, the withholding is on a 10 percent rate basis, constituting the entire tax prosurably due on the
nonresident alien's taxable income items. For the latter, withhold ng
is at the rate of 10 percent on dividends and 15 percent OR all other
taxable income amounts.
In general, the withholding agent corresponds to the paying agent
OF whoever is responsible for turning over the income to the nonresident
alien or to the nonresident foreign corporation) To make the withhold-
ing affective, the statute provides for a penalty of $10,000 and possible
imprisonment is eases of wilful failure to arrange for the payment of
the tax.
104
106
3. The capital grime tax, although applying to Americans,
has no application to a nonresident foreigner wheee
only business in the United States is the buying selling of merities and commitities on - exchange.
In pointing out the differencies treatment accorded the Andies
citisen and the foreigner with respect to income taxation, 10 is significant to note that while profits from security sales made w the narrestdent alien not doing business in the United States and by the morrosident
foreign corporation any not subject to the capital gaine tax, the ated percentage five-step system for taxing a proportion of the capital
gains from security transactions does apply against the United States
seller of securities. Thus, in a sense, there appears to be discrimina-
tion in favor of the foreign invester in connection with county deal-
ings. This is partially effect, however, by the relatively high withholding rates now applicable to the fined income items of these same
nonresident aliens and nonresident foreign corporations. It can be
readily appreciated. in view of our tax law providing for a 10 percent
tax on practically all income going out of the country to nonresident
aliens. that in the case of some of them the amount thus withhold is
decidedly in excess of what would be the tax liability determined w
the application of the regular normal tax and surtax after tue allow
anoe for personal credits and exemptions and business deductions.
4. This treatment is rationlly different from that of
previous tax law which provided for taxation of
capital give and income substantially on the -
basis as Americans.
Under the prior revenue asts, nonresident aliens and foreign canporations were subject to tax upon their respective net inconce from
courees withis the United States at substantially the same rates
-5-
105
applicable in the cases of citises or donostic corporations. Such
alien individuals and foreign corporations were required to file
returns disclosing therein the same information with respect to gross
income and deductions as was required of citizens and domestic corpora-
tions, whether or not such aliens were ongaged in business in the
United States. Time, under prior laws they were subject to the capital
gains tax.
The withholding rates were substantially less under all prior aste
than under the 1936 Act. The rates under the 1934 Act were 4 percent
for individuals and 13-3/4 percent for corporations. In general, in all
prior note the withholding rates paralleled the normal tax on our
Nationals and the flat tax on domostic corporations. In view of the
fact that for years prior to 1936 dividends were free from normal tax,
no withholding was required in the case of dividends received by mm
resident aliens from domostic corporations.
5. The change made by the 1936 Ast was due largely to
the feeling that adequate collection of taxes from
foreigners under the previous nots had been adminis-
tratively impossible.
In the administration of the tax provisions, covering principally
the tax on profite by foreigners arising from security transactions,
the Darom of Internal Revenue has difficulties with the
plan of permitting the income to move first to the morresident alien
with no withholding and them requiring the filing of a return to over
the transactions. Such difficulties were: (1) Having no jurisdiction
ever the person of the nonresident alien there existed no - to am-
pel the filing of a return, (2) the means for verifying the returns
-6-
106
were whelly inclogate in view of the lask of book records in this
country covering the nonresident aliens' security market activities.
and (3) accuring that in particular instances elegate information
was available from which profit determination arising from cederity
transactions could be made, there were not in this country in definite place known to the Surea either property OF bank accounts
of the nohresident alien against which distruint could be made.
From time to time, efforts were made in the Internal Revenue
Bureau to follow more intensively the transactions of the nonresident
aliens through abstracting from brokers' regular information reports
such data as were submitted dealing with security transactions where
the indicated customer was a foreigner.
This was not very productive of results in view of the easy
method of avoidance accomplished by nonresident aliens buying searc-
ties in the name of a foreign booker and the relatiance of such foreign broker to disclose to the Barean the names of his clients. This
reluctance is explainable by the existing foreign oustens, and is some
countries by regulations prohibiting the disclosing of the principals
for whom brokers sell securities. In addition, frequent dealings in
bearer certificates afforded no knowledge of the actual owners of the
stocks even to the foreign brokers themselves.
While the extent of failure to report prefite from stock transactions w foreigners cannot be determined with any degree of precision,
it becomes apparent that such failure was substantial from the fast
107
that, as per the Intest available information envering the year 1985,
only 10,530 returns were filed w associdant aliens, reflecting as
aggregate not income of approximately $80 million dollars and a tax
liability of not quite # million dollars. Included in - tax
returns were prefite from sales of real estate, stedies and bands in
as amount appreciation $5-1/4 million dollars, which figure orvers
capital asest miss held less than two years as well as sales of
capital assets held more than two years. To better appreciate the
picture time presented it is partiment to note that of the assresident
aliens who filed returns, many did so because the 4 parent withhold-
ing tax was in excess of the true tax liability when determined w
applying the regular nonal tax and surtax notes. These assessidant
aliens, therefore, filed returns accorpanied by claims for refund.
B. Americans may use the device of trading in American securities
abread in order to evade taxtion.
1. While the revenue asts require that they file a
return and M a tax ween mash transactions, is
is obviously mach more difficult to discover
such emaions.
Another aspect of the subject worthy of consideration is, are
there being erented under the United States tax system conditions taining to security transactions which night motivate - American to
contact his security transactions abroad. To be sure, the American
is tamble in the United States - all income which he came in other
countries. Nowever, according that the capital give tax is considered
by certain Americans to be too drustic to - masting in security
-8-
108
transactions in the United States and reporting the prefits thereen,
they may attempt to evade the tax for which they are liable by having
transactions consummated abroad and failing to report then. How persuasive the desire night become can be gleaned by analysing what the
withholding rates, as well as other taxes, are against nonresident
aliens in some of the principal foreign countries.
2. Taxation of Americans by foreign countries tends to
encourage such evasions since, in general, Americans
dealing in American securities abroad are not subject
to any foreign taxation.
(a) Great Britain
Nonresident aliens under British laws are subject to an income
tax collected at the source at the rate of 23-3/4 percent upon all
items of annual or recurring income such as dividends, interest, rents,
royalties, and the like. Hence, a United States citizen owning British
securities is taxed at 23-3/4 percent on dividends and interest from
these securities. In addition, he is subject to a graduated surtax on
amounts in excess of 2,000 pounds. With respect to capital gains
Great Britain does not tax casual capital gains, such as, gains realised
incident to transactions upon the securities exchanges. The American
citizen, nonresident in Great Britain, but trading there, provided he
trades through bona fide brokers, is not subject to any capital gains
tax, nor obviously is there any British withholding tax on income paid
from the United States.
(b) France
Like Great Britain, France imposes a tax collected at the source
on dividends and interest arising within its borders. The rates of
tax may be 12, 18, or 24 percent, dependent on the type of assurities.
the
109
111
In general, the rates are higher for "bearer" shares than for
"registered shares, and higher when the life of the corporation is
under ten years than when it is ever ten years. If an American
citisen carries on transactions in securities on the French Sourse
or other French Exchanges through a base fide commission agent, he
is not taxable upon the resulting profits. If. however, such American
citizen has a "permanent establishment in France he is subject to a
tax upon this class of profits at the rate of 12 percent.
(c) Canada
An American citizen, as a nonresident alien, is subject to 8 percent tax upon income in excess of $1,000 from sources within Canada.
Such tax is not withheld by deduction at the source. In addition, a
special surtax of 5 percent which is deducted at the source is imposed
upon certain items of dividends, interest, and reyalties.
A further withholding tax of 12-1/2 percent is operative against
rentals and "industrial" reyalties coming from patents, oil leases, etc.
If, however, the nonresident alien has income from sources other than
those subject to this 12-1/2 percent withholding tax, the 8 percent
tax applies to his aggregate income, and he is allowed to take a tax
credit for the 12-1/2 percent tax previously withhold.
(d) Netherlands
An American citises receiving dividends from a corporation dontciled in Holland sustains a tax which approximates 10 percent, suck
tax being chargeable against the corporation upon distribution of the
dividend. An American citisen, whether executing msual transactions
in stocks and securities, or trading therein through a kroker, is not
subject to tax spea the resulting prefits.
110
-3H.M.Jr:
Very good.
Zucker:
Thanks.
H.M.Jr:
Well, what is your pleasure, gentlemen?
Kent:
I may say, Mr. Secretary, that the particular
changes in the act were probably - next to the
surtax on undistributed corporate income, probably the most discussed in the sessions of the
committees up there in Congress of anything in
the 1936 act; and the statement is correct in
saying that the reasons for these changes were
because of the administrative impossibility of
getting any appreciable revenue out of the laws
as they were then and the upsetting consequences
of the attempts that have been made from time to
time to enforce the capital gains provisions. In
other words, they were felt to be theoretical
sanctions only, which had little or no value in
actual operation.
H.M.Jr:
How would this be? This is a pretty important
subject and I don't think we can do it justice.
If the Federal Reserve and the Securities Exchange
were each given at least one copy of this, or as
many copies as they want, and then each of you
gentlemen would designate somebody from your
staffs to meet with our staff and then they could
sort of mull this thing over and when they were
ready they could tell their respective chiefs
that they are ready. Then we could have another
meeting and they might bring in some kind of
recommendation. How would that be?
Eccles:
I think that would be fine. It's a complex
subject and the -
H.M.Jr:
I mean I can't get it with just one reading.
Eccles:
No.
H.M.Jr:
How does that strike you?
Landis:
I was wondering if, in addition to that, you
might get both the Federal Reserve Board and us
to consider the tax problem from our particular
#12
111
113
-4standpoints. Now, the administrative measures
taken in order to collect a tax, of course, are
not our business; but the effect of the absence
of capital gains tax on the flow of European
money in this country to buy American securities
at a competitive advantage over our residents
here who buy exactly the same thing: that is a
matter of our concern. You see?
H.M.Jr:
Landis:
H.M.Jr:
True. Well, all we had to do here was to simply
present the picture as it is, with no recommendations of any kind. We're very careful.
Naturally.
Now, I have been told repeatedly that American
citizens have found a method of operating from
abroad as a base in order to evade these taxes.
I have been told the only reason - they've been
going over to England and bought up defunct
companies, corporations, and used those to
operate as an English corporation in our stock
we can't - which would come under your organization more than ours.
market. There's all that sort of thing which
Landis:
But -
H.M.Jr:
Well, as far as I'm concerned - I mean if the
various staffs would explore this thing to
the limit, and whenever they've got something
we'd like them to come back and present it.
But from this particular standpoint: that a
man who operates abroad, whether American or
alien, has a distinct advantage over the
American citizen. Huh? And it must be quite
a lure to go abroad and operate from there.
Of course, there are certain counterbalancing
considerations that are present in many of
these cases. But I quite agree with you that
it is a situation that deserves exploration,
and I think we, for example, have a few slants
on the thing that we'd like to present from
our side, and I think the Federal Reserve Board
Landis:
also is concerned.
H.M.Jr:
Well, do you want to do it now?
112
5Landis:
No, not now. Just whether or not those different slants will be considered.
H.M.Jr:
Well, I sincerely hope so, and I want to again
repeat that we have been very careful to stay
within our own backyard on this thing. I mean
there is nothing in this where we have slopped
over anybody's -
Eccles:
Well, I think, Mr. Secretary, that after all,
your interest in this whole question of excess
reserves and all ties in with your stabilization
problem. It is a pretty difficult thing to say
just where our own backyard may be in this. I
think that we have such a community of interests
here that, as far as I'm concerned I - I don't
speak with the Board of any phase of the problem
but that, even though we may be charged with
certain responsibilities, they are very closely
related to our own problems.
H.M.Jr:
We realize that. Well, isn't it agreeable to
you two gentlemen? As I say, we'll turn this
over to our staffs and when they get something
let them knock on the door and -
Eccles:
King:
Haas:
I think that's an excellent plan.
