The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
168
August 24, 1936
The Secretary had a meeting in his office today at
which were present Mr. Eurr, Mr. Bell, Mr. Upham, Mr. Gaston
and Miss Roche. Harry Hopkins came in later.
Speaking to Mr. Burr, the Secretary said: "I want to
say that you have gotten $2 millions for contacting private
industry and $1 millions to reclassify. There will be
public announcement of the $1 millions, but publicity on
the $2 millions will be held until the President makes his
speech on Labor Day. He has asked all of us to draft a
speech for him, which we will send to him on the train, which
will explain how the whole unemployment thing works -- how
a man goes about getting a job. He wants 1500 words and
wants to announce that he is going to give $21 millions to
strengthen your organization and it is up to us to do it
a
for him. I think we ought to get the draft out to him the
latter part of this week. Is there someone over in your
organization, or probably yourself, who can explain just
how a man goes about getting a job?"
Mr. Burr answered, "Persons will be here in the morn-
ing and I will tell him what you have outlined. He will
probably ask me to make the first drait and then I will
turn it over to him." HM,Jr. added, "I want to make it
very simple.
At this piet Harry Hopkins came in.
Speaking to the group, HM,Jr. said, "Last night the
President dictated something to Bell which I do not think
is good at all. Bell read the material to the group.
(Copy is attached.)
Again addressing Mr. Burr, the Secretary said, "The
President is just beginning to realize that you people do
exist -- that is your fault, not mine. Personally
not know what is the matter with your organization or
whether anything is the matter with it. This speech will
give him a chance, when he gets the facts, to know what A
they are. If I were going to write his talk, I would
want him not only to talk about your organization but also
I
about Harry Hopkins' problems -- a real unemployment speech."
Harry Hopkins commented, "I do think 1 ought to point
169
-2-
out that this speech will not create any new jobs, but it
may make it easier to get a job. HM,Jr. remarked, "There
is the opportunity to get industry to take people off the -relief rolls through the United States Employment Service
that is my purpose for being interested in this thing.
Speaking to Mr. Burr, Harry Hopkins said: "This is
going to give you more publicity. The danger of publicity is that when the unemployed hear the speech they
may get the idea that if they go to the United States Employment Service they will get a job." HM,Jr., however,
replied, "This can be made clear in the President's speech.
Bell felt that the advantage is to the employer to get
this service. Harry Hopkins added: "Bill Green has said
a good word about this service," and HM,Jr. said it has the
complete backing of the veterans service.
HM,Jr. also said, "I think this needs to have one
person -- Herbert Gaston --to make a draft. I do not think
six people can write the copy.' Mr. Burr suggested that
Bell talk to Persons tomorrow morning and get the picture
from him "in order to steep himself with the facts." Gaston's
idea was, "I think you ought to put down on paper what you
people think the President ought to say and then I will go
over it with you."
Addressing the group, the Secretary said, "I am starting from scratch. on this thing. Would you think it a good
idea or a bad idea if immediately after the President made
his speech, the arrangements having been made beforehand,
that the United States Chamber of Commerce put on a national
campaign to cooperate with you fellows? Have you ever contacted the United States Chamber of Commerce?" Mr. Burr
answered, "Yes. They voted to study opportunities in industry and I understand Mr. Persons had a conference with
Mr. Sibley. I doubt if it would get the best results to
have the Chamber of Commerce engage in a great deal of pub-
licity. Our difficulty has been because we did not have
enough personnel in our offices to handle the unemployed
when they came in to give us a history of their background.
HM,Jr's response to this was: "This $250,000 a month
will give it to you. The President made this suggestion:
he wants to govto every newspaper in the United States and
ask them to run a list, free, of every unemployed in that city.
170
-3-
"If you say the Chamber of Commerce is no good, that's that.
I have had a lot of experience with the local Chamber of
Commerce in Poughkeepsie and I know what they can do.'
Mr. Burr remarked, "I do not approve of national publicity
campaign by the Chamber of Commerce." HM,Jr. explained,
"I am referring to the local branches of the Chamber of
Commerce. Harry Hopkins expressed this thought: "This
will put the private employment services in the United
States
out of business," to which HM,Jr. replied, "That's
O.K."
To Mr. Burr, IM,Jr. said, "This is your opportunity
to show the President what you fellows can do." Burr said,
"It will take one month to get the people together and two
months to finish the job."
HM,Jr. suggested there be another meeting on Thursday
morning. Harry Hopkins said he would have Thaddeus Holt
represent him in his absence from town.
Mr. Burr then stated, "I just want to say that, by
design, our service has been the most underpublicized.
Perhaps this policy has been wrong from the start."
171
Three years ago the United States Employment Service was originated. It
has during that time cooperated with the various States having employment
services. Quite frankly, I have failed to realise the importance of the United
States Employment Service in putting people back to work. During this period
of three years we have had 3,000,000 people on the relief rolls. I had supposed during all this time that those people were classified according to
their qualifications to perform various kinds of work. It has been only
in the last month that I have come to realize that employers were not getting
the kind of people they expected in response to their applications filed
with the Employment Service. Perhaps I have been a little impatient in
blessing employers for not making greater use of the United States Employment
Service, but I can see now why they have not done so. A recent study of
this whole matter convinces no that the Government has not done its duty in
properly classifying these workers 80 that their qualifications as shown by
the records can be relied upon when furnished to employers in response to
applications for help.
-
The President said get from Harry Hopkins several good examples of
employees qualifications. He cited the example of the bricklayer who had
previously two years' experience in bricklaying. That probably would not
qualify him as an expert in this line but for the past two years he has been
employed by the HPA àn this line of work and now instead of having two years
experience as shown by his card he has four years' experience to his credit.
This certainly should show on the record for the benefit of the employers
making application for help.
T
172
The President in moking such a statement as this night TO counter to
labor
union policies. It is suggested therefore that any statement
prepared for the President along this line be handed to Miss Roche, who
will discuss it with President Green of the American Federation of Labor.
173
Conference on Reinvestigation of Relief Rolls at Mr. Gill's
office, August 24th
Present - Mr. Gill
Miss Lonigan
The Secretary told Miss Lonigan over the telephone that Mr. Hopkins
had made an appointment to see her at four o'clock. She was to get
letters of introduction to WPA officials in six cities in which the WPA
was making an investigation of relief families. She was to see the
Secretary Tuesday morning before she left.
Mr. Hopkins transferred the appointment to Mr. Gill.
Mr. Gill said the letter and schedule had been sent to Mr. Morgenthau
at Hyde Park, and a copy had been sent to Mrs. Klotz.
The investigation would cover six places: San Francisco, Cleveland,
Baltimore, and the States of Georgia, Rhode Island, and Colorado.
It would be a reinvestigation of WPA families to see if they were
still in need. There would be one verification. (Presumably this
meant that one statement only would be verified by inquiry outside the
family.)
Mr. Gill said related information from 13 cities reporting continuously indicated that at most 5 percent of the families could be dropped
because they were not in need.
The study would require a budget appropriation of $383,000. It
would require the hiring of 3,000 investigators. The study could start
in one week from the day the money was released.
Miss Lonigan asked Mr. Gill if the Secretary had approved the
schedule and the study. Mr. Gill said he had. She asked if he had
seen the request for $383,000. Mr. Gill said he had - it was attached.
Mr. Gill said there was going tc be a serious comeback from visit-
ing these relief families. There was strong objection to it.
He also said he did not think the Treasury had any concern with
relief expenditures. He was going to ask Admiral Peoples to give him
a letter so he could look into the workings of the Income Tax Bureau.
Mr. Gill said it would be better to wait before giving the letters
of introduction because he had not decided whom it would be best for
Miss Lonigan to see. However, she told him she thought it best to have
the letters then and if there were any changes in officials or in
itinerary they could be made later.
He stated at the end, "We want to be sure Mr. Morgenthau gives
us that $383,000 tomorrow morning. We cannot start until we get it."
X
August 28, 1936
WORKS PROGRESS ADMINISTRATION
WALKER-JOHNSON BUILDING
1734 NEW YORK AVENUE NW.
WASHINGTON, D.C.
HARRY L. HOPKINS
ADMINISTRATOR
August 24, 1936
Mrs. Henrietta Klotz
Assistant to Secretary Morgenthau
Treasury Building
Washington, D. C.
Dear Mrs. Klotz:
In accordance with our telephone conversa-
tion this morning I am enclosing copy of my letter
of August 22nd to Secretary Morgenthau, together with
copy of schedule and instructions for the Household
Income Survey.
Sincerely yours,
Corrington Gill
Assistant Administrator
Enclosures
meeting 8/27
174
175
SUAMARY OF CASE LOAD STUDY - COST ESTIMATES
CITIES
BALTIMORE
Case load
9,000
$ 28,300.00
CLEVELAND
35,550
70,620.00
SAN FRANGISCO
17,000
35,660.00
COLORADO
28,689
82,350.00
GEORGIA
36,000
80,250.00
RHODE ISLAND
10,875
36,125.00
STATES
$333,305.00
HOTE:
Contingent fund to take care of emergencies;
to be held in Washington office. This will
also cover small additional administrative
cost here - maximum of three supervisors for
two months, approximately $2,500.00
-
August 20, 1956
9
TOTAL
50,000.00
$383,305.00
Estimate of the cost of the proposed investigation for WITH workers for the
following:
Cities of - Baltimore, Cleveland and Sex Francisco
States of - Colorado, Georgia and Rhode Island
BALTIMORE
(Case load - 9,000)
Staff
Per Month
Period
1 Director
$ 300.00
2 mos.
2 mos.
8 Supervisors
80 Visitors
2 Secretaries
16 Clerical workers
150.00
100.00
125.00
75.00
1} mos.
176
Total
$ 600.00
2,400.00
12,000.00
2 mos.
500.00
1,800.00
1) mos.
Total Salaries
$17,300.00
4,000.00
Travel
Office space, equipment and incidentals 7,000.00
Total cost of study
$28,300.00
CLEVELAND
(Case load - 35,550)
Staff
Per Month
Period
Total
1 Director
$ 200.00
2 nos.
$ 400.00
1 Ass't Director
18 Supervisors
263 Visitors
2 Secretaries
1 Office Manager
350.00
175.00
160.00
100.00
100.00
150.00
2 mos.
12 mos.
2 MOB.
400.00
300.00
100.00
80.00
2 mos.
400.00
1 mos.
4,520.00
39,450.00
2 mos.
2 Clerical workers
(Supervisory)
75 Clerical workers
13 mos. 9,000.00
Total Salaries
$54,620.00
6,000.00
Travel
Office space, equipment and incidentals 10,000.00
$70,620.00
Total cost of study
RHODE ISLAND
(Number persons employed August 1, 1936 - 10,845)
Staff
Per Month
Period
1 Director
$ 200.00
2 mos.
1s mos.
5 Supervisors
120 Visitors
2 Secretaries
40 Clerical workers
150.00
110.00
100.00
90.00
Total
1 nos.
$ 400.00
1,125.00
19,800.00
2 MOB.
mos.
5,400.00
Total Salaries
Travel
400.00
$27,125.00
6,000.00
Office space, equipment and incidentals 3,000.00
Total cost of study
$36,125.00
2 - continued
177
(Case lond - 17,000)
SAN FRANCISCO
Staff
Per Month
Period
1 Director
8 250.00
2 non.
B Supervisors
125 Visitors
2 Sacretaries
23 Clerical workers
160.00
180.00
110.00
100.00
1à mos.
1s mon.
2 nos.
13 mos.
Total
$ 500.00
1,920.00
82,500.00
440.00
3,300.00
Total Salaries
Travel
Office space, equipment, incidentals -
$28,660.00
4,000.00
3,000.00
Total cost of study
COLORADO
(Case load - 28,689)
Staff
Per Month
Period
1 Director
$ 250.00
2 mos.
1à mos.
12 Supervisors
300 Visitors
2 Secretaries
50 Clerical workers
300.00
100.00
100.00
80.00
1 EOS.
2 mos.
$35,660.00
Total
8 500.00
3,600.00
45,000.00
400.00
1) mos. 6,000.00
Total Salaries
$55,500.00
22,000.00
Travel
Office space, equipment art incidentals 4,850.00
Total cost of study
$82,350.00
GEORGIA
(Case load - 36,000)
Staff
Per Month
Period
1 Director
$ 300.00
2 mos.
8 mos.
10 mos.
1g mos.
2 mos.
$ 600.00
2,400.00
2,250.00
37,500.00
mos.
17,100.00
8 Supervisors
12 Supervisors
250 Visitors
2 Secretaries
190 Clerical workers
150.00
125.00
100.00
100.00
60.00
1à
Total Salaries
Travel
Total
400.00
$60,250.00
15,000.00
Office space, equipment and incidentals 5,000.00
Total coat of study
$80,250.00
178
I m, 1986
Renerable Heary Morgartham, Jr.
Secretary of the Treasury
Fishkill, New York
Dear Mr. Morgentheme
I - enclosing herewith for your approval tentative draft
of a proposed schedule to be used by investigators together with
instructions to be sent to the field.
I am also enclosing an estimate of cost which should be
handled by an alletment of $383,305 to the Works Progress Mutals
tration over and above our administrative costs.
After a careful inquiry I an convinced that we should not
make this study in either South Deketa or Chicago for the following
reasonas
South Baketa was chosen because 11 was a
drought state. We will, in effect, have -
parable data from drought counties is Georgia
and Colorado where the problem has been similar
but not as great as in the Daketas. It would
be physically impossible to investigate all of
the essee in South Saketa without bringing in
trained investigators from outside of the
State. Governor Tea Berry heard that we were
planing to make the study and objected veha
mently. our regional staff agrees with the
Governer's position, as does Mr. Hopkins.
For the past several weaks a carefully
worked out plan of investigation has been
formulated for all of Illinois including
Chicago. This investigation will start is
about thirty days and will last for sixty to
sinsty days thereafter. A lerried investige
ties such as is proposed for Chicago wold
disrupt present plans - would not be aliviaable is our epistes.
179
Hon. Henry Morgenthau, Jr.
-2 -
August 22, 1936
The work is roady to proceed as soon as I receive your
approval of the instructions and schedule and your approval of the
spending of these additional funds as administrative expense.
Data drawn from 13 representative cities in which we
conduct regular surveys have an interesting bearing on the matter
under consideration. An analysis of 2,900 cases with Works Program
employment in June, which has just been completed, shows that 21
percent of these cases had some private employment during the
month. Owing to the high rate of turnover in this group, however,
only 14 percent had both private and Works Program employment on
June 30th. In most cases the private earnings were small; those
cases which had both types of employment on June 30th and earned
$50 or more from private industry amounted to only 5 percent of
the total number of cases studied.
Sincerely yours,
Corrington Gill
Assistant Administrator
9944
Division of Social Research WPA
180
DRS 187
TENTATIVE AND CONFIDENTIAL
HOUSEHOLD INCOME SURVEY
INSTRUCTIONS TO SUPERVISORS
A. Purpose of Study. - The purpose of this survey is to ascertain the amount
of income of relief families employed on Works Progress Administration projects
which is derived from private employment and other non-relief sources, and to
compare this income with the "Security Wage Standard" which is defined below.
The study is based on the schédule DRS Form 185, a copy of which is attached
to DRS 186, "Instructions for Filling Schedule DRS 185." This schedule is to be
filled in part from the assignment files of the Employment Division and in part
through personal interview. Every effort is to be mode to secure reliable and
complete information. This is extremely important.
B. Households to Be Studied - Area Included. - All households with workers
certified as eligible for employment, with one or more persons employed on a
Works Progress Administration project on August 26, 1936, in the States of
Colorado, Georgia and Rhode Island and in the cities of Baltimore, Cleveland,
and San Francisco are to be included in this survey.
C. General Organization. - In the field this study is to be under the direction
of a State Supervisor in the States of Colorado, Georgia, and Rhode Island and a
City Supervisor in Cleveland, Baltimoro, and San Francisco. Those supervisors
are to work through the Regional Research Supervisors of the Works Progress
Administration.
In addition, there is to be a District Supervisor for each district. or
subdistrict office who is to be responsible to the State or City Supervisor.
D. Access to Employment Division Records - It will be necessary to use the
records of the Employment Division in each district and subdistrict office for the
conduct of this study. The Regional Research Supervisor together with the State
or City Supervisor will make arrangements through the State Works Progress
181
-2-
9944
Administrator for access to these records for the State or City as a whole. The
State or City Supervisor will notify the District Supervisors in their areas when
these arrangements have been completed so that each District Supervisor may then
make the necessary local arangements.
It is important that all the Employment Division records which are to be
used are frozen as of the payroll period including August 26 for as long as
necessary to complete the control card file and to transcribe the required information on the schedule. The arrangements which are made for the use of these
records should include the development of a plan whereby the Employment Division
may continue its normal operations during this period.
In using the records for this survey, the regular work of the Employment
Division is to be interfered with as little as possible. If necessary, night
forces are to be employed for establishing the control card file and for transcribing the required information.
E. Selection of Households to Be Studied - Control Cards. - The list of the
households to be studied is to be based on the names and addresses of all workers
employed on WPA projects on August 26, or employed during the payroll period including August 26.
In offices where local records make it possible to determine whether or not
the worker had a WPA job connection on August 26, the list is to be made on this
basis. Where this is not possible, the list is to be based on workers employed on
WPA projects during the payroll period including August 26. In either event, the
question of whether the worker had a WPA job connection on August 26 is subsequen-
tly to be verified through personal interview. (See DRS 186, "Instructions for
Filling Schedule DRS 185")
A standard 5x8 card is to be used as a control card for compiling the list
of households to be interviewed. The control card files are to be maintained on
a county basis. Each of these control cards is to contain the following information:
-3<
9944182
1. Serial Number
2. Relief Case Number
3. Identification Number
4. City or County
5. Name of Worker
6. Street Address
7. Date Schedule Given to Interviewer
8. Date Schedule Returned by Interviewer
9. Date Schedule Given to Editor
10. Date Schedule Edited and Approved
11. Date Schedule Tabulated
Sufficient space is to be left on the control card to permit entering the date
on which a rejected schedule is returned to the interviewer for verification
or correction and the date of its return for further editing. In general all
movements of the schedule until its final disposition are to be recorded on
this card so that the location of each schedule is known at all times. A copy
of the control card is appended as Exhibit 1.
When the control card file has been completed, the cards are to be
arranged in alphabetical or relief case number order for each county to determine whether there is more than one worker in any one household who is
employed on a Works Progress Administration project during the payroll period
including August 26. All similarities in name and address or relief case
number are to be checked against FERA Form 600 to ascertain whether the workers
concerned are certified as members of one household. In instances where they
have been certified as members of the same household, the names of such workers
are to be posted on the same control card and they are thereafter to be considered as representing a single household unit.
After this check has been completed, the cards are to be numbered
serially beginning with number one in each district office. So far as possible
a continuous block of numbers is to be assigned to each county. Cards with the
names of more than one worker in the same household are to receive only one
serial number. The completed control file will contain b serial number for
each household which is to be interviewed.
9944
183
4-
F. Households With WFA Employment in County Other than County of Residence.
In a number of instances persons are employed on WPA projects in counties
other than those in which the household resides. In such cases the payroll
records and Form 507 are located in the county of employment.
In all instances in which the worker-is employed on a WPA project
in a county other than the one in which the household resides, the District
Supervisor is to forward to the District Supervisor of the county of residence,
the original control card and an original copy of the schedule for the household containing all of the information based on the Employment Division records
which are in the county of employment. (See DRS 186- "Instructions for
Filling Schedule DRS 185") The District Supervisor of the county of employment
is to retain a copy of the control card and schedule but is not to include them
in his control card file or with his schedules for the county. All schedules
are to be tabulated as of the county of residence of the household.
G. Preliminary 20 Percent Sample - Areas Included. - In order to obtain
reliable results as quickly as possible, schedules are to be filled, edited
and tabulated for a random sample of 20 percent of the households in all
districts which include a city with a population of 50,000 or more persons,
except as provided for Rhode Island below. This will include the cities of
Cleveland, Baltimore, and San Francisco, and the following districts in each of
the States included in this survey:
Colorado
- District 2 (Denver)
Georgia
- District 2 (Augusta)
4 (Pueblo)
3 (Savannah)
5 (Atlanta)
7 (Macon)
9944
-5-
184
Rhode Island - Part of District 1 (Providence)
(Pawtucket)
(Woonsocket)
In Rhode Island the preliminary 20 percent sample is to be taken only
in the cities of Providence, Pawtucket, and Woonsocket. The 20 percent sample
is not to be taken for the remainder of the State.
The sample is to be selected by pulling from the control file all cards
with serial numbers ending in the digit "5" or "0" These cards are to be
separately filed, and labeled "sample control file".
H. Completion of Study in Sample Areas. - In the areas in which the preliminary
20 percent sample is to be tabulated the sample schedules are to be filled,
edited, and tabulated as rapidly as is consistent with accurate procedure. In
these areas work on the remaining schedules is to be begun only after inter-
viewers, editors and tabulation clerks, respectively, have completed their
work on the 20 percent sample. If the work is properly organized and staggered
it will be possible to maintain a continuous flow of work from the beginning of
the 20 percent sample through the completion of the remaining 80 percent of the
schedules.
I. Time Schedule. - This study is to be begun as quickly as possible after the
receipt of these instructions. In the sample areas it is expected that the hand
tabulation of the 20 percent sample will be completed by September 12. The
entire survey is to bo finished by September 24, 1936.
J. Clearance of Questions. - All questions which arise in the district or sub-
district offices relating to the establishment of the control card file, the
selection of the 20 percent sample, the proparation of the daily reports, and
the filling, editing, and hand tabulation of the schedules are to be cleared by
wire or telephone with the State or City Supervisor. The State or City Supervisor
in turn is to clear all questions with the central office in Washington and shall
immediately notify the Regional Research Supervisor of all such injuries. All
9944
6-
185
wires are to be addressed to Howard B. Myers, Works Progress Administration,
1734 New York Avenue, Washington, D.C., attention P.M.Hauser. Any telephone
calls to the central office which may be necessary are to be directed to
Mr. P.M.Hauser, Washington, D.C. DIstrict 0330, Extension 196. Do not hesitate
to make an inquiry about any questionable matter.
K. Instructions to Personnel. - The value of this study depends almost
entirely on the following factors:
1. The reliability and completeness of the schedule returns.
2. The thoroughness of the editing.
3. The accuracy of the hand tabulation.
4. The maintenance of an adequate control system.
It is essential that only persons with adequate training and experience be
employed for this survey.
The supervisor is to become thoroughly familiar with all of the in-
structions issued. Moreover, he is to instruct carefully all interviewers,
editors, tabulation clerks and control clerks in their duties. Interviewers
and editors are to be thoroughly familiar with DRS 186, "Instructions for
Filling Schedule DRS 185" and DRS 188, "Instructions for Editing Schedule DRS
185". Tabulation clerks are to be thoroughly familiar with DRS 189,
"Instructions for Hand Tabulation of Schedule DRS 185". Copies of these sets
of .instructions are appended as Exhibits 2,3, and 4, respectively. Control
clerks must be selected carefully and are to work under the immediate
supervision of the District Supervisor who is to be responsible personally for
the control system.
Although the length of the training period will necessarily vary for
different individuals, it is recommended that a minimum of 3 days be set aside
for the instruction of staff members in their duties. At the end of the
training period District Supervisors are to administer tests to all personnel
which are designed to insura a thorough knowledge of the required instructions.
9944
-7-
186
L. Assignment of Schedules to Interviewers - Special Cases. - Before being
assigned to interviewers, all schedules are to be sorted by county, city or town,
and street address. So far as possible schedules are to be assigned to interviewers for households in contiguous territory. Moreover, care should be exercised in making assignments so that so far as practicable interviewers are familia
with the area and type of people to be interviewed.
Interviewers are instructed (See DRS 186, "Instructions for Filling Schedule DRS 185") to return the following types of schedules to the District Supervisor:
1. Schedules with addresses from which the family has moved or
addresses which cannot be located.
2. Schedules for households which could not be found at home after
three successive visits.
3. Schedules for households which refuse to answer the questions.
In the first of these instances, the Supervisor is to make a reasonable
effort to trace the correct address of the household by consulting the records
of the Employment Division, or by consulting the records of the local public
or private relief agencies, and local directories. If a new address is ascertained the schedule is to be reassigned to an interviewer in accordance with the allo-
cation of territories affected. If it is impossible to ascertain the correct address of the household, arrangements are to be made through the Employment Div-
ision for interviewing the worker at the WPA job at which he is employed. The
schedule is to be reassigned to an interviewer in accordance with the nature and
location of the project. If the worker cannot be located, all items on the
schedule are to be answered "N.A." for "Not Ascertainable", and the schedule is
to be tabulated accordingly.
In the second instance, after reasonable efforts have been nade to reach
the family at home, arrangements are to be made through the Employment Division
for interviewing the worker at the WPA job at which he is employed. If
9944
-8-
187
the worker cannot be located, all items on the schedule are to be answered
"N.A." for "Not Ascertainable", and the schedule tabulated accordingly.
In the third instance, the schedule is to be assigned to an experienced
and mature interviewer who is to make another effort to obtain the desired
information. If he is unable to do so, the name and address of the household
is to be turned over to the Employment Division for the collection of the
information. If the Employment Division is unable to obtain the information
desired, the inquiries are to be answered "N.A." for "Not Ascertainable" and
the schedule is to be tabulated accordingly.
As a general precaution, it is suggested that the District Supervisor
do a certain amount of spot check verification by assigning a few of the
schedules which have already beon filled, to a different interviewer for a
reinterview and the filling of a duplicate schedule. Such spot checks should
be made particularly of interviewers who have a high margin of error as
determined through the editing process. Incompetent interviewers are to be
reassigned to work which they can satisfactorily perform or are to be discharged.
M. Samples of Schedules to Central Office. - Each State or City Supervisor
is to forward to Washington addressed to Howard B. Myers, attention: P.M. Hauser,
duplicate copies of the first fifty schedules tabulated for households in which
the income from sources other than Work Program and relief is equal to or above
the "Security Wage Standard". Moreover, each District Supervisor is to forward
to the Washington office by air mail, duplicate copies of the first ten
schedules which are filled, edited, and approved by the supervisor.
N. Control System and Reports, - It has already been stated that all movements
of the schedule are to be posted on the 5x8 control card so that the location of
-9-
9944
188
each schedule is known at all times. The only other mandatory control record
is the "Tabulation C ontrol Form - DRS 191" which is described in DRS 189
"Instructions for Hand Tabulation of Schedule DRS 185".
In addition to those office controls all District Supervisors are to
prepare a "Daily Progress Report - DRS 193" and a "Weekly Tabulation SummaryDRS 190".
The "Daily Progress Report - DES 193", a copy of which is attached as
Exhibit 5, is to be prepared in quadruplicate. The first copy is to be forwarded
to Mr. Howard B. Myers, Attention, Mr. P.M.Hauser, at the address indicated
above; the second, to the Regional Research Supervisor, the third, to the State
or City Supervisor, and the fourth is to be retained in the district office.
The items desired on the Daily Progress Report are self-explanatory.
The Weekly "Tabulation Summary - DRS 190" is to be prepared as of the
close of business on Thursday of each week. It also is to be propared in
quadruplicate andiis to be routed in the same manner as described for the Daily
Progress Report. Detailed instructions for filling this form are provided in
DRS 189, "Instructions for the Hand Tabulation of Schedule DRS 185".
0. General Procedure. - In general the procedural steps which are to be
followed in the conduct of this survey are:
1. The selection of adequately trained and experienced personnel.
2. The proper instruction and testing of all personnel.
3. The completion of arrangements for access to the Employment
Division records.
4. The establishment of the control card file and the maintenance
of the control system.
5. The selection of the 20 percent sample in the sample areas.
(NOTE: Steps 6 to 10 inclusive, are to be completed for the 20 percent
sample schedules in sample areas before step S is begun for the remainder of
the schedules.)
7
9944
- 10 6.
The filling of the schedules
7. The editing of the schedules and the rejection of inadequate
schedules for verification or correction.
8. The hand tabulation of the desired information.
9. The submission of the Daily Progress Report.
10. The submission of the weekly Tabulation Summary.
189
CONTROL CARD
(1) Serial No.
FORM DRS 192
(2) Relief Case No.
(3) Identification No.
(4) City or County
(5) Name of Worker
(Last) (Middle) (First)
(7) Date Schedule Given to Interviewer
(8) Date Schedule Returned by Interviewer
(9) Date Schedule Given to Editor
(10) Date Schedule Edited and Approved
(11) Date Schedule Tabulated
(6) Street Address
191
9944
EXHIBIT 2
DRS
186, "INSTRUCTIONS FOR FILLING SCH DUIN DRS 185," in preparation
9944
192
EXHIBIT 3
DRS 188, "INSTRUCTIONS FOR EDITING SCHEDULE DRS 185," in preparation
EXHIBIT 4
9944
193
DRS 189, "INSTRUCTIONS FOR HAND TABULATION OF SCHNDULE DRS 185," in preparation
9944 194
EXHIBIT 5
FORM DES 193
ORKS PROGRESS ADMINISTRATION
DAILY PROGRESS REPORT
State
County
City or Town
Week Ending
District Number
(Date)
20%
100%
PROCEDURAL STEPS
Sample
Sample
1. Control Card File:
(a) Date preparation of control cards
begun.
(b) Number of cards completed on date
of report.
(c) Cumulative number of cards completed.
(d) Date of completion of control card
file (Including alphabetization
and assignment of serial numbers).
(e) Total number of cards in completed
control card file.
2. Filling Schedules:
(a) Date filling of schedules begun.
(b) Number of schedules filled on date
of report.
(c) Cumulative number of schedules filled
(d) Date filling of schedules completed.
3. Editing and Approval of Schedules:
(a) Date editing begun.
(b) Number of schedules edited and
approved on date of report.
(c) Cumulative number of schedules
edited and approved.
(d) Date all editing and approval of
schedules completed.
4. Tallying of Schedules:
(a) Date tallying of schedules begun.
(b) Number of schedules tallied on date
of report.
(c) Cumulative number of chedules
tall'ed.
(d) Date tallying of schecules completed.
Date
Supervisor
(Signature)
(Fill in quadruplicate)
80%
Sample
--
of Social Research -
- MM
195
INSTRUCTIONS FOR PRESENT - - 145
L. -
so I - no is the payana of this - to - the
- of income of relief families employed on Moute Progress Medicine
'rejects on August 26, 1936 which is derived from private employment and other
sun-relief searees, and to compare this income with the *Security Sage
which is defined below The study is based on Schedule - 185, a copy of which
is attached
3. Angreach end Testaique of Interrig - The information supplied by this
schedule obtained through personal interview is most important. Since the
value of the survey is almost entirely dependent on the reliability and the
completeness of the returns, 10 is countial that all interviewers be extremely
conscientions in the conduct of their works The @@@@@@@ of the saterdies
depends largely on the approach and testimique of the interviews. to the loos
analysis there is no substitute for experience in success interviewing The
general resurks which follow are intended to call attention to some of the important considerations, but 10 is expected that appointment interviewes <111
person the teshaigne which they have found
The severably impression note by the - the / or hold I is stating the purpose of the visit, is usually directly -
for grinted M confidence and cooperation best and /
- be / The manage person to solution a CLOSE he offeise and - is - instances even nother refuse to - the -
- as be possible a a bas / I to obtain -
dentised Information I a and - approvate -
196
Interview is to remover that be is officially authorised w adidas the date
- but he is - no dreamstances to use this authority sa - /
booking or objectmable - Rare resistant I should be called to attention of the Supervisor for special follow 1
Normally the logical procedure in obtaining the required safernation
will be that of following the questions in order, but 18 manues - on of
order in the course of the interview they should be noted as moverade know
saking a pure fevenlity of the procedure. It is advisable to eak questions
in the briefest possible - using a simple non-technical vecalulary.
c. Seares of Information - All schedules are to be filled is part free the
central card, is part from the resords of the Works Progress Administration
district office and in part through personal interview.
1. Items to Be Filled free Sented Bank - Preliminary to obseining
further information from the recents of the NPA district office and through
personal interview, the following items are to be treascribed - the schedule
free the actual card.
Schodule Items
4. Schedule limber
2. Name of Wesker
2. Street Address
4. Relief Case Suber
The schedule number so to correopond in all instructions with the contain
number of the household central - as the sime that these item - filled
the name of the State, was, city or term, and the electric - - da
to be entered
2. Items to be Filled - the - adidas - - be as posethis the following items own to be filled - the sensite of - -
district office Shey e these Store - be desired - I research
197
Although a specific course is - for coth 10mm in the 1006 -
collece, is is expected that wash Superview will - the complete and reliable sensis analiable in the district office
3. Name of Nomehold Head
FIRA Form us
.
So Number of Persons is Household
6. Color or Radio
7. Date of Certification
a. Certified as Case
Yea
WE
9a. Employable Personal
.
the Sex
900 Age
94. Identification Number
.
.
.
.
.
.
WPA Form 507 or payroll
m Replayed Work Program August 26
M. type of Work Symbol
.
96. Wage Cless
me Meximes Monthly Baraings Rate
92. Monthly Baseings
.
.
.
.
.
.
.
.
.
So Items to Be Fallet Personal Internation - All other itema
- the cabable, except item 22, are to be filled - personal interview
the Stone described above which are transmithed free the I to be varified during the were of - saternion Your further instructions
for filling item 12, pea specific testructions below
D. Mara of - so for as possible all interviews - to be as the have adidas of the households us the family no Janger - as the
address - the / or the address / 2 Seart - / a to
198
be released to the Ristrich Supervisor with . are to that offects the
Superview will moke responsible affairs to treas the - address
and will receive the schoole in assessment with the allocation of tories to interviewers.
If the family is as as home - the first visit, two additional visite
at respecable times of the day are to be made to contact the family. Le after
these efforts the family has not been found at thomo, the schedule is to be
returned to the District Supervisor with a note to the effect that three visits
have failed to find the family as home. The Metrict Supervisor will than make
errangements for interviewing the water on the Work Program job at which he is
employed and reasoian the adidas for this purpose if necessary.
R. Parasa to Ba International - The interview 10 to be conducted with the worker
whose name is on the subsdale or with a responsible needer of the household.
F. Leathility and - In order to facilitate rapid tabulation of
the results, all entries should be made carefully, as that they are closely
legiblide A fairly hard penall such as No. , should be used no that the entries
will not Name Do not sake enteries with inko No. - - the is
to be lack blank meant Sales time If the entry to be made is sure,
a FOR is to be entered in the preper space. If the date requested are not
available, w (for Net secortainable) is to entered. However, this
entry is to be mad only as a last resert after researable efforts to obtain
the information have failed If the question is not applicable, a death (-)
is to be entered is the proper speake
II. SPREEFIC INSERVATIONS FOR FELLING Schedule Item:
4 Scholale I The schedule number is to be detailed from
and is to be identical with the - on the central card
4-
for the hand w be interview
aI.
199
& and -
are
2. Matelat I - district office later in these spacie the apprepricte designations
called for
1. - Business - Satur the name of the person - name
is listed on the central card for the household to be istem
viewed. If there is more then one worker for the sase house
hold, enter the name of the worker whose surers a given
same conse first alphabetically.
2. I - later from the control card.
3. Name of I - Mater the "ralier case new as
indicated on YMM Form 600 or equivalent form.
4. police Class June - Pater the relief ease number as
indicated on FIRA Form 400 or equivalent form. This
number is to be engine from the central and
In some insteaces households certified as in need of
volief have not actually received voltof. Therefore, -
- will not bear . relief - number. In all such - the
correct entay in this space is -
so I of - in I - Betwee the - of included in the household - Inguse 26 she contributed to
or benefited free the humbeld I this is to be /
from mm Form w - is to be verified through / to
abu
200
of the I - from I
to - should be included at they contribute
- I free the - A - of
I - from has in . one complete be included the
Instate
I or - wills Ithey we partially /
- - the household
w . Inter the ealar or rase of the head of
Per household as Andiested on FIRSA Pain 600 or equivalent some the
- Mits, Japanese, Section, etc.
Verify is interview
7. I of Section - later the date on which the house
hold was certified for Weste Progress employment. later the
m recent date If there is more than cas certification.
