The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
DIARY
Book 51
January 1 - January 15, 1937
-ABook Page
American Red Cross
HMJr authorizes and approves "investment of approximately
$120,000 obtained from called American Telephone and
Telegraph bonds in Federal Farm Mortgage Corporation
LI
32% bonds of 1964-44" - 1/11/37
198
Appointments and Resignations
McLeod, A. S. (Government Actuary) resigns,
effective 1/31/37
a) Discussed at staff meeting - 1/6/37
47
99
Associated Gas and Electric Company
Oliphant places before HMJr "a succinct summary of the
important provisions of the stipulation as now drawn"
1/6/37
26
Automobile Labor Situation
HMJr asks Miss Roche to explain difficulties between
General Motors Corporation and United Automobile
Workers Union - 1/4/37
a) Roche memorandum
18
19
b) Miss Roche and John L. Lewis to dine with HMJr
Seltzer (Division of Research and Statistics) reports
on labor developments in automobile field - 1/5/37
Miss Roche tells HMJr of developments in situation -
48
1/6/37
109
1/7/37
1/8/37
122
144
-BBank for International Settlements
Cochran reports on meeting, most of discussion centering
upon drafting an amendment to the statutes made
necessary by the plan for separating offices of
Chairman of the Board and President of the Bank 1/12/37
a) Trip will not continue as Chairman of the Board
after close of business year
b) Sir Otto Niemeyer most likely successor to Trip
c) Trip states that arrangements for gold reciprocity
between United States and Netherlands are working
satisfactorily
d) Swiss Governor, Bachmann, discusses his gold
shipments to New York
e) Rooth gives Cochran his reasons why Scandinavian
Central Banks are at present not inclined to
adhere to Tripartite arrangement
f) French budgetary and Treasury situation worries
the Dutch, Swiss, Italians, Germans, and British
g) Schacht-Cochran conversation reported
304
-B - (Continued)
Book Page
Banking Legislation
Conference in HMJr's office to discuss "Bell-Upham Bill"
(putting up Government bonds as collateral for Federal
Reserve notes) - 1/5/37
a) HMJr has promised Glass not to sponsor any
LI
31
banking legislation without first seeing him;
therefore decides to explain to the Senator
b) Eccles will accompany HMJr if necessary but
does not really want to
1) Group feels HMJr is "carrying the ball"
because of Glass' dislike for Eccles
c) HMJr talks to Eccles
1) Eccles suggests that HMJr say to Glass
entire Federal Reserve Board wants this,
not just Eccles
At luncheon, HMJr, Eccles, Renson, Taylor, and Upham
discuss joint HMJr-Eccles visit to Glass - 1/5/37
51
a) Glass agrees that the extension desired by
Eccles may be introduced in bill
b) HMJr comments on fact that ticker reported
his visit to Glass but did not mention Eccles
78
c) HMJr explains to Jesse Jones - 1/5/37
1) HMJr quotes FDR: " Jesse Jones, Eccles, and
you to see Joe Robinson and find out how to
handle problem"
a) Robinson informs HMJr conference in his
office is arranged for 1/7/37 at 10:30 A.M.
1) HMJr so informs Jesse Jones
2) HMJr and Jesse Jones discuss results
of conference; Jones thinks extension
for 23 years very good
3) Resume of conference
Extension of Stabilization Fund discussed by Vandenberg
and HMJr - 1/11/37
Meeting of the Committee; present: HMJr, O'Connor, Crowley,
Eccles, Bell, Jones, and Upham - 1/12/37
110
113
117
123
210
233
a) Crowley wants nothing to interfere with powers of
Federal Deposit Insurance Corporation to liquidate
closed banks; this agreement between O'Connor and
Federal Deposit Insurance Corporation
b) HMJr: "If Congress is to give authority to issue
rules and regulations, this authority should be
given to Secretary of Treasury"
c) Office of Comptroller of Currency: HMJr thinks it
should either be definitely in the Treasury or
definitely out
d) O'Connor raises point of "an irritating little situationCredit Unions in District of Columbia" (Federal ones
under supervision of Farm Credit Administration)
e) Eccles wishes offices of honorary Chairman and paid
Federal Reserve Agent kept separate
f) Final decision is no banking legislation is to be proposed
for sixty days (March 1)
g) HMJr reports meeting to Glass
264,365
- B - (Continued)
Book Page
Banking Legislation (Continued)
See legislation recommended by Comptroller of Currency
in annual report for year ending 10/31/35; Crowley's
statements; list of amendments to the laws affecting
Federal Reserve System
LI
275-302
-C---
Cartels, International
FDR and HMJr discuss - 1/4/37
Cochran, H. Merle
16
HMJr instructs Cochran to sail for United States 379
1/13/37
Cohen, Ben
FDR and HMJr discuss whether Cohen would be better in
Attorney General's office or Securities and Exchange
Commission - 1/4/37
16
C(ommittee) for I(ndustrial) O(rganization)
See Automobile Labor Situation
Comptroller of Currency
For proposed legislation, see Banking Legislation
Cuba
Coinage of 100 million Cuban silver pesos commented on
by State Department - 1/6/37
105
Customs, Bureau of
HMJr asks Assistant Secretary Gibbons to report with
regard to inspectors taking bribes at the docks 1/5/37
Dow, Frank: Congressman Kleberg tells HMJr charges were
preferred against Dow by Congressman West in July, 1935 no answer; HMJr tells Gibbons to prepare answer within
24 hours - 1/11/37
-DDebts, Foreign
See Italy
Deering, Milliken, and Company
See Taxation: Undistributed profits tax
Dow, Frank (Bureau of Customs)
See Customs, Bureau
Drought
See Unemployment Relief
-EEccles, Marriner
See Banking Legislation
.
.
England
Excess Reserves
Housing
See Stabilization
50
200
- E - (Continued)
Book
Page
Engraving and Printing, Bureau of
Discussion as to relative advantages of engraved plate
method and the offset process with regard to counter-
feiting:
a) Conference in HMJr's office with representatives
of Printing Pressmen's Union - 1/4/37
b) HMJr confers with Hall and Graves
1) HMJr tells Hall and Graves they must convince
LI
13
representatives of printers of the necessity
of changing future distilled spirits stamps
to the engraving process; wishes Miss Roche
present at conference with representatives
of Printers' Union - 1/5/37
Miss Roche reports on conference between representatives
of Pressmen's Union, Graves, Wilson, Hall, and herself 1/8/37
Excess Reserves
Eccles memorandum, "Prospect for Money Rates" - 1/12/37
HMJr directs Upham to advise Eccles that he (HMJr) is
hopeful that Federal Reserve can reach definite decision
for announcement not later that February 1st as to
whether or not they are to increase excess reserve
requirements at this time - 1/13/37
62
145
225
323
a) If decision is affirmative, HMJr hopes effective
date will be not later than February 15th so that
two weeks can elapse prior to any announcement
by the Treasury with respect to 3/15/37 financing
-F--
Federal Deposit Insurance Corporation
See Banking Legislation
Federal Reserve Board
See Banking Legislation
Excess Reserves
Financing, Government
See also Excess Reserves
Bell memorandum, "Preference on Small Subscriptions" -
269
1/12/37
Haas memorandum, "The Trend of Short-term Money Rates" 1/12/37
270
-
General Motors Corporation
See Automobile Labor Situation
. Japan
Government Bond Market
HMJr tells Bell to offer this week $50 million of 9-months
bills and then "just watch the picture" - 1/6/37
89
- G - (Continued)
Book
Page
Government Reorganization
Senator Byrnes (South Carolina) 'phones HMJr of his
hearty approval of "adjusting or abolishing General
Accounting Office" - 1/13/37
LI
359
-HHousing
Eccles sends HMJr revised copy of letter he (Eccles)
sent to Stewart McDonald, covering the extension of
Title II of Housing Act; letter is outgrowth of
McDonald's request that Eccles accompany him to
White House - 1/13/37
a) HMJr informs Fahey of fact that McDonald is
submitting through Budget a recommendation for
legislation that the Government guarantee of
debentures issued under Title II of Federal
Housing Act be extended until 6/30/39; HMJr has
withdrawn his objection; suggests that Fahey
protest to Bureau of Budget promptly, if he so
desires - 1/13/37
HMJr 'phones McDonald - 1/13/37
HMJr talks to Eccles concerning - 1/14/37
352
356
363
380
-Interstate Commerce Commission
See Taxation
Italy
HMJr and FDR discuss solution of foreign exchange problems;
16
war debts; international cartels - 1/4/37
-JJapan
HMJr informs FDR that foreign exchange for last two days
has been acting in peculiar and unaccountable manner -
178
1/11/37
Tax case of a Japanese steamship company, Osaka Shosen
Kabuishiki Kaisha, discussed by three representatives
of Bureau of Internal Revenue with HMJr - 1/11/37
Cable from Grew giving resume of situation - 1/13/37
Smith, Edgar W., of General Motors Corporation, Export
Division, gives HMJr resume of monetary situation at
request of James D. Mooney (Vice-President in charge of
188
317
325
Overseas Operations) - 1/13/37
Jones, Jesse
HMJr and FDR discuss qualifications for heading new
division of Public Works - 1/4/37
16
-LBook Page
Legislation
HMJr lists for Senator Joe Robinson's secretary
legislation in which Treasury is interested:
Reconstruction Finance Corporation bill, Commodity
Credit, Export-Import Bank, Stabilization Fund, the
right of the President to devalue the dollar, and
Federal Reserve's emergency power to put up Government
bonds as collateral for their Federal Reserve notes
(expires March 3, 1937) - 1/5/37
LI
Coast Guard proposals
Customs proposals
Enforcement agencies proposals
85,140
137
138
139
140
141
Fiscal proposals
Internal Revenue proposals
Narcotics proposals
142
143
Procurement proposals
-MMcLeod, A. S. (Government Actuary)
See Appointments and Resignations
Mellon Art Gallery
Oliphant and HMJr decide to tell Ned Bruce, "Since you
are handling matter directly with FDR, neither of us
has any suggestions to make" - 1/14/37
377
Meloney, Mrs. William Brown (New York Herald-Tribune)
See Rhondda, Lady
Mooney, James D. (Vice-President, General Motors Corporation,
in charge of Overseas Operations)
See Stabilization
. Japan
N-
National Munitions Control Board
HMJr, an ex-officio member; Oliphant recommends signature
for report to Congress - 1/4/37
21
Niemeyer, Sir Otto
See Bank for International Settlements
-PPeoples, Christian J. (Admiral; Director, Procurement Division)
HMJr and FDR discuss qualifications for heading new division
of Public Works; HMJr tells FDR of his continued drinking -
16
1/4/37
Printing, Division of (Treasury Department)
Statement of duties prepared by L. C. Spangler, Chief 1/9/37
155
- P - (Continued)
Book
Page
LI
16
Public Works Administration
Jones, Jesse: qualifications for heading new division
discussed by HMJr with FDR - 1/4/37
Peoples, Christian J. (Admiral; Director, Procurement
Division) qualifications for heading new division
discussed by HMJr with FDR - 1/4/37
16
-RRailroads
See Taxation
Rhondda, Lady
Mrs. William Brown Meloney (New York Herald-Tribune) asks
HMJr for special consideration through Customs 1/11/37
a) HMJr asks Harry Durning to attend to this
204
208
-S- Silver
See Cuba
Spaulding, A. G., and Brothers
See Taxation: Sporting goods tax
Stabilization
See also Bank for International Settlements
See speech "Stabilizing the Exchanges" by James D. Mooney,
Vice-President in charge of Overseas Operations, General
Motors Corporation, at international dinner of
Automobile Manufacturers' Association, New York City
HMJr instructs Cochran to sail for United States 1/13/37
England:
328
379
Statement by Government on the occasion of the adherence
of the Governments of Belgium, Netherlands, and
Switzerland to the principles stated in the Tripartite
Declaration of 9/25/36
73
Switzerland:
Sproul and Knoke (Federal Reserve Bank of New York) discuss
with HMJr question of a letter dispatched by Federal
Reserve Bank to Swiss National Bank covering gold transactions
in this market before letter had received the approval of
201
Treasury Department - 1/11/37
a) Oliphant memorandum concerning - 1/13/37
Stabilization Fund
See Banking Legislation for inclusion in bill to extend
Stabilization Fund and extension of authority under which
the Federal Reserve Banks can use Government securities as
collateral for Federal Reserve notes
Switzerland
See Stabilization
357
-TBook
Page
Taxation
Undistributed profits tax:
Haas reports on meeting with Gerrish Milliken, of the
Deering-Milliken Company, New York City, concerning
operation of tax on several specific textile
corporations to which his company has extended
substantial loans - 1/8/37
LI
146
Resume of Interstate Commerce Commission report,
commenting on undistributed profits tax, which did
not clear through Treasury before presentation to
FDR - 1/12/37-2/20/37
a) HMJr's letter to FDR - 1/12/37
b) Meeting at White House to discuss Interstate
215
217
Commerce Commission's 1936 Annual Report
concerning effects of operation of undistributed
profits tax, particularly with regard to weak
railroads; present: FDR, HMJr, Carroll Miller
(Interstate Commerce Commission), Oliphant, Haas-
1/14/37
374
c) Carroll Miller tells HMJr Interstate Commerce
Commission has appointed Eastman to confer with
Treasury - 1/15/37
Sporting goods tax:
Haas reports on meeting with Curtis, Chairman of Board of
Directors of A. G. Spaulding and Brothers - 1/8/37
394
147
-UUnemployment Relief
Conference at HMJr's home; present: Secretary Wallace and
Baldwin (Agriculture), Hopkins and Gill (Works Progress
Administration), D. W. Bell (Budget), and McReynolds 1/3/37
2
a) Wallace states his problem with respect to relief
funds
b) At close of conference, HMJr 'phones FDR his
recommendation to request Congress for additional
appropriation of $790 million for expenditure prior
to 7/1/37; HMJr explains this includes only $70 million
for Wallace; FDR approves HMJr's recommendation
c) Tugwell's figures used as basis of discussion
d) Wallace points out to HMJr relationship between
Tugwell's figures and his own figures used in
conference
Lonigan memoranda on (1) reemployment and new industries,
and (2) the low-rent housing industry - 1/8/37
Census of population and employment recommended by Lubin,
Chairman of Committee on an Unemployment Census - 1/11/37
Miss Lonigan reports error in information furnished on
Federal expenditures in drought area - 1/14/37
United Automobile Workers' Union
See Automobile Labor Situation
5
10
125
167
373
-WBook
Page
LI
17
Webb, Vanderbilt
HMJr again discusses with FDR; gets nowhere - 1/4/37
Wheat
Memorandum concerning "speculative activity and the price
of wheat" prepared by Bureau of Agricultural Economics 1/4/37
55
AMBASSADE DE FRANCE
AUX ETATSUNIS
Washington, January 1st. 1937
Honorable Henry Morgenthau,
Pecretary of the Treasury,
Washington, D.C.
My Dear Mr. Secretary,
Referring to our conversation on the
telephone, I wish to say that I received
copy of the text of the message which M.
Vincent Auriol cabled you. It appears that
through some mistake a slight omission was
made in the transmission. After the name of
President Roosevelt, M. Auriol added "and
yours® (your name).
According to his instructions, I wish
to make this correction in the text.
With best regards, I am,
Very sincerely yours,
hum
2
Memorandum of Conference at Secretary Morgenthau's house, 4 P.M.,
Sunday, January 3, 1937. Present: Secretary Morgenthau;
Secretary Wallace and Mr. Baldwin, of Agriculture; Mr. Bell,
Mr. Hopkins and Mr. Gill, and Mr. McReynolds.
Secretary Morgenthau asked Secretary Wallace to state his prob-
lem with respect to relief funds.
Secretary
Wallace:
The bird's-eye view, as I get it, as it has to do
with loans and grants, contrasted with last year,
is as follows: A year ago we handled a total of
450,000 families, of which 300,000 were loans and
150,000 grants. The total amount of money spent
was 88 million on loans and 15 million on grants.
This year under the proposal, putting together
both the amount we have spent and the suggested
amount that would be allowed us to carry us to
June 30, we would be handling a total of 820,000
families: 300,000 on loans, the same as a year
ago; 150,000 on grants, the same as a year ago,
but the grant cases would be carried for a somewhat
longer period; and 100,000 on feed loans; and in
addition to that we have 270,000 special drought
cases that we inherited from Mr. Hopkins. The
justification for additional money arises out of
the additional number of families which result from
taking over the drought cases and the feed loans.
Secretary
Morgenthau: Bell has given a figure. When we get these figures
together, we find we are charging/65 million dollars
to drought.
Why don't you let me say what I have in mind and
you try to break it down. The position I am taking
is this: I am going to take your figure and Hopkins'
figure, what you say you need in the way of money
from now until the first of July to take care of
people on relief and loans and grants, because I am
not going to be put in the position of trying to
sit and trade with you on that.
But, when it comes to Resettlement projects,
rehabilitation work, and administrative expenses,
land purchases, I am not going to say that that is
relief money, and on my advice the President will
not go before Congress and make a fight for addi-
tional money at this time. I will say just take
3
-2the 50 odd million dollars that you have got
and spread that over the five months and slow
up your program until you get new money. The
58 or 59 million dollars you need for relief,
I am for that; and under administrative overhead
I am suggesting that you get 10 million instead
of 15.
When it comes to land development and Resettlement
projects, which are not strictly relief projects,
and administration costs, I am going to be hardboiled. That is my position. I do not even know
whether
I feel. Bell agrees with me, but that is the way
The President has asked us to bring something to
Secretary
Wallace:
Baldwin:
Bell:
him tomorrow morning.
Let us look at this one thing at a time. On the
land utilization item
We have 17 million dollars in here for the completion of the Resettlement projects. We have some
projects here that we cannot get through. It will
take the 23 million you have given us plus the 17
million asked for to complete that.
The 17 million dollars is a duplication and can be
cut out, because that item is provided for in Mr.
Hopkins' program.
Secretary Wallace and Mr. Hookins spent some time in discussing
the question of what would be a normal load to carry for loans
to farmers every year, and what the cost of the administration
of such loans would be.
Secretary Morgenthau and Secretary Wallace discussed at some
length the exorbitant costs of Resettlement projects, and
Secretary Wallace expressed the belief that such costs are
probably 50 or 60 percent higher than would be necessary under
normal conditions. After discussing the administration costs
and project costs for some time, Mr. Bell suggested that "the
additional amount to be provided for Agriculture for all purposes up to July 1 be 70 million dollars, and Secretary
4
-3Morgenthau stated that he would recommend that amount to the
President,
790
million. plus 720 million for Hopkins, making a total of
Mr. Hopkins stated that he could operate on the amount proposed
up to June 30 without creating any obligations in excess of that
amount, and that in his planning it was not proposed to reduce
the relief rolls between now and the middle of March, all the
necessary cutting to be made after March 15.
After discussing the proposal suggested by Mr. Bell that an
appropriation be asked for only 650 million dollars to provide
funds for actual expenditures prior to July 1, and that in the
bill for next year authorization be included for the incurring
of obligations prior to July 1 up to 140 or 150 million dollars,
it was decided to recommend to the President that he include the
full amount of 790 million dollars as a direct appropriation
and not request authority to incur obligations beyond that amount.
Mr. Hopkins stated that for next year he would be willing to
undertake to get along with a billion and a half, including all
expenses, for unemployment relief.
Secretary Morgenthau then called the President on the telephone
and stated that, as the result of the conference just concluded,
appropriate an additional sum of 790 million dollars to provide
the necessary emergency relief funds for expenditure prior to
next July 1. The Secretary explained that this amount included
only 70 million for Secretary Wallace's activities. The President
approved the Secretary's recommendation and authorized the
inclusion of the 790 million dollar figure in his recommendation
he recommended to the President that he request Congress to
to Congress.
5
January 3,1937
The figures in Mr. Tugwell's letter of December 30,
attached hereto, were used as the basis of discussion in the
meeting
at the
Secretary's home on January 3rd, when final
decision was
reached.
6
RESETTLEMENT ADMINISTRATION
OFFICE OF THE ADMINISTRATOR
WASHINGTON
to
get VP60
ey.
December 30, 1936
The Honorable
The Secretary of the Treasury
My dear Mr. Secretary:
In accordance with your request of yesterday, I am giving
you below the statement of unencumbered and unallotted funds
which have been allocated to the Resettlement Administration
by purposes for which this money was made available and by
the approximate dates on which these funds will be obligated,
together with pertinent information on the various phases of
the program and the additional funds which will be needed to
carry this program through the present fiscal year.
On November 30, 1936, the unencumbered and unallotted balances
of funds allocated to the Resettlement Administration were epproximately $92,800,000. Since November 30, there have been allocated to the Resettlement Administration $5,000,000 as additional funds for loans and grants and $2,000,000 for administrative expenses. The allotment for administrative expenses
was made to meet immediate payrolls and will be encumbered completely before January 15. This means that the unencumbered
and unallotted balances which are being explained in this letter
total$ approximately $99,300,000. The summary statement below
will indicate the purposes, for which these funds are being used:
PURPOSE
TOTAL FUNDS unexcumBered
TOTAL ADDITIONAL FUNDS
AND UNALLOTED DEC. 1, '36
REQUIRED THROUGH JUNE
30, 1937
Rehabilitation and
drought relief
$43,000,000 (a)
Land Development
Submarginal Land
10,300,000
Purchases
2,200,000
Resettlement Projects
Administration
40,500,000 (b)
3,800,000 (c)
$99,800,000
$58,000,000
17,000,00017,000,000
15,000,000 ?
$107,000,000
(a) Includes $5,000,000 received after December 1, 1936.
(b) Includes $2,500,000 transferred after December 1, 1936.
from 1935 Rehabilitation funds.
(c) Includes $2,000,000 received after December 1, 1936.
7
-2RURAL REHABILITATION:
As of November 30, there remained unencumbered the sum of
$38,000,000 of funds which had been allocated for loans and
grants to farm families. Since November 30, we have received
an additional allocation of $5,000,000 making a total of
$43,000,000 available for this part of our program.
It is estimated that this $43,000,000 will be spent and obligated duringamounts:
the months of December and January in the following
approximate
$5,000,000 for direct grants during December;
2,000,000 for drought feed loans during December;
8,000,000 for grants during January (150,000 grant
case load, exclusive of the drought area
and 250,000 case load now being transferred
from WPA);
5,000,000 for feed loans during January;
2,000,000 for loans to cooperatives during January (these
loans have been processed and approved by the
regional offices and are now awaiting certification);
5,000,000 operating loans during January to farmers formerly residing on submarginal land purchased by the
Resettlement Administration and to other rehebilitation clients occupying Resettlement projects;
16,000,000 for supplemental loans to rehabilitation clients
for which farm plans have already been approved.
It is estimated that a minimum of $25,000,000 will be required for
grants to take care of 250,000 drought victims formerly employed
on WPA projects who are now being transferred to the Resettlement
25
58
Administration. During the same period it is estimated that a
minimum of $33,000,000 will be needed for loans and grants to re-
habilitation clients. At the present time, we have approximately
300,000 such clients. We believe that this $33,000,000 will be
sufficient to continue their rehabilitation, although it is only
one-half of the amount used for this same purpose during the
corresponding five months in 1936.
Our experience thus far definitely indicates that most of these
funds will ultimately be returned to the Treasury. Undoubtedly,
assistance of this sort to farmers in open rural country can be
extended very much more cheaply than is possible under any other form of
relief.
33
-3-
LAND DEVELOPMENT PROGRAM:
Of the funds allocated to the Resettlement Administration for
Land Development Projects $10,300,000 was unencumbered on
November 30, 1936. Of this amount, $1,400,000 was rescinded
in the transfer of certain projects to the National Park
Service, Department of the Interior. All but $2,400,000 of
the remainder will be encumbered by February 1, 1937 and
this balance has been irrevocably allocated to a few projects
and cannot be shifted to other projects under the terms of
the Deficiency Act of 1936. Thus it will be necessary to have
additional funds appropriated and allotted to meet February 115 payrolls on the great majority of projects. The sum of
$17,000,000 will be required to complete this phase of the program.
SUB-MARGINAL LAND PURCHASE PROGRAM:
Of the funds allocated to the Resettlement Administration for the
acquisition of land under the sub-marginal land program, a balance
remained on November 30 of $2,200,000. Of this amount $760,000
was encumbered during the month of December and $500,000 has been
set aside to complete the curative work in the field in connection
with clearing titles. The $940,000 remaining is for the purpose
of acquiring essential and necessary key tracts by the Resettlement
Administration, the National Park Service, the Bureau of Indian
Affairs, and the Bureau of Biological Survey.
RURAL AND SUBURBAN RESETTLEMENT CONSTRUCTION PROGRAM:
There remains approximately $40,500,000 of funds allocated
to the Resettlement Administration which have been and are
being used for rural and suburban resettlement projects. Since
November 30, there has been encumbered approximately $10,000,000
of these funds, leaving a balance of approximately $30,500,000
available to continue these activities. It is estimated that a
minimum of $17,000,000 will be required to complete sufficient
construction on these projects to establish them on a sound
workable basis.
8
9
On November 30 there remained approximately $1,800,000 of funds
allocated to the Resettlement Administration for Administrative
expenses which had not been encumbered. Since November 30, an
additional allocation of $2,000,000 has been made for this purpose.
At the present time, our administrative expenses are approximately
$2,500,000 per month and it is anticipated that this amount will
be required each month until the end of the fiscal year. Since
May 15 we have reduced our administrative personnel from appro-
ximately 19,500 to approximately 13,500. It was anticipated that a
further reduction would be made in the next 90 days, but because of
the seriousness of the drought situation it is not felt that any
additional economies can be effected in this fiscal year.
It should be borne in mind that it is necessary to maintain substantial working balances of all funds if the administration of
the Resettlement program is to be handled on an efficient basis.
We now have under way approximately sixty Rural and Suburban pro-
jects and, because of labor difficulties and other conditions
beyond our control, our estimates cannot be entirely accurate.
Allotments, therefore, in some cases will be greater than immediate
requirements, but it is essential that there always be maintained
working capital for each project. A similar situation exists with
regard to our loan and grant program. We are now making loans and
grants in all of the forty-eight states. If an average minimum
balance is carried in each state of $250,000 as working capital,
this alone will require twelve million dollars. Our experience indi-
cates that smaller balances not only make administration extremely
difficult, but result over a long period of time in greater expen-
ditures than would otherwise be required and in inéfficient use of
our personnel.
Sincerely yours
Administrator
10
DEPARTMENT OF AGRICULTURE
WASHINGTON
January 4, 1937
The Honorable
The Secretary of the Treasury
MA
Dear Secretary Morgenthau:
Inasmuch as during the conference yesterday afternoon, you
questioned the relationship of the figures which I presented in the
early part of the conference to the figures which former Administrator Tugwell had sent you, I wish to point out to you the relationship which seems to me to exist.
Dr. Tugwell's letter to you was addressed merely to the question
which you and Administrator Hopkins had raised in your office one morning last week as to the status of the unencumbered balances as of December 1, 1936. The figures which I gave to you in the early part of
yesterday's conference referred only to Rural Rehabilitation and
drought relief program for which the Resettlement Administration had
43 million dollars of unencumbered funds on December 1. Evidently, I
did not make myself clear, why it was, taking into account the money
thus far spent in this fiscal year and also in addition the 43 million
dollars apperently unencumbered and also the full askings for the remainder of the fiscal year, that the total expenditures are reasonable
as compared with the last fiscal year.
In brief, the point I was making is as follows:
In the fiscal year ending June 30, 1936, the Resettlement Administration took care of 300,000 loan cases and 150,000 grant cases,
spending 88 million dollars on loans and 15 million on grants, making
a total of 103 million dollars. In this fiscal year, taking into account
the money already spent, the technical unencumbered balance referred to
in the Tugwell letter and the askings as I presented them to you yesterday, Resettlement would be taking care of 820,000 families as contrasted
with the 450,000 last year. The 820,000 families would consist of
300,000 rehabilitation loan cases, 150,000 grant cases, 100,000 feed
loan cases and 270,000 cases sent to Resettlement by Hopkins. The money
spent on these 820,000 families would total 114 million dollars as com-
pared with 103 million last year. of this 114 million dollars, 51
million dollars will be spent for the 300,000 loan cases (a part of
this fund will be used for rehabilitation loans in the drought area
-2-
11
which will include feed loans; 5 million dollars will be loaned to
farmers removed from submarginal land, and to other rehabilitation
clients occupying rural resettlement projects; 46 million will be
spent on the combined grant cases for both the drought and the grant
case load which has been carried outside of the drought area; and
12 million would be used entirely for drought emergency feed loans.
In view of the fact that the year 1936 was one of the two most
severe drought years in this century and undoubtedly far more serious
in its character than the year 1935, it would seem to me that the total
showing of Resettlement for the relief end of its work in the fiscal
year ending June 30, 1937, contrasts very favorably indeed with the
showing made by Resettlement the previous year.
You made the statement yesterday that the 43 million dollars could
not be spent by June 30 even though certain askingsof Resettlement for
the remainder of the year were denied. of course, I am not yet suf-
ficiently familiar with the details of the Resettlement Administration
to say with absolute conviction that this statement is inaccurate, but
speaking in a general way, it would seem to me in view of the drought
nature of the 1936 season and the unusual demands coming on Resettle-
ment from the drought sufferers, that the Resettlement Administration
would be definitely remiss if it did not give out this money to the
people who need it. I believe they are now organized to do it, that
they can do it and they should do it.
