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or outside of United States to, for benefit of, on behalf of, or on account of an enemy or ally of enemy. Similarly lawful for enemy or ally of enemy, other than insurance companies as above provided, pending action on application, to continue business, provided that provisions of act making it unlawful to trade with enemy or ally of enemy and providing penalties upon conviction for so doing, shall apply to any act or attempted act of transmission or transfer of money or other property out of United States and to the use or attempted use of such money or property as basis for establishment of any credit within or outside United States to, for benefit of, on behalf of, or on account of an enemy or ally of enemy.

Act provides for Alien Property Custodian, to whom every concern in United States issuing shares of stock or certificates representing beneficial interests shall report names of any officers, directors, or stockholders as it may have reason to believe are enemies or allies of enemy. Every person in the United States indebted to, or holding property, beneficial or otherwise, on behalf of enemy or ally of enemy must report same to Alien Property Custodian. The President may require such money or property owing or belonging to or held for, by, on account of, on behalf, or for the benefit of enemy or ally of enemy not holding license, to be conveyed, transferred, assigned, delivered or paid over to Alien Property Custodian.

Terms “enemy” or “ally of enemy” deemed respectively to mean government of any nation with which United States is at war or ally of such nation, or any political or municipal subdivisions, officers, officials, agents, or agencies thereof; or any individual, partnership, or other body of individuals of any nationality resident within territory of such nation or ally of such nation, or resident outside United States and doing business within such territory, and any corporation incorporated within such territory, or incorporated within any country other than United States and doing business within such territory. The President may by proclamation include within these terms such other individuals, or body or class of individuals, as may be natives, citizens, or subjects of any nation with which United States is at war or ally of such nation, other than citizens of United States, wherever resident or doing business.

LANSING File No. 763.72112/7161 The British Ambassador (Spring Rice) to the Counselor for the

Department of State (Polk) No. 503

WASHINGTON, November 14, 1917.

[Received November 15.] MY DEAR MR. COUNSELLOR: I beg to enclose herewith, under instructions from my Government, summary of telegraphic instructions which have been sent to the British Minister at Rio, regarding financial measures to be adopted by the Brazilian Government. I have the honour to enquire whether you will be prepared to send instructions to the American Minister at Rio to support Sir A. Peel's representations. Believe me [etc.]

CECIL SPRING RICE

[Enclosure] Summary of Telegraphic Instructions Sent by the British Government to the British Minister in Brazil (Peel)

MEMORANDUM When you consider that a favorable moment has come, you should inform the Brazilian authorities of the desirability of adopting the following measures connected with the financial blockade of the enemy:

1. A controller should be appointed for all German banks in Brazil, which should only be allowed to carry on business subject to license, pending their being wound up.

2. Returns should be made by all banks in Brazil of all funds and securities held by them for enemies.

3. Embargoes should be placed on all German and Austrian balances and securities held by banks in Brazil, and their transference should be prohibited, not only to Central Powers, but to neutrals.

4. All banks in Brazil should require of any customer in Brazil purchasing neutral currency of them, or ordering remittances to neutral countries, to sign a declaration that such transaction (a) is in no way connected directly or indirectly with an enemy, and (b) is not for investment or speculation purposes.

5. All banks in Brazil should be required to obtain from all banking correspondents in other South and Central American countries which are neutral undertakings similar to that required by London banks of their banking correspondents in Central America and South America. It would be better, but not necessary, that this undertaking should be also obtained of banking correspondents in neutral European countries.

6. All banks in Brazil should make a daily or weekly return of all transactions involving sale or purchase of foreign currencies or remittances abroad. Return might be divided into two, one showing neutral currencies and remittances, and the other Allied currencies and remittances.

In addition you should point out that it is highly desirable that a strict censorship of all financial cables and letters should be conducted in collaboration with the Allies. In this connection you should inform the Brazilian Government that financial traffic between banks in Brazil and neutral Europe, especially Spain, has

1

The enclosure was forwarded to the Secretary of the Treasury Nov. 23.

been large and continuous, and of great assistance to the enemy. This refers not only to direct traffic but to traffic through Brazil from other Central and South American countries.

WASHINGTON, November 14, 1917.

File No. 763.72112/7160

The Ambassador in Brazil (Morgan) to the Secretary of State 1

[Telegram]

RIO DE JANEIRO, November 18, 1917, noon.

[Received 5.25 p. m.] [President of] Brazil has declared martial law in Federal District and States of São Paulo, Paraná, Santa Catharina, and Rio Grande and has approved law regulating trade and other relations with enemy within and without the Republic which is fairly satisfactory.

