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203 Secretary's pencilled draft of reply to General Marshall's Christmas greetings Please accept 204 my "wishes for my your continued success. my sincere and ferent the iswill that my become enough in toasdefend sairst any agg vesser. faith is defer gash our that Iam Is in looking an talt to to hing this accomplishment 205 centimed may forts prevened unhusiam . Ones country is moot fatrinate in having you chief of staff these must in difficult times and haverare considered t a privilege to be able to work with you problems of animal refence 206 mul marchal from letter of the 23 Ican not bym to tell you how pleased I was t receiving our alter of the 23 The fact that you believe 9 have feen asistance in thing the any der beginn un way most gratifying vl me and en com a ges me WAR DEPARTMENT OFFICE OF THE CHIEF OF STAFF WASHINGTON December 23, 1940. dear Mr. Morgenthau: Along with my holiday greetings and wishes go my thanks for your powerful assistance etting the Army program under way, in both men minitions. I do not forget your determining uence on two specific occasions last May when real beginnings of our major preparations were ched. I wish again to express my thanks and eciation and to wish you all good things - and seeing wisdom, in this coming year with its tragic ibilities. Faithfully yours, orable Henry Morgenthau, Jr., retary of the Treasury, hington, L.C. WAR DEPARTMENT OFFICE OF THE CHIEF OF STAFF WASHINGTON December 23, 1940. My dear Mr. Morgenthau: Along with my holiday greetings and good wishes go my thanks for your powerful assistance in getting the Army program under way, in both men and munitions. I do not forget your determining influence on two specific occasions last May when the real beginnings of our major preparations were launched. I wish again to express my thanks and appreciation and to wish you all good things - and far-seeing wisdom, in this coming year with its tragic possibilities. Faithfully yours, Honorable Henry Morgenthau, Jr. Secretary of the Treasury, Washington, L.C. Thanks WAR DEPARTMENT OFFICE OF THE CHIEF OF STAFF WASHINGTON December 23, 1940. dear Mr. Morgenthau: Along with my holiday greetings and good wishes go my thanks for your powerful assistance in getting the Army program under way, in both men and munitions. I do not forget your determining Influence on two specific occasions last May when the real beginnings of our major preparations were launched. I wish again to express my thanks and appreciation and to wish you all good things - and far-seeing wisdom,in this coming year with its tragic possibilities. Faithfully yours, Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D.C. 210 DEC 26 1940 My dear Cordell: There is attached a copy of a letter dated December 21, 1940, from the International Telephone and Telegraph Corporation, 67 Broad Street, New York, New York, with respect to & proposed transaction by such corporation affecting ith interests in Rumania. You will note that the contemplated arrangements are subject to the necessary licenses being greated, including a license for the unblocking of funds in the minimum amount of $13,753,720. The Charge d'Affaires ad interis of the Rumanian Legation has furnished this Department with a copy of his letter to you of December 19, 1940, which deals with this matter and requests that an agreement in principle be made for a license to release on amount of $14,000,000 from the gold which the Banque Nationale de Roumanie has on deposit with the Federal Reserve Bank of New York. In view of the nature of the proposed transaction and the substantial portion of the total Rumanian dollar assets in this country which would thus be paid over to one American concern, this Department would appreciate receiving the views of the Department of State as to whether a license should be approved upon receipt of proper application. Very truly yours, (Signed) E. Morganthan Jr Secretary of the Treasury. Honorable Cordell Hull, Secretary of State. CC to Mr. Thompson Enclosure JNPimgt 12/26/40 File returned to Mr. Pehle by 1mf on 12/26/40 per HSK By Messenger 5 5-50 211 COPI INTERNATIONAL TELEPHONE AND TELEGRAPH CORPORATION 67 BROAD STREET NEW YORK Sosthenes Behn President December 21, 1940 Honorable Henry F. Morgenthau, Jr. Secretary of Treasury Washington, D. C. My dear Mr. Secretary, In 1930 the International Telephone and Telegraph Corporation obtained a concession contract from the Rounanian Government which pro- vided for the development and installation in Roumania of & modern telephone system. Under this contract a Roumanian Company known as Societates Anonime Romena de Telefonne (SARDET) WEE organised BE a subsidiary of IT&T to own and operate the Roumanian Telephone system. The outstanding capital stock of SARDET consists of 1,650,000 shares of the par value of Lei 1,000 each or a total outstanding capital of Lei 1,650,000,000 of which 1,367,960 shares or 82.91% is owned by IT&T. The balance of 282,040 shares is held in Rousania. The recent readjustment of the borders of Roumania resulted in the separation from the control of SARDET of telephone property amounting to approximately 18% of the total telephone plant and claims have been filed by SARDET with respect thereto against the Rousenian Government. For a number of years, certain influential Roumanians have advocated the nationalization and complete ownership in Roumania of the telephone system and this, together with the more recent political developments in Roumania has led to negotiations which have oulminated in 212 Honorable Henry 7. Morgenthen Jr. Page 2 - December 21 1940 an oral agreement between ITAT and the Roumanian Government substantially as followst (A) ITMT will sell its stock in SARDEY amounting to 1,367,960 shares at $7.00 v. 8. currency per share, amounting to a total of $9,575,720 to the Roumanian Government or an agency of said Government or a cor- poration of Roumania to be designated for the purpose by the said Government. (B) IT&T will assign its claims upon the current account against SARDET which amount to $4,178,000 U. S. currency to the Roumanian Government or an agency of said Government or a corporation of Roumania to be designated for the purpose by the said Government upon payment of like amount. (c) ITMT will deliver certificates for its shares of stock in SARDET and an assignment of its claims against SARDET upon payment in the United States of the full U. 8. currency amount set forth in subparegraphs (A) and (B) above. (NOTE: It is understood that of the 1,367,960 shares owned by ITMT, certificates for 367,960 shares are actually located in Roumania. Arrangements will be made so that either delivery in advance will be made of these shares in Rousania or so that ITAT, upon delivering in the United States certificates for the balance of 1,000,000, at the same time will deliver an in revocable order authorising delivery in Roumania by the depositary of such certificates, of car- tificates for the 367,960 shares located in Roumania.) 213 Honorable Henry F. Morgarthers Jr. Page 3 - December n 1940 The Roumanian State Agrees: (D) 1) To pay or cause to be paid the aggregate of the amount specified in (A) and (B) above within the United States as specified in (c) above, 2) To pay or cause to be paid to the ITAT within the United States for the account of Standard Telephones and Cables, Ltd. of London and Bell Telephone Namefacturing Company of Antworp, Belgium, both subsidiaries of International Standard Electric Corporation, a subsidiary of ITMT, their pounds sterling and Belgian frane claims against BARDET, equivalent to $158,000 and $1,700,000 respectively, or to liquidate or cause to be liquidated the said claims direct to the aforesaid subsidiary companies and to the satisfae- tion of ITMT prior to delivery by the ITMT of certifi- cates for its stock in SARDET and the assignment of its claims against BARBET. Also to liquidate or cause to be liquidated in U. 8. currency within the United States or direct in the respective local our rencies but to the satisfaction of ITMT before making delivery of the certificates for the said stock in- terest of ITMT in SARDET and of the assignment of the claims of ITAT against SARDET, the claims of all other subsidiaries of ITMT and subsidiaries of International Standard Electric Corporation. The foregoing claims of subsidiaries of ITMT and of International Standard Electric against SARDET consist of balances due to the said subsidiaries arising out of the sale by the said subsidiaries of equipment to SARDET. 3) To make or cause to be made the aferesaid payments in U. S. currency in Washington against the deliveries hereinabove specified to be made by ITMT subject to the necessary licenses or permits being granted by the United States authorities providing for the un- blocking of funds in the minimum amount of $13,753,720; and subject to the necessary licenses or permits being granted by the United States authorities for the de- livery of certificates for the 1,000,000 shares of the canital stock of SARDEY which certificates are located within the United States if such permission is necessary. (Notes If the Roumanian Government elects to pay to the ITMT in U. S. currency for account of the various subsidiaries the equivalent of the 214 Honorable Henry F. Morgenthan Jr. Page 4 - December 21 1940 foreign currency claims of the said subsidiaries, the above minimum dollar amount will be increased by (a) $158,000 on account of the claim of Standard Telephones and Cables, Ltd. (b) by $1,700,000 on account of the claim of Bell Telephone Manufacturing Company and (c) by a further small amount representing claims of all other sub- sidiaries.) 4) To release the ITMT from its continuing obligations under the above-described concession contract and to consent that SARDET shall release the ITMT from all its uncompleted obligations under a contract between SARDET and the ITMT which provides for certain management services to be rendered by the ITMT to SARDET. However IT&T agrees to continue on a restricted basis and for reasonable compensation to be agreed upon to render certain technical services to SARDET and to cause its manufacturing subsidiaries to continue to supply material and equipment upon a cash basis when requested by SARDET, and to grant certain licenses under existing patents in the field of SARDET'S activities. The amount of $14,753,720 which IT&T would receive in payment for 1,367,960 shares in SARDET and for its claim against SARDET would be used by IT&T in the United States in liquidation of existing U. S. dollar debts or for other Corporate purposes. The 1,367,960 shares of SARDET are carried on the books of the IT&T at an investment cost of $7,667,000 and the claims at face amount of $4,178,000. In addition IT&T has an equity in the undistributed profits of SARDET of approximately $2,500,000. It is understood that the Roumanian Government, through its Laga- tion in Washington, is applying for the necessary licenses for the unblocking of the necessary funds of the Roumanian Government and the release of those funds to the IT&T and that such application will cover whatever licenses may be necessary for the release of the aforesaid certificates representing 1,000,000 shares of the capital stock of SARDET, if such permission is necessary 215 Honorable Heary F. Morgenthra Jr. Page 5 - December 21 1940 It is expected that the formal arrestment may be signed within a few days and the purpose of this letter is to acquaint you with the proposed sale and to give you certain pertinent information which might assist in the unblocking of the funds. In the event that you require any additional information or documents concerning BARDET or ITMT, I shall be very glad to submit same to you promptly. Very truly yours, /a/ Soathenes Behn President TO: Miss Chauncey 216 the Secretary want to send / white photostat copy to Office of naval Intelligence (Rear admiral Director Naval to photoclet Intelligence) W.S. audienon copy and / military white Intelligence via May Smith (scarbon copy hasbeen satte Mr Willy From: LT. COMDR. McKAY 217 December 26, 1940 Dear Admiral Anderson: I am sending you herewith, for your confidential information, a photostatic copy of a report on the Netherlands East Indies oil negotiations which has come to me from the Treasury Attache in Shanghai. Yours sincerely, (Signed) H Morgenthau, Jr. Rear Admiral Walter S. Anderson, (a Naval Intelligence Division, major Smith) Office of Naval Operations, Navy Department. Inclasure. By Memorand for 218 December ss, 1940 Dear Metrol Andersons your photoI an sending you horewith, for confidential copy information, the . statie of a report on Netherianis East Indies oil negotiations which has some to - from the Treasury Attnahe in Shanghai. Yours sincerely, Rear Admiral Walter s. Anderson, Naval Intelligence Division, office of Naval Operations, Navy Department. Inclesure. By Memora 219 December 26, 1940 Dear Admiral Andersons I am sending you herewith, for your confidential information, a photostatic copy of a report - the Neitherlands East Indice oil negotiations which has come to me from the Treasury Attache in Shanghai. Yours sincerely, (Signed) E Morganthan, Jr. Rear Admiral Walter S. Anderson, Naval Intelligence Division, Office of Naval Operations, Navy Department. Inclosure. By Messager 220 December 26, 1940 Dear Major Smiths I would appreciate 18 if you would see that the inclosed photostatic copy of report on the Ne therlands East Indies oil negotiations, prepared by the Treasury Attashe at Shanghai, reaches the Director of Military Intelligence for his confidential information. Yours sincerely, Major W. B. Smith, Office, Chief of Staff, War Department. Inclosure. By Memmere/ 221 December 26, 1940 Dear Major Smiths I would appreciate 18 if you would see that the inclosed photostatic copy of report on the Netherlands East Indies oil negotiations, prepared by the Treasury Attache at Shanghai, reaches the Director of Military Intelligence for his confidential information. Yours sincerely, (Signed) EL Morganthan, Jr. Major W. B. Smith, Office, Chief of Staff, War Department. Inclosure. By Message 222 December 26, 1940 Dear Major Smiths I would appreciate 18 If you would w that the inclosed photostatis - of report on the Netherlands East Indian all negotiations, prepared by the Transary ABtache at Shanghai, reaches the Director of Military Intelligence for his confidential information. Yours sincerely, (Signed) E Jr. Major W. B. Smith, Office, Chief of Staff, War Department. Inclosure. By Messenger 223 UNITED STATES TREASURY DEPARTMENT OFFICE OF CONFIDENTIAL MEMORANDUM THE ATTACHE SHANGHAI December 7, 1940. The Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. Dear Mr. Secretary: This is to confirm the following radio message, in four parts, forwarded to you December 4th, 5th and 6th giving details of the Netherlands East Indies 011 Negotiations between the Japanese, the N.E.I. authorities, the Standard-Vacuum and the Dutch Co., - Batoafshe Petroleum Mij.: N. E. I. 011 Negotiations 1. Japanese Memorandum of September 25, 1940, to Netherland delegation tabulated their Minimum annual requirements for five years as follows:Annual quantity in PRODUCT tons of 2,240 lbs. Crude 011 A. 1,100,000 1. Aviation Crude 2. Crude for lubricants 100,000 3. Other grades of Crude 1,050,000 2,250,000 Total Crude Aviation gasoline (over 87 Octane) 400,000 B. Diesel 011 500,000 C. 3,150,000 Grand Total 2. Quantities offered October 8, 1940 by the 011 companies and accepted on October 19th by T. Mukai (President of Mitsui Bussan Kaisha) as representing the Japanese Petroleum Importers:Betoafshe Standard-Vacuum PRODUCT Petroleum Mij. Aviation Crude Nil 120,000 tons 1. 2. Lubricant Crude Nil 100,000 " Other grades Crude 180,000 360,000 " 3. 180,000 580,000 tons Total Crude 4./ 224 Standard-Vacuum PRODUCT Batoafshe Petroleum Mij. Aviation gasoline 4. 5. Motor 75,000 Gas oil and Diesel 011 6. Nil N11 175,000 tons 166,500 . N11 7. Fuel 011 Nil 8. Kerosene 73,000 57,000 Grand total N11 312,000 994,500 tons Total by two companiest- Crude oil, 760,000 tons; Products, 564,500 Grand total - 1,306,500 tons (Quantities shown represent annual rates only - not fixed amounts) 3. Memo of agreement incorporating agreed quantities and terms and conditions of sale, signed on November 12, 1940:- Principal items:a. Annual sales contracts to be signed in Japan by actual purchasers and Standard-Vacuum 011 Co. and Rising Sun Petroleum Co. b. Contract period for Crude 011 - 12 months from November 1, 1940 " - - Products - 6 " C. Prices in U. S. Currency - according to formula based on California and Gulf quotations. d. Delivery - F.O.B. loading terminals of two companies in N. E. Indies in tankers to be furnished by the purchaser. Payment - upon delivery 100% in U. S. Currency (Standard-Vacuum Co.) 75% in U. S. Currency 25% in N. I. Currency Batoafshe Petroleum Mij. Irrevocable credits to be set up in New York 7 days before loading. f. Destination - Must be Japan, and can not be diverted to any other country. g. Force Majure - Applies. I/ 225 I understand copies of this data have been furnished by one of the negotiators to the High Commissioner of the Philippine Commonwealth and Admiral Hart, Commander in Chief of the U. S. Asiatic Floot. Respectfully, M.R.Name Treasury Attaché UNITED STATES TREASURY DEPARTMENT OFFICE or CONFIDENTIAL MEMORANDUM THE ATTACHE SHANGHAI Location of Japanese Armies as of December 1. 1940 North China: Divisions 21st 25th 27th 32nd 35th 36th 37th 41st East Lunghai Railway Wutai area, North Shanei Tientain area Shantung, Tsinan area North Honan - Southeast Shansi area Southeast Shansi Southwest Shanei Shansi, Linfen area Independent Mixed Brigades 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 16th *18th Hopei, Pingshan area Suiyuan Railway North Shansi East Shansi, Shichiachwang - Taiyuan Railway East Shantung, Kiao tsi Railway East Shantung Hopei, North Tsinpu Railway Hopei, Shichiachwang area West Shanei South Shantung Shansi, Taiyuan area Hopei Central China: Divisions 3rd 6th 13th *15th 17th 22nd *31st 33rd 34th *39th *40th 116th Northeast Hupeh Yochow Shasi area Ichang area, North Hupeh Nanking area, ? part Central Hupeh Yangtse Estuary Hangchow area Han River area, Central Hupeh Kiangsi - Hunan Border Nanchang area Wuhan area Central Hupeh Yangtse Independent Mixed Brigades *11th 12th 13th 14th 17th Kiangsu, Chekiang Southeast Kiangsu, Wushih area area North Central Kiangsi, Anhwei, Kiukiang Pengpu area Southwest Kiangsu, Shanghai 226 227 -2South Ohina: Divisions 18th 26th 28th 38th 104th 110th 5th East River area, Hong Kong Border Indo-China ( ? Hainan) South Kwangtung and Indo-China North & West River area (Kwangtung) Kwangtung Uncertain Indo-China, Tongking *1st Guards Independent Mixed Brigado --- Indo-China, Tongking *2nd Guards Independent Mixed Brigade --- Chungshan area, West River (near Macao) 15th Independent Mixed Brigade Swatow Manchuria: Divisions 1st Tsitsihar area (North) 2nd Mutankiang area (Northeast) Chiamussu area (Northeast) 4th Hailar area (North) ? returned Japan 7th Heiho area (North) Harbin area 8th 11th 23rd 24th Nomonham area (North) Nomonham area Korea: Divisions Russo - Korean border 19th 20th Ryusan Japan: Divisions Kanazawa ( ? relieved 7th Division) 9th 10th 12th 14th 16th Himeji Kurume Utsunomiya Kyoto Guards Division Tokyo Guards Division and 1st to 8th and 11th Divisions have depot divisions in Japan Note * means doubtful Division - 20,000 men Brigade - 10,000 men 228 UNITED STATES TREASURY DEPARTMENT November 27, 1940 OFFICE OF CONFIDENTIAL MEMORANDUM THE ATTACHE SHANGHAI TO THE SECRETARY: NOTE ISSUE IN FAR EAST AS OF JUNE, 1940 1. Amount of Japanese Military Yen Notes in circulation in Central China. 1940: % 67,854,941.26 73,644,323.68 82,603,094.94 89,519,748.49 105,144,959.20 100,301,195.49 125,000,000.00 January February March April May June November Now estimated at ¥ 150,000,000. Used as legal tender in occupied areas in Central China and Shanghai. In occupied areas in South China a conservative estimate is 50,000,000 total 200,000,000. 2. Amount of Japanese Yen Notes in circulation (000 omitted). 1937 Bank of Japan Bank of Chosen Bank of Taiwan 1939 1938 1,650,000 2,074,000 2,522,000 151,000 75,000 254,000 105,000 1,867,000 2,433,000 285,000 146,000 2,954,000 1940* 3,597,000 437,000 176,000 4,211,000 June, 1940. End October, 1940, Bank of Japan increased its note issue to ¥3,753,000,000, but "Tokyo Economic Magazine" declared that by that time the Bank of Japan issued a total of ¥5,735,000,000. Reliable sources state that the total amount to be issued by the three Japanese banks by end of 1940 will be ¥5,000,000,000 according to official Japanese figures. 3. Amount of Chinese Legal Tender Notes (Fapi) in circulation. Central Bank June, 1937 June, 1938 June, 1939 June, 1940 375,839,967 489,666,785 1,048,883,145 1,623,380,740 Farmers' Bank June, 1937 June, 1938 June, 1939 June, 1940 207,951,051 262,219,835 326,019,345 510,967,980 Bank of China 509,862,882 653,251,720 703,570,740 1,100,228,695 Bank of Communications 313,548,434 311,859,495 548,456,070 727,566,790 Totals 1,407,202,334 1,726,997,835 3,626,929,300 3,962,144,205 The actual issue of Chinese Legal Tender notes is being kept a dark secret in Chungking but knowing sources estimate the present issue to be 7000 million and perhaps over that figure. This, of course, does not include a very large sum of notes - all in denominations of one dollar - issued by the provincial banks during the past year but not circulated in Shanghai. -2- 229 Note Issue in North China & Manchuria (End of June, 1940). Federal Reserve Bank Monkiang Bank (Inner Mongolia) 4. Central Bank of Manchuria Hwa Hain Bank (Hongkew, Shanghai) FRB$558,000,000 61,000,000 634,000,000 6,400,000 All the banks are controlled by Japanese influences. 5. Sino-British Stabilization Fund (STRICTLY CONFIDENTIAL). Fund since last withdrawal - May 2, 1940 recovered Contributions for replenishment, Central Bank Bank of China 12,700,000 US$3,000,000 B 600,000 Bank of Communications ... 