Addressing myself now to the housing work of the Resettlement
Administration which you criticized so vigorously yesterday, I wish
to say that the housing has been given an importance by the press al-
together out of proportion to its real significance. Moreover the
President's visit to Greenbelt also publicized the housing end of Resettlement activities. In view of the fact that the suburban housing
work is very definitely under fire both inside and outside of the ad-
ministration, it seems to me that the sensible thing to do is to finish
up the present projects as rapidly as possible and then to have a complete and thorough understanding among the agencies concerned before
any new suburban housing activities are started. If the housing is
slowed down in the manner your recommendation contemplates, the result
is bound to be higher costs, pressure from various quarters and additional newspaper discussion of a sort which will not be good for the
administration.
Your criticism of the efficiency of the housing work of Resettlement may be perfectly well-founded. If the criticism consists
merely in the fact that the houses will have to be sold to the farmers
at less than the government put into them, I do not think it is wellfounded. It is obvious that the use of relief labor as required by
the W.P.A. has resulted in high costs, and other conditions and regulations beyond the control of the Resettlement Administration have
also served to increase the costs.
-3-
12
:
It may be that the Resettlement Administration has been unnecessarily experimental in some of its approaches to the problem and
that this experimentation has cost the government money. It may be
had
that the overhead costs of supervising the were
into that
to compare
such
I haveno
opportunity
to and
look housing
unduly supervisory
high.
costs with costs elsewhere. I believe you have such an opportunity and
I would appreciate it greatly if you would send me the results of your
survey. Oftentimes there are several sides to a problem of this sort
and I think both you and I are of a mind in which we like to get as
nearly a rounded picture as possible.
I have always appreciated your frank and cooperative spirit and
I am writing you now in the same spirit.
Sincerely,
Hawallac
Secretary
13
January 4, 1937
Mr. Ernest and Mr. Murray called on the Secretary
at ten 'clock this morning and presented the attached
letter.
Mr. Morgenthau inquired of Mr. Ernest if he knew
why it was contemplated to use the engraved plate method
rather than the offset process and Mr. Ernest's reply
was that it was because of counterfeiting. The Secretary next asked whether switching from the offset to the
plate printing method would mean that the men they represented would be laid off and Mr. Ernest replied that it
would. but added that it should be borne in mind that it
is a matter of governmental economy that the offset method
be continued.
The Secretary told Mr. Ernest that he was not familiar
with the matter, but that he would see Mr. Hall today or
tomorrow and would have an answer for Mr. Ernest by Wednesday.
14
PRINTING PRESSMEN'S UNION No. 1
I.P.P. and A.U.
TYPOGRAPHICAL TEMPLE 20 423 G STREET, NORTHWEST
WASHINGTON, D.C.
OF
RESIDENT AND
CRETARY
NAT. 9386
December 11, 1936
Honorable Henry Morgenthau,
Secretary of the Treasury,
Washington, D. C.
My dear Mr. Secretary:
We are reliably informed that the Bureau of Engraving and Printing is
contemplating printing all Green Bottled Distilled Spirit Stamps, which are
now being produced by the economic offset method at a cost of $7.49 per 1000
sheets, to the more expensive plate printing method at a cost of $52.75 per
1000 sheets.
Washington Printing Pressmen's Union No. 1 and the International Printing
Pressmen & Assistants' Union of North America request that you do not approve
such a change in the method of production of these Green revenue stamps in
the Bureau of Engraving and Printing.
Approximately 90% of all revenue stamps are being produced at the Bureau
of Engraving by the offset process at an approximate cost of $7.49 per 1000
sheets.
Approximately 10% are produced by the plate printed method at an approximate cost of $52.75 per 1000 sheets.
(All figures mentioned herein have been obtained from "The Hearing before
the Subcommittee of House Committee on Appropriations" for the fiscal years
1934, 1935.)
Green Bottled Distilled Spirit Stamps used on bonded whiskey and export
Bottled Distilled Spirit Stamps in blue are now and have been for 20 years
printed by the offset process at an approximate cost of $7.49 per 1000 sheets.
15
Honorable Henry Morgenthau
-2-
December 11, 1936
Since the repeal of prohibition Red Bottled Distilled Spirit Stamps used
on blended liquor are printed by the plate printing process at an approximate
cost of $52.75 per 1000 sheets.
From the available information, there have been produced approximately
50,000,000 sheets of these Red Bottled Distilled Spirit Stamps printed by the
plate printing process at an approximate cost of $2,637,500. Had this same
quantity of revenue stamps been printed by the offset process at a cost of
$374,500 the Government would have saved approximately $2,263,500.
Beer stamps also are now being produced by the expensive plate printing
process, and we are informed that approximately 10,500,000 sheets of these
stamps have been shipped out of the Bureau of Engraving at an estimated cost
of $553,875. If these 10,500,000 sheets of beer stamps had been printed by
the offset process it would have resulted in a saving for the Government of
approximately $475,230.
The Red Bonded Distilled Spirit Stamp has about served its purpose. Threeyear-old Bonded Liquor is about to be placed on the market which will result
in increasing the demand for Green Revenue Stamps and will increase from time
to time in the very near future displacing a like number of Red Revenue Stamps.
The above matters not only deeply affect the rights of the membership of
the International Printing Pressmen and Assistants' Union of North America but
in addition involves a matter of Governmental economy; therefore, we most respectively hope that you will give them your earnest consideration.
Respectively submitted,
Edwin a. Eckels
Edwin A. Eckels, President
Harry
C. Secretary
Harry
b Webb,
Webb
Sawin Edwin
J. Murray,
Junisy Chairman
Legislative
Committee
bharles
V. Emest
Charles V. Ernest, Representative
I. P. P. & A. U. of N. A.
(SEAL)
16
January 4th
The President talked steadily for one hour. He asked me to
think over whether Ben Cohen would be better in the Attorney
General's office or SEC. Without knowing the man, I felt heI
would be much less conspicuous with the Attorney General.
asked him who he was going to put in as head of the new Public
Works. He said he did not know, that he had not thought about it -
possibly Peoples. So I said, "Well if you are going to think
seriously of Peoples I want to talk to you about him sometime."
The President then said, " What is the matter - is he drinking
again?" I said to him, "What do you mean again?", so he told me
a long story of back when he was Assistant Secretary - Peoples'
drank very heavily so much so that at one time his wife talked
of leaving him. I told him what happened at our tea and what
we had done afterwards. I said, "What would you have done?" and
he said, "Just what you did". I said, "Should I have told you
this" and he replied, "Absolutely", so I said, "It is strictly
between us". He said, "You better send for Peoples and tell him
that if three or four times a year he wants to go off and get
drunk O.K. but the rest of the time he has got to be sober and
attend to his work". (I do not know how successful I will be
and I think I will wait and see what develops) Then the President
turned to me and said,
"Do you think that Jesse Jones is old enough now that we can
trust him?" I said, "What do you mean"? and he said, "What would
you think if I put Jesse Jones in as head of the new department of
Public Works. He said you know Jesse Jones is tough and I think
Jesse would make a go of it". He again repeated did I think he
was honest and I said, "In all my experience with Jesse Jones, I
have never seen him deviate the slightest in serving his government
100%". I was tremendously interested in the President's attitude
towards Jesse, showing evidently that he has not always completely
trusted him.
The President then said, "I wonder if some of your bright
young men could work out some way of solving the Foreign Exchange
problem of Italy and Germany. (I imagine he has this in mind
because I know he has just seen Will Hayes, who has returned from
Italy where he has made a deal with them to take 250 moving pictures
a year but he has to leave part of his money in Italy. Will Hayes
told me this himself Saturday night at the diplomatic reception).
I told the President that the question of foreign exchange of Italy
and Germany is only part of the picture; that some day he wants to
take up war debts; that the country is not ready for us to give
a big reduction in war debts. I said, "When we take up war debts
-2-
17
we ought to also take up disarmament at the same time". The
President then tried to interrupt me by saying, "You are just
taking the words out of my mouth". He said, "Let me give you
my big idea". He then went on and expounded at great length
about the thought of having an international cartel in different
commodities. He used "rubber" as an example. The various
countries would agree on an annual production of rubber, each
one taking a definite allotment and all the workers and the
business done in rubber would be paid for with some kind of an
international exchange and that those countries who participated
and who were debtor nations would put part of their debt into
this so-called rubber pool and would liquidate their debt as they
received payment for their share of the rubber in international
exchange.
I asked the President whether this had anything to do with
the idea that he had a couple of years ago where he was going to
divide the world up into different production areas. He said,
"No, this idea superseded that one". He pictures himself as being
called in as a consultant of the various nations of the world. He
said, "Maybe I can prescribe for their ailments or, after making
a study of their illnesses, I will simply turn up my nose at them
and say, 'I am sorry - I cannot treat them'. For example I would
tell England that she had too many people and she should move out
ten million of her population. I would take a look at each country
and, of course, when we made them disarm we would have to find new
work for the munitions workers in each country and that is where
this international cartel would come in and your job would be to
handle the finances". I took a deep breath and said, with a smile,
"I will have to think this one over, Mr. President and he said,
"Well it is just an idea, think about it".
I again talked to him about Vanderbilt Webb but he has the
idea so definitely fixed in his mind that Vanderbilt Webb has no
backbone and is not a New Dealer that I might as well drop the
idea.
18
January 4, 1937
Today the Secretary asked Miss Roche to explain
to him the difficulties existing between General
Motors Corporation and the United Automobile Workers
Union. She did so, as per the attached memorandum.
The thought that prompted the request for this
information was the fact that the Secretary is fearful of a strike and the resultant effect on recovery,
in view of a statement prepared by him and included
in the Budget message which the President will send
to Congress on Friday of this week to the effect that
the Budget will be balanced in 1938 provided recovery
continues at the present rate.
The Secretary also asked Miss Roche whether she
thought the situation would be ironed out within a
couple of months or whether it would be a prolonged
fight. She did not know. He then inquired of her
if she would ask Mr. Lewis if he would be willing to
spend an evening with them at his home so that he,
the Secretary, could get the picture first-hand from
Mr. Lewis.
Miss Roche and Mr. Lewis are spending Thursday
evening with the Secretary and Mrs. Morgenthau.
19
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
FROM
January 4, 1936.
Secretary Morgenthau
Miss Roche
Subject: Industrial Situation
The crux of the present crisis in the automotive industry
is the continued refusal of General Motors to answer the request
of the United Automobile Workers' Union for a national conference
for collective bargaining purposes between that corporation and
the union which represents its employes.
The Union has repeatedly requeated such a conference, but
has been told by a vice-president that any grievances should be
taken up with plant managers or general managers in the various
localities. Such a statement is subterfuge. General Motors policies are not settled locally; decisions as to wages, hours, and other
conditions of employment are all made at a central point for all the
plants controlled by General Motors. The United Automobile Workers'
have already been told repeatedly by various plant managers that
their reasonable demands must be referred to higher company officials
before an answer can be given. The Union is continuing its demand
for a conference with persons who have the power to negotiate.
If the management continues to refuse to confer, the decision
for a grave industrial set-back will be their responsibility.
The United Automobile Workers' Union is splendidly organized
and represented by keen, level-headed and very intelligent men. It
is a member union of the C. I. O. which was formed last spring by
fifteen of the largest and most effectively organized industrial
unions of the country, comprising at that time nearly half of all
organized labor. John L. Lewis and Sidney Hillman were active in
its organization.
Now, in addition to its charter unions, the C. I. O. has added
many new unions. Through its organization work in steel, automobiles,
glass, shipbuilding, electrical manufacturing, oil and by-product coke
industries, hundreds of thousands of workers have been organized and
union enrollment is increasing daily.
The C. I. O. is built on the industrial union principle of
organizing all the workers of one industry - such as coal - into one
union, instead of on the old time craft principle which meant many
different unions and union contracts in one industrial establishment
with resulting confusion, jurisdictional disputes, and, in the end,
industrial instability and losses and no labor progress.
20
-2-
Should the automobile industry, steel and other great basic
industries continue in their refusal to meet and bargain collectively
with the unions which represent the workers of these industries, they
will find themselves up against a totally new situation in the labor
world. Industrial union leaders today are prepared in every sense of
the word. They have ample funds: they have information on their
industries equal to that possessed by management. Financial and
technical data, markets, trade and special data, they are as much
masters of as they are of labor conditions. Their entire approach to
the problem is sound and constructive; they desire industrial peace
and industrial gains. They maintain however that the coming era of
prosperity be a shared prosperity, that workers' rights to organize
and deal collectively with highly organized capital be accepted as
a working basis for developing the increased jobs and increased purchasing power on which prosperity for the nation as a whole depends.
I Roche
21
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE Jan. 4, 1937
TO
Secretary Morgenthau
FROM
Herman Oliphant
Pursuant to your request of December 31, 1936, the proposed
report to Congress of the National Munitions Control Board, of which
you are ex officio a member, has been examined and is in substance and
form ready for your signature. I recommend that you sign it.
Note: This report was signed today by
Secretary Morgenthau and sent by special messenger
to Mr. Green of the State Department.
22
THE WHITE HOUSE
WASHINGTON
January 4, 1937
MEMORANDUM FOR
THE SECRETARY OF THE TREASURY
FOR YOUR INFORMATION
F. D. R.
23
DEPARTMENT OF AGRICULTURE
WASHINGTON
December 30, 1936
The President
The White House
Dear Mr. President:
Following up our conversation at Cabinet meeting yesterday,
I would like to make further comment to you with respect to
both wheat and sugar. At the moment there is no occasion for
unusual alarm about bread prices. The average retail price
of bread in November in the leading cities in the United States,
according to the Bureau of Labor Statistics, was 8.2 cents a
pound. This compares with 8.1 cents in June of this year,
8.6 cents in December of 1935, 8.3 in December of 1934, 7.2
in December of 1932 and 9.4 in December of 1927.
The recent rise in the price of wheat and certain other
ingredients will probably result in the next month or two in
an increase in bread prices of about .4 of a cent a pound which
would mean that bread would be about 8.6 cents or the same as
it was in December of 1935. Flour in the middle of December
of this year of both the Hard Winter and the Spring Wheat
grades was lower in price than in December of last year. Since
the first week of December, however, there has been an advance
of 10 to 15 cents a bushel in the price of wheat and this has
not yet had an opportunity to reflect itself in either flour
or bread prices. At the moment, however, taking into account
this lag, there seems little likelihood of present wheat prices
resulting in bread prices any higher than they were in December
of 1935. You must remember that a year ago there was a processing tax on wheat which, when added to the price of wheat prevailing at that time, gave a price very little different from
the present price.
I am having our Bureau of Agricultural Economics cooperate
with the Commodity Exchange Administration to see to what extent
present wheat prices in the United States are out of line with the
fair assessment of supply and demand conditions in the United
States and in the world. I hope to have the result of this study
in your hands within the next week.
With regard to sugar, I am confident that if we have an
excise tax of one cent a pound, we can by regulation of quotas
keep the price from rising to the consumer. As a matter of
fact, however, it might be all right to let the price rise
24
-2- - -
to the consumer by as much as .1 or possibly even .2 of a
cent a pound because of the fact that sugar prices are
now so reasonable. We have the quota mechanism, however,
to impose a substantial excise tax on sugar without
increasing the price to the consumer. The problem is not
the problem of the consumer but a problem of how much of a
handout the government by its policy wants to give to the
sugar processors. I certainly do not believe in punitive
measures with respect to them, but neither do I believe in
a policy which gives them a far greater return than they
had during the decade of the twenties.
It seems to me that you now have a splendid opportunity,
if you will take hold of it firmly, to inaugurate 8 sugar
policy which will do justice to all of the parties interested,
including Cuba, the beet farmers, the children and other
laborers in the beet fields, the processors and the United
States Treasury. It is possible to enrich the United States
Treasury by a net of some 30 to 90 million dollars, depending
on the amount of the excise tax and on whether you think it
advisable for our policy to result in a return to the processors of 9 or 10 percent or whether you think our policy
should result in a return to them of 6 or 8 percent.
If you yourself will give the word to Secretary Morgenthau to go into this matter of an excise tax on sugar sym pathetically with our people and if you will have a heart
to heart talk with Senator 0'Mahoney, I am convinced that we
can, if we stand fast, inaugurate a sugar policy which will
be just for all concerned and one of which we can be proud
in future years. I honestly believe a policy of this sort
in the long run will prove to be to the best advantage of
the processors and the growers as well as to all the other
interests at stake. Would you like further information on
this subject?
Respectfully yours,
/s/
cc - Haas
Taylor
Roche
Oliphant
H. A. Wallace
Secretary.
25
DEPARTMENT OF AGRICULTURE
WASHINGTON, D.C.
December 30, 1936
C
o
P
Y
Hon. Henry Morgenthau, Jr.
Secretary of the Treasury,
Washington, D. C.
Dear Henry:
In line with our conversation at the White
House this morning, I will be glad if you will designate someone from your Department to whom Mr. J. B.
Hutson, Assistant Administrator of the Agricultural
Adjustment Administration, can talk about the sugar
situation.
Sincerely yours,
/s/ H. A. Wallace
Secretary
cc - Haas
Taylor
Roche
Oliphant
1-6-37
26
The boy
I send you che full
memo for your fuller
to it
records. I should like
discuss hiffy 2
with you Kent Steffort
attending to
27
GENERAL COUNSEL
TREASURY DEPARTMENT
WASHINGTON
JAN 6 1937
Memorandum to the Secretary:
In re: Draft of Stipulation with Associated
Gas and Electric Company.
The negotiations between the Associated Gas and Electric
Company and the Government, represented by Messrs. Wideman, Kent,
and Buck, for a stipulation in the equity foreclosure suit pend-
ing in the Northern District of New York have now reached the
point where it seems advisable to place before you a succinct
summary of the important provisions of the stipulation as now
drawn. In the event, as now seems probable, that Judge Mack approves the stipulation in the 77-B proceeding pending in his
court and dismisses that suit on January 8th or shortly thereafter, it might become highly important that a stipulation be
agreed upon and filed in our equity suit without delay.
The stated object of this stipulation is to provide a
basis whereby the interests of the United States may be adequately and completely protected and the necessity of distraint by the Collector of Internal Revenue may be obviated
while the stipulation is in effect and the company's tax liabil-
ity is being determined by the Board of Tax Appeals or the court.
The first portion of the stipulation is devoted to a re-
cital of relevant facts relative to the Associated Gas and Electric
Company and other parties defendant, the jeopardy assessments, and
the tax liens. These paragraphs have been carefully drawn but present
no questions which it seems necessary to bring to your attention.
The middle portion of the stipulation is the most important
from the point of view of protection of the Government's tax lien
and the collection of its claim.
First, the defendants agree to withdraw and waive their
several motions to dismiss and to strike, addressed to the Bill of
Complaint. The trial of the issues raised by the amended Bill and
-2-
28
Memorandum to the Secretary.
In re: Draft of Stipulation with Associated
Gas and Electric Company.
Answer is to be held in abeyance, except for the redetermination
of the deficiencies, during the continuance and operation of the
stipulation.
Second, all hearings under or in connection with this suit
may be heard before the Hon. Julian W. Mack, at his Chambers in
New York City, or at such place or places in the Northern District
as he may designate.
Third, the Court is to appoint an officer to be known as
the Court Commissioner, with compensation to be fixed by the
Court and paid as part of the costs by A.G. and E. Co. He is
to be entitled to the services of such experts as he may require
to assist him in the performance of his duties, to be selected
by him, with compensation fixed and paid by the Government. The
Court Commissioner and his experts will be entitled under the
stipulation to access to all of the books, records, papers, docu-
ments, and files of the A.G.&E. Co., its subsidiaries, and affil-
iates deemed by such Commissioner to be relevant to the performance
of his duties and under or pursuant to any order or decree of the
Court.
The Court Commissioner is given the right of attendance at
each and every meeting of the board of directors and executive
committees of A.G.&E. Company and A. G. & E. Corporation, save
for meetings held for the sole purpose of considering the tax
litigation, and the privilege, as he may desire, of attending any
and all meetings of the Board of Directors or Executive Committee
of any subsidiary or affiliated corporation.
The defendant corporations and their subsidiaries and affiliates are required to report in writing to the Court Commissioner,
with supporting data and information containing full, true, and
correct information relative thereto, before the consummation thereof any transaction or transactions involving any one of the following things (in summary):
(1) The making, renewal or change in any manner whatsoever
of a service contract or of service contracts. Copies of all such
contracts in existence on the date of the stipulation are to be
filed promptly thereafter with the Court Commissioner.
-3Memorandum to the Secretary.
In re: Draft of Stipulation with Associated
Gas and Electric Company.
(2) Any sale, transfer, assignment, pledge, hypothecation
or other disposition of property otherwise than in the regular
course of business.
(3) The purchase, contract to purchase, or option to purchase, any property out of the regular course of business.
(4) Any increase of indebtedness out of the regular course
of business, whether resulting from borrowing or otherwise.
In elaborating upon the phrase "regular course of business"
and determining what transactions are to be deemed to be included
in the regular course of business, in order to allow the management such freedom of action as is consistent with the security of
the Government's claim, standards are adopted substantially similar
to those contained in the Public Utilities Act of 1935.
(5) Payment of dividends by defendants, except by A.G.& E.
Corporation to A.G.& E. Company, whether in cash, property, scrip
or notes, and payment of bonuses to officers of said companies.
It is believed the above categories include all the important transactions affecting the assets which represent the
security for the ultimate collection of the tax liability.
The stipulation gives the Court Commissioner a minimum of
seven days (exclusive of Saturdays, Sundays, and holidays) in
which to study the proposal and such additional time in any specific
instance as the Court may allow. Copies of the notices are also
required to be served upon counsel of record for the Government.
If either the Court Commissioner or counsel notify counsel of
record for the defendants that there is an objection to the proposed transaction, it cannot be consumated save upon order of
the Court after a hearing upon the matter.
The final portion of the stipulation provides a procedure
whereby the A.G & E. Company or its subsidiaries and affiliates
may, upon application, procure releases of particular assets from
the tax lien, subject to compliance with the provisions of Section
3186 of the Revised Statutes, as amended by Section 613 of the
Revenue Act of 1928, and of the provisions of Treasury Decision
4278 relating to the release of Federal tax liens, or the provisions
of any laws or regulations hereinafter enacted or promulgating permitting such release. The statutory limitations amply safeguard
29
--
30
Memorandum to the Secretary.
In re: Draft of Stipulation with Associated
Gas and Electric Company.
the security of the tax liens. At the same time the procedure proposed
will allow some leeway for refinancing of existing bond issues at lower
interest rates and for obtaining on advantageous terms new capital needed for the legitimate needs of the enterprise. Properly controlled as
it will be under the machinery set up by the stipulation, such financing
will increase rather than impair the value of the corporate assets to
which we must ultimately look for payment of the tax liability.
The stipulation also provides that the Collector of Internal
Revenue shall not resort to distraint or sale under the liens of the
jeopardy assessments described therein during the term of such stip-
ulation, and that liabilities arising from jeopardy assessments for
future years, if such be made, may be brought under and within its
terms by mutual agreement (in writing) of the parties.
The stipulation is to remain in force and effect for sixty
(60) days after the order (or decree) redetermining the tax becomes
final, unless further extended by agreement of the parties. In the
event of any violation of its provisions, it may be terminated by
the Court upon application by the adverse party on five days' notice
in writing.
The stipulation by its terms applies only to the tax liability
now in controversy and no act done thereunder shall have reference to
any other interest or right of the parties thereto.
have
General Counsel.
31
January 5, 1937
9:30 A.M.
Present:
Mrs. Klotz
Mr. McReynolds
Mr. Upham
Mr. Bell
Mr. Haas
Mr. Taylor
Mr. Gaston
Mr. Oliphant
H.M.Jr:
What I want to ask you people about - the reason
it's this kind of a conference - is this: it's in
connection with the Bell-Upham Bill (laughing).
Bell:
Take my name off it.
Upham:
H.M.Jr:
I'm glad you put his name first.
It has to do with the putting up of Government
bonds as collateral for Federal Reserve notes.
There was a general misunderstanding all along
the line, but unfortunately I gave my word to not unfortunately - I mean I gave my word to
Senator Glass that I wouldn't sponsor any banking legislation without first coming to see him,
and on the Hill I think one's word is the most
important thing. I've got to straighten myself
out somehow or other, and the thought that I had
this morning was that the only way I know would
be for me to go and see Glass and tell him how
this thing happened and then ask him how he feels
about it.
Then - this is what I wanted your advice - then
if he says, "I'm absolutely opposed to this thing,"
I'11 say, "I'll tell the White House and it's up
to Eccles to carry his own battle." I mean I'm
asking in here for advice, I'm not asking about let's put a question: Does anybody think I shouldn't
go to Senator Glass under these circumstances?
Bell:
I do not.
H.M.Jr:
What?
Bell:
I do not.
32
-2Oliphant: I very much think you should.
H.M.Jr:
All right. Huh? All right, then. I'll go to
Senator Glass.
Now, I asked Mr. Eccles whether he didn't want to
come with me and he said he would but he'd rather
not.
Oliphant:
He doesn't want to?
H.M.Jr:
He says he will but he'd much rather not. And
after thinking it over I think it's just as well
that he doesn't.
Oliphant:
Well, that's playing ball with him. You asked
H.M.Jr:
Yes, I've asked him. He'd rather not go, but he
didn't say he wouldn't. But should I ask him
him.
to go with me?
Oliphant:
You mean insist on his going?
H.M.Jr:
oh yes, if I insist he will go. I mean I lay -
you may wonder why I lay such stress on this thing.
My word is at stake, which is of enough importance
to spend a half day on, or a half an hour. And I
don't blame anybody. I mean everybody's motives
connected with it were perfectly honorable. I
mean it was just one of these things where we
moved a little too fast, that's all - under too
much pressure.
Taylor:
Why didn't Marriner want to go with you?
H.M.Jr:
Well - I mean I - Marriner said, "You could tell
Senator Glass that this is something that the
White House wants." So I said, "Well, Marriner,
how can I say that when, if I remember correctly,
all that Bell said was 'Here is something that
the Federal Reserve wants'?" I can't even remem-
Bell:
ber if you told the President what it was, do
you (to Bell)?
Yes, I told him what it was.
33
-3H.M.Jr:
Well then, Bell did, and the President - I mean
he was just waiting for his lunch, and the
President said yes; he didn't ask - but if the
President had any thoughts he would say, "Well,
there was Bell and Morgenthau saying this is
what the Federal Reserve wants," and he takes it
for granted that this is something Bell and
Morgenthau are recommending.
And so Eccles said, "Well, you can tell them this
is what the White House wants, because I know
if I could get to see the President he'd be for
it." That was exactly his language.
Gaston:
Really you are asked to do this because of Glass's
H.M.Jr:
Pardon me?
Gaston:
I say really you are asked to do this, to carry
the ball, because of Glass's feeling about Eccles.
No, I - I find myself in that situation, but then but maybe I'd better tell you the whole story.
It is very simple. I mean it's one of these
H.M.Jr:
antagonism to Eccles.
"comedies of errors."
Cy had a conversation yesterday with Eccles and
tells Eccles that there are these five different
items in the bill - you stop me if I'm not telling
it correctly - and Cy, as secretary of this banking
committee, has all the legislation. And the legislation is divided into two parts: general legisla-
tion and then this one item which is something which
expires March 3 and which there is a hurry about.
So he calls up Eccles, as secretary of this banking
committee, and tells Eccles, "Do you know that this
stuff is going to go in as hurry-up stuff?" And
Eccles says no, and I take it Eccles says, "Well,
for heaven's sakes get my stuff in."
Whereupon Cy writes me a memorandum. I'm too busy
to be seen, and therefore he says to Bell, "As you
go over to the White House, will you bring this to
the Secretary's attention. Also tell the Secretary
that Upham thinks that Glass will be opposed to
this."
34
4-
Bell and I walk over and tell each other a
lot of silly jokes on the way over to the White
House and Bell doesn't think of this. As the
dinner is coming in and Bell is about - is standing on his feet, he says, "Oh, by the way, Mr.
President, here is this memorandum from the
Federal Reserve," and the President says, "All
right, all right, put it in." I mean that's the
way the thing happened.
And so - I mean then the more I thought of it and Upham didn't know that I had given my word
to Glass that I wouldn't stand for any banking
legislation unless I first came in and told him
about it, see? Upham didn't know that.
And then I got a letter subsequently to that from
Glass asking me to have the banking committee,
heads of agencies, pass a resolution in which they
said they didn't want any more legislation. Well,
I never answered that, but I did receive that letter,
which in a sense was a confirmation of my tele- - of
my conversation with Glass. You see?
So - I mean I'm absolutely on the spot and - I mean
I've been around this town and I know you just can't
break your word with anybody, and the last person
in the world I want to break my word with is Glass.
Oliphant:
H.M.Jr:
Oliphant:
H.M.Jr:
My conclusion is that it will make for peace and
harmony if Eccles doesn't go. You'll have a pleasant talk with him. If Eccles goes, the chances
are Glass will be pretty scrappy.
Well, personally I'd get along much better if I
went alone, but I should think Eccles would want
to be there.
Yes, but you asked him and he doesn't want to go.
And I know what Glass is going to do. He's going
to sit back and spend the time criticizing Eccles,
why didn't Eccles come to him, which is what Eccles
should do of course. But I've asked Eccles. But
I've got a New england conscience, living in the
foothills of the Berkshires, and I think it's so
silly that Eccles doesn't want to go with me.