This date is available on FEBA Form 600,
e Serticial as June I Yes 1 No
a
If the household has been certified as a drought 1 - in
many which has been officially designated as a drought
county w to and including August 26, a / is to be please
in the been provided opposite News, if not the check is to be
entered in the been opposite % If this inquiry is not -
tainable write we in - balon the Mother or
not the bruncheld has health as a I - to Classica - - Poure m.
A 1200 of the officially - - counties w
to and including Ingust 26 will be - Mortino No
may to to be "Ne" on all / for - officially designated as / - - - 1400
.70
a in Family . this blood a to be sales 201
persons 18 or - years of an - are writing or and /
a addition persons - 18 years of age w are employed - the
Back hage or is privote industry are also to be entered. to
an instate Invoice whose they are writing - sooking work
outside the house
The sance of employable personal are to be transcribed from
FIRM Form 600, or equivalent form It is Superbeat however that
these entrice are verified through personal interview, and that
a check be nade to assertain whether any employable persons -
not listed on You 600 or equivalent form. If - such
additional employable persons are discognized their a should be
added to this blook on the schedules If any writer whose same
has been transcribed free the was district office records as employable person is disectered through personal interview the
longer to be a names of the household, a heavy Line is to be
- through his name The remeinder of blook , is not to
be filled for - a person.
Xa). I - Inter the asses of all employable persons is the
household as defined above
9(b). - - later the - of - No. w . Inter the age of cash - use or hear last histody
preseting August 26. - is recented - FIRA From - be
10 is to be verified is - with this definition /
personal interview
Xc). / - Bater the - by which the water
is Identified on m recente and - appears on the - vollo
202
If the with - no Identification member enter /
If the when is - enter w
TORK PROGRAM IMPLESSENT
side Indiana Seek have I x - Inter for each wher is
the household she was employed - the that Program on August
n one of the following abbreviations in accordance with the
of employments
Agencie
/
M.I.L."
Works Program Maintstration
National Youth Administration
including Student Add
Civilian Conservation Corps
Other Federal Agencies
If the washer was not employed - . Work Program project
- August 26 the proper entay is "Ne".
is is interest " water Manager the States shather -
not the - - has - - the sababala
I the w Matrial adidas - - malered - /
at - Indian the - will Media I x -
- - - This " tab - - - - - the - - - that Master - R - - - I - - A -
sides to x a - - - - I
sta) to stal inclusive to the - - - - entered - alain states - I % the - x
the / is not " he CITY Km 1 was
10 - to the -
203
the ToPodo Matrict Employment Division - month interest
vious of the location of Federal agency projects operating is or
- the To aid the interview the following to
a 1100 of Federal agencies operating Next Progress projects in
the office and States covered by this manage
Description
Bell Conservation Service
Parent Service
of and Plant Generatine
Burson of Plant Industry
Dereas of Public Boods
Weather Suream
of Interior
Office of Indian Affairs
National Park Service
Dureen of Reclamation
Office of Musetian
International of
Easted States Employment Service
Public Make Malaistantia
I Malaistration (work projects only)
Insurance
Coast Checks
Presentent Division
Sureas of Internal Revenue
U. a. Public Health Service
Net
Corpo of Engineers
Sorpe
Beton the inquiry is to be assured for Column XS),
through 9(s) only as the entay for the monther in Calem
No is - obbreviation indicating Bark Progress employee
mont. If the entay for the - in colum 9(a) se
w a - is to be entered in column 9(8) to
9(s) teclusive.
om.
204
Ks). was . Ester the type of week appeal of the
project on which the worker - employed on Ingust n This
a a be obtained from Form you or the paysell instating August ⑉
& - (ag) is to be entered in this color for all 608
enrollass.
Kd. James Slam - lister the sage class in which the sucher -
employed - August 26. The entay will be - for miller
age for international age for skilled, - & To for professional
and technical, and w.o." for non-ecencity. This information
is to be obtained from Form 507 w the pay roll including August
26. A dash ("-") is to be entered here for all CCC enrollees.
9(w) Rate - Inter the scheduled sestem
monthly earnings rate at which the worker me employed on
August 26, as show on WPA Form 507 or the pay rell insluting
26. The entay is to be made to the assrest dellar.
9(s).
(FLOW cents or more is to be considered as mother dollar).
A dash ("-") is to be entered here for all CCC enrollees.
Monthly Baratam . Aster here for each wester employed - the
Bank Program the I of away he has estacly earned Nork Program employment during the entire month of Augusta
Enter the number of dollars earned to the assrest dollars (Fifty
caste or - should be considered as mother dollar) the -
foresties is available - 507 w the Ingust y rellas
IS to to - (see 1 11/all that - services
- " ha - I and - - - ala -
a
sis). - - Inter / la case
as part of other I
our
205
colom for each weber who - employed in private industry
for my length of time during the entire month of Ingust
Return - for each warker listed who had no private employment
during the month of August.
Employment by - established mentional, State or Federal
government agency not operating from Secretary Belief or Book
Program State is to be considered as private employment, All
form operators and all persons employed on their one account
(own business, contractor, professional person with - office, n
needby etc.) are to be regarded as employed. Persons who
work - home forms without earnings should not be considered as
employed. However, persons writing on home or other form for
JMM should be considered as employed. Persons - strike are
also to be considered as employed for the purposes of this survey's
Nata The inquiry is to be manued for Gelmas 9(k) through X()) only
if the entay for the water in Column 9(5) is "Ene". If the
entry for the worker is Column 9(1) is "Ne" a deals (R.) is to
be entered in Galmas 9(k) to 9(e) inclusive.
9(a). Meathly Terminate - later have for each water the total
amount of his earnings through private employment during the
entire month of Bash eamings only are to be enterate
This entry is to be add in dollars recented to the address
dollars (Fifty caste or - made be considered as -
additional dollar) IS the - bee I I during the
month of bugest but has as - 1 the prepar entay is a
sere (
12
206
X(1). - Bater new for cash - - expensed is private employment, as defined - - Inquir -
This refune to j connection rather that to abother the I
- - that particular days Inter w for coak not ⑉ explayed.
(a). Izea of - If the worker was employed in private
intertay - August 26g he is to be asked abother his employe
most was that of form operator, "om account", or other, and
ahother he was - strike - that days the following
are to be used is making this entays
Animal
F
0
E
Mamine
Form Operater
Yes Account
Employed - Replayment other
then from operator or our
-
account
a
an strike on Ingust 26
/ accounts employment includes all workers - - solf.
employed such ass persons in - business productional
persons with one offices contractors someboys bootblooks,
*One accounts employment does not include my person employed
- a salary besta Years Laborase working for wages are to be
solumed as other than fees operator - - that in w the system yr.
%a). into Borro is a Inter here the date - which the w w
- reference is made is Sales was - Indicate
days and years
Ma). Name and MAIN of / - Inter the firm - - 1
address of - explain sw - the - - - I
as at the person meeted for other / dates the -
.19.
207
of Imports the - and addresses of such employees - to
be Motor - the - side of the substance If the me employed during the month of August (entay is Salem
so "Yes") but - not employed - August as (Hotory in Salem
(2) is w the - 1 addresses of his employers are to be
extered on the - side of the ochotalgo
In moking enterios on the reverse side of the schedule the
Line number of the water is to procede the name and address
of the employer so that identification can be node readily.
It is important to obtain the full and esset fire asse so that
the employers may be contacted easily as - later date if it is
deemed necessary.
No. - . This column is to be left blank by the interviews.
10. Police Income Year sh - Enter "You" or w as called for
to indicate shother the household has receiged my assistance
in cash or kind free public or private general relief Sunday
that 10, from pessions based - need, or from any other
source or public or private assistance other than employment
- the West Progress during the month of August
208
I - received during are to to
Surgine committee should be assisted Be - - I
or adjested service certificates as a from of consistence
Bates If the entry to item 10 is - the preper entay for items
20(a) through 20(a) is a 1 (as). If the e to item
10 is "Yea" an amount is dollars readed to the marreet dollar
(fifty conte or - is to be considered as as additional
dollar) or a - (age) is to appear is items 10(a) 10(a), and - - in dollars (as shown) is to appear in
item 20(c).
so(a). - Inter the total amount of 1
relief received from public funds in August Do not include
the cost of hospitalization OF other institutional care,
transportation, burials, or surplus commodition.
10(b). President Based - Beat - Enter the total amount received in
August from pensions based on used shother from public or
private funds. For emplo, pensions to the aged, to the
blind or to C dependent children.
10(a). Primate I - Enter the amount of relief received is
Ingust from primate funds. For comple, relief from private
relief egencies, Salvation Away, n Vincent do Paul Society
of the Oatholic Charities, Bed Cross, on
- Inter the amount received is Ingust from -
other public or printe words which - be please
in any of the antegories above Instate received during in this estageng. Specify the I
of the old and the - received from each I - the
source side of the /
-15-
209
so(a). Datal allet I - This item is to be obtained w addition
of items 30(a) through so(a). If w (for is the - to - of the Steme 10(a) to 10(a) instanting, the
correct entay for item 10(a) is also
11.
Baseball I Other the Bank Premium and Police The - in
Inter "Ins" or w as called for to indicate whether the I
hold had any income from sources other than Your Program explan
ment and relief.
late If the entry to item 11 is - the proper entay for items 23(a),
11(b), and 22(c) is a - (a). If the entay to item 12 is
"Yes" an - in dollars resulted to the assess dollar (realy
cente or more is to be considered as an additional dollar) -
a sere (- is to appear in items 22(a) and 11(w), and -
amount is deliver (as above) is to appear in item 11(a). I
on exception to the letter rule is indicated below
32(a). Total from Primate I - Enter here the total - of
income received by monthers of the household during the 1
of Ingust from privite This is to be obtained w
addition of items in Calama no. If the entay - - 14mm of
Column 9(a) to " for - the correct for item 12(a) is *Inc." (
22(b). Other - Liber have the total - of I
received during the with of Ingust from the Civilian Consumer
-16.
210
Geras, - I sole or from protecus, not I or bearders, gifts or laberitum person not I
- need, complamation, or - other more
sources. Insurance - from - -
other than eee are not to he entered Dental or adjusted service
artificates are not to be included as a seares of I
If the amount of income from any of these other more
surress is - the correct entry in this apaca is to be
"Inc." (for Incompletex Recever, in 1 - instance the
source of income and the amount from each source is to be
entered on the reverse side of the schedule for all I
sources and amounts.
22(c) States - This item is to be obtained by addition of items
11(a) - 22(b). If the answer to item 11(a) or ites 22(b)
is *inc." (for "incomplete") the entry for item 22(a) is also
to be *Ins.".
12.
Relation of Heartheld I Other than Bank Present -
to The Stanford - this study is primarily interested
is the comparison of household income other than that derived
from the Neck Program (except cos) and relief, with the *Security
Mage Standard the entire schedule fact, be regarded
as a week sheet for selding this experience
The computation - for assuring this am
3a be material in the presence of nonbers of the I
the Material Separdow will determine mother
each interviewer is to do his - competition, or abother -
computing will be - w statistical elector
19(a) - I Student for - I - The -
is the - of - based on the - working
-17-
211
wa eventage note of the - adjusted for funthy -
the famility of four - is to to regular as - also family for which the withing comings note of the wa
- is the Security Hage Health If the family of more than four persons, the *Security - Steaked is to
be determined w adding 10 present to the - monthly
earnings rate for coak additional number - see as the
other bound, ss the household consists of Source them four the Mountay The Standard is determined w subtotaling 20
parent from the - monthly earnings rate our 1 number
I
order four. The following is a sample scale of the /
Sign Standard for milliel labor at a - monthly earnings
rate of 855.00. antional dollars w be Material
sim of
&-
2 persons
, pareme
A5
6
,
8
20 9
12 persons
hall
Security
$39.00
44.00
50.00
855.00 - 55.00
95.00
.
55.00
Maximum Monthly
60.00
66.00
72.00
77.00
$2.00
855.00 plas w
mm
93.00
Burnings Date
Made
of
/
shape Standard
55.00
55.00
95.00
55.00
95.00
55.00
.
.
.
.
--
.
.
In stilling item 12(a) the I of pursues in the I
bold, as Meted in item s is to be imported in the Meals
I
212
provided, and the Quantity Sage is to be computed
- the books of the highest - monthly rate
of the wa were in the household
an(w). I - Other than - I - - Boton
the total - of household income derived from other these
Bank Program (emair 008) and relied - This has I
computed in item 22(a). If the entay to item 11(a) is i
(for Increplate") the entay to item 12(a) is also w be m
12(c). Jales. Market - Break to or Memo Masters - Please . about
mark in the apprepriate space provided w indicate that item
12(b), Household Income Other than Work Program and Solice,
is balon, or equal to or above item 10(c), the Security Sign
Standard for - personal.
If the answer to item 12(b) is "inc." (for - book
the proper entay for item 12(a) is w (for m Account
tainable"). This entay is to be placed in the apass w the
right of item 12(a). All schedules with this entry are to be
called to the attention of the Matrist Separates who will
receive special instructions for deeling with them
Name of Milk and - The signature of
interviews, editor and expension and dates on which the
schedule is filled, edited - approval, - to to entured
in the space provided
R-454
(o)
Code
(Leave
Blank)
(n)
Persons $
of Employer
Name and Address
(Supervisor)
C. County
B. State
E. District Number
D. City of Town
(m)
Job
Date
Began
Belor Standard
26
ed
(1)
August
EmployWork Progras and Relief
No
Equal to or Above Standard
ly
(k)
ings
Earn-
(c)
Month(b) Household Income Other Than
(a) Total from Private Employment
(b) Pensions (based on need)
(a) Security Wage Standard for
Date
Approved
12. Relation of Household Income Other Than Work Program
in
(j)
August
Private
Industry
Employed
ly
(i)
ings
EarnAmount
$
Month-
ly
(h)
(Yes or No)
Rate
Wage
Month-
(g)
Wage
Class
OPERATING SCHEDULE
7. Date of Certification
8. Certified as Drought Case: Yes
6. Color or Race
5. Number of Persons in Household
A. Schedule Number
4. Relief Case Number
(Signature)
of
HOUSEHOLD INCOME SURVEY
(f)
Type
Work
Symbol
Source
26
(e)
Work
August
Program
Source and Amount on Back)
Employed
(First)
Work Program and Relief:
EMPLOYMENT IN PRIVATE INDUSTRY
WORK PROGRAM EMPLOYMENT
(c) Total
(First Name)
(b) Other Non-Relief (Specify
(d)
No.
Ident.
Date
Editor
11. Household Income Other Than
(c)
and Relief to $ecurity Wage Standard:
Age
(Middle)
(b)
(Middle)
Sex
Amount
$
(Last)
(signature)
(Yes or so)
(Last Name)
(a)
Name
Source
(e) Total Relief Income
(d) Other Aid
(c) Private Funds
(a) General Public Relief
No.
Line
1
2
3
4
5
Interviewer
10. Relief Income:
9. Employable Persons in Family
1. Name of Worker
2. Address
3. Name of Household Head
Date
Secret Service
214
August 24, 1936
MEMORANDUM FOR MR. McReynolds:
I cannot understand why Frank Wilson's reports of
November 9 on Secret Service were not handed to me. Please
give me an explanation when you return.
Secretary of the Treasury.
I
for the Secunting There paper with all other
material developed by fresk wilem,
win turned ear to murphy who
took ear the investigation in
pursuance of agreement with
chief meran.
The tax investigation was
continued by In y's organization
met
8 Sept
TREASURY DEPARTMENT
WASHINGTON
OFFICE OF
COMMISSIONER OF INTERNAL REVENUE
ADDRESS REPLY TO
OF INTERNAL REVENUE
November 9, 1935.
AND REPER TO
SI-WEM
KEM
Mr. William H. McReynolds,
Administrative Assistant to the Secretary,
Treasury Department,
Washington, D. C.
In re: Personnel of Secret Service.
Sir:
In compliance with the directions of the Secretary, dated
September 4, 1935, we have been engaged upon an investigation of
the Secret Service Division during which certain information has
come to our attention in connection with the personnel of the
Service which will be referred to in this communication and it
has also been established that two representatives of that Service
have failed to report or have incorrectly reported their income
for taxation. The income tax cases relate to Agent in Charge
Thomas J. Callaghan and Agent Peter G. Brautzburg of Chicago, and
a brief preliminary statement regarding these cases will also be
set forth below.
It was found that Mr. Callaghan failed to file income tax
returns for the years 1926, 1927 and 1928 and that his returns
for the years 1929, 1931 and 1933 incorrectly reported his tax-
able income. When he was interviewed he stated that he had
filed returns in Chicago for the years 1926, 1927 and 1928 but
an inspection of the files of the collector of internal revenue
for the years in question indicated that he had misinformed us
with reference to the matter. He could not produce any records
to support his statement. He furnished us with copies of the
retained copies of his tax returns for the years 1929 to 1934,
inclusive. Mr. Callaghan made investments and traded in the
stock market in the years 1928 to 1933, inclusive. An examination of his income tax returns for 1929 to 1933, inclusive,
shows that no income tax was paid by him for any year, that the
profits from his trading transactions during three years were
incorrectly reported and that alleged losses by which he reduced
his taxable income to a figure requiring no tax to be paid were
improperly taken. Tentative computations of his tax liability
215
216
Mr. William H. McReynolds.
show the correct tax due from Mr. Callaghan to be $14.63; $14.36;
$25.86; $16.53; $12.95; and $153.70 for the respective years 1926,
1927, 1928, 1929, 1931 and 1933, totaling $238.03. This investiga-
tion relating to the tax liability of Mr. Callaghan will be com-
pleted by us and a report submitted at a later date.
Attention is called to the fact that part of Mr. Callaghan's
stock brokerage and commodity transactions were carried on without
his furnishing funds or personal credit to cover the purchases
because the account was guaranteed by a person in the stock
brokerage business in Chicago. On one auch occasion Mr. Callaghan
collected a profit of $2,266.20 in this manner.
During the course of the investigation at Chicago, it was
learned that Operative Peter G. Drautzburg had been acting as
Secretary and performing other duties for a fraternal organization for which he has received a salary of $85 per month since
January, 1932, to date. During 1932, 1933 and 1934 Mr. Brautzburg
received a salary of $3300 per annum from the Government which,
when supplemented by the salary received from the fraternal
organization, resulted in a total income of $4,320 per annum. Mr.
Drautzburg stated that he was married during these years, but had
no dependents. He admitted that he had failed to file income tax
returns, and stated that he would immediately file delinquent
returns for these three years. When the delinquent returns are
filed, we will obtain copies of them and give further consideration to this matter. The tax due from Mr. Drautzburg for the
three years is $3.37; $46.15 and $31.90 plus delinquent penalties
of $20.35 totaling $101.77.
There is attached a copy of a report dated May 20, 1929 from
the files of the Commissioner of Prohibition relating to the
alleged activity of Agent Peter A. Rubano, New York, in connection
with a prohibition case.
A former resident of Birmingham, Alabama who bears a good
reputation has informed us that Agent in Charge Robert F. Perry
has been unduly active in politics and that his personal conduct
has not been creditable to a person in the Government service.
The person who so advised us stated that if the heads of other
investigating agencies in that locality are called upon some
information with respect to this matter will be available.
There is attached a memorandum referred to us in which the
attitude of an agent at St. Paul upon the ocnasion of an official
call at a business office is commented upon.
217
-3Mr. William H. McReynolds.
During this investigation we were informed that complaints had
been received by the Chief of the Secret Service regarding the
personal conduct of Operative Joseph Flynn of the Syraouse office.
An acquaintance of Mr. Flynn who did not care to have his name
used reports to us that he is informed that Mr. Flynn borrowed
about $1,000 from the wife of a brewer located in or near Elmira
or Binghampton, New York and that other operatives in Syracuse, if
interviewed, will be in a position to furnish some information
regarding the matter.
During the investigation made at St. Paul, Minnesota we were
informed by Agent Lauren P. Jackson, who was formerly assigned to
the San Antonio District, that he experienced difficulty in carrying his official duties to a conclusion while assigned to the
latter district because of a policy of the Agent in Charge, Edward
Tyrrell, frequently to assign new work, P.B Mr. Jackson thought without regard to the urgency thereof, leaving the present assignment
uncompleted and to be finished by some other agent. Mr. Jackson
said that Mr. Tyrrell apparently did not have the full cooperation
of the United States Attorney's office at Houston, Texas, apparently
for the reason that the agent in charge objected to the length of
time that agents were kept on attendance at court longer than he
thought necessary. It was Mr. Jackson's opinion that Mr. Tyrrell
is too autocratic in his dealings with the agents under his supervision as well as other officers and persons with whom he comes in
contact. Mr. Jackson made it clear that he did not desire to be
placed in the light of criticising his former superior officer
but gave this information only in response to questions as to the
conditions of the district where he had been formerly employed.
It is understood that Mr. Jackson was transferred from the San
Antonio District at his own request.
It was found that an examination of the income tax liability
of Mr. Frederick W. Morris, Operative assigned to the New York
District and in charge of the branch office located at Newark,
New Jersey, had been made in October of 1934 and covered the years
1925 to 1932, inclusive. It established that Mr. Morris failed to
file income tax returns for the years in question and the Internal
Revenue Bureau found he had failed to report taxable income for
seven years which resulted in an assessment against Mr. Morris for
$115.13 plus delinquent penalties of $28.79. The assessment had
not been paid by Mr. Morris when the information was secured by
us about one month ago.
218
Mr. William H. MoReynolds,
IS is recomended that this communication be referred to the
Chief of the Secret Service for such action as may be deemed appropriate.
Respectfully,
THAT Wilson,
Special Agent in Charge.
Welfilleen
W. B.
Special Agent in Charge.
219
EXHIBITS TO PERSONNEL
COPY
white
M
220
CONFIDENTIAL
From a rumor I infer that you are interested in the behavior
of agents of the Secret Service.
The following incident may or may not interest you: The Spyco
Smelting and Refining Company, 55 South Third Street, Minneapolis,
Minnesota, purchases scrap gold. (The firm is exceptionally high
grade). Some person in the rural district complained about the
activities of an itinerant "scrap gold" purchaser. (The Spyco firm
has no such employees but does buy, under government approval and
license, such scrap).
The Department of Justice was making an investigation of scrap
gold sales near Minneapolis about three months ago and enlisted the
cooperation of the Spyco firm and did locate the purchaser and also
found the complaining lady sold him jewelry which was not paid for.
Both parties went to jail (the woman and the travelling scrap purchaser). During the progress or the cooperation between the Department of Justice and Spyco firm a Secret Service man (Mr. Boatwright)
got wind of some sort of activity and proceeded at once to Spyce
Company. He entered with pomp and majesty and proceeded to attempt
to intimidate the president of the firm, etc. If you are interested
you will of course want to get the facts from the president of the
firm. This report is made without the knowledge of the firm.
221
Net Task, N. Y., May 20, 1980.
PresF1SI:JAC
56-P.
Personal and Confidential.
Commissioner of Prohibition,
Weshington, D. C.
The above-numbered ease covere en investigation
of charges made in a letter dated August 27, 1920, from
the Honorable William I. Sirevier, M. C., 14th District,
New York, to Assistant Attorney-General M. W. willebrandt,
charging that Prohibition Agent Morris Bagelberg was gaged in bootlegging activities in and around the lover
east side section of this city. Dengresemen Sirovich also transmitted a copy of . letter from one Morris Cohom,
dated August 21, 1988, alleging that Ragelberg was using
his official position to intimidate residents of the section of the city.
Investigation has been made at intervals between
September 11, 1928 and December so, 1928 by both Special
Inspector J. A. G. Badest and agnelf.
After the receipt of the case jacket, Gongreen- Sirovich was interviewed on several oscasions and no
quested to furnish - with the information on which he
based his charges with Regalberg AS that time the
Congressmen was beatly compas is pro-election activities,
he being a candidate to out himself on the Penneratio
ticket, and 19 developed that Regalburg had for - time
been a very active Regublican worker and at this last
election was particularly active is behalf of sisovich's opporent.
The Congressmen stated that ss was widely known
throughout the lover east side that Engelberg was the
.1.
222
real owner of a eiger store conducted by one Jasob Ma
Bienfield at the setteent cerner of 7th Street end Avenue
D, which is the pelling place is that procinet, and that
at this place there was manufastured a very inferier predust known as the Harding Cigar, which Engelberg, because
of his position, foreed is large quentities at a high
price go violators of the National Prohibition not, the
in turn, received protection from Engalberg. Further,
the cigar store was alleged to be the warehouse and dis-
tributing point for liquer which Engelberg seized in the
course of his official duties and sold in large and small
lots from this eiger store.
During our various interviews with him, Congressman Sirovich put us is touch with several people who have
made various allegations concerning Bagelborg's activities,
and while there is little doubt that the latter's conduct
was very irregular, particularly regarding his political
activities, no tangible evidence of any other irregularities was accured.
Some time prior to the beginning of this investigation, Engelberg had been transferred from duty at New
ork City to Brooklyn and had been warned by Administrator
Campbell to cease his political activities, but apparently
had not done se as he was seen in and around the cigar
store heretofore mentioned by Special Impector Redort on
Election Day, for a period of about two hours, during
which Angelberg's activities were such as to indicate
that be was taking aa active part in the election.
Such political activity is further indicated by
the statements of Mrs. Rose Falken, hereto attached as
"Exhibit A": Morris Sadalsky, "Exhibit 3th Mrs. Frances
Marder, "Exhibit C*: Nerman Green, "Exhibit 1: Mary
"Exhibit N°: and Helen Sekwarts, "Exhibit r.
These alleged political activities were reported to you
verbally is the presence of Administrator Camball and
the latter stated that be would take immediate stage to
put - end to them.
Congressness Sizeviah stated that be was mobile
to give us any assistance in locating the Morris Debea
whose letter he transmitted to Assistant
Willebrendt, but he all put us in touch with several -
seas who made very general allogations emeoring legalbeng's connection with violations of the National Probsbition Ast. However, none of these persons made eay
223
tangible accusations that conte be ethetantiator.
IS was learned from a confidential source that
Sagelborg with Prohibition Agente William Bernanite and
Joseph Baseo were alleged to have exterted . - of money
from Anthony and Alfred Masco, who conduct a winery under
a permit at 178 Mett Street, this city, and the Masse
brothers were interviewed on December 5, 1988, and subsequent ocessions, and someshat reluctantly related the
following story:
About seen, March s, 1926, Alfred Masse was
alone in the place when the engineer of the building at-
vised him that three mas who represented thomasives to be
Revenue officers, were trying to force admission to a
part of the basement used by the Magoo brothers as a storeroom and Sharein a quantity of Italian grapes were steme
in barrels. Alfred Masse went to the basement and found
the three men who were amed with erou-bare and other in
plements for breaking in. These men identified themselves
as Engelberg, Bernanks and Russo, and Bernanks, who eated
as the leader of the group, said that the grapes in the
barrels were fermenting and that their possession by a
permittee was a violation of the terms of the Musco brothere' permit.
Alfred Meese told them that be did not believe
that possession of the grapes constituted any violation
of the law or of the terms of his permit, but being fear
ful that a complaint of any kind against him by the Agents
might endanger his permit, be asked if he could not "fix
up" the matter. Engelberg then asked who Masse knew and
the latter mentioned several possistees in his immediate
neighborhood (east side) but Bermanice did not seen satisfied and finally asked if Misso know anyone - the west
side. Musee then mentioned - Maleteste, who has a
winery permit, at 581 West Broadway. Bermanke seemed
satisfied at the motion of this - and suggested that
Male*eate be sent for, which Masse did by telephone.
While waiting for Maletesta's presence, Bermanke said 18
would cost $1500000 "fix wy" the case.
Alfred Measo also telephones to his brother,
Anthony, who was at . masty restaurant and the letter
came to the place, accompanied by one Tony Galdieno, who
also had a winery permit. Caldions water outside while
Anthony Meese went into the basement where he and kis
brother and the three agents, and still later, the Reneo
Miletesta before referred to, Johned the group. This
224
Maletesta permated the three agents to agree to take
$6000 to "fix w the matter.
The Masse brothers them got busy and made up
the $6000, partly from their on funds and by a thousand
dollar leas from one Recei, another permittee, and $400
free C. Mateshic, a greeer at 1688 West Broadway. IS
took some time to raise this money and the agents waited
at Missee's place until the money was paid by Alfred Masse
to Bermanke, wherespon they left the place and no action
was taken by them against the Masso brothers.
After thinking over the after, the Masses sea-
claded that the possession of the grapes on their premises
did not constitute any violation and they then got is toach
with one Pete Rabane, a friend who is also on operative
of the United States Secret Service in this city. They
explained the matter to him and Rabano promised to see
what he could do.
Shortly thereafter, Rabano case to the Massoa'
place and handed Anthony $1500. He said he had had Prohibition Agents Ingelberg, Bermanks and Busso is his of-
fice; that they had practically admitted the "shake-
down" and gave him the $1500 to return to the Masses,
pleading that they had lost the balance of the $5000 is
gombling. They stipulated, and Rabano agreed, that the
Masses would take no further action in the atter. inthony Mueco then gave Babano $600 of the $1500 for his
trouble and decided to let the matter drop lest he be
persocated by the Prohibition Agents if he took any fun
ther action in the matter.
Samuel Deanloff, engineer of the building at 98
Moss Street, was interviewed and he stated that he recalled
three man eering to the basement of the building - time
age, that these three man were armed with eroe-bare, etc.,
and started to force entry to that part of the basement 00copied by the Meses brothers; that he rea to the first floor
and informed Alfred Mapoo, who returned with him to the
busement, talked to the agents, unlooked the door and tered with the three mom.
Dannleff stated that he did not particularly call the apprepance of these three non, but readly identified a philograph of Bermanice as being one of the said three.
He recalls that these three - remained about the please for
several hours and that while they remained there a big. stout
- (whish description corresponds to that of Senso Maleteets)
cane to the place and entered into conversation with the
225
others but Demaleff did not hear the conversation as he
was ordered every from the visinity by one of the three
"Revenue -
Pete Rabane, the Secret Service operative, was
interviewed at his office and be related what appeared
to be rather a lane story - his part in this affair.
He stated that is as Tagel-
borg and Reaso
shortly thereafter, and entirely by accident, be not
Prohibition Igent Carl Resen, who died suddenly some time
prior to my interview with Rabano. Rebene assused Reeen
of being involved in the extorties from the Muscos and
threatened that if restitution was not made to them he
(Rabano) would expose him (Rosen). Rabone claim that
he heard nothing more about the matter except that he
did hear later from some unknown source that partial reetitution had been made but he emphatically denied having
had any interview with Angelberg. Bernsake and Russe;
that he had received any money from them which he had w
turned to the Musco brothers; or that he had received
from the Masse brothers Moo, or any sun of money. Asked
why he had approached Rosen about the matter when the latter was not implicated by the Masco brothers' story,
Habano said "There must have been two shake-domas." His
whole attitude was se evasive that I - more inclined to
accept the story of the Masco brothers for what happened
than Rabeno's, particularly since the letter, during the
course of our interview, several times referred to the
fact that he could be involved criminally If he had done
what the Musees claim he did in this matter.
Beth the Roasi and the C. Matashie referred to
as having leased Alfred Masco $1000 and 8400, respective
ly, on March e. 1926, were interviewed and they both ad
mitted that they had loaned money to Alfred Masco but
claimed that they had no records as to date, etc., and
that the leane were informal, cash loond, which were -
paid shortly thereafter.
Romeo Maletesta was interviewed and at the time
of the first visit, he denied ever having not essy Governmeat agents at the Meeee brothers' place, - had he served anything irregular at their place at any time. He
was then asked if he would give a SWOFD statement to that
.3.
226
effect. E deserved, refused and finally asked to cansult
his attorney. This was greated and be Eas again - two
days later, at which time he denied absolutely having seen
any Government agents at the Assess' place of business at
any time. He was not pressed for ea affidevit but be himself mentioned this, saying that he did not think it would
be necessary under the circumstances to give on affidavit.
At the time of bis interview, be admitted knowing Agent
Busso, but denied knowing Berseake or Engalborg. Special
Inspector Badorf, who interviewed Maletesta, states be is
of the opinion that Maletesta was not telling the truth.
Several Insureeneful attempts have been made to
interview the Teny Caldione mentioned by Anthony Maesa as
the person who accompanied the letter from the restaurant
to his place of business.or March 8, 1986, and who, accord.
ing to Anthony Masco, sew the Prohibition Agents (20mg or
all of whom were knows to him) at that place. However, it
is believed that Caldione has been advised by the Nuseoa
as to the reasons for the proposed interview and is evolding
it rather than be involved for fear that be incur the ensity
of other Prohibition Agents, he being a permittee.
Efforts have been made to locate the daily reports
of Agents Engalberg, Bernanke and Russo for March a, 1926,
but the daily reports of these three agents for the entire
month of March, 1926, are missing from the files, which
fast assumes a simister significance in view of the allow-
tions as to what occurred on March 8.
For some time prior to March, 1986, the Intelligenee Unit, Bureau of Internal Revenue, had been conducting
personnel investigations for the Prohibition Burean, upon
request of ea Mainistrator, and it does not appear that
say investigation of the Masoe allegations was made prior
to this time. As is to be expected, after such a lapoo of
time, sufficient evidence to sustain the allogation has
not been accured, although is is believed that the story as
related by the Masse brothers is substantially tree.
Ragelberg, Bernanite and Amee have individually
and together been the subject of several investigations by
the Special Agents of the Intelligence Dais - a period of
several years but the files disclose - tangible ovidence
secured during such investigations, Reserved, spealed Is
specter Badorf made as investigation of allegations commoning
7.
o
227
Bernanica and Agent Sunce J. D'imate (s.I. B-P), and under
date of February s 1989, he recommended
to resign that their
be projutioe, or, If they had not been
man accepted had been with permitted that resignations if these
dropped
the Service, that they be dismissed upon no.
eeipt
of from
his report.
This circumstance is eited morely because during
the course of that investigation, Bernanks, many times ossed of irregulatities with Engelberg, the subject of this
investigation, admitted that neither he nor his wife had
any source of income other than his salary (them $8500 per
annum), despite which he was them paying a yearly rental of
$2100 for a newly and eleberately-furnished apartment.
The filee in the office of the Prohibition Administrator show that Kngalborn. as well as Bernanke and Busso,
failed to pass a Civil Service examination for the position
of Prohibition Agent, and that they were permitted to n
sign January 31, 1989.
While this investigation did not disclose any
tangible evidence that Engelberg was connected with viole-
tions of the National Prohibition Ast, it did reveal his
pernisions political activity and also his general unfit-
ness for the position of Prohibition Agent.
However, since his resignation has already been
accepted, precumbbly without prejudice, it would be unfair
to change the records at this time. Therefore, it is -
commended that the proper notation be made in Engelborg's
personnel file to indicate his unfitness for a position, so
that this may be considered if be again applies for such.
The case Jacket, etc., is returned herewith and
is is further recommended that the case be closed.
228
SECRET SERVICE
August 24, 1936
HM,Jr's conference with Chief Moran. HM,Jr. informed Chief
that Wilson was to be Assistant Chief. Chief said he would
resign.
August 25
Chief's memorandum asking interview with Secretary to disouss personnel and operations of Secret Service.
September 5
Chief Moran told HM,Jr. he was going on vacation; could not
say for how long. HM,Jr. told Graves to move his desk
down there; to get Wilson started and bring Murphy back.
September 8
and Early
President told HM,Jr. that McIntyre/were upset because
Wilson was succeeding Murphy; that Wilson was a strong
Hoover man.
HM,Jr. then called Cummings and explained that he was
bringing Murphy back to assist Wilson, particularly in
the protection of the President during the campaign.
Told MoIntyre of his conversation with Cummings and McIntare
phoned Cummings that the action was what the White House
wanted.
Wilson's biography attached.
Press release announcing Wilson's appointment.
Excerpt from transcript of press conference.
September 9
Memo from McReynolds relating telephone conversation with
Chief Moran in which Moran was requested to remain away
from the Treasury for the rest of the month of September.
September 15
Wilson's memorandum relating Secretary's instructions that
additional measures be used to safeguard protection of President.
229
August 24, 1936
Conference with Chief Moran, Graves and Norman Thompson.
