The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
98 BRITISH EMBASSY, PERSONAL AND SECRET WASHINGTON, D.C. 7th June, 1941. Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, Halifex The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D.C. 99 Telegram from London dated 5th June, 1941. 1. Naval. During May 3548 tons cargo destined for enemy seized in prise; total seizures since the beginning of the war to the end of May 784,759 tons. 2. During the week ending 11th May importe in convoy exceeded 1 million tone again. 3. Ex. Dutch mine-layer Van Meerlant 690 tons sunk by mine Thomas Estuary a.m. the 4th. 4. Military. Iraq. Our troops reached Mosul morning of the 3rd gained touch with battalion of troope flown from Habaniyah. In Bagdad demonstrations included considerable looting and civilian casualties. situation restored by 2 Iraqi battalions from Kirkuk. June 2nd, our troops continued advance N. West of UR without incident; tribes reported generally friendly; roads this area bad, flooded, unfit for mechanical transport. June 3rd, O.C. Iraqi troops Qurna received orders to cease hostilities and return peaceably. to stations. 5. Ethiopia. In the battle of the Lakes 5772 Italians, 12010 natives, much material including 14 tanks, 7 armoured cars and 86 guns captured. Debareyi twice changed hands, remained ours. Our troops still having difficulty crossing the flooded Omo river. Small bridge-head formed at one place. 6./ 100 26. Royal Air Force. During daylight of the 4th four direct hite on 5000 ton merchant vessel west of Egersund, 18 bursts observed on the Mole Zeebrugge, 500 ton cargo vessel hit. 7. Daylight 4th. Three enemy aircraft destroyed; 3 probably destroyed, 6 damaged. Three Spitfires lost, 1 pilot safe. 8. Tobruk. 4 enemy aircraft destroyed during attack on anti-aircraft positions. 9. Royal Air Force bombed Benghazi night of the and/3rd June. 3 enemy aircraft destroyed on the ground. June 3rd. Royal Air Force from Malta attacked convoy escorted by six destroyers, destroyed one ship 8,000 tone, hitting another 5,000. 10. 11. Maryland destroyed Italian seaplane on the water near Cephalonta. 12. German Air Force. Enemy daylight operations over the United Kingdom slight, night of the 4th/5th bombing scattered, Birmingham, Medway, principal targets; no important damage. Two bombers destroyed. 101 BRITISH EMBASSY, PERSONAL WASHINGTON, D.C. AND SECRET 7th June, 1941. Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, Halifax The Honourable Colonel F. Knox, Secretary of the Navy, Navy Department, Washington, D.C. 102 Telegram from London dated 5th June, 1941. 1. Naval. During May 3548 tons cargo destined for enemy seized in prime; total seisures since the beginning of the war to the end of May 784,759 tons. 2. During the week ending 11th May importe in convoy exceeded 1 million tone again. 3. Ex. Dutch mine-layer Van Meorlant 690 tons sunk by mine Themes Estuary a.m. the 4th. 4. Military. Irea. Our troops reached Mosul morning of the 3rd gained touch with battalion of troops flown from Habaniyah. In Bagdad demonstrations included considerable looting and civilian casualties. Situation restored by 8 Iraqi battalions from Kirkuk. June 2nd, our troops continued advance N. West of UR without incident; tribes reported generally friendly; roads this area bad, flooded, unfit for mechanical transport. June 3rd, O.C. Iraqi troops Gurna received orders to cease hostilities and return peaceably. to stations. 5. Ethiopia. In the battle of the Lakes 5772 Italians, 19010 natives, much material including 14 tanks, 7 amoured cars and 85 guns captured. Debareyi twice changed hands, remained ours. Our troops still having difficulty crossing the flooded Omo river. Small bridge-head formed at one place. 6./ 103 -26. Royal Air Force. During daylight of the 4th four direct hite on 5000 ton merchant vessel west of Egersund. 12 bursts observed on the Mole Zeebrugge, 500 ton cargo vessel hit. 7. Daylight 4th. Three enemy aircraft destroyed; 3 probably destroyed, 6 damaged. Three Spitfires lost, 1 pilot safe. 8. Tobruk. 4 enemy aircraft destroyed during attack on anti-aircraft positions. 9. Royal Air Force bombed Benghazi night of the 2nd/3rd June. 3 enemy aircraft destroyed on the ground. 10. June 3rd. Royal Air Force from Malta attacked convoy escorted by six destroyers, destroyed one ship 8,000 tons, hitting another 5,000. 11. Maryland destroyed Italian seaplane on the water near Cephalonta. 12. German Air Force. Enemy daylight operations over the United Kingdom slight, night of the 4th/5th bombing scattered, Birmingham, Medway, principal targets; no important damage. Two bombers destroyed. 103 -26. Royal Air Force. During daylight of the 4th four direct hite on 5000 ton merchant vessel west of Egersund. 12 bursts observed on the Mole Zeebrugge, 500 ton cargo vessel hit. 7. Daylight 4th. Three enemy aircraft destroyed; 3 probably destroyed, 6 damaged. Three Spitfires lost, 1 pilot safe. 8. Tobruk. 4 enemy aircraft destroyed during attack on anti-aircraft positions. 9. Royal Air Force bombed Benghazi night of the 2nd/3rd June. 3 enemy aircraft destroyed on the ground. 10. June 3rd. Royal Air Force from Malta attacked convoy escorted by six destroyers, destroyed one ship 8,000 tons, hitting another 5,000. 11. Maryland destroyed Italian seaplane on the water near Cephalonta. 12. German Air Force. Enemy daylight operations over the United Kingdom slight, night of the 4th/5th bombing scattered, Birmingham, Medway, principal targets; no important damage. Two bombers destroyed. 104 RESTRICTED G-2/2657-220; No. 411 M.I.D., W.D. 12:00 M., June 7, 1941 SITUATION REPORT I. Western Theater. Air: German. Minor attacks on the English Channel coast. Fritish. Paids around Calais. II. Mediterranean and African Theaters. Ground: North Africa. Slight artillery and patrol activity reported. East Africa. British forces advancing on Jimma (Gimma) in southwest Ethiopia have crossed the river Omo and occupied Abalti, Air: Axis attacks on Tobruk and Malta. RESTRICTED 104 RESTRICTED G-2/2657-220; No. 411 M.I.D., W.D. 12:00 N., June 7, 1941 SITUATION REPORT I. Western Theater. Air: German. Minor attacks on the English Channel coast. Fritish. Paids around Calais. II. Mediterranean and African Theaters. Ground: North Africa, Slight artillery and patrol activity reported. East Africa, British forces advancing on Jimma (Gimma) in southwest Ethiopia have crossed the river Omo and occupied Abalti. Air: Axis attacks on Tobruk and Malta, RESTRICTED CONFIDENTIAL 105 Paraphrase of Code Cablegram Received at the War Department at 11:37, June 7, 1941 London, filed 16:50, June 7, 1941. 1. British Air Activity ever the Continent a. Day of May 6. Royal Air Force activity was on a small scale. Shipping was unsuccessfully attacked off Cherbourg. b. Night of June 5-6. No planes were dispatched during this night. 2. German Air Activity over Britain a. Night of June 6-7. - German operations were unimportant. Principle targets were shipping around North Scotland, the Straits of Dover, Bristol Channel, and Lands End. In the south of England ten planes made scattered appearances along the coast. b. Day of June 6. The only German activity reported was a single plane which made extensive reconnaissance around London and the Midlands. e. Night of June 5-6. The member of planes involved in the previously reported operations is now established as thirty long range bombers. d. Day of June 5. The number of planes involved in the previously reported operations are now set at fifteen reconnissance planes and an equal number of long range bombers. 3. Aircraft Losses. British Theater. No losses of any kind were reported. CONFIDENTIAL INFORMATION COPY CONFIDENTIAT 106 4. British Air Activity. Other Theaters. a. Middle East Theater. The Royal Air Force engaged in successful bombing and reconnaissance activity on a small scale throughout this theater. LEE Distribution Secretary of War State Department Secretary of Treasury Under Secretary of War Chief of Staff Assistant Chief of Staff, 0-2 War Plans Division Office of Naval Intelligence Air Corps Assistant Chief of Staff, G-3 -CONFIDENTIAL CONFIDENTIAL 107 of Date adidas Received as the Mar Department as on - s, me. Leason, filed mm, Jaso a mm the - of . Related m-ass which to buliered w I marked 1. - - the - anound My BY we in Doctors w - - - s Seven Wellington place on egeal member &. of Startings business the Brins Bages as Buest. Health please carried 9.8 of business but what demolities was complicated has not born reported. Beathere from the Regal Air Force seared s. -ti direct hite - - 5,000-000 vessale off Total and another off American. No please were disposition from Great s. Britata during this might & - - were on a wall seale and their air force - maily complet with stao laying off the - of Borth Sections, Motions, Bever and - - also valida - chipping is the I area. s name IS to now established that the number of - please Involved in the quertously separated attack - this date involved 25 long - bachere and 10 - please. s. the number of please involved - this sight were " - (close mage bembers ") and 10 also loging aircraft. 5. Leases British Baster. No Lessee of - kind reported. CONFIDENTIAL INFORMATION COPY CONFIDENTIAL 108 4. Ats Activity - mass - Daring the w or Jaso 6, the Regular AIF Force continued mell booking wide and - nights out this Member. 5. Ania Air Activity a. Berthian States. During the day of - T - sight of June 6-7, 28 Amte please note valda as regular intervils - Maite. the attachs centered on airporte. Distribution: Secretary of Mar State Department Secretary of Treasury Union Secretary of Year Shief of Staff Assistant Chief of Staff, 0-8 May Plans Division Office of Nevel Intelligence Air Gorge 6-3 CONFIDENTIAL - 109 BRITISH EMBASSY, WASHINGTON, D.C. PERSONAL AND June 8th, 1941 SECRET Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, have Bather The Honourable, Henry Morgenthau, Jr., United States Treasury, Washington, D.C. TELEGRAM RECEIVED FROM LONDON DATED JUNE 4th. 1941 110 NAVAL Photographic reconnaissance shows German battleaME Tirpits has left Kiel. 2. 4th/5th. Prins Eugen and Battle cruisers sighted Brest. 3. Daylight of 3rd in territorial waters outside Sfax harbour one enemy merchant vessel of 8,000 tons hit by four bombs blew up, ships in the same convoy damaged by falling debris. June 2nd/3rd second ship hit with four bombs. 4. A.M. June 3rd, Dutch merchant vessel torpedoed about 500 miles off the Azores. 5. Military. Egypt. No change. Second reconnaissance reported 24 enemy medium tanks approaching Halfa from the west. 6. Abyssinia. Enemy have withdrawn from the bridges over the Romo but are keeping them under artillery fire. General Palermo and remants of the Italian 24th Division 10 miles South West of Soddu have refused to surrender. 7. Iraq. Our column arrived at Mosul. 8. Royal Air Force. Night of 2nd/3rd. 127 tons of H.E. and 13,000 incendiaries dropped on Dusseldorf, both here, and at Duisburg large fires started further results not observed owing to bad weather. Over Berlin conditions better although objectives difficult to locate owing to searchlights, large fires caused. 111 -2 9. 3rd. During the daylight sorties over the French coast, enemy column with transport machine gunned, trawler sunk off Dunkirk direct hits soored on aeroplane factory at Havre. 10. German Air Force. June Srd/sth. About 120 enemy aircraft plotted. 2 destroyed. 11. Libya. Tobruk June 2nd. 30 hostile aircraft attacked anti-aircraft positions. Three destroyed. 12. Syria. June 2nd. A monoplane believed French attacked a company constructing road on Trans-Jorden side on Syrian frontier. 112 June 9, 1941 MEMORANDUM FOR THE SECRETARY From: Mr. Blough On Saturday, June 7, about 8 p.m. Washington time, you called me on the telephone and indicated that you wished to have a comparison made of the volume of business, net profits and Federal taxes of certain groups of corporations, for the base period years 1936 through 1939 and the year 1940. The groups of corporations were to include corporations engaged in shipbuilding, construction of airplane engines and other war orders, and also industries not engaged in filling defense contracts. You mentioned the profits figures published in the monthly bulletin of the National City Bank as an example of what you had in mind and asked that these figures be examined as a first step. I indicated that earlier in the year we had done some work of this kind for specific corporations. You said that at this time your purpose was not to compare specific corporations but groups of corporations so that the figures could be made public. You said one of your purposes was to give out figures on different groups of corporations at successive press conferences. In response to a question, I said I thought the and constituted a larger proportion If net profits in 1940 than in the previous years but that for most industries the corporations would have more profits left after taxes in 1940 than in such previous years. figures would show that the Federal taxes had increased You indicated that no work should be started at the office on this assignment until Monday, June 9, and asked me to submit for your diary a memorandum of the telephone conversation. RB 113 Corporation net income after Federal income and excess profits taxes, 1940. compared with average 1936 - 1939. by industrial groups 1 For corporations for which excess profits tax returns are available (Money figures in thousands of dollars) : of Net income after Federal income and excess profit taxes 1/ : Average :Percent increase : : : : : Industrial group Number :corporations: 1936 - : 1940 :1940 over average : 26 : Construction: General contractors : : 1939 1936 - 1939 3,963 4,869 961 606 - 36.9 4,036 19,078 372.7 766 1,890 146.7 7,906 9,445 19.5 489 794 62.4 300 455 51.7 4,345 5,157 18.7 296 813 174.7 596 732 22.8 23 8,989 9,478 5.4 14 2,136 4,312 101.9 18 2,684 3,277 22.1 1,373 1,671 21.7 5,099 17,447 12,240 6,538 17,672 18,184 28.2 48.6 236 514 117.8 575 607 5.6 6,006 14,533 13,444 9,092 123.8 - 37.4 219 311 42.0 Special trade contractors 7 Manufacturing: Aircraft and parts Automobiles and trucks, including 5 bodies and industrial trailers 6 22.9% Automobile parts and accessories (except electrical) and trail- ers for passenger cars 20 Electrical machinery Communication equipment and phonographs 4 Electrical appliances Electrical equipment for public utilities, manufacturing, etc. 4 23 Other electrical machinery equipment and supplies 5 Electrical machinery not allocable Industrial chemicals (except plastic materials) 3 Iron and steel: Blast furnaces, steel works and rolling mills Outlery, tools (except machine tools) and general hardware Fabricated structural steel and ornamental metal works Heating apparatus (except 9 electrical) and plumbers' supplies Tin cana and other tinware and steel products Other Iron iron and steel products not 30 5 104 allocable 4 1.3 Locomotives, transit cars and equipment 2 Metal working machinery, including machine tools Petroleum refining 43 11 Ship and boat building and repairing 1 Treasury Department. Division of Tax Research June 16, 1941 1 Excess profits taxes include declared value excess profits tax as well AS the excess profits tax under the 1940 Act. 114 Corporation profits and Federal income and profits taxes, 1940, compared with average 1936-1939. by industrial groups For corporations for which excess profits tax returns are available (Money figures in thousands of dollars) 1 : corpo- Average : rations 1936-1939 1940 screase 1940: Average over ever-1 1936-1939 age 1936- screase 1940 screase 1940: 1940 Average : over even-1 1936-1939 1940 : age 1936- : age 1936- : 1939 : 1939 : over aver: : of : 1 Industrial group Number :Net income before Federal income:Federal income and excess prof- Net income after Federal income and excess profits taxes 1 and excess profits taxes 1/ its taxes 1/ :Percent in :Percent in-1 :Percent in-1 1939 : Constructions General contractors 26 Special trade contractors 4,869 15.8 961 606 - 36.9 6,779 1,004.1 4,036 19,078 372.7 238 965 305.5 766 1,890 146.7 51.7 1,546 4,891 216.4 7,906 9,445 19.5 1,101 80.8 120 307 489 794 376 660 75.5 76 205 155.8 169.7 300 455 62.4 51.7 5,390 7,354 36.4 1,045 2,197 110.2 4.345 5,157 18.7 397 1,107 178.8 101 294 191.1 296 813 174.7 719 1,008 40.2 123 276 124.4 596 732 22.8 6,001 1,189 799 4,650 26.2% 794 1,132 - 32.8 228 192 25,857 456.1 614 1,004 2,855 184.4 9,452 14,336 4 609 4 7 22.9% 3,963 4.757 42.6% Manufacturing Aircraft and parts 5 Automobiles & trucks, including bodies & industrial trailers 6 Automobile parts & accessories (except electrical) & trailers for passenger care 20 Electrical machinery: Communication equipment and phonographs Electrical appliances Electrical equipment for public utilities, manufacturing, etc. 23 Other electrical machinery equipment and supplies 5 Electrical machinery not allocable Industrial chemicals (except 3 plastic materials 23 10,636 13,047 22.7 1,648 3.570 116.6 8,989 9.478 5.4 rolling mills 14 2,633 6,564 149.3 497 2,251 352.9 2,136 4,312 101.9 18 3,195 4,417 38.2 511 1,140 123.1 2,684 3,277 22.1 1,685 2,338 38.8 311 668 114.8 1,373 1,671 21.7 6,184 20,976 15,025 9.348 24,609 27,082 51.2 86.2 1,084 3,529 2,785 2,810 6.937 8,898 159.2 96.6 219.5 5,099 17,447 12,240 6,538 17,672 18,184 28.2 1.3 48.6 4 323 732 126.6 87 218 150.6 236 514 117.8 2 702 863 22.9 127 255 100.8 575 607 5.6 43 7,438 - 32.7 1,432 1,245 10,064 1,520 602.8 15,778 23,508 10,612 216.1 11 22.1 6,006 14,533 13,444 9,092 - 37.4 263 477 81.4 44 165 275.0 219 311 42.0 Iron and steel: Blast furnaces, steel works and Outlery, tools (except machine tools) and general hardware Fabricated structural steel & ornamental metal works Heating apparatus (except eleo- trical) & plumbers' supplies Tin cans & other timere Other iron & steel products Iron and steel products not 9 30 5 104 allocable Locomotives, transit cars and equipment Metal-working machinery, including machine tools Petroleum refining Ship & boat building & repairing 1 17.3 Treasury Department, Division of Tax Research 1 Excess profits taxes include declared value excess profits tax as well as the excess profits tax under the 1940 Act. 123.8 June 16. 1941 115 June 9, 1941 9:30 a.m. GROUP MEETING Present: Mr. Sullivan Mr. Foley Mr. Cochran Mr. Graves Mr. Odegarde Mr. Gaston Mr. Haas Mr. Thompson Mr. Schwarz Mr. Kuhn Mr. White Mr. Bell Mrs. Klotz H.M.Jr: I only bothered White and Blough over the week-end, that was all. I didn't call anybody else. That is pretty good. For heaven's sake, who brought you (Odegarde) in Monday morning? Odegarde: I forgot to go home. H.M.Jr: Too hot to go home? Odegarde: I forgot to go home. Graves: He is a regular hand now. H.M.Jr: Is he? 116 -2Graves: He is a full time hand. H.M.Jr: Does he belong to the CIO? Graves: I don't know which branch. H.M.Jr: Well, who wants to see me the least or the worst this morning? Bell: We ought to discuss that State Department memorandum. H.M.Jr: That bores me. Bell: It bores me, too, but then I think it has got to be done. I think you and the Secretary of State ought to see the President. They go up tomorrow, and they want to mention some- thing about it. H.M.Jr: How long are you going to be here today, Peter? Odegarde: I will be here all day. Bell: Well, Bell, if I see you at ten-thirty? That is all right. H.M.Jr: And then are you (Kuhn) ready? Kuhn: I have a speech, yes. H.M.Jr: Eleven o'clock? Kuhn: Right. H.M.Jr: Do you like it? Kuhn: I will leave that to you. H.M.Jr: 117 -3H.M.Jr: Is Odegarde coming in, too? Kuhn: At eleven? Yes. He has seen it. H.M.Jr: Oh, he has seen it? Kuhn: I would like to have him here. H.M.Jr: Would you please? Odegarde: Yes. H.M.Jr: Well, that takes care of the morning. I White: At your convenience. H.M.Jr: I mean, when will you be ready on that? I can't hear. My ears are all stopped. White: This afternoon would be preferable. H.M.Jr: About three-thirty? White: That will be fine. can't do anything else besides that. When am I going to get together with you, Harry? Dan, when is the hour on this Hopkins stuff? Bell: Whenever you are ready. White: Let's make it eleven-thirty. H.M.Jr: Harry, if you stay behind a minute, I would like to talk to you and Mrs. Klotz a minute right afterward, please. I personally picked sixty-three crates of strawberries yesterday. Sullivan: Crates? 118 -4White: You mean you picked them up? Blough: Crates? H.M.Jr: The pickings are good. I mean, the price is high so I didn't bring any down. Next week I expect the prices will be low, and I will bring you all some. They are bringing seventeen and eighteen cents a quart and I can't afford to give them around now. (Laughter) Herbert? Gaston: Mr. Maxwell caused to be introduced last week a very interesting bill in the House of Representatives to provide for a license for everybody who deals in war materials or supplies that can be made into war materials. It establishes additional control by Executive Order over the mails, over air carriers. It doesn't mention the Administrator of Export Control, but since it originates in his shop, apparently he has some intentions in that direction. I - we are trying to find out whether it was ever approved by any of the other agencies of the Government, the State Department or the Budget. H.M.Jr: Do you want to ask the Budget whether they approved it? Gaston: Did you yet? Foley: Yes. Apparently not. When Maxwell was down before the Committee, Faddis asked him if he had all the powers he needed, and he said no; so he pulled the bill out of his pocket and handed it to Faddis and Faddis introduced it. Apparently that is the genesis of it. We have been asked for a report by the Budget and we will -- 119 -5Gaston: You have been asked for a report? Foley: Oh yes, we got that request for a report. Justice doesn't seem to know anything about it. H.M.Jr: Well, why should I worry about it? Gaston: Nothing to worry about. It is just interesting information. H.M.Jr: Herbert -- Gaston: He is covering an awful lot of territory. H.M.Jr: That information you sent me about certain increased activities of Secret Service? Gaston: Yes. H.M.Jr: I would like to be kept posted on it. Gaston: All right, yes. Then also for your information, Maxwell has an Executive Order pending which would prohibit transactions with Germany, Italy, or any country controlled by them or a citizen of or domiciled in those countries and prohibit collaboration with them. The Administrator of Export Control is to determine what country or areas are under their control. Another feature of it is that residue cargo that comes into our ports to be subject to export control. H.M.Jr: I expect the telephone to ring any minute from Cordell Hull. "What do you mean by giving all that information to Kintner and Alsop? Did you see the one yesterday? 120 -6Foley: H.M.Jr: Yes. Did you see it? Get it, the one that is yesterday. So I will say, "Well, I haven't talked to them for three months. I haven't either. It is terrible. Bell: He had one this morning, too. Foley: Did you see the one this morning? Gaston: It says that an American destroyer dropped depth charges on a German submarine. H.M.Jr: They must have got that from Frank Knox or somebody. Schwarz: The Navy has been sitting on that story for more than a month. Foley: They are going to wind up their column. H.M.Jr: I imagine at the speed at which they are going Foley: Yes. H.M.Jr: They take a dig at everybody. Klotz: What are they going to do? H.M.Jr: One is going to the Army and one for the Navy. Foley: Joe has been accepted for the Navy. Bob says he was examined pretty thoroughly out at Walter Reed and everybody assures him that that they are going to wind up. (Laughter) he is O.K. but that he hasn't actually been cleared officially yet. H.M.Jr: Who is that? Foley: Kintner. He is the one for the Army. They 121 -7are both going into Intelligence. Joe won't be here. He will go out around the country but Bob expects to be located here. Gaston: Justice Department is now keenly interested in Coast Guard acquiring the Bureau of Marine Inspection and Navigation. Sam Smith of Justice has been buzzing around about it. That is also for your information. The Danish Minister is coming in this morning to try to dicker on the training ship Danmark. H.M.Jr: What does he want it for, a summer residence? Gaston: No, no, Waesche wants to buy the training ship Danmark for the Coast Guard. You remember the President - they made an informal - had a sort of an informal agreement on the price. The President says it is too high. All I can do is tell them I will see what I can do. H.M.Jr: Anything else, Herbert? Gaston: Waesche succeeded in arriving at a compromise with the Navy people on those anchorage regu- lations 80 they won't press their bill, but will agree to another one that we agreed to in the first place. H.M.Jr: All right? Gaston: Yes. We are still holding some French ships, awaiting the decision of the State Department. H.M.Jr: Gaston: Who gets the French wines on the Normandie? Well, I think the Maritime Commission will get those if they requisition the boat. H.M.Jr: Have you got Coast Guard guards on them now? (Laughter) 121 -7are both going into Intelligence. Joe won't be here. He will go out around the country but Bob expects to be located here. Gaston: Justice Department is now keenly interested in Coast Guard acquiring the Bureau of Marine Inspection and Navigation. Sam Smith of Justice has been buzzing around about it. That is also for your information. The Danish Minister is coming in this morning to try to dicker on the training ship Danmark. H.M.Jr: What does he want it for, a summer residence? Gaston: No, no, Waesche wants to buy the training ship Danmark for the Coast Guard. You remember the President - they made an informal - had a sort of an informal agreement on the price. The President says it is too high. All I can do is tell them I will see what I can do. H.M.Jr: Anything else, Herbert? Gaston: Waesche succeeded in arriving at a compromise with the Navy people on those anchorage regu- lations so they won't press their bill, but will agree to another one that we agreed to in the first place. H.M.Jr: All right? Gaston: Yes. We are still holding some French ships, awaiting the decision of the State Department. H.M.Jr: Who gets the French wines on the Normandie? Gaston: Well, I think the Maritime Commission will get thos e if they requisition the boat. H.M.Jr: Have you got Coast Guard guards on them now? (Laughter) 122 -8Gaston: I don't know whether there will be any. Bell: Any left? Gaston: The French Line, of course, will have the wines and they will have to keep them or import them. Or? (Facetiously) H.M.Jr: Are there Coast Guard men on there now? Gaston: I understand they have been very generous. I haven't been aboard. H.M.Jr: All right. Ed? Foley: We got clearance from ASCAP on our song, so H.M.Jr: When do we put on the show, showman? I am Graves: Mr. Kuhn is running the show. H.M.Jr: What? Kuhn: Would you like to have a show? In the building? H.M.Jr: Well, I thought you wanted to launch it. Kuhn: Well, they tell me that that is difficult, that I think we are all right. looking at -- if you want to do it right you have to have a band, and it would be better not to have any at all than to have the wong kind of thing. There could be a little one here in the building. H.M.Jr: A little band? Kuhn: With a piano and a little presentation, if you want one, but I don't think it is necessary. 123 -9I think it would be just as good - Berlin will be down here tomorrow afternoon. He is having dinner at the White House. He might be able to stop in late in the afternoon and just present this to you. H.M.Jr: I don't care. I thought that you wanted to for his sake. Where will it be played first and all that? Kuhn: It will probably be played first on the air H.M.Jr: Well, you handle it. I mean, I am not going to -- Kuhn: My suggestion is not to have a show, simply to have a simple presentation of the thing and and also have a movie made. you thank him for it and then leave it to the Defense Savings people to put it on in whatever way they want. Is that all right with you? H.M.Jr: Sure. But if you want a band, I can get you a band easy enough. That, you know, takes quite awhile, to orchestrate it. Kuhn: Yes. H.M.Jr: But I will leave it with you. I called up Roy Blough and - has he told you what I want? Sullivan: Yes, sir. H.M.Jr: I want to tell the crowd. I want Roy Blough to give me - and then after we get it - some of us will get together and talk about it, but I want to take the different industries, both defense and non-defense, and I told them for a better grouping to use the grouping of the National City Bank - because airplanes are up, 124 - 10 - let's take the airplane industry - and go back to '36 through '40, how much money did they make or lose in each year and how much taxes did they pay. I can announce publicly what the result is, the total as a group, you see. Sullivan: That is right. H.M.Jr: And the thought that I had in mind is twice a week - I mean, have a group for each of my press conferences and at every press conference I would announce, "Well now, here is another group. This is what the situation is," and keep pounding and pounding and pounding until I get somewhere. Every time simply give it out. "Here is from '36, gentlemen, each year through until '40. There are ten airplane companies. This is what their profits and losses have been as a group and this is what they paid in '40." And take the packing industry and the automobile industry and the steel industry and do one right after another. Foley: Insurance companies? H.M.Jr: Sugar Companies? Foley: Insurance companies. H.M.Jr: Insurance companies, different ones. Foley: They don't pay any taxes at all. H.M.Jr: And just go through it. Twice a week have a different group. And then I want you to find out, Chick- I mean, 125 - 11 - I want to see the stuff and then we will have a talk about it - I want you to work up a form with Callahan on the radio so that this thing would be prepared and a telegram would go to every radio station giving them this stuff, because I won't get any breaks in the newspapers but I might over the air. The newspapers may not carry it at all. White: I think it is a good idea, but I think it H.M.Jr: Don't worry. I would like at least a half Sullivan: Yes, I think that is very desirable. I would like a half dozen industries to see H.M.Jr: would be desirable to have laid out before you before you give the first announcement, at least three, four, or five announcements in advance so you will know whether it is going to show what you think. dozen industries. where I am leaping, but when we get them we will have a little round table talk, but I would like to push on that. Will you please? Blough: H.M.Jr: It will take a little time. I am going to give Mr. Roosevelt the first opportunity to see whether he wants to do it. I am going to put it on his table first and say, Would you like to do it, would you like to give a speech on it?" He may say, "Oh no, I wouldn't deprive you of that pleasure." But I am not going to sit in this chair - and Roy, if you don't know this economist for the CIO, I wish you would get acquainted with him. I will tell you how you can get his name. Ask Stephens who the man was who accompanied Phil Murray when 126 - 12 he came in to see me. White: I know the fellow. H.M.Jr: You know him? White: Yes. Blough: What is his name? White: Metzler. H.M.Jr: He has been writing that tax stuff for their monthly bulletin. Sullivan: It has been very good. H.M.Jr: White: See? He is a very attractive fellow anyway. He is a nice fellow. H.M.Jr: I don't hear you. White: He is a very nice fellow. H.M.Jr: He is a very attractive fellow. I met him two years ago out at dinner. But he has been writing that stuff for the bulletin and you may find that the A. F. of L. has a tax man also. I don't know him, but this man is a do you know him, Harry? White: This man is in charge of their bulletin, the man that I am speaking of. I don't know the A. F. of L. man. H.M.Jr: A very attractive fellow about thirty. White: The CIO fellow? H.M.Jr: Yes. What is his name? 127 - 13 White: Metzler. H.M.Jr: Before we do anything we will sit down. Because I will also give the President the first chance and Doughton the second. Sullivan: Well, I guess you will make the speech. H.M.Jr: All right. Sullivan: They are having some difficulty in -You will have to talk louder. I have never H.M.Jr: had my ears stopped up so badly. Sullivan: They are having difficulty in the Collector's office in Hawaii. There are thirty-nine em- ployees there and eleven of them are eligible for induction into the service. They have had one or two vacancies that they haven't been able to replace because there is absolutely no unemployment in the Island and the Collector has written to Commissioner Helvering asking that his eleven men not be subject to induction for one year and Helvering has recommended that that be - that deferment be granted for one year. He says they just can't get anybody out there to take the place of these men. H.M.Jr: How many men? Sullivan: There are eleven who are subject to the draft out of the thirty-nine. This comes up on one man being ordered to report, but they are looking -- H.M.Jr: What do you mean, they can't get any men. Sullivan: They say that there is no unemployment, that they can't get anybody of the standing of a 128 - 14 - deputy collector that they are -H.M.Jr: Can't we ship them out from here? Sullivan: The only thing that we can do that I can see is pick up some boys in California and send them out there. H.M.Jr: Well, I won't approve it. Sullivan: All right. I will suggest that they get some fellows in California and send them out. H.M.Jr: I am sorry, I won't approve it. Sullivan: The tax bill took a different turn Friday. Of course, the complaint all along has been that we were -H.M.Jr: You have got to talk up. Sullivan: The complaint has been all along that we were taxing too high in the lowest brackets. Of course, the percentage of increase was high, although the actual amount of dollars to be paid was low. So Friday afternoon we presented a chart showing what people in every bracket, starting at six hundred dollars, pay under the present law, under the new Canadian law, the new British law, then ours, then Stam's and then Eccles' And having our column next to the British, I think we overdid the job, because although they have been writing me for having them 80 high, when we came in Saturday morning they got after me for having them so low and wanted to know if I didn't realize there was an emergency on. Well, it wound up Saturday noontime by their 129 - 15 asking us if we could work out some kind of a special tax that would go down as low as six hundred dollars, seven hundred dollars on single people, and sixteen hundred dollars on married people. Now, I feel very strongly that we are down as low as we can go on single people. Anybody who earns around sixteen dollars a week has to pay a tax now. Anybody earning fifteen dollars and a half has to file a return and with - facing the probable increase in the cost of living and realizing that people in those brackets pay a larger proportion of their income in other kinds of taxes, I don't think it is safe to go below that. H.M.Jr: I agree with you with one proviso. If you could find a way legally that everybody should pay ten dollars a year - don't shake your head. I mean, you can't do it legally? Sullivan: Well, go ahead and finish. H.M.Jr: That is all. What is the present bracket? Sullivan: Eight hundred on single people. H.M.Jr: Yes, but they don't pay it. They don't pay anything on the exemptions. Sullivan: What do you mean, they don't pay anything? H.M.Jr: How many people in the eight hundred dollar class pay? 130 - 16 Sullivan: They don't pay anything until they are above eight hundred dollars. H.M.Jr: Then how much do they pay? Sullivan: Under this proposal they would start in -- H.M.Jr: No, but now. Supposing they earned eight Gaston: Four percent. Sullivan: Four and four tenths percent. Blough: hundred fifty. They would have to earn eight hundred ninety dollars before they would pay any tax, because of the earned income tax. H.M.Jr: Then how much do they pay? Blough: Four percent, so that you would get the ten dollars by the time they had four hundred - no, two hundred fifty. By the time they had two hundred fifty dollars taxable, they would have ten dollars of tax under the present law. But under the proposed law, it starts right at eight hundred and there would be eleven percent right away surtax and four percent normal tax. H.M.Jr: Well, I haven't got the time, but I would be very glad to sit down with you any time today. 131 - 17 - I feel that in that bracket they are taxed plenty. But as I say, if there could be a flat tax of ten dollars starting on everybody that earns eight hundred dollars. Sullivan: Well, I will go into that and then talk it out with you. What I wanted to clear with you this morning is, the sentiment in the Committee is so strong now, and I think the Republicans are unanimous in driving this down as far as they can. H.M.Jr: Yes. Sullivan: I think that if there is to be a reduction, H.M.Jr: Well, I am perfectly willing to take a it should be in the married people. public stand that the broadening of the base should be on the corporations that are making excess profits, and we shouldn't broaden the base on the poor working man. Sullivan: That is right. Now, I think I may be able to make a trade on this thing by leaving the single people where they are and reducing the married people from two thousand to eighteen hundred. 132 - 18 H.M.Jr: I personally would keep out of it. Why do we have to get in on it? Keep your record clean so we can attack them if we want to. Sullivan: Well, I just wanted you to know that is the situation. H.M.Jr: Well, I would keep out of it. Sullivan: You mean just stand pat against any kind of a reduction in the personal exemptions? H.M.Jr: Unless you can get a flat tax. I can't do it in three minutes. When do you go up there? Sullivan: Ten o'clock. I have got to leave now. H.M.Jr: Why don't you just stand on the sidelines? I would stand on the sidelines and see what has happened so that my hands will be free. I can say, "Well, we had no part in this. If I mean, if you come out with a tremendous increase on the very poor person with no excess profits, I want to be in the position that the President and I can slam them. So just stand by, will you? Sullivan: Right. H.M.Jr: So that either the President or I can attack Sullivan: this. "Well, you participated in this thing.' Well, I will say that we are standing by the present exemptions. H.M.Jr: That is all right. Do you agree on that Roy? Blough: Yes, sir. H.M.Jr: Don't say you do unless you do. 133 - 19- Blough: I do think we might go down a little on the married exemptions, but it is something that ought to be talked out and, for the time being, it can stand. H.M.Jr: I would rather stand by, and it would leave me free, than to take part in this discussion up there, John. Sullivan: Right. H.M.Jr: Is that all right with you? Sullivan: Sure. I just wanted you to know the situation. H.M.Jr: I may want to slam them, and I don't want you to say that you are committed. Sullivan: No, I am not committed. H.M.Jr: Then just stand by, will you? Sullivan: Right. H.M.Jr: Merle? Cochran: Phillips wanted to bring Sir Edward Peacock in today or tomorrow, and I told him it wasn't possible today. Could you see him tomorrow? H.M.Jr: Yes. Give them three fifteen tomorrow. Cochran: Yes, sir. That transaction is held up until after you have seen him. H.M.Jr: Bell: It is all right. Will that be discussed, the thread company? 134 - 20 Cochran: Yes. Bell: Will that dispose of that letter? Cochran: Yes. H.M.Jr: What else? Cochran: That is all. Blough: I was in touch with-- H.M.Jr: You have got to talk up louder. Blough: I was in touch with Douglas Brown. H.M.Jr: Oh yes. Blough: He is now in Lubin's job in the OPM since Lubin went over to the President to advise him on statistics. He is very much worried about the labor supply situation in the skilled the skilled labor supply situation, especially in metal work, and he feels that by fall it will be necessary to take a great deal of labor out of civilian industry and put it into defense industry, and he thinks that we ought to be very seriously - or somebody in Washington ought to be very seriously considering how to do that. H.M.Jr: There are two men in this room that we think we have got the answer. One is White and the other is myself. Blough: H.M.Jr: Blough: Fine. But it is good to know that Brown is working on that. I mean, Harry might want to contact him. Then he says one other thing. If these people 135 - 21 - are taken out of the civilian industries or whether they are or not, the purchasing power among the defense workers as compared to the goods which are going to be available will, in his opinion, mean a surplus of purchases by them of things they shouldn't in this time be buying, and he feels that we ought to have the dismissal wage taken very seriously in this time with an increase in Social Security tax rates now than to provide a dismissal wage at the end of the emergency. H.M.Jr: Could you and Professor Brown,on those two subjects, to a summary for me? I mean boil it right down, what it is all about, you and Brown, and give it to me? Blough: All right. H.M.Jr: I don't mean on the unskilled - the lack of skilled labor. Blough: On this dismissal compensation item? H.M.Jr: Yes. Could you and Brown do me a summary on that? Blough: Surely. Bell: Doesn't that tie in,Roy, with Altmeyer's recommendations on the Social Security? Blough: Not at the moment, but I asked Brown about Altmeyer's position on dismissal compensation, and he said he thought he was coming around and favor it, so he might by this time favor it. I thought I would call Altmeyer and find out. H.M.Jr: What is Brown doing over there at OPM? Blough: He is doing the work that Lubin was doing. 136 - 22 H.M.Jr: What is that? White: He took Lubin's place as labor adviser. H.M.Jr: Oh. What else, Roy? Blough: That is all I have. H.M.Jr: George? Listen, George, in my - I thought you were going to give me a report on how to save a Haas: half billion dollars from Agriculture. I gave you a report. I didn't know that I had the job of-- H.M.Jr: Sure, I said that you were to contact these fellows in White's report. He says, "I haven't done anything on Agriculture because you were to get one from Haas. Haas: I didn't know that you had given me that specific assignment. You asked me to go into the Agriculture appropriations, which I did. But I will do it. H.M.Jr: How long will it take you? Haas: Oh, could you give me three days? H.M.Jr: All right. I can do it in an hour if you must have it. Haas: H.M.Jr: No. Haas: It is one of those things that-- H.M.Jr: I would like something for Wednesday forenoon. Haas: All right. 137 - 23 H.M.Jr: Wednesday at nine-thirty. Haas: All right.total? Five hundred million dollars out of their H.M.Jr: No, I don't set any figure. How much can you do it. you think that they can save and not waste Haas: I see. H.M.Jr: I don't set any figure. Anything else, George? Haas: I have nothing, no. You notice the E and F are doing very much better, on that report of the bond sales. H.M.Jr: Yes. Chick? Harry? White: H.M.Jr: I have nothing. Do I do anything about Dan Tobin's call Satur- day? Bell: Well, he would like to talk to you sometime this week. He is in no hurry about it, but we might want to talk about that thing before you call him. He said that he would be there a week, in Indianapolis, and you could call him any time during that time. H.M.Jr: All right. Harold? 