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This article is protected by copyright and has been removed. The citation for the original is: 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. e-d 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 i 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. enclosures c c P Y WORKERS ALLIANCE OF AMERICA 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. dl/lk David Lasser National President c 0 p Y 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 legislation. 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 $250,000,000 or #500,000,000. In addition, as you point out, there is the unused authority under the Thomas Amendment, which provides that up to f3,000,000,000 of currency may be "issued only for the purpose of meeting maturing Federal obligations". -2Mr. David Lasser February 9, 1940 Finally, you ask what the economic effects would be of using such funds for increasing work and consumer buying power. The Government can spend only what Congress authorizes and appropriates. To the extent that these funds were used to meet such expenditures, it would avoid an increase in the public debt but consumer buying power in the hands of the Ion income groups would not be increased thereby unless increased expenditures ?jere voted by Congress. Very truly yours, (signed) M. S. Eccles. [ S. Eccles, . Chairman. February •?« 2340. Dear L&uah: As you — t 1 limit this matter to me lest overdagg I an —fling you tfa# at* tftdhrtl eorrespoa^ftnce so tlrct If tke sub* jset should coa® to the att^ntioa of %hm President, you wmCA be fully lafoimed ©Ma to &dTise feim ss to tlie m »m \*usrt;i>v$ . THE SECRETARY OF THE TREASURY WASHINGTON 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 y 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. —2— 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, Treasury, 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 b for t i purpose of meeting raaturing Federal obligations. Finally, l© 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 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 fft 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 , iriHiLilli 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 m>ftm 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.