8$$2,000,000 Hongkong & Shanghai Bank. $1,000,000 or approx. total 12,915,800 15,615,800 o Shanghai open market cross rate of 3.80 fund now has in possession US$21,340,000 No selling by fund since May 2, 1940. CUSTOMS REVENUE Whole of China August-October, 1940 August 92.57% 7.43% Total C$34,339,010.82 2,756,172.09 C$37,095,182.91 Total C$26,923,956.03 3,612,401.04 C$30,536,357.07 88.17% 11.83% 100.00% 86.48% Total c$28,896,054.82 4,517,865.03 C$33,413,919.85 0. P. N. 0. P. 100.00% September 0. P. N. 0. P. October 0. P. N. 0. P. 13.52% 100.00% 0. P. - Occupied Ports. N. O. P. - Non Occupied Ports. M.R.Naton Treasury Attache Treasury Department 230 Division of Monetary Research Date 1/21/41 To: Miss Chauncey From: L. Shanahan 19 Mr. White has noted. Do you want this back, or shall we file with the other Nicholson material? turn DEM Wrost 12. COMOR. MoKAY D8, TREASURY DEPARTMENT 233 INTER OFFICE COMMUNICATION CONFIDENTIAL TO FROM DATE December 26, 1940 Secretary Morgenthau Mr. Wiley Re the attached communications from the Treasury Attache, Shanghai -- 1. Note issue shows steady progress of currency inflation in the Far East. 2. Location of Japanese divisions would be of interest to MID. 3. The negotiations between Japan and the Dutch East Indies for gas and lubricants are based 7/8'ths on dollar payments with irrevocable credits in New York. An extension of freezing would constitute an impediment. GRYBOES no to : WAL 234 UNITED STATES TREASURY DEPARTMENT November 27, 1940 CONFIDENTIAL MEMORANDUM OFFICE OF THE ATTACHE HANGHAI TO THE SECRETARY: NOTE ISSUE IN FAR EAST AS OF JUNE, 1940 1. Amount of Japanese Military Yen Notes in circulation in Central China. 1940: & 67,854,941.26 73,644,323.68 82,603,094.94 89,519,748.49 105,144,959.20 100,301,195.49 125,000,000.00 January February March April May June November Now estimated at ¥ 150,000,000. Used as legal tender in occupied areas in Central China and Shanghai. In occupied areas in South China a conservative estimate is 50,000,000 total 200,000,000. 2. Amount of Japanese Yen Notes in circulation (000 omitted). 1937 Bank of Japan Bank of Chosen Bank of Taiwan 1,650,000 151,000 75,000 1,867,000 1940* 1939 1938 2,522,000 2,074,000 254,000 105,000 2,433,000 285,000 146,000 2,954,000 3,597,000 437,000 176,000 4,211,000 June, 1940. End October, 1940, Bank of Japan increased its note issue to ¥3,753,000,000, but "Tokyo Economic Magazine" declared that by that time the Bank of Japan issued a total of ¥5,735,000,000. Reliable sources state that the total amount to be issued by the three Japanese banks by end of 1940 will be $5,000,000,000 according to official Japanese figures. 3. Amount of Chinese Legal Tender Notes (Fapi) in circulation. Central Bank June, 1937 June, 1938 June, 1939 June, 1940 375,839,967 489,666,785 1,048,883,145 1,623,380,740 Farmers' Bank June, 1937 June, 1938 June, 1939 June, 1940 207,951,051 262,219,835 326,019,345 510,967,960 Bank of China 509,862,882 653,251,720 703,570,740 1,100,228,695 Bank of Communications 513,548,434 311,859,495 548,456,070 727,566,790 Totals 1,407,202,334 1,726,997,835 2,626,929,300 3,962,144,205 The actual issue of Chinese Legal Tender notes is being kept a dark secret in Chungking but knowing sources estimate the present issue does to be 7000 million and perhaps over that figure. This, of course, not include a very large sum of notes - all in denominations of but one not dollar - issued by the provincial banks during the past year circulated in Shanghai. -2 - 235 Note Issue in North China & Manchuria (End of June, 1940). FKB$558,000,000 61,000,000 634,000,000 6,400,000 Federal Reserve Bank Monkiang Bank (Inner Mongolia) Central Bank of Manchuria Hwa Hsin Bank (Hongkew, Shanghai) 4. All the banks are controlled by Japanese influences. 5. Sino-British Stabilization Fund (STRICTLY CONFIDENTIAL). Fund since last withdrawal - May 2, 1940 L2,700,000 recovered Contributions for replenishment, Central Bank Bank of China Bank of Communications Hongkong & Shanghai Bank. US$3,000,000 E 600,000 8$$2,000,000 61,000,000 or approx. total L2,915,800 15,615,800 o Shanghai open market cross rate of 3.80 fund now has in possession US$21,340,000 No selling by fund since May 2, 1940. CUSTOMS REVENUE Whole of China August-October, 1940 August Total C$34,359,010.82 2,756,172.09 0$37,095,182.91 Total c$26,923,956.05 3,612,401.04 c$30,536,357.07 Total c$28,896,054.82 4,517,865.03 $335,413,919.85 0. P. N. 0. P. 92.57% 7.43 100.00% September 0. P. N. 0. P. 88.17% 11.83 100.00% October 0. P. N. 0. P. . 86.48% 13.52 100.00% 0. P. - Occupied Ports. N. 0. P. - Non Occupied Ports. IN and to MAL ordered M.P.H. Treasury Attache UNITED STATES TREASURY DEPARTMENT OFFICE OF 236 CONFIDENTIAL MEMORANDUM THE ATTACHE SHA NGHAI December 7, 1940. The Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. Dear Mr. Secretary: This is to confirm the following radio message, in four parts, forwarded to you December 4th, 5th and 6th giving details of the Netherlands East Indies 011 Negotiations between the Japanese, the N.E.I. authorities, the Standard-Vacuum and the Dutch Co., - Batoafshe Petroleum Mij.: N. E. I. 011 Negotiations 1. Japanese Memorandum of September 25, 1940, to Netherland delegation tabulated their Minimum annual requirements for five years as follows:Annunl quantity in PRODUCT tons of 2,240 lbs. Crude 011 A. 1,100,000 1. Aviation Crude 2. Crude for lubricants 100,000 3. Other grades of Crude 1,050,000 2,250,000 Total Crude B. Aviation gasoline (over 87 Octane) 400,000 C. Diesel 011 500,000 3,150,000 Grand Total 2. Quantities offered October 8, 1940 by the 011 companies and accepted on October 19th by T. Mukai (President of Mitsui Bussan Kaisha) as representing the Japanese Petroleum Importerat= PRODUCT Standard-Vacuum Betoafshe Petroleum M11. Aviation Crude Nil 120,000 tons 1. 2. Lubricant Crude Nil 100,000 - 3. Other grades Crude 180,000 360,000 - 180,000 580,000 tons Total Crude 4./ 237 Standard-Vacuum PRODUCT Batoafshe Petroleum Mij. Aviation gasoline 4. N11 5. Motor N11 75,000 175,000 tons 6. Gas oil and Diesel 011 Nil 166,500 . 7. Fuel 011 N11 73,000 . 8. Kerosene Nil 57,000 Grand total 312,000 994,500 tons Total by two companies:- Crude 011, 760,000 tons; Products, 564,500 Grand total - 1,306,500 tons (Quantities shown represent annual rates only - not fixed amounts) 3. Memo of agreement incorporating agreed quantities and terms and conditions of sale, signed on November 18, 1940:- Principal items:a. Annual sales contracts to be signed in Japan by actual purchasers and Standard-Vacuum 011 Co. and Rising Sun Petroleum Co. b. Contract period for Crude 011 - 12 months from November 1, 1940 - - Products - 6 C. Prices in U. 3. Currency - according to formula based on California and Gulf quotations. d. Delivery - F.O.B. loading terminals of two companies in N. E. Indies in tankers to be furnished by the purchaser. e. Payment - upon delivery 100% in U. S. Currency (Standard-Vacuum Co.) 75% in U. S. Currency 25% in N. I. Currency Batoafshe Petroleum Mij. Irrevocable credits to be set up in New York 7 days before loading. f. Destination - Must be Japan, and can not be diverted to any other country. g. Force Majure - Applies. I/ 238 I understand negotiators and copies to the Admiral Hart, of High this data Commissioner in Chief Commander of of the the furnished by one of Philippine Asiatic Fleet. Respectfully, M.R. Treasury HOS 239 UNITED STATES TREASURY DEPARTMENT OFFICE OF CONFIDENTIAL MEMORANDUM THE ATTACHE SHANGHAI Location of Japanese Armies as of December 1. 1940 North China: Divisions 21st 25th 27th 32nd 35th 36th 37th 41st East Lumghai Railway Wutai area, North Shanei Tientain area Shantung, Tainan area North Honan - Southeast Shanai area Southeast Shanei Southwest Shanei Shansi, Linfen area Independent Mixed Brigades 1st 2nd 3rd 4th 5th 6th 7th 8th 9th 10th 16th *18th Hopei, Pingshan area Suiyuan Railway North Shansi East Shansi, Shichiaohwang - Taiyuan Railway East Shantung, Kiao tsi Railway East Shantung Hopei, North Tsinpu Railway Hopei, Shichiachwang area West Shansi South Shantung Shansi, Taiyuan area Hopei Central Chinat Divisions 3rd 6th 13th Northeast Hupeh Yoohow - Shasi area 17th Ichang area, North Hupeh Nanking area, 9 part Central Hupeh Yangtoo Estuary 22nd Hangohow area 15th *31st 33rd 34th 35th 40th 116th Han River area, Central Hupeh Kiangai - Hunan Border Nanchang area Wuhan area Central Hupeh Yangtoo Independent Mixed Brigades *11th 12th 13th 14th 17th Kiangsu, Chekiang Southeast Kiangsu, Wushih area area North Central Kiangsi, Anhwei, Kiukiang Pengpu area Southwest Kinngau, Shanghai 240 -2- South China: Divisions East River area, Hong Kong Border Indo-China ( ? Hainan) 18th 26th 28th 38th 104th 110th 5th South Kwangtung and Indo-China North & West River area (Kwangtung) Kwangtung Uncertain Indo-China, Tongking *1st Guards Independent Mixed Brigade *2nd Guards Independent Mixed Brigade - Indo-China, Tongking Chungshan area, West River (near Macao) Swatow 15th Independent Mixed Brigade Manchuria: Divisions Tsitsihar area (North) 1st 4th Mutankiang area (Northeast) Chismussu area (Northeast) 7th Hailar area (North) ? returned Japan 2nd Heiho area (North) 8th 11th 23rd Harbin area Nomonham area (North) 24th Nomonham area Korea: Divisions Russo - Korean border 19th 20th Ryusan Japan: Divisions Kanazawa ( T relieved 7th Division) 9th 10th 12th 14th 16th Himeji Kurume Utsunomiya Kyote Guards Division Tokyo Guards Division and 1st to 8th and 11th Divisions have depot divisions in Japan Note * means doubtful Division - 20,000 men Brignde - 10,000 men WALL UNITED STATES TREASURY DEPARTMENT 241 December 2, 1940 OFFICE OF THE ATTACHE SHANGHAI CONFIDENTIAL MEMORANDUM To the Secretary: WHAT THE JAPANESE ARE SAYING On or about November 23rd a special Ambassador or Envoy from Afghanisten arrived in Shanghai from Dairen en route to Tokyo where he will confer with the Japanese General Headquarters and the Tokyo Government. He was accompanied by one Murat, Mohammedan, who is one of the assistants to the Mohammedan poli- ticion, Kourban Gelieff. According to Murat, he has been appointed to act as agent and advisor to the Ambassador. In reality, he is an insignificant offi. cial who has been employed in Dairen by the Japanese Gendarmarie, and in this case will merely act as interpreter. A movement for independence among the Mohenmedans of Tokyo has been going on for quite some time. This movement is of an anti-foreign character. It has been dormant for a long period but is now coming to light, and the question of organization of a wide Mohammedan movement in Central Asia, India, and Arabia, as well 88 in the Near East, together with the formation of a great Mohammeden Empire, is being considered. The movement is being planned and sub- sidized by Tokyo, Berlin and Rome. According to Muret, a large number of Ger- man and Italian agents are working in the Near East; that is, Turkey, Egypt, Arabia, Pelestine, and India; while at the same time the work is being directed by the Kwantung Headquarters in the Far East. To organize the Mohammedan movement, General A. F. Goushin of the local Russian General Headquarters, who acted as advisor in China of the Moscow Government at the time of the Borodin and General Chiang Kai-shek incident (1925-1927), was called to Tokyo. Goushin left for Tokyo accompanied by a Japanese named Shimadzu, who is an employe of the South Manchurian Reilway and resides in Shanghai. The Mohammedan movement is regarded as of great importance by the Japanese and will be conducted under the alogan "Asia for the Asiatics." -2- 243 Tokyo is on the eve of signing a pact with Moscow, and therefore Japanese authorities are showing much concern regarding the activities of white Russian leaders, who have been warned against conducting any propaganda or display of anti-Soviet feeling. In order to strengthen the power of Weng Ching-wei, General Chen Yu Lin has been directed to organize an international legion in Central China, and to form 8 Russian unit similar to that which has been operating in North China. To assist in strengthening this unit, Russian units from Menchukuo will be transferred to Shanghei as guards for reilroads, telegraph lines, and other means of communication. Colonel A. D. Kouznetsoff, Cossack Atemen from Amour, is slated for the post of Commander of the local unit. A letter was received from Denmark, dated October the 28th, from one Pro fessor Brent, in which it was stated that the Danes and Germans residing in Denmark are absolutely certain that England will capitulate in the near future; that there is absolutely no chance for England to come out of the war victorious, oven with the active help of the United States. In his letter Professor Brant expresses great surprise that such a large number of persons exist who have been hypnotized by England and believe that she has a chance to win the war. Brent also states that free exchange of books, newspapers, magazines, are pro- hibited in Denmark, and that the receipt of these publications in the mail, except by special permission, is regarded as a crime. A Japanese Police officer from Japan, who was formerly attached to the Police Bureau at the Japanese Embassy in Central Chine, returned to Shanghai for a brief visit recently. He stated that internal conditions in Japan are going from bad to worse with alarming speed. The population has lost self control and all respect for the Emperor and the Government. All Japan is a revolutionary camp. Near riots are not uncommon whereby soldiers on leave dressed in civilian clothes attack and beat up Police Officers who, in line of duty, arrest drunkards and close up cabarets and cafes. The Police believe that the cause for all this is the Sect that many prominent and important posts in Japan are today complet by ex-soldiers who were formerly arrested and jailed for communist activities and who afterwards repented and were sent to the front where they served . your or two then returned home wounded or sick. These soldier-politicians - more wary active in the introducing of the so-called "New Order in Asia" which evidently has become very offensive to the people who do not enjoy the limitations of their everyday lives imposed by the so-called New Order. The specier further stated that antimilitary moves are growing every day and that COMMEN with which was so popular three years ago is seen no more. Intelligencia is aggressed and new sects and anti-Government groups are appearing all the time, and the - appear to be attracted by the propagenda and promises of such groups. Although Japan is surrounded by enemies, Government, Army and Many will are retreet from their plan of reformation of Asia. Regarding England and the United States, no one in Japan believes that these countries will declare war on Japan. If such war is declared, it would result in the immediate growth of patriotic feeling smong the Japanese. The Japanese believe they have sufficient forces to ensure victory in 8 war with England and the United States in the Pacific. Engarling the internal situation in Japan, military dictatorship and resolute - expected to succeed in restoring order in the country. It is said in Things that,after Prince Konoye, a military dictator will be appointed in Japan, with - of the Imperial Princes as puppet. A large part of goods received in Shanghei from the United States and cona signed to Chinees are being sent to Germany via Detron and Barbin. Exceedingly large transactions are noticed by the local German firm Darlowitz Company which is working through Chinese. Japanese military circles state that chief authorities are taking measures to cut off Chungking from any connection with the outer world. Many new military expeditions are planned in South China. me ve. 244 FEDERAL RESERVE BANK OF NEW YORK December 26, 1940. CONFIDENTIAL Dear Mr. Secretary: Attention: Mr. H. Merle Cochran Pursuant to Mr. Cochran's request, I enclose our compilation for the week ended December 18, 1940, showing dollar disbursements out of the British Empire and French accounts at this bank and the means by which these expenditures were financed. Faithfully yours, When L. W. Knoke, Vice President. Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. Enclosures 245 PERIOD Proceeds of Sales of Other tures( Debits 106.7 3.6 5.8 90.7 100.9 191.7 97.7 8.9 8.7 182.8 89.0 54.8 16.8 124.2 115.5 15.4 14.5 26.1 38.0 108.8 101.0 87.3 Total Credits 1939 94.3 Auste 31 Sept.27 1 Sept.28 Nov. Sov. 2-29 Str. 30 Jan. 3 1940 Jan. 4 - 31 Feb. 1 - 28 Feb. 29 Apr. 3 1 for. Moy May 2 - 29 May 30 July 3 July 5-31 Aug. 1-28 First year of war Aug. 29 Ost. 2 Oct. 3 - 30 Oct. 31 Nov. 27 Nov. 28 Dec. 31 113.4 100.9 283.2 249.7 261.1 1293.2 316.8 196.7 241.0 23.6 145.3 156.7 180.2 605.6 244.3 167.8 201.1 77.3 137.9 93.0 80.9 1,187.6 72.3 28.9 39.9 Gold Dec. 4 11 10 58.6 42.3 50.4 8.2 31.7 10.6 47.8 42.4 5.4 39.6 36.1 3.5(n) England (since June 19) Securities (insl. (Est.) (b) adj'ts) Net Inor. (+) or Decr. (-) in Balance Total Debits 185.4 3.2 33.6 52.6 57.8 25.0 75.2 50.6 14.2 43.4 20.6 108.3 94.0 86.4 56.7 60.9 46.8 17.8 17.9 21.5 13.4 126.2 93.2 7.1 319.3 225.0 294.8 301.3 212.2 267.4 1.0 26.4(1) 828.2 306.9 198.5 259.5 1,356.1 211.2 271.5 160.5 6.0 6.0 210.0 18.0 57.3 10.4 14.4 50.0 9.3 1.3 7.0 9.1 -31.9 -33.4 0.6 1.3 2.0 2.0 4.0 71.2 60.2 4.0 7.0(o) +31.6 0.2 27.6 million 58.4 million 1.4 -11.2(d) +113.5 19.4 86.2(e) 35.3 88.6 23.0 10.4 85.9 78.6 86.8 5.0(f) 33.7 11.6(g) 26.2(h) 22.5 CREDITS Gov't 207.8 Average ookly Expenditures Since Outbreak of War $19.6 million France (through June 10) Sogaland (through June 19) Other Credits 11.4 15.9 21.5 61.5 27.0 84.8 101.4 72.7 99.6 Expendi- tures( Other Debits 6.0 51.8 13.4 105.4 28.1 58.7 31.5 32.8 35.9 29.4 57.0 30.0 39.9 63.7 55.4 44.4 29.4 Total Credits - 8.1 12.4 82.9 109.2 55.1 93.9 27.8 + 4.3 15.3 22.4 55.9 50.1 5.8 71.5 54.8 105.0 75.4 16.7 29.6 78.7 60.7 126.2 335.6 18.0 19.2 3,0 10.4 0.2 0.5 900.2 195.1 12.9 36.1 24.7 156.7( 127.3(1) 10.3 7.3 6.3 1.0 33.7 35.0 7.9 8.9 0.5 8.4 866.3 416.6 449.7 1,095.3 8.6 4.4 4.2 1.3 1.8 0.5 0.2 18.5 0.8 0.3 0.1 0.5 0.7 - - - 1.3 - - Transfers from British Purchasing Commission to Bank of Canada for French Account Week ended Dec. 18 Cumulation from July 6 101:6 in Balance 11.3 5.1 - Other Credits 41.2 2.0 0.7 Sales Net Inor. (+) or Decr. (-) 35.0 13.3 + 25.3 31.4(k) 32.0(1) 31.5(m) Priseeds of Gold 76.2 25.9 260.9 Confidential FRANCE OF DEBITS 142.0 105.8 WEEK ENDED Nov. 27 BANK C REDITS 145.4 345.1(1 3.2 10.9 0.2 0.6 0.3 1.3 0.1 0.2 0.1 9.5(1) 1.3 - 5.6 - 1.2 + 5.4 - 6.1 + 44.0 +188.4 - 4.1 + 2.0 +2:9.0 - 7.3 0.5 0.7 - Total Debits Cov't Expendi- BANK OF ENGLAND (BRITISH GOVERNMENT) Strictly Dec. 18, 1940. - DEBITS Week Ended - (In Millions of Dollars) - ANALYSIS OF BRITISH AND FRENCH ACCOUNTS - - - - - 0.1 0.2 0.2 0.3 0.1 0.3 1.2 0.1 0.1 (See footnotes (in reverse side) Includes payments for account of British Purchasing Commission, British Air Ministry, British Supply Board, Ministry of Supply Timber (a) Control, and Ministry of Shipping. (b) Through June 19, these figures represent total sales of American securities in Sebond District reported for account of the United Kingdom. these sales, however, may not have been credited to the Bank of England's account in all cases.) Beginning with the week ended (Proceeds the figures represent transfers from the Bank of Montreal, New York Agency, which is custodian for requisitioned American securities June 26, this country. The transfers apparently reflect proceeds of official security sales, including those handled through private deals. held From June in 17 to July 19, transactions in securities payable in specified foreign currencies, including dollars, by United Kingdom residents of were prohibited. Includes payments for account of French Air Commission and French Purchasing Commission. (4) Includes adjustment for (b) above. (e) (e) About $85 million transferred from accounts of British authorized banks with New York banks. About 811 million transferred from accounts of British authorized banks with New York banks. (g) About $8 million transferred from accounts of British authorized banks with New York banks. (b) About $10 million transferred from accounts of British authorized banks with New York banks. (1) Adjusted to eliminate the effect of $20 million paid out on June 26 and returned the following day: (1) About $2 million transferred from accounts of British authorized banks with New York banks. (k) About $2 million transferred from accounts of British authorized banks with New York banks. (1) About $4 million transferred from account's of British authorized banks with New York banks. (a) About $6 million transferred from accounts of British authorised banks with New York banks. (a) About $0.9 million transferred to account of Sveriges Riksbank. (0) About $1.3 million transferred from account of British authorized banks with New York banks. (f) 246 Strictly ANALYSIS OF CANADIAN AND AUSTRALIAN ACCOUNTS (In Millions of Dollars) DEBITS OF Transfers Proceeds to Total Debits Official British Other Debits Total Credits A/C PERIOD 1939 51 Sept. 27 et.28 Nov. 1 2 - 29 30 Jan. 3 3 21.8 15.1 0.3 0.7 16.7 14.4 7.3 9.9 9.3 9.2 30.0 13.3 22.8 13.3 23.5 23.1 25.7 17.0 16.1 42.3 23.2 37.9 44.1 28.2 29.5 - 23.5 23.1 42.3 - 1 30 July 38.2 37.9 44.1 3 28.2 4 - 31 1 26 18.7 323.0 first year of war 2 v. 29 Oct. 1. 3 - 30 31 Nov. 27 28 Dec. 31 44.3 26.7 35.2 - - - 15.0 - 1 28 29 Apr. 4 May 2 29 0.8 2.1 16.9 30.0 - 18.7 - 306.4 16.6 44.3 26.7 - - 35.2 - 42.9 50.2 72.5 117.6 73.6 504.7 43.9 28.6 69.6 For Own A/C 0.6 21.1 29.3 24.8 50.0 72.2 96.3 53.9 412.7 16.4 14.0 49.2 COMMONWEALTH BANK OF AUSTRALIA DEBITS Transfers from Official British A/C Sales 17.5 9.6 1940 4 31 of Gold CANADA CREDITS For French 5.9 7.3 - 1.1 - - - - - - - - - 19.2 - 20.9 - - - Dear. (-) 19.5 38.7 27.3 14.3 16.7 + 4.3 + 7.1 + 4.5 Official British - - - - - - 11 18 - - - - 8.2 10.8 10.8 21.4 5.4 14.4 11.0 10.4 0.5 21.4 5.8 10.3 - - 6.1 0.2 - 12.8 5.2 3.3 3.0 3.1 + 4.7 2.3 0.2 0.3 2.1 0.2 32.4 0.2 0.3 + 12.3 + 28.4 + 89.4 + 54.9 1.2 2.3 4.6 0.2 6.8 3.0 +181.7 31.2 3.9 8.7 10.1 2.5 7.5 3.1 0.6 2.5 - 2.2 2.7 1.0 2.2 2.0 2.6 2.3 5.9 4.6 5.0 5.0 36.1 2.3 0.7 + 2.6 1.1 0.1 +10.6 0.8 - 0.8 - - 4.5 4.1 - 0.1 ekly Average of Total Debits Since Outbreak of War (Canada alone) Through December 18 $ 6.7 million - 9.0 -0.6 - 3.3 2.4 0.3 9.6 - - - 5.8 4.9 + 34.4 1.7 in Balance - 5.8 3.2 - Net Inor. (+) or Credits Deor. (-) Other - 2.5 0.3 - - 1.9 0.1 3.7 - Gold 1.9 - - Dec. 4 8.2 10.8 5.4 11.0 of Sales 3.8 27.3 6.2 2.6 2.5 KEEX ENDED Nov. 21 Total Credits - 4.6 0.9 + 1.9 Debits - - 7.2 - 0.4 Other A/C 6.5 2.2 Proceeds to Total Debits in Balance - - - Credits - - - Other A/C 3.0 15.0 Net Inor. (+) or CREDITS Transfers - BANK Confidential Week Ended Dec. 18, 1940. 1.0 0.8 0.8 1.7 3.0 1.6 - - 1.9 - 3.3 - 0.3 0.2 0.6 1.8 1.7 4.4 0.2 4.2 0.8 1.6 3.4 30.0 0.9 1.5 8.0 7.9 6.7 6.5 6.1 1.3 1.4 3.6 2.1 1.5 0.2 0.1 0.3 6.0 - - - 4.7 0.2 0.1 0.3 1.3 1.9 0.9 0.8 -0.3 +1.4 +3.6 +0.4 -1.8 4.9 -0.7 2.2 +0.5 -0.9 -0.7 -0.5 + 4.3 337 120 276 389 300 53 367 305 419 346 79 91 56 18 14 43 21 18 52 78 81 85 386 81 99 73 681 135 129 110 112 145 Oct. 13 Oct. 26 124Sept. 29 Oct. 12 467 176 119 643 143 2,693 Total 6,796 44 137 124 Aug. 4- Aug. 17 126 737 120 119 997 100 1,923 1,242 4,103 2,496 1,099 1,397 1,734 35 64 77 45 40 28 72 19 10 36 26 40 575 420 73 995 410 549 959 planes 9 88 10 8 2 2 2 39 81 16 2 ONE 2 8 9 6 70 10 108 196Sept. 29 Oct. 12 109 Commercial Bombers Pursuits TOTAL ALL PURCHASERS Jan. 1 July 6 planes July 7 July 20 96 74 60 82 83 86 92 43 33 67 131 171 172 131 139 206 184 179 159 30 26 13 92 87 946 111 136 532 1,800 881 258 350 19 36 15 27 27 30 31 203 at 61 43 44 Other 13 337 527 324 456 119 2,746 1,413 military 6 3 6 ? 