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209
TREASURY DEPARTMENT
Washington
Press Service
FOR IMMEDIATE RELEASE,
Tuesday, March 25, 1941.
No. 24-19
The Secretary of the Treasury today announced the sub-
scription figures and the basis of allotment for the cash
offering of 2-1/2 percent Treasury Bonds of 1952-54.
Reports received from the Federal Reserve Banks show that
subscriptions aggregate $6,145,000,000. Subscriptions in
amounts up to and including $5,000, totaling about $37,000,000,
where the subscribers specified that delivery be made in
registered bonds 90 days after the issue date, were alloted
in full. All other subscriptions were allotted 8 percent,
on a straight percentage basis, with adjustments, where
necessary, to the 8100 denomination.
More than 95 percent of the Treasury notes maturing
June 15, 1941, were exchanged, about $447,000,000 for the
bonds and $33,000,000 for Treasury Notes of Series D-1943.
Details as to subscriptions and allotments will be
announced when final reports are received from the Federal
Reserve Banks.
- 000 -
210
CONFIDENTIAL
WAR DEPARTMENT
OFFICE OF THE ASSISTANT SECRETARY
Washington,D.C.
Mar 25 1941
The Honorable
The Secretary of the Treasury
Dear Mr. Secretary:
In conformity with the instructions of the President,
dated March 18, 1941, to initiate procurement contracts under
the Act of March 11, 1941 (Lease-Lend Act), the War Department has received from Mr. Harry Hopkins several lists of
supplies urgently needed by the British Government.
Attached hereto is a schedule extracted from these
lists containing items which this Department believes can
be best handled by the Procurement Division, Treasury Department, as the agent of the War Department. It is, therefore,
requested that the procurement of these items be undertaken
by the Treasury Department.
Arrangements will be made to supply funds, if and when
Congress provides an appropriation, to implement the LeaseLend Act.
The British Purchasing Commission has carried on nego-
tiatios in connection with these items but has not placed
orders because of lack of funds. Mr. J. M. Nicely, Director
of Supply, British Purchasing Commission, Washington, D.C.,
is prepared to furnish to the Procurement Division details
of the present status of the negotiations.
Sincerely yours,
(Signed) Robert P. Patterson
ROBERT P. PATTERSON
Under Secretary of War.
Enclosure:
Procurement Program No. 2
(British Government)
CONFIDENTIAL
copied fm 4/10/41
211
CONFIDENTIAL
PROCUREMENT PROGRAM NO. 2 (British Government)
Urgent British Needs for Commerical Items
(As of March 18, 1941)
Approximate Value
(a) Road Building Equipment
$702,494.00
(b) Agricultural Implements
117,302.00
(c) 69,871 Ball Bearings
36,798.97
(d) 900,000 ft. - 2 1/2" Single
Jacket Cotton, Rubber Lined,
Fire Hose (3 items)
315,000.00
(e) Changes in quantities and Models
of Tractors
46,463.70
(f) 50 Spring-tooth Harrows
(g) Spare parts for Agricultural
Machines (7 items)
(h) Harvesters and attachments
(i) Aniline Oil, 300,000 1b.
CONFIDENTIAL
copied by fm 4/10'41
650.00
83,969.83
74,716.12
40,125.00
212
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE March 25, 1941
TO
FROM
Mr. White
Mr. Kanarck
Subject: Axis Influence in Bolivia
(Based on information supplied by the Office of the Coordinator
of Commercial and Cultural Relations Between the American
Republics)
Summary
The Germans dominate the commercial life of Bolivia and exercise
an important role in the country.
1. Two-thirds (12 out of 18) of the important commercial firms
in Bolivia are German controlled. There is only one important American
firm. The German firms in some cases make most of the money they donate
for Nazi propaganda from their representation of American goods.
2. The leading paper in the country, E1 Diario, receives from
one-fifth to one-third of its income from a subsidy for publishing a
daily page of Nazi propaganda. It is also heavily in debt to one of
the leading Nasis in the country. C. F. Gundlach, an ardent Nasi, and
the agent for General Motors is the leading advertiser in the country.
J. von Bergen, another Nazi, the principal supplier of newsprint and
ink to the newspapers, has used his strategic position, coupled with
the extension of credit to papers, to influence their news policies.
3. The Chief of Protocol, Federico Metsen Reyes, in the Bolivian
Foreign Office is a notorious Nazi sympathizer. Other information on
the personnel of the government was not available in the reports.
4. While the majority of the stock of the Bolivian airline,
Lloyd Aereo Boliviano, is in the hands of Bolivians, the company is
German dominated. The management is German and close connections are
maintained with the Condor Syndicate in Brazil and Lufthansa in Peru.
213
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE March 25, 1941
TO
Mr. White
FROM
Mr. Kamarck
Subject: Axis Influence in Colombia
(Based on information supplied by the Office of the Coordinator
of Commercial and Cultural Relations Between the American
Republics)
Summary
Nasi agents are very active in Colombia. Considerable progress
has been made in influencing some of the important political sectors
of the country.
1. There are 4,000 Germans in Colombia who are scattered throughout
the country.
The Nasis in Colombia are well organized with all the usual oranisations: a youth movement, S.A., S.S., woman's organisation. The regular
means of propaganda are employed: free news from the Transocean nows
service, daily bulletins issued by the Embassy and sent to strategic
individuals. In Colombia, in addition, cooperation is secured from
several pro-Nasi clerical orders, notably the Soliciano Fathers.
Propaganda is centered on the Conservative Party (landowning
interests, Catholic Church), which is one of the two major parties
though still in a minority in the government. Some success has been
achieved in influencing this party. E1 Siglo, the leading newspaper
organ of the Conservative Party, uses a great deal of Transocean news.
The Nasis have been working intensively on the army with most
success among the Conservative officers. Here the main method of
operations has been the provision of entertainment: food, drink and
women, furnished on credit with no bills ever presented.
2. The Italians (numbering 1,600) and the Japanese (numbering
300) are not regarded as dangerous as the Germans, nor are they as
active.
214
-2Division of Monetary
Research
3. The government is officially anti-Nazi but takes extreme care
not to irritate Nazi feelings. As a result, no effective governmental
opposition is offered to the propagation of Nazi political thought in
Colombia.
4. There are a number of American companies which are represented
by German agencies in Colombia. Perhaps even more dangerous, however,
is the employment by American companies of American fascist sympathizers.
Here must be mentioned notably the Texas Company. The two companies
managed by Texaco in Colombia, the Colombian Petroleum Company and the
South American Gulf 011 Company, are each run by pro-Nazi Americans,
Charles E. Williams and Charles S. Atwell, respectively. These two
general managers employ active German Nasis and are personally intimate
with Nazi leaders.
215
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
Mr. White
FROM
Mr. Kamarck
March 25, 1941
Subject: Axis Influence in Peru
(Based on information supplied by the Office of the Coordinator
of Commercial and Cultural Relations Between the American
Republics)
Summary
The influence of the axis powers in Peru while strong does not
appear to be as important as that of England or the United States.
1. There are 3,500 Germans in Peru, the largest number of whom
are located in Lima, the capital of Peru. It is estimated that onethird of the Germans are ardent Masis, one-third are indifferent and
one-third opposed to the present regime.
The Nazis have organized the German colony in the familiar pattern.
The Nazi leader, Consul Dedering of the German Legation, directs the
organisation and propaganda activities. The usual organizations are
present: a German school, several German clubs, a camp, classes in
gymnastics and an Arbeitsfront.
The German airline, Deutsche Lufthansa, operates two Peruvian
services.
Free news is provided by the German Transocean news service. The
second most important newspaper in the country, La Prensa, (circulation
30,000) is reputed to receive a monthly subsidy for printing this news.
2. There are 7,000 Italians in Peru, Most of these, however, are
more interested in Peru than in Fascist Italy. None of the Italian
firms are on the British blacklist. While some American firms have
discontinued business with the Banco Italiano, the British are maintaining their usual relationships. The Banco Italiano is much the largest
bank in Peru, holding about half of the total deposits of the country.
It is supposed to be only one-third Italian owned.
216
-
Division of Monetary
Research
The Italians have one of the largest and best schools in Peru,
several clubs, one newspaper and one magazine. On the whole, Fascist
activity is notas important as its Nasi counterpart.
3. Japan has the largest foreign colony in Peru totaling 25,000
residents. The Japanese lead an autonomous cultural life and make
little attempt to influence Peruvian political thought in a fascist
direction.
4. The economic life of the country appears to be in large part
dominated by the British and Americans, The British operate twothirds of the railways, the radio and wire telegraph system, the
rural telephone system, part of the cable service, the most important
radio station and supervise the postal service. Reuters provides free
news to the Peruvian press and is quite influential. Its representative
is a leading Peruvian pro-Ally senator.
217
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE
TO
Secretary Morgenthau
FROM Mr. Cochran
March 25, 1941
CONFIDENTIAL
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
£84,000
Purchased from commercial concerns & 7,000
Open market sterling was first quoted at 4.03-3/4. It remained at that
level until late in the day, and closed at 4.03-1/2. Transactions of the reporting
banks were as follows:
Sold to commercial concerns
£1,000
Purchased from commercial concerns £12,000
The Cuban peso reached a new current high of 4-13/16% discount this afterson, compared with 5% yesterday.
In New York the closing rates for the foreign currencies listed below were
follows:
Canadian dollar
Swiss franc (commercial)
15% discount
Swedish krona
Reichanark
Lira
.2384-1/2
Argentine peso (free)
Brazilian milreis (free)
Mexican peso
.2322
.4005
.0505
.2315
.0505
.2066
In Shanghai, the yuan in terms of our currency was quoted at 5-1/44, representing a gain of 1/324. Sterling advanced 1$ to 3.92-1/2.
We sold $1,890,000 in gold to the Central Bank of Afghanistan, which was
added to its earmarked account.
The Federal Reserve Bank of New York reported that the Central Reserve Bank
of Peru shipped $630,000 in gold from Peru to the Federal for its own account,
disposition unknown.
In London, a price of 23-1/2d was again fixed for both spot and forward
silver, equivalent to 42.674.
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
218
-2-
We made no purchases of silver today.
The Federal Reserve Bank's report of March 19, listing deposits of banks in
Asia with the New York agencies of Japanese banks, showed that such totaled
$111,927,000,
an of
since
March 12,
Most of change in
increase
$6,740,000
the deposits
deposits took place on the books of the Yokohama Specie Bank's New York agency.
The
latter's principal dollar liabilities to and dollar claims on Japanese. banks in Asia
stood as follows on March 19:
March 19
$65,676,000
37,718,000
22,724,000
Liabilities: Deposits for Japan and Manchuria
Deposits for China
: U.S. Treas. Bills, comm. paper, etc
: Loans
Claims
$66,936,000
8,714,000
: Other - mainly Jap. import bills
Change from
March 12
+ $5,793,000
+
697,000
+ 938,000
+ $2,314,000
- 1,303,000
The last three categories refer principally to Japanese banks in Japan and Manchuria.
It will be observed that deposits for such banks rose $5,793,000. The greater part
of this increase resulted from the sale of $3,123,000 worth of Japanese gold which
arrived in San Francisco during the week of March 19. A net increase of $1,011,000
is the Agency's claims also contributed to the expansion of Japanese bank deposits.
The report of March 19 received from the Federal Reserve Bank of New York
giving foreign exchange positions of banks and bankers in its district, revealed that
the total position of all countries was short the equivalent of $7,078,000, an increase of $227,000 in the short position. Net changes were as follows:
Short Position
Country
England**
Europe
Canada
Latin America
Japan
Other Asia
All others
Total
Short Position
March 12
March 19
$ 410,000
$ 464,000
3,091,000
245,000 (Long)
139,000
2,273,000
1,243,000
60,000 (Long)
$6,851,000
3,383,000
283,000 (Long)
260,000
1,883,000
1,339,000
Change in
Short Position*
+ $ 54,000
+ 292,000
- 38,000
+ 121,000
- 390,000
32,000
+ 96,000
+ 92,000
$7,078,000
+ $227,000
*Plus sign (+) indicates increase in short position, or decrease in long position.
Minus sign(-) indicates decrease in short position, or increase in long position.
nm.
"Combined position in registered and open market sterling.
CONFIDENTIAL
219
C
0
P
CONFIDENTIAL
Y
MEMORANDUM
March 25, 1941
To:
Walter C. Louchheim, Jr.
From:
Sigmund Timberg
Re:
Valuation of British-Owned Fire, Marine and
Casualty Insurance Companies.
General Summary:-
On the basis of the Annual Convention Statements
for 1940 sent us by the New York State Insurance Department, and Best's Insurance Reports for 1940, thirty companies
and branches, representing roughly a third of the British-
owned business units doing an insurance business in this
country, have been evaluated. Fourteen of these business
units are companies incorporated within the United States
and sixteen are branches of companies incorporated in Great
Britain. Using a most conservative valuation technique,
their assets roughly may be estimated at $215,000,000.
(See Table 1, immediately following.)
The 1940 values were obtained by adding four items:
(1) Capital
(2)
Surplus, based on market.
(3) Amounts set aside for voluntary reserves.
(4) Capitalization of average annual gain from
underwriting over the five-year period, 1936-1940,
inclusive. The capitalization rates were very
conservative, being 20 per cent for the casualty
and fire companies and 40 per cent for the marine
companies.
The 1939 estimates, which were supplied by the
Treasury, differ from our 1940 values not only in converting
an earlier period, but in the following material respects as
well:-
220
-2(1) Surplus based on book value and not on
market value, was used in the 1939 estimates. On
the assumption, supported in more detail later in
this memorandum, that the investment portfolio of
the company is worth market, use of book values
will result in considerable understatement.
(2) No account was taken, in the 1939 compu-
tations, of the fact that the British companies do
a profitable underwriting business, representing a
valuable investment over and above the companies'
profits from their investments.
If the same understatement characterizes the valuation of the
remaining British companies as was true of these thirty compa-
nies, i.e., approximately 50 per cent, the total value of the
British-owned insurance industry in the United States will be
approximately $450,000,000, instead of the $300,000,000 origi-
nally given out in the public press and in the initial Treasury
estimates.
Mechanics of Transferring Ownership:-
Table 1 summarizes these valuations in terms of groups
of companies (or individual companies) dominated by the same
financial interest, rather than in terms of the type of in-
surance business transacted (marine, fire, casualty) or its
form of legal organization (incorporation in the United States
or the mere carrying on of business as a domestic branch of a
foreign corporation). This was done on the theory that, if
all the companies are not to be acquired at one time, it is
advisable to purchase simultaneously all the companies under
a unified ownership and control. At least two practical
reasons recommend such a procedure:-
(a) The greater simplicity of carrying on
negotiations with a particular ownership group,
rather than dickering with several ownership groups
at the same time.
(b) Since the agency forces of constituent
members of a group usually work for other members
of the group, the problems of impaired good-will,
dislocation of agency force, and other operating
problems will be reduced to a minimum.
TABLE 1
Character
Form of
Name of Group
(or Company)
Valuation
of
Company
(Millions of dollars)
Business
Organization
1939
2
U.S.Corp.
U.S.Branch
Marine
1940
Fire Casualty Estimates Values
3
Royal-Liverpool
10
4
Commercial Union
4
5
Chubb & Son
-
3
4
-
3
7
3
7
2
-
-
Employers Liability
Assurance, Ltd. of
London 4
-
1
-
-
1
90
130
30
48
7
11
13
24
5
Miscellaneous
TOTAL
-
3
14
16
3
10
-
14
-
6
1.5
2.4
141.5
215.4
Incorporated within the United States.
1
A branch of a company incorporated in Great Britain. Most of the assets of these
companies are trusteed for the protection of U.S. policyholders.
2
3
4
Two of these companies also did some fire insurance business.
While a United States branch of a foreign company, that company is owned by Employers
Group Associates of Boston, a Massachusetts business trust. The Treasury has de-
scribed it as 100 per cent British owned, but there may be some difficulty in
establishing that Employers Group Associates is British-owned.
5
Owned by the Scottish Union and the National Insurance Company of Edinburgh; North
British and Mercantile Insurance Company of Lond on and Edinburgh; and Guardian
Assurance of London (?), respectively.
222
-3The problem of transferring ownership of the American
incorporated companies will reduce largely to the mechanics
of transferring control of stock now held by British interests
into American hands. The transferring of ownership of the
United States branches is more complex. Alternative sclu-
tions are possible, e.g., (a) the underwriting business of
the branch may be reinsured with an American company; (b)
the branch may incorporate under a state charger; (c) some
holding company may be formed to take over all the United
States branches, etc.
The difficulties in this respect will be primarily
legal. I do not attribute much validity to the argument
that the business of the American companies and branches
will tend to diminish if their affiliation with British
parents and home offices is severed. According to the
public statements of the New York State Insurance Superintendent, the U. S. branches are on a much sounder footing
than the British parent or the non-U.S. members of their
group, since the business of the U. S. branches is not
subject to the same war hazards. Furthermore, a much larger
proportion of their assets is trusteed for the benefit of
American policy holders than is held by domestic companies
under legal reserve requirements, or is necessary under the
law applicable to branches of foreign companies.
The fact 'that the underlying investment assets of the
British companies furnish a much bigger protective cushion
against prospective liabilities than is true of domestic
to the British unit in procuring underwriting business within
the United States. Even if, therefore, some of the securities
companies is a competitive business feature, highly important
owned by a company could be marketed independently of a sale
of the underwriting business itself, it would probably be
preferable not to do this, but to purchase all the investment
and underwriting assets of the company in the same transaction.
Valuation of Investment Assets:-
The investment portfolios of these companies, on a
seem to be so well selected and to have
such profitable
that it would
appear
surface
examination,
yields, well nigh im-
possible for other conservative investors to duplicate them
in the present state of the investment market. The portfolios were therefore valued at market, rather than at book
(including amortized values) or cost. These market valuations,
223
4-
as reported in the Annual Convention Statements, may be less
or more than book, but in the majority of cases will be found
to be higher than book or cost.
A more complete analysis of the investment situation
of the se companies should include the following:(a) Annual and average gains from investment
operations for the five-year period, 1936-1940
(already computed for the 30 companies included in
this survey): While capitalization of average annual
gain is not as good a measure of the value of the
companies' investment business as the figures which
have been used, it would be a good comparison figure,
as well as a cross-check on the efficiency of the
investment managers of the British companies.
(b) The portfolios of the companies could be
dissected. Amounts invested in railroads, public
utility bonds and governmental obligations, and in
common stock, preferred stock and bonds, could be
indicated, together with the percentages invested
in each classification and gains and losses on each
class of business. This would indicate whether the
portfolios were appropriately diversified, and would
focus attention on any weaknesses in the companies'
investment policies.
(c) Cost, amortized, and face amount values
might be taken into consideration. For example,
amortized values are permitted for securities which
have received above a certain preferential rating
from a fixed number of rating services. Where these
amortized values are lower than market, the buyers
of the securities may object to having to pay market
values; where they are higher than market, the sellers,
i.e., the insurance companies, may object to receiving
only market values. The various rationalizations which
may be advanced in defense of alternative methods of
valuation should be looked into to forestall complications when bargaining actually begins and to cross-
check the validity of our present valuations.
I lean, however, to the opinion that market values should
remain our primary test.
224
5-
Valuation of Insurance Business:The problem of valuing the underwriting end of these
companies' businesses is a difficult one. The approach
adopted in this survey was to capitalize average annual earnings over the five-year period, 1936-1940, at a very
conservative capitalization ratio, i.e., 20 per cent for fire
and casualty companies and 40 per cent for marine companies.
While this is the conservative investment banker's approach
to the problem of valuation, it is not the conventional in-
surance man's approach. If a more extended investigation is
called for, the following additional factors should be considered:-
(a) The capitalization rate could be put at 10
per cent for the fire and casualty companies and 20
per cent for the marine companies, and the value of
the underwriting business would thereby be doubled.
(This has been done for the 30 companies that have
been surveyed.) The appropriate rate of capitaliza-
tion for this type of business is a very debatable
item.
(b) An item which is a useful comparative check
on the value of the underwriting business is that of
unearned premiums. Unearned premiums on the companies'
books have already been subjected to deductions for
commissions and the initial heavy selling expenses;
andonlyabout
two cent of
per uncollectible. the unearned The only premiums
prove
ultimately
to
be
major
prospective charge against them, therefore, is the
payment of losses and minor servicing expenses.
Best's Insurance Reports (Fire and Marine, 1940) in-
dicates that even the liquidating value of a company
must include the equity in unearned premiums, "uniformly computed at 40% in the case of direct writing
and 35% in the case of reinsurance companies, these
percentages being conservative." (p. XI) A
liquidating value does not take into consideration
some highly important operating factors, e.g., the
fact that most of the business on the companies
books will be renewed without difficulty when its
present term expires, the irreplaceability of the
company's agency force, and other items of good-will
that the company possesses. When, as has been done,
here, 30 per cent of unearned premiums is taken and
225
6-
put down as the value of the underwriting business,
we are practically certain to have a figure which
will be challenged by the seller, i.e., the company,
as woefully inadequate. This figure, however, as
computed for 30 companies, is comparable with the
figure obtained by conservative capitalization of
the companies' earnings on their underwriting busi-
ness.
(c) The percentage of loss and loss expenses to
premiums earned has been computed both on an annual and
on an average basis for 1936-1940, inclusive. This percentage is a check on the operating efficiency of the
underwriting management. It is also an indication
of how conservative 30 per cent of unearned premiums
is as an estimate of the value of business at present
on the companies' books, since it indicates that, in
many cases, one might be justified in taking 50 or 55
per cent of the unearned premiums.
(d) The good-will item might be further appraised
in terms of the extent of the agency force and the
amount of money that it took to build that force up,
the likelihood of renewal and expansion of business,
etc. Such inquiries should be deferred until bargaining negotiations become imminent, however, and will
primarily take the form of interviewing experts in the
business, analyzing past reinsurance experience, etc.
I am attaching, for your information, a mimeographed
form indicating the items which have been worked out for the
30 companies surveyed to date and their place in the Annual
Convention Statements (the numbers in the parenthesis), filled
in for the Globe Indemnity Co., the largest company thus far
examined and a member of the Royal-Liverpool group.
226
SECURITIES AND EXCHANGE COMMISSION
Trading and Exchange Division
Name
Globe Indemnity Co., New York
Type (2) Casualty
Interest in Other Companies (8-16)
None
Interest by Other Companies (8-17)
24,875 shares owned by
Liverpool and London &
Globe Insurance Co., Ltd.
$2,500,000
(1) Capital or Statutory Deposit (5-34)
Surplus (Book) (5-35)
7,500,000
7,500,000
(2) Surplus (Market) (Feet)
(3) Voluntary Reserve (5-29 to 33) 7,499,000 (Book) 9,515,000 (Market) 1
$19,515,000
Unearned Premiums (5-18)
7,102,000
$2,131,000
30% of Unearned Premiums
Reinsurance Due Unauthorized in N.Y. (5-32b)
Gain from Underwriting (10-34b)
1940
1939
1938
1937
1936
Average
$ 63,000
Thousands of Dollars
1,733
1,740
2,541
2,423
1,175
1,922
19,000,000
9,500,000
Capitalized at 10%
20%
Gain from Investments (11-61b)
Thousands of Dollars
1940
1939
1938
1937
1936
Average
389
1,552
2,284
- 2,736 (Loss)
2,354
769,000
227
-2-
Per Cent of Loss and Loss Expense
to Premiums Earned
1940
1939
1938
1937
1936
Average
49.1
49.9
47.5
44.7
55.2 (Grand Total
49.3 1 - 4) 29,015,000
411565
1/ This represents the total of items 1, 2 and 3.
228
(COPY)
Apr 7 1941
Dear Mr. Purcell:
Thank you for your letter of March 27, 1941,
addressed to Mr. Harry D. White, transmitting a
preliminary memorandum on the valuation of British
insurance direct investments. We have found the
results so far of much interest.
We should like to have the same type of analysis made of the remaining companies and I would
appreciate the continuance of this work by your
Division. In view of the present situation, a
more detailed analysis on the lines outlined in
the memorandum probably will not be necessary.
Very truly yours,
(Signed) H. MORGENTHAU JR
Secretary of the Treasury.
Mr. Ganson Purcell, Director,
Trading and Exchange Division,
Securities and Exchange Commission,
Washington, D. C.
HDW/d1m
4/3/41
229
GRAY
Santos
Dated March 25, 1941
Rec'd 6:03 p.m.
Secretary of State,
Washington.
March 25, 2 p.m.
Brazilian coffee markets have been virtually paralysed
by a decision of the National Coffee Department to register
no (repeat no) further sales of coffee destined to the
United States because existing registered contracts have
already exhausted current Brazilian quota under the InterAmerican Coffee Convention. Regulations are to be published
soon.
Santos exporters hope for an increase of quota. Shipments under registered contracts proceeding normally.
Inform Commerce.
HUBNER
NK
Copy:bj
230
RESTRICTED
G-2/2657-220
M.I.D., W.D.
No. 348
March 25, 1941
12:00 M.
SITUATION REPORT
I.
Western Theater of War.
Air: No important offensive activity on either side.
II.
Balkan Theater of War.
Ground: Bulgaria. The movement of German troops proceeded
on schedule it was announced by the German High Command.
Albania, Local attacks in the Viosa River (central)
area and artillery and mortar activity on various points of the front.
Air: Routine activity.
III. Mediterranean and African Theaters of War.
Ground: Eritrea. Heavy fighting continues in the Cheren
area. The British claim they are making headway.
Libya. German and Italian motorized troops are
operating on the eastern side of the Sirte Desert, and there is an unconfirmed report to the effect that E1 Agheila which is about 175 miles
southwest of Bengasi and the westernmost point of advance of the
British Army of the Nile in North Africa has been occupied by German
troops.
G-2 Note. It is estimated that there are now between
three and five German Divisions in Libya which include two or more
armored divisions.
Air: German, Malta was again attacked. Considerable activity
against shipping in the Mediterranean.
Africa.
British. Continued support of ground operations in East
Note: This military situation report is issued by the Military Intelligence Division, General Staff. In view of the occasional inclusion
of political information and of opinion it is classified as Restricted.
RESTRICTED
CONFIDENTIAL
231
Paraphrese of Code Cablegrea
Received as the War Department
at 9:37, March 25, 1941.
London, filed March 25, 1941.
1. British Air Activity on Continent.
a. Daylight March 24. Shipping facilities at La Havro and
Cherbourg and constrice vessels off Nethoriania were targets for British
bombing.
b. Night March 23-24. Very successful results were reported by
the Air Ministry from British raids on Holder, Nel, Baton, Beauver, Betterdam and Calais. Bail and other transport facilities as well as commercial
plants were the target of bombing flights by 128 heavy and medium British
be
2. Genera Air Activity over Britain.
a. Night March 24-25. No aircraft attacks.
b. Daylight March 24. Sunness was subjected to - attack.
Other activities limited chiefly to where patrols.
3. Air lessee.
a. British. One bonber was shot down night, March 25-mr.
b. German. British report their aircraft shot down three German
planes and damaged 2 while 2 crached, March 24.
4. British Air Activity in Middle Fasters Theater.
a. Bornt airfield was the target of British attacks in Albenia.
Other activity in theater was limited to infentry and artillery support.
5. - air activity is Middle Eastern Theater.
a. Daylight March 24. Merber facilities at Malta were attached
CONFIDENTIAL
232
CONFIDENTIAL
w 6 low-flying bonbers at daybrook.
6. Air Lonees in Middle
a. Losses inflicted w British on Aste please is Albenia, daylight,
March 24, were 2 planos - - 4 in action with 2 more damaged.
7. One British and - destroyer were lightly his and
there was slight injury to part facilities in the Dombing w - please
at Malta, March as.
8. Major overnation of atvilions from Saleniki is expected when
military activities take place despite more antisfactory morale among the
people. Spirit of Hollonic troope is high.
SCANLON
Distributions
Secretary of Mar
test. Secretary of War
Chief of Staff
Secretary of Treasury
State Department
War Plans Division
Office of Neval Intelligence
Air Gorga
as
CONFIDENTIAL
233
CONFIDENTIAL
Paraphrase of Code Indiagram
Received at the War Department
as 22:05, March 25, 1941.
Bofta, filed March 25, 1941.
