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223 OFFICE FOR EMERGENCY MANAGEMENT OFFICE OF PRICE ADMINISTRATION AND CIVILIAN SUPPLY For Release PM Papers Saturday, May 24, 1941 PM 443 A schedule fixing ceiling prices for various grades of combed cotton yarn was issued today by Leon Henderson, Administrator, Office of Price Administration and Civilian Supply. Combed cotton yarn is used primarily in the manufacture of textiles, underwear, hosiery and other apparel requiring a high grade of yarn. The ceilings established for this product are expected to be reflected in the prices not only for other cotton textiles, but also for finished products. Ceilings fixed in the schedule are about 20% below those being quoted recently in the industry. The ceiling price for 30s single ply, the largest volume grade, is 42 cents, which includes an allowance for recent increases in raw material costs. This compares with recent quotations of 52 cents. Ceiling prices for other grades are keyed to the price for 30s single ply, and bear the same relation as normally exists in the trade for the various grades. The price ceilings apply to all deliveries under old contracts after Monday. May 26, the effective date of the schedule, as well as to new contracts. There are no geographical differentials. However, sales of special qualities of yarn may be made at premiums sufficient to cover higher raw material and manufacturing costs. In issuing the schedule Mr. Henderson stated that a cost study would be undertaken promptly to determine whether the schedule works such hardship on marginal firms as to threaten a curtailment of production. The ceiling prices, while considerably lower than the inflated level reached in recent weeks, are still well above averages for recent years. During 1938 and the first half of 1939 the price for 30s single ply fluctuated around 30 cents. At the outbreak of the war the price rose to a high of approximately 36 cents and then declined gradually to a low of about 31 cents in mid-1940. In the last quarter of 1940 prices moved up sharply to around 37 cents where they held steady through January of this year. Since then the price has moved up steadily to the recent level of 52 cents. "The ceiling prices established take full account of raw material and manufacturing costs at the present time," Mr. Henderson said. The mill margin or spread between cotton costs and yarn prices in recent weeks has been the highest for many years. 224 PM 443 TITLE 32 - NATIONAL DEFENSE CHAPTER XI - OFFICE OF PRICE ADMINISTRATION AND CIVILIAN SUPPLY Part 1307 - Raw Materials for Cotton Textiles PRICE SCHEDULE NO. 7 - Combed Cotton Yarns Stable operation of the cotton textile industry is essential to the production of commodities necessary for the defense of the nation and to the uninterrupted flow of goods to civilian consumers. An inflationary movement in the price of any basic material used in the manufacture of cotton textiles and related products raises costs of production for the entire industry. This necessarily jeopardises the legitimate opportunities for profit of manufacturers in the field, makes it difficult and in some cases impossible for the trade to cooperate with the government in maintaining price stability, and increases the prices which the public must pay for many basic necessities. Recent months have seen a rapid advance in the price of combed yarns, which constitute an important raw material used in the manufacture of cotton textiles, garments, and other products. The increases which have taken place far exceed the current rise in manufacturing costs. Present price levels of combed yarns are, therefore, inflationary in character; they are the result of, and unless subjected to control, will lead to further, speculative activity and withholding of yarn from the market. Accordingly, pursuent to and under the authority vested in me by Executive Order No. 8734, and after consultation with the Price Administration Committee, it is hereby directed that: This Price Schedule is published in 6 Federal Register, No. 102 (May 24, 1941). The title, chapter, part, and section numbers appearing herein are used for purposes of conformity with regulations prescribed by the Administrative Committee of the Federal Register. § 1307.1 Maximum prices established for combed yarn. 225 (a) On and after May 26, 1941, regardless of any existing commitment, no person shall for commercial use sell or deliver or offer to sell or to deliver any combed yarn, and no person shall for commercial use buy or accept delivery of or offer to buy or to accept delivery of any combed yarnat a price exceeding the Maximum price set forth in Appendix A, incorporated herein as Section 1307.7. (b) The prices established by this Schedule are prices for combed yarns delivered to the purchaser's customary receiving point, except that an extra charge may be made to the extent that the cost of transportation exceeds one cent per pound. The prices are gross prices before discounts of any nature and including all commissions.* § 1307.2 Records. Every person who during any calendar month shall sell 500 pounds or more of combed yarn shall keep for inspection by the Office of Price Administration and Civilian Supply, and preserve for a period of not less than one year, a complete and accurate record of every sale of combed yarn made during such month and thereafter, the person to whom such sale was made, the date thereof, the price paid, and the quantity and specifications of the yarn sold,* § 1307.3 Reports. On or before July 7, 1941, and on the seventh day of each calendar month thereafter, every person who during the preceding calendar month has made sales for commercial use of combed yarna aggregating 500 pounds or more shall submit to the Office of Price Administration and Civilian Supply a report, on §§ 1307.1 to 1307.8, inclusive, issued pursuant to the authority contained in Executive Order 8734. Report Form 107:1 (set forth in Appendix B, which is incorporated herein as Section 1307.8), in which he shall make a awarn statement that during the preceding calendar month all such sales, whether for immediate or future delivery, were made at prices in conformity with this Schedule or with an exception or modification thereof. Copies of Form 107:1 can be procured from the Office of Price Administration and Civilian Supply, or, provided that no change is made in the style and content of the form and that it is reproduced on 8 x 10-inch paper, they may be prepared by persons required to submit reports hereunder.* § 1307.4 Enforcement, In the event of refusal or failure to abide by the price limitations, report requirements, and other provisions contained in this Schedule, or in the event of any evasion or attempt to evade the price limitations or other provisions contained in this Schedule, the Office of Price Administration and Civilian Supply will make every effort to assure (1) that the Congress and the public are fully informed of any failure to abide by the provisions of this Schedule, and (ii) that the powers of the Government are fully exerted in order to protect the public interest and the interests of those persons who conform with this Schedule in the observance of the maximum prices herein set forth. Persons who have evidence of the demand or receipt of prices above the limitations set forth, or any evasion of or effort to evade such prices, or of speculation, or of the hoarding or accumulation of unnecessary inventories thereof, are urged to communicate with the Office of Price Administration and Civilian Supply.* 226 227 PM 443 § 1307.5 Modification of the Price Schedule, Persons complain- ing of hardship or inequity in the operation of this Schedule (whether arising from action taken in reliance on a commitment of sale at prices in excess of those herein established, or from any other cause) may apply to the Office of Price Administration and Civilian Supply for approval of any modification thereof or exception thereto.* § 1307.6 Definitions. (a) The term "combed yarns" means standard commercial quality combed cotton yarns of the specifications for which maximum prices are set by this Schedule. (b) The term "person" includes an individual, corporation, association, partnership, or other business entity. (c) The term "for commercial use" means for any use or purpose except use by an individual buyer at retail for home or private consumption.* § 1307.7 Appendiz A. 228 Prices per Pound for Combed Peeler Yarns ** Single 2-Ply 10s $ .32 $ .38 12s .33 .39 14a .34 .40 16s .35 .41 18s .36 .42 20s .37 .43 24s .39 .45 26a .40 .46 30s .42 .48 36s .45 .52 38s .46 .53 40s .47 .54 50s .55 .62 60s .64 .71 70s .74 .81 80s .84 .91 90s .94 1.03 100s 1.14 1.23 110s 1.43 120s 1.63° **/This Schedule applies only to combed cotton yarns of ordinary commercial quality. For yarns with excess twist, three or more ply, high break, or requiring the use of extra length American cotton, Pima cotton, Egyptian cotton. or Sea Island cotton, a premium over the above prices may be charged to cover the additional cost involved in manufacturing these special qualities. § 1307.8 Appendix B, 229 PM 443 Form No. 107:1 OFFICE OF PRICE ADMINISTRATION AND CIVILIAN SUPPLY, WASHINGTON, D. C. Report Form for Sellers of Combed Cotton Yarns For the purpose of making a report as required by Section 3 of Price Schedule No. 7 of the Office of Price Administration and Civilian Supply, I have examined the sales records for the month of 1941 of (name of seller) . of which concern I am . During that period the above-named concern has made no sales for immediate or future delivery or deliveries for commercial use of combed cotton yarns at prices in excess of those established by the afore2 said Price Schedule No. 7. Subscribed and sworn to before me this day of (Signature) (Notary Public) My Commission expires This report must be signed by the seller or by a partner or officer of the seller. 2/In the event that any sales or deliveries have been made at prices in excess of those estab- lished by the Schedule, the text of the above report should be suitably changed and a list should be appended hereto giving with respect to each sale or delivery the name of the purchaser, the date of sale, the delivery date, the quantity and the reasons for exceeding the maximum price. PM 443 Issued this 23rd day of May, 1941. /s/ Leon Henderson Administrator 230 231 OFFICE FOR EMERGENCY MANAGEMENT OFFICE OF PRICE ADMINISTRATION AND CIVILIAN SUPPLY PM 490 For AM release Monday, June 2, 1941 Price Schedule No. 8 fixing ceiling prices for a wide variety of scrap and secondary materials containing nickel was issued yesterday by Leon Henderson, Ad- ministrator, Office of Price Administration and Civilian Supply. The schedule becomes effective today, Monday, June 2. It covers pure nickel scrap, ferro-nickel-chrome-iron scrap, ferro-nickel-iron scrap, monel metal scrap, cupro-nidel alloy scrap, stainless steel scrap, nickel steel scrap, secondary monel metal ingot, secondary monel metal shot, and secondary copper-nickel shot. The schedule also fixes maximum prices for the straight chrome type of stainless steel scrap, which contains no nickel. Recent prices received for this type of stainless steel scrap have been out of line and it was felt advisable to include it in the price schedule, together with the other types of stainless steel scrap. Mr. Henderson explained that imposition of price ceilings for these materials is necessitated by the "outrageous" prices charged in recent months for their nickel content. Frequently such prices have been double or triple the price of virgin nickel. "This schedule represents another step in the general program of OPACS to bring prices of scrap into line with prices of equivalent primary metals," Mr. Henderson added. "The shortage of any metal will not be permitted to serve as an excuse for runaway inflation of scrap prices." Except for stainless steel scrap and nickel steel scrap, basic maximum prices are established to apply on sales of scrap, unsuitable and unprepared for industrial consumption. However a premium is allowed any seller of scrap, termed a "converter", who performs all of the following functions: (1) sells scrap directly to a consumer, (2) by chemical test or assay, determines the metal constituents of the 232 -2- PM 490 scrap, (3) on that basis, sorts, grades, treats, packages or briquettes by hydraulic press, and otherwise prepares the scrap, for direct industrial consumption, (4) guarantees the delivery of scrap in an agreed amount and analysis. Un- less a seller of scrap satisfies all four criteria, he is not a converter and is not entitled to the converter's premium but must sell his scrap at not more than the basic maximum prices. Quantity differentials are also established entitling any seller of scrap, whether he is a converter or not, to a premium for shipments of a specified quantity or more of material at one time. Thus a converter may be entitled to both the converter's premium and the quantity premium. Sellers who are not con- verters may nevertheless be entitled to the quantity premium. The following example will indicate how the maximum prices are to be com- puted. For example, the basic maximum price established for a pound of Inconel, containing 80% nickel, 14% chrome, and 6% iron, is 26 per pound of nickel contained; 8$ per pound of chrome contained, and no payment for the iron. The basic maximum price is thus 22.32 cents per pound. Any person shipping 10,000 pounds or more of Inconel at one time may receive 22.82 cents per pound, including a quan- tity premium of 1 cent. A converter, shipping 10,000 pounds or more may receive 24.32 cents per pound, including a converter's premium of 1à cents per pound. A converter shipping less than 10,000 pounds may receive 23.82 cents per pound. In addition to the basic maximum prices fixed for stainless steel scrap, a premium of $10 a ton is allowed for sales of scrap in the form of hydraulic press briquettes. The maximum prices for nickel steel scrap are tied to the maximum prices established for steel scrap in the Iron and Steel Scrap Price Schedule No. 4, Revised, A grade of steel scrap containing less than 1% nickel may not be sold 233 -3- PM 490 at more than the maximum price for a like grade of steel scrap fixed in Price Schedule No. 4, Revised. The maximum price for a grade of steel scrap which contains 1% or more nickel is the maximum price for a like grade of steel scrap fixed in Price Schedule No. 4, plus $1.00 per gross ton for each t of 1% of nickel content. A broker's commission is allowed on sales of stainless steel scrap or nickel steel scrap. The broker's commission on stainless steel scrap is 5% of the established maximum price; it is 2% on nickel steel scrap. The ceiling prices on secondary monel ingot, secondary monel shot, and secondary copper-nickel shot will bring the prices of these materials into line with the prices of equivalent secondary materials. Premiums are allowed for the sale of these secondary materials in smaller lots. The maximum prices established in Price Schedule No. 8, go into effect on Monday, June 2, 1941, regardless of preexisting contracts. However, permission will be granted by this office, to any person to carry out contracts entered into prior to May 30, 1941, the date on which Price Schedule No. 8 was published in the Federal Register, if such permission is necessary to protect such person against loss in the disposition of inventory already acquired at prices higher than the established maximum prices. Forms on which application for such permission may be made are available upon request made to the Office of Price Administration and Civilian Supply, Washington, D. C. ### PM 490 234 -4- TITLE 32 - NATIONAL DEFENSE CHAPTER XI - OFFICE OF PRICE ADMINISTRATION AND CIVILIAN SUPPLY Part 1308 - Scrap and Secondary Materials Containing Nickel Price Schedule No. 8 - Pure Nickel Scrap, Monel Metal Scrap, Stainless Steel Scrap, Nickel Steel Scrap and Other Scrap Materials Containing Nickel, Secondary Monel Ingot. Secondary Monel Shot, and Secondary Copper-Nickel Shot Due to the needs of the defense program, the demand for primary nickel, primary materials containing nickel, and for scrap and secondary materials containing nickel, has increased to the extent that the available supplies of such materials are insufficient to satisfy the total defense and civilian demand. As a consequence, inflationary pressure has been exerted upon the prices of such scrap and secondary materials causing their prices to rise greatly in excess of levels which are in proper relation to the price levels of primary materials. Price instability and dislocations injurious to the national defense and civilian economy have resulted. All this has made it difficult, and in some cases impossbile for the trade to cooperate with the Government in maintaining price stability. Accordingly, pursuant to and under the authority vested in me by Executive Order No. 8734, it is hereby directed that: 8 1308.1 Maximum prices on sales of pure nickel scrap, monel metal scrap. stainless steel scrap. nickel steel scrap and other scrap materials containing nickel. On and after June 2, 1941, regardless of the terms of any contract of sale or purchase, or other commitment, entered into prior to such date, except as provided in § 1308.3 hereof, no person shall sell, offer to sell, deliver, or transfer at a price, to any other person, pure nickel scrap, ferro-nickelchrome-iron scrap, ferro-nickel-iron scrap. monel metal scrap, cupro-nickel alloy scrap, stainless 235 -5- PM 490 steel scrap, or nickel steel scrap, at prices higher than the maximum prices set forth in Appendix A, incorporated herein as § 1308.10. No person shall buy, or offer to buy, or accept delivery of, such scrap materials from any person at higher prices. Lower prices than those set. forth in Appendix A may, however, be charged, demanded, paid, or offered.* §§ 1308.1 to 1308.11, inclusive, issued pursuant to the authority contained in Executive Order 8734. 1308.2 Maximum prices on sales of secondary monel ingot, secondary monel shot and secondary copner-nickel shot. § On and after June 2, 1941, regardless of the terms of any contract of sale or purchase, or other commitment, entered into prior to such date, except as provided in § 1308.3 hereof, no person shall sell, offer to sell, deliver, or transfer at a price, to any other person, secondary monel ingot, secondary nonel shot, or secondary copper-nickel shot, at prices higher than the maximum prices set forth in Appendix B, incorporated herein as § 1308.11. No person shall buy, or offer to buy, or accept delivery of, such secondary materials at higher prices. Lower prices than the prices set forth in Appendix B, may, however, be charged, demanded, paid, or offered.* § 1308.3 Permission to carry out contracts. Any person seeking permission to carry out a contract of sale or purchase, or other commitment, entered into prior to May 30, 1941, and calling for the delivery, after May 30, 1941, of any of the scrap or secondary materials described in Appendix A or 3, at prices higher than the maximum prices set forth in the Appendices, may apply for such permission in writing upon forms available upon request made to the Office of Price Administration and Civilian Supply, Washington, D. C. -6- PM 490 236 Permission will be granted if necessary to protect such person against loss in the disposition of inventory already acquired at prices higher than the established maximum prices. Permission, therefore, may be obtained only if such scrap or secondary materials, in quantities sufficient to carry out such contract or commitment, were acquired at prices higher than the established maximum prices, and held on May 30, 1941, by (1) the person seeking such permission, and (2) any other person, for delivery to the person seeking such permission, under a firm commitment entered into prior to May 30, 1941.* § 1303.4 Evasion. The price limitations set forth in this Schedule shall not be evaded whether by direct or indirect methods in connection with a pruchase, sale, or transfer at a price, of the scrap or secondary materials described in Appendix A or B, or in connection with a purchase, sale, or transfer at a price of any other materials, or by way of any service, transportation, or other charge, or discount, premium, or other privilege, or by tying-agreement or other trade understanding. or otherwise.* § 1308.5 Record-keeping requirements. Every person purchasing or selling the scrap or secondary materials described in Appendices A or B, shall, until such time as further information is deemed necessary or appropriate hereunder, keep for inspection by the Office of Price Administration and Civilian Supply, and preserve for a period not less than one year, complete and accurate records of: (a) every pruchase and sale of such scrap or secondary materials, showing the name and address of the PM 490 237 -person from or to whom each such purchase or sale was made, the date thereof, the price paid or received, and the quantity, in pounds or tons, of each kind or grade purchased or sold; and (b) the quantity, in pounds or tone, of such scrap materials and, separately, the quantity, in pounds or tons, of such secondary materials (1) on hand, and (11) on order, as of the close of each month.* § 1308.6 Enforcement. In the event of refusal or failure to abide by the price limitations, record requirements, and other provisions contained in this Schedule, or in the event of any evasion or attempt to evade the price limitations or other provisions con- tained in this Schedule, this Office will make every effort to assure (a) that the Congress and the public are fully informed of any failure to abide by the provisions of this Schedule: and (b) that the powers of the Government are fully exerted in order to protect the public interest and the interest of those persons who conform with this Schedule in the maintenance of the ceiling prices herein set forth. Persons who have evidence of the demand or receipt of prices above the limitations set forth, or of any evasion of or effort to evade such requirements, or of speculation, or manipulation of prices of the scrap and secondary materials, for which maximum prices are herein established, or of the hoarding or accumulating of unnecessary inventories thereof, are urged to communicate with the Office of Price Administration and Civilian Supply.* § 1308.7 Supplemental schedule and reporting requirements. In order to insure compliance with this Schedule supplements further stating 238 -8- PM 490 its scope and, if necessary, requiring reports to the Government, will be issued from time to time when found appropriate.* § 1308.8 Modification of the Price Schedule. Persons com- plaining of hardship or inequity in the operation of this Schedule may apply to the Office of Price Administration and Civilian Supply for approval of any modification thereof or exception therefrom.* § 1308.9 Definitions. When used in this Schedule, the term "person" includes an individual, partnership, association, corporation or other business entity.* -9- PM 490 239 can 1308.10 APPENDIX A. maximum prices for pure nickel scrap. monel metal scrap. nickel steel scrap. stainless steel scrap. and other scrap materials containing nickel Introductory Maximum prices herein established are for the principal kinds or grades of the scrap materials. All other kinds of grades, which are not specified, should be sold at their normal differentials from such principal kinds or grades. Moreover, the maximum prices are established for scrap which meets generally accepted maximum standards in the trade - as, for instance, the standard classification of the National Association of Waste Material Dealers, Inc., contained in its Circular o, effective as of June 1, 1940. Scrap which fails to meet such standards should be sold at their normal differentials below the established maximum prcies. PART I PURE NICKEL SCRAP, FERRO-NICKEL-CHEOME-IRON SCRAP, FERRO-NICKEL-IRON SCRAP, MONEL METAL SCRAP AND CUPRO-NICKEL ALLOY SCRAP The maximum prices established for the kinds and grades of scrap materials set forth in Part I of this Appendix, apply on sales of scrap, unsuitable and unprepared for industrial consumption. A converter of scrap as hereinafter defined, may receive, in addition to the maximum prices set forth below, a stated maximum premium for scrap which he has converted. A "converter" of scrap is defined for the purposes of this Price Schedule to include only those persons who: (1) (2) (3) (4) sell scrap directly to a consumer thereof; and, by chemical test or assay, determine the metal constituents of the scrap; and, on that basis, sort, grade, treat, package of briquette by hydraulic press, and otherwise prepare, the scrap, making it suitable for direct industrial consumption; and guarantee the delivery of scrap in an agreed amount and analysis. Unless a seller of scrap satisfies the four criteria, set forth above, he may not receive a converter's premium. His scrap must not be sold at a price higher than the maximum prices set forth below. Furthermore, a converter or any other person may receive, in addition to the maximum prices set forth below, a premium of a stated maximum amount on shipments of a specified quantity of material. -10- Kind or Grade of Scrap Material PM 490 240 Price (f.o.b. point of shipment) Pure Nickel Scrap Containing 98% or more nickel and not more than 3% copper 26$ per pound of material, Containing 90% up to 98% nickel 26$ per pound of nickel contained; no payment for any other metals contained. Converter's premium 24 per pound of material. Premium on shipments of 2000 pounds 14 per pound of material. or more of material at one time Ferro-nickel-chrome-ird scrap Containing 20% up to 90% nickel 26 per pound of nickel contained; 8$ per pound of chrome contained; no payment for any other metals contained. Converter's premium 1 per pound of material. # per pound of material. pounds or more of material at one time Premium on shipments of 10,000 Ferro-nickel-iron scrap Containing 14% up to 90% nickel and 26g per pound of nickel contained; no payment for any no chrome other metals contained. Converter's premium 1 per pound of material. # per pound of material. pounds or more of material at one time Premium on shipments of 10,000 Monel Metal Scrap New Monel Metal Clippings 20g per pound of material. Soldered Monel Metal Sheet 18 per pound of material. No. 1 Grade Monel Castings 15 per pound of material. and Turnings, Containing a minimum of 60% nickel, 30% copper, and not more than 3% free iron, clean and dry. Converter's premium 2$ per pound of material. Premium on shipments of 20,000 1# per pound of material. pounds or more of material at one time -11- Kind or Grade of Scrap Material PM 490 241 Price (f.o.b. point of shipment) Cupro-Nickel Allov Scrap Containing 90% or more combined nickel and copper 26$ per pound of nicke contained; 8+ per pound of copper contained; no payment for any other metals contained. Containing less than 90% combined nickel and copper 26$ per pound of nickel contained; no payment for any other metals contained. Converter's premium 2$ per pound of material. Premium on shipments of 20,000 # per pound of material. pounds or more of material at one time. PART II STAINLESS STEEL SCRAP AND NICKEL STEEL SCRAP In the event that a consumer of stainless steel scrap or nickel steel scrap shall employ an agent or broker to purchase such scrap for the consumer's use, the consumer may pay the agent or broker for such scrap a sum not exceeding the applicable maximum price set forth below plus a commission, in the case of stainless steel scrap, of not more than 5% and in the case of nickel steel scrap, of not more than 2% of such maximum price. The commission shall be payable only if (a) the agent or broker guarantees the quality and delivery of an agreed tonnage of the scrap; (b) the commission is shown as a separate charge in invoicing and billing; and (c) the agent or broker does not split or divide the commission allowed him by a consumer with the seller or sellers of the scrap. Kind or Grade of Scrap Material Price (f.o.b. point of shipment) Stainless Steel Scrap 18% Chrome, 8% Nickel Type Containing 16%-20% chrome and $85 per gross ton. 7%-10% nickel, except as indicated below Containing 18% chrome, 8% $95 per gross ton. All other grades or types of chrome-nickel stainless 28 per pound of nickel nickel and .08% or less carbon steel scrap contained; 9hd per pound of chrome contained; no payment for any other metals contained. PM 490 242 - 12 Kind of Grade of Scrap Material Price (f. .o.b. point of shipment) Straight Chrome Type Containing 16% chrome $40 per gross ton. Containing 12%-14% chrome $35 per gross ton. A maximum of $10 a gross ton may be added to the maximum prices set forth above for sales of stainless steel scrap in the form of hydraulic press briquettes. Nickel Steel Scrap The maximum price at which a grade of steel scrap containing less than 15 of nickel may be sold to a consumer shall be the maximum price for a like grade of steel scrap, as set forth or determined under the Iron and Steel Scrap Price Schedule No. 4, Revised. The maximum price at which a grade of steel scrap containing 15 or more nickel may be sold to a consumer shall be the maximum price for a like grade of steel scrap, as set forth or determined under the Iron and Steel Scrap Price Schedule No. 4, Revised, plus $1.00 per gross ton for each % of 1% of nickel content. 1 § 1308.11 APPENDIX B, maximum prices for secondary monel metal ingot. secondary monel metal shot. and secondary copper-nickel shot. Price Kind or Grade of Secondary Material (per pound, f.o.b. point of shipment) Monel Ingot 27$ Monel Shot 27$ Copper-Nickel Shot 25 containing 48% to 52% Nickel and 52% to 48% Copper and not more than 1% foreign matierals 1/The formula shall be applied in accordance with the following table 1% up to 1.25% nickel content " . If . If etc. If 1.25% up to 1.50% 1.50% up to 1.75% 1.75% up to 2.00% 2.00% up to 2.25% 1 $4 + $5 + $6 + $7 + $8 243 PM 490 - 13 The maximum prices herein established are for the principal kinds of grades of the secondary materials. All other kinds or grades which are not specified should be sold at their normal differentials from such principal kinds or grades. The maximum prices set forth above apply if the kind or grade of secondary material is sold, shipped, delivered, or carried away, in lots of 30,000 pounds or more. If such secondary material is sold and shipped, delivered, or carried away in lots of: 10,000 up to 30,000 pounds, ## per pound may be added to such prices . If If # If If " # 24d " 314 100 II 500 II less than 196 2$ 1,000 # 500 up to 100 up to = 1,000 up to 2,000 If 2,000 up to 10,000 Issued this 29th day of May, 1941 LEON HENDERSON ADMINISTRATOR CERTIFIED TO BE A TRUE COPY OF THE ORIGINAL JOHN E. HAMM DEPUTY ADMINISTRATOR OFFICE FOR EMERGENCY MANAGEMENT 244 OFFICE OF PRICE ADMINISTRATION AND CIVILIAN SUPPLY For Immediate Release June 3, 1941 PM 497 Further amendments to Price Schedule No. 2 designed to simplify administration of maximum prices for aluminum scrap and secondary aluminum ingot were issued today by Leon Henderson, Administrator, Office of Price Administration and Civilian Supply. Principal charges, effective June 3, include: (1) Special secondary aluminum alloys have been removed from that part of the schedule relating to secondary aluminum ingot. The types of aluminum alloy ingot now covered by the schedule include all silicon alloys, piston alloys, and No. 12 alloy. However, the usual differentials based upon market prices of the ingrefients and the expenses of manufacturing are to be observed. (2) Price regulation has also been removed from aluminum scrap of designated grades produced by the aircraft industry, segregated as to alloy, and returned to the supplier of the original material for reconversion into similar material in accordance with instructions of the Director of Priorities. (3) Quantity differentials for aluminum scrap have been removed but such differentials continue on secondary aluminum ingot sold in less than 30,000 pound lots. (4) A special note has been added to Appendix A removing from the schedule al- uminum foil and light gauge sheet which does not exceed .006 of an inch in thickness, Removal of special aluminum alloys from the schedule of maximum prices gives the trade wider discretion in establishing fair differentials for such ingots. However, producers and dealers are expected to keep prices of such products in line with the maximum prices established for the more standardized grades. It is expected that customary differentials will be maintained. If this is not done voluntarily ch differentials will have to be established by regulation. Copy of amendment, Price Schedule No. 2, is attached. 245 PM 497 TITLE 32 - NATIONAL DEFENSE CHAPTER XI - OFFICE OF PRICE ADMINISTRATION AND CIVILIAN SUPPLY Part 1302-Aluminum Scrap and Secondary Aluminum Ingot AMENDMENT OF PRICE SCHEDULE NO. 2 It appearing from investigation made and information received by the Office of Price Administration and Civilian Supply that Price Schedule No. 2, as amended, establishing maximum prices for aluminum scrap and secondary aluminum ingot, should be further amended in order to except therefrom certain special types of aluminum scrap and alloys and to facilitate the accomplishment of the purposes of said Price Schedule, IT IS HEREBY ORDERED, pursuant to and under the authority of Executive Order 8734, that Paragraph 5, Appendix A and Appendix B of the said Price Schedule No. 2 be and the same hereby are renumbered as Sections 1302.5, 1302.14, and 1302.15, respectively, and are further amended, effective June 3, 1941, as follows: Section 1302.5 (Par. 5) is amended to read as follows: 1302.5. Conversion of Scrap on Behalf of a Maker of the Scrap. A maker of aluminus scrap may sell, deliver, or transfer aluminum scrap to the producer of the material from which the scrap is made and the producer may purchase and receive such scrap, without re- gard to the maximum prices set forth in Appendix A, attached hereto, provided that either (a) The aluminum scrap so sold, delivered or transferred consists of extrusion butts or ends, redraw tube ends, or rod turnings of not more than one alloy, and such sale, delivery or transfor is made pursuant to a written contract whereby the purchaser 246 PM 497 2- of the scrap agrees to convert the scrap to the type of material from which the scrap was made and to deliver to the maker of the scrap an equivalent amount of the same type of material, and such sale, delivery or transfer is made in accordance with an established practice existing between the parties prior to March 24, 1941, and at prices which have not been increased since said date, or (b) The aluminum scrap so sold, delivered or transferred consists of unpainted and unlacquered strong alloy scrap in the form of sheet clippings or mutilated sheets, tube ends or mutilated tubing, or extrusion ends or mutilated extrusions, and is made by the aircraft industry and segregated as to alloy and sold, delivered or transferred to the producer of the material for conversion in accordance with the terms of the letter of the Director of Priorities to members of the aircraft industry under date of March 6, 1941. Section 1302.14 (Appendix A), Maximum Prices for Aluminum Scrap, is amended by: (a) Deleting therefrom the second footnote and the line "on carload shipments** above the price columns. (b) Inserting at the end thereof the following: Special Note: Aluminum foil and light gauge aluminum sheet which does not exceed .006 of an inch in thickness shall not be subject to this Price Schedule. 247 PM 497 -Section 1302.15 (Appendix B), Maximum Prices for Secondary Aluminum Ingot, is amended by striking from the second item set forth under the heading "Grade of Secondary Aluminum Ingot", the words, "and Special Alloya". Dated this 2d day of June, 1941. Leon Henderson, Administrator CERTIFIED TO BE A TRUE COPY OF THE ORIGINAL: John E. Hamm, Deputy Administrator PM 488 TITLE 32: NATIONAL DEFENSE 248 CHAPTER XI: OFFICE OF PRICE ADMINISTRATION AND CIVILIAN SUPPLY PART 1309 - COPPER Civilian Allocation Program for Copper The total defense and civilian demand for Copper is in excess of the available supply. To insure the obtaining of priority for deliveries of Copper under present and future Naval and Army contracts and orders and re- lated sub-contracts and sub-orders, the Priorities Division, Office of Production Management, has, simultaneously herewith, issued General Preference Order No. M-9 to conserve the supply and direct the distribution of Copper. Such Order will futher diminish the supply of Copper for civilian purposes. It is necessary, therefore, after military defense needs are satisfied, to provide for the equitable allocation of the residual supply of Copper among competing civilian demands. Accordingly, pursuant to and under the authority vested in me by Executive Order No. 8734, particularly Section 2(a) thereof, and pending the formulation of a more detailed program in this regard, the following program for the equitable allocation of Copper among competing civilian demands is announced for the interim period. § 1039.1 Insofar as the Director of Priorities, pursuant to General Preference Order No. M-9, particularly Section 933.1(b). (1), (2) and (3) thereof, will make allocations of the Copper set aside by Refiners and the Copper owned by the Metals Reserve Company among competing civilian demands, the Director will be guided by general or specific policies and programs formulated by the Administrator. The following factors, among other relevant factors, are to be taken into consideration in allocating Copper among competing civilian demands: -- 249 PM 488 a, The need to provide adequately for civilian uses of Copper essential to the public welfare. b. The degree of hardship upon labor or business resulting from the restrictions contained in General Preference Order No. M-9. c. The past rates of consumption of Copper by fabricators, d. The objective of achieving an equitable relation with regard to Copper supplies among all Copper fabricators, including those who are, and those who are not, subsidiaries of, affiliated with, owned or controlled by, Refiners. e. The availability of substitutes for the particular uses for which the Copper is sought. f. The policy of the Administrator to refuse to allocate Copper to any person who, in the conduct of his business, discriminates against defense orders. § 1309.2 Insofar as Section 933.1(b), (1), of General Preference Order No. M-9, relating to the shipment of the balance of a Refiner's production, over and above the amount required to be set aside, involves the allocation of Copper among competing civilian demands, it is in accord with the policy of the Administrator. § 1309,3 In formulating general and specific policies and programs for the allocation of Copper among competing civilian demands, an objective will betb alleviate any substantial inequities found to exist in the amounts of Copper obtained by fabricators as a result of the restrictions contained in General Preference Order No. M-9. PM 488 -- 250 (2) If a copper supplier has both defense and non-defense orders, he may fill the non-defense orders without requiring preference rating cer- tificates from customers so long as this does not interfere with the require ments that defense orders mist be filled first and that delivery dates on defense orders must be met. He must, of course, comply with all terms of this order, including the requirement to set aside a reserve pool. (3) Beginning June 1, refiners shall set aside each month an amount of copper, equal to 20% to April production, which will be specifically allocated by the Director of Priorities to meet emergency needs. The remaining copper will be prorated among customers. Each refiner shall include in his production figures copper refined for him under toll agreement but shall exclude copper refined by him for others. (4) Beginning June 1, all copper then or thereafter owned by the Metals Reserve Company (of the R.F.C.) will be allocated by the Director of Priorities. (5) Copper is removed from the list of sixteen metals and classes of metals subject to inventory control under General Metals Order No. 1, but the copper order itself provides inventory control and stipulates that custoners' inventories may not be built up to excessive or unnecessary levels. (6) The order is not intended to apply to the distribution of copper in fabricated or completed form (elthough any distributor of any copper products must comply with preference ratings) but is intended to govern the dis- tribution of copper in prefabricated form. This has the effect of regulating the distribution and supply of copper by going to the primary industrial source of the metal. (7) Copper, for the purpose of the order, is defined as "Copper metal produced from ores or scrap which has been refined by any process of electrolysis, or produced from ores by any process of fire refining, to a 251 -- PM 488 grade, and in a form (cathodes, wire bars, ingot bars, ingots, cokes, billets. wedge bars or other refined shapes), suitable for fabrication. It shall also include any Copper metal in the production of which Copper scrap has been mixed with electrolytic or fire-refined Copper produced from ores." Under the terms of this definition, the order does not regulate the distribution of copper scrap, in scrap form, and excludes copper metal of the kind known as "casting copper which has been prepared wholly from scrap by ordinary fire refining or melting processes. In addition to copper other metals now under mandatory industry- wide control include: aluminum, magnesium, nickel, nickel-steal and ferro- tungsten. Zinc is subject to partial control. Altogether, twenty-five materials and classes of materials are now subject to some form of broad priority control by the Priorities Division. More than 250 other items appear on the Priorities Critical List and, therefore, are subject to control in the sense that Army and Navy orders for these items can be assigned pref- erence ratings by contracting officers of the serivces. (oopies of the General Preference Order and the civilian allocation program are attached.) 