9 76 21 50 85 61 40 71 71 50 630 104 116 133 29 38 16 34 52 14 10 12 13 113 118 12 Trainers 67 11 11Oct. 27 Nov. 39 70 57 38 69 52 4a 51 67 21 152Sept. 1 Sept 14 21 80 10BRITISH EMPIRE AND FRANCE* 22 269 384 326 276 695 193 103 1,079 1,744 1,114 6 6 6 1 6 5 3 co 8 2 35 63 16 55 28 39 38 28 25 63 61 34 69 11 42 72 10 14 25 11 13 13 54 47 28 13 48 13 350 114 526 589 850 500 103 1,115 DELIVERIES OF AIRPLANES, BY PURCHASERS AND BY TIPES or PLANES January 1 - December 21, 1940 24 Dec. Subtotal July 7 Deo. 21 Subtotal July 7 - Dec. 21 Subtotal July 7 - Dec. 21 Subtotal July 7 Dec. 21 Subtotal July 7 Dec. 21 Total Jan. 1 - Dec. 21 Oct. 27 Nov. Dec. 8 Dec. 21 Oct. 13 Oct. 26 Sept. 29 Oct. 12 Sept. 15 Sept. 28 Sept. 1 Sept. 14 July 21 Aug. Nov. Nov. 24 10 Nov.23 Dec. July 7 July 20 17 Aug. 18 Aug. 31 Jan. 1 July 6 Aug. 4. Aug. 17 Total Jan. 1 Dec. 21 Sept. 15 Sept. 28 Sept. Sept. 14 Sept. 29 Oct. 12 Aug. 18 Aug. 31 Nov. 10 Nov. 23 Oct. 13 Oct. 26 Oct. 27 Nov. Nov. 24 Dec. 166 Dec. 8 Dec. 21 Jan. 1 - July 6 Total Jan. 1 - Dec. 21 118Deliveries under French contracts were made up to June 30, 1940. Sept. 15 Sept. 28 Dec. 8 Dec. 21 Nov. Aug. 4- Aug. 17 Sept. 15 Sept. 28 Oct. 27 - Nov. July 21 Aug. 3 Nov. 10 Nov. 23 Sept. 1 Sept. 14 4 Sept. 1 Sept. 14 Sept. 15 Sept. 28 Total Jan. 1 - Dec. 21 Jan. 1 July 6 Aug. 18 Aug. 31 Dec. 8 - Dec. 21 July 21 Aug. 56 Nov. 24 Dec. Dec. 8 Dec. 21 4 Sept. 29 Oct. 12 Jan. 1 July 6 Nov. 24 - Dec. 4 July 7 July 20 Oct. 13 Oct. 26 July 7 July 20 July 21 Aug. 3 Total Jan. 1 Dec. 21 Nov. 10 Nov. 23 Aug. 18 Aug. 31. Aug. 4- Aug. 17 Nov. 10 Nov. 23 Oct. 13 Oct. 26 Aug. 18 Aug. 31 Oct. 27 Nov. Aug. 4 - Aug. 17 OTHER NAVY ARMY STRICTLY CONFIDENTIAL July 21 Aug. 3 December 26, 1940.July 7 July 20 55 Office of the Secretary of the Treasury Bortion of Research and Statistics. 248 OF OFFICE OF THE DEPUTY MINISTER OTTAWA, December 26, 1940. CANADA Dear Mr. Morgenthau, Thanks very much for your Christmas card and its good wishes. May I take this opportunity of wishing in regard to the New Year, if "happiness and prosperity" be not wholly appropriate terms, may it be one in which we may take some pride in making a contribution that will bring us nearer to the day when you the Compliments of the Season, and, peace and sanity can once more reign among the nations of the world. It was a great pleasure and privilege for me to be able to meet you again and to discuss problems of utual interest. Yours respectfully, wbblesh Hon. Henry L. Morgenthau, Secretary of the Treasury, WASHINGTON, D.C. TREASURY DEPARTMENT Washington, M December 26, 1940. MEMORANDUM FOR THE SECRETARY: James B. Reston, of the New York Times Bureau in London, today gave me further impressions of conditions and prospects in England, supplementing his talk with you. The British need the following from us during the next three months: 1. The starting of mass shipbuilding in this country; 2. More destroyers, or their equivalent, in our convoying of cargoes half across the Atlantic; 3. Long-range land planes, capable of carrying 8 load of bombs, but staying over their targets, especially in these winter months when the nights are long; 4. Long-range seaplanes for patrolling the see routes and protecting convoys. The Germans now use such seaplanes, flying them regularly from Bordeaux to Stavenger on a vast are which takes them far out over the Atlantic, west of Ireland. These German planes are in constant communication with submarines and are directly responsible for a large proportion of present British shipping losses. About food conditions in England, Mr. Reston says that many cold storage plants have been bombed, feeding stuffs have been cut severely, end much British livestock has already been killed for lack of fodder. Fruit is scarce and dear, and milk probably will be rationed before the end of the winter. The British are coming into 6 period in which food will be as short in same categories 88 in Germany. About production: The Air Ministry is now planning for 8 50% lag in production by the end of the winter. One prospective shortage in the aircraft industry is aluminum, although the British are sure that they could get all the aluminum they need if they had enough shipping and enough protection for their convoys. A serious problem is the waste of about 50,000 skilled workers, badly needed in the war industries, who are now idle because their factories have been bombed and the government has not been able to resettle and reemploy them. 249 250 -2About Lord Halifex: Mr. Reston is convinced that he is not an appeaser and is 100% for winning the war. Halifex has, however, been an obstacle to Churchill as a man of deep principle who believes in fighting the war according to the rules. He was largely responsible for the British decision not to invede northern Norway ahead of the Germans, and has also opposed the bombing of Rome, which is strongly favored by Churchill. Churchill was therefore glad to get Halifax out of the country into a new post where his qualities of the war. can be effective without interfering with the conduct About & possible German invesion: Mr. Restor finds the British well protected, with a mobile and well-equipped army. The British docks and harbors are not only strongly armed, but they are equipped with oil pipes which are ready to squirt oil onto the water (for burning) whenever and wherever an attempted larding might be made. About the future, he believes that a British invesion of the Continent will be a mere dream until a "revolution in thinking* takes place among the German and the conquered peoples. He feels that the only way to win the war is to start 6 "war of ideas" to convince the enslaved peoples that Hemocrecy has an economic BISKET to their troubles. The British, he says, have not stated their WET aims because they do not know how for the United States will be will- ing to coordinate its economic policies with theirs after the war. Indennine kuna (weep's memo?) December 26, 1940 251 Subject: Probable Reasons for English Delay in taking Bardia. 1. The terrain around Bardia is fairly flat and there are practically no difficulties of terrain. The Italians have strongly fortified the port, however, and from this standpoint the capture of Bardia is fairly difficult. A frontal attack on the town would be costly in lives to the English. 2. The English have cut the lines of communication of the Italians and the Italians will therefore sooner or later have to surrender. 3. By not carrying out a large-scale frontal attack on Bardia, the British are exercising good judgment. In the position that the Italians are they will be forced to attack if they wish to avoid surrender. This enables the English to be tactically on the defensive even though strategically they are on the offensive. This enables them to carry out an important operation and minimize the loss of men. 4. The situation is somewhat similar to that of the siege of Yorktown in the American Revolution. Washington did not attempt to win the victory over Cornwallis by attacking him directly. Washington merely kept Cornwallis' lines of communication out thus forcing Cornwallis to make attempts to break through the strong defensive fortifications of the American Army. After the failure of these attempts Cornwallis had no alternative but to surrender. In the same way, unless the main Italian-Libyan Army can rescue the Italians in Bardia or the Italian Navy drive off the British Navy, the Italians will be forced to surrender. Copy of Letter from B, Mexico City, December 26, 1940. 252 This is a quiet week with little to write about, although one important occurrenceds in the making. The President has submitted to Congress his projected law, by which the administration of the National Railways is taken out of the hands of the Union. Reports seem to indicate that the project will hurriedly be approved by the Chambers before their recess on December 31st, and it is to be expected that we shall have a different set up for the Railroads by January 1st. The essentials of the project are these: The Railways will be administered by a Board of seven Directors, four of whom will be appointed by the Federal Government and three by the Union, whereby a Government majority is assured. A Director General, to be appointed by the President will be invested with the most ample faculties in order to manage the National Lines as any other business enterprise. Unfortunately this enterprise is by now so much run down that the new administrators are facing a terrible task, and we are not altogether sure that they will not resort to increases in tariffs in order to cover the ever growing deficits. As long as the Union was responsible, The picture is liable to change when the responsibility rests mainly with the Government itself. We have our fears in this respect. Although the Union has voiced itsdisapproval of this change, they will have to accept it, especially as the public and political opinion are applauding the the Government has been more or less opposed to freight increases. action taken by the President. As we had stated in previous letters, something had to be done about the Railroads, which were constantly going from bad to worse. Unfortunately their financial position seems to be very bad and the Government will have to find ways and means to finance the purchase of much needed equipment and the repair and upkeep of the long neglected tracks. How this will be done remains to be seen, as well as the Government's ability. to restore discipline amongst the members of the Union. As stated, the task will be no easy one, and since it is again a Government business, it is very possible that the Mexican people will be called upon to participate in the losses or the cost of reorganization, as one wishes to call it. We are following the matter with much expectation and are curious to learn the Government's choice for their 4 Directors on the Board and the Director General. A great deal will depend on these appointments. With the Government having its 10 day vacation there is little doing otherwise. To the best of our knowledge, no headway has been made towards a settlement of the Rosita strike. The term for concluding the Real del Monte contract discussions Pachuca. expired on the 24th, but so far we have not heard of any strike at strike. We are doubtful that the Union is prepared to sustain another major finances, Cananea and Rosita have given a heavy bleeding to the Union's Union to collect so has Matehuala, where the Union members are leaving the of reimburse- individually their indemnities, cheating the Union out del any Monte, we do ments for support received from it. At Rosita and Real the year. not expect to see anything new between now and the end of 253 -2- An electric tramway strike in the Federal District, scheduled for the 24th was postponed to the first week of the new year. The exchange continues at 4.85, where it seems to be pegged for the time being. Copy of Memorandum from Monterrey, Mexico, December 28,1940 We have received numerous reports of increasing strife between the Cooperativa (labor union) which is leasing the Ojuela mines and the "gambusinos" (ore thieves). The leaders of the Cooperativa group are said to be using high-handed methods in their attempt to rid the camp of "gambusinos", and, according to news items, blasted the San Jorge tunnel just before Christmas to prevent the "gambusinos" from gaining access to the mine. It is further stated that a pitched battle between the two factions was prevented by the intervention of Federal troops. - CHV SUBS 182 & MAL to individual 254 No. 733. Chungking, December 26, 1940 Subject: Reaction to the Establishment of the Central Reserve Bank by the Nanking Government. Air mail The Honorable The Secretary of State, Washington, D. C. Sir: I have the honor to refer to my telegram dated December 24, 10 a.m. and to report the substance of a conversation between the Vice Minister of Finance and a member of the staff of the Embassy regarding current financial matters in China. Summary The announcement of the establishment of the Central Reserve Bank in Nanking has caused no anxiety as it is believed that this institution will be weak and also pre- vented by Japanese influence from attaining appreciable financial importance. The main function of the bank will be to provide a means of financing the Nanking Government. The Chinese National currency could be harmed only if its circulation were prohibited in Shanghai but according to the Vice Minister of Finance it would be impossible to enforce such a prohibition in the International Settlement and the plan would be a failure. The American and British loans have been of material assistance. Chinese National currency now has a coverage of practically seventy per cent and there is no fear that the new note issue by the Central Reserve Bank will cause any drop in the exchange rate of fapi. The announcement that the Nanking Government will open a new bank of issue on January 6, 1940, has caused no anxiety in official or banking circles in Chungking. It is believed that the new bank he weak and deprived of sufficient power to be in a position to affect the foreign exchange value of Chinese National currency. It is the general feeling here that the primary purpose of the new bank is to provide a means for financing the Nanking Government and that the Japanese will prevent the bank from becoming too strong. The establishment of this financial -a- 255 institution was encouraged by the Japanese to relieve them from the financial responsibility of running the now government. On the other hand it is against Japanese interests to allow the Central Reserve Bank to become too powerful because the Military Yen would then be adversely affected. Since the circulation of the Military Yon is rather large, it,is to the decided advantage of Japan to prevent anything happening that might cause it to depreciate. The official mentioned above believes that the only possible way in which the Central Reserve Bank could hurt the Chinese National currency would be to prohibit its circulation and substitute the new notes in its place. He feels confident, however, that the Nanking Government would not issue such a decree because the only place where the substitution of the new notes for fapi could seriously harm the Chinese National currency would be in Shanghai and according to him such a decree could not be enforced in the International Settlement and very likely not in the French Concession either. The American and British loans have given tremendous encouragement to the Government and raised the morale considerably. The Vice Minister of Finance, however, pointed out that these loans have a most important material, as well as psychological, effect. As a result of the portions of the loans to be used for the stabilization fund, in addition to foreign exchange held by the government banks, the Chinese National currency has a coverage at present of almost seventy per cent. He stated also that the Ministry of Finance is convinced that the cost of conducting hostilities for the next year can be met by merely increasing the note issue without the coverage falling below forty to fifty per cent. The National currency is now in such a strong position that there is no fear that the new notes issue by the Central Reserve Bank at Nanking will cause any adverse reaction in the exchange rate. Respectfully yours, Nelson Trusler Johnson Original and two copies (by air mail) and three copies of the Department Copy to Pelping Copy to Shanghai 851.6 JJM:MCL True copy of signed original Copied: aja all mmc. 256 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE December 26, 1940 Secretary Morgenthau Mr. Dietrich CONFIDENTIAL Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns Purchased from commercial concerns 176,000 131,000 Open market sterling was quoted all day at 4.03-3/4 and transactions of the reporting banks were as follows: Sold to commercial concerns Purchased from commercial concerns L 2,000 -0- Closing quotations for the other currencies were: Canadian dollar Swiss franc Swedish krona Reichamark Lira Argentine peso (free) Brasilian milreis (free) Mexican peso Cuban peso Chinese yuan 13-7/8% discount .2321 .2385 .4005 .0505 .2355 .0505 .2070 8-5/8% discount .05-1/2 There were no gold transactions consummated by us today. No new gold engagements were reported. Today was a holiday in Bombay and there were no gold or silver prices quoted in that city. In London, spot and forward prices for silver were unchanged from Tuesday at 23-1/4d and 23-3/16d respectively. The dollar equivalents were also unchanged at 42.22# and 42.10#. 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 three purchases of silver totaling 426,000 ounces under the Silver Purchase Act. Of this amount 326,000 ounces represented secondary materials and the balance of 100,000 ounces consisted of now production from foreign countries, for forward delivery. 257 their TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE December 26, 1940. Secretary Morgenthau Mr. Dietrich STRICTLY CONFIDENTIAL The Federal Reserve Bank of New York reported the following transaction in the account of the Deutsche Asiatische Bank, Shanghai, maintained with the Chase National Bank. Date Amount Debited Dec. 23 $ 124,300 Account Debited Deutsche Asiatische Bank, Shanghai, by order of Deutsche Asiatische Bank, Berlin Paid To Chase National Bank, for account of Yokohama Specie Bank, N.Y., for account of Shows Tsusho Kaisha, N.Y. D 258 TREASURY DEPARTMENT time Secretary Morgenthau TO INTER OFFICE COMMUNICATION DATE December 26, 1940. STRICTLY CONT DENTIAL Mr. Dietrich The Federal Reserve Bank of New York reported the following transaction in the account of the State Bank of the U.S.S.R., Moscow, maintained with the Guaranty Trust Company of New York. Date December 24 Amount Debited $ 5,000 Paid To Guaranty Trust Co., N.Y., for account of Banque de Greece, Athens a 259 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE December 26, 1940. Secretary Morgenthau FROM Mr. Dietrich STRICTLY CONFIDENTIAL The Federal Reserve Bank of New York reported the following transactions in Russian accounts maintained with the Chase National Bank. Principal changes in the State Bank of Russia's dollar account during the period December 19 to December 26, inclusive, were as follows: Amount Amount Date Received From Credited Dec. 19 $ 131,565.71 Amtorg Trading Corp. Dec. 20 Dec. 21 250,475.26 $ 822,533.51 Commercial Letters of Credit 215,686.72 Commercial Letters of Credit 500,521.89 Amtorg Trading Corp. 128,176.02 Commercial Letters of Credit 83,636.65 Commercial Letters of Credit 57,933.88 Commercial Letters of Credit of Credit of Credit 275,000 Paid To Commercial Letters Dec. 23 131,898.08 Commercial Letters Dec. 24 Debited Chase National Bank, N.Y., by order of Stockholms Enskilda Bank, Stockholm Dec. 26 104,360.53 National City Bank, N.Y. 120,000 Amtorg Trading Corp. 260 2 Cn December 26 the balances of the State Bank and the Amtorg Trading Corporation were as follows: State Bank of the U.S.S.R. Amtorg Trading Corporation Cash Balance Cash commercial Letters of Credit Time deposits Total Changes in total since December 18 $ 9,633,000 $ 1,245,600 12,736,800 2,206,900 10,300 -a $ 22,380,100 $ 3,452,500 - $ 1,344,000 - $ 322,400 D 261 TRICTLY CONFIDENTIAL December 26, 1940. Secretary Morgenthau Mr. Klaus FBI reports: December 18. The National Maritime Union has organized at least two strikes OD foreign ships in American ports (the last being December 16th in the Port of e York with regard to a British steamship) to test the Union's power to control seaten sailing under foreign flags. December 19. Regarding a recent press interview by George R. Hutchinson con- certing the delivery of British planes from Canada over the Atlantic, FBI states utchinson has a bad record dating from 1926. December 20. The Dies Committee has subpoented the National City Bank for all records pertaining to German banks for the past year. The Banco de Mexico has paid ederal Reserve $9,000,000 and expects to pay over a remaining $3,000,000 for a 2,000,000 gold purchase to strengthen the Mexican gold reserve. December 21. A large batch of translations of official French documents, left on board the Pan-American Clipper by Governor General Orde and his aide when they were taken into custody by British authorities at Antigua in October, is transsitted. Among items in the papers is a statement that the Colonial Government's activities in the past three months have been devoted to resisting influences dreated to detaching the Colonies from the mother country; the plan of action in Mortinique and the other Colonies has been to diversify the economic and agriculturul production of the islands; the reduction of imports and regulation of internal consumption and production are planned as well as the obtaining of dollar credits in the United States; there is discussed a plan for exchange control for the stilles; it is reconmended that sugar prices be cut to meet world competition and that new outlets be found for the alcohol produced as well ES for bananas. There are complaints with regard to corruption and waste by prior officials. A summary the military situation is also appended. RK. 262 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION STRICTLY CONFIDENTIAL TO Secretary Morgenthau FROM Mr. Klaus FBI reports: M DATE December 26, 1940 November 20. It appears, with regard to the $2,000,000 United States currency transported from Washington by Italian officials on November 4th, that the Chief U. S. Customs Inspector at Laredo requested the Mexican Immigration Chief at Nuevo Laredo to treat the Italians as diplomatic couriers with every courtesy, that a guard of honor was provided by the Mexicans at the border but that upon the arrival of the Italians in Mexico City two days later the bags were seized, opened and one week later (November 13), the currency was placed in the Mexican Treasury for the reason that such an amount of American currency in Mexico might affect the value of the Mexican peso; the Mexicans told the Italian officials that the money would be returned if it were immediately transported out of Mexico. December 7. Report on the activities of Jean Monnet shows him to have been in communication with A. F. Adams, Comptroller of the Transcontinental Broadcasting company; with Twentieth Century-Fox Film; with Rene Boel, Belgian financial representative, formerly with Allied Dye and Chemical Company; Gasselin of Baldwin Locomotives. Gasselin got his job on the War Department's recommendation in consection with tank construction, having been associated with the Renault French Commission which came here in June, 1930. Gasselin worked at Baldwin Locomotive from September 2 to September 6, when he disappeared; he is reported to have gone to Canada. December 18. Packages of phonograph records consigned from the German Embassy at Tokyo to the German Consulate at New York have been received in New York City; these are recorded propaganda speeches covering British blockade, nayal and air warfare, etc., and are intended to show that England is bound to lose. While it is said that the speakers are different persons (usually "Rear Admiral Luetzow"), the report says that the voice of each talk seems to be the same. December 21. A private conference was held November 18, 1940, during the C.I.O. conference, at which John Lewis, Murray, Harry Bridges and others were present; Murray accepted the presidency only on condition that Harry Bridges be not named vice president but Bridges was allowed to select Joe Curran for the office. Prior to the conference, there was a report that the Communists threatened to start a new labor organization to be known as the National Transportation Federation with Joe Curran as president if Murray were elected President of the C.I.O. December 21. Affidavits and other information said to be reliable have been received to the effect that Wyndham Mortimer of the United Automobile Workers, who recently led the Vultee strike, is a Communist Party member. hr 263 G-2/2657-220 RESTRICTED SITUATION REPORT No. 278 M.I.D., W.D. December 26, 1940. 