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225 DEPARTMENT OF STATE randum of Conversation DATE: October 7, 1940 SUBJECT: PARTICIPANTS: COPIES M. Merry-Haye, French Ambessador; Mr. Welles. TO: s, A-B, Ea, RA, PE, EA, U-L, Co, NE,PA/H, PA/D The President 1-1-000 The French Ambasender called to see me this morning at his request. The Ambassador commoneed the conversation by con- plaining again, this time in extremely bitter tenes, of the over-increasing misrepresentation of his Government that was appearing in the American press and the totally false and Bondacious statements which were emariting from the British radio and news services tending to show that the French Government was under the complete control of Germany end me aeting as a support for the German Government. French Dental of presence of German officers in Date The Ambassador then read to me three eablee. The 226 first cable flatly denied that there were either Geresa soldiers or German officers at Dakar and that our own consular representative in Dakar could confirm this information. The Ambassador said that the only Germany officers who had every been in Dakar since the Armistics were the members of the German mission which had gone there under the terms of the armistice agreement to verify the sunitions that existed there. Allered demands by Italy on France for submarine and air bases and demobilisation of treeps The second cable the Ambaseador read to me was from his Government stating that the reports alleging that Italy had made demands on France for the installation of air bases in Syria, submarine bases in North African French possessions, and the complete demobilisation of all French forces in Syria were totally false. The French Foreign Minister by acans of this cable informed the French Ambassador to inform this Government that no demands of any character with regard to Syria OF other French African possessions had ever been formulated by Italy. Alleged intention of French Government to fortify Martinique with regard to the third cable, the Ambassador stated that reports sent by the United Press Correspondent 227 -3- from Vichy alleging that the French Government intended to undertake large military and naval fertifications in Martinique were totally unfounded. The Ambassador said that the report was probably due to the fact that the correspondent had read the budget for the year 1941, which had included the provisions insisted upon by N. Mandel when he was Minister for Colonies and which budget had been approved by the French Chambers before the armistice, providing for the undertaking of military and naval fortifications in Martinique as well as in many other French colonies. The Ambassador said that this budget, of course, was now a matter of past history and the present French Government could not attempt to carry out any of the provisions thereof. The Ambassador was instructed to state that the French Government had no intention of undertaking any military or naval fortifications in Martinique and that the only work to be undertaken there was the dredging of the harbor at Fort de France and the improvement of certain of the docks for commercial purposes. The Ambassador specifically stated that the submarine base which had been planned for Martinique had been completely abandoned. In brief, the French Government desired this Government to know that under no conditions would they agree to any of their possessions in the Western Hemisphere becoming, 228 directly or indirectly, the source of disquiet or of danger to the United States. Extralianties of French colonies in the Masters Hemisphere The Ambessador then referred to his conversation with the President of the other day and the suggestion made by the President that the French Government declare publicly that its possessions in the Western Hemisphere would be neutralised. The Ambassador said that he had this morning received a reply from his Government with respect to the suggestion made by the President and that in this reply the French Government declared that it desired to cooperate in every way with the United States se that the United States could assure itself that French possessions in the New World could in no event become a source of danger to the security of the United States. The French Government, consequently, made the following preposals: 1. The French Government would agree that United States official observers might be stationed in French Guiana, Guadeleupe and 58. Pierro-Niquezon, and that all facilities would be given these United States observers by the local French authorities to find out exactly what was going on and to assure themselves that no steps were 229 -3. in progress which could result in emdangering the seen- rity of the United States. 2. The French Government would instruct Admiral Robert, the French commander at Martinique with full authority over all of the other French colonies of the Western Hemisphere, to undertake with an American high ranking officer to be sent to Martinique for that purpose, the study and determination of such military steps as might in the judgment of the United States be required to avoid any disquiet on the part of the United States Government. The Ambassadernstated that owing to the present situation of France anything in the nature of a written contract or treaty would have to be avoided but that such oral arrangements as might be arrived at with Admiral Robert would be meticulously complied with. a. The French Government was appointing General Bonnavita as Military Attaché in Washington, and should the American Government se desire, the General would be instructed to leave immediately for the United States to cooperate in the coordination of such measures as night be agreed upon by Admiral Robert and the American officer to be sent to negotiate with Admiral Robert. 4. The French Government believed that in all of 230 the French celenies in the Western Hemisphere there was now a minimum of military forces stationed. In the opinion of the French Government, complete noutral. isation in the sense that the existing minimum military forces would either have to be sent away or be demobilized would be likely to stir up revolution the colonies, or at least social disorder, since the implication would be understood by the native populations as being an invitation to license through the renoval of all symbols of authority. 5. While the French Government would not discard the possibility of the issuance of an official statement by France with regard to the neutralisation of the French colonies in the Americas, it desired to know before reaching a final decision whether, if the measures above set forth were undertaken, the President still believed that such a statement would be necessary. I stated to the Ambassador that I would be glad to submit to the President the reply of the French Govern- sent as delivered to me and that at first glance it seemed to me that some of the steps suggested, if faithfully carried out, would undoubtedly remove some of the grounds for disquiet which this Government had possessed. I said that I was glad to note the friendly and coopera- 231 -7- tive reaction evidenced by the French Government to the suggestion made by the President. Purchase of musitions. eta.. the United States For French Indo-China The Ambassador then said that he had received a further telegram from his Government on another astter which had occasioned his surprise. He said this message was to the effect that the German Government had given permission to the French Government to purchase suni- tions in the United States for the use of the authorities in Indo-China and that he had, consequently, been instructed by his Foreign Minister to take up the negotiations recently conducted by Colonel Jacomy on behalf of the Indo-China Government and to ascertain whether the aunitions for the French authorities in Indo-China could now be obtained in the United States. The Ambassador said that upon receipt of this message he had sent a telegram to his Government inquiring whether this implied that the German Government would permit the shipment of the planes now in Martinique to Indo-China. He said that he had not received any reply to this inquiry as yet. The Ambassador thereupon inquired whether this Government would be prepared to facilitate the purchase by the French authorities in the United States of muni- 232 tions for Indo-China. I said to the Ambassador that it must be as evident to his as it was to me that the situation had changed completely since the time some weeks age when Colonel Jacomy had been informed that this Government would permit the sale of such aunitions as night be available to the Government of French Indo-China. I said that since that time the Japanese forces had occupied many points in Indo-China and it would be the obvious thing for this Government to want to know what practical assum- ances could be given that the aunitions that sight be bought here, or the planes that sight be sent from Martinique, would not fall into the hands of the Japanese authorities in Indo-China rather than into the hands of the French authorities. I said, furthermore, that in as much as all evidence of French resistance to the Japanese occupation had ceased, what reason could now be evidenced by the French Government that the dispatch of the aunitions or aviation material was of any practical or urgent need. The Ambassador replied that Indo-China would not only resist further aggression on the part of Japan, but would also probably soon be forced to resist aggression on the part of Siam. 233 I said that I was sure that the Ambassader must possess the feeling that any action taken by Sisa under present conditions must be action taken as least with the tacit acquiescence of Japan. I asked, consequently, whether the Ambassador could for a moment believe that Japan would permit the French Government in Indo-China to acquire munitions at this moment which might be utilized either in resisting Japan OF in resisting Siam. I also asked what explanation the Ambassador could give no as to why the German Government should accord permis- sion for the purchase of these munitions at this particular moment when the French Government had been either unable or unwilling to obtain the acquiescence of the German Government six weeks age to sending perfectly new and powerful airplanes to China before the actual occu- pation by Japan had begun. To all of these inquiries the Ambassador had no ready reply, and merely stated that he would give me further information as to the situation in Indo-China as a result of an inquiry which he would address to Admiral Decoux, the Governor General. Airplance in Martinious In speaking again of the airplanes in Martinique, the Ambassador said that he was informed that these air- planes had now deteriorated to such an extent that they 234 -10- would require & great deal of repair work before they could fly again. I said that this was not my information, but that on the contrary I was informed that the airplanes were being protected and that mechanics were looking after them. The Ambassador thereupon stated that should this Government desire to send a competent expert to look into the condition of these airplanes, he would be very glad himself to authorize the dispatch to Martinique of such an agent of the United States Government. Blooked French funds in the United States The Ambassador then inquired whether I had been informed by the President of his conversation with the Ambassador with regard to the request for the unblocking of French funds in this country se as to permit the French Embassy here to pay from these funds the expenses of French diplomatic and consular establishments in the Western Hemisphere and in certain countries of Europe, and also to utilise $1,500,000 for the purchase of beef in Argentina to be used in feeding French prisoners of war in Germany and in French occupied territory. The Ambassador also asked whether I had any information concern- ing his recent conversation on this subject with the Secretary of the Treasury. I replied that while the President had spoken to me 235 -11. concerning certain features of his interview with the Ambassador, the President had not spoken with me con- eerning the question of blocked funds. The Ambassador thereupon stated that he had out- lined the situation to the President and that as he was leaving, the President had said "I hope you will work out satisfactorily the question of your diplomatic and consular establishments on the American continent". I said to the Ambassador that I had spoken othygthis morning with the Secretary of the Treasury on the telephone and that I was afraid the Ambassador had sisunder- stood the President, since I was informed by the Seeretary of the Treasury that the President had made no com- aitment in that regard whatever. I then went on to say that I would have to inform the Ambassador that he could expect no relaxation by this Government of the blooking of French funds in so far as the suggested purchase of beef by France for the relief of French priseners of war was concerned. I said that under the accepted rules of international law and in accordance with various international agreements, the German government was obligated to undertake the proper feeding and care of the prisoners of war under its control. I stated that there seemed in the Judgment of this Government no justification whatever for the purchase by the French Government of large 236 -18- quantities of beef to be used in the feeding of prisencre of war, thus relieving the German Government of its valid obligations in this regard and making it easier for the German Government to feed its own troops and its own civilian population. I said that with regard to the facilitation of funds for the payment of diplomatic and consular establishments of France in the Western Hemisphere, I could at this time give him no definite reply. I said that all I could add in this regard was that questions of this character could undoubtedly be more readily solved if the French Government showed a more friendly and cooperative spirit in its dealings with the United States and that I trusted that the reply made by France as communicated to me this morning by the French Ambassador with regard to French colonies in the Americas wouldseen to the high officials of this Government as an indication of such desire on the part of the Vichy Government to cooperate to our autual advantage. The Ambassador then launched into a very long and exceedingly vohement tirade. He stated that the refusal of this Government at this juneture to release funds for the payment of French diplomatic and consular missions in the American continent was tantamount to a desire on the part of the United States to liquidate such establish- 237 -18. monte and as preef that this Government did not regard the Vicby Government as a sovereign government. He said that our refusal to permit French funds in the United States to be used for the purchase of food sup- plies to relieve the situation of French priseners of war was a proof that this Government had no humanitarian interest in the fate of these unfortunate individuals and that our action in this regard would be equivalent to a sentence of death for them. I said to the Ambassador that with regard to the first point, it seemed to be preferable that it be not discussed, that it seemed to me that 18 was for many easonsinadvisable to discuss the nature of the indopendence and sovereignty of the present French Govern- neat and that I believed that on full reflection he would agree with me that no useful purpose could be served thereby. with regard to the second point, I said that I could assure him, as I had in a previous conversation, that while the American people possessed to a full degree their traditional friendship for the French people and were aminated as they had been throughout their history by a humanitarian desire to relieve distress and suffer- ing of peoples in other parts of the world, it was the considered policy of this Government that no step should be taken which would in any sense facilitate or aid the 238 -14 Government of Germany in its prosecution of the present war. I said that it was well known to me that Germany had been exporting from occupied France many thousands of head of cattle for her own use and that if we agreed to permit France to send into the occupied sone very large quantities of beef, this would obviously only make it easier for Germany to pursue this course. The Ambassador immediately contradicted me and said that Wayne Taylor had told his that while the Germans had coanandeered cattle in the occupied sone, these cattle were being utilized for feeding German troops in that area. I replied that while I would not agree in any way that my information was incorrect, I could not see the slightest difference in the two cases presented. Here was the Ambassador demanding that the French Government be permitted to send beef into the occupied sone to feed the French priseners of war, and yet at the same time admitting through him that the eattle in that region which might be used for this purpose were being utilised for the Cheeding of German troops of occupation. I said that what the Ambassador had just stated confirmed me positively is my belief that the step which was proposed was merely a means of relieving Germany of her increasable -18- 239 obligation to food properly and give humanitarian treat. ment to the French priseners of was under her control without assistance from the outside world. The Ambassader then said that this made a "very grave situation'. I said that if he referred to the relations between the two countries, as I assumed he did, and had made this remark on the pretest that this Government was not giving friendly consideration to all the requests of the French Government, I night reind his that public opinion in the United States and the epinion of this Administretion had been prefoundly affected is a manner adverse to the present French Government by three things: first, the determination of the French Government with regard to the disposition of the French fleet as included in the terms of the armistice; second, the refusal of the French Government to return the airplanes in Martinique to the United States on the allegation that the terms of the Armistice made it necessary for all French sunitions in French territory to remain where they were at the time of the signing of the armistice, when only a few weeks age the American public had been informed that French airplanes in large numbers had left French possessions in Northern Africa in order to undertake the bembariment of Gibraltar; and third, the negotiation by 240 -16- the Vichy Government of an agreement with Japan which provided for a change in the status are in the Pacific by the occupation of Indo-Chima, although it was well known to the French Government that the maintenance of the status que in the Far East was a matter of peouliar concern to the United States. Furthermore, I said, did the Ambassador think that the statements made by his Foreign Minister is an interview with the press which the Foreign Minister was said to have given on the evening of October 4 in Vichy and in which N. Baudeia is alleged to have stated, among other things, "Japan is a great nation. Its prependerant position in the Far East cannot be denied by any realis- tie statesman, etc.", was the expression of a point of view which would be well received by American public opinion, or which would tend to bring eloser together the policies of the Government of the United States and the Government of France. At this point the Ambassador interjected to say that he was sure that his Foreign Minister had been misquoted again and that he would check up to ascertain whether such a statement had actually been made. I remarked to the Ambassador that I had been careful to say that his Foreign Minister had been "alleged" to have made this statement and that if this statement 241 -17- was not accurate, I would be glad to be informed accordingly. In conclusion, I said to the Ambassador that as soon as the President returned to Washington I would submit to him the reply of the French Government with regard to French colonies in the Western Hemisphere and that I would again discuss with him the question of therreleasebof funds sufficient to meet the expenses of the French diplomatic and consular establishments in the American Republics. For that reason, I said, I would prefer to withhold any further discussion on these problems until this conversation had taken place, and I said that I would ask the Ambassador to come to see me as soon thereafter as might be possible. Finally, I said that I trusted, in view of the cooperative spirit shown by the French Government in its latest communication to us, that the way might yet be found for a more friendly and understanding feeling between the two Governments than had seemed, at least on our part, possible because of the recent policies pursued by the Government of Marshal Petain. U:SW:IJ * COPY 242 DEPARTMENT OF STATE reply refer to WASHINGTON October 8, 1940 My dear Mr. Secretary: Reference is made to conversations between repre- sentatives of the Treasury and of this Department in connection with the question of the blocking of the personal bank accounts maintained in the United States by officers and employees of the Foreign Service serving in those countries which come within the scope of the Executive Order no. 8389 of April 10, 1940, as amended. I wish to take this occasion to say that the Dopartment is extremely grateful to the Treasury, and in particular to Mr. Pehle, for the prompt and efficient response given to requests for the unblocking of the bank accounts of certain Foreign Service officers. In a number of individual cases the officer has informed the Department that his account in a given bank has been blocked, and when the matter has been brought to the attention of the Treasury immediate steps have been taken The Honorable Henry Morgenthau, Jr., Secretary of the Treasury. 2- 243 taken to release the funds in question. Representatives of the Treasury and of this Department have agreed that for a number of reasons it would be inadvisable to arrange for the blanket unblocking of the personal bank accounts in the United States of all officers and American employees serving in the countries in question. This Department still considers that a system of blanket unblocking would be unwise and it has no wish to request the Treasury to give consideration to the adoption of such an arrangement. However, in view of the number of individual cases that have recently arisen and of the likelihood that there will be many more within the next few months, the Department ventures to submit to the Treasury for its consideration the following suggestion. A circular telegram would be addressed by the Department to officers serving in those countries which come within the scope of the aforementioned Execu- tive Order to inform them that the Department would be willing to present to the Treasury their requests for the unblocking of their personal bank accounts in the United States. A draft of the proposed telegram is attached hereto. It 244 -3- It is believed that the arrangements contemplated in the telegram would not be in conflict with the views heretofore shared by both Departments as to the inad- visability of a blanket unblocking. It is also believed that the proposed arrangements would serve several use- ful purposes. For one thing, it has become apparent that a number of officers and employees are unaware of the fact that their bank accounts have been blocked or are ignorant of the means whereby the funds can be released. For another thing, it is believed that it would be in the interest both of the Treasury and of this Department if the names of all the officers and employees concerned, together with the names and addresses of their banks, could be presented to the Treasury in definitive lists at stated intervels rather than as piecemeal cases from day to day. The Department will greatly appreciate receiving the Treasury's frank advice as to the proposed arrange- ments and, if they are acceptable in principle, will be glad to modify them in accordance with any suggestions offered. Sincerely yours, /s/ Cordell Hull Enclosure: Copy of proposed telegram. 245 PROPOSED CIRCULAR TELEGRAM To All Diplomatic and Consular officers in Belgium, Denmark, France, Luxemburg, Netherlands, Norway, and to Consular officers at Leopoldville, Algiers, Saigon, Tahiti, Tunis, Cayenne, Martinque, St. Pierre-Miquelon, Dakar, Batavia, Curacao, Medan, and Surabaya. 1. The Treasury Department has indicated its willingness to cause at the request of this Department the immediate unblocking of any personal bank account main- tained in the United States by a Chief of Mission, Foreign Service Officer, or American employee of the State Department now serving in a country that comes within the scope of the Executive Order no. 8389 of April 10, 1940, as amended, which imposes licensing requirements on transfers of funds. 2. The Department will be glad to present to the Treasury the requests of any of its personnel who wish their accounts unblocked. It is suggested that the requests of all persons at a given office be combined in one despatnh or telegram. If the latter, the cost of the telegram must be borne by the interested parties. The request should state the name of the officer or employee and the name and address of the bank where the account is maintained. 3. The officers and employees concerned will realize 246 -2- that only personal accounts can be unblocked and then only for the payment of personal obligations or the settlement of personal affairs. It would be a violation of the Executive Order no. 8389, a cause of acute embarrassment to the Department, and a serious dereliction of duty for an officer or employee to use his personal bank account in the United States to facilitate the transfer or release or remittance of funds for other persons, whether American citizens or aliens. 4. Officers and employees of other Departments who desire similar arrangements made in their behalf should consult the Departments concerned. 247 COPY DEPARTMENT OF STATE refer reply to WASHINGTON FA October 8, 1940 My dear Mr. Secretary Reference is made to conversations between repre- sentatives of the Treasury and of this Department in connection with the question of the blocking of the personal bank accounts maintained in the United States by officers and employees of the Foreign Service serving in those countries which come within the scope of the Executive Order no. 8389 of April 10, 1940, as amended. I wish to take this occasion to say that the Dopartment is extremely grateful to the Treasury, and in particular to Mr. Pehle, for the prompt and efficient response given to requests for the unblocking of the bank accounts of certain Foreign Service officers. In a number of individual cases the officer has informed the Department that his account in a given bank has been blocked, and when the matter has been brought to the attention of the Treasury immediate steps have been taken The Honorable Henry Morgenthan, Jr., Secretary of the Treasury. 248 -2taken to release the funds in question. Representatives of the Treasury and of this Department have agreed that for a number of reasons it would be inadvisable to arrange for the blanket unblocking of the personal bank accounts in the United States of all officers and American employees serving in the countries in question. This Department still considers that a system of blanket unblocking would be unwise and it has no wish to request the Treasury to give consideration to the adoption of such an arrangement. However, in view of the number of individual cases that have recently arisen and of the likelihood that there will be many more within the next few months, the Department ventures to submit to the Treasury for its consideration the following suggestion. A circular telegram would be addressed by the Department to officers serving in those countries which come within the scope of the aforementioned Execu- tive Order to inform them that the Department would be willing to present to the Treasury their requests for the unblocking of their personal bank accounts in the United States. A draft of the proposed telegram is attached herete. It 249 It is believed that the arrangements contemplated in the telegram would not be in conflict with the views heretofore shared by both Departments as to the inad- visability of a blanket unblocking. It is also believed that the proposed arrangements would serve several use- ful purposes. For one thing, it has become apparent that a number of officers and employees are unaware of the fact that their bank accounts have been blocked or are ignorant of the means whereby the funds can be released. For another thing, it is believed that it would be in the interest both of the Treasury and of this Department if the names of all the officers and employees concerned, together with the names and addresses of their banks, could be presented to the Treasury in definitive lists at stated intervals rather than as piecemeal cases from day to day. The Department will greatly appreciate receiving the Treasury's frank advice as to the proposed arrange- ments and, if they are acceptable in principle, will be glad to modify them in accordance with any suggestions offered. Sincerely yours, /a/ Cordell Hull Enclosures Copy of proposed telegram. 250 PROPOSED CIRCULAR TELEGRAM To All Diplomatic and Consular officers in Belgium, Denmark, France, Luxemburg, Netherlands, Norway, and to Consular officers at Leopoldville, Algiers, Saigon, Tahiti, Tunis, Cayenne, Martinque, St. Pierre-Miquelon, Dakar, Batavia, Curacao, Medan, and Surabaya. 1. The Treasury Department has indicated its willingness to cause at the request of this Department the immediate unblocking of any personal bank account main- tained in the United States by a Chief of Mission, Foreign Service Officer, or American employee of the State Department now serving in a country that comes within the scope of the Executive Order no. 8389 of April 10, 1940, as amended, which imposes licensing requirements on transfers of funds. 2. The Department will be glad to present to the Treasury the requests of any of its personnel who wish their accounts unblocked. It is suggested that the requests of all persons at a given office be combined in one despatch or telegram. If the latter, the cost of the telegram must be borne by the interested parties. The request should state the name of the officer or employee and the name and address of the bank where the account is maintained. 3. The officers and employees concerned will realise 251 that only personal accounts can be unblocked and then only for the payment of personal obligations or the settlement of personal affairs. It would be a violation of the Executive Order no. 8389, a cause of acute embarrassment to the Department, and a serious dereliction of duty for an officer or employee to use his personal bank account in the United States to facilitate the transfer or release or remittance of funds for other persons, whether American citizens or aliens. 4. Officers and employees of other Departments who desire similar arrangements made in their behalf should consult the Departments concerned. 252 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE October 9. 