35
-5So you people think I should just go over there?
Bell:
H.M.Jr:
Did you promise Senator Glass as head of the
Treasury or as chairman of this banking committee?
As chairman of this committee.
Bell:
Oh.
H.M.Jr:
Oh well, I really don't know, Dan. I did - I did
Bell:
Well, if you did it as banking legislation sponsored by the Treasury, I don't think you necessarily owe any duty to Senator Glass. But I
it as Henry Morgenthau, Junior.
realize what might develop as a result of Senator
Glass going to the White House and asking the
President about it.
H.M.Jr:
And he will say, "Henry Morgenthau and Bell
brought it here and recommended it." And the
Bell:
President will say, "But I don't remember it oh, do I - oh yes, Bell and Morgenthau brought
that thing over to me."
That's right; that's the way.
H.M.Jr:
What?
Taylor:
I think Marriner ought to go with you.
H.M.Jr:
(Laughing) You do want me punished, don't you?
Oliphant:
You think he ought to want to go, or ought to go?
Taylor:
I think he ought to go.
That's a question of what you want. If you don't
want the legislation, take Marriner along.
No, I think that this particular thing is one
that you can use to help out that situation,
because I think Glass - I disagree with Cy, I
Gaston:
Taylor:
think that Glass will want it and that it is a
very good, useful time to go down there with
Marriner because it is something that Glass will
want, and that he ought to go down there anyhow.
36
-6-
Taylor:
What makes you think Glass will want it?
Because he originally supported it.
Bell:
Only in an emergency.
Taylor:
But the situation is still the same.
H.M.Jr:
Well, Eccles has shifted, I don't know whether
because - did you get him to shift his position
(to Upham), to take it either for one year or
two years? He's given up the idea of wanting
it permanently.
Yes, he's given up the idea of wanting it
Bell:
Upham:
Oliphant:
Taylor:
Oliphant:
H.M.Jr:
permanently.
My impression is that Glass sponsored it as
emergency legislation and has expressed himself
as opposed to it as a permanent thing. That's
my impression. I couldn't put my hand on the
document, on the newspaper, or on the speech,
or what it was.
I'm not so sure.
I say that's my impression.
(To Kieley) Would you mind calling up Senator
Glass for me and telling him that I'd like to see
him between 10:30 and 11. Would he like me to
come to his apartment or would he come here, between 10:30 and 11? What time is convenient, I'll
come to see him, or would he care to come and see
me? You know he's changed, Kieley; I heard he's
moved to the Mayflower.
I tell you perfectly frank, I've made the - the
thing I thought Marriner would say, Marriner having
not said, in my old age I'm not the glutton for
punishment that I used to be. I think I'd rather
go and see Glass alone, explain to him what's
happened. He may say, "Morgenthau, O.K., that's
all right; let her ride." Or he may say, "I'm
opposed." And if he says, "Well, I'm opposed," then
I'm going to say, "Well, if you don't mind, I'm
37
7-
going to report this conversation both to the
White House and to Marriner Eccles," and let
Marriner come and explain it. Why should I
get excited about it? That I am going to report
to the White House and it is up to Eccles to
sell it to the White House and to Glass.
Upham:
Now we've still got 15 minutes. What's the matter?
It has to be sent before the third of March to the
H.M.Jr:
What's the matter with this?
Upham:
It's all right.
H.M.Jr:
President.
I mean why should I go and be in the midst of a
fight between Glass and Eccles? What? I mean
take enough around this town without getting into
that situation. I mean again what I said to you
men for three - for the two weeks that Eccles wore
me down. The reason that I'm so sock - I mean not
sick, why I am so played down - it is entirely due
to Eccles; he wore me down so with his darn gold
sterilization, he just wore me out. I'm no good at
these talk fests on these things.
I
Now, all through that I kept saying - because Taylor
took a somewhat different attitude, I kept saying to
Taylor, "If the country's good is at stake at any
time, I'll cut this out." You men remember I said
that to you repeatedly. "But," I said, "in the meantime we might just as well see this fight through for
future relationships between the Treasury and the
Federal Reserve." But I said, "At any time that the
country's good is at stake, we'll cut this out." I
said that to you (Taylor) two or three times, didn't
I? I feel the same way about this. I mean if the
economic welfare of this country would suffer by my
not taking Eccles with me or letting Eccles go alone,
I'd say, "Well, I'll take the personal punishment and
do it." But if this thing isn't extended on the third
of March, the country will go on just the same. Let
him go ahead and get the thing.
Upham:
I think I ought to tell you that the Comptroller
called me this morning and wanted to see the
38
-8language of the Eccles proposal.
H.M.Jr:
That's all right. He's entitled to see it.
What I did was I told Cy to call up the various
members of this banking committee and tell them
there was a piece of banking legislation.
Upham:
Bell:
H.M.Jr:
Haven't got Jesse Jones yet.
He's out of town.
Let me - do you think - I mean let's see what
he says. Do you think I should again say,
"Marriner, you ought to go with me when I see
him"? All I'm - what I'm going to see him
about - I'm not going to see him about this
legislation. I'm going to see him about my
word of honor.
Bell:
You're not sponsoring it.
Haas:
You're just clearing yourself.
H.M.Jr:
What?
Haas:
You're just clearing yourself.
Upham:
You haven't sponsored it.
H.M.Jr:
I don't think so.
But immediately after this, Wayne, I come back
and tell Eccles what's happened, then let Eccles
carry the ball. What?
Taylor:
O.K.
H.M.Jr:
AS a matter of fact, I remember I told Eccles
whatever I decided to do I'd call him up; so,
Taylor:
whatever I do, I'll call him up.
You've got my one point there; that is, here I
H.M.Jr:
I think that's all right, but let Eccles carry
think would be a good thing for the general
situation, something that you can win on.
it with the President and with Glass and the
rest of them. Huh?
(On phone) Chairman Eccles, please.
(Conversation
follows:)
39
January 5, 1937
9:48 A.M.
H.M.Jr:
This letting you put up Government bonds, you know, -
Eccles:
Yes
.M.Jr:
- as collateral. Now, if - if he says he's absolutely
opposed to it, see, then I'll let you know.
Yes
E:
E:
And I think the rest is up to you to carry the ball.
Now,
is that - is that agreeable to you? I mean I if he asks me Well, I don't think there's anything more you can do.
H.M.Jr:
Well, that's all - if he asks me do I favor it, -
E:
Yes
H.M.Jr:
- I'll say yes.
H.M.Jr:
H.M.Jr:
Well, don't you think too that if you tell him that
the President wants it 1 - I can't do that, Marriner.
E:
You can't?
E:
H.M.Jr:
No, because the President - if Glass would go to
see the President, we've talked it over here - Glass
would simply - the President would simply say, "I
don't know anything about this." He'll say, "Morgenthau and Bell walked over and said there's something that Eccles wants." He says, "I don't know
anything about it." And I don't want - I don't want
E:
to - I don't want to - ah Well, had I better try to see the President on it?
H.M.Jr:
An - if Glass objects, see?
H.M.Jr:
If he objects, then I'd better see the President.
I think so.
E:
I - I - if it shouldn't get in, it's -
H.M.Jr:
Well, I - I - I've asked to see him between 10:30 and
E:
11 and he won't answer - he hasn't answered the phone
40
-2yet. So, in other words, I'm seeing him the first
thing after he's had his coffee. I want him to
have his coffee.
You know, I guess he's not feeling very good, is he?
E:
H.M.Jr:
I don't know. But I want to know if this is entirely
E:
Well, I don't see that you can do anything else.
agreeable to you.
E:
All right.
What I would like you to - to say is that - don't -
H.M.Jr:
O.K.
E:
Because that - I think that might have more influence
H.M.Jr:
don't say Eccles, say the entire Reserve Board.
H.M.Jr:
E:
with him.
It's all right with me.
And they - they - we'd like it for the - like it for
the same time that the Stabilization Fund is being
extended, because -
H.M.Jr:
E:
That's - I understand - and you still understand that
if you want to go with me -
Well, I'll be - I'd - I'd be - just as soon go with
you; the only - the only point is I'm just wondering
if - if he turns you down on it, then I've got an
opportunity to follow the thing up, where if we both
go together, why, there's no - there's no comeback.
H.M.Jr:
All right.
E:
You see what I mean?
H.M.Jr:
Well -
E:
Now, what do you think?
H.M.Jr:
E:
H.M.Jr:
Well - ah I think you might get along better with him alone.
He just doesn't like me and I - I mean I -
All right.
41
-3Huh? You've gotten along with him pretty well.
E:
H.M.Jr:
Yes
H.M.Jr:
And I think you might - if - if you - if you say
for it, and then if he - if he demurs on it, simply
- simply say, "Well, I'll have to I'll tell him I'll report this to Eccles and to
E:
Yes
H.M.Jr:
And then -
E:
you think it's necessary and you - and you press
the White House, that's all.
Let him know that the reason I didn't get in touch
with him on it - I don't want him to think that I'm
trying to put something over on him, you see? -
E:
H.M.Jr:
Yes
E:
- is that - that I expected to later on -
H.M.Jr:
Yes
E:
- but that inasmuch as the President wanted all of
these emergency items in one bill, it's the reason
it came up now.
H.M.Jr:
Yes
E:
I think that's important, because otherwise he'll
think maybe I'm trying to evade him again.
H.M.Jr:
Yes
E:
And if he knows that - expected to see him later
H.M.Jr:
Yes
E:
H.M.Jr:
on -
- about this matter, but the President wanted them
all in one bill, I think that would - that would get
me off of a limb.
Well, I'm going over there to get myself off a limb.
42
-4-
H.M.Jr:
Well, get - don't put me on at the same time (laughing).
No, no, no - but I'm going over there to tell him how
E:
Yes
H.M.Jr:
Exactly how it happened. I'm just going over to
square it with him - that I gave him my word - and
exactly how this thing happened. And I'm going to
tell him that - that if it's - if he has any objections, that I'm simply going to withdraw my support
and it's up to you to sell it to him and to the
E:
this thing happened, see?
White House.
E:
Yes, but - but don't you think that it's - that you
could say to him that I expected to take it up with
him later on.
H.M.Jr:
E:
H.M.Jr:
E:
I'm going to tell him I talked to you and I - and
that after I leave there I'm going to report my
conversation to - with him to you, and that you'll
get in touch with him.
Yes. Yes. If he - if he - if he wants to discuss
it, and the only reason I haven't taken it up with
him now is because it happened to come up here yesterday for the first time No, but you can tell him.
- in connection with going in with this other emer-
gency legislation.
H.M.Jr:
I'll tell him as soon as I get back I'm going to
report my conversation with him to you, and then
that - then it's your legislation and I take it you'll
E:
get in touch with him.
If the old cuss will see me.
H.M.Jr:
Oh, he'll see you.
E:
Well, I -
H.M.Jr:
E:
And I think - I really think you should see him then.
Yes. Yes. I'll see him, but I want - but inasmuch as
43
-5 this bill is up immediately and it's an emergency
item, and it's to go in your bill, that you felt
you should see him in any case.
H.M.Jr:
E:
It's not my bill.
Well, but what I mean is it's in the Stabili- - it
goes in the same - this bill that the Stabilization
Fund does.
H.M.Jr:
E:
No, no. No, it - It's - it's - no, I mean any
more than the Export-Import. It's just the things
which - which are going to Well, it's the thing you talked to him about then,
isn't it?
E:
I never - oh, yes - I mean I talked to him about two
things. I told him I was only interested in two
things. That's where this whole thing
Stabilization and devaluation, and that's all.
Yes, but - and - and they're all being put in one
H.M.Jr:
Yep.
H.M.Jr:
bill.
H.M.Jr:
And that's why you want to take it up with him.
That's right.
E:
So that to the - to that extent it is your bill
H.M.Jr:
The President's bill, let's call it that.
E:
Huh?
E:
H.M.Jr:
E:
that we're tying onto, then.
The President's bill, let's call it that.
All right, the President's bill, and he's just tying
all this stuff in together.
H.M.Jr:
Yes
E:
And that it - I don't want Glass to think that I'm
evading him, and if he -
44
-6H.M.Jr:
E:
Well, he can't think it if you don't.
No. Well, I don't know. Sometimes a fellow
thinks what isn't true. He's thought that before.
H.M.Jr:
Yes
E:
But - but if you tell him that this bill is just this particular -
H.M.Jr:
Marriner, I'm going to tell him just what happened
yesterday morning - no more, no less - exactly
what happened, see? Hello?
E:
Yes
H.M.Jr:
From the time that Upham began until he gave it
to Bell until we saw the President, and - and until
I came out of the White House yesterday afternoon.
I'm going to tell him exactly what happened.
E:
Yes. Well, that - that -
E:
Because the truth is the easiest story. And I'm
going to tell him exactly what happened and how
1 found myself in this position, and that - that that the first thing this morning I've asked to
see him to explain it to him.
Well now, let's see, what position will that put me
H.M.Jr:
Pardon me?
E:
What position would that put me in with him? Would
H.M.Jr:
in with him?
he think I was trying to - to rush this in without
seeing him then?
H.M.Jr:
I don't know.
H.M.Jr:
Maybe I'd better let the damn thing go.
I don't know.
E:
If -
E:
H.M.Jr:
I don't know what your relationships are with him or
what you told him about banking lately, but I -
45
-7-
E:
H.M.Jr:
I haven't seen him.
- but I know what mine are. I gave him my word that
I'd not advocate any banking legislation without first
talking to him. Now, this thing happened yesterday
morning and I've got to explain it. Now, he'll most
likely wonder - I don't know; I don't know what he'll
wonder. Why you didn't see him or what - I don't know.
But I told you before I go over I'd talk to you.
E:
H.M.Jr:
E:
H.M.Jr:
les. Well If you want to think it over and call me back between
now and 10:30?
What - what time is he - is he I've asked to see him between 10:30 and 11, but he
hasn't answered his phone yet.
E:
Well, all right, then. Let me say - I may go over
H.M.Jr:
All right.
E:
with you.
I think maybe - then he won't - what I'm afraid of
is he - he's such a touchy old fellow, he may think
I'm trying to evade him, and trying to slip something
in here without taking it up with him, see?
H.M.Jr:
Well, you - you think it over and -
E:
I'll call you at 10:30.
H.M.Jr:
Right.
E:
All right, then.
H.M.Jr:
Thank you.
46
-9H.M.Jr:
I'm not going to tell Marriner what to do. I think
he's all wrong, don't you think so? I mean I'm
not going to tell Senator Glass that Marriner is
coming around some time to see him and explain this.
Tay lor:
He's in process of going with you now.
H.M.Jr:
All right. I mean my policy here is to be direct,
to the point, and - but I can't - I can't change
Marriner Eccles from doing business the way he
wants to do business.
Oliphant:
It's awfully funny when you talk about changing
Marriner Eccles.
H.M.Jr:
What?
Oliphant:
I say it's awfully funny, your talking about
H.M.Jr:
I did it in two weeks.
changing Marriner Eccles.
McReynolds: I'm afraid you've lost. I'm afraid Marriner's going
with you, that's all.
H.M. Jr:
If I was in Marriner Eccles' place - "Why, Henry,
you can't go there without me. Of course I'm going
with you. This is my legislation. If Glass has
got any questions I want to be there to answer
them."
Gaston:
Yes, from his standpoint he certainly ought to go
Oliphant:
He ought to want to go. That's what 1 say. He
ought to want to go, but if he doesn't want to go Well, he's got half an hour. He can call in
Elliot Thurston and he can talk it over for half
H.M.Jr:
with you.
an hour and he can decide.
Taylor:
A dime even money he goes with you.
H.M.Jr:
What?
Taylor:
A dime even money he goes with you.
McReynolds: I'll bet two bits to a dime that he'll go.
47
At a meeting on January 5, 1937, in which the main topic of discussion was legislation continuing the Federal Reserve's power
to use Government bonds as collateral for Federal Reserve notes,
Mr. Haas advised the Secretary of Mr. McLeod's impending resignation, as follows:
H.M.Jr:
Now, anybody got anything that they want to say?
Haas:
I have one thing.
H.M.Jr:
Go ahead, George.
Haas:
McLeod is resigning effective the end of this month.
McReynolds: No, not McLeod? What's he going to do?
Haas:
Going in business for himself.
Prepared by:
Lawrence H. Seltzer
48
Assistant Director of
AM
Research and Statistics
INTER OFFICE COMMUNICATION
DATEJanuary 5. 1937
Secretary Morgenthau
TO
FROM
Mr. Haas DA
Subject: Automobile Labor Developments
Mr. Seltzer reports the following information obtained in
Detroit:
1. The shut-downs of the plants of Pittsburgh Plate Glass and
Libbey-Owene-Ford Glass Companies, effected by the strike of the CIO
union of glass workers, would, by themselves, be sufficient to tie up
the automobile industry in a few weeks' time, because of the shortage
of glass for windshields and bodies. When the glass company manage-
ments continued to delay negotiations with union representatives, the
tie-up of the whole automobile industry became imminent.
2. In this situation, the CIO leaders were confronted with the
possibility of alienating the sympathy and support of automobile
workers who would be laid off as a result of the glass strike; and
whose involuntary lay-off would promise them no gains for themselves.
Hence, union strategy called for strikes in the automobile industry
proper, as well as in the glass field, in order that the workers in
the automobile industry as a whole might have a common cause.
3. The General Motors Corporation was chosen as the principal
antagonist both because of its preeminence and because the practical
chances of success appeared promising. The Ford Motor Company is a
much more close-knit organization, in which one out of every five of
the enormous Rouge Plant employees is supposed to be a member of the
company's secret service. The Ford Motor Company, moreover, is
regarded as more hardboiled in its anti-union views. An effective
strike at the Briggs and Murray Body Plants, however, as well as the
continuance of glass shut-downs, would also tie up Ford production.
4. Chrysler, Hudson, Studebaker, and other smaller automobile
manufacturers will likewise be forced to suspend final assemblies if
the glass and General Motors shut-downs continue, because, even apart
from glass, these makers are dependent in part upon components produced by General Motors plants.
49
Secretary Morgenthau - 1/5/37 - 2
5. A prolonged tie-up of the automobile industry would, without doubt, seriously affect the volume of business activity, and, if
the strikers are to be cared for, the volume of relief and work
relief requirements.
6. The apparent vagueness of the issues in controversy between
the General Motors Corporation and the automobile unions is due to
the fact that the present and prospective strikes are organizational
strikes - that is, strikes undertaken primarily to organize and
build up effective and recognized labor unions in the automobile
industry. Organizational strikes are commonly the most difficult to
arbitrate, because they involve differences of principle. Quantita-
tive differences between employers and workers are more easily suscep-
tible of arbitration and compromise precisely because the differences
are quantitative. In fact, the art of successful arbitration in labor
disputes, as indeed in most other kinds of disputes, is to transform
qualitative issues -- that is, differences of principle - into quantitative issues such as higher wage rates, lesser working hours, et
cetera.
7. The actual and pending strikes against the General Motors
Corporation have developed so quickly that the General Motors offi-
cials had not had time to formulate a definite policy as recently as
last week; though Mr. Sloan's published statement in this morning's
newspapers indicates that a tentative policy, mainly negative, has
since been adopted.
8. The current demand for automobiles is exceedingly strong.
Conversations with several General Motors dealers in Chicago and
Detroit, and their reports of country dealers in their districts,
indicate that retail sales are being made currently of every car
which these dealers can obtain from the factories.
50
January 5, 1937
The Secretary today asked Mr. Gibbons to have a report
by next Monday in regard to inspectors taking bribes on the
docks.
January 5, 1937.
51
Mr. Eccles, Mr. Ransom, Mr. Taylor and Mr. Upham had lunch
with the Secretary at 1 o'clock.
Mr. Morgenthau and Mr. Eccles discussed their visit earlier
in the day with Senator Glass with respect to including in the bill
to extend the Stabilization Fund an extension of the authority under
which the Federal Reserve banks use government securities as collateral
for Federal Reserve notes.
Mr. Morgenthau said that Senator Glass had told him that he
(H.M.Jr.) need not worry about getting in bad with the Senator.
Senator Glass agreed that the extension desired by Mr. Eccles
might be included in the bill. After the bill reached the Hill
he said he and Mr. Eccles would have a discussion on the matter.
Mr. Eccles said t hat there might easily have been an argument
between him and Senator Glass had it not been for the Secretary's
suggestion that it was time to go back to the office.
Mr. Morgenthau commented on the fact that the ticker reported
his visit to Senator Glass but it did not mention Mr. Eccles and
concluded from that that Senator Glass had told the newspaper men
before his arrival that he was coming, not then knowing that Mr.
Eccles was to accompany him.
There was some discussion of excess reserves, Mr. Eccles
reporting that the Reserve System is under considerable pressure
to raise excess reserves.
Mr. Morgenthau thought a good bit of the published comment
was to the effect that further increase at this time was not needed.
In connection with this matter Mr. Eccles referred to his view that
it is necessary to balance the budget promptly.
-2-
52
Mr. Morgenthau told him that as a friend he would make the
suggestion that Mr. Eccles talk less about balancing the budget.
He indicated that he, as Secretary of the Treasury was not free to
say too much about the absolute necessity for the President to
balance the budget. There had been some criticism of Mr. Eccles'
comments.
Mr. Upham referred to an article in last nights New York Post
in which Bob Allen said Liberals in the Administration are protesting
vigorously against Mr. Eccles swinging away from the Liberal group to
the Conservatives.
Mr. Eccles said that he had only spoken publicly on the subject
once -- in Boston -- a month or so ago.
Mr. Morgenthau replied that perhaps it bulked too large in his
mind because he had heard Mr. Eccles say the same thing three times
in the last two days.
Mr. Morgenthau said that no one had tried harder than he had to
achieve a balanced budget but that the final decision and responsi-
bility rested with the President. He said that some cutting might
be done, say for $50 million or $100 million but beyond that it was
almost out of the question.
Mr. Eccles said that his idea all along had been to increase
revenue rather than reduce expenditures.
Mr. Eccles and Mr. Taylor were of the opinion that something
might be done at this session of Congress to mitigate the effects
of the undistributed earnings tax on debt ridden corporations,
especially those with a contractual obligation to reduce debt.
Mr. Morgenthau said that investigation showed that any amendment
-3-
53
to the Act would result in a loss of revenue. He thought the
Treasury should do nothing about the matter until after March 15th
collections are available. He was of the opinion that it would do
no great harm to let things go along as they are for another year.
He thought Pat Harrison would be willing to wait.
Mr. Morgenthau thought that it would be pretty hard on the
Treasury staff to have to carry the ball on another tax bill in
Congress this session.
Reference was made to the fact that Jesse Jones has said a
good many things about amending the undistributed earnings tax and
it was stated that he thought his remarks might gather in "a few
votes".
Mr. Morgenthau said that it is now known that any business man
can come in to the Treasury and sit down and talk over his tax problems and get consideration -- that it is no longer necessary to
hire some "tax fixer" to do it for him. He doesn't even need a lawyer.
Mr. Ransom said that he thought one of the biggest changes in
the last few years had been the greater access which business men
have to Government officials.
Mr. Morgenthau told Mr. Eccles that Mr. Burgess had suggested
that the Reserve System might stay out of the market today and let
the Treasury carry it along since they had funds to invest.
Mr. Morgenthau regarded it as preferable for the partnership
to continue on a steadier basis rather than being effective one day
and ineffective the next.
Mr. Burgess had agreed and Mr. Eccles saidthat settled it.
Mr. Morgenthau told Mr. Eccles jokingly that if he were looking
54
-4for some way to improve the earnings of the Federal Reserve system
he might further extend the activities of the Federal Reserve Board
in the field of taxation to include a tax consultation service for
corporations.
Mr. Eccles reported that Dr. Goldenweiser is preparing a memoran-
dum on the flow of international funds to this country and that later
in the week he understands there is to be a joint meeting of the
Federal Reserve staff with that of the Treasury and the Securities
Exchange Commission.
Mr. Eccles said that he would like to talk about the "John
Fahey dual banking system". He thinks something ought to be done
about the competition between the Federal Savings & Loan Associations
and member banks.
At the close of the luncheon Mr. Morgenthau said he wanted to
tell Mr. Ransom that Mr. Eccles was pressing him to reduce his
weekly offering of bills from one hundred million to fifty million
for a while and let excess reserves increase.
Mr. Ransom said, smilingly, that that was a very difficult
statement for him to understand--that he thought Chairman Eccles
would have to explain that one to the board.
Mr. Morgenthau indicated that he had just about decided to
issue only $50 million instead of $100 million this week and he
commented that the bill rate had been pretty high recently.
C. B. Upham.
55
UNITED STATES DEPARTMENT OF AGRICULTURE
BUREAU OF AGRICULTURAL ECONOMICS
WASHINGTON, D.C.
January 5, 1937.
MEMORANDUM FOR THE SECRETARY
Dear Mr. Secretary:
In Mr. Kitchen's memorandum to you the other day, he
mentioned that Mr. wall was looking into the question of the
transfer of speculative funds from securities to commodities.
I am attaching a memorandum which he has prepared on that sub-
ject.
Very truly yours,
anywark
G. Black
Chief of Bureau.
Enclosure.
56
BUREAU OF AGRICULTURAL ECONOMICS
WASHINGTON D.C.
January 4, 1937
MEMORANDUM
TO: Mr. C. W. Kitchen,
Acting Chief of Bureau.
Dear Mr. Kitchen:
Subject: Speculative activity and the price of wheat.
In accordance with your request for a statement to be used
in connection with the Secretary's inquiry concerning the high
level of wheat prices, I am submitting the following:
No evidence of any appreciable decline
in speculative activity in stocks.
There is no conclusive evidence to show that there has been
a shift in speculative activity from stocks to commodities. While
the daily average volume of stock transactions and the average price
of industrial stocks has not been as high in the 5-week period ending December 23 as in the two weeks following the election, both
series are higher than in the 10-week period prior to election.
The volume of credit extended by reporting member banks for financing security transactions has remained remarkably stable during
this entire period. (See attached table.)
As the stock market rise has been largely on a "cash" basis,
the absence of any change in the amount of credit advanced on
securities cannot be regarded as a very conclusive indicator. The
relatively high level of stock exchange transactions and prices,
however, indicates no decrease in speculative activity in stocks.
It is probable, therefore, that the general rise in spot commodity
prices, including wheat, represents an increase in speculative
activity in addition to that in stocks. The rise in spot commodity
prices appears to be based upon a fairly sound basis: the relative
reduction in stocks of such commodities and the increase in world
purchasing power as indicated by the rising trend of world indus-
trial production.
Basis for Increase in Prices of
Speculative Commodities.
While industrial stock prices were rising from the end of
September to November 10, spot commodity prices (see attached table)
CHART 1.
INDUSTRIAL PRODUCTION OF THE WORLD *
PERCENT
1923 25=100)
130
120
110
COAL STRIKE IN
GREAT BRITAIN
100
90
80
70
STRIKES IN COAL AND COTTON
INDUSTRIES GREAT BRITAIN
60
1920
*
1922
1924
1926
1928
1930
1932
1934
1936
INDUSTRIAL PRODUCTION OF THE WORLD AS REPRESENTED BY 10 SELECTED COUNTRIES
U.S. DEPARTMENT OF AGRICULTURE
NEG. 31325
BUREAU OF AGRICULTURAL ECONOMICS
58
C. W. K.--1/4/37--2.
showed little change except in the last week of this period, the
week immediately following the election. Since the election, each
succeeding week has shown a rise in spot commodity prices while in-
dustrial stock prices have been relatively stable at a slightly
lower level. The rise in spot commodity prices from November 4 to
December 23 amounted to about 11 percent. In the period from
June 10 to August 18 this index registered a rise of slightly more
than 15 percent.
One of the major factors contributing to the rise in prices
of commodities having an international market has been the rise in
world purchasing power as indicated by the rise in world industrial
production. As measured by the industrial production of the 10
leading consuming countries, world industrial output has nearly
reached the levels in 1929. (See chart 1.)
Despite the rapid increase in world industrial output since
1932, prices have been held in check by the heavy accumulation of
world commodity stocks. Stocks of many commodities recently have
shown a material reduction and substantial further reduction, par-
ticularly in world wheat stocks, appear likely. This will tend to
further raise prices of the commodities so affected. Chart 2 shows
the relationship between the ratio of world industrial production
to stocks of 9 international commodities and the index of prices of
the same 9 commodities. While such commodity stocks are not
entirely the causitive factor influencing prices as speculation
can alter prices so as to influence the volume of commodity stocks,
the close relationship shown in the chart tends to emphasize the
importance of the level of commodity stocks as a factor influencing
the level of prices.
Factors Influencing Wheat Prices
As indicated previously the rise in world industrial produc-
tion and the reduction in commodity stocks have been major factors
in raising world commodity prices. In the case of wheat, prices as
measured by Liverpool quotations in terms of dollars, have reflected
the same developments. Chart 3 shows a comparison of the ratio of
the average monthly world wheat supply to world industrial production and the Liverpool price of wheat. The supply of wheat includes,
in addition to the monthly average world visible supply of wheat,
the annual world production of wheat adjusted to a monthly basis.
This series, which was compiled more than a year ago, is a
rough approximation which must be subjected to further study before
definite conclusions may be drawn. Nevertheless, it is suggestive of
the importance of world purchasing power and the relative level of
world wheat stocks upon Liverpool prices.