I might suggest this, Mr. Secretary: from reading that, I don't believe the other side of the
picture is brought out as clearly as it might be.
If we could furnish, along with this, some rather
convenient material which goes into it much more
fully than this, I think it might be helpful.
Mr. King - he's Special Deputy over in Internal
Revenue - he'll be in at the discussions.
H.M.Jr:
King?
Hass:
Yes.
H.M.Jr:
Fine.
King:
For example, I believe Mr. Kent has an - I believe,
the Columbia Law Review there, and there is quite
an article on various phases.
113
-6Kent:
Yes, I was just going to suggest - This is
the June number of the Columbia Law Review for
1936; there is an article in there which is valuable because it brings together a number of the
devices, concrete devices, that are being used
by various persons at the present time for the
purpose of gaining tax advantages, and points
out the difficulties to be encountered from a
legal as well as other points of view in coping
with
those situations. It is a very illuminating
article.
Viner:
I'd suggest that the State Department has an
H.M.Jr:
Well, in the absence of Dr. Feis why not ask Mr.
Viner:
Kent:
interest in this. As that was read over, I think
I detected a treaty violation there, Livesey to sit in, or at least send them this
abstract of the legislation?
- because this "contiguous countries" violates
our most favored nation obligations with respect
to taxation.
That arose out of a parliamentary situation.
The State Department was fully informed of what
was going on, and some disquietude was expressed,
and there have been some protests from foreign
countries; but the Committees themselves were
H.M.Jr:
aware of the situation. But they got into a
parliamentary tangle and their choice was to
risk a violation of a treaty or deny this treatment to Canada and Mexico, and they preferred
to do the latter - preferred to do the former.
Are there any other suggestions? Well then, I
think it's up to - -
Nov. 23, 1936
ritten by Joseph S. Zucker, Division of Research and Statistics,
assisted by Clarence V. Opper and P. J. Mitchell of the Office of the General Counsel,
and Eldon P. King and D. L. Siegrist of the Bureau of Internal Revenue, and
George C. Haas.
98
Tax Aspects of
114
International Security Transactions
Page
A. American taxation of foreigners under existing and
previous legislation on capital gains and on income
1
1. The income tax provisions of the 1936 law affecting
foreign individuals and corporations exempt them
from taxation of capital gains to which Americans
are subject and fix a flat withholding tax on income
received consisting of dividends, etc
1
2. The tax on income is a withholding tax of 10 percent
for individuals and 15 percent for corporations
(dividends 10 percent), paid by the American making
the disbursement and applies only to foreigners who
do not transact business in the United States
3
3. The capital gains tax, although applying to Americans,
has no application to a nonresident foreigner whose
only business in the United States is the buying and
selling of securities and commodities on an exchange
4
4. This treatment is radically different from that of
previous tax law which provided for taxation of
capital gains and income substantially on the same
basis as Americans
4
5. The change made by the 1936 Act was due largely to
the feeling that adequate collection of taxes from
foreigners under the previous acts had been adminis-
tratively impossible
5
B. Americans may use the device of trading in American
securities abroad in order to evade taxation
7
1. While the revenue acts require that they file a
return and pay a tax upon such transactions, it
is obviously much more difficult to discover such
evasions
7
2. Taxation of Americans by foreign countries tends
to encourage such evasions since, in general
Americans dealing in American securities abroad
are not subject to any foreign taxation
(a) Great Britain
(b) France
(c) Canada
(d) Netherlands
8
8
8
9
9
115
Tax Aspects of
International Security Transactions
A.
American taxation of foreigners under existing and previous legislation on capital gains and on income.
1. The income tax provisions of the 1936 law affecting
foreign individuals and corporations exempt them
from taxation of capital gains to which Americans
are subject and fix a flat withholding tax on income received consisting of dividends, etc.
Decided innovations affecting the treatment of income for tax purposes have been incorporated into the Revenue Act of 1936. Under its
provisions, nonresident aliens and foreign corporations having income
in the United States, are treated under two categories: (1) Those not
engaged in trade or business in the United States and not having an
office or place of business therein, and (2) those engaged in trade or
business within the United States.
With respect to the nonresident alien falling into the first group,
Section 211 (a) provides for a 10 percent tax on interest, dividends,
rents, royalties, and other fixed income from sources within the United
States, without the allowance of any deductions for expenses or the
granting of credits for dependents or any amount for personal exemption.
It is, in effect, a 10 percent tax on gross income from the above-stated
sources. From this it is clear that the nonresident alien not engaged
in trade or business in the United States is not subject to any tax
whatsoever on profits arising from sale of securities. In other words,
he is free from the capital gains tax. Correspondingly, the foreign
corporation having income in the United States and not classified as
#
-2-
116
one engaged in trade or business within the United States, designated
under the law as a nonresident foreign corporation, is subject to a
15 percent tax on its gross income consisting of interest, rents, or
such other fixed income. On dividends, the tax rate for the nonresident
corporation is 10 percent. On capital gains it is nothing.
For the relatively small group of nonresident aliens and foreign
corporations who classify under the statute in the second category,
i.e., those doing business in the United States, the tax provisions in
the 1936 law, Sections 211 (b) and 231 (b), are substantially similar
to those in the prior' tax laws. This type of nonresident alien is
allowed a personal exemption of $1,000 and also, if a resident of either
Mexico or Canada, the regular credit for dependents. The net income
within the United States of a nonresident alien of this type after such
credits is subject to the regular normal tax and surtar.
For the resident foreign corporation, i.e., the foreign corporation
doing business in the United States, the income which it earns here is
subject to a flat tax of 22 percent. It is not subject to the undistributed profits tax.
Opportunity to file returns in the same manner as is allowed our
own Nationals and domestic corporations, is given to this type of non-
resident alien and resident foreign corporation. Should these foreigners
fail to have filed with the Collector a true and accurate return of net
income, the Commissioner is empowered to collect a tax on the basis of
the gross income without allowance for business deductions and credits.
It may be observed that foreign individuals and corporations doing
-
117
93
business in the United States are subject to the capital gains tax on
any profit arising from security transactions in the United States in
like fashion as our own citizens or domestic corporations.
2. The tax on income is a withholding tax of 10 percent for individuals and 15 percent for corporations (dividends 10 percent), paid by the American
making the disbursement and applies only to foreigners who do not transact business in the United
States.
To assure collection, so far as possible the 1936 Revenue Act and
the prior acts contain provisions which permit the employment of the
mechanism of withholding, better designated as "the payment of tax at
source." This applies to nonresident aliens whether doing business
in the United States or not but only to foreign corporations not engaged in business in the United States, denominated as nonresident
foreign corporations. For the former, the withholding is on a 10 percent rate basis, constituting the entire tax presumably due on the
nonresident alien's taxable income items. For the latter, withholding
is at the rate of 10 percent on dividends and 15 percent on all other
taxable income amounts.
In general, the withholding agent corresponds to the paying agent
br whoever is responsible for turning over the income to the nonresident
alien or to the nonresident foreign corporation. To make the withholding effective, the statute provides for a penalty of $10,000 and possible
imprisonment in cases of wilful failure to arrange for the payment of
the tax.
-4-
118
3. The capital gains tax, although applying to Americans,
has no application to a nonresident foreigner whose
only business in the United States is the buying and
welling of securities and commodities on an exchange.
In pointing out the differences in treatment accorded the American
citizen and the foreigner with respect to income taxation, it is significant to note that while profits from security sales made by the nonresident alien not doing business in the United States and by the nonresident
foreign corporation are not subject to the capital gains tax, the graduated percentage five-step system for taxing a proportion of the capital
gains from security transactions does apply against the United States
seller of securities. Thus, in a sense, there appears to be discrimination in favor of the foreign investor in connection with security deal-
ings. This is partially offset, however, by the relatively high withholding rates now applicable to the fixed income items of these same
nonresident aliens and nonresident foreign corporations. It can be
readily appreciated, in view of our tax law providing for a 10 percent
tax on practically all income going out of the country to nonresident
aliens, that in the case of some of them the amount thus withheld is
decidedly in excess of what would be the tax liability determined by
the application of the regular normal tax and surtax after due allowance for personal credits and exemptions and business deductions.
4. This treatment is radically different from that of
previous tax law which provided for taxation of
capital gains and income substantially on the same
basis as Americans.
Under the prior revenue acts, nonresident aliens and foreign corporations were subject to tax upon their respective net incomes from
sources within the United States at substantially the same rates
-5-
119
applicable in the cases of citizens or domestic corporations. Such
alien individuals and foreign corporations were required to file
returns disclosing therein the same information with respect to gross
income and deductions as was required of citizens and domestic corpora-
tions, whether or not such aliens were engaged in business in the
United States. Thus, under prior laws they were subject to the capital
gains tax.
The withholding rates were substantially less under all prior acts
than under the 1936 Act. The rates under the 1934 Act were 4 percent
for individuals and 13-3/4 percent for corporations. In general, in all
prior acts the withholding rates paralleled the normal tax on our
Nationals and the flat tax on domestic corporations. In view of the
fact that for years prior to 1936 dividends were free from normal tax,
no withholding was required in the case of dividends received by nonresident aliens from domestic corporations.
5. The change made by the 1936 Act was due largely to
the feeling that adequate collection of taxes from
foreigners under the previous acts had been administratively impossible.
In the administration of the tax provisions, covering principally
the tax on profits by foreigners arising from security transactions,
the Bureau of Internal Revenue has encountered difficulties with the
plan of permitting the income to move first to the nonresident alien
with no withholding and then requiring the filing of a return to cover
the transactions. Such difficulties were: (1) Having no jurisdiction
over the person of the nonresident alien there existed no way to com-
pel the filing of a return, (2) the means for verifying the returns
120
-6-
were wholly inadequate in view of the lack of book records in this
country covering the nonresident aliens' security market activities,
and (3) assuming that in particular instances adequate information
was available from which profit determination arising from security
transactions could be made, there were not in this country in any
definite place known to the Bureau either property or bank accounts
of the nonresident alien against which distraint could be made.
From time to time, efforts were made in the Internal Revenue
Bureau to follow more intensively the transactions of the nonresident
aliens through abstracting from brokers' regular information reports
such data as were submitted dealing with security transactions where
the indicated customer was a foreigner.
This was not very productive of results in view of the easy
method of avoidance accomplished by nonresident aliens buying securi-
ties in the name of a foreign broker and the reluctance of such foreign broker to disclose to the Bureau the names of his clients. This
reluctance is explainable by the existing foreign customs, and in some
countries by regulations prohibiting the disclosing of the principals
for whom brokers sell securities. In addition, frequent dealings in
bearer certificates afforded no knowledge of the actual owners of the
stocks even to the foreign brokers themselves.
While the extent of failure to report profits from stock transactions by foreigners cannot be determined with any degree of precision,
it becomes apparent that such failure was substantial from the fact
-7-
121
97
that, as per the latest available information covering the year 1933.
only 10,910 returns were filed by nonresident aliens, reflecting an
aggregate net income of approximately $20 million dollars and a tax
liability of not quite $3 million dollars. Included in such tax
returns were profits from sales of real estate, stocks and bonds in
an amount approximating $5-1/4 million dollars, which figure covers
capital asset sales held less than two years as well as sales of
capital assets held more than two years. To better appreciate the
picture thus presented it is pertinent to note that of the nonresident
aliens who filed returns, many did so because the 4 percent withhold-
ing tax was in excess of the true tax liability when determined by
applying the regular normal tax and surtax rates. These nonresident
aliens, therefore, filed returns accompanied by claims for refund.
B. Americans may use the device of trading in American securities
abroad in order to evade taxation.
1. While the revenue acts require that they file a
return and pay a tax upon such transactions, it
is obviously much more difficult to discover
such evasions.