1940 Secretary Morgenthau Mr. Cochran STRICTLY CONFIDENTIAL Mr. Zoltowski, Financial Counselor of Poland, called on me at 1 o'clock today. He had one individual case, which had been the subject of previous correspondence, and for a discussion of which I took him to the Foreign Funds Control. where he was received by Mr. Wechsler. In his conversation with me Zoltowsky referred to a previous talk in which he had told ne that he understood that the $68,000,000 of gold, constituting the Polish Central Bank reserve, which had been in France for safekeeping, had been taken to Dakar when France was invaded. He referred to the French offer to make an equivalent amount of gold available to Poland in Canada, and to the Polish response, in accepting this offer, that France assist in arranging that such gold be free from blocking in Canada. Zoltowski stated that nothing further on these negotiations developed until recently when the Vichy Government informed the Polish Government in London that under a French decree dated August 8 the holdings in French territory of counries which had been invaded by Germany were blocked. Thus the gold belonging to the Bank of Poland and situated in French West Africa was blocked, since Poland had been invaded. The note which conveyed this information sought to terminate further discussion of the subject. Zoltowaki is naturally much upset over this action of France, since the gold constituting the reserve stock of the Polish Central Bank was the one source from which the Polish officials still functioning outside of Poland hoped to be paid. Furthermore these desired that as much as possible of this sum be conserved, looking forward to a restoration of Poland. Zoltowski preferred not to give me a written summary of his file of correspondence on this case. He would be agreeable, however, to come in to Washington at any time to show us this correspondence and to discuss it with us. Just now he is studying the possibility of some action that might be taken against France in this country. While he did not mention it, I believe that he had an attachment of French assets in mind. It will be noted that cablegram No. 17 of October 6 from the American Consul at Dakar referred to Polish gold in his district which, he understood, the Government officials of Dakar considered as "belonging to France because of advances made to Poland were many times greater than the value of gold holdings of Poland". Zoltowski said nothing to me about the French claiming this Polish gold in Dakar as a set-off against sums owed by Poland to France on earlier loans. Zoltowaki simply considered the gold "frozen". In cablegram No. 19, dated October 8. the Consul at Dakar reports further conversation that Director Michalaki of the Bank of Poland (who, according to an earlier hich I had with Zoltowski, had been placed in charge of the Polish gold in France,) had introduced himself to our Consul and had stated that Poland owns 56,920 kilos of the gold which is now in French West Africa. nml 253 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE October 9. 1940 Secretary Morgenthau TO Mr. Cochran FROM Mr. McKeon of the Federal Reserve Bank of New York gave us the following information regarding the transfers listed below from Italian accounts maintained with the Chase National Bank and the National City Bank. National City Bank Date October 2 ctober 2 Amount Debited $ 40,000 35,000 Account Debited Bank of Napoli Trust Paid To Swiss Bank Corp., Company, New York New York Credito Italiano, Payment of acceptance drawn by Guido Ajmore New York Marsan Chase National Bank Date October 7 Amount Debited $352,000 Account Debited Banca Commerciale Italiano, New York Paid To Check drawn to the order of Monsignor Thomas McDonnell for deposit with the Central Hanover Bank & Trust Co. for the account of the Society for the Propagation of the Faith 254 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE October 9. 1940 Secretary Morgenthau TO FROM Mr. Cochran Mr. McKeon of the Federal Reserve Bank of New York gave us the following information regarding transactions in the account of the State Bank of the U.S.S.R. maintained with the Chase National Bank. Principal changes is the account during the period October 3 to October 9. inclusive, were as follows: Date Received From Amount Credited October 3 $ 50,000 Amount Debited Chase National Bank, Garfield Branch, by $700,000 Paid To Reichsbank, Berlin order of Rasno Export Co. crober 4 57,000 Commercial Letter of Credit Account October 5 121,000 Commercial Letter of Credit Account 56,000 Moscow Narodny Bank, London October 7 143,000 October 8 Bank of Sweden, Stockholm 117,000 Narodni Banka, Prague 310,000 National Bank of Switzerland, Zurich 60,000 Received from the 361,000 Amtorg Trading Co. 500,000 Reichabank, Berlin 60,000 Irving Trust Co. by order of the Bank of Chase National Bank in payment of Exchange Contract on London Canton. Hong Kong October 9 2,765,000 U. S. Mint, San Francisco. advance payment against gold ship- 55,000 ment 173,000 Jordbrukarbanken. Stockholm BMP Commercial Letter of Credit Account 255 TREASURY DEPARTMENT Chauncoy INTER OFFICE COMMUNICATION DATE October 9. 1940 Secretary Morgenthan Mr. Oochran FROM Mr. McKeon of the Federal Reserve Bank of New York gave us the following information regarding the transfer listed below from the account of the Reichsbank, Berlin, maintained with the Chase National Bank, Date Amount Debited October 7 $400,000 Paid To A/B Svenska Handelsbanken, Stockholm for account of Allgemeine Warren Finanzerung Gesellschaft 256 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE TO FROM OCT - e 1940 Secretary Morgenthau Mr. Foley In accordance with the request contained in Mr. Thompson's memorandum ( f December 26, 1939, there is attached a summary report of studies or projects carried on in the Office of the General Counsel for the month of September, 1940. Smith Attachment 257 SUMMARY REPORT ON STUDIES OR PROJECTS IN THE OFFICE OF THE GENERAL COUNSEL SEPTEMBER 1940 The following matters received attention in the Office of the Chief Counsel for the Bureau of Internal Revenue: 1. Income Tax - Second Revenue Act of 1940. H.R. 10413, the Second Revenue Act of 1940, passed the House on August 29. It passed the Senate with numerous amendments on September 19. It is now pending in conference with prospects of an agreement being reached within a few days. Preliminary studies are being made with respect to amendments of the regulations which will be necessitated by the ultimate enactment. 2. Income Tax - Proposed Non-Recognition of Gain in the Case of Vessels. The Maritime Commission is sponsoring before the Merchant Marine Committee of the House an amendment of the Merchant Marine Act to the end that the owner of vessels would be exempt from taxation with respect to certain gains applied in the purchase or construction of vessels. Treasury Department representatives have cooperated with representatives of the Commission with a view to preventing the amendment from opening the door to abuse, and to the development of a statement of the amendment in such form as to be capable of fairly certain and orderly administration. 3. Social Security - Regulations 107. Regulations 107 relating to the tax on employers of eight or more persons, forwarded by 258 -2- this office on August 27, were signed by the Commissioner on August 29, and approved by the Acting Secretary on September 12, 1940. 4. Income Tax - Taxation of Virgin Islands. Consideration is being given to the suggestion that the Internal Revenue Code be revised so as to subject to income taxation the inhabitants of the Virgin Islands. 5. Social Security - Benefits and Tax Status of Men Serving in Land and Naval Forces. In cooperation with representatives of the Social Security Board, the Railroad Retirement Board, and the Veterans Administration, and at the request of the Legislative Counsel for the Treasury, study has been given to the question of an appropriate statutory provision for a system of benefits and social insurance for men serving in the land and naval forces and their dependents. Senator Vandenburg proposed in the Senate an amendment to H.R. 10413, the Second Revenue Act of 1940, de- voted to this problem. The Vandenburg Amendment was first adopted but was later displaced by a revision broad enough to render germane in conference almost any system which might be developed in the meantime. The internal revenue would be affected primarily by reference to payments made by employers to employees or to their dependents after induction of the former employee into the service. So far as the Bureau is advised, the matter is still pending in conference. 259 -36. Income and Other Taxes - Codification of Federal Regulations. There is now under review the galley proof of the 1939 Supplement to the Code of Federal Regulations covering Chapter I of Title 26. All of the above matters were handled under the supervision of G. C. Adams, Head, Legislation and Regulations Division. The following matters received attention under the general supervision of Assistant General Counsel Cairns: 7. Contingent Expenses. An opinion on this subject was prepared by Mrs. Haley and was signed on September 14, 1940. The opinion concludes that the Secretary may delegate to the Administrative Assistant to the Secretary authority to approve expenditures for contingent expenses of the Bureaus and offices of the Treasury Department in Washington, D. C., paid from the appropriation "Contingent Expenses, Treasury Department, 1941". 8. National Gallery of Art. An opinion prepared by Mr. Gilmore and signed on September 17, 1940, concludes that since the National Gallery of Art is a "bureau" of the Government, the Budget and Accounting Act requires estimates prepared by the Board of Trustees of expenditures and appropriations to be submitted to the Bureau of the Budget. The Budget, acting for the President, may revise such estimates in preparing the final budget. 9. "Temporary position" Within the Meaning of National Guard and Conscription Acts. The opinion on this question was prepared by 260 -4Mr. Wolf and was signed on September 23, 1940. The opinion (1) sets forth a standard for determining the answer to the question of what constitutes a "temporary position" as the term is used in those Acts; and (2) advises that section 8(d) of the Selective Training and Service Act of 1940 (Public, No. 783, 76th Cong.) provides a complete answer to the question whether an employee called for active military duty who is placed in a furlough or leave-without-pay status has left his position within the meaning of the Acts. 10. The President's Proclamation of June 27, 1940, promulgated pursuant to section 1 of Title II of the Espionage Act of June 15, 1917 (U.S.C. title 50, sec. 191), has necessitated considerable study regarding the extent that the regulation of anchorages and movements of vessels has transferred functions from the War Department and the Interstate Commerce Commission to the Treasury Department. This study also includes the preparation of comprehensive new regulations under the cited Act supplementing those issued by the Secretary of the Treasury, with the approval of the President, on June 27, 1940. Mr. George E. McMurray, Coast Guard Legal Section, and Mr. Ernest Feidler of the Opinions Section, in cooperation with administrative officers of the Coast Guard, are engaged upon this work. 261 -511. The Selective Training and Service Act of 1940 (Public, No. 783, 76th Cong.), has raised certain problems for the Coast Guard, such as changes in rates of pay for enlisted men, whether the opportunity to volunteer for induction into the "land and naval" forces comprehends the Coast Guard, and so forth. These problems are being studied by Kenneth S. Harrison and James C. Morton, Jr., of the Coast Guard Legal Section. 12. Trade Agreement Question. A study was made by Mr. Dwan, Chief Counsel, Customs, of an important case recently decided by the Customs Court, C.D. 373. The case necessarily involved the important question whether the President, by his proclama- tion of the trade agreement, transferred an article from one paragraph of the tariff act to another. However, the court did not seem to see that problem, although the result of the case is particularly bad since it reduces the rate of duty by more than 50% in direct violation of an express provision of the Trade Agreements Act. Mr. Dwan and Mr. Agee, Assistant to the Chief Counsel, worked with the General Counsel of the Tariff Commission and a representative of the State Department on a memorandum discussing this question, and the memorandum was presented informally to the Assistant Attorney General's office by Mr. Agee. As a result, a petition for rehearing has been filed with the court, based to a considerable extent upon the memorandum mentioned above. 262 -613. Schmoll V. Federal Reserve Bank of New York (in the Appellate Division of the Supreme Court of New York): This is an action to compel the respondent Bank to certify a different rate for the Brazilian milreis for certain dates than that previously certified pursuant to section 522 of the Tariff Act of 1930. In response to a letter from the attorneys for the Bank, Mr. Everett Smith of the Customs legal staff prepared a letter commenting upon the brief of the petitioner-appellant and suggesting certain arguments in favor of the respondent's position. A copy of the letter was sent to the United States District Attorney at New York for his use in preparing a brief as amicus curiae. The letter suggested two arguments for consideration in addition to those previously made: (1) that the action is in effect one against the United States or to which the United States is an indispensable party, and (2) that as state courts will not assist the United States to administer or enforce its tax laws, they should not assist a private litigant who claims to seek the proper administration of the revenue law. The following matters received attention in the Legislative Section nder the direction of Assistant General Counsel Bernard: CONTINUATION OF PROJECTS 14. Bill Relative to the Harrison Narcotic Act: Bill to Relieve the Hospitals from Double Taxation (for 263 -7description see original report, Item 9). This bill, prepared by Miss McDuff, was returned from Budget with a request for a further expression of our views in the light of the comments of the Federal Security Administrator in opposition to the pro- vision in the bill which would require registration by practitioners performing services in the employ of registered hos- pitals. In response to this request a letter has been prepared for the signature of the Administrative Assistant to the Secretary, together with a lengthy statement of arguments in support of this provision. 15. Fidelity Bond Bill (formerly identified as "Bond Survey") (for description see original report, Item 10). A draft of the proposed fidelity bond bill and letter of transmittal to Congress were sent to Budget on March 30, 1940. Because of the interest in this bill of about ten other agencies, the Bureau of the Budget has not yet been able to give it the usual clearance. 16. Compilation of Money Statutes (for description see original report, Item 11). Miss McDuff is continuing the work on this material. 17. Compilation in Annotated Form of Laws and Regulations Affect- ing Government Personnel (for description see original report, Item 13). The Legislative Section is continuing this project. 18. Codification of Federal Regulations (for description see 264 -8- original report, Item 16.) This project may now be regarded as completed since the last volume of the Code of Federal Regulations has now been published. Mr. Spingarn handled the Treasury phases of this work. 19. Codification of Anti-counterfeiting and Related Laws (for description see original report, Item 7.) Mr. Koken is continuing his work on this matter. 20. Federal Depositary System (for description see original re- port, Item 6). Mr. Reeves is continuing his work on this bill. It now appears improbable that legislative consideration of the bill can be secured this session of Congress. 21. Acting Administrators Bill (for description see June report, Item 33). Miss McDuff is continuing her study of the necessity and feasibility of general legislation to provide for acting bureau or division chiefs in the absence of a chief. 22. Testimony of Secretary Morgenthau Before Congressional Com- mittees. At the request of the Office of the Secretary, Miss McDuff is assembling and indexing the testimony of Secretary Morgenthau before various committees of Congress from 1934 to date. This ma- terial will be bound in volumes. 23. Litigation: Barlow Award. John F. Clark has brought suit in the District Court of the United States for the District of Columbia against Lester P. Barlow, the bomb inventor, claiming a half interest 265 -9in the sum appropriated by Congress to Barlow to reimburse him for using his bomb patents. The Secretary of the Treasury and the Treasurer of the United States have been joined as defend- ants for the purpose of restraining them from paying to Barlow the sum appropriated. Justice has been requested to take the necessary action to defend. Ellis and Hansen worked on the case at this end. The following matters were worked on under the direction of Mr. Bernstein: 24. Foreign Exchange Control. An extensive amount of work has been done in connection with the administration of the freezing control, including the issuance of general licenses and general rulings, the answering of voluminous correspondence relating to the Order, the preparation of licenses covering diplomatic staffs and the examination of legal questions which are continually aris- ing. The entire staff has been engaged in this work. In cooperation with the Federal Reserve Bank of New York we are preparing a pamphlet to contain the Executive Order and Regulations and amendments thereto, general rulings and general licenses. Messrs. Friedman and Groman are preparing this. In connection with the question of the status of Monaco under Executive Order No. 8389, this office prepared letters to the Department of State and discussed the matter informally with repre- sentatives of that Department. As a result of these conversations 266 - 10 and correspondence, the Department of State wrote to us and said there is no objection to our treating Monaco as being covered by the Executive Order. Messrs. Bernstein and Friedman handled this matter. 25. Purchase of Chilean Pesos. In cooperation with the Opinions Section, a study was made of the legal aspects of a proposed ar- rangement for the acquisition by the Stabilisation Fund of Chilean pesos from the Government of Chile. We also participated in discussions with several government agencies concerning the Chilean proposal. Messrs. Bernstein, Friedman, and Groman worked on this. 26. Canadian Account. A letter to the Department of State was prepared transmitting a copy of a letter from the Federal Reserve Bank of New York requesting that the Government of Canada advise us directly as to the persons who are authorized to operate the Government of Canada Account B. Mr. Friedman handled this work. 27. Dutch Accounts. This office is cooperating with the Federal Reserve Bank of New York and the Department of State in obtaining from the Dutch Minister in Washington authentication of the signatures of the persons authorized to operate the accounts of the Netherlands Government with the Federal Reserve Bank of New York and confirmation by the Dutch Minister of the authority of such persons to operate such accounts. 267 11 - 28. Canadian Silver Agreement. A letter was prepared to the Federal Reserve Bank of New York indicating this Department's approval of an amendment of the existing arrangement for the purchase of silver from Canada, which amendment was suggested by the Bank of Canada. Under the amendment to the arrangement payment for the silver will be made into an account of the Canadian Government instead of an account of the Bank of Canada. Mr. Friedman handled the last two above-mentioned matters. 29. Russian Inquiry. This office assisted in the preparation of a memorandum of information which might be used by the State De- partment in replying to the request of the Russian Government that this Government give assurances that it will continue to purchase gold from Russia. Mr. Bernstein did this work. 30. Questionnaire Sent out by Pan-American Union. This office cooperated with Mr. Cairns' office in preparing replies to certain questions included in a questionnaire sent out by the Pan-American Union in preparation for a conference to be held on the question of cooperation between the law enforcement agencies of the countries belonging to the Pan-American Union, particularly with reference to activities of aliens. Mr. Friedman worked on this matter. 31. American-Mexican Claims Bureau V. Morgenthau and Julian. A petition to intervene as plaintiff in this case, which involves awards of the Special Mexican Claims Commission, was transmitted to 268 - 12 the Department by the United States Attorney with a request for our comment. 2 letter in only THE propered My WITH office sug- gesting to the United States Attorney the possibility of attempting at this time to have the whole suit dismissed. Messrs. Sutton and Friedman prepared the letter. 32. Z. AND F. Assets Realisation Corporation V. Cordell Hull, etc. Petitions were filed in the United States Supreme Court by the plaintiff and intervenor plaintiff for a writ of certiorari to the United States Circuit Court of Appeals for the District of Columbia. We conferred with Justice with respect to the brief to be filed by the United States. A brief for the United States was filed on September 20. Mr. Bernstein and Miss Hodel handled this work. 33. Armand Schmoll V. Federal Reserve Bank of New York. The petitioner-appellant filed a brief on appeal from the order of Mr. Justice Rosenman dismissing the petition as a matter of law. This office has been cooperating with Customs in considering the question of filing a brief on behalf of the United States as amicus curiae in the above case. This matter was handled by Mr. Bernstein and Miss Hodel. 269 October 9, 1940. MEMORANDUM TO: The Secretary FROM: Mr. Gaston The following is a summary of information received from the Federal Bureau of Investigation: October 2nd - a memorandum on general information about activities of Germans and German sympathizers which was thought to be of possible interest. October 4th - memorandum relative to labor troubles encountered in the construction of the Corpus Christi Naval Base. October 4th - a letter stating that an unverified report claims that General Juan Andreu Almazan recently engaged Mr. Homer Cummings, former Attorney General, as attorney and lobbyist. Also that an unidentified follower of General Almazan in San Antonio, stated that General Almazan claims that everything is "fixed" in the State Department and that Almazan will be recognized as a bel- ligerent if he succeeds in starting a revolution. October 5th - a letter stating that the Marine Midland Trust Company, New York, had on October 3, 1940 received $1,233,600 from Deutsche Goldidiskontbank, Berlin, Germany, to be credited to the account of the law firm of Topken and Farley, attorneys for the German Consulate General. October 5th - a memorandum pointing out that European nationals avail themselves of the laws of Switzerland to incorporate in Switzerland, using dummies as incorporators, and stating it is quite possible that agents of the German Government as well as other foreign governments may use this device. October 5th - a memorandum setting forth expressions of opinion from a German source on the current European situation, particularly with respect to the Dakar expedition and the recently signed Germen-Italian-Japanese pact. 270 10/9/40. Memo. for Secretary Re F.B.I. Information. October 8th - a memorandum re an alleged four-hour conference between Captain Wiedemann, German Consul General at San Francisco, and a British Diplomatic official. It is claimed that the Captain indicated no disloyalty to Germany but showed a lack of friendliness to the present leaders. He stated that until recently Hitler had his own way in war plans, but that the apparent failure of the invasion of England to go forward according to plan was causing the army leaders to become less and less "yes" men. Wiedemann stated that he believed this was the beginning of the end and seemed to have instigated the conversation to learn how drastically England would deal with Germany at the conclusion of the war. 271 TREASURY DEPARTMENT Mind INTER OFFICE COMMUNICATION For DATE October 9. 1940 Secretary Morgenthau TO Mr. Cochran The six reporting banks' transactions in registered sterling were as follows: Sold to commercial concerns 1106,000 Purchased from commercial concerns 1 13,000 The Federal Reserve Bank purchased 40,000 in registered sterling from the New York agency of the Bank of Taiwan, Ltd. and 4,000 from another non-reporting bank, Open market sterling was quoted at 4.04 until late afternoon, when it eased to close at 4.03-1/2. Transactions of the reporting banks were as follows: 1 6,000 Sold to commercial concerns Purchased from commercial concerns L 9,000 The Swiss franc remained fairly steady in very light trading. After touching yesterday's high of .2317-1/2, the rate returned to .2317 at the close, A reaction took place in the Cuban peso quotation. As against yesterday's discount of 7-1/4%, that currency closed at 7-7/8% today. The other currencies closed as follows: Canadian dollar 13-1/2% discount Swedish krona Reichamark Mexican peso .2383 .4005 .2083 .2350 .0505 .0505 Argentine peso (free) Brazilian milreis (free) Lira There were no gold transactions consummated by us today. CONFIDENTIAL 272 -2- The Federal Reserve Bank reported that the following gold shipments were being consigned to it: 6,221,000 from Portugal, representing three shipments by the Bank of Portugal, to be earmarked for its account. 4,188,000 from Canada, shipped by the Bank of Canada for its own account, for sale to the U. S. Assay office at New York. $ $10,409,000 Total The Bombay gold price declined the equivalent of 5$ to $33.83, and silver was unchanged at the equivalent of 44.56 In London, spot silver was unchanged at 23-7/16d. The forward quotation was also 23-7/16d, representing a gain of 1/16d. The dollar equivalent of this price is 42.56 Handy and Harman's settlement price for foreign silver was unchanged at 34-3/4*. The Treasury's purchase price for foreign silver was also unchanged at 35$. We made five purchases of silver totaling 500,000 ounces under the Silver Purchase Act. Of this amount, 300,000 ounces represented a sale from inventory, and the remaining 200,000 ounces consisted of new production from foreign countries, for forward delivery. CONFIDENTIAL 273 October 9, 1940 Knox called me over the White House telephone and said that he is ready to go to the President and recommend that the Navy give the English the entire Norden bombeight. He said that they had given us things equally valuable, such as a device where a plane, through this radio, can detect another plane in the dark. It is device which the so-called Night Hawks are now using suocessfully. The so-nalled Night Hawk device came through the Tizard Commission. 274 Notes on Conference in the Secretary's office 3 P.M., Wednesday, October 9, 1940. Those present, Secretary Morgenthau, Mr. Knudsen, Secretary Knox, Secretary Stimson, Mr. Patterson, Mr. Forrestal, General Marshall, General Brett, Admiral Towers, Commander Pennoyer, Mrs. Klots, Mr. Young, Mr. Foley, and Mr. Buckley. (This meet- ing was called as a result of the first inspection trip to the Consolidated aircraft plant at San Diego.) Secretary Morgenthau asked Mr. Forrestal to tell about the expedition to San Diego. Forrestal said that Major Fleet sounded like a man on the verge of a nervous breakdown, that he had been faced with an extremely rapid plant expansion, that there had been no delegation of authority, and that there was resultant confusion in the Consolidated plant. He added that Fleet was a fanatic and needed a responsible man to whom he could delegate authority to run the plant. Forrestal said that Fleet had mentioned a lawyer that he might be able to get (Mr. Schnacke). It was Forrestal's idea that Mr. Schnacke could be a buffer against Fleet's mental gymnastics. Forrestal said with respect to the question of design that the British should take over the United States type ships insofar as they could, because a great deal of time would be required to make changes in the planes already under construction. Knox added that he had had lunch with Purvis the day before and that he had sold Purvis on the idea that the British should adopt the United States type of bomb and bomb rack so that that question might be eliminated. Knox said that he had also talked with Admiral Furlong about guns for the ships, and that it might be possible for the Navy to provide the machine guns and bombs to go with the planes turned over to the British. Knox added that he wanted to talk with Stimson and Morgenthau after the meeting about the bomb sight. Knox said that if the stablizer portion of the secret bomb sight could be left in the planes a thirty day delay would be eliminated. There seemed to be some difference of opinion among the mem- bers of the group as to the delivery schedule of Concolidated, so that the specific figures were not discussed. Forrestal pointed out that Consolidated had a Coast Guard flying boat about ready for delivery, but the Secretary said that he certainly would not give that up to the British. 