252 PM 488 TITLE 32 - NATIONAL DEFENSE CHAPTER IX - OFFICE OF PRODUCTION MANAGEMENT Subchapter B - Priorities Division Part 933 - Copper GENERAL PREFERENCE ORDER NO. M-9 TO CONSERVE THE SUPPLY AND DIRECT THE DISTRIBUTION OF COPPER WHEREAS, it is found that there exists R serious shortage of Copper, as hereinafter defined, which will increase in the future, by reason of the fact that the present and future domestic supply and probably future imports are now and will be insufficient for all defense and civilian needs, and it is further found that such shortage will prevent the obtaining of priority for deliveries of that material under present and future Naval and Army contracts and orders and related subcontracts and suborders unless the total present and future supply thereof be conserved and the present and future distribution directed, and it is further found that the best interests of the national defense require the exercise of the power conferred upon me to direct and insure such priority, and WHEREAS, the following provisions have been adopted by the Office of Price Administration and Civilian Supply AS the basis for its Civilian Allocation Program for Copper issued simultaneously herewith, now, therefore, IT IS HEREBY ORDERED THAT: 933.1 GENERAL PREFERENCE ORDER (a) Deliveries of Copper by any person shall be pade only in accordance with the following directions: (1) Deliveries under all Defense Orders which do not bear a higher preference rating are hereby assigned a preference rating of A-10. B-8. (2) Preference ratings, in order of precedence, are: AA, A-1-a, A-10; BB, B-1, B-2 A-1-b. A-1-J: A-2, A-3 (3) All deliveries to which a preference rating has been assigned shall be made upon the date or dates required by the Preference Rating Certificate assigned thereto, or, if none, then upon the delivery date or dates specified in the contracts or orders therefor. For the purpose, deliveries bearing no preference rating or a lower preference rating shall be deferred if necessary to assure the deliveries bearing a higher preference rating. This provision shall not apply to deliveries by the Metals Reserve Company. (4) When there is doubt as to whether A particular contract or order is a Defense Order the matter shall be referred to the Division of Priorities for determination, with a statement of all pertinent facts. PM 488 2- (5) Any person who accepts a delivery of Copper to which 6 preference rating has been assigned, either by this or any other order or by any preference rating certificate, shall use such Copper or an equivalent amount thereof for the purpose for which such preference rating has been assigned. (6) Preference retings DAY be assigned from time to time by the Director of Priorities to deliveries under con- tracts or orders other than Defense Orders, or other specific directions may be issued with respect to deliveries under such contracts or orders. Except as hereinafter limited, deliveries may be made under nondefense orders in the absence of such ratings or directions, after compliance with the preference ratings assigned to Defense Orders. (b) (1) During each calendar month hereafter, each Refiner shall set aside from his production of Copper (including therein Copper refined for his account under toll agreement, but excluding Copper refined by him under toll agreement for the account of others) a quantity equal to 20 percent of his total production during April 1941 (including therein Copper refined for his Account under toll Agreement, but excluding Copper refined by him under toll egreement for the account of others) to be delivered only upon express direction of the Director of Priorities. The quantity of Copper to be set aside may be veried from time to time hereafter by Order of the Director of Priorities. Each refiner shall ship the balance of his production in such manner that, except as limited by the provisions of para- graph (c) below, each customer shall receive P percentage of the Refiner's commitments to him for the month, including both Defense and non-defense Orders, equal to the percentage received by every other customer. The restrictions specified in this paragraph (b) (1) shall apply to and limit: (1) Shipments of Copper to third persons, including affiliates and subsidiaries of the seller, and (11) Shipments of Copper from the refining branch, division or section of e single business enterprise to another branch, division or section of the same or any other business enterprise owned or controlled by the same person. (2) Commencing June 1, 1941, all Copper then or thereafter owned by the Metals Reserve Company will be allocated by the Director of Priorities. (3) The Director of Priorities on and after June 1, 1941, will, in his discretion, make allocations of the Copper owned by the Metala Reserve Company and the Copper set aside by Refiners as provided in paragraph (b) (1) in accordance with the following provisions: 253 PM 488 -3- 254 (1) For delivery to any person whose supplies on hand and on order are insufficient for his Defense Orders; (11) Where deemed necessary to expedite deliveries under Defense Orders and such result cannot be adequately obtained use of preference ratings; (iii) For fulfillment of other orders which appear to the Director to be directly or indirectly in the interest of national defense; (iv) Any surplus remaining after fulfillment of the foregoing purposes may be allocated by the Director among other non-defense orders. In making such allocations, the Director will be guider by the Civilian Allocation Program for Copper issued simultaneously herewith by the Office of Price Administration and Civilian Sunnly. The Director may refuse to allocate to apolicants who discriminate against Defense Orders. (v) For June allocation, applications heretofore made to the Advisory Copper Committee of the Metals Reserve Company shell be treated AS applications made to the Director of Priorities under this Order; but any person may hereafter file with the Director A new or supplemental application for such allocation. Such applications, and all future applications for allocation of such Copper shall be made to the Director of Priorities only on forms prescribed by him. (c) In addition to the foregoing limitations, no person shell hereafter knowingly deliver Copper to any customer, and no customer shall accept delivery of Copper in an amount which will increase, for any calendar month, the customer's inventory of such material in the same or other forms, in excess of the quantity necessary to meet required deliveries of such customer's products, on the basis of his usual method and rate of operation. (NOTE: Section 928.1 - General Metals Order No. 1has this day been amended by separate order by striking therefrom the word "Couner" wherever the same appears.) (d) No person shall hereafter enter into any new contract, or any amendment or extension of any existing contract, for the refining of Copper on a toll basis without specific permission of the Director of Priorities. No existing toll contract shall be hereby invalidated or impaired until further order, but copies of all such contracts must be filed with the Director of Priorities within ten days after the effective date of this Order. (e) All Refiners and other persons who deliver Copper shall keep accurate records of their inventories, and of all purchases, sales, and deliveries of Copper, including the dates thereof, parties involved 255 PM 488 and other pertinent information, and shall, upon request, submit such records to audit and inspection by duly authorized representatives of the Priorities Division of the Office of Production Management, and shall execute and file with said Division such reports and questionnaires concerning the foregoing as said Division may from time to time request. No reports or questionnaires are to be filed by any person until forms therefor are prescribed by the Division of Priorities. (f) Any person who obtains Copper by means of a material or wilful misstatement contrary to any provision of this Order may be prohibited by the Director from obtaining further deliveries of Copper from any source. (g) For the purposes of this Order: (1) "Person" means any person, firm or corporation. (2) "Defense Orders" means all contracts or orders for material entering directly or indirectly at any stage of production into deliveries (1) for the Army or/Navy of the United States, or (ii) for the defense of Great Britain, or (iii) for the Government of any other country whose defense the President deems vital to the defense of the United States under "An Act to Promote the Defense of the United States" (Public No. 11, 77th Congress, First Session, approved March 11, 1941). (3) "Copper" means Copper metal produced from ores or scrap which has been refined by any process of electrolysis, or produced from ores by any process of fire refining, to a grade, and in a form (cathodes, wire bars, ingot bars, ingots, cakes, billets, wedge bars or other refined shapes), suitable for fabrication. It shall also include any Copper metal in the production of which Copper scrap has been mixed with electrolytic or fire-refined Copper produced from ores. (4) "Refiner" means any person who produces Copper, as herein- before defined, from ores or scrap by any process of elec- trolysis or fire refining in grade suitable for fabrication; for the purposes of this Order "Refiner" also includes any person who has such Copper produced for him under toll agreement. (h) This Order shall take effect on the 29th day of May, 1941, and unless sooner terminated shall expire on the 30th day of December, 1941. This Order shall supersede as of the date hereof any special orders or directions for the delivery of any Copper by the Director of Priorities. (O.P.M. Reg. 3, Mar. 7, 1941, 6 F. R. 1596; E. O. 8629, Jan. 7, 1941, 6 F. R. 191; Sec. 2(a), Public No. 671, 76th Congress) Issued this 29th day of May, 1941. R. Stettinius Jr. Director of Prietities 256 OFFICE FOR EMERGENCY MANAGEMENT Division of Priorities, Office of Production Management and Office of Price Administration and Civilian Supply For immediate release PM 488 May 31, 1941 Copper today was added to the list of vital defense metals under mandatory, industry-wide control. The new control is pro- vided in a General Preference Order signed by E. R. Stettinius, Jr., Director of Priorities, who said the action was made necessary by a shortage of copper which is expected to become worse during 1941. At. the same time, a Civilian Allocation Program for Copper was issued by Leon Henderson, Administrator, Office of Price Ad- ministration and Civilian Supply. In making allocations of copper among competing civilian demands, the Director of Priorities will be guided by the principles set forth in the OPACS program. The civilian program, first to be issued by OPACS, takes into account the need for providing as much copper as possible for civilian uses; hardships which will be imposed on labor or business by restrictions; past rates of consumption by fabricators; the desirability of pro-rating copper as equitably as possible among fab ricators; availability of substitutes. OPACS will refuse to allocate copper to any one in the industry descriminating against defense orders. 257 PM 488 -2- Available figures indicate that the total supply of refined copper in this country during 1941 will range between 1,340,000 and 1,470,000 short tons. Total military and civilian requirements, however, are estimated at about 1,810,000 short tons, thus indicating an overall shortage for the year of from 340,000 to 470,000 short tons. Such a shortage is considered especially serious because copper is used widely in both civilian and military channels. Typical military uses include the manufacture of shell cases, small arms ammunition, fire-control equipment, power and telephone equipment, switchboards, generators and parts in plane motor. One of the problems involved is that, although the Reconstruction Finance Corporation is prepared to buy up to 50 oon tons of refined Chilean copper in 1941, there is a question as to whether the Chilean refiners can meet this schedule and also as to whether ships will be available to transport it. The figures previously given for anticipated supply of copper in 1941 are based on the expectation of getting a S ibstantial part of the Chilean copper. Worked out by the Priorities Division and by representatives of the Office of Price Administration and Civilian Supply, the new General Preference Order has the effect of giving all defense needs first call on the copper supply. Major points in the order are: (1) All defense orders which do not bear a higher preference rating are assigned a rating of A-10. This puts such orders ahead of non-defense orders with lower ratings or no ratings. 258 -3- PM 488 § 1309.4 The terms used in this Order shall be defined as they are defined in General Preference Order No. M-9. Issued this 29th day of May, 1941. LEON HENDERSON ADMINISTRATOR Certified to be a true copy of the original JOHN HAMM, DEPUTY ADMINISTRATOR Secretary Morgenthan - Room 280 DEFENSE SAVINGS STAFF ADVANCE NOTICE RADIO PROGRAMS FRIDAY, JUNE 6 Time: 3:15 P.M. Station: WMAL, Washington, D. C. Program: Baseball Game. NOTE: Baseball games scheduled through June 14 on WMAL under sponsorship of General Mills, Inc. will use Defense Savings Bonds and Stamps announcements sometime during the game each day. Similar announcements are being carried on baseball games, sponsored by General Mills, over 86 stations throughout the country. Time: 8:00 - 8:30 P.M. Station: WRC, Washington, D.C., and National Broedcasting Company Red Network Program: Waltz Time. Time: 8:30 - 8:55 P.M. Station: WMAL, Washington, D. C., and National Broadcasting Company Blue Network. Program: "Your Happy Birthday". Time: 10:00 - 10:15 P.M. Station: WJSV, Washington, D. C., and Columbia Broadcasting System Network. Program: Treat Time. THESE PROGRAMS PROMOTE SALE OF DEFENSE BONDS AND STAMPS 259 260 June 5, 1941 P y Dear Sir: Acknowledgment is made of your letter of June 4, 1941, addressed to the Secretary of the Treasury, enclos- ing copies of a letter of May 31, 1941, from the Attorney General, and of a proposed Executive Order, entitled "Authorizing the Attorney General to investigate and require reports as to transactions and property involving foreign interests". An expression of the views of this Department is requested. The matter will be given careful consideration and the Director of the Bureau of the Budget will be advised in connection therewith as soon as possible. Very truly yours, (Signed) L. J. Bernard Assistant General Counsel F. J. Bailey, Esq., Assistant Director, Bureau of the Budget, Executive Office of the President, Washington, D. C. 261 EXECUTIVE OFFICE OF THE PRESIDENT Bureau of the Budget Washington, D.C. June 4, 1941 My dear Mr. Secretary: Enclosed herewith are copies of a letter of May 31, 1941 from the Attorney General, and of a proposed Executive Order, entitled "Authorizing the Attorney General to investigate and require reports as to transactions and property involving foreign interests". It will be appreciated if the Director of the Bureau of the Budget may have an early expres- sion of your views with respect to the proposed Executive Order. Very truly yours, /s/ F. J. Bailey (a) Assistant Director Legislative Reference The Honorable, The Secretary of the Treasury. Enclosures. 262 OFFICE OF THE ATTORNEY GENERAL WASHINGTON, D. C. May 31, 1941 The Director, Bureau of the Budget, Washington, D. C. My dear Mr. Director: I am herewith transmitting for your consideration a copy of a proposed Executive Order entitled "Authorizing the Attorney General to investigate and require reports as to transactions and property involving foreign interests." I am also enclosing for your information "Summary of Expenses" showing the amounts estimated as necessary for administering the order. I shall appreciate your views on the proposed order at your earliest convenience. Kindly return the "Summary of Expense" with your reply. Respectfully, /s/ ROBERT H. JACKSON Attorney General. Enc. 214090 263 EXECUTIVE ORDER AUTHORIZING THE ATTORNEY GENERAL TO INVESTIGATE AND REQUIRE REPORTS AS TO TRANSACTIONS AND PROPERTY INVOLVING FOREIGN INTERESTS By virtue of and pursuant to the authority vested in me by Section 5(b) of the Act of October 6, 1917 (40 Stat. 411), as amended, and by virtue of all other authority vested in me, and by virtue of the continued existence of a period of national emergency, and finding that this Order is necessary in the interest of national defense, it is hereby ordered as follows: Section 1. The Attorney General may investigate, under such rules and regulations as he may prescribe, any transaction referred to in subdivision (b) of Section 5 of the Act of October 6, 1917 (40 Stat. 411), as amended, in which any foreign state or a national or political subdivision thereof has any interest, by any person within the United States or any place subject to the jurisdiction thereof; and the Attorney General may require any person to furnish under oath complete information relative to any transaction referred to in said subdivision (b) of Section 5 of said Act, as amended, or relative to any property in which any such foreign state, national or political 264 -2subdivision has any interest, including the production of any books of accounts, contracts, letters, or other papers, in connection therewith in the custody or control of such person, either before or after such transaction is completed. Section 2. The Attorney General, with the approval of the President, may prescribe regulations defining, for the purposes of this Executive Order, foreign states, nationals and political subdivision thereof and property in which any foreign state or national or political subdivision thereof has any interest; and the Attorney General may also prescribe such other regulations and such rulings, orders, instructions, forms and reports as he may deem necessary and desirable for the purpose of exercising the powers and duties vested in him by this Executive Order. Section 3. This Executive Order and any regulations, rulings, orders, or instructions issued hereunder may be amended, modified or revoked at any time. Section 4. Nothing contained herein shall be construed as a limitation upon any power heretofore or hereafter delegated by the President under Section 5(b) of the Act of October 6, 1917, as amended, to any other officer or agency of the Government. THE WHITE HOUSE, , 1941. 265 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE June 5, 1941 TO Secretary Morgenthau FROM Mr. Kamarok Subject: Airplane Deliveries Summary 1. There has been a slow rise in the number of planes shipped to the British. In the first eight weeks of the seventeen-week period covered in the reports, the weekly average of combat planes delivered was 52. In the last eight weeks the weekly average has been 59 combat planec (excluding trainers). 2. One quarter of the planes delivered to the United Kingdom travel by air rather than water. In the period covered by the reports, 124, out of a total of 446 delivered to England, have flown the Atlantic. All of the heavy bombers and naval patrol bombers have taken this route. 266 2 Division of Monetary Research Airplane Shipments to the British (From February 1 to June 1 by air January 11 to May 10 by sea) Table A. - Shipments by Area Total Latest Week Reported To Date 28 349 Heavy bombers 5 38 (Consolidated PBY) Pursuit 4 50 0 9 To the United Kingdom Light and medium bombers Naval patrol bombers Light and medium bombers Pursuit 446 37 Total to United Kingdom To the Middle East 136 265 0 0 401 0 Total to Middle East To the Far East Light and medium bombers Naval patrol bombers (Consolidated PBY) Pursuit Trainers 6 0 8 1 123 21 55 0 192 22 Total to Far East Totals Light and medium bombers S bombers Naval patrol bombers Pursuit Trainers Grand Total 5 491 38 5 58 28 397 21 55 0 59 1,039 267 -3- Table B. Division of Monetary Research Shipments by Types - Total Reported Latest To Date Week 20 3 Boeing B-17 Brewster Buffalo Consolidated Catalina (PBY) Liberator 123 21 58 5 18 nov Curties Tomahawk 0 Douglas - Boston 3 265 97 Glenn Martin Maryland o 136 Grumman Martlett II 0 9 Lockheed Hudson I Hudson III 0 Hudson IV Hudson V Electra North American Harvard II United Chesapeake Grand Total - All Types 1 46 5 18 0 181 17 0 3 55 0 3 9 59 1,039 268 - Division of Monetary Research Table 0. - Plane Deliveries to the British by Weeks Light Week Ended and Medium Bombers Naval Heavy Bombers Patrol Bombers Pursuit Trainers - Total Feb. 8 22 - Feb. 15 42 - - 100 - 142 Feb. 22 - - 27 - 35 62 Mar. 1 - 25 3 7 25 - 5 10 - 3 - - 31 Mar. 8 16 Mar. 15 # 26 Mar. 22 17 Mar. 29 25 Apr. 5 21 Apr. 12 21 Apr. 19 20 Apr. 26 23 May 3 61 May 10 36 1 May 17 61 13 May 25 30 10 June 1 28 5 5 21 491 38 58 397 - 37 29 1 4 - 22 - 2 41 18 - 46 3 - - 73 7 2 - 52 - 32 28 56 15 27 106 10 - 8 7 19 27 2 4 3 5 2 1 101 - 3 2 - 25 55 - 100 - 65 - 59 55 1,039 . The date given is for shipments by air. Shipments by water start three weeks earlier. That is, the statement reporting the shipment of planes by air for the week ending June 1 would report the shipment of planes by water for the week ending May 10. 269 c DEPARTMENT OF STATE Foreign Activity Correlation June 5. 1941 MR. MERLE COCHRANE With reference to our telephone conversation this morning, I am attaching hereto a paraphrase of the telegram which was the subject of our discussion. A copy of this paraphrase is also being sent to the Federal Bureau of Investigation. INIT. F.B.L. F.B. Iyon NOTE: Merle: I'11 phone you as soon as I've been able to "un-garble," or whatever you do to a word that isn't clear. - Fred - 270 0 0 PARAPHRASE OF TELEGRAM P From: Rio de Janeiro To: The Secretary of State Dated: May 31, 1941 A nonimmigrant Section 3 (2) visa was issued at Rio, May 31, 1941, to Jose Fernandez de Oliveira, a citizen of Brazil. This alien is en route to the United States having left Rio on June 2, 1941. Despite the fact that he is in possession of a valid visa for Trinidad, he is proceeding to the States by plane by way of the West Coast of South America. The purpose of his visit is to sell three large rough diamonds which are supposed to weigh 116.38 karats. These diamonds are valued (official Brazilian evaluation) 763 contos 172 mil- reis. There is a possibility that with the funds realized from the sale of these diamonds, he may purchase (this word garbled but probably "boat") which would sell in Brazil for ten times the price in New York. It is reported that it is possible he might try to amoggle this out of the United States. Copytala 6-5-41 Word should be "boort" which means fragmentary diamond material for grinding 271 GRAY DES MADRID Dated June 5, 1941 Rec'd 3:20 p.m. Secretary of State, Washington. 509, June 5, 4 p.m. The June 4th evening papers carry in box on first page identical articles stating it has been unofficially learned from the Banco de Espana that the Spanish Govern- ment is negotiating for the recovery of $600,000 from the sale of silver made by former Ambassador de los Rios to the United States Government. "Efforts to recover this silver valued at approximately $10,000,000 have failed by reason of an American law which required the purchase of all silver offered in order to regulate world market prices. The $600,000 referred to is a premium of 5 percent on the silver sold." WEDDELL KLP 272 COPY CONFIDENTIAL PARAPHRASE A confidential telegram (no. 201) of June 5, 1941 from the American Consulate General at Hong Kong reads substantially as follows: On June 5 the British Financial Commissioner in the Far East (Hall-Patch) called at the Consulate General and expressed confidentially anxiety in regard to certain points as follows: (a) alarming development in the interior of China of inflation as shown by the influx into Shanghai of bank notes although quiet still prevails outwardly in the Shanghai market; (b) absence on the part of the Chinese of agreement to the nomination by Great Britain of Mr. Rodgers as the British member of the stabilization board; (c) Dr. Kung's purported scheme In attempting, to the detriment of Shanghai interests, to rush Mr. Fox and his party to Chungking immediately. Mr. Hall-Patch expressed the wish that in some way M joint Washington-Gondon action instead of action anywhere in China might effect stabilisation. The American Corsul at Hong Kong made no comment to Mr. Hall-Patch and transmits the above as information. A typhoon delayed the arrival of the Clipper carrying Mr. Fox and his party. Arrangements are being made for Mr. Fox to meet, when he arrives in Hong Kong, American bankers in that city. pY:bj:6-10-41 273 GRAY KD Berlin Dated June 5, 1941 Rec'd. 10:25 a. m. Secretary of State, Washington. 2203, June 5, 11 a. m. It is reported in Berlin that the Yugoslav National Bank has been liquidated on the grounds that "its assets are unobtainable and unascertainable". A new Serb bank of issue has been created under the "Serbian National Bank" with Dr. Radosasjevich as Governor. The NEW bank has a capital of 100,000,000 Serb dinars, a new currency unit to replace the old Yugoslav dinar at the same rate. This new dinar is not backed by gold but is described as "a currency of work on the German model backed by bills of Exchange and other sure business documents." The Serb Governor will be assisted and advised by Director Soengen of the German Reichsbank. This new banking and currency arrangement follows closely that set up in General Government of Poland. INFORM TREASURY AND COMMERCE. MORRIS. NPL 274 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE June 5. 1941. TO Secretary Morgenthan CONFIDENTIAL FROM Mr. Cochran Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns £34,000 Purchased from commercial concerns 9,000 Open market sterling was quoted at 4.03-1/4, as against 4.03-1/2 yesterday, and there were no reported transactions. The Canadian dollar moved off to 11-3/8% discount by the close today, as compared with 11-1/8% last night. The Argentine free peso, which touched a high of .2388 on June 3. was finally quoted at .2373 today. The Cuban peso moved to a new high of 1-5/8% discount, as against 1-13/16% yesterday. In New York, closing quotations for the foreign currencies listed below were as follows: Swiss franc Swedish krona .2321-1/2 Reichamark .2385 .4005 Lira .0526-1/4 Mexican peso .0505 .2070 Brazilian milreis (free) In Shanghai, the yuan was unchanged at 5-3/8. Sterling was quoted at 3.89-1/2, off 1-3/44. There were no gold transactions consummated by us today. The State Department forwarded a cable to us which stated that the Comptoir National d'Escompte in Bonbay, India, shipped $131,000 in gold to the Chase National Bank, New York, for sale to the New York Assay Office. In London, the price fixed for spot and forward silver was 1/16d lower at 23-3/88, equivalent to 42.444. The Treasury's purchase price for foreign silver was unchanged at 35 Handy and Harman's settlement price for foreign silver was also unchanged at 34-3/44. We made one purchase of silver amounting to 75,000 ounces under the Silver Purchase Act. This consisted of new production from various foreign countries, and was bought for forward delivery. AMP 275 NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS MILITARY INTELLIGENCE DIVISION TESTATIVE LESSONS BULLETIN No. 115 WAR DEPARTMENT 0-2/2657-235 Washington, June 5, 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. GERMAN INFANTRY BATTALION IN THE ATTACK IN BELGIUM SOURCE This bulletin is based upon a translation of an unsigned article appearing December 4, 1940, in Die Wehrmacht, an official semi-monthly periodical published by the Supreme Command of the German Defense Forces. The bulletin describes in part the actions of a German infantry battalion operating in the vicinity of Thielt, 40 miles west of Brussels, during the Lys River crossing operation. NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS -1- 276 NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS GERMAN INFANTRY BATTALION IN THE ATTACK IN BELGIUM On the morning of May 24, 1940, at Demarolle, Major Lans, commander of a German infantry battalion, met Major General of Infantry Geyer. The General gave him the following order: "You will cross the Lys near Macheln with your battalion immediately, take Gotthem, and break through the western edge of Denterghem. There will be no artillery at your disposal. It has not yet come up. I can assign no pioneers to you. The battalion must help itself. This order is effective at 9:15 A.M." Orders are orders. Since there were no pioneers available, the battalion helped itself. Rafts were constructed from empty metal drums, discovered in a deserted factory. Since there was no artillery, the heavy infantry weapons had to furnish fire protection for the crossing of the battalion. At 11 A.M. the leading elements crossed the Lye and established a bridgehead on the opposite bank without encountering hostile resistance. The remainder of the battalion followed with the heavy weapons. The entire operation took place according to plan, and the attack was carried on in the direction of Gotthem. Up to that point, the Belgians had acted as if they were not present, or had not seen the Germans, or did not care. But suddenly from a field of shoulder-high wheat, weapons of all calibers opened fire. The high grain made visibility impossible for the attackers, and orientation was extremely difficult, but the courageous, seasoned men of lower Saxony strained every nerve to continue the advance. The Belgians, with their deadly fire, fought desperately for every square meter of terrain. The German attack came to a standstill on the eastern edge of Gotthem in a hail of Belgian shell fire. It was very embarrassing for Major Lanz, a hard-bitten, roughand-ready campaigner, to request from his regimental commander per- mission for his battalion to retreat, but senseless sacrifice of German blood could not be permitted. Dislodging an enemy from a carefully selected position without artillery preparation is impossible. The regimental and division commanders both responded to the request of the battalion commander, and Major Lanz' battalion was disengaged late in the evening of that hot day without a single casualty. On Saturday, May 25, the regiment was ordered to capture Gotthem and Denterghem the next day. In answer to questions, two NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS -2- 277 NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS of the three battalion commanders in the regiment replied that they could not initiate an attack with their commands because of losses suffered in earlier attacks. Major Lanz' battalion had been forced to give up the attack on the previous day because of fierce enemy fire; and it had, in addition, suffered numerous losses on May 25. After a quick decision, however, Major Lanz declared that he would attack with his battalion for the second time, and this time with success. But first he requested a night's rest for his exhausted men. In the meantime, the long-awaited pioneers arrived, and with great skill they threw a permanent bridge across the river. Artillery also arrived and took revenge for the effective hostile fire of May 24. The Belgians found out what German artillery can do. Major Lanz' battalion began the attack at 8 A.M. on Sunday, May 26. It had been reinforced by an infantry cannon platoon and by an antitank platoon, and each of the three rifle companies had been reinforced by a detachment of heavy machine guns. Followed by the other two battalions of the regiment echeloned on the right and left respectively, Major Lanz' battalion crossed the Lys bridge and forced its way into the hostile country beyond. There were numerous hardships incident to the attack, including the indescribable difficulties of the terrain. Grain growing nearly six feet high over the rolling country made visibility impossible beyond ten paces, and stretching the head above the grain was prohi- bited because enemy bullets whistled through the air in all directions. Despite these obstacles and the heavy artillery fire with which the enemy again greeted the attackers, Gotthem was captured in a compara- tively short time. The battalion staff then pushed through the center of Gotthem and tried to make contact with two leading companies, from which nothing had been seen or heard since the attack began. Messengers were sent out, but they brought back nothing to show for their efforts; they could not find anyone. Finally Major Lanz ran upon a platoon of C Company and two infantry cannon just west of Gotthem. Since contact could not be established with A and B Companies, and since the attack, as such, had already failed, he decided promptly, boldly, and in spite of cost, that he would reach the objective with that single platoon of 0 Company, reinforced by the two infantry cannon and a group from his battalion staff. The group marched toward Denterghen with Major Lanz at its head. It passed Molenhoek on the north and advanced along the bank of the Mandelbeek River. Here and there on the way, scattered groups from the lost companies were met, attached to the Lanz group, told NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS -3- 278 NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS of the mission, and given their orders. The only guide the troops had as they struggled single file through the wheat field on that cloudless day was the compass in the hand of the battalion commander, but that more handful of men advanced towards the objective which had once been assigned to the entire reinforced battalion. They followed their leader with complete confidence because they knew that he was the only one who could get them out of their hopeless position and lead them to victory. The Mandelbeek was reached at noon. Prisoners were brought in and sent back behind the line. They numbered about 50, all vigorous young men. The tiring advance continued. Suddenly, fire came from the front and from the left flank, although no enemy was to be seen. But heavy machine guns silenced the opposing fire, and the attacking group promptly advanced to the Terdonk-Denterghen road, where bicycles were scattered about in wild confusion. A Belgian bicycle squadron had been so surprised by the suddenness of the German machine gun fire just as it was about to dismount that it had been almost completely destroyed. At this point Major Lanz met Major S., commanding the 2d Battalion. Major S., with a few runners, was making a reconnaissance, while the remaining elements of his battalion, now only a reinforced company, stood waiting two kilometers to the rear. The two commanders discussed the situation and decided that the 2d Battalion would be attached to the Lane Storm Troops. As it happened, this never took place. About 1 P.M. Major Lanz dictated to the regimental commander the following message which illustrated the situation as it appeared to the two battalion commanders: "12:30 P.M., southeast of Mandelbeek and slightly south of Denterghem. Heights of Denterghem reached. All companies of battalion completely broken up and acattered by heavy artillery fire and poor visibility. No unit still organized. Only sections of platoons and individual groups of the 1st and 2d Battalions remain. Have reorganized the remnants of A, B, and 0 Companies, approximately two and a half platoons altogether, as well as sections of F and H Companies, into a storm troop under my leadership, and am advancing to the eastern edge of Denterghem. Can see neither friendly nor enemy troops, although fire is being received from both flanks and often from the rear. Every attempt at advance is met by fire from hostile infantry weapons. NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS -4- 279 NO OBJECTION TO PUBLICATION KV SERVICE JOURNALS "Since there is no contact with other units of any kind, and since collecting individual groups is utterly impossible, I request IMMEDIATE assignment of reinforcements. Lieutenant Sch. seriously wounded. No news of B Company since beginning of the attack, except of those elements that have joined me. Information just received that Captain M. is near me. He has, however, only five men left. I will have him join us. Have just met Major G. with a few runners. He is attempting to guide sections of E and F Companies to me. The men are so exhausted by the attack that it can be continued only under extreme difficulties. "I urgently request white flares in large quantities. "Signed: Dr. Lanz Major and Battalion Commander. A runner worked his way through the waving wheat field carrying the message back to the regimental command post. Meamwhile, the battalion commander organized his troops into three platoons and, with the infantry cannon, continued the attack to the eastern edge of Denterghem, which was reached at 4 P.M. The platoons were ordered not to lose sight of each other again in the decisive phase of the attack. The Lanz Storm Troops held together in such a way that the oral orders of the commander were constantly audible. Belgians sprang out of their hiding places, threw down their weapons, and joined the column of marching prisoners in increasing numbers. No one had time now to bother about these men. Despite their heroic registance, they had learned how hopeless it was to cross swords with us. About 500 meters south of Denterghem there was a farm, surround- ed by a moat, from which the Lanz Storm Troops received fire devilishly well-aimed. Platoons were used to take the place from the north. At the same time, and quite unknown to Major Lans, the farm was attacked by C Company and an additional 30 men. The enemy increased its fire to check the violence of the attack at all costs. It became impossible for the attackers to effect a break-through from any side, and both attacks were halted by the Belgian fire. Major Lans then ordered the employment of two heavy machine guns and after two belts of ammunition had been fired, the white flag was seen waving from the farm. With arms up, the Belgian defenders came out of their fortress and were sent away as prisoners of war. Between 800 and 900 prisoners were taken by the battalion during the day. The objective, the western edge of Denterghem, was then easily reached. The battalion bivouacked in a deserted factory, while Major NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS -5- 280 NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS Lanz telephoned his report to regimental headquarters over wires hastily laid. A soldier standing near the telephone heard the Major say: "It was the most difficult day of my life. Only one thing was perfectly clear to me: either I must reach the designated objective or I should not come back at all." After a night disturbed by incessant Belgian fire, reinforcements arrived and Major Lanz' troops continued the attack. It was learned later that the capture of the objective at the western edge of Denterghem completed the penetration of the Belgian defensive sector on the Lys River at that point. On May 28 the advancing troops marched 30 kilometers to Thielt without encountering hostile resistance. A few days afterwards the Belgians laid down their arms and surrendered unconditionally. NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS -6- 281 RESTRICTED 0-2/2657-220; No. 409 M.I.D., W.D. 12:00 M., June 5, 1941 SITUATION REPORT I. Western Theater. Air: German. Fairly strong night attacks, with main effort directed against Birmingham and Chatham. British A daylight attack was made on the Boulogne area. II. Mediterranean and African Theaters. Ground: No change in the situation. Air: Axis. A strong attack on Alexandria. British Raids on Benghazi, on an airfield near Tobruk and on Rhodes, RESTRICTED 282 INFORMATION COPY Response of - Received as the - as 13mg, - so m SECRET By authority A. C. of so G-2 Date JUN 9 1941 Thum Initials Gaise, filed Jane no sets. L. Membership Regul of the U.S. Bay, Assistant Moral Associa, we - I the bottleship BARMAN (51,100 base) in the - of the operations in which the ohis was struck. the booking took place from about a 40 degree dive earing from the direction of the mm, busing being released as 1500 so 2000 feet. Although is was - that the ohly - about to be the aircraft were not visible until the attack had taken place. A number of times the only action which could be telma was to five barrages in the direction of the - - - committees the attack was delivered from the position about se degrees off the direction of the - 2. the strenet emotion, - (23,000 same) - able to have more than about two parents please alon on - of the tangie lask of atreast. that please - available as the time of the attack were effective - wanted off two or three Give atteste - destroyed two - booking please. as daylight of this w four Beartfish four Fainur please benefit Common sinience without less. - persons please was shot down is the course of the day - to a I (2) failing - the ohig. (e-e Notes - - gentlet). 3. the - I (1,870 tess) was struck w a I which fell - a depth - the deteration of the depth charge save - the entire steem above the All the on - erow were killed - the abouting - blow - - the retter and the propellers were not damaged - the ship - able to - part as the SECRET SECRET 283 speed the office of is about I w - wa - - . - 4. - - - w - a - - - / is soliming - the Solute of - 1 1 least - the onlow - - 6.500 - - - / - all to most - She - - www - - and - I (8,950 the time) - w / a / - I - I I The YORK was - w - - Italian less before - the - about Moto 0.00 begin. Distribution: of War of / the of Since of IN Other w American name State or - as as office of Revenue / Ate Sarge + . SECRET CONFIDENTIAL 284 of = Received as - Mary as mm, - s w Resident filed 15ml, - s with 1. Alm America - the s mumb - Regular - People please - name testion beened shipping as Bontage and continues Harmy. Ats bases in Belgium and Holland were also attached. x. No British air activity. 2. Activity One Britain. s - - please operated - the visinity of the - Detensive to the Mash. - - also attention has as yes no information has boss meeting sultenting the securito of this or other salds. - - - the night of Jaso 5-h, which have born - & viewaly reported, entailed TO was layon, 1mg mage busboro - 10 fighter please. 3. - . States s Share - as reports of British I from thats - - the w of - 4. b During the Brittah activity of - s 11 - please - During the - - the sign of - 45 two please were abot - 4. As I - section, a / bubbing please considerable photo - daring the of of June 3. 5. the - office bee separts of a Jaine w business plano abidab be attached a / dovies. Metythations DEL. Chief of staff, a.e CONFIDENTIAL INFORMATION COPY 285 June 6, 1941 Memorandum for the Secretary's Diary Mr. Harold Stanley, of Morgan Stanley and Co. and Mr. Charles McCain, of Dillon Read and Co., called on Secretary Morgenthau on June 5, at 11:00 a.m. Ed Foley also attended at the request of the Secretary. Mr. Stanley said the purpose of the visit was to bring the Secretary up to date on the Viscose deal in accordance with the understanding reached at the April 18 conference attended by Secretary Morgenthau and Messrs. Stanley, Douglas Dillon, and Ed Foley. The Secretary said that he was more than pleased with the way the sale had been conducted. Mr. Stanley thanked the Secretary and then reported that all the stock had been sold; that the preferred had been offered at 107-1/2, was now being quoted at 109; that the common had been offered at 24, and was now being quoted at that figure; and while the syndicate had not broken up, they proposed to wind up the details next Monday when the sales price, less expenses, commissions, and down pay- ment, would be turned over to the British. Stanley went on to say that while the sale had not been easy, he thought the British were thoroughly satisfied. Secretary Morgenthau then asked Mr. Stanley if he would object to questions in regard to the expenses, commissions and the syndicate's profits. Mr. Stanley replied certainly not, and that they were prepared to submit all the figures. Mr. Stanley then produced the attached statement which Secretary Morgenthau then went over item by item. After several preliminary questions, Secretary Morgenthan asked whether the total underwriting discount, expenses and con- tract fees amounting to approximately $7.9 millions didn't represent nearly 13 percent of the total sale price. Mr. Stanley admitted that it did and pointed out that the syndicate had already given up almost $1 million as the result of the talk with Secretary Morgenthau on April 18. Secretary Morgenthau then said that he wanted to talk on a man-to-man basis; and to disassociate himself from his office provided that was agreeable to the other gentlemen. They assured him that they wanted him to talk freely. 286 -2Secretary Morgenthau then said that he was not in the securities business and never expected to be and therefore didn't look upon this transaction from the standpoint of one who was experienced in the game. He said that he had been informed by the SEC that the commissions and profits in this deal were not out of line with the run of the mine cases of this kind. However, it seemed to him, looking at the thing as a layman, that public reaction would be much more favorable if the commissions and fees were not so high. He said that he was taking the over-all view; putting himself in the shoes of men who were not dealers in securities, who occupy places like his, and who are close to Prime Minister Churchill. They are the people who might make the move for appeasement, and he thought that these people might be a little shocked at the greediness of Wall Street and while he realized that concerns like Morgan Stanley and Dillon Read were in business for profit and he wanted them to make a reasonable profit; nevertheless he thought it would be very good advertising for Wall Street and for the British cause if the commissions and fees could be kept to a minimum. He added that Wall Street had not been very enlightened during the last eight years and while he couldn't ask the gentlemen to give up profits that they had earned under their contract; nevertheless, he would be just a little bit disappointed if they didn't make some effort in that direction. Mr. Morgenthau added that he would not say anything about the matter outside the four walls of the room and if the gentlemen rejected his suggestion he would still say nothing and his door would still be open to them. Mr. McCain asked Secretary Morgenthau if he had in mind any particular amount and the Secretary r eplied that he thought the syndicate could very well lop off another million. Mr. Stanley then said he appreciated very much the significance of what the Secretary was saying; that the Secretary would not say such things lightly, and that he was torn between his desire to be of as much assistance to Great Britain as possible and at the same time to satisfy the seventeen members of the syndicate. He said that he doubted very much if anything could be done. Mr. McCain then said that if they returned any- thing to the British it would be in the nature of a gift and they would have to pay income taxes on it, as it represented income earned under the contract. Foley said he thought the contract could be revised. McCain said that he had been advised by counsel that this could not be done. Foley said he would be glad to look into the question. 