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501
A meeting of the Board of Governors of the Federal Reserve System
was held in Washington on Thursday, April 11, 1940, at 3:30 p.m.
PRESENT:
Mr.
Mr.
Mr.
Mr.
Ransom, Vice Chairman
Szymczak
McKee
Davis
Mr. Bethea, Assistant Secretary
Mr. Goldenweiser, Director of the Division
of Research and Statistics
Mr. Ransom stated that he had called this meeting in order to
report certain developments with respect to Danish and Norwegian balances
611(
.1 other property in this country.
He said that at 11:50 a.m. yesterday
le had been requested to attend a conference at the Treasury, at which
there were representatives from the Treasury Department, the State Depart146,4t, Attorney General's Office and the Securities and Exchange Commission,
f°1
'the purpose of discussing what action should be taken to regulate
tralLeactions in foreign exchange, transfers of credit and the export of
* e°111 and currency involving property in which Norway or Denmark, or any
Ilational thereof, has an interest.
He said that the discussion at the
Illeeting indicated that the Treasury was not satisfied that the recommendatio
ns of the New York Bankers' Foreign Exchange Committee (of which Mr.
14ree, Vice President of the Guaranty Trust Company, is chairman) were adel/late to meet the situation; that the Treasury took the position that the
1*"edure recommended by such Committee would impose a great deal of responeibilitY on it without proper authority; and that consideration was being
84%1 to the issuance of an Executive Order which would prohibit all transact
i°ns affecting such property except such as may be specifically authorized
e ulation or license issued by the Secretary of the Treasury.
He said
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4/11/40
-2-
that the Treasury seemed to favor the issuance of an Executive Order;
that the Treasury had gotten the impression that Mr. Harrison, President
kn the Federal Reserve Bank of New York, and the Loree Committee did not
thtak well of this course; that he (Mr. Ransom) had told the Treasury
4Presentatives that he would like to mention the matter to Mr. Harrison
and get his views on it; that he (Mr. Ransom) had expressed no opinion
at the conference other than the statement that the Board would cooperate
With the Treasury in whatever policy was adopted, althouch he would preter the
voluntary action of the banks for the time being; and that Mr.
°°ehran of the Treasury Department seemed to share his views and feel as
he did that a number of perplexing problems would arise if an Executive
°rder were issued.
Mr. Ransom stated that at 2:35 p.m. yesterday he called Mr.
("rison on the telephone in the presence of Messrs. Szymczak, Wyatt,
Gel
denweiser, Morse and Bethea, with the loudspeaker in operation and
ad7lead him what had transpired at the Treasury conference and asked him
to indicate his views on the matter.
that in his opinion:
Mr. Harrison advised Mr. Ransom
(1) there was no necessity for the issuance of such
xecutive Order, (2) the issuance of such an Order might establish a
bad Precedent and be misinterpreted, and (3) similar situations had arisen
4't the time of the Czech and Polish crises and had been handled satisfact"ilY without Government intervention.
He (Mr. Harrison) also said that
the batks would naturally be cautious in putting through transactions in
°I'der to
protect themselves but that they were reluctant to agree not to
4ke anY payments because of the large number of legitimate transactions
503
4/11/40
-3-
Would be bound to come through, many of which had been initiated
Prior to the invasion of Denmark and Norway. He stated that as a result
Of the recommendations of the Loree Committee announcement had been made
(If the suspension of dealings in Danish and Norwegian exchange and that
the banks would report everything to the Secretary of the Treasury and
had even suggested that transactions be handled subject to his approval.
11r* Harrison added that he thought it would be a mistake to deny banks
the right to make payments in their discretion.
Mr. Ransom said to Mr. Harrison that the Treasury seemed to feel
that the
banks would not be fully protected under the existing procedure
N41_that there were some definite advantages to be gained by the issuance
Of
41 Executive Order.
He also said, however, that he recognized that
here might be a bad psychological reaction to the issuance of such an
OrA
as it might involve some problems concerning neutrality. He stated
'
t11ither that he had advised the Treasury that he could not express any
'4
"
7114 on behalf of the Board and that, although he knew that the Board
411d the Reserve Banks would wish to assist in any way that the System
e°113-ds he thought the Treasury should again contact Mr. Harrison before
he m,
"141 with his Committee, who were familiar with the operating details
444 the practical problems to be met, before deciding on the course to be
Purellea.
