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M. I.D. , W. D.
Tentative Lessons
Bulletin No. 40
Se~tember
5 , 1940.
TENT.A!riVE LESSO!<S FRo:.t THE REC:!:NT
ACTIVE CA!-IP AlGi< I N EUROPE
This document is being e;iven an approved distribut i on ,
and no addi tional copi es are avai l abl e in the Military Intel ligence Division. I t s reproduction in whole or i n part
is subject to the provis i ons of letter TAG , November 15,
1939, AG 350 . 05 ( 11-1-39) M- B- M, "Dissemination of Military
Information by the 1-lili tary Intelligence Division and by
Recipients of M. I. D. I nformation".
}
0
The information contained in t his series of bulletins
will be restrictPd to items from official sources which ore
reasonably confirmed. The lessons necessarily are tentative
and are in no sense mature studies.
FURTHER liOTES o:l GER!:..A!l JSTACKS UPON
FOl'.TI?ICAJ:IONS
SOURCE
~I
The information in this bulletin is from a German document translated in London late in June, 1940.
COHTENTS
I.
II .
.A!rTACK ON A FORTI FI ED FRONT BY A DI VISI ON.
ROLE OF THE ASSAIJLT DETACHMENT.
A.
B.
C.
Prenaration fo r the Attack.
Organization and Eguinment of the Assault
Detachment.
Method of Attack.
Franklin D. Roosevelt Librar1
••••••
OECL~
-:HED
ortn lilt!. 5200.9 (9/27/61).
~Date- )-'t- ? o
- 1-
SiPl&t.l1l'•·~
Franklin D. Roosevelt LibrarJ
1 ""!J:"t~o
·
r
r
[
, ........
S3
_ ·- _,
JIOTE
Although the subject of German Attacks >non ~!odern Permahas been discussed in TENT.ATIV:: LESSOJIS BULLETIN
1lO. ~8, . the present bulletin enlarges considerably upon t he previous
study Wlth l i ttle re~etition of the information contained therein.
~ent_,Fortifications
I.
.A!t'TACK ON A FORTIFIED FROl:T BY A DIVISIOll.
The cepture of a starting line must precede an actual
attack ~n a fortified front . This s tarting line must be as close
as !'~ss1ble to the front which is to be attacked, and must provide
0. P. s for the artillery, The reconnaissance of obstacles and
works must be completed while the t r oops are moving u~ to the startill€ line.
The attack on a fo rtifiad front may be divided into the
following nhases, which may , however, overlap in practice :
a. Drivi~g the enemy outposts oeck to the principal
line of resistance along the whole front to be attacked, and at the
same tiwe removinG ol>st~clPs,
b, Breclcing t hrou<>;h the fortified line at the most
favorable points .
c. Exten:l.in,; the brea.lc-throU&h ~1d follo"ing up the attack alon.g the wnole sector .
No rules can be g iven for calculating the time necessary
to crrry ottt these various phases. The time ~rill depend upon the
ground, the strength of the line att~cked, the Qegree of preparedness of the enemy defense, the respective strenr,th and fit;hting
qualities of the attacking and defending troops .
Advantage must be take~ of every opportunity for a ra::.> id
local penetration , even if it means sacri ficlng the continuity of
the at t ack over the f ront as a ~<hole. I t is essential where this
i s done, however, to send i~oediate reports to all concerned.
\'/hen the noint of attack is chosen,
be taken into consideration: The ground ; the
situation of the enemy's permanent v10rlcs , end
field of fire; his field works, and obstacles
the following UJUSt
number, nature, and
especially tl,eir
of all kinds.
Frontal attaclcs must never be made on enemy fortificatio•lS
from the rear or isoleted.
or worka . They must either be attacked
If even a few mutual ly su::.>porting works are neutralized, the whole
D. Rooeevel
DFrfanCkll~n,. n<'fl"'I(O
VGO
L
t LibrA...
-·
97
. 5200 .9 (9/271!\A\
-ee·wni:lr!UU:
system of defensive fire mey be disorganized.
Even ••here an attack is carr ied out by a ~<hole divis ion ,
the initial penetration on a fortified front will not be achieved
by a mass infantry attack, but rather by a carefully ulanned attack , executed by a limited number of specially selected assault
troops provided with the necessary equipment . These troops , who
must be placed under the orders of an energetic commander, shoul d
not exceed two or three infant r y companies in number but should
have infantry guns , antitank guns , attached engineer'personnel ,
and , if possible , tanks, antiaircraft guns, and any other types
of guns suitable to engage emplacements. Direct signal communication must be arranged with the supporting artillery .
An attack on a fortified line must be in de~th in order
to provide flank protection. The first t ask of the engineer s is
to remove obstacles of all sorts , including mine fields, and to
bridge streams . Decontamination detachments will open up lanes
across contaminated gr ound. Antit~~k artillery may , in addition
to its essential task of defense against enemy tarucs , successfully engage emplacer.ents.
An attack against a fortified line requires dete.iled
preparations evea if, in order to achieve surprise, only officers
are told beforeha.~d t·•hich sector is to be attacked. The assault
t r oops themselves must be brought up as l ate as possible to the
starting line.
I n general, the start of the attack against the principal
line ~till not begin until all the artillery is in TJOSition. In
or der to drive in the outuost s , ho~<ever, it is often sufficient
to brinP, only a part of the available artillery into action. Advantage will, therefore, be taken of every oprortunity to p r ess
on boldly--for example , to get behind the outpost s as they retire-particular!~· when there i s a chance of achieving local surpri se .
While the enemy out post s are r etiring and the artillery
preparat i on for the attack on the u r incipal line i s being put do1m,
the enemy artillery and its O.P. 1 s.must be neutralized.
•']
'
Concentrated artillery fi r e mey make gaps in the enemy
antitank obstacles . The advance of the assault t r oops up to the
principal line of resistance i s followed up as soon as p~ssible
by the assault troous who are to exnloit the penetration in the
enemy's fortified 1i.ne. The works to be attacked bl' the assault
troops will be laid down in a pre- arranged plan, and the attack
will be supported by infantry guns , antitank weapons , and tanks
engaging not only the fortifications to be attacked, but als~
those supporting them from the flanks. E~lacements i n the lntervala between the fort i fications must also be neutralized.
· ranklrn D• Roosevelt Librarr
,..
l.
.
-o
t •J
5::00.9 (9/ 27/58)
The extent to which the infantry guns will t ake part
in the artillery preparation will be arranged beforehand with
the artillerJ commander .
If the enemy 1 s system of defensive fire is di sor ganized at any one point , other assault troops, accomoanied by
forward nbservetion officers from the artillery , ~st be pushed
tlrrough at once . These assault troops will enlarge the breakthrough by attacks ~ainst the flank and in rear of supporting
fortifications . They 11ill thus open up a paSSAf;e for the main
body of the attacking troops.
Every subsequent opport unity of enlarging the breakthrough will be exnloited to the full . The ettDck will thus
develop aloni!: the ~<hole of the f ront and allow the divi sion to
Ltako the wei&ht · of its attacl: fe lt throut;hout the denth of the
defensive position.
At the sp~e ti~e, ant itank, antiaircraft, and infantry
guns are pushed un behind t he a ssault deteci~ents. Their role
is to silcace works, o.ntita.rk weapons , and machine gun nests by
a few well directeC::. rounC.s. Fortifications which are not to be
attacked mey frequent!~- be neutralized b~· snoke.
Part of tl.e infantry e,-uns sup;>ort the a<i.vance , and
the reoainder follow up the attac:<ing infantry as closelr as
possible in order to be in a nosi t i on to give supporting fire
throur,hout t he de., thof ti1e defensive position.
Durin~ the attack, i t will not be noss ible for the
prtill Pry to put down a creeping barrage, as the attack will
resolve itself i nt o a number of l ocal actions against defended
positions . Ranges will be indicated to the artillery by
liaison officers or forward observation officers .
Only a commander who is actually on the Sl)ot can have
nny direct control over this form of attaclc. This is part i cularly true of infantry . The divisional commander, if he is to
control the attack , must therefore be well forward.
The variou s nositions ~o be occunied by tho artillery
must be arranged beforehnnd in sucl• a way as to enable theu to
acco'llpMY or follo>~ the infantry 1rith sufficient r •midity. Certain batt ories must be detailed to act ln close support of the
infantry. These batt eries will have their ~<~on lines suffici-
-4-
98
Franklin D. Rooaevelt LibrarJ
o·Cl,dSSIFIEO
[J·
0 Ua. . o2oo.-§~ zt5"ls
ently near to their gun ~ositions to enable them t o move without
loss of time •
• Ac~ording to. the situation, the artillery may best
t •le 1nfantry ?• ther by sending observers forward or by
mov:ng its guns. Art1llery officers must follow imme~iately
beh1nd the infantry to reconnoiter positions for the close
Sup!lort artillery to come into acti~n .
sup~ort
In most cases , it will be necessary to pl ace a battery
under the orders of the leading infantry regiment as soon as the
attack has penetrated the fortified zone .
It mey also be necessar y for smoke units to fol l ow
the advance . (Smolce units are also gas units , if and ~<hen
Ar ran~ements should also be
chemi~al warfare is emplvyed.)
made for tho early employment of flash-spo tting and sound-ranging units .
During the attack , and particul?_rly while the artillery
is moving from position to no sition , dive bombers and fighter
aircraft must eU€age the enemy throughout the depth of the position. The principal task of tho air for=e in such an attack is
to prevent the enemy r eserves f r om being moved up to stop the
break-through. It s e~loyment against « r etiring enemy may be
particularly fruitful. The a i r intelligence liaison units p rovided with the necessary si~;nal equi.!'ment accompany the fir st
waves of attacking infrultry ani keep the air force constantly
informed of t he exact posit i on of our own front line.
II.
ROLE OF THE ASSAULT DETACI!i.rn:NT.
A.
PrePar? tion for the Att ack .
Before a plan of attack i s dra~<n up, nu:norous patrols
must be sent out. All arms, the e••g ineer s in particular, should
take part in these patrol s , ~<hich obtain information 0n the following points:
1 . The exact situation and direct ion of fire of each
of the fortified works .
2 . Po si tion of field works in the intervals between
the permanent fortifica tions.
3. The nature , strength, and po sition of obstacles
such as wire , antitank mines, and contaminated ground.
~
-5-
99
Frankl in D. Rooeevelt LibrarJ
OF I 1'\q''"!'" l')
C
520rf~·!l'JU)-
lGO
4 . Natural obstacles , such as streams, canals, marshes,
and steep slopes.
The company commander must have at his disposal specially
chosen assault detach~ents. The commanders of the assault detachments will be chosen from auong e:~erienced platoon commenders, and
the N.C.O. 1 s end men must be selected for their courage, determination , p~sicel fitness, end mental alertness .
Every man in the assault detachment must thoroughly understand his task and be specially trained to carry it out .
j
I
The :nre,..aratio•l of a.1 attack by an assault detachment
must be so thorough thBt the attack is carried t hrout;h Nithout any
hitch whatsoever. This means tr.at the attack must be Planned down
t o tha most minute detai ls.
B.
The Organization pAQ Equipment of t he Assault Detachment .
The assault detacheent must be hit;hly mobile, and it can,
therefore, only carry such equiPment as is absolut ely indispensable .
Each man in the assault detach'llent carries a ground sheet , a water
bottle, one cay's reserve rations, anQ a bqyonet. The respirator
is carried in its container on t~e back or in a pocket of the tunic .
The revolver , which is attached to a strap about the neck, is carried in the ot her pocket . ~~unition is carried in the pockets , as
pouches are dis:oeused >lith.
The f ollowing table gives an ex~le of the way in which
the various parties in an assault detachment may be or ganized.
Str ength
Eguipoent
Machine-pistol, wire cutters ,
Verey pistol , hand gr enades,
compass , f i eld-glasses,
whistle
Assault
detachment
co=ander
Wire-cutting
party
3-4 men for each
breach to be
made
4 rifles or revolvers, 4 entrenching tcolt , 12 hand
grenades , 4 wire-cutters
2 claw hatchets, 8 sandbag s , explosive charges
Embrasure
destroying
party
3 men for each
embrasure t o
be engaged
2 revolvers , 1 rifle, 10
sandbags , 2 hand grenades
per man, one 3 kg. charge
with fuse, 2 containers of
Benzol, Verey pistol
Frru 1t1 i n o. Rooee'v•l t""Lll)r;l.,
or l'
•
1
v
IT"IEO
l
Strength
Equipment
Supporting
parties
2-3 parties of 2-3
men each .
2 hand grenades per man , Verey
pistols, signalling flags,
2 smoke candles or grenades.
Number of rifles, machine
~istols, and light machine
guns depends on nature of
ground and cover
Smoke
party (if
required)
2-3 men
Rifles or revolvers, 4 hand
grenades, 8 smoke candles
or grenades , l entrenching
tool , l pair wire-cutters
0,
Method of Attack.
The assault de~achment is first brought up to a starting
line close to the edge of the area which is effectively covered by
the fire of the enemy's v1eapons . The attacking companies then begin their advance covered by artillery fire,
When the assault de tac~~ents bebin their attack, the
artillery and the infantry guns -put down a barrage in front of
their successive -position• . cnti machine ~s. antitank guns, and
tanks engage at short range the embrasures of the fortifications
which are t o be attacked.
The wire-cutting party is yushed forward either supported
by fire or hidden by smoke . They either blow up the wire or cut
their w~: through it. The remainder of the assault detachment then
advances , The sup-porting ~arties cover its advance with fire initiallyfrom the starting position . \\'hen a break in the wire has been
made, the commander of the assault detachment and a party detailed
to destroy the embrasures dash forward and take cover in the dead
ground in front of the embrasure .
At the same time, the supporting parties take up positions
alongside and behind the fortifications so as to give protection
from the flanks and rear. If a smoke part~· is available , it covers
the advance of the party detailed to destroy the embrasures and
keeps putting down smoke until this party is up to the fortification
and the covering parties have got to their ellottad positions .
The parties detailed to <iestroy the embrasures may find
it effective to roll in front of them cont ainers of Benzol, and to
ignite the Benzol by revolYer fire. The thick black smoke which
will be eiven off will blind the fortification.
I
~
The attack on the embrasures may be made in the following
.'
102
l,
By throwing hand grenades through the embrasure i f
it is open.
2.
By blowing up the embrasure if it is closed.
3.
Jly bloNing u:o:> the gun in the e'!lbrasure.
4. By stopping up the embrasure with
close t o the level of the gr~und.
5.
By blo.,ing
6.
By using flame thr owers,
UT>
sa~dbags
if it is
the entrance to the fortification.
Even if the party detailed to dest roy the embrasures
does not succeed by any of these means in capturing the fortification , it l<ill at least have prevented the enemy froru using his
14eapons against the attacking troops .
frilnl:"'··-
Rcoaevelt
DEC
DOU t..,.
5~00.9
Date- l - "' _
7D
Lib~ar,
(9/27/68)
Se"tP~~er ~
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1~4o .
103
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·ro; .. are :'ou?
!lenll t "r Sco tt
Lucas :
Juct f!.ne , he·· l're
·; .!.!. Jr :
Very ;te l .
L:
Thir \s Scot·,; Lucas
Y"U
"r . "'ecret ~"tl
1
o • 11
l'"'
ln "'htcn,:.o .
L:
!L". Jr :
L:
I don ' t h,~r y'Ju terribly l'ell.
I
1
":
out bcrc in Chic a ·o
~<'t tinr.;
stortec";. in the
ljnFrnt_. on cf ~e~ionnl ··re.dcnttrtrrc .
, . . Z'r :
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L:
'"oil I ' n f'e>tti~·- UT),
ei€n '..,n--·., ·r rrou'> .
in
· 1ir: offtce
re , t for-
,. ·. Tr :
L:
A!'lc tr•rin"' to ""i!'lo +tp 'l!ost out~te.ndin~ men in
t~o, different r"'C' . . 1 r:r:nl'JS out '1-•r::: .
:O ." . Jr :
L:
An·· I 1·oulC. li'ce to !:Pve y:>•l ~1ve rm P. stprter
or t..-o , I '1enn ~;_ve me tF':l Ol t :.:ree """'er after
vou ' ve "''Vf'l' CO!'l"'-"~rrtlon as to 1-:ho Y"U C')n"!C.er
in t'PPe 1~ st?tPs , the outstFndln- Jew'sh
"leo"llf' Hho live tPre .
" ." . J r :
I
L:
In othrr 1:ords ,
"r. " 0 r~ent!'>ru .
in I'll of theee
1.
J
t.:'
~,
T
•
Sf·P .
t~i"
1C 1-1'1-t I ' n tryin<" to no
I l:R"'t tbe v r:· ber.t I cAn find
den~rt~rntf .
... . . ... r .
T ~nOl' ,
L:
Anr. 1:' t·e ~rt t:·e ri ·ltt front h•'re , ,, y l'e ' ll .,.o
throuP"h in t hese stE>tes , othert·ire l'e ' re f"O ing
to fell. ':"·is is ll very ,vc ry d~ff'cult s1t•Jl1t·on
out herP .
10 4
-
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-
''pll T 1 '1 ne l"d to
1
"" "'opii,., ,r t1Mo eno,· -·
ar ' •
CQ"'P C)~ !:!''
friends and
or" ....... at too lonr .
L:
I 1 11 ~"t you SPVP.rl!l ne..,f"F
.. : · . J r :
"ell T 1 ll c-r·t 'f'J'l by ''onc\ev.
L:
'l,'}<tat 1 n :finr . '""<")11 fo ... ~ 0
:in ot"1rr Ut)!'dS , - , d
l1'>:c to h~"n t 11e:-1 c l f'nr on t·c outRicie Pncl
bevo:·cl t' . rc"l"' o"' )Oll t~ cr .
u
4.. .
•
Jr :
L:
"'hrt 1 c .,,1 !'1~ ct . I•1r'P'"1Cnt'ent o••t~tnnCJin·
!"el l 0\1B t ·CI~t ~E'" l l v "'P.nt t o P'" t 1n hrrr. ~ n cl
1
~'r:ht
P . · r. Jr :
L:
"'or th1F
cpu ~ ~ -
105
OONFI OEWTI At=·
Loaloa, fllo4 12104, Sephaller 5, 1940,
Dllr1q Sephallor 4th tho GV1W11 clelhero4 ho aUacks
oa \he area of \he 'rhaao1 :I1Uar7 u.d l:ea\,
Verllr14co, which maanfac\uro•
wu 1o1'1oully
fec\14,
Tickora Vall1~oa heaYT llo.llor,
claaaced. with the or
aa4 other• ou\•1de,
300 1a,11lra4.
\he
Tho Vioken plu.\ a\
dx direct h1 h ca tho ln11ld1qa
rorty-1.rea paraoa• war• killed aa4 about
ProdDcUoa of \h1a a1J"plu.e will be aor1ou1ly at-
!ho PoliJoy aircraft fao\ory a\ locheahr wa• ••' oa fire
lla\ there baa lleea no 1nhrference v1 ih promcUon.
Up io th11
ilal \he oaly taol ell 1na\allat1ona do1iroyed l17 IDiaT lloali1Jlc
han l l - \ho DPal e\oraga a\ Pallroke u.4 iho c1rtl1aa 1u\all&Uoa a\ LlaaUYiry, llo\h of vhich haTe prmoualy lleea rapor\ad.,
I aa laton... nat P•llron waa alaoli without prohoUoa 7oahr-
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J
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23
Owua a1rorat\ 101111 nre 52 collf1ned, 19 prollalllo, aD4
~d.
Th8 Br1\1ah loa\ 17 atrplallea u.d &p1loia,
Dllrtq the at«ht of Sephallar 3-4 iho .loyal. j.ir roroo
&\tacked tho Veai power liaUoa, \he 7redor1ohllel4e \raaaforaer
o\a\1on, tho Daas1ceratraaao c•• works aad \he Bhe1aaaiall-Bera1c
&l'll&aaa\ factol'ioa, all ill Berlia, •• well •• a&a7 o\ber potah.
h &lao aUDit oae nlluriae 1a \he llq of Bhcq.
:JrU1ah lloallara
haTe lteoa aot\1q Oera&ll forea\1 oa tire •ucco••tall7.
A CaDadia11 troop co11To7 arr1Ted. ea!el.J' on S~hallu
(p.rbhcl, proballl.J' 5th) •
..rtoue r ..uu eo far hae been the Ume of eaplo7••• loet to
lnduetr,.. b7
r~eated
air varn1nge.
The preeent r'CQlatione r ...
quiriJIC worklllen to take coTer will probabl7 be aod.1fh4.
'1'bt Brithh han not dhconrecl U7 1nd.1caUon of
All
1apend.1nc 1nTaa1on.
LD
D1etr1'blltlOD.I
Genual Wahon
Secre1;arr of War
State Deparbet
Seoretar,.. of 'l'reatuJ7
Aaat. Secretory of War
Ohlaf ot S1;a!f
liar Pla11e D1T111on
Office ot laTal Intelligenctranklin D Rooaevelt Librarr
D""""'
•.0
DuiJ 1J1:t. 52oo.s (9/27/61)'
Date- I - ~ - ? 0
Sicn&t\U'I~ ~~~
-a-
-
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Sept .hr
Present :
-~ .
