811.113 Senate Investigation/237a
Memorandum by the Secretary of State to President Roosevelt
Cooperation With the Nye Committee
It is my understanding that in your conference with the Nye Committee there was some reference to a further conference between you and the Committee on your return to Washington. I am informed that the Committee will request another conference in the near future. In view of the importance of the questions involved, I respectfully suggest that you may wish to give consideration to the following observations.
There are four phases of the activities of the Nye Committee to which I invite your attention—Neutrality, Taking the Profits Out of War, Control of the Arms Traffic, and the Investigation of Loans Made by the Allied Powers through American Banks in the Period 1914–17.
Neutrality
The Nye Committee had not, before their recent conference with you, contemplated the introduction of legislation modifying our neutrality policy. Something which was said in that conference was interpreted by some of the members of the Committee as a desire on your part that the Committee study that problem and, after a further conference with you, introduce appropriate legislation. In statements given to the press by Senator Nye, the impression was given that at your request the Committee was turning aside from other problems which it had in hand to expedite the preparation of draft legislation on neutrality. A few days later, statements were published to the effect that the Committee was in practical agreement on the type of legislation which should be introduced. Thereupon Senator Pittman called me by telephone and protested in his own name and in that of Senator Borah24 against what was construed as an attempt of the Executive to charge the Nye Committee with the preparation of legislation on a subject which, under the rules of the Senate, and according to precedent, properly fell within the jurisdiction of the Committee on Foreign Relations. I brought Senator Pittman’s observation to the attention of members of the Nye Committee and I am informed that the Committee thereupon decided not to go forward with the preparation of legislation on all phases of our neutrality [Page 332] policy. However, the report which the Committee made to the Senate on April 1 contains the following Article:
“IV. The Committee is in substantial agreement on a principle to govern the export of munitions and contraband in case of a major war, and expects to make certain recommendations to the Senate on this subject in the immediate future and for action in the present session of Congress. This is the only phase of the neutrality problem which the Committee considers to be within its jurisdiction.”
This phase of the neutrality problem is sufficiently broad to cover most of the important of the questions with which neutrality legislation would be likely to deal. It is my understanding that the Committee at its conference with you will probably present a draft of legislation on this subject, for your approval.
You may wish to refrain from committing yourself to the support of any specific legislation in respect to neutrality at this time. There is apparently great diversity of opinion among your closest advisers as to the proper method of dealing with this subject and certainly great diversity of public opinion. I am informed that the leaders in the Senate are opposed to the raising of any question of foreign policy which would result in acrimonious discussion and in delaying action on necessary domestic legislation. Furthermore it is contended that in view of the present situation in Europe, discussion of this question at this time would tend to arouse unjustifiable fears of imminent war. The subject is so complicated in respect to domestic law, international law and questions of policy that you may deem it unwise for the Administration to commit itself to the support of any specific program of legislation until the subject has been further studied and until a program can be drawn up on which your advisers are in substantial agreement.
A Committee of the Department has been studying this problem for some time and I am prepared to submit to you, if you so desire, a draft of possible legislative provisions. This draft may be of assistance to you in considering this subject although I am not prepared to advocate this or any other specific program for legislation on this subject at this time.
Legislation To Take the Profits Out of War
I have been informed that from something said in your conference with the
Nye Committee, members of the Committee have inferred that you approved
the draft of the bill to take the profits out of war which the Committee
was then considering. The report which the Committee made to the Senate
on April 1, contains the following articles:
Article III refers to the McSwain Bill which, in amended form, passed the House on April 9.25
There are attached hereto a digest of the Committee’s bill and a copy of the text.26
The Senate, in setting up the Nye Committee, charged it, among other things, “to review the findings of the War Policies Commission and to recommend … specific legislation”. The attached bill constitutes the “specific legislation” which the Committee was charged to prepare.
Taking the profits out of war is a difficult thing to accomplish as past experience has demonstrated. It may be doubted whether any means can be found to accomplish it to the extent to which some proponents of the idea appear to believe possible. You may regard it as wise to refrain from committing yourself to support any specific legislation on this subject, until a great deal of further careful study has enabled the Administration to formulate some definite program for dealing with this complicated matter. An attitude of complete neutrality on the part of the Administration may perhaps be particularly desirable at this time when there is so much controversy in Congress between the proponents of rival bills.
Control of the Arms Traffic
Two principal methods have been suggested for dealing with the evils of the international traffic in arms.
