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Reproduced from the Unclassified I Declassified Holdings of the National Archives
.
ROTARY CLUB OF PRINCETON, N. J.
'
/r
FEBRUARY 24, 1948
"ATOMIC ENERGY - WHAT IT MEANS TO YOU"
AS A WORLD CITIZEN
The title of this talk could be "The Control of Atemic Energy and the
Marshall Plan", or it could be "Can the United States Survive as a Nation"J
You n a y take your choice as we go through the propositions..
W h en I was asked b y Mr. Clark to talk on this problem, I suddenly realized
that the atom was off m y mind*
I had spend about two years as Chairman of the
Social Science Research Council’s Committee on Economic and Social Aspects of
Atomic Energy and had become quite immersed in the subject.
work was finished about a year ago.
M y part in that
It came as somewhat of a shock to me the
other day to realize that it was completely off m y mind.
When I probed a little
to find out what was on m y mind, I found that it was the Marshall Plan.
W he n I
probed a little more deeply, I discovered a n organic connection between the two,
or certainly a psychological connection.
That is w h a t I propose to tell you
about.
I think the same shift in preoccupation has happened amorg the American
people.
Up until last June or July, there was the danger of something approach
ing a state of frustration here, because every approach to this problem of atomic
energy, particularly in its international aspects, was ending in a blind alley.
The unexpected reception that attended Secretary ‘Marshall*s suggestion that some
thing comprehensive might be done to rescue Europe reflects the same reaction
that I went through.
Concern over the Marshall Plan has furnished a constructive
alternative to concern over what was essentially a n insoluble problem.
that it is a good thing that this has happened.
I think
I think that if w e had remained
exclusively preoccupied w i t h the problem e f the control o f atomic energy during
a period w h en no satisfactory agreement was possible, the results in our foreign
policy might have been incalculable.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
of these implications is this new military instrument which makes it possible
for civilization to destroy itself.
In its international aspects, atomic energy
is overwhelmingly military.
I would like to consider the background of the development #f the bomb.
First, w h y was it developed?
W h y did we do it?
I think that all of us would
have breathed a sigh *f relief if our research had shown that the use #f atomic
energy for military purposes was impossible.
Nevertheless, we had to try te d©
IHWf O
it.
In the world in which we lived, we were net wholly free agents r
If fission
were possible and a w a y could b e discovered te put it to military use, w e had te
try to be the first to discover that way.
There was a compulsion that over-rode
what might, in another context, be called the general interest.
Second, w h e n we had the bomb, w h y was it used?
think that it had to be used.
might have gone the ether way.
There again, personally I
I have many friends who think that that fiecision
Personally, I think that any one of us, if he
had been in the position of the general staff, with the responsibilities of a
general staff, would have made the same decision:
that it had to be used.
The fact, however, now that we have atomio energy, that we have the atemic
bomb, and that we have used it, leaves us in a position from which w e will never
escape— neither we nor eur children.
There is now available an instrument f©r
the destruction--not of the human race, but of everything we know of as civili
zation.
The pressing problem of our time, ■•nee the discovery ivas made, became
the problem of centrol.
How can we control a discovery like this, retain its
beneficent uses and prevent its use as an instrument ••f destruction?
There are, I think, three possible approaches to control.
The first two
are universal; the third unilateral-.
The first univeral approach is a religious one-.
problem that, in other times, a n o t h e r
has controlled.
societies., the religious -organization
It has done s-e ‘tn a moral basis--on the basis that there are
certain things that people dji n/lt do.
This is the s<ort o f
These moral inhibitions have been enforced
Reproduced from the Unclassified / Declassified Holdings of the National Archives
-4-
b y a religious hierarchy.
I feel personally that in the end the control of
atomic energy m ay well be achieved on this basis, but the religious or moral
approach to control clearly is not feasible at the present moment.
There is
no universal religion; there is no universal hierarchy to enforce a religious
or moral sanction.
As an immediate solution to the problem, the religious
approach is more or less out.
The second universal approach is through the police.
describe it in terms of a world government.
A great many people
That is a secondary consideration.
Werld government would help only because it would make unified police action
possible.
The atomic bomb and its destructiveness is the sort of thing that
has to be guarded against, not merely be declaring it illegal, as in the United
Nations, or in a world parliament, b u t by using the police and the methods de
veloped by the police to root out the danger wherever it may be.
controlled on the basis of a Kellogg Pact.
It cannot be
It is only through police action#
through an international, or transnational, organization similar to the F.B.I.,
or the Gestapo or the NKVD that one can use the state as a political instrument
to control this type of menace and to prevent it from being used for destructive
purposes.
That essentially is the avenue that our government took in it«
proposals for international control of atomic energy.
However, police action alone was not enough.
The brilliance of the
Lilientha1-Acheson report lay in its realization that we could not maintain
the quality of personnel necessary to control a thing like atomic energy in an
organization that was mainly a police force.
It would be necessary to combine
the policing and inspection function w i th a positive constructive function if
we hoped to attract and hold brilliant men of the caliber necessary to handle
the problem.
The proposals that w e put forward— the Lilienthal, Acheson, Baruch
proposals--consequently represented a combined approach to the control of atomic
energy.
They relied on the constructive responses of the atomic scientists to
galvanite the police functions of the control authority and thus sought to pre
rseproaucea irom tne unciassmed / Declassified Holdings of the National Archives
-5 -
vent the use of this discovery for destructive purposes.
This proposal broke down completely when Russia refused to go along.
think personally that the Russian refusal was inevitable.
simple.
I
The point is very
Russia could not tolerate international police action of the kind
proposed inside the Russian state and still be Russia.
patible.
The two were not com
Had they accepted it, their own social system would have disappeared.
If they were determined to maintain their social system they couldn't simultan
eously accept this type of control of atomic energy.
As a result, the universal
approach to control through police action failed too.
The third possibility was unilateral.
There was a cushion of time.
had the bomb; nobody else had it a t the moment.
of two or three years* duration, possibly of ten.
the obvious inference:
We
It was cushion of time possibly
That cushion of time led to
could we not, with the bomb in our pocket, use that
cushion ef time to impose a solution on the world for its own protection, to
keep it from self-destruction?
That is a perfectly logical proposal.
It
breaks down* however, for a reason that is very similar to th® one that made
the international approach through police action impracticable.
The reason
is that it is we Americans who have this bomb at the present moment.
not a police state*
We are
We d o n ’t think and live easily in terms of coercion.
could not adopt the unilateral approach and make it work.
American if we tried to make it work.
We
W e would not be
We wouldn't have the callousness to
enforce it if we tried.
These are the bare essentials of the problem as I see them.
the situation today.
made hie proposal.
ceive.
They describe
They describe the situation last June when Secretary Marshall
I doubt if he realized the reception his proposal would re
He had ceme back from the Mescow conference blanked on every side.
Europe was disintegrating.
He knew that we would be required to help in some
way and he thought that the approach ought to be m»re tha* just a unilateral
Reproduced from the Unclassified I Declassified Holdings of the National Archives
-6*
approach or a bilateral approach.
It required some w a y of galvanizing the nations
of Europe as a whole into an objective cooperative attack on their problems.
required alsp help from us.
speech on June 7, 1947,
It
As a result he made a v e r y simple suggestion in his
He suggested that he w ou ld welcome European initiative
in working out a comprehensive recovery program.
The reception to that speech marks a turning point in the world.
suggestion took root everywhere*
It released energies.
The
Within a few weeks
the European nations were getting together to see w h a t it was they needed tft do
fpr themselves, and w ha t help they would need frem us.
was equally galvanic.
(In this side the reaction
Within a short time poople everywhere— outside the gevern-
ment as well as within— were debating the problem, investigating its implications,
working out its details.
ing.