287 -3The Secretary then said that he would be willing to get a special act of Congress to exempt the syndicate from tax on the amount of profit refunded to the British. McCain and Stanley then said they would go back to New York and use their best efforts but they were not hopeful. The meeting broke up at 11:45. June 4, 1943 AMERICAN VISCOSE CORPORATION 288 Afe Offerings $24,561,600.00 101,546.71 87,652,000.00 228,480 lbs. Pfd. e $107.50 per Sh. Accorded dividend to June Srd. 1,568,000 She. Con. . $24. per Sa. $62,295,146.71 Proceeds of Public Offering " These were the offering prices for 91.14% of the Company's outstanding stock. On the basis of these prices the whole Company would have a valuation of $68,551,049.72 Underwriting Discounts 8 571,200.00 $2.50 per Sh. on Pfd. $2.25 per Sh. on Con. 3,528,000.00 4,099,200.00 $58,195,946.71 Resale Price $ 838,856.29 (1) Expenses # (11) 5% of down payment 1,822,800.00 581,959.47 (111) 1% of Resale Price (1v) 5% difference between Resale Price and (1) (11) (111) and $86,456,000 946.816.55 British Government to Receive Payment on Account - April 16, 1941 Balance to be paid to British Government ensation under March 15, 1941, Contract 581,959.47 946,816.55 (iv) $1.00 per Sh. on 105,280 Shs. Pfd. .75 . . . 708,550 a Com. chasers Compensation as Bollers $1.50 per Sh. on 71,871 Sha. Pfd. 1.50 : 406,400 . Con. $56,445,514.40 86,456,000.00 $27,989,514.40 $1,822,800.00 (11) (111) rechasers Compensation as Underwriters $3,750,482.51 $103,280.00 527,662.50 $ 650,942.50 $107,056.50 609,600.00 716,656.50 8,851,576.02 Total Compensation to the 17 Firms as Underwriters and Sellers $1,347,599.00 Total Compensation to the 17 Firms as Purchasers, including Managers, and as Underwriters and Sellers . 4,699,175.02 ajor part of the marketing costs, 1.0., the difference between $4,099,200 and $1,547,599. lling $2,751,601. was the compensation of some 581 other Underwriters and Doelers, fit or Loss in Trading Account not included. itemised list. 289 June a 1941 AMERICAN VISCOSE CORPORATION - EXPIRES Legal Fees Disbursements Taxes Advertising Disbursements Pandick Press Underwriting Agreements, letters, etc. Price, Waterhouse & Co. Arthur Little Registration filing fee Blue Sky Qualifying fee and Disbursements and Delivery ITelegrons Shipping Prospectuses Telephones Postage Miscellaneous Reserved for Contingent Expenses not yet determined $115,000.00 1,257.14 54,359.88 71,585.48 414.80 41,522.52 5,215.76 25,686.67 11,485.10 8,001.28 6,445.79 5,359.84 2,027.22 1,156.80 588.05 4,464.95 46.849.82 $396,856.29 . 290 June 6, 1941 9:30 a.m. GROUP MEETING Present: Mr. Bell Mr. Sullivan Mr. Cochran Mr. Viner Mr. Haas Mr. Blough Mr. White Mr. Foley Mr. Kuhn Mr. Schwarz Mr. Gaston Mrs. Klotz H.M.Jr: All right, Herbert, what have you got? Gaston: We would like to support a bill in - with your permission - in Congress immediately to raise the base pay of the uniformed force of the Secret Service from the present twelve eighty a year to fifteen hundred a year. About two thirds of these men are getting the minimum of twelve hundred a year. It isn't enough to keep them up. It isn't enough for the men and it isn't enough to keep the right type of men on the uniformed force. H.M.Jr: Oh, the uniformed force? Gaston: Yes, the guards, and if you don't object, we want to do a little conspiracy up on the Hill 291 -2- H.M.Jr: to raise that base to fifteen hundred. I heartily approve. Bell: Isn't that a classification matter? Is that fixed by legislation? Gaston: We have to get it fixed by legislation. We haven't been able to get it raised by classification, and Interior has a bill in now for a similar-- H.M.Jr: Do you mind, Herbert? Gaston: We are going to thresh it out at ten fifteen. H.M.Jr: One says, "No", and one says, "Yes", but as far as I am concerned, it is all right. Bell: We have got a law in the books. Thompson: We have been thrown down on that, and we have got to get it through legislation. This way, going back to Congress, It will be an amendment to the act. Bell: Exceptions to your general law when you break down your classification act, what good is it? Why shouldn't the stenographers come along and ask for the same thing? White: Good idea. Viner: Aren't you required by law to go to-- H.M.Jr: Gentlemen, am I for it? Yes. Is Mr. Bell against it? Yes. Would you get together? As far as I am concerned, it is past me. Is Gaston: that all right? All right. 292 -3Bell: That is all that is necessary. H.M.Jr: You can have your day in court with Gaston, is that fair enough. Bell: Well, butteditin.isn't really my problem. I just Thompson: There is a lot of history attached to that, Gaston: All I am concerned with is getting the men more and I think we can convince Dan. money. Bell: I would like to see that too. H.M.Jr: Anything else, Herb? Gaston: No. H.M.Jr: Ed? Foley: Nothing. H.M.Jr: Good morning. Foley: Good morning, sir. H.M.Jr: All right? John? Sullivan: Good morning. H.M.Jr: How do you do. Klotz: Very formal this morning. Cochran: Sir Frederick Phillips phoned yesterday evening to ask if he and Peacock could come in on Monday afternoon or Tuesday morning, preferably. They are going to be in town on the first of 293 -4the week. H.M.Jr: Well, let's hold them in suspense. Is somebody going to see them about that thing? Bell: I am going to try to get something this morn- H.M.Jr: Now, in my original talk - you make a note - ing on it. we originally asked Jesse Jones whether he couldn't give the English some money to buy some wool, and I see by the papers that he is now thinking of buying a lot of wool. Now, if he does, those dollars might go to their credit. Bell: That is in that memorandum. White: They have already counted on those, they say. H.M.Jr: Anyway, I am throwing it at you. All right? Bell: Yes, sir. Jones called me last night on the thread companies and said that he talked to Peacock and that he didn't get much information and he didn't seem very much interested in Mr. Jones' proposition. He suggested that Jesse talk to a man from Dillon and Read, and I think the man was down to see you. He called him and-Foley: McKain. Bell: Quinn, I thought it was. Foley: He is not Dillon Read. He is Tri-Continental. H.M.Jr: Well, it was Dillon and Read any how, and he didn't furnish much information, so we gave Jesse what Harry had worked up as a basis for starting. We didn't get very far. 294 -5Cochran: I told Phillips about that yesterday, too, because I talked to Peacock the evening before when Dan talked with Mr. Jones, so he knows all about it and I asked if-H.M.Jr: Knows all about what? Cochran: About that thread sale proposition and he said it was not that on which Sir Edward wanted to come in. H.M.Jr: Well, bring it up again Monday and we will just - because I want to sort of stall them until we know where we are with Hopkins on Cochran: this other thing. That is all I have. H.M.Jr: Roy? Blough: You sent down a clipping regarding the publication of financing defense put out by the Council for Democracy. I don't know what you wish to know about that. H.M.Jr: Well, they have got a full page ad about taxes in the New York Times and all that. Blough: By the Council? H.M.Jr: And somebody, they say, is on the Treasury staff, who helped prepare it. Blough: Well, Orville S. Poland. Viner: He was formerly a-- Bell: I don't know him. Kuhn: I think I can tell you about that. The Council for Democracy put out a booklet on financing defense which had no reference whatever 295 -6to our Savings Bonds. Poland got this in proof form and proceeded to raise hell with them in a polite way in New York to get that booklet to include some of your efforts to keep down inflation by borrowing from the people, and he went up there and went over this booklet with them, but I don't think it was ever intended that he should be a sponsor for it, and I don't think he ever authorized that. H.M.Jr: Well, somebody - get it - get a copy of the booklet, will you, Roy? Blough: Yes. It hasn't yet been received by us. I know something about its history, and it is one of those things where they write out to fifty people and get in their replies, and then hire David Cushman Coyle to write something up, and then take what he writes and turn it over to somebody else who rewrites it entirely, and then put it out and list the names of some of the more prominent people who wrote in replies. That is all it is. Schwarz: Melvin Hansen and David Coyle are listed also. Blough: I talked to Dave Coyle this morning, and he said maybe two or three sentences he wrote are in the final publication. H.M.Jr: If you make many reports like that, you are going to shame Harry White. (Laughter) All right. I signed a letter to Lily Pons and Grace Moore, et al. Somebody is picking some good voices. Kuhn: Mr. Callahan. H.M.Jr: What do I do at ten fifteen, have my picture 296 -7 taken and so forth and so on. Kuhn: Just the still cameras. H.M.Jr: Dr. Viner? Dr. Haas? Haas: I have this report which you-- H.M.Jr: I signed your letter to the President on steel. Haas: Oh, fine. H.M.Jr: Dr. Schwarz? Schwarz: Look at the company I am in. H.M.Jr: Professor White? Schwarz: Pardon me, I have something. I don't like to dignify Fred Crawford from Michigan either, but I think it might be well to smack him down now before he-H.M.Jr: I gave Harold a suggestion this morning on it. Not on publicly, but he is going to send somebody up to see him. Graves: I have already talked with Larry about it. H.M.Jr: Dan, do you think, early next week, we can get Bell: Whenever we get rid of the British, I think H.M.Jr: You know, I feel fine this morning. You see, on that tax certificate thing? we can sit down and talk taxes. I just - I gave birth to twins yesterday, the Treasury tea party and the broadcast last night, so I am in fine shape today. What have you got on your mind? 297 -8Bell: I think these fellows like Crawford and Wolcott and a few more of them that are mak- ing statements about the fiscal situation may be causing quite a bit of hoarding throughout the country. I have had several calls. I had one yesterday from Harold Stonier of the ABA and he was quite worried about the calls he had received yesterday from banks in New England and the banks in Los Angeles. People are taking their money out of savings accounts. When asked why, they say, "Well, there are a lot of statements made on the floor of Congress that their savings are going to be confiscated and that the Government is going to tax their savings." So they are drawing them out in currency and putting them in safe deposit boxes. H.M.Jr: Well, now, if you work it so that we can get those people to write me a letter mentioning the fact that the people are doing this on account of the statements Crawford and what is the other fellow's name? Bell: Wolcott of Michigan, I think, is one. H.M.Jr: When I said the fellow was smart, the fellow I meant was smart wasn't Crawford, it was Wolcott that is the smart fellow. Bell: He is very smart. H.M.Jr: Wolcott is the smart fellow. I had him confused. Bell: Crawford sits right next to him. Foley: Crawford, as you remember, is the ex-prosecuting attorney who asks all the questions when you go before the Banking Committee of the House. 298 -9H.M.Jr: But Crawford is a short, thick-set fellow. Foley: No, that is Wolcott. Crawford is a slimfaced fellow. H.M.Jr: Well dressed? Foley: No, he wears glasses, pinch-nose glasses. H.M.Jr: I am thinking of that Republican from Weschester Country or something. Foley: You are thinking of Ralph Gamble, I think. White: If there is some other aspect of it that bothers you, Dan, than hoarding, it might be important, but if it is just hoarding, hoard- ing is a good thing now for prevention of inflation. The more hoarding, the less danger of inflation, unless there are some aspects to it of rapid withdrawals from some savings banks or something of that character. H.M.Jr: Well, I still thing, Dan, that if you could get a letter from the savings banks to the ABA complaining, if they would, about these two gentlemen, then I could take that letter and send it up to them and say, "Now, look." Bell: I wonder if we might get some information and maybe you could say something in one of your press conferences. H.M.Jr: Will you give me something? What else, Dan? Bell: Last year you may recall that our regulations for the sale of Savings Bonds were so interpreted by the Department that private pension 299 - 10 funds could invest the full amount of their money available. That is, we brought in each individual employee who had rights, and we allowed them to invest on that basis. For about a month while we were changing our regulations and giving consideration to the matter, about forty-five million dollars was invested in pension funds - of pension funds was invested. Recently, a fellow by the name of Curtis, formerly Assistant Secretary of the Treasury back under Taft's administration, as I recall, has been selected as counsel for the Retirement System of the Federal Reserve Banks, and he has rendered an opinion that our first decision was illegal, that they couldn't invest those funds in Savings Bonds, and they have written us a number of letters, and we have told them our views and that we thought that the money was properly invested and that no subsequent Secretary of the Treasury would ever change that decision, but in view of this decision they have had from Curtis they passed a resolution last week to redeem two million of the Savings Bonds on June 1 and six million on July 1. Now, that may start the log rolling of the other pension funds and we may get as much as forty-five million dollars in redemptions in the next two months. I don't know what that will do from a public standpoint. It may scare people who will say, "Well, here people are redeeming their Savings Bonds. Now, maybe we can handle it through publicity as to why. it is being done, I don't know. I think it is a foolish decision, myself, but they had an opinion from counsel and there wasn't anything else to do. H.M.Jr: You are not leaving it in my lap, are you? 300 - 11 Bell: I am just telling you about it in case it comes up so you will know. H.M.Jr: O.K., Dan. Anything else? Bell: That is all. Thompson: I have a report on the Treasury voluntary purchase plan. H.M.Jr: Oh, yes. Thompson: It has only been under way three and a half days in the Treasury, as you know, and we have a subscription list of sixty-eight percent of the personnel. Out of nineteen thousand employees, thirteen thousand have signed pledges. H.M.Jr: Thompson: Isn't that grand? I think it will be better than that even when we get our next report. H.M.Jr: I think it is grand. Are the other Departments doing anything? Thompson: I don't know. Graves: Mr. Secretary, on that point we wanted to get this plan well established in the Treasury before we made any suggestions to the other Departments, but in a few days we want to talk with you about that and we thought you might possibly want to mention this to your colleagues at Cabinet. H.M.Jr: But not today. Graves: Well, I didn't mean today. In any case, I think we ought to send a full description of our plan, when we get around to it, to all the 301 - 12 Departments with the suggestion that they proceed accordingly. H.M.Jr: Fine. Who is this memorandum from? Thompson: This comes from my office. Mr. Schoeneman-- H.M.Jr: Do you mind just putting your initials on it? Now let me see what I have got today. I have got the A. F. of L. at ten fifteen, Harold graves group at ten thirty, Mr. Gaier at eleven thirty and Cabinet this afternoon, and then the farm and so to bed. All golfers notice that I am leaving this afternoon to return early Monday morning. Bell: There is one other thing. You remember Dean Acheson wanted you and the Secretary of State to see the President today. We are not going to be ready. H.M.Jr: And neither is the President. Don't tell them we are not ready, but the President never will be ready. Bell: I think Monday is a better day. H.M.Jr: What? Bell: Monday we may be ready. We have got a lot of conferring to do, I think, before our memorandum will be agreed upon. H.M.Jr: That takes a lot off my shoulders, Dan. Thank you all. 302 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE TO FROM June 6. 1941 Secretary Morgenthau Mr. Cochran At the Staff meeting this morning I told the Secretary of Sir Frederick Phillips' request for an appointment on next Monday afternoon or Tuesday morning for the Secretary to receive Sir Edward Peacock. In accordance with the Secretary's instructions I telephoned Sir Frederick after the meeting. I told him that the Secretary was leaving town after the Cabinet Meeting today and would not be back until Monday. We are not making any appointments for next week until after the Secretary returns to Washington. I advised against Sir Edward Peacock coming here for the specific purpose of seeing the Secretary on Monday. I told Phillips that I would look into the schedule on Monday and then let him know about an appointment for some date after that. This seemed agreeable to Phillips. mm 303 TREASURY DEPARTMENT WASHINGTON June 6, 1941. MEMORANDUM FOR THE SECRETARY: There is herewith submitted the first report of pledges received and Defense Savings bonds and stamps actually sold to employees of the Treasury Department in Washington under the "Voluntary Purchase Plan" which was put into operation, by your direction, on last Saturday, May 31st. The report, which covers only 3 days of the Voluntary Purchase campaign, shows that of the 19,573 employees of the Department in the District of Columbia, 13,301 persons, or 68 per cent of the total, have signed pledges under which they agree to purchase $31,983 in Defense Savings Bonds and $26,670 in Defense Savings Stamps each month. On an annual basis, these pledges call for the purchase of over $703,000 a year. This response is very gratifying, particularly in view of the short period during which the campaign has been under way. Organization of a similar effort in the Treasury's field offices has already begun, and the initial reports of pledges signed by field employees will be included in the -2- 304 report to be submitted to you on June 20th. The prompt participation of such a large percentage of the personnel within a few days not only indicates a splendid spirit on the part of the employees generally, but reflects great credit on the bureau workers who are assisting in handling the details of this effort. The 305 SEMI-MONTHLY REPORT OF PLEDGES AND PURCHASES TREASURY EMPLOYEES' VOLUNTARY PURCHASE PLAN PLEDGES - RECEIVED EMPLOYEES PREVIOUSLY REPORTED PATROLL PLEDGED TO BE PURCHASED EACH MONTH PERCENTANE RECEIVED LAST REPORT 1. OF TAX RESEARCH 24 24 v , DIVISION TIONAL REVENUE .CE OF THE SECRETARY BLIC DENT T CLERK RIAL OF THE KINT HASTRIER, U. 3. RECEISING TAT BOARD SAVINGS DONTS PREVIOUSLY PARTICIPATION RELIMENT DISBARKENT out SERVICE / or TO DATE 1000% STAMPS BONOS PLEDGER PLEASED SINCE REPORTED PLEASED PREVIOUSLY 19 DATE REPORTED SINCE LAST REPORT LAST REPORT ACTUALLY PURCHASED THROUGH GROUP AGENTS - TOTAL BONDS AND STAMPS PLEASED PREVIOUSLY TO BATE REPORTED , BUREAU OR DIVISION 3rd 71 140 12 PLEASED LAST REPORT PLEASED PREVIOUSLY TO BATE REPORTED / 44 BONDS STAMPS PURCHASE PURCHASED PERSONS PURCHASED TO DATE LAST REPORT REPORTED -- 100 104 249 were St 244 N 40.70 12.00 4168 83 46 18,640 16.078 / JAPAN 2,449 732.90 770 473 1441 4.00 1985 21428 2489 2045 LOSS can 191790 as 140 984290 19700 JESO KARY 161 140 81% 2184 134 84% 160 130 JJ as ** AND 2 240 / 81 m 150 283 76 446 10 % 1427 4977 46tt 212 - ... - 94460 80% 14.90 64.75 78 th 56 #20 J46 124 19300 318.50 18.350 iat EXPT 70 473 in 74% 750 747 1,477 so 6J 113 101 +2 J93 293 DOCUMENT DIVISION 8/1 516 DORAL COUNTAL 134 12 202 9200 20 173 ... 510.70 use 325 195 77.00 **** 1.77-5 TOTAL 4.00 400 77 % FAST GUARD - TO DATE 89% 76 th OF ACCOUNTS PURCHASE 97th 7J KRAVING AND PRINTING PURCHASES LIST REPORT as JY IT. OF TREASURY BLDGS, REPORTED 35 77 the PREVIDUSLY TE SATE 7J 74 APTRULLAR OF CURRENCY PURCHASE JY ECUTICS PRINTING LAST REPORT TOTAL BONDS AND STAMPS 9.60 FIXES SAVINGS STAFF REIGN FUNDS CONTROL JUNE 4,1941. REPORT FOR PERIOD ENDING I - DEFENSE SAVINGS CAMPAIGN STRICT OF COLUMBIA PERSONNEL 31 iss 74 " '7 73 72.4 allow JUNE 175 230.00 410.00 848 wee 3,487 +++ 1000 190 420 633 462 1100 * 125 LIFO 106 241 is 1760 4910 LOW aver JUN sys 1.74 IN 26670 51643 24450 1,473 KIT 2003 NEW 3.125 365 231 41% 4/71 19.573 13301 68% - 216.00 1520 6,444 80.00 AUSO /** 6667 sea san 136 - see age JAY 402.90 2860 10860 190.25 570.44 79.60 - 214.60 642 00 2,142.00 4125 1,948.76 602240 JA97230 306 June 6, 1941 11:36 a.m. Harold Ickes: Can you give me some information about tankers? H.M.Jr: Can I do what? I: Get me some information about tankers. H.M.Jr: Well, I'll do anything that is humanly I: Well, you probably have the figures possible. over there or can get them. I got a report yesterday that quite a bunch of tankers have been tied up in New York harbor for a number of days waiting for loads. You see, this problem means getting more service out of the - making better use of the tonnage than we have been doing to date. H.M.Jr: Well, I can find out from my port captains within an hour or two, or certainly by this afternoon, every tank in every harbor in the United States. I: And how long it has been there. H.M.Jr: And how long it has been there. I: That's right. And can you also give me H.M.Jr: Just a minute. I'm just making notes. And how long it has been there and its capacity. I: Yes. H.M.Jr: Well, that might take a little bit longer. I: No, let me have the other. 307 2H.M.Jr: All right. I: And there is one thing else that you might have over there, I don't know. Do you know what American tankers have been registered for instance in Panama and Japan and other foreign flags? H.M.Jr: I don't know but I can tell you - I'm sure that if we have it we can get it for you. We'11 do this all through Coast Guard. I: All right, thanks. H.M.Jr: But we can do it - and now I wrote you I sent you my memorandum on that oil conservation. You ought to get it any time and I marked it highly confidential because when I read it I was surprised at my nerve. (Laughs). I: Yes. H.M.Jr: Now the other thing, I've also sent you a letter you'11 get during the course of the day - I don't know how it'11 hit you, but we're putting up a proposal to you that we - on the possibility of using a space in front of the Treasury for bonds in connection with a company that wants to put up a pavilion. I: Uh-huh. H.M.Jr: But you get it and study it and see whether it comes within the sphere of the Park Service or not. I: All right, Henry. H.M.Jr: But this other stuff we'll get on it right away. I: Thanks. Good-bye. 308 June 6, 1941 Bear Harold: The memorandum that I referred to over the telephone was the one I sent to the President on July 19, 1940. I am inclosing a copy herewith for your very confidential information. I wish to draw your attention particularly to Paragraph One. After reading the memo, if you feel that I can be of assistance to you I would be glad to have you call on no. Sincerely yours, /s/ Henry Honorable Harold Inkes, Secretary of the Interior, Interior Department, Washington, D.C. Sent hymersemper at 1:30P.M. 309 June 6, 1941 Dear Harolds The memorandum that I referred to over the telephone was the one I sent to the President on July 19. 1940. I am inclosing a copy herewith for your very confidential information. I wish to drew your attention parti- cularly to Paragraph One. After reading the memo, if you feel that I can be of assistance to you I would be glad to have you call on no. Sincerely yours, /s/ Henry Honorable Harold Inkes, Secretary of the Interior, Interior Department, Washington, D.C. Sent by messenger at 1:30 P.M. 310 THE SECRETARY OF THE INTERIOR WASHINGTON TH OFFICER June 6, 1941. My dear Henry: I have read with interest your letter of June 6, to which was attached a copy of your memorandum to the President under date of July 19. I am very glad indeed to have this information, which, however, does not surprise no. Sincerely yours, Harrelt.Jebs Secretary of the Interior. Hon. Henry Morgenthan, Jr., Secretary of the Treasury, Washington, D. C. 311 June 6, 1941 3:50 p.m. H.M.Jr: Harold Ickee: Yes. Who told Cordell that there was a war on? H.M.Jr: (Laughs). I: Rip Van Winkle. Rip Van Winkle rubbing his eyes today. H.M.Jr: Well, it was the most amazing thing I I: Well, my God! H.M.Jr: And I don't think that he got what the President told him to. Maybe he did. oh, I won't believe he'll do anything I: ever saw. until he does it. H.M.Jr: Because after all what the President told him to do was to clean up all the Germans outside of the Embassy. Isn't that right? I: Yeah. H.M.Jr: Well, if he does it, I'll buy you the I: best drink that you can think of. All right. I just read your memorandum; it just came in. H.M.Jr: You mean about ...... I: oil and Japan. H.M.Jr: I: Isn't that a surprising one? Yes. Let me tell you one. H.M.Jr: Yes, sir. 312 -2When Japan invaded Manchukuo, which I: was a long time ago, Sir Henry Dedering of Dutch Shell and Teagle, Standard of New Jersey came into my office and we discussed the whole thing and they told me the whole story of the great reserves that they were building up in Japan, the pressure that they put on the oil companies and they wanted Sir Henry Dedering had just come from London, he said the British Government was willing to enter into an agreement with us to restrict and confine and if necessary cut off the supply of oil and gasoline. H.M.Jr: Yeah. I: The chief suppliers at that time were Dutch Shell and Esso of New Jersey. I think I must have called Hull directly on the thing, took it up with him. He sent over this fellow Hornbeck and he went into it. Well, you know what happened. H.M.Jr: Yeah. Well, when I made this suggestion and was getting somewhere it was Sumner Welles who killed it. I: Yeah. If one doesn't kill it, the other does, and you'll probably find Sumner Welles over at the President's office tomorrow or Monday trying to counteract what Cordell said today he'd do. H.M.Jr: Did you draw that cartoon on the front page of the Star this evening? I: No. H.M.Jr: Have you seen it? I: No. H.M.Jr: (Laughs). Wait until you see it. It's marvelous. 313 -3- Is it? I: H.M.Jr: Oh, it's got you leaning up against the gas tanks saying sorry, no gas today and it's got a car driving up... Says what? I: HMJr: It's got a car driving up with a Japanese as a chauffeur and Cordell Hull filling the gas tank I: Oh, wonderful. HMJr: And Sumner Welles saying, any oil, I: Wonderful ! Wonderful ! HMJr: (Laughs) I: Well, you know the papers are waking up now. When I was asked about Japan in my sir, today. press conference yesterday, I said that that was a matter up - that was in the jurisdiction of the State Department. "Have you any personal opinions?" - "Well I probably will have a personal opinion but I can't discuss any matters that aren't within my jurisdiction". HMJr: I: HMJr: Oh Papers all over the country are taking it up. They got it sweating now. Well, Harold, they have today - this is what the Navy tells us.- two years supply of high-test gas. I: of course they have. HMJr: So it's too late again. I: That's what Dedering told me way back years ago that they had a huge reserve and that they never cut in on that reserve. 314 -4HMJr: Well, that's why I told you the other day that I'm so glad you are oil administrator and - but if they do today what Cordell suggested and he does it, then will be the most amazed person I in the world. I: So will I and you noticed the note there - now I tell you when Frank Walker becomes an alarmist, something's wrong. HMJr: That's right. I: And the whole note through there and I had - the President's speech was a distinct diappointment to me. Then I'm tired of hearing fine words, I want to see something done. I: That's right. And we aren't doing it. HMJr: No. Well I: It's awful. HMJr: Maybe we'll get some where today. I: Well, I hope so. It looks hopeful HMJr: anyhow. HMJr: It looks most hopeful than for months. I: Oh yes. HMJr: Yeah. I: All right, Henry, goodbye. 315 Form TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE June 6, 1941 TO FROM Secretary Mergenthau Mr. Haad Subject: Proposal to Include a Request for Cash Position in the Monthly Schedules Sent to Banks Requesting the Detail of Their Government Bond Portfolios In accordance with your request, we have considered the advisability of including a statement of cash position in the monthly schedules sent to banks requesting the detail of their Government bond portfolios. The principal considerations appear to be as follows: (1) In the case of commercial banks, the data, if obtained, would be of greatest value in analyzing the ability of individual banks to subscribe to Government securities. The totals would be of doubtful value. In order to provide adequate material for analysis, it would probably be necessary to request data on the cash position of commercial banks under the four subheads of: (a) required reserves; (b) excess reserves; (c) due from other banks; and (d) cash in vault. The separation between required and excess reserves would, of course, be necessary in order to determine the actual free cash resources of any individual bank. The separation between excess reserves and balances due from other banks would be necessary for the quite different reason that these items, while essentially the same from the point of view of any individual bank, behave quite differently in com- posite. The more Government bonds any individual bank buys from its excess reserves the more other banks can buy. The more Government bonds any bank buys from its balances in other banks the less other banks can buy. In the aggregate, all banks could buy an amount of Government bonds equal to perhaps five times the amount or their excess reserves. Balances due from other banks, on the other hand, could not, in the aggregate, provide funds for the purchase of any additional Government securities by the banking system. (2) The value of information on cash position as a means of forecasting the probable future behavior of a commercial bank with respect to its Government bond portfolio would be greatly circumscribed. This is because: 316 Secretary Morgenthau - 2 (a) The policy of any bank with respect to its Government bond portfolio will depend in large part upon expected future changes in its deposits. (b) Individual banks differ widely in their ideas of the proper relationship between cash, deposits and Government bonds. For this reason a bank with relatively small cash holdings may, on the basis of its past performance, be more likely to purchase bonds upon any given offering than a bank with much larger cash holdings. Such policies may, of course, change with time, but the most reasonable presumption on the 00 casion of any given financing operation is that the old policy will be continued. Such individual bank policies could be traced, however, only after a substantial number of reports had accumulated, and even then an adequate analysis would present an almost insuperable statistical task. (3) The information now requested on individual issues is of obvious value to the Treasury and involves no dupli- cation in reporting from the standpoint of the individual banks. Individual banks had not reported the detail of their Government security holdings to any agency prior to the initiation of the Treasury report, and do not now report it to any other agency.1 For this reason banks generally have cooperated with the Treasury fully in furnishing the information so far requested. 1 The detailed schedule of Government security holdings filled in by bank examiners at the time of each examination might appear to be an exception. This exception is not important, however, because (1) it applies only to banks subject to Federal examination; (2) the schedule is filled in physically by the examiner and so does not involve a "report" on the part of the bank; (3) the examinations are infrequent (semi-annual in the case of national banks, and annual in the case of State member and insured non-member banks), and (4) the examinations are as of different dates thereby making the figures virtually worthless for the purpose of compiling totals. 317 Secretary Morgenthau - 3 It is not certain that equally good cooperation would be obtained if information on cash balances was also requested: (a) There might be some apprehension among bankers aware of the limited value of the figures as aggregates, that they were to be used as a means of checking up on the transactions of individual banks. (b) Not only is detailed information on cash balances furnished at the present time by each bank subject to Federal examination to its appropriate supervisory agency upon the occasion of periodic call reports, but 389 weekly reporting member banks (holding as of April 30, 1941, about 73 percent of all the Government securities held by all commercial banks reporting to the Treasury) report such information to the Federal Reserve Board weekly, and the data 80 reported are available as composites with only 5 days delay. In addition, the Federal Reserve Banks have available on their own books, information with respect to the total reserves of each member bank daily and the excess reserves of each member bank not less than twice each month. The initiation of a Treasury report on cash position might appear to the individual banks, therefore, as an un- necessary duplication in reporting, perhaps designed primarily as a means of influencing their future investment decisions. (4) The above considerations are for the most part not applicable to mutual savings banks and insurance companies. This is so for two reasons: (a) Information on the total cash position of mutual savings banks and insurance companies is not subject to the same limita- tions as those applying to commercial banks as these institutions have no power to "create deposits". 318 Secretary Morgenthau - 4 (b) The problem of duplication would not be serious as neither class of institution, with the exception of certain large life insurance companies, now furnishes information on its cash position directly to any Federal agency. 2 In view of these considerations we should recommend, on balance, against the inclusion, at the present time, of a request for cash position on the schedules sent to commercial banks. While most of the considerations advanced in support of this conclusion do not apply to mutual savings banks and insurance companies, there does not seem to be any immediate need that we request infor mation on the cash position of these institutions at the present time, inasmuch as the total available funds of the mutual savings banks are relatively small and the Treasury already receives a monthly report on the cash position of 37 large life insurance companies holding the bulk of all insurance company assets. 2 The data on mutual savings banks, published semi- annually by the Comptroller of the Currency, are obtained indirectly from the State supervisory authorities, and are available only about four months in arrears. TO: his Klatz 319 Photostat positive of this went to : pell Faley while 20 cc used at Cochraw 11 am meeting 2nes 6/10 6/6/41 x From: LIEUT. STEPHENS your FEDERAL LOAN AGENCY WASHINGTON JESSE H.JONES June 6, 1941 Dear Henry: With regard to the proposed loan by the banks and insurance companies to the British-owned American thread companies, it appears from the information which we have been able to obtain on short notice that the RFC could safely afford to lend as much as $30,000,000 in the expectation that earnings from the properties would fully amortize the loan within a reasonable time. This would provide the British with $14,000,000 more than the banks and insurance companies propose to lend. We will be glad to give prompt consideration to such a loan upon receipt of more definite information. Sincerely yours, Administrator Honorable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. alamy 321 TREASURY DEPARTMENT PROCUREMENT DIVISION OFFICE OF THE DIRECTOR WASHINGTON June 6, 1941 MEMORANDUM TO THE SECRETARY: Weekly Report - Lease-Lend Purchases (5/31 - 6/6/41) Purchases to 5/31/41 Purchases 5/31 to 6/6/41 $ 5,615,931.25 1,391,079.81 Total to 6/6/41 $ 7,007,011.06 Contracts totaling $4,071,218.60 are now being considered by the Board of Awards and will be cleared today or tomorrow. These will be included in next week's total. Requisitions Pending Cleared by O.P.M. Awaiting clearance by O.P.M. Total Pending Requisitions Estimated Cost $ 181,054,220.20 16,512,636.00 $ 197,566,856.20 In the total pending requisitions there are several for long term monthly requirements extending, in many instances, into the year 1942; zinc, for example 12 months $20,000,000; copper, months $13,720,000; scrap, 6 months $7,200,000; and pig iron, 6 months $7,680,000; a total for these alone of $48,600,000. 9 R Attachments-2 Clifton E. Mack Director of Procurement REQUISI- CONTRACT NUMBER CONTRACTOR'S NAME DA-TPS-60 American Airlines, Inc. DA-TPS-65 Minneapolis-Moline Power DA-TPS-66 Ingersoll Steel & Disc. Div. Implement Co. Borg-Warner Corp. QUANTITY TOTAL VALUE TIONER COMMODITY U.K. Airplanes, and Engines U.K. Harvesters & Spare Parts U.K. Discs, agricultural Spare parts for Surge 3 ea. $147,750.00 37,358.07 5,000 4,425.00 DA-TPS-68 Babson Bros. Co. U.K. DA-TPS-71 Deere & Company U.K. Combines DA-TPS-72 Allis-Chalmers Mfg. Co. U.K. Harvesters DA-TPS-73 J. I. Case Company U.K. Combines DA-TPS-75 Gravely Motor Plow & U.K. Tractors 34,836.60 DA-TPS-80 Oliver Farm Equipment Company U.K. Agricultural Implements 21,388.61 DA-TPS-81 Oliver Farm Equipment Company U.K. Agricultural Equipment 10,703.73 DA-TPS-87 The Massey-Harris Company U.K. Combine DA-TPS-88 Oliver Farm Equipment Company U.K. Cultivators DA-TPS-93 International Harvester U.K. Threshers DA-TPS-99 Chicago Flexible Shaft Co. U.K. Agricultural Equipment 1,032.70 DA-TPS-105 Oliver Farm Equipment Co. U.K. Agricultural Equipment 2,926.44 Cultivator Co. Export Company 2,676.00 Milking Machines 6 3,832.50 32,123.28 5 1 20 4 7,875.60 546.76 1,782.00 4,156.12 REQUISI- CONTRACT NUMBER CONTRACTOR'S NAME DA-TPS-109 Peek & Velsor, Inc. U.K. Stramonium 4,480 lbs $ 1,254.40 DA-TPS-110 S.B. Penick & Company U.K. Oil of Chenopodium 1,120 lbs 2,912.00 DA-TPS-157 Western Electric Co. U.K. Cells, Photo-Electric DA-TPS-170 Commercial Acetylene Supply U.K. Cylinders: Acetylene U.K. Alcohol, ethyl TIONER Co., Inc. DA-TPS-176 Publicker Commercial Alcohol Co. COMMODITY TOTAL PURCHASES 5/31 - 6/6/41 TOTAL VALUE QUANTITY 50,000 207,500.00 2,000 56,000.00 7,200,000 gals. 810,000.00 $ 1,391,079.81 324 June 6, 1941 10:30 a.m. RE DEFENSE SAVINGS BONDS Present: Mr. Sloan Mr. Johnston Mr. Sulds Mr. Callahan Mr. Edward Mr. Graves Mr. Sparks Mr. Odegarde Mr. Mahan Mr. Powel Mr. Kuhn Mr. Houghteling H.M.Jr: I just want to tell you gentlemen this, that I have been eight years in Washington and four years in Albany and I am fairly immune now to newspapers and don't let any fellow write a little article that I am upset and I am going to make any change in the organization upset you because the day I want to make any changes, I don't do it through a newspaper writer, and with all due respects to Mr. Kuhn. If they were all like Kuhn, it would be all right. The point is, quite to the contrary, I am very, very much pleased and I think we have got a swell crowd and certainly I am not conscious of any bickering or any difficulties and I just wanted to let you know that as far as I am concerned, I meant everything 325 -2that I said in my speech, even though Ferdie wrote it for me, so don't let any- thing like Gregory of the New York Tribune bother you. Graves: H.M.Jr: I thought you might want Mr. Edward to tell you something first of our bank elections. You mean he is going to tell me a couple of good Negro stories? Graves: He might do that. H.M.Jr: Isn't that the way we get the bank relations? Have you got a good story? Edward: Sure. Sloan: Come on up here. H.M.Jr: Come on up here and sit down up here. They Edward: Well, I hope so. That is what we are after. tell me you just tell them a good story and then they sign on the dotted line. Mr. Secretary, there are nearly ten thousand banks in the country who are qualified to sell these Series E bonds, and of course, in selling the Series E they are also selling the F and G, as you know by the statistics that have come in and that you have seen. These banks have spent hundreds of thousands of dollars in advertising. Several of them have spent up to nine or ten thousand dollars in one or two individual institutions. They are continuing to do that. Now, of course, we haven't - this job isn't finished. There are other banks who have not 326 3- qualified and who should qualify. I have asked the Federal Reserve Bank - I have asked Mr. Bell to have the Federal Reserve Bank in their report this week break down the report to show what is happening in the individual states. So far we have been getting it from the Federal only as to the district. They are getting it by states. In the meantime, I have been making some individual inquiries myself and it would seem that the State of Georgia, which claims to be the second home of the great President, is tailing the nation in the number of banks that are qualified in proportion to the banks of the state. Only about ninety-five banks out of some three hundred sixty -H.M.Jr: What are we going to do about it? Edward: We are going to get them in. As soon as I get the information, I am going to get after brother Oatley and several others down there and tell them to go out into the by-ways and hedges and ask them to come in to the - to see the bridegroom. (Laughter) H.M.Jr: Then what happens? Edward: We are going to bring them. If they don't come, we will go get others. Chicago isn't doing their part. The banks in Chicago in proportion to the size of the city have done less advertising, less promotion, I think, of the program, than any other city of its size in the country. I have been around a good many places since you had me to come up here, and agreed to employ me at some magnificent salary - and I think you are being cheated even at that -- 327 -4H.M.Jr: Let me decide that. Edward: O.K. Now, there might be one or two things that could be done to encourage the banks some in this program and that is, I think Mr. Bell has probably talked to you about this requirement that they put up collateral. It really hasn't made any hardship of any consequence on any bank, but a great many of them use that as an excuse, "Well, the Government won't even trust us to send us a blank bond to sell without putting up collateral." Of course, we did write in that provision about the FDIC insurance up to sixty-five hundred which took care of a good many of them, a greater number of them than the larger banks. For those, putting up collateral wasn't any burden. On the other hand, the supervising of that collateral and keeping it all up in shape is right expensive to the Treasury and the risk involved is negligible and after you have thought about it, if you feel like you can eliminate that collateral requirement on the basis of allowing banks - bonds somewhat in proportion -Graves: Dan feels the same way about it. It is just the matter of the technical requirements of the law. If we can find a way out, Dan, I think, intends to go along with that. Edward: If that can be done, it might help. That is about all I have to say, except this, that it has come to my attention that on one or two occasions and even now there are some spasmodic withdrawals around the country. Something like these little whirlwinds that you see started out in the field and they fly up here and fly out and then they will pop up somewhere else. 328 -5I understand there is some of it going on in Connecticut right now, and t here has been some in Los Angeles and in the past there was some in Cleveland. Evidently it is caused by Fifth Column talk maybe to some degree and think Bob Sparks said they had had some among the Italian element in New York. I Sparks: And Massachusetts. Edward: And if - I think it would be well if you would consider seriously making a statement - I believe you say Ferdie Kuhn can write some- thing you can say and if we get Ferdie to write a statement that we are not only not going to take anybody's money out of the banks, that we are not even going to urge them to buy anything. In other words, just get this fear allay this fear and get it to subside. That is the only thing that I see right now, Mr. Secretary, that is really of any consequence. (Mr. Houghteling entered the conference.) Graves: That is the same subject that was discussed at our nine-thirty meeting this morning. H.M.Jr: I know. Graves: I might add this to what Mr. Edward has said. At Dan's suggestion we are having Mr. Irey's people make an investigation in two or three communities under cover to try and find out where these rumors - where this gossip starts. We think that perhaps it is subversive, that there are local Fifth Columnists going on. H.M.Jr: Really? Graves: Yes. That has been suggested to us by certain banks, that they feel that is the source of 329 -6- our difficulty, so that investigation is now being made in two or three communities. H.M.Jr: Well, I think what you have done, Edward, is simply grand. The fact that we got ten thousand inside of a month, I think, is all that any reasonable person could expect and more too, and I am simply delighted. Edward: Well, I am happy that you are satisfied, but in the meantime, I am not because they all ought to be in. H.M.Jr: Well, I meant every word I said last night about the bankers. I don't know whether you heard me or not. Edward: Yes, I heard it. I was on a train, but I had the radio going. Graves: This subversive thing you have brought to my attention in other connections. For instance, Yorkville. We are having that investigated right now, and have agents in that community calling on all the branch banks and the one branch post office. H.M.Jr: Good. Graves: We will have a report of it tomorrow. Some of the other things here - I think Mr. Sloan might tell the Secretary of our recent conference with the Post Office Department people. Sloan: Yes. We met with three representatives of the Post Office Department a few days ago to discuss with them ways and means in which the Post Offices could cooperate to a fuller extent in doing a better selling and merchandising job on the bonds and the stamps and Harold Ambrose and Ironsides and Mr. Imus were there 330 -7and we had four of our people representing four different activities on the staff and we have agreed to draft a memorandum which Mr. Mahan has in preliminary form now which we are going to submit to them and they are going to make suggestions and that will give us a starting point from which we can make a request to the Postmaster General and see whether or not he approves that procedure. Graves: Tell him the specific plan you had in mind, Gene. Sloan: Well, the plan is to select certain areas, perhaps twenty-five cities and some other rural areas in which we would place in the hands of every person who has a mail box some piece of literature and solicitation and order form from the Department. Every single person who could be reached in the area and test that and check it and see what returns are brought in. That is one of the things that we were working on, and some of the others are for improvement of the displays in the post offices and identification of the points at which the bonds are on sale, so that people would get there and get quicker service and so on. H.M.Jr: What about that suggestion that was made that the clerk or somebody come out with a desk out in the lobby of the post office and have a desk there? They made that suggestion at Cabinet the last time I was there two weeks ago. Sloan: That didn't come up in our discussions. H.M.Jr: Well, the suggestion was made. John Carmody made the suggestion. Why don't you get a man with a desk right out in front the way 331 -8you have in a bank so you can meet the people and say, "Come in." Sloan: It would be very helpful. It would be a wonderful thing if we can do it. H.M.Jr: Well, they made it and Frank Walker said O.K, but he made the statement there, which I understand was wrong, that we had asked them not to push the thing. Sloan: All right. We will raise that in this memorandum, H.M.Jr: Will you? Just have a desk right out there Sloan: And then Bob Sparks told what they do in the Bowery Savings Bank, the manner in which they with a fellow sitting there. have set up their windows and I think the Secretary would be interested in knowing how the Bowery handles it there, Mr. Graves. H.M.Jr: Sparks: I would. It is all very simple and as I said to these gentlemen, it is so obvious that I hesitate to mention it. There is nothing so obscure as the obvious. We merely faced the question first by saying that the best personnel must be selected and properly trained and instilled with the spirit of helpfulness so that a person coming into the bank would have the feeling that they were really doing a job for the nation and a job for themselves; and second, we took the most conspicuous windows in the bank. The minute the public comes in from the main entrance the four windows facing the main entrance are the windows that have been selected. Those windows are equipped with 332 -9- little electric signs with replaceable letters so we labeled them "Defense Bonds and Defense Stamps. Then we merely took some small American flags of good quality, but small, silk flags not any higher than that (indicating) on their staffs and placed two at the top of these windows and then we took the floor men, who are the first approach, and we quickly decided that they never could become experts in finance so we instructed them to take anybody who showed any interest in the thing and smile and tell them how happy they were to be of service and escort them to the proper person who was trained to help them. Now, we have a peak business that comes at the noon hour, and it is impossible to keep lines away from the windows at the noon hour. We came to the conclusion that a reasonable number of people in front of the window was good psychology. It would show that the Defense Bonds were in demand, but that too many would be discouraging, so we had the floor men - gave them little cards with numbers and the minute there is more than four or five people around the window, the floor man just gives a number to the person and escorts them over to a seat and asks them to have a seat and as soon as that person's number is ready, the floor man personally escorts the lady or gentleman up to the window and tells them how happy we are that they are entering into the defense program and they are taken care of in that way. It is rather simple, but it seems to work. H.M.Jr: It sounds very nice, though. It is something new, as far as I am concerned. Graves: I think Mr. Powel might tell us about his work. I would like him especially to show some of the pamphlet material that is now beginning. 