Since Brazil is timid about «lestroying entrenched German interests on account of possibility of reprisals, it will be well, however, to invite attention of Brazil's representative at coming conference of Allies to the necessity of strict enforcement of the law, since the suppression of a dozen powerful German banks and commercial houses which constitute an active German peril by exercising detrimental influence on commerce and stimulating the German loyalty of colonists in the southern States would be the most effective immediate contribution which Brazil could make to the Allied cause. The suppression of these houses would directly benefit us.

MORGAN

File No. 763.72112/6708

The Secretary of the Treasury (McAdoo) to the Secretary of State

WASHINGTON, February 1, 1918.

[Received February 4.] MY DEAR MR. SECRETARY: I take the liberty of referring to your letter of November 23, in which you enclose copy of a memorandum from the British Embassy embodying a summary of telegraphic instructions sent to the British Minister at Rio de Janeiro in regard to the desirability of adopting certain methods connected with the financial blockade of Germany and Austria-Hungary. At the time when your letter was received, no steps had been taken here for the control of financial operations, and I therefore suggested that action be postponed in Brazil until we should have acted here.

* Repeated in paraphrase by the Secretary of State to the American Embassy in France for Colonel House, Nov. 24, 1917. (Same file number as above.)

· Letter not printed; enclosure printed ante, p. 314.

The President has now signed an Executive order, dated January 26, of which I enclose herewith a copy,' and this order, taken together with the general provisions of the Trading with the Enemy Act appointing an Alien Property Custodian, seems to cover practically all the points which the British Government was desirous of bringing to the attention of the Brazilian Government, except subdivision (6) of paragraph 4. This, however, is not, in my judgment, an important variation.

I think it desirable, if you approve, that this Government should either join the British Government in making representations to Brazil, or else that the American Ambassador at Rio de Janeiro should of his own motion bring to the attention of the Brazilian Government the steps that have been taken by the United States for the control of credit operations within its borders. By direction of the Secretary, Very truly yours,

R. LEFFINGWELL

File No. 763.72113/639

The Ambassador in Brazil (Morgan) to the Secretary of State

[Telegram]

RIO DE JANERIO, August 2, 1918, 3 p. m.

[Received August 3, 8.5.3 a. m.] Minister of Finance confirmed to me today current report that Brazilian Government is taking over and liquidating the three German banks as well as the principal German houses in Brazil with capital and offices in Germany. Please telegraph résumé of manner in which German houses in the United States are treated whose capital and offices are wholly located in the United States.

MORGAN

File No. 763.72112/9770a
The Acting Secretary of State to the Ambassador in Brazil (Morgan)

[Telegram]

WASHINGTON, August 10, 1918, 5 p. m. Department has received a memorandum from the British Embassy at Washington to the effect that the Brazilian Minister of Foreign Affairs has stated that the President of the Republic is very anxious

Not printed.

before the Brazilian Government takes steps to liquidate the principal German commercial houses and banks in Brazil, to receive an assurance that the statutory list would be withdrawn if the German firms are definitely wound up. It is represented to the Department that by securing the withdrawal of the statutory list, considerable popularity would be accrued to the President of the Republic and to the Minister of Foreign Affairs.

British Government state that they are in favor of giving assurances to the Brazilian Government that the published black lists for Brazil will be withdrawn as soon as effective action has actually been taken against the most important German concerns and particularly the German banks. The British Government are prepared to give the necessary assurances to the Brazilian Government, provided (1) that the action contemplated by the Brazilian Government is part of a general policy and will include all German concerns of importance, and (2) that the action of the Brazilian Government will not cause the Associated Governments to refrain from discriminating against the less important German firms in Brazil by including such concerns in a confidential black list.

The Department has conferred with the War Trade Board and has advised the British Government that you would be instructed that in principle the Department favors the procedure above outlined, and in the event that the Government of Brazil takes effective action to eliminate German interests so as to make unnecessary the continuance of the statutory list, this Government, upon being advised of the steps taken and upon being satisfied therewith, will withdraw the published statutory list for Brazil.

You are instructed to confer with your French, British, and Italian colleagues and to unite with them in any action that you may agree upon along the lines indicated in this telegram.

POLK

File No. 763.72113/664 142

The Ambassador in Brazil (Moryan) to the Secretary of State

[Telegram]

RIO DE JANEIRO, August 20, 1918, 4 p. m.
[Received August 21, 1 a. m.]

m Department's August 10, 5 p. m. Colleagues and myself are preparing joint note to Brazilian Government stating that if action against most important German concerns in addition to banks is actually made effective, Allied Governments will be ready to take into favorable consideration a proposal to withdraw their black lists from operation in Brazil, under the following conditions:

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