The Washington Merry-Go-Round (5-12-41)

The Pittsburgh Press (May 12, 1941)

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By Drew Pearson and Robert S. Allen

Washington –
One of the most vigorous inner Cabinet debates in a long time took place the other day over the question of freezing German-Italian funds on deposit in the United States. In a heated discussion, Secretary of State Hull and Secretary of Commerce Jesse Jones were the only Cabinet members who stood out for letting the two Axis powers continue to spend money as they wished in this country.

Many people may not realize it, but whereas the government has frozen the funds of all conquered nations – France, Norway, Denmark, Belgium, Holland, Greece, etc. – it continues to permit the conquering nations to use their money in the U.S.A. in any matter they wish.

For instance, Germany gets more than a million dollars monthly from the lease of patents to American companies. This is paid in American dollars and can be spent for anti-American propaganda or anything else, or shipped back to Germany. Italian diplomatic attachés, for instance, were carrying $2,000,000 in U.S. currency in a suitcase from New Orleans to Mexico for propaganda purposes. Another $2,000,000 of U.S. currency was shipped to Buenos Aires by the Italian Embassy.

Meanwhile, France, for example, no longer sells perfume, etc., to the United States, but sells to Germany, which in turn ships the perfume through Vladivostok to the United States. Reason is that French funds are frozen, so the French can get no money from the U.S.A. But German funds are not frozen, so French trade to the United States now increases Nazi profits and helps build up trade channels for the future.

Hot Cabinet split

All this came to a head at a Cabinet meeting last week. Five members were vigorous in urging that Axis funds be frozen. They were:

  • Secretary of the Treasury Morgenthau.
  • Secretary of War Stimson.
  • Attorney General Jackson.
  • Secretary of the Interior Ickes.
  • Secretary of Labor Perkins.

They argued that it was useless and silly for the United States to give all-out aid to Britain, then turn around and help subsidize Nazi and Fascist propaganda here. The two things didn’t make sense.

However, Cordell Hull and Jesse Jones opposed. Other members took no firm stand one way or the other, but appeared to favor freezing the funds. At one time, Roosevelt, in a private conversation with Hull, almost brought him around to freezing, but in the end, he backed away.

Career Boys favor freezing

Most of Secretary Hull’s State Department advisers – even many of the Career Boys – have also urged him to freeze German and Italian funds. For three months, Dean Acheson, the new Assistant Secretary of State, has been endeavoring to persuade him – without success.

Acheson was appointed to his post because he and Hull were congenial. But that has made no difference. Hull remains adamant.

In the inner Cabinet meetings, Secretary Hull gives the following reasons for opposing his Cabinet colleagues and the President:

  1. Freezing Axis funds would give Germany an excuse to retaliate against American property in Germany (other side contends that Germany will do what she wants with American property anyway, and that Germany has more property to lose in the U.S.A. than we have in Germany).

  2. There is not much real Axis money in American banks, most of it having been secreted long ago in strong boxes and bureau drawers.

  3. There is no definite evidence that Germany is using funds for propaganda or subversive activities in the U.S.A.

Regarding the latter point, Attorney General Jackson contends that the financial transactions of German companies in the U.S.A. should have been registered and checked long ago. This can be done under the laws for freezing funds. He especially contends that the financial activities of the German-American Board of Trade in New York should be registered.

Hull’s mountaineer pique

Inside fact is that Hull’s opponent goes back a long way to a rivalry with Morgenthau and Ickes. When the question of freezing Axis funds first came up more than a year ago, it was proposed that the Treasury take over not only this matter, but also various other State Department functions, such as control of munition shipments.

Mr. Hull became extremely indignant. He told assistants that the Treasury was trying to take over the State Department’s duties. And he has been suspicious of every Treasury proposal ever since.

Likewise, Hull never forgave Ickes for refusing to sell helium gas to Germany for the Graf Zeppelin. About that time, Ickes called the turn on Hull for selling arms to Germany up until the outbreak of war – despite the treaty of 1920 which prohibits the sale of arms to Germany.

Lindbergh and Willkie

Two very interesting episodes occurred during the House of Representatives debate on the bill empowering the President to take over idle foreign merchant ships in U.S. harbors. They gave a unique slant on Lindbergh and Willkie.

First episode was during the speech of scrappy Representative Luther Johnson of Texas who assailed Lindbergh as an appeaser. At mention of Lindbergh’s name, the Republican side of Congress broke into loud applause. Democratic side remained silent.

Quick as a flash, Johnson shouted:

I want the Record to show that this applause came from the Republican side.

The Republican answer was a louder burst of applause.

A little later, Representative John McCormack, Democratic Floor Leader, lauded Wendell Willkie as:

…a man who has shown himself to be an outstanding American.

The entire Democratic side broke into enthusiastic applause. But not a hand was clapped by a single Republican, not even by Representative Joe Martin, GOP Floor Leader and manager of Willkie’s campaign.