138 - 24 Graves: Here are the bond sales from the first until Friday. If you would like to compare them with the May sales, here are the May figures. H.M.Jr: What else? Graves: That is all. H.M.Jr: Harold, the man who is doing - who can I talk to besides - with you about the Texaco Hour thing? Graves: Callahan, I think, would be the-- Kuhn: The man who was running that program is going to be in town today, Monroe, who was in charge of building the whole program up. H.M.Jr: Is he? Kuhn: Yes. H.M.Jr: Then, could I talk with you (Graves) and Callahan and Monroe? I have got a suggestion. Kuhn: I think his name is Monroe. Graves: That is right. H.M.Jr: Two forty-five. I mean, I want to ask some questions, and I have got some suggestions. Did you people ever take on Miss Ernst? Graves: She is advising our people, as I understand. H.M.Jr: Find out and let me know just what she is doing, will you? Just what - when you come in at a quarter of. Graves: Yes. 139 - 25 H.M.Jr: Let me know at a quarter of three about Connie Ernst, will you? That girl is really awfully good. You know those two hours on election eve that every- body listened to on the radio? She had a lot to do with that, I believe. That was a swell hour. That was one of the best programs ever put on. Schwarz: Sherwood made a talk on that. H.M.Jr: Anything else, Harold? Graves: Nothing else. H.M.Jr: Dan? Bell: Are you interested in getting the allocations made by the President under the Lend-Lease once a week? H.M.Jr: No. Bell: We can give them to you Monday morning as of Saturday night, if you want them. H.M.Jr: Well, if you give them to me in a way I can understand them. Bell: They are usually a week late in getting them. H.M.Jr: They way they have been coming in-- Bell: The last sheet is a summary, right on the bottom. A total of four and a half billion has been allocated with two billion five yet to be allocated. H.M.Jr: You mean - does that show how much was done 140 - 26 during the week? Bell: No, these are cumulative figures, you see, for each department, and then at the end there is a-H.M.Jr: Could it be done with just another column of how much was done during the week? Bell: That is right, very simple. H.M.Jr: Well then, if you are going to do it - how much has been spent out of-- Bell: I haven't got that yet. I was supposed to get that Saturday. Not spent, but obligated. H.M.Jr: But how about out of pocket. Bell: That is on our daily statement every day. It is running now between five and six million dollars. H.M.Jr: Altogether? Bell: Yes, sir. The actual expenditures are on our daily statement every day. H.M.Jr: But if won't be, for instance - if you say, available funds for ordnance, so much, so much allocated during the week, and net spent, which is the figure I ought to have. Bell: That is a little difficult to get. Our figures are totals. They are not broken down into those categories. In order to get what is spent, we would have to get it from their books, the departmental books. H.M.Jr: Would you think about it? 141 - 27 Bell: Yes. H.M.Jr: I would like to have the figure that is spent. I am not interested in the obligated. Bell: The obligated is the real figure, because that is when they enter into the contracts and the machinery begins to move then. H.M.Jr: Well, if you want to give me allocated, obligated, and spent. Bell: I will try it. H.M.Jr: That would be - well, allocated, obligated, and spent. Bell: Sure, I will try it. H.M.Jr: They have only spent five or six million? Bell: Six million, I think it was. H.M.Jr: I am glad I don't have to sign that report going to Congress. Foley: Bell: This is per day, isn't it? Oh, no, that is total actual dollars spent out of Treasury under Lend-Lease. White: Do they buy on thirty, sixty, or ninety day credit, Dan? Is that lag existing between production and delivery? Bell: No, the lag is carrying out the commitments. They enter into a contract and then fulfilling that contract is the lag, but these expenditures are largely agricultural commodities. H.M.Jr: I know a week ago or two weeks ago, before I 142 - 28 - left they told me there was sixteen million dollars that had been put on the ocean, of Lend-Lease material. Bell: That largely came under the billion three H.M.Jr: Well, would that include a billion three, the limitation. figure you are going to give me, or not? Bell: We would have to work up something for that, H.M.Jr: I would like it, the allocated, obligated, I think. spent. What is the name of the Englishman who does the shipping? Kuhn: Salter. Bell: There has been a bill introduced to amend the National Housing Act. Among a number of other things, they are increasing the limit of commitments from four billion to five billion. H.M.Jr: Yes. Bell: That increases our potential contingent lia- bility up to five billion, and we are saying in this report to the Chairman of the Committee on Banking and Currency of the Senate, The Treasury Department is not in possession of evidence or information upon which to justify a conclusion as to the advisability or necessity for the enactment of this section, which would result in an increase in the potential contingent liability of the United States with reference to debentures. "It is recommended, however, that this proposal 143 - 29 be given consideration not only on its merits as to a separate and distinct activity but also in the light of the present situation which requires that we should concentrate our efforts to the fullest extent possible on national defense." Do you have objection to the Treasury saying that at this time? The Budget says that there is no objection to submission of this report as we have drafted it. H.M.Jr: Bell: What is the purport of it? To increase the limitation of four billion dollars of insurance to five billion dollars which, of course-H.M.Jr: On what? Bell: On mortgages insured by the FHA. H.M.Jr: It is all right. White: Well, the tone of that is disapproval, I gather, is that what you mean? Bell: That is an inference in it at this time. It is a question of whether, with our national defense program, we ought to increase FHA mortgages another billion dollars at this time. White: Well-- H.M.Jr: I thought you had approved it. Bell: No, we have raised a question about it at this time. We haven't exactly disapproved it, but there is an inference there that we might stop, look, and listen, at least. 144 - 30 White: It seems to me the implication drawn from the way that is phrased is that you disapprove it, but you haven't got evidence enough to come out flatly it. for a disapproval, but you don't like Bell: Well, you could also argue the other way. We haven't any evidence that we come out flatly and approve the necessity of it. H.M.Jr: Well, what I would like to do is this, as long as you have brought it up. On both FHA and Home Owners' Loan, I wouldn't try to stop it through the limitations, but I think people ought to put up more cash on the down payment. I think that is the place it should be gotten. Bell: You don't think we ought to insure them up to ninety percent? H.M.Jr: No, my feeling, if you want to do something on the thing, is that they should gradually in- crease the amount, make people - only insure them up to eighty-five percent and make people put down more money. Bell: Well, it seems to me that something outside of the defense housing that could be delayed until after this emergency is over, and then take up housing. H.M.Jr: Bell: Well, what are you going to do with all the people? They will get it some where - I wouldn't want to stop it now, but I would like to - just throw in a suggestion this would be a good time to only insure up to, say, eighty-five percent instead of ninety. The original was eighty percent, you know, and they increased It to ninety. H.M.Jr: Then let's go back to the original one. It is 145 - 31 the same idea as the installment payments on automobiles or anything else. Bell: Sure. H.M.Jr: Will you think about it Dan? Bell: Yes. I have two letters-H.M.Jr: You would go along on that, Harry, wouldn't you? White: Yes, I think that would be in the right direc- tion because it would force people to save more and not spend it for other things. H.M.Jr: And it would give the government more of a cushion against the post war collapse. White: Yes. I think if the Treasury comment on this means anything, then this will-- H.M.Jr: Treasury comments should mean something. Bell: I have two letters for your signature. One is debt notices to the State Department which is in line with the Stewart-Viner recommendation. It is in the last paragraph. The other is an investment of one hundred ninety-one million of old age funds. H.M.Jr: All right? Bell: Yes, sir. Thompson: Ted Wilson has finally gotten Civil Service and will report next Monday. H.M.Jr: Good. 146 - 32 Now, the suggestion that I have, I asked you to hold up on a certain person, you see. Thompson: H.M.Jr: Yes. And the suggestion I have, even before I look at this, is, I want to see if you are going can't get a well-trained, thoroughly quali- to strengthen that organization whether we fied young woman to go in there now instead of taking on a young man, whether we can't get some young woman. Thompson: We can use both. We already have some in the organization, but I think that is very good. H.M.Jr: Just hold up on this until I have a chance, but would you also think of some young woman. Thompson: I can do that very readily. H.M.Jr: But hold this up until I get a chance, because, after all, we have got so many women employees and that is a strictly male organization. Thompson: I think we can do that very nicely. H.M.Jr: Thank you. 147 June 9, 1941 10:19 a.m. HMJr: Basil Connor: Hello. Hello, Henry. HMJr: Hello, Doc, how are you? O'C: I'm fine. To what do I owe HMJr: this honor? Well, I wanted to ask you this: I wondered if through the Infantile Association if you knew of any able young man who had infantile and would like to have a job with me. Now I tell you what it 18. Hello? O'C: HMJr: Yes, Henry. I had a Coast Guard Officer who sits outside of my room and receives people and handles all telephone calls and all appointments, you see? O'C: Yes. HMJr: And with Coast Guard getting in more and more, I just don't think I ought to have a Coast Guard man doing that. O'C: Yeah. HMJr: He's a Lieutenant and I wondered if through your work whether you possibly - some fellow, might say graduated from Harvard Business School or some young fellow who was unfortunate enough to be struck down with infantile. O'C: You want a young man? 148 -2HMJr: Not necessarily. O'C: Well, I mean you don't want - I know what you want, you want HMJr: I want a bright young fellow. O'C: You want an intelligent man. HMJr: Yes. The more intelligent, the better, and a nice personality. O'C: Yeah. HMJr: Well, I was thinking - you remember the fellow that ran the thing down there - he came up from Cornell for a long time. O'C: Arthur HMJr: Somebody like that. O'C: Yeah. HMJr: On that order. O'C: Is he your outside man? HMJr: Yes. O'C: Now, Henry, this is a sordid question: What's the compensation? HMJr: Well, I don't know, but I suppose I'd have to ask our people. O'C: Well, I mean within what limits HMJr: Oh, I don't know. Maybe some where between - round maybe three would it be? thousand, thirty-six hundred. O'C: Yeah, I see. 149 -3HMJr: Ithat. don't know, I hadn't thought of O'C: Yeah. Well, Henry, I think your thought is a very splendid one and because it enters one of the problems we always have and that's a - placing - not placing duds you know, but placing good men, you know how people are around polio and they are kinda cripply. HMJr: Right. O'C: They think there's something the matter with them. Will you give me a little time on it? HMJr: Surely. O'C: Okay, boy, and I - you know I wont give you anybody unless he is all right. HMJr: I know you wont, otherwise I wouldn't ask you. O'C: And I'11 do a little exploring and then I'11 communicate with you before I do anything further. HMJr: Thank you. O'C: Fine, Henny. How are you? HMJr: Oh, I'm fine. O'C: I tell you one thing, you are doing all right. HMJr: Well, I like to hear it. O'C: And you can be sure of that. HMJr: Thank you. O'C: Fine, Henry. HMJr: Thanks, Doc. O'C: Thanks a lot. midday of 150 June 17. 1941 Memoranium prepared by Mr. Acheson after a conference with treasury representatives on June 4 regarding the draft of his memorandum of June 5 and the draft of the Land-Lease agreement attached therete. I understand that this was submitted to the President by Summer Velles on the afternoon of June 9. DWA 151 June 9, 1941. MEMORANDUM FOR THE PRESIDENT: The State and Treasury Departments have drafted and discussed various provisions for inclusion in a Lease-Lend Agreement with the British. Certain points have seemed clear to both Departments, certain other points less clear. It had been hoped that Secretary Hull and Secretary Norgenthau could have discussed these with you today. In view of Secretary Hull's indisposition and the urgency of initiating discussions with the British, it is recommended that the State Department be authorized to open with the British today discussion on the clear points noted below, informing them that the matter of consideration for non- returnable military items and certain other matters are being reserved for a few days. Clear Points 1. The Agreement should not include provisions relating to economic and other problems of the emergency, of post-war relief and of reconstruction. Provision shall be made in this Agreement for the designation of a BritishAmerican From achison 152 American commission which will att continuously tap the per pose of formulating solutions not only of Shose international economic problems which confrent both governments, but also of those larger problems involved in a postum volies and reconstruction. such commission will seek to work out problems with existing inter-American bodies. 2. The Agreement should include the following: (a) An undertaking by the British to supply similar aid to us should our defense at any time require 18. (b) As undertaking by the British to esasins sympathetically our noods for additional bases, with a view to giving full support and assistance to the strengthening of our defense. (o) Aa undertaking by the British to return to the United States, upon request of the President, all material transferred which is in existence at the end of the war, whereupen the charge therefor shall be written off. (d) Against their obligation to the United States for non-military materials, food, and similar items, the British shall receive credits for property, services, information, facilities, OF other considerations 153 -3considerations or benefits accepted or acknowledged by the President, the value of which considerations and benefits shall have been determined by the President. The terms and conditions of liquidating the balance of the British obligations for such non-uilitary materials shall be determined by the President, perhaps after receiving recommendations of a joint United States and United Kingdom commission. Unresolved Points 1. The principal material that will be lease-leaned to the British will be military material which will be destroyed or used up in the war. The question arises what, if any, compensation shall be received by the United States for such military material. Alternative ways of handling this matter are: (a) Write off the value of such materials upon their being consumed or destroyed. (b) Britain to furnish the United States war materials or articles not produced in the United States for such of the war materials transferred to Britain and consumed OF destroyed which are not, in the opinion of the President, offset by one or another form of consideration or benefit received or accepted by the United States. (c) 154 -4(e) Keep, as at present, what is essentially as open account, leaving for determination at some later time the question of what, if any, compensation shall be paid therefor by the British. Considerations Affecting the Selection of One of These Alternatives (1) It will unquestionably have a good effect on British morale to know that the cost of that part of the hose which is destroyed in putting out the fire is not a mortgage on Britain's future. It also seems probable that the consideration for amounts as large as the unreturnable military items are likely to be must be looked for in the political field rather than in the commercial field. The idea of lease-lend was to obviste the necessity of payment in cash. Repayment in commodities, 1f pushed far enough to compensate for a large amount of destroyed military items, would deprive the British in the post-war period of foreign exchange with which to buy from us and others necessary isports. Such a situation might provide the cause or the excuse for a British control over their foreign trade and foreign payments equalling or ex- ceeding the pre-war restraints of continental countries. As 155 5- As against this must be weighted the reaction, particularly at the present time, of the Congress and the American public to our receiving no consideration or payment for the bulk of the materials lease-leaned to Britain other than the use of such materials, when Britain has islands and in vestments in the Western Hemisphere. The State Department believes that opinion at the present time is more inclined to accept the writing off of destroyed items than it would be in the future, If and when the crisis is over, and that it would be wise now to eliminate a fruitful source of bitterness and difficulty between the two nations. (11) To wipe off the obligation will keep the total British obligations within more manageable proportions and will thereby reduce the postwar settlement and adjustment problems. The alternative is to make clear to the British that they will not be expected to repay dollar for dollar for such war materials. Because of the inability now to foresee an appro- priate basis of settlement, flexible powers are given 156 -6given to the President so that he may deter sine what, depending on future circumstances, may fairly be required of the British in compensation for such materials. (111) If, because of the foregoing, this is not a propitious time to crystallize the nature of the obligation of Britain for used-up was materials, then the matter can continue to be dealt with as at present, 1.00 through the continued maintenance of the open account for such materials. 2. Shall the value of the consideration and benefits received by the United States from Great Britain be determined by: (a) The President. (b) The President acting with the advice and recommendations of a joint British-American Commission. (e) A joint British-American Commission. 157 June 9, 1941 10:50 a.m. RE AID TO BRITAIN Present: Mr. Bell Mr. Foley Mr. Cochran Mr. Bernstein Mr. White H.M.Jr: All right, I am at your service. Bell: You will recall that we asked Mr. Acheson to come over to discuss the type of agreement which he was submitting to the President for approval. There were mainly two points in that that we discused with him. One was the tying up the agreeing with Great Britain with a sort of economic document governing the situation after the war. The other was writ- ing off the war materials used up or consumed during the war. Viner made quite an argument against the economic factor. In this agreement he said it was tying up this situation just like we tied up the last World War, the League of Nations, with the peace treaty and so forth, and he thought we were getting into a situa- tion we couldn't get out of, and he didn't think it ought to be in the agreement. After we discussed it sometime, Dean agreed to go back and rewrite his memorandum to the President 158 -2suggesting the things that - on which we were not quite agreed, and putting it up to the President to decide. He left out of his document entirely the e conomic problems. He thought that would be a separate document. The second one, about writing off the materials, while he raised the question, he submitted the document in such a way that he was arguing for his form, his recommendation, and we didn't think that it ought to be that way. We thought that the point on which we were agreed ought to be set forth in the document, and the points on which the President had to decide S a matter of policy, that they should set out in it and the alternatives given. In our iscussion of the matter the other evening, we felt that there might be some reference in this agreement to the economic document rather than spelling out what should be done after the war. We provide that there would be set up a joint British-American commission which would study the economic post war problems, and while that wasn't in our understanding with Dean, in our subsequent discussion of the problem we thought in this agreement would be a good place to tie it up, so that was put back in here as one of the clear points and followed it with the others, in which there is no difference of opinion between the Treasury and State. The other points on which we are not in agreement are matters of policy that only the President can decide. Now, Saturday morning Dean called me and said that Feis had just received a telephone call from Hopkins. H.M.Jr: From whom? 159 -3Bell: Hopkins, asking as to the status of this agreement, and Feis told him that Dean was carrying on discussionswith the Treasury, and they were trying to write a memorandum to set out the things on which there were agreements and on which they were not entirely agreed and let the President decide that. Harry asked what we are doing about the war materials used up or consumed, and Feis said "That is one of the points on which they are disagreeing," and he said, "Well, why don't you people meaning the State and the Treasury, recommend that they be written off." Feis said that he didn't know whether the Treasury would go along with that. Well, that is just where we were in disagree- ment. We felt that it should be set up in such a way that the President could see the problem and let him make the decision without a recommendation, but the State Department feels that they should recommend that the debt be written off. H.M.Jr: Now, will you wait one second and I will make this very easy, as far as we are concerned. Just one second. I don't quite understand on page 2, "An undertaking by the British to return to the United States all material which is in existence at the end of the war, whereupon the charge therefor shall be written off." You mean, if they return the stuff the charge will be written off? Bell: That is right. White: No charge for depreciation or obsolescence. H.M.Jr: That is all right. 160 -4Bell: Dean hates to see "B" go in, on page 4. He just doesn't think that anybody ought to recommend that or even suggest it. It complicates the problem and you will have another foreign debt settlement. H.M.Jr: Just a second. Haven't you seen this, you fellows? White: Yes, we have seen it. H.M.Jr: That is what he told us he wanted in the Foley: It is what he said he wanted in the first first place, isn't it? place, and that is the way we wrote our agreement, and that is the difference between our two Departments. H.M.Jr: Let him settle it. Hell, he can settle it like that. I have read this thing, and as far as I am concerned it is all right, let the damn thing go, and I hope the President will read it quietly and settle the thing without bothering me. Bell: You do not want to join the State Department in any specific recommendations on these unresolved points? H.M.Jr: No, I would much rather-- Bell: You would rather have him do it without any recommendations? H.M.Jr: Sure. I would much rather have him do it without my being in the room. Bell: Now, over on page 5 where we talk about public opinion and say that "when Britain has islands and investments in the Western Hemisphere," he wonders if we would be willing 161 -5- to put in there, in parentheses, that neither the State nor the Treasury Department want these islands or investments in South America. He says that the State Department certainly would run from all of them. They don't want to get entangled in any of those things. H.M.Jr: I wouldn't preclude it. Why just throw that overboard? I mean, if for no other reason than that you will certainly be criticized by Congress for throwing it away. I agree we don't want it, but it is there. Congress will say, "Well, why did you, at a wave of the hand, throw that away?" White: Well, I thought the islands were a liability. I don't feel the same way about the investments, but the islands are aneconomic lia- bility as long as you get all you want for air and military bases. Bell: I said, "You realize there are discussions every day in Congress about us taking over the British possessions in this hemisphere for this material," and he said, "Yes, I realize that and we are always going to get criticism of anything we do, but he thinks we have to be bold and take a stand at this time. H.M.Jr: Dan, let me tell you something. I think it is enough to lay it in the President's lap, and he will take it and write it and suit himself. I wouldn't do another damn thing. I would just let it go the way it is. White: Well, this presents the issues to the President and makes it very easy for him to make up his mind. 162 6 Bell: I told Dean that all I wanted you to decide was as to whether or not you would be willing to join the State in definite recommendations, because I knew I had heard you say in conferences from time to time that if you had your way you would give the British all of this tion. material. You wouldn't take any obliga- H.M.Jr: If it was left to me. Bell: Yes, if it was left to you, but I said, "You haven't got another Lease-Lend Bill to get from Congress, you have got the American public to consider," and I just questioned whether you would want to join that and not just let the President decide in view of what he had said to you before in drafting the agreement, but I said we had no pride of authorship in this memorandum and if he wanted to change some of it, we would be glad to get together after you decided that ques- tion of policy. H.M.Jr: I just - the memorandum that you sent me in the country, as far as I am concerned, I would let that go to the President. Bell: That is all we want, isn't it? H.M.Jr: I wouldn't go any further. White: There is a definite difference between what you would like to do if it were left wholly to you and what your recommendations are in the light of the general political situation. H.M.Jr: Are you satisfied, having carried this for me, to leave it just the way that memorandum is? I would say as far as I am concerned that, under the circumstances, it fills the bill. 163 -7Bell: Yes. I would rather you would say that so far as the matter of policy is concerned you are satisfied, and then we will work out the drafting of the agreement - a memorandum between the State and the Treasury. H.M.Jr: Well, isn't that the one? Bell: H.M.Jr: No, this is our draft, and he said, "It is an excellent job of presenting it impartially." I thought this was joint. Bell: No, he gave us a memorandum, and we changed it to make it more impartial. His was definitely in the line of recommending. H.M.Jr: Well, Dan, look, we have all got so much to do, and, God, you work on these things and the President takes it and does what he wants. I would send this over and say that is ours and the State Department can do what they want with the damn thing. Here we fought for three months to get a committee composed of Hull, Jackson, and myself to handle foreign exchange, four months. We get it and it is signed and what happens? The President throws it in the trash basket. He didn't do that. He threw it to the Director of the Budget and the Director of the Budget puts it in a pigeon- hole. Bell: They want to get some decision on this from the President, I think, today so that they can say something in the report that goes to Congress tomorrow. H.M.Jr: You can quote me as saying, "This represents, under the circumstances, the best that we can do, and they can do anything that they want with it. 164 -8Bell: And I think that you and Hull ought to go to the President together. H.M.Jr: No, leave me out. Bell: All right. H.M.Jr: Let Hull go over and see the President. Let Hull go over and see him. Bell: You would be glad to go with him if he wants you to go, I can say that? H.M.Jr: If you don't mind, I would simply say this, Dan, that that is the best that we can do, and it is Mr. Hull's privilege to do anything that he wants with it. I would just lay that on their desk and forget about it. Bell: O.K. H.M.Jr: I mean, we will spend the rest of the week finagling for position and then Mr. Hull-- Bell: No, I don't think so. I think this pretty well suits Dean from an impartial standpoint. He was hoping that it wouldn't be so im- partial. H.M.Jr: Well, it suits me. Bell: And he may have a change of a word or a sentence here and there. H.M.Jr: I appreciate tremendously that you fellows have kept this off my desk and out of my room. You have saved me all kinds of trouble, Dan. It is very helpful to me. Bell: Well, Dean has been very good on this, we must say. He has been very cooperative. 165 -9H.M.Jr: I take it just the way it is written, but don't suggest anything more about my going over with the President, I mean with Hull. Bell: H.M.Jr: You would go if Hull wanted you to go? If he asked me. Bell: O.K., , that is all I have. H.M.Jr: And I hope he doesn't. Thank you all. 166 (COPY) MEMORANDUM FOR THE PRESIDENT: The State and Treasury Departments have drafted and discussed various provisions for in clusion in a Lease-Lend Agreement with the British, This memorandum lists first those matters on which both Departments believe the decisions are clear and, second, those matters on which the decision is less clear. In the latter situation, the considerations favoring alternative procedures are outlined. It is suggested that the question of form of the Agreement be passed without decision at this time and, once you decide the less clear points, an agreement can be drafted in a very short time. Clear Points 1. The Agreement should not include provisions relating to economic and other problems of the emergency, of post-war relief and of recen- struction. Provision shall be wade in this Agreement for the designation of a British-American commission which will sit continuously for the purpose of 167 -2formulating solutions not only of those international economic problems which confront both governments, but also of those larger problems involved in a postwar relief and reconstruction. Such commission will seek to work out problems with existing inter-American bodies. 2. The Agreement should include the following: (a) An undertaking by the British to supply similar aid to us should our do- fense at any time require it. (b) An undertaking by the British to examine sympathetically our needs for additional bases, with a view to giving full support and assistance to the strengthening of our defense. (e) An undertaking by the British to return to the United States, upon request of the President, all material transferred which is in existence at the and of the war, whereupon the charge therefor shall be written off. 168 -84 (d) Against their obligation to the United States for non-military materials, feed, and similar items, the British shall receive credits for property, services, information, facilities, or other considerations or benefits accepted or acknowledged by the President, the value of which considerations and benefits shall have been determined by the President. The terms and conditions of liquidating the balance of the British obligations for such non-military materials shall be determined by the President, perhaps after receiving recommendations of a joint United States and United Kingdom commission. Unresolved Points 1. The principal material that will be lease-loaned to the British will be military material which will be destroyed or used up in the war. The question arises what, if any, compensation shall be received by the United States for much military material. 169 Alternative ways of handling this matter are: (a) Write off the value of such materials upon their being consumed or destroyed. (b) Britain to furnish the United States war materials OF articles not produced in the United States for such of the war materials transferred to Britain and consumed OF destroyed which are not, in the opinion of the President, offset by one or another form of consideration OF benefit received or accepted by the United States. (e) Keep, as at present, what is essentially an open account, leaving for determination propitious at some noter time the question of what, if any, compensation shall be paid therefor by the British. Considerations Affecting the Selection of One of These Alternatives (1) It will unquestionably have a good effect on British morale to know that the 170 cost of that part of the hose which is destroyed in putting out the fire is not a mortgage on Britain's future. As against this must be weighed the reaction, particularly at the present time, of the Congress and the American public to our receiving no consideration or payment for the bulk of the materials lease-leaned to Britain other than the use of such materials, when Britain has islands and investments in the Western Hemisphere. (11) To wipe off the obligation will keep the total British obligations within more manageable proportions and will thereby reduce the post-war settlement and adjustment problems, The alternative is to make clear to the British that they will net be expected to repay dollar for dollar for such war materials. Because of the inability now 171 +6. to foresee an appropriate basis of settlement, flexible powers are given to the President se that he may determine what, depending on future circustances, my fairly be required of the British in compensation for such materials. (111) If, because of the foregoing, this is not a propitious time to orystallige the nature of the obligation of Britain for used-up war materials, then the matter can continue to be dealt with as at present, i.e., through the continued maintenance of the open account for such materials. 2. Shall the value of the consideration and benefits received by the United States from Great Britain be determined by: (a) The President. (b) The President acting with the advice and recommendations of a joint British-American Commission. (e) A joint British-American Commission. 6/5/41 172 COPY THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA June 9th, 1941. Box 680 Benjamin Franklin Station Washington, D. C. D. W. Bell, Esq., United States Treasury, Washington, D.C. Dear Mr. Bell, Since the Memorandum dated May 16th, 1941, was submitted to Mr. Secretary Morgenthau, we have been in telegraphic communication with London as to whether some items included in Appendix A to the Memorandum could not after all be handled administratively at the British end under Lend-Lease arrangements without too much difficulty. These communications have also been supplemented by discussions with our officials here in the light of their actual current experience. The result is that we can now replace the previous list by a revised list attached below, which adds up to $m140 instead of $m199. The main part of the difference is due to four items: (1) It is now agreed that agricultural machinery can be conveniently handled by us under Lend-Lease, provided this category is acceptable at your end, which I gather it is. (2) In practice, the item previously included for civil road vehicles, including fire-pumps, cranes etc. is going foward under Lend-Lease. (3) It has been possible to divide up the paper and timber items into two categories and take out some of the larger items which seem to present no excessive difficulty under the Land-Lease procedure. (4) The item for oil plant equipment can be reduced, since it is now proposed to requisition under Lend-Lease for tin plate and drum sheets. 173 -2The items still remaining contain no margin for orders not thought of at the time when the list was compiled, and there is a sign that they are likely to increase moderately on account of unforeseen additions during the year. It would be advisable, therefore, to give a little margin and to think of the total as amounting now to (say) $m150 as compared with the strict total of $m140. Yours sincerely, (Signed) J. M. Keynes P.S. The above is, of course, on the assumption that the items now declared administratively practicable at our end are eligible for requisition under lease-lend at your end. 174 APPENDIX A Thousands of dollars Original Revised Machinery Components 40 Chemical manufactures, Drugs 30 30 Sundry Materials, machinery and consumption goods 18 18 Vehicle parts 37 8 8 Civil road vehicles, including fire pumps, cranes, etc. 24 0 Abrasives 2 3 Rutile, Bentonite, Diatomaceous earth, Tin residues, Bismuth & miscellaneous non-ferrous metals 6 9 Miscellaneous paper, Bagasse, cotton and linen rags 8 3 Timber (other than Aero spruce and Aero plywood) 10 3 Borax, Razorite, Sundry chemicals, Fibestos & synthetic resins, Carbon black, Pine tar, Rosin, turpentine & asphalt Agricultural machinery 6 6 12 Seeds 011 plant equipment 0 4 4 30 199 20 140 175 KEMORANDOM Jane 9, 1941 TO: FROM: Harry L. Hopicins Oscar Cox SUBJECT: Land-Lease Agreement with The Netherlands Government. 1. As you know, the Royal Netherlands Government wants to get aid under the Lend-Lease Act. 2. To get this aid the Netherlands Government wishes to pay cash in advance of receiving the aid. 3. I see benefits to both the United States and to the Netherlands from rendering lend-lease aid to the Netherlands. 4. Annaxed is an agreement which we have drafted. Copies have been sent to the State and Treasury Department for their views. QUESTIONS a) After State and Treasury approve it, shall it be taken up with the Dutch? Yes No 176 -2b) Do you want to have the Agreement propered se that 10 can be signed by the President and Queen Wilhomina - T the highest NetherLands representative? 108 e) Do you want this Agreement excested by the Secretary of State and the Netherlands Foreign Minister? Yes (Initialed) O.S.C. OSC:aja to 177 C 0 THE WHITE HOUSE P Y WASHINGTON June 9, 1941 Dear Oscar: Apropos of the Dutch coming under Lend-Lease, I have no objection to this provided any funds are not charged to the seven billion dollar appropriation, if you can work out a bookkeeping scheme where whatever we buy for them does not appear as an expense, thereby reducing the total amount of money available. I should say in answer to your questions that it should be taken up with the Dutch as soon as the State and Treasury approve; the State Department can tell you who should sign the agreement. Any authoritative people are all right with me. Cordially yours, (Initialed) H.L.H. Harry L. Hopkins Oscar S. Cox, Esquire, Federal Reserve Building, Washington, D. C. 178 Jame 20, 2942 TO: Mr. Borry L. Boybian FROM: Quear Cas SUBJECT: Methorlands Land-Lease Agreement. 1. I had in mind the central point which you - in your note of yesterday. 2. The webbed which I have in mind will not practically out into the 7 billion dollar appropriation. If, for the Datah put w a million dollars for 1 and, it will go into the revolving fund provided for in section 6 of the Land-Lesse Act and / the 7 billion dollars w - million dollars. This million dollars - then be spent for the - purposes as - Smile. The not effect will be a and of washed transactions In terms of dollars, 11 will be as If the Datah were never in under the hot. 3. As seen as State and Treasury approve, - will take up the agreement with the Datah and got 28 signed by the Batch representative designated by State. (Initialed) O.S.C. OSCiaja 179 June 9, 1941 10:50 a.m. Felix Frankfurter: Henry? HMJr: Yes. F: Hello. HMJr: Yes. F: I've just had a phone from the President saying he wants me to lunch with him today. HMJr: F: HMJr: Yes. So, we'll have to shift hours. Well, you weren't - it was Tuesday I was coming. F: Oh ! (Laughs) All right it was bad - I'm at home and I didn't look at my calendar, I thought it was today. So much the better. HMJr: Tuesday. F: Yeah. Listen Henry HMJr: Yeah. F: Even when he wants to see me, he can only see me through the Treasury because he said he wanted me to - he wanted to be off the record, 80 go enter by way of oppositp the Treasury. HMJr: Oh, I see. F: Get me? HMJr: I see. 180 -2F: I suppose your Secret Service men will make a report on me if I enter that way. HMJr: You never know. F: What? HMJr: You never know. F: Well, I'll get my friend Sam Morrison after you, if they do. HMJr: All right. F: See you tomorrow then, Henry. HMJr: Right. F: Goodbye, and sorry to have troubled you. HMJr: No trouble. F: Goodbye. 181 June 9, 1941 2:02 p.m. HMJr: Ferdinand Yeah. Kuhn: Sure, shoot. HMJr: Wednesday night, the President is the guest of the Broadcasting Association of Broadcasters out at Burning Tree Club K: Yeah. HMJr: I imagine they'11 have some stunts - I'11 tell you who is the head of it, the president of it is the fellow that - who is on Columbia Broadcasting in Washington? K: HMJr: A1 Warner. Yeah. What would you think of we could get the Marine Band or the Navy band to play Berlin's song and launch it that night. K; You have to have an arrangement HMJr: we haven't got one. What's that? written first for orchestra and K: We have to have the music arranged HMJr: Isn't it arranged yet? K: first No. Nothing but the piano part. Now, they might have a try at it, but I don't think it would be very good. HMJr: No, no. Well when is it going to be orchestrated? 182 2K: HMJr: K: Well, you see we didn't want to get going until we got the Ascap stuff cleared, now we are all clear. Well, that would have been a swell night to launch it. Well, it's possible that Berlin's own music factory up in New York could turn that out in a couple days. HMJr: I'm sure they could. K: But HMJr: But then they'd have to practice K: Sure. HMJr: it. And he'd want to be there. Why don't you call up A1 Warner and ask him? K: Yeah. HMJr: Do you know him? K: I know him well. He's a good friend of mine. I'd like to find out from this man, Monroe, how this thing is done - how this arrangement work is done - whether it takes long or not and that kind of thing. Let me have HMJr: a talk with him this afternoon. Yeah. I'm afraid it takes several weeks, I don't know. K: I think that it's quite a job, you know and I think that if we have it done in a hurry, we might get a rotten job done. HMJr: Well, then it would be no good. But I certainly want it launched in a National way. 183 -3K: Surely. HMJr: See? K: Yeah. HMJr: on some National hook-up or something. K: Yeah, I think that's what they were planning, but they want to get their arrangement done first and have a good band. HMJr: K: Okay. I'll talk to Callahan about it and let you know. K: Are you coming in at quarter off I can, may If HMJr: Sure. K: All right. Thank you. HMJr: 184 June 9, 1941 2:48 p.m. Howard Deitz: Hello, Mr. Morgenthau HMJr: How are you? D: Fine. HMJr: Good. D: Little bit tangled up in our HMJr: Oh. D: HMJr: radio plays. But I think seeing daylight. Good. Look, Mr. Deitz, the reason I'm calling you, I've been getting a little restless about not making any head way of putting on some of these plans about civil liberties, you see? D: HMJr: Yes. And particularly this series by Carl Carmer in PM, I think I showed you that last week. D: Yes. HMJr: Showed some of our people. D: Yes. HMJr: You know, he does a story every week on some incident in American history. They are fresh and not the - not the Plymouth Rock stuff and not that sort of thing, you see? D: Yes. 185 2HMJr: D: Now, if you haven't seen them, we could put them in airmail and send you out three, four this afternoon. I'd like to get them, even though I've seen one. HMJr: D: HMJr: Well, we'll send you three or four this afternoon. Paul is sitting here. Yes. Now, the thing that I got in mind is this: I'm thinking in terms of the movies, the radio and the theatre in connection with our friend, Bob Sherwood, you see, for the soldiers.and if we get a good play that we can use in all three mediums. D: HMJr: Good. Now, as far as the movies, what chance have we got of getting the industry to take a half a dozen of these various episodes, but after all where I got my mind is - it isn't only that we are asking them to buy the bonds, but what are they defending, what are they D: HMJr: fighting for, you see? Get behind it. In other words, until somebody else comes along, for the present I'm going to push like hell on this front myself. And when somebody else comes along, another organization, and they can do it better, I'll gracefully retire. 186 3D: Yes, I do understand, but Mr. Morgenthau, I'm not clear beyond this point - I think what you said was that these playlets that have a message that deal with civil liberties, some phase of it, are going to be presented, you want presented in all of the mediums including our radio. Do they exist beyond the copy that was in PM. I didn't know Bob Sherwood made any such plays. HMJr: Well, now here's - no they don't. The plays have to be written, and they have to be produced. We have got to start from scratch. What I'm thinking of has never been done at zero. before. Now, we have to start absolutely D: HMJr: Yes, and get right into writing them. That'e right and, of course, while we've asked for Carl Carmer to come down, he's never written any plays but I wouldn't hesitate a minute to ask Sherwood to do a couple of these. D: Neither would I. Now I've asked Sam Berman, Mark Connally, George Kauffman, and Morris Hart, already to write for this program. I never said civil liberties, but I said it doesn't necessarily have to be about bonds, nor does it necessarily have to be about historical episodes, it has to convey an underlying ethical quality a basis of the plays. They should run about ten minutes. I've also gotten the Screen Writers Guild out here to send a general notice to all its members to contribute to this program. I've also had the Screen Actors Guild to send a general note to all actors to cooperate. So far, I've gotten wonderful offers of cooperation. which we associate with democracy as HMJr: Yeah, I just put you on..... 187 4D: run into some technical difficulties. HMJr: I just want you to know you are on this loud speaker in my room because your own people are sitting around here. Graves, Powell D: HMJr: Well, that's fine. I'm delighted. It helps very much. They can hear you now. They couldn't before. Ferdi Kuhn, Mrs. Klotz D: Well, that's fine. Now, the general over all plan on this particular phase of it - it seems to me, offhand, the ideal would be to have a beautifully conceived and originally written program by the best writers of America, but the certain complications of little elements make it not feasible to make that your goal right at the very first minute. HMJr: D: Yes. Therefore, I immediately called up Information Please to make that spot and they responded, as you know. It looks as though we are going to have a program. The first program 18 going to be quite entertaining. It's going to be - it will also have certain inspirations in it which if not contained in the exact material of the performance will be contained in the in-between, all through it 80 that when we come through with a program, when it is finished, it will have an enobling effect. Now, the main idea of the program aside from its essential spirit is to keep up a in a rating as good as anything on the air, so that we get the full benefit of all the audiences that have ever been built up on radio. I am a little terrified for fear that if we reduce it to something that is not essentially very dramatic or very exciting even though it is very moral for our purposes that it might not be extremely interesting. In other words it does depend upon the quality of the copy. 188 -5HMJr: Well, now this thing that I have for instance 18 William Lloyd Garrison and the way he was almost lynched and how he rescued a negro, got in a carriage and galloped down through New York streets and I think finally entered - just escaped with this fellow, you see? Yes. D: HMJr: It's very dramatic. D: Yes. HMJr: I'll send it to you. D: Good. HMJr: I don't suppose there's one man D:9 in a hundred on the street that knows the incident, but this man, Cramer has taken - the things that I've read, the reason that I keep after - have taken the more dramatic things, you see? Let me send you he's done three or four. Yes, that sounds swell. Now, it is a problem. I don't think that one should exaggerate a problem, anyone should approach it HMJr: Look, Deitz D: I think that it is a problem to get good copy. HMJr: D: Deitz, if it was easy, it would have been done long ago. Yes, I mean the copy is pretty poverty stricken, even on the radio, even any where. HMJr: D: And if it was easy, I wouldn't be calling you. Well, that's sweet. (Laughs) 189 -6 HMJr: So I swear to you by all that's holy I would move heaven and earth, but I think that to embark on a project D: that isn't sure maybe - we want to have a great program, we want to have a successful one. It will not be cheap. Sometimes the sound of a name might make it sound a little bit cheapish, but it will be very popular and very broad and it will HMJr: have the right ideal behind it. Now, I'm not only thinking for the D: Yes, I know. HMJr: Texaco hour, that's only incidental. I'm thinking about these thousands and thousands of soldiers, you see? D: Yes. HMJr: On every ship board every night, you D: Yes. HMJr: know, they have a movie, you know that? Did you know that on every ship in the United States Navy every night they show a movie? D: Yes. I didn't know every night, but I knew they showed movies quite regularly. HMJr: I think, as far as I know, every single night they show a movie. Now - those audiences - until the President has somebody, whose job it is to do it on the audiences that have got to be reached, they got to be told what the hell this is all about. D: Sure. 190 -HMJr: And we are not doing it. Now, I've got some people that are kind enough to help me, like yourself and 88 I say, I'd at least like to make the effort. Yes, that's right. D: HMJr: D: And if he ask Now, I would like to know, for instance, would Sherwood-I'd like a talk with Powell, I know he's in Washington. HMJr: D: He's sitting here and he can hear you. That's good, that's what I'm saying. If ne could get with Sherwood right away, find out - I know a bit about Sherwood's plans and what he's done. I know he was side-tracked in many - a couple of things that he tried to do and in the course of it he may have built up some material which would represent more his ideal of the entertainment than the turn has taken. HMJr: Well, Powell will call him as soon as he leaves the room which will be when you hang up. D: I would love to see Sherwood for instance, if he would volunteer to be the dramatic editor of this program 80 that Sherwood - no playlet would be on unless approved by Sherwood. HMJr: Well, nothing would suit me better. D: And that Sherwood would also be the inspiration to inspire his fellow playwrights to contribute these things. Sherwood is brilliant on his subject and has standing that is the top, if he'd do it, but I'm a little freightened for fear that he is so involved in other things. 