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180 TREASURY DEPARTMENT WASHINGTON office OF THE ADMINISTRATIVE June 23, 1941 ASSISTANT TO THE SECRETARY MEMORANDUM FOR THE SECRETARY:- During the first 18 days of the "Voluntary Purchase" campaign, employees of the Treasury Department have pledged to purchase Defense Savings Bonds and Stamps as follows: IN THE DISTRICT OF COLUMBIA: Of the 19,900 employees of the Treasury Department in the District of Columbia, 16,241 employees, or nearly 82 percent, have pledged to buy $78,320 in bonds or stamps each month. IN THE FIELD: Reports from 5 of the Treasury field services show that 1868 field employees pledged to purchase $14,270 in bonds or stamps each month. Reports from some of the larger Treasury field services have not yet been received. TOTAL FOR THE DEPARTMENT: Reports for the entire Department (District of Columbia and Field Service) show that up to June 19th the Treasury's employees have pledged to purchase $92,000 in Defense Savings bonds or stamps each month, or a total of about $1,104,000 a year. In addition to bonds and stamps which are being purchased from their banks or through post-offices, Treasury employees have already actually purchased over $92,000 of these securities from the volunteer "Group Agents" designated by the bureau heads to handle sales in the various offices. And 181 SEMI-MONTHLY REPORT OF PLEDGES AND PURCHASES TREASURY EMPLOYEES' VOLUNTARY PURCHASE PLAN DEFENSE SAVINGS CAMPAIGN 99% 200 93 350 1,475 128 200 JUNE SAVINGS STAFF 82 59 16 15 93 1.775 CLERK'S OFFICE 160 130 17 147 913 100 65 140 148 90% 770 25 625 EXPENT DIVISION DEST ING TAX BOARD of the MINT C GUENSEL PAROUTICS FRIE of CURRENCY PRINTING 808 596 2256 839 8 OFFICE 291 25 316 86% 75 1214 86 1,627 un 85% 050 95 73 80 843 309 83* 33 79% 4814 3,125 3 7 36 2 " 325 300 173 187 1,854 277 CISTOMS 202 135 10 145 72% 437 - 1552 814 199 1013 653 ISD 125 124 66 318 57 1,154 136 56% 125 66 53 21 -25 100 87 332 152 s4 73% 136 45 190 141 231 1,160 1977 239 565 6,032 1927 38 244 3.057 1,131 141 750 784 81 2,650 - 750 18 4371 77 65 522 3,604 746 1,240 135 53 244 226 868 12 ito so 63 it 2,534 77 113 5,715 2,808 750 727 100 109 637 462 275 840 1,904 599 125 106 - 608 608 31.833 6,962 38,795 498 9,278 12,086 727 5,933 1,477 218 327 209 15 547 1,099 411 251 2,986 181 145 780 1.753 106 231 145 292 75 2,250 1,993 1,253 3609 7192 4,350,0 1335 200 250 25 275 2,500 225 300 550 200 +00 625 425 650 825 5,150 5,625 361 25 50 50 18 - - 17 22 16 732 5,207 - TOTAL BONDS AND STAMPS THIS 100 75 401 152 2,423 446 - 162 it 826 41 421 2,663,25102 222 300 188 1791 22 431 188 76 so 1277 457 75 380 51 the - 47 33 92 5,940 2982 457 80 268 56 308 216 ++0 348 42 47 77 157 234 177 707 884 it 1+1 155 214 766 980 1825 503 775 418 915 409 +327 100 is 21 35 65 18 903 2,340 243 2,543 2559 $102 36 65 136 100 35 83 201 118 145 811 1,418 .925 12,775 955 1+15 2370 805 3,340 275 +12 28 15 123 304 507 119 350 177 208 419 627 235 22 585 410 875 285 850 28 526 150 300 687 450 260 2,794 175 525 700 it 127 928 7881 50 - so 700 $ 700 58 39 61 5,364 5,364 72 15; 39 III 064 4.064 1477 150 216 349 565 825 to 277 317 366 590 686 552 1052 550 337 275 487 427 1.185 400 +75 875 190 297 +87 590 772 534 3522 500 800 3300 642 1144 836 2 142 994 131 2.684 1875 650 2,525 53 344 447 2362 5136 2.155 231 125 125 14 218 86 753 753 29261 78,320 75 79 32 75 928 1,027 204 204 32 142 107 107 % % . % % % % ACCOUNTS 1,562 3.545 88% 2 SERVICE FINDS CONTROL 40 the 82 3023 417 22 25 4307 795 825 2,820 92 31 383 300 333 1132 42 1.899 301 2,+87 76 75 SING & PRINTING 159 18 157 137 273 35 283 90% 1416 373 124 100 88% 43 92 1.188 724 20 8 162 284 088 1996 25 84 12 421 825 1,903 128 53 - + 70 4316 12 all STAMPS --- 5 ISO - - 8 $ - 11 $ ISO 3501 $ S 248 100 - $ 65 4068 350 -- -- - $ 73 4619 5 100? - --- . INTERNAL REVENUE - 29 - DRIVE REPORTED ACTUALLY PURCHASED THROUGH GROUP AGENTS BONDS . RSUNSEL DIVISION 5 s - WELL TOTAL BONDS AND STAMPS , SCLEMENT DISBARMENT 29 - STAMPS 1 29 - - $ VISION of TAX RESEARCH MASTER PLEDGED TO BE PURCHASED EACH MONTH BONDS , BUREAU DIVISION JUNE 19, 1941. REPORT FOR PERIOD ENDING , PLEDGES , OF COLUMBIA PERSONNEL . 19,900 13,113 3,128 16,241 81.6 26,226 13,299 39,525 58,059 25,150 34,717 59867 5,844 18920 24,764 30,994 53,637 84,631 182 SEMI-MONTHLY REPORT OF PLEDGES AND PURCHASES TREASURY EMPLOYEES' VOLUNTARY PURCHASE PLAN 27% - 2473 - - from $ 4,450 , 4,450 $ If OF THE MINT - 93% - 19 19 90% 25 25 - 471 471 56% - 2860 2,860 - 74 74 28% - 1,031 1.031 19 19 1% 25 25 - - - STAMPS - - $ 4,039 36 $ up MAROUTICS 845 1285 - BONDS - - TOTAL BONDS AND STAMPS REGISTER 4.039 36 1575 1,575 187 187 42 42 $ IN - 21 1285 -- - - - - $ 8489 61 THE $ 8489 61 - , text - 1381 WEIL 4,435 4,435 - 1,218 1,218 - 67 67 - - ACTUALLY PURCHASED THROUGH GROUP AGENTS BONDS PRICE MET NONE $ 3050 $ SOOT DIVISION and JUNE 3050 STAMPS - 25 25 - 1,975 1975 - - 450 450 - - THE MADE 2046 17 666 - the . 5096 $ 5096 TOTAL BONDS AND STAMPS PURCHASE REPRESENT . BREAS OR DIVISION JUNE 19. 1941. REPORT FOR PERIOD ENDING PLEDGED TO BE PURCHASED EACH MONTH , - PLEDGES DEFENSE SAVINGS CAMPAIGN 2046 17 666 24 24 19 19 $ PERSONNEL - - - 42 2641 474 19 42 2,641 474 19 % % % % % % % % FOLLOWING FIELD SERVICES a FILL THEIR INITIAL RE9 3 JULY 4th:14 INTERNAL REVENUE % must ACCOUNTS 9 HOUR SERVICE % CATTILLER UF CURRENCY a CONST GUARD a % % % % . s % . % . . 4992 - 1868 1868 37% - 8,391 8391 - 5,879 5,879 - 14,270 14270 - 5.500 5,500 - 2,772 2,772 - 8,272 8,272 183 SEMI-MONTHLY REPORT OF PLEDGES AND PURCHASES TREASURY EMPLOYEES' VOLUNTARY PURCHASE PLAN DEFENSE SAVINGS CAMPAIGN STELLER OF CURRENCY DON OF PRINTING FING A PRINTING STRVICE ACCOUNTS OF CUSTOMS GT GOARD TREASURY BLDGS, BARCH STATISTICS THIS KARCOTICS 150 12 TO 99% 200 - 200 84 4316 93* 12,350 1,775 1,475 13,825 10,088 128 1,903 1,525 4,750 6,275 - 12 292 75 22438 2,663 25 102 2250 35 159 1,899 94 1,993 75 4,261 5,823 3,087 12,098 400 75 93% 2009 92% 17 147 91% 100 100 124 1,562 283 148 90% 770 25 795 417 40 2015 22 88% 2487 358 2,845 3,545 862 291 25 316 41 300 1.927 1977 446 2277 1839 8 176 88 301 18 25 20 2 1,416 1132 82 1214 86% 1,627 137 92 25 LIT 85% 1,050 81 1.131 190 373 273 36 309 83% 1,667 187 1,854 868 54 72 33 79% so 50 63 14 5,775 2808 9,278 100 109 218 42 31 6307 3023 380 38 188 141 1552 814 1047 565 244 135 231 136 2526 1791 239 199 481 87 - 66 124 367 2 4814 76 3,125 277 73% 100 141 75% 1013 65% 616 318 136 66 750 1,150 59 57 637 1.154 56 53 2,650 125 2,860 750 125 608 73 81 154 42* 325 1.006 43 22 65 26% 75 25 750 1,275 3,497 462 1,904 599 125 106 457 4,407 383 1,188 8 9,011 42 47 503 2,961 3,464 650 77 157 825 14 141 10,800 2,426 401 100 1,253 200 5625 5,175 17 16 732 5,207 300 5 1917 1,214 45 29 361 50 2,423 3,604 746 4,350 1,925 12,775 244 1,240 135 1,375 0,850 275 412 687 28 940 2,534 260 2794 175 515 700 127 50 235 22 8,700 8,700 113 14 11.928 218 411 2,986 536 1,661 2,123 1,100 780 1,753 106 231 209 427 550 1,477 150 3,522 5,620 500 4,520 400 931 2,684 1.875 125 1,477 145 17,861 231 753 753 150 173 240 413 498 1,246 1,744 76 43 119 151 68 219 25 26,226 19,178 34,531 92,590 25,150 50 100 50 91 31 - 4,875 18 5.933 181 - 6,032 332 77 - - 221 275 12,500 65 7,246 25 200 10,250 225 4,475 550 625 12,086 327 727 2251 145 608 1,331 100 4 727 1,840 25 11,277 16 130 162 - 1,188 1413 140 162 421 284 59 160 - 92 8 596 165 4211 15 955 21 1,415 95 350 39 - 33 5,940 THE 47 92 216 308 2,982 15,457 18440 80 268 348 903 7,436 8339 234 177 707 884 155 214 766 4,343 7,542 7,601 36 2,370 65 11,805 136 3,340 980 15,143 201 123 304 507 811 585 410 875 1,285 61 72 5,364 39 III 14,064 1,052 825 40 216 349 565 590 366 552 686 1,800 487 3,300 642 1,194 1,836 2,142 3,450 3,850 190 963 1,153 590 2,994 4,413 650 2,525 53 394 447 1.928 1,027 125 75 15 750 900 25 317 79 79 15,145 14064 5,364 277 275 337 56 1,142 5136 5,003 2,955 204 204 32 32 58 142 200 208 892 35 84 119 35 109 107 107 1,100 144 * % % COUNSEL - 71 . LOTTER U.S. 150 - TOTAL BONDS AND STAMPS % CLASSING TAX BOARD 71 - % CLARK'S OFFICE REMART'S OFFICE 82 2189 350 100% 5 5 248 350 - STAMPS % MEDIC DIVISION 65 4068 - 100% - ACTUALLY PURCHASED THROUGH GROUP AGENTS BONDS % THE SAVINGS STAFF 73 4619 29 $ SUNNEL DIVISION 5 - , 5 wat DESBARMENT IT OF INTERNAL REVENUE 29 - TOTAL BONDS AND STAMPS $ 29 -- - = STAMPS . TAT RESEARCH WEN PLEDGED TO BE PURCHASED EACH MONTH BONDS JUNE 19, 1941. REPORT FOR PERIOD ENDING $ - PLEDGES 9 -- AND FIELD PERSONNEL 24,892 73 31,833 47,186 58,059 40,217 65,367 5,844 21,692 27,536 30,994 61,909 92,903 184 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE June 23, 1941 TO Secretary Morgenthau FROM Mr. Kuhn Since the last press conference, scores of business firms, many of them nationally known, have indicated their willingness to adopt a salary allotment plan so that their employes can buy Defense Savings Bonds. The initiative in every case has come from the employes themselves, and through the unions wherever a company is unionized. Here is a list of a few of the companies that have come in since last Thursday: Pratt and Whitney United Aircraft Corporation Michigan Bell Telephone Company Federal Motor Truck Company Southwestern Bell Telephone Company Sheffield Steel Company Scullin Steel Company Public Service Corporation of New Jersey Pennsylvania Central Airlines In addition, there are ten nationally known insurance companies and hundreds of other companies which are not nationally prominent. 185 x or THE SECRETARY OF COMMERCE WASHINGTON STATES of SECURITY June 23, 1941 Dear Henry: Many thanks for sending me the recordings by Irving Berlin. I am very glad to have them. Sincerely yours, Jangon Secretary of Commerce Honorable Henry Morgenthau, Jr. Secretary of the Treasury Washington, D.C. 186 June 23, 1941. LEMORANDUM FOR THE SECRETARY'S FILES A meeting relative to the administration of Executive Order 8389, as amended, was held in Mr. Foley's office at 3:00 p.m., June 23, 1941, attended from time to time by the following: Messrs. Foley, Bernstein, Pehle, Coe and Aikin for the Treasury, Messrs. Acheson and Luthringer for State, Messrs. Shea and McNamara for Justice. There was considerable discussion regarding the position of Russia. Mr. Bernstein read a proposed General License designating Russia as a "generally licensed country" and the relative press release. He explained the advantages of lifting Russia through the formula of a General License, as opposed to an Executive Order entirely freeing that country from the freezing regulations. Mr. Acheson, after telephoning the State Department, said that Mr. Welles agreed that action should be taken to lift the Russians from the freezing order by General License. It was decided that a General License should be issued, subject to check by the Department of Justice to determine what effect this action might have in respect to subversive activity investigations. Mr. Pehle mentioned the cable received by the New York Federal from the State Bank of the U.S.S.R. concerning the sale by the latter of four million Swiss francs against dollars. He said that he thought this transaction was significant in view of the latest developments abroad. Mr. Foley stated that the Associated Press, in order to repatriate their representatives located in Europe, had requested permission to pay $10,000 in free funds to the DNB which will undertake to arrange the repatriation. Mr. Pehle expressed the opinion that to allow such a payment to the DNB would be establishing a very unfortunate precedent. Mr. Bernstein said that there should of be some over-all statement of policy concerning repatriation Americans from abroad. If Germany agrees to provide funds for Americans to leave Axis-dominated Europe, this Government will of place an equivalent amount of free dollars at the disposal 187 -2- Germans who desire to leave this country, though the latter would not be an implied permission to let the Germans go. It was decided that the AP's request should be refused. Mr. Acheson then read a draft memorandum of the procedure to be followed in connection with diplomatic, consular and official accounts of the Italian Government in the United States. After discussion, it was agreed that no action be taken on the proposed memorandum until the Treasury had had an opportunity to study it. 188 Jame 29, 1942. MEMORANDUM FOR THE SECRETARY'S FILES A meeting relative to the administration of Executive Order 8389, as amended, was hold in Mr. Folay's office at 3:00 Pollop June 23, 1941, attended from time to time by the followings Nessrs. Felay, Bernstein, Pable, Coo and Alkin for the treasury, Messra. Asheson and Luthringer for State, Messre. Shea and MaNamara for Justice. There was considerable discussion regarding the position of Russia. Mr. Bernstein read a proposed General License designating Russia as a "generally licensed country" and the relative press release, lie explained the advantages of lifting Ransia through the formula of a General License, as opposed to an Executive Order entirely freeing that country from the freezing regulations. Mr. Asheson, after telephoning the State Department, said that Mr. Welles agreed that action should be taken to lift the Residence from the freesing order by General License. It was decided that a General License should be issued,subject to check by the Department of Justice to determine what effect this action might have in respect to subversive activity investigations. Mr. Pehle mentioned the sable received by the New York Federal from the State Bank of the U.S.S.R. concerning the sale by the latter of four million Swiss francs against dollars. He said that he thought this transaction was significant is view of the latest developments abroad. Mr. Foley stated that the Associated Press, in order to TO patriate their representatives located in Europe, had requested permission to pay $10,000 in free funds to the DNB which will under take to arrange the repatriation. Mr. Pehle expressed the epision to to the DMB would veryunfortunate that allow such a payment said be that establishing there should a Mr. Bernstein same concerning be over-all precedent. statement of policy provide repatriation funds for of Americans from shreed. If Germany agrees to will Americans to leave Axis-deminated Europe, this Government place an equivalent amount of free dollars at the disposal of 189 Germans who desire to leave this country, though the latter would not be an implied permission to let the Germans go. It was w eided that the AP'S request should be refused. Mr. Acheson then read a draft memorandum of the procedure to be followed in connection with diplomatic, consular and official accounts of the Italian Government in the United States. After discussion, it was agreed that no action be taken on the proposed memorandum until the Treasury had had an opportunity to study it. 190 June 23, 1941 3:04 p.m. HMJr: Hello. Summer Welles: Yes, Henry. HMJr: I have Press at 3 and the newspapers plus the United Press ticker are crediting to you that I have this thing in front of me - that Welles gave some previous report that the German pact with Russia may speed the issue of the general license of the frozen Russian funds in this country. And it goes on, other quarters say that the Treasury would act favorably on the Russians W: HMJr: W: at Press of that nature. I'd better send over to you my Press Conference. I said nothing of the kind. Well What I said was this in reply to a question with regard to what action would be taken concerning the frozen Russian balances. I said that that was a matter that they better consult the Treasury upon. I understood the Treasury and That Department Acheson here matter had withbeen thediscussing RussianAmbassador the during the previous week. That was all that I said. HMJr: As I understand it, from our boys, Foley and Pehle, that Acheson hasn't raised the point. 191 -2W: He's seen the Soviet Ambassador just the way he's seen the Diplomatic Representatives in other all of the countries, concerning whom in the original plan, it was stated that general licenses could be issued provided they gave satisfactory assurances - you remember the wording? HMJr: Oh, yes. Well, would it be all right to say that all foreign representatives are received by the State Department and I have to refer them to the State Depart- ment. W: Well, it's a little - it would be a little bit confusing, I think, Henry, in view of the fact that I referred the people here to the Treasury Department. HMJr: W: Well, that's why I'm calling you. I don't want What implied, of course, was that the State Department and the Treasury Department again are in their respective spheres working out these problems. HMJr: Well, how about this. We both don't want to get our wires crossed - I want to be truthful. Supposing I say that the matter has been brought to my attention or does that throw it down too hard? W: The matter has? HMJr: Has not. Not since this war business, you see? 192 -3Yeah. HMJr: Give it Well, exactly. HMJr: I mean, they've had contact since with Ouminsky no Germany and Russia have gone to war. Neither have we. Neither have we, and what I tried to make clear was the fact these conversatione last week had to do with the question of general licenses in accordance with the provisions of that order. HMJr: Well, would this be all right? Say that we've had no conversations with them since they've gone to war. W: That's absolutely all right. HMJr: Is that all right? If you don't mind adding that conversations did take place with the State Department last week concerning the issue involved HMJr: W: HMJr with - in the order. I'11 say that. That will be very helpful. Is that helpful? Yes, Henry. That's what I went to be. V: Thank you very much and you always are. HMJr: Thank you. Thanks, Henry. Goodbye. 193 MEMORANDUM June 23, 1941 To: Mr. Harry Hopkins From: Oscar S. Cox Proposal: That the President send to Congress immediately a message stating that he has directed 1) The Secretary of War and the Secretary of the Navy to increase shipments to Britain of defense articles out of stocks and current production and 2) The Secretary of the Navy to take all additional steps necessary to protect these increased shipments. The message should also state that the President is asking the Congress to approve this course of action by concurrent resolution. 1. This action is the only way in which the disruptive forces now at work in this country as a result of the German attack on Russia can be stopped. (a) A statement in support of Russia analogous to Churchill's, although necessary, will not suffice in a country tired of talk and thirsting for action. Talk has not stopped the isolationists before and hardly can be expected to do so now. (b) Aid to Russia in substantial amounts is not feasible as a practical matter and would not quell the isolationists. 194 -2- 2. Additional supplies out of stock and current production and naval protection are the only substantial assistance we can immediately give either Russia or Britain. They will: (a) Strengthen the British offensive against German war industries; (b) Strike a heavy blow at German morale if announced on the heels of the outbreak of war with Russia; (c) Answer the disruptive forces in this country in the only way possible -- by action. 3. Protection of American property by Presidential- as contrasted with legislative-action is clearly legal, and it is suggested by analogous action of Presidents John Adams, Tyler, Grant, Wilson, and Coolidge. 4. The method proposed will obviate the danger of a filibuster while at the same time allowing an expression of views by the Congress. (Initialed) OSC OVER 11/32/91 RECEIAED V. 8:42 2ECHELVBA,2 CONNE2LORDENCE DIAIZION 195 THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA Box 680 BENJAMIN FRANKLIN STATION TELEPHONE REPUBLIC 7860 WASHINGTON. D. c. June 23, 1941. Dear Henry: I have picked up one of these throats which seem to be going around Washington and, as I have a fairly high temperature, I feel I shall regretfully have to cut out my attendance at the meeting this afternoon. I am very sorry indeed. I shall be there in spirit! Yours sincerely, Hon. Henry Morgenthau, secretary of the Treasury, Washington, D. C. 196 June 23, 1941 My dear Mr. Keynes: I beg to acknowledge receipt of your letter of June 18th with enclosed copy of a letter to Mr. Harry Hopkins. Yours sincerely, (Signed) H. Morgenthesi, ⑉ Mr. J. M. Keynes, British Supply Council in North America, Box 680, Benj. Franklin Station, Washington, D. C. 197 June 23, 1941 My dear Mr. Keynes: I beg to acknowledge receipt of your letter of June 18th with enclosed copy of a letter to Mr. Harry Hopkins. Yours sincerely, (Signed) E. Morgenthan, m Mr. J. M. Keynes, British Supply Council in North America, Box 680, Benj. Franklin Station, Washington, D. C. 198 June 23, 1941 My dear Mr. Keynes: I beg to acknowledge receipt of your letter of June 18th with enclosed copy of a letter to Mr. Harry Hopkins. Yours sincerely, (Signed) H. Morgenthan, in Mr. J. M. Keynes, British Supply Council in North America, Box 680, Benj. Franklin Station, Washington, D. C. 199 copy June 23, 1941 Dear ar. Keynes: this is to acknowledge your note to me of June 17, which I have read with great care. A re-reading of it convinces me that the substance of your proposal relates to financial problems that seem to me primarily the concern of the Treasury rather than the Lend-Lease Administration. The matter of how the Lend-Lease Administration is to be utilized is, of course, one for the President and Congress to decide. A the moment we are engaged in buying seven billion dollars worth of materiel for you and the other democracies. dy own feeling is that the primary departmental interest nere lies clearly with the Treasury and not with us. I believe, therefore, that all the implications of our letter should be taken up with ar. Morgenthau. 1 do not mean to indicate that I am not zincful of the financial difficulties involved. I merely want to indicate to you that I ao not consider that my responsibilities include a working out of the fundamental financial arrangements between the United States and Great Britain. I realize that the Lend-Lease administrution and its machinery is an important and poten- tially controlling factor in regard to it. Very sincerely yours, HARRY L. HOPKINS J. d. Keynes, ssquire, british Supply Council, *ashington, L. C. CC: Secretary of the treasury 200 THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA Box 680 BENJAMIN FRANKLIN STATION WASHINGTON. D. C. TELEPHONE: REPUBLIC 7860 June 18th1941 Mr Secretary Morgenthau, The Treasury, Washington, D.C. Dear Mr Morgenthau, For some five weeks, as you know, we have been spending much time, primarily in connection with your undertaking to Sir F. Phillips, on the question what old commitments we can be relieved of, consistently with the statement made by the Director of the Budget. And at last it looks as if some sort of finality would be reached on this, one way or the other. Meanwhile time passes by (though usefully and to my great advantage in many ways), and it seemed to me advisable to attempt to crystallise the position on the other line of approach which you told me concerned Mr Hopkins primarily, namely relief by additional lease- lending in respect of entirely new commitments. I have, therefore, sent him a letter of which I enclose a copy; and I hope you will feel that the lines of approach I seek to open up are suitable and not unpromising. Some time I should much appreciate a talk with you on the "consideration" question, about which formal negotiations have now been initiated, though they have not yet reached any degree of definition. Yours sincerely, 201 COPY Harry Hopkins Esq., June 17th,1941 The White House, Washington, D.C. Dear Mr Hopkins, In the five weeks which have passed since I gave Mr Morgenthau a memorandum outlining what the Chancellor of the Exchequer had sent me to say, no positive progress has been made. But the possibilities of the situation have been very carefully explored by Sir F. Phillips and myself with the officials of the Treasury Department and with Mr Cox, who have been most kind and sympathetic and helpful but have been up against difficulties which were none of their making. I am given to understand that, as a result of this examination, Mr Morgenthau will be advised shortly of the utmost which is possible by way of relieving us of existing commitments. But it is clear, I think, that the amount, if any, available after satisfying Mr Morgenthau's promise to Sir F. Phillips to find relief of from $300,000,000 to $400,000,000, will not go far towards satisfying the needs which I outlined in my memorandum. The time has come, therefore, when I need guidance from you how it would be useful for me to try to make progress, in so far as this is possible through the Lend/Lease machinery. Leaving details and minor sources on one side, and assuming that we are already putting in requisitions in respect of all U.S. exports to U.K. which can be handled administratively on our side and are acceptable on yours, there appear to me to be only two methods which -2- 202 are of substantial importance:- (1) The financial estimates made in London assume that munition exports to the British Commonwealth outside Britain (excluding Canada) will be lent-leased but that we shall have to pay cash for other exports to those destinations. If you were prepared to apply to requisitions under Lend/Lease on behalf of other parts of the Empire outside North America the same general criteria that you apply to requisitions from Britain, this would afford us a material relief. I do not mean by this that you should not apply to Dominion applications stricter tests under the priority arrangements where commonsense and the necessities of the situation suggest that stricter tests are appropriate; but that types of cases which would be eligible for Lend/Lease if they were for the U.K. should also be eligible when they are for other parts of the Empire in all cases where the stuff is available for them to take. This would, I suggest, be a sensible sort of arrangement to make, since it would amount to substituting Lend/Lease supplies which present no administrative or other difficulties in place of U.K. requirements which do present such difficulties. It is unlikely that the relief obtainable in this way would do the whole trick, but it would go a long way. It is a difficulty in the way of my obtaining reliable estimates at short notice that London might think it inadvisable to encourage the Dominions to draw up requirements along these lines unless there was some reasonable hope of their getting satisfaction. Our total disbursements in respect of exports from the U.S. to the British Empire outside Great Britain and Canada are estimated at $450,000,000 a year, but only a proportion of this, say a third to a half, is likely to prove workable through the Lend/Lease machinery, at any rate in the first instance. -3- 203 What I contemplate in making this suggestion is not independent lend-leasing direct to the Dominions, but lend-leasing to Great Britain with authority to transfer to the Dominions. This procedure has the advantage that it does not complicate the "consideration# agreement or the organisation which is now conveniently centralised under Mr Purvis. Otherwise the President would have to make five distinct consideration agreements and you would have to deal with five independent requisitioning authorities. Moreover if the requisitions on Dominion behalf are not centralised and criticised by us before they reach you, considerable waste of time may ensue. There are also other difficulties which I need not labour. (2) The only other important way in which you can help us would be by obtaining fresh authority from Congress when next the President asks for an appropriation. We estimate that we are spending currently in the United States at least $700,000,000 a year, which, for one reason or another, is not being paid for through the Lend/Lease machinery, of which $250,000,000 is for Great Britain and $450,000,000 for the rest of the Empire exclusive of Canada (as mentioned under (1) above) . As you know, we have a common purse with the Dominions, apart from Canada, for dollar expenditure, and we must provide the dollars needed for their essential purposes as well as for our own. It is these heavy disbursements, additional to our pre-Lend/Lease commitments for munitions, which are the source of our financial difficulties. If we could be relieved of a substantial part of these, we should be - relatively speaking - in an extremely satisfactory position. To be more precise, would it be possible for the President to take authority, when next he approaches Congress for a Lend/Lease appropriation, to ask for a sum of (say) $500,000,000 a year (or -4- 204 $250,000,000 if the Dominions are being dealt with under (1) above) which he was free to make available for expenditure in the U.S. otherwise than through the strict Lend/Lease procedure of requisitions etc.? This would enable him, in effect, to make a cash transfer to us provided we undertook to expend it in the U.S. for current needs other than on pre-Lend/Lease munition commitments which we should continue to meet out of our own resources as we have agreed to do. He could point out to Congress that a few months' experience has shown that the Lend/Lease procedure is convenient and appropriate over 95 per cent of the field, but that there remains a margin where it is administratively inconvenient or impracticable, so that he needs a little elbow room to deal with this marginal field. Otherwise, it is a case of spoiling the ship for the sake of a coat of paint. We have this magnificent conception of Lend/Lease; #consideration is being discussed on lines more magnanimous than any hitherto recorded transactions between great nations; and yet, on account of our resources having been so completely enhausted before Lend/Lease came into operation, we suffer anxiety and possible embarrassment through being unable to accumulate the minimum reserves which are necessary to carry the vast financial responsibilities of London. At the present moment the total gold reserves of the Bank of England are less than $50,000,000, and the cash reserves of the British Treasury less than $100,000,000 - which would be laughable if it were not so embarrassing. To build these up, except very slowly, out of our accruing resources is impossible while we are facing the double task of paying off old commitments and financing current expenditure of the sterling using parts of the Empire in the U.S. outside Lend/Lease. Yet it needs only a trifling addition to the -5- 205 assistance we are already receiving to give us the necessary comfort of mind and freedom from daily cares - a gain to our Administration in all the circumstances of the present hour altogether out of proportion to the sums involved. I am sending Mr Morgenthau a copy of this letter so that he will be aware of what I am suggesting. Yours sincerely, (Signed) J.M. Keynes 206 June 23, 1941 3:30 p.m. RE AID TO BRITAIN Present: Mr. O'Connell Sir Frederick Phillips Mr. Keynes Mr. Childs Mr. Cochran Sir Clive Baillieu Mr. White Mr. Coyne Mr. Viner Mr. Bell Mr. Thompson Mr. Archer Mr. Elliott Mr. Boddis Mr. Foley Mr. Cox Mr. Malcolm H.M.Jr: Gentlemen, the reports that I get all seem to be favorable. I have a little agenda here, and the first one on it is whether representatives of the British Treasury have any additional information from London to be discussed. Keynes: Well, Mr. Morgenthau, there is a little addition to certain of the questions which I answered Dr. White at the last meeting. This is the more accurate answer. I might just hand that in. They aren't very im- portant matters. 207 -2H.M.Jr: Iafterward see. Would you like this to be discussed or now? Keynes: I should think it is sufficient just to hand that in. They are merely statistical points, clearing up certain things. On the Dominions, we hope to have a list for New Zealand fairly soon, but it isn't available today. From London we got a telegram this morning which doesn't seem to make any sense. I am afraid it must be corrupt. H.M.Jr: I see. Garbled, you mean. Keynes: We will have to get that repeated. It was breaking up the steel and oil amounts, but it was not intelligible. There isn't anything more there. H.M.Jr: I see. Then this would be -- Bell: As I recall, Mr. Secretary, there were certain questions asked and Mr. Keynes answered them from memory and he said he would like to check up on certain statistics. Keynes: Yes. Those are two points where I gave roughly correct answers, but that is the more accurate statement. H.M.Jr: Then the next thing I have on my agenda is actual contracts representing type cases, which the British propose to enter into. Now, that is something that you (Cox) are particularly interested in. Cox: Yes. H.M.Jr: Have you got that for Mr. Cox? 208 -3Childs: Yes, I have a very long list here, sir, in two special categories which I can give to you. One in the raw materials and manufactured goods, which is here; and the other aircraft, which is here. You don't want these in detail, do you? H.M.Jr: I don't think so. Cox: Are these contracts proposed to be entered Childs: Proposed to be entered into. They are the into? type cases which cannot be Lend-Leased. H.M.Jr: Could we let Mr. Cox take a look at them and see if that is what he wants? Childs: All right. (Mr. Foley entered the conference.) Cox: On this list I notice is an item for five million three hundred thirty-eight thousand long tons of steel, and I wondered if Mr. Elliott or someone else could explain that. Archer: That is not for purchases. That is the stuff we buy under the requirements of the U. S. A. up to June, next year. Cox: Right, but it is contemplated that you have to make dollar commitments for that unless you could get it under Lend-Lease. Archer: That is right. Cox: Now, do you know of any reason why that can't be covered under Lend-Lease completely? 