In 1938 a shadowy group of Frenchmen approached treasury secretary Henry Morgenthau Jr. about purchasing U.S. combat aircraft.
Following its enactment in March 1941 the Lend-Lease Program provided American war materiel to Allied nations before the United States officially entered World War II. While its importance in helping Great Britain, Free France, the Republic of China and the Soviet Union stave off Axis forces is widely acknowledged, less is known about earlier U.S. efforts to provide military aircraft to France at a time when many Americans—including many members of Congress— were firmly isolationist and against any attempt by the administration of President Franklin D. Roosevelt to skirt U.S. neutrality laws. In this excerpt from his forthcoming book The Jew Who Defeated Hitler (Prometheus Books, fall 2014) author Peter Moreira examines the role Secretary of the Treasury Henry Morgenthau Jr. played in providing American-built combat aircraft to France, a nation poorly prepared to defend itself against the coming Nazi onslaught.
On the evening of Saturday, Oct. 22, 1938, U.S. Secretary of the Treasury Henry Morgenthau Jr. welcomed two visitors to his farm in Hopewell Junction, N.Y., both of whom wanted to work with him in his fervent goal of battling Nazi Germany. Morgenthau had been in office for almost five years, and he was known to stray outside his economic portfolio and into foreign and military policy. He was President Franklin D. Roosevelt’s most ferocious hawk in standing up to the totalitarian aggressors in Japan, Italy and especially Germany. Morgenthau usually grabbed any chance Roosevelt gave him to battle Hitler’s regime, but he knew he needed to tread lightly when dealing with these two men. Rather than risk being seen with them in Washington, D.C., he arranged to host them for a weekend at his bucolic farm in the Hudson River valley.
The first was William Bullitt Jr., the American ambassador to France, an old family friend whom Morgenthau had visited in Paris that summer. The second, a French businessman, was more of a mystery. Jean Monnet was representing the government of Prime Minister Édouard Daladier, which had initiated a huge armament program spurred by Adolf Hitler’s rampant militarism. The French were worried their arms factories would be vulnerable in the event of a German invasion, so Monnet was heading a mission to build aircraft plants in Montreal, Canada. He would need some help —certainly technical, possibly financial—from the U.S. government and had enlisted Bullitt to open doors in Washington. Bullitt loved the plan and had taken it to Roosevelt, who told him to work with Morgenthau.
Suspicious by nature, Morgenthau was skeptical about the proposal. He knew France was in desperate economic straits, having devalued its currency twice in two years. Bullitt and Monnet tried throughout dinner to detail the operational side of the plan, but Morgenthau kept returning to the finances.
“Let’s take it for granted that you could overcome all technical difficulties,” said Morgenthau, who always recorded such meetings or had a stenographer present. “How much do you think the plant would cost—$25 million to build?”
“No,” Monnet responded. “Fifty million to $100 million.”
“How are you going to pay for that?”
“Frenchmen who have their money over here will subscribe to the stock.”
Morgenthau was incredulous. The French had been moving money offshore for several years as the threat of war grew. So he wondered aloud why such panicky Frenchmen would assume France would still be around to buy the planes. “Mr. Monnet, we figure that during the last four years, there must be at least $4 billion in gold that has left France,” he said. “Just as long as that is abroad, and what little money is left continues to leave France, there isn’t any use talking about building aeroplanes or anything else. You people have to devise means and method whereby you get this money back.”
Morgenthau said pointblank the government had to jail citizens—even cabinet ministers—with overseas money, even if that meant imprisoning 2,000 people and discharging two-thirds of the cabinet. Surprisingly, Bullitt and Monnet agreed, though the latter said only two or three people would need jail time.
“Mr. Monnet, if you don’t do something like this, your country is through,” Morgenthau said as the meeting ended. “It’s impossible for you to continue with the bulk of your capital abroad.”