191 -8HMJr: Well, Powell will try him this afternoon. D: That would be fine. HMJr: All right. Meanwhile, do you approve the lines that we are going as outlined by Paul Monroe? D: HMJr: D: He hasn't had a chance. He'11 get a chance before he goes home tonight. Good, and I would like to know whether you do approve and with one modification. Because then I will follow out along those lines, adding to it the interpretation of my own. HMJr: But he'11 be back here, he's coming back again at three thirty and he will see me at that time and I'11 give him a Chance then. D: That willobe very fine, Mr. Morgenthau. HMJr: Thank you. D: You can command me for anything on this. I will do anything in the world and change it according to a general idea or your ideas and try to deliver a program. HMJr: D: HMJr: D: Nobody could ask for more. And I'm seeing him again at three thirty. And then I'd like to hear what the general opinion of it 18. Well, one of this gang will call you back. Good. Good luck. HMJr: Thank you. D: Thank you very much. 192 June 9, 1941 4:15 p.m. HMJr: Hello. Jesse Jones: Hello. HMJr: Hello, Jesse. J: How are you? HMJr: Oh, I'm fine. HMJr: Well, I'm available any time you Well, all right. What are you doing J: Eleven tomorrow suits me all right. HMJr: What? J: But then I wouldn't get any lunch J: HMJr: around eleven tomorrow? on that? (Laughs) Wait a minute. (Pause) You got to go till Thursday for lunch. J: You made a mistake, you see. HMJr: Wait a minute, I'm - Thursday I'm J: Well, I think we better do it free. tomorrow. HMJr: Well, I tell you, we do it twice. J: Well, we might do it that way, yeah. HMJr: I'll put you down Thursday for lunch. J: Okay. 193 -HMJr: And I'm not going to let you call me. J: Okay. HMJr: And tomorrow morning at eleven, how's that? J: That will be fine. HMJr: What? J: That will be fine. HMJr: Okey doke. J: Goodbye. HMJr: Thank you. 194 June 9, 1941 4:48 p.m. HMJr: Hello. Ronald Ransom: Hello, how are you? HMJr: I'm all right, how are you? R: Fine, thank you. I told you HMJr: Oh yes. R: Now, the latter part of this when I got back from the swing around the country, I'd get in touch with you. week I'm going - I went to nine of the Federal Reserve Banks, but I'm going to Richmond and Atlanta, which will make eleven of the twelve. HMJr: oh, yes. R: And by next week when I get back I will have nearly covered all of them and I thought if you would be interested next week I would get in communication with you and. HMJr: R: Very much. I'd like you to come over and have a meal with me. I'd like to do that. There's a lot of things that I've run into that I think might be of interest to you. HMJr: Well, if you give me a ring, I'd love to have you come over and have a meal. R: Fine. I ought to say that I think the President's address was a magnifident one and that it beautifully timed and what he's doing on this labor situation is a masterpiece of statesmanehip. I feel that what he's done 195 -2in that speech and on debts is covering up two of the in things that I encountered nine of these districts were I think vitally important that and I feel happier about it than I did before the speech I heard at St. Louis. HMJr: All right. R: So, I'll call you next week. HMJr: Thank you. 196 MEMORANDUM FOR THE SECRETARY. June 9, 1941. Comments on the recent radio address of the Secretary are, on the whole, not particularly friendly. The situation in regard to strikes is very much in the average man's mind, judging both by letters of comment on bond sales and other correspondence. The mail of Monday morning, the 9th, indicated 4 critical letters to 1 friendly one, and of the 4, 3 criticized the Government's policy in regard to strikes. Typical comments are -- J. W. Kellogg, Chicago. "Your prattle about defense bonds would sound better if you cut out your communistic experiments. Too much labor coddling." V. Scott, Asheville, N.C. "Here are some of the remarks I heard after your radio talk last night." "I'11 not buy any more defense bonds as long as there are so many strikes on defense projects." "If labor can't be patriotic enough to work for the defense of our country, why should I deny myself buying defense bonds?" "The Communists are in a position to block by means of strikes any effort made by the USA which does not please them." In view of these facts, the writer begs the Secretary to use his influence toward the enactment of laws to end strikes during the emergency. A Post Office clerk, New York City. "Your speech was very good and to the point. I have been buying Savings Bonds since they were issued, but the majority of the clerks have not been approached to buy bonds. I hope a stronger campaign will be made among these Government employees." Mrs. G. C. Deill, McCune, Kansas. Listened with pleasure to the radio address, but asks why Cities Service should not be made to pay back dividends in order that hundreds of stockholders could buy defense bonds with money tied up in utility investments. W. W. McEachern, President, Union Trust Company, St. Petersburg, Florida. Listened with keen interest to the address, and reports that his bank has been particularly energetic in selling these securities. The entire personnel of the institution, totalling 52, is purchasing bonds on a monthly basis. "The sale of these defense Savings Bonds has been very gratifying as we have sold far more than we anticipated selling." 197 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE June 9, 1941 Secretary Morgenthau E. H. Foley, Jr. I thought you might be interested in the attached memorandum from Harold Stanley in regard to the fees and commissions in the Viscose deal. T.N.7h wa 198 COPY June 4, 1941 Public offering price $62,295,146 This was for 91.14% of the stock and indicates a valuation for the whole company (100% of the stock) of $68,351,049) Payment to 17 purchasers including managers, under the March 15 contract, was $3,351,576, which is 5.38% of the public offering price, for a rranging the original contract and tying up a large amount of capital; for arranging the recapitalization of the Company; for the risk and for carrying the commitment in difficult times; for forming nationwide underwriting and distributing groups and for planning and supervising a successful distribution and for other responsibilities and services. Payment to 17 purchasers, as underwriters and sellers, was $1,347,599, which is 2.16% of the public offering price. Payment to some 581 other dealers as underwriters and sel- lers was $2,751,601, which is 4.42% of the public offering price. Expenses paid by the British Government were .64% of the public offering price. 199 for Miss Chauncey TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE TO Secretary Morgenthau FROM Mr. Cochran June 9. 1941 STRICTLY CONFIDENTIAL Official sales of British-owned dollar securities under the vesting order effective February 19, 1940: No. of Shares $ Proceeds of Nominal Value Shares Sold Sold June 2 3 4 5 6 of Bonds Sold $ Proceeds of Bonds Sold 383,000 278,000 214,500 76,000 45,000 124,587 209.701 520 647,414 757,343 866,239 283,771 284,783 24,865 Nil Nil 111,274 2,864,415 996,500 591,851 9,214,835-1/2 266.759.280 41,312,050 34,682,641 9.326.109-1/2 269,623,695 42,308,550 35,274,492 25,876 33,759 33,200 10,120 7.799 161,5 65,213 30,848 7 Sales from 2/22/40 to 5/31/41 Total 2/22/40 to 6/7/41 MMP. 200 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE June 9. 1941 Secretary Morgenthau TO Mr. Cochran FROM STRICTLY CONFIDENTIAL Official sales of British-owned dollar securities under the vesting order effective February 19, 1940: $ Proceeds of Shares Sold June 2 $ Proceeds of Bonds Sold Total 772,001 967,044 647,414 757,343 866,239 283,771 284,783 24,865 124,587 209,701 161,502 65,213 30,848 2,864,415 591,851 3,456,266 266,759,280 34,682,641 301,441,921 35,274,492 304,898,187 Nil 1,027,741 348,984 315,631 24,865 3 4 5 6 7 Sales from Feb. 22, 1940 to May 31, 1941 Total Feb. 22, 1940 to June 7. 1941 269,623,695 $ proceeds of non-vested securities sold May 24, 1941 - May 31, 1941 $ proceeds of non-vested securities sold Sept. 1, 1939 - May 24, 1941 $ proceeds of non-vested securities sold Sept. 1, 1939 - May 31, 1941 200,000 226,800,000 227,000,000 GRAND TOTAL MM. 304,898,187 227,000,000 531,898,187 For Miss Chauncey 201 Jun 9. 1941 COMPIREDIAL Dear Mr. Knoke: Permit me to acknovledge, sa behalf of the Secretary. the receipt of your letter of Jame 5. 1941. enclosing year compilation for the week ended May 28 showing dollar disbursements out of the British Repire and French accounts as the Federal Reserve Bask of New York and the means by which these expenditures were financed. Faithfully yours, s. Morie Technical Assistant to the Secretary. L. W. Knoke, Require, Vice President, Federal Reserve Bank of New York, New York, New York. HMC:imc:6/9/41 202 0 0 FEDERAL RESERVE BANK I OF NEW YORK June 5. 1941. CONFIDENTIAL Dear Mr. Secretary: Attention: Mr. H. Marle Cochree I as enclosing our compilation for the week ended May 28, 1941, showing dollar disbursements out of the British Repire and French accounts at this bank and the means by which those expenditures were financed. Faithfully yours, /a/ L. W. Knoke L. W. Knoke, Vice President. Henerable Henry Morgentham, Jr., Secretary of the Treasury. Washington, D. O. Enclosure GOPYING:6/7/41 Other tures(a) Debits Credits Gold 1,187.6 828.2 1,356.1 52.0 420.1 308.9 198.5 271.0 6.0 6.0 31,4 7.9 8.6 160.5 32.0 1.8 0.5 4.4 0.3 4.2 1.3 0.2 0.5 0.1 0.7 2.1 456.9 0.7 0.6 1,098.4 1.7 0.2 0.5 0.2 0.7 1.6 0.9 0.9 0.4 0.8 605.6 Aug. 29 - Oct. 2 Oct. 3 - 30 316.8 244.3 72.5 196.7 167.8 28. Oct. 31 - Nov. 27 Nov. 28 - Dec. 31 241.0 234.6 201.1 39.9 206.8 425.6 27.8 Official (b) 3.556.72 259.5 198.0 Credits (e) Dear. (-) in Balance 35.0 Total Debits 866.3(e) 210.0 18.0 31.5 18.5 0.8 26.0 108.0 60.6 575.6 - 36.6 10.8 2.1 .793.1 111.4 .109.5 31.7 48.8 62.5 1.7 63.2 0.2 O Debit 416.6 (e) 449.7 tures 421.4 878.3 1941 Jan. 2 - 29 197.4 162.7 Jan. 30 - Feb. 26 Feb. 27 - Apr. 164.6 137.8 2 Apr. 3 - Apr. 30 May 1 - May 28 May 29 - July 2 34. 26.8 229.7 157.6 32.1 126.0 101.9 24.1 122.6 90.6 32.0 259.9 176.2 52.0 101.4 26.6 26.0 237.9 218.9 103.7 125.6 6.3 62.2 78.3 8.2 0.7 15.0 +92.9 0.9 32.0 52.7 -31.6 0.4 6.0 11.1 5.5 91.0 72.0 - - - - - Not Imp total Credit 900.2 095-((e) 900.2 - - - 195.1(e) +229.0 1.3 - 7.3 0.5 - - 1,793.2 2,782.31 C or CREDIT Expendit Other Confidential FRANCE - Total OF DEBITS and 1940 War parted through Dec. BANK - First year of WIT (8/29/39-8/28/40) ENGLAND BRITISH GOVERNMENT or - Strictly Week Ended May 28. 1941. - PERIOD I'm Millions of Dollars - Total Debits - ANALYSIS OF BRITISH AND FRENCH ACCOUNTS 0.7 0.6 - 0.1 - 1.5 198.2 +220.1 0.5 0.2 1.2 1.6 0.9 0.9 0.8 0.4 July July 30 July 31 - Aug, 27 Second year of war (0/29/40-8/27/41) Aus. 28 - Oct. 1 Oct. Oct. 29 Oct. 30 - Dec. 3 Dec. 4 - 31 ENTED: 21 29.3 29.2 20.2 21.6 28 27.0 19.6 14 26.7 10.4 17.1 6.5 7.7 27.8 11.5 7.4 34.6 Average Weekly Expenditures since Outbreak of War $19.6 million France (through June 19) 27.6 million England (through June 19) * - 39.6 May 6.3 16.0 6.0 - England (since June 19) 50.3 million For monthly breakdown see tabulations prior to April 23, 1941. 4.0 5.5 30.6(f) -22.5 0.2 +1.1 0.1 0.1 -17.8 +7.6 - - - - 0.2 0.1 01 - Transfers from Britinh Purchasing Commission to Bank of Canada for French Account Feek ended May 28 'million Cumulation from July 6 million 162.7 0.2 0.1 - - 0.2 0.3 - - 0.2 - 0.1 0.2 +0.1 0.3 +0.3 - (See footnetes on reverse side) (a) Includes payments for account of British Purchasing Commission, British Air Ministry, British Supply Board, Ministry of Supply Timber Control, and Ministry of Shipping. (b) Estimated figures based on transfers from the Now York Agency of the Bank of Montreal, which apparently represent the proceeds of official Brit iah sales of American securities, including those effected through direct negitiation. In addition to the official selling, substantial liquidation of securities for private British account occurred, particularly during the early months of the war, although the receipt of the proceeds at this Bank cannot be ident ified with any accuracy. According to data supplied by the British Treasury and released by Secretary Morgenthau, total official and private British liquidation of our securities through December, 1940 amounted to $334 million. (a) Includes about $85 million received during October, 1939 from the accounts of British authorized banks with New York banks, presumably reflecting the requisitioning of crivate dollar balances. Other large transfers from such accounts since October, 1939 apparently represent the acquisition of proceeds of exports from the sterling area and other currently accruing dollar receipts. (a) Includes payments for account of French Air Commission and French Purchasing Commission. (e) Adjusted to eliminate the effect of $20 million paid out on June 26, 1940 and returned the following day. (f) Includes $20 million received by the British Purchasing Commission as a refund of capital assistance payments previously made to a munitions concern in this country. This item also includes about $3.2 million presumably representing the proceeds of wool expar ts and $2 million transferred from account of B British authorize bank with a New York bank. Strictly 1941. Considential AUSTRALIA Total Debits PERIOD to official British Other Debits Total Credits A/C of Gold Other For Own For French (or Credits Dear. (-) Total Debits in Balance 323.0 16.6 British Debits Credits Gold Credits Dear. (6 Sales A/C A/C 20.9 38.7 32.4 +181.7 31.2 3.9 27.3 36.1 30.0 6.1 4.9 27.3 0.2 0.4 8.7 2.5 6.2 8.0 6.7 1.3 0.7 14.3 16.7 13.7 0.3 + 1.9 10.1 7.5 2.6 +34.4 0.6 2.5 2.2 0.5 12.6 4.8 2.1 4.8 1.4 1.5 4.4 41.0 3.1 4.8 7.9 3.6 6.8 6.5 3.7 2.0 2.0 +230.2 57.9 14.5 43.4 62.4 50.1 12.3 4.5 2.0 1.8 306.4 504.7 412.7 44.3 43.9 16.4 26.7 35.2 48.0 28.6 69.6 60.6 14.0 49.2 in Balance Sales A/C ,rotyearof war (8/29/39-8/28/40)* Official 1940 2 3-30 Ot. 31 - Nov. 27 7.28- Dec. 31 - parted Doo. 44.3 26.7 35.2 48.0 477.2 - - - - 16.6 - - Aug. 29 -Oat. - 42.5 - 460.6 707.4 33.7 31.1 60.9 33.9 16.9 24.3 14.3 23.1 34.9 46.0 35.9 12.5 - 39.2 25.6 15.8 - 534.8 20.9 110.7 1941 1 - Way 28 29-July 60.9 34.9 39.2 - - 27 - Jpr. 8 3-Apr. 30 33.7 31.1 - - - - 2 - 29 30 - Joba - 15.0 6.8 19.1 10.5 0.5 2.0 0.2 4.8 6.8 5.1 1.7 6.8 4.8 5.0 - 3.2 1.7 3.3 3.2 0.6 2.6 3.8 14.9 5.8 0.8 12.9 10 9.3 - 13.7 8.2 0.7 +3.2 2.8 5.4 5.0 13.7 - 2.8 5.9 12.5 4.6 - 5.4 49 4.1 1,2 1.3 0.8 7.9 +31 0.5 3-July 3 31 - Auge 87 (40-8/27/11) 28 - Oct. 2 - Oct. 29 30-Dec. 3 KOR 124 ENDED: 9.0 14 3.3 21 28 9.4 12.5 9.0 12.2 3.5 - 8.3 4.4 3.1 - - - 9.4 4.6 4.5 12.5 4.4 4.1 - - ity Average of Total Debits Since Outbreak of War million 0.704 May 28, 1941 through monthly breakdown 000 tabulations prior to April 23, 1941. 4/1 0.5 - My - - - - 0.1 0.3 -3.9 -4.9 - 8.1 17 - 0.2 - 1.7 0.2 0.1 0.1 - 0.1 0.1 1.7 - 1.7 1.8 - 4.3 0.4 3.9 0.2 0.2 1.8 - 04 -1.6 -0.1 +26 -1.4 206 ALLISON SHIPMENTS TRICTLY British b. 29 - Jan. 4 41 - 19 25 33 - - 26 - Feb. 1 31 - 28 60 - 30 b. 16 - 22 b. 23 - Mar. 1 r. 2-8 9 15 8 C Total E - 1 3 - b. 9 15 r. - 8 83 5 11 12 18 b. Total E C - 83 - 41 2 - - 2 - 33 - - - - 31 - - 60 25 1 1 - 31 32 - - - - 77 - - - - - - 6 69 - - 6 72 - - 36 14 6 6 - - 1 88 - 12 2 - 85 2 - 43 - - 33 - 32 - 86 1 1 35 - 66 2 1 80 - 80 - 91 - 91 2 - 71 - 77 - 2 74 - 80 1 2 17 - 53 14 - 3 103 47 - 5 71 3 12 10 88 - 21 10 19 3 23 - 29 87 2 - 89 10 1 r. 30 - April 5 24 - - 24 41 1 r. 6 12 60 1 66 r. 13 - 19 12 2 - F. 20 - 26 3 3 - - 4 10 24 11 17 8 1 14 - 2 6 1 - - - - - 24 - 53 11 73 - 9 y 18 - 24 60 13 16 89 - y 25 31 24 14 14 52 - ne 1 7 12 25 16 53 - 690 76 59 825 438 y 4 2 r. - TOTAL a 26 36 5 5 - 2 7 3 1 8 7 6 5 5 fice of the Secretary of the Treasury, vision of Research and Statistics 62 9 14 - 38 13 20 - 93 23 29 - 22 27 - 23 28 10 91 113 613 30 1,468 7 7 9 TAL Dec. 29 June 7 GRAND - 16 22 r. 27 - May 3 China Army 118 79 June 9, 1941. 207 STRICTLY CONFIDENTIAL ALLISON DIVISION, GENERAL MOTORS CORP. Shipments of Airplane Engines ( Actual shipments : : 40 January May 24 - June 22 June 23 - July 20 July 21 - Aug. 17 Aug. 18 - Sept. 14 Sept. 15 - Oct. 12 Oct. 13 - Nov. 9 Nov. 10 - Dec. 7 Dec. 8 - Jan. 4 : Estimated shipments : on existing orders 10 28 43 47 140 263 233 154 228 41 January 5 - February 1 February 2 - March 1 193 323 March 2 - 8. 77 March 9 15 80 March 16 - 22 March 23 - 29 53 March 30 - April 5 pril 6 - 12 103 71 88 April 13 - 19 April 20 - 26 April 27 - May 3 19 May 4 - 10 38 21 9 May 11 - 17 May 18 - 24 118 May 25 31 79 June 1 - 7 91 June 8 - 30 July August September October November December 93 330 475 580 700 800 900 1,000 42 January February fice of the Secretary of the Treasury, Division of Research and Statistics. 1,000 730 June 9, 1941. 208 EXPORTS OF PETROLEUN PRODUCTS, SCRAP IRON AND SCRAP STREET FROM THE UNITED STATES TO JAPAN, RUSSIA, SPAIN, AND GREAT BRITAIN AS SHOWN BY DEPARTURE PERMITS GRANTED Week ended June 7. 1941 : RUSSIA SPAIN : : JAPAN GREAT BRITAIN : STROLEUM PRODUCTS Fuel and Gas 011 (including Diesel 011) 120,070 Bbls. -- 157,250 Bble. -- 57,000 Bbls. 318,678 Bbls. Crude - Blended or California High Octane Crude* All Other Crude - -- -- - -- -- Gasoline - Gasoline A** Gasoline B* -- 12,750 Bbls. All Other Gasoline ---- 64,000 Bbls. 305,000 Bble. 104,000 Bbls. -- ubricating 011 - Aviation Lubricating 011*** All Other Lubricating 011 Tetraethyl Lead*** -- 24,402 Bble. - --- 34,800 Bble. 48,350 Bble. 6,762 Bbls. - -- -- -- -- -- - - "Boosters", such as IsoOctane, Iso-Hexane, or Iso-Pentane SCRAP IRON AND SCRAP STEEL Number 1 Heavy Melting Scrap -- All Other Scrap - -- 10,800 Tons - -- Office of the Secretary of the Treasury, Division of Research and Statistics. June 9. 1941. Source: Office of Merchant Ship Control, Treasury Department. Any material from which by commercial distillation there can be separated more than 3 percent of aviation motor fuel, hydrocarbon or hydrocarbon mixture - President's regulations of July 26, 1940. Aviation Gasoline. As defined in the President's regulations of July 26, 1940. Hanny White 209 June 9. P.M. An all-out defense program to utilize effectively our labor resources. This would involve the following steps: 1. A great expansion of the plans prepared by the services and the OPM for defense articles. 2. A separate program of defense construction which could employ most of those now unemployed. 3. In order to carry this out, give the Federal Works Agency as much as $5 billion to employ at regular rates of pay 2-1/2 million persons on defense projects which will otherwise not get done: a. Airports b. Roads C. Defense plants d. Defense housing e. Utilities in defense towns 4. Unify the present labor training program under a single director of labor training and supply and enlarge it so as to give training to enough men wi th appropriate skills to break the ap- proaching bottlenecks at the level of the expanded program. 5. Keep WPA at the project level to take care of the residue, if any. This program is based upon the fact that the present defense program is leaving unused approximately 7 million persons who are unemployed and seeking work and possibly 5 million who would be seeking work if there were enough jobs. The program for the coming year is officially stated to involve the direct and indirect employ- ment of not more than 3 million of these persons and the armed forces will absorb only another million. 210 JUN 9 1941 Ny dear No. Secretary I have your letter of May 20, 19th. (a 800.52 w enclosing a draft of a press release covering the payments - Jane 15. 1941, on obligations of foreign governments to the United States arising out of the World May, and asking for - comments as to have this matter should be mailed. The Treasury does not believe that any change should be made at this time in the soutine procedure under which notices of amounts due from detter governments have been transmitted to the representatives of such governments in this country. Therefore, I - enclosing copies of notices of amounts due on June 25 and July 1, 1942 from various debtor governments, and will be did as you will transmit such notions to the respective governments which have representation in this country. Very touly yourse (Signed) H. Morgentham. Jr. Secretary of the The Renerable, the Secretary of State. Recleanses. sent in duplicate File to Mr. Thompson VTH1m1b 6-6-42 By 211 - OF - - - - The following statement shave the - - water the Senting and on June 15. 1942 and July 2. 1948 Principal Internal June 15. 1942 R,800,000.00 1,500,000.00 $4,195,000,00 Hereterium State denta aland I -- Britain was $6,400,000,00 the 19. 92,405,00 Read 30 mails - melovia Total Ame 15. 1940 ..... $75,450,297.98 July 2. 19 $175,000.00 - I - OF ACCOUNTS June 4 194 413,169.45 2. ! 212 STATEMENT OF AMOUNTS DUE FROM THE GOVERNMENT OF FROM DECEMBER 15,AND 1932, TO DECEASED 15, 1940, INCLUSIVE, 19.2001 Instine Account Principal Interest Annuity under Assember Total of amounts due from December 15, 1932 to December 15, 1940, inclusive $36,100,000 $99,988,000 $7,214,809.20 I das June 15. 1941: Principal of bond No. 16 on account of pre-araistice indebtedness $2,900,000.00 Principal of bond No. 16 on account of post-armistise indebtedness. 1,900,000.00 Semiannual interest due June 15, 1941, on bonds Nos. 8 to 62, aggregating $237,600,000 representing post-armistice indebtedness, as provided for in the funding agreement of August 18, 1925 4,158,000.00 Sixteenth seniannal installment of the annuity due June 15, 1941 on account of the moratorium agreement of June 10, 1932. Amount due 184.453,81 89,442,453.88 213 STATEMENT OF AMOUNTS DUE FROM THE GOVERNMENT 25. 1910. 28. 1902 OF CEROMOSLOVAKYA FROM J 15, 1933 TO Examine Account Principal Interest Amerity under Merchants Account Total of amounts due from June 15, 1933 to December 15, 1940, inclusive $23,670,085.83 $2,713,191.70 I due June 35. 1961 Principal amount of bond No. 32 - June 15, 1941, under agree most of Ostober 13, 1925 $1,500,000.00 Sixteenth sessional installment of the annity das June 15, 1942 on account of the montarism agreement of June 10, 1932 Amount due $1,682,812.78 214 STATEMENT OF AMOUNTS DUE FROM THE COVERNOR OF THE REPUBLIC OF ESTONIA FROM DECEMBER 15, 1932 TO DECEMBER 15. 1040. ARD 100 16. 1942 Lundles Account Amaily under Meratorium Principal Internal $1,146,000 $4,835,610 Assessment total of amounts due from December 15, 1932 to December 15, 1940, inclusive $548,779.35 eat doe June 15. 1941, Senteensal interest due June 15, 1941 ea bonds Mos. 19 to 62 and 12-A to 54-A $866,210.00 Interest accreed from Dec. 15, 1940 to June 15, 1941 ea principal anounts of boads aggregating $1,146,000 which astured from Des. 15, 1932 to Dec. 15, 1940, inclusive Sixteenth sendannual annuity due June 15, 1941 on account of the maratorium agreement of June 11, 1932 Amount des 20,055.00 16.511.22 $322,890.89 215 STATEMENT OF AMOUNT DUE FROM THE COVERAGE OF THE REPUBLIC OF FINLAND 1942 I the June 15. 1941 Semiannual interest - June 15, 1941 on bonds Nos. 19 to 62 Sixteenth semionnual installment of monity due June 15, 1941 on account of the maraterium agreement of May 29, 1932 $139,037.50 19,030.50 First a installment of musicy due June 15, 1941 on account of the moratorium agreement of May 1, 1941 Amount due 19,695.06 $171,763.06 - 216 STATEMENT OF AMOUNTS DEE FROM THE - OF - REPUBLIC OFAND FRANCE FROM 15, 1930 TO 15. 1910. - 15. Primaries Total of - due from Dec. 15, 1932 to Dec. 15 1940, inclusive under Internal $439,739,188.79 $364,795,795.00 $45,703,195.80 I das Jane 15. 1941, Principal of board No. 16 due June 15, 1941 $91,728,872.98 Semiannual interest das June 15, 1941 on bonds Nos. 16 to 62 34,135,563.71 Interest accrued from Dec. 15, 1940 to June 15, 1941 on principal anomate of bonds Nos. 8 to 15, aggregating $436,730,128.79 which satured from June 15, 1933 to June 15g 1940 4,357,302.29 Sixteenth installment of the month due June 15, 1941 - - of the maratorian agreement of June 10, 1932. I due $93,270,617.30 217 TO STATEMENT OF AMOUNTS DUE FROM THE OF GREAT BRITAIN FROM - 15, 1933 25. 1910. 15.100 Immity under Principal Interest Memberles Total of amounts due from June 15, 1933 to December 15, 1940, inal. $241,000,000.00 $1,397,699,481. I doe June 15. 1941 Semiannual interest due June 15, 1941 on 19th to 62nd installments $71,032,500.00 Interest accrued from Dec. 15, 1940 to June 15, 1941 on principal installments Nos. 11 to 18, aggregating $281,000,000 which natured from Dec. 15, 1933 to Dec. 15, 1940 4,917,500.00 Sixteenth sentenceal installment of the annuity due June 15, 1941, on account of the masterium agreement of June 4, 1932. Amount das 9,729,765.05 $ 85,670,765.05 218 STATEMENT OF AMOUNTS DUE FROM THE GOVERNMENT OF THE KINGDOM OF HUNDARY FROM DECEMBER 15. 1930 TO DECEMBER 15. 1940. INCLUSIVE AND - 10. isu Annity under Account Principal Total of amounts due from Dec. 15, 1932 to Dec. 15, 1940, inclusive $123,385.00 Memberium Interest $681,127.05 161,391.70 Amount due June 15. 1941 Semiannual interest due June 15, 1941 on bonds Nos. 18 to 62, and on balances of principal mounts of bonds Nos. 63 to 65 $31,025.04 Interest accrued from Dec. 15, 1940 to June 15, 1941 on principal amounts aggregating $123,385.00 which natured from Dec. 15, 1932 to Dec. 15, 1940 2,199.24 Sixteenth seriannual installment of the annuity due June 15, 1941 on account of the moratorium agreement of May 27, 1932. Amount due 4,235.50 $37,410.66 NOTE: On February e, 1930, the Hangarian Government made a proposal for a - arrangement to replace its funding agreement of April 25, 1924, and moraterium agreement of May 27, 1932, which proposal was on March 28, 1938 transmitted by the President to the Congress for its consideration. Subsequently, payments of $9,828.16 each were received on June 15, 1930, December 14, 1938, June 12, 1939, December 13, 1939, June 14, 1940 and December 13, 1940, by the United States. 219 STATEMENT or AMOUNTS DES FROM THE TO I ML 15.1962 OF THE KINGSON OF ITALY FROM - 25. 1933 Total of amounts das from June 15, 1933 to Dec. 15, 1940, inclusive Priminal Internant $111,209,000.00 $19,172,416.76 - I$19.448.199.39 Amount due June 15. 1941 Principal of bond No. 16, due June 15, 1941 $16,400,000.00 Semianimal interest due June 15, 1941 on bonds Non. 16 to 62 2,351,875.00 Interest accreed from Des. 15, 1940 to June 15, 1941 on bonds Non. 8 to 15, aggregating $111,200,000 which natured from June 15, 1933 to June 15, 1940 Sixteenth sendannual installment of the annity due June 15, 1941 on assess of I- the moraterium agreement of June 3, 1932. 139,000.00 996,155.00 $29,727,030.88 220 STATEMENT OF AMOUNTS DUE FROM THE COVERAGE TO 25. AND 14.184 or THE REPUBLIC OF LASVIA FROM - 25, 1930 Primare Interest Total of amounts due from June 15, 1933 to $463,700.00 Dec. 15, 1940, inclusive I under Memberism $229,111.00 Amount due June 15. 1941 Semiannual interest due June 15, 1941 on bonds Nos. 19 to 62 and 11-A to 54-A 8 111,494.25 Interest accrued from Dec. 15, 1940 to June 15, 1941 on principal amounts aggregating 8463,700 which natured from Dec. 15, 1933 to December 15, 1940, inclusive 8,114.75 Sixteenth conformal installment of annuity due June 15, 1941 on account of the monterism agreement of June 11, 1932 Amount due 15.374.26 $134,883.26 221 - STATEMENT OF AMOUNTS DUE FROM THE GOVERNOUS OF THE REPUBLIC OF LITNUANIA FROM JUNE 15, 1933 TO MO. 15. 1940. XWOLDSXVX. AND are 15.1941 Principal Total of amounts due from June 15, 1933 to December 15, 1940, inclusive $364,160.00 Interest $1,661,355.37 Amaility under Meratorium Account $205.219.90 Amount due June 15. 1941 Principal of bond No. 17 for $49,000 and principal installment amounting to $3,425 ea bonds Nos. 63 to 71, due June 15, 1941 $ 52,425.00 Semiannual interest - June 15, 1941 on bonds Nos. 17 to 62 and balance of principal amounts on bonds Nos. 63 to 72 101,410.87 Interest accrued from Dec. 15, 1940 to June 15, 1941 on principal amounts aggregating 8364,160 which natured from June 15, 1933 to June 15, 1940 6,372.80 Sixteenth semiannal installment of assuity due June 15, 1941 on account of materian 13,683.26 agreement of June 9, 1932 Amount doe $173,891.98 222 STATEMENT OF AMOUNT DUE FROM THE GOVERNMENT OF THE REPUBLIC OF POLAND FROM DECEMBER 15, 1932 TO 15. 1940. INCLUSIVE AND THE 15. 1943 Assessment Principal Interest $13,632,000.00 $60,995,960.00 Amaility under Moratorium Total of amounts due from Dec. 15, 1932 to Dec. 15, 1940, inclusive Amount doe June 15. 19ALL Semiannual interest due June 15, 1941 on bonds Nos. 19 to 62 and $ 3,344,250.00 12-1 to 55-A Interest accrued from Dec. 15, 1940 to June 15, 1941 on bonds aggregating $13,632,000 which natured from Dec. 15, 1932 to Dec. 15, 1940 238,560.00 Sixteenth sexiannual installment of Amount due . the annuity due June 15, 1941 on account of the moratorium agreement of June 10, 1932 456,229.71 $4,039,039.71 - 223 STATEMENT OF AMOUNTS DUE FROM 1 - TO 16. 1910. 14.1011 OF THE KINGDOM OF INDIANIA FROM - 25, 1933 Principal Total of amounts due from June 15, 1933 to Des. 15, 1940, inclusive $11,630,560.63 Interest Amounts under MARATHON $2,722,679.49 $231,251.20 Issuat - June 15. 1941 Principal of bond No. 16 - June 15, 1941 8 445,000.00 Sextanemal interest das June 15, 1941 on bonds Nos. 15 to 62 aggregating $51,860,560.43 as provided for in the funding agreement of Dec. 4, 1925 907,559.82 Sixteenth sexianual installment of the annuity due June 15, 1941 on account of the moratorium agreement of June 11, 1932. Amount due 48,750.00 $1,401,309.89 / STATEMENT OF AMOUNTS DUE FROM THE 08 YUGOBLAVIA FROM JUNE 15, 1932 to 15. 1910. TECLNSIVE. AND - 15. 1941 Principal Interest Total of amounts due from June 15, 1932 to Dec. 15, 1940, inclusive $3,211,000.00 $385,156.28 I due June 15. 1941 Principal of bond No. 16, due June 15, 1941 Semiannual interest due June 15, 1941 on bonds Nos. 16 to 62 8 524,000.00 146,030.00 Interest accrued from Dec. 15, 1940 to June 15, 1941 on principal amount of bonds aggregating $3,213,000 which natured from June 15, 1932 to June 15, 1940. Amount due. 8,032.50 $678,062.50 224 225 / STATEMENT OF AMOUNTS DUE FROM THE GOVERNMENT OF GRENCE 1911. FROM JANUARY 1, 1933 TO JANUARY 1, Primarial Internal - Merstorian Total of amounts due from Jan. 1, 1933 to $2,810,000.00 Jan. 1, 1941, inclusive $69,987.50 $200,711.20 Amount due July 1. 1941 Principal of bond No. 27 due July 1, 1941, under Part I of agreement of May 10, 1939 $175,000.00 Seventeenth sections installment due July 1, 1941, under paragraph I(a) of moretorium 13.169.15 agreement of May 24, 1932 Amount das $188,169.45 226 DEPARTMENT OF STATE WASHINGTON In reply refer to May 28, 1941 EA 800.51 W 89/1142 My dear Mr. Secretary: About this time each year it has been customary for this Department to send governments indebted to the United States statements of the amounts due and payable June 15. However, exceptions have recently been made to this in the case of certain countries, and these exceptions have been covered by statements in press releases of this Department that no notices have been sent to the representatives of Czechoslovakia, Estonia, Latvia and Lithuania in view of current governmental conditions in those countries. Under existing circumstances I deem it undesirable to send notices to the debtor governments now defending themselves against agression, to some of which we are at present extending aid under the Lease-Lend Act. This would eliminate notices to all countries having payments due The Honorable Henry Morgenthau, Jr., Secretary of the Treasury. 227 -2due June 15, 1941 except France, Hungary, Italy and Rumania. Questions as to the payments due June 15 are likely soon to be raised by the press. If notices are to be sent to some countries and not to others, it would probably be desirable to issue an explanatory statement for the information of the public and for the record. A draft of such a statement is enclosed. The alternative would be to send no notices to any of the debtor governments and to inform the press either orally or through a press release that in the existing circumstances it 18 believed that no useful purpose would be served by the dispatch of the customary notices and that such notices are not requisite under the terms of the debt agreements. I should be glad to have your advice as to the handling of this matter. Sincerely yours, /8/ Cordell Hull Enclosure: Draft of press release. 228 DRAFT OF PRESS RELEASE PAYMENTS DUE JUNE 15, 1941 ON OBLIGATIONS OF FOREIGN GOVERNMENTS TO THE UNITED STATES ARISING OUT OF THE WORLD WAR Statements of amounts due and payable by other govern- ments on their obligations to the Government of the United States arising from the World War have customarily been transmitted to the representatives of such governments at Washington a few weeks before payments are due under the agreements with each country, although such notice is not requisite under the terms of the agreements. In view of current governmental conditions in Czechoslovakia, Estonia, Latvia and Lithuania, no statements of amounts due from Czechoslovakia have been rendered to that country since December 1938, and no statements have been rendered to Estonia, Latvia and Lithuania since June 1940. In view of the fact that Greece, whose defense the President under the authority granted him by Public Law 11, 77th Congress, has deemed vital to the defense of the United States, is engaged in a war of defense against unjustified aggression, no statement of amounts due and payable by Greece on May 10, 1941 has been rendered. For similar reasons, it is not contemplated that statements of amounts due and payable June 15, 1941 will be transmitted at this time to the representatives of the Governments of Belgium, Great Britgin, Poland and Yugoslavia, 229 -2Yugoslavia, which are also involved in war against the common aggressors of Europe. Legislation which would offer Finland an option of postponement of amounts due in the calendar years 1941 and 1942 is now pending in the Congress, and it is hoped that such legislation will be enacted before there is occasion for Finland to consider the payments due June 15, 1941 or for the Government of the United States to communicate with Finland regarding them. The Department of State has today transmitted to the representatives at Washington of the Governments of France, Hungary, Italy and Rumania statements of amounts due and payable June 15, 1941 on obligations of these Governments to the United States arising out of the World War. Payments from Germany under its debt agreement of June 23, 1930 fall due on March 31 and September 30 of each year, and payments by Germany in respect of the indebtedness of the Republic of Austria to the Government of the United States fall due on January 1 each year. Statements of amounts due and payable ha ve regularly been transmitted to the German Embassy at Washington in advance of these dates. 230 1941 by dear Mr. Velloo: Reference is sade to your letter dated June 4. 1941, (RA). with which you enclosed a copy of a translation of a memoranium presented to your Department w the Colombian interester. setting forth the request of the Government of Celebbia for financial and commonie assistance involving eredite for public works and agricultural development perposes and cooperation with the Colombian Stabilisation Fund. as you are suare. the question of extending the life of this Treasury's Mabilisation Fund beyend June 30. 1941. is new before Gongress. Until final action is taken thoresa, may I suggest the advisability of postponing any conversations between the Treasury and the Colombian Ambassador with respect to the possibility of cooperation between the American and Colonbian Stabilisation Funds. Sincerely years. (Signed) H. Morgenthau, Jr. Secretary of the treasury. The Renerable Summer Velles, Union Secretary of State. HMG:1ap-6/5/41 231 PARAPHRASE OF TELEGRAM SENT TO: American Embassy, Rio de Janeta DATE: June 9, 1941, 11 p.m. NO.: 385. Reference is made to the Enbassy's May 26, 10 a.m., no. 531. The former Governor and Vice Governor of the Yugoslav National Bank have now been removed by the Government of Yugoslavia. Mr. D. Lazarevich is now the Governor and Mr. R. Bichanish is the new Vice Governor. The appropriate authorities of the United States Government have been formally advised of this change by the Yugoslav Minister at Washington, who informs the Department that the Government of Brazil and the Bank of Brasil have also been advised of the change. He states that the Bank of Brasil has new been requested by the Yugoslav National Bank, through its appropriate officials, to effect transfor to the Federal Reserve Bank of New York of the $11,250,000. This request is being supported by the Yugoslav Minister at Rie and by the Yugoslav Minister here. You are requested to try to get this request carried through. HULL (AAB) EA: FL:MSG Eu RA EA:MSG June 10, 1941 FROM TEE SECURITY TO: Mr. Bell Mr. Foley Mr. Cochran Mr. White Copies sent to the above TREASURY DEPARTMENT UNITED STATES COAST GUARD SECRET WASHINGTON 9 June, 1941. Spagent, Hongkong, China. Secretary of the Treasury. Message from A. Manuel Fox. Fox, Taylor, and Frese arrived Hongkong today. Fox states confidential letter from Ambassador Gauss, Chungiding, intimates group may wish to visit Shanghai before proceeding to Chunglding. is in keeping with British interest to delay proceeding to ChungFox, however, is writing and wiring H. H. Kung that party is to proceed to Chungking at the earliest moment. Fox prepared following message en route to Hongkong: "Had talk with Dr. Alfred Sze in Manila. We had oppartunity of studying the many memos and reports en route and able to make critical analysis of British-Sino agreements, setting forth points of similarity, dissimilar aspects, and early steps hich agreements required board to take. I will forward a copy 1 this statement as soon as possible. In my talk with Sze, the allowing outstanding points were discussed: 1. Sze has been asked to visit the United States to aid V. Soong. He expects to stay a considerable time. 2. H. H. Kung is the weak spot in China. Lanier realizes a unfitness and would like retire but his wife against such soon. Sze stressed that it is necessary to watch Kung as his cisions are fickle and very changeable and it is necessary to everything definite and in writing. Yadame Kung is the real n Lving force. Chiang Kai-shek has done on the whole an excellent job has held the Chinese together like few oan do. 3. 4. Chiang Kai-shek has promised T. V. Soong finance minis- ship after he has finished satisfactorily business now in-hand United States. 5. Chinese must compose their differences and present a united front. 6. The Japanese in China can easily be bribed. They have to, pay as they go and corruption among the Japanese is increasing. Use says that for a price materials can be sent through the Japanase lines. 7. Sze is not well acquainted with the cooperative move- but thought it was doing a good job. Reports are that it is munistic, but this must not be taken too seriously. 8. Sze is of the opinion that we are coming to China at opportune time and that we can do much good for China. We dis- ased industrial cooperatives with bankers and others in Manila. Lye examined Carlson report and understand State Department criti- - Its objectives seem good. Its possibilities for increasing diable supply of goods real, but its plans require more funda- tal basis before additional substantial financial assistance would warranted. It seems worthy of early and serious consideration bard." SECRET June 10, 1341 FROM THE SECRETARY. TO: Bell Foley Cochran White copies sent to the above THE COMMANDANT COLUM BUARD AND NOVER TO NL TREASURY DEPARTMENT UNITED STATES COAST GUARD SECRET WASHINGTON From: Spagent, Hongkong, China. To Secretary of the Treasury. 9 June, 1941. Message from A. Manuel Fox. Fox, Taylor, and Frese arrived Hongkong today. Fox states that confidential letter from Ambassador Gauss, Chungking, intimates that group may wish to visit Shanghai before proceeding to Chunglding. This is in keeping with British interest to delay proceeding to Chung- king. Fox, however, is writing and wiring H. H. Kung that party is ready to proceed to Chungking at the earliest moment. Fox prepared the following message en route to Hongkong: "Had talk with Dr. Alfred Sze in Manila. We had opportunity of studying the many memos and reports en route and able to make critical analysis of British-Sino agreements, setting forth points of similarity, dissimilar aspects, and early steps which agreements required board to take. I will forward a copy of this statement as soon as possible. In my talk with Sze, the following outstanding points were discussed: 1. Sze has been asked to visit the United States to aid T. 7. Soong. expects to stay a considerable time. 2. H. H. Kung is the weak spot in China. Lanier realizes his unfitness and would like retire but his wife against such aotion. Sze stressed that it is necessary to watch Kung as his decisions are fickle and very changeable and it is necessary to have everything definite and in writing. Vadame Kung is the real ring force. 8. Chiang Kai-shek has done on the whole an excellent job has held the Chinese together like few can do. 4. Chiang Kai-shek has promised T. V. Soong finance minis- 10 after he has finished satisfactorily business now in hand ited States. Chinese must compose their differences and present a 5. ed front. The Japanese in China can easily be bribed. They have 6. as they go and corruption among the Japanese is increasing. sys that for a price materials can be sent through the Japanlines. Sze is not well acquainted with the cooperative move- 7. but thought it was doing a good job. Reports are that it is istic, but this must not be taken too seriously. See is of the opinion that we are coming to China at 8. Opportune time and that we can do much good for China. We dis- d industrial cooperatives with bankers and others in Manila. examined Carlson report and understand State Department criti1. Its objectives seem good. Its possibilities for increasing able supply of goods real, but its plans require more funda1 basis before additional substantial financial assistance would warranted. It seems worthy of early and serious consideration ard." SECRET 238 June 9, 1941 Dear Jim: Thank you very much for letting me have your diary on your trip to England, which I enjoyed reading immensly. Yours sincerely, Hon. James V. Forrestal, Under Secretary of the Navy. 239 June 9, 1941 Dear Miss Thompson: I am very glad to send you a copy of the memorandum "College Men and the War", as requested by Mrs. Roosevelt. With kind regards, Yours sincerely, /s/ Henrietta S. Klotz Miss Malvina Thompson, Secretary to Mrs. Roosevelt, The hite House. By Messenger AUT miss Chauncing 6/3/141. 240 B. Feculary is handling through Un Seares without any written rehly inted IncH M From: MR. GASTON R. GRAVES OFFICE TO R 241 Hall Mr. Powel Mack Mr. Johnston Mr. Sloan Ross Campbell Mr. Adams Wood Mr. Olney : In. faiton Had a pleasant talk a offent with Jackson him position. : Hewent will advise me Thursday. 