Told Chief Moran that I was going to deputize Frank Wilson
of Internal Revenue Intelligence as Assistant Chief. Chief
Moran said he would resign. I told him he could think it
over for 24 hours. Asked him if he had done anything about
Frank Wilson's report of November 9 (copy attached) and he
said he had turned the matter over to Joe Murphy; that he,
Chief Moran, had done nothing about it. Seemed unbelievable
that he should sit with a report like that in existence and
do nothing. As far as I am concerned, I am going through
with it and if Chief Moran resigns, it's Just too bad.
C
0
P
My confidential fill 230
Y
SI-WEM
November 9, 1935.
KEM
Mr. William H. McReynolds,
Administrative Assistant to the Secretary,
Treasury Department,
Washington, D. C.
In re: Personnel of Secret Service.
Sir:
In compliance with the directions of the Secretary, dated
September 4, 1935, we have been engaged upon an investigation of
the Secret Service Division during which certain information has
come to our attention in connection with the personnel of the
Service which will be referred to in this communication and it
has also been established that two representatives of that Service
have failed to report or have incorrectly reported their income
for taxation. The income tax cases relate to Agent in Charge
Thomas J. Callaghan and Agent Peter G. Drautzburg of Chicago, and
a brief preliminary statement regarding these cases will also be
set forth below.
It was found that Mr. Callaghan failed to file income tax
returns for the years 1926, 1927 and 1928 and that his returns
for the years 1929, 1931 and 1933 incorrectly reported his tax-
able income. When he was interviewed he stated that he had
filed returns in Chicago for the years 1926, 1927 and 1928 but
an inspection of the files of the collector of internal revenue
for the years in question indicated that he had misinformed us
with reference to the matter. He could not produce any records
to support his statement. He furnished us with copies of the
retained copies of his tax returns for the years 1929 to 1934,
inclusive. Mr. Callaghan made investments and traded in the
stock markrt in the years 1928 to 1933, inclusive. An examination of his income tax returns for 1929 to 1933, inclusive,
shows that no income tax was paid by him for any year, that the
profits from his trading transactions during three years were
incorrectly reported and that alleged losses by which he reduced
his taxable income to a figure requiring no tax to be paid were
improperly taken. Tentative computations of his tax liability
2
Mr. William H. McReynolds.
show the correct tax due from Mr. Callaghan to be $14.63; $14.36;
$25.86; $16.53; $12.95; and $153.70 for the respective years 1926,
1927, 1928, 1929, 1931 and 1933, totaling $238.03. This investiga-
tion relating to the tax liability of Mr. Callaghan will be com-
pleted by us and a report submitted at a later date.
Attention is called to the fact that part of Mr. Callaghan's
stock brokerage and commodity transactions were carried on without
his furnishing funds or personal credit to cover the purchases
because the account was guaranteed by a person in the stock
brokerage business in Chicago. On one such occasion Mr. Callaghan
collected a profit of $2,266.20 in this manner.
During the course of the investigation at Chicago, it was
learned that Operative Peter G. Drautzburg had been acting as
Secretary and performing other duties for a fraternal organization for which he has received a salary of $85 per month since
January, 1932, to date. During 1932, 1933 and 1934 Mr. Drautzburg
received a salary of $3300 per annum from the Government which,
when supplemented by the salary received from the fraternal
organization, resulted in a total income of $4,320 per annum. Mr.
Drautzburg stated that he was married during these years, but had
no dependents. He admitted that he had failed to file income tax
returns, and stated that he would immediately file deliaquent
returns for these three years. When the delinquent returns are
filed, we will obtain copies of them and give further consideration to this matter. The tax due from Mr. Drautzburg for the
three years is $3.37; $46.15 and $31.90 plus delinquent penalties
of $20.35 totaling $101.77.
There is attached a copy of a report dated May 20, 1929 from
the files of the Commissioner of Prohibition relating to the
alleged activity of Agent Peter A. Rubano, New Yor, in connection
with a prohibition case.
A former resident of Birmingham, Alabama who bears a good
reputation has informed us that Agent in Charge Robert F. Perry
has been unduly active in politics and that his personal conduct
has not been creditable to a person in the Government service.
The person who so advised us stated that if the heads of other
investigating agencies in that locality are called upon some
information with respect to this matter will be available.
There is attached a memorandum referred to us in which the
attitude of an agent at St. Paul upon the occasion of an official
call at a business office is commented upon.
231
232
3
Mr. William H. McReynolds.
During this investigation we were informed that complaints had
been received by the Chief of the Secret Service regarding the
personal conduct of Operative Joseph Flynn of the Syracuse office.
An acquaintance of Mr. Flynn who did not care to have his name
used reports to us that he is informed that Mr. Flynn borrowed
about $1,000 from the wife of a brewer located in or near Elmira
or Binghampton, New York and that other operatives in Syracuse, if
interviewed, will be in a position to furnish some information
regarding the matter.
During the investigation made at St. Paul, Minnesota we were
informed by Agent Lauren P. Jackson, who was formerly assigned to
the San Antonio District, that he experienced difficulty in carrying his official duties to a conclusion while assigned to the
latter district because of a policy of the Agent in Charge, Edward
Tyrrell, frequently to assign new work, as Mr. Jackson thought without regard to the urgency thereof, leaving the present assignment
uncompleted and to be finished by some other agent. Mr. Jackson
said that Mr. Tyrrell apparently did not have the full cooperation
of the United States Attorney's office at Houston, Texas, apparently
for the reason that the agent in charge objected to the length of
time that agents were kept on attendance at court longer than he
thought necessary. It was Mr. Jackson's opinion that Mr. Tyrrell
is too autocratic in his dealings with the agents under his supervision as well as other officers and persons with whom he comes in
contact. Mr. Jackson made it clear that he did not desire to be
placed in the light of criticising his former superior officer
but gave this information only in response to questions as to the
conditions of the district where he had been formerly employed.
It is understood that Mr. Jackson was transferred from the San
Antonio District at his own request.
It was found that an examination of the income tax liability
of Mr. Frederick W. Morris, Operative assigned to the New York
District and in charge of the branch office located at Newark,
New Jersey, had been made in October of 1934 and covered the years
1925 to 1932, inclusive. It established that Mr. Morris failed to
file income tax returns for the years in question and the Internal
Revenue Bureau found he had failed to report taxable income for
seven years which resulted in an assessment against Mr. Morris for
$115.13 plus delinquent penalties of $28.79. The assessment had
not been paid by Mr. Morris when the information was secured by
us about one month ago.
233
Mr. William H. McReynolds.
It is recommended that this communication be referred to the
Chief of the Secret Service for such action as may be deemed appropriate.
Respectfully,
Frank J. Wilson,
Special Agent in Charge.
W. E. McElveen,
Special Agent in Charge.
234
COPY
November 9, 1935.
SI-FJW
WEN-EEM
Mr. William H. McReynolds,
Administrative Assistant to the Secretary,
Treasury Department,
Washington, D. C.
In re: Secret Service Survey.
Sir:
In compliance with the directions of the Seoretary dated September 4, 1935, we have made a personal examination of certain field
offices of the Secret Service Division and we submit for consideration for the improvement of that service the recommendations set
forth below. Most of the recommendations may be carried out by
administrative action and a few require legislation. Many of them
may be put into effect without an additional appropriation and
others will, if adopted, require an increased appropriation for that
service. Statistics which we had prepared by 22 of the 36 districts
of the service are attached and they reflect the annual activities
of these divisions since July 1, 1932. After the repeal of the
National Prohibition Act counterfeiting increased from 50 to 80 per
oent within a few years. During the ten-year period from 1924 to
1934 counterfeiting increased five fold.
Our investigations have been confined to the personal inspec-
tion of four of the 36 district field offices from which the oonolusion has been reached that a careful survey of the entire service
will result in increased efficiency. We are informed that Assistant
Chief Murphy has already undertaken that assignment. This comprehen-
sive investigation will necessarily result in further suggestions or
modifications in addition to the recommendations which we are now
submitting and will probably result in some appropriate changes in
connection with the subjects which we have covered. Operatives in
charge and the more experienced operatives whom we interviewed have made
important recommendations which we are submitting. We had a oonference with Chief Moran and Assistant Chief Murphy on November 1 and
it was suggested by them that we submit written recommendations for
their consideration. All of the recommendations submitted herewith
were not discussed at that meeting. We will be pleased to oooperate
further with Chief Moran and Assistant Chief Murphy, if after they
have studied our recommendations they desire to confer with us about
any phase of the various subjects covered.
-2-
235
Mr. William H. MoReynolds.
Recommendations:
That a revised book of instructions be prepared and issued containing instructions and directions for the guidance of the personnel
of the Seoret Service in the performance of their official duties and
that one copy be furnished to each Secret Service Agent in charge and
one copy to each Secret Service Agent, written receipt being required
of each person receiving such book of instructions. Considerable
subject matter in the present book is obsolete and should be deleted.
For assistance in the preparation of the book of instructions the
following subject matter is recommended for consideration to be included among such other instructions as may be deemed advisable by
the committee compiling such book of instructions:
(1) That such book of instructions contain among other
subject matter comprehensive instructions for the
guidance of the agents with respect to the present
laws relating to searches and seizures, including
the basis for the procurement thereof and the steps
in the legal execution of such search warrants.
(2) That comprehensive instructions be given with regard
to the law and the duties of agents in making arrests,
citing all the statutes so authorizing them to make
arrests under the laws which they are called upon to
enforce.
(3) That comprehensive instructions be given for the
guidance of the agents in connection with each law
and/or regulation the Secret Service is called upon
to enforce.
(4) That the agents in charge make an effort to fully
acquaint the oity and state police officers with
counterfeits and the methods of differentiating
between legal money and counterfeits. That they
also endeavor to give similar instructions to at
least one teacher in each business college or
school located within their districts.
(5) That stepe be taken by each agent in charge to
cause periodic investigations to be made of the
employment and activities of persons previously
convioted of counterfeiting.
(6) That definite instructions be incorporated with
respect to the seisure of legal money by the
agents from prisoners at the time of arrest and the
subsequent handling and disposition thereof.
236
-3Mr. William H. McReynolds.
(7) That instructions be given the agents in charge covering
the advisability of the opening and keeping of bank
accounts to which funds are now sometimes deposited
when received by them for the purpose of the employ-
ment of informants, the purchase of evidence and for
the redemption of mutilated or defaced currency or
coins.
(8) That instructions be given prohibiting the agents of
this service from engaging in outside employment, and
that they acknowledge in writing the receipt of a
notice dated October 29, 1934, issued by Secretary
Morgenthau with regard to this prohibition.
(9) That if an agent of this service desires to make an
investment in a copartnership or to acquire more
than 5% interest in any other business whatsoever
he shall first obtain the written permission of the
Chief of this service.
(10) That each agent in charge be required to make a
written semiannual report regarding his requirements
as to office space, furniture and equipment sufficient
to maintain his office and district in keeping with
the modern standards.
(11) That at the conolusion of an investigation of plant
cases or unusual passing oases that the agent in
charge prepare a brief synopsis of the facts developed
(or that such synopsis be prepared by the Chief's
office) and furnish same to each agent in charge for
the latter's information.
(12) That upon the conviction of an alien for counterfeiting
this fact be reported by the agent in charge to the
nearest office of the Immigration and Naturalization
Service with view of deportation proceedings being
taken.
(13) That the agents in charge make periodic checks of the
records of banks and firms which have made deliveries
of counterfeits to the Secret Service Agents to ascer-
tain if the latter have correctly accounted for all
counterfeits so delivered by such banks and firms; or that
some other method be devised to ascertain if all agents
make correct reports of such counterfeits so delivered
to them.
237
Mr. William H. McReynolds.
(14) That when a well executed counterfeit appears in
active circulation in one or more districts that
steps be taken to furnish specimens thereof to
each agent in charge as early as practicable for
educational purposes.
(15) That each agent be required to provide himself
with and keep up to date such data, information,
history, eto., of all active counterfeits active
or recently active in whatever section of the country.
(16) That agents in charge and agents be advised that
it is not desired that they have their offices
furnished with furniture or equipment presented
to them by persons outside the Government service
or purchased by themselves unless they have the
written consent of the Chief of the Service permitting
the official use thereof.
(17) That agents be instructed to refrain from accepting
gifts or gratuities from others without the consent
of the Chief of the service, except gifts from relatives.
(18) That agents in charge be required to submit written
report at stated intervals, preferably semiannually,
containing constructive recommendations for the good
of the service in general and for the advancement of
the efficiency of his district in particular.
(19) That each agent be furnished with a copy of each
bulletin and/or other communications from the Chief
and the Secretary of the Treasury relating to sub-
jeet matter to the Seoret Service in general.
(20) That in warning circulars issued to the public by
agents in charge calling attention to active counterfeits they request that the passers "be detained"
rather than that such persons "be arrested", and
that in such circulars they request particularly
that an effort be made to obtain the automobile
license member (if automobile is used) of such
passers and/or of those accompanying them and if
such passers cannot be detained to get a description
of them.
.5Mr. William H. McReynolds.
(21) That stope be taken to give the Chief's of Police,
Police Captains, Sheriffs and other law enforcing
agencies in metropolitan cities more specific direetions as to the most prompt and direct method of
locating the nearest Secret Service agent during
official hours, nights and Sundays.
(22) That agents in charge make more frequent personal
contacts with the Governors and the heads of the
Currency Divisions of the Federal Reserve Banks in
the respective districts and the managers of the branch
Federal Reserve Banks for the purpose of obtaining
their fuller cooperation and constructive suggestions relative to the suppression of counterfeiting.
(23) That greater effort be made to secure more newspaper
publicity when now issues of counteRTeits appear or
when any counterfeits show increased activity, and
that agents in charge be advised that a newspaper
release of such information on or for Monday morning
will receive more consideration from the publishers
than if released for other issues.
(24) That definite instructions be issued as to the scope
of the agents duties in connection with all matters
to be investigated wherein the Federal Reserve Banks
and the National Banks may be directly or indirectly
interested.
(25) That the policy of the service be explained as to the
use of so-called entrapment. That differentiation be
drewn between entrapment and ordinary purchases of
counterfeits.
(26) That attention of the agents be directed to the statute
under which all banks are required to surrender counterfeits coming into their possession and that agents
endeavor wherever necessary to make use of this statute
in securing the more prompt surrender of currency direct
to the Secret Service office district in which such banks
are located.
(26a) That care be exercised in giving subject matter for
publication, to mention and give full credit to all
state and city police officers and others who may have
rentered assistance to the agents of the Secret Service,
and, that wherever practicable the names of the United
States Atterney, his assistants, and the United states
Commissioners EJ referred to.
238
-6Mr. William H. McReynolds.
(27) That wherever there is a city police or state police
radio broadcasting station located in the respective
Secret Service districts that agents in charge
endeavor to make arrangements to have such radio
stations broadcast the fact that certain described
counterfeits are active in that particular section,
and request that in the event of detection of the
passers that the Secret Service office or the police
be notified immediately. That if no broadcasting
stations are available then to attempt to get the
offices of the Chief of Police to use their teletype
to disseminate this information as widespread as
possible.
(28) That where circulars are sent out by agents in charge
to corporations and firms, including bankers associa-
tions, announcing the circulation of counterfeits for
the purpose of having such warning circulars furnished
to the branch offices of such companies that requests
be made that copies of their bulletin or other writing
announcing such warnings be furnished to the agents in
charge of the respective districts of origin. By this
means it may be ascertained when and to what extent
these corporations and firms are cooperating with this
service.
(29) That operatives in charge endeavor to obtain the
cooperation of all gasoline service stations to the
extent of procuring automobile license numbers of
strangers who pass or attempt to pass suspicious
currency of $5.00 or over. That if such bills are
recognized to be spurious that such attendant retain
such note and endeavor to detain such passer and that
the Secret Service office or the police be notified
immediately. That in the event of inability to detain
such passer that care be exercised to obtain complete
description of such person.
(30) That all agents in charge procure a list of the names,
addresses and telephone numbers of all heads of Federal,
state and city law enforcing agencies located in their
respective districts, for the information and use of the
agents under their supervision and for the purpose of
sending circulars regarding counterfeits to such as are
deemed beneficial.
(31) That the policy of the service be expressed as to the
use of distophones and other similar means of obtaining
information as to the violation of counterfeit laws.
239
240
Mr. William H. McReynolds.
(32) That careful investigation be made by agents in charge
to obtain the description, occupation, mode of travel
of passers of counterfeits ("innocents excepted") and
upon securing such information to dispatch it to the
agents in charge of the adjoining districts and other
districts if such counterfeits are or recently have
been showing therein, and that such agents in charge
in both the latter and former districts provide the
police in their respective districts with such information as has been obtained concerning such passers.
(33) That instructions to govern the agents of this service
with respect to the redemption of mutilated and
partially destroyed currency be included in the proposed book of instructions. If it should be concluded
that the funds for this purpose should be deposited in
a bank account carried in the name of the agent in
charge it is suggested that such bank account be in
the nature of an official account and that no personal
funds be commingled with the funds provided for this
purpose and that agents in charge do not use such funds
or such bank account for any other purpose than that
specified. If such bank account is to be used it is
recommended that a quarterly report showing the details
of receipts, disbursements, and balances be submitted
by the agent in charge.
(34) That in the event of the inability of the agent in
charge to have an agent call at the point where a
person has been taken into custody on a charge
involving the violation of counterfeit laws within
twenty-four hours after the receipt of the informa-
tion that such person has been taken into custody,
an explanation for such delay should be submitted to
the Chief of the service.
That in the event of the inability of the agent in
charge to have an agent call within from 24 to 48
hours from receipt of the information at a point
where a counterfeit note has been passed within 200
miles of his district or branch office or if he considers it inadvisable or impractical to do so he shall
state the reason for not having a personal call made
in his report for that day and in event the counterfeit
has been passed at a point over 200 miles from his
district or brench office he shall state the reason for
not causing a personal call to be made within approximately
three days from the receipt of the information.
8-
241
Mr. William H. McReynolds.
(35) That all persons who have written "orank letters" to the
President be kept under very close surveillance when the
President appears in the city of their residence.
(36) That agents in charge endeavor to have a meeting with the
agents under his supervision, singly or in a group, at
least once a month for the purpose of discussing pending
matters and exchange suggestions for the good of the
service, such conferences to be arranged with due regard
for the expense to be incurred and so as not to jeopardize
pending work.
(37) That the office of each agent in charge keep a complete
list of supply houses, located in his district, selling
materials used in counterfeiting, and that he detail an
agent to call upon all large businesses of this class at
regular intervals of not less than 30 days, for the purpose of obtaining information which may be helpful in the
suppression of counterfeiting, and a special record be
kept of such visits. Supply houses refer to retail, wholesale and mail order houses. It is believed such visits to
the large supply houses will be helpful, even though some
of these businesses are in the habit of reporting sales of
materials to unknown and suspicious persons to the Secret
Service office of the district in which located.
(38) That closer and more frequent contacts be established by
the agents in charge and the agents with Chiefs of Police,
Sheriffs and other enforcement officers.
(39) That all agents be instructed to refrain from the use of
intoxicants while on duty and that they should conduct
themselves in a manner becoming to their position when off
of duty.
(40) That upon change in personnel of agent in charge of a dis-
trict, the retiring agent in charge be furnished with a
receipt for all official property turned over by his suc-
cessor, and that an inventory be made of all property and
evidence surrendered by the retiring agent in charge and
that a copy thereof be sent to the Chief. That the combination of the safe in the office be changed by the incoming
agent in charge.
(41) That all field employees be given a particular title or
designation and that such title be consistently used by
such employees in their correspondence or in connection
with any other occasions where such designation may be
necessary. It has been noted that certain letters are
signed "Agent in Charge" and others "Operative in Charge".
9
Mr. William H. McReynolds.
General Recommendations
(1) Provisions for more prompt, adequate and wider dissemination of information to the public and banks
relative
to the circulation of counterfeit currency
and coin.
(2) Steps to be taken for annual statistical reports by
each district and reports from which efficiency or
merit ratings of the personnel may be move.
(3) That a bulletin be issued by the Treasury Department
at regular intervals of about 30 days in which all
banks, law enforcement agencies, and certain business
houses shall be officially notified re new counter-
feit notes. (The banks now receive such information
unofficially through two agencies which sell the
service.)
(4) That a periodical inspection be made by the Chief,
or his representative, every six months, or a
period to be determined later, of each field office
of the service.
(5) That all agents of the service, in small groups, be
detailed for a week under proper guidance and tuition
at the Bureau of Engraving and Printing at Washington,
D. c., and that at regular intervals agents should be
instructed in groups re their duties and the best
methods to pursue on their investigations.
(6) That bank employees and cashiers of business houses
be instructed in groups from time to time regarding
the detection of counterfeit notes.
(7) That in all offices in large cities the local Police
Department be requested to assign a permanent detail
of detectives to assist continuously with operatives
of this Service, and that effort be made to arrange
for some private room in the Federal building for
their occupancy.
(8) That the field offices be equipped with mimeographs
and addressograph machines in order that they may
promptly circulate information to banks and others
re counterfeit notes appearing in their districts,
and that each office compile and keep up-to-date a
complete mailing list of all banks, police officials,
242
- 10 -
243
Mr. William H. McReynolds.
and large handlers of money in their respective
Districts to all of whom circulars should be sent
in all instances when letters of advice are sent
out, and more frequent use be made of such circulars.
(9) That in all reports, etc., the name of the agent
b used who performed work with reference to the
subject matter instead of "a representative of
this office".
(10) That each district office be furnished a map show-
ing the outline of the territory included in each
district of the Secret Service.
(11) That an effort be made to recruit some agents for
the Secret Service from persons of foreign extrac-
tion, especially of Italian descent.
(12) That more specific instructions be issued regarding target practice by the agents and that ammunition be furnished to them for that purpose.
(13) That consideration be given to the use of a printed
letter head for circular letters instead of the
mimeograph paper now used, and that such circulars
be signed by the agent in charge.
(14) That in order to increase the efficiency and morale
of the Service an effort be made to secure salary
increases for the more efficient and experienced
agents in the service, as many of them have not had
increases for approximately ten years; also, that
temporary agents who have demonstrated their ability
be given permanent appointments.
(15) That steps be taken to procure the installation of a
"police wire" in the offices of agents in charge
located in the metropolitan cities, directly connecting the district office with police headquarters.
(16) That the Chief of the Secret Service or representatives
designated by him foster closer cooperation with the
Secret Service by the attendance of conventions of
State Law Enforcement agencies.
(17) That official automobiles in use by the Secret Service
be equipped with radios so that agents in charge or a
- 11 Mr. William H. McReynolds.
chief of police may be able to reach promptly, if
necessary, agents of this Service by requesting the
police broadcaster to call them; also, that heaters
be installed in these cars which are used in sections where low winter temperatures are prevalent.
(18) That a fund of $250.00 be made available to agents
in charge for prompt use, in the event it is
necessary in emergency cases, to purchase counter-
feit currency in an effort to suppress counter-
feiting.
(19) That specimens of counterfeit notes appearing in
circulation be used more frequently in instructing
and urging the public to recognize counterfeits,
as the more counterfeit conscious the public becomes
the greater cooperation will be secured in locating
and apprehending the violators.
(20) That agents be instructed to keep in frequent touch
with the office of the agent in charge in order that
they may be reached more promptly for emergency work.
(21) That consideration be given to the question of reduc-
ing the number of districts of this Service; that
districts having only one agent be abolished; that
consideration be given to moving the headquarters
office of the Syracuse District to Rochester or
Buffalo, both of which are much larger cities than
Syracuse and are closer to other thickly settled
sections and to the Canadian border; and that branch
offices be established at Milwaukee, Wisconsin, and
at Springfield, Illinois.
(22) That consideration be given to increasing the
personnel of the larger districts (from standpoint
of population) by additional appointments or by
transfers from smaller districts, or by temporary
assignments of agents from the smaller districts to
the larger ones.
(23) That consideration be given to the establishment,
temporarily or permanently, of a "flying squadron"
to make a systematic canvass of all supply houses
located in New York City, and perhaps in Philadelphia
and Chicago, selling materials from which counterfeits
may be made.
244
- 12 -
245
Mr. William H. McReynolds.
(24) That more frequent contact and closer cooperation be
developed with the State Bankers associations.
(25) That agents in charge be authorized to employ informers
for a temporary period of three days, at a per diem to
be fixed by the Chief, in emergency cases, without
first obtaining the approval of the Chief but at once
notifying him.
(26) That there be more strict surveillance of the automobile in which the President travels during the time
that it is stored in a garage or not in use.
(27) That all agents be required to furnish a statement and
or evidence to the Chief on or before March 15th of each
year as to whether or not they have filed income tax
returns, and in either event the net income should be
stated.
(28) That each office of the agents in charge and the branch
offices having two or more agents be provided with an
annual city directory.
(29) That new pocket commissions be issued to agents to replace any that have been signed by former Chief of the
Service and/or by former Secretaries of the Treasury.
(30) That recruits for agents of this Service should be
secured, as far as possible, by obtaining persons who
have had previous government investigative experience
and that personnel investigations be made to determine
the qualifications and fitness of the persons being
considered. Perhaps the Bureau of Engraving and other
Treasury branches may be a source of recruits.
(31) That arrangements be made through an agreement with the
disbursement agencies and others concerned for the more
prompt delivery to your office all forgery cases together
with all papers connected therewith in order that they may
be sent to the field for investigation at the earliest
possible time after the offense is discovered.
(32) That steps be taken to secure the further cooperation of
the Post office Department and disbursing agencies of the
Government with a view of having the disbursement agencies
print a request on the envelopes by which checks are
mailed that it be delivered to the addressee only, and
attempt to have the Post office Department assist in carrying out these instructions by the promulgation of appropriate
- 13 Mr. William H. McReynolds.
orders to its employees. See U. S. Postal Guide for
1934, re delivery of mail, letters, sections 69 to 73,
pages 34 and 35.
(33) That steps be taken to provide the larger district
offices, particularly New York and Chicago, with wire
tapping and dietophone equipment, to be used only in
important cases, and that at least two agents be
trained for the installation and use of such equipment.
(34) That the best and most complete method of record keep-
ing by the district offices which is most compatible
with the record keeping in the Chief's office be ascertained and that thereafter the agents in charge be
required to keep their records in such uniform manner
as may be decided upon.
(35) That there be assembled and properly annotated all the
sections of the laws which the Secret Service is called
upon to enforce and that a copy thereof be delivered to
each agent in charge and each agent.
(36) That pending the passage of proper legislation, an
effort be made to procure a regulation promulgated by
the Federal Reserve Board requiring all of its member
banks to surrender counterfeit money coming into their
possession to the Secret Service by mail or direct to
a Secret Service agent within twenty-four hours after
its receipt by such member banks.
(37) That consideration be given to revising the form and
the subject matter contained in the daily reports with
a view to simplifying and curtailing same. Pertinent
to this suggestion we quote a recommendation made by a
representative of the Secret Service who has given same
serious study.
"In addition to, or instead of, the present daily
report now being submitted, I would suggest that a
separate report be made on each counterfeit bill recoived where the passer can be identified, and these
reports filed according to the type of counterfeit
bill passed. A separate daily report of counterfeits
'not in evidence' could be made, and these counterfeits
forwarded to Washington as is now being done. At the
present time a daily report embracing every activity
of the operative is made and those reports are filed
as to dates in book form. Unless the date of an
occurrence is known it is hard to locate an account of
246
- 14 Mr. William H. McReynolds.
it in the daily reports. I would also suggest that a
short report be made daily by the operative showing his
location, case he is working on and daily expenses. An
'arrest' report could be submitted showing details of
the arrest, etc., and this report, together with copy
of report to the United States Attorney, could be forwarded to Washington, which would give a full account
of the case. Copies of reports containing information
which might be beneficial to other districts should be
forwarded to those districts. These reports would be
filed according to the type of notes passed, with
copies in the 'arrest' files, and card indexed both as
to name of person arrested and type of note passed.
More reports will have to be submitted under this
system, however, it will not involve more time than
the present report, and the filing system will be
greatly improved."
(38) That photograph, fingerprint classification, description and complete personal history of each maker of
counterfeit notes should be furnished each district
office for their files.
(39) That a card index system be installed in each district
office, the cards to contain a description of each
counterfeit note passer or maker not apprehended,
these cards to be filed according to type of counterfeit note passed, and should contain name and address
of victim and other witnesses. The cards to be placed
in another file when violator is apprehended and to
contain the name of the violator.
(40) That study be given to additional measures which may
be taken for the protection of the person of the
President, particularly in connection with electrical
devices recently developed. Attention is called to
an electrical revolver detector and package detector
produced by Paul W. Kooh and Company, Scientific
Equipment, #20 North Wacker Drive, Chicago, which
are in use in the Illinois State Prison. The
revolver detector also was used in a banking institution in Chicago. It may be practical to use similar
devices in certain places where the President appears.
It is recommended that a committee be named having a
representative of the Secret Service, the Bureau of
Standards and an electrical engineer from the Treasury
Department to make a careful study of all such devices
in order to determine whether the devices or modifications of them could be used to safeguard the President.
247
- 15 Mr. William H. McReynolds.
(41) That serious consideration be given to the question of
better safeguarding all materials and every phase of
details relating to the making of currency, stamps and
all other government obligations, etc., at the Bureau
of Engraving and Printing, and that as an aid in so
doing it is recommended that one representative from
the Secret Service, one from the Bureau of Standards
and one from the Bureau of Engraving and Printing
compose a committee to give these matters consideration.
(42) That the official pamphlet issued under the title of
Fines and Imprisonments in Counterfeiting Cases be
furnished to each agent in charge and to all employees
under their supervision and that, if not already done,
copies be furnished to each U. S. Attorney for their
information and in order to guide them in their
recommendation to the court as to sentences to be
imposed on persons convicted of counterfeiting. It
is suggested that this comprehensive treatise may serve
a useful purpose if presented in some way to the
committee on crime of the American Bar Association and
to other organizations having for their purpose the
prevention of crime. It is also suggested that consideration be given to the issuance of other bulletins
of a like or similar nature for the purpose of informing
and educating public officials, Crime Committees, and
other interested persons with reference to the Secret
Service and in order to promote their greater interest
and cooperation in connection with more appropriate
sentences, legislation or other matter in which their
aid or approval may be of value.
Recommendations for Legislation
(1) Statute making it a felony to threaten bodily injury to
the President or the President-elect of the United States,
either orally or in writing.
(2) Statute making it a felony to commit any assault on the
person of the President or the President-elect of the
United States.
(3) Statute making it a capital offense to assassinate the
President or the President-elect of the United States.
(4) Statute making it a misdemeanor to fail to report within
twenty-four hours to the Secret Service Division the
receipt of any counterfeit coins or currency, or receipt
248
249
- 16 Mr. William H. MoReynolds.
of any information concerning counterfeit coins or currency,
and making failure to report these violations prima facie
evidence of intent to defraud. (Banks have no direct
authority to confiscate counterfeits and often have trouble
with customers who do not want to surrender counterfeits
detected in their deposits. Banks would welcome such a
statute as they desire to co-operate with the Secret
Service, but have no specific authority to do so.) Suggest
making a nominal fine as a maximum penalty for failure to
comply with this statute.
(5) Statute providing for seizure of automobiles, trucks, or any
other property used in the manufacture, possession, concealment, or transportation of counterfeit money without regard
to prior liens or encumbrances of any kind.
(6) Statute providing minimum penalty of one year imprisonment
for the manufacture of counterfeit currency. (Present
statute provides only maximum penalty of $5000 fine and 15
years imprisonment).
(7) Statute authorizing operatives of the Secret Service to
make arrests of persons violating any of the laws which
they are called upon to enforce and authorizing them to
carry concealed weapons.
(8) Statute authorizing issuance of search warrants for search
for counterfeit money upon affidavit of an operative of
the Secret Service that he has information and is of the
belief that counterfeit money is being concealed in a certain place.
(9) Statute authorizing agents to administer oaths on affidavits
taken in the course of their official investigations.
(10) Stature authorising the creation of the Secret Service Division in the Treasury Department, setting forth its functions
and also that it shall perform any other duties delegated to
it by the Secretary of the Treasury.
(11) That consideration be given to the question of legislation
for extending of the statute of limitations in check
forgery cases from three years to six years.
250
- 17 Mr. William H. McReynolds.
There will be found attached several memoranda prepared by
Operatives in Charge Thomas J. Callaghan, Grady L. Boatwright,
Charles Mazey and Terrance V. Ryan, and Operatives Leo J.
Williams and George J. Whitteher, containing some constructive
suggestions and the reasons for same which are in addition to
some suggestions made by them during oral interviews. It was
our purpose to request memoranda of constructive suggestions
from other operatives in charge and the more experienced
operatives. It is suggested that serious consideration be
given to the constructive suggestions submitted by the representatives of the Secret Service with a view of adopting such of them
as may be found practical. Some of the suggestions made by these
employees concur with and somewhat enlarge upon some of the
recommendations heretofore made by us.
Attention is called to the memorandum submitted by Operative
Whittaker relating to how to detect counterfeit notes. It is
believed that this material may form the basis of instruction and
education of new agents, police officers, groups of bank employees,
and employees of other large handlers of money concerning counter-
feiting.
It was suggested by a number of the operatives and at least
one banker that additional cograving and coloring might be used
in the making of currency which would cause counterfeiting to be
much more difficult, either by engraving process or the photomechanical process. It is suggested this question be given consideration by a special committee composed of a representative
of the Secret Service, one from the Bureau of Engraving and
Printing, one from the Bureau of Standards and one from the
Board of the Federal Reserve Bank, and that this committee confer
with technical representatives of one of the large engraving
companies and of the Eastman Kodak Company.
Respectfully,
Frank J. Wilson,
Special Agent in Charge.
W. E. McElveen,
Special Agent in Charge.
251
August 24, 1936
Hopkins was terribly upset when he had lunch with me. It
seems that Farley called him up Saturday and told him he was
the most unpopular man in the Administration; that he was the
greatest handicap to the President, and that he did not want
Hopkins to make any campaign speeches and wanted him to discontinue all press conferences. I gather before they got through
they both lost their temper at each other.
Hopkins is seeing the President this afternoon about it.
He said he felt it was up to him to defend his work and I agreed
with him. I think Farley overstepped the bounde of his authority.
Hopkins said he would let me know what the President said to him.
252
August 24, 1936
The President telephoned HM,Jr. and said he wanted
to name the members of the Federal Aloohol Administration
today. He said he wanted to appoint someone from California and was thinking of retaining Buck, the present
General Counsel. Under the law, the General Counsel
18 a member of the Board of three. If the President
keeps Buck and names a Democrat from California, that
would be two Democrats and the law further says that not
more than two members of the Board shall be of the same
political party. This would leave no place on the Board
for Willingham. The President said there was a question
mark against Mr. Willingham and HM,Jr. said, "I think
there are a lot of question marks against Willingham. I
have not heard anything about Buck.
The President then said, "Perhaps we can appoint
Willingham for one year,' and HM,Jr's response was:
"Rather than that, I would prefer that you leave it
vacant. I would not do anything on it until after
election. I would let the thing ride, especially since
nobody has raised the question." The President said he
was worried about California, but HM,Jr. said that if
he gave California this appointment then the Finger Lakes
region would be on his neck. "My advice," he said to
the President, "would be to let the thing go for the time
being." The President agreed.
253
Conference on Reinvestigation of Relief at Miss Lonigan's
office, August 25th
Present - Mr. H. B. Myers, Director of Social Research, WPA
Miss Lonigan
Mr. Myers brought over the schedules and instructions for the WPA
study of need in WPA families. He gave Miss Lonigan a complete picture
of the mechanisms of the study.
If the money was released immediately, hiring would begin at once
in the local statistical offices, workers would be in the field by
September 1st, the small sample study would be completed by September
15th, and the whole study by October 1st.
The final result was to be a simple count of families in two
groups - "above standard" and #below standard."
Miss Lonigan questioned Mr. Myers very closely because at first
his answers seemed incredible.
The "standard" was assumed to be the security wage rates of the
WPA worker in the family. It was purely arbitrary to assume that the
security wage level was the level of need, because WPA wages were set
very high to begin with. In addition, they were constantly readjusted
upward because of group pressure. To assume that all families receiving less than security wages were entitled to WPA employment was to
bring a large part of the working population within the classes entitled to Federal relief.