2 Stimson asked what could be done toward standardization. Pennoyer said that it was very clear that nothing could be done at present on ships in production, that any change in design would slow production, and that he did not see how very much standardization could be achieved before the end of the current contract which would be next fall. Pennoyer added that part of the delay at the present time in Consolidated was due to the fact that wings were not being delivered by Brewster and that it was difficult to get adequate delivery from the aluminum company on forgings. Secretary Morgenthau said that certainly from now on addi- tional orders should call for just one type boat and one type bomber. Forrestal agreed with Pennoyer that little could be done at present to standardize the design as any change would definitely interfero with production. By not attempting to standardize the design, Forrestal pointed out that the British would get more planes quicker. Knox said there should be continued effort, however, toward the standardization of design but that, of course, the results of it would not show up until next year when new orders came into production. Secretary Morgenthau said he thought it was a discouraging outlook, but that both the British and the United States force should get together on the planes for next year. Secretary Morgenthau pointed out that the Army had twentynine B-24A's on order which had certain deficiencies, and it was his idea that the Army should not only give up twenty but that it should also give up the remaining nine as they would be orphans. General Marshall said that the Army should not have given up that many anyway. Secretary Stimson pointed out that Major Lyon had not yet returned from the Coast BO that the group did not have the benefit of his report. Secretary Morgenthau said he would like to see and hear what Major Lyon had to say before any definite action was taken. With respect to standardization, General Brett pointed out that there was already in effect a Joint Army-Navy-British Standardization Committee. This Committee had been working pretty well but it was hindered by the lack of British technicians. Knox said he had seen Lord Lothian and asked that the British send over some good technical people as well as some experts on aircraft operations. Forrestal said that Air Commodore Mansell was the type of person that should be sent over. Admiral Towers added that the British needed technical men to discuss radios, guns, bombs, armor, etc. There were evidently a number of technical items which had not yet been discussed between the British and the United States Army and Navy. 276 -3Mr. Kndden said that they had asked the British to get some technicians several times, but that he was never able to get any answer. Knox said that Lothian would 000 that some one was sent over. Brett added that he had had the same experience and that he had been trying to get the British back to work for the last six weeks but that they kept running out on him. Secretary Morgenthau said that if Brett would give him the items for which technicians were needed that he would tell Purvis at the end of the meeting and have them brought to the United States at once. Towers said he already had the list. The Secretary suggested that Towers and Brett get together on it with Knudsen. The next thing to come up for discussion by the group was the management of the Consolidated plant. Forrestal said that Fleet would have to get somebody to help him, some one who could take over on the production job, and that somebody would have to tell Fleet the kind of men to get. Forrestal even went so far as to suggest taking the plant away from Fleet, but Knudsen said that that could not be done. Patterson suggested that Ted Wright ought to be able to find some competent people. Patterson also stated that he didn't see why Fleet should be allowed to enlarge his plant when you couldn't get any planes out of it anyway. Further, that Fleet was a nut, that he roamed around and raved and clawed the air while the plant remained idle. He thought it was cockeyed and hopeless. Mr. Knudsen said that Fleet needed new personnel badly and that he didn't have any confidence in the present setup. Stimson suggested that Fleet might be put under a receiver. It was agreed that there should be further discussion after receiving Major Lyon's report. Next there was some discussion as to the production estimates which the group had received at the Consolidated plant. In this instance also, however, it was decided that little could be done until Major Lyon returned. It was arranged that Stimson, Knox, and Knudsen should work together in an attempt to try to arrange something intelligent in the way of a production schedule. There was some further discussion as to the municipal problens brought up by Major Fleet at San Diego. Knox said that he thought only half of the cost should be borne by the Navy. Stimson added that he was shocked at the suggestion of doing anything at San Diego where the plant was delinquent, and further what was the point of building a new city to be bombed in the next war in the wrong geographical location. Secretary Morgenthau pointed out, however, that the plant was there, that planes had to be built and 277 -4that certain facilities were necessary. Secretary Stimson said he didn't see why fancy houser and water plants should be built for the Consolidated workers, and Secretary Korgenthau kept in- sisting that some facilities would have to be provided for the 3000 people who would be working at the Consolidated plant. Mr. Knudsen said that when Major Fleet asked the Defense Commission for an increased plant that he had said nothing about these other problems. Forrestal said it was perfectly possible to make the water system self-liquidating, but Foley pointed out that there might be some trouble in getting a sufficient vote in San Diego to put the deal across. Forrestal said it would take about 7 million dollars to do the job for the water and about 2 million dollars to fix the sewer system. Knox said that the Navy would stand for half the cost. Secretary Stimson said he would like to have another meeting on the whole problem after he had a chance to do his home work, but that in the meantime Secretary Morgenthau should talk with the English and get them to send over technical men. Knox asked Secretary Morgenthau to plead with Purvis to standardize the bomber. It was suggested by Foley that a sub-committee be set up to look after the San Diego problems, but it was agreed that Forrestal should handle the situation. Secretary Morgenthau asked Knudsen if he would follow up the Brewster wings and the aluminum delivery and Knudsen said that he would fix it up. ooOoo By. 278 Agenda for Conference at 3:00 P.M. on October 9, 1940 Re Consolidated Aircraft Production Program Introduction It was found in conference with officials of Consolidated Aircraft Corporation at San Diego on October 4 and 5 that estimated deliveries of bombers and flying boats to the United States Army, United States Havy, and the British Government will be substantially less than earlier estimates upon which allocation of ships as between the United States Army and Havy and the British Government had been predicated. The comparison of these revised delivery estimates by Consolidated with the earlier estimates is as follows: Estimated Deliveries of Bombers As per agreement between Secretary Stimson and Secretary Morgenthan Army Month British As per Consolidated's Revised Estimate Total British Army Total 1940 Oct. 1 0 Nov. 1 3 3 0 3 3 0 7 5 2 Dec. 4 3 1 6 3 3 1941 5 Jan. 4 3 Feb. 4 5 4 7 5 0 7 7 7 0 9 April 4 9 11 11 15 14 24 8 1 March 11 3 8 8 June Total 10 16 26 41 67 108 7 1 10 May 3 14 13 16 50 64 Estimated Deliveries of Flying Boats As per agreement between Secretary Knox and Secretary Morgenthan Month Haw British As per Consolidated's Revised Estimate Total Navy British Total 1940 Oct. 0 0 0 0 0 0 7 Dec. 1 Nov. 6 3 4 5 6 7 11 4 11 9 19 7 1941 Jan. 9 10 19 10 22 Feb. 12 12 24 13 10 March 12 24 12 12 24 12 April 13 25 12 15 27 12 20 41 15 21 14 29 May 17 34 15 17 16 A June 94 185 89 81 91 Total 170 -2- 279 The above tables indicate a drop of 50% in Consolidated's estimated deliveries prior to June 30. 1941 Thun, the objective of getting substantial quantities of bombers and flying boats to the British Govern- ment before June 30, 1941, cannot be achieved without further adjustments. Further, a review of the situation in the Consolidated plant indicates that even these revised estimates of deliveries will not be met. Support for this statement is the fact that the firm insists that not the slightest change be made in any aircraft now in production. This production problem must therefore be given continuous attention. In any event, there will be further delay of at least thirty days to adapt these planes to British combat requirements. This period will be increased to from sixty to ninety days unless the automatic pilot portion of the Norden bomb sight be released. To increase or expedite deliveries to the British between now and June 30, 1941, as well as after June 30, 1941, requires certain immediate decisions and actions, an outline of which follows: I. Action required to increase or expedite deliveries to the British prior to June 30, 1941. (1) A decision from the Navy as to release of the automatic pilot portion of the Norden sight. (2) A decision from the British as to their willingness to take flying boats and bombers with certain combat deficiencies which must be remedied, provided the automatic pilot portion of the Norden sight be released. (3) A decision from the British as to how many B-24 bombers they would take if the automatic pilot portion of the Norden bomb sight were not released, in view of the serious delay to be caused by installation of the Sperry pilot. (4) A decision by the Army as to release of nine more B-24-A bombers to the British. (Seven B-24 bombers will be produced, of which the first 6 will go to the British and 1 to the Army. Then 29 B-24-A bomber's will be produced with 20 going to the British and 9 orphans to the Army under the present agreement. Originally none of these bombers had turrets, leak-proof gas tanks, or armor. Provision will be made in a few of the later deliveries for tanks and armor.) (5) Immediate expediting of deliveries of wing-tips for flying boats by Brewster. They were 15 sets behind on October 5. 280 3- (6) Immediate expediting of deliveries of various parts by the Aluminum Company of America, (7) Immediate expediting of deliveries of miscellaneous items by various small producers. (8) Formal instructions by the Army and Navy to Consolidated to rearrange production schedules so as to meet desired deliveries to the British. (9) An immediate production survey of the Consolidated plant with effect being given to the findings of such a survey through pressure brought to bear by those interested United States Government agencies which are in a position to do so. Certainly plant utilization is open to serious question for they now use 8,000 men on one ten-hour shift and 3,700 on another, with much of the plant idle on the second shift and almost all of it idle on Saturday and Sunday. (10) A decision by the Navy as to the release of Navy bombs to the British in case Navy flying boats, equipped with Navy type bomb racks, are diverted to the British Government. (11) A decision by the Aray and Navy as to their willingness to release the .50 caliber machine guns necessary to equip any Army bombers and Navy flying boats diverted to the British. (12) A decision by the Army and Navy as to their willingness to release the motors necessary for any Army bombers or Navy flying boats diverted to the British. II. Action required to expedite deliveries of flying boats and bombers by Consolidated after June 30, 1941, (1) Establishment of a permanent Anglo-American planning and design Committee to agree on standard models for the placing of future orders. This could be accomplished by extending the scope of the existing joint committee on standardization. (2) Agreement by the United States and the British to limit changes on planes already in production to those absolutely necessary for tactical reasons. (3) Agreement by the United States and the British to make changes simultaneously wherever possible. 281 -4(4) Immediate executive meetings between representatives of the United States Aray and of the British Purchasing Commission with a view to reconciling differences between the United States Army bomber type B-24-0 and D and the British bomber type LB-30 with particular reference to the following items: a. Bomb sight and related items, including automatic pilot b. Radio and navigation equipment C. Armor d. Armament and related items e. Bomb racks, bombs, and related equipment f. Turrets go Turbo-superchargers (5) Immediate executive meetings between representatives of the United States Navy and of the British Purchasing Commission with a view to reconciling differences between the PBY-5 and the British flying boat type 28-5-ME, with particular reference to the following: a. Bomb sight and related items, including automatic pilot be Radio and navigation equipment C. Armor d. Armament and related items 6. Bomb racks, bombs, and related equipment 282 CONFIDENTIAL MILITARY INTELLIGENCE DIVISION, TESTATIVE LESSONS BULLETIN No. 57 0-2/2657-235 WAR DEPARTMENT. Washington, October 9, 1940. NOTICE The information contained in this series of bulletine will be restricted to items from official sources which are reasonably confirmed. The lessons necessarily are tentative and in no sense mature studies. This document is being given an approved distribution, and no additional copies are available in the Military Intelligence Division. For provisions governing its reproduction, see Letter TAG 321.19 M.I.D. (8-16-40) M-B-M. . USE OF AVIATION IN THE GERMAN ATTACK ON THE MAGINOT LINE SOURCES The following information was secured by official American observers on a conducted tour through the Maginot Line and other areas July 9-13, 1940. It is based upon personal observation and conversation with German officers and other official observers. CONTENTS 1. OPERATIONS a. Vosges Sector b. Saarbrucken Area C. Sedan Area 2. TACTICS a. Assignment of Planes b. Speed C. Raids on Reserves d. Aerial Photography e. Ground Reconnaissance f. Balloons 3. CONCLUSIONS CONFIDENTIAL -1- 283 CONFIDENTIAL 1. OPERATIONS a. Voeges Sector No mention of the use of the air arm was made by Ger- man officers during a tour of the Vosges sector, but it was neither stated nor inferred that aviation was not used, The only clear and direct evidence of its use was one bomb crater near a French bunker. b. Saarbrucken Area Direct air support was used in the break-through of the Maginot Line on this sector June 14, 1940. The task of making the break-through was assigned to Lieutenant-Colonel Mikosch, already decorated as commander of the Pioneer battalion which reduced Fort Eben Emael. His troops are specialists in reducing fixed fortifications, and under the German system, he is assigned such auxiliary troops from any or all arms as he may need for a particular operation. Reports indicate that, in the reduction of the Belgian forts, Colone] Mikoach's losses were as low as three to five per cent. In the Saarbrucken area, however, his losses were almost as high as 50 per cent, since the weather was such that Stukas could not be em- ployed on the morning of the first day of the attack. The use of aerial photography in preparation for operations in the Saarbrucken area is mentioned in Paragraph 2d, this bulletin. In the Saarbrucken area observers saw a medium type French bunker which had obviously been put out of action by the direct hit of a Stuke bomb. This bunker was seen from a moving bus and pointed out by a German officer as an excellent exammle of the destructive effect of air bombing on fixed fortifications, It was impossible to examine the bunker in detail or at close range, but the destructive effect of the bomb was obvious even from a dietance of about 500 feet. Walls of the bunker, approximately three to four feet thick, were constructed of reinforced concrete and steel. One side of the bunker appeared to be entirely torn away. C. Sedan Area. Employment of the air force in the Sedan area was apparently the same as that in the Saarbrücken area. Much evidence of Stuka attacks was noted in the region about Sedan. CONFIDENTIAL -2- 284 CONFIDENTIAL 2. TACTICS a. Assignment of Planes A German officer stated that assault planes-Stukas- are sometimes attached to units as low as the division and may be attached to units of any size if the situation warrants. He added that when strong resistance is encountered the ground troops first call for Stukas. When asked about the amount of assault aviation employed, he said it was based upon the amount available and was always less than half of what the ground forces would like to have. b. Speed Other German officers stated that the success of an attack on a fortified line depended primarily upon the speed with which the attack was executed and continued forward. This continued speed, they said, prevented the defender's reorganizing or launching successful coordinated counterattacks, The officers did not believe that the necessary speed could be maintained without air supremacy and strong air support. C. Raids on Reserves Another important element in the success of a breakthrough is preventing the movement of enemy reserves. This was accomplished by the air force. Roads and bridges were severely bombed in reserve areas and the reserves themselves were subjected to air attacks, d. Aerial Photography Aerial photography is extensively used by the Germans in preparing for attacks on fortified positions. In the Saarbrucken area each commander participating in the attack had an aerial photograph not more than five days old showing exactly the terrain he would cover and the fortifications he would encounter. Great importance was attached to this photographic information. e. Ground Reconnaissance German officers gave the opinion that ground reconnaissance by a defending force in a fast moving attack is too slow to be of any value and that in the face of an attacker's air supremacy, the defender cannot effectively employ his reserve be- cause of lack of timely information. This would be true even in case his reserve were intact and capable of being moved. f. Balloons Little information could be obtained regarding the CONFIDENTIAL -3- 285 CONFIDENTIAL employment of observation balloons. It was stated that ballnone were used, but only for heavy artillery observation. The observation balloon is not considered particularly good for the fast moving type of warfare. Excellent radio communication now permits artil- lery units to place their observers well up in front, and thue to eliminate the need for balloon observers. According to a German officer, a new stabilizing device has been perfected which prevents away in a captive balloon. 3. CONCLUSIONS The observers arrived at the following conclusions: a. In German tactics the air force is considered a vital element in an attack on a fortified line. b. There is apparently a direct relationship between the number of casualties sustained by ground attackers and the num- ber of assault planes employed in an attack on a fortified position. Ground force casualties decrease as air strength (superiority) is increased. * C. It was particularly observed on this trip that all detailed information regarding tactics and employment of the air arm is carefully withheld. Such information is carefully guarded in Germany at the present time, Note: Before attacks were made on the Maginot Line, American officers remarked upon the weekness of the fortifications due to the absence of antiaircraft defensive measures. It should be observed that adequate provision of antiaircraft weapons of all calibers might considerably have lessened the moral and material . effect of Stuka attacks. G-2 CONFIDENTIAL -4 286 RESTRICTED 0-2/2657-220 M.I.D., W.D. October 9, 1940. SITUATION REPORT No. 215 12:00 M. This military situation report is issued by the Military Intelligence Division, General Staff. In view of the occasional inclusion of political information and of opinion it is classified as Restricted. I. Western Theater of War. 1. No ground operations. 2. Air Force Operations. The German attacks during daylight of the 8th and dur- ing last night are characterized by the British as the heaviest of the war. The day attacks were widespread and included the London area, southeast England and west coast harbors. The Germans also report day attacks on 7 airdromes. The night attacks, while heavi- est over the London area, where 300 tons of bombs are claimed to have been dropped, also were executed over southwest and west England. The R.A.F. made a few daylight raids along the Channel coast on the 8th. Last night they conducted normal operations against western Germany. The principal attacks were made against Bremen and Wilhelmshaven. Other points attacked included Kiel, Hamburg, Gelsenkirchen (oil refineries), the Krupp works at Essen, Mannheim, Gremberg, several airdromes, and the French ports of Boulogne and Lorient. II. Mediterranean and African Theaters of War. No ground operations and only minor air activity reported. III. Far East. There are indications of a deterioration of Japanese-American relations beyond those published in the press. RESTRICTED CONFIDENTIAL 287 Persphrase of Code Radiogram Received as the Var Department at BISS D.M. October s. 1940. Lenson, filed 18155, October 9, 1960. 1. The Dember Comment carried out prestically as opena- tions during daylight hours of Tuesday, October 8th. That sight a total of 108 please were dispetched with objectives as follower oil targets is Germany, 11; enemy naval bases, 19: alley factories in Germany, 61 invasion ports, 561 railroad yards is Germany, 10: and 6 laying mines. The Goastal Commond operated 85 planos on 01 missions and the escart of 28 conveys. This Common last three planes and had three damageds while 11 destroyed one enemy plane and damaged another. The Fighter Commond operated 959 planes ea 203 patrole. 2. The German Air Force carried out four main attacks during the morning of October 8th, consisting of about 50,30, so, and 40 planos, respectively, most of which were fighters. Recommissance missions and siner raids were earried out elsewhere. The raids during that night were over a wide area and lasted from 7:00 p.m. to 6,00 a.m. 3. German plane lesses were six confirmed, two probable and three damaged. The British lost four planos and four pilets. All planes last on both sides were fighters. 4. The Charing Gross railway and edition stations are closed. A hit in Whitehall ea the morning of October 8th damages several government offices. During that night two power stations CONFIDENTIAL 288 CONFIDENTIAL were w on five least are still in operation. Tires set in from fatheries were seen enter control. in Sentence factory in I shire was damages but production continuos. the selisead lines were blooked the Sever Bridge is cut of service for three or few days. Fires were set in (9) aviation factories but they were seen extinguished. Buildings and railways were damaged. Astacks were make on six airfields. the planes were dectroyed on the ground and two air fields are new massviosable due to unspladed boube. The German Dembertment during the last 24 hours, evia though very dispersed, was apparently the most successful of - w to this time. It is new reported that ea the sight of October 7-0th three fighters were destroyed es the great and others damaged in the attack on Newton Makrons. 5. One convey of 41 and eas of 9 marchant vessels has arrived safely is Britain. One was disabled by mines. 6. the invasion situation remites static. When the Germa concentration in Finland and Nervey is complete there will be four Geresa divisions in the Kirtunoo-Nervil area. Less than one division has passed through Fialand recently. 7. There have been considerable Italian activities is their forward areas in Sept and along their lines of communication. Permane elements have not been reinfereed but there are ovidences of preparations for an advance. Reliable reports state that the Italian call for velunteers to serve is the Bernan Air Force was a complete failure and the writters are being ordered to this only. CONFIDENTIAL CONFIDENTIAL 8. General do Gaulle Leaked at Judinas Day, Furnamic Yo, Spanish Weet Africa, on October 8th. Distribution to: Military Aide to the President, Secretary of Kar State Department Secretary of Treasury last. Secretary of War Chief of Staff May Plans Division office of Naval Intelligence CONFIDENTIAL 289 290 RESTRICTED Paraphrase of Code Radiogram Received at the Wax Department 3:11 Pollo, October 9, 1940. Peiping, Filed 17:55, October 9, 1940. Reliably reported that Peiping Staff of the German Enbassy is to be increased and will include army officers. There has been a steady flow (about 60 all told) through the Peiping area of young Germans, earing directly from Germany and said to be on vacations. A reliable source states that many of them are air officers. Their objectives and ultimate destinations are not known. The German air attache to Japan is visiting Peiping. MAYER Copies to: Military Aide to the President Secretary of War State Department Secretary of Treasury Amst. Secretary of Wer Chief of Staff WPD ONX RESTRICTED 291 BRITISH EMBASSY, WASHINGTON, D.C. October 9th, 1940. Personal and Secret. Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, Loteran The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D.C. 292 Telegram from London dated October 8th. 1. Naval. A British submarine reports that on the night of October 1st she attacked a northbound convoy of six merchant vessels off the Dutch coast. Results were not observed but a loud explosion followed the firing of the last torpedo. A British destroyer was mined off Dover on the evening of October 7th and was taken in tow by another destroyer. His Hajesty's Canadian destroyer "st. Laurent" was in collision early this morning but is returning to harbour under her own steam. 2. Royal Air Force. During the daylight of October 7th SEO medium bombers attacked small craft at the mouth of the Scholdt and 6 Blenheims from the Coastal Command attacked shipping in Le Havre where a large fire was started. All of these aircraft returned. During the night of October 7ch-8th 165 bombers were detailed for operations as follows: invesion ports 49; targets in Berlin area 445 shipping in Germany 25: marshalling yards 19; gun emplacements 16; and mine All machines except 1 Wellington returned. laying 12. Results are not yet available. 3. German Air Foree. During the daylight of October 7th enery made/ 293 made four - reids OVER east Kent in the direction of London. The first of about 140 sircraft was reported at 10.00 o'clock and a few reached the inner The second read at 1.30 contained two forms- sone. tions, 1 of about 100 aircraft approached from the Haidstone direction and the other up the Themes estuary. A similar raid of about 100 aircraft passed east of London at 4 P.M. in the direction of Essex and at the same time about 40 crossed the south west coast but were turned back when half way to Bristol and dropped their bombs in the Yeovil area. Our fighters were despatched to intercept these formations and a number of enery sireraft were shot down. The proportion of enemy fighters to bombers was approximately 3 to 1. No military damage was reported from these raids and the only industrial damage was a fire in London dooks which was extinguished the same evening. During the night of October 7th/8th, widespread bombing took place, the heaviest attacks being upon the London and Liverpool and Manchester areas. Preliminary reports indicate that damage and casualties are small in proportion to the number of bombs dropped. Seventyone fighter aorties were made by our aircraft but no reports of interceptions have yet been received. Eneay mine laying is suspected off the east coast and in the Mersey area. In London a few cases of damage to public services are reported and one fire station received a direct hit. The aerodromes at Hendon and Liverpool were attacked; at the former a hanger was his and at the latter one sirereft was destroyed. Both aerodromes remain serviceable. 4./ 294 etc Designed Probable Issues By our fighters Bonbers , 6 Fighters 21 5 Total 11 24 Is addition a Newheim of the Coastal Command while on reconneiesance shot down an MM 109 off Cherbourg. Britishi 16 fighters (10 pilote safe) One heavy bomber missing. 5. Shipping Coemultion. one small British vessel (900 sons) was mined and sunk off the southwest English acast on the 6th. A convey of 46 shipe has arrived safely is home waters; 18 included 6 tankore and 16 corgoes of iron and about. 6. Romania. It 10 believed that two groups of German motorised anti-aircraft artillery passed through Roumania on their way to the oil producing districts on October 6th. 7. Middle East. Harshal Grasiani returned from Rome to Libya on October 6th. 295 TREASURY DEPARTMENT WASHINGTON office OF THE ADMINISTRATIVE ASSISTANT TO THE SECRETARY October 9, 1940 MEMORANDUM FOR THE SECRETARY For your information, I have sent two men to Mr. Straus of the United States Housing Authority as possibilities for the administrative job which he has open. One was Ewart Hester, a brother of our former Assistant General Counsel, Clinton Hester, and the other was Davis Waters, who is now with the Public Works Administration. Ewart Hester is a clean cut, dynamic fellow like Clinton, although not quite as experienced. Mr. Straus felt that notwithstanding the ability and experience of these men neither of them met his specifications. What he is really looking for is a McReynolds or a Graves or a composite of both. I have had others in mind big enough for the job, such as William L. Mitchell of the Social Security Board and Messrs. Lawton and Patterson of the Bureau of the Budget. Upon contacting these men I was surprised to find that they were not at all interested, because word seems to have gotten around that the United States Housing Authority is an undesirable place for an administrative officer, the difficulty apparently being that no matter how sincere Mr. Straus may be in his assurances of backing up such an administrative man Mr. Keyserling, the Deputy Administrator, has a way of coming into the picture and making it impossible for such an officer to operate satisfactorily. I told Mr. Straus frankly that this is what I had run into, but he stated that such a condition would 296 2Memorandum for the Secretary-10/9/40 no longer exist, inasmuch as his organization chart now sets up a place at the top for an administrative officer who would be subject only to directions from Mr. Straus himself. Notwithstanding this, it is still the feeling of those persons whom I had contacted that as long as Mr. Keyserling is in the organization it will be impossible for anyone going into it to avoid running into an impossible situation. Mr. McReynolds, with whom I have discussed the matter, is of the same opinion. The men whom I have contacted do not wish their names to go before Mr. Straus, in view of the impression they have of his organization, and I have not therefore given them to him. I am sure however that he appreciates what I have been up against, and I have told him that if I do run across a man big enough for the job and willing to undertake it I will let him know, but it is not very promising in the circumstances. the 297 October 9, 1940. My dear Dr. Angell: It was indeed kind of you to write to me as you did under date of October 4th. When one knows that he is right it still helps greatly to get words of encourage- ment from a source that commands respect. I am most deeply grateful. Sincerely, (Signed) H. Morgentbau, Jr. Secretary of the Treasury. Dr. James R. Angell, 155 Blake Road, H amden, Connecticut. 00 to Mr. Thompson me Ostober 9 1940. by dear Dr. Angells It was indeed kind of you to write to - as you did under date of October 4th. When one knows that he is right is still helps greatly to get words of encourage- mont from a source that commands respect. I - most deeply grateful. Sincerely, (Signed) H. Secretary of the Treasury. Dr. James R. Angell, 155 Naice Road, H min, Connections. 299 October 9, 1940. My dear Dr. Angell: It was indeed kind of you to write to me as you did under date of October 4th. When one knows that he is right it still helps greatly to get words of encourage- ment from a source that commands respect. I am most deeply grateful. Sincerely, (Signed) H. Morgenthan, Jr. Secretary of the Treasury. Dr. James R. Angell, 155 Blake Read, H anden, Connectiont. Sopy to: Norgentheu, Sr. Joan Robert Monny 300 10/10/40 OCopy of this letter sent to: Mrs. Morgenthau H. Morgenthau, Sr. Joan Robert Henry, III 301 (or president angell was of yale NATIONAL BROADCASTING COMPANY, INC. MADIO CORPOMATION OF AMERICA SERVICE RCA BUILDING RADIO CITY NEW YORK.N.Y. Zz mal a Confidential Dear us As a commun cithyer duply Concerned for th fate of our Amenica hantap I have long hea concerned that th meat effective, The head Ephedilines reed The least expensive cause of action open & us is found in The profit acced lavish instribution to Employed of whalever She need read us case supply to and her in her fight for life you's bartonism. by sames of information than rund, it possible for kee to know good deal of what you has personally have able to do, and > but to express b you key deep gradited and my complaint being that th courage and imagination which has after been called for m your past an sum the accounted as patietic service of th fined kind, Even though you may to submitted for a time cand form certain guardian to seven criticism D. not Falter is This good work 302 1 . NATIONAL BROADCASTING COMPANY, INC. . RADIO CORPORATION OF AMERICA SERVICE RCA BUILDING RADIO CITY NEW YORK,N.Y. ZZ RO1 in which civilization itself not lero There th safety your us country is and stake J numember with please t goly sam at Bar Hastor with your father facus years ago. 7 has handly had I seeing you Since, through Than followed your cover with keen intense. during green firm Q.dupee nable for 155 Blake Road Haruden Cour. will Junetic, 2.f. ERA 30 303 To: Secretary Morgenthau Sent at the request of Mr. Forrestal 08 12010 Mr. Forrestal. 304 COPI SMITH, SCHNACKE & COMPTON Attorneys and Counselors at Law 131 North Ludlow Street Dayton, Ohio October 9, 1940 Hon. James Forrestal The Under-Secretary of the Navy Washington, D.C. Dear Mr. Secretary: I wish to acknowledge and thank you for your letter of October 7th regarding the proposal that I go to San Diego to assist Consolidated Air- craft Corporation. I am sure that this letter will be useful in helping me to arrange my affairs. I have talked with Major Fleet on the telephone and am arranging to be in San Diego by the first of next week. I will probably leave Dayton by air on Saturday evening and should arrive in San Diego on Sunday morning. After talking the situation over in San Diego and sizing it up, I will be able to make a more intelligent decision as to the length of time that I should be there. In any event, I am planning to be there most of the time during the next two or three months. Very truly yours, /s/ F. D. Schnacke FDS:CA INO OCI IS M a 08 OE OLLICE THE WHITE HOUSE WASHINGTON October 9, 1940. VEGORANDUM FOR THE SECRITARY OF THE TRE SURY: I have signed the Tax Bill, H.R. 10413, ithout comment at this time and I note that your letter of October third is limited substantially to u description of the Bill and an estimated yield, without commenting on the advisability of the Bill 8S drafted. Will you be good enough to have the Bill, now a law, studied from the'point of view of its affect on corporations taking into special consideration digcriminations against certain types of corporations, large and small, or discriminations in favor of other types of corporations. I am still of the belief that this bill discriminates in favor of the type of corporation, for example, which has a elatively small amount of actual invested capital but which, for the past four years, has hadinvested. very high earnings on the money actually F.D.F. 306 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE October 9. 