The principal concentrations of German troops are in the Meets
Valley, Strues Valley, Eledjamakasaja, Maritan Valley. There are bridging
materials and concentrations of the German Air Force at Petrich. At
Tambol (Jemboli) there are air centers. German divisional insignia have
been noted here during March 21/28 as follows: eress in circle, buy in
shield, inverted Y, vertical arrow. Is 10 desirable for me to send
information of a military nature to the US attaches at Athens and at
Ankere?
JADWIN
Distributions
Secretary of Mar
State Department
Secretary of Treasury
Acct. Secretary of Mar
Chief of Staff
Mar Plans Division
Office of Naval Intelligence
Air Garge
CONFIDENTIAL
234
CHINESE EMBASSY
WASHINGTON, D. C.
March 26, 1941
My dear Mr. Secretary:
I was greatly touched by your kind letter
of March 19th. The day after receiving it, I called
your office and found that you had gone for a wellearned vacation.
During all of these busy months. I have refrained from calling on you, knowing very well how busy
you have been, and knowing equally well how hard you
have been working to give aid to China. What you 80
kindly termed my cooperation really consisted in my
solicitude not to intrude on your busy time.
I wish to take this occasion to express to
you my deepest appreciation for all you have done for
my country all these years. Ever since that memorable
evening of October 25, 1938, when you first announced
to K. P. Chen and me the first loan to China on the very
day when both her power of resistance and her morale
were at the lowest ebb, - ever since that memorable evening at your home, you have given timely and effective
aid to my people whenever we were most disheartened and
most hard-pressed. I have been most deeply touched by
the way you managed to give China the third loan and the
big hundred-million loan, and more recently by the
tremendous effort you made in securing for China the one
hundred planes. In all these cases, I have not even
called to thank you. But, my dear Mr. Secretary, all
these acts of statesmanship and friendship are deeply
engraven in my heart and, I am sure, will be long remembered
in the hearts of my people when the historic facts are
known to them.
I want to raise a word of protest over one
sentence in your letter where you say that you are "no
longer advising and assisting" my Government in its purchases here. While I am sure Mr. Harry Hopkins will do
everything possible to be helpful to us, I must insist
that you, my dear Secretary. cannot possibly cease "advising and assisting" us, not merely in our purchases here,
235
-2-
but in all the larger policy-making concerning the world
crisis
which China's
of resistance
to aggression
is
nowofrecognized
as anwar
integral
part.
When you return from your vacation and are not
too you.
busy, I would like to call and have a little chat
with
Yours very sincerely,
Hn Shir
Hu Shih
P.S.
I had a very good time last month with your
son at Amherst. He drove me from Springfield to the
College and, after the lecture, again drove me to the
Springfield
station.
have found him a very thoughtful and lovable
young Iman.
Honorable Henry Morgenthau, Jr.
The Secretary of the Treasury
Washington, D.C.
236
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE March 26, 1941
TO
Mr. White
FROM
Mr. Kamarck
Subject: Axis influence in Guatemala
(Based on information supplied by the Office of the Coordinator
of Commercial and Cultural Relations Between the American
Republics)
Summary
Guatemala is the German propaganda center for Central America,
The Germans are very important in the general economy of the
country, controlling over 50 percent of the chief export commodity,
coffee. The President is taking vigorous measures to suppress
axis activities but is hampered by the Nazi syspathies of a small
number of government officials.
1. There are 2,300 persona of German descent in Guatemala,
but including those of partial German descent, the total comes
to over 5,000. Because of their prominence in the business and
social life in the country, the Germans are more important than
the size of the German population would indicate.
Nazi activity was flagrantly open in 1938-39. As a result,
the Quatemalan government decreed the dissolution of all Nazi
organizations in May 24, 1939. Since then the Nazis have been
forced to work illegally--which has somewhat restricted their
effectiveness.
Nasi activity is closely linked with the German consular and
diplomatic offices, the Nazi leader being the Commercial attache.
Germany has a legation and four consulates in Guatemala whereas
the United States has a lone consulate in Guatemala City.
The Germans are strongly entrenched in the economic life of
the country. Over 50 percent of the main export crop of Guatemala,
coffee, is controlled by Germans. There are four German directors
out of eighteen in the partly government owned bank of issue, the
Banco Central. Nottebohm Hermanos, one of the two other large
banks in the country, is an important wheel in the Nazi machine.
It is the local Chase National Bank and American Express representative,
The firm also does an export and import business, handling around a
quarter of the total coffee crop.
237
-2Division of Monetary
Research
None of the important papers are run by axis sympathizers.
However, there are a few small papers which spread Nasi
propaganda.
2. The Italians, of whom there are about 400 in Guatemala,
are relatively harmless compared to the Germans. The main source
of Italian propaganda is the Italian cultural center run by a
professor sent from Italy.
Only two Japanese live in Guatemala and these have no
political or cultural influence.
3. The President of Guatemala and the majority of the
government officials are strongly opposed to axis activities.
Several of the important officials are, however, pro-Nazi. This
includes the Minister of Finance, Gonzalez Campo; the Minister of
Agriculture, General Roderico Ansueto: the Minister of the Interior,
Guillermo Saenz de Tejada; and several Deputies, including one who
is the President's private secretary.
238
ABOARD U. S. S. DESTROYER BENSON-PRESIDENT ROOSEVELT'S SIGNATURE
OF THE $7,000,000,000 WAR-AID APPROPRIATION BILL WAS DELAYED TODAY
WHEN POOR FLYING WEATHER FORCED A NAVY PLANE CARRYING THE MEASURE OUT
TO THE PRESIDENTIAL YACHT AT SEA TO TURN BACK TO THE MAINLAND.
3/26--W0503P
ADD WAR-AID BILL, ABOARD U.S.S. BENSON.
THE PLANE HAD TAKEN OFF FROM THE DINNER KEY COAST GUARD AIR BASE
AT MIAMI AND HEADED FOR THE PRESIDENTIAL YACHT POTOMAC WHEN THE
BENSON ORDERED IT TO TURN BACK BECAUSE A CHOPPY SEA, RAIN SQUALL AND
LIMITED VISIBILITY WOULD MAKE A. LANDING HAZARDOUS.
THE PLANE HAD COVERED ABOUT HALF THE DISTANCE BETWEEN MIAMI AND
THE PRESIDENTIAL YACHT WHEN IT WAS ORDERED BACK.
THE PRESIDENT, UPON LEARNING OF THE HAZARDOUS LANDING CONDITIONS,
DECIDED THAT DELIVERY OF THE BILL SHOULD WAIT UNTIL THE WEATHER
IMPROVED.
3/26--W0507P E20-0
J.
239
RANCHO DE LA OSA march 26 1941
SASABE. ARIZONA
DISTANCE
BANCHO DE LA ORA
TUCSON ARIZONA
memo for 7, Kuhu:
my son Bob suggests that we
should examine some of the Left Wing
arguments a against aid to Britain
Please have Barth look up what
Morman Thmas has phil been saying
also the H. Ickes us. BE 1 La Folette
recent debate over the air Have
Barth preface a brief Bob says
that max Lerner has some of the
best answers to n. I Lomas
Bob says look up William L. White
son of William a. white
memo for Ed Toley
Please preface statement
foronme
to give
beforeBill.
committee
Bank
Holding
(oney
If we could get same
haveexamples
deriver where banks out of
Co. good
communities . I want the
Statement to be dramatic
and culiefully ( Have Kuhu
and Jean Unffield help. Have
this ready on my return flem
memo for Mrs Kloty
Please distribute
above memos
Thank y on.
240
month no, 1943
Down No. sourcy
Is the above of the Secretary. I receipt of your confidential
letter admostedging to him, dated March such, hand. concerning
the - of contras plance on
I shall be gind to wing your letter
to his attention as .... as he returns to
makington
Years cincerely,
R. s. Klots
Private Secretary
Reserable Rebert A. Lovest,
Special Assistant to the
Secretary of War,
Mar Department,
Keehington, D. C.
South letter
given to
4/16/91
241
March 26, 1941
Dear Mr. sovery
Is the absence of the Secretary. I am
acknovledging receipt of your confidential
letter to him, dated Marah 24th, concerning
the methor of center planes on hand.
I shall to gind to bring your letter
to his attention as seea as he returns to
Washington.
Yours sincerely,
E. s. Kiets
Private Secretary
Menorable Rebert A. Lovest,
Special Assistant to the
Secretary of War,
Var Department,
Washington, D. c.
242
March 20, 1941
Dear Mr. Lovesee
Is the absence of the Secretary. I as
receipt of your confidential
concerning
letter acknowledging to him, dated March 24th, on hand.
the number of combat planos
I shall be gind to bring your letter
to his attention as seen as he returns to
Mashington.
Youre sincerely,
H. s. Klobs
Private Secretary
Robert A. Levett,
Special Assistant to the
Secretary of War,
Var Department,
Washington, D. c.
243
7
WAR DEPARTMENT
WASHINGTON
125 kc
March 24, 1941
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury
Washington, D. C.
Dear Mr. Secretary:
I attach a condensed schedule showing the situation of the
Air Corps as of March 1 with respect to the number of combat planes
on hand suitable for use against a modern air force.
You will observe in the schedule the results of the increased rate of production from which the Air Corps is now benefiting, but the most significant improvement lies in the fact that the
planes now coming through are, for the most part, equipped with
leakproof tanks and armor. All of the heavy bombers (B-17D's),
light bombers (A-20A's) and the pursuits (P-39's and P-40's) are
coming through with armor and leakproof tanks, and the situation
is slowly improving with respect to fire power.
The Air Corps still faces a grave situation with respect
to securing adequate modern equipment to complete the training of
pilots.
Deliveries of combat aircraft have continued at an improved rate during March, notably in our bomber classifications,
but serious delay has resulted in the P-39 type as a result of the
failure to receive adequate deliveries of Allison E type engines.
The rate of progress in equipping the Air Corps will continue to be unsatisfactory for several months more, with the trend,
however, improving.
sincerely yours,
ROBERT A. LOVETT,
Special Assistant to the
Secretary of War
Enclosure
COMPARATIVE CONDITION OF COMBAT EQUIPMENT
FIT FOR USE AGAINST MODERN AIR FORCE
Heavy
Bombers
Medium
Bombers
Light
Bombara
Pursuit
Total
193
289
13
176
279
39**
208***
348
January 8
63
33
0
January 33
57
33
February 28
68
33
Notes
.
None with armory 5 with leakproof tanks. All now eoning through with leakproof equipment.
- 26 with leakproof tanks and year armer.
- 23 with loakproof tanks and armor.
SECRET
245
March 26, 1941.
I phoned Justice Brandeis' home on March 25th and
mentioned my name, that Mr. Istorik had indicated that
Justice Brandeis would like to see me, and that I would
be glad to come to the Justice's home at any time convenient to him. I was told to come at 9 a.m. on
March 26th.
The meeting with Justice Brandeis lasted for more
than an hour. I mentioned briefly the background of our
discussions with Istorik and Pinsent, of the British
Embassy, and why the Treasury had felt that it would be
quite inappropriate for a government agency to make a
loan to the Palestine Foundation Fund and to the Anglo
Palestine Bank, as was suggested by Istorik. I also
told him that Secretary Morgenthau felt that the approach
to the solution of the Anglo Palestine Bank's problem
was "through the heart" rather than through the usual
channels of making a loan to a bank, and that Istorik's
proposal, in linking the loan to the Palestine Fund with
the loan to the Anglo Palestine Bank, complicated the
problem. I also indicated that Secretary Morgenthau
had asked Istorik to discuss the problem with me with a
view to seeing if something could be worked out.
246
-2I asked Justice Brandeis of the importance of, and
the role played by, the bank in the Palestine picture.
Justice Brandeis emphasized that the bank was the
principal financial agency in Palestine, that it had
done very important and valuable work in the building
up of Palestine, that the bank was linked up with the
spirit of Hertzl and that the Jews in Palestine felt
very closely connected with the bank because of its
importance and of its traditions, that therefore the
Jews deposited their money with the bank, and that the
bank continued to play a tremendous role in Palestine.
At one time, he said, the bank's deposits included a
lot of money that came from depositors outside of
Palestine but that now practically all of the deposits
were of Palestine funds.
Justice Brandeis said he had first become familiar
with the Bank around 1918-1919 and has followed its
affairs closely since that time. Around 1918-1919 he
and others had some feeling that the bank had not been
run quite as it should have been, but as he studied the
problem further, he and the others realized that they
were judging the bank by the standards of American banks
and that this was not a proper basis of comparison.
247
-3Justice Brandeis felt that the bank had been and
was continuing to be well managed. He referred to a
Dutchman named Hoofien, who had come to the bank as a
young man around 1918 and who was very competent and
reliable and who had done and was continuing to do an
able job with the bank.
Justice Brandeis spoke very highly of the ability
and reputation of Istorik. He had first met Istorik in
connection with the reorganization of the Jewish Colonial
Trust which at the time was in straitened circumstances.
Justice Brandeis gave $12,500 to the Zionist organization
to be invested in the Jewish Colonial Trust and he
expected that the Zionist organization would never get
anything back on this money. Due considerably to plans
worked out by Istorik, the Zionist organization ultimately
realized $115 on every $100 of the money which Brandeis
gave them. Justice Brandeis also referred to this matter
as an example of the success in Palestine; that money
that he assumed would be lost was nevertheless more than
fully recovered.
Justice Brandeis spoke at great length and in glowing
terms of Palestine and the Jews who were there. He told
of the success in changing swamp, or rocky, or barren land
248
-4-
into fertile farm land; he spoke of the agricultural
colonies; of the people, principally young people, who
were not thinking of themselves or their children but
of creating a new land; of the new industries that are
being created to help in the prosecution of the war; and
of the 40,000 men who are willing to join the British
Army. He referred to the reaction of Mrs. Frankfurter
when she visited Palestine a few years ago and after
meeting the people and traveling about the country said,
"These are the happiest Jews I have ever seen, . and
then said, "These are the happiest people I have ever
seen." Justice Brandeis referred to other agriculturalists who had visited him and who impressed him so favor-
ably as to their ability, their selflessness, and their
being completely wrapped up in the development of
Palestine. He also said that the greatest luxury in
Palestine was to have a room by yourself, yet the Jews
there are willing to forego these and other comforts to
bring more Jews to Palestine.
I asked Justice Brandeis what he thought would happen
in Palestine if Britain were defeated and Germany got into
Palestine. Justice Brandeis said that if Hitler controlled
Palestine "he would drive the 500,000 Jews into the sea",
that Hitler was ruthless enough to do this and that he
249
-5had done as much in Europe. He felt that no one but
Hitler could capture Palestine and that Hitler would
not be able to capture Palestine because the Jews who
are there know every inch of the land and know how to
defend it much better than the Arabs. He felt that if
the Jews were driven out of Palestine, as long as they
were not all killed, through one method or another they
would find their way back to Palestine. He emphasized
that Palestine had been such a success and that the
people were 80 attached to the land that nothing would
keep them away from Palestine. In this connection
Justice Brandeis said that the people in Palestine have
a sense and appreciation of history that is unknown in
this country, and that they celebrate the anniversaries
of people who lived many hundreds of years ago and named
a steamship company after the first man who crossed the
Red Sea in the exodus from Egypt.
I asked Justice Brandeis what he thought of the
practicability of getting a group of wealthy Jews to
invest money in the Anglo Palestine Bank. At this point
Justice Brandeis spoke very bitterly of the rich German
Jews in this country. He said that not only had they
not helped Palestine and not contributed money, but that
250
-6they had actually hurt the movement. He said that if
these Jews had supported Palestine, Palestine would now
have 1,000,000 Jews rather than 550,000 Jews. He spoke
disparagingly of the experiments at Santo Domingo, British
Guiana, Philippines and elsewhere; he said that these
could not succeed and were diverting efforts from
Palestine. He said the lower middle class Jews would
continue to contribute money to Palestine even if England
was defeated.
Justice Brandeis spoke of his talk with Secretary
Morgenthau a few weeks ago, when Secretary Morgenthau
told him of the meeting he was going to have with a group
of Jews. Justice Brandeis said that the reactions of the
men whom the Secretary saw were precisely what he, Brandeis,
expected. He seemed to feel very discouraged about the
possibility of getting such rich Jews to contribute to
Palestine and said he had heard that Lessing Rosenwald
was not only refusing to contribute to Palestine but was
also urging his family and his friends not to contribute
to Palestine.
Justice Brandeis said several times that Secretary
Morgenthau was the key man in the whole country to try
to get the cooperation of such rich Jews in helping
251
-7Palestine, although he did not feel very hopeful of
success. He spoke warmly of the Secretary's coming
around to the point of view of supporting Palestine.
I asked Justice Brandeis if he thought there was
any possibility of interesting private American banks
in Istorik's proposal. He said that the trouble with
banks in this country 18 that they do not take enough
risks even though banks are supposed to take risks.
He said that the private banks would probably respond
to the Istorik proposal by saying, ask the Jewish
bankers to lend the money, and if the Jewish bankers
were asked to make the loan, they would say no.
I told Justice Brandeis that when Secretary
Morgenthau returned from his vacation next week I would
tell him of the discussion.
252
March 26, 1941
Mr. P. D. Houston,
President,
American Bankers Association,
22 East 40th Street,
New York, N. Y.
Ny dear Mr. Houstons
In the absence of the Secretary I acknowledge
receipt of your letter of March 21, 1941. enclosing
a copy of resolution passed at the Louisville
Regional Conference of the American Bankers Associa-
tion, hold on March twenty-first, in which the members
of the Association is attendance at that conference
agree to support the plan announced by the Secretary
for the sale of Defense Savings Bonds to the public.
We appreciate very such the action of the
conference and also the splendid reception that you
gave to Mr. Edwards and Mr. Johnston in their discussion
of these plans.
with kind regards,
Sincerely yours,
(Signed) D. W. BELL
Under Secretary of the Treasury
DWD:MLE
253
COP Y
THE AMERICAN BANKERS ASSOCIATION
Louisville, Kentucky
March 21, 1941
The Honorable Henry Morgenthau Jr.
Secretary of the Treasury
Washington, D. C.
Dear Mr. Morgenthaus
The officers and members of the American Bankers Association in
attendance at our regional conference in Louisville were delighted
with the opportunity of meeting with Mr. B. M. Edwards, your assistant,
in connection with the defense savings bond program, and with
Mr. Gale F. Johnston in charge of the sales of these bonds to the
public.
Enclosed is a copy of the resolution passed by the conference after
their addresses. This resolution expresses not only the feeling of
the bankers in attendance at Louisville, but, in addition, of our
members throughout the nation.
In conformity with the spirit of this resolution, my fellow
officers join me in expressing the belief that in the Treasury program
for the distribution of these savings defense bonds to the public those
banks, which so desire, should become banks of issue for the bonds to
the end that this important work may be facilitated throughout the
country.
Sincerely yours,
/s/ P. D. Houston
President
Enclosure
254
COP
Y
Resolution Passed at Louisville
Regional Conference of the
American Bankers Association
March 21, 1941
Since the success of the national defense program now under
way will rest upon the support of all the people,
Be it resolved that the members of the American Bankers
Association in attendance at this conference support the plan
announced by the Secretary of the Treasury today for the sale of
defense savings bonds to the public at large and pledge their
assistance and the use of their facilities in carrying out this plan.
255
March 26, 1941.
My dear Mr. Secretary:
I was glad to have your note of March 24.
I have talked at length this morning with Mr.
Houghteling, and we will work him into our organization as you suggest. I believe that he is pleased
at the opportunity.
As to Mr. Young, I am asking for information
about him from Rockefeller's group.
We are exploring the matter of induoing postmasters generally to sell stamps or bonds to
Governors and Mayors on May 1. Some of our group
doubt the propriety of attempting this, but it would
probably be feasible on a limited scale, at least.
As matters stand, arrangements would, of course, have
to be made by correspondence. We might be exposed to
some embarrassment if we should attempt to circularize
several thousand postmasters on such a subject.
I believe we are making some headway.
The bank meeting at Louisville was a complete
success and I am sure that wa can count on full 00operation from the bankers.
Our people are developing the details of plans
for radio and motion picture publicity, beginning May
1 and continuing steadily thereafter. In this we are
having the advice and help of Mr. Howard Diets, the
public relations man for M.G.M., sent us by the will
Hays organization.
We are attempting to organize immediately a small
group of speakers whom we can use to contact the various
national groups and organizations, to enlist their 00operation, and to make addresses before conventions and
meetings of such organizations as occasion may arine.
It is running in my mind that for the moment we might
well use Mr. Houghteling in this phase of our work.
256
The Secretary--2
We are going to make the effort to establish local
organizations in two or three States by May 1, on an experimental basis, along the lines of my conversations
with you on this subject.
I believe that these are the high spots of the work
that has gone on in your absence.
Hoping that you are having a good rest, and with
kind regards, I am
Sincerely yours,
(Signed) Harold N. Graves
Hon. Henry Morgenthau, Jr.,
Secretary of the Treasury,
Sasabe, Arisona.
HNG/mff
use give this better to me Kerty for my files
257
RANCHO DE LA OSA march 14.1941
SASABE. ARIZONA
ELEPHONE-LO DISTANCE
ARISONA
Dear Harold:
/, Isuggest you try and get the
fostmasters on may 1st to all
every governor and every mayor in
M.S. either a savings stawk or $18.75
B and and tie this up with
local newspapers.
2. Please give L. Houghteling
a chance to high on
obfense
know
he
Savings Bonds. you can write.
Jell Houghteting that 9 have made
this suggestion
3. I understand that Melan Rockefell
has with him a Mr. young who
was Professor of advertising at
chicago
heH.
could
useful?Maybe
Sincerely.
m.h.
258
TREASURY DEPARTMENT
Chammony
INTER OFFICE COMMUNICATION
Miss
DATE March 26, 1941
TO
Secretary Morgenthau
FROM Mr. Cochran
CONFIDENTIAL
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
£28,000
Purchased from commercial concerns
£ 5,000
Open market sterling was quoted at 4.03-1/2 throughout the day. Transactions of
the reporting banks were as follows:
Sold to commercial concerns
Purchased from commercial concerns
£2,000
£3,000
The Cuban peso moved to a new current high of 4-3/8% discount bid. The previous
high point, reached yesterday, was 4-13/16%
In New York, the closing rates for the foreign currencies listed below were as
follows:
Canadian dollar
15-1/16% discount
Swiss franc (commercial)
.2322
Swedish krona
Reichamark
Lira
Argentine peso (free)
Brazilian milreis (free)
Mexican peso
.2384-1/2
.4005
.0505
.2320
.0505
.2066
In Shanghai, the yuan was unchanged at 5-1/4 Sterling was also unchanged at
3.92-1/2.
There were no gold transactions consummated by us today.
No new gold engagements were reported.
2.674.
In London, spot and forward silver were again fixed at 23-1/2d, equivalent to
Handy and Harman's settlement price for foreign silver was unchanged at 34-3/4*.
The Treasury's purchase price for foreign silver was also unchanged at 35$. One of the
New York banks reported that it experienced some difficulty in obtaining silver for
immediate delivery at the 35 level, and was compelled to pay 35-1/16 for such silver
few days ago. The bank stated that it was purchasing spot silver in execution of a
Jwiss order for 500,000 ounces. Although it had received this order three months ago,
navicert had only been made available this week.
a
We made no purchases of silver today. M.M.P.
259
March 26, 19th.
Mrs. Friedues
Mr. Districh
will you please send the following cable to Spageal, Hong Keng for Sevene
"with reference " your eable of March n the Treasury. as the
present time, to not purchasing oliver for delivery outside of the United
States. Nicholson®
male 3-26-48
Delivered to Treasury by Mr. Nicholson
260
Shanghai
March 26, 1941.
French official sources in Hongkong confidentially report that Japanese
naval commander-in-chief is considering the construction of a small sub-
parine base in Spratly Island. Yoshinoa staff officer has been sent to
survey conditions there. Last week a military conference at Tokyo decided to send more troops to North Indo China. Some motorized units
including armored oars and tanks belonging to 8th division of Japanese
troops South China have arrived Hainan Island enroute North Indo China.
261
RESTRICTED
M.I.D., W.D.
G-2/2657-200
No. 349
March 26, 1941.
12:00 M.
SITUATION REPORT
I. Western Theater of War:
Air: No important activity and no night offensive operations over land by either side. The Luftwaffe claims additional
successes against shipping.
II. Balkan Theater of War.
Ground: Bulgaria. No change.
the Italians.
Albania. Normal artillery activity reported by
Air: Minor activity.
III. Mediterranean and African Theaters of War.
Ground: Abyssinia (Ethiopia). British forces are approaching Harrar, the second largest city in Ethiopia. The Italians report
the repulse of a British attempt to force a passage across the Dabus
River in west central Ethiopia.
Eritrea. The British claim the capture of further
positions covering Cheren and the repulse of another heavy Italian
counterattack.
Libya. It is now officially announced that El
Agheila was occupied by Axis forces March 24.
Air: Axis. Troops were attacked in northern Libya.
British. Pressure maintained in the Cheren and
Harrar areas. Tripoli was raided last night.
Note: This military situation report is issued by the Military Intelligence Division, General Staff. In view of the occasional inclusion of political information and of opinion it is classified as
Restricted.
RESTRICTED
CONFIDENTIAL
262
Paraphrese of Date Bactogram
Received as the New Department
at 22:65, March 26, 1941.
Befin, filed 19:00, March 25, 1941.
1. In a talk with the foreign minister, I wee told that he exposts
Green to we no aid from Turbay. Soverer, be does think the There will
offer resistance if the Comman estanliy attack them. Be feels that the
Greeks will mike same kind of terms with the Comment. the Bulgerians have
been told w the Germane that they have no intention of entering Tartage.
The sise of the Gomman foress in Balgaria was intented to compal the Type-
slave to sign w. IS they had been matter, the Togosists and the Taste
would have joined foress against the 2. Sofia converpendante of Buingest novagapers have think that
overtually the Baseteas will essume central of the territory east of the
River Mariton and the Gomman will take over the lead lying to the west of
10. information indicates that the bumblas of the Brasses
diplemate in Istember was Bussion the is that this was
meat to place Bulgaria and Germony in a bed light before the world, though
the Bassions themselves provoked Bulgeria late signing the past. the
Sensions deepise and fear Commony.
JAMAS
Distribution:
of Mar
State Department
Secretary of Treasury
Asst. Secretary of Mar
Ohiof of Staff
Mas Plans Division
Office of Naval Intelligence
CONFIDENTIAt
CONFIDENTIAL
263
Paraphrese of Code Budiogram
Received as Department
at 9:34, March 26, 1942.
London, filed 14:35, March 26, 1941.
1. British air activity on continues.
a. Daylight, March 25: Highteen assorted Anis vessels, as well
as other sea-boans traffic, were targets of British bombing off the
Motherinals coast. No hite reported.
b. There was no British aviation activity night March 24-25
on account of adverse weather conditions.
2. German air activity matest Dritain.
a. There were no Comman air operations over Britain during the
night of March 25-26. Socian enjoyed the longest period of fraction from
bombing alass beginning of hostilities (100 hours).
b. Daylight, March 25. operations Limited to off-chose
raids - a vessels and action against fighters occuriting 3. Air Leemea British theater.
Britter Daylight, March 25, no lessee. Daylight, March 24.
Three British stefields busbed at daybreak resulted in destruction of 1
banger and 4
- Two German please were injured in attache on shipping
daylight, March 25. Daylight, March 24, in attacks - R.A.F. fields @
Comman please were shot down, 8 others probably injured.
4. Britten air activity in made Statement theater.
a. Right, March activity was Limited to taffalay cal
CONFIDENTIAL
CONFIDENTIAL
264
artillery apport.
5. Axie are activity in made Section shouter.
a. The harber of Malta me again subjected to high altitule
bombing w - please in the night of March 24-25. Seals of attacks
10 bashero with double that number esearting please. Said successful.
I
b. Italian air forees are more active in esstern Meditarmasta
with light reinformement in fighters and distance bombers.
6. Air Leogue Middle Bastera Meater.
- Night, March 24-55. Three German please reported
7.
a.
A very trustmurthy source reports that large shipments of
Axis military and expplies continue to be east to the Quanny
Isles from a continesters Spanish your, including Image amounts of rice,
intreaching books and barbed wire, estimated 55,000 - make, 100 - 75am.
field please (pashage more), 1,000 sub-archise gms, 139am. healthere
(generally not reported), Team. Mauses rifies and mehine - with
apple supplies of ammition. Three hundred and fifty weeps are reported
ready to sail to follow 400 already reported leading in the this
month and 160 is February.