333 - 10 Powel: Can't I start by thanking you for what you Sloan: Yes, it was magnificent. Powel: We wished that on you, and your next performance is scheduled for July 2, when we open a radio hour and there you will have less time and can again report the events of June as you see fit. H.M.Jr: Why July 2? Powel: Because that is the Wednesday evening on which we have been given an hour on the did for us last night? National Broadcasting Company for thirteen weeks. H.M.Jr: And you want me to open that? Powel: I do. H.M.Jr: Where would that be? Powel: It can be piped in from anywhere you want. H.M.Jr: Can I choose my own opera singer? Powel: Sure. H.M.Jr: I signed all those letters this morning. Powel: Can I say without flippancy -- H.M.Jr: Somebody is picking some good ones, that is good voices. Powel: Can I say that we have to conjure a little with your name with Mickey Rooney, Judy Garland, and others whom we have to call up or telegraph inviting them to appear on such and such dates. 334 - 11 - Dietz has a schedule and if I can say at the request of the Secretary of the Treasury, I can handle it for you. H.M.Jr: You will do what? Powel: At the request of the Secretary of the Treasury you are invited to appear July 2. H.M.Jr: Oh no. I don't know yet what you are doing with that damn program. Powel: May I report on it now? H.M.Jr: I wish you would. Powel: We have a director. Mr. Dietz has kindly consented to be a committee of one responsible for all details. Under him we have engaged a production manager, Monroe. H.M.Jr: Who is he? Powel: He is a man who has had much experience with the Fred Allen hour, which it is, as you know. Fred Allen will master of ceremonies the first evening. He will cut his vacation short. He doesn't want to, but he will. And to prevent it being a benefit, just oleo stars, the continuity has been written, which you can see beforehand showing how the whole hour will lead to the next hour next week and to a climax on the thirteenth week. H.M.Jr: I see. Now, this production manager, who Powel: Callahan? Callahan: He works for the Buchanan Agency and he has been running the Texaco program through five does he work for? years. 335 - 12 H.M.Jr: He has been doing that work? Callahan: Yes. He is a thoroughly competent man and what he really is doing is continuing his work. H.M.Jr: And is that the agency I wrote a letter to? Callahan: No, that is another one. That other agency was in connection with the short announcements. H.M.Jr: But this is the man who has been running -- Callahan: The Fred Allen show for the past five years and other shows or networks for the past five years. H.M.Jr: Do we pay him? Callahan: Yes, sir, he is on the payroll. Powel: We pay him but not the agency. Callahan: That is the only payment in connection with Powel: Now, is that enough detail for the moment? There is a tremendous report, if you care the whole show. to read it. H.M.Jr: No. But can I - are you going to - is anybody going to report on my idea that I am going to keep riding you about my little plays? Kuhn: I think Mr. Powel can tell you about that. The ideas have been tried out and I think used, the idea of the little radio playlets on civil liberties. Perhaps you would tell the Secretary what you told me the other day. 336 - 13 Powel: For some time I had a relationship with the Anti-Defamation League of B'Nai Brith as Public Relations Counsel and that was one of numerous things done on the air at their behest. H.M.Jr: Is it any good? Powel: Sure, and it can be done again. H.M.Jr: Well, can't that be done independent of this Powel: Texaco hour? Absolutely, and will be. We have it in hand now. H.M.Jr: Well, the thing - the idea that I had, unless you people don't want me to do it or don't think we will have it, I would like to write a letter to Orson Welles and ask Orson Welles whether he won't write and produce this thing for the radio and for the movies with his Mercury Players and then when we are through with it we can turn it over to the Army and if the Army decides to have a theater at every cantonment, they can have a traveling company that travels across the country and use the same thing. Now, there is talk of - Irving Berlin is talking of having a company that is going to travel from one end of the country to the other and Sherwood would know about it and certainly they, as much or more than the rest of the public, ought to know, "Well, that is this thing that we are fighting for to protect?" I feel very strongly. I put something like this up to Lothian last year and got nowhere. 337 - 14 - I wanted the English to start with the Magna Charta and come down to date and so forth. Powel: H.M.Jr: If you wish to do that, sir, of course we are perfectly willing. I wish you would think about it and then if you think we will have it, I would just sit down and write a letter to Orson Welles, because after all, he has unusual - he is the only man that has been a success on the radio and the movies and in the theater. He knows all three techniques. Kuhn: Harford, the fact that it has been done before wouldn't spoil it now? Powel: We showed the Pilgrims landing at Jamestown that had been shown. Correct Jamestown to wherever they did land. Johnston: Plymouth. Powel: Plymouth. We showed every event in American history from Barbara Fritchie to Roger Williams. It has been good medicine whenever it was done. It is done in paintings, plays, playlets and all kinds of things. H.M.Jr: It is this series they are running on Sundays in PM that gave me the idea, and they are doing it in quite a novel way. The one last week was by the man who wrote the "Hudson River.' He is doing it for them, I think. Did you see that? Powel: Yes, sir. H.M.Jr: Well, will you come back at me with this? 338 - 15 Powel: I will, sir. Do you want a word about other activities than this? H.M.Jr: If you please. You mean on the Texaco hour? Powel: No. Let's say a word about Mail Order. Last year Mail Order issued from this department with the post office sales sold a billion dollars worth of bonds, nothing else, and we are now making tests. That is to say, we mail out ten thousand letters signed by one man and ten thousand by another. Ten thousand offering the G Bond and ten thousand the E Bond. Ten thousand offering all three. That is under the direction of Mr. Blair of the New Process Company who will be here next week, and from whom we have taken a man, Buckley, on full time. Those tests are in progress and we can then at any time turn on the full ten, twelve million of the list, which in Mr. Blair's opinion is the best list in the world. H.M.Jr: What list is that? Powel: Internal Revenue. No private company has any such mailing list as that in quantity or quality or up to date. I would like to say a word about the press. This is pleasant. H.M.Jr: This is what? Powel: Pleasant. H.M.Jr: It is all pleasant. This is the pleasantest Powel: Well, I just want to present you - you know hour I have each week. (Laughter) 339 - 16 on the twenty-sixth of May you wrote them a nice letter. This is the replies to date. They are still coming faster than we can read them. There was one unfavorable one in three hundred eighty-eight. I will leave you to find it or guess who. H.M.Jr: All right. Powel: Three shirts. hundred eighty-seven will give you their H.M.Jr: Who is the so and so? Powel: One guess. H.M.Jr: I wouldn't know. Powel: Then I won't tell you. H.M.Jr: Why not? Powel: Chicago Tribune. Houghteling: I could have guessed that. Powel: And at that it is a nice letter. (Laughter) That, I think, Mr. Secretary, indicates how we will proceed, just as we did with the radio. We are making them a little tiny daily feature with questions and answers, a question on defense bonds. We are mailing that to them on regular schedule. It takes no space that costs them anything. It is a filler. We are asking them to run it every day and report on it. We are starting that on the sixteenth of June in fifteen thousand newspapers and trade papers so we will have a newspaper coverage equal to that of the radio coverage. 340 - 17 H.M.Jr: Powel: Oh, I love that one from McCormick. If I show that to the President he will use it. Please don't show it until we answer it. I know the answer. H.M.Jr: Because if I show it to the President he will use it, he or Harold Ickes. Powel: But they are just swell, hundreds of them. H.M.Jr: But the stupidity of a man like "Birdie" McCormick is magnificent. Powel: H.M.Jr: He would admit it, too. That is nice. Powel: I think that is swell. I have never seen anything like it in thirty years. I think if you would be kind enough to let me have them back, I will answer them personally. Don't you think we ought to? H.M.Jr: Oh yes, definitely. Powel: Now, sir, if you are still patient I will show you some posters. H.M.Jr: O.K. Powel: In the first place, we made one. A man in the Bureau who made the stamp made that poster. Then Olin Dows' came along. H.M.Jr: Roach made that? Powel: Roach made it. H.M.Jr: Why don't I write him a letter thanking him? Powel: You did. 341 - 18 Graves: You did. (Laughter) Powel: And it is the stamp that might have "America on Guard"on it. Then a great many volunteers made them. For example, here the Massachusetts Savings Bank made them and paid for them and stuck them up. I just carried that one across the street under my arm. I suppose I have twenty. Now, Mr. Roach has made another with a sketch on it and he wasn't asked to make it, he just did it from the goodness of his heart and I thought it was very sweet of him. A sketch. Then Mr. Dows had a little prize contest, you remember, won by Henry Billings. A more glittering silver dollar. It isn't finished. H.M.Jr: Oh, I love that. Powel: Don't you like that? H.M.Jr: How do you like that, Peter? Odegarde: It is not thrilling. H.M.Jr: It is not good? Odegarde: It is not thrilling. I think it is good. Powel: So that is in the -- H.M.Jr: Well, now wait a minute. I just want to argue with Odegarde a minute. Do you think we are not up with the times? Odegarde: I think it fits in very well with the type of appeal we have been making, which has been 342 - 19 - primarily to buy a share in America. This fits in very well with that. H.M.Jr: I think it is all right for the time being. Odegarde: I think we can do better in the future. Powel: Now, sir, on that line, about twenty-six big companies have made them for us. I indicated one. I don't think you have seen these. They have kidded their own slogans? H.M.Jr: Kidded, is that what you call it? Created? Powel: Parodied their own slogans. H.M.Jr: Oh, I see. Powel: There is an ad by a bank which says, "Uncle Sam is too modest. We ought to really let the world know how good we are." So one of our friends went around among manu- facturers and I would like to show you these. Royal Typewriter, as you know, is the world's number one typewriter. Here it is writing a bond, "World's number one bond." This is red, white and blue. It says it is contributed by the Royal Typewriter. Each of those were run fifty thousand copies and were given to the salesmen. That was the first print-off. They get them quite cheaply, because twenty times fifty, you see, is a good press run. 343 - 20 H.M.Jr: Yes. Powel: And some of them are intensely amusing, none of which I happen to have with me. These are just the early ones. There is "God Bless America" by the Simmons Bed, you see. Now, remember, these will be in full colors. Life magazine, among others, is so keen on this that they wish to reproduce them when we get some of the best ones. You know Sherwin-Williams paint to cover the earth. Here is theirs. The idea of that is that the salesmen go in with these under their arms as something new and get the dealer to put them up. Some are in hardware stores, some are in grocery stores, some in cigar stores, and everywhere. This is on newsstands. This is Jiggs and Maggie on a rainy day. H.M.Jr: Buy a what? Powel: Buy United States Defense Bonds for a rainy day. You will see that on these things. That is where the salesman will put it. H.M.Jr: I see, these are all done-- Powel: By the company, paid for by them. H.M.Jr: But I mean the features, this is designed by them? Powel: That is right. H.M.Jr: They have done this themselves? Powel: The company has done it, paid for the art work and are about to put up a million of them all over the country in their own respective dealers' 344 - 21 stores, costing us nothing, you see, and giving the public a great smile because it identifies these familiar trade markswith Defense Bonds and it is called Industrial Cooperation Service. Then it can go into as many hundred million-- H.M.Jr: Powel: Have you shown these around? No, sir, nobody else has seen them except Mr. Kuhn. Kuhn: Harford, could you tell the Secretary some of the other slogans? H.M.Jr: You haven't sold me yet. Powel: Well, Dutch Cleanser's slogan-- H.M.Jr: I mean this whole thing. I am just thinking. I am not sold on the idea yet. Powel: These people wish to do something for the program. The best thing they can do for the program at this stage is give it publicity. They are not giving themselves any publicity. They are just signing as the person who gave it. They are giving their space and the message to the Defense Bond program besides the radio time and the amusing thing is that every slogan fits Defense Bonds as well as it fits them. Old Dutch Cleanser chases dirt and the Bonds chase debt. Maxwell House Coffee which is "Good to the last drop," becomes "Good to the last cent," and some of them are amazingly ingenious, and there is a smile, and I think it shows that the industrial leaders-- H.M.Jr: Let Odegarde get a reaction on that. 345 - 23 Powel: Do you want it now or later. H.M.Jr: Any time. I mean, is the thing all set? Has it gone? I mean, supposing I didn't like it. Powel: About half a million of them have been ordered and what you are seeing is simply black and white. Kuhn: They haven't been ordered by us, Harford, they have been ordered by the different com- panies. Powel: No, they are given to us and posted for us by these different companies, and I think where you get a good one, you get a very, very ap- pealing thing. I think that Simmons Bed is a very appealing thing. Odegarde: The Packard Car, have you got that one here? Powel: The Packard Car is "Ask the man who owns one. Graves: No, Buick. Oh, no, I am wrong. Powel: It all comes back to their wish to take this into the area where they deal. H.M.Jr: You don't think it is cheapening the thing too much? Powel: Not a bit. Odegarde: It isn't if we can keep control over the copy. The Packard Car one, I think, is a beautiful one. H.M.Jr: Where is it? Powel: It isn't in there. I just had a few. 346 - 24 Kuhn: It is no different from what the banks have been doing for us all over the country, put- ting our message in paid advertisements which they pay for in the newspapers and these are contributed advertisements of the same kind. H.M.Jr: I think you have got to watch it. Powel: Yes, sir, we are very careful to O.K. every one. Odegarde: Well, you don't want to have Maxwell House Coffee, for example, saying that the United States Defense Bonds are as good as Maxwell House Coffee or Maxwell House Coffee is as good as the United States Defense Bond, but you can avoid that by having careful editorial supervision of the copy. Powel: So with that-- H.M.Jr: Who is doing this for you? Powel: Paul Warrick. H.M.Jr: Who is he? Powel: He is an old New York writer, advertising man. H.M.Jr: Well, I would like to watch it as it goes along. You could kill it at any time if it got out of hand? Powel: Yes, sir. H.M.Jr: But it can't get out of hand. Powel: No, sir. H.M.Jr: All right. 347 - 25 Kuhn: Harford-- Powel: For instance, the liquor industry were very keen to put these up in bars and I just simply told all the four big liquor companies that they couldn't do it that way. We would have some other participation for them. H.M.Jr: That is good. We have got to watch it. And then as each one is done, I would - I would like to see it. Powel: Would you? H.M.Jr: Yes, I would. Powel: Now, may I finish? H.M.Jr: Please. Powel: You have heard from the Post Office. Mr. Mahan told you a little bit. Mr. Sulds is continuing with foreign language stations. Is there anything new to say about that, Mr. Sulds? Sulds: I have the English script of Court Sforza that I told you about the last time. I have a copy here for you. This is the English script of Mr. Paderewski's Polish talk this Sunday. In many respects that is more important than his talk in English, because it is based on the President's talk. We have pamphlets on it, also. Powel: Now for Mr. Johnston's department we made fourteen pamphlets. I don't know whether you have room for this kind of thing. H.M.Jr: Oh, yes. Powel: But there, for example, is the manual instructions 348 - 26 for anybody who gets on our staff. That is the charter of the thing. Graves: That is chiefly for state committees, these honorary state committees. Powel: Here is your speech and the President's speech and five official papers that tell the whole story. These print orders run from a few thousand to twenty or thirty million. That is a limited edition. Here is the invoices and press, newspaper editorials from every state in the Union, and I won't bore you with them, Where is Paderewski, have you got him? Sulds: I just did. H.M.Jr: Yes, I have got that. Powel: Where is the Secretary himself: I think you were on that. There is a wet proof, but that makes a very good thing to send to stations when we get inquiries, to give away, And there are fourteen of those in all, including pamphlets addressed to various kinds of farmers, dairy farms in the north and other farms in the south, pamphlets to the workers, pamphlets to the General Federation of Women's Clubs who have given this extraordinary help. H.M.Jr: I am impressed with this. Powel: It is all done by the Government Printer. Mr. Giegengack has worked like a beaver. H.M.Jr: He is a good guy. Powel: I would be glad if you would write him a note. We would appreciate it. 349 - 27 H.M.Jr: I have written him a lot of notes, but it is all right. He is known around here as Giggy. I will write Giggy again. Powel: Now, finally, he is the printer of magazines that aggregate twenty-seven million circulation a year. He has sent them all to me so that we may get on the back covers, like the Readers Digest. Mr. Hall has devised a little imprint thing made from the poster. That is going on the Treasury paper and form and it goes to all the Government departments and to the printers all over the United States. So we hope to get that in astral figures. We are on most house organs now. There is the botanist. Here is your friend, Stewart. H.M.Jr: I don't know him. Powel: Oh, yes. H.M.Jr: How do I know him? Powel: Oh, I know you know him. He is Mr. Strauss' sister's son, age thirty. He gave us this back cover, and many others have given back covers. H.M.Jr: I don't know him personally. Powel: That is Stewart. He sells that in bulk to schools. H.M.Jr: Mr. Strauss called me up and I thought it was something - I very seldom answer the phone at the house. He wanted me to help his son-inlaw get some of this advertising. That was several months ago. It was an amazing conversation. 350 - 28 Powel: You have given me two personal jobs to do for you, and I have done them, and I will report to you. H.M.Jr: What is that? Powel: One was on the comparative amount of radio time we are getting as compared with other Government departments. I am prepared to report on that. H.M.Jr: Well, go ahead. Powel: In the last week on the biggest independent station in the country we asked for forty minutes and got it all. Twelve other Government departments asked for six hours and got half of it. H.M.Jr: I see. Powel: That ratio I have checked with the little stations and the chains and it is substantially accurate all over. H.M.Jr: And what was the other thing I asked you? Powel: I don't dare bring it up here. H.M.Jr: No? Powel: Mr. Mahan, have you got a schedule? H.M.Jr: Oh, on advertising? Powel: Yes. You know Mr. Mahan was advertising manager of Westinghouse before he came here. H.M.Jr: Powel: He is going to be out of luck on this. You asked me to turn it in. If you wanted, 351 - 29 - Mr. Secretary, a full coverage job, I made the schedule on plain paper. It is correct and accurate, and you would cover every place in the country. H.M.Jr: It is all worth while.. I am very much pleased with all those pamphlets. Graves: And that is only the beginning in the pamphlet department. We have many other things. I would like, Mr. Callahan, if you please, Harford, to tell us about the Standard Oil of New Jersey thing. I have the letter here to the Secretary of the Interior. Would you mind telling about that? Callahan: Standard Oil Company of New Jersey, from Maine to Louisiana, has about eighteen thousand gas stations. For the past three years they have been selling at cost, glass banks to get people to save in them. H.M.Jr: Glass? Callahan: Glass banks. You drop pennies or quarters or whatever you want to in them. They have got- ten rid of three million of them. It has been tremendously successful. Beginning on July 4, they are going to give the banks out again. Around each bank will be a slogan, "Save For Devense, Buy Defense Bonds," If and you will put pennies in the bank or quarters and they will tell you how many pennies and how many quarters will fit in each bank to buy a Bond. They will plug that for an indefinite period on thirty-four radio stations, the biggest in the East and in the South. H.M.Jr: Esso Reporter? Callahan: Esso Reporter, four times a day, twice on 352 - 30 - Sunday. It is one of the biggest radio users in America. It is a tremendous job. And in addition they are trying to get eighteen thousand of their gas stations to put in window displays of these banks. Now, they make this suggestion, that they build a glass house and they build it over here on Pennsylvania Avenue across from the Willard Hotel in the vacant space over there between the Willard Hotel and the Department of Commerce between Fourteenth and Fifteenth, a very attractive place, built of these glass banks. Incidentally, there is no advertising display. They will have a red, white, and blue awning over it, and they will broadcast news every hour on the hour, or rather broadcast it over loud speakers. In addition, they will have people in there selling stamps, and they have asked us whether we would - if we could get permission for them to do that. We have a suggested pic- ture right there of what they would like to do. Now, we would like, if it could be done, to do it, and I think they will repeat it in a number of other cities in the East. H.M.Jr: Have we got to get this by Harold Ickes? Callahan: You are quite right, sir. Graves: We have been in touch with the National Park Service about this, and they have asked to have a formal letter. H.M.Jr: What does Harold say? Graves: It hasn't gone to him. H.M.Jr: Have you talked to Burlew? 353 - 31 Graves No, I haven't. They asked to have a formal letter. I will talk with Burlew. I will be glad to. H.M.Jr: You know Burlew? Graves: Very well. H.M.Jr: Don't you think it would be good to soften him up a little bit? Graves: I think if you will sign the letter, I will H.M.Jr: How was the Park Service on this? Graves: They have supervision-- H.M.Jr: I mean, have you got a commitment that if Ickes says, "Yes - Graves: Well, I think that goes without saying. They talk to Burlew and send it to him. simply said that they would have to have-- Callahan: All requests must be passed by Mr. Ickes. H.M.Jr: Would there be any advertising stands on it? Callahan: No, except on the banks and that is about a half inch, and you would have to get right on top of them to read them, and they would advertise them on thirty-four programs on all of their stations and say, "When you get to Washington, visit our glass houses." There is no money they would make out of it. H.M.Jr: I know. Callahan: It is a promotional stunt pure and simple. H.M.Jr: What are all these guns and things? 354 - 32 Callahan: Well, we hoped if we get the glass house down there, maybe we can show them something else. We can put up a gun and say, "Well, iforyou buylike Bonds, a gun this.'it will help buy this gun Powel: We can show the gun in terms of Bonds. The ten-cent stamp buys five bandages. Callahan: The Army and Navy and Marine Corps have dis- plays in various parts of the country. There was one in Times Square. We have no displays anywhere. H.M.Jr: That is all right. The worst Harold can say is "No," but I do think if you could do this through Burlew. Graves: I will do that. I think we ought to hear from Mr. Houghteling about his work with our national organizations. Houghteling: Well, we are plugging along. We are getting an awfully good response from the labor unions, which is my particular province, and we are getting along with the matter that we spoke of at the last meeting I was present at and that is this question of payroll allotment plans were labor asks the company to put such plans into effect. The Railroad Brotherhoods have come in strong in favor of cooperation with the pay offices of the railroad in that connection and the Association of American Railroads on the other hand has gotten their member roads to agree to such a plan. That is going through very well, and that is a very good start on that payroll allotment plan, which is the most practical plan for systematic saving, I think, for salaried people and wage earners, and I am working on one or two other systematic savings plans 355 - 33 - for labor unions, too. I am getting out a memorandum we can use for them. My desk is piled high with those who are sending me in the names and addresses of the heads of their local unions who will undertake to distribute these pamphlets to the American worker. We are also contacting all sorts of organizations, making speeches at meetings and conventions and trying to get - enlist the national organizations with an idea that as we do so we can pass their state and local organizations where they divide up into state organizations, as many of them do, over to the - to Mr. Gail Johnston's state system of organization, thereby getting out to the organizations through their members. H.M.Jr: Is Gail Johnston still ahead of you or are you caught up with him? Houghteling: I think we are just in step, side by side, now. (Laughter) We have signed a treaty of navigation. Johnston: I think so. H.M.Jr: I think it is wonderful the way they are com- ing in. I am delighted. Houghteling: It is very impressive. H.M.Jr: It is so nice to be on a basis with the labor unions that everything is lovely and you don't have to worry whether they are going to strike or not. It is nice to have one depart- ment in Washington that can have that rela- tionship. I think it would be very useful. Houghteling: Well, I haven't had a discordant note in the labor field at all. 356 - 34 H.M.Jr: It is fine. What is next, Harold? Graves: Gail Johnston, our field organizations. Johnston: I can bring you up to date briefly. As you know, we have organizations started or going in twenty-two states. There are nine state committees, completed and that is practically nine state organizations, about ready to go. Seventeen governors in these twenty-two states have accepted your invi- tation to serve, and we are pushing right on into other states as rapidly as is possible. The administrators in eleven states, adminis- trators for eleven states, met here last Thursday and they were quite enthused with a full day of sales congressing, if we might express it that way, in which Mr. Graves and every one in our Department and Mr. Powel's Department and Mr. Houghteling's Department participated and told them what we were try- ing to do, and they left here enthusiastic. We have had reports from a number of them which were very, very encouraging. To see that these states get good service, we are training a number of men who will be responsible for various sections of the country. These men, we hope, will know the plan from A to Z and will serve these people wisely and well. I might comment here that I have visited quite a number of states myself. There is one thing that stands out in my mind as I go around and meet these businessmen and women and labor leaders and different 357 - 35 - characters and leaders in the states. They are a hundred percent - almost a hundred percent behind this national defense program. As one man in Detroit put it, he said, "By God, this is our country and he is our President," and he said, "I may have fought him last year, but I am for him now a hundred percent, and that is the attitude you find from Mississippi to Missouri to Michigan, Connecticut, to different parts of the country, and it is very, very encouraging. We have no difficulty getting people to serve as volunteers in this thing. They seem to believe in it and they are very enthusiastic about it. Reports are coming in regularly from these various states and it is all very encouraging. We are pushing three big avenues of mart. The first is, of course, through the banks and the post offices. H.M.Jr: May I just interrupt you a minute? Johnston: Yes, sir. H.M.Jr: What luck have you had with, say, General Motors? 358 - 36 Johnston: I heard from Mr. Iseby and he advised that he had a meeting with the leading industrialists in Detroit. Mr. Ford was there, a representative of General Motors was there, representatives of Chrysler, representative of Burroughs Adding Machine. There were about twenty big companies, Briggs Body. H.M.Jr: Ford came himself? Johnston: Edsel came himself and they have all agreed to go along with a savings plan. Then in addition to that, the unions on the other hand had put their stamp of approval on the thing, so Mr. Iseby told me, and it made a very fine working arrangement between the two of them. H.M.Jr: Could I get some sort of thing in the way of a list of companies as you add them? Johnston: Yes, sir, we are going to put them in our H.M.Jr: I haven't gotten letters two or three. Everybody gets it but me. Johnston: Three isn't out. Two is out. Graves: You got two. H.M.Jr: I haven't got it. I have cleared all my mail. Well, here it is right here. I will give you Johnston: letter. two right there. We are not putting the names of these companies in until we see some evidence of what they are doing. When we get a plan that is written up, we know that it is satisfactory and then we write to them and ask these people for their permission to send their plan broad- cast around through the country and it makes 359 - 37 - fine advertising. H.M.Jr: Well now, have you circulated that amongst the nine-thirty group? Graves: Well, I am not sure that I have. We did, how- ever, send that as well as No. 1 to the members of the Cabinet. H.M.Jr: Including the President? Graves: We didn't send anything to the President. H.M.Jr: That was the one person that I wanted. I Graves: I will send that right away. H.M.Jr: Fix me up a letter to the President. I didn't Graves: Yes. I overlooked that. You signed letters H.M.Jr: I want the President and Vice-President par- Johnston: We designed this as simply a kind of a house organ where these men out in the field can did want a letter to the President. think there was one. to all members of the Cabinet. ticularly to get it. have their say. It is really for them and eventually we hope that it will work into that kind of a basis. H.M.Jr: Put Archie MacLeish on that list, too, will you? Graves: Well, we sent him one with your card, but I H.M.Jr: That is all right if he got it with the card. will see that he gets a letter. 360 - 38 Now, let me just check. What about letters to the Postmasters, a letter like this news letter. Graves: That is one of the things -- Johnston: Mr. Mahan, I think, is working on it. Mahan: That is one of the things that is planned -- Graves: We have it in the work stage, Mr. Secretary. H.M.Jr: Is there some way of rewarding the postmasters or rating them? Mahan: That was talked about in the meeting and it was generally agreed that it was a good idea and If we could work out some competition among them by different classifications, that it would be very, very helpful to them. Sloan: George Haas is working out your monthly report, Mr. Secretary. H.M.Jr: All right. Go ahead, please. Johnston: I was almost through. I wanted to tell you something of the methods of marketing. The banks and financial institutions, we feel, can do three things. Mr. Sparks and I have been working quite closely and Mr. Edward, the three of us, on this plan. One is a bank depositors draft plan whereby you can tell your bank that you would like to have a bond purchased each month or each day, as Mr. Edward over there has done, and the banks simply debit your account and it is amazing how popular that has become with a great many individuals. 361 - 39 We are publishing in the news letters some of the forms and then we shall have a form of our own to suggest to them so they can drop it in their reports to their depositors each month and all they have to do is just sign a card and send it back and that will automatically get them to buying a bond every month or say every three months. Edward: Here is an advertisement here. Johnston: That is fine. Mr. Edward has got it into the Bankers' Magazine. H.M.Jr: That is wonderful. I am afraid I am going to have to stop. We will have to ke ep this to an hour, Graves, so next week I will put you (Johnston) on first. Johnston: That is all. I have given you enough for next week. H.M.Jr: We will do it again next week. Thank you all. I am very much pleased, delighted. Johnston: Thank you, sir. Sloan: Thank you, sir. m mahan an m Powel's outfit ADVERTISING PLAN FOR DEFENSE SAVINGS BONDS AND STAMPS Any advertising plan for Defense Savings Bonds and Stamps must be carefully considered on the basis of the following major media which might be used. 1. RADIO. 2. DAILY NEWSPAPERS. 3. COUNTRY AND SUBURBAN WEEKLY NEWSPAPERS. 4. MAGAZINES. 5. OUTDOOR POSTERS. 6. CAR CARDS. 7. MOTION PICTURES. Summarized on the following pages is brief, basic information on each media together with the cost of a reasonable year-round advertising campaign of national scope, using all media. 362 -3- 363 including time and talent, would amount to approximately $100,000. While these network shows would retain the same talent and program idea, they would be staggered over a 13-week period on each network, thereby securing an over-all coverage of 52 weeks. 52 weeks - 4 networks - half-hour nighttime period to be selected - Total Cost $400,000 TOTAL COST RADIO - 13 weeks - Spot Announcements on 750 Stations 52 half-hour programs on 4 networks $887,500 NEWSP RS Metropolitan Dailies 287 Daily newspapers in 370 cities over 25,000 population account for more than 75 percent of the total circulation of daily newspapers published in the United States. Total circulation, 32,180,041. Rate per line, $69.34. The following schedule would give weekly frequency in reasonable size space, in these 287 papers: 26 - 300 line ads 26 - 200 line ads Total Cost - Metropolitan Dailies - $901,420. -2RADIO Spot Announcements There are 787 radio stations in operation in the United States - 37 are non-commercial - the remaining 750 sell commercial time. It is estimated that the average cost of a one-minute announcement daytime is $10 and nighttime is $20. To use all 750 stations for a one-minute spot daytime would cost $7,500 and nighttime $15,000. A minimum schedule of spot radio would consist of 13 weeks of announcements, staggered over a 12 months period on all 750 stations. In other words, each station would receive, during the year: 13 weeks - 1 daytime spot per week, Thursday or Friday - Total Cost $97,500. 13 weeks - 2 nighttime spots per week, Thursday and Friday - Total Cost $390,000. Total Cost Spot Radio - 12 months - $487,500. Network Programs There are four major networks - all of which have been equally cooperative - to be considered for this program. It is estimated that the average cost of a 13-week half-hour nighttime program on each network, 364 365 Small City Dailies There are 1376 Daily newspapers in 1059 cities under 25,000 population. Total Circulation, 8,923,406. Rate per line, $62.76. The following schedule would provide a 10-inch ad in preferred location, every other week, in these 1376 Daily newspapers: Cost per week of 10-inch ad - - $8,786.40 - Total Cost - 26 - 10-inch ads - in Small City Dailies - $228,466.40 - Country and Suburban Weekly Newspapers There are 9,941 listed weekly newspapers in the United States with probably several hundred more unlisted. Total Circulation of listed papers, 16,241,172. Rate per inch, $3,317.41. The following schedule would provide a 5-inch ad in preferred location, every other week, in these 9,941 weekly newspapers: $16,587.05 Cost per week of 5-inch ad - - Total Cost - 26 - 5-inch ad in Weekly Newspapers - - $431,263.30 - TOTAL COST NEWSPAPERS - 26 - 300 line ads and 26 - 200 line ads in Metropolitan Dailies 26 - 10 inch ads in Small City Dailies 26 - 5 inch ads in Weekly Newspapers $1,561,129.70 -5 MAGAZINES A blanket use of magazines would involve a very large expenditure. Any plan of selecting certain magazines from the total group calls for comprehensive study and discussion because of those not included and because of the total dollars required to do a continuous year-round job in magazines. For the purpose of establishing a base of schedules, coverage and costs for consideration, magazines have been segregated into three groups consisting of: (a) 9 weekly magazines; (b) approximately 40 general and women's magazines, representing an arbitrary selection of women's magazines and national fiction magazines as well as key fraternal publications, religious publications, industrial publications, publications appealing to housewives, school teachers, children, etc., - in fact, to all "kinds" of people through their favorite publications; (c) 4 national farm publications and an undetermined number of sectional and State farm papers which could only be selected after further study. 