59
C. W. K.--1/4/37--3.
The importance of changes in national income of important consuming countries was summarized in the preliminary report entitled
"Monthly Index of World Industrial Production, 1920-35", as follows:
"With commodities of an inelastic demand, changes in national
income do not alter appreciably the quantity consumed but the influence of decreased industrial output is exerted upon the amount paid
for such commodities. Thus in the case of wheat a decline in world
industrial production with its consequent influence upon the national
income of leading industrial countries reduces the amount of income
which consumers can use in paying for wheat and its processed forms.
The means by which a relatively stable level of consumption is maintained, is through lower prices to meet the curtailment in consumer
incomes."
Likewise, with an improvement in world industrial production
and wholesale prices. a tendency towards higher prices is exerted
for such a commodity as wheat.
The price developments in this country. as indicated elsewhere,
have largely represented a readjustment to the world price level.
Open commitments, as shown in the attached table, have shown roughly
the same general trend as the volume of stock exchange transactions.
From the beginning of September to the week ending November 10, both
series showed an advancing trend. Since that time both series have
shown a slight decline. Changes in the daily volume of trading in
wheat futures have not shown any appreciable expansion until the
latter part of December and this expansion appears to be a readjustment
to the rise in Liverpool quotations.
In previous years when supplies have been relatively low in the
major exporting countries, prices have tended to be relatively higher
than when the supply has been more evenly distributed. By the end of
the current crop year, supplies in major exporting countries probably
will be reduced to a minimum. With the ever-present possibility of
another short crop in 1937. importers will probably continue to be
active bidders for wheat until the 1937 crop prospects become more
definite. Under these circumstances, the prospective demand-supply
factors point to a continuation for the next few months of a level of
prices at Liverpool not greatly different from that now existing.
Very truly yours,
Norman J. Wall,
Senior Agricultural Economist.
Division of Agricultural Finance.
CHART
Percent
Percent
-120
120
Ratio of World Industrial Production
to Stocks of Nine International Commodities compared with Prices of such
Commodities.
1923-24-25 100%
110
110
Ratio of World Industrial Production to Stocks,
Index of Prices of Fine International
100
100
f 90
90
80
80
70
70
60
60
50
strikes 1s Cost and Cotton
50
Industrian - Great Britain
y40
40
30
30
Division of Agricultural Finance.
June or Agricultural
20
20
1921
1922
1923
1924
1925
1926
1927
1928
1929
1930
1931
1932
1933
1934
1936
1935
-
CHART 111.
Index
Index of World Industrial Production
(World Wheat Prod. exc. Russia
Index of: and China : 12) . Monthly Av:
of World Stocks of Wheat
Price of Wheat (Imported Red
Index of
at Liverpool)
Index of British Wholesale Price
1920 1934 (Crop Year)
(1923-24-25 100)
140
€
120
Federal Tara Board Stabiliantion Operations,
100
80
60
NO
,
- - - of Agricultural Beenweice
Finance
62
January 5, 1937
The Secretary saw Mr. Hall today in connection
with the complaint, presented in person yesterday by
Mr. Ernest and Mr. Murray, of the Printing Pressmen's
Union No. 1, that in the future distilled spirits stamps
are to be engraved rather than printed.
Mr. Graves was present when Mr. Hall saw the
Secretary.
The Secretary instructed Mr. Hall and Mr. Graves
to confer with Mr. Ernest and Mr. Murray and to give
them every opportunity to present their side of the
case, giving the two gentlemen all the time they needed
and being very considerate. At the same time the Secretary told Mr. Hall and Mr. Graves that they must
convince the representatives of the printers why it
was necessary to change to the engraving process. He
also told them he wanted Miss Roche present at the conference.
After this conference, the Secretary said, if
retary, will see them again.
Mr. Ernest and Mr. Murray are not satisfied he, the Sec-
63
OFFICE OF
TREASURY DEPARTMENT
WASHINGTON
THE
SECRETARY
January 6, 1937.
Memorandum of Conversation Between the Undersigned and Mr. Hall
Prior to a Conference with the Secretary on January 5 at About
Noon Regarding the Proposal to Produce "Bottled-in-Bond" Strip
Stamps by Engraving.
Mr. Hall phoned me early in the day to say that the Secretary had
asked him to come in at 11 o'clock to discuss with him objections made
by the interested trade union organization to the Department's plan to
shift the production of "bottled-in-bond" strip stamps from the "off-set"
method now employed to the "engraving" method.
Mr. Hall referred to a conference had in my office some six months
ago, attended by representatives of the Secret Service Division, the
Bureau of Engraving and Printing, and the Bureau of Internal Revenue,
at which the conclusion was tentatively reached to make arrangements
for an improvement in the quality of "bottled-in-bond" strip stamps
in order to lessen the risk of counterfeiting, and stated that it was
apparently this tentative decision which was objected to by the trade
union representatives who had seen the Secretary on behalf of the pressmen's craft.
Mr. Hall further stated that in view of the fact that the decision
referred to was reached with a view to better law enforcement, it would
be advisable in his opinion for me to be present at his conference with
the Secretary.
I suggested to Mr. Hall that it would be well for him to come to
my office shortly before his scheduled conference with the Secretary,
and this was done.
In our conversation, Mr. Hall and I simply reviewed the ground
covered in the earlier conference above referred to, attended by representatives of the interested bureaus, and we agreed that if called upon
we would recommend to the Secretary that the necessity from a lawenforcement point of view of improving the quality of the "bottled-inbond" stamp far outweighed the considerations urged by the Union representatives, since these were based simply upon a relatively small saving
in money which would result by manufacturing these stamps by the off-set
process instead of by engraving.
NOTE.
At our subsequent conference with the Secretary, the Secretary requested that we arrange to have Miss Roche receive the representatives
64
-2-
of the Union, together with Mr. Hall and myself, and consider their
proposition with them.
Miss Roche arranged for a conference at 2:30 to-day (January 6).
The Union representatives, however, later called Miss Roche, requesting
that this conference be postponed until some day next week, in order
that certain officers of the Union not now present in the city might
attend the conference.
HAROLD N. GRAVES
65
January 5, 1937
9:30 A.M.
While
sation: waiting to speak to Chairman Eccles, the following converH.M.Jr:
Now, I spoke to George Harrison yesterday and he's
sending Knoke and one other man down to get this
thing, this difference about how the Bank handled
their contacts with the Swiss Central Bank; there's
some misunderstanding some way or other on it.
Oliphant:
Oliphant:
He'll probably be down today or tomorrow, won't he?
Yes, and he's sending down a couple of fellows to
iron this out - I mean the first time we have ever
approached having any difference.
Taylor and Lochhead talk to him?
H.M.Jr:
Yes, that's what I think.
H.M.Jr:
66
January 5, 1937
9:48 A.M.
H.M.Jr:
This letting you put up Government bonds, you know, -
Eccles:
Yes
H.M.Jr:
- as collateral. Now, if - if he says he's absolutely
opposed to it, see, then I'll let you know.
E:
Yes
H.M.Jr:
And I think the rest is up to you to carry the ball.
Now, is that - is that agreeable to you? I mean I if he asks me -
E:
Well, I don't think there's anything more you can do.
H.M.Jr:
Well, that's all - if he asks me do I favor it, -
E:
Yes
H.M.Jr:
- I'll say yes.
Well, don't you think too that if you tell him that
E:
the President wants it -
H.M.Jr:
I - I can't do that, Marriner.
E:
You can't?
H.M.Jr:
No, because the President - if Glass would go to
see the President, we've talked it over here - Glass
would simply - the President would simply say, "I
don't know anything about this." He'll say, Morgenthau and Bell walked over and said there's something that Eccles wants." He says, "I don't know
anything about it." And I don't want - I don't want
to - I don't want to - ah -
E:
H.M.Jr:
E:
H.M.Jr:
Well, had I better try to see the President on it?
Ah - if Glass objects, see?
If he objects, then I'd better see the President.
I think so.
E:
I - I - if it shouldn't get in, it's -
H.M.Jr:
Well, I - I - I've asked to see him between 10:30 and
11 and he won't answer - he hasn't answered the phone
L
67
-2-
yet. So, in other words, I'm seeing him the first
thing after he's had his coffee. I want him to
have his coffee.
E:
You know, I guess he's not feeling very good, is he?
H.M.Jr:
I don't know. But I want to know if this is entirely
E:
Well, I don't see that you can do anything else.
H.M.Jr:
All right.
What I would like you to - to say is that - don't -
E:
agreeable to you.
don't say Eccles, say the entire Reserve Board.
H.M.Jr:
O.K.
E:
Because that - I think that might have more influence
H.M.Jr:
E:
with him.
It's all right with me.
And they - they - we'd like it for the - like it for
the same time that the Stabilization Fund is being.
extended, because H.M.Jr:
E:
That's - I understand - and you still understand that
if you want to go with me -
Well, I'll be - I'd - I'd be - just as soon go with
you; the only - the only point is I'm just wondering
if - if he turns you down on it, then I've got an
opportunity to follow the thing up, where if we both
go together, why, there's no - there's no comeback.
H.M.Jr:
All right.
E:
You see what I mean?
H.M.Jr:
Well -
E:
Now, what do you think?
H.M.Jr:
Well - ah -
E:
H.M.Jr:
I think you might get along better with him alone.
He just doesn't like me and I - I mean I -
All right.
68
-3E:
Huh? You've gotten along with him pretty well.
H.M.Jr:
Yes
H.M.Jr:
And I think you might - if - if you - if you say
you think it's necessary and you - and you press
for it, and then if he - if he demurs on it, simply
- simply say, "Well, I'll have to I'll tell him I'll report this to Eccles and to
E:
Yes
H.M.Jr:
And then -
E:
E:
the White House, that's all.
Let him know that the reason I didn't get in touch
trying to put something over on him, you see? -
with him on it - I don't want him to think that I'm
H.M.Jr:
Yes
E:
- is that - that I expected to later on -
H.M.Jr:
Yes
E:
- but that inasmuch as the President wanted all of
these emergency items in one bill, it's the reason
it came up now.
H.M.Jr:
Yes
E:
I think that's important, because otherwise he'll
think maybe I'm trying to evade him again.
H.M.Jr:
Yes
E:
And if he knows that I expected to see him later
on -
H.M.Jr:
E:
H.M.Jr:
Yes
- about this matter, but the President wanted them
all in one bill, I think that would - that would get
me off of a limb.
Well, I'm going over there to get myself off a limb.
69
-4-
H.M.Jr:
Well, get - don't put me on at the same time (laughing).
No, no, no - but I'm going over there to tell him how
E:
Yes
E:
H.M.Jr:
this thing happened, see?
Exactly how it happened. I'm just going over to
square it with him - that I gave him my word - and
exactly how this thing happened. And I'm going to
tell him that - that if it's - if he has any objections, that I'm simply going to withdraw my support
and it's up to you to sell it to him and to the
White House.
E:
Yes, but - but don't you think that it's - that you
could say to him that I expected to take it up with
him later on.
H.M.Jr:
I'm going to tell him I talked to you and I - and
that after I leave there I'm going to report my
conversation to - with him to you, and that you'll
get in touch with him.
E:
H.M.Jr:
E:
H.M.Jr:
Yes. Yes. If he - if he - if he wants to discuss
it, and the only reason I haven't taken it up with
him now is because it happened to come up here yesterday for the first time No, but you can tell him.
- in connection with going in with this other emergency legislation.
I'll tell him as soon as I get back I'm going to
report my conversation with him to you, and then
that - then it's your legislation and I take it you'll
get in touch with him.
E:
If the old cuss will see me.
H.M.Jr:
Oh, he'll see you.
E:
Well, I -
H.M.Jr:
E:
And I think - I really think you should see him then.
Yes. Yes. I'll see him, but I want - but inasmuch as
70
-5this bill is up immediately and it's an emergency
item, and it's to go in your bill, that you felt
you should see him in any case.
H.M.Jr:
E:
It's not my bill.
Well, but what I mean is it's in the Stabili- - it
goes in the same - this bill that the Stabilization
Fund does.
H.M.Jr:
No, no. No, it - It's - it's - no, I mean any
more than the Export-Import. It's just the things
which - which are going to -
E:
H.M.Jr:
E:
Well, it's the thing you talked to him about then,
isn't it?
I never - on, yes - I mean I talked to him about two
things. I told him I was only interested in two
things. That's where this whole thing
Stabilization and devaluation, and that's all.
Yes, but - and - and they're all being put in one
bill.
H.M.Jr:
Yep.
E:
And that's why you want to take it up with him.
H.M.Jr:
That's right.
E:
So that to the - to that extent it is your bill
H.M.Jr:
The President's bill, let's call it that.
E:
Huh?
H.M.Jr:
The President's bill, let's call it that.
All right, the President's bill, and he's just tying
all this stuff in together.
E:
that we're tying onto, then.
H.M.Jr:
Yes
E:
And that it - I don't want Glass to think that I'm
evading him, and if he -
71
-6H.M.Jr:
Well, he can't think it if you don't.
E:
No. Well, I don't know. Sometimes a fellow
thinks what isn't true. He's thought that before.
H.M.Jr:
E:
H.M.Jr:
Yes
But
- but if you
this particular
- tell him that this bill is just Marriner, I'm going to tell him just what happened
yesterday morning - no more, no less - exactly
what happened, see? Hello?
E:
Yes
H.M.Jr:
From the time that Upham began until he gave it
to Bell until we saw the President, and - and until
I came out of the White House yesterday afternoon.
I'm going to tell him exactly what happened.
E:
H.M.Jr:
E:
Yes. Well, that - that Because the truth is the easiest story. And I'm
going to tell him exactly what happened and how
I found myself in this position, and that - that that the first thing this morning I've asked to
see him to explain it to him.
Well
now, let's see, what position will that put me
in with him?
H.M.Jr:
Pardon me?
E:
What position would that put me in with him? Would
he think I was trying to - to rush this in without
seeing him then?
H.M.Jr:
I don't know.
H.M.Jr:
Maybe I'd better let the damn thing go.
I don't know.
E:
If -
E:
H.M.Jr.
I don't know what your relationships are with him or
what you told him about banking lately, but I -
72
7E:
H.M.Jr:
I haven't seen him.
- but I know what mine are. I gave him my word that
E:
I'd not advocate any banking legislation without first
talking to him. Now, this thing happened yesterday
morning and I've got to explain it. Now, he'll most
likely wonder - I don't know; I don't know what he'11
wonder. Why you didn't see him or what - I don't know.
Yes. Well -
H.M.Jr:
If you want to think it over and call me back between
E:
What - what time is he - is he -
H.M.Jr:
E:
now and 10:30?
I've asked to see him between 10:30 and 11, but he
hasn't answered his phone yet.
Well, all right, then. Let me say - I may go over
with you.
H.M.Jr:
E:
H.M.Jr:
E:
All right.
I think maybe - the he won't - what I'm afraid of
is he - he's such a touchy old fellow, he may think
I'm trying to evade him, and trying to slip something
in here without taking it up with him, see?
Well, you - you think it over and I '11 call you at 10:30.
H.M.Jr:
Right.
E:
All right, then.
H.M.Jr:
Thank you.
stitle
OFFICIAL COMMUNICATIONS TO
THE SECRETARY OF STATE
73
WASHINGTON, D.C.
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
January 5. . 1937
EA 851.5151/1201
The Acting Secretary of State presents his compliments to the Honorable the Secretary of the Treasury
and transmits two copies of a note (No. 411) dated
December 29, , 1936, from the British Ambassador in Wash-
ington and of the enclosure thereto, copies of the
statement issued by His Majesty's Government in the
United Kingdom on the occasion of the adherence of the
Governments of Belgium, the Netherlands and Switzerland
to the principles stated in the Tripartite Declaration
of September 25th last. A simple formal acknowledgment has
been sent to the British Ambassador.
Enclosures:
From the British
Ambassador, December
29, 1936, with enclosure.
FL
(
Department of State
EA
BUREAU
DIVISION
ENCLOSURE
TO
Letter drafted
ADDRESSED TO
TREASURY
1-1003
74
No. 411
His Britannie Majesty's
Ambassador presents his compliments to
the Acting Secretary of State and has
the honour to enclose three copies of
the statement issued by His Majesty's
Government in the United Kingdom on the
occasion of the adherence of the
Governments of Belgium, the Netherlands
and Switserland to the principles stated
in the Tripartite Declaration of
September 25th last.
BRITISH EMBASSY
WASHINGTON, D.C.
December 29th, 1956.
75
[This statement appeared in the U.K. press on the
morning of 24th November, 1936
PRESS NOTICE.
For morning papers only.
Not to be published on the Club
tapes, or by broadcast, or in any other
way before the morning of Tuesday, the
24th November.
His Majesty's Government have noted with
pleasure the Declarations of the Governments of the
Netherlands and Switzerland which were issued yesterday,
expressing their adherence to the principles stated in
the Tripartite Declaration of September 25th; the
Belgian Government declared their adherence to those
principles on September 26th.
His Majesty's Government are informed that
the United States Treasury are extending to Belgium,
the Netherlands and Switzerland the arrangements for
technical co-operation in exchange matters which were
referred to in the statement published on October 13th.
His Majesty's Government welcome this step, which is in
harmony with the arrangements already made between the
United States and this country and between the United
States and France. The extension of this arrangement
is also in harmony with the general basis of mutual
co-operation which exists between the British monetary
authorities and the Belgian, Netherlands and Swiss
monetary authorities.
76
PARTIAL PARAPHRASE OF TELEGRAM RECEIVED
Ait"
FROM: American Embassy, Paris
DATE:
January 5, 4 p.m.
NO.:
12
FROM COCHRAN
Paris exchange market fairly quiet. European press
is giving much space to American labor troubles and to
likelihood of tax on American securities held by foreigners.
Weakness of dollar may be attributed to such factors. French
rentes down 75 centimes to one franc. Ministry of Finance
has issued communique explaining so called annesty provisions
in financial law passed on January 2nd which permit exchange
of gold and other effects held abroad against the new national
defense bonds. The period for conversion into the new bonds
is extended from January 15 to 31.
I learned in strictest confidence at the Bank of France
this morning that the surrender of gold against these new
bonds has been very limited. I described the issue of these
bonds in my 1259 of December 16, 6 p.m. Additional tables
and counters which were set up in the Bank of France to
take care of the expected clients were not used.
(END SECTION ONE)
ea:DJW
77
Section two of telegram No. 12, January 5, 4 p.m., from Paris
There is on the other hand a constant outflow of gold to
London which is frequently more serious than is suspected
by financial writers and market operators. Yesterday
alone, for instance, the Bank of France lost two hundred
million francs gold to London on whathobservers termed a
quiet day. According to the Bank, the immediate and early
financing of the Government is at its expense either indirectly
through discounting Treasury bills as described in my No. 8
directly
January 4, 6 p.m., or/through straight advances. There would
appear to be no opportunity to veil a cession of gold from
the Bank of France's stock to the French exchange stabilization fund, since the entire English banking credit has now
been repaid. That is to say, any new loss of gold appearing
in the Bank's statement will mean that the fund has taken it
from the bank against france to replenish its reserves.
With reference to rumors of war debt negotiations,
the Lombard Street editor of the FINANCIAL NEWS today re-
marks that if substantial payments were to be made by
Great Britain and France to the United States, the present
relationship between the three currencies would have to
be changed. That is to say, the exchange value of sterling
and the franc as against the dollar would have to be
lowered.
EA:FL:DJW
78
January 5, 1937
4:04 P.M.
H.M.Jr:
Jesse
from the Federal Reserve an amendment which has -
it expires on the third of March - which has to do
with giving them the right to put up Government bonds
as collateral against their currency, -
Jones:
Yes.
H.M.Jr:
- which expires March third.
J:
Yes
H.M.Jr:
Well, we got over at the White House and stayed a
long time, and I won't take time to explain it now,
but anyway the President said, "All right, throw
it in with the others."
I had to go up to explain to Carter Glass today - that I'd given my word that we'd have no banking legislation
unless we talked to him first, see?
J:
Yes
H.M.Jr:
And explained to him how through a chain of circum-
J:
Yes
H.M.Jr:
He said, "All right, leave it in." But I don't - I
J:
Yes
H.M.Jr:
And Marriner was with me.
J:
Ah-ha.
H.M.Jr:
I took him with me. I didn't want any misunderstanding.
Ah - I brought up at Cabinet how we're going to handle
stances it got over there.
said "I'm going to talk to the President before we
have that in any omnibus bill." See?
this thing on the Hill.
J:
Yes
H.M.Jr:
Because - on account of the attitude that Glass is
J:
Yes
taking.
79
-2H.M.Jr:
So the President said, "Well, the thing to do is to
have Jesse Jones and Eccles and you go up on the
Hill and see Joe Robinson and see the Speaker and
find out how they want to handle it."
J:
Yes
H.M.Jr:
See?
J:
Yes
H.M.Jr:
And that's why I'm calling you.
Is - is Carter agreeable to the - to leaving that
thing you just mentioned in the bill?
Well, he - he's willing - he said he's got no objection
for the President to put it in his message.
J:
H.M.Jr:
J:
H.M.Jr:
Ah-ha.
But when it comes up he says if it's going to be an
omnibus he wants to talk about it, see?
J:
I see.
H.M.Jr:
So I thought if the three of us went up on the Hill
J:
Yes
H.M.Jr:
- or if we could even get Joe to have the Speaker
and first saw Joe Robinson and then the Speaker -
at his office -
J:
Yes
H.M.Jr:
- and lay all our cards on the table and then ask
J:
Yes.
H.M.Jr:
See?
J:
Yes.
H.M.Jr:
And
J:
You mean about - an....
them what their wishes were.
80
-3 H.M.Jr:
Well,
I mean
about our - your - your - your three
children
-
J:
Yes
H.M.Jr:
- and my two children -
J:
Yes
H.M.Jr:
- and Eccles' pup.
J:
I
see. I see. All right. Now, when do you want
to go?
H.M.Jr:
Well, that's what I'm going to call you - I - I
thought tomorrow they'd be busy, and I thought
if it was agreeable to you I'd ask for an appoint-
ment for Thursday morning.
J:
That'll be all right with me.
H.M.Jr:
See?
J:
I've been up there today.
H.M.Jr:
Yes
J:
I've been talking with Steagall for the - for his
side.
H.M.Jr:
Yes
J:
And been talking with - I talked to Joe Robinson
this morning.
H.M.Jr:
Yes
J:
In general, don't you see?
H.M.Jr:
I understand.
J:
And talked to Garner, and I talked with Bankhead.
H.M.Jr:
Yes
J:
H.M.Jr:
The speaker. And - ah - talked to Carter a little
bit.
Yes
81
-4J:
H.M.Jr:
And - ah -
Did you follow us or you - were you ahead of us with
Carter? We were there at 11.
J:
Well, I didn't go to Carter's office today. I talked
H.M.Jr:
Oh.
J:
to him on the telephone.
But I had asked him two or three days ago whether
he'd want to introduce our bill or did he want
Wagner to do it.
H.M.Jr:
Yes
J:
And he said we'd talk it over.
H.M.Jr:
Now when you say your bill are you talking about
J:
At that time, I was - that was before our meeting.
H.M.Jr:
I see.
J:
And he said that we'd talk it over and determine.
H.M.Jr:
Yes
J:
H.M.Jr:
J:
So I think it's best if we can get Carter to take
the whole bill.
I think so too.
And so I'm ready to go with you, and if you'll ask
for an appointment Thursday morning
H.M.Jr:
I'll ask for it Thursday morning.
J:
Ah -
H.M.Jr:
I tell you, I don't know - there's some- something's
up over at the White House. This is strictly between
us, see?
J:
Yes
H.M.Jr:
- which I don't quite understand. Now, this is
82
-5absolutely between the two of us.
J:
All - all right, I'll treat it so.
H.M.Jr:
Ah - the other day the President said he'd have
J:
Yes
H.M.Jr:
Charley West handle it, see?
Today you - you'd never think he'd heard of Charley
West -
J:
Ah-ha.
H.M.Jr:
- and it was for us to go up there and do it, see?
J:
Well now, I'll tell you
H.M.Jr:
I don't know what's happened in the last few days.
J:
Ah-ha.
H.M.Jr:
See?
J:
Well now, I'll tell you, you and I could do it a
H.M.Jr:
lot better than - than anybody else.
Well, I'm glad to go up there myself.
J:
Yes
H.M.Jr:
And - ah -
J:
The other fellow's poison in some places, you know.
H.M.Jr:
Who'd you mean, Eccles?
J:
Marriner, yes.
I know that, but what you going to do?
H.M.Jr:
H.M.Jr:
Well, I just don't know.
Ah - I don't think he's poison with Robinson.
J:
No, but he is with Carter.
J:
83
-6 - -
J:
I know, but And he is with some of the others.
H.M.Jr:
Well -
J:
He is where he doesn't think he is, Henry.
H.M.Jr:
Well -
J:
That's a -
H.M.Jr:
H.M.Jr:
Well, I - I think we'll have to take him along on
the first time, and then if - if they tell him
that they - they won't - what Carter told him this
morning -
J:
Yes
H.M.Jr:
- that he wanted to handle that thing separately.
J:
Yes
H.M.Jr:
Now, if - if Robinson tells him that, well then it's
up - we'll see.
J:
Yes
H.M.Jr:
See what I mean? And - but I'd much rather have
Eccles there. Now, if I'd have gone up and seen
Carter alone and he told me, "No, I don't want to
handle the Eccles bill," Eccles would have thought,
well, if he'd have been there he could have done
better. Well, he didn't do any better.
J:
Yes
H.M.Jr:
See?
J:
Yes
H.M.Jr:
And - well, I'll ask for -
J:
You ask for the appointment and I'll be ready.
H.M.Jr:
And I'll let you know and I'm going to ask Joe if -
84
-7 I don't know how those things are done - if he could
have the Speaker there.
J:
Yes
H.M.Jr:
And if he could it'd make it easier. Is about 10
J:
Yes, that's fine.
H.M.Jr:
O.K., Jesse.
J:
All right.
H.M.Jr:
J:
H.M.Jr:
o'clock a good time for you?
And I'll keep you If I get any - if I have any suggestions in the
meantime I'll call you.
But this thing of throwing this all - this other
thing in isn't - of this Federal Reserve - isn't
making it any easier for us.
J:
No, it certainly is not.
H.M.Jr:
No. I'll explain to you when I see you, Jesse -
J:
All right, and if I get -
H.M.Jr:
-
what's happening.
J:
- if I get any hunches, I'll call you.
H.M.Jr:
Thank you.
J:
All right.
85
January 5, 1937
4:13 P.M.
H.M.Jr:
Please
J.R.
Brewer:
(Sen. Robinson's
secretary)
There are - if you've got a pencil, so.
I have it right here.
B:
There - let's see, I think there - I know it's five
or six. There's the R.F.C. bill.
R.F.C. bill.
H.M.Jr:
Commodity Credit.
B:
Commodity Credit.
H.M.Jr:
Export-Import Bank.
B:
Export-Import Bank.
H.M.Jr:
H.M.Jr:
B:
H.M.Jr:
B:
H.M.Jr:
B:
H.M.Jr:
B:
H.M.Jr:
B:
H.M.Jr:
Stabilization Fund.
Stabilization Fund.
The right of the President to devalue the dollar.
I didn't understand you.
The - the right of the President to devalue the dollar.
Right of the President
The right of the President
The right of the President
to devalue the dollar.
to devalue the dollar.
And then the last thing, a - a - on March third, the
Federal Reserve's emergency power to put up Government
bonds as collateral for their Federal Reserve notes.
B:
Emergency power to Federal Reserve Banks
H.M.Jr:
Yes
86
-2put up..
B:
H.M.Jr:
B:
Government bonds
Government bonds.
H.M.Jr:
..&S collateral..
B:
...as collateral..
H.M.Jr:
..for Federal Reserve notes.
B:
Oke - for Federal Reserve notes.
H.M.Jr:
Now, all of these things expire - Hello?
B:
Hello?
H.M.Jr:
They all - an - they all expire within a very
B:
Yes
H.M.Jr:
short time, you see?
And the President suggested that Mr. Jones and Mr.
Eccles and I call on Mr. - Senator Robinson, you see?
Hello?
B:
Yes
H.M.Jr:
And explain to him what these things are and that
these are the emergency things which we need very
badly at this end of the Avenue.
B:
Fine.
H.M.Jr:
Now - and then to find out how the Senator thinks
B:
Omnibus bill.
H.M.Jr:
that that should be handled. The thought that the
President had was that they should be - all be put
into an omnibus bill.
Now, I don't know whether that's practical or not,
and that's what he'd like us to discuss with the
Senator.
The other thought was - the Senator's done this for
87
-3 me before - was for him to invite the Speaker to
come to his office so that we could do it at one
time, you see?
B:
Ah-ha.
H.M.Jr:
He's done that before.
B:
Yes
H.M.Jr:
And what I was going to take the liberty of suggesting
is that we might come up there the first thing Thursday
morning and have this meeting in Senator Robinson's
office.
B:
H.M.Jr:
B:
H.M.Jr:
Ah-ha - including Mr. Jones, Mr. Eccles
Yes. Yes.
..and the Speaker of the House.
B:
Yes, and anybody else that the Senator wished.
I see.
H.M.Jr:
But you -
B:
Now, I'll get you in touch with him. I'll make a
memorandum of this for him, Mr. Morgenthau, so
it'11 be right on his desk when he comes in, and
we'll ask him to contact you as soon as he does.
H.M.Jr:
B:
H.M.Jr:
I - I - I can say for the President that these are -
are they six things?
Six, yes.