The dinner at Morgenthau’s farm set in motion a forgotten incident from the buildup to World War II—the clandestine program to sell American-built aircraft to France. When it became public, it created a short-lived scandal that shook Morgenthau’s Treasury Department to the core. It cost one U.S. serviceman his life and almost cost Morgenthau his job. It brought to the surface an issue that would plague the Roosevelt administration throughout the war— the need to supply the frontline European allies while rearming America. And in the end it aided the greatest arms buildup and economic program in human history, and showed the determination and frustration of the architect of that economic program, Henry Morgenthau Jr.
In late 1938 the United States was lagging in the arms race, with a capacity to produce only 3,600 military aircraft annually. If the United States had had 5,000 planes that year and the ability to produce 10,000 more, Roosevelt told senior Treasury, State and military officials at a November 14 meeting, Hitler could not have taken the stand he did on Czechoslovakia. The group agreed Roosevelt would ask Congress to approve annual production of 12,000 military aircraft and the capacity to double that number.
Morgenthau had to work out the finances, but his most crucial task was working with the French. It was a task layered with complications, involving negotiations among the Treasury and State departments, the White House, the Army, commercial corporations and a France weakened by social unrest, financial problems and political turmoil. In addition to respecting America’s neutrality laws, Morgenthau had to adhere to the Johnson Act, which forbade credit to France because it had defaulted on World War I loans.
Throughout November 1938 the Treasury secretary waited for France to declare it would reverse the flow of capital, but no declaration came. “If the French don’t really do something to get control of their own situation, I think they’re through, and I think it’s only a matter of months,” Morgenthau told his staff. When Monnet returned to the United States in mid-December, he brought only three aviation technicians and a letter from Daladier saying France would like to buy 1,000 American-built military aircraft. Monnet still demanded secrecy and wanted to make the purchases through a Canada-based corporation. He was hoping the United States would grant the company credit, but Morgenthau told him to see a commercial bank, as the Treasury couldn’t lend him money because of the Johnson Act.
The internal differences within the U.S. government regarding the wisdom of selling military aircraft to France mushroomed when the armed forces were brought into the talks. Roosevelt and the State Department supported the proposal. But senior military leaders did not want the French orders interfering with their own services’ requirements. Nor did they want foreign countries like France or Britain armed with America’s best technology. U.S. law prohibited foreign representatives from even seeing secret devices or weapons, let alone inspecting them. Roosevelt had some sympathy for the military leaders’ stance. Morgenthau had none and was incensed the Army had not yet placed orders with private factories. “Think about it again,” Morgenthau told the president in support of the French. “If you want them to be our first line [of defense], let’s either give them good stuff or tell them to go home, but don’t give them stuff that the minute it goes up in the air it will be shot down.”
Morgenthau believed French orders for combat aircraft would increase American industrial capacity and drive manufacturers to develop badly needed machine tools. But he didn’t want to jeopardize his relationship with the War Department, which was a tricky task, because the organization was divided into two warring camps. The first was led by archisolationist Secretary of War Harry Woodring. His nemesis was Assistant Secretary Louis Johnson, who was more amenable to arming the Allies, though he too drew the line at allowing France access to secret weapons.
By December 21 Morgenthau had produced a list of three aircraft the French might test—the P-40 Warhawk fighter, manufactured by Curtiss-Wright Corp.; the Douglas Model 7 (later A-20 Havoc) light bomber; and the Glenn L. Martin Co. Model 166, an export-only version of the firm’s B-10 twin-engine bomber. Roosevelt greenlighted the request.
But Woodring responded that aircraft orders for the U.S. Army would take at least nine months to fill, and only 40 machines could be produced in the first year. “An order at this time for 1,000 planes for a foreign government would prevent fulfillment of our 10,000-plane program within the time limits now assigned,” he wrote in a memo. “The foreign orders could not be cleared through the American plants in under 18 months.”