366 -6- 367 The allotment of space and the breakdown of costs for these various groups is as follows: 9 weeklies - 27, 177, 381 circulation 26 - 1 column ads $331,942.00 40 general and women's magazines approximately 40,000,000 circulation 12 - 1 column ads $373,398.40 4 National farm publications and sectional and State farm papers to be selected. Approximately 10,000,000 circulation 12 - 1 column ads 87,480.00 TOTAL COST - Weekly magazines, general and women's magazines, farm publications, as above $792,820.40 OUTDOOR POSTERS While outdoor advertising is generally recognized as the cheapest form of advertising on a cost-per-thousand basis, it is one of the most expensive media on the basis of dollars required for over-all coverage. A representative one-month, nation-wide posting would require 29,481 posters. Towns covered 17,179. Resident population of towns covered, 81,577,000. The cost shown does not include production of the actual posters themselves. A single month's posting would probably represent the maximum expenditure that should be made for outdoor advertising. TOTAL COST - 26,842 Posters (non-illuminated) 2,639 Posters (illuminated) - $375,396.00 -7- 368 CAR CARDS This is the most difficult media on which to establish current facts. Figures given below represent a pretty accurate estimate of present facilities, traffic and costs, not including production of necessary cards. A three-months' carding would probably be a maximum purchase of this media. Number of Cities covered 200 Number of Riders per month 126,757,733 Number of Cards 71,143 Size of cards 11 x 28 Cost per Month $50,000 TOTAL COST - 3 Months' showing 70,000 cars $150,000 MOTION PICTURES At the present time approximately 10,000 theatres out of the 15,000 in the country have agreed to cooperate with the Treasury Department by running various types of Defense Savings Bonds films at no cost. These films will be showing for several months to come. Actually only about 6000 theatres will use paid screen advertising. These are for the most 369 -8part theatres in smaller communities. None of the nationally known circuits, operating the great majority of de luxe theatres, will`accept paid screen advertising in any form. However, motion pictures for non-theatrical use - schools, P. T. A. , fraternal organizations, women's clubs, churches, etc. - are in great demand. Probably 56,000 such outlets throughout the country could be serviced with great effectiveness on a very reasonable appropriation. 6 - 10 minute subjects $60,000.00 1 - 20 minute subject 20,000.00 Necessary Prints (estimated) 12,000.00 Promotion material - leaflets, posters, return cards, etc. 20,000.00 TOTAL COST - 6 ten minute and 1 - 20 minute non-theatrical motion pictures, necessary films and promotion material $ 112,000.00 -9- 370 SUMMARY OF COSTS Radio 887,500.00 Newspapers 1,561,129.70 Magazines 792,820.40 Outdoor Posters 375,396.00 Car Card 150,000.00 Motion Pictures 112,000.00 $ 3,878,846.10 In the above no allowance has been made for art work, preparatory cost or contingencies of any kind. Conservatively this would amount to approximately 10% GRAND TOTAL $ $ 387,884.61 4,266,730.71 371 Here are figures on the advertising expenditures of A & P and Sears, Roebuck. These are published figures for the year 1940: A&P Total Business $ 982,700,000 Total Newspaper 4,752,000 Radio & Magazine 1,848,000 $ 6,600,000 SEARS, ROEBUCK Total Business (1939) $ 617,414,267 Newspaper advertising 11,404,649 Radio & Circulars 991,708 Total advertising (Catalogues not included) $ 12,396,357 7,000,000 catalogues issued twice a year estimated cost 88$ apiece. PASSENGER GAR ADVERTISING EXPENDITURES Advertiser RADIO Farm Total Newspapers Magazines Journals Chain $7,635,534 $2,788,547 $214,983 $19,983 $38,078 $10,697,125 Chrysler Corp. 3,040,984 2,866,935 227,224 950,146 119,938 7,205,227 Ford Motor Co. 2,792,084 1,658,333 236,738 949,297 56,677 5,693,129 General Motors Corp. Spot GRAND TOTAL $ 23,595,481 CIGARETTE ADVERTISING EXPENDITURES RADIO Advertiser Newspapers Magazines Journals Chain Spot Total Lucky Strike 660,408 1,506,154 209,593 1,837,833 Chesterfield 4,902,363 1,402,196 206,201 1,265,447 10,902 7,787,109 Camel 4,462,964 1,668,070 160,475 468,426 138,887 6,898,822 GRAND TOTAL 4,213,988 $ 18,899,919 These expenditures are compilations for the calendar year 1939 (1940 not available yet) and are exclusive of preparatory costs, talent cost for radio and cost of outdoor paper and posting. Furthermore, it does not include the cost of collateral advertising material such as literature, displays, etc. Outdoor is not included as it is practically impossible to establish advertising expenditures accurately for this medium. In other words, the figures shown are very conservative and do not indicate the total advertising budget for these companies by any means. 373 JUN 6 1941 Mr. Hugh Baillie, President, United Press Associations, 220 E. 42d Street, New York, New York. Dear Mr. Baillies On May 1st we inaugurated a carefully considered plan for enlisting the savings of the American people in the task of financing the National Defense Program. Defense Savings Bonds and Stamps are now on sale in post offices and banks throughout the United States. It is important that the Treasury Department reach as often as possible - every home in the United States with information about these government obligations. Through your association, your assistance will be invaluable in our efforts to do this on a continuing basis. We should like to come to you from time to time with specific requests for cooperation. I shall look forward to hearing from you. Very truly yours, (Signed) H. Morgenthan. Sr. Secretary of the Treasury MM:f1 On list to mmc 374 June 6, 1941 Mr. Roy Howard, Scrippe-Howard, 230 Park Avenue, New York, N.Y. Mr. Cranston Williams, American Newspaper Publishers Asen. 370 Lexington Avenue at 41st St., New York, N. Y. Mr. Robert McLean, President, Associated Press, 50 Rockefeller Plaza, New York, N.Y. Mr. Barry Faris, President, International News Service, 235 E. 45th Street, New York, N.Y. Mr. Hugh Baillie, President, United Press Associations, 220 E. 42d Street, New York, N.Y. Mr. Fred S. Ferguson, President, NEA Service, Inc., 1200 W. Third Street, Cleveland, Ohio. Letters were sent to the above asking their assistance and cooperation, through their associations, in getting information to the public to promote the sale of defense bonds and stamps. "We should like to come to you from time to time with specific requests for cooperation." - /8/ H. Morgenthau, Jr. (Prepared by MM:f1 - File to Mr. Thompson) 375 JUN 6 1941 Dear Miss Meares Beginning July 2nd, and Wednesday nights for thirteen weeks thereafter, the Treasury Department is presenting over the Columbia Broadcasting System's notwork a full one hour program of entertainment, the purpose of which is to promote the sale of bonds and stamps to help finance national defense. Mr. Howard Diets has been named chairman of the committee arranging the programs, and Mr. Paul C. Munroe his assistant. with this program we went to reach every home in the United States, and to do this we must give to the radio listeners the greatest of America's fine artists. For this reason we come to you, knowing, of course, that you, like all Americans, are ready and will- ing to aid is this defense effort. the should be proud to have you on one of these programs. I am writing to ask whether you would be willing to offer your services. Please let - hear from you. Sincerely yours, (Signed) H. Morgenthau, 597 Secretary of the Treasury. Miss Grass Moore Newtown, Connecticut PCM/MM On lest to nmc File to Mr. Thompso: 376 June 6, 1941 Mr. A1 Jolson 2 Sutton Place New York, N. Y. Mr. Fred Schang Columbia Concerts Corporation 113 West 57th Street New York, N.Y. Mr. George Engles, Vice President National Broadcasting Company Artist Service 30 Rockefeller Plaza New York, N.Y. Mr. John Charles Thomas Care of Mr. George Engles National Broadcasting Company Artist Service 30 Rockefeller Plaza New York, N.Y. Miss Lily Pons Silvermine Norwalk, Connecticut Miss Grace Moore, Newtown, Connecticut Letter advising that beginning July 2nd, and Wednesday nights for 13 weeks thereafter, the Treasury Dept. is presenting over the Columbia Broadcasting System's network a full one hour program of entertainment, to promote the sale of bonds and stamps to help finance national defense, and asking whether they would be willing to offer their services. /B/ H. Morgenthau, Jr. (Letters prepared by VFC/mon - Files to Mr. Thompson) Mr. Fred Allen 180 West 58th Street New York, N.Y. Expressing appreciation of Treasury Dept. for his acceptance of offer to act as master of ceremonies on inaugural broadcast of the series which Treasury is going to present over Columbia network starting July 2nd. /8/ H. Morgenthau Jr. (Prepared by PCM/mon) File to Mr. Thompson. 377 RADIO ADDRESS by COUNT SFORZA to THE ITALIANS OF AMERICA. (Delivered in Italian) I come to talk to you in your homes as a countryman, as a friend, a friend who knows your thoughts, your feelings, and who also under- stands the uncertainties which some of you have until recently felt. You love this free America which has afforded to so many of you a greater dignity in personal and civil life. But you retain, and you should retain, a feeling of faithful love for our ancient common country, Italy. The new American who is ashamed of his Italian origins, is being cowardly and stupid. Who can deny the possibility that the greatest writer, the most gifted artist, the profoundest philosopher of the United States of tomorrow may be a young American whose parents were born in Piedmont or in Sicily? I assure you that such is not only possible, but probable. I have seen some of these young fellows in the American universities to which I have been invited. Those who feel ashamed of their mother because she does the washing in an old- fashioned way, instead of using an electric machine which wears out the shirts, are merely pathetic creatures. But the young American who is loyal to his new country and at the same time proud of his noble Italian origin, is one of the most hopeful elements of the United States of tomorrow, in which all faiths and all nationalities will come together in a common love of liberty and human dignity. It is to defend this generous America of today and of tomorrow that the Government in Washington is asking all citizens and residents of the United States to invest their savings in Defense Bonds now on sale. 378 -2What is your duty? Where do your interests lie? Your duty and your interest is to buy as many as you can. That it is in your own immediate interests is clear: you are deciding on a good investment - and you entitle yourselves to the respect and confidence of all Americans of other national origins. But if these reasons alone were to determine your decision, I would not be here to talk to you. You must know and feel, deeply and proudly, that by buying Defense Savings Bonds and other similar American bonds, you are also contributing to Italy's freedom and to the independence and greatness of the Italy of tomorrow. And you know it well - even those among you who, for old illusions, prefer to shut your eyes to the impending perils menacing today our Italian fatherland. For Italy faces the same dangers that imperil the United States: disguised invasion today, servitude tomorrow, by those mechanized barbarians, the Nazis. A murderous demagogue has made these poor fools believe that they are endowed with Germanic racial superiority. And therefore these barbarians despise in their hearts the Italians for their "outmoded" love of liberty, and likewise despise the Americans for their "adolescent" faith in the democratic principles that were taught them by Jefferson and Lincoln. In a Europe become Nazi, Italy would be only a German colony, and America, in her turn, would be faced with a similar danger. Today the Nazis are paying compliments to the Italians; but God preserve you, my friends, from knowing them as masters: their overbearing 379 -3vanity would make your lives a constant humiliation, not only in Italy, but here as well. Italians of America! Happily no disagreement will ever arise between a free Italy and the United States. The same goals and the same ideals will unite us tomorrow to create a more harmonious, peaceful, and humane world. Italians, when Italy will speak again to the world in the language of Mazzini and Caribaldi, the United States will be glad to find in a free Italy a loyal and powerful collaborator, which she lacked in the Europe of Versailles. The Italy of tomorrow has, like the United States, a great and glorious task: the peace and union of Europe - not the false and delusive union the dictators seek to establish, which scarcely hides the greatest of all perils: that we all become slaves of the Nazis. Italians, by helping the United States today, by buying the Defense Savings Bonds, you can proudly tell yourselves: "We are loyal to America because we want to see a really great and free Italy such as our noblest spirits, from Dante to Mazzini, have envisioned it." 380 RADIO ADDRESS by IGNACE PADEREWSKI to THE POLES OF AMERICA. (Delivered in Polish) My dear Compatriots: - Quite recently, upon the invitation of the Treasury Department I spoke over the radio recommending the purchase of United States Saving Bonds. Fully appreciating the importance of the Poles in the life of this country the Treasury Department has asked me to broad- cast again addressing you this time in Polish. I do this with great pleasure, indeed, knowing by experience the ardent patriotism of the American Poles. It is clear to everybody that this country of yours has taken an unmistakable and decisive stand on the side of the nations which are fighting for freedom and democracy. You may be proud and happy that your great President, Franklin Roosevelt, did not follow the path of the leaders of many European countries, who had paid for their efforts to maintain neutrality with the loss of independence and the ruin of their countries. Let us be aware of the fact that neutrality, once a total war has been forced upon the world, has ceased to be any guarantee of security. Just as once upon a time, the Germany of the Kaiser had called her guarantee of the inviolability of Belgium's frontiers, a scrap of paper - so does Hitler today break his given promises any time he sees an opportunity to commit the crime of another invasion. -2- 381 Grounding his opinion upon facts well known to all of us, the President declared that it will be too late to think of the defense of the United States when the Germans will have occupied Atlantic bases, and will be able to terrorize from these bases the civilian population of this continent. We may now candidly tell ourselves that Great Britain's military effort had suffered a delay in the first days of the war. Poland's heroic resistance against the invaders of 1939 has aroused general admiration. Yet it was but France's catastrophe which in the last resort convinced England and the British Empire that to save our civilization not only a supreme effort of the nation and her army was absolutely necessary, but also a harmonious and self-denying collabora- tion of all citizens. The glare of the bloody European war is daily growing more dazzling on the Western shore of the Atlantic ocean. German battleships and U-boats have long ago crossed the boundary line of the Western Hemisphere. Availing themselves of the helplessness of France the Germans are establishing their bases nearer and nearer to America. The heroic resistance of Great Britain and her allies has delayed the direct attack of the Germans against the American continent. But no one is permitted to nurse any illusion as to what would happen should the British Navy be unable to defend the Atlantic and the American shores. In the present war Poland's sacrifice was the greatest among all nations of the world. The Poles too have the most thorough experience. 382 -3- Everyone of you, my friends, has someone in Poland who is near to his heart. Everyone of you knows what a military invasion of a totalitarian state means; that German hangmen follow in its steps, and that the aim of the latters is the extermination of a beaten people, the breaking of its moral stamins, and common looting. In the beginning of 1939 the Poles became aware that the moment of an attack was approaching. The Poles understood that to make blood offerings efficacious one had to make a material sacrifice to assure the soldier's adequate equipment. Liberal gifts were flowing into the Fund of National Defense, a fund to which the Poles of America contributed then over a million dollars. People were giving everything they could give. The workingmen in military industries gave their overtime work free of charge. The farmers donated grain. The intelligentsia a large part of their modest earnings. The enthusiasm was general. Fortunes were donated to the Country's cause. Gifts exceeding one hundred thousand dollars each were not an exception. Unfortunately, it was too late. It was impossible in 80 short a time to accomplish what had been left undone in the lost years, in the years which the enemy had used for arming himself, for preparing his criminal attack. The greatest enthusiasm, the loftiest heroism cannot effectively oppose themselves to the deadly machine of modern warfare. An airplane, constructed too late is being destroyed by the enemy's bomb before it is able to rise from its airfield. In the modern blitzkrieg one is 'not permitted to wait for the enemy's attack. Experience teaches that 383 it is too late to think of defense when the foe attacks. President Roosevelt told you that the United States will choose the moment and the place of resisting the danger. To be able to realize that announcement in conditions most propritious for the country, the President must have the unanimous backing of an enlightened and disciplined body of the country's citizens. He mist know that each of his instructions addressed to you will be properly understood and immediately executed. Those who tell you that the defense of this country should begin when the enemy assails you, are seemingly not aware of the destruction resulting from total warfare. They are not aware that at the present moment your industries, your agriculture, your railways, that all of you who do their share for the common victory, are working in peace and safety. We are not permitted to let those conditions change to your disadvantage. The enemy must be crushed before he succeeds in landing on your shores. At the present moment a comparatively small sacrifice on your part, a small financial contribution, a small donation of overtime work, a temporary remunciation of some comforts and pleasures - will enable you to do your civic duty. I repeat: at the present moment today - for tomorrow it may be too late. It is your duty to assure the production and the delivery of military equipment to the United States, to England, Poland and their Allies, the equipment which is indispensable to win. -5- 384 The United States are big, powerful and wealthy. They do not ask you to sacrifice your property - they demand a loan, they demand collaboration and a concerted effort on the part of the whole nation. Only harmony, only unity, only civic discipline and abiding by the words of your President and his Administration may bring about the total collapse of the assailing forces of evil and barbarism. I feel sure that every American citizen of Polish descent, that every Polish organization will do their duty purchasing United States Saving Bonds, in the consciousness that by doing so they will serve this country, they will serve Poland and the whole civilized world. -5- 384 The United States are big, powerful and wealthy. They do not ask you to sacrifice your property - they demand a loan, they demand collaboration and a concerted effort on the part of the whole nation. Only harmony, only unity, only civic discipline and abiding by the words of your President and his Administration may bring about the total collapse of the assailing forces of evil and barbarism. I feel sure that every American citizen of Polish descent, that every Polish organization will do their duty purchasing United States Saving Bonds, in the consciousness that by doing so they will serve this country, they will serve Poland and the whole civilized world. 385 SURVEY OF NON-DEFENSE EXPENDITURES H.D. WHITE Treasury Department, Division of Monetary Research Remind June 386 Table of Contents Page Numbers Summary 12 38 Waste of Labor Supply 9 12 Foreword Organization for Training and Labor Supply The Civilian Conservation Corps The National Youth Administration 13 - 20 Office of Education 28 31 The United States Employment Service 32 - 33a The WPA Agriculture Over-all Budgetary Picture 21 - 23 24 - 27 34 - 38 39 - 40 41 - 46 387 May 31, 1941. To: Secretary Morgenthau From: H. D. White Subject: Survey of Non-Defense Expenditures. Foreword On April 24, 1941, in speaking before the House Committee on Ways and Means Committee, you said that ap- propriations of the Federal Government for non-defense expenditures should be reduced by approximately $1 billion. The context made it clear that you had in mind that the financial burden of increased expenditures on defense would be very heavy and that curtailment on non-defense expenditures should therefore be sought, and that since incomes and employment were rising with the expanding arms program, there was less real need for the various relief programs. You will remember that members of the Committee requested you to make more specific recommendations on curtailment and that you took the position that the Treasury Department had neither the responsibility nor the resources to do 80 and that specific recommendations should properly come from the Budget Bureau and from the regular committees of Congress. You requested me to undertake -- for your own use -- a rapid and informal investigation of the expenditures of a number of agencies, including the CCC, the NYA, the WPA, the Office of Education, the United States Employment Service, and the Defense Training Program. You also 388 -2- Division of Monetary Research requested that Mr. Haas should review the agricultural expenditures of the Federal Government, and you asked me to cooperate with him on his findings. This report is the result of my survey. (A second report dealing more fully with agriculture will, I presume, be submitted by Mr. Haas). In the preparation of the report many Government officials were interviewed, private and public documents of the agencies concerned were studied, and a brief field trip was spent in visiting offices, camps, and projects in the nearby states of Virginia, Maryland, North Carolina, and Pennsylvania. This report aims to suggest and analyze. It does not pretend to be definitive and detailed. Neither does it pretend to make recommendations in a form directly trans- ferable into legislation. If any action is to be taken on the basis of these recommendations, it should be taken only after the usual investigations have been made by the Budget Bureau and appropriate committees of Congress which possess the necessary authority, staff, information and time for detailed consideration. -3- Division of Monetary Research 388 Summary The appraisal of non-defense expenditures which follows has been made primarily in terms of the paramount objective of national defense. 1. The general conclusions of this appraisal are: (a) The country is spending large sums of money on non-defense activities which should in- stead go to tasks more immediately contributing to the defense program. (b) Although a substantial portion of the funds going to nominally non-defense activities is actually being spent on defense tasks, this expenditure is not making anywhere near its maximum contribution to that end. (c) Most important of all, we are wasting a large portion of the most valuable productive asset of the country, our labor supply, which should d either be working at vital defense tasks or be receiving training for such tasks. These conclusions go even further than the position you took before the Ways and Means Committee; they suggest that much larger savings than those recommended by you can be obtained -- if the organization of the defense program is improved, enlarged and intensified. I wish to make it clear that these conclusions do not reflect upon the competence of the administrators of the nondefense programs. It is apparent from discussions with some of these officials and from observations of some of the projects 390 Division of Monetary Research that a considerable transformation of these programs has already taken place and that existing plans will result in still further conversion of these programs in accordance with the interests of national defense. 2. Waste of labor supply. The most important single conclusion of my survey is that this country is wasting its labor supply on a tremendous scale. Budgetary economies in non-defense expenditures are of minor significance in com- parison with this waste. (a) On a rough estimate, there were in April 1941, about 12 million persons idle. The liquidation of this pool of unemployed is the first neces- sity in this period of national emergency. If we were to mobilize as high a proportion of the adult population for gainful employment as we did in the last war, we should be employing today 61 million persons, compared to the 49 million actually employed in April -- including those serving in the armed forces. (b) Much better use could be made of the non-defense agencies which are participating in the defense training program. (c) The responsibility for the waste which has been found lies in the administration of the Defense agencies and not in that of the non-defense agencies. The National Defense program has not been planned to embrace all the resources of the country which are available for defense purposes. 391 -5- Division of Monetary Research (e) To remedy this situation it is recommended that: (1) The OPM should immediately prepare plans for and initiate a vastly expanded production schedule for an all-out defense effort and a detailed schedule of the future labor requirements needed for the expanded production schedule. (2) A thorough inventory of the available labor supply should be compiled on the basis of which a rational labor program can be constructed. This program should cover not only training of the youth and unemployed but also up-grading of workers in industry, "dilution", occupational and regional transfers, etc. (3) As the process of re-employment in defense industry will take time, the existing emergency relief programs should be converted as rapidly as possible into defense programs, and the managers of defense production should be charged with the duty of switching these programs to production and training which are as benefi- cial as possible to the defense effort. This process has already begun, but it should be accelerated and coordinated. 392 -6- Division of Monetary Research 3. Specific recommendations with respect to non-defense agencies. (a) CCC. The CCC and NYA programs should be merged into a single youth program. The regular appropriations for this unified program should be $100 million less than the two appropriations now contemplated for the CCC and the NYA. (b) NYA. Approximately $50 million should be diverted as rapidly as possible to specific defense training. (c) Office of Education. No savings can be made on the expenditures of the Office of Education. (d) U.S. Employment Service. The U.S. Employment Service should as soon as possible be made into a Federal agency. The requested appropriation for the U.S. Employment Service should not be curtailed. (e) WPA. At least another 25 percent of the WPA projects should be diverted from non-defense to defense categories and the necessary relaxations of administrative and legal restrictions to make this possible should be introduced. Until the defense program is enlarged considerably beyond our present plans, WPA should not be cut more compared with last year than the $450 million which is in process of being realized. 4. The savings in non-defense expenditures ensuing from the above recommendations consist of (a) actual reductions in expenditures and (b) diversion of funds from non-defense programe to purposes of defense, which represent amounts that would otherwise have to be provided for in defense appropriations. 393 -7- Division of Monetary Research In brief the picture would be roughly as follows: (Millions of Dollars) Reductions already effected in latest appropriations as compared with earlier Bureau of the Budget recommendations Savings from reduced recommendations for WPA Savings from reduced recommendations for CCC $100 35 Total Diversions already effected from nondefense to defense expenditures Diversion effected in the WPA Diversion made on U.S. Employment Service Program Diversion made on regular NYA out-ofschool work program $135 225 66 25 $316 Total Possible savings from recommended reduction in expenditures Desirable reductions in the agricultural programs, net Reductions in expenditures from combining NYA and CCC $350-450 100 $450-550 Total Possible savings from recommended further diversion Recommended further diversion in regular NYA out-of-school program Recommended further diversion in WPA from non-defense to defense Total Grand Total savings (including diversions) already realized or possible 50 225 $275 $1,175-$1,275 394 -8- Division of Monetary Research However, the magnitude of the non-defense expenditures reviewed in this report constituting as they do but 10 percent of the total contemplated Federal expenditures of $22.2 billion for fiscal 1942, 1s by no means our major budgetary problem. It must be emphasized that price con- trole and financial measures adequate to the prevention of inflation, for example, will save the Government much more money than any possible curtailment of non-defense expendi- tures. Likewise, prices which do not allow unnecessarily large margins of profit on defense contracts are more important from the point of view of monetary savings than curtailment of non-defense expenditures. -9- Division of Monetary Research 395 SURVEY OF NON-DEFENSE EXPENDITURES Waste of Labor Supply This country is wasting its labor supply on a tremendous scale. Any analysis of labor supply for defense purposes and of expenditures on labor training, and, likewise, any analysis of Governmental expenditures for relief quickly runs into this hard fact. On a rough estimate, there were in April, 1941, about 12 million persons who should certainly have been productively employed in a period of national emergency but who were not being employed. These 12 million persons consisted of 7 million unemployed who were seeking work and another 5 million who would have worked in industry if jobs had been plentiful. These figures of the available labor supply are conservative rather than exaggerated. We should be able in the United States today to mobilize a higher proportion of the adult population for gainful employment than we did in 1918 because among other reasons the United States is more urban, the employment of women is more usual, and our ad- ministrative machinery is better. But if we did only as well as in 1918, we should be employing today 61 million persons. What we were actually employing in April, 1941, was 49 million persons -- including those serving in the armed forces. Of these 12 million persons available for the defense effort, the programs of WPA, NYA and CCC are utilizing the services of 2 million. But this work is generally 396 - 10 - Division of Monetary Research regarded as improvised and as being partially wasteful during the period of military emergency. It is probably correct to treat the whole of these 12 million persons as being available for more urgent defense tasks and to measure the waste of basic resources by this figure of 12 million. Corroboration of this estimate is found in the following statement which was concurred in unanimously by the representatives of the Budget Bureau, OPM, Social Security Board, Wages and Hours, WPA and others at a conference on labor potential held March 31, 1941: "Assuming that an increase of approximately 9 million in the employed working forces (including the armed forces) is necessary to meet defense program schedules during the next 2 years, the required number of workers could be ob- tained without placing more strain on labor reserves than has occurred several times in the past, and specifically the strain would not be as great as it was during our participation in the World War." What is the outlook for the coming year? According to estimates submitted to the Secretary of the Treasury by Mr. Hillman, Associate Director of OPM, the scheduled defense program will result in the employment of 3 million additional workers in the fiscal year 1942. In addition, the armed forces will absorb another million persons. Allowing for 600,000 youthful entrants into the labor market, there will be a net decrease in the unused labor supply of approximately 3-1/2 million persons. These estimates make no provision for expansion in the defense program beyond what is now planned. It is 11 - DIVISION or Monetary Research believed also that they make no allowance for such contrac- tion in employment as will result from the application of priorities and from other shut-downs due to the lack of raw materials and equipment. Therefore, the outlook 18 that at the end of the second year of the defense effort there will still be as many as 8-1/2 million persons available for employment but not being used in the national effort. Perhaps 4 million of these will be seeking work and 4-1/2 million will be among those who would work if jobs were plentiful. These facts make it evident that present defense plans involve a continued waste of our labor supply for at least another year on a scale only somewhat smaller than the pres- ent one. Responsibility for this waste lies in the administration of the Defense agencies rather than in that of the non-defense agencies. The National Defense program has not been planned to embrace all the resources of the country which are available for defense purposes. Even that program which has been planned is not being carried out on schedule. Furthermore, the Defense agencies, in their first year of operation, have not succeeded in making their future plans definite enough so that the non-defense agencies of the Government can adapt themselves to these plans. This basic shortcoming of our defense program seems to call for two lines of action: (1) The first is to give definite responsibility and authority to someone in the defense program to lay plans to put these unused resources to necessary defense production, and initiate appropriate action. This recommendation is far reaching. It means 398 - 12 - Division of Monetary Research that the whole planning and administration of the defense production program should be overhauled. The managers of defense production -- the OPM rather than the armed services -- should be instructed to prepare immediately plans which will constitute an all-out defense effort. (2) Since it is not clear that such an overhauling is going to take place in a matter of weeks or even months, the existing emergency relief programs should be converted into defense programs. The managers of defense production should be charged with the duty and the responsibility of seeing that these agencies are engaged in production and training which 18 as beneficial to the defense effort as it can be made. This process has already begun but it should be enlarged, coordinated, and energized. 399 - 13 - Division of Monetary Research Organization for Training and Labor Supply The responsibility for training and labor supply is in the Office of Production Management. This office, under Mr. Hillman, has started a number of programs designed to ensure that defense production obtains the labor supply it needs. In the carrying out of this task, the OPM has an easier job than was the case in the last war for several reasons. (1) The first is the abundant supply of unemployed labor which the OPM found at hand when it commenced opera- tions -- a total of perhaps 9 million persons in April, 1940. (2) A number of Governmental agencies which did not exist in the last war are in a position to assist the OPM in its task. (a) The first such agency is the U.S.E.S. Whatever the shortcomings of our system of employ- ment offices, we are better off than in World War because we have such a system. The problems of discovering where workers are and where they should be and of placing them are therefore very much simplified. (b) The existence of the NYA and the 000 provides the OPM with going administrative agen- oies for recruiting youth into the defense program and for training them. Again,whatever the defects 400 - 14 - Division of Monetary Research of these organizations, they have provided administrative machinery, some equipment, and connections with a large untrained and unemployed population. (c) The Office of Education, with various small programs of vocational education and with excellent connections with the school system, has provided another convenient administrative appa- ratus to help in the problems of training for defense work. (d) The WPA provides a functioning administrative machine whereby otherwise unemployed persons can be put to useful work, particularly constructive work. (e) In the last World War the United States did not possess a Department of Labor. The advantages of the information, knowledge, and contacts which the present Department of Labor possess are obvious. For the program of labor training and supply, the Department of Labor can serve as an important staff organization, advising and planning on all major labor problems. Thus the OPM when it commenced operations found at hand administrative agencies to aid in the production of defense articles, in the training of workers, and in the transfer and placement of workers. The OPM and the Services are making use of all these agencies. 401 - 15 - Division of Monetary Research Yet, after one year of experience, it does not appear that the defense training and labor supply program and, more importantly, the defense production program have taken such form that full use is being made of these agencies. still more important, full use is not being made of our labor supply. The programs of the CCC, the NYA, the Office of Education, and the Employment Service, have had added on to them certain defense functions. But these agencies have not been adapted to the defense program to anything like the necessary extent. It is doubtful whether the CCC is doing useful defense work. It is not clear that the NYA is giving the most useful kinds of industrial training. The two youth programs, the NYA and the CCC, are still run with little regard for each other. The training program of the NYA and that developed in the Office of Education are to a considerable extent com- petitive. The formal decision that the Office of Education should supply training and that the NYA should take on projects does not, when analyzed, make much sense. A whole cluster of legal and administrative difficulties s together with the shortcomings of the basic defense program have prevented the WPA from being converted into a defense project administration. The organization of the U.S.E.S. is not being overhauled sufficiently rapidly to make it the agency responsible for providing the workers when and where they are needed. 402 - 16 - Division of Monetary Research A clearer picture of the shortcomings of our present programs of labor training and labor supply can be obtained only if it is realized just where these programs should fit into the basic program of industrial production for defense. Such a general defense industrial program should have the following parts: 1. A production schedule which goes beyond contracts already let and includes all defense goods and services which the Government would like to get produced if it were able to. 2. As part of this production schedule, there should be a highly detailed schedule of labor requirements for military and civilian purposes, but particularly adapted to show in what occupations, industries, plants and districts, additional labor will be required to fulfill the basic production schedule. 3. An inventory of the available labor force including: (a) The unemployed, broken down according to residence and type of skill; (b) The employed population, broken down by skills so as to show where workers can be diverted from less to more essential work; (c) What skills will be produced by the current training program, and when; (d) The labor supply currently outside the labor market. 4. On the basis of the above figures, a rational training program can be constructed. If we know ahead of time 403 - 17 - Division of Monetary Research what we will need in the way of skills and also know what is available and where it is available, the nature of the training which is most necessary can also be indicated. 5. Such schedules are also necessary for an intelligent program of labor diversion in order to break existing bottlenecks. Unless we know what we have in the way of skills and where skilled labor is now employed, diversion of workers will be slow, costly in terms of money and output, and in many cases will be at the expense of other defense articles. By common consent, the defense training program suffers because of the numerous agencies involved and because of a variety of shortcomings common to a new program. But the basic inadequacy of the defense training program really consists in the absence of an expanded production schedule and a detailed schedule of future labor requirements. It is hard to see how there can be a program which trains workers for defense tasks or one which diverts workers for more important tasks unless there is foreknowledge of what skills will be required and where and when they will be required. And such knowledge obviously requires a detailed schedule of production which shows what is going to be produced, where it is going to be produced, and at what time it is going to be produced. The OPM at the present time does not seem to have this knowledge in sufficient detail to determine the character of the programs relating to labor supply. 404 - 18 - Division of Monetary Research But even if it had, the scope of the program which has now taken form is small in relation to the available labor supply. Therefore, there are millions of persons whose labor is not now being employed and for which the defense program has no employment plans. In these circumstances, the defense labor supply program cannot be organized on the only rational basis -- namely that every able-bodied person is useful and that jobs will be found for those who are given skilled training. The managers of defense production ought to think first in terms of a program which is definite and which has reached the contractual stage. They ought to think second in terms of other and additional defense programs which will utilize our labor and other resources to produce necessary defense articles and services. Unless the managers of defense production rise to the level of think- ing in terms of a national economy -- that is, in terms of utilizing all available resources for defense production -- they will not succeed in organizing the national economy for defense. Instead of such an efficient organization, we now have: lack of planning of production; lack of creation of new facilities; lack of expansion of raw materials; and lack of training of labor. All these deficiencies result in (a) a much smaller total of defense articles now and in the future; and (b) a much smaller total of civilian goods now and in the future. If these trends are not checked, the 405 - 19 - Division of Monetary Research United States will be the only war economy which finds it impossible to use all its man-power at some productive task. We should not be satisfied with a national defense program involving production plans which provide for the employment of anything less than all the available labor forces, in the extended sense in which the available labor force has been defined above. We should not be satisfied with plans which do not start with a complete inventory of available labor (by skills and areas), complete knowledge of the new skilled labor forthcoming from existing vocational training establishments, and a comprehensive picture of labor requirements (broken down by time periods and the particular skills required). Starting with such a picture, an intelligently and aggressively directed labor training program could take in hand the job of supervising up-grading, dilution, combing workers out of unessential occupations, regional transfers, etc. Were the administrators of the labor sup- ply and training program in a position to state their labor needs cogently, no one would stand in their way if they requested that the training of labor be imposed as a contract provision in Government awards, that priorities on labor requirements be established among industries, that the Government provide funds for "vestibule schools", that the Government pay for training "on the job", and that the Government expand and intensify the training now done in connection wi th public school facilities. 