The number of reports that have been issued is stagger
I try to keep currently abreast of these reports--it is one of m y jobs—
and I just have not been able to begin to read them all.
It is amazing, the
reaction that resulted from that suggestion.
I am not going to ge into the Marshall plan here.
I am trying simply, to
sketch the relation of the Marshall Plan t© the problem of t he contr*l ef atomic
energy.
From that point ef view, the essential feature is, I think, that it deals
w it h things that we, as Americans, can do; we cannot carry out effective police
action--we are no good at that.
We can do a great deal to help to create healthier
political conditions, in which people are free to go about their work and t#
have elections and to fight out issues, through the ballot-b*x.
That we can
do a 1ft about; that gees w a y back to the well-springs #f our traditions.
We
can do a lot also about economic recovery— we are an industrial nation, we have
a lot of industrial "know-how".
We tackle problems like these with alacrity, and now our attention is
focussed *n probably the most interesting economic problem the world has ever
had.
Here is Western Europe truncated, having lost m u c h ef its agricultural
Reproduced from the Unclassified I Declassified Holdings of the National Archives
-7base, with a larger population than preqar, having lfst its overseas investments
and the income it got from these; yet it must somehow get back to a self-supporting
basis.
Well* the only way it oan do that is the American way, by tremendous
*•
•
industrialization, by greater productivity, by the employment of capital to
increase output per worker, by imitating America in the integration of th«
economic base that is left.
It will not come about by sixteen separate nations
all working within their own little boundaries, but only th the broader over-all
basis that we have worked out in this country.
The Marshall Plan, from both its
political aspects and its economic aspects, is something we can comprehend and
deal with.
It relies for its success on things that we know about.
As far as I
can see it has completely superseded, done away with, the sense of frustration
and fear that was spreading early last summer, when it became quite apparent
that atomic energy would not be controlled, that this awful business of further
development of the atomic bomb was going to have to go forward, and that we were
getting nearer to the time when it would no longer be our possession alone,
I am nearly through.
There remains one question.
In view of this situation,
where do we stand today on the problem of atomic energy?
I think it is quite
clear that we are going to live with this bomb and that means we are going to
live with the possibility of destruction ever-present.
There are times in the
world when we are faced with insoluble problems— problems that may become
soluble sometime but that are simply insoluble in the context of the immediate
situation.
I think that this is one of th*se times.
learn t# live with the problem of the bomb.
We are going to have to
That does not mean that bombs will
inevitably rain down on us next week or two or three years from now.
to use the bomb will be a terrible decision for anybody ever to make.
not be made lightly.
The decision
It will
But as we learn to live with this insoluble problem, we
will also be engaged in rebuilding for ourselves and for our friends the kind
of world in which we can function.
I think that as we try to handle this problem
of danger day by day, month by month, in all its very difficult international
Reproduced from the Unclassified I Declassified Holdings of the National Archives
-8—
aspects, we will handle i t much more sanely if w e live in a world in whi ch the
nations of Western Europe who have more’ or less our own traditions, our own
background, our own sense *f freedem, and political rights, are back on their
feet, out of the morass of disintegration.
I think that we will be able to handle
it much more sanely if w e succeed in recreating in Western Europe a sense #f
unity among the nations themselves and w i t h us*
We want a democracy there— with
decisions reached b y consent, net coercion— not the sort o f thing that is
happening in Czechoslovakia today.
We w a n t als* economic self-respect.
We
want to get those countries to the point where they are self-supporting and,
consequently, can respect themselves and not feel that they have to toady to
anybody— to Russia, to ourselves, or anybody else.
Recorded b y Roger H. E i c h # m
S*undScriber.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
(l6) Frankfurt/Main - Hoechst 2
McNe i r- Kas eme
March 6, 19^8
Dear Winfield Riefler,
Your friendly letter of February 17 arrived on February 23, was a
relief to me.
I had been wondering why you had not answered my letter
of last year and am glad to have your explanation.
I ’m awfully sorry
there was no chance to see each other last year.
I still v/as at MonAen
(Westphalia) when y o u were in this country and you probably did not get
there at all.
1 hope you will be here again some time. D o n ’t forget to
call me up then (Tel, 961, ext. 620).
Mrs. Troemel wishes to be remembered
to you both.
I have just with me some photos of March *29 showing you,
Mrs. Riefler, and your oldest (Donald?;.
How a^e your boys? We had often
been thinking of all of you, especially wondering if the boys had been
drawn into the war.
Fortunately our boys were too young for that, they
are 16 and 13 now, and the little daughter is six,
I terribly miss them.
We have been separated for eight years now.
My family is living in the
ruins of Aachen, and there is still no chance of getting united again.
Connect!:ns are bad; trains overcrowded,
^y wife is wearing herself out
trying to feed and clothe the children.
Our second boy and the daughter
have grown fast recently and their state of health is giving us some ’^orry.
Not belonging to the bartering section of the German economy, as mentioned
in my last letter, we have no means to improve our rations, which now stand
at lees than l/3 of normal and contain neither fat nor meat, and it is only
thanks to some friends abroad that we have be?n able so far to get through
this period which is more difficult than any previous one.
Forgive me for
mentioning this at all.
These problems are a source of constant troubles
and are particularly vexing for all of us who should like to work most en
ergetically for a better world but are simply held down by hunger and ex
haustion.
One can stand that for some time but not indefinitely and we see
no hope yet of improvement.
And this leadB me again to the subject of my last letter.
Unless the
Russian methods are adopted things cannot be put right, especially by force.
We are in for a great experiment in freedom.
This country has become the
battle-ground of the great combat between the ideas of freedom and respect
of human person and those of the slave state.
In '^0 this combat was raging
over London while the German people was enslaved.
The German people is free
now from that slavery; there are many people realizing the ideals of a free
society.
On the other hand hunger and isolation from the rest of the world
have suppressed sound developments.
Democracy does not mean much to many
people here.
Whatever can be said against the Germp-ns (they certainly have
not proved a likeable people for generations, but at least all the decent ones
still feel ashamed and humiliated at the horrible misdeeds committed in their
name) it cannot be denied that they have had a terrible punishment.
And it
is in this country that the most important decisions will have to b e taken
soon.
When I wrote you last I could not foresee that our nearest neighbor
to the east would b e enslaved so soon and so thoroughly.
The road to seffdom
is Vider open than ever and it is alluring to many in this country as in others.
Communism has. its attractions insofar es it has a definite though rather primi
tive ideology, as it plays on the wishes of the hungry masses and promises key
rteprooucea rrom tne unciasstnea / ueciassmea noiaings or me manorial Hrcnives
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positions to the would-be slave masters.
The ideas of the west are definitely
superior but they do not appeal to the man in the street who decides the fate
of democracies.
It is his imagination we must try to catch; it is his volun
tary cooperation we need.
Xt is he whom we must convince that we mean the
respect of the human person and genuine liberty, and some Frenchman or English
man said the other day thst people in Europe were just craving for this.
The
fact that Germany is in such a state of decay does also mean that there are
the greatest chances for a nev formation.
People are waiting to be called
up for new tasks— the Question is: Who will be first* east or west?
The
greater energy so far, I regret to say, has come from the east.
Only b y dras
tic and startling action can people here, in Europe and elsewhere, be made to
rally for our ideals.
This is the political background of what I wrote in my
last letter.
I have pondered over it again and again.
You know I am a bit of
en economist myself.
I realize the economic difficulties of my suggestions,
the inevitable crisis (but this would be a crisis leading to recuperation,
and for years to come our world will go from crisis to crisis uniess we take
bold measures).