British authorities report parts of as Common divisions are
now is Belgaria (16 of them with full employeests) and not less then "
Sulgerias and Meany traffic on suitrasts further
reinforement shortly. More than two-thinks of the 30 Tegeslar divisions
are in service.
CONFIDENTIAL
CONFIDENTIAL
265
.
Lease of - - w Section is the - days I
March 9, - 72,775 teme. This is a distraction of two
27,099 - over the proceting with
the - magnite final to appearing more activity about
charee of Britata. Quester - - to to relatively instinative.
Distributions
Secretary of the
Amer. Becrobany of War
shiet of staff
State Department
office of Insolligence
Yes Please Division
Secretary of Treasury
Air Gaoge
es
CONFIDENTIAL
CONFIDENTIAL
266
of Code
Received as the Year Department
as 8196, March my 1941.
Loston, filed 24:30, March 27, 1943.
1. Activity - the Centinent.
a. of March 86. Anis - shipping along the coest
of Holical was attached w Britten Dembersment please. An aerial terpedo
from - of the British please caused some damage to a Corona travier and
a 6,000-ten energe best was each. In addition, these British planos
attacked other tenmine and eargo bosto with anchine - five.
D. Bight of March 25-06. Admisse weather cassed the cancellation
of all flights of Bribish please.
2. George Air Activity over
a. Hight of March 86-97. Only five Gumma please were platted
over Britaia during this night and their activities resulted is no damage.
b. BarLight of March 86. A total of 45 Gomman planse wase
cogney is - on British merchant shipping. Treaty other Common
please posstrated the constitue of Register The extent of the I does
has not yet been determined.
3. Airport legace is the Battle of Britain
a. MANCH Baylight of March 26 . 1 be
b. - Boylight of March 26 - , planes.
4. Britten Activities is made Statement
the following areas - targets - attached by British busband.
meat pleases The Karea region of Britres, airfields - the Delonance islands
of Galate and Beargeates the Milges city of Brigoli, and the is the
visinity of MAIL Abuba, Ethicipin.
CONFIDENTIAL
CONFIDENTIAL
267
5. date Air Ambivity is MANA Nectora Notes.
A British staffeld as the takens of Grote we ablected by
mehine-gen fire from three Italian please.
6. Assembly in middle Declare
There are as reports of please shot down in these Montess
but five German please were damaged during the British vaide - the Galate
and Scorgeate
7. Activity is the mode
During the afternoon of March 24, the Milgan team of m Aghetia
was occupied by a force of General table which processed beyond this term for
a distense of almost tounty miles. As this point the column changed its
direction and est off to the southeast. a Britten Mar Office was assessment
speet over the report that another column of Ganasa amount fighting vehicles
is in the vietality of Bank, Libera. There is only a wall number of Brittah
troops in this even, which is about 575 miles due south of Stipeli.
8. the Good attachs on Pigmouth on March 20th - Rist have
accountated the of all structures within one-fourth mile of the
City Hall.
9. Maral Activities.
As 10 o'slook on the marking of March 25 a Gosuas working saider
attached a British earge vessel 480 miles south of the Sage Vanie Intends.
British navel units have been unable to locate the two - mandage
and - which were sighted in the Assessic a few days ago.
SCANLON
Distributions
State Department
Securitary of Was
Aest. Secretary of Year
Oster of Staff
Secretary of Treasury
War Please Division
office of Royal Intelligence
Air Garge
6-3
CONFIDENTIAL
CONFIDENTIAL
268
of Code
Received as the Mar Department
as March my MAL.
Selstaki, filed March 27, w
A few maths age a - strenlated of on agreement between
the Seviets and - the Finas and the - are now working
together and soldiers on reate to Bermay still pass through
Finishi Consultations between the staffe of the too countries have
occurred is Serita as will as is
Distributions
Secretary of Mar
State Department
Secretary of Treasury
last. Secretary of Mar
Mar Plans Division
office of Naval Intelligence
CONFIDENTIAL
269
RESTRICTED
0-2/2657-200
M.I.D., W.D.
No. 350
March 27, 1941
12:00 M.
SITUATION REPORT
I.
Western Theater of War:
Air: Minor activity only.
II.
Balkan Theater of War:
Ground: Bulgaria. No change.
Yugoslavia. According to press reports Jugoslav
army leaders have by a coup d'etat overthrown the regency and cabinet
and have installed the boy King Peter as Monarch and General Dushan
Simovil, Chief of Staff for air, as Premier.
Albania. Local infantry and artillery actions.
III.
Mediterranean and African Theaters of War:
Ground: No change.
Air: German. Malta was attacked.
British. Support continued of operations in Ethiopia
and Eritrea. The Dodecanese Islands were raided.
Note: This military situation report is issued by the Military Intelligence Division, General Staff. In view of the occasional inclusion of political information and of opinion it is classified as
Restricted.
RESTRICTED
270
March 27, 1941
10:53 a.m.
Operator:
Schwarz is out of town and Mayl is coming
in in his place, and if he wants Mr. Haas,
he is at home and I can reach him there.
D.W. Bell:
O.K.
Operator:
I think that covers them all, doesn't it?
B:
I think all the others are here.
Operator:
O.K., and your recorder is working now.
Is there anybody else you want?
I'll call you in a minute.
(Pause).
B:
have to consult you.
H.M.Jr:
and we didn't
(In Sasabe, Arizona. Well, as I say, I
was both pleased and surprised.
B:
Well, that's fine. What happened, the
President sent a cable saying that he
didn't want any transactions to go through
without his approval, 80 then I had some
conferences with the State Department and,
in view of the situation over there, they
cabled an Executive Order to the President
which they retyped on board the boat and
he signed it and cabled us that he signed
it. 8o it was gotten out within a few
hours.
H.M.Jr:
Was that freezing orders?
B:
How's that?
H.M.Jr:
Was that a different order?
B:
No, it was the same kind of an order as
the other cases.
H.M.Jr:
I see.
271
2-
Just an amendment of the original order
to include Yugoslavia.
B:
H.M.Jr:
I see. Well, have there been some special
transactions that made him do that?
Well, I don't know what made him do that.
I suppose he had in mind the gold transaction
and I think the State Department was keeping
B:
him currently informed of the situation over
there, and it looked as though it was getting
worse and I assume that he thought he'd put
that stop order in against any transactions
going through.
H.M.Jr:
I see. Well, now, do they know yet whether has it come over on the ticker yet whether
they have been able to keep order, I mean,
have they got the Army under control 80
that they can fight if they want to?
B:
It isn't clear. It just says that King
Peter in a manifesto to his people announced
that he had taken the leadership in his
own right and was appealing to the people
for support, and Churchill announced at the
same time that they would give them all
H.M.Jr
the help that they could.
Well, I wish that around, say, 4:30 this
afternoon you would have Cochran and
Ferdi Kuhn send me a telegram of whatever
the latest news is, you see.
B:
H.M.Jr:
All right.
And then if Cochran can go over to the
State Department and if there is anything
secret, we have a very secret code here
with us and he could send me that, you
see.
B:
Yes. Just a moment until I get this note
here. (Pause). Huntington Cairns just
came in and said that there was a new
report on the ticker that all reserve
officers in Yugoslavia were to report
today at 4:00 p.m.
272
-3- H.M.Jr:
Good.
B:
So it looks as though they are getting
the army behind the government.
H.M.Jr:
B:
H.M.Jr:
Well, don't be afraid to send any telegrams.
Remember it is two hours' difference.
All
right.
Is there anyone here you want
to talk
to?
No, I just wanted to talk about this
because this is the most significant thing
that has happened since September, 1939.
B:
H.M.Jr:
That's right.
And I'd like to be informed. I want
Cochran to go over to the State Department;
I'd like him to go over and see the cables
after lunch. You see?
B:
All right.
H.M.Jr:
And then if there is anything, he can send
it either in the clear or we have two
codes; one is just ordinary and one is a
very confidential one.
B:
H.M.Jr:
All right. We'll fix it up.
And anything that happens on this Yugoslav
thing, I'm really terribly interested, and
I wouldn't mind being called on the phone.
B:
All right. We'11 give you a full report
and keep you advised.
H.M.Jr:
Because there is nothing that has happened
which is as good as this. Now, what I want
to find out while I'm here, if Young has
anything to report on what Donovan has been
doing. (Pause).
B:
Phil says he hasn't a thing and he hasn't
seen Donovan. This thing has happened in
that connection. As the bill was sent to
the President, the Bureau of the Budget
273
made up a list of allocations for the
President's signature and they did that
at his request.
H.M.Jr:
Yes.
B:
And they are allotting to the War Department
$2 billion for aircraft, ordnance, tanks,
facilities, et cetera; to the Navy, $500 million;
Maritime Commission, $400 million; Procurement
Division of the Treasury Department, for
steel and other industrial products, $375
million; and Agriculture for food and tobacco,
$125 million; making a total of $3 billion,
400 million. Now on the Procurement, we
didn't have any advance notice of that, but
the Budget said they did it because they
wanted to get started on it and they knew
that the Procurement Division was the only
office in the Government that had authority
to delegate - authority to purchase, so they
just gave it to Procurement and I told them
that while we'd go ahead and work on the
procedure, we'd have to wait until you came
back to see whether or not you wanted to
take that over. There was some indication
that Forrestal of the Navy would like to
do the purchasing, but there seemed to be
a difference of opinion because Mack talked
to Admiral Spear and he intimated that they
had all they could do and they'd be glad to
get rid of these interim orders.
H.M.Jr:
Who wants to do it?
B:
Well, Forrestal talked to me and he seemed
to think that they ought to do it because
they were already in the picture and
already buying steel, but I think Spear
feels that they've got enough to do and
would be glad to be relieved of it, but
H.M.Jr:
B:
we're trying to find out about it.
Well, I don't want you to wait. If that's
what they want, I'd show them what we
could do. I'd just go ahead and do it.
Well, Mack is in touch with them over there
and going ahead and getting everything in
readiness, so he'11
274
-5H.M.Jr:
I wouldn't hesitate to go in and do it
if you know what they want.
B:
Well, we don't know yet and the allocations
haven't come back so we can't do anything
until we get the letter from the President.
The procedure is being worked out.
H.M.Jr:
Are we buying this fr ourselves or for
the use of the English?
a
B:
H.M.Jr:
B:
H.M.Jr:
B:
H.M.Jr:
This is/British matter.
Well, now, the British have got very good
people over here on steel.
Yes, I understand.
And I certainly would let Phil Young get
in on this with both feet.
Phil is in on it.
And I'd show them what we could do. I mean,
I'd give them instantaneous service. I
think you'll find that it's just a question
of signing the contracts as far as the
British are concerned.
B:
Well, the Navy has already had under
consideration some contracts during the
time, you know, the bill was pending .....
H.M.Jr:
Yeah.
B:
they let a few contracts for ordnance
and steel and other items and I think the
Navy is considering some and I think that
is the reason they were raising the question
as to whether or not they should do it or
the Procurement should do it under this
$375 million allocation.
I wouldn't delegate it to the Navy.
H.M.Jr:
B:
How's that?
H.M.Jr:
I wouldn't delegate it to the Navy.
275
-6B:
H.M.Jr:
Well, I don't think they want it. Down the
line I don't think they want it. I think
they'd like to get rid of it; they've got
too much to do as it is. But anyhow, we're
looking into it and e'll let you know.
Yeah, but if it's for the English, I think
you'll find that the contracts are all
ready and that the price is fair and all
you've got to do is to buy the stuff.
B:
I'm not 80 sure.
H.M.Jr:
What?
B:
I'm not so sure, but we'll have to check
into that.
H.M.Jr:
Well, if you want any advice, I'm here.
B:
O.K.
H.M.Jr:
But I wouldn't - well, anyway, you say
B:
Phil is in on it?
Yes, sir. He's familiar with the whole
thing; he's been in right along, and he's
been in touch with Mack.
H.M.Jr:
B:
All right. Now, what else?
Everything else is rather quiet, bond
market is good, new bonds are selling
close to 102. One sale yesterday at 102
and this morning it's 30-31, and the whole
market has a very good tone.
H.M.Jr:
Let me ask you this on this stuff for the
English. Is Phil there? Could I talk to
him for a minute?
B:
Philip
Yes, he's right here.
Young:
Hello.
H.M.Jr:
Hello, Phil.
Y:
Yes, sir.
276
7H.M.Jr:
Y:
H.M.Jr:
Have
you been talking with the English
on this?
On this buying, yes, sir, every day.
Well, I mean, how far along have they
got their negotiations for the money that
we have?
Y:
Well, they're in all stages. They have
some contracts that are ready to sign.
H.M.Jr:
They have.
Y:
Right.
H.M.Jr:
Y:
Well, I mean, have you been in contact
with Purvis?
Yes, I've been talking with Purvis and
with the Army and Navy and with Cliff Mack.
H.M.Jr:
Well, now, what I'd like you to do is to
arrange a meeting in Bell's office with
Purvis and Mack.
Y:
Right.
H.M.Jr:
Hello?
Y:
Yes, sir.
H.M.Jr:
So that Bell can get the feel of the
thing.
Y:
Right.
H.M.Jr:
I say, get Purvis and whoever is doing
their steel buying - who is buying their
steel?
Y:
Elliot.
H.M.Jr:
Well, bring Elliot and Purvis over to
Bell's office and have Mack over there
and let Harold Graves sit in too.
Y:
Yes, sir. I think that they are all pretty
familiar with this picture already.
277
8H.M.Jr:
Y:
H.M.Jr:
Well,
do it anyway, Phil. Get them all in
the same room.
Yes, sir.
I say, there'd be Mack and Harold Graves
and you and Bell there and Purvis and
Elliot.
Y:
Right.
H.M.Jr:
I'd do that this morning.
Y:
I'd have to get Elliot down from New York;
H.M.Jr:
What?
1:
it may take a day to do it.
It may take a day to do it - to get the
people together.
H.M.Jr:
Well, that's a day longer than necessary.
Y:
The immediate difficulty on it is the
question of authority of Procurement to
actually go ahead and sign the contracts
H.M.Jr:
Oh.
because
Y:
H.M.Jr:
Here out West, you know, we shoot from the
hip.
Y:
Yes, sir.
H.M.Jr:
We shoot on sight, you know.
Y:
Yes. Well, maybe we ought to move out
there too.
H.M.Jr:
Come on.
Y:
(Laughs). That all?
H.M.Jr:
That's all I've got.
Y:
Right.
278
9H.M.Jr:
Y:
B:
H.M.Jr:
B:
H.M.Jr:
B:
What else?
I'll turn you back to Danny.
That's all I have Mr. Secretary.
You don't mind my arranging a meeting
for you in your office.
No, that's fine, as long as it's held .....
But I think it'11 bring it to a head.
But I'm going to insist on its being
held this afternoon. As you know I'm
going away over Friday and Saturday.
H.M.Jr:
Good for you.
B:
The only other thing that I've got is to
tell you that the revenue receipts are
coming in with a bang. It looks as though
we might get as much as $175 million over
our estimate.
H.M.Jr:
B:
Wonderful.
So that the year might run up pretty well
in excess of the estimate. They really
are looking good.
H.M.Jr:
Ithere.
might speak with John Sullivan if he's
B:
How's that?
H.M.Jr:
Is John Sullivan there?
B:
Yes, sitting right here.
H.M.Jr:
Let me talk to him a minute.
B:
O.K.
John
Sullivan:
H.M.Jr:
Hello, Mr. Secretary.
Hello, John.
279
- 10 S:
H.M.Jr:
How are you, sir?
Fine. I've got an idea that may not be
worth anything but I wish you'd think
about it, and that is the thought of you
and me, or one or both of us, possibly
going to some of these camps and getting
off a speech on the taxes particularly
along the line of state tax exempts and
try to interest these million boys in this
whole picture and then get the reaction
through them to their homes to the Congress-
men.
S:
Yes.
H.M.Jr:
I wish you'd be thinking about it.
S:
Right.
H.M.Jr:
I mean, the idea, you know. Here they are
working at a dollar a day and here people
could invest in these Arkansas bonds which
couldn't have been sold if it wasn't for
the tax exempt privilege and continuing to
permit certain groups to put their money
into tax exempts without making any contribution towards national defense.
S:
Right.
H.M.Jr:
And I was thinking as a background that we
might go and talk to some one of these
large
cantonments. Will you think about
it?
S:
I will, sir.
H.M.Jr:
How does it strike you at first blush.
S:
Good.
H.M.Jr:
What?
S:
Good.
H.M.Jr:
And we could try it and if it works we
could go to one-half a dozen of these
280
- 11 different cantonments and make this
speech about this whole question of taxation
and see if we can't build a bonfire under
some of our friends on the Hill.
S:
I think the bonfire is being built right
now and I think
accelerate
it. this would help and would
H.M.Jr:
I'd like to do it through the soldiers.
S:
Right.
H.M.Jr:
S:
And as I say you might think about it
and, oh, outline what
I'll prepare a talk. I will prepare a
talk, I say.
H.M.Jr:
Good.
S:
Right.
H.M.Jr:
Well, it has been pleasant to talk to
all of you. Anybody want to volunteer
anything?
S:
H.M.Jr:
S:
You might be interested to know that Dano
instead of ousting Gaston from his chair
is now working on the Undersecretary.
Wonderful. My money is on Dano.
We're all betting on Dano. Just a minute,
Mrs. Klotz is going into her room to talk
to you.
H.M.Jr:
S:
Right. (Pause). Hello.
Hello, I'm just waiting for Mrs. Klotz
to take the phone.
Operator:
Hello.
H.M.Jr:
Yes.
Operator:
Do you want Mrs. Klotz now?
H.M.Jr:
If you please.
281
ABOARD U. S. S. DESTROYER BENSON. -PRESIDENT ROOSEVELT TODAY SIGNED
THE $7,000,000,000 WAR-AID APPROPRIATION BILL AT 10:50 A.M. EST.
3/27--RS1126A
ADD BILL SIGNED, ABOARD BENSON.
PRESIDENT ROOSEVELT SIGNED THE BILL LESS THAN AN HOUR AFTER IT
HAD BEEN DELIVERED TO HIM ABOARD THE YACHT POTOMAC.
A NAVY BOMBING PLANE WHICH BROUGHT THE BILL FROM MIAMI LANDED IN
THE SEA NEAR THE POTOMAC AT 10 A. M. FIFTY MINUTES LATER THE PRESIDENT
SIGNED IT IN THE POTOMAC WARDROOM, SURROUNDED BY HIS ADVISERS, HARRY
L. HOPKINS, ATTORNEY GENERAL JACKSON, SECRETARY ICKES, REAR ADMIRAL
ROSS T. MCINTIRE, HIS PERSONAL PHYSICIAN, AND SECRETARIES MAJ. GEN.
WATSON AND EARLY.
THE PRESIDENT THEN PRESENTED THE HISTORIC PEN WITH WHICH HE
SIGNED THE MEASURE TO HOPKINS.
THE BILL WAS BROUGHT TO THE POTOMAC BY LEO DE WAARD, POSTAL
INSPECTOR ATTACHED TO THE PRESIDENTIAL PARTY, WHO FLEW FROM MIAMI
TO THE YACHT ABOARD NAVY BOMBER 33-P-4, PILOTED BY ENSIGN J. F.
BUNDY, STATIONED AT KEY WEST, FLA.
THE POTOMAC WAS ROCKING GENTLY IN A SUNNY, SUB-TROPIC SEA. MR.
ROOSEVELT INDICATED AFTER SIGNING THE BILL THAT HE WOULD CONTINUE
HIS FISHING CRUISE.
3/27--RS149P
282
CONFIDENTIAL
(To Keep You Posted)
March 27, 1941
To:
The Secretary
From:
Mr. Young
Re: British Aircraft Shipments
Attached herewith is the latest statement of aircraft shipped to the United Kingdom and other points.
This statement gives figures showing the number of planes
which have been received at the assembly points during
the past week.
au
283
STRICTLY CONFIDENTIAL
STATEMENT NO. 7
AIRCRAFT SHIPPED TO U. K. & OVERSEAS COMMANDS
By Air
By Sea
During Week
TYPE
DESTINATION
ASSEMBLY
POINT
Ending
March 1, '41
During Week
Ending
March 22, '41
Brewster
Buffalo
Far East
Singapore
(via Panama)
22
ilenn Martin
Maryland I
S. Africa
Capetown
5
Lockheed
Hudson III
Hudson V
U. K.
U. K.
U. K.
U. K.
U. K.
4
(via Gander)
U. K.
1
7
Consolidated
Catalina
U. K.
TOTAL
British Air Commission
March 24, 1941
U. K.
(via Bermuda)
2
38
3
RECEIVE
MAR 25 1941
Treasury Department
Office of Philip Young
284
TO:
Mrs. Klotz
)
Mr. Young sent you a copy of this
memorandum last week, but he thought
you might like to have the original
for the Secretary's files.
bj
4/1/41
From: MR. YOUNG
Lend Lease
285
WAR DEPARTMENT
WASHINGTON
March 27, 1941.
MEMORANDUM FOR THE SECRETARY OF THE TREASURY.
Subject: Procurement Program under
allotments recommended from
Lend-Lease Appropriation.
1.
On March 25, 1941, recommendations were forwarded
to the President with reference to immediate allotments to
start procurements under the Lend-Lease appropriation.
These included $375,000,000 to the Treasury Department.
2. It is desired that there be available to Mr.
Harry Hopkins upon his return to Washington a summary of the
procurement programs involved in the recommended allotments.
3. It would be appreciated if you would submit to the
undersigned by noon, Saturday, March 29, 1941, the proposed
Treasury Department procurement program under its allotment,
together with information as to the extent to which the
program conforms to official British requirements.
For and in behalf of Mr. Harry Hopkins:
Jarm
H. BURNS,
Major General, U. S. Army.
mack
and
Cof copy
to Bull
merkletz 3/27/41
B.g.
RECEIVED
MAR 27 1541
Treasury Department
Office of Philip Young
286
Mrs. Klots
)
Mr. Young is returning this for
your files.
bj
4/1/41
From: MR. YOUNG
OSW
JJMcC/jhs
March 37. 1941
KENGRANDEN FOR: the Ohiof of Ontanase.
Sa with instructions of the Secretary, I as
costing you herein th a w of a letter, dated March 19. 1942. from
the Maintenances of the Federal Loan Agency to the Sporetary of
Yes relating to certain articide to be manufactured through the
Federal Sona Agency for the Mar Department. The enclosed letter is
is response to the letter can't by the Secretary of Year en March 10
to the Federal Less Multistantor. a copy of which you already have.
JOHN 8. NOCLOT
Special Assistant to
the Secretary of Mar
Inc.
1tr. 8/19/42
Multistrater Jense to
Secretary Stinoon
sew to
Secretary Morganition
Inder Secretary of Mar
Onlor of Staff
Colonel
Colonel Quinton
0.62 - OM
287
288
FEDERAL LOAN AGENCY
WASHINGTON
March 19, 1941
Dear Mr. Secretary:
Receipt is acknowledged of your letter of
March 10, 1941, requesting that the Mar Department
be not limited to the various estimated costs set
forth in the list of articles which was transmitted
with your letter of January 25th, provided that the
total cost of the articles to be manufactured does
not exceed the total cost set forth in such list.
This request has my approval. Since the
President's letter of January 23rd containing the
statement of accessity required by the Act of June
25, 1940 (Public No. 664) made no provision for his
approval of the estimated cost of the arms, annunition and implements of war designated by you for
manufacture, his approval of this modification is
unnecessary. Needless to say. both Defense Supplies
Corporation and the undersigned will be guided by
your estimates as to the cost of the items to be
manufactured.
Yours very truly,
/s/ Jesse H. Jones
Munistrator
Henorable Henry L. Stimson
Secretary of Mar
Washington, D. 0.
COPY
289
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
Miss
For
DATE March 27. 1941.
TO
Secretary Morgenthau
Mr. Cochran
CONFIDENTIAL
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
Purchased from commercial concerns
£107,000
& 5,000
The Federal Reserve Bank of New York sold £15,000 in registered sterling to
the American Express Company.
Open market sterling remained at 4.03-1/2. Transactions of the reporting banks
were as follows:
Sold to commercial concerns
Purchased from commercial concerns
£ 5,000
-0-
Continuing its improvement, the Cuban peso advanced to a discount of 3-1/2%. A
month ago, when the appreciation of the peso began, the quotation was 7% The upward
ovement was first attributed to the seasonal movement of Ouban sugar to this country.
More recently, the enactment of a measure authorising the Cuban Government to nego-
tiate for an $11,000,000 Export-Import Bank sugar loan, and a British inquiry for
200,000 tons of Cuban sugar have been mentioned as possible factors in the advance.
In New York, the closing rates for the foreign currencies listed below were as
follows:
Canadian dollar
Swiss franc (commercial)
Swedish krona
Reichsmark
Lira
Argentine peso (free)
Brazilian milreis (free)
Mexican peso
15-1/16% discount
.2322
.2384-1/2
.4005
.0505
.2320
.0505
.2066
In Shanghai, the yuan in terms of our currency advanced 1/32 to 5-9/324, and
sterling was unchanged at 3.92-1/2.
There were no gold transactions consummated by us today.
No new gold engagements were reported.
2
290
In London, the price fixed for spot silver was unchanged at 23-1/2d. The forward
aotation was 23-7/16d, representing a decline of 1/16d. The U.S. equivalents were
42.67$ and 42.56
Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44.
The Treasury's purchase price for foreign silver vas also unchanged at 35#.
We made no purchases of silver today.
gimi?
CONFIDENTIAL
291
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE March 27, 1941
TO
Mr. White
FROM
Mr. Kamarck
Subject: Axis Influence in Costa Rica
(Based on information supplied by the Office of the Coordinator
of Commercial and Cultural Relations Between the American
Republics)
Summary
Axis influence is not important in the present Costa Rican
government. Nasi propaganda through the medium of the Catholic clergy,
a German school and a German club is important, however.
1. There are less than 1,000 Germans in Costa Rica. However,
the Germans are important in the commercial and cultural life of the
country beyond their numbers.
Nazi propaganda is carried on in Costa Rica most effectively
through the Catholic Church. Most Costs Ricans are Catholics and
ninety percent of the clergy are pro-Germans. The Seminario where
priests are educated has predominantly German priests as teachers and
turns out, therefore, fascist-minded clergy.
The German school in San Jose is also important. It is the best
school in the country and its classes are attended by the children of
government officials and of the wealthier business people. The children
going to the school come out as thorough-going Nasis.
The German club in San Jose is the best club in the country. For
a time, all the most prominent people belonged to it. Its popularity
has diminished recently.
It is also important to mention that the Germans control the port
of Puntarenas, the chief Pacific outlet of the country. While the Germans
are not so entrenched in the commercial life of the country as they are
in the state of Guatemala, they still control about one-fifth of the
coffee crop (the second most important commodity of the country).
There are a number of suspected Nasis on the United Fruit Company
payroll. The company is of the opinion that by means of its excellent
intelligence service the activities of these people can be kept innocuous,
292
2Division of Monetary
Research
2. The Italians in Costs Rica are about as numerous as the Germans
(less than a thousand) but are nowhere nearly as important. Most of the
Italians are small shopkeepers and exercise little influence. The Costa
Ricans have a tendency to look down on the Italians as lacking in military
ability.
There are only about 40 Japanese in Costa Rica and these do not
exercise any political influence.
Spanish fascian is also represented in Costa Rica in the form of
The Colegio de Los Angeles, a school for boys which is taught by Spanish
fascist priests.
3. British propaganda by means of generous subsidies has been much
more effective in influencing the Costa Rican press than the axis powers
have.
293
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE March 27, 1941
TO
Mr. White
FROM
Mr. Kamarck
Subject: Axis Influence in Honduras
(Based on information supplied by the Office of the Coordinator
of Commercial and Cultural Relations Between the American
Republics)
Summary
Axis influence in Honduras is very small. The only factor of
significance is the control by the Germans of the transportation and
commercial facilities of Honduras' only Pacific port, Amapala.
1. There are 450 Germans in Honduras. These do not possess any
dominant economic position aside from the control of the transportation
and commercial facilities of the port of Amapala. Amapala has considerable
importance because it is the only Pacific outlet for Honduras and, in
addition, also serves E1 Salvador through the town of La Union.