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10 :0
' 1 40
ell
; "' · 'i te
r . och:'a.'l
Chanber ' n :
I ho.ve this ce:1ot•a:1du:::. : called crle UP and
he told me t:u1 t !1e i.oul · ~pprove ·rnntir: "to
the !-rene~ Dirlo!:l~tic ~rv.:.ce cxncn:;e::; in the
Un.ited States ~nu L!!tin .-'llerica."
.:1.' . Jr :
f.nu in Latin .'-"!lerica?
Cluunber ' n :
,.nil he alzo approved stronrly of t. "t . ··c
"pproved ::.lso o:!: t:te general .:;rent "or the
rest oi' tl.c ilorla, tec_:Jorarily. He thou h'..
the con:::ec:uonce:: oi' our not doin·· :::o are
SCl'iOUS ana he :;uno~es'.;ed it -:i~ht be a 'lerJ
use!ul thi:1~ to ~~ve the accounts ~o throu~h
the oi'fice here as the· ;1oul ii in t~e con thly
re:port to sho1-: •-:!u:. t t.-.e~ ;,et·e doinr; .:.n r..uro.:-e .
Th.is .is in the Orient . le is narticularly
interested . ~:is jud,::::ten'- was lt was better
to co ahead on the l cited basis that JOU
SU~""ested to the rrench.
··.!:. Jr :
!ic O.oes l il:e the lil:U ted basis?
Cha.nber ' n :
i-Ie likes the l bited basis .
!: .' .• Jr :
You nean conth to r:onth?
I
Char ther ' n :
:ont!t to :::tonth, yes , :te likes t hat .
'ioul d the 'Cnited_ ~tace~ re~re~ent::.tlve to
:"ranee :-a:· all t!lese b1lls .
Cha:tber ' n :
The Stc.te Deparbcnt tell• •. s the;,• pt.i t~e
bills c.nd then bill Fra::c~> . 'he:• are :o:..n:;
to :.s:: us ver~· ::hortl;)' for ~ license to
reno.- one ~~~~red t~ousan' dol l Prs and they
hope" ~-;e CC!:. cct C!.U.:_ c~: act . 0~ •
- 2 -
I
n
Bell :
'!hat is the usual thin~ r:hen they take over
the representation of ~nother cou.."ltr;:,•.
Chamber ' n:
Lnd then they char;;e . That isn ' t exactly
the saae , but it is concernin::; the use of
blocked funds for payment of expenses in
South America .
H.l.!. Jr :
The Department of State objected, and authority to be limited to this hemisphere?
Chember ' n :
TheJ object to it being paid over all the
\·.9rld because they felt the ~:i nistcr here
would have no control over the other parts
of the •~orld . The~· feel he has control
over the Embassies and Consulates in t~is
countrJ.
!l..L Jr :
On a monthly basis?
Charnber ' n :
I:o, I think i t is on a general basis . Of
course, it can be revoked at any tine .
~bite :
There is no reexanination periodically.
Bell:
But you do have sone control over the anount
of money transferred out of the ~eneral
account 01 the Bank to the Embassy account .
\~i te :
7herc is a ce ilin~ .
H .!~. Jr :
\,ell, if r;e \·;ere going to do this nonth to
month with France, I t hink \',e ou~ ht to do
it \'lith ;)enmark so v;e could treat then all
alike .
Chanber ' n :
I think so .
l,.e could say to :·ranee r;hen they cone o':er
here , "i.'ell, 1:e are do in:; it that \'ia'J ·.. 1 th
Ben;;Jark," and ~oe could explain it to the
r:ancz that \'lC r:ant to use thera as a good
exanple .
Charn".!er 1 n :
I think the' 1·o• 1'
is very fri~mdl:• .
Bell :
VcrJ coo~erat:ve .
!! . ~· • Jr :
"T'ne Frene "'. ~ ~' ·ency also requests licenses
(1) to cov0r doll ar exoenses of French
colonies , such as purchases in the ~nited
Sta~es or tr~.velin"' expenses , r.i th a monthly
!:ltl.XH.ltl...1 of ,50, 000 ; (A report on the use of
t.~e mone; 1ouB be_~~ven nonthly. This
hcense 1',Q 1la be h:u ted to pu:'c'lases in
this countr:r for t'1e colonies w'..:ch are not
included in the Eri tis'J bloc'c~a e, as , for
instance, the •ect !nd;e! , "
"'O
alon.:; .
'iiiC ::lni.ster
You don 1 t ';norT yet 17hll t t:.a t r;oul:l be'?
Ch.e.nber 1 n :
vnted to cdl ~·our att ntion to the
he~~ nrc ~uite
.ent .:.!1 ~he !"!e'.·:sp!'pers .
c ~ .. c~.;rned o·;er the si. tua ~:)f. of the rrench
colonicc . Tl.is request wr.;; t:J.ve some connection t.i th t' eir effort to heln finance
French col~nies .
o.
t:'~
j.
: .. !:. Jr :
thlnl: that is a :ood re' o t . Let ::e
\'ell ,
as'·, ho·r do you feel r.bout t is: :·erle?
Cochran :
in the olnorlt~·, :.::r. Secretory. I felt
,,e i. ent too fn r in revokin;; all these
thi:l • • I ullin It th:~ r:e had adequate rca:;on
for t.' · t , hut no11 Lhat it is done I think r.e
ou hL to ·o nuite a \,a··s to·:~ard meetin, thei r
But you' su-";ested a control
desire::: :.v.
and I 1.ould ~o alon;:; wl th that now, but ~
thou;~ht it rather u.nfortunnte to hav~ tlu~
hnppen just the day the ne11 French Flnanclltl
lL •tac'1e arrived, you .,ee, rr~d he asked - he
sr · • " ~11 ".as ther~> beer any abu:Je of
A• d
1~ II
1"
•
•
1
• ...n
~ _ po 1 ~ell .
·es or ~s
t' 1 ~lv'lt:.
yo coul ~ 1 t loint out any a1u~es .
I
U.'!l
th~ t
e:
.L
.L •
Jl.l1. Jr :
\ell, it is li!:e the cnse tl:• t "aston uns
tell in- nc about last :rl ~ht . "'hey didn ' t
let this S·.;ede r-o to Ahska and t~e;r c.::'·cd
·.:h~· c.n • t en the. £' ir.nlly h.:J.d to ·i Ye t \em
so:'".c reason, so they said - some fr.i.cnJs
of his il.i. th VCT'J e;ood CO!Ulections in the
State Dc!1artmcnt \/anted to knm: ~-:hy they
p i d:ed on h.!.:n and the:· said, "•. ell, ~.e
decided not to let any ali ens ro up t o
Alu:;l:• . II It i:; rrett~· hard to explain o.hy
11e o..m ' t lcL a S;7edc ,..o u: in his or.11
;racht in : laska:1 ·.1 aters, • Tn tho roo:n ht~e ,
the .ar Departent as::ed • s not to l et hi.
;;;o .
This is a
ood m o.
7his .is \7lw.t I \.c.nt .
Chanber ' n:
! have so"1e memoranda
i: •..!. Jr :
:.ell , leave i+ ·,;ith ...e .
Cha.:lbc:r ' n :
I r:ill l V(' h:o of them . 7hl're .:.s o: c for
]Ja . '.hi~e . I ~:oul u r~ther have~ r- • ., •.:.te
chec~
;:," . Jr :
his a ... te!'\.~rJ. .
0:1
this Sl':iss quest· o
Secretarr lorcantbau
J. P. Chuberl.ain
fba Ac•na.r raq~aata that 11eanaat be eraDted for ~·Dta t.roa the
blooltecl 4ollar aecouata of tba Bank of Franca 1n th11 couctq tor the
follolliq
purpo,.,,
(1) 'l'o pa, tba expena.. of the Fl'eneb diplouUo an4 conll\llar
repr..eDtathr.. ill tb11 OClWltq. It 11 propoaed that a ~ aontb~ uount be fixed for a period of one aonth. tou INfll••ted that the
~ for \!Ia tucoae41q aontbt be taken up on the 15th of e&ch
aoatll, to be aot.ed upon for the followiDa aontb. Raporta would be 11a4e
d 'be aDd of MC h IIOIItho
(2) 'l'o ~ the l&lariet aDd apenaaa of Fl'each diploll&tio and contillar oftioaa in tba Aaer1oan fi..Uphere. !he aaoUilt neea11&17 for
\hi~ h. .llpbere woul.4 probablJ be about t2 111ll1ona a year. !hie lltiuta 11 bated upon a requaat for t285,000 tor three aontbtl, for Fl'ellch
r apr.. eataU"•• ill .&rcant1Da, o~, Chile, Bolirla and Pa.rqv.q the yaarq .-penta baiac about four tiau thia aaouat, or tJ.,uo,ooo.
(J) to pa, the aalarill aDd axpenaea of French 41ploaat1o and conll\llar ofticea 1A other parte of the world. !he FNnch hna now 110
r~r repr11antat1ou ill CeriiiD,)', Itaq, Great Brita1A, Bel&iua, Rollaad, Jonq, Lu:uabourc or n.-n. fb• Outed etat11 repr11ant•
h'uce 1n all of tba,. OOWltr1aa ezoapt Craat Britain, pa.ya the upaJUIII
and billa Prance. Expen41turea for priloner• of war and for care of
refUaaaa hat increated sreatl¥ tinea tha collapte. A rou,b eetimata
would place tb11 coet at bat.WIIIl t)OO,OOO all.d 14001 000 4~1111 the next.
dx aontha.
With DO 41ploaat1c or co11eular repreeentation in 10 aaQT eountriea,
the total eoet ~l be aucb lee1 thaD noraal, 10 tbe aaount inYolTid
will probably not exceed t5 ailliona a year for repreaentation tbroucbout the whole world wit.b tha exception of south Aaarica.
!he total eua lnYolYed tor both tba Aaer1can continent aDd other
l a.. than
lf,Oo,ooo a al)nth. Ae, u.ader the plan you propoea, the licen.. w1ll be
IIOnthly, the uount whlob the French GonrnDent w1ll diapo.. of 1l1ll
110t be large a e pqaenta aq be etoppeci at the cloae of a01 aontb.
part, of the world will not exceed t7 ailliolll a year -
112
- 2-
1M pr1ao1fllll f111UC1&1 no01.1r- G! t.be lX'eacb Clanr--' appear to
lie la ~ acc,..ta •at MrMrked coJ.4 blocked 1D \bio oouat17, ao \bat e
rel'Mal to rraat t.be lleanaeo requeated alaht. -banuo Uae Frenclt a-awnt earioulJ. n. Bull: Gf rr.nta ~ NJ'MJ'ked rold here 1a tM
. - a t of fS04 111ll.iou Uld t.2S7 •UHooa 1a . .poalt..
llr'o Ber1e, oo belli& OGaaulted, apprond. ot all three llcana. . lle1a&
.,..W oa t.ba ll"'''D4 t.bet. t.M auu i.Jwol'Nd are aot. lar1e ..s that. a
refUel •OIIld -~rruo t.bo -pre. .nt lreiiC!l a--nt.. Bio faTOnbl.e
op.Uloa 11 4.rin1ta u to tho expa111eo in the vatted Statu and ia tbll
otlulr eoqt.rieo or Ule ~wieu JI.Upbera. lo felt. \bat. rataeol o! \.be
1 1 - for &J:OlOIIaOI ia l.atia AMrica:o COWltriU aipt MU 0 bed 1JipraecoWltrieo, oapecl&lq i t tbe . - . . i u , le1athna or conIS. 1A
111111\u •ere clo1ed or their ot.atr1 red~.
tbo••
AI e ao:~~nbat parallel o1twat1o111 1011 llicht COI1114er the t.raawaat.
ucoried DeaM;rlt 1a t.h11 nopect. !be Daniob 41pl-tic aDd OOAoulu
ott1c:ws 1a t.be AHrlc.u IIMio,pbai'e are 11011 'beiDc pa.14 troa bl.ockod ao--'e• !be IIO~t ot st-ate approor" tile ar1'&JII-nt. u tbll DaD!*
ll1ailter hare bat ebarp ot d:lo~t. tra the acooat.o Ull ~1• tert.aia ~oa nv t.11e Dania clipl-uo •at OQD8Ul.Ar e.paci...
Ja lllaiob cliploutio Ull CIOIWular cxpenou 11an Cr111M.UT pa1ll holl
OUbb bl.oebd !'ado ben, blat there 1111 o~Jaatioa ~ t.be Depariaaat. of
llt.at.e ..s the authoriv • • 11111~ to tht. ~-·
fte J'nMh .&&e*IJ' aloo requno 11~•• (1) to eaorer 4ollar a,_... or 7J'UCb OGlolliu, 111c:b u pu.rcbueo iA the u.tW &tat.u or
report. oo
V.ftli.A& oxpo_, with • JtOat~ IIUiaua or tSO,OOOt
11M of the 11011111 woul4 be ci9U aon~. 1h18 Ucauo 1ICiuU be
11111ted to pllll'Cballl ta tbb oowaU7 !or t.be eGlolli. . llhiob are aot.
1Aoladed 1.11 t.ba lrit.lob bl.ocUISe, ... tor w~. the 1Ut IaliMo)
(2) to COYer purobanl or ~ .-de io ot.he:r couot.riM . _
t.11e 1Jl11W at.atu, liP t.G t"',OOO a aoatbo (10~ reportl 1I01Il4 be
<•
*
.....
)
It thoea ucaaoao oro apprOY&d 1n prlactpla, no1ot:Lotion• •1t.h the
J'ranob Ai&DC wUl be necOIIOI'1 to fix tbe tanoa &od cood1tio)DI of tba
J~Ureru BOO to be uda •
(In
!, P,
JPCaBJ
C,
1.15
TREASURY DEPARTMENT
INTER OFFICE C OMM UNIC A T ION
D A TE
0'_ <;"- 1./.. ~
Secretary Yorgenthnu
TO
E. H. Foley , Jr .
I
According t o the report of his
Knu:lsen,
~peaking
re~ks
in the Wall Street Journal, Mr.
before the Senate Finance Committee on September 4, 1940
in a personal capacity, said the following :
"The defense cocmission decided that the excess pr ofits
tax bill, while very important, had no direct effect on Ule
prosecution of the defense program; therefore was not an
appr opr iate subject for the defense cocmission to cocment on
or make r ecollll•endations .
•consequently, you will realize that anything I say
here is purely pcrsonal--j~t an expression of ~ own ideas .
***
"I aSSUI:lC th· t vou intend this to be an excess profits
tax law , as its nace' implies. That seems to ce to mean a tax
on the excess pr ofits which may flow to vnrious com~~cs
directly or indiroctl) as a res~t of the defense program.
Consequently, it seems fair that this should be a tax on earnings above their norc~ past r ecord ruld not a tax based solel y
or largely on earnines above an arbitrary percent or standard
I do not t rJUlk a penalty tax should be imposed on nor mal
earnines . I f the government needs more revenue , why not
obtain i t by a flat increase in the corporation tax r ate?"
Apparently l.!r . Knudsen does not distinguish between an "excess " profi t s
tax
and a "war" (or defense) profits tax.
Uoreover , his request tllat t he
Government obtain r..ore revenue by a .f1!i increase in the cor porati on tax rate
is fundacentally inconsi stent with the request of the President for a steeply
&r&dmted excess profits tax.
1(.'
1.......
II
uo
(1) , (J)
.~u
ino
~
(k)
cr
1t.1
~1
124
t!
o!~~
~rr.cwu a
1
~o!t.ho ~
I7
~
t.o
r
cWt1e
! err
1tl out U:o
pm! d t.hin 90
1 , w1:1 h 1f tho
1 th racilllita
~be
cUllk
protocl
in
~~~~·rrl c=,~~~1.t:
-:.4 bo UIID tlmb
I
to\he
wUb
or
_lte
1
or
:roR YOUR INFOffi-IATIOII
Septeober 5, 1940
To:
Tho
From:
l·!r, Young
Secret~r:r
Re :
llartinique
Amone th& items belone;in.-: to the Belgian Governoent
which had been shi-;>ped on the French aircraft carrier
"3earn• I!Jld subsequently unloe.ded at Martinique are:
Six Brewster sine;le seater pursuits
Twelve Colt mnchine guns . 50 calibre
146,000 rounds of . 50 cl\libre az=mi tion
Four oxy~en inhl\l~<tors
Spare .,arts for tha Brewsters.
Tha Belgian Embassy has inforoed the British Purch ~s
ing Commission that it can obtai n possession of these iteos,
with the possible exception of the ammunition, and that it
will arrance for the export from llartinique if they ara nurchascd by the British.
~1e ~ritlah Purchasing Commission has informed the Belgian
Embassy that it would like to buy this material.
,l
113
...
1
15 B RO A D S T REET. NEW YORK
I
IJ
B RIT ISH PURCHASING COMMISSION
September 5, 1940
I.
Dear Mr. Morgenthau,
I have not forgotten that. I promised you particulars
of the Heinkel 113 Single-seater Fighter Aircraft.
I find we have no reliable figures here and am
endeavoring to obta.in them for you.
The Honor able Henry M. Morgenthau, Jr .
Secretary of the Treasury
Washington, D.C.
CRF;pc
t -
1 u ..ndlac JOU herewith, tor ;rour oontldentll\l UQe,
tw copln et the !ollovlnc report.:
Par\ l • Alrplaut
D.lherht ot and -.v Orden tor Alrplanea,
~ 1. • -.'111\ )1, 1911QI 'll'lltlllet Orfert
an4 Jlatf.Jiated Delherh• on ~·t Jl, l,IIQ,
Par\ II • All'l'lane ~t:ln••
Ilelhule• of and Jw Order• tor All'l"lan•
Jaclnea, M~ l • Aucnct Jl, 19~01 Uhtlllet
Orden and latf.Jiate4 DeUYerles on
~· Jl, 1940.
!hell \allln U>r'l7 torvard thro~ ~·' 31, 191jQ the
t.atonatioa t'Grllldled JOU latt veell:.
8bcerel;r,
Mr. WUUu 8 , luu4aen,
Ollall'Mll, \'lae Ad.rlaor;r Ooainlon to \be
QoQAoll ot Ja\lonal Oetenae,
•o• 22,2, hde,al ltt1n1 Bll.ll4tac,
Wathtncton, D, O,
120
I 1111 ae!ldinc ;you her evi \h, for ;rour confideo\ial uao,
\be tollovinc reportoc
Part I - .Airplane a
l>el1TI!rt. . 9! and !lev Orden tor .lirplanea,
Mq l - Au.uat Jl , l94o; t1Dt1lled Orwa
and T. att.~~atecl U.lhel'iet on ~t Jl, 19110.
Par\ II - Airplane ntgin. .
~l1Ttr1et ot aA4 Uev Order• for Airplane
bginu, l~q l - Au&u•t Jl, 191101 UntUUci
Orden &114 J:a\laa\td Delinriet on
~·' Jl, 194o.
'theae Ublea cart'7 torvard throU&h J.ucut Jl, 19110 \be
1ntor•Uon tllrnhhed 7011 lett vHk.
Sincere}¥,
'lhe Bonorallle,
~ Sec:retarT ot Var,
alhlncton, D. 0.
~
4.enr MJ-. Pa'Her1011.1
1 aa .. li41DC
J'OU
berewl\h, for 7'0111' contl4.eli.Ual uaa,
\be fo1lovliiC renorha
Par\ I - .Airplanea
Delharha of and lfew Ordera for Ail"!'llanae,
Kq 1 - .....,,, 31, 19liol Untllla4 Or4.era
alii\ 1tl\laa\e4 :O.llnrl. . 011. .Aqut\ 31, 19110.
Par\ II - AU]:IlaiM lllcln••
Dallnrl. . of u4 lev Ordere for .Airplalla
:£1111Ua, llq 1 - Aqu\ 31, 191101 Vllfllla4
Ol'llera &Jill leu. .w Del.lYerl. . oa
A,uaala\ Jl, 191to.
!DIM \&\lea Ull'J' forwar4 \broucb -'IJ&1U\ 31, 19110 \be
lllfena\loa tvabbe4 rou 1aa\ week.
SllloarelJ',
(&!pad)
HonorAble Jlobert P. Pa\taraon,
Au1e\all.\ S.cre\arT of War,
VaahlQCtoA, D. 0.
a.!lor,.mbau, ~r .
Dear General Marahall:
••lldiAC
I u
J'OU herevlth, for JQur contlclen\lal uae, \be
folloviD& reports:
Par\ I - .tJ..rplanea
llellnrlaa of and Jlev Or4era for .Urplan..,
X., l - AliCia' )1. 19llo; UA!Uled OrUH
aDd ~U-\ed Deltnrlea Oil .Au«ua\ )1, 19110.
Par\ Jl - A1l"pl..aDe ~"
.Dellnrl" of IUid , . , Orclere for .t.lrplaM
ZDclua, Mit' l - Aucut 31. l94o; Unt111ecl
Orclera •4 Zetba\ecl Delh..rlea oa
.t.1Qcla' )1, 19110 •
!b.ae \able• ~ forvarcl throl!Ch .&ucua\ )1, 19110 \he
WonaUoa turlllahed JVU laa\ week.
SlacarelT,
(~)
O.aeral Oeorp
c.