209 -4Elliott: Now, Mr. Cox, the immediate position is, so far as I know, covered in the form of approved requisitions to the extent of approximately half a million tons, which are only waiting for the machinery to go through its final movements to get into the mills. I had understood that steel situation would be covered in successive approvals of that kind, now presumably in the first instance through this committee. Childs: I should make clear, I think, that list includes certain items which are very probably lend-leasable, including steel. We put them all together to include Mr. Archer's whole program so as to be a positive declaration once and for all as to every item in there. Cox: Yes, but I gather in executing the Secretary's idea that the actual contracts before execution would be submitted for approval just to make sure that on a case basis you would exclude or include it in Lend-Lease. Childs: Exactly. That is my understanding, I think. Baillieu: Any possible contracts will be lend-leased. Cox: Now, do you have any specific contracts? Childs: I think you could take those three air ones as very good ones. They involve a good deal of money. Take this one right here, amendments to the contract with Brewster Areonautical Corporation. Just modifications of planes. Mr. Boddis can explain the modifications to you. Cox: You had better talk out loud. Boddis: I am not quite sure what the point is that you want. 210 -5Cox: Boddis: The point is, is the contract ready now for the modification? Yes. It could be signed immediately, but what we are trying to do in that particular case is to persuade the firm to agree to a cancelation of certain machines so we can total the commitment on the contract. It is not increased on the understanding that the machines are bought under Lend-Lease. So far they have not agreed to it. In the other two cases here, pretty definitely the firms have entirely refused to play on those lines, so there we are faced with an immediate expenditure of one million two hundred thousand in one case, and one million nine in the other. H.M.Jr: I don't see that. Take the one million two. I mean, the idea that I started with and I don't want to get away from is, if you have got one million two - what is it for? Boddis: Modifications. H.M.Jr: And you are about ready to let that contract? Boddis: Yes, actually the work is proceeding. H.M.Jr: Then, the thing would be to bring it before the committee and say, "Can that go under Lend-Lease?" Cox: Childs: That is right. And that is the reason for this exhibit right here. H.M.Jr: But I gather it isn't the way Mr. Cox wants it, is it? 211 -6Cox: No, I think this is all right. I think they can just put the requisition in immediately if it is practicable to handle it that way. H.M.Jr: Cox: But don't you want the actual proposed contract with the companies to clear through? It would be better to see that, but I think it would save time if we know what they are going to do if they would let us know immediately through the form of a requisition. Childs: I think it would be very much better, Mr. Secretary, because the requisition form probably contains all pertinent information. As a matter of fact, as the work comes up we have quite a lot in that list. We propose to puf in before the committee a draft of the requisition under Lend-Lease. That has the pertinent information. Then if you say it is all right under Lend-Lease, we will just put it right in and waste no more time. H.M.Jr: Unless Mr. Cox or somebody else wants more information, the way it came over in January to March 15 for me, every night, was all right. You saw that? Cox: Yes. H.M.Jr: Wasn't that all right? Cox: Yes, that is all right. H.M.Jr: Then if you wanted any additional information, you could call for it. Cox: Right. H.M.Jr: Are you familiar with the way it came over? Childs: Yes. 212 -7H.M.Jr: What list. I call the thirty-five million a week Childs: That is right. H.M.Jr: If it came over like that, then if somebody wanted - that was just on one sheet. It gave the name of the company, the amount, and was just on one piece of paper. Childs: Well, that is the same thing there in effect, but we will follow those strictly hereafter. H.M.Jr: Well, that is not strictly unless you agree. Childs: No, I am perfectly agreeable. H.M.Jr: And then if somebody in the Treasury - it wouldn't be the Treasury, but somebody representing Mr. Hopkins wanted more in- formation, he could simply say, "I need more details." Cox: Right. H.M.Jr: But I okayed, out of these ten items, eight, and please let me have more details on two," or something. Wouldn't that be right? Cox: Yes, that would be satisfactory. H.M.Jr: And I should think the sooner that got started, the better. Would that be agreeable to the British Treasury? Phillips: Yes sir, we can see how it works, certainly. H.M.Jr: What? Phillips: We can see how it works. I haven't seen a full day's list yet, so I don't know how much material there would be in it. 213 -8- Baillieu: It could only be to your advantage. Certainly. H.M.Jr: It only could be to your advantage. Baillieu: Undoubtedly. I don't think there is any Cox: I agree. H.M.Jr: I should think the sooner, the better, from H.M.Jr: difficulty there at all, sir. your standpoint. Childs: Well, we have been trying to get these together as fast as we can, admittedly not knowing precisely what you would want, but that is an almost completely exhausted list with the possible exception of Mr. Elliott's -- H.M.Jr: But I haven't - it isn't in such shape that we could pass on it today? Cox: No. Childs: We can make it up in that shape very promptly, H.M.Jr: Good. That is the kind of language I like. Cox: That presents another question for the committee's action. Do you want to have presented contracts that save money? Because on the June 7 figures for the week ending June 7, there was a net gain of six million three hundred forty-six thousand dollars under the Treasury figures. H.M.Jr: How do you mean? Cox: Well, on cancelations, they got credits instead do it tonight, sir. of debits and those come up in the form of particular contracts. 214 -9H.M.Jr: Well, what would happen on that? Cox: Well, for example on ammunition the Empire total, they have got a three million dollar credit, apparently. H.M.Jr: Cox: What would you do with that, Oscar? Well, I think it needn't come before the committee, but I think the information is already available on the net outgo and income sheets, and you would know the financial status as of a very particular day of the month. H.M.Jr: Well, wouldn't that come up under the thing that I hope they are going to let me have, the net position once a week? Cox: I should think so. H.M.Jr: The net position once a week. Phillips: Yes. H.M.Jr: Wouldn't that come up there, cancelations? Bell: It would come up in connection with their outstanding commitments. H.M.Jr: Yes. Bell: Their outstanding commitments would be reduced by this credit. Phillips: Yes. Cox: Well, also the problem involves cash refunds in some of these, doesn't it? It would affect both your commitments and your income. 215 - 10 Childs: If there were down payments that you got H.M.Jr: If you gentlemen would come in tomorrow with back, it would, definitely, yes. the - one of these sheets, I should think that this committee would be ready to do business with you. Wouldn't you, Oscar? Cox: That is right, sure. Phillips: Yes, we can do that. H.M.Jr: And when will the Treasury present to us the first net position of the Treasury? When do you start that? White: They have already given us one. H.M.Jr: They already have? White: Yes. H.M.Jr: As of what date, Harry? White: I don't know the exact date, but I think it was within the week. H.M.Jr: Well, I -- Phillips: Yes, once a week we can do it. H.M.Jr: When are you going to close your week, on Saturday? Phillips: We can fit it in to suit you, I think, without H.M.Jr: Well, suit yourselves. Phillips: I will just settle with Mr. White. White: Oh, if you would have a definite date that much trouble. 216 - 11 you would close on. Phillips: Yes, I will do that. Cochran: We have it as of June 1, now. H.M.Jr: Well, if it is going to be weekly, they ought to have a date that they close on and I take it it will take a couple of days from then on to get the position, wouldn't it? Phillips: Yes. Well, I will discuss it with Mr. White if I might. H.M.Jr: Good. Cox: I have another question about steel. H.M.Jr: Please. Cox: Are there any outstanding steel orders for steel that could be terminable or could be terminated? Elliott: No, sir. I would say that there is nothing at all now which could be terminated. There have been substantial cancelations and substitutions on the steel program because over the last four months we have actually fallen on a period of reduced shipping and the situation has changed from week to week, and something has come forward of greater urgency than what had already been entered into as a commitment and in the process of bringing the situation right up to date, I would like to say that we have cleared out anything that could possibly be cancelable. H.M.Jr: Do you have any outstanding commitments on steel? 217 - 12 Elliott: The outstanding commitments are small in relation to the program, very small. There may be some fifty thousand tons of steel still to deliver against purely British commitments, which is a very, very small figure. H.M.Jr: Mr. Elliott, just - I am rusty on this sort of thing now. I haven't done it for months. Do the British buy their steels through the Purchasing Mission or do they buy it outside? Elliott: Entirely through the Purchasing Mission, sir, and there was an element which, as you will recall, appeared to suggest some independence from the Purchasing Commission which was in appearance and not in fact, but for the purpose of Lend-Lease that has been entirely removed. Anything like that just isn't in the picture today. H.M.Jr: I don't know. As I say, it has been months since I have dealt with it. Oscar? Cox: That is all. Elliott: I think Mr. Cox really wanted to know the history of that a little more in detail and I will be very happy to give it to him without troubling this committee. I think, Mr. Cox, you agree, don't you? Cox: Yes. H.M.Jr: The next thing we have is actual contracts placed since March 11. Phillips: Yes. Well, we have furnished Mr. Cox with a complete list of everything except things under fifty thousand dollars, which is a 218 - 13 - rather long job, but we will do that. H.M.Jr: Have you got that? Cox: I just received it today. H.M.Jr: Could we get a copy of that? Cox: Yes. H.M.Jr: But you got that today? Cox: Yes. I have got them right here with me. H.M.Jr: I will tell you, you stay behind. Cox: All right. H.M.Jr: Is there any question about that? Cox: No. H.M.Jr: Then the next thing I have, memorandum which Keynes: H.M.Jr: the British were to prepare on the U.K. imports from the United States, administratively difficult to place under Lend-Lease. That isn't quite ready. It is in draft, but it isn't quite ready. All right. The next thing I have is further information on needs of Dominions and India which may be handled under Lend-Lease. Keynes: That again we haven't had anything further from London, as I mentioned in the beginning. I think the only thing we shall be able to do quickly is New Zealand. Australia we have done fairly thoroughly already. The difficulty is really on South Africa. 219 - 14 Cox: I received a memorandum today from Sir Frederick on New Zealand and which takes care of that end of it. H.M.Jr: Any developments with respect to the centralization of South African purchases in the United States? Childs: Yes. I had a call this morning from the Secretary of the South African Legation who said that they were investigating the matter now with a view to taking affirmative steps. We are simply making inquiries. I went through the whole thing, reviewing the general discussion we had here at one of the committee meetings following the meeting we had with you, sir. H.M.Jr: Memorandum on possible sale of wool already Phillips: Well, we can put a memorandum in, sir. I here or stored in Australia. wanted a communication with one of the defense organizations on that, but I will certainly put in a memorandum. Nothing has developed very much yet. They simply asked us how the matter stood, and I have given them some figures showing how much is here and how much is being shipped and the value of the stuff. Bell: Have you discussed it with Jones lately with a view to having him take over -- Phillips: I got a message he was interested in it and simply wrote him a letter explaining what there was. Bell: How long ago has that been? Phillips: Oh, three or four days. 220 - 15 H.M.Jr: Mr. Bell and I spoke to Mr. Jones today on his financing that we are doing for him, and he said he hoped to get tomorrow - this money he can lend - Peacock's, isn't that it? Bell: Yes. H.M.Jr: I told him it was urgent. Well, the wool thing we are still to hear from? Phillips: Yes. If it gets held up anywhere, we will H.M.Jr: All right, please. Any further information let you know. on other materials which Defense Supply Corporation contemplates buying from the Keynes: British Empire or which the British Empire hopes to sell to the United States? There I have asked Mr. Melville of the Colonial Office to prepare a document on one or two commodities, and I think that will raise - these buying bodies of yours are in several cases buying goods which they don't quite know where they will ship and their tendency is to ask for a contract which is payment f.o.b., so we get no dollars unless and until they are shipped. It would help a great deal if they would pay on delivery in the country of origin without necessarily waiting for the shipping. The particular things I have the exact details of is sisal. It isn't a very large amount. They don't know whether or when they will ship it. I believe there are a good many cases like that. Wool, of course, is a case like that. I am told that the Metal Reserve -- Cox: Metal Reserves Corporation. 221 - 16 Keynes: Metal Reserves Corporation has been buying a good deal of manganese from India. They don't quite know where they will ship it. I rather think they are not paying it until they do ship it. I expect one could find a good many of those cases. H.M.Jr: Information on our taking over the Swedish charters and placing them under Lend-Lease. Keynes: The position there, Mr. Morgenthau, is that there has been - London is not quite sure whether that would work, and have told us that we are to consult with Sir Arthur Salter, who is in Canada at the moment, and we can't get hold of him until the end of the week, so it is held up until we can talk to him about it. White: Your memorandum with respect to such commodi- ties as manganese and wool, would that also be accompanied by another report on the possi- bilities of helping out on the cocoa situation and similar commodities? Keynes: Yes, it will have cocoa, but I should say that we could only give it in the case of sisal and what is really contingent, your own buying bodies - you see, I only heard by gossip, so to speak, that they were buying manganese. What you are buying in India doesn't come our way officially. White: But apparently the cocoa situation came your way. Keynes: Yes, and sisal also comes our way. Both of those memoranda are being prepared. White: It is our understanding that anything that comes to your attention of that character, 222 - 17 that a memorandum will be prepared and submitted? Keynes: Yes, certainly. I think that going beyond that, it might be that your buying organizations would have better information than we have where they are buying on these terms, with payment on shipment rather than on delivery. It is only by accident that we heard of those in certain cases. H.M.Jr: Well, we could find out. Is there something you (Cox) want to bring up? Cox: No. H.M.Jr: Now, is there something you gentlemen would like to bring up? I have cleared my little agenda. Elliott: I wonder if I might say in the case of steel referred to, may I say a new presentation of what we are working on at the moment seems to me might fit in very well with what you have in mind here, the control you are going to have. Conferences have been taking place at home with the representatives of the Dominions who produce steel, and they are continuing. The object is to secure the most economical distribution of the steel produced in the Empire for the purpose of the war effort. One consequence of that is the practical elimination of direct steel exports from the U.K. to Dominions and theatres of war which naturally fits in particularly well with the conservation of shipping. The result of that will be that Instead of presenting a picture for the direct requirements of steel to the U.K. and requirements for Dominions and theatres of war and so on 223 - 18 - separately, it will really become one over-all picture, although, of course, it can be broken up and the one over-all picture will be the total quantity of steel required as essential to the War Office, which must be obtained in the United States and the effect -H.M.Jr: Now, do you mind my interrupting you? I want to be very careful to keep the meetings in this office on dollars, and I am fearful that what you are saying is going to lead into production and over-all, and I don't - I don't want to get in on that, you see. I am no longer in on that. Elliott: Yes. H.M.Jr: All I want from the British Treasury - I hope you don't mind my interrupting you, but all I want from the British Treasury is this weekly statement, the day to day things that they bring in from the Purchasing Commission. We are going to be just chartered accountants. We want to buy this today. Now, I am going to be very ignorant and whether it is here or whether it isn't here isn't for this purpose my responsibility, but it is just a question of whether the British Treasury has or hasn't got the dollars and whether Mr. Cox, representing Mr. Hopkins, can or cannot finance it under the Lend-Lease, but whether our steel production in this country or the steel pro- duction of the Dominions is big enough to take care of your needs - I am using this as an example - I am just blind. My head is in the sand. I just don't know anything about it. Elliott: I appreciate, sir, that this is a little pre- mature. It comes back to dollars in the end, but we haven't got it in that form yet. 224 - 19 H.M.Jr: But if you don't mind, I am very fearful that we will get off, and the first thing you know I will be back in my old business and I don't want to get back in it. Somebody else has got it. Would you gentlemen care to discuss some- thingwould in Mr.like Bell's room? Is there anything you to discuss? Keynes: We have got to wait for some further information which we have got to get before we can do much more. H.M.Jr: Then - will you want to meet tomorrow to clear some contracts? Phillips: Well, I personally should rather like to deal with some detailed questions on these amendments of orders with Mr. Cox. I think we are making progress. H.M.Jr: Do you want to do that today? Phillips: Only we have unloaded a great mass of papers on him, so perhaps he may like some time to look them over. Childs: When we talk about after this meeting, I think we can talk about the amendments to the air- craft. H.M.Jr: Well, let's leave it this way. If you have some orders you want to clear tomorrow, would you let us know, let Mr. Bell and Mr. White know, and we will have a meeting for you and I will hold three o'clock Thursday open in the hope that both Treasuries have gotten somewhere. Phillips: Very good, sir. 225 - 20 H.M.Jr: Three o'clock Thursday, but if you want to adjourn to Mr. Bell's room now, and as I say, if you will let Mr. Bell and Mr. White know when you want the next meeting, they are available; but I would like to meet with you at three o'clock Thursday with the hope that we can say, "Well, we have done this. If And I just want to borrow Mr. Cox from the Lend-Lease for about.five minutes and then I will send him in there, if I may. (The conference at this time adjourned to Mr. Bell's office, with Mr. Bell acting as chairman.) Bell: Did you (White) say you had some new figures on their cash position? White: What I had in mind was a figure which they had recently submitted, which would modify their anticipated position. I didn't know that the last figures were June 1. I thought it was a little later than that, but Merle says they are June 1. He has the last date. Phillips: What figure is this, the gold and dollar Cochran: That is the only thing I saw. Phillips: We can give you that figure up to - it isn't Bell: It just about offsets your output? Keynes: About thirty million dollars capital assets balance? altered. came in, wasn't it? Thompson: Well, I think a great part of that was after the first of the month. I think that is most of it. 226 - 21 White: I have here a table that we might give them. I sent a copy around to Mr. Bell which is merely a compilation of material which Mr. Keynes gave us at the last meeting. It is put in sort of a summary fashion. I thought he might have that table to make sure that we understood, just for your con- venience. Keynes: These are cases where, as you know, I am Phillips: June to December. White: That is merely a tabular resume of what you told us. Keynes: What is the hundred and nine? White: I take it that that is the estimate of the getting more accurate in figures. These are all subject to correction, and they are almost certain to be wrong. British Purchasing Commission expenditures monthly. Keynes: You mean it is the average figure per month? White: That is right. You see, that is taken in conjunction with - it is not yet complete in conjunction with an earlier table which you provided us with, which indicates the changes that you anticipate each month and what your cash balance would be at the end of the month, looking ahead during the next year. You remember that table you gave us about a week or two ago. Phillips: I am afraid you will find your miscellaneous one -- 227 - 22 Keynes: Phillips: Keynes: Income, fifteen million. Fifteen a month, that is all right. Oh, that is all kinds. White: Yes. It is merely to see whether we understood the things. Phillips: Miscellaneous ones should include that training scheme and radios. White: Then that figure would be off. Those small payments don't matter, but merely make it -- Keynes: Have you any idea how this has been running? Phillips: No. You mean the hundred and nine? Keynes: Yes. We never can find out what that figure White: The expenditures on purchasing? Keynes: Yes. White: Well, those are the commitments which you is. anticipated would fall due, and I imagine that they are subject to constant change. Bell: Ninety-eight million this month, as I remember, for those commitments. White: Yes, except that this - for purposes of convenience, this was taken as an average. Bell: That is right. They went up to a hundred and fourteen million during the next six months. White: That is not, in other words, an accurate portrayal of what your outgo and income would be during the next month. 228 - 23 Keynes: I think there is one item left out. There White: were other South African purchases from the Empire. It seems to come to not quite enough. Other South African purchases? Keynes: Yes. I gave you figures of other South African purchases. You see, twelve times thirty-four is four hundred eight. It ought to be four times four hundred fifty. Then there is the forty millions of the sterling area which are not in. White: Isn't that in there? That is forty million Keynes: Yes, I don't see where it is. White: We will check up on both of those items. Keynes: You see, there is forty-two - there are three for the year? or four a month missing there for the Empire and for the sterling area not Empire it doesn't seem to be right. That ought to be three and a half. Two Items are three and a half. We can get that right. White: Well, we have the data upon which that was based, and we will recheck it. Keynes: Yes. Phillips: One point in the discussion today left me not very clear. What was suggested was that you might see all the contracts we are placing with a view to determining whether they could be brought under Lease-Lend. What about the Dominion problems? White: Well, I imagine that that would have been the next step after you were ready to indicate what the Dominion anticipated. I should think 229 - 24 the next step would be to examine them in the same way that you do the English. Now, I am wondering, Dan, whether it wouldn't be helpful to have those submitted at once in the same way as the - as we are doing with the British purchases. No decision need be made, but the information might facilitate it. Bell: Didn't I understand that that was being looked into in each case, as to whether or not they could be brought under Lend-Lease? White: Well, I thought this would be the way to look into them. Yes, they were going to submit the memoranda. Bell: That is what I understood. Keynes: Private purchases? Viner: Those Dominion ones might break up in the same categories. White: I should think that would be the way to raise the principle. Viner: Why not? White: Well, I should think that would be the way Viner: In other words, if a few of those were approved, that would settle the question to facilitate it. quickly. Archer: Well, I don't think you can settle it on individual cases, can you, because the Dominions have got to know beforehand in order to make their arrangements for distribution and centralizing. 230 - 25 White: Well, I take it that that was the step which you were going to get additional information on, as to what their - what they anticipated they would need and the extent to which their purchases could be centralized and the extent to which what now is purchased through private channels could be placed under the Government pur- chases. Those were all matters which I take it you were going to pursue. Keynes: I think what would help us very much is if there could be some approval in principle on a certain list of commodities. We should then ask them to centralize those. There is a fairly clear list of those prima facie easy to do. Steel, I think, is being done already. Then there is oil. Then there is motor vehicles and fertilizers. Then there is machine tools and there is a small it em for food. Those are the clearest cases. If we got a fairly clear ruling on those, it would be very helpful. Archer: That is what we would like. White: Would that be the easiest way, to get a ruling on it, to present the specific contracts covering each of those items? Viner: But the answer is that in order that they shall be able to present the contracts through this machinery, they have to organize their buying on that basis. White: Not if they have some contracts. I gather from Sir Frederick that you have some Dominion contracts. Now, they may not cover all those 231 - 26 - items. I don't know. Phillips: I think we could give you a very sketchy list of contracts placed through the British Purchasing Commission for the Dominions. Archer: Keynes: Very few are placed through the Purchasing Commission. What we want to ask is that those commodities would be favorably considered and then we could put them up. But it is difficult to stop the other machinery, you see, unless we can hold out some hope to them that this machinery will work. White: Well, wasn't that what we expected to do with the partial list that you submitted last time with a more complete list that you were going to submit this time? Keynes: White: That is right. But if in addition to that there were any specific contracts which you were contemplating placing, then that list might be supplemented by those contracts and further, might be clarified by the decision on that matter. Keynes: I think the real difficulty is India and South Africa, and if we could tell them, "If you will centralize such and such commodities, we can put them forward in the same way we put forward the Australian. But they have got into their heads that there are great obstacles in the way. They are quite misunderstanding our position. Bell: Didn't you say that India was sending some representatives? Keynes: You said that, Phillips, didn't you? I don't know anything about it. 232 - 27 White: I thought they said there was one on the way. Viner: I saw a newspaper item to that effect. Keynes: Yes. White: I think Mr. Davidson remarked that there was one on the way. Viner: I have forgotten the name now. It was an Keynes: I think that was so. White: Well, does that answer your question, Sir Indian name. Frederick, that when these lists will be prepared and brought to this committee, then I take it that that question of to what extent the Lend-Lease are ready to treat those various commodities and Lend-Lease items would be considered. Keynes: Yes, I think that is what we should do. It is a ham and egg problem, you see. White: I was wondering whether the Secretary fully understood Mr. Elliott's point. If I understood it, I thought he was - had something specific in mind that did bear definitely on the matter that was being discussed - I mean Elliott's point with respect to the needs of the Dominions for steel, which they had hitherto been exporting from England and the question was whether there couldn't be an export directly from the United States, I take it, to the Dominions and save the shipping from there -- Keynes: What I think he was driving at is, when we put in a requisition we can't know whether it is a Dominions or our own in the first 233 - 28 - instance. That will be settled at a later stage. Therefore, the ultimate destination wouldn't be so clear as it has been. White: What is that? I didn't gather that point -- Viner: Let's encourage Mr. Elliott to push the matter further with this committee. Archer: Perhaps I could explain it. I know something about the steel condition, I think. The United Kingdom wants to change its steel production, switch over from certain things, say from making tin-plate to more direct armaments materials so as to economize the use of its steel to the best of its ability, and in- stead of bringing steel back across the Atlantic, say to South America, to have that steel sent from here, you see, which was formerly done with British accounts. That would save a certain amount of steel going across the ocean and it would mean that instead of having to use ships to carry it all the way down, it could be used for other purposes. There is also an advantage in so far as the labor would be relieved from making these par- ticular types of steel. It can be used on making other types, which are more direct in use. White: That is what I thought. Archer: Now then, to do that, one has got to transfer certain steel production from the U.K. to the U.S. We understand that the U.S. capacity is available to take this, and it can be done here. If we have to take it here and we can't get it under Lease-Lend, then we shall be involved in a dollar expenditure. 