Mr. Harrison stated that he felt certain that the Loree Committee
17°111c1 be perfectly willing to change the existing procedure in any way
that WoUld
meet with the approval of the Treasury, although in his judg:tit tile
existing arrangement was entirely adequate.
Mr. Ransom replied
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4/11/40
-4-
that on this point the Treasury held a contrary view and in fact had
l'aised a question as to whether the procedure had been satisfactory in
dealing with the Czech and Polish situations.
At Mx. Ransom's slimes-
ti°nUr. Goldenweiser took the telephone at this point and advised 1:.r.
Ir'errison that it was his own opinion that there were only two alternatives:
(1) for the banks to be left free to act in their discretion,
Or (2) for the Government to take complete control, in which event an
4ecutive Order should be issued.
In concluding the conversation, which lasted approximately ten
Mr. Ransom advised Mr. Harrison that he understood the Treasury
W°11-1-d contact him later that afternoon and that he merely wished to Give
414 thi5 background information as a basis for a further discussion of
the matter at that time.
Mr. Ransom said that immediately following this conversation he
In a call for :Ir. Gaston, Assistant Secretary of the Treasury, and
l'el3e1"ted to him the substance of his conversation with President Harrison.
Mr. Ransom referred to the fact that the President had issued an
'blVa Order late yesterday which prohibits, except under license, all
tilsfers of credit, all Tayments, all transactions in foreign exchange,
Q11(1 the export or withdrawal from the United States or the earmarking of
eold or
silver coin or bullion or currency by any person within the
kited States,
if involving property in which Norway or Denmark or any
I tional of
either has at any time on or since April 8, 1940, had any inte
eSt of any
nature v.thatsoever, direct or indirect.
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4/11/40
-5He stated that he had been called to the Treasury to attend meet-
at 10:30 a.m. and again at 2:30 p.m.
MY
today, which were held prima-
for the purpose of discussing the forms, regulations and procedure
to be adopted in effectuating the provisions of the proclamation.
He
Bald that the Federal Reserve banks would act as Fiscal Agents for the
fi'reaslu'y in issuing licenses but that individual transactions would have
to be submitted to the Treasury for approval.
4c1
Ile stated that the Treas-
set up a committee consisting of Messrs. Cochran, White and Bernstein
to Pass on such transactions; that the Treasury had asked that the Board
Cooperate by
having a representative meet with that committee at 11:00
and 4:00 p.m. daily; and that he had asked Mr. Goldenweiser, and in
418 absence Mr. Morse, to attend such meetings.
He said that banks, after
1191111€ applied for and being granted a license for a specific transaction,
W°11-141 have to submit a report to the Treasury upon consummation of the
tl'ansaction.
He further stated that the Treasury was proposing to take
illventory or census of all assets of Norway and Denmark in this count17 through the Federal Reserve banks and that it was proposed that a run111.1% inventory would be kept thereafter. la'. Goldenweiser said that the
be,
vartment of COIIIIIIOrCe had been doing substantially the same thing for
ell countries for some time and that the same forms used by the DepartOf
Commerce, after being elaborated in certain respects, would be
Ileed by the Federal Reserve banks for the purpose.
Mr. Ransom concluded his report by saying that the Treasury is
'
lng as rapidly as possible to develop the necessary forms and regulato be issued pursuant to the Executive Order and, in addition, is
506
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-6-
rzeparing a clear-cut statement that might be made public if and when
the Administration deems it advisable to make a comprehensive explanatic'n of the purposes and effect of the Executive Order.
Thereupon the meeting adjourned.
Assistant Secretary.
APProved:
Vic
Chairman.
@FedFRASER