406 406 - 20 - Division of Monetary Research Such requests for further authority to maintain an adequate supply of labor for defense industries and such requests for further funds as would be necessitated by this program, have little force at this time because the OPM appears to be going about its job in 80 improvised and haphazard a fashion. Final authority for the planning and execution of our labor training program should be in the hands of the OPM. Such additional authority would be more willingly granted if first the OPM should show more competence to conceive and carry out such a program. The Office of Educa- tion, the NYA, the CCC, etc., should survive as labor training agencies only insofar as they may be regarded as convenient administrative agencies for the performance of particular parts of the OPM's program. It is unlikely that the CCC will be able to justify itself as making a substantial contribution to industrial skills necessary for the expansion of defense industries. The NYA and Office of Education will fare better, but even they will need to be "coordinated" severely with reference to objectives and procedures other than those they have been following up to now. In the following sections, the various agencies are briefly surveyed and evaluated with respect to their place in the defense program, and the possibility of budgetary economies. - 21 - Division of Monetary Research 407 The Civilian Conservation Corps (Millions of dollars) Estimated Expenditures, fiscal 1941 $274 Budget Recommendation, fiscal 1942 270 Prospective Appropriation, fiscal 1942 235 The decrease in prospective CCC expendi tures is entirely the result of the decline in the number of enrollees. The total enrollment has declined by about 25 percent to about 225,000, despite the intensified appeal for enrollment and the relaxation in requirements. The decreased enrollment reflects improved employment opportunities in industry as well as present and prospective inclusion in the Army of young persons eligible for the CCC. Although much of the expenditures of the CCC is valuable from the point of view of long-run social objectives, it appears that only a small part of these expenditures is directly related to our defense effort. The training now provided in the CCC is of little use as preparation for the Army, which trains former CCC enrollees in much the same manner 8.8 any other men. Despite the outward similarity to Army life, the routine training of CCC enrollees having value for military purposes could be surpassed by the Army in very much shorter time. If considerable sums are to be spent at this time in preparing young men for the Army, it would seem that the appropriage agency for the purpose is the Army and the appro- priate method induction into the Army. No very significant part of CCC expenditure is directed toward training enrollees for defense employment. The equipment and instruction provided in the CCC are with few 408 - 22 - Division of Monetary Research exceptions inadequate for a satisfactory training program. There is some training of CCC enrollees as cooks, bakers, radio-repairmen and motor-repairmen. But such training is given to relatively few men, and it is only remotely related to the more urgent training required for industrial defense work. The conservation work of the CCC, important though it is, must be regarded as less urgent than defense; and such conservation work as might properly be undertaken at this time, e.g. forest fire and crop insect control, can be performed by other agencies. Most authorities on the youth program agree that there is and has been substantial overlapping between the CCC and the NYA. Although the NYA can be and is being converted into a defense training program, the CCC cannot be satis- factorily adapted for this purpose. If the CCC were abolished and its funds were made available for a unified and effective youth program organized specifically to provide industrial defense training, many more youths could be given preparatory industrial experience at a considerably smaller cost. Furthermore, the CCC is well known to be an expensive program costing the Government over $1,000 for a year's enrollment per person. This cost results not only from the payments made on behalf of CCC enrollees to their parents, but also because of its very large overhead cost. Its supervisory personnel is large and expensive in comparison wi th the NYA. 409 - 23 - Division of Monetary Research Therefore, it is recommended that the CCC and NYA program should be merged into a single youth program. It 18 further recommended that the regular appro- priations for this unified program should be $100 million less than the two appropriations now contemplated for the CCC and the NYA, or approximately $235 million instead of $335 million. These recommendations should not be interpreted as reflecting in any way on the usefulness of the CCC in the past. The CCC expenditures have been amply justified from the point of view of their long-run contribution to the health, welfare and morale of the enrollees and their families, and their contribution to the conservation of the natural resources of the nation. But ends and means have changed rapidly and the CCC, as well as other agen- cies, must be adapted to the more urgent objectives of the defense emergency. 410 - 24 - Division of Monetary Research The National Youth Administration Appropriations for the current NYA program may be split roughly into three parts. Fiscal Year Fiscal Year 1941 1942 (Est.) (Est.) 32.5 60.0 74.1 28.1 73.7 28.1 134.7 161.8 (In millions of dollars) Defense production projects Other production projects School aid Total The NYA has already made considerable progress in con- verting its out-of-school work program into a thorough defense training program. In April 1941 some 405,000 youth were employed in the out-of-school work program, and of these about one-fourth were employed in workshop production having a direct relation to defense industries. This production training included machine shop, sheet metal, welding, foundry, auto maintenance and repair, aviation services, radio, electrical, drafting, blue-printing, etc. The projects operated under the special youth work defense budget ($60 million) during the coming fiscal year will run on a full-time basis. Their operations will dove-tail with the regular part-time NYA program in that the shops operated on a part-time basis will be used as "feeders" to the full-time defense shop projects. Youth with demonstrated superior ability, and those who have had some previous training or experience in defense 411 -25- Division of Monetary Research occupations, will be transferred from regular part-time projects to the defense full-time projects for intensive work and training. It is now planned to limit employment under the youth work defense program to a maximum of 100,000 youth with a monthly average employment of 92,000. Youth employed on this program will be required to work or attend classes a total of 160 hours a month. The average period of employment will be between three and four months, depending upon the occupational field in which the youth is receiving work experience. Therefore, the youth work defense program will reach between 275,000 and 375,000 different youth during the course of the fiscal year. The shop projects operated under this program will be devoted to providing work experience in occupations recommended by the Office of Production Management. In these plans, we see emerging a program which could make a valuable contribution to the expansion of defense production. Already about $25 million of the regular out-of-school work program (budget $74 million) is actually being spent for defense purposes. It should, in fact, be possible to convert the whole out-of-school work program into a defense training program so that there would be a single defense training program instead of two separate programs, one a defense training program and the other an out-of-school training program on non-defense projects. - 26 - Division of Monetary Research 412 It is recommended, therefore, that the approximately $50 million which the NYA is using for production projects not specifically related to defense be diverted as rapidly as possible to specific defense training. Among all NYA expenditures, those for assistance to students who are in school are most open to criticism on the ground of not making a direct contribution to the de- fense program. But, in my judgment, such criticism is short-sighted. The expenditures in question are less than $30 million. They are used in order to help pay for the education of youth belonging to families which are in the lowest third income group of our population. It would not strengthen our defense program to eliminate this small national contribution to the education of needy youth. On the contrary, the adverse social effects of cutting this expenditure would be, in my opinion, quite disproportionate to the amount saved. It was suggested above that the NYA and the CCC should be merged. In that case, the enlarged NYA should become an integrated national agency for youth defense training. It would organize its program of training labor supply in relation to the over-all plans for labor requirements developed by the Office for Production Management. In recommending this integrated youth defense training agency, we do not pretend to decide how much defense training should be pre-vocational and how much should be "on the job". It may be that a larger amount of defense training should be taken over by private industrial plants, and this may in fact happen as the defense program expands. 413 - 27 - Division of Monetary Research If the defense program is very slow in getting under way, the NYA defense training will seem to many people to be a waste of money because the youth will not succeed in getting employment. However, pending the development of plans for the utilization of all our labor power in defense work, it is good insurance and a wise use of money to continue training youth for defense work, trying to make that training as intensive and valuable as possible. 414 - 28 - Division of Monetary Research Office of Education The following are the estimated appropriations for the Office of Education for the fiscal years 1941 and 1942: Fiscal Year 1941 Fiscal Year 1942 (In millions of dollars) National Defense 75.5 94.4 Other 28.5 29.3 104.0 123.7 Total There is no saving possible in the Office of Education's program except by curtailing valuable educational services or reducing the defense training program. The regular appropriations of the Office of Education go for the endowment of agricultural colleges, engineering colleges, vocational education and other activities of this kind. This work is of the highest importance. It constitutes a part of our social services of the greatest long-run value. No emergency should cause us to go back on the se social gains. In 1940, Congress appropriated $75.5 million to enable the Office of Education to inaugurate and maintain a pro- gram of industrial training utilizing facilities of existing vocational schools. The upkeep of this program for a full year is now estimated at approximately $94 million. Instruction is being given under these appropriations, during the present fiscal year, to very nearly a million persons. This training is of various kinds. Perhaps the most valuable training is that given in socalled "supplementary" courses. These courses are given in public schools, private schools, and industrial plants to men 410 - 29 - Division of Monetary 415 Research now employed in occupations essential to defense. The purpose of the supplementary courses is to "upgrade" men already having some skill in short courses of 8 to 10 weeks' duration to enable them to hold more important jobs in defense industry. From July 1, 1940, to April 1, 1941, some 286,000 persons have received training in these supplementary courses. The United States Office of Education estimates that about 400,000 persons will receive training inthese supplementary courses by the end of the fiscal year 1941. Also unquestionably of value is the 80-called "engineering defense training". In October, 1940, Congress allocated $9 million for the cost of short engineering courses of college grade, to be given by engineering schools, designed to avoid the emergence of a shortage of engineers with specialized training in fields essential to national defense. About 1,000 courses are now being given under this program in more than 135 engineering schools. Some of these courses require the full time of the student; others are given after working hours for those who are employed. The United States Office of Education estimates that perhaps 100,000 persons will receive training in these engineering defense courses during the fiscal year 1941. In the following year it may be possible to double the number of persons receiving training in such courses if the appropriations now pending before Congress are approved. Also bulking very large in the Office of Education defense training program are the "pre-employment refresher" courses designed to give unemployed persons some training 416 - 30 - Division of Monetary Research in a skill essential to industrial operations. These courses generally last from 8 to 12 weeks. About 400,000 persons will apparently receive some training in these courses dur- ing the present fiscal year. Mr. Hillman has spoken of the skills acquired in these courses as "rudimentary"; they are commonly described as "pre-vocational", and to that must be added the fact that they are often more related to local training facilities than to defense needs. However, the United States Office of Education has reported that, of a total of about 190,000 persons who had completed such courses up to April 1, 1941, about 101,000 were known to have obtained employment. This record doubtless exaggerates the degree of success of the training program inasmuch as there is no indication that the positions the trainees received required the skills for which they were trained. To date, the coordination of this defense training program with visible defense labor needs leaves a great deal to be desired. The OPM has not generally been in a position to give the local training officials a picture of labor requirements by regions which they could use as a master plan for their local training program. The funds made available for this program are reported by the Budget Bureau to have been spent throughout the 48 states in accordance with population rather than adjusted to the location of defense industry. One feature of the general training program that appears to offer an obvious opening for improvement is the matter of coordination in the field--where actual operations are carried out. At Greensboro, North Carolina, the WPA (under Office of Education sponsorship) conducts classes in welding, 417 - 31 - Division of Monetary Research machine operations, and sheet metal work using the local high school facilities. The WPA officials were not aware of what, 1f anything, was being done in these fields by the local NYA. The NYA was simultaneously constructing a modern shop -for training in machine work, welding, and sheet-metal-for the present using old shop buildings for the same type of training. NYA officials did not know what WPA was doing in these fields, and stated that there was no effort to relate the two programs (if the WPA did have a similar program) insofar as the type of training or the numbers of trainees was concerned. Both, incidentally, explained that welding classes were designed to provide welders for the Norfolk Navy Yard, despite the fact that we had been told by officials in charge of Norfolk vocational classes that no welding courses were given in Norfolk, since the Navy Yard preferred to trainits own welders. Similar lack of coordination was evident at Cumberland, Maryland, where the NYA shop superintendent did not know whether or not WPA had shop courses. Also, the State NYA office at Harrisburg, Pennsylvania, was unaware of what, if anything, the WPA was doing in vocational training--either near Harrisburg or in the state as a whole. Mor did any of these agencies know what was being done to train workers inindustry for the same jobs that they were aiming toward. No monetary savings can be made at the present time on the appropriations for the defense training program. The Office of Education plays a vital part in this program. The progress of the defense program calls for expansion of this training and improvement inits quality rather than ourtailment of expenditures. Division of Monetary Research - 32 - 418 The United States Employment Service Appropriations for the United States Employment Service are as follows: Fiscal year 1941 (Est.) Fiscal year 1942 (Est.) 3.0 3.1 2.0 1.5 61.0 63.0 66.0 67.6 (In millions of dollars) Grants to States, United States Employment Service Social Security Board: Selecting, testing, and placing defense workers Grants to States for Employment Administration Total Practically all this money is devoted to the maintenance by the states of a system of employment offices which serve not only for placement but also for unemployment compensation. The defense programs of labor training and of labor supply cannot function efficiently without such a network of employment offices and indeed the efficient functioning of our labor training and supply programs will probably require considerable expansion and improvement of these employment offices. In other words, the United States Employment Service is one of the most important arms of our present defense program and it should be strengthened in every possible way. There are at present approximately 5 million persons seeking work who are on the Employment Service registers. The data obtained from these registers is the best data we now have on the available skills needed in the defense program. It is the data whereby shortages of skilled labor are observed and forecast and consequently is, or should be, an important element in the program of labor training. The information of -33- 419 Division of Monetary Research the Employment Service should be expanded as rapidly as possible to cover more of the unemployed population and large sections of the employed population. The placement activities of the offices of the Employment Service have become of much more importance since the inception of the defense program. In the future it will be desirable to expand the scope of the Employment Service. If it is not possible for the Employment Service to participate in a larger proportion of the total placement made, it will at least be necessary for the Employment Service to have records covering a larger proportion of the total placements. The problems of diverting labor from non-defense to defense jobs, or fromLess important to more important activities in the defense program, will probably involve either an expansion in the powers of the United States Employment Service or of an agency working closely with that Service. Our system of employment offices is administered by the states with funds granted by the Federal Government. Unemployment is a national problem. Administration of employment offices by states has produced, and will continue to produce, shortsightedness and poor administration. Problems of the labor supply for defense purposes are national problems. It is placing an unnecessary impediment in the way of the defense program to continue to mintain the employment offices under state administration. Even if it is deemed desirable for a while longer to get along with this cumbersome machinery, the United States Employ- 420 Division of Monetary - 33a- Research ment Service should be granted powers to intervene directly and run employment offices wherever this seems necessary. It is further recommended that the requested appropriation for the United States Employment Service should not be ourtailed. - 34 - Division of Monetary Research The W.PIA. The following table shows estimated expenditures of the WPA for the fiscal year 1941 and for the fiscal year 1942: (In millions of dollars) Estimated Expenditures for fiscal year 1941 $1,325 Original Appropriation request for fiscal year 1942 975 Regised Appropriation Request for fiscal year 1942 875 The appropriation of $875 million will provide work relief for a million men throughout the year. At the present time there are probably 7 million unemployed, of whom 2,800,000 are the chief wage earners of families in need already certified as eligible for WPA employment. Even with an expansion of employment, estimated WPA expenditures for the fiscal year 1942 will provide work relief for only a minor part of the needy unemployed. To what extent curtailment of WPA expenditures is desirable depends upon two factors. The first is the expansion of the defense program and the number of additional persons who will be employed in the economy as a result of that program. The second is the extent to which WPA projects are converted into more urgent defense projects. The WPA program has never provided work for much more than one-fourth of the unemployed -- and sometimes for con- siderably less. If WPA rolls are out on July 1 to 1 million the percentage of the unemployed receiving work relief will -35 - Division of Monetary Research 422 be lower than has been usual. If, as the figures given out by OPM anticipate, there is a net decrease in unemployment of approximately 3-1/2 million in the coming year, the proportion of unemployed who are on WPA rolls will still not exceed 25 percent of the total unemployed in the last months of the fiscal year. There can be no doubt of the capacity of WPA to perform useful defense work. The contributions of WPA to defense have been substantial ever since its inception. The WPA has built about 80 percent of the airports in the country. Under projects sponsored by the War and Navy Departments, the National Guard, and the Coast Guard, more than 12,000 buildings were constructed and improved by the WPA. The WPA road construction program has been of great value to the Army and Navy and to defense industries. At the present time about 240,000 WPA workers are employed on projects certified by the War and Navy Departments as important for defense purposes, and another 200,000 on un- certified defense projects. But altogether no more than 25 percent of the total WPA man-power may be estimated as currently employed on defense projects. The assertion is commonly made and has some substance to it -- that a number of WPA workers are far below the standards required by defense industry either because of age, physical incapacity, or some other reason. However, this circumstance, where it exists, derives much more from local standards of certification to the WPA than from the general characteristics of our unemployed population. In the usual estimates of unemployment, workers unfit for work are excluded, 423 -36 - Division of Monetary Research and certainly no significant proportion of the 7 million persons now unemployed in this country should be classified by industry or others as unfit for work. Some idea of the ive restricted standards which private industry maintains for its employees may be obtained from the fact that at present most defense industry employers will not at present employ: (a) aliens, (b) negroes, (c) persons not born in the United States, (d) persons over 45 years of age, (e) women. In the present emergency intelligent use of our man- power distates that as large as possible a proportion of WPA projects should be defense projects. Here 1s an organiza- tion available for defense work, particularly construction work, and a large supply of labor. The things that stand in the way of diversion to defense work are legal and admin- istrative obstacles, inability of the management of the defense program to utilize this machinery and man-power, and the present allocation of defense contracts. For example, legal provisions requiring minimum spon- sors' contributions on non-Federal projects and limiting non-labor costs paid from WPA funds prevent a wider use of WPA for defense purposes. Limitations on hours of labor and earnings also restrict the usefulness of WPA in the defense program. Projects certified by the War and Navy Departments as important for military and naval purposes are now exempted to some extent from these restrictions. How- ever, there is much useful work for defense that cannot be undertaken because of these limitations. In the coming year it should be easily possible to overcome the various obstacles at least to the extent of making 50 percent of the WPA projects into defense activities. 424 -37- Division of Monetary Research Valuable as is the work now done by WPA, there is no doubt that this labor force is not being effectively used from the point of view of our defense program. The Army and Navy could make much more use of the services of the WPA on important projects under their sponsorship. They seem to think of WPA too much in terms of painting buildings, clearing up grounds, and other auxiliary services rather than as a regular labor force. In addition to possible Army and Navy work, there are many opportunities for WPA projects that can serve industrial and civilian requirements under the defense program. Many more airports, more access roads and badly needed communal facilities for defense boom towns can all be progided very effectively by WPA labor. Equally important is the fuller utilization of the WPA in a unified training program. There are now more than 150,000 men on the WPA rolls qualified by special skills for employment in defense industries. An additional 150,000 are suitable for industrial training courses. Despite this, only 34,000 are currently assigned to the WPA vocational training courses. An enlarged and coordinated training program would not only help to expand defense production, but would also transfer needy unemployed from work relief to industrial defense work. If the defense program is expanded to a size which will enable it to utilize the man-power of the country, it should be possible drastically to curtail the WPA appropriations. If OPM does its job properly, WPA can be out to almost nothing. If OPM and the services cannot make plans to utilize 425 - 38 - Division of Monetary Research the labor force of the country on defense tasks, then there will continue to be a large volume of unemployed. The national problem of unemployment will remain what is has hitherto been namely, a choice of leaving people without anything to do or devising machinery whereby they can do some useful work. In the intermediate period when the scope of the defense program and its method of organization have not yet been determined, the WPA can serve as a defense projects administration whose task it is to receive a large variety of defense projects and to mobilize the otherwise unused labor force to carry out these projects. This, too, would require considerable improvement over present methods of organization and planning, but perhaps it is a more realizable objective than the complete elimination of the need for work relief. It is recommended that at least an additional 25 percent of the WPA projects be diverted from non-defense to defense categories. It is further recommended that plans be undertaken to have the WPA utilize for defense -- either training or projects the full capacity of our otherwise unemployed man-power. Unless the defense program is enlarged much beyond our present plans, it is not recommended that the WPA be cut by more than the $450 million proposed decrease from fiscal 1941 expenditures. Division or Monetary Research - 39 - 426 Agriculture The expenditures for the current fiscal year and the appropriations for the fiscal year 1942 for the agricultural programs here considered are: (Millions of dollars) 1941 Expenditures 1942 Appropriations and contract authorizations Parity Payments $210 $212 1 Soil Conservation (AAA) $475 $499 $ 67 $ 66 Farm Security Adminis- tration 1 $450 million recommended by Senate Committee. In the current fiscal year national income has increased $10 billion, and it is generally agreed that an increase by a further $10 billion to $95 billion, will take place in the fiscal year 1942. In the past the Department of Agriculture has consistently held that farm incomes are directly related to industrial activity and to consumer purchasing power. Although the surtailment of foreign markets adversely affects particular crops (an effect partially offset by the estimated $500 million of Lend-Lease exports of food production to Britain), the coming year should see a marked increase in farm income. In the face of these prospects, it seems possible and desirable that some of the Federal Government's spending which is designed to increase the incomes of farmers should be ourtailed. Mr. Haas has already submitted a memorandum, one part of which states that parity and soil conservation payments should be examined with a view to possible ourtailment. Pending the submission of the second report on Agriculture, it is necessary - 40 - Division of Monetary 427 Research here merely to indicate the scope of possible savings on the farm program. Abandonment of parity payments under the Triple A pro- gran would involve a saving of $212 million on the appropriation requested in the budget message of January, 1941 (or a saving of $450 million, if reference is made to the Senate Committee's recommendation). The chief beneficiaries of this program are a small number of large-scale farmers. The program of Soil Conservation administered by the AAA is estimated to cost $475 million in the current fiscal year, and approximately $500 million is recommended for it in the fiscal year 1942. For the reason stated above, a substantial reduction in this program would seem to be desirable at this time. If the budget request for soil conservation payments were halved and parity payments abolished, the savings on these two farm programs would be $450 million. In order to offset the impact of the ourtailment suggested above on the poorer farmers, it would be desirable to increase the funds of the Farm Security Administration by a substantial amount-- say $100 million. In summary the following tentative recommendations are made: 1. Eliminate parity payments and decrease soil conservation payments so as to realize budgetary savings of from $450 to $550 million. 2. Increase Farm Security funds by $100 million so that: 3. A net saving of $350 to $450 million is realized on the farm program. 428 41 - Division of Monetary Research Over-all Budgetary Picture The most recent estimate of the Federal Government's budgetary expenditures in the fiscal year 1942, made by the Budget Bureau, gives a total of approximately $22.2 billion. This expenditure will result in a deficit of over $12.5 billion, without a change in our tax structure, or about $10 billion assuming that something like the Treasury tax program is passed by Congress. of the $22.2 billion of expenditures, nearly threequarters-or $15.5 billion--18 classified by the Budget Bureau as expenditure for national defense. In contrast, the amount requested in the Budget Message of January 3, 1941 for the programs reviewed in this report was roughly $2.2 billion. Since then there have been some increases and decreases in the estimates, but the net change is not great. The contemplated expenditures under these programs remain roughly 10 percent of the total contemplated budgetary expenditures. These figures indicate, first, that budgetary economy is necessary and, second, that the magnitude of defense expenditures is 80 great as severely to limit reduction in total expenditures attainable even by the most severe economy on non-defense items. It must be emphasized that price con- trole and financial measures adequate to the prevention of inflation, for example, will save the Government much more money than any possible curtailment of non-defense expendi- tures. Likewise, prices which do not allow unnecessarily 429 - 42 - Division of Monetary Research large margins of profit on defense contracts are more important from the point of view of monetary savings than curtailment of non-defense expenditures. If only 10 percent on the price the Government pays for armaments could be saved, the savings would be greater than the total of non-defense expenditures. These comparisons do not argue against economy on the non-defense programs, but they serve to remind us that the magnitude of non-defense expenditures is by no means our major budgetary problem. In attempting to get a true picture of the non-defense expenditures, it is necessary to consider three different groups of budgetary figures. The first consists of requested appropriations for regular expenditures and authorizations as of January 3, 1941, or as amended by later requests; the second consists of the appropriations for these same agencies which are classified as defense expenditures; and the third consists of the strictly non-defense expenditures of these same agencies. Regular Expenditures. In the table which follows there are set forth the ordinary expenditures of these agencies for the fiscal year 1941. These are compared with the re- quested appropriations for the fiscal year 1942. It is seen that the budget recommendations of January 1941 involved a out (exclusive of agriculture) of $340 million below the expenditure for the fiscal year 1941. In the case of agriculture the budget recommendations involved an increase of $25 million for the three programs which are dealt with here. 430 Division of Monetary - 43 - Research Comparison of 1941 Expenditures and 1942 Appropriations as Requested in Budget Message of January 1941 (Defense Items Excluded) Estimated Expenditures for 1941 Budget's Requested Approp. for 1942 CCC $ 274 $ 270 NYA 95 102 Office of Education 28 29 Amendments for 1942 $- - U. S. Employment Service Payment to States 3 3 Grants to States for employment office administration WPA Total (excl. Agriculture) 61 63 1.325 975 875 $1,786 $1,442 $1,342 $ 475 $ 499 210 212 67 66 $ 752 $ 777 - Agriculture: Soil Conservation (AAA) Parity Payments Farm Security Administration Total - Agriculture - 450 1/ - $1,015 1 Recommended by Senate Committee. Defense Expenditures. Three of the above programs-- the NYA, the Office of Education, and the United States Employment Service--are making additional expenditures for defense training. The appropriations, as requested May 13, 1941, for the fiscal year 1942 are set forth below, together with estimated expenditures on the same activities in the fiscal year 1941. 431 Division of Monetary Research 44 - Estimated Expenditures for 1941 NYA Office of Education U. S. Employment Service Total for Defense Requested Appropriations for 1942 $31 $ 60 52 94 1.5 2 $85 $155.5 Most of the above $70 million increase for defense train- ing is due simply to the fact that the defense training program was started after part of the fiscal year had elapsed. In addition to the above sums budgeted for defense train- ing, the OPM has certain consultative activities relating to training within industry, money for which has been supplied by the President's emergency funds. "Concealed" Defense Expenditures. A third set of budgetary figures, showing the amounts which the above agencies as at present organized are really spending on defense and non-defense activities, is harder to construct. But rough estimates are possible. They total $315 million as follows: On a rough guess one-quarter of the WPA pro- gram 1s at present devoted to defense tasks. The corresponding figure for next year might be $225 million--assuming that conversion of WPA activities into defense lines goes no further than at present. A large and rapidly increasing share of activities of the U.S.E.S. costing $66 million may be regarded as useful for defense, and therefore may be reasonably included under defense expenditures. -45- - Division of Monstary Research 492 Perhaps $25 million of the $102 million regular appropriation for the NYA should be classed as defense expenditure. The ordinary expenditures of all these agencies (exolud- ing agriculture) are likely to total about $1,300 million. of these contemplated "ordinary" expenditures about $315 million (as enumerated above) can fairly be regarded as de- fense expenditures. Therefore, the non-defense portion of these agencies' budgets is approximately $1 billion. In summary, it is desirable to keep in mind the following points about the over-all budgetary picture of the agencies and programs considered in this report. 1. The appropriations requested for the ordinary budgets (1.e. excluding defense appropriations) of the agencies dealing with training and labor supply for the next year are approximately $1,440 million. The request for the three agricultural programs here considered is $780 million. Thus the total of "ordinary" expenditures is roughly $2.2 billion. 2. These requested appropriations of $2.2 billion rep= resent a cut of over $300 million below the expenditures for the fiscal year now ending, or, excluding agriculture, a out of $340 millie 3. An additional $135 million is being out in this area. Since Secretary Morgenthau spoke before the House on this subject, the Administration has already recommended an additional cut of $100 million in WPA appropriation, and it is expected that there will be a out of perhaps $35 million in the 000 program. 433 - 46 - Division of Monetary Research 4. For these programs (excluding agriculture), the contemplated ordinary expenditures for the coming fiscal year seem likely to total about $1,300 million. of this total, approximately $315 million will be spent on activities which are important for defense -- if the present organization of the programs is continued. Therefore, the true non-defense expenditures for the fiscal year 1942 may be said to be approximately $1 billion. 5. In addition to the above requested appropriations of $1,300 million, three of these agencies have requested defense appropriations for the training of workers which amount to something more than $155 million. In order, therefore, to get a better figure of what the agencies surveyed will be spending on defense in the coming fiscal year, the $315 million roughly estimated above as likely to be spent on defense out of ordinary budgets, should be added to the defense appropriation of $155 million, making a total of about $475 million to be spent for defense by these agencies. 434 June 6, 1941 My dear Mr. President: John Carmody has written me a letter enclosing a copy of a memorandum from you, dated May 17, in re- gard to the letting of a contract of 3,600,000 gallons of asphalt for Eglin Field, Florida. Attached hereto you will find a photostatic copy of the report of the Director of Procurement on this matter. You will be pleased to note that the Allied Materials, Inc., were given the contract as low bidder, at an approximate saving of $25,000 as compared with the second bidder, the Pan American Petroleum Company. I think you will agree with me that Mr. Mack proceeded in an entirely ethical and businesslike manner in regard to the letting of this contract. Yours sincerely, (81gmed) E. Borgeather, Ss. The President, The White House. Copy to: Secretary of War Mr. John Carmody m also mack (Capus to m graves me schwary By Member 435 TREASURY DEPARTMENT PROCUREMENT DIVISION OFFICE OF THE DIRECTOR WASHINGTON June 4, 1941 Memorandum for the Secretary of the Treasury: Bids were opened March 31, 1941, by the Procurement Officer, Jacksonville, Florida, for the furnishing of an estimated quantity of 3,600,000 gallons of out back asphalt for Eglin Field, Florida. The low bid was submitted by Allied Materials, Inc., Atlanta, Georgia, based upon shipment on Government bill of lading which results in lower transportation cost due to land grant rates. The next low bidder, Pan American Petroleum Company, Pensacola, Florida, protested any award being made on the bids received and requested that all bids be rejected because of their objection to the determination of the transportation costs and also requested that the needs be readvertised and a personal hearing be granted. Under date of April 22, 1941, Mr. Millard Caldwell, representing the Pan American Petroleum Company, who was accompanied by Senator Pepper, was given a hearing by me. They presented their reasons why all bids should be rejected, stating, among other things, that Allied Materials, Inc., could not perform the contract if awarded and that the only fair thing to do was to readvertise. Because of the statements made on behalf of Pan American Petroleum Company, indicating that the low bidder, Allied Materials, Inc., could not perform the contract, representatives of Allied Materials, Inc., were given a hearing under date of April 24, 1941, and they furnished satisfactory proof of their ability to comply with the requirements of the advertised specifications and satisfactorily perform the contract if award be made to them. Accordingly, after careful consideration of all the facts of record, it was determined by me that no basis existed for rejecting the bids and award was made to the low bidder, Allied Materials, Inc., under date of April 25, 1941, at a total price of $224,853.12 job site as against a price of $250,560.00 job site submitted by the Pan American Petroleum Company. Is Director of Procurement Clinton E. Mack getter 436 FEDERAL WORKS AGENCY WASHINGTON May 31, 1941 OFFICE OF THE ADMINISTRATOR Honorable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. My dear Mr. Secretary: Because of the President's misunderstanding of the relationship of the Procurement Division to the Treasury, I am taking the liberty of sending you a photostatic copy of a memorandum he sent me a few days ago. I do not know what part the Procurement Division played in the matter the President refers to. I do know that WPA was an innocent bystander that had a good deal of pressure put upon it to change a contract award when one group of asphalt dealers under-bid another group that apparently thought it had the business sewed up. Sincerely, John M. Carmody Administrator Enclosures 437 May 31, 1941 The President The White House Washington, D. c. My dear Mr. President: Nothing would have happened to embarase the Admin- istration or WPA or Procurement in the Eglin Field, Florida, asphalt purchase if Senator Pepper had not tried to upset . contract award made by Procurement. WPA was doing an airport job for the Aray. Bids were asked for asphalt. Pan America in Florida apparently thought it had the business seeed up. A Georgia company (both of them get their asphalt from Texas), slipped in with a bid that took account of land grant rates for shipment of federal materials by rail. This made them low. This sur- prised the Florida boys who use barges to transport asphalt from Texas to Florida. They got busy, They got their friends to work on TPA, on the Army, and I understand on Precurement. The bidding was regular and we know of no reason for switching. I don't know how Tou Stekes get hold of the story but I suspect the san who put in the low bid probably told his, when he was in Washington to checkmate the Senater and some Florida lawyers, she were trying to take his business away free his after he triamed then. I understand they all know one another very well and trust one another about as such as one professional poker player trusts another. The publicity was bad but the price of asphalt dropped sharply on the next contract. Prosurement is a branch of Treasury under Secretary Mergeathan and not part of Federal Yorks Agency. Incidentally, three of our w boys who were subjected to heat are before the Senate for confirmation. 2 think the way they steed their ground quietly is a crodit to your Maintention. Sincerely, Saha S. Carmedy 438 THE WHITE HOUSE WASHINGTON May 17, 1941 MEMORANDUM FOR HON. JOHN CARMODY I know nothing of the merits of the recent newspaper controversy concerning certain bids for asphalt let for the paving of a runway on some airport in Florida, I understand, however, that the two agencies concerned are WPA and the Procurement Division, both of which are under your direction. I have even heard it stated that these agencies plan to make it difficult for the Georgia contractor who after much protest secured one con- tract, because he "kicked up a stir" in the news- papers. As I say, this may be just gossip. In these particular days, I have, as you know, too many problems to devote myself to the problem of an asphalt bid. However, there may be something to all this conversation. I wish you would look into the matter, to make sure there is no "whitewash" of any one concerned. I will, of course, rely upon your discretion t take whatever measures are necessary. I need hardly point out the bad effect on public confidence in our defense program if this sort of thing is true. I need hardly add I have no idea whether it is true or not. for F. D. R. 439 Dr. Haas kept the report. 