234 - 29 White: That is what I thought it was. Archer: That is the point. White: And that is a question of policy that would very definitely be pertinent to the matters which we are -- Archer: And if we didn't, if we couldn't, what we want to know now is whether we are going to get it under the Lease-Lend, because if we don't get it under the Lease-Lend, we will have to reverse the production policy in the United Kingdom and not have this tin-plate made over here. White: Is there this difference? Do I understand the process correctly? Whereas hitherto there has been, let us say, a million dollars worth of raw material going to the British Isles, there converted into a semi-finished or a finished product, and an export of, let us say, two million dollars to some point in South America, that the question which is being raised is the possibility of avoiding that shipment? Archer: Yes. White: Well, you wouldn't want to confine it to the Dominions? Viner: Well, the question has been raised only with respect to the Dominions. Archer: No, on two angles. First, to the Dominions, that is, mainly Australia, South Africa, and a certain amount to Egypt for oil cans and things of that kind; and secondly, to the Dominions of South Africa and Portugal for canning foodstuffs, which go back to the U.K. 235 - 30 White: So that it would be, let us say, a million dollars of raw material which you would export for the equivalent of two million dollars, the difference being in shipping and the manufacturing process and your the suggestion now is a consideration of an export of the semi-finished or finished product directly from the United States to South America and the proceeds from that point on - it is not clear to me who receives the proceeds of the sale. Archer: Well -- Viner: If delivery made in South Africa, the payment would be made by South Africa to London in sterling, I take it. Archer: Yes. White: That is in the case of Dominions. Then in the case of the Argentine -- Archer: In the case of the Argentine, that position has not been clear yet. Keynes: No payments would pass because you see this tin-plate is coming back to the United Kingdom. Archer: I think there probably would have to be payments for practical reasons. Viner: You mean unless South Africa - but if South Africa is charging you now for - or let us say South America, charging you now for the meat, is also charging you for the tin-plate, if it got the tin-plate under Lend-Lease -Keynes: We are sending the tin=plate, you see. Viner: And you don't - you mean it is a transaction which in time -- 236 - 31 Keynes: Viner: Cancels itself. But in sterling, in monetary returns. There isn't a direct cancelation in which they say, "We are not charging you for the material for the container"? Keynes: Yes, the procedure on Africa hasn't been determined yet. That is a rather difficult question. Viner: I wonder on this Dominion thing, these individual cases, why they can't be moving toward some part at least of the general principles involved? White: Well, I think they can. I don't know the extent to which they have been re-raised again. They were raised very early and possibly were discussed again at the time of your letter, Mr. Keynes; but whether the question has taken the form of a specific request -- Viner: I take it we would be taking an important step if we were formally to invite a discussion. White: I thought that was what we were doing right here. Viner: I don't think they understood it that way. Keynes: I was suggesting that that list of commodities should have some conditional approval in principle. Archer: I have asked - I gave this memorandum which I prepared containing the list of the United Kingdom - United Kingdom list, you see, I gave a copy to Mr. Cox at the meeting. White: Today? 237 - 32 Archer: Yes. The United Kingdom list, you see, and what I would like to get is approval in principle -- (Mr. Elliott and Mr. Malcolm entered the conference() White: Some of us were afraid that your (Elliott's) point wasn't thoroughly understood, and we were re-raising questions as to what speci- fically you had in mind, Mr. Elliott, and I think that as the matter was explained it does have some relevance on the problems we are discussing. Elliott: Yes, it comes back to your committee's par- White: Is it your thought that the - some of the raw materials which you now are importing in the U.K. to be converted into semi-finished ticular responsibilities eventually. or finished manufacture and sent to the Dominions, is it your thought that that would also want to be raised in connection with raw materials which are sent to England now through the Argentine? We thought that might be the case as well. Elliott: Well, my thought is limited to steel. There may well be applications of the same principle beyond that, but in the case of steel, it is really a very simple problem. We have been exporting from the U.K. for essential war purposes in the Dominions and elsewhere, a much reduced but still a considerable quantity of steel; and if that steel can be obtained under Lend-Lease in the United States, there is an obvious great economy in the shipping. White: Let me ask one or two questions to make that a little bit clearer to us. Let us take the case of a manufactured article that is sent 238 - 33 - to Australia, we will say a tank, or parts of a tank. Now, that is one of the types of items, I take it, which Australia might be able to get under the Lease-Lend directly. I mean, that is one of the type of items we have just been speaking of. Right? Elliott: Yes. White: And similarly with any exports of armaments, steel or any other commodity, that is sent to any other one of the Dominions. That represents nothing new, nothing other than the question as to what the Dominions can get directly under the Lend-Lease. Now, are there some other items that would not fall in that class, either because they are not armaments or anything that is presumably intimately connected with armaments, or because they do not go to the Dominions? Elliott: Now, I have not thought of seeking to present this problem, but there are very large quantities required not only in the Empire but elsewhere for purely British Government contracts. Now, that tin-plate has to be supplied from somewhere. If it is supplied from Britain, as it has been very largely hitherto, it means that Britain has to obtain or seek to obtain under Lend-Lease an equivalent in English steel. Perhaps not in that form, 80 that the total requirements on steel can be expressed as an over-all figure for all purposes essential to the war effort and the net effect of this is that if all such requirements in steel could be accepted as an over-all requirement under Lend-Lease, all of these vast economies in shipping are possible. If not, they are im- possible. It raises a difficult question, but It ties up with the presentation of demands 239 - 34 - for steel for Dominions, theatres of war and so on, which might be disallowed and which ture. might therefore require dollar expendiArcher: That is right. Keynes: I think it is quite clear. Archer: You come back to a dollar expenditure if you Viner: A dollar expenditure and a wastage of shipping. Elliott: And a wastage of shipping. White: Supposing we take tin-plate to Argentine. I take it you are including that. Supposing Argentine couldn't get tin-plate from the United Kingdom by virtue of difficulties of shipping. Would they buy it from the United can't get this relief. States? Elliott: That is the only other source from which they White: And that in turn depends on what they will can get it. get paid for their - in that event they might insist on gold or dollars rather than sterling which they might take if they didn't have to pay dollars for the tin. Thompson: I would suggest they would ask for it. Bell: Oscar is familiar with it, and he thinks you ought to put it up. Cox: I think you ought to put it up with some indication as to what the things are so you can look at it on the over-all basis from Lend-Lease; and if they want to exclude 240 - 35 - tin-plate from the Argentine, that could be done, but you know something definitely as to what the over-all approach is. Viner: In other words, work up your potential program, itemized as best you can, and put It up to the committee. Elliott: Yes. Viner: In estimate form. White: And I think that generalization, probably, Viner: I would like to bring up, while you are here, this British Dominion case again. On the applies to all of this. question as to whether and in what ways the Dominions might be brought in under the Lend-Lease. Now, what is the status on the question of principle? Cox: There hasn't been any decision on it yet. Viner: Do we need a formal request in order to come to a decision? Cox: I think the best way to get a decision on it is to take it up in terms of a concrete case or a series of concrete cases. Viner: Well, there is this aspect, apparently. In order to - if they were brought under LeaseLend, it would put them under pressure to put their purchasing procedures in such forms that the contracts would flow to you for O.K. Cox: Well, you have got a double -- 241 - 36 Keynes: If we put up -- White: Not a pressure, but an inducement. Viner: Pressure in that sense. Keynes: If we put up the program for Australia, does that prove that another similar case would be approved? If we could have approval in principle, we could say to these rather difficult Dominions, "We have reason to believe if you will centralize these pur- chases and put them up in due form, we have reason to believe that they will be approved." Then I think we can get some steam up on this. Cox: I am a little skeptical as to whether you can get it decided that broadly in principle. In the first place, you have got a priorities problem in terms of relative utilization of different spots in the world, and I would think that the policy might be different, for example, in terms of a bomber or a motor vehicle in Australia than it would be in India. Keynes: It wouldn't exclude that. If they were allowed to have that class of article from this country at all, it would be lend-leased. It wouldn't prevent you from saying this is a low priority. It wouldn't mean you are committed to approve any particular application, but if this is what they were to have -Cox: I think in terms of Professor Viner's observation you have got two different forks to the thing which would act as a means of persuasion to the Dominions. One is if they placed the order themselves by reason of the general priorities situation, they either 242 - 37 - have more difficulty in getting the order placed and executed, or they don't get it placed at all and executed, whereas if the same order were decided to be placed under Lend-Lease, they automatically get the statutory priority. In terms of particular items, a decision could be reached under the Lend-Lease in terms of the availability, and I should think on motor lorries you could probably even get them for India because of the production facilities unless they decide to curtail the automobile industry to the point where the whole personnel and machinery and everything are thrown into defense work; but you take a thing like scout cars, for example, as one illustration. The Army already has over a hundred percent of its requirements and they can produce them so fast that I don't think there would be any objection at all to sending scout cars to India. They just have such a supply. Then your only condition, practically, would be shipping, and you would have to make the decision as to whether you wanted to do it. Keynes: I think that is most satisfactory. If there Cox: That is what it comes down to. Archer: is reason to believe - if they are going to have the thing at all, it will be lend-leased. That is rather the point. Mr. Cox, it is not availability, it is eligibility. Cox: It is a combination of both. Viner: Shipping availability, priorities availability, and Lease-Lend, and if they are told that on many of the items they are interested in shipping is their problem, that priorities availability 243 - 38 depends on whether it comes under Lend-Lease and they ought to try it as their only chance of getting it. Archer: We would like to tell them that it would be available under Lend-Lease, subject to production being available. Keynes: Cox: That is the point. If we could tell them it is eligible, not necessarily available. All I am saying is this. You put up the general policy question on Australia. My own hunch is that in terms of the President it is going to be very difficult to get it decided on the over-all basis. From our experience if you send through a requisition on specific items, and tell the Dominions at the outset that they will be given sympathetic consideration in the light of these three points Professor Viner mentioned and then if the requisition is granted, they have got a practical assurance that the sympathetic understanding or consideration has been executed in that case and likely will be in all those other cases within the terms of production and our needs and other needs, when the stuff is available. Archer: But there is a great practical problem in there, Mr. Cox, you know, in organizing the flow of goods backward and forward through the two very small channels. You see, at the present time we have got the whole of the trade, exports from the United States, flowing out through intricate commercial machines that have been going on for years. What we are trying to do is channelize it at one end through the various U.K. and Dominion channels, and at this end it is coming through the Treasury Procure- ment Division. Well, It is just a tremendous administrative job. 244 - 39 - Cox: Oh, I agree, but I think you can't be too sanguine about doing the whole job in one day in terms of dominions. Archer: I quite agree, but it takes them sometime to organize their essential purchases. Equally, it will take you time here to get your Treasury Procurement augmented. Therefore, if we can have the - an early decision that these things will be eligible, they can be getting on and making all their administrative arrangements. Keynes: White: We don't want to think up these organizations for no purpose. If we think in general of their usefulness, then it is well worth doing. Well, the incentive to avoid losing any time at your end of it, it seems to me, is very considerable because it is a question as to whether there is immediate payment for the goods or whether it goes under the Lend-Lease for a hundred percent of the value plus the shipping charges, so the incentive should be very considerable. Now, the more rapidly your organization is set up and your list prepared, I think that very factor in itself puts pressure at our end and helps to expedite the decisions here, and I don't think from Mr. Cox's remark that you can quickly reach the stage where there will be a sufficient delineation of the principle so that you can feel wholly assured that you can go ahead on all these commodities and know that they will be made available, but I think, on the other hand, there is sufficient feeling of hope on Mr. Cox's part to warrant your going ahead as rapidly as you can. Childs: Mr. White, that means if we can get in here 245 - 40 complete enough lists and representative enough, we can get enough precedence right off the bat. White: That is what-- Childs: Now, those dominion lists which we put in here last week-- Cox: I certainly would start on Australia or New Childs: We must put them in a form-- White: A little more specific, and that was merely Zealand. one of the categories. I think it is merely a little more specific than an actual request. Childs: Are we going to follow the thirty-five million dollars a week list form? Phillips: What is the thirty-five million about? Childs: He is talking about the form of list which we used to put in over here. Viner: It is my understanding that that thirty-five million dollar list - a week list that he referred to was the form which he wants as a summary, that that is to be supported still by these fuller itemizations. Childs: That is the point. How would you like to have it done? Viner: Well, we weren't clear this morning. Mr. Cox may have been clear. We weren't. Did the Secretary want to cut down the amount of specific information or supplement it? Cox: I think all you have to do is in terms of prospective contracts, for instance you 246 - 41 supply a summary list that you want to place a contract at A, for let's say oil or copper or brass or whatever it is, and the dollar amount is X dollars, and whatever comments you want to add, and then if we need any additional information we will ask you for it but, as I understand it, the Secretary had in mind the same kind of approvals that he used to give between January 1 and the date that the Lend-Lease Bill was passed in advance of the execution of the contract. The purpose at that time was quite different, just to make sure that the dollar commitments would be met. The purpose now is to determine whether or not you can pick up any of it under Lend- Lease and at that point if it looks all right on the face of it, we would just go ahead and say, "Put the requisition in." White: No question of approval in this. Cox: You invite them to go ahead with Lease-Lend or you just say flatly, "That is out, you might as well go ahead and place the contract." Bell: As the Secretary said, "You might take eight of the items out of the ten and approve them." Cox: That is right, or you might just say, "Place the contract with your own dollars. Archer: But all this has got to be prefaced by setting up an organization to work lt. Phillips: Yes. Keynes: It doesn't reach us at all, you see, until the organization exists. 247 - 42 - Viner: The minute - if you could start one of them fairly promptly on that and the others are having difficulties and you can inform them as to the experience of the other, that would also be an inducement to them. Cox: Well, you have got several classes of cases, haven't you? Your first case is the U. K. purchases handled through the Purchasing Mission. Archer: Which were very small, Mr. Cox, in relation to the things that we are considering now. Cox: I know, but it is one type of case. The other type of case are the dominion cases. O'Connell: Does the dominion - does the Purchasing Mission purchase anything for the dominions? Keynes: Oh, yes. I think we can get ahead on this. The root of the trouble is that about six weeks ago the impression got abroad in London and in the dominions that the thing was not going to be used for Lend-Lease except through a limited application of strict munitions. That impression got abroad. That impression is not being completely dispelled. So then they stopped forming any organizations in these countries, and it will take some time to reverse them. You are dealing with people scattered all over the world. Cox: Oh, of course. Keynes: To get the government in India to forming an organization that centralizes all the purchases of any merchant in India with any part of the United States isn't easy to accomplish; and they thought, six weeks ago, that they weren't going to be able to put anything under Lend-Lease. What we have got 248 - 43 - to do is get the contrary impression in their minds and tell them that if they will start centralizing easy cases, we have hopes of sympathetic treatment, and then they can gradually extend as time permits them to. Archer: We muston. give them a list,I think, of things to start Keynes: The list I mentioned to Mr. Viner. White: Would it be possible, Oscar, to help them out in their problem, in that aspect, to accompany a decision of approval with respect to a specific item? Viner: If there were any available now. White: That they were able to work out to make that specific item a type of a class, no matter how narrow you wish to make it, so that it would be clearly indicated that if the item falls within that particular category as described by yourself, it will be acceptable under Lend-Lease provided the shipping fa- cilities and priorities and so forth are available, so that if they give you a com- modity they can have the knowledge that it is not an isolated case or a commodity that they have received favorable response to or an unfavorable response, but rather a cate- gory of items, and in that way they can build up very quickly a body of principles upon which they can work at once. Cox: You sound like a common law lawyer. Archer: You put it very well. Keynes: That is exactly what we want. Cox: Let me ask you this. What has been done on 249 - 44 the dominion's purchases or proposed purchases for arms and munitions and implements of war, just to take one great category? Viner: And the easiest case. Archer: There is no difficulty about that because they are generally being regarded as subject to the Lease-Lend. Keynes: That is automatically centralized. Cox: I know, but how do they centralize that? Keynes: Automatically, because it is already government, and there they have for months past thought of it as being under Lend-Lease, but on the other hand they haven't been cen- tralizing implements of war except in the case of Australia because our hopes weren't ours, and what we have got to do is revive those hopes. Fortunately Australia didn't take the discouragement seriously, and therefore they are ahead of everybody else. Phillips: One other point occurs to me on this. Let's take the case of tin plate. Supposing some application by Australia for tin plate under Lease-Lend was passed. Is that sufficient assurance to us that all future applications will be passed? The steps might be reversible taken on the face of that. For instance, they might leave one or two of the best tin plate works in the United Kingdom going just to provide a supply for our own purposes, and then all the rest would be shut up. We would be switched on to war production at once. White: I presume there might be some qualification. That fact in itself might not constitute adequate description for a decision as to cate- gory. We might, for example, want to know 250 - 45 - what is going to happen to the tin plate, is it going to be used - is the amount such that you can anticipate it is going to be used for X purpose or Y purpose. In other words, they might want to ask questions with respect to the use as well as to the description of the items. Phillips: Can that be done by - on mere requisitions? White: It could be done this way. Supposing the question of tin place - a shipment of tin plate were requested and a decision were made that tin plate shipments to Australia were to be permitted up in the Lend-Lease up to X thousand tons. Phillips: Oh, that is fine, but that doesn't quite Cox: No, but I think it would be related to the coincide with what Mr. Cox was saying. purpose, Harry, as you indicated. For example, let's take a non-real case but with a possibility of tin plate being used for the manufacture of arms and munitions and implements of war. Or to take an alternative case, if it were going to be used to make cans to put up kippered herrings to be sold in the export market, I think we might get a different decision. Phillips: It is quite difficult because some of those kippered herrings might be used for troops and some might be used domestically and some exported. Cox: That is where you are dealing-- Keynes: I think we must exercise a good deal of judgment. Cox: That is like the case Childs and I had up here 251 - 46 recently when the purely practical problem was the problem of paper coverage, part of which was used for covering shelves and part for covering food. The things passed on the requisition. I think if you had a great surplus of tin plate for the export market, that is one thing, and I think we have got two bucketfuls of water and one is augmented by the defense effort and the other for your exports, and it is a different case. Archer: But surely the position of the control of commodities of the United Kingdom is such that the amount going for export is relatively small in total; and all you would be doing, if you said we couldn't have that, we would have to use our own steel for that and come to you for direct armament steel. These things are all interchangeable. White: I take it those are facts for consideration. Archer: That would probably mean a wastage of shipping. Cox: Well, you take the case - it seems to me in terms of shipping and everything else on tin plate it is conceivable it would be better for your tin plate factories in the British Isles to go into the defense effort and for us to supply tin plate and ship it all over the world. Keynes: Yes, that is it. But it isn't possible for us to put our tin plate factories out of commission. Viner: Or to transfer them to - transfer their equipment so they can make other kinds of steel products. Archer: They would be closed down mostly. 252 - 47 Phillips: Cox: The labor situation is bad. May I raise one question that was raised in the Secretary's office in terms of payment for purchases where the materials are stored because of lack of shipping? My offhand reaction is that there is no legal prohibi- tion on either the Metal Reserves Corporation or any of the RFC corporations making payments on account or advance payments, so to speak, for materials that are stored in some other spot in the world, and I think that some exploration ought to be had there in terms of getting Jesse Jones to pay part while the materials are stored pending the avail- ability of shipping. Keynes: I think they are just taking the natural Cox: Oh, of course. Keynes: They are not considering the reaction on our cash position. Phillips: Well, mind you, on the wool position, as I business line, Mr. Cox. understand the agreement, there has got to be a declaration by the United States Govern- ment that there is a shortage of wool supply in the United States before they can do anything at all, before they can buy the stocks for here and much less the stocks for other areas. White: Is that part of the written agreement? Phillips: Yes. White: Well, assuming that that may be so, the question as to who determines that shortage and under what conditions that shortage may be determined, at least the latter certainly, I 253 - 48 should imagine would be subject to discussion and obviously the shortage is one that might well be related to the prevailing prices and ones cognizance is taken of the effect of the limited supply on the price, it might become possible to make a decision with respect to a shortage that one wouldn't expect any absence of price considerations. True, there are vested interests in this country who dislike to see the supply of wool augmented, but whether their view shall be de- cisive is a question that I think can be explored. Viner: Well, let me ask this question on these stocks and the question of f.o.b. payment or payment on final delivery on different cases, including wool. Who ought to look into that? Is that a question for the British to take the initiative on or for us? White: No, I thought the procedure that would help us would be if we had all the pertinent information, we explore the situation - our technical men get whatever information there is available so that the Secretary has before him the facts so far as the actual terms are concerned, an analysis of what the situation is, and a recommendation. If he is satisfied with the committee's recommendation and if the committee's recom- mendation is such that he is to take action, or at least to attempt to obtain action, then he will use whatever channels of persuasion or power that are open to him either through the President or Mr. Jones or any other department, but coming that way, you do get an over-all picture - or rather an over-all objective which you don't get if you are working through a particular corporation. 254 - 49 - White: Do you propose to go at it that way? What is that? Viner: Do you propose to go at it that way? White: That is our proposal. I think that is carry- Viner: ing out the Secretary's intent and that is what we suggested at the last meeting would be done. Did I understand you that you would have a memorandum on wool? Keynes: Oh, yes. Viner: And on the cocoa? Keynes: Yes. We asked for it. It just hasn't arrived. Cox: In the light of your observations about the wool, Harry, I suspect that written into the agreement was the essential provision of the "Buy America" act. Now, since that wool agreement has gone on, there have been a great many changes, one of which is an in- creased shortage of a strategic, critical item, and the other is the Lend-Lease Bill which isn't provisioned in the same way by the "Buy America" act, for example, because anything that is used outside the United States is not covered by the "Buy America" act. If it is stuff to be used, then you are conditioned by differentiations in prices, relative shortages and so forth and so on, and I think your people ought to have a look at both the legal and practical difficulties. White: That is what this committee would do. The lawyers would examine to see what are the restrictions. The economists might look to 255 - 50 an economic analysis in relationship to price, and then the policy decision with respect to what to try for would emerge with that committee; and, if it met with the satisfaction of the Secretary, he might be able to do something. O'Connell: As far as the legality is concerned, it is purely a matter of agreement. But the wool situation is entirely different from the one you are speaking of, is it not? Keynes: Oh, yes. There is no clause in the agree- ment. It is simply that they are taking a straightforward business line about it. 'Connell: We have made contracts in Procurement where we have made partial payments at ship-side or even at the warehouse on the other side. White: But they are not even selling the wool they have in the storehouse, and you know what is happening to the price of wool. O'Connell: But they are not so much concerned about the price of wool. They are being paid for the wool. Viner: No, we aren't being paid for it. Not in the wool that is here. O'Connell: That is where I didn't understand it. Keynes: White: It was apparently a kind of political compro- mise which may have had some point at the time it was made but ceases to have the same effect. Phillips: I wanted to raise also the question of these amendments to contracts. We have put in now to Mr. Cox a full list of all the amendments 256 - 51 that have been made since March 11 which comes up to three millions, but I gather these things are bearing off, and I am not quite clear how we are going to continue under Lease-Lend. That is my trouble. Boddis: It is a peculiar feature in aircraft, that you can't do away with modifications of the original design. You have got them coming up all the time. Of course, all contractors are paying for them against this enormous list, and there are two problems as far as I am concerned. One is, first of all the principle of whether they are eligible for Lease-Lend, secondly, to get the contractors to accept. So far-- Viner: Why should the contractors care who pays them? Boddis: I don't know, to tell the honest truth, but they do. White: I don't quite understand that problem of getting them to accept the contract. Do they have to accept the Government's contract or is it merely a case of where they continue and the dollars are coming from the Government instead of the Purchasing Commission. Boddis: It isn't quite a case of accepting a straightforward contract, because it is an amendment to an existing contract to ours. Viner: Is it the question of profit limitations? Would that be involved? Boddis: That is undoubtedly a factor. Cox: The U. S. Government pays less than the British. That may be - it is not a question of profit limitation. 257 - 52 White: It doesn't pay less than the British on contracts that are already arranged, does it? Cox: The modification contract ought to be between the United States Government and the manufacturer. O'Connell: Who negotiates it? Cox: The Army would want to negotiate it jointly with the British, because they get a better deal on-- O'Connell: But your difficulty with your aircraft people on modifications must be purely one of negotiation on a mutually satisfactory basis for the addition, is that right? Boddis: Yes. O'Connell: They want more than you want to give them in terms of additional compensation. Boddis: That is one of the reasons, but of course there are all others, such as the problem of inspection. If you got seventy-five percent of a machine inspected by British inspectors, it is a little difficult to have the other twenty-five percent inspected by somebody else. The U. S. Army Air Corps, if they were responsible for the contract modification, would have to try to inspect that in order to clear their books. How they would do it, goodness only knows. White: Well, is that an insuperable difficulty, Oscar? Cox: I don't know. I think it is a difficulty that ought to be looked into. 258 - 53 Boddis: Well, it is an insuperable difficulty from our point of view. If we could get a lot of pressure brought to bear on them, we might get by with it, but so far we haven't been able to do it. Cox: Well, you haven't had any cases up yet, have you? Keynes: Are these cases - can't you break it up and hand over a small proportion of the finished aircraft to the American Army authorities? Boddis: We do break up the modification into two parts, parts which are necessarily bought out by the contractor and the others can not be identified from any other pieces of structure. Keynes: If the increased cost is ten percent, why shouldn't you readjust it so that ten percent of the total contract is lease-lent? Childs: We tried that and they refused that. Keynes: Why should they refuse that? That is very unreasonable, isn't it? Childs: They are very unreasonable very often. Mr. Boddis has some amendments. He has got to get them made immediately. If we have got to fight those people, we must spend weeks with them. The aircraft people are very difficult and can be arbitrary. Until you break their objections, it is impossible to continue production of aircraft. That is the trouble. Boddis: That is one of them. Cox: Now, is this in terms of your talking to the 259 - 54 company alone? Boddis: Cox: So far, yes. The legal end is clear if we can get the policy end clear so that the Army puts the heat on the contractor, I should think it might change the picture because, after all, the principal customer of most of these aircraft companies is the Army Air Corps. Boddis: Not for the moment. Cox: I see Keynes is right, and these fellows are being very unreasonable, and maybe you ought to counter by being unreasonable the other way. Childs: Brewster is a large amount, eight million, and we could try it there. Cox: What is the change in the Brewster? Boddis: There are some where about forty-five of them, speaking offhand, which is an accumulated change. Cox: Sir Frederick had once a machine which may cover the inspection problem and so forth and that is that you take the dollar amount of the changes and translate it in number of planes and give that number to the Army Air Corps. Childs: We tried that a long time ago. Boddis: We haven't tried that - we are still discussing it. Childs: They haven't accepted it. Cox: I think it is one thing to discuss it on your 260 - 55 - own. I think it is another, if the Army is agreeable all the way through and is participating with you because they can bring pressures to bear that you can't because you are a customer that is pretty much out of the picture now because you haven't got any more dollars. Boddis: How do we get the Army to cooperate? Cox: Oh, I think they have to get a directive on that, which is a fancy name for an order. Childs: Who would issue that, General Burns? Phillips: Have you got a case which is ripe enough to try out now? Boddis: Certainly. There is one of those with Mr. Cox now where we are expecting first deliveries of the modified machines within the next fortnight. Cox: Which one is that? Boddis: The Consolidated job. Cox: What is the dollar amount of that? Boddis: One hundred ninety-two, I think. Cox: When does the Brewster come out? I think this is a guinea-pig case. You ought to take the eight million plus contract. Boddis: But that means Consolidated has got to be held up. Cox: That is a question of policy as to whether the delay occasioned might not be a greater disadvantage than putting up the million and a quarter. 