Mr. MORGENTHAU. It alters it. It does alter it; yes. Mr. FISH. Does it alter it in any major respects? Mr. MORGENTHAU. As far as the credit provisions are concerned. Mr. FISH. Does not this change it also so far as refitting and outfitting of belligerent ships is concerned? Mr. MORGENTHAU. There is nothing in the Neutrality Act in regard to the refitting and outfitting of ships, so I do not see that this bill changes that any. Mr. FISH. Well, is the gentleman familiar with the neutrality proclamation of the President? Mr. MORGENTHAU. I am in a general way; yes. Mr. FISH. I think that proclamation is very specific about not outfitting belligerent ships in our harbors. Mr. MORGENTHAU. I have it here, but I need not point out to Congressman Fish that you are asking me questions which are matters of foreign affairs and are not matters which I, as Secretary of the Treasury, deal with. Mr. FISH. Well, I will not persist in asking any more, Mr. Secretary. The only reason I asked was that I was told that you were one of the authors of the bill. I assumed that to be a fact and that I would wait to ask the details of the bill of you and not of the Secretary of State, who said he was not familiar with it. Mr. MORGENTHAU. As I say, I have come prepared to answer any questions that have to do with finances and any questions that have to do with the British finances and anything having to do with British purchases. But when you get into the matter of international law and the matter of foreign affairs I am not prepared to answer. Mr. FISH. Mr. Secretary, then would you object to there being an amendment placed in this bill limiting or putting a ceiling in it so far as the amount to be spent is concerned, such as $2,000,000,000? Mr. MORGENTHAU. I think that is a matter for the committee to decide on. Mr. FISH. You have no views on it? Mr. MORGENTHAU. Well, I think that is a matter for the committee to decide on. Mr. FISH. You have no views on it that you care to express to this committee? Mr. MORGENTHAU. I think this: Where the situation changes so rapidly from day to day that nobody that I have come in contact with can say what the ceiling should be-not only for our own defense but as it affects the munitions that some other country which might want to borrow from us may need-I just do not know what the figure is today. Mr. FISH. Does not the Secretary of the Treasury realize that not to put in a limit in a bill of this nature is putting in the hands of one man the possibility, the dangerous one, of spending an unlimited sum, maybe 10 or 20 billion dollars, when instead he can come back to the Congress and ask for more if we limit it to $2,000,000,000; and he can give his reasons for it? Mr. MORGENTHAU. Well, Congressman Fish, somebody certainly would have to appear before the Appropriations Committee when we put in a figure, and I take it at that time they will want to know from Mr. Stimson, Mr. Knox, and the National Defense Commission as to what they think the requirements are. Mr. FISH. Yes; but there is no limit in it now. There is no limit in the bill. You and I agree there should be some limit in it. Then when they explain what they need beyond that they would have to come to the Congress. Mr. MORGENTHAU. There is no figure mentioned at all, because this bill does not carry any appropriation. Mr. FISH. That is correct. Mr. MORGENTHAU. And I take it if it did we would be appearing before the Appropriations Committee. Mr. FISH. But the Congress can put it in. Mr. MORGENTHAU. They have to put it in. Mr. FISH. I asked you what you think should be that limit. Mr. MORGENTHAU. And I am trying to say that at this time for me to say is very, very difficult, but I think that after you gentlemen and ladies and the Appropriations Committee hear from the Secretary of War and the Secretary of the Navy, and the National Defense Commission, that Congress will be able to decide what figure should go into the appropriations bill. Mr. FISH. And then you think there should be a specific limit, but you are not able to say what it should be? Mr. MORGENTHAU. There has to be a limit. Mr. FISH. But you are not ready to say what you think it should be? Mr. MORGENTHAU. No; I am not. The CHAIRMAN. Dr. Eaton? Mr. EATON. Mr. Secretary, are you in a position to tell us what are the compelling reasons why this particular bill at this particular time should be presented to this House? Mr. MORGENTHAU. I can do it as best as I know how. I presented to this committee a picture of the dollar position of the British Empire as it is today. They need vast armaments in this country. It is the only place that they can go to get them. They have not got the dollar exchange to pay for them. And therefore it is necessary to get this kind of legislation passed to make it possible for them to place the orders for the munitions they need so desperately in this country and get them on a lend-lease basis because they have not got the dollar exchange with which to pay for them. Mr. EATON. Now, has the United