In short it would b e a plunge into freedom, but I have no
doubt that peoule everywhere would soon learn how to move and act in freedom,
released fromthe fetters of economic and political controls.
The main duties
of states would be to see that everybody is playing the game fairly, that all
aspirations for tyranny were suppressed from the beginning.
Would not that
be a much nobler task for a state than to see to it that every or not even
every one of its citizens once a month gets a box of matches, for instance?
The state is debased and even corrupted by interfering too much into economic
everyday affairs of which the citizens should take care themselves, individually
or cooperatively.
This, I rasy add, is the Christian concept of state, and
since y o u knew me I have become a genuine believer in Christ (I finally made
up my mind in 1938 when I had to take a decision on my children’s education).
I think I must mention this in order to show you the sincerity of m y ideas
since you can't be aware of who I have become during all these long years.
And to conclude: the German people has no state now and as things are,
chances for political unity are only very slight.
Splittingtp this country
would create ne*/ and dangerous problems.
Since things cannot be allowed to
drift any longer unless Germany is to be left to the east, and with Germany
the re*t of the continent, mainly Italy and France, one decisive step can be
taken: establishing— apart from any political organization— a free society
based on free economy.
In every state economy the currency is the product
of state legislation.
Since we have no state we cannot h?.ve such legislation
but this does not mean that we cannot have any currency, it only means that we
must take refuge to the only currency there is without state backing: the gold
standard with gold circulation.
The gold standard is indeed the currency of
free economy and free society.*
Ara I clear enough? Do you see what I mean? Am I wrong? Please, do think
things over, discuss it with your friends or come here to make up a kind of
advanced headquarters for this— new invasion which must be started as sur
prisingly as in 19 ^ .
I trust I would be as successful as then.
As far as I know I can't send this letter bv air.
I hope it won't take
too long.
With kindest regards to ell of you, in which Mrs. Troemel joins me,
/ s/ Werner Tsroemel
*AljL that is needed is a gold fund for Germany or any part of it controlled
by fci body of experts.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
(4 6 )
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W. *. Biefler
Introduction
In view of the current discussion of the wisdom of modifying oupport policies for long-term Treasuries, I feel it my duty to raise th* -frbfelem of the long-term capital!s&tion rate of the American economy* The rea
sons for snd agsinst changing current support policies for Treasury Issues
have focussed in large part on the, current inflation, •the current phase of
the postwar reconversion boos that we are experiencing, or the current phase
of the business cycle in which ire find ourselves. I have neither heard nor
road much significant discussion of long-term considerations other than the
^olfl&Mto .>neceaeity o f stopping tho inflation, or the ondesirability of increas
ing the interest barges of the freaotycy* tIt is o y conviction that we are
dealing with a much more fundamental problem thin this, or rather that tho
policies which are under consideration to deal, oith the inflation impinge
on a m ob '.mar* fundasiental problem than this, namely, the long-term capitali
sation rate of the American economy.
Abo**t 19©0* the American economywas capitalized at a range of
long-term.(rates that rested m a bottom ‘around 3-1/2 per cent, i .e .,t h « best
borrowers — at. that time the soundest railroads —* paid around 3-1/2 per
oot& for ioia^term‘mam##, less favored borrower* paid more* ' In my name town
in Hooter* Hew Xork, for ejtamplo, home owners on first mortgagee paid 5 por
eoigt. In Other sections of the country rates were higher. These rates of
interest Iter
money wore low and persisted for a long time. They
became eagrltaHsoA liifc* tne economy, i * e .f the capital value of land, of
'buildings, of oq<jfa^isi^ all were affected by those, low long-term rates for
mcmey, ' lind, Im flaS^o, equijfiont commanded higher market prloos because
long-tera aoasy was low.
From 190G t o 1920, I6ng-ter» money rate* rose, slowly, veiy slowly,
until 1917 and much -*ore rabidly thereafter. Commodity prices also rose
alaii^r
steadily from 1900 to 1914 and very rapidly thereafter until 1920*
Piiopet4!^ valoei reflected both1of these forces j thOy rose less than one might
have ©xieeted om the baeie of the commodity price index alono because long*term interest rates were aloo rising* By 1920, however, the whole economy
of the bnited States was capitalized at much higher long-term rates than in
1900 or 1914* In general, the rates ranged upwards from a base between 4*1/2
aad 3 per cent.
I have long folt that many of the peculiar characteristics of the
1920* s jreflected primarily the shift in the world flM M M M l of long-term in
terest jratoo that resulted from the First I arid far* Tho United States emerged
-r.uuuw;u from he Unclassified
classified / r w i-
M0Mngs 0((he Nationa| Ardljves
-2 -
froa that war a current creditor rather than a debtor on international ac
count, a long-term lender of new money rather than * borrower. Great
Britain emerged froa the war a current debtor rather than a creditor on
international account9 a borrower of new money rather than a lender.
At the ease time, the economy of the United States was capitalized at
long-term rates resting on a base of 4-1/2 to 5 per cent for the best risks,
while the economy of Great Britain was capitalised at long-term rates rest
ing on levels of 3-1/2 to 4 per cent for the beat borrowers. In a free
market, the action of the forces of arbitrage could have only one result
unde'r these conditions, long-term interest rates in the United States would
tend to fall under these conditions, those in l#ondon would tend to rise*
the failing long-tera interest rates in ths United States would require
a recapitalisation of equities and durable goods, capital gains would prera il, speculation would be buoyant* The rising long-tera interest rates in
London would require a recapitalisation of the British economy at higher
long-ten* rates* Capital values would fall, capital gains would predoainate.
I agree fully that sales of long-term treasuries to the Federal Re
serve Banks by insurance companies and other non-bank investors are the most
important factor asking for inflation in the United States at the present
time. 1 agree also that a support price for governments sufficiently low
cto deter such sales would probably bring the inflation under control more
effectively than any other aove the monetary authorities could make. I am
not prepared, however, to endorse such a aove in the long-term aoney markets
without adequate consideration of its effect upon the rates of capitalization
of the American economy and without soae consideration of the aethods by
which the monetary authorities are prepared to deal with those effects.
The American economy is now capitalized at a range of rates rest
ing on 2-1/2 per cent as a bottom. From a long-term viewpoint, X think this
is near an equilibrium level. By this £ mean that it is sufficiently below
long-term rates
to sustain a steady outflow of capital if international
tensions should ease, the Marshall Plan succeed and intereonvertibillty of
currencies should be restored. Any higher capitalization rate in the Ameri
can economy would add another factor to delay and impede^ the restoration
of convertibility of currencies. Froa our long-term domestic point of view,
I see no reason to question a series of capitalization ratios resting on a
2-1/2 per cent long-texm rate level. Admittedly this ic difficult ground
for judgment, but I aa sufficiently impressed with some phases of the
•economic maturity* argument, the high productivity of this country, and
therefore the high margin for saving without groat la^alrment of
consua^Ttion essentials, to feel that it is the duty of the monetary authori
ties! to seek to maintain as low a long-term interest rate as is possible
without inflation. The present exorbitantly large inflationary demands for
capital in our markets do not seem to me to reflect appreciably the fa,ct
that we are capitalized at low interest rates. They seem to me to reflect
Reproduced from the Unclassified I Declassified Holdings of the National Archives
3~
directly (1) th# piling up of a huge backlog of deferred demand for capital
good® during the war, (2) the existence of aa excessive volume of money aa
a result .of w a r financing, and (3) the pyramiding of capital, demands that
are typical of all boos periods* I n other words, all three o f the factors
primarily responsible for t h e inflation .reflect ephemeral situations rather
than long-term capitalisation rates*
Theae considerations l e a d ae personally to the conclusion teat
there is no evidence to indicate that the System1s long-run policy should
envisage a long-term Treasury rat# above 2-1/2 p«r cent.