261 - 56 O'Connell: Isn't the Consolidated question somewhat simpler in terms of its - the problem - the changes? Boddis: No, in principle it is exactly the same. It is only a question of amount. But there - Consolidated is more urgent because the machines are coming right out. White: Cox: O'Connell: What makes you think it would be more difficult to handle the million two case because of the amount or the time is short? Time is short. If you don't do anything about Consolidated, what happens, the planes start coming off without improvements? Phillips: We have to pay cash. Keynes: Couldn't you put it up in writing, that the solution that you suggested to the manufacturer, that seems to you workable and satisfactory, is this taking over ten percent of the machinery? You put down the details of a particular case and then you can pass over and they can take it up. They haven't got that in writing, have they? Boddis: Yes. Now-- Keynes: Now, the box has been passed to you. Viner: "So what" is the American way of saying it. Childs: Tell me, sir, we didn't quite straighten out the point raised about how we are going to put this material before you. I take it these figures now are not sufficiently complete. White: It was my thought that you were going to present 262 - 57 - it to this formal committee and that there may be some brief discussion in the way of explanation or some further questions, but it would very rapidly be channeled to where the decision would have to be made in the first instance in any case, and that would be to Mr. Cox. Childs: So we should re-do these dominion lists in a fashion that-- White: In such form as will suit Mr. Cox's purposes. Childs: So I will talk to him about that. White: Present them to - either directly to Mr. Cox or to this group, whichever Mr. Cox wishes. I guess they had better go directly to you. Cox: Yes. White: Or you can have copies made and send it directly to Mr. Cox and no time will be lost and let one go here so that the interested persons can have information with respect to your request. Childs: Good. Now there is one more point in that connection, sir. I take it that those dominion lists in each case were not yet in a shape which would permit them to be put in as requisitions, is that generally true? Archer: We must get a program. Childs: Now, could we do this, sir? To accomplish this thing in advance that we were talking about a little earlier, could we put in a case which gives all the details on what we expect it to be except that it will not be ready to requisition yet? We could state 263 - 58 - the material, place to which it is going, purpose for which it is going to be used, and how distributed, and so forth. White: Even though it is not a requisition. Can you handle that? Cox: Yes. Childs: Can we do that? White: Yes. Cox: It would be much easier if you could put it in a requisition. Childs: The difficulty is that I do know from talking to so many of these people they do know what list of things they will want to order, but they don't know how much they will want to requisition. Viner: If they are not sure as to whether they want eighty thousand tons or a hundred thousand tons, let them requisition eighty thousand now but say that probably they will want a hundred thousand. Childs: We can do that, but if we couldn't even give the eighty thousand, then we could put in one for declaratory judgment. When we cover the whole list, there is a very large list of Archer's here, and we could really cover a large field and do the same for the dominions, so the dominions could foresee-- Cox: Now, wait a minute. As I understand it, Australia is fast centralizing its purchasing of non-armed-- 264 - 59 Archer: Cox: Childs: Archer: Cox: No, it isn't yet. I said it is fast centralizing. It is turning in that direction. It is turning in that direction, but nobody knows what the situation is now. Well, the first thing you have got is that the chances are pretty high that they won't be able to get any of that because every day the priorities situation is becoming tighter. Childs: Yes. Cox: The second thing is what Professor Viner pointed out, they must now, at least in minimum form for requisition purposes, state what they want because you have got your whole program there. Childs: Well, to the extent that requisitions can be put in presumably, they will be put in, but should that leave a large field open, couldn't we get a declaratory judgment on it? Cox: What happens as a purely practical matter is, the letter goes to the President either for allocation of funds or for allocation of funds and transfer, and he has got the decision to sign or not to sign, and there may be a short covering memo on it. Where you get an actual decision easily, it is hard to get a hypothetical decision. Childs: I thought you were going to decide these problems here. Cox: I can decide them, but I am not positive that every one I decide the President is going to decide the same way. 265 - 60 Childs: We recognize that. The point is you could put them in, you see, and get what we recognize might be up-set later on. It would be worth having. White: It would appear to me, without knowing more of the difficulties, that it should not be impossible to translate parts of your program into a requisition because, after all, since you are not involving amounts you can always assume safely some small quantity where you have no definite information as to total quantity. If you do not have in mind any small quantity, why the item at all? Since you have put that item in, whatever the item may be, there must be in the back of your mind some information. There must be somewhere along the line some information that those items will be needed in which case it could easily take the form of a requisition, even though the requisition- even though the requisition might be five or ten percent of what you might subsequently ascertain to be your needs. Viner: You might requisition your first month's estimate of your program or your first two month's estimate. Keynes: Have you got the exact specifications? Childs: Exact specifications is one reason, ultimate purpose of use would be another. Are there any others, Mr. Archer or Mr. Elliott? Cox: Let me mention one other factor that seems to be relevant. That is the question of availability of funds. The largest category in the appropriation still available is the one for agricultural, industrial, and other commodities, which covers things like steel and so forth. 266 - 61 Keynes: would all come under that category, IThey should think. Cox: Practically all. You could only transfer out of that a certain limited amount. Before that is used up - in other words, you ought to get your requisitions in as fast as possible as a charge against that account and it is more likely at this time you will get them recognized than if you wait a long time until you get hypothetical judgments and programs all worked out-Childs: Don't mistake me. Cox: What I am saying is, you ought to get your requisitions in as soon as possible. Childs: I think that is being done all over the lot. Take this South African situation this morning which Jack came in to talk about. He wanted to know - New Zealand asked me two or three years ago, "What can we get? Here is the sort of list we think you ought to cover and we are examining our import licenses for next year. What do you think of them." Well, they could probably state perfectly good hypothetical cases on every one of the list which would cover every possible use that everyone wanted to be put to and then if we could say, "Yes, that is definitely O.K., assuming the funds are all right and so on and so on," then they can immediately set about framing their whole program around Lend-Lease. It gets back to the same thing Mr. Keynes was talking about, only I was trying to put it up in a way which might be workable, namely the form of requisition. White: Does the requisition have to be specific 267 - 62 - with respect to specifications going into such detail as the make of a truck? Supposing, for example, specifications which might be adequate for Mr. Cox's purpose would not be at all adequate for a final requisition for your purpose; might take the form of a hundred two-ton trucks. Now, whether there are modifications of those two-ton trucks in any form, I take it, is your decision. There might be later opportunities to specify the make. Cox: The Procurement Agency would have to know what dollar amount to ask for. You have to translate it into dollars. Viner: At that stage would it be necessary to know more than the maximum amount? Supposing you said two-hundred trucks, not to exceed over one million dollars? Cox: Well, suppose they get the allocation in two days? When do they start buying? Viner: At that stage they can come back to you again but they have got to clear a channel now. Cox: That makes a lot of unnecessary administra- tive work, to have a requisition with inadequate specifications and then follow it up at a later date. O'Connell: The requisitions have got to be extremely definite. White: So their problem is one, in a sense, of taking a chance and getting the specific requisitions as rapidly as possible. In other words, that kind of complicates their problem, but that is an essential requisite of your decision. 268 - 63 Bell: After they put through a few cases, wouldn't the procedure work out on the types of items that they could include, that would become clearer and clearer? White: I should think so. Archer: You have got to stop your existing channels of trade if you do it that way, and you can't stop them without some assurance this will work. Cox: Aren't they being stopped now? Isn't that the tendency? Archer: Oh, no, only for certain things. White: It wouldn't be true of many of the items like foodstuffs and things of that kind. It might be true of - I don't think that the priorities has hit very many of the items yet. 0' Connell: Maybe not, but it certainly is going to. They are going to be stopped on such things as aluminum and steel. Keynes: It is a question of whether the hen or the eggs come first. Viner: We are apparently saying that it has to be the egg. Keynes: That is it. White: Or the hen. Cox: We are not sure. Bell: Is it possible for you and Childs, Oscar, to sit down and go over the list? You could indicate to him the ones that could be put under Lend-Lease. 269 - 64 White: Bell: Let me re-raise the problem, Oscar. Excuse me, Dan. Well, I wanted to see if these fellows can get together. We can sit around and talk about this program all evening, and I don't think we will get any place unless he sees the list and the man who has got to eventually decide and recommend to the President indi- cates his attitude on it. White: He has indicated the form in which he wants Bell: Well, I think he has still got to see the list. White: Is it possible that you can make a decision it, I think, while you were out. on certain categories, talking it over with Mr. Hopkins? Is it excluded? Cox: I don't think it is excluded. It is a lot harder. Viner: Is it going to be a lot harder on the way or a lot harder once and easier afterward? I see something which will develop bottle-necks all over the world, not merely here, and I am not confident that the procedure has really been worked out and time is going, and I am not so sure that this committee oughtn't to set up licenses and maybe you ought to take those lines and see if you can get them through, because I don't think the only issue is to simplify the administrative problem on this side or to find a way of adhering to our own routines. There is a problem of a complicated commercial machinery all over the world that we have to fit into some how or other. Cox: I agree. 270 - 65 Viner: And I made am not that progress is really being onclear that issue. Cox: No, but what you are saying -- Viner: But I don't see how, speaking frankly, I don't see how Australia can dare to scramble up all its existing importing machinery on on in individual on the come a slow stream that they will the the hope experience that in here perhaps in study cases of that - will find that this thing works and what sort of - I have been trying to think about what sort of a message can you send to Australia telling them, "Scrap your import machinery and try this. We can't assure you of anything, but you will find out from the we can't." way the cases work what we can do and what Cox: Well, wait a minute, on the other hand, you have the question of what you are trying to do is sell the constituent part of the Empire that they ought to get something which doesn't require dollar exchange, and it seems to me they ought to at least be willing to try in terms of tightening up on the avail- ability of production which is going to hit them on all this stuff. Viner: It may be that these general principles would be quite restricted, and we will tell them that it is only a restricted field of operations, that anything is available, but they couldn't plan on that to scrap t heir existing importing procedures and adopt it here because they had in principle an assurance that that would work. Cox: They don't have to scrap them, Jake, because if they are going to buy a hundred thousand tons of steel, for example, and they want to - 271 - 66 and that is six months' requirements and it is the same for the year, they can put in a requisition for half of it or the whole of it and still buy the other way until they find out what is happening on the requisition. Viner: Cox: Is it as simple as that? What they have to do, as I understand, they have to work out very detailed specifications which they would do through their regular trade. Let's ask Elliott about steel. If they want to buy steel bullets or pig-iron, they know what kind of pig-iron they want to buy, don't they? Elliott: That wouldn't come into the picture, but it is steel requirements are quite specific for specific purposes. It isn't like a flexible program such as we have in the United Kingdom where we are buying a lot of pig-iron and ingots and billets which can be used for a great range of purposes. We can place an order today and take it in six months' time and use it just as well then within certain limits. But the dominion requirements are quite different. Cox: Do they have any other purposes? Elliott: No. Cox: Now, on this special purpose stuff, don't they know now what they want in sufficient detail to place an order? How else could they place it with their own dollars? Elliott: This conversation has been a little general to me. In the case of steel, it is very largely centralized already, and there is no requirement for the Empire which doesn't 272 - 67 pass through our machinery here. Keynes: Yes, I think steel is rather difficult. Viner: What would be-- Keynes: Miscellaneous lists. Viner: Can you give a hypothetical example, if necessary? Keynes: A rather straightforward case is oil. There has been no ruling as to whether oil goes to the dominions, has there? Archer: I don't know. Keynes: I don't think there has been. Cox: What kind of oil? Gasoline, lubricating oil? Keynes: Yes. Archer: Or you take wood-pulp is probably the worst case you can find. We have put in a U. K. requisition for wood-pulp and it has been allowed. I don't know for certain, but I believe it is going through. Some of the dominions, New Zealand, Australia, India, all their requirements of wood-pulp, we don't know whether to advise them to put in requisitions. They have got to order months ahead, much longer ahead than the U. K. to get their requirements, and they are probably placing long contracts now running through until June, perhaps the end of next year. We want to tell them to stop doing that because they can get woodpulp under the Lease-Lend. The same for New Zealand. They get their orders right through. We want to be able to tell them to stop giving the orders. We can't stop 273 - 68 them over the whole range. Cox: Suppose they get a return message on that in four or five days? Archer: They must have some idea of the value of stuff that is going to come through. Cox: No, but they put in a requisition for their wood-pulp for their year's requirements or whatever the limit is. Can't they wait in terms of saving their dollar exchange as long as a week to determine whether it is going to be covered by Lend-Lease? Archer: Certainly they can wait for that, but why can't we get a list and tell them quite frankly-- Cox: I agree it would be better if you could get it. All I am saying is that I am not so sure you can get it in that form, and that raises the practical question of the alternative. It doesn't mean we ought not to try on the first possibility. Keynes: Cox: Do you mean that you will get a decision as to a given quantity of wood-pulp-- This is the sort of thing. It is just a question of the way the administrative and policy machinery on this thing worked, and we send over to the President a book full of papers to be signed with whatever necessary comments are in it, and he will either sign them or he will put a note on one that he doesn't sign. Keynes: We will send one of these funny ones and see if that helps. Thompson: Could we not suggest that they might put 274 - 69 - forward token orders. Let's say that the governments of dominions concerned would say, "Well, if we find ourselves long on so much on the Government's hands, it wouldn't trouble us, and we will for that purpose in order to establish eligibility put forth a token order without disrupting the trade channels. Cox: They don't always get the requisitions approved in the same amounts as they are put in. Bell: But if he is talking about an eight thousand ton order of steel, where possibly they would need a hundred thousand. Cox: I think Thompson's suggestion is a possibility all right. It might be better to put it in since the difference may only be a week, determining whether you get a decision on something other than a token order. Viner: You mean to put in a real order? Cox: Yes. Viner: How about this New Zealand case? Supposing they put in a requisition for a half year's supply as they estimate of wood-pulp? Cox: I think you would get a decision on that particular thing. They want so many pounds or so many tons of wood-pulp of a certain type. Keynes: Have you got all the particulars to put in such a requisition? Archer: No, I haven't. 275 - 70 Keynes: That is the difficulty. You have got to Archer: We have got to centralize all the purchases get it from New Zealand. of wood-pulp for New Zealand through one office, and you have got to arrange for the distribution. There is all the Government finance situation to be rearranged, too. Thompson: Archer: There might be some products which we could get here faster than others. I think so. We could take out some of the major raw material things, because the manufactured goods would be much more dif- ficult. Keynes: Couldn't we forward a letter to the committee asking whether the committee would approve of our encouraging the dominions to centralize the purchase of the following articles? Cox: And the committee would answer back, "Yes." Viner: Well, would it? We wouldn't unless we thought that certain results would ensue. I mean, if we said, "Yes," they would say we have a moral commitment. Cox: Even on the U. K. requisitions, you don't always get the requisition approved for months ahead. Keynes: We could act on that without treating it as a very binding thing. Viner: You would want that to use with, say, Australia and New Zealand? Keynes: Yes. Viner: Would you encourage that? 276 - 71 - Cox: I think it is all right, but I still think you will get a faster decision on a requisition. Keynes: If we have the particulars, but it takes a long time to get the particulars. Viner: That would be one of your ways of getting these requisitions, wouldn't it? Archer: Yes. Keynes: I think we should toy with that thought and see what happens. Cox: Archer: All right. Now what do they do on oil? I have a memorandum for you on the United Kingdom. Cox: I haven't gotten that. Childs: It is being photostated. Phillips: Well, what about oil? Cox: Well, I was asking Archer about oil. Archer: Oil, I am afraid, is not my particular field. You mean oil equipment? Keynes: No. There is seven million dollars worth which comes from this country and five million dollars comes from other sources. Cox: Including what, tetraethyl? Thompson: Yes. Keynes: There we have those lump sum figures, but we haven't fooled particularly with exactly 277 - 72 - where it is or exactly what kind of oil it is. Cox: Well, how do you know - you can't definitely, then, tell that until it is put in because there are all kinds of variations on that. Let me give you an illustration. Since it was approved for the U. K., one of the things that has come up is that the Texas Oil Producers want to contribute one day's production of oil to the President for distribution through Lend-Lease, and that amounts to about a million barrels a month. Now, that is the first stage. Now, in terms of the finding of the different types of oil, that is likely to be developed. Now, if you knew - if you could put the requisition in in terms of the over-all picture, you could get a decision as to whether this would be recognized. Thompson: Cox: Thompson: I believe they will be more easy ones, because oil is centralized at the present in London, and I think the chance of collecting information on that is much earlier. I would try the oil one because of the present situation. I think you could hope to get that faster. Cox: Pierson has already - Purvis got a decision on something which they didn't think could be decided and that is the hundred million dollar oil program. Bell: Did you get all your questions answered on the contracts that you wanted to talk to Cox about? Phillips: Yes. 278 - 73 - Cox: Shall we stand adjourned? Bell: If all the questions are settled. I don't know whether you have settled the problem or not, but I think we can stop for the night on it. I think Childs and you have got to get together and see where the list is and where do you go from there. 279 AGENDA for 3:30 MEETING 1. Any additional information from London to be discussed. 2. Actual contracts representing type cases which the British propose to enter into. 3. Actual contracts placed since March 11. 4. Memorandum (which British were to have prepared) on U.K. imports from U.S. administratively difficult to place under Lend-Lease. 5. Further information on needs of Dominions and India which may be handled under Lend-Lease. 6. Any development with respect to the centralization of South African purchases in U. S. 7. Memorandum on possible sale of wool already here or stored in Australia. 5. Any further information on other materials which the Defense Supply Corporation contemplates buying from the British Empire, or which the British Empire hopes to sell to U.S. 9. Information on our taking over Swedish charters and placing them under Lend-Lease. 10. Suggestions from the Canadian Treasury on ways in which we could help them improve their dollar position. June 23, 1941. S 280 NOTE ON WOOL 1. By an exchange of notes dated 9th December, 1940, the U.S. and British Governments agreed that there should be established a reserve of Australian wool in the United States. The British Government undertook to put at the disposal of the U.S. Government a stock of 250 million pounds of Australian wool f.o.b. an Australian port subject to the conditions that the wool would remain the property of the British Government, that the expenses of transport and storage would be for the U.S. Government, and that all or any part of the wool might be purchased by the United States Government, or an agency of that Government, for use in the United States, or might be sold to the U.S. domestic trade if, and when, it had been determined by the U.S. Government that an emergency shortage of wool exists in the United States. 2. The shipments of wool from Australia for this strategic stock up to the 15th June totalled 87,000,000 lbs. Shipment has been slower than estimated for the reason that ordinary commercial shipments which it was mutually agreed should have priority have been heavy. It is not possible to make any precise estimate of the value of the wool since the value of particular grades 3. of wool varies a good deal and we do not know the exact grad- ing of the stock. But,roughly, the total value of the whole strategic stock might be $70 millions, more or less. 4. To the best of our knowledge the apparel wool situation in the United States is as follows (figures on greasy shorn basis) :- 281 -2- United States stock of apparel wool, May 1st, 1941, (exclusive of strategic stock) 612,000,000 lbs. One year previous was 600,000,000 lbs. Ten-year May 1st average 633,000,000 lbs. Stocks of approximately 600,000,000 1bs. as at 1st May have been carried to enable the transaction of the business involved in an annual U.S. apparel wool consumption of, 550,000,000 lbs. Current U.S. apparel wool consumption 900,000,000 lbs. Estimated United States Clip, 1941 480,000,000 lbs. Stocks necessary to handle 900,000,000 lbs. consumption should naturally be much greater than is necessary to handle 550,000,000 lbs. annual consumption. Stocks cannot be completely used to the extent of bare floors because wool stocks are held on farms, in dealers stores, in greasy form, scoured, pulled, as tops, yarn, etc. Additionally, some dealers and manufacturers are short, others are long, on the market. Stocks are never evenly distributed among all users. Substantial imports seem to be necessary if a starvation period is not to be reached in the United States by the end of the year. 5. We have proposed to the Secretary of Commerce that the U.S. Government or an agency should purchase the wool outright partly in the United States and partly in Australian ports. If existing conditions call for an addition to the strategic stock (we believe that in fact 500 million pounds was the figure originally considered, though subsequently reduced to 250 million pounds) we are in a position to supply much greater quantities of wool since we have acquired the clips of Australia, New Zealand, South Africa, India and Chile. Washington, D.C., June 26, 1941. 282 MEMORANDUM TO: U.S. TREASURY COMMITTEE It will be recalled that at the end of last week the U.S. Press announced the formation by Great Britain of a Civilian Technical Corps for the operation of radio-locators and that volunteers for the corps would be enlisted in the United States. Preliminary information indicates that the expenditure immediately proposed is to be one million dollars for expenses of transportation to Canada. If the full number of 30,000 volunteers is reached, allotments of pay to families and dependents in the United States could amount to ten or twelve million dollars a year. Further information is being sought from London on details. Meanwhile the estimates of British dollar expenditure outside Lend-Lease should be increased by the above amounts. Washington, D.C., June 23, 1941. 283 REQUIREMENTS FOR NEW ZEALAND I. The New Zealnd representatives have submitted the following table of estimated requirements. The details are given in an Appendix in N.Z. Ls on c.i.f. terms. In the summary table this has been converted into a dollar value f.o.b. by taking the N.Z. L at 13.20 and deducting about 10 per cent (in accordance with New Zealand statistical practice) to convert c.i.f to f.o.b. value. EXCLUDING DIRECT WARLIKE STORES New Zealand Estimated Requirements from U.S.A. Year ending June 30. 1942 Essential for GROUP War Effort $ Far Purposes (Minimum List) million f.o.b. $ million f.o.b. Metils (including Steel shifting, iron and couper . re, metal cordage and wire roue, and steel, copper and Driff tubing.) 2. Oils 7.2 5.2 2.9 1.7 3. Other raw materials 5.8 3.2 4. Foodstuffs, including tobacco 2.6 .7 5. Machinery 5.4 3.6 0. General manufactures 3.3 1.3 1. 7. Motor Vehicles, principally spare parts Liter adjustment- addition to estimate .26 .5 .29 27.8 16.2 The amounts in the first column represent what it was considered in to provide for after a very thorough and careful examination of imports from all sources confined to essential commodities and to essential quantities. The lower estimate given in the second column tikes account of those items in the first column which are in respect of materials for use in the production of goods required directly in connection with the war together with materials necessary for production of foodstuffs etc. essential to maintain the Dominions' reguirements and their supplies to the U.K. as part of the war effort. l'evertheless, if the aggregate amounts imported had to be reduced to the lower figure, it is stated that there would be a danger of a breakdown in the Dominion's economy. 284 2 II. The above tables are comprehensive of all imports. The New Zealand representative states that items falling in the following categories do not present serious administrative difficulties for importation and distribution by the Government, subject to the caveat that he has suggested to the New Zealand Ministry of Supply to examine this question in regard to some of the items which might be too difficult to administer. It would, however, be of great assistance to the New Zealand Ministry of Supply if there could be a prior determination of the eligibility of these items before a centralisation of purchases is set up in such goods. Leaf Tobacco Wood Pulp Ferrous and Non-Ferrous Metals Wire Tubes Agricultural and Dairying Machinery Ball Bearings Surgeons' materials and Appliances Tractors Motor Vehicles Cardboard Sulphur Manures Inorganic Salts Possibly particular machines for Industrial Purposes Electrical Appliances peculiar to Telegraphy and Surgery Scientific Instruments. APPENDIX 285 ESTIMATED IMPORTS INTO NEW ZEALAND FROM U.S.A. Year Ending June 30,1942. Group Sausage casings 4 Confectionery (medicated) Dried Fruits Fresh Fruits 7,000 2,000 30,000 20,000 8,000 2,000 80,000 105,000 3,000 1,000 4 4 4 Beans 4 Nuts, edible Glucose, grape sugar 4 Cocoa butter 4 Provisions n.e.i. 4 Raw coffee 4 Cigarettes 4 L (NZ) c.i.f. 4 Leaf Tobacco Hides, pelts and skins Gums and resins (T.I. 118) Grass and clover seeds Agricultural seeds - 650,000 20,000 16,000 10,000 15,000 20,000 300,000 1,000 6,000 6,000 25,000 4,000 4 3 3 3 Tanning materials 3 3 Wood Pulp 3 Apparel Grindery Buttons 6 3 3 Elastics, tapes, webbings Staymakers' steels etc. Towels, sheets etc. 3 3 - 6 Braids and bindings 5,000 1,000 2,000 1,000 5,000 2,000 1,000 3 Drapery, haberdashery 6 Felt Piece goods Felted textiles 6 6 Leather goods and oil baize Waterproof material Cordage for fishing lines 6 6 6 Asphalt and bitumen 2 Skip greases 2 Lubricating greases Cod liver oil Fish oil 2 2 2 Kerosene 2 Other refined minerals Motor spirits 2 Lubricating oil Other oils in bulk n.e.i. Medicinal mineral oil 2 2 1,000,000 2 2 Crude petroeum 2 Transformer oil Vegetable oils Mineral and vegetable waxes Dry colours 2 2 2 Paints and lacquers Varnishes mixed 42,000 4,000 1,000 3,000 3 6 6 6 Aluminum, Mill, oil, copper, etc. stones in Precious metals bars Metal Iron in and pig,steel-angle, ingots, tee etc. 1 1 etc.1 n.e.i. 1 1 andsteel in in sheets sheets Metal Iron Metal cordage Pipes, tubes Wire 1 2,498,000 1 1 1 Ball bearings Bolts, nuts, rivets, etc. Buckles Castors for furniture 3 6 6 6 6 50,000 15,000 2,000 2,000 -2- 286 Group Chain Belting 5,000 5,000 1,000 1,000 40,000 1,000 3,000 6,000 1,000 5,000 2,000 70,000 50,000 40,000 80,000 3,000 50,000 30,000 8,000 50,000 4,000 3,000 1,000 1,000 5,000 3,000 Eyelets Fire Engines, etc. Lawn Mowers Measuring and testing appliances Nails and tacks over 1* Nails and tacks n.e.i. Pins and needles Printers' materials Railway and tramway gear Spring coil, etc. Artificers' Tools Builders' hardware 6 Hardware n.e.1. 