One of the two most important newspapers in the country, E1
Cronista, is mildly pro-German (the other important newspaper is controlled by United Fruit Company).
While the Germans had a Nasi organization, it was suppressed by
the government in 1939. Since then there have been few manifestations
of Nagi propaganda,
2. The 200 Italians and 2 Japanese in the country are of little
importance as far as the propagation of fascist ideology is concerned.
The Papal Nuncio who is pro-fascist wields a certain amount of
influence.
3. The Honduran government is strongly opposed to the European
and Japanese fascisms and only a few minor officials can be classed
as pro-axis.
/
294
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE March 27, 1941
TO
Mr. White
FROM
Mr. Kamarck
Subject: Axis Influence in Panama
(Based on information supplied by the Office of the Coordinator
of Commercial and Cultural Relations Between the American
Republics)
Summary
Axis influence in Panama is small. The present government
administration is extremely nationalistic and is reputed by some to
be semi-fascist.
1. Around 600 Germans live in Panama. There is no known Hazi
party organisation in the country. German commercial firms are known
to contribute for the purpose of spreading Nazi propaganda. Propaganda
distributed in Panama appears to originate from Guatemala.
2. There are 170 Italians and 250 Japanese living in the republic,
The two nationalities do not appear to be making any important attempts
to influence public opinion, though they may be active in espionage.
The French Vichy government has recently sent a military attache
to Panama. In all the years prior to this, that France was a military
power, she did not find such representation necessary.
3. The present administration of Dr. Arnulfo Arias has shown itself
to be violently nationalistic. The private secretary of the President,
Antonio Isaza, has the reputation of being pro-Nasi, It is reported that
the government will try to influence the press to curb attacks on the
axis powers. There are indications that the government while not
possessing completely fascist tendencies may be classed as semi-fascist.
295
Arisiah
Washington, B. C.
27th March 1941
Dear Cochisan,
I enclose a oopy of the letter from Sir Advant
Peanook which I mentioned to you ea the telephone today.
Years sincerely,
R.V. Playfair
Bochras
v. a. treasury
Washington, 2. e.
COFFEE
296
BRIENDS PURCHASING COMMISSION
15. Broad Street, New York.
March 26, 1942.
Dear Playfair.
I have year letter enclosing ene seat to
Mr. Sectures about property in the propesed Cumberiant Gap
National Historical Park.
If through Mr. Cochran w could - some further
information as to the English additional which owas " such
of the lead, I shall be gind to follow 18 - in Lesson, if
yes do not think 10 would be asking too such to request
this.
Years sincerely,
3. a. PRADOCK.
B. V. Payfair,
British Purchasing Conniscies
Williams Notel
Washington, D. O.
-
297
COPY
LONDON
Dated March 27, 1941
Rec'd 3:05 p.m.
Secretary of State,
Washington.
1208, March 27, 6 p.m.
CONFIDENTIAL.
British Treasury has supplied the Embassy with copies
of the two agreements signed on March 19 with General de
Gaulle and the Council of Defense of the French Empire
together with an exchange of letters between de Gaulle and
the Chancellor of the Exchequer by which half of the gold
production of French equatorial Africa is to be put at the
disposal of the British Government.
These documents which are confidential are being
forwarded by mail. The financial agreement apart from fixing
the rate of exchange at 176.625 francs to the pound and
including in the sterling area the French colonies under the
jurisdiction of the council (defined as comprising French
Equatorial Africa, and French Cameroons, French Oceania
and French Establishment in India) provides for machinery of
exchange and import controls in the territories concerned and
for sympathetic consideration by the British Treasury of
application by the council for foreign exchange required
temporarily for the efficient prosecution of the war.
The
298
- 2 - 1930
82
The secret agreement provides for the granting of
credits to General de Gaulle by the British Government and
for the procedure of submission of budgets and accounts
of expenditure by the former and allows him to re-lend sums
to colonies after agreement with the British Government.
The British official when handing these documents to
the Embassy stated that the agreements are designed largely
to supply the French territories concerned without the support
of which their present status has deprived them. The British
Government is taking considerable quantities of colonial
products the bulk of which are being stored locally with a
view to using them eventually in feeding post war Europe.
It was also emphasized that no profit is being made out of
these arrangements which are calculated to cost the British
Government a good deal more than any considerations being
received.
The British Treasury official also stated that Iceland and the Faroe Islands are being brought into the
sterling area, the Iceland agreement having already been
signed, and April 2 being the probable effective date for
both agreements, which are also designed to provide the
aupport of which the present status of these territories has
derived them.
Please inform Treasury.
WINANT.
299
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Legation, Budapest, Hungary
DATE: March 27, 1941, 5 p.m.
NO.: 116
This morning I was asked by the Foreign Minister to
express to the Department his regrets that Hungarian funds
in the United States were frozen. The Minister told me that
when Ghika got to New York the latter was informed that the
United States would freeze Hungarian funds. However, the
Minister either could not or would not tell me who gave
that information to Ghika. The same information had been
telegraphed by the Havas agency, he said.
Many rumors have been current here, it is true, that
when the Lease-Lend Bill was passed the United States would
freeze Hungarian funds. Efforts had been made by the
Minister to be absolutely correct with the United States
Government in withdrawing funds. For that reason the
Charge d'Affaires in Washington had been instructed by him
to make advance explanation that Hungary might experience
difficulty in obtaining money for financing legations and
consulates in the United States, England, Canada and the
countries of South America, and he had been instructed to
explain to the Department that it was for that purpose
the funds were being withdrawn. The Minister said that
if the Charge had been advised by the Department not to
withdraw the funds, or if he had been told that funds for
the
300
-2the upkeep of Hungarian diplomatic needs would be released
in sufficient amount should the general funds be blocked,
Hungary would not have withdrawn the funds.
The Minister evidently feels that the freezing of
Hungarian funds was definitely a political act, and that
such action regarding Hungary was meant to be an example
to the Yugoslavs.
TRAVERS.
EA:LWW
301
TREASURY DEPARTMENT
FOR RE EASE, MORNING NEWSPAPERS,
Friday, March 28, 1941.
The Secretary of the Treasury, by this public
notice, invitea tenders for $100,000,000, or thereabouts, of
91-day Treasury bills, to be issued on a discount basis
under competitive biding. The bills of this series will
be dated April 2, 1941, and will mature July 2, 1941, when
the face amount will be payable without interest. They will
be issued in bearer form only, and in denominations of $1,000,
$5,000, $10,000, $100,000, $500,000, and $1,000,000 (maturity
value)
Tenders will be received at Federal Reserve Banks
and Branches uo to the closing hour, two o'clock p. m.,
Eastern Standard time, Monday, March 31, 1941. Tenders will
not be received at the Treasury Department, Washington. Each
tender must be for an even multiple of $1,000, and the price
offered must be expressed on the basis of 100, with not more
than three decimals, e. g., 99.925. Fractions may not be
used. It is urged that tenders be made on the printed forms
and forwarded in the special envelopes which will be supplied
by Federal Reserve Banks or Branches on application therefor.
Tenders will be received without deposit from
incorporated banks and trust companies and from responsible
and recognized dealere in investment securities. Tenders
from others must be accompanied by payment of 10 percent of
the face amount of Treasury bills applied for, unless the
24-26
302
2-
tenders are accompanied by an express guaranty of payment
by an incorporated bank or trust company.
Immediately after the closing hour, tenders will
be opened at the Federal Reserve Banks and Branches, following which public announcement will be made by the Secretary
of the Treasury of the amount and price range of accepted
bids. Those submitting tenders will be advised of the
accentance or rejection thereof. The Secretary of the
Treasury expressly reserves the right to accept or reject
any or all tenders, in whole or in part, and his Action in
any such respect shall be final. Payment of accepted tenders
at the prices offered must be made or comoleted at the
Federal Reserve Bank in cash or other immediately available
funds on April 2, 1941.
The income derived from Treasury bills, whether
interest or gain from the sale or other disposition of the
bills, shall not have any exemption, as such, and loss from
the sale or other disposition of Treasury bills shall not
have any special treatment, as such, under Federal tax Acts
now or hereafter enacted. The bills shall be subject to
estate, inheritance, gift, or other excise taxes, whether
Federal or State, but shall be exempt from all taxation now
or hereafter imposed on the principal or interest thereof by
any State, or any of the possessions of the United States, or
303
-3-
by any local taxing authority. For purposes of taxation the
amount of discount at which Treasury bills are originally
sold by the United States shall be considered to be interest.
Treasury Department Circular No. 418, as amended,
and this notice, prescribe the terms of the Treasury bille
and govern the conditions of their issue. Copies of the
circular may be obtained from any Federal Reserve Bank or
Branch.
-000-
304
TREASURY DEPARTMENT
Community
Mins
INTER OFFICE COMMUNICATION
For
DATE March 28, 1941
Secretary Morgenthau
TO
FROM
CONFIDENTIAL
Mr. Cochran
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
£69,000
Purchased from commercial concerns £17,000
Open market sterling held steady at 4.03-1/2. Transactions of the reporting
banks were as follows:
Sold to commercial concerns
£1,000
Purchased from commercial concerns -0The Cuban peso touched a new current high of 3-5/16% discount this morning.
During the afternoon, however, it developed a weaker tendency and the closing rate
ras 3-7/8%
In New York, the closing rates for the foreign currencies listed below were
follows:
Canadian dollar
Swiss franc (commercial)
Swedish krona
Reichsmark
Lira
15-1/8% discount
.2322
.2384-1/2
Argentine peso (free)
Brazilian milreis (free)
Mexican peso
.4005
.0505
.2318
.0505
.2066
In Shanghai, the yuan in terms of our currency was quoted at 5-11/324. up
/164. Sterling was 1/24 higher at 3.93.
We sold $1,000,000 in gold to the Central Bank of the Uruguayan Republic,
which was added to its earmarked account.
No new gold engagements were reported.
In London, the spot and forward silver prices were unchanged at 23-1/24 and
3-7/16a, respectively. The U. S. equivalents were 42.67 and 42.56
Handy and Harman's settlement price for foreign silver was unchanged at 34-3/44.
Treasury's purchase price for foreign silver was also unchanged at 35
We made no purchases of silver today.
pm.p.
305/or Miss Chauncos
March 28, 1941
CORFIDENTIAL
Dear Mr. Knoke:
Permit - to acknowledge, on behalf of the
Secretary, the receipt of your letter of March 27,
1941. with which you enclosed your compilation for
the week ended March 19. 1941. showing dollar diebursements out of the British Repire and French accounts at the Federal Reserve Bank of New York and
the means by which these expenditures were financed.
Faithfully yours,
H. Morie Geohrai
Technical Assistant to the Secretary
L. W. Knoke, Sequire,
Vice President,
Federal Reserve Bank of New York,
New York, New York.
HMG: lap~ 3/23/41
306
FEDERAL RESERVE BANK
OF NEW YORK
March 27, 1941.
CONFIDENTIAL
Dear Mr. Secretary: Attention: Mr. H. Morle Cochran
I am enclosing herewith our compilation for the
week ended March 19, 1941, 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,
L. W. Knoke,
Vice President.
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. C.
Enclosure
SB W 8 12
ANALYSIS OF BRITISH AND FRENCH ACCOUNTS
(In Millions of Dollars
DEBITS
Total
Debits
PERIOD
Cov't
Expendi-
tures(a)
BANK
BANK OF ENGLAND (BRITISH GOVERNMENT)
Other
Debits
Total
Credits
Securities Other
Gold
Official) (b)
OF
DEBITS
CREDITS
Proceeds of
Sales of
Credita(a)
Strictly
Week Ended March 19, 1941.
Net Inor.
(+) or
Dear. (-)
in Balance
Total
Debits
Confidential
FRANCE
CREDITS
Proceeds
Gov't
Expendi-
Other
tures (d)
Debits
6.0
13.4
Total
Credits
of Gold
Other
Sales
Credits
Net Inor.
(+) or
Deer. (-)
in Balance
1939
Nov. 30 Jan.
3
100.9
182.8
8.7
89.0
75.2
50.6
54.8
16.8
38.0
43.4
20.6
124.2
115.5
113.4
100.9
283.2
249.7
15.4
108.8
14.5
26.1
23.6
145.3
156.7
180.2
605.6
101.0
108.3
94.0
56.7
60.9
14.0
46.8
20.0
19.6
77.3
137.9
93.0
86.4
126.2
319.3
225.0
93.2
12.0
3.0
21.0
15.0
* 36.1
567(0)
294.8
2.0
1.0
24.7
80.9
10.8
26.4
420.1
31.4
32.0
+ 1.8
36.6
90.7
106.7
191.7
5.8
97.7
8.9
3.2
57.8
22.4
-
-
-
1940
Jon. 4 - 31
Feb. 1 28
3
1
Feb. 29 Apr.
Apr. 4 - May
May 2 - 29
Lay 30 - July 3
July 5-31
Aug. 1 28
First year of war
Aug. 29 Oct.
Oct. 3 - 30
Oct. 31 - Nov. 27
261.1
Nov. 28 - Dec. 31
March 5
12
19
86.8
28.1
22.8
11.4
61.5
31.5
30.0
72.7
99.6
32.8
35.9
39.9
63.7
27.0
84.8
29.4
+ 25.3
101.4
57.0
55.4
44.4
29.4
51.6
15.9
19.1
21.5
828.2
1,356.1
308.9
167.8
28.9
201.1
39.9
234.6
206.8
27.8
1356.7
198.5
259.5
198.0
271.5
160.5
210.0
111.4
26.0
31.5
60.6
2,793.1
2,109.5
108.0
575.6
101.4
176.2
26.6
26.0
48.8
4.0
13.9
6.3
164.6
137.8
26.8
40.0
56.7
44.6
45.5
27.0
49.0
13.0
1.7
44.5
50.1
41.6
3.0
95.4
37.1
8.4
32.3
Average Weekly Expenditures Since Outbreak of War
$19.6 million
France (through June 19)
England (through June 19)
England (since June 19)
27.6 million
54.6 million
26.6
24.8
76.8
52.0
6.0
6.0
18.0
19.0
12.0
14.0
55.9
71.5
105.0
78.7
24.6
22.5
72.5
KEEK ENDED:
Fab. 26
267.4
109.2
78.6
1,187.6
We period through Dec.
Jan. - Feb.
212.2
58.7
88.6
- 85.9
244.3
Jan.
Feb. 27 - Apr.
301.3
82.9
+ 35.3
48.0
316.8
196.7
241.0
1,793.2
2
87.3
-
-
35.0
138.8
6.6
18.3(f)
+ 33.7
. 35.0
- 7.9
18.5
10.8
62.5
6.36.2
-13.2
105.4
127.3(e)
5.3
0.5
1.0
8.4
866.3
416.6
449.7
8.6
4.4
0.5
0.8
2.1
0.3
4.2
0.2
0.1
0.7
878.3
421.4
7.3
8.9
145.4
345.1(e)
3.2
10.9
1095.3
1.3
2.1
0.5
0.7
0.6
456.9
1,098.4
0.2
0.5
0.2
1.7
0.2
+4.5
-6.6
+50.8
61.8
-
-
- 12.4
55.1
41.2
27.8
93.9
15.3
+ 22.4
50.1
5.8
54.8
16.7
29.6
18.0
19.2
75.4
60.7
126.2
335.6
3.0
10.4
900.2
-
-
-
900.2
0.1
-
Transfers from British Purchasing Commission to
Bank of Canada for French Account
million
3 6.0
Week ended March 19
million
$150.9
Cumulation from July 6
- 5.6
- 1.2
. 5.4
6.1
+ 44.0
+188.4
9.5(e
- 4.1
0.2
0.5
+ 2.0
195.1
+229.0
1.3
7.3
0.5
0.7
0.6
198.2
- 0.1
- 1.5
+220.1
UND
0.2
-
-
-
* 4.3
-
-
0.1
- 8.1
11.3
11.3
76.2
-
1
19.4
185.4
3.6
-
Sept.28 - Nov.
Nov. 2 29
+113.5
207.8
142.0
105.8
94.3
)
Aug. 31 - Sept. 27
0.3
-
-
-
-
+0.2
0.3
-
(See footnotes on reverse side)
(a)
(b)
Includes payments for account of British Purchasing Commission, British Air Ministry, British Supply Board, Ministry of
Supply Timber Control, and Ministry of Shipping.
Estimated figures based on transfers from the New York Agency of the Bank of Montreal, which apparently represent the
proceeds
of offioial.British sales of American those direct
to the official selling, substantial liquidationofsecurities,
including
effected
through
negotiation.
In addition
securities for
private British
account
occurred,
particularly
during the
early months of the war, although the receipt of the proceeds at this Bank cannot be identified with any accuracy. According
to data supplied by the British Treasury and released by Secretary Morgenthau, total official and private British liquidation
of our securities through December 1940 amounted to $334 million.
(e) Includes about $85 million received during October from he accounts of British authorized banks with New York banks, presumably
refleeting the requisitioning of private dollar balances. other large transfers from such accounts during more recent months
apparently represent the acquisition of proceeds of exports from the sterling area and other currently accruing dollar receipts.
(d) Includes payments for account of French Air Commission and French Purchasing Commission.
(e) Adjusted to eliminate the effect of $20 million paid out on June 26 and returned the following day.
(f) Includes about $10.5 million transferred from accounts of British authorized banks with New York banks.
37
2013
72*2
JOHNS
ere
(In Millions of Dollars)
DEBITS
Transfers
Proceeds
to
Total
Debits
Official
British
Other
Total
of
Debits
Credits
Gold
A/C
PERIOD
1939
Aug. 31 Sept. 27
Sept. 28 - Nov.
1
Nov. 2 29
Nov. 30 Jan.
Transfers
Transfers from Official
British A/C
For Own
Sales
A/C
For French
16.9
21.8
15.1
0.8
-
0.3
16.7
7.3
2.1
-
9.9
0.7
9.3
9.2
14.4
13.3
30.0
22.8
13.3
23.5
23.1
42.3
23.2
37.9
25.7
17.0
29.5
42.9
50.2
72.5
117.6
21.1
16.1
-
-
37.9
44.1
3
July 4 - 31
Aug. 1 - 28
First year of war
Aug. 29 Oct.
-
18.7
-
44.3
26.7
35.2
Oct. 3 30
Oct. 31 Nov. 27
Nov. 28 - Dec. 31
48.0
ar period through
477.2
Jan. 2 29
28.2
18.7
44.3
26.7
-
-
35.2
-
48.0
460.6
-
16.6
33.7
-
31.1
306.4
16.6
33.7
Jan. 30 Feb. 26
Feb. 27 Apr.
44.1
-
28.2
323.0
2
15.0
31.1
-
-
-
24.8
50.0
72.2
96.3
53.9
15.0
412.7
20.9
-
-
-
7.3
7.1
1.1
4.5
6.5
- 7.2
2.5
4.6
+ 2.2
12.8
5.2
3.3
3.0
4.7
2.3
2.1
0.2
19.2
19.5
38.7
32.4
0.2
Official Other
British Debits
Total
Credits
-
-
-
-
-
12.3
1.2
2.3
54.9
+181.7
6.8
31.2
5.8
5.8
0.3
4.9
3.3
0.1
3.2
2.7
2.3
2.4
3.0
2.2
1.6
1.8
1.7
0.4
0.2
-
4.6
3.0
3.9
2.5
2.2
2.0
0.2
0.9
0.3
+1.4
4.4
1.5
0.8
3.8
5.0
36.1
3.4
30.0
1.6
8.0
6.7
1.3
+4.9
-0.7
7.9
6.5
1.4
-2.2
3.6
6.8
2.1
4.8
1.5
2.0
+0.5
+2.0
27.3
6.2
2.6
16.9
15.0
2.0
0.2
4.8
14.3
6.8
3.2
6.8
5.0
1.7
3.3
3.2
0.4
4.9
5.9
1.2
1.8
1.2
1.0
2.0
0.6
0.2
0.8
14.5
-0.9
0.8
4.2
57.9
0.6
0.2
0.6
5.0
12.6
-
20.9
34.4
-1.9
4.6
+230.2
16.7
-
1.9
0.3
2.6
41.0
534.8
14.3
-
3.3
5.9
13.7
14.0
49.2
42.5
7.5
-
1.9
1.0
110.7
28.6
69.6
60.6
707.4
33.9
24.3
27.3
-
-
2.3
0.3
3.7
4.4
16.4
-
-
2.5
0.3
in Balance
-
1.9
-
Net Incr.
(+) or
Credits Deer. (-)
Other
-
8.7
10.1
3.1
4.8
43.9
Gold
1.9
-
28.4
89.4
of
Sales
A/C
4.3
0.2
0.3
-
-
Debits
5.9
- 6.1
Proceeds
to
Total
2.5
4.8
43.4
4.8
62.4
6.8
50.1
6.1
12.3
3.6
0.4
-1.8
+4.5
5.1
1.7
+2.0
0.6
2.6
-1.8
2
WEEK ENDED:
7.9
Feb. 26
12
13.6
8.5
19
8.2
March
73.6
504.7
29.3
Credits Deen (-)
0.9
0.2
3.1
-
-
1
-
-
-
-
3
-
Apr. 4 May
May 2 - 29
May 30 July
23.1
42.3
38.2
-
-
Feb. 29 Apr.
23.5
Net Inor.
(+) or
in Balance
1940
Jan. 4 31
Feb. 1 28
Other
A/C
0.6
3.0
CREDITS
DEBIT S
17.5
9.6
30.0
3
COMMONWEALTH BANK OF AUSTRALIA
CANADA
CREDITS
+
OF
-
BANK
Confidential
Week Ended March 19, 1941.
ANALYSIS OF CANADIAN AND AUSTRALIAN ACCOUNTS
7.9
-
3.0
2.6
4.3
2.6
9.2
13.6
7.7
-
8.5
-
8.2
14.4
15.7
-
-
-
2.3
1.1
10.1
1.7
6.0
0.5
+ 5.9
2.0
7.5
0.6
+
6.6
0.6
0.1
6.4
0.2
0.2
-1.0
0.2
+.4.8
0.4
0.1
-1.4
-0.5
Weekly Average of Total Debits Since Outbreak million
of War
Through
March 19
7.1
308
309
PLAIN
LS
LONDON
Dated March 28, 1941
Rec'd 1:50 p.m.
Secretary of State,
Washington.
1225, Twenty-sight.
FOR TREASURY.
Since the first press reaction on the Viscose deal
reported in the Embassy's 1052 of March 18, numerous
further comments have appeared along the same lines,
SOME of which however are less philosophical in tone.
There is no doubt that the city is finding it difficult
to resign itself to the prospect of the sale of bulk of
British direct investments in the United States which are
regarded as of key importance in Britain's trade position.
In two CRSES press commentators have noted that the Vis-
COSE sale doubtless played an important part politically
as a gesture at a psychological moment when the appropria-
tion bill for $7,000 million was under debate. For EXample, in the EVENING STANDARD of March 27, the Londoner's
Diary included a chatty reference to Sir Edward Peacock's
activities stating that he disappeared on arrival in NEW
York and that when Congress was being asked to approve
the appropriation the question went around "Where is
Peacock?
310
-3- 1225, Twenty-sight from London.
Peacock? Why should WE foot the bill if England won't
spend her dollars?" The dinrist goes on to say that the
LEASE Lend Bill was signed, the Viscose deal was announced
and two days later the appropriation was passed.
The WEEKLY TIME AND TIDE finance Editor makes the
following comment in the issue of March 29: "A gesture
was wanted and something had to be done quickly ... the
price obtained may not have been the right price and there
SEEMS no adequate reason for the ten percent profit to be
made by the American interests who are to re-sell the
shares to the American public I hope Americans will
realize that all aid to Britain is only being given at a
price and it is a price which will do America no good in
the long run. It will accentuate the dollar famine later
on. A 8 the NEW York HERALD TRIBUNE said, in commenting
on the Viscose deal 'surely it is more than a little
short-sighted to destroy Britain's Economic health while
giving all-out support to her battle for democracy. That
sentiment is WELCOME but WE may not EXPRESS it OVER here.
President ROOSEVELT may be willing to 'abolish the pound
and dollar sign' in the Anglo-American war bill but it
looks as if Wall Street is out to abolish the pound as
the price of American help."
The FINANCIAL NEWS seized upon the publication of
Mr. Harold
311
-3- 1225, Twenty-sight from London.
Mr. Harold Smith's figures which it analyzed in an editorial entitled "Bang goes Viscose" and concluded that if
Canada has available dollar assets it would be highly
desirable that the transfer from the remainder of the
Empire should take the form not of gold but of a temporary hypothecation of United Kingdom direct investments
which could thus be retained within the Empire for possible post-war re-purchase. Canada's gold reserve as
well as Dutch gold in the United States WETE also mentioned in this Editorial as assets which it would be more
desirable to liquidate thrn Britnin's direct investments.
The subsequent speech by the Canndian Finance Minister has EVOKED a further editorial in the FINANCIAL NEWS
of March 27 referring to Canada's helpful attitude in
war finance problems which is concluded as follows:
"Owing to the SEVERE depletion of our own Exchange resources a point may be reached where it may be necessary
to ask Canada not only to accept sterling in payment for
our own deficit but actually to supply the Empire with
dollars with which to pay the United States. The generous and loyal spirit which permeates Mr. Ilseley's speech
gives little doubt that if and when the time COMES Cannda
will gladly make this further sacrifice."
WINANT
CSB
311
-3- 1225, Twenty-sight from London.
Mr. Harold Smith's figures which it analyzed in an cditorial entitled "Bang goes Viscose" and concluded that if
Canada has available dollar assets it would be highly
desirable that the transfer from the remainder of the
Empire should take the form not of gold but of a temporary hypothecation of United Kingdom direct investments
which could thus be retained within the Empire for possible post-war re-purchase. Canada's gold reserve as
well as Dutch gold in the United States WERE also men-
tioned in this editorial as assets which it would be more
desirable to liquidate than Britain's direct investments.
The subsequent speech by the Canndian Finance Minister hns EVOKED a further Editorial in the FINANCIAL NEWS
of March 27 referring to Canada's helpful attitude in
war finance problems which is concluded as follows:
"Owing to the SEVERE depletion of our own Exchange resources a point may be reached where it may be necessary
to ask Canada not only to accept sterling in payment for
our own deficit but actually to supply the Empire with
dollars with which to pay the United States. The generous and loyal spirit which permeates Mr. Ilseley's speech
gives little doubt that if and when the time COMES Cannda
will gladly make this further sacrifice."
WINANT
CSB
312
TREASURY DEPARTMENT
WASHINGTON
March 28, 1941.
Dear Mr. Morgenthau:
I have your letter of the eighteenth advising me of my
appointment as an Assistant to the Secretary of the Treasury.
You have certainly done me a great honor by this appointment.
I most certainly did not come to Washington expecting such
magnanimous consideration, and I fully realize my lack of
cualification, but I promise to do my very best.
With respect to the matter of compensation, I beg to advise
that I will try to handle this in such a way that I will not be
very expensive to the Treasury, but of course there are certain
expenses that I will be put to, principally the expense of going
back and forth to South Carolina each weekend. It will be
necessary for me to do this in order to give some reasonable
supervision to my duties there.
I was in Washington two days last week and then it required
the better part of three days to make the trip to Louisville.
I came back to Washington Monday morning and have been here since.
I am trying as best I can to find my way around and in some
measure to fit into the organization and program. It will make
me very happy if some day I can have the feeling that maybe I
have been of at least a little help to you in the great work
which you are doing and the wonderful service that you are
rendering the nation and, as a matter of fact, to the entire
world.
With my best regards, I am
B.
Sincerely yours,
Honorable Henry Morgenthau, Jr.
Secretary of the Treasury
Copy to mr. Graves 0/29/41
313
March 28, 1941
Mr. Young
Mr. Mullin and Mr. Kaufman
At a meeting in Mr. Foley's office, with Mr. Foley,
Mr. O'Connell, Mr. Bernard, Mr. Kades, Mr. Mullin, and
Mr. Kaufman, it was decided that the Procurement Division
may accept the delegation of the Secretary of War to act
as agent of the War Department. In that capacity, the Procurement Division may enter into contracts on a negotiated
basis.
Mr. Foley has decided that it will be best to secure
further legislation which will suspend the operation of
Section 3709 of the Revised Statutes in regard to contracts
entered into under the Lend-Lease program and allow those
contracts to be made on a negotiated basis. It is understood that steps will immediately be taken to secure the
necessary legislation.
