Evening star., 1939-12-18
Morgenthau Planned
To Prevent War by
Buying Up Vital Goods

Buying Up Vital Goods
But Scheme Died; 1t Was
Too Costly and Russia
Was Feared Unreliable
~ the Associated Press.
An inside story of how Secretary
Of the Treasury Henry Morgenthau,
jr., dreamed of preventing the Euro
pean war by buying up much of the
worlds market supply of strategic
war materials" was revealed today
for the first time.
The Morgenthau peace plan called
for buying such goods as copper,
manganese, cotton, oil, rubber and
nickel so that aggressor nations,
unable to get a sufficient supply for
war purposes, would be stymied.
The plan died last April 10, when
Mr.. Morgenthau read report made
by Harry D. White, director of none
tary research at the Treasury. Mr..
White said it would cost too much,
about $l00,0O0,O00 a month.
He added that an alternative
plan of getting the principal owners
of the materials to embargo them
was impractical because Russia. one
of the three major owners of the
resources. could not be relied on to
cooperate. The other two were the
United States and the British en-
pire.
Later, Congress authorized the
Treasury, War and Navy Depart
ments to buy 500, 100000 of such
materials over period of years for
our own use, but this had nothing
to do with the peace plan.
Part Of Story.
The plan and why it didn't work
are just small part of the sensa-
tion-studded story of what the ad-
ministration's highest financial off,
cials were doing in scores of secret
meetings last spring to prepare the
Nation for the shock of a foreign
war
Some of the other headline facts
officially disclosed today were:
Mr.. Morgenthau threatened vir-
tual seizure of all the allied money
in this country if England and
France did not take steps to pro-
tect American investors from dis
astrous selling of American securi-
ties by allied owners-a threat
which, incidentally, the French ig-
nored.
Jesse H. Jones, then Reconstruc-
ton Finance Corp. chairman and
now Federal loan administrator,
gave a blunt mo" to British feelers
on an r. F.. C. loan.
Carl Gray, late president of the
Union Pacific Railroad, spent some
of his last hours at a secret meet
Ing on war needs of the railroads.
William o. Douglas, en- route from
the Craftsmanship of the Securities
and Exchange Commission to a seat
on the Supreme Court, drafted in
blank, Just in case we need It," an
order to close every stock exchange
in the country. When war came
stocks went up instead of down and
the order never was issued.
Other Precautions.
Mariner S. Eccles, Federal Re-
serve Board chairman, arranged
secret authority to buy $500 900 900
worth of Government bonds. For
a few weeks In September Govern
ment bond prices fell sharply and
the Federal Reserve used more than
e400 900 900 of this authority.
Henry A. Wallace, Secretary of
Agriculture, looked for but found
no powers except those Of per
suasion," for controlling commodity
markets. The commodity markets
voluntarily set limits on daily fluc-
tuations after war came.
The New York Stock Exchange
discussed voluntarily limiting itself
to 10 per cent daily f1uctuation in
stock prices. This never was done.
The series of events started the
day after Hitler entered Bohemia
and Moravia-the remnants of
Czecho Slovakia left after the
Munich pact.
The Chronology.
Chronologically here's what hap
pened:
March 16-Mr. Morgenthau, State
Department Economist Herbert Feis
and others decided American banks
mad better be cautious about letting
the Germans draw on Czech de-
posts IN this country until it could
be established that it was legal. Mr..
Morgenthau telephoned the advice
to George L. Harrison, president of
the New York Federal Reserve
Bank, who passed it on to the banks.
Later, after 1t was found that Czech
deposits amounted to the relatively
small rum of 100000, the banks
were told to use their own jude-
ment. The March is group also
discussed countervailing tariff duties
against Germany and abrogation of
the Czech-United States trade
agreement, both done a few days
later.
March 17-Europes jitters had
unsettled the foreign exchange mar
ket, in which the value of the dollar.
compared with other currencies is
determined and Mr.. Morgenthau
told Archie Lockhead, then man
ager OF the Treasury's $4,000 1000 900
stabllization fund: IF things get
sloppy Gin the foreign exchange
market) and if we have to spend
little money, today is the day we
can do it,"
April 10-Mr. Morgenthau started
lining up his six war advisers, who
came to be known as the Wizards
OF o." The six, who promised to
drop their private jobs and come to
Washington If and when war broke
out, and actually did so in Septem-
Der, were Tom K. Smith of st. Louis,
w. R. Burgess and Earle Bailie of
New York, bankers; Winfield Reifler
and Walter Stewart of the Institute
Tor Advanced Study, Princeton,