6 Agricultural machinery Blowers and fans 5 5 Boring and well-drilling machines 5 Adding machines 5 Cash registers 5 Dairying machinery n.e.i. Pasteurisers, etc. Typewriters, duplicators Storage batteries and parts Batteries o.t. storage 5 5 5 5 5 Carbons for arc lamps Electrodes for welding 5 5 Electric cooking and heating appliances 5 Electrical appliances peculiar to telegraphy and surgery, etc. Insulated vable and wire Electric lamp bulbs Electric lamps O.T.S. Metal poles for power lines Electrical appliances peculi ar to 2 6 6 - 6 5 Aeroplane engines Engine governors Knitting and knitting machinery Mining machinery Printing machinery Power driven spray pumps Machinery n.e.i. o.k. 5 Sparking plugs 5 Tractors and parts Industrial machinery Belting for machinery Canvas tubing Rubber solutions Rubber manufactures Goat skins Japanned and enamelled and patent leathers Leather n.e.i. Ash, hickory, etc. Timber, rough sawn n.e.i. Woodenn handles for tools Veneers and plywood see tractors 7 4,000 100,000 9,000 4,000 2,000 7,000 3,000 75,000 3,000 45,000 450,000 7,000 (220,000 AN 5 5 5 5 5 5 5 Road graders Seving machines Vacuum cleaners 150,000 4,000 10,000 10,000 1,000 5,000 5 Emery, etc. wheels Glass, stone and metal machinery Grinding mills 110,000 200,000 10,000 10,000 5 gen. of electricity, fuse, boards etc.) lectrical appliances n.e.i. Engines for motor vehicles Engines for tractors L (N.Z.)c.1.f. 5 5 5 6 5 (250,000 230.000 Govt. 10,000 15,000 3,000 2,000 50,000 6 6 3 6 3 3 3 3 3 6 3,000 1,000 3,000 50,000 20,000 - 3 287 -3- (NZ) c.i.f. Group 10,000 3,000 6 Woodenware n.e.i. Refractory material n.e.i. 3 6,000 (for electric 3 Glass sheet lamps) Glassware n.e.i. Miners' safety lamps 50,000 2,000 12,000 3 6 6 Lenses 13,000 (for electric 3 Glass rods lamps) 500 6 Watch glasses Plaster of Paris 1,000 100,000 3,000 1,000 1,000 50,000 1,000 40,000 3 3 Cardboard etc. Cellulose etc. mo Emery paper Filter paper 6 Parchment and greaseproof 6 Waxed paper paper (large) 3 S for Wrapping Wrapping Paper paper orchardists (small) paper n.e.i. in rolls paper n.e.i. in sheets 6 Printed books Calendars and showcards 6 Posters, etc. Paintings, pictures 6 Stationery n.e.i. - 6 Fancy goods Cinematographs 3,000 260,000 6 Film, cine 6 (amount fixed for remittance Sensitized surfaces 7,000 1,000 (12,000 (50,000 (60,000 30,000 10,000 5,000 10,000 2,000 3,000 4,000 10,000 15,000 15,000 20,000 9,000 4,000 50,000 6 Scientific instruments 6 Appliances for wear Surgeons' appliances Surgeons materials 6 6 6 Acids 3 Chloroform, antiseptics, etc. Facteriological products Dextrine 6 6 3 Crude distillates, etc. 3 Drugs for culture media 6 Drugs, crude, not powdered 6 3 Dyes Es ences, synthetic Escential oils 3 3 Gases my Insulin, etc. Drugs,n.e.i. druggist's sundries,etc Insecticides edicinal preparations in 15 C.C. vessels Sheep and cattle licks Sulphur 6 6 6 2,000 6 6 625,000 3 Toilet preparations concentrated perfumes Vitamins Inorganic Salts,n.o Drugs and chemicals n.e.i. Janures O.T. sulphur Aeroplane and parts Axles, etc. Brake lining in the piece etal fittings for vehicles otor vehicles C.K.D. cigarette paper 14,000 20,000 10,000 20,000 4,000 3,000 2,000 3,000 6 6 3 3 mu 6 6 6 6 7 2,000 2,000 100,000 25,000 100,000 6,000 2,000 8,000 7,000 5,000 288 Group Motor Vehicles O.K. Parts of motor vehicles Pneumatic rubber tires 7 - 80,000 22,000 2,000 1,000 1,000 7 NO Detonators and caps 6 Undercarriage springs 6 Cartridges .22 cal. getal caps for cartridges (x.z.) c.i.f. 6 warlike stores Explosives Ordnance stores A. & M.S. 6,000 me warlike stores 6 Articles for blind, etc. 150,000 1,500 6,000 4,000 6,000 1,000 2,000 100,000 2,000 4,000 4,000 1,000 30,000 mu Educational apparatus 6 Engine packing Cramophone records 6 6 Voice recording appliances Life saving appliance 6 Articles n.e.i. 6 3 Other oils 3 Other raw materials 3 Other foods Other machinery Other manufactures 4 uno 9,537,000 Subsequent addition for motor vehicles 100,000 9,637,000 SUIDIARY L 2,498,000 Group No. 1 Metals 1,000,000 Group No. 2 Oils 2,063,000 Group No. 3 Other raw materials Group No. 4 Foodstuffs in- cludingtobacco Group No. 5 Machinery Group No. 6 General manufactures Group no. 7 Motor vehicles incl. spare parts 912,000 1,893,000 1,141,000 190,000 9,637,000 289 Note on prospective sales of British West Africanmarket. cocoa in the United States Since the beginning of the war, the total 1. crops of COCOB produced in British West Africa ( and more recently in the French Cameroons) have been bought by the British Government through a specially appointed West African Cocoa Control Board, and sold to overseas markets through normal trade channels. During the crop year 1939/40, sales of British controlled cocoa to the American market were satisfactory. Up to the present about 128,000 tons of the 1940/41 crop have been sold to United States buyers, and a further 10,000 tons is afloat for American ports. Provided the present loading programme is maintained, it is hoped that an additional 12,000 tons may be shipped and sold to this market from the current crop. It has, however. become increasingly difficult in recent months to obtain freight space for all United States requirements of West African cocoa: and the Caritime Commission has recently instructed the Barber Line ( which now alone supplies ships for the West African - U.S.A. run ) to load only strategic materials, amongst which COCOA is not of course included. This has involved the cancellation of certain forward bookings for cocoa. The Commission is unable to say how long the ban on COCOS shipments will be maintained. If it could be regarded as a temporary measure only, 2. 3. and if COCOB loadings could be resumed by say January 1942, then the effects on our selling programme might abnormal surplus of cocoa will have accumulated by the end of the current season; and the 1941/42 Weat African crops will not be ready for shipment until December. It appears doubtful, however, whether the shipping position will have sufficiently improved in six months' time to allow normal quantities of COCOS to be lifted not be very serious. It is not expected that any for the United States from West Africa. At best, loadings from the next crop cannot be expected to reach anything like the total quantity of about 150,000 tons shipped, or to be shipped, from the current crop. Apart from the real difficulties of providing freight space in any circumstances while demands for strategic materials continue at current rates, the fact that American menufacturers are now very heavily stocked with COCOB makes it difficult to justify maintaining loadings at the rate which has been possible during the current season. The approximate net dollar troceeds on the anticipated sales of 150,000 tons of 00008 from the current crop are $17,000,000. These sales have however, been ade on a rising market, nd if they could be maintained for the 1941/42 season at the present level of prices (about & cents per Lb. ox dock New York) the net dollar proceeds from the next crop would be approximately 20,000,000. This may be taken as the L. total potential loss which would result to the British Treasury from the continuation of the present complete ban on COCOA loadings from West Africa to the United States. IRITISH EMBASSY, WASHINGTON, D.C. June 23rd, 1941. Even 290 Note on proposed purchase by U.S. Government of sisal for stockpile. In February last the British and Dutch Governments presented identical notes to the State apartment suggesting (a) that some international control of sisal production was needed in producers' 1. interests, at least while the war lasted, and (b) that relief could best be given to the immediate heavy stock accumulation by a purchase of about 40,000 tons of sisal by the United States Government for stockpile. In reply to (b), the United States Government 2. stated that the Defence Supplies Corporation were prepared to purchase for stockpile 40,000 tone of sisal provided suitable shipping arrangements could be made. The note added that "in view of the acute shortage of shipping space which is delaying this vernment's stockpile programm. it is not contemplated that elsel be transmorted at the expense of space for more strategic materials". The note asked Cor proposals 02 to the allocation of the purchase between British n Detch producers. price, terms of sale, utc. The British Government 1a prepared in principle to share the purchase with the Dutch Government in >. reportion to average roduction in recent years or on GOLD other accutable basic. to are further prepared to sell our chore to the Defence supplles,Corporation at the equivalent of our buying price in Saat Africa, namely, on average for all grades of 219. per long ton free on rail estates. Before putting forward definite proposals, however, we are awaiting the views of the Dutch Government on the United States Government's reply. 4. It has been indicated unofficially that the only terms on which the Defence Supplies Corporation would be propared to conclude a purchase contract would be f.o.b. at ports where other strategic materials are being loaded. That is, the Corporation would not be prepared to buy sisal until space had actually been shipping position, a purchase on these terms would provide no guarantee that the total of 40,000 tons would be bought, and consequently the dollar proceeds of our share acerue to the British Treasury, within any reasonable period. It would be much to our advantage if the Defence Supplies Corporation could agree to purchase provided to lift it. In view of the present difficult stockpile sisal in warehouse and hold it in East Africa until freight space became available. This point has not yet been discussed with the Dutch Government. but it seems likely that they would take the same view in respect of any purchases made in the Netherlands East Indice. BRITISH EMBASSY. WASHINGTON, D.C. June 23rd, 1941. from June 23, 1941 BRITISH AIR COMMISSION REQUIREMENTS FOR THE IMMEDIATE FUTURE WHICH MAY REQUIRE U. K. DOLLARS to Existing British Contracts. Contract Supplier Material MEME F-677 A-242 Date of Consolidated Aircraft Corporation Lockheed Aircraft Corporation Various modifications to Liberator Airplanes, mainly structural changes. Installation of F-2 engines in lieu of F-3 in Lightning. Signature of Amendment Formal com-itment not yet issued but firm already Value Excluding Capital Thousands of Dollars 1,234 (approximately) proceeding with work. Formal commitment not yet issued. but firm already 1,948 (approximately) proceeding with work. (Notes In both the above cases, the firms refuse to proceed on the basis of cancelling airplanes off the contract to the equivalent TATE of the modifications, such cancelled airplanes to be subsequently replaced by Lend Lease.) A-642 Browster Aeronautical Corporation A-1492 Various modifications to Bermuda airplanes. Formal commitment not yet issued. but firm already 8,500 (approximately) proceeding with work. (Notes Here still discussing with firm possibility of cancelling airplanes to the equivalent value of the modifications, such cancelled airplanes to be replaced under Lend Lease.) the city of cases. it is impossible to foresee that modifications will be required other than when a major policy isview involved, of the case of the Lightning, where the change in type of engine was finally decided upon mainly from the point of securing formity with U. S. suppliers. Small modifications crop up daily, which have little monetary value, but which are, In e.S. neverthe working B. New essential to meet service requirements. All these require immediate attention, We have found in the past that a safe for this type of case may amount to as much as $50,000 per contract, or, say, $250,000 per week. thants, other than amendments. arise from the day/to day needs to keep airplanes moving, of which a representative list of cases which Innu have must the No (marked Exist "A") 11 red urgent in the demands immediate past is attached It is impossible to foresee what these demands will be in the future and, consequently, they recast can be given, but it will be equally obvious from the nature of the demand because and from we the have above not explanation, had time to prepare that thout delay. is necessary to emphasize these that have the foregoing been regarded list as is more incomplete, or less of a special question of their own, thus because It itexcludes modifications, ement. in any sense of the word selective. Navigation course for British Contract not yet issued. Pan American Airways, Inc. observers. See attached memorandum marke Exhant"B No Formation of a corps of U. S. Contracts not yet issued. technicians to serve in Various suppliers (See attached memorandum) marked Exhibite citilian capacity in the U.K. to undertake maintenance and servicing of technical equip- ment and armaments of the defense services. 1.169 (Approximately) (See analysis in memorandum attached, marked BAGER marked Exh:b.1"C" 946 (Maximum) (See attached memoranda Exhib LIST OF BAC 65/40 REQUISITIONS APRIL 12th. 1941 to DATE. Requisition Number Description of Stores Date Value Remarks 486.00 65/40/1605 April 16th 1607 12th Bendix Equipment for B-24 Aircraft 1609 14th 4 Generators, 4 Control Boxes for Consolidated LB30A Aircraft 840.00 1610 12th 1 set of sample engine, airscrew, and cockpit covers and 6 sets of drawings of covers for Vultee Vanguard I Aircraft unknown 1611 12th same as 65/40/1610 for Liberator II Aircraft 1612 12th same as 65/40/1610 for Cheaapeake I Aircraft 1613 12th same as 65/40/1610 for Boeing B178 Aircraft 1615 15th 25 31-inch rubber balloons 1616 15th 5 gallons U.S. Slushing compound to Fuller Spec. 3595 T.L. - 284. 1618 14th 12 Colt cal .50 MG53-2 gun retracting slides 1619 15th 112 Type 236-3 gun charging slides 1620 14th 100 Hub Dust L.H. & R.H. Covers 1622 15th 200 Hamilton Stand. Bracket Assemblies 1623 15th 1000 Schraeder Valves complete with 1000 Bendix washer $ 1200 lbs. Magnesium Metal Stocks 1,054.42 unknown unknown unknown 175.00 16.75 136.48 1,066.24 170.00 for Martin Maryland I Aircraft. 2,210.00 722.25 187.25 Aircraft 2 of BAC 65/40 12th. 1941 to DATE Requisition Number Description of Stores Date Aluminum Metal from Aluminum Co. of Canada 65/40/1634 April 22nd 1637 23rd 11 Danforth Navy anchors Mark II 1638 18th 1 Export boxing of P&W engine for shipment overseas as a spare engine 1639 26th Removal of markings from 131 engino cases 1641 21st Repncking for export of 9 Curtiss incines Value unknown $ 363.00 30.00 52.90 225.00 Exhibit B In response to an urgent need for training facilities for Observers, the United States Army Air Corps allocated to us 100 va eancies in each Training Course at the Pan American School of Navigation. The number of places has since been increased to 150 at each of two overlapping courses (course population 300) with the possibility of increase to an ultimate total course population of 400. In accordance with these arrangements Requisition No. 1207 dated May 7th, 1941, (copy attached) was filed asking for the provision of such items as fall within defence aid requirements. This requisition contemplated that expenditure on the following items could be provided under L/L terms. Capital items: A. 1. Equipment for ground instruction and aircraft for flying instruction. 11. Ancillary facilities e.q. use of existing hangars, workshops, aircraft and aerodromes. 111. Running Costs: B. 1. 11. 111. iv. Flying clothing and equipment. Gasoline and oil. Day to day running mintenance of equipment and aircraft. Instructors and ground staff. Maintenance. charges related to A. 1. and 11. The Pan American School is already a fully operating undertaking and it is impracticable for the firm to break their existing arrangements for the supply of gas and oil. In these circumstances the United States authorities felt unable to provide anything under L/L other than the use of certain Army Air Corps navigational equipment already in the possession of Pan American Airways. We have accordingly conducted negotiations with the firm on the lines of an inclusive fee per student, covering all above items. The fee proposed is $595.00 per student. Other iteas of expenditure arising are set out below and an estimate of the approximate costs of training (for a full year) at Miami on the basis of an average course population of 300 is as follows:$ 618,800 = 1. Fees for training at $595 per student 2. Pay of students at $2 a day $ 219,000 = 3. Food and lodging at $12.25 per student $ 191,100 = per week $ 100,000 = 4. Medical and hospitalisation (say) 5. Cost of R.A.F. instructors and misc. $ 10,000 = expenses. 6. Cost of transportation on return to - $ 30,000 Canada. $1,168,900 Exhibit C THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA MEMORANDUM FROM Mr. Cribbett Reply TO June 23, 1941 SUBJECT: CIVILIAN TECHNICAL CORPS Arrangements have been concluded under which it is proposed to recruit in the United States a body of technicians of various skilled trades for the purpose of serving and maintaining technical equipment and armaments in the United Kingdon of H. M. naval, military and air forces. This scheme aims at recruiting upwards of 30,000 technicians to be formed into an organisation known as the Civilian Technical Corps, which will be purely civilian in status and will not be employed on combatant duties. Certain expenditures will be incurred in the United States in connection with the recruitment of this body which will be transported to the United Kingdom by Canada. Details of the expenditure under the various heads are contained in the following ertimate, which is based on the assumption that the full number of 30,000 will be recruited: - (1) INTERNATIONAL BUSINESS MACHINES CORPORATION, NET YORK, Handling of all application forms is being centralized on this firm. They have agreed to deal with applications free of cost except for printing of literature. Cost under this head, $9,000.00. Salaries of technical examiners, $300.00 a week; (say) for 3 months $39,000.00. (2) PUBLICITY (Earl Newson & Company, New York) $1,000 & month; (say) $5,000. (3) TRANSPORTATION ARRANGEMENTS It has been agreed with four transportation companies (Thos. Cook, Cunard White Star, CPR, and C N R) that they will provide tickets to pay subsistance allowance of $3.00 a night on a repayment basis. Estimated Cost $250,000.00. (4) COST OF SECURITY Vetting to be undertaken by FBI and Credit Bureau of New York. $180,000.00 (5) MEDICAL EXAMINATION $150,000.00 (6) TRADE TESTING $300,000.00 Exhibit C Advice B THE BRITISH SUPPLY COUNCIL IN NORTH AMERICA MEMORANDUM FROM Mr. Cribbett TO June 23, 1941 SUBJECT: CIVILIAN TECHNICAL CORPS Arrangements have been concluded under which it is proposed to recruit in the United States a body of technicians of various skilled trades for the purpose of serving and maintaining technical equipment and armaments in the United Kingdon of H. M. naval, military and air forces. This scheme aims at recruiting upwards of 30,000 technicians to be formed into an organization known as the Civilian Technical Corps, which will be purely civilian in status and will not be employed on combatant duties. Certain expenditures will be incurred in the United States in connection with the recruitment of this body which will be transported to the United Kingdom by Canada. Details of the expenditure under the various heads are contained in the following ertimate, which is based on the assumption that the full number of 30,000 will be recruited: (1) INTERNATIONAL BUSINESS MACHINES CORPORATION. NEW YORK. Handling of all application forms is being centralized on this firm. They have agreed to deal with applications free of cost except for printing of literature. Cost under this head, $9,000.00. Salaries of technical examiners, $300.00 a week; (say) for 3 months $39,000.00. (2) PUBLICITY (Earl Newson & Company, New York) $1,000 & month; (say) $5,000. (3) TRANSPORTATION ARRANGEMENTS It has been agreed with four transportation companies (Thos. Cook, Cunard White Star, CPR, and C N R) that they will provide tickets to pay subsistance allowance of $3.00 a night on a repayment basis. Estimated Cost $250,000.00. (4) COST OF SECURITY Vetting to be undertaken by FBI and Credit Bureau of New York. $180,000.00 (5) MEDICAL EXAMINATION $150,000.00 (6) TRADE TESTING $300,000.00 June 23,1941 Subt Hyllian Technical Corps Page #2 (7) PASSPORT EXPENSES $300,000.00 (8) MISCELLANEOUS OFFICE EXPENSES $13,000.00 Thus, on the assumption that the total number of 30,000 aimed at is recruited, the cost of recruitments and transportation to Canada would amount to $1, 246,000.00. It is not, however, anticipated that the response to the scheme will produce even 50% of this number, and likely to be more in the region of $600,000.00. DISTRIBUTION OF SPARE PARTS OF AGRICULTURAL MACHINERY Certain agricultural machinery is being obtained under Lend-Lease for United Kingdom use. The demands are made by the U. K. Ministry of Agriculture, and on arrival in England, the goods are distributed through agents to consumers. The companies which act as distributing agents are paid a fixed rate of commission; the selling price of the machinery to the consumer being fixed by the Ministry. With regard to spare parts, the Ministry of Agriculture has inquired as to the procedure which should be followed in the U. K. for distribution. It is contemplated that the distributing agents, who in the main are former importers, will continue to order spare parts for their machines in the ordinary way, and pay for them in dollars. Insofar as the spare parts for the Lend-Lease machines are concerned, it will be impossible to require the agents to keep their spare parts in separate stores according to whether some are imported under Lend-Lease and some under the ordinary import licensing procedure. It is desired to suggest to the Ministry that they should have all spare parts ordered through their organization, and that no objection would be taken to the parts being sold to the distributing agents. If the Ministry feels unable to handle the spare parts for pre-Lend-Lease machines, then it is suggested that they should be authorized to sell Lend-Lease spare parts to the agents. Britis 23rd June 1941 family Illed in FORM 1 No. oner) 6/21/41 Martime Comea War REQUISITION FOR DEFENSE ARTICLES Date (Under the Act of March II. 1941) New OPM Requisitioner BPC/ /IV(G) by the United States Government for the material requisitioned herein be covered by direct cash reim 1 WILL the United States Government? 2 Articles C Countible, USA continuation sheet(s) for detailed specifications; otherwise attach one complete not of drewings and to each copy of form): Quantity and description (include mark, model, or other Identifying designation): A. 21,000 Hide Butts C. Um Ministry of Supply B. Specticitions U.S. and British U.S. DriNe other Army. Navy, Air, other 1 II the articles requisitioned herein are to be insteller in or used to the construction of some other article(s), name and identify the besto article(s). Indicate number of requisition (Form oz 2 or PNR number, or both, covering request for basic article(s). Indicate contract number If contract has be 1 negotiated for besto article(s). A. Name and Identification of basic article(s): Not applicable C. H2.No A Recentation No D. Contract No. 4 Delivery destred (by check (x) or, if possible by quantitaLive breakdown) 3500 per month T X 1941 1942 2nd Quarter 3rd Quarter 4th Quarter Lat Quarter 2nd Quarter 3rd Quarter 4th Quarter S Imparta Qualification of request, urgency. general information, etc.): These are required for making belts to drive machinery essential to WBT effort. This requisition should be referred to the Procurement Division of the Trensury which has been consulted. Further details from Henry Tetlow, B.P.C., SD IV Ex. 498. (Signed) (Title) GOVERNMENT OF THE UNITED STATES TITIONAL INFORMATION FOR I.S.C. USD A. Application for Jeg'n submitting LV: B. For: Ministry of Supply, l'inistry of Ministry of Aircrrft Product.on, Admirily C. Arthority: D. Estimeted Cost: C E. Consinment: F. Head of Charge: continuation Sheet) No. REQUISITION FOR DEFENSE ARTICLES (Under the Act of March 11. 1941) 6/21/41 date Britth Balan Section 2A SO/ SD IV(G) BPC/ Additional Information Butts to be froc heavy native steers, 58/70 lbs., salted, cut 42% or 45% Average about 30/35 lbs. salted. Must be free from grubs or warbles. Preferably packed 2 per bundle, flesh side out. Estimated value L 53,000, F.A.S., on basis of a butt averaging 32 lbs., at 20 d. per lb., C.I.F., less 1 1/2d. freight. About half the butts are required for essential belting for textile machinery in ******** England and the reminder for production of hairy belting for export to U.S.A. Butts should be consigned to Ministry of Supply, care Imported Hide Pool, K, 26-27 Exchange Buildings, Liverpool, who will dis- tribute to tanners as agents of Ministry of Supply. Since French and Italian sources failed, purchases have been made in U.S. on private account but outstanding commitments now negligible. GOVERNMENT OF THE UNITED STATES ING 1207 (Not filled in FORM 1 No by regulationer) May 7, 1941 Maritime Comm. War REQUISITION FOR DEFENSE ARTICLES State Navy Treasury OPM Date (Under the Act of March 11, 1941) United Kingdom Requisitioner Agriculture Air No. 1087 British Rate BAC/ S156 BAC/23 D AL 189 1. Will orders placed by the United States Government for the material requisitioned herein be covered by direct carh reim- bursement to the United Statos Government? Yes See Form la attached. 2. Articles (II possible, use continuation sheet(a) 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): It is desired to place 100 students in training at the Pan American School of Navigation, Miami, Florida. General Arnold and General Johnson of the U. S. Army Air Corps. are familar with the arrangement. - B. Spectfications - C. ULO Army, Navy, Air, other U. S., British, other 3. If the articles requisitioned herein are to be Installed in or used in the construction of some other article(s). name and identify the basic article(e), indicate number of requisition (Form 1 or 2) or PNK number, or both, covering request for basic article(s) and Indicate contract number If contract has been negotiated for basic article(s). A. Name and Identification of basic article(s): Not applicable. D. Contract No. C. PNR. No B. Regulation No 4. Delivery desired (by check (x) or, if possible, by quantitative breakdown) Training Course commencing July 5, 1941, and subsequent Courses. 1942 1941 Quarter 3rd Quarter 4th Quarter 5. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Quattification of request, urgency, genoral information, etc.): to our urgent need for training of observers, we requested from the U. S. ir additional facilities for such training. In response, t T in al. furth withi Brith Exten te that they are prepared immediately to allocate to us 100 vacancies places ining Course a the above mentioned school in lieu of the 10 located in each Course in respect of which we entered into Contract 1th Pan American Airways, Inc. for the training of our students. It was tated that additional vacancies would be allotted as soon as possible total of 400 places at any one time. details, if desired, may be obtained from Captain L. J. Douglas-Mann, S Commission, 1785 Massachuse Cts Ave., Telephone Hobart 9000, 176. (Signed) A. C. Boddis (Title) BRITISH.AIR.COMMISSION eg GOVERNMENT OF THE UNITED STATES 1207 No REQUISITION FOR DEFENSE ARTICLES (Under the Act of Marah 11. 1941) May 7, 1941 Date AC/ S156 Air No. 1087 BAC/23 D AL. Additional Information Section 1 To the extent that it is decided by the competent U. S. authority that any part of the service does not fall within Defense Aid Requirements. GOVERNMENT OF THE UNITED STATES eg 189 21.6.41 LEND LEASE ACT RAW MATERIALS AND MANUFACTURED ARTICLES Estimates of certain U. K. Requirements from U. S. A. to 30th June, 1942. SUMMARY Thousands Long Tons odity Iron & Steel Abrasives Non-Ferrous Metals Textile Materials of Dollars. 5,338,000 338,648 35,360 9,787 262,985 62,264 38,300 12,680 18,496 Timber Chemicals Oneer & Paper- ing materials iscellaneous materials 1,188,370 44,311 281,950 24,766 99,410 9,054 icultural 30,000 Repair 9,135 40,000 9,700 750 8,500 580 1,120 tus Instruments 7,244,375 1,510 621,301 -1- Value Thousands Quantity Long Tons (OD) of Dollars Iron 3,069,000 184,140 460,000 92,000 15,000 9,000 804,000 29,748 990,000 23,760 5,338,000 338,648 2,700 4,000 Carbide 30 500 Tungsten ire 10 1,000 5,500 1,500 9,000 2,160 120 35 14,000 392 4,000 35,360 9.787 1,000 1,000 14,000 8,424 430 1,140 4,480 1,610 122,000 24,400 36,000 1,260 80,000 14,470 560 1,600 4,465 2,960 -- 1,200 Carbon Alloy (s Drop Forgatu Pig Irc Scrap Ibrasiven Etc. Molybdep ungst Carbon Electrodes Rutile Bentonite Diatomaceous Earth 200 on-Forzous Metals Alumin Rods, Tubes,Sacc. Magnes Magne Powder Brass Bar & Tip Coppe Zinc etal Inc res tes rms - als - lon ous 262,985 1,200 3.000 62,264 - 2- -2Value Thousands Quantity commodities of Dollars Tons fextile Materials (Excluding cotton) silk, Raw & Waste 2.6 M lbs. silk Noils 1.8 M lbs. 1,080 6,820 Tons Manila Hemp 35,000 4,200 Ramie 1,300 38,300 12,620 Softwoods 15,000 2,280 Hardwoods (inc. Peeler Logs) 90,300 4,246 580 Timber Loads of 50 Cu.it. Plywood & Veneers 5,030 Sitka Spruce & Fir Boxboards Miscellaneous 22,000 Stds. 4,000 5,000 25,000 Stds. 940 2,000 18,496 Quantity of Dollars tons oditi -3 Value Thousands memicals golasses (Cuba) Industrial 150,000 12 M. Galls. 2,100 2,250 :lcohol Tons 3,000 icetone 3,000 Aleium 28,000 2,320 81,000 1,377 126,000 1.852 1,000 35 574,000 3,560 115,000 4,400 70,000 2,800 Borax 7,300 370 Boric Acid 2,500 260 15,500 580 4,700 293 1,370 220 600 96 Carbide sulphur Regular ulphur, Acid Sulphur, Ground Phosphate Rock Triple Superphosphate sh Razorite Arsenic Carbonate of Potash Caustic Potash Dyestuffs, Incl. Intermediate 1,075 U.K. 403 - Canada -- 9,000 -- 200 Products Butylphenol Methylene Chloride 400 120 Phenophthalein -- 200 dathylamine -- 160 ------ 640 3,000 -- 6,340 Colloason Cotton (not it Explosives) Phosphorus Padium Compounds Sodiu Compounds Pha euticals Miscel laneous Chemical 1,183,370 200 300 160 44,311 (35,000 1bs. for Middle East Suply 4461) -4- - Quantity Tons COMMOD Value Thousands of dollars Papermaking Materials Paper foodput (a) for per 8 If rayon Traft Liner Board Building Board 160,150 57,500 12,166 6,000 14,400 880 24,000 2,600 9,700 2,256 4,200 480 12,000 384 281,950 24,766 Other paper & Board Cotton & inen rags Bagasse discellaneous Raw Materials Carbon Blacks amp Black Rosin Liquid Rosin Pine Tar 27,000 2,700 480 72 46,000 2,760 700 56 3,000 180 14,000 1,680 1,030 65 2,300 644 2,500 107 1,300 120 300 30 800 640 99.410 9,054 F Curpentine French Chalk Hair sphal 1ca for Plas 4 - 5- nufacture Articles Number Value Thousands of dollars ricultural Machinery Ploughs 10,500 1,500 Dises 200 Combines 500 - Tractors - 30,000 R.P. & Repair Materials Fire hose Horn & Hoof meal Wheel barrow pumps Tarpaulins Roofing Felt 4,000,000 ft. 500 Tons 3,500 1,400 35 700 - 3,500 - 3,500 9,135 :counting Machines 750 at Oars 580 -Ray Apparatus 1,120 identific & Optical Instruments 1,510 11 Bearings 8,500 hicles ad making Machinery, including trains) 40,000 9.700 5 t BPC Form 555 BRITISH PURCHASING COMMISSION Supplementory Information Sheet to accompany Supply Branch drafts of U.S. Procurement Requisitions 1. Ministry or Empire Government: Ministry of Supely 2. Origin of Demand (Cable Reference, etc.): SUPLY 3928, June 3. 3. Domand Number (if Known): 4. Shipping and Packing Instructions (if any) :Consignee: "inistry of Supply, c/o Imported ide Pcol, K, 26-27 Exchange Building, Liverocol. 5. Certificates that specifications have been sanctioned and approved by Technical Officers concerned (Cive names) and where British specifications are involves, by B representative of the appropriate Inspection Department and that drayings are available: (A) Technical Officers Henry Totlo: (B) Inspection (c) Drawings 6. Rough Estimate of Cost 212 00000 FAS 7. Statement of Gaps in Information: BPC Form 555 BRITISH PURCHASING COMMISSION Supplementary Information Sheet to accompany Supply Branch drafts of U.S. Procurement Requisitions 1. Ministry or Empire Government: Ministry of Supely 2. Origin of Dcmand (Cable Reference, etc.): SUPLY 3928, June 3. 3. Domand Number (if Known): 4. Shipping and Packing Instructions (if any):Consignee: "inistr of Supply, c/c Importer ide Pool, K, 26-27 Exchange Building, Liverocol. 5. Certificates that specifications have been sanctioned and approved by Technical Officers concerned (Give names) and there British specifications are involves by G representative of the appropriate Inspection Department and that drowing are available: (A) Technical Officers Henry Totlo: (B) Inspection (c) Drawings 222, 00000 FAS 6. Rough Estimate of Cost 7. Statement of Gaps in Information: BPC Form 555 Page 2 80% Name of Supply Officer responsible for preparing draft requisition with whom contact can be made by the U.S. Government Procurement Agency H. Swiggett 9. Status of any preliminary negotiations that may have been undertaken prior to submission of the draft requisition. Give names and addresses of supplier and/or contractor: 10. Where no negotiations have been started, suppliers with whom previous orders for similar stores have been placed or with whom orders could be placed within the knowledge of the Commission: e Ango American Hide Co., New York A Armand Scholl. Inc.. 41 Park Row, New York These firms have had considerable experience supplying U.K. needs, and since butt trade is full of pitfalls it is suggested that their advice might be valuable. 11. Is the item known to be "controversial" in the sense that it is known from past discussions that there may be objections on the part of the U.S. Authorities to its production in the U.S.? NO Signature of Supply Officer or Empire Government representative authorized to sign requisition drafts. Supply Branch or Empire Government . 