3mg 6/20 ): Mr. Gaston 5:20 P.M. 6-10-41 242 Brought in by Mrs. McHugh. "The Secretary says will Mr. Gaston please speak to him about this." From: MR. GASTON 243 When GARDNER JACKSON WEST KIRKE STREET 6/9/41 CHEVY CHASE. MARYLAND m Dear Mr. Morgenthau:- In the midst of your manifold and heavy burdens in these crucial deys please forgive to for posing my personal problem briefly. Were it not for my desire to contribute what I can to the tremendous common effort ahead of us, I would not impose upon you this much. When I pulled away from John Lewis last fall and pitched in with my nickel's worth at the Hotel Roosevelt headquarters for F.D.R. and H.A.W., it was with the hope that might subsequently return to the CIO operation under Phil Murray. Because of the nature of my letter of resignation to John (which sprang from me without thought of its effect on my future) and because of John's bitterness it seemed impossible for Phil to do anything about me. I have understood and sympathized with his predicament. In the internal workings of the CIO, especially around headquarters, I unwittingly became by my action of withdrawal a symbol of the struggle within that organization. Now, after these months during which I have collaborated behind the scenes with various of the CIO forces trying to shake the control you see exemplified in the North American Aviation and Woodworkers situations, I find that the long delay has made it difficult for me to get a job back in the Government where I think I can make the best contribution that's in me in the grave months ahead. My role, as you know, has been largely that of public relations, promotion and liason fellow for the efforts to which I have been attached, with a strong emphasis on the civil rights side. My only craft is that of newspapering. In our years in Washington I have been sort of a center of calls from most liberal organizations and individuals for aid and advice. In the punsuit of the causes that seemed good to me I have been reckless in the dispensing of our limited funds and am now faced with the absolute necessity of getting a moderate income to keep the family afloat. I am terribly anxious to get that income, if possible, while trying to pull my weight in the defense effort. My cronies down in the Department of Agriculture -- Milo Perkins, Paul Appleby and the others -- have worked out a job for me pushing the school lunch program in the field. It's an undertaking in which I'm definitely interested. But it will require pulling up stakes here and moving perhaps to California. In addition to the financial problem involved in our old house here (in which we now have a slight equity) there is the more compelling problem psychologically of the associations and relationships we have here. It is through them that we have our chief value for the struggle to which we all dedicate ourselves. The President, I think, has been told in a vague way by Jim Rowe about my predicament and has indicated his desire to have my energies utilized. You know me well enough to see just what kind of a bird I am and where, in any number of spots, I might function. may say that the terrible events of the last two years have made me a much soberer, middle-aged individual than you used to see. If you could spare the time, I'd welcome conversation with you and would hope that you might mention it to the President. But I honestly don't want to be presumptuous. Yours sincerely, Hon. Henry Morgenthau, Jr., 2211 Thirtieth St., Washington, D.C. Gardner Jackson 244 TREASURY DEPARTMENT Customer INTER-OFFICE COMMUNICATION wiss For TO DATE June 9, 1941 Secretary Morgenthau CONFIDENTIAL FROM Mr. Cochran Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns Purchased from commercial concerns £114,000 £ 14,000 Open market sterling held steady at 4.03-1/2. Transactions of the reporting banks were as follows: Sold to commercial concerns Purchased from commercial concerns £ 4,000 £ 2,000 The discount on the Cuban peso widened further to 1-3/16%, as compared with 13/16% on Saturday. In New York, closing quotations for the foreign currencies listed below were as follows: Canadian dollar Swiss franc Swedish krona Reichsmark 11-7/8% discount .2321-1/2 .2385 .4005 Lira .0526-1/4 Argentine peso (free) .2368 .0505 .2070 Brazilian milreis (free) Mexican peso In Shanghai, the yuan was 1/32 lower at 5-11/32 Sterling was quoted at 3.90, up 1/2 There were no gold transactions consummated by us today. No new gold engagements were reported. In London, the price fixed for spot and forward silver was unchanged at 23-3/8d, equivalent to 42.44 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 three purchases of silver totaling 200,000 ounces under the Silver Purchase Act, all of which consisted of new production from various foreign countries, bought for forward delivery. M.M? 245 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION CONFIDENTIAL DATE June 9, 1941 TO Secretary Morgenthau FROM Mr. Hase ADA Subject: The Business Situation Week ending June 7, 1941. Summary (1) The BLS all-commodity index has continued to advance, rising 0.2 point in the week ended May 31 to 85.2 (1926 - 100). Basic commodity prices have tended to flatten out in recent weeks, but some indication of a renewed rise appeared near the end of last week. (2) A growing shortage of farm labor threatens to ourtail production of certain canned food products and further increase food prices. Except for California, the production of vegetables for canning is concentrated in States where distinct shortages of farm labor exist. The WPA is said to be making additional efforts to place workers in agricultural employment. (3) Recent advances in national income have had continued influence in increasing consumer purchases, especially of durable goods. A new study we have made to measure the intensity of consumer demand points to the conclusion that considerable advance stocking up by consumers is taking place. (4) The urgent need for increased production of steel plates for shipbuilding and freight oars foreshadows outs in the output of steel sheets and strip for automobiles, refrig- civilian Two more freight car buildclose down due to lack ing erators, and have other had to goods. ofrating to steel, railroad but an OPM ordershops granting a special preference equipment builders' steel requirements is reported to be imminent. -2- 246 All-commodity index rises further The accentuated rise in commodity prices which began the middle of March was continued in the week ended May 31, when the BLS all-commodity index rose 0.2 point to 85.2 (1926 = 100). The subgroup "petroleum products* showed the largest advance, increasing 5 percent in that week, while no other subgroup index gained as much as 2 percent. Prices of basic commodities, on the other hand, have tended to flatten out in recent weeks. (See Chart 1, upper section.) Near the end of the week, however, prices of wheat, cotton, and a number of other basic commodities again turned strongly upward. The following influences on individual commodity prices last week deserve special mention (see Chart 1, lower section): (1) A threatened collapse of Japanese-Dutch Indies trade negotiations stimulated buying and price increases at the end of the week for import commodities from the Pacific area, with advances in prices of silk and tin. Burlap and 0000a prices have also increased, in response to uncertainties over the Far East situation. (2) Large quantities of foodstuffs, said to total 246 carloads, are reported to be en route to the Atlantic seaboard for shipment to Britain before June 10. The Department of Agriculture continues to buy heavily of various products. Purchases of foodstuffs by the Department of Agriculture in the week ending May 31 are listed in Table 1. Increases in the prices of lard and cottonseed oil doubtless are in part the result, directly or indirectly, of these purchases. Farm labor shortage threatens higher food prices A growing shortage of farm labor, which threatens to handicap the production of various canned food products needed for aid to Britain and for increased civilian and military demand, may have an important influence in raising food prices. Defense activity, together with the draft, many areas. This has reportedly made it difficult for can- has reduced the supply of farm workers far below normal in to contract for the usual acreages of tomatoes, and certain vegetables conand ofother these ning string siderable companies beans, hand labor, prices canned which require products is have been rising in recent months. The canning season be now getting under way, and peak operations will soon reached in some areas. 247 -3The relative supply of farm labor on April 1 this year as compared with last year is indicated by Department of Agriculture data showing the reported supply of labor (percent of normal) expressed as a ratio to the reported demand (percent of normal). The farm labor shortage 18 most pronounced in the Eastern States, in which defense activity is heavily concentrated. In most States the reported supply of farm labor this year is substantially less than the reported demand. The production of vegetables for canning (except for the important production in California) 18 concentrated in the general area where a pronounced farm labor shortage exists. The ten leading States in the production of truck crops for canning are shown in the following table, together with the respective farm labor supply ratios: Commercial truck crops State California Maryland New York Indiana Wisconsin New Jersey Ohio Pennsylvania Illinois Minnesota for processing, Total farm value, 1939 Farm labor supply, ratio to demand, April 1, 1941 $8,722,000 4,674,000 4,541,000 4,462,000 4,196,000 3,943,000 2,476,000 2,446,000 2,107,000 2,046,000 91 74 69 77 80 72 73 73 81 86 Aid from CCC and WPA suggested Two possible sources of additional farm labor for the present emergency are the Civilian Conservation Corps and the Work Projects Administration. A suggestion has been made in the press that CCC workers might be assigned to harvest canning crops where labor shortages exist. The WPA is understood to be making somewhat greater efforts than usual to place workers in agricultural sections. Rise in employment and income continues The recent increases in employment and income have con- tinued in April, as the following table shows: 248 - April 1940 April 1941 Percentage increase National income (billions of dollars, annual rate, adjusted) 72.4 80.3 t 10.9 97.9 134.4 t 37.3 103.2 122.3 t 18.5 34,882 37,617p t 7.8 Factory payrolls (BLS, 1923-25 = 100) Factory employment (BLS, 1923-25 = 100) Non-agricultural employment (BLS, thousands) The increase in the number of workers employed, which has been more largely concentrated in manufacturing, has accounted for about one-half of the 37.3 percent in earnings of factory workers, the rest being due to increased wage rates and increased hours worked. Thus, consumer purchasing power has been augmented both by wages of the newly employed and by increased earnings of those already employed. The impact of this new buying is apparent in the reports of sales of durable household goods, as the following table shows. of course, the buying derived from higher incomes has been reenforced by anticipatory buying against the day when priorities and shortages will interfere with the normal supply of consumer goods. April April 1940 1941 (units) Ironers Washers Ranges Refrigerators Vacuum cleaners 11,984 135,179 43,308 339,693 140,223 Percentage increase (units) 21,789 213,611 65,692 482,498 165,672 t 81.8 t 58.0 t 51.7 t 42.0 t 18.1 The increase in buying of durable goods is also evidenced by the FHA mortgages selected for appraisal, which show a sub- stantial increase over last year. (See Chart 2.) Although a decline is reported for the week ended May 31, this is largely the result of holiday influences, and the final figure still shows a continued wide margin over the holiday week of the preceding year. 349 -5 Consumer demand shows substantial advance buying Indications of the expanding volume of consumer purchases, such as those given above, may not fully measure the intensity of consumer demand, since they do not take into account the influence of changes in price levels. If consumers buy the same number of refrigerators, for example, after prices have advanced 10 percent, it obviously indicates a stronger demand for refrigerators than if that number had been bought at the lower price. We have constructed an index to measure the level of consumer demand for selected items, taking into account the effect of variations in price levels. (See Chart 3.) The index provides a useful measure of the intensity of actual consumer demand. It may also be used to indicate whether consumers are buying more heavily than usual in relation to purchasing power (indicated on the chart by an index of "potential demand" based on national income payments). It will be noted that the index of consumer demand rose very sharply last fall, far exceeding the current purchasing power of consumers, and has continued to rise. The buying has been most noticeable in automobile sales and in rural retail sales, but has also appeared in various other products. Two conclusions may be drawn from this study: (1) advance stocking by consumers has been taking place on a substantial scale, apparently on the fear of restricted future supplies and higher prices; (2) this is likely later to be replaced in some degree by an offsetting curtailment of consumer buying. Production problems confront steel industry The urgent need for rapidly increased production of steel plates for shipbuilding, railroad freight cars and other requirements is one of the outstanding problems now confronting the steel industry. Inasmuch as current demand far exceeds the normal production facilities of the country's plate mills, some sheet and strip mills are now rolling plates. Furthermore, the OPM has indicated that additional shifts in production from sheets and strips to plates are in the offing. These shifts will reduce the amount of steel available for such products as automobiles and refrigerators. The extent of the cut is not yet known but more light may be shed on this when a survey of the conversion possibilities of the industry's sheet and strip production facilities is completed. 250 -6Further evidence of the extreme need for additional plate production appeared recently, when 2 more shops building freight cars had to close down due to lack of steel plates, thus bringing the number of closed shope to 4. In view of this situation, it is reported that the OPM will issue an order during the current week giving railroad equipment manufacturers a special preference rating in connection with their requirements for steel. In addition to making changes in existing steel production facilities, the OPM has advised the Iron and Steel Industry Defense Committee that the Government desires to consider a plan for enlarging steel ingot capacity by about 10,000,000 tons per year in the shortest possible time and has requested assistance of the committee in that connection. Steel output near capacity After declining moderately in the Memorial Day holiday week, steel operations last week were scheduled to rise 0.6 point to 99.2 percent of capacity. Operations during the cur- rent week, however, have again been reduced to 98.6 percent of capacity. As will be seen in Chart 4, both the important Pittsburgh and Chicago steel districts have been operating recently at slightly in excess of theoretical rated capacity, while several other districts have made an even stronger showing. Only the Wheeling district has failed at least to approximate rated capacity operations, and in that case the tonnage in- volved is not large. New orders lower Our index of new orders showed a steep decline for the week ended May 31 to 169.0 from 224.4 in the preceding week. New orders for steel and textiles both showed a very substan- tial reduction while the total excluding steel and textiles was off somewhat. (See Chart 5.) Since there is no real shortage of new business, in view of the defense program, the current decline in orders has much less significance than it would have under normal conditions. According to a report from the New York Cotton Exchange, the domestic cotton goods market was still unsettled in the last week in May, following the action of the OPACS in placing a ceiling on combed cotton yarn prices. Buyers expressed 251 -7 uncertainty about differentiale between various cotton products. Trading volume increased again last week, however, 80 that many mills in sold the major print cloth, sheeting and osnaburg divisions are up through October. Weekly business indexes higher The New York Times index of business activity during the week ended May 31 rose 0.6 point to a new record high at 129.0. This was the sixth consecutive gain in the index from the mid-April low. The gain in the index during the week mentioned was very largely due to a sharp rise in the adjusted index of paperboard production, although four other components of the index also showed gains. The principal offsetting factor was a greater than seasonal decline in electric power production. The adjusted index of lumber production also showed a substantial drop, and the adjusted index of miscellaneous freight carloadings declined moderately. Barron's index of business activity during the week ended May 31 moved ahead at a faster pace than the Times index and reached a new high at 134.6 as compared with 133.1 in the previous week. Preliminary data for the week ended June 7 reveal a contra-seasonal rise in steel ingot production and a sharp rise in automobile production to a level slightly above the previous high for the year attained just before the Memorial Day holiday week. However, the preliminary figures on automobile production may be revised downward because of labor troubles at the Ford plants at the end of the week. 252 Table 1 A summary of foodstuff purchases made by the Department of Agriculture Week ended May 31 Commodity Vegetables and fruit: Apples, fresh Beans, dry Oranges, fresh Tomatoes, canned Immediate delivery Future delivery Dairy and poultry products: Cheese, American Eggs, dried Eggs, frozen Eggs, shell Milk, dry skim Milk, evaporated Other food: Lard Pork meat products Canned Cured and frozen Syrup, cane Wheat, cracked Quantity 65,115 Bu. 23,030,000 Lbs. 46,200 Boxes 419,596 Cases 635,800 Cases 2,353,569 Lbs. 157,000 Lbs. 2,137,920 Lbs. 35,600 Cases 400,000 Lbs. 392,800 Cases 4,260,000 Lbs. 170,632 Lbs. 1,230,000 Lbs. 10,000 Cases 900,000 Lbs. MOVEMENT OF BASIC COMMODITY PRICES AUGUST 1939-100 PER Weekly Average CENT PER PER PER CENT CENT CENT Daily 160 160 155 155 150 150 150 150 140 140 16 Raw Industrial Materials 12 Foodstuffs 130 130 145 145 120 120 140 140 12 Foodstuffs 110 16 Row Industrial Materials 135 110 135 111111111 J M A $ J A o S F J S J 1941 12 M APR 3 D O J A 1940 10 24 31 130 JULY 1941 PER 1941 6. 12 Foodstuffs CENT 16 Raw Industrial Materials CENT 21 JUNE MAY Percentage Change for Individual Commodities, August Low to May 29. and to June PER 7 N A M 28 14 100 26 $ 17 19 12 130 100 Tallow 12862 *120 *120 Cottonseed Oil 100.9X +100 Burlap 93.2% +100 Cocoa 88.6 % Print Cloth 78.9% Hides 71.8% Lard 85.8 % +80 Shellac 69.0% +80 Coffee 73.2 % Wool 53.0% Cotton 36.4% +60 Flaxseed 26.4% .60 Hogs 46.7 x Lead 232% Wheat 43.3 % Rosin 22.5% Silk 18.1 % .40 Sugar 30.7 % +40 Butter 302% Rubber 156% Zinc 151% Barley 29.4% Copper 11.8% Corn 14.9% Steel Scrap.dom. +20 +20 Steers 12.5% 8.7% Tin 4.2% 0 Aug Low May 29 June 6 0 "Steel Scrap.exp 2.7% Aug. Low May 29 June 6 P-187-R-4 MORTGAGES SELECTED FOR APPRAISAL. F.H.A. Weekly DOLLARS MAR. JAN. MAY JULY SEPT. NOV. DOLLARS MILLIONS MILLIONS 40 40 35 35 30 30 1941 25 25 1939 20 20 15 15 1940 10 10 5 5 0 0 JAN. MAR. MAY JULY SEPT. NOV. Citizen Office of the Secretary of the Treasury Division of Research and Statistics c 260 B INDEXES OF CONBUSR DEMAND AND POTENTTAE 1935 - 1939 = 100, SEASONALLY ADJUSTED 1935 1936 1937 1938 1939 1941 1940 1942 PER PER CENT CENT 140 140 130 130 CONSUMER DEMAND' 17 120 120 POTENTIAL DEHAND 110 110 100 100 90 90 80 80 1935 1936 1937 1938 1939 1940 1941 1942 BASED ON DEPARTMENT STORE SALES. RURAL RETAIL SALES. AUTOMOBILE SALES, AND SALES OF BEEF AND VEAL, PORK, BUTTER, CHEESE. OLEOMARGARINE. CIGARETTES AND CIGARS. ADJUSTED FOR THE INFLUENCE OF PRICE CHANGES. Office of the Secretary of the Treasury Division of Research and Statistics c 400 "Beeed on iron Age date - 1942 1940 www. 1940 1941 o Detroit 40 40 40 Cincinnati o 0 o Wheeling 40 40 40 Birminsher o 1941 1942 0 40 40 so so YY so so Cleveland Buffalo o 0 o 0 40 40 40 40 Philadelphia 80 so so so 120 120 120 120 160 160 140 o o 200 200 Youngstown 40 40 0 o so 40 so so 120 40 20 80 160 160 120 120 200 160 200 160 200 200 240 240 Output Output 280 280 240 240 320 320 280 280 MV 320 Pittsburgh 360 360 320 Capacity Chicago Thousands /Capacity Thousands TONS TONS UNTONS JFM 1940 1941 1942 1940 1942 PRINCIPAL PRODUCING DISTRICTS $ 0 o J F M 1940 194 1942 0 2 2 4 8 Output 1.0 1.2 Capacity 14 U S Total Millions TONS 1942 Weekly Tonnage STEEL OUTPUT AND RATED CAPACITY INDEXES OF NEW ORDERS Combined Index of New Orders and Selected Components 240 240 230 N 230 220 220 210 Total 210 1999 1004 100 Index) 200 200 190 190 180 180 170 170 160 160 150 150 140 140 130 130 120 120 110 110 100 100 90 a 80 Total excluding Steel and Textiles 70 8 so 40 Steel Orders 30 x 10 Textile Orders 1 .85 D 258 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE June 9, 1941 TO FROM Secretary Morgenthau Mr. Haas According to the attached tables and chart, Work Projects Administration employment declined to 1,464,000 persons during the week ended May 28, 1941, from the 1,474,000 employed during the preceding week. This represents a decrease of 96,000 persons from the number employed at the end of April. Attachments 259 WORK PROJECTS ADMINISTRATION Number of Workers Employed - Weekly United States Week ending Number of Workers 1940-41 (In thousands) November 6 November 13 November 20 November 27 December 4 1,783 1,786 1,807 1,822 December 18 December 25 1,832 1,855 1,872 1,878 January 1 January 8 January 15 January 22 January 29 1,880 1,887 1,894 1,895 1,895 February 5 February 12 February 19 February 26 1,892 1,893 1,885 1,867 March 5 March 12 March 26 1,806 1,764 1,736 1,708 April 2 April 9 April 16 April 23 April 30 1,662 1,634 1,607 1,586 1,560 May 7 1,519 1,497 1,474 1,464 December 11 March 19 May 14 May 21 May 28 Source: Work Projects Administration 260 WORK PROJECTS ADMINISTRATION Number of Workers Employed - Monthly United States Number of Workers (In thousands) 1938 July August September October November December 1939 January February March April May June July August September October November December 1940 January February March April May June July August September October November December 1941 January February March April 3,053 3,171 3,228 3,346 3,287 3,094 2,986 3,043 2,980 2,751 2,600 2,551 2,200 1,842 1,790 1,902 2,024 2,152 2,266 2,324 2,288 2,092 1,926 1,665 1,701 1,691 1,704 1,779 1,821 1,878 1,895 1,867 1,708 1,560 1,464 May Source: Work Projects Administration Monthly figures are weekly figures for the latest week of the month. They include certified and noncertified workers. 261 / WORK PROJECTS ADMINISTRATION Number of Workers Employed United States Weekly V.P.A. Employment - Monthly W.P.A. Employment MILLIONS WILLIONS - FORM ML m / MAY 1942 1941 1940 BORKERS WORKERS WILLION 2.7 IDES 239" MORELAS 2.4 2.6 3.2 2.5 1.2 2.5 2.4 2.4 2.3 2.8 2.3 2.8 2.2 2.2 2.1 2.4 2.1 2.0 2.4 2.0 1.9 2.0 1.9 1.0 2.0 1.8 1.7 1.7 1.4 1.4 1.6 1.4 1.5 1.5 1.4 1.2 1.4 1.3 1.3 1.2 .8 1.2 1.1 1.1 1.0 A 1.0 . .9 .8 0 119 1935 1936 1937 1939 1940 JAN. 1941 '42 SOURCE: WORK PROJECTS ADMINISTRATION --- Office of the Secretary of the Treasury MAR. MAY JULY 1940 SEPT. NOV. JAN. MAY JAY 1941 SEPT. NOV. -1942 . me. 2 221 c 262 BRITISH EMBASSY, PERSONAL AND SECRET. WASHINGTON, D.C. June 9th, 1941 Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, Halifax The Honourable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D.C. 263 Telegram from London dated 6th June, 1941. Naval. 1. M.T.B. 215 Night of June 2nd/3rd intercepted auxiliary schooner, reported to be Turkish, north of Cyprus. She was set on fire, heavy explosion followed. Believed carrying petrol and had fake papers. Government dredger sunk, possibly by mines, 2. or torpedo, entrance to Lagoe harbour on June 4th. on June 4th German tanker was intercepted 3. by Maradale O.B.V. in 43 degrees 38 minutes north, 28 degrees 15 minutes west. In position 43 degrees 32 north, 23 degrees 56 minutes west at 2030 June 4th, Nelson and Neptune intercepted a German supply ship. Ship scuttled and 4. finally sunk by Neptune. Sixty eight prisoners including 32 naval personnel. of the latter two stated they were from Bismarck. Prisoners state they left a French Port a fortnight earlier in connext n with Bismarck's operati Armed boarding trawler Northern Sky shot 5. down HE 111, 220 miles west of the Faroes a.m. June 5th. Nine aircraft bombed Alexandria night of 6. June 4th/5th. No naval damage. East Coast convoy south of Aberdeen twice 70 attacked by aircraft on June 5th. One ship on fire, assistance sent. One tanker damaged. Military. 8. left Irac. curna on Under June 3rd. orders from Euphrates Bagdad, bridge Iraqi at Qurna forces is efficient, railway between UR and Samawa has been repaired. 9. Ethiopia. Our forces have crossed the river in order to engage enouty artillery handle of opposing Omo Lingah; crossing, they were obliged river. to man their guns up escarpement east of on June 2nd Italians attacked and dispersed patriots 10. operational centre near Gimm. 11. Royal Air Force. 5th. Two formations of 3 and 6 Blenheims, June the former escorted by results. 12 fighters, at- tacked shipping with inconclusive on June 3rd/4th, heavy 12. bombers successfully diterranean. attacked Benghasi June 4th harbour Lockhood and set Maritan fire to aerodrome two petrol Rhodes. cistorns on at Beirut. 13. German Air Force. June off the 5th/6th. east const About of 30 sootaircraft attacked known 3 shipping more enemy aircraft of were 5. destroyed land. on night Now of June 4th/5th miling total 264 BRITISH EMBASSY, PERSONAL AND SECRET. WASHINGTON, D.C. June 9th, 1941 Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, Halifex The Honourable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D.C. Telegram from London dated 7th June, 1941. 1. 26:- a/m Upright at 2.0 a.m. May 28th landed a party fourrailway miles west up line. of Punto stile light, Calabria, who blew 2. A.M. June 6th. Outward convoy attacked by U-Soat 120 miles west of Cape St. Vincent. Two shipe of 3,400 tone and 1,400 tons, torpedood. Later at 0618 convey bombed by Focks-Wulf. One ship reported sunk at 1400, further but unsuccessful torpedo attack on same convoy made 80 miles west off Cape St. Vincent. Goastal aircraft night of June 4th/5th made reconnaissance of Narvik and Kirkenes. No unesual activity observed. 3,000 ton merchant vessel in Vest Fierd near- 3. missed. 4. Norway. There are indications of continuous troop movements northward from Oslo to Trondhjem and Mosjoen. Believed tanks, estimated at six divisions are at present north of Trondhjem. 5. At 1900/June 6th two battle oruisers and Prina 6. Eight bomber command aircraft attacked convoy of Eugen were still at Brest. eight or nine ships and escort vessels off IJmiden a.m. June 7th. Two shipe of 5,000 tone each bombed and hit from 100 feet, claimed total losses. 7. Hight of June 4th/June 5th. Wellingtons from Egypt made successful attacks on Benghasi Harbour and Derna aerodrome and Kattanec aerodrome at Rhodes. on June 5th three Blenheims from Palestine set fire two hangars Aleppo aerodrome. 8. Syria, syria via Rhodes. 9. Modern French bombers reported arrived Believed Italians have offered Antiaircraft equipment to the French in Syria. 10. Iraq. Remainder of Indian battalions arrived Mosul by air on June 4th, 300 already having flown there. One British battalion was proceeding to Mosul from Habbaniya via Bagdad June 6th. Northern column and part of southern Abvesinia. 11. one have now crossed River Omo in advance to Ginna. 12. French West Africa. on June 4th single aircraft, believed French Glenn-Martin bomber from Conakry, made reconnaissance of Freetown and aerodromes sierra Leone at 1500 feet. On being engaged by Anti-aircraft fire aircraft replied with machine guns. German Air Force. Night of June 6th-June 13. 7th about 50 aircraft operated against constal shipping and One destroyed by fighter. 17 inland. 266 NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS MILITARY INTELLIGENCE DIVISION TENTATIVE LESSONS BULLETIN WAR DEPARTMENT No. 117 G-2/2657-235 Washington, June 9, 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 Intel11, nce Division. For provisions governing its reproduction see Letter TAG 350.05 (9-19-40) M-B-M. NOTES ON THE GERMAN INVASION OF GREECE SOURCE Those two sketches appeared in the authoritative German newspaper, Volkischer Beobachter, the first on April 18 and the second on April 21, 1941. Intended propagandistic effect should not be overlooked in either case. CONTENTS 1. THE BREAK-THROUGH INTO GREECE a. The Terrain b. Enemy Situation on the Day of Attack C. The Decisive Tank Thrust d. Capitulation of the East Macedonian Army 2. ON THE BRITISH AIR FIELD AT LARISSA NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS -1- 267 a NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS NOTES ON THE GERMAN INVASION OF GREECE 1. THE BREAK-THROUGH INTO GREECE a. The Terrain The few roads that lead into Greece run through deep narrow mountain valleys, and there are no other routes over which an invading force can pass. The points at which these approach roads debouch from the mountains are, however, on Greek soil, and at the time of the German march into Greece they were blocked by strong fortifications of all kinds. Figuratively speaking, the Greeks had their barrier forts arranged like stoppers at the end of long, narrow bottlenecks. These stoppers had to be pushed out if the way was to be cleared southward to the Thracian and Macedonian plains, towards Salonika, and to the Aegean. The fight to accomplish this end was the first phase of the campaign in the southeast. b. Enemy Situation on the Day of Attack The Greek defense of the mountain exits had been developed into a system representing a continuation of the Metaxas Line. This defense system, organized in the years 1938 to 1940, when our West fall was built, was a modern system consisting of armored works, concrete bunkers, field fortifications, and searchlight and alarm stations. All these were built in accordance with the latest military experience. The works were located deep in the rock, and the fact that their checkerboard arrangement enabled one bunker to cover the other made the capture very difficult. In and behind the line of forti- fications was the Greek Macedonian Army of approximately 50,000 men - about four active divisions and one reserve division under the command of General Bakopulos. Nearly all of the Greeks were under 23 years of age. Since all of them had been in the army at least since the spring of 1939 and in the Metaxas line for at least six months, they were well acquainted with the works, operation of the equipment, and localities. In addition, they had been given plenty of practice in the use of the arms of the fortifications. There were very strong fortifica- tions on both sides of the passes. There were no Englishmen found in the first line, but the best of the Greek forces were located in the fortifications. NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS -2- 268 & NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS At 5:20 A.M. on April 6, 1941, German divisions set out over all the approach routes to attack Greece. The first works were captured in hand-to-hand fighting, but we soon found that we had in the Greeks an extremely brave adversary. It was not easy for our Stukas and heavy artillery to get to them, particularly on the right wing and in the well placed mountain fortifications. Bunker after bunker had to be taken, because the separate works, which were so con- nected that they could cover and assist each other with their fire, threatened to stall the German advance at certain points. They offered a good distant view towards Bulgaria and into the German assembly positions. From all sides - even from the bunkers that had already been crushed - the advancing Jaegers, riflemen, pioneers, and artillerymen continued to receive heavy fire. The mountain fortifications were arranged, like warships, on the principle of the bulkhead system; they were not decisively neutralized even after a considerable part had been destroyed and burnt out. All the openings had to be filled and blocked and the openings to the works had to be blown up before we finally attained success. The Greeks defended themselves bravely and stubbornly, but they were eventually forced to give way to the numerical superiority of the Germans, who would not allow themselves to be shaken loose once they got a foothold in the fortifications. The thick fog and rain that came during the first night and the second day of the attack partly blinded the defense and aided the attackers. When storming one fort, ve could not be seen by the artillery of sister forts; thus we could deal individually with one fort after another and even push in between works. During the first night, some of the attacking regiments succeeded in weaving themselves through the Greek lines and in capturing important points to the rear of the enemy - particularly bridges that were still intact. Whole battalions, however, were still fighting in the mountains. The left wing did not appear to be as well garrisoned, and an attack by weaker German forces soon began to make headway. These forces first captured Komotini, then Xanthi; they later reached the coast of the Aegean. c. The Decisive Tank Thrust As a result of resistance in Serbia, German forces concentrating against Greece were confronted with an entirely new situation just before the attack. The whole right flank of the armies marching southward was threatened by the Serbs, and in order to avoid the danger of a Serbian thrust in the very region of the IIO OBJECTION TO PUBLICATION IN SERVICE JOURNALS -3- 269 NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS lines of communications, the German divisions, already deployed, had to be regrouped again a short time before the attack. Tank troops in particular were used for flank protection. On the same, day that they crossed the Greek frontier the mountain Jaegers and the infantry advanced to the attack over the Bulgarian-Serbian frontier. They broke the light resistance of the Serbs on the frontier, pressed on in a westerly direction, made a swing of 90 degrees towards the south, broke through the Greek frontier fortifications, and then made a continuous advance through all of East Macedonia to the Aegean Sea. While the mountain Jaegers and the infantry were still engaged in a hard fight on the Hetaxas Line, Salonika, the Nacedonian capital which lay far in the rear of the Greeks, surrendered to our tank and motorized infantry formations. The tank thrust in car of the enemy cut the Greek supply lines and surrounded their entire East Malgedonian Army. Thus a further defense of the Metaxas Line would have been senseless. Here in the Southeast we repeated what the world had already looked upon with amazement in the West, when our tank troops, advancing over the Aisne in the rear of the Maginot Line up to Switzerland, made useless a further defense of the French line of fortifications and forced the capitulation of the French in Alsace Lorraine and in Burgundy. The tank thrust through Macedonia toward the South, carried out with scarcely any losses, resulted in the decision for which troops had been fighting hard in the mountains for three days. d. Capitulation of the East Nacedonian Army The East Macedonian Army of the Greeks surrendered at about 1 P.M. on Avril 9, 1941, after a fight lasting three and a half days. Article I of the terms of surrender stated: "The parts of the Greek army fighting in East Macedonia are to lay down their arms. There is to be an armistice at once. Greek officers are to be allowed to keep their swords. The area of the East Macedonian Army embraces the part of Greece from the Turkish boundary up to the Vardar River." Signing of the armistice marked the end of the first phase of the carrosign against the British in Greece and those who allowed themselves to be led by the British. The points at hich mountain roads from Sulgaria debouch into Greece were in German hands. The breal:-through had succeeded. NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS -4- 270 NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS 2. ON THE BRITISH AIR FIELD IN LARISSA We curved around the air field of Larissa, from which the British and Greeks took off as late as yesterday. This morning the first German machine landed here a few minutes after the occupation of the city. Before landing, ve observed that our pursuit planes were already on the field. Ammunition was quickly unloaded, for we knew that the tanks, pressing forward, would be thankful for a fresh supply of ammunition. In the meantime, we were able to explore briefly the air field which the enemy had lost. We opened a creaking door that led to the quarters of flying personnel. On the tables there was bread that had been cut perhaps only a few hours before; there were also knives, utensils, tin cane, letters, newspapers, packs, and various articles of equipment. English signs on the walls indicated that it was the British whose meal had been disturbed. It was a queer scene which the enemy had just left. There had apparently not been sufficient time to take along report pads, paper supplies, regulations, and propaganda leaflets from the offices. Drawers and boxes had been broken open in an effort to save certain documents, but a number of mail bags had been left unopened. The sleeping cuarters presented a gloomy picture - one that could have been created only by chaotic flight. Our ammunition was now unloaded and automobiles and motor- cycles took it at top speed to the tanks, which had passed through Larissa some time ago. We took off again to bring additional supplies up to the front on the same day. NO OBJECTION TO PUBLICATION IN SERVICE JOURNALS -5- 271 RESTRICTED G-2/2657-220; No. 412 K.I.D.,I.D. 12:00 M., June 9, 1941 SITUATION REPORT I. Western Theater. Air: German, Extremely limited offensive activity. British. Unimportant activity on the 7th and 8th. Last night small attacks were made on Essen and Dortaund. II. Mediterranean and African Theaters. Ground: Minor activity around Tobruk and in the Sollum area. Air: Axis, A second heavy attack was made on Alexandria on the night of the 7th-Sth. Raids on l'alta and Tobruk. British. Repeated raids on Derna and Bengazi. Gombut and Capuzzo, both in Libya,were attacked. III. Syria: Free French and British forces estimated at 1 free French Division (incomplete) and 2 British Divisions have moved into Syria, apparently in 4 columns, as follows: 1 column N from Palestine, objective Beirut; 2 columns N from Trans-Jordan, objectives Damascus and road net east of coastal mountains; 1 column NW from Iraq along Euphrates, objective Aleppo. Defense forces estimated at 49,000 in five or six weak divisions, with uncertain morale. Only slight resistance reported encountered. Germans reported to have moved out of Syria. Invaders appear to have air superiority. RESTRICTED 272 CONFIDENTI AT Paraphrane of Code Cablegram Received at the Var Department at 8:09, June 9. 1941 Lendon, filed 14:25, June 9, 1941. 1. Britter the Continent. & Richt of June L. Right planes from the Rayal Air Force bonbod shipping and docks at Bergen. One vessel of 400 tone displacement was struck, 2. German Air Activity ever Princis s German planes operated ever the East Coast of Britain in the area Lewesteft-Marwich and the Inle of Wight and Farme Islands. 4. Eight of Jana J. It is new known that 25 long range bombers were involved is the operations of this night previously reported. s Day of June z. The Germans employed 190 fighters, 25 long range bembers and 10 recommissence planes in their attack on this day which has previously been reported. 3. lesses Methish Theater. & No British lesses for their operations during the night June 7-8 were reported. & During the German operations on the night of June 8-9 one plane was shot down. CONFIDENTIAL 1- INFORMATION COPY 273 CONFIDENTIAL 4. Asia Air Other Theaters. s Benties Theater. During the night of Jane 7-8 a successful attack was made ea the harber of Alemetric w 44 German planes. 5. Since me British operations in other theaters were reported there are no lesses. During the German raid on Alexamiria Marber one plano was shot down by antiairwaft fire. Distributions Secretary of Year State Department Secretary of treasury Under Secretary of Var Ohiof of Staff Assistant Chief of Staff, G-3 War Plans Division Office of Naval Intelligence Air Carpe 6-3 CONFIDENTIAL INFORMATION COPY CONFIDENTIAL 274 Paraphrase of Code Cablegram Received at the War Department at 06:42, June 9, 1941 Caire, filed 14:20, June 7, 1941. Part 2. 1. Summary of Iraq situation continues. 2. The most sealous of the followers of Rashid All was from among the young people in the visinity of Baghdad. Electhore he had no large personal following nor did he have the leadership required to attain popularity. His former harsh treatment of the southern tribes told against him and he was completely lacking of support at Mosul. Increasingly what support he had from the people cooled off. In his overthrow of the government he was able to secure a following because he personified the accumulated Anti- British feeling widespread throughout Isaq. 3. When the Iraq Minister of War came back from Ankara to Baghdad with the advice that Rashid resign, a split appeared among the cabinet members which spread to the Army. Junior officers were satisfied with the situation as it was but their elders were of two minds and the prestige of Rashid All was undermined. 4. To further complicate his situation, he found himself facing financial troubles. Before the overthrow of the government the British blookade had already made the business situation in Iraq very unsatisfactory. The dinar, the Iraq unit of value, had been tied to the pound sterling. An inflation of Iraq money followed the announcement by the British that the dinar was no longer guaranteed in sterling. Even the British now drop the claim that Rashid All was being bribed by the Masis. If so, it was on a minor scale. The CONFIDENTIAL INFORMATION COPY 275 CONFIDENTIAL treasury was emply and he had no - to pay the any an the other hand, funds were available to his opposition. 5. Rashid All had planned to transfer the government to Monal but the followers of the Regens Abutal Films, who had a large following in that area, made difficulties about doing so. FELLERS Distribution Secretary of War State Department Secretary of Treasury Assistant Chief of staff, 0-2 War Plant Division office of Maval Intelligence Assistant Chief of Staff, 0-3 -2- CONFIDENTIAL INFORMATION 276 SECRET By authority A. c, os G-2 of Sade Babiogram Received at the War Department Date JUN 10.1941 Ro Initials as 06:42, June 9, 1941. Gaire, filed thise, June 8, 1941. 1. Bezia. A Joint expedition of Britten and Free French troops entered Byria at 02:00, Jane 8. Reporte covering the first four hours state that the advences are proceeding satisfactorily without opposition. 2. Mine. There is reasoned Anic activity by patrels and please in the neighborhood of Sellum. 3. Alexandria. Two different formations of bombing please at midnight and at 03:00 on the night of Jane 7-8 and again on the night of June 8-9 heavily bombed Alexandria with ainer damage to military targets and severe destruction in native quarters. The morale of the Agretion people continues good, but it cannot be expected to do se 1f the attacks are continued. FELLERS Distribution: Secretary of Mar State Department Secretary of Treasury Mater Secretary of War Chief of Staff Assistant Chief of Staff, 6-8 War Plans Division Office of Naval Intelligence 0-3 SECRET INFORMATION COPY Confidential 277 June 10, 1941 This morning I had breakfast with Mrs. Roosevelt at 8:30 at the White House on the portico. She asked me whether or not all young people could get jobs today. She said she had asked Lubin to give her the facts on it. All day last Saturday I had been thinking about this question of how we should take care of the unem- ployed and train them for national defense. On either Saturday or Sunday I called up Harry White and told him that after reading his report, which I thought was in- adequate and did not get down to the kernel of the prob- lem, I thought we should think of this thing in three pools. The first pool would be the unemployed - the WPA. The next would be a training pool in which we would put United States Employment Service, NYA, CCC and the Studebaker Bureau of Education. This pool would train the people who are necessary for industry. The final pool would be industry itself. Weeks ago Peter Odegarde told me that the America First Committee would wait until England fell, and that would be the signal for them to go to work, and try to get their men in Congress next election so that they will have control of Congress, and then run Lindbergh for President. Knowing that if one wants to be realistic, there is a possibility that England might go under, what are we doing to prepare the country to withstand such a shock? After all I went through with the experiences of Huey Long and Father Coughlin, I know that they can SOW the seed of dissension amongst the unemployed, and that if every man and woman who are able to work in this country had a job, neither Father Coughlin nor this America First Committee could get very far with that group of people. After all, it is a very large and important group in this country. 278 -2- Ever since Saturday and Sunday, the thought has been going through my mind as to what we can do to strengthen the country from within to withstand the kind of shocks that we may have to take if England should go under. If England should go under, that would be a tremendous blow to the President and his whole power would be weakened. After seeing Mrs. Roosevelt this morning, I had another talk with Odegarde, which was recorded by the stenotypist. All day long I kept arguing with myself as to whether I could, in view of my statement that I wanted to save a billion dollars, recommend that every able-bodied man and woman in this country get a job. At supper, I was surprised that Harry White had not taken up the suggestion I had made. He did not hand me his five-page report that he brought last evening, but it ought to be attached to this record to show that when he came to supper he had not kept up with me. I don't know whether he did not believe it or what, but at the supper meeting neither he nor Coe brought up the question. It was entirely my own recommendation and at no time was I pushed by anybody. In fact, I think they all were breathless when I said I had arrived at the point where I felt that in order to make this country sufficiently strong against Fascism and Nazism we would have to put every able-bodied man to work and also every woman, doing the jobs which are necessary in case we get into the war, such as building strategic highways, erecting bridges, increasing electric water power, etc. Of course, this has been a tremendous transition which has taken place within me, but I feel that with the very black days which are ahead of us, we have to take care of the unemployed so that there is one less group for the Nazis and the Fascists to appeal to. At the same time, if we give these people good jobs at living wages, they will become a very important group who are not only satisfied with this kind of government, but will be amongst the best advocates to maintain it. I expect to make this recommendation to Mrs. Roosevelt at lunch tomorrow. 