I have n o personal
addiction to the •par**
* There Is no valid reason that governments
should sell at or above p ar than below. It happens, however, that this
long-run view of mine as to the capitalisation rate that w l H be consistent
with hi$i level product! cm without inflation would result in a market price
for Treasuries around par*
The present situation which we face is how to deal with' a boom
in which t h# current rat# of investment demand is well in excess of avail
abilities.
Boons ar# not exceptional in American history. They have al
ways been t«aiporary. Basically, I would prefer to deal with thl# boost by
freeing short-term rate#,, .letting them rls# to or above th# long-term rate
dumping of longbefore 1
on the long-term rat#* th # m rrm t
terms b y tfee insurance companies, however* f£-«e#a the System with a condition,
not a theory. Its immediate imperative problem is to stop this dumping.
The recommendation of the committee that support prices for governments be
dropped drastically is directed solely toward this objective* I t should be
viewed aa temporary, as a policy that will b# revised a a soon as it can be
without encouraging a renewal of dumping. It should not be viewed as a
permanent rise i n th# long-term rate of capitalisation of the eeonoogr.
It would be a mistake* for example* i f insurance campmlea o r old age se
curity reserve systems should raise the rates on which they compute their
reaerve r e t i r e m e n t s as a result of a temporary phenomenon of this kind.
Should -the System adopt the policy recommended, it should adopt
simultaneously resolutions that will insure aggressive buying if necessary
to raise long-term Treaauriea from 95 to 97 ;
'aa soon as dumping etopa and
back, t o par as soon aa the inflation is over. The knowledge that the System
haa this viewpoint and haa adopted siich resolutions will help to diminish
the dumping*
We should change ©nr slogan "Maintenance of the 2-1/2 per cent
yield level" — not for the 'foreseeable'future — that ia important, bat
"for the long future* » i.e., something to be returned to after the present
temporary
»
Reproduced from the Unclassified I Declassified Holdings of the National Archives
CH R ISTIA N A. HERTER
H A R R IE T A . C O N E L
1 0 t h D is t r ic t , M a s s a c h u s e t t s
SECRETARY
C O M M IT T E E O N R U L E S
J O I N T C O M M IT T E E O N T H E
E C O N O M IC R E P O R T
Congre&i of tlie ®ntteb Stated
Jfyauit of ftepredentatibeg
Hagfnngton, 2B. €♦
V IC E -C H A IR M A N
SE L E C T C O M M IT T E E O N F O R E IG N
A ID
April 20, 194S
Br. Winfield W. Riefler
The Institute for Advanced Study
Princeton University
Princeton, Hew Jersey
Dear fin :
fhanks so much for your very
good letter of April 15th# We are all
delisted that you are going to lie a'ble
to take orer the reins of the School and
guide its policy In the days to come*
Everyone with whom I have talked feels
that we could not have made a better
choice.
X shall fee looking forward to
seeing you down here in the very near
future*
Best as ever,
M A R Y E . B R IS T O R
ASST. SECRETARY
B o st o n O f f ic e :
1703 POST OFFICE BUILDING
R it a K e e n a n M u r p h y
Reproduced from the Unclassified I Declassified Holdings of the National Archives
BOARD DF G O V E R N O R S
O F THE
FEDERAL RESERVE SYSTEM
W ASHINGTON 2 5 . D. C.
ADDREBB OFFICIAL CDRREBPDNDKNOC
TO THE BOARD
April 22, 194S
Mr. Winfield W. Riefler,
Institute for Advanced Study,
Princeton, N ew Jersey.
Dear Mr. Riefler:
The Board of Governors of the Federal Reserve
System has appointed y o u as Assistant to the Chairman
of the Board of Governors of the Federal Reserve Sys
tem, with basic salary at the rate of $15,000 p e r annum,
effective as of the date upon which you enter upon the
performance of your duties.
W h e n you come to Washington we will arrange
for your physical examination by our doctor.
Very truly yours,
Division of Personnel Administration.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
C H R ISTIA N A. H ERTER
H A R R IE T A . C O N E L
1 0 t h D is t r ic t , M a s s a c h u s e t t s
SECRETARY
C O M M IT T E E O N R U L E S
C o n g r e s s o f tfte 3 H tu te b S t a t e s
House of EeprcSentattoeS
Hasfitngton,
C.
May 24, 1948
Dr, Winfield W, Hiefler
Assistant to the Chairman
of the Board
Federal Heserve System
Washington 25. D. C,
Dear Win:
B o w that the Select Committee on Foreign A i d
has completed its work a n d been officially terminated, I
want y o u to k no w ho w deeply I appreciate the part you
played in the successful accomplishment o f our mission.
There is no question in my mind that our staff was the
equal of any that ever before served a Congressional
Committee on a vitally important task. You can take real
pride in your contribution to a job well done.
It is generally agreed that our Committee had a
large part in galvanizing the thou^at of Congress and the
country as a whole to the point where the ECA m s passed
with surprising speed.
Our report should prove to be of
great value to those iuho will administer the Act in the
days to come as well as being a source of fundamental
material for all who are involved in other ways in inter
national activities,
I cannot close without saying again h o w grateful
I a m for your cheerful and efficient support throu^iout the
Select C o m m i t t e e ^ life.
With kindest personal regards.
Most sincerely
M A R Y E . B R IS T O R
B
o sto n
O
f f ic e :
1703 POST OFFICE BUILDING
R it a K e e n a n M u r p h y
R e p rod uced from th e U n cla ssified / D ecla ssified H o ld in g s o f fh e N a tio n a l A rchives
Sent A ir Mail - S p ecia l D elivery
September 3, 1948.
Mr, Thomas B. McCabe,
Kimball House,
Northeast Harbor, Maine.
Dear Tom:
Here is a draft of a letter to the insurance companies that
1 have worked out* 1 have shown it to no one else* 1 want you to
see it, and consider whether you like the approach before you arrive
here Tuesday morning.
I
think .the letter would have real impact, more impact than
the increase in reserve requirements taken alone. Together the two
actions ought to produce results. The insurance companies are now
considering a huge volume of financing for the fall quarter, much
larger than their current revenues and much larger than savings of
the country justify. A decrease ia their bids to a level consistent
with their revegfuas would have a marked effect. As the letter ia#
drafted, you are asking them only to put the facts before their respon
sible officials and to act according to their conscience. I believe,
however, that th«y would feel they would have to conform.
A letter like this would of course be a major policy move
and a major personal move on your part. Xt would lead to repercussions.
Considered strictly on its merits, however, froa a narrow viewpoint,
you are asking the insurance companies merely to hold their government
portfolio constant during a period of crisis. This is certainly aot
extreae. It should appeal to the Treasury. In essence, it is a cotraterpart to the American Bankers Association committee (the Dodge Committee)
which has asked commercial banks to be prudent in their lending. I
wonder why the insurance loophole was not covered last spring when the
program of voluntary restraint was adopted. In the meantime, it has
gro*n to a "Very M g loophole indeed.
As 'ever,
Winfield W. Biefler.
Enclosure
IWRtjol*
R ep rod uced from th e U ncla ssified
I D ecla ssified H old in g s o f th e N a tional A rchives
Suggested d r a ft o f a l e t t e r to th e heads
o f major l i f e insurance companies
Mr. George L. Harrison, Chairman,
New Xork L ife Insurance Company,
51 Madison Avenue,
New York, Mew lo r k .