Another aspect of the subject worthy of consideration is, are
there being created under the United States tax system conditions pertaining to security transactions which might motivate an American to
conduct his security transactions abroad. To be sure, the American
is taxable in the United States on all income which he earns in other
countries. However, assuming that the capital gains tax is considered
by certain Americans to be too drastic to warrant engaging in security
--
122
transactions in the United States and reporting the profits thereon,
they may attempt to evade the tax for which they are liable by having
transactions consummated abroad and failing to report them. How persuasive the desire might become can be gleaned by analysing what the
withholding rates, as well as other taxes, are against nonresident
aliens in some of the principal foreign countries.
2. Taxation of Americans by foreign countries tends to
encourage such evasions since, in general, Americans
dealing in American securities abroad are not subject
to any foreign taxation.
(a) Great Britain
Nonresident aliens under British laws are subject to an income
tax collected at the source at the rate of 23-3/4 percent upon all
items of annual or recurring income such as dividends, interest, rents,
royalties, and the like. Hence, a United States citizen owning British
securities is taxed at 23-3/4 percent on dividends and interest from
these securities. In addition, he is subject to a graduated surtax on
amounts in excess of 2,000 pounds. With respect to capital gains
Great Britain does not tax casual capital gains, such as, gains realized
incident to transactions upon the securities exchanges. The American
citizen, nonresident in Great Britain, but trading there, provided he
trades through bona fide brokers, is not subject to any capital gains
tax, nor obviously is there any British withholding tax on income paid
from the United States.
(b) France
Like Great Britain, France imposes a tax collected at the source
on dividends and interest arising within its borders. The rates of
tax may be 12, 18, or 24 percent, dependent on the type of securities.
-9- -
123
In general, the rates are higher for #bearer" shares than for
"registered" shares, and higher when the life of the corporation is
under ten years than when it is over ten years. If an American
citizen carries on transactions in securities on the French Bourse
or other French Exchanges through a bona fide commission agent, he
is not taxable upon the resulting profits. If, however, such American
citizen has a "permanent establishment" in France he is subject to a
tax upon this class of profits at the rate of 12 percent.
(c) Canada
An American citizen, as a nonresident alien, is subject to 8 percent tax upon income in excess of $1,000 from sources within Canada.
Such tax is not withheld by deduction at the source. In addition, a
special surtax of 5 percent which is deducted at the source is imposed
upon certain items of dividends, interest, and royalties.
A further withholding tax of 12-1/2 percent is operative against
rentals and "industrial" royalties coming from patents, oil leases, etc.
If, however, the nonresident alien has income from sources other than
those subject to this 12-1/2 percent withholding tax, the 8 percent
tax applies to his aggregate income, and he is allowed to take a tax
credit for the 12-1/2 percent tax previously withheld.
(d) Netherlands
An American citizen receiving dividends from a corporation domiciled in Holland sustains a tax which approximates 10 percent, such
tax being chargeable against the corporation upon distribution of the
dividend. An American citizen, whether executing casual transactions
in stocks and securities, or trading therein through a broker, is not
subject to tax upon the resulting profits.
124 Fin
November 24, 1936.
10:15 a.m.
Gordon
Rentschler: Hello Mr. Secretary.
H.M.Jr:
R:
H.M.Jr:
R:
H.M.Jr:
R:
H.M.Jr:
R:
H.M.Jr:
Hare are you ?
Oh I'm fine and you?
Oh fine thanks.
Look I'd like to have a little talk with you at
a time that is mutually convenient.
Yes what would suit you - what time would suit you?
Well
here's the thing. I'm going up to the farm
tomorrow afternoon.
Yes.
At Fishkill. And I'11 be there till Sunday.
Yes.
You - I don't know - I mean are you going away
over
R:
H.M.Jr:
NO I'm going to be - I'll be here over the holiday.
Well I mean would either - I could - Friday or
Saturday
R:
Either Friday or Saturday would suit and I could
come wherever you're going to be if - whatever is
convenient to you.
H.M.Jr:
R:
H.M.Jr:
Well it might be as convenient there as it would
be to - ah - come down to Washington.
Yes. Just whatever suits your convenience
Well - ah
I'll be delighted to do.
R:
H.M.Jr:
Well Here's - you could - supposing you look this
up, you see? I mean I don't - you could either drive
or take a train, you see?
R:
Yes.
125
-2H.M.Jr:
R:
H.M.Jr:
R:
Whichever you preferred - its about the same time.
Why yes - ah.
I mean you could have your Secretary look it up.
Yes I'll motor - why don't I do this. Why don't
I motor over to your - to the farm either on Friday
or Saturday whichever suits you the better.
H.M.Jr:
R:
H.M.Jr:
R:
H.M.Jr:
R:
H.M.Jr:
Well I was going to suggest if you come up - say
if you wanted to come up here Friday afternoon
you could have supper with us and then go back.
We could have supper at 7 o'clock and go back
right after or you could - or - or Saturday - either
one - I've made no dates.
Well
Which would
it does make a particle. Saturday would be
a little more convenient to me than Friday really.
All right. Would you - would Saturday afternoon.
Saturday afternoon? Fine.
Well I mean would you - ah - would you rather come
say at 4 o'clock and then spend a little time and
then go back or would you rather come later?
R:
Well suppose I drop over about 4 o'clock Saturday
afternoon.
H.M.Jr:
R:
H.M.Jr:
R:
H.M.Jr:
R:
All right and then we can have a talk.
Yes, fine that would suit me just right.
Now I'll tell you the best way. You know there's
this new East - they call it Eastern Motor Parkway,
which is an extension of Bronx River?
Yes.
Now that's finished - hello.
Yes.
126
-3-
H.M.Jr:
And you get on that parkway and go to the end of it
and52.
then you come to what they call State Highway
No.
Yes, I know that road.
H.M.Jr:
R:
H.M.Jr:
R:
H.M.Jr:
And you turn left.
Yes.
And you come to the Village - Wiccopee Village.
Yes.
And at the Wiccopee store you'd better inquire - we're
about a mile from the Wiccopee store on a dirt road.
R:
Fine, well I'll come right to the village. I think
H:M.Jr:
Well you go up on the new extension of Bronx River
R:
Yes.
H.M.Jr:
R:
H.M.Jr:
R:
H.M.Jr:
I know exactly where it is.
to route - State Highway 52 -
Turn left to the little village of Wiccopee.
Yes.
And at the store you inquire.
Fine and I'11 motor up Saturday afternoon.
And then we could have a little talk. I - I'd like
to go over the general situation as well as the
bond market.
R:
Yes, very good. I'd rather go that than come down
to Washington.
H.M.Jr:
R:
H.M.Jr:
R:
Good.
All right. It'11 be very nice to see you.
Say listen.
Yes.
127
H.M.Jr:
What do you mean by buying our whole bill issue
and not leaving any for anybody else?
R:
Well
wethem?
wanted them this time. Do you mind letting
us have
H.M.Jr:
R:
H.M.Jr:
R:
H.M.Jr:
R:
H.M.Jr:
(Laughter) No, I was very much amused.
(Laughter) We'd rather have you give us a better
rate though fellow.
Well listen, you write the ticket.
I know it. We write the ticket.
All I do is to print them.
Well you keep on printing them but let's try to
get that rate up a bit.
(Laughter) All right with me.
R:
All right, fine.
H.M.Jr:
All right. Saturday at 4 o'clock at my farm.
R:
All right, fine.
H.M.Jr:
Thank you.
R:
Bye-bye.
H:M.Jr:
Goodbye.
128
November 23, 1936
3:05 P.M.
H.M.Jr:
Hello.
Operator:
Mr. Burgess.
W.R.
Burgess:
Hello, sir.
H.M.Jr:
Yes
B:
Well, things are weakened a little bit. They -
H.M.Jr:
Ah ha.
B:
They 're off about two to seven thirty-seconds.
H.M.Jr:
Yes.
B:
And we bought about a million and a quarter.
H.M.Jr:
Since when?
B:
Well, that's - I haven't had the report just at
the close yet; -
H.M.Jr:
Uh huh.
B:
- most of it in the past two hours.
H.M.Jr:
I see.
B:
H.M.Jr:
B:
But the market maintained itself in pretty good
condition. We bought up to two hundred and
fifty thousand on some issues; on some of them,
a good deal less than that.
All right.
I think it's been a pretty successful day. We've - we've got this market a
little - a little down where it ought to be.
H.M.Jr:
Yes
B:
And everything's been orderly.
H.M.Jr:
Yes
B:
And it's been done without our spending much money.
-2H.M.Jr:
I don't understand why the stock market's fell
off so much.
B:
You saw 0. P. Van Sweringen's death, did you?
H.M.Jr:
What?
B:
Did you see about 0. P. Van Sweringen's death?
H.M.Jr:
No.
B:
He died about 12 o'clock.
H.M.Jr:
would that put the market off?
B:
Well, I don't know. I haven't seen the individual
stocks yet.
H.M.Jr:
B:
Oh - two and a half points.
I think that probably a larger effect was the
French and - and London markets, -
H.M.Jr:
B:
H.M.Jr:
B:
Yes
- which were quite bad at the close.
I wonder what was the matter with them.
Oh, I think it's this Spanish war thing and the
neutrality partly.
H.M.Jr:
Uh huh.
B:
Question of the British blockade, you know.
H.M.Jr:
I see. All right. Thank you.
B:
But I don't think it means much.
H.M.Jr:
All right.
B:
Yes. Right.
H.M.Jr:
Goodbye.
130
-3 3:18 P.M.
B:
thousand.
ran to two million, seven thirty-three
H.M.Jr:
Good!
B:
So we weren't just pikers, you know.
Who said you're pikers?
H.M.Jr:
B:
They - they closed at about the low; was about
two to seven thirty-seconds off.
H.M.Jr:
Who's accusing you of being a piker?
B:
Well, you did a little while ago.
H.M.Jr:
Did I?
B:
Yes, sure, in one of your weak moments. (Laughs)
(Laughs) In one of the weak moments of the
H.M.Jr:
market.
B:
H.M.Jr:
B:
That's right. Well, I - I still think my
previous conclusions are right, that it did
pretty well today.
Oh, I think so.
Everything went all right, and everybody likes
this statement, likes getting it out in the form of
mouth.
It's made a good taste in everybody's
H.M.Jr:
Well, I don't know who suggested that to Eccles,
but it was a wonderful idea he had.
B:
(Laughs) I wonder where he got it.
H.M.Jr:
I haven't the slightest idea.
I haven't any notion either.
B:
H.M.Jr:
No - no -
B:
It's a good idea, though.
H.M.Jr:
Yes, good idea.
-
4
-
B:
Yes
H.M.Jr:
Well, they get those once in a while.
That's right, yes.
B:
H.M.Jr:
All right.
B:
Yes. Goodbye.
H.M.Jr:
Goodbye.
J
132
November 23, 1936
3:38 P.M.
Operator:
Mr. Harrison has someone with him. He wants
H.M.Jr:
Yes
Operator:
All right.
H.M.Jr:
Hello.
Operator:
Just a minute.
George
to know if he can call you back.
Hello.
Harrison:
Hello, Henry.
H.M.Jr:
Hello, George?
H:
Yes, sir.
H.M.Jr:
Have you got any explanation of what happened to
H:
It's what?
H.M.Jr:
Off three and a third points.
H:
No, I haven't any at all. It was -
H.M.Jr:
Could you ask around or find out something?
H:
H.M.Jr:
the stock market today? It's off three and a
third points.
All right, I'll do that. I just had George
Davidson in here for half an hour and he didn't
even mention it as being anything of interest.
I was asking him what was going on.
Of course, you know, on account of it - I mean we
had quite a flurry in sterling.
H:
Well, it's up a little.
H.M.Jr:
Oh yes; well, we had to step in.
H:
Yes.
H.M.Jr:
Would you check up? I'm going into a press
conference at four and maybe a little after that
you can let me know?
133
-2H:
All right, I'll check. After that?
H.M.Jr:
After that.
H:
Yes, all right.
H.M.Jr:
I mean
know.
I - I just wondered what the gossip is, you
H:
Yes, well, there's - there's nothing - it was
pretty - it was quiet.
H.M.Jr:
Well -
H:
It must have been easy.