1940 Secretary Morgenthau Mr. Cochran STRICTLY CONFIDENTIAL Following the conference which Professor Chamberlah and he had with the Secretary this morning, Mr. Pehle told me that he planned to consult Mr. Bernstein in regard to legal questions arising from the German control being now exercised in Runania, since some of the banks in New York, including the Federal Reserve Bank, were nervous over this situation. Mr. Pehle said that it was the Secretary's desire that I should then speak to the Department of State in regard to the question which the Treasury posed some days ago, that is, whether the Department of State desired that the Treasury extend its control to Rumanian assets on this market. Shortly after 12 o'clock Mr. Cameron telephoned me from the Federal Reserve Bank in New York. He stated that a cablegram had been received from the National Bank of Rumania requesting that $4,000,000 be paid from its account with the Federal to the Chase Bank. The Chase Bank has informed the Federal that it has received instructions from the National Bank of Rumania to hold this $4,000,000 at the disposal of he Central Bank of Argentina. The Federal Reserve Bank at New York found that the "test" in the message to it from the National Bank of Rumania was incorrect insofar as the date was concerned. Consequently the Federal has asked the National Bank of Rumania for a confirmation of the "test". Until this is received, the Federal Reserve Bank will not make the transfer; once the "test" is received and found in order, the Federal will have no choice but to proceed with the transfer, unless the Treasury might take some action in the premises. After learning from Mr. Pehle that Mr. Bernstein thought the question should be again raised with the State Department, pointing out that one of the basic purposes of our control is to protect American economy, including American banks holding foreign assets, and after receiving the above message from Mr Cameron I telephoned Mr. Pasvolsky in the Department of State, one of the four members of the Committee which Secretary Hull had with him yesterday when the Treasury representatives met in Secretary Hull's office on freezing problems. I explained the situation to Mr. Pasvolsky. He thought this was a matter which could most properly be handled through the Interdepartmental Committee suggested yesterday. I therefore went in to see Mr. Bell shortly after 12:30. where Mr. Bernstein also was present. After we discussed the situation Mr. Bell telephoned Assistant Secretary of State Berle. The latter promised to convene his Committee and let the Treasury hear from him before the end of the working day. I have telephoned Mr. Cameron in New York and have told his secretary, in his absence, that the matter of Rumania had been taken up with the Department of State. Some decision in the premises was Ippected today, and if Mr. Cameron received a confirmation of the "test" from Rumania, he should not take action on the transfer without first speaking with me. Time 307 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE October 9. 1940 Secretary Morgenthau Mr. Cochran STRICTLY CONFIDENTIAL Mr. Pinsent telephoned me yesterday evening from the British Enbassy. He stated that he had received some statistical information from London which he hopes to tabulate and have in form for presentation to us within the next two or three days. He is holding up the report which was expected for delivery to us on October 3. for inclusion in the more general statement on which he is working. Mr. Pinsent hopes that he may be able to give the Secretary an oral explanation of certain items included in his report. This morning Mr. Pinsent telephoned me that the date for the contemplated departure from London of Mr. d'Arcy Cooper, senior member of the British Export Council, for the United States has been advanced. The Embassy thought, therefore, that it should immediately proceed to learn from the Department of State whether an indication could be given to the British Government that the mission of Mr. Cooper, for the purpose of discussing the extension of British exports to the United States, rould be welcomed by the United States Government. Pinsent asked if I could indicate that Secretary Morgenthau's reaction had been to the information provided in Mr. Pinsent's earlier conversations on this subject. I told Mr. Pinsent that Secretary Morgenthau confirmed that he had not discussed the above subject with Sir Frederick Phillips when the latter visited us this summer. The Secretary feels that this is a subject which falls within the field of the Department of State. In answer to Mr. Pinsent's question as to whether an occasion night arise for Secretary Morgenthau to receive Mr. Cooper if and when the latter is in this country, I told Mr. Pinsent that I was sure the Secretary would be sympathetic to any request made of him by the Embassy. BMR 308 October 9, 1940 4:56 p.m. Sumner Welles: Hello, Henry. H.M.Jr: Summer, this after in the first place I'm sorry about W: H.M.Jr: W: H.M.Jr: Oh, I understood fully. That the thing went on and on Yes, indeed. I know. Now, Berle has been in touch with Dan Bell about our freezing the Rumanian funds tonight. tried to get Mr. Hull and they say he's out of touch for an hour and a half, 80 I take it you are Acting Secretary. Are you I W: H.M.Jr: familiar with it? Yes, I'm familiar with it, Henry, but since he's here in town I think it's preferable for me to pass it on to him. Well, there's a $4 million transaction which we are holding up which is to go through from the Federal Reserve to the Chase in the Argentine on Rumanian funds, but we could ask them to hold it up tonight. W: I think that ought to be done anyhow and then we can decide on the definite policy with you tomorrow. H.M.Jr: W: H.M.Jr: W: All right. I'll tell them to hold this particular thing and not - just to hold it. Yes, Henry. While you're on the wire I want to talk to you about another matter. Please. I'm very anxious to have a chance to talk with you about two or three things that are urgent and your secretary suggested when you couldn't keep the appointment this afternoon 3 o' clock tomorrow. 3 o'clock tomorrow is my weekly meeting of the 309 2 Inter-American Financial and Economic Committee over which I have to preside and I can't give it up, but 1f there is some other time tomorrow afternoon that you have available, I'J like to drop over. H.M.Jr: How long does that run? W: Usually an hour to an hour and a half. H.M.Jr: W: Well, Lacour-Gayet is ooming in at 11 tomorrow. Are you free at 11:30? 11:30? Just hold the wire one second and I'11 tell you. (Talks aside). 11:30 will be all right, Henry. H.M.Jr: H.M.Jr: W: H.M.Jr: W: H.M.Jr: W: I'11 put you down at 11:30. Now would you take the initiative tomorrow on this Rumanian thing? I will. And we'll hold everything tonight. Hold everything tonight and I'11 let you know the first thing in the morning. Thank you. Berle seems to be on it but I want to make sure that Hull and you know about it. Right. Now one other matter - I understand that you told Espil last night that you would prefer not to have Trabidge come up here until after November. H.M.Jr: That's right. W: Have you any strong feeling on the subject? H.M.Jr: W: No, but I just think it would be more how shall I say - effective. I'd be grateful if you would withdraw your is tremendously important/ give them the feeling down there that we're postponing - objection for this reason, that I think it 310 3- you're not familiar with all the difficulties we've had in regard to trade agreement during the past years. Time and again we've made tento+iye commitments M them and time and again we've withdrawn and I think if we showaabad lackeffect. of interest now it will probably have H.M.Jr: W: I see. And politically here I think anything that is purely financial in character - not trade agreement - would be taken as all right because it's strengthening nation defense and Inter-American cooperation. H.M.Jr: Well, it's just my own feeling. I expressed it to your own people ten days ago, but if you want them to come up that's W: Well, I'd be awfully grateful if you'd let me tell them that you are satisfied to have them come up. H.M.Jr: W: That's all right. Sure. All right, Henry. Thanks a lot. Then I'11 see you tomorrow morning at 11:30. H.M.Jr; Please. W: Right. Good-bye. 311 October 10, 1940 8:55 a.m. Harold Ickes: Henry. H.M.Jr: Good morning. I: Any more signs of embargoing gasoline to Japan? H.M.Jr: No. There not only are not any signs, but the stuff is flowing at a great rate. of course the thing to do is the thing that I think Frank Knox suggested, to drop the octane content. I: Sure. H.M.Jr: But they've got the worst attack of jitters over at the State Department I ever saw. I: It's really incredible. H.M.Jr: I mean, I've never seen such an attack of I: Well, my God, here we are sending gasoline jitters. over to Japan to give them the power to kill a lot of our own people. H.M.Jr: Well, this is the way I feel, Harold. The Burma Road thing will be opened the 17th or 18th, you see, and if the Japanese back down and do nothing, then that's a great victory for people like yourself and Stimson and myself who think that the thing to do is to give them a crack on the jaw and they'11 like it and take it, and I think if they do nothing then I thought that some of us might get together I: and put up a big fight to really do something on the gasoline thing. Well, I think we ought to. H.M.Jr: What? I: I think we ought to. How about that ship that you torpedoed? 312 2H.M.Jr: (Laughs). You know the President's great he likes that but on the other hand, as you know, he won't tell Hull to lay off me. I: No, I know he won't. H.M.Jr: What? I: I know it. H.M.Jr: Yeah, she's beached. She's still there as far I: H.M.Jr: as I know. (Laughs). Well, you had better go and drill another hole in her bottom. Yeah. But I thought right after the Burma Road thing if the Japanese back down then I thought I'd really start to fight, but right now if I did anything or you did anything and they did something why they'd put the entire blame on us. I: All right, I was just interested to know what you were doing. H.M.Jr: Well, you keep after me, will you? I: Yeah. H.M.Jr: Will you? I: Yes. H.M.Jr: Please. I: All right, Henry. H.M.Jr: Thank you. I: Good-bye. 313 October 10, 1940 9:15 a.m. H.M.Jr: Hello. Operator: H.M.Jr: Hello. Mr. J. T. Hartson: Good morning, Mr. Morgenthau. H.M.Jr: How are you? H: Very well indeed, thanks. H.M.Jr: Is Mr. Martin away? H: Yes, he's gone over on Eastern Shore this morning. H.M.Jr: Will he be back today? H: No, he'11 be back in the morning. H.M.Jr: Uh-oh. I had a little time off and I wanted a breath of air and I thought I might come over this afternoon quietly. H: Well, let me call you in a little while. I think I could get hold of him in the next hour and it's very possible he might slip back. H.M.Jr: H: It's 80 seldom I can get off and I thought I might be able to leave here about 2:15 and just slip over there. Well, now, I think that would be swell and I think Mr. Martin would be delighted to come back so as to talk with you, Mr. Secretary. H.M.Jr: When do you think you could let me know? H: I think in the next hour. H.M.Jr: That would be good. Let me ask you a question. H: Yes, indeed. 314 2 H.M.Jr: H: H.M.Jr: H: These two bombers which you are building, one for the Army and one for the English, how far apart are they in design? Completely different, sir. Completely different. Yes. No similarity whatsoever. H.M.Jr: None whatsoever. H: None at all. H.M.Jr: If we could get them together on, say, one bomber, would that help your production problems over there? H: It probably would have had it come a little earlier, sir. Now I think we're too far down the line on both of them to be of much help. However, I'll talk that over with our vice president of manufacturing this morning and see what he thinks. H.M.Jr: H: Well, how about - I mean, there must be a period of certain months where if you could get together, say, on one bomber it might make a difference. Yes, and that, I understand, is more or less the program. Our British production at the moment will carry us through until about well, let's see, the present orders expire on October 31st and the options they intend to exercise would carry us over until February or March of 42. From that time on we would, as I understand it, concentrate on the Army bomber. H.M.Jr: Yeah, but that's a lifetime. H: What's that? H.M.Jr: That's a lifetime. H: Oh, yeah, I understand that. 315 - -3 H.M.Jr: I mean, how about - what I'm interested in if you were said - here you write the ticket, how can you get increased production for the Army and the English between now and the first of July, 417 H: H.M.Jr: Increased production. Between now and the first of July 41 for the Army and English, how would you go about it. H: I doubt very much, Mr. Secretary, if there is much we can do beyond our present schedule. H.M.Jr: H: oh, there must be something you can do. The matter involved there is largely getting material in and that seems to be our bottle- neck at the moment - material as represented by forgings and machinings and castings. H.M.Jr: You mean to say there is nothing you can do between now and the first of July to increase your production? H: I doubt very much if there is very much we can do although I'd like to talk it over here before I give you a positive answer and when I call you back I'll tell you some more about it. H.M.Jr: Will you? H: You bet I will. H.M.Jr: Thank you. 316 October 10, 1940 9:18 a.s. H.M.Jr: Hello. James Forrestal: Henry. H.M.Jr: Jim, I felt awful lonesome yesterday. F: (Laughs). H.M.Jr: My God! F: Well, we're Operator: At least Knox, you and I knew what it was all about, which was something. Have you ever attended a meeting like that? (Pause) Are you cut off? H.M.Jr: Yeah. Operator: Sorry, I'11 get him right back. F: Cut off. H.M.Jr: Yeah. F: Well, I think after all the pain and struggle H.M.Jr: however you're getting some results. This man telephoned in last night to Towers and he agreed to our deal; that is, to his contract on the PDY-2 and H.M.Jr: Wait a minute. You're ahead of me. I don't F: On Consolidated. H.M.Jr: He agreed to what? F: understand. Well, he was arguing about - they wouldn't take a contract for the production of new boats. H.M.Jr: Who wouldn't. F: Fleet. -2H.M.Jr: Oh. I didn't know about it. F: Well, it was that telephone conversation which Towers read yesterday. H.M.Jr: Well, I didn't know about it. F: Well, he read it in that meeting. It was just an evidence of how irrational this man was. H.M.Jr: Well, they passed it around but I didn't see it. Everybody saw it but me. He wouldn't take another order? F: H.M.Jr: F: No. In any case he came back on the track, took the order, took it at our price and on our terms in general. That's for more boats? Yes. Now, he also has taken that man Schnacke, who's name is in the letter that I gave you, who'11 be out there on Monday. H.M.Jr: F: Schnacke, that's the lawyer. That's right. Now, I've talked to Schnacke and he impresses me a rational and clear- headed man. Knudsen is sending Mead out. I'm going to see Mead because I think there is some danger of this bird's harassing him with too damn many people. Mead, however, I don't think will because he is, I understand, a very tactful fellow, but I think that all of these things - I don't agree with what Stimson said, you've got to deal with what you've got, and many of these men are exploding under the internal pressure of not getting mad at themselves. H.M.Jr: Well, I think that - I mean, I felt that both F: That's right. Well, we'll get that through Stimson and Knox were, well, let's put it, not sufficiently educated on this whole thing particularly on the municipal end of it. today. 317 -3H.M.Jr: You will? F: I think, yeah. H.M.Jr: I've got to count on you on that because F: 318 it'sfederal all verycity well to talk not building a and all ofabout that stuff. Oh, but hell, I get impatient with that. We re not talking of a federal city, we're talking of world explosion. H.M.Jr: Right, and the Navy has this tremendous plant out there exclusive of Consolidated and you've got to take care of an influx of fifty to a hundred thousand people. Now, how are you going to do it? F: That's right. Well, I think we'll get that through. Now, I just want to report these facts to you which are in my judgment considerably more encouraging this morning. H.M.Jr: Well, now, let me go after you on something. F: All right. H.M.Jr: These wing tips being made by Brewster are for F: Yes. H.M.Jr: Now that's the Navy's responsibility. F: Yes. H.M.Jr: Now what the hell are you going to do about the Navy flying boats. it? F: Well, we've got to - Knudsen said yesterday that he was - I'm going to talk to him, I have talked to him already last night after that meeting. We've got to get a man up there to produce the wings. H.M.Jr: But I mean, are you going to go after the Brewster end? F: Yes. Well, I'm going to do it through Knudsen. 319 H.M.Jr: You're going to do it through Knudsen. F: Yeah. And then I think we've got to see whether we can get the Brigge Body Plant eaking wings and whether - then it's a question of whether your thought of having that plant well, you see the parts plant is to include wings also whether they have that at Salt Lake City or not but I think we've got to - I don't want to upset what Knudsen is doing 80 I'm going to do it through him. H.M.Jr: I see. Well, now, let me ask you this. I rode down this morning with Bob Patterson and it's perfectly agreeable to him now to send a group similar to the one that went to the other place to both Douglas and Lockheed, that up tomorrow, see? 80 if either you or Frank Knox could bring F: H.M.Jr: Right. And that a similar group should go out to the because that's where the English have big orders and the English don't have any orders West Coast and do a job on those two concerns at Boeing 80 it's no concern of ours. You don't either. F: Right. H.M.Jr: But I'd like to do those others as soon as possible. F: Douglas and Lockheed. H.M.Jr: Yeah. F: Well, we can do it. H.M.Jr: So the English will be ready to go and my boys will be ready to go. I think if either you or Knox could make that suggestion tomorrow ..... F: All right, Henry. H.M.Jr: Thanks for calling. 320 GROUP MEETING Present: Mr. Haas October 10, 1940 9:30 a.m. Mr. Pehle Mr. Foley Mr. Graves Mr. Young Mr. Cochran Mr. Thompson Mr. Bell Mr. Schwarz Mrs Klotz H.M.Jr: They ought to get a good chef up at the Supreme Court. I had lunch there for the first time and it was the worst meal in Washington, unbelievably bad. I had a crisp, burnt piece of meat that was supposed to be veal. Klotz: Looked like liver. H.M.Jr: Yes, and it tasted like eel. When we went over to Mr. Hull the other day, you could have knocked me over with a feather, when Mr. Feis, I think, mentioned the fact that we hadn't been getting the proper reporting on Japan's money. Cochran: Well, Japan - this bank up in New York hadn't made exactly the right report to the state bank people. H.M.Jr: State bank? Cochran: It is not a bank that comes under the regular inspection service, but we had gotten the Federal to get the State Bank Inspector to go in there and they have found out after some time what they do hold. H.M.Jr: Did we miss by a hundred million? 321 -2Cochran: No. I mean, there was a hundred and - about seventy million dollars worth of Government bonds in that strong box. We had knowledge that there were some securities in there. H.M.Jr: What bank was it? Cochran: That is that Yokohama bank in New York. H.M.Jr: How did Feis know about it? Cochran: I don't know. H.M.Jr: That is what surprised me. Bell: Was there anything on Harry's table that he sent to Feis? Cochran: I didn't see the table. Bell: I didn't either. We sent over a letter asking what we should do about Rumania and they sent back and asked for a lot of figures on all those countries and they may have asked for some figures on Japan and Harry may have given them the figures in the statistics he sent. He did send them something. H.M.Jr: I see. Now, what about Rumania? Bell: Well, we are all ready to go. Have you heard from Mr. Hull? H.M.Jr: No. Welles said he would let me know. Do you think I had better go after Mr. Hull? Welles said he would. Bell: Well, Berle promised us a letter today signed by Mr. Hull. Foley: It is the six months anniversary. 322 -3H.M.Jr: Whose? Foley: Setting up this exchange control. Every H.M.Jr: You used an expression which was new to Cochran: tenth of October and tenth of May. me last night. They had a test order. No, that is in the cablegram. You see, the central banks have one code group which is the test group to show this comes from that area, and so Cameron was expecting a message back this morning and if It is, it should go ahead unless we tell them different. But we have told them to hold that transaction up. Foley: I don't know whether anybody has shown you that or not. That is the document on the freezing control that was gotten up for the convenience of people, Executive Orders and forms. H.M.Jr: No. Who gets all that? Foley: All the banks and people who want to make applications. H.M.Jr: Now, for instance, do you give these to Schwarz: Yes. H.M.Jr: Kiplinger and the others? Schwarz: Eaton and the others. H.M.Jr: You do? Schwarz: Yes, sir. the various business services in Washington? 323 -4H.M.Jr: That is very nice. There are two things that I have done this morning. In order to keep you fellows up to date, I had Patterson pick me up and I asked him whether he still had any objection to our trying to do a job on Lockheed and Douglas, and he said no, he did not. He was perfectly willing. So I said I would try to have them send a crowd out there, and then Forrestal called me and I told him now, would either he or Knox bring that up tomorrow, that we send a crowd out there, you see, to try to do a job on them. (Telephone conversation with Secretary Hull follows :) 7 324 October 10, 1940 9:39 a.m. H.M.Jr: Hello. Operator: Secretary Hull has Secretary Wallace with him. Would you rather wait? H.M.Jr: No, I'd just like to talk to him a minute Operator: Right. if I could. 9:40 a.m. H.M.Jr: Hello. Cordell Hull: Hello. H.M.Jr: Cordell, I called up last night. Berle sent over word that the State Department wanted us to approve - or just what H: On that Balkan thing? H.M.Jr: On the Rumanian thing. H: Yes, I mean the Rumanian thing. H.M.Jr: But I didn't want to do it unless I heard H: Yes. Well, I tell you what I'd do - I was from you direct. informed that the German troops had marched into the capital there yesterday and that they are occupying it and just to check on this morning's news on it, if I could 160k at the official dispatches and then call you back I was in favor of it so far as a rough conclusion is concerned and I said so. There's about $5 million isn't there? 325 -2H.M.Jr: Well, no, it's the whole thing. H: Oh, yes, the whole thing. H.M.Jr: Freeze all their assets. H: Yes. It looks like the Germans are going in there and then they're going on to Africa around that way. H.M.Jr: Could you let me know between now and 12 o'clock? H: Yes, sir. H.M.Jr: Thank you 80 much. H: Thank you. 326 5H.M.Jr: Well, Forrestal says he is going to town today on this housing business. He also said that Knudsen is sending George Mead out to do a job on the production on Lock- heed - pardon me, on Consolidated, and the thing - everybody saw that message yester- day, but I didn't. I didn't know what the thing they were passing around was, but I gather -- Foley: You mean the conversation that Towers had H.M.Jr: What was that? Foley: With Fleet. Well, Fleet submitted a very conditional bid. It had an escalator clause. H.M.Jr: A bid on what? Foley: A bid on 200 additional long-range bombers, H.M.Jr: Yes. Foley: He had an escalator clause in there and the fee was not based on any figure, because you with -- flying boats. couldn't tell what the cost of the planes was going to be. It all depended upon what the labor market was and whether prices ad- vanced, and all that sort of stuff, so it was just an open-end bid. They rejected it and they told him that they would take it for so much a plane and he refused and he as much as told the Navy to go to hell. He said he was going to go hunting over this week-end, he wouldn't be available, he wouldn't send anybody to Washington, there wouldn't be anybody there to talk with the Navy, and when he got back from his hunting trip on the 15th or 16th of October, he didn't know whether he would talk to them or not. 327 6- That is what burned Patterson and Jim Forrestal up. H.M.Jr: Evidently he piped down last night and he has taken the contract. I didn't know about it. Here they are talking about not doing anything more for Consolidated, and last night they give them an order for another 200 planes. What are 200 planes worth, $100,000 apiece? Foley: These are more than that. These are the big things that run up around $250,000. H.M.Jr: That is 50 million dollars. Foley: Yes. H.M.Jr: Here they sit and in one breath they won't build them any houses, and last night, they okayed that 50 million dollar contract for Consolidated. It is just crazy, you know, just crazy. Foley: I gathered it was more Stimson that said he didn't want to do any of these things than it was the Navy. I think there was an appreciation on the part of the Navy that these things have to be done. After all, the City belongs to the Navy. Forrestal was all right. Forrestal came around to me and said, "Get this thing dragged out into a subcommittee and you and I will go to town on it and we will put it through. H.M.Jr: But Stimson said yesterday he wouldn't do anything until he knew more about it, and last night they signed a contract for 50 million dollars. Foley: Well, that is the Navy. 328 7H.M.Jr: Of course, what Patterson said, they ought to separate these companies entirely. They can have one and the Navy can have the other. Foley: That is right. Stimson simply was exorcised about that report to build up San Diego. H.M.Jr: Who was? Foley: Stimson. H.M.Jr: I was thinking of taking an afternoon off and going over to see Glenn Martin this afternoon. Do you think I ought to tell Knudsen that I am going? Foley: Yes. H.M.Jr: Do you think so? Foley: It wouldn't do any harm. H.M.Jr: I thought I might take Purvis with me. Thompson: Mr. Pehle has recommended a promotion for Norman Towson, one of his best men. H.M.Jr: That is the Army Intelligence fellow? Pehle: Yes, sir. Thompson: He is from the Washington Loan & Trust Com- pany, I believe. He is a very good man. Here is a memorandum I have just prepared for your information. H.M.Jr: How much did Congress give us to run that show? Thompson: They gave us $700,000. We will be short 329 8- of money by January or February at the latest. We asked for a million and they gave us $700,000. We will have to submit a deficiency. H.M.Jr: Would you and Foley put your heads together on this letter, and whatever you do, some- thing or nothing, let me see it. I don't care, but whatever you two fellows decide. Do nothing or something on it. Thompson: All right. H.M.Jr: Now, did you (Bell) freeze that Rumanian Bell: Yes, that is in New York. They won't do anything until they hear from Merle. Cochran: We hadn't taken it up with any banks other than the Federal, had we? Bell: No. H.M.Jr: Do you know whether anything is going on stuff? That is all frozen? in the Japanese funds to excite any interest one way or the other? Cochran: Last week's report, which we got on Thursday, last Thursday, didn't show much move- ment at all. H.M.Jr: George? Haas: I have got the September figures on the aircraft. H.M.Jr: Oh. Haas: That is ten days late, but those figures are really a scoop. 330 9H.M.Jr: I tell you what I want you to do, fix it up with a map the way you did the other one, you see, and send that map over again to Steve Early. He liked it. He told me Haas: H.M.Jr: Cochran: yesterday. You know how you fixed it up. Yes. Do you want me to send it over there? Mrs. Klotz. May I mention, before you speak with Mr. Harrison, Mr. Secretary, that I had asked Cameron there to keep us informed, and he has telephoned me once or twice in the last few days and then they gave us the weekly statement on Japanese balances. H.M.Jr: And I haven't talked to George in so long, it will give him something to do. What else? Haas: That is all. Pehle: I have nothing. Young: Mr. Dewar of the British Purchasing Commission has invited people from Defense and the Army and myself and Buckley to a "tank party" with cocktails, at the Carlton this evening. Evidently none of the British are invited. H.M.Jr: Say it again. Young: I say, Mr. Dewar of the British Purchasing Commission is having a tank party. H.M.Jr: Who is invited? Young: Buckley and me and Defense and War Department, representatives that have been working on this tank program, and none of the British seem to be invited except for one or two outside of that picture. 331 - 10 H.M.Jr: What time? Young: Oh, I think from six to eight. It is a H.M.Jr: cocktail party tonight. What is a "tank" cocktail? Young: I don't know. It did arouse my curiosity. H.M.Jr: Call me up when you get home and I will -- Klotz: And he will tell you. H.M.Jr: Yes, I will tell you. That is very amusing. What are you celebrating? Bell: They got one tank, I saw in this morning's paper. Young: Probably getting some of these contracts signed. The Baldwin contract is now being signed gradually. It is just due to mechanical delay. The thing is all set on the assembly. Is there any objection to our going or not? H.M.Jr: Are you serious? Young: Sure. H.M.Jr: Why? Why shouldn't you go? Young: I have always been suspicious of tanks. H.M.Jr: Well, I don't know -- Foley: You can find out whether you are a tank or Young: Do you think I will come out with a caterpillar not, Phil. tread? 352 - 11 H.M.Jr: Listen, I have to settle a lot of questions. You servic that one. I reause to get in on that sort of internal plumbing. How do I know what you can take? What else? Young: What is your reaction to the issuance of a commemorative stamp for the opening of the National Gallery of Art, getting away from tanks? H.M.Jr: Well, I will tell you how I feel on all stamps, I am against any more issues for the rest of the year. I don't think it is - personally, if it was up to me, I would say no. Young: I gather that most of the trustees think H.M.Jr: Well, I don't think it is cute enough. If it is sort of a cute idea. you are asking me, I would say no. They can get away with it, but put me down as no. What else? Young: That is all. Schwarz: I have a story here from last night's New York Post which you wouldn't have seen, probably, on the Japanese machine tools. H.M.Jr: "Morgenthau Carries Japanese,"? Schwarz: I think they got the germ of that out of the Kintner and Alsop story. H.M.Jr: Who is Richard Stokes? Schwarz: He is from the St. Louis Post Dispatch. 333 - 12 H.M.Jr: What a fellow! Ickes called me up and wants to know if that boat is still on the beach, and couldn't I put another bomb in her. Cochran: Lacour-Gayet telephoned last night and wanted to come by and see Dan and me be- fore he comes in to see you. I haven't seen him. H.M.Jr: What is he doing over here? Cochran: They sent him over to finish up this Purchasing Commission's work, and supposedly to instruct Alphand and also the Ambassador as to the proper attitude to pursue in this country, so I think he is needed. H.M.Jr: Yes, very much so. What else? Bell: You are seeing him, are you? H.M.Jr: Yes, you can come. Bell: No, I don't wan to come. I just wanted H.M.Jr: Well, he is here at 11:00. Bell: They called up through the National City in New York as to what he should do, and I told him he should go through the State Department to know before I saw him. first. H.M.Jr: Why don't you come in at 11:00? Bell: If you want me to. I have got to see him anyway. H.M.Jr: Come up at 11:00. You and Merle will be here. What else. If Ed and Philip Young could stay behind, please. 