12:00 M. This military situation report is issued by the Military In view of the occasional Intelligence Division, General Staff. inclusion of political information and of opinion it is classified as Restricted. I. Western Theater of War. Truce on offensive air operations prevailed from noon on the 24th. II. Greek Theater of War. Only local operations on a reduced scale are reported. Bad and cold weather limited ground and aerial activity. III. Mediterranean and African Theaters of War. The situation in the Bardia area is reported unchanged. The Italian Air Force has intensified its operations against British positions in Libya. The tempo of British air activity in this region has been maintained. RESTRICTED 264 RESTRICTED MILITARY INTELLIGENCE DIVISION TENTATIVE LESSONS BULLETIN NO. 78 WAR DEPARTMENT G-2/2657-235 Washington, December 26, 1940 NOTICE The information contained in this series of bulletins will be restricted to items from official sources which are reasonably confirmed. The lessons necessarily are tenta- tive 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 350.05 (9-19-40) M-B-M. SOLDAN'S OPINIONS ON GERMAN MILITARY SUCCESS SOURCE This bulletin contains a translation, somewhat abridged, of an article written by Lieutenant Colonel Georg Soldan, one of Germany's most noted military critics, and published in The Deutsche Wehr, semi-official journal, on September 20, 1940. An American official observer makes the following statement: "Articles appearing in The Deutsche Wehr are considered to voice the official views of the German armed forces, and the article by Lieutenant Colonel Soldan, one of the editors, is considered to portray accurately German military opinion on the subject of Germany's recent military success. n RESTRICTED -1- 265 RESTRICTED SOLDAN'S OPINIONS ON GERMAN MILITARY SUCCESS During the World War it was difficult for me to see beyond the narrow circle of my duties as company commander and later as battalion commander, and I succeeded only partially in understanding the larger aspects of the war. It was a long time before I was able to see the full picture and to grasp the reasons for our not being able to win. Many others felt the same way. In the present case, however, circumstances are entirely different. We have won the war with such fantastic speed and effectiveness that today we are consumed with eagerness to know how victory has been possible. This question has often been asked even by comrades with a good background of personal war experience. Clausewitz has said, "Only now and then do some of the threads which form the web become visible. Most of the mental struggles are purposely hidden because they touch on political matters." Our question cannot be answered in an entirely satisfactory manner, but in giving it consideration we shall deal with the factors which are plain for all to see. First, we can state without qualification that the German Air Force has altered the entire art of war. I an inclined to value this fact as the most important element in the achievement of our success and in the speed with which it has been achieved. I do not think of the air force only as a new branch of the service which is able to fight for itself independently of the army and navy. We are now watching it in the gigantic aerial fight against England, and there is no doubt that this aerial war is something entirely different from anything we have seen before. But we should realize that great aerial battles and immense bombing attacks by day and by night are only pre- ludes, and that they presage a change in the conduct of war-a change whose effect cannot yet be foreseen. The change will not occur during this war. When I think of the future in terms of what I have seen and experienced, and when I consider the possibility of further development of the air force, I conclude that the present moment in the history of war can be considered as only a beginning. We know that today, as well as in the future, war by land and by sea can be successful only with superiority in the RESTRICTED -2- 266 RESTRICTED air. The present conflict has already demonstrated this fact, and the air force must now be considered the controlling and decisive branch of the service. Its development, therefore, will be the central point of all future military efforts. The air force, however, must not be developed as an individual arm which conducts an individual war, for neither the army nor the navy of the future can operate without strong units of the air force. This is already true of the army, although it is not reflected in army organization. Recent events have given rise to the question of whether heavy artillery is still of value to the army, and the matter has been discussed in neutral military technical literature. We know-and I think this the second reason for the greatness and rapidity of German success-that we must grant our air force a complete artillery effect, an effect which artillery on the ground would never be able to produce. During the World War, the offensive successes of the infantry were possible only with the support and cover of ar- tillery fire of all calibers. The fact that infantry attack stopped as soon as artillery support ceased is the essential reason for failure of the entire 1914-1918 military effort. We artillerymen could not help, since the artillery was not suffi- ciently mobile to change position quickly when a break-through was effected and when the attack was going forward well. Sooner or later, the enemy always had opportunity to stop our successes by utilizing the defensive force of the machine gun. The air force, as the most mobile and effective artillery, changed this. Without it, tanks and the motorized troops would not have achieved their great successes as effectively and as quickly as they did. We are not unaware of the important development of armored and motorized forces. On the contrary, we consider their effectiveness the third factor of our quick success, for without their weapons and the speed of their movements, the artillery effect of the air force would have been in vain. Never has it been so evident that the secret of success lies in cooperation of all weapons and in proper combination of individual forces. It is futile to ask which factor has been most important, for no individual weapon alone has achieved our success and our glory. The success of one is not possible without the success of the others, and even the most modern weapons are finally dependent upon old weapons. Regiments, brigades and divisions, after long marches and hard fights, completed jobs which had been begun with lightning attacks. This fact is an additional conRESTRICTED -3- 267 RESTRICTED sideration which must not be undervalued. It is decisive. Individual factors have been closely strung together until an unbreakable chain has been forged around the enemy's neck. This has been possible only because the soldier has been trained to use his power efficiently and because the spirit of the new period has inspired enthusiastic devotion. The soldierly virtues of our army and the spirit of the nation are additional factors-factors which Clausewitz has characterized as most important. But even these elements would be useless without an eminent command to point the way for annihilating attacks. The ability and the genius of the strategist are, as Clausewitz also stated, the crown of the extraordinary achievements of our armed forces. RESTRICTED - Dear Mr Secretary I - enclosing . - in regard to the possible - of Benish meets is our and other noutral parts. - you have had ea opportunity to look over this - I should 1 to all down with you and Admiral Lead and discuss 10. I as agains . copy of the - to Muisal Leade Sincerely, Secretary of the Treasury. - the Secorable s Secretary of the Bary. Inclusive 268 DEC 26 1940 269 - STATES AND - NURBER PORTS (a) 0a December 12, 1940 there were - (77) Design vessels of a total dead weight tomage of 439,543 tons in mentral mutries. On the - date there were (43) Denish shipe of a deed weight teemage of 272,938 tens in parts of the United States or its pessessions. I is a share showing the location of each of these vessels, their their deed weight - and the year in which the vessels were built. (2) There are several ways by which these Danish boats can be put to use under existing law (a) By a bere best charter from the Danish owners to the President, the Nevy or a private corporation finessed and controlled by the RFC. (a) By requisition. (3) Dates The attentiy for H. 3. Ishrandteen and Ishwandscan-Moller Inc. (agents for the - of the Marria Line boats) has been negotiating bests. with the Havy Department to have best charter the Marrik IS the is also possible In all probability - a charter can be worked out. contests N. S. Tobrandtom's Macrak Mollor, the see of do P. Moller, who indications are that the boats, in the charter. The the Mavy power over beatswill arejein chartered to the President, that If the March Line bare best abarter, the other Benish OWAYS or a follow are corporation the I pattern. - . If this is done all TV of the Denish will vessels would probably be covered w the charters. If the Denish vessels are chartered by the the President, vousals When and RFC corporation on a bare boat - the Savy water the such as the CREES MASSIER to a - the Havy be put OF to an various wass. These, for example, charter party could convert a venual for - in the Philippine Islands. set of mail (not of sumiliary June 26g or 1940 patrol - Public waft No. 667 - - 76th Congress) September 90 1910 - Publica, no. 702 270 76th congress). If this were some, as would relieve the on existing shipping and this make more vensole available for the British. The Bavy directly - through the the Department was of July 22, 1929 (42 Sist. 2320, des of July x, 1000, as - (27 Stat. 321, 45 Stat. 988, 40 U.S.Coh., Bon. 303)). the President or as are corporation, with the advice and assistance of the Maritine Commission, - probably sub-therter the Souish vessels to private steenship companies few the Pacific or South American - upon the understanding that substitute ships will be soleneed for the w of the British or charter this directly to the If not already committed, the Funds appropriated to the President (Ast of June 12, 1940-Fubile, No. - Congress and set of June 13, 1940-Publica, No. 611-70th Congress) - also be used to pay for the chartering. Similarly, the 850,000,000 appropriated to the President for the coquisition and conversion of vessels by the has of July 19, 1940 - be used to charter these vessels. (a) Remisitivates of Bastah Versels If the Denish vessels cannot be chartered, those of then in our parts ess probably be requisitioned under existing law. Under the presently proviling the Insective ean probably requisition vessels both as a matter of demostic and international law. U.S. Coust. Are. II, See. 2. United States . so U.S. 623 (1871) Philisains Samp Estates in A Mind States (1904) 40 co. 01. 33, 1 Germer, International and Ohe TY (1920) D. 178, fas is Regainities doe Revires MA11 - Portugal, (1916) Revee Generale do Droit International Public 266, 272, Ballesk (1922-23) British Year Book of International Las 110-11. Upon inquisitioning, payment to the owers can probably be left to exait future congressional appropriations VA Persoll, surra) or such appropriations as the President 9 Thereporty Funds, the Nevy appropriations or RFO Sunda - be word. or. 014 Pastates Land Company VA (1925) m U.S. 55; Special A Cream (1912) 224 U.S. 290, 306, Nature Amely a CA Breakling (1897) 166 U.S. 665. If the requisitioning is done, 18 should probably be bandled by Presidential proclamation and Resecutive Order designating the department or agency to take the boats and providing for the methods of present payment to the - as - 271 (s) Recommendations We receiment thats (1) The Savy Department and the KFC be authorised to proceed with the negotiations with H. 3. to charter the Hearek line boats - a bare Mont charter and to negotiate with the other eccess of Daniels books is noutral posta on a stailer bester (2) Simultanously, the Navy, Maritine Commission, the are and Treasury work out with the Account General the bases for requisitioning the Denish vessels is our ports under existing low and prepare the accessasy Preelamations and Orders: and (3) When and if the vessels are obtained by charter OF requisition, the Secretary of the Navy, the Chairman of the Maritime Commission, the Chairman of the RFC and the Secretary of the Treasury sotermine their disposition and use. LOCATION OF DANISH VESSELS IN NEUTRAL COUNTRIES 272 Year of Vessel Owner and Address J. Lauritzon, Hammerensgade 1, Copenhagen K., Denmark its Maerak N/S. D/S. Svondborg & D.C., A.P. Moller, Mgrs., Copenhagen (Kongens Nytoro 8) Same Haerok Same Location Portland, Me. D.W.T. Built 2700 1934 Boston Boston Boston 13,580 1928 3,450 1939 3,500 1939 New York 2,600 1936 New York 3,940 1938 New York 2,183 1933 New York 6,850 1926 New York New York New York 2,200 2,900 4,500 1933 1936 New York 8,270 1930 New York New York New York 2,700 2,500 2,900 1937 New York New York New York New York 2,520 4,460 2,545 2,600 1938 Philadelphia 8,380 1937 Philadelphia 4,965 1930 Baltimore Baltimore 5,377 5,110 1920 1916 Baltimore 3,950 1938 Baltimore 8,690 1939 its Maerak tralian Reefer J. Lauritzen Hammerenagade 1, trud Coponhagen K. Denmark Dampskslak Torm (A Schmielgelow & A Kampen Mgrs.) Holmens Kanal 42, Copenhagen K., Denmark J. Leuritzen Hammerensgade 1, Copenhagon K., Denmark Reimann, A. E., Stensbyaard tr Stensved, Denmark J. Lauritzen Hammerensgade 1, Copenhagan K., Denmark Same Same 1940 F yapia Orient, A/S Dampakslak Ved Stranden 14, Copenhagen, Denmark is J. Lauritzen Hammerensgade 1, Copenhagen K., Denmark aja 688 eilian Same Same Det. Forenede Dampskibs Selsk, Saukt Annae Plads 30, Copenhagen K., Denmark orgia Same mis Same rholm Same order A/S Dampskalsk, Norden P. Brown Jr. & Co. Mgrs., 1934 1936 1920 1936 1925 Amaliegade 49, Copenhagen K. Denmark N, Danm Dampskibs Vendila (Svendsen & Christenson Eggs.), Frederikagade 1, Copenhagen, Demark sound D/S Hafnia A/8 (T. C. Christenson, Mgrs.) Amaliegude 33, Copenhagen, Denmark round gahild Same Dampakelak Torm (A. Schniegelow & A. Kampen Mgrs.) Holmons Kanal 42, Copenhagen K., Denmark 31 Maarak A/S D/S Svendborg & R.S., A. P. Moller Mgrs., Copenhagen (Kongens Hytoro 8) -2- 273 Year Owner and Address Location D.N.T. Built 208 Vecsal Maerak A/S D/S Svendborg & D.S., A.P. Moller Mgrs.,Baltimore Bultimore Baltimore 8,805 8,590 9,100 1931 Orient, A/S Dampekslak Ved Stranden 14, Baltimore 8,280 1928 Dampskibs Vendila (Svendsen & Christensen Egrs.), Frederikagade 1, Copenhagen, Norfolk 4,965 1930 Det. Forenede Dampskibs Selsk, Saukt Annae Plads 30, Copenhagen K., Denmark Norfolk 3,693 1918 Copenhagen, Denmark (Kongens Nytoro 8) Same b Maerak ura Maerak lumbia M. Delgas Same Copenhagen, Denmark Denmark rode roline Maerak A/S D/S Svendborg & D. S. A. P. Moller Mgrs., Copenhagen, Denmark Jacksonville 12,725 erdpol A/S Dampskelsk Norden P. Brown Jr. & Co. Mgrs. Amaliegade 49, Copenhagen K., Denmark Same ardhval Same ardvest Reimann, A., Stensbyaard tr Stensved, Denmark tris Ostasiatiske Kompagni, Holbergagade 2-4 Copenhagen K., Denmark rohen Maersk (Kongens Nytoro 8) rtrude Maerak rate Maerak candia Same Same Same (F. W. Kraft, Mgr.) 13, Skt. cristian Holm Same trine Maersk A/S D/S Svendborg & D.S. A.P. Moller Mgrs., Copenhagen (Kongens Nydoro 8) Same thilde Maerak Same rit Maerak Same ordbo 1928 1926 Gray's Harbor 8,320 1924 Gray's Harbor 8,380 1938 Long View 7,350 1936 Los Angeles 8,500 1932 Cebu, P. I. 9,200 1937 Manila, P. I. 8,690 Manila, P. I. 8,665 Manila, P. I. 9,200 1938 Det. Danske Petroleums A/S Anna Plads, Copenhagen mete Maersk 8.300 1939 A/S D/S Svendborg & D. S. A. P. Moller, Mgrs., Copenhagen olda knorsk San Pedro 1932 Thomas, V.I St.Thomas, V. 114,026 193 1918 1927 8,635 1928 Limerick, Ire. 3,579 Limerick,Ire. 3,575 1921 Bilbao 1921 Piraeus 3,330 1938 Kobe 8,365 198 A/8 Dampakslak, Norden P. Brown, Jr. & Co., Mgrs. Amaliegade 49, Copenhagen K., Demark 12,760 1936 -3- 274 Year Owner and Address Vessel Location D.W.T. Built Dampskelek Torm (A.Schniegelow & A. Kampen Mgrs.) Holmens Kanal 42, Copenhagen K., Riodo Grande Sul Denmark Same S. Sass ra Dampak - A/S Myren (Holm & Wonsild Mgrs.) Analiegade 36, Copenhagen K., Denmark J. Lauritzen Hamerenagade 1, Copenhagen K., Denmark 2,900 1935 Janeiro 2,940 1936 Montevideo 7,170 1931 Montevideo 2,450 1933 Bahia Blanca Bahia Blanca 5,500 5,500 1927 Bahia Blanca Bahia Blanca 2,400 13,400 1936 Las Palmas 6,000 1938 Las Palmas 1,500 1936 Lisbon 1,950 1919 Lisbon Lisbon 2,135 3,270 1924 Rio de A/8 Det. Demak - Franske Dampskalsk and (A.N. Peterson, Mgrs.) Store Kongenagade 49, Copenhagen, Denmark Same 1928 tagne rilian Reefer aye J. Lauritzen Hammerenagade 1, Copenhagen K., Denmark Now British Owned arig A/S Det. Demak- Franske Dampakelak (A. N. Peterson, Ligrs.) Store Kongensgade 49, Copenhagen, Denmark J. Lauritzen Hammerenagade 1, Copenhagen, K., Denmark 1921 A/S Det. Damak - Franske Dampskelsk Det. Forende Dampskibs Selsk Saukt Annae Plads 30, Copenhagen K., Denmark Now British Owned J. Lauritzen, Hammerenagade 1, Copen- ta hagen K., Denmark Same Taloahuano,Chile3,400 1938 1936 1937 1922 1,400 1922 Valencia, Spain 2,540 1931 Stockholm 1,975 1922 Stockholm 3,200 1923 Buenos Aires Buenos Aires 2,600 3,400 1936 Santos 3,235 1936 Same . Same 1924 2,900 2,900 2,900 4,160 M Kongensgade 49, Copenhagen, Denmark in " (A. N. Petersen, Mgrs.) Store 1936 Same Rotterdam Same Same life Same or Det. Forenede Dampskibs Selak, Saukt Annae Plads 30, Copenhagen K., Denmark rican Reefer J. Lauritzen, Hammerensgade 1, Copen( Reefer ptian Reefer hagen K., Denmark 1939 Same Same 4 e of Vessel ada Owner and Address Hsona lifornia a Year Built Location DEAT. Santos 6,925 1917 Funchal 2,500 1935 Victoria, Brasil 9,900 1922 Peruambuco 8,090 1913 Det. Forenede Dampskibs Selsk Saukt Annae Plads 30 Copenhagen K., Denmark rican Reefer 275 - J. Lauritsen, Hammerensgade 1, Copenhagen K., Denmark Det. Forenede Dampskibs Selak Saukt Annae Plade 30 Copenhagen K., Denmark Same 276 December 27, 1940 Dear Metrol Louds I - enclosing a - in regard to the possible - of Denish vessels in - and other mentrol parte. Then you hito had - opportunity to look was this - I should 15 to sit down with you and Secretary Hear and discuss it. I - sending a copy of the - to Secretary Know. Sincerely, Secretary of the Treasury. Honorable Insurance s. Lead Chairman, Maritino Commission Washington, D. C. Inclusive with/na/sa 12/29/10 277 December 26, 1940. DAMISS SURRING IS STATES AND OTHER NETTRAL PORTS (1) On December 12, 1940 there were - (77) Denish vessels of a total dead weight transage of 419,543 tons in neutral committee. On the same date there were farty-three (43)Denish ships of a doed weight tomage of 272,929 tens in ports of the United States or its persessions. Amount is a short aboving the location of each of those vessels, their ownership, their doed weight termage and the your in which the vessels were built. (2) There are several ways by which those Denish boats can be put to use water existing laws (a) By a bare boat charter from the Danish owners to the President, the Newy or a private corporation financed and controlled by the RFC. (b) By requisition. (3) Surie The attorney for H. J. Labrendteen and Ishrandtoon-Koller Inc. (agents for the oware of the March Line boats) has been negotiating Line boats. the Merry Department to hare best charter the Maerak also with all wath a charter can be worked out. It is J. Istreadt- possible In probability of A. P. Maller, who contests H. will join in the the Line boats are ahortered to that are sea's that Merst power if Moller, over the Sharek the the boats, son charter, charter. the the President, The other indications Danish RFC corporation on a here boat all 77 of the Bavy or will an follow the same pattern. If this is done Denish owners vessels would probably be covered by the aharters. the Denish vessels are chartered by the vessels President, can be the put Them KFC and if corporation on & bare best charter, the the charter party Kavy or as These, for example, the Hevy under naval suriliary or to various - vessal wash as the CREES MAERSK to a June 26,1940 - Public could courant a is the Philippine Islands. (set of No. TOL - No. patrel - craft - 76th for Congress) - set of September 9, 1940 - Pu lie, 278 -276th Congress). If this were done, it would relieve the pressure on existing shipping and thus zake more vessels available for the British. The Nevy directly or through the Var Department (Act of July 11, 1919 (41 Stat. 132): Act of July 28, 1892, as amended (27 Sint. 321, 45 Stat. 968, 40 U.S.C.A. Sec. 303)), the President or as RFC corporation, with the advice and assistance of the Maritine Commission, can probably sub-charter the Danish vessels to private steamship companies for the Pacific or South American runs upon the understanding that substitute ships will be released for the use of the British or charter them directly to the British. If not already committed, the Emergency Funds appropriated to the President (Act of June 11, 1940-Public, No. 588-76th Congress and Act of June 13. 