1696 1700 1695 1693 1694 1692 1691 1690 1689 1687 1682 1679 1678 65/40/1677 Requisition Number Date May 7th May 7th May 7th May 6th May 3rd May 6th May 3rd May 3rd May 3rd May 2nd May 1st May 8th May 1st April 6th spares. cobra aircraft. Buffalo I aircraft. under Contract A-218. Curtiss Wright Engines. 25 oil Separators, Type 560 also "drayage" on the planes. Description of Stores 20 Magnavox 24 Volt Solenoids for Lockheed Hudson V Aircraft. to work in U. K. for at least 3 months. Reslushing and preparation for export of 6 Sets maintenance drawings for Browster 1300 Fuses for Belgian Brewster Aircraft. 7 Hammar lund radio receivers and 7 sets of 2 or 3 Service Engineers from Consolidated Necessary repair of 1 damaged Allison Engine 1 Set of sample engine, airscrew and cockpit Flight testing of 10 Bell Airacbora Aircraft Brewster Aeronautical Corporation. covers and 6 sets of drawings of covers from Storage of Aircraft being sent to New Zealand Gears, Vacuum pump drive shaft, Assembly Generator 100 hours flying by B.A.C. personnel on Bell Aira- $ Drive Shaft,etc. from Allison Div. of General Motors Necessary service, including fuel and oil, to enable 40 Signal Pistols & 40 sets Signal Pistol Cartridges Value unknown unknown unknown 826.21 4,947.98 250.00 3,140.00 3,494.40 103.10 87.06 12,154.00 13,000.00 600.00 per mo.or 112.00 1668 1670 1674 1665 1660 1675 1657 1652 1650 1648 1647 1676 1646 1643 1644 65/40/16/2 Requisition Number Date May lot May 8th May 27th April 29th April 29th April 30th April 26th April 28th April 24th April 23rd April 24th April 22nd April 22nd April 23rd April 24th April 24th test in England. and Bermuda 1 aircruft. 30 HF 300 Amperex Valves Description of Stores II Aircraft off Contract F-294. 30 Type 35-T Eimac radio valves Aircraft delivered off Contract A-446. Necessary repairs to 1 damaged Hudson IV for indefinite period from Jan. 15, 1941. Engines awaiting installation in aircraft. in U. K. for an unspecified period of time. Necessary repairs to 3 danaged Douglas Havoc radio Equipment from Bendix for installation 2500 yds. Electric Cable off Contract A-5340 Extended service of 3 Douglas representatives Gruman to furnish 2 service men for assisting 2 Consolidated crews to be stationed at Bermuda at Debert in Canada. in Hudson III aircraft as required for training Necessary repair to 1 damaged Curtiss Propeller 8 Complete sets of radio drawings for Buffalo I 25 Housing and Drive Shaft Assembly,200 Rubber- 1 Set Electrically-heated undersuit required for 5 Condensers from Bendix for Catalina I Aircraft Aluminum Alloy Tubing from Aluminum Co. of Canada with re-assembly of aircraft under Contract F-292. driving, 25 Retainer-rubber for Tomahawk aircraft. Grumman Martlet II -Reslushing of 3 Pratt & Whitney Value unknown 852.90 394.00 29.87 unknown 144.00 305.25 363.50 879.90 141.76 unknown 480.00 per mo. 150.00 approx. 200.00 per week $ unknown 1833 1829 1831 1832 1828 1827 1825 1826 1814 1816 1813 1834 1808 65/40/1807 65/40/1801 Requisition Number Date June 10,1941 June 10,1941 June 11,1941 June 9, 1941 June 9, 1941 June 5, 1941 June 5, 1941 June 5, 1941 June 3, 1941 June 3, 1941 June 4, 1941 June 10, 1941 June 10, 1941 June 14, 1941 June 14, 1941 Center, Inc. of New Jersey Littel fuse Inc. APRIL 12th 1941 to DATE engine parts,jige, tools etc. 1 Gross High Speed L.H. Drills 3 Dual Control Sets for Hudsons 1 Six inch Straining machine #4 LIST OF BAC 65/40 REQUISITIONS Description of Stores 2 Signal Generators from General Radio Co. 60 Grounding Plugs from Parr Electric Corp. names of the British Air Commission and Aero- 12 Fafnir Ballrace, spares for Martin Maryland other stores from Consolidated 50 Sets Adaptors, 25 sets Weatherhead Hose and Deposit for float for Refresher Course in joint Spare lengths of rubber Blading for above. 4 wiper, each 12 inches long. 2 Wiper arms for Air Associates rotary windscreen 100 60 amp. .Fuses and 100 Renewal Elements from Liberator Spares from Contridated under Contract of which are for Maryland Aircraft from Consolidated under Contract A-5320 50 Plug-Cannon and 1000 Breeze Coupling Nuts, 900 1 Bilge Pump, 1 Drain Pump, 1 Wing tip float strut Payment to the account of the Standard 011 Company Working Capital for Rolls-Royce to cover orders for 2 56" Main Gear Tubes 12 phere and shime, and other Value $ 555,483.59 320.00 700.00 575,000.00 369.70 3,951.00 48.96 23.28 110.00 approx. 220.58 82.80 30.00 35,000.00 LEND LEASE RAW MATERIALS AND MANUFACTURED ARBICL'S Since the beginning of the war, the United Kingdom 1. has arranged for the supply and distribution of the principal raw materials to be controlled by the Ministry of Supply. In the main, purchases of raw materials abroad have been made through the usual commercial channels, varying in detail with the nature of the commodity. Purchases are made direct from producers in the country of origin, from agents of such producers, either in the U.K. or in the country of origin, and sometimes through established merchants. On arrival in the United Kingdom, the goods are distributed under the direction of the Control, the normal merchant houses being employed wherever their services can be of use. Selling prices by the Ministry are strictly controlled, and use of commodities is subject to license. Purchases of raw materials have been restricted to the minimum necessary. In recent months the shipping position has been such that authority has only been given for the purchase 2. of supplies required for (a) direct war purposes, (b) essential civil uses and (c) a limited amount of export trade of high value. These conditions still obtain and all demands will continue to be approved by the U.K. Treasury. So far as the bulk raw materials are concerned, no 3. insuperable difficulties exist on the United Kingdom side in arranging for all the purchases In the United States to be centraliced. Certain manufactured goods can be deslt with in a similar way. In order that proper planning can be carried out, however, and supplies from the U.S.A. be properly related with similar goods coming from other countries, It is necessary that the Ministry should be in a position to 'non as far ahead 83 possible that the supplies will be available. It is desirable that at 3 very early stage in the consideration of individual items a decision should be given as to whether or not the requirements as a whole of a particular commodity are eligible under Lease Lend, and, in the case of certain minor commodities which have not hitherto been purchased centrally by the U.K., this is necessary in order that arrangements can be made in advance to organize control in the U.K. This particular aspect is of special importance In the case of the Dominions who have not the same experience of commodity control 33 the U. K. 4. In the consideration of some recent requisitions, questions have been raised by officers of the regarding the eligibility of certain materials under Lend Lease. Two examples are steel products and woodpulp there it is understood certain requirements were queried as being of a type required for civil or export trades. While the immediate position has been satisfactorily cleared, it is suggested that such questions should be determined in advance 30 that when the requisition goes to the Treasury Procurement Division and the OPM the only question for then to deal with is procurability. 5. The position regarding distribution in the U.K. is still in some doubt. It will be recognized that the only practicable method is to employ the existing skilled organizations subject to control of destination and price, the distributors being remunerated on a basis agreed by the U.K. Government commensurate with the service rendered. The precise details would have to vary with each commodity. LEND LEASE RAW MATERIAL3 AND MANUFACTURED ARBICLES Since the beginning of the war, the United Kingdom 1. has arranged for the supply and distribution of the principal raw materials to be controlled by the Ministry of Supply. In the main, purchases of raw materials abroad have been made through the usual commercial channels, verying in detail with the nature of the commodity. Purchases are made direct from producers in the country of origin, from Agents of such producers, either in the U.K. O" in the country of origin, and sometimes through established merchants. On arrival In the United Kingdom, the goods are distributed under the direction of the Control, the normal merchant houses being employed wherever their services can be of use. Selling prices by the Ministry are strictly controlled, and use of comnodities is subject to license. Purchases of raw materials have been restricted to the minimum necessary. In recent months the shipping position has been such that authority has only been given for the purchase 2. of supplies required for (a) direct war purposes, (b) essential civil uses and (c) a limited amount of export trade of high value. These conditions still obtain and all demands will continue to be approved by the U.K. Treasury. So far as the bulk raw materials are concerned, no 3. insuperable difficulties exist on the United Kingdom side in arranging for all the purchases In the United States to be central- ized. Certain manufactured goods can be dealt with in a similar way. In order that proper planning can be carried out, however, and supplies from the U.S.A. be properly related with similar goods coming from other countries, it is necessary that the Ministry should be in a position to know as far ahead ns possible that the supplies will be available. It is desirable that at 3 very early stage in the consideration of individual items a decision should be given as to whether or not the requirements as a whole of a particular commodity are eligible under Lesso Lend, and, in the case of certain minor commodities which have not hitherto been purchased centrally by the U.K., this is necessary in order that arrangements can be made in advance to organize control in the U.K. This particular aspect is of special importance In the case of the Dominions who have not the same experience of commodity control 83 the U. K. 4. In the consideration of some recent requisitions, questions have been raised by officers of the OPM regarding the eligibility of certain materials under Lend Lease. Two examples are steel products and woodpulp where it is understood certain requirements zere queried as being of a type required for civil or export trades. While the immediate position has been satisfactorily cleared, it La suggested that such questions should be determined in advance 30 that when the requisition goes to the Treasury Procurement Division and the OPM the only question for then to deal with is procurability. The position regarding distribution in the U.K. is still in 5. some doubt. It will be recognized that the only practicable method is to employ the existing skilled organizations subject to control of destination and price, the distributors being remunerated on a basis agreed by the U.K. Government commensurate with the service rendered. The precise details would have to vary with each commodity. -2 6. A program is appended of the estimated United Kingdom requirements of raw materials and certain manufactured goods, which, in the main, can conveniently be dealt with under the existing procedure. Similar details are not yet available for the Dominions. The following items may present administrative difficulties akin to those of certain manufactured goods referred to in a separate mémorandum: abrasives non-forrous metals miscellaneous timber manufactures dyestuffs miscellaneous chemicals miscellaneous paper Pharmaceuticals The total value of such raw materials is approximately twenty-seven million dollars. In addition to the manufactured goods shown in the attached 7. program, requisitions are constantly being put in for a variety of articles required for direct use by the fighting services, and which remain government property. There can, of course, be no doubt as to the eligibility of such items under Lend Lease. The following list, which is not exhaustive, illustrates the range of items:- tractors; pumps; electrical equipment including generators, Diesel engines and auxiliary equipment; asbastos piping; plumbing equipment; mechanical transport equipment including tires; small instruments and tools; medical equipment; oxygen cylinders; photoelectric cells; and wireless valves. It has not, so far, been possible to get any reliable estimate of future requirements within this area. Demands tend to arise somewhat suddenly owing to changes in the direction of the war, and & substantial proportion is required for dispatch to the Middle East. Provision has been made in the estimates about to be submitted to General Burns, for a sum of $300,000,000.00 to cover these miscellaneous military stores and other unforseen requirements. For the balance of miscellaneous manufactured goods, which, 8. although not in many cases directly related to the war effort, are necessary for the maintenance of supplies and the life of the population of the U.K., it has been felt that the administrative difficulties in arranging for control of purchase and distribution were so great as not to be really practicable. As alrendy noted above, a separate memorandum is b g submitted on this particular aspect. To sum up. The points for consideration are: 9. (a) Can 8 decision be given that the goods enumorated in the attached programme are eligible for Lease Lend procurement when required for any use in the United Kingdom. (b) The settlement of the question of arrangements for distribution in the U.K. (c) The position of Dominion requirements. B. 2rd Communic June 1941 Food 315 TREASURY DEPARTMENT For Miss Chauncey INTER-OFFICE COMMUNICATION ( DATE TO Secretary Morgenthau FROM Mr. Cochran June 23, 1941 STRICTLY CONFIDEN Official sales of British-owned dollar securities under the vesting order effective February 19, 1940: No. of Shares $ Proceeds of Nominal Value $ Proceeds of Shares Sold Sold June 16 17 18 19 20 21 of Bonds Sold Bonds Sold 178,132 87,330 335,006 42,700 74,194 Nil 44,000 119,100 16,000 163,000 Nil 1,000 37,426 62,154 12,106 38,389 Nil 77,168 717,362 343,100 150.779 9.356.919-1/2 270,517,759 42,862,250 35,555,166 9.434.087-1/2 271,235,121 43,205,350 35,705,945 5,921 2,945 63,665 1,619 3,018 Nil 704 Sales from Feb.22,1940 to June 14,1941 Total Feb.22, 1940 to June 21, 1941 AMS 3 316 TREASURY DEPARTMENT INTER-OFFICE COMMUNICATION DATE June 23. 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 16 17 18 19 20 21 $ Proceeds of Bonds Sold 178,132 87,330 335,006 42,700 74,194 Nil 37,426 62,154 12,106 38,389 704 704 717,362 150.779 868,141 270,517,759 35,555,166 306,072,925 271,235,121 35,705,945 306,941,066 Nil Sales from Feb.22, 1940 to June 14,1941 Total 215,558 149.4 347,112 81,089 74,194 Total Feb.22,1940 to June 21, 1941 $ proceeds of non-vested securities sold June 6, 1941 - June 14, 1941 $ proceeds of non-vested securities sold Sept.1 1, 1939 - June 7. 1941 $ proceeds of non-vested securities sold Sept.1, 1939 - June 14. 1941 306,941,066 100,000 228,000,000 228,100,000 GRAND TOTAL 228,100,000 535,041,066 6/24/41 Photostats to: Mrs. Morgenthau Bob Henry HM,Sr 317 318 BRITISH EMBASSY, WASHINGTON, D.C. 23rd June, 1941. My dear Mr. Secretary, I cannot refrain from writing you one line to tell you with what interest and admiration I have read, and indeed read twice, your address to the Alumni at Amherst. I think it is quite admirable, and must have done a great deal of good. I am very grateful to you for giving me the opportunity of seeing it in full. I am, Yours sincerely, Halifax The Honourable Henry Morgenthau, Jr., Secretary of the Treasury. 319 June 23, 1941 Dear Harold: Thank you for your very nice letter of June 16th. I was delighted to learn that you and Norman Hickman, as well as your families, all liked my Amherst speech. Remember, if you come to Washing- ton, there is a supper waiting for you at my house. Sincerely, (Signed) Henn Mr. Harold K. Hochschild, 61 Broadway, New York, N. Y. 320 June 23, 1941 Dear Harolds Thank you for your very nice letter of June 16th. I was delighted to learn that you and Norman Hickman, as well as your families, all liked my Amherst speech. Remember, if you come to Washing- ton, there is a supper waiting for you at my house. Sincerely, (Signed) Henry Mr. Harold K. Hochschild, 61 Broadway, New York, N. Y. 321 June 23, 1941 Dear Harolds Thank you for your very nice letter of June 16th. I was delighted to learn that you and Norman Hickman, as well as your families, all liked my Amheret speech. Remember, if you come to Washing- ton, there is a supper waiting for you at my house. Sincerely, (Signed) Henry M Mr. Harold K. Hochschild, 61 Broadway, New York, N. Y. 322 HAROLD K.HOCHSCHILD BIXTY-ONE BROADWAY NEW YORK June 16,1941 Honorable Henry Morgenthau, Secretary of the Treasury, Washington, D. C. Dear Henry: Your address to the Alumni of Amherst College is a swell piece of work. I wish it could be read by the graduating and under-graduate classes of every college in the country. Sincerely, Harold I gave the address to my friend, Norman Hickman, who has an unusually wide knowledge of history and literature and who also has a son graduating from college this year. He has just sent it back with the following note: "This is a great piece of oratorical sincerity - plainly but movingly phrased. See page 6 for a real epigram." The one he refers to is: "It is for us to decide, and to decide now, whether we would rather die on our feet than live on our knees." Walter, who has also read the address, has asked to take it home so that he can show it to his wife and children. 323 MEMORANDUM FOR THE SECRETARY June 23, 1941. Abstract on Mail During the past week the general mail centered largely around the Secretary's exceedingly fine Amherst speech. Curiously, the proportion continued strongly antagonistic. In all, 36 communications were abusive or critical; 3 praised it and 2 mentioned the speech but made no comment one way or the other. In addition, there were 6 signed letters abusive of the Secretary personally, and 6 anonymous; 2 abusive of the President, signed; 2 anonymous. There were 17 violently anti-England, anti-war and anti-American-participation in any type of war activity which might eventually involve us in conflict. Opposed to these there were 4 letters anti-Hitler and urging every effort to defy him. There were 8 resolutions from various business organizations urging Administration economy and the reduction of non-defense expenditures. The "curb labor" correspondence fell off somewhat, with 7 letters, one or two of which urged the dismissal of Secretary Perkins, while others spoke of the lack of encouragement to buy bonds when strikes were permitted. One writer suggested that all bank loans become due and payable when the borrower participates in a strike. There were 2 protests on sending oil to Japan; 2 protests against freezing Axis funds and 1 letter commending it; and 1 letter with many signatures requesting a referendum on participation in the war. The America First Committee sent a circular, which is being widely distributed, with the cover slogan, "Convoy - A Funeral Train". On the subject of taxes, there was a steady protest against the husband and wife joint return, and there were also a number of letters praising the income tax investigation in Seattle. There was the usual collection of ideas as to what might be taxed, including radios, taxexempt bonds, slot machines, bingo games, Union dues, etc. One man, sending his income tax payment wrote that he was disturbed by the increased spending for war activities and wished he could assign his money to the function of the Government rather than armament spending. 324 2 Memorandum for the Secretary. June 23, 1941. Various comments from the letters follow: G. B. Eberens, San Francisco -- 75 years old and still working at good salary. Suggests it would help the Government if he and others like him should continue payments on Social Security pension whether they intended to claim it eventually or not. He is now eligible for pension but prefers to work, saying, "I can assure you of the great pleasure I derive from spending the last few years of my life under the greatest President and Administration this country has ever had", H. Long, Lowell, Mass. "I like the way you are conducting the defense program in regard to bonds. Our forefathers built the U.S.A. to be a formidable nation. Let's keep it so by buying bonds so that we may never have to take a backward step or lose our national dignity." William Davenport, Greenfield, Mass. Radio talks repeatedly claim defense bonds are safe and the buyer can get his money back at any time. If the banks handle these bonds as they did Liberty Loan ones, they will charge high interest on loans, and bonds will depreciate. People who invested in Liberty Bonds, "To Keep the World Safe for Democracy", took a terrible licking. C. A. Hubbard, Martinsville, Ind. To be consistent, the President should deport Lord Halifax for alien activity within our boundary. J. Milne, Jamaica, New York. If England will not listen to suggestion of a reasonable negotiated peace, let her fight her war alone. "Everyone wants peace but violently aggressive England." H. Knollenberg, Baltimore. "Our country is invincible. We have no enemies that think of attacking us except such as are manufactured for us by the English Lords." John W. Fuller, Buffalo, N. Y. telegraphs as follows: "For reasons that should be very apparent to any American, I shall not consider myself bound to pay my Federal income tax next year if Roosevelt gives war supplies to communist Russia. John Phillips, Long Beach, Calif. The rank and file of labor is as patriotic as the average American has ever been. However, the past years badly affected the moraleof the laboring group. They have had to guard their jobs jealously or have had no jobs at all, and for the first time their services are in demand. Also, a new generation has grown up, and for thousands of men, it is their first job. It is only right that everyone should help bear the cost of defense and the writer suggests that for those who will pay their first income tax this year, stamps and bonds should be issued in order to teach them to save as they go. 325 3- Memorandum for the Secretary. June 23, 1941. Joseph Sukup, Schodack Landing, N. Y. The writer has land south of Albany which he has offered as a U. S. Army Airport. It has been surveyed and approved by the CAA and Army Air Corps. Needing to finish the work to put it in shape, be applied locally for a loan of $5,000. Local banks turned it down as a speculative project, with the additional danger that he might be killed in an airplane accident on the grounds. They would give no consideration for the plea to consider it as a defense activity. His family, Czechoslovakian origin, has $15,000 in a Los Angeles bank, and this money may now be frozen. He asks any help that the Secretary can give him. W. T. Wightman, San Francisco, believes that the Nazie have been counter- feiting U. S. currency, and possibly using it in this country to promote discord, agitate strikes, etc. "One thing is certain, money is being used lavishly to delay U. S. Navy convoys to Britain." KEntrick 326 a Jun, 1941. Chairman, Committee on Appropriations, House of Representatives, Washington, D. G. My dear Mr. Chairmans with reference to - letter of June 19, 1941, requesting reconsideration by your committee of an appropriation of $3,000,000.00 for the construction of training stations for - listed personnal of the Coust Guard as Iway Point, Connectious, I as enclosing herewish for your information a copy of the letter from the Secretary of the Keny, dated June 18, 1941, requesting that this department take immediate steps to obtain the necessary facilities for the institution of the training program necessary to meet the demande which will be made upon the Coast Guard by the Havy for several thousand trained enlisted - over the next several years. Very truly yours, (Signed) E. ⑉ Secretary of the Treasury. One inclosure. 327 THE WHITE HOUSE WASHINGTON June 23, 1941 MEMORANDUM FOR: THE SECRETARY OF THE TREASURY If, after the usual investigation, you find E. H. Birmingham satisfactory for Collector of Internal Revenue for Iowa, will you secure the resignation of the incumbent, who is, I understand, a hold-over and send the necessary nomina- tion papers to me? F. D. R. AR 328 June 23, 1941. My dear Mr. Cochrans I have your letter of June 19, which refers to the recommendation of Representative John Hunter of Ohio for the appointment of Ralph Snyder to be Collector of Internal Revenue at Teledo, Ohio. I have been amaiting further advice before undertaking to make a positive recommendation to the President as to this vacancy. You are, of course, entirely familiar with the fact that it is not the practice of the Treasury Department to make initial selections in the case of Presidential appointees. Several candidates have been recommended for the position by various persons and organisations in Ohio. One of the earlier recommendations was that by Representstive Hunter of Mr. Snyder. We have had no recommendation as yet from the Chairman of the Democratic National Committee. I thank you for writing to me on the subject and you may be sure that your views will be given the most serious consideration. Sincerely yours, (Signed) H. Morgenthan, Jr. Secretary of the Treasury. Honorable John J. Cochran, House of Representatives. File to Mr. Thompson By Messenger 329 0 0 P Congress of the United States House of Representatives Y Washington, D. C. June 19, 1941 Personal Honorable Henry Morgenthau, Jr., Secretary of the Treasury. My dear Mr. Secretary: Representative John F. Hunter of Ohio, 18 a Member of the Committee on Coinage, Weights, and Measures, is an outstanding Administration man and has given us a great deal of support. He advised me today that there 18 a vacancy in the Office of Collector of Internal Revenue at Toledo, Ohio, and that he talked to the President in reference to the matter, being advised that the President would settle the appointment within two weeks, based upon your recommendation. When this vacany occurred, Mr. Hunter recommended Ralph Snyder and Senator Donahey as well as the Democratic State Chairman joined him in approving Mr. Snyder. As you know, Senator Donahey was not re-elected and since that time it seems that the Chairman of the Democratic National Committee has stepped in and made another recommendation. Mr. Hunter says as far as he is concerned there cannot be any compromise as he 18 required to stand on his recommendation of Mr. Snyder. In view of the fact that Mr. Hunter has been assisting us so much, I felt at liberty to call this to your attention because I know that he would never forget it if you could act favorably on his recommendation. With assurance of my high esteem, I am Sincerely yours, /8/ John J. Cochran CONFIDENTIAL WAR DEPARTMENT WAR DEPARTMENT GENERAL STAFF MILITARY INTELLIGENCE DIVISION, G-2 WASHINGTON. D.C. June 23, 1941 MEMORANDUM TO COLONEL W. B. SMITH, Office of the Deputy Chief of Staff Room 2026. 1. With reference to information requested for Secretary Morgenthau, you are advised that although more than 400 P-40's are in England, and delivery of six Bell "Airacobras" was made in May 1941, none of either type has engaged in combat in the Western Theatre. 2. Available information relative to these airplanes in Egypt has been furnished Mr. Morgenthau's office via distribution of cables from Cairo. Major (A.C.) G. you JACK C. HOBGSON S.C. Chief, Air Section, G-2. CONFIDENTIAL 330 CONFIDENTIAL WAR DEPARTMENT WAR DEPARTMENT GENERAL STAFF MILITARY INTELLIGENCE DIVISION, a-1 WASHINGTON. D. c. June 23, 1941 MEMORANDUM TO COLONEL W. B. SMITH, Office of the Deputy Chief of Staff Room 2026. 1. With reference to information requested for Secretary Morgenthau, you are advised that although more than 400 P-40's are in England, and delivery of six Bell "Airacobras" was made in May 1941, none of either type has engaged in combat in the Western Theatre. 2. Available information relative to these airplanes in Egypt has been furnished Mr. Morgenthau's office via distribution of cables from Cairo. JACK C. MODGSON Major (A.C.) G. S.C. Chief, Air Section, G-2. CONFIDENTIAL 330 331 STRICTLY CONFIDENTIAL ALLISON SHIPMENTS British Total C Mar. 2 - 8 - 6 Mar. 9 - 15 - - 6 China Army 6 - 6 E C 69 - 2 72 - 2 - 74 - 17 - 14 - 36 36 14 1 Mar. 23 - 29 87 2 - 89 10 1 24 24 41 1 5 47 8 1 3 12 Mar. 30 - Apr. 5 - - - Apr. 6 - 12 60 5 1 66 Apr. 13 - 19 12 2 - 14 Apr. 20 - 26 3 3 Apr. 27 - May 3 - - - 24 May 11 - 17 53 11 9 May 18 - 24 60 13 May 25 - 31 24 June 1 - 7 12 June 15 - 21 3 -257 1-23 6 - - 8 77 80 53 103 - 71 10 88 21 - 10 19 - 1 9 May 4 - 10 June 8 - 14 2 C 71 Mar. 16 - 22 - Total Total F Grand - - 24 9 14 - 13 20 - 23 29 - 22 27 - 23 28 10 91 35 38 12 95 7 7 38 73 - 16 89 - 14 14 52 - 25 16 53 - 23 22 45 - 16 24 62 - 16 34 50 - 112 426 114 105 645 215 65 180 460 42 1 147 - 22 7 6 5 5 3 93 118 79 TOTAL Mar. 2 June 21 Office of the Secretary of the Treasury, Division of Research and Statistics. June 23, 1941. 332 STRICTLY CONFIDENTIAL ALLISON DIVISION, GENERAL MOTORS CORP. Shipments of Airplane Engines Actual : Estimated shipments shipments : on existing orders : 1940 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 10 28 43 47 140 263 233 154 228 1941 January 5 - February 1 February 2 - March 1 March 2 - 29 March 30 - April 26 April 27 - May 3 May 4 - 10 May 11 - 17 May 18 - 24 May 25 - 31 June 1 - 7 June 8 - 14 June 15 - 21 193 323 313 199 9 38 93 118 79 91 95 112 June 22 - 30 139 459 580 700 October 800 900 July August September November December 1,000 1942 January February February Office of the Secretary of the Treasury, Division of Research and Statistics. 