334 October 10, 1940 9:55 a.m. H.M.Jr: Hello. Operator: Knudsen. H.M.Jr: Hello, Henry talking. Wm. S. Knudsen: Yes. H.M.Jr: How are you? K: Fine, thank you. How are you? H.M.Jr: Bill, it's a lovely afternoon and I thought I might want to take a little flight over to Glenn Martin. I haven't been there in six months. Are you busy? K: I guess I will be this afternoon. I could do it tomorrow. H.M.Jr: Tomorrow. I see. When could you go tomorrow? K: In the morning. H.M.Jr: We have that meeting tomorrow morning. K: That's right, but right after that's over. H.M.Jr: After that. K: Yeah. H.M.Jr: Well, let me look at my calendar K: You have 9 o'clook haven't you? H.M.Jr: No, they've made it 10:30. K: I see. H.M.Jr: I tell you what we could do - I could leave right after lunch. K: Fine. H.M.Jr: If the President - I don't think the President's going to be here tomorrow. -K: H.M.Jr: K: H.M.Jr: 335 No. If he's not here there's no Cabinet. That's right. I could leave right after lunch and then I can go from there and go on up home. Supposing we set it tenatively, say, to leave here around K: what time - quarter of two? Sure. Fine. H.M.Jr: How would that be? K: Yeah. Have you got the plane or do you want my plane. H.M.Jr: Well, I have a plane to take us that far but would you have a plane to bring you back? K: Yeah, I'11 have to have that. Yeah. H.M.Jr: Can you arrange that? K: Yeah. H.M.Jr: Well, we could go over together in my plane if you have somebody to bring you back. K: Yes, sir. H.M.Jr: Well, let's fix it that way tenatively for two. K: All right. H.M.Jr: Thank you. K: Good-bye. 336 October 10, 1940 10:08 a.m. H.M.Jr: Hello. Operator: Mr. Vaughn. H.M.Jr: Hello. Guy Vaughn: Hello. H.M.Jr: How are you? V: Well, pretty good. How are you? H.M.Jr: V: Fine. You're really doing something up at Buffalo, Aren't you? Well, I tell you, we're getting a little better all the time which - we've got to do that or get worse; we never stand still. We're getting more engines, thank God. H.M.Jr: Yeah. Let me ask you a question. V: Yes. H.M.Jr: I was talking with our English friends about V: No. We're developing a dive bomber which will dive bombers. Are you making any for them? fly in about, oh, under thirty days for the Navy and it's an experimental type. Now the only dive bomber we had was the FBC-4 which, I think you'll remember, we shipped 52 of them released 52 and we're building 52 more to replace them. H.M.Jr: V: H.M.Jr: For the Navy. That's for the Navy. But a new dive bomber will be ready to fly how soon? V: Well, that's the experimental model - inside of thirty days. H.M.Jr: What do you call that one? 337 2 V: Well, that's a 2600 - I forget the designation it's an X designation and it's got a 2600 Wright engine in it and it's a much larger dive bomber than the FBC-4, which is a bi-plane. In other words, it's about the last word in dive bombing we think. H.M.Jr: Well, the 2600 - how much horse is that? V: That's 1700 h.p. take-off. H.M.Jr: 1700. V: Yes. H.M.Jr: Well, now a plane like this - have you an order for this from the Navy? V: I think we have an experimental contract. H.M.Jr: For how many? V: H.M.Jr: V: H.M.Jr: V: H.M.Jr: V: Oh, just the one. Just the one! That's all. My God! You see it's a broader type job and it's for production in 1941 - late 1941 - if it's as good as we think it is. Well, let me ask you this. If you got an order, when could you begin to deliver this stuff? Well, I'd have to look into that for you because we've got a pretty tight schedule on the Buffalo plant as it is. Well, now, you know we have the present dive bomber; that is, the FBC-4 similar to the ones that were released to I think it was England - yas - or France - I guess it was England. You remember that. H.M.Jr: Yes. V: Well, that dive bomber - the material is in production for 52 more of them. Now, of course, those belong to the Navy. 338 -3- H.M.Jr: Now, juet a second. I've got Curtiss here - V: Just a minute and I'll give you the status of those things too. (Talks aside). H.M.Jr: Hello. Well, I don't - you've got according V: at your Buffalo plant - Curtiss Wright. I'm getting that production report for you. There's 52 of them - material in production. I know that. Now just what the delivery of just a minute. to my sheet - I don't see any Navy bombers the first one is I'd have to look at the report again. H.M.Jr: Well, darned if I can see it on my sheet. V: Well, it's in the cards. H.M.Jr: What? V: It's in the cards. H.M.Jr: Is it on order for the Navy or the Army? V: It's a replacement order for the Navy and the designation is FBC-4. H.M.Jr: FBC-4. I have it under the Army - scout V: It's a scout bomber for the carriers. H.M.Jr: Yeah, 60. V: Well, there may be 60 but there's 52 to bombers 60. replace. I can give you that in a second the designation number. H.M.Jr: I've got FBC-4. V: That's right. H.M.Jr: V: Now, you're tooled up for that? Oh, yes, tooled up for it and we could probably be producing those in not under four months and probably four and a half months. 339 H.M.Jr: V: Well, how long will it take you to go to the new one? Well, that would depend - you see that is an experimental airplane all the way through It's a brand-new airplane and my guess would be 12 airplane months and that's assuming it's a pretty good at the start. H.M.Jr: I see. V: Now the designation of that is X. H.M.Jr: Just X. V: XFB-2-C-1. H.M.Jr: Now wait a minute. Do it slowly. H.M.Jr: x is the last letter in the alphabet - X,Y,2. I've got it. I have it on my sheet. V: XFB2-C-1. H.M.Jr: Yeah. Well, look, Vaughn, supposing you do V: a little thinking and maybe you could call me back this afternoon. If you got an order from the English - what they want is a dive bomber, see - when could you give them some production on this FBC-4 or on this new one? V: I'll call you back just as soon as I can get H.M.Jr: Will you? V: Yes, sir. H.M.Jr: V: that information. I mean, what could you do - how big an order would you need to really give them something? That's right. I'11 give you the whole dope. And now on this order for 50 airplanes, design 77, Navy dive bomber FBC-4, it is on schedule. That means it's in production and the wing j1g is being erected now; that is, they're not being made but they're just being set up in the shop, and we expect to complete that order of 50 airplanes in March 41. 340 5 H.M.Jr: V: H.M.Jr: Ialong see. on Well yean, FOR could ge right thatyou one. We could go right along on it if we had some- thing to tie in with it now. Ion get you - you mean, you could go right along that one. V: I don't see why not, sir. H.M.Jr: Is that a pretty good bomber? V: H.M.Jr: V: It carries two 500-1b. or one 1,000-lb. bomb and is considered an excellent dive bomber. The Navy have used it now for two years and there is nothing better that we know of. How about the Vultee dive bomber? Well, I was going to say the Vought might be able to help you. They ve got a good dive bomber. H.M.Jr: The Vought. V: The Vought Company, yes. H.M.Jr: V: Yeah I know. They've got a good one. Is theirs in production? Theirs is in production. I don't know whether they are producing them at this moment but they have produced them in quantity so that they're all tooled up and ready to do whatever they can do. There won't be any great delay about it. H.M.Jr: Well, just a second - let me look at my sheet just a moment. (Pause). Well, they're just about where you are on their bomber. Well, they've got one they call SBTU-3. V: H.M.Jr: That's right. Yeah. Well, they're just about exactly the same place that you are - they've got about the same number. 341 -6V: H.M.Jr: Wall, I think we could probably the - deliver you some airplanes before they could. You think so. er V: Yes, sir. I think we're quick than they are. H.M.Jr: Well, does Vultee have any on order for the Navy? H.M.Jr: I don't think so. Let's take a look. Wait a minute. V: I don't know of any. H.M.Jr: Just a minute. I'm paying for this call so V: V: H.M.Jr: it's all right. Yes, sir. You don't have to take it off your excess- profits tax. V: (Laughs). H.M.Jr: Just a minute. No, they have no order for the Aray. V: I didn't think so, no. H.M.Jr: Well, then it gets down to both of you are V: about the same size and your delivery schedules are about the same place. Well, I think we can beat - whatever they can do, we can do better. H.M.Jr: (Laughs). All right. V: Guarantee it. H.M.Jr: Think it over. V: All right. I'11 get ahold of Burdette H.M.Jr: V: right away on the telephone and get that information. O. K. Thank you. All right, sir. Good-bye. 342 October 10, 1940 11 am Present: Mr. Lacour-Gayet Mr. Bell Mr. Cochran Mr. Lacour-Gayet: I had the pleasure of seeing you at the Bank of France when you came over. I was at the Bank of France. HM,Jr: That was a long time ago. Let's see, what year it was. Mr. Lacour-Gayet: It was a few years ago. Mr. Cochran: 1934 or 1935. Mr. Lacour-Gayet: When I left America it was. In 1930, I was financial attache from 1924 to 1930, and when I left I went to the Bank of France at the time and when did you come over? It was in 1934. 1934 I think. We went down to Spain and HM,Jr: came through. Mr. Lacour-Gayet: Yes. Well, Mr. Secretary, I want you to know exactly the reasons of my presence over here. As I was saying, I have been in this country six years, from 1924 to 1930, as Financial Attache to our Embassy, at the time of the debt Mr. Bell: We settled the debt. Mr. Lacour-Gayet: We did our best. Mr. Bell: We did our best. 343 -2- Mr. Lacour-Gayet: At least we did our best. I was not in France when this tragedy happened in June, because I had been sent by Mons. Paul Reynaud to Turkey and the Balkans. So in May and June I was in Turkey on a financial mission and I could not get back to France until the middle of August and when I arrived the middle of August, a few days later they thought it might be useful for them to send me over to the United States for several reasons. First one is that of course, as you know, there are certain difficulties we have due to certain circum- stances. We have not a Commercial Attache just now 80 they thought it might be useful for the new Ambassador and for your Government, too, to have here at your disposal somebody who, after all, knows, if I may say so, knows a little about your country. So they asked me to come over and to remain in the United States temporarily. I expect to be here six week, two months, I don't know, to supervise all the commercial and financial problems which might arise between our two countries. And also one part of my job, which is rather important, is to try to liqui- date as soon as quickly, our commission in New York. As you know, we had an important commission in New York. I think it is in the interest of both countries that it should gradually disappear as quickly as can be done. And, third, of course my mission, rather naturally, I don't come here for any definite purpose at all, just come here to be at your disposal to answer any questions you would like to ask me about any situation in France and at the same time when I go back to France, perhaps in the not long future, not too distant future, to give you a mental picture as complete as possible and your own point of view. So you see, my mission is very general. It is an informal mission and I would be very glad if I could answer any questions you would care to ask me about conditions in France now and some other problems. HM,Jr: Well, I think, in order to -- there is this thing, the President seems sort of mixed up. I think all the questions, allthat sort of thing, I think I am going to let the State Department ask them and as far as I am concerned right now there really isn't anything I would 344 -3- want to ask. If, on the other hand, something should come up, I would be very glad to make use of your services, but right now I really would not know what to ask because your Ambassador was here last week, and this week he saw Mr. Welles. Mr. Lacour-Gayet: He saw him again yesterday, I believe. HM,Jr: And Mr. Welles keeps me informed and I think until these very serious matters that your Ambassador is discussing with the State Department are straightened out I think I would rather stay in the background. Mr. Lacour-Gayet: Very good. HM,Jr: But I appreciate very much your coming in and if there are times either Mr. Bell or Mr. Cochran or I do want something, we will make use of your services. Mr. Lacour-Gayet: It would be quite a pleasure for me to give you any information which you would like to very difficult to make any definite plans under present conditions which move so quickly. have. So as I repeat, I expect to stay two months. It's HM,Jr: All right, sir. Thank you for coming in. Mr. Lacour-Gayet: Good-bye. HM,Jr: Good-bye. o0o-o0o 345 October 10, 1940. 11:28 a.m. H.M.Jr: Hello Operator: Mr. Morgenthau? Talking H.M.Jr: 0: Guy Go ahead. Vaughn: Hello H.M.Jr: Hello V: Goodmorning or good day rather. I just heard from Buffalo on this dive bomber thing. H.M.Jr: Oh yes. V: Now on the excess B2-C-1 production November-December '41 and that puts that pretty much out of the picture. H.M.Jr: V: Oh thats the Thats that experimental dive bomber and thats with the proviso that everything goes along in pretty good shape. H.M.Jr: No production until when? V: November-December 41. H.M.Jr: V: Well thats out. Thats out. Now on the SBC-4 - as far as the deliveries to the British go - our deliveries to the United States Navy are January 6; February 20; March 24. H.M.Jr: V: H.M.Jr: V: Yes. Now if the British want to order immediately we can give them in April 30. Wait a minute - I'm writing it down. (Laughs) 346 2 ...... V: U. K. in April April - 30. V: May 30; June 30 and so on. H.M.Jr: Now here's what we have to offer - if you're ready V: to take a little down. Ah - those SBC-4's carry one of each weight. Now if they don't want to one 1,000 pound bomb or one 500 and two 116 pound - H.M.Jr: order those - in four months we could give them one and a half airplanes for every one of the SBC-4 in pursuit which would carry one 500 pound bomb, provided the Navy will release the displacement gear. I see. That is a secret thing, you see? V: H.M.Jr: V: I see. Now if that's so we can substitute one and a half airplanes for every one of the SBC-4. H.M.Jr: Now you're a little bit beyond me - ah V: Now if you take your schedule 30 - would make 45. H.M.Jr: In April. V: In April which would give them 45 of those. H.M.Jr: If what happened? V: If the Navy will release the displacement gear. H.M.Jr: Displacement gear. V: That's correct. H.M.Jr: Now why can you give them more? V: Because we are tooled up on the SBC-4 for 1936, 7 and 8 production which is not a modern tooling setup H.M.Jr: I see. V: ....as compared with the P-40 - the pursuit. H.M.Jr: I see. -3 - V: 347 We've got a modern job and with the same number of men and same space of floor we're tooled up so we can turn out 50% more airplanes. H.M.Jr: Now but the displacement gear would have to be released V: Correct. H.M.Jr: What is a displacement gear? V: H.M.Jr: V: by the Navy? Now its a design of gears - they know what it is - that has not been released - its complicated but it has not been released for foreign shipment but I'm - I feel that they should release that should the British decide that they want the pursuits in place of the dive bombers. If they want the pursuit. Yes in place of the dive bombers. The pursuit is rigged up for one 500 pound bomb and two 116 pound. H.M.Jr: V: H.M.Jr: V: What pursuit ship is that? That's the P-40. Yes - now wait a minute - you're talking about something you know inside out and I don't. I thought we were talking about the SBC-4. Allright, we were until I said that if they would take the pursuit we could give them the pursuit in four months that would carry one 500 pound bomb and two 116 pound bombs - wait a minute - one 500 pound bomb - not two 116 - thats the SBC-4. Now let me straighten you out on the SBC-4 and then I'11 go back to pursuits. H.M.Jr: Let me see if I can repeat it. V: All right. H.M.Jr: V: You're prepared to give - to begin to give them 30 a month, beginning with April, of the SBC-4's. That's correct. 348 4- H.M.Jr: Now you could give them another 15 on the P 40s? V: No - ah - you have the specifications on the SBC-4 that carry a 1,000 pound bomb? H.M.Jr: Yes. V: Or one 500 and two 116. H.M.Jr: Yes. V: All right, now that finishes the SBC-4. H.M.Jr: Right. V: Now if they want to substitute in place of the SBC-4 we can give them 45 a month or one and a half airplanes for every one of the SBC-4's that will carry one 500 pound bomb and that with the proviso that the Navy will release their displacement gear. H.M.Jr: V: I get you. I've got it now and that would not interfere with the present production of the P-40s. That's correct. H.M.Jr: I see - I've got it. V: This will not interfere with any production because they couldn't afford to do it. H.M.Jr: V: H.M.Jr: I see. In other words, you could make 45. 45 a month beginning in April. of the P-40s if the Navy would release this displacement gear. V: H.M.Jr: V: That's correct. I've got it. In fact I think we could beat their delivery a little bit - we'd probably get them in four months. H.M.Jr: I've got it. V: But it would be a tight squeeze. -5H.M.Jr: 349 Well now just one thing - ah - for the P 40 you'd have to have the Allison engine, wouldn't you? V: oh yes. H.M.Jr: And on the SBC-4 you have a Curtiss Engine. V: Cyclone engine. H.M.Jr: Well that comes in the picture too. V: Yes, but Allison recently have been giving us 11 a day. H.M.Jr: Well but they're going to - how long are they going to V: Well that I couldn't tell you - I don't know the situation out there - wish I did but H.M.Jr: V: continue that? Well this gives me something to shoot at. they've done a real job in the last four months since Sloane got into the picture. H.M.Jr: Right - you're right. Well thank you, I'm going to V: Allright, well now wait - there's a little more take this up with Knox this afternoon. information I have to give you because Iwant to get it pretty complete. V: Ah - beginning four months from now we could deliver the pursuit ship as they get it with one 115 pound bomb in each one of the wings - that is their own pursuits that they're going to get anyway could be rigged up that way if what we had in mind as a possibility of their wanting to go out over the channel and drop small bombs on small ships or small barges or whatever might come over. H.M.Jr: I see. V: Its just for their information. H.M.Jr: I see. Well thank you so much. -6- V: 350 Now on pursuit production - just one more item - on pursuit production its 6 per day right now and on December 1st itknow. will go to 8 a day and that I thought you'd like to H.M.Jr: You're making 6 a day. V: 6 per day come off the assembly line right now. H.M.Jr: And on December 1st? V: On December 1st we start making 8 a day off the assembly line. H.M.Jr: Wonderful. V: Ah - that's not bad. H.M.Jr: I say its damn good. V: I think I can get aluminum from the Aluminum Company. They're quoting 20 weeks delivery which is terrible on any new orders but I think we can fix that - possibly have to come to you for some help on it. H.M.Jr: V: Well we'll help you. O.K., well then I'm not worried about that one. H.M.Jr: Thank you. V: Thank you very much 351 October 10, 1940 12:12 p.m. H.M.Jr: Hello. Operator: McReynolds. H.M.Jr: Hello. Wm. H. McReynolds: Good morning, sir. H.M.Jr: Mac, how's the big professor? McR: No. I'm still dragging around. How are H.M.Jr: I'm fine. McR: H.M.Jr: McR: you feeling? Well, that's good. What's your personal private worry? Well, I have - it wasn't a worry, but when I called you I had in here Charles Day who just got back from China. He's been building airplanes and airplane factories for the Chinese over there - working for China for the last six years. He's lived out along the edge of the Burma Road with the Chinamen. He was tremendously interesting H.M.Jr: McR: H.M.Jr: McR: Oh, yeah. from intimate knowledge of just what's happening in China - I thought you might like to talk to him. I'd love to talk to him. Well, he's gone now but I can reach him and he said if you care to devote the time to it of course he'd be delighted to come and see you. H.M.Jr: McR: Well, if you can get him in here at 3:30, I'd like to see him very much. I'm sure I can. 352 2H.M.Jr: O. K., Mac. McR: I'11 have him come over. H.M.Jr: Take care of yourself. McR: He's really a very delightful person and he's got the intimate knowledge - he lived with the fellows - he lived with all kinds of Chinamen. He lived on the - he was bombed out, his factories were bombed out I think he said six different times. H.M.Jr: McR: Did he bring home any little Chinamen? (Laughs). No, he didn't bring home any touch and an intimate current knowledge of little ones I don't think, but he's got a Chinese situation and I thought you'd like to talk to him. H.M.Jr: I would, Mao. McR: 3:30. H.M.Jr: Thank you. McR: O. K. 353 October 10, 1940. Mr. Charles H. Day (99 Main Street, Dansville, N.Y.) Educated at Rensselaer Polytechnic (not a graduate). Built his first aeroplane engine and flew it in 1910. 1910-1914--Manufactured aeroplanes in Los Angeles under name of Day Tractor Aeroplanes. During part of this time was Chief Engineer of Glenn Martin Co. 1914--Joined Sloane Aeroplane Co. which afterwards became Standard Aircraft Corporation, and was second largest aeroplane manufacturing corporation in the United States during the World War. Was Vice President of that Company between 1914 and 1919. 1919-1927--In consulting engineering work in New York. Two years of this time was Chief Engineer of Electron Metals Corp developing magnesium alloys. Also during this six-year period designed and built three different models of aeroplanes. 1927-1930--Vice President and Chief Engineer of New Standard Aircraft Corporation of Patterson, New Jersey. 1931--Designed and built experimental aeroplane for private flying with which he toured around the world studying private flying. 354 -2- 1931-1934--Consulting aeronautical engineering in New York City. 1934-1940--Advisor to Commission on Aeronautical Affairs to Chinese Government and manager of Shiuchow Aircraft Works, North Kwangtung Province and of the first aircraft manufaoturing works Kunming, Yunnan Province, China. 355 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE October 10, 1940 Secretary Morgenthau Mr. Pehle I talked to Hall Roosevelt today with respect to the diamond matter in which he is interested. An application had previously been filed to make available in Holland 10,000 free dollars to pay for the polishing in Holland of certain dismonds owned by Harry Winston, Inc. of New York. This application was discussed with the Committee and denied. Mr. Roosevelt explained that the Harry Winston company presently has in Holland large guilder balances. He indicated that he was working with the State Department on several projects which would involve getting the diamonds out of Holland and also getting skilled workmen out of Holland who could cut and polish the diamonds. I told Mr. Roosevelt that the matter of getting the diamonds out of Holland and also obtaining permits for the workmen to leave Holland was not a matter which concerned this office, but that if it was desired to pay out the guilders which the Harry Winston concern has in Europe, an application should be filed therefor through the Federal Reserve Bank of New York, indicating in detail the purpose for which such payments were to be made. Mr. Roosevelt explained that his interest in the project arose from the fact that he was contemplating designing and perfecting an "electric eye" machine which would do some of the polishing and other work now done by hand. Ort 356 October 10, 1940. MEMORAN DUM TO: Secretary Morgenthau FROM: Mr. Gaston Mr Summer Welles called me at 4:30 to say that he had talked to the President about the French ships at New Orleans and that the President is entirely in accord with permitting the four ships to go since that is the wish of the British Government. I immediately instructed the Office of Merchant Ship Control to issue departure permits for the three ships for which they had been asked, that is, the OREGON, MICHIGAN and WINNIPEG. Welles said that the President added that he had noted that some ships carrying shipments of machine tools for Japan were being held on the Pacific Coast although the shipments were not embargoed. He wished, in view of the present situation with Japan, that we would not give them added cause for excitement and would keep everything on a normal basis. I don't know of any situation such as that to which the President refers, but will look into it. 357 October 10, 1940. MEMORANDUM TO: Secretary Morgenthau FROM: Mr. Gaston Mrs. Harry Durning called me late today to tell me that John Gammie, formerly United States Director of the Cunard Line and now with the British Purchasing Commission, had told him confidentially that the QUEEN ELIZABETH will sail soon - it may be within a week. There have been indications noted by the newspapers in the last few days that preparations were being made. Also, Berger, General Manager of the Norwegian Lines, told him that the OSLOFJORD and the BERGENSFJORD would sail soon. 358 (Handed by Mr. Pinsent of the British Embassy to Mr. Cochran in the Treasury at 3:15 p.m., October 10, 1940.) UNITED KINGDOM HOLDINGS OF GOLD AND EXCHANGE There have been some discrepancies in the figures received regard- ing our holding of gold and dollars, and regarding the monthly drain. I have now received the following corrected statement from London, starting with 1st July 1940 (the date of the tables handed in by Sir Frederick Phillips during his visit here). Monthly balance and loss. Balance of gold and exchange at beginning of month Aug. 1572 1293 1062 235 231 165 1293 1062 897 235 231 165 Oct. (million $) Loss of gold and of U.S. and Canadian dollars Sept. July 897 Write-off of French france 44 etc. Balance of gold and exchange at end of month Resources utilised. dollars (as above) Proceeds of sale of securities * Gold, and U.S. and Canadian - * 7 242 235 Figure not yet reported. It should be about $7 ( million, giving a total of $172 million). In future the monthly loss of gold and exchange reported will represent gold, and United States and Canadian dollars, only. (Initialed) G.H.S.P. BRITISH EMBASSY, 7th October 1940. 359 (Handed by Mr. Pinsent of the British Embassy to Mr. Cochran in the Treasury at 3:15 p.m., October 10, 1940.) STERLING AREA NEWLY-MINED GOLD. In the memorandum given by Sir Frederick Phillips on July 17th to the Secretary of the Treasury, and later to the President, the value of the gold production of the sterling area was given as:- $ million sent direct to U.S.A. sent to United Kingdom 80 400 480 This figure was compared with the Federal Reserve Board's figure of $572 million for the sterling area production in 1939, and Sir Frederick Phillips promised to clear the matter up. A revised estimate for the production in the second year of the war has just been received from His Majesty's Treasury. This is:$ million Australasian production sent direct to U.S.A. Gold purchased by Exchange Equalization Account 74 480 554 This may possibly be still an underestimate as production is rising. But the Exchange Equalization Account's purchases in the first year of the war were $448 million only. Further we cannot be certain that India or South Africa might not /insist 360 insist on making some increase in their gold reserves, though we hope this is unlikely. (India's gold reserve has not been increased since the war began, but South Africa's has been increased by about $30 million). gari BRITISH EMBASSY, 7th October 1940. PLAIN DFB 361 London Dated October 10, 1940 Rec'd 12:06 p.m. Secretary of State, Washington. 3364, Tenth. FOR TREASURY FROM BUTTERWORTH. The Bank of England has today blocked Rumanian balances in the United Kingdom and similar action is to DE taken in the Empire. Since a clearing and payments agreement has been in force bEtwEEn Great Britain and Rumania for SOME time most Rumanian funds ar E already under that control. In fact, this action is not so much dictated by practical as by political considerations as the readiest means of overt British retaliation. HOWEVER, the Embargo will no doubt affect SOME funds of the Rumanian National Bank, pre-clearing balances and a few "black" balances of Rumanian individuals. KENNEDY ALC OCT 1940 Secretary Morgenthau 365 The question of aluminum supply is one of the jams in the Consolidated picture. I am sending a copy of this to Ed Stettinius. JVF Mr. Forrestal. 366 THE UNDER SECRETARY OF THE NAVY 7 October 1940 FROM: TO: JAMES FORRESTAL COMMANDER PENNOYER Have you a memorandum to check on aluminum supply for Consolidated or do you want me to? S. I am addressing a memo to the Navy Member of the Priorities Committee of the Army and Navy Munitions Board, Room Munitions requestthis and also the ing that 2010, Building, urgent need for expediting Brewster's production of PBY-5 wings be investigated. BNO 10 W 8 Va zwp: F.W.P. 362 October 10, 1940 Dear Jim: Thanks for your note on aluminum sup- plies for Consolidated. I talked to Guy Vaughn today, and he said that on any new orders the aluminum company holds then up for twenty weeks. I an delighted that you are bringing this matter to Stettinius' attention. Youre sincerely, Henry Honorable James v. Forrestal, Under Secretary of the Navy, Navy Department, Washington, D.C. By Messenger 4 455 363 Ostober 10, 1940 Dear Jims Thanks for your note on aluminum sup- plies for Consolidated. I talked to Guy Vaughn today, and he said that on any new orders the aluminum company holds them up for twenty weeks. I am delighted that you are bringing this matter to Stettinius' attention. Yours sincerely, Henry Honorable James V. Forrestal, Under Secretary of the Nevy, Navy Department, Washington, D.C. By Messenger 364 October 10, 1940 Dear Jims Thanks for your note on alminum sup- plice for Consolidated. I talked to Guy Vaughn today, and he said that on any new orders the aluminum company holds them up for twenty weeks. I am delighted that you are bringing this matter to Stettinius' attention. Yours sincerely, Henry Henorable James V. Forrestal, Under Secretary of the Navy, Havy Department, Washington, D.C. By Messenger 367 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE October 10, 1940 Secretary Horgenthau Mr. Cochran STRICTLY CONFIDENTIAL At the Staff Meeting this morning the Secretary talked by telephone with tary of State Hull and the latter agreed to give the Treasury Department before the State Department's views with respect to blocking Rumanian assets. Shortly e one o'clock today I asked Commander McKay to learn whether the Secretary had ved any further word from Mr. Hull. At 1:05 Commander McKay told me that tary Morgenthau had received no word and desired that I telephone Secretary Hull's e. Immediately after this call I received a call from Mr. Pinsent, Financial elor of the British Embassy. He asked for an early appointment this afternoon fixed 3 o'clock. He said that he wanted to tell me in advance the subject of isit. He stated that his Embassy had received instructions from London that in understandings had been reached between Germany and Rumania on the question nds, and that the British had decided to block Rumanian assets as of today. tritish hoped that we might take similar action. I did not then, and have not y time, mentioned to Pinsent the possibility of our taking such action. When I reached Mr. Renchard in Secretary Hull's office at 1:10 he told me that eting had yet been held to discuss the question of blocking of Rumania. I sized the urgency of the need for a decision if we are to expect the Federal ve Bank at New York to stop the $4,000,000 transfer from Rumania to Argentina. ard promised to call me back in just a few minutes. Shortly after 1:15 tenchard telephoned that Messrs. Atherton and Feis were with Secretary Hull, ng on the draft of a letter to Secretary Morgenthau on this subject. therton then came to the phone. He told me that the Secretary of State was able to the Treasury freezing "the $4,000,000. In the meantime, he said the Department would continue to look into this subject. If the State tment found that the situation does not warrant freezing, a change of policy be made later. I told Mr. Atherton that we could not freeze the $4,000,000 : that any freezing must be a general order: and that we did not desire to move $ the matter was definitely decided. He stated definitely that we could go and freeze. I left word with my office that if Mr. Cameron should call from New York the uction was to be continued that no action on the $4,000,000 transfer should be before consulting me. I did not try to reach the Secretary or the Under tary at luncheon. At 2:05 I found the Secretary engaged, and discussed the mat- ith Mr. Bell. From his office I telephoned Secretary Hull's office and spoke Mr. Stone. my At the latter made a search and request, Messrs found Atherton that and the Feis is subject which Secretary Hull had discussed withletter was . Atherton's office. Stone arranged for this to be sent to him and promised to vor to obtain Secretary Hull's signature thereto before the latter goes to the House for a 3:15 meeting. 