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My Lord,
In my despatch No. 691 E of June 20th
I reported a greater activity on the part of
Congress.   This activity in the past week has
resulted in a lamentable display of
i*!ibompetence, partisanship and log-rolling.
Midnight, June 30th, is the fiscal New Year's
Eve, and it brought with it an automatic dead-
line for appropriations for the new fiscal year
and the expiry of several major items of
temporary legislation such as the power to
devalue the dollar and to maintain a
stabilisation fund.   These matters, as well as
the 1940 relief bill, were up to the Senate,
while the House of Representatives was debating
neutrality legislation.   Last week's debates
have served to emphasise more sharply than ever
the discord between the President and the anti-
New Deal section of the Democratic Party, and the
Republican opposition has been able to take
advantage of this discord and of the ineptitude
displayed by the Administration leaders in both
Houses.   On the issues of taxation and
economy, of relief administration and of
neutrality, the President either failed or
only partially succeeded in getting Congress
to follow his lead.   The motive behind this
opposition to the President is no doubt
partly the usual tendency towards the end of a
Presidents second term to assert the
independence of Congress from the Executive.
Recent talk about a third term for Mr.
Roosevelt has accentuated the opposition of
the conservative wing of the Democratic Party.
On top of this the influence of European
events can be detected.   The desire of Americans
to live their own life^ independent of
Europe's quarrels for domination is strong
Just now^and consciously or unconsciously
members of Congress feel moved to strike at
the extraordinary powers obtained by the
President at the beginning of his first term
because they feel the shadow of dictatorship
hanging over the world.   The U.S. is today
obsessed by Europe.
2./
(Mr. Pinsent's
de bpatch)
-3-
At the beginning of last week a
revolt developed in the Senate against
continuing into the new fiscal year the
Presidents devaluation powers which were
first granted to him in the emergency of
193V   In the House meanwhile objections to
the conduct of the Works Progress Administra-
tion were crystallized in an appropriation
hill imposing the drastic restrictions on the
agency's actions described in paragraph 4 of
my despatch No* 691 S.   The President
returned from Hyde Park on Tuesday and
attempted to influence events, but in vain.
After a long series of complicated manoeuvres
,.YHq£ of
i
described in my despatch No
i
• the Senate failed to act on
the devaluation bill before the end of the
fiscal year and at the same time, although
no similar opposition had been raised to the
continuance of the stabilisation fund, no
bill was passed to renew it.   The silver group
of Senators from the Rocky Mountain States
by their selfish and sectional insistence on
increasing the already exaggerated price
which the Treasury has to pay for domestically
mined silver, played right into the hands of
the Republican opposition and w40U^
principally to blame for the tangle which has
now come about.   It is now believed that
legislation can be passed this week to
continue the two expired acts, but there is a
certain amount of doubt as to the legality
of such legislation*
3. The Senate after conference with
the House succeeded in reaching an agreement
on June 30th on the 1940 relief bill and the
President was able that evening to sign a
measure which assured the continued operation
of the Federal relief machinery.   The total
expenditure agreed upon was $1,755,600,000.
Of this the W.P.A. got $1,477,000,000 which
was the sum asked for by the President, but
the restrictions already described in
paragraph 4 of my despatch No. 691 E were
not to the President's liking.    Even the
impassioned advocacy before a Senate Committee
-6-
of Miss Tallulah Bankhead, the Speaker's
.nji«f ¦» was unable to induce legislators to
restore the Federal Theatre Project^which the
House had insisted upon dropping because
some of the plays performed contained what
it considered seditious lines.
4. The/bill remodelling the
Corporation Tax and renewing the excise
duties has proved to represent a compromise
acceptable to Congress.   It became law as
the Revenue Act 19^% on receiving the
President's signature on 29th June. Its
provisions correspond substantially to those
outlined in paragraph 2 of my despatch
No. 586 S of 29th May, 1939.
Anattasw important matter which
*^ \    j    /*—    Idelay was the Tennessee Valley Authority
^c*++fc> frttdru*- j project referred to in paragraph 5 of my
M jfcU- "fix** I
and in consequence the deal with the
Tennessee Electric Power Company is off
rf for
the time being and a contract will have to
be negotiated all over again.   It seems
probably however that no insuperable
difficulties will be found to such action.
^fi am reporting separately upon the
neutrality bill which has emerged from a
debate in the House of Representatives.    It is
a feeble and probably unworkable compromise
and the debate was conducted on the lowest
-
possible level*   The statement made by Mr.
Cordell Hull seems to indicate that the
Administration will continue to fight in
the Senate for the abolition of the arms
export embargo clause, but the unexpected
revolt of the House may have put fresh heart
into the ^position in the Senate, and it is
not impossible that Congress may adjourn with
no new bill to replace the existing one.
The Government reconstruction under
Reorganisation Plan No. 1 referred to in
paragraph 7 of my despatch No. '507 B of
May 8th has now automatically come into force
and the reshuffle of government agencies is
taking/
H IB
taking place,   Mr. John M. Carmody, former
Head of Rural Electrification, has teen
put in charge of the Federal Works Agency,
and Mr. Jesse Jones of the Reconstruction
Finance Corporation, has "been made Head of
the Federal Loan Agency.
^* Serious scandals continue in
different parts of the country.   Judge Martin
T. Manton, the Senior Judge of the Second
Federal Circuit Court of Appeals and,
incidentally, the highest ranking judge in
the country after the nine Supreme Court
Justices, has teen sentenced to two years'
imprisonment and a fine of $10,000 for
accepting bribes on a large scale^some of them
from disreputable abortionist doctors in New
Jersey.   In Louisiana the President of the
State University, Dr. James Munroe Smith,
has fled to Canada after speculating with
hundreds of thousands of dollars from the
University's funds and losing them all. Dr.
Smith was a nominee of the late Senator
Huey
Long^who once explained that he had chosen
him/
him because "he had a hide as tough as an
elephant's".   The scandal has involved
Governor Leche, another of Long's gang, who
hastily resigned on grounds of ill health.
It is however impossible to believe that
political racketeering in Louisiana has been
new Governor is Huey Long's brother, Earl K.
Long.   He has unctuously announced that his
motto will be the Biblical text "Better is
a little with rightousness than great
revenues without right", but he will prove
to be a unique member of the Long political
gang if his deeds do not belie his words*
/£. I am sending copies of this
despatch to the High Commissioner for the
United Kingdom in Canada, the Prime Minister
of Australia c/o the Dominions Office, and
the Department of Overseas Trade.