Kingdom paid for or obligated itself to pay for all the war materials that it has purchased hitherto and including this particular year? Mr. MORGENTHAU. Using rough figures, the British Purchasing Commission has spent a little over $1,300,000,000 and has on order with our manufacturers another $1,400,000,000. Mr. EATON. And they are in a position to pay cash for that? Mr. MORGENTHAU. I believe that, given the time, by that I mean the balance of this year, they are in a position to pay for the orders already placed. Mr. EATON. Do you have any idea how much profit the producers of these goods will make out of those contracts? Mr. MORGENTHAU. We have an excess profit bill which Congress passed under which, after the corporations file their income tax returns on the 15th of March, we will have a very accurate idea as to what profits they will make. Mr. EATON. The point I have in mind is this: We have been hearing a great hurrah about giving things to Great Britain. Up to now we 288128-41-5 have not given her anything free. We have been making her pay through the nose for everything she has got? Mr. MORGENTHAU. So far she has paid cash for everything. She has not been given anything. Mr. EATON. And so if England is our first line of defense, we have not covered ourselves with a special glory so far? Mr. MORGENTHAU. I agree with you. Mr. EATON. That is, we have not covered ourselves with a special glory so far in our system? Mr. MORGENTHAU. I agree with you. Mr. EATON. Now, just one more question, due to the fact that I have no economic experience or knowledge, these security holdings that are set forth in these statements, do they belong to private citizens of England? Mr. MORGENTHAU. They do. Mr. EATON. Now, does it mean that the British Government will take those over from the private citizens and use them for a public purpose? Mr. MORGENTHAU. What they are doing now is this: In the case of American securities listed on our exchanges, they have been rapidly taking those over and selling them to American investors; and they propose to sell, as rapidly as they can find buyers, the so-called direct investment in factories or businesses, which are not listed on the exchange. Mr. EATON. How do they take them over? Are the owners compensated? Does the government borrow them and promise to pay later on? Mr. MORGENTHAU. They call it vesting under their law. They take possession and they pay for them in sterling. They give the English citizen sterling and they keep the dollars and pay our American manufacturers with the dollars that they secure in that manner. Mr. EATON. Now, just one more question. How much more in value does the United Kingdom desire to purchase here in 1941? Mr. MORGANTHAU. Well, that figure I have not given. Mr. EATON. Yes. Mr. MORGENTHAU. Because I would rather that that would be developed by Mr. Stimson and Mr. Knox and Mr. Knudsen, because, as I explained, it becomes a part of the orders which we will be placing for our own munitions. It is an integral part and it becomes a matter for our Army and Navy expense. I think you will find they are prepared to answer that question. Mr. EATON. From now on under the terms of this bill all materials acquired by Great Britain in defense orders will be placed by our Government authorities with our producers and will be paid for by our Government to those producers? And then a transaction of exchange or gift or sale or whatever it is will be made by our Government to the British Government? Mr. MORGENTHAU. Your statement is, as I understand it, correct. with this slight modification, if I may make it. It does not follow necessarily that all the orders that Great Britain will place will be done in that way. They may, I think you will find, have orders that they will place directly. I think the bulk, the majority, it is proposed would be placed in just the way that you described. Mr. EATON. Up to this time the American people have made no financial sacrifices in assisting Great Britain defending America against the totalitarian governments? Mr. MORGENTHAU. Not one dollar. Mr. EATON. Thank you, Mr. Secretary. The CHAIRMAN. Mr. Tinkham? Mr. TINKHAM. I notice with a good deal of interest that you only ask the British Government to use American assets with which to pay for anything they buy. They have assets in England. They have assets in their dominions, now; I am speaking of stocks and bonds. They have assets in many other countries, particularly South America. We have a rate of exchange. Why should not they either sell some of those assets because they are their property and they are buying from us, and which our taxpayers, if they do not pay us, have got to pay. Why should not they pay some of those or segregate some of those securities in such a way that we may have the benefit? Mr. MORGENTHAU. Congressman, I have not attempted to say what the British should or should not do. I do not feel that I have the right or the authority. All I have attempted to do here today is to lay before this committee