FAK:aja
TREASURY
8523
314
GRAY
EH
Madrid
Dated March 28, 1941
Rec'd 5:46 p.m.
Secretary of State,
Washington.
252, March 28. 7 p.m.
My 100, February 9, noon.
Have now been Enformed by a reliable source that the
Spanish Government has received and is studying a proposal
submitted by the Argentine Ambassador under which Argentina
would grant a ten year credit of approximately 160,000,000
Argentine pesos to COVER the purchase of wheat, corn, cotton,
linseed, meats, hides and other Argentine products which
apparently would Eventually be compensated, at least in
part, by supplies of specified Spanish products; that no
definite decision will be reached on this proposal until
after the Easter holiday. As soon as official confirmation
and further details can be obtained, the Department will
10
be informed by cable. TECHNIC
WEDDELL
EMB
315
EH
GRAY
Shanghai via N. R.
Dated March 28, 1941
Rec'd 5:25 p.m.
Secretary of State,
Washington.
359, March 28, 6 p.m.
Reference my 355, March 28.
Chinese financial circles, concerned over rising
value of military scrip, express satisfaction over the
statement of the Jaranese military authorities warning
against speculation in scrip. These circles interpret
statement to mean Japanese authorities do not desire
an artificially high value of scrip, wishing to avoid;
firstly, resulting high prices of Japanese imported
goods and Chinese export goods in F.A.P.I. in Central
China: secondly, the bad psychological reaction should
scrip fall sharply from unduly high speculative values.
INFORM COMMERCE.
Sent to the Department. Repeated to Chungking,
Peiping. Code text by air mail to Tokyo.
LOCKHART
EMB
Copy:bj
316
RESTRICTED
M.I.D., W.D.
0-2/2657-220
No. 351
March 28, 1941
12:00 M.
SITUATION REPORT
I.
Western Theater of War.
Air: German. Minor activity over England where weather
was unfavorable. Further attacks on shipping reported.
British. Apparently normal operations with main
effort on Cologne and Dusseldorf. Dunkirk, Calais and Brest also
were raided.
II.
Balkan Theater of War.
Ground: Bulgaria. It is probable that German troops are
being moved to the Yugoslav border.
Yugoslavia. According to press reports Yugoslavia
has proclaimed her full independence. Although understood to have
been demanded by Germany, a definite statement by the new Government
as to its attitude towards the Tri-power Pact has not yet been issued.
Full mobilization is reported in progress.
Albania. Artillery activity reported.
Air: No reports of activity.
III. Mediterranean and African Theaters of War.
Ground: Eritrea. Cheren was occupied by the British
March 27. The way is now open to the capital, Asmara, 45 miles
to the southeast, and to the last and largest port in the territory,
Massawa. The Italians have made a stout fight at Cheren since about
the 4th of February.
Abyssinia (Ethiopia). Harrar, second largest
city in Ethiopia and only about 25 miles from the Addis Ababa railroad, has been captured by the British. Gambela in west central
Ethiopia has fallen to British forces.
Libya. Axis mechanized units which occupied
El Agheila on March 24 are reported to have advanced 18 miles to
the east and then turned southeast. An Axis mechanized column
is reported to be operating in the vicinity of Brach which is
about 375 miles southeast of Tripoli. Note, G-2: This latter
RESTRICTED
-1-
317
RESTRICTED
movement may be directed at Free French forces which were reported
to have captured Hurzuch and El Gatrun, south of Brach, the latter
part of January.
Air: British. No reports available but normal supporting
operations in East Africa are assumed.
Note: This military situation report is issued by the Military Intelligence Division, General Staff. In view of the occasional classified in- as
clusion of political information and of opinion it is
Restricted.
RESTRICTED
-2-
318
CONFIDENTIAL
Pasaphrase of Code Indiagnos
Received as the West Department
at 15:12, March 18, 1941.
Delgrade, filed March 28, 1942.
"In gratitude for having lived a day like this, I shall be
gind to die tenassor," is the way Yeguelav Away officers say they feel
today. The coup d'etat of the army has been perfectly executed. The
pleasing as well as the execution are largely due to the younger officers.
The state of affairs here has been completely altered. The new minister
of var, Mr. Bageljabilie, is a first class soldier with plenty of vigor.
General Simovich has all the qualities of natural Lendership, and has a
strongly pro-American stitute. Pealch and Koeich have been arrested.
FORTIER
Distribution:
Secretary of War
State Department
Secretary of Treasury
Assb. Secretary of Mar
Chief of Staff
Var Plans Division
office of Naval Intelligence
Air Gorge
CONFIDENTIAL
CONFIDENTIAL
319
of Code Soliegres
Received at the War Department
at 22:02, March 28, 1961.
Befin, filed 12:20, March 28, 1941.
The Bulgare have 300 bombers and fighters in the air force
but not many of these are up to date. There are also 500 training
planes. This makes a 600 total. Mobilisation at present totals
400,000 to 500,000 troops. The Bulgers are receiving German encourage-
ment to earry out more extensive mobilisation and are acting on it. There
is now reason to believe that the Common are moving troops to the
vestern boundary. There is a shortage of feed here. German denands
and extravagances have forced prices to rise.
JADWIN
Distributions
Secretary of Mar
State Department
Secretary of Treasury
Asst. Secretary of Mar
Chief of Staff
War Please Division
office of Neval Intelligence
Air Garge
CONFIDENTIAL
320
CONFIDENTIAL
Pasaglasse of Code Ballegne
Received as the Was Department
at 9:03, March 20, 1941.
London, filed March as, 2042.
RETRACE
1. Britter Salisate of the Percent Strength and Disposition of
the Germen Air Tores is made Ensteam Theaters.
All
Treaters
All types
Long Bango Seabore
Fighters
Tripolt
so
age
as
-
10
10
200
-
-
80
120
12
--
-
-
10
170
as
20
80
50
92
--
--
80
12
so
Assay Cooperation
Stells
20
494
Dive Bumbers
Italy
Shates
2. Other changes in the distribution of the - Air Force are
as follows to the 80 German dive besture stationed in Balgeria have
recently been added be additional Give beature that were transfessed from
Research (all based in the continuators part of Bulgaria); is enter to
provide fighter plano essorts for Italian convage saving to Brigali from
Steily, all German heavy fighter please that were operationally reviewable
is North Africa have bose transferred to Sicily.
SEASION
Distributions
Secretary of Mar
State Department
Secretary of Treasury
Aest. Sessotory of We
Ohiof of Staff
Bar Please Division
Office of Naval Intelligence
Ats George
as
CONFIDENTIAL
CONFIDENTIAL
321
or Code
Received as the - as 9:05, March so, 1941.
London, filled March 16, 1942.
1. British Ats Activity OVER the
s. Englight of March ay. Auto vessals along the essate of
Trease, Belgium, and Hallent and in the visinity of the Channel Islanda ware
tangote of British bombous. Observation of complete resolts was impossible
is spite of the fact that tangete were closely visible. It is I becomes,
that a 6,000-tea coago bass off the Dates seast as I and another small
a beat off the Chemical Intents were -
b. Right of March 26-27. Bristen planes happed phlets - Gasoal - Finching. No other please was active during
this night.
2. Service Air Assisting - Retire
&. Right of March ST-00. Basing state night as - please were
platted - England.
Day of March 27. Leas - please attached tangote in Barfall,
Buffolk, - I the Shanne Natural, Seath Males, ani Notemonth. A total of 100 Game please states defensive patrets along the
const of Belgian, the Done Struite - off the Breads const at Breat. the
offensive - - sate w - fighter please our Mark. Shirty -
please were in - - assessment shipping in the
Bristel Manual, the Shouse Saturay eat the Hagitah Chessel.
3. MEMO I
a. Restatch - as reports.
CONFIDENTIAL
CONFIDENTIAL
322
2. German, day of March 27 - name abot down, but one
110 we damaged by British fighter please.
4. Revel Air Force Activities in Middle Bentern Theaters.
In Albania please of the Regul Air Force supported Greek load
forces. In Sthippin British please supported leas troops in the capture of
Naror. In Eritres British please assisted is bringing about the fall of
Keren.
5. The Deputy Chief of the Importal General Staff is very much
monuraged by the everthrow of the Axis-inslines Yugoalav government. The
Tugoslav army, according to most recent authoritative estimates, is well
organised and is now composed of about 800,000 officers and - It is
thought that at loast 14 days will be required for the Gomusas to realine
their foress in Bulgeria If a large seals offensive is to be mas on Yageslavia. The most pressing noed of the Yugoslav government is for arms for
its sivilian velanteers as well as for its regular army.
6. The now organization of the Yagoalav government is as follows:
The Prime Minister is General Sistevitah, communiting officer of the Yagoalav
Air Force, who is believed to have the support of both the civilian popula-
tion and the any and who is considered to be a well qualified military by the British Year Office. The Military Governor of Selgrade is General
Stefenovie. The Minister of War is General Iligh.
7. Reval and Shizzias.
as March 26 a faree of Games bumbore carried out as attack on
a British marchant CORVER southeast of the Island of Crete which resulted
in the staking of three small onerge beats. on the same day a Britten naval
-2-
CONFIDENTIAL
CONFIDENTIAL
- and the Brittah ordinar - in Date Day on State
suffered same d from
Distributions
Secretary of Mar
State
Secretary Department of Treasury
Aust. Secretary of War
Shief of Staff
Mar Please Division
Office of Naval Insulligence
Air Garge
6-3
CONFIDENTIAL
323
324
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
HING
For
DATE March 29, 1941
Secretary Morgenthau
CONFIDENTIAL
Mr. Cochran
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
Purchased from commercial concerns
& 9,000
£21,000
Open market sterling was quoted at 4.03-1/2. Transactions of the reporting
banks were as follows:
Sold to commercial concerns
Purchased from commercial concerns
E1,000
-0-
In New York, the closing rates for the foreign currencies listed below were
as follows:
Canadian dollar
Swiss franc (commercial)
Swediah krona
Reichemark
Mexican peso
.4005
.0505
.2320
.0505
.2066
Cuban peso
3-13/16% discount
Lira
Argentine peso (free)
Brazilian milreis (free)
at 3.93.
15-1/8% discount
.2322-1/2
.2384-1/2
In Shanghai, the yuan was unchanged at 5-11/324. Sterling was also unchanged
We purchased $350,000 in gold from the earmarked account of the Central Bank
of Chile.
No new gold engagements were reported.
AMP.
Delivered to Treas. by Mr. Nicholson
325
Shanghai
March 29, 1941.
Information received from French Intelligence Hongkong to effect that
consul for Salvador in Tokyo in 1936 received Yen 100,000 for Japanese
propaganda work in Salvador and other Central American countries and that
this consul is still in Japan and has dispensed additional Japanese
suns for same purposes.
Trew 326
CONFIDENTIAL
CONFIDENTIAL
PARAPHRASE
A telegram (no. 362) of March 29, 1941 from the
American Consul General at Shanghai reads substantially
as follows:
The action taken by the Japanese concerning specu-
lation in military scrip is considered by Chinese
bankers in Shanghai as indicating that paradoxically
the Japanese do not wish to bring on sharp depreciation
of the F.A.P.I. immediately in central China and that
the value of the F.A.P.I. in their economic aims is
recognized by Japanese. The development is therefore
looked upon by the Chinese as advantageous to Chinese
currency. Some of the Chinese are of the opinion that
this action practically assures that the Chinese Government's banks at Shanghai will for the time being at least
continue to function. While admonishing speculators,
the statement made by the Japanese attributes public
spiritedness or unselfishness to the Chinese for their
showing of confidence in the military yen. Nevertheless,
it must have been fully realized when the statement was
prepared, that the fact that the scrip had gradually increased in value since last summer evidenced Chinese
hedging on the chance that finally F.A.P.I. would be
eliminated
327
CONFIDENTIAL
-2-
eliminated from Shanghai and in general from central
China. It must have been realized also that the sharp
advance during the past few days in the value of the
scrip resulted from panic--the public being fearful
lest Chinese Government banks would be (?) and exchange
support for F.A.P.I. taken away from Shanghai following
the terrorism which occurred between March 21 and 24.
There are indications that on March 31 the Farmers Bank
of China and the Central Bank of China will reopen.
These banks have been closed since the March 24 bombings.
Copy for Mrs. Klots
328
March 29, 1941
KENDRANDUM
To:
Mr. Lauchlin Currie
From:
Mr. Philip Young
I am sending you 200 copies of Form 1, together with 400
copies of the continuation sheet for Form 1 which is used for
additional information purposes.
I an also sending a few copies of Form 2 (PMR) which is
used only for lond-lease countries which wish to place orders
in the United States and pay for them with their own money.
The purpose of Form 2 is to control the allocation of produc-
tion capacity, and, until this form is approved, the foreign
purchaser is not at liberty to sign a contract.
Form 1 is used both for requisitions which are paid for
from United States appropriations and for requisitions where
there is a direct cash reimbursement to the United States
treasury. (See Item 1.)
Ten copies of each Form 1 are filled out by the British,
signed and transmitted to my office for recording, classification, and routing to the Departments of the United States
Government which will be interested in the particular items
listed and which may release the items from surplus decks,
divert them from current orders, or place new orders for production. Ny office represents the control point where individual
case histories with respect to the handling of those items will
be built E and become a part of the permanent lend-lease record.
Those forms have been designed to fit all countries and all
types of purchases, and it would seen to me desirable that a
single form be used for all countries operating under the lend-
lease act if it is possible to do so. If you wish any additional
information or explanation with respect to this procedure, please
do not hesitate to call on no.
(Initialed) P.Y.
PY:bj
Copy for the Secretary
329
March 29, 1941
MEMORANDOM
To:
General J. H. Burns
From:
Philip Young
Re: Operations of the Supply Division of
the Office of Lend-Lease Control.
As you are already avere, my office has had drewn up and
printed a Form 1 entitled Requisition for Defense Articles
(Under the Act of March 11, 1941)". and Form 2 entitled Purchase Negotiation Report (Request for Clearance on Direct Pur-
chase)". These forms have been examined and approved informally
by representatives of the treasury, Burean of the Budget, Yar
Department, Havy Department, Office of Production Management,
and the British Supply Douncil in North America.
Copies of the forms have been distributed to the British
purchasing missions, and 18 is expected that they will start to
flow to the United States Government beginning today, March 29th.
The procedure as is has been currently established is as follows:
all copies of Form 1 will be filled out by the interested British
purchasing missions, signed by duly authorised representatives of
the British Government, and filed with my office for distribution
to the agency of the United States Government which is involved.
These forms may be reuted to more than one agency if the particu-
lar item or items overlap.
After these requisitions are processed through the various
departments, copies of the basic memoranda and directives issued
within the department will be sent to the Supply Division for
filing and control purposes. Each Form 1 forms the basic document for a case history of a particular item which is gradually
built up after the requisition is filled out and presunably
closed at the point where the actual goods are turned over and
receipted
for by an authorised representative of the British
Government.
330
a-
Form 1 will be used both for orders placed by the U. s.
Government and paid for from U. a. appropriations, and for orders
placed by the U. s. Government which will be covered by direct
cash reimbursement to the Treasury.
Form 2 will be used for direct purchase requisitions and will
be routed by my office to ONP which, before approving or disapprov-
ing an allocation of production capacity. will coordinate with the
Var and Navy Departments. Form a is the counterpart of the present
Preliminary Negotiation Report (PMR) and is used only in those
instances where a country in the lend-lease area wishes to place
an order for goods and pay for them itself. A filing and classi-
fication system, card control system, and follow-up system have
been established and are ready to operate.
In addition to the foregoing. the Supply Division has been
working closely with representatives of the Budget and the Treasury
on accounting records and reports as well as with the Statistical
Division in establishing the types of statistical controls and susmaries that will be necessary.
Beginning next Monday my office will have seven persons design
nated to handle Forms 1 and a together with the files and controls.
Arrangements have been made for assistance on this project from the
Army, the Navy, and the Procurement Division of the Treasury. The
British have been asked to designate those persons officially
authorised to sign requisitions on behalf of His Majesty's Government. Formal notification of such designees will be furnished to
the U. S. Government. Similarly, the British are investigating a
method whereby representatives of the British Government will be
designated at certain shipping points to receive and receipt for
goods transferred by the U. S. Government.
(Initialed) P.T.
PY:bj
STATE
DEPARTMENT OF STATE
WASHINGTON
March 29. 1941
reply refer to
My dear Mr. Secretary:
I have received your letter of March 20, 1941,
referring to your letter to the President dated March 12,
1941, in which you recommended that all foreign countries
outside the lend-lease area desiring to purchase military
supplies in this country submit their needs to the
Secretary of State.
In this connection, and in accordance with your
understanding that Mr. Philio Young, the Treasury member
of the President's Liaison Committee, has discussed this
problem with Mr. Acheson, Assistant Secretary of State,
in order that the transition with respect to both new
and pending purchases by the foreign countries concerned
may be consummated with as little difficulty as possible,
you state that you have instructed Mr. Young to accept
no new business from such countries beginning March 20.
The
The Honorable
Henry Morgenthau, Jr.,
Secretary of the Treasury.
-2The Department of State is prepared to assume
responsibility for dealing with this problem. May I
request, therefore, that all files, records, papers, and
other materials now in the possession of your Department
and concerning the purchase of military supplies by
foreign countries outside the lend-lease area be transferred to this Department on or before March 31, 1941?
It is my understanding that the countries outside the
lend-lease area include all those except Poland, Iceland,
Greenland, the Netherlands, Greece, China, the British
Empire, and Norway which, according to your information,
are interpreted as being within the lend-lease area and
under the supervision of Mr. Harry Hopkins.
Your kind offer of assistance by the members of
your office experienced in foreign purchasing operations
is greatly appreciated.
Sincerely yours
Delhi
Acting Secretary
Mr. young 9/21/41 has333
copyTHE SECRETARY OF THE NAVY
WASHINGTON
March 29, 1941
MEMORANDUM FOR
SECRETARY OF THE TREASURY
For your information, I quote the following
message which I received from the President today:
"Authorized cancellation previous allocation
30 Gruman planes to British and transfer
these planes to Greece."
334
OFFICE OF
TREASURY DEPARTMENT
WASHINGTON
March 29. 1941
In order that the defense financing program may be conducted
with the greatest facility, it seems to me essential that the
Treasury be provided with frequent detailed statistical information on the ownership, by classes of investors. of every outstanding security issued or guaranteed by the United States Government.
1 an writing you at this time. therefore. to ask if you would be
kind enough to submit to me for my confidential use the data
provided for on the attached schedule.
These data cannot be obtained from the present records of
the Treasury Department because the securities covered have been
issued, as you know, principally in coupon form. When combined
with data secured from other investors they will give us a compre-
hensive picture of the ownership of the securities issued or
guaranteed by the Federal Government.
The attached schedule. you will note. provides for the par
amount of each security issued or guaranteed by the Federal
Government owned by your institution on March 31. 1941. and the
total par value of all such securities owned. Savings bonds
should be included at their face (maturity) value.
Please forward the attached schedule in the enclosed envelope,
which requires no postage. to Mr. George C. Haas. Director of
Research and Statistics, Treasury Department, Washington, D. C.,
whom I have asked to arrange to obtain from you such subsequent
figures as are necessary to bring the information up to date each
month. I shall appreciate it if you will send your reply as soon
as possible.
May I take this opportunity to thank you in advance for your
cooperation.
Sincerely,
Enclosure
Amagenthan J.
Name
Address
Issue
Bills
March 31, 1941
Amount
(par value)
01
02
June 1941
03
Notes
1-3/8% June 41
1-1/4 Dec. 41
1-3/4 Mar. 42
2-1/2 45
25
05
3-3/4 - 46-56
26
- 46-48
27
08
3/4
Mar. 43
09
1
3/4
3/4
3/4
22
04
Dec. 42
3/4
21
24
1-3/4
1
20
2-3/4 - 45-47
07
1-1/8 June 43
3-3/8 - 43-47
3-1/4 - 43-45
3-1/4 - 44-46
23
06
10
3
3-1/8 - 46-49
4-1/4 - 47-52
2 47
2-Mar. 48-50
2-3/4 - 48-51
2-1/4% 51-53
2-1/2 - 52-54
2
53-55
2-1/4 - 54-56
2-7/8 - 55-60
2-3/4 - 56-59
2-3/4 - 58-63
2-3/4 - 60-65
29
U. S. Savings
Postal Savings
30
31
28
3% - 42-47
42
43
2-3/4 - 42-47
3-1/4 - 44-64
57
44-49
58
44
3
45
HOLO
46
5/8% 41
2-1/4 42-44
47
56
59
60
50
RFC
Conversion
51
7/8% July 41
63
7/8 Nov. 41
64
2- Dec. 48-50
34
COC
35
5/8% 41
Sept.44
15
Sept.4
Mar. 45
Dec. 45
16
48
3
Guaranteed
1 41
3/4 43
7/8 42
65
42
66
1
52
53
54
USHA
1/4% 41
1-3/8 44
38
39
55
Panama Canal
13
- 51-55
41
62
33
3
YPMC
1-1/2 - 45-47
2-1/2 48
18
40
49
12
37
Code
(Cont'd)
32
36
(par value)
61
Dec. 43
Mar. 44
June 44
3-1/8 - 49-52
2-1/2 - 49-53
2-1/2 - 50-52
2-3/4 - 51-54
Amount
- 44-52
11
17
(par value)
Issue
Code
Guaranteed
Sept.43
14
Amount
Cont'd
19
4 - 44-54
Sept.42
1-1/8
(par value)
Issue
Code
Bonds
3-1/4% 41
May 1941
1
Amount
Bonds
Maturing in:
April 1941
2
Issue
Code
Total Par
Value
Instructions: Enter for each security listed above and for the total the par amount in your own portfolio on March 31, 1941.
Include savings bonds at their face (maturity) value. If transactions are in process on March 31, show only
the amount of those securities for which delivery has been taken at the close of business on that date.
Include, however, any beneficial holdings of the new issue of 1952-54 irrespective of whether physical
delivery has actually been taken.
67
68
336
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE March 29, 1941
Secretary Morgenthau
FROM
Herbert Merillat
TAX OPINION BEGINS TO TAKE SHAPE
Who Should Be Taxed for Defense?
Comment by the press and by public figures is agreed on
three generalities:
the need and inevitability of greatly increased taxes;
the wisdom of paying-as-we-go in the defense program as
much as possible;
the readiness of taxpayers to accept greater burdens in
the interests of defense.
But disagreement on the method of raising new revenue is brought out
by comments on three recent events; the President's speech of March
15th, calling for sacrifices from all, Senator Taft's talk on March
10th, and the publication of rumors that a 5 per cent wage tax is
being considered in Washington. It is the old disagreement between
those who would tax the workers but spare business, and those who
would tax business but spare the workers.
Senator Taft, for example, said that if government spending
annually amounts to 25 per cent of the national income, a like amount
should be raised annually by taxation. Only 5 or 10 per cent of the
national income could be obtained from the wealthy, he asserted, and
337
-2therefore the remaining 15 or 20 per cent must come from the rest
of the people. "This means more income taxes, sales taxes, and
payroll taxes."
About March 15, moreover, newspapers began to carry reports
of a plan, suggested by "Congressional fiscal experts," to impose a
gross income tax of 5 per cent on wages and salaries, to be withheld
at source. In general, the press has been noncommittal on this proposal, but regards it as serving notice of heavy tax burdens to come.
Some few papers favor the plan and express confidence in the willing-
ness of wage earners to sacrifice. Others point out the inequities
of a gross income tax and prefer a broadening of the income tax base.
Taking its cue from the Taft talk and the wage tax proposal,
the conservative press has begun to warn the wage earner that he must
expect great tax burdens in the interest of national defense. Familiar arguments, such as the following, appear again: Taxes on large
incomes and corporations have reached a point of diminishing returns;
further increases will destroy the profit motive and result in less,
not more, revenue; small and middle incomes must bear the brunt of
defense costs, through wider application of the income tax or sales
taxes or both. Such was the burden of former Undersecretary Ballantine's address to the Finance Symposium of the New School of Social
Research on March 25th. The National Association of Manufacturers
and National Economy League urge a general sales tax, and the League
338
-3adds a proposal of a 10 per cent gross income tax. Mr. Alfred
Sloan, Jr., suggests increased special taxes on consumer goods. The
Wall Street Journal, referring to the President's call for sacrifices,
speaks of the shortage of sacrifices now available to any but recipients of comfortable incomes and property-owners, and suggests that
farmers and wage earners be privileged to sacrifice.
Calls for drastic reductions in "non-defense" spending come
from the same sources. The Journal asks, "Why continue to mouth
phrases about social gains?" and others warn that although the public
is ready to sacrifice for defense, it will not tolerate wasteful
spending.
These proposals and comments form an easily recognized pattern.
PM and the Chicago Times assail such talk and regard the Taft speech
as the opening gun in a campaign to soak-the-poor.
Speculation on New Taxes
The most frequent prediction is that the Administration will
recommend boosting the normal income tax rate to 6 per cent and the
corporation income tax rate to 30 per cent, lowering personal exemp-
tions, increasing surtax rates in the middle brackets, and imposing
additional excise taxes.
The most ambitious attempt to forecast future Administration
tax policy appeared in Business Week. First, it is said, an attempt
will be made to prevent profiteering by increases in income and excess
339
-4profits taxes; somewhat later, excises will be laid on various kinds
of consumer goods; when full employment and production have been at-
tained, a general rather than selective tax on consumer goods will be
imposed.
Isolated reports have appeared to the effect that a gross income tax withheld at source is being considered by the Joint Committee
on Internal Revenue Taxation and that some "influential tax experts
of the Government" favor reviving the undistributed profits tax in
modified form to replace the excess profits tax. The Wall Street
Journal and New York Journal of Commerce report that surtaxes on
corporations are being considered, to get at income from outstanding
United States bonds.
Special Taxes for Aid to Britain
Senator Nye has received scant notice with his announcement
that he will call for taxes to raise 31 billions in each of the next
two fiscal years to match the lend-lease appropriation. But his remarks indicate an attempt by isolationists to cool popular enthusiasm
for aid to Britain by earmarking burdensome taxes for British aid. The
same objective is apparent in Senator Taft's latest call for new taxes
amounting to $5,000,000 and Senator Wiley's recommendation that all
income above a certain level be taken in taxes.
Defense Bond Program
The Treasury savings bond program has been greeted with almost
unanimous approval. Anti-administration papers and columnists are
-5-
340
as loud as others in their tributes. Even John T. Flynn and Hugh
Johnson have given the plan their blessing. The program is praised
as having been devised with great skill to appeal to smaller investors
and to provide proper safeguards against speculation in the bonds.
It is pointed out everywhere that the program will give all sections
of the American people a chance to contribute to national defense and
will also serve to check inflation.
The financial journals do not regard the terms of the issues
as especially attractive, and feel that success of the program must
depend upon patriotic fervor rather than the desire for financial
gain. A few papers take the occasion to say that heavy taxes, not
borrowing, should be relied on to pay for defense. There are also
occasional misstatements of fact which can be corrected before May 1st.
For example, a few papers and commentators (notably John T. Flynn)
persist in saying that the Treasury plans a high-pressure sales
campaign rivalling the Liberty Loan drives, in spite of Treasury assurances to the contrary. One or two say that we intend to persuade
employers to push the sale of bonds among employes. In the Cleveland
area there has been a sudden withdrawal of cash from savings deposits,
apparently for hoarding, as the result of a queer rumor that we intend
to take a proportion of savings accounts for the forced purchase of
bonds. These, however, are minor blemishes upon a picture which is
uniformly friendly and favorable.
341
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
DATE March 29, 1941.
TO
FROM
Secretary Morgenthau
Alan Barth
LEND-LEASE TAKES HOLD
Revolt
The news of the revolt in Yugoslavia has had an electrifying
effect on American thinking. It was hoped for, yet unexpected.
Coming, as it did, when the hope for it had been virtually abandoned,
it provided a dramatic vindication of the course in foreign policy
which the President has set. Editorial commentators have accepted
it as proof that there is a contagious quality about moral force.
Other factors than the Lend-Lease Law and the President's
promise of aid to the Yugoslavs are acknowledged to have influenced
the revolt; the example of the Greeks and the British pledge of assistance are recognized as potent causes. But there appears to be
universal satisfaction here that the strength of the United States
helped to forge the courage of a threatened people.