279 June 10, 1941 9:25 a.m. RE AMHERST GRADUATION ADDRESS Present: Mr. Odegarde Mr. Kuhn Mr. Klotz H.M.Jr: Mrs. Roosevelt is very enthusiastic about the speech. She wants a copy as soon as possible for the I.S.S. Bulletin. Kuhn: International Student Service. H.M.Jr: Yes. I don't think she would want it in the bulletin unless she thought it was good, would she? Odegarde: I wouldn't think so. H.M.Jr: Before I get on that, I want to get this thing off my chest. No one has told her what she is to say tomorrow night on the radio. Would somebody please send her some suggestions? Kuhn: Yes, we did send some. H.M.Jr: Well, it hasn't gotten to her. The way to get it to her is to give it to Mrs. Klotz and Mrs. Klotz will give it to her. Nobody has told her what to say. That is number 1. Mrs. Klotz has already gotten a message to her about this young woman. She thought she would 280 2 like to have it. Then she was told that Irving Berlin had to leave the White House tonight at nine thirty because he was going to have a rehearsal on the steps of the Capitol tonight. Kuhn: That is the Army song and they are not doing it at the Capitol, they are doing it at the War College, and I thought they were doing it before the dinner, not after. It is not our song. He spent the whole evening at my place last night. H.M.Jr: She only had two suggestions. She said one thing we can not do at this moment in the fate of the western world - she doesn't like the word "in." She says, let's put it some other way. Odegarde: Why not say, "In the history of the Western H.M.Jr: Well, something. "We fought eighteen months World"? to win a victory by - and then we promptly washed our hands of all the responsibility we, as a democratic nation, should assume. Then she has written here, "Ours is the only disinterested - " Here we came back. We are disinterested. We, of all people, should have shown the way, but instead of that we went back-Kuhn: That is a very good line. H.M.Jr: We instead of that went back to our own reconstruction and washed our hands of the thing. She said if you could work that in. Kuhn: Easy. It is very good. H.M.Jr: Otherwise she had no suggestions. Now, I am 281 -3sending this off to Henry at 11:00. I explained to you how this came - my little outline that I gave to Ferdie, how it came to me. Do you know the history of it? Klotz: Ferdie told me some of it. H.M.Jr: You see, Mrs. Roosevelt came for lunch and Henry, knowing her great interest in youth and its problems, unburdened himself the way he never had to his mother or me, and talked all of his doubts. I don't know whether I have told you this or not. Klotz: No. Odegarde: Bob told me something about it. H.M.Jr: Well, then I waited a time and Henry and I went for a long walk and I tried to answer his doubts and those things which I answered I subsequently wrote on a little piece of paper and gave them to Ferdie, but there is where - how my - and she was saying, "Well, what hap- pened after I left?" and I said - well, my talk and now this, but I said, "We have you to thank for bringing out in Henry his doubts. And this is another thing which is just a little thing which she is - she is sending me over her St. Paul speech, incidentally. She has read, which I haven't, very, very carefully, Cudahy's interview. She takes it very seriously. I think this is interesting in view of what we are doing. She says, "Now, one thing in the thing is really understandable: When Hitler said, 'You still have unemployed, you see. So she said - of course, this isn't for this, but she gave it to me. She said when people talk and Hitler says well, his standard of living is high and so forth and so on, the thing that she uses and which is so effective is, Well, all I can say is that I support an 282 4- orphan in China. It cost me $20 a year. I support an orphan in Finland. It costs me $6 a month. I support an orphan in England and the rate is still higher. Odegarde: $60. H.M.Jr: "And then I support one in the United States," which is true, and it costs me $6 a week." So she said, 'That is my answer to the dif- ferent costs of living. She says, "That is my own personal experience." And she says, "All of this goes down very, very well. Kuhn: Of course, the Egyptian pharachs had no un- employment in their time, either, as one Peter Odegarde pointed out. H.M.Jr: Well, I am in the throes between now and noon tomorrow on this recommendation which we are laying before her and I am getting around more and more that we must give every person a job in this country and there are plenty of things to do but we can't get strong - I mean, between now and noon tomorrow I have got to make up my mind. We can't face a Facist world unless every able-bodied person in this country has a job. I am gradually getting to that point. Klotz: That is the idea. H.M.Jr: I am gradually getting to it, but of course things that we can do with those people, the roads we have to build and the thousand and one things that we have to do which takes years to do, I am gradually coming around. I don't see how we can face the Fascist world alone. It isn't just arms, it is the - she said she had this letter in answer to this Youth Congress, that they say they can't get jobs, and she is asking Lubin whether it is true or isn't true. It is in this thing we 283 -5are facing, which is years - have we arrived at a time we have got to give every ablebodied man andiswoman How important that? a job in this country? Odegarde: I think it is tremendously important, quite apart from the economic angle. I don't think the income and the actual groceries side of it is as important as the fact that the individual sense of significance, the sense of being a part of something that is greater than himself, is the real problem, so far as unemployment is concerned. A man who is unemployed is literally told that this society has no place for him. "You are shut outside," and the devastating effect of that on his morale, on his own sense of personal significance, in my judgment, is a most terrifying and the most serious aspect of the whole problem of unemployment; and I am not so sure of that, stating it in terms of a job, as a job simply for groceries, but stating it as a job to do in connection with a larger objective. I think that is true. H.M.Jr: Well, you put it far more beautifully than I can, but let me argue with you just a minute. Maybe I am a little more crass about it, maybe not. I don't know, but this is what I am thinking about. I am laying - these are the things that I am checking off on the side, why we should, you see. I think one of our troubles in this country is that we don't - we are not willing to face the really unpleasant things. We have kidded ourselves about North Africa, we have kidded ourselves about Viche and so forth and so on. There is all this hoping for the impossible. We have written off Viche, the Mediterranean, and so forth. Now, the next thing I am going to say is, following what you told me about America first, I think you at least have to say, "What do we do if England falls?" I am not writing it off. 284 -6Here is a game of checkers. Odegarde: That is right, it is one of the continued H.M.Jr: And as you said, and it made a great impression, things. if England falls, that is the signal for America first. Then if they go to town where is the fertile soil? It is amongst the unemployed. I went all through the Huey Long, Father Coughlin, the Reverend Mr. Smith, and it is very, very vivid in my mind. If these people are employed, there is practically no fertile soil for them to sow the seed in. Is that right? Odegarde: It is certainly much, much less fertile. H.M.Jr: Well, they can't SOW it there anyway. They may SOW it amongst-Odegarde: Sow it at the top. H.M.Jr: At the top. Well, I am not afraid of the top. I am afraid of the bottom. The top part doesn't - we can take care of them with the taxes. Kuhn: In Germany it was sown among the barbers and waiters and little employed people. H.M.Jr: Oh, well, if you are going - in Germany it was sown on an empty belly, on the rickets and so forth. I mean, that is - I mean, then the inflation and - sum it up on poverty. Kuhn: Yes. H.M.Jr: What? Kuhn: Yes. 285 -7H.M.Jr: I mean on dire poverty. Odegarde: When I was in Germany in '32 there were six million people unemployed and there was nothing for them to do. They were on the dole. They were fed, they had housing of a sort. And you can put people on the dole in the United States and keep them from starving and keep them out of the rain and the storm, but you don't solve the problem of unemployment or the problem of morale that way. It is only as these people are given something to do which makes them - even if the relief is pushed up as high as their wage standards would be. H.M.Jr: Is that the economic conference you were at in Germany? Odegarde: Yes. H.M.Jr: Is that the one? Odegarde: Well, I went to the Congress of the Reichswirtschaftsrat. H.M.Jr: Is that the agricultural economy thing in Germany? Odegarde: Yes, I think so. H.M.Jr What is the name of this man in England who Kuhn: Leonard M. Elmhurst? Odegarde: Willard Straight. H.M.Jr: Is that the same meeting? Odegarde: I don't know. H.M. Jr: The reason I am asking is that I was trying to married this rich girl? 286 -8bring up the message Dr. Warren brought back to me from Germany and I placed it in '32 and he is checking me. I was telling them last night to look up the message he brought back and the question of high interest rates and the influence it had on me, Farm Credit, trying to counteract, to eliminate that as an argument, you see, in this country, and Warren, I think, brought it back in '32. So to come back to this thing, you think it is very important? Odegarde: I think it is tremendously important, as I say again, more from the psychological than the purely economic standpoint. H.M.Jr: Let me tell you the way my mind is working. What I have done is, you see we are presenting this to Mrs. Roosevelt tomorrow noon. Are you going to be here? Odegarde: Yes, I will be here until Thursday. H.M.Jr: I would like you to come to lunch tomorrow noon. Let me just give you the way my mind is working. We are only having - I put it up to her and she approves - people at the White House so that nobody can talk. That will be Lubin and Lauch Currie and nobody else except Treasury people. I am looking at this thing as three pools of individuals in this country. The unemployed will be given work to do through WPA. Everybody that can work, men and women. That will be number one. The second pool will be the training pool for industry, which will be the United States Employment Service, NYA, CCC-- Odegarde: Office of Education. H.M.Jr: And Office of Education. They will all be there 287 9- under one head. Now, I am putting the employment service there because they should know - industry will go to them and say, "Well, we need so many people," and they will go and say, "All right, how many do you need?" "Well, we need 25,000 machinists, and then they go and circulate WPA. "We need 25,000. We would like volunteers." They train them, and then the third pool is industry, you see. Now, in order to even talk about it, we couldn't have anybody present whose head might be lopped or might get a new boss. But the interesting thing is that the President gave that job last June and July to Hopkins. He played with it for a month and dropped it. He never did anything about it. Hopkins stayed with it for one month. He was given that - the story that happened, the President first started out and said, "Henry, you and I are going to run this defense show. I had the engines and the tools and so forth. I said, "Fine, Mr. President. Then the next thing, "Henry, you, Harry, and I will run this thing." And Harry was to do all the training of unemployed. Hillman came over to see me and had lunch with me and said, "Mr. Morgenthau, I am going on the Hill for five hundred million dollars to train people and I want to know how should I do it," and he sketched the whole thing with he working under Hopkins. He never went on the Hill and the thing just - Hopkins lost interest. The whole thing was there and of course the next step was, the President put on the Defense Council and I was on with the Director of the Budget as an ex-officio member of that first - the one that Knudsen and rest were on, and I had the order here and I took my pen and drew it through my name. I said, "It is wrong and I don't want to be on it.' I just drew a line through my name and said, "I don't want to be on it." 288 - 10 Odegarde: Is that the National Defense Advisory Commission? H.M.Jr: Yes. So we are going back and - of course, I started trying to save money and I am ending up this way. Kuhn: The inception of this was the billion dollar economy, wasn't it? H.M.Jr: Yes. Odegarde: I am not so sure, Mr. Secretary, that the two H.M.Jr: are incompatible. I am not, either. I have got to do a little mental gymnastics, but my mental gymnastics that I am going through are that the figures that we have got are that it is going to take nine million more men and women in two years. Well, if that is right, then WPA will dry up. Kuhn: Yes. H.M.Jr: They will dry up. Is that what you are thinking? Odegarde: Well, they will dry up - WPA will dry up, yes. The problem will be unemployables. H.M.Jr: The unemployables. Well, that is something else again. But the employables ought to dry up inside of a year. So if, during this year certainly the next twelve months will be as difficult - I don't want to say they are going to be the most difficult, but if during the next twelve months with these various things that might happen and we have the employables on a good, sound footing and in a good mental state, then we can get over that hump. Odegarde: I think so. I think you have much less to worry about in morale. 289 - 11 Kuhn: How many are unemployed now? H.M.Jr: Three or four million. Odegarde: There are all sorts of estimates. Klotz: Five. H.M.Jr: I am using the Industrial Board figures, three and lion. a half million. Three, four, or five milKuhn: I don't think it can go very much below that, two and three million. because the number of unemployables is between Odegarde: But they are not on WPA. Kuhn: No, I am talking not about the number in WPA. H.M.Jr: The unemployables is another thing. Odegarde: There is a possibility, isn't there, that WPA even in its present set-up may become a very important segment of the defense program? For example, they have done work of very sub- stantial character in preparing landing fields and so on. H.M.Jr: Well, this thing that we are preparing, everything that they do will be for defense, strategic roads and that kind of stuff. I mean, we are in terrible shape on roads. We can't just move troops up and down the Atlantic border. From Richmond to Boston, the whole plans are laid and have been laid for four years by MacDonald. You try to move any troops - all these cities, Baltimore and all those, have to be by-passed. You can't move any troops up and down the Atlantic Seaboard. Odegarde: You would never get them through Baltimore. 290 - 12 H.M.Jr: You would never get them through Baltimore, and those things are the things that these people should be doing. I mean, there is plenty of useful work. Why, I went all through that thing with MacDonald and the work to do I forget how many millions of roads and bridges would have to be built that the Army will certify to just to move troops. That would keep three or four million men busy, but it takes years to do it, and now is the time to start. Are you busy tonight? Odegarde: No. H.M.Jr: Well, keep it open, will you please? Just a second, there is one thing here. I thought what 1 would do - I showed this to Gaier and Gaier said he had some suggestions, and I said to write them out and give them to you. You are going to show this to Gaston, aren't you? Kuhn: Is it ready now to show to Gaston? H.M.Jr: Yes. Kuhn: I didn't know whether you wanted to do it yet. H.M.Jr: And show it to Harry White and ask him to show it to some of the younger men in his place. He has got some men that are just out of college a couple of years. Let them see it. In the first place, I want to name Admiral King by name and then what would you think of my sending this up to him, mail it, make sure it is in nautical language? I am not quite sure it shouldn't be in nautical language. Kuhn: I don't know. Herbert Gaston can tell us. 291 - 13 H.M.Jr: He wouldn't know, either. Is that what you mean? Kuhn: Yes. H.M.Jr: Where is King? Kuhn: "I learned that the Navy always acts on what the Admirals call--" H.M.Jr: Didn't I say I was out with the fleet? Kuhn: You said you were out with the United States H.M.Jr: And then I say with an admiral-- Kuhn: King, Commander in Chief - he is that, isn't Atlantic Fleet. he? H.M.Jr: He is the Commander in Chief. What I was think- ing of was this: If I could just have this page done over, I thought I might mail it up to him and I would say I would like to know, one, whether this language is Navy language, and 2, as a fighting man, how does the thing appeal to him. Kuhn: I will have it done over. Odegarde: There is one other thing-- H.M.Jr: Don't you think it would be interesting? Odegarde: Yes, I think it would be very interesting to H.M.Jr: Take this letter: get his reactions. "My dear Admiral King: I am sending you herewith my proposed speech to 292 - 14 the graduating class of Amherst on Saturday, April 14. You will see in my talk that I refer to a conversation that I had with you and I would like you to let me know, after reading talk.' it, whether or not I have used 'Navy I also would very much appreciate your reaction to the whole speech. What effect, in your opinion, would it have on the enlisted men in the Navy? I want to take this opportunity to tell you again how much I enjoyed my trip with you and particularly the opportunity afforded me to become acquainted with you personally. Yours sincerely." (The Secretary's address was delivered by Lieutenant Stephens to Admiral King at Bolling Field, Anacostia, without a letter of transmittal.) Odegarde: H.M.Jr: Incidentally, you will have some Navy people in your audience. I am going to phone him and find out how to get this letter to him, you see. Inasmuch as we are using Navy language, I want to have it now, what you didn't use, and I don't know, maybe you did it advisedly, we had in there about calculated risk. You can say, for example, Admiral Raeder must have sat down and figured what is the calculated risk of sending the Bismarck out. Well, he figured it and he figured wrong. Did you leave it out on purpose? Kuhn: Yes. I didn't think it strengthened your argument, but it can be done. 292 - 14 the graduating class of Amherst on Saturday, April 14. You will see in my talk that I refer to a conversation that I had with you and I would like you to let me know, after reading talk.' it, whether or not I have used 'Navy I also would very much appreciate your reaction to the whole speech. What effect, in your opinion, would it have on the enlisted men in the Navy? I want to take this opportunity to tell you again how much I enjoyed my trip with you and particularly the opportunity afforded me to become acquainted with you personally. Yours sincerely." (The Secretary's address was delivered by Lieutenant Stephens to Admiral King at Bolling Field, Anacostia, without a letter of transmittal.) Odegarde: Incidentally, you will have some Navy people in your audience. H.M.Jr: I am going to phone him and find out how to get this letter to him, you see. Inasmuch as we are using Navy language, I want to have it now, what you didn't use, and I don't know, maybe you did it advisedly, we had in there about calculated risk. You can say, for example, Admiral Raeder must have sat down and figured what is the calculated risk of sending the Bismarck out. Well, he figured it and he figured wrong. Did you leave it out on purpose? Kuhn: Yes. I didn't think it strengthened your argu- ment, but it can be done. 293 - 15 H.M.Jr: No. Kuhn: What I could do and what I thought of doing was that you were in the operations room during this Bismarck-Hood thing. H.M.Jr: No. Kuhn: You don't want to tell them that? H.M.Jr: No, but I think just - Oh, I think it would be a compliment to him, sending it up there. Klotz: It may be you are burdening him. (The Secretary held a telephone conversation with Senator Carter Glass.) Klotz: I couldn't hear what he said. H.M.Jr: He said, "that man from Connecticut, that mouther." He wouldn't even name him, you see, Danaher. I love this thing. Before the Lend- Lease he would keep saying, "Why don't they vote? Why don't they vote? All this argu- ment. Let's vote! Let's vote!" Klotz: He is marvelous. H.M.Jr: You say you thought King would think it was Klotz: Yes. You are asking for his opinion and he a nuisance? has got to sit down and think about it. I don't know. H.M.Jr: Well, I would like to know what effect it would Klotz: That is different, if you want it. H.M.Jr: Yes, I would. I would like very much. Here have on those men. 294 - 16 - he is. What effect would a thing like this have on the enlisted men? Odegarde: Do you know Admiral King? Klotz: No. Odegarde: It might have a different effect on different people, but I should think the normal person's reaction would be that he likes to be asked his opinion of something like this. H.M.Jr: Oh, yes. Odegarde: And unless Admiral King is different-- H.M.Jr: No, no, he will like it. Kuhn: Mr. Secretary, you have some little checks in the margin. H.M.Jr: I didn't do those. Somebody else must have done it. This is Peter Odegarde's copy. His checks are not mine. Odegarde: No, no, my copy went to-- H.M.Jr: They are not mine. Kuhn: I can disregard them? H.M.Jr: They are not mine. Kuhn: Do you have any other-- H.M.Jr: I can't find anything. I have sent one up to my wife and to Bob and one to Henry now and as soon as you can get a clean copy to Mrs. Klotz mentioning King I want to send it up to him and there is nothing major. There will be little - whatever may come up, you see. 295 - 17 Kuhn: H.M.Jr: And that thing that Mrs. Roosevelt suggested, which I am going to insert-- Yes, but when I send it to King I want it to have his name in. I will find out this morning. You are not afraid that this may get out before Odegarde: you deliver it? I think it will-- H.M.Jr: Where? Odegarde: Oh, this I.S.S. H.M.Jr: I told Mrs. Roosevelt I wasn't going to send it to her until the last word was finished. I won't send her that until it is finished. Kuhn: "It is better to die on our feet than live on our knees." That got in all right. H.M.Jr: The funny thing, Gaier or-- Klotz: Gaier. G-a-i-e-r. H.M.Jr: That is the one thing he picked out. Odegarde: He didn't like it? H.M.Jr: No, he liked it, that Passionata or whatever Kuhn: She is not the inventor of it. H.M.Jr: I think it is-- Klotz: You can't use it too much these days. Kuhn: It is a good saying. Odegarde: We need a good deal of that sort of thing. the name is. We need the "Don't Tread on Me" note in our Defense Savings Bond copy, too. 296 June 10, 1941 9:55 a.m. HMJr: Hello. Carter Glass: Hello, Mr. Secretary. HMJr: How are you? G: I'm just fairly well. HMJr: Well, I hope you are not anything wrong? G: HMJr: No, not especially. I called up - I wondered if I could come and see you and find out just how we were going to procede. G: Well, I can't tell until after the meeting of the Banking and Currency Committee this morning. HMJr: G: HMJr: G: HMJr: I see. I'm going to substitute the I introduced on the question of devaluation and I think we ought to promptly pass it. I see. Well, that sounds good. House Bill for the bill that Taft and this Connecticut mouther always want to rewrite everything that's done in the Committee. Well, Senator, I'm at your disposal and any time - I'd little bit rather not doing it tomorrow morning, but any time after two o' clock tomorrow I'm available. G: HMJr: All right, I'll try and get you. 297 - HMJr: Yes, but I mean - I can come up to see you tomorrow, but I mean I little bit rather not testify tomorrow morning. G: HMJr: G: Yes, all right. But any - I'm free to run up to see you any time you say at your office or at your apartment. All right, sir, I'm perfectly willing to run down to see you. HMJr: Oh no. It's a privilege, I like G: Very well, I'll communicate with HMJr: Thank you. G: Goodbye. to come and see you. you first thing. 298 June 10, 1941 10:05 a.m. GROUP MEETING Present: Mr. Graves Mr. Haas Mr. White Mr. Thompson Mr. Foley Mr. Schwarz Mr. Cochran Mr. Kuhn Mr. Odegarde Mrs. Klotz Mr. Bell Mr. Gaston H.M.Jr: Dan, while we are waiting for the people to drift in, have you had any chance to talk with Harold Graves about extending this "F" bond or "G" bond above fifty thousand? (Mr. Haas entered the conference.) Bell: I talked to him and talked to Haas and talked to Bob Rouse this morning, and I think it is the consensus that we should not extend it. We are afraid that if we do extend it, that it will draw other bonds, marketable bonds, out of portfolios to be sold at a premium, and people will put their money in this bond. (Mr. Graves and Mr. Thompson entered the conference.) 299 2- Bell: That is what we were afraid of at first in extending that limit to a hundred thousand, you may recall. We had some discussion of it. (Mr. Foley entered the conference.) Bell: We think maybe we had better leave it alone and try to work it through some other means like preferential allotment. Even that is a little difficult. (Mr. Schwarz entered the conference.) H.M.Jr: What about your tax certificate? Bell: I am ready to talk to you about that. I have those replies from the Federal Reserve Banks. They are not so good. Some say that we probably won't get any volume of subscriptions. Maybe the first year won't go very well. They think maybe the second year it might go better. They are not against it, but they are not enthusiastic about it. Foley: Mr. Secretary, instead of a tax certificate, I wonder if consideration could be given to a provision in the law to permit twelve periods of payment of the income tax instead of quarterly payments as the law now provides? I think if a fellow could pay his income taxes out of earnings so he won't have to make savings in order to effect the payment, it might suit the convenience of the little fellow a little better. I know in the case of some of my boys where they have been able to pay their taxes out of their regular salary check without having to anticipate the payment by saving in anticipation of it, it has been a pretty convenient thing to do; and now that the income tax 300 -3payments are going to be 80 much larger so that you won't be able to do that if you have to pay in four installments, it would be a little more suitable for them if the payments could be arranged the first of every month, for instance. H.M.Jr: The first of every month? Foley: Or the fifteenth of every month, and have it in twelve installments if that is what the taxpayer wants to do, instead of quarterly. (Mr. White entered the conference.) H.M.Jr: You mean that they pay monthly. Foley: Instead of quarterly. Bell: Would you give them a discount? Foley: I would have it the same as you have it now Gaston: Foley: for your four installments instead of one installment. You would have them begin on the due date of the taxes and then to make those payments? Yes. Graves: That would be a very difficult administrative -- Foley: That is the only objection to it, Harold, and now that you have more taxpayers than you have particularly small taxpayers, to me the ever it seems had before, administrative convenience difficulties of might be adjusted to suit the the taxpayer rather than to have a tax certiwhere a fellow accumulates against ficate the time in the future when he will have to pay. 301 4Haas: When would the first payment start, Ed, Graves: In March. Haas: I thought maybe the beginning of the year. Foley: No, start on the fifteenth of March, then for the year -- pay on the fifteenth of April, fifteenth of May, fifteenth of June and right straight through instead of the four payments. H.M.Jr: We are talking, if you don't mind, about two separate things. We could do yours, but that has got nothing to do, I don't think, with doing that - the money that you are earning now, to save some of that to pay the income tax on your present earnings. Bell: That is right. Foley: That is right. H.M.Jr: I mean, that is the thing. Bell: Save out of your present earnings to pay your tax on these earnings, not wait until next year and pay it out of next year's earnings. H.M.Jr: We could pay it - still do it monthly, but the question that I wanted to push is a little bit different than what you are talking about. Foley: I think that is entirely correct. What I H.M.Jr: Is something else. Foley: Another phase of the same problem; namely, the convenience of being able to meet income tax payments. am talking about is a -- 302 -5H.M.Jr: But my thing, I think it is like the chicken and the egg, I think mine comes first. After all, I am getting - how much do I get this month from the Treasury? Six hundred twenty-five? Klotz: Twice. H.M.Jr: Six hundred twenty-five? I get that every two weeks. Should the Government make it easy for me to take a certain percentage of that six hundred twenty-five and lay it aside now, regardless of how much I would pay when it comes due, and that is the proposal, what we are earning now, and that is the thing that has -- Bell: The tax is on the six hundred twenty-five you get this month and not on the six hundred twenty-five that you drew -- H.M.Jr: That is the difference. You get the point. Foley: Yes. H.M.Jr: Let's say we wanted to do it. What, out of all of this stuff now which has been running for two or three weeks, seems the best way to do it if we wanted to do it? Bell: I think the best way to do it is a discount Gaston: They would be non-transferable and available and certificate. We have some old forms of certificate indebtedness that we think we could rearrange and print up pretty fast and put it on a discount basis, and we have the authority in the law to issue discount certificates. only to the amount of the man's taxes no more? 303 6- Bell: We thought we ought to limit it to about twenty thousand dollars tax a year, or five thousand dollars a quarter, and make them not registered but inscribe the name of the taxpayer on the certificate 80 that when he turns in his tax return, he can attach the certificates to the return and then the collector will turn those over to the Federal Reserve Banks in payment of the taxes and they will be redeemed and credited as tax receipts. Gaston: Bell: Discounted at about two and a half percent or something like that. That is a little high. We thought about ninety-nine point forty beginning in June. That gives us six tenths of one percent for the nine months. White: Is there any possibility of graduating - of Bell: Yes, it will start at - oh, you mean as to White: graduating the discount rate? taxpayers? Give a small taxpayer, let us say, four or five percent, up to a few hundred dollars and then graduate that very sharply so that a large taxpayer will not be getting much more than he would be getting on any short term investment, because they are very investment-conscious whereas the small tax- payer, the amount he would save would be compared to what the inconvenience of a tax bond - or if you him a it would not only trifling large buying return, offered have the advantage of really helping him out and making defaults later much smaller, but it would also have the very important advantage of taking out of circulation purchasing power which would otherwise be spent; and 304 7 - during the first year, you might mop up as much as a billion dollars or two billion dollars that way. Bell: Oh, I doubt that. White: Which wouldn't be increasing each time, but H.M.Jr: it would be -- Well, Harry, if I understand it, let's say that we could get this thing started the first of July. I suppose that would be the earliest, wouldn't it? Bell: That is right. H.M.Jr: Well, you would sell during the month of July certificates to meet the tax on the fifteenth of March. Would you sell it just in July? Bell: Probably sell it in July and August and then in September you would sell the certificates to meet the taxes in June, and then in December for September and so forth. H.M.Jr: All right. Now, do I understand that we are limited to any one person, he can only buy five thousand dollars worth? Bell: I would limit it to an annual tax of say thousand. That isn't set, but I do we to limit a tax it. or is now pay has twenty think been paying ought Anybody going that to tax in excess of twenty thousand dollars, you a don't have to tell him how to invest to his money or how to save. He has been used that. But the small fellow, I think we can take care of him. 305 -8H.M.Jr: Let me just argue with you a little bit. Take General Motors that just paid us in round figures a hundred million dollars, wasn't it? Bell: Yes, a hundred and ten or twelve million dollars. H.M.Jr: A hundred million dollars. That money of General Motors invariably was in the banks. Yes, sir. Bell: H.M.Jr: Why shouldn't we let General Motors buy a hundred million dollars worth of these certificates? Bell: Well, there are other securities which they can buy, Treasury bills -- H.M.Jr: Well, but -- Bell: Smaller return, but Treasury bills are now H.M.Jr: Well, we would be bearing it cheaper than an eighth, wouldn't we? Bell: No. H.M.Jr: But I mean on this proposal. Bell: No, sir. We pay a little better than a half H.M.Jr: You mean under your proposal? Bell: Yes. White: Dan is right. Thos e large concerns have to getting around to a little under an eighth, and that is a -- for the nine months. figure very closely. They don't let any 306 9- possibilities of investment go and their anticipation of payment of taxes is a factor which plays a role in their determination of what kind of securities to invest, et cetera. Bell: And also dividend payments. Gaston: I don't think for the small taxpayer you ought to consider it as a nine months' proposition, because he has the privilege of paying from March to December, and that makes the equivalent of a payment about August 1. Consequently, you can figure on a full year's discount on the small taxpayer. White: I think that is an important point, and I think that ought to be stopped if you provide this other measure. If you provide a way in which a man can and should set aside out of his current income to pay taxes when they fall due, then you don't have to give him a whole year and it would have the advantage of moving up funds for the Treasury a full year and taking that out of circulation. That is an additional point. It is necessary so long as you don't encourage or make it easy for a man to set aside out of his current income, but once you do, I don't see any justification for allowing either a corporation or an individual the privilege of paying in four quarterly payments. That was all right in normal times. It didn't matter. But I don't think it should be permitted now, and I think it would be a wise move both from the point of view of saving the Government money and from the point of view of taking funds out of circulation and also from the point of view of having greater ease of administration. 307 - 10 H.M.Jr: To do what? White: Not to permit them to pay as we are now permitting to pay their taxes in four installments over the following year. In other words, a tax payable for this year, 1941, our income tax, we will be able to pay in March, 1942, in June, 1942, and I think in September, 1942. I have forgotten whether it is three or four payments in the following year. And it seems to me that that is something that might well be stopped now. H.M.Jr: How? White: Make everybody pay their full tax when it is due, on March - you can even move that date up a month, if you like, so that on March 15 -H.M.Jr: Well, that is just the opposite of what White: Well, that is, except that his point is met Ed Foley is saying. if you permit and encourage them and make it easy for them to take their taxes - to allow for their taxes out of current payments now, set them aside now. Foley: The reason I said what I said, Mr. Secretary, is, I was thinking of my own situation. Here I am paying my taxes in installments that are now due and here we are talking about an arrangement whereby I can save to pay next year's taxes when I haven't paid my own taxes for this year; and I think that if it could be made easier out of current 308 - 11 earnings to pay taxes already due, you have gone one step toward making it a little easier for the little fellow to meet his tax payments. H.M.Jr: Well, that is the whole plan. The whole plan is to start now to encourage the man to take out of his current earnings and set it aside now, enough money to pay his taxes in '42. I mean, that is my only interest so that he won't find in 42 he has spent it and he hasn't got the money. Gaston: What Ed says is a good argument for Harry's scheme, which I like very much, of decreasing the interest rate as the payment - the dis- count rate as the payment increases. There are several arguments for giving advantage to the small taxpayer that you don't give to the large taxpayer. One is the expense of collection on the small taxpayer and the desirability of taking his savings out of consumption, and the fact that he normally pays in the - at the last date in the four year install- ments. White: This idea of moving the tax up a year has a dual advantage, Mr. Secretary. It has to be examined. H.M.Jr: If you don't mind, I find myself doing now just what I said I wouldn't do. I am not going to have these arguments in 309 - 12 - my office. I haven't got the time, Dan. They should take place in your office. , Bell: Well, we have already had a number of conferences on it. Foley: I think that is right, but this is a pretty big problem, Mr. Secretary. We have all got different ideas. H.M.Jr: And that is just what I am not going to do any more. White: Well, except that we might not have heard of it unless it came up here. At least I wouldn't have heard of it. Foley: This is the first time I have had a chance H.M.Jr: All right, that is all right -- Bell: What am I supposed to do, circularize the to say my say. Treasury? Foley: No, but I think when these things come up in here, Dan, "Very well," the Secretary may say, "take this up in your room." H.M.Jr: I don't want to shut anybody off, but I just haven't any more got the time to sit for two hours and be patient, and therefore it is terribly important - I have been waiting now, Harold, what is it, a month? 310 - 13 Graves: About, a little over a month. H.M.Jr: It is over a month, and I would like this discussion to take place, everybody to have a chance to air their feelings, and then come in with a majority or minority report, and then I am going to listen to it, but I can't do this any more, so I am going to stop now, but please, Dan, let them go into your room Bell: H.M.Jr: for a half a day-In the hall? No, this is important, and Harold brought this up at least a month ago and have the first, second, and third airing in your room, and Sullivan should be there and Blough should be there, and then come to my room, you see. Will you do that? It is at least four or five weeks since Harold first brought it up. Gaston: We did discuss this thing at one of those Friday economic conferences several months ago. H.M.Jr: But you can see - I mean, when White and Foley are apart, you can see there is something wrong. (Laughter) Foley: We haven't had a chance to get together. (Laughter) H.M.Jr: That is the point. White: You had better begin changing your mind now, Ed. (Laughter) H.M.Jr: So get together, boys, and I am waiting. And you people run up a flag on me. I can't do it any more, but I will bring up these things that I am waiting for here, and then if I 311 - 14 - find you are not prepared, I will throw it into somebody's lap and then come on back. Is that right, Herbert? Gaston: Yes, very good. Bell: Well, this other thing has been interfering with it. We have been ready for a couple of weeks to discuss the thing. H.M.Jr: Well, what I am going to do at eleven o'clock with Jones, is this. I will simply say, "Now, look, Jesse, you have got your bill through. It is fine, and I am just going to tell you from now on that I consider it is entirely your responsibility to decide what loans you want to make or those you don't want to make and how much you want to make, and I am going to ask you - I know it will be difficult for you to do this - to make up your own mind without referring it to the Treasury." And then this afternoon when Sir Edward Peacock comes in, I am going to say exactly the same thing to him. (The Secretary held a telephone conversation wi th Admiral King.) Kuhn: I think they will have it ready in fifteen minutes. Where does it have to go? H.M.Jr: Anacostia. Get it and give it to Stephens and I will tell him to take a car and go over there. You have just got to change the one word. Where were we? Oh, that is what I am proposing to say to Mr. Jones. 312 - 15 White: It would be nice if he could inform you how much the amount of the loan is so we could keep track of what they are-- H.M.Jr: Oh, well - I will say, "As each transaction is completed, if you would let us know how much these loans are, we would like it." Cochran: Then would they approach us at all on these, the British? H.M.Jr: No. We will wash our hands of it. Foley: That is good. H.M.Jr: Wash our hands of it. That was the - you know, they originally wanted me to let them have a man to pass on each one. Now, I am passing on each one myself. Cochran: That is right. H.M.Jr: I don't want to do it any more. Any doubts, Dan? Bell: I guess not. The only thing that is worrying me is that you have got a responsibility to Congress in those figures that you presented and if there is a private loan of the character that was just proposed or there is a sixteen million dollar loan against forty-seven million dollars in assets and of course it is in favor of the British because they have that many dollars to pay back in the future, whereas if they get their loan of Jones of thirty million dollars, they get more dollars to liquidate the American commitments and of course they have to pay back more. Somebody ought to watch that. H.M.Jr: The point is this. I would much rather - if 313 - 16 I had to go before Congress and say, "Well, after all, gentlemen, their assets were so much," I couldn't pass on each loan. The responsibility is the British Treasury's to get as much as they can out of it. Now, they have gone through various avenues of private bankers to Mr. Jones, and I take it that they are not throwing away any money, but if I pass on each one and then we don't get the last dollar out of it, then it is my responsibility. White: I think with one modification, which would probably be implicit in this, and that is that if Mr. Jones is having the same kind of difficulty that he apparently was having with respect to this loan, in other words, where they were going to the private investors without giving serious consideration to the larger investment, that you ought to get in the picture at that time, if he reports to you that they are not coming to him for lease loans and they are making these loans-H.M.Jr: That is something else. But whether they lend them twenty or twenty-one or nineteen million dollars, I don't want to pass on it. White: So long as Jones is satisfied that he has had an opportunity to bid on it. H.M.Jr: I am going to tell him this afternoon that the only advice I am going to give them on every transaction, it is the height of folly if they don't go and find out how much can Jones let them have. Cochran: Should we give them any advice about cutting off entirely from complete sales? I am thinking of the Tinkham letter. H.M.Jr: No, I am going to wash my hands of this thing 314 - 17 - entirely. I am not going to be in the position of telling them every time what they should do. Now, I am in a very untenable position, and I am going to get out of it. All I want to know is after the thing is through. I mean, I have given this thing - if you don't mind, I have had lots of time, and I have made up my own mind, and I am not really asking for advice in this case. I very seldom say that. Bell: Well, I think it is right to get out of that, and I would like to see you get away from this-H.M.Jr: I don't want to go through the motions of saying what do you think, when I have already made up my mind. I have made up my mind, and I want to get out of this thing. You can't work with Jones. Jones is a one-man show. Why not recognize it? And I am not going to be bothered week in and week out on every deal, is Jones undercutting me? is he trying to do me dirt? is he trying to do this? I mean, life is too short. Why not recognize it? I mean, Jones won't work with anybody. He is a one-man show, and you might just as well recognize it. He has got the authority. Why have everyone worrying - friends of mine in this room - am I getting the worst of this or that? And let the British take care of their own dollars, because that is their responsibility. They can take good care of them. Now, if Jones says the British aren't coming, he can come to me and say, "Well, I never heard of this deal," but that is something else again. Has anybody got anything else that needs to be decided this morning? 315 - 18 Bell: This is a statement we worked up on the relief of the three or four hundred million dollars. H.M.Jr: Supposing we do this right after Jones leaves? Bell: All right. H.M.Jr: See? After Jones leaves. Gaston: There is one thing I would like to bring up if you have a minute or two. I would like to try something new in regard to the German propaganda films. We have one now. It is called "The Bismarck." I think we ought to release it. We could probably find some grounds for holding it up. It is a Ufa film, but what I would like to do, and this is John Wiley's suggestion, I would like to invite in a number of first string columnists, show them this picture in confidence, and then suggest to them that they see the film when it is released, go to these German theaters and see it, and they will be pre- pared to handle it, to discuss it, and it is a film - this particular one is a film that is very susceptible to that sort of treat- ment, because you can handle it in a good way with counteracting. H.M.Jr: How long a film is it? Gaston: It is about a two-hour film. I think you might like to see it. H.M.Jr: I would like to see it before I pass on it. Gaston: But this is a type that I - a device that I think we might use on a number of those propaganda films as they come up. H.M.Jr: Herbert, I don't care who the men are that you 316 - 19 - invite here, see. You can't trust them any more than Winant, who told me yesterday that he was promised by Henry Wallace that the men that he picked wouldn't talk, and he went up there and every word that he said was repeated to another Senator and the third Senator told what he said. Now, you can not invite a group of columnists into this office, Treasury, and show them a film that one, two, or three won't say they saw it in the Treasury. Gaston: That raises a question whether any damage would be done by that. H.M.Jr: Well, I don't want it. Gaston: The Army took one of our films and showed it to a whole group of newspaper correspondents. Schwarz: H.M.Jr: Gaston: H.M.Jr: Including I don't want to do it, if you don't mind. I turn the idea down. Right. That isn't our job, and I don't - I don't want it. Gaston: What is distinctly our job is to decide whether we have grounds for the exclusion of the film. H.M.Jr: I would like to see it, and Mrs. Klotz, we will fix up sometime in the next day or two. Have you got the picture in town? Gaston: Oh, yes. H.M.Jr: But I don't want to get into that picture. I just don't want it. I mean, that isn't - if and when they have a fellow in charge of 317 - 20 - propaganda, let him do that, but I don't want to get in on it. You can't do that thing half way. Gaston: It is distinctly in the propaganda field. H.M.Jr: Well, we are doing an entirely different thing. You have asked me, and if you don't mind, I say no. Gaston: No, right. H.M.Jr: But I would like to see the picture. Gaston: It is available any time you would like to see White: Can some of us act as ushers? H.M.Jr: On the picture? Oh, yes, anybody in the room Bell: Take tickets. H.M.Jr: We will fix it up. Cochran: Archie left with me that colored picture of the Burma Road this morning, it is a film of thirty minutes, sixteen millimeter, if you want to see it. H.M.Jr: Anything else? it. is invited. We will do it some-- I want to see you a minute, Odegarde, please. 