The scheme of tabulation also provided that if all family income
(except WPA) added together equalled less than the security wage, the
family was classed as sub-standard. In other words, if a man's security rate was $50, and his wife earned $49. he was classed as #below
standard." The inference was that he ought to continue getting $50.
whereas according to any normal program he ought to get $1. He would
not be "below standard" but 98 percent of standard.
In this count relief income was not counted. All direct relief,
old-age pensions, gifts from relatives, based on need, and other help
were excluded. The family's income, including pensions, might run
well above $50, but they would be sub-standard.
Relief in kind was not even recorded, elthough the distribution
of free commodities and free medical aid puts many relief families
far above families that earn their own living.
254
-2-
Finally, the "standard" proposed was reduced to complete absurdity
because it took no allowance of irregular income received at some
other time of the year. All farmers whose income depended on a harvest,
or irregular sales of wool, or meat animals, and all seasonal workers
would be #below standard by that test, and presumably eligible for
WPA. All families living in communities where they could maintain
themselves by gardening, hunting, fishing, or logging, would inevitably
have incomes below the "security wage."
The whole proposal was so incredible that Miss Lonigan made no
comment whatever to Mr. Myer. Apparently he had never seen anything
questionable in his definition, either of the standard or "below
standard."
The only possible explanation of such a study was that it was part
of a skillful piece of propaganda, because it would apparently "prove"
that 98 percent of the people on relief were in need. The definition
of need was much too elaborate for any one to follow it.
Mr. Myers described one modification of the security rate. It
is now adjusted upward or downward depending on the size of the family.
That means a complete return to relief standards, and removes one of
the last excuses for having started the WPA program. This was one of
the reasons especially urging for the replacement of the FERA works
program.
August 28, 1936
255
August 25, 1936.
In connection with the tax study, there were present in the
Secretary's office today: Dr. Haas, Mr. Upham, Mr. Taylor, Mr.
Bell, Mr. Gaston, Mr. Oliphant, Mr. Parker who is with the Joint
Committee on Internal Revenue Taxation, Mr. Beaman who is House
Legislative Counsel, and Commissioner Helvering.
MR. PARKER said: "The gift tax seems to be in fairly good
shape, but on miscellaneous taxes we have a conference with Dr.
Haas and we figure to go through miscellaneous taxes first for the
inequities and seek further administrative difficulties and then
on those it seemed worth while to make some economic study to see
what the economic effects are. Not on all but probably more on
temporary taxes and those that have doubtful merit. That is based
on your letter. You pointed out those three things, inequities,
administrative difficulties and economic effects."
THE SECRETARY inquired: "Have you got started?"
DR. HAAS replied: "We decided at the conference there was
certain statistical information to accumulate and we have been
working on that. Of course, it will take a little while to do that.
That's only in regard to miscellaneous taxes."
MR. PARKER added: "I had a further thought that we did not
take up at the other conference and that was to get somebody in the
General Counsel's office who was handling miscellaneous taxes to tell
us as far as they could the points in those taxes on which they were
having litigation; that is, doubtful points, because when you come
to miscellaneous taxes,a large part of which are passed on, it is
very desirable to have certainty. If the man does not pay the tax,
thinking he is not liable and finds he is, it is too late to pass it
on. On miscellaneous taxes, especially sales taxes, it does seem
that we could improve certainty of taxes-clear up any doubt-and
that is not entirely limited to temporary taxes. I think there is
considerable doubt on some features of the stock transfer and that
we have had on the books for years."
THE SECRETARY inquired: "Will you sort of get started on the
miscellaneous taxes first?'
256
-2MR. PARKER replied: "We thought we would start that first, but
we thought we would run the others concurrently. Both are big jobs."
THE SECRETARY asked Commissioner Helvering if had any suggestions.
COMMISSIONER HELVERING'S reply was: "Of course some of those
miscellaneous taxes are causing us more trouble in litigation. For
instance, the fur tax produces about a couple million dollars that I
think has taken more time in proportion to what we collect than any
other particular tax. Now, under the new law it is in better shape
than heretofore, but I have not been able yet to see the effect.
There has been quite a bit of trouble about the stock issue tax too,
which I am not able to go into now, mostly where under strict interpretation of the law we would have to make one, two or three stamp taxes
applicable, which in effect meant only one transaction."
THE SECRETARY inquired: "Do you gentlemen expect that your
committee will wait or are they going to let the staff do the work?"
MR.PARKER replied: "Senator Harrison said he hoped to get the
committee together sometime the latter part of September and by that
time I hope to have an outline of what we hope might be done."
THE SECRETARY remarked: "We are getting off to a good start.
Do you feel that way, Mr. Beaman?"
MR. BEAMAN replied: "I don't know anything about it."
MR. PARKER explained: "We are not in shape to make any decisions
as to what changes we want to make. We have to find inequities first
and then Mr. Beaman will have to see what can be done."
MR. BEAMAN asked Mr. Parker: "Are you confining inequities to
miscellaneous taxes?"
MR. PARKER answered: "Oh, no. We are going through the income
taxes but only on the major ones. I think we have to look at the
major ones and see what we can do. We don't mind a little one if its
easy to fix but that's a pretty big order to take out inequities on the
income taxes. I don't want to say we can make a complete job, but we
can do something worth while."
THE SECRETARY then asked Mr. Beaman: "Do you have some idea from
some other approach?"
-3. -
257
MR. BEAMAN replied: "No, I am pretty much of a pessimist about
remedying the major inequities in the income tax law. It's so complicated that nobody knows anything about it."
MR. PARKER remarked: "Yes, it's pretty true. Most of the
Treasury agreed that we thought it would be nice if a man, say, reported
income in 1936 and he paid his tax on it and then after 1936 was outlawed, the Treasury comes along and says, 'no you should have reported
that in 1937 and you get two taxes on the same income. As a matter
of policy it would be very fair to say, 'all right, you tax the man
in 1937, but we will credit him with that refund that he would have
been entitled to and then he would just pay the additional rate of
tax.' And the same way in favor of the case where a man does not pay
a tax in 1936 and then comes along in 1937 and says, 'I should have
included that in my 1936 income.' So you can't tax him in either
year. Then we worked on that for some weeks with Mr. Beaman and it is
a terrific job to try to do it. We have not been able to do anything
on it because it's so difficult to bring about. I may have a good
idea or the Treasury may have a good idea, but it's pretty hard to
put it in law because the law is so complicated. It just seems we
can't do it without opening up a lot of loopholes."
THE SECRETARY said to the group: "I would like to keep in touch
with you people and have a meeting from time to time as you go along
because I am really very much interested in this thing and I take it
from what you say that you really haven't gotten started yet."
MR. PARKER answered: "I would say we have started. It's neces-
sary to do a little preliminary thinking and planning before you start
something and you don't lose much time by that. We have certain outlines of the income tax that we might look into and we have a partial
outline on miscellaneous taxes and we are ready to go over that with
Mr. Bliss, who I think is the best man in the Miscellaneous Tax Unit,
and I think we can say we are getting a fair start this week."
THE SECRETARY said to Mr. Parker: "Just so there is no misunder-
standing, I wish your committee would address all of it's requests
to me and I will redistribute them."
MR. PARKER answered: "Very glad to do that, Mr. Secretary."
Continuing, the SECRETARY said: "So there won't be any delay
and in that way I will be able to keep my fingers on it if the committee
will address it's requests to me."
258
-4THE SECRETARY added: "I just want to know how you were getting
along."
At this point Mr. Beaman left the Secretary's office and the
Treasury group remained.
THE SECRETARY said to them: "This thing Mr. Oliphant gave me is
a draft of a letter in which he brings up five different inequities
in the law and No. 4 in it is a question of the Liberty League and the
method of giving a note and then deducting it as a gift. I thought
about it considerably and I decided not to ask the President to sign
it because I felt we could do it without bringing the President into
it. I thought it was a mistake politically to bring the President
into it. Just so you will know all the facts about it,Guy (Mr. Helvering), I will give you a carbon. I spoke to the President about it.
This is what he suggested. He thought that Helvering ought to write
the following letter somewhat like this:
My dear Mr. Chairman:
On the question involving Treasury ruling, the law provides (quote the law).
Mr. X has given a check to a political or party organization, obviously for immediate use in furthering the
interests of that organization. He has received in return
what purports to be a note from the political organization,
this note payable after election. He claims that if the
note is not paid on due date he can deduct it as a bad debt
in his return.
It is believed by the Bureau that such a procedure
would violate the intention of the statute and that a gift
to a political organization is just as much a gift as a
gift to an individual and should, therefore, pay the gift
tax. The fact is clear that the history of political contributions shows either outright gifts or bona fide loans
made in the expectation of repayment.
Evidence in this new type of case seems to show that
the so-called loans are not made with the expectation of
repayment and in addition, the donor shows that by this
device he can further make a deduction of a loan.
259
5-
It would help the Bureau if the committee could advise the Bureau as to the intent of the committee when
drafting the law."
"That was the President's idea," Mr. Morgenthau said, "of
how to Handle it. I didn't correct him because he didn't have
quite the thought but his idea was that you could write it and
I think Oliphant's original idea where he incorporates four
others. The thought back of this thing is to put these fellows
on notice that we will ask for new legislation when Congress meets
which covers the loans of the Liberty League as outright gifts.
What you should do is to read that and think it over. But the
President's idea is it should go to the committee-very importantfrom the commissioner rather than from him, or a letter from the
commissioner to me or from me to the commissioner.
"What I would like you to do, Guy, is to talk it over with
your people and with Oliphant and between now and Thursday noon
come back and see me.
"The President caught this 'cold'. He loves to be a tax
lawyer and sit down and write himself a letter and he's a little
mixed on the gift tax, but he got a big kick out of it."
COMMISSIONER HELVERING said: "My thought is to serve notice
someway to these people that this thing is going to be made retroactive."
THE SECRETARY said: "Well, think it over and come back
Thursday."
THE WHITE HOUSE
WASHINGTON
My dear Mr. Secretary:
Replying to your letter calling attention to
five methods by which the fair intention of the Congress
in enacting tax legislation is defeated and recommending
legislation to stop these practices, I shall transmit your
suggestions to the next Congress and recommend the enact-
ment of the corrective legislation you outline, with the
further recommendation that it be made effective as to all
transactions entered into subsequent to the date of this
letter which, with a copy of your communication, I as today
making available to the public.
Very sincerely yours,
The Honorable
The Secretary of the Treasury
260
261
By dear Mr. Secretaryt
Replying to your letter calling attention to
five methods by which the fair Stitution of the Congress
in emating tax legislation is defeated and recommending
legislation to stop these practices, I shall treasmit your
suggestions to the next Congress and recommend the and
ment of the corrective legislation you outline, with the
further recommendation that it be made effective as to all
transactions entered into subsequent to the date of this
letter which, with a copy of your communication, I - today
making available to the public.
Very sincerely yours,
The Benerable
The Secretary of the Treasury
THE WHITE HOUSE
The Honorable
The Secretary of the Treasury
OFFICIAL BUSINESS
PAYMENT OF POSTAGE,8300
PENALTY FOR PRIVATE USE TO AVOID
THE SECRETARY OF THE TREASURY
262
WASHINGTON
My dear Mr. President:
Methods by which taxpayers avoid or reduce taxes contrary to
the general intent and purpose of our tax laws are the subject of constant
study in the Treasury Department. These methods are of two general sorts,
those within the strict letter of the statute but contrary to its spirit,
and those outside the statute but offering insuperable difficulties of
proof in the process of collecting taxes which the Congress meant to be
collected.
The Department's study of five of these methods which operate sub-
stantially to defeat the purpose of the Congress has been completed. They
should, in my judgment, be the subject of corrective legislation when the
Congress next meets. These methods are briefly described on the attached
sheets and the type of legialation which should be sought is indicated. I
think it desirable that you recommend to the next Congress the enactment of
these corrective measures. Moreover, it would be desirable and wholly fair
that the proposed legislation be made applicable to all transactions entered
into subsequent to the day your purpose to recommend the legislation is made
public. I, therefore, suggest that your communication to the Congress include a recommendation to this effect.
Faithfully yours,
Secretary of the Treasury
The President,
The White House.
263
1. As the law now stands, where a parent corporation
and a subsidiary corporation use the accrual basis in making
their separate tax returns, the accrued portion of a given
interest item on an obligation owed by the subsidiary to the
parent may, under certain circumstances, not be reported as
income by the parent, but, be reported as a deduction by the
subsidiary. Obviously, the identical interest item, if not
income for one purpose, should not be a deduction for another
purpose. The law should clearly state that, where a taxpay-
cr, reporting income upon the accrual basis, is not required
to report a particular item of income on the ground of a
reasonable certainty that such accrued income will not be
collected, then, the debtor, also reporting income on the
accrual basis, shall not be allowed a deduction for such item
unless and until it is actually paid.
2. In numerous situations, liability for Federal taxes is imposed upon the person to whom a taxpayer transfers
property. The Commissioner of Internal Revenue now has in all
cases the burden of proving before the Board of Tax Appeals
that such transferee received the property in question under
circumstances giving rise to this transferee liability. If
such transferee is a foreign corporation, foreign trust, foreign
estate, or a non-resident alien, the burden of proof should not
be on the Commissioner because, typically, in such cases, the
books, records, and other means of proof are beyond the reach
of the Commissioner. With proper safeguards, the Commissioner
should be relieved of the burden of proof in cases before the
Board of Tax Appeals involving transferees of the sorts mentioned.
3. Section 113 (b) (1) (D) of the present Revenue Act
requires amendment. As it now stands, a taxpayer or group of
taxpayers may avoid all tax liability upon an enhancement in the
value of property by transferring such property to a corporation,
which he or they control, without taking back any stock, such
property thereafter appearing as part of the paid-in surplus of
the corporation. Later, this taxpayer or group of taxpayers may
sell their stock in the corporation at a price enhanced by the
value of the property so transferred to the corporation and the
tax liability on the proceeds of this sale of stock would not
include tax liability on the enhancement in the value of the
property prior to its transfer to the corporation. Section 115
(b) (1) (D) should be so amended as to correct this situation.
-2264
4. Funds are sometimes supplied to organisations
not operated for profit under circumstances making it
difficult to establish whether the transaction in question
was in fact a loan, or, in reality, a gift cast into the
form of a loan. From the very nature of the situation,
there is often great difficulty of proof in such cases. The
whole matter should be made clear by legislation. Losses on
loans made to organizations of the classes typically supported by gifts should be expressly made non-deductible as bad
debts.
5. The present estate tax law gives the executor an
election to have the estate valued as of the date of death
or as of one year thereafter. It is now being asserted that,
if such later date is elected, increases of various sorts in
the estate are not to be included in such valuation a year
after death. The matter should be put beyond all doubt to
cover numerous situations. Thus there should be no possibility
of an estate tax avoidance by an executor being able, during
the year following the decedent's death, to strip of its surplus
a corporation, in which the decedent was heavily interested, of
substantially all of that surplus by having dividends declared
in extraordinary amounts with the result that the value of the
stock in such corporation one year subsequent to the death of
the decedent is greatly reduced. The intention of Congress as
to the taxability of such interim increments in estates should
be made clear.
WASHINGTON
PAYMENT OF POSTAGE 8300
OFFICIAL BUSINESS
THE SECRETARY OF THE TREASURY
The President
The White House
PENALTY FOR PRIVATE USE TO AVOID
TREASURY DEPARTMENT
OFFICE OF THE SECRETARY
WASHINGTON
SECRET SERVICE DIVISION
August 25, 1956.
The Honorable
The Secretary of the Treasury.
Dear Mr. Secretary:
I respectfully request a personal conference at your
convenience granting me sufficient time to discuss with you
somewhat in detail matters relating to the personnel and
operations of the Secret Service Division in order to theroughly acquaint you with those matters gleaned through -
more than fifty years' experience in that Service.
I shall be glad if you will indicate when and where
this conference shall take place if agreeable to you.
Yours very truly,
265
Draft sent to Breakus
aug. 25,1936
own
266
Centiming the practice incugarated last year, the at
tashed - revises the Budget for the fiscal year 1997
by reflecting the changes affecting the estimates of revenues
and expenditures which have occurred since the 1937 Budget
was transmitted to Congress in January 1936. Two outstand.
ing events have taken place since that time which have satertelly affected the receipts and expenditures of the Government.
The first of these was the decision of the Supreme Court declare
ing the Agricultural Adjustment Act unconstitutional, as a
result of which the Government lost substantial revenue from
processing taxes. The second was the passage by the Congress
of the Adjusted Compensation Payment Act providing for the
immediate payment at their face value of the veterans' adjusted
service certificates, which by their terms were not due antil
1945.
As a result of the Supreme Court decision the extimated
revenue free processing taxes for the fiscal year 1936 was
reduced by $452,000,000. Up to the time of that decision
the Agricultural adjustment Maintaination had empended in
accordance with law the - of 8325,000,000 and had made
substantial commitments for additional expenditures is sation
Spation of free this source. To provide for carrying
out the atral obligation of the Government with respect to
the already estered late with Summare and /
on their part had been at least partially performed, Congress
appropriated $296,000,000.
By the esestment of the Soil Conservation and Demobite
Alletment set, which insluded authority for as ammul printies of not to exceed $500,000,000, Congress provided
a new fare progres to proverve to the farmers the benefits
of fair and adequate prices for the preduct of their labors.
The passage of the Adjusted Compensation Payment AND
caused as increase in payments to veterens for the past year
of $2,673,000,000 and will result in further payments
estimated at $560,000,000 - this account during the present
fiscal year.
To most the additional requirements of the Treasury on
account of these expenditures the Deagress was requested to
provide sufficient additional revenue, (1) to - good the
less of processing tanes is the fiscal year 1936, (2) to
defrey the I cost of operation of the - fare program, and
(3) to - ever a period of nime years the cost of payment
or the adjusted service certificates.
the Revenue not of 1936, morted w the Congress is
- to this request, will produce, - the basis of
268
estimated business conditions Zer the colortor year 1936,
- animal is the amount of $652,000,000.
For the fiscal year 1937 the amount of this revenue will be
only $328,000,000, since only the first and second of the
quarterly payments of income taxes under this Ast will be
made to the Treasury within that year. For the same year,
however, there will be a non-recurring revenue of $82,000,000
from the windfall taxes.
Review of the Fiscal Year 1936
The total receipts amounted to $4,115,996,615 against
the estimate in the 1937 Budget of $4,410,793,946, a not
decrease of $294,837,331. After taking into consideration
the loss in processing taxes of $452,000,000, receipts from
other sources amounted to $157,000,000 more than was estimated.
A. receipts showed a net increase of $316,000,000 over those
for 1935, and rescipts from sources other than processing
taxes showed an increase over 1935 of $760,000,000.
The total expenditures of the Government for the fiscal
year ended June 30, 1936, signated to $8,879,798,258. The
estimated expenditure show in the Budget of last Jennary of
$7,663,301,338 did not, of course, include $1,673,003,000
for adjusted compensation payments. Except for this amount
the expenditures would have been about $439,000,600 less the
the January estimate.
269
The defieit for the year montal to $4,763,002,642.
which included $403,240,190 for statutory dobt retirement.
Deducting this assest leaves a not defiest of 44,360,601,452
The estimated not deficit as shown is the of last
January was $2,682,482,392. Had is not been for the isvalidation of processing tames and the passage of the us
justed Compensation Payment has, the not deficit would have
been less than the January estimate by more than $400,000,000.
The public debt increased during the year $5,077,690,869.
but in that time the balance of each in the general fund of
the Treasury likewise showed as increase of $840,164,664.
Increase for the Fissal Year 1937
Total receipts is the fiscal year 1937 are new estimated
at $5,665,839,000. a not increase of $12,000,000 over the
amount of the 1937 Dudget estimate. The estimated increases
in general revenue more them effect the revenue lesses due to
the invalidation of the special taxes levied under the provisions of the Agricultural Adjustment and situminous Goal
Conservation hats, and Desease of a change in the method of
collecting tames under the Social Security Ast which will defer
to the fiscal year 1938 the collection of a portion of these
teace. the lessee free these cases assent to $668,000,000,
which are alightly more them effect w ectimated increases in
- of $420,000,000 resulting from the Revenue hat of 1936.
833,000,000 from tames on carriers and their -
270
$237,000,000 reflecting chiefly improvement in business disions.
the expenditure requirements for the fiscal year 1937 are
new estimated at $7,762,835,300, skills includes $560,000,000
to complete the payments of adjusts: expensation to veterans
and $580,000,000 for statutory debt retirement.
Some of the principal items included in the expenditure
requirements are as follows: The Agricultural Mdustment
Administration will require $5,5,000,000 and the Civilian Conservation Corps $300,000,000. The requirements of the Agri-
cultural injustment Administration will be greater for 1937
than for 1936 due to the interruption of that program in the
past year by the Supreme Court decision and the consequent
postponement of expenditures. The expenditures for the Civilian Conservation Gerpe for 1937 will be less than those for
1936 due to the reduction made in the number of earellees as
compared with the average number for 1936.
The operations of the Social Security Board and the estadlichment of the Old Age Reserve Account will require as addisional $405,000,000. The Board commond operations late
in the fiscal year 1936 and its expenditures, therefore, were
not large during that year. The old Age Reserve Account will
require - initial contribution is 1937 of $265,000,000.
271
For interest on the public debt $625,000,000 will be
required, and for recovery and volier $2,835,000,000. In
view of the general improvement in business conditions, 16
is anticipated that the assess expended for recovery and
relief in 1937 will be materially less than for the fiscal
year 1936.
The estimated expenditures for the other establishments
are $445,986,000 greater than the expenditures for 1936. due
principally to the development of the general public works
program and to increased expenditures for national defense.
The estimated defieit for 1937 is $2,096,996,300, which
includes $500,000,000 for statutory debt retirement and
$560,000,000 for further payments under the Adjusted Componee-
tion Payment set. Deducting the amount of the statutory debt
retirement leaves a not defieit of $1,526,996,300. This does
not mean that there will be an increase is the public debt
of this amount for the reason that 18 is contemplated during
the year to reduce the working balance of the general fund
by approximately $1,100,000,000. The following / show the
changes during the year is the working balance of the general
fund and is the gross public debt.
272
FORD
Working balance Jane 30, 1936
Reseipts from tense and secreta
Receipts from sale of public debt obligations (not)
Punds available fiscal year 1937
Expenditures
5,MAY
$7,762,835,300
Lones
Statutory debt retirements $580,000,000
Veterens' bends issued ... 560,000,000
1,240,000,000
Cash required to most
ordinary expenditures
Cash required to most
redemption of veterens'
6,622,835,300
beads
800,000,000
Cash required to meet
redemption of national
bank notes
100,000,000
Total cash required during fiscal year 1937
Working balance June 30, 1937
7,522,835,300
$1,110,216,050
PUR-IC
Gross public debt June 30, 1936
New public debt obligations to be issued (not) $750,000,000
New public deist obligations to be issued
to vetereas
560,000,000
Total new public debt obligations
Less redemptions:
Veterans' bonds
National bank notes
833,778,543,494
8000,000,000
100,800,000
Net increase is debt
Gress public dobs June 30, 1937
$1,310,000,000
900.000.000
430,000,000
896.389.543.096
48
273
The following table - total receipts and 1
Stares for each of the fiscal years 1934, 1995, 1936 and
estimates for 1937. It will be noted that there so a stantial reduction in the - deficit for each of the years
following the pook of 3934.
(In millions of dollars)
1934
1935
1936
1937 (est.)
Receipts
3216
3600
4336
5666
Expenditures
7105
7375
6880
7763
Gress deficit
3989
3575
4764
2097
Debt retirement 360
573
Deduct
Veterma' bonds -
-
403
580
1674
560
2667
957
Deficit (eminities
debt retirement
and veterans'
bonds)
3629
3002
In - massage to Congress on March 10, 1936, requesting
- apprepointing of $1,900,000,000 for relief of employment,
X stated than that request, together with those previously missed w the Congress to provide for the Civilize Conservation
George - certain passe - 1 as ented - faverably
*9
by the Congress, give security during the most fiscal year
to these most in nood, on condition, heaver, that private
employers hire mony of those now on relief rolls. I
further states that should industry cooperatively achieve
the goal of reemployment the appropriation of $1,900,000,000,
together with the unexpended balances of previous appropria.
tions, will suffice to carry the Federal works progres
through the fiscal year 1937 and that only if industry
failed to reduce substantially the number of these now out
of work would another appropriation and further plans and
policies be necessary. Many of the unemployed are now
being absorbed in industry. I believe that there will be
a further substantial increase of employment in private
industry during the coming months. Whether it will be
sufficient se that the work relief rolls can be reduced to
come within the amount appropriated by Congress is a matter
that cannot be determined for several months.
Furthermore, in estimating the amount that would be
necessary to care for a mach reduced number of unemployed
during the current fiscal year there was - factor which
was ast taken into consideration. That was the serious
drought which has affectedlarge sections of our country.
It I necessary to expend substantial amounts from the
4. 10
- relief - to million the - in the draught ween. the total I that will be medid
for this purpose - be determined at this mother correct of the - problem and the
- required for / volier <131 be - only is the
evaing a year, - if it is found - to request
additional appropriations for these purposes, the - posted therefore will, of - increase the estimated
expenditures show is this - Any - requests for
additional funds will, of course, be kept at a
It is confidently expected that they will adment to Loss
then $500,000,000.
GENERAL MIDGET SUMMARY
BALANCED STATEMENT AS REQUIRED BY YES BUDGET AND ACCOUNTING ACT, 1921 (U.S.C. TITLE 31. and. 11 (8))
Revised estimate,
GENERAL AND SPECIAL ACCOUNTS
fissal year 1937
Actual, fiscal
Actual, fiscal
year 1936
year 1935
I. RECEIPTS:
1. Revenues (Supporting Schedule No. 1):
Internal revenue
Customer
Miscellaneous revenues
Total revenues
2. Realisation upon assets
Total receipts
3,512,851,608.15
386,811,593.69
216.293.413.29
3.277.690.027.82
343.353.033.56
169,002,670.00
5,642,760,000
23,079,000
4,115,956,615.13
3,790,045,732.26
10.481.469.70
5,665,839,000
4,115,956,615.13
3,800,467,201.96
24,100,000
991.735.300
920,000,000
1,941,636.11
717.300.766.94
764,439,126.94
20,081,420.72
589.501.937.22
533.597.243.04
675,962,094.01
605.573.274.31
5,074,691,000
402,000,000
166,069,000
11. EXPENDITURES (Supporting Schedule No. 2)
1. Legislative and executive
2. Civil departments and agencies, and the judiciary
3. National defense
4. To and' pensions and benefits
Jerana' Administration
Adjusted Compensation Payment
Agricultural Adjustment Act
6. Civilian Conservation Corps
7. Social Security
8. Debt charges:
Interest
5.
Retirements
9. Refunds
10. Recovery and relief
11. Supplemental items (for above groups 1 to 7. inclusive)
Total expenditures
III. DEFICIT
IV. MEANS OF FINANCING DEFECIT:
1. Decrease in working balance
2. Borrowings (Supporting Schedule No. 3)
Total seans of financing
(1) Included in miscellaneous receipts.
600,000,000
560,000,000
585,000,000
300,000,000
405,000,000
$25,000,000
(1)
1,673,492,531.72
542,605,751.95
486,281,193.58
743,027,311.27
435,906,643.05
24,136,110.39
44,165,625.78
2,776,796,468.51
820,926,353.45
573.556.250.00
45,247,679.32
3,068,803,053.80
7,762,835.300
8,879,798,257.61
7,375,825,165.57
2,096,996,300
4,763,641,642.48
3,575,357,963.61
4,763,641,642.48
1,262,632,853.56
2,312,725,110.05
4,763,841,642.48
3.575.357.963.61
580,000,000
47,000,000
1,835,000,000
749,396,801.60
403,240,150.00
90,000,000
1,106,996,300
2,096,996,300
277
SUPPORTING SCHEDULE NO. 1
RECEIPTS
(Ordinary revenues and other receipts belonging to general and special accounts excluding postal revenues)
Revised estimate,
fiscal year 1937
Actual, fiscal
year 1936
Actual, fiscal
year 1935
I. REVENUES,
1. Internal revenue
(1) Income tax
2,303,363,000
1,426,575,433.84
1,099,118,637.90
258,000,000
110,000,000
121,000,000
589,200,000
531,650,000
80,900,000
406,820,000
94,600,000
218,780,753.53
160,058,761.47
140,440,682.34
(2) Missellaneous internal-revenue taxes:
Setate tax
01ft tax
Capital stook and excess-profite taxes
Aleoholic beverage taxes
Tobacco taxes
Stamp taxes
Manufacturers' excise taxes
Sundry taxes
Total (uned justed)
Adjustment to daily Treasury statement
Total miscellaneous internal-revenue taxes
(3) Processing taxes (Agricultural Adjustment Administration)
2,204,170,000
26,006,000
2,230,176,000
--
109,452,042.21
505,464,037.10
501,165,726.39
68,969,865.60
382,652,152.90
68,292,012.86
71,671,276.89
98,068,603.93
411,021,772.35
459,176,625.46
43,133,373.45
341,999,395.97
108,469,100.85
2,034,855,374.08
1,673,982,831.24
- 25,006,079.60
16,791,312.54
2,008,619,291.48
1,657,191,518.70
76,619,383.41
521,379,671.22
(4) Other internal-revenue taxes
Tax on unjust enrighment
Taxes on carriers and their employees
Bituminous ocal tax
Social security taxes
Total other internal-revenue taxes
Total Internalerevenue
2. Customer
3. Missellaneous revenues
(1) Miscellaneous taxes
(2) Interest, exchange, and dividends
(3) Fines and penalties
(4) Fees
(5) Forfeitures
(6) Assessments
(7) Reimbursements
(6) Gifts and contributions
(9) Sales of products
(10) Sales of services
(11) Rents and royalties
(12) Permits, privileges, and licenses
(13) Sundry receipts
Total (unad justed)
Adjustment to daily Treasury statement
Total missellaneous revenues
Total revenues
82,000,000
134.552,000
48,276.74
729,217.68
-
541,152,000
777,496.42
--
5,074,691,000
3,512,851,606.15
3,277,690,027.82
402,000,000
386,811,593.69
343,353,033.56
324,600,000
-
2,385,000
57,315,100
1,823,300
32,797,013.42
14,693,200
12,354,030.03
6,667,934.90
6,658,214.55
1,491,100
2,214,900
W
14,258,900
5,100
1,947,074.64
(1) 216,293,413.29
113,302.27
3,022,300
28,819,200
8,034,300
2,634,700
29,371,900
166,069,000
--
1,433,694.65
5,620,509.79
2,392,766.70
27,467,866.06
5,159,631.59
1,626,538.54
65,877,606.26
216,293,413.29
-
170,316,407.42
1,313,736.54
166,069,000
216,293,413.29
169,002,670.88
5,642,750,000
4,115,356,615.13
3,790,045,732.26
II. REALIZATION UPON ARSETS,
1. Repayments of investments
2. Sales of public lands, Department of the Interior
3. Sales of Government property
Total realisation upon assets
Total reseipts, general and special accounts
(1) Separation not yet available
(2) Included und missellaneous revenues, separation not yet available,
21,200,300
(2)
7,320,403.67
86,757.46
3,014,306.57
(2)
10,421,469.70
1,878,700
23,079,000
5,665,839,000
4,115,956,615.13
3,800,467,201.96
278
SUPPORTING SCHEDULE NO. 2
EXPIRES TURES
(Setimated and actual expenditures from general and special accounts)
Revised estimate,
fiscal year 1937
Actual, fiscal
Actual, fiscal
year 1936
year 1935
I. LOGISLATIVE AND EXECUTIVE:
1. Legislative establishment
2. Executive Office
Total, legislative, and executive
23,600,000
21,516,234.43
19,623,726.95
500,000
425,401.68
457,693.77
24,100,000
21,941,636.11
20,081,420.72
185,000,000
33,000,000
95,000,000
13,000,000
38,000,000
21,000,000
18,500,000
105,548,626.58
62,036,611.90
23,077,453.09
10,967,463.76
66,080,926.91
13,889,113.53
37,842,352.06
17.131.185.74
16,816,356.30
55,211,498.12
195,000,000
130,000,000
11,500,000
85,000,000
45,000,000
46,735,300
70,000,000
5,000,000
149.946.225.22
11. CIVIL DEPARTMENTS AND AGENCIES, AND THE JUDICIARY:
1. Department of Agriculture
2. Department of Commerce
3. Department of the Interior
Boulder Canyon project
4. Department of Justice (including the judiciary)
5. Department of Labor
6. Department of State
7. Treasury Department (except debt retirement, interest, old age reserve
account, and refunds, VII, VIII and IX below)
8. Bar Department (nommilitary)
Panama Canal
9. Independent Offices and Establishments
10. Tennessee Valley Authority
11. Retirement funds, civil, Casal Zone, and Foreign Service (Government share)
12. Post Office Department, deficiency
13. District of Columbia, contribution
Unclassified items
Adjustment disbursing officer's checks outstanding
Total, civil departments and agencies, and the Judiciary
72,780,090.80
11,447,778.98
52,016,467.19
21,016,755.48
32,276,677.51
13,012,157.65
15,860,779.62
147,132,321.61
57,246,869.33
5,766,204.74
44,391,279.57
40,662,400.00
21,009,100.00
85,860,912.32
5,707,500.00
1,940,085.81
63,956,146.64
4,539,295.00
-4,463,463.07
-6,416,302.83
991.735.300
717.300.766.94
529,501,937.22
550,000,000
370,000,000
391,424,149.26
373,014,977.68
321,410,530.43
920,000,000
764,439,126.94
533,597,243.04
600,000,000
560.000.000
675,962,094.01
605.573.274.31
1,673,492,531.72
1,160,000,000
2,349,474,625.73
---
490,365.40
111. NATIONAL DEFENSE:
1. Navy Department
2. Var Department
Total, national defense
212,186,712.61
IV. TETERANS' PENSIONS AND BENEFITS:
1. Veterans' Administration
2. Adjusted Compensation Payment
Total, Veterans' pensions and benefits
V. AGRICULTURAL ADJUSTMENT ADMINISTRATION
Refunds of DE recessing taxes
Total, Agricultural Adjustment Administration
vs. CIVILIAN CONSERVATION CORPS
605.573.274.31
550,000,000
35,000,000
532,524,007.92
10,041,744.03
711,819,102.95
31,204,208.32
585.000.000
542,605,751.95
743,027,311.27
300,000,000
486,281,193.58
435,508,643.05
140,000,000
265,000,000
405.000.000
24,136,110.39
525,000,000
580,000,000
749,396,801.68
403,240,150.00
820,926,353.45
573.554,250.00
1,405,000,000
1,152,636,951.68
1,394,484,603.45
17,000,000
30,000,000
14,085,195.44
30,100,430.34
20,715,688.09
24,531,990.82
47,000,000
44,185,625.78
45,247,679.31
VII. SOCIAL SECURITY:
1. social Security Board.
014 Age Reserve Account
2.
Total, social security
24.136.110.39
-
-
VIII. DEST CHARGES:
1. Interest
2. Retirements
Total, debt charges
11. REPUBDS
1. Custome
2. Internal revenue
Total, refunds
a
Extens of credits, deduct.
279
SUPPORTING SCHEDULE NO. 2 - CONTINUED
EXPRESTIONES - CONTINUED
Revised estimate,
fiscal year 1937
Actual, fiscal
Actual, fiscal
year 1936
year 1935
I. RECOVERY AND RELIKE:
1. Agricultural aid:
(1) Commodity Credit Corporation
(2) Farm Credit Administration (including Federal Farm Vortgage
Corporation)
(3) Federal land banks
Total, agricultural side
$175,000,000
129,715,022.53
360,244,064.86
a 80,000,000
a 33,223,232.37
141,500,814.96
64,000,000
60,486,790.63
46,107,860.54
a 131,000,000
156,978,580.79
127,454,610.64
7,500,000
495,591,986.97
676,195.79
1,814,342,306.87
500,000
1,000,000
2,882,448.90
2. Reliefs
(1) Federal Imergency Relief Administretion (including Federal Surplus
Relief Corporation).
