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New York Times, “Morgenthau Finds ‘Interpreter’ Peak: Many Views on Associated Gas Wrong,
Secretary Says,” February 27, 1940.

February 27, 1940.

Dear Henry:
la the K w York Times %h&M morning I notice
aa article quoting you as saying that you thought it
woyld be p a good idea* if I were to read the Budget
Message and that you were requesting copies of ay
correspondence with Mr. David Lasser*
I am enclosing a copy of Mr. l m i r f l
letter to me of February 5 and i y reply of February 9,
which you will aote is a brief and factual response to
the specific questions he raised sm& contains no ex*
preasion of opinion what sower on my part* I a® at a
loss to see bow I could respond to the inquiry at all
without giving these purely factual answers to the
specific questions bm asked.
Accordingly, I regret the nature of your comment as quoted in the press, siaee it reflects what appears to be a critical or disapproving attitude. I am
coafideat that if yon will take the trouble to r i i Mr.
Leaser's letter, his specific q«testioBS aad my replies
thereto, ftw will save no occasion, to feel aj
I an mot acquaiated with .Mr* Lasher, His
letter was aastfereci as a ?aatter of cotirae, as is all
office correspondence. I wmm surprised timt l e should
make it public or that the Mffgpapwrs slinuld thiak it
worthy of any notice since it contained ao news or, for
that matter, anything that « M not already a setter of
public information.

I must M J that I am somewhat puzzled by
your reference to the Budget Passage. There was no
meat ion of or reference to tlie Budget Message in my
letter, which, made no roeoxirriea&ations wiiatsoeyer with
respect to the buciget, working balances, or any other
matter and, therefore, coulo not be rep*reted as in any
« U in conflict with the Budget Message.
Actually, as I thouglit you knet?, 1 lisve read
the Btidget Message vltb great care and as. thoroughly
familiar with it. I regret ig^ls tliat before affording me an opportunity to ^iTe you tlie fticts in the
isutter, you should h^ve m&de N H f l l at a press conTerence that can only have the effect of stirring up
adTerse newspaper

Sincerely yours,

Honorable Henry Morgenthau, IT*,
Secretary of the
Washington, D, C.



National Headquarters
930 M Street, N. W,
Washington, D. C.
February 5, 1940.

Hon. Marriner Eccles,
Chairman, Board of Governors,
Federal Reserve Board,
Washington, D. C.
Dear Mr. Eccles:
I have been informed, in connection with the current discussion on our public debt limit and the effect of this on government expenditures, that there are considerable resources
available to the Administration today, without further legislative authority.
My understanding is that these resources for meeting current
expenditures can be used without increasing the debt limit or
without further taxation.
Among the funds I am referring to are a two billion dollar
stabilization fund, one billion dollar pov/er to issue silver certificates, one and one-half billion dollars excess in the Treasury*s
working balance, over normal requirements, totalling four and onehalf billion dollars. The last figure is b^sed on the fact that
the Treasuryfs working balance today is about one billion eight
hundred million dollars. The usual practice is to maintain a working balance of about two hundred fifty million dollars.
This four and one-half billion figure is in addition to the
power to issue three billion dollars of additional currency, not
specially backed by gold or silver.
I wonder if you could inform me as to: first, whether these
figures are correct, second, whether, to your knowledge there are
additional funds that can be used for meeting current expenditures
of the government without further legislation or without increasing
the debt limit, and last, your viewpoint as to the economic effects
of using such funds for increasing work and consuming power in the
hands of the low income groups.
Appreciating any information you may give me, I am
Very truly yours,
(signed) David Lasser.