318 June 10, 1941 10:22 a.m. HMJr: Hello. Admiral King: Good morning, Mr. Secretary. HMJr: How are you? K: I'm very well, thank you, very busy, etc. as usual. Admiral, I wondered if this afternoon you have a little HMJr: time. I attempted to write out an address for Amheret. some young men who have doubts about this whole thing. K: HMJr: I see. And I bring in parts of some conversations I had with you on shipboard. K: Yes. HMJr: I wondered if you were free at this afternoon to give me a little time, I'd like to get your reaction personally as to how you think this might effect K: Well, I wish that I could, Mr. Secretary, but I'm right on the point of starting back now. They called me in here in a hurry and I'm to be back here Thursday. HMJr: K: Well, could I do this? Could I get into your hands, possibly you could read it, then give me a call? I'd like to do that very much, Mr. Secretary. Could you have that sent over at once please to Anacostia? 319 -2HMJr: K: HMJr: When are you leaving? Well, I hope to be in the air at eleven o' clock. You hope to be in the air at eleven? K: Yes. HMJr: I don't know whether we could eleven, get but it we'll there make by effort. Hello? K: the I may be later than that 80 I suggest that you do that, Mr. Secretary. HMJr: All right and then possibly you could read it on the way up. K: Yes. That would fit in very nicely. HMJr: And then if you would give me K: All right, sir, I'11 be glad HMJr: That will be very nice. a ring on the phone I'd appreciate it. to do it. HMJr: All right. But I really would like to get K: Well, I'11 be very glad to give K: your reaction. you that. HMJr: Fine. K: That will be the way to do it. 320 -HMJr: K: We'll try to be almost as good as the Navy and get it to you. I'm sure it will be there. I may be later than that. HMJr: I'll see if I got a man the name Junior of Garcia, around by here to carry the message. K: HMJr: I see. All right, Mr. Secretary. All right. K: Glad to hear from you. HMJr: Thank you. K: Goodbye. 321 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE June 10. 1941 Secretary Morgenthau TO FROM Mr. Cochran STRICTLY CONFIDENTIAL At 11 o'clock this morning the Secretary of the Treasury received the Secretary of Commerce. Messrs. Bell, Foley, White and Cochran were present. Mr. Morgenthau told Mr. Jones that he is receiving Sir Edward Peacock this afternoon. He added that he would like to speak to Sir Edward Peacock along the following lines. Now that Mr. Jones has received the required legislation from Congress, the British representatives should approach Mr. Jones directly in any instance where they desire to obtain a loan against British direct investments in the United States. The responsibility for passing on such transactions would be that of Mr. Jones. Mr. Jones agreed to accept this responsibility, but with the condition that he would be free to call upon the Secretary of the Treasury and mem- bers of his staff for support and assistance. (Mr. Jones thought that the British night get out of hand unless they realized that the Treasury was still interested.) Kr. Morgenthau and Mr. Jones agreed that their basic desire was to see that the British do not dissipate their resources in this country, but obtain the maximum amount of dollars possible in order to meet their commitments in this country. The foregoing outline of the approach to Sir Edward Peacock was agreed upon by the two Secretaries. Mr. Morgenthau stressed the point that he could not look into every transaction which the British proposed to enter. Unless some system such as the above is adopted, there would be chance for confusing triangular conversations such as took place this past week in the case of the Coates thread deal. Kr. Morgenthau considers it undesirable for the British to approach consummation of a deal with private bankers and then come to the Treasury in a rush at the last minute to obtain approval of the Secretary to the transaction under reference. He believes that British interests would best be served by the plan which he has suggested. The point was made that the Secretary of the Treasury, with the assistance of the British, made known to Congress the various holdings of the British in the United States at the time the Lend-Lease Bill was under consideration. It is now the duty of the British themselves to handle these assets in the manner most likely to procure a maximum of dollar exchange to pay for their commitments in this country. Mr. Jones agreed to inform the Treasury of the results of any transactions upon which he passes. pm.P. Copy-to mr. Jones 6/11/+1 usper attached letter copy of transmitted 322 JUN 11 1941 Dear Jesses In accordance with the understanding reached at - mooting posterior. I have pleasure is attaching a - of our conversation. wall you kindly inform no of - point which you may think 10 not antiofactorily covered? Sincerely years, Secretary of the treasury. Copy of of June so, 1942 the Receivable Jesse Sease. Secretary of - 1960:1ap-6/10/41 323 THE UNDER SECRETARY OF THE TREASURY WASHINGTON June 10, 1941 MEMORANDUM FOR THE SECRETARY: The Secretary conferred today with Mr. Jesse Jones regarding his financing requirements for the next three months and the refunding of $211,000,000 of RFC securities maturing on July 11. The Secretary told Mr. Jones that it was his thought that we would offer a RFC note for about the same terms as in the past for $300,000,000 for cash, and offer at the same time to exchange the maturing security of July 20 for the same note issue. There was some discussion as to whether the issue should not be divided 80 that Mr. Jones could get an average of 1 per cent. The Secretary told him that he would be glad to look into this, but his present thought was that we might put the whole issue in January 1944. Mr. Jones said this would be satisfactory to him. Mr. Jones then left with the Secretary a letter dated June 10 regarding the purchasing by the RFC of approximately $50,000,000 of PWA securities as contemplated by the President's Budget Message covering the fiscal year 1941. Mr. Jones told the Secretary that the RFC stood ready to include this purchase whenever the PWA gave them the clear sign. This would complete the program as contemplated by the President's Message. I told the Secretary that I was familiar with the transaction and that I would handle it with PWA. DWB FEDERAL LOAN AGENCY WASHINGTON JESSE June 10, 1941 Dear Henry: The $350,000,000 which the President directed the RFC to make available for the Treasury during the current fiscal year has been provided, except for part of the funds to be furnished PWA through the purchase of securities to enable PWA to pay the Treasury $50,000,000. Of the total amount, approximately $300,000,000 was made available through retirement of the Corporation's stock and purchase of stock of the Federal Home Loan Banks. The RFC has paid PWA $6,516,666.67 for securities on commitments made since July 1, 1940; and in a letter to Mr. Carmody, dated April 30, 1941, RFC offered to purchase for $43,500,000 the remaining securities held by PHA, except approximately $10,000,000 of issues not regarded as transferable. Mr. Carmody acknowledged the letter under date of May 5, 1941, stating that there were some aspects of the PWA bond situation to which he desired to give additional study. This is to advise you that the RFC is ready to conclude the purchase of the PWA securities, thereby completing the program. Sincerely yours, Administrator Honorable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D. C. 325 COPY FEDERAL LOAN AGENCY WASHINGTON JESSE H JONES FEDERAL LOAN ADMINISTRATOR June 10, 1941 Dear Harold: Referring to your letter of May 12th, our lawyers are not in agreement that the RFC has the authority to make a loan to a dummy corporation for the purchase of the electric system of Puget Sound Power & Light Company. It would seem to me much better for the Bonneville Dam to be incorporated, with authority to borrow and pledge its revenues. There would then be no question of RFC's authority to make the loan, However, the President, the Secretary of the Treasury, and you should give serious consideration to the matter of diverting $100,000,000, or more, from defense purposes to the acquisition of public utilities which are already in existence and serving their customers at what I am informed are fair rates. Inasmuch as the market already exists for all of the power that can be created during the next few years, it may be advisable to defer the purchase of these utilities. I shall be glad to discuss it further with you at your pleasure. Sincerely yours, (Signed) Jesse H. Jones Administrator Honorable Harold L. Ickes Secretary of the Interior Washington, D. C. Hunded to me by Jones June 12, 1941. 326 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE June 10, 1941 TO FROM Secretary Morgenthau Mr. Cochran STRICTLY CONFIDENTIAL At 11:30 this forenoon the Secretary received the attached statement from Under Secretary Bell entitled, "Dollar Relief for British Treasury". Mesers. Folay, White and Cochran were also present at the conference. In explaining this table, Mr. Bell stated that the $228,000,000 under heading I constituted definite relief which should be found acceptable to the British. The total of $210,000,000 under heading II might be disputed by the British, since they could figure that some of the relief involved was already expected by them through the Lend-Lease system. Our rebuttal would be that as late as March 15 they included these items in their estimates of suns which they would be obliged to pay. The Secretary agreed that it is preferable to grant relief of the type represented by the $210,000,000 than to achieve this end through deferring contracts. He agreed, therefore. that Mr. Bell should consult Mr. Hopkins' office on the attached table. If it is found acceptable to that office, the Treasury would then endeavor to have the British accept this as fulfillment of the Secretary's undertaking to arrange for them relief to the extent of from $300,000,000 to $400,000,000. M.M.R. 327 0 0 P Y DOLLAR RELIEF FOR BRITISH TREASURY I. Already provided and which can be immediately provided: 1. Plant and Equipment (RFC) (a) Already purchased (b) Can be purchased $ 48 M 52 $ 100 M 2. Supply contracts: (a) Already taken over by the War Department (b) Entered into by the British after 50 March 11, 1941, which can be taken over by the War Department 78 128 $ 228 M II. In addition to the above, relief can be given by taking over the following payments under Lend-Lease which the British had originally contemplated meeting out of their dollar resources: (1) 011 to be purchased in the United States during the next six months (2) 011 to be purchased from American sources outside the United States (3) Merchandise inside the United States (4) Shipping services Total $ 33 M 30 132 15 210 $438 M Additional relief could be given on same basis as (3) and (4) above. June 10, 1941 COPY: 6/10/41 328 DOLLAR RELIEF FOR BRITISH TREASURY I. Already provided and which can be immediately provided: 1. Plant and Equipment (RFC) (a) Already purchased (b) Can be purchased $ 48 M 52 $ 100 M 2. Supply contracts: (a) Already taken over by the War Department (b) Entered into by the British after 50 March 11, 1941, which can be taken over by the War Department 78 128 $ 228 M II. In addition to the above, relief can be given by taking over the following payments under Lend-Lease which the British had originally contemplated meeting out of their dollar resources: (1) 011 to be purchased in the United States during the next six months $ 33 M (2) 011 to be purchased from American sources outside the United States 30 (3) Merchandise inside the United States (4) Shipping services 132 15 210 . Total $ 438 M Additional relief could be given on same basis as (3) and (4) above. June 10, 1941 329 June 10, 1941 Dear Felix: I am sending you herewith a copy of the memorandum "College Men and the War", , which I spoke to you about at lunch today. Yours sincerely, (Signed) Henry Honorable Felix Frankfurter, United States Supreme Court. By Messenger 330 June 10, 1941 3:30 p.m. RE AID TO BRITAIN Present: Mr. Phillips Mr. Peacock Mr. Cochran Mr. Bell Mr. Foley Mrs. Klotz Mr. White H.M.Jr: You asked to see me so maybe you have some- thing on your mind. Would you care to talk first? Peacock: Well, I have, sir, if you would like me to begin. H.M.Jr: Please. Peacock: I can put it in a very few words. Sir Frederick has been going into what he requires from Gifford and me in order to cover his needs, and we have gone into the figures pretty carefully and It is quite clear that under present conditions we can't provide him with the sum he wants. We certainly can't provide him in time, and unless conditions change we probably couldn't provide him at all. I have in the last three months worked very hard at this problem of direct investments and I have acquired a very large amount of 331 2- information on the subject, but I haven't accomplished very much in the way of producing cash. Conditions are not moving in our favor, and so we have been looking at the thing as realistically as we could to see whether there was any alternative. Now, if I may revert to past history for the moment, I feel that we have accomplished something worthwhile. With your help, this Viscose thing, which took an unpleasant turn the other day - I am glad that is over - has really, I feel, done a lot of good. H.M.Jr: No question about it. Peacock: I feel that in that sense I have been an instrument at doing something that was useful. H.M.Jr: Definitely. Peacock: But I can't get on with very much further good, enough to meet Sir Frederick's requirements. Under those circumstances, we have been wonder- ing whether the time hasn't come when - to look into the possibility of in some other way meeting the requirements, because after all, what is wanted, and I know what you want is, that we shall see to it that Sir Frederick is in a position to pay all his bills; and we feel that we ought to explore some other way of providing him wi th the funds and providing him in a sure way, so that there is no doubt and question as there is at the present time as to whether the amount is going to be available at the time, when it is required. So I asked to come to see you. I feel that I may come and consult you and ask for your help and advice and I am here today for that purpose. That is the story. 332 -3H.M.Jr: Well, have you any suggestion of your own? Peacock: Well, yes. A change has taken place, or is taking place, rather, in the matter of the RFC bill. They are having it amended, and it appears to us as if it had been amended with a view to opening the way for people like us to borrow some money, and so I had in my mind the possibility of exploring that as a possible way out. H.M.Jr: Well, what I wanted to say is right along the same line. Mr. Jesse Jones was here this morning. I said that, talking for the treasury, now that his bill had passed and he had the authority from Congress to lend to England on their securities, that I would like to take this position; namely, that from now on if the English government had any properties or securities which they owned in this country and they wanted to either sell them or borrow against them I was going to suggest this this afternoon to you gentlemen - that before you sold or borrowed on them, that you would consult with Mr. Jones to see at what price he could either buy or borrow and that the responsi- bility being yours, you naturally would sell or borrow from wherever you could get the most money, that in the future I didn't want to be consulted on each transaction because you can't have too many people in this picture and the responsibility for lending is Mr. Jones' and not mine. The responsibility for paying the bills which you have obligated yourself to in this country is yours. Mr. Jones was entirely agreeable to this procedure. He said he would like to feel that he could call on any of us here for advice and help, that in case he had any difficulties with you, meaning the English, he would like to call us in for help, but 333 4- he would be very glad to proceed on that basis. I made it very clear to him, and I would like to make it very clear to you that the difference is this, that in the future, unless Mr. Jones specifically asks us or you, I don't want to be in the position that we are going to pass on every transaction. I just can't do it. I mean, I haven't got the time. My past experience with the English Treasury has been so highly satisfactory that I feel confident that certainly you are not going to waste your assets and that you are going to try to get every dollar possible. If you can't get it from one source, you will try to get it from another. But I don't want to go through another Viscose deal and so if that procedure is agreeable to you, it is agreeable to Mr. Jones. That doesn't mean that you can't drop in, but I don't want to on every transaction - "Well, we can get twenty million, do you think that is enough or can you get us twenty-two or should we do business with X, Y, 2, or should we see -" I am just taking it for granted that in each case you will give Mr. Jones a chance to say, "Well, I can buy or borrow so much," and then I should think that that would be a distinct advantage to you, because you know that it gives you a bargaining power. You are not at the mercy of one group or several groups, and as I say, it doesn't mean that you can't drop in and discuss the broad principles, but we don't want to be - and I explained that originally - it is your money, it is your nation's money, your obligations, and I think it is up to you people to make the best bargain you can and nothing has happened in the past that makes me think you 334 -5are going to waste your assets. Is that stated, Dan, about the way I stated it to Mr. Jones? Bell: Yes, sir. H.M.Jr: Is that about right? Bell: That is about right. H.M.Jr: Just about the same way? Have I overlooked anything? Bell: No, sir. H.M.Jr: Well now, is that agreeable to you gentlemen? Phillips: Yes. It is understood that if we do run Isn't that an easier way to do? into trouble, you would be good enough to listen to us? H.M.Jr: Always. Peacock: That -- H.M.Jr: We are always here. We are a friend in court, but I don't want to go through the agony of another deal any more than you do. Peacock: Quite so. I perfectly understand that, sir, and we will certainly explore this other avenue, but I do very much value your permission to come here -- H.M.Jr: Peacock: Any time. As we say in this country -I will certainly not trouble you over minor things. 335 -6H.M.Jr: Oh no, it isn't that. I think if I can be - well, the responsibility for each deal, if that is lifted off my shoulders I may be of more service in other ways to you. Peacock: There may come times when we will just have to come and have a talk with you. H.M.Jr: Any time that you call up and give me twenty- four hours' notice, I will see you; and if is it is an emergency, I will see you in twenty-four minutes, and Phillips knows that after a number of years, that he can call up and say, "Can I drop over, there is something you have got to see," that I have always found time. Is that right? Phillips: Yes. H.M.Jr: And there is no change on any of this, but it is just this one thing which I have always right from the beginning - I didn't want to be in the position that I have got to place a value on every one of these businesses and I haven't changed. Well, that is that. Now, on Phillips' own problem, we are making headway. Phillips: Yes. H.M.Jr: On what we call here the three to four hundred million. We hope to have something this week, don't we? Bell: We hope to have it tomorrow. I don't know whether we can get it through in view of the pending report there. Hopkins and his crowd are spending all their time on that report, but that ought to get out tonight or tomorrow. 336 7H.M.Jr: But I am trying terribly hard to get you something this week and then after we have that, if that can be done to your satis- faction, then we can take another look at your balance sheet, so to speak, and then what we call the six hundred fifty million dollar plan can come after that. Phillips: Yes. H.M.Jr: But we want to get this - what we call here the three to four hundred million dollar one straightened up first. We think we are pretty well on the way, aren't we? Bell: Yes, sir. I think so. H.M.Jr: Now, what other unfinished business is there? Peacock: May I take the opportunity of a personal matter? H.M.Jr: Surely. Peacock: I want to get this business on to the point where I know that provision has been made that - I have had three SOS messages from the Bank of England in the last two weeks. They are in a rather difficult position over there in one way or another. They are denuded of most of their directors, so I have promised the moment I can feel honestly that this thing is on its way, I would try to return home. H.M.Jr: Only for a short time, I hope. Peacock: He said that that would be it, but I would like to add that for some considerable time, Carlyle Gifford, whom you know, has been cooperating with me and he has been in- valuable. He knows the whole thing thoroughly 337 8- and he would, of course, carry on and in can on can, he knows the here certain than I and respects all because he carry procedure better that kind of thing better than I do, in it.so that there wouldn't be any break H.M.Jr: Well, I think with this new arrangement which we have here which we have been talking about, I should think that after you have seen Mr. Jones you will know whether you will or won't be on a satisfactory basis. I am sure you will be. His attitude is, he would like very much to help you. Peacock: Well, we will explore it and give him every opportunity. H.M.Jr: But any time that I can help - your cause is still before me every minute. I don't lose sight of it day or night. Phillips: H.M.Jr: Well, sir, I think that is all. All right. (Mr. Phillips and Mr. Peacock left the conference.) Bell: There is probably only one thing in there that you mentioned that you didn't cover this morning with Jones, and that was the securities. You brought securities in with the direct investments. Did you understand that when he made his statement, that Jones was in a position to buy or lend on that? Cochran: He put that in this afternoon which he didn't Bell: But I don't think that is important. have this morning. 338 -9H.M.Jr: What is that, Dan? Bell: You see, they are selling their investments, their time. security investments at the present H.M.Jr: This morning we talked about -- Bell: Only about the direct investments. H.M.Jr: Well, they don't bother me with their securities. Bell: I just wondered if they got the impression now that you are willing for them now to go to Jones and get a loan, but I take it you are willing for them to work that out. H.M.Jr: Sure. Bell: O.K. H.M.Jr: Just as long - I have said it right from the beginning, I don't want to be in the position that I am appraising the value of every one of these securities. White: Did you raise the question of -- Foley: Not yet. I will as soon as I get a chance. H.M.Jr: Dan, this tonight isn't one of those must things. We are just having a little re- hearsal for lunch tomorrow. Bell: I told Mrs. Klotz that I would come. I had this engagement which would make me a little late, I am afraid. H.M.Jr: Oh no. You will get it tomorrow, but I am trying to talk myself out tonight. Bell: You will get tired. 339 - 10 Cochran: You gave us a cablegram from Fox on China. H.M.Jr: Well look, Merle, unless these things are important - I read that Fox one - unless it is something that is really important -- Co chran: Well, we don't need to bother you with it. H.M.Jr: No. I can't. Cochran: All right, we will -- H.M.Jr: I mean it is - the old brain just won't take it. Cochran: All right, sir. H.M.Jr: I mean, it has got to be something that is out of the ordinary. I can't take any more. Cochran: All right. No, we don't need to bother you with it. (Secretary held telephone conversation with Mr. Harry Hopkins as follows:) 340 June 10, 1941 3:50 p.m. HMJr: Hello. Operator: Mr. Hopkins. HMJr: Hello. Harry Hopkins: Henry? HMJr: That's my name. H: I want to get your advice about something. HMJr: H: It's cheap. The Danish ships - we are going to buy them out of lend-lease - we going buy the ships outright. Pay about $17,000,000 for 34 ships. HMJr: Yeah. H: Now, the Danish Minister.. HMJr: How many million, pardon me? H: 17. HMJr: Right. H: The Danish Minister then put up to the Maritime Commission that he thought he ought to get 2% interest. Now, not interest you see, we just put that on the price. Now, I don't know whether we want to give that any breaks or not HMJr: No. 341 2H: I know the money 16 frozen promptly andyou'd then dole it out to him as he needs it. HMJr: H: HMJr: No, it would be a bad precedent, Harry. It'd be a bad precedent. Well, we got, I don't know, 4 or 5 billion, if we begin to pay interest on the stuff, it would sink me. H: Well, I think he was thinking of a way of getting some money. Are they in trouble? HMJr: No, no. We. H: Have they got dollar exchange here? HMJr: Now, what we do every month we've given him the amount of money that he says he needs to run the various Embassies and Legations in North and South America. H: Yeah. HMJr: And we've given him every dollar he has asked for. H: So, he's in no trouble for money? HMJr: None what so ever. H: Yeah, all right, I get you. HMJr: Okay? H: Yeah. HMJr: Our boys gave Oscar a memo for you on what I call the 3 to 4 hundred million. 342 -3H: HMJr: H: HMJr: Yeah, Oscar was telling me something about it. And when you get a breathing spell will you take a look at it? Yeah, I'm going to try to do it this afternoon. That would be wonderful, Harry. Now, wait a minute. Most important of all, how are you feeling? H: Better, Henry. Little tired, but I'd say definitely better. HMJr: Taking your medicine? H: Yeah. HMJr: Be a good boy. H: I am. HMJr: All right. 343 - 11 H.M.Jr: Do you agree with me on that? Two and a Bell: I take it what they wanted was two and a half percent on the investment from some day back when the ships were locked up. It half percent interest. is not on the seventeen million -- Foley: No, because they can invest that. They can H.M.Jr: Nuts. White: This is for the record. It may be important some day or it may not be, but if it is, do take their seventeen million and invest it. I read this thing correctly -H.M.Jr: How do I know how you read it? White: I mean, do I interpret it correctly? H.M.Jr: That is better. You have done so much Chinese I don't know if you can read English any more. White: "Mr. Morgenthau and Mr. Jones agreed that their basic desire was to see that the British do not dissipate their resources in this country, but obtain the maximum amount possible when realization thereon is undertaken." We wonder whether this might not be taken to mean that you are worrying that they are not getting their money's worth from what they sell here. It appears that you are worrying about them and not about raising the dollars necessary to pay their debt. There is kind of a different slant in this than I think you intended, if I think you interpreted it properly. Do I make myself clear? 344 - 12 H.M.Jr: Argue with the counsel. (Laughter) Is there anything to what he says or not? White: Read it over again with that in mind. It seems as though you are working for the British instead of the Americans. Foley: As I gather, what we were doing here was reporting a conference this morning and I think that this sets forth what went on here in the room. H.M.Jr: Are you satisfied? Foley: Yes, I am satisfied. I think maybe -- Bell: You are thinking about the word "dissipate" and the interpretation on the other side. I think it means -White: It sounds as though you are worrying how they spend their money when what you are worrying about is whether they will have money enough to take care of the Americans. Bell: Of course, the interpretation of it is that he is worrying they won't get enough dollars to pay off the American contractors. You might change the word. Foley: Well, we can say, "The basic desire was to see that the British realize the maximum amount of dollars --" White: "To meet their obligations __" Foley: ..... in this country." White: That is different. H.M.Jr: How would you change it? 345 - 13 Foley: He would change "the British do not dissi- pate their resources in this country" to "that the British realize the maximum number of dollars." White: "In order to meet their obligations." Cochran: I think they used that phrase, "dissipate or waste." When you were talking with Jones that phrase was used. Foley: I think it was, but Harry is thinking of H.M.Jr: So that they will receive the maximum amount the record rather than reporting it accurately. of dollars, how is that? Will you do it that way? Cochran: I am quite happy about that. Foley: He has almost got that. He has got, "that the British do not dissipate their resources in this country but obtain the maximum amount possible when realization thereon is undertaken." White: You can't talk me out of that other interpretation, Ed. H.M.Jr: Fix it up to say, "in order that they will receive, and so forth. White: That is the point. Merely to make it appear that you are working for the American Treasury instead of the British Treasury. H.M.Jr: Merle, fix it up and then give me a letter Cochran: All right, fine. H.M.Jr: All right. Good-bye. tomorrow morning, "My dear Jesse." 346 - 14 Foley: May I bring up one thing? H.M.Jr: I doubt it. White: Yes, I think so. H.M.Jr: Have you two talked it over? Foley: Yes. H.M.Jr: And you are in agreement? Foley: We had lunch. (Laughter) Bell: We might as well leave. Cochran: All right, Dan. Foley: I don't know whether you - whether I made myself clear or not when I told you about the meeting on Friday before Glass' committee. They are meeting not only on our bill, but they are also going to bring up Taft's bill to give effect to the Federal Reserve suggestions. . H.M.Jr: I know. Foley: I thought if you were going to be away tomorrow and Thursday -- H.M.Jr: Who is going to be away tomorrow and Thursday? Foley: I thought you were. H.M.Jr: I am right here. White: I thought you were making your talk at Amherst Thursday. H.M.Jr: Saturday. 347 - 15 Bell: I thought it was Thursday. H.M.Jr: Saturday. We will have a chance to do this when I am fresh tomorrow morning. Foley: O.K., that takes care of it then. I was just afraid you were going to be away tomorrow and Thursday and come back here on Friday and we wouldn't have a chance. H.M.Jr: Ten-fifteen tomorrow morning. For a better name, I will put down, "Foley, et al," and make it ten-thirty. Bell: Et al? H.M.Jr: All right. Good-bye. 348 June 10, 1941 Harold Graves Secretary Morgenthau I wish you would talk to me about trying to put on some kind of a program or arrangement whereby each week we can send something to each individual Senator and each individual Congressman to keep them posted on the progress that we are making with our Defense Savings Bonds. I think it is very important; in fact, I think it is sufficiently important that you assign one man who will be thinking of something to send to the Senators and Representatives each week so that they will know what we are doing and the progress we are making. given to very again -7-1 Frusted 349 June 10, 1941 Harold Graves Secretary Morgenthau I would like to make a suggestion as to how the Defense Bonds should be advertised on the Texaco Hour. Rather than the usual commercial announcement, I suggest that if we have an artist like Lily Pons sing that either just before or just after she sings, she step out of character and say fifty or one hundred words to the effect that she believes in Defense Bonds and that she hopes all of the listeners do also. My thought is that if each of our special artists did that it would be quite novel and that would be the least objectionable way to get over our message. I wish you would talk this over with the people who are handling the program, and give me a report on it as soon as possible. Followed up Followed up at Defense Bonds Staff Meeting on June 12. 1941. Group decided this suggestion was inadvisable because of the added expense which would be incurred. Better to have same orchestra all the time was unanimous opinion at end of discussion on this subject. 350 351 June 10, 1941 Harold Graves Secretary Morgenthau I also would like to suggest that on the Texaco Hour we invite various well known orchestras to play on different evenings so that we don't have the same orchestra every time. Please think that one over. Followed up at Defense Bonds Staff Meeting 6/12/41. Werner Josten has informed Mr. Monroe he is writing a March, and he will let him know when he has finished it. When Mr. Monroe hears from him, it will then be decided when he should appear on the program. 352 353 June 10, 1941 Harold Graves Secretary Morgenthau On the Texaso Hour, there is no reason why if they have Werner Josten conduct that he couldn't conduct one of his own compositions, and let the orchestra play something that he composed himself. Please pass this on and then let me know. I would like to have their reaction. Some of his compositions are quite stirring and he could suggest the one which he thought might be most fitting for our program and then we could give it consideration. 354 June 10, 1941. Memorandum for the Secretary's Files I mentioned the attached letter from James Rowe, Jr., to the Secretary during the staff meeting on Thursday, June 5. He said that Rowe had handed it to him just before he went in to see the President the previous day, but that he had had no opportunity to mention the matter to the President. I explained to the Secretary that I had told Rowe that we could not recommend, or even investigate, a candidate for a position now held by an appointee of this administration except on direct request of the President and that I did not think it was our responsibility to take the matter up initially with the President. I have since discussed the matter over the phone with Rowe and he said he would try to speak to the President himself about it. my 355 THE WHITE HOUSE WASHINGTON June 4, 1941 Memorandum For: The Secretary of the Treasury Dear Mr. Secretary: Collector of Internal Revenue for Iowa If you have a moment at lunch today could you take up the question of the Collector of Internal Revenue for Iowa with the President? Ed Flynn informs me that he and both Iowa Senators would like to have E. H. Birmingham appointed as Collector, to replace the incumbent, Charles Huston. Under Secretary Gaston tells me, however, that the President recently sent a note to you asking why Huston had not been reappointed, and he says that therefore it will be necessary to have a formal request from the President, and that the usual investigation of Birmingham will then be made. Flynn is anxious to get rid of Birmingham as State Chairman and thinks this is the solution. Huston is almost ninety years old. Flynn is quite anxious to get this done as soon as possible. Will you let me know one way or the other? Very sincerely, In Rose James Rowe, Jr. Administrative Assistant to the President 356 June 10, 1941 Dear Claude: I am having the matter, mentioned in the note which you handed me at Cabinet, looked into and just as soon as we have the information I will forward it on to you. Yours sincerely, (Signed) Henry Honorable Claude R. Wickard, Secretary of Agriculture. FILE TO NMC 357 THE WHITE HOUSE WASHINGTON 9 have been wed that German people far ticularly farmers, in nor thwest Ohio are openly Pno Kitter. anglaise County was mentioned I would be interested in knowing about the Bond Sales in that area Wickand 358 FIRST REPORT UNDER THE ACT OF MARCH 11, 1941 (Lead-Lease Act) - FIRST REPORT UNDER THE ACT OF MARCH 11, , 1941 (Lend-Lease Act) LETTER FROM THE PRESIDENT TRANSMITTING REPORT UNITED STATES GOVERNMENT PRINTING OFFICE WASHINGTON 1941 V LETTER OF TRANSMITTAL To the Congress of the United States. Section 5 (b) of Public Law No. 11, Seventy-seventh Congress, approved by me on March 11, 1941, provides in part as follows: "The President from time to time, but not less frequently than once every ninety days, shall transmit to the Congress a report of operations under this Act except such information as he deems incompatible with the public interest to disclose." In compliance with this provision, I am submitting this report. We have supplied, and we will supply, planes, guns, ammunition. and other defense articles in ever increasing quantities to Britain, China, and other democracies resisting aggression. Wars are not won by guns alone, but wars are not won without guns. We all know this full well now. Beginning with the outbreak of the war. the American public began to realize that it was in our own national interest and security to help Britain, China, and the other democratic nations. Beginning with the outbreak of the war, British and French orders began to be placed. But dollars could not be immediately turned into airplanes and ships and guns and ammunition. In those dark days when France was falling, it was clear that this Government. to carry out the will of the people, had to render aid over and above the matériel coming off the assembly line. This Government. therefore, made available all that it possibly could out of its surplus stocks of munitions. In June of 1940, the British Government received from our surplus stocks rifles, machine guns, field artillery. ammunition, and aircraft in a value of more than 43 million dollars This was equipment that would have taken months and months to produce and which, with the exception of the aircraft. cost about 300 million dollars to produce during the World War period. Most of this matériel would not have been usable if we had kept it much longer. This equipment arrived in Britain after the retreat from Dunkirk. where the British had lost great quantities of guns and other military supplies. No one can appraise what effect the delivery of these supplies had upon the successful British resistance in the summer and fall of 1940 when they were fighting against such terrific odds. 111 IV V Since June 1940, this Government has continued to supply war matériel from its surplus stocks, in addition to the matériel produced by private manufacturers. The 50 over-age destroyers which Britain received in exchange for the defense bases were a part of the aid Millions of pounds of food are being and will be sent. Iron and steel, machine tools, and the other essentials to maintain and increase the production of war materials in Britain are being sent and received in larger quantities day by day. supplied by the Government. Since September 1939, the war goods sent to Britain have risen By the turn of the year 1941, the British commitments in this country for defense articles had reached the limit of their future steadily. The over-all total exports to the British Empire have dollar resources. Their striking power required the assurance that their munitions and equipment would steadily and certainly be aug- increase of those things which are necessary for fighting have increased greatly increased in 1941 over 1940. What is more important, the far beyond our other exports. In the first five months of this year, we have sent more than twelve times as many airplanes to Britain as we did in the first five months of 1940. And as the rate of aircraft production increases, relatively more and more heavy bombers and mented, not curtailed. The will of our people, as expressed through the Congress, was to meet this problem, not only by the passage of the Lend-Lease Act, but by the appropriation of 7 billion dollars made on March 27th of this year to carry out this task. In the ninety days since the Lend-Lease Act was passed, and in the seventy-four days since the funds were appropriated, we have started in motion the vast supply program which is essential to the defeat of the axis powers. In these seventy-four days, more than 41/4 billion dollars out of the 7 billion dollars have been allocated to the War, Navy, Agriculture, and Treasury Departments and to the Maritime Commission to pro- medium bombers are being sent. At the same time, we have sent more than ten times as many aircraft engines in the first five months of 1941 as we did in the first five months of 1940. For the first four months of this year, the dollar value of explosives sent to the British Empire was about seventeen times as much as for the first four months of 1940. Ninety times as much in dollar value of firearms and ammunition was sent to Britain during the first four months of this year as for the first four months of 1940. With our natural resources, our productive capacity, and the genius of our people for mass production, we will help Britain to outstrip the axis powers in munitions of war, and we will see to it that these cure the aid authorized. Contracts have been let for long-range bombers, ships, tanks, and the other sinews of war that will be needed for the defense of the democracies. The balance of less than 23/4 billion is being rapidly allocated. To be effective, the aid rendered by us must be many-sided. Ships are necessary to carry the munitions and the food. We are immediately making available to Britain 2 million gross tons of cargo ships and oil tankers. But this is not enough. Adequate shipping for every day to come must be reasonably assured. Since the Appropriation Act was passed, 550 million dollars has been allocated for the construction of new ships under the Lend-Lease Act. Contracts have been let and the new ways required to build these ships are now nearing completion. Allied ships are being repaired by us. Allied ships are being equipped by us to protect them from mines, and are being armed by us to protect them as much as possible against raiders. Naval vessels of Britain are being repaired by us so that they can return quickly to their naval tasks. The training program of seven thousand British pilots in our schools in this country is under way. Valuable information is being communicated, and other material assistance is being rendered in a mounting benefit to the democracies. ) munitions get to the places where they can be effectively used to weaken and defeat the aggressors. In the report that follows, facts and figures are given to the extent advisable without disclosing military secrets to benefit the axis powers. These facts describe the past and portray the present status of our aid to those nations so gallantly fighting the aggressors. They do not present the most important fact of all-the strong will of our people to see to it that these forces of aggression shall not rule the world. We have before us a constant purpose not of present safety alone but, equally, of future survival. FRANKLIN D. ROOSEVELT. THE WHITE HOUSE, June 10, 1941. ) CONTENTS Page Chapter I. Summary of Lend-Lease Legislation 1 Chapter II. Operations 4 1. General 4 2. Summary of lend-lease operations 6 ) Chapter III. Agreements and Assurances 13 1 Chapter IV. Organization and Procedure 14 Appendix 17 VII FIRST REPORT UNDER THE ACT OF MARCH 11, 1941 (LEND-LEASE ACT) CHAPTER I SUMMARY OF LEND-LEASE LEGISLATION 1. THE LEND-LEASE ACT Ninety days ago, the Congress enacted the Lend-Lease Act-the Act of March 11, 1941. The main object of this Act is to promote the defense of the United States by supplying material aid to those nations whose defense is vital to our defense. Unlike prior methods, it focuses directly on the aid to be rendered rather than upon the dollar sign ultimately to be translated into war material. The material aid which can be rendered under the Act is of several kinds. Guns, tanks, planes and other defense articles in stock or procured from appropriations made prior to March 11, 1941, can be lend-leased or otherwise disposed of after consultation with the Chief of Staff of the Army or the Chief of Naval Operations of the Navy, or both, to the extent of $1,300,000,000. Defense information-plans, specifications or other information-relating to defense articles turned over can be communicated to those nations resisting the aggressors. Plants can be erected or expanded, and defense articles can be manufactured or procured on behalf of such foreign nations when Congress authorizes it or appropriates the necessary funds. Ships and other defense articles can be repaired, tested, inspected or put into good working condition for those foreign nations whose defense is vital to ours when Congress provides the necessary funds or contract authorizations. Protection of our national interest is specifically provided for in the Act by requiring any nation to which defense articles or defense information is transferred to obtain the consent of the President before turning them over to any other foreign nation or anyone not an agent, officer or employee of such government. Protection and furtherance of our own defense is also assured by the Act by reason of the fact that this Government-particularly the A copy of the Act is contained in the Appendix. 