Morgenthau was uneasy battling the entire military establishment in partnership with Monnet, a man he didn’t know and who provided so little detail. At a December 28 meeting Morgenthau lost patience when the shadowy Frenchman explained the Canadian companies buying the airplanes would be financed with $250,000 of capital put up by the directors. If the directors declined to do so, Monnet said he would put up the money himself. Morgenthau asked why, and Monnet responded, “Frankly, I do a lot of things in this affair that I should not be doing.” Pressed by Morgenthau and other Treasury officers, the Frenchman was unable to name the directors or say what they would receive in return for their investment.
Morgenthau bluntly said that he was worried about the arrangement violating U.S. law, and that he would prefer France to establish an office in Canada to buy the airplanes. “I will do business with a certified, authentic agent of the French government, but I am not going to do business with a dummy corporation,” the Treasury secretary said. “There is so much secrecy over such a simple operation. Either the French have or have not the money. If they have, I would like to see some of it, on account of all this discussion. It seems to me you are making the thing as difficult for yourself as possible.”
On December 30 Woodring wrote Morgenthau demanding the Treasury guarantee the French had sufficient money before any French officials were allowed to inspect the airplanes. Morgenthau immediately phoned Woodring to say he could not possibly issue such a guarantee and demanded the letter be withdrawn. As he frequently did when he fell out with other government officials, Morgenthau told the president of the spat.
“I find myself now in the position that the whole United States Army is opposed to what I am doing, and I am doing it secretly, and I just can’t continue, as secretary of the Treasury, forcing the United States Army to show you planes which they want for themselves,” Morgenthau told Monnet on New Year’s Eve.
As Morgenthau prepared for a Florida vacation in early January, he pressured Monnet to state publicly France’s intention to buy American aircraft. “The United States Treasury can offer no more cooperation until a public statement is made in regard to this mission,” he said in a Jan. 2, 1939, phone call with Monnet, repeating the same message six times.
But when Morgenthau returned to Washington, the French government still had not announced anything, much less tackled its economic problems. Though Woodring and Johnson showed rare unanimity in opposing the sale, the president ordered them to cooperate. The Army successfully blocked the French purchase of Curtiss’ state-of-the-art P-40, so Monnet ordered 150 of the company’s P-36s and was pondering whether to raise the order to 250. His team was also evaluating light bombers produced by the Douglas and Martin companies, though the Army did not want the French to have access to the Douglas models.
Harry Collins, a former naval officer who was taking over the Treasury’s procurement division, told a Treasury meeting January 16 the Army just didn’t understand that the French orders could boost America’s industrial capacity. Their order could allow Martin to order manufacturing tools and add 1 million feet of factory space. Another official added that the Allison Engine Co. could increase its capacity from 300 aircraft power plants per year to 500 with French and British orders.
At a White House meeting later that day Roosevelt told the Treasury and military officials he wanted every effort made to furnish the French with military airplanes. Bullitt, also attending the meeting, said the French were particularly interested in the Douglas 7B light bomber, even though Woodring said it had many secret elements and was built partly with government funds. What he didn’t need to say was that neither Congress nor the public were aware of the negotiations with the French, and news of the talks would likely excite isolationist ire. Roosevelt made it clear he wanted the French to see the 7B.
Three days later Johnson informed the Treasury Department he would cooperate with the French requests, and General Henry H. “Hap” Arnold, head of the U.S. Army Air Corps, signed an order allowing French technical advisers to view the 7B at Douglas’ factory in Santa Monica, Calif. They were to have full access to the plane, including its classified components, and would be allowed to go on a test flight.
By January 23 the French were testing the Douglas bomber in California and were also meeting with representatives from Curtiss and Martin. Overall, Morgenthau was pleased; he felt certain the French would sign a contract within 24 hours.
Then, in the afternoon, disturbing calls began coming in from the West Coast. The French team had inspected the 7B, and French technician Paul Chemidlin went along on a test flight. In the course of the maneuvers, pilot Johnny Cable banked the airplane too steeply, and it went into a spin at 500 feet. Losing control of the bomber, Cable bailed out, but his parachute failed to open in time. The 7B crashed in a parking lot near Mines Field (Los Angeles’ municipal airport), demolishing nine automobiles and injuring 10 bystanders. Chemidlin escaped with a broken leg, severe back injuries and minor head injuries. Cable was killed instantly.
Later that day the Associated Press ran a story on the crash, including the fact that a member of the French air ministry had been aboard. Then, on January 28, the New York Herald Tribune ran a frontpage story headlined TREASURY LET FRENCH AGENT RIDE BOMBER. The article said the revelations came in closed sessions of the Senate Committee on Military Affairs, and Morgenthau guessed immediately that USAAC chief Arnold was the source. Morgenthau’s first call was to Woodring, who claimed he knew nothing about the matter. “I’m not going to forget it after Arnold has done this,” Morgenthau told him. When committee chairman Morris Sheppard called for Morgenthau to testify, the secretary agreed and asked immediately who had blamed the Treasury. Confidentially, said the senator, it was Arnold.
If there was one bright spot, it was that the French had actually placed orders for U.S.-built aircraft: 115 Martin 166s, 100 Curtiss fighters and at least 100 bombers from Douglas on an expedited delivery. They planned to buy all the engines from Pratt & Whitney, enabling the company to rehire workers it had just laid off. The total order was expected to rise to 400 bombers and 100 pursuit planes. Roosevelt, a master at handling reporters, seized this good news and immediately announced the French were buying airplanes, creating employment for idle workers. He also said he’d ask Congress for an appropriation of $50 million so the Army could buy 575 planes. The New York Times noted, however, there was a “serious conflict” between Roosevelt and senior military officials, and it quoted Sen. Bennett Champ Clark of Missouri as saying he would fight the French sale.
Morgenthau’s testimony before the Senate committee was intentionally bland. After apologizing for speaking quietly because of a recent illness (a long-standing problem with migraine headaches had flared up after the 7B crash), the secretary explained that the French mission was an accredited group representing France, and that he was involved because the Procurement Division was in the Treasury. He then read aloud Arnold’s note that gave the French team permission to view the Douglas bomber.
The atmosphere was grim when Morgenthau gathered his senior officials together in his office on the morning of Feb. 6, 1939. He said he had acted properly and would do it all over again if he had to. Repeating himself several times, he said anyone who disagreed with him should come out and say it. “I don’t want anyone connected with me who doesn’t believe in Henry Morgenthau Jr., and who doesn’t believe in what he is doing,” he said. He closed by saying, “I see extremely difficult times ahead of us, and I don’t want anyone who isn’t as closely associated as these people are here with me.”
“I’m a thousand percent with you in it,” said Under Secretary John Hanes II. “I think you’re absolutely right. I’ll go down with you, if it means going down; we’ll all go down.”
“It’s going to get dirtier and dirtier, and I just want to know that I’ve got a team with me through thick and thin; and it’s going to get pretty damn thick,” Morgenthau said. “I mean, I’ve never seen the weather so thick.”
In the end Assistant Secretary Wayne C. Taylor, a closet isolationist, did resign. And Morgenthau was outraged that the president, a close friend, did not back him publicly. But the French scandal blew over, and America’s production of military aircraft flourished. Morgenthau became Roosevelt’s airplane czar and eased production bottlenecks in 1939 and 1940, then became the point man for British and French ordnance orders. He always represented America’s interests but fought hard to supply the Allies and increase production. His efforts ultimately helped ensure U.S. aircraft companies were able to produce the tens of thousands of fighters, bombers, trainers and transports the nation needed following the Dec. 7, 1941, Japanese attack on Pearl Harbor and America’s subsequent entry into World War II.
Originally published in the July 2014 issue of Military History. To subscribe, click here.