David Lasser
National President


February 9, 1940,

Mr, David Lasser, National President,
Workers Alliance of America,
930 M Street, Northwest,
Washington, D. C.
Dear Mr, Lasser:
I have your letter of February 5 in which you inquire
as to cash resources available to the Administration, without
further legislative authority. You mention specifically the
stabilization fund, the power to issue silver certificates, and
the Treasuryfs working balance.
Under the Gold Reserve Act the stabilization fund is
available for expenditure under the direction of the Secretary
of the Treasury "for any purpose in connection with carrying out
the provisions of this section, including the investment and reinvestment in direct obligations of the United States of any
portions of the fund which the Secretary of the Treasury, with
the approval of the President, may from time to time determine
are not currently required for stabilizing the exchange value of
the dollar." I am advised, however, that it would require legislation to apply the fund to meet current expenditures.
As to silver, I am informed that approximately
$1,500,000,000 would be available by monetizing the difference
between what has been paid by the Treasury for the silver and
the official price of fl.29, and that this would not require
The Treasury's working balance as of today is approximately $1,600,000,000. Tentative estimates made in our statistical division indicate that without any new financing the balance
will not fall to less than §1,000,000,000 at the end of the
present fiscal year and may be somewhat more than that if sales
of so-called baby bonds continue at the volume at which they have
been selling of late. I understand that prior to the advent of
the present Administration, it was not customary to keep ?7orking
balances in excess of $250,000,000 or #500,000,000. In addition,
as you point out, there is the unused authority under the Thomas
Amendment, which provides that up to f3,000,000,000 of currency
may be "issued only for the purpose of meeting maturing Federal

-2Mr. David Lasser

February 9, 1940

Finally, you ask what the economic effects would be of
using such funds for increasing work and consumer buying power.
The Government can spend only what Congress authorizes and appropriates. To the extent that these funds were used to meet such
expenditures, it would avoid an increase in the public debt but
consumer buying power in the hands of the Ion income groups would
not be increased thereby unless increased expenditures ?jere voted
by Congress.

Very truly yours,


M. S. Eccles.

[ S. Eccles,

February •?« 2340.

Dear L&uah:
As you — t 1 limit this matter to
me lest overdagg I an —fling you tfa# at*
tftdhrtl eorrespoa^ftnce so tlrct If tke sub*
jset should coa® to the att^ntioa of %hm
President, you wmCA be fully lafoimed
©Ma to &dTise feim ss to tlie

m »m \*usrt;i>v$



February 29, 1940.

My dear Marriner:
I was very glad t o receive your l e t t e r of February 27,
because i t gives me an opportunity to say to you frankly what I
think about your l e t t e r of February 9 to David Lasser, which was
published i n the New York Times of Monday, February 26, a copy
of which, together with Lasser's l e t t e r to you dated February 5>
you were good enough to enclose.
I did make the statement a t my press conference on Monday
that I thought i t would be a good idea i f both you and Lasser
were to read the President's Budget Message. The explanation of
that statement i s , I think, quite simple. Lasser's questions to
you and your replies were directed t o matters of budget and fiscal
policy. The budget and fiscal policy of the Administration for
the current and coming fiscal years were authoritatively outlined
in the Budget Message for the fiscal year 1941»
M own concern with Government fiscal policy, I think you
will agree, i s as immediate as yours, but I should feel i t d i s tinctly improper for me t o attempt to indicate publicly ways in
which the President's f i s c a l policy could be improved. You say
that your l e t t e r was confined t o statements of fact, but when you
point out that prior administrations were content with smaller
working balances — and without any attempt to explain the present
justification for a larger working balance — i t seems quite e v i dent to me that you are, Ity inference a t least, criticising or
suggesting amendment of the President's fiscal policy. The same
inference i s contained i n your l i s t i n g of other fiscal resources
that might be utilized.
You say that you are at a loss to see hovr you could have r e sponded t o the inquiry a t a l l without giving these purely factual
answers. If you will permit me to suggest, I think that you might
with entire propriety have responded that the matters of which Mr.
Lasser wrote and on which he sought information did not f a l l within
the sole jurisdiction of the Board of Governors, Mr. Lasser's l e t t e r
doesn't give me the impression that he was in search of facts. Factual answers to the questions he put are contained in Treasury publications and h i s l e t t e r seems to indicate that he already had the
answers. HHhat he appears to have been seeking was to use the name
and authority of a highly placed Government officer in support of
his propaganda for larger relief appropriations. If you had considered this aspect of the matter carefully, I think you would not
have been surprised that he made your l e t t e r public.