Dear lir. Harrison:
A s itu a tio n has arisen tn i 3 autumn in connection iritn the in vest
ment a c t i v i t i e s o f the l i f e insurance companies which I d esire to c a l l to
your personal a tten tio n and through you to th e a tten tio n o f your Board and
th e o ff ic e r s o f your Company who are responsible fo r the broaa lin e s o f
your investment p o lic y d e cisio n s. I t r e la te s to the con trol o f the i n f l a
tio n from which the country i s now .su fferin g . 1 know th a t you are aa
worried over t h is s itu a tio n as I am, not on ly because the insurance busi
ness i s com pletely t ie d to fin a n c ia l investm ents, but also because the
holders and b e n e fic ia r ie s o f l i f e insurance p o lic ie s are drawn from a l l
sectio n s o f the community and in clu d e in t h e ir number an ap preciable,
and p o ssib ly a major, fra c tio n o f th e coanunity. As a consequence, anything
which a ff e c t s adversely the l i f e o f the nation i s l i k e l y to a ff e c t adversely
the w e ll-b ein g o f l i f e insurance. This i s p a r tic iila r ly tru e when the prob
lems th a t beset us are fin a n c ia l, and e s p e c ia lly tru e when they have to
deal with in f la t io n and i n s t a b i l i t y in the value of aaoney. The in fla tio n
th a t has already taKeu p lace has d r a s t ic a lly reduced the r e a l valu e o f l i f e
insurance p o lic ie s outstanding. Erery day that i t continues i t a ff e c t s ad
v e rs e ly th e in ce n tiv e to in v e s t savings in l i f e insurance as compared to
other forr&s of investm ent.
The s p e c if ic s itu a tio n th at has arisen t h is autumn and th a t forms
the occasion fo r t h is l e t t e r i s the la rg e amount o f u. S . government s e c u ri
t i e s which the Federal Reserve Banks now fin d i t n ecessary to buy and to
hold as a r e s u lt of p o r tfo lio s a le s by the insurance companies. I think I
ap preciate f u l l y th e con sideration s th at have m otivated the insurance com
panies in scheduling t h e ir s a le s . Throughout th e period o f h o s t i l i t i e s , the
l i f e insurance companies cooperated to the f u l l by in v estin g t h e ir current
r e c e ip ts i a Treasury is s u e s . Aa a r e s u lt , they acquired a p o r tfo lio in
which Treasury is s u e s bulked d isp ro p o rtio n ately la r g e , not with resp ect to
q u a lity but mainly from th e point o f view o f y ie ld . I f e e l th a t i t has been
e n tir e ly reasonable fo r the l i f e insurance companies, now th a t the war i s
o ver, to seek g re a te r d iv e r s ity and a higher aggregate y ie ld on t h e ir in v e s t
ments, thereby resto rin g the y ie ld on t h e ir p o r tfo lio to a caore favorable
re la tio n to t h e ir reserve c a lc u la tio n s . Under th e circumstances th a t pre
v a i l t h is autumn, however, the current execution o f such a p o lic y , to the
extent th at i t in v o lve s a decrease in the government s e c u r ity p o r tfo lio o f
the insurance companies, i s d ir e c t ly financing the in f la t io n .
R ep rod uced from th e U ncla ssified
I D ecla ssified H o ld in g s ot in e n a tio n a l «iuuv<»
-2Th« reason that the situation this autumn differs from that
which earlier prevailed, is the disappearance in June of the Treasury sur
plus. So long as the Treasury was collecting from the public a larger "vol
ume of cash than it was paying out and had a sizable margin left over for
debt retirement, their funds were available, in effect, to take over 0. S.
securities sold by the insurance companies in pursuit of their postwar
policy of portfolio diversification. Now that that surplus has disap
peared, there is no offsetting source of funds to absorb these bonds.
As a result, they are now being absorbed and held directly by the Federal
Reserve Banks, Each dollar of securities so absorbed puts a dollar of
additional reserves into the money aarket.
I do not wish to imply that the diversification of life insurance
portfolios will be the only source of inflationary demands this autumn, or
that all our problems would be solved by the presence of a surplus in the
Federal budget. To do so would fly in the face of the facts of the past
three years whan we have had a major inflationary development in spite of
the fact that the Treasury surplus was absorbing securities disposed of by
the life insurance companies. The blunt fact is that we are operating in an
extremely complicated situation in which no one factor can be singled out
either as a cause or a cure of the inflation. It remains true nevertheless
that the disappearance of the surplus incredibly complicates the problem
of credit management and that it has come moreover at a time when the physical
supply situation was beginning to show signs of balance and to indicate
that the inflation might be more amenable to control by wise moves in the
area of money and credit*
1 would appreciate it if you would bring these.facts to the con
sideration of those irtio are responsible for policy decisions in your Company
to enable them to make such adjustments in their policies in the light of
these facts as their conscience and their obligations to their policyholders
may indicate* I have long believed teat this inflation could not be brought
under control by the government alone or by any one agency in the government
a l o n e . It is a job for team play and everyone is on the team. It has been
ay job since April to help shape Federal Reserve policies to «et the infla
tion under control. In pursuit of that objective, 1 have played my part
In raising interest rates in the short-term money markets, in raising re
discount rates, in securing authority from Congress to ( l) reirapose con
trols over consumer credit, and (2) to increase the reserve requirements
of member banks* These moves will be in the right direction but they will
not, so far as we can see, prevent a major exp^nsim of credit between now
and the end of the year. It is not in my power to create a budget surplus
during the next six months* From a practical point of view, it is not in
the power of any man to plug that new hole in our armor before the new Congress
reconvenes and acta. It is for that reason that 1 am laying the situation
frankly before you for such action as you think proper.
R ep rod uced from th e U ncla ssified
I D ecla ssified H o ld in g s o f th e N a tional A rchives
-y-
It is fitting that 1 should tall 70a haw 1 feel I would act If
I wire in your place. 1 think I would decide to hold *y portfolio of
government securities constant in volume until the Inflatlonaiy situation
had turned. 1 think 1 would feel that this waa in the best interest of
my polioyholdere as citizens and as individuals purchasing life insurance,
to *ake this decision would involve & foregoing of interest of around
1/2 of ode per cent cm that part of the U. S. securities portfolio that
otherwise would hare been switched into higher yielding assets. If Con
gress should act in the coming session the deferment would be- for only
six nonths and would amount only to about l/U of one per cent on the
saoonts that alght hare been switched. Such an -Mount is utterly negligible
from the direct standpoint of the pecuniary well-being of policyholders
wfasa it is ^spared with the consequences of another loss, say, of 4 per
cent in th«£$arehasing power of all the funds tied up in life insurance
policies* In asking such a decision to defer switching out of treasury
Issues, I would be aware tbat the action would have relatively little effe$fe if my eoapaoy were the only one to adopt such a course. I think I
would feel that the majority of cowpanies would react to the facts in th*
•« M way that 1 had and that the consequences of such a coamon reaction
would aid very s»teri&lly ia coab&tting inflation during the autuaa.
final point* Soate of your officers may feel that the Federal
Reserve System is at fault in this situation in Maintaining its policy of
supporting tha 2-1/2 per cent yield level on Treasury securities under ex
isting conditions. I have given this probleat the aost serious considera
tion aad continue in the conviction that such support should be continued.
This conclusion is* I believe, supported by the weight of responsible
financial opinion in this country*
Sincerely yours,
Thoa&s B. McCabe
R ep rod uced from th e U ncla ssified
I D ecla ssified H o ld in g s o f th e N a tional A rch ive s
September 22, 194-
Mr. H . H* Kelly, Chairman,
United States Civil Service Committee
of Expert Examiners for Economists,
Department of State,
Washington 25, D. C.
Dear Mr. Kellys
On September 10 you a
fill out with resTor the position of In
pect to the application of Mr.
temation&l Economist in the Be.