Chlet of Swt,
Var D.p&r\Mnt,
WallhiJIC\oD,
J).
C.
Marehall,
B. Morpmb&U, JY
t P uii41Dc 1011. herewith, for ;your
fo1low1Dc reporht
contld~Ual
uao, the
Par\ I ~ .U.rp1an..
Dellnr1et of aa4 lev Orden for A1rp1pu,
•at 1 ~ ~ua\ J1, 19401 Untilled Orden
aa4 :ltU-\ed De1hor1u on Aucuat J1, 1911o.
Par' tt • AUplane 'lllcill••
Dalherl01 of aD4 Jlev Orden for Airplane
b81n01, 1ta,r 1 - &Jco.a\ Jl, 194o; UllfUle4
Orden aD4 aU-ted llel1ftr1ot on
AQc~&••
J1, 1940.
!'!leu \all1oe oarr:v forward \brn&b Aacut\ J1, l94o the
bfor-tloll furalthed JOU lu\ woolt.
Slllcerel7,
!bt loDOr_.lo,
!be leorotar:v of tbe
t:..,.,,
Vatblnc1oll, D. 0 ,
¢;( -r: FILE
COPY
September 5, 19~.
I aa eezadlog JVU herewith, for ;rour contlden\ial use,
the follow!Ag reporta:
Par\ I - Airplanes
Delber1ee of and lew Ordere for AirplaDea,
~ 1 - .Au&wst 31, 1940; Untilled Orders
aDd :&ett.ated DeUnr1ea on ~at 31, 19~.
Part II - Airplane ~1nes
Dal1nr1. . of and lev Orders for Airplane
Jad,nee, N..., l - .Augut 31, 19~; Untilled
Orders &1111 :&aU..ied Del1Ter1.. on
.A:Qgua\
31, 191().
'flutH \able• carrT forward ihroll&h quat 31, 19~
the Wor•Uon turnhbed 70U last nek .
Sincere}¥,
MaT. Director,
Jarep of :S.Harch and Stathtlca,
'rhe Ad'rl ao17 Colllllieaion to the
Council of :Rational DefenH,
Booa 2715, Mwl1Uona Jlu.1ldlog,
llr. Staq
Wuh1JIC\OD, D. C.
J,
I • oftllllac Jl'll. llerwith, for ;rov coDtlclaDUal u .. ,
U. fo1loir1JtC reporto:
Pan J - Alrpl&Mo
h1hv1ea of .a lev Or«era tor .llrpt..a,
llq 1- Aucaot Jl, 19'-0; 11uttlle4 Orden
8114 laU•te4 DaUnrlea 011. .Aucu•t Jl, lglio.
Per\ II - Al.r plaua lllciua
Delhwrlea of 8114 lew Ordara tor .lUp1ue
~-·· Mq 1 - .ta,pu\ Jl, 19l!o; Uatllle4
Orl.e:n 8114 . .U . .\84 Dallnrlea oa
.llllpe\ Jl, 19110.
*
!bitH \abloa e1an7 tol'WU'd ~ Mcu\ Jl, 19l!o
lat-Uoa tlindllho4 701l laat wtlt •
.14alral llorold Jl. S\arit,
Chlot of llaYa1 OporaUou,
IM7 :U.,ar'-'t,
Waalllq\oD, ~. C.
fit k
FILE COPY
DMr Mr. Dortli:Npl
Ill eoauoUoa vi \ll reporh t •
r-lflll& froa \be al'J)111U
1o tKIII'o oti'Wa
btonaUoo n11U"4lnc 11Af1Ue4 o1'41n't, MV or4era, u4 4el1Ytrloa
for JOV oo~~p~~~~~. I • ODCla.lnc a b'b1o vbloh bu 'bou prepared
for JOUZ oo~ fro YIU"loua 4a\a an1lab1o a\ \M War Depar\MJI\
lllowbc \he -'bor of airplaa.a oa oriAW 011 Aacu\ Jl, 19110. WUl
1ft pl.... rnt .. \bh \abl.o lA acoordance wl\h tbo prooo4ure
ou\UIIM llelA»w.
aJI4 al'J)lane uclu lll4uaV7, I ahoul4 Uko
Jrlq fo1'Var4 \o SeptoDtl' 7 \ha ••U• \ed. 4ol1•orlll of the
utllled. or4Ain oa ~·' Jl, 19110 'II¥ (1) 4e.hto\1JI4 4olharlu
_... 4vlnc u. ~ r1o4 Sop\oaMr l U.Z.O'IIojltl llep\oelltl' 7 UDder Nab
'De of airplaM All4 olaao of puchanr1 (2) tMlca\lAC etA¥ ~-
nalou 7ft ban M4e lA tho ..u ted. clollnrl. . of 1be r..u1a&
or4ore
OI'Urt IIIIW llbow oa \be ochelulol e.ncl (J) iAial'Unc NMlft4 4vlllc tho ptr1o4 hp\oabor 1 \bro~ s.ptoobor 7 1a \heir
or4ore wi\b or4on aow aholfll oa tbo
J>l'epOI' plaoo", eoabWnc \a'blo vblre \1M tn>• of ai'J)lalle u4 clu• of vurcbuor aro t.bo
llne tor cq \7po of a1rplaD8 or ola81 of
· u4 uaf.JI& a parCih..r ao\ alroAil,r t..clwt.A 1D \be •~•· Alter \baao rontlollt han bo• - . . \bo echNalo tbnl4 t!lov . .u ..to4 ...u .....loo
ot all oi'Urt uat1Ue4 oo lop\oe\er 7. balwUnc- orura roctlncl
4vlnc \be week.
Ia adcll \loa \o tho allo.o, vUl JOU aloo 111bol t a atatoMD\
t!lovtac, b.f VJ>• of aU,.lano ( 1no1udln& ldoaUtlcaUon IIUIIblr),
all 4ollnrl. . lla4o a.t uv ol'411r• rooel'POCl durl114 \be }'Orlocl
lop\•bor 1 \brou.;h SoptnbG' 7, clanit)1.DC thooo ull.orloo aJI4
or4trt 'II¥ the toll.oviJlc olx croup• of pu.roaaoor11 (1) Ual\ed. 1\atoo
1re and J'ruool
.Anirl (2) Ull.lted. 8\a\oo llntl (J) Jlrl\ioh
(4) Bou\h AlleJ'le&l (!)) Otbor J'orolPI and (6) 'Ool\ed. 11\att•
Co rolal. P1-• aako tor oach aov orur a11 oa\1Mto4 cloll'N1'7
ICibed.ul.o ~~ aoa\bo, olualtled. •• abo.o, bo\b '117 olall of J'IU'oho..r
.a ))' tn-e of a.lrplane.
1 t.r
~ ..,
AU 4&\a .tlo1&l4 bol,.._ 1111111'" la , _ ld OOIIple\e 1111Ua.
wU!l tlru\1ou I'OUD4ed \o Usa MANa\ vtlolo -'Mr.
n - torww4
\M \a'llloa \e Mr. Oearp c...... Diree'"
~ Depao"-\. VUbl:l&-.. 11, c••
• • I haft ull:e4 \e ~ \o o\t.ala fJ'O• 7ft nell •\Mq"~~Q\
tlcaft• u are
\o Wi.q \ho Wona\1oa 19 to 4&\e at
u.. ea4 ot oaeb calodar wok. I aball ~rpp7oct.a\e 1\ t.t 7W wt.ll
IIDil 7DCI' rwp~ b~ at.r -.ll opeolel 4oll'Nl')' oo \ha\ U will r..U
b1JI •• Mollllq• . . ,_ _ 9·
et le...n!l .-4 t.Ua\loa.
-•111117
80't/na
128
Ia eoueo\1oD wl\h r • r h I • r coh1nc troa the .S.rplazle
u4 alrplanll olll:lno ln4uo\r7, I aboul4 llko \o eoauro cor\1\ln
1Jitona\1oa ro&ard111;( unflllo4 ordere, MV ordera, M4 dolhorloa
tor J'OilP OOIIpN\T• I ea oncloalnc a \alll.o whlch hu lloOD prO'[Iero4
tor J'O"Gr oo~ tro11 n.rloua data ll'ftllablo a\ \ha lfer Der>ar\11&\
Cowl~ the llllaMr Of a1rpliiDOI On OJ'dv OD Julf 3lt ll)4o, Wlll
:rn plea" r«ho thla teblo ln acoor4aDco v1\h UIO proMduro
ouU1•4 'below.
llrl.al4 forward \o Soytoabor 7 tho oeUM\ecl. 4ollnrloa of the
uflllM ol"Ure 011 lv.l.Jo 31. 19~ 'V (1) dodw:Un4 4olherloe Mile
Grlllc ~ ,..1o4 Alleu\ 1 \hrou..b ..ep\. .bor 1 un4ar oach Vr4
et abpl_. Mil elaoo of parcha..r1 (2) i..slcaUDC ezq roYhlone
~ _... .... 1a \lila oe\lM\ecl. 4ollnrloe ot the r..tnlnc orun
nw order• rocolft4
...., ehowa on \he ecbedlll.ol NJi' (J) b"rt
durbc \lila perlo4 ~·' 1 Ulrou,#l hptoaber 1 ln tholr proper
pl.Me, -llllllnc aw ordoro v1 tt order a nov ehovn on the table
vhero tho \7J)e of alrplue aD4 cla.. ot purcha.-r ero tho . . . .
aa4 Ul~ a new llne for atJ¥ \r,)O of alrpll\118 II' clAII of J'II.I'Oha8or
• • alro.t;, 1nali&U4 1n \he acb14ulo. Attor \he .. rnhlona tul't'e
\ieon ....u. \he ochO<l'lle aboul4. ehow oetlaA\ecl. 4elhorl•• of all
ordore lllltlllo4 oa opt•'ber 7 • lncludlllol MW ord.ore reoehecl
durlnc the woolc.
Ia a441tlon \o t.ho aboYo, vlll ;you aloo t111biiU • a\a\o:IQt
lbovl"' VMHl¥, 111 typo of AirJilMO ( 1nnlu41• ldan\ltlcoUoa
-bor), all dolherloo made 11114 nav ordore recolft4 durlnc \ho
por1o4 ~\ 1 \hrougb eptoabor 7, olaealt7in& tho•• 4ollYorloe 1.114 order• b7 the follovinc eh: crou-,e ot porcha..r•'
(1) IJU\o4 1\!\hl Anilrl ( &>) UaUo4 r>tat. . llP"fTI (J) lrlUih ( )
lro IUI4 J'rMOOI (II) o.ou\h Mlrlcal (5) Other rorolpl azul li
UaU.o4 ta\ol Co-rolal. J'leaao ..>co for each MW order all
oe\1Mto4 4ol1YU7 ached 1lo tv 80n\ha, ola..ltlod •• abon, '-\h
'llir ala11 of puroha"r aM liT tno ot alrl'lt.M •
123
All 4a\a llDul4
1aoma.
lpal'Q
la \enla of co~~plo\11 11a1 \a,
wl\ll ~loaa I'OUIIodK to ~ •uea\ vhob - - ·
n .... forvar4
of leMarch
\be \allloa \o Rr. O.Orc- c. ..... iJlreo\or
~'• llnlabctn. D.
aad 1\aUaUoa, frMR1'7
o.,
dlla I han Mlr:e4 \o .rraac- \o »'-1& r:roa ,._ ~ Rll~
f1FH• •• ara neooaSIII')' \o llrlllc \be latorM\loa Qp to 4&\11 a\
\boa .-4 of each oalondazo VMll:. I aball IIPIIHOla\11 U U 7VU vtll
llft4 ,our np17 _, a1r aail ~peele.l llollftl1 ao Us\ U will rMOh
Ida OJl Moo.:r, ~\eMber '•
Sl~,
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
Septe:nber 5, 1940
secretRry Mor~en~~au
J. p. Chllllberlain
Re:
Reque sts of French financial Agency.
The Agency requests that licenses be &r&nted for pa~ents fron ~e
blocked dollar accounts of the Ba:lk "f Frhnce in t:-.is co!Jl\tcy for l he
followi "Jg purposes:
(1) To pay the ex:>enses of the French diplollllltic and c onsular
representatives in tnis country. It is ?r eposed t hat a maximuc m~oth
zy &lllount be fixed for a p( riod of one m:>•>th. You s~gesteu thal the
renewals for the succeedi~ months be taken uo on the 15th of each
month, t o be acted upon for the follo~ing month. Fenort; would be made
·
at the end of eac h month.
(2) To pay the salaries ~nd expenses of French diplomatic and consular offices i n the American Hemisphere. The s"'ount necessn,-; for
this hendsphere "ould probebl,y be eoout <'- 2 millions a year. Thi~ esti&te is based upon a request for !285,CY.l0 for three mont.'ts , for French
representatives in Ar6entina, Uruguay, Chile, Boli•ttl\ nrvl Per~<guDJ' the 1eul,y expense being about four times this aoount, or ~l ,U:l,(Y.l().
()
(3) To pay the salllries and expenses of French diplo!:18tiC and consular offices in other parts of the world . The French have now no
regular representAtion in Germany, Italy, Greet Britain, Belgi~, Holland, Norwa,y, Luxe:abourg or Denmark . The United States represents
France in all of these c ountries except Greet Britain, pays t he e X?enses
and billa France. Expend! tures for prisoners of ~ar and for ca:"e of
refugees has increased greatly since the coll apse . A rough estt:nate
would place this cost at between tJOO , OOO and $400 , 000 durtng the next
-
six
mont.~s.
With no diplomatic or consular representation in so many countries,
the total cost will be much less than normal, so the amount involved
will probably not exceed ~5 millions a year for repr?sentation throughout the Whole world with the exception of South Amer,cs.
The total sum involved for both the American continent end other
puts of the world will not exceed $7 millions a year -- les s than
$600,000 a onth. As, under the plan ,.ou propose, the license will ba
11
monthly, the amount wh ich the French Government will di5pose 10of0 ~~11
not be luge as payments may be stopped at the close of &1\Y ~ ~'1.
.
..., ...
- 2 -
r
r
The principal financial re~ources of the French Coveracent appear to
be in the accounts and. ear:~~arked gold blocked in t his countr-J, 80 that a
r efusal to ,:rant t:te hcenses re~ue sted might embru-rass the French Coveraoent seriously • The Bank of Fr•>:1ce holds earmarked gold here in the
&IIIOWlt of S504 millions and $257 millions in deposita.
llr· Berle, on being consulted, approved of all t.lu-ee licenses being
gT&nted on the cround that the SIL'Il& involved are not large and thD.t a
refusal would embarrass the present Fr~nch Government. His favorable
opinion i s defl~te as to t he expenses in the United States and in the
other countries of the American Hemisphere . He felt that refusal of the
license for ex;>enses in Latin American countries oight make a bad impression in t hose countries , especiallf if the embassies, legations or consulates were closed or their staffs reduced.
As a so:newhat parallel situation, you mieht consider the treat•~ent
accorded DelW8r:C in this respect. The Danish diplomatic and consular
officers in the American Hemisphere ere now being 90id from blocked accounts. The Department of st!l.te approves the ar-rangement as the Danish
Minister here has charge of disbursement from the accounts and exercises
a cer-tain super-vision over the Danish dipl omati c and consular agencies .
,, U Danish diplomatic and consular expenses were originally paid from
iiiltsh blocked funds here , but t.'lere was objection b)• the Deparbent of
state and the authori ty was limited to t his hemisphere.
The French Agency also re~uests licenses,(!) to cover dollar expenses of French colonies , such as ?UTChases in the United states or
tr..veling expenses , with a m<lnthly maxiroun of $50, 000J (A rej)or-t on
t he use of the money would be given monthly. This license would be
limited to purchases in this countrJ for the col onies which are not
included in the British blockade, as, for instance, the 'heat Indies.)
(2) to cover p1Lrchases of merchandise made i n ot.'ler countries than
the United states, up to $30, 000 a month. (Monthly reports would be
made.)
If these licenses are approved in principle, negotiations wi th the
French Agenc; will be necesS&r'.f to fix the terms and conditions of the
purchases to be made .
TREASURY DEPARTMENT
r·
"\
INTER OFFICE COMMUNICATION
' UNCB:smrf
I
TO
FROM
Secretary
V.or~nthau
Mr. Cochran
DATE September
l.I· .~. ··~ 20~
5, l94o
~ diit-
ffRI CTl Y--6-&N ~
The attached nemorpndum was handed to me by Mr. Alphll.lld, Financial Counselor
of the !'rench Embaeay, on August 29 , 194o. I discussed it the next day with Acting
secreta17 Bell, It Val\ recalled t hat Mr . Bell and I had received Mr . Leroy-Beaulieu
on July 19. My memorandum written on the folloWin& day, recountill€ our interview,
Jade no mention of ~ such assurance as l·!r, Leroy-Beaulieu stated had been made. It
vu recalled, hovever, that the subject of permitting l!'rench colonieo or protectorates
to use for purchasint; in tho l'nited States the pr oceeds of exports me.de froo those
ae~s to the TJnited Stotea we.s discusced, and we &bowed a syopatnetic attitude tovp.rd
euchA prOliO&ition. Mr. Bell hi's penciled on Mr. Alphend 'e memor andum the following
note: •I thillk it vould be accurate if he had said ' would willingly consider grant in~ ' 11 •
At eleven o 1 clock this morning Hr . Alphand telephoned oe from llev York and
referred to the meoorandum under reference. I suggested thRt to be correct the ' memoran'1lllllhould be amended in the vorde of lU'. Bell , ...tlich I quoted to Mr. Alphend 1 s
ecreta17.
,
(l!&llded by Mr. Alphand, FillNlci al Counselor of the Fr h
to Mr. Cochran in the Treasury at 1:30 p. m. , Auguat ~;~ l~~)sy,
•
.AMBASS.Am:
DE LA BEPUBLI Q.UE F.IWICAI SE
J.UX ETATS-UlUS
Washington, le Auguat 29 ,194o.
In the course of a conversation, which he had with
the l'inancial. Attache of the French Embassy on
July
19,
194<>, Mr. :Sell was kind eno\l&h to aesure Mr. Leroy-l!eaulieu
that the Treaaury would willing).¥ grant the necea.a.rt
licensee for releasing the funds obtained from export
product• of French colonies or protectorates to the
United States in the event such funds vera to be used
for purchaaea in this country.
The J'inancic.l. Atta.che vould be grnteflll to receive
from the Treasury a confirmation of the above statement.f.
134
ADVI SORY CO:~:IS SIO:' TO T!r:: ~CUJTCIL OF l!ATIOllAL DEF:::NSE
Federal ~serve Building
September 5, 194o
Mr. Ro1ell
Federal Reserve l3e.nk
New York, N.Y.
Dear Mr. Rozell :
I understand you have been studying British policy and O?erationa
in connection with the usc of British gold resources .
I
am hoping to
include in a study of British W1<r finance the extent of the use of
gold and foreign exchange for the payment of war supplies and your
deta on the use of gold would be extremely useful to me.
a~reciate
I would
your sending me a copy of anything you Qay have written
or telling me in what manner I can arrive nt the proper figuru .
With mflllY t hanks , I
&:l
Very truly yours,
(Signed)
Jamea S. Earley
The Advisory Commission to tha
Council of National Defense
1424 K Street - Room 420
Washington, D. C.
JSE:iVR
(l!ec'd. . by telephone from l!r . Rozell , Federal Reserve Bank of N. Y.
ll a . m., Sept. 26, 194o. ) - emk
Seotember 5, 1940
9:24
a . ::~ .
H. J..Jr:
Hello.
O?erator:
Leon Henderson .
H. IL J r :
Hello, Leon .
Leon
Henderson :
Hello .
H. M. J r :
Am I mad at you?
H:
Yeah.
H. ll .Jr :
No , I' m just disappo i nte d.
H:
I n what way?
H. M.Jr:
At your whole cr owd over there, oarti cularly
you , so lon& as you' re aski ng me.
!!:
'1/ell , you know, I t hough t we knew eac:n other
well enough that you 'd call me .....
You mad at me?
H. !L Jr:
~o ,
H:
'II ell, you :nave t o live fr om day to day,
Henry, and you have to do things according
to your best judbment s
H. li.Jr:
Sure, I know.
H:
I ' m not -- I just figure what ' s t he use.
I know you do and I certainly try to.
H. l1 . Jr:
I know . I was ver y disappointed and Sullivan
was absolutely flat l ast ni ght.
H:
dell , how do you supoose ~e felt-- I mean,
you were away -- I called you ; you 1.rer e away ,
Ed was away , nobody over there - - Harry was
away-- nobody I could talk to .....
H. l1 . Jr:
Can 't you talk to Sullivan?
H:
No . Sullivan -- J ohnny -- the only kind of
conversation that we could have outside of
just on a friendly basis, t~t i s on an old
'' "'
1vO
-
2 -
when we e~ et onto anyth:ng
friendstip ba~if
lik e t.hi e h e juet
• well , you • re eold
~
. ~aye
,
I
t
don t liKe that kind of tP.l£ I don't
ou .
tar.e it fro~ a~ybody exce?t someoody'tnet I'
fr~endldy with. He eaid I'm a cnamber at com:erce
guy a n eo fortn .
H.:.. J ,..:
l LAughs)
H:
On mPrit~ of a~ything it ' e just been im?oeeible
to talk to John .
