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Bernard Bernstein Oral History Interview


Oral History Interview with
Bernard Bernstein

Attorney, U.S. Treasury Department, 1933-42; Financial Adviser, North African Economic Control Board, 1942-43; Director, Finance Division and Director, Division of Investigation of Cartels and External Assets, U.S. Group Control Commission for Germany, 1944-45; and Financial Adviser to Gen. D.D. Eisenhower for Civil Affairs and Military Government, ETO and MTO, 1942-45.

New York, New York
July 23, 1975
by Richard D. McKinzie

[Notices and Restrictions | Interview Transcript | List of Subjects Discussed]


This is a transcript of a tape-recorded interview conducted for the Harry S. Truman Library. A draft of this transcript was edited by the interviewee but only minor emendations were made; therefore, the reader should remember that this is essentially a transcript of the spoken, rather than the written word.

Numbers appearing in square brackets (ex. [45]) within the transcript indicate the pagination in the original, hardcopy version of the oral history interview.

The Papers of Bernard Bernstein are in the Library's archival collection.

This oral history transcript may be read, quoted from, cited, and reproduced for purposes of research. It may not be published in full except by permission of the Harry S. Truman Library.

Opened December 1976
Harry S. Truman Library
Independence, Missouri

[Top of the Page |Notices and Restrictions | Interview Transcript | List of Subjects Discussed]


Oral History Interview with

July 23, 1975

by Richard D. McKinzie


BERNSTEIN: I was a student at the Columbia Law School from 1927 to 1930. In my first year at the law school I took, like all the other students that year in the opening class, the course in contracts. The professor who taught contracts was Herman Oliphant. He gave me the only A+ in the class.

After graduation from law school I went to work for a prominent New York law firm, Taylor, Blanc, Capron and Marsh, at what happens to have been the highest salary paid


any law clerk in the City of New York at the time, $3,000 a year. I worked there for a few years.

President Roosevelt and the New Deal, obviously struck a response in the hearts and minds of young people all around the country. I read in November 1933 that Henry Morgenthau had been appointed Under Secretary of the Treasury and that his General Counsel was Herman Oliphant who had been his General Counsel at the Farm Credit Administration. I decided some time in December 1933 to write a letter to Herman Oliphant reminding him of the favorable relationship he and I had had as professor and student at Columbia and saying I would be interested in coming down to work. He invited me to come down to see him.

I went to Washington and waited in


Oliphant's outer office for quite a while. He was a busy man. As soon as Oliphant and I began to talk he said that I should just start working.

I said that I couldn't quite do that; I'd been working with a law firm for several years and I had to go back and get their approval and prepare a memorandum about my cases so that an associate could take over my work.

He said that is all right, but I should come down as soon as I can.

I went back to New York. The man I worked for, a partner in the firm, was Charles Angulo, a wonderfully able lawyer, a very hard-working and dedicated lawyer from whom I learned a lot of law as I had occasion later to tell some of my colleagues at the Treasury. He understood my wanting to go to the Treasury. I think I worked over a Christmas four-day weekend, almost around the clock, dictating


my views on various matters that I had worked on at the office, where the matters stood, what were the succeeding steps, and what we were trying to accomplish. I was told that for years thereafter the memorandum was used in dealing with the cases.

I then went back to Washington I think toward the end of December, just before the New Year weekend. Herman Oliphant found a legal division at the Treasury of just a few lawyers, who had been there many years and who were lawyers of modest ability. Herman Oliphant was a lawyer and professor of great ability, great imagination, and the highest standards. He was proceeding to put together a legal staff of considerably increased numbers and of outstanding quality. I make the point because I think the course that he followed had a direct relationship to the war effort, and had a direct


relationship to what happened in Washington in the ensuing dozen or more years.