1,000 730 June 23, 1941 333 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE June 23, 1941 STRICTLY CONFIDENTIAL TO FROM Secretary Morgenthau Mr. Wiley FBI reports: June 17. During the monitoring of foreign funds at the Chase Bank, FBI discovered various payments to oil companies in the United States. There are indications that the Standard 011 Company of New Jersey has been receiving money for oil sales by order of the Reichsbank. dow 334 TREASURY DEPARTMENT Chaunoey Miss INTER-OFFICE COMMUNICATION DATE June 23, 1941 Secretary Morgenthau TO CONFIDENTIAL FROM Mr. Cochran Registered sterling transactions of the reporting banks were as follows: Sold to commercial concerns Purchased from commercial concerns £83,000 £17,000 Open market sterling was quoted at 4.03-1/4, and there were no reported transactions. The Canadian dollar again improved and closed at a discount of 11-1/2%, as compared with 11-5/8% on Saturday. The Uruguayan free peso, which advanced from .4265 to .4310 last Friday, rose further to close at .4387-1/2 this afternoon. In New York, closing quotations for the foreign currencies listed below were as follows: Argentine peso (free) Brazilian milreis (free) Mexican peso .2380 .0505 .2070 1-1/16% discount Cuban peso In Shanghai, the yuan was unchanged at 5-7/16 and sterling remained at 3.92. There were no gold transactions consummated by us today. No new gold engagements were reported. In London, a price of 23-7/16d was again fixed for spot and forward silver, equivalent to 42.55 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, bought for forward delivery. We also purchased 275,000 ounces of silver from the Bank of Canada. So far this month, we have bought 925,000 ounces from that source, under our regular monthly agreement to purchase up to 1,200,000 ounces. amp 335 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION CONFIDENTIAL DATE June 23, 1941 TO Secretary Morgenthau FROM Mr. Haas LA Subject: The Business Situation, Week ending June 21, 1941. Summary (1) According to the Federal Reserve Board, the index of industrial production (1935-1939 = 100, adjusted) has been revised upward 1 point and now stands at 149 for May, as compared with 140 in April and 115 in May 1940. Judging by weekly indexes, last month's rise in business activity has carried over into the current month. Both the New York Times index and Barron's index have reached new highs. (2) Commodity prices are rising at an accelerated pace. The BLS all-commodity index reached 84.9 (1926 = 100) for the month of May, an increase of 2.0 percent over April. For the week ended June 14 the index stands at 86.7, a further increase of 2.1 percent over the May average. (3) The outstanding price movement last week was an ad- vance in prices of fats and oils. The lead was taken by cottonseed oil, spot prices of which gained 7 percent in the week. Among the major bullish influences have been the heavy Government purchases of lard and pork products, which together totaled 248 million pounds in the 2 months ending June 14. Purchases of lard in this period totaled 7 percent of an average year's production, while lard prices in this period have risen more than 40 percent. (4) The tight supply situation in steel scrap has become more acute. In an endeavor to alleviate the situation, OPACS has threatened strong action against hoarders, and has made amendments to the maximum price schedule which should favor increased scrap collections. The situation is further complicated by the tightness in the supply of pig iron. -2- 336 Further rise in business activity The Reserve Board's preliminary estimate of the FRB index of industrial production for May proved to be 1 point too low. As a result, the index stands at 149 as compared with 140 in April. The index is far above the 1929 peak of 114. Last month's rise in business activity has carried over into the current month, with both the New York Times and Barron's seasonally-adjusted indexes moving into new high ground. Such basic factors as automobile production, steel ingot production, and cotton mill activity, after allowance for seasonal factors, have all made further gains thus far in June, while electric power output has reached a new high, and freight carloadings are running well above last fall's seasonal peak. Prices have increased 4 percent since April Commodity prices are rising at an accelerated rate. The BLS all-commodity index reached 84.9 (1926 = 100) for the month of May, an increase of 2.0 percent over April. For the week ended June 14, the weekly index was 86.7, which represents a further increase of 2.1 percent over the May average. Prices have therefore advanced about 15 percent since August 1939, the month before the war started. In the same number of months in the World War period prices advanced 22 percent. For the week ended June 20, prices of foodstuffs were sharply higher (see Chart 1, upper section), while prices of industrial materials made but little further gain. Among the basic food materials, the greatest advances were in the fats and oils group, including cottonseed oil, lard, and butter. Hog prices were also substantially higher. Increased prices of cotton and print cloth, in the industrial materials group, were offset by a strong decline in hides, following the estab- lishment of a price ceiling by the OPACS. (See Chart 1, lower section.) Very sharp rise in prices of fats and oils The very strong advance in prices of fats and oils last week was led by cottonseed oil, which reached a new high in the futures market, and in the spot market made a gain of 7 percent in a single week. The advance occurred in spite of reports that the OPACS 18 studying recent price increases, presumably in an attempt to restrain unwarranted speculative activity. Basic economic influences underlying the price 337 -3- - - advance are increased consumer incomes, rising industrial demand, and expanded building activity, together with a scaling down of the cotton crop estimate. Government purchases of lard and dairy products (discussed in a later section) have been a strongly bullish influence while difficulty in secur- ing supplies of some imported fats and oils has also been a factor. The increase in the price of lard has occurred in spite of heavier stocks of lard, which on June 1 were 10 percent over May 1 and 25 percent over June 1 last year. One reason for the heavier stocks is the higher average weight of hogs marketed recently. Stocks of butter are also large, being over twice as high on June 1 as a year earlier. Nevertheless, the price of butter during May was the highest for the month since 1929 and the highest for any month since 1937. Trends of fat and oil prices In view of the critical importance of fats and oils in the present war, their price behavior is of special signifi- cance. Spot prices of cottonseed oil, along with prices of other fats and oils, showed a considerable upward movement in September 1939 following the outbreak of war, reversing a downward trend which had been in progress since 1937. (See Chart 2.) The sharp price gain after the war started, however, was more than lost later by all except butter, in a decline due largely to the blockade of foreign markets. The price of butter has shown a generally upward movement interrupted only by the usual seasonal swings. Since late 1940, all four prices have shown a strong advance. In the case of butter, the relative increase is greater than the chart indicates, since the recent rise has come when the seasonal price movement is downward. The price of butter is now considerably above last December's seasonal peak. The price increase shown by these four selected items has been matched by most other fats and oils. Government food purchases a significant proportion of total production Purchases of food products by the Department of Agriculture in the 2-month period March 15 to June 14 are shown in Exhibit 1 (attached), compared with annual average production in the 10-year period 1929 to 1938. Wholesale price changes since March 15 for these products are shown on the same table. 338 Government purchases, it will be noted, represent sub- stantial proportions of annual production in the case of cheese, evaporated milk, and lard, while purchases of dried beans, dried apples, dried peaches and raisins, of canned grapefruit and canned tomatoes are also apparently large enough to influence the market. Judging by the price changes, most of the markets have evidently responded to this influence. Thus, the price of lard has increased over 40 percent since March 15, while the price of cheese has increased over 30 percent. In the case of dried and canned fruits and vegetables, of course, the approaching new crop is also a strong influence. The price of apricots, for example, has declined in view of the fact that the new crop is estimated to be considerably above last year. The Federal purchases are said virtually to have eliminated the carryover in dried apricots, peaches, apples, and raisins. Steel scrap shortage troubling steel producers The tight supply situation in steel scrap has become more aoute, and is now looked upon in some trade circles as the most serious threat to the continuation of the current high level of steel operations. It 18 reported that consumption is running ahead of receipts of scrap, with a consequent drain on stock piles. In an endeavor to alleviate this situation, the OPACS during the past week threatened strong action against hoarding of iron and steel scrap and also made certain amendments to the schedule establishing maximum prices for scrap. Coincidentally, Price Administrator Henderson asserted that the maximum prices now in effect are high enough to fully compensate scrap collectors and insure an adequate supply of the material. The situation 18 further complicated by a tightening in pig iron supplies, and some sources now anticipate an exten- sion of priorities and allocations of supplies in this branch of the steel industry. Steel ingot production, however, continues to run at close to capacity levels, with operations last week rising to 99.0 percent of capacity from 98.6 in the previous week. During the current week, steel operations are scheduled at 99.9 percent of capacity. Steel backlog higher despite decline in orders Although new orders booked by the U. S. Steel Corporation in May fell 8 percent below the previous month, incoming business was still well above shipments, with a consequent 339 -5further rise in the company's backlog of unfilled orders. (See Chart 3.) Steel shipments last month reached a new high by a narrow margin but it will be noted that, due to the company's attainment of virtual capacity operations by March of this year, further large increases must await expansion of productive facilities. New orders booked by the U. S. Steel Corporation in the second week of June, the latest available, rose 3 percent to 157 percent of capacity. Heavy construction contracts rising After showing a gradually declining trend for the past several months, heavy engineering construction awards during turned highest on awards the current last month week reached have the third sharply higher. figure Thus contract record, and a four weeks' moving average of contract lettings moved into new high ground for the year. (See Chart 4, upper section.) Prominent awards in the recent expanded totals include: $46,000,000 artillery shell loading plant at Texarkana, Texas. $39,000,000 TNT plant at Chattanooga, Tennessee. $30,000,000 shell loading plant at Minden, Louisiana. $16,000,000 TVA dam at Fort Loudon, Tennessee. $15,000,000 ammonia plant at Henderson, Kentucky. $15,000,000 pipeline from Louisiana to North Carolina. Structural steel bookings, as shown on Chart 4, declined abruptly during May, after reaching a new high for the current year. Thus far, the rise in engineering construction awards above mentioned has not been accompanied by a similar spurt in lettings of construction steel. Steps taken to speed up shipbuilding Following upon the recent allocation of early deliveries of 469,000 tons of steel plates and shapes to shipbuilders, it was announced during the past week that the OPM had moved up orders for shipbuilding materials to the highest priority rating. Previously the Maritime Commission had advised the OPM that unless the priority rating of shipbuilders was 1m- proved, they would not be able to get materials in time to carry out scheduled completions of cargo ships totaling 3,000,000 tons in 1942 and more than 5,000,000 tons in 1943. -6- 340 While a very considerable expansion in shipbuilding activity has already taken place, the foregoing figures indicate that much greater activity lies ahead. As will be seen in the upper section of Chart 5, an almost uninterrupted rise in shipbuilding production has been under way since the early part of 1939. By May the FRB seasonallyadjusted index of shipbuilding activity had reached 368, as compared with 164 a year earlier and only 109 in January 1939. Sharp rise in orders for merchant vessels Nevertheless, as shown in the lower section of Chart 5, really sharp expansion in ordering of merchant vessels did not occur until recent months, although heavy contract awards for the expansion of the U. S. Navy were made last year. As a result, merchant vessels under contract or construction by June 1 had risen to 826 vessels totaling 5,350,000 gross tons as compared with only 295 vessels, aggregating 1,516,000 tons a year earlier. Furthermore, since the figures mentioned cover only ships built to American Bureau of Shipping Classification, they do not include orders placed last December by Great Britain for 60 cargo vessels totaling 408,000 gross tons, as well as a few other vessels on order or under construction for American owners. Moreover, it is now reported that shipbuilders are expecting the Maritime Commission to place orders soon for 259 more cargo vessels. Some idea of the magnitude of the shipbuilding program that lies ahead may be gathered from the fact that despite the increase in output that has already occurred, merchant ship completions in the first 5 months of this year totaled only 33 vessels (265,000 gross tons), while launchings numbered 39 vessels (310,000 gross tone). These figures contrast sharply with the 890 merchant vessels of all kinds (5,800,000 gross tons) on order or under construction in United States shipyards on the first of the current month. New orders continue at high level Our index of new orders declined slightly in the week ended June 14, though remaining at a high level. (See Chart 6.) New orders for steel were somewhat higher, but new orders for textiles and total excluding steel and textiles showed some decline. While irregularity in the volume of orders can doubtless be expected, no basis exists for any substantial deoline 80 long as the defense program 16 expanding. 341 -7Weekly business indexes higher With all components except one showing gains, the New York Times index of business activity in the week ended June 14 rose 2.2 to a new high at 130.2. During the same period Barron's index of business activity also reached a new high at 134.9 although the gain over the previous week amounted to only 0.3. The principal factors in the rise in the Times index were a greater than seasonal rise in paperboard production and a contra-seasonal gain in miscellaneous freight carloadings. The only component to decline was electric power production, which rose by less than the seasonal amount despite the fact that power output reached a new high. Preliminary data for the week ended June 21 reveal a further slight contra-seasonal rise in steel inget production, and a decrease in automobile output of 1,100 units to 133,600. This figure contrasts with the 90,100 units produced in the corresponding week of 1940. 342 Exhibit 1 Selected food purchases by the Department of Agriculture March 15 to June 14 compared with production and prices Commodity Vegetables and fruits: Apples, fresh Apples, dried Apricots, dried Beans, dry Grapefruit, fresh Grapefruit juice, Unit Bu. Bu. equiv. Lb. Bag Box Case Percent Percent purchases of increase in March 15 to: production price since June 14 1929 - 1938 annual average: March 15 Purchases 1,461,765 447,063 8,000,000 1,587,684 1.20 6.57 - 20.1 1 0.0 - 4.4 273,879 643,200 13.87 12.13 1.25 18.44 398,418 13.64 19.8 16,000 0.06 311.8 370,062 0.66 8.45 0.25 0.99 7.06 10.97 - 1.6 47.8 2/ 20.6 canned Grapefruit segments, Case canned Onions Oranges Peaches, dried Potatoes, white Prunes, dried Raisins Tomatoes, canned Carrots, fresh 50 Lb. bag Box Bu. Bu. Ton Ton Case Bu. 458,333 909,015 2,232 15,000 2,591,311 11,000 0.09 11.1 60.3 13.6 9.8 15.5 2 Dairy and poultry: Dried eggs Shell eggs Frozen eggs) American cheese Lb. equiv. 63,800,000 3 1.40 36.4 Lb. Lb. 30,998,799 105,022,050 7.13 6.28 31.1 7.8 Pork, meat products 41.1 23.0 Rice Bu. 131,581,039 116,298,441 1,120,000 71,111,000 6.61 1.44 Oleomargarine Lb. Lb. Lb. Wheat flour Bbl. .35 .16 .30 8.3 21.3 13.8 Evaporated milk Other food: Lard 307,285 Quotation for average grade, New York Average grade, Chicago, increased 88.9 percent; medium grade, Seattle, increased 86.0 percent. 3 Approximate. 2 Not available. Note: Items omitted for which comparable production data are not 1 available or for which less than .05 percent of production was purchased. MOVEMENT OF BASIC COMMODITY PRICES AUGUST 1939.100 PER Weekly Average CENT PER PER PER CENT CENT CENT Daily 160 160 155 155 150 150 140 140 16 Raw Industrial Materials 150 150 12 Foodstuffs 130 130 145 145 120 120 140 140 12 Foodstuffs 16 Row Industrial Materials 110 135 110 135 130 $ A A M J M J F J o S D N $ A 1941 J M J A 1940 , APR o 100 17 24 10 31 24 7 19 12 14 21 20 JULY JUNE MAY $ 130 12 100 1941 Percentage Change for Individual Commodities. August Low to June 13. and to June 20. 1941 PER PER 16 Raw Industrial Materials CENT 12 Foodstuffs CENT follow 1286% Cottonseed Oil 127.7 X +120 *120 Print Cloth 94.7 X Burlap 91.7 x -100 Shelloc 82.8 X Hides 53.8% Lard 97.2 x +100 Cocoa 93.6 X Coffee 73.2 I +80 Wool 48.4 X +80 Hoge 623 X Cotton 47.4% (Flaxseed 30.6X +60 (Resin 258X +60 Wheat 44.8 x Lead282X (Silk 20.0% Sugar 35.2 x +40 Butter 849X (Line 15.1 X +40 Rubber 13.0% Copper 11.8 X Barley 294X Corn 14.8 X +20 Steers 10.0 x Steel Scrap.dom. 8.7X Jin 50 X Steel Scrap.exp. 2.7X 0 June 13 June 20 0 .20 June 13 June 20 Aug. Low Aug Low P-187-R-1 PRICES OF SELECTED FATS AND OILS CENTS CENTS PER POUND PER COTTONSEED OIL TALLOW POUND 10 12 8 9 6 6 4 2 3 1934 1988 1940 1934 1936 1938 1940 CENTS CENTS PER POUND PER LARD 14 40 12 35 10 30 - 25 20 6 15 4 1934 BUTTER POUND 8 C 1936 1936 1938 1940 1934 1986 1938 1940 Note Lotest figures as of June 19,1941 - the the Treasury P-220 a Chart 3 CONFIDENTIAL REPORTED NEW ORDERS, SHIPMENTS, AND INDICATED 345 UNFILLED ORDERS OF THE U.S. STEEL CORPORATION NET TONS THOUSANDS NET TONS THOUSANDS 2800 2800 2400 2400 2000 2000 REPORTED NEW ORDERS 1600 1600 1200 1200 800 800 REPORTED SHIPMENTS 400 400 1939 1940 1941 0 0 1938 NET TONS NET TONS WILLIONS MILLIONS 10 10 8 8 6 6 4 4 INDICATED UNFILLED ORDERS 2 2 1 1939 1940 1941 0 G 1938 the Secretary of the Treasury - of - and Statistics I 133 - B CONSTRUCTION CONTRACTS AND STRUCTURAL STEEL ORDERS JAN. SEPT. JULY MAY MAR. NOV. DOLLARS DOLLARS MILLIONS WILLIONS Heavy Engineering Contracts* Eng. News Rec., Daily Ave. 36 36 32 32 28 28 1941 24 24 20 20 16 16 1939 12 12 1940 8 8 4 4 MAY MAR. JAN. SEPT. JULY NOV. TONS THOUSANDS TOMS THOUSANDS Structural Steel Orders* 70 70 60 60 1941 50 50 40 40 30 30 1939 20 20 1940 10 10 0 0 JAN. MAY MAR. JULY SEPT. NOV. FOUR-WEEK MOVING AVERAGE PLACED ON FOURTH WEEK . 346 Office of the Secretary of the Treasury Division of Research and Statistics C 393 Chart 4 Chart 5 347 BHIPBUILDING ACTIVITY 1940 1939 1 941 1 942 PER PER CENT CENT F.R.B. INDEX OF SHIPBUILDING 400 1935 - '39 - 100, ADJUSTED 400 350 350 300 300 250 250 200 200 150 150 100 100 1941 1940 1939 1942 TONS MILLIONS TONS WILLIONS MERCHANT VESSELS UNDER CONSTRUCTION 6 OR CONTRACT 6 5 5 4 4 3 3 2 1 0 $ 0 $ 1939 1940 1941 1942 EXCLUDES VESSELS NOT BUILT TO AMERICAN BUREAU OF SHIPPING CLASSIFICATION C - 403 - of - - - office of the Secretary of the Treasury INDEXES OF NEW ORDERS Combined Index of New Orders and Selected Components PERCENTAGE POINTS POINTS 240 240 230 230 N 220 220 210 210 Total Leneb and Index) 1936 100 200 200 190 190 180 180 170 170 160 160 150 150 140 140 130 130 120 120 110 110 100 100 90 90 80 Total excluding Steel and Textiles 80 70 70 60 60 50 50 40 Steel Orders 30 20 10 Textile Orders 0 1940 1.85.0 349 TREASURY DEPARTMENT INTER OFFICE COMMUNICATION DATE June 23, 1941 TO Secretary Morgenthau FROM Mr. Haap OA Employment reports of the Work Projects Administration show a decrease of 19,000 persons to 1,423,000 during the week ended June 11, 1941. Attachments 350 WORK PROJECTS ADMINISTRATION Number of Workers Employed - Weekly United States Week ending 1940-41 November 6 November 13 November 20 November 27 December 4 Number of Workers (In thousands) 1,783 1,786 1,807 1,822 December 11 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 19 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 May 14 May 21 May 28 June 4 June 11 Source: Work Projects Administration 1,519 1,497 1,474 1,464 1,442 1,423 351 WORK PROJECTS ADMINISTRATION Number of Workers Employed - Monthly United States Number of Workers 1938 July (In thousands) August September October November December 3,053 3,171 3,228 3,346 3,287 3,094 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 May 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 Source: Work Projects Administration Monthly figures are weekly figures for the latest week of the month. They include certified and noncertified workers. 352 WORK PROJECTS ADMINISTRATION Number of Workers Employed United States Weekly W.P.A. Employment Monthly W.P.A. Employment 1935 1941 1940 42 1942 MAR MAY 200 SEPT. BY - and MAY 000 NOX WILLIONS MILLIONS MILLIONS or 23 WORKERS WORKERS mosages 2.7 2.6 2.6 3.2 3.2 2.5 2.5 2.4 2.4 2.8 2.8 2.3 2.3 2.2 2.2 2.4 2.1 2.4 2.1 2.0 2.0 1.9 2.0 1.5 2.0 1.8 1.8 1.7 1.7 1.6 1.6 1.6 1.6 1.5 1.5 1.2 1.2 1.4 1.4 1.3 1.3 1.2 .8 1.2 1.1 1.1 1.0 .4 1.0 .9 .9 1937 1938 1939 1940 1941 0 .. 0 . .8 - .... the 1935 1936 HILL JAN. '42 MAR. MAY JULY 1940 SEPT. NOV. JAN. MAR. MAY JULY 1941 SEPT. NOV. - was. 1942 SOURCE: WORK PROJECTS ADMINISTRATION 2 221 c Office of the Secretary of the Treasury - Statistics .8 353 June 23. 1941 Files Mr. Cochran At 11 e'clock es Saturday, June 21. I received Dr. Chao-Ting Ohi. who acted as secretary to Mr. K. P. Chen when the letter made his survey of the Darna Read, and who is shortly preceeding to China to serve as secretary to Mr. Ohen ea the Stabilisation Board. I received Dr. Chi at the request of Mr. Archie Leehhead. who had telephoned from New York the preceding day in regard to the contemplated visit. Dr. Chi and I talked over the general problems of Chinese stabilisation. When he asked whether Ohina could expect to receive further financial help eace the present $50,000,000 of assistance may be exhausted, I told his that they should endeaver to make this money & as far as possible. No and his friends should realise our keen interest is seeing China strengthened. AS the same time, I pointed out that the currency had already depreciated greatly. It had during the past several months held at a fairly steady level. If. with the backing now to be made available by the Stabilisation Fund, reneved confidence in the currency can be established, the support thereof should require little foreign exchange. I thought it would be to the benefit of China to let 11 be seen that the endorment of the Stabilisation Fund is not exhansted. I assured Dr. Chi, however, that we expected to receive frequent and freak reports from the Stabilisation Board and would be guided accordingly. HMC:aap-6/23/41 are Chaunce any has the Q and one position stat to have been LIEUT. STEPHENS g AND BEYER TO NL TREASURY DEPARTMENT UNITED STATES COAST GUARD HEADQUARTERS SECRET From: To : WASHINGTON 23 June, 1941. Spagent, Hongkong, China. Secretary of the Treasury. Conference with the Generalissimo on the fourteenth was satisfactory. He expressed satisfaction at further evidence of American aid. Assured board of support and was informed of its intent to take a broad view of the situation, though reliably reported that he would like it to absorb excess note issue. Kung informed Chen on the eighteenth that the board's ac- tivities should certainly be tied in with major economic issues and is in favor of Chinese members going on short fact-finding tour of the leading Chinese cities, while Fox plans to go together with American trained Chinese economists to investigate Shanghai conditions. Fox is having Frese accompany Chinese members. Arrangements authorized for meeting of board on eighteenth. Technical organization deferred until board reassembles. Expect to Leave Chunging on the twenty second. Convenient time for trin as our quarters are not ready and may not be CT some time. Furthermore, Chinese members are hesitant to organize formally imeliately for fear of offending the British. No time is being lost however as Chinese members, Fox, and Taylor are holding many informal and profitable discussions and much good will is being built up. Conferences with local bankers, economists, and others SECRET -2- are also being held. Because of time lost through air-raids, the following hours are established: seven to eleven, mornings, and four to seven, afternoons. At board meeting on fifteenth, courtesies were exchanged. Subject to later formal ratification, 3 number of decisions were made. Chungking headquarters to be in Central Bank building; Dr. Y. L. Lin, appointed secretary pro-tem. Agreed that a small and flexible economic research division should be organized depending primarily on existing government ministries and other bodies for source material. Emphasis laid also on importance of organizing competent accounting division to keep records and render periodic reports as per agreement. Fox affirmed that operations must be in complete secrecy. No decision reached on general branches, agencies, vice-chairman, counsel. National financial conference opened Chungking on sixteenth. Primary purpose to achieve trans- fer of land tax from provincial to federal government. Generalissimo addressed opening of the meeting and pointed out that in Manchuria one hundred per cent Chinese assets were confiscated and therefore any sacrifice in Free China, no matter how great, was justifiable for war purposes. The tax structure must be improved and centralized. Stressed the fact that the food supply represented one of the most pressing and serious problems and that every effort will be taken to improve the situation. Have had several conferences with officials in the Vinistry SECRET -2 - are also being held. Because of time lost through air-raids, the following hours are established: seven to eleven, mornings, and four to seven, afternoons. At board meeting on fifteenth, courtesies were exchanged. Subject to later formal ratification, a number of decisions were made. Chungking headquarters to be in Central Bank building; Dr. Y. L. Lin, appointed secretary pro-tem. Agreed that a small and flexible economic research division should be organized depending primarily on existing government ministries and other bodies for source material. Emphasis laid also on importance of organizing competent accounting division to keep records and render periodic reports as per agreement. Fox affirmed that operations must be in complete secrecy. No decision reached on general branches, agencies, vice-chairman, counsel. National financial conference opened Chungking on sixteenth. Primary purpose to achieve trans- fer of land tax from provincial to federal government. Generalissimo addressed opening of the meeting and pointed out that in Manchuria one hundred per cent Chinese assets were confiscated and therefore any sacrifice in Free China, no matter how great, was justifiable for war purposes. The tax structure must be improved and centralized. Stressed the fact that the food supply represented one of the most pressing and serious problems and that every effort will be taken to improve the situation. Have had several conferences with officials in the Vinistry of Finance STAGE is in aivising on American practices and turned nister of Finance Koo some materials he has with him. to cable for more in the future. Frese will continue to assist Koo until technical work with board becomes too heavy. Fox was invited to address the financial conference. will stress the need for political unity, increased democracy, insured oroduction, expanding tax revenues, modernization of fiscal system, tax centralization, budget control, and relationship of board to broad economic problems. Stated on good authority that British ambassador told Generalissimo that unless Rogers was reappointed, the exchange value of FAPI would be seriously affected. Generalissimo then abruptly terminated the interview. 358 C 0 P Y PARAPHRASE OF TELEGRAM RECEIVED FROM: American Embassy, Chungking. DATE: June 23, 1941, 4 p.m. NO. : 252. This telegram is from Fox for the attention of the Secretary of the Treasury: I have received your instructions telegraphed on the 18th, inst. (1) I am sending a separate telegraph message with reference to the confidential secretary. (2) With regard to the appointment of Rogers, the position outlined in the telegram has already been taken by Fox. (3) I am endeavoring in every way possible to set up the board in a formal way at the earliest occasion that presents itself, and during the delay I am exploring the problems of economics. (4) Taylor and Fox are on their way to Shanghai without Lin, the Chinese economist, who is dubious about accompanying them. In the meantime Pei, Chen and Frese are observing the conditions in various Chinese areas. Contacts with economists and Government Ministries are being followed up by Hsi and staff in Chungking. (5) Having been summoned by the Generalissimo, I had a three- hour conversation with him yesterday, at which time he stated that his chief concern was over the formal organization of the board at an early date. However, he completely agrees with the steps which 359 -2- have been taken in an informal way thus far. He wants to have the board organized inside a month with or without a member from Great Britain. According to our advices in Chungking, it is impossible to establish a five-man board without the British. Although Chiang is prepared to allow the board to proceed on a four-man set-up, he considers it best for diplomatic reasons to wait for only one month to permit a member to be appointed by the British. Chiang is adamant in his opposition to any compromise or to the appointment of Rogers. (6) Although I am not sure of the advantages to be gained from a tour of the Chinese members, it may render less conspicuous the visit to Shanghai. All publicity will be avoided. The contacts with U. S. bankers and others in regard to Fapi will be emphasized. (7) The living arrangements are poor: have moved once already. Frese and Fox are indisposed to a slight extent. It is hoped that before - return, suitable accommodations can be located. Living accommodations are of great importance under conditions in Chungking. I will telegraph my next message through the Shanghai consulate. S GAUSS EA:MSG 360 BRITISH EMBASSY, WASHINGTON, D.C. PERSONAL AND SECRET 23rd June, 1941. Dear Mr. Secretary, I enclose herein for your personal and secret information copies of the latest reports received from London on the military situat tion. Believe me, Dear Mr. Secretary, Very sincerely yours, Halifax The Honourable Henry Morgenthau, Jr., United States Treasury, Washington, D.C. 361 Telegram from London dated 20th June, 1941. 1. H.M.S. Vanessa arrived at Yarmouth. Two mine- sweeping trawlers bombed in Peterhead Bay a.m. 29th June. One sunk, other damaged. A coastal command aircraft obtained direct hit on merchant vessel of 5,000 tons off Etaples, 2. Royal Air Foree. Successfully bombed docks at Havre on 19th June. Enemy air activity against United Kingdom very slight. Night of 17th/18th June enemy aircraft dropped bombe in harbour area of Alexandria, damage small. 3. Imports into United Kingdom in convoy week ending 14th June exceeded one million tons, average 795,445 tons for past ten weeks. Last week 900 British, Allied and Neutral ships were convoyed and only one lost, making total 68,202 ships convoyed and 344 lost since the beginning of the war. 4. German and Italian war expenditures estimated at £16,000,000 a day. 5. Benghasi bombed nights 17th/18th June and 18th/19th June also Derna. Syria. During morning 19th June our troops advanced at Messe and Damascus but held up by heavy artillery fire. Free French attacked Jebel Kelb 6 miles north Kiswe but Vichy troops counter-attacked inflicting heavy casualties. Note sent to General Dents informing him we would shell Damascus unless declared an open town. In centre we attacked Maniavoun/ 362 -2 Merjayoun where estimated three Vichy battalions holding out from north. After initial success advance was held up on outskirts of the t own. Coastal sector, our patrols pushed ahead. 6. Night of 19th/20th June. 48 aircraft sent to Cologne and Dueseldorf, 2 are missing. At Cologne 23 tone of high explosives including 9 one thousand pound and 5,300 incendiaries were dropped, and at Dusseldorf 18 tons of high explosives including 10 one thousand pound and 3,800 incendiaries. Results difficult to observe but fires seen in both target areas. 363 Telegram from Londea dated 21st June, 1941. Reconneiseance Cale 20th June showed Leipsig class eruisor in Harbour. On 20th June 65 mines exploided OF were detonated off the British coast. British submarine on 11th June torpedoes ship in Benghasi harbour causing fire and explosion. She also sank one ship in convoy on 12th June. No further details received. His Majesty's Trawler Capstone shot dora enemy bomber off Mounta Bay a.m. 20th June. 2. Libra and Revot. No activity frontier area 19th June over mobile column reported no enemy escarpment area east of Bir Sofafi. 17th June four aircraft with French markings bombed locality south-east of sidi Barrani. 3. Abrasinia. Large enemy concentration reported near Mendi about 50 miles from the Sudan border. Enemy's morale there reported low. Gunina area enemy appears to be burning petrol and M.T. A force has been sent to support patriots being attacked 70 miles south south-west of Lecamoti. 4. syria. Damasous area. We opened road to Messa 19th June. Free French have successfully held counter attacks. quneinan area Vichy French still occupying area 5 miles north-eastwards. Situation in Merdjayoun obscure our troops hold position 1,000 364 -2yards to south-west and Vichy-French on high ground 5 miles to the south. Coastal area we are advancing slowly against M.G. fire. In Jebel Druse country our bombers attacked Suweida fort 18th June where local tribe reported to have surrounded Vichy garrison on afternoon of 19th June. 5. 13th June. Bomber command aircraft sank small vessel off the Dutch coast. 20th/21st June. 128 aircraft despatched to Kiel shipbuilding yards battleship Tirpitz and industrial targets. Small numbers also to Boulogne, Cologne and Kesen. Two aircraft missing. German Air Force 20th June Two Spitfires intercepted three German bombers escorted by five fighters south of Plymouth and destroyed two fighters. 20th/21st June. Fortytwo enemy aircraft were plotted of which 17 came overland. One was damaged by a night fighter. 6. Comprehensive photographs taken 16th June to 18th June of all important ports Kiel to Bordeaux reveal practically no movement of ships or barges except merchant shipping activity at Bremon, Emden and Rotterdam though that not ab- normal. Believed much activity on defences and storage Cap Grisnez and Boulogne areas. Work continuing on the projection and extension of ammunition dumps N. Holland and Germany. 