1940--Public, No. 611--76th Congress) can also be used to pay for the chartering. similarly, the $50,000,000 appropriated to the President for the acquisition and conversion of Yes als by the Act of July 19, 1940 can be used to charter these vessels. (6) Requisitioning of Denish Vessels If the Denish vessels cannot be chartered, those of them in our ports can probably be re:unsitioned under existing law. Under the presently prevailing circumstances the Executive OSB probably re utilition vessels both as a setter of donestic and international law. U.S. Connet. Art. II, See. 2. United States Ye 80 U.S. 623 (1871) Philippine Sugar Lotates Development Co. V. United States (1904) 40 Ct. C1. 33: 1 Gerner, International Law and the World Mar. (1920) D. 178, fn: Bastevant, La Sequisition des Revires Allemond on Portugal, (1916) Revue Generale de Droit International Public 268, 2721 Bullock (1922-23) British Year Book of Interactional Low 110-11. Upon requisitioning, payment to the overs can probably be left await future congressional appropriations (United States Funds, Ya Russell. to endra) or such appropriations as the President's Emergency or EFC funds ean be used. Gf. Old Dominion the Navy appropriations United States. (1925) 269 U.S. 551 Crozier Y Kroon, Land (1912) Company 224 U.S. V. 290, 306; Lone Island Enter Supply Co. Ya Brooklyn (1897) 166 U.S. 685. requisitioning is done, 11 should probably be handled the Presidential If the proclaustion and Executive Order designating the by department OF agency to take the boats and providing for methods of present payment to the owners, 1f any. I (5) We - thats (2) to The Bary Department and the are be proceed with the negotiations withauthorised International - to charter the Name Line N. 3. the a bure beet abarter and to negotiate boats with other others of Denish beats in neutral parts - a similar beates (2) Simultanoously, the the Havy, Baritine RPO and Treasury work out with the Commosion, vessels III the bases for requisitioning the Attorney Death in our parts under existing law and pare the - Preclamations and Orders, pre- and (3) Khen or and is the vessels are obtained by charter requisition, the Secretary of the Bavy, the Chairman of of the Maritime Commission, the Chairman the RSG and the Secretary of the Treasury w termine their disposition and use. 279 280 LOCATION Or DANISH VESSELS IN NEUTRAL COU RIES Year Veasel Owner and Address J. Lauritzen, Hammerenagade 1, Copenhagen K., Denmark Maerak A/S. D/S. Svondborg & D.C., A.P. Moller, Mgrs., Copenhagen (Kongens Nytoro 8) Same Maerok is Maersk Same tralian Reefer J. Lauritzen Hammerensgade 1, trud Coponhagen K. Denmark Dampskslak Torm (A Schmielgelow & A Kampen Mgrs.) Holmens Kanal 42, Copenhagen K., Denmark J. Lauritzen Hammerensgade 1, Copenhagon K., Denmark Reimann, A. E., Stensbyaard tr Stensved, Denmark J. Lauritzen Hammerensgade 1, Copenhagan K., Denmark Same Same mpia Orient, A/S Dampakalsk Ved Stranden 14, Copenhagen, Denmark J. Lauritzen Hammerensgade 1, Copenhagen K., Denmark Same Same cilian Det. Forenede Dampskibs Selsk, Saukt Annae Plade 30, Copenhagen K., Denmark orgia Same Same cholm rden Portland, Me. D.W.T. Built 2700 1934 Boston Boston Boston 13,580 1928 3,500 1939 1939 New York 2,600 1936 New York 3,940 1938 New York 2,183 1933 New York 6,850 1926 New York New York New York 2,200 2,900 4,500 1933 1936 New York 8,270 1930 New York New York New York 2,700 2,500 2,900 1934 1937 New York New York New York New York 2,520 4,460 2,545 2,600 1938 Philadelphia 8,380 1937 Philadelphia 4,965 1930 1920 Baltimore 5,377 5,110 Baltimore 3,950 1938 Baltimore 8,690 1939 3,480 1940 1936 1920 1936 1929 Same A/S Dampskslak, Norden P. Brown Jr. & Co. Mgrs., N. Danm Location Amaliegade 49, Copenhagen K. Denmark Dampskibs Vendila (Svendsen & Christensen Mgrs.), Frederiksgade 1, Copenhagen, Denmark Issund D/S Hafnia A/8 (T. C. Christenson, Mgrs.) Baltimore Amaliegude 33, Copenhagen, Denmark rosund gnhild Same Dampakslak Term (A. Schmiegelow & A. Kampen ligrs.) Holmens Kanal 42, Copenhagen K., Denmark exa Marak 1916 A/S D/S Svendborg & D.S., A. P. Moller Mgrs., Copenhagen (Kongens Hytoro 8) -- 281 Year Owner and Address Location D.L.T. Built Vogsil werek A/S D/S Svendborg & D.S., A.P. Moller Mgrs., Baltimore 8,305 8,590 9,100 1931 "herek Bultimore Baltimore Baltimore 8,200 1928 Norfolk 4,965 1930 Norfolk 3,693 1918 Jacksonville 12,725 1928 8,300 1926 Copenhagen, Denmark (Kongens Nytoro 8) Same Orient, A/S Dampskslok Ved Stranden 14, Copenhagen, Denmark 1. Delgas Dampskibs Vendila (Svendsen & Christensen Eggs) Frederikagade 1, Copenhagen, Dermark pie Det. Forenede Dampskibs Selsk, Saukt Annae Plads 30, Copenhagen K., Denmark roline "sersk A/S D/S Svandborg & D. S. A. P. Moller Mgrs., Copenhagen, Denmark ardpol A/S Dampskslak Norden P. Brown Jr. & Co. Mgrs. Amaliogade 49, Copenhagen K., Denmark ordhval erdvest Same Gray's Harbor 8,380 1938 Long View 7,350 1936 Los Angeles 8,500 1932 Cobu, P. I. 9,200 1937 Manila, P. I. 8,690 Manila, P. I. 8,665 Manila, P. I. 9,200 1938 12,760 1918 St.Thomas,v.134,026 1927 8,635 1928 rris Ostasiatiske Kompagni, Holbergagade Denmark 2-4 Copenhagen K., Denmark A/S D/S Svendborg & D. S. A. P. Moller, Mgrs., Copenhagen (Kongens Nytoro 8) Same Same Same rete Maerok candia Det. Danske Petroleums A/S (F. W. Kraft, Mgr.) 13, Skt. Anna Plads, Copenhagen hristian Holm Same atrine Maerck A/S D/S Svendborg & D.S. A.P. Moller Mgrs., Copenhagen (Kongens Nydoro 8) Same geste Maerak St.Thomas, V.I.: Bilbao 1930 1937 Limerick, Ire. 3,579 Limerick, Ire. 3,575 1921 1921 Piraeus 3,330 1938 Kobe 8,365 1923 Same athilde Maersk Same brit Msarak ordbo 1924 Gray's Harbor 8,320 Reimann, A., Stensbyaard tr Stensved, alia Herak ertrude Maerak San Pedro Same reby rohen Maersk 1939 . ura Maerak Same 1932 A/S Dampakslak, Norden P. Brown, Jr. & Co., Mgrs. Amaliegade 49, Copenhagen K., Denmark -3- 282 Year Owner and Address of Vessel Location D.W.T. Built Dampskalek Torm (A.Schniegelow & A. Kampen Mgrs.) Holmens Kanal 42, Copenhagen K., Rio Grande Denmark Same do Sul Rio de 2,900 1935 2,940 1936 Montevideo 7,170 1931 Montevideo 2,450 1933 Bahia Blanca Bahia Blanca 5,500 5,500 1928 Bahia Blanca Bahia Blanca 2,400 13,400 1936 Las Palmas 6,000 1938 Las Palmas 1,500 1936 Lisbon 1,950 1919 Lisbon Lisbon 2,135 3,270 1924 Janeiro S. Dampak - A/S Myren (Holm & Wonsild Mgrs.) Sass Amaliegade 36, Copenhagen K., Denmark J. Lauritzen Hammerenegade 1, Copenhagen K., Denmark A/S Det. Damak - Franske Dampskelsk ed (A.N. Peterson, Mgrs.) Store Kongenagade 49, Copenhagen, Denmark Same agno Hlian Reefer J. Lauritzen Hammerenagade 1, Copenhagen K., Denmark Now British Owned 1927 1921 A/S Det. Damak- Franske Dampskelsk rig (A. N. Peterson, Ligrs.) Store Kongenagade 49, Copenhagen, Denmark J. Lauritzen Hammerensgade 1, Copenhagen, E., Denmark A/S Det. Damak - Franske Dampskelsk Kongensgade 49, Copenhagen, Denmark Det. Forende Dampskibs Selak Saukt Annae Plads 30, Copenhagen K., Denmark Now British Owned rg J. Lauritzen, Hammerensgade 1, Copen- a hagen K., Denmark Taloahuano, Chile3,400 " (A. N. Petersen, Mgrs.) Store Same " Same N Same * Same Same Same Same Det. Forenede Dampskibs Selak, Saukt Annae Plads 30, Copenhagen K., Denmark Fican Reefer J. Lauritzen, Hammerensgade 1, Copenhagen K., Denmark Reefer ptian Reefer 2,900 2,900 2,900 4,160 1924 1938 1936 1936 1937 1922 Rotterdam 1,400 1922 Valencia, Spain 2,540 1931 Stockholm 1,975 1922 Stockholm 3,200 1923 Buenos Aires Buenos Aires 2,600 3,400 1936 Santos 3,235 1936 1939 Same Same 283 as of Vessel da rican Reefer Hsona lifornia mer and Address Det. Forenede Dampakiba Selek Saukt Annas Plads 30 Copenhagen K., Denmark Year Location PALT Built Santos 6,925 1917 Funchal 2,500 1935 Victoria, Brasil 9,900 1922 Peruambuco 8,090 1913 J. Lauritson, Hammerenagade 1, Copenhagen K., Denmark Det. Forenede Dampskibs Selak Saukt Annae Plads 30 Copenhagen K., Denmark Same 284 December 27, 1940 9:58 a.m. H.M.Jr: Hello. Operator: Secretary Hull coming on. Cordell Hull: Hello. H.M.Jr: Cordell? H.M.Jr: Well, Mrs. Hull and I wanted to felicitate with you folks on the delightful social event which is a great epoch in the life of It was terribly nice of the Roosevelts. H: Yes, that was great. H.M.Jr: And Joan had a great time. H: H.M.Jr: We were so glad to hear it. It's a wonderful age - eighteen. H: Yes. H: H.M.Jr: Cordell, I've got a document here which we have not shown to anybody yet outside of the Treasury. H: H.M.Jr: Yes. It's a proposed Executive Order covering foreign funds and foreign buying and the whole question of how we treat the question of letting foreigners buy in this market. H: H.M.Jr: Yeah. Now, before I show it to anybody, I'd like to have at least an hour to go over it with you and see whether you like it and get the benefit of your advice. H: Yeah. H.M.Jr: Now, how about Monday morning? 285 -2 H: Monday morning would be all right with me. (Talks aside). Yeah, that would be all right. H.M.Jr: What time would be good for you? H: Well, a quarter after 9:00 or 9:30. H.M.Jr: 9:30? H: 9:30? H.M.Jr: H: H.M.Jr: Yes. I think it will take at least an hour. All right. And I'll send you a copy over of it. I'll have a summary - I have no summary - I'll have a summary made and send over that, plus the original, as you might want to look at it before Monday. H: Yes, just send it over as soon as convenient. Then at 9:30 Monday morning. H.M.Jr: H: Yes, and I'11 bring a couple of my fellows with me who've been working on this with me. Yes. Let's see - all right, Henry. H.M.Jr: As I say, nobody outside of the Treasury has H: Yes, well, I'll be glad. H.M.Jr: Thank you. H: Yeah. Good-bye. seen this and I don't want to go any further until I know how you feel about it. 286 Notes on Conference in the Secretary's Office 11 A.M., Friday, December 27, 1940. Those present at the meeting were Secretary Morgenthau, Captain Collins, and Philip Young. The Secretary asked Captain Collins as to how many Bell pursuit ships were produced in December, and Captain Collins replied thirty-two. It was expected that twenty-eight would be delivered in January, all to go to the Army. It was thought, however, that probably five additional ships would be delivered to the British. In response to Secretary Morgenthau's question as to the status of British orders, Captain Collins replied that the first British ship was supposed to be tested that day. Captain Collins thought that probably a total of 62 planes per month would be produced in February, March, and April, and that the number would probably increase to 66 in May, which represented the maximum rate of production for Bell (three per day for twentytwo days). The new Bell plant at Niagara Falls is to be completed about May and will have a production capacity of about two planes per day. The Secretary inquired as to whether Bell was going to build another new plant at Niagara Falls, and Captain Collins said he thought it probable. This new plant costing six million dollars would have an area of about 440,000 square feet plus a drop hammer house and an engine building. This new plant would have a production capacity of about ten more planes per day and could be ready by November. Secretary Morgenthau inquired as to how much the Bell planes cost, and Captain Collins said that the first batch of 200 with- out enginee, propellers, radios, guns, or oxygen equipment cost from $40,000 to $45,000 each. The price of the second batch of 250 was cut to $39,500, and on the third batch of 360 was cut to $38,593. The speed of the Bell with the Allison E-5 is 388 miles per hour loaded, and this is expected to jump to 400 miles per hour with the new Allison E-4 engine. Captain Collins said that the leak-proof tanks and armor which had been added to the planes had increased the weight and resulted in cutting down their speed. Ry. 287 December 27, 1940 1:00 p.m. William Clayton: H.M.Jr: Hello, Mr. Secretary. How are you? It's Henry to you. C: Hello? This is Will Clayton. H.M.Jr: Yeah. How are you? C: Pretty well. I hope you had a nice Christmas you and all your family. H.M.Jr: Very good. C: Well, that's good. Mr. Secretary, I'm giving a very small luncheon for Mr. D'Arcy Cooper of England on Tuesday and I'd feel highly honored if you could come. It's very informal, no speeches or anything of that kind. H.M.Jr: C: H.M.Jr: C: H.M.Jr: C: Well, I'd love to come, but it 80 happens I've got Leon Henderson coming over here for lunch and some other people, on Tuesday. oh, I see. But thank you for asking me. Well, I'm sorry and maybe some other time. Well, I'd love to. All right. Thank you, sir. Recoid afabinet the 27.1980 288 d Dearbenery, This is a personal male only in case it may be of Some ralne if matter more that way. - So sorry about today Have hee trying by every been proofie to feb here earlier but both planed were freunded. any MEMORANDUM 289 1. To provide for U. S. defence needs still further production facilities for weapon manufacture on a very large scale are necessary. 2. As to whether such weapons will be loaned to the U. K. as a means of defending the U. S. is for Congress to decide. 3. If the creation of such new production facilities is delayed, it may be too late to attend to U. S. needs by either method. 4. The President, in consulting Congress as to whether or not it wishes to supply the U. K. with weapons as a means of defending itself, therefore asks for the immediate establishment by Congress of a $1,000,000,000 appropriation for the creation of capital facilities for such new weapons. (This is without prejudice to any other means which may be available from existing appro- priations for assisting in a broader manner. In this connection it should be remembered that the provision of certain items of the Army "A" programme and merchant ships are of special urgency in the view of His Majesty's Government.) 5. If Congress, in due course and after appropriate debate, decides to loan the output of such plants to the U. K., well and good. 6. If not, the insurance of U. S. defence needs will have been effected at a relatively insignificant insurance premium in that the weapons will be available to the U. S. Arthur B. Purvis. 290 TELEPHONE REPUBLIC 7860 WILLARD HOTEL WASHINGTON D. c. BRITISH PURCHASING COMMISSION December 27, 1940. Dear Henry: Sir Frederick has given me the enclosed memorandum which he would like to have in your hands immediately. As our appointment is for Monday, I am therefore sending it on. I was so sorry about today. Yours sincerely, and The Secretary of the Treasury, Washington, D. C. Mr. Purvis, 291 It is very important that we should be given an opportunity, before any final decision is reached, to have a look at the scope of the authority to be given by Congress in respect of the supply of munitions, etc. to the United Kingdom. The reason is this. As we explained to Mr. Morgenthau, our total dollar deficits (not allowing for Canada) during the second year of war is estimated to be roughly equa 1 to the expenditure of the British Purchasing Missions (which includes, beside armaments, certain expenditure on raw materials and consumable stores used for warlike purposes). Assuming that the assistance received were sufficient to cover the expenditure of the British Purchasing Missions, the remaining problem would re- solve itself into the following two points:(a) Our free resources in gold and United States dollars were on the 2 3rd of December down to the dangerously low level of $416 millions. Of this, $63 millions represent the working balances held by British banks operating on behalf of the British exchange control, and cannot in practice be appreciably drawn down. This leaves only about $350 millions, and this figure is being daily reduced. How are we to carry on in the interval before Congress has approved the new proposals, and how are our resources to be (b) brought back to a proper working balance? How are we to deal with the remaining adverse balance, which mainly arises in Canada? After taking into account the help which Canada can give us and all the newly-mined South African 292 -2- gold, this is estimated to run at about $200 millions a year (Our adverse balance with Canada is swollen not merely by munitions orders but also by our increasing dependence on Canada for materials such as timber, paper, etc., which we used formerly to obtain largely from Europe). . But there is a previous question to be answered. Will the expenditure of the British Purchasing Missions in fact be covered by the powers to be granted by Congress? If not, that part of their expenditure which is not covered will also have to be provided for; and this might increase the net deficit of $200 million a year, which I have mentioned above, to quite a different order of magnitude. In the same connection, it is intended that the proposals to be laid before Congress should cover the warlike expenditure of Canada and the other Dominions, and of Greece and our other Allies? This obviously may make a considerable difference to our position. 76 27th December, 1940. 293 - PERMASING COMMERCIAL Telephone Republic TOTO Villard Hotel, Washington, D. C. December 27. 1940. Dear Beasys sir Freieriek has given me the enclosed neneranism which he would like to have is your hands immediately. As our appointment is for Healthy I an therefore sending 11 on. I was se copy about today. Yours sincerely. (Signed) Arthur The Secretary of the Treasury. Washington, 3. e. OUTSIDE 294 Rr. Purric. It is very important that we should be given as oppertuality. before any final desision is reached. to have a Look as the asses of the authority to be given by Congress is respect of the supply of musitions, etc. to the United Kington. The reases is this. As we emplained to mr. Mergeathes, our total dollar deficite (not allowing for Canada) during the second year of was is estimated to be roughly equal to the expenditure of the British Purchasing Missions (which instales. beside certain expenditure on F materials and consumable stores used for warlike purposes). Accuring that the assistance received were outficient to eever the expenditure of the British Purchasing ML science, the remaining problem would receive 11self into the following two points:- (a) Our free reseures is gold and United States dollars were on the 23rd of December down to the dangerously low level of $416 millions. or this. 863 milliess represent the working balances hold by British banks operating on behalf of the British exchange central, and cannot is practice be appreciably dress down. This leaves only about 8390 millions. and this figure is being daily returne. New are we to carry on is the interval before Congress has approved the new preposale. and how are our researces to be brought bask to a proper working balance? 295 (b) New are we to deal with the remaining adverse bal- ands, which sainly arisss in Ganndal After taking into account the help which Ganada can give us and all the South African gold, this is estimated to yes at about $200 millions a year (Our adverse balance with Ganada is swellen not merely by orders but also by our increasing dependence on Canada for materials such as tim- ber, paper, etc., which we need formerly to obtain largely from Burope). But there is a previous question to be answered. will the expenditure of the British Purchasing Missions in fact be covered by the powers to be greated by Gongress? If not, that part of their expenditure which is set covered will also have to be provided for: and this sight increase the not deficit of $200 million a year. which I have mentioned above, to quite a different order of magnitude. In the same connection. 10 is intended that the proposals to be laid before Congress should cover the warlike expenditure of Canada and the other Demisions. and of Greese and our other Allies? This obviously may make a considerable difference to our position. (Initialed)F.P. 27th December, 1940. 296 TELEPHONE REPUBLIC 7860 WILLARD HOTEL WASHINGTON, D.C. BRITISH PURCHASING COMMISSION December 27, 1940. Dear Henry, Thank you for your note of December 23rd, enclosing a copy of "Inventory of Idle Plants", which will undoubtedly be most useful to us. Yours sincerely, arthur Dr. The Honourable Henry Morgenthau Jr. Secretary of the Treasury Washington, D.C. 297 PARAPHRASE OF TELEGRAM RECEIVED FROM: American Consulate, Dakar, French West Africa DATE: December 27, 1940, 2 p.m. NO.: 115 FOR THE TREASURY. At the present time, Bank of France inspectors are in French West Africa making a check on the gold reserves of the Bank of France which now are stored at Kayes, French Sudan, in an old fort. It was stated by the Banque de l'Afrique Occidentale that the gold sent to France recently belonged to the Belgian and Polish Central Banks, and Germany had demanded that it be returned. WASSON. allies EA:LWW 298 CONFIDENTIAL December 27, 1940 To: The Secretary From: Mr. Young Re: Rifles for Canada In response to my memorandum which you forwarded to Secretary Stimson requesting 100,000 additional rifles for Canada, Secretary Stimson has replied that this matter has been referred to the Joint Defense Board. He also stated that investigation by the War Department disclosed that the need for these rifles was not urgent at present and that the ultimate needs of Canada were thought to be considerably less than the number of rifles requested. Further, Secretary Stimson stated that no additional rifle ammunition was now available for transfer to Canada. This matter is still under discussion by the Joint Defense Board. P.4. 299 Miss Chauncey: Mr. Young sent the Secretary a memorandum on the rifles for Canada dated 12/27/40. bj 12/28/40 MR. YOUNG 300 x December 27, 1940 My dear Mr. Secretary: On behalf of the Secretary of the Treasury, may I thank you for your letter of December 16th, suggesting that no action be taken on the request of the Canadian Government for 100,000 additional rifles until the matter has been fully considered by the Var Department and the Permanent Joint Defense Board. Sincerely yours, (Signed) Philip Young Philip Young Assistant to the Secretary The Honorable, The Secretary of Mar. by 301 CONFIDENTIAL WAR DEPARTMENT WASHINGTON WD 400.3295 (12-12-40)M DEC 16 1940 The Honorable, The Secretary of the Treasury. Dear Mr. Secretary: I am in receipt of your letter of December 12th and its enclosures relative to the supply to the Canadian Government of 100,000 additional rifles. The question of the extent of the Canadian need for additional rifles has been under investigation by the War Department in consequence of discussions of the subject between the military representatives of the two Governments who are members of the Permanent Joint Defense Board. The investigation to date indicates that this need is not urgent at present, and that the ultimate needs will be considerably less than the numbers shown in the enclosures accompanying your letter. Moreover it should be noted in this connection that no additional rifle ammunition is now available for transfer to Canada because of the dangerously low level to which our stocks have been depleted. In view of the foregoing and as the matter is one that concerns continental defense, it is suggested that no action thereon should be taken until it has been fully considered by the War Department and the Permanent Joint Defense Board, as an important and integral feature of joint defense plans. Sincerely yours, Aren L Stunson Secretary of War. CONFIDENTIAL 302 December 27, 1940 4:36 p.m. H.M.Jr: Hello. Operator: Mr. Foley. H.M.Jr: Hello. Ed Foley: Yes, Mr. Secretary. H.M.Jr: At Cabinet there was a big discussion on how to do the Danish boats. The President seemed very much interested. I tried to get in on it but for some reason, I don't know why, he doesn't want us in on it. F: H.M.Jr: F: H.M.Jr: I see. But I told the Attorney General that we had it all wrapped up in a pink package and he said for heaven sakes to send it to him at once. 80 he could work on it tonight. All right. But why the President doesn't want us in on ittoI do don't know. He says it has got nothing with munitions. F: (Laughs). H.M.Jr: So I said Anyway, I'd send it up - get it right over to the Attorney General by special messenger. F: All right. That will be a copy of that memorandum you sent to Knox this morning. H.M.Jr: That's right. F: O. K. I'll do it right away. H.M.Jr: Thank you. F: All right. 