H.M.Jr:
There must have been - I imagine you'll find there
was a lot of selling from Europe.
H:
Well, you know, I've argued all along, and these
people wouldn't believe me H.M.Jr:
Yes
H:
- that a good part of this money from Europe was
coming because they felt that, with all these
excess reserves -
H.M.Jr:
Uh huh.
H:
- we couldn't stop the stock market from going up.
H.M.Jr:
Yes
H:
And therefore I've argued that if you sopped up
the excess reserves that would be one way of
stopping this money coming from Europe.
H.M.Jr:
Yes.
H:
If that were true I'd - I'd be glad if that is
H.M.Jr:
the explanation, frankly.
You mean - you mean since - they feel that the
market won't go up so because we're going to stop
it?
134
-3H:
Because we're going to sop up some of the excess
H.M.Jr:
Yes.
H:
That may be an explanation. I don't know.
H.M.Jr:
H:
H.M.Jr:
H:
H.M.Jr:
reserves.
Well, if you would find out and then if - if
you'll call me.
I'll try and I'll locate it and see what I
can find out.
You may not be able to find anything.
I may not, but if I can without being too
conspicuous, I will.
And I thought the fact that the Board got out
that statement was good.
H:
I thought it was, and I thought it was a good
statement.
H.M.Jr:
And, as I said to Burgess, I don't know where
they got the idea but it was an awfully good
idea.
H:
(Laughs)
H.M.Jr:
Huh?
H:
H.M.Jr:
H:
As I told you the other day, you did a great job
on that.
Well, I just wanted to say that I thought it was
the silliest thing, in front of twelve people, to
try to bring up something that happened last
July, and to try to bring it out that way.
Oh, I thought the whole thing was the silliest
thing.
H.M.Jr:
I thought it was the silliest thing.
H:
That was silly, and we wasted more time on that.
H.M.Jr:
And -
135
-4H:
Then I think to bring up the question of a
conversation between you and me - you and I
never had any misunderstanding.
H.M.Jr:
H:
No, and - and after all, when you talked to me
three minutes before ten, I got - the impression
that I got
- the
correct impression was that you
hadn't
been
notified.
Well,
before.I hadn't until nine o'clock the night
H.M.Jr:
No.
H:
But I can -
H.M.Jr:
I know. Well - I mean what - at - what's that
in the - and I heard Anderson said a telegram
went to your night telegraph operator.
H.M.Jr:
Did. Got a telegram about six o'clock to the
telegraph operator: "Please keep a senior officer
at the bank."
Well, it's over the dam.
H:
Yes
H.M.Jr:
I'm announcing this whole business at four, and -
H:
What whole business?
H.M.Jr:
Belgium and Holland and Switzerland.
H:
Oh, good.
H.M.Jr:
And that's - and London and Paris will announce
H:
I see.
H.M.Jr:
You - you got the thing.
H:
Yes.
H.M.Jr:
And I feel very, very happy because I think again
it comes at - just at the time when Europe needs
H:
simultaneously.
a little moral backing.
136
-5H:
(Laughing) Yes, it does.
H.M.Jr:
What?
H:
It certainly does.
H.M.Jr:
Yes.
H:
All
findright,
out. Henry; well, I'll see what I can
H.M.Jr:
Thank you.
137
November 23, 1936
Mr. Bell, Mr. Viner, Dr. Williams, Mr. Taylor and
Mr. Haas met with the Secretary at 4:45 this afternoon.
Mr. Lochnead joined the group soon after the meeting
started.
Following is stenographic report of the conference:
HM,Jr: What I want to do while you two gentlemen
(Dr. Williams and Dr. Viner) are staying one more day -you are staying, aren't you?
Dr. Williams: I will stay if you want me to or I
will go back to the Bank.
HM,Jr: I think you will stay when you near this.
You are here as a Harvard professor. I think when you
near this, you willwant to stay.
I have what I call "the germ" of an idea. I won't
say anything more. I have talked it over with Bell;
had a couple of minutes with Viner. And the thing that
kind 8f stirred me up on this was this article by Mr.
Warren Case Pomeroy going back to the McMillan report
and this thought of isolation and sterilization of gold
and separating it from our domestic stock.
Bell: Our monetary stock.
Haas: Our banking system.
HM,Jr: Monetary stock. Have you read that article?
Dr. Williams: No.
Dr. Viner: I have not read it yet.
HM,Jr: I recommend it. I think it is more clearly
put than by anybody else.
Haas: It's "Bob" Warren.
HM,Jr: He used to be down here. I can 't put it
as well as he can, but the thought is if there could be
some way found of isolating and sterlizing gold so it did
not mix into our domestic economy, I think -- all I think
we have is the germ of an idea. I talked with Bell this
morning and I don't know whether he has had time or not
-2to
go
into it.
Have you had time, Dan?
Mr. Bell: No, I haven't had time.
HM,Jr: Could you do this, Dan? Could you take
it on the
people?
very first thing in the morning with these
Mr Bell: First time. Nine o'clock.
Jake, would you office?
meet with Bell and these
men inHM,Jr:
the Under-Secretary's
Viner: I will be there at five minutes to nine.
HM,Jr: I want Archie (Lochhead) in on this. I
don't know whether we can do it or not, but if we can
(Secretary sent for Lochhead and he came right in.)
Viner: That's a legal question.
HM,Jr: Archie, I want you to sit in on this thing.
Then all this stuff that these fellows were talking about
last week
would all this
fall gold
by the wayside. If there is a
method
of separating
Mr. Bell: It would help out on that situation.
balances.
HM,Jr: It would help out in settling international
Dr. Williams: I have a couple of ideas on how it
could be done. It could be done in the British method.
HM,Jr: It isn't 80 easy. Dan 18 too tired tonight.
We areenough
all tiredtoat
hour. Don't you think
it is important
sitthis
in on?
Dr. Williams: Oh, yes!
HM,Jr: Dan says he is available at nine o'clock.
I would like to keep it secret as a Treasury matter, because if it leaks out that we are considering it at all
it will be in all the papers. So if you (Dr. Williams)
would
sit it.
in on this as a University man, I would appreciate
138
139
-3-
Dr. Williams:
I'll certainly be here.
HM,Jr: Because I don't know -- if we could do that
it would certainly make Eccles' job easy, much easier.
And George (Haas) I don't know whether you have had anybody examine this or not.
Dr. Haas: Yes, we were talking about it today and
done and I don't think it will need any changes in the law.
talked about it previous to that. I think it can be
HM,Jr: Have you anybody who has been working with
you on this?
Haas: Yes. Seltzer and White.
HM,Jr: Will you bring them into the meeting tomorrow.
Mr. Lochhead: My thought 18 you could always bring
gold in and keep it in as free gold.
Dr. Williams: How about excess reserves?
HM,Jr I don't want to start it tonight, but I just
wanted to whet his appetite.
Dr. Williams: I am all for staying!
HM,Jr: If Dan is through at -- you and I sai d we
would go into Relief at 10:30.
Bell: It won't take very long for me to tell all
I know about it.
HM,Jr: Oliphant would come in handy at certain
stages of it. If you decide this is the only way of
operating, then you have to find out from Oliphant's office
if you can do it. Do you want Opper?
Dr. Viner: Opper or Bernstein.
Mr. Lochhead: He's in my office now.
HM,Jr: will you tell him to sit in on the conference
tomorrow morning at nine o'clock.
140
-4-
Mr. Lochhead: Yes, sir; I will.
Dr. Williams: That's grand! We will be here at
nine o'clock tomorrow.
HM,Jr: But, as I say, if we could start this while
you two men are here
Dr. Viner: I think technically it is not difficult.
One question is what are the powers under the law of
manipulation and handling?
Dr. Williams: I think it involves borrowing operations. If you have authority to borrow
HM,Jr: I recommendto all of you that you read
Warren's article in the Analysist.
THE ANNALIST
November 13,1936
Friday. November 13,1936
THE ANNALIST
667
Gentlemen's Agreement" Embodies Basic Tenets
M
Of the MacMillan Report
Royal
By ROBERT B. WARREN*
1981
proposed
Co.
they
Royal
678
141
THE ANNALIST
November 13,1936
Tene of the MacMillan Report
Continued from Page
itself with the domestic ecc
the committee believed
my,
which
be itself
control
very largely regulated ough
This marked
of the quantity of mon
a radical attempt to concile the two
theories of money ited above. Under
the MacMillan port, the pound would
be, domestical purely a token of exchange, the quantity of pounds and the
interest te being determined by volition, exernally, the pound would be a
gold currency maintaining a stated relation to other gold currencies. The MacMillan Report did not contemplate devaluation, and it recommended that the
gold fund be created in and operated by
the Bank of England. Events brought
devaluation, placed the fund in the Brit-
ish Treasury but the theory of the
Equalization Fund and its function were
described in the report almost a year
before the fund was created
Cycle, and the stability of the price level
cannot be attained except by the constant exercise of knowledge, judgment
and authority, by individuals placed in
a position of unchallengeable independ-
once with great resources and every
technical device at their disposition.
(Italica supplied.)
The history of five years shows the influence of the MacMillan Report on British monetary policy. Britain has a managed currency, detached from gold domestically, attached to gold Internationally, in the sense that international balances are settled in gold, and the relation of the pound to other currencies is
controlled through the mechanisms of
the gold market.
A Permanent Monetary System
I have given this somewhat extensive
account of the British system for two
reasons:
1. The basis of that system has been
elaborately explained.
2. The present British system has been
Meaning of Control
The committee was fully aware that
the mere control of the exchange rate
was far simpler than the control of an
economy through the management of
the domestic money supply. It was fully
aware that the operation of a managed
currency placed upon the central bank
far heavier responsibilities and more exacting requirements than had been imposed by the gold standard. They knew
that mere inconvertibility did not constitute a managed currency. They were
not sponsoring a soft money scheme as
In no other country has there been any
comparable statement of the principles
guiding its monetary policy, and in no
other country can the guiding principles
be so clearly deduced from the actual
record. Nevertheless, it cannot but be
apparent that the theses of the MacMil-
an easy way out of a hard situation;
nor a trick device by which they could
eat their cake and have it. I will quote
from their report
The monetary system of this country
must be a managed system. It is not
money concocted by cockeyed braintrusters. The machinery will no doubt be
modified in detail, but in my opinion it
will persist, as former standards have
persisted, until the course of human
advisable, or indeed practicable to regard
our monetary system as an automatic
system, grinding out the right result by
the operation of natural forces aided by
in operation long enough for us to see
its form rather distinctly.
Ian Report are influencing monetary
policy here and in France.
These principles represented no emergency improvisation, no scheme of funny
events, an economic earthquake displaces
it, as it has displaced its predecessors.
A Landmark in Monetary History
In conclusion let me tie together my
a few maxims of general application and
three themes. Although limited in scope,
policy for example the maintenance of
parity of the foreign exchanges without
unnecessary disturbance to domestic
business, the avoidance of the Credit
the agreement of Sept. 25, 1936, is a
landmark in monetary history. It is an
effort to give international unity to national currency systems which are attempting to reconcile the ancient con-
some well-worn rules of thumb. The
major objectives of a sound monetary
flict between two divers
money, both supported by
in their own fields, im
ments. Second, the system
no leap in the dark: its or
ble to every one who
trouble to read it, and its
ation to date, although br
out success.
So far I have attempte
jective reporter. Now le
comments:
1. Stabilization, unless
mere pegging operation
from fundamental equilibi
group of funds may peg
but they cannot of the
fundamental internation
They may even, for a t
aggravate disequilibrium
again from the report:
gold reserve today is, th
able a country to meet d
ternational balance of 1
the appropriate measure
to bring it again to equil
2. Second, let me repe
stated by the report to
currency management:
ercise of knowledge, juc
thority, by individuals P
tion of unchallengeable
Unless those qualities e
country adopting a ma
has merely exchanged
gold" for some new
"debbil."
