Courtesy Reuters

Freezing Dollars Against the Axis

WHEN Germany occupied Norway and Denmark in April 1940 the United States Treasury, in a protective countermove made at President Roosevelt's direction, "occupied" the $267 million in Norwegian and Danish property in this country. Secretary Morgenthau remarked: "Certainly it is in the interests of the American people that I sit on this money and do nothing . . . until the State Department can advise us more clearly on the status of these countries." In the next fifteen months the President directed similar moves involving seven and a half billion dollars owned by 32 countries (set forth in detail in the accompanying table), and it became clear that "doing nothing" really meant engaging in perhaps the most extensive exchange control ever undertaken by any country. With the position of the United States gradually shifting from that of an indignant neutral to one of active opposition to the Axis, the Treasury's control came to include not only the funds of countries occupied by the Axis, but those of the Axis itself and of the neutrals who might wittingly or unwittingly aid the Axis. In short, our financial policy was back on the 1917-18 basis.

Our control of foreign funds is highly important as a weapon of economic warfare. How does it operate? For what purposes? How effective is it? The control also raises questions, perhaps even more significant and perplexing, as to the peace. Will the United States be able to remove the controls and return to its traditional free exchange policy after the war? If so, whose claims now "frozen" under Treasury restrictions are to be recognized?

I

The United States undertook the control of foreign funds reluctantly. Our maintenance of a free exchange market was the logical counterpart of our traditional free trade policy, under the banner of which the government crusaded vigorously against the growing number of exchange restrictions imposed by other countries. Even apart from ideological considerations, we had an understandable distaste for foreign controls which operated as

"FROZEN" FUNDS OF FOREIGN NATIONALS
Country Effective Date of Amount Percent of Total
Blocking (millions of dollars)
GERMAN-CONTROLLED COUNTRIES
Denmark April 8, 1940 $ 92 1.2
Norway " " "  175 2.4
Netherlands May 10, 1940 1,619 21.8
Belgium " " "  760 10.2
Luxembourg " " "  48 .7
France June 17, 1940 1,593 21.4
Latvia July 10, 1940 13 .2
Estonia " " "  10 .1
Lithuania " " "  6 .1
Rumania October 9, 1940 53 .7
Bulgaria March 4, 1941 2 (a)
Hungary March 13, 1941 24 .3
Jugoslavia March 24, 1941 71 1.0
Greece April 28, 1941 122 1.6
Finland June 14, 1941 17 .2
Czechoslovakia " " "  5 .1
Poland " " "  7 .1
Albania " " "  (a) (a)
Austria " " "  9 .1
Danzig " " "  (a) (a)
------ -----
  Total $4,626 62.2
AXIS COUNTRIES
Germany (and Liechtenstein) June 14, 1941 $ 107 1.4
Italy (and San Marino) " " "  72 1.0
Japan (b) " " "  131 1.8
------ -----
  Total $ 310 4.2
ANTI-AXIS BELLIGERENTS (c)
U.S.S.R. June 14, 1941 $ 39 .5
China (b) " " "  275 3.7
------ -----
  Total $ 314 4.2
UNOCCUPIED NEUTRALS (c)
Portugal June 14, 1941 $ 157 2.1
Spain (and Andorra) " " "  30 .4
Sweden " " "  516 6.9
Switzerland " " "  1,484 20.0
------ -----
  Total $2,187 29.4
Grand Total $7,437 100.0
aNegligible.
bOrder not actually issued until July 25, 1941.
cLiberal general licenses involving these countries have been issued.
Sources: Figures for countries frozen through October 9, 1940, were compiled by the Treasury from property-census
reports required under the freezing orders. Similar official figures on later freezings will be available for the other countries
if, and when, the Treasury releases the results of the property-census now being taken on all foreign holdings. The figures
given here are derived from estimates emanating from the Department of Commerce, the Federal Reserve Board and
government defense agencies.

moratoria on the huge volume of

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