365 CONFIDENTIAL TENTATIVE LESSONS BULLETIN MILITARY INTELLIGENCE DIVISION No. 123 WAR DEPARTMENT 0-2/2657-235 Washington, June 23, 1941 NOTICE The information contained in this series of bulletins will be restricted to items from official sources which are reasonably confirmed. The lessons necessarily are tentative and in no sense mature studies. This document is being given an approved distribution, and no additional copies are available in the Military Intelligence Division. For provisions governing its reproduction, see Letter TAG 350.05 (9-19-40) M-B-M. BRITISH SURVEY ON GERMAN ARMORED FORMATIONS IN ACTION SOURCE This survey is based upon notes compiled by a high British official source in February 1941. CONTENTS 1. HISTORICAL 2. THE CAMPAIGN IN POLAND 3. THE CAMPAIGN IN NORWAY 4. THE CAMPAIGN IN THE WEST 5. FACTORS CONTRIBUTING TO SUCCESS 6. MAINTENANCE AND SUPPLY DURING OPERATIONS CONFIDENTIAL -- 366 BRITISH SURVEY ON GERMAN ARMORED FORMATIONS IN ACTION 1. HISTORICAL The combined maneuvers in Mecklenburg in 1937 saw the first appearance of a German armored division. During the years of secret training and preparation of equipment which had been devoted to its development, the German General Staff had been considering three principles of tank warfare: a. Use of tanks in close cooperation with infantry: b. Independent use in order to break through and penetrate the enemy's defensive position; C. Best use of air cooperation. It was necessary to choose between the first two of these principles, for the former sacrificed speed and the latter armor. The final decision favored speed in order that tanks might act without being tied to slow moving infantry and justify their independence by exploiting a break-through to the full. Close support bombing was to be used to increase striking power to the utmost. No large-scale experience was gained from the Spanish Civil War, for German light tanks with the Nationalist forces did not exceed 300 to 350. But certain lessons were learned. First, the 15-mm. armor of the light tank proved inadequate. Second, light tanks showed their chief usefulness in reconnaissance work. Third, a strong tank attack well supported from the air, as at Guadalajara, proved irresistible against a weaker enemy. Finally, the antitank gun, in German opinion, showed itself a stage ahead of armor. Hence, the Germans concluded there was a necessity for developing speed at the expense of armor. Valuable experience in performance was gained from the moves into Austria and Czechslovakia. Results in March, 1938, were below expectations, but the defects were remedied before the occupation of Sudetenland. The occupation of Czechoslovakia, carried out early in 1939 in the most difficult weather conditions, proved that armored divisions could operate on frozen roads and in very difficult country. For example, on the first day of the march to Prague, one armored division is reported to have covered nearly 100 miles over bad roads and in a snowstorm without disabling of a single vehicle. In broad outline, a German armored division consists of the following: CONFIDENTIAL -2 - 367 CONFIDENTIAL a. A divisional reconnaissance unit comprising armored cars and motorcyclists; b. A tank brigade of two mixed tank regiments: C. A motorized infantry brigade consisting of motorized infantry and a battalion of motorcyclists; d. Remaining divisional troops. By the summer of 1939, the number of armored divisions had been increased to six, and there were in addition four light divisions whose role was that of strategic cavalry. In place of a tank brigade, the light division had a truck-borne light tark battalion. These divisions proved unsatisfactory and by May, 1940, they had been converted into armored divisions, making a total of ten. In this connection, there are indications that armored divisions are being divided into two groups, heavy and light, and that the latter may represent a compromise between the old light division and the normal armored division. At present there are believed to be 13 armored divisions, including converted light divisions, and a number of independent tank regiments. 2. THE CAMPAIGN IN POLAND a. General Factors Three factors need emphasis when the Polish campaign is considered: (1) Relative Strength of Opposing Forces More marked than Polish inferiority in numbers was inferiority in equipment, particularly as regards lack of antitank guns. Further, the Polish Army was not fully mobilized at the outset. (2) Weakness of the Polish Air Force (3) Ground The flat nature of the country and the hard, dry condition of the ground in general facilitated progress of armored vehicles. b. Principal Methods in Employment of Armored Formations (1) In Cooveration with Infantry with Object of Breaking Crust of Polish Resistance CONFIDENTIAL -3- 368 CONFIDENTIAL The flexible organization of an armored division permitted the detachment of part or all of its tank strength to support the infantry. (2) Independently Tanks were often used in an independent role, as for instance against enemy flanks, lines of communications, or centers of resistance. In such cases, armored divisions operated in groups which varied according to tasks. The main thrust was entrusted to a group of three armored divisions and two motorized divisions advancing from Silesia under General Guderian. At the end of the first week, the deepest penetration was about 90 miles. This employment will be described in greater length in the paragraphs deeling with the campaign in the West. C. Attack by Tanks on Enemy Defensive Position in Cooveration with Infantry. (1) General Thorough ground and air reconnaissance preceded the attack, which was launched after artillery preparation and supported by machine gun fire from aircraft. Generally the whole tank brigade that is, 400 to 450 tanks - was placed in support of the attacking infantry. The detailed preparation and execution of such an attack in support of a division is summarized in the ensuing paragraphs. About 30 hours before the attack took place the armored division moved by night to a bivouac area some 20 miles in rear of the division which it was to support. Strict measures were taken to ensure concealment from ground and air observation during the preparatory period. Supply units moved into the same area, while administrative and medical units bivouacked some seven or eight miles in rear. The antiaircraft battery of the division provided antiaircraft defense for the bivouac area. Upon arrival in the bivouac area, all units were supplied with copies of a report containing the latest intelligence of the enemy and indicating probable future tasks. The intervening time before the attack was devoted to reconnaissance and preparation. (2) Tasks of Reconnaissance Groups and Specialists CONFIDENTIAL -4- 369 CONFIDENTIAL Reconnaissance groups and specialists - such as engineer and signal personnel - proceeded to the assembly area, about seven miles behind the forward troops, before dawn on the day preceding the attack to carry out the following tasks: (a) Reconnaissance of assembly areas, routes forward to the leading infantry, and suitable location for battle headquarters; (b) Liaison between commanders of the two tank regiments and commanders of the forward infantry regiments; (c) Execution of engineer tasks required in the assembly areas or on routes forward, including concealment and camouflage in cooperation with engineer detachments from the forward division where necessary; (d) Establishment of a line telephone system within the assembly area, and of line telephone communication with the forward division and corps: (e) Arrangements for traffic control, including detailing of guides to wait at suitable points for directing vehicles and troops moving forward on the following night. Tactical and battle reconnaissance were carried out during the day by the reconnaissance flight of the division. To mislead the enemy regarding the true direction of attack, detachments of armored vehicles were used to carry out moves in various directions during daylight. In the evening the fuel column was brought forward into the assembly area. (3) Operation Order for the Attack details: The operation order for the attack contained the following (a) Information About the Enemy - This included location of enemy reserves and battery positions. (b) Intention - The armored brigade was to support the infantry division, which was attacking encadre. The object of the attack was to break through enemy positions on the front of the infantry division. The armored brigade was to push forward to an objective some eight or nine miles in rear of the enemy position, where it would hold itself in readiness for further operations. CONFIDENTIAL -5- 370 CONFIDENTIAL (c) Method. Subsequent paragraphs dealt with: 1. 2. 3. Routes forward. Time at which the first wave was to cross the line of the forward infantry - about 30 minutes before dawn. The axis of attack. This was, as in all similar cases, a road running at right angles to the armored brigade's objective. 4. 5. 6. Penetration of the enemy position in depth and destruction of strong points. Destruction of enemy reserves. Artillery tasks. Artillery support was to be given by the whole artillery of the infantry division with which tanks were cooperating. Initial tasks were counterbattery and harassing fire, which would begin five minutes before the first wave of tanks crossed the line of the forward infantry. Thereafter, the following tasks were to be carried out on demand from the tank brigade: a. Lifting from the area of the break-in and screening the tank attack with concentrations on the high ground on the right flank; b. Concentrations on two small villages - possible points of resistance - which the tanks were going to avoid; c. Counterbattery fire on battery positions located some 5,000 yards in rear of the enemy's position; d. Smoking the forward outskirts of a small town situated some two miles to the left of the objective, and counter-preparation fire on two roads leading out of the town towards the German left flank. On demand of the tank brigade further support was to be given by the artillery of the neighboring infantry division on the right as follows: a. Counterbattery fire on the right flank of the tank attac b. Smoke on the outskirts of a small village overlooking the right flank. A forward artillery observation officer accompanied the tank brigade. CONFIDENTIAL -6- 371 7. Motorized infantry to move in rear of the armored brigade and support it after the break-through. 8. Air tasks. These included: a. Direct support bombing on enemy reserves in the area of the tanks' objective; b. Close support bombing where required as the tank attack progressed - especially against enemy battery positions - to be carried out by two Gruppen, of 39 aircraft each, allotted by corps; C. Reconnaissance by the 12-plane reconnaissance Staffel of the armored division. Message-dropping and message-collecting posts were to be established by the armored division, first at a point some three miles in rear of the enemy's position and subsequently in the area of the objective; ₫. Fighter support was to be given to the reconnaissance aircraft by fighters from the fighter Geschwader of 120 aircraft overating from army. 9. Antiaircraft tasks. These included protection of the armored brigade and the motorized infantry at any defiles. The subsequent task was protection of the armored brigade when it had reached its objective and was preparing for further operations. 10. The Reconnaissance unit was to move with the motorized infantry and, as soon as the armored brigade had reached its objective, to push on and reconnoiter to a line some 12 miles in advance. (d) Administration - A gasoline point was established about three miles in rear of the original forward infantry positions. A supply point was established forward of the bivouac area. An ammunition distributing point was established in the assembly area, and a medical distributing point forward of the bivouac area. (e) Intercomiunication - Divisional signals provided radio radio communication between the division commander's armored command vehicle and higher formations, subordinate units, and attached troops. Divisional headquarters moved along the axis of attack. (4) Tasks of Waves It now remains to point out in general terms the tasks of the CONFIDENTIAL -7- 372 CONFIDENTIAL various waves of attacking tanks. (a) First Wave - This wave, consisting of light tanks which advanced with about 100 yard intervals between tanks, generally had two tasks. The first was to draw the enemy's fire and disclose his defensive position, while the second was to penetrate the enemy's defensive position and attack antitank gun and artillery positions which artillery preparation and aircraft had not destroyed. (b) Second Wave - This wave consisted of light and light- medium tanks advancing about 1,000 yards behind the first wave. Its task was to attack isolated points of resistance. Its formation varied according to circumstances. At times it was divided into groups to operate against specified objectives. As the attack developed, each group was ordered to attack and destroy one particular point of enemy resistance and to ignore any other objectives met. (c) Subsequent Waves - The task of subsequent waves was to attack any remaining points of resistance. All types cf tanks were used and medium and heavy tanks were employed to reduce strong points with dive-bomber support if necessary. Infantry followed the successive waves to mop up. Once a break-through had been achieved, it was exploited to the full by attacking armored vehicles, supported by motorized infantry where needed. (5) Conclusions on Tanks in Cooperation Study of the best information at hand leads to the conclusion that the main principles of employment of tanks in cooperation with infantry in the Polish campaign were as follows: (a) Thorough reconnaissance of ground, supplemented by information received with the help of a well organized intelligence service; (b) Selection and definition of sectors to be attacked in order that they might be isolated and outflanked; (c) Penetration of the enemy's positions by the determined use of infantry, artillery, aircraft, and tanks working in close cooveration: (d) Avoidance of centers of resistance; (e) Destruction of enemy communications. CONFIDENTIAL -8- 373 CONFIDENTIAL d. General Conclusions Finally, two broad principles governed the employment of armored formations in general: (1) Armored Vehicles were Employed in the Maximum Possible Numbers. The task set was to crush Polish resistance before winter and before a campaign could develop in the West. Therefore, the full first-line force of six armored divisions and four light divisions was thrown in at once. (2) The armored division was employed in cooperation with whatever arm would enable its striking power to be used with greatest effect. 3. THE CAMPAIGN IN NORWAY The Norwegian campaign produced no new lessons in German use of tanks. No armored divisions were sent to Norway, but small detachments of tanks, both light and medium, operated in the advance northwards up the Gudbrandsdal. When used in cooperation with infantry, the tanks advanced along the road at about six or seven miles per hour with the infantry following close behind. At the same time other parties of infantry, usually ski troops, operated on either side of the road. Light tanks were also used for reconnaissance. In Norway, tanks were not the main striking force, as in Poland, but were used in cooveration with other arms when circumstances permitted. Here, again, successful cooperation with other arms was very marked. 4. THE CAMPAIGN IN THE WEST a. General The use of armored formations in the campaign in the West was governed by the same general principles which governed their use in Poland. The urgency of the task was not so great, though, for four months of summer lay ahead and there was no risk that a campaign would develop on another front. But the degree of resistance to be overcome was greater, and success could be achieved only by a quick and decisive break-through. Therefore armored divisions were handled with the same speed, and they cooperated closely with the other arms as in Poland. All ten armored divisions were used. CONFIDENTIAL -9- 374 CONFIDENTIAL The task of armored divisions was to break through enemy defensive positions and reduce further power of resistance by penetrating reserves and areas of lines of communications. The infantry, motorized or on foot, followed as quickly as possible to occupy the ground gained. b. Differences from Polish Campaign Methods of attack differed from those employed in the Polish campaign in three main respects: (1) The Schwervunkt principle - feeling for the weak point and then driving through in force - was used in preference to the mass frontal attacks employed in Poland; (2) Strong points of enemy resistance, such as villages, were not always passed and left to be pinched out by the following infantry as in the Polish campaign: they were often smashed with the assistance of dive bombers before the tanks passed on; (3) The German armored formation, since it operated much farther in advance of the infantry, had to deal with points of resistance - such as tank blocks in villages and defiles, or antitank guns - without the help of the infantry; the only assistance available was from the air or from the motorized infantry in the armored division. C. Organization Such methods naturally made difficult the problem of control, but it was solved by grouping formations together for certain operations as occasion arose. For instance, at the time of the break-through north of Amiens, three corps comprising six armored divisions were grouped under the command of General von Kleist to exploit to the Channel ports to the North. Acting in cooperation with this group was the Hoth Group in Flanders, consisting of two corps of two armored divisions each commanded by General Hoth. Motorized divisions, including an S.S. division, were also operating with these groups. Similarly, the Guderian Group was formd under General Guderian for the task of attacking south from Chalons-sur-Marne to outflank the Maginot Line. Its commosition seems to have varied during its existence, but broadly speaking it consisted of two corps of two armored divisions each and one motorized division. As soon as the tasks for which these groups had been formed CONFIDENTIAL - 10 - 375 CONFIDENTIAL were completed, component formations reverted to their normal commands. The group commander was equipped with an armored command car in which he toured the front line, conducting operations in person and communicating with subordinate formations by means of the wireless with which the vehicle was equipped. The formation of such groups presented no staff problems, for staffs were so constituted as to be able to work with any additional formation temporarily placed under command. d. Sample Order The formation of ad hoc groups was not confined to divisions or corps. There were instances of groups formed of a tank regiment and attached troops, as is illustrated by the operation order of the 1st Armored Division, dated May 17, 1940. The order, brief and simple, was for the advance of the division along a given axis. It contained the following: Paragraph 1 gave in very broad outline information regarding the enemy. Paragraph 2 stated the intention of the higher formation. The German 1st Armored Division, normally in the XVI Corps, had been attached to the XIX Corps for the advance northwest between Laon and St. Quentin. Paragraph 3 gave the axis of advance which was to be followed by the Krager Group. This group consisted of the 2nd Tank Regiment and attached troops under Colonel Krager, commander of the tank regiment. The composition of this group is not certain, but it probably included motorized infantry and/or motorcycle troops of the division. Paragraphs 4 and 5 gave the tasks and approximate location of neighboring formations operating to the southeast. The River Aisne runs from east to west about 18 miles south of the line Laon Chauny. Paragraph 6 dealt with areas to be reconnoitered during the advance. The Nedtwig Group consisted of the 1st Tank Regiment and attached troops under Colonel Nedtwig, commander of the tank regiment. Its composition is not known for certain, but it was probably similar to that of the Kruger Group. Its task, combined with that of the Krager Group, illustrates the principle of movement along a given CONFIDENTIAL - 11 - 376 CONFIDENTIAL axis, with detachments or units of tanks operating on one or both sides and reconnaissance detachments thrown out a considerable distance in the direction of the enemy. The No. 4 Reconnaissance Unit belonged to the 1st Armored Division, while the divisional reconnaissance unit whose task was to reconnoiter the south flank, was most probably the No. 2 Squadron of the No. 23 Reconnaissance Unit, a part of the 23rd Division, which was attached to the 1st Armored Division. Paragraph 7 stated that the No. 666 Engineer Battalion, consisting of GHQ troops, was attached to the Krager Group, probably to assist its advance along the main axis, to render any assistance necessary at crossings of the Oise and the Crozat Canal, or to deal with obstacles on the outskirts of St. Quentin. Paragraph 8 indicated that although a light antiaircraft unit was shown as part of an armored division, it was only attached. In practice at least one battery always moves with the division. All antiaircraft units are part of the Air Force. Paragraph 9, the administrative paragraph, is noteworthy for its brevity. Problems of supply and maintenance are dealt with more fully in Section 6 of this bulletin. Paragraph 10 indicated that it is a general rule in such operations for divisional and other headquarters to move along the axis of advance. e. River Crossings The crossing of defended water obstacles is illustrated by the crossings of the Aisne and the Mouse, which were effected with the cooveration of infantry. (1) The Aisne On June 9, 1940, six infantry divisions had the task of crossing the river and forming between Asfeld-Ia-Ville and Rethel, a bridgehead over which armored and motorized forces could pass and advance south towards Chalons-sur-Marne. The Kleist Groun, which had moved southeast after completing operations in the area of the Channel ports, consisted of three or four armored divisions and one motorized division. It was assombled west of the Forest of Signy, about 12 miles behind the forward infantry. on June 8. The French were holding ground a few miles to the north of CONFIDENTIAL - 12 - 377 CONFIDENTIAL the river, and aerial photographs had revealed 14 battery positions south of the river on about one mile of the front. At 4:40 A.M. on June 9, counterbattery and harassing fires against French OP's on the rising ground to the south were out down and maintained for an hour. At sunrise - about 4:55 A.M. - the infantry attacked and took the high ground at Ecly. During the morning, armored and motorized formations moved forward, and by noon they were in position a few miles behind the infantry. They had not yet been in action, and they remained in position so as to be able to take quick advantage of any bridgehead formed along the front of the attack. The infantry attack was not altogether successful, and by nightfall only the division on the extreme right had succeeded in crossing and establishing a bridgehead. Bridges of 16-ton capacity were constructed at this point on the afternoon of June 9. Two courses now remained oven: (a) To move light and light-medium tanks into the small bridgehead during the night and attack the following morning; (b) To continue the infantry attack on June 10 in order to widen the bridgehead. The first course was adopted, and by June 11 the whole of the Kleist Group had reached Rheims. (2) The Meuse The Meuse River was crossed just south of Namur at a point where the river runs through a deep valley with steep banks on each side. On arrival the Germans found one bridge standing. An armored car troop and a light tank were ordered to cross, but the leading armored car was destroyed as the bridge was blown up. Destruction of the bridge was complete. Reconnaissence revealed an undamaged weir with a footway across, but this was covered by a machine gun. The original plan had been to force a crossing and establish a bridgehead, but the far ban't was so lightly held that advance troops - a company of motorcyclists - crossed by the weir at once. CONFIDENTIAL - 13 - 378 CONFIDENTIAL They were not able to hold the small bridgehead they had formed and had to retire at nightfall, but the following morning at dawn they were able to regain a footing on the far bank without much difficulty. They were reinforced by other troops who crossed both by the weir and in rubber boats. The boats were apparently fairly vulnerable, and about 50 per cent were damaged by small arms fire. Tanks forming part of the advance guard could not cross by the weir and had to wait until a deeper bridgehead had been formed and ferrying operations could begin. The lieuse at this point is about 50 to 100 yards wide, and the ground rises fairly steeply to about 200 feet on each side. As soon as the far heights had been taken, rubber boats and light rafts constructed of rubber boats were used for ferrying antitank guns over. The larger German rubber boats can take 20-mm. antiaircraftantitank guns; rafts are needed for heavier types. The Germans were thus in a position to offer strong resistance to a French counterattack with tanks, which developed later in the day. By the time the bridgehead was from 2 to 2 miles deep, the first light tanks could be ferried across on rafts made of pontons and towed by motor boats, which are part of the normal ponton bridging equipment. Heavier ponton ferries for taking 22-ton tanks were constructed later. The bridgehead was by now well established, and the Germans made a tank attack. Although an extensive mine field was encountered, the mines were found to have been left at safety in the haste of the retreat. In this connection, it is interesting to note that, although the mines were not armed, the weight of the heavier tanks was such as to destroy the safety device, and in quite a few cases the mines exploded. One heavy tank under which a single mine had exploded, sustained damage to a track and shock absorber, but repairs were made later under unit arrangements. Another tank, under which three mines went off, had its whole side blown out; the crew only suffered from concussion. To facilitate crossing water obstacles, armored divisions had, in addition to their own bridging unit, one or more bridging units attached from coros, and they were followed by special construction battalions. 5. FACTORS CONTRIBUTING TO SUCCESS a. Speed The importance of s') was even more apparent in the West than in Poland. Its use was at times characterized by complete CONFIDENTIAL - 14 - 379 CONFIDENTIAL disregard for flank protection, which it was felt could be sacri- ficed so long as momentum was maintained. The distances covered by armored divisions, as the crow flies, averaged between 20 and 25 miles per day, although one covered 490 miles in 18 days, or 27 miles per day. The speed of advance in the West was due to: (1) Good supply and maintenance arrangements; (2) Availability of spare crews; (3) High performance of armored vehicles due to technical lessons learned from past experience; (4) Short oral orders wherever possible. b. Flexibility of Organization Flexibility allowed switching of armored and motorized units and formations from one command to another for special tasks. Thus the use of tanks in the largest possible numbers in order to reinforce success was made possible. C. Training All campaigns showed training to be of a very high standard. Preparatory training had aimed at a thorough knowledge of motor transport by all ranks; exercises were devoted to encouraging speed and initiative in all ranks, and great powers of endurance were expected of officers and men. Above all, it was stressed that inaction was criminal. d. Initiative The doctrine or initiative was inculcated in all officers down to the most junior commanders. Coupled with a high standard of training and !nowledge of other arms, it has produced in all ranks initiative which contributed in no small measure to the success of canyaigns. e. Cooperation with the Air Force A German armored division contains a reconnaissance Staffel of twelve aircraft, and it may have a dive-bomber group of thirty or forty aircraft attached. The latter provided direct and close support bombing at very short notice in the Polish and French campaigns. There was one instance of close support bombers arriving only thirty CONFIDENTIAL - 15 - 380 CONFIDENTIAL minutes after forward troops had called for them by radio. On occasion, dive bombers also carried out the equivalent of artillery preparation before an attack by armored forces. The noise of the bombers covered that of the tanks, and thus surprise was achieved. Cooperation was facilitated by the attachment of small air force staffe to army formations. These staffs were commanded by officers known as Koluft officers. f. Elastic System of Maintenance Elasticity of the maintenance system allowed armored forma- tions to be supplied from the air if: (1) Speed of advance prevented supply and workshop units from keeping up with the forward elements; (2) Vehicles could not be supplied or repaired from local sources. g. Intercommunication Communication between units was maintained by radio and by light signals between tanks. Commanders' tanks were equipped with sending and receiving sets, while other tanks were equipped with receiving sets only. Radio discipline was very good. The extensive supply of radios in armored divisions gave commanders much greater control over their formations than was possible in other divisions. Time was saved, and, having voice control over his subordinates, the commander could impress his personality upon them more forcefully and control their actions more closely. 6. MAINTERANCE AND SUPPLY DURING OPERATIONS a. Maintenance Each tank squadron and the headquarters troop of each battalion has a light aid section which carries spare parts on a generous scale and is organized to carry out running repairs with the utmost speed. It consists of mechanics, radio instrument mechanics, and drivers. Its transport includes light trucks for spare parts and tools, and a converted light tank for carrying spare parts and mechanics across country to stranded tanks. At battalion headquarters there is a light aid section under an officer who can, when necessary, dispatch all light aid sections to any part of the front where they CONFIDENTIAL - 16 - 381 CONFIDENTIAL are urgently needed. Each regiment has a workshop company equipped with machine tools and canable of doing all but the heaviest repairs. It produces its own power and is, therefore, independent of stationary workshops. The company consists of two identical platoons which may be attached to a battalion or may leap-frog through in order to ensure continuity in repair work. The workshop company also has a breakdown platoon for bringing in stranded tanks as well as an armory and a signals repair shop. Spare parts are also carried in the light tank column in each battalion. b. Supply The speed of the advance in both campaigns made supply largely a question of improvisation. Gasoline trucks were brought forward during hours of darkness. A number of tanks carried extra gesoline containers, each of which would hold about 5 gallons. Distribution of gasoline was also carried out by means of tracked vehicles carrying 100 such containers. They operated from the division where they exchanged empty containers for full ones. This system ensured speed, mobility, and minimum waste of containers. A rather exceptional method was adopted in the Guderian Group. Tanks would assemble after 10 o' clock at night at a given rendezvous and park close together - about four meters apart without any attempt at concealment. Here they would receive supplies, gasoline, ammunition, and any maintenance required, from convoys which had moved up close behind the division. It appears that a good deal of horse transport was used for these convoys. CONFIDENTIAL - 17 - 382 RESTRICTED G-2/2657-220; No. 424 M.I.D., W.D. 12:00 M., June 23, 1941. SITUATION REPORT I. Eastern Theater. Germany commenced hostilities against U.S.S.R. at dawn, June 22. Italy has declared war on the U.S.S.R. Rumania is participating in the war on Germany's side. Ground: To date the only reports received indicate German offensive action from the East Prussian border into Lithuania and pressure along the axis Brest--Litovsk-Moscow. Air: The German Air Force is adopting its familiar pat- tern of attack on Soviet air bases and on communications. Some offensive Russian air activity is reported. II. Western Theater. Air: German. Limited activity. British. Continuation of the offensive against the Ruhr and German ports. III. Mediterranean and Near East. No important developments. RESTRICTED at 9:15, June 23, 1941. Date JUN 25 1941, R Initials m Cairo, filed June 21, 1941. ) Paraphrase of Code Cablegram Received at the War Department SECRET By authority A. C. of S., G-2 Ninety-nine hours is the greatest time on a Tomahavk. There is still trouble with new crews and pilote who do not know the airplane and have ao desire to learn about it. The pilots and Grows who have had a number of weeks' operation of this airplane like it very much. Troubles due to equipment have not hampered operations or maintenance. To date there have been three engines which have had bearing (Revolutionsprminute) failures, one of these was due, admittedly, to high R.P.M. and manifold pressure during combat. On the ground it was noticed that the oil in the small orank case had been cut and the Prestone was on fire due to the failure of four, five and six rods in both banks. Probably the other two failures seized on number six throw. Two representatives of Allison are in the Middle East to set up an overhaul shop. The failures details are not known but expect they are due to high manifold pressure and R.P.M. FELLERS Distribution: Secretary of War State Department Secretary of Treasury Chief of Staff War Plans Division Office of Naval Intelligence GHQ G-3 Air Corps SECRET INFORMATION COPY