The agreement of Sep
a number of isolated m
into a relatively homog
tional monetary system
speak, the introductory
book to be written from
experience passes into
greater mistake can be
suppose that it is an Inc
mality, except to suppo
sents a return to somet
the past. A period of in
etary anarchy has close
has not returned to 1
standard. As Secret
said, It has created a I
standard.
THE ANNALIST
November 13,1936
THE ANNALIST
668
Friday, November 13,1936
Triparte Agreement a Retreat From the Gold Standard
fixed parties I believe
Toward Managed Money
by International currency stabilities
have mind
well their prediction has already
the
tary
prospects for is the
ture
not only
highly
along
By WALTER E. SPAHR*
believe
stand
of the accuracy of its prediction
happen to know other
Professor of Economics New York University
with
why that letter is likely to prove
That
tions:
warning
(1)
regarding
weight of
in
(2)
letter
when
of
part
the
that
but
form which may
sent
Destination Unknown
Just
where
be anen
cated
change
The
the
early
proposed
stable
of
of
of
There
it
Signs Managed Currency
the
the
It
be
of
politi-
money
12.
What Kind of
that
First
that
that
30.
the
1937.
which
how
(b)
The
further
142
DOW JONES - November 23, 1936.
NOV 23 1936
ADD DUTCH JOIN TRI-PARTITE PACT
10.15
WASHN- THE NETHERLANDS WILL ASSUME THE
SAME STATUS AS BELGIUM WHICH ALSO HAS ALIGNED
ITSELF WITH THE UNITED STATES GREAT BRITAIN AND
FRANCE UNDER THE SEPTEMBER AGREEMENT BUT NOT
UNDER THE OCTOBER 13 EXCHANGE ARRANGEMENT
-0-
ADD DUTCH JOIN TRI-PARTITE AGREEMENT
WASHN- A STATEMENT FROM THE U S TREASURY
RECOGNIZING THE ADHERENCE OF THE NETHERLANDS
TO THE INTERNAT IONAL MONETARY AGREEMENT OF
SEPT 26 PROBABLY WILL BE MADE PUBLIC THIS
AFTERNOON- OFFICIALS SAID THEY WERE -HIGHLY
GRATIFIED- AT A DECLARATION BY THE DUTCH
GOVERNMENT OF ITS ADHERENCE TO THE PRINCIPLES
LAID DOWN IN THE TRI-PARTITE AGREEMENT OF SEPT
26
-0-
NOV 23 1936
11.34
NOV 23 1936
DUTCH MAY NOT BE ADMITTED TO FULL
PARTNERSHIP UNDER OCT 13 EXCHANGE AGREEMENT
WASHN- ALTHO THE DUTCH GOVERNMENT HAS
STATED ITS ADHERENCE TO THE TRI-PARTITE
ANNOUNCEMENT OF MONETARY PRINCIPLES MADE ON
SEPT 25 THE NETHERLANDS MAY NOT BE ADMITTED TO
FUL PARTNERSHIP UNDER THE OCTOBER 13 EXCHANGE
AGREEMENT BETWEEN THE U S GREAT BRITAIN AND
FRANCE
INSTEAD OF BEING INCLUDED AS A MEMBER OF
THE OCT 13 EXCHANGE CLEARING SYSTEM HOLLAND
PROBABLY WILL MAKE SEPARATE BUT MUTUALLY
ACCEPTABLE EXCHANGE ARRANGEMENTS WITH EACH OF
THE THREE POWERS IN THE OCT 13 COMPACT- FOLLOW-
ING OUT OF THIS SYSTEM WOULD LEAVE THE UNITED
STATES GREAT BRITAIN AND FRANCE AS THE SOLE
PARTNERS IN THE OCT 13 AGREEMENT WITH SATELLITE
NATIONS ARRANGED AROUND THESE THREE
UNDER THE OCT 13 AGREEMENT THE U S AND
THE OTHER TWO POWERS AGREED TO REDEEM EACH
OTHER-S CURRENCY THROUGH THEIR EXCHANGE STABILIZ
-ATION FUND AT MUTUALLY AGREED UPON GOLD PRICES
-0-
UNITED PRESS - November 23, 1936.
upversion
144
Helland
WCNS35
FORMAL NOTIFICATION THAT THE NETHERLANDS HAS JOINED THE BRITISHFRENCH-AMERICAN MONETARY ACCORD IS EXPECTED BY TREASURY OFFICIALS
TODAY.
HOLLAND IS KNOWN TO HAVE BEEN CLOSELY WATCHING OPERATIONS OF THE
CURRENCY AGREEMENT SINCE IT WAS REACHED IN SEPTEMBER IN CONJUNCTION
WITH DEVALUATION OF THE FRENCH FRANC.
REPORTS THAT THE NETHERLANDS HAD OFFICIALLY JOINED THE ACCORD WERE
REGARDED AS PROBABLY AUTHENTIC. TREASURY OFFICIALS EXPECT TO
RECEIVE FORMAL NOTIFICATION OF THE ACTION DURING THE DAY.
11/23--R1022A
145
last night)
Monetary agreement
WCNS139
SECRETARY MORGENTHAU ANNOUNCED TONIGHT THAT THREE MORE COUNTRIES
BELGIUM, HOLLAND AND SWITZERLAND-HAVE JOINED THE U. s, GREAT BRITAIN
AND FRANCE IN THEIR INTERNATIONAL MONETARY AGREEMENT. HE DESCRIBED
IT AS ANOTHER STEP TOWARD WORLD MONEY STABILIZATION.
BEGINNING TOMORROW, THE U. S. WILL SELL GOLD OR EARMARK IT
FOR ANY OF THESE COUNTRIES OR THEIR DESIGNATED FISCAL AGENTS. THEY
AGREE TO SEEL OR EARMARK GOLD FOR THIS NATION.
THE FEDERAL GOVERNMENT BANK OF NEW YORK WILL ACT AS FISCAL AGENT
FOR THE U. S.
THE NEW LINEUP NECESSITATED A SLIGHT CHANGE FROM THE "NEW GOLD
STANDARD* MORGENTHAU ANNOUNCED OCT. 13, IN EXTENDING THE MECHANISM
OF EXCHANGES TO FISCAL AGENTS. THIS WAS DUE TO THE FACT THAT BELGIUM
HAS NO STABILIZATION FUND. EACH OF THE OTHER FIVE PARTIES TO THE
AGREEMENT HAVE SUCH FUNDS.
PRIVATE INDIVIDUALS AND INSTITUTIONS STILL ARE BARRED FROM OBTAIN-
ING GOLD FOR USE EITHER IN THE U. S. OR ABROAD.
MORGENTHAU SAID THE NEW AGREEMENT WILL PERMIT OTHER COUNTRIES TO
ENTER THE "INTERNATIONAL MONETARY EQUILIBRIUM ARRANGEMENTS" WITHOUT
MAKING ANY CHANGES NECESSARY. HE REFUSED TO PREDICT WHAT COUNTRIES
MIGHT JOIN OR WHEN.
11/23--E815P
-
DOB e 40, 1956.
-
FROM
48.45 REUTERS DISPATCH BERNE SAYS SWITZERLAND-S ADHESION TO THE MONETARY CONVENTION BET-
WEEN GREAT BRITAIN FRANCE AND THE UNITED
STATES HAS BEEN BROUGHT A STEP NEARER TODAY
BY A COMMUNICATION BY THE SWISS GOVERNMENT TO
LONDON PARIS AND WASHINGTON - THIS COMMUNICATION NOTIFIES THE THREE GOVERNMENTS THAT
THE SWISS FEDERAL COUNCIL HAS TAKEN COGNIZAN-
CE OF THEIR DECLARATION OF SEPT 25 CONCERNING
THEIR INTENTIONS ON MONETARY POLICY AND ADDING
THAT IT APPROVES IN GENERAL THE PRINCIPLES
CONTAINED IN THE CONVENTION - THE COUNCIL ADDS
THAT IT IS CARRYING ON INEGOTIATIONS ALREADY
ANNOUNCED WHICH ARE AIMED AT BRINGING ABOUT
IN COOPERATION WITH THE OTHER STATES ADHERENCE
BY SWITZERLAND TO THE THREE-POWER CONVENTION
ON GOLD MOVEMENTS
LONDON - UNITED PRESS - November 23, 1936.
147
Holland Joins agreement
WCNS19
LONDON.--THE EXCHANGE TELEGRAPH REPORTED FROM AMSTERDAM TODAY
THAT THE NETHERLANDS HAD JOINED THE PRITISK-FRENCH-AMERICAN MONSTARY
AGREEMENT.
11/23--8931A
MST ERDAI
9.35
<<0
DOW JONES - November 23, 1936.
DUTCH JOIN TRI-PARTITE AGREEMENT
AMSTERDAM- THE NETHERLANDS HAS JOINED
THE TRI-PARTITE AGREEMENT- THE GOVERNMENT
DECLARED THAT IN JOINING THE AGREEMENT PREPARATION WAS BEING MADE FOR ESTABLISHING TECHNICAL
COOPERATION- NO MENTION WAS MADE
OF ANY INTENNOV 23 1936
TION OF STABILIZING
-0-
9:57
ADD DUTCH JOIN TRI-PARTITE AGREEMENT
AMSTERDAM- THE GOLD AGREEMENT IS WITH
GREAT BRITAIN FRANCE THE UNITED STATES AND
SWITZERLAND
-0-
NOV 23 1936
149
THE HAGUE - UNITED PRESS - November 23, 1938.
WCNS45
THE HAGUE. --IT WAS OFFICIALLY ANNOUNCED TODAY THAT HOLLAND AGREES
TO THE PRINCIPLE OF MONETARY COOPERATION WITH THE UNITED STATES,
GREAT BRITAIN, AND FRANCE.
11/23--R1054A
150
November 23, 1936.
4:47 p.m.
Operator: Governor Harrison.
H.M.Jr:
Hello.
0:
Go ahead.
H.M.Jr:
Hello George.
H:
Hello, Henry?
H.M.Jr:
Yes.
H:
Now the best that I can find in a short while
H.M.Jr:
Yes.
is that there is nothing that you can
H:
specifically blame this on but both London and
Paris were quite weak to-day
H.M.Jr:
Yes.
due I suppose in no small part to the
H:
British difficulities with Spain and perhaps
the new fears about war.
H.M.Jr:
Yes.
H:
That is usually translated over here.
H.M.Jr:
Yes.
H:
Whenever there's the war talk and whenever those
markets are weak because of war.
H.M.Jr:
Yes.
H:
That may have started it. Also I did find, from
one source, the report that there was considerable
foreign selling to-day.
H.M.Jr:
I see.
H:
Now whether that was due to their own fears about
war is for the same reason that made London and
Paris weak.
H.M.Jr:
Yes.
2-
H:
151
Or whether it was due in some part to the threat
of a reduction of excess reserves I have no way
of knowing.
H.M.Jr:
Yes.
H:
Still further than that there was - that might have
accounted
hour
or two for the extra heavier selling in the last
H.M.Jr:
Yes.
was the death of Van Swerigin
H:
which occurred around noon. I think the
H.M.Jr:
report came out about noon
H:M.Jr:
Yes.
which made many of the railroad issues of his
H:
stock weak.
H.M.Jr:
I see.
H:
And that already found an easy market.
H.M.Jr:
Yes.
H:
So that may have accentuated it.
I see.
H.M.Jr:
H:
But I think probably a combination of all those
factors.
H.M.Jr:
H:
I see.
And I don't think there is anything myself to be
concerned about. Furthermore, it was about time
there was a shake-out.
H.M.Jr:
Yes.
H:
When you get enough reason to give them the opportunity
to have a shake-out they usually get it.
H.M.Jr:
Weren't you pleased to see us step in on sterling and
steady it?
-3H:
H.M.Jr:
H:
H.M.Jr:
Oh yes, I think its the thing to do, you know. on yes.
Well
myallPress
hopeI -its
right.Conference lasted 35 minutes. I
Well
I hope
its papers
all rightnow.
too and I'll be very
interested
in the
The trouble is with these boys - you've got to go
over, and over and over it. Several of them, of
course, are damn smart and get it but the rest of
them - its just spinach to them.