368 At 2:45 Mr. Cameron telephoned me from New York that a further message had received from the National Bank of Rumania. They confirmed their cablegram and stated was correct. Cameron been yesterday incorrect, that the and, "test" insisted, however, thatofthe "test" was no "test" wasfurthermore, contained in today's message. The Federal, consequently, cannot act upon instructions received to date and is requesting a further properly tested message from the National Bank of Rumania. I told Cameron that we were working on the Rumanian proposition and would certainly let him know definitely this afternoon of our action. I anticipated extending our control to Rumania. Earlier in the day, Cameron had told me that the Chase Bank had received a cablegram from the National Bank of Rumania correcting the #test" on the message which that bank had received yesterday from Rumania in regard to transfering the $4,000,000 under reference to the Central Bank of Argentina. At 3:00 I gave the foregoing information orally to Secretary Morgenthau. He telephoned Mr. Bell to proceed with the freezing order as of 3:00 today. The Secretary understood that the letter had not yet been received from Mr. Hull but that Mr. Atherton had definitely told me to go ahead with the freezing, after I had emphasized to him that we either had to do it completely or not at all. Mr. Pinsent called at 3:00 and handed to me the attached memoranda in regard to British action with respect to blocking Rumanian assets. At 5:11 I received the letter from the Department of State approving the extenion of the control to Rumania, a copy of which communication is attached. I Ammediately showed this letter to Under Secretary Bell and, with his approval, tele- phoned Mr. Cameron in the Federal Reserve Bank at New York, bringing him to date on developments. At 5:25 I let Mr. Pinsent know that we were extending the control to Rumania. p.m.s. 369 Message from London Dated 10th October 1940 Bank of England are taking steps today officially to block Roumanian assets in this country. Please urge United States Government to take similar measures in regard to Roumanian assets in the United States. (Initialed) G.H.S.P. British Embassy, October 10th, 1940. COPY 320 Message sent on 9th October from British Legation, Bucharest, to London and Washington It is reliably reported Germans are negotiating or have concluded arrangements with Roumanian Government by which they will be able to dispose of foreign exchange. What are your views in particular the dollar assets Roumanian National Bank? (Initialed) G.H.S.P. 10th Oct. 1940 COPY lap 371 DEPARTMENT OF STATE reply refer to $40.51 Frozen Credits/648 WASHINGTON October 10, 1940 My dear Mr. Secretary: Reference is had to the Treasury Department's letter of October 2, 1940 and to other correspondence concerning the applying of freezing control to Rumanian assets in this country. As stated by telephone today, the Department of State believes that immediate application of such control would be in line with the policy that has been pursued in this field. Sincerely yours, (Signed) The Honorable Henry Morgenthau, Jr., Secretary of the Treasury. (Copy) enk Cordell Hull 372 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE October 10, 1940 Secretary Morgenthan FROM Mr. Cochran STRICTLY CONFIDENTIAL At 10:05 this morning I received a call by telephone from Dr. Somary, the Swiss economist. He stated that he had talked by telephone yesterday with Mr. Weber, President of the Swiss National Bank. Dr. Somary stated that, according to Weber, the rise in the Swiss franc will be stopped today. The gold import point has been reached and Switzerland will not permit the exchange rate to go higher. Dr. Somary did not indicate just how the intervention to hold the Swiss franc is to be executed. Weber had stated that rise in the franc was purely a result of repatriation. In addition to small business concerns requiring working capital which they had sent abroad, the big insurance companies are now taking funds back to Switzerland from the American market. This is a consequence of the Japanese alliance, which leads Switzerland to believe that the war will now be longer than anticipated recently. Furthermore, there is the increased danger that the United States might become involved and extend its control of foreign exchange and assets. Since the Swiss have large oldings of dollars and the United States has practically no Swiss francs, the transYer of comparatively small amounts of dollars into Swiss france has tended to affect the rate sharply. The present plan is, however, not to let the Swiss franc go higher. In answer to my inquiry, Dr. Somary stated that the Swiss are still experiencing difficulties in passing the British blockade with ships bringing raw materials and other merchandise from the United States. Just recently the Swiss have succeeded in getting one of their chartered vessels over to the United States with a cargo of Swiss merchandise. The Swiss realize that they are in the middle of a war, but are patiently trying to negotiate around the British blockade. They feel that Great Britain has talked hemisphere blockade so thoroughly that they have lost sight of the interests of their small friends on the continent, such as Switzerland, Greece and Turkey. The Swiss realize that it is easier to exercise a complete blockade of the continent, than to limit it to certain countries. Nevertheless the Swiss will persist in pressing their rights with the British. MMP. 373 October 10,1940 Dear Steves Here are the September figures on the airplane industry which you my wish to make public. Youre sincerely, Henry Non. Stephen Early, Secretary to The President. by Memories 374 October 10, 1940 Dear Steves Here are the September figures on the airplane industry which you may wish to make public. Yours sincerely, Henry Hon. Stephen Early, Secretary to The President. By Messenger 375 October 10, 1940 Dear steve: Here are the September figures on the airplane industry which you may wish to make public. Yours sincerely, Henry Non. Stephen Early, Secretary to The President. By Messenger 376 EMPLOYMENT IN THE AVIATION MANUFACTURING INDUSTRY, BY REGIONS Factory Wage Earners N.DAA. MINN wis S DAK DAMO IOWA NESS UTAH MICH ILL OHIO IND COLO MO KANS Mountain Central and Southern Atlantic Sept.1939-3600 ARIZ 54,800 Sept.1940-1/500 M.MEX OKLA YENN TEXAS ARE .. GA MISS CALIF LA Total U.S. Sept 1938-28,700 Sept 1939 -50,600 Sept. 1940-1/8,800 1-124-A Over - Office at the Secretary of the Treasury STRICTLY CONFIDENTIAL TREASURY DEPARTMENT CONFIDENTIAL INTER-OFFICE COMMUNICATION 377 DATE October 10, 1940. TO FROM Secretary Morgenthau Mr. Hase Subject: Employment in the Aviation Manufacturing Industry 1. In the year since the outbreak of war, employment in the aviation manufacturing industry has increased by approximately 135 percent. In September 1940, manufacturers of airplanes employed 90,400 factory workers, and manufacturers of airplane engines approximately 28,400 factory workers, a grand total of 118,800 factory workers for the entire industry. In September 1939, the aggregate employment was 50,600. 2. Proportionally, the greatest increase in employment has taken place in the airplane engine plants where the number of factory workers employed in September 1940 was about three times the number employed a year ago. The largest increase has taken place at the Allison Engineering Company where employment has multiplied eight times (to 5,282) since the outbreak of war. 3. The September increase in employment was distributed among practically all of the manufacturers in the industry. The largest increase in employment -- approximately 1,450 factory workers -- occurred at the Consolidated Aircraft Corporation. In recent months, Consolidated has shown a steady increase in employment, and for the period since May leads the industry in number of factory workers added (4,250 persons). 4. The attached chart shows total employment in the aviation manufacturing industry and the employment of selected companies since January 1937. The attached tables give the figures plotted on the chart. Attachments Employment in Aviation Manufacturing Industry (Airplanes and Airplane Engines) 1937-1940 1937 1938 1939 1940 22,100 23,700 25,000 56,800 24,100 24,200 27,400 25,200 22,800 36,500 23,400 23,800 21,700 41,100 24,100 52,800 5,500 6,500 7,300 Airplanes Jan. Feb. Mar. Apr. May June July 83,800 Aug. Sept. Dec. 57,200 58,700 60,600 65,200 70,300 77,500 90,400 Airplane Engines Jan. Feb. Mar. Apr. 6,000 15,600 6,600 8,100 17,100 18,400 20,500 22,600 24,900 26,600 28,400 May June July 6,600 6,900 8,900 6,400 6,600 7,000 9,500 7,100 12,600 Aug. Sept. Dec. 13,700 Total Industry -- Airplanes and Airplane Engines Jan. Feb. Mar. Apr. 27,600 30,200 32,300 70,500 72,800 30,100 30,800 35,500 75,800 85,700 May June 31,800 29,700 45,400 Sept. 29,800 28,700 50,600 Dec. 30,400 31,200 65,400 July 79,000 Aug. Office of the Secretary of the Treasury, Division of Research and Statistics. 92,900 102,400 110,400 118,800 October 10, 1940. 378 379 Employment of Selected Aircraft Manufacturing Corporations 1937-1940 1937 1938 Jan. 615 Feb. Mar. 1939 1940 222 654 850 290 912 859 865 896 840 873 808 440 1,410 Sept. 718 235 703 Dec. 213 606 799 1,834 1,493 2,666 1,726 1,742 3,016 5,567 5,445 5,319 4,776 5,785 1,249 1,836 3,374 6,513 7,313 : Bell Aircraft Corp. Apr. May June July Aug. 1,192 1,480 1,963 2,413 Boeing Aircraft Co. Jan. Feb. Mar. Apr. May June July Aug. Sept. 1,109 1,948 4,468 Dec. 1,380 2,485 5,199 3,169 2,540 968 3,246 2,518 819 3,099 2,104 832 Sept. 2,617 989 1,408 Dec. 2,580 981 2,540 7,910 8,650 Consolidated Aircraft Corp. Jan. Feb. Mar. Apr. May June July Aug. 2,837 3,477 3,807 4,349 5,040 5,821 6,743 7,836 9,289 380 Employment of Selected Aircraft Manufacturing Corporations 1937-1940 (continued) 1938 : : 1937 1939 1940 Curtiss-Wright Corp. (excluding Wright Aeronautical Corp.) Jan. Feb. Mar. Apr. 1,241 2,211 3,802 4,380 4,744 5,016 5,213 5,698 6,314 6,531 6,597 6,824 1,500 2,347 2,939 1,933 2,310 2,848 Sept. 2,202 2,736 1,562 Dec. 2,007 3,491 3,447 6,328 4,334 11,952 5,961 6,173 4,177 13,119 6,653 4,672 5,445 14,033 14,656 14,957 14,662 14,898 Sept. 5,532 4,028 6,318 15,323 Dec. 6,771 4,110 10,362 Jan. 910 1,577 2,305 Feb. Mar. 1,094 1,594 3,509 May June July Aug. Douglas Aircraft Co., Inc. Jan. Feb. Mar. 5,591 Apr. May June July Aug. 12,077 Lockheed Aircraft Corp. Apr. May June 1,338 1,797 5,699 July Aug. 5,157 4,768 4,362 4,400 5,016 5,591 6,599 7,296 Sept. 1,383 1,997 5,324 Dec. 1,428 2,123 5,156 7,582 381 Employment of Selected Aircraft Manufacturing Corporati one 1937-1940 (continued) 1937 1938 1939 1940 Jan. 1,364 1,814 2,905 Feb. Mar. 1,716 1,892 4,092 2,044 2,134 6,029 10,984 9,407 9,133 9,010 9,357 9,133 9,513 Glenn L. Martin Co. Apr. May June July 11,200 Aug. Sept. 2,032 2,341 10,070 Dec. 1,818 2,777 11,174 11,877 North American Aviation, Inc. Jan. 829 1,713 2,223 Feb. Mar. 889 1,935 2,457 841 2,400 3,125 1,272 2,685 2,992 566 2,530 3,795 2,350 2,245 1,826 2,444 2,168 1,766 2,497 1,972 1,952 Sept. 2,439 1,880 2,123 Dec. 2,338 1,774 2,588 Apr. May June July Aug. Sept. Dec. 4,049 4,324 4,154 4,371 4,336 4,782 4,918 4,916 5,111 United Aircraft Corp. (excluding Pratt & Whi tney) Jan. Feb. Mar. Apr. May June July Aug. 2,757 3,051 3,468 3,735 3,912 4,282 4,823 5,016 5,445 382 Employment of Selected Aircraft Manufacturing Corporations 1937-1940 (continued) 1938 : : 1937 1939 1940 364 742 938 959 Vultee Aircraft, Inc. Jan. Feb. Mar. 440 Apr. 1,008 May 1,334 2,127 2,618 2,857 3,531 June 560 533 Sept. 430 288 Dec. 334 662 July Aug. 383 Employment of Selected Airplane Engine Corporations 1937-1940 1937 1938 1939 1940 218 262 454 229 297 466 238 339 558 Sept. 238 382 642 1,114 1,261 1,610 1,958 2,766 3,254 3,917 4,595 5,282 Dec. 266 439 901 151 153 134 153 152 138 162 144 171 Allison Engineering Co. Jan. Feb. Mar. Apr. May June July Aug. Continental Motors Corp. (Airplane Engine Division) Jan. Feb. Mar. Apr. May June July Aug. 288 344 358 368 378 388 398 382 Sept. 135 146 203 Dec. 152 142 243 567 Lycoming Division of Aviation Manufacturing Corp. Jan. Feb. Mar. 849 729 519 581 521 657 638 889 704 Apr. 711 May 765 June July 901 549 573 S19 873 970 Aug. Sept. 756 514 644 Dec. 762 506 689 1,080 384 Employment of Belected Airplane Engine Corporations 1937-1940 (continued) 1937 1938 1939 1940 Jan. 1,931 2,567 2,264 Feb. Mar. 2,119 2,489 2,659 2,384 2,555 3,066 5,642 6,549 7,158 7,541 7,765 8,504 Pratt & Whitney Aircraft Apr. May June 9,121 9,449 July Aug. Sept. 2,471 2,384 3,394 Dec. 2,618 2,227 5,022 2,254 2,607 3,398 2,515 2,705 3,771 2,800 2,930 3,997 Sept. 2,690 3,184 4,026 Dec. 2,608 3,374 5,141 9,406 Wright Aeronautical Corp. Jan. Feb. Mar. Apr. May June July Aug. 5,411 6,081 6,537 6,984 7,882 8,682 9,491 10,151 10,726 385 STRICTLY CONFIDENTIAL EMPLOYMENT IN AVIATION MANUFACTURING INDUSTRY Factory Wage Earners 1937 1938 1940 EMPLOYEES EMPLOYEES Thousands Thousands Total Industry (Aircraft and Engines) 140 140 120 120 100 100 80 60 60 60 40 40 20 20 0 o , Selected Aircraft Manufacturing Companies Thousands The Douglas Aircraft Co Selected Airplane Engine Companies EMPLOYEES EMPLOYEES Thousands EMPLOYEES 1941 Thousands Glann Martin Ca 15.0 15.0 12.5 12.5 12.5 10.0 10.0 7.6 7.5 s.c 5.0 5.0 2.5 2.5 1930 1937 1939 1940 1941 0 1939 1938 1940 1937 1999 1989 1040 1941 17.4 15.4 . 1937 . 7.5 2.5 Wright Aeronautical Corp 15.0 17.5 10.0 . 1940 1937 Press and Whitney Aircraft Boeing Aircraft Ca 1941 15.0 12.9 12.5 Consolidated Aircraft Corp 10.0 10.0 7.1 7.5 12.5 10.0 7.6 5.0 5.0 so 2.5 2.5 1.5 1934 1938 1940 0 0 1937 1941 1937 1930 1939 1940 1941 12.5 12.9 Curties ight Core Beotuding . Lockhead Aircraft Care Shipped 1987 1999 1940 1941 1940 1941 1939 1940 1941 1999 1940 1941 1989 12.1 10.0 10.0 Allison Engineering Ca 10.0 7.5 7.5 1.0 5.0 2.1 2.5 7.4 s.o 1.5 1938 1939 1940 . 1937 1941 1937 1938 1939 1040 1941 0 10.0 10.0 North American Avation Inc 0 United Aircraft Cora Press 1937 1000 1939 7.6 7.8 7.5 5.0 5.0 2.5 2.5 Lecomine Division of Avation Corp so 1.5 0 1938 1939 1940 . 1937 1941 1937 1934 1939 1040 104 1987 um so 1.0 Bell Aircraft Vultee Aircraft Corp Corp Breath Continental Expires Motors 1.5 2.5 2.5 1934 1939 1940 1941 . 1933 1937 1934 1934 1040 1941 . . 8.0 1087 1999 1-100 STRICTLY CONFIDENTIAL OCT 10 Nazis Reported Secretly Unloading Vast Quantities of Seized U. S. Stocks By S. F. Porter YORK POST The British deny the off butes the evidences of foreign clal figures don't show it, but liquidation to German sources. still the rumors of extensive for- eign liquidation of America's best-known stocks continue cir- culating among Wall Street insiders. Financial The stories won't downed Jst Marks Despite all efforts to prevent Nazi selling of American stocks seized in conquered European lands, several brokers insist the Germans are slipping stock certificates through the official sentinels and are working out some big selling deals in the New regardless York markets. of the statistics which, incidentally, are months late and admittedly incomplete. And in the last few days, a new twist has come up to add to the general confusion about the extent of foreign sell- ing here and its influence on stock-prices. A seport traveling through the financial district today attri- Problem Just how important bond yields are to insurance com- panies was suggested by C. A. Caaig, president of the Amer- Life Convention, in his speech to the convention at Chicago. "There can be no mistaking the gravity of the problem" created by steadily declining interest rates and lower re- turns on investments, said Craig. The yield on .S. government bonds has fallen from 5.6 to 2.6 per cent in the last 10 years. The return on mortgages, from 6 to 4 per cent. The intriguing part of Craig's statement is its timing, for it came just as the big insurance companies were refusing to buy Southern Cal- fornia Edison's bonds at a of less than 3 per cent. But much as the investors dialike the trend, there it is. And there it will be as long as the government maintains its strict control over the money did credit markets. Undercover The sales can't be traced sat- isfactorily, for, according to the brokers, the stocks involved are registered in American names. Once those stocks are over here, no one can be certain of the identities of the ultimate receivers of the proceeds from sale. The stock certificates are just like all other certificates. When sold, the cash is delivered to the seller without ques- tion. What the sellers do with the money after that is any one's guess. That's the trouble, of course. Washington is worried about German selling: officials have stated repeatedly their Intention to prevent it. Wall Street abhors the idea; brokers are constantly on the lookout for signs of it. Yet the feeling is that It is going on. And no one knows It's generally conceded that currently going on are com- the Germans confiscated large amounts of securities and other valuables after the Invasions of Holland, Belgium and France. Those are the securities being sold, it is believed. Enough are registered in American names to make quite a difference both to the Germans and the American investors, Hunch Since the rumors can't be proved or disproved, they persist undimmed by Commerce Dept. statements showing mere- ly a trickle of liquidation from British and Canadian sources. In some instances, it's probably just a hunch of the brokersa hunch borne out by the sluggish action of specific stocks, by the market's refusal to mark The reports of the last few days have centered around one major steel stock which has been running into broad and unexplained selling every time it reaches a certain price. Other Sources Switzerland is another source of selling that brokers are wor- rying about. A substantial amount of "hot money" from other European countries is lodged in Switzerland today. impossible. ble from London stated that British owners of American stocks aren't selling now be- Transfers The certificates could be trans- ferred here without the knowledge of American sources. The litle pieces of paper that are so valuable when placed on the market might be brought in by any travelers-from South America, Japan, Africa, even from Canada. In fact, the rumor persists that South America and Japan have been used freely by Nazi agents attempting to conceal the true source of stock selling. Here are some of the big ones due for SEC registration soon: Crane Co. of Chicago has a $10,500,000 issue of 10-year sinking fund debentures in the works. Proceeds will be used for refunding the company's outstanding 31/ss of 1951. Mor- gan Stanley & Co., Inc., will manage this one. Boston Edison Co.'s stock- holders will vote early in No vember on an issue of bonds to refund the utility's $53,000,000 first mortgage 31/sm of 1965, ac- cording to present plans. Under the laws of Massachu- setts, utility issues must be of fered for competitive bidding by underwriters. In 1935, when the 31/2s were sold, First Boston Corp. won the bid. the advance of business. what further steps can be taken to make such liquidation pleted. As for England, a recent ca- cause they think the price level is too low. They're waiting for a price advance before freezing their profits, it's said. SEC Calendar Now that the Southern Callfornia Edison issue is out of the way, the SEC's calendar of pending bond offerings holds less than $100,000,000 corporate financings. But this figure will remain low for only a few days or just until the negotiations Novelty The distribution of Southern California Edison Co.'s $108,000,000 3s in five and 10- bond lots to small buyers in all sections of the country constitutes a variation in the financing news these days. Because the Big Five insurance companies so far have held off on buying the bonds, little investors are getting a chance to pick up the highgrade securities at the formal issue price. And at least this one utility is obtaining real distribution of its bonds. Just why the insurance companies are holding off is something of a mystery. It may bit pique, for it is known that the companies wanted to buy the entire issue privately. Or it may be the yield, for at 104 the utility's 38 yield only 2.78 per cent. But the big thing is that the offering is a success despite the absence of these tremendous bota buy era. 387 THE SECRETARY OF THE INTERIOR WASHINGTON October 10, 1940. My dear Henry: For your information, I am sending you copies of correspondence between the Department of State and this Department with reference to the proposed sale by the Atlantic Gulf and Pacific Company, of Manila, an American corporation, of the steamer ATLANTIC GULF. to a Japanese subject. Sincerely yours, Secretary of the Interior. Hon. Henry Morgenthau, Jro, Secretary of the Treasury. Washington, D. C. Incs. 388 THE SECRETARY OF THE INTERIOR WASHINGTON October 10. 1940. (Co 8113.86/25) My dear Mr. Secretary: I acknowledge receipt of your letter of October 7. with reference to the proposed sale by the Atlantic Gulf and Pacific Company of Mamila, an American corporation, of the steamer ATLANTIC GULF. to a Japanese subject. I - sending to the High Commissioner to the Philippine Islands, in code, the eable that you suggest in your letter. Sincerely yours, Secretary of the Interior. Non. Summer Velles, Under Secretary of State, Washington, D.C. SECRETARY STATE DEPARTMENT OF STATE WASHINGTON In reply refer to Co 811B.85/25 October 7. 1940 CONFIDENTIAL My dear Mr. Secretary The receipt is acknowledged of Mr. Mendenhall's letter of September 19, 1940, enclosing a copy of a radiogram dated September 16 from the United States High Com- missioner to the Philippine Islands in regard to the proposed sale by the Atlantic Gulf and Pacific Company of Manila, an American corporation, of the steamer Atlantic Gulf, now under Philippine registry, to A Japanese subject. It appears from the High Commissioner's radiogram that the vessel is not suitable for either salvage work or interisland trade and, accordingly, it seems at least probable that the vessel is desired for conversion into scrap. In this connection, I enclose a copy of the White House press release of September 26, 1940, from which it will be noted that, effective. October 16, 1940, the The Honorable Harold L. Ickes, Secretary of the Interior. -2- the exportation of all grades of iron and steel scrap will be placed under the licensing system and that under the new regulations licenses will be issued to permit shipments to the countries of the Western Hemisphere and Great Britain only. In view of this fact and, for your confidential information, of the fact that this Government has not in recent years, as & matter of policy, authorized the transfer of vessels of United States registry to Japanese interests, it is recommended that a cable, in confidential code, reading somewhat AS follows be sent to the High Commissioner: "1t seems at least probable that the vessel is desired for conversion into scrap. Under the new regulations effective October 16, 1940, 11censes for the exportation of all grades of iron and steel scrap will be issued to permit shipments to the countries of the Western Hemisphere and Great Britain only. Furthermore, it may be stated, for your strictly confidential information, that the United States Maritime Commission has not in recent years, as a matter of policy, authorized the transfer of vessels of United States registry to Japanese interests. It is suggested, there- fore, that you inform both the company and the Philippine Government that this Government, while not asserting any legal control in the matter, does not look with favor on the proposed transfer." Sincerely yours, For the Secretary of State: Under Secretary Enclosure: Press release of September 26, 1940 FOR IMMEDIATE RELEASE THE WHITE HOUSE FOR THE PRESS SEPTEMBER 26, 1940 CONTROL OF IRON AND STEEL SCRAP EXPORTS The President has approved the early establishment of additional controls of the exportation of iron and steel scrap with a view to conserving the available supply to meet the rapidly expanding requirements of the defense program in this country. Effective October 15, 1940, all outstanding balances of licenses which have been granted pursuant to the existing regulations of July 26, 1940, for the exportation of No. 1 heavy melting steel scrac will be revoked. On October 16, 1940, the exportation of all grades of iron and steel scrap will be placed under the licensing system. Under the new regulations which will be made effective on October 16, 1940, licenses will be issued to permit shipments to the countries of the Western Hemisphere and Great Britain only. 392 THE SECRETARY OF STATE WASHINGTON October 10, 1940 My dear Mr. Secretary: I wish to thank you for your letter of October fourth, with which you send me the very interesting summary of purchases in this country by the Nether- lands. I am very happy to have this information. With best wishes, Sincerely yours, Godine Street The Honorable Henry Morgenthau, Jr., Secretary of the Treasury. IS W a 12 393 October 10, 1940 2:00 p.m. RE BRITISH PURCHASING PROGRAM Present: Mr. Buckley Mr. Purvis Mr. Fairey Mr. Young Mr. Towers Mr. Knox Mrs. Klotz H.M.Jr: I hope it wasn't inconvenient, but I have got another brainstorm and Mr. Knox wants to leave at three. I think I can save you some time on the dive bomber. Purvie: Right. I wonder whether it would be a good idea for you (Fairey) to explain to the Secretary how we stand on dive bombers. H.M.Jr: I had nothing to do this morning, and I want to get you some dive bombers. Purvie: I hope you will have a holiday all the time. Fairey: We have placed, 80 far, orders for 650 and 600, that 18, 1,260, as between Vultee and Brewster, some of the ordere being placed with Northrup, but that is for the same machine. We have approval for but not placed, 60. H.M.Jr: With whom? Fairey: Brewster. H.M.Jr: I wasn't working with either concern, because I was thinking in terms of the Navy. Neither of these are Navy ships. Fairey: No. 394 -2Purvis: These are our ships, are they? Fairey: I thought you would like to know our position. That is how it stands at the moment. H.M.Jr: Curtiss can begin in April turning out 30 a month, of the one he has now got on order. It is an oldish one. Purvis: It 18 a Navy? H.M.Jr: Yes. (Mr. Young entered the conference.) H.M.Jr: It is an oldish one, but it is the same one that we were - it is lying down at Martinique, but he has got the dies and tools and everything and he is completing an order now to take the place of those ones for Martinique and beginning in April he can give you 30 a month. Purvis: The Navy 1s replacing the onea she gave up in Martinique. Fairey: I see. Purvis: That is interesting. H.M.Jr: These initials drive me crazy. I wish somebody would call them one, two, three and four, The model is called SBC4. It takes a 1,700 horsepower engine known 88 the 2,600, Curties. Purvis: The SBC4. H.M.Jr: Yes, it is a new one to me. That takes a -- Purvie: H.M.Jr: It 18 the 2,600. It is a question of whether you have the engines, you see, but he could start in April and knock out 30 a month for you. You know, if he says it, he will do it. I was talking to Guy Vaughn direct. Purvis: Yee, that is true with Curtiss. 395 -3H.M.Jr: Now, the interesting situation, the other place where you have no orders 18 Vought, you see, which is part of Pratt & Whitney. Purvis: That is the one you were talking about, Vought H.M.Jr: Strangely enough, they also have about 60 on Purvis: H.M.Jr: Sikorsky. order. Their orders are running out about March. I haven't talked to them. They might begin in April also to turn out R good many. They run out in March? Is that an approved type from the Navy view? Yes. You see, you are not getting the Navy bomber. The Navy are really the people who invented this thing. Purvis: And I understood from Secretary Knox that he would be perfectly willing to have our people go in and they would tell them everything they knew. H.M.Jr: That is what I want to get today, the approval 80 that you would be saving a week, you see, and have a look at these things, you see. Purvie: When does Baker get back? Fairey: Mansell gets back on Friday. H.M.Jr: Purvis: I thought you could have A look at these things and -- I will take the liberty of asking whether Morris Wilson might come along. Fairey: I will go down myself if it is important. Purvis: Yes. H.M.Jr: Vought Sikorsky, you have no orders there, you know. Purvis: No, that 18 one of those in which we put in application for release. 396 H.M.Jr: Well, here it is, known in the Navy term as SB2U3. Purvis: Idid don't like the commentation at all. SB2U, you say? H.M.Jr: SB2U3. I can't see anything wrong in that. Well, you see they are running along and their orders are completed in January and they have most likely got a setup and they are turning out 20 or 23 a month, these people are. Klotz: We are like children, having a wonderful time. H.M.Jr: Do you get it, what they are laughing at? Buckley: H.M.Jr: I haven't the slightest idea. Neither do I. It must be good. Purvis: It is perfectly good. Twenty to 23 a month? H.M.Jr: Their orders are supposed to be completed in January. Now, the Curtiss dive bomber which will make its first test flight in 30 days, and which they say is the last word - but that is a year off on delivery, 80 you see again 1f you and the Navy have got together on it, on the order, but in the meantime, you would be getting possibly the Vought Sikorskys which are all tooled up and ready to go on the Curties. They are both there. I don't know how they compare to what you have got or anything else. Purvis: Frankly, I would like to know more about this. It really needs Mansell and you. Fairey: Yes. H.M.Jr: The important thing, which was news to me, was the thing he says here about the eluminum company, Fairey: and this is interesting. He saye here, "I think I can get aluminum from the Aluminum Company." They are quoting 20 weeks delivery, which he says is terrible. That wee news to me. 397 - 5. Purvis: The last time - I was supposed to follow that up and I am afraid I haven't. The last time I saw Stettinius they thought that as there was a very big tonnage for peace purposes, there would be something that could be drawn on there, cut down a little. H.M.Jr: Well, anyway, he is supposed to bring Towers over and if you can get a - which you will get - permission to see these two planes and within a reasonable time you can say what you want. Maybe you prefer what you have got, but at least here are two companies. They are both good compenies. Fairey: Yes. H.M.Jr: They are finishing up on a Navy order. They are not the latest thing, but there is nothing new you could get here now, but you could jump in here if you have the answer for him. You could keep them going until the new ones come over the line. Purvis: Are the enginee suitable for this liable to be Fairey: There again, I don't know. I am not familiar with this question. It is very easily answered when I get back to the office. H.M.Jr: Well, with the help of Towers and Knox giving it his blessing, you certainly over the week-end could say, "Well, of this group, we can do this.' Here are two companies, I am sure, that can take your orders -- Purvis: Quite soon. Fairey: Anything that we could get from this, I suppose, would be extra to our present program. We H.M.Jr: the ones that would go on the new Brewster that you haven't yet placed orders for? shouldn't have to give up anything for it, because they are holding us a bit tight to our 4,200 in the allocation. I don't know anything. I am not on that committee. 