(2) Civil Works Administration
(3) Drought-stricken areas (Department of Agriculture)
Total, relief
3. Public works
(1) Administrative expenses, Public Works Administration
(2) Boulder Canyon project
(3) Loans and grants to States, municipalities, etc
(4) Lease to railroads
(5) Public highways
(6) River and harbor works
(7) Works Progress Administration
(8) Other public works (national defense, public buildings, etc.)
Total, publ 1e works
9,000,000
20,000,000
9,000,000
250,000,000
220,000,000
499,150,631.66
11,327,263.67
80,561,219.99
1,906,230,820.53
25,255,459.16
14,561,002.60
10,023,710.53
23,520,507.04
172,116,011.89-
137,707,417.46
a 127,661,597.33
66,230,752.95
215,095,581.31
152,316,737.09
317,356,940.05
147,924,751.64
85,000,000
1,350,000,000
250,000,000
1,263,661,190.21
381,480,413.64
312,810,468.76
2,184,000,000
2,092,069,806.50
1,020,411,640.50
3,000,000
37,385,350.26
24,906,423.42
75,686,784.06
40,000,000
15,000,000
14,504,600.14
130,000,000
137,907,723.26
106,264.37
15,963,873.02
1,761,663.06
3,661,937.72
168,000,000
214,812,369.47
103,554,093.34
10,000,000
-
19,581,457.76
a 2,616,496.63
5,111,371.02
497,850.35
12,496,730.81
10,000,000
24,692,826.76
10,376,084.53
a 425,000,000
a 258,722,416.76
. 135,384,933.68
27,814,666.09
36,148,537.34
2,776,796,468.51
3,068,805,053.20
---
---
8,879,796,257.61
7,375,825,165.57
4. Aids to home owners,
(1) Home loan system
(2) Reergency housing
(3) Federal Housing Administration
(4) Resettlement Administrati
(5) Subsistence homesteads
Total, aids to home owne re
6,479,835.47
5. Miscellaneous
(1) Export-Import Banks of Washington
(2) Federal Deposit Insurance Corporation
(3) Administratio for industrial recovery
Total, miscellaneous
6. Reconstruction Himase Corporation
7. Tennessee Valley Authority
Total, recovery and relief
XI. SUPPLEMENTAL ITEMS
Total, expenditures
. Excess of credits, deduct.
1,835,000,000
90,000,000
7,762,835,300
280
SUPPORTING SCHEDULE no. ,
EFFECT ON THE PUBLIC DEST OF FINANCING THE DEFICIT
Revised estimate,
fiscal year 1937
Public debt at beginning of year
33,778,543,193.75
Increase in public debt during year:
To meet deficiency in revenues and receipts, general and special accounts
Less debt retirements included in defieit
2,096,996,300.00
580,000,000.00
1,516,996,300.00
Increase in working balance (+) decrease (-) general and special accounts
Decrease in public debt during year due to national bank note retirement chargeable
increment on gold
Net increase in public debt during year
Public debt at and of year
Amangt
year 1936
26,700,892,624.53
4,763,841,622.48
403,240,150.00
Actual, fiscal
year 1935
27,053,141,414.48
3,575,357,963.61
573,556,250.00
4,360,601,142.45
1,114,471,856.72
1,262,632,853.56
760,000,000.00
5,475,973,349.20
1,739,166,860.05
- 100,000,000.00
397,422,180.00
- 91,415,650.00
660,000,000.00
5,077,650,869.20
1,647,751,210.05
33,778,543,493.73
26,700,892,624.53
- 756,996,300.00
Total increase in public debt during year
Actual, fiscal
34,438,543,493.73
3,001,799,713.61
281
August 25, 1936
My dear Senator:
Referring to your telegree of the fourteenth instant with regard to the refund
of Mr. Matt Biltshire to accept the position of Assistant State Procarement officer as
the same salary he is now receiving, there appears to be some misunderstanding on the
part of Mr. Wiltshire which I wish to correct.
In his letter to you of Ingust 3 be was under the impression that the State Pro-
curement Office is perment established. This is not the case. The office -
created soleiy as as energency mass to handle the procurement of materials required
for local projects of the Works Progress Ministration. Nanco, such appointments are
solely of a temporary nature and for the period of the emergency only.
Mr. Miltabire also thought that be could be transferred from H.O.L.C. where be
is now receiving a salary of $3600, to the State Procurement Office at 84500 - the
salary fixed therefor.
Executive Order #1070 dated June 12, 1935, which governs appointments of
employees paid from emergency funds (as in this case) provides, with respect to trensfers that:
#3. If such transfer is approved, the salary of employee transferred to
a position the salary of which is paid from emergency funds shall not be
increased at the time of the transfer except upon the approval of the
President, and thereafter no increase shall be made is the salary of such
employee paid free energency funds for a period of at loast six months."
The Comptreller General, in a decision dated September 24, 1935, ruled that
generally a resignation and * subsequent employment within the six month period by
another federal department or establishment, the compensation of which is paid from
emergency funds, constitutes a contravention of Axecutive Order #7070, even though
the separation from the original service assumed the form of . resignation rather than
transfer, and that,
"A voluntary termination by resignation or otherwise, from another
department or branch of the federal service and as appointment
even though there be a few days break in the service, is a transfer
within the terms of the Executive Order. Any attempt to evade the
consequences of the Executive Order by subtenfage MY result in
disallowance of eredit for payment of salary to the employee involved."
to of the
The above are the compelling reasons for my telegram to you of August 14. in
effort cooperate I - willing to put Mr. Mass Kiltakiro is darge office
temporary appointment for the duration of the energency only, at the salary he is receiving, under the decision of the Comptroller General.
Very truly years,
Honorable Certer Class
Virginia
(Signed) H. Morgenthan, Jr.
Secretary of the Treasury
Not
sent the
as letter
August 25, and signed by the Secretary
covered
entiredated
matter.
282
Ny dear Senator:
During the temporary absence from the city of Mr. Morgenthes your telegree of the
fourteenth instant with regard to the refusal of Mr. Matt Wiltshire to accept the position
of Assistant State Precurement Officer has been referred to no for reply.
There appears to be seas misunderstanding on the part of Mr. Wiltshire which I wish
to correct. In his letter to you of August 3 he was under the impression that the State
Procurement Office is permently established. This is not the case. The office was
created solely as an emergency measure to handle the procurement of materials required for
local projects of the Works Progress Administration. Sence, such appointments are solely
of & temperary nature and for the period of the emergency only.
Mr. Filtshire also thought that he could be transferred from N.O.L.C. where he is
now receiving a salary of 83600, to the State Procurement Office at $4500 - the salary
fixed therefor. This cannot be done except for special reasons, and then only upon
Presidential approval.
Executive Order #7070 dated June 12, 1935, which governs appointments of employees
paid from emergency funds (as is this case) provides, with respect to transfers that,
a
#3. If much transfer is approved, the salery of employee transferred to
position the salary of which is paid from emergency funds shall not be
increased at the time of the transfer except upon the approval of the
President, and thereafter no increase shall be made in the salary of such
employee paid from emergency funds for a period of at least six months."
The Comptroller General, in a decision dated September 24, 1935, ruled that
generally a resignation and a subsequent employment within the six month period by
another federal department or establishment, the compensation of which is paid from
emergency funds, constitutes a contravention of Executive Order #7070, even though the
ceparation from the original service assumed the form of a resignation rather than a
transfer, and that:
"A voluntary termination by resignation or otherwise, from another department or branch of the federal service and an appointment even though
there be a for days break in the service, is a transfer within the terms
of the Executive Order. Bay attempt to evade the consequences of the Executive
Order by subterfage may result in disallowance of credit for payment of
salary to the employee involved."
As the above decision is applicable to all departments alike and prescribes the
conditions under which they are all working I - sure that it is clearly obvious that
Mr. Wiltshire could not be transferred to the Precurement office on a persement heats
at a salary of $4500 per - If you would kindly permit me, I shall be very to have an appointment with you is Lynchburg to further explain the matter) or would
greatly appreciate if you would kindly ask Mr. Wiltshire to see m here.
Very truly yours,
onorable Carter Glass
prechburg, Virginia
JP:RMC
Dayging
Streeter H
TREASURY DEPARTMENT
283
PROCUREMENT DIVISION
WASHINGTON
OFFICE OF THE DIRECTOR
August 25, 1936
As
MEMORANDUM TO THE SECRETARY:
I made a personal call on Senator Glass at the Hotel
Raleigh at 1:00 P.M. today, and presented to him your letter
with regard to Mr. Matt Wiltshire.
The Senator read your letter carefully and was pleased
with its contents. He said he would write to you acknowledging
receipt, saying that as the State Procurement Office is a
temporary one that he would advise Wiltshire to remain where
he is with H.O.L.C. which would be of longer tenre.
The Senator's principal objection was the fact that when
it comes to matters of patronage in the State of Virginia that
the recommendation of the Senators should be followed, and that
the man retiring from office should not be permitted to name
his successor. I told him that the recommendation with regard
to promoting the assistant in that office, Bittings, to fill
the office created by the transfer of Coleman, was based solely
on Bittings very excellent record, and his ability to do the
work.
The Senator was exceedingly gracious and kindly disposed
and appreciated your effort in getting the matter straightened
out.
July
Director of Progresment
284
August 25, 1936
Mr. O'Connor asked to see the Secretary this morning and
while he was in the office, HM,Jr. took occasion to suggest
that he send for Leon Henderson (he is known as an economist,
but he is really the right-hand man of Charlie Michaelson) and
tell him to take the ten leading banks in the country and make
up some sort of a pictorial graph showing, on one page, how
they have increased their holdings in long-term Governments,
and, on the other page, show a list of the directors of these
banks and their business connections.
HM,Jr. suggested that Leon Henderson ought to go back to
the time when Mr. O'Connor first started the practice of classifying banks' holdings to show length of Government maturities.
The idea back of this statement is to have material ready
should some of these Republican directors say that the program
and policy of the New Deal is all wrong. We can come back
and show that as a matter of fact, if they did think that, they
actually invested their own bank's deposits in long-term Governments.
Prepared by Lawrence H. Soltzer,
Division of Research & Statistics
TREASURY DEPARTMENT
285
CORMUNICATION
DATE August 25. 1936
Secretary Morgenthau
TO
FROM
Mr. Haas
CA
Subject: Moody's Opinion on the Budget Outlook
AA
In the issue of August 24, 1936, Moody's Bond Survey presents
the most reassuring comments on the Federal Budget outlook that have
appeared in the public prints from impartial sources.
The Survey points out that the Federal deficit, less Sinking
Fund and bonus provisions, has declined as follows:
1934
1935
1936
$3,630 millions
3,002
2,587
Referring to the very rapid increase in Government revenues, the
Survey emphasizes the fact that Federal revenues have not yet fully
reflected either the improvement in business or the strengthening of
the tax structure.
Moody's believes that total expenditures are likely to continue
at about present levels for several years to come regardless of the
possibility of a change in Administration; but that "the rising tide
of business recovery and corporate and individual incomes makes vir-
tually certain lower Federal deficits in coming years. In fact, a
balanced budget for the fiscal year 1938 could well be witnessed if
calendar year 1937 business is as good as that of 1936."
THE LIBRARY to
Mr. Haas
6
Miss Anderson
Mr. Burgess
5
Miss Lonigan
8
Mr. McLeod
Mr. Chevraux
Miss Michener
Mr. Coe
Mrs. Miller
Mr. Collado
Miss Diamond
4
3
Mr. Murphy
Mr. Nichols
Mr. Ellsworth
Miss Northrup
Miss Eyre
Mr. Reagh
Miss Florin
2
Mr. Gunther
Miss Sanford
Mrs. Harris
However
Mr. Hesse
Mr. Hooker
Miss Rose
Mr. Shere
7
Miss Snyder
Miss Hughes
Mr. Tickton
Miss Irons
Miss Westerman
Mr. Jett
Mr. Whelan
Mr. Kindleberger
Mr. White
Miss La Combe
Mr. Wolff
Mr. Lindow
Miss Wyckoff
Mr. Loker
AUG 24 1936
LIBRARY
286
PAGE 259
MOODY'S BOND SURVEY
Copyright. 1936, by MOODY'S INVESTORS SERVICE 65 Broadway. New York
AUGUST 24, 1936
VOLUME 28, No. 34
ESTABLISHED 1909
Published Mondays Subscription rate $100.00 per annum. With Moody's Stock Survey $150.00 per annum.
Entered as second-class matter January 18, 1936, at the post office at New York, N. Y., under the Act of March a 1879.
Bond Review and Outlook
Corporate bonds as well as Federals went to new
highs last week. Each of the four rating groups
and each of the three corporate groups established
new highs.
The bond market, except for the more speculative
issues, promises to be little disturbed by events
abroad. No change in policy is advised.
sented also as not to present a comparable tabula-
tion. The processing taxes which had brought in
$521 millions in the fiscal year 1935, dropped to only
$76 millions in the 1936 fiscal year, due both to the
injunctions obtained against its collection and the
Supreme Court's invalidation of the levy. The Revenue Act of 1936 provides for new taxes to replace
the amounts lost and more. Therefore, the gross
Federal Budget Outlook Better
Federal Government fiscal policies are coming in
for much discussion-of a political nature, because
of the Presidential campaign-of an economic nature, because of the fear that continuing Federal
deficits may lead eventually to a kind of concealed
inflation. Fears over the eventual results of the re-
cently mounting Government debt are not warranted now to the extent they may have been a year
or so ago.
By now the rising tide of business recovery and
corporate and individual incomes makes virtually cer-
"tain lower Federal deficits in coming years. In
fact a balanced budget for the fiscal year 1938 could
will be witnessed if calendar year 1937 business is
as as
were
at levels for recent the fiscal
year which closed last gross
deficit was $4,764 millions which carries appearance of a deficit,
but upon is found to nearly
so
bonus to millions
The Governmental the good staggering. which the 1936 highest soldiers' that of analysis expenditures 1936. the rapidly June extent years and 30. of mounting superficially the during The $1,774 be deficit total not
was charged to the 1936 fiscal year and was, of
course, a ron-recurring outlay. Therefore it seems
entirely reasonable to deduct the bonus in attempting
to obtain the actual trend of Governmental finances.
Receipts during the 1936 fiscal year were so pre-
revenue figures for the fiscal year 1936 in comparison with preceding ones and those to follow (under
the new tax Act) present a distorted picture.
The following table summarizes the Governmental
financial situation for the past three fiscal years with
allowance, as noted therein, for the factors just mentioned:
Fiscal Years
1934
Total Receipts
Total Receipts Less Processing Taxes
Ordinary Expenditures, Less Bonus
and Sinking Fund
Emergency Expenditures
Total Expenditures, Less Bonus and
Sinking
Fund
1985
1936
(In Millions of Dollars)8.116
3,800
4.116
2,763
3,279
4,039
2,741
8.148
3,413
4,004
8,655
8,290
6.745
8.802
6.704
3,630
Deficit, Less Sinking Fund and Bonus
3,002
2,587
*Had processing taxes yielded the same amount as during the precoding year, the 1936 deficit would have been $3,142
Governmental revenues are increasing very rap-
idly, both because of rising business activity, and
consequently higher profits and incomes, and because of the tax increases which have been made
during recent years. Neither the increased incomes
IN THIS ISSUE
Chicago, Great Western R.R. Co., 1st Mtge. 4s, 1959
Cuba (Republic of), Ext. Pub. Wks. 51/28 of 1930, 1945
Federal Budget Outlook Better
Improving Business Versus the Bond Market
New Issues-Offered and Proposed
Ratings-New and Revised
Review of Previous Recommendations
PAGE
268
262
259
260
264
266
266
St. Louis-San Francisco Railway Co., Equip. Trust 6a
Series 71-A to 71-E January 15, 1935 and Equip. Trust
41/25 Series BB February 15, 1935
Utilities Power & Light Corporation-Review
268
261
287
PAGE 260
DAILY BOND FIELD AVERAGES
Improving
The Bond
current
(Based on Closing Prices)
agust
discussions
In
17
30
Corp
market,
number
a
14
PAGE 261
BOND
the
of
high
factors
of
cited
Market
grade
which
said, would cause attention
to these situations, changes in
evoke
a large amount of Is this
vousness justified?
R.R.
Bea
U.
Developments which are quite popularly expected
to cause high grade bonds to decline include:
(a) Improving business:
(b) Rising short term money rates;
(c) Rising bank loans:
(d) Increasing flotation of securities to Tain
Bas
Ind
-
for
K For
Daily averages
new capital.
Friday each week
Charts published herein show the course of these
items during the six year period ended 1927. During
U B BOND YIELDS AND PRICES*
Tield
1.36
1.00
22
1.25
2.24
those years all four of the developments which an
feared as apt to "break the market". occurred Bus
2.25
Price
108.25
102.61
bonds
fully
and profits nor the increased taxes have yet been
fully reflected in the revenue figures, since income
taxes for any calendar year are paid to the Treasury
only during the following calendar year.
Total expenditures after deducting the bonus have
remained at about the same level during the past
three years. For a number of reasons, and whether
or not there is a change in Administration expenditures are likely to continue at about these levels
for several fiscal years to come. The deficit actually
has fallen and probably will continue to fall because
(1891-37)
is a denial that these factors can eventually
change in bond prices. The seeming contra-
diction a matter of timing. The reason the bond
market is affected by improving business and growloan and capital demands is that these developabsorb bank reserves and at some point prostringency in the banking position. The bank-
Ass BOND YIELDS
AV SHORT TERM MONEY
ing position determines the course of money rates in
this country. When a degree of stringency occurs,
therefore, money rates, both short and long term,
tend to rise. Likewise, the short term rate, tends to
above the long term rate, bond yields, whereupon money tends to flow out of the bond market
US.GOV'T BOND VIELDS
1921
22
23
24
25
24
21
the shert term market in order to obtain the
higher return. (See Bond Survey June 29, 1986.)
During the previous decade, here under review,
Applying these facts to the present situation, it
this situation did not develop during the stage of
of new capital procurement was upward, and short
mands for bank loans and new capital are almost
term money rates experienced a substantial and per
so comfortable that the increasing demands upon
half that of the pre-depression years; nor is any
longed rise on two occasions. Furthermore, three
the four of these items were at levels substantials
higher than at present during all of the period, and
the fourth, business activity was as high or higher
than at present
Yet. despite all of these omens, high grade bond
yields continued to decline steadily, i.e., prices
good bonds continued to rise. This was true of bell
governments and high grade corporates.
the banks had no effect upon the long term rate, 1 e.,
bond yields, and so small an effect elsewhere that
short term rates, although rising at times, remained
below the long term rate as measured by yields on
high grade corporate issues. It was only in the culminating, or boom phase, that the demands upon the
banks became so great as to affect the high grade
bond market.
negligible, and the total of bank loans is but about
sizable demand likely to occur for some time to come
(See Bond Survey August 3, 1936.) The banking po-
sition, on the other hand, is extremely easy the ratio
of reserves to liabilities is higher than it has been
for more than 40 years. Investors need not, therefore, become nervous about the high grade market,
at this stage.
Not until early 1928 did the high grade market
turn downward. It continued downward through
Review of Individual Companies
out the boom months of 1928 and 1929.
TRIENDS OF RUSINESS ACTIVITY. NEW CAPITAL
ISSUED AND BANK LOANS
1401
neighborhood of $2 billions. The Bureau of the Bud-
Under this heading are discussed from time to
time companies whose bonded indebtedness com-
where's
mands investment interest.
20
BUSINESS ACTIVITY
get expects to publish a detailed intermediate budget
study about September 1, from which more definite
conclusions will be possible. For the fiscal year 1938,
Utilities Power & Light Corporation
a defleit of no more than a few hundred million
Utilities Power & Light Corporation is a public
61
The outlook for Federal finances suggests that
Treasury borrowing from the be
the amount
-
NEW CAPITAL ISSUES
borrowings promises to be
further limited. further insufficient Treasury In fact probable banks involved will quite in
to have much effect upon bank reserves
upon the supply of effective money, upon commodity
prices and Interest rates, or upon the bond market.
SHORT TEAM MONEY DATE IN KWW YORK
business recovery, but came only in the boom, 1928-9.
During the recovery period the banking position was
ness and bank loans rose almost steadily, the treat
Prospects for the current fiscal year (to end June
dollars,
or perhaps a balanced budget appear not
improbable
FREEDS OF - GRADE BOND VIELD AND
While this action during the years prior to 1928
contrary to what should in popular belief occur,
appears likely that a considerable time must elapse
before the bond market will be threatened. The de-
of the rise in revenues.
30, 1937) suggest that the deficit may be in the
ADDUST 24. 1936
2
MOODY'S
TOTAL LOANS
10.
#2
22
23
24
25
26
utility holding company controlling properties in
the United States, Canada and Great Britain. In
recent years the latter have had a much more favor-
able earnings' record than the former and their
consolidated earnings applicable to Utilities Power
& Light Corporation have exceeded the balance from
the non-British companies, including those which
are not utilities. Furthermore, the British subsidlary holding company has declared dividends in ex-
cess of its actual net income. Those dividends have
been added to the loan account of the British subsidiary to a wholly owned subsidiary of the holding
company and the loans reduced through repayments
of $1,700,000 in 1935 and $1,800,000 in 1934, both
payments substantialy exceeding consolidated earn-
ings for these years The board of directors has
just approved the sale of the holding company's
Investment in the British properties, which is expected to provide a net cash balance, after liquida.
tion of certain British loans, of $25,000,000.
The following tabulation, expressed in thousands,
indicates the trend of earnings during recent periods
and shows the consolidated earnings as contrasted
with actual payments to the holding company by the
British company on the one hand and the non-British
companies on the other:
288
PAGE 262
MOODY'S BOND SURVEY
COUST
24.
PAGE 268
1936
Non-Dris
If Utilities Light Corporation
Year
Brit.
roughly $24,000,000 available from the has
$20,162
English
for
properties, assuming
working capital,
it
the
use
would
be
10,276
$1,000,000
in
a
Balance
Total Bal
Year
Bub
of
Sub
A Misc
Holding
exp
$1,115
to retire a substantial part of its funded position debt
through a request for tenders from debenture
era. This appears logical expectation and if one
assumes, for the sake of discussion, that the debes
tures could be so acquired at an average price
of
1/00/M $24,000 12/21/M $13,000 1/21/86
The balances available from the American properties have been increasing gradually, the largest
gain occurring in the quarter ended March 31, 1936.
These companies have continued to make payments
to the holding company in excess of earnings, but
this margin has diminished recently and would be
eliminated if depreciation charges of Indianapolis
Power & Light Company were reduced to more
nearly average levels.
80, the debenture debt could be reduced from $50
000,000 to $20,000,000.
If equal proportions of the outstanding Debentum
5s and 51/28 are so acquired, annual debenture inter
est would be reduced by $1,490,000 to about $1,090,
000, or slightly less than the balance available from
the non-British properties in the twelve month
ended March 31, 1936. Such a step should sub
stantially improve the position of the debenture
which remain outstanding, particularly since interest payments would no longer be dependent upon
the ability of the holding company for the British
important of the company's domestic utility subsidiaries followed by Laclede Power & Light Company, Central States Power & Light Corporation,
properties to continue to make payments in excess
of the balance available from its actual income To
the extent that the foregoing assumptions are car
rect and earnings are adjusted by reducing the de
Laclede Gas Light Company, Interstate Power Com-
preciation accrual of Indianapolis Power & Light
pany, Newport Electric Company and Derby Gas
Corporation as indicated above, the holding CODE
& Electric Corporation. Of these Laclede Gas Light
pany's earnings would be equivalent to about 14
Company contributes no income and faces an uncertain future. Central States Power & Light Corporation and Interstate Power Company are cover-
ing fixed charges, including interest to the holding
company, by small margins. Derby Gas & Electric
Corporation, a small company, is contributing noth-
ing. but is a potential source of income, while La.
clede Power & Light Company and Newport Electric
Company, both rather small, are doing well and con-
tributing to the holding company. The non-utility
subsidiaries can probably be depended on to contribute about as much as they are now.
times its debenture interest. These remarks an
of course, hypothetical, but indicate the possibilities
inherent in the recent sale of the British properties
The company's debentures are speculative, but
are considered worth holding either in the expects
tion of tendering them, or of holding them for the
benefits which may accrue from a debt retirement
program. Company's debentures outstanding are
Maturity
Tield
-
68%
8.03%
$36,000.00
72
9.70
follows:
Rating
B
B
Indianapolis Power & Light Company is the most
Issue
Debenture 5a. 1959
Debenture 5% 1947
Recent
Price
14,000.00
Individual Bond Recommendations
Republic of Cuba
External Public Works 51/20 of 1930, 1945
These bonds (is default as to interest) are ridered on interesting speculation among foreign
dollar issues, and there appears to be no reason
to disturb holdings.
Among the dollar bonds of the Republic of Cuba,
the External Public Works 51/20 due 1945, main
tain a special position for they are the only issue
in default as to interest payments, the latter having
been suspended since the end of 1933. The original
reason for defaulting was the question of validité
a special commission set up for the purpose of 000
vestigating the Public Works indebtedness
racted by the Machado Government having found
obligations to be illegal. Subsequently, how.
ver. a decision of the Cuban Supreme Court estababed the bonds as representing a legal claim upon
St. Louis-San Francisco Railway Company
Equip. Trust 6a, Series 71-A to 71-E, Jan. 15, 1935
Equip. Trust 41/20, Series BB, Feb. 15, 1935
Holders of the foregoing issues should tender
their certificates and coupons for purchase at
their face value. This purchase offer followe previous purchase offere with respect to defaulted
be government.
As matters stand now, the question of service
sumption on these 51/25 is closely tied up with the
evelopment of Cuban governmental finances. An
examination of the budget for 1936-37 reveals acunts balancing at around 73.2 million dollars, with
tal receipts comprising ordinary revenue of 56.0
million dollars, seigniorage profits of 8.7 million
ollars and public works receipts estimated at 8.5
million dollars. Interest requirements on the deulted Public Works debt of 80.0 million dollars
mount to roughly 4.5 million dollars a year. The
budget. however, makes no provision for service of
Public Works loans, though earmarking 7 mildollars for interest and amortization payments
the Cuban Government's remaining direct funded
M of 60 million dollars.
Although the public works receipts, which are
specifically pledged as security for the Public Works
debtedness, provide an ample coverage for service
the latter, the desire to maintain the budget in
ullibrium makes necessary the finding of anther 4.5 million dollars of revenue if service on
he defaulted obligations is to be resumed. An intrease of about 8 per cent. in ordinary or of about
per cent. in combined ordinary and public works
receipts would be sufficient for this purpose
Based on the sharp economic recovery witnessed
ver the past 18 months or so, such an expansion
revenue is not altogether impossible. Of course,
remains to be seen whether or not expenditures
equipment trust certificates. This latest offer
takes care of all past due equipment trust obliga-
tions with maturities through February 1985.
The trustees of the St. Louis-San Francisco Railway Company will purchase upon tender at not more
than their face value (without interest subsequent to
their respective maturities) the Equipment Trust
6s. Series 71-A to 71-E. which matured January 15,
1935 together with the final interest coupons and the
Equipment Trust 41/28, Series BB, which matured
February 15, 1935 together with interest coupon
which matured on the same date. Tender should be
made at the office of C. W. Michel, Eastern Representative of the Trustees, Room 1952-120 Broadway,
New York, N. Y. Ownership certificates (Form
1000) are required from all holders except corporations.
Chicago Great Western Railroad Company
First Mortgage do. 1959
On the basis of present earnings and future
earnings prospects of the road, these bonds ap-
pear to constitute ON attractive purchase for
appreciation at current prices.
Rating
Issue
Chicago Great Western R.R. 1st 4a. 1959.
B
Friday's
34%
The ICC on August 17 continued until November 18 an order which in effect, restrains the Chicago
Great Western Railroad Company and the Keeshin
place without any subsequent adjustment of the
Motor Express from establishing joint rates for
motor-rail transportation between the East and
points in the Midwest. It is quite possible that the
withholding of such authorization has had a re-
tatus of the Public Works indebtedness, Cuba's willhgnesa to pay might be seriously questioned.
prices for the road's 4s. 1959. However, it should be
be maintained within the foreseen limits. but if
further rise in governmental receipts should take
The External 51/g were the subject of a recent
inference between representatives of certain Amer-
can bondholders and the Cuban Government
Failure to arrive at a definite agreement does not
eprive the issue of its speculative possibilities and
though temporary recessions from the current market price of 511/4 flat (1936 price range 601/-371/4)
may be seen, disposal of the bonds, rated Caa, seems
awarranted at this level.
straining influence during recent weeks on market
pointed out that the ICC, under an order effective
June 26. permitted the railroad to haul loaded trucks
and trailers on flat cars between Chicago and Minneapolis-St. Paul at low rates. It is estimated that
the latter arrangement will result in a substantial
increase in the annual revenues of the railroad company.
On the basis of present earnings and future prospects the Chicago Great Western First Mortgage 4a.
1959 appear to constitute an attractive purchase for
289
PAGE 264
PAGE 265
MOODY'S BOND
ACCOUNT
appreciation possibilities. As shown below, total
fixed charges for the twelve months to June 30, 1936
were earned about 0.90 times as compared with 0.52
times in the preceding twelve months and 0.78 times
June
1984
Gross Revenues
Yield
1935 levels. In road reported abroad
railway operating deficit of $19,001.
$16,745
1985
$15,544
$15,617
Balance for Fixed Charges
*1,745
1,007
1,422
Fixed Charges
Times Earned
*Partly estimated
*1,941
1,940
1,939
*0.90
0.52
0.73
It is estimated that with net railway operating income of about $200,000 for July, 1936 the road would
cover fixed charges in full for the twelve months
period ended July 31, 1936. This appears to be a
good probability. On a 20.0 per cent. gain in carloadings for June, net railway operating income for
that month amounted to $197,111 as compared with
$9,947 in June, 1935. Carloadings for the five weeks
Allied Stores Corporation
have a serious effect upon earnings of the Chican
Rating
Ba
Amount
$4,500,000
Call
*105
Offering
100
wheat tonnage from southern connections As
winter wheat crop this year was the largest is
number of years, its transportation of wheat
nage for 1936 should prove highly satisfactory.
The recent earnings' gains reported by the
cago Great Western should result in & definite
provement in its cash position during the near fo
ture. This would consequently improve the position
of the First Mortgage 4s, 1959 and probably justify
an interest payment of one or two per cent. this
Amount
1$50,000,000
$50,000,000
in the Bond Survey of August 17. 1936 (page
101%
2.82%
1104
101%
8.12
the policy of Moody's Investo
after
1961. ITs August L 1938 inclusive: at lower prices
The company will use $1,500,000 of the proceeds
of this issue as reimbursement for property purchase effected earlier this year, and will devote the
remainder to additional property purchases and/or
working capital Indicated coverage for fixed
charges, giving effect to the new issue, was 2.78
times in the year ended January 31, 1936. This
coverage, while moderate, is improving during the
current year as evidenced by an interim statement
Corporation were publicly offered on August 26
A detailed description of the issue appeared in a
Bond Survey of August 10, 1936 (page 283), gind
which time changes in the call provisions have bee
made by amendment to registration statement
The Debenture 3a. 1946 and 81/48, 1951 may be
showing for the twelve months ended July 31, 1936,
garded as of very good quality. At the current asket
net profit of $8,001,000 before Federal income and
price of 1021/2, the maturity yields are 2.71
undistributed profit taxes. This figure compares
with $1,841,000 in the year ended January 31,1936
At the offering price the debentures, rated Ba,
are considered fairly attractive as an income holding
of the business man's type, and purchase is recommended where this kind of a security is desired.
ered high grade and suitable for investment
cent. for the Sa and 3.08 per cent. for the 314a.
is interesting to observe how closely the maturil
Offering Price
Amount
Ass
To Yield 0.50%-2.30% To Maturity
$3,000,000
The certificates, rated Aaa, are well protected by
equipment, the total cost of which was $4,319,-
192 Under present market conditions, the certifi-
rates appear fairly priced and are suitable for
personal or institutions desiring high grade security
BTU, principally from the Kentucky- West
Virginia Gas Company. an affiliate. Louisville is
fairly important financial and manufacturing city, its
Security: The new bonds will be secured by a first mortgage
on all fixed assets, subject to $1,009,000 Louisville Light
ing 5a, and also by the pledge of practically all Invest
ments including stock Interest in the Kentucky-West
Virginia Gas Company. Total bonded debt will amount
to 41.3 of investments and depreciated prop-
erty carried approximately $70,800,000. Fixed assets
are stated primarily on the basis of cost of reproduction
new at December 81, 1930 (which appraisal resulted in
. net write-up of $8,548,000) and include Intangibles
of $7,312,000.
Additional Bonds: Additional bonds of this or other series
may be Issued for refunding purposes, and also up to
$2,000,000 for capital expenditures made subsequent
September 1986 and after the Issuance of that amount
up to 66% cent. of the cost or fair value. which
ever is less, of further addition and capital expenditures,
subject to certain restrictions
Capitalisation: Giving effect to proposed financing, capitals.
sation will consist of $1,009,000 Louisville Lighting 5a.
1953, $28,000,000 First & Refunding 814s. 1966, and $87,
$76,800 capital stock. Funded debt will represent u per
cent. of the total
amounted to $3,648,000 as against current and accrued
liabilities of $2,198,000.
A registration statement has been filed for an Issue of
of the above company, the offering to be made probably
or after September 2 Main details of the proposal follow:
Franchises: Company's electric franchise in Louteville is
according counsel, perpetual. A new gas franchise
obtained the city on July 8. 1936 has done much to
Amount: $28,000,000
clarify the situation in this respect Present agreement
Description:
First and Refunding Mortgage 846. due September
1966
electric and gas rate to be charged for the next two
years which time such matters will cause within the
turisdiction of the Public Service Commission of Ken
PERSON provide funds for the redemption of outstanding debt as follows:
Issue
Approx. Date Price
Electric
Amount
Ct.:
or
$20,800,000
6,000,000
cent. basis) approximate the yields (to earliest call
date) of U.S. Government obligations redeemall
aking Fund: None is provided Mortgage however, estab-
at about the time of the maturity of the debenture
factured form product of 900
Financial Condition: On May 81, 1936, current assets
Louisville Gas & Electric Company
Call Feature: Callable as a whole or is part on SDY date
Wirty days' notice at 10716 prior to September 1, 1941,
and at lower prices thereafter
yields (after allowing for income tax on a 15
71 per cent. from the former and as per cent. from the
latter service. Natural gas which in mixed with manu-
ending in 1935
consideration
and short term
These debentures of General Motors Acceptant
It
is engaged principally in the electric and gas business in
Louisville, Kentucky and vicinity, deriving approximately
Interest Protection: Annual interest requirements on total
debt to be outstanding would have been earned 4.60
times in 1935 and 4.65 times for the three year period
Equipment Trust 21/4a, 1937-1946
These recently offered certificates are consid-
30 per cent.
1103
ware), part of Standard Gas & Electric system.
principal Industries Including food products, textiles.
1939 1.10 per cent. 1940, 1.35 per cent.: 1941, 1.65
ber cent.: 1942, 1.85 per cent.; 1948, 2.05 per cent.
1944, 2.15 per cent.: 1945, 2.25 per cent and 1946,
Mary
Nature of Basiness Louisville Gas & Electric Company is
controlled by Louisville Gas * Electric Company (Dela
chemicals, tobacco, lumber, distilleries and breweries
Northern Pacific Railway Company
Per Cent. Certificates were offered at the following
rields: 1937, 0.50 per cent.: 1938, 0.85 per cent.
Offering
Call
Price
current market.
August 17. 1936 (page 274). The $3,000,000 21/4
somewhat above the offering.