Yes, well these are the things which are really
urgent, you see?
B:
The urgent emergency bills.
H.M.Jr:
Yes. And the - and - and the President thought it
might be possible to put them into an omnibus bill.
I don't know whether it would be practical or not.
B:
In any event, you think it would be well to have this
conference Thursday morning.
88
-4H.M.Jr:
Well, I'm suggesting - because I suppose everybody! 11
B:
Yes
H.M.Jr:
And several times the Senator has done that for me.
B:
Fine.
H.M.Jr:
be busy tomorrow.
And if you'll let me know, or if the Senator will
let me know, then I'll get in touch with Mr. Jones
and Mr. Eccles.
B:
That's splendid and thank you very much, Mr.
Morgenthau.
H.M.Jr:
Thank you.
89
January 6, 1936
Bell came in to discuss the weekly bill offering
and HM,Jr. decided that he wanted Bell to offer $50,000,000
of 9 months' bills for this week and then "just watch the
picture".
90
9:30
January 6, 1937
9:30 A.M.
GROUP MEETING
Present:
Mrs. Klotz
Mr. McReynolds
Mr. Bell
Mr. Upham
Miss Roche
Mr. Haas
Mr. Taylor
Mr. Gaston
Mr. Oliphant
H.M.Jr:
Herbert, I wonder where that (an A.P. clipping) comes
from? (Gaston takes and reads)
(To Oliphant) Can you get a review of this for me
("Federal Justice," by Homer Cummings and Carl
MacFarland)?
(To Mrs Klotz) You thank Mr. Cummings for this
book; make a note. And Mr. Oliphant will review
it for me. "Federal Justice" by Homer Cummings.
Haas:
I thought there "aint" no justice.
H.M.Jr:
(To Gaston) Where do you suppose A.P. gets that
story?
Gaston:
It says the Treasury report the first six months
shows a billion spent, leaving the 320 million
unexpended balance, so they just take the daily
statement and they subtract 320 from what we spent
in the first six months, and it leaves them 700
million. It's just a deduction from the daily
statement.
H.M.Jr:
Dan, I notice for December Mr. Hopkins went over
190 some million. How you going to do 150 million
for December?
Bell:
I don't know.
H.M.Jr:
I'm surprised. Isn't that about the biggest that
they have had?
Bell:
Yes, I think that's the biggest.
H.M.Jr:
Huh?
91
-2Bell:
H.M.Jr:
I think 180 million probably the biggest before.
Ithat?
think it's 190. Could I have an explanation of
Bell:
All right.
H.M.Jr:
Because Hopkins still talks in terms of 150 million
a month, but he just doesn't come anywhere near
hitting it.
Bell:
Probably an accumulation of liquidation of old
obligations.
H.M.Jr:
Could you put a man on it?
Bell:
Yes
H.M.Jr:
Let's see. Today's Wednesday? Friday morning?
Bell:
We can get something in a couple days.
H.M.Jr:
Friday morning?
Bell:
Yes
Mac, you look all piled up.
McReynolds: I had nothing of first importance - at least - I've
got these progress reports to go out.
H.M.Jr:
Well, we'll see how this runs - this meeting - see
how it runs.
H.M.Jr:
Oh - now, this is a question of sugar. Wallace
wants to have a new kind of a tax on sugar. Who
can handle this for me?
(Referring to letter from Secretary Wallace to the
President dated December 30, 1936) Now, the
President - Wallace - "It seems to me that you
now have a splendid opportunity" - this is Wallace
talking - "if you will take hold of it firmly, to
inaugurate a sugar policy which will do justice to
all of the parties interested, including Cuba, the
beet farmers, the children and other laborers in
the beet fields, the processors and the United
92
-3-
States Treasury. It is possible to enrich the
United States Treasury by a net of some 30 to 90
million dollars, depending on the amount of the
excise tax and on whether you think it advisable
for our policy to result in a return to the
processors of 9 or 10 percent or whether you think
our policy should result in a return to them of
6 or 8 percent."
Who does this fall under?
Oliphant:
Those people under Process Tax.
Roche:
Let me have it (laughing). That would be good.
H.M.Jr:
Supposing Miss Roche and Haas and Taylor and
Oliphant.
Roche:
In the interest of child labor, I would love to sit
in on it.
H.M.Jr:
Well, Miss Roche, Haas and Taylor and Oliphant.
Bell:
Does this interest you (to Bell)?
No, sir.
H.M.Jr:
How long do you people want to come back? Want to
give you a week from today? What?
Taylor:
It's quite a complicated story.
H.M.Jr:
Well, give me something on it.
Haas:
It's an outgrowth of
Oliphant, you're nearest to me - no, tell you what
we'11 do: (To reporter) Have copies made of this
H.M.Jr:
and give one each to those four people.
Cyril?
Upham:
H.M.Jr:
(Nods negatively)
I got a call in for Mr. - Senator Robinson, asking
morning. Will have the Speaker there - will get
started on this bill. Spoke to secretary again
him whether he'd see Mr. Jones and myself tomorrow
five minutes ago and he said he'd let me know.
93
4-
President seems to have changed his mind and
Bell:
H.M.Jr:
something - I don't quite understand it. evidently - this is very much in the family - West
evidently is not going to handle legislation.
A couple days ago he was. And the President
thought I'd better go up myself.
Well, Jesse spent all day on the Hill yesterday,
he told me, following up.
That's the reason I couldn't get the draft of
legislation.
Following up what he had done previous to the
fact, before he had known that his legislation
and mine was going to be tied together. He spent
yesterday simply following up what he had done
before. - - He's a great guy, Jesse.
Oliphant:
H.M.Jr:
Is the Federal Reserve thing in the bill?
Yes. Mr. Eccles and I called on Mr. Glass and
Mr. Glass told me not to worry, I could do no
wrong. He thinks I got too excited and too worried and he never would misjudge me, and I took
things too seriously. He said, "Let the President
put it in. Then when it comes up Mr. Eccles and I
will talk it over." (Hearty laughter) That's
after it's on the Hill. So the Treasury's honor
is still up high and we'll see. Jones is worried
about Eccles going along. Well, we'll see.
(To Upham) Did you fix up a meeting Monday and
Tuesday for banking?
Upham:
I just have a request in - maybe you haven't seen
it - to find out whether 10 on Tuesday is free.
(Mrs Klotz checks calendar and O.K.s Tuesday at 10)
H.M.Jr:
Dan?
Bell:
I have - I want to start investing the Social
Security. You remember I talked to you before
about it and we decided to do it on a monthly
basis rather than in one lump sum. I didn't know
now that would affect the lawyers' viewpoints
94
-5with court decisions coming along. Alanson Willcox
has been working on it. I suppose he's been in
touch with you too, Herman.
Oliphant: Yes
Bell:
He's had the matter up with the Department of
Justice in drawing this brief that they are working
on, and apparently they are not interested in time
or amounts, so long as it isn't definitely tied in
with the revenue.
Now, what I propose to invest is about 45 million
dollars in January, and we get very little revenue
in January, so that it isn't definitely tied in.
H.M.Jr:
Bell:
Now, wait a minute. I'm afraid you've got to start
with me and you've got to take a little time on this.
There was an appropriation put in last July 1 of
265 million dollars, but we decided
H.M.Jr:
Now, that appropriation was made to whom?
Bell:
The Secretary of the Treasury, to invest in obligations of the United "tates for account of the
old age reserve account. Do you recall?
H.M.Jr:
Yes
Bell:
And we decided
H.M.Jr:
For the old age. Now, when do they draw on that?
Bell:
Well, they may draw on it a little from time to
H.M.Jr:
Just take three or four minutes to explain how this
Roche:
I'll be interested in this, the Social
H.M.Jr:
time on account of death.
thing works.
What?
I mean I figured when it came I'd learn it as we
go along, but I've got to start over on it; I'm
fuzzy on it.
95
-6Bell:
H.M.Jr:
Bell:
I should have thought about going into the history
of it. The old age - the Social Security Act sets
up what it calls an old age reserve account in the
Treasury, to which there is a - Congress authorizes
an annual appropriation based upon actuarial computations of whatever amount of money you submit in the
form of an estimate. Last year you submitted an
estimate of 265 million dollars to meet the accruing
liability of that fund. That was appropriated and
made available to you on July 1, 1936, to be invested
during the year at your discretion.
We put in "at your discretion" purposely so that you
could invest it in monthly installments or in one
month just as you saw fit.
Wait a minute. Monthly installments - you mean
that we divide that by 12 and that gives us 45?
Ordinarily you divide it by 12, but the first year
is - let's say the revenue doesn't start until
January 1 of this year.
H.M.Jr:
Yes
Bell:
So that you only have a half year's revenue, so
in effect the fund begins January 1; so that we are
dividing the 265 million by 6 instead of by 12.
H.M.Jr:
Now, the revenue - you say I have had revenue for
Bell:
No, you will have had revenue for six months by
H.M.Jr:
No revenue yet.
Bell:
Revenue begins this month.
H.M.dr:
Where does revenue come from?
Bell:
Taxes on employers and employees.
H.M.Jr:
That's just beginning to come?
Bell:
That's right.
six months?
the end of this fiscal year.
96
7H.M.Jr:
And this is only for old age?
Bell:
Old age reserve account.
H.M.Jr:
And this 265 million is based on that.
Bell:
Yes
H.M.Jr:
Is that equal - what relation is that to the
Bell:
Well, within the Treasury it has a pretty close
relationship, because the appropriation for a
revenue that we expect to get from this six months?
few years will be based upon the contemplated
revenue less administrative expenses of the Board,
until they have compiled their records and can
get some basis of computation.
H.M.Jr:
But based upon the payroll tax, what do we estimate
Bell:
325 million.
H.M.Jr:
I see. And Congress appropriated 265.
Bell:
265.
H.M.Jr:
the revenue will be for this
Now, I've forgot. Is that supposed to be the
Federal Government put up half?
Bell:
The Federal Government appropriates the whole amount
H.M.Jr:
But the General Fund gets the taxes.
Bell:
H.M.Jr:
Just like any other taxes. See?
In other words, they haven't tied up the taxes and
Bell:
They have tried to separate them purposely because
H.M.Jr:
Haas:
out of the General Fund.
the old age reserve account.
of Constitutional reasons.
(To Haas) Now, I've asked you to give me a summary
of this thing.
Yes, on January 11.
97
8H.M.Jr:
This is - I mean I haven't got it yet. I'll wait
until George's report comes in. I've asked him
to break this thing down. Anybody wants a copy
of it can have one. Because I - I still haven't
got it.
Haas:
We had a big discussion of this whole problem up
at the meeting Tuesday.
H.M.Jr:
I haven't got it yet. Anybody wants a copy can
have it.
Roche:
Here.
Haas:
'All right.
(To Taylor) All right.
H.M.Jr:
For the immediate thing you mean we've got to
Bell:
Yes, sir.
H.M.Jr:
Now, have we invested the 9 million Government Life?
Bell:
No, sir, we have not; that is, unless it was done
Haas:
Bell:
H.M.Jr:
Bell:
H.M.Jr:
Bell:
invest around 45 million dollars?
yesterday.
This will not affect the market.
No, this is a special obligation, Mr. Secretary,
which we issue to the fund, bearing 3 percent
interest.
Oh. Oh, we don't go into the market?
No, sir.
Do we have an appropriation for the interest?
That comes out of the regular interest appropriation.
H.M.Jr:
Well, did we put it into the Budget - I mean so much
for interest?
Bell:
Well, the interest in the Budget is the interest
on the total public debt.
Yes, but I mean this is figured in it.
Yes, sir.
H.M.Jr:
Bell:
S8
-9H.M.Jr:
The law says three percent.
Bell:
Right.
H.M.Jr:
Well then, it doesn't make any difference. I mean.
We are going to invest this just the same way that
Bell:
you invest the 2 percent money of the Postal Savings.
H.M.Jr:
And it starts
Bell:
January 1.
H.M.Jr:
For 45 million?
Bell:
Yes, sir.
H.M.Jr:
But I still want to wait for that report. You better
have it too, George.
All right, what else?
Bell:
Well, I'll talk to you about bills right after this.
H.M.Jr:
Bell:
All right, anything else?
That's all.
H.M.Jr:
Miss Roche?
Roche:
I have nothing special this morning, sir.
H.M.Jr:
Do you take
Roche:
Yes.
H.M.Jr:
Do you take any stock in the Federal conciliator
Pardon me.
Roche:
on this strike - think he will do anything?
I don't think for a while, no.
H.M.Jr:
What do you call a while? A day or a week?
Roche:
Well, I shouldn't think for a week - not for the
action General Motors is taking. I don't think
anybody can do anything until public opinion crashes
.
H.M.Jr:
in on it a bit. - Might!
George?
99
- 10 Haas:
Yesterday when you were tied up in this other matter
mentioned about McLeod. You got that yesterday?
I
H.M.Jr:
No, I didn't.
Haas:
Well, he's leaving us about the 15th. He's paid to
run on somewhat longer than that. He's going in
business
for himself - he and others, another
fellow.
H.M.Jr:
What kind of a business?
Haas:
H.M.Jr:
Oh, the other man that's in with him has been working
market analysis and I think he's going to take some
investment accounts and that type of consulting work.
Did we increase his salary?
Haas:
Yes
H.M.Jr:
How much?
Haas:
Well, since I've been here we increased it
McReynolds:
Two thousand.
Haas:
46 to 65. Twice you increased it.
H.M.Jr:
Since I've been here?
Haas:
Yes.
McReynolds: Within the last year, little over a year, been
increased two thousand dollars.
H.M.Jr:
Well then, certainly
Haas:
Oh no, no resentment.
H.M.Jr:
Gave him a different office.
Haas:
He's got a little private office.
H.M.Jr:
He didn't have a private office and he has now. But
I mean didn't I promote him to the extent of two
thousand dollars within a year?
Haas:
Somewhere around that I think.
100
- 11 H.M.Jr:
What are you going to do to replace him?
Haas:
Well, fortunately we have built up a staff somewhat.
I haven't made up my mind exactly just what I'll do,
H.M.Jr:
but we'll get along.
Of course, his big work, estimating for this year,
Haas:
That's right.
is done, isn't it?
McReynolds: Same kind of business, I understand, he was in
before.
H.M.Jr:
Huh?
McReynolds: Same business - same kind of business he was in
before he came with the Treasury.
Haas:
That's right. He worked for Burke-Meyer for a
while. I don't think there's any resentment.
I talked to him, tried to find out.
H.M.Jr:
Anything else?
Haas:
That's all.
H.M.Jr:
Wayne?
Taylor:
Nothing.
H.M.Jr:
Herbert?
Gaston:
No, I don't think I have anything.
H.M.Jr:
that must have been a funny press conference yester-
Gaston:
day. The President - he must have ducked a lot of
stuff.
He ducked everything. No meat in it at all. Of
course, he just referred to the - that he was going
to. deliver his message to Congress and that most of
the things they asked about were anticipating the
message.
H.M.Jr:
Everything all right?
101
- 12 Gaston:
Yes. The only thing I'm particularly worrying about
is as to what to do about this doggone - these
still-movie pictures of gold movement. Post Office
Department doesn't want to authorize anything and
I'm afraid the results are going to be a little
worse than if we had.
H.M.Jr:
Can't you leave it in the hands of Nellie Tayloe
Ross?
Gaston:
Without any difficulty at all we can leave it in
her
hands. But my - I'm having difficulty right
now.
H.M.Jr:
I said real worries.
Gaston:
I don't want to force the Post Office Department
to consent to anything. Then if we have some bad
luck they'11 say, "Well, you did this."
H.M.Jr:
Oh, I'm not worried.
Gaston:
But it's of no importance.
H.M.Jr:
Herman?
Oliphant:
See you some time about the legislation, if you
want to - run over it. Personnel matter, too.
At your convenience.
H.M.Jr:
Well, let me clear this matter with Robinson first,
you see, and when I go up to see him I want you to
go along with me. And after that, let's talk about
the other. Let's get - let's feel his pulse and
see how it's beating. And then on the other let's
just see. But on the personnel, as soon as I get
through with
Oliphant:
Well, I'll tell you, now
H.M.Jr:
Come in about 10:30. Oh, do you have a staff today?
Oliphant:
Yes
H.M.Jr:
What time?
Oliphant:
At 10:30. I can move that up to 10 and be through
by 11 - be through at 10:30. As a matter of fact, I
102
- 13 haven't anything special to take up.
H.M.Jr:
with them?
Oliphant:
Yes
H.M.Jr:
All right, then you'll be in at 10:30.
Oliphant:
O.K.
H.M.Jr:
Mac, take -
(To Oliphant) DO you want to tell
your office?
Mac, I want to take a few minutes now for yours.
McReynolds: I've got one thing that I've been holding for a
few days, a letter prepared by Waesche and approved
by Gibbons to the Secretary of Commerce pointing
out the lack of cooperation with Weaver's outfit,
Bureau of Marine Inspection and Navigation, and
Coast Guard.
Now, I told Waesche and Steve both that I didn't
think we ought to send the letter. It's just a
routine - they get along with everybody; it's the
only organization in the Government that they are
not getting active cooperation with the Coast
Guard down there. Nothing serious. They merely
H.M.Jr:
want to make a record. But, in view of the pending consideration of reorganization matters, I
don't think we ought to write it.
I'm beginning to think that we're too "sissy"
around here.
McReynolds: No objection to the letter except from that standpoint.
H.M.Jr:
(Glancing at letter) What's the matter with this?
McReynolds: Nothing the matter with it except it seems to me
it is the question of the organization set-up. The
President being in the process of sending a recommendation on the reorganization, I don't see any
particular point in making a record of their failure
in an official communication - of their failure to
cooperate. No specific point at issue.
103
- 14 H.M.Jr:
Well, what do you think you're going to do, take
over Marine Inspection?
McReynolds: I don't know.
H.M.Jr:
What?
McReynolds: I don't know. Certainly something will be done
about it.
Well then, you go ask for it and there's nothing
on record to show that everything isn't all right.
McReynolds: I've got no objection to doing it.
H.M.Jr:
H.M.Jr:
Well, it's a very polite letter.
Gaston:
Is it addressed to the Secretary of Commerce?
McReynolds: Yes. Waesche said he felt that we were not protecting ourselves if we didn't, as a matter of
record, in a letter to the Secretary of Commerce,
point out the fact that we weren't getting cooperation. He says it's the only place in the Government
where we fail to get it.
H.M.Jr:
I just
McReynolds: I have no objection to it.
H.M.Jr:
I'm not going to write Mr. Roper a letter that I
think his foreign and domestic commerce is lousy,
because it is none of my business, but where we rub
up against him on this, I'm
All right, Mac, you've got five minutes now.
McReynolds: Well, I don't know how you want this. It's just
one page.
H.M.Jr:
Well, read the first page.
McReynolds: Well, the first one is "Commissioner of Accounts
and Deposits - Administrative Expenses for Treasury"
H.M.Jr:
All right, go ahead.
McReynolds: (Referring to Weekly Progress Reports on Treasury
Projects) The authority is an Executive Order, 7034.
The estimated total cost is 71 million dollars for
a period
104
- 15 H.M.Jr:
71 million?
McReynolds: - ending June 30, 1938. That's the total from the
beginning for a year from next July. And the net
amount allotted by the President is 40 million,
Bell:
950 thousand. and personnel, 16,544.
That's Procurement too.
McReynolds: Yes, includes all the administrative expenses for
Treasury.
H.M.Jr:
16,0001
Bell:
Procurement has 7,000.
H.M.Jr:
Let me take the book home. I'll see. (Laughter)
Bell:
Well, he's fair. It's the first one.
Haas:
It began with an "A" - that's why.
Taylor:
What do the differences in colors mean, Mac?
H.M.Jr:
That amount is the amount to carry it on from
January 1 - is included in the four million dollars
that Harry Hopkins mentioned.
McReynolds: Yes
H.M. Jr:
Four million dollars a month.
MeReynolds: Well, it's all - all information showing what's
been allocated, what's been done, the amount available for commitment, the amount actually expended,
and the amount estimated will be required for the
completion of these projects. Of course, there are
a lot of projects there that are - that is, merely
a lot of emergency ones. That is, there are a lot
of others that are on regular appropriations.
Merely special projects that have been taken up.
H.M.Jr:
Anybody any afterthoughts?
-
think if Bell and Taylor will stay
All right, I
no Locktead
Mr. Tryla 105
COMMUNICATIONS TO
SECRETARY OF STATE
WASHINGTON, D.C.
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
January 6, 1937
ANK
LA 837.51/1990
The Acting Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and,
with reference to the Department's letter of December 11
concerning a scheme of Mr. Eduardo Grenas to coin 100,000,000
Cuban silver pesos, transmits herewith, for the confidential
information of the Treasury Department, a copy of a further
despatch on this subject, No. 7866 dated December 24, 1936,
received from the American Ambassador at Habana, Cuba. It
will be noted that in the last paragraph reference is made
to the Ambassador's despatches No. 7561, dated November 2,
1936, and No. 7829, dated December 17, 1936. A copy of
the former is enclosed herewith. A copy of the latter
was routed to the Treasury Department at the time of its
receipt.
Enclosures:
From American Embassy,
Habana, No. 7866,
December 24, 1936, and
No. 7561, November 2,
1936.
is
Department of State
LA
BUREAU
ENCLOSURE
TO
Letter drafted
ADDRESSED TO
TREASURY DEPARTMENT
1-1033
COPY: FEB
106
COMP:
EMBASSY OF THE
UNITED STATES OF AMERICA
No. 7866
Habana, December 24, 1936.
AIR MAIL
(Grenas returns from Washington:
Subject: He feels encouraged to push his
(100,000,000 pesos coinage scheme
The Honorable
The Secretary of State,
Washington, D. C.
Sir:
I have the honor to acknowledge the receipt of
the Department's air mail instruction No. 1128, of
December 22, informing the Embassy of the great interest of the Secretary of the Treasury in the so-called
Grenas scheme for the coinage of 100,000,000 silver
pesos, part of the proceeds of which would be used to
liquidate the floating debt, with a 13% commission for
the entrepreneur, and to report that in compliance
therewith I shall keep the Department promptly informed
of all developments in the premises.
The Department will recall from my despatch No. 7561,
of November 2, that Sr. Grenas called upon me prior to
his last trip to Washington and that, in reply to his
request for my personal opinion concerning his various
monetary schemes, I expressed the view with respect to
the proposed 100,000,000 pesos coinage (to which I
limited my comment) that it would be disastrous for the
economy of this republic. Following his return from
Washington and his several conversations at the Department, of which the Embassy was kept informed through
the Department's instructions Nos. 1102, of November 28,
and 1115, of December 11, Sr. Grenas again called upon
me. He seemed to feel encouraged as a result of his
talks at the Department and I believe it to be his intention to push the matter and to have the bill transmitted
with despatch No. 7829, of December 17, presented in the
Cuban Congress.
Respectfully yours,
JEFFERSON CAFFERY
(AIR MAIL)
No. 7561
107
Habana, November 2, 1936.
Subject: Further interest of Sr. Eduardo Grefias in
scheme to coin 100,000,000 pesos of silver.
The Honorable
The Secretary of State,
Washington, D. C.
Sir:
Referring to previous reports concerning the interest of Sr. Eduardo Grefias in a scheme for coining
100,000,000 pesos of silver, I have the honor to report
that Sr. Grefias came to see me on Saturday last in an
endeavor to elicit my opinion concerning his various
monetary schemes. (The 100,000,000 pese coinage is one
of several.) I declined to comment except on the
100,000,000 peso coinage. I told Sr. Grenas that, in my
opinion, that would be disastrous for the economy of this
Republic. I pointed out the obvious fact that the value
of
108
-2of the Guban peso would immediately fall, etc., etc.,
etc.; that, in my opinion, all efforts at artificial
control of the exchange in that case would be unavailing, and that the greatest sufferer would be the Cuban
workman. (As the Department is aware, some of the sugar
interests, Cuban as well as American, would welcome
monetary inflation as it would enable the sugar companies
to pay their labor in depreciated currency while they
received good foreign currency for their sugar.)
Sr. Grefiae retorted that he agreed with my observa-
tions, but said that he would like to submit a memorandum
to me in the near future. I told him that I would be
glad to receive it.
true
Respectfully yours,
Jefferson Caffery.
851
JC:CBS
copy
-M
of
109
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 6, 1937
TO
FROM
Secretary Morgenthau
Miss Roche
Developments in the General Motors' Situation
Four more plants were closed today in the General Motors controversy.
Alfred P. Sloan, Jr., President of General Motors, stated that his open letter,
advertised in the daily papers yesterday, was final on General Motors refusing
to confer with the Union. He added "Let them pull the workers out".
The Department of Labor Concilistors are still working to bring about a
conference. The Union representatives have expressed entire willingness to
cooperate with the Federal Government.
Some confusion was created in the situation by a statement issued yesterday from the Secretary of Labor's office that a conference between General
Motors officials and Union representatives had been arranged. Later the
Secretary, according to quoted press reports, said that "this statement was the
result of a mistaken transcription" of A telephone conversation with the Labor
Department Conciliator. She was still hopeful, however, that a conference
might develop.
An interesting sidelight on one of the most provocative features of
the situation was the fact brought out yesterday about Judge Black, who issued
a sweeping injunction prohibiting workers in Flint, Michigan, from striking
or picketing. It appears that Judge Black is the owner of a considerable
number of shares of General Motors stock. The judge is reported to have
admitted this fact but did not feel that it would disqualify him for presiding
in the injunction case involving General Motors.
Current reports indicate that steel output is beginning definitely to
feel a slackening of orders as a result of the auto closing-down.
General Motors was among the industrial corporations found to have
spent large sums of money for hiring detectives and providing ammunition and
tear gas, in the testimony taken by the Senate Investigating Committee hearings
this fall.
I Roche
110
January 6, 1937
11:49 A.M.
H.M.Jr:
Hello?
Joe
Robinson:
Henry?
H.M.Jr:
Good morning.
R:
How are you?
H.M.Jr:
I was beginning to think I was the Torgotten man"?
R:
No, I've been in a meeting of the Steering Committee.
H.M.Jr:
Well, I had -
R:
That conference is arranged at my office in the
morning at 10:30.
H.M.Jr:
You're a gentleman and a scholar.
R:
And - now, you bring whoever you want with you, and
do you want me to notify anybody up there?
H.M.Jr:
Well, you have in the past been kind enough to have
the Speaker at your office. Do you suppose that
would be possible?
R:
Have what?
H.M.Jr:
The Speaker.
R:
H.M.Jr:
Oh, I've already got him and his crowd; I've already
arranged it with him.
Well, what do you think about - well, do you think
you want to have Carter there?
R:
Yes, I've already got him.
H.M.Jr:
Ah-ha.
R:
But I'm talking about your crowd.
H.M.Jr:
R:
Well, I'll take care of that.
All right.
111
-2H.M.Jr:
I'll bring Jesse
R:
And Mar-
H.M.Jr:
. .and Mar- - and Marriner Eccles.
R:
And anybody else you want.
H.M.Jr:
And Oliphant.
R:
H.M.Jr:
R:
All right.
Is that all right?
All right. Now, who do you want from the Senate
side? I'll have - I've arranged to have - ah - an Harrison, -
H.M.Jr:
Yes
R:
- Wagner, -
H.M.Jr:
Yes
R:
-
and Glass. Wagner will be Chairman of Banking and
Currency.
H.M.Jr:
Fine.
R:
Anybody else you want?
H.M.Jr:
No.
R:
Smith's not here, this here Chairman of Agriculture.
H.M.Jr:
R:
No. No, I think that's all right.
All right.
H.M.Jr:
And at 10 o'clock, your office.
R:
10:30.
H.M.Jr:
Oh, 10:30?
R:
H.M.Jr:
Yes, sir.
At 10:30 at the Senate Office Building?
112
-3 R:
No,
sir, at my office in the Capitol. You know where
you come there.
H.M.Jr:
I know.
R:
Old Rules Committee Room.
H.M.Jr:
Rules, yes.
R:
H.M.Jr:
That's more convenient for the Speaker.
10:30, tomorrow morning, your office.
R:
Yes
H.M.Jr:
I appreciate it very much.
R:
In the Senate.
H.M.Jr:
In the Senate.
R:
All right.
H.M.Jr:
Thank you.
R:
Goodbye.
113
January 6, 1937
11:53 A.M.
H.M.Jr:
In the Capitol tomorrow morning, at the old Rules
Room, he said.
Jesse
Jones:
Yes
H.M.Jr:
At 10:30.
J:
10:30 tomorrow.
H.M.Jr:
And
he'sthere
invited
some of the Senators and the Speaker
will be
too.
J:
Fine.
H.M.Jr:
So I think that's pretty nice, don't you think so?
J:
Fine.
H.M.Jr:
And -
J:
10:30 tomorrow.
H.M.Jr:
And it's your good luck that Senator Smith is out of
town.
J:
(Laughs) All right.
H.M.Jr:
What?
J:
Fine.
H.M.Jr:
Do you want to stop by and pick me up and we'll go up
together?
J:
I'll be delighted. I'11 come by your office.
H.M.Jr:
If you'd come by about 10:15?
J:
10:15.
H.M.Jr:
We'll go up together.
J:
Fine.
H.M.Jr:
Thank you.
J:
Fine.
****
114
-2H.M.Jr:
Hello.
Operator:
Chairman Eccles.
H.M.Jr:
Yes. Hello.
Eccles:
Hello.
H.M.Jr:
Marriner.