398 -6Purvis: What you want is to get these over and above the Fairey: Yes, an additional classification. H.M.Jr: Well, try for it. Didn't your committee meet Fairey: Yes. H.M.Jr: Well, what did you get in exchange for the Fairey: The question of the trainers came up and I accepted it, but the United States Navy said they had great need of trainers and the matter was referred back to a subcommittee. I am on 14,365? yesterday? Swedish order? the subcommittee, 80 when it comes back, I shall fight for my trainers. H.M.Jr: Why not let's say something to Knox today about it? Was Towers on it? Fairey: Yes, Admiral Towers was Chairman of the meeting Young: Admiral Towers would like to have Mr. Buckley H.M.Jr: What is your recommendation, Mr. Young? Young: I told him I thought it could be arranged. H.M.Jr: Do we have to have a committee meeting on it? Young: I think it is all right. H.M.Jr: How would you vote, Mrs. Klotz? Klotz: I take it Mr. Buckley is going. Purvis: Would it be an impertinence to suggest that you will need about five Mr. Youngs and five and it was he who referred it back, but I suppose this could have consideration. This is to be referred back to the subcommittee. on our committee. Mr. Buckleys. 399 Buckley: H.M.Jr: You just want a packed committee. (Facetiously) Well, we are thinking of getting another Buokley, a prototype. Purvis: A mock-up. H.M.Jr: There 18 the mock-up (indicating Young). Buckley: I thought one was enough. H.M.Jr: Seriously, if they are going to - if this Young: Purvis: thing keeps going - seriously, Philip. I know it. I was very, very disappointed, and worried, when just before lunch Ballantyne rushed into my office and asked me one or two questions, which I couldn't answer, and then he said, "You know, I am only cutting out the things that are most important to talk to Mr. Young about because it isn't fair to press him beyond a certain point." H.M.Jr: Well -- Purvis: There was a consideration which I didn't realize. Fairey: If the plane comes back from Seattle, does Purvis: I had given him too much to worry about. Fairey: H.M.Jr: it go to Buffalo? I thought I would get Mansell to get off at Buffalo. Is it agreeable to you to go up to Martin with me tomorrow? Purvis: I would love to go up. H.M.Jr: I wd 11 keep right on going and I will drop you Fairey: Very good. in New York. 400 8H.M.Jr: I will drop you at LaGuardia. Purvis: That is better still, because I have got to be H.M.Jr: I have to get up to my place before sundown. Purvis: I would like to very much. H.M.Jr: Just while we are here, I called up - up there on Saturday. Glenn Martin was out on his boat, but his second man was there. He 18 very good. I asked him what could he do to speed up production for the Army and the English and he said nothing. An hour later I talked to him and he had been in touch with every supplier in the United States and he is going to have 8 report tomorrow. (Secretary Knox and Admiral Towers entered the conference.) H.M.Jr: I will be very much to the point, because you want to get a plane. Knox: No, I am not going this afternoon. I can't get away until tomorrow. That is a result of going to the White House too often. If I had stayed away from there, I would have gotten away. H.M.Jr: I know just how you feel. What I did, took the liberty of doing, 18 this: I had nothing to do this morning, 80 I Knox: H.M.Jr: Come on over, I will give you something to do. You might say I am over there now when you hear what I say. In a message which I received, which you are familiar with, they said they wanted two things. One was a long-distance bomber and the other was a dive bomber. Knox: And also some machine gun tools. H.M.Jr: Yes. So I looked around, knowing they had orders 401 -9with Brewster and Vultee, knowing the Navy invented this thing, and it gets down to Vought Sikorsky and to the Curtiss. Knox: How about Brewster? H.M.Jr: They have orders. Purvis: We have some placed, and some not placed. H.M.Jr: Here is the point. I talked to Guy Vaughan, whom I have worked with. He will complete an order for you in March and he could - beginning in April - I learned this - the SBC4, which is the one, I believe, the same one that is down at Martinique - is that right? Towers: That 18 right. H.M.Jr: And these are being made to take the place of them, aren't they? Towers: That is right. He could start out for the English in April and H.M.Jr: grind out 30 a month. He also told me this, which I haven't had a chance to tell these people, that if they wanted to, he could take the so-called Curtiss P-40, which is this pursuit plane of which he is making six a day now, and told me on December 1 he would be making 8 a day. Knox: Who 1s this, Curties? H.M.Jr: Curtiss. He is the only man that is really Knox: Towers: H.M.Jr: doing anything. He told me that the Navy has never released a so-called displacement gear. Never heard of it, but this man (Towers) knows, that is why I am bringing him up. We have released it. Well, I an just quoting Guy Vaughn, and if the Navy in its wisdom decided to release the 80called displacement gear over and above what they are making now, they can make another 45 402 - 10 Curties P-40's a month with this displacement gear which would hold certain bombs. Knox: Hold bombs? H.M.Jr: Which would hold bombs. Knox: I don't understand it. H.M.Jr: Towers: Well, Towers could help explain it. Does that make sense to you, Towers? Yes, sir, it does, except I don't see how they can carry a bomb of any real size on that plane and dive it and carry it out without very extensive modifications in the plane. I don't think it would stand it. They could do it with a hundred pound bomb, but a hundred pound bomb 18 not much use. H.M.Jr: I'm just quoting him. This other thing you know better than I. This other thing it takes one 500 pound bomb, this other thing which I called the Martinique bomber. Knox: Why do you call it that? H.M.Jr: It 1g down there now. Towers: The SBC4 will carry it, but the P-40 won't. And when he's through with your order, he can H.M.Jr: grind out 30 a month. Knox: Towers: If they are no good, what do they want them for? The SBC4 is a good dive bomber except that it is too slow for that European mess. We are replacing them as fast as possible. These planes we are getting now are going to reserve bases. H.M.Jr: No good for them? Towers: It is too slow, in my opinion. H.M.Jr: How about the Vought Sikorsky, of which you have 403 - 11 got 60 odd? Towers: That is a faster plane. I haven't got the exact performance. H.M.Jr: The SB2U3 bombers, you have got 68 on order. Yes, those are for our Marines. Towers: Knox: What is this meeting for, to gyp the Navy again? Purvis: We are hoping so. Knox: I have been so damned good natured, but you take H.M.Jr: me for a ride every time I come over here. No, I thought maybe when we get through you would say, "Well, Henry, we have got 68 on hand and I will give you half of them, II but I wasn't going to suggest it. Knox: My own planes. H.M.Jr: These fellows have never even been able to look at them. You have got to give them permission to go un over the week-end and see it. Knox: Suppose I condition it to say they can't take any of the ships I have got but buy some themselves. H.M.Jr: That is all right, but they can't even look at Towere: them until you say yes. We have never refused it in any single case. Purvie: They haven't known what to ask for. H.M.Jr: Can they look at these? Knox: Sure, as far as I'm concerned. How about it, Towers? Towers: Knox: Yes, sir. Go ahead and look. I know what the next thing will be, Henry. 404 - 12 were: I would like -- M.Jr: Listen -ox: M.Jr: wers: I am getting out of -I am having trouble watching when you pitch. You are going right along. I would like to point out that these SB2U3's are planes long overdue to equip our Marine Expeditionary Force and to my mind that is the last force that should be weakened, right now.' M.Jr: You people are the most suspicious -- ox: They are flying planes made before the flood. M.Jr: You are too suspicious. All I ask is that ox: We know how you work, though. arvis: Are the oldest finished - I gather that in January they might be open for further orders. were: They are behind schedule, they are way behind arvis: Really? overs: Yes. Vought Sikorsky has had a lot of trouble getting started, bad organization. They are started now and well on their way. arvis: But they won't be finished with your orders, these people be permitted to look at them. schedule. I was up there last week and they are just about to begin to deliver and they should have been delivering in the spring. then, by the end of December? owers: M.Jr: I em sure they will not. I can find out. Well, Admiral, what is there that these men can place orders for for a dive bomber without taking anything away from anybody? Where can they go and get additional dive bombers? 405 - 13 Knox: There are 35 in Manila. H.M.Jr: Without engines. Knox: No engines? H.M.Jr: No engines. Knox: Where will Siam go to get any engines? That 18 why we haven't asked for them. H.M.Jr: Knox: I thought there was something funny about that. Towers: There is always a catch in it. I doubt seriously -- H.M.Jr: The Filipinos can have them. That is what 18 Towers: I doubt seriously if the performance, the speed of any of the dive bombers now in production would be sufficient for the English purposes, because the dive bomber is only useful in known as our "one dive bomber." daylight and the only targets you have got is where you are going to be exposed to fighter attacks and these dive bombers are just duck soun for fightere, because they can run them down and shoot them down. That is what the Germans found out in using those slower dive bombers over England. They have had to stop it because in one case they lost every plane Purvis: that took part in the attack. Is that really so? Towers: Every one of them was caught and shot down. Fairey: We had one fellow get five in one attack, not in one day. Towers: Now, these new dive bombers won't begin to be produced until next summer. They have got a pretty good performance. Those are the Brewster SB2-A and the Curties SB2-C. Purvis: Could our people see those? 406 - 14 Towers: Purvis: Towers: Yes, sir. You have your own version of the Brewster dive bomber being built. It 18 different. Slightly different. We are working now - I told my people that we certainly can only have one model built. We had to standardize that right away. Fairey: Couldn't I have that notation again? Towers: Brewster SB2-A, of which you are having a sample Knox: Are those both dive bombers? Towers: Yes. Fairey: And they are the smaller ones? Towers: Yes. Fairey: And what are -- Towers: I have forgotten the performance, but it is built right now and the Curtiss SB2-C. above 300. H.M.Jr: Do you have one on order with Curtiss? Towers: Yes, sir. Fairey: And with Breweter? Towers: With Brewster. We are placing production H.M.Jr: Towers: contracts in both plants. Then they had better leave this old Curtiss bomber alone and they can't get any production -- They can get the old Curtiss bomber. In fact, we could perhaps walk back a little bit on our deliveries, but I am positive it wouldn't serve their purpose. H.M.Jr: That is ell right, then. 407 - 15 Fairey: I am much impressed with what Admiral Towers says about this because he hae got all the figures right. H.M.Jr: Knox: I am, too. of course, you fellows are going to be, I hope to God, beginning an offensive warfare sometime and then dive bombers, even of this type, will be useful in Germany. Fairey: Just as soon as they get back in the middle of the ring. Towers: By that time these others will be coming through. Purvis: The Vought Sikorsky is a little faster than Towers: I am sure. H.M.Jr: Could they see this dive bomber that Guy Vaughn says will be ready in 30 days, known as XS? the Curtiss? Towers: XSB2-C 18 the full title. Knox: How do you remember those? Towers: They all have a meaning. For instance, X is experimental and 80 on. H.M.Jr: Could they take a look at that? Towers: Yes. H.M.Jr: That hasn't been flown, has it? Towers: No. It is not much of a plane to look at, except the mock-up. H.M.Jr: Towers: Ien't that the thing that will be ready in a year or six months? That and the Brewster are coming right along parallel to each other. The orders were placed on almost the same day. 408 - 16 Purvis: These are the two, you say, the SB2-A and the SB2-C - the X is merely an affix? Towers: Yes. H.M.Jr: Has the Brewster been flown? Towers: No, sir, the Brewster isn't built yet. H.M.Jr: And if they ordered them, they would order Towers: Or we will order the British model. I am not the Navy bomber? sure but what the British model might be a little better than ours. It is a question of the position of the turret. H.M.Jr: Have the British got anything on the Curtiss? Towers: That 18 the Brewster. H.M.Jr: Then out of this meeting they ought to take Towers: H.M.Jr: Yes, sir. That is worth twenty minutes. Knox: Even of your time. H.M.Jr: I have nothing to do. Towers: They can see our technical people and they H.M.Jr: a look at the advanced Brewster and advanced Curtiss models? will be glad to give them all the information. All right. I hear you have got under consideration whether you are going to give them 70 or 100 of these Harvard trainers in exchange for the Curtise planes. Knox: Now he is back in the box again. Towers: I caught the Army giving away our Harvard H.M.Jr: trainers. Wonderful. That was right-handed. 409 17 Purvis: I wondered why they were coming through 80 well. H.M.Jr: That is marvelous. I see. That explains their Towers: generosity. I have been trying and trying to get them to include in their order more of those Harvard trainers for us. We have need immediately for about 150 and eo far they said 25 was about all they could spare, and now they suddenly - yes, as Fairey knows, he was there, they offered to exchange -- Fairey: Seventy -- Towers: Something else for -- Purvie: Republice? Towers: Yes, Republics, 70 of these planee that we are in dire need of and have been pressing them for. I see. Well, I have accomplished what I wanted to. You don't want to let Stimson down on this. H.M.Jr: Knox: You are good, Henry. H.M.Jr: All right. Now, what do you want out of the English today? Towers: I would like to point out that - Mr. Buckley Young: Yee, he is here. Buckley: I have been quiet. Towers: You agree now, I understand from my Lieutenant Anderson, that the figures that were used when isn' here, is he? the division between the British and the Americans on Consolidated was made by Secretary Knox and Secretary Morgenthau, were in error. Remember I discussed it with you. Buckley: Yes, but the figures we gave yesterday were the figures that hed been used when Secretary Knox and Secretary Morgenthau talked about them, 410 - 18 - made the first allocation, but nobody claims they were right. Towers: The point 18 that we can't quite live up to that allocation because there aren't that many planes to be juggled. Buckley: I agree, as it stands today, all you have got Towers: We can certainly carry out the spirit of the Purvis: It ie a minor adjustment, Admiral Towers? Towers: Yes, it is A minor adjustment. H.M.Jr: What do you call a minor adjustment? Towers: Well, in one case they deduct everything over is what Consolidated says. thing. a certain amount and give it to the British, but there isn't an overage there, there is a shortage. They wouldn't get their total number of planes quite so quickly because there aren't so many planes being produced within the present fiscal year. Purvis: Does the one and one still apply? Towers: Yes. Secretary Knox hasn't even seen this. It was thrust into my hands just as I came out of the door. Buckley: H.M.Jr: I have discovered five different estimates of the PBY-5 deliveries. Could I suggest, Admiral, that Buckley go over to your office with you now and sit down so they will be ready for tomorrow's meeting? Why can't he just run along with you now? H.M.Jr: It is a very minor adjustment. He will go along with you. Purvis: I am very anxious about this, because London Towers: 411 - 19 has been advised. H.M.Jr: He will go along with you. 412 October 10, 1940 2:40 p.m. Robert Patterson: Hello, Henry. H.M.Jr: Your ears ought to be burning. Frank Knox is just sitting here and says there isn't a better lawyer in Washington than you, and you call up on the phone. P: (Laughs). Well, I just wanted to know if you knew that Knudsen had sent Dr. Mead and a man out to the Consolidated plant? H.M.Jr: P: Somebody told me that this morning. Dr. Mead came over and I talked it over with him. Knudsen is sending him out with a man named Brand, who is working in our Ordnance Department. He's an automobile production man. H.M.Jr: I see. P: And they're going out together. H.M.Jr: Well, do you think that's good? P: Yes. H.M.Jr: P: H.M.Jr: P: Well, that's a start. I think that is good. They're going out there to look at it. Knudsen and Purvis and I are going to take a look at Glenn Martin tomorrow afternoon. We re going to go over there. Good. I just wanted you to have the information about what had developed on the other thing. H.M.Jr: P: Well, I tell you who told me - your opposite number - Forrestal told me this morning, but I appreciate your calling me. Thank you. Good-bye. 413 October 10, 1940 2:57 p.m. H.M.Jri Coohran is sitting here talking to me on this Rumanian thing and he saye that this so-called test oable fortunately has not come through correct yet from Rumania. Dan Bell: Now that's on the Federal. H.M.Jr: Yeah, so in view of the conversation he's had with Ray Atherton, I'm now going to tell you to go ahead and freeze all Rumanian assets in this country as of 3 o clock. B: Fine. Well, now, have you got the papers? H.M.Jr: No, the letters are on the way over ..... B: To the President? H.M.Jr: No - what's his name - Foley has those. B: I see and do you want to send those to the White House or wait until you get Hull's letter before they go over. H.M.Jr: Well, with the President going away - let me see when he leaves - no, I think Hull's letter ought to go with it. The President doesn't go until 11 p.m. tonight. B: H.M.Jr: I see. I mean, Hull promised it to me faithfully at 12 and the letter hadn't even been written after 1 o'olock. B: Well, you say it's coming over now. H.M.Jr: What's that? B: H.M.Jr: B: You say it's coming over now. Hull's going to see the President at 3:15. Excuse me. I understood Hull was going to the White House at 3:15. 414 2 H.M.Jr: B: H.M.Jr: B: Well, we don't know - I don't know - I can't tell. He's going to sign it anyway and I'd send the stuff over to the President . I wouldn't wait for Hull's letter. All right. We'll do that right away then. I'd send the thing over to - can I leave it with you? Yeah. I'11 turn it over as is the usual thing to Thompson because he's always handled it. H.M.Jr: That's right. Let's get it over and ..... B' We can get it signed anyhow. H.M.Jr: But Ray Atherton has told Coohran - he came out of Hull's offi ce - O.K. I can't - well, it's no use B: Yeah, I think so. All right - go right to it. H.M.Jr: Thank you. 415 October 10, 1940 3:17 p.m. H.M.Jr: Hello. Operator: Mr. Purvis at his office in the Willard Hotel. H.M.Jr: Hello, Arthur. Arthur Purvis: Hello, Henry. H.M.Jr: I meant to tell you before you left - the thing that was motivating me, and I thought you might want to get that back to your people across the water, was P: H.M.Jr: What was that again? I didn't quite get it. The thing that is motivating me - what I've been doing today and tomorrow - is in response to that hush, hush cable. P: Yes, exactly. H.M.Jr: And I just thought you had most likely got P: H.M.Jr: it, but I wanted Yes. Oh, I did. I wanted to point out that the two things that they ask for I was trying to do today and tomorrow, because I think that Glenn Martin is the best chance for the bomber. You see? P: Yes, I realize that. I thought that. H.M.Jr: Well, that's that and if you and Fairey P: up and I'll drop you at La Guardia. Excellent. Thank you very much. I'm looking could be at my entrance at twenty minutes of two tomorrow with your luggage, we'11 go on forward to it. H.M.Jr: Good-bye. P: Thank you and good-bye. 416 October 10, 1940 4:04 p.m. H.M.Jr: Arthur Purvis: Hello. Henry, I wanted to ask your advice. I'm sorry to trouble you, but I think it has a certain importance. Sir Walter Layton is preparing the new memorandum which has in it a great deal of data weapon by weapon in regard to the U.K. production, et cetera. H.M.Jr: Yeah. P: He has asked General Strong who asked for this data to enable him to make up his mind what he can do or what he thinks the Army could support.- - he showed it to General Strong - as to whether it was in the form that he would like. General Strong in looking at it said now there's a good deal of information here which if it got around would be pretty risky for you, I'm not quite sure about it being put in that form and I'd rather that you showed it to me as you have done but didn't include it in the final draft, because you're putting a great responsibility - copy of that will go in to the Defense Advisory and 80 on in all probability when Secretary Morgenthau has passed it and therefore, Sir Walter is in this position, that he is in the position of editing something that he has shown to General Strong. He would like to show it to you. He wonders whether he should sort of run over with the draft and show it to you and then whether, if your reaction is the same as General Strong's, he should edit it accordingly or how he should do it, or whether he should edit it in accordance with Strong's request and then show you a draft and the old copy. He'll do either. H.M.Jr: Well, when is he ready? P: He's ready this afternoon or tomorrow morning. H.M.Jr: Now, tomorrow morning is a bad day. I can do it if he Game this moment. 417 2P: Well, now, let me try and arrange that, may I2 will you assume he's coming unless I tell you to the contrary? H.M.Jr: Yes, would you send his over - would you bring him or how about it? P: Which would you prefer? H.M.Jr: Well, if you're not too busy I'd rather P: I will. That's all right. H.M.Jr: You know, just to keep ..... P: Yes, I agree. H.M.Jr: have you come yourself. discipline. P: I quite agree. All right, I shall be there. H.M.Jr: Thank you. P: Fine. Thank you very much. 418 October 10, 1940 4:10 p.m. H.M.Jr: Hello. R.K. Evans: Hello, Mr. Secretary. H.M.Jr: How are you? E: Evans. H.M.Jr: E: H.M.Jr: Just because you are doing well I didn't want you to think I had forgotten you. (Laughs). Well, thank you just the same. I had a nice talk with Mr. Sloan and told him that - how pleased I was at what was happening. Well, we're all very pleased, Mr. Secretary, E: H.M.Jr: and I think - well we were two engines ahead of what Curtiss had asked for this morning. Good heavens! That's wonderful! And had also almost cleaned up - well we've almost cleaned up our spares on the U.S. contract. E: H.M.Jr: Is that right? E: Uh-huh. H.M.Jr: Tell me something, how is the next engine E: I know you're thinking about E for Bell. H.M.Jr: coming along? Well, I'm thinking of two things - the one that - is it the F engine which takes the power off both ends? E: both the F and the E take their accessory drives off the back end - the improved engines. H.M.Jr: Well, now how is F coming along? E: We think we're ready for model test right now. 419 -2H.M.Jr: Model test. Does that mean that you run it in your own plant first? E: Well, we run the final in our own plant under H.M.Jr: Yes. Now what is a model test? E: H.M.Jr: E: H.M.Jr: Army observation. A model test is a 150-hr. run that gives the final blessing to the design details. And you think they are ready for that? Yes. We've been working along for several months on crankcase difficulty and I think we're out of it. Well do you think that - I mean, is it a matter of starting maybe within a couple of days? E: I'd say within a week. We're still running some, what we call, development tests that are preliminary tests before we go on the final model test. H.M.Jr: E: H.M.Jr: Now, what about the engine for Bell? Now, on the engine for Bell, it's E-4, it's in the same category with the F - the only difference in the engines is the final drive, the reduction gear, and we're not 80 much concerned about model tests as a matter of fact on either one of those engines as we are about production quantities of gear boxes. Huh-uh. Aren't those made by General Motors? E: Yes, but not all of the tooling is in yet. H.M.Jr: Oh, good heavens! E: We'll run 100 F's available for assembly in December and then we'll go on to E's. But apparently Bell is doing a little better than of engines - he'll get 35 engines at the end he had expected to and he's going to be short of December. H.M.Jr: Not before that, huh? 420 3- Not before that and they are all required for U.S. Then starting in January I think they E: get 35 in the month of January and build up quite rapidly after that, but we're going to actually be short on Bell at least until the end of February and possibly until the middle of March. H.M.Jr: Well, when will the English begin to get some E: The English will begin to get some in January. H.M.Jr: Oh, in January. E: The Army hasn't very many E's scheduled and engines for their Bell. the British will begin to get theirs in January. H.M.Jr: How many will they get in January? E: Just a second - (pause) - the Bell will show about even production of U.S. and British but if U.S. insists why the British won't get any. H.M.Jr: Pardon me, I didn't get that. I say, Bell shows about even production of E: British and U.S. in January, but if the U.S. insists on maintaining their schedule, I'm afraid the British won't get any. H.M.Jr: They won't get any when? E: In January. H.M.Jr: I see. Well, we'll see what happens. E: Well, now perhaps you already know, Mr. Secretary, Bell is very much in need of a sample engine - of one engine - in order to test the British plane. H.M.Jr: E: No, I don't know that. Well, the British have made the request for the loan of an engine. Harry Collins called me day before yesterday about it and we have not been able to do anything about it from this end. 421 4 H.M.Jr: E: h.m.ur: E: I get you. Now maybe you can do something from the other end. I know I can. And there is an engine to be available at the end of this week or the first of next which we'd like to give to the British instead of the Air Corps. H.M.Jr: E: H.M.Jr: E: H.M.Jr: E: H.M.Jr: One engine. One engine. That's in order to complete and test No. 1 British plane. Now, what's the description of that engine? Model E-4. Model E-4, and there will be one ready at the end of this week or next week. Yes. Mr. Secretary, that's a mistake - it's E-5 but E-5 is a temporary designation, later on it'11 be E-4. Well, when we ask for something, we ask for E-5. E: H.M.Jr: E: Yes. I see. All right we'll get busy on that. Now let me ask you this - how about the engines for the Lockheed Interceptor? Lookheed had 8 British engines out there already and the latest information that we have is that they will not use them until March. H.M.Jr: E: Well, I'll be darned! (Laughs). Well, that's certainly bad. On the other hand there is no use in shipping those engines back because we are already up to Curtiss unless the British decide that they don't want them to lay that long, there's no necessity for shipping them back. 422 5H.M.Jr: E: Well, aren't those engines left and right? No, the engines for the British P-38 are the D-15 engines which are the same as are used in the Curtiss P-40 and are both right-hand rotation engines. H.M.Jr: I didn't know that. Yes. E: H.M.Jr: But there are 8 engines lying out there in the Lockheed plant which they will not use until March. E: That's our information. The 8 engines were H.M.Jr: Well, I'11 be darned. Well it seems a shame - E: No, Curtiss doesn't need them and unless shipped from here about 20 days ago. H.M.Jr: E: well, but you say Curtiss doesn't need them? the British need them as spares there is no object in bringing them back. Well, I can get word to them that there are 8 engines lying out there. They were shipped in accordance with the British representative's instructions but he apparently didn't know of the delay in the Lockheed program. H.M.Jr: Well, the longer I'm in this the less I'm surprised at anything. Now I talked this morning to Guy Vaughn - this may or may not be news to you - he is now turning out 6 P-40's a day and on the first of December he goes to 8. I don't know whether that's news to you or not. E: No, that is the schedule that the Buffalo plant gave us at the beginning of September. H.M.Jr: E: And you're taking care of them, evidently, on engines. We're completely taking care of them. They had finished 54 ships on the 27th of September and we're actually ahead of them right now. 423 6H.M.Jr: E: Now, as I understand the game, they're to keep grinding out these P-40's until you have got your engine tested and coming along the next month. Is that right? Well, we actually will - they keep grinding out P-40's according to my schedule here until May, at which time they start delivery of what is known as the P-40-D to the Air Corps. H.M.Jr: E: I see. And then they start up slowly using the F engine in the P-40-D and reach - well, they reach 95 at the end of December, 95 a month. So far there is no portion of that program allocated to the British, but I understand that the Air Corps is considering doing 60 and they expect to have a standardized ship H.M.Jr: that can go to either service. I see. But the way it is now, I mean, you have all the orders that you can possibly take care of haven't you? E: We have orders, Mr. Secretary, until March, 1942. Now that is assuming that the British take up their option of 300 a month starting in October, 1941 and continue on. From March, 1942 to the end of 42 we have 4800 engines open for sale. H.M.Jr: I get you. Now, the other thing which Mr. Sloan told me was that he's hopeful that you may be getting an engine that might turn out 1400 or 1500 horse. E: Well, we have another engine coming - well, an improvement of the current engine of course, coming along with 2-stage supercharging which will permit a higher rating - give higher rating at higher altitudas. H.M.Jr: E: Now when do you think that that will be We were discussing that one at lunch today and we all agreed that we could undertake delivery of that engine in January 42. H.M.Jr: Oh, Ey, my, my! That's a long way off. 424 7 Well, there's still a lot of test work to be E: done on it. H.M.Jr: E: H.M.Jr: E: I see. That would be 1400 or 1500 horse? Well, they haven't talked that high yet at the Air Corps. I think 1325 is the test rating that we are to run at. Well, ought they to bother with that - is this 2,000 horse engine you've got, is that That's the double engine, Mr. Secretary, what we call the 3420 - twice the displacement of the present engine and is really just a double of the present engine. Now, we have experimental contracts on that and we're working on it as much as we can. A little later we'll be able to work on it a lot more. H.M.Jr: Right. Well, I've enjoyed this conversation and if you don't mind I'll call you again, and I think you're doing a perfectly swell job. E: Well, I'm delighted to have you call, Mr. Secretary, and we're doing the best we can and we're going to keep on doing it. H.M.Jr: Right. E: Right-o. H.M.Jr: Good-bye. E: Thank you. 425 October 10, 1940 COPY OF TELEGRAM FROM UNDER SECRETARY OF NAVY TO MAJOR PLEST Major R. H. Fleat President, Consolidated Aircraft Corporation San Diego, California I AM VERY PLEASED TO LEARN THAT YOU AND ADMIRAL TOWERS HAVE COME TO AN AGREEMENT ON THE CONTRACT OF PB TWO Y THREES AND AL80 DELIGHTED THAT SCHNACKE IS COMING WITH YOU. BEST REGARDS JAMES FORRESTAL 00 TO SECRETARY MORGENTHAU MR. WITALTAM 8. KNUDBER 426 October 10, 1940. MEMORANDUM TO: Secretary Morgenthau FROM: Mr. Gaston uses The new Elizabeth City, North Carolina, airport (near Norfolk) is to be dedicated at eleven a.m. Thursday, October 17th. I am scheduled to make the dedicatory speech and Lindsey Warren is also to make an address. A development today somewhat changes the aspect of the affair. M. O. Dunning, Counsel for the Canadian Colonial Air Lines, which runs a line from Montreal to New York and is anxious to extend it down our coast to Florida and to the Bahamas, has arranged to send a Canadian Colonial Air Lines plane to the dedication, although United States air lines have neglected invitations to participate. Dunning has invited as his guests C. J. Power, Air Minister for National Defense, of Canada; G. D. Howe, Minister of Munitions and Supply; Commander H. Edwards, Minister of Aviation and Transport; T. A. Wilson, Director of Civil Aviation and the Honorable Ernie Savard. On learning this today Coast Guard at once consulted the State Department and Dunning went over there. At the State Department's request invitations to these Canadian officials are being delivered through State Department channels and a representative of the State Department will accompany them from Washington to Elizabeth City. In view of this, I have suggested to the Admiral and Commander Reed-Hill, who is in charge, that invitations be extended at once to the heads of Military and Naval aviation of the United States. This seems to raise the question whether we should not have higher representation and I wonder whether you would care to go. 427 SIGNETARY OF STATE DEPARTMENT OF STATE WASHINGTON In reply refer to October 10. 