:1.1 . J r:
I
H:
ThRt "·ne just terrible tnat we had to go
down tnere yePterday and there was no occasion
for it, but all I coulc understand Henry
wa~ a~~er it hac apoe~rec -- after ' we had'
made /~lch of a orotAct to him and to anybody
else as we could , after WE' had scent as much
time as we had on t hat thing, when the thing
ap?eared and we ' d learned that Johnny had
ineieted on it I tnought it nad your O.K .
and you ' VA t,Ot no other choice then than ,..hat
you believe. Tn. eP amer.c·cer.ts, Hf'nr:;, arP Pntirely
r 'o?rkable, abfvlute:!.y un,.·orknole , and in my
inion and I 1 VP s pPr.t quite a bit o~ time on
it in addition to havlr.g handled a lot of thlE
tuff ln the laet war, and I con ' t make snap
juobments that way.
n.' . Jr
:
rt>P. .
iell, 1t ' B a ~ood thing :;ou C"llea me uo.
I wouldr.'t nave called you because-- well ,
H:
I 1uet don ' t understand the atti t ude of t he
and -- oh , I ' d 1 tke soon to ei t
down with you b!'cauPe I Just oon ' t understood
it, I n.ran I can ' t understand 11·hy this stuff
is soing on .
.• ell , sur e .
H. r .Jr:
I ' m just dieapoointed.
H:
I tn out,ht that 1o•ae t he way you fe l t . You
didn ' t call me at all and ,.natever it was you
ware nnving yesterday noon , I got R gar bled
acc!>unt !:In that . l.y i~eo •.ee that -~ what
we hP.ard was from ~nudsen t~ t the w.~le
th1ng __ that you ' d said our ~hole ~ roce~ure
1o1ae l.llegal . .:ell, tMt botnered oe .
Co~·.i eel on
J37
- 3 H.lL J r :
tell , I mean the idea of an
to t~e Comotroller General t~g~ncy writir.g
6et en o~inion
on a tr.x matter without v
it
b~forehand to tr.e Tree e en showing
6
since I 1 v~ been ·in a _suiry ha never ha;>·jened
this
and
ngton
an
•
.
f 11
e ow Bi~t !re setting himself U? ae a
committee Ol' taxation end f1
~'ri tin! to Com!)troller Gener~~n~~ :~do~r~~on
wn en s pur ely a Treasury matter end never
even givi~b us the court~sy of ehowing it to
us. Lots of things have hepoened to me
before but that's never' h~opened b~fore .
H:
'.i~ll
H. l\ .Jr:
It 1 e unhe>ard of .
H:
~ ell,
the~
H. H. J r:
I ~ ean, it'E unhe>ard of . I ~ean what the
hell does the .\atior.el Defenee C~uncil want
a committee on finance end taxation end tnen
to be writing on a purely a matter of Internal
Revenue and not even giving us a chance to
looK at it and then sticking it all in the
:>a perf'.
H:
',lell , let me seoarate the two items, Henry,
one of the~ is the auestion of Biggers setting
I thought I told you and if I
hi~eelf uo .
didn't I was reoise that ell kinds of things
having to do with taxation end finance were
beine done in th~t division by J esee and by
eo~e of Stettinius ' grouo and none of them
were coming uo to the Commission for review.
And what I did , I forced -- I forced the
orgllnization of a committee on which :lelson
and l·!cReynolde and myself, all three of whom
are --well, shall ..,e say, considered to be
at leRst in o;r~ )u s with you and relatively
fond of you -- as three out of that five,
anc we've been forcir.g everything in:o thPt.pictur~ .
T~P other day Kades tole me for examole eb ~t
t .. e Curtise-.lri!:.ht contract . Aelson and I
juet forced the rewriting of tnat co1tract
on the basis of what Kede~ had told us. I
mean, I talked to Ed and Kades end so die
Oinebe r g and we talked to Oscar -- 1-te talked
there're two items in there . One of
is Biggers setting himself up on thPt
J.38
- 4 witr. your peo ple every da
g et some organization outy~f ne've
.... . tried to
.
~/ell, on th3 t letter t
aeked, when I read abo~tt~e Com)tr?ller, I
hac a corr.-:.1 ete c;'1eck made ~f i~h the ?a per ' I
e Treasury
k
a n d nobody in t he Trea~
~ury new anything
about it. 1Jobody .
H:
Nobody knew about it -- Oscar di dn 't
know
about it?
H.IJ..Jr:
,</ell , all I know was that I called up S lli
van
and asked him t o rna k e a check amongst thu
le6al ~~~Bf and amongst his staff and th:
ody i n t he Treasury knew anything
abnswer
a out it.
H:
,·/ell, now , that may have gotten away . . ...
H. I: . Jr:
Look, Leon.
it may have botten away from me .... .
H:
H. h.Jr:
Look, Leon. Leon, let'e not get bogted down .
You and I want to bet the armament progr am
t,oing .
H:
That'
H. !: . Jr:
I have no oereonal feelings.
H:
Yeeh.
H. !..Jr:
So if any of you fellows wan t to see me,
I ' ll meet you anywhere you want, but I ' m here
t o be helpful and my pers onal feelings don't
amount to a Goa-damn.
H:
Jell , now , Henry, on the matter of t his contra ct
orocedure business to the bes t of my lights
Ginsberb and ffiyself constantly kept checking
back and forth with your oeople , and on the
opinion request I may nave sl i oped, but Just
the ainute we had the contract procedure I
•ent it to you ae you ~till r ecall. Now , on
the Committee itself, I :nean - - has been working
under a lot of ? reeeure and Bib~ers or nobody
E
right .
I want to s ee
thie country rearm, now God-damn it I ' m here
ready to go 75% of t he way. See?
•
'r J
l39
- 5 ~17e ever thought of doing anythln l i ke
we ve taken the res oonsi bill ty rn g I' 1 that.
soon it
n '"knows
•
knows 1 t an d so d oes Mac. McReynolds
that as to -- we nave wanted not ever to keeo
you -- your ~eo~le out of it but to utiliz e ·
them completely e,nd every chance ~~e •ve got
t o take anything away from somebody that was
trying to side-track why we ' ve done .
H.l •• Jr:
.~ell, t he way I feel at nre~ent , I mean,
certainly relations on t his tax thing the way
it is now are none too good and I can 't keep
track of all the people over a t the Council
who are messing into taxes, I mean , the day
ian 1 t long enough and what I would suggest
ie that after this conversation you talk
to HcReynolcs and tell l~c R eyno l ds t o come
over and have a talk with me. See?
H:
Yeah.
H.l~ . Jr:
Knd let ' s see if Mac and I can't get this
thing going again on par allel tracks or on
the s:ome track .
H:
All right. !low look, Henry, another thing .
On t~e ~atter -- I don ' t ~now whether you
know it or no t, but there was started somewher e
wi t hin the members of the staff - - "E'rion "'plso'1e
and eo forth an attemp t to get the Defense
CommisEion on record about t h e excese orofite
tax . They wan t ed t o weaken it. 'll'ell, .leleon
enc I handled that together wi t h l'.aC end we
killed t he who le t hing off, t ha t is, as f a r
as I know we ' ve tri ed to play ball acco r ding
to what our lights a re.
H. H.Jr:
~;ell,
I 1 m glad you called me, Leon .
H·
~ell ,
Henry, I'v e . •...
H.lLJr:
And you just asked me how d i d I f eel, I sa id
I felt disaooointed. But tell Ma c to come on
over aod see me . See?
H:
Yeah.
H. i~ .
Jr:
And let me
tsl~
with him .
14~
- 6 H:
~ell,
H. :cJr:
Well , he oubh t to be.
H:
I ' ll tell ~ec to do that bu
tell ::elson and I'll tel . t I w111 also
he sees anything that w 7 nim that whenever
e re going to check
~·1 th -- if ito
~ith you or Edsa~~r~e~lml~ort~nt --we'll check
mar..e sure but
b
o
~e ve een very badly disturbed f~ankly
'
t'
Y -- well, our inability to
f.e a working
bee1s with John .
H . l·~. J r :
Uh-huh.
H:
Now, I've got the greatPst admiration for
hie caoaci ty and his earnestness. He wants
the same things that I do but I can't se
to ~et on a basis where w~ can talk thing:~
H.l . J::-:
I
H:
No w, we've got to find that because of
oeople ar.d things that are involved. You
Eew the scrao re~ort , didn't you?
H•• • Jr:
Yeah.
H:
I sent tnat to the ?resident and I also got
the Commission to endorse it and the President ' s
ot the t.
H.l1 . Jr :
How many fellows are in on this tax thing over
at your Commiss i on?
H:
Here ' s the Committee: Biggers is the chairman ,
Helson , and he ' s the tower of strength in the
thing, Carl Adams reoresenting Stettiniue,
li, cReynolds and myself, Ginsberg is chairman -eecrPtary and Fred Eaton, wno'e from Black1~ell
Smith's firm, reoreeents Bigbers ee counsel.
Tney're the main tninge, but as far as-- I ' ve
been trying to bring everything into that
CJ~rnission -- we ' ve been having our scraps
as we go alent, ~·e've fou_ht every one of them
through. As I say, Don Nelson, wnen he bets
a cleor line of ~rinci~le he's a tremen~ous
help because he brings a business noint of
Mac, bet•een you
and me, isn ' t abreast
of ~hat ' e going on .
see.
Yeah.
- 7 view thet juet u~sets Bigters and Adame a~d
~aton and those fellows and I don ' t heve to
_et indie;r.ent - - sort of a rabid 'ew Deal
Reich ~ou k ~ow and business flaunting and all
like thAt.
•e' ve had fairly 6 ood success .
If it nadr.' t been for that I t'tink w~>' c be
in a ~retty bad ~osition although ?art of
thet'e due to something as I told you-- the
form or organization of this Commission .
H. J.! . Jr :
0. K.
H:
dell, I think I ' m going to try to get
something done on tha t.
H. lL Jr:
~ell ,
~.i
if it'e the form- th llcReynolds .
~ay ,
let me etert
H:
All right , you start with Me c . l•ow look ,
if JOU ' ve got anything, call Don or me, wi ll
you?
H. !LJr:
0 . K.
H:
I'm not going to let you get away from me .
H. ' . Jr:
c.
H:
All right .
H . ~ .Jr:
Good-bye.
K.
All right .
Glad you called .
142
Septemoer 5, 1}40
10:05 e . 'TI.
!l . .. Jr :
'-im .
H':'llo.
sir .
r:eReynolde :
Yrs
H . ~ . Jr:
l!ao? LP.or, Henderson called e U? thte morning ,
wantPa to know Nhat I tllou2:ht about i t, see.
So I said I simply was very disaryn~inted t~at'f
all . And I said that I thJueht the whol~ thing
:;esteraay ~'P.S too bad . ..ell , he ~:ent on for
fifteen or twenty minutes about their troubles,
Hello.
~articularly with Sullivan , eee?
l~eR:
YPE .
!l.l.. Jr :
And of cnur ee the thinb that bothered me was that
it ' • been re~orted, I don ' t know- eort of off t~e
record, not an off t~e record, but a special
£taternent . I ' ~ told Knudsen said :ree terday the t
ne thoucht it wee a mistc~e to have the excess
prafi te tax.
~.cR :
He said l>'ha t?
That it was a mis t ake to have the excess or ofit s
tnx. No~<: that ' s ·~hat Sullivan tells me he
said in a euft~lementary statement.
l~cR:
Bill said t hat.
S~ll1van
tells me that Knudsen said that.
MeR :
He hasn't said anythln£ to me that would
indlc~te any euch answe r s .
H. M. J r:
Well, I ' ve
MeR:
I don ' t ~now of course .
H. H.Jr :
·•ell, I' m repeatint, what Sullivan told me .
l~cR:
1. es .
H.!' .Jr :
itat I war.t to ,mow from you , as I told
t interested in per Aonal
· -•
· ·
d all thet we want
Henaerecn, l m no
'
differences of opinion an
t th i ~ G~c damned rearma~en t or ogram
. - f ou think 1 t would hel? any •
to "'e
I ' 11 have anybody
goir.g. olow 1 Y
I 1 r.i not era zy to do 1 t •
6
ot a cony of the statement .
I wasn ' t there.
''c~ :
~ - · . Jr :
e S•1ll!•:€n "nC. ~.,le .. t" re 1 t tl•~:.,
~ec i!' '·:e cen ' t ,..."t t\-p ,.,~'='""C,ry r.n~
t~p c~.,~ la•• n~ba:~ "n ~"'c ea-e trrc~ , btceuce
"~" ' rc '1r>t on·£' "r-e trac:.: , ···e • re n..,t -o!nr-in
AN I ' 1 1
..., •.
h"'ve 1..t O'tt ,
the
Er~e d~rrction c•~ce y~et·r ~v .
"cP:
y,-,s tt<>t 011->-t t.., bf' e:tr~1.,.htcncc1. out l'nnol'''frn .
':'rr.v ' ve never bE>f'n - 1-:el 1 .-,1' co•trcf' Johnn\• hpr
\·'Pll, t<•e ·,oys h·ven ' t see~,..d ~" ,..,t ?lon~
o.nr' :>ee t,..r"t'-'" ~he ~11"'" ~..,ectoc1 eA "" Jnl-lnnv
·
I thin~~ S 1 11 " nudse>n oncl
''"G on trir- .
J~c": l'lir-<"f'rs , · '~t"l o:P ""O"' h·vc tbn" " l'lt o~
':ork on ~•·ir in tr~rin- to br - Fo ft>r PD "nv
C')llVPrrq+l')n t .,t I • --e "'"c' ••it" trr-n, I ' ve hllcl
lot:" 1 T trin~: t·,rv ' re trv!n- aufull~· h11r~. to
-., in n !'tr·• ~"t linP on thi".
" . ·• . .Tr :
'ell , T tl-'1n': tr•P\' "' t off t· r trnc': yr-at.,rd<>y
"-lln 1'l"•nl:ly I don ' ~ thin'~ 1'1i--Prs h'lB ber.n
~lay1n- b•ll nt <>11 .
"h , no . ·•.,t if ""~t S•tlliw•r. tf'llr "'f'
"'u' 1 • v"n }t"S ph•a••s tole; .,,... t'" truth .
''c1.:
i~
ell o"' course J"hnn•• ••o•1ldn' t te'.l •· u " Y h in"
~el1trrt1telw t"J~t - hr ~ ~ulfn ' t "'iAre..,~,~e'1t ,
>-e- • r t"'e 1., ~t ..-,~rs.-n in tJ·.e vor ld tn no t"Jot .
~e tole' ne 11~~ers h~s been v~rv tricky on
P. . ' . J r:
~o .
" c:-l:
I t'in'· trrt it ' s lac'' of uncerct;:--nO.in; - I don ' t
ll"'re" thl't Jl'c'' is trtc:or on it , oeoeu. e -
u. '' . Jr:
c~:
t~le t~nle thin~ ,
v~rv tr ic~y .
~-" llivnn r<'~VS tl El t he I S e~'"">lP \nf'd :\. t tf) hi"!l 1')\r~r
1 •b .,.. telY 'liPleAde tl•e
·•
· ·
•
•
j nt
I'
·
Pnd over ag~ln .,nil hP c'.E'-- P_a
M u~
Con..,itteP "n tle '-!111 , dellbf'rQtclv .
rp..,pot1n~ th1r.
v ••
~"·
r,.. •o
c o ... o\..,
..c":
..
·"·r:
'/C
F0lcv ~nc Sulll.•1r:1 t'•"re anci tre
11 out .
·p11 , ! ' 11 .. ..,,.~ .. t"
''cl\:
..
I ' -1
l',.vc tt
"""ln ~ 0vrr t'l
Tr:
, v:e ' rc
'\h !
· " l rr>t
"c-=t:
~c
t1 "~0'1 t""i"' iO~"nin"" .
tiH' Pre~lc'ent • • Ft tl-'n .
Cfl!l
•
'~·1~
01"
+he b? ·•r ·nd
'1'"
thr'""l , '"'ni4 T • , , cell
~'"''1
~~c·•e
c. little tt:>l't
,,tPr in t
.. ~r .
\1hrt ... 11"\~" """"'J1,; , ..... ,, li"rn tf) ':Il"" :1
.}
;J • •• • •J:- :
All r1- 1t , ! , ,,
' ' c~ :
,.
Tr:
'
•,:Pll, • • c; 11'~" ·-? ' ' :1::>" bn"·re one " ' cloc:O: s.,
I cou 1 ~ 0r"i )' "ll '1;>"r .
-~t
:;:.r t' roy ' :-c con1!1l':
hol.C. of t' ,.., ,
l_t ..o•tlt'
be , l rt • ~ say ,
C' 1 ll'!'t
,. .. , 1-ht .
''c~ :
..
. .rr :
" c'l:
i'J•n.t~
,\t
t '~t t1•11' ,.,~ f'OUrF.e 1 i t ','') 111/.i. bP nll ri-ht .
., Tr :
c.,:
t:
" .J r :
- 1 11
l
t
'IOU
·~nl)l·l -
>:1-ht o ' cloc'~ •roul<' "lilt ne .
better~
HeR:
II
il
" .Jr :
c"~·
Ei r-ht o ' cloclc .
Anti no clrns" .
· ~ich l'lu1t!l th~>:oJ
r
143
- 4 T~ere would be Knu~sen
81
g6er~, ~elson,
Henderson and yourself:
xcR:
Yes.
v:.Jr;
are th•
Tnoee
tnls e t all?
Y.cil :
llo , Ed - ti:d ' s going to i!ew York this after noon
anyhow, on som~ of his m?terlol stuff .
H.!'.Jr;
'ilell . ....
MeR:
He hasn't been in on lt to amount to anything.
Anc I'll bet in touch with him thls morning.
H. .. . Jr:
Because you k11ow N~c , that - sendinr, that
letter to the Comptrol ler General to bet e
rulin~ without ever lettinb anybody in the
Treasury know anything about it, it just i sn 't
olaying the bame .
MeR;
~ell ,
fello~e
- 1e
s tett1n1us
in on
of course the letter to the Comptroller
s, tha. t carne about because I told them I
didn 1 t think they could e;et a clearance from
the Cooptroller ~n the kind of a contract they
were worltin;; on a .d he Eaid well -
',o!B
H. J.:. Jr;
YeE, but 1,:~ c, when you were over here, if anybody
war.ted ~omethint; th.at had to do ~11th taxes, we
would go over to Internal Revenue and find out
and t~en if we neeced a ruling from the
Comptroller , the Treasury would get it .
MeR;
•ell , of course, the Comotroller, the limits of
the Cornotroller didn't nave anythin;; to do with
the question of what the taxes would be .
H.!-!.Jr:
Well , it ' s a oueetion of amortizati on.
MeR;
Wil~tiler we COUld ,neke contracts WhiCh segregated
a reoay~ent of cao1tal from the price of tne
No
the oueetion out up to the Comptroller was
material contracted for .
!!.!-~ . Jr;
Ye~.
MeR:
and I wouldn ' t
~el1- • and of course I told them
i elude as the Navy
go along w1 th a orooose.l to n '
J 4o
- 5-
and t:.e Army have al".olays done, the i te:n of pay ing
f~r a ecial facilities built in orcer to carry
out a contract as a ~art of the orice of the
material they bought. I said you can ' t do that
I won't be a o~rty to it because that is bivlng'
the contract to the facilities with no consideration- no co~sideration of the Government ' s
intereEt in it. I said I don't believe that
you can t,et EO cortract where you segregate
that, you ' ve 50t to find some other wey to oay
for your facilities.
H.Y. . Jr :
I nave e;ot oown Knudsen, Big;gers , Nelson ,
He nderEon and yourself , see .
MeR:
And I'll let you
~now
before twelve o ' clock.
And you let me know, and if they think they
can be heluful I'll be very glad to have you
all at eight o ' clock , and they can call a
eoaue a space, but the way the thing is now ,
we feel over here in the Treosury distinctly
ae the injured oarty .
Y.cR:
.•/ell , I ' 11 let you ~r.ow before t>~el ve o'clock.
H.l.. Jr :
0. K.
11: 00 a.m .
q,!I.Jr:
Hell:>.
Operator:
Jl,r . lt.cReynolds .
H.li. .Jr:
Hell o.
McReynolds :
H. J.' .Jr :
Bill Knudsen and J sck Biggers
he evenin~ con'
Mr. Secret~ry,
both have enbae:;eonents for ~he· have h~re from
ferences •,o~ith oeoole tha~d h/couldn ' t call it
He will be available
out of to~m, and Bill sa
off much as he ' o li~ett~~ couldn't co it
u
a~y time tomorrow,
toni bht.
ll get uo early, let's
~ell, tho2e fellowetathe office at
hllve a conference a
::: •or. lunc'•J.nr-o •·tth t'·p "Oref'' c' ent
"cR:
';orJorro~·: .
::ell 1"1 Pee if Fe C!'n ' t P..rr~n~e t'"'rt rt nine
o ' cl.oc'c o'; vour of' ~ ic~ .
:;"'~ ' Jr:
''cfl :
Eil':'io t - thirty?
l'." . J r :
l:o ulCI thP t hnln Any?