303 December 27, 1940 4:49 p.m. Operator: Mr. Haas. H.M.Jr: Hello, George. George Haas: Yes. H.M.Jr: Please send over at once by direction of the Secretary a copy of what the Army uses in the way of wool. H: Yes, to whom? H.M.Jr: That list. H: Who do you want it sent to. H.M.Jr: Secretary of Agriculture. H: H.M.Jr: oh, I didn't get you. Get it over to him. Send it by direction of me. H: Yes, sir. Right away to the Secretary of Agriculture. H.M.Jr: Right away. H: I'll do it by special messenger. 304 December 27, 1940 4:56 p.m. H.M.Jr: Hello. Operator: Mr. Kunn. Ferdinand Kuhn: Hello. H.M.Jr: Ferdi, have you got that stuff ready? K: Yes, certainly. I've given it to Schwarz, and it was approved by Welles over at the State Department. H.M.Jr: Well, do you know - am I going to read something? K: He said no. They couldn't get a sound man H.M.Jr: over, there wasn't one in town, 80 it will simply be a silent film. Oh, but the statement is all right. K: The statement is O. K. H.M.Jr: But Schwarz has it? K: H.M.Jr: Yes, he has it, Mr. Secretary. Do you want me to get it? Well, if you and Schwarz would be in my outer office at 5 minutes of 5:00 K: All right. H.M.Jr: Will you please? K: Fine. I'11 tell him. H.M.Jr: Thank you. K: Thank you. 305 December 27, 1940 5:00 p.m. H.M.Jr: Hello. Chester Davis: Hello, Henry. H.M.Jr: Hello, Chester. D: I've finished all except typing a couple of memoranda to you and I wondered if you - if tomorrow morning will be all right, because if you are not planning to come to the office I can send them to the house. H.M.Jr: Be perfect. D: Tomorrow morning? H.M.Jr: Perfect. D: H.M.Jr: D: All right. I wouldn't work on it tonight anyway; I'll be honest. Fine. Now, I've done one thing that maybe I shouldn't have done: I've added to the memorandum which is responsive to your question, I've added another one giving you confidentially some observations on the need to define and delineate and clear up this whole defense distribution of functions. H.M.Jr: D: I'd love to see it. Well, that's good. and you can throw it in the wastebasket if you want to. H.M.Jr: D: Well, I'11 read it carefully. Well, I'll send this over to you for what it's worth. H.M.Jr: Thank you, Chester. D: All right. 306 December 27, 1940 5:00 p.m. RE ARGENTINE LOAN Present: Mr. Scilingo Mr. Grumbach Mr. Bell Mr. Gaston Mr. Espil Mr. Berle Mr. Prebisch Mr. White Mr. Bernstein Mr. Foley Mr. Cochran Mrs. Klotz H.M.Jr: Mr. Bell? Bell: Your signature, I guess, comes first, Mr. Secretary. Mr. Prebisch is next, and then the Ambassador signs. H.M.Jr: Do I sign here? Bell: Yes, sir. H.M.Jr: How many times do I sign? Bell: You sign two originals. H.M.Jr: Does the check go with this? Bell: Not quite. 307 -2- Bell: No check today, no cash. (Laughter) This is the same one. H.M.Jr: You people have seen the proposed press Berle: Yes, I think so. H.M.Jr: Well, I hope it will be most fruitful and will cement the friendship. Now, as I understand it -- Bell: There are a lot of photographers outside. Espil: Thank you. Prebisch: Thank you. H.M.Jr: statement? 308 - add as of the 1st day of January, 1941, at the City of Bachington, District of Calumbia, behaven the Secretary of the Treasury of the United States of Invoice (hareinetter called the Secretary), the Banco Gentral de la Depobilities Argentina (horeimather called the Bank), and the Government of the Argentino Republic (hereinafter called Augustims). NERRAS, the montaly and financial cooperation of the United States of America and the Argentino Republic and the stabilization of the United States dellar-Argentine pass rate of exchange are important fasters is premoting trade and is festuring the welfare and friendly relationships of the two countries, mon, THEEKFORE, is order to further such objectives and in consideration of the premises and of the actual covenants herein contained, 18 is agreed as follows 1. The Secretary, through the Federal Reserve Bank of New York as fiscal agent of the United States, shall, as hereinafter provided, purchase Argentias passe from the Bank from time to time as requested by 19, the United States dollars thus obtained w the Bank to be used exclusively for the purpose of stabilising the United States dollarArgentino pass rate of exchange. The total amount of passe purchased by the Secretary from the Bank, exclusive of accrued interest thereon and of any passe repartness w the Bank, shall not at any time in the aggregate the equivalent of United States $50,000,000 computed as the rate at which such peace are purchased as harsimatter provided. The peace se purchased shall be credited to the Federal Reserve Bank of New York as fiscal agent of the United States on the books of the Bank in a special -1- 309 - as Fiscal to Agent be / of - in m of / I l of Because Bank of - Shitted States. m receipt - York this - York of - from the - w - the Federal / has I - with a states w teated eable - will in - wells 1 - of - Years as Pleases - - of of - - I Federal - Bank of Bank is a missing I to be - is the - In York as final - / w - Account is of / - do 2a Repression of to United States provalling free as 1 in United States dollars Argentine, equivalent, Special is Argentine peese buying on rate of / in New York for as the - se credited to / Aires, to the amount in cable transfers New York fiscal the - is the - of the Federal Argentine passa 2. I as as - of the litted States as the books Reserve of Bank Benk. of - otherwise specifically approved w the the no The Central shall be made free the dollar account in Secretary, 05,000,000 in do is Republica Argentim, Special Accounts the - of - that - - I from and after the date of this is - of from - tomy math. - the - which be - - each worth - shall be - 2. The Bank shall wells interest to the special in United the of "Federal Because Bank of New York as fiscal pass account the date States a the last - of 1 - - - from of (one bereaf. - interest shall be - at the rate and after in - and - I your - - the daily balance of of * special - as were purchased w the Secretary water such peose - - provided, I that m interest shall be payable this I of 1 I as Sa equivalent, as the average rate at which - the dollars the is - special pass - were to the - is the / Central do la Regulation Argentium, Special I of 310 which the Seak - - - the terms of this Agreement withdraw from 1I 4. as any time - or after w 31, 1941, either the Beak or the Secretary Costing directly or through the Federal Reserve Bank of New York as fiscal agent of the United States) my, w giving to the other on or after my 32, 3942 not less than thirty (30) days notice in writing or w eable, alost that - or all of the peese shall be w purchased (and in the ence of assured interest, purchased) w the Banko On the date specified in - notice the Bank shall reperchase (or purchase is the case of accreed interest) the pases therein referred to is United States dollars (utilising, If necessary, the gold resources of the Bank and Argestina) by payment Sharefer at the Federal Reserve Bank of New York at the following rate or rates of exchanges (a) Peace purchased w the Secretary through the Federal Reserve Bank of New York as fiscal agent of the United States shall be repurchased as the - rate or rates of enchange at which such poses were purchased and (b) Peace representing interest accrued on, and whether or not credited w, the special pass account on the books of the Beak in the name of Federal Secerve Bank of New York as fiscal agent of the United States shall be purchased at the average rate of enchange at which the pesse, upon which such interest has accurate, were purchased w the Secretary through the Federal Beserve Bank of New York as fiscal agent of the United States. Rewithstanting the foregoing, in the abounce of a request w the Secretary or the Federal Reserve Bank of New York as fiscal again of the United States, passe in the - of - accrued interest shall be chesed w the Bank w payment is United States dollars as the Federal Reserve Beak of New York on the last - of each successive three - -3- 311 parted from and after the date horest and - the termination of this - as the sate of - described is addivision (w) of paragraph 4. ALL the peons dreathed to the aftermantioned sportal account (including interest) and the other obligations of the Bank and Arguste enter this Agreement shall, in se for as the rights, powers and privileges of the Secretary or the Federal Reserve Bask of New York as fiscal - of the United States my Sharely be affected, be - and i from - temp, charges, restriction, regulations and controls of any nature under the love of Augustine or any political subdivision thereof. 5. The Bank my also as any Mas w making payments at the Federal Reserve Bank of New York in United States dollars at the rates of / provided in paragraph 40 repurchase the passe described in paragraph 4 with available funds resulting free - increases in the exports of Argentime or from - other source. 6. In the event of - failure to repurchase (or in the case of interest, purchase) the passa as provided in paragraph 4 or other act, done or emitted, not is accordance with the provisions of this Agreement, the Beak shall, If and who the Secretary (acting directly or the Federal Reserve Bank of New York as fiscal agent of the Suited States) se elects w cabiting or writing the Bank to such effect, I for theith obligated to repartness all of the passe at a total price is United States dollars debusions as words a paragraph 4 bersef by / at the Federal Reserve Bank of New Earth and the dollars remining is the - Central do is Republica legestium, Special Account shall be applied w the Federal Reserve Beak of I York as fiscal again of the Shited States as a - on - of such parties with a failure or dalay - the part of the Secretary is - - of ME -4- 312 rights, pecure or privileges in whole or is part, when this shall constitute a maiver thereof, or of any other rights, powers privileges greated to the Secretary under this Agreement. It is understood that the Federal Reserve Beak of New York will ast only as fiscal agent of the United States in easy out this Agreement and in doing and performing - sets or transactions in connection with this Agreement, and that as will not inno any liability for any asts dama or emitted personal to Instructions of the Secretary. 7. Argentim hereby monditionally glarantees the full performance by the Bank of all of the obligations, duties and liabilities of the Bank under this Agreement and any arrangement made pursuant thereto. a. Argentim, the Bank and the Secretary agree that at some convenient time (to be agreed upon) during the last three months of 1941 there shall be held in Washington a conference to be attended w the representatives of each of such parties to discuss and consider the United States dellar-Argentine pess rate of exchange, problems of antual interest in connection therewith and all other monetary, financial and economic problems of nutual interest. 9. Each of the parties to this Agreement shall take and cause to be taken all the necessary measures to effectmate the carrying out of this Agreement and to provide each other with such information in their possession relative to foreign exchange transactions, stabilisation operations and other matters of natural interest as is relevant to the preper functioning of this Agreement. Any obligation of the Secretary pursuant to tate Agreement shall be conditional and dependent upon the prior performance w the Bank and/or Argentina of any obligations to be performed or liabilities to be discharged w them, or either of them, miar this Agreement and any arrangements sade pursuant thereto. 313 10. Any obligation of the Secretary to purchase posse under this Agreement shall terminate on June 30, 1941, subject to earlier termi- nation at any time thirty days after receipt by the Bank of a written communication or cable from the Secretary or the Federal Reserve Bank of New York as fiscal agent of the United States giving notice to that effect. The termination of any such obligation of the Secretary shall not affect any of the rights, powers or privileges of the Secretary or of the Federal Reserve Bank of New York as fiscal agent of the United States, or any of the duties, liabilities or obligations of the Bank or of Argentime herounder, all of which shall continue in effect until the Bank and Argentine shall have fully performed their said duties and obligations and discharged said liabilities. If an extension of the Agreement is agreed upon, the Agreement shall continue in full force and effect during the period thus agreed upon. In the event that the Bank and Argentina wish an extension of this Agreement, they will give the Secretary notice to that effect in writing or by cable at least thirty days prior to the termination of the Agreement. 11. This Agreement shall come into operation and effect as between the parties herete when Argentina shall file with the State Department of the United States appropriate documents satisfactorily evidencing ratification and confirmation of the authority of Argentina under its constitution and laws to enter into this Agreement. Argentina and the Bank each for itself represents and agrees that upon the delivery of the aforementioned documents of retification and confirmation, the execution and delivery of this Agreement shall have in all respects been duly authorised, and that all acts, conditions and legal fermalities which should have been completed prior to this Agreement becoming effective shall have been completed as required by the constitution, lass, statutes, -6- 314 - - registration of - the regardingly, ent in Marath. . - - m partico hereto have - this Agreement in deplicate /a/ Henry Morgenthau, Jr. OF S 62 2305 was BARCO OUTERAL m LA REPUBLICA ARGENTINA By /B/ Raul Prebisch General Manager GOVERNMENT OF THE ADGENTING REPUBLIC by /a/ Felipe A. Espil Universitivery and Plenipotentiary signed bed 27,1940 315 TREASURY DEPARTMENT Washington Press Service No. 23-5 FOR IMMEDIATE RELEASE Friday, December 27, 1940. The following joint statement is made by the Secretary of the Treasury, the Argentine Ambassador and the General Manager of the Central Bank of Argentina: As another practical proof that the Good Neighbor policy is a living force among American Republics, the United States and Argentina have completed a stabilization arrangement by which $50,000,000 of the United States Stabilization Fund is set aside to promote stability between the United States dollar and the Argentine peso. The agreement provides, under conditions acceptable to both parties, for the purchase of Argentine pesos with dollars, and for the exchange of information and of views bearing on the proper functioning of such a program. This is a cooperative arrangement between old and good friends. It has been discussed and formulated in this spirit by representatives of the Argentine Government and the Central Bank of Argentina, and by the officials of the United States Treasury. The monetary authorities of the two countries expect to hold further discussions in the same friendly spirit during the coming year; and it 18 hoped that these conversations will enable both countries to reap the greatest possible benefit from the workings of the present agreement, -00o- 316 December 27, 1940. 5:07 p.m. H.M.Jr: Admiral Hello. Stark: Mr. Secretary. H.M.Jr: Yeah. You're not on the White House, you know. S: Sir? H.M.Jr: You're not on the White House phone. S: Well, I don't see why in the world they don't connect me up. I'm on my White House phone. H.M.Jr: S: H.M.Jr: Well, should I - let me call you. All right, sir. Well, I think what I can give you is all right anyway. Our ship sailed this morning and should arrive on the 5th. Should arrive on the 5th. S: Yes, sir. H.M.Jr: Well S: And the other messages are all cleared and everything is squared away and I'11 keep you informed. H.M.Jr: Well, now, you'll advise them of this through yourman in London, won't you? S: H.M.Jr: S: H.M.Jr: S: Yes, sir. Will you do it that way? Yes, sir. I mean, I'm not going to say anything to him here, 80 if you could get I'll keep them informed. 317 -2H.M.Jr: Through your man in London. S: Yes, sir. H.M.Jr: Thank you 80 much. S: All right. H.M.Jr: Thank you. 318 Conversation with Attorney General Jackson, December 27th, 5:27 and 5:40 in Safe. 5:27 Tried to get 5:40 Talked. 319 (Confidential) PARAPHRASE A strictly confidential telegram (no. 502) of December 27, 1940, from the American Consul General at Hong Kong reads substantially as follows: Orders have been received by Cyril Rogers (British Financial Adviser to the Chinese Government) to leave Hong Kong by airplane on the morning of December 28 en route to the United States. From the United States Mr. Rogers will go to London with Mr. T. V. Soong. Rogers has connections with the Bank of England and lives in Hong Kong. He expects that his wife and his British woman secretary will accompany him. As is usual with him, Mr. Rogers is very mysterious in regard to his plans and his movements. However, the American Consul General has been informed confidentially by divers reliable observers in Hong Kong that Mr. Rogers will make every effort possible to obtain at least joint control by Great Britain and the United States of the loan made by the United States to be used to stabilize Chinese currency. The American Consul General states that he is personally well acquainted with Mr. Rogers and that although their relations have always been pleasant he, the Consul General, feels certain that Mr. Rogers has a very 320 -2- very set opinion to the effect that Americans are so lacking in expertness in connection with exchange matters, banking, et oetera that lie (Rogers) feels that it is virtually his religious duty to work to bring about control by the British of financial relations between China and the United States. 321 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE December 27. 1940 TO Secretary Morgenthau FROM Mr. Cochran CONFIDENTIAL Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns 156,000 Purchased from commercial concerns L 23,000 The Federal Reserve Bank of New York sold 15,000 to a non-reporting bank. Open market sterling was quiet all day at 4.03-3/4. Transactions of the reporting banks were as follows: Sold to commercial concerns 116,000 Purchased from commercial concerns L 4,000 Closing quotations for the other currencies were: Canadian dollar Swiss franc 13-9/16% discount .2321-1/2 Swedish krona Reichemark .2385 .4005 .0505 .2360 .0505 .2070 Lira Argentine peso (free) Brazilian milreis (free) Mexican peso 8-11/16% discount .05-17/32 Cuban peso Chinese yuan We sold $1,000,000 in gold to be added to the earmarked account of the Bank of Portugal. We purchased $40,000 in gold from the earmarked account of the National Bank of Nicaragua. Under licenses previously issued the Federal Reserve Bank of New York today transferred from the account of the Central Bank of E1 Salvador gold valued at the B.I.S. The B.I.S. advised the Federal that owned the Central Bank Reserve approximately Bank $150,000 the gold to the transferred account of is by of E1 Salvador and constitutes a pledge securing repayment of credit. In the report of December 24 regarding a shipment of gold valued at $41,581,000 from the Bank of Canada to the Federal Reserve Bank of New York for the account of is Britannic Majesty's Government, it was stated that the disposition of this ship- -2- 322 ant was unknown at that time. The Federal Reserve Bank informed us today that the gold arrived in New York this morning and it was sold directly to the United States Assay Office. The Federal Reserve Bank of New York reported that the Bank of Canada shipped $8,322,000 in gold from Canada to the Federal for the account of His Britannic Majesty's Government. We received a cable from the State Department advising that the following shipments of gold were made from Bombay, India. $1,138,000 shipped by the National Bank of India to the Chase National Bank, New York. $1,036,000 shipped by the Comptoir National d' Crimin compte, Bombay, to the Chase National Bank, New York. $948,000 shipped by Chartered Bank of India, Australia and China, Bombay, to its New York Branch. $349,000 shipped by the Comptoir National d' Crimin Compte de Paris, Bombay, to the French-American Banking Corporation, New York. $131,000 shipped by the Netherlands Trading Society, Bombay, to the Bank of the Manhattan Company, New York. All of the above gold shipments will be sold to the United States Assay Office in New York. The Bombay gold price was the equivalent of $33.96, up 12 from December 20. Silver was the equivalent of 44.02 up about 1/24. The prices fixed for spot and forward silver in London were 23-1/8d and 23-1/16d respectively, both off 1/8d. The dollar equivalents were 41.99$ and 41.86 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 three purchases of silver totaling 250,000 ounces under the Silver Purchase Act. Of this amount 150,000 ounces represented inventory silver and the balance of 100,000 ounces consisted of new production from foreign countries, for forward delivery. CONFIDENTIAL 323 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE December 27. 