440 JUN 6 1941 by dow Mr. Presidents lost December 16. as you - result, $ was you agreesing my sorious - over the capacity of the steel intentiye. is view of the immense 101 - of safence - civilian extens them in prospect. No expert knowledge eeemed accessary as that time to foresse that the industry would be mobile to bould the values of orders that lay about. and I gave you my opinion that as institute major expension program eeemed clearly called for, to guard against a stringmay in steel supplies that would react unfavorably on our national economy and our fiscal program, as well as hinder our defense effort. Is his first report to you last February, Mr. Dunn objected to in- creasing our steel capacity on the ground that there was - shortage of posity, forecasting surpluses of 10 million tens this year and 2 million tons in 1942. In his second report, he admits that steel capacity will be inadequate this year not greatly inadequate in 1942: but he still recommends against increasing sapacity, this time on the ground that an expansion pro- would take two years, not would require steel new badly needed for do fould purposes. I disagree with My. Dunn's arguments against increasing our steel as posity. There is as - that this will be a short sar, as Mr. Dunn apparently visualises: on the centuary, we must prepare for the possibility of a long ear, receiving the street of our productive capacity. I should much prefer to see civilian consumption oursailed temporarily by as amount accessary to provide the steel for - stool plants, than to see our national economy threatened w a steel shortage for as indefinite period. I greatly doubt that two years would be model to build new plants, if full defenseconstruction effort were directed toward that ead. The objection of the steel companies that an increase in capacity at this time would leave them with surgine espacity after the war seems to - particularly what Union the world-wide competitive conditions of the post-vest era, as abulant steel capacity of the most medern type should prove one of our greatest assets. To eits our experience after the world Var, although steel organity was increased from 44.5 million tons at the and of 1913 to 61.0 million tens as the and of 1918, yet each year after the Apalotice - a further expension, with so interruption until 1932. In view of the increasingly urgent need for more steel, I wish to sepost, as - cames conviction, that - innodiate expension program for the steel interestey seens clearly called for. The shortage of steel especity is a fundamental problem now, - a problem which will procedd as the defense effort expends. The President, The White House. Faithfully years, (Signed) H. Morgenthau, Jr. w By Messenger 960 441 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE June 6, 1941. TO Secretary Morgenthau FROM Mr. Thompson Vaughn B. Ferguson, 31 years of age, is the man I mentioned as having in mind to attach to the Administrative Office as soon as Ted Wilson reports as Personnel Director. Ferguson is now a principal assistant in the Personnel Division at $4,600 per annum. He is a Civil Service man and came to the Treasury in January, 1940, by transfer from the Soil Conservation Service at Albuquerque, New Mexico, where he was employed as Assistant Chief, Regional Per- sonnel Management Division, at $3,800 per annum. Attached is copy of Civil Service Form 375 which outlines his educational qualifications and various employments. Charlie Bell and I have been observing him closely and turning over important assignments to him/during the past year and we feel that he has much ability and will develop into an excellent administrative officer. for A 442 UNITED STATES CIVIL SERVICE COMMISSION WASHINGTON, D.C. / TEMPORARY APPOINTMENT, TRANSFER REINSTATEMENT OR PROMOTION, ETC. (NONCOMPETITIVE) Any false statement in an application, or alteration of a voucher or certificate, or presentation to the Commission of any such paper. is violation of the law and punishable as such. All answers must be in ink or typewriting. If more space is required, an additional sheet securely fastened to this form may be used. Answers on such sheet should be numbered to correspond to questions. GIVE DATES AND PERIODS OF TIME REQUIRED IN YEARS AND MONTHS AS ACCURATELY AS POSSIBLE Vaughn B. Ferguson L (e) Give your name Yes (b) Are you citizen of the United States? 1 Give (a) the date of your birth August 9. 1910 Yes No Davenport, Icena (b) the place of your birth Give in the Marks below detailed statement of your education including dates: September 917 to June (b) High school Name and location Attended from September 1. 926. (e) College or university (Give both graduate and under- June 929 Highest Dates of attendance grade Semester graduate work) Location Name Univ of California 925 8th Highest completed Roosevelt High School, Oakland, California 1 1 (a) Grammar school Attended from From Berkeley, Cal. 8/30 8/34 credit received To 5/34 6/35 124 completed 12th Yes Major subject Name Economics Seen. hrs Degree conferred Date of B.S. 5/17/34 degree in major 50 M.A. Pol. Soi. 5/23/36 Univ.of California Berkeley, Cal. NOTE: Public Administration was actually my ma for subject while taking graduate work, 23 36 however, this is part of the Political Science ourrioulum at the Univ. of California. (d) Specify here any specialized course which you have completed in high school, college, or elsewhere, and Indicate the credits received for each course sensater hours of graduate work in Public Personnel Administration--20 semester hours of Public Administration courses; 4 of statistics; 3 of Industrial Personnel Administration: 6 of Public Financeor what 6 ofStateAccounting others in Psychology, etc. (e) Have you ever to the barf No 4 When? Furnish in the blanks below . complete prehensive statement showing every employment you have had since you first began to work. including your present L employment and accounting for all periods of unemployment List employment chronologically, beginning with the earliest. NAME AND ADDRESS OF Dates of Place EMPLOYER employment (Month and year) (Give street address and city and State If employment tremployed --- at that City Oakland net 30g hr SS 33 Recreation Department 70g 35 City of Oakland, Cal. hr. n 5 NAME OF POSITION AND DESCRIPTION OF DUTIES earnings Safeway Stores, Inc. Oakland, California 28 11 Calif. Yearly salary or to $30 wk Clerk and Store Manager From Oakland 5 2 Calif. 9 San Fran. -55 11 3 Calif. 36 9 36 buquerque N. Mex. present 9 12th U.E. Civil Service District $1620 San Francisco. Calif. p.a. Soil Conservation Svd $3800 Albuquerque, N. Mex. p.a. Playground Supervisor Jr. Civil Service Examiner Assistant Chief, Regional Personnel Management Division City 19 $ To From 19 To 19. To 19 From 19 To 10-07 IF MORE SPACE 19 IS REQUIRED. CONTINUE YOUR ENTRIES ON A SEPARATE SHEET ARRANGED AS ABOVE UNITED STATES CIVIL SERVICE COMMISSION WASHINGTON D.C. TEMPORARY APPOINTMENT, TRANSFER, REINSTATEMENT, OR PROMOTION, ETC. (NONCOMPETITIVE) Rating Application No. The applicant will carefully All ALL blank spaces Position sought (Give exact title of position or examination) in the (Office in which the position exists) Admin Officer Present position (if now employed) (Title) SCS USDA (Department and bureau or office) N. B.-Applicant will write plainly full name (If woman, stating Miss whether address in here the below applicant's address until notification Commission writing Name of Applicant Vaughn B. Ferguson Number and Street 925 W. New York Ave Post Office Albuquerque County Bernalillo State or Territory New Mexico Applicant will not All the following blanks Kind of examination Place Date Application By whom approved approved 19 443 TREASURY DEPARTMENT Hense INTER OFFICE COMMUNICATION DATE June 6, 1941 TO FROM Ferdinand Kuhn, Jr. Alan Barth FALTERING IN THE RANKS Unity Developments of the past week have sapped the sense of resolution and exaltation which followed the President's fireside talk: (1) The President's press conference on the day following his radio address was construed, both by reporters and by editorial commentators, as diluting the implications of his emergency proclamation. It struck them as anti-climactic -- as a yielding to minority reluctance to run great risks of war. (2) Isolationists, led by Wheeler and Lindbergh, declined to acknowledge that the policy issue had been settled. They went right on with the debate, suggesting that America has not yet made a final choice even as to its leadership. An important minority, stubborn and unconvinced, continues to oppose the national program. (3) The property expropriation bill sponsored by the War Department opened a fresh cleavage. Almost all newspapers denounced it as unnecessarily drastic. Some conservative 444 -2commentators argued that it constituted a New Deal attempt to promote socialism under cover of the emergency. (4) President Roosevelt's speech raised public opinion to the expectation of swift and dramatic action. There appears to have been a letdown, a sense of disappointment, when conditions under the unlimited emergency proved to be much the same as they had been under the preceding limited emergency. News- papers reflect, above all, a keen dissatisfaction over continued strikes in defense industries. They are dejected over the failure of all segments of the country to fuse miraculously into a common purpose. Yet, despite these fissures, national unity has undoubtedly been advanced by the President's talk. The opposition has thinned. Such stalwart critics of Administration tactics as The Saturday Evening Post, The St. Louis Post-Dispatch and the Knight papers -- Detroit Free Press, Akron Beacon Journal, Miami Herald -- announced acceptance of the decision and pledged full support to the President's leadership. Felix Morley, who but lately espoused a negotiated peace acknowledging Hitlerian domination of Europe, found in Mr. Roosevelt's words "American leadership at its best." Throughout the country there has been a squaring of shoulders, a lifting of heads, a preparation for great events. 445 -3 Defense Although the debate over national policy continues, it is pitched now upon a somewhat different level. The President's speech successfully shifted emphasis from aiding Britain to defending the Western Hemisphere. Current editorial comment shows general appreciation of the point that the vital American problem is to prevent Axis control of Atlantic sea lanes or island bases. The persistent question, consequently, is no longer if we will go to war against Germany, but if Germany, to forestall our defense, will go to war against us. The press seems increasingly aware, also, of the fact that this war is being fought on the psychological, as well as on the military, plane. There are rather frequent editorial demands for a more positive statement of democratic purposes. Anthony Eden's recent outline of British war aims manifestly did not satisfy this demand. It was politely applauded in some American newspapers because it paid respects to President Roosevelt's four freedoms and to Secretary Hull's plea for free markets and free sources of raw materials. Other commentators, however, were distressed by the British Foreign Minister's insistence on punitive measures against Germany and charged him with traditional thinking out of which no fresh pattern of societal organization would be likely to emerge. 446 -4The demand at this stage -- and it comes mainly from liberal sources -- is not for any rigid blueprint of peace terms, but for the formulation of basic principles on which a rational political and economic order can be built. Only by presenting an affirmative program of this sort, the liberals insist, can democracy be given the dynamism needed to combat the so-called new order of the totalitarians. Discouragement Newspapers focussed American attention on the Battle of Crete. Because of the novelty and drama of the struggle there, the defeat suffered by the British seemed far more impressive than the victory which they won at about the same time in Iraq. Editorial opinion, consequently, is extremely pessimistic over the entire British situation in the Mediterranean. The Cretan disaster has been attributed by a good many military commentators to inferior generalship, as well as to inferior equipment. There appears to be a growing feeling here, in fact, that the British have been outgeneraled by the Germans all along the line. And this distrust of British military leadership is being cast in some degree upon our own Army and Navy chiefs. There is suspicion that they are exhibiting less imagination and daring in their war plans than the German General Staff. 447 -5The form which this criticism most commonly takes in the American press is a demand for an independent air force. Amateur strategists have been suddenly persuaded by the German aerial triumph over Crete and by the sinking of the Bismarck, partially through the use of naval planes, that great armies and navies may be outmoded. Our Generals and Admirals will no doubt be subjected to a quantity of clamor for some time to come. The public is beginning to think in terms of military tactics rather than of diplomatic strategy. 448 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE June 6, 1941 Ferdinand Kuhn, Jr. TO FROM Herbert Merillat PRESS TAX OPINION: EPT PLAN DIES UNMOURNED Press comment on taxes continues to be small in volume. There is an air of watchful waiting as the Ways and Means Com- mittee gets down to the business of writing a tax bill. Meanwhile the press is absorbed in other matters. Excess Profits Tax The press seems to have taken for granted the demise of the Treasury's excess profits tax plan in the Ways and Means Commit- tee. Press opponents of the plan were confident from the outset that this would be its fate. Neither the announcement of the Treasury plan nor its quiet death in Committee aroused the comment which could have been expected if the Committee had shown signs of favoring the EPT proposals. So far there has been no editorial comment on Secretary Morgenthau's statement indicating that efforts will be made to revive the victim. The Committee cannot base its rejection of the Treasury's EPT program on any widespread press demand for such action. True, the plan was attacked by the oracles of business and papers 449 -2which consistently oppose almost any Administration proposal, but smaller papers in general have been noncommittal toward the Treasury plan and have emphasized the need of an effective EPT. The Treasury proposals have frequently been misrepresented in the press. One anti-Administration stalwart asserted that the Treasury regards 4 per cent on invested capital as a proper maximum return for all corporations. The 2/3 - 1/3 Formula With regard to the Budget Bureau's report that Federal expenditures in the fiscal year 1942 are likely to exceed 22 billions, headlines have announced that the Treasury expects to abandon its formula to raise 2/3 of the needed money by taxation, 1/3 by borrowing. The Wall Street Journal attributed the dropping of the formula to Treasury fears that Congress will balk at raising even as much as 3 billions by additional taxes. U. S. and British Taxes Reversing the earlier tendency to say that Americans are not taxed as heavily as the British, the press in recent weeks has circulated fairly widely the report of the Tax Foundation showing that the American per capita tax burden was about the same as the British before the war, and is soon likely to be as 450 -3great as the present British burden. The report of the staff of the Joint Committee on Internal Revenue Taxation, to the same effect, is now getting publicity. Collier's has devoted an editorial to the same story. Prepayment of Taxes The Treasury's plan to issue certificates which can be used to pay taxes has continued to meet almost universal approval. The only sour notes have come from a very few conservative papers which deplore the plan as an encouragement of loose personal budgeting. Sales Tax The Wall Street Journal and Nation's Business still speak hopefully of a general sales tax and predict that Congress will seriously consider such a tax. A syndicated editorial, praising the tax as a money-getter and pointing out La Guardia's apostasy on the sales tax issue, continues to get fairly wide circulation in small-town papers. 6-6-41 451 [PUBLIC LAW 101-77TH CONGRESS] [CHAPTER 174-1ST SESSION] [H. R. 4466] AN ACT To authorize the acquisition by the United States of title to or the use of domestic or foreign merchant vessels for urgent needs of commerce and national defense, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That whereas Congress has power to provide for the common defense and general welfare and to regulate commerce with foreign nations and whereas for this purpose embargo Acts and nonintercourse Acts have from time to time been passed and whereas the commerce of the United States is at the present time interrupted and the general welfare of its citizens is threatened and an emergency has been declared. for the purposes of national defense, during the existence of the national emergency declared by the President on September 8, 1939. to exist, but not after June 30. 1912. the President is authorized and empowered, through such agency or officer as he shall designate, to purchase, requisition, for any period during such emergency charter or requisition the use of, or takeover the title to, or the possession of, for such use or disposition as he shall direct, any foreign merchant vessel which is lying idle in waters within the jurisdiction of the United States, including the Philippine Islands and the Canal Zone, and which is necessary to the national defense: Provided. That just compensation shall be determined and made to the owner or owners of any such vessel in accord- ance with the applicable provisions of section 902 of the Merchant Marine Act. 1936. as amended: Provided further, That such compensa- tion hereunder shall be deposited with the Treasurer of the United States. and the fund so deposited shall be available for the payment of such compensation, and shall be subject to be applied to the payment of the amount of any valid claim by way of mortgage or maritime lien or attachment lien upon such vessel, or of any stipulation therefor in a court of the United States, or of any State, subsisting at the time of such requisition or taking of title or possession; the holder of any such claim may commence within six months after such deposit with the Treasurer and maintain in the United States District Court from whose custody such vessel has been or may be taken or in whose territorial jurisdiction the vessel was lying at the time of requisitioning or taking of title or possession, a suit in admiralty according to the principles of libels in rem against the fund. which shall proceed and be heard and determined according to the principles of law and to the rules of practice obtaining in like cases between private parties; and such suit shall be in the manner provided by section 2 of the Suits in and service of process manner Admiralty commenced Unitedupon shall the States be made attorney in the therein provided by Act service and by mailing by registered mail to the Attorney General and the United States Maritime Commission and due notice shall under order of the court be given to all interested persons, and any decree shall be 2 (Pus. Law subject to appeal and revision as now provided in other cases of admiralty and maritime jurisdiction: Provided further, That if the Maritime Commission, after consideration by it of evidence submitted to it within ten days after the approval of this Act, shall find that on September 3. 1939, and continuously thereafter. any vessel was exclusively owned, used and operated for its exclusive sovereign purposes by a sovereign nation making claim therefor, such vessel may be taken under this section only by purchase or charter; and in determining said ownership, use and operation the Commission shall disregard (1) all contributions made in whole or in part at any time to the construction, repair, reconditioning, equipping or operation of said vessel, (2) all such matters, in nature similar to or dissimilar from, the foregoing clause as in the opinion of the Commission are immaterial or irrelevant to the determination of such ownership. Use of such vessel at any time since September 3, 1939, in commercial trade shall be presumptively deemed to show that said vessel is not owned, used and operated by a sovereign nation for its sovereign purposes. The final determination by the Maritime Commission shall be conclusive: Provided further, That if any vessel shall be found under the proviso next preceding to be exclusively owned, used and operated by any sovereign nation SO that it can only be chartered or purchased, and such vessel shall be chartered or purchased, then the cash to be paid for said charter or purchase, to the extent that may be necessary, after payment of existing claims and liens of creditors against said vessel, shall be held for application upon such debt, if any, as may be due to the United States from the sovereign nation so found to have exclusive ownership to said vessel: Provided further, That the Maritime Commission and the Department of Justice are authorized to make just provisions out of funds provided in section 2 of this Act for employees displaced by the taking of any ship hereunder and report to the Congress their action within thirty days after the enactment of this Act. SEC. 2. Funds appropriated by the Act of March 27, 1941 (Public Law 23, Seventy-seventh Congress), are hereby made available to carry out the provisions of section 1 hereof, including payment of the costs of repair, reconstruction, or reconditioning necessary or incidental to the use or disposition under this Act of vessels acquired, or the use or possession of which is acquired, under such section. SEC. 3. (a) During the national emergency declared by the President on September 8, 1939, to exist, but not after June 30, 1942, the United States Maritime Commission, whenever it finds that vessels in addition to those otherwise available are necessary for transporta- tion of foreign commerce of the United States or of commodities essential to the national defense, is authorized, notwithstanding any other provision of law, (1) to charter any vessel, whether undocumented or documented under the laws of the United States or of a foreign country, deemed by the Commission to be suitable for such transportation, without regard to the provisions of section 3709 of the Revised Statutes, on a time-charter or bare-boat basis, upon such terms and conditions, and for such period or periods, as the Commission may deem necessary or desirable in the public interest, and at such rate of hire as it may deem to be fair and reasonable in view of the attendant circumstances, and (2) to charter any vessel chartered by the Commission under clause (1) hereof to a private oper- 6-6-41. 3 [Prs. LAW 101.] ator, a citizen of the United States (including a corporation, nership, or association, only if it is a citizen of the United States part. within the meaning of section 2 of the Shipping Act, 1916, as amended), or to any department or agency of the United States Government, without regard to the provisions of title VII of the Merchant Marine Act, 1936, on time-charter or bare-boat basis, for use in any foreign trade or service or as otherwise hereinafter vided, upon such terms and conditions, for such period or periods, proand subject to such restrictions as the Commission may deem necessary or desirable for the protection of the public interest, and at such rate of hire as it may deem to be fair and reasonable. Any department or agency of the United States Government is authorized to enter into such charters. All moneys received by the Commission under the provisions of this subsection shall be deposited in the construction fund of the Commission, and all disbursements made by the Commission in carrying out the provisions of this subsection shall be paid from such fund. (b) The Commission is authorized to provide such insurance and reinsurance with respect to vessels (including any interest of the owner or charterer) chartered, purchased, requisitioned, or the title to which or the possession of which is taken over, under this Act, as it may deem necessary in connection with the operation, use, or disposition thereof under this Act, whenever it appears to the Commission that adequate and satisfactory insurance is not otherwise obtainable at reasonable rates and upon reasonable terms and condi- tions, The fund established pursuant to Public Resolution Numbered 94, Seventy-sixth Congress, approved July 18, 1940 (54 Stat. 766). shall be available for all purposes of this subsection: and all moneys received from premiums and from salvage or other recoveries and all receipts in connection with such insurance shall be deposited to the credit of such fund. and all disbursements made by the Commission in carrying out the provisions of this subsection. including the payment of return premiums and all liabilities incurred hereunder. shall be paid from such fund. The provisions of sections 225 and 226 (a) to (e), inclusive, of the Merchant Marine Act, 1936, as amended, shall be applicable in the administration of this subsection. (c) Nothing in this Act shall be construed to modify or affect any provision of the Neutrality Act of 1939. as amended. SEC. 4. Whenever the United States Maritime Commission is authorized to charter vessels under section 3 hereof, it is further authorized, notwithstanding any other provision of law. to purchase any vessel, whether undocumented or documented under the laws of the United States or of a foreign country, deemed by the Commission to be suitable for transportation of foreign commerce of the United States or of commodities essential to the national defense. without regard to the provisions of section 3709 of the Revised Statutes, at such price and upon such terms and conditions as it may deem fair and reasonable and in the public interest. Such vessels and vessels otherwise acquired by or made available to the Commission may be chartered as provided in section 3 of this Act, or operated by the Commission the upon such terms and conditions as it may deem desirable and in public interest, giving primary consideration to the needs of national 4 (PUB LAW 101 defense: but no vessel constructed under the provisions of the Mer. chant Marine Act, 1936, as amended, may be chartered to a private operator hereunder. All moneys received by the Commission under the provisions of this section shall be deposited in the construction fund of the Commission, and all disbursements made by the Commis- sion in carrying out the provisions of this section or section 5 (f) (except as provided in section 2) shall be paid from such fund. SEC. 5. (a) Notwithstanding any other provision of law, during the effective period of section 3 of this Act, any vessel (except a vessel constructed under the provisions of the Merchant Marine Act, 1936, as amended), not documented under the laws of the United States, acquired by or made available to the Commission under this Act or otherwise, may (1) in the discretion of the Secretary of Com. merce be documented as a vessel of the United States under such rules and regulations or orders, and with such limitations, as the Secretary of Commerce may prescribe or issue as necessary or appropriate to carry out the purposes and provisions of this Act; and (2) in accordance with the provisions of subsection (c) hereof engage in the coastwise trade when so documented. Any document issued to a vessel under the provisions of this Act shall be surrendered at any time that such surrender may be ordered by the Secretary of Commerce. No vessel, the surrender of the documents of which has been so ordered, shall, after the effective date of such order, have the status of a vessel of the United States unless documented anew. (b) Notwithstanding any other provisions of law, the President may, by rules and regulations or orders.waive compliance with any provision of law relating to masters, officers, members of the crew, or crew accommodations on any vessel documented under authority of this Act to such extent and upon such terms as he finds necessary because of the lack of physical facilities on said ships, and because of the need to employ aliens for their operation. No vessel shall cease to enjoy the benefits and privileges of a vessel of the United States by reason of the employment of any person in accordance with the provisions of this subsection. (c) Any vessel while documented under the provisions of this Act, when chartered hereunder by the Commission to other Government agencies or departments or to private operators, may engage in the coastwise trade under permits issued by the Commission, which is hereby authorized to issue permits for such purpose pursuant to such rules and regulations as it may prescribe. The Commission is hereby authorized to prescribe such rules and regulations as it may deem necessary or appropriate to carry out the purposes and provisions of this Act. (d) The second paragraph of section 9 of the Shipping Act, 1916, as amended, shall not apply with respect to vessels chartered to other Government agencies or departments or to private operators under section 3 or section 4 of this Act. (e) Existing laws covering the inspection of steam vessels are hereby made applicable to vessels documented under this Act only to such extent and upon such conditions as may be required by the regulations of the Board of Supervising Inspectors with the approval of the Secretary of Commerce: Provided, That in determining to what extent those laws should be made applicable, due consideration 5 (Prs. LAW 101.) shall be given to the primary purpose of transporting commodities essential to the national defense. (f) The Commission without regard to the provisions of section 3709 of the Revised Statutes may repair, reconstruct, or recondition any vessels to be utilized under this Act. Any other Government department or agency by which any vessel is acquired or chartered, or to which any vessel is transferred or made available under this Act may, with the aid of any funds available, and without regard to the provisions of said section 3709, repair, reconstruct, or recondition any such vessels to meet the needs of the services intended, or provide facilities for such repair, reconstruction, or reconditioning. (g) In case of voyage of a vessel documented under the provisions of this Act is begun before the date of termination of the effective period of section 3, but is completed after such date, the provisions of this section shall continue in effect with respect to such vessel until such voyage is completed. (h) When used in this Act, the term "documented" means "registered" and "enrolled and licensed". Approved, June 6, 1941, 11 a. m., E.S.T. 452 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE June 6, 1941 TO Secretary Morgenthau FROM Mr. Cochran When we received the attached cablegram of May 7 from Ambassador Armour at Buenos Aires, you asked me to look into the question of the movement of dollar funds to Argentina, with the view to possibly setting forth information on this point in a letter to Secretary Hull. Since that time we have studied this question rather carefully and have ob- tained considerable data from the Federal Reserve Bank at New York. The appended memorandum prepared by Mr. Hawkey summarises the situation, from which it would appear that there is no real basis for a communication from the Treasury to the State Department. The most interesting point developed is that Argentina's net exports to the United States in the first quarter of this year yielded nearly $20,000,000. This certainly indicates a better situation in Argentina's foreign exchange position vis-a-vis the United States than Mr. Prebisch anticipated when he was negotiating the Argentine Stabilisation arrangement with us. As you are aware, the Argentine Parliament has not ratified this agreement. Consequently, it was not possible for the Argentine Government to give us the thirty days' notice required for extension of this agreement, which was drafted to expire on June 30 of this year. BMK. 453 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE June 2, 1941 TO Mr. Cogitan FROM Mr. Hawkey Subject: Movement of Funds to Argentina. An Argentine cable dated May 7 (No. 407 from the American Embassy in Buonos Aires) observes that there has been an "increasing influx of dollars seeking investment in Argentina", with an inflow of $25 million on May 4 and 5 reported by the Buenos Aires exchange market. This report may refer (1) to transfers of foreign-owned (non-Argentine) dollar balances from this country to Argentina, or (2) to the repatriation of Argentineowned funds. In either case, our information suggests that the report is greatly exaggerated. 1, From our records, it appears that no appreciable transfer of foreign-owned dollar balances to Argentina has occurred this year, either by conversion into pesos or by the acquisition of third-party dollar deposits on the books of Argentine banks. Resort to either of these two methods of capital transfer would lead to a corresponding rise in Argentine gold and dollar holdings here, assuming that Argentine banks, when crediting a foreigner with a dollar deposit on their books, follow the conservative banking practice of holding a counter-value in dollars or gold in their own New York accounts. (They might hold the counter-value in the form of American securities; our S.E.C. reports, however, inuccate that Latin American security purchases have not been overly large this year.) Emmination of changes in Argentine gold and dollar balances since the end of last year reveals that their total holdings only rose $14.3 million between the end of last year and May 21, 1941. Argentine Short-term Balances in New York (In millions of dollars) Central Bank - Gold and Dollars Private banks - Dollars Total 12/31/40 4/30/41 5/21/41 $ 88.7 $ 110.2 $ 126.3 97.9 89.5 74.6 $186.6 $ 199.7 $ 200.9 Moreover, since Argentina's net exports to the United States in the first quarter of this year yielded nearly $20 million, it seems clear that most of the rise in Argentine holdings as resulted from the accumulation of dollars on trade account. This conclusion is supported by a study of movements in Argentine dollar accounts. The increase of $37.6 in Central to mainly transfers from million holdings Bank was due private Argentine balances office An examination has one principally from the dollar accounts of the Banco de la Provincia, Banco de la Nacion and of thelarger the dollar B.A. deposits of the Bank London and So. America. of of bothofthe Banco de la Provincia and thebeen Bancomade de la Nacion. It has been found that no large sums have been paid into these accounts; such credits as been received represent largely the proceeds of Argentine exports or other legitimate transactions. 454 -2- There is no doubt that some movement of foreign capital to Argentina has occurred: In the exchange market, the free peso has experienced occasional periods of strength in terms of the dollar, and more than once, these periods have been accompanied by American "freesing" rumors and a reported European demand for pesos. But the free peso market is extremely thin, and a relatively small demand exerts an undue influence on the rate. As for foreigners building up dollar deposits with Argentine banks, this method of capital transfer has been used at least to an extent sufficient to bring about the adoption of preventive measures by the Argentine authorities. In a circular issued by the Argentine Central Bank on May 12, the latter reported that Argentine commercial banks have frequently received offers of foreign money deposits from abroad, only a part of which have been accepted by the banks, owing to the unproductive nature of such deposits, and the unnecessary risks involved (referring, no doubt, to the complications resulting from a general freezing order here). The Central Bank requested the banks not to accept any more foreign money deposits appearing to represent flight capital, and urged that the banks bring about the conversion of existing foreign money deposits into Argentine pesos. 2. From the table shown above, it can be seen that Argentine commercial banks have rensferred sizable amounts of dollars to the Central Bank, presumably receiving pesos in exchange. The reports contained in cable No. 407 may conceivably refer to this repatria- ion of private Argentine funds as an "influx of dollars seeking investment". But a ratriation of $25 million within two days seems highly improbable; our figures indicate it the commercial banks turned over to the Central Bank only $15 million during the first three weeks of May. 455 C 0 P C.3.2 60M 9-40 SPICE CORRESPONDENCE Federal Reserve Bank of New York Date: June 6, 1941. Files from: L. W. Knoke Mr. Buck of Central Hanover Bank & Trust Co. called today to say that they had received in United States currency $180,720 from Gerhard Schuts, 80 Wall Street (the representative in the United States of Reichskredi tges- ellschaft) with instructions to credit the amount to the Banco de la Nacion Argentina, Buenos Aires, for account of the Reichskreditgesellschaft, Berlin. This is the second such payment within eight days. In the first case Central Hanover received the following day a cable from Buanos Aires request- ing them to pay the amount to the debit of the account of the Banco de la Nacion Argentina to the Chase National Bank for account of the Reichabank. Mr. Buck is expecting similar instructions in this instance. The notes were turned in to us today by the Central Hanover. The bundles are all in our original straps and our original binders. I looked them over this afternoon and found that the 100's show the date May 7. 1941, the 20's September 13. 1940, the 50's December 6, 1939. or possibly earlier. All dates, I am told, were put on by the Federal Reserve Bank and indicate the day on which the notes were counted. The 100's also bear the stamp May 19, 1939. This, I understand, was the day on which the packages were made up in Washington. The 100's and the 50's all show in pencil the number 23 which may be the Guaranty Trust Company Clearing House number. The 20's showed no such number. LWK:KW eh:copy 6-9-41 456 C 0 P Y Federal Reserve Bank of New York MISC. 3.2 60M 9-40 OFFICE CORRESPONDENCE Date: June 6, 1941. for Files From: L. W. Knoke Several days ago Mr. Funck, of the Chase National Bank, called to say that they had received in San Francisco from the Chase in Shanghai two shipments of U. S. currency totaling $550,000. He estimated that for the whole of 1941 the total of such shipments did not exceed $1,000,000 and that in 1940 the amount had been very small. They had recently advised their Shanghai office that if it wanted to make currency shipments to the States, New York wanted to be advised first and incidentally wanted to have the insurance covered here. They had also indicated to Shanghai that they presumed Shanghai would not handle the business if there was any Axis interest in these shipments. Since the last shipment had arrived Mr. Funck said Shanghai had advised him that there were no more coming. LWK:KW ehicopy 6-9-41 457 C 0 DEPARTMENT OF STATE P WASHINGTON Y reply refer to 862. 51/4866 June 6, 1941 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and transmits for his information and for such comment as he may desire to make a copy of a memorandum dated May 16, 1941 con- cerning transactions of W. V. Gibara & Co., 61 Broadway, New York, in German securities, together with a cony of a memorandum dated May 20, 1941, reporting the circumstances under which Mr. Stephen C. Kollmar, counsel for W. V. Gibara & Co., left the memorandum at the Department of State on May 20, 1941. Enclosures: 1. Memorandum of May 16, 1941. 2. Memorandum of May 20, 1941. 458 c OPY W. V. Gibara & Co. Sixty-one Broadway New York May 16, 1941. Following transactions were completed during the past three weeks - (1) We bought from Lamborn, Troup & Co. (ex Forstmann estate) 147,000. Reichemarks par value of Siemens & Halake A. G. common shares for $22,000 cash. (2) We bought from Lamborn, Troup & Co. (ex Forstmann estate) 500,000. Reichsmarks par value of Deutsche Bank und Disconto-Gesellschaft common shares for $38,000. cash. (3) Bought from U.S. and Foreign Securities Corporation, Jersey City, N.J., their claim against Vereinigte Stahlworke A.G., Duesseldorf, in the amount of $540,000., payable in ten annual instalments, for $40,000. cash. On all transactions we paid cash to the sellers while disposing of the shares and/or claim against blockmarks which were successively sold in Switzerland and Germany against dollars in New York. In addition we have also commenced to make cash advances against bills covering exports to South America from this country. W. V. GIBARA & CO. By W. G. Stephen C. Kollmar, Esq., 500 Fifth Avenue, New York, N. Y. DEPARTMENT OF STATE OFFICE OF THE ADVISER ON INTERNATIONAL ECONOMIC AFFAIRS May 20, 1941 ACTIVITIES OF W. V. GIBARA & CO. IN REPATRIATION OF GERMAN SECURITIES Mr. Stephen C. Kollmar. Mr. Livesey. Mr. Riddleberger. Having telephoned from New York yesterday for an appointment to discuss matters of interest to W. V. Gibara & Co., Mr. Kollmar came down by plane early this morning. He referred to the fact that his cousin, Herman Kollmar, had joined the firm of W. V. Gibara & Co. May 1 and said that Mr. Von Gibara and Mr. Herman Kollmar, in view of the possible interest attaching to their activities in dealing with German securities, wished to keep the Department informed thereof and to make full disclosure of what they were doing. In this connection he mentioned the Dies Committee. He brought forth a single-page statement dated May 16 and signed by Mr. Von Gibara, listing three transactions completed during the past three weeks, 459 460 -2- involving the purchase of obligations of German companies in the amount of 647,000 reichsmarks and $540,000, and said that Von Gibara & Co. are operating in this field of buying securities for cash and selling them to concerns in Buenos Aires for blocked marks which they sell in Switzerland and Germany against dollars in New York. Mr. Livesey said that having regard to Mr. Kollmar's statement that he was making disclosures of these activities as a self-protective matter, it must be understood that in bringing such information to the Department of State he was not submitting it to anyone having competent authority to pass upon it in any way as to legality or propriety or otherwise. Such activities are in a field subject to a variety of laws and regulations which concern different administrative and law-enforcing bodies. Such information is of interest from many points of view but Messrs. Livesey and Riddleberger were in no way competent to pass on these activities in a way which would protect W. V. Gibara & Co. Mr. Kollmar said he was satisfied as to the legality of the operations. Mr. Von Gibara and Mr. Herman Kollmar had very good business connections in Germany arising from their financial experience there in the past few years, during which, for example, Mr. Kollmar had passed long periods in Berlin as an officer of the Chemical National 461 -3- - - Bank engaged in collecting outstanding credits of the bank in Germany. They had gone into these activities because of their ability to handle transactions of this kind and because they could make money doing it. For example, in the third item, which concerns the purchase of $540,000 claims against Vereinigte Stahlworks A.G. for $40,000, they had sold the claims for $60,000, netting them some $18,000 profit. The previous owner, United States and Foreign Securities Corporation, was an affiliate of Dillon, Reed & Company. He displayed a letter setting forth the purchase arrangement and describing the claims as having arison under a contract made in 1927. Under the other two items they had acquired two lots of German securities which had been held in the Forstmann estate and had found a customer for them. He assumed that the purchases might ultimately be for account of the German companies whose securities or obligations were thus repatriated to Europe and probably purchased by the companies at a discount and credited at par on their books. In reply to questions he said that W. V. Gibara & Co. were not the only people engaged in this business but that they probably did a very large part of it. Herman Kollmar left the service of the Chemical National Bank voluntarily in view of the public attention. comment and odium which had followed from mention of his name in a report of the 462 -4-- Dies Committee. He had put a certain amount of money in with Mr. Von Gibara in order to build up working capital. The enterprise has a working capital of about $100,000 and can get credit if it engages in transactions which cannot be handled for that amount of capital. It banks with the Irving Trust Company. He did not know from whom payments for the blocked marks sold for Von Gibara account were received. They would merely receive notice from the Irving Trust Company that the latter had received instructions to credit such and such amount to their account. The Irving Trust Company would of course know on whose instructions it acted, but they would not know. He volunteered that they were in the business merely to make money. What they make remains in the United States. Mr. Von Gibara paid $25,000 income tax to the United States on his 1940 income of $63,000 although he has been in this line of business only since last October. They had also thought of going into shipbuilding. They are business men seeking ways to make money. The South American transactions mentioned in the last paragraph of Mr. Von Gibara's were a now venture unrelated to their activities in German securities. In further explanation he said that there are many Jews in New York owning German securities or claims on German organizations. Von Gibara & Co. deal with them on the one side and with the Germans on the other. They 463 -would be very glad at any time to have any representative of the United States Government come to their office, look over their books and inquire into their activities. He said that in addition to their dealings with Americans, Mr. Von Gibara had also had dealings with English sellers of German securities or of claims on Germany, including standstill credits. These transactions had of course to be made under permit of the Bank of England and the Ministry of Economic Warfare. Unexpectedly two consignments of securities in transit to Buenos Aires, one of which was securities which they had purchased from British sources under these auspices, had been held by the British censors at Trinidad. Mr. Kollmar said he had asked the services of their London counsel, Slaughter & May, and had received from them a telegram which he produced, which said that the British attitude on these matters had changed on its being discovered that the securities were being sold to Germans. Mr. Kollmar smiled at this "discovery" and said that these transactions had been going through with British approval as recently as March. Possibly these April deals had merely fallen into the wrong hands. He still thinks, confidentially, that in spite of this unexpected hitch the British wish to continue collection of standstill credits from Germany through this procedure, which enables the British to obtain dollars for these blocked credits. 