"cR:
..'ell , 1 t nrobrl:1.y Pnul·' , hec"IJRC
r le v£n 0 1 Cl0C~ ~('Ptinq ,
~;e
h"ve an
t: . ''. Jr:
''cR:
·'." .Jr :
''c::t:
"flr. all rtr·':1t , e!.-:-t-t:-.trt" t:J,:>l'r"\' -,rn'""' ·
" c::l :
'1:"~-"t - thtrt;: t();,c rro•· '"Jrnin , u:11ecr : cf'1.l
~rou
l 'c ~ :
t"> the co'ltr"r·· .
All r i ,.• t , I"Ood"ve .
148
Seote~ber 5, 1940
4 :10 o . m.
~ . ¥.. Jr :
Hello.
rorrestal:
Hello.
H.~ .J r:
How ere you?
F:
\:ell, I' :n
H.t... Jr :
Good .
F:
T•,ro things' Mr. Secretary . 0
I don 't ne , I sent over
eome stuff on oi l
to harass you
about it ' bu t I j~st 1~an t to wan
be t sure t ha t'
,~ell .
5
U!. J r:
etti
hel~, die you mean that they were
eome of this Kettleman fuel oil . . ~ .. ng
F:
Yee .
which :night be made into
~.~ . Jr:
aviati~n .
F:
Yee.
H . ~.. Jr:
I read 1t, got 1t.
F:
Right. The second thing is, how would it sit
~ith you 1f I asked you to let me have Oecar
Cox for Rbout a month or five weeks.
Uh-huh.
f
F:
Huh?
H.M.Jr:
I don 't know .
F·
Well , I tell you, the reason I - t hat fellow
at l unch yesterday - the whole question of
contracts i s somethi ng that I want to ~ et at
here pretty vigo rously, and I honestly mean
that when I eay that I think we could lay out
'I :>rocedu:::-e in that l ength of time that would
H. !-..Jr:
Let me ta l k to Ed Fol ey about it.
F':
nll right.
And I ·.. ant to be helof..tl. Our trouble i s , with
the exceotion of myself , everybody wante to borrow
il.!o..Jr:
149
- 2 -
someb?dy lr: the Treasury T
but ~~ • mPan tney don't
people.
'
... ey want to borrow thP
~ nt to borrow me
~c~ ···al~
::
·ell, 1f you ' re
here any d y.
S.ILJr:
ThanJt YJU.
every day .
f:
Yes .
S.!1. Jr:
~
f:
~:ell ,
3.1!.Jr:
One d~y they wa.tAd to tRke ePven of my
chr.uf.eure , ~ne for esc~ me~bPr of the c~uncll .
i':
lL
~. l' .J r :
But l t e t lk eboJt it, and I'll g!ve you an
anEwer tocorrow.
::
All right .
3.. Jr:
I
F:
ell, I'll understard perfActly if you can ' t o~
it , I ~ n't cJnelder it ne not being r.eloful .
H.!!.Jr:
F:
~ . l!. J r :
l:
vrllable you
· ~
•· o·: er
And eo we have thls thing almost
rtlcularly the )~fen£~ Council, I
yuet ned to DUt "Y ~oot down .
~e~n
I
I unc!ereta ,:1 that .
h6)
~ell,
I
K~ow
now . . .. .
nt to be helpful.
I on't no~ what h!s e1tuat1on ie, but I ' ll
look 1nto lt and 1'11 call you bacK in the
0:01' 1ns.
I wac a 11 ttle d!FA!)pOlnted that
ench fellow ~v ted to sort of draw bnck
yesterdAy but .....
~ell , I was trying to lead ln the other
direction.
I .now you w•r~, ad what I uldn ' t,tell the~
th t they're o1nb to learn lf you ve go; to
go u? on the Hill and t~et1fY - tte etuf. tb~t
•
Bell w s 1v1ng I mean, after all the Secre.ar1e.
or :ar 11nd .lavy ' are both eu;,poscd to be ~-rk1ng
for the some an.
Ex
ctly.
there Rnd trY to ex~lain wh~t
150
- 3-
F:
tee Havy d ~e i s one ~ay and th
a. clff erent .., / , and 1 thi~k t; e ~f:ny does it
t ne t, I don ' t know I ha v•n 't · ey 1 find au t
esic r.e , "~ bo!. r:g t o do 1 t for chectkh.ied. lJ,r. Prt.::e
n~ bu t isn ' t .
no
You Just can ' t maKe it .. . . .
H.Y.. Jr:
Uel l, 1t doesn 't a dd uo , it do esn't
r:
Of cou r ee no t .
v:.Jr:
But I ffinue my little of f er snd they didn ' t
~ e ~n: to thin~t ·~ell of it &nd that ' s t hat .
r:
•ell , I Jus t do n ' t eee - I don ' t think it' s _
I haven ' t s t ono ed , I ' :n going to .....
~ - ·· . Jr :
But you - you mea n - you defini t el y seem to
ta%e t he ?arne v!.eN)O int t ha t I did.
make ....•
r:
Yee, I mean , wha t t he hell , we ' re trying t o do
t he earr. e .)-:.b .
s.:.. Jr :
I mean , suooos i ne a fellow li ke Bell , sunoosi ng
let ' s say , some Republican had the informa t ion
t h3t Be! l had yes t erday .... .
?:
Yee .
~.... Jr:
and nut tna t into the records and then
they asked you and th ey asked somebody a t the
.a r· De~Je r tm e n t t o ccme uo and eYolain 1t.
f:
YP S .
H. H.Jr:
How t he hell would you exol a i n it?
f:
Can ' t , a~u anyway all that you ar e sug&eeti ng 1~
you o r~ no t s ugg esting t ha t you ar e going t o maKe
r i £1d f or ms t hn t 11an 1 t be ever deviated f r om .
.. . .. bu t a s emblance of uni formity.
?:
Tna t ' e r i ght, a n eff ort to set u.o a oattern t owa r d
which yo u ' l l a im.
Tha t ' s all.
- 4 F:
.• ell, that ' ~ a ~i:n;:>le , sane business.
?..x.Jr:
I ' 11 c:...ve you ar. ar.e1.·er torr.vrrow.
F:
C. K.
H. L.Jr:
A .C.
F:
Yee .
H. o'.. Jr:
Ne are preo!!ring a reoort
I ' ll eer.d you a cooy most
I'Sti:nates on the Ja~an ese
hal f of wnat tne ir Navy ' s
F:
Is tnat so.
H.!.. Jr:
aut th~y chec~ witni n a ?ercen t or two of whet
oure hnve beer. .
i!'lcidentl'lly I hnve over here now_ C!!:n
over nere Rt my req~est with the aooroval ~~
the :rPeident - Sir Andrew At;ne·.~, who has all
cf tne oil fl~ures at his fingertips .
to the PreEident.
likely tomorrow. His
oil reeerve ere just
has been.
::
:l.) . Jr:
The r.:av;r told the State Deoart:nent that the
J& SC:PS~ hac ~OmP cixty ~illiOn barrels Of Oil
reserves. rl rew ' < fie>uree and ours check about
thirty-two or thirty-three.
0
E':
Yes.
~. v .Jr:
~hen
f:
I' d like vPry much t o see hi m.
H.l..Jr:
He really knows his stuff
I'll arrange it
and he knows th~ whole - he formerly was with
Shell and he 1 e retired.
r:
the re oo rt le finished , I hone we ' ll be
finished tomorrow , I ' m 5 o i~g t o ~ive a cooy
to the ?reeide t and a cony will ~o over to you,
but I think it ' s or et t y im portant and I think
you ' d en~oy meet ing this fellow.
Uh- huh .
He's running the " hole oil show for. England.
A
Uh-huh.
152
- 5 S.J!.Jr:
Another thing that h~ tole ce which I thou nt
wne hignlj eignif1ce~ :, tnat the octar.e orb
the Oermen lnnee 1s etead1ly re~l1ng.
F:
7hn t checks with w~ t we 've got .
H.... Jr:
He sal6 it ' s dOkT. as lo·.. ae
F:
.e haan 't we ~: n 't have thos~ precise
flbures , but our fell~WE wto ar• observing
in En 1 nd dopPd out tnat one reaeJn tor the
Flow1n down on tn" volume ~!' th.OJ.l long
d!et :1ce stuff 1e t~alt the~· j!.lst haven 1 t go t
67 .
the t;El e .
•
.• ell , ~ t 1 s etead!ly tnlllnb.
:..M.Jr:
:J.atever I bet
tobetcer fJr the President, I' l l eend you a
co y .
F:
. ell, thn: ' s very K~na or you .
Tnank you .
Seotembpr 6, 194o
8:30 a.m.
ilE i.AC£SS PROFI TS TAX
Present:
l•.r.
Mr.
Hr.
Mr.
• r.
J..r.
l{r .
~l r.
H.I·!.Jr:
•
SulU van
Foley
Adame
"elaon
Henderson
Biggf:'rs
Knudsen
'lc!\eynolde
The reason I asked for an oooortunity to
see you gentlemen was really due to
Leon Henderson's call to me yeeterdsy.
If he hAdn't called me, I don't eunooee
I would have said anything. But he did ,
and I just wF.nted to say this, that I tried
evPry way thP t I know to work along w1 th
the Defense Council and we hAve done everythin g here in the Tr~aeury to give you
as s istance when you have asked for it.
Now, the Treasur.v is reeooneible for tax
legislation, there is no aueetion about it,
a nd we are ~ided in this oarticular bill
by statements which the President of the
United States made as to what he wanted.
It is no secret that the Treasury was not
n repared for a steeply graded exoess-orof 1ts
tax bill at this time. I mean , after we go t
one tax bill through which agreed with the
oommi t tee that we would work on this thing
this summer and be nreoared some time this
fall - but the President asked for 1t and
this 1a IWhB.t he wants.
Now, we are trying to do the best that we
can on a vrry, V€ry difficult job, and we
find ourselves on onooei te trecks ~·i th the
Defense Council gcing 1n opnosite directi ons,
and I don't think through any fault of ur own.
I
- 2 -
It make!! tt.e job whtcl': 1 e Are doing, w~ich
the President has given us t ~ do, just thRt
much nore difficult. I feel v~~Y badly about
1t . I think it is going to slow uo tf.c bill.
I w:m 't .take second nlace to anylx>dy in wontine.
to see tne defenPes of this c0untry get ready
ouickly as po~sible, but I think thPt the
stf'.tf'ments whl ch hAve been made both in writing
and by nersonal aP•earar:cee recently are
naturally magnified by the neoPle who don't
WAnt An excess- orofits tAx bill . I mean,
they blow them up as to difference between
the Council and the Tre<\sury, and it mAke~
the job just thllt much more difficult .
Sneaking for myself, I li•qB just wondering if
there was somethinb where the Council end
the 7reasury didn ' t see eye to eye end where
I think the Treasury is carrying out the
orders of the President in this case, couldn ' t
we ~eet either at your place or my plAce 0r
Any place end heve it out in the room end then
if ve co:.tldn ' t agrf'e, let's say, '"llell,
~r . President , I hf!Ve en imoortant disAgreement
and 11e would Uke to eee you , " rather than goin~
UP And washing our dirty linen in nublic. I
!eel very badly about the thing, bec11use I th1nl•
it is juct going to mnke it that much more
difficult to get any kind of 'l bill. ·;h,q t is
my <~tory .
As
1
Knudsen:
But when we were in your office the first
time here, an agreement ~~s ore~cribed,
wasn ' t it?
H. 4.Jr :
I thought so, yes. You ~e~n with the leaders,
with harrison and Daughton?
Knud~;en :
Yes, P.nd the only thing the t uo qet the
epple cart was th~t these nrov1aione covPring
a tex 1rrite-off csme into the bill.
H. i .Jr:
I don ' t knm,.
Sulllv<\n:
At the time of t~t conference, none of the
det<\ils of the bill had been worked out,
,.,r. Knudsen .
Sullivan .
I will h~ve to refE'r it to
Is that right, John?
- 3 Knudsen:
Dut when ~t' left here , I reme~ber the
SecretRr:r tellir.g you end Sta::~ that you
h11d to get tot!etht r.
Sulll van:
Th/;t ls rl..ght.
KnudPen:
Ey the r.l'.xt
Sul ll van:
ThAt is right , but all or t h1s bill hM
been written e1.rce t!Jen .
Knudsen:
So
SulliVI!.tl :
Oh yell. There art- over n hundred oa~;es
1n the btll And they have all been wr itten
s•nce that meeting.
. Jr:
They did get together thut rnor nlng, didn ' t
you?
H. ~
th~t
Sull ivan:
YPe,
Bi ggt>ra:
~r.
- thi£
at ten o ' cl cck.
wa~ ~rter
the agreement?
<~ir .
Secretary, we eat down after you
the rs~td emnr;tzati~n or de?reciat l cn
pr inc1pl". You then hnd a cee t 1ne> ln your
off\ce . You tl:t'n were kind t>nough to tRk e
it up ~~th •he PrPs!der.t and wtth the
Concrpssi~nal leRdere and it was cleared
\n prtnctryle by tht' July lOth statement
from the '..'hi te House and subsequently you
9ske~ us, and ~e would have welcomed the
ooportunity ar,y,.,ay , to mPet with ~:r. S\llllv"!n
nnd try to work o•..1t th'lt orovi~lon , nnt the
tex btll but the nmort l !etion orov1s1cn. So
we met 1n Mr. SullivAn ' s office llnd had very
a~eq~ate coonerAt! n fr~m him l n solvi ng the
~eneral or1nc1~le , but he ~t th~t tl~e t hought
nr 11uggP11te(! thPt these last orov1a1on~< thA t
~ere now de~t~n~ted ~ecttone I, J, ~nd K,
!'hOUld re Rddpd.
,e 811 demurre~, Rnd
e~pl~tned our obJecttone Rnd our peoole ,
our attornsy11 , worked wtth hts pttorneys ,
euboeouently i n the drRft\ng or the bt l l
an~rcved
n~
A~aoe :
r.~orn!.nt;;
--
lJr:lft1nr or thnt secti on .
J ss
- ll -
1
1
Bigger11:
DrAfting thAt section or the bill, and ~e
hooe d th~ t the whole thing would be ~<Orked
out in a mutually satisfactory manner. It
lflls when · ·e found that Mr. Sulli vnn nnd his
l'seocintes , or nt lenet wr. Sulli vnn , felt
th'l t the Re ]) rovi e ione should remain ir• the
bill before it ever t-: ent to the House
Subcom"littee, .:r . E11ton, our Coun~el , and
I :net l·•ith l1r . Sulli van at luncheon, I
think it waa, John
Sullivan:
Th" t ts right.
Biggers:
. • . . . . Rnd we talked over and tried to very
earnestly exolain our continued obJections
and those or the Co:nmisRion , and I recognized
at the conclusion or our luncheon thnt we
lfere still not of one mind.
Th" t is right.
biggers:
On this subject. So it "'ent before the House
i.ays and .. eans Subcommittee with these
amendments added by the TreAsury nnd we were
asked our --
Sullivan:
Those amenQments had not been written " t
thllt time, ~:r. Biggers. I told the full
Committee and executive section our Posit i on
Pnd I eta ted you re , end then I said thll t I
thought in Justice to the N11 ti onnl Defense
Commission that you and Mr. EPton should
be invited down to explain your orov i eion
11nd you will remeMber you and Eaton wer e
in vi ted do lin around noon nn d ell me down th •t
J.
~ rternoon.
lliggers:
Yes, and we PXOlPined the poe1t1on of the
Comrni eA ion, which hAd been reYi ewed tTi th
the full Commission and voted on unanimously
by the af'ven members of the ComrnitHoion and
they tr~nemit t ed to CongresnmPn Doughten ,
over Mr. HcReynold 1 s signature, 11 letter
exnrcssinb t heir firm and un11n1mous dis agreement "~th these three limiting amendments
in 11 tax b ill nnd we made clear - we tried
,
-
....
~:;,
- 5 to ake clear to the Haure Subcommittee in
.. r. '>1lll1van's oresence why \te ~>grP-cl with
you in "lri ,ci-ole thGt the Government •s
interes t in these respe cts shn~ld be ryrotected
in this emer~e ncy snd that we s~ould ryroftt by
the eJ'l)erience f the ·.rorld '/Ftr snd should
avoid some of the things thPt haooened in
the Aftprrn~th . Yet we a ll strongly believed
that because of the varyinb conditions which
we encountered, thf>t those '> rotections of the
Gove>rnrnent interest should be 1·1ritten into
the contract rather than into a t11x lat~ with
Rn Pttemot to h8vc it anoly to everything.
T~ is the viewpoint of the Commission and the
unanimous vie~roo int of the tax com:ni ttee of
the Com~ission and ~n the Subco~~1ttee's
reryort to the full committee, there seemed
to be no so ecific reference to the oe featur es,
but when the bill came from the full com~ittee
to the House, these ;rere contatned.
Sullivan:
!hat 1a ri ght.
Bi~~;ers:
I think it oould be fllirly satd , .r. Sullivlln,
thnt even though these amendments in I, J, and
K were not perh'~ ps before the SubcoMmittee
at the time I testified, th'¢ nevertheless the
Amendment in or1nc1 t)le had beFn draftP.d by you
or your associates and it was oresum8 bly before
them or 11 t least we hD.d a CO ">Y of whAt you
orooosed.
Sullivan:
Yeo, but - -
H.M . Jr:
!·lay I interrupt a minute? If .you don ' t mind ,
I think you are getting down into too much
detail, see .
biggers:
I am just doing th~t, sir , to exola1n to you
. he efforts we both ~de, both your Associates
And our esqociates , to try to Avotd ryubl tc
controversy.
H.H.Jr:
!Ught I make this suggestion, because it 1s
-
b -
~Atcr over tt-e dam and all I Am 10 ·king
forward to is -.;o workinb together. If
you started with me Rr.d I ref'erred you to
Sulliv~n, you went along on the thi ng,
8
oPrt of the bill which, to me, certainly
cPn 't he the ~aJor clause in tr.e wh:Jle bill it isn ' t that imoortent - but in any case,
At no time dici you say, ".fell , let ' s have
P talk with V~rgenthau , because we don' t see
eye to eye with Sulli van . Let's go beck and
see him. " "'nd then if I found th~t the
Tre~ou ry and the whole seven members of the
Council didn ' t see eye to eye , I should
think we should hAve gone to see ~r . Rr:1o~eve1t
rnther then hRve a public disagreement. In
the future , I may au~gest i f we find we are
not seeing eye to eye and you ere worki ng
with so~ebody in the Treasur y here or we ere
working wit h eo~ebody i n the Coro~ieaion ,
before we ~o u and sor ead it on the Recor d ,
th~t the Council and the Treesury a re i n
disagreE'~ent, for God ' s sake let ' s ge t t ogether
enc see if we can ' t work it out he re and if
we can ' t we can alwaye g!l across the s treet
and ere the ?resident .
:o~·. that is all.
it
io W3ter oVPr the dam, but l?oking toward the
future we will All be here, ~e have got a hell
of a lot to do, the battle isn 't won , and I
want to \lin. Th~t is 1111. I Juat w~<n •cd to
get that thing across. This has been bo i nb
on now for A month.
Yol Peked -Big.,;e r s:
I t hAs been gotng on almost since July l Oth.
H . ~•• Jr :
I w11s a1~ay the last two we~>ka in August .
IE' l l,
J h11ve hPen here this week and your aonePrance
has been this week. lefore we go uo and d?
this thing again , let ' s get together . That
is All. \fe are ell of a - Bi ggers:
The Co~tea1on, of couroe, went on reoord with
the House ll'11ys and Means Committee some mo re
thnn tw? weeks ago to the same effect they d1<\
in tne Stnllte .
- 7 H. !'. Jr:
J
1
Eut I don't think thts is so impo rtAnt we
ot t~ d1ea6ree publicly before we get
hav~
I am alw~ye evnilable.
to~eth~r nrivately.
•l e hAve got lots of grouoe working here with
your eople. lie hAve m11.chine tools and tanks
snd thto tning and thnt thing . Every day I
could write n letter to aome - the Committee
on .1lit,.ry At't'eirs, t his or t ·...,t , and so
forth, but I just wanted to use t ie for
myself. If I am wron~, tell ~e . Is thet
Pll right? Is the VPr1ous - the tremendous
organ~zet1~n you hP Ve nlus the Treasury and
all the subdenert~ente, 1f they can ' t let
the bo~;.,es get together end e1t dmm - I
just wnnted a chance to sAy thAt .
Henderson:
I think, Henry, you started out by saying you
wo•lldn ' t wve cPlled thte r:~eeting lf tt ha:tn't
been <'or me . I thin ~ I ought to say I called
you on e oersonel beats beceuoe of ~ur sort
of e long -st··ndinb underetendi~g th~ t 1f you
A.nd I hAVP Any di l'ficultie~, •··e will hAve
them ~ut with ench other and I asked you were
you mad et me and th~t --
H.... Jr:
And what did I tell you?
Henderson:
You told me you were disaooointed with me.
H. • . Jr:
Th•t is all.
mad .
Hennerson:
1 told you I dtdn ' t feel any too de:nned well
myself.
H. ~
.Jr:
It isn't a question of getting
/ell, I hnve ,.:o t nothing 1ore to sPy.
you?
J:'ove
Knudqen:
lhtre llre we 11t now?