H:
Yes.
H.M.Jr:
And
H:
Weak spinach too.
H.M.Jr:
Yes - yes. Well -
H:
Its awfully hard to handle that sort of thing.
H.M.Jr:
152
Where - where - where the - you see you get down
there reporters who only cover the financial district.
H:
H.M.Jr:
Yes.
We get general news reporters who just don't know
anything about this thing.
H:
H.M.Jr:
H:
Do you get those? I suppose you do.
Oh yes, I mean people for just general information
Yes.
H.M.Jr:
H:
H.M.Jr:
and its all Greek to them.
Yes.
But I mean we only have really two or three trained
men on a little detail - like the Wall Street Journal they know it - they get it
H:
Yes.
153
-4-
H.M.Jr:
H:
H.M.Jr:
H:
......but the other boys don't.
Well I I - I - they - they all help each other out though.
Yes, I think they do as a matter of fact. They get
down in the Press Room and help one another.
H.M.Jr:
Yes, well thanks George.
H:
All right, Henry. Is that - well now is that
H.M.Jr:
Oh I
H:
I'll try to get more tomorrow if you want
H.M.Jr:
Well -
H:
H.M.Jr:
another - as close as I can et now.
.....but I think its better for me not to nose in
too hard.
Oh I imagine by tomorrow. Let's leave it this way
if you get anything that's really significant give
me a ring.
H:
All right, I shall.
H.M.Jr:
Thank you.
H:
All right.
-
154
November 24, 1936.
9:15 a.m.
Operator: Go ahead.
Hello.
H.M.Jr:
Cochran:
Hello.
H.M.Jr:
Good morning.
C:
Good morning Mr. Morgenthau.
H.M.Jr:
Well everything went all right on this side.
Good - well it did over here too.
C:
H.M.Jr:
I see.
C:
The releases appeared in proper form in the French
papers this morning and in the London papers.
H.M.Jr:
They did.
C:
Then the Financial Times, which I have before me,
has a two column head-line, "Six Power Monetary
Accord".
H.M.Jr:
I see.
C:
And in the Financial News the observation was made
that this was a natural step and they didn't see
why Holland hadn't made it before.
H.M.Jr:
C:
H.M.Jr:
C:
H.M.Jr:
C:
I see.
That the smaller countries had quite a bit to gain
from such facilities.
Ah-ha.
And there has not been a great amount of wires from
the United States yet.
There has not what?
There - there was a fair amount of cables from the
United States.
H.M.Jr:
Yes.
-2-
C:
But most of it, of course, was available locally
H.M.Jr:
Yes.
C:
in these communiques. Of course they
published in full your communique.
H.M.Jr:
They did.
C:
Which I had given them.
H.M.Jr:
Yes.
C:
H.M.Jr:
The British communique was very good.
I see.
C:
It was along the lines of that which I transmitted
some days ago.
H.M.Jr:
Yes.
but amplified some more.
C:
H.M.Jr:
C:
H.M.Jr:
C:
H.M.Jr:
Well the American papers didn't carry that and they
didn't carry the French.
They didn't carry it.
No. I guess yesterday was too late most likely
for them to get it.
I see.
The papers carried it but they didn't play it up
as much as they did the first time we made an
agreement.
C:
Well no no - they didn't in Paris.
H.M.Jr:
Oh.
C:
But one French paper, the Argonne Press, says,
"That the technical collaboration extended to
center to limit the fluctuation
a more
and at the same time it facilitates the National
Trade Relations which the world recovery is now
giving rise to".
155
-3H.M.Jr:
Yes.
C:
But I mean there - there's not much discussion
156
or comments so far.
H.M.Jr:
Well now I don't understand yesterday why they
sold so many of our stocks, see? None of our
papers have got a correct explanation, see? Hello.
Yes.
C:
H.M.Jr:
You know we get a report every night of where the
selling comes from, see? Hello.
C:
Yes.
H.M.Jr:
And confidentially the selling yesterday of American
stocks came from the Netherlands and Switzerland.
H.M.Jr:
The selling of American stocks?
Of stocks - came from the Netherlands and Switzerland.
C:
Yes.
H.M.Jr:
And not from Great Britain.
C:
C:
I see.
H.M.Jr:
Now - ah - I don't understand it - hello.
C:
Yes.
H.M.Jr:
Have you any explanation?
C:
No. When I was up in the Netherlands and was
H.M.Jr:
Yes.
C:
talking to Tripabout this arrangement
he said, "well it interests me right now
just because I've been selling some dollars (corrected himself to) - ah buying some dollars".
H.M.Jr:
I see.
C:
And I said, "well you'd like to convert those to
gold".
H.M.Jr:
Yes.
C:
He said, "I've already at London".
H.M.Jr:
Yes.
(Still quoting Tripp) "But would prefer to buy
directly in the States".
C:
H.M.Jr:
I see.
C:
And I asked him about American securities.
H.M.Jr:
Yes.
C:
He said that people had been holding ontocapital
American
securities and had not been
invested on the American market. He said that
H.M.Jr:
Now look - while I'm waiting. I - is Mr. Bullitt
C:
No - I'm at the house, you see, now?
H.M.Jr:
Oh you're at the house.
C:
Yes.
H.M.Jr:
around anywhere?
All right well some other time I'll say - I'11
speak to him. I just wanted to say hello to him that's all.
C:
Yes. No I'm at the house now.
H.M.Jr:
All right.
C:
And may I explain - oh this morning the franc
opened better here.
H.M.Jr:
It did.
C:
It was pretty weak yesterday because of so many
H.M.Jr:
Yes.
C:
Germany and Russia and because of a submarine
scare and so on.
H.M.Jr:
Yes.
rumors of broken international relations
-5But to-day it's considerably stronger both
against the dollar and sterling.
C:
H.M.Jr:
Good.
C:
And I talked to Governor R ygg for two hours
H.M.Jr:
Yes.
this morning
of the Bank of Sweden
C:
H.M.Jr:
Yes.
and he explained to me that on October 24th
C:
H.M.Jr:
C:
Yes.
four of the Scandinavian Central Bank
Governors at Basle each week.
H.M.Jr:
Hello.
C:
Hello.
H.M.Jr:
Go ahead. I didn't get that.
C:
Had one of their periodic meetings at Oslo.
H.M.Jr:
Who met?
C:
The Central - the Governors of the Central Banks.
H.M.Jr:
But what countries?
C:
Sweden, Norway, Denmark and Finland.
H.M.Jr:
Yes.
C:
They met at the Norwegian capital.
H.M.Jr:
Yes.
C:
On October 24th.
H.M.Jr:
Where did they meet?
C:
At Oslo.
H.M.Jr:
Oh yes.
158
-6-
C:
H.M.Jr:
That's the capital of Norway.
Yes, I know that.
Yes (laughs) all right.
C:
H.M.Jr:
(Laughs)
C:
Met there at one of there periodic meetings.
H.M.Jr:
Yes.
C:
Usually meet once a year
H.M.Jr:
Yes.
and they discussed the stabilization and
devaluation of France, of course, and the
statement of October 13th.
C:
H.M.Jr:
Yes.
And the others delegated Roueff, the man who was
C:
here this morning, to look into the matter and
to report to them up at Helsingfors where they
are journeying and
0;0:
Three minutes.
H.M.Jr:
Go ahead.
C:
Hello.
H.M.Jr:
You'd better repeat.
C:
H.M.Jr:
To report back to them
Yes.
at Helsingfors, Finland
C:
H.M.Jr:
Yes.
on December 12th.
C:
H.M.Jr:
I see.
C:
On that date they're having the 125th anniversary
H.M.Jr:
Yes.
159
-8 -
160
of the founding of the Bank of Finland
C:
H.M.Jr:
Oh yes.
and so they're all going to be there but
not under the guise of a meeting of themselves
but not to attend the affair.
C:
H.M.Jr:
I see.
C:
And I explained to him the different statements
which were being made to-day
H.M.Jr:
C:
Yes.
and he said that, of course, they had been
interested in getting gold but he said they were
already getting gold in London.
H.M.Jr:
Right.
C:
And I said, "but just on the open market though".
H.M.Jr:
Yes.
C:
And he said, "No, the Bank of England will get us
gold no matter whether there is any on the market
or not".
H.M.Jr:
I see.
C:
You see they're really getting facilities without
any arrangements.
H.M.Jr:
I know.
C:
And
H.M.Jr:
C:
Well that's not very nice. It's not very gentlemanly,
is it?
Well it's just a point I'm making that they're
doing that to those - certainly to those sterling
bloc countries.
H.M.Jr:
Yes.
161
-9C:
And I said, "You ought to get into this like the
H.M.Jr:
Yes.
Netherlands do - the gold".
And he said - well he said that he wouldn't say
anything yet as to a decision but that he thought
the four countries would probably have to stand
C:
together.
H.M.Jr:
Yes.
C:
And support Scandinavia.
H.M.Jr:
Yes.
C:
And his bank and the Finish Bank are state-owned.
H.M.Jr:
Yes.
C:
State-owned - they're all in stocks so I think the
arrangement of the declaration would be satisfactory
there.
H.M.Jr:
C:
H.M.Jr:
Yes.
There might be a little difficulty with Norway which
is a privately owned bank
Ah-ha.
H.M.Jr:
But the big trouble comes with Denmark where
they have exchange control.
I see.
C:
So then Denmark probably couldn't be eligiblé at
H.M.Jr:
Ah-ha.
C:
So whether any of the others would come in would
C:
all.
then be a question. But he said not to consider
anything settled
H.M.Jr:
Yes.
C:
He will report to them on the 12th of December.
H.M.Jr:
Yes.
162
- 10 And I said, "well could you take action sooner
if you decide".
C:
H.M.Jr:
Yes.
He said, "No there won't be any action taken until
early in the year.
C:
H.M.Jr:
Yes.
C:
They're all busy with their budgets.
H.M.Jr:
I sees
H:M.Jr:
Well you're sending me a cable on that.
C:
I'll send - I'11 confirm it by cable this afternoon.
H.M.Jr:
Good. Well this would be a good time, if you
wanted to take a week off right now.
C:
Oh no.
H.M.Jr:
What?
C:
What's that?
H.M.Jr:
Do you want to take any time off right now?
C:
H.M.Jr:
C:
But not unless it's for you because the point is
this. I talked to Baumgartner yesterday
Yes.
when I was talking about the arrangements
and I said, "when is going to be quiet time in in France"?
H.M.Jr:
C:
H.M.Jr:
And I said, "Now or in January"?
Yes.
And he said, "The difficulty, if any, will come
here the last week in the year - that's when
".
their budget would probably be
Ah-ha.
- 11 -
163
And I said, "Well I'm thinking of getting away probably - I'm not sure". I said, "Would you
C:
recommend now or in January?"
H.M.Jr:
Yes.
C:
And he said, "Well it's safer now than January".
H.M.Jr:
Yes.
C:
Outside of that I didn't mention any more
I meant if you wanted to take a week's vacation
H.M.Jr:
right now. I think you need the - supposing I
tell you so that you won't have to charge it up
to
your leave. Just supposing I order you
somewhere?
Oh no there's no use in that - I'd rather stay here
C:
and be on the job than take a vacation now.
H.M.Jr:
I see.
C:
My only point was did you mention about my coming
home.
H.M.Jr:
C:
Yes, well that can wait. We'11 see. But I mean
I think you ought to come back and recharge your
batteries and get a little American air.
Now my point is that's entirely up to you to
decide whether you want me to come.
H.M.Jr:
Well you look up the steamers and see what sails
early in January.
C:
Yes.
H.M.Jr:
And you might even make a reservation, you see?
C:
Yes.
H.M.Jr:
Not so many steamers sail now. Hello
C:
Hello.
H.M.Jr:
I say you might make a reservation early in
January.
see. Then you'd rather put it off till then?
C:
I
H.M.Jr:
Yes - until the French
164
- 12 -
C:
I can get one easily whenever you say in the
wintertime.