E:
Yes, sir.
Go ahead.
H.M.Jr:
Senator Robinson's arranged a meeting in his office
tomorrow at 10:30 at which the Speaker will be present.
E:
Yes
H.M.Jr:
And you, Jesse and I are going up to explain this
legislation and find out how they want it handled.
E:
H.M.Jr:
All right, sir, 10:30 at Do you want to stop by at 10:15 and pick me up?
E:
All right, I'll do that.
H.M.Jr:
Will you?
E:
We'll go up - we'll go up together.
H.M.Jr:
Yes
E:
10:15.
H.M.Jr:
Yes
E:
Thank you.
H.M.Jr:
O.K.
E:
Goodbye.
115
January 7, 1937
9:43 A.M.
H.M.Jr:
I tell you, I had a press conference at which the
Wall Street Journal asked me the question what
were you doing here Monday afternoon.
J.M.
Landis:
Yes
H.M.Jr:
To which my answer was we were discussing mutual
L:
Yes
H.M.Jr:
O.K.?
problems.
They asked me the same question and I said, "Oh,
I commonly drop over at the Treasury for discussion
of mutual problems and concerns."
L:
H.M.Jr:
Well, they said, "Were you discussing hot money?"
I said we were discussing mutual problems.
L:
Yes
H.M.Jr:
Which I thought was very truthful.
(Laughs) I thought so.
L:
H.M.Jr:
(Laughs) I consider them mutual problems.
L:
Yes
H.M.Jr:
All right.
I hear that the letter that the President sent out
Monday night was a very strong one. I haven't seen
it.
I saw it. I thought it was very strong. I don't
L:
H.M.Jr:
know what results it will bring.
I didn't see it. Miss LeHand simply told me
over the phone that it was a very strong one.
L:
Yes
H.M.Jr:
Well, you - you saw it.
116
-2L:
Yes, I saw it.
H.M.Jr:
Ah - what - how - what argument did he use?
L:
I think the argument of the public interest primarily.
Well, I think that's the main argument. Well, he
ought to hear in a couple of days, oughtn't he?
Yes, I should think so.
H.M.Jr:
My own betting is - I think - I - I think this -
L:
I don't know. He has his own problems.
H.M.Jr:
Ah-ha. Like all of us.
L:
Yes.
H.M.Jr:
Well -
L:
And I hope to hear from him shortly anyway.
H.M.Jr:
All right.
L:
Fine.
H.M.Jr:
Goodbye.
L:
H.M.Jr:
I think there'd be a pretty good chance that Conant
would do it.
117
January 7, 1937
3:27 P.M.
H.M.Jr:
Jesse
Hello, Jesse.
Jones:
Hello, Henry.
H.M.Jr:
How are you?
J:
H.M.Jr:
J:
H.M.Jr:
I think we got along all right, don't you?
I think so.
We got two and a half years. that's pretty good.
Oh, as far as that goes I'm perfectly satisfied.
J:
Yes
H.M.Jr:
And I thought the - how shall I say - the spirit
J:
I thought so. I thought their - their whole atti-
in which they received it was very nice.
tude was good.
H.M.Jr:
I'm just as - well - pleased that they separated
them.
J:
H.M.Jr:
J:
H.M.Jr:
J:
Yes. Well, I - I knew that - I thought you would
be, because there's one particular thing there Yes
- that irritates some people. And while Well, that's - and while they're not going to oppose it - I've
been talking to the Senator a good deal about this;
he's living over now at the Mayflower and I see him
a good deal more than I used to.
H.M.Jr:
Yes
J:
And so I don't think he's going to bother anybody.
H.M.Jr:
Well, I - I - I think it's all right, and - an - I
J:
Oh, there's no doubt about that.
think we've all got to watch it.
118
2H.M.Jr:
J:
H.M.Jr:
J:
H.M.Jr:
J:
Yes, I thought
But I - I - for the first meeting
of the year I thought it went extremely well.
I thought so. Now, in my bill I was going to check
this one thing with you.
Yes, sir.
In my bill, when I originally showed the - the
language of it to the President, Yes
- I had it in there that he could, upon the recommendation of our Board, or independent of it,
suspend from time to time.
H.M.Jr:
J:
Yes
Now, I put that in, frankly, because of something
that you said about putting him on the spot about
doing these things.
H.M.Jr:
Yes
J:
See what I mean?
H.M.Jr:
J:
H.M.Jr:
J:
I didn't say that. Somebody else.
Well, I meant at - at one of our meetings.
Oh, did I?
And I haven't the slightest objection to taking the
responsibility for recommending at any time that "Mr. President, in this particular line I - we - our
Board sees no reason for continuing our authority."
H.M.Jr:
You got me mixed up with somebody else.
J:
Well, anyway - well, even so, what do you think about
H.M.Jr:
Well now -
J:
H.M.Jr:
that.
Leave it in or out, I don't care.
Well, how did they feel about it up there? As I
remember - they didn't want it in, did they?
119
-3J:
Well, I think it would please Glass. I think it
would please the others. I don't think they care.
H.M.Jr:
J:
H.M.Jr:
J:
Well, I tell you what I'd do, frankly, if I were
in your shoes; I'd ask the President himself.
Well, that's what I was going to do if I could.
And
I - I'd rather he did it. All I wastogoing
to do if
hide behind
was to give him a little
he wants it, don't you see?
H.M.Jr:
Well, Glass can't have everything he wants anyway.
J:
Yep.
H.M.Jr:
J:
And I - I - I frankly would put it up to the President.
All right.
I think it's important enough.
I'll do it that way.
H.M.Jr:
Yes
J:
Now, another thing - a thing - Mortimer Buckner,
J:
H.M.Jr:
President of the New York Trust, whom you know don't you know him?
H.M.Jr:
I've never met him, but I know who he is.
J:
You know who he is.
J:
Yes, I do.
He called me two minutes ago or five.
H.M.Jr:
Yes
J:
He said that a man named Curtis, President of A. G.
Spalding is Company, I believe he said it was -
H.M.Jr:
Yes
J:
- had an engagement to see you tomorrow.
H.M.Jr:
120
-4H.M.Jr:
No.
J:
And he - he wanted me to tell you that Curtis was a
good man and all that. He doesn't know what he's
going to see him about - see you about, nor do I.
I told him I'd be very glad of course to telephone
that message to you.
H.M.Jr:
J:
Well, he's wrong.
I see.
H.M.Jr:
I have - I haven't - I have no such appointment.
J:
I see.
H.M.Jr:
You'd better - you -
J:
Well then, he's maybe hoping to get one.
H.M.Jr:
No, there's no request for any such appointment.
There isn't, huh?
J:
H.M.Jr:
No.
J:
I see.
H.M.Jr:
J:
Ah - you better Well, if there should be one, I've - I've already
telephoned you.
J:
What's the fellow's name, Spalding?
Curtis.
H.M.Jr:
Curtis.
J:
His name is Curtis.
H.M.Jr:
Of A. G. Spalding.
J:
President - I understand he's President of A. G.
H.M.Jr:
Spalding & Co.
H.M.Jr:
Well, I need a new pair of golf clubs.
121
-5J:
H.M.Jr:
J:
H.M.Jr:
J:
What?
I need a new pair of golf clubs.
All right, then you might get two.
(Laughs) All right.
Well anyway, I - I told him that I would relay
the message to you.
H.M.Jr:
J:
All
right,
hasn't
- well it's very nice - (laughing) - he
Maybe you can get two.
J:
All right.
All right.
H.M.Jr:
All right, sir.
J:
Goodbye.
H.M.Jr:
Goodbye.
H.M.Jr:
122
TREASURY DEPARTMENT
Ms
INTER OFFICE COMMUNICATION
DATE January 7, 1937
To
Secretary Morgenthau
FROM
Miss Roche
Automotive Industrial Developments.
Federal Conciliators are still trying to prevail upon General
Motors to agree to a conference with Union officials. Up to this time
there is no word that they have been successful.
Very interesting data is coming to light regarding the excessive speed-up system in General Motors, which has made the slogan "Through
at Forty" a common expression among workers. Only very young men can
possibly stand the pressure of work on the production and conveyor lines.
This is one of the chief grievances.
Demands are being made for the impeachment of Judge Black, who
issued the sweeping injunction prohibiting picketing and striking in
Flint, Michigan. Probably no judge has issued so drastic an injunction
as this since the days of Judge Parker of "yellow dog" contract fame,
whose confirmation to the United States Supreme Court was prevented in
the Senate by Senator La Follette, Sr., and other progressives some fifteen
years ago.
Judge Black, it develops, owns approximately 6655 shares of
General Motors worth at present market quotation approximately $219,900.00.
I think it might be interesting to ask Mr. Lewis this evening
to tell you something of the general practice of industrial espionage and
storing up of munitions and tear gas by General Motors, and also ask him
to give a little picture of the great pressure corporations put on
employees through company unions and the exorbitant amounts of money they
spend on these employe representation plans to prevent genuine collective
bargaining.
gRoche
123
A conference was held January 7th at 10:30 in Senator Robinson's
office attended by Secretary Morgenthau, Senators Glass and Harrison, Speaker
Bankhead, Representatives Rayburn, Doughton, Vinson, Steagall, and Golds-
borough, Eccles, Acting Budget Director Bell, Jesse Jones, Alley, and Herman
Oliphant.
Robinson presiding, asked the Secretary to state the general
plan for the legislation requiring immediate action. He enumerated the
powers requiring extension.
Jones then stated the general plan he had in mind for his legis-
lation. Glass spoke in opposition to "mass legislation" in the form of
any such omnibus bill.
After announcing that Senator Wagner would head the Banking and
Currency Committee and that he was sick but would abide by the result of
the conference, Robinson spoke strongly against further doubtful delega-
tion of legislative power.
Jones made an extended statement of what his organizations had
been doing, mentioning farm commodities, mortgages, and railroads as the
remaining important problems, and arguing for power in the President to
discontinue any or all of his functions. Glass and Bankhead insisted on
the RFC taking the responsibility for such discontinuance.
There was a general expression of strong feeling against executive extension and it was agreed no such power should be included in any
of this legislation, but there was general agreement to giving the President power
to suspend the functions in which Jones is interested.
124
- 2-
It was rather quickly agreed to put Jones's legislation in a
separate bill. Robinson argued that the Treasury and the Federal Reserve
legislation should go into one bill, but, upon Glass's insistence, it
was agreed that they should be separated. Glass said he would not oppose
the Federal Reserve extension. He assured the Secretary there would be
no difficulty about his legislation, although he said he was personally
strongly opposed to extending the power to devalue. It was agreed that
all legislation should be introduced simultaneously.
Eccles then stated the substance of his legislation. Glass,
while agreeing to this extension, spoke strongly against the power as
tending to restore a bond-supported currency, which, he said, Congress
had tried for 40 years to get away from, succeeding only with the passage
of the Federal Reserve Act.
It was agreed that in all casec the extension should be the end
of the fiscal year involved.
125
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
All
DATE January 8, 1937
TO
The Secretary
FROM
Miss Lonigan
w
Attached are two memoranda relating to employment and the cost
of living Reemployment and New Industries
The Low-Rent Housing Industry
126
THE LOW-REIT HOUSING INDUSTRY
The immediate opening for new industries to meet present
unemployment is in provision of necessities for mass consumption,
especially for people of lower income levels than were aided by
the business recovery of 1922-1929.
The chief necessity of mass consumption in the face of the
rising cost of living is housing. It is the poorer people who will
bear the brunt of the approaching shortage of housing. Relief clients
are already suffering in New York City.
A housing shortage means that mothers of poor families must
walk the streets, going from house to house, only to be rebuffed by
landlords because they have children, or are on relief, or cannot
provide evidence of continuing employment. Families with children
pay more than they can afford for rent, and economize on food. Sick
people, and those with heart disease or physical defects, take rooms
on the top floor of a walk-up tenement, because top floors are
cheaper. Old people take houses with worn-out stoves, and carry coal
up several flights of stairs. Shabby private houses in old sections
are remodelled for two, three, or six-family tenements, creating new
slums and new vested interests which will fight all future housing
legislation.
There is not the slightest chance that private industry can be
organized in time to relieve next year's shortage. Even if private
industry were expanded to its full limit it could not meet the
immediate demand for new housing. But there is no private industry
providing low-rent housing. Industry has never entered that field.
127
-2The need for housing is so great that it no longer matters whether
the government finds the one best method or not, so long as houses
are built. It is far better to make grants to several types of
housing agencies, in time, than to find the best agency, too late.
Prompt expansion of public housing will indirectly stimulate
private industry by far more than the amount of government expenditure.
It will speed up the activity of private builders because of the money
put into circulation. It will stimulate a large circle of satellite
industries that always increase with new housing.
Funds used in low-rent housing will meet the need to put excess
reserves to work in productive employment. The only other employment
for excess reserves is speculation, in one form or another.
Finally, the best single way to expand the market for farmers
raising wheat, dairy, meat, and fruit products is to reduce the cost
of housing. The poor man's budget may support rising costs for one
or the other, but it cannot support both.
If public housing is not begun promptly, it will make the cost
of relief even higher, lead to demands for even higher WPA wages, and
cause more strikes in private industry, because of the rising cost
of living.
January 8, 1937
128
REEMPLOYMENT AND NEW INDUSTRIES
The essential problem in reemployment is the creation of new
firms and new industries. Appeals to existing firms to increase
employment will never be sufficient.
Old firms never expand fast enough to take care of the oncoming
working population. It is new firms and new industries that take
care of the 400,000 new workers each year. There must be a gain in
the number of employers before there can be large gains in the
number of the employed.
Recovery after every depression has been due to the rise of new
industries. Recovery from the 1914 depression was due to the new
manufacture of war materials for Europe. In 1919, recovery from the
incipient decline after demobilization was due to development of
new mass consumption industries, to satisfy the needs of workers with
post-war wages. Silk was the most striking example. Ready-made
clothing. furs, and textiles were others. In 1922, recovery was due
to new industries to provide consumers' durable goods - automobiles,
radios, and suburban housing for those with high wages.
All future recovery will be found in new inventions and new
industries which can supply the needs of the masses at lower and lower
levels of the wage scale.
The explanation of present unemployment must be sought in the
scarcity of new employers. Private enterprise did not develop new
firms and new industries in 1933-1936 at the rate that is usual for
-2-
129
this stage of recovery. Industry is not seeking money in the investment market for new undertakings, nor seeking bank loans for further
expansion, at its usual rate. The turnover of bank deposits is still low.
The reason that prevents private enterprise from starting new
ventures is that risk-taking is still not as well paid as safe investment in bonds or other forms of debt. The need is there, but men who
start new ventures must see favorable returns ahead for the critical
years of a new enterprise. Their forecasts may have been good or bad,
but they are final. The new ventures have not been started, the new
employments have not been created. The effect of this delay must somehow be counteracted.
It has been claimed that government spending would replace private
investment. But government spending did not replace investment in
new ventures because, like the Federal Farm Board, it was artificial,
inconstant and unpredictable. It did not encourage risk-taking.
Artificial "purchasing power" does not create new sources of
employment. It provides more business for existing units, rather than
the setting up of new units. It increases the cost of living rather
than increasing the supply of employments. All influences which increase
government spending, without increasing new employment, tend to increase
monopoly. That is why retail business favors them.
The remedy is a reorientation of government spending, not to
create "purchasing power" but to create employment. This means that
all government emergency spending should be coordinated and used as a
capital fund for the needy with emphasis on two things - continuous
encouragement of new firms and new industries in private business, and
a continuously increasing degree of self-support in public undertakings.
This is the original program outlined by the President in his relief
message in January 1935.
January 8, 1937
130
January 8, 1937
9:30
9:30 A.M.
GROUP MEETING
Present:
Mr. McReynolds
Mr. Upham
Mr. Haas
Miss Roche
Mr. Gibbons
Mr. Taylor
Mr. Gaston
Mr. Oliphant
McReynolds:
H.M.Jr:
and it's easy enough for me to arrange it.
Have you got a friend there?
McReynolds: No, but they - I know these Inaugural Committee
boys.
H.M.Jr:
Well -
McReynolds: And H.M. Jr:
Well, maybe somebody else here is interested - I
mean I told them point blank if they thought I was
going to be under there and look at Mrs. Morgenthau
down below sitting in the rain, they were mistaken;
one of us would be absent. I mean I'm thinking of
this covered stand. But if you've got any friends
around here Oliphant:
I hope I am or one member of my family is a friend
of Mac's.
McReynolds: Well, of course, I don't suppose you could get very
many under there. But how many would you want?
I don't suppose you'd need a lot of help.
H.M.Jr:
Well, it's all right, as I say.
McReynolds: Who's getting it for you?
H.M.Jr:
I spoke to Admiral Grayson. I called Admiral Grayson.
McReynolds: On well, Grayson will take care of it.
But I'm so used to having to scramble for myself the
H.M.Jr:
131
-2-
last four years that I know if I don't go after
it myself - I'm not referring to people around
here
- nobody
Admiral
myself. else will. No, I called up the
I hear you took my suggestion to charge a dollar
a seat and the Welfare is going to get $175.
McReynolds: I didn't know they had taken that. Have you heard
of it, anybody? I got a request for 60 from a few
of these offices around here - 60 chairs. We have
sent around bills for sixty dollars.
H.M.Jr:
George?
Haas:
I have nothing this morning.
Not a thing.
Roche:
Taylor:
Mr. Reefer. (Hands Secretary some papers)
H.M.Jr:
Yes, thanks. Herbert?
Gaston:
I haven't anything.
H.M.Jr:
Did they cross-question you much last night?
Gaston:
No, I had only three telephone calls after I got
home, two or three at the office before I left.
H.M.Jr:
Hello Steve.
Gaston:
I didn't have very many calls.
H.M.Jr:
Herman?
Oliphant:
Lamar Hardy's here; I wasn't able to get him last
night or yet this morning. I'm just staying after
it - telephoning him.
Huh?
It's of general interest, I think, that the Supreme
Court decided in a recent case that a person seeking
a refund of processing taxes would have to go back
and comply with all those provisions we put in the
statute designed to make that none too easy, among
other things giving the Commissioner 18 months in
132
-3-
H.M.Jr:
which to pass on his claim. So I imagine that now,
with the decision on that case, we will begin to
get a considerable amount of those refunds.
And another thing, I noticed Glass, when he left
that conference, was asked, was he not, if they
had separated the Stabilization Fund and the gold I mean the dollar thing, and Well, my own guess is that he is going to do quite
a bit of mumbling on that, but I don't look for
much trouble.
Oliphant:
Of course, he might want to get it in a separate
H.M.Jr:
bill so that - to play one off against the other.
I don't think they'11 let him. Do those two bills
Oliphant:
They'11 be introduced when the gavel falls.
H.M.Jr:
go in the hopper today?
I must say the temper of the gentlemen that we met
with on the Hill yesterday was excellent, and I felt
that their attitude towards the Treasury was as good
as it's ever been.
Incidentally, one of them, the Speaker said, though,
"As long as we have Pat Harrison here, what about
taxes and tax bill, etc.?" So I said, "Well, I'm
not ready to talk on that." Harrison said, "No.
No, we're not ready. We're working with the
Treasury; we're not ready."
Steve?
Gibbons:
You heard about Mr. Hearst's episode, trying to pull
H.M.Jr:
a publicity stunt with that aviator.
I can't hear.
Gibbons:
I say you heard about what happened in New York the
day before yesterday - Hearst's publicity stunt, one
of his papers trying to get a - have us stop a
Spanish boat.
H.M.Jr:
I can't hear, Steve.
133
-4Gibbons:
H.M.Jr:
Gibbons:
Trying to stop a Spanish boat that was sailing.
Yes.
This aviator went into court after the Collector
had cleared the boat and said that they owed him
$1,500, which of course they were perfectly willing
to pay. But he didn't want that. He wanted the
Coast Guard to go down and bring the boat back.
And I happened to be up there at the launching of
the ship - talked it over with Harry Durning - so
obvious it was just a stunt. They would have had
this Acosta flying down over the ship taking moving
pictures
andsail.
all that sort of thing. So Harry just
let
the boat
H.M.Jr:
But he didn't. He fell for it. He didn't, because
he did exactly what they wanted him to do.
Gibbons:
H.M.Jr:
Well, the way they had it at 5 o'clock
Why, he sent a radio down to stop the ship, had
them accompany the Coast Guard - what's the name?
Gaston:
H.M.Jr:
Hottel.
Hottel got the Marshal and then - then he communicated
with Durning and Durning ordered him to release it.
Gibbons:
At
I talked
- well then, that
wasthe
thetime
Coast
Guard to
didDurning
it.
H.M.Jr:
They certainly did, because I called up Admiral
Waesche yesterday and inquired about it, and they
sent this Marshal down and, if I can use my legal
language, they had a writ instead of a libel, and
they had the wrong thing. A writ is for an individual
and a libel is for a boat. Is that right?
Oliphant:
Gibbons:
H.M.Jr:
(Nods affirmatively)
Hottel did that on his own then.
They certainly fell for it, and so did the Collector,
if he didn't instigate it - I don't know. But quite
a story - as long as you brought it up - it's just
134
-5Gibbons:
H.M.Jr:
Well, at 5 o'clock I talked to Harry and
Well, it was all in the papers, and I asked
Waesche, "Is it the usual thing for a Coast
Guard
boatHarbor?"
to accompany every boat that goes
out of the
Gibbons:
Certainly not.
H.M.Jr:
And they got this writ - is that what you call it? that you serve on an individual, and the Marshal
did go down on the Coast Guard. They did radio
down. And then, the thing that you need to stop
a
boat is a libel and not a writ; they had the wrong
thing. And so the boat sailed. Is that the correct
legal language?
Gibbons:
Well, Hottel then did this thing on his own. I'm
going to look into that thing, because Durning
was just decidedly opposite at 5 o'clock. Now,
Hottel had no reason at all - took this thing on
himself.
H.M.Jr:
Well, I don't know. All I know is the boat was
stopped, the U. S. Marshal was taken down with a
writ for the salary and the - this aviator
Taylor:
They talked to me about that a couple times on
H.M.Jr:
Pardon me?
Taylor:
Durning let them go.
H.M.dr:
After they stopped them.
Taylor:
No, no.
Gibbons:
No, before. No, Hottel did this thing without any
orders at all.
H.M.Jr:
Taylor:
that same day, and the Collector of the Port - that's
correct, they let him go.
The Marshal went down with this writ on board a
Coast Guard boat.
Yes, that's right.
135
-6H.M.Jr:
And stopped this boat.
Gibbons:
Yes, but the Collector didn't do anything about it.
Yes, that's the only point.
Taylor:
Gibbons:
The
Guard had absolutely no right to do that,
in myCoast
opinion.
H.M.Jr:
Then I asked Mr. Waesche was everything legal and
everything proper and he said that Hottel had
checked with him before he had done it.
Gibbons:
Well, just making a cat's-paw out of the Coast
H.M.Jr:
Well, it worked anyway.
Taylor:
Your point is if they'd brought it to Durning's
Gibbons:
At the time I left him he hadn't known anything
about Hottel doing this.
Taylor:
That ought to develop because, as I say, they
talked to me and Steve about it.
H.M.Jr:
All I know about it - I called up Waesche - "I
want to know everything that you did, if it is
legal and regular, routine. If it is, don't call
me back." He didn't call me back, so I dropped
the matter. See? Now, where the Collector or
anything else is, I don't know.
Well, I'm going to find out where - pardon I'm going to find out if Hottel took the thing on
himself to do it.
Gibbons:
Guard and tried to do it out of the Collector.
Just a typical Hearst publicity stunt.
attention he'd have stopped it.
H.M.Jr:
I can't tell.
Oliphant:
Well, I'm bound to say that there's a tendency on
the part of the Coast Guard to take legal matters
into their own hands. I understand they have a
large number of students taking a correspondence
136
-7 course in law and that is paid for by a special
appropriation of Congress. There have been a
number of instances where matters should have
been referred to the Legal Department for action.
Gibbons:
Should where they are in touch. That is presumed
to be when they are out on the high seas and out
of the way places where they are - that is, times
when they have to know something about the law.
But
Oliphant:
I was very much surprised to find that we are
paying for a large number of students who are
taking correspondence courses in law, a thoroughly
disreputable - thoroughly disreputable form of
legal education.
H.M.Jr:
Oliphant:
That is not a good way to learn law?
Well, it's a good way to learn to practice medicine,
H.M.Jr:
Miss Roche should have something to say there.
Taylor:
Gaston:
In other words, the patients
Well, they bear their mistakes as long as they can.
Pay it out loud, George, I dare you to.
Haas:
What?
Oliphant:
but not law. (Hearty laughter)
Oliphant:
I dare you to say it out loud.
I said they thought - I thought that's the way Abe
Lincoln learned his. I just got in the habit of
that, talking taxes and all
No better was available at that time.
H.M.Jr:
Well, the launching went off successfully?
Gibbons:
The launching was successful.
H.M.Jr:
All right. If anybody's got anything - anybody got
anything personally, privately, under the table?
Upham:
Haas:
Jan 8 -19237
PROPOSED LEGISLATION 75th CONGRESS
COAST GUARD
1. INCREASE EFFICIENCY OF COAST GUARD
To provide for voluntary and involuntary retirement of officers of
the Coast Guard. Involuntary retirement is to be brought about by
action of the President upon the recommendation of a Board convened
for the purpose of making recommendations for such involuntary re-
tirement. Draft of this bill has been submitted to Budget. A bill
of the same title was introduced in the last Congress but permitted
to die by the Department. The present bill is a substantial revision
of that bill with selection features, as well as provisions relating
to enlistments, eliminated. See bill ENLISTMENTS IN THE COAST GUARD,
EXTENSION OF.
2. ENLISTMENTS IN THE COAST GUARD, EXTENSION OF
To authorize extensions of enlistments for 1, 2, or 3 years; to permit detention of enlisted men beyond their terms of enlistment when
necessary in the public interests; to extend to personnel (not civil)
the facilities of the Public Health Service; to extend certain naturalization privileges to Filipinos serving in the Coast Guard; to enable
retired Coast Guard officers to accept any other office to which compensation is attached; to authorize the awarding of a distinguished
flying cross to members of the aviation branch; and to credit a cadet
with $250 upon entering the academy to cover cost of initial clothing
and equipment. Draft of bill prepared but not yet submitted to Budget.
Many of these provisions were formerly included in the bill to INCREASE
EFFICIENCY OF COAST GUARD.
3. PROFESSORS BILL
To establish a permanent instruction staff for the Coast Guard Academy
and to create a Board of Visitors therefor. Bill would authorize the
appointment of 5 professors and 2 civilian instructors, the professors
to be appointed the President and to be commissioned officers. The
Secretary is to appoint the civilian instructors in accordance with
civil service laws and regulations. Board of Visitors is to consist
of 2 Senators and 3 Members of the House, to be appointed by the Chairmen of the committees handling Coast Guard matters. Bill approved by
Budget May 20, 1936, prior to insertion of provision for Board of Visitors; letters of transmittal signed by Acting Secretary June 9, 1936.
In view of revision of bill, letters of transmittal have also been re-
vised.
4. COAST GUARD OFFICERS, ACCEPTANCE OF FOREIGN DECORATIONS
To authorize various Coast Guard officers to accept certain foreign
decorations and diplimas. Draft of bill approved by Budget November
27, 1936.
138
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5. COAST GUARD OFFICERS, PURCHASE OF ORDNANCE MATERIAL
To authorize Coast Guard officers to purchase articles of ordnance
material in the same manner as such articles may be purchased by officers of the Army, Navy and Marine Corps. Draft of bill submitted to
Budget December 22, 1936.
6. RETIRED COAST GUARD OFFICERS, APPOINTMENT TO PUBLIC OFFICE
To permit retired Coast Guard officers to accept any other office to
which compensation is attached. This will place such retired offioers on a parity in this respect with retired officers of the Army and
Navy who are now excepted from the law providing that no person who
holds an office to which is attached compensati on of $2500 or more shall
be appointed to any other office to which compensation is attached, un-
less specially authorized by law. This provision is to be included in
the bill relating to ENLISTMENTS IN THE COAST GUARD, EXTENSION OF.
CUSTOMS
1. CALDER ACT, AMENDMENT
To increase Secretary's power to appoint customs officers by adding
thereto authority to appoint assistant collectors, assistant comptrollers, and at New York, the assistant surveyor and chief assistant
appraiser. Also to authorize appointment of additional solicitors at
ports other than New York. Approved by Budget April 30, 1936. Letters
of transmittal signed by Acting Secretary May 11, 1936. This bill will
probably be inserted in the CUS TOMS OMNIBUS BILL.
2. CUSTOMS AND IMMIGRATION FACILITIES AT BORDERS
To increase from $3000 and $6000 to $5000 and $10000, respectively, the
limitation on the amount which may be expended on customs and immigra-
tion office and housing facilities at the borders. Approved by Budget
during first session but not recommended to Congress. Returned to Customs November 15, 1936, for determination of whether enactment of bill
is desired.
3. FENCES AND GATES AT BORDERS
To provide protective gates and fences for the better enforcement of
the customs laws, on highways running along or crossing our international
boundaries. Returned to Customs November 15, 1936, for determination of
whether enactment of bill is desired.