Rating
are not regarded as outstandingly attractive at
this issue will be found in the Bond Survey dated
outstanding in the current market at prices
4.50%
Corporation obligations. The debentures, there-
The above Equipment Trust Certificates were
Although of very good quality, these recently
*To August 1. 1988 at lower prices thereafter
peared
273)
2.61
oblicly offered on August 21. A detailed discussion
offered debentures are not considered especially
Maturity
The above debentures were publicly offered on
August 18. A detailed description of the issue ap-
bonds or reimburse company for additions.
attractive as that of the General Motors Accept-
conditions. Moreover, the road receives a substance
3 Per Cent. Debentures, 1946
3% Per Cent. Debentures, 1951
these debentures are considered to offer eatis.
factory value or on income holding
so deposited with the Trustee may be used to purchase
2.46%
In cases where the 15 per cent. tax rate would be
Great Western. Other than "farm commodities
applicable, it will be seen that the U. S. Governoriginated on its lines should continue to move
good volume in accordance with improved business securities can be purchased on a yield basis
General Motors Acceptance Corporation
At current prices approximating the offering
aperal Motors Acceptance Corp 846. 1951
8. Treasury 2% 1951-54
gross revenues less certain credits, Including maintenance
and charges for renewals or ements Any funds
2.82
& Treasury 3s. 1946-48
New Issues Offered and Proposed
Debenture 41/28, 1951
2.18%
Motors Acceptance Corp. 3a. 1946
Drought conditions in the Northwest should
Calendar
1936
ended August 89.0 per cent.
for the calendar year 1935.
" months ended
24.
lishes mainten fund under which the company is
required to pay to the Treates annually 15 per cent. of
which to extend twenty years, socidies in part the
tucky.
Rates: Company's domestic electric rate schedule in Louis
ville at 4% cents per kwh compares favorably with the schndules prevailing in comparable cities.
Rates for gas service in Louisville also, generally speak-
ing, compare favorably with those existing in nearby
areas
Holding Company Act: None of the parent openies has
registered under the Public Utility Act of 1935. The
company Itself is holding company but has been ex.
empted by the Securities & Exchan Commission from
to
PAGE 266
MOODY'S BOND SURVEY
all provisions of Title 1 of the Public Utility Act. Pro-
visions of Title 2 of the Act will increase the jurisdiction
of the Federal Power Commisison over the company.
General: Company is involved in litigation over
franchise taxes and taxes on tangible property. certain While
Depreciation: Company follows the retirement reserve
method of depreciation. Combined deductions for maintenance and depreciation in 1935 amounted to 14.5 per
cent., which is, generally speaking, in line with the practice of comparable companies.
Legality: Not yet established-present bonds legal in Maine,
Rhode Island and New Hampshire.
Tax Provision: Company will reimburse holders for Pennsylvania five mills tax and Massachusetts income tax not
in excess of 6 per cent.
the maximum liability of such suita is large, court da
cisions to date have been in the company's favor. Com
pany is not beyond the T.V.A.'s sphere of influence, by
its relatively low rates as well as the considerable dis
tance
from the Authority's power sites definitely lesses
such risks.
Quality: The new bonds will be high grade, qualifying for
conservative investment purposes. Rating, As (subject
to change only in case of amendments to the registra
tion statement which would affect the security of this
issue).
Review of Previous Recommendations
Central Power & Light Company First 5s, 1956-Retention
of these bonds is recommended despite the recent advance
in price.
In line with expectations, the company's report for the
second quarter of the current year was very favorable,
reflecting good improvement in both the electric and
ice departments. In comparison with the corresponding
quarter of 1935, gross revenues increased 15.4 per cent.
and total income 40 per cent. In the twelve months
ended June 30, 1936, fixed charges were earned 1.34
times after depreciation as against 1.23 times in the
twelve months ended March 31, 1936, 1.13 times in 1935,
and 1.16 times in 1934. While the recent excellent showing is in contrast with a period including poor ice opera-
tions (during the first half of 1935), the company's
good control over expenses and the impressive expansion
in electric sales during the first half of 1936 are quite
encouraging and point to further gains over the balance
of the year.
These bonds were recommended in the Bond Survey
of June 22, 1936 (page 849). They recently sold at 94 1/2.
Wabash Railway Company Refunding and General Mortgage
Bonds-With the past twelve months' earnings equivalent
to about 2 per cent. on the junior bonds, early reorganization possibilities appear favorable, indicating that an
interest in these bonds should be maintained
In accordance with improved business conditions in the
territory served by the Wabash Railway Company, es-
pecially in the automobile manufacturing districts, the
earnings of the Wabash have shown substantial increases
over low depression levels. Whereas gross income avail
able for charges amounted to only $604,065 in 1931, this
item increased to $5,595,158 in the calendar year 1935
and to about $6,000,000 in the twelve months period ended
July 31, 1936 (partly estimated).
After deducting senior interest requirements of ap
proximately $4,850,000, it is estimated that close to 2 per
cent. was earned on the $60,867,000 Refunding & General
Mortgage bonds in the twelve months ended July 31.
1936. With senior interest requirements being more than
covered, each additional $600,000 increase in net railway
operating income means 1 per cent. more earned on the
junior mortgage bonds. In view of the road's demosstrated earnings recovery and its favorable future prospects, further earnings' gains are considered a good
possibility.
While a reorganization plan for the Wabash Railway
Company has not been submitted to security holders.
definite proposals may not be long delayed. With
earnings now equivalent to 2 per cent. on the junior
bonds (with further increases anticipated) it should not
be difficult to formulate an acceptable plan of financial
readjustment.
A continued interest in the various Refunding and
General Mortgage bonds is recommended. The bonds
most recently discussed in the Survey of July 13, 1934
(page 323), recently sold as follows:
Recent
Issue
Rating
Refunding & General 51/sa. A. 1975
Refunding & General 5a. B. 1976.
Refunding General 4168 c. 1978
Refunding & General 5s. D. 1980
NEW AND REVISED RATINGS
RATINGS RAISED
South Carolina:
NEW RATINGS
Edward G. Budd Manufacturing Co.:
*1st mtge. conv. 41/28, 1961
u
Ba
RATINGS REDUCED
Budd Wheel Co.:
*1st mtge. conv. 41/28, 1946
Ba
Charleston, South Carolina:
Water works extension 3a, 1940-1976
Bas
Louisville Gas & Electric Co.:
*1st & ref. mtge. 31/68, 1966
As
Northern Pacific Railway Co.:
Equipment trust 2148 to 1946
Ass
Temercal Water Company:
1st mige. 5a, 1960
Institutional 4a dated July 1. Bas to A
Bas
Greenburgh, New York:
General obligations
A
to Bas
*This rating has been assigned after information in the registration statement filed
with the SEC has been examined (where regIstration statements are not required, after
other information has been examined). Such
registration statements are, in practice, sub-
fect to dment any time prior to the offer-
ing. The rating may be subject to change If
any amen to the registration statement
should be filed which affects the security of
the proposed new issue.
NOTE-Our opinions and reports are based on information believed to be reliable, but the are not guaranteed.
Printed in
290
August 25, 1936
HM,Jr. today asked Mr. Bell and Mr. Gaston to go
over and see Steve Early about the Secretary's letter to
the Red Cross in which the Secretary had disapproved the
purchase of certain utility bonds for the Endowment Fund
of the American Red Cross.
Note: Gaston's report of this conference is filed
under date of September 1 in this diary.)
This afternoon Mr. Bell brought Mr. McClintock in
to see the Secretary. He told the Secretary that Admiral
Grayson had discussed the Secretary's corrected letter (the
first one having been returned to Mr. Bell) with several
people and that they had pointed out that the Secretary's
disapproval of investment in specific utility bonds by
the American Red Cross might be interpreted as & statement
that the principal of any trust fund is not safe when 80
invested and 18 only safe when invested in Governments.
The Secretary explained, however, that he does not
say that Pacific Gas and Electric, and Southern California
Edson, are not safe, but he maintains that American Red
Cross funds should be invested exclusively in Government
securities.
Mr. McClintock told the Secretary that Admiral
Grayson had tried to reach him, but HM,Jr. contradicted
this, saying: "That is not true. He never tried to reach
me.
Even though he was ill, he seemed to have time to
call Steve Early, but he never had time to call me."
Mr. McClintock also said, "The Admiral said that if
there was a chance of misinterpretation, before he released
the letter he wanted you to have a chance to change it."
When HM,Jr. inquired which letter the Red Cross wouldThe
release, Mr. McClintock answered, "The second letter.
first one was returned to Mr. Bell. The second letter
bore the same date as the first one." Upon re-reading the
I
second letter, HM,Jr's decision was, "Let it go as is.
will not change anything."
do
I
Secretary Morgenthau then asked Mr. McClintock, "How
go about resigning from this fund?" His reply would was,
"I wish would not ask me that. I assume you
resign to you the Board of Incorporators. The annual meeting
291
-2-
is held in December. Of course, I would have to consult
our legal advisers. II
HM,Jr. then remarked, "I am not going to be put in
this position again.' Mr. McClintock explained to the
Secretary, "I hope you will understand that this is not our
position. We personally feel that our money should be invested in Governments."
At this point the Secretary stated his position as
follows: "Here I am, Secretary of the Treasury. Am Iamgoing to take XYZ Corporation and write, as Secretary of the
Treasury, that this is a good thing to invest in? I
trying to avoid, as Secretary of the Treasury, officially
endorsing any company."
Mr. McClintock made this interesting remark: "When
Henry P. Davison was head of the Red Cross, he only invested
in Government securities."
Continuing, HM,Jr. said, "As Secretary of the Treasury,
certainly for any trust fund that I am connected with I can
only recommend one thing and that is Government securities.
The Woodrow Wilson Foundation had some very smart men at the
head of it. That Fund shrunk somewhere between 40 and 60
per cent. They put their money into South American bonds.
As Far as I am concerned, if somebody brought up the fact
that the Secretary of the Treasury has recommended that the
American Red Cross invest its money in XYZ Utilities Company,
then I would be worried, but certainly I am not worrying about
the recommendation I made in my letter to the Red Cross."
Mr. McClintock then said to the Secretary, "I hope
you understand it is our solicitude for your official position that we brought this letter to your attention. Mr.
Morgenthau's response to this was: "Our first letter was
a mistake and I was delighted to correct it, but I certainly
am not going to make any change in the second letter. It
stands as if. I am very glad that you came in. You personally are in an impossible position."
Mr. McClintock then repeated his previous statement:
"I hope you will understand our position. We are in favor
of investing our money in Governments.
292
SOIL CONSERVATION CHECKS
Aug. 25, 1936
At Hyde Park HMJr. told President he thought Soil Conservation Checks should be out before election. When Wallace
came to Hyde Park President discussed it with Wallace and
latter said he was having difficulties with Comptroller
General. President suggested Wallace ask HMJr. for help.
Today Wallace phoned HMJr. and told him of his difficulties
and that Wenchel was the man handling it for Agriculture.
Wenchel called on HMJr. Latter telephoned to Acting Comptroller General and made appointment for HMJr., Wenchel and
Bartelt to see him tomorrow.
HMJr. also telephoned Public Printer for help in expediting
printing of forms after Wenchel said it would take twenty-one
days to print forms. Government Printing Office promised
presses would roll after Elliott phoned back that Comptroller
General's office thought everything had been cleared.
Aug. 26
Report of meeting with Acting Comptroller General. Differences of opinion between Department of Agriculture and Comptroller General's office outlined - furnished by Mr. Bartelt.
Aug. 26
HMJr's telegram to President Roosevelt and succeeded in getting
complete clearance.
Aug. 27
Meeting with Secretary of group from Department of Agriculture.
He wants to assist but not interfere. Thinks Treasury should
keep out of picture now.
Aug. 31
Survey, prepared by Mr. Bartelt, of fiscal procedure set up
by Department of Agriculture in connection with administration
of Soil Conservation.
Sept. 17
Bartelt's survey returned by Secretary Wallace. Wallace
will take man from Bell's office to be assistant to Mr.
Jump, Division of Finance of Agriculture Department to
work for present on Soil Conservation work.
293
August 25, 1936
When HM,Jr. was at Hyde Park, he overheard the President make an appointment with Secretary Wallace.
Knowing that Secretary Wallace was coming up to Hyde
Park, HM,Jr. told the President about his idea of getting
the soil conservation checks out before election. Secretary Wallace came to see the President the middle of last
week and the President discussed it with him and Wallace
informed the President that he was having difficulty with
the Comptroller General. The President suggested that
Mr. Wallace ask Mr. Morgenthau for assistance.
Mr. Wallace got in touch with Mr. Morgenthau today
and told him that he was having difficulty with the Comptroller General and asked if there was anything Mr. Morgenthau could do. Wallace said that his man Winchel is
the person who is handling this matter and HM, Jr. asked
that Winchel come in to see him today at 12 o'clock, which
he did. Also present were Taylor, Oliphant, Norman Thompson
and Bartelt came in a little later.
Mr. Winchel reported that there were four points of
differencewhic the Comptroller General was insisting on.
One of the points he referred to was that heretofore they
had been sending the checks out to the County Chairman or
State Extension Agent for distribution to the farmer (the
checks being made payable. to the farmer) and the Comptroller
General ruled that the checks if made payable to the farmer
had to be sent directly to him. He started to enumerate
other points when the Secretary stopped him and asked whether
it would not be a good idea if he (the Secretary), Mr. Bartelt
and Mr. Winchel went over to see the Acting Comptroller General
and straighten the thing out all at once. They all thought
the idea was a good one and the Secretary telephoned Mr. E1liott, the Acting Comptroller General. Following is their
conversation:
HM,Jr.: Hello.
Elliott:
Hello.
HM,Jr:
Henry Morgenthau, Junior.
E:
Oh, hello, Mr. Morgenthau.
294
-2-
H14,Jr:
How are you?
Hot, now.
E:
HM,Jr:
Hot?
Yes.
E:
HM,Jr:
Well, I'm sorry, I'm cool. Mr. Elliott, in regard
to some of the difficulties that the Department of
Agriculture are having on their soil conservation
checks -Yes.
E:
HM,Jr:
The President and Mr. Wallace have asked me to in-
terest myself in it. And I have Mr. Winchel here
now. I'd like to come over and see you tomorrow
about it.
All right, what time?
E:
HM,Jr:
Eleven o'clock?
Well, that's all right.
E:
HM,Jr:
E:
HM,Jr:
E:
How's that?
or - ten would suit me better if it would you.
I'll be there at ten o'clock.
Yes, all right.
HM,Jr:
Now, Mr. Winchel can come with me and Eddy Bartelt.
E:
Yes.
HM,Jr:
E:
HM,Jr:
And - I take it you're familiar with some of the
difficulties?
Well, not particularly - I -- I could get the
fellows in here who will talk to you about it.
Well, would you have everybody there? Because
it's - I don't know what the trouble is - on which
side, but it's been dragging saokong and we're
getting 80 many complaints.
295
-3-
Well, I didn't know that there was any particular
trouble about it -
E:
Yes.
HM,Jr:
Nothing has ever come up to me.
E:
Well, let - supposing I come over and we'11 put all
our cards on the table, how's that?
All right, ten o'clock tomorrow?
HM,Jr:
E:
Ten o'clock tomorrow.
HM,Jr:
All right.
E:
HM,Jr:
At your office.
E:
Yes.
HM,Jr:
Right.
E:
All right, goudbye.
Mr. Winchel reported that he went on his vacation the
early part of July; that he was away for a month and that
during that month nothing had been done, the Comptroller's
office having held up the works. Mr. Winchel also said
that the application forms which the farmer fills out in
order to get his check had not even been approved by the
Comptroller General. He added that after all the four
points were cleared up, it would then take about 21 days
to print the forms.
At this point, HM,Jr. telephoned Mr. Giegenbach, the
Public Printer. He was out of his office and HM,Jr. talked
The following is their conversation:
to Miss Coffin.
PM,Jr:
Miss Coffin?
C:
Yes.
HM,Jr:
Henry Morgenthau, Jr.
C:
Yes.
296
HM,Jr:
C:
HM,Jr:
Miss Coffin, the President has asked me and Secre-
tary Wallace has asked me to interest myself in
this whole matter of getting out the documents and
forms and checks of the soil conservation, see?
Soil conservation?
Yes. Now, the forms I believe were cleared yesterday?
C:
Yes,
HM,Jr:
It's going to be a tremendous printing job.
C:
Yes,
HM,Jr:
C:
HM,Jr.:
And I want to make sure chat - I don't believe they've
notified you even that it's coming. And I want to
make sure that when it does come that there won't be
a minute lost and that the thing 18 going through as
rapidly as possible.
Well, I can assure you, Mr. Secretary, that the whole
plant is at your service.
Fine. Now, they don't even know the name of the man
who is handling it, but he is going to let Mrs. Klotz
know --
C:
Yes.
HM,Jr:
And then Mrs. Klotz will call you this afternoon.
C:
Yes.
HM,Jr:
And we -
C:
We haven't got the copy yet.
HM,Jr:
You haven't got anything, you haven't even --
C:
HM,Jr:
If you will help us with getting the proofs back
once we get it approved the presses will roll.
Well, what I am going to do is, after I find out who
the man is in the Department of Agriculture, I'm going
297
-5-
to designate somebody from the Treasury just to
work over there with you and with the Department
of Agriculture.
C:
HM,Jr:
Well, I can assure you the place is yours.
Well, I can't ask for anything more.
Well, you know we try to be good to the Treasury, we
C:
have many good friends there.
HM,Jr:
C:
Right. Thank you, Miss Coffin.
Thank you.
It is interesting to note that a little while after HM,Jr
spoke to Mr. Elliott and arranged for an appointment for tomorrow
at 10 o'clock, Mr. Elliott called the Searetary back and told
him that he had tried to find out who Mr. Winchel had been con-
tacting; that as far as he could find, the Comptroller's office
thought everything had been cleared, and that the reason for his
call was he wanted to try to straighten everything out so that
perhaps it would not be necessary for Mr. Morgenthau to come or
if he could not he at least wanted to be prepared when he came.
As Mr. Winchel was concluding his meeting with the Secretary,
HM,Jr. said to him, "Now that Mr. Wallace has asked me to help
him I am going like a steam shovel. We must get these checks
out by October 1."
After Mr. Winchel left, HM,Jr. told the group of Treasury
people that getting these checks out would make a difference in
carrying four States: Iowa, Kansas
298
August 26, 1936.
Mr. Gill came in to see the Secretary. Mr. Fullaway from the
Bureau of the Budget was present, representing Mr. Bell who was
away for the afternoon. Miss Lonergan and Dr. Haas were also present.
SECRETARY said to Mr. Gill: "There seems to be a misunderstanding
on this project of yours. I understand you wrote me a letter asking
for my approval."
MR. GILL replied: "The only thing I wanted your approval on was
the spending of $350,000. We would have to hire three thousand people
for three weeks to make this survey and in order not to increase our
cost we would have to fire three thousand people for thirty days."
SECRETARY inquired: "What do you mean 'fire'?"
MR. GILL replied: "Well, leave without pay."
SECRETARY then said to Mr. Gill: "I have made a study of your
report and I would say I disapprove. I disapprove increasing your
overhead."
MR. GILL answered: "I raised the point of cost and you said
never mind the cost."
SECRETARY added: "I do not think your program would give me what
you or I want."
MR. GILL disagreed, saying: "Yes, it would give you what you want,
but not what we want." He then handed the Secretary the attached memo,
showing a special tabulation of the cases having WPA employment in
thirteen cities during June.
SECRETARY said to Mr. Gill: "Hopkins told me that you had completed
Illinois."
MR. GILL, however, stated: "Well that is not quite finished."
SECRETARY then said: "I feel it best until he comes back to let the
whole thing rest.
MR. GILL said to the Secretary: "It's not entirely satisfactory to
us, I am in agreement with Rice. If we made the study the way he wanted
it done it would take about six months and it would cost us a great deal
299
-2more than $150,000. I think It's of terrific importance and you can't
afford to get off half-cocked. I think we ought to work out a way of
testing these lists. It ought to go on constantly. In a discussion I
have had with Mr. Bell we both feel that your overhead is way too high
and to increase your overhead now is to go contrary to what we think.
That is something for the Budget to get up. We would much rather wait
until Hopkins gets back and then you, he, Rice and our people and I can
talk about it."
MR. GILL said: "Excellent This will be more pleasing to the men
I called back from vacation to start the job."
300
special tabulation of eases having York Program employment in as
cities during June show that n1.2 persent had some private employment,
a
is addition to York Progres employment, during the meath. (
Employment Status of Gases Having Work
Program Employment During June 1996
13 office
Total Work Program eases
2,924
300.0
1.00
70.9
No private employment
Both W.P. and private employment
615
488
during June
Both on June 30
so
Private emp. only on June 30
V.P. only on June 30
Neither on June 30
96
14
n.1
33
70
Innoved
14.6
3.7
3.3
.5
As shown above, about one-seventh of the 615 cases which had both
private and W.P. employment during the month had been separated from the
York Program by June so. A slightly I proportion had lest their jobs
in private employment by the and of the month. This left 14.6 percent of
the total member of Work Program cases which still had on the last day of
the month both private and Work Program employment. The income received
by these cases from private employment during June is shown in the following
table.
V
The 13 cities ares
Atlanta, Georgia
Bultimore, Maryland
Beidemport, Connections
Date Mentons
Chicago, Illinois
Detreit, Michigan
Houston, Texas
Manchester, New Hempshire
Quales, Debresia
Paterson, New Jersey
St. Louis, Missours
San Francisco, California
Pennsylvania
301
Private Employment Barnings in June
of Gages having both Works Program
and Private Employment on June 30, 1936
is cities
Percent of total
Private employment
earnings during
June
Total
Under $25.00
25.00 - 40.99
80.00 - 74.99
75.00 - 99.99
100.00 - 140.99
180 and ever
N.A.
L.P.
14.6
458
6.1
178
94
so
32
18
,
4
3.3
3.1
1.1
.6
5.1%
.3
.1
The table shows that 178, or about two-fifths of the 485
cases having both Works Program and privato employment on June so,
received less than $85.00 is private employment earnings during
the month. only 147 of the cases which had both Works Program
and private employment on June 30 received as mach as 880.00 from
private employment during Jane. This group represents 5 percent
of all eases on the Works Program during the month. this indicates
that the percentage of cases still 68 the Verite Program which could
support themselves entirely from private employment earnings is
small.
302
Meeting in the Secretary's office, August 26th
Present - The Secretary
Mrs. Klots
Mr. Haas
Miss Lonigan
The Secretary asked Miss Lonigan if she had seen the people at
the WPA in connection with the study of relief rolls.
Miss Lonigan said she had seen Mr. Gill and Howard Myers, and
that she had strong reservations concerning the proposed study.
There were three objections -
The study would not give the Secretary the information
he wanted.
There was no justification for the proposed cost
of $383,000.
The study would certainly lead to serious criticism
of the Treasury, and perhaps of the Secretary.
When the study was finished the conclusions would be used to the
disadvantage of the Secretary, and at the same time he would bear the
inevitable criticism for the making of the study.
The study was to determine whether the relief families visited
were "above standard" or "below standard." But the standard used was
the arbitrary one of present security wages. Also families with incomes
of even one dollar below present security wages were all classified as
"sub-standard," along with families with no resources whatever.
Security wages were an unreasonable standard because they had in
many localities been set far above the level that could be obtained
in private productive industry. They had also been continuously increased as a result of labor politics, and local pressure.
It was giving away the whole study to assume that the present
security wage was the level at which families ought to be supported
by the Federal Government.
Mr. Haas said that whatever way they worded it they could make
the study come out the way they wanted to.
Miss Lonigan said that as the schedule was worded, if a family's
security wage was $50 a month, and the wife or son of the family earned
$49. that family would be rated as #below standard." By any reasonable
procedure that family ought to get $1, not $50.
302A
-2Income from relief sources was not counted at all, so that if a
grandfather was getting an old-age pension of $15, the family might
have an income of $64 and be rated below the $50 security wage. That
is nonsense.
No allowance was made for commodity relief. The distribution of
relief commodities has now reached a million dollars a month in
New York State, and is likely to rise as sewing, canning, and furniture
projects get more efficient.
The most absurd feature of the schedule was that farm families
counted only current income, so that beet-sugar farmers in Colorado,
whose harvest payments were not due until October would be classified
as "below standard. Nearly all agricultural families would qualify
as below standard except in harvest months. All workers in their dull
season would qualify whatever their savings.
If the Federal Government seriously undertook to follow any such
standard, it would soon have nearly all the farm population and most
of the employed workers on Federal relief.
On the basis of such a study, of course, 95 or 98 percent of WPA
families would be classified as "below standard." The figures would
be quoted widely. The Secretary would be held jointly responsible and,
in all future discussions, the Secretary would have to meet propaganda
based on this study, to prove that relief rolls should not be cut.
Also, there would be a strong backfire against any visits to
relief families. The Secretary would certainly be made to carry the
blame. The study was being charged to him already, and when criticisms
arose the entire responsibility would be put on his shoulders.
When the Central Statistical Board objected to the schedule,
Mr. Gill said that if they did not like it the study would go ahead anyhow, because Mr. Morgenthau wanted it.
The statistical unit of WPA is a propaganda organization. Any
study they made would be part of their propaganda. They are experts
at it. No matter what part the Treasury took in it would be used to
the Treasury's disadvantage.
Mr. Gill had given the impression to Miss Lonigan, and to the
Central Statistical Board, by specific statements, that Mr. Morgenthan
had insisted on the investigation and had formally approved the
schedule at lunch with Harry Hopkins on Monday. The only point at issue
was the money.
The Secretary said he had told Mr. Hopkins he would approve no
schedules.
303
-3The Secretary asked why they should have wanted to put the
responsibility on him, including definite misstatements of fact.
Miss Lonigan replied that the Secretary was the only person in
Washington who was not afraid of them, that every one else was afraid
to put up any resistance to their plans.
Miss Lonigan suggested that it be made a general policy that
the Treasury would take no responsibility for any inquiry involving
visits to relief families. The subject of visits to relief families
was loaded with dynamite. We could exercise no control, but we could
get severely criticised.
August 28, 1936
August 26, 1936
The Federal Reserve Bank of New York today re-
ceived a further cable from the Norges Bank requesting
that their request for the purchase of $5,000 000 gold
be held in abeyance as they were writing a letter giving
further particulars.
305
August 26, 1936
I have been trying to accomplish the following during
the past ten days.
1. I have gotten the Hopkins organization to agree
to recheck the unemployed as to whether or not they are
in need.
I have gotten the President to realize that there
2.
is such an institution as the United States Employment
Service and got him to give them $1 to reclassify the
unemployed on their rolls and to give them sufficient funds
to put on a real campaign to get private industry to take
people, through them, off the relief rolls.
3. I brought the President's attention to the fact
that Wallace was not ready to pay the farmers their checks
for their soil conservation program. The President told
Wallace to contact me and I am very hopeful of getting the
thing 80 organized that all of the farmers in America will
be paid before November 1.
(I still want to follow up Hopkins to make sure that
he really checks his own lists and I also want to follow
up Persons to make sure that he will be ready to handle
the unemployed. I also want to make sure that the speech
will be ready for the President which he is making at my
suggestion on Labor Day.
4.
Finally, after weeks of effort, I got the Presi-
dent to agree to let Bell give out the Budget summation.
5. I got the President to agree to let me have a
Tax Advisory Commission.
These are the high points of what I have been working
on during the last couple of weeks and what I will continue
to concentrate on for the next 10 days.
306
WOOKESDAY, AUGUST 26. 1936
A conference was held at 10:00 A. M. on Wednesday, August 26,
1936, in the Office of the Comptroller General of the United States
between the Secretary of the Treasury and the Acting Comptroller General
of the United States regarding payments to be made this Fall and Winter
under the Soil Conservation Act, approved February 29, 1936.
In addition to Secretary Morgenthau and Acting Comptroller General
Elliott, there were present at the conference Mr. Wenchel, Counsel for the
Department of Agriculture; Mr. Tulloss, Chief of the Division of Investigations, General Accounting Office, and Mr. Bartelt, Commissioner of
Accounts and Deposits, Treasury Department.
The conference was opened by Secretary Morgenthau, who made a
general statement concerning the necessity for reaching an agreement
upon certain matters in controversy between the Department of Agriculture
and the General Accounting Office involving the approval of certain forms
and procedure. Secretary Morgenthau stated that he had been requested by
the President and Secretary of Agriculture (Mr. Wallace) to interest
himself in the matter and, during the absence of the President and Secre-
tary of Agriculture from the City, to take such steps as he might consider
necessary to get the fiscal machinery in motion.
Secretary Morgenthau then requested Mr. Wenchel of the Department
of Agriculture to outline to the Acting Comptroller General the several
points of difference between the Department of Agriculture and the
General Accounting office, which were holding up the program.
These differences were briefly outlined by Mr. Weachel, as
follows:
-2-
307
1. The form of certification requested by the General
Accounting Office in connection with the payment
of salaries and expenses of employees of county
associations;
2. The form of certification on applications of
farmers to the effect that no payment has been
received or applied for under any other Agricultural program based on soil improving
practices.
3. The manner in which the checks would be
delivered.
The items will be taken up in the order listed above:
1. With respect to the form to be filled out by the county associations, the Department of Agriculture objected to that part of the certification which read:
"We further certify that no portion of the above
amount will be paid to any individual otherwise
an employee of the United States or an employee
of any agency, the expenses of which are paid in
whole or in part from funds furnished by the
United States.
The Department's objections were:
1. There was no legal requirement for such on the
part of the General Accounting office; and
2. That it was impracticable for the certifying
officer to make the certification proposed by
the General Accounting Office.
The General Accounting Office agreed to eliminate the objectionable
part of the certification with the understanding that the Department of
Agriculture would agree and so advise the General Accounting Office that
in the case of county agents a lump sum of money would be transferred
from the AAA appropriation to a separate fund under the Extension Service
of the Department of Agriculture to cover such payments.
308
2. As to item No. 2, the General Accounting Office requested that
all application forms contain the following:statement:
"No payment has been received or applied for
under any other Agricultural program based
on soil improving practices."
On objection by the Department of Agriculture, it was agreed to
modify this as follows:
"No payment has been received or applied for
based on the same soil improving practices."
(Underscore supplied)
There was also proposed by the General Accounting office another
provision reading as follows:
"I hereby authorize the Secretary of Agriculture to deduct from any amount payable to me
under this application my pro rata share of the
estimated expenses of the County Agricultural
Conservation Association for the county in which
this application is filed and to pay said amount
deducted to said Association."
The Department of Agriculture objected to this on the ground that
the General Accounting Office might hold that this required the Secretary
to pay the full pro rata share of the applicant. This would interfere with
the program since in some counties it will be necessary for the Department
to contribute a proportion of the expenses of the Association. The organic
law under which these payments are made authorizes the Secretary of Agri-
culture to do this.
The General Accounting Office thereupon agreed to the following
change:
"In accordance with the provisions of the
1936 Agricultural Conservation Program the Secre-
tary of Agriculture is authorized to pay the
309
county Agricultural Conservation Association
for the county in which this application is
filed from any amount that otherwise would be
payable to me hereunder, my pro rata share of
the estimated expense of said association or
such part thereof as may be prescribed by the
Secretary."
3. As to item No. 3, the General Accounting Office suggested that
checks should be mailed to farmers instead of being delivered to them by
County Agents. There is no law governing the manner in which checks shall
be delivered to payees. Under the old AAA program checks were delivered
to the farmers through County Agents. Aside from advantages claimed for
this procedure, the manner in which checks are delivered to payee is one
for determination by the Secretary of the Treasury, inasmuch as the
Secretary is responsible for the function of making disbursements. There
are several reasons why the Department of Agriculture believes that checks
should be delivered to farmers through County Agents rather than through
the mails. Among these may be mentioned:
(a) Delivery of checks through the office of the county
association or the county agent contributes to efficienoy in the local administration of the program and
to pleasant relationships between the producers and
the county committees and county agents who are charged
with the responsibility of local administration of the
program. This responsibility involves checking performance, maintaining records, rendering assistance
in filling out Work Sheets and filing Applications for
Payment, and in many cases, the unpleasant task of mak-
ing reductions in the base acreage and normal yield
figures to which producers maintain that they are
entitled. All of the operations in connection with
the program prior to oheak delivery must be handled
through the county office and distribution of whooks
through the county office permits that office to oomplete the job and to make a record of the delivery of
checks and to obtain signatures signifying the receipt
thereof.
(b) It has been found that the delivery of checks through
the county office results in the detection of errors
made in ocputing payments and designating payee,
-5-
thereby making possible the correction of these
errors before the checks reach the producers.
(o)
While it might appear that delivery of checks
through county offices increases the possibili-
ty for fraud and loss of checks, the fact is
that more than a billion dollars have been distributed to farmers in this way during the last
three years with practically no difficulty along
this line.
After discussion of the question relating to the delivery of
checks, it was decided that the ohecks would continue to be delivered
to farmers through County Agents rather than through the mails.
4. There then followed a brief discussion with respect to the
pre-audit of vouchers by the General Accounting Office in the field.
It developed that the Secretary of Agriculture had requested the General
Accounting Office to make a pre-audit and the Comptroller General agreed
to furnish a skeleton supervisory force provided the Secretary of Agriculture would furnish competent clerical help in connection with the
administrative examination of the claims. It is believed that the preaudit of these claims by the General Accounting Office will result in
delays in making payments, but the Secretary of the Treasury felt that
inasmuch as the Secretary of Agriculture had requested the Comptroller
General to make a pre-audit he did not feel that the Treasury should
suggest any change.
310
311
August m. 1000
TO PRESIDENT ROOBEVELS FROM SECRETARY NORGESTRAN
thought you and Henry vallace would be interested in moving
that I spent the greater pars of this marning as the General
Accounting office and have successed in gossing a complete
elearance from them w that the sell Conservation pregram
con now begin to move forward Best regards
Henry Morgenthau, Jr.
312
August 26, 1936
Admiral Standley came in to see the Secretary today
told him of rumors of a recent secret agreement between
and Chang Kai Check and Japanese. The Secretary in-
mediately General sent a cable to Nicholson asking him to find out
if there was any truth to the rumors.
GLASS
VA.
HALE MAINE
TERM
KRYER H.
NYE DAK.
STRIWER ORES.
NORBECK, a. DAK.
OWA
MD.
DEL
a.
MOMENT
MASS.
United States Senate
Jule
313
COMMITTEE ON APPROPRIATIONS
NEV.
ALA
WYB
ADDR CALIF.
MG
KENNEDY F REA. CLERK
W. a SMITH ASST. CLERK
August 26th, 1936.
Dear Mr. Secretary:
Touching your letter of the twenty-fifth, by the
hand of Rear Admiral Peoples, I may say that I have dismissed the
Wiltshire matter from my mind, without abating in the slightest
degree my suggestion that the recommendation of the two Virginia
Senators was entitled to quite as much, if not a good deal more,
consideration than that of the retiring Virginia State Procurement
Officer; all that Mr. Wiltshire know about the proposed transfer
from the position he now holds to that of Assistant State Procurement
Officer was told him by those peouliarly interested in having him
accept the second place instead of the first. Those active in the
effort to prevail on Mr. Wiltshire to take the second place, assured
him that it was agreed at Washington that he might be transferred at
$4,000.00 and would receive an advance to $4,500.00 at the end of a
six months period. Even on this assurance, Mr. Wiltshire was not
interested in accepting the position of Assistant State Procurement
Officer at any salary; and I was unwilling to advise his acceptance.
In view of your letter of the twenty-fifth relating
to the temporary nature of the position, I think it would be
perfectly foolish in Mr. Wiltshire to accept either the first or
the second position in the Federal Procurement Service and have so
advised him today.
Sincerely yours,
Oaster glass
Honorable Henry Morganthau, Jr.,
Secretary of the Treasury 2V
Washington, D.C.
314
August 26, 1936
Mr. B. L. Stevens, the Premier of New South Wales,
called on . the Secretary today and they had a pleasant
visit together with just general conversation.
in
Mr. B. S.S. Stevens.
PREMIER OF New SOUTH WALES.
AUSTRALIA.
APT
August 27, 1936
315
For the Secretary:
Both Mr. Persons of the USES and Mr. Holt of WPA are wager
that neither the President nor the Secretary have any idea that
the grants to USES will result in any reduction of the relief load
or any substantial increase in employment. They want to guard age
against any such impression being given in the Labor Day speech,
or at least against the President getting any such impression.
Both seemed agreed that 1f the allocations were made under that
belief, that the process better be reversed, and the money withheld.