You regret that before giving you an opportunity to give
me the facts in the matter I made remarks a t a press conference
"that can only have the effect of s t i r r i n g up adverse newspaper
comment." This, my dear Marriner, i s , I must submit, putting the
cart before the horse. You had from about February 6 to February 26
an opportunity to give me the facts in the matter.
But I should add a word about my press conferences. I t i s
very seldom that I volunteer anything, and then only when I have
some important announcement to make about Treasury business. I
didn't volunteer anything in this case. I was asked what I thought
about your l e t t e r to Lasser. I thought my comment was exceedingly
restrained. The newspaper men have learned that I don't talk at
conferences about ^natters that are outside of Treasury jurisdiction
and they don't ask me to comment on what somebody else has said
unless that other person has been dealing with Treasury n a t t e r s ,
I didn't think I was justified in refusing to answer this particular
question. I am at a loss to know how I could have answered i t differently.
I am no less anxious than you to avoid adverse comment and
newspaper controversy. I t can be avoided if we both stick s t r i c t l y
to our own knitting. I , for my part, intend to do t h i s .
Sincerely yours,


The Honorable Marriner S. Eccles,
Chairman, Board of Governors of the Federal Reserve System,
Washington, D.C.

March 6, 1940.

My dear Henry:
A.B I told you in our telephone conversation om Moaciaj,
I felt that I s&ould not let our -discussion of the Lasser correspondence end without a farther effort to correct f o w impression of the matter as reflected, in your letter of February 29th.*
Tlie beat way to do this, it N O U to s» t is to repeat, first,
exactly ^-het Mr. Lasser asked me and, second, whet I said Is reply, because 1 believe that your impression as to this correspond
ence must have been based on titat someone else told you about it.
la Mr. Lessor's letter to mo he stated (a) that lie had
been informed tliat there are considerable resources available to
tJae Administration today without further legislative authority
which could be used for meeting current expenditures without increasing the debt limit or without tmrXhmt taxation; (b) that
aaong these i^inds are a f2,000,000,000 stabilisation ftind,
1:1,000,000,000 pvwer to issue silver certificates, and *l,a
excess in the Treasury* s working balance over a o m a l requireraenta,
totaling ?<1,bOQ,000,000; (c) tliat this $4,500,000,000 is based on
tine Treasury*s working balance of about $1,800,000,000, tlie usual
practice being to maintain a workiag bslanee of about f;250»000,000;
and (d) that this ^4,500,000,000 is in addition to the yy-ev to
issue ; 5,000,000,000 ot additional curTer*.cy not specially "backed
by gold or silver* He then asked me, first, whether these figures
were correct; secosd, whether to my knowledge there were additional
ftrnds that could be used for meeting current ezt>eaciiture& of the
GvrinWttt without farther legislatiTe authority or witkottt I M ? H I
lag the debt limit and, last, my vie^rpolat as to the economic
effects of using snoh fMttfts for incretsin.; work rr^l
in the hands of the low-income
These are the questions whicla «ere before me whe£ I snswerad M s letter and I replied in four brief paragraphs, first, I
quoted the language of t&t Gold Reserve JUrt ^iiiela states the purposes
for which the stabilizeition f\md is available for eupenditure, aad
stated that I was adTised tn&t it ttettU require legislation to apply
the fmxd to meet current expenditures. Second, I stated that as to
silver I was informed that approximately f1,500,000,000 would be
available hj monetising the difference bet-'reea. what had baem paid by