The suggestion has been made in various quarters that a Government monopoly of the manufacture of and trade in arms and implements of war is the best method of dealing with the evils which have arisen from the present lack of Governmental supervision and control in that field. From various public statements made by Senator Nye, it would appear that this is the solution which he favors. The Committee has not, however, committed itself to this program and there appears to be reason to hope that it may be willing to support a program in accord with the policy of the Administration. In [Page 334] your discussion with Mr. Phillips and Mr. Green of our telegram of May 28, 1934, to Norman Davis,27 you decided, wisely I believe, that although the elimination of all private manufacture of arms and munitions might be admirable as an ultimate objective, it is not feasible at this time.
Since the negotiation of the Arms Traffic Convention of 1925, this Government has consistently followed the policy of attempting to establish, by international agreement, a system of supervision and control of the international traffic in arms based upon export and import licenses and full publicity. Under your administration, we have proceeded one step further and have attempted to establish by international agreement a similar system of licenses and publicity for the manufacture of arms.
Although this Government has been foremost during the last two years in efforts to obtain an international agreement along the lines I have indicated, we have lagged behind almost all the other civilized nations of the world in our domestic legislation. The Nye Committee asked Mr. Green of the Department to prepare a draft of legislation following the principles embodied in the Draft Articles now under discussion in Geneva, insofar as they could be put into effect by constitutional legislation in advance of the Convention. Mr. Green was authorized by me to comply with the Committee’s request and he has submitted a draft of legislation to the Committee. I attach a copy of this draft legislation. Two Articles—5a and 5b—were submitted separately because they embody the principle of the Arms Embargo Resolution, which encountered opposition in the Senate. Should the Committee decide to present this legislation, it might wish to omit these articles, in order to avoid the controversy which arose when the Arms Embargo Resolution was under discussion. Should the Committee decide otherwise, these Articles could be incorporated in the draft legislation. I believe that this draft legislation embodies the wisest and most practical method of dealing with the evils inherent in the manufacture of and traffic in arms.
The Committee has apparently in recent weeks been diverted from its original interest in the supervision of the arms traffic by its interest in neutrality legislation and legislation designed to take the profits out of war. I believe a word from you in support of this draft legislation might serve to concentrate the efforts of the Committee on this subject and to accomplish some tangible result. I suggest, therefore, that you tell the Committee that you have been informed that Mr. Green has, at the Committee’s request, presented a draft of legislation to establish some measure of supervision and control of the manufacture of and traffic in arms; that you understand that the Committee now has this [Page 335] legislation under consideration; that this legislation is based upon the same principles as the Draft Articles which are now under discussion in Geneva; that you hope that the Committee may decide to report favorably on legislation of this type; and that if so you are prepared to give the Committee the backing of the Administration in this matter and, if circumstances appear to warrant it, to send an appropriate Message to Congress.
Investigation of Loans Made by the Allied Powers Through American Banks 1914–17
The Committee, in connection with its study of methods to take the profits out of war, is proceeding with the examination of documents in the files of the Guaranty Trust Company of New York pertaining to the dealings between that Bank and the British Government in 1916 and with documents from the files of the Central Hanover Bank of New York in regard to the French loan of April 1, 1917, made by the Central Union Trust Company of New York, predecessor of the Central Hanover Bank. The Committee is proposing to examine several thousand documents in the files of J. P. Morgan and Company, relating to the dealings between the British Government and that Bank in 1914–17. The British and French Ambassadors, acting under instructions of their Governments, have protested against this procedure.28 Mr. John W. Davis, acting as counsel for two of the Banks, has drawn up a brief, questioning the legal right of the Committee to examine the documents in question. My legal advisers do not believe that the legal arguments of the British and French Governments and of Mr. Davis are well founded. Nevertheless, as there is a question of international comity involved, I approached the Chairman of the Committee and suggested that he refrain from this phase of its proposed investigation. This suggestion was not agreeable to Senator Nye. He agreed, however, that none of the documents in question, the publicity of which might result in embarrassment to the British and French Governments, would be published until they had been referred to me and I had had an opportunity to consult the interested Ambassador in order to ascertain the attitude of his Government. This agreement did not satisfy the Ambassadors who, acting under instructions, object on principle to any examination of the documents by the Committee whether their contents are made public or not.
Waiving the question of the legal right of the Committee in the premises, I recommend that in your conference with the Committee, you urge that it do not proceed with the examination of these documents. The proposed action of the Committee would result in irritating the British and French Governments and it is difficult to [Page 336] conceive that any useful purpose could be served by a study of these documents. It can scarcely be maintained with reason that such a study is a necessary preliminary to the study of legislation for taking profits out of war particularly as the Committee has already prepared its Bill on that subject.