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FEDERAL RESERVE BOARD WASHINGTON X-9400 ADDRESS OFFICIAL CORRESPONDENCE TO THE FEDERAL RESERVE BOARD December 20, 1935. Dear Sir: There are inclosed, for your information, a copy of a letter dated November 6, 1935, from Governor Harrison, of the Federal Reserve Bank of New York, a copy of a letter dated November 50, 19S5, from the Secretary of State, and a copy of the Board's letter of this date to Governor Harrison, with regard to the financing of shipments of goods to belligerent nations. The statements referred to in the letter from the Secretary of State are also inclosed, together with a copy of the Proclamation issued by the President of the United States on October 5, 1935. Your attention is invited" particularly to the suggestions contained in the Board's letter to Governor Harrison in connection with future inquiries received by the Federal reserve bank and with regard to the acceptance- by the Federal reserve bank of paper which appears to represent the extension of credit to finance shipments of the character referred to in the inclosed statements. It will be appreciated if you will bring this correspondence promptly to the attention of the Governor and the directors of your bank. Very truly yours, Inclosures. TO ALL CHAIRMEN. Chester Morrill, Secretary. COPY X-9400-h December 20, 1935. Mr. G. L. Harrison, Governor, Federal Reserve Bank of New York, New i'ork, New York. Dear Governor Harrison: Following receipt of your letter of November 6, 1935, with respect to the financing of shipments of goods to belligerent nations, a copy thereof was sent to the Secretary of State, with a request for an expression of his views concerning the position taken in your letter. A reply was received from the becretary of btate under date of November 30, 1935, a copy of which is attached, together with copies of the inclosures mentioned therein. It will be noted that the becretary of State refers to the inclosed statements by the President c.nd tht Secretary as setting forth the purpose and policy of the Government in respect to commercial transactions with the belligerents; that he does not feel that he can undertake to amplify these statements at this time or to issue a special ruling in respect to any particular case; and that it is assumed that all agencies of the Government and all semi-Governmental agencies will wish to conform their action to the policy set forth in the statements. It will also be noted that in the statement of November 15, 1935, reference is made to shipments of goods, which are considered to be essential war materials, as a class of trade which is directly contrary to the policy of the Government, and, that the becretary states in his letter that the policy with regard to these abnormal shipments of primary war materials flowed naturally from the general purpose and policy of the Government as -2- X-9400-h expressed in earlier statements. The Board suggests that* if other inquiries similar to the one referred to in your letter be received by your bank, you reply by forwarding copies of the statements issued by the President and the Secretary of State as announcing the policy of the Government, and that you state that you are informed that the State Department advised the Board that it did not feel that it could undertake to amplify these statements at this time or to issue a special ruling in respect to any particular case. The Board feels that the only proper course for the Federal reserve system to follow is to cooperate with the Government in carrying out its announced policy in this matter and believes that the banks of the Federal reserve system will agree with the Boar-i. It is not improbable, unless the situation should improve materially, that questions involving not only the attitude of the Federal reserve system but also the exercise of the discount functions of the Federal reserve banks may arise. It is the feeling of the Board that such inatters might well be left to be dealt with when Lhe occasion for their consideration appears, in which event the Board will expect that these questions bo brought to its attention. Copies of this letter are being sent to the Chairmen of all Federal reserve banks ana to the Secretary of State. Very truly yours, (Signed) Chester Morrill Chester Morrill, secretary. Inclosures. \ COPY X-9400-b. • DEPARTMENT OF STATE WASHINGTON November 30, 1935 fty dear Mr. Morrill: I am in receipt of your letter of November 19, 1935, enclosing a copy of a letter of November 6 addressed to the Chairman of the Board of Governors of the Federal Reserve Board by Mr. George L. Harrison, Governor of the Federal Reserve Bank of Nfew York* in regard to a question submitted by an officer of the Bank (of New York) with respect to the propriety of financing shipments of cotton to Italy. In reply, I enclose, foi4 your consideration, copies of statements recently made by the President and by me in which are set forth the purpose and the policy df this Government in respect to commercial transactions with the belligerents, I do not feel that I can undertake to amplify these statements at this time or to issue a special ruling in respect to any particular case. I assume, however, that all agencies of the Government and all semi-governmental agencies will wish to conform their action to the policy set forth in these statements. I may add that in a Press Conference on November 26 I made it clear to the representatives of the Press that the policy of this Government in respect to abnormal shipments to belligerents of primary war materials, enunciated in my statement of November 15, flowed naturally from the general purpose and policy of this Government as expressed in preceding statements made by the President and by me. Enclosures: Five Statements Sincerely yours, (Signed) Cordell Hull Mr. Chester Morrill, Secretary, Federal Reserve Board, Washington, D. C. ' COPY X-9400-g DEPARTMENT OF FOn THE PKEbS NOVEMBER 15, 1935 STATEMENT BY THE SECRETARY OF STATE. MR. COxiDELL HULL In view of the many inquiries that are being asked from time to time with respect to trade with Ethiopia and Italy, I deem it proper again to call attention to the statement by the President on October 5, that he desired it "to be understood that ti^f of our people who voluntarily engage in transactions of c~ny character with either of the belligerents do so at their own risk." On October 10 I explained that the President's statement was based primarily upon the policy and purpose of keeping this country out of war, and that "it certainly was not intended to encourage transactions with the belligerents.11 I further explained that "our people might well realize that the universal state of business uncertainty anc suspense on account if the war is seriously handicapping business between all countries, anc! that the socner the war is terminated the sooner the restoration and stabilization of business in all parts of the worlc, which is infinitely more important than trade with the belligerents, will be brought about." The President, in a statement on October 50, further emphasized the spirit of this policy. The American people are entitled to know that there are certain commodities such as oil, copper, trucks, tractors, scrap iron and scrap steel which are essential war materials, although not actually "arms, ammunition or implements of war," and that according to recent government trade reports a considerably increased amount of those is being exported for war purposes, This class of tra< e is uirectly contrary to the policy of this Government as announced in official statements of the President and Secretary of State, as it is d s o contrary to the general spirit of the recent neutrality act. The administratie>n is closely observing the trend and volume of exports to those countries and within a few days the Department of Commerce expects to have complete detailed lists of all commodities exported tc the belligerents which will enable exact comparison with lists for the same period last year.
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