« . lou say 'in the
letter that a reply in the fora af a written letter caa substitute
for filling out of the form. Because of the fact that my knowledge
of Mr* Tirana is intimate and extends over a considerable period
of year*, but never involved a direct working relationship with
him, I would prefer to answer in the form of a letter rather than
the questionnaire.
I met Mr. Tirana first on a trip of his to Washington, in
1933 or 1934, taut ay real contact began in 1936 when I visited
Geneva and went out of ay way to stake contact with hia* when he
was with the Secretariat of the League of Nations. Subsequent to
that time, 1 served as American member of the Finance Committee of
the League of Nations, of the Statistical Sub-Committee of the
League of Nations on Financial Statistics, and on the League of
Nations Commission on Bconomic Stability.
Through August 1939 X went to Geneva twice a year on mis
sions, and after July 1940 saw a great deal of the economic work
of the League when it was moved to this country. As long as
Mr. Tirana was with the League of Rations, 1 saw a great deal of
him on these trips. Vhen he left the League to come to this
country, he came first to my house* 1 was one of those irtio recom
mended him here at that time*
My subsequent contacts have been equally close except
fdr the last two or three years, in which 1 have seen relatively
little of him, much as I desire to do so.
R ep rod uced from the U nclassified
I D ecla ssified H o ld in g s o f the N ational A rch ive s
Mr. H. H. ICelly
-2 -
Fro® t h is period o f extended con tact,
in c lin a tio n
would be to answer a l l o f the questions on the qu estionnaire in
the most favorable lig h t* Mr. Tirana i s c e r ta in ly a man o f un
usual cham , in t e llig e n c e , and a b i l i t y . He i s c e r ta in ly an
outstanding in d iv id u a l. So f a r as I know, he w rite s very w e ll
and organizes w e ll. I regard him in every way as l f y a l to the
United S ta te s . I would imagine th a t hew onld be an outstanding
candidate fo r appointment t o the Department o f S ta te .
Very s in c e re ly yours,
W infield 7n E ie f le r ,
A ssistan t t o the Chainnan*
W IRscls
R ep rod uced from th e U ncla ssified
UNITED
I D e cla ssified H o ld in g s o f the N ational A rch ive s
STATES
CIVIL
SERVICE
COMMITTEE
OF
EXPERT
EXAMINERS
F OR
ECONOMISTS
DEPARTMENT OF S TATE
WASHINGTON
25,
D.
C.
September 10, 1948
Name of applicant:
,
Tirana, Rifat/
Title of position:
Mr. iiV. V#. Riefler,
Federal Reserve Board,
Washington, D. 0.
International Economist
Dear Mr. Riefler*
The applicant named above is being examined for the position indicated, in the
Department of State. In evaluating the potentialities of prospective employees, we
would like to have the considered opinion of former teachers, employers, and associates
who are acquainted with the candidate, and who know the quality of his work. Your
help in selecting an individual to fill this position is desired on the basis of your
knowledge of the applicant.
A qualifications voucher has been prepared which contains a list of certain of
the qualities which is believed an individual must have in acceptable combination
in order to perform the duties of this position. It would be appreciated if you would
complete this form and return it at your earliest convenience. If you prefer, you may
write a letter covering essentially the same traits as are listed on the form, plus
any other information which seems pertinent.
We realize that some of these traits are difficult to judge objectively. Never
theless, your considered appraisal is desired with respect to the qualities of which
you have personal knowledge. Since your judgment should be based on his past per
formance, any items which you have had no opportunity to observe should be omitted.
If you feel that someone else knows more about the candidate than you, feel free to
ask him for information. If someone besides you fills out the form or assists you in
filling it out, that person should sign it, indicating trhe items which he completed.
enclosed
A description of the duties of this position is
for your use
in evaluating the qualifications of the candidate for this position. Your assistance
will be greatly appreciated by the Committee and the information you furnish will be
treated as confidential. A self-addressed franked envelope is enclosed for convenience
in replying.
Very truly yours,
Enclosures - 3
CSC F O RM 15*+
8-48
Reproduced from the Unclassified / Declassified Holdings o f the National Archives
Tirana, Rifat
BUDGET BUREAU NO. 50.R 128
APPROVAL EXPIRES JULY 31, 1950
U N IT E D ST A T E S C I V I L S E R V IC E
COM M ITTEE OF EX P ER T EX AM IN ER S
FOR E C O N O M IS T S
DEPARTMENT OF STA TE
W A S H I N G T O N 25,
QUALIFICATIONS
1.
INQUIRY
FOR
D.
C.
ECONOMIST
POSITIONS
G iv e y o u r e s t im a t e o f th e a p p l i c a n t 's q u a l i f i c a t i o n s f o r each o f th e e le m e n ts l i s t e d
check mark for each element in that c olum n which beat expresses your opinion.)
SOMEWHAT WEAK
OR SPOTTY
ELEMENTS
ADEQUATE
b e lo w .
(Place
a
EXCEPTIONAL KNOWLEDGE
OR A BILITY
VERY GOOD
KNOWLEDGE OF THE P R I N C I P L E S AND
THEORY OF ECONOMICS
KNOWLEDGE OF THE P R I N C I P L E S AND
THEORY OF THE S P E C I A L I Z E D BRANCH OF
FCONOMICS USED IN T H I S P O S I T I O N
KNOWLEDGE OF RESEARCH METHODS AND
SOURCES OF DATA A P P R O P R IA T E TO
T H IS P O S IT IO N
A B I L I T Y TO CONDUCT
ECONOMIC RESEARCH
2.
A B I L I T Y TO PLAN AND D I R E C T ECONOMIC RESEARCH S T U D I E S :
□
□
3.
4.
5.
NO T A GO OD R E S E A R C H A D M I N I S T R A T O R
GENERALLY SATISFACTORY
E3
SOMEWHAT WEAK
□
□
SATISFACTORY
□
KNOWLEDGE OF CURRENT PROBLEMS, DOM ESTIC AND I N T E R N A T I O N A L ,
O
NOT UP -T O-DATE
□
KNOWS- T H E C U R R E N T S I T U A T I O N
SOMEWHAT RESTRICTED
AS GO O D AS MO ST
1
1 SOMEWHAT
1
1 WRITES
1
S K IL L
OUTSTANDING
REL ATED TO THE WORK OF T H I S
□
VERY WELL
□
E X C E P T 1 ONA L K N O W LEDGE
PE R S P E C T IVE
P O S IT IO N :
IN F O R M E D
U N U S U A L ABI LITY
EXCEPTIONAL ABILITY
□
VERY GOOD
□
E X C E P T I O N A L L Y C L E A R AND C O N C I S E
IN W R I T T E N ECONOMIC REPORTS
H A R D TO F O L L O W
GOOD
C ]
□
REPORTS
NOT A GOOD SPEAKER
1
MA KE S G O O D O R A L P R E S E N T A T I O N S
□
1
VERY GOOD
EXCEPTIONAL SPEAKING ABILITY
IN O B T A I N I N G APPROVAL OF IDEAS AND PROGRAMS:
□
NOT A 6000, S A L E S M A N
□
□
HAS
1
AVERAGE SKILL
A 8 I L I T Y TO DEAL W IT H
O R G A N IZ A T IO N :
1
B E T T E R T H A N MO ST
1 EXCE PT IO NA LL Y CO NV INCING
THE P U B L IC A N D M A 1N T A 1N WORK R E L A T IO N S H 1 PS W lT H
1 NOT GOOD. A T C O N T A C T W O R K
□
10.
FI EL D
P O S IT IO N :
VERY GOOD
A B I L I T Y TO EXPRESS H IM S E L F ORALLY ON ECONOMIC M ATTERS:
□
9.