In their first enthusiasm over this sudden shift in the
Balkans, the editorial writers have permitted themselves hopes -perhaps unwarranted and naive -- that other victims of the Nazi war
machine will also rise against aggression. But more significant than
these hopes is the sense of identity, or community, with these
-2-
342
victims which is now felt here. The common reaction has been that the
fear of consequences can no longer deter the American people in implementing the policy on which they have determined.
Definition
As zealously as ecclesiastical scholars searching Holy Writ, the
editorial writers have been combing President Roosevelt's most recent
radio address for subtle and secret meanings. Their attention during
the past week has been centered on one abstract and two concrete implications.
A great many of them called the speech an outright declaration
of war. An appalling quantity of newsprint has been consumed in ex-
plaining the curious and special nature of our belligerency. Placed
end to end the news columns devoted to this academic inquiry would no
doubt curl clear around the earth -- winding up precisely where they
started. The commentators found themselves confronted with a highly
irregular and unconventional state of affairs -- and could not help
being slightly peevish at the inconvenience it occasioned them.
Their prevailing opinion appears to be that we are in the war,
all right, but that the Germans have not yet been quite bright enough
to realize it. A decided majority predict that so improper a situation cannot long continue and that, in time, old-fashioned belligerency
in the shooting sense must ensue.
This assumption that we are already in the war plainly colors
editorial thinking in regard to the concrete problems raised by our
- -3 -
343
anti-Axis program: (1) the problem of delivering aid for Britain in
the face of the German blockade; (2) the problem of producing aid for
Britain in the face of industrial unrest here.
Convoys
Both news and editorial columns during the past week have been
replete with speculation and discussion on methods of sending American
materiel across the Atlantic. The news stories on the subject have
emanated, for the most part, from "informed sources close to the
White House" -- possibly from Steve Vasilakos, the Greek peanutvender stationed on East Executive Avenue -- or they have been ack-
nowledged "think-pieces." Tribute should be paid to the ingenuity
of the authors.
Although these "inside stories" differ widely as to the
specific measures to be adopted, they are more or less uniform in
predicting that some form of convoying is to be adopted. A considerable percentage of the editorials discussing them also assume that
now or later the United States will undertake convoy duty. The wish
may be father to the thought in this assumption; but as to the wisdom
of the course, most of the editorial writers are curiously noncommittal.
Editorials on convoys can be divided roughly into two classes;
(1) those which state pontifically that we must see to it that our
war materiel reaches the beleaguered British, but that convoys might
cause shooting and shooting "comes awfully close to war"; (2) those
-4-
344
which declare with equal sententiousness that the American people
desire to remain at peace and have given the President no mandate
for convoys, but that we must build a "bridge of ships" to Britain.
Whether they start marching with the left foot or the right, they
arrive at the same destination -- that convoying is inevitable.
Comment on the subject of sending more of our destroyers overseas
follows much the same pattern. The outstanding characteristic of
all these editorials is prolixity, apparently a handmaiden of indecision.
Boomerang
The nub of the argument advanced by those opposing aid to
Britain has been that it will involve us in the war. The argument
has been interpreted so literally by some of the more impressionable
commentators that they accept it already as an accomplished fact.
But one is entitled to wonder if this thesis of the isolationists
has not boomeranged against them.
For there is implicit in current comment the feeling that if
this be war, its horrors have been overrated. Moreover, the very
sense of inevitability which has been engendered has served to make
Americans less fearful of the involvement which may ensue from force-
ful action. The example of Yugoslavia in particular has made it un-
likely that fear will any longer serve as an effective restraint upon
American conduct.
The insistence in the American press that we are now, or soon
-5-
345
will be, at war can scarcely have other than a disquieting effect if
it is taken at all seriously by leaders of the Axis. The isolationists, by their overstatements, may have forged a valuable instrument
for American diplomacy.
Labor
The applause which interrupted President Roosevelt's speech at
the point when he warned against "unnecessary strikes" has been
echoed and re-echoed by every conservative editorial page in the
country. The newspapers are gleeful in anticipation of a federal
crackdown on labor. Indeed, they are already caroling that all
strikes are "unnecessary."
Public opinion as reflected in the Gallup Poll and in numerous
letters to editors undoubtedly supports this editorial attitude. But
public opinion is fashioned by headlines which have been designed to
convey the view that all strikes are "unnecessary" and even treason-
able. It might be recognized, in addition, that the Federal Government itself is in large measure responsible for the present popular feeling. For the Government awarded defense contracts to employers who had violated federal laws and against whom labor resent-
ment was intense. And it did so without requiring these employers
to reform their labor policies. Thus, in the public eye, the practices
against which labor is now protesting were given Governmental sanction.
346
-6The public has been fanned into a dangerously inflammatory
state respecting organized labor. Nowhere else could a cooling-off
period be instituted with more salutary effects.
347
TO
THE SECRETARY or STATE
DEPARTMENT OF STATE
WASHINGTON
March 29, 1941.
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury, and
encloses one copy of paraphrase of telegram No. 81 of
March 28 from Helsinki.
348
PARAPHRASE OF TELEGRAM RECEIVED
FROM: American Legation, Helsinki, Finland
DATE: March 28, 1941, 3 p.m.
NO.:
81
The following is confidential:
Information has come to the British Legation in
Helsinki that certain Finnish dollar holdings are being
converted into Swedish crowns because of the possibility
that Finnish funds in the United States may eventually
be frozen. However, as to the amounts involved or
the owners of the holdings, the British Legation has not
been able to secure confirmation. Any information which
the Department could let me have as to the amount of
such conversions, if in fact there have been any, I would
welcome.
SCHOENFELD
EA:LWW
349
SECRETARY OF STATE
DEPARTMENT OF STATE
WASHINGTON
In reply refer to
EA 848A.5151/39
March 29, 1941.
The Secretary of State presents his compliments
to the Honorable the Secretary of the Treasury, and
encloses 7 copies of paraphrase of telegram No. 30
of March 27, 1941 from the American Consulate General,
Capetown, South Africa, with regard to the limitation
on the disposal of currency balances held abroad by Americans in South Africa.
of
350
PARAPHRASE OF TELEGRAM RECEIVED
FROM: Americah Consulate General, Capetown, South Africa
DATE: March 27, 1941, 4 p.m.
NO.: 30
The Finance Minister addressed a letter to me on March 26,
in which he clarifies the limitation on the disposal of
currency balances held abroad by Americans in South Africa.
I quote below the pertinent part of the Minister's letter:
"The undertaking to be furnished by foreign
nationals in respect of funds held abroad is merely
intended to prevent such funds being used in a
manner which would enable other residents in the
Union to circumvent the control which 18 being
exercised by the Treasury through the banks over all
exchange transactions.
"Cases have come to the knowledge of the Treasury
where American nationals have quite innocently placed
dollars at the disposal of Union residents by handing
them checks on their American bankers in exchange for
South African pounds. Whilet such transactions are
not necessarily in conflict with the interests of the
Union it is essential to make them subject to the
approval of an authorized dealer in order to ensure
that the persons concerned will not thereby be enabled
to acquire foreign currency for unauthorized purposes".
The letter explains further, answering questions I
had raised, that as for "personal and domestic expenditures",
business transactions by American holders of currency
balances abroad would not be excluded where the transaction
did not involve the purchase or sale of foreign exchange
within the Union, or where securities or other property
outside the Union were acquired with those funds by the
American resident in South Africa from persons to whom the
emergency
351
-2emergency finance regulations did not apply.
Another paragraph in the letter is as follows:
"The banks will be suitably instructed regarding
the intention of the undertaking to be furnished by
holders of exempted balances and will gladly assist
American nationals with advice in cases of doubt as
to whether
not aundertaking.
particular transaction falls within
the
scope ofortheir
I have also been informed orally by the Secretary of
the Treasury that Americans in South Africa will not have to
give any details as to amount when they declare the currency
balances held abroad. However, should they not file a
declaration of the possession abroad of certain unspecified
currency holdings, any letters which the censor intercepts
which
such possessions may be held up until investigation canmention
be made.
END MESSAGE.
KEENA.
EA:LWW
COPY
352
PARAPHRASE OF TELEGRAM SENT
TO: American Embassy, Vichy
DATE: March 29, 1941, 6 p.m.
NO. : 277
Information has come to the Department that at present a
general investigation is being carried on by the French authorities
of foreign accounts which are blocked in France. The Department re-
quests that you keep it informed about this reported investigation.
You are also requested to report any decisions concerning the
accounts of American citizens which may be taken by the French
authorities.
WELLES (ACTING)
EA:LWW
eh:copy
4-21-41
353
RESTRICTED
0-2/2657-220
M.I.D., W.D.
No. 352
March 29, 1941
12:00 M.
SITUATION REPORT
I.
Western Theater of War.
Air: No activity over Great Britain or the Continent,
presumably because of bad weather.
II.
Balkan Theater of War.
Ground: Bulgaria. No change.
Yugoslavia. Armed resistance to Germany seems
increasingly probable. The attitude of Croatia seems uncertain.
Albania. Artillery activity reported.
Air: No reports of activity.
III. Mediterranean and African Theaters of War.
Ground: Eritrea. British troops are pursuing the
Italian forces withdrawing toward Asmara.
Abyssinia (Ethiopia). The British report
favorable development of the situation in all sectors.
Libya. No change.
Air: Axis. Malta was again attacked. The Italians
claim successes against British naval and merchant vessels.
British. The R.A.F. raided Lecce, Italy, on the
28th.
Note: This military situation report is issued by the Military Intelligence Division, General Staff. In view of the occasional inclusion of political information and of opinion it is classified as
Restricted.
RESTRICTED
CONFIDENTIAL
354
of Code
Received as the May
as 13106, March m,
Belgrate, filed March no, 2012.
1. the - is going about with its / adbitionation with
a vise to the defense of Berbia. the feeling is military etroies is that
so for as - is - the dis is - definitely east.
a. Caloral Reducts I the German military attache, has
must the - Matery that all mobile of his staff will 8
about capitalely - Shis to I the assistant - military
attache outfused injury as the brain of demonstrators - the 27th of March.
the - tourist office ml the office of the - committe have boon
burnet. they - carpietely gutted - thats contents were I
3. Cartain Common - either is Balgaria streetly or else
Just entering, - having thats marking enters alsowed to them
tenants the Together frontier. there are no reports of further as yet - detected information is not to be had stace there Inc I as
communication with the estatio for a hours. the General Staff
thinks is will be two - before the - - - - attack - that
coming.
4. - have are clearing est either w train or elong the
I River. Departure on - to anticipated on the Sist.
5. 30 is cognected that you cont administragement both of yesterlay's
able - of this FORTIER
Distributions
Country of Years
State Department) dist of Staff
Secretary of - Please Division
hase. Book. of Yes
office of Name Intelligence
Air Googe CONFIDENTIAL
CONFIDENTIAL
355
Persphence of Code Cablegree
Incoived as Mas
10:39, Narch 29. 1942.
Benton, filed 15:35, March no. 1941.
1. Sentiment.
s
DayLight of March 28. Axis morahant shipping off
the coast of Holland was - attacked w a small number
of British planos.
A Right of March 27-me. A total of 97 British heavy
bombers were active. of these, 19 were dispotated to Drest, Calate,
and Deskirk, se more attached Desealdost. and Cologne was visited
by se others. The returning pilote maintain that the solds were
successful but that observation was difficult.
2.
Samma Me Antivity over Britain.
s
High of March 28-39. No German planse were pletted
over Regiant.
s
Daytight of March ss. Six German planes were over
Regland. Marchant shipping off the southeastern tip of Regland was
the target for three of these planos, and three German planes
operating singly earnied our saids on the Kenly airfield and
targete in the Returned of the These and as Claston.
s
Date unported. Your British marahant shipe off
the coast of Valee and Hilford Name were severely d during
as attack w Germa please.
CONFIDENTIAL
356
CONFIDENTIAL
3.
a.
James
British. High of March 29-38 - three bombare.
Germa. Reglight of March 28 - eas confirmed and
one other probable.
4. British Me Contactions in mana Eastern Theaters.
Reyal Air Force please were used in support of land
troops in Athiopia and Britron. A force of British bombare carried
out a said on the airfield ea the Dedecances island of Galate.
5. IS has been reported that defensive lines are being
built w the French along the State-Syrian border.
6. The Yogo Away and civilian population are
orderly and are showing Regulty to the present government. The
recently mobilized Yugosiav Army is now composed of at least as
complete divisions and will seen reach a total of so divisions
since the mobilisation of seven more is practically completed.
7. In the southern Albenian theater, proporations are
being note w the Italiana to establish a defensive line reasing
from Tireso to Darease, which is mased by a total of 12,000
soldiers.
SCARLON
Distributions
Secretary of Mar
State Department
Secretary of Treasury
Asst. Secretary of Var
Chief of Staff
Mar Plans Division
office of Naval Intelligence
Air Corps
Aviation Section
a-s
CONFIDENTIAL
CONFIDENTIAL
Received
357
of Code
to
as 27.00, - w
Sategood, filed 19:30, March ⑉ w
there is no ovidence of a Registration mobilitation as I
now for the Institute future. B is not bolieved that the /
will being - as I time. the other of Importan zabitas.
-
- states this - was - Bagga will to completed
about Ageth 200. Imageston - Boing communicated for in Bulgeria and Banala.
Distributions
Secretary of New
State September
of -
see Secretary of Mar
which of Staff
Was Please Division
office of Intelligence
CONFIDENTIAL
CONFIDENTIAL
358
of Date Bollogism
Received as the Was Department
as 22.02, March 30, 1961.
Softn, filed March m, 1946.
A Bolgerian - which though mefficial is regarded as workly
of confidence, totte the Material here that the - c. a.,
Field Marchal / Most, care this - - against
will be - multilose the those they - to take egatest -
- foress are being from Reging to I from
to Bulgeria, - so to the Vegetar treation. the - will Issuate regairing Support to in enter to take book the territory
they test to in the last Mr. If the - eat than w the
Bulgeriess will fight. - Selgeries - beeening - Please - the Minister's Dispatch M. 192 to the Secretary of State for
further details. Please instrust shother is future I shall estic
only military information that the Material also is - or Mother
I shall - - w refunding to his JAMKER
Distributions
of State
Benefits of -
Becombany of Treasury
Amer.
- of other of Staff
Year Please Division
office of Move Intelligence
CONFIDENTIAL
CONFIDENTIAL
359
Paraphanoe of Code Ballogram
Received as the Year Department
as 22:36, March 30, 1941.
Belgrade, filed 25:00, March so, 1963.
The Assistant Chief of the Air Teres, General Mirosvic, was the
ma who planned the resent coap d'etat. No explained to as today Just how
is was done. They used a carefully selected group of Serbian officers,
small is number, and - battelions of the Royal Goards, Major Naojovie
amounting, with teak re-enforcements. They captured the Prime Minister
and the Ministers of Yes, Foreign Affairs, and Court, the Chief of Staff,
Commanding General Deser, the division commindent, the Belgrade chief of
police, and various others. All those were gathered is at the sase time,
about two o'clock is the morning of the 27th. Shortly before that, trucks
picked w the police, mater orders from the assistant chief of
They also seised retio and other military and eivilion centree of military
communication in or mose Solgrate. After taking over the Was Department,
they three a defense cartes around as is a square of four blocks each my.
They them the king's proclemation - orieve in the - of the
king. The rest of the country - to be backing - those - and
public opinion approved. There we no military action outside Belgrade.
IS was a materity job.
FORTIER
Distributions
Secretary of Mar
State Department
Secretary of Treasury
Asst. Secretary of War
Ohiof of Staff
War Please Division
office of Reval Intelligence
Ats Garga
CONFIDENTIAT
CONFIDENTIAL
Received as
360
of Gate
as ⑉ March 30,
Institution, sized aboun, March 30, with
a. Als - the
s of Much . three effective - were w three flights of - Betting fighters each - the - daring
which stefields is Belgies and Trease - addition - In addition,
also - shipe off the assets of Belgian and Bolland were attention
w a small - of I - both the Constal - Bonber Commits.
A 5,000 to - best - his directly.
A High of March MM. Adverse weather conditions 1
the consellation of all nights of British please.
a. - Activity - Reliate
a. High of March 19-30. - - please cerried one midd
- Request, the Marthols staffeld as Indian, Cardiff, and
- smill Sereon of - - were - in stating time is the Nature River - in attents - targets in the violatty of
of March . A total of 172 - please pletted - Britata - the / orr the essets of Massinchise
and Vertaking, Britten - - obtacted w . - please a total
of a please ministees detensive patrels - the Bever Refull,
Buffalk, and Sinceleshiro - visited w the ats - please that
provided the - Mas water this - - - shipping is the
CONFIDENTIAL
CONFIDENTIAL
361
missed I and States / - - attention w mother 90 please. a extent of the - - w - / has not you board
determined.
3.
s British. - - as reports of British I
s / DaySight of Huch " - - abot does off the
cost of Belgian - - - - please as Belgies and Trunk
staffelds - I
4. Air in made Materia States
is the / of March as a formation of Briston please
inquest - this eight tone of bosto - - Italian Health - is the
- about us attes - of the Tate of Crute. the Suree mis - of three three endorse - - bookleships. Diseas
hits - a on - destroyer - - - - of which is thought
to - bod - state as - observed that - I had born Sticked is hav. Daily is the morning of the - w the steffeld as
I Italy, - attached w Bessish please - beary - - in
Sticked - Indica I - the 1 in the Italian Heat African
theater Regal Ats Term please - - active outport to - fores
w attacking the Itelina trage submitting - Hour and - - is
the Addition Make are.
9. - Are is the made States
Might - to possible - the taken of Milks
was inflicted w is - 6.
CONFIDENTIAL
362
CONFIDENTIAL
a to please - less.
As a - 2 the British attest - the I
- heavy busber - the I - destroyed, - other probably declarged, - a other Italian please of vorious - 7. In all - of Attrice as the present Almo, these - a
total of 285,000 Italian was 159,000 of which are motion. In the
Britton Member, - - 39,000 antino - weepe and 16,000
white wrongs. Is is the splates of the Hostial - office this if the
Brittens capital to - the I will by to - all of thats
forese late the highlinate I Addition Ababa before the Degisting of
the relay -
8. a Hard . - me a I mm Instito in the
-
- I the British and the Indian Meries. ALL the dotatio of
this - - be found in the any - reports.
Distributions
Samples of -
state
- of Treasury
Amount
- Nites of Clas of staff
office of Rest Intelligence
Ale Gaorge
as
CONFIDENTIAL
363
TREASURY DEPARTMENT
INTER-OFFICE COMMUNICATION
DATE March 31, 1941
TO
Secretary Morgenthau
FROM
Mr. Cochran
STRICTLY CONFIDENTIAL
At 2 p.m. yesterday, Sunday afternoon, March 30. Admiral Noyes telephoned
me at my home to let me know that he had just received a message from the cruiser
in South African waters saying "All loaded." He told me further that the cruiser
had obtained the required oil supplies and should be expected in New York around
April 18.
At 9 'clock this morning I gave this information to Acting Secretary Bell
and at 9:20 to Sir Frederick Phillips, Under Secretary of the British Treasury. At
10:20 this morning I succeeded in reaching Mr. Pinsent, Financial Counselor of the
British Embassy, and also gave him the same information. I reminded him that we
had not yet received from the British Government through his office a description
of the gold cargo. I told him that as soon as he supplied this, together with an
official letter from himself, as in the last instance, confirming the transaction,
our 95 percent advance payment would be made. Pinsent said that he had not yet
received the details of the shipment, but had telegraphed yesterday requesting them.
At 10:30 I telephoned Mr. Knoke at the Federal Reserve Bank in New York to
advise him that within the next day or so he would probably have a telegram from the
Treasury to make an advance payment on a gold shipment similar to the transaction
made in favor of the British some weeks ago. He understood that I was giving him
this information in strictest confidence.
364
March 31, 1941.
Memorandum for the Secretary's Files
From:
Mr. Gaston
us
At 10:05 P.M. Saturday, March 29, I got a telephone
connection with the Secretary at Sasabe, Arizona, from my
home and reported to him as follows: Through Naval Intelligence
we received a report, between three and four o'clock Saturday
afternoon, that there were reports of sabotage on Italian ships
at Wilmington, Norfolk and Baltimore; that as a result our men
at various ports had made inspections of these ships and on
the ships at Philadelphia they found that there had been extensive damage, including the smashing of engines with sledges.
Stark had strongly recommended that I send a message to the
President asking permission to take possession of these ships
and remove the crews and Knox had called me up during the
evening to make the same plea. I asked his opinion whether
we ought to consult the State Department and he demurred,
saying that in his opinion we ought to act swiftly. Later
Captain Allan Kirk, Chief of Naval Intelligence, called me up
and Admiral Stark also came on the wire. They had prepared a
draft of a message to the President for my signature. I told
them the draft seemed all right and that I personally favored
it, but that I wished to consult the Secretary. Kirk argued
against it, but I told them flatly that I intended to do that.
The Secretary on hearing this story said that he was glad I
had called him up and that he approved our taking the action
that Navy had requested.
Previously, after conversations with Waesche, I had
authorized him to put guards on all the Italian vessels and
on the two German vessels and I gave the Secretary that information.
The newspapers found out that we were putting guards
on the vessels and there were lead stories in the late editions
of all the morning papers, stating that we had "seized" Italian
ships.
365
-2Admiral Waesche, after again consulting with me, sent
messages to all the Captains of Ports to prepare to take
possession of all the Italian and German ships at 9:00 A.M.,
Eastern Standard Time, Sunday, but not to act until the
message "Execute" had been received.
At 8:50 o'clock Sunday morning Captain Kirk called me
to ask if I couldn't do something to expedite a reply from
the President. He said the President's yacht was still tied
up at Port Everglades and wanted to know if I couldn't contact someone by telephone. I said I would make the effort.
I put in a call for either Steve Early or Pa Watson and I got
Pa Watson on the phone about fifteen minutes later. Watson
told me that he supposed what I was calling about was the
ship matter and that he had just cleared a message containing
the words "Proceed as outlined. He explained that my code
message through Navy radio had not been decoded until two
o'clock in the morning and he had not presented it to the
President until he a woke in the morning. I immediately informed Waesche and we agreed that he would send a message
substantially as follows: "Execute immediately as to Italian
ships only. I gave this information to Kirk later and had
word from Kirk of the receipt of the message by Navy and
shortly afterwards word from the White House that a decoded
message
in a sealed
envelope the
addressed
me hadoperator
been to received there.
I authorized
White toHouse
open
the message and read it to me so as to make certain that it
checked with my information from Pa Watson, which it did.
Shortly after noon on Sunday, Sumner Welles called me
at home to say that they had been talking over the ship matter
at the State Department and that he had also talked to Stark.
He and Stark agreed that we ought to proceed to seizure of
the Danish ships in the same manner as we had taken the Italian
ships. He said he had reasons to fear the same sort of thing
in the case of some Danish ships that had happened in the case
of the Italian and suggested that if I agreed we ask the Presi-
dent for authority to act with respect to the Danish ships.
I told him that I did agree and that I would get off a message
to this effect. I prepared the following message and gave
it by telephone to the White House communications officer:
"State and Navy Departments concurring respectfully request
authority to take possession Danish and German ships in
American ports as well as Italian. Stark called me up just
is
366
3-
after I had sent this message and I read it to him. He said
he agreed entirely. His particular object in calling up,
however, was to ask that we remove the crews from the German
ships at once without awaiting word from the President. I
told him that I had just discussed the matter with Waesche and
that we agreed that we could take a chance on doing this as
a temporary precautionary action and that I had instructed
Waesche to go ahead. Stark expressed entire satisfaction with
this.
I was in my office at the Treasury at 4:55 P.M. Sunday
when the reply to my second message to the President was re-
ceived. I gave it to Waesche and informed Navy as soon as
I could get rid of the newspaper men. The information was
not given out to the newspapers until around ten in the even-
ing, when they began to get their first reports locally that
the Danish ships were being treated in the same fashion.
Copies of the messages to and from the President are attached.
Earlier in the day I had sent a code message to the
Secretary telling him of our request to the President with re-
spect to the Danish and German ships. At 10:00 P.M. he called
me on the telephone, having just received my message, and said
that it had his approval.
Attachments
for
367
6425
RESORT DEPARTMENT
COART GUARD
E4 Sept.1990
U. S. COAST GUARD
OFFICIAL DISPATCH
UNIT HEADQUARTERS
INCOMING HEADING
DATE 29 MAR 1941
RECEIVED FROM OPNAV VIA TELEPHONE
1522
FROM
TO (FOR ACTION)
ACKNOWLEDGE
PRIORITY
ROUTINE
NITE
(FOR INFORMATION)
ACKNOWLEDGE
PRIORITY
ROUTINE
NITE
TEXT
INFORMATION RECEIVED THAT ITALIAN VESSEL AT WILMINGTON
NORTH CAR. BEING SABOTAGED BY OWN CREW. INSPECTION OF TWO
ITALIAN VESSELS IN BALTIMORE THIS DATE BY CUSTOMS DISCLOSED
THAT ENGINES WERE DI SMANTLED AND PARTS ALL OVER ENGINEROOM
EXPLANATION GIVEN WAS THAT ENGINES WERE BEING OVERHAULED
AND THERE IS NO EVIDENCE THAT SUCH WAS NOT THE CASE BUT
CUSTOMS OFFICIALS WERE AT FIRST BARRED FROM GOING BELOW BY
SHIPS OFFICERS WHO STATED THAT THE ITALIAN CONSUL HAD FORBIDDEN ANYONE TO GO BELOW DECKS AND ENTRANCE WAS ONLY GAINED
BY THREAT OF ARREST. CONDITION OF ENGINES OF SHIPS IN NORFOLK
NOT KNOWN BUT WILL ASCERTAIN AS SOON AS POSSIBLE. NOT CERTAIN
OF LEGALITY OF CUSTOMS INSPECTION SO TREAT SOURCE OF INFORMATION ON BALTIMORE SHIPS AS RECEIVED FROM COMFIDENTIAL INFORMInitials of "ACTION" officer.
ANT.
ABOVE REC'D BY NAVY FROM NORFOLK. (HAL)
Operator's
Record.
C ONFIDENTIAL
GOVERNMENT PRINTING OFFICE
--154
368
C
0
P
Y
U. S. COAST GUARD
Official Dispatch
Unit Headquarters
30 March, 1941.
NAVY MESSAGE
RELEASED: Capt. Kirk by direction Adm. Stark
(Not cleared thru White House)
From Radio Washington 300319
TO:
PRESUS
FOLLOWING ADVICES THIS AFTERNOON FROM NAVAL INTELLIGENCE
SERVICE INDICATING ATTEMPTS SABOTAGE ITALIAN MERCHANTMEN TWO
AT BALTIMORE ONE NORFOLK ONE WILMINGTON NCAR X THE COAST GUARD
AND ALL NAVAL DISTRICTS WARNED EXERCISE ESPECIAL VIGILANCE X
CG DISTRICT COMMANDER PHILEADLPHIA NOW REPORTS MACHINERY PLANTS
FOUR SHIPS THAT PORT EXTENSIVELY DAMAGED AND ADMIRAL WARSCHE AT
MY DIRECTION HAS ORDERED GUARDS ON ALL ITALIAN VESSELS BUT NOT
TO SEIZE X RECOMMEND YOU DIRECT ME SEIZE AT NINE HOURS EST
SUNDAY MORNING ITALIAN MERCHANTMEN IN US PORTS CANAL ZONE AND
PUERTO RICO IN ACCORDANCE EXECUTIVE ORDER 8677 of 11 FEBRUARY X
SECNAV CONCURS X REQUEST IMMEDIATE REPLY AS ALL OPERATIONS MADE
X SIGNED ACTING SECTREAS
CONFIDENTIAL
DISTRIBUTION:
16 Originator 38..XXX 10/11..12 NAVAID ONI OPNAV CG
369
lamply sufer to Initials
NAVY DEPARTMENT
OFFICE OF CHIEF OF NAVAL OPERATIONS
WASHINGTON
FROM THE PRESIDENT
FOR ACTING SECRETARY OF TREASURY
PROCEED AS OUTLINED
SECRET
WHITE 86
370
Message from Mr. Gaston to the President, given to the
White House Communications Officer by telephone, for transmission.
Sunday, March 30, 1941.