I wrote this in the little paper that I'm going to read in a minute. That legal division was the greatest single source of new ideas in the Treasury, and combined with it was a Treasury chief (Henry Morgenthau), who was not only receptive to new ideas, but affirmatively kept pushing the legal division to produce new ideas; a Treasury chief who had this unusual relationship with the President of the United States. They were close friends and that friendship and association gave the Treasury, through President Roosevelt, an opportunity to bring forward ideas on matters that weren't strictly Treasury business.

Well, the first couple of years at the Treasury I worked most of my time on matters relating to gold and silver. We were calling


in all the gold at $20.67 an ounce. The President in January, 1934 had fixed a price of $35 for an ounce of gold. A lot of people who had gold were reluctant to turn it in at $20.67 an ounce. Similarly people who owned gold clause obligations did not like the idea of such obligations being paid off dollar for dollar after the devaluation of the dollar. Such people wanted $1.69 for every dollar of their gold clause obligation. The Joint Resolution of June 5, 1933 made all gold clause obligations, both public and private obligations, payable in any U.S. legal tender currency dollar for dollar.

We had a great deal of work in administering the various gold control orders and in participating in litigation that attacked gold controls and the gold clause resolution. It culminated in a famous group of cases


coming before the United States Supreme Court, the famous gold clause cases. As a young lawyer I was given the opportunity of working on the briefs in the Supreme Court cases. This surely was, up to then, the high point of my career as a lawyer. I participated in the development of the Government's strategy in these cases, in the writing of the briefs and in the preparation for the oral arguments.

MCKINZIE: How was the strategy determined?

BERNSTEIN: A small group of lawyers from the Treasury and Justice Departments and the Reconstruction Finance Corporation worked together over a period of months in 1934 and 1935 on the group of cases that came from lower courts to the Supreme Court. Perry v. United States involved a gold clause in a U.S. Government Bond; Nortz v. United States


involved U.S. currency called gold certificates; and Norman v. Baltimore & Ohio and United States v. Bankers Trust involved gold clauses in private obligations.

Because of the depreciation in value of greenbacks during the Civil War, the practice developed in the United States of including in all private and public obligations a provision for payment of gold dollars of a certain weight and fineness, which was really based on gold being worth $20.67 an ounce. President Roosevelt, on coming into office, sought ways and means to break the terrific deflation that was undermining the nation's economy. After extensive discussion with Treasury and other financial advisors, the President embarked on a program of gold purchases at prices in excess of $20.67 an ounce.

Herman Oliphant who at the time was


General Counsel for Morgenthau at the Farm Credit Administration, found an existing statute which he felt authorized the President to pay more than $20.67 an ounce for gold.

At the Treasury from March to November 1933 the Under Secretary of the Treasury was Dean Acheson. The Secretary of the Treasury was William Woodin, an elderly and sickly gentleman. Therefore, in a sense, Acheson was the real driving force at the Treasury. I think Acheson also had some help from lawyers, young lawyers in the Government with whom he was acquainted, and with whom he had a great capacity to work. I found it a great privilege as a young lawyer to work with Dean Acheson.

In any event, Acheson had the view that the President could not pay more than $20.67 for an ounce of gold. It was that conflict of view that turned the President against Acheson and resulted in Acheson being fired and Morgenthau


being brought over to the Treasury with Herman Oliphant as his General Counsel.

The gold buying matter not only played an important role in helping to turn the economy upward; it also played a great role in the change of personnel at the Treasury. Among the outstanding lawyers that Herman Oliphant brought onto his staff, there were Clarence Opper, who had been associated with Oliphant at the Farm Credit Administration and was also a graduate of Columbia Law School, and thereafter became a judge on the Tax Court; John Laylin, who happened to be very closely associated with Dean Acheson and remained on at the Treasury for a couple of years and then went over to Dean Acheson's law firm as a partner, an outstandingly able man; and Robert Jackson, who came to the Treasury as an Assistant General Counsel and who later held many important


posts in the Roosevelt administration and ultimately became a Justice of the Supreme Court. At one point when Robert Jackson was an Assistant General Counsel his office was right next door to mine when I was Assistant General Counsel on what we called the first floor of the Treasury. Another Treasury Assistant General Counsel was Clinton Hester, a man of outstanding capacity to understand and work with the members of Congress and further the Treasury programs on the Hill. And then in turn, a lot of younger men were brought in, generally speaking of high caliber from good schools, hard workers and quite loyal to the Roosevelt Administration.