H. I.Jr:
Wtll, if we h~ ve Pny 'tt'ferences of any
imoortance, before we tnke it to the ! ill
or ouol1cly, we vill sit down And fight them
out here .
Knudsen:
Can't we decide w~ether thoee three sections
are desirable or undesirable while ve are
here? Then ~e Are at least thAt f~r ahead.
- g H. !' .Jr:
A~ I understand the thi~g - the oueetion is
if the bill goe6 through and allo1s amant~
Write Of f R niece Of •rooerty in five years,
After he h8s built e olant, when th!•t O<!ri:Jd
is over if he w">nts to c nttnue 11sin~ the
Jrooerty, that is ht@ deciRion, but if he
wente to demolish it, before he ccn demolish
it the Govern'llcnt hP.s the right to sPy whether
it W!lnts to t"ke it over or not.
Nels on :
No, if 1t were just demoliahed , r . Secretary,
I think you would find a lot neArer agreement .
Substantia lly imoa1r or move any oArt of it .
H. M. J r :
Th11t is the
morning.
~!•leon :
Demolish is another word.
H . !~ .J r :
The experts are here.
Sulli van :
1r . .. elson ie correct.
alter.
H.!-! . Jr :
;'{ell, lti'S it explained to me" this morning as
demol111hed?
Sull1v11n:
,,o, I think it was demoli!'h or 11lter.
H. l! . Jr:
/ell, here it sayE, "No t11xoayer tnking
amortization reduction fort he emergency
factlitiefl m11y destroy or substant i ally
alter the facilities without the consent
of the Secretary of 1far And the 'lecretll r y
of the Navy. If such consent is not biven
within 90 days, the Secretary of ,{nr or .~evy
CAn purchase the f~c111tiea 11t P price not to
eycccd the ju!'t basis, ~rhich, 1f fully
amortized, would be ze r o."
Nel son :
" r. Secretnry, those fsctlitiee 'lli!Y be
machine tools Pnd you will have to chllnge
them all Around in order to 11ccornoliah the
job of running your olant . Th~t is Qubstllnt1Ally altering.
H. I".Jr :
One of the thing" t h11t ~ticks in my croo
is whAt you told me the way 'leers Roebuck
i
r~
WJ.Y
i t was exolained to me this
I t is demolish or
161
- 9 Oocc tb th~n . You told ~ i t ScP.ru Ro~buck
v nt to ut oceboOy in hue1ne ~. y~u buy :he
tools, teep tltle to the~. and t! at P.ny t!~
~urln. th c~ntr•ct you don't ~ike 1t, you
c~n ~let u the :oolA ~~d ~ve - ~% eocet~cre
else. I n't thrt right.,
t;oloon:
'l'h
F. • • Jr:
And that stuck ln
I
elPon:
•I
H.Y . J.:-:
t
1e r!ght .
y crop --
And ln the contrnct t~t can be
oakr•o 1 h.!1r.1 end t'net, nod the
you cnn ' t aubatant 1nlly el ter a
you ha~e taken deprec!atl~n on,
you hAve just "!cd lt up 1n'o a
done.
Th1o
law s ya :r.•lt
t'M1ltty t t
r. Secret!lry,
bow knot.
wlll take the t!~e nov and say th t we ~111
settle !• bet'orc vc leave the rooa, one ~~1
or the oth r, I nm v1111nb to do t~~t.
!
o~. ~~onoe!~ t~~ t'ellov wnn~e to dezolleh
hie building, ~s!ng the exn~le the Prcsi•ent
uo
oo orten o! ;hnrlcston Arcor ?late, wh'~h
la th euolc or h1e eye. H~ put gr~aee on lt
nd ke?t t th•re eo he could uoe 1t 25 years
leter. 5u~oe1n~ they vauld want to dr. ol1ah
thnt egnln !n a ver.
•
loelaon:
I nhould th1nk they hav~ a ~~rreot right to,
Mr. ~erttary. Just b~c~uee th~y allowed thee
to tftke extrA-rRp!d deprcc1ntlon - the man hae
p111d ror thet raclllty w1th h1s own money.
H.• Jr:
llo.
I,
ehon:
H. M.Jr:
Oh yne,
1r.
~ loane~
them thn money .
l:elaon:
ho elr,
l:ender11on:
I think ve ought to 11t 1 t olf!ar, Kr. B•cretAry.
Un"llr the c ntract nrJcedurP wh'ch ve hnVII
n~t
under thle
rov1s1on.
worked out, th~ ~ r tmbaree~~nt tor exprnd1turee, yen. ''nder w ollt we Cllll PlAn No. l.
the contractor puts U? ~111 own money, etc no
- 10 -
ndcit1on 1n orice, ~nd teke£ his chFncee on
furt he does get 1e thte !lccelerated
thet.
denrec1Ption for tay purposee and whPt he
gets is the value of that to him as a concession
from the GovPrnment.
H. : . Jr :
Leon, let's talk abont - you divide the tninf
1nto ~ olen where the f~llow borrows the money
from the RFC or where he uses hie own money.
Do you make any distinction?
Henderson :
Yes.
H.I<.Jr :
Let ' s talk about l>'here he gets the rooney from
the arc cr from some Government agency .
Henderson:
Don, will you exolein thet?
.. elson :
Hay I --
Biggers:
Explnin the three steos .
llelson:
It will take just e few minutes .
n• •Jr:
Take ell the t1me you "'Ant.
•lelson :
In Plt>n No. 1 the manufacturer outs un his own
money, takes all the chAnce. He ask~ the
Government to do notning more for hiM. In the
event of cancellation of contract, even, he
esks for no nrotection. All he gets is a
certificete >nd a right to take extr~-rPo1d
deoreciat1on for five ye~rr .
B1g!!.ers:
For tax
!<elson:
At the sixth year he starts naying taxes without
any denreci~tion beoeuse tt is all written off.
In the event the man has out uo the facility
with his own money, he has gotten no reimbursement from the Govfrnment except as to the orof1t
he has made on the trPnsaction, but no increase
in or1ce. Those are all requisites for Plan No. 1.
pur~oses .
H. V..Jr:
Incressee 1n orice?
Nelson:
To nny for amortization facilities.
He hA9
1S3
J
- 11 -
made thAt chair Rt the same nri ce Mr. X will
mqk£ tr.e Cf~ir, without 1ncre9ainf fAC1litieq ,
ole belif'\'e the man has out uo .tis oun money
and the Government has no right to say to hi~
just because he took extra-r~oid depreciation
on that oroperty he can ' t do anything •·it h it.
Plan No . 2 , he takes a contrnct f rom t he
Government - we l l , may I start the first one
over?
In each case what ~·e have tri ed to do ie to
aeoarate amor tizat i on fr om pri ce oer uni t of
the t hi ng bought. ~e think t hRt one of the
wor st featu r es or Gover nmen t buying i ~ t hF. t
you have i nfl ated the or ice of the uni t i tem
by an a mount eauivalent to that necesRery to
aooroximate the amort izat i on of the feci li t ie P.
H. M. J r:
Is that the Cu rtie s- ',iri ght olan?
Knudsen:
That i e the oopoaite.
Nelson:
It has become s o .
H.. . Jr:
Curti as- .iri ght ?
:lels on:
They are
,/ri ght.
Knuds en :
I t becomes the Curti ss-1'/right pl an 1f the
co ntrac t is eooroved.
Henderson :
But thAt wil l be under Plan No . 2 .
Nelson:
I w11 nted to ~e t t ha t ooin t , t ha t we tried
to eeoll r &te a mortiza tion of t he fll cilit y
from the orice of t he un i t object.
~orking
on thi s ol an now fo r Curtiss-
Nl)w , under Plan No . 2, he takes t he co nt ract
to make "X" number of wha t ev er i t may be . He
is go i ng t o need "X" amount of new fPc ilit i es .
H. lo!.Jr:
You can ' t bive i t to me in t he form or an
Rctual e:rAmpl e?
Nelson :
Yea , eir.
I can give it to you i n the f or m of
lS:,
- 12 -
an actual examryle.
let'a eay that a ~An 1s going to nake these
airplane motors. He ls goine to need 57
million doll~re worth of new facilities to
The contrAct ls for
~Ake strolane motor~ .
5, 6, 7, 10, any number of thousands, say
10,000 Airplane rnotor<o . Now, the contrnctlng
officer a~rees on the price of thqt P.lrplane
motor, irresryective of the Amount or money
needed for new fac1l1t1eA to m~ke them. He
tAlks nrice, strnl~ne motors, just as tf therF
were no ~mortlzation or facllltieP in it at
•e believe, .r. SecretAry, thst thAt 1s
all .
where the Government is ouite Ant to get
rooked, is where you begin to try to Amortize
over the unit ryrice of the nroduct bec~use
you don 't know ho~< many you are ,;otng to make,
over what neriod o~ time you ~re ~oing to
make them ln. You don't know how long the
contr~ct will last or anything elee .
Now , after th9t ie agreed upon, he is going
to gtve him the order.
!" , .Jr:
At so much --
.. elson:
Irrea ect1•1e of how much fec1lit1es are EOing
to be nfeded. Now then, the contrrctor talks
to him ebout the amount of !Pc1l1tie• he is
gotng to need and they eonroximnte they will
need 57 million dollArs worth of new fPcil1ties.
The contrnct ie entered into under this Plan
No . ~ for sc many FlrplAne motors qnd such
And such ~scilities to be rPoAid - the amount
of money out up is to be renAid by one fiftb
amortization each year, to be PAid by the
:1'a r Deoartment .
H. ¥. . Jr:
The .ar Deonrtment is to oay bAck --
Neleon:
One fifth eech year, sir.
Mc!'.eynolds :
?art of the contra.ct.
.. elson:
That 1s part of the contract .
One ftfth of
?7 million dollars a yeAr for five years.
- 13 Adams:
But in a scoarste section fro~ --
H.M .Jr:
You mean they a re to o~y back the oanufocturer?
Nelson:
The m<~nuf11ctu rer ha11 nut this uo .,.-ith hie
own m~ney . He hPs either tFken rts own cesh,
gone to the bank and borrowed the money , or
he has gone to the ~C and borrowed the money.
McReynolds:
he .,ets the Money <~t l' ts own eroen11e, whetner
it is his own or ~hether it is borrowed.
H.I~.Jr:
And the Army end NP vy nays them beck in five
en'.lal oayments?
Nelson:
Ftve eoual naymen ts over five years, cays lum
bsck for thAt facility. He goes to work and
makes airplane motors .
P..M.Jr :
Could tt be six yeArs?
!:elson:
No s1r, we set it at five years.
Henderson:
The ?rea1dent set 1t at five years st th~t
conference wi"ere all these thing~ were out
tn one ball of wax.
Nelson:
Your ~xtra deprec!Ption bill slso is five
years.
i!.Y..Jr:
I knov .
Nelson:
And t his took s right in, one dove tF 11 e with
the other. Now, st the end of the five year
oeriod or after the contract hoe exPired,
whatever length o f time it may be, he may
go right on mPking the motors for 6, 10, 1?,
13 years if the emergency should last thst
lon~, but the oayments stop at the end of
che f1fth year, qutte nAturally. At the
terminstion of the contract oeriod, then ia
set in motion certain thinge which we think
nrotect the G>OvF-rnment and do the thing thAt
you Pnd I "·ere talkine. about .,rhen I was over
At tru t ttme the facilities
her~ with you.
sre apnr~ised or rather they are ~rb1trcted
under the nrenent form of contrqct. Th!s
may hElve to bt> mo<Hf1ed some becRUIIe t.1ere
IJ -
•
lSS
lSS
- 14 -
~s ettll some little - so~e fe~ k1nk 3 to
ron ~ut Rnd whtch cn~e up late lest night.
!o!c:l.eynol!s:
Right there , Don, yo·..~ should !lla:tc 1t entirely
clear, after th t fifth nay~ent hAs been ~de
by the Govern~ent , the C~vernoent owns th~se
fRc111t1es .
l'elson :
Oh, the Government owns the f· c111t1es but
the title is still 1n the manuf~cturer unttl
the end of the contract .
H. M. Jr :
tlow walt
fact~ry.
toolo?
I!
minute. Thts ts .:-n 'l1ro1Rne motor
Yo1l eay the Government Ol-.'111! the
Nel son:
Owns everythi ng. This 1s tools, machinery,
bu1lrl1nge, everythinb .
~cReynold.s:
It le a new build1nb nut un under this
and the Governoent has reoa1d the
contractor for >•hAt he hAs l)Ut in at 20"'
a year and et the end of five years , the
Government owns tt~t.
contr~ct
::clson:
The
Foley:
\~by doesn't the Go1•ernrnent do it directly
in the first instance, that ' s whAt I don't
understand.
MC' Reyno l:l. ~ :
\lal..t just a mtnute.
lle leo n:
ay I just co 'IP let e th1R? At the end of the
contrnct ner1od, you see the Governmen t now
han renn 1d this man entirely for the money
he has out uo for the facility . Then there
1s the questi on of an oot1~n coming to the
mc..nufact'.lrer as to whether he \'Ants t o buy
those fllc111t1es and a nrtce to ·e set on
them, 1n which case he may buy the facility
from the Government or he may turn 1t comoh tely b11ck to the Go"Prnment and say,
"I don't wnnt 1t." I won ' t go into All the
details d the o~t1on .
H.!~ . Jr:
Eut the Government has no cot t on ?
Goveru:~ent
hils rena1d it.
1S7
- 15 -
"
Nelson:
7hRt \s t~e thing we ar~ working on now ,
slr.
H. M.Jr:
This te entirely at the diPcretion of the
rnan•Jf!lct.Jrer?
t<elson:
It was at that mo~ent. We think we can
work out - this was brought un to us last
night . \le had P mf'etinb of our Tax Subconmi ttee and 1~e think ·~e c'ln ~tork out a
nlan where the Government has an ontion.
Thl;t C!\n be worked out . I 11m sure that I
am at no 1~nasse.
H. !l . Jr:
This ie no SeArs Roebuck olan the W''Y you
de~cribe it now, because eve r ythtng io
t!i~h the manufPcturer .
.~elson:
I think it is . ThAt is a diffe r ent sort
of o?inion . I think if I took the ti;ne I
could r)I'OI's to you 1t i". I don't think
the fact the Govtrnment has thAt O'tion
111 the oo i nt . I thi nk the Governoent w1ll
m11ke morP coney wit!lout the cotton, bu t
that is a difference or ooinion.
H.H.Jr:
~•bat about the oue~tion Foley rai sed?
do we have to go into the install ment
businesP, the C~vernment?
Nelson:
All right, sir, why do we eO \nto the
installment business? If the Gover nment
goes in and buys those facilities, orivate
capital •.11s no chAnce to be used in this
thing at all . Je st~rted out in pl an
~o. 2 with two defi nite objrctiveo, firs t
to find a method by which these fsc111tt~s
could be fairly anorn1sed at the end of
tbe ooeratton and fairly disposed of to
the Governl'len t, ei th•·r by selling to the
manufacturer or by the Government taking
them over. If it hasn ' t been nerfectly
fair , I ~~~ sure th11t we will ~it down to
make it so Rnd 1~ will be fAir before we
get through. •,;e wanted also , l'o . 2, to
try to use orivate caoital rather than h vin~
the Government make the outlay At the ve r y
start. True , what the Government is doing
Why
:ca
- lb i~ borrowin~ that money four or fiVP years
and it ie bein~ repaid eve r v five years
but orivate caoital r~s nad· a chRn~e to' get
in on th ~t buelneeo during thnt five year
pPriod. The bank cnn mAke the loan. :l.l:'C
could make the l?an. The can can uae his
own m ney . ~;e think tha t
H.H.Jr:
You don't think or :l.FC as being nriVQte
CR01 tal?
Nelson:
No, sir . I didn ' t mean P.FC was orlvate
caoltal , sir.
Henderson:
Isn't there e thlrd, and stro nger , reason,
Don, to Foley ' s quest i on? The nu~ber of
these fac1li t leG aren't all Curt l.sq- .iright
and Buffalo plants , cornolete olanta. In
many cases they are i ncreased facilitie s that is what we ca.lled them in the lnst
r•ar - for manufocturers alr e"dy 1n business
1~1th plants ready "~<ith machinery where extra
fRcili ties ere neeced to ~eet the defense
contract needs. I n that case, there is a
~reat p .vantage in h"vln g the mRnufacturer
who is fPmlll9r with the sources of hls
machiner y sunoly and tool suooli es do it
rnther than introducing the Oovern!Dent into
it and the Gove rnment having to go out and
hlre co!DOetents of all sorts for those
pa rti cul;,r needs, anc it \iO'..I l d run too :nsny
kinds of facilities .
H. !t..Jr:
I am sure you have had this in mind. How
nbout the thoueht of industry not wanting
to be in the nosition it has a lot of extr~
\fuo is going to
~lan t s, s t and-by pl ant s?
decide whether these o l anta should be
demolished in over-oroduction?
Nelson:
In No. l, in the first case, where the man
haa ryaid for this out of his own money and
all he hRs gotten is the benefit of en extrar.,oid income tax amorttzotion and at the sixth
ye~r start oaying taxes on the full ~~ount
undeoreciated a gain , we think the Government
hasn 't any interest, hasn 't any e~ ity in
that olant, none whatever, and therefore has
(0
1S9
- 17 no rlght to say vhether he shall not demolish
it or substentlally imnalr and eo fortn and
if by putting thht in there you orevent those
t h ln~e haorenin~. you orevent t~t olPnt from
evr>r being used.
Now, it may not be used . I ~m telling you
thPt l.t will be s.n imoortllnt pPrt of the olan,
b •tt I think th"t manufacturers today feel
thrt they went to use lt. They reel thnt they
will out un some of thel r o1m facil1tie~.
McRpynolds:
Some of them eX9ress~d the desire to use it,
oa rttcul rly one or two of the~ in thl!re ~1r.o
sald they preferred to do it thAt w11y .
Nelson:
·;e c'ln ' t see the eouity, !:r. !!fcretary, or why
the C~vernment should ~RY that merely becPuee
they have allowed the~ to teke deorectqtton
for tax our. >osee in 1'ive yeRr~ r~>ther than
ten, why d on ' t Y'>U ~ve tn your recul::>r bill
at tl:e end or 1::- ye~rs th11t they :;:Rn demol1eh
it.
H./.Jr:
t:ow, you have got a t h ird "llan .
.. elsor :
t~ow, the third ·olan is the Government nutting
un the money enttrely. It bpcomee the GovPrnment
p l11n, they h1re ~omebony to manage it, as e
"'>urply Government-o•mPd plent.
H. . Jr:
Like
NPlson :
Like Chryalfr on
H. ·I.Jr:
..!lw t haooen s in ti:'IR t case?
Nelson:
ThRt ta ourely Government "'> rooerty .
Knudsen:
Th~t
H.
~ . Jr:
Chry~lpr
on tanks?
tRnk~ .
is your nlan, you get it back. And while
we are talkinb about Chrysler, do you rr~ember
.1r . Bell said ChryslFr was getting a 4 ~ fee?
The fee is .2 . 00, one for the building nnd one
for the r.schi n ery.
You aleo know he only hPd overntght to get thnt .
110
- lS Knudsen :
Yes . I ~men 't sure rnyPclf. ! thought
somebody hRd chPnt;,ed ti1e contract.
Henderson:
hefore you oRse from ttat, Don , I don't
belleve you had exnlAlr.ed ~·hst was the
orovieion for - i~ the event thAt the
GovErn~ent tekes the orooerty st the end
of the five yeer q for the contract period
under PlAn :;o . 2, thAt 1s, thpt it hae
pose:1bilitie~ of compulPion of mAir.ten~>nce
of stAnd-by facilitie~ . You might want
·
to exolsi~ that .
l<elson:
.• ell, becnu~e thP.t whole t hin6 ,,·se st\ 11
in the twilight area after our mt;;etin~:~,
last nie;ht, I didn ' t 1~snt to go tnto 1t
too much. I went to ea~urc the Secretary
th13 , thPt ~·e Are goir.g to try to 1 ron ell
thet out to ~c fPir to everybody concerned,
because thet wAs the \ntent of nlan No . 2 .
LPt :'!C ~s~ you, SullivAn, l<hat is t:r.e
TreAsury 1 ~ "I'!!.'J!:lentfl for :u:.vlnti thle nrov1s1cn
).n here?
Sulliven:
The plan l!r ... elson just told about where
the Govrr~ment relmbur~ee and DAys for the
buUdinb> t'Je olAn ;.:r. !iehon hl'l' juct outlined, ~1ve~ ~orp protect ion to the GovernMent
thlln the nrovlsions that Are no~· 1n the blll.
The House 'il':rs Pnd :.~ellnR Committee felt very
strongly thPt it should be sryelled out 1n the
lB" ""c1 not left to be ou t into the contr,cts
end Pt the tlme J.:r. biggere and Mr. Eeton
l'ppeared there , they asked 1r. Bige;ers to
furnish them with s!'m:'le cll'fuPes thet they
1 ere to ryut into the contrect, Pnd Pt the
conclusion of th'lt meetinb, ~r. Bi g ers find
,r , Eeton llnd I continued a converestion we
n~d hnd ~t luncheon the day beforP, in whtch
we 'ere ~oin~ to try to ~ork out different
trentmente for whAt r . ~elson now deRcribes
PR PlAn 1 and AC Plan 2.