the Treasury for the sil¥©r and the official price oi' -'1.29 «nd
that this would not require legislation. Third, I told him that
the Treasury's working balance « M approximately ('1,500,000,000,
that tentative estimates of our statistical division indicated
that without new financing the balance veeXd not fall to less
than tl,000,000,000 at the end of the present fiscal ye&r, and
might be soisewhet more than that if sales of baby bonds continued
in the current voluose, and that I imcienstoocl that prior to the
advent of the present administration it was not otistoaary to keep
WOlfcftag balances in excess of t250,000,000 or ^00,000,000. I
confirmed M s statement that there is H M £ authority mder the
Thomas Amendment which proride.? that up to f5,000,000,000 of
currency may " e tilli'lB,fcttstated taat it sight be issued oaly
for t i purpose of meeting raaturing Federal obligations. Finally,
in the last paragraph of my letter. In respoase to his question
regarding the ecoaomic effects of using such funds for increasing
work aad ©oasiaiser trying power, 1 stated that the f n minium I
cotild cjxpemd oaly ifhat Coagress authorizes and ep.propriates and
to the extaat that these fyacig were used to me#t s«ch e'p
it would &¥oi& an h»!!•«•• in the public d c c but consumer q
pow&r in the hands of tlie low-income groups would not be increased
thereby miess increased expenditures were Yoted by Congress*
The foregoing 1* all that there * U to the i i r n j U i W i i ,
You say that Mr. Lasseyfs letter did sot giTe you the *impression
that he was in search of facts*. But, as I said to you bc-fore, I
am not acquainted with Ur* La-sser and it did not occur to me to
suspect or question his motives. His letter ssie in in the usual
course, was referred to the staff and. a draft of i reply prepared
on a faetiMl basis, as is customary in the case of m & correspondence. It so happens that I took special care to see that my reply
was purely faatual and contained B O expression of opinion whatsoever on my part regarding "matters of huci^et and fiscal ;;oliey" or
regarding n^t.jB in which the ?resident*s fiscal policy could be i?a*
proved*• HoweTer, I would, have been doing }wt that if, as jour
letter suggests, I had "attempted to explain the present justification for a larger working balaaeew#
It is perfectly trtacs, &a you say, that the .matters to
whieh Mr. Lasserfs letter related did mot wfalL within the sole
jtirisdietioB of the Board of Sevimorg*. On tlie other hand, they
do not fall ifholly outside the field of my responsibilities as
Hiinfrai of the Board of GoTemors and, incidentally, as a member
of the fiscsl end Monetary Committee. Consequently, I felt that

when Mr, Lasser addressed kia inquiry to Ml in siy capacity as
Chairman of the Board of Governors he was justified in expecting from me, as a public official, direct answers to his
questions* That is a courtesy thfct *• endeavor to seeord to
many inquiries from individuals whose interest in these matters
is frequently less substantial than that of the Notional President
of the Workers alliance of America.
In the circicnst&ncefi, I wmtld not have felt justified in
asking Mr. Lesser to read the Presidents Dud^et M
to obtain
trie information •sraie:; lie requested in3te;..u of glviftg ^i-i direct
answers. In fact, it w m U d ii^re been quite difficult for Lia to
find the answers that way. Ai i'or your statement to the oress tnat
I should read the budget, 1 !• sure truLt you did not tiiink that I
needea to be informed as to its contents mor tbttt fern expected the
presii to ttiiak so. You s&j %h&% 1 i:ad an opportxmity from about
February 6 to February 26 to give you the facts. It never occurred
to me that you could possibly have the least interest in & factual
reply to a routine letter. I had no way of knowing that you vere
in any way concerned about tiie isatter until I saw your coaaeat in
the press. As for the eomeni itself, it would li&ve been possible
for you to have said simply Hurt you I a i aot se©n the correspondit
ence. I think you assumed, as your cownent indicated, that the
facts were quite different from what they actually are*
Possibly you * H 1 recall that ^rhen I was requested to
appear before the Senate Special Committee to investigate unemployment and relief in January 1938 I did my best to avoid it but
was told by the Chairman or the Committee not only that if I did
not appear voluntarily he womld issue a subpoena but tliat if I
was not prerjared to testify 1 should not be occupying my present
office. I tm convinced that it wotild hter« been exceedingly
difficult, if aot impossible, for me to justify the avoidance of
• direct and simple answer to each of Mr. Lasser f s questions.
As I have said before, I intend always to cooperate
with you as fully as possible, and I have undertaken to go into
this Blatter fully and frankly with that ead in

Sincerely yours,

Eonorable Henry Morgeiitliau, J r . ,
Secretary of the Treasury,
-Vaington, E. C.