I do want to say this about the gold matter. There were probably in all between 75 to 100 lawsuits in various courts around the country. I think it's fair to say that


we didn't lose any case. Even in the Perry case, the Liberty Bond case, where the Supreme Court said that not to pay in gold coin as provided in the bond was a breach, the majority of the Court nevertheless held that there were no damages because if the Treasury had paid in gold the bondholder would have had to turn the gold back to the Treasury at $20.67 an ounce.

There was also a good deal of work relating to silver. The Treasury was buying a great deal of silver at the time. There was a lot of criticism of the administration for buying silver. The feeling was that the administration was giving in somewhat to the so-called silver Senators. I remember one observation that Herman Oliphant made in defending the silver-buying program. I think we were paying roughly 60-odd cents for an


ounce of silver. We were buying great quantities of it from China, among other countries. Oliphant said it seemed to him that it was better for international trade to move on a road paved with silver than on a road paved with defaulted paper. I think actually it proved in the end to have been a very successful program in terms of making money for the United States because ultimately the silver was sold by the Treasury at a price greatly in excess of the price the Treasury had paid.

In connection with the silver program, there was legislation enacted by the Congress imposing a tax on profits made by speculators in silver, and the tax was retroactive to the date the bill was introduced into the Congress. That was then a most unusual provision and it was subject to legal attack as being unconstitutional as a retroactive tax. As the Treasury


lawyer handling the matter, I formulated the legal principle that the Congress had to have the power to freeze a situation while the Congress was considering what to do about it, and therefore, it was legitimate for the Congress to say in effect, "While we're considering whether there should be a silver tax, we have the right also when we decide that there will be a tax to make it retroactive to the beginning of our consideration." In that way someone can't take advantage of the fact that it's now become known that Congress is considering imposing a silver tax.

Well, the Supreme Court upheld that thesis and sustained the retroactive silver tax. It seems to me an important principle of law and important for Congress to have that power.

In 1937, the Japanese sank the American


gunboat called the Panay in the Yangtze River in China. The President asked the Secretary of the Treasury if he had some ideas as to what the Government might do. Secretary Morgenthau talked to Herman Oliphant and Herman Oliphant talked to Clarence Opper and me. Clarence and I almost locked ourselves up in Opper's office. Oliphant was so concerned about possible leaks that he asked Opper to have the venetian blinds in his office shut so that nobody could spy on us from the Washington Hotel across the street. What we produced at that time, was the first document that ultimately came to be known as Foreign Funds Control, based on Section 5(b) of the Trading With the Enemy Act of 1917. We said that the President had the power to control banking transactions under certain circumstances. We drafted a document for the President by which he would impose controls on banking transactions in


which the Japanese had an interest. For reasons formulated at the top level of Government, the President decided not to go forward with issuing that order.

Thereafter, for I would say three years to about--in any event, to April 1940, everytime there was a crisis in international affairs, generally speaking precipitated one way or another by Hitler and the Nazis, I would take out these old documents, redraft them in terms of the current crisis, and we always were ready with our written plans as to how to proceed. Now, if I may, it's at this point that I would like to read some ideas that I put down on paper.

Beginning sometime in 1936 or '37, the Secretary of the Treasury, Henry Morgenthau, Jr., as a result of his own foresight and sound judgment, as well as his close personal


and official relationships with the President, began to be increasingly concerned about the dangers to the democratic nations of the world of Nazism and aggressions on the part of Germany and Japan. He was continuously studyin