~w . the ooposition in
thAt lf tte Governoent
for p ~lPnt, it should
control over it At t he
the HouAe ls thiP,
is oayin~ outright
hAve £>me mel'sure of
c ~ncluston of the
171
- 19 -
'9
I
nnd the~e ~ensures were
thrre for "hot ounoac.
e~ergency
p~t
1n
1:01, the bill itself, dOE'Bn't give the
Goverr.~ent as good P. brenk an the clnuee
th t · r . t elson ht\!' s'Y)ken ~>bout, but the
HauFe feels t~~t th~t ohould be 1n the bill
itself and nJt left to a contract .
P. . M. Jr :
J
I
I O E1ggers:
•ell , I h.'lve a rueee~tlon to ~~~ke. I am
ti inking ne I em going along here . I
re~>llze the difficulty of h9vtng things
too hidebound end evE'n if they ~re, 1f
thE' ~ood will isn ' t there , you c~n Plwnys
find P "''"'Y to get Around tt . ·.tould you
peoole be w1111ng to ~>sr~e w1th me to go
on reco~ publicly Pnd give your wore that
from no'.f on every contrnct th"t the Gcvern!!'ent
rnskrs be 1=~ed1Pte l y oubliehed, be ~ade a
matter of purltc record'/ r:ow, 1f you are
~11lling to do that , I w111 ~o alon, \oil th you
on this .
l!l'y I object --
Henderson:
row, Henry --
H. ~~ . Jr:
I f you are willing to go along with me on
that , I ~.·111 go 11 long w1. th you on tt.e s e
sugge~tlons.
.
'
"Oubllc record .
~:cRe ynolds:
'!'he contrsct 1.s
q
H.Y.. Jr :
No, excuse me .
I want to keen --
!·:cRe ynolds:
I knoH , you wl'nt i t orsct1cA l ly tru>.t .
mAtter of la~:, it 1s.
"a
B
wa l t A mtnute, .·.!'C. •:e Are here amoneet
~he ftrst t\~e ao~E'body stgned ~
contrrct w1tn the ~bcrts Constructtor. Comoany,
if tr..At had been mllde oubltc he wouldn't r.·we
gotten '0 mtllion doll1n·s worth of business.
I am ~~ll1ng to t~~~t t~e A~er1cPn ?ubl 1c .
I am sure you gentle~en are, too, and I sny
tf evErY one nr ttFFe contracts, ns soon as
tt 1s signed, can get out into a contract
record and be given out to the ne~spaoers
Now
our~elven .
172
- 20 -
in full detail, I am ~illing to go Plon~
with you. You can't arl!>ue very m•1ch 11b~ut
thAt. Let the kmeric~n nublic decide.
i.enderson:
>rAnt to be renorted in ff vor of 'lublici ty
contracts, but isn't t .ere thte coneideretion
t>s to whether there is informRtion of vrl•1e to
the notenttal enemiE'F in some of tr~ contracts?
I
o~
H.!of. Jr :
I
I
'
Listen, Leon, I am not • kid . Hy God , you no
sooner hAve e plane tt-Pn the deetgn <~nd everythin~ is in the osoers Pnd everybody tell e every
contrActor four ti~ee over.
}r. ~ecretary , I see no objection at Pll to
your sug~eation, hut I don't think it is our
orerogattve . It is the 1/ar anc Navy Denart~tnt ' s.
H••'!. Jr :
Here you ere pdvocAtine P certAin kini of a
contrAct. You ct>n advccpte a public contract.
:lendt'rson:
ThAt 1s within our bounde of advice .
~ H.!l,Jr:
You out your shoulders behind it, and lf I
may eay <~o, ":hile I wfls rttttng .ere, we hEld
the first ones ~it: Colt ~no then ~e hPd A
co mle r.Jore, "nc. Fe ~1err PttPcked by the
Senator frorn NPw EA~'loh1re. I 1m .ed~&tely
r,ut the c:>ntrllct in t; e 'laner End said,
"Let the oublic dec1de . If i t is not all
right, okay. If tre nubltc sQys tt is all
right, Rll right . " :t took the bent right
off me la~t fall .
If t 1f American nubltc ~ren ' t BAtisfled,
the n you c1n ' t soend one minute nush1ng for
one certAin kind of ~ thi nb ~nd the next
minute sPy you won ' t nut the Coml'lise1on on
record --
Knudsen:
There ie no ar0 ument about thRt, thAt 1e
All ri&nt .
l:i . M.Jr:
!en' t th<~ t 1>ll right?
the Amertcnn nublic.
I 11m ••Ullng to trust
Knudeen:
sure 1t is All rit;ht .
fuy don ' t you publish
173
- 21 -
;he thre~ forn:.~, !!nd you cen "8'J, "Thill
ie For:n •'o . 1 ~r.d t h i!' 1s Form llo. ? And
thl fl la For:n No. ' . '1 XYZ Colll'Jsny get a
n contrAct '1Ccord1n g t o Form t:o. "·
Biggers:
J: ut 1-!r. !' ore!enthPu means 1111 to detR.1le of
the C')ntrR.ct ~>nd tr.e arlee ~nd the name o r
the contrsctor end everythin~, ee I underst~nd
lt .
::elaon:
The only ohject1on I w~uld r.ee, lr. Secretary,
1s tt.e oubl1sh1nt> of the S"le c1f1r.At1onA tn
P:Vfry CriSE' .
Foley :
You Are talkin~ about the ftn~ncing of the
contract for the new fectlittes, you ~re not
trlking about the contract for the mRtertnlg .
Bigger.;:
I thou~ht you me~nt 311
all c . ntracta.
H. H. Jr:
Under the ·..,alah-Heflley «ct, eech :·•eek they
h,"lve to - Jtiso ~ erk1ns 1>ublishre er.ch contr ct,
doeen ' t she, and ho11 much it ~o<ll~ let !or and
all tr.At?
!.eleon:
sir, she gete out weekly stPte~ents
sl:owlng the Pmount, to whom the cent rn ct went,
and the ~:nount of the c~ntract and the
parttculQr kind of cls;.~s1f1cat1on th 'l t the
thing was for.
E • • • Jr:
NoH , what I am tal king 11bout is that the
f1nenc1nl detllils of the contrAct should be
mflde ,..,ublic .
c o ntr~cts .
You
~Aid
Ye~,
Knudsen:
I,
Ada'llS:
Th?t means Plsn 2.
i:i ••• • Jr:
·~'hilt ever
Knudsen:
Thqt
1 t te . If Chrysler signed thl f.
contrRct end you And : and Eell s1t there
And none of us hPve tflken the noteP. Pnd
\hether Ch~ysler did get 2. 00 or 4
we don ' t kr.ow
WRB
Just bPcauee we ..·ere bU:l'/ at the tt"'le .
174
- 22 -
As soon as I went home ~nd got the contrect,
I called you un Pnd I knew it ~os 2.00, but
the e;entlenan had been there later than I
hPd qnd I thought he knew something I didn ' t
kn!lw .
f)
H. M.Jr:
uhnt I am tR lking Pb ·U t is the finAncial
details of the contract. As each contract
is signed, whPt ere the ftnnncial thin,;s,
just a way - \\•ell, SEC nublishes how !lluch
does R financing house make and how much
does a commissioner make and so forth and
so on, Ju st the way the SEC does tt, as to
the -whAt Pre the details Ra to the man ' s
orofits And ~!l forth and so on , end I am
going to let the AmericAn oublic dectds·
and if it isn't right, they will come back·,fupt
Con~ress will c:>c:e beck and chan~e it.
is the matter with thAt?
Knudsen:
The
Pre
H.l~.Jr:
contract, thPt is what you
about?
facilitte~
tRl~ing
For anything.
I understand the Secretary to mean for ~ns
or for blankets or unifor~s or anything.
llelson:
If you
~.r .
~~uld
eliminete the certlficattons,
thRt th'1t didn't hPve --
Secret<~ry,
H. '~.Jr:
I am not interested tn
~:elson:
because the soeciftcation ts the thing
may
a~ec1ftcat1ons.
th~>t
H.M .Jr:
No, leave out the spectficnttons .
Bt.,eers:
You mean the number and the orice and the
detalla of the ftnanctng?
I see no ob jection t·' thAt P-t all.
BtggPrs:
t see no objection to recommending thAt to
the Commission end if they in turn recom~end
1 t, 1 t Phould go to the 'l{sr and Navy Deonrt:nents,
tsn ' t thRt right?
175
- 23 Knudeen:
Publts}, the price .
!.eleon:
Oh,
Pr!ce ulll be ryublished any ray.
Y~e.
1c ~ publlc record . Ycu ryu~lleh n:>~ the
number or pifces tR~en and t~e price .
It
So rcnlly Rnybo~y c~n vork out the piece ~rice
for those ~hlngs .
H . ~..
Jr :
Knudoen:
If Chryelfr hPs an order , tr ne gets ~n order
for a thouennd t~nks, I d~n ' t care wh~t ar1ament
it h~s or wh~t eize e~ n or the eoePd, but I
want to kno\ot on what bRain did the Government
enter, how CIUCh ere they peying him, :~nd w:1~t
ie he 60lng to meke out of t t .
.e can ' t tell
tn~t.
.ell , ae f<~r e~ you c11n .
pArt of lt is .
1./hate\·er the f1.M.nc1al
Knudsen:
33,000 end he gets
~eta 2 , 000 t~nks st
Gov "r::lmen t pl<~n t paid for by the Goverrur.cnt
and it rc:na 1 ns t!:e ~M~·erty of the Govcrn'llent.
H. M.Jr:
Do you un:leret.,nd trht•t ! mean7
llel~>on:
I do, certainly , elr.
H•• Jr:
u'!Vlt
1
els:>n:
1' • .·.. Jr:
ne
do you fJP.y?
I aPe ,oobRI)lutely no ob j ec ti on to 1t.
be l00il> f Jr 1 t .
I "-ou:d
If tht; Ar'lly Rn•l r:nvy nnd tl e Cor.uni!H<lon w1ll
,.,o along on th~t, I 3m will ln!l to h'lve the
thin~ decided in the c.,ntrRct orovlded the
various p<~rte th"t have t o do 11th 'lloney
ere ~ade publ ic.
Kn•11l een:
Tl1'~t
Etggere:
I
le f ai r enough .
do, too, l:r . Secret'lry. If I m~y , qttt>O':'lt
tc amnlifv onu ooln;, because I don t wAnt
t~ leave ha~~ , wlt~ your pe r~la elo n, without
!'eellng nui te s•Jre that you end your
nasoc lateo and ~e •nderstnnd the fundA~ent•l
176
- 24 -
on ~m~ch there has been a difference of
ODin1on ~ccur~tely.
H. M.Jr:
I
Biggers:
\1ell, I don't concur ou1te in !l.r . S•lllivt>n ' s
at11tement, and here is why , if I may --
H. M.Jr:
1/ould you feel better if you exolained it7
Biggers:
I nm certain, air, thPt it is not unde r stood.
H• •.•.Jr
:
Biggers :
underet<~nd.
All right, go ahead. I have got nll the
that you fellows have .
ti~e
In the first ulace, I don ' t Cl're to tAke up
your time in amnlifying this unless you with,
sir, b•1t I thou.;ht your ourpoae was, liB you
stated, and I think very soundly eo, to
avoid mieunderstendings between those of us
who 'lre ~~orking for a co:n:non objective.
Under ~lan 1, as ~r. Neleon outlined it , the
contr11ctor nuts uo hie own money for his own
olant without Government S'JBrantee or ~ithout
reimbursement. Hie only benefit under the
tax lew is that if hie olant cost q billion
dollnre, he can write off ~200 , 000 worth of
depreciation a year , and under the uresent
law his nor:nel tax on that would be sooroximntPlY 21~ , 20.9 . Hie tax saving, therefore ,
on that accelerat ed denrec1at1on would be
42,000 " yeflr . His normal deoreci.qtion would
avernge about 6;o i nsteqd of 20 , or hts \/riteoff 1~ould be ~60 ,000 and 2l1• of thPt would be
12,600 , eo the difference between •hose two
fiS'Jree is the amount thAt he actuPlly benefits
by this Pccelerated depreciAtion written into
this tax ll'w and aool\cAble under Plan 1 end
the difference is 29,400 a year, or ~147,000
\n five yeare.
Henderson:
ThAt 111 in cl'se there aren ' t any excess
orof1ts.
Sullivan:
ThAt ts where I Q1ssent.
l77
- 25 ThAt is undpr existing law. Su~oo~e his tax
be do'Jbled under the excess orofi ta tax. Then
his savings in the course of five years mi ·ht
be two times ~147,000 but still it is a'lon~
way fr 'lm the million dollP.rs of his own
caoi till which he haP invested, and ••e argue
thAt inaEmuch a s the Government give him 3
tex aavin~ to encourage him to take the risk
and to emoloy hts own ccoital without qny
drain or demand on Government credit and
witho~t any inflation of '>rice, th>•t thAt
is all to the Governmpnt ' s interest, and that
the Government in the long run doPsn't loRe
anything beceuae he hAonens to teke his
deoreciAtion quickly inste~d of tAking tt
ovEr the norrnel longer oeriod. And tf t'I:X
retes advr-nce, the Government may Rctunlly
gain because after the orooerty has once
been depreciated, of course, he has to nay
ter.ea on hts entire profit.
H• • Jr:
)
Big~ers:
Nelson:
Bit)gPre:
I know all
th~t.
Now, •·e a/J.y thrt under that olen if the the more oeo~le we can encourage, especially
in the borderline c~aea where a mon just
A' pli nes or extPnds his preaent fac1l1. tiel',
tf he can be encouraged by that tax incentive
to ~o ahead and use hte own caoital and
initiP.tive ~1thout Government obligation,
it is good. If he won ' t do it And wants
GovFrnment re1~bursement and wants Government
protection, then we say plan two aoolies or
pl'lr three .
le
any the
facilitie~
belong to the Government.
in those CRees, WP say tr.e Government hAs
oa1d for the factl1 tl.e~ and the Gov~>rnment
should control the future use of those
f~cilitiea and should not only control the~
but should be reimbursed for the sound value
of the Government eouity ,qt the end of the
emer~ency under Plan 2, and, of cource, under
Plan ' tr,e Governr1ent owne it from stPrt to
fintsh, and we just sey that to try and \moose
~<nd
178
- 26 t hqt i n Pl~n l isn't equitRl'o le and " Ould
dl'i ve CVF>ry')ody to e\ t her PlPn 2 or 3
which means even~ual or present rel1a~ce
on Government credit or e dra tn on
Gov ernmen t credit, and Pnother thing tha t
te ouite i~nortant in both Pl~ne 1 and 2
Mr. SecretPry, is fee. To the extent t~t
we Cl!n get orive te capital to go e hePd Pnd
build on t heir otm in\ti,.t1ve or bulld 1-•ith
a contract for GovPrnment reimbursement
under Plan 2, they can out these facilities
uo with lEss rcgul s; tion llnd re!ltriction by
the ,/qr 11nd Navy Del)l'rtrnents and less delfly
by the ~uartermaster Coros and get going
faeter a nd be making the materialP 11e 1111
think we so vitally need .
H•..• Jr;
I am no t 0-o in6 t o gf't into t hi s ')articulAr
d 1Fcussi·?n. I don ' t think - I don ' t know
whether :·r. Sullivan agrees wit i" you or
not . I stArted out my stste~ent by sa.in~
that I wouldn't teke second olPoe to enybody
in wanting to see this country ~et ready to
defe nd itself. Now, you oeonle are down
here to helo the Government get these
contrllc t s eigned . You are convinced t ha t
you 1 eed thie thing. Othe~1ise, you wouldn ' t
have mAde such A fuse about it. I don't
know w1.ether you are right or not, but I a:n
w1 J lin~ to let the ~eric11n public decide,
1f they know, ~h9t the Government is doing
each dllY and ':ow these contrPcte ere signed
~<nd hov much the oublic 1e go1nb to make
and let ePch fello•·· get out his o1m 'Q encil
11nd figure And not 1191 t like in the last
.lorld '"r until the war is over and then
all of you rronnuf~tcturers be drag_~d do 1m
here for the next five years having to exol~in
.
wh'lt you did with the contracts 11nd eo f .,rth
11nd eo on, and I think the euKgestion I qm
m11 kin s qs r~r as the ~mer1can mAnufActurer9
are concerned is ell tn t neir intereAt, and
I t h ink - bec~use then the Amer•c~n rn~nu
facturers ei~n uo - he c~n always eRy,
"~ell, Rfter all , gentlemen, it ta a mattPr
o! ou':>lic record 11nd ""s been,"' matter of
ryubltc record for five ye~re, Rnd 1f ~ny
17s
- 27 C~n~re~Pm~~ cr ~n. co~petltor didn't llke
hta contrl'ct, lt •;As right 1n tt.e ne\•~pnpers,
he kne•• how they ~1e;•e signed and t~ e tlrne to
object \1 s the tlme ••:O:en lt II'Jne11red 1n t!".e
neweoaourP. And there wlll be cert~ln things
they 1r:ill object to . You will u.qve to adjust
yaur!'elves acc~rdin~];ly, b·Jt it ta 11 dAI!Illed
sight better t o do it wlthln three or six
conths fr1m the time you eigned it thAn to
w11it un~il the contract or the war is over
end you soend the next five yellrs down here
like U. !. Steel and ~orne of thePe other
corr.oani~'£\ did, and I think it is absolutely
1n the inte rest of the crnufsc t urer, this
ouggeetion, and I dnn ' t see how snyrody
can be !lf'l'~id of the publicity .
The :J·:>J'€ I tr.ir•k of it, the '!lore I
you llre aboolu tely right.
El!ll
sure
H••~. Jr:
;;n,i I can not, as Secret~ry of the l're~surJ,
eit with you eo~le or try to tell you dAy to day
how to writer c~ntract, end I ~~uldn ' t if I
could.
Flggers:
I thir.k lt is e very valuAblE 11nd practical
( )
suc.seat!.on.
~ . • Jr:
You \'111 C:'lke
:leleon:
Ard you correct theo as you go along
thPn lP ter .
Henderson:
Mr . Secretery, AP I understand it, if ~e get
r.urllc•ty on contracts, whnt, in effect,
:r.""'"nfl 1s th11t I, J, l'nc1 K thAt we wve
betn referr1n~ to ls not preAent ln the
m!.~tll.kes .qnC. they will object
to come of the~ And 1! they do, it 1~ e dqmned
P ie>ht better for you to kno•· it now than f1 ve
yeArs froc no•.
r~ther
bil l.
H.~
. Jr:
ho, we vlll take the inlt11't 1 ve. I w1ll
holi 'J"> my end. I w1ll tell theo th'lt
we will withdraw 1t if they will let us.
130
- 2S -
Hend e rpor. t
Th<>t ;a ~·hat I Am cnnvPeelr.g. ! h'l"'':len to
~now .hl't in 1/pye "nc Mt>en" Pnd in the Sen<>te
;ommlt tl'e - 1~c !moP thP "Jer!!onnel d'ltm there •
• l:ere l!re eome oeoole tr.at a1•e honet>t about
thae thing~, An< PO"'e 'Oeon lt> o uld be vt>ry
glad to tie us ur And we hP.ve h11d this public
brawl About the thine wh ich some ':leoole, ""'
Thnt tP
Y0 1l knou, will tPkl!' rdvRntP~e nf.
trhPt 1e bothering you and m~ . PPople <~r€
not tntereRted PS thie grou'"l i~ .
H. !I..Jr:
I VAS RiCk
Eendercon:
I r they n!'He ror eometh1nr; And t'ven if they
don't precq, why 1Pn't this something to be
c-:>nsidered, thAt - you eee, what ve objt>cted
to ~nd whRt ! objected to in my discuesion
with ClArk ne to whether •ou ~~ndle it
ad:n!n11' trnt1vely or t•hether you t~ndle it
by atatutn - I didn 't go int c e long
er.olnnetion of the nroduc tions. I think
you cgn get under hAndline it admin~etrstively .
Shouldn't we think tte gPne rnl orinctoles
that nre to £n in contracts, Ae well as the
?Ublicity, would be reco ~~ended to both
grouos? Suryooee we took the penerPl etnnd~rd just like in the SEC we ge t n 7."neral 1tenderd
~or the admtr.istrA tion o f the Pu~lic Utilities
P.olding Co~pllny Act and then \le administer
that in te~o of thrt atandPrd . Th~t is
;e hnve got our 11:r.its. llov,
bine.tng on us.
llhy don't 1<e c'nP1der whether or not th.'lt 1\&
e substitute for I, J, qnd K A declaration of
orinclple And R benrr~l stannArd tc be observed
in tLe writing of contracts for orotection or
Government interests included, th 'l.t is , thA.t
would not be 11 Procruste~n bed, AS I c<~lled
it before the Commlecion, becAuse you have
the p roper limits of 1nterprt>tAt1~n.
OV~r
lt.
You (J re brlr.ginf!
~o eooethin~
nc\t.
Henderson:
And a contracting officer would hRve lts
c.Hrecti n.