"State and Navy Departments concurring respectfully
request authority to take possession Danish and German ships
in American ports as well as Italian."
371
TELEGRAM
The White House
Mashington
6poki 22 Gov't Collect 3:47 p.m.
VERO BEACH, FLORIDA, Mar. 30, 1941
THE WHITE HOUSE:
For acting Secretary of the Treasury approve additional taking
of ships as recommended by you with concurrence of State#and Navy.
Roosevelt.
Phoned to Mr. Gaston.
3:56 p.m.
372
EASURY DEPARTMENT
Washington
Press Service
No. 24-32
FOR IMMEDIATE RELEASE,
Monday, March 31, 1941.
The Secretary of the Treasury today announced the final subscription and
allotment figures with respect to the current offering of 2-1/2 percent Treasury
Bonds of 1952-54 and 3/4 percent Treasury Notes of Series D-1943. Cash allotments on public subscriptions aggregated $526,213,750. This amount includes
$37,337,500 allotted in full to subscribers for $5,000 or less who specified
that delivery be made in registered bonds 90 days after the issue date. In
addition to the amount allotted on public subscriptions, $28,940,200 of the
bonds have been allotted to Government investment accounts, within the
$50,000,000 reservation. of the $503,877,500 of Treasury Notes of Series B-1941,
naturing June 15, 1941, $480,037,500 have been exchanged for the new issues.
Subscriptions and allotments were divided among the several Federal Reserve
Districts and the Treasury AS follows:
2-1/2 PERCENT TREASURY BONDS OF 1952-54
Federal Reserve Total Cash
District
Subscriptions
Received
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
TOTAL
$
Boston
Total Cash
Subscriptions
Allotted
Total Exchange
Subscriptions
Received
Total
Subscriptions
Allotted
(Allotted in full)
479,191,750 $ 40,912,800 I 17,951,700
316,632,600
251,649,950
3,043,206,550
8,088,400
32,661,950
354,963,200
17,731,500
31,141,200
369,307,650
18,074,900
17,915,500
201,579,400
8,372,000
19,970,000
236,579,450
31,587,200
59,425,400
681,248,700
6,971,400
12,674,250
130,326,800
2,866,000
8,916,800
84,341,150
9,327,800
10,817,200
101,665,850
2,327,500
12,513,300
138,829,900
6,944,700
26,352,200
308,321,150
584,500
1,263,200
15,224,600
$6,144,786,150 $526,213,750 $447,458,200
( 58,864,500
568,282,550
40,748,350
48,872,700
35,990,400
28,342,000
91,012,600
19,645,650
11,782,800
20,145,000
14,840,800
33,296,900
1,847,700
$973,671,950
373
-23/4 PERCENT TREASURY NOTES OF SERIES D-1943
Federal Reserve
District
Total Subscriptions
Received and Allotted
$ 160,000
Boston
New York
30,797,600
Philadelphia
65,500
155,900
111,500
Cleveland
Richmond
Atlanta
5,000
582,300
135,500
122,500
101,000
197,000
105,500
100,000
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Treasury
{32,639,300
TOTAL
-000-
374
Delivered to Treas. by Mr. Nicholson
SHANGHAI
March 31 1941
From Y L Chang
To Nicholson
Announcement made by Japanese that military yen would be pegged to
Chinese national currency at present level namely 423 military yen
to $1000 national currency. Believe this action has following
motives colon To check speculation on military yen. If military
yen too expensive it will be difficult to acquire products. Do
not desire to see collapse of Chinese currency to which military
yen commands only value. Present circulation of Central Reserve
Bank notes approximately $24,000.000 such circulation centered
mostly in Nanking area where as Shanghai is still not noticeable.
Exchange market remaining rather steady in spite of present
trouble. Hongkong bank continues to give support. Speculators
position not big.
10
THE
VHE
TECHNICY
bill
RECEIVED
mg
COPY
01
Delivered to Treas. by Mr. Nicholson
375
Shanghai
March 31 1941
From Jacobson
To Nicholson
Full details of bombings and attempted bombings of Chungking Government
banks and kidnapping of some hundred clerks of Bank of China at Shanghai
were sent by all local news agencies to the United States As I assumed
these happenings would make front page news of every newspaper in the
United States I did not cable to you On March 22nd five Chinese clerks
of Kiangsu Farmers Bank were killed in their sleep and six others wounded
by a gang of six gunmen who entered the house in which they were all
living On 23rd over 100 clerks of Bank of China were kidnapped and are
still being held at 76 Jessfield Road On 24th time bombs were placed in
premises of Farmers and Ningpo banks but no damage was done as police
arrived in time to render bombs ineffective On same date bombs were
delivered to both branches of Central Bank These bombs exploded causing
the death of about six minor employees of bank and considerable damage
was done to the new branch on Bubbling Well Road Central Bank has been
closed ever since but will open tomorrow with promise of additional
protection from U S Marines and police No important bank officials were
killed or kidnapped in any of these outrages. It is believed the TNT used
used in these bombs was of German origin Some quarters are of opinion
Hanking Government is trying to get all Chungking Government banks out
376
-2of Shanghai so they can promote their now notes as they have made very
little progress in getting their notes in circulation Another quarter
thinks that those bombings are retaliatory and further bombings will be
carried out
ehicopy
377
0
0
LONDON, March 31, 1941.
P
Y
No. 185
SUBJECT: British Press Comment on the Viscose Deal and Canadian
Dollar Assets.
The Honorable
The Secretary of State,
Washington.
Sirs
I have the honor to refer to the Embassy's telegrams No. 1052 of March 18
and No. 1225 of March 28, containing quotations from the British Press on the
Viscose deal, the question of the sale of further British direct investments
in the United States, and the bearing on this question of figures published
showing dollar assets and payments by the British Empire to Canada.
The first reaction of the press indicated that the Viscose sale was a
shock to the City, in spite of the knowledge that Sir Edward Peacock had been
sent to the United States in January for the purpose of "exploring the possi-
bilities" of liquidating British direct investments. That the announcement
of the deal constituted a timely and potent gesture was recognized. Nevertheless, the prospect of further deals of a similar nature caused a degree of
dismay which became evident in the endeavors made by financial writers to find
some other way to meet the dollar requirements which, it seemed, were to continue to be a greater strain on British dollar resources than had been expected
after the passage of the Lease-and-Lend Act.
Notable among such attempts was an editorial published in the Financial
News of March 19. This journal had anticipated the possibility of a liquidation of direct investments, in an article published on March 14 in which it
vas argued that in the light of the estimates of Britain's dollar requirements
for 1941 it was clear that the necessity for the realization of direct investments is closely bound up with the proposed payment of $620 million to Canada
in settlement of the adverse balance of the rest of the Empire with that Dominion.
In the editorial of March 19. after mentioning the varied intangible adventages in the way of control, good-will etc. of such holdings, and conceding
that "it is clear that the active cooperation of the American authorities has
sufficed to ensure that we are not being forced to unload these industrial
378
2
participations at sacrifice prices in a buyer's market", the question was put
as to whether the foreign exchange position had already reached the degree of
urgency which this sale might indicate and it was pointed out that "as it
happens, the estimated loss (of dollar assets) for this year includes no less
than $620 million required for the settlement of our obligations not to the
United States but to Canada. On the face of it, therefore, the policy of liqui-
dating direct investments would seem to be closely linked with this payment to
Canada. Hence the necessity for this drastic step can be judged only in the
light of Canada's own exchange position on which there is very little infornation". The editorial then went on to suggest that if Canada has available
dollar assets it would be highly desirable that the transfer from the remainder of the Empire should take the form not of gold but of a temporary
hypothecation of British direct investments in the United States which could
thus be retained within the Empire for possible repurchase after the war".
A similar thought was expressed in the Economist of March 15 which, in a
paragraph from which a quotation is given below, implied that Canada might
well extend to the United Kingdom assistance similar to that rendered under
the Lease-and-Lend Act, while in a further note on March 22, also quoted below,
it was suggested that the difficulties of Canada's trade balance with the
United States would disappear if Canada could obtain her required imports
from the United States on lease and lend terms:
"It is impossible to leave the subject of
the supply of and demand for dollars without
remarking what a relief would be secured if it
were possible to make with Canada arrangements
similar to the Lease and Lend Act. It is
somewhat anomalous that a neutral should be
providing munitions free of cash payment while
gold or American dollars are still being paid
to a belligerent. There is no reason to
suppose that this is not appreciated in the
most realistic and generous spirit in Ottawa."
(Economist - March 15. 1941, page 329)
"The appearance in the estimates of British
dollar needs which have been published recently
in the United States of substantial sums paid
to Canada has naturally given rise to some discussion in this country. As was remarked in
The Economist last week, sit is somewhat anomalous that a neutral should be providing munitions
free of cash payment while gold or American
dollars are still being paid to a belligerent'.
But it would be wrong to read into this anomaly,
as is being done in some quarters, a suggestion
that there is any hoarding of gold by Canada or
any lack of financial cooperation at Ottawa.
379
The gold or American dollars paid to Canada by
the United Kingdom are needed to settle Canada's
own adverse balance with the United States, a
balance swollen by imports of raw materials and
machinery for the rapidly growing Canadian armament programme. If Canada could obtain these
commodities on lease-and-lend terms, the necessity
would, of course, disappear. But the difficulties
that have to be surmounted do not include any
lack of cooperation on Canada's part, and it is
a pity that the publication of partial statistics
should have given rise to a false impression".
(Economist, March 22, page 372)
After the publication of the speech by the Canadian Minister of Finance there
appeared
of which
the following, quoted from the City Column of the Daily
Telegraph comment
of March 28,
was typical,
"Misconceptions have arisen, both here and in the
United States, following the publication of official
figures showing that the Empire would meet a deficit
with Canada during the current year by payment of $620
million in gold. To many people it seemed odd that such
a large gold transfer should be made when the United States
was doing so much to relieve the pressure on Britain's
financial resources. It is made clear, however, in a speech
by Mr. Ilaley, the Canadian Finance Minister, that this
figure of $620 million has been interpreted falsely.
"Mr. Ilsley gave chapter and verse to show that Canada's
contribution to the Empire's financial effort has been much
larger than was suggested by the estimates recently published.
In the first 10 weeks of 1941 the Canadian Foreign Exchange
Control placed at our disposal, against sterling, 150,000,000
Canadian dollars. It is clear that Canada regards the $620
million merely as a residual item in the Empire balance-sheet,
for which payment solely in the form of gold is not anticipated.
The Financial News, however, in an editorial on March 27. which began by
paying tribute to Canada's financial assitance and cooperation, expressed the opinion
that in view of Canada's helpful attitude the British authorities would seem to have
acted a little precipitously in disposing of American Viscose at so early a stage.
The passing of the Lease-and-Lend Act, the editorial continued, was thought to demand
a sweepinggesture but the value of the gesture must have been largely vitiated so
long as pro-Nazi elements could claim that the dollar proceeds were required in
settlement of British obligations not to the United States, but to Canada. "Had
the authorities refrained from putting out estimates for Canada's dollar payments,
which now seem to have little practical significance, the need for such a gesture
might never have arisen".
380
The editorial concluded by repeating the contention made in the earlier
articles in the Financial News that in the long run, in spite of Canada's position
as a dollar currency country, it may be necessary "to ask Canada not only to
accept
sterling
payment
forthe
ourUnited
own deficit,
but actually to supply the Empire
with dollars
withinwhich
to pay
States".
Another aspect was stressed by the Financial Times which, in an editorial
on March 30, after pointing out that the Lease and Lend Act will not absolve
Great Britain from further realization of dollar assets, and that sales of
both
stated:securities and businesses must be accepted as a necessary war arrifice,
"Sacrifice is not confined to the individual, or necessarily to this nation. Britain
relinquishes potential earning power with every
asset that is sold, and it may be doubted whether
it is an unmixed advantage to America to permit a
serious disturbance to the economic set-up between
the two countries. Far-sighted observers in the
United States may well be disturbed at the prospect
of Britain losing a considerable volume of future
purchasing power. The United Kingdom is normally
among the best customers of the United States, and
for some years prior to the war there was a distinct
tendency to regulate trade relations between the two
countries with a view to preserving some sort of
equilibrium,
This editorial concluded by emphasizing that, because of the importance of
American sympathy and goodwill, British dollar assets must, if necessary,
continue as an earnest of determination to venture all for the winning of the
war, and
"apart from any devices, such as pledges instead
of sales of assets, that may be found possible,
our post-war position, and our correlative
ability to absorb U.S. xports, must be left
to take care of themselves".
Though the above summary of the British press reaction to the Viscose deal
and its bearing on the Canadian position is by no means exhaustive, it covers
the more significant published comments, with one exception, which is quoted
below from the weekly Time and Tide for March 29 (page 274):
"From the long-term point of view, the
sale of the Viscose Corporation is bad for Courtaulds' shareholders and bad for the nation. It
represents the sale of the golden goose that lays
a number of valuable dollars every year, and is
likely to lay bigger eggs as American prosperity
grows under the stimulus of defence expenditure on
that side,
381
"It may be that politics, and American
politics at that, played a big part in de-
termining the Viscose sale. A gesture was
wanted in advance of the debate on the
£1,750,000,000 appropriation for aid to Britain.
Something had to be done, and done quickly.
The Viscose undertaking was the easiest thing
to sell and it was sold. But under these
conditions the price obtained may not have
been the right price, and there seems no
adequate reason for the ten per cent profit
to be made by American interests who are to
re-sell the shares to the American public.
The bargain is that the British Treasury
will receive 90 per cent on the proceeds of
such re-sale. I hope Americans will realize
that 'all aid to Britain' is only being
given at a price, and it is a price which
will do America no good in the long run.
It will accentuate the dollar famine later
on. As the New York Herald-Tribune said, in
commenting on the Viscose deal, surely it
is more than a little short-sighted to destroy Britain's economic health while giving
all-out support to her battle for democracy'.
That sentiment is welcome, but we may not
express it over here. President Roosevelt
may be willing to 'abolish the pound and
dollar sign in the Anglo-American war bill,
but it looks as if Wall Street is out to
abolish the pound, as the price of American
help."
It may be as well to note that the sentiments expressed in the above quotation are doubtless not entirely absent in other quarters, though all but the
more outspoken may refrain from giving any expression to them. So long as the
liquidation of British assets was confined to the sale of gold and quoted market
securities, no question arose as to the necessity for the sacrifice of valuable
earning assets. But the prospect of parting with direct investments was met at
first with a hope that such sacrifices would not really prove necessary, and
after the first sale had been announced, with the reactions reviewed above, which
may be summarized as indicating that this form of sacrifice is one which must be
not with a stiff upper lip, if further resort to it cannot indeed be prevented.
Respectfully yours,
For the Ambassadort
Herschel V. Johnson
Counselor of Embassy
Enclosures:
1-4/ See page 6.
382
- 6- Enclosures;
1. Article from the Financial News,
March 14, 1941, entitled U.K.V
Trade Interests in America".
2. Editorial from the Financial News,
March 19. 1941, entitled "Bang
Goes Viscose".
3. Editorial from the Financial News,
March 27, 1941, entitled "Canada
to the Rescue".
4. Extract from the Londoner's Diary,
Evening Standard, March 27. 1941,
entitled "Peacock Hunt".
NOTE:
Owing to the paper shortage, it is
impossible to obtain five copies of
daily newspapers in most cases. The
clippings quoted are, therefore,
transmitted in one copy only. attached
to the original of this despatch. For
this reason extracts have been rather
extensively quoted in the body of the
despatch. It is assumed that copies of
The Economist are available in any
Departments in Washington where refer-
once to the full text may be desired.
KAHE/JC
A true copy of the signed original
383
C
0
P
Y
Paraphrase of telegram no. 266, March 31,
7 p.m. from Madrid, Spain.
I have been informed by the Argentine Embassy that
the Spanish Government is now studying the proposal which
contemplates the extension of a 160,000,000 Argentine peso
credit to be amortized over a period of 15 years at the
maximum. The credit would be used entirely for the
purchase of certain quantities of Argentine products
described in my previous telegram, but the Argentine
Embassy is not willing to specify them in detail at the
present time as the quantities may be changed. This
would not be a clearing agreement even though in part
payment might be made from the full proceeds of certain
Spanish goods to be sold to Argentina, including
especially iron and steel products, and also from other
exchange earmarked for this purpose. Approximately
35,000,000 Argentine pesos would be grouped in this credit
to cover the cost of approximately 5,000 tons of wheat
from which shipments are at present actually being made,
even though details of the terms have not been completed.
RA:AED:GRS
Copy:bj:4-18-41
384
TURKISH EMBASSY
WASHINGTON, D. C.
March 31, 1941.
My dear dr. President:
I represent on behalf of the Turkish Government, pursuant to Sections 4 and 7 of the Act of March 11th,
1941, that:
1) Every contract or agreement for the disposition of any defense article or defense information,
pursuant to Section 3 of the Act of March 11th, 1941, to
the Turkish Government shall be deemed to include a clause
that the Turkish Government will not, without your consent,
or the consent of someone designated by you for that purpose,
under the Act, transfer title to or possession of such defense
article or defense information by gift, sale, or otherwise,
or permit its use by anyone not an officer, employee or agent
of the Turkish Government;
and
2) If, as a result of the transfer to the
Turkish Government of any defense articles or defense inform-
ation, it is necessary, pursuant to Section 7 of the Act of
March 11th, 1941, fully to protect the rights of any citizen
of the United States, who has patent rights in and to any such
defense article or information, the Turkish Government will do
so, when so requested by you or your designee for that purpose.
Please accept, Mr. Fresident, the assurances of
my highest consideration,
His Excellency
ll. Mining Colega
The President
of the United States of America
V
385
March 31, 1941
MEMORANDUM FOR THE SECRETARY:
Attached 18 a summary report of the projects
which have been worked on in the Division of Tax
Research during March, 1941.
RB
Attachment
386
Monthly Report on Projects in the
Division of Tax Research
March, 1941
I. New projects
1. Capital gains taxation
A memorandum analyzing the treatment of
capital gains under the 1938 Act is in
process. (Miss Coyle)*
2. Intergovernmental fiscal relations
An outline for the study of intergovernmental fiscal relations was prepared.
(Mr. Ecker-Racz)
3. National income and savings
A memorandum on the volume of savings and
income available for consumption was
prepared. (Mr. Farioletti)
4. Advertising costs
A memorandum analyzing the treatment of
advertising costs under the excess profits
tax was prepared. (Mr. Campbell,
Mr. Farioletti and Mr. Mills)
Persons listed as working on the different projects
do not include those who acted largely or exclusively
in a consulting or reviewing capacity. In general,
the person, if any, actively in charge of the project
is listed first.
387
-25. Income taxation
Tables were prepared showing the effects
of lowered personal exemptions and
increased surtax rates. (Mr. Zorach)
6. Gold and silver mining
(a) The principal arguments advanced in
support of classifying gold and
silver as strategic minerals for the
purpose of exemption under the excess
profits tax were analyzed. (Mr. EckerRacz)
(b) A memorandum on the taxation and
subsidization of gold mining in
Australia, South Africa and Canada
was prepared. (Mr. Eoker-Raoz and
Mr. Gordon)
7. Shipping tax
A memorandum commenting on a proposal for
a tax on water and pipe line transportation
was prepared. (Mr. Ecker-Racz)
II. Continuing projects
1. Income tax payment
A memorandum analyzing the problems
involved in the collection of the individual
388
-3income tax at source and other methods
of facilitating income tax payment is
in process. (Mr. Atlas and Mr. Mille)
2. Tax-exempt securities
(a) A memorandum relating to tax-
exempt securities of foreign
countries is in process. (Mr. EckerRacz and Mr. Mannen)
(b) A table showing the treatment of
interest from governmental obligations
under State income taxes was completed.
(Miss Wells)
(c) A digest of congressional proposals
pertaining to the elimination of taxexempt government securities was
completed. (Mr. Mannen)
3. Taxation of insurance companies
A memorandum analyzing statistical
information relating to the profit and
income tax payments of insurance companies
is in process. (Mr. Mills)
389
-44. Federal sales taxes
A memorandum on some possible forms of
Federal sales taxes, including taxes
on value added, manufacturers and whole-
salers, is in preparation. (Mr. Farioletti
and Mr. Copeland)
5. Federal excise taxes
A memorandum analyzing possible additional
sources of excise tax revenue is in
process. (Mr. Campbell)
6. Foreign taxes
(a) Memoranda on the latest changes in
Canadian and Australian taxes are
in preparation. (Mr. Atlas and
Miss Hughes)
(b) In collaboration with the Division
of Monetary Research, a study of the
Haitian fiscal system is in final
stages of completion. (Miss Wells)
7. Treasury Bulletin
An article for possible publication in
the Treasury Bulletin 18 in process comparing taxpayers' reported State of residence
390
-5 in 1936 with the States in which they
filed their income tax returns.
(Miss Coyle and Mr. Zorach)
8. Income, excess profits and undistributed
profits taxation
Reports on the following subjects have
not been actively prosecuted during the
month:
(a) Analysis in the light of issues
raised by the undistributed profits
tax of the statistics made available
from income tax returns and other
sources. (Mr. Atlas and Mr. Copeland)
(b) Analysis of the proposal to allow
corporations with five or less shareholders to be treated for tax purposes
as partnerships. (Mr. Mills)
(c) Analysis of special treatment afforded
financial, personal service and public
utility companies, the professions and
agriculture under the World War and
present excess profits taxes of the
United States, Great Britain and Canada.
(Mr. Mills)
391
-6III. Routine Assignments
1. Technical review of forthcoming
Treasury publications
(a) The work of the Philadelphia
project analyzing income, excess
profits and estate tax returns is
in final stages of completion.
A press release for the forthcoming
volume on capital gains and losses
was prepared. (Miss Coyle)
(b) Table outlines for periodic tabulations
from corporation excess profits tax
returns were reviewed. (Mies Coyle)
2. Digests and comments on other studies
(a) The following studies were reviewed:
1. Page proof of an article on
taxation for the Americana Annual.
(Miss Hughes)
2. The article "Public Relations in
Tax Administration" published by
the Federation of Tax Administrators,
August 1940 (Mr. Zorach)
(b) The report "Study of the Delaware State
Income Tax Yields" by Walter C. Wilson
is pending review. (Miss Coyle)
392
-7-
3. Statistics
(a) In connection with the supervision
of the statistical work of the
Bureau of Internal Revenue, various
proposals for statistical compilations
were examined including suggested
tabulations from the corporation
income and excess profits tax returns.
(Mr. Blough, Mr. Shere and Miss Coyle)
(b) Administrative reports and statistics
of the Bureau of Internal Revenue are
graphed and commented upon for
Mr. Sullivan's information. (Mr. Campbell)
(c) Data relating to different taxes,
digests of tax items, and congressional
activity on tax items of interest to
the Division are currently prepared.
(Staff members)
4. Correspondence
The Division handled correspondence pertaining
to tax matters. (Staff members)
393
March 31, 1941
MENORANDUM FOR THE SECRETARY:
Attached is a summary report of the projects
which have been worked on in the Division of Tax
Research during March, 1941.
Astachment
Masted
3/31/41
394
Monthly Report on Projects in the
Division of Tax Research
March, 1941
I. Here projects
1. Capital gains taxation
A memorandum analysing the treatment of
capital gains under the 1938 Act is in
process. (Miss Coyle)*
2. Intergovernmental fiscal relations
An outline for the study of intergovernmental fiscal relations was prepared.
(Mr. Keker-Raez)
3. National income and savings
A memorandum on the volume of savings and
income available for consumption was
prepared. (Hr. Farioletti)
Advertising conta
A menorandum analysing the treatment of
advertising costs under the excess profits
tax was prepared. (Mr. Campbell,
Mr. Farioletti and Mr. Hills)
Persona listed as working on the different projects
do not include those who acted largely OF exclusively
in a consulting or reviewing capacity. In general,
the person, if any. actively in charge of the project
is listed first.
395
5. Ineene toxation
Tables were prepared showing the effects
of lowered personal excaptions and
increased surtax rates. (Mr. Zorach)
6. Gold and eilver mining
(a) The principal argumonts advanced in
support of classifying gold and
silver as strategic minerals for the
purpose of exemption under the excess
profits tax were analyzed. (Hr. KekerRaes)
(b) A menorandum on the taxation and
subsidisation of gold mining in
Australia, South Africa and Canada
was prepared. (Hr. Ecker-Raes and
Mr. Gordon)
7. Shipping tax
A memorandum commenting on a proposal for
a tax en water and pipe line transportation
was prepared. (Mr. Beker-Raes)
II.
1. Income tax persent
A memorandum analysing the problems
involved in the collection of the individual
396
3income tax at source and other methods
of facilitating income tax payment is
in process. (Hr. Atlas and Mr. Hills)
2. Tex-except securities
(a) A memorandum relating to tax-
exempt securities of foreign
countries is in process. (Mr. EakerRees and Mr. Mannen)
(b) A table showing the treatment of
interest from governmental obligations
under State income taxes was completed.
(Niss Wells)
(e) A digest of congressional proposals
pertaining to the elimination of taxexempt government securities was
completed. (Mr. Nannea)
3. Taxation of insurance companies
A memorandum analysing statistical
information relating to the profit and
income tax payments of insurance companies
is in process. (Hr. Milla)
397
-
4. Federal sales taxes
A memorandum on some possible forms of
Federal sales taxes, including taxes
on value added, manufacturers and whole-
salere, is in preparation. (Mr. Parioletti
and Mr. Copeland)
5. Federal excise taxes
A memorandum analysing possible additional
sources of excise tax revenue is in
process. (Hr. Campbell)
6. Foreign taxes
(a) Hemoranda on the latest changes in
Ganadian and Australian taxes are
in preparation. (Mr. Atlas and
Miss Hughes)
(b) In collaboration with the Division
of Nonetary Research, a study of the
Haitian fiscal system is in final
stages of completion. (Hiss Wells)
7. Treasury Bulletta
An article for possible publication is
the Treasury Bulletin is in process comparing taxpayers' reported State of residence
398
5-
is 1936 with the States in which they
filed their income tax returns.
(Hise Geyle and Mr. Zorach)
8. Income. excess profits and undistributed
Reports on the following subjects have
not been actively prosecuted during the
months
(a) Analysis in the light of issues
raised by the undistributed profits
tax of the statistics made available
from income tax returns and other
sources. (Mr. Atlas and Mr. Gopeland)
(b) Analysts of the proposal to allow
corporations with five OF less shareholders to be treated for tax purposes
as partnerships. (Nr. Mills)
(e) Analysis of special treatment afforded
financial, personal service and public
utility companies, the professions and
agriculture under the World Var and
present excess profits taxes of the
United States, Great Britain and Ganada.
(Mr. Mille)
393
XXX. Rostine Assicuments
1. Technical review of forthooming
Treasure numbers
(a) The work of the Philadelphia
project analysing income, excess
profits and estate tax returns is
in final stages of completion.
A prese release for the forthooming
volume on capital gains and lesses
was prepared. (Hiss Coyle)
(b) Table outlines for periodic tabulations
from corporation excess profite tax
returns were reviewed. (Miss Coyle)
2. Digests and comments on other studies
(a) The following studies were reviewed:
1. Page proof of an article on
taxation for the Americana Annual.
(Miss Hughes)
2. The article #Public Relations in
Tax Administration" published by
the Federation of Tax Administrators,
August 1940 (Hr. Zorach)
(b) The report "study of the Delevare State
Income Tax Fields' by Walter C. Wilson
is pending review. (Miss GoyLe)
400
3. Statistics
(a) In connection with the supervision
of the statistical work of the
Bureau of Internal Revenue, various
proposals for statistical compilations
were examined including suggested
tabulations from the corporation
income and excess profits tax returns.
(Mr. Blough, Mr. Shore and Kiss Coyle)
(b) Administrative reports and statistics
of the Bureau of Internal Revenue are
graphed and commented upon for
Mr. Sullivan's information. (Hr. Campbell)
(e) Data relating to different taxes,
digests of tax items, and congressional
activity on tax items of interest to
the Division are currently prepared.