IN T H I S
A B I L I T Y TO EXPRESS H I M S E L F
1
8.
V E R Y GO O D
OU TSTANDING
A B I L I T Y TO COORDIN ATE H I S ECONOMIC RECOMMENDATIONS W IT H THE PROGRAM O B J E C T IV E S OF AN O R G A N I Z A T I O N :
□
7.
□
□
A B I L I T Y TO SERVE AS CONSULTANT ON CURRENT PROBLEMS REPLACED TO THE BRANCH OF ECONOMICS USED IN T H I S
□
6.
INDEPENDENT
SATISFACTORY
GROUPS AND I N D I V I D U A L S O U T S ID E t h e
□
BETTER THAN
CD
FXCFPTIONAL ABILITY
□
A GO OD T E A M W O R K E R
□
E A S Y TO S U P E R V I S E
MO ST
A B I L I T Y TO WORK AS A MEMBER OF A TE AM:
□
H A R D TO G E T A L O N G W I T H
1 1 . W I L L IN G N E S S TO ACCEPT D I R E C T I O N AND S U G G E S TIO N S :
□
12.
13.
TO R E S E N T S U P E R V I S I O N
A B I L I T Y TO S U P E R V I S E AND D I R E C T OTH ERS:
□
T E N D S T O BE A PO OR S U P E R V ISOR
□
A VERY GOOD
□
GENERALLY SATISFACTORY
□
RE MA RK AB LE SKILL AND
SUPERVISOR
EFFECTIVENESS
A B I L I T Y TO APPLY COMMON SEN SE AND SOUND JUDGMENT TO ECONOMIC PROBLEMS AND A R R IV E AT SOUND CON C LU SIO N S AND
WORKABLE METHODS:
□
□
U .
TENDS
IN C L I N E D T O BE U N R E A L I S T I C
GENERALLY SOUND
OR
INFLEXIBLE
□
□
BETTER THAN MOST
UNUS UA L COMMON SENSE
ANO S O U N D J U D G M E N T
A P P L I C A T I O N AND EFFORT ON A S S IG N M E N T S :
I— '
OFTEN NEE05 PRODOING
WORKS HARDER THAN MOST
^
GENERALLY ACCEPTABLE
E X C E P T IO N A L L Y
IN D U S TR IO U S
-------- ---------------------- ----------------------------------------------------------------------------------------------------- Caver}-------------------------------------------------------------------------------------------------------------------------------------
R ep rod uced from th e U ncla ssified
I D ecla ssified H o ld in g s o f th e N a tional A rchives
BUDGET BUREAU NO. 5 0 - R 1 2 8
15.
16.
APPROVAL E X P I R E S J U L Y 3 1 ,
1950
E S T IM A T E D F I T N E S S FOR THE TY PE AND LE V E L OF ECONOMIC WORK FOR WH IC H A P P L Y I N G :
□
N O T TH E T Y P E
C3
SOME DOUBTS
FOR T H I S
JOB
OR R E S E R V A T I O N S
d
A G O O D P E R S O N FOR T H I S W O R K
D
ONE OF TH E B E S T
I N D I C A T E IN WHAT C A P A C I T I E S AND FOR WHAT P ER IO D OF T I M E YOU HAVE BEEN A S S O C IA T E D W IT H THE A P P L IC A N T BY G I V I N G
IN THE A PP R O P R IA T E BLANKS, TH E YEARS IN WHIC H SUCH A S S O C I A T I O N BEGAN AND END ED -S U C H AS 1 9 3 2 - 3 7 .
I AM, OR HAVE BEEN A S S O C IA T E D W IT H THE A P P L IC A N T AS:
r~ l
HtS
T E A C H E R ________________________________________________________
□
HIS
FELLOW EMPLOYEE.
HIS
C O - W O R K E R ON A S P E C I F I C
□
□
N A M E OF
HIS S U P E R V I S O R
OR D I R E C T O R
_____________
□
HIS
□
H I S WORK A S S I S T A N T
E M P L O Y E R ________________________ ___________________________
S U B O R D I N A T E _______
PR O J E C T .
□
OF HIS W O R K .
OR
___________
O T H E R , (Specify)_
I N S T I T U T I O N OR C O M P A N Y :
D ES C R IB E H I S D U T I E S AND R E S P O N S I B I L I T I E S DURING THE PER IOD
1 7 . HAVE YOU ANY IN FO R M A TIO N
I N D I C A T I N G TH A T T H I S
(s)
IN D I C A T E D ABOVE:
PERSON BELONGS TO ANY O R G A N IZ A T IO N WHIC H ADVOCATES OVERTHROWING
OUR CONS I T I T U T I O N A L FORM OF GOVERNMENT BY FORCE OR OTHER IL L E G A L MEANS,
OR IS TH ERE REASON TO Q U E STIO N H I S
LOYALTY TO THE U N I T E D STATES?
□
YES
□
NO
I F YOUR ANSWER I S ” Y E S " PLEASE L I S T THE O R G A N I Z A T I O N ,
OR G I V E THE REASONS YOU QU E STIO N H I S
LOYALTY TO THE
UNITED STATES.
18.
WHAT I S THE P E R S O N 'S R E P U T A T IO N W I T H RESPECT TO H ONESTY,
UNFAVORABLE,
I N T E G R I T Y AND GENERAL CONDUCT?
I F YOUR ANSWER IS
PLEASE E X P L A I N F U L L Y .
19. ADDITIONAL COMMENTS
DATE
TITLE
OR P O S I T I O N
S I GNATURE
p
th e N ationabA rehives*
gm e z a i 3T\nm$? of ditties
x m im T ic m L EGONCMisrs positions
At Salaries o f $10,3GS to $ 10,330 a Tear
D m a m i r r of stilts
International ScancKaists at these salary levels in the Department
o f State planj, direct? administer* supervise, advise on. a? perfosvt
<
professional work pertaining to the formulation and implementation of
tha foreign policy of the United States in .the field of international
economics * Such work is conducted with the widest possible latitude
fo r the exercise of independent judgment* subject to only the most
general supervisionc They negotiate and otherwise deal with repre
sentatives of other governments on international economic problems
T 'any propose t appraise and implement action on specific international
esmomic problems
They may direct and supervise the work of a staff
o f professional personnel.
Such top level work requires a substantial
understanding of international, economic and political problems and pro
grams including programs of the United States ar*d other governments
together with knowledge o f United States and foreign governments and
international organisations* structure, operations, and personnel
i
C ertain specific positions require a knowledge rf a specialised field
cf international economic problems p ertin en t to the* particular posi
tions to be filledo
(75)
K ep roa uce a trom th e U ncla ssified / D ecla ssified H o ld in g s o f th e N a tional A rchives
A D D R E S S O F F IC IA L C O M M U N IC A T IO N S T O
T H yE S E C R E T A R Y O F S T A T E
W A S H IN G T O N 2 8 , D . C i
DEPARTMENT OF STATE
W A SH IN G T O N
December 6, 1948
Dear Mr. Riefler:
I have received your le tte r of November 19,
1948, giving an outline of the work of the Eco
nomic Warfare Division of the Embassy in London
during 1942, and of the a c tiv itie s of Mr. James
Somervilla^ u r in g his connection with i t l This
information is exactly what we needed to complete
Mr. Somerville’s records, and I wish to thank you
most cordially fo r providing i t . Tour le tte r w ill,
of course, be kept en tire ly confidential.
Very tru ly yours,
Mr. Winfield If. B iefler,
Assistant to the Chairman, Board of Governors,
Federal Reserve System,
Federal Reserve Building,
Washington, D. G.