4. CUSTOMS OMNIBUS BILL
To emend certain administrative provisions of the Tariff Act of 1930;
to remedy existing defects in the customs laws, etc. Several of the
139
-3-
provisions of this bill are (a) to withdraw from customs territory
the Island of Wake and the Midway Islands in order to obviate unneces-
sary examination of Clipper ships at fuelling stations, (b) to liberal-
ize provisions with respect to marking of imported merchandise, and
(c) to permit the Secretary to issue special instructions in order that
exceptions may be made to the requirement that one package of every ten
of the same article must be inspected, examined, and appraised.
5. SURVEYOR BILL
To abolish the office of Surveyor of Customs at the port of New York.
Draft of bill submitted to Budget November 25, 1936.
ENFORCEMENT, GENERAL
1.
ATTORNEYS BILL
To modernize and plug loopholes in the statutes regulating the prosecution by persons at present or formerly in the Government service, of
claims in which the United States is interested, by making them uniform
as to classes of persons to which they apply, extending them to include
persons employed by independent establishments, Government-owned or con-
trolled corporations, and the District of Columbia, etc. Submitted to
Budget last session, thence through National Emergency Council to Justice; Justice approved, but suggested revision so as to exempt special
counsel and retired officers of Army, Navy, and Marine Corps. Revised
draft not yet submitted to Budget.
2. FORFEITURE BILL
To provide for the seizure and forfeiture of vessels, vehicles, and
aircraft used to transport narcotic drugs, counterfeiting material,
firearms, etc. Approved by Budget April 1, 1936.
3. ATTACHMENT BILL
To impose upon smugglers liability for customs duties and internalrevenue taxes for the importation of smuggled merchandise, and to per-
mit the use of foreign attachment in enforcing such liability. Draft
of bill prepared but not yet submitted to Budget.
4. TREASURY AGENCY SERVICE
To consolidate the Treasury enforcement agencies. Passed by House May
6, 1936, and reported by Senate Finance Committee on June 8, 1936. See
H.R. 12556, 74th Congress.
5. PREFERENCE, UNITED STATES PROCEEDINGS
To grant preference as to hearing and trial to proceedings involving
fraud upon the revenue of the United States. Passed Senate June 1, 1936,
140
and referred to House Judiciary Committee. See S. 4341, 74th Congress.
FISCAL
1. GOLD CONTENT OF DOLLAR, EXTEND PRESIDENT'S AUTHORITY
Extend beyond January 30, 1937, the authority of the President to fix
the gold content of the dollar. Draft of bill prepared but not yet
submitted to Budget.
2. STABILIZATION FUND POWERS, EXTEND
To extend beyond January 30, 1937, the stabilization fund and powers
of the Secretary in connection therewith.
3. DUPLICATE CHECKS, BONDS OF INDEMNITY
To provide that no bond of indemnity need be executed in any case where
the Secretary is satisfied that the loss of a check occurred without
fault of the person from whom such bond would otherwise be due, while
such check was in control or custody of the United States or while it was
being transported. This bill was inserted in the INSURANCE BILL.
4. FIVE PERCENT BILL
To cover into the Treasury as a miscellaneous receipt the so-called 5%
National Bank Note Redemption Fund. This fund has now been returned to
the national banks, except for a portion estimated to be sufficient to
redeem the outstanding notes and defray the administrative expenses in
connection with such redemption. In order to avoid burdensome bookkeeping procedure, the Treasurer has recommended that the sum retained be
covered into the Treasury. Thereafter, amounts which would otherwise
be paid out of the fund to cover redemption and administrative expenses
will be provided by annual appropriations. Recommendation of this bill
to Congress is being withheld pending final disposition of the suit brought
by the Dixie Terminal Co., to recover interest on a coupon of a Fourth
Liberty Loan 42% bond called for redemption April 15, 1934.
5. SECOND LIBERTY BOND ACT, AMEND
To permit (1) withdrawal without loss of interest of postal savings funds
to purchase savings bonds (baby bonds); (2) the free use of the Registry
Service of the Post Office Department for transmitting such bonds through
the mails, and (3) the issuance of duplicate lost, stolen or destroyed
bonds without requiring a bond of indemnity. Action deferred, at suggestion of Mr. Broughton, on (1) and (2), while (3) was incorporated in
the INSURANCE BILL.
141
-5-
6. INSURANCE BILL
To minimize risks of loss and destruction of, and damage to, valuables
shipped by executive departments, independent establishments, agencies,
wholly-owned corporations, officers and employees of the United States,
by authorizing an initial appropriation of $500,000 and an annual appropriation of $200,000 for 10 years, to be used, under the direction
of the Secretary, for the payment, reimbursement, replacement and duplication of valuables lost, destroyed, or damaged, in the course of shipment effected in accordance with regulations prescribed by the Postmaster
General with the approval of the President. This fund is to be a revolving fund. This bill also includes provisions relating to the furnishing
of bonds of indemnity for the issuance of duplicate lost, stolen, or
destroyed checks and bonds, explanation of which appears elsewhere under
this heading. Draft of bill prepared and sent to Budget for approval on
November 25, 1936.
7. VOUCHER BILL
To give specific statutory sanction to 17 year old practice of Division
of Disbursement's preparing both United States Government Life Insurance
dividends checks, and vouchers from addressograph equipment lent by Veterans'
Administration. This is necessary to obviate recent ruling of Comptroller
General that this practice violates Act of August 23, 1912, which provides
that all vouchers shall be prepared and examined by and through the administrative heads of divisions and bureaus of the executive departments and
not by the disbursing clerks of said departments. Draft of bill now being
prepared.
8. CHECKS, PHILIPPINE AND PUERTO RICO TRUST FUND
To amend section 21, Permanent Appropriation Repeal Act, in order to prevent the covering into the Treasury of amounts of checks on account of
public debt operations of the Philippine Islands and Puerto Rico which
are not presented for payment within the prescribed period (end of fiscal year following fiscal year of issue). Passed Senate June 1, 1936,
and referred to House Committee on Expenditures. See S. 4596, 74th
Congress.
9. MEDALS, COMMEMORATIVE, IN LIEU OF COINS
To provide for the striking of commenorative medals in lieu of coins.
Passed Senate July 30, 1935, and referred to House Coinage Committee;
House bill not reported. See S. 3086 and H. R. 8969, 74th Congress.
INTERNAL REVENUE
1. MISCELLANEOUS TAX BILL
To remove existing defects in internal-revenue laws, plug loopholes, etc.
Draft of bill not yet prepared. For list of suggested amendments referonce is made to comprehensive memorandum prepared for Mr. Oliphant in
142
-6-
November, 1936. Suggestions include changes affecting the Board of
Tax Appeals, Capital Stock Tax, Collection of Tax, Estate Tax, Estate
and Gift Tax, Income Tax, Miscellaneous Excise Taxos, Penalties, and
Postage Rates.
MISCELLANEOUS
1. PHILATELY BILL (STAMP CATALOGUE)
To permit the reproduction of illustrations of foreign or United States
postage stamps bearing postmark cancellations; to provide for the publication by the Government of a stamp catalogue; and to prohibit the sale
of plates. Transmitted to Budget November 21, 1936.
2. DEATH OF FEDERAL EMPLOYEES ABROAD
To pay the expenses back to the United States of the remains and fami-
lies of all Federal employees who die while abroad. Draft of bill not
yet prepared.
3. OATHS, RENEWALS OF
To dispense with renewals of oaths of office for every change in status,
where the public interest will not be jeopardized. Senate bill passed
Senate June 1, 1936; House bill reported by House Judiciary Committee
on May 8, 1936. See S. 4519 and H.R. 12219, 74th Congress.
Note: The Treasury will sponsor several bills for the relief of
Treasury employees.
NARCOTICS
1. PUNISHMENT OF SECOND, THIRD, AND SUBSEQUENT NARCOTIC OFFENDERS
To increase the punishment of second, third and subsequent offenders
against the narcotic laws. Approved by Budget April 16, 1936.
2. PHYSICIANS, REGULATION OF
To provide for the automatic revocation of registration under the Harrison Act of physicians and other persons convicted of violation of
that Act, and refusal of registration to persons thus convicted. Studying constitutionality in light of comments made by Dr. Woodward of
American Medical Association.
3. RACEHORSE DOPING BILL
To discourage the administration of narcotic drugs to racehorses, except for medical purposes, by providing severe penalties for those
violating the bill. Commissioner of Narootics authorized to prescribe
143
-7-
reasonable regulations which may include registration of animals and
owners. Draft of bill under Commerce power prepared last session. Draft
of bill under Treaty power recently prepared but not yet submitted to
Budget.
4. CANNABIS (MARIHUANA) BILL
To regulate the production, manufacture and disposition of marihuana
by the imposition of an occupational tax upon such production, manufac-
ture and di sposition and a transfer tax upon all transfers of marihuana.
Draft of bill has been prepared but has not yet been submitted to Budget.
PROCUREMENT
1. KEYES ELLIOTT AREA IN D. C. EXTEND
To emend the Public Buildings Act so as to include within the Northwest
Area (within which building sites may be acquired by the Secretary) the
area west of 19th Street, N. W., bounded by New York Ave., N. W., E.
Street, N. W., and the Potomac River; also squares 122, 104, 81, 58,
59, 44, and 33. Reported by House Public Buildings and Grounds Commit-
tee; Senate bill not reported. See H. R. 11959 and S. 4696, 74th
Congress.
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
of
DATE
TO
FROM
144
January 8, 1937
Secretary Morgenthau
Miss Roche
Developments on General Motors' Situation
The American Bar Association has taken cognizance of the seriousness of the issuing of an injunction by Judge Black, who owns considerable
General Motors' stock, and has ordered its Grievance Committee to investi-
gate his action. Cadillac Plant of General Motors is shut down, bringing
the total number of men now out to nearly 80,000.
An interesting development is the friction that is being re-
ported between union and non-union employes of General Motors, due in all
probability to company instigation through company controlled employe
representatives.
Governor Murphy is endeavoring, as are the Federal conciliators,
to induce General Motors' officials to enter into a conference on the
situation. No cooperation has been given so far by the General Motors'
officials.
J. Roche
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
K
145
DATE January 8, 1937
TO
FROM
Secretary Morgenthau
Miss Roche
Calendar - January 8th.
The entire morning following Staff Meeting was given over to
the conference with the representatives of the International Pressmen's
Union, Mr. Graves, Mr. Wilson and Mr. Hall on the matter of the change
in the method of printing the green bottled-in-bond revenue stamps. We
all felt that it was a very satisfactory conference although no final
decision was reached and we are having a further discussion with experts
from the Bureau of Engraving and Printing to testify on relative merits
of the two processes regarding counterfeiting -- engraving versus offset
printing. At the next conference representatives of the Plate Engravers
will also be present.
There is nothing immediate about the situation. The contemplated change of method would not take place for several months or a year,
nor is there any serious question of labor displacement involved.
The chief concern of the Pressmen's Union is that in the future,
if this change is made, other revenue stamps may be changed in like way
and their particular operations in the Bureau be curtailed. They also
feel that if this change is not made to engraving the increased use of
the stamps printed on the offset processes will in the future substantially
increase and give more opportunities for jobs in their craft.
The spirit of the conference was most friendly and cooperative
and both Mr. Wilson and Mr. Graves were exceedingly frank and cooperative
in their discussions with the Union officials and appreciative of the
information and suggestions given by the Union officials in the course
of the discussion.
g Roche
TREASURY DEPARTMENT
146
INTER OFFICE COMMUNICATION
DATE January 8, 1937
TO
FROM
Secretary Morgenthau
Mr. Haag
On
At a meeting with Mr. Gerrish Milliken, of the Deering
Milliken and Company, New York City, in your office at 11:45 this
morning, you requested that I discuss further with Mr. Milliken
the problem he raised with regard to the operation of the un-
distributed profits tax on several specific textile corporations
to which Mr. Milliken's company has extended substantial loans.
Mr. Milliken said he was in the position of sole creditor but
that in order to have his loan repaid it would be necessary for
him to foreclose, which would be at the expense of the small stock-
holder. He said he was sure it was not the intention of the
Administration to enact tax legislation which would bring injury
upon the small shareholder. You asked that I investigate
thoroughly the specific companies to which he referred and that I
furnish you with a written report.
TREASURY DEPARTMENT
147
INTER OFFICE COMMUNICATION
DATE January 8, 1937
TO
Secretary Morgenthau
FROM
Mr. Haas OAA
At a meeting in your office at 3:10 today with
Mr. Julian W. Curtis, Chairman of the Board of Directors of
the A. G. Spaulding and Brothers, and also Chairman of the Tax
Committee on the Sporting Goods Industry, following a discussion by Mr. Curtis of the present tax on sporting goods, you
requested that I discuss the matter further with Mr. Ourtis,
and go into this whole matter with Mr. Curtis, and submit a
written report of my findings to you.
148
GRAY
U
Paris
All
Dated January 8, 1937
Rec'd 2:18 p.m.
Secretary of State
Washington
26, January 8, 5 p.m.
FROM COCHRAN.
Exceptionally quiet day on Paris exchange market.
Security market on the other hand is active and firm with
French rentes up 50 centimes to one franc and industrials
in demand. Market observers encouraged to see such a good
day in spite of international political situation and
particularly the developments in the Alexandretta affair.
Part of market strength may well be attributed to amelioration of French labor situation and part to more frequently
occurring observations in British as well as French
financial press upon actual evidence of economic recovery
in France.
In AGENCE ECONOMIQUE Willis reports administration will
seek prolongation of monetary authority until June 30,
1939. Reuter cables from New York that Governor Eccles
participated in conference on foregoing subject and that
he seeks inclusion in the legislation of an "extension of
the authorization under which United States securities are
eligible as coverage for Federal Reserve notes".
(END SECTION ONE)
CSB
BULLITT
149
Section two From
of telegram
No. 26, January 8, 5 p.m.
Paris.
Yesterday afternoon I had a talk with the resident
officer in charge of an American Bank in Paris. As for his
bank, he confirmed information which I communicated recently
to you as received from one of the other important American
banks in Paris, namely, that accounts show that banking
clients, mainly industrial concerns, have experienced an
improvement in business during the past few months, are
paying dividends, and have increased their reserves. This
banker said that French franc deposits of his bank which
had picked up after devaluation had declined somewhat due
to end of year requirements, but are again increasing.
However, he stated, the announcement made recently to the
no longer
effect that the Bank of France would/discourage movement
of funds from France abroad for investment in foreign
exchange or securities is being seized as an opportunity
for some of these business concerns which have been
now
prospering/to place abroad the proceeds of their business.
That is to say, the people benefiting therefrom are not
yet sufficiently convinced of the soundness of the
monetary and financial outlook in France to place their
gains in French investments or hold them in French banks,
despite the fact that business is improving. It is understood confidentially by my informant that the Minister of
Finance had thought that this was an appropriate gesture
to be made with a view to covercoming the belief which
was
150
-2-
was growing toward the end of the year that placing of
exchange control might prove necessary, but that the
Bank of France had been opposed to the above-mentioned
step. Thus, advantage is being taken of this generous
gesture to such an extent that the present tendency may
in fact result in necessitating some sort of exchange
control if it is not checked by a genuine revival in
confidence or a marked recovery in French business.
My informant confirmed my opinion that the financing
of the government is now to be accomplished through issuance
of short-term treasury bills and through borrowing at the
Bank of France. It would appear to my banking friends that
the Bank of France is likely to be obliged to give up important amounts of gold if the franc rate is to be held steady,
in view of the recurring advances by the Bank of France to
the French Treasury and judging by the extent to which
capitalists have recently operated to protect themselves
against forward francs with resultant pressure on the
exchange situation. That is to say, the pressure on the
franc is likely to become heavier as treasury borrowing
at the bank grows and consequent fear of inflation increases.
This would mean that the stabilization fund would be
obliged to take gold from the Bank of France to replenish
its funds, as it would have to yield more gold to protect
the franc. It is thought by my contact that it is possible
that
151
-3-
that the recovery in French business may be sufficient
within a few months to rescue the situation, if the authorities have the courage to see the gold supply of
the bank diminish importantly without consideration for
"war chest" alluvial. During the past few days this
banker has heard gossip of efforts on the part of France
to procure a new short-term credit from banks in London.
He believes also that some of the responsible officials
in the Ministry of Finance are still hopeful that some
arrangement can be made with the United States so that
French borrowing on the American market will be feasible.
Within the past week this American banker had called on
several of his colleagues in the important French banks
and had found a general lack of optimism regarding the
monetary outlook in France.
I talked with Pennachio of the Bank of Italy later
in the evening. He also had been paying New Year calls
on French bankers, and had the very different opinion
that proceeds of (?) business were not remaining in France,
but were moving to foreign centers. In addition, he had
likewise heard the gossip that the French were seeking
English aid in obtaining another credit.
End of message.
EA:FL:DJW
152
FEDERAL RESERVE BANK
OF NEW YORK
OFFICE CORRESPONDENCE
CONFIDENTIAL FILES
L. W. Knoke
DATE January 8, 1937.
SUBJECT TELEPHONE CONVERSATION WITH
BANK OF ENGLAND.
I called Mr. Bolton at 10:30 today and mentioned that we
were going to request him by cable tonight to make three shipments
of gold of $10,000,000 each per Steamship Manhattan on January 16,
President Harding on January 21 and Washington on January 28.
Bolton thanked me for giving him a little notice.
He then stated that he had just found out that the Chemical
Bank, which had been a steady buyer of gold in London, was always
shipping on two Red Star boats only. I replied that we had been
aware of this for a number of months, that I had discussed it with the
Chemical which had frankly told me that they had been able to make an
arrangement under which part of the freight money earned by the carrier
on the Chemical's gold was being applied against an old debt and that
the Chemical was thus enabled to liquidate some frozen items. Bolton
emphasised that as far as the Bank of England was concerned, they did
not mind at all and that I was not to imagine that he was asking me to
take some action. He wanted to mention it to me only because, if this
sort of thing continued and if, furthermore it were true as was now
being rumored, that certain German boats, through agencies in
Amsterdam, were taking gold at more or less any price, the figures on
which the Bank of England bases its gold parities were no longer correct.
I replied that the rumors about German boats breaking the conference
rate were new to me and that I would certainly keep my eyes open. Present
evidence, however, I said, did not bear out the rumor. There were, for
instance, according to reports received yesterday morning, close to
153
FEDERAL RESERVE BANK
OF NEW YORK
OFFICE CORRESPONDENCE
DATE January 8, 1937.
CONFIDENTIAL FILES
L. W. Knoke
SUBJECT: TELEPHONE CONVERSATION WITH
-2-
BANK OF ENGLAND.
$50,000,000 of gold on the way to New York, none of which was coming
on a German boat. This of course was not conclusive but did not, at
least on the face of it, quite tally with what he had learned.
We then discussed briefly the foreign exchange market in
general. I asked Bolton about France and he replied that, personally,
he was getting more faint-hearted about the French situation every day.
I inquired whether he knew to what extent the French Fund had used the
original 10,000,000,000 francs and he replied that, if he were to venture
a guess, he would say 75%.
LWK:KMC
154
January 8, 1937
4:26 P.M.
H.M.Jr:
Knoke:
H.M.Jr:
Vice-President, how are you?
Thank you. Very well indeed. Thanks very much.
I knew about it three or four days ago, but it just
came over the ticker and I wanted to congratulate
you.
K:
That is very kind of you. I greatly - I appreciate
that greatly, Mr. Secretary.
H.M.Jr:
K:
H.M.Jr:
I thinkjudgment
the Federal
good
thisReserve
time. of New York showed very
(Laughs) Well, that's - thank you very much.
Well, you earned it.
K:
(Laughs)
H.M.Jr:
I'll be seeing you Monday.
K:
That's right.
H.M.Jr:
All right.
K:
Thank you again.
H.M.Jr:
I'm delighted.
K:
Very kind of you. Thank you, sir.
H.M.Jr:
Bye.
K:
Bye.
155
TREASURY DEPARTMENT
OFFICE OF THE SECRETARY
DIVISION OF PRINTING
WASHINGTON
January 9, 1937.
Memorandum to Mr. Thompson:
In response to your telephonic request for a
statement of the duties of the Division of Printing
the following is respectfully submitted:
The Division of Printing has supervision over
printing and binding of the Treasury Department;
authorizes engraving work done by the Bureau of Engraving and Printing for all Departments and establishments, unless money, bonds or stamps are involved;
stores and distributes blank books and forms to various
Department activities; controls newspaper and periodical advertising; and exercises administrative control
over the Department's appropriations for stationery
and for printing and binding.
The
sections comprising the Division of Printing
are as
follows:
Administrative
Printing and Binding
Accounts and Statistics
Stationery
Treasury Binding and Service Section
Stores and Issues
Advertising
Office Service
ADMINISTRATIVE SECTION
The personnel of the Administrative Section con-
sists of the Chief and Assistant Chief of the Division,
who exercise general supervision over the employees
of the Division and are responsible to the Secretary
for the efficient administration of the Division.
156
-2-
PRINTING AND BINDING SECTION
This section is in charge of Mr. F. H. Berger,
ment Printing Office. In addition to Mr. Berger,
there are seven employees in this section who devote
their time to the preparation of orders for printing
who is the principal contact man with the Govern-
the
of
all
of
estimates
of
copy proofs; editing and preparing weekly Treasury
and binding; auditing vouchers covering payments in
connection work and ordered; therewith; making handling costs; inquiries revising
Decisions and maintaining a mailing list for their
distribution. Constant watchfulness is exercised to
prevent appropriation allotments made to the several
offices and divisions of the Department from being
exceeded. In this section the records are kept of
authorizations issued for engraving work to be done
by the Bureau of Engraving and Printing. The major
part of these records pertains to blank checks and
travel requests used by the entire Federal Government.
There is no printing done in the Division of
Printing.
STATIONERY SECTION
This section is supervised by Mrs. R. L. Miner,
who, with eight assistants, revises requisitions for
stationery supplies with a view to preventing waste
by restricting to actual needs the quantities of the
various items supplied. Purchase Authorities for
stationery items are prepared in this section which
also handles the correspondence in connection with
its work. Every precaution is taken to prevent the
issuance of supplies in excess of annual allotments
to the various branches of the Department.
ACCOUNTS AND STATISTICS
This section is supervised by Mr. C. N. Belt,
who, with three assistants, handles the bookkeeping
and accounting work of the Division in connection
with expenditures from printing and binding and stationery appropriations including the allotments made
thereto from other appropriations. In this section
are prepared the estimates for the appropriations
under control of the Division of Printing.
157
-3TREASURY BINDING AND SERVICE SECTION
This section is under the supervision of Mr.
John V. Shea, who, with eight assistants does special
book binding of confidential records for the Department; produces scratch pads from paper waste; cuts
paper to special sizes and renders general service
to offices in the Treasury Building.
STORES AND ISSUES SECTION
This is a warehouse section supervised by
Mr. Paul H. Moore, who, with six assistants receives,
inspects, stores, packs, and ships blank books and
forms to the different offices of the Department.
ADVERTISING SECTION
This section is under the supervision of Mr.
Leo C. Nolan, who, with two assistants, selects
advertising mediums, prepares advertising orders for
the Department and makes final audit of vouchers
therefore; keeps record of amount expended for ad-
vertising and maintains a file of sworn statements
of advertising rates submitted by publishers.
OFFICE SERVICE SECTION
The Office Service Section is supervised by
Miss D. M. Ireman, who, with four assistants, handles
the personnel work of the Division, receives and distributes mail, maintains files, directs messengers
and prepares office requisitions.
Chief, Division of Printing.
158
9:30
STAFF MEETING
Present:
January 11, 1937
9:30 A.M.
Mrs Klotz
Mr. McReynolds
Mr. Upham
Mr. Bell
Mr. Haas
Mr. White
Mr. Taylor
Mr. Gibbons
Miss Roche
Mr. Gaston
Mr. Oliphant
H.M.Jr:
(To Haas) I'll see you and White at 11:15.
Herman?
Oliphant:
Nothing at the moment. We have that letter to the
Interstate Commerce Commission almost ready to clear.
I thought it would be ready this morning, but it will
be a few minutes before it will be ready.
H.M.Jr:
Herbert?
Gaston:
Nothing much, except we are letting the boys take
pictures at the Philadelphia Mint and giving them
a story for at least Wednesday morning, when the
first trainload of gold arrives at Fort Knox.
H.M.Jr:
Gaston:
Mrs. Ross be in Philadelphia?
Mrs. Ross will be in Philadelphia and also at Fort
Knox.
Gibbons:
Was it arranged for the Coast Guard to fly her out
from Philadelphia to Fort Knox? She has to be both
places at the same time.
H.M.Jr:
No, no. I'm not so sure whether she is or not.
Gaston:
All right.
All right.
H.M.Jr:
Well, she can go out on a gold train.
Gibbons:
I was just joking.
H.M.Jr:
What?
159
-2Gibbons:
I was just joking.
H.M.Jr:
Anything else?
Gaston:
No, that's all, except the State Department has
complained about some of the statements we made
in that little pamphlet we got out.
H.M.Jr:
If you don't mind my saying, whenever a pamphlet
like that goes out, it's just got to be as good as
Ivory Soap.
Gaston:
H.M.Jr:
Yes. I thought we had it all pretty well safeguarded,
but we didn't show it to the State Department.
I think it is unfortunate. I mean it gives them a
chance to talk about it for the next four years.
Gaston:
Yes.
H.M.Jr:
Who wrote it?
Gaston:
H.M.Jr:
Craig did most of it.
Did Anslinger go over it?
Gaston:
Yes.
H.M.Jr:
What are the mistakes in it?
Gaston:
Why, as far as I have been able to see, they are very
trivial, although I haven't gone through all the
corrections that Wayne marked. The first statement
was the statement that because of its tax collection that narcotics was an important concern to the Treasury
Department because it was the Treasury Department's
responsibility for collecting the revenue. Of course
that is true, but they regard that over there as an
insufficient statement - that they should have had
something about the responsibility on account of
international conventions.
And then another place, where we said that the prevention of the import of illicit drugs was an important
function of the Customs Bureau - they objected to that
statement because they said that the international
160
-3conventions made prevention of narcotics imports
H.M.Jr:
primarily a concern of the Bureau of Narcotics.
I see.
Gaston:
H.M.Jr:
Gibbons:
H.M.Jr:
Both
correct,
they thought something statements
should haveare
been
added but
to them.
Well, if it was nothing worse than that
Splitting hairs.
I'll say so.
Gaston:
Those that I saw were just splitting hairs, but there
H.M.Jr:
may be some others that are genuine misstatements.
All right.
Taylor:
H.M.Jr:
There were two or three of them that were misstatements.
Well, anyway we'll do the best we can.
Gibbons?
Gibbons:
H.M.Jr:
Gibbons:
H.M.Jr:
Gibbons:
Nothing. Ballinger will be back today on that New
on it. situation. I'll have a report for you today
York
All right.
Going to take all the Deputy Surveyors that've been
in charge of that work - change them, put younger
Lack of administration, you know.
You mean move them around or fire them?
We are going to reduce them, move them around. A
lot OI them are about ready to retire anyhow - fellows
been
there for years. Just a question of not watching
the stuff.
H.M.Jr:
Gibbons:
H.M.Jr:
All right sir.
Bit lackadaisical unless you are there yourself.
Wayne?
161
-4Taylor:
(Nods negatively).
H.M.Jr:
George?
Haas:
H.M.Jr:
We've got this Social Security thing. (Hands report
to Secretary).
You saw they quoted the President - I mean on that
Haas:
No, I didn't.
H.M.Jr:
Yes, the boys - it was on the front page of the
Haas:
Oh yes, I did.
H.M.Jr:
Well
Haas:
That looks rather long, but in reality that is only
H.M.Jr:
All right.
Haas:
There's one other thing that you might hear something
about. We asked the Bureau to add an additional
schedule to the corporation income tax return, which
was necessary to give us some information to analyze
fund.
Times Friday and Saturday.
a summary. That's a large Act.
the operation of this undistributed profit tax; and
returns have gone out, so that the extra schedule has
to be mailed out separately. You might hear something
about it, so
H.M.Jr:
How about those two business men I sent back to you?
Haas:
The first one might work out rather interestingly.
I don't know who this Milligan is looking out for,
but we..
H.M.Jr:
The reason I asked you - I know he went up on the
Hill to see Senator George and Senator George is
coming down when?
Mrs Klotz:
At 10:45.
H.M.Jr:
So I may
Haas:
They are located in that territory, in the South.
162
-5-
H.M.Jr:
What we are going to do - we are going into it,
as you suggested, in great detail, and if he's
worried about the small stockholder, we'll know.
It's an interesting case. This man came down. I
think you call him a factor. Is that what you call
him?
Haas:
H.M.Jr:
Haas:
H.M.Jr:
He's been at his mills.
Aren't they factors?
He's a selling agent.
He's got this contract, but nothing in writing.
They have never done business in writing, so - I
mean under the law if you had a certain contract at
a certain time it exempted you; he said he finds
himself in the position that under this tax law he's
got to close on the cotton mills. He says he, his
brothers and sisters will make a million. George
had some doubts as to whether he didn't own the
corporation.
Haas:
H.M.Jr:
I found out he owned stock in those mills he's
worried about.
Well, it's interesting. Milligan is a name for
years - is a reputable name.
Haas:
Oh yes.
H.M.Jr:
I mean reputable firm.
Haas:
He's not doing anything disreputable.
H.M.Jr:
I'm pleased to have them come in that way directly no "shenanigans" - and put their cards on the table;
and when they do that I'll go 75 percent of the way.
When you are ready, let me know.
Haas:
That will take a little time.
H.M.Jr:
Well, when Senator George comes in, I'll simply tell
Haas:
Curtis?
him we are not ready. How about the other man?