1940. TO Secretary Morgenthau FROM Mr. Dietrich STRICTLY CONFIDENTIAL We received from the Federal Reserve Bank of New York the following information regarding the transactions listed on the attached statement in Italian accounts maintained at: Chase National Bank National City Bank R Chase National Bank Amount Date Credited Dec.24 $2,137,209.65 Amount Account Credited Received From Debited Account Debited Banco di Napoli Trust Two checks drawn by $2,137,945 Banco di Napoli Trust Co., N.Y. C. J. Devine & Co., Co., N.Y. N.Y. on Manufacturers Trust Co., N.Y. Paid To Two checks drawn by Banco di Napoli Trust Co., N.Y., in favor of Yokohama Specie Bank, N.Y. These checks were deposited in Chase National Bank by Yokohama Specie Bank, N.Y. National City Bank Amount Date Dec.21 Credited Amount Account Credited Received From Debited $ 25,000 Account Debited Banca Commer- ciale Italiana, N.Y. Paid To National City Bank, 51st Branch, N.Y., for account of Italian Line, N.Y. Dec.23 400,000 Banca Commer- National City Bank, ciale Italiana, N.Y., for account of N.Y. Stockholms Ensicida Bank, Stockholm. Dec.26 675,740 805,375 Banco di Napoli Trust Co., N.Y. Banco di Napoli Trust Co., N.Y. Check to order of Yokohama Specie Bank, N.Y. Check to order of Yokohama Specie Bank, N.Y. 325 TREASURY DEPARTMENT is INTER OFFICE COMMUNICATION DATE December 27. 1940. Secretary Morgenthau TO STRICTLY CONFIDENTIAL FROM Mr. Dietrich The Federal Reserve Bank of New York reported the following transactions in German accounts maintained with the Chase National Bank, Date Dec. 26 Amount Debited $ 388,620 Account Debited Deutsche Golddiskontbank, Berlin Paid To Irving Trust Co., N.Y., for account of Vongibara 68,612 Deutsche Golddiskontbank, Berlin Irving Trust Co., N.Y. for account of Vongibara 200,000 Narodni Banks pro Czechy a Moravia, Prague Swiss Bank Corp., N.Y., for account of Swiss Bank Corp., Zurich A 326 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION STRICTLY CONFIDENTIAL DATE December 27, 1940 TO Secretary Morgenthau FROM Mr. Klaus FBI reports: December 9. In connection with the investigation of the sale of Rueckwanderer marks in the Milwaukee area, it appears that before an individual can purchase such marks the approval of the German Consul in Chicago is necessary. The application states that if the applicant fails to establish permanent residence in Germany the proceeds will be available to him in Reichmurks in German banks designated by him; the a licents, however, must declare their intention to return to Germany after the war, 444 to follow their trade or occupation in Germany. December 12. The FBI is analyzing the individual ledger sheets of the accounts of the Gorman Embussy and twelve of its main officials at the Riggs Bank. The sources of deveral large deposits are indicated; these throw light on the pattern of German fund - for example, $50,000 in the German Embassy account on August 12 122 received from to Stockholm Bank: 30,000 on August 22 came from the German to General in Chicago; $60,000 on September 6 came from a Swiss bank. Mr. 326 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION STRICTLY CONFIDENTIAL TO DATE December 27, 1940 Secretary Morgenthau FROM Mr. Klaus FBI reports: December 9. In connection with the investigation of the sale of Rueckwanderer zarks in the Milwaukee area, it appears that before an individual can purchase such marks the approval of the German Consul in Chicago is necessary. The application states that if the applicant fails to establish permanent residence in Germany the proceeds will be available to him in Reichmarks in German banks designated by him; the by licents, however, must declare their intention to return to Germany after the sur, nd to follow their trade or occupation in Germany. December 12. The FBI is analyzing the individual ledger sheets of the accounts of the Gorean Embassy and twelve of its main officials at the Riggs Bank. The sources of several large deposits are indicated; these throw light on the pattern of German fund novements - for example, $50,000 in the German Embassy account on August 12 122 received from the Stockholm Bank; $30,000 on August 22 came from the German Lorevinte General in Chicago; $60,000 on September 6 came from a Swiss bank. m 327 BJS GRAY Berlin Dated December 27, 1940 Rec'd 12:50 a. m., 28th Secretary of State, Washington 5156, December 27, 3 p. m. My 5000, December 19, 10 a. m. FROM WC003 (IN ABSENCE OF HEATH) FOR CREASURY It is reported that further PROGRESS has been made in the German canpaign for establishing Berlin as the European clearing center and the Reichemark as the principal continental currency: according to the VOLKISCHER BEOBACHTER of December 21, 1940 the German-Swedish negotiations are said to have included a provision for the establishment of a double account system for accomodating the clearing arrangements of the two countries. Heretofore the German-Swedish clearing has been conducted through a single account maintained in Swedish crowns in Stockholm. It is now claimed that a second account in Reichsmarks will be set up in Berlin. German banking circles point out that the Exchange risk which has been imposed under the old system upon German creditors holding Swedish promises to pay will now be sliminated while the prestige of the Reichsmark will be enhanced by the Berlin Reichsmark clearing account. The 328 -2- 5156 December 27, 3 p. M. from Berlin The tendency towards a revaluation of Balkan currencies in terms of the Reichsmark has resulted in another shift in the Reichsmark-lsi Exchange rate the Bucharest quotation for the Reichsmark having been advanced accord- ing to the same report, which is confirmed by quotations from Minister Cancioov's speech in the SUDOST ECHO of December 20, 1940 and by officials of the Rumenian Legation from 50 to 60 lsi to become Effective April 1, 1941 while simultaneously in accordance with the German program for improving the relative position of the Reichsmark at the EXPENSE of the American dollar the amount of lsi quoted to the dollar is reported to have been reduced from 217 to 185. In conformity with yet another policy tending to transform all former mechanisms for making payments between states now under German control into indirect clearings in Reichsmorks by way of Berlin it is also announced that through agreements with France and with Belgium Berlin is now to be the center for Franco-Belgian clearing arrangements with Reichsmarks serving as the basis for Exchange computations The negotictions lending to the new arrangement are said to have established an Exchange rate of 5 Reichsmarks per 100 fronce and this rate will henceforth be used to clear all current obligations between France and Belgium. Former obligations 329 -3- 5156 December 27, 3 p. 14. from Berlin obligations will be settled direct between Paris and Brussels. It is pointed out by competent observers that German financial policy tends towards the establishment of multilateral to replace bilateral clearings wherever feasible and thus to remove certain of the most obvious handicaps and restrictions imposed upon international trade by the system of Exclusively bilateral clearings which the Raich formerly introduced and supported. PLEASE INFORM COMMERCE. MORRIS E.B TREASURY 29161 330 PLAIN AS Tokyo via Shanghai & N.R. Undated Reo'd 3:30 p.m., Secretary of State, DECEMBER 27, 1940 Washington. ATTACHÉ COMMERCE, 34, DECEMBER 23. Surgrise Cabinet shakeup involving replacement HOME Minister by Baron Hiranuma and Justice Minister by Lisutenant General Yanagawa reportedly considered unusually significant and ESSEntial for following reasons: to attain speedy and broad Expansion national defense facilities view increasingly tense situation at home and abroad; to mobilize total strength of nation under full wartime system order construct proposed new order in East Asia and to acquire international political POWER to contribute to creation of new world order; to counteract any difficult situation which may arise in coming session Diet; and to give Americans to successful passage by Diet of proposed Electoral law bill, new national Economic structure bill and other controversial measures. Stock market sentiment continued cautious and prices fairly steady but with weak undertone. ( Reported passing STRICTLY 331 AS-2- NO. 34, DEO. 23rd, from Tokyo. passing of dividend by Ibigawa Electric Company caused hravy unloading this and associated issues. Changes in Cabinet personnel also disturbing factor. Only strengthening influences WETE continued buying by Life Insurance Securities Company and announcement Central RESERVE Bank, China, would begin business January. Money market slightly tighter with approaching year End settlement demands. Foreign Exchange rates unaltered and market dull. Bank Japan note issue for first time in history EXCEEDED four billion yen mark reaching yen four zero four five four five three thousand on twenty-first, representing gain two six one four nine five thousand OVER last year. Widespread interest EVIDENCED in three day session of Central Coopera- tive Council of Imperial Rule Assistance Association held during past WEEK. Discussions COVERED numerous issues most of which EXPECTED, before Diet session. Outstanding feature was frank presentation of actual conditions prevailing among people Especially serious problems confronting small and medium sized businessmen and agrarian popula- tion. New silk control bill for presentation Diet reportEdly will provide establishment Japan silk control company capitalized yen one hundred million which will control production silkworm Eggs and cocoons on planned basis and will 332 AS-3- No. 34, DEC. 23rd, from Tokyo. will purchase entire output Eggs and ooooons. These will be sold to reelers, textile manufacturers and spinners. Raw silk will be repurchased for sale to textile manufaoturers and to EXPORTERS. Minister Communications repor- tedly drafting bill for Diet giving Government increased POWERS OVER entire shipping business. Press reports recent organization cooperative association iron and steel control for purpose facilitating increased production and Effective control of iron and steel to meet changing situation at home and abroad. Minister COMMETOE reportedly drafting bill for Diet providing license system for all retail establishments. Trade reports indicate rayon yarn allotment for sale during January has been fixed at forty thousand cases and minimum Export price yen Eighty per case, increase yen five compDecember. Japanese press strongly advocating con- clusion permanent fishing agreement with U.S.S.R. Present temporary arrangement EXPIRES DECEMBER 31st. Trade reports indicate Japan Steel Tubing Company and Nauayana StEEl Manufacturing Company will shortly merge result position small open hearth iron and steel and rolled steel manufaoturers have been placed since Embargo on scrap iron Exports by United States of America. To protect people from high prices on winter clothing price Bureau Ministry COMMETCE fixed 333 AS-4- No. 34, DEC. 23rd, from Tokyo. fixed official prices on pure cotton knitted goods for underwear, ties and artificial silk goods. Labor Bureau WELFARE Ministry reports labor disputes September lowest in history with only twenty one involving SEVEN six four people representing decline sixty two disputes and one SEVEN two SEVEN people compAugust. Number disputes from January to September six four six with five ZETO ZEIO SEVEN four participants representing decline two four SEVEN and two five Eight ZEIO nine respectively comsamper. French Indochina delegation comprising sixteen members headed by Jean Cousin, Director Finance Control, Indochina Government, arrived Tokyo 19th to participate Economic CONFERENCE with Japanese Government officials. Chairman delegation reported ly stated forthcoming parley would be strictly confined Economic matters. Reports indicate Japan Foreign Trade Promotion Association will be inaugurated January 16th under leadership Baron S. Goh. A fund of ten million yen is to be provided of which yen two and one half million will COME from Cotton Textile Export Federation, one and one half million from Japan Rayon Export Federation and six million from such foreign traders as Mitsui, Mitsubishi, ct CETERA. Ministry Finance promulgated regulations righteenth pro- viding release foreign trade statistics to applicants on certain 334 JT-5- No. 34, DEC. 23rd, from Tokyo certain conditions. Press comments indicate statistical tables for release will contain only items whose public knowledge will not interfere with nations anti-espionage aims. Trade reports Indian Government has decided revise import tariff January 1st, that further restrictions of imports into Australia from non-sterling countries is EXPECTED shortly, that import licensing system in Netherlands Indies is to be Effective from January. All of these restrictions will adversely affect Japan's Exports. Three Nagoya banks have signed provisional merger contract, Aichi, Nagoya and Ito Banks. Press reports eight banks in Hyogo Prefecture signed tantative merger agreement on 19th. Cabinet Board of Information announced 16th that up to End November 30 banks have ceased EXISTENCE by merging with stronger institutions. This reduces number commercial banks to two eight BEVEN against three four five at and 1938 and three one SEVEN at End 1939. These MEIGETS have strengthened underwriting capacities of larger institutions, have enabled granting more credit and concentrated financial control in fewer hands. It is understood Ministry Finance has encouraged such amalgamations order accelerate rate bond absorption which for first Eleven months reported only eighty SEVEN point ten percent of issues, decline of four percent comsamper. 335 -6- 34, December 23 from Tokyo comsamper. Bond holdings by Deposits Bureau End November reported yen six one three two million against yen one four five Eight million comsamper. Ministry Finance announced bank deposits End November read million yen two Eight nine right two, gain SEVEN two nine compOctober. Loans one SEVEN four Eight two up three one ZEIO compOctober. Security holdings nine two nine five increase one five nine compOctober. Bank Japan wholesale commodity price indtx Tokyo November three one ZEIO point SEVEN increase ZEIO point three percent compOctober and three point eight percent comsamper. Government's price fixing measures responsible for decline two percent in price of foodstuffs and ZETO point two percent in building materials compOctober, textiles, textile materials and misorllaneous goods advanced while metallic goods, fuel, fertilizer and chemicals remained stationary. All Japanese press commentators Enthusiastically welcome establishment new Central RESEIVE Bank of China and anti- cipate Early stabilization Chinese currency in occupied areas. Corporate debentures issued last quarter this year totaled in million yen six wight one, only twenty below anticipated amount. Of total four two four underwritten by Government offices and syndicate banks, remainder offered public subscription. Oriental DEVELOPMENT Company reportedly decided double present capital of fifty million yen 336 -7- 34, DECEMBER 23, from Tokyo yen by resorting to increase of capital rather than issuance debentures due present state bond market. Financial reports indicate large number leading corporations have reduced dividends for last half year term of 1940, majority of CASES due to decline in profits resulting from difficulty obtaining materials, depression in Export trade and Government's price fixing policy. To more adequately meet demand for funds necessary for productive Expansion Ministry Finance reportedly decided introduce next session Diet bill revising provisional fund adjustment law providing authority Extend issue limit of industrial debentures and saving debentures. Present maximum limit industrial debentures yen one right SEVEN five million and amount issued End November yen one four ZERO five million. Margin yen four SEVEN ZETO million considered too small under present conditions. Industrial share prices twenty first average seventy SEVEN point sixty SEVEN, index righty point ZETO one. Week's average seventy SEVEN point seventy one, index Eighty point ZEIO five. INFORM COMMERCE. Williams. GREW TFV 337 AS Swatow via N. R. Dated December 27, 1940 Rec'd 9:45 a.m. Secretary of State, Washington. 38, December 27, noon. Linen shipment left December 22 by Japanese vessel for Shanghai. Comprised 203 tons with a total estimated value of 3,021372. 500 per ton "voluntary contribution" paid to Mitsubishi Shoji Kaisha; handling charges and freight to Shanghai were 144 per ton; total paid to Japanese agencies was 131,319. This shipment was the smallest since the beginning of the occupation and is indicative of the industry's desire to get its product out of Swatow as rapidly as possible. During my absence first half of December an importation of materials was made from Hong Kong via Amoy under Japanese auspices. 450 cases were imported valued at 5,227,579. on which the "11 per cent ad valorem duty" paid to Mitsui Bussan Kaisha was 575,033. In addition 5,227 had to be paid to Japanese agencies in Amoy. Freight and handling charges from Hong Kong to Swatow via Amoy totalled 22,489. All amounts stated are in Chinese national dollars. Sent to the Department, repeated to Peiping, Shanghai. FORNES CSB ng COPY At CONFIDENTIAL December 27, 1940 To: The Secretary From: Mr. Young Re: Extra Machine Guns In talking with Mr. Goodrich of Colt Firearms this afternoon, I was advised that Colt has on hand 120 light air machine guns 7.92 calibre. These guns had originally been made by Colt as a speculative proposition for the Chinese, but no order was ever received. Both the Chinese and the Greeks use this calibre and the guns could be made available for shipment in a week's time. I asked Mr. Goodrich to hold then temporarily and to let me know if he received any inquiries concerning them. It is my understanding that these guns, which are the equivalent of a standard United States .30 calibre type, will probably fit into P-40 planes. P.4. 338 339 CONFIDENTIAL December 27, 1940 To: The Secretary From: Mr. Young Re: Sperry Bomb Sight M On December 10th, the British Purchasing Commission filed a request with the Liaison Committee for priority ratings on the parts and materials involved in the manufacture of the Sperry 01 bomb sight. The British have placed an order with Sperry for 345 sights for delivery April to September, 1941. It is my understanding that this priority rating is essential to the early installation of these bomb sights in British bombers being built in the United States. This priority request was passed on to the Limison Commit- tee members and to Mr. Knudsen on December 12th. On December 19th, I received a letter from the Assistant to the Administra- tor of Priorities, Mr. A. 0. C. Hill, Jr., advising me that a study was being made of the possibility of extending preference ratings to cover the manufacture of equipment for foreign governments. In the meantime, however, he stated that nothing could be done. In addition to the foregoing, the British would like to place orders for Sperry bomb sights to be produced at the rate of 450 per month commencing in October, 1941. This priority case will be forwarded again to the Priority Board, and it is my understanding that the Sperry Company has also talked directly with the Priority Board. I bring this matter to your attention because of our interest in getting the bomb sights released and using them to equip bombers being built for the British in this country. Attached is the most recent memorandum which I have received from the British Purchasing Commission concerning this matter. P.4. 340 AIDE-MEMOIRE Late in September the Sperry bomb sight was released to us, and we immediately placed orders with the Sperry Company for sufficient sights to cover our presently contracted deliveries of heavy bombers in this country, viz. Consolidated LB30s, together with a number of heavy bombers released to us by the United States Army, such as Consolidated B24s, and Boeing B17s. The Sperry Company recently reported that they would be unable to meet their delivery schedules unless priority ratings could be given to their orders to suppliers and sub-contractors, since the latter already have U.S. Army and Navy orders with high priorities. Our representations have been made through the President's Liaison Committee to the National Defense Advisory Council Priority Board, and also by the Sperry Company direct to the Board. As far as can be ascertained no action has yet been taken by the Board. This is a matter of great concern to us, since heavy bombers are of no military value without bomb sights, and as is well known, these heavy bombers are considered of prime importance in the war effort. We are wondering whether any further assistance can be given us in obtaining the necessary priority action. V13038 your you'll giving British Purchasing Commission, Washington, D.C. December 21, 1940. 341 7 Have you CONFIDENTIAL had are me letter no. from December 27, 1940 To: The Secretary From: Mr. Young Re: Reports Requested by Defense Commission I have written Mr. Stacy May stating my understanding of the conference which he attended in my office on December 12th, at which George Haas was also present. This understanding was that the Advisory Commission had taken official action to centralize reporting activities through Mr. May's office and that future reports of British purchasing activities should be sent to him. I suggested and Mr. May agreed that Mr. McReynolds should address a letter to you citing this official action on the part of the Advisory Commission and outlining the scope and nature of the reports desired. I explained to Mr. May that his requests for information would be held pending this official action by Mr. McReynolds. Py. 342 CONFIDENTIAL December 27,1940 To: The Secretary From: Mr. Young M Re: Siamese Planes Arthur Palmer in Secretary Stimson's office has informed me that the War Department is negotiating for the ten North American planes owned by Siam and now rest- ing in the Philippines. He added that if these ten air- planes were taken over, the Army would release ten P-26 planes for China if she wanted them. I gather that the P-26 is an obsolete pursuit ship and that it would not be useful to the Chinese anyway. Mr. Palmer said that he would be glad to find out whether the Air Corps would make these planes available to a purchaser other than the Chinese. However, he would only take this matter up if a specific purchaser were designated. P4 answer ? 