a picture, a correct one, as far as I know, of all of the securities in dollars that the British Empire has. I have also given you a list of the sterling securities that they have, an estimate not an estimate furnished by them, but the best that we could get of their investments all over the world. And I have not attempted to say whether they should or should not make those available. I have simply tried to present as best I know how what they have in the way of worldly goods that can be converted into dollars. Mr. TINKHAM. You are an American and you represent the American taxpayers in part. It seems to me that as our chief financial officer you should tell us what your opinion is as to whether they should pay us anything with some of their sterling securities, no matter where they are situated, or segregate them in such a way that we get the benefit. Mr. MORGENTHAU. You do not mind if I have an honest difference of opinion with you? Mr. TINKHAM. No; I am only asking you if you do not think that ought to be done to protect America's interests. That is all. If you want to say no, it is up to you. That is your position; that is all. Mr. MORGENTHAU. I feel that I have discharged my duty as an American citizen and as Secretary of the Treasury when I lay all the facts before you. Then, as to how we proceed from that point, I feel it is up to the Congress which has this bill. And I would fail in my duty if knowingly I withheld any information from you. Mr. TINKHAM. It is not a question of information. It is a question of policy and of deep fiscal policy and of very great importance to the American people who are apparently being asked under this bill to finance a world war. If you want to decline to answer, that, of course, is your privilege, but are you or are you not in favor of some policy which will either mean that we should approach Great Britain as to the segregation of securities for final payment or for the sale of some of the securities for making payment? When I say immediate I mean in 1941 or 1942. I would say they are wealthy. If you do not want to answer that question it is all right. But it seems to me as chief fiscal officer of this Government you should say whether England should do that with her wealth or whether the burden should be put upon the United States and its taxpayers. Mr. MORGENTHAU. Well, as long as you have given me the option, I would rather not express an opinion. Mr. TINKHAM. Excuse me? Mr. MORGENTHAU. As long as you have given me the option I would rather not express an opinion. Mr. TINKHAM. Every year Great Britain is receiving gold from South Africa where it is mined to an extent of $700,000,000 to $750,000,000. What reason is there, that you know of, why that gold in due course and under proper arrangements should not be transferred to us? I mean of course as security and collateral for what we may advance it which may be an unlimited amount. Mr. MORGENTHAU. Mr. Tinkham, under that section B (3) it says South African exports of gold, $480,000,000, which they advise me is the amount which would flow to the United Kingdom. There is $480,000,000. We have also listed in Australian gold $75,000,000. Mr. TINKHAM. We will not dispute about the amount. I have seen seven hundred to seven hundred fifty million dollars repeatedly stated as the amount of gold produced in the Rand in English publications which I could submit to you. If they are submitting a larger amount and we have notices of approximately the amount of $450,000,000 or $750,000,000, or as I suggested, $700,000,000, why should not they transfer it to us as collateral against such loans as we are making so the American taxpayer does not have to meet their bills as is proposed in this legislation? Mr. MORGENTHAU. You and I think alike on this point. I believe that any amount of South African gold that the United Kingdom receives during this year they should use to pay for merchandise which they buy in this country. Mr. TINKHAM. Now, have they been doing that, do you know? Mr. MORGENTHAU. They have been paying their bills. Mr. TINKHAM. But you do not know whether they have used that or whether they are segregating that, cacheing it, as it were, in London? Mr. MORGENTHAU. No. Mr. TINKHAM. Or even selling it to us, of course, at a very heavy profit at the present prices you are paying for gold? Mr. MORGENTHAU. That is something else again. They have been selling us most of their South African gold and they propose to sell us all the South African gold that they produce. Mr. TINKHAM. Sell us! Yes; but do you not think that where we are to let them have an unlimited credit it should be given us as security and as collateral annually? Mr. MORGENTHAU. I do not think you really mean that. Mr. TINKHAM. What did you say? Mr. MORGENTHAU. I do not think you really mean that. Mr. TINKHAM. Certainly, I do, Mr. Morgenthau; I am always very serious. Mr. MORGENTHAU. These figures which I presented here today include, I believe, all of the gold that will be mined in South Africa |