R ep rod uced
from the U ncla ssifie d / D ecla ssified H o ld in g s or tne N a tio n a l Archives
December 6, 1948
Dear I‘« . Riefler:
I haw received your le tte r of Jlovember 19,
1948, : ivizc eji out lino of the t-rork of the Eco
nomic ■> rf ore Division of the Embassy ia London
during 1942 and of the a c tiv itie s of Mr, James
Sotnerville during h is connection with i t . This
information is exactly 'what we seeded to complete
?,rr . ;om.ervil.let s recordr., and I wish to thank you
most eordially fo r providing i t . Your le tte r w ill,
of course, he kept en tirely confidential.
Very truly yours,
Oleiaent J . ^obotka, ussociate Chief
Division of ^Foreign Service ersonnel
Hr, ^In field S* R iefler*
A ssistant to the Chairman, Board of Governors#
Federal Reserve System,
Federal Reserve Building,
Washington, D. 0.
R ep rod uced from th e U ncla ssified
I D ecla ssified H o ldings o f th e N a tional A rchives
November 19, 1948.
Mr. Clement J. Sobotka,
Associate Chief,
Division of Foreign Service Personnel,
Department of State,
Washington, D. C.
Dear Jr. Sobotka:
1 am very pleased to help to clear up any edsconception
that may exist ia the personnel records concerning the contribution
of Mr. J sates Somervill^jlCo the 1942 operations of the Economic War
fare Division of the 'American Embassy in London. I am writing in
the understanding that this ccsaffiunication is entirely confidential
and that I can be frank in .my comment s.
1 was sent to London early in March 1942 as Principal
Officer of the Board of Economic Warfare to sit for them on the
Blockade Coamttee which was located at the Ministry of Economic
Warfare and which the United States had just joined on the basis
of "equal, voice". You may recall that the exact status of the
Board of Economic Warfare in relation to the Department of State
was not settled at that time and that some tension existed as to
what the relationship should be. In making this initial trip, it
was my purpose to examine the proble-a of future organization on the
ground in London and then to return and report my personal recom
mendations on organization to the home officials of the Board of
Economic Warfare.
When I arrived in London, 1 found that all matters per
taining to the Ministry of Economic Warfare were being handled by
Mr. James Somerville, who held the rank, 1 believe, of Second
Secretary in the American Embassy. He recognized, as did 1, that
our relative responsibilities witn respect to Economic Warfare
were quite hazy and would remain so until the status of the Board
of Economic Warfare was settled. In these difficult circumstances,
he handled our Mutual relations with complete tact and cooperation.
I found that he had established magnificent personal contacts with
officials of the Ministry of Economic Warfare at all levels, there
was no problem at ail of securing American access to officials or
to information at the Ministry- of Economic Warfare.
R ep rod uced from th e U n d a s s ifie d / D ecla ssified H o ld in g s o f th e N atio n a l A rch ive s
Mr. Clement J . Sobotka
-2 -
On ay return to Washington at the end of June 1942, X recorameoded to the Board of Economic Warfare:
1.
That Aaerican-British negotiations with respect
to Economic Warfare a c tiv itie s be transferred
in the main from Washington to London.
2.
That a l l economic warfare a c tiv itie s th a t in
volved relatio n s with the Ministry of Economic
Warfare in London be handled through an ade
quate!/ staffed economic warfare division th at
would be an in teg ral part of the American
Eabassy in London rather than through a sepa
rate B.E.W* fie ld office in London.
3* That the proposed Economic Warfare Division be
headed by a Board of Economic Warfare o ffic ia l
with the rank of M inister but th at i t be staffed
by personnel borrowed from the Department of
State and from other Washington Departments as
well as from the Board of Economic Warfare*
These recommendations were fin ally adopted on the condition
th at I accept the position of head of the new Economic Warfare Divi
sion. Before accepting, X stipulated th a t Ur. Somerville be made
second in command and th at his rank in the Babassy be raised.
The contemplated s h if t of negotiations to London required
intimate and continuous fam iliarity with the personnel operating in
Washington. I t was my plan, consequently, on «y return to London
to request Mr. Somerville to v is it Washington in two or three weeks,
in other words as soon as su fficien t tisie elapsed for ae to fam iliar
ise myself with current developments there. I thought at th a t time
th at one or the other of us ought to be in Washington fa irly fre
quently, i f we were to maintain adequate liaison with the home base.
When I returned to London in mid-September 1942, I found
the situ atio n radically changed as compared with the preceding June.
The Economic Warfare Division had increased enormously i s sise and
was s t i l l growing rapidly. The work load was increasing even more
rapidly. Mr* Somerville was a very tire d man and was certainly not
in the best of health. He had been working u n til the early hoars
of the morning almost continuously and his work basket was always
heaped before him. When I informed him of the program under which
he fas to return to Washington early in October to fam iliarise
R e p rod uced from th e U ncla ssified
I D ecla ssified H o ld in g s o f th e N a tional A rch ive s
/ / Mr. Clement J* Sobotka
-3 -
himself with the complex economic warfare agencies th a t were de
veloping th ere, he was loathe to leave u n til he had completed tasks
he had set himself in London. I t Is th is situ atio n th a t fin ally
gaye occasion fo r the Ambassador1s request, concurred in by me,
th a t Iir. Somerville be recalled for consultation. One day the
Ambassador requested me to v i s i t him to ta lk over the organisation
of the Qivision. After going over the whole question, including
my original plane, in which the Ambassador concurred, we decided
th a t a message of re c a ll was the only device available th a t would
prevail on Mr. Somerville to Hake the much needed break with h is
routine* The message was accordingly sent.
Mr. Somerville* s health was such th a t he was not actually
able to depart u n til a considerable further period had elapsed.
Subsequent to th a t time, I had an opportunity to review Iir. Somer
v ille * s contribution to our operations as a whole. I can never
ra te too highly Ur. Somerville1 s contribution in settin g up the
;Division originally and in the selection of .personnel fo r the
Division. To s ta ff the organization adetjaately, we were compelled
to pick up a considerable number of people in London where sk illed
a&npower was extremely scarce. In numerous eases, Mr. Somerville,
a fte r great care, made selections with respect to which I had reser
vations. In no case were these reservations ju s tifie d . The g if t
which he has for establishing exceptional contacts in the fie ld
showed i t s e l f also in his a b ility to select personnel.
I have w ritten you frankly aad at length because I think
the record ought to be clear. Mr. Somerville made a substantial
contribution in the opening phases of the Economic Warfare ac tiv i
tie s in London- He wore himself out in the process.
fery tru ly yours,
Winfield I . R iefler,
Assistant to the Chairman.
IKRtjsU
i
R ep rod uced from th e U ncla ssified / D e c la s s ifi|f
D EPARTM EN T O F S T A T E
WASHINGTON
November 1, 1948
Dear Mr. Riefler:
The Division of Foreign Service Personnel was v isited th is
morning by Iv3r. James Somerville, J r.,. a Foreign Service Officer
who served with you in the Economic Warfare Division of the
Embassy at London during 1943 and 1944.
In discussing his record kr. Somerville expressed the feeling
th at the value of h is services in London had not been adequately
set fo rth . I t is , indeed, quite possible that the reports received
by the Department of his work in the Economic 'Warfare Division did
not give as complete a picture as might be desirable of Mr. Somerville,
and that in th is connection he may have been done some in ju stice.
I t would be greatly appreciated, therefore, if you would find
i t convenient to furnish me, for insertion into Ivir. Somerville's
record, a frank and objective statement of the value you attached
to his work under your direction in London.
Very tru ly yours
Kr. Winfield W. R iefler,
Assistant to the Chairman of the Board of Governors,
Federal Reserve System
Federal Reserve Building
'Washington, D. C.
@FedFRASER