163
-6H.M.Jr:
Yes, the Spalding man.
Haas:
Zucker had done quite a little work on that and he's
supplying Zucker with some information which was not
available to us. So he's coming back again too.
H.M.Jr:
Well, I - I'll get a set of golf clubs out of that.
Haas:
You put yourself in.
H.M.Jr:
Jesse Jones has asked for a set. He made the
Oliphant:
Not much now, but he saw me the day he saw you.
He's seen me several times.
H.M.Jr:
Nice fellow.
appointment. Do you play golf (to Oliphant)?
or is he a lobbyist?
Oliphant:
Oliphant:
No, Chairman of the Board. No, no, he's all right.
de's a good fellow.
Oh yes. He's been over to see the President at the the same day. No, he's quite
Well, he's seen me several times.
Haas:
Might bring Bobby Jones up to the committee.
H.M.Jr:
I like to see those people occasionally.
All right, George?
H.M.Jr:
Taylor:
H.M.Jr:
Haas:
If I can
H.M.Jr:
When you come in at 11:15 you'll have plenty of time.
Haas:
All right.
H.M.Jr:
Miss Roche?
Roche:
Nothing very special. We have a few week-end
conferences on possible problems under reorganization.
H.M.Jr:
Oh.
Roche:
Nothing very special.
164
-7-
Roche:
Going all right?
Going all right.
H.M.Jr:
I thought the President got an awful good press on
Bell:
Very good.
H.M.Jr:
What have you got in your lap?
Bell:
Well, I've got some memoranda, things that you asked
H.M.Jr:
his budget message.
for, a couple of letters to sign. One thing that I
have is the Annual Report of the Social Security Board,
which we have been over several times and made several
suggestions. They had quite a harangue on the money
market and the effect that the operation of the old
age reserve fund would have on the money market, so
we got them to take that out. It's in fair shape now
and I just wondered if you'd like to have anybody else
look over it.
McReynolds: Gaston's already semit.
H.M.Jr:
I'd like Haas to look at it.
Bell:
They'd like to have it today. (Hands report to Haas)
H.M.Jr:
All right.
Haas:
Thanks.
Bell:
That's all I have.
(To Haas) You got that out. I mean as long as you
just made this study of Social Security, I think
H.M.Jr:
Who made it, Seltzer?
Haas:
Yes
H.M.Jr:
Seltzer, then.
Haas:
Well, I agree 100 percent. That would be my major
operation.
Bell:
There are still some things in there that might very
well be cut out, but they don't do any harm leaving
them in.
165
-8McReynolds: They called me about it about a week ago and I told
to send
over, not release it until they got
itthem
released
fromithere.
H.M.Jr:
Bell:
(To Bell) Do you want to stay afterwards for me?
Yes, can I have about three or four minutes?
H.M.Jr:
Yes. Upham?
Upham:
Nothing.
H.M.Jr:
You're
so well. looking better. Last week you didn't look
Upham:
Well - an - I feel fine.
Bell:
(Laughing) Hangover, ne says.
H.M.Jr:
What from, Christmas?
Haas:
Cyts blushing.
Mrs Klotz:
That's because of the fire.
A reflection.
H.M.Jr:
#ac?
Upham:
McReynolds: No, I have nothing. We had an interesting time over
at the White House.
H.M.Jr:
were you over? When was that?
McReynolds: Four o'clock. Two hours.
H.M.Jr:
Did you go over to that meeting?
McReynolds: Lots of fun.
H.M.Jr:
What?
McReynolds: Lots of fun. Hester's on the Hill this morning; went
up there before 8 o'clock, talked to the Legislative
Counsel, which was the arrangement.
H.M.Jr:
Well, did the Attorney General - when he got hold of
166
-9it, did he change Hester's work? Did he find
Hester had done his home work all right?
McReynolds: He approved, said it was all right.
H.M.Jr:
The main thing that got the Attorney General up
was that - when he found they were going to take
prisons away from him.
McReynolds: Well, that wasn't Hester's job. But it stayed in.
H.M.Jr:
But he used that excuse. What?
McReynolds: I said that stayed in in spite of his protest.
H.M.Jr:
All right.
McReynolds: But instead of releasing the draft of legislation
H.M.Jr:
Did this leave me anything besides Baby Bonds? What?
McReynolds: You got a bigger shop than you ever had.
H.M.Jr:
Did they leave me Baby Bonds?
McReynolds: Yes, they left you Baby Bonds.
H.M.Jr:
All right. Well, you who stay - we'll have a
sub-school in here. All right now - now, in the
order that you asked. The rest of you can be excused.
Miss Roche first and then Bell.
Roche:
Mr. Bell first; he's busier than I am.
167
Prepared by
Miss Lonigan
Division of Research & Statistics T
INTER OFFICE COMMUNICATION
DATE January 11, 1937
TO
FROM
Secretary Morgenthau
Mr. Haas
GH
Mr. Stuart Rice of the Central Statistical Board has in his letter
transmitted a report from Mr. Isador Lubin, Chairman of the Committee on
an Unemployment Census. This report concerns the meeting of the Committee
on December 23, 1936.
The Committee unanimously agreed upon the advisability of a census
of population and employment.
The Bureau of Labor Statistics, the United States Employment Service,
and the Works Progress Administration have a large volume of data on
employment and unemployment in the United States.
The weakness of the existing data lies "in the fact that we do not
know exactly what proportion of the unemployed population they deal with.'
If a census were taken it would be possible to correlate the records of
the Employment Service with the totals obtained from the Census in each
district, to determine how representative they were.
A continuous picture of the unemployment situation in the United States
could then be obtained from Employment Service figures.
Mr. Lubin instructed the subcommittee on technical methods "to report
on the possible mechanisms by which continuing data can be maintained as
to the extent of unemployment in the United States."
act'd
168
CENTRAL STATISTICAL BOARD
7028 COMMERCE BUILDING
WASHINGTON, D.C.
.
January 4, 1937
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Washington, D. C.
My dear Mr. Secretary:
I think you will be interested in some
of the information contained in a report of the
Committee of the Central Statistical Board on an
Unemployment Census, which is enclosed.
Sincerely yours,
Stuart A. Rice
Chairman
021 M e MW 8 28
mainT
BE
DE
OFFICE
54
169
U. s. DEPARTMENT OF LABOR
Bureau of Labor Statistics
Washington
December 31, 1936
MEMORANDUM
To:
Stuart A. Rice, Central Statistical Board
From:
Isador Lubin, Bureau of Labor Statistics
Re:
Meeting of Committee on an Unemployment Census of the
Central Statistical Board.
On December 23 I, as Chairman of the Committee on an Unemployment
Census of the Central Statistical Board, called a meeting of the membership.
This Committee, as you know, is made up of representatives of all of the
agencies that are interested in the problem of employment and the problem of
population emumeration. It consists of:
Isador Lubin, Bureau of Labor Statistics, Chairman
Vergil Reed, Assistant Director, Bureau of the Census
Lewis C. Gray, Bureau of Agricultural Economics and the
Resettlement Administration
William Stead, Assistant Director, U. S. Employment Service
Howard B. Mygrs, Alternate for Corrington Gill, Assistant
Administrator of Works Progress Administration
Stuart A. Rice, Chairman, Central Statistical Board
Morris A. Copeland, Executive Secretary, Central Statistical Board
(Mr. Calvert Dedrick, of the Bureau of the Census, was also present)
The Committee gave careful consideration to the question of the
advisability of a consus of population and employment. The discussion revealed the unanimous agreement that such a census is essential to provide
benchmarks from which to measure current changes in employment and unemployment.
A large volume of data are now available throwing light on employment
and unemployment in the United States. These data have been collected by the
Burean of Labor Statistics, the U. S. Employment Service, and the Works Progress
Administration. They throw considerable light upon the status of employment
in the various important industries of the country and contain essential basic
information on the composition of the population now employed on Works Progress
projects or registered in the U. S. Employment Service as applicants for
positions.
-2-
170
The data dealing with persons employed on works projects are based
upon a census made in March 1935 and a census made in January 1936. The data
for March 1935 cover for the heads of families and for secondary workers the
following information:
Previous occupation
Former industrial connection
Age
Sex
Color
Previous education
Number of workers in each family and
sise of family
These data cover every county in the United States.
A second series of data cover approximately 6,000,000 persons certified
to the works program and includes the occupation and sex of the economic heads
of families and of secondary workers for each county in the United States.
These data also show the occupation and sex of workers employed on the works
program.
Additional data subsequent to 1936 have been collected in 13 cities.
Furthermore, information amounting virtually to a perpetual inventory of
workers in occupational groupings is available in the WPA office of every
local community. Such information could easily be assembled for any given
area.
The data available in the U. S. Employment Service cover the characteristics of 7,800,000 workers registered with the Employment Service in December
1935 and 6,600,000 registered in July 1936. These cover the geographical
distribution of such registrants, their sex, their occupational qualifications,
their industrial background, their age distribution, the number of veterans
among the registrants, and the proportion of such registrants who are on relief.
The data showing geographical distribution show the situation in
3,098 counties in the United States and reveal the extent of registration in
each of these counties.
As to occupational groupings of registrants in the active file in
July 1936 the data show that 23.4 per cent of the registrants were unskilled
laborers, that 23 per cent were semi-skilled workers and that 18.8 per cent
were skilled workers. of the total 15.5 per cent were service workers, 6.6
per cent clerical workers, 3.5 per cent sales persons, 3.9 per cent professional
and kindred workers, and 5.3 per cont unassigned persons who had never had
occupational experience.
Of the 6,600,000 registrants in July 1936, 20 per cent had formerly been
connected with manufacturing and the extraction of minerals. of the whole 14,3
per cent had been connected with agriculture, forestry and fishing, 11.6 per cent
-3-
171
with building and construction, 9.4 per cont with domestic and personal
service, 8.6 per cent with distribution, 5 per cent with public utilities
and transportation, 3.4 per cent with givernmental service, 2.7 per cent
with commercial, professional, finance and service callings, and 25 per cent
with miscellaneous and unspecified activities.
The data available in the U.S. Employment Service files show that
approximately one-fourth of the registrants fall in the age group from 16 to
24 years. An equal number fall in the age group from 25 to 34 years and
approximately one-fifth are in the group from 35 to 44 years. Of the total
16 per cent are from 45 to 54, 9.4 per cent from 55 to 64 and 4.5 per cent 65
years and over. These data are further broken down by sex. The figures
dealing with this aspect of the problem show that the preportion of registrants
between 25 and 45 is somewhat smaller than the proportion of the gainfully
employed within that age range, suggesting steadier employment and greater
ease in securing jobs for this group. A further outstanding fact shown by these
data is that the proportion of the applicants between the ages of 45 and 65
exceeds the proportion of the gainfully employed of there ages. This fact has
a definite bearing upon the contention that it is difficult for old people
to secure employment, once they become unemployed. The third significant fact
shown by these existing data on age distribution is that the greatest excess
of applicants for positions with the Employment Service, as compared with the
gainfully employed, is among the males in the younger age group, 25 years or
less.
The recently completed tabulations of the more important data available
in the Employment Service files cover all persons who are seeking public relief
or are engaged on public works. In addition, they cover 4,000,000 other persons
who are seeking employment at the present moment. They no doubt cover a very
large segment of theunemployed population of the country.
Existing data no doubt furnish as good a cross-section picture of the
unemployed population as could be made available by any method other than a
census of population and employment. Their weakness lies in the fact that we
do not know exactly what proportion of the unemployed population they deal with.
If a census were taken it would be possible to correlate the records of the
Employment Service as of the date of the census, thereby securing a basis for
getting a picture of the representativeness of the Employment Service figures.
With definite knowledge of their representativeness, these figures could be
tabulated at regular intervals to secure a continuous picture of the unemployment situation in the United States.
The Committee has instructed me to request our technical subcommittee
to report on the possible mechanisms by which continuing data can be maintained
as to the extent of unemployment in the United States. Upon receipt of the
report of that committee I shall notify you of their recommendations.
172
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 11, 1937
TO
FROM
Mrs. Klotz
Miss Lonigan
Attached are ribbon copies of the two memoranda that I sent to the
Secretary on Friday afternoon.
I will try to give you an extra ribbon copy of all future memoranda
for your files, but they will be a little later than the first copies.
COPY
173
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
FROM
January 8, 1937
The Secretary
Miss Lonigan
Attached are two memoranda relating to employment and the cost
of living Reemployment and New Industries
The Low-Rent Housing Industry
COPY
174
REEMPLOYMENT AND NEW INDUSTRIES
The essential problem in reemployment is the creation of new
firms and new industries. Appeals to existing firms to increase
employment will never be sufficient.
Old firms never expand fast enough to take care of the oncoming
working population. It is new firms and new industries that take
care of the 400,000 new workers each year. There must be a gain in
the number of employers before there can be large gains in the
number of the employed.
Recovery after every depression has been due to the rise of new
industries. Recovery from the 1914 depression was due to the new
manufacture of war materials for Europe. In 1919, recovery from the
incipient decline after demobilization was due to development of
new mass consumption industries, to satisfy the needs of workers with
post-war wages. Silk was the most striking example. Ready-made
clothing, furs, and textiles were others. In 1922, recovery was due
to new industries to provide consumers' durable goods - automobiles,
radios, and suburban housing for those with high wages.
All future recovery will be found in new inventions and new
industries which can supply the needs of the masses at lower and lower
levels of the wage scale.
The explanation of present unemployment must be sought in the
scarcity of new employers. Private enterprise did not develop new
firms and new industries in 1933-1936 at the rate that is usual for
--
175
this stage of recovery. Industry is not seeking money in the investment market for new undertakings, nor seeking bank loans for further
expansion, at its usual rate. The turnover of bank deposits is still low.
The reason that prevents private enterprise from starting new
ventures is that risk-taking is still not as well paid as safe investment in bonds or other forms of debt. The need is there, but men who
start new ventures must see favorable returns ahead for the critical
years of a new enterprise. Their forecasts may have been good or bad,
but they are final. The new ventures have not been started, the new
employments have not been created. The effect of this delay must somehow be counteracted.
It has been claimed that government spending would replace private
investment. But government spending did not replace investment in
new ventures because, like the Federal Farm Board, it was artificial,
inconstant and unpredictable. It did not encourage risk-taking.
Artificial "purchasing power" does not create new sources of
employment. It provides more business for existing units, rather than
the setting up of new units. It increases the cost of living rather
than increasing the supply of employments. All influences which increase
government spending, without increasing new employment, tend to increase
monopoly. That is why retail business favors them.
The remedy is a reorientation of government spending, not to
create "purchasing power" but to create employment. This means that
all government emergency spending should be coordinated and used as a
capital fund for the needy with emphasis on two things - continuous
encouragement of new firms and new industries in private business, and
a continuously increasing degree of self-support in public undertakings.
This is the original program outlined by the President in his relief
message in January 1935.
January 8, 1937
COPY
THE LOW-RENT HOUSING INDUSTRY
The immediate opening for new industries to meet present
unemployment is in provision of necessities for mass consumption,
especially for people of lower income levels than were aided by
the business recovery of 1922-1929.
The chief necessity of mass consumption in the face of the
rising cost of living is housing. It is the poorer people who will
bear the brunt of the approaching shortage of housing. Relief clients
are already suffering in New York City.
A housing shortage means that mothers of poor families must
walk the streets, going from house to house, only to be rebuffed by
landlords because they have children, or are on relief, or cannot
provide evidence of continuing employment. Families with children
pay more than they can afford for rent, and economize on food. Sick
people, and those with heart disease or physical defects, take rooms
on the top floor of a walk-up tenement, because top floors are
cheaper. Old people take houses with worn-out stoves, and carry coal
up several flights of stairs. Shabby private houses in old sections
are remodelled for two, three, or six-family tenements, creating new
slums and new vested interests which will fight all future housing
legislation.
There is not the slightest chance that private industry can be
organized in time to relieve next year's shortage. Even if private
industry were expanded to its full limit it could not meet the
immediate demand for new housing. But there is no private industry
providing low-rent housing. Industry has never entered that field.
176
177
-2 The need for housing is so great that it no longer matters whether
the government finds the one best method or not, so long as houses
are built. It is far better to make grants to several types of
housing agencies, in time, than to find the best agency, too late.
Prompt expansion of public housing will indirectly stimulate
private industry by far more than the amount of government expenditure.
It will speed up the activity of private builders because of the money
put into circulation. It will stimulate a large circle of satellite
industries that always increase with new housing.
Funds used in low-rent housing will meet the need to put excess
reserves to work in productive employment. The only other employment
for excess reserves is speculation, in one form or another.
Finally, the best single way to expand the market for farmers
raising wheat, dairy, meat, and fruit products is to reduce the cost
of housing. The poor man's budget may support rising costs for one
or the other, but it cannot support both.
If public housing is not begun promptly, it will make the cost
of relief even higher, lead to demands for even higher WPA wages, and
cause more strikes in private industry, because of the rising cost
of living.
January 8, 1937
The President
178
Jahanece Foreign
exchange for last
two days have has
been acting in
peculiar and
Ineccominable
manner
Maguthan
bee 5, 1936
179
Monday, January 11, 1937
Re: Japanese Exchange Restrictions
On January 8 it was reported that the Japanese Government was in-
stituting exchange control restrictions and one or two New York banks
were informed by cable on Saturday, January 9, that certain sums which
were to be paid to the credit of their accounts with their Japanese
correspondents were not made because of these exchange restrictions.
On Monday, January 11, the cotton market in Osaka, Japan was closed
because of speculation in cotton and rayon due to the fears of local users
of these materials that they would have difficulty in obtaining exchange
to cover the necessary purchase of these materials. The foreign exchange
value of the yen remained steady and the disturbance in cotton was confined to the Japanese internal markets.
The National City Bank was requested through the Federal Reserve
Bank of New York to obtain cable advice from their Tokyo Office giving
the latest developments in this situation.
On the occasion of the Secretary's visit to the President at 10:45
this morning he advised the President of this situation and informed him
of the steps we had taken to obtain further information.
A. Lochhead
180
CABLE SENT TO THE NATIONAL CITY BANK OF NEW YORK,
TOKIO, JAPAN, JANUARY 9, 1937
DO YOU ANTICIPATE ANY DIFFICULTY IN REGULATING CASH POSITION DURING
NEXT SIX MONTHS SINCE SIMULTANEOUS READY AND FORWARD OPERATIONS
PROBABLY BARRED (STOP) DO YOU ANTICIPATE ANY DIFFICULTY IN DELIVERIES
OF FORMER FORWARD CONTRACTS WHERE THEY CANNOT BE IDENTIFIED WITH
STRICTLY COMMERCIAL TRANSACTIONS
181
CABLE RECEIVED FROM THE NATIONAL CITY BANK OF NEW YORK
TOKIO, JAPAN, JANUARY 11, 1937
YOUR CABLE OF THE 9TH INST. NEW LAWS REFER ONLY TO TRANSACTIONS RELATIVE
TO IMPORTS AND PAYMENTS TO BANKS AND BRANCHES UNDER INSTRUCTIONS FROM
ABROAD (STOP) PRESENT INDICATIONS NO EFFECT UPON OPERATIONS WITH OUTSIDE
BRANCHES OR BANKS EXCEPT WHEN TRANSACTIONS INVOLVE PAYMENTS TO ANOTHER BRANCH
OR BANK PERMISSION IS REQUIRED (STOP) APPARENTLY NO ONE KNOWS HOW NEW
REGULATIONS WILL BE INTERPRETED (STOP) IMPORTERS PRACTICALLY CEASED BUSINESS
PENDING CLARIFICATION
182
p
y
THE MITSUI BANK LIMITED
Account 12
New York, January 8, 1937.
Bank of the Manhattan Co.
40 Wall Street
New York City
Gentlemen:
Attention: Foreign Department
We are informed by cable from our Tokio Head Office
that the Japanese Government has issued an urgent and temporary
ordinance tightening their exchange control effective on and
after January 9th, 1937. In this connection, we hasten to inform
you that you are kindly requested to understand that all your
drawings on our Home Branches in favor of banks or bankers, for
the time being, will not be effected by them unless permission
of the Government has been obtained. (The above licenses are
not required for transactions of Less than 110,000. or equivalent
by draft or by mail.)
As to the particulars, we shall be pleased to write you
again upon receipt of the confirmatory information.
Yours truly,
THE MITSUI BANK LIMITED
ROUGH TRANSLATION
183
On January 8th the Finance Department under the Exchange Control Act promulgate decree effective as of the same date.
Among the articles the following are of importance to banks-
(1). Basically a permit is required for Exchange Transactions and acquisition of letters of credit covering payment of imports.
(2). Exchange transaction controlled under this regulation include-buying
of Foreign Exchange, selling of Yen exchange in foreign countries, remittances
to foreign countries, payments to be held in trust, etc. and execution of
exchange contracts which were made before the issuance of this decree.
(8). No permit is required for Exchange Transactions or for acquisition of
letters of credit in the following cases:a. Where the aggregate amount for one month does not exceed
Y 30,000.00 or its equivalent.
b. Where Exchange Transactions arising out of letter of
credit acquired by permit or where permit is not required (however, a permit is necessary for exchange
transactions covering payment of imported good when
letter of credit was obtained prior to the issuance
of this decree).
C. Where payment of Documentary Bills, relative goods of which have
been imported into Japan or shipped from foreign ports at the
time of enforcement of this decree.
d.
Where execution of exchange contract which has been made prior
to the enforcement of this decree, for the purpose of payment
of Documentary Bills, relative goods of which have been
shipped from foreign ports within one week after the enforcement of this decree.
Permit is required in case of appropriation of proceeds of "Exports
without bill of Exchange" to the payment of imports.
(4)
(5). Permit is required when importers desire to realize from their
securities, deposits and loans, etc. in foreign currencies held abroad or
to borrow funds on mortgage of above items for the payment of imports.
(6). Exchange Banks are required to examine and confirm the legality
of exchange transactions or acquisition of letter of credit of their
customers.
(7). Exchange Banks are required to get permit when they make payment under
the instructions from abroad except the payment of cheques, drafts and paying notes not exceeding the equivalent of Y10,000.00 per item.
(8). Those importers who have imported more than Yen 500,000.00 during
1936 are required to file the return for 1935 and 1986 showing the results
of payments for imported goods.
(9). Those who obtained permit regarding exchange transactions for imports
are required to file monthly return of imports when the relative goods are
imported.
- Received by the Bank of the Manhattan Company from the
Yokohama Specie Bank, January 11, 1937.
Submitted to the Federal Reserve Bank of
New York by the Bank of the Manhattan Company, January 11, 1937.
184
THE CHASE NATIONAL BANK
OF THE CITY OF NEW YORK
January 11, 1957
Federal Reserve Bank of New York,
33 Liberty Street,
New York, N.Y.
Attention - Mr. D. J. Cameron
Manager Foreign Department
Lobe
Gentlement
We have today received the following cable from the
Netherlands Trading Society:
"HAVE BEEN INFORMED YOUR EXCHANGE TRANSACTIONS WITH
ME ALLOWED WITHOUT A PERMIT INCLUDING EXECUTION
OUTSTANDING CONTRACTS*
Yours
,
very truly,
have
E. O. Funck
Second Vice President
185
CABLE
From: National City Bank of N.Y.
Tokyo Branch
Date: January 12, 1937
Exchanges firmer small business account uncertainty of effects of
new regulations. Assurances given permits will be granted for all
normal business with preferred attention to non-speculative imports
meantime nothing forthcoming Burean swamped with applications which
must report volume of business done prior period.
186
PARAPHRASE OF TELEGRAM SENT
TO: American Embassy, Tokyo, Japan
DATE: January 11, 1937, 5 p.m.
NO.: 3
RUSH.
You are requested by the Treasury to telegraph
at its expense a comprehensive report on Japan's present
financial situation.
MOORE, ACTING
EA:LWW
187
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE January 11, 1937
To
Secretary Morgenthau
FROM
M. A. Harris
Treasury Bill Offering
In New York, tenders were received in the amount of
$107,555,000 to the offering of 273-day Treasury
Bills today. The average discount on the first
50-million was 0.345. The highest discount was 0.288
and the low 0.377. On a similar offering last week,
the average discount was 0.316 on the accepted bids.
188
January 11, 1937
10:25 A.M.
Eldon P. King, Bureau of Internal Revenue
Chas. T. Russell, 11
"
Eldon 0. Hanson,
"
"
"
"
Present:
"
Hanson:
This case involves the year 1920.
H.M.Jr:
Will you talk a little louder?
Hanson:
The taxpayer is a Japanese steamship company
(Osaka Shosen Kabuishiki Kaisha, 17 Battery Place,
New York, New York).
I have a memorandum for your files. (Hands to Secretary)
King:
At the last session we thought we'd better prepare
H.M.Jr:
This helps. Now, you go ahead.
Hanson:
The year 1920 is involved, and the taxpayer filed a
tentative return upon which he disclosed a tax of
about - of $200,000. It was a tentative return and
no income was reported. Paid $50,000 with the return
and later, in 1921 - June 15 - paid an additional
a brief memorandum.
$50,000.
Thereafter it filed its final - filed its completed
return, upon which it disclosed a net loss and no
tax due. But inasmuch as the - a hundred thousand
had been paid in, the Bureau made an assessment of
$100,000 to offset the payment.
You will bear in mind that on its return it disclosed
this large loss of $431,000. The Bureau made its
re-audit of the return and determined that an income
of $121,725.44 had been realized and that a tax of
$34,243.40 was due. Inasmuch as they had paid in
$100,000 on their tentative return and the Bureau
has determined that a tax of only $34,243 is due,
there is a resulting over-assessment of $65,000.
H.M.Jr:
I see.
Hanson:
No refund is contemplated, because this case is related
H.M.Jr:
I see.
to the case of the taxpayer for the years '18 and 19.
189
2Hanson:
Which you approved, Mr. Secretary, on the - the
settlement on which you approved on September 4.
So the overpayment will simply be applied for the
tax due on it. As Mr. Russell indicated, this is
one of the remaining few Japanese or foreign
steamship company cases, and the case has been
audited in accordance with the usual practice of
the Bureau governing cases of that kind.
H.M.Jr:
If you don't mind, I'm just going to read this
(the memorandum) as long as you've got it down
(Reads memorandum) - That looks
here.
all right.
King:
(Signs settlement form) That's that.
Mr. Secretary, may I inquire whether - as to the
form of that little memo there?
H.M.Jr:
That's just the way I want it. That's all right.
King:
That's fine.
H.M.Jr:
That's just the way I want it.
Now, will you take the other case up here, this
Russell:
Matamoras Water Company.
Hanson:
Here is the other company.
H.M.Jr:
What's the name of this company?
King:
This is the Matamoras Citizens' Water Company.
This (memorandum) will be a part of your record (to
reporter) I suggest I just read this, if it is
Hanson:
satisfactory with you.
Supposing I read it. (Reads memo) Well, this
looks all right, doesn't it? No argument.
I don't think so.
Russell:
There's nothing in the future, because the company's
H.M.Jr:
H.M.Jr:
closing out and winding up its affairs.
All right, now this is for me and this is for me
here. (Signs settlement) And what else?
King:
That's the end of it, Mr. Secretary. That's all
we have this morning.
190
-3H.M.Jr:
How are you coming on some of these old cases?
Russell:
We are ready to just about come out of them.
H.M.Jr:
You're making some progress?
Russell:
Yes, sir. And we are consolidating the examination
of returns; we are about two months ahead of any
prior year on that.
H.M.Jr:
Swell.
Russell:
We started in July of last year checking 1935
H.M.Jr:
Well, that's fine.
Russell:
And while we did have some '34 still on, most of
them were a result of the taxpayers themselves asking
for late examinations. So we are really about two
returns.
months ahead of any prior year.
H.M.Jr:
But you are doing July returns now?
Russell:
on yes.
H.M.Jr:
That's fine.
Russell:
we're almost half way through with our '35 now.
H.M.Jr:
Good. All right.
Russell:
And we're getting lot of favorable comments.
I should think you would. Of course, once you get
H.M.Jr:
caught up, it's going to be so much easier. It's
the catching up process that's hard.
Russell:
And we're practically caught up now.
H.M.Jr:
Well, do you think you'll have all of '35 done before
Russell:
Yes. Well, all but just a few that the taxpayers
themselves asked us to hold off, and some of the very,
very large cases which it is impossible to do. but
we'll have them all started by then.
H.M.Jr:
Fine.
the '36?
191
-4King:
H.M.Jr:
It seems to me that's the important thing. We get
Russell, whatever happened - there was six or eight
or ten very important alcohol cases - I mean companies
in alcohol business - when I first came over here,
some of them in Baltimore. I remember they were
taken away from us by the Department of Justice. I
Russell:
think there were ten companies.
Those were Alcohol Tax cases.
H.M.Jr:
Diversion of alcohol.
Russell:
U. S. Industrial Alcohol was one of them.
H.M.Jr:
That's right. That was taken out of the Treasury
when I first came here. That's over three years.
Whatever's happened to them?
Russell:
I believe Justice settled U. S. Industrial Alcohol.
King:
H.M.Jr:
I saw the announcement of it in the paper, one of
those big ones, and I haven't seen a thing since.
There was either eight or ten diversion of alcohol
cases, and just - either when I came here or just
before, they took them out of our hands.
Russell:
I'll check on those.
H.M.Jr:
And let me know.
Russell:
Yes, I'll check on those today. Was that all?
That's all. Thank you.
H.M.Jr: