-Caveat Lector-
an excerpt from:
>From Major Jordan's Diaries
George Racey Jordan©1952 All rights reserved
LCCN 52-6448
Western Islands
395 Concord Avenue
Belmont. Massachusetts 02178
PRINTING HISTORY
Harcourt, Brace edition published 1952
Free Enterprise edition published 1958
American Opinion edition published 1961
The Americanist Library edition published 1965
170pps — out-of-print
--[12]--
CHAPTER TWELVE
How Russia Got U.S. Treasury Plates
I returned to Great Falls, for the last time as an Army Officer, on June
13th, since I had just been replaced by Lieutenant George Walewski Lashinski.
I was due to speak in Omaha on the 16th, and this was my last chance to say
good-by to my friends, including Colonel Kotikov. On a personal level, I had
always been very friendly with the Colonel; he was one of the most unusual
people I had ever known, and he had many likable traits as a human being. It
was only when politics intervened, or orders came to him from above, that his
attitude and manners became difficult.
During our farewell talk, Colonel Kotikov mentioned the "money plane" which
had crashed in Siberia and had been replaced. I asked what he meant by "money
plane." The U.S. Treasury, he explained, was shipping engraving plates and
other materials to Russia, so that they could print the same occupation money
for Germans as the United States was printing.
I was certain he was mistaken. I was quite sure that never in history had we
let money plates go out of the country. How could there be any control over
their use? "You must mean, Colonel," I said, "that we have printed German
occupation money for Russia and shipped the currency itself."
"No, no," he replied. He insisted that plates, colored inks, varnish, tint
blocks, sample paper—these and similar materials had gone through Great Falls
in May in two shipments of five C-47s each. The shipments had been arranged
on the highest level in Washington, and the planes had been loaded at the
National Airport.
I was still incredulous, but I was impressed enough to pass these remarks on
to Colonel Bernard C. Hahn, the Air Force Inspector who had come on as a
result of my trip to Washington.
Not until 1950 did I learn all the particulars about these money plates. The
full story has never been released to the general public, and only a few
people in Washington seem to know the details of this Lend-Lease scandal. I
see no reason why every citizen should not know how his public servants
handled such a grave matter in wartime.
The sum of money which we lost in redeeming the marks which the Russians
rolled off their presses, with no accountability whatever, appears to have
been $250,000,000! It was not until September, 1946, that we put a stop to
the siphoning of our treasury by refusing to redeem further marks. By this
time the plates had been in Russian hands over two years. At the closed
hearing in June 1947 Senator Styles Bridges, chairman of the Committee on
Appropriations, inquired of Assistant Secretary of War Howard C. Petersen:
"Does Russia still have the plates, so far as you know?"
Mr. Petersen: As far as I know, they still have the plates.
Chairman Bridges. And as far as you know, are they still printing the
currency?
Mr. Petersen: As far as I know, they are still printing the currency.
Chairman Bridges: And has there been any protest from this Government
endeavoring to stop them?
Mr. Petersen: There have been strenuous efforts from the Allied Control
Council in Berlin to obtain an accounting from the Russians as to the amount
of Allied military marks which they have issued. Those efforts have been
unsuccessful.[1]
Senator Bridges and Mr. Petersen had previously had this exchange:
Chairman Bridges: Was there any action taken by the War Department to
restrict the number of notes issued by the Russians?
Mr. Petersen: The answer of the War Department is "No."
Chairman Bridges. And, as far as you know, was there any action taken by the
State or the Treasury Department to restrict Russia in the number of notes
she would issue?
Mr. Petersen: To my knowledge, none.[2]
Mr. Petersen later stated: "I know when we stopped the use of them (the
Allied marks) in Germany. It was September 1946."
Here is the exchange between Senator William F. Knowland of California and
Assistant Secretary Petersen:
Senator Knowland. As I understand, there are $380,000,000 more currency
redeemed than there were appropriations for?
Mr. Petersen: That is correct
Senator Knowland. And you expect eventually that that amount will be cut down
to $160,000,000; is that right?
Mr. Petersen: Yes ...
Senator Knowland: Now what I would like to ask is, what is the amount
outstanding as of, let us say, the end of last month (May, 1947)?
Mr. Petersen: That is $340,000,000.[3]
The hearing continued for two days. At its end there were, 141 printed pages
of oral testimony, and in addition 31 pages of State Department documents, 59
pages of Treasury Dopartment documents, and 474 pages of War Department
documents. From this mass of unreleased material it is possible to
reconstruct the story chronologically, step by step.
It started early in 1944, when the need for uniform occupation currency in
Germany was acknowledged by the Allies. On January 29th Ambassador Averell
Harriman informed our State Department from Moscow: "Great importance is
attached by the British Government to the Russian Government's participation
in this arrangement."[4] Cordell Hull informed Harriman on February 8th that
the U.S. would be glad to print the money for Russia: "The production of
sufficient currency to take care of Soviet requirements, if desired, is being
contemplated."[5]
On February 15th Moscow's answer came from Harriman: "The Commissariat for
Finance considers that in preparing the currency it would be more correct to
print a part of it in the Soviet Union in order that a constant supply of
currency may be guaranteed to the Red Army ... it will be necessary to
furnish the Commissariat for Finance, in order that the M-marks may be of
identical design, with plates of all denominations, a list of serial numbers,
and models of paper and colors for printing."
The Russian technique was clever: Don't ask whether your demand will be met;
ask when it will be met. Harriman's cable ended as follows: "Molotov asks in
conclusion that he be informed soon when the Commissariat for Finance may
receive the prints, models of paper and colors, and list of serial numbers.
Please instruct."[6]
Secretary Hull took over a month before replying on March 23: "It is not
expected that the Combined Chiefs of Staff will favor the delivery of plates
to the Russians." [7]
However, other departments of the Government were also being consulted.
Inside the Treasury Department great concern was expressed by two veteran
civil servants, Mr. D. W. Bell, Under Secretary of the Treasury, and Mr. A.
W. Hall, Director of the Bureau of Engraving. In a memorandum to his
immediate superior Bell stated: "It would be very difficult to make the
plates available to the Russians. The Treasury had never made currency plates
available to anybody."[8] Mr. Hall reported to the same superior, pointing
out the gravity of the problem of accountability. His memorandum said:
To acquiesce to such an unprecedented request would create serious
complications. To permit the Russian Government to print currency identical
to that being printed in this country would make accountability impossible ...
The present contractor for the printing of invasion currency for Germany is
under heavy bond to insure against the misappropriation, loss, or improper
use of plates, paper, and printed currency.
I do not believe at under any circumstances would the contractor agree to the
manufacture of duplicate plates by any agency outside of his plant.
Furthermore, it is doubtful that the Treasury Department could force him to
do so. Almost certainly his bond would become forfeit if such an arrangement
were resorted to.[9]
The immediate superior of Mr. Bell and Mr. Hall was a relative newcomer to
the Treasury Department named Harry Dexter White. Revealing testimony about
Mr. White has been made by Whittaker Chambers in his recent book, Witness.
In the persons of Alger Hiss and Harry Dexter White, the Soviet military
intelligence sat close to the heart of the United States Government. It was
not yet in the Cabinet room, but it was not far outside the door ...
Harry Dexter White had become Assistant Secretary of the Treasury. In a
situation with few parallels in history, the agents of an enemy power were
able to do much more than purloin documents. They were in a position to
influence the nation's foreign policy in the interests of the nation's chief
enemy, and not only on exceptional occasions like Yalta (where Hiss' role,
while presumably important, is still ill-defined), or through the Morgenthau
Plan for the destruction of Germany (which is generally credited to White),
but in what must have been the staggering sum of day-to-day decisions.[10]
With this clue in hand, the day-to-day progress of the decision on the
engraving plates makes fascinating reading. Mr. Bell again conferred with
Harry Dexter White. He pointed out that the plates which had been engraved
for the Treasury Department were, in fact, the property of the Forbes Company
in Boston and if we insisted that they should make duplicate sets available
to the Russians, it is possible that the Forbes Company would simply refuse
to print any further currency for us, on the grounds that security control
had been removed and they could not be responsible for anything that might
happen to the printing of the currency from that time on.[11]
He added that not only could the U.S. print all the currency the Russians
could possibly desire, but "we could have the first shipment ready for them
before the Russians could start manufacturing currency from plates that we
might make available to them."
What did Harry Dexter White think of all this? White said that he
... had read with considerable interest the memorandum of March 3 from Mr.
Hall to Mr. Bell on this subject, but he was somewhat troubled with the views
expressed therein, which indicated that we could not make these plates
available to the Russians ...
Mr. White reiterated that he was loath to turn the Russian request down
without further review of the matter. He called attention to the fact that in
this instance we were not printing American currency, but Allied currency and
that Russia was one of those allies who must be trusted to the same degree
and to the same extent as the other allies.[12]
Never, of course, had any other ally asked for engraving plates nor had we
supplied them. We had printed other occupation currency for use in Italy and
Japan, and our other allies were perfectly satisfied with this arrangement,
but Mr. White made no reference to this.
Mr. White then records his meeting with Ambassador Gromyko at the Soviet
Embassy in Washington on the evening of March 22. He relates that Gromyko
"kept coming back with a question which he asked a number of times, namely,
why the Forbes Company should object to giving a duplicate set of plates to
his Government. He said that after all the Soviet Government was not a
private corporation or an irresponsible government. I explained to him how
both the Forbes Company and the American Banknote Company felt but I am
afraid he remained unimpressed with the reasons I offered."[13]
At no point did Mr. White say that our Government, for which he was in this
instance the spokesman, objected to providing duplicate plates because this
would make accountability impossible. There was only the integrity of two
American business firms with which to meet Russian demands and protect the
interest of the United States.
The State Department also heard from Mr. Harriman in Moscow that "the
Russians could not accept the explanation of a private printing, company
interfering with the program under consideration. The Russians asked that
they be told whether the plates would or would not be made available to them.
In the event the plates were not made available, they were prepared to
proceed with the printing of their own variety of mark currency."[14] This
threat had the desired effect.
When Senator Bridges asked Assistant Secretary Petersen at the closed
hearing, "Who in the United States made the decision to turn over, to the
Russians, United States engraved printing plates for producing currency?",
Petersen answered: "The record as I have seen it in the War Department
indicates that the decision was made by the State and Treasury Departments .
. ."[15]
The decision was made on April 14, 1944. It was recorded by James Clement
Dunn of the State Department in the following memorandum of his conversation
with Secretary Morgenthau. The paragraph next to last, referring to the
difficulties raised by the Forbes Company, indicates that the Treasury
Department was ready and willing to assume, under the President's War Powers,
the responsibility which the business firms would not undertake. Here is Mr.
Dunn's memo in full:
DEPARTMENT OF STATE
Memorandum of
TELEPHONE CONVERSATION
Date: April 14, 1944.
Subject: Duplicate plates to be furnished to the Soviet Government.
Participants: Mr. Henry Morgenthau, Jr., Secretary of the Treasury; Mr. Dunn.
Copies to: S EE—Mr. Bohlen.
Mr. Morgenthau. telephoned me this morning to say that he was informing the
Soviet Ambassador this afternoon that the duplicate plates for the printing
of the Allied military mark to be used in the invasion of Germany would be
furnished to the Soviet Government in response to that Government's request.
He asked whether the Department of State was in favor of this action.
I replied that it was the opinion of this Department from the political point
of view, aside from any military considerations or any technical questions or
difficulties, that if possible it was highly advisable to have the duplicate
plates furnished to the Soviet Government in order that the three Governments
and the three Armies entering Germany would be using the same identical
currency. The Soviet Government had informed us that if the plates were not
furnished to it, that Government would proceed to produce a separate currency
for use in Germany. It was our opinion that it would be a pity to lose the
great advantage of having one currency used by the three Armies, which itself
would indicate a degree of solidarity which was much to be desired not only,
for the situation in Germany but for its effect on the relations in many
other aspects between the Soviet, British, and United States Governments.
Mr. Morgenthau said he was very glad to have this expression of the
Department's views on this question as there might be some technical
difficulties arise which would require the Treasury to take over, under the
President's War Powers, the plant which is now using the original plates for
the production of these marks.
This question has been up between the United States and Soviet Governments
since last November, and it has become perfectly clear to us as a result of
the exchanges of correspondence on the subject that the Soviet Government is
not ready to join in the common use of the same currency unless it receives
the duplicate plates from us. In order to convince the Soviet Government of
our sincerity in the desire to have the closest collaboration in these
military operations against Germany, it becomes essential that we make every
effort within our possibility to furnish the plates to that Government.
JAMES CLEMENT DUNN.[16]
On the same day Secretary Morgenthau sent a memo to Soviet Ambassador Gromyko
saying, "There will be shipped from Washington on Tuesday, April 8, glass
negatives and positives of all plates used for printing M-marks. The designs
are in negative and positive form since it is not known which is preferred by
the Soviet Government." He ended by saying, "The U.S. Treasury is desirous to
cooperate with the Soviet Government in this matter in every possible
way."[17]
It was not until May 13 that the first shipment actually left the Washington
airport. There was a comedy of errors on the second shipment, which was
supposed to leave by plane at 6 A.M. on Tuesday, May 23. Mr. Hall reported to
Mr. Bell as follows:
The material was loaded on the trucks yesterday, and a crew of men brought in
to work at 5 A.M. today (May 23), and delivery was made to the Airport before
6 A.M. . . . I called Colonel Frank H. Collins (of the ATC) to ascertain
whether the planes had left, and he informed me that the crews of the five
planes were standing by waiting for the representatives of the (Soviet)
Embassy. He further stated that the crews were becoming impatient as they
wanted to land at Great Falls, Montana, before sundown.[18]
The trouble was that the Soviet Embassy had arranged for their couriers to
board the planes on May 24! The five airplanes were therefore held overnight
with "a guard in each plane, and a guard around the area where the planes
were parked." They left early on Wednesday, May 24, after each courier
arrived with an additional box weighing over 200 pounds. Colonel Collins said
he "thought the extra boxes contained American canned goods and American
liquor."[19]
As for the third shipment, said Mr. Hall, "it is now necessary to uncrate all
of the material and rearrange the whole shipment. You will remember when we
talked to the Ambassador (Gromyko), he insisted upon complying strictly with
instructions he received from his government, and now that his government has
reversed itself, we have to do the job all over again. This," concludes Mr.
Hall, "has been a pretty trying assignment for all associated with it." [20]
Was there anything else that Russia could possibly ask from the Treasury?
Yes, it could ask us to repeat one of the planeloads. That is exactly what
Gromyko asked on June first, in a note to Morgenthau which stated briefly
that "all the materials ... perished in connection with a crash of the plane
which carried them."[21] Gromyko said absolutely nothing about when the crash
occurred, or where.
Did we ask for proof of the crash, or direct any questions whatever to
Gromyko about the alleged accident? On the contrary, Secretary Morgenthau
promptly answered: "I am pleased to inform you that the seven items
representing replacement of the materials lost in the plane crash will be
ready for shipment on Wednesday, June 7 . . . I trust that this arrangement
meets with your approval."[22]
Why was Russia so insistent on printing German occupation currency without
accountability? The answer is quite simple. They knew that the U.S. Army
would convert such currency into dollars. (Russia, of course, refused to
redeem the same currency with roubles.) As a result, every Russianmade mark
that fell into the hands of an American soldier or accredited civilian became
a potential charge against the Treasury of the United States.
Russia could pay its occupation army in marks, and in fact did so, adding a
two-year bonus for good measure. If the Red Army could get anything out of
the German economy with these marks, all well and good. If they could get
anything out of America, even better. In any event, these marks cost the
Russian economy nothing whatever. With the materials provided from
Washington, they took over a former Nazi printing plant in Leipzig, deep in
the Russian zone, at a safe distance from American inspection, and started
the presses rolling.
Any GI could buy a pack of cigarettes for 8 cents at a U.S. Army Post
Exchange. For this the Russian and German black-markets would offer him 100
marks from the Leipzig mint. To realize a profit of almost $10 on an 8-cent
package of cigarettes, the American had only to take his 100 Leipzig marks to
an Army Post Office, purchase a $10 money order and mail it to the United
States. It was revealed that the standard offer for a five-cent candy bar was
50 marks, or $5; $18 for one pound of Crisco; $20 for one K-ration; $25 for a
pound of coffee, and $2,500 for a wrist watch costing $17.
By December 1946, the U.S. Military Government found itself $250,000,000 or
more in the red. It had redeemed in dollars at least 2,500,000,000 marks in
excess of the total marks issued by its Finance Office! The deficit could
have had no other origin than the Russian plant in Leipzig.
Let us read once again the War Department's testimony at the hearing in 1947:
Chairman Bridges: Was there any action taken by the War 'Department to
restrict the number of notes issued by the Russians?
Mr. Petersen: The answer of the War Department is "No."
Chairman Bridges: And, as far as you know, was there any action taken by the
State or the Treasury Department to restrict Russia in the number of notes
she would issue?
Mr. Petersen: To my knowledge, none.
Chairman Bridges. My next question is, does Russia still have the plates, so
far as you know?
Mr. Petersen: As far as I know, they still have the plates.
Chairman Bridges. And as far as you know, are they stiff printing the
currency?
Mr. Petersen: As far as I know, they are still printing the currency.
Chairman Bridges: And has there been any protest from this Government
endeavoring to stop them?
Mr. Petersen: There have been strenuous efforts from the Allied Control
Council in Berlin to obtain an accounting from the Russians as to the amount
of Allied military marks which they have issued. Those efforts have been
unsuccessful.[23]
To everyone's surprise, the Russians at one point agreed to submit quarterly
statements of the volume of money they were putting into circulation. Their
statements were so palpably rigged, however, that American officers called
them "Unbelievable." In that case, smiled the Russians, it would be useless
to make further reports.
It took 18 months before Russia's siphon into the American Treasury was
severed. The Army's payroll in Germany was shifted from Allied marks to U.S.
Military Certificates, which were non-convertible.
In addition to the $250,000,000, there was a further loss, which though small
was mortifying. A charge of $18,102,84 was rendered to the Soviet Embassy,
covering the expense of the engraving plates and the materials in the three
1944 deliveries. The bill was ignored and is still unpaid. The Russians, as
Mr. Petersen indicated, still have the plates and undoubtedly a good deal of
knowledge regarding U. S. currency manufacture techniques.
As for Harry Dexter White, his ascent was steady. Five months after the
duplicate plates fiasco, there was a conference of the Secretaries of State,
War and the Treasury at the Hopkins office in the White House. White read a
prospectus for the doom of Germany: Its people were to become a pastoral
horde; their entire industrial plant would be removed or destroyed; all
equipment was to be torn from the Ruhr -mines, and its coal deposits would be
"thoroughly wrecked.."
Secretary Stimson was struck with horror—an emotion which Secretary Hull
shared. They learned with consternation two weeks afterward that the
"Morgenthau Plan!, had been initialed by President Roosevelt and Prime
Minister Churchill at the Quebec Conference of Sept. 11, 1944. To Mr.
Roosevelt's face, Secretary Hull charged that Churchill's signature was
procured by Morgenthau with an offer of $6,500,000,000 of postwar Lend-Lease
for Britain.[24]
>From Assistant to the Secretary, Mr. White moved up to Assistant Secretary of
the Treasury in 1945. During February 1946, he was appointed by President
Truman, and confirmed by the Senate as U. S. Director of the International
Monetary Fund, with a tax-exempt salary of $17,500.
The name of Harry White became so important in the record of the Senate
committee that finally Senator Bridges suggested calling him as a witness.
But White was absent from the capital on vacation. It was announced that
Morgenthau and White would be placed on the stand at a future session, but
this was never called.
Mr. White submitted his resignation from the International Monetary Fund on
June 19, 1947, the day after the committee recessed. When the economist was
put on oath in the following year, he denounced the Chambers accusations as
"unqualifiedly false." He was not and never had been a Communist, White
affirmed, and had committed no disloyal act. But two weeks later his funeral
was held at Temple Israel in Boston: he had died of a heart attack.
In November of that year Whittaker Chambers produced five rolls of
microfilmed documents. Among them were eight pages of script divulging U. S.
military secrets. Found in possession of an acknowledged Communist courier,
the handwriting was identified as that of Harry Dexter White.
pps.126-137
--[SOURCES]--
CHAPTER TWELVE
How Russia Got U. S. Money Plates
1. Occupation Currency Transactions Hearings before the Committee on
Appropriations, Armed Services and Banking and Currency, U. S. Senate, (U. S.
Government Printing Office, 1947), p. 27.
2. Ibid., p. 27.
3. Ibid., p. ~S 8.
4. Ibid., p. 147.
5. Ibid., p. 147.
6. Ibid., p. 148.
7. Ibid., p. 150.
8. Ibid., p. 178.
9. Ibid., pp. 175-76.
10. Witness, Whittaker Chambers, (Random House, 1952), p. 427.
11. Occupation Currency Transactions Hearings, p. 178.
12. Ibid., pp. 178-79.
13. Ibid., p. 183.
14. Ibid., P. 15 1.
15. Ibid., pp. 16-17.
16. Ibid., pp. 152-53.
17. Ibid., p. 186.
18. Ibid., pp. 206-7.
19. Ibid., p. 208.
20. Ibid., p. 207.
21. Ibid., p. 208.
22. Ibid., p. 211.
23. Ibid., p. 27.
24. The Memoirs of Cordell Hull, (Macmillan, 1948), Vol. II, pp. 1613-18.
--[cont]--
Aloha, He'Ping,
Om, Shalom, Salaam.
Em Hotep, Peace Be,
Omnia Bona Bonis,
All My Relations.
Adieu, Adios, Aloha.
Amen.
Roads End
Kris
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