H.M.Jr:
All right. Well then let's just keep it
C:
Yes.
H.M.Jr:
The other thing - how worried are you right
C:
It doesn't look very good but I still don't
in abeyance.
now on the Spanish thing?
C:
think any international troubles are coming.
Do you feel fairly strongly about?
Well I shouldn't be too strong when - when -
H.M.Jr:
Yes.
H.M.Jr:
with so much going on.
C:
But I still think nothing is going to happen.
I still think Franco won't be foolish enough
to hurt any British ships.
H.M.Jr:
Ah-ha.
C:
Or French either.
H.M.Jr:
All right.
C:
H.M.Jr:
Now that's my honest feeling.
Well fine - I'm very much pleased and now we
can all take a deep breath for a couple of days.
C:
All right - fine - I'll wire this in this afternoon
H.M.Jr:
All right.
C:
About Scandinavia.
H.M.Jr:
Thank you.
C:
Goodbye.
H.M.Jr:
Goodbye.
then.
165
November 24, 1936.
10:15 a.m.
Gordon
Rentschler: Hello Mr. Secretary. How are you?
H.M.Jr:
Oh I'm fine and you?
Oh fine thanks.
R:
H.M.Jr:
Look I'd like to have a little talk with you at
R:
Yes what would suit you - what time would suit you?
H.M.Jr:
Well here's the thing. I'm going up to the farm
R:
Yes.
H.M.Jr:
At Fishkill. And I'll be there till Sunday.
R:
Yes.
H.M.Jr:
You - I don't know - I mean are you going away
a time that's mutually convenient.
tomorrow afternoon.
over
R:
H.M.Jr:
No I'm going to be - I'll be here over the holiday.
Well I mean would either - I could - Friday or
Saturday
R:
Either Friday or Saturday would suit and I could
come wherever you're going to be if - whatever is
convenient to you.
H.M.Jr:
Well it might be as convenient there as it would
R:
Yes. Just whatever suits your convenience
H.M.Jr:
Well - ah
R:
be to - ah - come down to Washington.
.......I'll be delighted to do.
H.M.Jr:
Well here's - you could - supposing you look this
up, you see? I mean I don't - you could either
drive or take a train, you see?
R:
Yes.
166
2-
H.M.Jr:
R:
H.M.Jr:
R:
Whichever you preferred - it's about the same time.
Why yes - ah.
I mean you could have your secretary look it up.
Yes I'll motor - why don't I do this? Why don't
I motor over to your - to the farm either on Friday
or Saturday whichever suits you the better.
H.M.Jr:
Well I was going to suggest if you come up - say
if you wanted to come up here Friday afternoon
you could have supper with us and then go back.
We could have supper at 7 o'clock and go back
right after or you could - or - or Saturday - either
one - I've made no dates.
R:
Well
H.M.Jr:
Which would
it does make a particle. Saturday would be
R:
H.M.Jr:
a little more convenient to me than Friday eally.
All right. Would you - would Saturday a fternoon.
R:
Saturday afternoon? Fine.
H.M.Jr:
Well I mean would you - ah - would you rather come
say at 4 o'clock and then spend a little time and
then go back or would you rather come later?
R:
Well suppose I drop over about 4 o'clock Saturday
afternoon.
H.M.Jr:
R:
H.M.Jr:
All right and then we can have a talk.
Yes, fine that would suit me just right.
Now I'll tell you the best way. You know there's
this new East - they call it Eastern Motor Parkway,
which is an extension of Bronx River?
R:
Yes.
H.M.Jr:
Now that's finished - hello.
R:
Yes.
167
-3H.M.Jr:
And you get on that parkway and go to the end of
it and then you come to what they call State
Highway No. 52.
Yes, I know that road.
H.M.Jr:
And you turn left.
R:
Yes.
H.M.Jr:
R:
H.M.Jr:
R:
And you come to the Village - Wiccopee Village.
Yes.
And at the Wiccopee store you'd better inquire - we're
about a mile from the Wiccopee store on a dirt road.
Fine, well I'll come right to the village. I think
I know exactly where it is.
H.M.Jr:
Well you go up on the new extension of Bronx River
to route - State Highway 52 -
R:
Yes.
H.M.Jr:
Turn left to the little village of Wiccopee.
R:
Yes.
H.M.Jr:
And at the store you inquire.
Fine and I'll motor up Saturday afternoon.
R:
H.M.Jr:
And then we could have a little talk. I - I'd like
to go over the general situation as well as the bond
market.
R:
Yes, very good. I'd rather do that than come down
to Washington.
H.M.Jr:
Good.
R:
All right. It'11 be very nice to see you.
H.M.Jr:
Say listen.
R:
Yes.
168
4H.M.Jr:
R:
H.M.Jr:
What do you mean by buying our whole bill issue
and not leaving any for anybody else?
Well
wethem?
wanted them this time. Do you mind letting
us have
(Laughter) No, I was very much amused.
R:
(Laughter) We'd rather have you give us a better
rate though fellow.
H.M.Jr:
Well listen, you write the ticket.
I know it. We write the ticket.
All I do is to print them.
Well you keep on printing them but let's try to
get that rate up a bit.
(Laughter) All right with me.
R:
H.M.Jr:
R:
H.M.Jr:
R:
H.M.Jr:
R:
H.M.Jr:
R:
H.M.Jr:
All right, fine.
All right. Saturday at 4 'clock at my farm.
All right, fine.
Thank you.
Bye-bye.
Goodbye.
169
Memorandum of a Conference of Secretary Morgenthan with Aubrey
Williams, Acting Administrator of W. P. A., and Mr. Ross,
his Chief Finance Officer, Mr. Bell and Mr. McReynolds in
the Secretary's Office at 10:30 a.m., November 24, 1936.
The Secretary stated that in a conference with the President and
Mr. Hopkins on November 15th, Mr. Hopkins stated that 250,000 drought
farmers would be dropped from the rolls and 125,000 of them would
need relief.
Mr. Williams stated that 250,000 drought farmers are to be dropped,
but that the relief cases will be individually studied and he did not
know exactly how many would have to be furnished relief.
Mr. Bell stated that the Tugwell organization had already been
furnished $12,000,000 from the amount previously reserved for them to
take care of those cases.
Secretary talking: It was also stated that prior to December 15,
25,000 employees are to be dropped - consisting of administrative
employees, foremen and supervisors who were not taken from relief rolls.
Mr. Williams: Yes.
The Secretary: In starting December 15th, you will save $25,000,000
a month through these changes?
Mr. Williams: The full effect of that saving will not be felt until
about the middle of January.
118
-2-
170
The Secretary: Mr. Hopkins stated that a new formula is to be
established to be effective January 1st, reducing the cost per man
per month to $50, and that the formula would be ready in 24 hours.
Mr. Williams: We have worked out arrangements and will start
January 1st.
The Secretary: You will tell us what the formula is?
Mr. Williams: Yes.
The Secretary: It was stated that 85% of the unemployed is in
a hundred cities.
Mr. Williams: That is right.
The Secretary: There was an agreement between the President and
Mr. Hopkins that the only Federal payment after January 1st would be
wages and that would be $50 per month per man; the material costs of
any project to be taken care of by the locality.
Mr. Williams: We had a meeting here of state directors and a
plan was worked out for a money quota as well as a man quota to be
given to the states which I think is one of the things you wanted.
That quota was fixed at $126,000,000 for the state projects not
including the costs of administration. This does not include the
Federal agencies. The quota, including W.P.A. administration, is
$136,000,000.
The Secretary: One of the reasons I asked you to come here
is that I feel you are in an impossible position. I was dumbfounded when I heard Harry was away. I was going to point out to him
117
171
-3-
118
that the earliest he can expect new money is February 1st. I
wondered whether you people realized that. What arrangement can
you make so that your money will last until February 1st?
Mr. Williams: We have estimated that we can go into January
with approximately $75,000,000. That $75,000,000 would carry us
through the month of January on the basis of an expenditure of
$136,000,000 over-all for W.P.A. Based upon that, Mr. Hopkins is
telling each state that this is all the money they can have and they
will have to employ as many men as they can.
The Secretary: Let me ask you this: Have you got the
$136,000,000
Mr. Williams: No.
-
After some discussion of the details of the availability of
funds, and the possible shifting of cushions now provided for
operating convenience, the Secretary asked Mr. Williams to have his
Finance Section restate their financial picture and come back the
following day for another conference. The Secretary also asked
Mr. Williams to bring with him copy of the letter signed by
Mr. Hopkins establishing both money and man quotas in the states and
showing amount allotted to each state.
172
WORKS PROGRESS ADMINISTRATION
WALKEROHNSON BUILDING
1734 NEW YORK AVENUE NW.
WASHINGTON, D.C.
HARRY L. HOPKINS
ADMINISTRATOR
November 24, 1936
To:
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
From:
Emerson Ross
EX
Attached are copies of the statements
left with Mr. Bell which I am sending to you for
your files, at your request.
173
Approximate Time Limit of Operations Union Present Funds
Agriculture
Agricultural Komenics
Animal Industry
Geological Survey
Entenology and Plant Quarantine
Forest Service
None Economics
Commerce
Consue Bureau
Interior
National Park Service
office of Education
Department of Laber
Labor Statistics
Department of New
Bureau of Yards and Desks
Treasury Department
Internal Revenue
February 1
February 1
February 1
February 15
March 15
May
1
March
1
March
1
Jame
1
January 15
January 10
February 1
Public Health Service
January 15
Perscinent of Wer
Corps of Engineers
June
Quartermaster Corps
Resettlement Administration
Land Utilization
30
March 1
February 1
174
November n ANALYSIS or w. P. A. FINDS
(Allocation figures Insed on Illness of the Snight
report as of November no. 1986 - based on Conniectener of Accounts sed Superite
Statement as of October a. 1998.)
(Line References Used Merein Refer to Detailed Statement
Attached)
Allocations to WA through November
20, 1936 (Line 3)
1,093,544.965
Enoundered to October 31, 1936
(Line 6)
720.077.994
Unobligated Allocations (Line 7)
343,466,801
Funds not Available for Immediate
Incurrence (Line 17)
99.000.000
Net Balance Available for I
brance w WPA (Line 10)
(As of October 31, 1936)
Requirements for November
(Line 20)
Requirements for December
(Line 21)
264,466,882
100,000,000
160,000,000
Total Requirements to Deem
Der n. 1936 (Line 24)
Total Funds Recoverable (Line 24)
310,000,000
25,000,000
Has Requirements to December
31 (Line 25)
Additional Allocations Required
(Line 26)
Funds Available in the Act (Line 33
206.000.000
20,833,119
67,687.000
da bests of above WPA will " into January without any funds
for admance membraness as required w Treasury Regulation No. 1.
approved w the President. Consequently is ories to pay the obligations
insured in January, 11 will w necessary (1) to - all previously
established advence (a) to ashount the Mashington pools
(a) to disaust working balances is WPA district alletment accounts.
this name that shortly after January 1. projects will start
shutting down - to lack of funds is appropriations where nooled and in
obsister to purchase materials, and that sometime between January 10 and so
the pregnan will probably - to a close.
175
Page 1
I. states of Papie - october n. MM
(1) Allocations Received (Nev. no)
(2) Less Allocations to NEA
(3) Net Allocations to WPA
11,197,046,104
81,008,544,000
(4) Incumbrances through Oct. 31
(5) Less NYA Inrestreness
(6) Net WPA Incustrances
(7) Unobligated Allocations . WPA
764,148,065
14,020.00
II. Funds Allocated but not Available Due to Improsable
for Completion of
(8) Total Allocated
(9) Knountranees through out. 31 $17,000,000
48,000,000
(10) Estimated Enembrences
(11) Total
Nov.1-80 6,000,000
85,000,000
(12) Balance Earmarked and Net
Available
$19,000,000
III. Funds Not Available Due to Treasury Accounting and Procurement Systems
(Due to segregation of funds into numerous Appropriation Accounts
and approximately 5,000 Allotment Accounts and advance brance of payrolls and material requisitions)
(13) In Washington Feels for interappropriation transfers. (Sec- # 50,000,000
essary to expedite treasfora between appropriations
as requested by States - other-
wise serious delays would be
oscasioned pending completion
of transfers by Treasury Warrents).