1 322965 41 2 War and Navy Departments-controls and merges our own production and procurement program with that on behalf of those nations whose defense vitally affects ours. By a fused production and procurement program based on as high a degree of standardization of our own and foreign specifications as possible, we are in a position sooner to have a productive capacity that can outstrip our potential enemies. By reason of the fact that we retain control of the defense plants and of the defense articles until they are manufactured and ready for disposition, we also safeguard our defense. In the event that our own use of the defense articles procured under the Lend. Lease Act will further our national defense more than disposing of them to those countries whose defense is vital to ours, we can so use them. 3. THE DEFENSE AID APPROPRIATION ACT Seventy-four days ago, the Congress enacted the Defense Aid Sup- plemental Appropriation Act-the Act of March 27, 1941. This Act appropriated $7,000,000,000 to carry out those provisions of the organic Lend-Lease Act which require additional Congressional authority or appropriations. In the main these funds were appropriated for: The construction or expansion of plant facilities to manufacture or repair, test, or prove defense articles on behalf of any foreign nation whose defense is vital to ours; the new procurement of guns, aircraft, tanks, vessels, food and other defense articles; and the services and expenses necessary to carry out the Lend-Lease Act. The organic Lend-Lease Act empowers the President, when Congress appropriates the requisite funds, to execute these powers of plant con- struction, repairing and new procurement through the Secretary of War, the Secretary of the Navy or the head of any other department or agency concerned. The Appropriation Act contemplates that the President will allocate the necessary funds to those departments and agencies of the Government, such as the War, Navy and Agriculture Departments, the Maritime Commission and the Procurement Division of the Treasury Department, most experienced in procuring the particular defense articles desired. Power is given to the President by the Appropriation Act to reimburse to the extent of $1,300,000,000 those departments and agencies which dispose under the Lend-Lease Act of defense articles procured from appropriations made prior to March 11, 1941. Power is also given to the President to turn over to the War, Navy or any other department or agency of the United States Government any defense article procured out of the 7 billion dollar appropriation if he deems it in the interest of our defense to do so. A copy of this Act is contained In the Appendix 3 3. LEND-LEASE PRIORITIES-THE VINSON BILL The Lend-Lease Act provided for the placement of all orders for defense articles by the War and Navy Departments and such other departments and agencies of the United States Government as are designated by the President. The orders placed by the Army and Navy-by far the major part of the orders to be placed under the LendLease Act-could doubtless have been given statutory priority over all deliveries for private account or for export under the Act of June 28, 1940 (Public No. 671-76th Congress). To eliminate any doubt on this score and to enable regular defense and lend-lease orders of the other departments and agencies of the Government, such as the Maritime Commission, the Coast Guard, the Procurement Division of the Treasury Department, etc., to have statu- tory priority, the Congress enacted the Vinson Priorities Bill (Act of May 31, 1941, Public No. 89-77th Congress). At the present time, therefore, all lend-lease orders can be given statutory priority. A copy of this Act is contained in the Appendix 5 UNITED STATES EXPORTS TO THE BRITISH EMPIRE AND EGYPT CHAPTER II DOLLARS Millions It should be noted that lend-lease orders placed now with deliveries coming in the future are the necessary complement to the British orders placed last year, the deliveries from which are the principal source of British exports. These current exports, however, must be 240 A A British Empire 200 United Kingdom 200 160 160 120 120 80 maintained and increased by whatever defense articles can be released 80 40 40 0 D from Army and Navy stocks, as well as by the release of equipment from the production lines of tomorrow. Since September of 1939 when the war started, the United States has played an ever increasingly active part in helping the United Kingdom and its allies to secure planes, guns, ammunition, and other implements of war. The total exports from the United States to the British Empire have steadily increased during this period. For instance, the total dollar value of all exports to the British Empire for the first quarter of 1941 was nearly two and one-half times the value for the first quarter of 1939 and over half again higher than the value for the same period of 1940. The following table reflects graphically the increase in United States exports to the British Empire, to the British Empire and Egypt, and to the United Kingdom. Egypt 240 D 1. GENERAL Millions 0 OPERATIONS DOLLARS Monthly September 1939 to March 1941 040 193 1940 DOLLARS Billions DOLLARS Brillions Cumulative Monthly September 1939 to March 1941 40 40 36 34 1.2 12 2.8 2.8 2.4 24 To British Empire plus Egypt 4 20 2.0 To All British Empire 16 16 1.2 1.2 . 8 >To United Kingdom 4 4 0 D N 0 1939 1941 1940 including . 0 7 6 2. SUMMARY OF LEND-LEASE OPERATIONS During the period from March 11 to May 31, 1941, inclusive, defense articles of all kinds amounting to a little over $75,000,000 have been transferred under the Lend-Lease Act. Of this total value. about $64,000,000 of defense articles, procured from appropriations made prior to March 11, 1941, and about $11,000,000 of defense articles, procured from appropriations under the Defense Aid Sup. plemental Appropriation Act, were transferred. In connection with the dollar value of articles authorized for transfer. it should be emphasized that in all cases this value is an estimated value and may in many cases represent an approximate evaluation placed upon a specific article after depreciation. obsoles cence, deterioration, etc., have been taken into account. A formal valuation procedure has been established to survey all transfers and determine true valuations. Summary statements of defense articles transferred as of May 31, 1941 appear on the opposite page. 948 8 9 The Lend-Lease Act coupled with the Defense Aid Supplemental Appropriation Act of March 27th made possible the placement of orders on the basis of requirements submitted by those countries the defense of which the President deemed vital to the United States, As of May 31, 1941, over $4,200,000,000 equal to 60 per cent of the $7,000,000,000 appropriated by Congress for lend-lease orders have been allocated for specific purposes. Over 2,000 requisitions setting forth specific requirements have been received for the procurement of defense articles during the period March 11 to June 1, 1941. All requisitions have been carefully studied by those government departments or agencies best qualified to survey them, and allocations have been made by the President on the basis of such departmental or agency recommendations as were approved by the Division of Defense Aid Reports and the Director of the Bureau of the Budget. In addition, allocations amounting to approximately $137,000,000 have been made for facilities necessary to back up the procurement program. The breakdown of the allocations made, by departments and by classifications, are summarized in the following tables: Allocations by departments under the Defense Aid Supplemental Appropriation Act, 1941, as of May 31, 1941 Department or agency War Summary of allocations by appropriations under the Defense Aid Supplemental Appropriation Act, 1941, as of May 31, 1941 Ordnance and ordnance stores Aircraft and aeronautical material Tanks and other vehicles Miscellaneous military equipment Facilities and equipment Agricultural, industrial, and other commodities Testing, reconditioning etc., of defense articles 589, 339,958.00 562, 354,800.00 Treasury 180, 085, 863. 50 Agriculture 54. 886. 305 00 Executive Office of the President 25, 000.00 Office for Emergency Management 100,000.00 Total 4,277,412,879.50 It should be noted in this connection that lend-lease orders, although based on the re- 48,385,880.00 3,042,606.00 Administrative expenses Total 45,574.00 4, 277, 1,412,879.50 Statement of allocations by appropriation and purpose under the Defense Aid Supplemental Appropriation Act, 1941, as of May 31, 1941 Ordnance and ordnance stores: Ammunition Small-arms ammunition Artillery ammunition Aircraft bombs and pyrotechnics Explosives, propellant powders, and miscellaneous ammunition Subtotal Ordnance material: Small arms and infantry weapons Artillery material Antiaircraft material Aircraft armament Miscellaneous fire control Torpedo equipment Mine equipment Miscellaneous ordnance and ordnance stores quirements of a foreign government, are actually United States Government orders and are Subtotal treated the same as any other United States defense contract. Defense articles delivered from lend-lease contracts can only be transferred to the custody of a foreign government with the consent of the President. 137,134,818.00 280,314,697.50 Services and expenses Allocations Navy 318,502,800.00 551,414,140.00 119,172,013.00 Vessels and other watereraft $2,890,620,953.00 Maritime Commission $880,176,863.00 1,938,823,489.00 Unclassified ordnance allocations Total $38, 359, 000. 235, 139, 150. 52,330,000.00 432,194.00 330,260,344.00 81,264,000.00 21,348,550.00 222,063,000.00 164, 601, 250. 5, 257,911.00 647,000.00 8,000,000.00 5,000,000.00 518,181,711.00 31, 734,808.00 880, 176,863.00 Aircraft and aeronautical material: Aircraft Bombardment Pursuit, interceptor, and fighter Transport, utility, and other Training Subtotal 322965-41- 1,396,063,000.00 232,330,000.00 2,640,000 76, 800, 000.0 1, 707, 833, 000.0 10 11 Statement of allocations by appropriation and purpose under the Defense Aid Supplemental Appropriation Act, 1941, as of May 31, 1941-Continued Aircraft and aeronautical material-Continued. 00 Aircraft engines, spare parts, and accessories: Spare engines and engine parts Spare propellers and spare propeller parts. Accessories and other parts Subtotal General aeronautical supplies and equipment Modernization and reconditioning of completed aircraft Unclassified aircraft allocations Total $117,625,014.00 22,060,000.00 10,000,000.00 10,231,868.00 25,000,000.00 46,073,607.00 Tanks and other vehicles: Ordnance vehicles: Other ordnance combat vehicles (except tanks) Miscellaneous ordnance automotive supplies Subtotal 138,810,000.00 80,767,000.00 22,397,000.00 241,974,000.00 Other than ordnance vehicles: Trucks Automobiles Other automotive supplies Miscellaneous automotive supplies Subtotal Unclassified vehicle allocations 46,004,000.00 3,710,200.00 2,055,000.00 8,272,800.00 60,042,000.00 16,486,800.00 318,502,800.00 Total Miscellaneous military equipment, supplies, and material: Quartermaster equipment, supplies, and material Clothing Equipage Kitchen, mess, and field baking equipment Fuel 149,685,014.00 1,938,823,469.00 Tanks Statement of allocations by appropriation and purpose under the Defense Aid Supplemental Appropriation Act, 1941. as of May 31, 1941-Continued Provisions Miscellaneous quartermaster supplies Subtotal Signal equipment. supplies, and material Chemical warfare equipment, supplies, and material Engineer equipment, supplies, and material Aircraft equipment, supplies, and material Unclassified equipment Total Facilities and equipment for production, total Agricultural, industrial, and other commodities Agricultural products-Foodstuffs: Dairy products and eggs Meat, fish. fowl Fruits, vegetables, and nuts Grain and cereal products Lard, fats, and oils Other foodstuffs not classified above Subtotal Agricultural products-Other than foodstuff Vessels and equipment for vessels: Watercraft Combatant Naval auxiliary and small craft Merchant Subtotal Equipage Unclassified vessel allocations Total 12,750,000.00 29,447,000.00 500,011,800.00 542,208,800.00 4,360,140.00 4,645,200.00 551,414,140.00 Machinery, equipment, materials, and supplies: Agricultural implements Road-building equipment, materials, and supplies Electrical equipment. materials, and supplies Fire-fighting equipment, materials, and supplies Other Subtotal Metallic minerals: Iron and steel $1,499,393.00 4,686,804.00 557,335.00 5,164,000.00 600,000.00 9,810,972.00 22,318,504.00 75,592,895.00 5,739,800.00 9,752,394.00 1,668,420.00 4,100,000.00 119,172,013.00 137,134,818.00 31,658,000.00 6,055,400.00 5,960,000.00 3,000,000.00 3,577,000.00 1,543,600.00 51,884,000.00 3,000,000.00 1,258,814.00 2,650,054.00 1,796,480.00 770,000.00 2,781,973.00 9,257,321.00 95,314,000.00 Copper and brass 15,925,000.00 Zinc 20,907,500.00 Lead Other metals and alloys Subtotal 936,000.00 2. 712,096.00 135. 7,494,596. CHAPTER III 12 AGREEMENTS AND ASSURANCES Statement of allocations by appropriation and purpose under the Defense Aid Supplemental Appropriation Act, 1941, as of May 31, 1941-Continued Section 4 of the Lend-Lease Act provides as follows: Agricultural, Industrial, and other commodities Continued Nonmetallic minerals: Nitrates $500,000.00 Phosphates 750,000.00 Subtotal 1,250,000.00 Petroleum and coal products Miscellaneous and unclassified equipment and materials Total All contracts or agreements made for the disposition of any defense article or defense information pursuant to section 3 shall contain a clause by which the foreign government undertakes that it will not, without the consent of the Prestdent, transfer title to or possession of such defense article or defense information by gift, sale, or otherwise, or permit its use by anyone not an officer, employee, or agent of such foreign government. 2,898,400.00 76,230,380.50 Section 7 of the Lend-Lease Act provides as follows: 280,314,697.50 The Secretary of War, the Secretary of the Navy, and the head of the department or agency shall in all contracts or agreements for the disposition of any defense article or defense information fully protect the rights of all citizens of the United States who have patent rights In and to any such article or information which is hereby authorized to be disposed of and the payments collected for royalties on such patents shall be paid to the owners and holders of such Testing, reconditioning etc., of defense articles: Servicing of defense articles: Vessels 26,856,000.00 Stores, etc 13,918,880.00 Subtotal 40,774,880.00 Unclassified services patents 7,611,000.00 Before any defense articles were transferred, the Ambassador or the 48,385,880.00 duly accredited officer of the foreign government receiving the de- Services and expenses Administrative expenses 3,042,605.00 Grand total 77,412,879.50 fense articles was required to make the necessary agreement and give the requisite assurances that his government would comply with Sections 4 and 7 of the Act of March 11, 1941. These agreements and assurances provide in substance that no defense article or defense information received by the foreign nation under the Lend-Lease Act will be turned over to anyone not an agent, officer or employee of such Total 445,574.00 ) government without first obtaining the consent of the President. These agreements also provide that when called upon to do so by the United States they will take the requisite steps and make such payments as are necessary to protect the rights of American patent holders as provided in Section 7. Section 3 (b) of the Lend-Lease Act provides as follows: The terms and conditions upon which any such foreign government receives any aid authorized under subsection (a) shall be those which the President deems satisfactory, and the benefit to the United States may be payment or repayment in kind or property or any other direct or indirect benefit which the President deems satisfactory. Work has started on the agreements to fix the terms and conditions, under Section 3 (b), upon which the foreign governments receive the aid. 13 15 CHAPTER IV Reports falls normally into six categories-namely, processing of requirements, fiscal accounts, statistical operations, transportation ORGANIZATION AND PROCEDURE coordination, liaison between governmental agencies and foreign governments, and legal problems. In addition, because of the complex problems which arise, it is becoming increasingly necessary to utilize the services of special analysts and attorneys to devote full time to studying the varied and complicated ramifications of the defense aid On May 2, 1941, the President issued an Executive Order establishing the Division of Defense Aid Reports in the Office for Emergency Management of the Executive Office of the President. In accordance with this order, the President subsequently, on May 6th, designated by military order an Executive Officer of the Division of Defense Aid Reports to administer the functions described in the Executive Order. program. The first step in the furnishing of defense aid to a foreign government must necessarily be the determination of specific requirements. In most instances, such a determination requires a series of conferences It was specifically provided in the Order of May 2nd that the Division of Defense Aid Reports should provide a central channel for the clearance of transactions and reports; that it should coordinate the processing of requests for aid under the Lend-Lease Act; that it should maintain a system of reports and accounts, approved by the Bureau of the Budget; and that it should serve as a clearing house of information for agencies participating in the lend-lease program. Although its formal organization was not established until May 2nd, approximately six weeks after the passage of the Lend-Lease and negotiations between the military and technical representatives of the department or agency of the United States Government which is best qualified to deal with any specific purchasing program. To expedite this determination of requirements, the War Department, for instance, has instituted a Division of Defense Aid in the office of the Under Secretary of War. In addition, the War Department established Defense Aid Requirements Committees which included in their membership representatives of foreign governments receiving defense aid. In the case of the other procuring agencies, similar steps have been taken to expedite the flow of defense aid and to Act, defense aid operations were carried on during that interim maintain adequate records of defense aid transactions. period by the group which had performed the administrative fune- tions of the President's Liaison Committee for the coordination of foreign and domestic military purchases during the preceding twelve months. Under the Lend-Lease Act, actual purchasing operations are conducted by the various governmental departments or agencies best qualified to do any specific procurement job. Actual procurement negotiations are carried on by each department operating in its own field in the same manner and in the same way as negotiations are carried out for any defense contract. Up to the present time, the War Department, the Navy Department, the Treasury Department, the Department of Agriculture, and the Maritime Commission have all participated directly as procurement agencies under the Lend-Lease Act. In addition, the Office of Production Management, the Department of Commerce, the Department of State, the Department of Justice, and the Department of Interior have all contributed to the defense aid program in an advisory capacity. The Division of Defense Aid Reports serves as a channel for the processing of defense aid requests, as a control point for the coordination of such requests, and as a repository for the over-all records and accounts required by law. The work of the Division of Defense Aid Copy of this Executive Order is contained In the Appendix. 14 ( In order that the Division of Defense Aid Reports might adequately perform its functions, every foreign government desiring defense aid under the provisions of the Lend-Lease Act has been requested to submit to the Division formal signed requisitions for specific defense articles or defense services. These requests are prepared on standard requisition forms and submitted to the Division of Defense Aid Reports from which they are forwarded to the procuring agency of the United States Government best qualified to make a recommendation as to whether the specific item should be supplied. When these requisitions are received by a procuring agency, they are studied from the point of view as to whether the items called for can be supplied from stock on hand, whether they can be diverted from existing contracts, or whether they will have to be ordered for future delivery. The recommendation of the Department with respect to every requisition is forwarded to the Division of Defense Aid Reports for further processing and approval. The detailed organization of War Department defense aid operations is contained in the Appendix, A standard requisition form is contained in the Appendix. 'A standard recommendation form is contained in the Appendix. 16 If a specific item to be supplied can be released from stock or diverted from contracts placed with appropriations made prior to March 11, 1941, the Division of Defense Aid Reports secures a Presj. dential directive authorizing the agency in question to transfer the defense articles to the foreign government. If the item recommended to be supplied involves the placement of a new order, it is the responsibility of the Division, if it approves, to secure an allocation of funds so that the procuring agency may actually place the contract. It should be noted, however, that an allocation of funds for the placement of a defense aid contract may not necessarily include the power to transfer the defense articles produced to the foreign government which filed the original requisition. In order that proper accounting and fiscal reports may be compiled, a fiscal unit was established in the Division and a system for financial defense aid reports initiated, which has the approval of the President, the Secretary of the Treasury, the Comptroller-General and the Director of the Bureau of the Budget. These records reflect every angle of defense aid financial operations, expressed both in terms of dollars and in terms of quantities. Specific records cover the status of appropriations, the acquisition and disposition of defense articles, defense aid services, defense aid facilities, the consideration received from foreign governments, and the receipts for defense articles transferred to foreign governments. Complete financial and accounting reports are received from all the procuring agencies semimonthly and are used as one of the bases for compiling the operating reports of the Division. In addition to the standard forms for requisitions and recommendations and in addition to the specified fiscal and accounting reports, individual case histories of requisitions are being compiled. These case histories provide a complete historical record of each specific item, and a controlling system for the coordination of requirements and programs, procurement between purchasing agencies, procurement between foreign governments, and for expediting action on recommendations, the placement of orders and the delivery of goods. The great mass of detailed information contained in the various operating forms, in the case histories, and in the fiscal reports are summarized by an operations analysis unit. These statistical summaries are compiled on a current basis and are used for controlling APPENDIX internal operations and for providing complete information on defense aid operations. 17 THE LEND-LEASE ACT [PUBLIC LAW 11-77TH CONGRESS] [CHAPTER 11-18T SESSION] [H. R. 1776 AN ACT Further to promote the defense of the United States, and for other purposes Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled. That this Act may be cited as "An Act to Promote the Defense of the United States". SEC. 2. As used in this Act(a) The term " defense article" means(1) Any weapon, munition, aircraft, vessel, or boat; (2) Any machinery, facility, tool, material, or supply necessary for the manufacture, production, processing, repair, servicing. or operation of any article described in this subsection; (3) Any component material or part of or equipment for any article described in this subsection: (4) Any agricultural, industrial or other commodity or article for defense. Such term "defense article" includes any article described in this subsection: Manufactured or procured pursuant to section 3. or to which the United States or any foreign government has or hereafter acquires title, possession, or control. (b) The term "defense information" means any plan, specification, design, prototype, or information pertaining to any defense article. SEC. 3. (a) Notwithstanding the provisions of any other law, the President may, from time to time, when he deems it in the interest of national defense, authorize the Secretary of War, the Secretary of the Navy, or the head of any other department or agency of the Government- (1) To manufacture in arsenals, factories, and shipyards un- der their jurisdiction, or otherwise procure, to the extent to which funds are made available therefor, or contracts are authorized from time to time by the Congress, or both. any defense article for the government of any country whose defense the President deems vital to the defense of the United States. (2) To sell, transfer title to, exchange, lease, lend. or otherwise dispose of, to any such government any defense article, but no defense article not manufactured or procured under paragraph (1) shall in any way be disposed of under this paragraph, except after consultation with the Chief of Staff of the Army or the Chief of Naval Operations of the Navy, or both. The value of defense articles disposed of in any way under authority of this 19 20 21 paragraph, and procured from funds heretofore appropriated, is shall not exceed $1,300,000,000. The value of such defense articles shall be determined by the head of the department or agency con- cerned or such other department, agency or officer as shall be designated in the manner provided in the rules and regulations issued hereunder. Defense articles procured from funds hereafter appropriated to any department or agency of the Government, other than from funds authorized to be appropriated under this Act, shall not be disposed of in any way under authority of this paragraph except to the extent hereafter authorized by the Congress in the Acts appropriating such funds or otherwise. (3) To test, inspect, prove, repair, outfit, recondition, or otherwise to place in good working order, to the extent to which funds are made available therefor, or contracts are authorized from time to time by the Congress, or both, any defense article for any such government, or to procure any or all such services by private contract. operations under this Act except such information as he deems incom- patible with the public interest to disclose. Reports provided for under this subsection shall be transmitted to the Secretary of the Senate or the Clerk of the House of Representatives, as the case may be, if the Senate or the House of Representatives, as the case may be, is not in session. SEC. 6. (a) There is hereby authorized to be appropriated from time to time, out of any money in the Treasury not otherwise appropriated, such amounts as may be necessary to carry out the provisions and accomplish the purposes of this Act. (b) All money and all property which is converted into money (4) To communicate to any such government any defense information, pertaining to any defense article furnished to such government under paragraph (2) of this subsection. (5) To release for export any defense article disposed of in any way under this subsection to any such government. (b) The terms and conditions upon which any such foreign government receives any aid authorized under subsection (a) shall be those which the President deems satisfactory, and the benefit to the United States may be payment or repayment in kind or property, or any other direct or indirect benefit which the President deems satisfactory. received under section 3 from any government shall, with the approval of the Director of the Budget. revert to the respective appropriation or appropriations out of which funds were expended with respect to the defense article or defense information for which such consideration is received, and shall be available for expenditure for the purpose for which such expended funds were appropriated by law, during the fiscal year in which such funds are received and the ensuing fiscal year; but in no event shall any funds so received be available for (c) After June 30, 1943, or after the passage of a concurrent resolution by the two Houses before June 30, 1943, which declares that the powers conferred by or pursuant to subsection (a) are no longer necessary to promote the defense of the United States, neither the President nor the head of any department or agency shall exercise any of the powers conferred by or pursuant to subsection (a) except that until July 1, 1946, any of such powers may be exercised to the extent necessary to carry out a contract or agreement with such a foreign government made before July 1, 1943, or before the passage of such concurrent resolution, whichever is the earlier. (d) Nothing in this Act shall be construed to authorize or to permit the authorization of convoying vessels by naval vessels of the United States. (e) Nothing in this Act shall be construed to authorize or to per- mit the authorization of the entry of any American vessel into a combat area in violation of section 3 of the Neutrality Act of 1939. SEC. 4. All contracts or agreements made for the disposition of any defense article or defense information pursuant to section 3 shall contain a clause by which the foreign government undertakes that it will not, without the consent of the President, transfer title to or possession of such defense article or defense information by gift, sale, or otherwise, or permit its use by anyone not an officer, employee, or agent of such foreign government. SEC. 5. (a) The Secretary of War, the Secretary of the Navy, or the head of any other department or agency of the Government involved shall, when any such defense article or defense information exported, immediately inform the department or agency designated by the President to administer section 6 of the Act of July 2, 1940 (54 Stat. 714), of the quantities, character, value, terms of disposition, and destination of the article and information so exported. (b) The President from time to time, but not less frequently than once every ninety days, shall transmit to the Congress a report of ( expenditure after June 30, 1946. SEC. 7. The Secretary of War, the Secretary of the Navy, and the head of the department or agency shall in all contracts or agreements for the disposition of any defense article or defense information fully protect the rights of all citizens of the United States who have patent rights in and to any such article or information which is hereby authorized to be disposed of and the payments collected for royalties on such patents shall be paid to the owners and holders of such patents. SEC. 8. The Secretaries of War and of the Navy are hereby authorized to purchase or otherwise acquire arms, ammunition, and implements of war produced within the jurisdiction of any country to which section 3 is applicable, whenever the President deems such purchase or acquisition to be necessary in the interests of the defense of the United States. SEC. 9. The President may, from time to time, promulgate such rules and regulations as may be necessary and proper to carry out any of the provisions of this Act; and he may exercise any power or authority conferred on him by this Act through such department, agency, or officer as he shall direct. SEC. 10.- Nothing in this Act shall be construed to change existing law relating to the use of the land and naval forces of the United States, except insofar as such use relates to the manufacture, procurement, and repair of defense articles, the communication of information and other noncombatant purposes enumerated in this Act. SEC. 11. If any provision of this Act or the application of such provision to any circumstance shall be held invalid, the validity of the remainder of the Act and the applicability of such provision to other circumstances shall not be affected thereby. Approved, March 11, 1941. 23 (d) For necessary services and expenses for carrying out the pur- DEFENSE AID SUPPLEMENTAL APPROPRIATION ACT, 1941 poses of such Act not specified or included in the foregoing, $40,000,000. (e) For administrative expenses, $10,000,000. (f) In all, $7,000,000,000, to remain available until June 30, 1943. [PUBLIC LAW 23-77TH CONGRESS] SEC. 2. If any defense article procured from an appropriation made before March 11, 1941, is disposed of, under such Act of March 11, 1941, by any department or agency to the government of any country whose defense the President deemed vital to the defense of the United States, the President may transfer, from the [CHAPTER 30-1st SESSION] (H, R. 4050] AN ACT appropriations made by this Act to the appropriate appropriation of such department or agency, an amount equivalent to the value (as computed for the purposes of the $1,300,000,000 limitation contained in section 8 (a) (2) of such Act of March 11, 1941) of the defense Making supplemental appropriations for the national defense to provide aid to the government of any country whose defense the President deems vital to the defense of the United States, and for other purposes. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That to enable the President, through such departments or agencies of the Government as he may designate, to carry out the provisions of An Act to Promote the Defense of the United States, approved March 11, 1941, and for each and every purpose incident to or necessary therefor, there is article so disposed of, but not to exceed in the aggregate $1,300,000,000. SEC. 3. Any defense article procured from an appropriation made by this Act shall be retained by or transferred to and for the use hereby appropriated, out of any money in the Treasury not otherwise appropriated, the following sums for the following respective purposes, namely: (a) For the procurement, by manufacture or otherwise, of defense articles for the government of any country whose defense the President deems vital to the defense of the United States, including services and expenses in connection therewith, as follows: (1) Ordnance and ordnance stores, supplies, spare parts, and mate- rials, including armor and ammunition and components thereof, $1,343,000,000. (2) Aircraft and aeronautical material, including engines, spare parts, and accessories, $2,054,000,000. (3) Tanks, armored cars, automobiles, trucks, and other automotive vehicles, spare parts, and accessories, $362,000,000. (4) Vessels, ships, boats, and other watercraft, and equipage, supplies, materials, spare parts, and accessories, $629,000,000. (5) Miscellaneous military equipment, supplies, and materials, $260,000,000. (6) Facilities and equipment, for the manufacture or production of defense articles, by construction or acquisition, including the acquisition of land, and the maintenance and operation of such facilities and equipment, $752,000,000. (7) Agricultural, industrial, and other commodities and articles, $1,350,000,000. (b) For testing, inspecting, proving. repairing, outfitting, reconditioning, or otherwise placing in good working order any defense articles for the government of any country whose defense the Presi- dent deems vital to the defense of the United States, Including services and expenses in connection therewith, $200,000,000. (c) Not to exceed 20 per centum of any of the foregoing eight appropriations may be transferred by the President to any other such appropriation, but no appropriation shall be increased by more than 30 per centum. 22 ( of such department or agency of the United States as the President may determine, in lieu of being disposed of to a foreign government, whenever in the judgment of the President the defense of the United States will be best served thereby. SEC. 4. No part of any appropriation contained in this Act shall be used to pay the salary or wages of any person who advocates, or who is a member of an organization that advocates, the overthrow of the Government of the United States by force or violence: Provided, That for the purposes hereof an affidavit shall be considered prima facie evidence that the person making the affidavit does not advocate, and is not a member of an organization that advocates, the overthrow of the Government of the United States by force or violence Provided further, That any person who advocates, or who is a member of an organization that advocates, the overthrow of the Government of the United States by force or violence and accepts employment the salary or wages for which are paid from any appropriation in this Act shall be guilty of a felony and, upon conviction, shall be fined not more than $1,000 or imprisoned for not more than one year, or both: Provided further, That the above penalty clause shall be in addition to, and not in substitution for, any other provisions of existing law. SEC. 5. This Act may be cited as the "Defense Aid Supplemental Appropriation Act, 1941". Approved, March 27, 1941, 10:50 a. m., E. S. T. VINSON PRIORITIES ACT EXECUTIVE ORDER [PUBLIC LAW 89-77TH CONGRESS ESTABLISHING THE DIVISION OF DEFENSE AID REPORTS IN THE OFFICE FOR EMERGENCY MANAGEMENT OF THE EXECUTIVE OFFICE OF THE [CHAPTER 157-18T SESSION] PRESIDENT [H. R. 4534] By virtue of the authority vested in me by the Constitution and Statutes and by the Act of March 11, 1941, entitled "An Act to Promote the Defense of the United States" (hereafter referred to as the Act), in order to define further the functions and duties of the Office for Emergency Management of the Executive Office of AN ACT To amend the Act approved June 28, 1940, entitled "An Act to expedite the national defense, and for other purposes", in order to extend the power to establish priorities and allocate material. the President in respect to the national emergency as declared by the President on September 8, 1939, and in order to provide for the effective administration of said Act in the interest of national defense, it is hereby ordered as follows: 1. There is established within the Office for Emergency Management of the Executive Office of the President the Division of Defense Aid Reports, at the head of which shall be an Executive Officer Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That section 2 of the Act approved June 28, 1940 (Public, Numbered 671, Seventy-sixth Congress), as amended, is amended by inserting "(1)" after "SEC. 2. (a)" and by adding at the end of subsection (a) thereof the following: (2) Deliveries of material to which priority may be assigned pursuant to paragraph (1) shall include, in addition to deliveries appointed by the President. The Executive Officer shall receive compensation at such rate as the President shall approve and, in addition, shall be entitled to actual and necessary transportation, subsistence, and other expenses incidental to the performance of of material under contracts or orders of the Army or Navy, deliveries of material under- his duties. "(A) contracts or orders for the Government of any country whose defense the President deems vital to the defense of the United States under the terms of the Act of March 11, 1941, entitled 'An Act to promote the defense of the United States': 2. Subject to such policies and directions as the President may from time to time prescribe, the Division of Defense Aid Reports shall perform and discharge the following described duties and responsibilities: "(B) contracts or orders which the President shall deem necessary or appropriate to promote the defense of the United States; a. Provide a central channel for the clearance of transactions and reports, and coordinate the processing or requests for aid under and "(C) subcontracts or suborders which the President shall deem necessary or appropriate to the fulfillment of any contract or order as specified in this section. Deliveries under any contract or order specified in this section may be assigned priority over deliveries under any other contract or order. Whenever the President is satisfied that the fulfillment of require- ments for the defense of the United States will result in a shortage in the supply of any material for defense or for private account or for export, the President may allocate such material in such manner and to such extent as he shall deem necessary or appropriate in the public interest and to promote the national defense. The President shall be entitled to obtain such information from, require such reports by, and make such inspection of the premises of, any person, firm, or corporation as may be necessary or appropriate, in his discretion, to the enforcement or administration of the provisions of this section. No person, firm, or corporation shall be held liable for damages or penalties for any default under any contract or order which shall result directly or indirectly from his compliance with any rule, regulation, or order issued under this section. The President may exercise any power, authority, or discretion conferred on him by this section, through such department, agency, or officer of the Gov- ernment as he may direct and in conformity with any rules and ( the Act. b. Maintain such system of records and summary accounts to be approved by the Bureau of the Budget, as may be necessary for adequate administrative and financial control over operations under the Act and as will currently reflect the status of all such operations. c. Prepare such reports as may be necessary to keep the President informed of progress under the Act: assist in the preparation of reports pursuant to Section 5b of the Act: and serve generally as a clearing house of information for agencies participating in the program. d. Perform such other duties relating to defense aid activities as the President may from time to time prescribe. 3. Within the limitation of such funds as may be allocated for the Division of Defense Aid Reports by the President. the Executive Officer may employ necessary personnel and make provision for the necessary supplies, facilities. and services. In so far as practicable, the Division of Defense Aid Reports shall use such general business services and facilities as may be made available to it through the Office for Emergency Management or other agencies of the Government. FRANKLIN D. ROOSEVELT THE WHITE HOUSE, May 2, 1941. regulations which he may prescribe." Approved, May 31, 1941. 25 24 WAR DEPARTMENT THE ADJUTANT GENERAL'S OFFICE WASHINGTON MILITARY ORDER AG 020.1 (3-29-41) M-M By virtue of the authority vested in me as President of the United States and as Commander in Chief of the Army and Navy of the APRIL 10, 1941. Subject: Procedure Under the Lend-Lease Act. To: The Chiefs of Arms and Services and the Divisions of the War Department General Staff. United States, I hereby designate Major General James H. Burns, of the United States Army, as Executive Officer of the Division of Defense Aid Reports in the Office for Emergency Management, to administer the functions described in the Executive Order establishing said Division, which functions are essentially of a military character, under the direction and supervision of the President as Commander in Chief of the Army and Navy of the United States. FRANKLIN D. ROOSEVELT The following letter from the Secretary of War is quoted for your information and guidance: 1. The Act of March 11. 1941 (Lend-Lense Act) Imposes heavy responsibilities on the War Department which must be met with promptness and dispatch if the purposes of the Congress and the orders of the President are to be consummated Strategic results affecting the defense of this country may depend upon the speed THE WHITE HOUSE, May 6. 1941 with which this Act Is administered in the Department. I therefore desire to impress upon all concerned the necessity for prompt action in all matters relating to the Act. ( 2 Every effort has been made to set up the administration of this Act in the Department so as to apply to the lend-lease program the normal procedure of our procurement agencies. I am confident that our present organization. in ereased by the augmentation of such personnel as may be necessary can fully meet the additional responsibilities to be Imposed upon it. It appears necessary. however, to set up In the Office of the Under Secretary of War a division to be called the Defense Aid Division with duties as shown in Exhibit 1 herewith and I have, accordingly, directed that such an organization be created This division will be concerned mainly with the coordination and acceleration of all phases of the lend-lease program within the Department. It is my desire that all papers pertaining to the program be handled in the "immediate action" category. 3. Attached hereto as Exhibit 2 is an outline of the routine which will, in general, be followed within the War Department The desired budgetary procedure is shown in Exhibit 3. 4. To deal with questions of substance which we can foresee will arise under the Act. Defense Aid Committees, whose functions are set forth in Exhibit 4. will be organized. No new committee has been set up for aircraft inasmuch as the Joint Aircraft Committee, which has heretofore been in operation, is In a position to perform the functions prescribed for the Defense Aid Committees in Exhibits 3 and 4 and, subject to the principles and procedure outlined in such Exhibits, the War Department members of the Joint Aircraft Committee are hereby empowered, in addition to the powers heretofore exercised by them on the Joint Aircraft Committee to perform with the British, or other representatives concerned, the functions of the Defense Aid Committees. 5. War Department agencies are authorized to issue necessary regulations not inconsistent with the policies outlined herein. to administer their activities under the Act. 6. Close contacts between the personnel of the War Department and the ac. credited foreign representatives concerned with transactions under the Act shall be sought and encouraged at all times 7. The organization herein provided for is solely designed to expedite. not to complicate. the work of the existing procurement agencies. It is always sub, cet to change if in the light of experience it does not fulfill its function (8) HENRY L. STIMSON. Secretary of War. By ORDER OF THE SECRETARY OF WAR: J. A. ULIO. 202 Brigadier General, Acting The Adjutant General. 