343 CONFIDENTIAL December 27, 1940 To: The Secretary From: Mr. Young Re: Toluol for Sweden M Joe Green of the State Department called me yesterday and asked the cooperation of the Treasury. Evidently, last spring Sweden released to the British 500 tons of toluol with the understanding that the British would replace it before the end of the year upon demand of Sweden. Sweden has now requested the fulfillment of this obligation, and the British Embassy has advised the State Department that a navicert has been issued and that the British Government would like to live up to its promise. Joe Green advised that the State Department had issued an export license for this toluol and that the cooperation of the Treasury was requested in not holding up the shipment. I told him that I saw no reason why the ship should be held up on that account as long as the British had issued a navicert and the State Department had issued an export license. Py. At CONFIDENTIAL December 27, 1940 To: The Secretary From: Mr. Young Re: War Supplies for Greece You have received a note from Under Secretary of State Summer Welles attaching copies of two cables, one to the Minister at Athens, and the other from the Minister in reply. These do not add anything to what we already know. The situation is still that no one has yet been able to find out whether the Greeks are satisfied with the twelve British Gladiator planes which were brought into Greece from Egypt. Ten thousand rounds of .57 mm. ammunition are being made available to the Greeks from United States Navy surplus stocks. The first batch of 4000 rounds will be made available in three or four weeks inasmuch as it has to be reworked and assembled. The British Purchasing Commission is handling the mechanics of the transaction although payment will be made by Greece. I received a letter this morning from the Greek Minister requesting 150 tons of manganese. The Minister asked as to whether it would be possible for the National Defense Commission to defer delivery of this amount from United States orders in view of the urgency of the request. I am investigating this as I am not currently up on the manganese situation here or in Greece. Ry. 344 345 CONFIDENTIAL December 27, 1940 To: The Secretary From: Mr. Young Re: Planes for South America A new list of requests for airplanes and parts for South American countries, pending or recently disapproved, has been compiled as of December 26th. I have sent a copy of this to Messrs. Rockefeller and Meiga. I am informed that Mr. Meigs will be out of town from noon today until Monday, and that Mr. Rockefeller will be out of town next Monday. I have not yet been able to contact Mr. Duggan. My feeling is that it would be better to postpone a meeting on this subject until about Tuesday or Thursday of next week in order that we will have all of the interested parties together at one time. A certain amount of spade work can be done in the meantime toward finding out just what the exact status of each request is. P.Y. REQUIRES FOR AIRPLANES AND PARTS BY SOUTH AURICAN COUNTRIES PERDERS OR RECEIPLY DISAPPROVED AS OF DECEMBER 26. 1940 Request For Counter Argentine Date of Request Date Forwarded to Defense. Army. Navy Status Disapproved Nov. 4. 1940 Nov. 23, 1940 Dec. 4. 1940 Dec. 9, 1940 Sept. 25, 1940 Sept. 28. 1940 Spare parts for Wright Cyclone engines Dec. 13, 1940 Dec. 17, 1940 Pending Repair parts for Wright Whirlwind engines Dec. 18, 1940 Dec. 20, 1940 Pending Raw materials for manufacturing Curties Dec. 18. 1940 Dec. 20, 1940 Pending Raw materials for repairs (PNR AA-1) Dec. 26, 1940 Dec. 26, 1940 Pending Repair parts Martin WAN-717 Dec. 19. 1940 Dec. 23, 1940 Pending Spare parts for Pratt and Whitney Nov. 13, 1940 Nov. 13, 1940 Pending information 2 Lockheed Model 18-14 airplanes equipped with Pratt and Whitney 84040 engines and Hamilton Standard constant speed propellers, Hub Oct. 28, 1940 Oct. 31, 1940 Pending Nov. 25, 1940 Nov. 25, 1940 Pending information Nov. 28. 1940 Pending information 666 - Part 16892 - Rocker Shafts for Twin Vasp Jr. 82440 engines Spare parts for Wasp 83H1 engines 15 KA-16-1 and 15 NA-16-3 training Dec. 7. 1940 Disapproval rec'd 12-26-40 Pending planes Hawk 75's Brasil Vasp Jr. engines (PMR B-11) $25850 and Blades 46139A-12. (Filed by Lockheed) Chile 1 8133-0 Hornet engine and accessories (PNR D-3) 25 Fairchild Trainers M. 62-B and spare parts (PNR D-5) (PNR D-3) Nov. 28, 1940 (PNR D-5) Date of Request Date Forwarded to Defense, Army, Navy Dec. 18. 1940 Dec. 18, 1940 Pending Nov. 15, 1940 Nov. 19, 1940 Pending Spare parts for airolane engines Nov. 15, 1940 Nov. 19, 1940 Pending in- 21 airolanes CW22 and 6 airplanes CW21 Oct. 10, 1940 Oct. 12, 1940 Temporarily disapproved Oct. 24, 1940 Oct. 25, 1940 Disapproved Request For Country Celombia Spares for Wright GR-1820-E1 Status (PNR No. 0-1) Mexico Spare parts for airplane engines (Wasn S1B1 and Vasp Jr. SB) Uraguay 8 Model 6-4000 Ranger aircraft formation Nov. 14, 1940 engines (Pluna) Venesuela Dec. 4, 1940 Dec. 5, 1940 Pending Oct. 25(9) 1940 Oct. 25, 1940 Pending 1 2030 (6167A-6 blades) propeller Dec. 10, 1940 Dec. 13, 1940 Pending Spare parts from Aviation Equipment Dec. 17, 1940 Dec. 17, 1940 Pending 2 Standard Hamilton propellers, 40 rubber tubings and 80 clamps 3 Curtiss P-36 planes 3 Stearman A75L3 planes 5 North American NA 16-3 planes 3 North American 76-D-3 planes and Export 4 Pratt and Whitney Engines SB3 Jr. (Linea Aeropostal Venexolana) Dec. 26, 1940 348 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE December 27, 1940. TO FROM Secretary Morgenthau E. H. Foley, Jr. Subject: Standard 011 Tankers Jay Crane brought in Captain Howard, the head of the Marine Department of Standard Oil of New Jersey, this morning to discuss the disposition of several Standard 011 of New Jersey tankers to the British. The proposals of Captain Howard are split up into two different cases: (1) Two Danish flagships, the Scandia and the Christian Holm, now located at St. Thomas in the Virgin Islands, are to be ordered to dry dock in New York. The idea is that as soon as they leave St. Thomas they will be picked up by British men-of-war operating probably from Trinidad. The British will then doubtless take them into a prize court in the British West Indies or elsewhere and retain the Danish crows if they deem it wise or else make replacements wherever they consider it necessary. These two tankers located at St. Thomas are owned by a Danish company controlled by the Standard Oil of New Jersey. The Scandia has a dead-weight tonnage of 12,760 tons and the Christian Holm has a dead-weight tonnage of 14,026 tons. (2) The other case involves two tankers. One is the Esso Belgium with a dead-weight tonnage of approximately 15,000 tons and the Ampetco with a dead- weight tonnage of 13,000 tons. Apparently by a three-cornered agreement between the Standard Oil of New Jersey, Sir Ashley Sparks, representing the British Ministry of Shipping, and a representative of the Belgian Gu ment, these two vessels will be operated under the Belgian flag by the Standard Oil of New Jersey, or one of its controlled companies. The Standard Oil of New Jersey in consideration for the operation of the Esso Belgium and the Ampetco will give up two of its vessels under Panamanian flag to the British if the Maritime Commission gives the necessary clearance. The British Ministry of Shipping has not yet decided whether it wants two clean vessels (vessels which carry gasoline, kerosene, etc.) of approximate tonnage of 22,000 dead-weight tons or two dirty vessels (vessels which carry crude oil) of approximate dead-weight tonnage of 29,000 tons. Captain Howard said that he was going over to discuss the clearance of the Panamanian vessels for transfer to the British with Max Truitt of the Maritime Commission and would apply with the local customs office at St. Thomas for the Treasury clearance to authorize the two Danish flagships to sail for dry dock in New York. 349 -2- Under this arrangement the British will secure for their own use four tankers. In view of these circumstances, I recommend that we drop any further discussions looking to the purchase of the Danish and Belgium tankers which Jay Crane mentioned in his conversation with you yesterday and facilitate insofar as possible the carrying out of the arrangement described above. I.N.H 350 December ST. 1940 My dear Mr. President: I als inclosing herewith, for your information, . tabulated statement giving the latest figures - deliveries of airplanes. Yours sincerely, (Signed) is The President, to Hure) The White House. Enclosure. By - 505 351 December 27, 1940 My dear Mr. Presidents I - inclosing herewith, for your information, a tabulated statement giving the latest figures on deliveries of airplanes. Yours sincerely, (Signed) E The President, The White House. Enclosure. / 352 December 27, 1940 My dear Mr. Secretary: I - inclosing herewith, for your information, a tabulated statement giving the latest figures on deliveries of airplanes. Yours sincerely, (Signed) E Jr. Henorable Cordell Hull, Secretary of State, Washington, D.C. Enclosure n / 505 353 December 27, 1940 My dear Mr. Secretary: I - inclosing herewith, for your information, a tabulated statement giving the latest figures on deliveries of airplanes. Yours sincerely, Honorable Cordell Hull, Secretary of State, Washington, D.C. Enclosure By - REV Subtotal July 7 Dec. 21 July 21 Aug. Sept Sept. 14 61 (I 300 Nov. 24 Dec. 681 119 386 Total Jan. 1 Dec. 21 99 100 Oat. 27 - Nov. 119 Sept. 29 Oct. 12 56Total Jan. 1 Dec. 21 124 737 643 467 135 176 144 112 367July 7 July 20 389 320 TOTAL ALL PURCHASERS 110ARMY 419 Aug. Aug. 17 276 Nov.10 Nov. 1,734 2,496 1,397 1,099 1,923 6,796 4,103 1,242BRITISH EMPIRE AND FRANCE* 73 36 10 959 549 410 64 77 no 575 2 2 70 10 35 a 16 65 196 Other 109 995 Jan. 1 - July 6 planes 337 456 92 324 350 258 119 527 203 532 136 10 179 1,413 354 2,746 CommercialJuly July 20 Bombers Pursuits Trainers military 2,693 2 , 2 76 11 124Oct. 13- Oct,26 16 10Subtotal July 7 - Dec. 21 14 67 269 13Sept. 29 Oct. 12 12 29 50 193 695 10 326 861 276 113 118 630 946 108 420 1,079 Dec. 8- Dec. 21 1,744 1,114 88 1,800 6 5 35 48 13 54 38 16 If 55 72 10 14 42 69 350 850 34 384 500 63 103 526 589 January 1 - December 21, 1940 Total planes 1,115 DELIVERIES OF AIRPLANES, BY PURCHASERS AND BY TYPES OF PLANES 14 1' Aug. 16 Aug. 120 Subtotal July 7 - Dec. 21 Subtotal July 7 - Dec. 21 Deliveries under French contracts were made up to June 30, 1940. ug. July 21 Aug. Sept Sept. Total Jan. 1 - Dec. 21 Sept. 15 Sept 28 Dec. 5- Dec. 21 70 July 7 July 20 Jan. 1 July 6 Oct. 13 Oct.26114 997 Nov.10 -Nov.23 Nov.24- Dec. Dec. Dec. 21 Total Jan. 1 - Dec. 21 11Jan. 1 July 6 Sept. 15 Sept. 26 Jan. 1 July 6 Sept. Sept. 166Aug. Aug. Nov. 24 - Dee. Sept. #9 Date 12 Oat. Nov. Nov.10-Nov.23 Oas. 065.26 July 21 Aug. Aug. 16 Aug. Aug. Aug. 11Nov. 10 NOV. 23 Dec. 8 - Dec. 21 December 26, 1940July July 20 Nov.24. Dec. Sept. 15 Sept. 28 Sept. Sept 14 Nov.10-Nov.23 Sept. 29 Oct. 12 Oct.27-Nov.9 July July 20 July 21 Aug. Aug. 18 Aug Sept. 15 Sept. 28 52 OTHER 14 Oct. 13 Oct. 26 Oct. 27 Nov. 9 Nov. Dec. Sept. Sept 14 Dec. 8 - Dec. 21 July 21 Aug. Jan. 1 July 6 Sept. 15 Sept. 28 104 28 17) 9 Aug. 18- Aug. Total Jan. 1 - Dec. 21 Oct. 13- Oct.26 Sept. 29 Oct. 12 Aug. 18 Aug. 116 305 206 337Subtotal July 7 Dec. 21 Oct. 27 Nov. Aug. Aug. KAVY STRICTLY CONFIDENTIAL Office of the Secretary of 420 TREASURY Division or Research And Statistics. All 355 December 27. 1940. MEMORANDUM To: Secretary Morgenthau From: Mrs. Forbush The comments elicited by the "slacker money statement" have about stopped so I am sending a brief resume on this group. In all about 30 communications were received, 2/3 protest, 1/3 approval. Wires and letters of protest from Florida Chambers of Commerce or important men went to Mr. Gaston for individual replies. All others were briefly acknowledged for his signature. Representative comments follow: Strange that money invested in Government securities should be called "slacker money" now! Wealth has been "drafted" by the present Government, which is most incompetent. M.E.A. Pa. Nothing fair about confiscating wealth and not labor. Labor should be made to contribute equally with wealth and capital. C.S.A. Ind. The Secretary has a crust describing money invested in tax-exempt bonds as "slacker" money after expressing delight at their successful sale. "Resentful Baby Bondholder". N.Y. Present Administration has done more deliberately to spread class hatred than any other, during a fifty year period. Why should insidious comparisons be made between owners of Government bonds and others after Government made the first conditions on which the bonds were bought? W.W. N.J. Congratulates Mr. Morgenthau on courageous stand to tax slacker capital. Mrs. C.S.C. N.Y. 356 MI Personal and Secret BRITISH EMBASSY, WASHINGTON, D.C. December 27th, 1940. 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. Belive me, Dear Mr. Secretary, Very sincerely yours, Work Brother The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D. C. 357 Telegram from London dated December 23rd, 1940. Naval. 1. British destroyer mined and sunk in Mediterranean on December 22nd; two destroyers (ex U.S.A.) have arrived at the United Kingdom from Canada. 2. Shipping Casualties. British ship of 3,000 tons reported being attacked by U-boat in astern Atlantic on December 22nd. 3. on the same day an icelandie trawler was bombed off west coast of Scotland and subsequently abandoned. The crew of thirteen picked up by tug was also bombed and machine-gunned five of the reseved crew being wounded. 4. on December 22nd British tanker 7,000 tons British ship 5,000 tons and a tug were mined in home waters. 5. During air raid on Liverpool on the night of December 21st-Dec.22nd two merchant ships were sunk and six others damaged in docks. 6. Air photographs of kiel tsken on December 21 show battle cruisers Scharmhorst and Gneisenau armoured ship Lutzow two old battleships three six-inch gun cruisers and a number of aneller warships present. Photographs also show eastern end of the canal congested with shipping probably owing to blocking of the Canal referred to in the second paragraph of my immediately preceding telegram. 7. western Desert and Lybia. Reports up to midday on December 22nd indicate that re-inforcements are/ 358 are steadily reaching our troops in Bardia area a further seves guas have been collected from the easy freatier posts recently occupied by our troops and the total prisoners now estimated to be not less than 37,000. Intermittent shelling of Sollum has taken place from long range guns in Bardia area. 8. During December 20th. December 21st Wellingtone successfully attackso Banghezi herbour and dispersed reraft on enery aerodrome. One Italian bomber shot down by Murricane. 9. Albania. Greeks have made further advance in Epirus sector capturing villages of Kue and Piluri. three Italian bombers brought down by Greek small arms fire. 10. On December the 21st nine Gladiators engaged formation of 6 Italism bombers eacorted by 50 fighters. Result of attack on bombers unobserved but eight Italian fighters shot down confirmed and three more unconfirmed. Two Gladistors shot down. 11. Italians now have four divisions and part of an amoured division of 18,000 Pogradec. They appear extremely saxious about this sector which covers the approaches to Elbason. They have maintained strong resistance in Topolone-Keleyre area covering Valona. In mountainous central sector Italian resistance is weak and on the coast they are fighting rearguard actions only. 18. R. A. F. During the night of December 22nd/23m 59 aircraft despatched to attack marshalling yards at Greeberg, docks and shipping at Boulogne and Flushing and industrial targets at Mannheim and Frankfurt. Aircraft from/ 359 from fighter command also bombed targets in occupied France. Reports not yet available. 13. German Air Force, Heavy attack commenced at dusk of December 82nd against Manchester-Liverpool area. Approximately 210 aircraft engaged and 36 mine laying. A further 135 raiders were plotted south of a line Humaer-Wersey. 14. Later reports indicate that raid on Liverpool night of December 21st/22nd caused more fires and damage than was at first reported. Road and rail traffic was badly cislocated and considerable damage done to ships and warehouses in cock area, public utility services Parachute mines industrial and private property. necessitated evacuation on fairly large scale. Casualties reported as 53 killed and 123 injured. During the same night four were killed and 155 injured in London. 15. The third successive raids on Liverpool on night of December 22nd/23rd caused fires in dock area and at one war factory. Main attack during this night was .on Nanchester, where 400 fires were started of which 70 were large . xtent of damage not yet assessed. Three unexploded mines reported included one ir a ship in Manchester shipping canal. 16. Aircraft canualties in the above operations over and from the British Isles. newy 2 bombers destroyed British 5 bombers (operations night of December 21st/22nd) three crew safe. 360 BRITISH EMBASSY, WASHINGTON, D.C. December 27th, 1940. PERSONAL AND SECRET. Dear Mr. Secretary, I enclose herein for your personal and secret information copies of the two latest reports received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, Wave Bother The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D. C. 361 Telegram from London dated December 24th. 1. There was some activity by E-boats on night of the 23rd-24th. An M-8 trawler was sunk by an E-boat while sweeping of f Yarmouth. About 23-15 a destroyer escorting a convey engaged an E-beat in the same vieinity. The E-boat was driven off and destroyer sustained slight superficial damage. Five of her crew were wounded. About 23.00 a destroyer escorting another convoy engaged an E-boat off Lowestoft. The E-boat is believed to have been sunk or severely damaged. A convoy of 19 ships has arrived from Gibralter without loss, also 19 out of 21 ships from Halifax. 2. Libya. The latest estimate of Italian tankers still available in Cirenaice is 74 medium 11-ton and 34 Garrison of Bardia is thought to be 24,100 personnel, comprising regular, blackshirt and frontier light 3-ton. guard troops, with 85 field and 45 medium guns; and of Tobruk 22,600 personnel comprising regular, blackshirt and frontier guard troops, with 135 field and 16 medium guns. Another division estimated at 10,600 strength is believed to be moving up from Agedabia; this division may be without artillery. 3. Royal Air Force. Night of 23rd/24th. 42 aircraft sent to attack Mannheim area, Channel ports and aerodromes. Two heavy bombers also detailed to drop leaflets over Paris and Amiens. 4 bombers lost. 4. German Air Force. Night of 21st/22nd. Liverpool. Number killed now reported 244. Hydraulic pressure resotred at Gladstone and Canadian dooks December 23rd. 5./ 362 -25. Night of 22nd/23rd. Manchester. A Chemical works and a gas works suffered some damage. There was no interference with production at Metrovic, but there is an unexploded mine in Trafford Park power station. Casualties 67 killed, 332 seriously injured. 6. Night of 23rd/24th. About 200 enemy aircraft were operating and a heavy attack on Manchester and Liver- pool areas started at dusk. Many fires were started in south and centre of Manchester and at Trafford Park here several important factories are situated. The extent of damage cannot yet be assessed but position is reported improving. Some bombs also dropped at ortsmouth and dockyard area damaging torgeão depot but service casualties slight. 7. Aircraft essualties in operations over British Isles. Destroyed. Enemy one bomber. one aircraft additional 22nd/23rd. British, 5 bombers missing. 363 Tel egram from London dated December 25th. 1. Albania. In Epirus sector Greeks have advanced three kilometres beyond Himara and have captured complete black shirt battalion 29 officers and 679 other ranks. 2. German Air Force. Night of 23rd/24th. Hanchester, Full extent of damage not yet assessed, but the situation much easier. All fires are under control. Utility services and water supplies are fairly satisfactory. Portsmouth. Total casualties reported: 4 killed 137 injured. CONFIDENTIAL 364 People New of Code Ochiogram Received as Department at 22:20, December 27, 1940. the I Filed 16040, December 27, 2940. 2. During design hours of Thursday, December 26, eight Name from the Coastal Command stacked desks and I The Censital Communi also operated 18 in day and 32 patruls were dispatched patrels - - The this special w and the routine Fighter might before only two British patrols were operated. During the night of December 23.26 Channel parts were attached and the been w 40 British planes. Four British beI -- -last, 2. Service - was inflicted on a and utility plant and a 332 chemical factory in / during the night of December 22-23 this individuals were seriously injured and 67 - killed daving the mid. A total or 244 individuals were killed as a result of said - Liverpool during the night of December 23-92 2. a December 25 the 20,000-000 Dritish ording BERNICK, - - w in the Atlentic company a - enulow a with Sodach - 700 miles met of Finishment, Spain, The - officer - his alasy the funal and possibly other hite and driven off. the Initials ondow had five cammities - outfured - to I a December 26 a - received from Balifor, Only of the n shipe - last, On the - - 19 in CONFIDENTIAL CONFIDENTIAL 365 - is Offmulter with no I Certain productions are being taken for the protection of convage in the 4 New office - believed to be voliable indicate that - Increasing - of - from the Common Many - in elvillan distine are in the - accounting Never, - that - of the - in Pertagel are being called back to possibly - the purpose of getting now instructions. Those developments my - that Community is preparing for on action against Participant at - time in the future. so No - - in any of the investion parte - m Intinations of increased activity at Sange along the - - electroned as a result of - from the air Describer 23. There had been - increase since December n, - over, in the activity in retireed yards in and calate, 6. - trange - reported by soliable - to have sailed from Trieste for probable Sending in Derease, % Additional - into / during December are reported w - in the - office. The possible - of h as . I place tw future actions is - w this development, e. in Italian division, probably of 10,000 - is believed to be - for Agentable to the theater operations in northern CONFIDENTIAL 366 CONFIDENTIAL / / I I - - in the - - adidas - - as medium - 139 Male please and mm - - at - AS - - as child place of -- - - as Burding 24 Higher - The - I at MM M - President of you Place office of Intelligence CONFIDENTIAL 0 CONFIDENTIAL Paraphrase of Code Radiogram Received at the War Department at 5:16 P.M., December 27, 1940 Rome, filed 19:40. December 27, 1940 German troops are moving south through Italy in an increasing number. It is reliably reported that a total of two Pansor Divisions will be sent to North Africa. However, to date there have arrived only a few. It is moreover understood that the plan of the Germans calls for 800 Stukas to be assigned to Sieily together with the necessary personnel. As regards these being advance elements of a major force, there is no indication as yet. With r oforence to the war in Albania, the Germans are giving no assistance. FISKE Distribution: Military Aide to the President Seqretary of War State Department Secretary of Treasury Asst. Secretary of War Chief of Staff War Plans Division Office of Naval Intelligence CONFIDENTIAL 367