(14) Incumbrences is Transit be
tween MPA District Offices
and fressury State Accounts
office.
(15) Working Balance is District
Allotment Accounts.
(820,060 in each of 5,000
accounts - There being 10
appropriation accounts is
cash of see districts)
(16) Total
(19)iseas
Total
of Allowsan available
(18) Net available Balance - IPPA
86,000,000
30.000.000
12
176
Page s.
IV. Number and Beacher Quarations
(10) Net AveileMe Balance m
married from section III
(80) Estimated Insurance
Nev. 1-30 v
(21) Estimated
$100,000,000
Dec. 2-52 2/
(22) Total Requirements Oct.
180,000,000
$310,000,000
a through Dec. a
Recoverable from
(23) 1935 Act Funds
(24) Federal Project Pende
15,000,000
10.000.000
(25) Net Requirements
36,000,000
286,000,000
(26) Additional Allocations
Required to Operate
to December 31
V.
20,535,119
Status of Punda - 1936 Ast 11/20/26
(27) Funds Appropriated
1,425,000,000
Allented
(23) To WPA
(29) To NEA
(so) Other
1,083,544,000
33,801,250
(a) total Allocations
(as) Balance Available for
Allocation
(as) Balance
07.627.200 w
47,089,709
N Desirates based on reduction in employment of 400.000
verture w Junery first
Figures cocared from Barea of the Beight. (11/20/86)
177
SAMPLE OF LETTERS SENT TO STATE ADMINISTRATORS
NOVEMBER 21, 1936
REGARDING EMPLOYMENT QUOTAS AND BUDGETS FOR STATE WPA PROGRAMS
EXCLUSIVE OF FEDERAL PROJECTS I-VI, NYA, AND FEDERAL AGENCIES.
CONFIDENTIAL
Mr. Bankson T. Holcomb, Administrator
State Works Progress Administration
Water and West Streets
Wilmington, Delaware
Dear Mr. Holcomb:
I am writing you at this time so that you may begin
immediately to make the necessary adjustments in the program of
the Works Progress Administration which are called for in the
immediate future.
In order to plan operations, it is necessary to
assume that in January the Congress will make an appropriation
to finance the Works Progress Administration until July 1, 1937.
The amount which the Congress will appropriate cannot, of course,
be forecast, but it is clear that a further substantial reduction
in the expenditures of the Works Progress Administration will be
necessary and can be made in the light of improving economic
conditions. Consequently, it is necessary to restrict expenditures to a sum sufficient to cover the wage bill plus a smaller
allowance for materials and other expenditures than has heretofore
been available.
The current review as to need, together with the reduction of drought employment, will reduce total employment on
Federal agency programs, State WPA projects, and Federal WPA
projects. On state projects, excluding Federal arts and other
Federal agency programs, you should plan to keep a maximum of
persons at work throughout January, February and into
March. After the first part of March, further reductions are
to be anticipated in the number employed. The sum of
will be released to you for encumbrances in January to employ
not more than the above
persons on your state projects.
In making the necessary adjustments to this set of
conditions, two primary obligations on your part must be kept
constantly in mind. First, the relief situation must be met.
In this connection, let me re-emphasize that it is highly
important that your employment quota be equitably apportioned
to the districts strictly on the basis of relative need for
178
125
2
employment. Second, the whole future of the EPA requires that
the integrity of the projects must not be sacrificed. The
program cannot be carried on with projects of doubtful value
or those which are overloaded with labor, in order to reduce
men-year costs. Projects must be executed with reasonable efficiency and at unit costs which are not excessive.
This means, therefore, that immediate action must be
taken to enter into negotiations with the state government,
cities and other political subdivisions to secure from these
sponsors a larger share of the total cost of the program,
particularly in the form of materials and other non-labor costs.
I firmly believe that this can and should be done, in view of the
improved financial condition of municipalities and state governments and the very extensive benefits and public improvements
which they derive from WPA projects. To make the situation
perfectly clear, I should like to repeat that we are going to have
less Federal funds available than ever before and that the release
of funds for your state projects for the month of January will be
.
restricted to $
In the meantime, we are facing a difficult financial
situation, pending the next session of Congress. Consequently,
we shall not be able to release the full amount of funds which
were contained in the November budget, and releases for December
will be smaller than in recent months. This means that reductions in employment resulting from the review must begin at once.
Also, I should like to call your attention to the wire of
November 18, sent to your Director of Finance and Statistics, to
the effect that it is imperative that advance encumbrances be
held to actual requirements; that a concerted drive be made to
liquidate unnecessary encumbrances; and that material requirements
be held to an absolute minimum.
I realize that these adjustments give you a difficult
assignment, but the most important job facing the Works Progress
Administration is to make these necessary adjustments and at the
same time to protect the workers who depend on the WPA, and to
insure the integrity of the whole program of the Works Progress
Administration.
Sincerely yours,
Harry L. Hopkins
Administrator
179
Employment Quotas and Budgets for. State. WPA Programs,
Exclusive of Federal Projects I-VI, NYA, and Federal Agencies
Employment
State
Alabana
Arizona
Aricansas
California
Colorado
Connecticut
Delaware
District of Columbia
Florida
Georgia
Idaho
Illinois
Indiana
Iowa
Kansas
Kentucky
Louisiana
Maine
Maryland
Messachusetts
Michigan
Minnesota
Mississippi
Missouri
Montana
Nebraska
Nevada
New Hampshire
New Jersey
New Mexico
New York State
New York City
North Carolina
North Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
Rhode Island
South Carolina
South Dakota
Tennessee
Texas
Utah
Vermont
Virginia
Washington
West Virginia
Wisconsin
Fyoming
Total
January
Quota
Budget
29,500
8,000
28,400
100,000
24,500
1,160,000
17,300
1,800
5,400
24,400
33,100
1,240,000
100,000
330,000
1,030,000
1,260,000
7,000
490,000
990,000
6,600,000
1,460,000
410,000
160,000
64,600
25,700
41,500
9,470,000
3,930,000
1,390,000
1,800,000
50,000
32,500
7,700
12,800
90,000
1,720,000
1,420,000
67,000
44,500
23,700
85,000
9,500
4,070,000
2,979,000
18,700
1,600
7,700
70,000
8,500
1,030,000
90,000
172,000
27,500
19,800
138,000
5,910,000
14,570,000
940,000
50,000
14,600
225,000
11,700
23,200
1,750,000
1,000,000
15,300,000
21,900
31,500
75,000
8,500
950,000
3,900
23,000
440,000
750,000
6,300,000
850,000
4,210,000
540,000
90,000
450,000
5,060,000
420,000
900,000
9,050,000
690,000
920,000
1,140,000
2,820,000
520,000
190,000
860,000
30,000
40,000
50,000
2,800
1,990,000
1,930,000
2,980,000
2,158,800
$126,860,000
170,000
GRAY
LMS
AM
180
Paris
Dated November 24, 1936
Rec'd 2:41 p. m.
Secretary of State,
Washington.
1142, November 24, 5 p. m.
FOR THE SECRETARY OF THE TREASURY FROM COCHRAN.
Your statements to the press of Tuesday evening and
the communiques of the French and British Treasuries have
been carried in full in the French and British financial
press today and in part or in summary in other French and
British papers. FINANCIAL TIMES London carries a twocolumn headline "Six Power Monetary Accord". FINANCIAL
NEWS remarks that the adherence of Switzerland and the
Netherlands to the tripartite agreement was a natural
step. AGENCE ECONOMIQUE ET FINANCIERE Paris considers
that the Swiss and Dutch decisions affirm and extend the
technical collaboration of the important exchange markets
with the view to limiting fluctuations and thereby facilitating the international commercial trade which the
world business receovery is setting in motion.
Paris exchange market understood that weakening of
dollar on New York market Tuesday night resulted from
foreign sales of American dollars and securities. While
the
181
LMS 2-No. 1142, November 24, 5 p. m., from Paris.
the franc opened strong this morning in Paris, it has
subsequently weakened against both the dollar and sterling,
with the Bank of France now giving pounds at the rate
heretofore held of 105.15 I am confidentially advised
that the rise in the dollar rate here has resulted principally from the purchasing of dollars by Lazard for
official Russian account. French rentes have made slight
gains. International securities fairly well bid.
Reference my 1140, November 23, 5 p. m., today's
Journal Officiel confirms that Rueff is to succeed Baumgartner
(END SECTION ONE)
BULLITT
WSB
My, 182
PARAPHRASE OF SECTIONS TWO, THREE AND FOUR OF
telegram No. 1142 of November 24, 1936, from Paris.
I had a visit in Paris this forenoon from Governor
Ivar Rooth of the Sveriges Riksbank (the Swedish Central
Bank). Governor Rooth had been in London for a few days,
and is going to Basel from Paris. He said that on October 24 and 25 one of the periodic meetings of the
Scandinavian Central Bank Governors had been held at Oslo,
which was attended by the Governors from the Central Bank
of Sweden, Norway, Denmark and Finland. At that time the
central banks had discussed the American declaration of
October 12 and the tripartite monetary agreement. When
they had their meeting they were not ready to take any action,
but they desire to obtain further information regarding
the technical working of the reciprocal arrangements on
gold. Therefore Governor Rooth, who twice a year visits
the important European financial centers, was asked to
investigate the matter for the Scandinavian group of
banks.
I pointed out to Governor Rooth the various declarations in this morning's London and Paris papers, and gave
him the full background of them, with the exception of
certain confidential information, regarding Belgium in
particular. I was told by Governor Rooth that the four
Scandinavian central banks are pledged one to the other
not
183
-2not to depreciate their respective currencies further without giving due notice to the others; they consult one
another constantly, and their aim is to maintain common
policies.
On December 12 there will be celebrated at Helsingfors
the 125th anniversary of the founding of the Bank of Finland.
The ceremony will be attended by the central bank Governors
mentioned above, who will take advantage of the occasion
to have a confidential meeting. At that meeting Governor
Rooth will report his findings regarding the tripartite
agreement and technical arrangements subsequent thereto.
I was told by Gov ernor Rooth that he would let me know
after December 14, and most likely before December 25, of
the conclusions that may be reached at Helsingfore; he
does not expect that any definite action in the premises
will be taken by any one of the central banks before the
first of the year, because throughout December the respective
state budgets will keep most of them very busy.
As for the possibility of adherence by any one of the
Scandinavian countries, Governor Rooth did not appear to
be very optimistic. He said that they usually all stand
together, and that there would be cause for unhappiness if
two or three of them might adhere to the tripartite declaration and the other one or two might not be eligible
thereto. It would appear impossible for Denmark to pledge
herself
184
-3herself to give gold since that country has exchange control.
Norway furthermore has no exchange equalization or stabilization fund and the central bank of Norway is a private corporation. The Governments of Sweden and Finland own the stock
of their respective central banks, and the Governments
guarantee the acts of those banks. However, I should add
that Governor Rooth is a firm exponent of central banks
retaining what independence has been acquired by them.
On several occasions during the past year Governor Rooth
has informed me of his interest in carrying a certain part
of his reserves in dollars, provided he had the facility
for converting them into gold at his desire; however, he
frankly stated that present circumstances do not make it
urgent that such facilities be afforded him. The Bank of
England, he informed me confidentially, is very accommodating
in carrying out such gold operations as he may need. In
other words, the Bank of England will sell gold for his
account or buy for the account of the Riksbank such gold as
the latter may order, even though at the time the quantities
stipulated are not procurable on the London open market.
Thus the Bank of England has been willing to yield gold to
the central bank of Seden even though the two countries did
not have an arrangement such as has now been consummated
in the tripartite agreement, and with Belgium, the Netherlands
and Switzerland.
END MESSAGE.
EA:LWW
BULLITT.