27 [EXHIBIT 1] 29 HAN OFFICE ORDER: APRIL 8, 1941, 1. In order to coordinate the functioning of the War Department in its relation to the Act of March 11, 1941 (Public 11, 77th Congress), there created a division in Aid the Division. office of the Under Secretary of Waristohereby be known as the Defense n. To maintain the office of record for all transactions of the War Department under the Act of March 11, 1941. O. To furnish such statistical unformation as may be required, in collaboration War. with the Statistics Branch, Office Under Secretary of 2. The duties of the Defense Aid Division will be as follows: a. To maintain liaison on matters relating to the Act of March 11, 1941, with the following: To participate in the functions of the Joint Advisory Board onp. American Republics. (1) Such agency or agencies as may be designated by the President to administer the Act. (2) Other government agencies. (3) Foreign governments. March 11, 1941, as may be prescribed by the Under Secretary of War. (4) Arms and Services of the War Department and the War Department General Staff. b. To coordinate requests for aid from foreign governments with interested agencies of the War Department. c. To coordinate the procurement under appropriations provided to implement the Act, in collaboration with the Production Branch and the Purchase and Contracts Branch, Office of the Under Secretary of War: G-4 Division War Department General Staff; and the Office of Production Management. d. To coordinate the distribution of the items to foreign govern- ments, in collaboration with the G-4 Division, War Department General Staff. e. To coordinate the activities authorized in Section 3 (a) (3) of the Act, in collaboration with the interested agencies of the War Department. f. To supply foreign governments with defense information pertaining to defense articles, in collaboration with the G-2 Division of the War Department General Staff. g. To report to the Administrator of Export Control the defense articles and defense information released to foreign governments. h To furnish information concerning the transactions of the War Department to the agency designated by the President for the preparation of the quarterly report required by the Act of March 11, 1941. i. To coordinate importation of arms, ammunition, and implements of war. j. To initiate requests for priorities for materials, equipment, and machine tools for foreign orders for military equipment and supplies through the Priorities Committee, Army and Navy Munitions Board, and the Priorities Administrator, Office of Production Management. k. To clear preliminary negotiation reports for procurement of military equipment and supplies for foreign governments other than beneficiaries of the Act of March 11, 1941. 1. To prepare staff action for the approval of the Secretary of War, on all matters pertaining to the Act. m. To clear items for export on the basis of military secrecy, in collaboration with the G-2 Division of the War Department General Staff. 28 q. To discharge such additional duties pertaining to the Act of 3. To provide personnel for the Defense Aid Division, I hereby transfer the commissioned and civilian personnel of the Army Section, Clearance Army and Navy Munitions Board, to the Defense Aid Committee, Division. (S) HENRY L. STIMSON, Secretary of War. EXHIBIT 21 [EXHIBIT 3] OUTLINE OF WAR DEPARTMENT PROCEDURE-LEND LEASE ACT OUTLINE OF BUDGETARY PROCEDURE UNDER LENDLEASE ACT WAR DEPARTMENT ACTION WAR DEPARTMENT 1. Requests for assistance received from foreign governments whose defense is deemed vital to the defense of the United States under the terms of the Act, to be referred to the Secretary of War. Upon receipt of approved expenditure programs or requests for services in the Defense Aid Division of the Office of the Under Secretary of War, they will be transmitted to the Budget Officer of the War Department who will make application for allocations to the War Department of the necessary funds for the approved purposes. Upon receipt of such allocations, the Budget Officer of the War Department will make apportionments to agencies within the War Department in accordance with the approved expenditure programs or requests for services, informing the Defense Aid Division of this 2. Referred to the Defense Aid Division, O. U. S. W., for recommendation. 3. Defense Aid Division informally to consult G-4 and, if advisable, other interested War Department agencies and prepare recom- mendation for signature of Chief of Staff. To obtain the basis for recommendation, Defense Aid Division to route requests through the appropriate Defense Aid Requirements Committee, calling for definite recommendations as to disposition of materiel or placement of action. The existing accounting methods within the War Department will be utilized in accounting for Lend-Lease funds. The preparation of expenditure programs and requests for services, orders. 4. Reply of Chief of Staff forwarded to Secretary of War for approval. as 5. After approval, forwarded to White House. ( WHITE HOUSE ACTION well as the administration of any funds set up for administrative expenses, will follow present procedure. In case future appropriations are required for Lend-Lease purposes, the normal estimating cycle will be completed. 6. President issues directive to Secretary of War. WAR DEPARTMENT ACTION 7. Directive turned over to Defense Aid Division for preparation of appropriate instructions to War Department agencies, and sub- mittal to the Secretary of War, through Executive. O. U. S. W. and G-4, for signature, with copy of original action by Chief of Staff (paragraphs 4 and 5 above). Copies of directives will also be furnished to B. O. W. D. 8. War Department agencies concerned in executing approved ac- tion, including B. O. W. D., to maintain informal contacts with the Defense Aid Division during process of execution and render report to Defense Aid Division on completion. 9. Defense Aid Division to be office of record for Lend-Lease Act transactions and to prepare such reports as the President and/or the Secretary of War may prescribe. 30 31 33 [EXHIBIT 4] DEFENSE AID COMMITTEES REQUIREMENTS COMMITTEES There will be created within the War Department committees to be known as the Defense Aid Requirements Committees. The function of these Committees within the War Department will be the determination under the Defense Aid program of materiel requirements as to type, quantity and destination. In carrying out this function, the Committees will follow such policies as may be prescribed, from time to time, by the Chief of Staff, subject to such redetermination, if any, as may later be made by the President In performing their function, the Committees may be compelled to plan for the diversion of materiel to uses not contemplated at the time of the placing of the orders. In dealing with this problem, the Committees may propose plans for somewhat distant objectives. However, recommendations for actual diversion should normally be made only sufficiently far in advance to permit arrangements to be made for the effective use of the diverted materiel at the completion of production. The Committees will be organized for each of the following supply arms and services, i. e., Ordnance Chemical Signal Engineer Quartermaster In order to provide continuity and unity of direction to these Committees, they will include a nucleus of personnel which will have membership on all the Committees. This nucleus will be composed of the following: G-4 War Department, Chairman Representative of the Under Secretary of War Representative of the Clearance Committee of the Army and Navy Munitions Board, and Representative of the Foreign Supply Service (in case of the British, the Chairman of the British Supply Council). United States and foreign representatives of the arm or service concerned and of the user of the items under consideration shall be members of the respective Committees. In appropriate situations the Training Division or War Plans Division of the War Department General Staff will be represented. The Committee decisions will be signed by the senior representative of each concurring group. Minority views, if any, will be submitted by the senior member of any non-concurring group. These will be submitted to the Chief of Staff to assist him to consult with the President under the provisions of the Lend-Lease Act. 32 FACILITIES COMMITTEE Under the Lend-Lease Act and pending War Department priations, there is approximately $1,300,000,000 provided for appro- new facilities and a committee consisting of six general officers has been selected under the authority of the Under Secretary of War to trol the facilities program. To consult with this Committee conappropriate representatives of the British Supply Council will be appointed with opportunity to present their dissenting views, if any, on matters relating to the necessity for and priority of additional facilities being created, to the Under Secretary of War. 34 35 FORM la CONTINUATION SHEET) ROUTING M FILLED IN REQUISITIONER REQUISITION FOR DEFENSE ARTICLES MAR FORM I WAVY (UNDER THE ACT OF MARCH 11, 1941 NO. OPM AGRICULTURE MARITIME COMM. REQUISITION FOR DEFENSE ARTICLES DATE (UNDER THE ACT OF MARCH 11, 1941) AMERICAN STATE TREASURY REQUISITIONER 1. SECTION ADDITIONAL INFORMATION WILL ORDERS PLACED BY THE UNITED STATES GOVERNMENT FOR THE MATERIAL REQUISITIONES HEREIN at COVERED ST. DIRECT CASH REIMBURSEMENT TO THE UNITED STATES GOVERNMENT 2. ARTICLES (in POSSIBLE, USE CONTINUATION SHEET(S) FOR DETAILED SPECIFICATIONS: OTHERWISE ATTACH ONE COMPLETE SET OF DRAWINGS AND SPECIFICATIONS TO EACH COPY OF FORM): A. QUANTITY AND DESCRIPTION (INCLUDE MARK. MODEL, OR OTHER IDENTIFYING DESIGNATION): a. SPECIFICATIONS c. Use U.S., DRITISM, OTHER ARMY. MAYT. AID COMMERCIAL 1. IF THE ARTICLES REOUISITIONED HEREIN ARE TO BE INSTALLED IN OR USED IN THE CONSTRUC- TION OF SOME OTHER ARTICLE(S), NAME AND IDENTIFY THE BASIC ARTICLE(S), INDICATE NUMBER OF REQUISITION (FORM OR 2) OR FNR NUMBER, OR BOTH, COVERING REQUEST FOR BASIC ARTICLE(S), AND INDICATE CONTRACT NUMBER IF CONTRACT WAS BEEN NEGOTIATED FOR BASIC ARTICLE(S). A. NAME AND IDENTIFICATION OF BASIC ARTICLE(S): 0. CONTRACT No c. PMR No. a. REQUISITION No. 4. DELIVERY DESIRED (BY CHECK ()os, IF POSSIBLE, BY QUANTITATIVE BREAKDOWN) 1942 1941 160 QUANTER 140 QUANTER 586 QUARTER RE QUARTER 5. REMARKS (JUSTIFICATION OF REQUEST. URGENCY, GENERAL INFORMATION, ETC.): (SIGNED) (TITLE) GOVERNMENT OF THE UNITED STATES GOVERNMENT OF THE UNITED STATES DATE 36 37 ROUTING MAR NAVY OPM AGRICUL TURE MARITIME COMM. -- Consulted Pales MAS (BOT TO KC FILLED REQUISITIONER War FORM 1b - AMERDMENT Navy REQUISITION FOR DEFENSE ARTICLES (UNDER THE ACT OF MARCH 11, 1941 Recommendation on Regulation for Defense Articles OPM Agriculture DATE Maritime (Under the Act of March 11. 1941 State STATE Treasury TREASURY (Agency reporting) Number of detail sheets attached o REQUISITIONER DESCRIBE FULLY NATURE OF AMENDMENT DESIRED; STATE SECTION WHETHER INSTITUTION, ADDITION. CANCELLATION ETC. 1 It is recommended that the following goods and/or services listed on the requisition be supplied in the quantity indicated below from the sources shown on the detail sheets attached: Quantity (SIGNED) (TITLE) GOVERNMENT OF THE UNITED STATES Description Estimated Value Detail Sheet No 359 JUN 10 1941 Dear Mr. Curries I have your letter of May 21. 1941. advising that you have been endeavoring for some time to work up an aircraft program for China under the Lend-Lease Act, and requesting to be advised as to whether I thought 10 proper for the United States to take ever under the Land-Lease Act a portion of the old British contracts for China and to reimburse the British for those contracts. I - in sympathy with what you are trying to do and I think we night very well take over a portion of the British contracts for China if the British are willing to assign them. I understand that the Vultee planee available under British contract are in process of being turned over to China. Sincerely yours, (Signed) H. Morgenthau, Jr. Secretary of the Treasury Henorable Lanchlin Carrie, Ministrative Assistant to the President, The White House, Washington, D. C. ORIGINAL FORWARDED TO ADDRESSEE FROM OFFICE OF THE SECRETARY DWBice 6-10-41 oweHHW By Messenger 530 360 THE WHITE HOUSE WASHINGTON May 21, 1941. Dear Mr. Secretary: For some time I have been endeavoring to help work up an aircraft program for China under Lease-Lend. The most promising possibilities seem to lie in attempting to induce the British to release some planes from their program. I think their willing- ness to do so would be increased if the release could be from some of their old commitments rather than from some of their now programs under Lease-Lend. Do you think it would be proper for us under Lease-Lend to take over a portion of these old contracts for China and to reimburse the British for them? Yours sincerely, Duci Lauchlin Currie Administrative Assistant to the President Honorable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D. C. V 361 0 0 P DEPARTMENT OF STATE Y WASHINGTON June 10, 1941 The Secretary of State presents his compliments to the Honorable the Secretary of the Treasury and encloses a memo- randum for Treasury from Mr. Donald R. Heath, First Secretary of the American Embassy, Berlin, dated May 27, 1941, regarding German economic conditions and plans. Enclosure: Memorandum, May 27, 1941. 362 COPY Air Mail Pouch EMBASSY OF THE UNITED STATES OF AMERICA Berlin, May 27. 1941. Strictly confidential MEMORANDUM for Treasury from Heath From the entirely reliable but cautiously discreet contact mentioned in my memorandum of May 13, 1941, I learn that Goring has ordered the preparation of plans of autarchic continental economic organization and development, under German domination, not only for war conditions but also for peace time. My informant remarked ironically that this was a splendid example of German foresight. The plan contemplates abundant access to Russian agricultural products and raw materials. My informant asserted that he was more convinced than when he had last talked to me (my memorandum of May 13) that at least as a purely economic proposition Germany with supplies from North Africa and Russia could stand a war and blockade of several years. He asserted that whatever the dissatisfaction of France was with the occupation, the German authorities had been quite successful in the absorption of unemployment, and that the French factories were working for Germany. Whether Germany could continue to exert wise and effective political domination of unoccupied Europe was another story, and of course the standard of living at best would be a very low one under blockade conditions. A less degree of optimism as regards Germany's ability to maintain bearable economic conditions in a blockaded Europe was expressed by Vice President Pihh of the Reichsbank in a recent conversation. Puhl spoke of Germany as able to maintain the continent in a bearable economic condition for two or three years, but I thought he gave an intimation of some doubt as to the effect of continued short rations over such a period. In this conversation I remarked that the German papers recently were crowing over the fact that Britain's military and civil expenses were equal to 90 per cent of the whole national income, and stated that my own rough calculation showed that German central and local government expenditures, plus semi-governmental collections for labor dues, charity, social insurance premiums, etc., amounted to about nine-tenths of Germany's estimated national income (see my telegram No. 1907 of May 14, 7 p.m.) He thought this was a little high but said, not for quotation, that it WAS something of this order. (Signed) Donald R. Heath Donald R. Heath First Secretary of Embassy DPE/hu Approved (s) Leland Morris Leland Morris Charge d'Affaires a.i. C 363 0 P 13762 Y PARAPHRASE OF TELEGRAM RECEIVED FROM: AMEMBASSY, BERLIN. TO: Secretary of State, Washington. DATED: June 10, 1941 - 9:40 p.m. NO.: 2291. It is announced in Berlin that an agreement reached between the German and French Governments provides, among other things, that exports from occupied to unoccupied France with the exception of a few undisclosed categories of goods and payments between the two areas in both directions may not be made without a special permit. This relaxation does not apply, however, to traffic in non-French currency or gold. Made public after the announcement of Vichy's stand with respect to Syria, this concession by (*) indicates apparently that the German Government is following the policy of making progressive specific concessions as Vichy shows, under the general collaboration agreement, that it is living up to the obligations in actual practice. MORRIS. (*) Apparent omission. eh:copy 6-17-41 364 EH GRAY Berlin Dated June 10, 1941 Rec'd 4:15 p.m. Secretary of State, Washington. 2288, June 10, 3 p.m. FOR TREASURY FROM HEATH. Am leaving today for the States En route my new post at Santiago, Chile. Expect to be in Washington around the first WEEK of July. MORRIS WITH THE COMPLIMENTS OF HAROLD K. HOCHSCHILD - 365 Copy of Letter from A, Mexico City, June 10,1941 Things are not getting better here, in fact it seems that the Cardenas faction in the Government is continuing to make steady headway. No change whatever has taken place and the crowd which ran the country during the last presidency is getting stronger and stronger. Lombardo Toledano, who appeared to be down and out six months ago, is back in full force. Strikes are getting more frequent and the red and black flag which had somewhat disappeared on closed establishments is to be seen again quite often. Financially things are keeping on the same way. There was some news in the papers, undoubtedly officially inspired, that the Government had a superavit of twenty millions. Such and similar news are only published when the contrary is the case, therefore we can figure that & continuous overdraft is going on heavily on the Bank. It is generally believed, and I agree, that the action Plant, and if followed up by similar actions, will have a very strong and healthy effect on the situation here. of the United States in taking over the North American Aviation DAYES Signature FAET Et tidn 366 June 10, 1941 Mr. Foley Secretary Morgenthau In connection with my testimony before Senator Glass, I have just received a memo from Merle Coohran which gives me the impression that our $50, 000,000 Stabilisation Loan to the Argentine is definitely off because they have not given us an extension notice prior to June 30th. Please consult Merle Coohran and let me know about it because if it is off, I would like to know before I testify up on the Hill. I also want to know how much, if any, money China has drawn on us for. See memo from Mr. Foley fited in diary under 367 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE June 10, 1941. Secretary Morgenthau FROM E. H. Foley, Jr. The Argentine stabilization arrangement provides for Argentina giving us thirty days'notice of a request for an extension. Since this notice requirement is for our convenience we, of course, can waive it. I understand that the Argentine Ambassador told Dan Bell that it would be embarrassing to Argentina to have to give us this notice at this time but they were doing everything possible to have the legislation guaranteeing the arrangement approved in Argentina before June 30. It is my information that Dan Bell told the Ambassador that under the circumstances we would waive the notice requirement. I agree with this action. While the Chinese stabilization arrangement has been signed, sealed, and delivered, China has not drawn any funds under it. China has, however, requested us for an extension of this stabilization arrangement for one year beyond June 30, 1941, and we have replied saying that we are deferring action on their request until the passage of the legislation now pending before the Senate Banking and Currency Committee. You will recall that under the old stabilization arrangement, collateralized by gold, we own a little over $19 millions of Chinese yuan. 368 2. TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE TO FROM June 10, 1941 Secretary Morgenthau H. D. White Subject: A Program to Utilize Effectively the Available Labor Supply A. Defense Training 1. Complex Organization -- The present organization of defense training is extremely complicated. There are at least six agencies participating in administration, and there 18 great dispersion of authority and responsibility. OPM, Hillman Final authority resides here. Under Mr. Hillman, a number of officials, notably Mr. Reeves, are attempting to coordinate the whole program. In addition, this office administers one of the programs. Federal Security Agency, McSherry Four of the operating organizations are in this agency. Recently McSherry has been set up to coordinate at this level. Operating Programs, Office of Education, N.Y.A., C.C.C. W.P.A., and U.S.E.S. The NYA and the Office of Education have been designated to administer certain defense training programs. The NYA 18 recommended to receive $60 million for this purpose and the Office of Education about $95 million. To some extent the two agencies are competitive. In addition the CCC as a regular agency overlaps the NYA. Furthermore, some of the "regular" projects of the NYA appear to overlap the "defense" projects of the NYA. 369 -2- Division of Monetary Research The WPA ($875 millions now recommended for fiscal 1942) is carrying out a number of defense projects. The amount of defense training being received by WPA personnel is small, only 34,000 now being enrolled. The U.S.E.S. furnishes data about the skills in the unemployed population. This organization is becoming important to the defense training and labor supply program. The U.S.E.S. is under the Social Security Board but the operating organization of employment offices is administered by 48 different States. 2. Overlapping -- It is natural that the administrative set-up briefly sketched above should result in considerable confusion, bureaucratic conflict and reduced efficiency of operation. Leadership Although the O.P.M. is ultimately responsible for defense training, a great deal of leadership, often at cross purposes, appears to be exercised by the Federal Security Agency, the N.Y.A. and the Office of Education. Budgetary Control and Administration The N.Y.A. and the C.C.C. offer alternative programs for youth and split the money available for youth training between them. Likewise the N.Y.A. organized on the basis of production projects and the Office of Education interested in utilizing the school system for defense training are in conflict. In addition to these programs, a section of the O.P.M. runs a "within-industry" training program. The determination of whom to train and what to train for is now being made by several heads rather than one head. Overlapping in the Field The N.Y.A., the C.C.C., and the U.S.E.S. have local offices and local officials. So has the W.P.A. The Office of Education, though it has no local offices, works through the local school systems and advisory groups of local citizens. 370 -3- Division of Monetary Research One or two examples will serve to show the inefficiency which is resulting. At Greensboro, North Carolina, the W.P.A. is offering classes sponsored by the Office of Education in welding, machine operations, and sheet- metal work, using the local high school shops. The in which to give these classes and at the present time it is using old buildings to give training in machine work, in welding, and in sheet-metal work. The W.P.A. officials there did not know what was being done by the local N.Y.A. Nor did the N.Y.A. officials know what the W.P.A. was doing. Both officials explained that the welding classes were designed to provide welders for the Norfolk Navy Yard. However, in N.Y.A. is simultaneously constructing a modern shop Norfolk officials in charge of vocational classes stated that they were not giving any welding courses because the Navy preferred to train its own welders. Similarly at Cumberland, Maryland, an N.Y.A. shop superintendent did not know whether or not W.P.A. was giving shop courses, or again in Harrisburg, Pennsylvania, the State office of the N.Y.A. was ignorant of what, if anything, the W.P.A. was doing in or near Harrisburg or elsewhere in the State. Finally, none of these agencies seemed to know what was being done to train workers in industry for the same jobs that they were aiming toward. 3. Recommendations a. There should be a single defense training program. The job merits the creation of a separate Office of Labor Training and Supply. It is essential to fix clear responsibility for labor training as well as for other problems of labor supply. This central office should have control of the budgets for defense training. If it finds it expedient to utilize existing organizations, it should have the power to recommend the size of the funds to be used for this purpose; to divert those funds where this is necessary; and to determine the type of training to be given, the places where it should be given, and the persons to whom it is given. In the field, it should coordinate the various agencies which are doing training. 371 -4- Division of Monetary Research b. One youth organization. It would simplify the problems of defense training if there were a single youth organization. This unification would have beneficial effects upon the regular or normal youth program of the Government. The normal defense work of the youth organization would work, not be subject to, the Office of Labor Training and Supply. This office should, however, be in a position to determine the volume and the character of the defense training which is to be given the youth. B. Waste of Labor Supply Amount of waste -- Judging by World War standards, the United States is wasting the labor of about 12 million persons. Seven million of these are the unemployed and the other 5 million are those persons who would work if jobs were available. Apparently there are no plans in O.P.M. or in the Army or in the Navy to utilize this man-power within the near future. O.P.M.'s estimate of additional re- employment for the coming year is 3 millionpersons. The armed forces will absorb another million persons. Meanwhile the labor supply will be increased by 600,000 persons. Therefore, the net inroad into our unused labor supply will be only 3 millions. The program of labor training even if reorganized is bound to be ill-directed and wasteful so long as there are no defense production schedules which show what kind of labor will be needed. Only on the basis of such schedules of labor requirements can an efficient forecast of shortages be made and a program of labor training devised. Recommendations The O.P.M. or some other organization should be charged with the duty of drawing up a definite program large enough to absorb within the coming year several million more persons than will the present program. As part of this program of expanded defense production, the Federal Works Agency should be given funds for a wide variety of defense construction projects. 372 - 5- Division of Monetary Research Defense housing, construction of defense plants, the provision of utilities in the new boom towns, military roads and air ports appear to be examples where a large volume of this wasted man-power could be employed at useful defense work if there were more imagination and drive at the center of the defense program. Defense construction work ought to be paid for at standard rates and it ought to utilize the best available methods of production. If these oriteria are accepted it is of doubtful wisdom to convert the W.P.A. into a defense organization. If O.P.M. were doing its job, there should be no W.P.A. In the interim period the W.P.A. should probably be left to contract as is now being recommended and other organizations not as handicapped as W.P.A. should be utilized to increase the volume of our defense effort. 373 June 10, 1941 The Secretary called Grace Tully today and said: "When you see the President I wish you would give him this message. We have the position in the Treasury that Congress created of Fiscal Assistant Secretary. It is a permanent position and was created for Dan Bell. He is very anxious to go into that position and give up being Under Secretary. He does not like being Under Secretary because the responsibility is too great. I have been looking around for an Under Secretary, and I wonder how the President would feel about Jim Landis if I could get him. I have not talked to him yet. I would like the President's advice. If you get a chance to talk to him about it today, I would appreciate it. Bell has been after me so much now that I want to get somebody." The Secretary had lunch with Felix Frankfurter, and asked him what he thought about Jim Landis as Under Secretary, and he said that as to his legal mind, he knew of no one better, but as to his public relations, he was not so good. The Secretary then asked him what he thought of Lloyd Garrison, and Justice Frankfurter thought that he would make a perfect Under Secretary. HM Jr telephoned Grace Tully again. She had not yet given the President the message in regard to Landis, so the Secretary asked her to substitute the name of Lloyd Garrison for Jim Landis. 374 June 10, 1941 My dear Sir Arthur: Thank you very much for your letter of June 3rd giving me the shipping statement for June. Whenever it is convenient, I should like to have you drop in to see me. Yours sincerely, (Signed) H. Morgenthan, Jr. Sir Arthur Salter, British Supply Council in North America, Box 680, Benjamin Franklin Station, Washington, D. C. By Messenger Round June 4.1941 375 THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA Box 680 BENJAMIN FRANKLIN STATION TELEPHONE: REPUBLIC 7860 WASHINGTON D. c. fasma 2 June 3, 1941 Dear Mr. Morgenthau, When sending you, with my letter of April 26, a statement giving particulars of our deficiency in ships for May loading of our priority programme from North America, I promised to send you similar statements for subsequent months, and I now enclose the corresponding statement for our June loading. You will see that the nominal deficiency shown is of 31 ships as compared with 61 for May. This does not, however, represent an improvement but only the fact that the programme has been further cut down in view of the obvious impossibility of lifting at the rate previously hoped for. Indeed, the actual number of ships at our disposal at the date of the return is 23 less than in May. Our need for the 31 ships is, therefore, much greater than for the 61 in May. The Maritime Commission is working hard to provide as many as possible of them. I have full information in the office as to the details of the programme, which is, of course, at your disposal if you should wish to see it. Yours sincerely, Arthur Salter Honourable Henry L. Morgenthau, Jr., Secretary of the Treasury, Washington. 376 UNITED KINGDOM Comparative Statement Showing Deficiency of Ships for Priority Programme, North America Ships June May Required 196 249 Allocated 165 188 31 61 10 13 11 22 *Deficiency * Deficiency in U.S.A. for General Cargo 70,000 tons Deficiency in U.S.A. for Steel 79,000 tons Deficiency for Grain U.S.A. & Canada 15,000 tons 2 10 Deficiency for General Cargo in Canada 60,000 tons 8 Total N.B.: 1 Ship - 7,000 tons cargo 31 16 61 377 June 10, 1941 My dear Sir Arthur: Thank you very much for your letter of June 3rd giving me the shipping statement for June. Whenever it is convenient, I should like to have you drop in to see me. Yours sincerely, (Signed) W. Morgenthan, Jr. Sir Arthur Salter, British Supply Council in North America, Box 680, Benjamin Franklin Station, Washington, D. C. FILE TO NMC By Messender 378 June 10, 1941 My dear Sir Arthur: Thank you very much for your letter of June 3rd giving me the shipping statement for June. Whenever it is convenient, I should like to have you drop in to see me. Yours sincerely, (Signed) F. Morgenthau, Jr. Sir Arthur Salter, British Supply Council in North America, Box 680, Benjamin Franklin Station, Washington, D. C. FILE TO NMC By Messenger 379 Confidential June 10, 1941. MEMORANDUM TO: Secretary Morgenthau FROM: Mr. Gaston As to protection of the President: (1) Although the President rejected some months ago a plan for invisible ray protection of the White House grounds, plans are being made and estimates being obtained from A.D.T. for such a system at Hyde Park; rough estimate $15,000. (2) Two agents will return this week from New York where they have been taking special training on suspected packages with the bomb squad of the New York police. Two packages were recently conveyed to a field outside the city for opening. The sound of ticking was heard in one, which proved to be an expensive fishing reel, with watch attached. The other was a package of phonograph records of speeches by Winston Churchill, sent by Churchill to Harry Hopkins without advance notice. The Chief is consulting the Bureau of Standards regarding a strong steel trailer for conveying suspected packages through the city. (3) Through the New York police a tip has been received that American Peace Mobilization is trying to get American Legion veterans to join the picket line at the White House. Officers assigned by Army, Marine Corps and Navy are constantly on duty at the White House to deal with enlisted men who endeavor to muss up the pickets. (4) The number of crank visitors is increasing. They now average about one a day. (5) The Chief has a nephew, Carroll L Wilson, a gradu- ate of M.I.T. , who is attached to the National Defense Research Organization under Dr. Vannevar Bush. He recently returned from London and reports that a new radio-active 380 -2compound of high power has been developed and might become a menace in the hands of a foreign agent. His organization is working on a sensitive device for detecting radio-activity and when this has been properly perfected it can be used for periodic inspection of rooms used by the President. (6) Elmer Hipsley, the athletic trainer and jiu jitsu expert, who was taken over from the Metropolitan Police force in January, 1939, by your orders after the gate crashing incident at the New Year's reception, is starting a new course of first aid training of the White House Police. He has just finished giving the same course to one hundred Bureau of Engraving Uniformed Guards. He has done similar work for the Red Cross. Net 381 This letter was not sent to the Budget Bureau as the Executive Order, issued on Saturday, June 14th, had incorporated in it the "reporting, etc. phases. 382 Illas of 6-10-41 pee 6/5 ack of Budgets thinglt Dear Sirs Further reference is made to your letter of June 4, 1941, relative to a proposed Executive Order, entitled "Authorising the Attorney General to investigate and require reports as to transactions and property involving foreign interests". This Department is giving the matter careful considaration. However, the purpose of the Executive Order and the fields in which the powers conferred are intended to be exercised are not entirely clear from the text of such Order OF from the accompanying letter of the Attorney General. Among other things, Executive Order No. 8389 of April 10, 1940, as amended, vests the Secretary of the Treasury wi 1th many of the powers referred to in the proposed Executive Order and there is at least an apparent overlapping of functions between the two Orders. This Department, in considering the various aspects of the proposed Order, will appreciate being advised as to the purposes of the Order and the scope of its anticipated use. Very truly yours, Secretary of the Treasury. F. J. Bailey, Esq., Assistant Director, Bureau of the Budget, Executive Office of the President, Washington, D. C. 6/10/41 *A23 MEMORANDUM FROM British Supply Council in North America TO Mrs. Henrietta Klotz COMPLIMENTS OF E.N. GRAY K 383 384 STATEMENT NO. 18 AIRCRAFT SHIPPED TO U. K. AND OVERSEAS COMMANDS By Sea DESTINATION E ASSEMBLY POINT During Week ending May 17, 1941 By Air During week ending May 8. 1941 SOLIDATED atalina iberator U. K. U. K. U. K. (via Gander) - 7 - 2 - 1 U. K. (via Gander) KHEED udson III U. K. U. K. (via Sander) udson III U. K. U. K. udson V U. K. U. K. udson V U. K. U. K. 8 hesapeake U. K. U. K. 4 (via Gander) 10 - - 2 - TED - GLAS oston III U. K. TALS tish Air Commission, e 10, 1941 U. K. 12 34 - 12 385 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION Miss TO DATE June 10, 1941 Secretary Morgenthau FROM Mr. Cochran CONFIDENTIAL Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns £63,000 Purchased from commercial concerns £ 3,000 The Federal Reserve Bank of New York sold £10,000 in registered sterling to the American Express Company. Open market sterling was again quoted at 4.03-1/2. Transactions of the reporting banks were as follows: Sold to commercial concerns £3,000 Purchased from commercial concerns £4,000 In New York, closing quotations for the foreign currencies listed below were as follows: Canadian dollar Swiss franc Swedish krona Reichsmark Lira Argentine peso (free) Brazilian milreis (free) Mexican peso Cuban peso 11-7/8% discount .2321 .2385 .4005 .0526-1/4 .2365 .0505 .2070 1-3/16% discount In Shanghai, the yuan was quoted at 5-3/84, up 1/324. Sterling advanced 2$ to 3.92. There were no purchases or sales of gold effected by us with foreign countries today. The Treasury issued a license under the Gold Reserve Act permitting the Federal Reserve Bank of New York to effect the following transfer of gold in its vaults: $4,502,000 from the Bank of Finland's account to the account of the Bank of Sweden. 386 -2There were no gold engagements reported to us today. In London, a price of 23-3/8d was again fixed for both spot and forward silver, equivalent to 42.44 The Treasury's purchase price for foreign silver was unchanged at 35$. Handy and Harman's settlement price for foreign silver was also unchanged at 34-3/44. We made one purchase of silver amounting to 50,000 ounces under the Silver Purchase Act. This consisted of new production from various foreign countries, and was bought for forward delivery. The report of June 4 received from the Federal Reserve Bank of New York giving foreign exchange positions of banks and bankers in its district, revealed that the total position of all countries was short the equivalent of $7,149,000, a decrease of $376,000 in the short position since May 28. Net changes were as follows: Short Position Country May 28 $1,165,000 3,236,000 419,000 (Long) England** Europe Canada Latin America 543,000 1,372,000 1,669,000 41,000 (Long) Japan Other Asia All others Total $7,525,000 Short Position June 4 $ 729,000 3,250,000 199,000 (Long) 552,000 983,000 1,862,000 28,000 (Long) $7,149,000 Change in Short Position* - $436,000 + 14,000 + 220,000 + 9,000 - 389,000 + 193,000 + 13,000 - $376,000 *Plus sign (+) indicates increase in short position, or decrease in long position. Minus sign(-) indicates decrease in short position, or increase in long position. gm. **Combined position in registered and open market sterling. CONFIDENTIAL 387 BRITISH EMBASSY, WASHINGTON, D.C. PERSONAL AND SECRET. June 10th, 1947 There Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, Halifax The Honourable Henry Morgenthau, Jr., Secretary of the Treasury, Washington, D.C. 388 Telegram from London dated June 8th, 1941. British submarines at 0825/3 torpedoed and sank laden 1,000 ten merchant ship in 1. Lampedues harbour. 2. West-bound channel convoy repeatedly attacked by enemy aircraft from 0001 to 0340/7 straits of Dover and to Westward. Enemy coastal batteries fired 19 rounds. 1 balloon vessel slightly damaged. No other damage, no casualties. 2 enomy aircraft shot down. 3. Night 6/7 enemy aircraft raided Loch Ewe. 1 ship damaged by 2 near misses. Night 7/8 11 coastal aircraft despatched to attack shipping at Bergen and 37 bomber aircraft attacked Prins Eugen at Bresit weather clear but smoke screen was put up over warships. 24 4. 2,000 pound bombs dropped amongst others. 5. On morning of 8th Free French and British troops entered Syria. Light naval forces are working in cooperation with army. 6. Abyssinia. Enemy apparently beginning withdrawal Lechenti area. Our troops Abalti area attacked taking 100 prisoners. 300 prisoners have repulsed 2 enemy attacks June 5th and counter- been captured by southern column. 19,000 prisoners have been taken in southern Abyssinia since May 20th of which 5,000 were Italian - remnants of the 24th Italian division, previously lost, now located west of Soddu in hills where they are being harressed by Patriots. 389 BRITISH EMBASSY, PERSONAL AND SECRET. WASHINGTON, D.C. June 10th, 1941 Dear Mr. Secretary, I enclose herein for your personal and secret information a copy of the latest report received from London on the military situation. Believe me, Dear Mr. Secretary, Very sincerely yours, Have Buther The Honourable Henry Morgenthau, Jr. , Secretary of the Treasury, Washington, D.C. 390 Telegram from London dated June 9th. Two cruisers and four destroyers supporting left flank of Army in syste. Rough sea prevented a landing from other shipe being made at mouth of Nehr Litany River north of Tyre. Reports received, apparently we have occupied 1. Date Merdjayeum and Naqurre. Tyre surrendered 1700/8th. 2. German aircraft made two heavy attacks on Alexandria night of 7th/8th Military damage slight, civilian population appeared main objective. British submarine reported a.m./8th that she had Lorpedoed French 3,300 ton tanker off Dardanelles. Tanker 3. routed Naplee to Constantes via Messina Corinth Canal Doro Channel. Night of 7th/8th coastal aircraft attack on Bergen started several fires in docks and one hit claimed on small 4. ship entering harbour. 5. Last night Royal Air Force carried out medium weight attack on Dortmund. Weather prevented other operations and enemy activity United Kingdom still very slight. 6. Iraq. Night of 7th/8th small mobile column moved from Mosul to Tel Kotchek about 75 miles to the North West on the Syrian border. Our troops found no sign of German activity and received friendly welcome from inhabitants; they returned to Mosul. Estimated enemy forces remaining in Abyssinia. 7. Southern Abyosinia 10,000 Italians 15,000 natives. Gondar area - 15,000 Italians and natives. In this area ground action is being taken against Tabor which has been cut off for several weeks. Elsewhere numbers negligible. Roumania. Roumanian mobilization almost complete. Army strength probably 20 divisions. H.M.S. London reports that German 10,000 ton tanker 9. was sunk D.m./4th about 1000 miles from West Freetown and a second German 10,000 ton tanker was sunk in position few 8. miles distant a.m./5th. Prisoners 28 officers 152 ratings of whom 7 officers 106 ratings were naval. Former left St. Nasaire May 20th latter left St. Nazaire April 20th. 391 RESTRICTED G-2/2657-220; No. 413 H.I.D., W.D. 12:00 11., June 10, 1941 SITUATION REPORT I. Western Theater. Air: Extremely limited activity on both sides, with some attacks on British and Axis shipping. II. Mediterranean and African Theaters. Ground: Libya. At Tobruk, German artillery fired on British battery positions, and Italian artillery shelled steaners entering the harbor. East Africa. British forces in southwest Ethiopia have continued their advance west of the Omo River, capturing additional prisoners and some trucks. The British claim the destruction of four Italian divisions in this area. Air: Normal Axis raid on Tobruk and Halta and British raids on Benghazi and Tripoli. III. Syria. Invasion continues to progress but not particularly rapidly. No indication of serious fighting and none of defections from Vichy forces. RESTRICTED CONFIDENTIAL 392 Haraphress of Code Oablegrea Received at the Mar Department as 99:mg, June 10, 1941. filed 14:45, Jane 10, 1941. 1. British Air Activity over the Continent. g. Der of June 9. Sterling bombers operated against shipping off the Belgium and Dutch coast. Two of those bembers were attached by six Messerechmitte ME 109's. Thirteen fighters performed defensive missions over east Kent. Thirty-seven Whitley bombors operated 2. ever Dertional and Bakr. 2. Germa Air Activity Over Britain. & Night of June 9-10. The Germane operated on a small seals in the visinity of the southwest coast of England and the northeastern coast of Sections. . e. Day of Jane 9. There were few raids over Kent and Dorect. Eight of Jane 8. It is now established that the Germans used twenty-five long range bombers and five mine-laying aircraft. 4. of Jane 8. The Germane employed tea please and ten long range bombers in the operations of this day. 3. Aircraft Lesses, British Theater. a. There were no British lesses reported. . of the six Messerschmitte ME 109's which attacked the two Sterlings on the day of June 9, one was shot down and two damaged. On the same day three Messerschmitts ME 109's were shot down and three damaged during the defensive patrols over East Kent. INFORMATION COFF CONFIDENTIAL CONFIDENTIAL 393 4. Invoice State During the night of Jane B-T please from the Reyel Air Force make - attention - I I and Dangbast. E Distributions Secretary of War State Department of Treasing Union of War of Assistant Chief of a-e think Staff Shaff, Year Please Division office of Naval Intelligmie Air Barge 6-3 CONFIDENTIAL 394 CONFIDENTIAL Paraphanase of Gods Cablegree Received at the Mar Department at 09:16, June 10, 1941. Gaire, filed 14:40, June 8, 1941. 1. The fall of Bashid All has ingroved British prestige impossurably and, on the other hand, has had a reverse effect on prestige. German agitation will hereafter, as heretofere, encourage the freelen of the Arab nations, anti-Semitism and a pan-Arabic union. The posification of Trug is a a phase and it is not impossible that the revels has not yet been terminated. 2. The uprising had the support of the people, the revolting forces were not crashed, the posification has resulted in no asses to any existing problem. There still exist influences which were at work and which have not been brought to light, and in fact even the actual events are not clearly visible. However, the basic origin of the trouble is Jewish colomisation of Palestine, and this was the subject which Mr. Mon, in his negotiations with the Regent and others, evaded. 3. The Regent, Abdal Illah, saw his opportunity in Bashid ALL's aborrosment and he demanded from Mr. Men a statement on the government's intentions towards the Araba. In Mr. Mon's reply he made no detailed premises, but he spoke in favor of Arabie unity and freedom for Imag. This was the program for which Bashid All was fighting and 18 gave the Regent's followers a platform upon which to stand. The Regent's advisors had placed Mr. Mom's government in a position where it had been forced to make a statement. CONFIDENTIAL INFORMATION COPY CONFIDENTIAL 395 4. In addition, upon the Regent's regaining his place, no relinguishment of Rachid ALL'S popular program had to be make. The latter, having lost a large mossure of his following, being Regeived of the financial moma for prolenging the straggle sai having had his platform stelen from under his feet, took shelter in Persia. Distribution Secretary of War State Department Secretary of Treasury Assistant Chief of Staff, G-2 War Plans Division Office of Naval Intelligence 6-3 -2- CONFIDENTIAL