(Staff members)
4. Correspondence
The Division handled correspondence pertaining
to tax matters. (Staff members)
3/31/41
401
Customer
TREASURY DEPARTMENT
INTER OFFICE COMMUNICATION
For
DATE March 31, 1941
Secretary Morgenthau
FROM
CONFIDENTIAL
Mr. Cochran
Registered sterling transactions of the reporting banks were as follows:
Sold to commercial concerns
£53,000
£71,000
Purchased from commercial concerns
Open market sterling remained at 4.03-1/2. Transactions of the reporting banks
were as follows:
Sold to commercial concerns
Purchased from commercial concerns
.£ 1,000
£ 2,000
In New York, some improvement took place in the quotation for the Canadian
dollar, while the Cuban peso continued to ease off from the high of 3-1/2% discount
reached on March 27. The closing rates for the foreign currencies listed below were
as follows:
Canadian dollar
Swiss franc (commercial)
Swedish krona
Reichsmark
Lira
Argentine peso (free)
Brazilian milreis (free)
Mexican peso
Cuban peso
14-3/4% discount
.2322
.2384-1/2
.4005
.0505
.2320
.0505
.2066
4% discount
In Shanghai, the yuan in terms of our currency was quoted at 5-9/32 off 1/16
Sterling was 1/24 lower at 3.92-1/2.
There were no gold transactions consummated by us with foreign countries today.
The Federal Reserve Bank of New York reported that the Bank of Canada shipped
$3,399,000 in gold from Canada to the Federal for account of the Government of Canada,
for sale to the U.S. Assay Office.
The prices fixed in London for spot and forward silver were unchanged at 23-1/2d
and 23-7/16d respectively. The U.S. equivalents were 42.67$ and 42.56
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
402
We made two purchases of silver totaling 250,000 ounces under the Silver
Purchase
Act, all of which consisted of new production from foreign countries for
forward delivery.
During the month of March, we purchased 3,611,000 ounces of silver under the
Silver Purchase Act, as against 3,662,000 ounces in February. The figure for March
represents the lowest monthly total that has been recorded since October, 1939. The
sources of these purchases were as follows:
Type of Silver
Ounces
New production
1. From various countries
2. From Canada under agreement
Inventory
Total
2,910,000
450,000
251,000
3,611,000
The Federal Reserve Bank's report of March 26, listing deposits of banks in
Asia with the New York agencies of Japanese banks, showed that such deposits totaled
$112,661,000, an increase of $734,000 since March 19. Most of the change in deposits
took place on the books of the Yokohama Specie Bank's New York agency. The latter's
principal dollar liabilities to and dollar claims on Japanese banks in Asia stood as
follows on March 26:
Change from
March 19
March 26
Claims
: Loans
: Other - mainly Jap. import bills
$66,101,000
38,260,000
21,921,000
$68,232,000
6,173,000
$ 425,000
+
+
-
Liabilities: Deposits for Japan and Manchuria
Deposits for China
: U.S. Treas. Bills, comm. paper, etc
542,000
803,000
+ $1,296,000
- 2,541,000
The last three categories refer principally to Japanese banks in Japan and Manchuria.
It appears that the reduction in the Agency's own holdings of Japanese import bills
was effected primarily with funds loaned by the Agency to Japanese banks, plus part of
the proceeds of sales of U.S. Treasury bills, etc. held for account of such banks.
pml
CONFIDENTIAL
403
EXPORTS OF PETROLEUM PRODUCTS, SCRAP IRON AND SCRAP STEEL
FROM THE UNITED STATES TO JAPAN, RUSSIA, SPAIN, AND GREAT BRITAIN
AS SHOWN BY DEPARTURE PERMITS GRANTED
Week ended March 29, 1941
:
JAPAN
RUSSIA
99,600 Bbls.
--
--
117,000 Bbls.
64,000 Bbls.
--
-
---
---
----
-
--
SPAIN
GREAT BRITAIN
RPLOUER PRODUCTS
Fuel and Gas 011 (including
Diesel 011)
310,324 Bble.
Crude -
Blended or California
High Octane Crude*
All Other Crude
Gasoline Gasoline
Gasoline B*
100,000 Bbls.
All Other Gasoline
--
12 Bbls.
115,000 Bbls.
ubricating Oil Aviation Lubricating 011***
All Other Lubricating 011
-
--
11,633 Bbls.
32,252 Bbls.
--
-
-
-
-
-
--
--
-
-
Number 1 Heavy Melting Scrap
--
--
--
10,596 Tons
All Other Scrap
--
-
3,600 Tons
Tetraethyl Lead
26,120 Bbls.
"Boosters", such as IsoOctane, Iso-Hexane, or
Iso-Pentane
CRAP IRON AND SCRAP STEEL
ffice of the Secretary of the Treasury, Division of Research and Statistics.
March 31, 1941.
ource: Office of Merchant Ship Control, Treasury Department.
Any material from which by commercial distillation there can be separated
more than 3 percent of aviation motor fuel, hydrocarbon or hydrocarbon
mixture - President's regulations of July 26, 1940.
Aviation Gasoline.
As defined in the President's regulations of July 26, 1940.
404
ALLISON SHIPMENTS
British
Army
:
8
-
83
-
Jan. 12 - 18
41
-
Jan. 19 - 25
33
Jan. 26 - Feb. 1
31
Feb. 2 - 8
60
-
Feb. 9 - 15
30
Feb. 16 - 22
Feb. 23 - Mar. 1
Mar. 9 - 15
-
1
-
83
-
41
-
33
31
-
2
Total
4
-
2
-
-
-
1
-
-
71
77
74
80
17
53
14
103
417
841
-
77
2
1
-
-
-
36
Mar% 23 - 29
87
421
72
-
2
3
36
14
89
10
424
388
Office of the Secretary of the Treasury,
Division of Research and Statistics.
3
-
1
1
20
32
-
-
6
1
91
-
-
33
91
1
6
-
-
2
-
2
43
80
32
69
2
80
31
6
85
66
1
-
2
35
1
6
12
86
25
88
total
26
60
Mar. 16 - 22
TOTAL Dec. 29 - Mar. 29
8
F
3
Jan. 5 - 11
Mar. 2 - 8
:
Dec. 29 - Jan. 4
E
C
:
:
Total
C
Grand
2
2
3
9
March 31, 1941.
STRICTLY CONFIDENTIAL
405
ALLISON ENGINEERING COMPANY
Shipments of Airplane Engines
:
:
Actual
shipments
Estimated shipments
on existing orders
1940
January
10
May 24 - June 22
28
June 23 - July 20
July 21 - Aug. 17
Aug. 18 - Sept. 14
Sept. 15 - Oct. 12
Oct. 13 - Nov. 9
Nov. 10 - Dec. 7
Dec. 8 - Jan. 4
43
47
140
263
233
154
228
1941
January 5 - 11
January 12 - 18
January 19 - 25
January 26 - February 1
85
February 2 - 8
February 9 - 15
February 16 - 22
February 23 - March 1
March 2 - 8
86
March 9 - 15
March 16 - 22
March 23 - 29
March 30 - 31
43
33
32
66
80
91
77
80
53
103
306
260
310
April
May
June
330
320
370
400
July
August
September
October.
November
500
600
December
1942
700
800
800
800
January
February
March
April
646
May
Office of the Secretary of the Treasury,
Division of Research and Statistics.
March 31, 1941.
STRICTLY CONFIDENTIAL
406
BRITISH EMBASSY,
WASHINGTON, D.C.
31st March 1941
PERSONAL AND
SECRET
Dear Mr. Secretary,
I enclose herein for your
personal and secret information copies
of the three latest reports received
from London on the military situation.
Believe me,
Dear Mr. Secretary,
Very sincerely yours,
Halifex
The Honourable,
Henry Morgenthau, Jr.,
United States Treasury,
Washington, D.C.
407
Tel egram from London dated March 28th.
Naval. Enemy aircraft attacked shipping off
Milford Haven evening of March 22nd. Four small ships
totalling 2,337 tons damaged. Two enemy aircraft were
1.
badly damaged.
2.
H.M.S. "Leith" attacked by two enemy aircraft
with bombs S.W. off St. David's Head, March 27th, was
undamaged but destroyed at least one aircraft. On March
27th, the Coastal Blenheims on reconnaissance of Lorient
attacked Fokke-Walf aircraft and cruiser presumably the
"voltaire" results unobserved. Two Blenheims dive-bombed
near missing about 6,000 ton
and two naval
auxiliaries off Brest.
Military - Albania. NO indications of Italians
3.
yet able to resume the offensive. Defensive preparations
being made in the southern sector. Total forces north of
line Durazzo - Tiranha probably not more than 12,000.
4.
Yugoslavia. The army loyal to the new Government
and reported concentrating southwards. Minimum of 23
divisions mobilised. The whole country appears enthusiastic
and orderly.
5.
on March 23rd - British Colonial and Belgian
forces occupied Bengali (about 331 miles west of Addis-
Abbaba) after severe fighting.
Royal Air Force March 27th. Daylight attacks
6.
were made on shipping from Ushant to La Rochelle and on
small navel craft off the Dutch coast. Alderney harbour,
buildings and small merchant ship hit. Two Blenheims
shot down by enemy fighters.
7. Night/
408
-Night of March 27th/28th. Ninety-seven
bombers sont to attack Cologna (30) Dusseldorf (39)
7.
Dunkirk, Calais and Breat. Three aircraft missing.
8.
Eritros.- During March 25th-26th. Sixteen
tons of bombs dropped on enomy positions near Keren;
two enomy fighters reported destroyed.
9.
Ethiopia. Three trains on Addis-Abbaba
Djibuti Railway Station at Awda received direct hits.
10.
Greece. On March 25th four Gladiators
intercepted 20 enemy fighters escorting 6 bombers.
They probably destroyed 1 fighter and damaged another.
One Gladiator destroyed on the ground at Parengtha.
11.
German Air Force. March 27th. Two enemy
fighters over Kent. One ME.110 damaged and one
Spitfire missing.
12.
Night of March 27th/28th. A few aircraft
reported off the coast.
13.
Syria. French reported building a defensive
line in northern Syria facing Turkey.
409
Telegram from London dated 29th March
Commander in Chief Mediterraneen with strong
force of Mediterrenean Floot on the 28th got into touch
with strong Italian forces south of Yildis west of Crete.
Enemy cruisers first sighted 8 a.m. By noon the enemy
forces in two groups retiring westwards at high speed
one group consisting of two battleships three cruisers
five destroyers, second group three cruisers three
destroyers with possibly two battleships. Air attacks
by aircraft and strong force of Blenheims from Greece
made several attacks. Former scored possible torpedo
hit on one cruiser; latter claim two bomb hits on one
cruiser two heavy bomb hits on another cruiser, one hit
heavy bomb on destroyer. One Littovio class reported
to have speed reduced to fifteen knots by day torpedo
attacks. Commander in Chief reported at 12:28 a.m.
29th March also two eight-inch cruisers severely damaged
by our battleships in ensuing night action - hoped sunk.
Result of destroyer night attacks not yet reported.
Survivors from believed six inch gun cruiser reported by
aircraft.
2.
On the 16th Parthian fired torpedoes at 6000
ton merchant ship and 10,000 ton tanker in escorted
convoy in the Straits of Measina, two explosions heard
believed two ships hit.
3.
Scharnhorst Oneisenau were at Brest on 28th.
One in dry dook one in Rade Aboi.
4. Royal/
410
24.
Royal Air Force. Night of 27th/28th.
Industrial contres Cologne and Dusseldorf each
attacked by 33 aircraft; 26 tons H.E. dropped on
the former and 33 tons and 3,000 incendiaries on
latter. Many fires and explosions caused.
5.
Night of 28th/29th. All bombing operations
cancelled.
6.
Dodocanese. Enemy aerodrome in Rhodes
bombed on 27th one enemy aircraft destroyed on the
ground.
7.
German Air Force, 28th. Only slight enemy
activity; our fighters destroyed one enemy bomber and
probably destroyed a second.
8.
reported.
Night of 28th/29th. No enemy operations
411
Telegram from London dated 30th March.
Naval. No further news yet received about
the action in the Mediterranean March 28th and 29th
but Greek destroyers have picked up 110 Italian
survivors and have been directed by Sunderland
aircraft to the position to pick up 600 more.
2.
March 29th, several enemy air attacks made
on east coest convoya; one British tanker was hit and
sunk.
Royal Air Force. Night of March 29th/30th.
All bombing operations cancelled.
4.
Italy. March 28th. Six medium bombers
3.
attacked aerodrome at Locco (near Frindisi) destroying
at least one aircraft and damaging 20 others.
German Air Force. Night of March 29th/30th.
5.
About 40 aircraft operating principally in Avonmouth
ares, and 36 more suspected of mine laying.
C.
In central Mediterrenean German dive bombing
force has been reinforced from units previously located
in northorn France.
7.
Whole dive boning force in the Balkan theatre
(160) now located in south vest Bulgaria,
No.yo Security. Night of March 29th/30th.
B.
Bombing not heavy but sharp attacks on Avonmouth and
Bristol. At Avenmouth three oil cisterns set alight and
still burning. Firea all under control. Casualties so
far reported not serious.
Add to paragraph 1 above. Three Italian eight
9.
inch cruisors, two destroyers now confirmed sunk, one six
inch cruiser possibly sunk. Our losses nil.
412
CONFIDENTIAL
MILITARY INTELLIGENCE DIVISION,
WAR DEPARTMENT,
TENTATIVE LESSONS BULLETIN,
No. 86
G-2/2657-235
Washington, March 31, 1941.
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 tentative
and in no sense mature studies.
This document is being given an approved distribution,
and no additional copies are available in the Military Intelligence Division. For provisions governing its reproduction,
see Letter TAG 350.05 (9-19-40) M-B-M.
NEW TYPES OF GERMAN ARMORED DIVISIONS
SOURCE
This bulletin is based upon information recently received
from American official observers in Europe.
CONTENTS
1. GENERAL
2. THE REDUCED-SIZE DIVISION
3. THE LARGE DIVISION
a. General
b. Common Organization
C. Differences in Organization
4. G-2 COMMENT
CONFIDENTIAL
-1-
413
CONFIDENTIAL
NEW TYPES OF GERMAN ARMORED DIVISIONS
1.
GENERAL
During the winter 1940-41, Germany reorganized her armored,
or Panzer, divisions and expanded their number. There is probably
no longer a single Panzer division in The German Army which is
organized along 1940 lines. While information as to details of reorganization is in no sense conclusive, it permits an insight into
organizational trends prevailing at present in the German Army.
There is no longer a single type of Panzer division, for
two major types have been recognized - a large division and one
reduced in size. Three variations of the large division have also
been identified.
The concept of the "task force" governs German military
thought to a great extent, and it is not inconceivable that still
other types of armored divisions will be set up during 1941.
A part of the armored divisions reported to have been
transported to Tripoli are of the reduced-size type, probably
because lack of a road net in North Africa would seem to render
impracticable the constant use of as large a body of troops as
the 1940 type of Panzer division.
2.
THE REDUCED-SIZE DIVISION
According to usually well-informed European sources, the
reduced-size Libyan Panzer division is organized as follows:
Division headquarters;
One tank regiment of two battalions - 188 tanks;
One reconnaissance company or battalion - 29 armored
cars;
One battalion of motorized infantry;
One "assault" artillery battery - 75-mm. infantry
howitzers mounted on light tank chassis and
provided with limited armor protection;
One antitank battalion armed with 37-mm. and 47-mm.
antitank guns;
One antiaircraft battalion, armed with the following
dual purpose antiaircraft and antitank guns:
twenty-four 15-mm. antiaircraft machine guns;
twelve 20-mm. antiaircraft machine guns, and
sixteen 37-mm. machine guns.
CONFIDENTIAL
-2-
414
CONFIDENTIAL
It is probable that this type of division also contains
a small pioneer and signal detachment, although no information
to this effect has reached the War Department.
3.
THE LARGE DIVISION
a.
General
The three types of large Panzer divisions already
recognized are alike in all respects except in the matter of
organization of the tank brigade. In all cases reconnaissance
echelons, as well as motorized infantry brigades, are similarly
organized.
b.
Common Organization
Common organization is as follows:
Division Headquarters:
5 command vehicles;
5 light tanks for the reconnaissance
platoon;
25 motorcycles for the messenger service.
Motorized Reconnaissance Battalion:
One company of 24 armored cars;
One company of 24 light tanks;
One company of 120 motorcycles;
One heavy weapons company consisting of
One antitank platoon of four 47-mm.
antitank guns,
One infantry howitzer platoon of two
75-mm. infantry howitzers.
Motorized Infantry Brigade:
One motorized infantry regiment - two
battalions - armed as follows:
72 light machine guns;
16 heavy machine guns;
24 light 50-mm. mortars;
8 medium 81-mm. mortars;
4 infantry howitzers, 75-mm.;
8 assault guns, 105-mm. howitzers on
self-propelled mounts. (Note:
There has been no previous report
to the effect that these howitzers
were set up on self-propelled
mounts. G-2.)
One Motorcycle regiment, or possibly battalion,
consisting of:
24 machine guns;
8 mortars, probably of 50-mm. caliber;
CONFIDENTIAL
-3-
415
CONFIDE TIAL
16 infantry howitzers, 75-mm, mounted
on light tank chassis and provided
with light armor protection.
Divisional Artillery
One battalion of 105-mm. howitzers.
(Note: One report states that
these howitzers are mounted on
"sleds". This report is believed
to be of doubtful authenticity.
G-2.)
One battalion of 120-mm. howitzers.
(Note: This gun has not been
previously reported except for a
special Rheinmetall model constructed before the outbreak of
war for sale to the Norwegian
Army. G-2.)
Antitank Regiment or Battalion:
36 antitank guns, 47-mm.;
18 guns, 75-mm. or 88-mm.
Antiaircraft Regiment, or Battalion, armed
with the following dual purpose antiaircraft and antitank guns: twentyfour 15-mm. guns; twelve 20-mm. guns,
and sixteen 37-mm. guns.
Signal Battalion.
Pioneer Battalion with Bridge Columns.
C.
Differences in Organization
In the case of the three types of heavy Panzer
division, each tank brigade has a different organization. Difference
may be due to restrictions in German tank production, but it is
more probably the result of German GHQ's desire to produce special
types of units for specific theatres of war. The three varieties
of organization have been arbitrarily designated as Types A, B,
and c, and the differences among them lie in the organization and
equipment of the 2nd Tank Regiment of the brigade.
The Tank Brigade Headquarters and 1st Tank Regiment
are organized in all cases as follows:
Tank Brigade Headquarters:
5 command vehicles;
5 light tanks for the light tank reconnaissance
platoon;
25 motorcycles for the messenger service.
CONFIDENTIAL
416
CONFIDENTIAL
The 1st Regiment (two battaliona):
15 command vehicles;
15 light tanks for three reconnaissance
platoons;
176 medium tanks;
Twelve 15-mm. antiaircraft machine guns and
twenty-four antiaircraft 20-mm. machine
guns, all of which are dual purpose
weapons in that they can also be used
against tanks. The organization used
is probably that of a single anti-
aircraft company, which is a regimental
unit.
The 2d Regiment:
Type A:
Same as 1st Regiment.
Type B:
5 command vehicles;
15 light tanks for three reconnaissance
platoons;
One battalion equipped with 64 medium
tanks - class III, 18 tons, and
class IV, 22 tons;
One battalion equipped with 64 medium
and heavy tanks - class V, 32 tons;
class VI, 32 or 36 tons, and class
VII, weight unknown.
Type C:
5 command vehicles;
5 light tanks for the reconnaissance
platoon;
One battalion equipped with 5 light
tanks and 64 heavy tanks, class
VII, weight unknown;
One battalion of 47-mm. antitank guns,
protected by light armor, on self-
propelled mounts, number unknown.*
*Note: An American official observer in Sofia reports that he has
observed these "tank chasers." He states that they are "fast
light tanks, probably tank chasers, armed with guns of about 75-mm,
and having traction from 12 wheels made of hard rubber." G-2.
CONFIDENTIAL
417
CONFIDENTIAL
4. G-2 COMMENT
Establishment of these new types of German armored divisions
illustrates the fluidity which prevails in the German Army. The
organization and equipment of a German unit never remain stabilized
for a long period of time, and constant change appears the only fixed
rule. Changes of organization are simple in the German Army, for
Tables of Organization are anything but sacrosanct and basic cells squads - always remain constant. Reorganization involves only
shifting the proportion and arrangements of the cells.
Five major trends in organization are apparent in these
new types of Panzer division:
1. A shift from light to medium and heavy tanks. In all
four types of divisions, light tanks appear only in the divisional
reconnaissance battalion and in the reconnaissance platoons of the
various tank sub-units. In the former, light tanks seem to be replacing armored cars.
2. A strengthening of antitank defenses in the division.
This is clearly discernible from the appearance of 47-mm. antitank
guns in quantity and the assignment to the division of an antiaircraft
machine gun battalion, all of whose guns are also capable of antitank
fire.
The reorganization of the artillery component of the
division as deduced from the appearance of a large quantity of light
assault artillery set on self-propelled mounts and protected by armor.
3.
4.
The appearance in one instance in the tank brigade of
a battalion of "tank destroyers" - 47-mm. antitank guns on selfpropelled mounts.
The strengthening of the antiaircraft protection of
the division by the assignment of an antiaircraft machine gun
battalion.
5.
CONFIDENTIAL
-6-
418
RESTRICTED
M.I.D., W.D.
G-2/2657-220
No. 354
April 1, 1941
12:00 M.
SITUATION REPORT
I.
Western Theater of War.
Air: German. In daylight yesterday there was scattered
activity over England. Last night a fairly heavy attack was made on
a "northeast coast town."
British. Normal night attacks on northwest Germany
with concentrations on Enden and Bremen.
II. Balkan Theater of War.
Ground: Bulgaria. No change.
Yugoalavia. The possibility now exists of an immediate attack against Albania.
Albania. The Greeks report the annihilation of an
Italian center of resistance. Local Greek action reported in the
Ninth Army or Northeast Sector.
Air: Normal close support by both sides in Albania.
III. Mediterranean and African Theaters of War.
Ground: Abyssinia (Ethiopia). Diredawa, on the Addis
Ababa railroad, was occupied by British troops on the afternoon of
March 29.
Eritrea. The British advance toward Asmara is
continuing.
Air: Some Axis offensive activity in Libya.
Note: This military situation report is issued by the Military Intelligence Division, General Staff. In view of the occasional inclusion of political information
and of opinion it is classified as
RESTRICTED
Restricted.
419
RESTRICTED
G-2/2657-220
No. 353
M.I.D., W.D.
March 31, 1941
12:00 M.
SITUATION REPORT
I. Western Theater of War.
Air: German. Widespread activity over Great Britain in
small force.
British. Limited activity. Last night fairly heavy
attacks were made on the Invasion Ports, including Brest.
II.
Balkan Theater of War.
Ground: Bulgaria. It is definitely reported that German
troops are being reoriented from Rumania and Yugoslavia toward the
Yugoslav frontier.
Yugoslavia. Mobilization continues.
Albania. Intense patrol and artillery activity
is reported by the Greeks.
Air: Normal close support in Albania.
III.
Mediterranean and African Theaters of War.
Ground, Eritrea, The Italians are retreating toward
Asmara under British pressure.
Ethiopia. British forces are advancing from Harar.
Diredawa has already been evacuated by the Italians.
Libya. No activity reported.
Naval: The British Fleet has sunk three heavy Italian
cruisers and two destroyers in a sea and air battle west of Crete.
The British appear to have suffered no losses.
Air: German. Malta was again raided.
RESTRICTED
420
RESTRICTED
British, The sea fight in the eastern Mediterranean
appears to have involved very close aerial cooperation. The Fleet
Air Arm is said to have mauled and delayed the Italian fleet until
British ships could come up.
Note: This military situation report is issued by the Military Intelligence Division, General Staff. In view of the occasional inclusion of political information
and of opinion it is classified as
RESTRICTED
Restricted.
CONFIDENTIAL
421
Paraphrese of Code Radiogram
Received at the War Department
as 10:09, March 31, 1941.
London, filed 14:50, March 31, 1941.
1. British Air Activity over the Continent.
a. Daylight of March 30. Axis shipping off the coasts of
Holland and France were attacked by a formation of British bombore.
Machine-gua fire and near misses inflicted some damage on at least four
cargo boats and the activities of those bonbers also caused the staking
of one Magi anti-submarine vessel.
R. Day of March 29-30. Adverse weather caused the cancellation
of all flights of planos of the bomber commund. However mines were planted
by a small number of bombers from the Coastal Command along the coast of
France.
e. Night of March 27-26. A total of 5,000 incondiary bomba
and 33 tons of high explosive bombs were used in the British attack on
Desselderf. Fifty tone of high explosive bember were used in the British
raid on Cologno.
2. Geresa Air Activities over Britain.
a. Night of March 30-31. Bervick, Seatland, was attached by
three German bembers but little damage was done. Lone German please
engaged in seattered attacks in Lineolashire, Saffolk, Yorkshire and
Horfell. A few German planes carried out mining operations along the
coast of Register from the Member River to Yormouth. An attempt was made
to intereept those almo-laying please by British night fighters but 18
was unouccessful.
CONFIDENTIAL
CONFIDENTIAL
422
B. Day of March 30. Four German bumbers crossed the coast
line of Regiend. About 200 Gerasa please were over the Dover Straite
on defensive patrole. Large members of German planes were engaged is
weather and a shipping recommissance on all coasts of England.
2. Hight of March 29-30. A total of 40 Gorman please took
part in the reid against Avennouth. German boube set fires at three
oil storage eisterno which were completely destroyed.
3. Aircraft locass.
a. British. There are as reports of British aircraft leases.
B. German. Bay of March 50. One plane destroyed and one
other damaged.
4. British air activities is Middle Eastern theaters were as
follows: in both theaters in Italian East Africa, (Hritree and Ethiopia)
please of the Reyel Air Force supported the operations of land foresa;
in the Albenian theater British bombing attacks were sade in the Bornt,
Himero (8) and Topoleni regions; the Libyen harber of Tripoli was
ouccessfully bombed w Brittah please.
5. Geresa sir activities in Middle Eastern theaters consisted
of two saids on Maite. The first was during the night of March 29-30,
and share we 116620 damage from the reason bombing. Early on the morning
of March 30 eight more Genera please attacked as airfield on Maita. There
were no commities and the damage done was slight.
6. The two 86,000-sen German battleships SCHARUHORNY and
CHRISSBALL that were eighted is the Atientic some days ago are now at Breas.
SCAHLON
-8-
CONFIDENTIAL
423
CONFIDENTIAL
Distribution:
Secretary of Mar
State Department
Asst. Secretary of War
General Miles
Chief of Staff
War Please Division
Office of Navel Intelligence
Air Gergo
0-3
-3-
CONFIDENTIAL
CONFIDENTIAL
424
Resignation of Code Rediegree
Received as the Mar Department
as 19:12, March 31, 1941.
Seignte, filed March 31, 1941.
1. Togoclavia tatenie to sake an attack - Albania at the
start of hostilities, and to drive the Italian forces out, seising
the parts, according to a statement made to - by General Mirkovie.
Preparations for hostilities are being rushed at fever heat at the
Year Department, which is reasing twenty-four hours a day.
Nothing bayend delaying action is intended anywhere to the north of
the river line of the Save and the Danabe. Aid from the Crostians
would be velomed by the War Office, but they are planning their
military activities - a bosis of Serbian support.
2. Last night eight hundred Germans departed by steamer.
AS also e'slook tonight a special train will take Italian subjects,
installing - and children from the Italian Legation, back to Italy
for repatriation. The offices of the German military attache and the
German cancal were leading tea trucks during the afternoon yesterday.
The city of Belgrade is entirely orderly. Statements to the centrary
are program by the Asic Powers.
FORTIER
(e-e Note. General Misteria is assistant chief of air force and the
- who largely planned the military details of the coup d'etat.)
Distributions
Secretary of Mar
State Department
Office of Naval Intelligence
Air Gorpe
Secretary of Treasury
Aest. Secretary of Mar
General Niles
thief of Staff
Mar Please Division
CONFIDENTIAL
CONFIDENTIAL
425
Perephrase of Code Indiagram
Received at the War Department
at 15:12, March 31, 1941.
Madrid, filed 12:30, March 51, 1941.
Spain producing only 100 tons of copper per month and to
supply shortage is endeavoring to purchase British copper. Dependable
sources state that Spain is shipping no copper to Germany.
EAGER
Distribution:
Secretary of Mar
State Department
Secretary of Treasury
General Miles
War Plans Division
Office of Naval Intelligence
CONFIDENTIAL