Miss Roche feels, and it is pretty generally agreed, that
since it is a Labor Day speech, every precaution should be taken
to not include ideas not acceptable to Labor. To play up too much
the idea of cooperation with employers might be misunderstood, and
certainly any deal with Chambers of Commerce would be.
A strengthened emphasis on reemployment service, stressing
service to unemployed, and making better known an agency which from
now on will be amble to do its job better, seems to be the idea.
Mr. Persons is strong for "profess ional standards", and a
slow firm growth, no mushrooming, no hurry, and he will reject any
proposals not in line with that policy. Others in USES have had
other ideas, which have not prevailed.
Upm
316
August 27, 1936.
MEMORANDUM FOR THE SECRETARY
W. Frank Persons, Director of the United States Employment Ser-
vice saw you in your office at 11:45 A.M., August 26th. There were
present in addition Mr. Upham and Mr. Gaston. You said that you had
gathered the impression from his assistant, Mr. Burr, that his organisation would not be ready to go ahead promptly with the work authorised
by the President on the new allocations. Persons said he was sorry
if Mr. Burr gave you that impression and Mr. Gaston said that he
gathered that Burr thought it would take some time to recruit the
necessary force. Mr. Persons explained that he sent a wire Tuesday
night to all his directors telling them to begin the reolassification
work September 1. About s/8ths of his registrations are in ten important states and he has called all of the se directors in here for a
meeting next Monday.
You asked what would be done about taking on extra interviewers.
Mr. Persons said that they had had about twenty thousand people on their
rolls in the last three years and that they now have a force of nine
thousand. They could call in people they formerly employed and promote
others on their rolls so as to build up an effective organization. He
remarked his people only get about three-fifths to one-half of what
WPA personnel gets for similar work. He said there would be no diffioulty whatever with going ahead with the program in an efficient way
if only the publicity could be controlled. There is no reason, he said,
why there should be an excited, clamoring orowd about the employment
-2-
317
offices. WPA had arranged to release workers to them in groups for
interviewing. In the past the Employment Service had registered nine
million people in six weeks, but it wasn't advisable to do a rush job
like that. The escence of this job, he said, is thoroughness. He
added it was not a stupendous thing, if we don't let the public get
excited.
You then asked if he had been able to get started on the material
for the President's Labor Day speech. Persons said he had something
in addition to the memorandum he had sent to you the night before.
This was a rough draft in the shape of an explanation of the work of
the U. S. Employment Service, much longer than could be used. You
asked Mr. Persons to discuss the matter with me, with the understanding
that I was to put the draft in more usable form. He agreed to meet
with you again on Thursday morning to read the speech draft. You
asked him if he would be good enough to give Mr. Upham a letter of in-
troduction, so that he might visit some of your of fices. He said he
would be very glad to do it.
The same people as above, with the addition of Mr. Burr and
Miss Roohe and Mr. Thad Holt of WPA, met again in your office at
noon this (Thursday)morning. Mr. Persons read over his draft of the
proposed speech and after very little discussion you requested all of
those present to get together and work further on the draft. This
resulted in a long discussion of the whole problem involved and of
the terms in which it should be expressed by the President, in Miss
Roche's office. All of these present had positive ideas on the subjoot, which were reconciled. All were agreed that it would be very
318
-8-
unwise for the President to hold out the hope that this work of the
U. S. Employment Service would result in providing now jobs. It
should be emphasized rather that this is a long time program of
assistance to the worker and assistance to industry to obtain better
distribution of labor and to obviate the great evils of the old employment system. These evils include faulty distribution of labor,
disappointment and waste of time of candidates seeking work, unnecessary
labor turnover, inefficiency in production. Mr. Persons expressed
a wish to rework the draft himself along these lines and to bring it
in for another meeting tomorrow morning, whi oh was agreed to. Miss
Roche hopes to get in touch - as soon as we have a draft tomorrow -
with the labor people.
His
m Purms hought in today. Friday,
Q draft not much different from the
original It will here to be recorched
and after discussion min miss
Roche
and
upham has 8mm
to work
inmyself
it
I
319
asread
READ BY MR. PERSONS IN SECRETARY MORGENTHAU'S OFFICE
AUGUST 28, 1936
Shoree years ago the United States Spige Service me
extentional In these three years the organization has - from 120
employment - located in the Langue Industrial office to a
water of 700 district, or principal office, with 1000 adida
tional brongh offices. Soday as is as work is every community in the
nation, effectively, bringing weekers and Jobe together.
The Superment Service has been - counties instrument is
the process of Share has boon no dam, with millions
of employed - one side, and with witing work opportunities the other. The public employment service is the widge across that cham,
the connecting link to self-supporting work, the bridge to assual in
destrial life.
It has been a 1 used widge during these three years. the
number of individuals who have - to the offices of the Replayment -
vigo to record, their desire - all who has sought
Heady work Suring - or - Short Shire in which placements
have been made - to the total of sisteen millions. or this total,
the placements - is the - and was were - and and-half milliones
the placements made - the projects of the m. the - of Public
Toots, and all other politic waite projects were five millional and the
placements mild in petitube Sminday - three and - millions.
as all times, dating these three years there has I - active
writing list of the employed who have registered as the offices. is July 1. 1986, there were 6,500,000 - this withing 11st.
320
of this 5,800,000 were without work, and 8,000,000 - n 1 socking for botter John
I the 3,000,000 Just - - say first, chese
2,800,000 employed - projects of the Works Program
About these - and - I - capacially, to - a - or - w
are not the dregs of - indestrial ories. - are as work ml the the
greater part, seeking in - to independent self-apport. - have
employment at which they - and & asquire and prove their
for regular employment.
Is is true that a considereMe proportion of these persons are
working in compations different from those in which they had funnity
been This my be for their adventage in may If 10
shall become their - of econging from - obsolete, or
vention take an compation in which there is more hopeful outlock for
independent livelihood
For these - and - as is essential that their competitor
recordsto brought www. in as other my. is ss
al should
possible to accure - these makers the deserved reports of their frishma
effort to Immediate and to operating for
Apportingly. 1 have recently assinged that the United States
Replayment Service shall have the - to 1 a words relater
view for each of those - employed w the Progress
These will remails is - - to their - and in further of their compational Stiness - equally
as - w married w the fasts - Motors
s purpose is - Street. w give these - 1 - a
square Coals and - to - that their natural to Jobe so - the
+
tasts of - I me sufferent Julgems of their
-
321
an
- expenditty.
the Replayers Service does not refer - " =
the basis of the mod of the employed aggiliant for work. m refund
10 sale - the mais / of fitness to & the - miletta
in me other - - there to - of stability of employment for the
worker. or of centiming milistration is the - of the Service w are.
This policy has been followed continuously during these three
years, with increasing - results for washers and for employers. the
Employment Service has consistently trained its waters to market
the special requirements of each job in industry. and to appraise with
care, capatity. and good Johgment, the skill and the fitness of the individ
deal applient for work of particular kinds. - compational
tions resulting from these approimate, or interviews, are released and
filed within appropriate groups It is not the to
confine each applicant to a single assocification. Femally a mather of
any experimen will to assigned a potenty dest
fination, and, partage - or two or more / Date
is - to enlange his - w - work and to assist him, when that
is his actual situation, to essage - the have of in his endorsary work
As % have entites stated, the explanate office - have -
file the active applications of am mature. - - sere than - thousand John, the destified - the Socia of
their experience and
+
322
Is round - - of these - - the active signs
testion of the Replacement Service - experiences is /
- - to offer - expectation of I quarterity
for - Another third - young persons the have not as yes
had - - experience. - other third - the we
they have had experience and have I fitness for explanate in
compations which will I their services as the Instructs proceeds.
the fear million were the are not w will struntaged 1
be saved from that hopeless employment which my be their fato If they
cannot to considered for - Job wheee and until they have had specific
experience in that job. Replayers have usually been quite right in their
instatence that the applient worker shall have had actual experience on
the particular Job to be filled. This is the natural - of
earlier conditions and practices.
s Replayment Service is whertaking to simplify the took of
getting these people lack to work. Is is breaking - these traditional
barriers to the working - change for enitable exployment. - and - are now being referred to John for which they are will quistical,
but in which they have not emitier had estant spocific experience. Mas
is being commilished with antistration - the you of explayers me, a
deed, with the active and entertaining compension of withholder employers.
Field - of the Replacement Service - of what 1. really model in the - of aptitudes and - - which
end experience to qualify verture to fill - Jobe - - Superhead
cal - in Saladay. Sale Information se dentified and potated and
sent to the loant - office a assists the / - in -
323
local office to to - in adapting I certifications w wass. For people, If the explanation office has - employer's whe
for a water to - or to repair airplane - there
is registered - - with this questific experience. the - -
- and - employed with mine with - that his - and
experience are good qualifications for that - kind of work.
Many employers are cooperating in this - to elegatity
traditional job requirements they are applying information which share
the relation of - Job to anothers that is. has a certain job is like - other Jobe in the - or in other industries $ that a single
earlier experience - a qualification 1 more generally applicable,
and house greatly increases the prospects of the employed -
In - of this practice of the Replayment Service,
with which employers are cooperating, the employers are getting the kind
of people they actually w in request to their applications filed with
the employment offices, and the employed are mailed to - the
artificial burriers to work opportunities for which they are actually
well qualified
the gin of this description of the effectives and yes
of the Replayment Service - be these expressed The opportunity for 1
employed water, and see pleasure in 1 mangies sum
the Replayment Service so a tesfall Service. 30 belye w
the varies and the explain. Auth 1 donald - to - this - thas to prevent mate of time - efforts to sitigate the /
of abstess Job weildness w - the stability of New Issa the completed - - this Survieor No visite
the - employment office me his and for - his
324
new and his Interests and to - - - are saturdad to reveal his assifications. is be is a veteran, to -
that fast I - be I accured of the abroadages ml gotter10100 - to Mis w have - yours works Jobs for which be se 1
fich Insidentally, the records - that daring these three years, the
Repleyment Service bee registered 1,815,000 Individual vehicues. in the
- period 1,486,000 Jobs have I found for veterans. n - no.
1956, the when of veterans registered. and - the active writing 11st.
ess only 375,000. Surely this record mailing establishes two fests -
first, that the Replayment Service has accorded to the veterans - administration of their legal rights, in second with their antifications
and - that the vetereas of this nation are a highly employable of citions.
Then the employed - is registered and classified as to his
compational qualifications. be seed not will repeatedly to ask for work
No will to notified when a mitable job opening is availsMe.
If the registered applicant is not referred to a Job within so
days he should - his application in order so maintain his place - the
active line.
then the when bee - placed is employment. be - wm
- w Minute, mistain his - as the - office
and - - that his substrict record there to 1 - --w the admission of - participant State - this mode
skill - operators
New does the explayer . about whing - of - -
Services So - will the / office - - - or was
the office in person - state his most of a - a - of a w
325
and of Ms - requirements.
If be adida for a with months, only a outified - of -
Saler commission - will be referred " Ma. b the - that
there is - all - aveilable in the registry w the /
office, that office will, If the employer " desires, - - whe
to the preper wien official.
If the explayer desires to extent from two - more
workers, the reasonable requested will to referred " his the his
our interview and desisten.
them the explayer is a large or constant - of he should seek or welcome a talk with the manager of the least -
office. Indoor the manager will 1 1 as interview with the
employer or with his suitable representative. - purpose of this personal
acquistense is to water certain that there is complete minut ministent
ing of the function and practice of the Replayment Service - of the
needs and special requirements of the employer. the / Service
will furm all of the employers' proper and reservable
Strike I of course, are not functional
I the - w employers, - to - - nights
-
and interests - s regular
s Replacement Service, - is is the position of the
Important - of the extent interests of the and of the
the informat optain will comparable in and to the -
- Service apportunity to - cogninted with the - -
and the of and and - which - provided /
326
Me factory. day. or please of to exployers w appropriatives of the / Certifica
has as their particular
not only the - of the
convision
interest, w also may of that questal of the explan
er's seels did will mine the Regional Service to give complete
antistantion to with englayer and employee.
s Supleyeous Service - believe between people and Jobs
is steadilly becoming a wither and a stranger pathery. n is Twile -
the strong support of pullite - That public to
founded upon understanding and actual experience with the Registered
Service. Age the Registered Service is shill in 100 inform. It is at
the beginning of a payment national Service. 1 - now to moute
public ministrating of see purpose and to request the cooperation of
employers to the and that the Service - multify progress toward the
haffilment of its daties and opportunities.
82 to
in - - of - - - a I
- w - Reburs
F. Regionites
of w - to
for WITH
Barky
As of Box I abovely the Matted States see was - July first of that year. This - the benefit of laber, was - the first of the addievements of this Medicine designed to - - social
selfare against the adverse tide of a great communis depression.
This Replayment Service has born ability administrator eithin
the Department of Labor under the - - with the interest of Frences Perkins.
The plan of operation of the United States Replayment
Service is consistent with ste purpose. It integrates the support
of lesale State, and Federal - in the - offers to
aid the saltholp of these who care their living - - Its
organization - its equation are abolity in accord with the Invoice
tradition of good - and of good public service.
Ultimately the United States - Service will be
a
congregation of w State - Services, w
realisting its service / the whole - of its - State.
the Pederal - member, dollar for dollar, the funds provided 1
w the State - the some additional - - the - that of
State - Benton shall - the - electronic
organisation - proofies presenting w the - States Service.
328
.2Already, this Federal-State cycles exhresse 36 State
Replayment Services. The initial 135 local employment enchanges
have increased to the 300 offices - operated w the State Services.
In order, everyshere, to recruit verburs for public moties
projects, the National Temployment Service, as a subsidiary of the
United States Replayment Service, was organised to operate in areas
not covered by the State Replayment Survices.
These State Services and the National Remployment
Service have worked in misse and in harmony and without daplication
of effort. There is nee . nation-side Employment Service with 700
district, or principal, offices with 1000 additional brench offices.
Today, this United States Employment Service is at work in every
community in the nation, effectively bringing workers and Jobe w
gether.
This national Service has been - essential instrument
in the process of recovery. There has been no unbridged chees,
with millions of employed workers on one side, and with waiting
work opportunities - the other. The public employment service is
1
the widge assess that chees, the commeting link to self-supporting
This billigo Inc been much used during these three years.
The - millions who have sought old is securing John restly on
number there who have had to seek relief. The instances is shield
placements have been made - to the total of sim millions.
329
or this we / - in - - - - - - - hill millions / - - - projects of - m the -
of - Public I - all other - projects - five millions
/ - in printe Industry - these - the - Service to - in - - a solief -
Yes so so - - to - Juhe - the Johlness. It helpe w m
-- level
1 --- w electing - e qualified
to fill
- - Service dass - refer - to solvate to players - the basis of the - of the employed applicant for work
referent is made solity - the beats of Stimus to w the 1
millable. the referral is - without report for week, onles, -
politions affiliation. a no other - - these be - of n
bills of - w the - - of - midstration is
the - of the Survice w - This police has been followed
1
daving
and
forthese
- three years, with good monite for -
- / has - touined Ste states
to - - special - of 1 w is I - to
- of with - - and I the / - the - - - - of Make as so -
the - to - to 1 - a single s - a to
- a the - - meeted w - as Ma / -
330
1 this so - to - Ms - to w - - w
easter his - that to Me actual attention, w essage - -
- hope of in to - -
In round water - of - - - - active
registration of the Replacement Service are in -
which offer - expectation of - operating explayment. Another third - young persons - I - - you - work experience. the other third - the best attention -
have had - and have - - for in
which will demand their - as the business pressols.
the the of these - - - not - will /
tryed - be and free that hopeless - which - be thate
fate whose they are eligible s John in which the have - had
operation - Replayers are often quite sighs in thats today
tense that - - - well I had actual - the particular w to be I This to the I - of
motion - - - w ss to w - 1 sale.
- Sandoo to undertaking w - the
- to - - - - - / /
of gotting these people book to 1 no is I - these -
May - - - - - being released to Jobe - / - will 1 is which - have w entire but actual /
/
331
⑉ / M - / office Inc -
- - - - a - to / - to regular election -
/ to m - registered with this / -
that his office - - - / - - 1 - -
- kind of - - / - - - - - that
In - of this prection of - /
with kind which of employees - - the employees - to 1 people they estanliy met, and the - - writting
they - -actually
artificial
- apportunities milled for which
will to
qualified.
the gist of this - of - of the
some
- played Service my be - / Fit - for 1 - 1
- - as / in each -
m - this - - the I village
take Mast a See - - for Substration A certain Set -
In any - - a Job of 1 factory /
- - the - - a - of 2000 - / /
--/---/-
a / extending - - falling. - - stood, a - -
- - Sa 10m - be had / - - 1 - / - thoses new - - morted I -
- I of / - - w 1 - - w a -
332
+
the aged could w / - office this moto of - - - - -
- the 1 less offers - - / s - - this - 90 / please Mess is with - the of / Burden. The / stated - -
The / / - still - - Ma /
- meriously Survice minutes from its - / - / - of
- - called to Interviewed who could - - / T w
- that - the / office and - for bis shotos could fill the MIL. They - referred to to the - - m new - kind. Inc the /
a the - / - - elected / -
better - to - the - / The - other as -
- less
of make
- within of
the shale
any - I me - as - the the the
/
is
a
I
- - - - - - was 1 to It belge both
- / wm
noteI of
- / this - - of
- -- --- // -of
n
/ - the 1 - - this / Burdent n
total 1 I office - States Me - w Wate
- Me - and / n 1 - - Me 1 I
333
that - Schooled to several Me quelifications. n - - second as
as for explayed - to Me extract qualifications. - than
registered, be nool not will reportedly to - for - No will be
notified which a suitable w - to continible. If he to
not referred to a Job elitida 30 days be should - his application
in order to minista his place - - active 11st.
Than the water has been please in employment, be should
mistain his relations with the explayment office and make - that
his Industrial record there is constantly kept up-to-date w the with
time of partiant feets concerning and acquired skill and experience.
New does the employer " about making - of the Replayers
Survies? No my sell the employment office - the telephone, or visit
the office is person, - state his nood of a worker is terms of the
job and of his - requirements.
M be - for a miss - only a qualified member of the
Labor organization - will be referred to him. Is the event
that there to - - eligible - available in the registry as
the - office, - office, will, If - employer w desires,
transfer the color to - - mice official. Swith business
of - - - I - when - w
employees, - be destinge. - / - - interests be regarded June as the - rights - -
335
as u - - I - of millio / -
-a----//-
- Baration Sale - Business as - mm
Saturday. a sm - of . 1 / - $
- - to - public - of Ste - - w the componation of / w the - - - - -
joing I - of see - - -
336
August 27, 1936
The attached report, citing several narcot1c-smuggling
cases, was prepared by Mr. Graves upon request made by the
Secretary when Graves WES on the Farm on August 17th.
OFFICE OF
THE SECRETARY OF THE TREASURY 337
August 27, 1936.
Mrs. Klots:
When I was at Mr. Morgenthau's farm on the
17th, he asked me to provide him with a text
account of two or three narcotic-smggling
cases, which he might show the President,
together with a small quantity of heroin.
I attach hereto a memorandum relating the
facts in three such cases, furnished me by Mr. Dow
and a bottle containing one ounce of heroin,
provided by Mr. Anslinger.
GRAVES
me have heroin (10g)
in safe
338
MEMORANDUM:
The much-publicized case at Seattle in which customs officers
seized 1440 ounces of smoking opium from the steamship TANTALUS
early in 1935, involved nearly a year of constant investigative
effort. Customs Agent Hanks was approached by an intermediary
for a Chinese narcotic smiggling syndicate at Seattle and offered
a substantial bribe to protect the unlading of their shipments.
He secured the permission of Department officials to play along
with the ring, pretend to furnish the desired protection, take
the bribes, and work into a position to make a substantial seisure
and secure evidence sufficient to convict every member of the
organisation.
For nearly a year pretended protection was furnished, bribes
were accepted, member after member of the ring, including all the
principals, was successively identified in Seattle, Chicago, and
Detroit, telephone conversations and conferences between Customs
Agent Hanks and the various members were permanently recorded on
aluminum disc records by wire tapping and diotaphone devices, and
the finale staged with the utmost precaution as to every detail.
Customs Agent Hanks was on the dook in plain clothes, as
arranged with the smugglers, he persuaded the dook guards to
absent themselves as also arranged, but he had placed row boats
under the docks, powered with small electric motors and manned
by his assistants, other assistants were in high speed motor boats
laying to in the darkness some distance from but where they could
observe the TANTATUS, others were concealed on the land side of
the docks, and Deputy Marshals had been furnished criminal warrants
and were stationed at the locations of all the principal members of
the ring.
The snugglers were given the signal that the coast was clear,
and a motor boat slipped under the stern of the TANTALUS and received a large package. Hanks discharged a flare from a Very Light
pistol he carried, and the government boats and the officers closed
in, capturing the smugglers, their boat, and the narcotics. The
Deputy Marshals in Seattle, Chicago and Detroit were immediately
advised by telephone of the seisure and the arrests made before the
smugglers could give warning.
All the defendants involved, major and minor, pleaded guilty and
were sentenced to penitentiary terms, one receiving eleven years.
C
339
-2-
Philip Eidelman, a trunk maker of New York City, was arrested
at New York on March 6, 1936, upon arrival from Europe, when customs
officers found 118 ounces of heroin in a false compartment of his
wardrobe trunk. This false compartment was about one inch thick
and extended from the top to the bottom of the trunk behind the
drawers. The facing of the compartment was thin veneer board over
which oloth lining, identical with that in the rest of the trunk,
had been glued. Each of the drawers had been out off one inch and
the oloth lining glued over the edges. The work had been so carefully done that the fact there was a false compartment was determined
only by careful measurement.
Investigation by Customs Agents at New York and in France disclosed that Eidelman was a. carrier of narooties for Nathan Rothman
(alias "Little Natie") of New York from Michel and Alexander
Shviriansky, well-known international narootic smugglers residing
near Paris. Indiotments were secured against all those involved.
Eidelman pleaded guilty and was sentenced to six years in the penitentiary, Rothman was arrested but has not yet been tried, and proceedings are under way to extradite the Shvirianskys for trial.
For three years Treasury Attache Nicholson at Shanghai has
kept under constant surveillance Naftali Loffelhols Brandstatter
and Anton Wirthmuller, leaders of an international narentic smuggling
ring which had transferred its seat of operations from Europe and
the Near East to the Orient. Some months ago Wirthmiller proceeded
to Mexico and was covered by Customs Agents to Masatlan, Mexico, from
where he went to Nicaragua.
In May, 1936, Brandstatter left Shanghai for Mexico via Sues,
Spain, and Havana, his movements, all cablegrams and radiograms sent
by him being immediately known to Treasury Attache Nicholson. He
was refused admission into Mexico and has been in Havana since July
27, 1936, our customs representatives there having been able to learn
everything about him except his thoughts.
On August 4, 1936, Molly Marie Wendt, an Eurasian nurse of
Shanghai, was arrested at Los Angeles by customs officers when
approximately 840 ounces of heroin, in bulk, were found in false
compartments in her wardrobe trunk. (Treasury Attache Nicholson
had learned more than six months ago that the Brandstatter-Wirthmauller
ring had purchased seven trunks containing false compartments).
In Miss Wendt's bag was found a slip of paper bearing two WORLD
"Brandstatter" and "Rosendal". The Customs Agents, believing Miss
Wendt to be only a carrier for the ring, finally persuaded her to
carry out her instructions as to delivery. Pursuant to her instructions she registered in Room 345 at the Rosslyn Hotel at Los
Angeles, where she was to remain until an individual giving the name
340
-3-
"Rosedeal" (not Rosendal) came to her room, and to whom she was
to deliver the trunks. A Customs woman stenographer occupied
Room 345 jointly with Miss Wendt and a Customs Guard occupied
communicating Room 346, the communicating door being left open.
The receiver of the trunk had not yet appeared on the night
of August 7. Shortly after 9:00 P. M. the woman stenographer was
permitted to go to the hotel lobby to see her brother, who had
come from the East to visit her. A few minutes later Miss Wendt
went into her bathroom, apparently to bathe, as the Customs Guard
in the communicating room saw her enter the bath room, heard her
turn water into the tub, and heard water splashing. At that
moment the phone in the Gaurd's room rang and he answered it,
finding that the call was from one of the Customs Agents asking
if everything was all right. When he returned to his position at
the door he discovered Miss Wendt had escaped. The hotel doors
were immediately blooked and the hotel searched, city detectives
and all police, cars were given Miss Wendt's description and requested to arrest her, Customs Agents contacted all taxicab companies, railroad, bus, and steamship companies for information,
all other hotels in the city were furnished her description, but
she was not located.
On the afternoon of August 8, it was discovered that Miss Wendt,
although seriously ill with amoebic dysentery, had boarded a United
Air Lines plane one and one-half hours after her escape, with a ticket
to New York. Customs Agents at New York were notified by telephone
and their inquiries showed Miss Wendt had arrived at Newark a short
time before, had left the airport bus in front of the Hotel Pennsylvania,
and had purchased a round trip ticket to Pittsfield, Mass. All out-
going vessels were immediately covered, and a check made at Pittsfield,
but she was not located.
On the evening of August 12, Customs Agents observed a woman
wearing smoked glasses going aboard the DEUTSCHLAND. She was stopped,
identified as Miss Wendt, and a ticket to Southampton found in her
purse. She was returned to Los Angeles by airplane and is now con-
fined there in default of $25,000.00 bail.
Brandstatter in Havana had in the meantime cabled Shanghai for
"the name of the girl", to which the one word cable reply received was
"Wendt". His continued presence in Cuba is being assured through the
efforts of customs representatives, and in the event Miss Wendt gives
any information or legal evidence is secured through other sources
connecting him with the Los Angeles seisure, steps will be taken to
bring him to the United States for trial. The United States associates
of the ring are believed to be known and investigation is being pushed
with all possible speed.
341
It is believed by Treasury officials charged with mareotic
swiggling prevention that Japan has, in the last few years, largely
replaced Europe as the principal source of supply for the illieit
traffic in morphine and other refined marketies. Examples of
seisures during the last for years of marcotics apparently of
Japanese origin are set out below:
640 os. morphine
560 os.
36 os.
32 os.
in
"
.
30 os. eccaine
148 os. morphine
352 os.
- July, 1952
- February, 1983
- March, 1984
-
Seattle
-
Portland, are.
-
- July, 1984
-
- April, 1956
-
- May, 1935
- September, 1935 -
San Francisco
San Francisco
Les Angeles
Les Angeles
Seattle
342
August 27, 1936
The following met with the Secretary this morning:
Mr. J. P. Wenchel, Assistant to the Solicitor, AAA;
Mr. Paul H. Appleby, Assistant to the Secretary of Agriculture; Mr. J. P. Hutson, Acting Administrator, AAA
and director of the Northeastern and Southeastern regions;
George E. Farrell, director of the Western region; G. B.
Thorne, director of the North-Central region, and Eddy
Bartelt from the Treasury. The following is a report
of their meeting:
HM,Jr: I have taken the liberty of asking you to
come over because Mr. Wallace asked me to assist in get-
ting this thing out of the Comptroller's Office. I
just wanted to see if it was on its way and to wish you
good luck. I want to assist, but not interfere. Mr.
Wenchel and I had a very successful meeting with the Acting Comptroller and it's out of his shop now. I think
that's about all we can do unless Mr. Wallace wants us
to do something else. I believe I know what the President wants. I have seen the schedule and I think the
bulk of this schedule is definitely longer than I think
they are going to want. That's up to Mr. Wallace to tell
you, but I had hoped that 75% of the contracts would be
executed, signed and checks out before the first of November. As I understand, in order to do that, there will
have to be some midnight oil burned. I don't know whose
responsibility that is over in your ship.
Hutson: It's in the hands of the AAA now. But I
don't know how much this can be speeded up, Mr. Secretary.
It's going to be exceedingly difficult to move very much
faster than the schedule that we have.
HM,Jr:
The contracts haven't even gone into the
field to be signed.
Wenchel: The application blanks are being printed.
They are the ones we got out yesterday morning. They
went to the Printing Office yesterday afternoon. Jack
(Mr. Hutson), the Secretary has arranged with the Printing Office that they go through first. My understanding
is they are printing them now.
HM,Jr: During the night I got to thinking about
343
-2-
this and I think with the exception of Mr. Bartelt, who has
the responsibility of getting checks out, the Treasury should
step out of the picture this morning. We did our job when
we met and got that thing out. I think we should step out,
except Bartelt whose regular job is to get checks out. I
would like to leave it this way: I sent word to Wallace to
call me on the telephone. I want to tell him personally
what we have done and what the situation 16. He asked me
to do a specific thing and I was able to be helpful. That's
done. We talked to the Printing Office and that's done.
Unless there is something specific -- I was thinking about
it last night, and I think it is a mistake for the Treasury
to do anything more than what we have done.
Hutson: We appreciate very much this, Mr. Secretary,
and we are going to move just as fast as we can. Secretary
Wallace talked with us about this before he left and asked
us to move as fast as we could.
He will give you the orders, but I would
like to see this whole thing advanced three months. On
applications for payments on corn, for instance, what is
the status of that?
HM,Jr:
Hutson: Applications from the North-Central region,
that is the states of Iowa, Montana, etc., will be ready
for payment, according to schedule, about the latter part
of September, but the big flow of checks, as set up at present, would not come during the month of October. But according to the best we have been able to work out,according
to our procedure, would be November before the flow would
be fully under way.
HM,Jr:
They won't start until November?
Hutson:
They will start in October.
HM,Jr:
But very little.
Hutson:
From 3 to 5%.
HM,Jr:
I would like to see 75%
We will canvass this situation among ourselves
again this morning and see the very best we can do, 80 if
Hutson:
344
-3-
Secretary Wallace gets in touch with you
But I want it distinctly understood, with
the exception of Mr. Bartelt, who has his responsibility
with the checks, that we are finished, unless Mr. Wallace
asks us specifically to do something. It would J ust be
a mistake for us to go any further.
HM,Jr:
Hutson:
You have been a great help.
345
August 27, 1936.
Mr. Appleby stayed behind, after the conclusion of the meeting
in the Secretary's office this morning, when the Secretary explained
to the group from the Department of Agriculture that he wanted to
assist in getting out soil conservation checks but not to interfere.
Mr. Appleby told Mr. Morgenthau confidentially that their fiscal
setup is in very bad shape; that they had three thousand checks from
last year's wheat that they have not sent out.
At this point the SECRETARY sent for Mr. Bartelt and when he came
in he said to him: "Appleby would like you to go over and visit with
him and go over the fiscal setup at AAA. I have told him that if they
wish it you are available to help them revise their fiscal setup.
Appleby has been very frank and says that there has been a succession
of difficulties in getting out the checks."
THE SECRETARY then called in Mr. Bell and repeated to him: "I
want to tell you that Mr. Appleby tells me that they have their troubles
in their fiscal setup in AAA and I told him that we had gone as far as
we could in getting this thing started through the Comptroller General
and the Public Printer and that if I went any further I would be so
involved with Agriculture, before I knew it, that it would look badly
to the public. Can we send Bartelt over immediately?*
MR. BELL asked Mr. Appleby: "How long would it take?"
MR. APPLEBY replied: "All I want to give Bartelt first is the
picture of what our setup is."
THE SECRETARY then said: "What you need over there is a Number-One
fiscal man."
MR. BELL inquired: "Would we run into the Comptroller General's
people? Can we stay away from them?"
MR. APPLEBY replied: "Yes."
MR. BELL said: "I suggest that Bartelt and Maxwell go over and
then Maxwell can carry the ball for Bartelt."
346
-2
job."
MR. BARTELT remarked: "I believe that Paul Banning could do the
Then MR. BELL stated: "Well, we will work it out and I am sure
we can get a couple of men together to work on this thing."
To Mr. Appleby the SECRETARY said: "You understand that by doing
this we are holding up our own work."
MR. BELL inquired of the Secretary: "Your principal interest is
in moving this present program forward. Do you expect us to revise
the present accounting system?"
THE SECRETARY replied: "Yes. If they ask us I would give them
a good setup."
MR. BELL remarked: "They never had a proper setup."
MR. APPLEBY explained: "There is a lot of politics going on as
far as personnel is concerned."
THE SECRETARY'S comment was: "Well, if we go in to do the account-
ing job, we will disregard politics and we must have carte blanche in
order to do a good job. If you turn us loose I guarantee to do a good
job, but I will not be interferred with."
MR. APPLEBY remarked: "I want you first to see and get a feel of
our setup."
THE SECRETARY said: "I want Bartelt to go over this afternoon and
on Tuesday the three of us can have another meeting."
At this point Mr. Appleby departed.
To Mr. Bell and Mr. Bartelt the SECRETARY said: "Appleby says that
the only excuse we have is that we have always been slow. He blames
Chester Davis because he never set it up correctly in the first place."
CANTON, N. Y. P. O.
COPY FOR THE DIRECTOR
347
August 28, 1936.
SA
on. Owen D. Young,
370 Lexington Avenue,
lew York City.
Dear Sir:
In connection with your telephone conversation with
Secretary Morgenthau on the 26th instant, he has instructed
me to take up the matter direct with you.
The facts are that the Treasury Department has not
authority to exceed the limits of cost for Federal buildings
as fixed by the laws of Congress. When the funds available
have been fixed as in this case, the building must be designed
within that limit. There are no general funds available from
other sources.
The controlling feature, of course, in the design of
any public building is the needs of the Executive Department
which is to occupy it. The outside treatment of the building
Is then designed so that it may be reasonably in harmony with
the architectural and other local conditions in the vicinity,
out then only to the extent to which funds available will
permit.
In the case of the Post Office building at Canton, the
size of the building was such as to lead the Department stone to
believe that funds might not be sufficient to have a on the
faced building, and for that reason bids were invited but an
basis of having red brick facing with stone trim, the
alternate bid on local stone was also requested in hope so
that the lowest bid would be within the funds available
that this alternative for stone facing could be accepted.
As a result of the latest advertisement, the bid therefore for
stone facing exceeded the legal limit of cost, brick and facing with
it was necessary to award the contract for Under the
stone trim, and action was taken accordingly.
action that could be taken,
circumstances
only the Municipal
authorities
except thatthisifwas
thetheUniversity
or for
the
at desired to reimburse the contrastor
Canton had the cost of brien facing and stone authorise facing,
difference the Treasury between Department would have been willing to
GANTON, N. X. P. 0. 348
the stone faced building. However, in view of the latest cell
your office this morning, to the effect that the Government
- gone as far as 10 could is this matter and that your
had and with the contractor had led you to think that be should have his notice to proceed, the contractor's notice to present
is being cont to his by wire today.
I regret the aircuntances surrounding this case have provented the construction of a stone faced building.
Respectfully yours,
Director of Precurrence
CJP1LAS/mag
Wednesday
August 26, 1936
349
2:52 p. m.
Admiral
Peoples:
Mr. Secretary -
HMjr:
Low is Mrs. Peoples, Admiral?
P:
HMjr:
P:
Why, you're very kind to inquire, Mr. Secretary,
I'm afraid we're going to have some serious trouble
there.
Well, I'm sorry.
Yes, she's got a - there's a good size gall stone
that's formed and I've had a doctor twice a day
trying to get her in shape to have Xrays and an
exploratory examination made preparatory to this
operation. We took her - we went up to Bluemont
on the last weekend to spend a day or two with Ned
Bruce and this thing flared up up there. And I
didn't know whether I could get her home or not.
HMjr:
P:
HMjr:
P:
HMjr:
P:
HMjr:
P:
HMjr:
P:
Oh - well, is she resting comfortably now?
She is now, Mr. Secretary, yes indeed. You know
her brother-in-law is Doctor Swope.
Oh yes
And he really has gotten her comfortable so she's all things considered - as comfortable as can be
expected, sir.
Well, I hope she gets along nicely.
You're awfully kind Mr. Secretary.
Now, Admiral, besides that, two things Yes, sir
Were you - did you have any luck in seeing
Senator Glass?
Bless your heart, I sent up - a memorandum up to
you yesterday afternoon HMjr:
P:
All right
- reporting that I interviewed Senator Glass at
one o'clock -
HMjr:
Yes
P:
- at the Hotel Raleigh -
-2HMjr:
P:
HMjr:
Yes
He appreciated - he read your letter over earefully.