464 - -6- - In these transactions, title passes to Germans at Buenos Aires. The securities are presumably shipped to Europe via the Italian air line. He had heard that several hundred bonds had been lost when an Italian airliner crashed. Asked whether the three items totalling $100,000 cash spent by the firm in "transactions completed during the past three weeks" was a full statement of the firm's transactions during that period, he said the firm has not been active in picking up small lots of securities which were frequently offered them. There is some market for such securities in New York but it is not very active and he thinks German repatriation transactions at the present time involve much smaller amounts than they did some time ago. Some months ago Mr. Von Gibara's purchases, he thought, had caused prices to rise. The Germans will buy at a price but will not follow prices up no matter how long they have to wait. Of course if Germany wine the war, holders will have a very good thing; if Germany loses, the securities will be worth nothing. Mr. Kollmar talked very easily and with an apparent wish to give any desired information. He had evidently brought along a number of documents on which he found no occasion to draw during the discussion. 465 -7Mr. Livesey said that he would make a report on the conversation and it would be circulated to various other officers for their information and possible comment. Mr. Kollmar asked whether it would go outside the Department. Mr. Livesey said he could accept no stipulation that it should not. Mr. Riddleberger suggested that Mr. Kollmar meant "outside the Government". Mr. Kollmar accepted this suggestion and said he hoped information would not be given to private parties or to the Dies Committee, which would be sure to make a big noise about it. He added the firm is glad to give full information regarding completed transactions, but would prefer not to do so concerning uncompleted transactions, where the business might be lost to the firm if information leaked out. Mr. Livesey said he did not know whether the Department would care to have Mr. Kollmar come down from time to time to make oral reports, as he suggested, or make written reports, as he had also suggested. Information in his field has a certain interest of course from several points of view. Mr. Kollmar said he hoped the Department would write him concerning his suggestions in a week or two. Mr. Riddleberger left but Mr. Kollmar lingered on for a moment or two contemplating his mission. He volunteered that the firm some time since went to the Justice Depart- ment agents in New York and told them all about their activities. -- 466 It was at this point that he spoke in a confidential way of the firm's expectation that the British will still wish to liquidate German credits through the firm in spite of their "discovery" of what they have been doing. He referred again to the Dies Committee and to the heated atmosphere. Finally he said that if my report elicited adverse comment on the firm's activities, they might be disposed to discontinue them. EA:LIVESEY:MSG bj:alm:eh:copy 6-9/41 467 C 0 DEPARTMENT OF STATE P WASHINGTON Y reply refer to A 840.51 Frozen Credits/1814 June 6, 1941 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses two copies of a paraphrase of telegram no. 297 dated May 28, 1941 from the American Legation at Budapest, Hungary, regarding Hungarian funds which are blocked in the United States. Enclosure: No. 297, May 28, from Budapest. (2) 468 Y PARAPHRASE OF TELEGRAM SENT TO: American Legation, Budapest, Hungary. DATE: May 28, 1941, 10 p.m. NO.: 297. Reference is made to the Legation's telegrams nos. 288 and 315 dated May 15 (6 p.m.) and May 24 (2 p.m.), respectively. It would appear that the Hungarian Government does not have a clear picture of the matter. The Treasury Department has granted licenses permitting all payments requested for expenses of the Hungarian diplomatic and consular establishments in this country, and it knows of no warning that the use of the Hungarian Legation's cash for such expenditures for June would not be allowed. In fact the Treasury has now in the regular course issued a license for the payment of such expenses for June and such payments may be made out of the Legation's cash if so desired by the Legation. Concerning the funds for the upkeep of the Hungarian missions in South America, Treasury has authorized the transfer of $20,000 to the Hungarian Legation in Buenos Aires and $20,000 to the Hungarian Legation in Rio de Janeiro from the cash funds which the Hungarian Legation at Washington holds. Department understands that the amounts transferred were adequate to cover current needs. Difference of opinion existed only on the question of lump-sum payments to Hungarian missions in South America 469 -which would be enough to take care of their requirements over a three-year period. The policy and practice of the Treasury is not to authorize transfers covering periods as long as three years; however, the Treasury has in the past and is willing in the instant case to authorize transfers to cover current expenditures on a monthly basis or some other basis that is reasonable. The Treasury has met every request presented to it with regard to the expenses of the Hungarian missions in Canada and for repatriation of the Hungarian missions in Great Britain and Canada, including the payment of $10,000 which recently was licensed to cover traveling expenses of the Hungarian mission returning from the British Isles via New York. No licenses covering the expenses of the Hungarian mission in Japan have been granted by the Treasury but, considering the circumstances, the Treasury is prepared to authorize transfers of funds from the cash which the Legation holds to cover current expenses of the Hungarian mission in Japan on a monthly basis or some other basis of a reasonable kind. Treasury will do the same with regard to the expenses in Portugal and Spain. In the event that the above arrangements are, in your discretion, insufficient to adjust the matter, you may inform the Hungarian Government that the Treasury 470 -3- will license the lump-sum payments which are desired by the Hungarian Government as soon as an American bank receives a deposit of the cash funds. HULL (AAB) 840.51 Frozen Credits/1814 EA;FL:Pak EU EA:MSG Copy:bj:mgtam:6-6-41 471 Memo for Secretary: Appended is a memorandum which I would like to have you glance at. ) It is a preliminary and incomplete draft which I can shorten, tone down, tighten up, and modify if you think that the general idea contained therein can be of any use to you. 6/6/41 free HDW 472 STRICTLY CONFIDENTED. White May 1941 I. The Franco-British brand of diplomacy emulated by our own State Department appears to have failed miserably. Due to half-measures, miscalculations, timidity, machinations or incompetence of the State Departments of the United States, England and France, we are being isolated and we find ourselves rapidly moving toward a war which can be won by us under present circumstances only after a costly and bitter effort and only with a terribly dangerous aftermath. Granted the necessity for being optimistic about the outcome of a war in which before many years we alone may be fighting a victorious Germany (with Japan and Italy as her allies, and with the whole of Europe turning out equipment for them), it would be fatal to let such optimism obscure the difficulty of the task confronting us and prevent us from taking drastic steps to strengthen our position while there yet remains time. It is becoming increasingly evident that diplomatic preparedness is as important an instrument of defence as is military preparedness. Military activity may win battles, diplomatic activity can make the fighting of these battles unnecessary; military victories can gain raw material and equipment and can weaken the enemy, diplomatic victories can do the same. Without major diplomatic victories Germany could not have attained her spectacular success. Had they not suffered major diplomatic defeats neither England nor France would be in their present predicaments. But to be effective, diplomacy, like an army, must use modern equipment and employ modern strategy. An "all out" effort involves in diplomacy as in military strategy the TRICTLY CONFIDENTIAL -2- 473 fullest use of every economic and political advantage. In the field of diplomacy many opportunities for successful strategy are open to a country like the United States. A rich country can do things a poor one cannot; a democratic country, having no expansionist ambitions, has advantages a totalitarian country bent on agression has not; a government that has never broken its international pledges has advantages that governments which have repeatedly done 80 cannot claim. These advantages must be utilized to the fullest in modern diplomatic activity if it is to have any chance of success, just as our military forces in preparation for defence or in actual warfare must make intelligent use of our geographical position, our rich resources, our vast labor power, technical equipment and democratic traditions. In the light of requirements and possibilities of modern diplomacy, the efforts of American foreign diplomatic manouver- ing during this grave crisis in the world's history have been pathetic. It has consisted of a 19th century pattern of petty bargaining with its dependence upon subtle half promises, irritating pin pricks, excursions into double dealing, and copious pronounciamentos of good will alternating with vague threats -- and all of it veiled in an atmosphere of high secrecy designed or at least serving chiefly to hide the essential barrenness of achievement. Our diplomatic maneuver- ing is proving as futile in strengthening our international position or in keeping us out of a difficult war as was the equipment and strategy of the Polish Army in the task of defending Poland. Virtually surrounded by a world ablaze, and with the fire growing hotter, and nearer and more dangerous, our -3- 474 diplomatic machinery concerns itself chiefly with maintaining a facade of important goings-on, an appearance of assured and effective functioning, whereas behind that front is largely hesitation, bewilderment, inaction, petty maneuvering, sterile conversations, and diverse objectives. Here and there, now and then progress is made but on a scale that 18 completely inadequate to the task in hand. Where modern diplomacy calls for swift and bold action, we engage in long drawn out cautious negotiation; where we should talk in terms of billions of dollars, we think in terms of millions; where we should measure success by the generosity of the government that can best afford it, we measure it by the sharpness of the bargain driven; where we should be dealing with all-embracing economic, political and social problems, we discuss minor trade objectives, or small national advantages; instead of squarely facing realities, we persist in enjoying costly prejudices; where we should speak openly and clearly, we engage in protocol, in secret schemes and subtleties. We must out loose from that outmoded and decayed pattern of diplomacy. We must substitute, before it is too late, imagination for tradition; generosity for shrewdness; understanding for bargaining; toughness for caution, and wisdom for prejudice. We are rich - we should use more of our wealth in the interests of peace and victory. We are powerful - we should be willing to use our power before our backs are to the wall. We need no nation's lands - we should make full use of that fact. We keep our national pledges - now is the time that record of integrity should stand us in good stead. We are protected by two oceans - let us exploit that protection 475 -4while distance is still a potent barrier. We are a democracy let us take full advantage of the strength of open covenants openly arrived at, where such covenants are in the interest of people in every land. The longer we wait the less chance will we have to use diplomacy as an aid to our defence. The patterns of rela- tionship jell; plans become irrevocable; opportunities lost are gone forever. A nation committed irrevocably to a course of action loses the power to exercise choice, to accept offers and make conditions. If ever there was a time when diplomacy could secure its most brilliant victories for the United States, now is that time 1 The proposed program of diplomatic effort given below will be called naive and visionary. It will be laughed at by the professional diplomats, but their ridicule will not alter our desperate situation, nor will their traditional method of handling the situation lead to any better results than have the efforts of their colleagues in England and France. I am convinced the proposal is workable and could be spectacularly successful. I am equally convinced the particular proposal, or anything resembling it will not be adopted nor, I fear, even get a serious hearing unless pushed, in the beginning at least, by high officials outside the State Department, yet the stakes are 80 great I believe it 18 worthwhile making a strenuous effort to get a new diplomatic offensive started. The proposal consists of two parts. Part I deals with our relations with Japan; Part II deals with our relations with Russia. 476 -5Each proposal is given below only in bare outline and in only enough detail to indicate the essential point. Obviously, 1f and when the proposal is given serious consideration each of the enumerated points must be elaborated carefully, with appropriate conditions spelt out, loopholes or evasion blocked, and adequate protective clauses added. 477 -6II. United States and Japan A. Whereas: War between the United States and Japan would cost thousands of lives, billions of dollars; would leave the vanquished country bitter and desirous of revenge; would foster social disruption, and would not insure peace during our children's lives, nor permanently solve troublesome problems now standing between the two countries, and Whereas: The United States is eager to avoid war, and is willing to go more than half way to settle peaceably the issues that stand in the way of more friendly intercourse between the two coun- tries, and Whereas: The United States recognizes that Japan, be- cause of the special nature of its economy, is greatly in need of opportunities for increased foreign trade, and in need of capital to repair the ravages of four years of warfare, and Whereas: The United States recognizes that injustice has been done to the Japanese people by our immigration laws, and 478 7- Whereas: The United States believes that in the long run the interests of both the Japanese people and the American people can best be served by establishing fair and peaceful conditions under which Japan and her neighbors can prosper, and Whereas: The United States is, because of numerous circumstances, powerful enough to destroy Japan should the United States be forced against her will to take up arms against Japan, and Whereas: The United States is rich enough in funds, raw material, equipment, and technical skill to build, if necessary, a Navy and air force ten times as strong as that which Japan can build, and Whereas: The United States wishes so much to avoid unnecessary bloodshed and destruction that it will pay well to help Japan's economy back to a peaceful and healthy basis, and Whereas: The United States wishes to help China maintain her independence and attain peace so that she may go forward in her political and economic development, 80 unfortunately interrupted in 1937, and -8Whereas: The United States believes there is no basic obstaole to permanent and more friendly relations between the United States and Japan and believes that the Japanese people will welcome an opportunity to restore peace, to reconstruct Japan's industry and trade, and to promote friendly relations with her neighbors on a basis fair both to Japan's needs and the needs of her neighbors, And finally -- and of most immediate importance -- Whereas: The United States wishes to concentrate as soon as possible her naval force in the Atlantic 80 as to be prepared for any emergency against a potential enemy with whom there is no our- rent basis for friendship. The United States proposes to enter into an Agreement with Japan at once under which the United States and Japan will agree to do certain things, as follows: B. On her part, the United States Government proposes to do the following: 1. To withdraw the bulk of the American Naval forces from the Pacific. 2. To sign a 20-year non-aggression pact with Japan. 3. To recognize Manchuria as a part of the Japanese Empire. 479 -9- 480 4. To place Indo-China under the Government of a joint British, French, Japanese and American Commission, which will insure most-favored-nation treatment for those four countries until the European War is ended, and which will govern the country primarily in the interests of the Indo-Chinese people. 5. To give up all extra-territorial rights in China, and to obtain England's agreement to give up her extra- territorial rights in China, and cede Hong Kong back to China. 6. To present to Congress and push for enactment a bill to repeal the Immigration Act of 1917 which prohibits immigration into the United States of Japanese, and place the Japanese and the Chinese on the same basis as other peoples. 7. To negotiate a trade agreement with Japan, giving her (a) most-favored-nation treatment and (b) such concessions on imports as can be mutually satisfactorily arranged, including an agreement to keep raw silk on the free list for 20 years. 8. To extend a $3 billion 30-year credit at 2 per cent interest, to be drawn upon at the rate not to exceed $200 million a year except with approval of the President of the United States. Half of the funds to be used to purchase the products of the United States, and the remainder to be used to purchase commodities of Latin American countries. 9. To set up a $500 million stabilization fund half supplied by Japan and half by the United States, to be used for the stabilization of the dollar-yen rate. -9 480 4. To place Indo-China under the Government of a joint British, French, Japanese and American Commission, which will insure most-favored-nation treatment for those four countries until the European War is ended, and which will govern the country primarily in the interests of the Indo-Chinese people. 5. To give up all extra-territorial rights in China, and to obtain England's agreement to give up her extra- territorial rights in China, and cede Hong Kong back to China. 6. To present to Congress and push for enactment a bill to repeal the Immigration Act of 1917 which prohibits immigration into the United States of Japanese, and place the Japanese and the Chinese on the same basis as other peoples. 7. To negotiate a trade agreement with Japan, giving her (a) most-favored-nation treatment and (b) such concessions on imports as can be mutually satisfactorily arranged, including an agreement to keep raw silk on the free list for 20 years. 8. To extend a $3 billion 30-year credit at 2 per cent interest, to be drawn upon at the rate not to exceed $200 million a year except with approval of the President of the United States. Half of the funds to be used to purchase the products of the United States, and the remainder to be used to purchase commodities of Latin American countries. 9. To set up a $500 million stabilization fund half supplied by Japan and half by the United States, to be used for the stabilization of the dollar-yen rate. C. 481 On its part, the Japanese Government proposes to do the following: 1. Withdraw all military, naval, air police forces from China (boundaries as of 1931) from Indo-China and from Thailand. 2. Withdraw all support -- military, political, or economic -- from any government in China other than that of the national government. 3. Replace with yen currency at a rate agreed upon among the Treasuries of China, Japan, England and United States all military scrip, yen and puppet notes circulating in China. 4. Give up all extra-territorial rights in China. 5. Extend to China a billion yen loan at 2 per cent to aid in reconstructing China (at rate of 100 million yen a year). 6. Lease at once to the U. S. Government for 3 years such naval vessels and airplanes as the United States selects, up to 50 per cent of Japan's present naval and air strength. Rental to be paid to be equal to 50 per cent of the original cost price per year. 7. Sell to the United States up to half current output of war material -- including naval, air, ordnance and commercial ships on a cost-plus 20 per cent basis as the United States may select. 8. Accord the United States and China most-favorednation treatment in the whole Japanese Empire. 9. Negotiate a 10-year non-aggression pact with United States, China, British Empire, Dutch Indies (and Philippines). 482 - 11 D. Inasmuch as the United States cannot permit the present uncertain status between the United States and Japan to continue in view of world developments, and feels that decisive action is called for now, the United States extends the above offer of a fair and peaceful solution of the difficulties between the two countries for only 30 days. If the Japanese Government does not indicate its acceptance of the proffered agreement before the expira- tion of that time, it can mean only that the present Japanese Government prefers other and less peaceful ways of solving those difficulties, and is possibly awaiting the propitious moment to carry out further a plan of conquest. In the event that Japan elected to reject the offer of peaceful solution under terms herein indicated, the United States would have to shape her own policy accordingly. The first step in such policy would be a complete embargo on imports from Japan. 483 - 12 - III. United States and Russia A. Whereas: The United States is desirous of improving its relations with Russia to the mutual benefit of both countries, and Whereas: There is no geographical area in which the economic interests of the United States and of Russia are in conflict, and Whereas: The United States is desirous of increasing its trade with Russia and believes that Russia 18 likewise desirous of increasing its trade with the United States, and Whereas: Russia produces some essential raw materials that the United States needs and the United States produces goods that Russia needs, and Whereas: The interests of the peoples of both countries are served by a restoration of world peace as rapidly as possible and the maintenance of that peace as long as possible, and Whereas: The interests of both countries are especially served by maintenance of peace in the areas bor- dering the Pacific Ocean, and - 13 - 484 Whereas: Both countries can maintain powerful military forces which can effectively supplement each other in the interests of preserving peace or checking aggression -- the United States chiefly in form of naval and air forces and Russia chiefly army and air force, and Whereas: Both countries have a great enough degree of economic self-sufficiency so far as Europe or Asia are concerned to carry out a program of economic collaboration without any significant lowering of the standard of living of either country, and Whereas: Both countries are eager to be able to devote more of their productive effort to improving the standard of living of the peoples and less of their effort to armaments. The United States proposes the following agreement with the Government of the U.S.S.R. B. On its part the United States Government will do the following: 1. Permit Russia to purchase up to $300 million a year in the United States of any kind of raw or finished material she may wish -- with certain exceptions noted in the appendix. 485 - 14 - 2. Permit Russia to maintain up to 5,000 technical men in the United States as students or experts in our industries. 3. Permit Russia to maintain 50 military and naval attaches who shall be permitted to participate in our military and naval maneuvers. 4. Extend to Russia a 10-year credit of $500 million to be used at the rate of not more than $100 million a year, except with the approval of the United States. The credit to be applicable only to purchases for her own use by Russia in the United States in any calendar year and not to exceed $200 million. 5. Enter into a 5-year Mutual Economic Assistance Pact under which the United States agrees to the following: (a) In the event of war between Russia and any major power, the United States will undertake to sell to Russia and to deliver to Russian ports military equipment or material out of current stocks such goods as Russia may desire up to $2 billion a year. The sale to be made on a costplus 10 per cent basis and 1/4 for cash and the remainder for a 20-year credit at 2 per cent interest. (b) To place an embargo on any imports whose origin is a country with which Russia is in a state of war and to impose an embargo against any exports, the destination of which involves a country with which Russia is in a state of war. (c) To at once undertake to prohibit all exports 486 to or from Germany or all countries which have been conquered by Germany. 6. Extend to Russia most-favored-nation treatment with respect to trade. C. The Russian Government on its part agrees to do the following: 1. Impose an effective embargo at once on all exports of any commodities to Germany or to countries conquered by Germany and also impose an embargo on all imports from those areas. 2. To prohibit the passage through Russian territory or waters of any goods, troops, or equipment under control of Germany or her Allies. 3. To sell to the United States up to $200 million of any commodities produced in Russia -- with conditions noted in appendix. 4. To effectively prohibit the export, directly or indirectly to the United States, of all propaganda whether in the form of material, literature, radio or economic support. 5. To settle the outstanding debts of the Russian Government to Americans under terms similar to those offered in 1933. 6. To conclude a non-aggression pact with the National Government of China. 7. To permit up to 5,000 American professional or technical men a year to freely inspect, or study, in Russian institutions and industries. - 16 8. To permit 50 United States military or naval observers to participate in the military maneuvers of the Russian forces. IV. The advantages of terms indicated above to the three countries are so great, and the disadvantages 80 small, that it is difficult to believe either the Japanese or Russian Government would hesitate to accept the offers. The advantages accruing to each government are listed below: A. To the United States 1. Our naval power will be greatly increased at once -- both by the freeing of our Pacific fleet for duty elsewhere, and by the addition of Japanese ships leased to us. 2. We would be able to send more of our equipment to England without increasing our vulnerability to an attack from the East. 3. We will have stopped the war in China and have regained for her her freedom. 4. We will have paved the way for a substantial increase in trade of non-war materials. 5. We would greatly strengthen England's position vis-a-vis Germany. 6. We will have saved ourselves from a war with Japan with all its terrible social, political and economic consequences. 487 7. The money it would cost us would be a very small 488 part of what we would save by not having to fight Japan, or by not having to be prepared for a two-ocean war. 8. A prosperous Japan and China can greatly help to restore our normal trade, and thus make easier our own transition to a peace time economy. 9. Insure for ourselves an adequate supply of manganese, and other scarce strategic materials from Russia; tin, antimony and wood oil and rubber from the Far East. 10. Deter Germany from undertaking acts of aggression in the Western Hemisphere because of the terms of the U.S.-Russian Economic Assistance Pact, and the danger that such a pact might be converted into a Mutual Assistance Pact. 11. Handicap Germany in its present military campaign and at the same time give great moral encouragement to the British people. 12. Reduce communist propaganda in the United States. 13. Our military forces could doubtless learn something from close contact with Russian forces. 14. Finally, we will have demonstrated that there are other ways of solving major international problems than by war. B. To Japan 1. Instead of being confronted with prospect of a more serious war and certain defeat in the end, she can have peace at once. 2. She can proceed at once to shift from a war economy to peace economy and at the same time experience prosperity rather than a serious depression. 3. She can withdraw from the China incident without loss of "face". 4. She can strengthen her currency and reduce her public debt. 5. Her foreign trade will greatly increase. 6. She can devote her energies and capital to reconstructing Japan, building up Manchuria, and developing new trade possibilities at a time when other countries are engaged in war or preparation for war. 7. She will at one stroke have solved some of her thorniest problems in her international relations. 8. She will avoid the danger of social disruption that is bound to take place in Japan after an expanded or prolonged war effort. C. To Russia 1. Give her assurance that the United States will not participate in war against Russia or encourage any other power to war against Russia. 2. Weaken Germany and make victory by Germany much more difficult. 3. Assure Russia a supply of machine tools and other materials she must have. 4. Greatly strengthen Russia in the event of a war against Germany. 5. Enable Russia to import more goods. 6. Convert the relationship between United States and Russia from one of thinly-disguised suspicion, dis- trust and hostility, to one of friendly promise. 7. Insure peace in the Far East for some time to come. 489 490 - 19 8. Her technicians and military observers could learn much from us. V. It would, of course, be necessary to obtain Congressional approval before making such offers. with proper preparation through preliminary confidential conferences with leaders of both parties and with appropriate committees, the ground could be prepared 80 that the act could be passed in a short time. A completed document could then be offered to the Japanese Government. The world, including the Japanese people, would know the motives and the contents of our offer. If the Japanese Government would not accept, it would have at least the advantages of (1) clarifying our own policy and rallying support behind the President, (2) create serious division in Japan. Whether the Russian Government accepted or refused we would know better just where she stood, and England and the United States could adjust their foreign policy accordingly. 491 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE June 6. 1941 Secretary Morgenthan TO Mr. Cochran FROM CONFIDENTIAL Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns £30,000 Purchased from commercial concerns £ 8,000 The Federal Reserve Bank of New York sold £10,000 to the American Express Company. Open market sterling remained at 4.03-1/4. and there were no reported trans- actions. The Canadian dollar eased further to close at a discount of 11-3/4%, as compared with 11-1/8% last night. The Argentine free peso again moved off to a final quotation of .2368, as against .2373 yesterday. Continuing its improvement, the Cuban peso moved from yesterday's quotation of 1-5/8% discount to a new three-year high of 5/8% today. The current strength in that currency is attributed to improved conditions in the sugar and molasses export market. It has also been reported that Havana banking circles expect that Cuba will receive a large loan from the Export-Import Bank. In New York, closing quotations for the foreign currencies listed below were as follows: Swiss franc .2321-1/2 Swedish krona Reichamark Lira .2385 .4005 .0526-1/4 Mexican peso .0505 .2070 Brazilian milreis (free) In Shanghai, the yuan in terms of our currency was unchanged at 5-3/84. Sterling was again quoted at 3.89-1/2. We purchased $350,000 in gold from the earmarked account of the Central Bank of Chile. No new gold engagements were reported to us today. 492 -2A price of 23-3/88 was again fixed in London for both spot and forward silver, equivalent to 42.44d. The Treasury's purchase price for foreign silver was unchanged at 35 Handy and Harman's settlement price for foreign silver was also unchanged at 34-3/44. We made two purchases of silver amounting to 150,000 ounces under the Silver Purchase Act, representing new production bought for forward delivery. of this amount, 100,000 ounces came from Pera, and 50,000 ounces from various foreign countries. MM. CONFIDENTIAL 493 NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS MILITARY INTELLIGENCE DIVISION TENTATIVE LESSONS BULLETIN WAR DEPARTMENT No. 116 G-2/2657-235 Washington, June 6, 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. GERMAN TRAFFIC AND MARCH DISCIPLINE SOURCE Marching and march discipline have been previously dealt with in TENTATIVE LESSONS BULLETINS No. 56 and No. 110. These ad- ditional notes are based upon a translation which appeared in the Militar Wochenblatt, authoritative German military publication, on February 21, 1941. NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS -1- 494 NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS TRAFFIC AND MARCH DISCIPLINE Although a great deal of the activity of troops consists of marching, it is not feasible to establish many uniform and invariable rules because marching is done under so many different conditions. This fact is taken into consideration by our field service regulations, which state that when march orders are issued, one question is of decisive importance: Is ground contact with the enemy to be expected or not? If so, tactical demands regarding organization, succession, and halts in marching receive first consideration, and desire to spare troops is subjected to these. If there are no prospects for ground contact with the enemy, regulations prescribe that first consideration be shown troops, which march in small formations, preferably separated according to arms. These general principles also hold good for cre- ation and protection of billets. March discipline and traffic discipline have much in common. Although they overlap each other in part, traffic discipline, which is applicable to numerous vehicles of all descriptions, as well as to troops, goes beyond march discipline in many ways. Mechanization and motorization of considerable parts of the army have increased the importance of street and road nets, not only for combat troops, but for rearward services. The demand for supplies of all kinds - ammunition, food, fuel, and many other things - has increased considerably, and traffic discipline is necessary if the demand is to be met. No troop or vehicle should use the road longer than necessary for moving forward - that is to say, in cases of lining up, halting, moving into billets, or breaking down, the first task is to have the road completely cleared at once. Let us look at a number of cases in detail; these instructions may seem easier to carry out than they actually are. Even the formation of a marching column sometimes involves con- siderable difficulty. In no case should the column be formed on the main road. Side roads, by-ways, and sometimes even the terrain along main roads can be utilized. In order to assure lining up of units in time, the simplest system is to send leaders ahead and have them main- tain connection with their troops by signals or motorcyclists. Lighter vehicles, as well as troops marching on foot, may almost always be taken off the road with some dexterity. If heavy cars have to stop on the road itself, however, especially broad spots should be selected for halts, and operators should drive as sharply as possible to the right. Roads have frequently become blocked when columns of some length stopped suddenly and vehicles in the rear were unable to turn to the right along the roadside. It is advisable, therefore, to use NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS -2- 495 NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS signals or commands well in advance for advising vehicles in the rear of intention to halt. For such purposes there are mounted sergeants for horse units and motorcycle orderlies for motorized troops. A troop which has to stop on the road must stop for only a short time, and it must move at once to the extreme right side of the road. Arms are to be stacked by the side of the road as the troop leaves and rests at one side only - preferably to the right. Space is gained if single vehicles close up so that the left side of the road is totally clear, and field kitchens and other vehicles are not permitted to block the left by driving ahead. Care should be exercised in the selection of convenient sopts for such vehicles close to the border of the road. It may happen that a single vehicle will foolishly halt on the left and stop traffic from the opposite direction. In such a case, officers and men should not stand around without taking action, for it is the duty of men of every rank to take the initiative in maintaining order. When this goal has been attained, blocking of roads may be nipped in the bud and not allowed to grow to greater or more dangerous proportions. Timely and careful reconnaissance of rest places is of great importance for traffic discipline, and each unit must understand that the road serves many units besides itself. Since individual circumstances dictate what formation will be ordered for resting, general directions cannot be given in advance. Only the question of water supply is of decisive importance, but it concerns all arms of the service except motorized units; an infantry regiment with about 650 horses is no less dependent upon water supply than artillery is. In sparsely settled districts it will be advisable - tactical circumstances permitting - to organize rests for the same location, with successive troop units rotating. To regulate the rest according to time alone will be of little advantage, for it may happen that units having the largest number of horses stop at places where is no water. The question of providing good watering facilities, therefore, must be carefully considered by officers with experience in this matter, for abundant watering is necessary for keeping horses in good health and condition. The smooth movement of troops from main march roads into villages on or near these roads must be given consideration, and arrangements must be made in advance. The troop must never stop and wait on the main road itself. If it takes time, as it often will, to pre pare and announce billets, the troop must take to a by-road, a farm, a vacant spot or, if it comes to the worst, the field, in order to keep the main road clear for other traffic. NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS -3- 496 NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS Difficulty is caused when one column overtakes another, and clogging of the road may result. At times it is necessary for one column to pass another, but if two columns are headed in the same direction, whether they are marching or stopped, a third column should not be permitted to shove ahead or alongside. Such action leads to hopeless clogging. In all cases where general circumstances permit, it is advisable for the leader of the overtaking detachment to come to an understanding with the leader of the detachment he intends to overtake. The objection that valuable time would be lost is not tenable, for a clogged road would cause greater loss. Congestions on the march cannot be entirely avoided, and time and again single units drift out of the column in order to pass ahead of troops at rest. Such procedure is both wrong and inadmissible. It almost necessarily leads to congestion, especially when a narrow pass, a road blockade, a shell crater, or a small bridge is reached. If a unit on the left side of the road approaches such a bottleneck, it cannot move ahead and it constitutes a disturbance and a nuisance. Neither does it reach its goal sooner than if it had remained in line. Apart from the fact that such action is prohibited by orders, judgment and consideration ought to lead to its elimination. Drivers of single motor vehicles sometimes behave with partic- ular lack of consideration. It is a matter of course that motor vehicles should overtake foot troops at a moderate rate of speed, and this necessity should frequently be called to the attention of all drivers. Both horse-drawn and motor vehicles which are temporarily out of commission should be removed from the road. With use of good judg- ment, it will usually be possible to turn the vehicle into a side road even a poor field road, if necessary - although the vehicle may have to be pushed by personnel. Repairs can thus be effected where other traffic is not interfered with. Calling the attention of all participants to this extremely important problem is essential for improving and keeping up good traffic discipline. Success frequently depends upon keeping the roads in good shape in all areas so that not only the troop itself, but also the supplies of all kinds may arrive on time and in good condition. Training in march discipline is important in peacetime as well as in wartime, for bad peacetime habits exert a very positive influence upon wartime actions. Every superior has not only the right, but also the clear duty to intervene where he is needed and to use his personality to prevent the clogging of roads or to bring about the necessary disentanglement. In such cases there can be no disputes about competency; he who is present is competent and responsible. NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS CONFIDENTIAL 497 Perephunes of Code Cablegram Reserved at the Your Department as 09:56, June 6, 1941. Lenium, filed 15:53, June 6, 1942. 1. - the Continue & Please from the Denber Comment operated against debend and Sentiment Manuary. Homite - abserved. b. Right of Juna les. The Royal Air Force did not leave England during this night. 2. German Air Activity over Britain A. Night of June 5-6. German planes operated over Seatland from Wisk to Amible and over the east coast of Britain. Objectives were sonstal targets and shipping. b. Right of IS is now known that the previously reported Geshan operations on this night involved ninety- five long range bembers, twenty mine layers, and fifteen fighters. 3. Princh Air Activity. Other Theaters. a. Theater. British planos bombed Bengani, Nogition, and Darks on the night of June 3-4 A large - of - remited. LEE Distribution Secretary of War State Department Secretary of Treasury Under Secretary of War Chief of staff Assistant Chief of staff, 0-2 - Pime Division office of Naval Intelligence Air Course Assistant Chief of Staff, G-3. INFORMATION COPY CONFIDENTIAL