1940 RA My dear Mr. Secretary: I refer to the Secretary's letter of October 4, 1940 informing you of the visit of a Cuban economic mission, and conversations on this subject between officers of the Department and officers of the Treasury Department. I received the Cuban group formally yesterday and at that time its chairman, the Cuban Ambassador, informed me that by the end of the week there would be submitted a comprehensive statement of the purposes of the mission and the types of financial and technical cooperation which it desired to discuss. Pending the receipt of such a statement and before entering into technical discussions with the several members of the economic mission, I believe that it would be appropriate for you to receive the group formally. With W a to The Honorable Henry Morgenthau, Jr., Secretary of the Treasury. 428 -2- With the idea of laying out a program for discussions between the Cuban group and the interested agencies of this Government I am arranging for a meeting at my office on Monday, October 14 at eleven o'clock of the members of the Cuban economic mission and officers of this Department and of the Departments of the Treasury and Agriculture, the Export-Import Bank, and the Federal Reserve System, who will carry on the detailed discussions. I should greatly appreciate your designating one or more officials to attend this preliminary meeting. Sincerely yours, Nets Under Secretary class , w & not x I the Hill of with stany 429 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE October 10, 1940 TO Mr. Jochran The Secretary FROM Mr. Hawkey MMS Subject: Most of Portugal's gold holdings have been transferred to the United States. That Portugal has moved most of its gold to this country is indicated by the table below. The major part of the inflow has occurred within the past three months. Close of: January 10, 1940 June 26, 1940 August 21, 1940 October 9. 1940 "Gold Reserve" of Bank of Portugal.* Earmarked in N.Y. for Bank of Port. (millions of dollars) $ 68.9 $ 8.3 68.9 68.9 29.6 49.4 73.7 (not avail.) Now in Transit plus To New York $ 10.7 *Encaisse-or" on the Bank's statement. The above figures suggest that the Bank of Portugal carries some gold outside the "Encaisse-or", perhaps in its asset item Disponibilites-or a l'etranger et autres reserves". The latter is used as secondary cover for the Bank's sight liabilities, and may contain as much as $20-25 million in gold. I would place Portugal's total holdings between $89 and $94 million, of which $84.4 million is here or en route to New York. The rise in Portugal's earmarkings here has been due almost wholly to imports from that country. Net sales of gold to the Bank of Portugal by the U.S. Fund this year amounted to only $8.4 million; such sales, incidentally, did not change the Bank's "Encaisse-or" figure. In its table "Gold Reserve of Central Banks and Governments," the Federal Reserve Bulletin uses only the "Encaisse-or" asset for Portugal. W 430 23432 PLAIN HSM Stockholm Dated October 10, 1940 Rec'd 3:47 a. m., 11th Secretary of State, Washington. 963, Tenth. Additional appropriations requested by Army 140 and Navy 112 for year 1941-42 Riksbank October 7 metallic COVER 637, foreign Exchange 755, note circulation 1402, loans and discounts 697, defense loan opened April reaches 600 all million crowns. SEPTEMBER cost of living index 126 industrial production August 106. Stockholm housing construction 5 percent compared last October and lowest in 20 years. SEPTEMBER bankruptcies 109 lowest in year. Swedish Agricultural Association requesting Government to adopt measures increase prices agricultural products including milk products, beef and grains claiming farm income decreased this year by 375 million crowns owing decrease of 22 peroent in basic food crops compared average 1936 to 1939. Inform Treasury, Agriculture, COMMETOE. STERLING REP 431 October 10, 1040 My dear Mr. President: In accordance with your request, I am returning herewith for your files the correspondence in connection with the proposed bill for the establishment of a Coast Guard Reserve. Yours sincerely, (Signed) H. Morgenthau, Jr. The President, The White House. By Message 3 x5 432 not .. --any APOU My dear Mr. President: In accordance with your request, I am returning herewith for your files the correspondence in connection with the proposed bill for the establishment of a Coast Guard Reserve. Yours sincerely, (signed) H. Morgastine.dr. The President, The White House. By Meanonger 4.333 October 10, 1940 EMUNANDUM From: Secretary Morgenthau To: Mr. Gaston I communicated the contents of this to Admiral Waesche, and I wish that you personally would follow through on it. THE WHITE HOUSE J WASHINGTON October 9, 1940 MEMORANDUM FOR H.M. Jr. For your information and return for my files. F.D.R. 434 THE WHITE HOUSE WASHINGTON October 9, 1940 MEMORANDUM FOR H.M. Jr. For your information and return for my files. F.D.R. ! THE WHITE HOUSE WASHINGTON October 4, 1940. MEMORANDUM FOR THE PRESIDENT In conformity with the President's memorandum to me, I have obtained Admiral Stark's reaction to Coast Guard Reserve. CNO's comments attached. Respect Jully Hansagham D.J. CALLAGHAN HMJ ak FAR Laroply and Op-10 Hu NAVY DEPARTMENT OFFICE OF THE CHIEF OF AM OPERATIONS WASHINGTON October 940 MEMORANDUL FOR THE PRESIDENT Admiral Waesche discussed with me from its inception the details of the Coast Guard Reserve Bill. The proposed reserve, of course, will be of value to the Coast Guard in assisting in the control of shipping. Many of the yachts and motorboats throughout the country will be needed by the Navy in time of war. This bill will put the Coast Guard in daily touch with these boats. This contact will enable the Coast Guard to accomplish a great deal of the preliminary investigation and organization which will be required prior to the use of such boats by the Navy. I, therefore, join with the Secretary of the Treasury in urging your approval of this Bill. NRS OFFICE OF TREASURY DEPARTMENT WASHINGTON THE SECRETAR MEMORANDU 2 October 1940. - The President I urgently request your approval of & proposed Bill for the establishment of a Coast Guard Reserve. The enactment of this proposed Legislation is essential for me, through the Coast Guard, to carry out the duties resulting from your Proclamation of June 27, 1940, placing upon the Secretary of the Treasury the responsi- bility for the control of all merchant shipping and the security of the harbors and waters of the United States including the movements and anchorages of vessels and the lading and unlading of explosives, infla mables and other dangerous cargo. The Coast Guard needs approximately 270 additional small craft immediately to carry out these duties. Even though time did permit, it is more economical to use Coast Guard Reserve craft for these duties than to build or buy these vessels and use regular Service men to man them. It will cost to operate these boats, including the personnel to can them, out 8525 per month per boat. The final draft of this proposed Bill was drawn up by the Navy Department 'with minor changes being made by the Coast Guard. The Bill as submitted by me to the Bureau of the Budget had the official approval of Admiral Stark in writing. It does not conflict with Naval Reserve legislation. It permits the nation to use to best advantage trained yachtsmen and small boat men. The Chief of Naval Operations is interested in the Bill and has recommended favorable action for the reason that it will permit the Coast Guard to organize for the use of the Navy in time of war small yachts and other motorboats of the country. There are other minor advantages such as permitting the federal government to keep close supervision over a large percentage of the several hundred thousand motorboats of the country and obtain information regarding possible subversive activities on the part of some of these craft. This proposed Bill was submitted by me to the Bureau of the Budget on August 20, 1940 and was returned to me by the Director of the Bureau of the Budget on September 11, 1940 with an unfavorable report. If you will approve this Bill, and I urgently recommend that you do so, I feel confident we can have it enacted by the Congress in the near future. Anywellan Secretary of the Treasury. 439 G-2/2657-220 No. 216 RESTRICTED SITUATION REPORT M.I.D., W.D. October 10, 1940. 12:00 M. This military situation report is issued by the Military Intelligence Division, General Staff. In view of the occasional inclusion of political information and of opinion it is classified as Restricted. I. Western Theater of War. 1. No ground operations. 2. Air Force Operations. During daylight of the 9th the Germans attacked over Sussex, Kent and the London area, taking advantage of favorable cloud cover. Several airdromes were attacked in this period, as well as the London docks. During the night the German raids over the London area were said by the British to have been the heaviest of the war. The Germans claim to have concentrated on the port area, while the British state the bombing was widespread. Cardiff was also bombed. The R.A.F. raided objectives in Holland and at LeHavre with single planes during daylight of the 9th. Normal night operations were conducted over western Germany, Belgium, Holland and France. II. Mediterranean and African Theaters of War. No ground operations and only minor air activity reported. RESTRICTED 440 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE October 10. 1940 Secretary Morgenthau TO FROM Mr. Cochran CONFIDENTIAL The six reporting banks' transactions in registered sterling were as follows: Sold to commercial concerns Purchased from commercial concerns £56,000 £ 8,000 In the open market, sterling opened and closed at 4.03-1/2. Transactions of the reporting banks were as follows: Sold to commercial concerns £ 2,000 Purchased from commercial concerns £13,000 The Swiss franc remained at .2317 until late in the afternoon, when a new current high of .2319 was recorded. It closed at .2318. Only a small amount of isiness in that currency was believed to have been transacted. The other currencies closed as follows: Canadian dollar 13-3/4% discount Swedish krona .2385 .4005 .2083 .2355 .0505 Reichamark Mexican peso Argentine peso (free) Brazilian milreis (free) Cuban peso Lira Holiday .0505 There were no gold transactions consummated by us today. The Federal Reserve Bank reported that it had made two three-months loans totaling $55,000 to the Central Bank of E1 Salvador, setting aside as collateral $70,745 in gold from the Salvadorean Bank's earmarked account. The total of such loans now outstanding amounts to $575,000. secured by $649,243 in gold. No new gold engagements were reported. There was a holiday in India, and no gold or silver prices were received from Bombay. 441 - 2 - CONFIDENTIAL In London, spot silver was fixed at 23-3/8d, off 1/16d. The forward quotation vas 23-5/16d, off 1/8d. The dollar equivalents were 42.44 and 42.33# respectively. Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44. The Treasury's purchase price for foreign silver was also unchanged at 35#. We made two purchases of silver totaling 400,000 ounces under the Silver Purchase Act. The larger purchase consisted of 300,000 ounces from an American refining company's inventory. The other 100,000 ounces represented a portion of the 1,122,000 ounces recently shipped to this country by the Central Bank of China. IPMS. 442 THE AMERICAN METAL COMPANY. LIMITED 01 BROADWAY NEW YORK HKH:AA TELEPHONE BOWLING GREEN 9-1800 October 10,1940. CABLE ADDRESS: EFFLUX. NEW YORK Honorable Henry Morgenthau, Secretary of the Treasury, Washington, D. C. Dear Henry: As you have expressed an interest in special news from Mexico, I am enclosing a memo- randum on the present rather critical outlook of the mining industry in Mexico. In the mining industry, as in general, things don't always turn out as bad as they seem, but I am giving you the picture as it is today simply for your information. I have not sent a copy to any one else. Sincerely, Harold met swhite t note retain Calso dated rates) 443 October 10,1940. That large portion of the Mexican mining industry which produces lead as its principal metal is today facing a serious situation. Taxes, which are excessive under present conditions, and decreasing efficiency of labor are contributory factors, but the principal cause is the drying up of the market for Mexican lead. Normally the bulk of the Mexican lead output is taken by Continental Europe, which is now entirely cut off. The only offsets to the disappearance of this market have been some purchases by Japan and by the United States, which this year has been able to absorb some Mexican lead into domestic consumption after paying the duty. These purchases have been relatively small compared to the total Mexican lead output. It is estimated that there is now an accumulation of over 100,000 tons of unsold Mexican lead, equivalent roughly to half a year'sproduction. Even prior to the cutting off of Continental Europe, lead sales during this war had not kept pace with other metals. Lead has not been used to the same relative extent that it was in 1914-18. This is probably because less bullets have been used and because considerable proportion of the bullets now being manufactured are made of metals other than lead. a Most Mexican mines producing lead also produce zinc and silver, and their ability to sell the two last named metals has helped them to keep going. A continuance of present conditions in the lead market will, however, force many of these mines to consider shutting down. Shutting down a mine is at best a serious matter. Idle mines frequently have to undergo steady and expensivere-timbering or unwatering to keep them from becoming a total loss, and when such expenses are prohibitive shutdown means abandonment. In Mexico, in addition to the foregoing expenses, a mine which shuts down incurs heavy liabilities to workmen for extra compensation. Failure to pay such compensation or shutting down a property without the Government's permission renders the property liable to confiscation. Because of unwillingness or inability to defray these costs some companies - perhaps not some of the most important ones - may prefer under present conditions to abandon or forfeit their properties. As the Government and the labor syndicates would face the same lack of market, it is believed that they are not very anxious to take over ny mines at this time. Developments which would enable the mines to keep going would be one or more of the following: (a) Substantial abatement of the production and export taxes, for which several mining companies are now petitioning the Mexican Government. Such abatement would reduce the cost of production and make Mexican lead more com- petitive for whatever market there might be at lower prices. It would also ease the financial burden of the mining companies to the extent that they have to tie up money in unsaleable lead. 444 -2- (b) Change in world conditions resulting in the reopening of normal markets. (c) Increase in the United States lead consumption enabling the U.S. to absorb much larger quantities of Mexican lead. 445 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE October 10, 1940. TO Secretary Morgenthau FROM Mr. White HDW There is attached a list of memoranda and reports prepared in the Division of Monetary Research during August and September, 1940. 446 Memoranda Prepared in the Division of More tary Research during August and September, 1940. 011 Refineries in Dutch East Indies. The Work of the Habana Conference. The Petroleum Situation in Japan. Effectiveness of licensing control over aviation gasoline, aviation lubricating oil and tetraethyl lead. Reducing the supply of oil available to aggressive countries. Memorandum for the President on the Petroleum Situation in Japan. Scrap Iron and Steel. Possible Agenda for Secretary's Conference with State Department on the Far East. Memorandum for the President: Summary of 011 Situation in Japan, Germany and German-controlled territory. Conference held at Secretary Morgenthau's office, Sept. 3, with Lord Lothian. Memorandum for the President: Recent petroleum information. Tide Water Associated Letter of September 11, 1940. Proposal for a possible three-way arrangement between the United States, Russia and China. Chile's request for financial assistance. Memorandum for the President: Correspondence with Mrs. G. Nye Steiger. Gold Inflows since Outbreak of War. Suggested Agenda for the coming Inter-American Treasury (lonforence. Foreign Exchange Assets of the United Kingdom, classified according to speed of liquidity. United Kingdom Expendi tures in the United States. Division of Monetary -2- 447 Research How much free foreign exchange will the United Kingdom need during the next six months and how it may be raised. Memorandum the President: Attaching table on the Lubricating 011 Situation inforEurope. Sir Walter Layton. Soviet Gold Production. Summary of Nicholson's Reports Received on Sept. 26, 1940. Netherlands Indies Petroleum; Consular Telegram. Foreign Funds Control - Foreign Holdings of United States Property Affected by Control. Personal Remittances from the United States to Germany and Italy. Monetary Developments, for special review issue of Annual Report of the Secretary. Proposal for Confidential Schedule of Intra-Treasury Round Table Conferences, 1940-41. Possibilities of Increasing Purchases of Copper from Chile. Costa Rican Reserves Against Note Issue. Possible Agenda for Discussions between Secretary Morgenthau and Representatives of the Argentine Government. The British Deficit. Topics Requiring Continued Analysis and Research for the Foreign Funds Committee. The Chinese Currency Situation. Lord Swinton. Who Bears the Cost of Silver Purchases? Effect of Gold Purchases. Draft of release on How the Government Acquires and Pays for Gold. How the Gold Stock of the United States is being used. Division of Monetary -3- Research 448 Bibliography monetary role of of books gold. and articles relating directly to the Defense Finance. Finding of Injury in Glass Frosting Case. Payments to American Banking Affiliates in France and Belgium. Revision of Capital Movement Figures for Treasury Bulletin. French Government Accounts. Service of French Loans. Affiliates of American Banks subscribing capital to new Belgian bank of issue. Morocco. French and Belgian Banking Branches in Argentina. Compulsory Lending Bills of Senator Lee. Report of Conference at State Department on questionnaire and agenda for proposed Pan American meeting on police and sub- versive activities. Various memoranda on Foreign Funds Control. Report on meeting on the future of gold, at Federal Reserve Board, Augus t 15. Reports on French Assets. Comment on "A Program for a Dynamic America - A statement of Republican principles". Review of "Can the Gold Problem be Solved?" by Peter F. Drucker. Reasons for Enactment of S. 4204. Coffee Control. Food and Feed Prospects in Continental Europe. The Applications for Dollars, from the Bank of France's Account, to Make Payments on French Securities Held in Switzerland. French Gold Holdings. -4- Division of Monetary Research The French 42% 1937 Loan. The Franco-Argentine Payments Agreement of December 23, 1939. The Financing of German Rearmament nd War Expenditures. Memoranda to the Secretary on Developments in the War. Comments on Hitler's Speech. Developments in the Chinese Military Situation. Sofina. The European Military Situation. Preliminary memorandum on German Disbursements in the United States. The German Offensive Against England. Philippine Emergency Powers Act. Conclusions Reached by Prof. Holcombe in his study of Canada's war effort. Current Liabilities of American Concerns Operating in the Five German-Occupied Countries of Europe. Export-Import Bank. Assets of Rumanis Held in the United States. U. S. Balance of International Payments During the First Year of War. Foreign Exchange Assets and Needs of the British Empire. Balance of International Payments on Current Account between the United States and Germany. Alleged Discriminetion by Turkey against American Shipping. French Banks in the Argentine. Suggested Questions on Costa Rica. Further Information it would be helpful to have about Costs Rica if it is available. 449 Division of Monetary -5- Research Article on Japan Henry H. Douglas, appearing originally in Amer-Asia for Julyby 1940. The Petroleum Situation in Japan. Petroleum in Latin America. Tetraethyl Lead Manufacture. Unreported Petroleum Shipments to Japan. Japanese Reserve Stocks of Petroleum. Meeting with Tide Water Officials, August 8. Dumping of Mexican Petroleum. "Strategic # and "Critical" Materials Possibly obtainable from China. Tetraethyl Lead in Japan. Scrap Iron Deliveries to England. Exports of Scrap Iron and Petroleum. Exports of Scrap Iron and Steel and of Petroleum Products to Japan, U.K., and U.S.S.R. Exports of Number 1 Scrap and of Controlled Petroleum Products. September 4th Conference with British 011 Experts. Spanish Tankers. Aviation Gasoline for Japan. Export Control of Aviation Gasoline. Soviet 011 Refined in Rumania. Copper. Scrap Iron Export Regulations. United States Trade with Japan. Nitrates. Naval Estimate of Japanese 011 Stocks; Opinion of British Specialist. 450 Division of Monetary -6- Research Proposed French Plan to obtain U. S. Petroleun Weidlein letter on Nitrates. Imports of Manganese Ore from the U.S.S.R. Dumping cases completed: Wrapping paper from Finland. Pig Iron from British India. Portland cement from Germany, Japan and England. Shoe fiber board from Germany. Earthen tableware from Finland, Denmark, England and Japan. Wood Screws of iron and steel from Japan. Animal glue from Germany, Italy, Hungary. Compounds of mercury from Italy. Current reports: See previous reports. Correspondence: 98 Letters replied to. 451 452 Persphrase of Code Ratiogram Received as the War Department at 12:55 pm, October 10, 1940. CONFIDENTIAL Rese, filed 17:21, October 10. Two million men are remaining with the colors in the Italian Army. About 500,000 man of the classes of 1910, 1911, and 1912 are being called up to take the place of a similar number of older non, who will be relieved. General Bastico has been relieved from the command of the Army of the Po, and it is reported, without confirmation, that he will replace Marshal Orasiani as supreme commander in North Africa. The latter has been reportedly in conflict with the Duce with respect to additional troops and equipment desired by him, He is now in Rome, and rumor has it that he will be relieved of the African command, PAINE Distributions Military Aide to the President Secretary of War State Department Secretary of Treasury` Aest, Secretary of War Chief of Staff War Plans Division Office of Neval Intelligence CONFIDENTIAL 453 CONFIDENTIAL of Code Ballogram Reserved as the Wear as 2033 Polley October 10, 1940 Lossion, filed 14:13, Ostober 10, 1940. 1. During daylight hours of Wednesday, October 9, eight please of the Bember Command attacked military and oil targete in Germany with no lessee. That night 132 boubers attacked enery - made invesion parts, industrial and naval targets, and laid mines. The German battleship TIRPITZ was attached with one 2,000-1b. 1 that was a near miss. The Fighter Command operated 439 planes - 115 patrels. the Coastal Comand disputched 55 planes on 35 nissinne during daylight hours of October 9, assorted 10 energy, and dispatched 12 planes on two attack missions that night. Three recent naissance places were last. 2. During daylight hours of October 9 the Genes Air Force eminated wideoproad reconnaissmess and made three main attacks with about 20, 60, and 170 planes, respectively. In all about 290 planes operated over Britain. That night raids of varying intensities were carried w from 7:00 PeMo to 6:00 A.M. with London and the Midianis as the main objectives. 3. All plane essualities were fighters, the Germans losing four confirmed, four probable and five damaged. the British Bect - plane and - pilote. 4. the General daylight booking on October 9 was generally CONFIDENTIAL 454 CONFIDENTIAL ineffective in Louisian, although valds tedes provided the city. Now testice of low level booking and mahine gining were observed over South and Southeast Bagland. In London a telephone was flooded by broken water mains and gas waters were set - fire. The chair and alter of st. Pail's Cathedral were badly damaged. Two very large boube lended in the same blook as the Debeasy build ing at 9:30 P.M. We suffered no damage but creters were formed in the atrest and several buildings were wreaked. Attacks were made on three sintrance, one of which, a neval station, had two planes destroyed and is now unserviceable due to unsoleded bobbs. Your railreed lines are blocked. Two deeks were slightly damaged. Four fasteries were attacked with some damage or delay in production to one mireless fastory and one milling shop. There was civil damage in Heekings, Falmouth, Maidstone, and Nonport. The Consul in Southsuptom reports that during the week of September 23-29th there were a total of a air raid alame lasking a total of 50 hours and that is was the worst week - to this time. The factory manfacturing the Supermarias Spitfire fighter, a grain warehouse, the goo works, a charch, and - houses were wreaked. Casualties were 95 deed and 273 injured. a reports that the morale of the works is baily a 5. Three ships, totalling 13,000 tens, rure suk and were damaged by submissings. All were in conveys. One truster was reported lost. 6. There are positive indications that the Genesas are CONFIDENTIAL -2- 455 CONFIDENTIAL - their presenter - as I % Cas states in a - Sectory in and in - - are reported a. Amounting to viliable reports Control - Any is - to Zikya. - Aide to The President of Tet Broomly of Kar Division office of New Intelligente CONFIDENTIAL ase 456 BRITISH EMBASSY, WASHINGTON, D.C. October 10th, 1940 Personal and Secret. Dear Mr. Secretary, In the temporary absence of the Ambassador I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, have Bother The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D. C. Telegram from London dated October 9th, 1940. (1) Naval During a bombing attack on Dover herbour on the morning of October 8th a naval trawler was damaged and suffered casualties. Five more ex-American destroyers have reached a British port. In addition to 46 ships reported yesterday 50 ocean going ships in convoy have arrived in the United Kingdom ports; cargoes included 11 of cereals and 8 of oil. The outward bound transport "Oronasy" (20,000 tons) which was attacked and damaged by enemy aircraft in the north-western approaches on October 8th has reached harbour safely. (2) Royal Air Force. Among the invesion ports visited by our bombers during the night of October 7thOctober 8th Calais and Boulogne received the heaviest attacks and numerous fires and explosions were caused notably in the railway station/ 458 station at Calais. Large fires were started in the docks at Dunkirk; and at other ports, although results could not be assessed, hits were scored in target areas. At Berlin s power stations were attacked by 13 aircraft and in each case large fires were started. Near one of them a particularly large fire with a large explosion followed by many smaller explosions was observed; a large building in the centre of the city was set on fire and completely gutted and 5 aircraft which bombed the Templehof marshalling yards started a fire of great extent. other objectives in Berlin were attacked without observed results. Direct hits were scored and namerous fires caused at the Fokker aircraft factory at Amsterdam and 1 aircraft which attacked naval docks at wilheImshaven caused fires amongst buildings. Six marshalling yards in Germany were bombed by eleven aircraft and 8 more which attacked gun emplacements opposite Dover caused a big fire. Our mine laying operations were successful. During the night of October 8th-9th, 115 aircraft were sent out to objectives as follows: invasion ports 59; marshalling yards 4; oil targets in Germany 23; metal and aircraft factories 7; Wilhemshaven docks 19; and mine laying 3. All these aircraft have returned but results are not yet available. (3)/ (a) Forte Fourteen training type aeroplanes were destroyed en the ground at Hendon aerdrome where some Mangare were not on fire. AS Rochester the gas works were hit and production has been suspended indefinitely although water gas can still be produced and a full supply of seal gas for the district is available from another source. During the daylight of October 8th 5 accessive attacks were made on London between 8,40 and 18,80. The first s raids of about 40 aircraft each and the fourth of about so reached London outskirts and some penetrated to the innor none. The fifth raid of 40 aircraft was turned back south of the capital. Some interceptions were made by our fighter squadrons and - energy aircraft desiroyed. In the siverpool area single enemy machines were operating during the morning and one was shot down w our fighters. From these raids the following damage is reported: Charing Gross patient station was hit and L persons killed and ⑉ inform. Tower Bridge was hit and read traffic will be interrupted for a few days/ 460 days in other London areas 31 persons were killed and about 50 injured. Some Government offices in Whitehall were hit and a few fatal casualties resulted. Outside London damage, in some cases extensive, was caused to property in south coast seaside resorts but there was no damage of a military nature. During the night of October 8th - 9th, three aerodromes were attacked shortly before dark and 2 were rendered temporarily unserviceable from unexploded bombs. one enemy aircraft was shot down by anti-aircraft fire. From 7.30 P.M. until 6.00 a.m. London was the centre of enemy activity about 170 enemy aircraft taking part; 2 major fires and some minor fires occurred in industrial premises and in docks but all were either extinguished or under control by morning. one hospital was hit in east London and 20 casualties are reported so far and it is feared there are others. outside London 2 public schools were hit, Wellington college and Beaumont college (windsor). At the former the only casualty was the head master who was killed. Summary of air casualties. (4) Destroyed Probable Damaged Enery By fighters: Bombers Fighters 2 1 By Coastal aircraft - Seaplanes By anti-simenti Fighters Totals: 1 - 1 1 Bombers 2 s 8 2. 5 British/ British: 4 aircraft and 4 pilots. (5) Middle East, Libra. on October 7th and October 8th our medium bombers attacked motor transport and en Italian landing ground where a transport aircraft was destroyed and a modern bonber believed to have been damaged. Eritree. on October 8th 6 Blenheims attacked Assab and obtained hits on buildings, barracks and piers. Ends.