He appreciated the - very much the idea of your
sending it to him.
Yes
P:
It was very obvious - he said that what - his
principal objection -
HMjr:
Yes
P:
HMjr:
P:
- was the fact that when it came to a matter of
patronage Yes
- he thought the two Virginia Senators should be
permitted to name the successor to that outgoing
man -
HMjr:
yes
P:
- rather than the outgoing man name his own suc-
HMjr:
Yes
P:
HMjr:
P:
cessor.
I explained to the Senator he did not do so. That
the second man-was selected under consideration
only by reason of his record and his ability.
Yes
But, he said, 'Well, Admiral', he said, 'I see
now that it is only a - for a temporary period
only' -
HMjr:
Yes
P:
And he said, 'I am going to advise Wiltshire to
HMjr:
Yes
P:
HMjr:
350
remain in the HOLC where he is'.
And, Mr. Secretary, he was very, as- much as he's
capable of, he was very gracious
Yes
-3-
351
- very kind -
P:
HMjr:
Yes
P:
And
he said he was going to write you a letter
and
HMjr:
Thank you very much.
P:
It smoothed it out very nicely.
HMjr:
P:
HMjr:
P:
HMjr:
Now one more -
Yes, sir
I just had a very interesting call from Owen D.
Young.
Yes, sir
It seems we're building a post office at Canton,
New York which St. Lawrence University is interested
in.
P:
Yes, sir
HMjr:
And he and Mr. Simon have been up there.
P:
HMjr:
Yes, sir
And they've asked for - offered bids, one quarried
stone and the other brick.
HMjr:
Yes, sir
And, in - there's a difference of five to seven
P:
Yes
P:
HMjr:
thousand dollars.
Now, he said this means more to him than I don't
know what and the University have offered the
stone free from the quarry but of course we have
to cut it.
P:
Yes, sir
HMjr:
But, as you know, we've had better men than Owen
D. Young - I've had thirty-five states in here,
one representing natural stone and for seven
thousand dollars I don't think we could even please
-4-
352
Owen D. Young.
P:
Well -
HMjr:
Supposing you take a look at it and when you come
P:
HMjr:
over tomorrow at the big staff supposing you report
on it to me, will you?
I will, Mr. Secretary.
But, the way I feel is it might be a very good
lesson to show Owen D. Young that seven thousand
dollars to the Treasury - it means as much to us
as seven million.
P:
Yes - as I understand it the - this building -
HMjr:
Yes
P:
- is in the setting -
HMjr:
- of the University?
P:
Exactly so.
HMjr:
Well, supposing you look into it and bring it
around. I thought he was going to offer us seven
thousand dollars -
P:
(Laughs)
HMjr:
- to make up the difference, but I was wrong.
P:
(Laughs) I'll let you know - I'll report tomorrow,
Mr. Secretary.
HMjr:
0. K.
P:
Thank you, sir. Byebye.
Wednesday
August 26, 1936
2:47 p. m.
Owen
Young:
Hello
HMjr:
Yes
Y:
Hello, Mr. Secretary
HMjr:
Yes
Y:
This is Owen Young in New York.
HMjr:
How do you do?
Y:
Have you got just a second?
HMjr:
Surely
Y:
Because what I am going to speak to you about may
seem to you ridiculously small, but to me it's
very important.
HMjr:
Y:
Well, then it's important to -You're building a - you're building a post office
up in the Village of Canton, New York.
HMjr:
Canton?
Y:
Yes
HMjr:
That's where you come from?
Y:
And then
-
University is.
no, that's where the St. Lawrence
HMjr:
Oh yes
Y:
And I'm more interested -
after my own family
I'm more interested in that little College than in
anything else in the World.
HMjr:
Yes, Mr. Young.
Y:
Now, I've had the finest kind of cooperation from
the department.
HMjr:
Yes
Y:
Simon himself finally went up to Canton at my
353
-2-
354
request and they made a special design of that
building -
HMjr:
Yes
Y:
- which is on the most prominent corner of the
Village
-
HMjr:
Yes
Y:
- on the street leading directly to the college.
HMjr:
Yes
Y:
And he made a design of the building where - to
suit the - to match in with the buildings of the
college, you see?
HMjr:
Yes
Y:
And was going to use the stones out of which the
college buildings are built and the college,which
owns the quarry, was going to give the stone to the
Government without any charge -
HMjr:
Y:
Yes
- so that the post office could be built out of
that stone -
HMjr:
Yes
Y:
- and matched in to the college buildings.
HMjr:
Yes, Mr. Young
Y:
Now the Treasury has taken the bids on it -
HMjr:
Yes
Y:
And because they were fearful that they didn't
have quite money enough in their appropriation
they asked for bids both on brick and stone.
HMjr:
Yes
Y:
Now, they've got just money enough to cover brick.
HMjr:
Yes
-3-
355
Y:
And
from five to seven thousand dollars
shortthey're
-
HMjr:
Yes
Y:
- on that contract to make it of stone.
HMjr:
Yes
Y:
And I am just going to appeal to you to see if
you can't find somewhere that extra sum to build
that building of stone. The contractor is ready
to go ahead with it, though. And it is true
-
HMjr:
Y:
HMjr:
Y:
HMjr:
Y:
HMjr:
Y:
HMjr:
Y:
Yes
-appropriate.
that I think the differential is perfectly
I see.
He can't build it of stone at the same cost that
he can of brick.
-Do I understand that the local
These contracts are on a very narrow margin.
Is there a local quarry there?
What is it?
Is there a local quarry there?
The University - the College owns the quarry
HMjr:
Yes
Y:
And it is giving the stone -
HMjr:
I see.
Y:
- making no charge to the Government at all. -
HMjr:
I see.
Y:
- for the stone.
HMjr:
Yes
Y:
But to get them out and cut them -
HMjr:
Yes
-
356
-4Y:
HMjr:
- will cost
more
than about
brick. five to seven thousand dollars
Well, I'll call up Adm- --
Y:
I'm terribly
anxious that that building should be
built
of stone.
HMjr:
I'll call
Admiral
him
toup
look
into it.Peoples right a way and ask
Y:
Fine, will you?
Yes, I'11 do it immediately.
And Simon has all the information -
HMjr:
Yes
Y:
HMjr:
Y:
- because he has been following it very carefully
and he's been very very nice about it.
HMjr:
Yes, well, I'll be glad to look into it.
Y:
He himself has been to Canton with me -
HMjr:
Right
Y:
And Simon himself feels that it's just too bad
HMjr:
that it can't be built of stone.
Yes
- well, thank you, Mr. Young, I'll have
it looked into right away.
for me and I'll appreciate it very much.
Y:
-
HMjr:
I'11 look into it immediately.
Y:
Thank you ever so much.
HMjr:
Goodbye.
356A
From COMMUNICATE
THE SECRETARY or STATE
WASHINGTON,
DEPARTMENT OF STATE
WASHINGTON
August 28, 1936.
My dear Mr. Secretary:
Cochran seems to have run into a rather pointless
display of caution at our Enbassy in London which he
relates in his telegram. I as sure you will not be
misled by this episode. I need hardly say that the
Department has never under any circumstances failed to
transmit to the Treasury any and all reports of every
kind bearing upon Treasury matters.
Sincerely yours,
Enclosure:
Paraphrase of sections
four to twelve, inclusive,
of telegram No. 798 of
August 27, 1936, from the
Greesture
American Embassy, Paris.
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
356B
PARAPHRASE OF SECTIONS FOUR TO TWELVE, INCLUSIVE, OF
TELEGRAM NO. 798 of AUGUST 27, 1936, FROM AMERICAN EMBASSY,
PARIS.
The Governor said he would see me at Basle in October
and asked me always to drop in on him when I visited
London.
I ran into Broderick Haskell of Guaranty's New York
headquarters while I was cashing & check at the Guaranty
Trust. A few days ago he had visited me with a letter of
introduction from Chandler, a Guaranty economist, who is
an old professor and friend of mine. Although on a
pleasure trip, Haskell is meeting many people so that he
may gather information as to probable future capital
movements. He made the remark that business in London
is much livelier than it is in Paris. The amount of new
private construction in England impressed him on his tour
of that country. In his conversations with Britishers
he has noted that apparently they are satisfied with the
present status of the currency, and that until the United
States may be receiving goods instead of gold in adjustment of favorable international balance of payments, the
British are opposed to any final fixing of sterling in
terms of gold. Or, to put it in their words, until we
assume full responsibilities of being a creditor nation,
gold movements are so likely to be upsetting internation-
ally that any charge from the present basis will not be
willingly risked by the British.
I called
356C
-2I called at the Embassy a second time, before keeping
my appointment on Tuesday with Sir Frederick Phillips,
Under Secretary of the Treasury, and I mentioned my engage-
ment with the Under Secretary. At the Embassy they let me
glance at messages which were recently sent for Monick to
Washington. They offered to show to me two despatches
to the Department in which were reported conversations
which Atherton had when Chamberlain called him to the
Treasury in June, shortly after I had discussed currency
relations with Auriol. The Embassy placed two conditions
on this offer. They were, first, that I should not
communicate the substance of the reports to the Treasury
in writing, since the Embassy did not know whether the
Treasury had received from the State Department copies
of the despatches, and second, that I should not discuss
the subject of the despatches with Phillips. I preferred
not to see the despatches, realizing that they must touch
Franco-Anglo-American monetary relations. My visit to
Phillips would have been rendered purposeless if I had
bound myself not to talk on this subject. The Department
is aware that when outside of France I always report to
it the names of every official I ever see, and I leave it
to Washington to judge the propriety of my visits and
to instruct me accordingly. Last autumn when I was ordered
to London it will be recalled that Governor Norman
invited
Phillips
3560
-3Phillips, whom I had known at the Monetary Conference at
Geneva, to be present at the Bank for lunch, and to join
in the private conversations we had. Last spring when
I was ordered through London on my way to Washington,
as I reported at that time, I saw Phillips. On August 26
as soon as Phillips received me I took the precaution of
explaining that I was just calling unofficially on one of
my periodic trips away from Paris, and that I did not want
to cross in any way any discussions that his Ministry may
have had with American officials in London or in Washington.
The Under Secretary expressed particular interest in
he was tempted to beliefe that
the French situation. He remarked that/early October might
witness a crisis possibly including the French Cabinet,
judging from the many advices which had reached him as
to the outlook in France. He expressed the opinion that
Auriol's legislation and threats had frightened back a
little money to France, but it was such a small amount that
together with the influx of tourist exchange it was barely
enough to steady the franc for a few weeks. The past
several days, he said, he noticed that the franc has been
intermittently shaky. It is his definite hope that there
will be devaluation of the franc. But he is not sure
how France will aot now, after seeing her miss ten or twelve
good chances to devalue in the past. Celerity and secrecy
he said are two requirements for a successful devaluation.
These essentials he said are lacking, as long as France
continues
356E
-4continues to falter and at the same time her Treasury and
Central bank officials talk widely of alignment of currencies.
The Under Secretary said that the problem of France
is to secure capital, and only by devaluation can this
be accomplished. I asked Phillips whether, in case of
a clear-out devaluation, he thought a great deal of
capital would go back to France; he replied that this
depended upon the attitude as to capital that the Government then in power was manifesting, and by the degree of
international political tension obtaining in Europe at the
time of devaluation. He thought there might be an important
movement, given anything like favorable circumstances in
this regard.
Phillips said that Great Britain could stand a pretty
heavy outflow of gold to France, especially as this could
be effected without having too much attention attracted to
it. As for the United States, Phillips wondered whether,
now that we have acquired such a big lot and are getting
accustomed to it, the American people might not quickly
become perturbed if publicity were directed to a fairly
significant removal of gopd to Europe - especially if there
were a sharp drop in our prices at that time, due to the
outflow of gold or from other coincident economic fautors.
I observed that the price rise and purchasing power of
the dollar which had been accomplished in the United States
had
356F
-5had been to the benefit of the world in general, and he
agreed with this. Our gold losses, he said, would be
lessened correspondingly by the recent heavy gold produo-
tion in Russia and elsewhere, and by the existence of
European war clouds.
The Under Secretary, as had Norman, discussed the
Spanish situation with me at some length. Phillips made
the observation that today the German as well as the
Italian attitude toward an understanding seemed encouraging. However, he imagined that relief on the other point
might be overbalanced by France's shock from the news of
Hitler's announcement regarding military service. I said
that it was a question [reference: my telegram of August 24]
as to what device France would use to manage the reentry
of capital. He insisted that this was just a matter of
technique which when the time came could be worked out
by France, and analysis of the attending circumstances made.
I asked Phillips why London was withdrawing so rapidly
the equalization account gold which is earmarked in paris.
Phillips replied that when the Blum Government took office
they had not withdrawn the gold since they felt there
would be quick devaluation and it would be more convenient
to have it in France to provide for the return flow which
should follow devaluation of the franc. But nowFrance
that
356 G
-6France had delayed 80 long and might yet take some sort
of step other than definite devaluation, such as an
embargo, he thought it was better to withdraw the gold
and bring it back to London, since there are so many
Communists in the picture. Statistics on this movement
wi 11 be discussed in a separate message.
The Under Secretary said that the main reason for
the Bank of England buying large quantities of gold this
week was because they needed the gold to avoid deflation
in view of the heavy purchasing of sterling notes by
foreigners. In addition he said that because of the
general demand for large denominations, it was plainly
evident that a big part of the increased note circulation
was due to hoarding.
Phillips remarked that there is no need for early
decision on a loan for defense or armament, explaining
that the Chancellor is inscribing increasing amounts
for armaments in his budget, but before he determines
whether and what special measures must be taken to raise
funds, he can wait to see how the estimates turn out.
The defense projects, he said, were making rapid enough
progress. I asked him about possible reactions in foreign trade. He expressed concern over the probable
boost in British prices of iron and steel. There was
continued
3564
-7continued activity in private construction, but there had
been a switch from houses to building of other types.
He remarked that, while he personally does not believe
in closing too severely the British capital market to
outside borrowers, this new offer to (advisory?) committee
which has taken over responsibility from the Treasury
seems dven more "generously Treasury kitty" than the
Treasury had been. It was Phillips's opinion that
cheap money rates could be continued. He said that
British recovery had not yet been inconvenienced by price
rises. He expressed the thought that the world in general
was experiencing this upward movement.
The Under Secretary mentioned Monick, saying that
he had not known until after Monick sailed that he was
going to the United States. I said that I too had not
been aware of his plans although soon after Auriol took
office I had been in touch with the French Ministry of
Finance. Phillips said it was his opinion that Monick is
one of a small group who have been nursing his plan along
for some time, but they do not have Government backing
now. The Under Secretary thought it safer that the main
fiscal administrator was Auriol himself.
Phillips said he did not see just what more could be
done on this matter at the present time, and that he was
not aware that any hitch had developed between the Americans
and the British. The French would now have to decide what
they
356 $
-8they wanted to do about it. France would then probably
want assurances from Great Britain and the United States.
He said that should the French ask the British about trade
retaliatory measures, the latter would say they were not
contemplating any such measures. However if the French
sought a promise to hold the pound within certain gold
points such a promise would not be given. He presumed
that on our side we would give France similar trade assur-
ances, but if the French asked us to waive our right to
devalue the dollar further, we would refuse.
Phillips talked about the French idea of handling
agreements on 80-called alignment. I asked him if the
method had ever been discussed or seemed worth consider-
ing, in view of the difficulties that might surround
any sort of a conference or tripartite agreement, and
of issuing three individual but complementary and simultaneous declarations of monetary policy by the appropriate
authorities in our respective nations. He replied that
this matter was something to be decided by the Chancellor
alone. I explained to Phillips that my idea was & strictly
personal one.
Phillips said with reference to the degree of devaluation which France might require that he had thought for
a time that the right level would be about ninety france
to the pound, but he realizes that this might prove to be
insufficient in view of current French legislation.
3565
-9I mentioned to Rim that Rist had formerly talked twenty
to twenty-five percent to me but that it seemed the
necessity for greater out was felt by observers. I expressed the hope that France would see fit and be per-
mitted to reach a level that could give promise of
permanency that she could bear.
Phillips said he wondered whether the interests of
the middle classes would hold Schacht back from too serious a out in the Reichsmark, and he asked whether, in
this devaluation game, we are to let Schacht have the
last word.
Phillips, as had Norman, mentioned that Leith-Ross
was back, but said he was on holiday at present.
Phillips asked that whenever I am in London I should
come to see him. I asked him whether my visits embarrassed
him in any way, and he replied that quite the contrary it
might be helpful toward our both getting an idea as to just
what the French want if they again bring up this business
of alignment.
On Tuesday I had lunch with R. H. Porters, who was
formerly with Rothschilds, then the BIS, and who is now
financial adviser in Europe for the Standard 011 Company
of New Jersey. Porters said he saw no likelihood of
the
356 k,
- 10 the capital market at London being opened soon to other than
Colonial and Dominion borrowers and conversion operations.
Recently he saw Schaoht in Berlin, who said he was unhappy
over the American invoice declarati on requirements which
allegedly inorimate shippers under German law. Porters
said that Schacht told him he had found Labeyrie on the
latter's visit to Berlin a charming and cultured gentleman capable of discussing any subject except that of
central banking.
While I was in London Munakata of the Bank of Japan
called on me. He expressed the thought that soon Norman
would be paid a visit by Labeyrie. He expressed doubt
whether London could maintain for many months longer the
low interest rates.
Munakata said that in the face of the policy of
the British Empire, neither Japan nor the United States
will be able to get a trade agreement from England.
Munakata urged that the best of relations prevail between
the United States and Japan, and said that the highly
publicized accounts of our market being flooded by Jap
anese crepe, rubber shoes, bicycles, and so on, should
not worry us. He made a contrast between the volume of
such articles with the really important imports which
are exported from the United States to Japan. I asked
him
356kc
- 11 him about the invasion of British textile markets. He
insisted that England continues to fail to modernize her
industrial equipment. Before returning to Japan, Munakata
will during early September pay farewell calls on
colleagues in several European capitals. In October
his successor on the BIS board will be introduced.
I did not gain any idea of any British intent to
stabilize in the conversations which I held. The supreme
consideration in matters of policy centers on defense
necessities. No economic factors have developed sufficiently to cause dissatisfaction with the present system
of managed currency. The system is still held to be
meeting needs and to be best fitted to the uncertainties
of a threatening future in international political
situations.
END OF MESSAGE.
WILSON.
EA:LWW
356L
GRAY
MJD
Paris
Dated August 29, 1936.
Rec'd. 10 a. m.
Secretary of State,
Washington.
809, August 29, 1 p. m. (Section One).
FROM COCHRAN.
In unofficial trading this forenoon French franc has
again weakened to around gold exporte point for United
States, Switzerland, Netherlands and Belgium. Guaranty
sold $1,100,000 against French franc at 15.19 all to
Switzerland. National City Bank also did some business but
amounts of the two American banks' operations too small
to warrant week end shipment to New York.
Premier has issued official communique to show recent
improvement in certain French economicpart
indices. The
reservation should be made, however, that/of the recovery,
especially in railway fares of tourist centers, resulted
from forced holiday legislation which is affecting adversely
important production of business elements. Communique
states subscriptions to baby bonds have now passed 3.5
billion francs.
Commenting upon Schacht's visit and results thereof,
LONDON TIMES today carries article from its Paris corres-
pondent which has the following interesting
"DR.conclusion:
SCHACHT'S
356 m
-2- No. 809, August 29, 1 p. m. (Section One) from Paris.
"Dr. Schacht's visit has, however, achieved one
result of outstanding importance. It has brought the
monetary question once more into prominence and has raised
'currency alignment to the level of practical, though
still remote, possibilities. The present French Government
are not at all likely to act.
WILSON
WVIC
TREASURY DEPARTMENT
357
WASHINGTON
OFFICE OF
COMMISSIONER OF INTERNAL REVENUE
ADDRESS REPLY TO
MMISSIONER OF INTERNAL REVENUE
August 29, 1956.
AND REFER TO
MR. SECRETARY:
Receipt is acknowledged of your letter of August 28, 1936,
concerning the proposed tax studies to be made in conjunction
with the Division of Research and Statistics for the purpose of
eliminating inequities and administrative difficulties.
In accordance with your instructions, Deputy Commissioner
Blias has contacted Mr. Hase, the Director of Research and
Statistics on this matter. Mr. Haas was advised of the personnel
selected by Deputy Commissioner Bliss to work on the compilation
of the necessary data, and also advised that such work would be
started at once.
At a later date I should like to submit a recommendation
relative to certain miscellaneous taxes which, in my opinion,
might be repealed. My recommendation with respect to such repeal
will be based upon the small loss of revenue involved, the great
number of taxpayers affected and the elimination of the more
objectionable administrative difficulties.
Yes Commise ioner. Helming
PECHE
3002
TREASURY DEPARTMENT
Secretary of the Treasury
Honorable Henry Morgenthau, Jr.
OFFICIAL BUSINESS
WASHINGTON. D.C.
OFFICE OF COMMISSIONER OF INTERNAL REVENUE
PAYMENT OF POSTAGE $300,
PENALTY FOR PRIVATE USE TO AVOID
Monday
August 31, 1936
10:15 a. m.
H. S.
Klotz:
Hello
Operator:
Go ahead.
Taylor:
Hello
HMjr:
Hello
T:
Good morning, Henry
HMjr:
Hello, Wayne?
W. C.
T:
I have some news for you that I thought you would
be sufficiently interested in to bother you about.
HMjr:
Go ahead.
T:
Mexican Government -
HMjr:
Go ahead.
G:
- decided tonight to increase the silver content
of its money because of the declining price in
world silver - world price of silver.
HMjr:
I see.
T:
Now what they've done is go back to seven twenty.
HMjr:
Is that what they had before?
T:
Yes
HMjr:
Yes
T:
HMjr:
T:
HMjr:
T:
They're going to reissue them, they're going to
put - have - issue and circulate five peso
certificates.
Yes
- silver certificates which would then be comparable to the ones that the Cubans are using Yes
And then there's been a very interesting thing,
which is to make your Bank of Mexico notes and
the silver certificates redeemable in silver coin
or bar silver.
557A
-2HMjr:
What's that?
T:
Silver coin or bar silver -
HMjr:
What does that mean?
T:
Well, it means that they've gone back largely on
HMjr:
Yes - Well, I tell you what I wish you would
357B
to a silver standard.
do. I wish you'd send a summary in explanation
of that to the President over the White House
wire -
T:
Right
HMjr:
- and sign my name to it.
T:
I will.
HMjr:
And before it goes out let Jake Viner look it over.
T:
Yes
T:
he's in town.
He is in town?
HMjr:
Yes
T:
0. K.
HMjr:
Let Jake take a look at it.
T:
Yes
HMjr:
HMjr:
-
And let Archie take a look at it. But I'd condense
it and send it to the President and say I thought
that he'd be interested in the following news.
T:
Yes
HMjr:
Because he may be asked about it, you see? He's
T:
Yes
HMjr:
I'd get it off before noon.
T:
Right.
out in that country.
3516
-3HMjr:
Because he's in the silver country.
T:
Yes
HMjr:
And sign my name.
T:
Right
HMjr:
And
T:
I think it's terribly interesting.
HMjr:
Very -
T:
Yes
HMjr:
-
T:
Yes
HMjr:
And why don't you also let Haas and White take a
T:
Right
HMjr:
See?
Well, I'd send it and let, as I say,
let -Jake
of course
look at it and I'd
let
look atletit Archie
you send it out. -
Hello?
look at it?
Haas and White -
thing for me?
Now, will you do some-
T:
Right
HMjr:
This last cable that Cochran sent from London when I get in tomorrow morning I want the original
of that, because I - that transposing is not
good. The cable of Cochran's trip to London, I
Hello?
want the original.
T:
Yes
HMjr:
You know what I mean?
T:
Yes
HMjr:
Before they - what do they call the thing?
Paraphrase -
T:
HMjr:
Before they paraphrase it. They've never refused
me you know when I've asked for it.
357D
-4T:
No, no
T:
And did you read Secretary Hull's letter to me?
Yes, I did.
HMjr:
- about apologizing for the way the British -
HMjr:
the London Embassy acted?
HMjr:
No, I didn't see that.
It was very interesting. I'm going after them.
I mean they treated Cochran terribly over there
and Hull apologized for it.
T:
Well - I've got two letters that I talked to
T:
you about that came in on Saturday.
HMjr:
Yes
T:
Now - a very very confidential one from number
HMjr:
Yes
T;
- is in French.
HMjr:
Yes
T:
HMjr:
one -
And I'll send that on to you if you want it.
Well, if you would send it special delivery air mail
to the Savoy-Plaza and send it down to the Post
Office, see? Hello? - Hello?
T:
Yes
HMjr:
I tell you what you do, give it to Mrs. Klotz and
she'11 get it to me to the Savoy-Plaza tonight and
Mrs. Morgenthau can translate it for me.
T:
HMjr:
T:
Right
I mean send it right in to Mrs. Klotz, will you?
I!11 do it right now. And also one from Butterworth that came in at the same time. They're
about the same subject.
HMjr:
Well, send them all - give them all to Mrs. Klotz
and she'll get them off.
351E
-5T:
I will.
HMjr:
Right
T:
No, that's about all.
HMjr:
-
All right,
I'll be
was
the funeral?
anything else?
in in the morning. Oh, - how
T:
Oh - I - I think I only did see it.
HMjr:
Why?
T:
I ought to put on that big hat.
HMjr:
Oh, really?
T:
Well, it was all right, but -
HMjr:
Well, you take your hat off in Church don't you?
T:
Yes -
HMjr:
I was trying to hide it all the time
without too much success. No, it was all right.
Yes Did - I understand it rained terribly - ?
T:
Yes, but it - it didn't rain at the time of the but when we were going in to the Church.
HMjr:
Well, thanks for going for me.
T:
Well, it was -
I was very glad to go anyhow,
as I always thought he was a great fellow.
HMjr:
Well, I'll call up again this afternoon.
All right.
All right
T:
Goodbye
HMjr:
Goodbye
Operator:
Hello
HMjr:
Mr. Oliphant
Operator:
All right.
HMjr:
T:
(Pause)
357F
-6Operator:
Mr. Oliphant
Herman
Oliphant: Yes
HMjr:
Herman?
0:
How are you?
HMjr:
I'm fine.
0:
That's good. I feel grand.
HMjr:
Good
0:
The weather is marvelous here.
HMjr:
Good
0:
Jim Landis called up and said that he was ready
to talk to George Haas and me. Remember when we
had our lunch together we agreed that we would
separately make up a list of things we wanted to
find out.
HMjr:
Yes
0:
And I just wanted you to know about this development.
I have seen George and I shall see him today.
HMjr:
0:
HMjr:
All right. And then after you have seen him will
you please - George and you give me a joint memo?
That's right.
- of what takes place.
O:
Anything else on your mind?
HMjr:
Yes, I wish that you would have somebody write me
O:
Yes
HMjr:
- starting back when I first put Secret Service
O:
Yes
HMjr:
- the various steps that were taken, - what information we did or didn't get abroad
0:
Yes
a brief history of the Stern-Goldberg case.
on it -
-
-7HMjr:
- through whom we got it abroad, I mean who was
helpful and who wasn't.
0:
Yes
HMjr:
And then a time-table on the cases as they appeared before the jury, you know?
0:
Yes
HMjr:
And then also what the convictions were and, not
only of Goldberg, but also of the three men
0:
Yes
HMjr:
In other words, I'd like, if it could be done right
0:
357G
away - whatever your man's name is Yes, I've had Manning - I've had him for about
three weeks working on a comprehensive report of
all of that activity. And I suppose that's nearing
completion. Now HMjr:
Could it - it will most likely be too big for me -
O:
Well, I'll have him write a summary of it; he can
if I could have it and then have a condensed version.
do that.
0:
I'd like to have it fairly promptly.
And - the angle - I get the angle of it you want.
HMjr:
Well, I want the whole business plus the European
0:
Yes
HMjr:
The - our - the men in the Treasury who were involved, what happened to them -
0:
Yes
HMjr:
Why we did or didn't get Stern -
0:
Yes
HMjr:
How the cases went before the jury and the term
and so forth and so on.
HMjr:
end of it, who was helpful, who wasn't -
381 4
-80:
All right.
HMjr:
See?
0:
Yes - Well, this ought to be very nearly com-
HMjr:
Pardon me?
0:
The present one - the one he is working on, I
plete.
asked him three weeks ago to make us a compre-
hensive report -
HMjr:
Right
0:
And it ought to be very nearly complete. I'll
have it summarized.
HMjr:
Right
0:
Anything else?
HMjr:
I'11 be in in the morning.
0:
How's that?
HMjr:
I'll be in in the morning.
0:
All right, goodbye.
HMjr:
Goodbye.
(Short pause)
HMjr:
Hello
Operator:
Hello
HMjr:
Mr. Bell -
Operator:
Mr. Bell?
(Pause)
Operator:
Mr. Bell -
Bell:
Hello
HMjr:
Hello, Dan?
B:
Good morning
Dan.
357.0
-9:
HMjr
How are you?
B:
Fine
HMjr
Dan -
B:
Yes
HMjr
As long as Jake Viner's in town I thought it might
be a good idea to let him read that budget summation
and see if he could find any flaws in it.
B:
All right.
HMjr:
You like him, don't you?
B:
Sure
HMjr:
Well, will you send for him?
B:
Yes
HMjr:
And I'll -
B:
Is he in the Treasury?
HMjr:
Pardon me?
B:
Is he around in your office?
HMjr
Well, I'll ask Mrs. Klotz to tell him to get in touch
B:
All right.
HMjr:
And I thought if he'd do that he -
B:
Yes
HMjr:
- that he might find some technical something -
B:
Yes
HMjr:
And I knew that you'd be glad to have him look it
B:
All right. Yes, I'll be glad to let him do that.
HMjr:
Yes
B:
I think his criticism would be good.
with you.
over.
-10HMjr:
Yes
B:
of course I'11 talk tomorrow - more tomorrow with
you about this Polish financing.
Yes, and -
HMjr:
B:
But the time is a little short.
HMjr:
What?
B:
The time is a little short for mechanical work.
HMjr:
Why?
B:
Well, you see you don't - you don't get it out
the
in
3515
until late Saturday and the Bureau is on a five
day week and the Printing Office has got some
work in it and they're on a five day week and
they've got Monday a holiday and then next Saturday
would be a holiday to both of them. So they've
really only got four days to get it out in.
HMjr:
They only need one day.
B:
What?
HMjr:
They only need one day.
B:
One day?
HMjr:
Yes - it'11 be opened and closed on Tuesday.
B:
No, no, I'm thinking about printing the securities, -
HMjr:
Oh -
B:
- and getting them into the hands of the bank. You
see fiscal alone is four days, at least two days
away -
(End of first record - balance of conversation was on
a second record which was shaved at Mrs. Klotz'
request)
358
August 31, 1936
The attached telegram to the President was prepared
by Mr. Taylor at the Secretary's request, after Mr. Taylor
had telephoned the Secretary that the Associated Press
this morning carried a story that the Mexican Government
would increase the use of silver in its currency. (Clipping also attached.)
359
PRESIDENT ROOBEVELT
AUGUST 31 1936
THINK YOU WILL BE INVERESTED IN ASSOCIATED PRESS REPORT THIS MORNING INDICATING
THAT THE MEXICAN GOVERNMENT DECIDED AUGUST THIRTIETH TO INCREASE THE AMOUNT OF
SILVER IN CIRCULATION AND IN REQUIRED RESERVES AGAINST NOTES STOP STEP BY THE
MEXICAN GOVERNMENT SEEMS TO CONSTITUTE AN IMPORTANT DEVELOPMENT IN THE RESTORATION
OF MONETARY USE OF SILVER STOP THE FOLLOWING REPORTED CHANGES WOULD REQUIRE
SUBSTANTIAL INCREASES IN THE USE OF SILVER GOLON ONE PESO NOTES INTRODUCED IN
NINETKEN THIRTY FIVE ARE TO BE WITHDRAWN AND REPLACED WITH SILVER PESOS OF OLD
POINT SEVEN TWENTY FINENESS STOP FIVE PESO NOTES NOW IN CIRCULATION ARE TO BE
REPLACED BY SILVER CERTIFICATES REDEEMABLE AS WILL BE ALL NOTE ISSUES OF THE BANK
OF MEXICO IN SILVER COIN OR BAR SILVER AT TWELVE GRAMS APPROXIMATELY TWO FIFTHS
OUNCE PER PESO STOP FOR SMALL COINS NOW IN CIRCULATION NEW COINS CONTAINING MORE
SILVER ARE TO BE SUBSTITUTED STOP FURTHER IMPORTANT INFORMATION WILL BE FORWARDED
AS RECEIVED STOP
HENRY MORGENTHAU JR
WASHINGTON POST
Aug. 31, 1936
Mexico Raises
Silver Content
Money
W 8-39 of
Degree Ord Recall
Paper Pesos Issued by
Bank in 1935.
No the Associated Press.
Mexico City, Aug. 30.-The Mexican government decided tonight to
increase the silver content of its
money because of the declining
world price of silver.
A presidential decree restored to
circulation silver coins demonetized
State's in April, huge 1935, silver when purchases the pushed United
the world price so high the coins
brought more than their face value
as bullion.
Changes In the monetary laws
had given the Bank of Mexico authority to Issue notes of various denominations, redeemable at the bank
in silver coins.
Carry "Cartwheels,"
One-peso notes, introduced in
1935, will be withdrawn. under the
new decree, and Mexicans must
again carry "cartwheels," or big
silver pesos.
Five-peso notes now in circulaas
of
silver
silver tion will be will certificates, note be issues replaced redeemable of the by five-peso Bank
at Mexico, The 12 grams silver in silver per pesos coin peso, and or bar fractional
silver currency of the old .720 (of
weight) silver content will be
taken out of the vaults of the bank
where they have constituted re.
serves against notes, and put back
into the public's hands,
Six-Month Limit.
Coins of the new 420 content as
well as bronze 20-centavo and 10centavo coins issued In 1935, bronze
5-centavo pieces placed in circula.
tion in 1914 and nickel 5-centavo
coins of 1905 must be surrendered
within six months
The fractional currency of
smaller denominations will be replaced by silver and copper-nickel
alloy pieces, much smaller, lighter
and more convenient
Septesber 1, 1936
To:
Secretary Morgenthau
From:
Mr. Haas g
Subject: Tax conference with Miscellaneous Tax
Section, Internal Revenue, pursuant to
letter of August 28, 1936 from the
Secretary of the Treasury to Commissioner
Helvering.
TREASURY DEPARTMENT
781
NA
INTER OFFICE COMMUNICATION
DATE
TO
Mr. Haas
FROM
Mr. Zucker
August 31, 1986.
gsz.
Conference held in Mr. Bopp's office,
Internal Revenue Bureau, at which were
present Messrs. R. J. Bopp, J. M. McKenna,
and A. M. McCreight, of the Miscellaneous
Tax Unit, and J. S. Zucker of the Division
of Research and Statistics.
Subject: Project No. 1 - Miscellaneous Taxes.
This meeting was held, pursuant to letter of August 28, 1936, from
the Secretary of the Treasury to Commissioner Helvering, for the purpose
of discussing the requested Miscellaneous Tax Study. Preliminary discussion was had of the ground to be covered. Mr. McCreight will prepare
the so-called key sheet on all miscellaneous taxes coming under the
jurisdiction of the Miscellaneous Tax Unit on which will be shown the
items, the rates, the yields for the fiscal years 1936, 1937, and 1938,
the applicable sections of the law, and the approximate number of tax-
payers. The key sheet will also reflect footnotes indicating effective
dates of the various rates and revisions thereof.
Mr. McKenna will furnish Mr. Zucker with a copy of original recommendations on miscellaneous taxes made in 1935. He will also assemble
a folder on all forms used in connection with miscellaneous taxes and
will select several auditors' reports on large tex cases to serve as
examples of the administrative hardships involved in making the audits.
The data on liquor taxes will have to be obtained through the
office of the Head of the Alcohol Tax Unit, and on the narcotic taxes
through the Narcotics Bureau.
There was also discussed at this meeting the general set-up for
the special studies on each one of the items in order that the members
of the Miscellaneous Tax Unit be made acquainted with the second step
in the study after the key sheets are completed.