H• . Jr:
Yo u are bringtn~ up something new wh1ch I
would ~~ve tc think about. I don't know
181
- 29 wh!lt. tt.e clause of the SEC 1'1 Ps to fir:~ncing
publicity, but i know th~t in tte orosoectus
you hsve got to '?Ut down in ev(ry detP U just
t.o"'' much you ~eke and wh£.t yo~r co"n~lEis l '>nE
are end your cost and eo on .
Henderson:
ThAt lt>n 't eoecified by law, 11r . !'lecretary.
H.lo'.Jr:
All I kno1o· 1a th11t they tell r:~e th"t the
Com~~e~ion thinks this ts e good auggPstion
end they will nush fo r that Pnd out the RAme
pushin~ behind it th~t you did to kill tte
'>ther thing and I will brtnb it un in Cabinet .
The
I non ' t th1n7. I wtll have pny trouble.
easiest thtng to do is if this thinG is
imoortant enough and we find that ~·e cf'n ' t
get Harrir.on end Daughton, ~e ~nll PE~k them
to C')'I!C down and ~o~e will sit down with them
and hAve another tAlk .
Henc!e~eon:
Y'>u could eta rt on thi P . I thin'' Ed s eee
what I a~ drtvin~ Pt . You cen start at least
witt a '?1ous - whPt we call a pious e~oreesion
of wil!h, At any :-Rte. It would ooer~<te t.-.en
ae a mand~te on two ttinge, tn~t tte c ontracts
be ouoli11hed --
Y.nudeen:
./hat do you want to dn ~<i th thls '?ioue w1Bh,
'C•Jhl1£0h it?
Htnderson :
Inco~o rnte
KnudPen:
Put 1t 1n the law't
Hendtrson:
YeP., uut tt tn the le\t ,
Knud sen :
Yo•1 [!ICI'n for Plan 1, :> or 3?
Henderson :
t.o , th..'\t tc l(hy I say pious •.ritth, Bill, th11t
tte contr'lctor in mak1nt Pny co ntract or the
DefennP. ~ol'\~1se ion in givin.; any certifi cate
ehall insert claueee whtch will proop rly
protect the Governoent ' e inter~Pt . Thet 1s
the o iou!l wieh way :>f st,..tint; that. !'low, you
might wnnt to - if you ~·ere milk ing s stand11rd
for Bn ad~1nistrative Agency , you ~roul d go a
1t tn the statute ea a dir ective
132
- 30 -
little bit further and spell out in
generAlity, not in s~eclficity, a~ to
what the nrotective clBuee~ were, becr,uee
I can ~rite it before I ~et o~t of this
room.
There \e a
Knudl'en:
I am leArning " good word.
That is a
11• ..$
~ood
biggers:
word.
2 .00 word.
Henderson:
ThPt ts right.
Sullivan:
'.iell, now, hr. SecretAry, so there won't
be any mteunderetpnd in6 Pbout this, I
doubt very much if the House will be satisfied without hav in~ some standard set fortn
1n the law 3nd I think ~r. Henderson'~
suggestion is a very good one .
H.M. Jr:
~re
Sullivcn :
I
Henderson:
I csn give you an illustrAtion as between
whAt I Cl'd 1n mind.
bigt;ers:
Mr. Secretary, wouldn't it - 88 e matter of
oracticRl cooperation , 1f we cAn tAke yo•Jr
eu~6ePt1on bPck to the Commission At 8
mett1ng At 11: 00 o'clock today and 1! they
can approve it
H. M.Jr:
ThAt te right .
big~ers:
And 1f the lar and Navy Decartments cPn be
pereunded - -
H• .~ . Jr :
Pu t se . much oreseure on t hem on this
did on the o ther thing .
biggers:
If they cnn be oersuaded to nut this into
ef!ect without c~mculs1on, won't t~e eflme
obj ect1 vee "be flccomol1ehed And ~·on t they
feel better about 1t tt~n if Congress delays
further by Rttemoting to I\Tite f'IOME'thlng
into the la~l'?
Anybody want to bet't
you for soecif1city?
don't know.
fiR
you
183
- 31 thi~
Henderson :
No, John, for
H. f.! . Jr:
Thla tP [etting down to ~ discuF.@ion . ~y
don't you fello~1e have it ln your own 11hoo
nnd you c~n give me 11 ring afterwards.
~>e l son:
You want •Jo t()
Henderson:
You cl'n gu'lrl'ntee a t>olicy f()r h·o more
mon•hs or four ~ore month•.
H. :.I,J r:
Leon , I ~1ould rather hP•re these men e;ive me
their word nlue the w)rd of the "ecretary
of ;{ar Pnd the Secretary of the Navy thRt
they are goine; to BE'e tr~~t this eten 1P t:oing
to be mP-de nublic than all the law in the
world. If thE'y give me tteir word and I
hAve the ~:ord of the gpcretarye of :ar end
l/F.vy th11t they are going to have every
contract rnsde nublic --
tlel Ron :
I think it is vAluAble to the :nanufsct'.lrer
an1 the Cornmis~ion and everybody else.
Biggers:
It will be nulte a
Procure~ent
Nelson:
d~
reRson
it on our own time .
etron~
officers .
I think "0, too .
influence on the
{ Q_ 184
185
mber 6, 1940
'J . I!l .
fore I saw the
E>nything , your
ted to the Commission
ously and
the sug.,estion.
ed this afternoon
nds of the Secr etar y
nt recommendation
ion from the meeting
I were just tickled
i n that way .
he Commission
ar tha t ooint tha t
d us to wash our
f1ceos hereafter
ttee and so I t hink
:1 . I'J • tJ J. •
MeR :
Yeah . And everybody said that it was something
that oueht to have been done before and we're
so rry it ha?oened at all and I think the t hing
clic ked very well .
H.l'•• Jr:
And I made it clear that after all the Secretary
of the Treasury is res ponsible f or tax
lebi slation.
185
Se?tember 6 , 1940
12:50 o . m.
H. I· .Jr:
Hello .
Operator:
Mr . McReynolds .
H. l. . J r:
Hollo.
'A·m . H.
l-.cReynolds :
You wanted me to call.
H. L.Jr:
Yee . I wanted t o know before I saw the
President wha t action , if anything, your
Com~ittee t ook .
MeR:
~ell , t he thing was repo rted to the Com~i ssi o n
and t he Com~ission unanimously and
enthusiastically aooroved the sug~estion.
H. M.Jr:
vood .
MeR:
The t hing is being ore oa red t his afternoon
end will be out in t ne hands of the Secr~tary
of ~< a r and Navy wi th urg ent recom!llendation
t his afternoon .
H.!CJr:
Good . What was tne reaction fr om
over here, Mac?
MeR:
Well , of course , Leon and I were just tickled
pink to g et the thing out i n t ha t way.
Bi bgers in repo rting t o the Commission
meeting made entirely clear t ha t ooint that
you ' d made tha t yo u wanted us to wash our
linen in our own joint o ffic~s hereafter
instead of the noo r commi ttee and so I think
it sunk in.
H.H.Jr:
He did say that .
NcR:
Yeah . ~nd everybody eaid that it was some~hing
t ha t ou 0 ht to have been done before and we re
sorry it ha?oened at all and I think the thing
clicked very well.
H. I: .Jr:
And I rnade it clear that after all the Secretary
th~
of the Treasury is responsi ble f or tax
lebislation .
!llee ting
186
- 2 -
MeR:
Yeah.
H.' .Jr :
l.luh?
!4cR:
Ye s, sir.
H. ! .Jr :
.1ell , I t hink it was a gooc:! mee ting.
MeR:
It was a very eYcellent meeting and the
sol ution you pr oposed was just one of your
usua l strokes of genius.
H. lL Jr:
Thank you . Oh , !4ac , let me a sk you this.
Did Leon keep on on the theory t ha t you had
to wri te it into the bill?
MeR:
~ell, his t hought -- he talked t o J ohnny
later as they came ou t -- his onl y Jur pose
there is as a substitute, that is, if it ' s
necessary to ge t -- in order to ~et t he othe r
ou t - - to ge t something in, that should &o
in it s o>lace, t hat ' s all .
H.<I..Jr:
Well .....
MeR:
It' s a question of negotia ti on, t het ' e all.
I t ole him to stay close to J ohnny and work
with him and he and J ohnny are on oretty
good terms. He had lunch with him yester day
end wen t ou t to his house for dinner l ast
night and they 're getting al ong and Leon is
just as well, t horoughly convinced as I am
t ha t J ohnny -- there i sn 't any more hone st
or prooer-pur 0 osed per son ar ound as J ohnny
Sullivan , and the thing is all on an even
keel once mor e.
H. J... Jr:
Well , Mac, if there is any reso luti ~n or
anything in writing t hat you oass on , could
I have a cooy of it?
MeR:
Yes, sir .
H.B.Jr:
.V1ll you?
MeR:
Yes, sir.
H• . . Jr:
I'll see t ha t you get it.
All right, Mac , and there ' s ?o argument
tha t we ought to do those th.ngs in our own
off ice s and no t in the oubl ic.
187
- 3 n r ~u,ec t
~!cR :
Eo
!i . l . Jr:
Rlt,h t .
l·:cR:
Rlbh t-o .
:~ . l
Thank you.
.Jr:
MeR:
Thar:k yo u .
a t all .
188
TREASURY DEPARTMENT
IN TER OFFICE COMMUNICATI ON
DATE Se~te~ber
TO
Secntarv l!orge:ltb&u
FROM
Joseph P. ChLmberlain
6, 1940
Supplement to yesterday ' s nemorandum,
Fe : Requests of French Fill6ncial Agency.
I called Mr. Berle about 5: 30 last night .
He confirt~ed his
opinion as stated in yesterday 1 6 memorandun , after conversation
With various officers of the Departoent of State. He
MIS
Entire-
ly of the opinion that trB request of the French should be
grlll•ted to cover the next month as to diplomatic and consulu
offices in the United Stetes, South America and the rest of the
"orld.
189
THE SECRETARY OF COMMERCE
WASHINGTON
.. t
r
0 ••
'
... J40
nr:,:
1
ry
.)r~
u
t
r;,
190
190
)
Deu Rams
I aa wrl uns to esp"•• . , recrn *ha' ' "
are leartns 1&1 aact to wbll )'0\l IGOd b * ln 70'U'
uw &4ftn~1'...
! know 1 t h tbl'oulh JtN-1' ow
oboloe aact 70111' own 1nehten~,
'here are MftJ
Of Ul
0
bate
'0 IN JOU 10•
bu'
'ba'
U M7 DOt be aalll 'o tell JH
I ban
b&4 a lot of •aUetutloa 1a 'IIOSlns w1 ~ 7011, fJ'Otl
'!w beelaftlac of tile 'l'.K.a.A. la A1MII7 J'iCb' 4oft
to 1o4q.
h ' I ~- 7011 know that.
I .... h
H._ber that wbea .. CO' 'otetbu .. lll\lallJ COt
Hnlt1.
I han al.-,a tbouebt of 70• 1ft a a&al
1'ole - u a aaa of aotlon an4 a flolen4.
ftlat 1 e
a PNUJ soo4 OOilblnaUon here 1ft laeh1nston.
Yaa ban cloDe a CJ'U4 Jolt bne.
I • 101'17
tbat 1t Me bela at 80 «Hat a JIIV'Illal I..U. tbat
70• aow ban to etop and Nltl "-' kaowliiC wba' a
coo4 Job 7011 1 n
wlth
JOU
.a.~
cloM 7011
eontent.eet.
0\llbt to be able to leaf
I cloa 1 t -.nt to loM toaob wl ~ JCMl aD4 I hope
f . .l ~ . . . .
Slaoe1'11J,
Boa. 11urJ BopklDe,
leol'lt&J7 of O=r ••·
-_,
191
Dear Jlazor7a
I u Wl'UiJic to expreaa 1111 repet tba~ 10.
are ~ •• and to w1 ah 1011 1004 hek ln 1f1U
aew 114ftn~rea.
I tno. 1 t la tbl'oqb JOV o.a
e!:aoloe an4 JOU:r owa 1Da1atenoe, bid 'here are .aJl7
of u wbo bate to ... J'OQ co.
Ill
I t
Cl
.,
lt'f
IC"l
I
It
It
u
h
It •1 -~ 1M ..taa to '-ll ro• ._, I ban
a lot of aaU!Ifaotloa 1D ~ w1tb Ja, ' " 'be MJ1nn1JtC of the 'l'. E. R. A. 1D Allau7 J'SCbS 40Wil
ba4
~o ~·
ld I ~* 7011 1tDow ~~.
I . . . to
:re..-beP t:bat 1lbb .. cot •oc-tbe' we uuall1 cot
haw alwa;ra tb!NP~ of 7011 1ll a eaal
IIIUl of anloD an4 a Mend.
!!Ia'' a
a Pfttt)' 1004 OCII'IdNUon blre 1D traa~.
reAl'•·
:role -
I
aa a
CftD4 job bare.
I u 801'17
baa • • at eo c:reat a pbJaloal atNla tbat
JOU DOW baft to atCIP and N8tJ bid kDow1JlC ,._, a
Coo4 Job JW'ft toDe JOQ oupt to be able to loaf
w1\b . - eoa•aa._....
tbat
u
You baw doni a
I don't want to loa• ~ wUh J'OQ and I hope
JOU f . .l tbe .....
ttllloerelJ,
lon. llarl7 Bopklba,
leere~
of Oa•rrea.
192
September 4, 19-4.0
Dea r llarJ71
I &II wr1 Ung to eXpreu rq regret that J0\1
are leavin« ue and to w1 eh you good luok 1n JOur
new adnntur...
I know it 1a through 7our own
oholoe and your own 1nl1etenoe, but there are unr
of ue who b& te to eee you go.
It 11&7 not be aai11 to tell you that I ba'fl
bad a lot of eat11faoUon 1n working w1 th JCN, fro11
the beg1nn1ng of the T. ~ . R. A. in Albal\7 right do1fll
to ~.
But I think fOU ltnow thd.
I 11111 to
rea•ber that 111ben " got tOfl'lther we uiiU&llf got
reeults.
I b&n al~e thougbt of 7011 1n a aa&l
roll - a1 a aan of action and a friend.
'l'bat' e
a prett1 100d oollbinatloa here 1n wa1h1ngton.
You ban clone a grand Job here.
I aa 1orrr
that it ba1 been at 10 great a Pb711oal 1tra1n that
fOU now ban to etop an4 r11t1 but ltnowlrlfr what a
good Job rou'" done rou ought to be able to loaf
with 1~ oontentment.
I 4on 1 t ,.,., to loee touoh with
70u feel the 1a1:1e.
8inoerel1,
Ron. Harr7 Hopkin I,
leoretarr ot
Oo.~eree.
JOU
and I hope
I
I
THE ASSISTANT SECRETARY OF OOMMERCE
WASHINGTON
September 6, 1940
My dear Mr. Secret ary :
I am enclosing a
ot
I
IIt:
II
m<~norandwn
on Plastics in Aircraft
Construction , as prepared for me by Colonel Aldrin.
Since its prepar..tion,
a
po~sible
~lr.
YoWJg called me regarding
meeting with Ur. Vidal for a discu• sion of what
his company is doing in plywood aircraft construction.
I am therefore sending this
~<ldrin
m<~norandum
to you by Colonel
so that he may discuss the topic of Ur . Young' s
!hst telephone conversation with him.
ll
Sincerely,
Hon. Henry Morgenthau
The Secretary of Treasury
194
PLASTICS IN AIRCRL"'T CONSTRUCTIOn
Plastic ~terials are used in aircraft construction: (one) as a
binder and adhesive in the making of plywood , molded shapes for airplane
wings and fuselages; (two) in_ the making of aircraft pro,ellers , ins+~
ment boards , e-l;c . by cornpresnng layers of 11ood impregnated with resinous
material , and (three) in the making of aircraft parts from resinous
material, such as windshields, knobs , etc,
The term "plastic airplane: has been greatly misunderstood , AirplBnes
have been made out of veneer , using various glues and molded to form like,
tor example, the Lockheed Vega , lon ~ before plastics became a fad for everybody to talk about. As a matter of fact , there hss never been constructed
a true •plastic airplane". Several airplanes , however , have been built in
the United States from plywood molded into various shapes in a manner
,eculiar to plastic binders .
The new synthetic resin adhesives can conveniently be used between
layers of veneer and when molded under a reasonable pressure and temoerature
can be formed directly into the desired shapes without internal strains,
Besides, this resulting product remains stable and retains ita shape under
atmospheric conditions thnt previously were not ,ossible .
The aircraft companies who have recently gone into plywood construction
using resinous binders are : Fairchild Engine and Airplane ~orporation ,
which developed the "Oura.mold" process , now also licensed to Hughes Tool
Company ; the Aircraft Research Corporation of Bendi:r , !lew Jersey , have
developed some other way f or molding this material under the so-called
"Vidal Process"; and the Tinm Aircraft Company h•we evolved another procesc
called "Aermold" end built a trainin g plane by it. Other aircraft companies
have taken an int&rest in the question , such as the Glenn L. l!..rtin Company ,
which established a fellowship for researching this at the Mellon Institute .
Haskelit& l~ufacturing Corporation , •s well as the United States Plywood,
and possibly others , have done a good doal of development work on this subject.
The National Bureau of St~ndards , on a project sponsored by the N. A. C. A., are
likewise developin : the subject.
The U. s. Army Air Corps have given considerable attention to the subject
and have placed e:tp~rimentnl contracts for sample parts t or study, as well as
investigating the building ot a complete "plastic" trainer ai.rplane by this
means , The U. s. Navy Bureau of Aeron&ut.ics also has bad seaplane floats
built tor study .
Aa occ.urs in so many other cases , we in the United States ars lagging tar
behind in this development work . The Germans seem to have undertaken this in
the most active form having airplanes made from plastic treated plywood which
have flown in variou~ parts of the World as early as 1936. No training airplanes
ot United States manufacture h~ve yet passed type approval . One model several
years ego , the Clark cabin monoolane was ~iven an Approv~d Type Certitic~te .
195
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The opin ~ on ot many informed , but disinterested individual1 , \s th•~ it is
too ditt~cult to: new ·~nu!• cture r s to financ9 a prosr~ ot this sort, The
60ve r~ent a penc~e3 , on the ot~ er hand, altr.ougr. interested assuoe t~e
attitude of ~·wing "to be shown" and are too buay wi tb bieber priority
mili tary proJects ,
The 'ldvantages or bni~din~; aircraft trol'l ph.Atic molda~ plywood are
manr , but there ere 'llso ~~sadvo~t~ees dependin~; upon the clasa and typ~ of
air pl ane consid~rod , It is fairly obvious tb•t t~e lareest multi · eneined
air pl anes can bost be built out ot metal . In reneral , air trAnaport equipment is best "hen constn.tcted ot metal because ot the long period or utility ,
'!1lere seems to t.~ve b•q~ considerabl e questi.on rego.rHnr the se.tsty in using
wood under ell sorts of conditio~• tor a l en, time , The real ree.son behind
t his i s that compresslon failures in wood ce.nnot be detected as well as in
metl\1 , directly or indirectly , l'lhen metel is overstressed H. buckles or
s tret ches, as the case may be , and tr.is can generally be dotected on tne outaide in the case ot any internal structure, Such is not the case in wood,
Consequently , even tor training planes , there are disadvantaees where t hey
have student r ouch-1 anding end questionabl e bo.ndling, Tbe factory equipment ,
faci l itiea and skilled personnel needed !or the construction ot metal aircr af t are many-told more than \n the case o! wood, The latter wovlc be e.
sim~ler productinr problem •tartin~ !r~m scr•tch and this is cert~in l y i~
portant w!:len e are t.U kin11 '\bout multiplying t actory racili ties by four or
tive .
~
It would eppear tb~t the ~o•t useful applic~t.ion tor building aircr aft
woul d be in ~he case o! war - ti~e mod,ls for which a lon ~ number of years ot
utility is un necessar~ . If adeouate strength under repented peak loadine
could be assured as in pulling out o~ dives , then this ~ater\al mi~ht well
be used in the cons+.ruction o! irterceptor fighters ,
Although the utiliz~tion of wood veneer mi~bt relieve peak dem~~d on
aluminum to some d9,.ree , it should rot be assumed the.t an unlimited wkr
supply o! the proper wood can be had, Our experience in tbe lnst War , as
well es some recent in•restiGation points a ""rning in this direction,
Pr om the
9
tandnoint of the usual safety !eaturos desired in aircr aft
i t can be at.ated th~t , curious l y enough, the woorl cons+.ruction is morB fi r e-
sat e t han the mGtal cons t ruction, This r esinoua t r eated wood wi ll only cbar
under a torch; whereas ...Iuminnn disappears i nto osh, Also , tbe wood construction does not blo., out at the exit hol es when bullets nre shot tiJrough it ""
in metal ,
It is contendBd th~t l'letal cockpits a re safer i.n the event ot a eras?
than other cockpits , ~lood enthusiasts have pointed out that tbe l'letal bun~
strong in tension hao e. tendency to buckle and fold in ; w~eru.s the wood bn~G
weak in tension piveo away nnd opens up like an e~gsbell . Possibl y the met~l
cockpit ia safer most o! t~e time , but there are srguoents both ways .
~
':. E. A.
9- 6-40